STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT, dated as of July 21, 1997 between
BGJ ENTERPRISES, INC., a Delaware corporation with its address at
0000 Xxxxxxxx, Xxx Xxxx, XX 00000 ("Purchaser"), and DEVON GROUP,
INC., a Delaware corporation with its address at Xxxxx 000, 000
Xxxxxxx Xxxxxxxxx, Xxxxxxxx, XX 00000 ("Seller").
WHEREAS, Seller owns all of the outstanding capital stock of
GRAFTEK PRESS, INC., a Delaware corporation ("Graftek"), consisting
of 10,000 shares (the "Shares") of common stock with a par value of
$20 per share, and
WHEREAS, Purchaser desires to purchase from the Seller, and
the Seller desires to sell to Purchaser, the Shares upon the
terms and subject to the conditions hereinafter set forth,
NOW, THEREFORE, in consideration of the premises and the
mutual covenants herein contained, Purchaser and Seller hereby
agree as follows:
1. DEFINITIONS. The words "hereof", "herein", "hereto"
and "hereunder" and words of similar import, when used in this
Agreement, shall refer to this Agreement as a whole and not to
any particular provision of this Agreement. Terms defined in the
singular shall have a comparable meaning when used in the plural,
and vice versa. As used herein, the following terms shall have
the following meanings:
1997 Financials the audited consolidated financial
statements of the Companies, consisting
of a balance sheet as of March 31, 1997
(the "1997 Balance Sheet") and
statements of operations and cash flows
for the fiscal year then ended (the
"1997 Statement of Operations"),
together with accompanying notes,
certified by KPMG Peat Marwick LLP,
certified public accountants and
auditors for Seller ("KPMG")
1997 Net Equity the Net Equity (as hereinafter defined)
calculated from the 1997 Balance Sheet
Affiliate with respect to a given Person, any
Person directly or indirectly con-
trolling, controlled by or under common
control with such Person (provided that
when used herein unless otherwise
specifically provided, none of the
Companies shall be deemed Affiliates of
Seller), and "control" means the
possession, directly or indirectly, of
the power to direct or cause the
direction of the management and policies
of the given Person, whether through
ownership of voting equities, by
contract or otherwise
Agreement this Stock Purchase Agreement, together
with the Schedule and Exhibits hereto
Antitrust Authorities the United States Federal Trade
Commission and the Antitrust Division of
the United States Department of Justice
Benefit Arrangement as established or maintained for the
benefit of any current or former
Personnel or dependents of any of the
Companies, any health, dental, optical,
life, disability or workers' compensation
insurance (including any self-insured
arrangements); pension, retirement allowance,
severance pay or supplemental unemployment
benefit; vacation or leave of absence policy;
incentive or deferred compensation plan
or right; or equity participation, stock
purchase, stock option, stock appreciation
plan or right
Books and Records all books, records, ledgers, files,
reports or plans, written or electronic,
of or maintained by or maintained for
any of the Companies, or Seller solely
with respect to any of the Companies
Business Day any day other than a Saturday, Sunday,
or a day on which banks in New York City
are authorized or obligated by law or
executive order to close
Cap as defined in Section 12.3.3 hereunder
CERCLA the Comprehensive Environmental Response,
Compensation and Liability Act, as amended,
42 U.S.C. Section 9601 et seq.
Claim any claim, cause of action, action,
lawsuit, litigation, arbitration, legal
proceeding, administrative proceeding,
condemnation proceeding or expropriation
proceeding, of which any written notice
of assertion or service of process has
been given or made
Closing the completion of the transaction herein
contemplated as further set forth in
Section 3.1 hereunder
Closing Date the date of the Closing, as further set
forth in Section 3.1 hereunder
Closing Date
Balance Sheet the unaudited consolidated balance
sheet of the Companies as of the Closing
Date as prepared in accordance with
Section 3.2 hereunder
Closing Date Net Equity the Net Equity (as hereinafter defined)
shown on the Closing Date Balance Sheet
in accordance with Section 3.2 hereunder
COBRA the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended,
26 U.S.C. Section 4980B et seq.
Code the Internal Revenue Code of 1986, as
amended, 26 U.S.C. Section 1 et seq.
Companies Graftek and each of the Subsidiaries, on
a consolidated basis if in reference to
an accounting matter (or in the
singular, any of the Companies)
Covered Taxes all Taxes of the Companies or any
affiliated, consolidated or unitary
group of which any Company is or has
been a member for periods ending on or
prior to the close of business on the
Closing Date in excess of the reserve
for Taxes stated on the Closing Date
Balance Sheet (as such reserve may be
adjusted pursuant to the provisions of
Section 3.2.4, whether by agreement of
the parties or by the decision of the
Third Accounting Firm)
Cushions as defined in Section 12.3.3 hereunder
Damages all losses, liabilities, damages and
expenses, including, without limitation,
such reasonable expenses of investigation
and reasonable attorneys fees and disbursements
as may arise in connection with any Claim by
one party hereto against the other
Employee Plan an "employee benefit plan" as defined in
Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended,
29 U.S.C. Section 1001 et seq.
("ERISA"), and as further specified in
Section 5.21.1 hereunder
Environmental Condition as defined in Section 5.22.1 hereunder
Environmental Law as defined in Section 5.22.1 hereunder
Environmental Notice as defined in Section 5.22.2.3 hereunder
Environmental Claim as defined in Section 12.3.4.5(d) hereunder
Environmental Damages as defined in Section 12.3.4 hereunder
Environmental as defined in Section 12.3.4.5(d) hereunder
Claim Notice
Environmental Panel as defined in Section 12.3.4.5(e) hereunder
Environmental Report The letter of Xxxxx Intertec to Xx. Xxxxxx Xxxxxx
on June 27, 1997, with respect to the Phase II
Site Assessment Study, together with accompanying
documents
Environmental
Representation as defined in Section 12.1 hereunder
Final Determination
Date as defined in Section 3.2.4 below
GAAP generally accepted accounting principles
applicable in the United States (unless
otherwise stated), applied on a basis
consistent with prior practice
Governmental Body any court or federal, state or municipal
or other local governmental body or any
subdivision, commission, board, bureau,
instrumentality, administrative agency,
official or other authority thereof
Graftek Graftek Press, Inc.
Guarantor as defined in Section 6.4 hereunder
Guarantor's Financial
Statements as defined in Section 6.4.2 hereunder
Guaranty the guaranty of Purchaser's obligations
hereunder, issued by Guarantor to Seller
as of the date hereof
Hazardous Substance any toxic, caustic or otherwise
hazardous substance, pollutant or
contaminant (including, without
limitation, petroleum, its derivatives,
by-products and other hydrocarbons;
polychlorinated biphenyls in
concentration and form subject to
regulation under Environmental Laws;
urea formaldehyde; and friable or broken
asbestos), whether or not regulated
under CERCLA or any other federal, state
or local Law, except as specified herein
HSR Act the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976, as amended,
15 U.S.C. Section 1311 et seq.
Indemnified Party as defined in Section 12.8 hereunder
Indemnifying Party as defined in Section 12.8 hereunder
Intellectual Property
Right as defined in Section 5.19 hereunder
Interest Rate the prime rate of interest announced
from time to time by Chase Manhattan
Bank, in New York City, minus three
percentage points
Judgment any judgment, injunction, stipulation,
order, writ, award or decree issued by
any Governmental Body or any arbitral
tribunal, whether initially sought by a
private or public Person, resulting from
or arising in connection with any Claim
Law any law, statute, ordinance, rule or
regulation of any Governmental Body
Lien any lien, security interest, mortgage,
pledge, charge, claim, encumbrance,
restriction or legal limitation of any
kind
Material Contract each contract, agreement, plan, arrangement
or procedure required to be listed pursuant
to Section 5.15 hereunder
Multiemployer Plan an employee benefit plan as defined in
Section 5.21.2 hereunder
Net Equity "Total Stockholders Equity" as reflected
on any consolidated balance sheet of the
Companies determined in accordance with
GAAP, plus any amount reflected on any
such balance sheet as "Due to Parent
Company"
Notice of Disagreement as defined in Section 3.2.3 hereunder
Other Representations as defined in Section 12.1 hereunder
PBGC the Pension Benefit Guaranty Corporation
Pension Plan the Graftek Press Inc. Employees Defined
Benefit Pension Plan and Trust
Permit any permit, license, certificate,
permission, easement, variance, order,
consent, approval or any other
authorization of any kind applicable to
any of the business activities of any of
the Companies
Person any person, company, corporation,
partnership or any other natural or
juridical person
Personnel with respect to any of the Companies,
any director, officer, employee or
partner thereof
Proceeding as defined in Section 9.5.1 hereunder
PSSI Plan the Graftek Press-Elkhorn Webpress
Profit Sharing/ Savings & Investment
plan, consisting of a 401(k) portion as
to which there is a Company matching
program (the "401(k) Provisions") and a
profit sharing portion as to which there
is a Company profit sharing contribution
(the "Profit Sharing Provisions")
Purchase Price as defined in Section 2 hereunder
Purchase Price
Adjustment as defined in Section 3.2.6
Purchaser BGJ Enterprises, Inc., a Delaware corporation
Reasonable
Environmental Expense as defined in Section 12.3.4.5 hereunder
Registered Rights as defined in Section 5.19 hereunder
Release the release or threatened release of a
Hazardous Substance, as defined in 42
U.S.C. 9601(22)
Restricted Business as defined in Section 7.8 hereunder
Schedule the attachment to this Agreement
containing the various Exhibits called
for herein, and as further specified in
Section 4 hereunder
Securities Act the Securities Act of 1933, as amended,
15 U.S.C. Section 77a et seq.
Seller Devon Group, Inc., a Delaware corporation
Shares as defined in the Recitals hereto, and
as further specified in Section 5.4 hereunder
Subsidiaries Elkhorn Webpress, Inc., a Wisconsin
corporation, and Carlith Printing, Inc.,
a Delaware corporation, both of which
are wholly owned by Graftek
Taxes all taxes of any nature (including,
without limitation, gross receipts,
income, estimated, franchise, use or
property taxes and customs duties)
imposed upon any Company or its property
by any taxing jurisdiction anywhere in
the world, or that any Company is
required to collect from others
(including, without limitation, taxes
imposed on retail sales and amounts that
are required to be withheld from
payments to employees or to foreign
Persons) and all interest, additions to
tax, penalties, fines and other amounts
that are imposed with respect to any
such taxes or amounts
Third Accounting Firm as defined in Section 3.2.4 hereunder
Title IV Plan an Employee Plan as defined in Section
5.21.2 hereunder
WARN Act the Worker Adjustment and Retraining
Notification Act, 29 U.S.C. Section 2102 et seq.
2. PURCHASE AND SALE OF SHARES. Upon the terms and
subject to the conditions of this Agreement, at the Closing,
Seller agrees to sell the Shares to Purchaser, and Purchaser
agrees to purchase the Shares from Seller. The initial purchase
price for the Shares and the consideration for certain of
Seller's covenants herein shall be $35,800,000.00 (Thirty Five
Million Eight Hundred Thousand U.S. Dollars), adjusted pursuant to
Section 3.2 hereunder and as may be adjusted pursuant to Section
11.1.2 hereunder (together with the amount payable to Seller
pursuant to Section 7.8.1.3 hereunder, referred to herein as the
"Purchase Price").
3. CLOSING; PURCHASE PRICE ADJUSTMENT.
3.1. Closing. Subject to satisfaction or waiver of the
conditions set forth in Section 8 hereunder, the closing (the
"Closing") of the purchase and sale of the Shares hereunder shall
be held at the offices of X'Xxxxxxxx Graev & Karabell, LLP, 00
Xxxxxxxxxxx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000, counsel to Seller,
at 10:00 a.m., New York City time, on the third business day
after the expiration of any waiting period established by the HSR
Act or the Antitrust Authorities, or at such other date, time or
place as Purchaser and Seller may agree in writing (the date on
which the Closing shall occur being herein the "Closing Date").
3.1.1. At the Closing, Seller shall deliver to Purchaser: (i)
certificates representing the Shares, duly endorsed in blank for
transfer or accompanied by stock powers duly endorsed in blank,
with any required stock transfer tax stamps affixed thereto; (ii)
all minute and stock books and corporate seals and records of the
Companies; and (iii) all documents required or contemplated to be
delivered by Seller pursuant to Section 8.2 hereunder.
3.1.2. At the Closing, Purchaser shall pay the Purchase Price to
Seller by wire transfer to an account of Seller, such account to
be designated by Seller to Purchaser at least two (2) business
days prior to the scheduled Closing Date, and shall deliver to
Seller all documents required or contemplated to be delivered by
Purchaser pursuant to Section 8.3 hereunder.
3.2. Purchase Price Adjustment.
3.2.1. Within 60 days after the Closing Date, Seller shall,
with the full cooperation of Purchaser as the owner after the Closing
Date of the Companies, prepare and deliver to Purchaser the
Closing Date Balance Sheet and Seller's calculation of the
Closing Date Net Equity. The Closing Date Balance Sheet shall be
prepared in accordance with GAAP applied in a manner consistent
with the preparation of the 1997 Financials except that (i) no
effect shall be given to (a) any transaction occurring between
the actual time of Closing and the close of business on the
Closing Date between the Companies and Purchaser or its
Affiliates or relating to Purchaser's financing of any of the
Companies or any of the transactions contemplated hereby or (b)
any purchase accounting or other similar adjustments resulting
from the consummation of the transactions contemplated hereby,
and (ii) liabilities and obligations reflected on the Closing
Date Balance Sheet shall be excluded from the calculation of
Closing Date Net Equity to the extent any such liabilities and
obligations are to be, pursuant to the provisions of this
Agreement (such as, but not limited to, tax payments to be made
by Seller pursuant to Section 9 hereunder, or employee benefit
payments pursuant to Section 10 hereunder) the responsibility of
Seller after the Closing Date.
3.2.2. In connection with the foregoing, Purchaser shall (i)
maintain at their current locations and make available to Seller
all Books and Records reasonably required by Seller to prepare
the Closing Date Balance Sheet and the calculation of the Closing
Date Net Equity, and (ii) continue to offer employment to, and
make reasonably available to Seller, all Personnel of the Companies
who, prior to the Closing Date, had meaningful responsibility for the
preparation of financial statements of the Companies for the purpose
of assisting in the Seller's preparation of the Closing Date Balance
Sheet and calculation of Closing Date Net Equity.
