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EXHIBIT 2.1
ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT ("Agreement") made this 28th day of August,
1998 between PrimeSource Corporation ("PrimeSource") and Xxxx Industries, Inc.
("Xxxx"), and sets out the terms and conditions pursuant to which PrimeSource
will purchase certain of Xxxx'x assets.
Unless otherwise specifically noted, all assets, liabilities,
inventory, leases, lists, names, records, etc. being purchased or assumed by
PrimeSource hereunder pertain solely to the Graphic Arts Supply Group of Xxxx
(herein "GASG").
ARTICLE 1
CLOSING AND PURCHASE OF ASSETS
1.1 Closing and Closing Date. The closing of the transactions
contemplated hereby (the "Closing") shall occur at the offices of Xxxx in El
Segundo, California on the "Closing Date" which shall be on September 14, 1998,
or some other mutually agreeable date, but in no event later than October 30,
1998 (the "Termination Date").
1.2 Purchase of Assets from Xxxx. On the Closing Date, subject to the
terms and conditions hereof and in reliance upon the representations, warranties
and agreements contained herein, PrimeSource shall purchase from Xxxx and Xxxx
shall sell, convey, transfer and assign to PrimeSource, free and clear of all
liens and encumbrances, subject to Section 2.2, the following assets as of the
Closing Date, in each case pertaining solely to the GASG assets (collectively,
the "Assets"):
(a) All inventory of GASG (including new and used equipment
and parts). Such purchased inventory shall be set out on Schedule 1.2(a) which
will be prepared by Xxxx and attached to this Agreement when the Closing Balance
Sheet has been finalized. A physical inventory of GASG inventory will be taken
jointly by PrimeSource and Xxxx as of the Closing Date. The items identified by
the physical inventory shall provide the basis for determination of the unit
quantities of the inventories for preparation of the Closing Balance Sheet, with
individual items valued at Xxxx'x book value which is in accordance with
generally accepted accounting principles consistently applied ("GAAP").
Items on order by Xxxx as of the Closing Date and not yet
received into inventory shall be paid for by PrimeSource, provided such items
for stock are in usual amounts and ordered in the normal course of the GASG
business. To the extent any ordered (but not received) inventory stock has been
recorded as a liability as of the Closing Date, such liability will not be
deemed outstanding for the purpose of determining the Final Purchase Price.
(b) All accounts and notes receivable of GASG as of the
Closing Date (the "Receivables"). The Receivables shall be listed on Schedule
1.2(b) which shall be prepared by Xxxx and attached hereto within 12 days of
Closing.
(c) GASG's customer lists, trademarks, servicemarks and
tradenames as listed on Schedule 1.2(c).
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(d) Contracts, open orders, books and records, or copies
thereof, of GASG. All of such items will be listed on Schedule 1.2(d) to be
attached prior to or at Closing. Xxxx may keep photocopies of all such items,
and in the event that PrimeSource wishes to dispose of any such items within
five years the originals shall be returned to Xxxx.
(e) All property, plant and equipment of GASG valued at GASG's
net depreciable basis. A final listing of such assets will be prepared by Xxxx
and attached hereto within 12 days of Closing as Schedule 1.2(e).
(f) All other miscellaneous tangible assets of GASG as listed
on the Closing Balance Sheet.
PrimeSource is only purchasing those Assets described in 1.2
(a) through (f) above and shall in no regard be deemed a legal successor to
Xxxx.
1.3 Purchase Price. The purchase price ("Purchase Price") for the
Assets shall be Forty Three Million Five Hundred Thousand Dollars ($43,500,000);
provided however, the final Purchase Price shall be increased or decreased
dollar-for-dollar to the extent the net tangible assets being purchased by
PrimeSource have a value on the Closing Date greater or less than Thirty One
Million Dollars ($31,000,000). Net tangible assets shall mean total tangible
assets acquired (inventory, property, plant, and equipment, Receivables,
pre-paid expenses, and other items classified as tangible assets per GAAP), net
of reserves, and less the book value of Assumed Liabilities, all valued based
upon Xxxx'x book values in accordance with GAAP or as otherwise set out herein.
Two dollars of the Purchase Price will be allocated to items in 1.2(c) & (d)
for income tax purposes.
The final Purchase Price for the Assets will be determined by
a Closing Balance Sheet and final schedules of GASG as of the Closing Date which
will be prepared in accordance with GAAP by Xxxx and based on the criteria above
in 1.2(a), (b) & (e) for valuing assets and delivered to PrimeSource within 40
days of Closing; provided, however, that there will be no reserve for inventory
and the reserve for receivables will be $220,529. Along with the Closing Balance
Sheet, Xxxx shall prepare and deliver to PrimeSource a calculation of "net
tangible assets" of GASG as of the Closing Date based upon the Closing Balance
Sheet. Xxxx shall promptly provide PrimeSource access to all related accounting
entries, working papers and such other documentation as may be reasonably
requested by PrimeSource. In the event that PrimeSource disputes any item set
forth in, or any item omitted from, the Closing Balance Sheet, or the
calculation of "net tangible assets", the parties shall attempt, in good faith,
to resolve such dispute or controversy. In the event the parties cannot resolve
such dispute or controversy, it shall be resolved in accordance with the
procedures set forth below. Within 20 days of the receipt of the Closing Balance
Sheet, final schedules and calculation of "net tangible assets", PrimeSource
shall give notice to Xxxx setting forth in reasonable detail the basis for any
such dispute or controversy. PricewaterhouseCoopers LLP ("Accountants"),
independent accountants for both PrimeSource and Xxxx, shall promptly commence a
review of the matter and issue its decision to both parties within 15 days. If
either party is not satisfied with the opinion so rendered, then within 10 days
of receipt of the decision it will so notify the other party, and PrimeSource
and Xxxx shall jointly, within 10 days thereafter, appoint a national accounting
firm other than Accountants to resolve such dispute or controversy. If the
parties cannot agree on the selection of such national accounting firm, they
shall select such national accounting firm by lot among the "Big-Five"
accounting firms other than Accountants (the "Neutral Accountants") to resolve
such dispute or controversy. The Neutral Accountants shall make their
determination as to such dispute or controversy within 30 days of their
appointment and their determination shall be final, binding and conclusive as
between PrimeSource and Xxxx, absent fraud or manifest error. The fees and
disbursements of the Neutral Accountants shall be apportioned between
PrimeSource and Xxxx in such manner as the Neutral Accountants shall deem
equitable in light of
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the issues raised and the degree to which the parties prevail on each such
issue. Upon final determination, if the net tangible assets are more or less
than $31 million, the difference will be transmitted to the other party within
three business days by bank wire, except that in the event that the net tangible
assets are less than $31 million and there remains outstanding any unpaid
portion of the Purchase Price, the difference may be offset against said unpaid
amount.
