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STOCK PURCHASE AGREEMENT
BY AND AMONG
MINI CROWN FUNDING CORP.,
("BUYER")
ITS PARENT, SOVEREIGN SPECIALTY CHEMICALS, INC.,
("PARENT")
IMPERIAL ADHESIVES, INC.
("IMPERIAL")
AND
NS GROUP, INC.
("SELLER")
DATED AS OF SEPTEMBER 13, 2000
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TABLE OF CONTENTS
Page
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1. Definitions...............................................................1
2. Purchase and Sale of the Imperial Shares..................................8
(a) Basic Transaction....................................................8
(b) Purchase Price.......................................................9
(c) Working Capital Adjustment...........................................9
(d) The Closing..........................................................9
(e) Deliveries at the Closing............................................9
(f) Closing Audit.......................................................10
(g) Post-Closing Purchase Price Adjustment..............................11
3. Representations and Warranties Concerning the Transaction................11
(a) Representations and Warranties of Seller............................11
(b) Representations and Warranties of the Buyer and the Parent..........13
4. Representations and Warranties Concerning Imperial.......................14
(a) Organization, Qualification and Corporate Power.....................14
(b) Capitalization......................................................14
(c) Noncontravention....................................................14
(d) Subsidiaries........................................................15
(e) Financial Statements................................................15
(f) Events Subsequent to the Most Recent Financial Statements...........15
(g) Undisclosed Liabilities.............................................17
(h) Tax Matters.........................................................17
(i) Tangible Assets.....................................................18
(j) Real Property.......................................................18
(k) Intellectual Property...............................................20
(l) Warranties and Product Liability....................................22
(m) Contracts...........................................................22
(n) Insurance...........................................................23
(o) Litigation..........................................................23
(p) Employees...........................................................23
(q) Employee Benefits...................................................23
(r) Environment, Health and Safety......................................25
(s) Legal Compliance....................................................27
(t) Certain Business Relationships with Imperial........................27
(u) Brokers' Fees.......................................................27
(v) Accounts Receivable.................................................27
(w) Bank Accounts; Investments..........................................28
(x) THERE IS NO SUBSECTION (x)..........................................28
(y) Customers and Suppliers.............................................28
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(z) Certain Business Practices..........................................28
5. Pre-Closing Covenants....................................................28
(a) General.............................................................28
(b) Notices and Consents................................................28
(c) Operation of Business...............................................29
(d) Preservation of Business............................................29
(e) Access..............................................................29
(f) Notice of Developments..............................................29
(g) Exclusivity.........................................................30
(h) HSR Act Filing......................................................30
(i) Plant Closing Notification..........................................30
(j) Intercompany Items..................................................30
(k) Excluded Assets and Excluded Liabilities............................30
(l) No Negative Cash....................................................31
(m) Title Insurance.....................................................31
(n) Surveys.............................................................31
(o) Certain Insurance Policies and Arrangements.........................31
(p) Comparison Month Financial Statements...............................31
(q) Physical Inventory Taking and Determination of Whether Inventory
Reserve Understatement Exists.......................................32
(r) Termination of Xxxxxxx Salary Continuation Agreement................32
6. Additional Covenants.....................................................32
(a) General.............................................................32
(b) Litigation Support..................................................32
(c) Obligation to Refer Inquiries.......................................33
(d) Confidentiality.....................................................33
(e) Additional Tax Matters..............................................33
(f) Covenant Not to Compete.............................................37
(g) Employee Benefit Plans..............................................38
(h) Disability Workers' Compensation....................................39
(i) Severance Policy....................................................39
(j) Collective Bargaining Agreement.....................................40
(k) Backyear Audits.....................................................40
(l) Special Arrangements Relating to Known Environmental Matters........40
(m) Post-Closing Employee Benefit Matters...............................42
7. Conditions to Obligations to Closing.....................................43
(a) Conditions to Obligation of the Buyer...............................43
(b) Conditions to Obligations of the Seller.............................45
8. Remedies for Breach of This Agreement....................................46
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(a) Survival............................................................46
(b) Indemnification Provisions for Benefit of the Buyer.................47
(c) THERE IS NO SECTION 8(c)............................................48
(d) Indemnification Provisions for Benefit of the Seller................48
(e) Matters Involving Third Parties Claims..............................48
(f) Determination of Loss...............................................49
(g) Exclusive Remedy....................................................49
(h) Payment.............................................................49
(i) Other Indemnification Provisions....................................49
(j) Arbitration with Respect to Certain Indemnification Matters.........50
(k) Adjustment to Purchase Price........................................51
9. Termination..............................................................51
(a) Termination of Agreement............................................51
(b) Effect of Termination...............................................52
10. Miscellaneous............................................................52
(a) Press Releases and Announcements....................................52
(b) No Third-Party Beneficiaries........................................52
(c) Entire Agreement....................................................52
(d) Succession and Assignment...........................................52
(e) Facsimile/Counterparts..............................................52
(f) Headings............................................................53
(g) Notices.............................................................53
(h) Submission to Jurisdiction..........................................54
(i) Amendments and Waivers..............................................55
(j) Severability........................................................55
(k) Expenses............................................................55
(l) Construction........................................................55
(m) Incorporation of Exhibits, Annexes and Schedules....................56
(n) Specific Performance................................................56
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LIST OF EXHIBITS AND SCHEDULES
EXHIBITS
Exhibit A Financial Statements
Exhibit B Form of Opinion of Seller's Counsel
Exhibit C Form of Opinion of Seller's Buyer's Counsel
Exhibit D Press Release of Seller
Exhibit E Press Release of Buyer
SCHEDULES
Schedule 6(m) List of Applicable Plans
DISCLOSURE SCHEDULES
Schedule 4(a) Jurisdictions
Schedule 4(c) Noncontravention
Schedule 4(e) Financial Statements
Schedule 4(f) Material Adverse Change
Schedule 4(g) Undisclosed Liabilities
Schedule 4(h) Tax Matters
Schedule 4(j) Real Property
Schedule 4(k) Intellectual Property
Schedule 4(l) Warranties
Schedule 4(m) Contracts
Schedule 4(n) Insurance
Schedule 4(o) Litigation
Schedule 4(p)(i) Employees
Schedule 4(p)(ii) Terminations
Schedule 4(q) Employee Benefits
Schedule 4(r) Environment, Health and Safety
Schedule 4(w) Bank Accounts
Schedule 4(y) Customers and Suppliers
Schedule 5(e) Designated Imperial Customers
Schedule 5(o) Certain Insurance Contracts and Arrangements
Schedule 6(i) Severance Policy
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STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT (the "AGREEMENT") is entered into
as of the 13th day of September, 2000, by and among MINI CROWN FUNDING CORP., a
Delaware corporation (the "BUYER"), the Buyer's parent, SOVEREIGN SPECIALTY
CHEMICALS, INC., a Delaware corporation (the "PARENT"), IMPERIAL ADHESIVES,
INC., an Ohio corporation ("IMPERIAL"), and NS GROUP, INC., a Kentucky
corporation (the "SELLER"). The Buyer, the Parent and the Seller are referred to
herein individually as a "PARTY" and collectively as the "PARTIES."
RECITALS
WHEREAS, the Seller owns all of the outstanding capital stock of
Imperial; and
WHEREAS, this Agreement contemplates a transaction in which
the Buyer will purchase from the Seller, and the Seller will sell to the Buyer,
all of the outstanding capital stock of Imperial, and the Parent will be
primarily liable as a co-maker, of each and every liability and obligation of
the Buyer to the Seller created by the provisions of this Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing Recitals,
the mutual promises herein made, and the representations, warranties and
covenants herein contained, the receipt and sufficiency of which are hereby
mutually acknowledged by the Parties, they hereby agree as follows:
1. DEFINITIONS.
"AAA" has the meaning set forth in Section 8(j) hereof.
"ADJUSTED INVENTORY" means the dollar value of the inventory of
Imperial as of the date of determination net of all reserves, but without any
adjustment for capitalized labor or overhead.
"ADJUSTED SECTION 338 TAXES" has the meaning set forth in Section
6(e((xiii) hereof.
"APPLICABLE XXX TAX RETURNS" has the meaning set forth in Section
6(e)(iii) hereof.
"ARBITRATION" has the meaning set forth in Section 8(j) hereof.
"ARBITRATOR" has the meaning set forth in Section 8(j) hereof.
"ADVERSE CONSEQUENCES" means all actual damages from complaints,
actions, suits, proceedings, hearings, investigations, claims, demands,
judgments, orders, decrees, stipulations, injunctions, damages, dues, penalties,
fines, costs, amounts paid in settlement, liabilities, obligations, taxes,
liens, losses, expenses and fees, including all reasonable accounting fees and
all reasonable attorneys' fees and court costs.
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"AFFECTED PARTICIPANTS" has the meaning set forth in Section 6(g)(i)
hereof.
"AFFILIATE" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Securities Exchange Act of 1934, as amended.
"XXXXXX XXXXXXXX" has the meaning set forth in Section 2(f) hereof.
"AUDITED STATEMENT OF NET WORKING CAPITAL" has the meaning set forth in
Section 2(f) hereof.
"BUSINESS" means the business of manufacturing, distributing and
selling specialty chemical adhesives, sealants and coatings conducted by
Imperial.
"BUYER" has the meaning set forth in the preface above.
"BUYER CUSTOMER SIGN-OFF LETTER" has the meaning set forth in Section
8(a)(vii) hereof.
"BUYER'S PLAN" has the meaning set forth in Section 6(g)(i) hereof.
"CLOSING" has the meaning set forth in Section 2(d) hereof.
"CLOSING DATE" has the meaning set forth in Section 2(d) hereof.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMPARISON MONTH" means Imperial's fiscal month ending September 2,
2000.
"COMPARISON MONTH FINANCIAL STATEMENTS" has the meaning set forth in
Section 5(p) hereof.
"CONFIDENTIAL INFORMATION" means (i) the terms and provisions of this
Agreement or the transactions to be consummated pursuant hereto and (ii)
Imperial's trade secrets and non-public confidential or proprietary business
information, including without limitation, all inventions, formulas or
compositions (whether patentable or unpatentable and whether or not reduced to
practice), know-how, manufacturing and production processes and techniques,
research and development information, drawings, specifications, designs, plans,
proposals, technical data, copyrightable works, business and marketing plans,
lists or descriptions of any customers, referral sources or organizations,
financial statements, cost reports or other financial information (and any
analyses or compilations thereof or reports thereon), contract proposals, or
bidding information, training and operations methods and manuals, personnel
records, fee structure; computer software, and management systems, policies or
procedures, including related forms and manuals, provided that "Confidential
Information" shall not include any information (i) which is disclosed pursuant
to subpoena or other legal process, (ii) which has been publicly disclosed by
means other than by a breach of a confidentiality agreement, or (iii) which is
subsequently disclosed by any third party not in breach of a confidentiality
agreement.
"CONTROLLED GROUP OF CORPORATIONS" has the meaning set forth in Code
Sec. 1563.
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"CURRENT EMPLOYEES" has the meaning set forth in Section 4(p)(i)
hereof.
"DESIGNATED IMPERIAL CUSTOMERS" has the meaning set forth in Section
5(e) hereof.
"DISCLOSURE SCHEDULE" has the meaning set forth in Section 4 hereof.
"DOJ" means the Antitrust Division of the United States Department of
Justice or any successor Governmental Body.
"EMPLOYEE BENEFIT PLAN" means any (a) Employee Pension Benefit Plan,
(b) Employee Welfare Benefit Plan, or (c) any other plan, arrangement, or policy
relating to stock options, stock purchases, compensation, deferred compensation,
severance, fringe benefit or other employee benefit, which covers any current or
former employee of Imperial or to which Imperial makes contributions or has made
contributions within the immediate past five years.
"EMPLOYEE PENSION BENEFIT PLAN" has the meaning set forth in ERISA
Sec. 3(2).
"EMPLOYEE WELFARE BENEFIT PLAN" has the meaning set forth in ERISA
Sec. 3(1).
"EQUITABLE EXCEPTIONS" has the meaning set forth in Section 3(a)(ii)
below.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"EXCLUDED ASSETS" means (i) all real property associated with the
facility formerly owned by Imperial located in Virginia, (ii) the note
receivable of Imperial associated with the sale of the real property formerly
owned by Imperial located in Michigan, (iii) cash and cash equivalents, (iv)
intercompany indebtedness owed to Imperial by the Seller and its other
Affiliates, (v) prepayments of any Taxes for which the Seller is liable pursuant
to Section 6(e) and (vi) prepaid premiums for insurance maintained for Imperial
by the Seller and/or its Affiliates other than for Imperial.
"EXCLUDED LIABILITIES" means (i) all Funded Indebtedness, (ii) all
liabilities and obligations of Imperial whatsoever arising out of, in connection
with or related to Imperial's ownership of any real property located in Virginia
or Michigan, (iii) Taxes for which the Seller is liable pursuant to Section
6(e); and (iv) premiums payable for insurance maintained for Imperial by the
Seller and/or its Affiliates other than Imperial.
"FIDUCIARY" has the meaning set forth in ERISA Sec. 3(21).
"FINANCIAL STATEMENTS" has the meaning set forth in Section 4(e)
hereof.
"FUNDED INDEBTEDNESS" means all (i) indebtedness of Imperial for
borrowed money or other interest-bearing indebtedness; (ii) capital lease
obligations of Imperial; (iii) intercompany indebtedness owed by Imperial to the
Seller and its Affiliates other than Imperial; and (iv) indebtedness of others
guaranteed by Imperial or secured by an Encumbrance on any of Imperial's assets;
provided, however, that Funded Indebtedness shall not include any Letter of
Credit unless actually drawn upon by the beneficiary thereof.
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"FTC" means the United States Federal Trade Commission or any successor
Governmental Body.
"GAAP" means generally accepted accounting principles as in effect from
time to time.
"GOVERNMENTAL BODY" means any foreign, federal, state, county, city,
town, village, municipal or other governmental department, commission, board,
bureau, agency, authority, court or related judicial authority or
instrumentality of any of the foregoing.
"HSR ACT" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of
1976, as amended.
"IMPERIAL" has the meaning set forth in the preface above.
"IMPERIAL SHARES" means all outstanding shares of the common stock, no
par value per share, of Imperial.
"INDEMNIFIED PARTY" has the meaning set forth in Section 8(e) hereof.
"INDEMNIFYING PARTY" has the meaning set forth in Section 8(e) hereof.
"INDEPENDENT ACCOUNTANT" has the meaning set forth in Section 2(f)
hereof.
"INTELLECTUAL PROPERTY" means all (a) trademarks, service marks, trade
dress, logos, websites, e-mail domains, trade names and corporate names and
registrations and applications for registration thereof, (b) copyrights and
registrations and applications for registration thereof, (c) computer software,
data and documentation and (d) trade secrets and confidential business
information (including formulas, compositions, inventions (whether patentable or
unpatentable and whether or not reduced to practice), know-how, manufacturing
and production processes and techniques, research and development information,
drawings, specifications, designs, plans, proposals, technical data,
copyrightable works, financial, marketing and business data, pricing and cost
information, business and marketing plans, and customer and supplier lists and
information).
"INVENTORY RESERVE UNDERSTATEMENT" means that in accordance with the
provisions of Section 5(q), based upon Xxxxxx Xxxxxxxx'x audit of the Adjusted
Inventory, Xxxxxx Xxxxxxxx has determined that such audited Adjusted Inventory
as at the close of the Comparison Month, determined in accordance with GAAP
applied on a basis consistent with the preparation of the Financial Statements,
is at least $175,000 less than the Adjusted Inventory as disclosed by Imperial's
Comparison Month Financial Statements.
"IRS" has the meaning set forth in Section 4(q) hereof.
"XXXXXXX AGREEMENT" has the meaning set forth in Section 5(r) hereof.
"KNOWLEDGE" of a matter referred to in this Agreement means, with
respect to each of (x) Imperial alone, (y) the Seller alone and (z) Imperial and
the Seller, together, the actual knowledge
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about that matter held by any of the following persons: Xxxxxxxx Xxxxxxx, Xxxx
Xxxxxxxxx, Xxxxxx Xxxxxxxxxx, Xxxxxx Xxxxxxx, Xxxxxx Xxxxxxxxxx, Xxxxxx
Xxxxxxxx and Xxxxx Xxxxx.
"KNOWN ENVIRONMENTAL ACTIVITIES" has the meaning set forth in Section
6(l) hereof.
"KNOWN ENVIRONMENTAL CLAIM RESOLUTION ACTIVITIES" has the meaning set
forth in Section 6(l).
"KNOWN ENVIRONMENTAL COSTS" has the meaning set forth in Section
6(l)(iv) hereof.
"KNOWN ENVIRONMENTAL IDENTIFICATION AND REMEDIATION ACTIVITIES" has the
meaning set forth in Section 6(l) hereof.
"KNOWN ENVIRONMENTAL MATTERS" has the meaning set forth in Section 6(l)
hereof.
"KNOWN ENVIRONMENTAL THIRD PARTY CLAIMS" has the meaning set forth in
Section 6(l) hereof.
"LAWS" means all laws, including the common law, statutes, codes,
rules, regulations, ordinances or Orders of any Governmental Body.
"LEASED REAL PROPERTY" has the meaning set forth in Section 4(j)
hereof.
"LEASES" has the meaning set forth in Section 4(j)(ii) hereof.
"LIABILITY" means any liability, debt, obligation, amount or sum due
(whether known or unknown, whether absolute or contingent, whether liquidated or
unliquidated, and whether due or to become due) including any liability for
Taxes.
"MATERIAL" (whether or not capitalized) means, when used in Section 4,
an amount of money greater than $50,000 or an occurrence or circumstance which
results in a loss to Imperial in excess of $50,000, provided that with respect
to the occurrence of any series of related events or set of related
circumstances, "Material" means an amount of money greater than $50,000 per
single event or circumstance or $100,000 in the aggregate for such series of
related events or set of related circumstances, or which result in a loss to
Imperial in excess of $50,000 per single event or circumstance or $100,000 in
the aggregate for such series of related events or set of related circumstances.
"MATERIAL ADVERSE CHANGE" or "MATERIAL ADVERSE EFFECT" means one or
more events, changes or effects, or a series of related events, changes or
effects, which, taken as a whole, or in the aggregate, can reasonably be
expected to have the effect of reducing the annual income from operations of the
Business for one or more years by more than $175,000, provided that: (A) a
"Material Adverse Change" or a "Material Adverse Effect" shall not include
events, changes or effects relating to or caused by general economic or industry
conditions; (B) Imperial's customer relationship with Xxxxx with respect to
Xxxxx'x volume of purchasing from Imperial and the prices paid on such purchases
shall not be taken into account in determining whether a Material
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Adverse Change or a Material Adverse Event has occurred; and (C) the terms
"Material Adverse Change" and "Material Adverse Effect" do not include the
expression of the intention by any one or more of the "Designated Imperial
Customers" (as that term is defined in Section 5(e) hereof) to decline to
continue to transact business with Imperial following the Closing solely or
primarily on account of the Buyer's ownership of Imperial.
"MOST RECENT BALANCE SHEET" means the balance sheet contained within
the Most Recent Financial Statements.
"MOST RECENT FINANCIAL STATEMENTS" has the meaning set forth in Section
4(e) hereof.
"MOST RECENT FINANCIAL STATEMENTS DATE" has the meaning set forth in
Section 4(e) hereof.
"MULTIEMPLOYER PLAN" has the meaning set forth in ERISA Sec. 3(37).
"NET CASH" has the meaning set forth in Section 2(b) hereof.
"NET WORKING CAPITAL OF IMPERIAL" means an amount, calculated as of the
close of business on the Closing Date, equal to (a) the book value of total
current assets of Imperial other than Excluded Assets (and all related
reserves), minus (b) the book value of total current liabilities of Imperial
other than Excluded Liabilities, in each case determined in accordance with GAAP
applied on a basis consistent with the preparation of the Financial Statements;
provided that neither (i) rework inventory on hand on the Closing Date in excess
of $416,000 nor (ii) reserves for liabilities relating to any matters covered by
Section 4(r) and Section 6(l) hereof created after June 30, 2000 shall be
included in the calculation of the Net Working Capital of Imperial.
"NON-SECTION 338 TAXES" has the meaning set forth in Section 6(e)(xiii)
hereof.
"OWNED REAL PROPERTY" has the meaning set forth in Section 4(j) hereof.
"ORDER" means any order, writ, injunction, decree, judgment, award,
determination or written direction of any court, arbitrator or Governmental
Body.
"ORDINARY COURSE OF BUSINESS" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
"PARENT" has the meaning set forth in the preface above.
"PARTY" has the meaning set forth in the preface above.
"PBGC" means the Pension Benefit Guaranty Corporation.
"PERMITTED LIEN" means (a) mechanic's, materialmen's and similar liens,
(b) liens for Taxes not yet due and payable (or for Taxes that the taxpayer is
contesting in good faith through appropriate proceedings), (c) liens arising
under workers' compensation, unemployment
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insurance, social security, retirement and similar legislation, (d) liens
arising in connection with sales of foreign receivables, (e) liens on goods in
transit incurred pursuant to documentary letters of credit, (f) purchase money
liens and liens securing rental payments under capital lease arrangements, and
(g) other liens arising in the Ordinary Course of Business and not incurred in
connection with the borrowing of money.
"PERSON" means an individual, corporation, partnership, association,
trust or other entity or organization, including a Governmental Body or an
agency or instrumentality thereof.
"PHYSICAL INVENTORY TAKING" means the physical counting of Imperial's
inventory to be observed by Xxxxxx Xxxxxxxx and the Buyer's regularly employed
independent public accountants, commencing on or about September 5, 2000,
incident to the completion by Xxxxxx Xxxxxxxx of the Audited Statement of Net
Working Capital.
"POST-CLOSING TAX PERIOD" means any Tax period that commences after the
Closing Date.
"PRE-CLOSING TAX PERIOD" means any Tax period ending on or prior to the
Closing Date.
"PRELIMINARY STATEMENT OF NET WORKING CAPITAL" has the meaning set
forth in Section 2(c) hereof.
"PRODUCTS" means that group of products which has been designed,
developed, produced and/or sold or which is presently sold or offered for sale
by the Business.
"PROHIBITED TRANSACTION" has the meaning set forth in ERISA Sec. 406
and Code Sec. 4975.
"PURCHASE PRICE" has the meaning set forth in Section 2(b) hereof.
"REAL PROPERTY" has the meaning set forth in Section 4(j) below,
including all buildings and improvements (collectively, the "Improvements")
situated thereon, any appurtenances thereto, and any right, title and interest
of Imperial in the fixtures attached or appurtenant to the Improvements.
"REPORTABLE EVENT" has the meaning set forth in ERISA Sec. 4043.
"XXX TAX RETURNS" has the meaning set forth in Section 6(e)(ii) hereof.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SECURITY INTEREST" means any mortgage, pledge, security interest,
encumbrance, charge, or other lien, other than a Permitted Lien.
"SECTION 338 ELECTIONS" has the meaning set forth in Section 6(e)(xi)
hereof.
"SECTION 338 REPORT" has the meaning set forth in Section 6(e)(xiii)
hereof.
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"SECTION 338 TAXES" has the meaning set forth in Section 6(e)(xiii)
hereof.
"SELLER" has the meaning set forth in the preface above.
"SELLER'S PLAN" has the meaning set forth in Section 6(g)(i) hereof.
"SELLER'S PORTION OF KNOWN ENVIRONMENTAL COSTS" has the meaning set
forth in Section 6(l)(iv) hereof.
"SPECIAL SECTION 338 GROSS-UP AMOUNTS AND FEES" has the meaning set
forth in Section 6(e)(xiii) hereof.
"STRADDLE PERIOD" shall mean any Tax period that begins before and ends
after the Closing Date.
"SUBSIDIARY" means any corporation with respect to which another
specified corporation has the power to vote or direct the voting of sufficient
securities to elect a majority of the directors.
"TARGET NET WORKING CAPITAL" has the meaning set forth in Section 2(c)
hereof.