3.2.3. During the fifteen (15) days immediately following
receipt of the Closing Date Balance Sheet by Purchaser, Purchaser
and its accountants shall be entitled to review the Closing Date
Balance Sheet and any working papers, trial balances and similar
materials relating to the Closing Date Balance Sheet. The
Closing Date Balance Sheet and the calculation of the Closing
Date Net Equity shall become final and binding upon the parties
on the 16th day following delivery thereof unless Purchaser gives
written notice to Seller of its disagreement with the Closing
Date Balance Sheet or the calculation of the Closing Date Net
Equity, specifying in reasonable detail the nature of any disagreement
so asserted (a "Notice of Disagreement") prior to such date.
3.2.4. If a timely Notice of Disagreement is received by Seller,
then the Closing Date Balance Sheet and the calculation of the
Closing Date Net Equity (as revised in accordance with clause (i)
or (ii) below) shall become final and binding upon the parties on
the earlier of (i) the date the parties hereto resolve in writing
any differences they have with respect to any matter specified in
a Notice of Disagreement or (ii) the date any matters in dispute
are finally resolved in writing by the Third Accounting Firm (as
defined below) (the date on which the Closing Date Balance Sheet
and the calculation of the Closing Date Net Equity so becomes
final and binding being hereinafter referred to as the "Final
Determination Date"). During the 15 days immediately following
the delivery of any Notice of Disagreement, Purchaser and Seller
shall seek in good faith to resolve in writing any differences
which they may have with respect to any matter specified in such
Notice of Disagreement and shall provide each other with access
to working papers, trial balances and similar materials prepared
in connection therewith. At the end of such 15-day period,
Seller and Purchaser shall submit to an independent "Big 6"
public accounting firm (the "Third Accounting Firm") for review
and resolution any and all matters which remain in dispute and
which were included in any Notice of Disagreement, and the Third
Accounting Firm shall reach a final, binding resolution of all
matters which remain in dispute (including in any case a
determination of Closing Date Net Equity), which final resolution
shall be (a) in writing, (b) furnished to Purchaser and Seller as
soon as practicable after the items in dispute have been referred
to the Third Accounting Firm, (c) made in accordance with this
Agreement and (d) conclusive and binding upon Purchaser and
Seller and not subject to collateral attack for any reason. The
Closing Date Balance Sheet and the calculation of the Closing
Date Net Equity, with any adjustments necessary to reflect the
Third Accounting Firm's resolution of the matters in dispute,
shall become final and binding on Purchaser and Seller on the
date the Third Accounting Firm delivers its final resolution to
the parties. The Third Accounting Firm shall be such independent
Big 6 public accounting firm, excluding KPMG and Price
Waterhouse, as shall be agreed upon by Seller and Purchaser in
writing or, if Purchaser and Seller cannot so agree within the 15-
day period referred to above, by lot from among the remaining
independent Big 6 public accounting firms willing to act. In the
event determination by the Third Accounting Firm (1) results in a
change in Closing Date Net Equity in excess of $75,000 as
compared to the Closing Date Net Equity originally calculated by
Seller, the costs and expenses of Seller, Purchaser and the Third
Accounting Firm shall be borne by Seller; or (2) results in a
change in Closing Date Net Equity of $75,000 or less as compared
to the Closing Date Net Equity originally calculated by Seller,
the costs and expenses of Seller, Purchaser and its Third
Accounting Firm shall be borne by Purchaser.
3.2.5. Upon the final determination of the Closing Date Balance
Sheet in accordance with Sections 3.2.3 and 3.2.4 above, the following
amounts will be payable:
3.2.5.1. If Closing Date Net Equity is greater than $27,962,129,
Purchaser shall pay to Seller the amount by which Closing Date Net Equity
exceeds $27,962,129.
3.2.5.2. If Closing Date Net Equity is less than $27,562,129,
Seller shall pay to Purchaser the amount by which Closing Date Net Equity
is less than $27,562,129.
3.2.5.3. If Closing Date Net Equity is more than $27,562,129 but
less than $27,962,129, no adjustment shall be made to the Purchase Price.
3.2.6. Any required adjustment to the Purchase Price pursuant to
this Section 3.2 shall be referred to as the "Purchase Price Adjustment".
3.2.7. Purchaser agrees, solely with respect to the calculation
of the Purchase Price Adjustments, and without restricting in any manner
whatsoever Purchaser's right to take any such action that would not affect
such calculation, that following the Closing, Purchaser will not take any
actions with respect to the accounting books, records, policies and
procedures of the Companies on which the Closing Date Balance Sheet is to
be based that are not consistent with GAAP applied in a manner consistent
with the preparation of the 1997 Financials.
3.2.8. Within 20 days after the receipt by Purchaser of the
Closing Date Balance Sheet in accordance with Section 3.2.1 hereof,
Seller or Purchaser, as the case may be, shall make the payments
required by Section 3.2.5 hereof with respect to any undisputed amount
constituting Purchase Price Adjustment. With respect to any items that
are the subject of a Notice of Disagreement, disbursements shall be made
within 3 Business Days after the Final Determination Date.
4. SCHEDULE AND EXHIBITS. Seller has previously prepared
and simultaneously with the delivery of its executed copy hereof,
has delivered a schedule (dated the date hereof and certified by
Seller as complete) setting forth certain information and
Exhibits required to be provided to Purchaser under the terms of
this Agreement (the "Schedule"). The Schedule is hereby
incorporated into, and made a part of, Seller's representations,
warranties and covenants for all purposes of this Agreement,
including without limitation the Closing conditions under Section
8.2.1 and the indemnification provisions under Section 12 hereof.
4.1. Single Disclosure; No Admission. Any item disclosed for
any one purpose in the Schedule shall be deemed disclosed for any
other purpose therein unless expressly so stated with respect to
such item. The inclusion of any information in any Exhibit to
the Schedule shall not be deemed to be an admission or acknowledgment,
in and of itself, that such information is required to be disclosed
or otherwise set forth in any of the Exhibits to the Schedule.
4.2. Reliance. Each disclosing party hereto making any
representations and warranties herein agrees and acknowledges
that (i) the other party hereto, in entering into this Agreement
and performing at the Closing, is relying on the accuracy and
completeness of each representation and warranty of the
disclosing party, notwithstanding any knowledge of facts to the
contrary obtained prior to the Closing by such other party,
provided however, that such other party shall not be entitled to
rely thereon unless such other party shall have promptly
identified any such facts to the contrary by notice to the
disclosing party if learned or discovered at any time prior to
the Closing, and (ii) the representations and warranties made
herein are for the dual purpose of (a) disclosing information to
the other party and (b) in conjunction with the indemnification
provisions herein contained and subject to the limitations and
qualifications contained in this Agreement with respect thereto,
allocating the risk represented by any particular fact or event
which may be contrary to any one or more of the representations
and warranties.
5. REPRESENTATIONS AND WARRANTIES OF SELLER. Seller
hereby represents and warrants to Purchaser as follows:
5.1. Organization and Standing of Seller. Seller is a
corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware, and has all requisite
corporate power and authority to own and sell its properties
(including without limitation the Shares) and to carry on its
business as now conducted (including without limitation, entering
into and performing its obligations pursuant to this Agreement).
The execution and delivery by Seller of this Agreement and the
consummation of the transactions contemplated hereby have been
duly and validly authorized and approved by all necessary
corporate action, including without limitation approval by the
Board of Directors of Seller, copies of which approval shall have
been delivered to Purchaser prior to the Closing Date.
5.2. Ownership of Shares. Seller is the beneficial and record
owner of all of the Shares and, except as may be restricted by
reason of the execution and delivery of this Agreement by the
parties, has the absolute and unrestricted right, power and
authority to sell the Shares (and the complete right, title and
interest thereto) to Purchaser as herein provided, and at the
Closing, Seller will transfer to Purchaser good title to the
Shares, free and clear of all Liens (including, without
limitation, any restrictions on the right to vote, sell or
otherwise dispose of the Shares).
5.3. Organization and Standing of the Companies. Each of the
Companies (i) is a corporation duly organized, validly existing
and in good standing under the laws of the state of its
incorporation, (ii) has all requisite corporate power and
authority to own, lease and operate its properties and to carry
on its business as now conducted, and (iii) is duly qualified to
do business as a foreign corporation and is in good standing in
each jurisdiction in which the property owned, leased or operated
or the nature of the business conducted by it makes such
qualification necessary, all as set forth on Exhibit 5.3 of the
Schedule, and the failure of which qualification would be
materially adverse to the ability of the Companies to carry on
their business. True and complete copies of the certificate of
incorporation and all amendments thereto to date of each of the
Companies, certified by the Secretary of State of their
respective states of incorporation, and copies of their
respective bylaws as amended to date, certified by the corporate
secretary of each such corporation, have been delivered by Seller
to Purchaser prior to the date hereof.
5.4. Capitalization. The authorized capital stock of Graftek
consists solely of 15,000 shares of common stock, par value $20
per share, of which there are 28 shares held in the treasury of
Graftek, and 10,000 shares issued and outstanding (the "Shares").
All such issued and outstanding Shares have been duly authorized
and validly issued and are fully paid and nonassessable. There
is no subscription, call, option, warrant, right or other
agreement or obligation providing for the purchase, redemption,
repurchase, sale or issuance of, and there is no security
convertible into or exchangeable for, or security convertible
into, any common stock of Graftek, nor of any other stock or
security of any of the Companies.
5.5. Capitalization of Subsidiaries. The authorized capital
stock of each Subsidiary consists solely of the shares of common
stock as set forth on Exhibit 5.5 of the Schedule, and the number
of issued and outstanding shares of stock of each Subsidiary is
as set forth thereon. All of the issued and outstanding shares
of common stock of each Subsidiary is owned of record and
beneficially by the Company, free and clear of all Liens
(including without limitation any Lien on the right to vote, sell
or otherwise dispose of such stock or other ownership interest).
All such issued and outstanding shares of common stock of the
Subsidiaries have been duly authorized, validly issued and are
fully paid and nonassessable.
5.6. Ownership of Equities or Interests. Graftek does not
(except for ownership in the Subsidiaries), and each Subsidiary
does not, directly or indirectly, (i) own any equity, debt (other
than accounts and notes receivable arising in the ordinary course
of business) or interest (including, without limitation, options,
rights, agreements or commitments to acquire any securities) in
any corporation, partnership, association, joint venture or other
business entity or (ii) have voting power to elect a majority of
the members of the board of directors or other persons performing
similar functions in any such business entity.
5.7. Conflicts with Agreements or Law. Except as set forth on
Exhibit 5.7 of the Schedule and except for compliance with the
applicable requirements of the HSR Act, the execution and
delivery by Seller of this Agreement and the consummation by
Seller of the transactions contemplated hereby do not and will
not (i) require action by, registration or filing with, or
consent, authorization or approval of, any Governmental Body
applicable to Seller which will not have been obtained or waived
prior to the Closing Date; (ii) violate or conflict with any Law
or any Judgment by which any of the Companies or any of their
respective properties or assets may be bound; (iii) result in the
creation of any Lien upon the property or assets owned, used or
held for use by any of the Companies; (iv) violate or conflict
with any provision of the certificate of incorporation or bylaws
of Seller or any of the Companies; or (v) violate or conflict
with, constitute a default (or an event which, with or without
notice or lapse of time or both, would constitute a default)
under or give rise to any fight of termination, cancellation,
suspension, modification, acceleration or loss of benefits under
any Material Contract, or the material provisions of any Benefit
Arrangement or Employee Plan, or any material Permit held by any
of the Companies.
5.8. Books and Records. Except as set forth on Exhibit 5.8 of
the Schedule, the Books and Records of each of the Companies are
complete and accurate in all material respects, fairly reflect
all material transactions involving such Company, and have been
kept in accordance with GAAP.
5.9. Financial Statements. Seller has previously delivered to
Purchaser true and complete copies of the 1997 Financials.
Except as set forth on Exhibit 5.9 of the Schedule, the 1997
Financials (i) have been prepared in accordance with GAAP, (ii)
are in accordance with the Books and Records of the Companies,
and (iii) fairly present the consolidated financial condition and
results of operations and cash flows of the Companies as of March 31,
1997 and for the fiscal year then ended.
5.10. Absence of Undisclosed Liabilities. Except as stated on
the 1997 Financials or on Exhibit 5.10 of the Schedule, none of
the Companies has any material liabilities or obligations of any
nature, whether absolute, accrued, contingent, determined,
determinable or otherwise, except (i) with respect to liabilities
or obligations of the type required to be stated on or reflected
by a balance sheet prepared in accordance with GAAP, current
liabilities or obligations incurred since March 31, 1997, in the
ordinary course of business, and (ii) with respect to liabilities
or obligations of the type not required to be stated on or
reflected by a balance sheet prepared in accordance with GAAP,
liabilities or obligations pursuant to the Material Contracts,
the Benefit Arrangements, the Pension Plan or the PSSI Plan.
