ASSET PURCHASE AGREEMENT
AMONG
XXXXX PLASTICS CORPORATION,
XXXXX PLASTICS DESIGN CORPORATION,
VIRGINIA DESIGN PACKAGING CORP.
AND
THE SHAREHOLDERS OF
VIRGINIA DESIGN PACKAGING CORP.
MAY 13, 1997
TABLE OF CONTENTS
PAGE
SECTION 1. TRANSFER OF PURCHASED ASSETS, ASSUMPTION OF CERTAIN
SPECIFIED LIABILITIES AND RELATED MATTERS.. 1
1.1. Transfer of Assets 1
1.2. Assets Not Being Transferred 3
1.3. Liabilities Being Assumed 4
1.4. Liabilities Not Being Assumed 4
1.5. Instruments of Conveyance and Transfer, Etc. 6
1.6. Further Assurances, Assumed Taxes, Etc. 6
1.7. Assignment of Contracts, Rights, Etc. 7
1.8. Bulk Sales Laws 7
SECTION 2. CLOSING PAYMENTS; ESCROW; PURCHASE PRICE ADJUSTMENT;
ALLOCATION................................. 8
2.1. Purchase Price; Other Payments 8
2.2. Closing Payment 8
2.3. Debt Payments by Buyer 8
2.4. Escrow Account 9
2.5. Purchase Price Adjustment 9
(a) Preparation of Final Working Capital Statement 9
(b) Review by the Seller 10
(c) Adjustment 11
2.6. Allocation of Purchase Price 11
2.7. Closing 12
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS 12
3.1. Title to the Shares 12
3.2. Authority; Noncontravention; Consents 12
SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE SELLER AND THE
SHAREHOLDERS.............................. 13
4.1. Organization; Good Standing; Qualification and Power
13
4.2. Equity Investments 13
4.3. Capital Stock 13
4.4. Authority; Noncontravention; Consents 14
4.5. Financial Statements 14
4.6. Absence of Undisclosed Liabilities 15
4.7. Absence of Changes 15
4.8. Tax Matters 16
4.9. Title to Assets, Properties and Rights and Related
Matters................................... 17
4.10. Real Property-Owned 18
4.11. Intellectual Property 18
4.12. Agreements, No Defaults, Etc. 19
4.13. Litigation, Etc. 20
4.14. Compliance; Governmental Authorizations 21
4.15. Labor Relations; Employees 21
4.16. ERISA Compliance 22
4.17. Environmental Matters 23
4.18. Brokers 24
4.19. Related Transactions 24
4.20. Accounts and Notes Receivable 25
4.21. Accounts and Notes Payable 25
4.22. Inventories 25
4.23. Warranties of Products; Products Liability; Regulatory
Compliance................................ 26
4.24. Suppliers and Vendors 26
4.25. Customers 26
4.26. Disclosure 26
SECTION 5. REPRESENTATIONS AND WARRANTIES OF THE BUYER 27
5.1. Authority 27
5.2. Noncontravention; Consents 27
5.3. Brokers 28
SECTION 6. CONDUCT AND TRANSACTIONS PRIOR TO THE CLOSING;
ADDITIONAL PRE-CLOSING AGREEMENTS......... 28
6.1. Affirmative Covenants of the Seller 28
6.2. Negative Covenants of the Seller 29
6.3. Confidentiality 30
6.4. Consents 30
6.5. Efforts to Consummate 30
6.6. Notice of Prospective Breach 30
6.7. Public Announcements 30
6.8. Negotiation with Others. 31
SECTION 7. CONDITIONS 31
7.1. Conditions to Each Party's Obligations 31
(a) Approvals 32
(b) No Injunctions or Restraints 32
(c) Statutes 32
7.2. Conditions to Obligations of the Buyer 32
(a) Accuracy of Representations and Warranties 32
(b) Performance of Obligations of the Seller and the
Shareholders.............................. 32
(c) Authorization 33
(d) Opinion of the Seller's and the Shareholders' Counsel
33
(e) Consents and Approvals 33
(f) Government Consents, Authorizations, Etc. 33
(g) Corporate Resolutions. 33
(h) Absence of Material Adverse Change 33
(i) Officer's Certificate. 34
(j) Instruments of Transfer 34
(k) Proprietary Information Agreements 34
(l) Change and Use of Seller's Name 34
(m) Releases of Encumbrances 34
(n) Due Diligence 34
(o) Employment Agreement 34
(p) Consulting and Noncompetition Agreement. 35
(q) Escrow Agreement 35
(r) Financing 35
(s) Environmental 35
(t) Foreign Person Affidavit 35
(u) Transfer of Cash 35
(v) Real Property Matters 35
(w) Forms 5500 36
(x) Power of Attorney 36
(y) Audited Financial Statements 36
(z) Equipment Purchase 36
7.3. Conditions to Obligations of the Seller and the
Shareholders.............................. 36
(a) Accuracy of Representations and Warranties 36
(b) Performance of Obligations of the Buyer 36
(c) Authorization 37
(d) Government Consents, Authorizations, Etc. 37
(e) Corporate Resolutions 37
(f) Officer's Certificate 37
(g) Payment of Closing Payment and Debt 37
(h) Employment Agreement 37
(i) Consulting and Noncompetition Agreement 37
(j) Escrow Agreement 38
(k) Opinion of Parent's and the Buyer's Counsel 38
(l) Equipment Purchase 38
SECTION 8. INDEMNIFICATION 38
8.1. Indemnification Generally; Etc. 38
(a) By the Seller Group in Favor of the Buyer Group 38
(b) By Each Shareholder in Favor of the Buyer Group 39
(c) By the Buyer in Favor of the Seller and the
Shareholders.............................. 40
8.2. Limitations on Indemnification 40
(a) Indemnity Basket for the Seller and the Shareholders
40
(b) Indemnity Cap for the Seller and the Shareholders 40
(c) Indemnity Basket for the Buyer Group 41
8.3. Assertion of Claims; Payment of Claims; Right of Set-
Off; Levy Debt Not Subject to Escrow...... 41
8.4. Notice and Defense of Third Party Claims 41
8.5. Survival of Representations and Warranties 43
8.6. No Third Party Reliance 43
8.7. Remedies Exclusive 43
SECTION 9. ADDITIONAL AGREEMENTS 44
9.1. Expenses 44
9.2. Disclosure of Information; Noncompetition 44
9.3. Use of Name 45
9.4. Relationships with Vendors and Customers 45
9.5. Health Insurance 46
9.6. .......................................... 46
9.7. Undertakings of the Buyer 46
9.8. Employees; Seniority; WARN Act Compliance 46
9.9. COBRA Coverage 47
SECTION 10. TERMINATION; EFFECT OF TERMINATION 47
10.1. Termination 47
10.2. Effect of Xxxxxxxxxxx 00
XXXXXXX 00. MISCELLANEOUS PROVISIONS 48
11.1. Amendment 48
11.2. Extension; Waiver 48
11.3. Entire Agreement 49
11.4. Severability 49
11.5. No Third-Party Beneficiaries; Successors and Assigns
49
11.6. Headings 49
11.7. Notices 49
11.8. Counterparts 50
11.9. Governing Law 50
11.10. Incorporation of Exhibits and Schedules 51
11.11. Construction 51
11.12. Remedies 51
11.13. Waiver of Jury Trial 51
11.14. Recovery of Attorney's Fees and Costs 51
-i-
SCHEDULES AND EXHIBITS
Annex I - Definitions
Schedule I - Machinery, Equipment, etc.
Schedule II - Real Property
Schedule III - Permits
Schedule IV - Excluded Assets
Schedule V - Retained Contracts
Schedule VI - Designated Debt
Schedule VII - Allocation of Purchase Price
Schedule VIII - Capitalization
Schedule IX - Compensation Rates
Exhibit A - Xxxx of Sale
Exhibit B - Escrow Agreement
Exhibit C - Form of Opinion of Seller's and Shareholders' Counsel
Exhibit D - Form of Consent
Exhibit E - Form of Employment Agreement for Xxxxx Xxxxxxxxx
Exhibit F - Form of Noncompetition Agreement for Xxx Xxxxxxxxx
Exhibit G - Form of Power of Attorney
Exhibit H - Form of Opinion of Parent's and the Buyer's Counsel
ASSET PURCHASE AGREEMENT dated as
of May 13, 1997, among XXXXX PLASTICS
CORPORATION, a Delaware corporation
("Parent"), XXXXX PLASTICS DESIGN
CORPORATION, a Delaware corporation (the
"Buyer"), VIRGINIA DESIGN PACKAGING CORP., a
Virginia corporation (the "Seller"), and XXX
X. XXXXXXXXX and XXX X. XXXXXXXXX, each an
individual and a shareholder of the Seller
(the "Shareholders").
The Seller is engaged in the business (the "Subject Business") of
developing, manufacturing, distributing and selling packaging products
including expandable polystyrene. The parties desire that the Seller sell,
transfer, convey and assign to the Buyer substantially all the assets,
properties, interests in properties and rights of the Seller, and that the
Buyer assume certain specified liabilities of the Seller, and that the
Buyer purchase and acquire the same, upon the terms and subject to the
conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and the mutual
representations, warranties, covenants and agreements hereinafter set
forth, the parties hereby agree as follows:
SECTION 1. TRANSFER OF PURCHASED ASSETS, ASSUMPTION OF CERTAIN
SPECIFIED LIABILITIES AND RELATED MATTERS.
1.1. TRANSFER OF ASSETS. (a) On the terms and subject to the
conditions of this Agreement, at the Closing, the Seller shall sell,
transfer, convey and assign to the Buyer, and the Buyer shall purchase and
acquire from the Seller, all of the assets, properties, interests in
properties and rights of the Seller of every kind and description, wherever
located (other than the Excluded Assets), as the same shall exist
immediately prior to the Closing, free and clear of all Encumbrances (other
than Permitted Encumbrances), including, without limitation, the following:
(i) all cash, accounts and notes receivable, deposits,
credits, prepaid expenses and other current assets;
(ii) all owned machinery, equipment, vehicles,
furniture, removable leasehold improvements, molds, office
equipment, supplies, spare parts and other items of tangible
personal property, substantially all of which are set forth on
SCHEDULE I;
(iii) the real property, together with the buildings and
other structures, fixtures and improvements situated thereon, located
in Suffolk, Virginia, as more fully described on SCHEDULE II (the
"Real Property");
(iv) the entire right, title and interest in and to the
Requisite Rights, including, without limitation, the trademarks
set forth in the Disclosure Letter and all variations thereof,
the name "Virginia Design Packaging Corp.", "Virginia Design" and
all variations thereof, and all logos of the Seller;
(v) all inventories of work-in-process, raw materials,
finished products, supplies, spare parts, shipping containers and
other materials;
(vi) subject to Section 1.7, all rights in, to and
under all Contracts relating to the Subject Business or the
Purchased Assets and set forth in the Disclosure Letter in
response to Section 4.12 (other than such items that constitute
Excluded Assets) or not required to be set forth therein because
of the limitations contained in Section 4.12 (the "Assumed
Contracts");
(vii) all records of the Seller relating to the Subject
Business or the Purchased Assets, either in original or
photostatic form (except in the case of all computer software,
which must be in original form, whether in machine or man
readable format), wherever located, including, without
limitation, property records, production records, engineering
records, purchasing and sales records, personnel and payroll
records, copies of financial and accounting records, mailing
lists, customer and vendor lists and records and computer
programs and related software;
(viii) all interests in and to telephone and telex
numbers and all listings in all telephone books and directories;
(ix) all stationery, purchase orders, forms, labels,
shipping material, catalogs, brochures, art work, photographs and
advertising and sales material and literature;
(x) to the extent transferable, all Permits of the
Seller, all of which that are material to the Subject Business
being set forth on SCHEDULE III;
(xi) all rights (including experience ratings) with
respect to unemployment, workers' and workmen's compensation, and
other similar insurance reserves relating to employees of the
Seller who become employees of the Buyer; PROVIDED, HOWEVER, that
the Seller shall retain any liability or obligation arising out
of any retroactively increased premium relating to the insurance
described in this subsection (xi);
(xii) all rights in and to insurance and indemnity claims
(other than such rights relating exclusively to the Excluded Assets);
(xiii) all rights, choses in action and claims (known or
unknown, matured or unmatured, accrued or contingent) of the
Seller against third parties that relate to the Subject Business
or the Purchased Assets (unless such right or chose in action is
a claim or counterclaim related to litigation which is not an
Assumed Obligation); and
(xiv) all other assets, properties, rights and
businesses of every kind and nature owned by the Seller relating
to the Subject Business or the Purchased Assets or in which the
Seller has an interest as of the Closing, known or unknown, fixed
or unfixed, xxxxxx or inchoate, accrued, absolute, contingent or
otherwise, whether or not specifically referred to in this
Agreement, other than the Excluded Assets.
(b) For convenience of reference, the assets, properties,
interests in properties and rights that are to be sold, transferred,
conveyed and assigned to the Buyer by the Seller pursuant to Section 1.1(a)
are hereinafter collectively referred to as the "Purchased Assets."
1.2. ASSETS NOT BEING TRANSFERRED. Anything contained in Section
1.1 or elsewhere herein to the contrary notwithstanding, there are
expressly excluded from the assets, properties, interests in properties and
rights of the Seller to be sold, transferred, conveyed and assigned to the
Buyer the following (collectively, the "Excluded Assets"):
(i) the consideration delivered to the Seller pursuant to
this Agreement;
(ii) originals of financial and accounting records, the
minute books, ownership record books and information, originals of all
financial statements and information and Tax Returns;
(iii) all right, title and interest in, to and under the
assets set forth on SCHEDULE IV;
(iv) all rights and interests of the Seller and the
Shareholders in, to and under the Contracts listed on SCHEDULE V (the
"Retained Contracts");
(v) all rights and interest of the Seller in the account
receivable of the Seller in the amount of $60,000 representing an
amount owed to the Seller by Xxx Xxxxxxxxx; and
(vi) all assets, interests and rights related to or owned by
any Employee Plan, sponsored or maintained by the Company or any of
its ERISA Affiliates.
1.3. LIABILITIES BEING ASSUMED. (a) Except as otherwise provided
herein and subject to the terms and conditions of this Agreement,
simultaneously with the sale, transfer, conveyance and assignment to the
Buyer of the Purchased Assets, the Buyer shall assume, and hereby agrees to
perform and discharge when due:
(i) all liabilities and obligations of the Seller (other
than those liabilities and obligations described in Sections 1.4 (a)
through (h)) which are accrued or reserved against on the December
Balance Sheet and which remain unpaid as of the Closing to the extent
of any remaining reserve or accrual;
(ii) all liabilities and obligations of the Seller (other
than those liabilities and obligations described in Sections 1.4(a)
through (h)) which are incurred in the ordinary course of the Subject
Business, consistent with past practice, subsequent to the December
Balance Sheet Date and through the Closing Date and which remain
unpaid as of the Closing (together with the liabilities and
obligations described in (i) above, the "Assumed Payables"); and
(iii) all liabilities and obligations arising or to be
performed after the Closing under the Assumed Contracts that are
effectively assigned and transferred to the Buyer including any
Assumed Contracts the benefits and burdens of which are assigned to
the Buyer under Section 1.7.
(b) For convenience of reference, the foregoing liabilities and
obligations of the Seller being assumed by the Buyer are collectively
referred to herein as the "Assumed Obligations."
1.4. LIABILITIES NOT BEING ASSUMED. ANYTHING CONTAINED HEREIN TO
THE CONTRARY NOTWITHSTANDING, EXCEPT FOR THE ASSUMED OBLIGATIONS, THE BUYER
SHALL NOT AND DOES NOT ASSUME ANY LIABILITIES OR OBLIGATIONS (FIXED OR
CONTINGENT, KNOWN OR UNKNOWN, MATURED OR UNMATURED) OF THE SELLER WHETHER
OR NOT ARISING OUT OF OR RELATING TO THE PURCHASED ASSETS OR THE SUBJECT
BUSINESS OR ANY OTHER BUSINESS OF THE SELLER, ALL OF WHICH LIABILITIES AND
OBLIGATIONS SHALL AT AND AFTER THE CLOSING REMAIN THE EXCLUSIVE
RESPONSIBILITY OF THE SELLER (the "Excluded Obligations"). Without
limiting the generality of the foregoing, the Buyer is not assuming any of
the following liabilities and obligations of the Seller:
(a) all liabilities and obligations for (1) income Taxes and
(2) Taxes that are neither accrued nor reserved against on the
December Balance Sheet nor incurred in the ordinary course of the
Subject Business, consistent with past practice, subsequent to the
December Balance Sheet Date;
(b) all liabilities and obligations relating to or arising
under any Environmental, Health and Safety Law relating to the
manufacture, processing, distribution, use, treatment, storage,
disposal, transport, handling or emission, migration, discharge or
release of pollutants, contaminants, chemicals or industrial,
hazardous or toxic substances, crude oil or any fraction thereof or
wastes of any kind into the environment or otherwise, in any such
case, to the extent such liability or obligation results from or
arises out of events, facts or circumstances occurring or existing on
or prior to the Closing, notwithstanding that the date on which such
action or claim is commenced or made is after the Closing;
(c) all liabilities and obligations relating to or arising
out of any claim, action, suit, investigation or legal or
administrative or arbitration proceeding which is based on or related
to products (or parts or components thereof) manufactured, sold,
distributed or otherwise disposed of or services performed by the
Seller on or before the Closing Date, or which is based on events
occurring on or before the Closing Date, in each case notwithstanding
that the date on which such action, suit, claim, investigation or
proceeding is commenced or made is after the Closing;
(d) all liabilities and obligations of any nature whatsoever
of the Seller to any Affiliate of the Seller (provided that, pursuant
to Section 2.3, the Buyer is obligated to pay, on behalf of the
Seller, certain Designated Debt that is owed to an Affiliate of the
Seller);
(e) all liabilities and obligations associated with, related
to or owed by any Employee Plan sponsored or maintained by the Seller
or any of its ERISA Affiliates;
(f) all liabilities and obligations of the Seller or any
Shareholder under any guarantee for the payment of money or otherwise;
(g) all liabilities and obligations of the Seller or any
Shareholder under the Promissory Note issued by the Seller to Xxxxx X.