1.4 Delivery and Payment. At the Closing Date, Xxxx shall execute and
deliver to PrimeSource a Xxxx of Sale transferring the Assets (in the form of
Exhibit A attached), an Assignment of Contracts specifically related to the
Assets and business of the GASG (in the form of Exhibit B attached), and such
other documents as PrimeSource may reasonably request so as to effect a complete
and valid transfer to PrimeSource of the Assets, free and clear of all liens and
encumbrances. The assumed Purchase Price of $43.5 million, less a good faith
estimate by Xxxx of the Receivables as of the Closing Date (the "Estimated
Receivables") shall be paid by PrimeSource to Xxxx at Closing by bank wire.
Until the sooner of ninety (90) days after the Closing Date or amounts
equal to the Estimated Receivables have been received by Xxxx, customer checks
relating to both the Receivables and post-closing receivables shall go into the
existing Xxxx lockbox at First Chicago Bank number 100630 located in Pasadena,
California (account number 55-50807), the Xxxx/Xxxxx bank account (account
number 115-0000000) at NorWest Bank located in Omaha, Nebraska, or the
Xxxx/Xxxxx bank account (account number 635-0000000) at NorWest Bank located in
Minneapolis, Minnesota. All funds attributable to Receivables shall be wired to
Xxxx as it from time to time may designate. As soon as practical after the close
of business of each day, Xxxx shall wire all funds relating to post-receivables
to PrimeSource's bank account at First Union Bank, ABA No. 000000000, account
number 2000107583787. Funds will be allocated in accordance with the invoice(s)
designated by the customer or if no designation is made and the amount paid does
not match any unpaid invoice, then the payment will be applied to the oldest
unpaid invoice. As soon as an amount equal to the Estimated Receivables has been
received, then the receipts of all Receivables collected thereafter shall be
transmitted to PrimeSource's bank account above. If after ninety (90) days an
amount equal to the Estimated Receivables has not been received by Xxxx,
PrimeSource shall wire Xxxx to its account at Union Bank of California, Los
Angeles, California (account number 0710004048) the balance of the Estimated
Receivables, irrespective of whether the funds for the remaining Receivables
have been collected or whether there exists a dispute regarding the proper
valuations thereof as set forth on the Closing Balance Sheet.
1.5 Guarantee of Certain Receivables. Xxxx guarantees that the
following receivables will be paid within 6 months of the Closing Date: all
non-Xxxxx accounts receivable from Schedule 1.2(b) that will be listed on
Schedule 1.5 to be prepared by PrimeSource within 14 days of the Closing Date
and to contain not more than $1,700,000 of sums specified by PrimeSource.
Within 10 days of the end of the six-month period, PrimeSource will
provide Xxxx with an accurate list of the items qualifying for the guarantee
under this Section 1.5 and Xxxx will purchase such accounts by bank wire within
10 days of receipt of this list. Upon receipt of these funds PrimeSource will
immediately assign these accounts to Xxxx along with any supporting
documentation.
1.6 Guarantee of Certain Inventory. PrimeSource may designate up to
$2.7 million of the inventory items listed on Schedule 1.2(a) for inclusion on a
Schedule 1.6 to be prepared by PrimeSource within 14 days from the Closing Date
and attached hereto. Xxxx guarantees that PrimeSource will realize sale or
return proceeds from each item on Schedule 1.6, during the six-month period
beginning on the Closing Date, that are not less than the book value of such
item on Schedule 1.2(a). At the end of the six-month period, Xxxx shall pay
PrimeSource for (a) the value of the inventory items listed on Schedule 1.6 that
have not been sold or returned to
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vendors, (b) for each item sold by PrimeSource or returned to its vendor for an
amount less than its value stated on Schedule 1.6, the difference between the
sale price (or return proceeds) and the value listed on Schedule 1.6, and (c)
any additional expenses approved in advance by Xxxx incurred on the sale of
Schedule 1.6 items during the six-month period such as special sales incentives,
conversion costs, and freight costs of returning items to vendors and
transferring items to other locations.
Within 10 days of the end of the six-month period, PrimeSource will
provide Xxxx with an accurate list of the items qualifying for guarantee under
this Section 1.6 and Xxxx will pay PrimeSource the total amount owed under this
guarantee by bank wire within 10 days of receipt of this list. Upon receipt of
these funds PrimeSource will make any Schedule 1.6 unsold inventory available to
Xxxx.
PrimeSource agrees to make commercially reasonable efforts to sell or
return the inventory on Schedule 1.6 during the six-month post-Closing period.