5.11. Absence of Certain Changes. Except as set forth on
Exhibit 5.11 of the Schedule, since March 31, 1997, the Companies,
taken as a whole, have carried on their business in the ordinary
course consistent with past practice and none of the Companies has:
5.11.1. entered into any material transaction, contract or
commitment that is not in the ordinary course of its business
consistent with past practice; or
5.11.2. assumed or had transferred from Seller any liability or
obligation of any nature which in the ordinary course of its
business prior to March 31, 1997, had been carried by Seller on
Seller's books and records and was not stated on or reflected in
the 1997 Financials, or transferred or assigned any asset of any
nature which was stated on or reflected in the 1997 Financials to
Seller for less than fair market value, except for the transfer
of cash by the Companies to the Seller in the ordinary course of
business consistent with past practice prior to the Closing Date; or
5.11.3. failed to pay or discharge when due any liability or
debt, whether or not incurred in the ordinary course of its
business, unless such liability or obligation is being contested
by the Companies or by Seller in good faith (and if any such
contested liability or obligation would call for the payment by
any of the Companies in excess of $25,000, Seller will nevertheless
identify such liability or obligation on Exhibit 5.11); or
5.11.4. purchased or sold, assigned or transferred any machinery,
equipment or other fixed asset except (i) in the ordinary course of its
business consistent with past practice or (ii) having a value of $50,000
or less; or
5.11.5. subjected any asset to any Lien except in the ordinary
course of its business consistent with past practice; or
5.11.6. made or suffered any amendment or termination of any
Material Contract, or canceled, modified or waived any material
Claim held by it, other than in the ordinary course of its business
consistent with past practice, or waived any rights of substantial value,
whether or not in the ordinary course of its business; or
5.11.7. suffered any damage, destruction or other casualty
loss, whether or not covered by insurance, or suffered any repeated,
recurring or prolonged shortage, cessation or interruption of
inventory shipments, supplies or services of its vendors and
service providers required to conduct such business, which in any
such case materially and adversely affects its business: or
5.11.8. to the best of Seller's knowledge, received notice
of any actual or threatened (i) labor strike or labor union organizing
efforts with respect to its business, or (ii) labor dispute or
other occurrence, event or condition of any similar character
which has had or is likely to have a material adverse effect on
its business; or increased the compensation payable or to become
payable to any of its officers or employees currently making in
excess of $80,000, or increased its obligations in respect of any
bonus, insurance, or Employee Plan for any such Person, or
entered into any written agreements with respect to the
employment of any such Person, or made any advance (excluding
advances for ordinary and necessary business expenses) or loan to
any such Person, or put in place any general increase in the
compensation payable to any of its employees; or
5.11.9. made any alteration in its accounting practices except as
required by law or consistent with GAAP (provided that no such alteration
that may be consistent with GAAP shall change the manner of determining the
Closing Date Balance Sheet as hereinabove provided); or
5.11.10. to the best of Seller's knowledge, suffered or experienced
any facts or circumstances that, individually or in the aggregate, have had
a material adverse effect on the Companies; or
5.11.11. taken any action, which if it had been taken after
the date of this Agreement, would require the consent or approval of
Purchaser pursuant to Section 7.1 below.
5.12. Taxes: Reports and Filings
5.12.1. Each Company has timely filed all federal, state,
local and foreign income, franchise, sales and use, real and personal
property, payroll, withholding and other tax returns and reports
required to be filed by it, and, except as set forth on Exhibit
5.12.2 of the Schedule, has paid all amounts shown due on such
returns and reports and all assessments in respect of such
returns and reports that have become due. All taxes or other
governmental impositions that any Company has withheld or
collected from others (including customers and employees) have
been properly withheld or collected and have been paid over to
the appropriate Governmental Bodies or, if not yet required to be
paid over, are being held in cash in bank accounts for the
account of such Company for such payment.
5.12.2. Except as set forth on Exhibit 5.12.2 of the Schedule:
5.12.2.1. all tax returns and reports of each of the
Companies for taxable periods ended on or before March 31, 1992 have
either been examined by the appropriate taxing authorities, which
examinations have been concluded and any resulting taxes or other
amounts resulting therefrom have been paid, or the relevant
statute of limitations on assessment or collection of the tax has
expired; Exhibit 5.12.2.1 of the Schedule lists tax returns and
reports of each of the Companies for periods ending after March 31,
1992 that have been examined by a taxing authority;
5.12.2.2. no tax return or report of any of the Companies
is currently being examined by a taxing authority, and there has
been no notice from a taxing authority that it intends to examine
such a return or report or that there exists a deficiency with
respect to such return or report;
5.12.2.3. there is no pending dispute or contest involving
a tax liability for which any of the Companies is or may be liable;
5.12.2.4. there has been no adjustment made by a taxing
authority to a tax return or report of any of the Companies for any
taxable period that would have a direct effect on a tax return or report
of such Company for a subsequent taxable period that has not yet
been filed, unless that effect also is contained in a tax return
or report of the Company that has been filed;
5.12.2.5. there has been no adjustment made or proposed
by the Internal Revenue Service to a tax return referred to in Section
5.12.3 below relating to an item of income, deduction or credit
of any of the Companies that would result in a direct increase in
any taxable year in the federal income tax liability attributable
to any of the Companies;
5.12.2.6. there is no outstanding agreement or waiver
extending a statute of limitations on assessment or collection of
a tax for which any of the Companies is or may be liable; and
5.12.2.7. none of the Companies is bound by a closing
agreement under 7121 of the Code or a similar provision of state or
local law.
5.12.3. Each of the Companies, during all taxable periods
beginning on or after March 31, 1992, was a member of the
affiliated group (as defined in 1504(a) of the Code) of which
Seller is the common parent, and has been included in the
consolidated federal income tax return of Seller and its
subsidiaries for each such period.
5.12.4. Except as set forth in the next-following sentence,
none of the Companies is subject to taxation in or by any tax
jurisdiction other than the United States of America, the State
of Wisconsin and political subdivisions thereof, the State of
Illinois and political subdivisions thereof, and the State of
Connecticut and political subdivisions thereof. The income of
the Companies is included in unitary returns filed with Nebraska,
California and Minnesota, but no Company would be subject to tax
by any of such states if such Company were not affiliated with
any other Person.
5.13. Title to and Condition of Properties; Encumbrances.
Except as otherwise stated on or reflected by the 1997 Financials
or as otherwise set forth on Exhibit 5.13 of the Schedule, the
Companies own their properties and assets (whether real, personal
or mixed, tangible or intangible, other than leased assets),
subject to no Lien, including, without limitation, properties and
assets stated on or reflected in the 1997 Balance Sheet and all
properties and assets purchased or otherwise acquired since March
31, 1997, except for (i) inventory sold or otherwise disposed of
since March 31, 1997 in the ordinary course of business
consistent with past practice, (ii) equipment retired since March
31, 1997, in the ordinary course of business consistent with past
practice, (iii) accounts receivable which have been collected,
adjusted or otherwise settled in the ordinary course of business,
(iv) assets or properties not material to the conduct of the
business of the Companies, (v) Liens for current taxes not yet
due or being contested in good faith, (vi) Liens which do not
materially detract from or impair the value or marketability of
the properties or assets subject thereto, or materially interfere
with the present or intended use of, such property or asset or
the conduct of the business of any Company, (vii) mortgages or
security interests, individually of no more than $50,000 and in
the aggregate of no more than $100,000 for all Companies,
incurred in connection with the purchase of property or assets
after March 31, 1997, each such mortgage or security interest
being limited to the property or asset so purchased.
5.13.1. Exhibit 5.13 of the Schedule identifies in general
all real property interests owned by any Company. Seller has
previously delivered to Purchaser true and complete copies of the
deeds and other instruments (whether or not recorded) by which
any Company acquired such real property or interests, as well as
copies of all title insurance policies, opinions, abstracts, and
all surveys in the possession of Seller or any of the Companies
relating to such real property or interests. Each such title
insurance policy insuring any interest of any of the Companies in
any such real property is in full force and effect and names such
Company as beneficiary.
5.13.2. All plants, structures and improvements owned or
leased by any Company are wholly within the boundaries of the real
property owned or leased by it and do not encroach upon the
property of, or otherwise conflict with the real property rights
of, any other Person. Except as set forth on Exhibit 5.13, the
properties and assets owned or leased by the Companies taken as a
whole include all material rights, properties and assets
necessary to permit the Companies to conduct their respective
businesses in the same manner as now conducted and have been
conducted prior to the date of this Agreement.
5.13.3. Except as identified on Exhibit 5.13, the plants,
structures, improvements, machinery and equipment owned or leased
by the Companies have been regularly maintained, are adequate for
the uses to which they are being put, and are in generally good
operating condition and repair, reasonable wear and tear excepted
(it being understood that Seller is not making any representation
or warranty with respect to the useful life of, or any latent
defects with respect to, any thereof).
5.14. Notes and Accounts Receivable. All notes and accounts
receivable of the Companies stated on the 1997 Balance Sheet and
all notes and accounts receivable created by the Companies since
March 31, 1997 have arisen in the ordinary course of business.
Attached hereto as Exhibit 5.14 to the Schedule is a list of all
notes and accounts receivable of the Companies in excess of
$50,000 per note or account that is outstanding, with respect to
which any of the Companies has received written notice from the
obligated party or any guarantor thereof that payment is being
refused, disputed or materially delayed beyond the due date for
payment, and in each such case (i) an identification of the
obligor thereto, (ii) the outstanding amount, and (iii) the
stated reason, if any, for such refusal, dispute or delay.
5.15. Contracts and Agreements. Exhibit 5.15 of the Schedule
includes an accurate list of the Material Contracts of the
Companies, listed in the order and containing the numbering of
the next following paragraphs of this Section 5.15. Each
Material Contract is in full force and effect and is the legal,
valid, binding and enforceable obligation of each Company which
is a party thereto, except to the extent that enforceability may
be subject to or limited by bankruptcy, insolvency, reorgan
ization, moratorium and other similar laws relating to or
affecting creditors' rights generally and the availability of
equitable remedies, and to the effect of certain laws and
judicial discretion and decisions upon the availability and
enforceability of certain remedies provided in the Material
Contracts, including the remedy of specific performance. To the
best of Seller's knowledge, except as disclosed on Exhibit 5.15,
(i) no Company nor any other party to any Material Contract is in
material default or alleged to be in material default under such
Material Contract, (ii) there exists no event, condition or set
of circumstances or facts which, after notice or lapse of time,
or both, would constitute such a material default, and (iii) no
Company has any contract or commitment arising outside the
ordinary course of its business or in violation of its
certificate of incorporation or bylaws. Seller has previously
delivered to Purchaser a true and complete copy of each of the
written Material Contracts. For the purposes hereof, Material
Contracts shall be written contracts within the following:
5.15.1. all leases of real property, and all leases of personal
property (whether or not capitalized), calling for one or more payments
of $25,000 per annum, to which any Company is a party, including in each
case the identity of the lessor (or lessee, as the case may be);
5.15.2. all employment, representative, sales agency, consulting,
indemnification, non-competition, commission, retainer and other agreements
of any Company with any Personnel (exclusive of any contract that is
cancelable by the respective Company on notice of not more than thirty
(30) days without liability, penalty or premium in excess of $25,000,
or which calls for annual payments of less than $25,000);
5.15.3. all confidentiality or non-competition agreements regarding
the business of any Company to which any Company or any Personnel is a party;
5.15.4. all agreements entitling any Personnel to any bonus,
severance or similar benefit (or enhancement of such benefit) as
a result of the transactions contemplated hereby;
5.15.5. other than those referred to in Section 5.15.2, all Benefit
Arrangements and Employee Plans of any Company or the Seller currently in
force with or for the benefit of any present or former Personnel;
5.15.6. all accounts, balances, debts, obligations, arrangements,
agreements, understandings or practices between Seller and/or any
Affiliate of Seller on the one hand, and any of the Companies, on
the other hand, whether with respect to the business of such
Company or otherwise, which will by their respective terms,
survive the Closing Date;
5.15.7. all collective bargaining and union agreements applicable
to any Company;
5.15.8. all partnership, joint venture and similar agreements or
arrangements to which any Company is a party;
5.15.9. all policies of insurance or fidelity bonds in force
covering any Company or any of its property, assets, business, operations,
employees, officers or directors, stating in each case sufficient detail
to permit Purchaser to identify such policies or bonds;
5.15.10. all loan agreements, credit agreements, instruments,
indentures, notes, note purchase agreements, security agreements,
mortgages, pledges, conditional sales agreements and other agreements or
arrangements to which any Company is a party relating to indebtedness for
borrowed money, the deferral of the purchase price of real or personal
property or the securing of the payment of obligations thereunder;
5.15.11. guarantees (and similar instruments) by any Company of
the obligations of any third Person (including without limitation, Seller)
and guarantees (and similar instruments) by Seller or by any Personnel with
respect to obligations of any Company;
5.15.12. tax-sharing agreements or policies affecting any Company;
5.15.13. all research and development agreements, license and
royalty agreements to which any Company is a party, including without
limitation those with respect to Intellectual Property Rights and all
indemnification agreements relating to infringement of Intellectual
Property Rights;
5.15.14. all agreements relating to the transportation or
warehousing of goods, including without limitation, rail-spur
agreements and contracts for wharfage or dock rights;
5.15.15. all agreements for the purchase or sale of goods or
services, pursuant to which any one or more of the Companies has
an obligation to make individual payments for future performance
or services or supply of goods and materials, or is entitled to
receive payments for future performance of services or supply of
goods and materials, in each case where any amount payable or
receivable, as applicable, exceeds $50,000 per annum individually
or $100,000 in the aggregate per annum for any individual Company; and
5.15.16. all printing or other agreements relating to printing
services between any of the Companies and a customer, which are still
to be performed after the Closing Date.
5.16. Insurance. None of the Companies maintains any insurance
policies other than through Seller.
5.17. Permits and Licenses; Compliance. Except as set forth
and identified on Exhibit 5.17 of the Schedule, each Company has
all material Permits required to carry on its business as now
conducted and is in compliance in all material respects
therewith. No material violation of any Law (including without
limitation that relating to building, zoning, city planning,
health, fire, occupational safety, equal opportunity, improper
payments or fair labor practice) or Judgment exists with respect
to the properties, assets or business of any Company. Neither
Seller nor any Company has received any written notice of any
such violation, nor to the best of Seller's knowledge, has any
Company been threatened with the receipt of notice of any such
violation. Each Company has filed all reports and returns
required to be filed by it with all Governmental Bodies with
respect to any material Permit and has complied in all material
respects with the requirements of such reports and returns.
5.18. Litigation. Except as set forth on Exhibit 5.18 of the
Schedule, (i) there are no Claims pending, or, to the best of
Seller's knowledge, threatened, against, involving or affecting
Seller or any Company, or the business, properties or assets
(owned, leased, subleased, occupied, operated or used) of any
Company, which, if determined or resolved adversely to Seller or
such Company, as the case may be, would be materially adverse to
a Company's ability to own and use its assets and carry on its
business as heretofore carried on, and (ii) no Company or its
properties, assets or business is subject to any Judgment.