"TAX" or "TAXES" means any federal, state, local or foreign income,
gross receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium, windfall profits, environmental, customs duties, capital
stock, franchise, profits, withholding, social security (or similar),
unemployment, disability, real property, personal property, sales, use,
transfer, registration, value added, alternative or add-on minimum, estimated,
or other tax of any kind whatsoever, including any interest, penalty or addition
thereto.
"TAX RETURN" means any return, declaration, report, claim for refund,
or information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
"TERMINATION FEE" shall mean the sum of $260,000, provided that if the
Material Adverse Event or the Material Adverse Change which has occurred is that
Xxxxxx Xxxxxxxx has determined that there was an Inventory Reserve
Understatement, the "Termination Fee" shall mean $75,000.
"THIRD PARTY CLAIM" has the meaning set forth in Section 8(e) hereof.
2. PURCHASE AND SALE OF THE IMPERIAL SHARES.
(a) BASIC TRANSACTION. On and subject to the terms and
conditions of this Agreement, the Buyer agrees to purchase from the Seller, and
the Seller agrees to sell to the Buyer, all of the Imperial Shares for the
consideration specified below in this Section 2. In order to induce the Seller
to execute and deliver this Agreement to the Buyer and the Parent, the Parent
expressly acknowledges and agrees that the Parent shall be primarily liable to
the Seller for each and every liability and obligation of the Buyer to the
Seller created by the provisions of this
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Agreement as a co-maker of such liability or obligation, provided that where,
in the Seller's sole judgment, there is no impairment to the Seller's receipt
of the timely satisfaction of any such liability or the timely performance of
any such obligation of the Buyer, the satisfaction of such liability or
obligation shall be made or performed by the Buyer.
(b) PURCHASE PRICE. The purchase price for the Imperial
Shares to be purchased by the Buyer from the Seller pursuant to the terms hereof
shall be the sum of $26,750,000, as adjusted pursuant to the provisions of
Section 2(c) and Section 2(g) hereof (the "PURCHASE PRICE"), which shall be paid
in cash. In addition, the Buyer will pay to the Seller the aggregate amount of
all cash and cash equivalents on the books of Imperial as of the Closing Date
(the "NET CASH"). The Purchase Price, as preliminarily adjusted in accordance
with the provisions of Section 2(c) hereof, together with the Net Cash, shall be
paid by the Buyer to the Seller at the Closing by wire transfer or delivery of
other immediately available funds to an account or accounts designated by the
Seller not less than five (5) days prior to the Closing Date.
(c) WORKING CAPITAL ADJUSTMENT. At the Closing, the
Purchase Price shall be adjusted upward or downward on a dollar-for-dollar basis
by the amount by which the Net Working Capital of Imperial at Closing is more or
less than $6,550,000 (the "TARGET NET WORKING CAPITAL AMOUNT"), provided that if
rework inventory on hand on the Closing Date is less than $416,000, the Target
Net Working Capital Amount shall be reduced by $1.00 for each $1.00 by the
amount $416,000 exceeds the book value of rework inventory on hand on the
Closing Date. The Net Working Capital of Imperial at Closing shall be
preliminarily determined by the Seller based on Imperial's Most Recent Financial
Statement (the "PRELIMINARY STATEMENT OF NET WORKING CAPITAL").
(d) THE CLOSING. The closing of the transactions
contemplated by this Agreement (the "CLOSING") shall take place at the offices
of XxXxxxx Xxxxx & Xxxxx, 000 Xxxx Xxxxxxx Street, 40th Floor, in Chicago,
Illinois, commencing at 8:00 a.m. local time on the later of October 2, 2000 and
the second (2nd) business day following the satisfaction or waiver of all
conditions to the obligations of the Parties to consummate the transactions
contemplated hereby, or such other date as the Buyer and the Seller may mutually
determine (the "CLOSING DATE").
(e) DELIVERIES AT THE CLOSING. At the Closing:
(i) The Seller will deliver or cause to be delivered
to the Buyer:
(A) certificates representing the Imperial
Shares, duly endorsed or accompanied by stock powers
duly executed in blank, and otherwise in form
acceptable for transfer on the books of Imperial and
any other documents that are necessary for the
transfer to the Buyer of good title to the Imperial
Shares, with any requisite transfer tax or stamps
attached or provided for;
(B) a copy of the Certificate of
Incorporation of Imperial with all amendments thereto
and Certificates of Good Standing for the State of
Ohio and each State where Imperial is
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qualified to do business as a foreign corporation,
each of which shall be certified as of a date within
thirty (30) days prior to the Closing Date by the
Secretary of State of such States;
(C) a copy of the by-laws of Imperial as
amended through the time of the Closing, certified by
the Secretary of Imperial;
(D) the minute book, stock record book and
corporate seal of Imperial;
(E) all books and records of Imperial which
are requested by the Buyer; and
(F) the various certificates, instruments,
and documents referred to in Section 7(a) below.
(ii) The Buyer will deliver or cause to be delivered
to the Seller:
(A) the consideration specified in Section
2(b) above as may be adjusted at the Closing pursuant
to Section 2(c) above and subject to further
adjustment after the Closing pursuant to Section 2(g);
(B) the various certificates, instruments
and documents referred to in Section 7(b) below.
(f) CLOSING AUDIT. Within ninety (90) days following the
Closing Date, Xxxxxx Xxxxxxxx, L.L.P. ("XXXXXX XXXXXXXX") shall prepare and
deliver to the Seller and the Buyer an audit of the Net Working Capital of
Imperial (the "AUDITED STATEMENT OF NET WORKING CAPITAL") at and as of the close
of business on the Closing Date. The Audited Statement of Net Working Capital
shall be determined in accordance with GAAP applied on a basis consistent with
the preparation of the Financial Statements. The cost to prepare the Audited
Statement of Net Working Capital shall be borne equally by the Buyer and the
Seller; provided, however, that in the event that Xxxxxx Xxxxxxxx audits more
than the Net Working Capital of Imperial, the Seller's portion of the costs of
such audit of the Net Working Capital of Imperial shall be limited to 50% of
Xxxxxx Xxxxxxxx'x determination of its fees and expenses allocable to the
completion of the audit, preparation and delivery of the Audited Statement of
Net Working Capital. In the event that either the Buyer or the Seller disputes
any item(s) on the Audited Statement of Net Working Capital within ten (10) days
after such Party's receipt thereof, and the Parties are unable to resolve such
dispute among themselves within thirty (30) days following their receipt of the
Audited Statement of Net Working Capital, the Parties agree that another "Big
Five" accounting firm acceptable to the Buyer and the Seller (the "INDEPENDENT
ACCOUNTANT") will review the disputed item(s) on the Audited Statement of Net
Working Capital together with the documentation provided by the Buyer and the
Seller supporting their respective positions in the dispute, which referral
shall be made to such Independent Accountant not more than ten (10)
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days following the expiration of the said thirty (30) day period. The final
determination of such disputed item(s) by the Independent Accountant shall be
made within sixty (60) days following the Parties' referral thereof to the
Independent Accountant, which determination shall be reflected on the Audited
Statement of Net Working Capital and shall be final and binding on the Parties
for all purposes and all references to "Audited Statement of Net Working
Capital" elsewhere in this Agreement shall be deemed to refer to the Audited
Statement of Net Working Capital as modified by the Independent Accountant. The
fees and expenses of the Independent Accountant shall be allocated between the
Buyer and the Seller by the Independent Accountant in proportion to the extent
that, on a dollar-weighted basis, either Party did not prevail on items in
dispute, provided, however, that such fees and expenses shall not include, so
long as a Party complies with the procedures of this Section 2(f), the other
Party's outside legal, accounting or other fees. All determinations by the
Independent Accountant shall be final, conclusive and binding upon the Parties
with respect to the Audited Statement of Net Working Capital and the allocation
of fees and expenses.
(g) POST-CLOSING PURCHASE PRICE ADJUSTMENT. In the event
that the Net Working Capital of Imperial as disclosed on the Audited Statement
of Net Working Capital as finally determined is less than the Net Working
Capital of Imperial as disclosed on the Preliminary Statement of Net Working
Capital, then the Purchase Price will be adjusted downward, on a
dollar-for-dollar basis, to reflect the decrease in Net Working Capital of
Imperial as disclosed on the Audited Statement of Net Working Capital from the
amount of Net Working Capital of Imperial as disclosed on the Preliminary
Statement of Net Working Capital. Conversely, the Purchase Price will be
adjusted upward, on a dollar-for-dollar basis, to reflect the increase, if any,
in the Net Working Capital of Imperial as disclosed on the Audited Statement of
Net Working Capital as finally determined from the amount of the Net Working
Capital of Imperial as disclosed on the Preliminary Statement of Net Working
Capital. The post-Closing adjustment to the Purchase Price, if any, plus
interest on the amount of any such adjustment calculated at a per annum rate of
five per cent (5%) from the Closing Date, shall be paid by the Seller to the
Buyer or by the Buyer to the Seller, as the case may be, in immediately
available funds within fifteen (15) days of delivery of the Audited Statement of
Net Working Capital as finally determined.
3. REPRESENTATIONS AND WARRANTIES CONCERNING THE TRANSACTION.
(a) REPRESENTATIONS AND WARRANTIES OF SELLER. The Seller
represents and warrants to the Buyer that, subject to the specific
qualifications and limitations set forth below, the statements contained in this
Section 3(a) are correct and complete as of the date of this Agreement and will
be correct and complete as of the Closing Date (as though made then and as
though the Closing Date were substituted for the date of this Agreement
throughout this Section 3(a)).
(i) ORGANIZATION OF THE SELLER. The Seller is a corporation
duly organized, validly existing, and in good standing under the laws
of the Commonwealth of Kentucky.
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(ii) AUTHORIZATION OF TRANSACTION. The Seller has full
corporate power and authority to execute and deliver this Agreement
and to perform its obligations hereunder and this Agreement has been
duly executed and delivered by the Seller. This Agreement constitutes
the valid and legally binding obligation of the Seller, enforceable in
accordance with its terms and conditions, except that (A) such
enforceability may be subject to bankruptcy, insolvency,
reorganization, moratorium or other laws, decisions or equitable
principles now or hereafter in effect relating to or affecting the
enforcement of creditors' rights or debtors' obligations generally,
and to general equity principles and (B) the remedy of specific
performance and injunctive and other forms of equitable relief may be
subject to equitable defenses and to the discretion of the court
before which any proceeding therefore may be brought (the terms of
clause (A) and (B) are sometimes collectively referred to as the
"EQUITABLE EXCEPTIONS"). Except for filings required by the HSR Act,
the Seller need not give any notice to, make any filing with, or
obtain any authorization, consent or approval of any Governmental Body
in order to consummate the transactions contemplated by this
Agreement.
(iii) NONCONTRAVENTION. Except for approvals required under
the HSR Act, neither the execution and the delivery of this Agreement
by the Seller, nor the consummation of the transactions contemplated
hereby by the Seller, will (A) violate any Law or Order or other
restriction of any Governmental Body to which the Seller is subject or
(B) conflict with, result in a breach of, constitute a default under,
result in the acceleration of, create in any part the right to
accelerate, terminate, modify or cancel, or require any notice under
any contract, lease, sublease, license, sublicense, franchise, permit,
indenture, agreement or mortgage for borrowed money, instrument of
indebtedness, Security Interest or other arrangement to which the
Seller is a party or by which it is bound or to which any of its
assets is subject, which, as to clauses (A) and (B), will prevent the
Seller from consummating the transactions contemplated by this
Agreement.
(iv) BROKER'S FEES. The Seller has no Liability or
obligation to pay any fees or commissions to any broker, finder or
agent with respect to the transactions contemplated by this Agreement
for which the Buyer or the Parent could become liable or obligated.
(v) IMPERIAL SHARES. The Seller holds of record and
owns beneficially all of the Imperial Shares, free and clear of any
restrictions on transfer (other than any restrictions under the
Securities Act and state securities laws), claims, Taxes, Security
Interests (other than those to be removed prior to or concurrently
with the Closing pursuant to Section 7(a)(xii)), options, warrants,
rights, contracts, calls, commitments, equities, preemptive rights and
demands. The Seller is not a party to any option, warrant, right,
contract, call, put or other agreement or commitment providing for the
disposition by the Seller of any capital stock of Imperial (other than
this Agreement). The Seller is not a party to any
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voting trust, proxy agreement, stockholders' agreement or other
understanding (written or oral) with respect to the voting of any
capital stock of Imperial.
(b) REPRESENTATIONS AND WARRANTIES OF THE BUYER AND THE
PARENT. The Buyer and the Parent jointly and severally represent and warrant to
the Seller that, subject to the specific qualifications and limitations set
forth below, the statements contained in this Section 3(b) are correct and
complete as of the date of this Agreement and will be correct and complete as
of the Closing Date (as though made then and as though the Closing Date were
substituted for the date of this Agreement throughout this Section 3(b)).
(i) ORGANIZATION OF THE BUYER. The Buyer and the Parent are
each corporations duly organized, validly existing, and in good
standing under the laws of the State of Delaware.
(ii) AUTHORIZATION OF TRANSACTION. Each of the Buyer and
the Parent has full corporate power and authority to execute and
deliver this Agreement and to perform its obligations hereunder and
this Agreement has been duly executed and delivered by each of the
Buyer and the Parent. This Agreement constitutes the valid and legally
binding obligation of each of the Buyer and the Parent, enforceable in
accordance with its terms and conditions except for the Equitable
Exceptions. Except for filings made under the HSR Act, neither the
Buyer nor the Parent need give any notice to, make any filing with, or
obtain any authorization, consent, or approval of any Governmental
Body in order to consummate the transactions contemplated by this
Agreement.
(iii) NONCONTRAVENTION. Except for approvals required under
the HSR Act, neither the execution and the delivery of this Agreement
by the Buyer or the Parent, nor the consummation of the transactions
contemplated hereby by the Buyer and the Parent, will (A) violate any
Law or Order or other restriction of any Governmental Body to which
the Buyer or the Parent is subject or any provision of its charter or
bylaws or (B) 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, lease, sublease, license, sublicense,
franchise, permit, indenture, agreement or mortgage for borrowed
money, instrument of indebtedness, Security Interest or other
arrangement to which either the Buyer or the Parent is a party or by
which it is bound or to which any of its assets is subject, which, as
to clauses (A) and (B), will prevent either the Buyer or the Parent
from consummating the transactions contemplated by this Agreement.
(iv) BROKERS' FEES. Neither the Buyer nor the Parent has
any Liability or obligation to pay any fees or commissions to any
broker, finder or agent with respect to the transactions contemplated
by this Agreement for which the Seller could become liable or
obligated.
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(v) INVESTMENT. The Buyer is not acquiring the Imperial
Shares with a view to or for sale in connection with any distribution
thereof within the meaning of the Securities Act.
4. REPRESENTATIONS AND WARRANTIES CONCERNING IMPERIAL. The Seller
represents and warrants to the Buyer that, subject to the specific
qualifications and limitations contained herein and except as set forth on the
Disclosure Schedule delivered by the Seller to the Buyer concurrently with the
execution and delivery of this Agreement (the "DISCLOSURE SCHEDULE"), the
statements contained in this Section 4 are correct and complete as of the date
of this Agreement and will be correct and complete as of the Closing Date (as
though made then and as though the Closing Date were substituted for the date of
this Agreement throughout this Section 4), except to the extent that such
representations and warranties are made as of any other specified date, and as
to such representation, the same shall be true as of such date. The Disclosure
Schedule will be arranged in paragraphs corresponding to the lettered and
numbered paragraphs contained in this Agreement. As required, the Disclosure
Schedule will be updated one or more times prior to the Closing Date; provided
that except as otherwise provided by the provisions of Section 4(p)(i), any such
updated Disclosure Schedule containing any change that would result in any
Material Adverse Effect must be delivered to the Buyer not less than two (2)
business days prior to the Closing Date.
(a) ORGANIZATION, QUALIFICATION AND CORPORATE POWER.
Imperial is a corporation duly organized, validly existing and in good standing
under the laws of the State of Ohio. Imperial is duly authorized to conduct
business and is in good standing under the laws of the States of Ohio and
Tennessee, and in each other jurisdiction listed on Schedule 4(a) of the
Disclosure Schedule, which jurisdictions constitute all of the jurisdictions in
which the nature of its businesses or the ownership or leasing of its properties
requires such qualification, except where any such failure would not have a
Material adverse effect on the Business or Imperial. Imperial has full corporate
power and authority to carry on the businesses in which it is engaged and to own
and use the properties owned and used by it.
(b) CAPITALIZATION. The entire authorized capital stock of
Imperial consists of 10,000 shares of common stock, 9,499 of which are issued
and outstanding and held by the Seller. None of the Imperial Shares is held in
treasury. The Imperial Shares have been duly authorized, are validly issued,
fully paid, and nonassessable, and are held of record by the Seller. There are
no outstanding or authorized options, warrants, rights, contracts, calls, puts,
rights to subscribe, conversion rights or other agreements or commitments to
which Imperial is a party or which are binding upon Imperial providing for the
issuance, disposition or acquisition of any of its capital stock. There are no
outstanding or authorized stock appreciation, phantom stock, or similar rights
with respect to Imperial.
(c) NONCONTRAVENTION. Except as set forth on Schedule 4(c)
of the Disclosure Schedule, neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, will
(i) violate any Law or Order or other restriction of any Governmental Body to
which Imperial is subject or any provision of the charter or bylaws of Imperial
or (ii) conflict with, result in a breach of, constitute a default under, result
in
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the acceleration of, create in any party the right to accelerate, terminate,
modify or cancel, or require any notice under any contract, lease, sublease,
license, sublicense, franchise, permit, indenture, agreement or mortgage for
borrowed money, instrument of indebtedness, Security Interest or other
arrangement to which Imperial is a party or by which it is bound or to which any
of its assets is subject (or result in the imposition of any Security Interest
upon any of its assets) which, as to clauses (i) and (ii) will result in a
Material adverse effect on the Business or Imperial. Except for the filing under
the HSR Act, Imperial does not need to give any notice to, make any filing with,
or obtain any authorization, consent or approval of any Governmental Body in
order for the Parties to consummate the transactions contemplated by this
Agreement.
(d) SUBSIDIARIES. Imperial has no Subsidiaries and does not
control, directly or indirectly, or have any direct or indirect equity
participation in, any Person.
(e) FINANCIAL STATEMENTS. Attached hereto as EXHIBIT A are
the following financial statements (collectively, the "FINANCIAL STATEMENTS") of
Imperial: (i) unaudited statement of operations, retained earnings and cash
flows for the fiscal years ended September 27, 1997, September 26, 1998 and
September 25, 1999, (ii) unaudited balance sheet as of the last date of each
such fiscal years and (iii) an unaudited balance sheet and statement of
operations, changes in stockholders' equity and cash flows as of and for the ten
month period commencing September 26, 1999 and ending August 5, 2000 (such
financial interim statements being collectively referred to as the "MOST RECENT
FINANCIAL STATEMENTS" and the last day of the period covered thereby being
referred to as the "MOST RECENT FINANCIAL STATEMENTS DATE," respectively).
Except as set forth on Schedule 4(e) of the Disclosure Schedule, the Financial
Statements (A) have been prepared in accordance with GAAP applied on a
consistent basis throughout the period covered thereby, (B) are correct and
complete in all material respects, (C) fairly present the financial condition
and results of operations of Imperial as of such dates and for the periods
indicated, and (D) have been prepared from and in accordance with the books and
records of Imperial (which books and records are correct and complete in all
material respects).
(f) EVENTS SUBSEQUENT TO THE MOST RECENT FINANCIAL
STATEMENTS. Except as set forth on Schedule 4(f) of the Disclosure Schedule,
since the Most Recent Financial Statements Date:
(i) there has not been any Material Adverse Change
affecting Imperial;
(ii) Imperial has not sold, leased, transferred or
assigned any of its assets, tangible or intangible, other than for a
fair consideration in the Ordinary Course of Business;
(iii) Imperial has not entered into any contract,
lease, sublease, license or sublicense (or series of related
contracts, leases, subleases, licenses and sublicenses) either
involving more than $100,000 or outside the Ordinary Course of
Business;
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(iv) other than in the Ordinary Course of Business,
Imperial has not accelerated, terminated, modified or canceled any
contract, lease, sublease, license or sublicense (or series of
related contracts, leases, subleases, licenses and sublicenses)
involving more than $100,000 to which Imperial is a party or by
which it is bound;
(v) no Person has notified Imperial of any
acceleration, termination, modification or cancellation of any
Material contract (other than a customer contract in the Ordinary
Course of Business), agreement, lease, sublease, license or
sublicense (or series of related contracts, leases, subleases,
licenses and sublicenses), involving more than $100,000 to which
Imperial is a party or by which it is bound;
(vi) other than in the Ordinary Course of Business,
Imperial has not made any capital expenditure (or series of related
capital expenditures) either involving more than $50,000 individually
or $100,000 in the aggregate, or outside the Ordinary Course of
Business;
(vii) other than in the Ordinary Course of Business,
Imperial has not made any capital investment in, any loan to, or any
acquisition of the securities or assets of any other person (or
series of related capital investments, loans, and acquisitions)
either involving more than $50,000 individually or $100,000 in the
aggregate;
(viii) Imperial has not delayed or postponed (beyond
its normal practice) the payment of accounts payable and other
liabilities;
(ix) there has been no change made or authorized in the
charter or regulations of Imperial; (X) Imperial has not experienced
any damage, destruction or loss involving more than $100,000 (whether
or not covered by insurance) to its assets;
(xi) Imperial has not made any loan to, or entered
into any other transaction with, any of its directors, officers and
employees outside the Ordinary Course of Business or involving more
than $50,000, giving rise to any claim or right on its part against
the Person or on the part of the Person against it;
(xii) Imperial has not entered into any employment
contract or collective bargaining agreement, written or oral, or
modified in any material respect the terms of any existing such
contract or agreement with any of its full-time staff employees;
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(xiii) Imperial has not granted an increase in the
base compensation of any of its directors, officers and employees
outside the Ordinary Course of Business;
(xiv) Imperial has not adopted any (A) bonus, (B)
profit-sharing, (C) incentive compensation, (D) pension, (E)
retirement, (F) medical, hospitalization, life, or other insurance,
(G) severance or (H) other plan, contract or commitment for any of its
directors, officers and employees, or modified or terminated any
existing such plan, contract or commitment;
(xv) Imperial has not changed its accounting methods
or principles;
(xvi) Imperial has not suffered any Material shortages
of raw materials used in the production of the Products;
(xvii) Imperial has not made or paid any non-cash
dividends or distributions to the Seller whether or not upon
or in respect of its capital stock;
(xviii) Imperial has not redeemed or otherwise
acquired any shares of its capital stock or issued any capital stock
or any option, warrant or right relating thereto or any securities
convertible or exchangeable for any shares of its capital stock; and
(xix) Imperial has not agreed to do any of the
foregoing.
(g) UNDISCLOSED LIABILITIES. Since the Most Recent Financial
Statements Date, Imperial has incurred no Material Liabilities required by GAAP
to be reflected on its balance sheet other than in the Ordinary Course of
Business or as disclosed on Schedule 4(g) of the Disclosure Schedule.
(h) TAX MATTERS. Except as set forth on Schedule 4(h) of
the Disclosure Schedule:
(i) Imperial has filed all Tax Returns that it was
required to file. All such Tax Returns were correct and complete
in all material respects. All Taxes owed by Imperial (whether or
not shown on any Tax Return) have been paid or accrued. Imperial
currently is not the beneficiary of any extension of time within
which to file any Tax Return. No claim is currently pending by an
authority in a jurisdiction where Imperial does not file Tax
Returns that it is or may be subject to taxation by that
jurisdiction. There are no Security Interests on any of the
assets of Imperial that arose in connection with any failure (or
alleged failure) to pay any Tax.
(ii) Neither the Seller nor any of the officers (or
employees responsible for Tax matters) of Imperial has received
any notice that any authority
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23
intends to assess any additional Taxes for any period for which
Tax Returns have been filed. There is no dispute or claim
concerning any Tax liability of Imperial either (A) claimed or
raised by any authority in writing or (B) as to which the Seller
or Imperial has Knowledge based upon personal contact with any
agent of such authority. Schedule 4(h) of the Disclosure Schedule
lists all federal, state and local income Tax Returns filed with
respect to Imperial for taxable periods ended on or after
September 25, 1993 that currently are the subject of an audit.