1.7 Liabilities and Potential Liabilities. PrimeSource does not assume
any past, present or future liabilities or obligations of Xxxx pursuant to this
Agreement or otherwise, whether such liabilities or obligations are known or
unknown, actual or contingent, asserted or not, except as specified below
(herein the "Assumed Liabilities") which will be assumed by PrimeSource at the
Closing Date and PrimeSource shall execute and deliver to Xxxx at Closing as
Assumption of Liabilities Agreement in the form of Exhibit B hereto evidencing
such assumption:
a. the liabilities of GASG as reflected on the Closing
Balance Sheet including accounts payable;
b. the contingent and unknown liabilities of the GASG up to
$870,000 in the aggregate after receipt of any insurance
proceeds from Xxxx insurance coverage, but excluding
environmental liabilities, any accounts payable or other
known liabilities not properly recorded in accordance
with GAAP or this Agreement, and any liabilities in
connection with employment agreements with X. Xxxxxxxxx,
X. Xxxxxxxxx, X.X. Xxxx, X. Xxxxx and X. Xxxx;
c. personal property leases (trucks, forklifts, telephone
systems, etc.), an accurate list of which are attached
hereto as Schedule 1.7(c);
d. real estate leases, an accurate list of which is
attached hereto as Schedule 1.7(d);
e. supply contracts entered into prior to the Closing Date;
f. the employment agreement with Xxxx Xxxxx; and
g. all consignment agreements.
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ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF XXXX
Xxxx represents and warrants to PrimeSource that:
2.1 Authority. Xxxx is a corporation duly organized, validly existing,
and in good standing under the laws of the state of California. The execution
and delivery of this Agreement and the related documents to PrimeSource, and the
consummation of the transactions contemplated by this Agreement have been duly
authorized and each will be a valid and binding obligation of Xxxx. All
corporate action on the part of Xxxx and its directors and shareholders
necessary for the authorization, execution, delivery and performance of all
obligations of Xxxx under this Agreement and related documents has been taken.
Neither the execution of this Agreement and related documents nor the
performance by Xxxx of the transactions required hereunder and thereunder will
constitute a violation of or default under, any law, regulation, order,
contract, commitment, or restriction of any kind to which Xxxx is a party or by
which Xxxx is bound, subject, however, to the fulfillment of the conditions set
forth in Sections 5.4 and 5.5.
2.2 Title and Condition of Assets. Xxxx will have at Closing good and
marketable title to the Assets, free and clear of all title defects, security
interests, pledges, options, claims, liens, encumbrances, and restrictions of
any nature whatsoever (including, without limitation, leases, chattel mortgages,
conditional sale contracts, purchase money security interests, collateral
security arrangements and other title or interest-retaining agreements);
provided, however, to the extent that any Asset is encumbered by bank financing,
such lien may remain on the Asset after Closing and Xxxx hereby agrees to hold
PrimeSource harmless from such lien(s), and further provided that the parties
agree that certain vendors' and lessors' approvals will not be obtained by the
Closing Date.
2.3 Litigation and Other Proceedings. Other than as set out on Schedule
2.3 hereto, Xxxx is not a party to any pending or, to the best knowledge of
Xxxx, threatened action, suit, labor dispute, proceeding, investigation, or
discrimination claim in or by any court or governmental agency arising from the
actions or inaction's of Xxxx which could have any significant adverse impact on
PrimeSource or its business after Closing. Xxxx is not subject to any order,
writ, judgment, decree or injunction barring or adversely affecting the Assets
or transactions contemplated hereby.
2.4 Personnel Matters. Xxxx shall retain responsibility for any and all
liability incurred in connection with the termination of its employees as of the
Closing Date, whether or not such employees are subsequently offered employment
by PrimeSource except to the extent any such liabilities are Assumed
Liabilities. Xxxx represents that it has no labor unions and that there has been
no union organizing activities related to Xxxx since January 1, 1996.
To the best of Xxxx'x knowledge, Xxxx has not violated any
employment laws, the violation of which would have a material adverse effect on
the Assets or Assumed Liabilities. Schedule 2.4 discloses any existing GASG
employee leave of absence that has been identified or designated as a leave of
absence subject to the FMLA.
No promise has been made by Xxxx to any of its GASG employees
that PrimeSource will continue, assume or otherwise be responsible for any of
the employee benefits that Xxxx has provided or is providing to such employees,
or that PrimeSource will provide any employee benefits to employees who are
hired by PrimeSource subsequent to Closing.
2.5 Accuracy of Financial Information. The Closing Balance Sheet to be
delivered to PrimeSource by Xxxx after the Closing Date will be prepared from
(and will be in accordance
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with) the books and records of the Company, will be prepared in accordance with
GAAP except as set forth on Schedule 2.5 or as otherwise specified in this
Agreement, and will fairly present in all material respects as of the Closing
Date the financial condition of GASG.
All other financial information concerning GASG delivered and
to be delivered to PrimeSource by Xxxx on or prior to the Closing Date (a) fully
and fairly reflect the transactions set forth therein as recorded on the books
and records of Xxxx in accordance with Xxxx'x past practices and (b) fairly
present in all material respects as of the dates indicated the information set
forth therein.
2.6 Brokers. PrimeSource will not be obligated to pay any broker's or
finder's fees as a result of activities by Xxxx.
2.7 Taxes. Xxxx has filed all tax returns or reports which could affect
the Assets or Assumed Liabilities which were required to be filed by it for all
periods prior to or including the Closing Date, and such returns or reports are
correct and complete in all material respects. All federal, state and local
income, profits, franchise, sales, use, occupation, property, excise, payroll,
withholding, employment, estimated and other taxes of any nature, including
interest, penalties and other additions to such taxes applicable to the assets,
liabilities and business of GASG ("Taxes"), payable by, or due from, Xxxx for
all periods prior to the date hereof have been fully paid or adequately reserved
for by Xxxx, or, with respect to Taxes required to be accrued, Xxxx has properly
accrued such Taxes. All Taxes which Xxxx is required by law to withhold or
collect relating to the business of GASG have been duly withheld or collected
and have been paid over the appropriate governmental agency or authority or are
properly recorded as a liability on the books of Xxxx.
2.8 Property, Plant and Equipment. The assets on Schedule 1.2(e) are
being directly utilized in GASG's business. Such assets that, as of the Closing
Date, have not been fully depreciated by Xxxx, are in existence and in working
condition, in accordance with industry standards taking into account the age
thereof.
2.9 Reliance. The foregoing representations and warranties are made by
Xxxx with the knowledge and expectation that PrimeSource is placing complete
reliance thereon.