Xxxx in the face amount of $300,000 dated September 25, 1986 and all
documents and instruments related thereto (the "Levy Debt");
(h) all liabilities and obligations of any nature whatsoever
relating to the Excluded Assets.
1.5. INSTRUMENTS OF CONVEYANCE AND TRANSFER, ETC. At the Closing,
the Seller shall deliver (or cause to be delivered) to the Buyer, such
deeds, bills of sale, endorsements, assignments and other good and
sufficient instruments of sale, transfer, conveyance and assignment as
shall be necessary to sell, transfer, convey and assign to the Buyer, in
accordance with the terms hereof, title to the Purchased Assets, free and
clear of all Encumbrances (other than Permitted Encumbrances), including,
without limitation, the delivery of a xxxx of sale, assignment and
assumption agreement (the "Xxxx of Sale"), substantially in the form of
EXHIBIT A hereto. Simultaneously therewith, the Seller shall take all
steps as may be required to put the Buyer in possession and operating
control of the Purchased Assets.
1.6. FURTHER ASSURANCES, ASSUMED TAXES, ETC. (a) The Seller
shall promptly transfer to the Buyer any amounts which shall be received by
the Seller after the Closing which constitute Purchased Assets. The Seller
shall, at any time and from time to time after the Closing, upon the
reasonable request of the Buyer, do, execute, acknowledge, deliver and
file, or shall cause to be done, executed, acknowledged, delivered or
filed, all such further acts, transfers, conveyances, assignments or
assurances as may reasonably be required for better selling, transferring,
conveying, assigning and assuring to the Buyer, or for aiding and assisting
in the collection of or reducing to possession by the Buyer, any of the
assets, properties, interests in properties or rights being purchased by
the Buyer hereunder. The Seller shall pay its own costs and legal expenses
incurred in connection with complying with the provisions of this Section
1.6; PROVIDED, HOWEVER, that the Buyer shall pay the costs and legal
expenses (other than expenses of legal counsel to the Seller) of creating
the necessary documents to comply with the provisions of this Section 1.6.
(b) After the Closing, the Seller or either Shareholder
shall, promptly upon receiving notice or gaining knowledge thereof, notify
the Buyer of the existence of any Tax Liability that constitutes an Assumed
Obligation that must be discharged and/or included in a Tax Return required
to be filed. In connection therewith, the Seller and the Shareholders
shall cooperate with the Buyer to the extent necessary or appropriate to
prepare, execute and file any Tax Return or other filing required in
connection with such Assumed Obligation. In addition, the amounts of any
refunds for any payments made by the Buyer, the Seller or the Shareholders
with respect to any Taxes that are Assumed Obligations shall be for the
benefit of the Buyer, and the Seller and the Shareholders shall either
promptly pay over any such amounts actually received (including interest
received, if any) by them with respect to such refunds or take whatever
actions are necessary to assist the Buyer in recovering such amounts.
(c) After the Closing, the Buyer shall, promptly upon
receiving notice or gaining knowledge thereof, notify the Seller and the
Shareholders of the existence of any Tax Liability that constitutes an
Excluded Obligation that must be discharged and/or included in a Tax Return
required to be filed. In connection therewith, the Buyer shall cooperate
with the Seller and the Shareholders to the extent necessary or appropriate
to prepare, execute and file any Tax Return or other filing required in
connection with such Excluded Obligation. In addition, the amounts of any
refunds for any payments made by the Buyer, the Seller or the Shareholders
with respect to any Taxes that are Excluded Obligations shall be for the
benefit of the Seller and the Shareholders, and the Buyer shall either
promptly pay over any such amounts actually received (including interest
received, if any) by the Buyer with respect to such refunds or take
whatever actions are necessary to assist the Seller and the Shareholders in
recovering such amounts.
1.7. ASSIGNMENT OF CONTRACTS, RIGHTS, ETC. Anything contained in
this Agreement to the contrary notwithstanding, this Agreement shall not
constitute an agreement or attempted agreement to transfer, sublease or
assign any Contract or any claim of or right to any benefit arising
thereunder or resulting therefrom or any Permit if an attempted transfer,
sublease or assignment thereof, without the consent of any other party
thereto, would constitute a breach thereof, is prohibited by law or would
in any way affect the rights of the Buyer or the Seller thereunder. The
Seller and the Shareholders shall use their best efforts (and the Buyer
shall assist the Seller and the Shareholders) both after and prior to the
Closing to obtain such consents to the assignment or transfer thereof to
vest in the Buyer all of the Seller's right, title and interest in such
Contracts, in all cases in which such consent is required for assignment or
transfer. If such consent is not obtained, the Seller and the Shareholders
shall cooperate with the Buyer in any arrangements necessary or desirable,
on commercially reasonable terms, to provide for the Buyer the benefits and
to have the Buyer assume the burdens arising after the Closing thereunder,
including, without limitation, enforcement for the benefit of the Buyer,
and assumption by the Buyer of the costs of enforcing, any and all rights
of the Seller thereunder against the other party thereto arising out of the
cancellation thereof by such other party or otherwise.
1.8. BULK SALES LAWS. The Buyer, the Seller and the Shareholders
hereby waive compliance with the provisions of any applicable bulk sales
laws.
SECTION 2. CLOSING PAYMENTS; ESCROW; PURCHASE PRICE ADJUSTMENT;
ALLOCATION.
2.1. PURCHASE PRICE; OTHER PAYMENTS. (a) The aggregate purchase
price (the "Purchase Price") to be paid for the Purchased Assets shall be
$1,761,000{*} plus the Additional Escrow Amount, if any, payable as
follows: (i) pursuant to Section 2.2 below, $1,761,000 (as adjusted based
on the amount of Designated Debt){*} is payable to the Seller on the
Closing Date; and (ii) pursuant to Section 2.4 below, $300,000 shall be
deposited in an escrow account pursuant to the Escrow Agreement.
(b) In addition, (i) pursuant to Section 2.3 below, the
Buyer, on behalf of the Seller, shall pay on the Closing Date, and/or shall
deposit funds with the Buyer on the Closing Date for the payment of, the
Designated Debt; and (ii) pursuant to the Consulting and Noncompetition
Agreement, the Buyer shall pay $800,000 to Xxx Xxxxxxxxx, payable as set
forth in the Consulting and Noncompetition Agreement.
2.2. CLOSING PAYMENT. As used herein, "Closing Payment" shall
mean an amount equal to $1,761,000 (as such amount is increased or
decreased based on the Designated Debt). Subject to the conditions set
forth herein, the Closing Payment shall be paid, or caused to be paid, by
the Buyer at the Closing by wire transfer to the account or accounts
designated by written notice from the Seller to the Buyer at least two
Business Days before the Closing Date.
2.3. DEBT PAYMENTS BY BUYER. Subject to the conditions set forth
herein, on the Closing Date and on behalf of the Seller, the Buyer shall
pay and satisfy, or cause to be paid and satisfied, in full certain
outstanding indebtedness of the Seller, the amounts and general description
of which as of the date hereof are set forth on SCHEDULE VI (the
"Designated Debt"). The outstanding amounts of all notes, debentures and
other payables set forth on SCHEDULE VI shall be paid on the Closing Date
by check or by wire transfer (with wire transfers being made to those from
whom encumbrance releases are required) to the accounts designated in
writing by the payees to the Buyer or the Seller. In addition, the Buyer
shall pay the lesser of $40,000 and 50% of the prepayment penalty (which
amount shall not constitute Designated Debt and shall not therefore reduce
the Closing Payment) relating to the payment of the indebtedness
outstanding under the Industrial Development Authority of the City of
Suffolk Industrial Development Refunding Revenue Bonds; provided that any
interest earned on amounts placed in escrow to repay such bonds shall be
for the benefit of the Seller.
2.4. ESCROW ACCOUNT. On the Closing Date, the Buyer, the Seller,
the Shareholders and Lawyers Title Insurance Corporation shall enter into
the escrow agreement substantially in the form of EXHIBIT B hereto (the
"Escrow Agreement"), pursuant to which, on the Closing Date, the Buyer
shall deposit with Lawyers Title Insurance Corporation the amount of
$300,000 in an escrow account (the "Escrow Account"). As used herein,
"Additional Escrow Amount" shall mean any amount payable to the Seller from
time to time pursuant to the Escrow Agreement.
2.5. PURCHASE PRICE ADJUSTMENT.
(a) PREPARATION OF FINAL WORKING CAPITAL STATEMENT. As
promptly as practicable following the Closing Date (but in no event later
than 60 days after the Closing Date), the Buyer shall prepare, and cause
Ernst & Young LLP, the accountants of the Buyer (the "Buyer's
Accountants"), to certify, a statement (the "Final Working Capital
Statement") setting forth the computation of the Final Working Capital (as
defined below) of the Seller as of the Closing Date, which statement shall
be prepared in accordance with generally accepted accounting principles
("GAAP") consistently applied with the historical financials of the Seller.
For purposes of preparing the Final Working Capital Statement, "Final
Working Capital" shall mean working capital as determined in accordance
with Chapter 3 of Accounting Research Bulletin 43 and other GAAP,
consistently applied with the Seller's historical financials, and (i)
specifically including the Seller's prepaid deposits to the extent such
deposits have value and are recoverable, but specifically excluding
security deposits on outstanding operating leases considered as other
assets on the Seller's financial statements, (ii) specifically excluding
current liabilities included in Designated Debt, (iii) specifically
excluding prepaid expenses with no value on a going-forward basis, and (iv)
inventory shall be, as of the Closing Date, good, usable and of
merchantable quality. The Seller's inventory shall include no items,
unless a reserve has been established with respect thereto on the books of
the Seller, which are (A) over one year old, (B) in excess of one year's
sales requirements, based on the Seller's historical sales to its
continuing customers, (C) decorated or colored items (other than white) for
which the Seller has no customer purchase orders, or any item, or the
matching component to any item, which has been discontinued in the Seller's
product line or (D) discontinued by the Seller's customers for which there
are no other current customers.
(b) REVIEW BY THE SELLER. (i) Upon completion of the
certified Final Working Capital Statement, the Buyer shall promptly deliver
the same to the Seller with a notice ("Buyer's Notice of Adjustment") of
the Buyer setting forth its proposed adjustment, if any, of the Purchase
Price as contemplated by Section 2.1. The Buyer's Notice of Adjustment
will include adequate detail including, without limitation, descriptions of
any write-downs or reserves proposed by the Buyer and the reasons
therefore, to reasonably facilitate the Seller's review. During and after
the preparation of the Final Working Capital Statement until the Final
Determination Date (as defined below), the Buyer shall consult with the
Seller and its advisors and provide the Seller and its advisors with timely
access to the employees and records of the Buyer and the work papers, trial
balances and similar materials used in connection with the preparation of
the Final Working Capital Statement.
(ii) Following receipt of the Buyer's Notice of Adjustment,
the Seller will be afforded a period of 20 Business Days (the "First
20-Day Period") to review the Buyer's Notice of Adjustment. At or
before the end of the First 20-Day Period, the Seller will either (A)
accept the Final Working Capital (as set forth in the Buyer's Notice
of Adjustment) in its entirety, in which case the Final Working
Capital will be as set forth in the Buyer's Notice of Adjustment or
(B) deliver to the Buyer a written notice (the "Objection Notice")
containing a sufficiently detailed written explanation of those items
in the Final Working Capital Statement (as set forth in the Buyer's
Notice of Adjustment) which the Seller disputes, in which case the
items identified by the Seller shall be deemed to be in dispute. The
failure by the Seller to deliver the Objection Notice within the First
20-Day Period shall constitute the Seller's acceptance of the Final
Working Capital as set forth in the Buyer's Notice of Adjustment. If
the Seller delivers the Objection Notice in a timely manner, then,
within a further period of 20 Business Days from the end of the First
20-Day Period the parties and, if desired, their accountants will
attempt to resolve in good faith any disputed items and reach a
written agreement (the "Settlement Agreement") with respect thereto.
Failing such resolution, the unresolved disputed items will be
referred for final binding resolution to an independent nationally-
recognized firm of certified public accountants mutually acceptable to
the Seller and the Buyer (the "Arbitrating Accountants"), the fees and
expenses of which shall be borne equally by the Shareholders, on the
one hand, and the Buyer, on the other hand. The Final Working Capital
will be deemed to be as determined by the Arbitrating Accountants.
Such determination (the "Accountants' Determination") shall be (A) in
writing, (B) furnished to the Seller and the Buyer as soon as
practicable after the items in dispute have been referred to the
Arbitrating Accountants, (C) made in accordance with Chapter 3 of
Accounting Research Bulletin 43 and other GAAP, consistently applied
with the Seller's historical financials and (D) nonappealable and
incontestable by the Seller, any Shareholder, the Buyer or any of
their respective Affiliates and not subject to collateral attack for
any reason.
(iii) For purposes of this Section 2.5, the "Final
Determination Date" shall mean the earliest to occur of (A) the 21st
day following the receipt by the Seller of the Buyer's Notice of
Adjustment if the Seller shall have failed to deliver the Objection
Notice to the Buyer within the First 20-Day Period, (B) the date on
which either the Seller or the Buyer gives the other a written notice
to the effect that such party has no objection to the other party's
determination of the Final Working Capital, (C) the date on which the
Seller and the Buyer execute and deliver a Settlement Agreement and
(D) the date as of which the Seller and the Buyer shall have received
the Accountants' Determination.
(c) ADJUSTMENT. (i) If the Final Working Capital is
greater than $690,000 (the amount of such excess over $690,000 being
referred to herein as the "Underpayment Amount"), then, within five
Business Days following the Final Determination Date, the Buyer shall pay,
or cause to be paid, to the Seller the Underpayment Amount with interest
from the Closing Date at an annualized rate of 5%. Parent and the Buyer
shall be jointly and severally liable for the obligations of the Buyer in
this Section 2.5(c).
(ii) If the Final Working Capital is less than $640,000
(the amount of such shortfall being referred to herein as the "Overpayment
Amount"), then, within five Business Days following the Final Determination
Date, the Seller and the Shareholders shall pay, or cause to be paid, to
the Buyer the Overpayment Amount with interest from the Closing Date at an
annualized rate of 5%. The Seller and each of the Shareholders shall be
jointly and severally liable for the obligations of the Shareholders in
this Section 2.5(c).
2.6. ALLOCATION OF PURCHASE PRICE. The Purchase Price and the
Assumed Obligations that are properly treated as purchase price for Federal
income Tax purposes shall initially be allocated to the Purchased Assets in
accordance with SCHEDULE VII. The Seller and the Buyer shall complete a
Form 8594 Asset Acquisition Statement under Section 1060 of the Code
promptly upon determination of Final Working Capital at the Final
Determination Date, in a manner consistent with SCHEDULE VII; PROVIDED,
HOWEVER, that the amount of purchase price allocated to current assets in
working capital will be adjusted in accordance with Final Working Capital.
The parties shall each file a copy of such form with their respective
federal income Tax returns for the period that included the Closing Date.
None of the parties shall take any action inconsistent with the allocation
of the Purchase Price set forth on SCHEDULE VII.
2.7. CLOSING. The closing (the "Closing") for the consummation of
the transactions contemplated by this Agreement, unless another date or
place is agreed to by the parties, shall take place at the offices of
X'Xxxxxxxx Graev & Karabell, LLP, 00 Xxxxxxxxxxx Xxxxx, Xxx Xxxx, Xxx Xxxx
00000, as soon as practicable after the satisfaction or waiver (to the
extent the same may be waived) of the conditions set forth in Section 7
(such date on which the Closing is consummated being referred to herein as
the "Closing Date").
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS.
Each Shareholder severally represents and warrants to the Buyer as follows:
3.1. TITLE TO THE SHARES. Such Shareholder is the lawful owner,
of record and beneficially, of those shares of capital stock set forth
opposite his or her name on SCHEDULE VIII hereto and has good and
marketable title to such shares.