(iii) Imperial has not filed a consent under Code
Sec. 341(f) concerning collapsible corporations. Imperial has not
made any payments, is not obligated to make any payments, nor is
a party to any agreement that under certain circumstances could
obligate it to make any payments that will not be deductible to
Imperial under Code Sec. 280G. Imperial has disclosed on its
federal income Tax Returns all positions taken therein that could
give rise to a substantial understatement of federal income Tax
within the meaning of Code Sec. 6662. Imperial is not a party to
any Tax allocation or sharing agreement.
(iv) Except for Taxes incurred in the Ordinary Course
of Business since the Most Recent Financial Statements Date,
Imperial has no liability for Taxes for any Tax period ending
prior to the Closing Date other than Taxes for which there is an
accrual for current taxes reflected on the Most Recent Balance
Sheet.
(v) Imperial has no liability for Taxes of any other
person or entity and has no Tax liability as a successor or
transferee, except as provided pursuant to Section 1.1502-6 of
the Treasury Regulations or similar provisions of state, local or
foreign Tax laws.
(vi) Imperial has no liability pursuant to any
agreement to share, allocate or reimburse Taxes or Tax benefits.
(vii) Following the Closing, Imperial will not have
any "excess loss accounts" within the meaning of Section
1.1502-19 of the Treasury Regulations and there will be no
"intercompany items" between Imperial and any member of the
Seller's affiliated group.
(i) TANGIBLE ASSETS. Imperial owns or leases all tangible
assets necessary for the conduct of the Business as presently conducted. Each
such tangible asset is free from Security Interests (other than Permitted Liens
or the Security Interests to be removed prior to or concurrently with the
Closing pursuant to the provisions of Section 7(a)(xii)), is in good operating
condition and repair (subject to normal wear and tear), and is suitable for the
purposes for which it presently is used.
(j) REAL PROPERTY. Schedule 4(j) of the Disclosure Schedule
lists and describes briefly all real property owned or leased by Imperial
(collectively, the "REAL PROPERTY"; such owned Real Property being hereinafter
referred to collectively as the "OWNED REAL
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PROPERTY" and such leased Real Property being hereinafter referred to
collectively as the "LEASED REAL PROPERTY").
(i) With respect to the Owned Real Property, except as set
forth in Schedule 4(j) of the Disclosure Schedule:
(A) Imperial has good and marketable title to the
Owned Real Property free and clear of any Security Interest,
easement, covenant, or other restriction, except for (1)
installments of special assessments not yet delinquent, (2)
recorded easements, covenants, and other restrictions which do
not impair in any Material respect the current use, occupancy, or
value, or the marketability of title, of the property subject
thereto and (3) Permitted Liens;
(B) there are no (1) pending or, to the Knowledge
of the Seller and Imperial, threatened condemnation proceedings
relating to such parcel, or (2) pending or, to the Knowledge of
the Seller and Imperial, threatened litigation or administrative
actions relating to such parcel;
(C) the buildings and improvements thereon are in
Material compliance with applicable setback requirements, zoning
laws, and ordinances;
(D) all facilities located on such parcel have
received all approvals of governmental authorities (including
licenses and permits) required in connection with the ownership
or operation thereof and have been operated and maintained in
Material compliance with applicable laws, rules, and regulations;
(E) there are no leases or subleases, written or
oral, granting to any party or parties the right of use or
occupancy of any portion of such parcel;
(F) there are no outstanding options or rights
of first refusal to purchase such parcel or any portion thereof
or interest therein; and
(G) there are no parties (other than Imperial) in
possession of such parcel, other than tenants under any leases
disclosed in Schedule 4(j) of the Disclosure Schedule who are in
possession of space to which they are entitled.
(ii) With respect to each parcel of Leased Real Property,
except as set forth in Schedule 4(j) of the Disclosure Schedule, the
leases by which Imperial is invested with the leasehold estate in the
Leased Real Property (the "LEASES") are each legal, valid, binding,
enforceable and in full force and effect and will remain so on
identical
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terms immediately following the Closing (subject to the Equitable
Exceptions), Imperial is the sole owner of the leasehold estates
created by the Leases for each parcel of Leased Real Property and
there are no Persons (other than Imperial) in possession of any of
such parcels of Leased Property. A true, correct and complete copy of
each Lease, and all amendments and modifications thereto has been
delivered to the Buyer. Except as set forth in Schedule 4(j) of the
Disclosure Schedule, neither Imperial nor, to the Knowledge of
Imperial and the Seller, the landlord under any Lease has made any
prior assignment or transfer of their respective interest in the
Leases. Subject to the Permitted Liens and any Security Interests
disclosed on Schedule 4(j) of the Disclosure Schedule, Imperial has a
valid leasehold estate in each parcel of the Leased Real Property as
created by the applicable Lease free and clear of any Security
Interests. Except as set forth in Schedule 4(j) of the Disclosure
Schedule, Imperial is not in Material default under any of the Leases,
and to the Seller's and Imperial's Knowledge, there does not exist
under any Lease any Material default of any other Person or any event
which with notice or lapse of time or both would constitute a Material
default by Imperial or any other Person. To the Knowledge of the
Seller and Imperial, except as set forth on Schedule 4(j) of the
Disclosure Schedule, there are no (A) pending or threatened
condemnation proceedings relating to any of the Leased Real Property,
or (B) pending or threatened litigation or administrative actions
relating to any of the Leased Real Property.
(k) INTELLECTUAL PROPERTY.
(i) Except as set forth on Schedule 4(k) of the
Disclosure Schedule, Imperial owns or has the right to use
pursuant to license, sub-license, consent, agreement or
permission, or may otherwise lawfully use, all Intellectual
Property necessary for the operation of the Business as presently
conducted. Each item of Intellectual Property owned or used by
Imperial immediately prior to the Closing hereunder will be owned
or available for use by Imperial on identical terms and
conditions immediately subsequent to the Closing hereunder.
(ii) Except as set forth on Schedule 4(k) of the
Disclosure Schedule, to the Knowledge of Imperial and the Seller,
Imperial has neither (A) interfered with, infringed upon,
misappropriated or otherwise come into conflict with any
Intellectual Property rights of third parties, nor (B) received
within the three (3) year period immediately preceding the date
of this Agreement, any charge, complaint, claim or notice
alleging any such interference, infringement, misappropriation or
violation.
(iii) Schedule 4(k) of the Disclosure Schedule
identifies each patent or trademark, tradename or copyright
registration which has been issued to Imperial with respect to
any of its Intellectual Property, identifies each pending patent
application or application for trademark, tradename or copyright
registration which Imperial has made with respect to any of its
Intellectual Property, and identifies each material license,
agreement or other permission which Imperial has granted to any
third party with respect to any of its Intellectual
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Property (together with any exceptions). Except as identified in
Schedule 4(k) of the Disclosure Schedule, with respect to each
item of Intellectual Property that Imperial owns:
(A) Imperial possesses all right, title and interest
in and to the item;
(B) the item is not subject to any outstanding Order;
and
(C) no charge, complaint, action, suit, proceedings,
hearing, investigation, claim or demand is pending or, to
the Knowledge of the Seller and Imperial, is threatened,
which challenges the legality, validity, enforceability, use
or ownership of the item.
(iv) Schedule 4(k) of the Disclosure Schedule also identifies
each item of Intellectual Property that any third party owns and that
Imperial uses pursuant to license, sub-license, agreement or
permission, other than general commercial third party software (as to
which all license fees properly due and owing for Imperial's usage
thereof, have been properly paid). Except as identified in Schedule
4(k) of the Disclosure Schedule, with respect to each such item of
used Intellectual Property:
(A) the license, sublicense, agreement or permission
covering the item is legal, valid, binding, enforceable and in
full force and effect (subject to the Equitable Exceptions) as to
Imperial, and to the Knowledge of the Seller and Imperial, as to
the other Persons who are parties thereto;
(B) the license, sublicense, agreement or permission will
continue to be legal, valid, binding, enforceable and in full
force and effect on identical terms following the Closing
(subject to the Equitable Exceptions) as to Imperial, and to the
Knowledge of the Seller and Imperial, as to the other Persons who
are parties thereto;
(C) To the Knowledge of the Seller and Imperial, (i)
Imperial is not, and no other party to the license, sublicense,
agreement, or permission is in breach or default, and (ii) no
event has occurred which with notice or lapse of time would
constitute a breach or default or permit termination,
modification or acceleration thereunder; and
(D) to the Knowledge of the Seller and Imperial, no charge,
complaint, action, suit, proceedings, hearing, investigation,
claim or demand is pending or is threatened which challenges the
legality, validity or enforceability of any Material underlying
item of Intellectual Property.
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(l) WARRANTIES AND PRODUCT LIABILITY. Subject to any
applicable reserve established on the Audited Statement of Net Working Capital,
and except as disclosed on Schedule 4(l) of the Disclosure Schedule, each
product manufactured, sold or delivered by Imperial has been in conformity with
all applicable contractual commitments and all express or implied warranties in
all material respects. There is no outstanding Material action, suit,
arbitration or other proceeding, or claim, demand, demand letter, lien, notice
of noncompliance or violation, or to the Knowledge of the Seller and Imperial,
threatened against Imperial, for injury to any person or any property suffered
as a result of the manufacture, distribution or sale of any product or material
by Imperial, including any claim arising out of the defective or unsafe nature,
or allegedly defective or unsafe nature, of any such product or material.
(m) CONTRACTS. Schedule 4(m) of the Disclosure Schedule
lists the following contracts, agreements and other arrangements (oral or
written) to which Imperial is a party:
(i) any arrangement (or group of related written
arrangements) for the lease of personal property from or to third
parties providing lease payments in excess of $75,000 per annum;
(ii) any arrangement (or group of related written
arrangements) for the purchase or sale of Products, raw
materials, commodities, supplies or other personal property or
for the furnishing or receipt of services which either requires
the performance over a period of more than one year after the
Closing Date or requires expenditures of more than the sum of
$100,000;
(iii) any arrangement concerning a partnership or
joint venture;
(iv) any arrangement requiring confidentiality or
non-competition;
(v) any arrangement involving the Seller and its
Affiliates that will survive the Closing; or
(vi) any other arrangement (or group of related
written arrangements) either involving more than $100,000 or not
entered into in the Ordinary Course of Business.
The Seller has delivered to the Buyer a correct and complete copy of each
written arrangement (as amended to date) listed in Schedule 4(m) of the
Disclosure Schedule. With respect to each arrangement so listed: (A) the
arrangement is legal, valid, binding, enforceable and in full force and effect
(subject to the Equitable Exceptions) as to Imperial, and to the Knowledge of
the Seller and Imperial, as to the other Persons who are parties thereto; (B)
the arrangement will continue to be legal, valid, binding, enforceable and in
full force and effect (subject to the Equitable Exceptions) as to Imperial, and
to the Knowledge of the Seller and Imperial, as to the other Persons who are
parties thereto, on identical terms following the Closing; (C) Imperial is not,
nor to the Knowledge of the Seller and Imperial, is any other Person who is a
party thereto in breach
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or default, and no event has occurred which with notice or lapse of time would
constitute a material breach or default or permit termination, modification, or
acceleration, under such arrangements; and (D) Imperial has not, nor to the
Knowledge of the Seller and Imperial, has any other Person who is a party
thereto, repudiated any provision of any arrangement.
(n) INSURANCE. Schedule 4(n) of the Disclosure Schedule
sets forth an accurate and complete list of all policies of fire, liability,
keyman life insurance, worker's compensation, products liability and other forms
of insurance owned or held by or beneficially for Imperial. All such policies
are in full force and effect, no premiums with respect thereto are past due and
no notice of cancellation or termination has been received by the Seller or
Imperial with respect to any such policy. Neither the Seller nor Imperial has
received any notification that Material changes are required in the conduct of
the Business as a condition to the continuation of coverage under or renewal of
any such policy. True, correct and complete copies of such insurance policies
have been made available to the Buyer.
(O) LITIGATION. Schedule 4(o) of the Disclosure Schedule
sets forth each instance in which Imperial (i) is subject to any unsatisfied
judgment, order, decree, stipulation, injunction or charge or (ii) is a party
or, to the Knowledge of the Seller and Imperial, is threatened to be made a
party, to any charge, complaint, action, suit, proceeding, hearing or
investigation of or in any court or quasi-judicial or administrative agency of
any federal, state, local or foreign jurisdiction or before any arbitrator.
(p) EMPLOYEES.
(i) Schedule 4(p)(i) of the Disclosure Schedule lists
all of the employees of Imperial currently on Imperial's payroll
as of the date of this Agreement (including those on leaves of
absence), which schedule will be updated at and as of the Closing
Date to reflect any employees hired or terminated prior to the
Closing Date ("CURRENT EMPLOYEES").
(ii) To the Knowledge of the Seller and Imperial, no
key employee or full-time group of employees has any plans to
terminate employment with Imperial. Except as set forth on
Schedule 4(p)(ii) of the Disclosure Schedule, Imperial is not a
party to or bound by any employment agreement or any collective
bargaining agreement, nor has it experienced any strikes,
grievances, claims of unfair labor practices or other collective
bargaining disputes since January 1, 1999. Imperial has not
committed any unfair labor practice, including, without
limitation, violation of the Fair Labor Standards Act of 1938 or
any laws respecting the hiring of non-United States citizens.
(q) EMPLOYEE BENEFITS. Schedule 4(q) of the Disclosure
Schedule lists all Employee Benefit Plans in which any current or former
employee of Imperial participates or has participated within the last five
years, whether sponsored by Imperial or a current affiliate of Imperial. To the
extent reasonably available, copies of each such plan and related summary plan
descriptions, trust agreements, service agreements and insurance policies and
the three (3) most recent annual reports on Internal Revenue Service ("IRS")
Form 5500 for each plan have
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heretofore been provided to the Buyer by the Seller. As to each Employee Benefit
Plan in respect of which a copy has not been provided to the Buyer, Schedule
4(q) of the Disclosure Schedule contains a description of the material terms of
that Employee Benefit Plan, including its eligibility requirements, benefit
accrual, vesting, distributions, funding arrangements and financial condition.
(i) Each Employee Benefit Plan (and each related trust
or insurance contract) complies and has at all times complied in
all material respects in form and in operation with the
applicable requirements of ERISA and the Code. No Employee
Benefit Plan has been the subject of an audit, review, or
examination by the Internal Revenue Service, Department of Labor,
or the PBGC.
(ii) The list of Employee Welfare Benefit Plans in
Schedule 4(q) of the Disclosure Schedule discloses whether each
such plan is (i) self-funded, (ii) funded through a "welfare
benefit fund," as such term is defined in Section 419(e) of the
Code, or other funding mechanism or (iii) insured. Each Employee
Welfare Benefit Plan may be amended or terminated at any time
after the Closing Date without any material Liability, other than
claims incurred (and premiums due) but not yet paid through the
date of termination and any applicable termination fees,
penalties or expenses. Each plan complies in all material
respects with the applicable requirements of Section 4980B(f) of
the Code with respect to each Benefit Plan that is a group health
plan, as such term is defined in Section 5000(b)(1) of the Code.
Schedule 4(q) of the Disclosure Schedule discloses each
individual who is currently receiving, who is currently eligible
or entitled to COBRA's continuation coverage, his or her monthly
premium payments, and number of months remaining for such
continuation coverage.
(iii) All contributions (including all employer
contributions and employee salary reduction contributions) which
are due have been paid to each Employee Benefit Plan and all
contributions for any period ending on or before the Closing Date
which are not yet due have been paid to each Employee Benefit
Plan or accrued on the Financial Statements in accordance with
the past custom and practice of Imperial. All premiums or other
payments which are due for all periods ending on or before the
Closing Date with respect to each Employee Welfare Benefit Plan
have been paid or accrued on the Financial Statements in
accordance with the past custom and practice of Imperial.
(iv) Each Employee Benefit Plan which is an Employee
Pension Benefit Plan intended to be a qualified plan in fact
meets the requirements of a "qualified plan" under Code Sec.
401(a).
(v) No Employee Pension Benefit Plans is a
"multiemployer plan", as defined in Section 4001(a)(3) of ERISA
(a "Multiemployer Plan"), and the Seller and its affiliates,
including Imperial, has never contributed to a Multiemployer
Plan. Neither the Seller nor an affiliate of the Seller,
including Imperial, has contributed or been obligated to
contribute at any time during the
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immediate past five years to a "defined benefit plan" as defined
in Section 3(35) of ERISA. Except as disclosed in Schedule 4(q)
of the Disclosure Schedule, no Employee Pension Benefit Plan has
been completely or partially terminated or been the subject of a
Reportable Event as to which notices would be required to be
filed with the PBGC, and no proceeding by the PBGC to terminate
any Employee Pension Benefit Plan has been instituted or, to the
Knowledge of the Seller and Imperial, threatened.
(vi) There have been no Prohibited Transactions with
respect to any Employee Benefit Plan. No Fiduciary has any
Liability for breach of fiduciary duty or any other failure to
act or comply in connection with the administration or investment
of the assets of any Employee Benefit Plans. No charge,
complaint, action, suit, proceeding, hearing, investigation,
claim or demand with respect to the administration or the
investment of the assets of any Employee Benefit Plan (other than
routine claims for benefits) is pending or, to the Knowledge of
the Seller and Imperial, threatened.
(vii) No compensation payable by Imperial or an
affiliate to any of its employees, officers or directors under
any existing contract, Employee Benefit Plan or other employment
arrangement or under-standing (including by reason of the
transactions contemplated hereby) will be subject to disallowance
under Section 162(m) of the Code or be characterized as an
"excess parachute payment under Section 280G of the Code.
Imperial has not incurred any Liability to the PBGC (other than PBGC premium
payments) or otherwise under Title IV of ERISA (including any withdrawal
Liability) or under the Code with respect to any Employee Pension Benefit Plan
that Imperial and the Controlled Group of Corporations which includes Imperial
maintains or ever has maintained or to which any of them contributes, ever has
contributed, or ever has been required to contribute. Imperial does not
maintain, nor has it ever maintained or contributed to, or ever has been
required to contribute to any Employee Welfare Benefit Plan providing health,
accident, or life insurance benefits to former employees, their spouses or their
dependents (other than in accordance with Code Sec. 4980B).
(r) ENVIRONMENT, HEALTH AND SAFETY. Except as disclosed on
Schedule 4(r) of the Disclosure Schedule:
(i) Imperial is in material compliance with all Laws
concerning the environment, public health and safety, and
employee health and safety, and no material charge, complaint,
action, suit, proceeding, hearing, investigation, claim, demand
or notice has been filed or commenced against it or, to the
Knowledge of the Seller and Imperial, is threatened alleging any
failure to comply with any such Laws.
(ii) Imperial has no material Liability (and there is
no present or threatened charge, complaint, action, suit,
proceeding, hearing, investigation, claim or demand against
Imperial giving rise to any material Liability) under the
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Comprehensive Environmental Response, Compensation and Liability
Act of 1980, the Resource Conservation and Recovery Act of 1976,
the Federal Water Pollution Control Act of 1972, the Clean Air
Act of 1970, the Safe Drinking Water Act of 1974, the Toxic
Substances Control Act of 1976, the Refuse Act of 1899, or the
Emergency Planning and Community Right-to-Know Act of 1986 (each
as amended), or any other Law or Order of any Governmental Body,
concerning release or threatened release of hazardous substances,
public health and safety, or pollution or protection of the
environment.
(iii) There is no present or, to the Knowledge of the
Seller and Imperial, threatened, charge, complaint, action, suit,
proceeding, hearing, investigation, claim or demand against
Imperial giving rise to any material Liability) for damage to any
Real Property, location, or body of water (surface or subsurface)
or for illness or personal injury.
(iv) Imperial has no material Liability under the
Occupational Safety and Health Act, as amended, or any other Law
concerning employee health and safety.
(v) Imperial has obtained and been in material
compliance with all of the terms and conditions of all permits,
licenses and other authorizations which are required under, and
has been in material compliance with all other, Laws and Orders
of any Governmental Body relating to public health and safety,
worker health and safety, and pollution or protection of the
environment, including laws relating to emissions, discharge,
releases or threatened releases of pollutants, contaminants or
chemical, industrial, hazardous or toxic materials or wastes into
ambient air, surface water, ground water or lands or otherwise
relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of
pollutants, contaminants or chemical, industrial, hazardous or
toxic materials or wastes.
(vi) Imperial has delivered or caused to be delivered
to the Buyer all environmental assessments, reports, audits and
other documents in its possession or under its control that
relate to Real Property that Imperial or any predecessor entity
currently occupies or has occupied at any time in the past in
connection with the Business.
(vii) The Buyer will not incur more than $25,000 of
Adverse Consequences in any way resulting from, arising out of,
relating to or caused by the environmental matter described as
item X.XX. of Schedule 4(r) of the Disclosure Schedule.
(viii) The source of the material comprising the berm
on the parcel of Real Property located in Ohio was non-hazardous
construction debris, and not soil surrounding the underground
storage tank formerly located on that parcel.
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(ix) The Buyer will not incur more than $25,000 of
Adverse Consequences in any way resulting from, arising out of,
relating to or caused by the environmental matter described as
item B.V. of Schedule 4(r) of the Disclosure Schedule.
(x) The Buyer will not incur more than $25,000 of
Adverse Consequences in any way resulting from, arising out of,
relating to or caused by the environmental matter described as
item C.I. of Schedule 4(r) of the Disclosure Schedule.
(s) LEGAL COMPLIANCE. Imperial has:
(i) been in Material compliance with all
non-environmental Laws, and no charge, complaint, action, suit,
proceeding, hearing, investigation, claim, demand or notice has
been filed or commenced against Imperial which is currently
pending and alleges any failure to comply with any such
non-environmental Law;
(ii) not violated in any Material respect or received
a notice or charge asserting any violation of the Xxxxxxx Act,
the Xxxxxxx Act, the Xxxxxxxx-Xxxxxx Act or the Federal Trade
Act, each as amended;
(iii) been in Material compliance with all TOSCA and
other related rules and regulations; and
(iv) been in Material compliance with all
requirements to file all reports, documents, and other materials
it was required to file (and the information contained therein
was correct and complete in all material respects) under all
applicable Laws.
(t) CERTAIN BUSINESS RELATIONSHIPS WITH IMPERIAL. Neither
the Seller nor its Affiliates other than Imperial owns any property or right,
tangible or intangible, which is necessary for the conduct of the Business.
(u) BROKERS' FEES. Imperial does not have any Liability or
obligation to pay any fees or commissions to any broker, finder or similar
representative with respect to the transactions contemplated by this Agreement.
(v) ACCOUNTS RECEIVABLE. With respect to the accounts,
notes, and loans receivable recorded on the Most Recent Financial Statements,
subject to a reserve for bad debts set forth in the Most Recent Financial
Statements, as adjusted for the passage of time through the Closing Date, and
determined in accordance with GAAP applied on a basis consistent with Imperial's
past custom and practice: (i) all of such accounts, notes, and loans receivable
are free and clear of any Security Interests; (ii) no claims of offset have been
asserted in writing against any of such accounts, notes, or loans receivable;
and (iii) none of the obligors to such
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accounts, notes, or loans receivable has given written notice that it will or
may refuse to pay the full amount or any portion thereof.
(w) BANK ACCOUNTS; INVESTMENTS. Attached hereto as
Schedule 4(w) of the Disclosure Schedule is a list of all banks or other
financial institutions with which Imperial has an account or maintains a safe
deposit box, showing the type and account number of each such account and safe
deposit box and the names of the persons authorized as signatories thereon or to
act or deal in connection therewith. Schedule 4(w) of the Disclosure Schedule
also contains a list of all material investments by Imperial in any funds,
accounts, securities, certificates of deposit or instruments of any Person.
(x) THERE IS NO SUBSECTION (X).