5.19. Intangible Personal Property. Exhibit 5.19 of the
Schedule contains a list of all patents, copyrights, trade names,
service marks or trademarks registered, or for which registration
has been applied ("Registered Rights") of any Company (or as the
case may be and so noted on Exhibit 5.19, of the Seller and
heretofore used by or in the business of any Company as a
material element thereof). The Registered Rights and any
technology, know-how, trade secrets, formulae, inventions and
processes owned, used, or held for use by any Company in its
business (in the aggregate, "Intellectual Property Rights") will
be, at and immediately after the Closing Date, good and
sufficient to permit each Company to carry on its business as
heretofore carried on. To the best of Seller's knowledge, there
exists in respect of any of the Companies or the conduct of their
respective business, no material conflict with valid Intellectual
Property Rights of others and no material infringement or
challenge (or basis therefor) by others of the Intellectual
Property Rights owned, used or held for use by the Companies.
5.20. Employees; Management Transactions. Exhibit 5.20 of
the Schedule sets forth the names of Personnel whose annual base
compensation or commissions exceed $80,000, and their respective
compensation, age and date of hire. Except as set forth on
Exhibit 5.20, there are no transactions involving any Company or
Seller and any Personnel of any Company (or of Seller in respect
of any Company) which would be required to be disclosed pursuant
to Item 404 of Regulation S-K under the Securities Act, assuming
the full application of such Regulation and further, that the
threshold thereunder were $25,000.
5.21. Employee Benefit Plans.
5.21.1. Exhibit 5.21 of the Schedule identifies each "employee
benefit plan" as defined in Section 3(3) of ERISA, that (i) is
subject to any provision of ERISA; (ii) is maintained, administered
or contributed to by the Companies (as defined below for purposes of
this Section 5.21 ) for the benefit of any Personnel of any of the
Companies and (iii) covers any employee or former employee of the Companies.
5.21.2. Except as listed on Exhibit 5.21, neither Seller nor
any of its affiliates maintains, administers or contributes to, for
the benefit of any Personnel, (i) any multiemployer plan (as
defined in Section 3(37) of ERISA) (a "Multiemployer Plan"), (ii)
any Employee Plan which is subject to Title IV of ERISA,
excluding for these purposes any Multiemployer Plan (a "Title IV
Plan") or (iii) any Employee Plan which is maintained in connection
with any trust described in Section 501(c)(9) of the Code. For purposes
of this Section 5.21 only, an "affiliate" of any person means any other
entity which, together with such person, would be treated as a single
employer under Section 414 of the Code.
5.21.3. Seller has previously delivered to Purchaser (i) copies
of the Employee Plans (and, if applicable, related trust agreements)
and all amendments thereto and written interpretations thereof,
(ii) the three (3) most recent annual reports prepared in connection
with any Employee Plan, (iii) the three (3) most recent actuarial
valuation reports prepared in connection with an Employee Plan,
(iv) complete age, salary, service and related data as of September 30,
1996 for all employees and former employees covered under any Title IV Plan
and (v) the most recent determination letters from the Internal Revenue
Service relating to each Employee Plan which is qualified under
Section 401 (a) of the Code.
5.21.4. As of September 29, 1996, the fair market value of
the assets of each Title IV Plan exceeded the present value of all
benefits accrued under such Title IV Plan determined on both an
on-going basis using the assumptions established by the PBGC, and
a termination basis, using assumptions established under the
General Agreement on Tariffs and Trade (the so-called "GATT"
rates), as in effect on such date. As of the date hereof, there
exists no aggregate unfunded liability of in respect of all
Employee Plans described under Sections 4(b)5 or 401 (a)(1) of
ERISA, computed using reasonable actuarial assumptions and
determined as if all benefits under such plans were vested and
payable as of such date. The actuarial assumptions and the data
used in any actuarial reports on which funding of Employee Plans
was done were in accordance with the provisions of the respective
Employee Plans.
5.21.5. With respect to each Employee Plan or Benefit Arrangement
maintained by the Companies which is covered by Title I of ERISA:
5.21.5.1. no "prohibited transaction", as defined in Section 406
of ERISA or Section 4975 of the Code, has occurred with respect thereto,
excluding transactions effected pursuant to a statutory or administrative
exemption;
5.21.5.2. no "accumulated funding deficiency," as defined in
Section 412 of the Code, has been incurred with respect thereto, if such
Employee Plan is subject to such Section 412, whether or not waived;
5.21.5.3. no "reportable event", within the meaning of Section
4043 of ERISA and regulations promulgated thereunder, has occurred or
is continuing with respect thereto, other than a "reportable event" that
will not have a material adverse effect on any of the Companies or their
respective business and assets, and no event described in Section 4062
or 4063 of ERISA has occurred;
5.21.5.4. no condition exists which could constitute grounds for
termination by the PBGC of any Employee Plan or, with respect to any
Multiemployer Plan, presents a material risk of complete or partial
withdrawal under Title IV of ERISA;
5.21.5.5. each Employee Plan that is intended to be qualified
under Section 401 (a) of the Code is so qualified, has been so qualified
from its adoption and no event has occurred since the date of such
determination that would adversely affect such qualification; and any trust
created under any such Employee Plan is exempt from tax under Section 501(a)
of the Code and has been so exempt from its creation;
5.21.5.6. each Employee Plan which is not a Multiemployer Plan
has been maintained in substantial compliance with its terms and with
the requirements prescribed by any and all statutes, orders, rules and
regulations, including but not limited to ERISA and the Code, which are
applicable to such plans; and
5.21.5.7. no tax under Section 4980B of the Code has been
incurred with respect to any Employee Plan sponsored by the Companies
that is a group health plan, as defined in Section 162(i)(2) of the Code.
5.21.6. Neither Graftek nor any Subsidiary has (i) engaged in, or
is a successor or parent corporation to an entity that has engaged in, a
transaction described in Section 4069 of ERISA or (ii) incurred, or
reasonably expects to incur prior to the Closing Date, any liability under
Title IV of ERISA arising in connection with the termination of, or
complete or partial withdrawal from, any plan covered or previously covered
by Title IV of ERISA that could become a liability of Purchaser or any of
its affiliates after the Closing Date. If a "complete withdrawal" by Graftek
or any of the Subsidiaries were to occur as of the Closing Date with respect
to all Multiemployer Plans, none of the Companies nor Purchaser would incur
any material withdrawal liability under Title IV of ERISA.
5.21.7. No Company has any current or projected liability
with respect to post-employment or post-retirement benefits for
retired or former employees of any Company (whether or not
pursuant to any Employee Plan or Benefit Arrangement), except
as required to avoid excise tax under Section 4980B of the Code.
Except as stated on Exhibit 5.21 to the Schedule, there has been
no (i) amendment to, (ii) written interpretation of or
announcement (whether or not written) by any of the Companies or
by Seller or any of its affiliates relating to, or (iii) change
in employee participation or coverage under, any Employee Plan
or Benefit Arrangement that will become the responsibility of
Purchaser or any of the Companies after the Closing Date that
would increase materially the expense of maintaining such
Employee Plan or Benefit Arrangement above the level of the
expense incurred with respect thereto for the most recent fiscal
year ended prior to the date hereof.
5.21.8. All contributions and payments accrued under
each Employee Plan and Benefit Arrangement that will become the
responsibility of Purchaser or any of the Companies after the
Closing Date, determined in accordance with prior funding and
accrual practices, as adjusted to include proportional accruals
for the period from September 30, 1996 to the Closing Date, shall
be discharged and paid on or prior to the Closing Date.
5.21.9. There is no contract, agreement, plan or arrangement
covering any present or former Personnel that, individually or
collectively, could give rise to the payment of any amount that
would not be deductible pursuant to the terms of Section 280G of the Code.
5.21.10. All IRS Form 5500's (and, as applicable, any similar
reporting forms required by any state) for all Employee Plans and
Benefit Arrangements sponsored by the Companies with respect to
all periods to and through the Closing Date have been or will be
duly filed as may be required.
5.21.11. With respect to the PSSI Plan, the PSSI Plan document
and Summary Plan Description have been amended to comply with
applicable law through the Closing Date, and Graftek has received
a determination letter that complies with applicable law.
5.21.12. With respect to the Pension Plan, (i) the Pension Plan
document and Summary Plan Description have been amended to comply
with applicable law through the Closing Date, (ii) all PGBC,
Internal Revenue Service and Department of Labor filings shall be
current through the Closing Date, (iii) no outstanding penalties
or excise taxes exist or at the Closing Date will exist, (iv)
through the Closing Date, the Pension Plan shall have been
operated in accordance with its terms, and (v) Graftek has
received a determination letter with respect to the Pension Plan
that is current through the Closing Date.
5.22. Environmental Compliance.
5.22.1. Each of the Companies is in compliance in all material
respects with any and all applicable federal, state and local
Laws and Permits relating respectively to air, water, land, noise
or other pollution, or the production, storage (including storage
in underground tanks), labeling, treatment, transport, handling,
Release or disposition of any Hazardous Substance (including, but
not limited to, the Clear Air Act, as amended, 42 U.S.C. Section
7401 et seq.; the Safe Drinking Water Act, as amended, 42 U.S.C.
Section 300 et seq.; the Clean Water Act, as amended, 33 U.S.C.
Section 1251 et seq.; the Toxic Substances Control Act, as
amended, 15 U.S.C. Section 2601 et seq.; the Resource
Conservation and Recovery Act, as amended, 42 U.S.C. Section 6901
et seq.; and CERCLA, together with rules and regulations
promulgated thereunder; collectively, the "Environmental Laws").
As used herein, "Environmental Condition" shall mean any
condition or circumstance that (i) is required to be abated or
corrected under any Environmental Law, or (ii) is likely to give
rise to any civil or criminal liability of the Seller or any of
the Companies under an Environmental Law, or (iii) is likely to
create a public or private nuisance, including, but not limited
to, the presence of Hazardous Materials, in quantities that are
not in compliance with Environmental Laws.
5.22.2. Except as set forth on Exhibit 5.22 of the Schedule
or in the Environmental Report:
5.22.2.1. no material violation of any Environmental Law
has existed since March 31, 1997 with respect to the properties,
assets or business of any Company;
5.22.2.2. the properties, assets and business of each of
the Companies has been and is in compliance in all material respects
with all applicable Environmental Laws;
5.22.2.3. no material Environmental Condition at or relating
to any of the properties now or heretofore owned or used by any of the
Companies exists, and neither Seller nor any of the Companies has
received any notice, notification, demand, request for information,
citation, summons or order has been issued and no penalty has been
assessed by any Governmental Body or other entity under Environmental
Laws (generally, an "Environmental Notice");
5.22.2.4. neither Seller nor any of the Companies has received
an Environmental Notice (i) with respect to any Company's generation,
treatment, storage, recycling, transportation, disposal or Release of any
Hazardous Substance or (ii) with respect to any other violation of any other
Environmental Law with respect to the properties, assets or business of any
of the Companies.
5.22.2.5. no Company (i) has handled any Hazardous Substance,
other than as a generator, on any property now or previously owned,
operated or leased by a Company, except in material compliance with
applicable Environmental Laws; (ii) has transported or arranged for the
transportation (directly or indirectly) of any Hazardous Substance to any
location which is listed or proposed for listing under CERCLA, or on any
similar state list, or which, to the best of Seller's knowledge, is the
subject of federal, state or local enforcement actions or other
investigations which may lead to Claims against any Company for clean-up
costs, remedial work, damages to natural resources or for personal
injury claims, including, but not limited to, claims under CERCLA; or
(iii) is required to place any notice or restriction relating to the
presence of Hazardous Substances at any property owned by it in any deed
to such property;
5.22.2.6. at, on or under any property now or previously owned,
operated or leased by any Company, there exists no (i) storage tank for
Hazardous Substances (active or abandoned), or (ii) to the best of Seller's
knowledge, Hazardous Substances in concentrations, form or quantities subject
to regulation under any Environmental Law;
5.22.2.7. no oral or written notification of a Release of
a Hazardous Substance has been filed by or on behalf of a Company;
5.22.2.8. no property now or previously owned, operated or
leased by a Company is listed or, to the best of Seller's knowledge,
proposed for listing, on the National Priorities List promulgated
pursuant to CERCLA or on any similar state list of sites requiring
investigation or clean-up;
5.22.2.9. there are no environmental Liens on any of the real
property or other properties owned, operated or leased by any Company,
and no government actions have been taken or are in process which might
subject any of such properties to such Liens; and
5.22.2.10. there have been no environmental investigations,
studies, audits, tests, reviews or other' analyses conducted, since
December 31, 1991, by or which are in the possession of Seller or any
Company in relation to any property or facility now or previously owned,
operated or leased by a Company which have not been delivered to Purchaser
prior to the date hereof.
5.23 Bank Accounts; Powers of Attorney. Exhibit 5.23 of the
Schedule sets forth a true and complete list of the names and
addresses of (i) all banks, savings and loan associations and
other financial institutions in which any Company has an account
or safe deposit box, together with the account number and the
most recent balance or contents thereof, as the case may be, and
the names of all persons authorized to draw thereon or to have
access thereto and (ii) all persons, firms or corporations (other
than service companies for statutory representation) holding
general or special powers of attorney from a Company and a
summary statement of the terms thereof.
5.24. Brokers' and Finders' Fees. Neither Seller nor any
Company has retained an investment bank, broker, finder or other
intermediary who is entitled or may claim entitlement to a fee,
commission or similar compensation in connection with the
transactions contemplated by this Agreement.
5.25. Seller's Knowledge. For purposes of this Agreement,
a matter is deemed to be to "the best of Seller's knowledge" if
such matter is actually known by any Personnel of Seller or of
the Companies named on Exhibit 5.25 of the Schedule or should
have been known by any such persons after reasonable inquiry with
respect thereto after reviewing the terms of this Section 5.
5.26. Qualifications and Limitations. Anything contained in
this Agreement to the contrary notwithstanding, the representations
and warranties of Seller expressly and specifically set forth in this
Agreement, including the Schedule referred to herein, constitute the sole
and exclusive representations and warranties by Seller to Purchaser in
connection with the transactions contemplated hereby, and Purchaser agrees
that no other representations and warranties of any kind or nature (whether
relating to the past, present or future financial condition or results of
operations of any of the Companies, or other subjects) are made or to be
implied.
6. REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to Seller as follows:
6.1. Organization and Standing of Purchaser. Purchaser is a
corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware, and it has all requisite
corporate power and authority to own its properties and to carry
on its business as now conducted, including without limitation,
entering into and performing its obligations pursuant to this
Agreement. True and complete copies of the certificate of incorporation
and all amendments thereto to date of Purchaser, certified by the Secretary
of State of the State of Delaware, and of Purchaser's by-laws as amended to
date, certified by Purchaser's corporate secretary, have been delivered to
Seller prior to the date hereof.
6.2. Corporate Approvals. The execution and delivery by Purchaser
of this Agreement and the consummation by Purchaser of the transactions
contemplated hereby are within Purchaser's corporate powers and have been
duly and validly authorized and approved by all necessary corporate action,
including without limitation approval by the Board of Directors of Purchaser,
copies of which approval shall have been delivered to Seller prior to the
Closing Date.
6.3. Conflicts with Agreements or Law. Except for compliance with the
applicable requirements of the HSR Act, the execution and delivery of this
Agreement by Purchaser and consummation by Purchaser of the transactions
contemplated hereby do not and will not (i) require action by, registration
or filing with, or consent, authorization or approval of, any Governmental
Body applicable to Purchaser, which will not have been obtained or waived
prior to the Closing Date; or (ii) violate or conflict with any Law or
any Judgment by which Purchaser or its properties or assets may be bound;
or (iii) violate or conflict with any provision of the certificate of
incorporation or by-laws of Purchaser; or (iv) violate or conflict with,
constitute a default (or an event which, with or without notice or lapse of
time or both would constitute a default) under or give rise to any right
of termination, cancellation, suspension, modification, acceleration or loss
of benefits under any material written agreement to which Purchaser is a party.
6.4. Organizational and Financial Information. Prior to the
date hereof, Purchaser has delivered to Seller an accurate organizational
chart of Purchaser and its Affiliates, as well as certain financial
information as to the condition of Bertelsmann, Inc. ("Guarantor").
6.4.1. Guarantor is a corporation duly organized, validly
existing and in good standing under the law of the State of Delaware.
6.4.2. Guarantor previously has shown to Seller a copy of
the financial statements of Guarantor as at June 30, 1996 audited
by KPMG Peat Marwick LLP (the "Guarantor's Financial Statements").
Such copy is a true, correct and complete copy of the Guarantor's
Financial Statements. The Guarantor's Financial Statements
fairly present in accordance with GAAP the financial position of
Guarantor as of such date and for the year then ended, and show
that the Total Shareholder's Equity of Guarantor on such date of
not less than $590,000,000 (five hundred ninety million dollars).
6.4.3. As of the date of the Agreement, there has not been
a material adverse change in the Total Stockholder's Equity of
Guarantor from that shown on Guarantor's Financial Statements.
6.5. Brokers' or Finders' Fees. Purchaser has retained no
investment bank, broker, finder or other intermediary who is
entitled or may claim entitlement to a fee, commission or similar
compensation in connection with the transactions contemplated by
this Agreement.
6.6. Investor's Intent. Purchaser is purchasing the Shares
solely for the purpose of investment and not with a view to, or
for the sale in connection with, distribution thereof in
violation of the Securities Act. Purchaser acknowledges that the
Shares are not registered under the Securities Act or any
applicable state securities law, and that such Shares may not be
transferred or sold except pursuant to the registration
provisions of such Securities Act or pursuant to an applicable
exemption therefrom and pursuant to state securities laws and
regulations as applicable.
6.7. Qualifications and Limitations. Anything contained in
this Agreement to the contrary notwithstanding, the representations and
warranties of Purchaser expressly and specifically set forth in this
Agreement constitute the sole and exclusive representations and warranties
by Purchaser to Seller in connection with the transactions contemplated
hereby, and Seller agrees that no other representations and warranties of
any kind or nature are made or to be implied.
7. COVENANTS OF SELLER
7.1. Conduct of Business of the Companies. During the
period from the date of this Agreement to the Closing Date,
Seller shall cause the Companies to conduct their respective
operations in the ordinary and usual course of business and
consistent with past practice, to preserve intact their
respective business organizations, and to use reasonable efforts
(i) to keep available the services of their respective Personnel,
(ii) to maintain and enforce all employment, non-competition, or
nondisclosure agreements with its current and former Personnel,
and (iii) to maintain satisfactory relationships with licensors,
licensees, suppliers, contractors, distributors, customers and
others having business relationships with the Companies, provided
however, that nothing contained in this Section 7.1 shall
prohibit or prevent the payment by any of the Companies of its
payables and the collection of its receivables in the ordinary
and usual course of its business consistent with past practice,
or the payment by the Companies to the Seller of excess cash in
the ordinary and usual course consistent with past practice.
Without limiting the generality of the foregoing, and except as
otherwise expressly provided in this Agreement, prior to the
Closing Date, Seller shall not, without in each instance
obtaining the prior written consent of Purchaser, permit any
Company to, and shall cause each Company not to:
7.1.1. adopt or propose any amendment to its certificate of
incorporation or by-laws;
7.1.2 . authorize for issuance, issue, sell, or deliver (whether
through the issuance or granting of options, warrants, commitments,
subscriptions, rights to purchase or otherwise), or amend any material
term of, any security of or other ownership interest in a Company;
7.1.3. split, combine or reclassify any shares of its capital
stock, declare, set aside or pay any dividend or other distribution
(whether in cash, stock, property or any combination thereof) in respect
of its capital stock, or redeem or otherwise acquire any security of or
other ownership interest in a Company, except as may be permitted hereunder;
7.1.4. create, incur or assume any indebtedness for borrowed
money other than indebtedness for money borrowed not in excess of
$100,000 for all the Companies in the aggregate;
7.1.5. assume, guarantee, endorse or otherwise become liable
or responsible (either directly, contingently or otherwise) for the
obligations of any other Person;
7.1.6. make any loans, advances or capital contributions
to, or investments in, any other Person, other than (i) short-term
investments in financial instruments, issued by the United States
or any agency thereof, (ii) advances or capital contributions to,
or investments in, another Company, or (iii) advances to
Personnel of the Companies for travel and other business expenses
incurred in the ordinary course of the business of the Companies;
7.1.7. except for the purchase of materials and supplies in the
ordinary course of business consistent with past practices, enter into any
agreements, commitments or contracts for the purchase of commodities or
options to purchase commodities which, individually or in the aggregate,
require, or upon exercise would require, one or more payments aggregating
more than $100,000 for all Companies in the aggregate;
7.18. enter into any agreements, commitments or contracts for
the purchase, sale, lease, transfer or exchange of any real property or
interests in real property;
7.1.9. except as may otherwise be permitted herein and except
for capital expenditures relating to a certain 21.50' x 57" 8-unit Xxxxxx
Heidelberg press, Model No. M-2000 (the "Press"), make any capital
expenditures in excess of $100,000 for additions to property, plants or
equipment;
7.1.10. except as may otherwise be permitted herein, enter into
any other agreements, commitments or contracts which, individually or in
the aggregate, are material to the assets, property or business of any
Company;
7.1.11. increase or decrease in any manner the compensation,
bonus or other benefits payable to, enter into any agreement,
contract or commitment with, or alter in any material way the
terms of employment of or employment policies covering, any
Personnel (whether by a grant of a severance or termination
agreement, an increase in benefits payable under existing policies
or otherwise), except as expressly provided for on the Schedule;
7.1.12. pay any pension, retirement allowance or other employee
benefit not required by any existing Benefit Arrangements or Employee Plans
to any Personnel of any of the Companies, to the extent that such Benefit
Arrangement or Employee Plan will be the responsibility of any of the
Companies or of Purchaser after the Closing Date;
7.1.13. except as expressly provided for on the Schedule, commit
itself to any additional Benefit Arrangements or Employee Plans or amend
any existing Benefit Arrangements or Employee Plans that will become the
responsibility of any of the Companies or of Purchaser after the Closing Date;
7.1.14. except with respect to payroll or salary payments to
Personnel in the ordinary course, consistent with current wage and salary
obligations of the Companies, or as may otherwise be permitted herein, make
any payment to or enter into any agreement with any Personnel, or with Seller
or any of its Affiliates or any Personnel of any of them;
7.1.15. except in the ordinary course of business or pursuant
to contractual obligations existing on the date hereof, (i) sell,
lease, license, transfer, create a Lien, or otherwise dispose of
or encumber any of its property or assets; (ii) pay, discharge or
satisfy any of its Claims, liabilities or obligations (whether
absolute, accrued, contingent, or otherwise); or (iii) cancel any
of its debts or waive any of its Claims or rights;
7.1.16. undertake, either as the surviving, disappearing or
the acquiring corporation, any merger or other business combination
or consolidation, asset or securities acquisition or disposition,
or other takeover transaction involving a Company;
7.1.17. dispose of or alter the manner of keeping or recording
any Books and Records related to the assets, liabilities, operations or
businesses of the Companies;
7.1.18. change the accounting methods or practices of the
Companies or make any material change in the conduct of the business
or operations of the Companies;
7.1.19. with respect to the proposed purchase of the Press, enter
into any final contractual arrangement with builders, contractors or other
Persons for the installation thereof, or for the modification of any plant
for the purposes of such installation; or
7.1.20. agree, whether in writing or otherwise, to do any of the
foregoing in this Section 7.1.
7.2. Maintenance of Accuracy. Seller shall, and shall cause
each Company to, take all action necessary to maintain the
accuracy of all representations and warranties made by Seller
herein. Seller shall give notice to Purchaser promptly after
becoming aware of any inaccuracy (or event which, if it occurred
prior to the date hereof, would have caused an inaccuracy) in any
such representations or warranties, and shall in such notice, set
forth the details of such inaccuracy or event, the representations and
warranties herein affected thereby, and Seller's best estimate, if
possible (which estimate shall not be binding on Seller for any purposes
herein) of the financial scope of such inaccuracy or event.
7.3. Access to Information. Between the date of this
Agreement and the Closing, Seller shall, and shall cause each
Company to, give to Purchaser, each of its Affiliates, counsel,
financial advisors, accountants and other authorized
representatives reasonable access to, and permit the inspection
and inquiry of, as the case may be, (i) the plants, offices,
warehouses and other facilities and properties of the Companies,
(ii) the officers, directors and employees of the Companies and
(iii) the Books and Records, financial and operating data and
other information relating to the Companies (and Seller shall
provide copies thereof as reasonably requested), provided,
however, that such rights shall be exercised in a manner so as
not materially and adversely to disrupt the ordinary course of
the business of Seller or the Companies. Seller further agrees
that as a part of this covenant, Price Waterhouse LLP, certified
public accountants and auditors for Purchaser, will be permitted
to inspect inventories of the Companies as of the Closing Date.
Seller shall instruct the employees, counsel, accountants and
other advisors of Seller and the Companies to cooperate with
Purchaser in its investigation of the Companies hereunder. All
information obtained by Purchaser and each of its Affiliates and
other authorized representatives pursuant to this Section 7.3
shall be governed by the terms and subject to the conditions of
that certain Confidentiality Agreement between Seller and Xxxxx
Printing Company dated February 13, 1997, a copy of which is
included as Exhibit 7.3 of the Schedule; in respect thereof,
Purchaser agrees to be bound to each and every covenant and promise
in the same manner as Xxxxx Printing Company. The parties acknowledge
and agree that such Confidentiality Agreement is an independent agreement
which shall survive any termination of this Agreement.
7.4. Expenses. Except as may be otherwise specifically allocated or
designated in this Agreement, all costs and expenses incurred in connection
with this Agreement and the transactions contemplated hereby shall be paid
by the party incurring such costs and expenses whether or not the
transactions contemplated hereby are consummated.
7.5. Announcements. Purchaser and Seller shall consult with
each other before issuing any public statement with respect to
this Agreement or the transactions contemplated hereby including
any statements to non-management employees of the Companies, and
shall not make any such public statement prior to such consultation,
except as may be required by law or any listing agreement with a
national securities exchange.
7.6. Certain Notifications. Each party shall promptly
notify the other in writing of (i) the occurrence of any event
which will or could reasonably be expected to result in the
failure to satisfy any of the conditions specified in Section 8
hereunder, or (ii) any notice or other communication from (a) any
person alleging that the consent of such person is or may be
required in connection with the transactions contemplated by this
Agreement or (b) any Governmental Body in connection with the
transactions contemplated by this Agreement.
7.7. Acquisition Proposals. Seller shall not, and shall not
permit any Affiliate or any Company (or Personnel of any of them)
to (i) accept or approve any offer or proposal for, or any
indication of interest in, any acquisition other than the
transactions contemplated by this Agreement involving any
Company; (ii) directly or indirectly, take any action to initiate,
encourage or solicit any such acquisition proposal; or (iii) engage
in any negotiations with, or furnish any non-public information
concerning the Shares or the Companies, or afford access to the
properties, books or records of the Companies to, any Person that may
be considering, or has made, such an acquisition proposal.
7.8. Certain Covenants of Seller.
7.8.1. For a period expiring at the end of the thirtieth
(30th) full month following the Closing Date, Seller shall not
and shall cause each of its corporate Affiliates not to (whether
for its own account or jointly with others, as a stockholder,
joint venturer, investor, operator, partner (limited or general),
agent, manager, consultant or otherwise) (i) engage, directly or
indirectly, in a business competitive with the Restricted
Business; (ii) solicit, raid, entice or induce any Person which
currently is a client or customer of any of the Companies to
become a client or customer of any Person other than the
Companies with respect to the Restricted Business; or (iii)
solicit, raid, entice or induce any Person who currently is, or
at any time prior to the termination of his or her employment
shall be Personnel of any of the Companies to become employed by
any Person other than the Companies.
7.8.1.1. Seller acknowledges that a breach of Seller's
agreement under this Section 7.8.1 shall result in irreparable and
continuing damage to Purchaser and the Companies for which there
will be no adequate remedy at law. Seller agrees that in the event
of any breach of this Section 7.8.1, Purchaser and its successors and
assigns shall be entitled to injunctive relief, without bond, and
without limiting the availability of any other remedy of Purchaser.