3.2. AUTHORITY; NONCONTRAVENTION; CONSENTS. (a) Such Shareholder
has full and absolute legal right, capacity, power and authority to enter
into this Agreement and any Related Document to which he or she is a party
and this Agreement and each such Related Document is the valid and binding
obligation of such Shareholder, enforceable against such Shareholder in
accordance with its terms, except as enforceability thereof may be limited
by any applicable bankruptcy, reorganization, insolvency or other Laws
affecting creditors rights generally or by general principles of equity.
(b) Except as set forth in Section 3.2 of the Disclosure Letter,
neither the execution, delivery and performance of this Agreement by such
Shareholder or any Related Document to which he or she is a party nor the
consummation of the transactions contemplated hereby or thereby nor
compliance by such Shareholder with any of the provisions hereof or thereof
will (i) conflict with, or result in any violations of, or cause a default
(with or without notice or lapse of time, or both) under, or give rise to a
right of termination, amendment, cancellation or acceleration of any
obligations contained in or the loss of any material benefit under, any
term, condition or provision of any Contract to which such Shareholder is a
party, or by which such Shareholder or any of his or her properties may be
bound or (ii) violate any Law applicable to such Shareholder or any of his
or her properties, which conflict or violation would prevent the
consummation of the transactions contemplated by this Agreement or result
in an Encumbrance on the Purchased Assets or give rise to any claim against
the Seller, the Buyer, or any Affiliate of the Buyer or have a Material
Adverse Effect.
(c) Except as contemplated by this Agreement, no Permit,
authorization, consent or approval of or by, or any notification of or
filing with, any Person or Governmental Entity is required in connection
with the execution, delivery and performance by such Shareholder of this
Agreement or any Related Document to which he or she is a party or the
consummation by such Shareholder of the transactions contemplated hereby
and thereby.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE SELLER AND THE
SHAREHOLDERS. The Seller and the Shareholders jointly and severally
represent and warrant to the Buyer and Parent as follows:
4.1. ORGANIZATION; GOOD STANDING; QUALIFICATION AND POWER. The
Seller is a corporation duly organized, validly existing and in good
standing under the Laws of the State of Virginia, has all requisite
corporate power and authority to own, lease and operate its properties and
to carry on its business as now being conducted and, except as set forth in
Section 4.1 of the disclosure letter dated the date of this Agreement (the
"Disclosure Letter") certified by the Chief Executive Officer of the Seller
and each of the Shareholders and delivered by the Seller and the
Shareholders to the Buyer, is duly qualified and in good standing to do
business in each jurisdiction in which the nature of its business or the
ownership or leasing of its properties makes such qualification necessary,
each of which jurisdictions is set forth in Section 4.1 of the Disclosure
Letter. The Seller has delivered to the Buyer true and complete copies of
the Seller's Charter and the Seller's By-laws, in each case as amended to
the date hereof.
4.2. EQUITY INVESTMENTS. Except as set forth in Section 4.2 of
the Disclosure Letter, the Seller has never had, nor does it currently
have, any subsidiaries, nor has it owned in the last five years, nor does
it currently own, any capital stock or other proprietary interest, directly
or indirectly, in any Person.
4.3. CAPITAL STOCK. The authorized capital stock of the Seller
consists of 50,000 shares of Common Stock, no par value, of which 20,000
shares are issued and outstanding. All of such issued and outstanding
shares are owned of record by the Shareholders in the amounts set forth on
SCHEDULE VIII. Other than the Common Stock described above and an option
issued to Xx. Xxxx X. Xxxxxxxxx to acquire 2,000 shares of Common Stock of
the Seller, there are no outstanding securities, options, warrants, rights
or agreements or other commitments pursuant to which the Seller is or may
become obligated to issue any shares of its capital stock, or any
securities convertible into or exercisable or exchangeable for such capital
stock.
4.4. AUTHORITY; NONCONTRAVENTION; CONSENTS. (a) The Seller has
all the requisite corporate power and authority to enter into this
Agreement and each Related Document to which it is a party and any and all
instruments necessary or appropriate in order to effectuate fully the terms
and conditions of this Agreement and each Related Document to which it is a
party and all related transactions contemplated thereby and to perform its
obligations hereunder and thereunder; the execution, delivery and
performance of this Agreement and each Related Document to which it is a
party and the consummation of the transactions contemplated hereby and
thereby have been duly and validly authorized by all necessary corporate
action on the part of the Seller; and this Agreement and each Related
Document to which it is a party has been duly and validly executed and
delivered by the Seller and this Agreement and each Related Document to
which it is a party is the valid and binding obligation of the Seller,
enforceable against the Seller in accordance with its terms, except as
enforceability thereof may be limited by any applicable bankruptcy,
reorganization, insolvency or other Laws affecting creditors rights
generally or by general principles of equity.
(b) Neither the execution, delivery and performance of this
Agreement and the Related Documents to which the Seller is a party nor the
consummation by the Seller of the transactions contemplated hereby or
thereby nor compliance by the Seller with any provision hereof will (i)
conflict with, or result in any violations of, or cause a default (with or
without notice or lapse of time, or both) under, or give rise to a right of
termination, amendment, cancellation or acceleration of any obligation
contained in or the loss of any material benefit under, or result in the
creation of any Encumbrance upon any of the Purchased Assets under any
term, condition or provision of (x) the Seller's Charter or the Seller's
By-laws or (y) except as set forth in Section 4.4(b) of the Disclosure
Letter, any Contract to which the Seller is a party or by which its
properties or assets are bound, or (ii) violate any Laws applicable to the
Seller or any of its properties.
(c) Except as set forth in Section 4.4(c) of the Disclosure
Letter, no consent, approval, Order or authorization of, registration,
declaration or filing with, or notification to any Governmental Entity or
any other third party is required in connection with the execution,
delivery and performance by the Seller of this Agreement or the Related
Documents to which it is a party or the consummation of the transactions
contemplated hereby or thereby.
4.5. FINANCIAL STATEMENTS. The Seller has previously delivered to
the Buyer:
(i) the audited balance sheets of the Seller as of December
31, 1995 and the related statements of income, stockholders' equity,
cash flows and supplemental data for the fiscal period then ended;
(ii) the draft of the audited balance sheet of the Seller as
of December 31, 1996 and the related statements of income,
stockholders' equity, cash flows and supplemental data for the fiscal
period then ended;
(iii) the internally prepared balance sheet of the Seller as
of March 31, 1997 and the related statements of income and cash flows
for the three months then ended;
(all of such statements being, collectively, the "Financial Statements,"
and the balance sheet as of December 31, 1996 being the "December Balance
Sheet" and the date thereof being the "December Balance Sheet Date").
Except as set forth in Section 4.5 of the Disclosure Letter, the Financial
Statements (i) are in accordance with the books and records of the Seller,
(ii) fairly present the financial condition of the Seller on the respective
dates indicated and the results of operations, stockholders' equity and
cash flows of the Seller for the respective periods indicated and (iii)
have been prepared in accordance with GAAP consistently applied throughout
the periods covered thereby.
4.6. ABSENCE OF UNDISCLOSED LIABILITIES. Except as set forth in
Section 4.6 of the Disclosure Letter, the Seller has no material Liability,
except for (i) Liabilities reflected in the Liabilities section of the
December Balance Sheet, (ii) Liabilities under Contracts that are set forth
in the Disclosure Letter which have arisen in the ordinary course of
business (none of which relates to a breach of contract), and
(iii) Liabilities that have arisen since the date of the December Balance
Sheet in the ordinary course of business (none of which relates to breach
of contract, breach of warranty, tort, infringement, violation of Law, or
any action, suit or Proceeding (including any Liability under any
Environmental, Health and Safety Laws)). There were no loss contingencies
(as such term is used in Statement of Financial Accounting Standards No. 5
issued by the Financial Accounting Standards Board in March 1975) that were
not adequately provided for on the December Balance Sheet and the related
Financial Statements for the period then ended. Except as set forth in
Section 4.6 of the Disclosure Letter, the Seller has not, either expressly
or by operation of law, assumed or undertaken any Liability of any other
Person, including, without limitation, any obligation for corrective or
remedial action relating to Environmental, Health and Safety Laws.
4.7. ABSENCE OF CHANGES. Except as set forth in Section 4.7 of
the Disclosure Letter, since December 31, 1996, there has not been any
Material Adverse Change. Since that date, except as set forth in Section
4.7 of the Disclosure Letter, the Seller has been operated in the ordinary
course, consistent with past practice, and:
(a) no fee, interest, dividend, royalty or any other payment
of any kind has been made by the Seller to any Shareholder or any
Affiliate of the Seller or any Shareholder;
(b) no party (including the Seller) has accelerated,
terminated, modified or canceled any Contract (or series of related
Contracts) involving more than $5,000 to which the Seller is a party
or by which the Seller is bound and, to the Best Knowledge of the
Seller and the Shareholders, no party intends to take any such action;
(c) the Seller has not experienced any material damage,
destruction, or loss (whether or not covered by insurance) to its
property;
(d) the Seller has not taken any action that would violate
any of the negative covenants set forth in Section 6.2 of this
Agreement; and
(e) there has been no agreement, understanding or
authorization, whether in writing or otherwise, for the Seller to take
any of the actions specified in items (a) through (d) above.
4.8. TAX MATTERS. Except as set forth in Section 4.8 of the
Disclosure Letter, the Seller (a) has paid all Taxes required to be paid by
it through the date hereof and (b) has filed or caused to be filed in a
timely manner (within any applicable extension periods) all Tax Returns
with appropriate Governmental Entities in all jurisdictions in which the
Tax Returns are required to be filed, and all such Tax Returns are true and
complete. The Seller is not, nor has it ever been, included in any
consolidated or combined Tax Return for Federal, state or local Tax
purposes or is it a member of an affiliated group within the meaning of
Section 1504 of the Code. All Taxes, including those shown to be due on
each of the Tax Returns, have been timely paid in full. No Tax liens have
been filed and neither the Seller nor any Shareholder has been notified by
the Internal Revenue Service or any other taxing authority that any issues
have been raised (and are currently pending) by the Internal Revenue
Service or any other taxing authority in connection with any Tax Return,
and no waivers of statutes of limitation have been given or requested with
respect to the Seller. To the Best Knowledge of the Seller and the
Shareholder, there are no pending Tax audits of any Tax Returns. No
unresolved deficiencies or additions to Taxes have been proposed, asserted
or assessed against the Seller. The Seller has no predecessors, nor is it
a member of any affiliated or combined group. The Seller has made full and
adequate provision (i) on the December Balance Sheet for all Taxes payable
by it for all periods prior to the date thereof, and (ii) on its books for
all Taxes payable by it for all periods beginning on or after such date.
The Seller has not incurred any Tax Liability since the December Balance
Sheet Date, except for Taxes incurred in the ordinary course of business.
The Seller has not made an election to be treated as a "consenting
corporation" under Section 341(f) of the Code and the Seller is not nor has
it ever been a "personal holding company" within the meaning of Section 542
of the Code. The Seller has complied in all material respects with all
applicable Laws relating to the payment and withholding of Taxes and has
withheld and paid over all amounts required by Law to be withheld and paid
from the wages or salaries of employees, and the Seller is not liable for
any Taxes for failure to comply with such Laws. The Seller neither is nor
has it ever been a party to any Tax sharing agreement. The Seller has been
a "small business corporation" (within the meaning of Section 1361 of the
Code) for all taxable years beginning after 1984, and has duly elected
under Section 1362(a) of the Code to be taxed as an "S corporation" for
Federal income tax purposes. The Seller is treated as an "S" corporation
under Virginia law. The Seller has not agreed to nor is it required to
make any adjustments pursuant to Section 481 of the Code, and the Internal
Revenue Service has not proposed any such adjustments or changes in the
Seller's accounting method. There is no Contract covering any Person that
individually or collectively could, as a result of the transactions
contemplated hereby, or otherwise, give rise to the payment of any amount
being non-deductible by the Seller by reason of Section 280(G) of the Code.
4.9. TITLE TO ASSETS, PROPERTIES AND RIGHTS AND RELATED MATTERS.
The Seller has good title to the Intellectual Property Rights as provided
in Section 4.11 and to all other assets, properties and interests in
properties, real, personal or mixed, reflected on the December Balance
Sheet or acquired after the December Balance Sheet Date (except inventory
or other property sold or otherwise disposed of since the December Balance
Sheet Date in the ordinary course of business and accounts receivable and
notes receivable paid in full subsequent to the December Balance Sheet
Date), free and clear of all Encumbrances, of any kind or character, except
for those Encumbrances set forth in Section 4.9 of the Disclosure Letter
and Permitted Encumbrances. To the Best Knowledge of the Seller and the
Shareholders and except as set forth on Schedule 4.9 of the Disclosure
Letter, there does not exist any condition which materially interferes with
the economic value or use of any such assets. Except for inventory and
supplies in transit in the ordinary course of business, all material
tangible personal property owned by the Seller is located on the premises
of the Seller. Except as set forth in Section 4.9 of the Disclosure
Letter, the Purchased Assets are in good operating condition (ordinary wear
and tear excepted). Except as set forth in Section 4.9 of the Disclosure
Letter, the assets, properties and interests in properties of the Seller to
be owned by the Buyer after the Closing shall include all assets,
properties and interests in properties (real, personal and mixed, tangible
and intangible) and all Contracts necessary to enable the Buyer to carry on
the Subject Business as presently conducted by the Seller.
4.10. REAL PROPERTY-OWNED. (a) Section 4.10 of the Disclosure
Letter contains a list and brief description of all of the Real Property.
The Real Property constitutes all real properties used or occupied by the
Seller in connection with the Subject Business.
(b) With respect to the Real Property, except as set forth in
Section 4.10 of the Disclosure Letter:
(i) no portion thereof is subject to any pending
condemnation Proceeding or Proceeding by any public or quasi-public
authority and, to the Best Knowledge of the Seller and the
Shareholders, there is no threatened condemnation or Proceeding with
respect thereto;
(ii) the physical condition of the Real Property is
sufficient to permit the continued conduct of the Subject Business as
presently conducted subject to the provision of usual and customary
maintenance and repair performed in the ordinary course with respect
to similar properties of like age and construction;
(iii) no notice of any increase in the assessed valuation of
the Real Property and no notice of any contemplated special assessment
has been received by the Seller and to the Best Knowledge of the
Seller and the Shareholders, there is no threatened special assessment
pertaining to any of the Real Property; and
(iv) there are no Contracts, written or oral, to which the
Seller is a party, granting to any party or parties the right of use
or occupancy of any portion of the parcels of the Real Property.
4.11. INTELLECTUAL PROPERTY. Except in each case as set forth in
Section 4.11 of the Disclosure Letter:
(a) the Seller owns, has the right to use, sell, license and
dispose of, and has the right to bring actions for the infringement
of, and, where necessary, in the Seller's reasonable opinion, has made
timely and proper application for all Intellectual Property Rights
necessary or required for the conduct of the Subject Business as
currently conducted (such Intellectual Property Rights, collectively,
the "Requisite Rights") and such rights to use, sell, license, dispose
of and bring actions are exclusive with respect to Requisite Rights
developed by the Seller and in the Seller's reasonable opinion are
sufficient for such conduct of the Subject Business as currently
conducted by the Seller in the case of all other Requisite Rights;
(b) there are no royalties, honoraria, fees or other
payments payable by the Seller to any Person by reason of the
ownership, use, license, sale or disposition of Requisite Rights;
(c) no activity, service or procedure currently conducted by
the Seller violates or will violate any Contract of the Seller with
any third party or infringe any Intellectual Property Right of any
other party;
(d) the Seller has not received from any third party in the
past five years any notice, charge, claim or other assertion that the
Seller is infringing any Intellectual Property Right of any third
party or committed any acts of unfair competition, and no such claim
is impliedly threatened by an offer to license from a third party
under a claim of use; and
(e) the Seller has not sent to any third party in the past
five years nor otherwise communicated to another Person any notice,
charge, claim or other assertion of, or has any knowledge of, present,
impending or threatened infringement by, or misappropriation of any
Intellectual Property Right of the Seller by such other Person or any
acts of unfair competition by such other Person.
Section 4.11 of the Disclosure Letter contains a true and complete list of
all applications, filings and other formal actions made or taken pursuant
to Federal, state, local and foreign Laws by the Seller to perfect or
protect its interest in the Requisite Rights, including, without
limitation, all patents, patent applications, trademarks, trademark
applications, service marks and service xxxx applications.
4.12. AGREEMENTS, NO DEFAULTS, ETC. Except in each case as set
forth in Section 4.12 of the Disclosure Letter, the Seller is not a party
to any:
(a) Contract for the employment of any officer, individual
employee or other Person on a full-time, part-time, consulting or
other basis or agreement with any Affiliates, other than advances in
the ordinary course of business;
(b) Contract relating to the borrowing of money or to the
mortgaging, pledging or otherwise placing an Encumbrance on any asset
or group of assets of the Seller;
(c) Contract relating to any guarantee of any obligation
for borrowed money or otherwise;
(d) Contract with respect to the lending or investing of
funds;
(e) Contract or indemnification with respect to any form of
intangible property, including any Intellectual Property Rights or
confidential information;
(f) Contract or group of related Contracts with the same
party (excluding purchase orders entered into in the ordinary course
of business which are to be completed within three months of entering
into such purchase orders) for the purchase or sale of products or
services under which the undelivered balance of such products and
services has a selling price in excess of $5,000;
(g) Contract that prohibits it from freely engaging in
business anywhere in the world;
(h) other Contract (x) that is not terminable by either
party without penalty upon advance notice of 30 days or less and
involves aggregate consideration in excess of $5,000 or (y) that
involves aggregate consideration in excess of $10,000 (excluding in
the case of clauses (x) and (y) above any purchase order entered into
in the ordinary course of business which is to be completed within
three months of entering into such purchase orders); or
(i) other Contract material to the Subject Business.