(y) CUSTOMERS AND SUPPLIERS. Schedule 4(y) of the
Disclosure Schedule lists the ten largest customers of Imperial and the ten
largest suppliers of Imperial for the twelve (12) consecutive fiscal month
period ending July 1, 2000. Since the Most Recent Financial Statements Date,
there has been no Material Adverse Change in the business relationship of
Imperial with any customer or supplier named on Schedule 4(y) of the Disclosure
Schedule. To the Knowledge of Seller and Imperial and other than in the Ordinary
Course of Business, no customer or supplier named on Schedule 4(y) of the
Disclosure Schedule has threatened or expressed an intention to reduce
materially the volume of its purchases from or sales to Imperial or otherwise
materially modify its business relationship with Imperial. Notwithstanding the
foregoing, no representation or warranty is made by the Seller that Imperial's
relationship with any customer or supplier will not be effected by the purchase
of Imperial by the Buyer.
(z) CERTAIN BUSINESS PRACTICES. Neither Imperial nor any
of its directors, officers, agents or employees has (i) used any funds for
unlawful contributions, gifts, entertainment or other unlawful expenses related
to political activity, (ii) made any unlawful payment to foreign or domestic
government officials or employees or to foreign or domestic political parties or
campaigns or violated any provision of the Foreign Corrupt Practices Act of
1977, as amended, or (iii) made any other unlawful payment.
5. PRE-CLOSING COVENANTS. The Parties agree as follows with
respect to the period between the execution of this Agreement and the Closing.
(a) GENERAL. Each of the Parties will use its reasonable
best efforts to take all action and to do all things necessary, proper or
advisable to consummate and make effective the transactions contemplated by this
Agreement (including satisfying the closing conditions set forth in Section 7
below).
(b) NOTICES AND CONSENTS. The Seller will cause Imperial to
give any notices to third parties, and will cause Imperial to use its reasonable
best efforts to obtain third-party consents, that the Buyer may reasonably
request in connection with the matters pertaining to Imperial disclosed or
required to be disclosed in the Disclosure Schedule. Each of the Parties will
take any additional action (and the Seller will cause Imperial to take any
additional action) that
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may be necessary, proper or advisable in connection with any other notices to,
filings with, and authorizations, consents, and approvals of Governmental
Bodies, and third parties that he, she or it may be required to give, make or
obtain.
(c) OPERATION OF BUSINESS. Except as contemplated hereby
or as may be incidental to or in furtherance of the transactions contemplated
hereby or as may have been set forth herein or in the Disclosure Schedule,
without the consent of the Buyer (which consent shall not be unreasonably
delayed or withheld), the Seller will not cause or permit Imperial to engage in
any practice, take any action, embark on any course of inaction or enter into
any transaction outside the Ordinary Course of Business or that would constitute
a breach of the representation and warranty contained in Section 4(f) hereof if
such action, inaction or transaction occurred after the date of the Most Recent
Financial Statements and prior to the date of this Agreement.
(d) PRESERVATION OF BUSINESS. Except as contemplated hereby
or as may be incidental to or in furtherance of the transactions contemplated
hereby or as may have been set forth herein or in the Disclosure Schedule, the
Seller will cause Imperial to use its reasonable best efforts to keep the
Business and Imperial's properties substantially intact, including its present
operations, physical facilities, working conditions, and relationships with
lessors, licensors, suppliers, customers and employees.
(e) ACCESS. Prior to the termination of this Agreement as
provided in Section 9 herein, the Seller will permit, and the Seller will cause
Imperial to permit, representatives of the Buyer to have access at reasonable
times, and in a manner so as not to interfere with the normal business
operations of Imperial, to the headquarters and all other facilities of
Imperial, to all books, records, contracts, Tax records and documents of or
pertaining to Imperial and to all employees, customers and suppliers of
Imperial, provided however, that the Buyer shall not be entitled to conduct any
further environmental investigation on site at the Real Property. During the
Buyer's on-site investigation of Imperial, except as otherwise provided herein,
the Buyer shall not discuss any aspects of the operation of Imperial with any
employee of Imperial, and the Buyer shall direct all requests for information
and material only through the Seller, unless otherwise agreed to by the Buyer
and the Seller in writing. The Buyer shall be entitled to contact and interview
the customers of Imperial listed on Schedule 5(e) of the Disclosure Schedule
("DESIGNATED IMPERIAL CUSTOMERS"), which communications and interviews shall be
conducted in strict conformity with the format included in Schedule 5(e) of the
Disclosure Schedule, provided that the President of Imperial and/or
representatives designated by him shall accompany representatives of the Buyer
on any visit to or with any Designated Imperial Customer, and shall participate
in all communications between the Buyer and any Designated Imperial Customer. At
the request of the Buyer, the Seller shall proceed to arrange with Imperial a
mutually agreeable time and place at which the Buyer may conduct interviews with
key employees of Imperial.
(f) NOTICE OF DEVELOPMENTS. The Seller will give prompt
written notice to the Buyer of the occurrence of any Material Adverse Change or
Event. Each Party will give prompt written notice to the others of any Material
development affecting the ability of the Parties to consummate the transactions
contemplated by this Agreement.
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(g) EXCLUSIVITY. The Seller will not (and the Seller will
not cause or permit Imperial to) (i) solicit, initiate or encourage the
submission of any proposal or offer from any person involving Imperial or the
Business relating to any (A) liquidation, dissolution or recapitalization, (B)
merger or consolidation, (C) acquisition or purchase of securities or assets or
(D) similar transaction or business combination or (ii) participate in any
discussions or negotiations regarding, furnish any information with respect to,
assist or participate in or facilitate in any other manner any effort or attempt
by an, person to do or seek any of the foregoing.
(h) HSR ACT FILING. The Buyer, the Parent and the Seller
will use commercially reasonable efforts to file or cause to be filed with the
FTC and the DOJ at Buyer's expense, as promptly as practicable but in no event
later than one (1) business day after the execution of this Agreement, the
Notification and Report Form and related material required to be filed in
connection with the transactions contemplated in this Agreement pursuant to the
HSR Act, and to promptly file any additional information requested by the FTC or
the DOJ as soon as practicable after receipt of a request therefor. In addition,
the Buyer and the Parent shall use its commercially reasonable efforts to take
or cause to be taken all actions necessary, proper or advisable to obtain any
consent, waiver, approval or authorizations relating to the HSR Act that is
required for the consummation of the transactions contemplated by this
Agreement; provided, however, that neither the Parent nor the Buyer shall be
obligated hereby to accept any order providing for the divestiture by either the
Parent or the Buyer of such of the assets relating to the Business (or, in lieu
thereof, assets and businesses of the Parent or the Buyer having an approximate
equivalent value) as are necessary to fully consummate the transactions
contemplated by this Agreement or an order to hold separate such assets and
businesses pending such divestiture.
(i) PLANT CLOSING NOTIFICATION. The Buyer shall be
responsible for providing any notice of layoff or plant closing required with
respect to any manufacturing facility of Imperial pursuant to the Federal Worker
Adjustment and Retraining Notification Act of 1988, any successor federal law
and any applicable state or local plant closing notification statute, for any
such layoffs or plant closings which will commence effective on or subsequent to
the Closing Date.
(j) INTERCOMPANY ITEMS. The Seller shall, as of the date
immediately preceding the Closing Date, by appropriate documentation and
accounting entries, eliminate any intercompany payables, receivables and/or
indebtedness to the Seller arising prior to the Closing Date, provided that the
Seller expressly agrees that any other provision of this Agreement to the
contrary notwithstanding, the "basket" provisions of Section 8(b)(ii) hereof
shall not apply to any obligation of the Seller to the Buyer for a breach of
this covenant.
(k) EXCLUDED ASSETS AND EXCLUDED LIABILITIES. The Seller
covenants to the Buyer that prior to the Closing, Imperial shall transfer and
assign to the Seller, and the Seller shall accept and assume, all of the
Excluded Assets and all of the Excluded Liabilities, and the Seller shall cause
all related reserves to be eliminated from the financial books and records of
Imperial.
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(l) NO NEGATIVE CASH. The Seller covenants to the Buyer
that Imperial shall not have a negative cash position on close of business on
the Closing Date, provided that the Seller expressly agrees that any other
provision of this Agreement to the contrary notwithstanding, the "basket"
provisions of Section 8(b)(ii) hereof shall not apply to any obligation of the
Seller to the Buyer for a breach of this covenant.
(m) TITLE INSURANCE. To the extent reasonably requested by
the Buyer, the Seller and Imperial shall cooperate with the Buyer and assist the
Buyer in obtaining (at the Buyer's expense) with respect to each parcel of Real
Property, an ALTA Owner's and Leasehold Policies of Title Insurance in form and
substance reasonably acceptable to the Buyer's counsel.
(n) SURVEYS. To the extent reasonably requested by the
Buyer, the Seller and Imperial shall cooperate with the Buyer and assist the
Buyer in obtaining (at the Buyer's expense) with respect to each parcel of Real
Property as to which a title insurance policy is to be procured pursuant to
Section 5(m) above, a current survey of that parcel certified to the Buyer,
prepared by a licensed surveyor in form and substance reasonably acceptable to
the Buyer's counsel.
(o) CERTAIN INSURANCE POLICIES AND ARRANGEMENTS. With
respect to each of the insurance policies and other contractual arrangements
listed on Schedule 5(o) of the Disclosure Schedule, on or before the Closing,
the Seller shall cause the insurer providing such insurance policy or the other
party to such contractual arrangement, as the case may be, to establish a
separate insurance policy or contractual arrangement for Imperial providing for
identical coverage as under such insurance policy (and, with respect to the
stop-loss insurance policy, taking into account claims paid during the portion
of the contract period preceding the Closing) or identical terms as under such
contractual arrangement, to remain in effect for a period of time commencing no
later than the Closing and ending on the date of the expiration of such
insurance policy or the contract period of such contractual arrangement (subject
to the terms and conditions of such policy or contract), as set forth opposite
that insurance policy or contractual arrangement on Schedule 5(o) of the
Disclosure Schedule. The Buyer acknowledges, however, that the cost of such
separate policies and contractual arrangements will be higher than the cost of
such policies and contractual arrangements to the Seller or Imperial prior to
the Closing.
(p) COMPARISON MONTH FINANCIAL STATEMENTS. The Seller
covenants to the Buyer that (i) the Seller shall cause to be prepared and
delivered to the Buyer within five (5) days following the date hereof,
Imperial's unaudited balance sheet and statement of operations, changes in
stockholders' equity and cash flows as of and for the eleven month period
commencing September 26, 1999 and ending on the last day of the Comparison Month
(the "COMPARISON MONTH FINANCIAL STATEMENTS"), and (ii) except as set forth on
Schedule 4(e) of the Disclosure Schedule, the Comparison Month Financial
Statements shall be (A) prepared in accordance with GAAP applied on a consistent
basis throughout the period covered thereby, (B) correct and complete in all
material respects, (C) fairly present the financial condition and results of
operations of Imperial as of such date and for the period indicated, and (D)
prepared from and in accordance with the books and records of Imperial (which
books and records shall be correct and complete in all material respects).
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(q) PHYSICAL INVENTORY TAKING AND DETERMINATION OF
WHETHER INVENTORY RESERVE UNDERSTATEMENT EXISTS. The Seller shall have caused
the conduct of the Physical Inventory Taking to be commenced on or about
September 5, 2000. Within fifteen (15) days following the date of this Agreement
Xxxxxx Xxxxxxxx shall conduct an audit of the Adjusted Inventory as reflected in
the Comparison Month Financial Statement and issue a written report thereon,
which report shall disclose whether or not an Inventory Reserve Understatement
exists. The Buyer shall have an opportunity to review and comment on the said
Xxxxxx Xxxxxxxx report and its underlying workpapers for at least five (5) days
following its receipt of same from Xxxxxx Xxxxxxxx. The Buyer and the Seller
agree to consult and resolve in good faith any issues arising as a result of the
Buyer's review of the said Xxxxxx Xxxxxxxx report. If the Buyer and the Seller
are unable to reach an agreement on the conclusions of the said Xxxxxx Xxxxxxxx
report within such five (5) day period, they shall submit the issue to
arbitration by a nationally recognized accounting firm mutually acceptable to
the Buyer and the Seller, whose determination shall be made within twenty (20)
days following the first to occur of the date the Parties conclude they are
unable to reach agreement or the date of the expiration of the said five (5) day
period, and shall be final and binding on the Parties, and whose expenses shall
be shared equally by the Buyer and the Seller.
(r) TERMINATION OF XXXXXXX SALARY CONTINUATION AGREEMENT.
The Seller shall deliver to the Buyer a copy of any termination of, or amendment
to, that certain Salary Continuation Agreement dated May 1, 1999 by and between
the Seller and Xxxxxx X. Xxxxxxx (the "XXXXXXX AGREEMENT").
6. ADDITIONAL COVENANTS. The Parties further covenant and agree as
follows:
(a) GENERAL. In case at any time after the Closing any further
action is necessary or desirable to carry out the purposes of this Agreement,
each of the Parties will take such further action (including the execution and
delivery of such further instruments and documents) as any other Party may
reasonably request, all at the sole cost and expense of the requesting Party
(unless the requesting Party is entitled to indemnification therefor under
Section 8 below). The Seller acknowledges and agrees that, from and after the
Closing, the Buyer will be entitled to possession of all documents, books,
records, agreements, and financial data of any sort relating to Imperial;
provided that the Seller may retain any copies of the foregoing as shall be
necessary to comply with applicable tax and other laws, regulations and
ordinances.
(b) LITIGATION SUPPORT. In the event and for so long as any
Party actively is contesting or defending against any charge, complaint, action,
suit, proceeding, hearing, investigation, claim or demand in connection with (i)
any transaction contemplated under this Agreement or (ii) any fact, situation,
circumstance, status, condition, activity, practice, plan, occurrence, event,
incident, action, failure to act or transaction on or prior to the Closing Date
involving Imperial, each of the other Parties will cooperate with him, her or it
and his, her or its counsel in the contest or defense, make available their
personnel, and provide such testimony and access to their books and records as
shall be necessary in connection with the contest or defense,
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all at the sole cost and expense of the contesting or defending Party (unless
the contesting or defending Party is entitled to indemnification therefor under
Section 8 below).
(c) OBLIGATION TO REFER INQUIRIES. The Seller will use
reasonable best efforts to refer all customer inquiries relating to Imperial's
Business to the Buyer and/or Imperial from and after the Closing for a period of
12 months thereafter.
(d) CONFIDENTIALITY. The Seller will treat and hold as such all
of the Confidential Information, refrain from using any of the Confidential
Information except in connection with this Agreement for a period of two (2)
years commencing with the day following the Closing Date, and deliver promptly
to the Buyer or destroy, at the request and option of the Buyer, all tangible
embodiments (and all copies) of the Confidential Information which are in its
possession. In the event that the Seller is requested or required (by oral
question or request for information or documents in any legal proceeding,
interrogatory, subpoena, civil investigative demand or similar process) to
disclose any Confidential Information, the Seller will notify the Buyer promptly
of the request or requirement so that the Buyer may seek an appropriate
protective order or waive compliance with the provisions of this Section 6(d).
If, in the absence of a protective order or the receipt of a waiver hereunder,
the Seller is, on the advice of counsel, compelled to disclose any Confidential
Information to any tribunal or else stand liable for contempt, the Seller may
disclose the Confidential Information to the tribunal; provided, however, that
the Seller shall use its reasonable best efforts to obtain, at the reasonable
request and at the expense of the Buyer, an order or other assurance that
confidential treatment will be accorded to such Portion of the Confidential
Information required to be disclosed as the Buyer shall designate. The foregoing
provisions shall not apply to any Confidential Information which is generally
available to the public immediately prior to the time of disclosure.
Notwithstanding anything contained in this Section 6(d) to the contrary, the
Seller shall not be prevented from keeping copies of Confidential Information
and including such information in any filing, report or disclosure it reasonably
believes it is required to make pursuant to Law, including without limitation
any filings, reports or disclosures to the IRS or the Securities and Exchange
Commission.
(e) ADDITIONAL TAX MATTERS.
(i) The Seller shall be responsible for the preparation
and filing of all of the Seller's federal consolidated income Tax
Returns with respect to all Pre-Closing Tax Periods, which shall
include Imperial, and for the payment of all federal income Taxes with
respect to such Tax Returns.
(ii) The Seller shall be responsible for the preparation
and filing of all state and local Tax Returns ("XXX TAX RETURNS") of
Imperial for Pre-Closing Tax Periods that are required to be filed on
or before the Closing Date, and for the payment of all Taxes with
respect to such XXX Tax Returns. Such XXX Tax Returns shall be
prepared in a manner consistent with prior practice, and shall utilize
accounting methods, elections and conventions that do not have the
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effect of distorting the allocation of income or expense between
Pre-Closing Tax Periods and Post-Closing Tax Periods, unless required
otherwise by law.
(iii) The Seller shall have prepared and delivered to the
Buyer for review and comment thereon at least fifteen (15) days prior
to the due date for their filing Tax Returns relating solely to
Pre-Closing Tax Periods that have not been filed on or prior to the
Closing Date and which are required by applicable law to be signed and
filed by the Buyer, provided that the provisions of this paragraph
(iii) shall not apply to any XXX Tax Returns (other than those to be
filed in the States of Ohio and Texas) in which Section 338 Taxes are
or will be due and owing (collectively, the "APPLICABLE XXX TAX
RETURNS"), which Applicable XXX Tax Returns shall be subject to the
provisions of paragraph (xiii) hereof. The Buyer and the Seller agree
to consult and resolve in good faith any issues arising as a result of
the review of such Tax Returns by the Buyer prior to the filing of Tax
Returns to which this paragraph (iii) applies. The Seller shall
promptly reimburse the Buyer, in immediately available funds, any
Taxes that are required to be paid with such Tax Returns.
(iv) The Buyer shall be responsible for the preparation
and filing of all Straddle Period Tax Returns with respect to
Imperial, and for the payment of all Taxes with respect to such Tax
Returns. The Buyer shall provide the Seller with an opportunity to
review and consult on all such Tax Returns at least fifteen (15) days
prior to the due date for the filing of such Tax Returns, provided
that the Buyer and the Seller agree to consult and resolve in good
faith any issues arising as a result of the review of such Tax Returns
by the Seller prior to the filing of such Tax Returns. The Seller
shall reimburse the Buyer, in immediately available funds, for the
portion of any Tax relating to the Straddle Period that is allocable,
in accordance with paragraph (vii) below, to the pre-Closing portion
of such Straddle Period other than any Section 338 Taxes.
(v) The Buyer shall be responsible for the preparation
and filing of all Tax Returns and the payment of all Taxes with
respect to Imperial for all Post-Closing Tax Periods.
(vi) To the extent permitted by law, the Seller and the
Buyer shall use their best efforts to cause any Tax period to close on
the Closing Date.
(vii) Except for Section 338 Taxes provided for in
paragraph (xiii) below, Taxes payable with respect to a Straddle
Period shall be allocated to the pre-Closing and post-Closing portions
of a Straddle Period on the basis of the Audited Statement of Net
Working Capital, except that Taxes imposed on a periodic basis, such
as real and personal property Taxes, shall be prorated based on the
number of days before and after the Closing Date.
(viii) The Buyer covenants that it will not cause or permit
Imperial or any other Affiliate of the Buyer to amend any Tax Return,
take any
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Tax position on any Tax Return, or take any other action that results
in any increased Tax liability of Imperial or the Seller in respect of
any Pre-Closing Tax Period without the prior consent of the Seller,
which consent shall not be unreasonably withheld or delayed. The
Seller covenants that neither it nor any Affiliate of the Seller will
amend any Tax Return, take any position on any Tax Return, or take any
other action that results in any increased Tax liability of Imperial
or the Buyer in respect of any Post-Closing Tax Period without the
prior consent of the Buyer, which consent shall not be unreasonably
withheld or delayed.
(ix) The Seller shall pay any stock transfer taxes due as
a result of the sale of the Imperial Shares to the Buyer pursuant to
the transactions contemplated by this Agreement.
(x) The Buyer shall promptly pay or shall cause prompt
payment to be made to the Seller of all refunds of Taxes and interest
thereon received by, or credited against the Tax liability of the
Buyer, Imperial or any other Affiliate of the Buyer attributable to
Taxes paid by the Seller, Imperial or any other Affiliate of the
Seller with respect to any Pre-Closing Tax Period or pre-Closing
portion of a Straddle Period. If, with respect to a Tax Return
required to be filed by Imperial, the Seller reasonably determines
that Imperial is entitled to file a claim for refund or an amended Tax
Return with respect to a Pre-Closing Tax Period, the Buyer shall, upon
the Seller's reasonable request, cause Imperial to file any such claim
or amended Tax Return, except in the instance where the Buyer
reasonably believes that to take that action would adversely affect
the Buyer's interests.
(xi) At the Buyer's request and expense, the Seller shall
join the Buyer in making elections under Code Sec. 338(g) and Code
Sec. 338(h)(10) of the Code and any state, local and foreign
counterparts with respect to Imperial (the "SECTION 338 ELECTIONS").
The Seller and the Buyer shall jointly complete and make the Section
338 Elections on the applicable forms and in accordance with
applicable law. The Buyer shall deliver such forms and related
documents to the Seller within fourteen (14) days following the
Seller's receipt of the final Purchase Price allocation referred to in
Section 6(e)(xii) below. The Seller shall, within fourteen (14) days
of its receipt of those forms and related documents, deliver to the
Buyer such completed forms as are required to be filed with respect to
the Section 338 Elections. The Buyer and the Seller shall timely file
the Section 338 Elections and any required forms and documents.
Notwithstanding the foregoing, the Seller makes no representation,
warranty or covenant as to the validity or effectiveness of the
Section 338 Elections other than as to the capacity and authority of
its officers or employees who join in the making of the Section 338
Elections.
(xii) The Buyer and the Seller shall act reasonably and in
good faith to reach an agreement promptly, but in no event later than
one hundred fifty
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(150) days after the Closing Date, on the allocation of the Purchase
Price among the assets of Imperial for purposes of the Section 338
Elections. The Buyer shall deliver to the Seller a proposed allocation
of the Purchase Price within one hundred twenty (120) days following
the Closing Date. The Seller shall have an opportunity to review and
comment on such proposed allocation of the Purchase Price for at least
fifteen (15) days following its receipt of same from the Buyer. The
Buyer and the Seller agree to consult and resolve in good faith any
issues arising as a result of the Seller's review of the Buyer's
proposed allocation of the Purchase Price. If the Buyer and the Seller
are unable to reach an agreement on the allocation of the Purchase
Price within such one hundred fifty (150) day period, they shall
submit the issue to arbitration by a nationally recognized accounting
firm mutually acceptable to the Buyer and the Seller, whose
determination shall be made within forty-five (45) days following the
first to occur of the date the Parties conclude they are unable to
reach agreement or the date of the expiration of the said one hundred
fifty (150) day period, and shall be final and binding on the Parties,
and whose expenses shall be shared equally by the Buyer and the
Seller.