2.10 Insurance. Xxxx will cooperate with PrimeSource in asserting
coverage under Xxxx'x insurance policies for claims and litigation arising
before and after the Closing Date that pertain to activities or omissions of
Xxxx relating to the business of GASG prior to the Closing Date when such a
claim is filed against PrimeSource or PrimeSource is named as a defendant in
such litigation.
2.11 Environmental Matters. Xxxx reasonably believes that it has
obtained and is in compliance with all permits, licenses and such other
authorizations required to be obtained for the operation of GASG's business and
the ownership and use of the Assets under current applicable federal, state and
local laws, rules and regulations relating to pollution or protection of human
health and the environment, except for any permits, licenses or authorizations
which, if not obtained or complied with, would not have a material adverse
effect on business or liabilities of GASG.
2.12 Certain Events. Except as disclosed in Schedule 2.12 hereto, since June 30,
1998 Xxxx has operated the business in the ordinary course and, except as set
forth on Schedule 2.12 hereto, there has not occurred:
(a) any damage, destruction or loss (whether or not covered
by insurance) materially adversely affecting the Assets
or Assumed Liabilities;
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(b) any sale, transfer, pledge or other disposition of any
tangible or intangible Assets except in the ordinary
course of business;
(c) any capital appropriation or expenditure or commitment
therefor on behalf of Xxxx for the GASG business in
excess of $25,000;
(d) any event or any other change in the condition of Xxxx
which has, or could reasonably be expected to have, a
material adverse effect on the Assets, the Assumed
Liabilities, or the GASG business;
(e) any default by Xxxx in any material liability or
obligation relating to the GASG business or any material
adverse change in the terms of any contract or
instrument relating to the business of GASG;
(f) any waiver, cancellation, sale or other disposition, for
less than the face amount thereof, of any material claim
or right which Xxxx has against others which relate to
the GASG business or the Assets;
(g) any change in any method of accounting or accounting
practice relating to the GASG business; or
(h) any notices that any supplier or customer has taken or
contemplates any steps which could materially and
adversely disrupt the GASG business.
2.13 Contracts. Xxxx has in all material respects performed all of its
obligations required to be performed by it to the date hereof under, and is not
in default in any material respect under, any contract that PrimeSource is
assuming under Section 1.7 above.
2.14 Condition of Facilities. To the best of Xxxx'x knowledge, the GASG
facilities are in material compliance with local building, zoning and fire
protection laws and regulations, and have no known defect which could materially
adversely effect the business of GASG.
2.15 Transactions with Affiliates. During the last two years, with
respect to or for the GASG business, Xxxx has not purchased, leased, or
otherwise acquired any material property or assets or obtained material property
or assets or obtained any material services from, or sold, leased or otherwise
disposed of any material property or provided any material services to, any
person or entity which is an "affiliate" of Xxxx or any officer or director of
Xxxx or any member of the immediate family of such officer and director.
2.16 Material Misstatements or Omissions. No representation or warranty
of Xxxx in this Agreement nor in any document, statement, certificate, or
schedule furnished or to be furnished to PrimeSource pursuant hereto, or in
connection with the transactions contemplated hereby (taken as a whole),
contains or will contain any untrue statement of a material fact, or omits or
will omit to state a material fact, necessary to make the statements or facts
contained therein or herein not misleading. All representations and warranties
of Xxxx shall be deemed made as of the date of this Agreement and again as of
the Closing Date.
2.17 Other Negotiations. Prior to the termination of this Agreement,
Xxxx shall not pursue, initiate, encourage or engage in any negotiations or
discussions with, or provide any information to, any other person or entity
(other than PrimeSource and its representatives) regarding the sale of any of
the Assets.
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ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF PRIMESOURCE
PrimeSource hereby represents and warrants to Xxxx that:
3.1 Authority. PrimeSource is a corporation duly organized, validly
existing, and in good standing under the laws of the Commonwealth of
Pennsylvania and has full corporate power and authority to enter into this
Agreement and to perform its obligations under this Agreement. The execution,
delivery, and performance of this Agreement by PrimeSource have been duly
authorized by all necessary action of the Board of Directors of PrimeSource or
its Executive Committee under delegated authority and is a valid and binding
obligation of PrimeSource. PrimeSource has duly and validly executed and
delivered this Agreement, and this Agreement constitutes a valid, binding and
enforceable obligation of PrimeSource in accordance with its terms. Neither the
execution of this Agreement and related documents nor the performance by
PrimeSource of the transactions required hereunder and thereunder will
constitute a violation of or default under, any law, regulation, order,
contract, commitment, or restriction of any kind to which PrimeSource is a party
or by which PrimeSource is bound subject, however, to the fulfillment of the
conditions set forth in Sections 4.6 and 4.7.
3.2 Accuracy of Documents and Information. All instruments, agreements,
other documents, and written information delivered and to be delivered to Xxxx
or its representatives by PrimeSource are and will be complete and correct in
all material respects as of the Closing Date.
3.3 Employees and Employee Benefits. PrimeSource agrees that,
immediately following the Closing, it shall offer employment to each employee of
the GASG. These employees will be identified by payroll code or otherwise on
Schedule 3.3 to be attached hereto prior to Closing (collectively, the
"Employees"), such employment to be effective as of the Closing Date. Such
employment shall be offered on terms reasonably comparable to those such
Employee now enjoys and is entitled to receive from Xxxx immediately before the
Closing, but consistent with PrimeSource compensation programs. Each such offer
of employment to an Employee (i) shall be consistent with the employment
policies and practices of PrimeSource and (ii) shall be contingent on such
Employee assigning his or her personnel file to PrimeSource. PrimeSource
represents and warrants to Xxxx that it intends to continue such employment
arrangements with such Employees for a period of at least 90 days following the
Closing Date, subject to terminations for good cause or otherwise in the
ordinary course of PrimeSource's business.