Except as set forth in Section 4.12 of the Disclosure Letter, there are no
vehicles, boats, aircraft, apartments or other residential or recreational
properties or facilities owned or operated by the Seller for executive,
administrative or sales purposes or any social club memberships owned or
paid for by it. Except as set forth in Section 4.12 of the Disclosure
Letter, the Seller has in all material respects performed all the
obligations required to be performed by it to date and is not in default or
alleged to be in default in any material respect under any Contract, and
there exists no event, condition or occurrence which, after notice or lapse
of time, or both, would constitute such a material default by the Seller of
any of the foregoing. The Seller has furnished to the Buyer, Parent or the
Affiliates of either of them true and complete copies of all documents
listed in Section 4.12 of the Disclosure Letter or complete descriptions of
all material terms of any oral Contracts listed in Section 4.12 of the
Disclosure Letter.
4.13. LITIGATION, ETC. Except as set forth in Section 4.13 of the
Disclosure Letter, there are no (i) Proceedings pending or, to the Best
Knowledge of the Seller and the Shareholders, threatened against the
Seller, whether at law or in equity, or before or by any Governmental
Entity or arbitrator or (ii) Orders of any Governmental Entity or
arbitrator against the Seller. The Seller has delivered to the Buyer all
material documents and correspondence relating to such matters referred to
in Section 4.13 of the Disclosure Letter.
4.14. COMPLIANCE; GOVERNMENTAL AUTHORIZATIONS. Except as set
forth in Section 4.14 of the Disclosure Letter, the Subject Business has
not and is not being conducted in violation in any material respect of any
Law, Order or Permit, including, without limitation, Environmental, Health
and Safety Laws. Except as set forth in Section 4.14 of the Disclosure
Letter, no investigation or review by any Governmental Entity with respect
to the Seller is pending or, to the Best Knowledge of the Seller and the
Shareholders, threatened, nor has any Governmental Entity notified the
Seller of its intention to conduct the same. The Seller has all Permits
necessary for the conduct of its business, including those required under
any Environmental, Health and Safety Laws, such Permits are in full force
and effect, no violations are or have been recorded in respect of any
thereof and no Proceeding is pending or, to the Best Knowledge of the
Seller and the Shareholders, threatened to revoke or limit any thereof.
Section 4.14 of the Disclosure Letter contains a true and complete list of
all material Permits under which the Seller is operating or bound, and the
Seller has furnished to the Buyer, Parent or the Affiliates of either of
them true and complete copies thereof.
4.15. LABOR RELATIONS; EMPLOYEES. Except as set forth in Section
4.15 of the Disclosure Letter, (i) the Seller is not delinquent in payments
to any of its employees for any wages, salaries, commissions, bonuses or
other direct compensation for any services performed by them to date or
amounts required to be reimbursed to such employees, (ii) upon termination
of the employment of any such employees, neither the Seller nor the Buyer
will by reason of any action taken or not taken, which is required to be
taken by the Seller, prior to the Closing be liable to any of such
employees for severance pay or any other payments, (iii) the Seller is in
compliance in all material respects with all Laws respecting labor,
employment and employment practices, terms and conditions of employment and
wages and hours, (iv) there is no unfair labor practice complaint against
the Seller pending before the National Labor Relations Board or any other
Governmental Entity, (v) there is no labor strike, material dispute or
grievance, slowdown or stoppage actually pending or, to the Best Knowledge
of the Seller and the Shareholders, threatened against or involving the
Seller, (vi) no labor union currently represents the employees of the
Seller and, to the Best Knowledge of the Seller and the Shareholders, no
labor union has taken any action with respect to organizing the employees
of the Seller, and (vii) no key employee has informed the Seller, any
Shareholder or any senior executive of the Seller that such employee will
or may terminate his or her employment or engagement with the Seller. The
Seller is not a party to or bound by any collective bargaining agreement,
union Contract or similar agreement.
4.16. ERISA COMPLIANCE. (a) Set forth in Section 4.16 of the
Disclosure Letter is a true and complete list of all Employee Plans. All
Employee Plans have been operated and administered in compliance in all
material respects with ERISA, the Code and other applicable Laws.
(b) Except as set forth in Section 4.16 of the Disclosure
Letter:
(i) neither the Seller nor any of its ERISA Affiliates, nor
to the Best Knowledge of the Seller and its ERISA Affiliates, any
other "disqualified person" or "party in interest" (as such terms are
defined in Section 4975 of the Code and Section 3(14) of ERISA,
respectively) with respect to an Employee Plan has breached the
fiduciary rules of ERISA or engaged in a prohibited transaction that
could subject the Seller or any of its ERISA Affiliates to any Tax or
penalty imposed under Section 4975 of the Code or Section 502(i), (j)
or (l) of ERISA;
(ii) all required or declared Seller contributions (or
premium payments) to (or in respect of) all Employee Plans have been
properly made when due, and the Seller has timely deposited all
amounts withheld from employees for pension, welfare or other benefits
into the appropriate trusts or accounts;
(iii) no Proceedings (other than routine claims for
benefits) are pending, or to the Best Knowledge of the Seller,
threatened, with respect to or involving any Employee Plan;
(iv) none of the Employee Plans obligate the Seller to
provide any employee or former employee, or their spouses, family
members or beneficiaries, any post-employment or post-retirement
health or life insurance, accident or other "welfare-type" benefits;
(v) each Employee Plan that is a "group health plan" within
the meaning of Section 5000 of the Code has been maintained in
compliance with Section 4980B of the Code and Title I, Subtitle B,
Part 6 of ERISA and no tax payable on account of Section 4980B of the
Code has been or is expected to be incurred;
(vi) neither the Seller nor any of its ERISA Affiliates is
or has ever maintained or been obligated to contribute to a "multiple
employer plan" (as defined in Section 413 of the Code), a
"multiemployer plan" (as defined in Section 3(37) of ERISA), a
"defined benefit pension plan" (as defined in Section 3(35) of ERISA)
or a "defined contribution plan" (as defined in Section 3(34) of
ERISA); and
(vii) all reporting and disclosure obligations imposed under
ERISA and the Code have been satisfied with respect to each Employee
Plan.
(c) The Seller has provided the Buyer with true and complete
copies of all documents pursuant to which each Employee Plan is maintained
and administered, the two most recent annual reports (Form 5500 and
attachments) and financial statements therefor, all governmental rulings,
determinations, and opinions (and pending requests therefor), and the most
recent valuation (but in any case one that has been completed within the
last calendar year) of the present and future obligations under each
Employee Plan that provides post-retirement or post-employment health and
life insurance, accident, or other "welfare-type" benefits. The foregoing
documents accurately reflect all material terms of each of the Employee
Plans (including, without limitation, any agreement or provision which
would limit the ability of the Seller to make any prospective amendments or
terminate any Employee Plan).
4.17. ENVIRONMENTAL MATTERS. (a) Neither the Seller nor any of
its past owned or leased property or operations are subject to or the
subject of, any Proceeding, Order, settlement, or other Contract arising
under Environmental, Health and Safety Laws, nor, to the Best Knowledge of
the Seller and the Shareholders, has any investigation been commenced or is
any Proceeding threatened against the Seller under the Environmental,
Health and Safety Laws with regard to the Subject Business. For purposes
of this Section 4.17, the term "Seller" shall include any predecessor of
the Seller, including any Person to whose Liabilities the Seller may have
succeeded, in whole or in part, pursuant to Environmental, Health and
Safety Laws, contract, common Law or the operation of Law.
(b) Except as set forth in Section 4.17 of the Disclosure
Letter, neither the Seller nor any Shareholder has received any written or
oral notice, report or other information that the Seller is potentially
responsible under the Environmental, Health and Safety Laws for any
damages, sanctions or remedies, including for response costs or natural
resource damages, as those terms are defined under the Environmental,
Health and Safety Laws, at any location and the Seller has not transported
or disposed of, or allowed or arranged for any third party to transport to
or dispose of, any Hazardous Materials at any location that was then or
since has been (1) included on the National Priorities List, as defined
under CERCLA, (2) proposed for inclusion on that List, or (3) included on
the CERCLIS database prepared under CERCLA or any analogous list prepared
by any state.
(c) Section 4.17 of the Disclosure Letter sets forth a complete
and accurate list of all properties and facilities previously owned or
operated by the Seller. Except as set forth in Section 4.17 of the
Disclosure Letter, none of the following has existed or occurred at any
such property or facility or at any of the Real Property either (1) at any
time when owned or operated by the Seller or (2) to the Best Knowledge of
the Seller and the Shareholders, at any time prior to when owned or
operated by the Seller: a release of Hazardous Materials in an amount then
or now exceeding a reportable quantity as defined under, or in a manner
that then or now would support an Order by a Governmental Entity under,
Environmental, Health and Safety Laws; hazardous waste treatment, storage
or disposal facilities, as those terms are defined under the Environmental,
Health and Safety Laws; any asbestos-containing material, underground
storage tank, aboveground storage tank, landfill, waste pile, other waste
disposal area, surface impoundment, or article or equipment containing
polychlorinated biphenyls; and no facts, events or conditions that would
prevent compliance by the Seller with, or could give rise to any Liability
or corrective or remedial obligation of the Seller under, Environmental,
Health and Safety Laws.
(d) The Seller has provided the Buyer, Parent or an Affiliate of
either of them with correct and complete copies of all reports and studies
performed by or on behalf of, or within the possession or control of, the
Seller with respect to past or present environmental conditions or events
at any of the Real Property or any property formerly owned, leased, or
operated by the Seller, and to the Best Knowledge of the Seller and the
Shareholders, there are no other environmental reports or studies with
respect thereto, other than as contemplated hereby.
(e) Except as set forth in Section 4.17 of the Disclosure
Letter, the Seller has not by Contract, consent Order or other agreement
assumed (1) any obligations or Liabilities of any other Person arising
under Environmental, Health and Safety Laws or (2) responsibility for,
either directly or indirectly, the remediation of any condition arising
from or relating to the release or threatened release of Hazardous
Materials.
4.18. BROKERS. None of the Seller or any of its officers,
directors, Shareholders or employees (or any Affiliate of the foregoing)
have employed any broker or finder or incurred any Liability for any
brokerage fees, commissions or finders' fees in connection with the
transactions contemplated hereby.
4.19. RELATED TRANSACTIONS. Except as set forth in Section 4.19
of the Disclosure Letter, and except for compensation to regular employees
of the Seller, no current or former Affiliate of the Seller or any
associate (as defined in the rules promulgated under the Securities
Exchange Act of 1934, as amended) thereof, is now, or has been during the
last five fiscal years, (i) a party to any transaction or Contract with the
Seller, or (ii) other than Xxxx Xxxxxxxxx and his Affiliates as to which
the Seller and the Shareholders have no knowledge, the direct or indirect
owner of an interest in any Person which is a competitor, supplier or
customer of the Seller (other than non-affiliated holdings in publicly-held
companies), nor does any such Person receive income from any source other
than the Seller which relates to the business of, or should properly accrue
to, the Seller.
4.20. ACCOUNTS AND NOTES RECEIVABLE. Except as set forth in
Section 4.20 of the Disclosure Letter and as reserved against in the
December Balance Sheet, all the accounts receivable and notes receivable
owing to the Seller as of the date hereof constitute, and as of the Closing
will constitute, valid and enforceable claims arising from bona fide
transactions in the ordinary course of business, and there are no known or
asserted claims, refusals to pay or other rights of set-off against any
thereof. Except as set forth in Section 4.20 of the Disclosure Letter, as
of the date hereof, there is (i) no account debtor or note debtor
delinquent in its payment by more than 90 days, (ii) no account debtor or
note debtor that has refused or, to the Best Knowledge of the Seller and
the Shareholders, threatened to refuse to pay its obligations for any
reason, (iii) to the Best Knowledge of the Seller and the Shareholders, no
account debtor or note debtor that is insolvent or bankrupt and (iv) no
account receivable or note receivable pledged to any third party by the
Seller.
4.21. ACCOUNTS AND NOTES PAYABLE. Except as set forth in Section
4.21 of the Disclosure Letter, all accounts payable and notes payable by
the Seller to third parties as of the date hereof arose, and as of the
Closing will have arisen, in the ordinary course of business, and, except
as set forth in Section 4.21 of the Disclosure Letter, there is no such
account payable or note payable more than 30 days past due, except those
contested in good faith.
4.22. INVENTORIES. Except to the extent written down on the books
of account of the Seller or reserved against thereon, the inventories of
the Seller as of the date hereof are of good, usable and merchantable
quality. Except to the extent written down on the books of account of the
Seller or reserved against thereon, the Seller's inventory includes no
items which are below customary quality control standards of the plastics
industry and any applicable governmental quality control, or of a quality
or quantity not usable or salable in the normal course of business (it
being understood that inventory not usable or saleable within one year
constitutes obsolete inventory). The aggregate value of the inventory has
been written down on the books of account of the Seller to realizable
market value or adequate reserves have been provided in accordance with
GAAP.
4.23. WARRANTIES OF PRODUCTS; PRODUCTS LIABILITY; REGULATORY
COMPLIANCE. (a) Except to the extent written down on the books of account
of the Seller or reserved against thereon, each group of products
manufactured, sold, distributed, used or held in inventory by the Seller
is, subject to customary and reasonable tolerances, free from any
significant defects in workmanship and materials, and conforms in all
material respects with all customary and reasonable standards for products
of such type.
(b) Neither the United States Food and Drug Administration nor
any other Governmental Entity regulating the marketing, testing or
advertising of any of the products currently manufactured, sold,
distributed or used in connection with the Subject Business has requested
that any such product be removed from the market, that substantial new
product testing be undertaken as a condition to the continued
manufacturing, selling, distribution or use of any such product or that
such product be modified in a way likely to have a Material Adverse Effect.
4.24. SUPPLIERS AND VENDORS. Except as set forth in Section 4.24
of the Disclosure Letter and except in the ordinary course of business,
since January 1, 1996, whether as a result of the transactions contemplated
hereby or otherwise, no material supplier or vendor of the Seller has
canceled or otherwise terminated, or threatened to cancel or otherwise
terminate, its relationship with the Seller or has decreased, limited or
otherwise modified, or threatened to decrease, limit or otherwise modify,
the services, supplies or materials it provides to the Seller.
4.25. CUSTOMERS. Except to the extent any such business
relationship is impaired solely by virtue of an account or note receivable
past 90 days due as disclosed in Section 4.25 of the Disclosure Letter, to
the Best Knowledge of the Seller and the Shareholders, the business
relationship between the Seller and its customers is generally good and no
material disagreement or problem exists between the Seller and any
customer. Except as set forth in Section 4.25 of the Disclosure Letter, no
customer to which more than $20,000 of the Seller's annual sales are
attributable has threatened, or has notified the Seller that it intends, to
terminate its relationship and dealings with the Seller, whether as a
result of the transactions contemplated by this Agreement or otherwise.
4.26. DISCLOSURE. To the Best Knowledge of the Seller and the
Shareholders, neither this Agreement nor any of the schedules, attachments
or exhibits hereto contains any untrue statement of a material fact or
omits a material fact necessary to make the statements contained herein or
therein, taken as a whole, in light of the circumstances in which they were
made, not misleading. There is no fact that has not been disclosed to the
parties referred to above of which Xxx X. Xxxxxxxxx, Xxxxxxxx X. Xxxxxxxxx
or Xxxxxx Xxxxxxx is aware and which constitutes or could reasonably be
anticipated to result in a Material Adverse Change.
SECTION 5. REPRESENTATIONS AND WARRANTIES OF THE BUYER. The
Buyer represents and warrants to the Seller and the Shareholders as
follows:
5.1. AUTHORITY. Each of Parent and the Buyer has all requisite
power and authority to enter into this Agreement and the Related Documents
to which it is a party, to perform its obligations hereunder and thereunder
and to consummate the transactions contemplated hereby and thereby; the
execution, delivery and performance by each of Parent and the Buyer of this
Agreement and the Related Documents to which it is a party and the
consummation of the transactions contemplated hereby and thereby have been
duly authorized by all necessary action on the part of Parent and the
Buyer; and this Agreement and the Related Documents to which Parent or the
Buyer is a party has been duly executed and delivered by such party and
constitute the valid and legally binding obligations of such party,
enforceable in accordance with its terms and conditions, except as
enforceability thereof may be limited by any applicable bankruptcy,
reorganization, insolvency or other Laws affecting creditors' rights
generally or by general principles of equity.