7.8.1.2. For the purposes hereof, the term "Restricted Business"
shall mean the business of printing, binding and distribution of trade and
special interest publications and offset catalogs, except (i) any business
currently engaged in by Seller or its corporate non-Company Affiliates
(and in particular, this is meant to permit Seller to remain and actively
pursue and expand pre-press services), (ii) any business carried on at any
time by any Person who is not currently an Affiliate of Seller and who
may subsequent to the Closing Date acquire all or any part of the business
and operations of Seller or any of its corporate Affiliates, or (iii) any
business acquired by the Seller or any of its Affiliates which derives less
than forty percent (40%) of its gross revenues from a business which
otherwise would be a Restricted Business.
7.8.1.3. In consideration of the covenants of Seller contained
in this Section 7.8.1, Purchaser agrees to pay Seller the amount of
$4,200,000.00 (four million two hundred thousand U.S. dollars) in the same
manner and at the same time as set forth in Section 3.1.2 above.
7.8.2. Provided that Purchaser shall reimburse Seller for
its reasonable costs and expenses in so doing, Seller agrees, for
a period of sixty (60) days subsequent to the Closing Date, to
administer claims for any of Purchaser's benefit plans that are
similar to Seller's Benefit Plans, and to work with Purchaser in
the orderly transfer of payroll, Employee Plan and other data as
may be reasonably requested by Purchaser.
7.8.3. With respect to the disclosure made by Seller pursuant
to Item (6) on Exhibit 5.10 hereto, Seller agrees that it will be
responsible for obtaining the Settlement therein disclosed, or
such other settlement as the State of Illinois may be willing to
accept, or otherwise be responsible, at its risk and expense, for
any and all costs arising out of the matter so disclosed in excess
of any amount reserved therefor on the Closing Date Balance Sheet.
7.8.4. Purchaser has advised Seller of a certain UCC-1 filing
with respect to Graftek, filed by X. X. xxXxxx de Nemours & Co.,
in respect to a "37C Processor". Seller agrees that it will take
all action and do all things, whether prior or subsequent to the
Closing Date, to obtain an appropriate UCC-3 or otherwise to
remove such UCC-1, at its cost and risk. The said UCC-1 filing
shall not be deemed to be a breach of any representation or
warranty herein made or to be made at the Closing.
7.9. Payment of Obligations. Except for liabilities and
obligations incurred in ordinary course commercial transactions
between Seller and/or its Affiliates, on the one hand, and any of
the Companies, on the other hand, immediately prior to the
Closing, all intercompany indebtedness for borrowed money
outstanding among such parties shall be satisfied or otherwise
eliminated by Seller without any liability to Purchaser except by
means of the Purchase Price Adjustment.
8. CLOSING CONDITIONS
8.1. Conditions to Obligations of Each Party. The respective
obligations of each of Purchaser and Seller to consummate the
transactions contemplated by this Agreement are expressly subject
to the fulfillment on or prior to the Closing Date of the
following conditions:
8.1.1. Purchaser, Seller and the Companies shall not be subject
to any Judgment issued by any Governmental Body, or any Law, which prevents
or materially delays the consummation of the transactions contemplated hereby.
8.1.2. No Claim before any Governmental Body shall be
pending against Purchaser, Seller or any Company or any of their
respective Affiliates, (i) challenging the consummation of this
Agreement, (ii) seeking to restrain, prevent or change in any
material respect the transactions contemplated hereby or (iii)
seeking substantial damages in connection with such transactions.
8.1.3. Each "person" (as defined in the HSR Act and the rules and
regulations thereunder) required in connection with the transactions
contemplated by this Agreement to file a Notification and Report Form for
Certain Mergers and Acquisitions with the Department of Justice and the
Federal Trade Commission pursuant to Title II of the HSR Act shall have made
such filing, and the applicable waiting period with respect to each such
filing (including any extension thereof by reason of a request for
additional information) shall have expired or been terminated.
8.2. Conditions to Obligations of Purchaser. The obligations
of Purchaser to consummate the transactions contemplated by this
Agreement are expressly subject to the fulfillment, on or prior
to the Closing Date, of all of the following additional conditions
(compliance with which or the occurrence of which may be waived in
whole or in part by Purchaser, in writing):
8.2.1. All representations and warranties made by Seller in
this Agreement shall be true and correct in all material respects as
of the Closing Date as if made at and as of such date, and all
schedules, exhibits or documents attached hereto or previously or
hereafter delivered to Purchaser as stated or provided by the
terms of this Agreement shall be true and complete in all material
respects as of the date of this Agreement (or, if delivered hereafter,
as of the date of delivery) and as of the Closing Date, except to the extent
any change in any condition or fact between the date hereof and the Closing
Date is expressly permitted herein.
8.2.2. Seller shall have performed and satisfied, in all material
respects, all covenants and conditions required by this Agreement to be
performed or satisfied by it on or prior to the Closing Date.
8.2.3. There shall have been delivered to Purchaser on the
Closing Date a certification signed by a Vice-President of Seller
confirming the matters set forth in Sections 8.2.1 and 8.2.2 above.
8.2.4. All actions by, registrations or filings with, or
consents, authorizations, or approvals of, any Governmental
Bodies applicable to Seller or to any of the Companies and
necessary for the consummation of the transactions contemplated
hereby shall have been obtained or completed by Seller, and not
revoked, and in each case shall be in form and substance
satisfactory to Purchaser.
8.2.5. Seller shall have obtained and delivered to Purchaser
all consents and waivers referred to in Section 13.2 below and such
consents and waivers shall be in form and substance satisfactory
to Purchaser.
8.2.6. Purchaser shall have received the legal opinion of
Seller's counsel, X'Xxxxxxxx Graev & Karabell, LLP, dated the Closing
Date, substantially in the form of Exhibit 8.2.6 attached hereto.
8.2.7. Seller shall have delivered to Purchaser the resignation
of each director and officer of each of the Companies dated as of
the Closing Date.
8.2.8. Purchaser shall have received the approval of the
Supervisory Board (Aufsichtsrat) of Xxxxxx + Jahr AG to the
consummation of this Agreement, it being acknowledged by Seller
that the grant of such approval is wholly within the discretion
of the Supervisory Board.
8.3. Conditions to Obligations of Seller. The obligations
of Seller to consummate the transactions contemplated by this
Agreement are expressly subject to the fulfillment, on or prior
to the Closing Date, of all of the following additional
conditions (compliance with which or the occurrence of which may
be waived in whole or in part by Seller in writing):
8.3.1. All representations and warranties made by Purchaser
in connection with this Agreement shall be true and correct in all
material respects as of the Closing Date as if made at and as of
such date and all schedules, exhibits or documents attached
hereto or previously or hereafter delivered to Seller as stated
or provided by the terms of this Agreement shall be true and
complete as of the date of this Agreement (or, if delivered
hereafter, as of the date of delivery) and as of the Closing Date,
except to the extent any change in any condition or fact between
the date hereof and the Closing Date is expressly permitted herein.
8.3.2. Purchaser shall have performed in all material respects
and satisfied all covenants and conditions of this Agreement to
be performed or satisfied by it on or prior to the Closing Date.
8.3.3. There shall have been delivered to Seller on the Closing
Date a certification signed by the President of Purchaser confirming
the matters set forth in Sections 8.3.1 and 8.3.2.
8.3.4. All actions by, registrations or filings with, or
consents, authorizations, or approvals of, any Governmental
Bodies applicable to Purchaser and necessary for the consummation
of the transactions contemplated hereby shall have been obtained
or completed by Purchaser, and not revoked, and in each case
shall be in form and substance satisfactory to Seller.
8.3.5. Seller shall have received the legal opinion of
Purchaser's counsel, Fox & Xxxxx dated the Closing Date,
substantially in the form of Exhibit 8.3.5 attached hereto.
8.3.6. The Guaranty hereof shall continue to be in full force
and effect.
9. TAX MATTERS
9.1. [Intentionally Omitted]
9.2. Responsibility for Taxes and Returns
9.2.1. Covered Taxes shall be the sole responsibility of Seller.
If any tax authority seeks to collect any Covered Tax from any
Company, Purchaser, or any Affiliate of Purchaser, Seller shall
(subject to the provisions of Section 12.3, including the
application of the Cushion and Cap set forth in Section 12.3.3)
indemnify and hold harmless such Person from which such Covered
Tax is sought to be collected from any liability in respect of
such Covered Tax, and any reasonable expenses (including reasonable
attorneys' fees) incurred in connection with any Proceeding relating
to such Covered Tax.
9.2.2. The extent to which Taxes for a taxable period that
includes but does not end on the close of business on the Closing
Date are treated as Taxes for the period ending on the close of
business on the Closing Date shall be determined as follows: (i)
Taxes measured in whole or in part by net or gross income and
Taxes relating to specific transactions shall be apportioned on
the basis of a closing of the books of the entity liable for such
Tax at the close of business on the Closing Date; and (ii) all
other Taxes shall be prorated according to the ratio of the
number of days in such taxable period prior to and including the
Closing Date to the number of days in such taxable period. If
Seller and Purchaser are unable to resolve any dispute regarding
the application of the principles of this Section 9.2.2, the
matter shall be referred for determination as promptly as
possible to the Third Accounting Firm, whose determination shall
be binding on the parties in the absence of fraud.
9.2.3. For purposes of federal income taxes, each Company
shall close its books as of the close of business on the Closing Date.
All items of income, deduction or credit for the period ending on
the Closing Date shall be reported by Seller on its consolidated
federal income tax return for its taxable year ended March 31,
1998. All such items for the period beginning on the day after the
Closing Date shall be reported on the consolidated federal income tax
return of the affiliated group that includes the Companies and Purchaser.
9.2.4. For purposes of any state or local income tax with respect
to which it is required or permitted to do so, each Company shall close its
books in a manner comparable to that described in Section 9.2.3 above.
9.2.5. Seller and Purchaser shall cooperate, and Purchaser shall
cause the Company to cooperate, in the closing of the books of the Companies
and the proper reporting of items on the tax returns referred to in this
Section 9.2.
9.2.6. With respect to a return of any Company that is due
after the Closing Date that includes a Covered Tax, not less than
thirty (30) days before the due date of such return, Purchaser
shall furnish Seller a copy of the return and a statement of the
amount of such Covered Tax. If Seller agrees with Purchaser's
statement, Seller shall pay such amount to Purchaser not later
than five (5) days before the due date of the return. If Seller
does not agree with Purchaser's statement, Seller shall give (i)
notice to Purchaser not later than twenty (20) days before the
due date of the return of the specific reason or reasons Seller
does not so agree and (ii) a statement of the amount of Tax that
in Seller's opinion is a Covered Tax. In such case, Seller and
Purchaser promptly shall confer and attempt to resolve the
disagreement, and, not later than five (5) days before the due
date of the return, Seller shall pay to Purchaser any portion of
the amount set forth in Purchaser's statement with which Seller
agrees. Nothing in this Section 9.2.6 shall relieve Seller of
responsibility for a Covered Tax because Seller has disagreed
with Purchaser's statement, and any amount that ultimately is
determined to be a Covered Tax pursuant to the preceding
provisions of Section 9.2 but initially was paid by Purchaser or
a Company shall bear interest at the rates in effect from time to
time under Section 6621(a)(1) of the Code from the date the
amount actually was paid by Purchaser or a Company until the date
that Seller pays Purchaser for such Covered Tax. Notwithstanding
anything to the contrary in this Agreement, the Cushion and the
Cap provided for in Section 12.3.3 shall not apply to the
obligations of Seller under this Section 9.2.6.
9.2.7. If an adjustment by a taxing authority of one or more
items on a tax return does not give rise to an immediate increase
in Taxes as a result of the availability of losses or credits to
offset the effect of the adjustment, then the indemnification
hereunder with respect to such adjustment shall be made at the
time that the affected taxpayer or its successor otherwise would
have been able to use such losses or credits to reduce Taxes had
it not been for such adjustment, notwithstanding any limitation
of time contained in this Agreement.
9.3. Amended Returns; Certain Tax Refunds.
9.3.1. Notwithstanding anything to the contrary in Section 9.2,
Seller shall not be required to indemnify Purchaser with respect
to any Tax shown due on an amended return filed after the Closing
Date by Purchaser or a Company unless (i) such amended return is
required by law, or (ii) Purchaser obtains an opinion of counsel
reasonably acceptable to Seller that the aspects of such amended
return that result in a Covered Tax are necessary to avoid further
accrual of interest or penalties with respect to such Covered Tax.
9.3.2. After the Closing, except as provided in the following
sentence, Seller shall not file any claim for refund or credit,
or an amended return claiming a refund or credit, of Tax paid by
a Company. The preceding sentence shall not restrict Seller from
(i) filing a claim for refund or credit, or filing an amended
return claiming a refund or credit, of an income tax paid with
respect to a consolidated, combined or unitary tax return of
Seller, notwithstanding the fact that a Company is included in
such a return, or (ii) filing with any state or local taxing
authority a report required by law of federal changes.
9.3.3. If Seller has complied with the provisions of Section
9.3.2 and, as a result of an audit of a Tax return of a Company
for a taxable period ending on or prior to the close of business
on the Closing Date or a filing of a report of federal changes
for such period, a Company receives a refund of Tax paid by it
for such period, Purchaser shall pay to Seller, as an increase of
the Purchase Price, an amount equal to the amount of such refund
(including any interest received with respect to such refund)
minus all Taxes payable by a Company or any consolidated,
combined or unitary group that includes such Company as a result
of such refund. If the amount of such refund subsequently is
adjusted by a taxing authority, Seller shall pay to Purchaser, or
Purchaser shall return to Seller, as an adjustment of the
Purchase Price, an amount necessary to reflect such adjustment.