In connection with the foregoing, PrimeSource acknowledges and agrees
that it is responsible for the notice and other obligations, if any, imposed by
the WARN Act with respect to any termination of GASG employees on or after the
Closing Date and the foregoing paragraph is provided to Xxxx for the sole
purpose of relieving it from any obligations under the WARN Act.
The provisions of the foregoing two paragraphs are for the benefit of
Xxxx and PrimeSource only, and no other person or entity (including without
limitation past, present or future employees of the GASG) will be deemed a
third-party beneficiary of this Agreement.
All employees of Xxxx hired by PrimeSource will be given credit for
their past service with Xxxx for purposes of calculating (a) eligibility to
enroll in the PrimeSource 401(k) Savings Plan, and (b) vacation time under the
PrimeSource vacation plan, however, the Xxxx vacation entitlement formula will
continue to apply until January 1, 1999. No credit for prior service will be
given for the PrimeSource pension plan or other benefits.
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Xxxx employees hired by PrimeSource shall be eligible to participate in
PrimeSource's health benefits (medical, dental, vision, life insurance, AD&D
insurance, and short & long term disability) on the first of the month following
thirty days of service with PrimeSource and other benefits normally accorded to
new employees. For the interim period of time from the Closing Date until such
first of the month, the former Xxxx employees may retain certain prior health
benefit coverage under Xxxx'x plans under the provisions of COBRA and
PrimeSource will pay Xxxx the COBRA rate for such coverage. For this interim
period, PrimeSource will collect the normal Xxxx employee contributions for such
coverage from the former Xxxx employees who want COBRA coverage for this interim
period.
3.4 Other Proceedings. PrimeSource is not subject to any order, writ,
judgment, decree or injunction barring or adversely affecting the transactions
contemplated hereby.
3.5 Brokers. Xxxx will not be obligated to pay any broker's or finder's
fee as a result of activities of PrimeSource.
3.6 Material Misstatements or Omissions. No representation or warranty
of PrimeSource in this Agreement nor in any document, statement, certificate, or
schedule furnished or to be furnished to Xxxx pursuant hereto, or in connection
with the transactions contemplated hereby (taken as a whole), contains or will
contain any untrue statement of a material fact, or omits or will omit to state
a material fact, necessary to make the statements or facts contained therein or
herein not misleading. All representations and warranties of PrimeSource shall
be deemed made as of the date of this Agreement and again as of the Closing
Date.
ARTICLE 4
CONDITIONS PRECEDENT TO PRIMESOURCE'S PURCHASE OBLIGATIONS
The obligation of PrimeSource to close the transactions
described above is subject to the fulfillment of all of the following conditions
at or prior to the Closing Date, any one or more of which may be waived by
PrimeSource in its sole discretion.
4.1 No Litigation. No suit, investigation, action or other proceedings
shall be seriously threatened or pending before any court or governmental agency
which may bar or adversely affect the transactions contemplated by this
Agreement or otherwise adversely affect the business of GASG. In the event
PrimeSource becomes aware of any of the foregoing proceedings, it shall
immediately notify Xxxx of such proceedings and the court or agency wherein such
proceeding is involved or threatened.
4.2 Representations and Warranties. The representations and warranties
of Xxxx set forth herein shall be true and correct in all material respects as
of the Closing Date.
4.3 No Adverse Event. The Assets shall not have been substantially
damaged or otherwise adversely affected in any material respect by any casualty,
act of God or any judicial, administrative or governmental proceeding. Xxxx
assumes all risk of loss due to fire or other casualty up to the time of
Closing. In the event any such loss occurs prior to the Closing Date, or in the
event the business of Xxxx is closed or interrupted by reason of any event not
in the ordinary course of business, PrimeSource shall have the right to
terminate this Agreement by written notice to Xxxx received prior to the Closing
Date, and upon such termination there shall be no further liability on the part
of Xxxx or PrimeSource hereunder.
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4.4 Documents. All actions, instruments, resolutions, certificates, and
documents reasonably requested by PrimeSource to be executed and delivered to
PrimeSource in order to convey the Assets to PrimeSource as provided in 1.4 and
carry out this Agreement, and all other relevant legal matters, shall be
reasonably satisfactory to PrimeSource.
4.5 Non-Compete. Xxxx shall have executed a five-year Non-Compete
Agreement in the form attached as Exhibit 4.5.
4.6 Xxxx-Xxxxx-Xxxxxx. The waiting period under the Xxxx-Xxxxx-Xxxxxx
Antitrust Improvement Act of 0000 (xxx "XXX Xxx") with respect to the
transaction contemplated by this Agreement shall have expired or been
terminated. The U.S. Department of Justice or Federal Trade Commission shall not
have issued any adverse order or instigated any investigation of the instant
transaction.
4.7 Financing. PrimeSource shall have obtained the consent of its
revolving credit lenders under its Credit Agreement dated as of November 1,
1996.
ARTICLE 5
CONDITIONS PRECEDENT TO XXXX'X OBLIGATIONS
The obligations of Xxxx to consummate the transactions contemplated by
this Agreement are subject to the fulfillment, prior to or at the Closing Date,
of each of the following conditions, any one or a portion of which may be
waived, in writing, by Xxxx:
5.1 Representations, Warranties and Covenants of PrimeSource. All
representations and warranties made in this Agreement by PrimeSource shall be
true and correct in all material respects as of the Closing Date as fully as
though such representations and warranties had been made on and as of the
Closing Date, and PrimeSource shall have in all respects performed and complied
with its obligations under all the covenants, agreements and conditions required
by this Agreement and all related documents.
5.2 Payment of Purchase Price. PrimeSource shall have paid the Purchase
Price to Xxxx in accordance with 1.4.
5.3 Resale Certificate. PrimeSource shall deliver to Xxxx a properly
completed and executed resale exemption certificate indicating that the
inventory type assets are being purchased by PrimeSource for the purpose of
resale in the normal course of PrimeSource's business.