(xiii) Subject to the limitations set forth in the
penultimate sentence of this paragraph (xiii), the Buyer shall be
responsible for the payment of any Taxes of the Seller's affiliated
group or Imperial imposed by any State or local tax authority that
result from the Section 338 Elections (the "SECTION 338 TAXES"). The
Applicable XXX Tax Returns shall be (x) prepared by the Seller in mass
in a manner consistent with prior practice, and shall utilize
accounting methods, elections and conventions that do not have the
effect of distorting the allocation of income or expense between
Pre-Closing Tax Periods and Post-Closing Tax Periods, unless required
otherwise by law, (y) delivered to the Buyer in one group comprising
all of the Applicable XXX Tax Returns within one hundred fifty (150)
days after the Closing Date, and (z) accompanied by a written report
(the "SECTION 338 REPORT") prepared by Xxxxxx Xxxxxxxx that sets forth
in detail the computation of the Section 338 Taxes due therewith and
all other Taxes due therewith relating to Pre-Closing Tax Periods (the
"NON-SECTION 338 TAXES"). The Buyer and its accounting firm shall have
a period of not more than thirty (30) days to review and comment upon
the Applicable XXX Tax Returns and the Section 338 Report. The Seller
and Xxxxxx Xxxxxxxx shall permit the Buyer and its accounting firm
access to the Tax and accounting records they reasonably request in
order to verify the calculations set forth in the Applicable XXX Tax
Returns and the Section 338 Report. The Buyer and the Seller shall act
reasonably and in good faith to reach an agreement regarding the
amount of the Section 338 Taxes and the Non-Section 338 Taxes due with
the Applicable XXX Tax Returns. If the Buyer and the Seller are unable
to reach an agreement within sixty (60) days after the Seller's
delivery of the Section 338 Report to the Buyer, then they shall
promptly submit the matter to arbitration by a nationally recognized
accounting firm mutually acceptable to the Seller and the Buyer, whose
determination shall be made within ninety (90) days after the Seller's
delivery of the Section 338 Report to the Buyer, which shall be final
and binding on the Parties. The expenses and fees
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of the said accounting firm shall be shared equally by the Buyer and
the Seller. Following the determination of the Section 338 Taxes and
the Non-Section 338 Taxes due in respect of the Applicable XXX Tax
Returns, the Seller shall promptly pay to the Buyer in immediately
available funds an aggregate amount, if any, equal to the sum of (1)
the Non-Section 338 Taxes, if any, plus (2) the Section 338 Taxes, if
any, in excess of $403,000. The Buyer shall promptly pay to the Seller
in immediately available funds an amount equal to the lesser of (x)
any third-party advisory fees paid by the Seller in connection with
the Section 338 Elections and the analysis and determination of the
Section 338 Taxes plus any additional Taxes payable by the Seller's
affiliated group as a result of the Buyer's payment of any Section 338
Taxes, or (y) $37,000 (the "SPECIAL SECTION 338 GROSS-UP AMOUNTS AND
FEES").
(xiv) The Seller, the Buyer and Imperial shall cooperate in
good faith in (a) preparing and filing all Tax Returns, (b)
maintaining and making available to each other all records necessary
in connection with the preparation and filing of all Tax Returns and
the payment of all Taxes and (c) resolving all disputes and audits
with respect to any Tax Returns and Taxes. The Buyer and the Seller
recognize that each may need access, from time to time, after the
Closing Date, to certain accounting and Tax records and information
held by the other; therefore, the Buyer and the Seller agree (A) to
retain and maintain Tax records relating to Imperial for a period
expiring on the earlier of five (5) years after the Closing Date or a
date that is at least ninety (90) after the expiration of all
applicable statutes of limitation relating to Taxes and Tax Returns,
(B) to allow each other and their agents and representatives, at times
and dates mutually acceptable to the parties, to inspect, review and
make copies of such records, such activities to be conducted during
normal business hours and at the requesting party's expense and (C)
and to offer the other parties such records before destroying such
records.
(f) COVENANT NOT TO COMPETE. For a period of four (4) years
from and after the Closing Date, the Seller will not, directly or indirectly, as
shareholder, partner, associate, principal, agent, trustee or through the agency
of any corporation, partnership, association or agent, (i) participate or engage
in the Business existing as of the Closing Date, (ii) take any action that is
designed or intended to have the effect of discouraging any lessor, licensor,
customer, supplier or other business associate of Imperial from maintaining the
same business relationships with Imperial after the Closing as it maintained
with Imperial prior to the Closing, or service or solicit any of Imperial's
Business from any customer of Imperial, (iii) request or advise any customer of
Imperial to withdraw, curtail or cancel such customer's business with Imperial
or (iv) solicit for employment any person employed by Imperial on the Closing
Date (other than through means of general advertisements); provided however,
that (A) no owner of less than five percent (5%) of the outstanding stock of any
publicly traded corporation shall, for purposes of this Section 6(f), be deemed
to engage solely by reason thereof in any of its businesses and (B) the future
acquisition by the Seller or its Affiliates of any Person or business engaged in
the Business shall not be deemed to violate this Section 6(f) if (x) less than
ten percent (10%) of the total revenues of such acquired business or Person are
derived from the Business and (y) Sovereign is
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given a right of first refusal pursuant to which it could purchase the portion
of the acquired business that is engaged in the Business.
(g) EMPLOYEE BENEFIT PLANS. Except as set forth in Schedule
4(q) of the Disclosure Schedule, from and after the Closing Date, the Buyer
shall be the plan sponsor for each and every Employee Benefit Plan of Imperial
that is listed on Schedule 4(q) and shall continue as sponsor of each such plan
and related trusts, insurance contracts, other assets and documents that have
been maintained by Imperial or the Seller for the benefit of employees or former
employees of Imperial and all of which plans, trusts, insurance contracts and
other assets and documents are set forth on Schedule 4(q) of the Disclosure
Schedule); provided, however, that with respect to:
(i) BUYER'S PLAN. The Current Employees who are salaried
employees or hourly employees not subject to a collective bargaining
agreement shall cease participating in the NS Group, Inc. Salaried
Employees Retirement Savings Plan (the "SELLER'S PLAN") as of the
Closing Date. The Buyer or Imperial shall establish or designate a
defined contribution plan (the "BUYER'S PLAN") effective as of the
Closing Date, to accept the assets of, and to assume the liability of,
the Seller's Plan associated with those Current Employees
participating in the Seller's Plan on the Closing Date (collectively,
the "AFFECTED PARTICIPANTS").
(ii) TRANSFER OF PLAN ASSETS. No later than 30 days after
the Closing Date, the Buyer shall deliver to the Seller (a) a copy of
the Buyer's Plan and any amendment necessary to effectuate the
transfer of assets and the assumption of account balances in
accordance this Section and to preserve any benefits protected from
elimination or modification under Code Section 411(d)(6), (b) a copy
of the trust agreement for the Buyer's Plan, and either, (c) the most
recent favorable determination letter from the IRS with respect to the
Buyer's Plan, or (d) an opinion from the Buyer's legal counsel
acceptable to the Seller that the Buyer's Plan document(s), as so
amended, complies or will comply on a timely basis with the applicable
provisions of the Code relating to the qualification of, and the
transfer of assets and assumption of benefit liabilities by, the
Buyer's Plan. As soon as practicable, but in no event later than 90
days after the Buyer has established or designated the Buyer's Plan,
the Seller shall cause the Seller's Plan to transfer to the Buyer's
Plan the value of Affected Participants' account balances in the
Seller's Plan as of the transfer date, including shares of NS Group,
Inc. Common Stock having a fair market value equal to the aggregate
value of the Affected Participants' account balances invested in the
NS Group Common Stock Fund under the Seller's Plan as of the transfer
date. Prior to the transfer of assets, the Seller shall certify in a
form acceptable to the Buyer as follows: (1) that the assets being
transferred to the Buyer's Plan equal the liabilities associated with
the Affected Participants under the Seller's Plan; (2) that the assets
being transferred to the Buyer's Plan from the Seller's Plan were
calculated in accordance with the provisions of the Seller's Plan,
Section 414(l) of the Internal Revenue Code, and Section 1.414(l)-1 of
the Treasury Department Regulations; and (3) that the
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transfer of assets to the Buyer's Plan from the Seller's Plan will
satisfy the requirements of Section 414(l) of the Internal Revenue
Code and Section 1.414(l)-1 of the Treasury Department Regulations.
Upon such transfer and certification, the Buyer, Imperial and the
Buyer's Plan shall be responsible for all benefits attributable to
Affected Participants' accounts and the Seller and the Seller's Plan
shall cease to have any liability for such benefits or accounts.
(iii) BACK SERVICE CREDIT. Service of each Current Employee
shall be recognized by the Buyer in connection with the administration
of the Buyer's Plan and the Buyer's Welfare Benefit Plans for all
purposes, including, without limitation, vesting, eligibility for
benefits, level of benefits and optional forms of payment, but not
benefit accrual.
(iv) BENEFITS. The Buyer covenants to the Seller that after
the Closing Date, the Buyer shall cause Imperial to provide to each
Current Employee benefits that are no less favorable than the benefits
offered by the Buyer to the employees of the Buyer's operating
subsidiaries relative to geographic location, business area, job
description, seniority and related relevant classifications.
(v) COBRA. Schedule 4(q) of the Disclosure Schedule lists
all of the current and former employees of Imperial and the dependents
of such employees with respect to whom a qualifying event occurred
prior to or on the Closing Date and who is receiving or who is
currently entitled or eligible to continuation coverage under COBRA.
The Buyer shall assume all COBRA obligations with respect to all such
persons. The Buyer shall assume all COBRA obligations that arise on or
after the Closing Date under all Employee Welfare Benefit Plans that
are listed in Schedule 4(q) of the Disclosure Schedule which are group
health plans subject to COBRA.
(h) DISABILITY WORKERS' COMPENSATION. To the extent
commercially feasible, the Buyer and its plans shall assume all responsibility
for unpaid workers' compensation, short-term disability and long-term disability
claims made by a Current Employee after the Closing Date. With respect to any
Current Employee on short-term disability on the Closing Date, the Buyer shall,
at its expense, continue short-term disability coverage substantially similar to
that provided by the Seller.
(i) SEVERANCE POLICY. The Buyer shall establish and maintain,
for the period commencing on the Closing Date and terminating not less than one
(1) year following the Closing Date, a severance policy for Imperial which
provides severance benefits to the Current Employees who are retained by
Imperial following the Closing Date which are substantially similar to the
severance benefits described on Schedule 6(i) of the Disclosure Schedule;
provided that nothing in this Agreement shall require the Buyer to retain any
Current Employee or prevent the Buyer from terminating any Current Employee at
any time to the extent not inconsistent with applicable Law.
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(j) COLLECTIVE BARGAINING AGREEMENT. The Buyer agrees to be
bound by the terms and conditions of the collective bargaining agreement
covering employees of Imperial described on Schedule 4(p)(ii) of the Disclosure
Schedule and to continue to provide any compensation or employee benefits
required to be provided under the terms of Imperial's collective bargaining
agreement.
(k) BACKYEAR AUDITS. Following the Closing, the Seller shall
cooperate with the Buyer's efforts to cause Imperial, at Buyer's expense, to
deliver, or cause to be delivered, to the Buyer an unqualified and unmodified
audit report of Ernst &Young, LLP on the balance sheets of Imperial as of
September 26, 1998 and September 25, 1999, and audited statements of operations
and cash flows of Imperial for the fiscal years then ended, which report shall
be without limitation as to the scope of the audit. The Seller shall assist the
Buyer, at no third-party cost or expense to the Seller, by providing all
management letters, reports or representations reasonably requested by such
auditors in connection with such audits. In addition, the Buyer and the Seller
shall cooperate with all reasonable requests of the other to take any actions
required to consummate the transactions contemplated by this Agreement, and to
provide the other with such assistance as is reasonably necessary to comply with
all of their respective filing and reporting obligations.
(l) SPECIAL ARRANGEMENTS RELATING TO KNOWN ENVIRONMENTAL
MATTERS. All of the items listed on Schedule 4(r) of the Disclosure Schedule are
collectively referred to as "KNOWN ENVIRONMENTAL MATTERS", provided that for
purposes of this Agreement, a breach of any of the representations of the Seller
set forth in Sections 4(r)(vii), (viii), (ix) and (x) are not Known
Environmental Matters, and the breach by the Seller of any of the
representations and warranties set forth therein are not subject to the
provisions of this Section 6(l). (Further, the Parties expressly acknowledge and
agree that notwithstanding that the Seller has furnished the Buyer with a copy
of that certain report dated June 14, 2000 prepared by BHE Environmental
concerning the Imperial facility located in Cincinnati, Ohio, the subject of
that report shall also not be treated as a Known Environmental Matter to which
the provisions of this Section 6(l) apply.) The Parties hereby agree that
following the Closing, the Buyer shall have the right to conduct the following
activities relating to the Known Environmental Matters (collectively referred to
as "KNOWN ENVIRONMENTAL ACTIVITIES"): (x) all activities reasonably necessary
for the assessment, sampling, investigation, monitoring, remediation, abatement
or the like relating to any of the Known Environmental Matters ("KNOWN
ENVIRONMENTAL IDENTIFICATION AND REMEDIATION ACTIVITIES"); and (y) the defense,
settlement and/or other resolution of all third party claims against the Seller,
Imperial, the Buyer or the Parent (including those asserted by any governmental
agency) arising from or relating to any of the Known Environmental Matters to
the extent such claims are asserted against the Seller, Imperial, the Buyer or
the Parent ("KNOWN ENVIRONMENTAL THIRD PARTY CLAIMS" and "KNOWN ENVIRONMENTAL
CLAIM RESOLUTION ACTIVITIES," respectively).
(i) With respect to the conduct of the Known Environmental
Identification and Remediation Activities and any Known Environmental
Claim Resolution Activities in connection with any Known Environmental
Third Party Claims brought by any governmental agency, the Parties
hereby agree as follows:
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(A) as appropriate, such activities shall be
conducted by an environmental consultant selected by the
Buyer with the consent of the Seller, which consent shall
not be unreasonably delayed or withheld;
(B) a copy of all submissions to any Governmental
Body, including without limitation work plans, sampling and
analysis plans and health and safety plans, shall be
delivered to the Seller within a reasonable time in advance
of the submission date to allow for the Seller to review and
consult with the Buyer;
(C) the Buyer shall deliver to the Seller copies of
all information discovered or prepared as a result of the
Buyer's conduct of any such activities, including, but not
limited to results of soil or groundwater analysis, pumping
test results, monitoring results and consulting reports or
correspondence;
(D) the Seller shall have the right to attend all
meetings or discussions with any Governmental Body, and the
Seller shall receive notice of the time and place of the
meeting or discussion within a reasonable time prior to any
such meeting or discussion, provided that so long as the
Buyer has furnished the Seller with such reasonable advance
notice thereof, the Buyer shall have no responsibility for
the Seller's unavailability or failure to attend any such
meeting; and
(E) the Seller or its representative shall have the
right to enter the relevant portion of Imperial's Real
Property at all reasonable times for the purpose of
observing the conduct or performance of any such activities,
subject to reasonable health and safety plans or
restrictions imposed on the Seller during such observation.
(ii) With respect to the conduct of any Known Environmental
Claim Resolution Activities in connection with any Known Environmental
Third Party Claims other than a Known Environmental Third Party Claim
brought by a Governmental Body, the Parties hereby agree as follows:
(A) upon the Buyer's or Imperial's receipt of any
such Known Environmental Third Party Claim Buyer shall
promptly so notify the Seller in writing; provided, however,
that no delay on the part of the Buyer in notifying the
Seller shall relieve the Seller from any liability or
obligation hereunder unless (and then solely to the extent)
the Seller is damaged and prejudiced from adequately
participating in the defense of that Known Environmental
Third Party Claim;
(B) the Buyer shall defend any such Known
Environmental Third Party Claim with counsel of its choice
reasonably
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satisfactory to the Seller, provided that the Seller may
retain separate co-counsel at its sole cost and expense, to
participate (as an observer) in such defense, further
provided that the Buyer shall have full and complete control
over any such defense;
(C) the Buyer shall deliver or cause to be delivered
to the Seller copies of all correspondence, pleadings,
motions, briefs, appeals or other written statements
relating to or submitted in connection with the defense of
any such Known Environmental Third Party Claim, and timely
notices of, and the right to participate (as an observer) in
any hearing or other court proceeding relating to any such
Known Environmental Third Party Claim; and
(D) the Buyer may defend against or enter into any
settlement with respect to any such Known Environmental
Third Party Claim in any manner it reasonably may deem
necessary or appropriate.
(iii) If the Seller objects to any significant matter related to
any of the Known Environmental Activities, the Seller and the Buyer
agree that they will attempt in good faith to promptly resolve any
such dispute, provided, however, that if such dispute cannot be
resolved through good faith negotiations, the Buyer shall have the
absolute right to conduct the Environmental Activities in a manner
that it reasonably deems to be appropriate.
(IV) The Parties hereby agree that the
Seller shall reimburse the Buyer in immediately available
funds, within ten (10) days after receipt by the Seller of
reasonably satisfactory supporting documentation from the
Buyer, for (x) two-thirds (2/3rds) of the first $750,000 of
"Known Environmental Costs" (as that term is hereinafter
defined) incurred by the Buyer and (y) one-half (1/2) of the
next $750,000 of Known Environmental Costs incurred by the
Buyer, provided that in no event shall the Seller be liable
for more than an aggregate of $875,000 of Known Environmental
Costs (the portion of the Known Environmental Costs for which
the Seller is liable to Buyer under this Section 6(l) being
hereinafter referred to in this Agreement as the "SELLER'S
PORTION OF KNOWN ENVIRONMENTAL COSTS"). For purposes of this
Agreement, the term "KNOWN ENVIRONMENTAL COSTS" means the
aggregate sum of all costs and expenses incurred by Buyer in
conducting the Known Environmental Activities during the seven
(7) year period following the Closing.
(m) POST-CLOSING EMPLOYEE BENEFIT MATTERS. The Seller covenants
to the Buyer that the Seller shall cooperate with the Buyer and Imperial in
establishing the insurance policies and contractual arrangements listed in
Schedule 5(o) of the Disclosure Schedule.
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7. CONDITIONS TO OBLIGATIONS TO CLOSING.
(a) CONDITIONS TO OBLIGATION OF THE BUYER. The obligation of
the Buyer to consummate the transactions to be performed by it in connection
with the Closing is subject to satisfaction or waiver of the following
conditions:
(i) REPRESENTATIONS AND WARRANTIES. The representations
and warranties set forth in Section 3(a) and Section 4 above shall be
true and correct in all material respects at and as of the Closing
Date, provided that in the case of the representation and warranty
contained in Section 4(f)(i), the provisions of Section 7(a)(xi) shall
apply.
(ii) COVENANTS. The Seller shall have performed and
complied with all of its covenants hereunder in all material respects
through the Closing.
(iii) THIRD PARTY CONSENTS. Imperial shall have procured
all necessary third party consents specified in Section 5(b) above.
(iv) GOVERNMENT ORDER, INJUNCTION. No action, suit or
proceeding shall be pending or threatened before any court or
quasi-judicial or administrative agency of any federal, state, local
or foreign jurisdiction wherein an unfavorable judgment order, decree,
stipulation, injunction or charge would (A) prevent consummation of
any of the transactions contemplated by this Agreement, (B) cause any
of the transactions contemplated by this Agreement to be rescinded
following consummation or (C) affect adversely the right of the Buyer
to own the Imperial Shares or have a Material Adverse Effect on
Imperial's operation of the Business (and no such judgment order,
decree, stipulation, injunction or charge shall be in effect).
(v) COMPLIANCE CERTIFICATE. The Seller shall have
delivered to the Buyer a certificate (without qualification as to
knowledge or materiality or otherwise) to the effect that each of the
conditions specified above in Section 7(a)(i)-(iv) is satisfied in all
respects.
(vi) ENTIRE OWNERSHIP; ABSENCE OF LIENS. The acquisition
by the Buyer of the Imperial Shares shall represent one hundred
percent (100%) of the issued and outstanding capital stock of Imperial
and all of the Imperial Shares shall be free and clear of any Security
Interests or other liens, claims or encumbrances of any nature
whatsoever.
(vii) GOVERNMENTAL APPROVALS. The Parties and Imperial
shall have received all required authorizations, consents and
approvals of Governmental Bodies including such authorizations,
consents or approvals required under the HSR Act and set forth in the
Disclosure Schedule;
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(viii) BUYER COMPLETION OF CUSTOMER DUE DILIGENCE. Within
fourteen (14) days following the date of this Agreement, the Buyer
shall have completed a due diligence investigation of the Designated
Imperial Customers subject to the provisions of Section 5(e) hereof
and determined that no Material Adverse Change has occurred in
Imperial's vendor-customer relationship with those Designated Imperial
Customers, by delivering to the Seller a written letter within the
said fourteen (14) day period advising the Seller to that effect (the
"BUYER CUSTOMER DDI SIGN-OFF LETTER"); provided that: (A) if the Buyer
shall fail to deliver the Buyer Customer DDI Sign-Off Letter to the
Seller within the said fourteen (14) day period, the Buyer shall be
deemed to have waived the condition imposed by this Section
7(a)(viii); and (B) if a Material Adverse Change shall have occurred
and the Buyer shall, in its absolute discretion, elect not to waive
the condition created by this Section 7(a)(viii), the Buyer shall pay
the Seller the Termination Fee, payment of which shall be made in
immediately available funds by the Buyer to the Seller within ten (10)
days following the termination of this Agreement by the Buyer.
(ix) OPINION OF SELLER'S COUNSEL. The Buyer shall have
received from counsel to the Seller an opinion with respect to the
matters set forth in Exhibit B attached hereto, addressed to the Buyer
and dated as of the Closing Date;
(x) RESIGNATIONS. The Buyer shall have received the
resignations, effective as of the Closing, of (A) each director of
Imperial and (B) each officer of Imperial designated by the Seller, in
each case prior to the Closing.
(xi) ABSENCE OF CERTAIN CHANGES. Since the date of this
Agreement no Material Adverse Change shall have occurred in Imperial's
Business, provided that if a Material Adverse Change shall have
occurred and the Buyer shall, in its absolute discretion, elect not to
waive the condition created by this Section 7(a)(xi), the Buyer shall
pay the Seller the Termination Fee, payment of which shall be made in
immediately available funds by the Buyer to the Seller within ten (10)
days following the termination of this Agreement by the Buyer.
(xii) TRANSFER OF EXCLUDED ASSETS AND EXCLUDED LIABILITIES;
NO SECURITY INTERESTS. All Excluded Liabilities and all Excluded
Assets shall have been transferred to and assumed by the Seller, all
Funded Indebtedness of Imperial shall have been paid in full prior to
or at the Closing and all Security Interests in the Shares and in any
assets of Imperial except Permitted Liens shall have been fully
released of record to the satisfaction of the Buyer and all mortgages
and Uniform Commercial Code financing statements covering such Funded
Indebtedness shall have been terminated or the Buyer shall be
reasonably satisfied that all such Security Interests will be fully
released of record within three (3) days thereafter.
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(xiii) REQUIRED CORPORATE AND SHAREHOLDER ACTIONS. All
appropriate corporate and shareholder authorizations of Imperial
shall have been obtained.
(xiv) ABSENCE OF PROSCRIBED TRANSFERS. Except as set forth
on the Disclosure Schedule, since the date of the Most Recent
Financial Statements, Imperial shall not have transferred, conveyed,
disposed of and/or sold any Material assets, except in the Ordinary
Course of Business other than the Excluded Assets.
The Buyer may waive any condition specified in this Section 7(a) if it executes
a writing so stating at or prior to the Closing.
(b) CONDITIONS TO OBLIGATIONS OF THE SELLER. The Obligation of
the Seller to consummate the transactions to be performed by it in connection
with the Closing is subject to satisfaction or waiver of the following
conditions:
(i) REPRESENTATIONS AND WARRANTIES. The representations
and warranties set forth in Section 3(b) above shall be true and
correct in all Material respects at and as of the Closing Date.
(ii) COVENANTS. The Buyer and the Parent shall have
performed and complied with all of their respective covenants
hereunder in all Material respects through the Closing.
(iii) GOVERNMENT ORDER, INJUNCTION. No action, suit or
proceeding shall be pending or threatened before any court or
quasi-judicial or administrative agency of any federal, state, local
or foreign jurisdiction wherein an unfavorable judgment order, decree,
stipulation, injunction or charge would (A) prevent consummation of
any of the transactions contemplated by this Agreement or (B) cause
any of the transactions contemplated by this Agreement to be rescinded
following consummation (and no such judgment order, decree,
stipulation, injunction or charge shall be in effect).
(iv) COMPLIANCE CERTIFICATE. The Buyer shall have
delivered to the Seller a certificate (without qualification as to
knowledge or Materiality or otherwise) to the effect that each of the
conditions specified above in Section 7(b)(i)-(iii) is satisfied in
all respects.
(v) GOVERNMENTAL APPROVALS. The Parties and Imperial
shall have received all other authorizations, consents, and approvals
of Governmental Bodies including such authorizations, consents and
approvals required under the HSR Act and set forth in the Disclosure
Schedule.
(vi) OPINION OF BUYER'S COUNSEL. The Seller shall have
received from counsel to the Buyer an opinion with respect to the
matters set forth
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in EXHIBIT C attached hereto, addressed to the Seller and dated as of
the Closing Date.