9.3.4. If a Company recognizes a loss or becomes entitled to
a credit with respect to a period beginning after the Closing Date
that is carried back to a taxable year during which such Company
was included in a consolidated, combined or unitary tax return of
Seller or one or more affiliates of Seller, Seller will pay to
Purchaser, as a reduction of the Purchase Price, an amount equal
to the amount of Tax refund or reduction of Tax otherwise payable
obtained by Seller or such affiliate as a result of such
carryback, minus all Taxes payable by Seller or such affiliate as
a result of such refund or reduction. If the amount of such
refund or reduction subsequently is adjusted by a taxing
authority, Seller shall pay to Purchaser, or Purchaser shall
return to Seller, as an adjustment of the Purchase Price, an
amount necessary to reflect such adjustment. For purposes of
this Section 9.3.4, Seller or such affiliate shall not be deemed
to have had a tax refund or reduction of Tax otherwise payable as
a result of such carryback until all other tax benefits available
in that year have first been taken into account.
9.4. Tax Agreements and Arrangements. Effective on the date
of this Agreement, all agreements and arrangements pursuant to
which any Company makes a payment of Tax with respect to a
consolidated, combined or unitary group that includes a
corporation other than the Companies are terminated with respect
to the Companies, and the Companies shall not have any liability
under any such agreement or arrangement.
9.5. Tax Proceedings.
9.5.1. Purchaser promptly shall notify Seller of the
commencement of any audit or other proceeding with respect to a
tax return of a Company for which Purchaser may seek indemnity
hereunder (a "Proceeding"). Such notice shall specify, to the
extent then known to Purchaser, the action Purchaser in good
faith intends to take with respect to the Proceeding, but
Purchaser shall not thereby be restricted from taking other or
different action. If Purchaser elects to pay a Tax asserted
(whether or not Purchaser intends to seek a refund of such Tax),
Purchaser nevertheless shall not do so for at least thirty (30)
days after the date of its notice (or such shorter period as may
be required by law or by prudent practice) in order to permit
Seller to inform Purchaser of Seller's views as to the merits of
the assertion.
9.5.2. Purchaser shall use commercially reasonable efforts
to resist an assertion of Covered Taxes but shall not be required to
contest any such assertion if Seller consents. Seller shall give
its consent if (i) there would not be a reasonable probability of
having such claim declared to be incorrect by a court if the
matter were fully litigated, or (ii) Purchaser reasonably would
agree to such claim if Purchaser were not indemnified for such
claim, taking into account the collateral effects of such claims
on the applicable Company, as if the Company always had filed a
separate return with respect to such Tax. If Seller and Purchaser are
unable to resolve any dispute regarding the application of the principles
of this Section 9.5.2, the matter shall be referred for determination as
promptly as possible to the Third Accounting Firm, whose determination shall
be binding on the parties in the absence of fraud.
9.5.3. For purposes of Section 9.5.2 and to the extent
permitted by law, Purchaser may contest a claim for Taxes either by
contesting the imposition of such Tax prior to payment or by
paying the Tax and pursuing appropriate procedures for obtaining
a refund. If Purchaser elects the latter course, (i) Seller
shall indemnify Purchaser (to the extent it is required to do so
under the preceding provisions of this Section 9) promptly after
Purchaser's payment of the Tax; if a refund subsequently is
obtained, Purchaser shall turn over to Seller the amount of tax
(but not interest) refunded, together with interest on such
refund of tax from the date Seller made such indemnification
payment, at the rates in effect from time to time under Section
6621(a)(1) of the Code, and (ii) Purchaser actively and in good
faith will pursue such refund, regularly will keep Seller
informed of the status of the matter, and regularly will consult
with Seller regarding the matter.
9.5.4. Throughout any Proceeding, Purchaser and Seller will
cooperate and consult with each other from time to time in good
faith regarding the defense of such claim. Each of Purchaser and
Seller will afford the other and its attorneys and agents
reasonable access to all documents and other materials pertaining
to such claim the defense thereof. Neither Purchaser nor Seller
shall be required to disclose to the other a consolidated,
combined or unitary tax return including a corporation other than
a Company, but if information with respect to a Company contained
in such a return is relevant to a Proceeding, such information
shall be furnished as a pro forma separate return of the Company.
9.6. Miscellaneous Tax Matters.
9.6.1. The affiliated group of which Seller is the common parent
has not elected or applied for permission, and shall not elect or apply for
permission, to discontinue filing consolidated federal income tax returns.
9.6.2. Not later than ten (10) days before the Closing Date,
Seller shall provide Purchaser with a statement meeting the requirements
of Treas. Reg. 1.1445-2(b)(2)(i).
9.6.3 . After the Closing Date, Purchaser shall cause each
Company to elect, where permitted by law, to carry forward any
net operating loss or other item arising after the Closing Date
that would, absent such election, be carried back to a taxable
period of the Company ending on or before the Closing Date in
which the Company was included in a consolidated, combined or
unitary tax return of Seller or an affiliate of Seller.
10. EMPLOYEE BENEFITS AND INSURANCE
10.1. Establishment of Benefit Arrangements. Effective as of
the Closing Date, all Personnel shall cease participating in all
health care plans sponsored by the Seller, and Purchaser shall
cause such Personnel to be covered by health care plans
subsequent to the Closing Date which are substantially similar to
Seller's health care plans immediately prior to the Closing Date.
In doing so and in the coverage of such health care plan after
the Closing Date to such Personnel, (i) Personnel shall be
credited with service time or duration of employment under
Seller's health care plan, and (ii) Personnel and their covered
dependents shall be provided with a health care plan that (a)
does not require a waiting period after the Closing Date to
qualify, (b) waives any pre-existing condition that was accepted
under Seller's health care plan, and (c) will provide that any
amount paid by Personnel through the Closing Date for medical
expenses that are treated as deductible, coinsurance and maximum
out-of-pocket payments under Seller's health care plan shall
reduce the amount of any similar payments during a similar period
of qualification under the health care plan covering such
Personnel after the Closing Date.
10.2. WARN Act Matters. Purchaser shall indemnify and hold
Seller harmless from and against any loss which Seller incurs
under the WARN Act, or any similar state law arising out of, or
relating to, any actions taken by Purchaser or the Companies with
respect to Personnel after the Closing Date. Purchaser agrees to
provide Seller with advance notice of any "plant closing" or
"mass layoff," involving Personnel after the Closing, and to
comply with the provisions of the WARN Act if such actions are
taken.
10.3. Assumption of Sick Pay and Vacation Pay. Effective as
of the Closing, Purchaser shall arrange for the assumption of
Seller's obligations (if any) with respect to accrued sick pay
and vacation pay for the Personnel, to the extent that amounts in
respect of such obligations have been reserved on the Closing
Date Balance Sheet.
10.4. Payment of Health Benefit and Disability Claims.
Seller shall be responsible for the payment and administration
after the Closing Date of health benefit and short- and long-term
disability claims of Personnel and their covered dependents
incurred through the close of business on the Closing Date,
including (i) any short-term disability claims which may, by
reason of time, event or condition occurring after the Closing
Date, be deemed to be long-term disability claims to the extent
covered under Seller's Benefit Arrangements, or (ii) long-term
disability claims which may be incurred prior to the Closing
Date, but the waiting period for which shall end after the
Closing Date. Purchaser shall be responsible for the payment of
health benefit and short- and long-term disability claims of
Personnel and their dependents incurred after the Closing Date.
Seller agrees that it will duly and timely file all waivers of
premium for life insurance policies carried by Seller for the
lives of Personnel who, on or before the Closing Date, shall be
on short- or long-term disability leave and do not subsequently
return to employment.
10.5. COBRA Matters. Seller shall be responsible for
providing health care continuation coverage pursuant to the
requirements of COBRA, to the extent required by COBRA, for all
Personnel and their covered dependents who had a "qualifying
event" under COBRA to and through the event of Closing.
Purchaser will cause all Personnel to be offered enrollment under
a health care plan after the Closing Date in accordance with the
conditions set forth in Section 10.1 above.
10.6. Health Plan Coverage. Promptly after the execution and
delivery hereof, Seller will provide Purchaser with a complete
and accurate list of all covered lives of Personnel and their
covered dependents, and will offer reasonable assistance in the
coordination and delivery of information regarding health care
coverage to Purchaser and its health care insurance providers and
administrators. Within thirty (30) days after the Closing Date,
Seller shall provide Purchaser with reasonably acceptable
formatted information with respect to the status of health plan
deductible and out of pocket payments for the current plan year
as of the Closing Date.
10.7. Insurance Policies and Proceeds.
10.7.1. If, in the period from the date hereof through the
Closing Date, any Company shall sustain loss, liability or damage
with respect to any of its assets or business and such loss,
liability or damage is insured pursuant to policies of insurance
maintained by Seller, Seller agrees to pay any proceeds received
by it pursuant to such policies of insurance to the affected Company.
10.7.2. Upon the reasonable request of Purchaser after the
date hereof, and subject to such additional or further documentation
as Seller may reasonably request, Seller agrees that it will use
its best efforts to purchase extended reporting period coverage
(so-called "tail" coverage) for a period of at least one (1) year
under any of its "claims made" insurance policies for the benefit
of Purchaser and the Companies, provided that Purchaser shall
indemnify and hold Seller harmless from and against all costs,
expenses and liabilities of carrying such additional coverage for
the Purchaser and the Companies.
10.8. No Third Party Beneficiaries. Notwithstanding any
possible inferences to the contrary, neither Seller nor Purchaser
intends for this Section 10 to create any rights or obligations
except as between Seller and Purchaser and no past, present or
future employees of Seller or Purchaser shall be treated as third
party beneficiaries of this Section 10.
11. TERMINATION
11.1. Grounds for Termination. This Agreement may be
terminated at any time prior to Closing (i) by mutual written
consent of Purchaser and Seller; (ii) by either Purchaser or
Seller by notice to the other party if, without the fault of such
terminating party, the purchase and sale of the Shares shall not
have been consummated on or before October 21, 1997, or such
other later date as Purchaser and Seller shall agree in writing;
(iii) by either Purchaser or Seller by notice to the other party
if any Governmental Body having competent jurisdiction shall have
issued an Order or taken any other action restraining, enjoining
or otherwise prohibiting the transactions contemplated hereby and
such Order or other action shall have become final and non-
appealable; (iv) by Purchaser by notice to Seller, at any time
prior to the date of service of the notice under Section 11.1.1
below, if either the Supervisory Board of Xxxxxx + Xxxx XX shall
have voted against approving this transaction for any reason
whatsoever, or if by September 2, 1997, the Supervisory Board of
Xxxxxx + Jahr AG shall not have voted to approve this transaction;
or (v) by Seller by notice to Purchaser if:
11.1.1. Purchaser shall not have served written notice on
Seller on or before September 2, 1997, that the condition described
in Section 8.2.8 above shall have been satisfied, or
11.1.2. Purchaser shall have failed to provide Seller with
satisfactory proof of Purchaser's filing of its notification and
report form with the Antitrust Authorities as required under the
HSR Act on or prior to Monday, August 18, 1997, provided however,
that Seller shall have, in its sole discretion, the right to
waive its right to terminate this Agreement for the failure
timely to file as aforesaid, and if Seller shall waive such right
of termination, the Purchase Price will be increased by $250,000
as of the close of business on August 18, 1997, and by a further
$25,000 on the close of each calendar day after August 18, 1997
that such filing under the HSR Act shall not have been made by
Purchaser.
11.2. Procedure and Effect of Termination. In the event of
termination of this Agreement pursuant to Section 11.1, such
termination shall be without liability of either party (or any
shareholder, director, officer, employee, agent, consultant or
representative of such party) to the other party; provided that
if the failure to consummate the purchase and sale of the Shares
arises from the intentional breach by either party of any of its
covenants made in this Agreement or the intentional misrepresentation
or breach of its representations or warranties made in this Agreement,
such breaching party shall be fully liable for any and all resulting
damages, costs and expenses (including, but not limited to, reasonable
attorneys' fees) sustained or incurred by the other party, provided further
however that the failure of the Supervisory Board of Xxxxxx + Xxxx XX to
approve this transaction, or its vote against approval thereof, shall in
no case be deemed to be an intentional breach by Purchaser hereof.
12. SURVIVAL OF REPRESENTATIONS AND INDEMNIFICATION
12.1. Environmental and Other Representations. For the
purposes of this Article 12, the term "Environmental Representations"
shall mean those representations and warranties made by Seller in
Section 5.22 above, and "Other Representations" shall mean all other
representations and warranties made by Seller or Purchaser herein.
To the extent that a matter shall become the subject of an indemnification
hereunder and which reasonably is covered by the specific provisions of
Section 5.22 above as well as any other representations and warranties made
by Seller, the same shall be deemed to be an Environmental Representation.
12.2. Survival. All representations and warranties made in
this Agreement and all covenants and agreements made by Purchaser
and Seller in this Agreement shall be deemed to be continuing and
shall survive the sale of the Shares on the Closing Date to the
extent set forth in Sections 12.2.1 and 12.2.2 below:
12.2.1. Seller shall have no liability to Purchaser with
respect to any misrepresentation or breach of any Environmental
Representation, unless on or before the tenth anniversary of the
Closing Date, Purchaser shall have given Seller notice asserting
a claim with respect thereto and specifying the factual bases of
such claim in reasonable detail to the extent then known (an
"Environmental Claim").
12.2.2. No party shall have any liability to the other party
hereunder with respect to any misrepresentation or breach of any
Other Representation unless on or before the second anniversary
of the Closing Date, it is given notice asserting a claim with
respect thereto and specifying the factual bases of such claim in
reasonable detail to the extent then known, provided, however,
that a claim for breach of any covenant or for breach of any
representation or warranty made by Seller contained in (i)
Sections 5.2 (Ownership of Shares), 5.3 (Organization and
Standing of the Companies) and 5.4 (Capitalization) may be made
until such time as the applicable statute of limitations with
respect to the enforcement of any contract claims shall have
expired, and (ii) Sections 5.12 (Taxes; Reports and Filings) may
be made until such time as the statute of limitations applicable
to the Taxes in question shall have expired.