5.4 Xxxx-Xxxxx-Xxxxxx. The waiting period under the HSR Act with respect
to the transaction contemplated by this Agreement shall have expired or been
terminated. The U.S. Department of Justice or Federal Trade Commission shall not
have issued any adverse order or instigated any investigation of the instant
transaction.
5.5 Lenders' Approval. Xxxx shall have obtained the consent of its
lenders under its Credit Agreement dated as of January 7, 1997 to the
transactions contemplated herein.
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ARTICLE 6
COVENANTS OF XXXX
Xxxx hereby covenants and agrees with PrimeSource as follows:
6.1 Conduct of Xxxx Prior to Closing. Between the date hereof and the
Closing, Xxxx shall:
not increase the rate of compensation of any Xxxx employee who
may be hired by PrimeSource at the Closing except as in accordance with Xxxx'x
past practices and, in the event Xxxx has increased the rate of compensation of
any such employee PrimeSource shall be so notified at least five days before
Closing;
use reasonable best efforts to maintain good relations with its
customers and suppliers;
not take any action or fail to take any action which taking or
failure would directly or indirectly have a material adverse impact on the
Assets (including subjecting them to any lien or encumbrance) or the
transactions contemplated hereby;
not knowingly take any action or, insofar as it is able to do
so, suffer to be taken any action that will cause any representation, warranty,
or schedule to this Agreement to be untrue at the Closing Date;
continue to conduct the business of Xxxx consistent with good
business practices; and
take all steps reasonably necessary so as to be able to transfer
the Assets and Assumed Liabilities to PrimeSource on the Closing Date in
accordance with the terms of this Agreement.
6.2 Publicity. The timing and content of any disclosure to vendors or
customers must be approved in advance by PrimeSource.
6.3 SAP Business System. From the Closing Date through February 28,
1999, PrimeSource will utilize Xxxx'x SAP computer business system while
PrimeSource transitions the GASG business to the PrimeSource business system in
accordance with Schedule 6.3. The charge to PrimeSource for use of the SAP
system and supporting Xxxx personnel shall be $80,000 per month (prorated for
any partial month) through December 1998, and reimbursement for Xxxx'x actual
out-of-pocket costs for January and February 1999.
6.4 Existing Warranties. Existing manufacturer and third party
warranties on the Assets are assigned to PrimeSource as of the Closing Date.
Except as specifically agreed otherwise herein, XXXX MAKES NO REPRESENTATIONS OR
WARRANTIES OF ANY NATURE, EXPRESS OR IMPLIED, CONCERNING THE ASSETS, INCLUDING
WITHOUT LIMITATION ANY IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE.
6.5 Use of Names. PrimeSource shall be entitled to use the Xxxx name
and all fictitious or assumed business names utilized by the GASG for a period
of 6 months after the Closing Date and leave the Xxxx name on inventory being
purchased hereunder for one year from the Closing Date.
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6.6 Dealerships. Xxxx shall cooperate with and support PrimeSource in
any efforts to transfer dealerships utilized by the GASG business.
6.7 Officer's Certificate. If this Agreement is executed prior to the
Closing Date, the President and CFO of each party will reaffirm its own
representations and warranties hereunder at and as of the Closing Date by
Officer's Certificate.
6.8 Nonassignable Contracts. Nothing in this Agreement shall be
construed as an attempt or agreement to assign any contract or claim as to which
a required third party consent to assignment cannot be obtained. Xxxx agrees to
use its best efforts to obtain the consent of each other party to any such
contract, right or commitment to the assignment thereof to PrimeSource in all
cases in which such consent is required for assignment or transfer. If, however,
following the Closing, there is any contract, right or other commitment which
would have been assigned had the required consent been obtained, or any claim
for which consent to the assignment thereof cannot be obtained, Xxxx and
PrimeSource agree to take such action, to the extent permitted by applicable
law, in order for PrimeSource to obtain the benefit and assume the obligations
thereunder, including Xxxx designating PrimeSource as Xxxx'x subcontractor or
agent for purposes of performing such contracts and Xxxx collecting monies due
under such contracts and paying the same promptly over to PrimeSource.
ARTICLE 7
INDEMNIFICATION
7.1 Indemnification by Xxxx. From and after the Closing, Xxxx agrees to
defend, indemnify, and hold PrimeSource harmless from and against, and to
reimburse PrimeSource with respect to, any and all losses, damages, liabilities,
claims, judgments, settlements, costs, and expenses (including reasonable
attorney's fees) of every nature whatsoever incurred by PrimeSource by reason of
or arising out of or in connection with:
(i) any breach of any warranty or representation given by Xxxx
in this Agreement or in any schedule, or other document delivered to PrimeSource
pursuant to the provisions of this Agreement;
(ii) any claims made against PrimeSource for liabilities of
Xxxx or for operations of Xxxx prior to Closing which are not Assumed
Liabilities;
(iii) failure, partial or total, of Xxxx to perform any
agreement or covenant required by this Agreement or any other document delivered
to PrimeSource pursuant to this Agreement to be performed by it; and
(iv) the failure of the parties to comply with any bulk
transfer or bulk sales law or fraudulent conveyance law applicable to the
transactions contemplated herein.
7.2 Sole and Exclusive Remedy. Except for fraud and gross negligence,
and except for any right to seek specific performance or recession, the
indemnification provided under this Article 7 shall be the sole and exclusive
remedy of the parties with respect to the breach of any covenant, representation
or warranty contained herein.
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7.3 Permissible Offsets. PrimeSource shall make demand on Xxxx in
writing for the payment of any amounts due pursuant to this Article 7. In the
event the entire amount is not paid to PrimeSource within twenty-five days of
Xxxx'x receipt of its demand, PrimeSource shall have the right, at its option
and in addition to any other remedies available to it, to enforce its claim by
setoff against, or deduction from, any amounts due or which may become due to
Xxxx or any assignee; provided PrimeSource may not offset against the Purchase
Price. If Xxxx disputes the amount claimed to be due under this Article 7 within
said twenty-five days, then the dispute shall be submitted to binding
arbitration in accordance with Section 8.10 of this Agreement.