5.2. NONCONTRAVENTION; CONSENTS. (a) Neither the execution and
delivery of this Agreement and the Related Documents to which Parent or the
Buyer is a party nor the consummation of the transactions contemplated
hereby or thereby by Parent or the Buyer shall (i) violate any Law, the
result of which would prevent the consummation by Parent and the Buyer of
the transactions contemplated hereby or (ii) other than with respect to the
Financing and Security Agreement by and between Nations Bank, N.A. and
Parent dated as of January 21, 1997, conflict with, result in a breach of,
constitute a default under, result in the acceleration of, create in any
party the right to accelerate, terminate, modify, or cancel, or require any
notice under any Contract to which Parent or the Buyer is a party or by
which Parent or the Buyer is bound or to which any of their respective
properties is subject the result of which would prevent the consummation by
Parent and the Buyer of the transactions contemplated hereby.
(b) Except as contemplated by this Agreement or any Related
Document, no material permit, authorization, consent or approval of or by,
or any material notification of or filing with, any Person (governmental or
private) is required in connection with the execution, delivery and
performance by Parent and the Buyer of this Agreement and the Related
Documents to which either Parent or the Buyer is a party or the
consummation by Parent and the Buyer of the transactions contemplated
hereby or thereby.
5.3. BROKERS. Neither Parent, the Buyer nor any of their
respective officers, directors, stockholders or employees (or any Affiliate
of any of the foregoing) has employed any broker or finder or incurred any
Liability for any brokerage fees, commissions or finders' fees in
connection with the transactions contemplated hereby.
SECTION 6. CONDUCT AND TRANSACTIONS PRIOR TO THE CLOSING;
ADDITIONAL PRE-CLOSING AGREEMENTS.
6.1. AFFIRMATIVE COVENANTS OF THE SELLER. From and after the date
of this Agreement until the Closing or the earlier termination of this
Agreement pursuant to Section 10.1 (the "Transition Period"), except as
otherwise consented to in writing by the Buyer, the Seller shall, and the
Shareholders shall cause the Seller to:
(a) conduct the operations of the Seller according to the
ordinary and usual course of business consistent with past custom and
practice (including the collection of receivables, the payment of
payables and the maintenance of supplies) and use best efforts to
preserve intact its business organization, keep available the services
of officers and employees, and maintain satisfactory relationships
with suppliers, customers and others having business relationships
with them;
(b) maintain the assets of the Seller in customary repair,
order and condition, maintain insurance reasonably comparable to that
in effect on the December Balance Sheet Date, replace in accordance
with past practice inoperable, worn out or obsolete assets with modern
assets of comparable quality and, in the event of a casualty, loss or
damage to any of such assets or properties prior to the Closing Date
for which the Seller is insured or the condemnation of any assets or
properties, either repair or replace such assets or property or, if
the Buyer agrees, cause the Seller to retain such insurance or
condemnation proceeds;
(c) promptly inform the Buyer in writing of any material
variances from the representations and warranties contained in Section
4; and
(d) permit representatives of the Buyer to have full access
to the Seller's books, records, property, facilities, customers,
suppliers, sales representatives, consultants, key employees and
independent accountants in connection with the Buyer's due diligence
review of the Seller (it being understood that such investigation
shall in no way affect or otherwise obviate or diminish any
representations or warranties of the Seller or the Shareholders, or
conditions to the obligations of the Buyer, in each case as set forth
herein).
6.2. NEGATIVE COVENANTS OF THE SELLER. During the Transition
Period, without the prior written consent of the Buyer, except as expressly
contemplated by this Agreement or the Related Documents, the Seller shall
not, and the Shareholders shall cause the Seller not to:
(a) sell, lease, transfer or assign any of the assets of
the Seller, tangible or intangible, other than inventory in the
ordinary course of business consistent with past custom and practice;
(b) delay or postpone the payment of accounts payable and
other obligations and Liabilities or accelerate the collection of
accounts receivable, other than in the ordinary course of business
consistent with past custom and practice (provided that the Seller may
delay the payment of accounts payable as cash flow dictates);
(c) enter into any Contract (or series of related
Contracts) other than in the ordinary course of business or with
respect to the design of a line of tamper evident lids;
(d) enter into any employment Contract or collective
bargaining agreement, written or oral, or modify the terms of any
existing such Contract;
(e) grant any increase in the base compensation of any of
the officers or employees of the Seller other than in the ordinary
course of business consistent with past custom and practice;
(f) adopt, amend, modify or terminate any bonus, profit-
sharing, incentive, severance or other plan, Contract or commitment
for the benefit of any of the officers or employees of the Seller;
(g) other than as contemplated by this Agreement or any
Related Document, enter into any transaction with any of the officers,
employees or Affiliates of the Seller (or any directors, officers or
employees of such Affiliate), other than ordinary course employment
arrangements entered into in accordance with past custom or practice;
(h) in any manner take or cause to be taken any action
which is designed, intended or might reasonably be anticipated to have
the effect of discouraging customers, employees, suppliers, lessors
and other associates of the Seller from maintaining the same business
relationships with the Seller after the date of this Agreement as were
maintained with the Seller prior to the date of this Agreement; or
(i) intentionally take any action which would require
disclosure under Section 6.1(c).
6.3. CONFIDENTIALITY. Each Shareholder agrees that all
confidential or proprietary information or workproducts relating to the
Subject Business or the Purchased Assets which is known to such Shareholder
as of the Closing Date is the sole property of the Seller. Each
Shareholder agrees that it will not use or disclose such information or
workproduct except for the benefit of the Seller, and such Shareholder will
take reasonable steps to protect such information and workproduct from
misuse, loss, theft or accidental disclosure.
6.4. CONSENTS. Each party shall use its reasonable best efforts,
and the other party shall cooperate with such efforts, to obtain any
consents and approvals of, or effect the notification of or filing with,
each Person or authority, whether private or governmental, whose consent or
approval is required in order to permit the consummation of the
transactions contemplated hereby.
6.5. EFFORTS TO CONSUMMATE. Subject to the terms and conditions
herein provided, the parties shall do or cause to be done all such
reasonable acts and things as may be necessary, proper or advisable,
consistent with all applicable Laws, to consummate and make effective the
transactions contemplated hereby as soon as reasonably practicable.
6.6. NOTICE OF PROSPECTIVE BREACH. Each party shall immediately
notify the other parties in writing upon the occurrence, or failure to
occur, of any event, which occurrence or failure to occur would be
reasonably likely to cause (i) any representation or warranty contained in
this Agreement to be untrue or inaccurate in any material respect at any
time from the date of this Agreement to the Closing as if such
representation and warranty were made at such time or (ii) any material
failure of any party hereto or any officer, director, employee or agent
thereof, to comply with or satisfy any covenant, condition or agreement to
be complied with or satisfied by it under this Agreement.
6.7. PUBLIC ANNOUNCEMENTS. Each party agrees that, except (i) as
otherwise required by Law or public disclosure obligations of any party and
(ii) for disclosure to its respective directors, officers, employees,
financial advisors, potential financing sources, legal counsel, independent
certified public accountants or other agents, advisors or representatives
on a need-to-know basis and with whom such party has a confidential
relationship, it will not issue any reports, statements or releases, in
each case pertaining to this Agreement or the transactions contemplated
hereby, without the prior written consent of the Seller or the Buyer, as
the case may be, which consent shall not unreasonably be withheld or
delayed; PROVIDED, HOWEVER, that the Seller may disclose such information
to its employees after the execution of this Agreement as it deems
necessary provided that the Seller shall have given prior written notice to
the Buyer of its intent to make such disclosure.
6.8. NEGOTIATION WITH OTHERS. (a) During the Transition Period,
the Seller and the Shareholders shall deal exclusively with the Buyer and
its Affiliates regarding the acquisition of or investment in the Seller,
whether by way of merger, purchase of capital stock, purchase of assets or
otherwise (a "Potential Transaction") and, without the prior written
consent of the Buyer, neither the Seller nor any Shareholder shall, and the
Shareholders shall cause the Seller not to, directly or indirectly, (i)
solicit, initiate discussions with or engage in negotiations with any
Person (whether such negotiations are initiated by the Seller or any
Shareholder or otherwise), other than the Buyer or a party designated by
the Buyer, relating to a Potential Transaction, (ii) provide information or
documentation with respect to the Seller or the Subject Business to any
Person, other than the Buyer or a party designated by the Buyer, relating
to a Potential Transaction or (iii) enter into an agreement with any
Person, other than the Buyer, providing for any Potential Transaction. If
the Seller or any Shareholder receives an unsolicited inquiry, offer or
proposal relating to any of the above, the Seller or such Shareholder shall
immediately notify the Buyer thereof. The Seller and the Shareholders
represent to the Buyer that they are not bound to negotiate a Potential
Transaction with any other Person.
(b) The parties recognize and acknowledge that a breach by the
Seller or any Shareholder of this Section 6.8 will cause irreparable and
material loss and damage to the Buyer and its Affiliates as to which it
will not have an adequate remedy at law or in damages. Accordingly, each
party acknowledges and agrees that the issuance of an injunction or other
equitable remedy is an appropriate remedy for any such breach.
SECTION 7. CONDITIONS.
7.1. CONDITIONS TO EACH PARTY'S OBLIGATIONS. The respective
obligations of each party to effect the transactions contemplated hereby
are subject to the satisfaction prior to the Closing Date of the following
conditions unless waived (to the extent such conditions can be waived) by
the Buyer or the Seller, as applicable:
(a) APPROVALS. All authorizations, consents, Orders or
approvals of, or declarations or filings with, or expiration of
waiting periods imposed by, any Governmental Entity necessary for the
consummation of the transactions contemplated hereby shall have been
obtained or made.
(b) NO INJUNCTIONS OR RESTRAINTS. No temporary restraining
order, preliminary or permanent injunction or other Order issued by
any Governmental Entity nor other legal restraint or prohibition
preventing the consummation of the transactions contemplated hereby
shall be in effect.
(c) STATUTES. No action shall have been taken or
threatened, and no Law or Order shall have been enacted, promulgated
or issued or deemed applicable to the transactions contemplated hereby
by any Governmental Entity that would (i) make the consummation of the
transactions contemplated hereby illegal or substantially delay the
consummation of any material aspect of the transactions contemplated
hereby, (ii) compel the Seller or the Buyer to dispose or hold
separate all or a material portion of the business or assets of the
Seller, the Buyer or any Affiliate thereof as a result of the
consummation of the transactions contemplated hereby or (iii) render
any party unable to consummate the transactions contemplated hereby.
7.2. CONDITIONS TO OBLIGATIONS OF THE BUYER. The obligations of
the Buyer to purchase the Purchased Assets and consummate the transactions
contemplated hereby are subject to the satisfaction of the following
conditions unless waived (to the extent such conditions can be waived) by
the Buyer:
(a) ACCURACY OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties made by the Seller and the Shareholders
in this Agreement shall be true and correct in all material respects
(except for such representations and warranties which are qualified by
their terms by a reference to materiality, which representations and
warranties as so qualified shall be true in all respects) at and as of
the Closing Date with the same effect as if such representations and
warranties had been made at and as of the Closing Date, and the Buyer
shall have received a certificate signed by the Chief Executive
Officer of the Seller and the Shareholders to that effect.
(b) PERFORMANCE OF OBLIGATIONS OF THE SELLER AND THE
SHAREHOLDERS. The Seller and the Shareholders shall have performed in
all material respects all obligations and covenants required to be
performed by them under this Agreement as of the Closing Date, and the
Buyer shall have received a certificate signed by the Chief Executive
Officer of the Seller and the Shareholders to that effect.
(c) AUTHORIZATION. All action necessary to authorize the
execution, delivery and performance of this Agreement and the Related
Documents by the Seller and the consummation of the transactions
contemplated hereby and thereby, including, without limitation, the
requisite shareholder approvals, shall have been duly and validly
taken by the Seller, and the Seller shall have full power and right to
consummate the transactions contemplated hereby and thereby on the
terms provided herein.
(d) OPINION OF THE SELLER'S AND THE SHAREHOLDERS' COUNSEL.
The Buyer shall have received an opinion of Xxxxx & Stant, P.C.,
counsel for the Seller and the Shareholders, dated the Closing Date,
in substantially the form of EXHIBIT C attached hereto.
(e) CONSENTS AND APPROVALS. The Buyer shall have received
duly executed copies of all consents and approvals in form and
substance satisfactory to the Buyer and its counsel, that are (i)
required for consummation of the transactions contemplated hereby or
(ii) that are required in order to prevent a breach of or a default
under or a termination of any Contract to which the Seller is a party
or to which any portion of property of the Seller is subject. With
respect to each party to the Assumed Contracts, the Buyer shall have
received a copy of a duly executed consent to the assignment and
assumption of such Assumed Contract in the form of EXHIBIT D hereto,
which shall contain the statement that, as of the Closing Date, all
sums due by the Seller have been paid in full and the Seller is not in
default under any of the terms, covenants or conditions of the Assumed
Contract.
(f) GOVERNMENT CONSENTS, AUTHORIZATIONS, ETC. All
consents, authorizations, Orders or approvals of, and filings or
registrations with, any Governmental Entity which are required for or
in connection with the execution and delivery by the Seller and the
Shareholders of this Agreement and the Related Documents and the
consummation by the Seller and the Shareholders of the transactions
contemplated hereby and thereby shall have been obtained or made.
(g) CORPORATE RESOLUTIONS. The Buyer shall have received
certified copies of the resolutions of the Seller's board of directors
and the Shareholders, approving this Agreement, all other agreements
and documents contemplated hereby and the consummation of the
transactions contemplated hereby.
(h) ABSENCE OF MATERIAL ADVERSE CHANGE. Since December 31,
1996, there shall have been no Material Adverse Change.
(i) OFFICER'S CERTIFICATE. The Seller shall have delivered
an Officer's Certificate dated as of the Closing Date to the Buyer
certifying (i) that attached thereto is a true and complete copy of
the Seller's Charter and all amendments thereto; (ii) that attached
thereto is a true and complete copy of the Seller's By-laws as in
effect on the date of such certification; and (iii) as to the
incumbency and genuineness of the signature of each officer of the
Seller executing this Agreement or any of the other documents
contemplated hereby.
(j) INSTRUMENTS OF TRANSFER. The Buyer shall have received
duly executed instruments of sale, transfer, conveyance and
assignment, including, but not limited to, the Xxxx of Sale, as
contemplated by Section 1.5, and such documents shall be in full force
and effect.
(k) PROPRIETARY INFORMATION AGREEMENTS. The Seller shall
have entered into proprietary information agreements, or other
agreements reasonably acceptable to the Buyer and its counsel, with
Xxx X. Xxxxxxxxx, Xxxxx X. Xxxxxxxxx, Xxxx X. Xxxxxxxxxx and Xxxxxx X.
Xxxxxxxx with respect to (i) the confidentiality of all non-public,
proprietary information of the Seller and (ii) the ownership by the
Seller of all patents, copyrights, inventions and other intellectual
property discovered, developed or improved by such individuals.
(l) CHANGE AND USE OF SELLER'S NAME. The Seller shall have
filed with the appropriate official of the Seller's jurisdiction of
incorporation an amendment to its articles of organization so as to
change the name of the Seller to a name which, in the reasonable
opinion of the Buyer, is sufficiently distinct from the Seller's
current name so as not to be confused therewith.
(m) RELEASES OF ENCUMBRANCES. The Buyer shall have received
duly executed releases of all Encumbrances on the Purchased Assets,
each in the form specified by the Buyer, and UCC termination
statements with respect to all such Encumbrances.
(n) DUE DILIGENCE. The Buyer shall be satisfied in all
respects with the results of their business, legal, environmental and
accounting due diligence investigation and review of the Seller
(including, without limitation, customer interviews and discussions)
which shall be performed by counsel for the Buyer, accountants and
other representatives.
(o) EMPLOYMENT AGREEMENT. The Buyer and Xxxxx Xxxxxxxxx
shall have entered into the Employment Agreement substantially in the
form of EXHIBIT E, and such agreement shall be in full force and
effect.
(p) CONSULTING AND NONCOMPETITION AGREEMENT. The Buyer and
Xxx Xxxxxxxxx shall have entered into the Consulting and
Noncompetition Agreement substantially in the form of EXHIBIT F, and
such agreement shall be in full force and effect.
(q) ESCROW AGREEMENT. The Buyer, the Seller, the
Shareholders and the Lawyers Title Insurance Corporation shall have
entered into the Escrow Agreement and such agreement shall be in full
force and effect.
(r) FINANCING. Parent and the Buyer shall have obtained on
terms and conditions satisfactory to Parent and the Buyer in their
sole discretion all of the financing needed in order to consummate the
transactions contemplated hereby.
(s) ENVIRONMENTAL. The Buyer and its representatives shall
have satisfactorily completed the environmental audits and analyses
with respect to the Real Property located in Suffolk, Virginia and
other potential liability under Environmental, Health and Safety Laws,
and the results of such audits and analyses shall be satisfactory to
the Buyer in its sole discretion.
(t) FOREIGN PERSON AFFIDAVIT. The Buyer shall have received
from the Seller a duly executed certificate pursuant to Section
1.1445-2(b)(2)(i) of the Treasury Regulations under Section 1445 of
the Code.