(vii) RECEIPT OF BUYER CUSTOMER DDI SIGN-OFF LETTER. The
Seller shall have received, or be deemed to have received, the Buyer
Customer DDI Sign-Off Letter within the time period fixed by the
provisions of Section 7(a)(viii) hereof.
The Seller may waive any condition specified in this Section 7(b) if it
executes a writing so stating at or prior to the Closing.
8. REMEDIES FOR BREACH OF THIS AGREEMENT.
(a) SURVIVAL.
(i) SELLER - GENERAL. All of the representations and
warranties of the Seller contained in Section 4 above (other than the
representations and warranties of the Seller contained in Sections
4(b), (h), (r) and (u) above) shall survive the Closing hereunder and
continue in full force and effect for a period of one (1) year
following the Closing Date.
(ii) SELLER - ENVIRONMENTAL. The representations and
warranties of the Seller contained in Section 4(r) shall survive the
Closing hereunder and continue in full force and effect for a period
of three (3) years following the Closing Date.
(iii) SELLER - CERTAIN OTHER REPRESENTATIONS AND
WARRANTIES; SELLER COVENANTS. The representations and warranties of
the contained in Section 3(a) and Sections 4(b), (h) and (u) above,
and the covenants of the Seller contained in this Agreement, including
the indemnification obligation of the Seller created by the provisions
of Section 8(b), shall survive the Closing and continue in full force
and effect until and only until the expiration of the applicable
statue of limitations.
(iv) BUYER - GENERAL. The representations and warranties of
the Buyer and the Parent contained in Section 3(b) and the covenants
of the Buyer and the Parent contained in this Agreement, including the
indemnification obligation of the Buyer and the Parent created by the
provisions of Section 8(d), shall survive the Closing and continue in
full force and effect until and only until the expiration of the
applicable statue of limitations.
(v) PRIOR KNOWLEDGE; TIMELINESS OF CLAIMS; POST-CLAIM
ADVERSE CONSEQUENCES. All of the representations and warranties of a
Party shall survive the Closing hereunder even if any other Party knew
or had reason to know of any misrepresentation or breach of warranty
by that Party at the time of the Closing. Provided that a Party makes
a written claim for indemnification against
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any other Party pursuant to the notice provisions of Section 10(g)
below within the applicable survival period fixed by the provisions of
Section 8(a): (A) such claim shall survive the expiration of the
applicable survival period so fixed by the provisions of Section 8(a);
and (B) except as expressly provided otherwise in this Section 8, such
claim shall include any Adverse Consequences the other Party may
suffer after the date of the claim for indemnification and/or after
the end of the applicable survival period.
(b) INDEMNIFICATION PROVISIONS FOR BENEFIT OF THE BUYER.
(i) SELLER - GENERAL. Except as expressly provided
otherwise in this Section 8, in the event that the Seller breaches any
of its representations, warranties, agreements or covenants to the
Buyer contained herein, subject to the provisions of Section 8(b)(ii),
the Seller agrees to indemnify the Buyer from and against the entirety
of any Adverse Consequences the Buyer may suffer through and after the
date of the claim for indemnification resulting from, arising out of,
relating to or caused by any such breach. Without limiting the
generality of the foregoing, the Seller agrees to indemnify the Buyer
and Imperial from and against (A) all liability for Taxes of the
Seller (other than Section 338 Taxes to the extent provided in Section
8(d)(i), below) and its Affiliates, including Imperial, for all
Pre-Closing Tax Periods and for the portion of all Straddle Periods
that ends on the Closing Date, including all Adverse Consequences
suffered by the Buyer in connection with the determination and
settlement of any such Seller liability for Taxes, (B) all Adverse
Consequences suffered by the Buyer resulting from, arising out,
relating to or caused by any of the Excluded Liabilities or any of the
Excluded Assets, (C) the Seller's Portion of the Known Environmental
Costs and (D) any Adverse Consequences suffered by the Buyer arising
in any manner whatsoever out of the Xxxxxxx Agreement.
(ii) SELLER - MONETARY LIABILITY LIMITATIONS. The Buyer
shall not be entitled to indemnification under Section 8(b)(i) for
breaches of the Seller's representations and warranties made in
Section 4 hereof unless (and then, only to the extent that) the
Buyer's aggregate Adverse Consequences by reason of such breaches
exceed $100,000. The Buyer shall also not be entitled to
indemnification under Section 8(b)(i) for breaches of the Seller's
representations and warranties made in (A) Section 4 (other than those
contained in Sections 4(b), 4(h) and 4(u)) to the extent that the
Buyer's aggregate Adverse Consequences by reason of such breaches
exceed $2,600,000, and (B) in any other Section of this Agreement,
including without limitation, Section 3(a) and Sections 4(b), 4(h) and
4(u), to the extent that the Buyer's aggregate Adverse Consequences by
reason of such breaches when taken together with all Adverse
Consequences subject to the limitations in the immediately preceding
clause (A), exceed the amount of the Purchase Price (as adjusted
pursuant to the provisions of Sections 2(c) and 2(g)). Finally, with
respect to any matter for which a reserve or liability was established
on the Audited Statement of Net Working Capital, the Buyer shall not
be entitled
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to indemnification for any Adverse Consequences under Section 8(b) to
the extent of any such reserve or liability.
(c) THERE IS NO SECTION 8(c)
(d) INDEMNIFICATION PROVISIONS FOR BENEFIT OF THE SELLER.
(i) BUYER - GENERAL. Except as expressly provided
otherwise in this Section 8 hereof, in the event the Buyer or the
Parent breaches any of its representations, warranties and covenants
contained herein, the Buyer and the Parent jointly and severally agree
to indemnify the Seller from and against any Adverse Consequences the
Seller may suffer through and after the date of the claim for
indemnification, resulting from, arising out of, relating to or caused
by the breach. Without limiting the generality of the foregoing, the
Buyer and the Parent shall jointly and severally indemnify the Seller
for (A) all liability for Non-Section 338 Taxes of the Buyer, the
Parent and their subsidiaries, including Imperial, for all
Post-Closing Tax Periods and for Taxes for the portion of all Straddle
Periods after the Closing Date, (B) all liability for Section 338
Taxes properly due with any XXX Tax Returns to be filed in the States
of Ohio and Texas, (C) all other Section 338 Taxes (but in no event
more than $403,000) due with any Applicable XXX Tax Returns, (D) all
of the Special Section 338 Gross-Up Amounts and Fees (but in no event
more than $37,000), and (E) the Adverse Consequences to the Seller
arising from or relating to a Known Environmental Matter (as defined
in Section 6(l) above) in excess of the Seller's Portion of the Known
Environmental Costs (as that term is defined in Section 6(l) above).
(ii) BUYER - MONETARY LIABILITY LIMITATION. The Seller
shall not be entitled to indemnification under Section 8(d)(i) for
breaches of the Buyer's and the Parent's representations and
warranties to the extent that the Seller's aggregate Adverse
Consequences by reason of such breaches exceed the amount of the
Purchase Price (as adjusted pursuant to the provisions of Section
2(b)).
(e) MATTERS INVOLVING THIRD PARTY CLAIMS. If any third party
shall notify any Party (the "INDEMNIFIED PARTY") with respect to any matter
which may give rise to a claim for indemnification against any other Party (the
"INDEMNIFYING PARTY") under this Section 8 other than Known Environmental Third
Party Claims (which shall be subject to the provisions of Section 6(l) above) (a
"THIRD PARTY CLAIM"), then the Indemnified Party shall notify in writing each
Indemnifying Party thereof promptly; provided, however, that no delay on the
part of the Indemnified Party in notifying any Indemnifying Party shall relieve
the Indemnifying Party from any liability or obligation hereunder unless (and
then solely to the extent) the Indemnifying Party thereby is damaged and
prejudiced from adequately defending such Third Party Claim. In the event any
Indemnifying Party notifies the Indemnified Party within thirty (30) days after
the Indemnified Party has given notice of the Third Party Claim that the
Indemnifying Party is assuming the defense thereof, (i) the Indemnifying Party
will defend the Indemnified Party against that Third Party Claim with counsel of
its choice reasonably satisfactory to the Indemnified Party,
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(ii) the Indemnified Party may retain separate co-counsel at its sole cost and
expense and (iii) the Indemnified Party will not consent to the entry of any
judgment or enter into any settlement with respect to that Third Party Claim
without the written consent of the Indemnifying Party (which consent may not be
unreasonably withheld or delayed). In the event no Indemnifying Party notifies
in writing the Indemnified Party within thirty (30) days after the Indemnified
Party has given notice of the Third Party Claim that the Indemnifying Party is
assuming the defense thereof, however, the Indemnified Party may defend against
or enter into any settlement with respect to, that Third Party Claim in any
manner it reasonably may deem appropriate, and the Indemnifying Party shall be
liable for the settlement amount of that Third Party Claim if and only if its is
finally determined to be liable for such amount pursuant to the provisions of
this Section 8. At any time after commencement of any such Third Party Claim,
any Indemnifying Party may request an Indemnified Party to accept a bona fide
offer from the other Party(ies) to the Third Party Claim for a monetary
settlement thereof payable solely by such Indemnifying Party (which does not
unreasonably burden or restrict the Indemnified Party nor otherwise prejudice
it, him or her) whereupon such course of action shall be taken unless the
Indemnified Party determines that such Third Party Claim should be continued, in
which case the Indemnifying Party shall be liable to the Indemnified Party for
indemnity hereunder in respect of that Third Party Claim only to the extent of
the lesser of (A) the amount of the settlement offer or (B) the amount for which
the Indemnified Party may be liable with respect to such Third Party Claim. In
addition, the Party controlling the defense of any Third Party Claim shall
deliver or cause to be delivered, to the other Party copies of all
correspondence, pleadings, motions, briefs, appeals or other written statements
relating to or submitted in connection with the defense of that Third Party
Claim, and timely notices of, and the right to participate in (as an observer)
any hearing or other court proceeding relating to that Third Party Claim.
(f) DETERMINATION OF LOSS. The Parties shall make appropriate
adjustments for Tax benefits and insurance proceeds (reasonably certain of
receipt and utility in each case) in determining the amount of any Adverse
Consequence or loss for purposes of this Agreement.
(g) EXCLUSIVE REMEDY. Except as set forth in Section 8(i), the
Parties acknowledge and agree that the foregoing indemnification provisions in
this Section 8 shall be the exclusive remedy of the Parties for any claim or
action arising out of any breach of this Agreement or relating to the
transactions contemplated hereby.
(h) PAYMENT. The Indemnifying Party shall promptly pay to the
Indemnified Party as may be entitled to indemnity hereunder in cash the amount
of any Adverse Consequences to which such Indemnified Party may become entitled
to by reason of the provisions of this Agreement if and when it has been finally
determined that the Indemnifying Party is liable for such amount in accordance
with the provisions of Section 8(j) hereof.
(i) OTHER INDEMNIFICATION PROVISIONS. The foregoing
indemnification provisions are in addition to, and not in derogation of, any
statutory or common law remedy any Party may have for intentional fraud.
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(j) ARBITRATION WITH RESPECT TO CERTAIN INDEMNIFICATION
MATTERS. For purposes of this Section 8(j), the Buyer and the Parent shall be
deemed to be one and the same Party. Except as expressly provided otherwise
elsewhere in this Agreement, the Parties agree to submit to arbitration, in
accordance with these provisions, any disputed claim or controversy arising from
or related to the alleged breach of this Agreement or any disputed
indemnification claim made pursuant to the provisions of this Section 8. The
Parties further agree that the arbitration process agreed upon herein shall be
the exclusive means for resolving all disputes made subject to arbitration
herein, but that no arbitrator shall have authority to expand the scope of these
arbitration provisions. Any arbitration hereunder shall be conducted under the
procedures of the American Arbitration Association (the "AAA"). Any Party may
invoke the following arbitration procedures fixed by the provisions of this
Section 8(j) by written notice for arbitration containing a statement of the
matter to be arbitrated, and any disputed matter, controversy or indemnification
claim so submitted hereunder is hereinafter referred to as an "ARBITRATION").
Each Arbitration hereunder shall be conducted in accordance with the following
procedures.
(i) The Arbitration shall be conducted in Cincinnati, Ohio.
(ii) The governing law shall be Ohio.
(iii) The Arbitration shall be conducted by a mutually
agreeable, neutral arbitrator who, in the case of any arbitration the
subject matter of which is related to accounting matters, shall have
extensive knowledge of accounting matters (the "ARBITRATOR"). Within
fourteen (14) days following written notice of arbitration, the
Parties shall prepare and submit to the AAA a joint submission, with
each Party to contribute half of the appropriate administrative fee.
In the event the Parties cannot mutually agree upon a neutral
arbitrator within that fourteen (14) day period, their joint
submission to the AAA shall request a panel of three arbitrators who
are practicing attorneys with professional experience in the field of
corporate law, and the Parties shall attempt to select an Arbitrator
from the panel according to AAA procedures.
(iv) Each Party shall be responsible for its costs incurred in
any Arbitration, and the Arbitrator shall not have authority to
include all or any portion of said costs in an award, regardless of'
which Party prevails.
(v) In the conduct of the Arbitration:
(A) each Party shall be entitled to discovery pursuant to
the Federal Rules of Civil Procedure; and
(B) evidence shall be competent only if it is admissible
in evidence, under the Federal Rules of Evidence.
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(vi) The award of the Arbitrator shall be rendered "baseball
style," such that the award by the Arbitrator shall be only (A) as
requested by one Party or (B) as requested by the other Party;
provided that the legal and accounting fees incurred in connection
with the Arbitration by the Party whose award request is accepted by
the Arbitrator shall be paid by the Party whose reward request is
rejected by the Arbitrator, as soon as practicable after receipt of
the appropriate supporting invoice.
(vii) Any Arbitration award shall be accompanied by a written
statement containing a summary of the issues in controversy, a
description of the award, and an explanation of the reasons for the
award. Judgement upon any award may be entered in a court of competent
jurisdiction.
(k) ADJUSTMENT TO PURCHASE PRICE. Any payment under this
Section 8 shall be treated for tax purposes as an adjustment of the Purchase
Price to the extent such characterization is proper and permissible under
relevant Tax authorities, including court decisions, statutes, regulations and
administrative promulgations.
9. TERMINATION.
(a) TERMINATION OF AGREEMENT. The Parties may terminate this
Agreement as provided below:
(i) the Buyer and the Seller may terminate this Agreement
by mutual written consent at any time prior to the Closing;
(ii) the Buyer may terminate this Agreement by giving
written notice to the Seller at any time prior to the Closing in the
event the Seller is in breach of any representation, warranty or
covenant contained in this Agreement and such breach, if curable, has
not been cured within fifteen (15) days of written notice thereof, and
the Seller may terminate this Agreement by giving written notice to
the Buyer at any time prior to the Closing in the event the Buyer is
in breach of any representation, warranty or covenant contained in
this Agreement and such breach has not been cured within fifteen (15)
days of written notice thereof;
(iii) the Buyer may terminate this Agreement by giving
written notice to the Seller at any time prior to the Closing if the
Closing shall not have occurred on or before October 15, 2000 by
reason of the failure of any condition precedent under Section 7(a)
hereof (unless the failure results primarily from the Buyer itself
breaching any representation, warranty or covenant contained in this
Agreement); or
(iv) the Seller may terminate this Agreement by giving
written notice to the Buyer at any time prior to the Closing if the
Closing shall not have occurred on or before October 15, 2000 by
reason of the failure of any condition precedent under Section 7(b)
hereof (unless the failure results primarily from the
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Seller itself breaching any representation, warranty or covenant
contained in this Agreement).
Nothing contained in this Section 9(a) shall alter, affect, modify or restrict
any of the Parties' rights to rely on and/or seek indemnification for a breach
of any of the representations and warranties and/or conditions or covenants of
any of the Parties contained in this Agreement.
(b) EFFECT OF TERMINATION. If either the Buyer or the Seller
terminates this Agreement pursuant to Section 9(a) above, all obligations of the
Parties hereunder shall terminate without any Liability of any Party to any
other Party, except as provided in Sections 7(a)(viii) and (xi), if applicable.
10. MISCELLANEOUS.
(a) PRESS RELEASES AND ANNOUNCEMENTS. Attached hereto as Exhibit
D and Exhibit E, respectively, are the form of the press release each of the
Seller, on the one hand, and the Parent and the Buyer, on the other hand, will
issue promptly following the date hereof. Except as may be required by
applicable securities laws or stock exchange requirements, no Party shall issue
any other press release or announcement relating to the subject matter of this
Agreement prior to, at or about the Closing without the prior written approval
of the Buyer and the Seller, which written approval will not be unreasonably
withheld; provided, however, that any Party may make any public disclosure it
believes in good faith is required by law or regulation (in which case the
disclosing Party will advise the other Parties prior to making the disclosure).
(b) NO THIRD-PARTY BENEFICIARIES. This Agreement shall not
confer any rights or remedies upon any person other than the Parties and their
respective successors and permitted assigns.
(c) ENTIRE AGREEMENT. This Agreement (including the documents
referred to herein), and that certain letter agreement dated the day preceding
the date of this Agreement between the Buyer and the Seller related to certain
Designated Imperial Customers, constitute the entire agreement among the Parties
and supersedes any prior understandings, agreements or representations by or
among the Parties, written or oral, that may have related in any way to the
subject matter hereof.
(d) SUCCESSION AND ASSIGNMENT. This Agreement shall be binding
upon and inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No Party may assign either this Agreement or
any of his, her or its rights, interests or obligations hereunder without the
prior written approval of the Buyer, the Parent and the Seller; provided,
however, that the Buyer or the Parent may (i) assign any or all of its rights
and interests hereunder to another wholly-owned Subsidiary of the Parent (but
not its obligations, without the consent of the Seller, which consent shall not
be unreasonably delayed or withheld) and (ii) assign its rights to indemnity
hereunder as additional collateral to its lenders.
(e) FACSIMILE/COUNTERPARTS. This Agreement may be executed in
one or more counterparts, each of which shall be deemed an original but all of
which together will
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constitute one and the same instrument. A facsimile, telecopy or other
reproduction of this Agreement may be executed by one or more Parties, and an
executed copy of this Agreement may be delivered by one or more Parties by
facsimile or similar instantaneous electronic transmission device pursuant to
which the signature of or on behalf of such Party can be seen, and such
execution and delivery shall be considered valid, binding and effective for all
purposes. At the request of any Party, all Parties agree to execute an original
of this Agreement as well as any facsimile, telecopy or other reproduction
hereof.
(f) HEADINGS. The section, paragraph and subparagraph headings
contained in this Agreement are inserted for convenience only and shall not
affect in any way the meaning or interpretation of this Agreement.
(g) NOTICES. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim
or other communication hereunder shall be deemed duly given if (and then three
(3) days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient as set forth
below:
If to Buyer or Parent:
c/o Sovereign Specialty Chemicals, Inc.
X. Xxxxxxxxxx Xxxxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Attn: Xxxxx Xxxx
Vice President
Tel: (000) 000-0000
Fax: (000) 000-0000
with a copy to:
Xxxxxx X. Xxxxxxxxx, Esq.
XxXxxxx Xxxxx & Xxxxx
000 Xxxx Xxxxxxx,
00xx Xxxxx Xxxxxxx, Xxxxxxxx 00000
Tel: (000) 000-0000
Fax: (000) 000-0000
-53-
59
If to Seller or Imperial:
c/o NS Group, Inc.
000 X. Xxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Attn: Xxxxxx X. Xxxxxxxxxx
Tel: (000) 000-0000
Fax: (000) 000-0000
with a copy to:
Xxxxxxx Xxxxxxxx, Esq.
Xxxxx Xxxx, LLP
000 Xxxxx Xxxxxxxx
Xx. Xxxxx, Xxxxxxxx 00000
Tel: (000) 000-0000
Fax: (000) 000-0000
Any Party may give any notice, request, demand, claim or other
communication hereunder using any other means (including personal delivery,
expedited courier, messenger service, facsimile, ordinary mail or electronic
mail), but no such notice, request, demand, claim or other communication shall
be deemed to have been duly given unless and until it actually is received by
the individual for whom it is intended. Any Party may change the address to
which notices, requests, demands, claims and other communications hereunder are
to be delivered by giving the other parties notice in the manner herein set
forth.
(h) SUBMISSION TO JURISDICTION. This Agreement and the rights
and obligations of the Parties hereunder shall be construed in accordance with
and be governed by the laws of the State of Ohio, without regard to any
applicable conflict of law principles. Except as provided in Section 8(i), any
legal action or proceeding against any of the Parties with respect to this
Agreement may be brought and enforced:
(i) if the Party bringing the legal action or proceeding
is the Seller, in a federal or state court located in the Circuit
Court of Xxxx County of the State of Illinois or in the District Court
of the United States of America for the Northern District of Illinois,
and by execution and delivery of this Agreement, in either case each
of the Parties hereby irrevocably accepts for itself and in respect of
its property, generally, irrevocably and unconditionally, the
jurisdiction of the aforesaid courts; and
(ii) if the Party bringing the legal action or proceeding
is the Buyer or the Parent, in a federal or state court located in the
Court of Common Pleas of Xxxxxxxx County of the State of Ohio or in
the District Court of the United States of America for Southern
District of Ohio, and by execution and delivery of this Agreement, in
either case each of the Parties hereby irrevocably accepts for itself
and in respect of its property, generally, irrevocably and
unconditionally, the jurisdiction of the aforesaid courts.
-54-
60
Each of the Parties agree that a judgment, after exhaustion of all available
appeals, in any such action or proceedings shall be conclusive and binding upon
them, and may be enforced in any other jurisdiction by a suit upon such
judgment, a certified copy of which shall be conclusive evidenced of this
judgment. In the instance where the provisions of Section 10(h)(i) apply, each
of the Parties hereby waives irrevocably, to the fullest extent permitted by
law, any objection to the laying of venue in Chicago, Illinois or any claim of
inconvenient forum in respect of any such action in Chicago, Illinois to which
it might otherwise now or hereafter be entitled in any actions arising out of or
based on this Agreement; and in the instance where the provisions of Section
10(h)(ii) apply, each of the Parties hereby waives irrevocably, to the fullest
extent permitted by law, any objection to the laying of venue in Cincinnati,
Ohio or any claim of inconvenient forum in respect of any such action in
Cincinnati, Ohio to which it might otherwise now or hereafter be entitled in any
actions arising out of or based on this Agreement.
(i) AMENDMENTS AND WAIVERS. No amendment of any provision of
this Agreement shall be valid unless the same shall be in writing and signed by
the Parties. No waiver by any Party of any default, misrepresentation or breach
of warranty or covenant hereunder, whether intentional or not, shall be deemed
to extend to any prior or subsequent default, misrepresentation or breach of
warranty or covenant hereunder or affect in any way any rights arising by virtue
of any prior or subsequent such occurrence.
(j) SEVERABILITY. Any term or provision of this Agreement that
is invalid or unenforceable in any situation in any jurisdiction shall not
affect the validity or enforceability of the remaining terms and provisions
hereof or the validity or enforceability of the offending term or provision in
any other situation or in any other jurisdiction. If the final judgment of a
court of competent jurisdiction declares that any term or provision hereof is
invalid or unenforceable, the Parties agree that the court making the
determination of invalidity or unenforceability shall have the power to reduce
the scope, duration or area of the term or provision, to delete specific words
or phrases or to replace any invalid or unenforceable term or provision with a
term or provision that is valid and enforceable and that comes closest to
expressing the intention of the invalid or unenforceable term or provision, and
this Agreement shall be enforceable as so modified after the expiration of the
time within which the judgment may be appealed.
(k) EXPENSES. Each of the Parties and Imperial will bear its
own costs and expenses (including legal fees and expenses and investment banking
fees) incurred in connection with this Agreement and the transactions
contemplated hereby. Except as paid out of the cash of Imperial or reflected as
a liability on the Audited Statement of Net Working Capital, the Seller
acknowledges and agrees that Imperial has not borne or will not bear any of the
Seller's costs and expenses (including any of its legal fees and expenses and
investment banking fees) in connection with this Agreement or any of the
transactions contemplated hereby.