7.4 Defense of Claim. If any claim of liability is made by a third
person against PrimeSource based on any liability, the existence of which would
give rise to a claim for indemnification under this Article 7, PrimeSource shall
with reasonable promptness give to Xxxx written notice of the claim and request
Xxxx to defend the same. Xxxx shall have the right to defend against such
liability at their expense, and shall give written notice to PrimeSource of the
commencement of such defense with reasonable promptness after receipt of the
written notice of the claim from PrimeSource. Failure to receive notice from
PrimeSource shall not relieve Xxxx of any liability which it might otherwise
have to PrimeSource under this Article 7 unless such failure materially,
adversely affects Xxxx'x ability to defend against such claim. PrimeSource, its
successors and assigns shall be entitled at its own expense to participate with
Xxxx in such defense, but shall not be entitled in any way to release, waive,
settle, modify or pay such claim without the consent of Xxxx. In the event Xxxx
has assumed said defense and have employed counsel with respect thereto which
represents Xxxx and PrimeSource, PrimeSource shall also be entitled to employ
separate counsel at its own expense. In the event Xxxx does not accept the
defense of the matter as provided above, PrimeSource shall have the full right
to defend against such liability, at Xxxx'x expense, and shall be entitled to
settle or agree to pay in full such claimed liability in its sole discretion.
Xxxx and PrimeSource, and their successors and assigns, shall, in any event,
cooperate in the defense of such action and the records of each shall be
available to the other with respect to such defense.
7.5 Limitations on Indemnification. The indemnification obligations in
this Article 7 shall expire four years after Closing, except for claims arising
from potential (a) federal, state and local tax liabilities, (b) environmental
claims, and (c) claims involving clear title to the Assets which shall not
expire until 60 days after the expiration of all applicable statutes of
limitation.
7.6 Indemnification by PrimeSource. PrimeSource agrees to defend,
indemnify, and hold Xxxx, its officers, directors, shareholders and agents
harmless from and against, and to reimburse them with respect to, any and all
losses, damages, liabilities, claims, judgments, settlements, costs, and
expenses (including attorneys' fees) of every nature whatsoever incurred by them
by reason of or arising out of or in connection with (i) any breach of any
representation or warranty of PrimeSource contained in this Agreement, (ii) the
failure, partial or total, of PrimeSource to perform any agreement or covenant
required by this Agreement or any other document delivered to Xxxx pursuant to
this Agreement to be performed by it, (iii) any liability assumed by PrimeSource
hereunder, and (iv) the operation of the GASG business after Closing.
7.7 Insurance. The amount of any indemnification under this Agreement
will be reduced by any insurance proceeds paid to the claiming party as a result
of the loss or other matter for which indemnification is sought, as adjusted for
any increased insurance premiums. The claiming party will be obligated to submit
to its insurance carrier all coverable claims and pursue such claims against its
insurance carrier in good faith, and will not abandon or compromise any such
claim without the consent of the other party, which consent will not
unreasonably be withheld.
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ARTICLE 8
MISCELLANEOUS
8.1 HSR Act Filing and Expenses. PrimeSource and Xxxx shall pay their
own costs and expenses, including legal and accounting fees, relating to this
Agreement, without regard to whether the transaction is consummated.
Notwithstanding the foregoing, the parties shall jointly make the HSR Act
pre-merger clearance filing and share equally the out-of-pocket expenses
associated with the preparation and filing of this document, including legal
fees. PrimeSource shall be obligated, as the buyer of assets, to pay the HSR Act
filing fee.
8.2 Owned Real Estate. GASG operating facilities owned by Xxxx in
Omaha, NE and St. Xxxx, MN shall be leased to PrimeSource on a triple net lease
basis on the lease forms attached as Exhibits 8.2(a) and 8.2(b).
8.3 Sales Tax. PrimeSource shall be responsible for and shall pay or
reimburse when and if due, all applicable sales, transfer, excise, use or
similar tax which may be imposed by any domestic authority in connection with
the sale of the Assets.
8.4 Amendment. This Agreement shall not be amended, except by a writing
duly executed by both parties hereto.
8.5 Entire Agreement. This Agreement, including the schedules delivered
pursuant to this Agreement, contains all of the terms and conditions agreed upon
by the parties relating to the subject matter of this Agreement and supersedes
all prior agreements, negotiations, and communications of the parties, whether
oral or written, respecting that subject matter.
8.6 Governing Law. This Agreement shall be governed by, and construed
in accordance with the laws of the Commonwealth of Pennsylvania.
8.7 Notices. All notices, requests, demands, and other communications
made in connection with this Agreement shall be in writing and shall be deemed
to have been duly given on the date of receipt or telecopy, if hand delivered or
telecopied to the persons identified below, or the third day after mailing if
mailed by certified mail, postage prepaid, return receipt requested addressed as
follows:
If to PrimeSource: With a copy to:
----------------- --------------
PrimeSource Corporation PrimeSource Corporation
0000 Xxxxxxxxxxx Xx., Xxxxx 000 355 Treck Drive
Pennsauken, NJ 08109 Xxxxxxx, XX 00000
Attention: Chief Financial Officer Attention: General Counsel
Fax: 000-000-0000 Fax: 000-000-0000
If to Xxxx: With a copy to:
---------- --------------
Xxxxxx Xxxxxx Xxxx Xxxxxx
Xxxx Industries, Inc. Irell & Xxxxxxx
0000 X. Xx Xxxxxxx Xxxxxxxxx 000 Xxxxx Xxxx Xxxxxx, Xxxxx 0000
Xx Xxxxxxx, XX 00000 Xxx Xxxxxxx, XX 00000
Fax: 000-000-0000 Fax: 000-000-0000
Such addresses may be changed, from time to time, by means of a notice
given in the manner provided in this Section 8.5.
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8.8 Severability. If any provision of this Agreement is held to be
unenforceable for any reason, it shall be modified rather than voided, if
possible, in order to achieve the intent of the parties to this Agreement to the
fullest extent possible. In any event, all other provisions of this Agreement
shall be deemed valid and enforceable to the full extent.