(u) TRANSFER OF CASH. The Buyer shall have received an
officer's certificate, signed by the President and the chief
accounting officer of the Seller, certifying the amount of cash held
by the Seller as of the Closing Date (including, but not limited to,
all cash held in the bank accounts of the Seller), and the Seller
shall have liquidated any securities and used any such cash to pay
down the Assumed Payables or transferred any such cash to an account
designated by the Buyer.
(v) REAL PROPERTY MATTERS. The Buyer shall have received,
at the Buyer's cost, (i) surveys with respect to each parcel of Real
Property, in form, substance and content satisfactory to the Buyer in
its discretion, (ii) an ALTA owner's policy (and, if required by the
Buyer's lender, if any, a lender's policy) of title insurance insuring
each parcel of Real Property (each, a "Title Policy") which shall be
in full force and effect as of the Closing and in form and substance
and in such amount and with such affirmative coverage and endorsements
as are satisfactory to the Buyer in its sole discretion and (iii) such
title affidavits and title and zoning opinions as are satisfactory to
the Buyer in its discretion. In connection with the foregoing, the
Seller shall have delivered to the Buyer or the Title Insurance
Company all title affidavits and undertakings that may be required as
a condition to the issuance by such Title Insurance Company of the
Title Policies.
(w) FORMS 5500. The Seller shall have filed all Forms 5500
(Annual Report - Report of Employee Benefits) required to be filed by
it pursuant to the rules and regulations of the Code and the Seller
shall have paid all penalties related thereto.
(x) POWER OF ATTORNEY. The Seller shall have executed and
delivered to the Buyer the Power of Attorney in the form attached
hereto as EXHIBIT G, and such Power of Attorney shall be in full force
and effect.
(y) AUDITED FINANCIAL STATEMENTS. The Buyer shall have
received an audited balance sheet of the Seller as of December 31,
1996, and the related statements of income, stockholders' equity and
cash flows for the fiscal year then ended.
(z) EQUIPMENT PURCHASE. The Xxxx X. Xxxxxxxxx Trust shall
have sold to the Buyer the equipment currently leased by the Seller
for $582,500, and such Trust shall have executed and delivered all
documentation related thereto that is reasonably requested by the
Buyer.
7.3. CONDITIONS TO OBLIGATIONS OF THE SELLER AND THE SHAREHOLDERS.
The obligations of the Seller and the Shareholders to sell the Purchased
Assets and to consummate the transactions contemplated hereby are subject
to the satisfaction of the following conditions unless waived (to the
extent such conditions can be waived) by the Seller and the Shareholders:
(a) ACCURACY OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties made by Parent and the Buyer in this
Agreement shall be true and correct in all material respects (except
for such representations and warranties which are qualified by their
terms by a reference to materiality, which representations and
warranties as so qualified shall be true in all respects) at and as of
the Closing Date with the same effect as if such representations and
warranties had been made at and as of the Closing Date, and the Seller
shall have received a certificate signed by an authorized officer of
Parent and the Buyer to that effect.
(b) PERFORMANCE OF OBLIGATIONS OF THE BUYER. Parent and
the Buyer shall have performed in all material respects their
respective obligations and covenants required to be performed by them
under this Agreement prior to or as of the Closing Date, and the
Seller shall have received a certificate signed by an authorized
officer of Parent and the Buyer to that effect.
(c) AUTHORIZATION. All action necessary to authorize the
execution, delivery and performance of this Agreement and the Related
Documents by Parent and the Buyer and the consummation of the
transactions contemplated hereby and thereby shall have been duly and
validly taken by Parent and the Buyer.
(d) GOVERNMENT CONSENTS, AUTHORIZATIONS, ETC. All
consents, authorizations, Orders or approvals of, and filings or
registrations with, any Governmental Entity which are required for or
in connection with the execution and delivery of this Agreement and
the Related Documents by Parent and the Buyer and the consummation by
Parent and the Buyer of the transactions contemplated hereby and
thereby shall have been obtained or made.
(e) CORPORATE RESOLUTIONS. The Seller shall have received
certified copies of the resolutions of the board of directors of
Parent and the Buyer and the Buyer's sole shareholder, approving this
Agreement, all other agreements and documents contemplated hereby to
which the Buyer is a party and the consummation of the transactions
contemplated hereby.
(f) OFFICER'S CERTIFICATE. The Buyer shall have delivered
an Officer's Certificate dated as of the Closing Date to the Seller
certifying (i) that attached thereto is a true and complete copy of
the Buyer's certificate of incorporation and all amendments thereto,
if any; (ii) that attached thereto is a true and complete copy of the
Buyer's by-laws as in effect on the date of such certification; and as
to the incumbency and genuineness of the signature of each officer of
the Buyer executing this Agreement or any of the other documents
contemplated hereby.
(g) PAYMENT OF CLOSING PAYMENT AND DEBT. The Buyer shall
have paid the Closing Payment and, on behalf of the Seller (and/or
shall have paid amounts to the Seller for payment thereof), all
outstanding indebtedness set forth on SCHEDULE VI.
(h) EMPLOYMENT AGREEMENT. The Employment Agreement shall
have been duly and validly executed by the parties thereto and shall
be in full force and effect.
(i) CONSULTING AND NONCOMPETITION AGREEMENT. The Consulting
and Noncompetition Agreement shall have been duly and validly executed
by the parties thereto and shall be in full force and effect.
(j) ESCROW AGREEMENT. The Escrow Agreement shall have been
duly and validly executed by the parties thereto and shall be in full
force and effect.
(k) OPINION OF PARENT'S AND THE BUYER'S COUNSEL. The Seller
and the Shareholders shall have received an opinion of X'Xxxxxxxx
Graev & Karabell, LLP, dated the Closing Date, in substantially the
form of EXHIBIT H attached hereto.
(l) EQUIPMENT PURCHASE. The Buyer shall have purchased from
the Xxxx X. Xxxxxxxxx Trust the equipment currently leased from the
Seller for $582,500.
SECTION 8. INDEMNIFICATION.
8.1. INDEMNIFICATION GENERALLY; ETC. From and after the Closing
Date:
(a) BY THE SELLER GROUP IN FAVOR OF THE BUYER GROUP. The
Seller Group jointly and severally agrees to indemnify and hold
harmless the Buyer Group for any and all Losses they may suffer,
sustain or incur as a result of:
(i) the untruth, inaccuracy or breach of any
representation or warranty of the Seller and/or any Shareholder
contained in Section 4 or in the Disclosure Letter, any Related
Document or any certificate delivered in connection herewith at
or before the Closing; or
(ii) the breach of any agreement or covenant of the
Seller contained in this Agreement or in the Disclosure Letter or
any Related Document; or
(iii) the assertion of any claim, demand, Liability or
obligation against any member of the Buyer Group arising from or
in connection with (A) any action or inaction of any Shareholders
in connection with the action of the Shareholders of the Seller
required to approve the transactions contemplated by this
Agreement and the Related Documents or (B) any assertion by any
current or former shareholder or optionholder of the Seller or
the heirs, representatives or estate thereof of any impropriety
with respect to any actions or transactions of or involving the
Seller prior to or at the Closing (including, without limitation,
the actions and transactions contemplated by this Agreement and
the Related Documents); or
(iv) the assertion of any claim, demand, Liability or
obligation against any member of the Buyer Group arising from or
in connection with any of the Excluded Assets or Excluded
Obligations; or
(v) the assertion of any claim, demand, Liability or
obligation against any member of the Buyer Group arising from or
in connection with the failure to provide any benefit under any
Contract contemplated by and subject to the provisions of Section
1.7; or
(vi) the assertion of any claim, demand, Liability or
obligation against any member of the Buyer Group arising from or
in connection with the non-compliance by the Seller and the Buyer
with the bulk sales laws of any jurisdiction; or
(vii) other than with respect to any matter set forth on
Schedule 4.17 to the Disclosure Letter and which is accrued on
the books of the Seller, (A) any environmental condition existing
or event occurring on or before the Closing Date at any property
currently or formerly owned, leased, or used by the Seller or any
predecessor of Seller, or (B) any generation, storage, treatment,
disposal, transportation, shipment offsite, or other management
of Hazardous Materials by the Seller or any predecessor of the
Seller on or before the Closing Date; or
(viii) the assertion of any claim, demand, Liability or
obligation against any member of the Buyer Group arising from or
in connection with the Seller's failure to file, or lateness in
filing, any Annual Report - Report of Employee Benefits on Form
5500; or
(ix) the assertion of any claim, demand, Liability or
obligation against any member of the Buyer Group arising from or
in connection with the Levy Debt.
(b) BY EACH SHAREHOLDER IN FAVOR OF THE BUYER GROUP. Each
of the Shareholders and their respective heirs, estate and assigns
(severally as to himself or herself and not jointly) agrees to
indemnify and hold harmless the Buyer Group for any and all Losses
they may suffer, sustain or incur as a result of:
(i) the untruth, inaccuracy or breach of any
representation or warranty of such Shareholder contained in
Section 3 or in the Disclosure Letter, any Related Document to
which such Shareholder is a party or any certificate delivered by
such Shareholder in connection herewith at or before the Closing;
or
(ii) the breach by such Shareholder of any agreement or
covenant to be performed by such Shareholder contained in this
Agreement or in any Related Document to which such Shareholder is
a party.
(c) BY THE BUYER IN FAVOR OF THE SELLER AND THE
SHAREHOLDERS. The Buyer agrees to indemnify and hold harmless the
Seller and the Shareholders for any and all Losses they may suffer,
sustain or incur as a result of:
(i) the untruth, inaccuracy or breach of any
representation or warranty of Parent or the Buyer contained in
Section 5 or in any Related Document or any certificate delivered
in connection herewith or therewith at or before the Closing; or
(ii) the breach of any agreement or covenant of Parent
or the Buyer contained in this Agreement or in any Related
Document; or
(iii) the incurrence of any sales tax that arises out
of the purchase of the mold (2x8 seven ounce) from Signet
Business Leasing Corporation and the subsequent sale of such mold
to the Buyer; or
(iv) the assertion of any claim, demand, Liability or
obligation against the Seller or the Shareholders arising from or
in connection with any of the Assumed Obligations with respect to
events or circumstances that arise after the Closing Date.
8.2. LIMITATIONS ON INDEMNIFICATION. Anything contained herein to
the contrary notwithstanding:
(a) INDEMNITY BASKET FOR THE SELLER AND THE SHAREHOLDERS.
The Buyer Group shall not have the right to be indemnified pursuant to
Section 8.1(a) and (b) for breaches of representations and warranties
(other than under Sections 4.8, 4.18 and 4.19 and willful breaches)
unless and until the Buyer Group shall have incurred on a cumulative
basis since the Closing Date aggregate Losses for breaches of
representations and warranties (other than under Sections 4.8, 4.18
and 4.19 and willful breaches) in an amount exceeding $25,000 in which
event the right to be indemnified shall apply only to the extent such
Losses exceed $25,000.
(b) INDEMNITY CAP FOR THE SELLER AND THE SHAREHOLDERS. The
sum of all Losses pursuant to which indemnification is payable by the
Seller and the Shareholders pursuant to Section 8.1(a) shall not
exceed $1,500,000 in the aggregate; PROVIDED, HOWEVER, that in no
event shall the limitation set forth in this Section 8.2(b) apply to
the rights of the Buyer Group to be indemnified pursuant to (i)
Section 8.1(a)(i) with respect to the representations and warranties
set forth in Sections 4.1, 4.4, 4.8, 4.9, 4.17, 4.18 and willful
breaches or (ii) Sections 8.1(a)(ii), 8.1(a)(iii), 8.1(a)(iv),
8.1(a)(vii), 8.1(a)(viii) and 8.1(a)(ix).
(c) INDEMNITY BASKET FOR THE BUYER GROUP. The Shareholders
and the Seller shall not have the right to be indemnified pursuant to
Section 8.1(c) for breaches of representations and warranties (other
than under Section 5.3 and willful breaches) unless and until the
Shareholders and the Seller shall have incurred on a cumulative basis
since the Closing Date aggregate Losses for breaches of
representations and warranties (other than under Section 5.3 and
willful breaches) in an amount exceeding $25,000 in which event the
right to be indemnified shall apply only to the extent such Losses
exceed $25,000.
8.3. ASSERTION OF CLAIMS; PAYMENT OF CLAIMS; RIGHT OF SET-OFF;
LEVY DEBT NOT SUBJECT TO ESCROW. (a) No claim shall be brought under
Section 8.1 hereof unless the Indemnified Persons, or any of them, at any
time prior to the applicable Survival Date, give the Indemnifying Persons
(i) written notice of the existence of any such claim, specifying the
nature and basis of such claim and the amount thereof, to the extent known
or (ii) written notice pursuant to Section 8.4 of any Third Party Claim,
the existence of which might give rise to such a claim. Upon the giving of
such written notice as aforesaid, the Indemnified Persons, or any of them,
shall have the right to commence legal proceedings subsequent to the
Survival Date for the enforcement of their rights under Section 8.1 hereof.
(b) The obligation of the Seller or any Shareholder to
indemnify the Buyer Group shall be paid (i) first, by the release of funds
from the Escrow Account (other than with respect to the Levy Debt), and
(ii) second, after making a demand in writing against the Seller and the
Shareholders that remains unsatisfied for 30 calendar days, by offset
against the payments to be made to Xxx Xxxxxxxxx under the Consulting and
Noncompetition Agreement in the order of payments to be made thereunder
from the time of such set-off.
8.4. NOTICE AND DEFENSE OF THIRD PARTY CLAIMS. The obligations
and Liabilities of an Indemnifying Person with respect to Losses resulting
from the assertion of liability by third parties (each, a "Third Party
Claim") shall be subject to the following terms and conditions:
(a) The Indemnified Persons shall promptly give written
notice to the Indemnifying Persons of any Third Party Claim which
might give rise to any Loss by the Indemnified Persons within 15 days
of obtaining knowledge thereof, stating the nature and basis of such
Third Party Claim and the amount thereof to the extent known;
PROVIDED, HOWEVER, that no delay on the part of the Indemnified
Persons in notifying any Indemnifying Persons shall relieve the
Indemnifying Persons from any Liability or obligation hereunder unless
(and then solely to the extent) the Indemnifying Persons thereby is
prejudiced by the delay. Such notice shall be accompanied by copies
of all relevant documentation with respect to such Third Party Claim,
including, without limitation, any summons, complaint or other
pleading which may have been served, any written demand or any other
document or instrument.
(b) If the Indemnifying Persons shall acknowledge in a
writing delivered to the Indemnified Persons that the Indemnifying
Persons shall be obligated under the terms of their indemnification
obligations hereunder in connection with such Third Party Claim, then
the Indemnifying Persons shall have the right to assume the defense of
any Third Party Claim at their own expense and by their own counsel,
which counsel shall be reasonably satisfactory to the Indemnified
Persons; PROVIDED, HOWEVER, that the Indemnifying Persons shall not
have the right to assume the defense of any Third Party Claim,
notwithstanding the giving of such written acknowledgment, if (i) the
Indemnified Persons shall have been advised by counsel that there are
one or more legal or equitable defenses available to them which are
different from or in addition to those available to the Indemnifying
Persons, and, in the reasonable opinion of the Indemnified Persons,
counsel for the Indemnifying Persons could not adequately represent
the interests of the Indemnified Persons because such interests could
be in conflict with those of the Indemnifying Persons, (ii) such
action or Proceeding involves, or could have a material effect on, any
material matter beyond the scope of the indemnification obligation of
the Indemnifying Persons or (iii) the Indemnifying Persons shall not
have assumed the defense of the Third Party Claim in a timely fashion.
(c) If the Indemnifying Persons shall assume the defense of
a Third Party Claim (under circumstances in which the proviso to the
first sentence of Section 8.4(b) is not applicable), the Indemnifying
Persons shall not be responsible for any legal or other defense costs
subsequently incurred by the Indemnified Persons in connection with
the defense thereof. If the Indemnifying Persons do not exercise
their right to assume the defense of a Third Party Claim by giving the
written acknowledgement referred to in Section 8.4(b), or are
otherwise restricted from so assuming by the proviso to the first
sentence of Section 8.4(b), the Indemnifying Persons shall
nevertheless be entitled to participate in such defense with their own
counsel and at their own expense; and in any such case, the
Indemnified Persons may assume the defense of the Third Party Claim,
with counsel which shall be reasonably satisfactory to the
Indemnifying Persons, and shall act reasonably and in accordance with
their good faith business judgment and shall not effect any settlement
without the consent of the Indemnifying Persons, which consent shall
not unreasonably be withheld or delayed.
(d) If the Indemnifying Persons exercise their right to
assume the defense of a Third Party Claim, they shall not make any
settlement of any claims without the written consent of the
Indemnified Persons, which consent shall not be unreasonably withheld.