(l) CONSTRUCTION. The language used in this Agreement will 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. Any
reference to any federal, state, local or foreign statute or law shall be deemed
also to refer to all rules and regulations promulgated
-55-
61
thereunder, unless the context requires otherwise. The Parties intend that each
representation, warranty, and covenant contained herein shall have independent
significance. If any Party has breached any representation, warranty or covenant
relating to the same subject matter as any other representation, warranty or
covenant (regardless of the relative levels of specificity) which the Party has
not breached, it shall not detract from or mitigate the fact that the Party is
in breach of the first representation, warranty or covenant.
(m) INCORPORATION OF EXHIBITS, ANNEXES AND SCHEDULES. The
Exhibits, Annexes, and Schedules identified in this Agreement are incorporated
herein by reference and made a part hereof.
(n) SPECIFIC PERFORMANCE. Each of the Parties acknowledges and
agrees that the other Parties would be damaged irreparably in the event any of
the provisions of this Agreement are not performed in accordance with their
specific terms or otherwise are breached. Accordingly, each of the Parties
agrees that the other Parties shall be entitled to an injunction or injunctions
to prevent breaches of the provisions of this Agreement and to enforce
specifically this Agreement and the terms and provisions hereof in any action
instituted in any court of the United States or any state thereof having
jurisdiction over the Parties and the matter, in addition to any other remedy to
which they may be entitled, at law or in equity.
-56-
62
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as
of the date first above written.
BUYER:
MINI CROWN FUNDING CORP.
By:
-----------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
PARENT:
SOVEREIGN SPECIALTY CHEMICALS, INC.
By:
-----------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
IMPERIAL:
IMPERIAL ADHESIVES, INC.
By:
-----------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
SELLER:
NS GROUP, INC.
By:
-----------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
-57-
63
SCHEDULES TO THE
STOCK PURCHASE AGREEMENT
BY AND AMONG
MINI CROWN FUNDING CORP.,
ITS PARENT, SOVEREIGN SPECIALTY CHEMICALS, INC.,
IMPERIAL ADHESIVES, INC.
AND
NS GROUP, INC.
BY LISTING MATTERS ON THESE SCHEDULES, THE SELLER AND IMPERIAL SHALL NOT BE
DEEMED TO HAVE ESTABLISHED ANY MATERIALITY STANDARD, ADMITTED ANY LIABILITY, OR
CONCLUDED THAT ANY ONE OR MORE OF SUCH MATTERS ARE MATERIAL
64
SCHEDULE 4(a)
(1) Michigan
(2) Virginia
(3) North Carolina
(4) Texas
(5) Massachusetts
(Note that Imperial has sold its facilities in Michigan and Virginia.)
65
SCHEDULE 4(c)
(1) See Schedule 4(m)(vi) regarding Subsidiary Guarantee.
66
SCHEDULE 4(e)
(1) The interim financial statements attached as part of Exhibit A to the
Stock Purchase Agreement do not include notes and do not incorporate
normal recurring year-end adjustments.
(2) The annual financial statements attached as part of Exhibit A to the
Stock Purchase Agreement do not include notes.
(3) Imperial calculates labor and overhead capitalization amounts on an
annual basis at fiscal year end. Therefore, the interim inventory has
not yet been adjusted for changes in labor and overhead expense for the
current year.
(4) On an interim basis, Imperial expenses employer medical claim costs
based on a budgeted amount. However, this year medical costs exceeded
the budgeted amount. Therefore, Imperial anticipates that the year-end
adjustment to the accrual will exceed $50,000.
(5) All freight charges are submitted to Computrex who prepares a weekly
xxxx for Imperial. Imperial then wires payment to Computrex. Imperial
records freight expenses only as they are paid, even though charges may
not be submitted on a timely basis to Computrex, and does not maintain
an accrual on its financial statements for freight expenses. This
accrual would exceed $50,000.
(6) See Schedule 4(h)(i) regarding state taxes.
(7) See Schedule 4(k)(ii)(B)(1) regarding a settlement agreement with
Reichhold Chemicals, Inc.
67
SCHEDULE 4(f)
(i) Imperial has been notified by certain suppliers of increases in the
costs of certain of Imperial's raw materials, such as Methylene
Chloride, Acetone, Textile Spirits, Toluene, MEK, N-Propyl Bromide,
Vinyl Acetate, Poly Vinyl Acetate Emulsion, Ethylene Vinyl Acetate
Emulsion, and Acrylic Emulsion, which increases in the aggregate may
constitute a Material Adverse Change.
(ii) None.
(iii) None.
(iv) None.
(v) None.
(vi) None.
(vii) None.
(viii) In the first half of 2000, Imperial received complaints from certain of
its customers relating to steel drums used by Imperial to ship its
products. On May 30, 0000, Xxxxxxx Xxxxxxxxx Company, the manufacturer
of the drums, offered to compensate Imperial for its out-of-pocket
costs related to the defective drums through credits against future
purchases. On June 28, 2000, Imperial advised Winston Container Company
that its out-of-pocket costs were $12,156.50 to-date and took a credit
toward future purchases. Imperial is currently withholding payment of
$40,000 of outstanding invoices to cover future claims and has reserved
its right to recover all future losses from Winston Container Company.
(ix) None.
(x) None.
(xi) None.
(xii) None.
(xiii) None.
(xiv) (1) Certain Employee Benefit Plans for Imperial's employees, as set
forth in Schedule 4(q), are part of plans, programs, agreements,
contracts or insurance policies of the Seller. Therefore, prior to the
Closing Date, Imperial will adopt or establish its own plans, programs,
agreements, contracts or insurance policies with respect to the
applicable Employee Benefit Plans set forth in Schedule 4(q), except as
otherwise provided for under Section 6(g).
68
(xv) (2) Additionally, Imperial has promised to its employees one additional
day of vacation to be used by each employee on his or her birthday,
within the next twelve months, if Imperial achieves ISO 9001
certification.
(xvi) None.
(xvii) None.
(xviii) None.
(xix) None.
(xx) None.
69
SCHEDULE 4(g)
(1) See Schedule 4(e)(3)-(5) regarding potential adjustments to financial
statements.
(2) See Schedule 4(f)(viii) regarding Winston Container Company claims.
(3) See Schedule 4(f)(xiv)(2) regarding extra day of vacation.
(4) See Schedule 4(h)(i) regarding state taxes.
(5) See Schedule 4(k)(ii)(B)(1) regarding Reichhold Chemicals, Inc.
settlement agreement.
(6) See Schedule 4(r) regarding potential environmental liabilities.
(7) See Schedule 4(f)(i) regarding raw materials costs.
70
SCHEDULE 4(h)
(i) (1) There are several states in which Imperial employs salesmen, sells
products, and/or stores goods but does not file Tax Returns. Should
those states successfully take the position that Imperial is required
to file Tax Returns in such states, the aggregate impact to Imperial
based on historical income would be less than $10,000 per year,
exclusive of any penalties for failure to file.
(2) Imperial does not consider the location of its returnable containers in
determining whether a nexus exists requiring the filing of a state Tax
Return.
(ii) Imperial participates in filing consolidated Tax Returns with the
Seller and its Subsidiaries. The consolidated federal Tax Returns for
the fiscal years ended September, 1993 through September, 1997 are
currently under audit by the Internal Revenue Service.
(iii) Imperial is not a party to any written Tax allocation or sharing
agreement. Consolidated Tax liability of the Seller and its
Subsidiaries, including Imperial, is required to be allocated pursuant
to Section 1552(a)(1) of the United States Internal Revenue Service
Code of 1986, as amended.
(iv) See (i) above regarding state taxes.
(v) None.
(vi) Imperial's liability for taxes pursuant to federal and/or state
consolidated Tax Returns is reflected in an intercompany account.
(vii) None.
71
SCHEDULE 4(j)
Owned Real Property
(1) 6315 and 0000 Xxxxx Xxxx, Xxxxxxxxxx, Xxxx: 4 parcels of land, totaling
approximately 6.72 acres and including plant and administrative
buildings (approximately 103,683 square feet) and a parking lot. See
legal descriptions attached as (1)(a)(i), (1)(a)(ii), and (1)(b) (Note:
the parcels described in (1)(a)(i) and (ii) have been consolidated into
one parcel).
(2) 0000 Xxxxx Xxxx, Xxxxxxxxxx, Xxxx: a Grant of Easement by the City of
Cincinnati, dated May 14, 1971, recorded in the Xxxxxxxx County
Recorder of Deeds Office in Book 3787, Page 198, for a sewer pipe along
the railroad referenced below to an existing sanitary sewer. See legal
description attached as (2).
(3) 0000 Xxxxxxxxxx Xxxxxxxxx, Xxxxxxxxx, Xxxxxxxxx: plant of
approximately 69,000 square feet (3.61 acres) and a parking lot of
approximately .6 acre, totaling 4.21 acres. See legal descriptions
attached as (3)(a) and (b).
Leased Real Property
(1) 0000 Xxxxx Xxxx, Xxxxxxxxxx, Xxxx: a license for sewer pipe under and
along railroad tracks owned by Norfolk Southern (behind Imperial's
facilities), represented by a License Agreement for Wire, Pipe and
Cable Transverse Crossings and Longitudinal Occupations, dated January
20, 1971, between Imperial and the Trustees for the property of Penn
Central Transportation Company.
(2) Imperial rents space in the following public warehouses:
(a) Lithonia (Atlanta), Georgia (i) Bridgewater, New Jersey
(b) City of Commerce, California (j) Phoenix, Arizona
(c) Downsview, Ontario, Canada (k) Portland, Oregon
(d) Farmers Branch (Dallas), Texas (l) Saltillo, Mississippi
(e) Pompano Beach, Florida (m) San Xxxx, Puerto Rico
(f) High Point, North Carolina (n) Wilmington, Massachusetts
(g) Cincinnati, Ohio (o) Nashville, Tennessee
(h) Minneapolis, Minnesota
72
(i) (A) (1) Imperial's Cincinnati facilities at 0000 Xxxxx Xxxx are subject to
the following mortgages: (a) Fifth Third Bancorp, dated September 9, 1986,
in the amount of $130,000; (b) Xxxxxxxx County Development Co., Inc., dated
February 3, 1988, in the amount of $215,000; and (c) the State of Ohio 128
Program, dated February 19, 1987, in the amount of $130,000.
Imperial's Nashville facilities at 0000 Xxxxxxxxxx Xxxxxxxxx are subject to
a Xxxxxxxx State Bank mortgage, dated July 2, 1998, in the amount of $55,000
for the parking lot and a mortgage given to IGI Adhesives, Inc., dated
August 15, 1997, in the amount of $339,168.80.
Each of the notes underlying the above-listed mortgages will be paid or
assumed by the Seller at or prior to Closing.
(2) The Cincinnati facilities at 0000 Xxxxx Xx. are subject to an
easement, recorded in the Xxxxxxxx County Recorder of Deeds Office in Book
3482, Page 48, which grants to Cincinnati Transmission, Imperial's next door
neighbor, a right-of-way to use Imperial's driveway to access its
facilities.
(3) Imperial has been made aware of, but cannot confirm at this time,
various encroachments of improvements onto adjoining property or a
right-of-way which affect the Cincinnati, Ohio property at 0000 Xxxxx Xx.
referenced above.
(B) None.
(C) Imperial's parking lot at 0000 Xxxxxxxxxx Xxxx. in Nashville,
Tennessee may not comply with zoning requirements concerning the
number of parking spaces.
(D) In connection with previous renovations to the Cincinnati property,
Imperial applied for an Air Permit to Install ("PTI") from the Xxxxxxxx
County Department of Environmental Services. A final PTI was issued by
the Ohio Environmental Protection Agency on February 16, 2000.
Application for a Permit to Operate ("PTO") was made with the Ohio
Environmental Protection Agency on March 13, 2000. Approval is pending.
(E) Imperial has orally leased to Xxxxxxx Rubber (a nearby company) space
in the corner of its parking lot on Xxxxx Road. This space serves as
two parking spaces. For this lease, Imperial is to receive $40.00 per
month from Xxxxxxx Rubber, although no payments have been received
recently.
(F) None.
(G) None.
(ii) Imperial has only a license for a sewer pipe under and along the
railroad referenced in (1) above and is, therefore, not in sole
possession of such property. Imperial only rents a portion of the
warehouses referenced in (2) above, in each case on a month-to-month
basis and is, therefore, not in sole possession of such warehouses.
73
SCHEDULE 4(k) (Intellectual Property)*
* Schedule 4(k) has been intentionally omitted. Please see "Information Required
in accordance with Item 601(b)(2) of Regulation S-K" following the execution
page hereof.
74
SCHEDULE 4(l)
(1) On July 14, 1997, an action captioned Xxxxxxx x. DeZario Shoe Company, et
al. was filed in the Superior Court of the State of California for the
County of Los Angeles. Imperial was named as a defendant. The plaintiff,
through his mother and guardian ad litem, alleged that by virtue of his
mother's exposure to hazardous chemicals at her employment at DeZario Shoe
Company from 1995 through 1996, he was born on July 15, 1996 with acute
lymphoblastic leukemia as the result of in utero exposure to chemical
fumes. Imperial was named as a defendant because it allegedly supplied
cleaning solvents to plaintiff's mother's employer and to which plaintiff's
mother was exposed while she was pregnant with the plaintiff. Imperial
denied the allegations against it and attempted to conduct discovery to
determine with specificity the actual Imperial products to which plaintiff
claimed his mother was exposed and that caused his medical problems.
Imperial never received answers to its interrogatories, and the plaintiff
took no further action to pursue the claims against any of the defendants.
Plaintiffs' counsel withdrew from the case, and the Court refused to allow
the plaintiff's mother to appear pro se. On March 31, 1998, the Court
dismissed the case without prejudice because of the plaintiffs' failure to
comply with previous court orders. Because the case was dismissed without
prejudice, it can be refiled at any time before the statute of limitations
expires, which will occur one year after the plaintiff reaches the age of
majority.
(2) See Schedule 4(f)(viii) regarding Winston Container Company.
(3) Xxxxx Xxxxxxx v. Asbestos Defendants, Case No. 304443, pending in the
Superior Court of California, San Francisco County. The plaintiff claimed
that Imperial was potentially liable for his personal injuries resulting
from exposure to asbestos based on Imperial's production of its Bond Rite
product. Imperial's counsel communicated to the plaintiff that the product
did not contain asbestos and was not used in the asbestos industry. On July
6, 2000, the plaintiff filed a notice of dismissal without prejudice of
Imperial.
75
SCHEDULE 4(m) * (Contracts)
* Schedule 4(m) has been intentionally omitted. Please see "Information Required
in accordance with Item 601(b)(2) of Regulation S-K" following the execution
page hereof.
76
SCHEDULE 4(n)
See attached.
77
SCHEDULE 4(o)
(1) Xxxxx Xxxxxx v. Imperial Adhesives, Inc. B 5040 798 (27151) 062998, 22A
98 1922. Former Imperial employee Xxxxx Xxxxxx filed a charge of
religious and disability discrimination against Imperial on June 29,
1998 with the Ohio Civil Rights Commission ("OCRC") and the Equal
Employment Opportunity Commission ("EEOC"). Imperial filed a position
statement on September 2, 1998 explaining that Handel was discharged
for excessive absenteeism. The OCRC dismissed Handel's claim with a "No
Probable Cause" letter on March 5, 1999. The EEOC issued a finding of
insufficient evidence on June 30, 1999 and issued Handel a 90-day right
to xxx notice. Handel did not serve Imperial with a complaint during
the 90-day period, and it appears he has forfeited his right to xxx
Imperial under federal anti-discrimination laws. Handel has six years
from the date of his termination (April 7, 1998) to xxx Imperial under
state anti-discrimination laws. Neither Imperial nor its counsel has
received any communications from or concerning Handel since his charge
was dismissed by the OCRC and EEOC.
(2) Xxxxxxx Xxxxxx was injured while an employee at Imperial on July 3,
1997. The injuries consisted of xxxxx to his hands, arms and chest.
Xx. Xxxxxx filed a workers compensation claim as a result of the
incident (Claim No. 97-442814). In addition, Xx. Xxxxxx filed an
application with the Industrial Commission of Ohio for an additional
award of compensation based on alleged violations of specific safety
requirements ("VSSR claim") promulgated by the Industrial Commission.
Imperial agreed to pay $2500 in settlement of the VSSR claim. The
settlement has been approved by the Industrial Commission. The only
tasks which remain are the exchange of the settlement check and a
receipt and release signed by Xx. Xxxxxx. We anticipate the matter
will be closed shortly. The statute of limitations has run on any
intentional tort claim. The accident occurred on July 3, 1997. Under
R.C. 2305.10, Xx. Xxxxxx would have had to file a lawsuit by July 3,
1999.
(3) See Schedule 4(k)(ii)(B)(1) regarding Reichhold Chemicals.
(4) See Schedule 4(f)(viii) regarding Winston Container Company.
(5) See Schedule 4(l)(3) regarding asbestos claims.
(6) See Schedule 4(l)(1) regarding DeZario Shoe.
(7) Imperial is currently involved in a dispute with GlobalServe
Corporation concerning a contract between Imperial and GlobalServe for
the provision of software. GlobalServe contends that Imperial owed
$44,562.31 on the contract. Imperial contests this claim and contends
that GlobalServes owes it $20,000 for payments made by Imperial for
inoperative software. GlobalServe has threatened to file suit but has
not yet done so.
78
SCHEDULE 4(p)
(i) See attached.
(ii) (1) See Schedule 4(o)(1)-(2) regarding claims filed by employees.
(2) An election to unionize was held by Nashville plant employees
in 1999. Imperial prevailed and the plant is union-free.
(3) Collective Bargaining Agreement, dated November 7, 1998,
between Imperial and United Steel Workers of America relating
to production, maintenance, shipping and receiving employees
at the Cincinnati, Ohio plant.
(4) In April, 2000, an employee filed a grievance with the union
related to Imperial's requirement that the employee work a
different shift. The grievance was withdrawn, and the employee
remains with Imperial.
(5) In April, 1999, an employee filed a grievance with the union
related to his supervisor's claim that the employee might have
been using drugs. The matter was resolved with no loss of pay,
and the employee remains with Imperial.
79
SCHEDULE 4(q)
Employee Benefit Plans
(1) Imperial Adhesives, Inc. Hourly (Union) Employee Health Plan providing
for self-funded medical, dental and sickness and accident benefits with
stop-loss insurance. (Administered pursuant to a third-party
administration agreement with United Medical Resources, Inc.)
(2) Imperial Adhesives, Inc. Salaried (and Non-Union Hourly) Employee
Health Plan providing for self-funded medical, dental and sickness and
accident benefits with stop-loss insurance. (Administered pursuant to a
third-party administration agreement with United Medical Resources,
Inc.)
(3) PruCare HMO for Ohio and Tennessee.
(4) Basic and supplemental life and accidental death and dismemberment
insurance.
(5) Long-term disability insurance.
(6) NS Group, Inc. stock options (issued periodically by the Seller for
salaried, exempt employees) -(will not be assumed by Buyer).
(7) NS Group, Inc. Premium Only Plan - (will not be assumed by Buyer).
(8) Fringe benefit plans and employment policies and practices, with
certain plans, policies, and practices described in the draft Salaried
Associate Handbook (January 3, 2000) and in the Agreement between
Imperial Adhesives, Inc. and The United Steelworkers of America
(November 7, 1988):
(a) Vacation
(b) Holidays
(c) Sick/personal days
(d) Bereavement pay
(e) Overtime
(f) Car allowances
(g) Credit union
(h) Educational financial assistance
80
(i) Employee assistance program
(j) Family and medical leave
(k) Jury duty leave
(l) Military leave
(m) Travel Expense Reimbursement Policy
(n) Pre-paid legal services - (will not be assumed by Buyer)
(o) Attendance bonus (union only)
(p) Severance pay program for salaried exempt and salaried
non-exempt employees (see also Schedule 6(i))
(q) Imperial Adhesives and Chemicals, Inc. Profit Sharing Plan
(a bonus program)
(r) Vision plan
(9) Imperial Adhesives, Inc. Hourly Employees Retirement Savings Plan and
Trust Agreement (a 401(k) plan with matching contributions).
(10) NS Group, Inc. Salaried Employees Retirement Savings Plan and Trust
Agreement (a 401(k) plan with matching contributions) - (will not be
assumed by Buyer).
(11) NS Group Master Trust (a qualified retirement plan master trust
providing for the NS Group stock fund under the plans set forth in
items 9 and 10 above) - (will not be assumed by Buyer).
(12) Salary Continuation Agreement for Xxxxxx Xxxxxxx (a non-qualified
plan) - (will not be assumed by Buyer).
(13) Travel and Accident Insurance - (will not be assumed by Buyer).
(i) None.
81
(ii) Individuals Currently Receiving or Eligible to Receive COBRA
Continuation Coverage
---------------------------- -------------------------------- ---------------------------- ----------------
Individual(1) Status Monthly Premium Months of
---------- ------ --------------- Eligibility
Remaining(2)
---------
---------------------------- -------------------------------- ---------------------------- ----------------
Xxxxx Xxxxxxx Must enroll by 8/14/2000 Medical: $114.45 32
---------------------------- -------------------------------- ---------------------------- ----------------
Xxxx Xxxxxx & spouse Must enroll by 8/14/2000 Medical: $285.94 15
Dental: $ 28.95
---------------------------- -------------------------------- ---------------------------- ----------------
Xxxxxxx XxXxxx & spouse Paid through 8/31/2000 Dental: $ 28.78 13
---------------------------- -------------------------------- ---------------------------- ----------------
Xxxxxx Xxxxxxxx Paid through 8/31/2000 Medical: $133.14 8
Dental: $ 14.61
---------------------------- -------------------------------- ---------------------------- ----------------
Xxxxxx Xxxxxx & family Must enroll by 10/2/2000 Medical: $262.29 17
Dental: $ 44.55
---------------------------- -------------------------------- ---------------------------- ----------------
Xxxxxx Xxxxxxxx & spouse Paid through 8/31/2000 Medical: $262.29 10
Dental: $ 28.78
---------------------------- -------------------------------- ---------------------------- ----------------
Xxxxxxxx Xxxxx Paid through 8/31/2000 Medical: $114.45 7
Dental: $ 14.61
---------------------------- -------------------------------- ---------------------------- ----------------
Xxxxx Xxxxx Must enroll by 9/23/2000 Medical: $133.14 17
Dental: $ 14.61
---------------------------- -------------------------------- ---------------------------- ----------------
Xxxxx Xxxxxxxxxx & spouse Must enroll by 10/11/2000 Medical: $262.29 17
Dental: $ 28.28
---------------------------- -------------------------------- ---------------------------- ----------------
Xxxxxx Xxxxxxx Must enroll by 10/8/2000 Medical: $133.14 35
Dental: $ 14.61
---------------------------- -------------------------------- ---------------------------- ----------------
Xxxx Vanskee & family Must enroll by 9/10/2000 Medical: $442.70 17
Dental: $ 44.82
---------------------------- -------------------------------- ---------------------------- ----------------
Xxxxxx Xxxxxx Son of covered employee who Medical: $145.15 18
attained age 19 and lost Dental: $ 14.69
coverage; enrollment pending
---------------------------- -------------------------------- ---------------------------- ----------------
Xxxxx Xxxxxxxx Must enroll by 11/18/2000 Medical: $145.15 18
---------------------------- -------------------------------- ---------------------------- ----------------
(1) Including qualified beneficiaries.
(2) Subject to the provisions of COBRA.
(iii) None.
(iv) None.
(v) None.
(vi) None.
(vii) None.