8.9 Survival of Representation and Warranties. All representations and
warranties contained in this Agreement, including the schedules delivered
pursuant to this Agreement, shall survive the Closing Date for the period of
indemnification in 7.5 or one year, whichever is longer.
8.10 Waiver. Waiver of any term or condition of this Agreement by any
party shall not be construed as a waiver of a subsequent breach or failure of
the same term or condition, or a waiver of any other term or condition of this
Agreement.
8.11 Assignment. No party to this Agreement may assign, by operation of
law or otherwise, all or any portion of its rights, obligations, or liabilities
under this Agreement without the prior written consent of the other party to
this Agreement, which consent may be withheld in the absolute discretion of the
party asked to grant such consent. Any attempted assignment in violation of this
Section shall be void.
8.12 Arbitration. In the event of any dispute between Xxxx and
PrimeSource relating to this Agreement, the parties agree that such dispute
shall be resolved by means of binding arbitration in accordance with the
commercial arbitration rules of the American Arbitration Association, and
judgment upon the award rendered by the arbitrator(s) may be entered in any
court of competent jurisdiction. Depositions may be taken and other discovery
obtained during such arbitration proceedings to the same extent as authorized in
civil judicial proceedings in the state in which the arbitration is held. The
arbitrator(s) shall be limited to awarding compensatory damages and fees (in
accordance with 8.12) and shall have no authority to award punitive, exemplary
or similar type damages. If PrimeSource requests the arbitration then it will be
held in Los Angeles, CA. If Xxxx requests the arbitration then it will be held
in Philadelphia, PA.
8.13 Attorneys' Fees. In the event that either party to this Agreement
is required to, or does, maintain or defend any claim or cause of action against
or brought by, as the case may be, the other arising out of or relating to this
Agreement, the prevailing party in any such claim, or cause of action, or
arbitration, or trial or appeal therefrom, shall be entitled to recover from the
other its reasonable attorneys' fees incurred therein, in addition to its costs,
expenses and disbursements, including the costs of the arbitration proceeding.
8.14 Cooperation. Xxxx will fully cooperate with PrimeSource and with
PrimeSource's counsel and accountants in connection with any steps required to
be taken as part of Xxxx'x obligations under this Agreement. Xxxx and
PrimeSource will use their reasonable best efforts to cause all conditions to
the parties' obligations to effect the Closing under this Agreement to be
satisfied as promptly as possible and to obtain all consents and approvals
necessary for the due and punctual performance of this Agreement and for the
satisfaction of the conditions hereof.
8.15 Authority. Each party signing below represents and warrants that
it has authority to execute this Agreement and to perform its obligations
hereunder. Each person signing on behalf of such party represents and warrants
that he has been duly authorized to execute this Agreement on behalf of such
party.
8.16 Termination of Xxxx'x Rights. If Xxxx fails to satisfy in all
material respects any of the conditions to Closing specified in Article 4 at or
prior to Closing, and such failure either is not waived in writing by
PrimeSource or cured by Xxxx prior to the Termination Date, then PrimeSource
may, without liability, terminate this Agreement, provided PrimeSource has
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satisfied (or stood ready to satisfy) all of PrimeSource's conditions specified
in Article 5, or such conditions have otherwise been satisfied or waived, by
written notice to Xxxx.
8.17 Termination of PrimeSource's Rights. If PrimeSource fails to
satisfy in all material respects any of the conditions to Closing specified in
Article 5 at or prior to Closing, and such failure either is not waived in
writing by Xxxx or cured by PrimeSource prior to the Termination Date, then Xxxx
may, without liability, terminate this Agreement, provided Xxxx has satisfied
(or stood ready to satisfy) all of Xxxx'x conditions specified in Article 4, or
such conditions have otherwise been satisfied or waived, by written notice to
PrimeSource.
8.18 Other Termination. If no Closing occurs prior to the Termination
Date, and the failure to close is not the result of Xxxx'x or PrimeSource's
failure to satisfy in all material respects any of the conditions to Closing
specified in Articles 4, 5, or 6 at or prior to the Termination Date, other than
the parties failing to agree to the Schedules contemplated by 1.2 hereof, then
any party hereto may terminate this Agreement by written notice to the other
parties hereto without further liability to any of the parties under this
Agreement.
IN WITNESS WHEREOF, PrimeSource and Xxxx have executed this Agreement
as of the date first written above.
PRIMESOURCE CORPORATION XXXX INDUSTRIES, INC.
BY: /s/ Xxxxx X. Xxxxxx BY: /s/ Xxxxxx Xxxxxx
---------------------------- ------------------------------
President President
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SCHEDULES/EXHIBITS
Listed below and attached hereto are the schedules and exhibits to the
August 28, 1998 Asset Purchase Agreement between Xxxx Industries, Inc. and
PrimeSource Corporation. These have been prepared and agreed to as of the
Closing Date of September 14, 1998:
a) Schedule 1.2(c) customer lists, service marks, etc.
b) Schedule 1.2(d) contracts, books, records
c) Exhibit A (Section 1.4) xxxx of sale
d) Exhibit B (Sections 1.4 & 1.7) assignment and assumption
e) Schedule 1.7(c) personal property leases
f) Schedule 1.7(d) real estate leases
g) Schedule 2.3 list of litigation
h) Schedule 2.4 Xxxx employees on FMLA
i) Schedule 2.5 exceptions to GAAP
j) Schedule 2.12 exceptions to certain events
k) Schedule 3.3 list of employees
l) Exhibit 4.5 non-compete agreement
m) Schedule 6.3 SAP utilization
n) Schedule 8.2(a) Omaha lease
o) Schedule 8.2(b) St. Xxxx lease
XXXX INDUSTRIES, INC. PRIMESOURCE CORPORATION
By /s/Xxxx Cost By /s/Xxxxx X. Xxxxxx
------------------------ ---------------------------------