8.5. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Subject to the
further provisions of this Section 8.5, the representations and warranties
of the Shareholders contained in Section 3 and the representations and
warranties of the Seller and the Shareholders contained in Section 4 and
the representations and warranties of the Buyer contained in Section 5
shall survive the Closing Date until the second anniversary of the Closing
Date; PROVIDED, HOWEVER, that the representations and warranties of the
Shareholders and the Seller contained in Sections 3.2, 4.4, 4.9, 4.17 and
4.18 shall survive the Closing Date without any time limit and the
representations and warranties set forth in Sections 4.8 and 4.16 shall
survive the Closing Date until the expiration of the statute of
limitations, if any, applicable to the matters set forth therein. The
covenants and other agreements of the parties contained in this Agreement
shall survive the Closing Date until they are otherwise terminated, whether
by their terms or as a matter of applicable law. For convenience of
reference, the date upon which any representation, warranty, covenant or
other agreement contained herein shall terminate, if any, is referred to
herein as the "Survival Date".
8.6. NO THIRD PARTY RELIANCE. Anything contained herein to the
contrary notwithstanding, the representations and warranties of the Seller
and the Shareholders contained in this Agreement (including, without
limitation, the Disclosure Letter) (i) are being given by the Seller and
the Shareholders as an inducement to the Buyer and Parent to enter into
this Agreement (and the Seller and each Shareholder acknowledges that the
Buyer and Parent have expressly relied thereon) and (ii) are solely for the
benefit of the Buyer and Parent. Accordingly, no third party (including,
without limitation, the Shareholders or any other holder of capital stock
of the Seller) or anyone acting on behalf of any thereof other than the
Indemnified Persons, and each of them, shall be a third party or other
beneficiary of such representations and warranties and no such third party
shall have any rights of contribution against the Seller with respect to
such representations or warranties or any matter subject to or resulting in
indemnification under this Section 8, or otherwise.
8.7. REMEDIES EXCLUSIVE. The remedies provided for in this
Section 8 shall be the exclusive remedies of the Indemnified Persons in
connection with any claim, demand, loss, liability or obligation arising
under this Agreement or in connection with the transactions contemplated
hereby; PROVIDED, HOWEVER, that nothing in this Section 8.7 shall be
construed to limit in any way the rights and benefits of, or the remedies
available to, any party to this Agreement under or in respect of any other
instrument or agreement to which such person may be a party or for fraud.
SECTION 9. ADDITIONAL AGREEMENTS.
9.1. EXPENSES. Each of the Seller and the Shareholders, on the
one hand, and the Buyer, on the other hand, shall bear their own fees and
expenses incurred in connection with the preparation, execution and
delivery of this Agreement and the Related Documents and the consummation
of the transactions contemplated hereby and thereby (the "Transaction
Expenses") including, without limitation, the payment by the Seller of the
Grantor's Tax relating to the transfer of the Real Property and the payment
by the Buyer of all other transfer taxes relating to the Real Property.
9.2. DISCLOSURE OF INFORMATION; NONCOMPETITION. (a) From and
after the Closing, the Shareholders shall not use or disclose to any
Person, except as required by law or judicial process, any Confidential
Information for any reason or purpose whatsoever, nor shall they make use
of any of the Confidential Information for their own purposes or for the
benefit of any Person except the Buyer or any Affiliate thereof.
(b) Reference is made to the Consulting and Noncompetition
Agreement pursuant to which, in connection with the sale of the Purchased
Assets by the Seller to the Buyer and the other transactions contemplated
hereby, Xxx Xxxxxxxxx is entering into a noncompetition covenant in favor
of the Buyer and its Affiliates. Such Consulting and Noncompetition
Agreement is incorporated herein by reference as if set forth herein in its
entirety.
(c) The Seller acknowledges that the Subject Business has
been conducted by the Seller, and substantial sales of the Seller's
products have been made, in each State of the United States, and
acknowledge and recognize the highly competitive nature of the industry in
which the Subject Business is involved. Accordingly, in consideration of
the premises contained herein, the consideration to be received hereunder
and in consideration of and as an inducement to Parent and the Buyer to
consummate the transactions contemplated hereby, the Seller and Xxx X.
Xxxxxxxxx shall not from and after the Closing until the fourth anniversary
of the Closing (i) directly or indirectly represent or engage in any
Competitive Business, whether such representation or engagement shall be
for profit or not or whether such engagement shall be as an officer,
director, partner, stockholder (other than ownership of up to 1% of the
outstanding securities of any public company whose securities are traded on
an established national or international securities exchange or investment
in mutual funds), Affiliate or other participant, (ii) interfere with,
disrupt or attempt to disrupt the relationship, contractual or otherwise,
between the Buyer (or any Affiliate thereof) and any third party,
including, without limitation, any customer, supplier or employee of the
Buyer, or (iii) affirmatively assist or induce (including, by way of
example but not in limitation thereof, providing financing or advisory or
consulting services) any third party to engage in any Competitive Business
in any manner described in the foregoing clauses (i) and (ii); PROVIDED,
HOWEVER, that nothing contained in this Section 9.2 shall prohibit Xxx
Xxxxxxxxx from engaging in any activity that is an activity which Xxx
Xxxxxxxxx is permitted to engage in under the terms of the Consulting and
Noncompetition Agreement.
(d) The parties hereto recognize and acknowledge that a
breach by the Seller or any Shareholder of this Section 9.2 will cause
irreparable and material loss and damage to the Buyer and its Affiliates as
to which they will not have an adequate remedy at law or in damages.
Accordingly, each party acknowledges and agrees that the issuance of an
injunction or other equitable remedy is an appropriate remedy for any such
breach.
9.3. USE OF NAME. Neither the Seller nor any Shareholder shall
allege or assert that the name "Virginia Design" or any variant thereof has
not become distinctive and unique and neither the Seller nor any
Shareholder shall allege or assert that such names have not obtained
secondary meaning, identifying "Virginia Design" or any variant thereof as
the source of goods associated with such name. The Seller and the
Shareholders recognize and acknowledge that they are proscribed by
operation of law from, and undertake in this Agreement as a matter of
contract to refrain from, (A) owning any interest, directly or indirectly,
in, or becoming associated with or otherwise lending any aid or support to,
any Person (other than the Buyer or any Affiliate thereof) using "Virginia
Design" or any variant thereof or (B) performing any service or offering
any goods identified with the name "Virginia Design" or any variant thereof
in a manner that is likely to cause confusion in the minds of ordinary
purchasers, except on behalf of the Buyer or any Affiliate thereof. In
connection therewith, it is agreed that the undertaking under this
Section 9.3 is of a special and unique nature, the loss of which cannot be
adequately compensated for in damages by an action at law, and that the
breach or threatened breach of the provisions of this Section 9.3 would
cause the Buyer and its Affiliates irreparable harm. In the event of any
such breach, the Buyer shall be entitled, as a matter of right, to
injunctive and other equitable relief without waiving any other rights
which they may have to damages or otherwise.
9.4. RELATIONSHIPS WITH VENDORS AND CUSTOMERS. From and after the
date hereof, neither the Seller nor any Shareholder shall take or fail to
take any action which could reasonably be expected to, directly or
indirectly, have an adverse effect on the Subject Business or the Purchased
Assets or the business or operations of the Buyer after the Closing, or on
the business relationship between the Seller or the Buyer and any vendor,
supplier or customer thereof.
9.5. HEALTH INSURANCE. From and after the Closing Date until May
2, 2002, the Buyer shall provide, and Parent shall cause the Buyer to
provide, to Xxx Xxxxxxxxx the medical benefits that are provided to
employees of the Buyer on the same terms and conditions as those provided
to such employees.
9.6. [INTENTIONALLY OMITTED]
9.7. UNDERTAKINGS OF THE BUYER. Except as otherwise consented to
in writing by the Seller, the Buyer shall, and Parent shall cause the Buyer
to:
(a) in the event that the Buyer or Parent elect to sell the
expandable polystyrene business of the Buyer, the Buyer shall promptly
notify Xxx Xxxxxxxxx and permit him to submit a bid for the purchase of
such business;
(b) use its commercially reasonable best efforts to have
Xxx and Xxx Xxxxxxxxx released as guarantors on any of the Assumed
Obligations including, without limitation, the indebtedness owed to United
Leasing Company; and
(c) provide the Seller and its accountants with reasonable
access to employees of the Buyer (in a manner that does not interfere with
their duties) and books and records transferred to the Buyer to aid the
Seller in the closing of its books for the 1996 and 1997 tax years, to
assemble information required to prepare its 1996 and 1997 tax returns and
to handle any lawsuit, audit or claim for which the Seller or the
Shareholders are responsible.
9.8. EMPLOYEES; SENIORITY; WARN ACT COMPLIANCE. On the Closing
Date, the Buyer shall offer employment to all of the Seller's employees,
except those who resign or whose employment is terminated between the date
hereof and the Closing Date, at the rate of compensation paid to such
employees as of April 1, 1997, which compensation rates are set forth on
SCHEDULE IX; PROVIDED, HOWEVER, that in no event shall the Buyer or Parent
be obligated to employ such employees for any period of time. In addition,
the Seller's employees who become employees of the Buyer shall, for
purposes of employee benefit matters, be given past service credit that
gives effect to the period of time employed by the Seller. The Buyer shall
be solely responsible for (i) providing any notices required pursuant to
the WARN Act regarding any proposed or anticipated plant shutdown, employee
layoffs or other events which may give rise to WARN Act requirements
(including attorneys' fees) and (ii) any expenses or losses (including
attorneys' fees) incurred as a result of any violations of the WARN Act by
the Buyer.
9.9. COBRA COVERAGE. COBRA continuation coverage obligations
under Section 4980B of the Code with respect to the current and former
employees of the Seller and their covered spouses and dependents shall be
divided as follows: (i) the Seller's health care plans shall provide such
coverage for qualifying events occurring prior to the Closing Date and (ii)
the Buyer's health care plans shall provide such coverage for qualifying
events occurring on or after the Closing Date and thereafter with respect
to the Seller's employees. The Buyer shall handle the administration of
COBRA coverage for the Seller's former employees after the Closing Date.
SECTION 10. TERMINATION; EFFECT OF TERMINATION.
10.1. TERMINATION. This Agreement may be terminated at any time
prior to the Closing by:
(a) the mutual consent of the Buyer and the Seller; or
(b) the Buyer, if there has been a breach by the Seller or
any Shareholder of any representation, warranty, covenant or agreement
set forth in this Agreement on the part of the Seller or any
Shareholder which is material and which the Seller or such Shareholder
fails to cure within 10 Business Days after notice thereof is given by
the Buyer (except no cure period shall be provided for a breach by the
Seller or any Shareholder which by its nature cannot be cured); or
(c) the Seller, if there has been a breach by Parent or the
Buyer of any representation, warranty, covenant or agreement set forth
in this Agreement on the part of Parent or the Buyer which is material
and which Parent or the Buyer fails to cure within 10 Business Days
after notice thereof is given by the Seller (except no cure period
shall be provided for a breach by the Buyer which by its nature cannot
be cured); or
(d) the Buyer or the Seller, if the conditions set forth in
Section 7.1 shall not have been satisfied or waived (to the extent
they may be waived) by May 16, 1997; or
(e) the Buyer, if the conditions set forth in Section 7.2
shall not have been satisfied or waived (to the extent they may be
waived) by May 16, 1997; or
(f) the Seller, if the conditions set forth in Section 7.3
and 7.2(n), (r) and (s) shall not have been satisfied or waived (to
the extent they may be waived) by May 16, 1997; or
(g) the Buyer or the Seller, if any permanent injunction or
other Order of a court or other competent authority preventing the
Closing shall have become final and nonappealable;
PROVIDED, HOWEVER, that neither the Seller nor the Buyer shall be entitled
to terminate this Agreement pursuant to Section 10.1(d), (e) or (f) if such
party's intentional breach (or, with respect to the Seller, any
Shareholder's intentional breach) of this Agreement has prevented the
satisfaction of a condition. Any termination pursuant to Section 10.1(a)
shall be effected by a written instrument signed by the Buyer and the
Seller, and any termination pursuant to this Section 10.1 (other than a
termination pursuant to Section 10.1(a)) shall be effected by written
notice from the party or parties so terminating to the other parties
hereto, which notice shall specify the Section hereof pursuant to which
this Agreement is being terminated.
10.2. EFFECT OF TERMINATION. In the event of the termination of
this Agreement as provided in Section 10.1, this Agreement shall be of no
further force or effect, except for Sections 6.3, 6.7, Section 9.1, this
Section 10.2 and Section 11 and the provisions of the Confidentiality
Agreement dated October 18, 1996, between the Seller and Parent (the
"Confidentiality Agreement"), each of which shall survive the termination
of this Agreement; PROVIDED, HOWEVER, that the Liability of any party for
any breach by such party of the representations, warranties, covenants or
agreements of such party set forth in this Agreement occurring prior to the
termination of this Agreement shall survive the termination of this
Agreement and, in addition, in the event of any action for breach of
contract in the event of a termination of this Agreement, the prevailing
party shall be reimbursed by the other party to the action for reasonable
attorneys' fees and expenses relating to such action.
SECTION 11. MISCELLANEOUS PROVISIONS.
11.1. AMENDMENT. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the Buyer and the Seller.
11.2. EXTENSION; WAIVER. At any time prior to the Closing, the
parties may (a) extend the time for the performance of any of the
obligations or other acts of the other parties, (b) waive any inaccuracies
in the representations and warranties contained in this Agreement or in any
document delivered pursuant to this Agreement and (c) waive compliance with
any of the agreements or conditions contained in this Agreement. Any
agreement on the part of a party to any such extension or waiver shall be
valid only if set forth in an instrument in writing signed on behalf of
such party, and any such waiver shall not operate or be construed as a
waiver of any subsequent breach by the other party.
11.3. ENTIRE AGREEMENT. This Agreement and the other agreements
and documents referenced herein (including, but not limited to, the
Disclosure Letter, the Confidentiality Agreement, the Related Documents and
the Exhibits (in their executed form) attached hereto) contain all of the
agreements among the parties hereto with respect to the transactions
contemplated hereby and supersede all prior agreements or understandings
among the parties with respect thereto (including, but not limited to, the
letter of intent dated as of February 20, 1997, among Parent, the Seller
and the Shareholders).
11.4. SEVERABILITY. It is the desire and intent of the parties
that the provisions of this Agreement be enforced to the fullest extent
permissible under the Law and public policies applied in each jurisdiction
in which enforcement is sought. Accordingly, in the event that any
provision of this Agreement would be held in any jurisdiction to be
invalid, prohibited or unenforceable for any reason, such provision, as to
such jurisdiction, shall be ineffective, without invalidating the remaining
provisions of this Agreement or affecting the validity or enforceability of
such provision in any other jurisdiction. Notwithstanding the foregoing,
if such provision could be more narrowly drawn so as not to be invalid,
prohibited or unenforceable in such jurisdiction, it shall, as to such
jurisdiction, be so narrowly drawn, without invalidating the remaining
provisions of this Agreement or affecting the validity or enforceability of
such provision in any other jurisdiction.
11.5. NO THIRD-PARTY BENEFICIARIES; SUCCESSORS AND ASSIGNS. Except
as expressly provided herein, this Agreement shall not confer any rights or
remedies upon any Person other than the parties hereto and their respective
successors and permitted assigns. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors
and permitted assigns, representatives, heirs and estates, as the case may
be. This Agreement shall not be assignable by any party hereto without the
consent of the other parties hereto; PROVIDED, HOWEVER, that anything
contained herein to the contrary notwithstanding, the Buyer may, without
the prior written consent of any other party, assign any or all of its
rights and interests hereunder to any lender providing financing for the
transactions contemplated hereby.
11.6. HEADINGS. Descriptive headings are for convenience only and
shall not control or affect in any way the meaning or construction of any
provision of this Agreement.
11.7. NOTICES. All notices or other communications pursuant to
this Agreement shall be in writing and shall be deemed to be sufficient if
delivered personally, telecopied, sent by nationally-recognized, overnight
courier or mailed by registered or certified mail (return receipt
requested), postage prepaid, to the parties at the following addresses (or
at such other address for a party as shall be specified by like notice):
(a) if to the Seller or the Shareholders, to:
Virginia Design Packaging Corp.
0000 Xxxxx Xxxxx Xxxxxxxxx
Xxxx Xxxxx, Xxxxxxx 00000
Attention: Xxx X. Xxxxxxxxx;
with a copy to:
Xxxxx & Stant, P.C.
000 Xxx Xxxxxxxx Xxxxxx
Xxxxxxxx Xxxxx, Xxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxx, Esq.
Telecopier: (000) 000-0000; and
(b) if to the Buyer or Parent, to them at:
Xxxxx Plastics Corporation
Xxxxx Plastics Design Corporation
000 Xxxxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxx 00000
Attention: Xxxxxx X. Xxxxxx
Telecopier: (000) 000-0000;
with a copy to:
X'Xxxxxxxx Graev & Karabell, LLP
00 Xxxxxxxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx Xxxxxx X'Xxxxx, Esq.
Telecopier: (000) 000-0000.
All such notices and other communications shall be deemed to have been
given and received (i) in the case of personal delivery, on the date of
such delivery, (ii) in the case of delivery by telecopy, on the date of
such delivery, (iii) in the case of delivery by nationally-recognized,
overnight courier, on the Business Day following dispatch, and (iv) in the
case of mailing, on the third Business Day following such mailing.