82
SCHEDULE 4(r)
KNOWN ENVIRONMENTAL MATTERS
A. Imperial Adhesives - Nashville Site
I. All items documented in the Phase I Environmental Site
Assessment, Imperial Adhesives - Nashville, prepared by IT
Corporation dated July 1999 and the Interoffice Memorandum
from Xxxxx Xxxxxxx to Xxxxx Xxxx dated July 20, 1999
including:
a) groundwater contamination resulting from releases
from USTs including both on-site and off-site
groundwater contamination.
b) Soil contamination due to UST releases.
c) Soil contamination due to above ground solvent
transfer activities including UST/AST areas and the
northern property boundary.
d) Potential fines and disposal costs associated with
speculative accumulation of returns and less than
prime product.
e) The lack of an OSHA PSM program at Nashville.
f) Methylene chloride exposure levels have resulted in
a requirement for all employees to wear supplied
air respirators and production of methylene
chloride containing products occurs on the second
and third shifts.
g) Water from vessels in the manufacturing area is
discharged to the sewer system leading to the
Nashville Metropolitan treatment plants.
h) Potential asbestos containing materials in floor
tile, ceiling, pipe insulation, and building
siding.
i) Fluorescent light fixtures may have ballasts that
contain PCBs.
j) Two pole mounted transformer clusters located
along the north property boundary may contain PCBs.
k) Hydraulic mixing pumps may contain PCBs.
II. First Amendment to Agreement of Sale for Real Estate
dated August 1, 1997 establishes the New Baseline for
condition of the premises as described in the following
reports:
a) Soil Contamination Assessment Report, IGI
Adhesives Facility, Nashville, Tennessee, dated
December 15, 1994, prepared by ViroGroup, Inc.
(Xxxxxx Xxxxx).
b) Letter from TriAD Environmental Consultants
(Xxxxxx Xxxxx) to Xxxxxx X. Xxxx, State
Remediation Section, Division of Solid Waste
Management, Tennessee Department of Environment
and Conversation, dated November 23, 1996,
reporting results of additional soil
investigations performed in the northeast corner
of
83
the Premises.
c) Letter from Xxxxxx X. Xxxx, State Remediation
Section, Division of Solid Waste Management,
Tennessee Department of Environment and
Conservation, to Xxxxxxx X. Xxxxx, Senior Vice
President, Finance, The International Group, Inc.
dated December 2, 1996, concurring that no further
action need be taken with regard to soils at the
Premises.
d) Ground-Water Remediation Plan for the Former IGI
Adhesives Facility, Nashville, Tennessee, dated
March 24, 1997, prepared by TriAD Environmental
Consultants (Xxxxxx Xxxxx).
e) Letter from Xxxxxx Xxxxxx, Program Manager, State
Remediation Section, Division of Solid Waste
Management, Tennessee Department of Environment
and Conservation, to Xxxxxxx X. Xxxxx, The
International Group, Inc. dated May 5, 1997,
approving groundwater remediation plan.
In the event of a conflict between facts or data stated
in one document listed above and facts or data stated
in another such document, the later document shall
prevail.
III. All items documented in the Phase I Environmental, Due
Diligence and Assessment of IGI Adhesives, North Plant,
Nashville, Tennessee, dated November 5, 1991.
IV. All items documented in Preliminary Soil Sampling and
Analysis Report, IGI Adhesives, Nashville, Tennessee prepared
by Xxxxx Xxxxxxx & Xxxxxxxx Inc. dated December 2, 1991.
V. All items documented in Soil Sampling and Analysis Report, IGI
Adhesives, Nashville, Tennessee, prepared by Xxxxx Xxxxxxx
Environmental, Inc. dated April 29, 1992.
VI. Imperial Adhesives has been named as a third party defendant
in the lawsuit styled Southdown, Inc. et. al. v. Xxxxxx X.
Xxxxx, United States District Court for the Northern District
of Alabama, Southern Division - Case No. CV96-J-3300-S.
VII. The lighting system in the shipping and storage area at
Nashville incorporates electrical panels, junction boxes, and
conduit which do not comply with NFPA 70.
VIII. At the Nashville facility, some flammable products are being
stored in stacks higher than 6 1/2 feet which may be a
violation of NFPA 30.
B. Imperial Adhesives - Cincinnati Site
84
I. All items documented in the Underground Storage Tank Removal
Report, prepared by Xxxxx X. Xxxx, dated December 18, 1998.
II. All items documented in the Site Investigation Report
prepared by BHE Environment, Inc. dated January 24, 2000
including:
a) Soil contamination resulting from releases from USTs and
removal of leaking USTs.
b) Contamination of groundwater located at the Cincinnati
site and downgradient of the Cincinnati site, beneath
property owned by third parties, resulting from leaking
USTs. This includes, but is not limited to, groundwater
beneath the railroad right-of-way owned by SORTA.
III. All items documented in the Phase I Environmental Site
Assessment, Imperial Adhesives - Cincinnati, prepared by IT
Corporation dated July 1999 and the Interoffice Memorandum
from Xxxxx Xxxxxxx to Xxxxx Xxxx dated July 20, 1999
including:
a) Soil contamination resulting from releases from USTs and
removal of USTs.
b) Groundwater contamination resulting from releases from
leaking USTs including onsite and offsite groundwater
contamination. This includes, but is not limited to,
groundwater beneath the railroad right-of-way owned by
SORTA.
c) All items related to a potential DNAPL groundwater issue.
d) The facility may be subject to RCRA penalties from OEPA,
USEPA, or other regulating bodies, as a result of storage
or treatment of contaminated soil and groundwater.
e) Potential fines and disposal costs associated with
speculative accumulation of returns and less than prime
product.
f) Seven USTs are located beneath the warehouse floor. All
have been used for storage of latex products. Four of
these USTs are currently out of service. Three are
actively used to store latex products.
g) Potential asbestos containing materials in floor tile,
ceiling, pipe insulation, and building siding.
h) The facility is subject to a "synthetic minor" air permit
and must comply with emissions limits listed in the
permit.
i) Minor spills have been observed inside the berm area
containing thirteen ASTs.
j) Water rinse from cleaning vessels in the manufacturing
area is discharged through a wastewater treatment plant
to the Metropolitan Sewer District's sewer.
Administrative Order #98-804 has been successfully
concluded as a result of the installation of the
wastewater treatment plant.
k) Fluorescent light fixtures may have ballasts that
contain PCBs.
l) Three pole mounted transformer clusters may contain PCBs.
85
IV. Construction debris generated when grading and paving the
south parking lot has been used to build a berm on the
northeast side of the property.
V. It has been determined that three (3) out of service, 2000
gallon storage tanks located inside the building, under the
floor, at the Cincinnati facility require registration under
BUSTR regulations before they can be closed in place. This
requirement was determined during conversations with BUSTR
personnel during planning for closure. After consideration of
the regulations, BUSTR determined that registration was
required since the tanks, when in use, were used to store
water base emulsions manufactured with up to 12% solvents.
These tanks have been out of service since 1980.
The subject registration forms and the associated $150.00 fee
were mailed to BUSTR on July 18, 2000. Upon receipt of
approval, these tanks will be closed in place.
VI. Cincinnati has an Air Permit To Install (PTI) and has applied
for a permit to operate (PTO). The initial application for a
Permit to Install (PTI) was submitted to the Xxxxxxxx County
Department of Environmental Services on December 14, 1998. The
Ohio Environmental Protection Agency issued the final Permit
To Install (PTI) on February 16, 2000. Application for a
Permit to Operate (PTO) was made with the Ohio Environmental
Protection Agency on March 13, 2000. Approval is pending.
C. General
I. Notices of Export, required by Section 12(b), 15 U.S.C., S
2611(b) and 40CFR S707.60(a), for the period from May 15, 2000
to July 12, 2000 have not been submitted as required. This has
occurred due to computer software problems. Notifications will
be completed by August 31, 2000.
86
SCHEDULE 4(t)
None.
87
SCHEDULE 4(w) (Bank Accounts)*
* Schedule 4(w) has been intentionally omitted. Please see "Information Required
in accordance with Item 601(b)(2) of Regulation S-K" following the execution
page hereof.
88
SCHEDULE 4(y)(Customers and Suppliers)*
* Schedule 4(y) has been intentionally omitted. Please see "Information Required
in accordance with Item 601(b)(2) of Regulation S-K" following the execution
page hereof.
89
SCHEDULE 5(e)
Customers
Kingstree
Xxxxx
Steelcase
Steelcraft
Xxxxx
Xxxxx
Hickory Springs
Sunnex
90
SCHEDULE 5(o)
(1) Stop-loss insurance with Pacific Life Insurance Company--expiration
date July 31, 2001.(1)
(2) Basic and supplemental life and accidental death and dismemberment
insurance with PM Group Life Insurance Company--expiration date
September 30, 2001.(1)
(3) Long term disability insurance with Life Insurance Company of North
America--expiration date September 30, 2001.(1)
(4) Third party administration contract with United Medical Resources,
Inc.--expiration date June 30, 2001.(1)
-----------------------
(1) Subject to the terms and conditions of the policy.
91
SCHEDULE 6(i)
Imperial has no formal severance policy. Imperial has generally followed the
severance policy established by U.S. Shoe, which is as follows:
------------------------------------------------------------ ---------------------------------------------------------
Classification & Length of Service Severance Allowance
------------------------------------------------------------ ---------------------------------------------------------
All Salaried Exempt and Salaried Non-Exempt - less than 12 None
months of service
------------------------------------------------------------ ---------------------------------------------------------
Salaried Non-Exempt Employees - One (1) to Three (3) years Two (2) weeks pay
of service
------------------------------------------------------------ ---------------------------------------------------------
Salaried Non-Exempt - Three (3) or more years of service Two (2) weeks pay plus one (1) additional day's pay for
each year over three (3)
------------------------------------------------------------ ---------------------------------------------------------
Salaried Exempt Employees - One (1) to three (3) years of Two weeks pay
service
------------------------------------------------------------ ---------------------------------------------------------
Salaried Exempt Employees - Three (3) or more years of Four (4) weeks pay plus one (1) additional day's pay
service for each year over three (3)
------------------------------------------------------------ ---------------------------------------------------------
92
FIRST AMENDMENT
TO
STOCK PURCHASE AGREEMENT
This FIRST AMENDMENT TO STOCK PURCHASE AGREEMENT (the "AMENDMENT") is made
and entered into as of the 10th day of October, 2000 by and among MINI CROWN
FUNDING CORP., a Delaware corporation (the "BUYER"), the Buyer's parent,
SOVEREIGN SPECIALTY CHEMICALS, INC., a Delaware corporation (the "PARENT"),
IMPERIAL ADHESIVES, INC., an Ohio corporation ("IMPERIAL"), and NS GROUP, INC.,
a Kentucky corporation (the "SELLER"). The Buyer, the Parent, the Seller, and
Imperial are referred to herein individually as a "PARTY" and collectively as
the "PARTIES." Capitalized terms used but not defined herein shall have the
meaning assigned to them in certain Stock Purchase Agreement dated as of
September 13, 2000 by and among the Parties (the "STOCK PURCHASE AGREEMENT").
RECITALS
A. Certain disputes have arisen among the Parties regarding certain terms
of the Stock Purchase Agreement. In order to resolve those disputes, the Parties
have agreed to amend the Stock Purchase Agreement as set forth in this
Amendment.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing Recitals, and the mutual
agreements herein contained, and other good and valuable consideration, the
receipt and sufficiency of which are hereby mutually acknowledged, the Stock
Purchase Agreement is amended as follows:
1. Section 1 of the Stock Purchase Agreement, entitled "Definitions," is
hereby amended by deleting the definition of "Preliminary Statement of Net Work
Capital" in its entirety.
2. Section 2(b) of the Stock Purchase Agreement, entitled "Purchase
Price," is hereby amended by deleting the phrase," as preliminarily adjusted in
accordance with the provisions of Section 2(c) hereof".
3. Section 2(c) of the Stock Purchase Agreement, entitled "Working
Capital Adjustment," is hereby amended as follows:
(a) by deleting the clause "At the Closing, the Purchase Price shall
be adjusted upward or downward on a dollar-for-dollar basis by the amount
by which the Net Working Capital of Imperial at Closing is more or less
than $6,550,000," appearing in the first sentence thereof and, substituting
therefor the clause "Pursuant to the provisions of Section 2(g) hereof,
the Purchase Price shall be adjusted upward or downward on a
dollar-for-dollar basis by the amount by which the Net Working Capital of
Imperial at Closing is more or less than $7,450,000," in its place and
stead; and
(b) by deleting the last sentence of Section 2(c) in its entirety.
93
4. Section 2(e)(ii)(A) of the Stock Purchase Agreement is hereby amended
by deleting the phrase "at the Closing pursuant to Section 2(c) above and
subject to further adjustment" appearing on the second and third lines thereof.
5. Section 2(g) of the Stock Purchase Agreement, entitled "Post-Closing
Purchase Price Adjustment" is hereby amended by deleting the phrase "Net
Working Capital of Imperial as disclosed on the Preliminary Statement of Net
Working Capital" throughout Section 2(g) and substituting therefor the phrase
"Target Net Working Capital Amount" in its place and stead.
6. All of the other terms and provisions of the Stock Purchase Agreement,
except as hereinabove amended by the terms of this Amendment, shall remain in
full force and effect.
7. This Amendment shall be effective as of the date first above written.
8. This Amendment may be executed in any number of counterparts, each of
which when so executed and delivered will be deemed an original, and such
counterparts together will constitute one instrument.
2
94
IN WITNESS WHEREOF, the Parties have entered into this Amendment on the day
and year first above written.
BUYER:
MINI CROWN FUNDING CORP.
By: /s/ Xxxxxx X. Xxxxxx
------------------------------------
Name: Xxxxxx X. Xxxxxx
------------------------------
Title: Chairman
------------------------------
PARENT:
SOVEREIGN SPECIALTY CHEMICALS, INC.
By: /s/ Xxxxxx X. Xxxxxx
------------------------------------
Name: Xxxxxx X. Xxxxxx
------------------------------
Title: Chairman
------------------------------
IMPERIAL:
IMPERIAL ADHESIVES, INC.
By:
------------------------------------
Name:
------------------------------
Title:
------------------------------
SELLER:
NS GROUP, INC.
By:
------------------------------------
Name:
------------------------------
Title:
------------------------------
Information Required in accordance with
Item 601(b)(2) of Regulation S-K
The following schedules have not been filed herewith pursuant to Item
601(b)(2) of Regulation S-K:
- Schedule 4(k) (Intellectual Property)
- Schedule 4(m) (Contracts) - provides information concerning the nature,
identity and value of Contracts with vendors, employees and customers.
- Schedule 4(w) (Bank Accounts) - provides information identifying the
account numbers and authorized signors on accounts.
- Schedule 4(y) (Customers and Suppliers) - provides information concerning
the identity and significance of certain customers and suppliers.
The issuer agrees to furnish supplementally a copy of any of the foregoing
omitted schedules to the Securities and Exchange Commission upon request.
3
95
SECOND AMENDMENT
TO
STOCK PURCHASE AGREEMENT
This SECOND AMENDMENT TO STOCK PURCHASE AGREEMENT (this "AMENDMENT") is
made and entered into as of the 11th day of October, 2000 by and among MINI
CROWN FUNDING CORP., a Delaware corporation (the "BUYER"), the Buyer's parent,
SOVEREIGN SPECIALTY CHEMICALS, INC., a Delaware corporation (the "PARENT"),
IMPERIAL ADHESIVES, INC., an Ohio corporation ("IMPERIAL"), and NS GROUP, INC.,
a Kentucky corporation (the "SELLER"). The Buyer, the Parent, the Seller, and
Imperial are referred to herein individually as a "PARTY" and collectively as
the "PARTIES." Capitalized terms used but not defined herein shall have the
meaning assigned to them in that certain Stock Purchase Agreement dated as of
September 13, 2000 by and among the Parties, as amended by that certain First
Amendment to Stock Purchase Agreement dated October 10, 2000 (as amended, the
"STOCK PURCHASE AGREEMENT").
RECITALS
A. Certain disputes have arisen among the Parties regarding certain terms
of the Stock Purchase Agreement.
B. In order to resolve those disputes, the Parties have agreed to amend
the Stock Purchase Agreement as set forth in this Amendment.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing Recitals, and the mutual
agreements herein contained, and other good and valuable consideration, the
receipt and sufficiency of which are hereby mutually acknowledged, the Stock
Purchase Agreement is amended as follows:
1. Section 4(r) of the Stock Purchase Agreement, entitled "Environment,
Health, and Safety," is hereby amended by adding the following subsection (xi):
"(xi) There are no polychlorinated biphenynls ("PCB'S"), in,
immediately adjacent to, on or under, or migrating from, that certain 60
foot by 60 foot portion of the Real Property (the "SUBJECT CINCINNATI
PLOT") that was the subject of that certain report dated June 14, 2000
prepared by BHE Environmental concerning the Imperial facility located
thereat in Cincinnati, Ohio."
2. Section 6(l) of the Stock Purchase Agreement, entitled "Special
Arrangements Relating to Known Environmental Matters," is hereby amended by
deleting the phrase "in Sections 4(r)(vii), (viii), (ix) and (x)" beginning at
the third line
96
thereof and substituting therefor the phrase "in Sections 4(r)(vii), (viii),
(ix), (x), and (xi)" in its place and stead.
3. Paragraph (i) of Section 6(l) of the Stock Purchase Agreement,
entitled "Special Arrangements Relating to Known Environmental Matters," is
hereby amended by inserting the words "with respect to" in between the words
"and" and "any" appearing on the second line thereof.
4. Section 6 of the Stock Purchase Agreement, entitled "Additional
Covenants," is hereby amended by adding the following new Section 6(n), entitled
"Remediation of PCB's on Subject Cincinnati Plot":
"(n) Remediation of PCB's on Subject Cincinnati Plot. With respect to
any PCB's in, immediately adjacent to, on or under, or migrating from the
Subject Cincinnati Plot (the "PCB ENVIRONMENTAL MATTERS"), the Parties
hereby agree that following the Closing, the Buyer and the Seller shall
conduct the following activities relating to the PCB Environmental Matters
(collectively referred to as "PCB ENVIRONMENTAL ACTIVITIES"): (x) any
activities reasonably necessary for the assessment, sampling,
investigation, monitoring, remediation, abatement or the like relating to
the PCB Environmental Matters (collectively, the "PCB ENVIRONMENTAL
IDENTIFICATION AND REMEDIATION ACTIVITIES"), and (y) the defense,
settlement and/or other resolution of all third party claims against the
Seller, Imperial, the Buyer or the Parent (including those asserted by any
governmental agency) arising from or relating, to the PCB Environmental
Matters, to the extent such claims are asserted against the Seller,
Imperial, the Buyer or the Parent ("PCB ENVIRONMENTAL THIRD PARTY CLAIMS"
and "PCB ENVIRONMENTAL CLAIM RESOLUTION ACTIVITIES," respectively).
(i) With respect to the conduct of the PCB Environmental
Identification and Remediation Activities and with respect to any PCB
Environmental Claim Resolution Activities in connection with any PCB
Environmental Third Party Claims brought by any governmental agency, the
Parties hereby agree as follows:
(A) as appropriate, such activities shall be conducted by an
environmental consultant mutually agreed upon by the Buyer and the
Seller;
(B) all submissions to any Governmental Body, including without
limitation work plans, sampling and analysis plans and health and
safety plans, shall be mutually agreed upon by the Buyer and the
Seller prior to submission;
(C) the Buyer shall deliver to the Seller copies of all
information discovered or prepared as a result of the Buyer's conduct
of any such activities, including, but not limited to results of soil
or groundwater analysis, pumping test results, monitoring results and
consulting reports or correspondence;
2
97
(D) the Seller shall have the right to attend all meetings or
discussions with any Governmental Body, and the Seller shall receive
notice of the time and place of the meeting or discussion within a
reasonable time prior to any such meeting or discussion, provided that
so long as the Buyer has furnished the Seller with such reasonable
advance notice thereof, the Buyer shall have no responsibility for the
Seller's unavailability or failure to attend any such meeting; and
(E) the Seller or its representative shall have the right to
enter the relevant portion of Imperial's Real Property at all
reasonable times for the purpose of observing the conduct or
performance of any such activities, subject to reasonable health and
safety plans or restrictions imposed on the Seller during such
observation.
(ii) With respect to the conduct of any PCB Environmental Claim
Resolution Activities in connection with any PCB Environmental Third Party
Claims other than a PCB Environmental Third Party Claim brought by a
Governmental Body, the Parties hereby agree as follows:
(A) upon the Buyer's or Imperial's receipt of any such PCB
Environmental Third Party Claim Buyer shall promptly so notify the
Seller in writing; provided, however, that no delay on the part of the
Buyer in notifying the Seller shall relieve the Seller from any
liability or obligation hereunder unless (and then solely to the
extent) the Seller is damaged and prejudiced from adequately
participating in the defense of that PCB Environmental Third Party
Claim;
(B) the Buyer shall defend any such PCB Environmental Third Party
Claim with counsel of its choice reasonably satisfactory to the
Seller, provided that the Seller may retain separate co-counsel at its
sole cost and expense, to participate in such defense;
(C) the Buyer shall deliver or cause to be delivered to the
Seller copies of all correspondence, pleadings, motions, briefs,
appeals or other written statements relating to or submitted in
connection with the defense of any such PCB Environmental Third Party
Claim, and timely notices of, and the right to participate in any
hearing or other court proceeding relating to any such PCB
Environmental Third Party Claim; and
(D) any settlement with respect to any such PCB Environmental
Third Party Claim will be subject to the mutual agreement of the Buyer
and the Seller.
(iii) The Parties mutually agree that the appropriateness of any PCB
Environmental Activity, the reasonableness of the extent to which any such
activity shall
3
98
be undertaken, and the reasonableness of any action taken by the Buyer and the
Seller pursuant to paragraphs (i) and (ii) of this Section 6(n) shall be
determined by reference to the following standard: a reasonable businessman who
owns a piece of real estate on which an on-going manufacturing business is being
operated, and who intends to continue to operate that business on that real
estate; and in any event, in compliance with all applicable environmental laws.
The Seller and the Buyer agree that they will attempt in good faith to promptly
resolve any dispute pertaining to any PCB Environmental Activity and the
operations of the provisions of this Section 6(n), and failing any such
resolution, the provisions of Section 8(j) shall apply.
5. Section 8(b)(ii) of the Stock Purchase Agreement, entitled "Seller--
Monetary Liability. Limitations," is hereby amended as follows:
(a) by deleting the phrase "made in Section 4 hereof" appearing in the
third line thereof and substituting therefor the phrase "made in Section 4
hereof (other than those contained in Section 4(r)(xi))" in its place and
stead; and
(b) by deleting the amount of "$12,600,000" appearing in the ninth
line thereof and substituting therefor "$3,200,000" in its place and stead.
6. Notwithstanding that the Parties have executed and delivered to each
other all of the agreements, documents and instruments contemplated by the
provisions of Section 7 of the Stock Purchase Agreement, which are each dated
October 10, 2000 (collectively, the "CLOSING DOCUMENTS"), the Parties expressly
mutually acknowledge and agree that (x) the Closing Date is October 11, 2000,
(y) for all purposes under the Stock Purchase Agreement and each Closing
Document, each such Closing Document shall be deemed to be dated October 11,
2000 and (z) the Parties shall execute and deliver to each other such further
instruments and shall take such further actions as any of them may request to
further evidence that the Closing occurred on October 11, 2000.
7. All of the other terms and provisions of the Stock Purchase Agreement,
except as hereinabove amended by the terms of this Amendment, shall remain in
full force and effect.
8. This Amendment shall be effective as of the date first above written.
9. This Amendment may be executed in any number of counterparts, each of
which when so executed and delivered will be deemed an original, and such
counterparts together will constitute one instrument.
4
99
IN WITNESS WHEREOF, the Parties have entered into this Amendment on the day
and year first above written.
BUYER:
MINI CROWN FUNDING CORP.
By: /s/ Xxxxx X. Xxxx
------------------------------------
Name: Xxxxx X. Xxxx
------------------------------
Title: Vice President
------------------------------
PARENT:
SOVEREIGN SPECIALTY CHEMICALS, INC.
By: /s/ Xxxxx X. Xxxx
------------------------------------
Name: Xxxxx X. Xxxx
------------------------------
Title: Vice President
------------------------------
IMPERIAL:
IMPERIAL ADHESIVES, INC.
By:
------------------------------------
Name:
------------------------------
Title:
------------------------------
SELLER:
NS GROUP, INC.
By:
------------------------------------
Name:
------------------------------
Title:
------------------------------
5