11.8. COUNTERPARTS. This Agreement may be executed in any number
of counterparts, and each such counterpart shall be deemed to be an
original instrument, but all such counterparts together shall constitute
one agreement.
11.9. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the domestic Laws of the Commonwealth of
Virginia without giving effect to any choice or conflict of law provision
or rule (whether of the Commonwealth of Virginia or any other jurisdiction)
that would cause the application of the Laws of any jurisdiction other than
the Commonwealth of Virginia.
11.10. INCORPORATION OF EXHIBITS AND SCHEDULES. The Exhibits and
Schedules identified in this Agreement are incorporated herein by reference
and made a part hereof.
11.11. CONSTRUCTION. Where specific language is used to clarify by
example a general statement contained herein, such specific language shall
not be deemed to modify, limit or restrict in any manner the construction
of the general statement to which it relates. The language used in this
Agreement shall be deemed to be the language chosen by the parties to
express their mutual intent, and no rule of strict construction shall be
applied against any party.
11.12. REMEDIES. Subject to the provisions of Sections 8.7 and
10.2, the parties shall each have and retain all other rights and remedies
existing in their favor at law or equity, including, without limitation,
any actions for specific performance and/or injunctive or other equitable
relief (including, without limitation, the remedy of rescission) to enforce
or prevent any violations of the provisions of this Agreement.
11.13. WAIVER OF JURY TRIAL. Each of the parties hereto hereby
irrevocably waives all right to trial by jury in any action, Proceeding or
counterclaim arising out of or relating to this Agreement.
11.14. RECOVERY OF ATTORNEY'S FEES AND COSTS. If any party to this
Agreement files any action or brings any proceeding against any other party
to this Agreement that arises out of this Agreement, the prevailing party
shall be entitled to recover, as an element of its costs of suit and not
its damages, reasonable attorney's fees to be fixed by the court or
arbitrator plus any other related out-of-pocket fees, costs and expenses
incurred in connection with such action or proceeding; PROVIDED, HOWEVER,
that in the event of any conflict between the provisions of this Section
11.14 and any provision of Section 8, the provisions of Section 8 shall
govern.
* * *
**FOOTNOTES**
{*} Such amount to be increased by the amount by which $7,874,350.02
exceeds the Designated Debt on the Closing Date; and such amount to be
decreased by the amount by which the Designated Debt exceeds
$7,874,350.02 on the Closing Date (whereby Designated Debt will
include accounts payable that are 30 days past due and prepayment
penalties (other than the portion of a prepayment penalty to be paid
by the Buyer pursuant to Section 2.3), if any).
IN WITNESS WHEREOF, each of the parties hereto has duly executed
this Asset Purchase Agreement as of the date first written above.
PARENT:
XXXXX PLASTICS CORPORATION
By: /S/ XXXXX X. XXXXXXXXXX
------------------------------
Xxxxx X. Xxxxxxxxxx
Vice President, Chief Financial
Officer, Treasurer and Secretary
THE BUYER:
XXXXX PLASTICS DESIGN CORPORATION
By: /S/ XXXXX X. XXXXXXXXXX
------------------------------
Xxxxx X. Xxxxxxxxxx
Vice President, Chief Financial
Officer, Treasurer and Secretary
SELLER:
VIRGINIA DESIGN PACKAGING CORP.
By: /S/ XXX X. XXXXXXXXX
------------------------------
Xxx X. Xxxxxxxxx
President
SHAREHOLDERS:
/S/ XXX X. XXXXXXXXX
------------------------------
Xxx X. Xxxxxxxxx
/S/ XXX X. XXXXXXXXX
------------------------------
Xxx X. Xxxxxxxxx
ANNEX I
DEFINITIONS
The following terms used in the Stock Purchase Agreement shall
have the following respective meanings:
"ACCOUNTANTS' DETERMINATION" has the meaning set forth in Section
2.5(b)(ii).
"ADDITIONAL ESCROW AMOUNT" has the meaning set forth in Section
2.4.
"AFFILIATE" means, with respect to any Person, (i) a director,
officer or stockholder of such Person, (ii) a spouse, parent, sibling or
descendant of such Person (or spouse, parent, sibling or descendant of any
director or executive officer of such Person), and (iii) any other Person
that, directly or indirectly through one or more intermediaries, Controls,
or is Controlled by, or is under common Control with, such Person.
"ARBITRATING ACCOUNTANTS" has the meaning set forth in Section
2.5(b)(ii).
"ASSUMED CONTRACTS" has the meaning set forth in Section
1.1(a)(vi).
"ASSUMED OBLIGATIONS" has the meaning set forth in Section
1.3(b).
"ASSUMED PAYABLES" has the meaning set forth in Section
1.3(a)(ii).
"BEST KNOWLEDGE" of any Person shall mean and include (i) actual
knowledge and (ii) that knowledge which a prudent businessperson could have
obtained after making a reasonable investigation. In connection therewith,
the knowledge (both actual and constructive) of each of Xxx X. Xxxxxxxxx,
Xxxxx X. Xxxxxxxxx and Xxxxxx Xxxxxxx shall be imputed to be the knowledge
of the Seller.
"XXXX OF SALE" has the meaning set forth in Section 1.5.
"BUSINESS DAY" means any day that is not a Saturday, Sunday or a
day on which banking institutions in New York, New York are not required to
be open.
"BUYER" has the meaning set forth in the caption.
"BUYER GROUP" means the Buyer, Parent and each of their
respective successors and assigns, officers, directors, employees,
representatives and Affiliates, other than any Shareholder.
"BUYER'S ACCOUNTANTS" has the meaning set forth in Section
2.5(a).
"BUYER'S NOTICE OF ADJUSTMENT" has the meaning set forth in
Section 2.5(b)(i).
"CERCLA" means the Comprehensive Environmental Response,
Compensation, and Liability Act.
"CERCLIS" means the Comprehensive Environmental Response,
Compensation, and Liability Information System.
"CLOSING" has the meaning set forth in Section 2.7.
"CLOSING DATE" has the meaning set forth in Section 2.7.
"CLOSING PAYMENT" has the meaning set forth in Section 2.2.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMPETITIVE BUSINESS" means any business involving the sale of
products or provision of services in any city or county in any State of the
United States if such business or the products sold or services provided by
it are competitive, directly or indirectly, with the business of or any
product sold by the Buyer (after the Closing Date) or any Affiliate
thereof.
"CONFIDENTIAL INFORMATION" means Intellectual Property Rights of
the Seller and the Buyer and all information of a proprietary or
confidential nature relating to the Seller, the Buyer or the Subject
Business (other than information that is in the public domain at the time
of receipt thereof by any Shareholder at the time of its use or disclosure
by a Shareholder other than as a result of the breach by any Shareholder of
his or her agreement hereunder).
"CONFIDENTIALITY AGREEMENT" has the meaning set forth in Section
10.2.
"CONSULTING AND NONCOMPETITION AGREEMENT" shall mean the
Consulting, Noncompetition, Nonsolicitation and Nondisclosure Agreement to
be entered into by the Buyer and Xxx X. Xxxxxxxxx, which is attached hereto
as EXHIBIT F.
"CONTRACT" means any loan or credit agreement, note, bond,
mortgage, indenture, lease, sublease, purchase order or other agreement,
instrument, permit, concession, franchise or license.
"CONTROL" means, with respect to any Person, the possession,
directly or indirectly, of the power to direct or cause the direction of
the management or policies of a Person, whether through the ownership of
voting securities, by contract or otherwise.
"DECEMBER BALANCE SHEET" has the meaning set forth in Section
4.5.
"DECEMBER BALANCE SHEET DATE" has the meaning set forth in
Section 4.5.
"DESIGNATED DEBT" has the meaning set forth in Section 2.3.
"DISCLOSURE LETTER" has the meaning set forth in Section 4.1.
"EMPLOYEE PLAN" means any "employee benefit plan" (as defined in
Section 3(3) of ERISA) as well as any other plan, program or arrangement
involving direct and indirect compensation, under which the Seller or any
ERISA Affiliate of the Seller has any present or future obligations or
Liability on behalf of its employees or former employees, contractual
employees or their dependents or beneficiaries.
"EMPLOYMENT AGREEMENT" means the Employment Agreement to be
entered into between the Buyer and Xxxxx Xxxxxxxxx.
"ENCUMBRANCES" means and includes security interests, mortgages,
liens, pledges, charges, easements, reservations, restrictions, clouds,
equities, rights of way, options, rights of first refusal and all other
encumbrances, whether or not relating to the extension of credit or the
borrowing of money.
"ENVIRONMENTAL, HEALTH AND SAFETY LAWS" means all Laws, Permits
and Contracts with Governmental Entities relating to or addressing
pollution or protection of the environment, public health and safety, or
employee health and safety, including, but not limited to, the Solid Waste
Disposal Act, as amended, 42 U.S.C. 6901, ET SEQ., the
Clean Air Act, as amended, 42 U.S.C. 7401 ET SEQ., the
Federal Water Pollution Control Act, as amended, 33 U.S.C.
1251 ET SEQ., the Emergency Planning and Community Right-
to-Know Act, 42 U.S.C. 11001 ET SEQ., the Comprehensive
Environmental Response, Compensation, and Liability Act, as amended, 42
U.S.C. 9601 ET SEQ., the Hazardous Materials
Transportation Uniform Safety Act, as amended, 49 U.S.C. 1804 ET
SEQ., the Occupational Safety and Health Act of 1970, the regulations
promulgated thereunder, and any similar Laws and other requirements having
the force or effect of Law, and all Orders issued or promulgated
thereunder, and all related common law theories.
"ERISA" means the Employment Retirement Income Security Act of
1974, as amended.
"ERISA AFFILIATE" means, with respect to any Person, any entity
that is a member of a "controlled group of corporations" with, or is under
"common control" with, or is a member of the same "affiliated service
group" with such Person as defined in Section 414(b), 414(c) or 414(m) of
the Code.
"ESCROW ACCOUNT" has the meaning set forth in Section 2.4.
"ESCROW AGREEMENT" has the meaning set forth in Section 2.4.
"EXCLUDED ASSETS" has the meaning set forth in Section 1.2.
"EXCLUDED OBLIGATIONS" has the meaning set forth in Section 1.4.
"FINAL DETERMINATION DATE" has the meaning set forth in Section
2.5(b)(iii).
"FINAL WORKING CAPITAL" has the meaning set forth in Section
2.5(a).
"FINAL WORKING CAPITAL STATEMENT" has the meaning set forth in
Section 2.5(a).
"FINANCIAL STATEMENTS" has the meaning set forth in Section 4.5.
"FIRST 20-DAY PERIOD" has the meaning set forth in Section
2.5(b)(ii).
"GAAP" has the meaning set forth in Section 2.5(a).
"GOVERNMENTAL ENTITY" means any court, administrative agency or
commission or other governmental authority or instrumentality, domestic or
foreign, Federal, state or local.
"HAZARDOUS MATERIALS" means any hazardous or toxic chemicals,
materials or substances; any pollutants or contaminants; or crude oil or
any fraction thereof (as such terms are defined under any Environmental,
Health and Safety Law).
"INDEMNIFIED PERSONS" means the Buyer Group, the Seller or the
Shareholders, as the case may be.
"INDEMNIFYING PERSONS" means the Seller Group, the Shareholders
or the Buyer, as the case may be.
"INTELLECTUAL PROPERTY RIGHTS" means all industrial and
intellectual property rights, including, without limitation, patents,
patent applications, patent rights, trademarks, trademark applications,
trade names, service marks, service xxxx applications, copyrights,
copyright applications, know-how, trade secrets, proprietary processes and
formulae, confidential information, franchises, licenses, inventions,
instructions, marketing materials, trade dress, logos and designs and all
documentation and media constituting, describing or relating to the
foregoing, including, without limitation, manuals, memoranda and records.
"LAW" means any law, statute, treaty, rule, directive or
regulation or Order of any Governmental Entity.
"LEVY DEBT" has the meaning set forth in Section 1.4(g).
"LIABILITY" means any liability or obligation, whether known or
unknown, asserted or unasserted, absolute or contingent, accrued or
unaccrued, liquidated or unliquidated and whether due or to become due,
regardless of when asserted.
"LOSSES" means any and all losses, claims, damages, liabilities,
expenses (including reasonable attorneys' fees actually incurred) and
assessments arising from or in connection with any such matter that is the
subject of indemnification under Section 8.1.
"MATERIAL ADVERSE CHANGE" means, with respect to any Person, any
material adverse change in the business, operations, assets (including
levels of working capital and components thereof), condition (financial or
otherwise), operating results, Liabilities, employee relations or, to the
Best Knowledge of such Person, business prospects of such Person or any
material casualty loss or damage to the assets of such Person, whether or
not covered by insurance.
"MATERIAL ADVERSE EFFECT" on any Person means a material adverse
effect on the business, operations, assets (including levels of working
capital and components thereof), condition (financial or otherwise),
operating results, Liabilities, employee relations or, to the Best
Knowledge of such Person, business prospects of such Person.
"OBJECTION NOTICE" has the meaning set forth in Section
2.5(b)(ii).
"ORDERS" means judgments, writs, decrees, compliance agreements,
injunctions or orders of any Governmental Entity or arbitrator.
"OVERPAYMENT AMOUNT" has the meaning set forth in Section
2.5(c)(ii).
"PARENT" has the meaning set forth in the caption.
"PERMITS" means all permits, licenses, authorizations,
registrations, franchises, approvals, certificates, variances and similar
rights obtained, or required to be obtained, from Governmental Entities.
"PERMITTED ENCUMBRANCES" means (i) Encumbrances for Taxes not yet
due and payable or being contested in good faith by appropriate proceedings
and for which there are adequate reserves on the books, (ii) workers or
unemployment compensation liens arising in the ordinary course of business;
and (iii) mechanic's, materialman's, supplier's, vendor's or similar liens
arising in the ordinary course of business securing amounts that are not
delinquent.
"PERSON" shall be construed broadly and shall include an
individual, a partnership, a corporation, a limited liability company, an
association, a joint stock company, a trust, a joint venture, an
unincorporated organization or a governmental entity (or any department,
agency or political subdivision thereof).
"POTENTIAL TRANSACTION" has the meaning set forth in Section
6.8(a).
"PROCEEDINGS" means actions, suits, claims, investigations or
legal or administrative or arbitration proceedings.
"PURCHASE PRICE" has the meaning set forth in Section 2.1(a).
"PURCHASED ASSETS" has the meaning set forth in Section 1.1(b).
"REAL PROPERTY" has the meaning set forth in Section 1.1(a)(iii).
"RELATED DOCUMENTS" means, collectively, the Escrow Agreement,
the Xxxx of Sale, the Consulting and Noncompetition Agreement and the
Employment Agreement.
"REQUISITE RIGHTS" has the meaning set forth in Section 4.11(a).
"RETAINED CONTRACTS" has the meaning set forth in Section
1.2(iv).
"SELLER" has the meaning set forth in the caption.
"SELLER GROUP" means the Seller, each of the Shareholders and
their respective successors, assigns, representatives, heirs and estate.
"SELLER'S BY-LAWS" means the by-laws of the Seller.
"SELLER'S CHARTER" means the certificate or articles of
incorporation of the Seller.
"SETTLEMENT AGREEMENT" has the meaning set forth in Section
2.5(b)(ii).
"SHAREHOLDER(S)" has the meaning set forth in the caption.
"SUBJECT BUSINESS" has the meaning set forth in the preamble.
"SURVIVAL DATE" has the meaning set forth in Section 8.5.
"TAX" means any of the Taxes.
"TAX RETURNS" means Federal, state, local and foreign tax
returns, reports, statements, declarations of estimated tax and forms.
"TAXES" means, with respect to any entity, (i) all income taxes
(including any tax on or based upon net income, gross income, income as
specially defined, earnings, profits or selected items of income, earnings
or profits) and all gross receipts, sales, use, ad valorem, transfer,
franchise, license, withholding, payroll, employment, excise, severance,
stamp, occupation, premium, property or windfall profits taxes, alternative
or add-on minimum taxes, customs duties and other taxes, fees, assessments
or charges of any kind whatsoever, together with all interest and
penalties, additions to tax and other additional amounts imposed by any
taxing authority (domestic or foreign) on such entity (if any) and (ii) any
liability for the payment of any amount of the type described in the
immediately preceding clause (i) as a result of (A) being a "transferee"
(within the meaning of Section 6901 of the Code or any other applicable
law) of another entity, (B) being a member of an affiliated or combined
group or (C) any contractual obligation.
"THIRD PARTY CLAIM" has the meaning set forth in Section 8.4.
"TITLE POLICY" has the meaning set forth in Section 7.2(v).
"TRANSACTION EXPENSES" has the meaning set forth in Section 9.1.
"TRANSITION PERIOD" has the meaning set forth in Section 6.1.
"UNDERPAYMENT AMOUNT" has the meaning set forth in Section
2.5(c)(i).
"WARN ACT" means the Workers Adjustment and Retraining
Notification Act, 29 U.S.C. 