12.3. Indemnification.
12.3.1. Subject to the limitations and qualifications set
forth in Sections 12.3.3, 12.3.4, 12.4 and 12.5 hereunder, Seller shall
indemnify and hold Purchaser harmless against all Damages arising from or
in connection with (i) any breach of any covenant made by Seller in this
Agreement (including, without limitation, the obligation of Seller with
respect to its obligations under Sections 9 and 10 hereof), and (ii) any
breach of any of the representations or warranties made by Seller in this
Agreement, provided, however, that there shall be no right to indemnification
under this Section 12.3.1 with respect to a breach of such a covenant or
representation or warranty unless a claim with respect thereto is asserted
in writing against Seller prior to the expiration of the applicable period
provided in Sections 12.2.1 and 12.2.2.
12.3.2. Subject to the limitations and qualifications set forth
in Sections 12.3.3, 12.4 and 12.6 hereunder, Purchaser shall indemnify and
hold Seller harmless against all Damages arising from or in connection with
(i) any breach of any covenant made by Purchaser in this Agreement (including
without limitation, the obligation of Purchaser with respect to its
obligations under Sections 9 and 10 hereof), and (ii) any breach of any of
the representations or warranties made by Purchaser in this Agreement,
provided, however, that there shall be no right to indemnification under
this Section 12.3.2 with respect to a breach of such a covenant or
representation or warranty unless a claim with respect thereto is asserted
in writing against Purchaser prior to the expiration of the applicable period
provided in Sections 12.2.2.
12.3.3. With respect to all indemnification claims for Damages
made by one party against the other in connection with the breach
of any of the representations or warranties made by the other in
this Agreement (except Seller's obligations with respect to any
breaches of Environmental Representations), the indemnifying
party shall not be obligated to pay the first $500,000 thereof in
the aggregate for all indemnification claims (so, for example, if
Purchaser should seek indemnification of Damages of $500,001 and
sustain its claims therefor, Seller would only be obligated to pay Purchaser
the last $1.00 thereof; herein, such deductible amount being the "Cushion"),
and the maximum aggregate amount to which the indemnifying party may be
liable to the other party hereto under or in connection with this Agreement
(not taking into effect the Cushion) would be the Purchase Price (herein, the
"Cap"). Notwithstanding anything herein to the contrary, the Cushion shall
not apply to any indemnification claim made by Seller against Purchaser, or
by Purchaser against Seller, for a breach of any covenant herein made.
12.3.4. With respect to all indemnification claims for Damages
made by Purchaser against Seller in respect of Environmental
Representations ("Environmental Damages"), the following
provisions shall apply:
12.3.4.1. The first $1,000,000 of Environmental Damages shall be
borne equally by Purchaser and Seller (and any sharing of such Environmental
Damages as set forth in Sections 12.3.4.1 - 12.3.4.3 shall be subject to the
following, namely, that any payment of such Environmental Damages made by
Purchaser shall not be subject to any Claim for indemnity against Seller, nor
shall any payment of such Environmental Damages made by Seller affect the
Cushion (nor be mitigated by application of the Cushion), but shall be
counted as applicable to any calculation of the Cap);
12.3.4.2. The second $1,000,000 of Environmental Damages shall be
borne 25% by Purchaser and 75% by Seller;
12.3.4.3. All Environmental Damages in excess of $2,000,000,
up to $9,150,000 (subject to Section 12.3.4.4 below) shall be borne
solely by Seller, with the maximum aggregate amount to which Seller
could be liable for Environmental Damages being $8,400,000.
12.3.4.4. The maximum aggregate amount to which Seller could be
liable for Environmental Damages to Purchaser shall reduce by $1,200,000 on
the fourth and each subsequent anniversary of the Closing Date, and each such
reduced amount shall apply only with respect to Environmental Claims made on
or after the applicable anniversary of the Closing Date.
12.3.4.5. Seller shall have no liability to Purchaser with respect
to any Environmental Damage that is not a "Reasonable Environmental Expense",
defined as follows:
(a) With respect to Environmental Damages
that do not arise from a duty under Environmental Law, a
Reasonable Environmental Expense is an expense or other cost
that is reasonably necessary for the continued utilization
of the property in question in a manner consistent with its
use as of the Closing Date, but only to the extent that a
reasonable and prudent Person in the Purchaser's position
would choose to incur such expense or cost in order to
minimize Environmental Damages to such Person that over a
period of time could arise from the relevant Environmental
Condition, if such Person did not have the benefit of a
contractual indemnity but rather would be paying for such
present or future Damages with its own funds. Determining
what is a Reasonable Environmental Expense with respect to
Damages that do not arise from noncompliance with or a duty
under Environmental Law shall include consideration of
factors such as (i) the estimated cost of the contemplated
current expense, (ii) the magnitude and likelihood of
Environmental Damages that may result if such expense is not
incurred, and (iii) the value of the property to which the
Environmental Expense relates.
(b) With respect to Environmental Damages
that arise from a duty imposed under Environmental Law, but
where applicable Environmental Law allows the Purchaser a
range of options with significantly differing costs
concerning compliance with or discharge of that duty, an
expense or cost shall be deemed a Reasonable Environmental
Expense only if it is an expense that (i) is one of the
options that a reasonable and prudent Person in the
Purchaser's position would incur to comply with or to
discharge the duty imposed under Environmental Law, if such
Person did not have the benefit of a contractual indemnity
but rather would be paying for such cost or expense with its
own funds (and in a jurisdiction that has formally adopted
risk-based cleanup standards for the presence of Hazardous
Materials in the soil, groundwater and other environmental
media based upon current or future land uses if such
standards and the cost of meeting them differ according to
the current or future land use type, then only expenses and
other costs associated with attaining such standards as are
applicable to the property's land use as of the Closing Date
shall be deemed a Reasonable Environmental Expense); (ii) is
incurred pursuant to an order of a Governmental Body under
Environmental Law; or (iii) is incurred in order to prevent
or xxxxx an imminent and substantial endangerment to human
health or the environment from or in response to an
Environmental Condition, Release or threatened Release.
(c) Notwithstanding the preceding clauses (a)
and (b) of this Section, with respect to any Environmental
Damages, a cost or expense shall not be deemed a Reasonable
Environmental Expense to the extent that such cost or
expense, or any duty under Environmental Law to undertake
the activity giving rise to such cost or expense, arises
from any actual or proposed demolition, remodeling,
expansion, construction, replacement or similar activity by
or at the direction of Purchaser or any Affiliate of
Purchaser in, on, under or within any such property that is
neither (i) otherwise required to be undertaken under any
Environmental Law or other applicable Law, nor (ii)
reasonably necessary for the continued utilization of the
property in a manner consistent with its particular use as
of the Closing Date.
(d) For a Claim of Purchaser under the
Environmental Representations (an "Environmental Claim") to
be eligible for indemnification under this Section 12, prior
to incurring any costs or expenses for which indemnification
is to be sought, Purchaser shall provide Seller with a
notice (an "Environmental Claim Notice"), which notice shall
include documentation showing in reasonable detail the basis
for Purchaser's assertion that the proposed action and the
costs and expenses anticipated to be incurred are Reasonable
Environmental Expenses. Purchaser shall provide, and cause
its representatives to provide, Seller and Seller's
authorized representative access to and the opportunity to
review related studies, records, sampling data, cost
estimates and other related documents utilized by Purchaser
in connection with establishing the Environmental Claim.
Unless Seller delivers written notice to Purchaser prior to
the thirtieth day following Seller's receipt of the
Environmental Claim Notice disputing its liability to
indemnify Purchaser with respect to all or part of the
Environmental Claim, which notice shall specify in
reasonable detail the basis therefor, Seller shall be deemed
to have agreed to indemnify Purchaser in respect of such
Environmental Claim. If Seller so disputes its liability to
indemnify Purchaser in respect of all or part of an
Environmental Claim, Purchaser and Seller shall use
reasonable efforts to resolve in good faith their
differences and any resolution by them shall be reduced to
writing and signed by a duly authorized officer of the
respective parties and shall be final, binding and
conclusive on the parties. Notwithstanding any other
provision of this Section, Purchaser shall not be required
to provide an Environmental Claim Notice to Seller before
incurring any costs or expense (i) pursuant to an order by a
Governmental Body under Environmental Law, or (ii) in order
to prevent or xxxxx an imminent and substantial endangerment
from an Environmental Condition, Release or threatened
Release, provided, however, that the (b) and (c) above shall
otherwise continue to be applicable.
(e) If, after sixty (60) days following
delivery of the Environmental Claim Notice (or such other
period as Seller and Purchaser may then agree), any
Environmental Claim or part thereof remains in dispute, the
disputed Environmental Claim shall be submitted for final
resolution to an Environmental Panel, consisting of one
representative chosen by each of Seller and Purchaser, and a
third person chosen mutually by such representatives
("Environmental Panel"). Each party agrees to execute, if
requested by the members of the Environmental Panel, a
reasonable engagement letter in form and substance
satisfactory to such members. Representatives on the
Environmental Panel shall be experienced in dealing with the
impact that adverse environmental conditions may have on the
value and/or use of real property. All fees and expenses
relating to the work, if any, to be performed by the
Environmental Panel shall be borne equally by Seller and
Purchaser. The Environmental Panel shall act as an
arbitrator to determine, based solely on presentations by
Purchaser and Seller and their respective representatives,
and not by independent review, the Environmental Claim, or
part thereof, in dispute. Purchaser and Seller and their
respective representatives shall cooperate fully with the
Environmental Panel. Purchaser and Seller shall provide,
and shall cause their representatives to provide, the
Environmental Panel and its representatives such assistance
and access to the relevant site or property that is the
basis of the Environmental Claim, and any studies, reports,
sampling data, cost estimates and other documents as the
Environmental Panel shall reasonably request. The
Environmental Panel's determination shall be based upon
majority vote, shall be made within thirty (30) days of the
date of selection of the third arbitrator, or such other
time as Purchaser, Seller and the Environmental Panel may
mutually agree, shall be set forth in a written statement
delivered to Purchaser and Seller (which statement shall
merely award allocation of responsibility with respect to
the disputed Environmental Claim), and shall be final,
binding and conclusive on Purchaser and Seller.
(f) Upon the payment to Purchaser for any
Environmental Damages arising out of an Environmental Claim,
Seller shall be subrogated to all rights and causes of
action which Purchaser may have against any third Person to
the extent of such Environmental Damages in excess of
Environmental Damages suffered and paid by Purchaser
pursuant to Sections 12.3.4.1 to 12.3.4.4 above.
12.4. Indemnification Net of Proceeds and Recoveries. Any
payments due from one party to the other in respect to a claim
for indemnification (i) shall be computed net of any proceeds
from any insurance policy or from a recovery made against any
third Person under any statutory or common law remedy, to the
extent that such proceeds have been actually received by the
indemnified party with respect to such claim by the indemnified
party at the time such indemnification payments are due from the
indemnifying party, less any costs and expenses reasonably
incurred by the indemnified party in connection with obtaining
such proceeds (provided that nothing in this Section 12.4 shall
be deemed to require the indemnified party to seek recovery against any
such third Person as a condition of receiving indemnification), and (ii)
shall be treated as an adjustment to the Purchase Price.
12.5. Effect of Tax Benefit on Damages. With respect to any
Damages to which Section 12.3.1 applies:
12.5.1. The amount of Damages shall be computed taking into
account any Tax benefit actually realized, in the year in which
Seller makes an indemnification payment in respect of the Damages
or in a prior year, by a Company as a result of such Damages.
For purposes of this Section 12.5.1 and of Section 12.5.2, a
Company shall not be deemed actually to have realized a tax
benefit as a result of Damages in any year until all other tax
benefits available in that year have first been taken into account.
12.5.2. If in a subsequent year (but not later than the second
taxable year after the year in which an indemnification payment
is made) a Company actually realizes a tax benefit as a result of
the Damages giving rise to such indemnification payment, Purchaser will
pay Seller, as an increase of the Purchase Price, an amount equal to the
amount of such tax benefit attributable to such Damages.
12.5.3. If a tax benefit that has been taken into account
pursuant to Section 12.5.1 is wholly or partially disallowed by a
taxing authority, Seller shall pay to Purchaser, as a reduction
of the Purchase Price, an amount equal to
(i) the amount Seller would have paid with respect
to such Damages had such disallowed tax benefit not
been taken into account pursuant to Section 12.5.1,
- minus -
(ii) the amount paid by Seller with respect to such Damages,
-with interest incurred by reason of the disallowance of the
tax benefit; interest shall be treated as having been incurred
by reason of such disallowance even if no interest actually
was paid by reason of the availability of an item offsetting
such disallowance.
12.5.4. If Purchaser has made a payment pursuant to Section
12.5.2 and the tax benefit with respect to which such payment was
made is wholly or partially disallowed by a taxing authority, Seller
shall return to the Purchaser, as a reduction of the Purchase Price,
the amount of such payment attributable to the disallowed tax benefit,
with interest incurred by reason of the disallowance of the tax benefit;
interest shall be treated as having been incurred by reason of such
disallowance even if no interest actually was paid by reason of the
availability of an item offsetting such disallowance.
12.6. Effect of Taxes on Receipt of Indemnification Payments.
If any Taxes are imposed on a Company or Purchaser with respect
to any indemnification payment made by Seller under this Agreement
(including this Section 12.6), Seller will pay Purchaser, as a
reduction of the Purchase Price, an amount equal to such Taxes.
12.7. Indemnification Exclusive Remedy. Except as set forth
in Sections 9 and 10, the indemnification procedures and remedies
set forth in this Section 12, including the qualifications and
limitations contained herein, shall constitute the sole and
exclusive remedy for any party hereto for a breach of any
covenant or representation or warranty of the other party hereto.
12.8. Indemnification Procedure - Third Party Claims. Seller
or Purchaser, as the case may be, shall promptly notify the party
against whom the right to indemnification arises (the "Indemnifying Party")
of any claim by any third party coming to the attention of the party in
whose favor the right to indemnification runs (the "Indemnified Party"),
which claim may result in any liability hereunder on the part of the
Indemnifying Party. The Indemnifying Party shall be entitled at its own
expense to conduct the defense of any such third party claim with
counsel of its own choosing, but the Indemnified Party shall be
entitled to participate in such defense with the counsel of its
own choosing and at its own expense, provided that control of the
defense shall remain with counsel for the Indemnifying Party.
Failure to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations hereunder, except to the
extent that the defense of any claim is prejudiced by such
failure to give notice. The Indemnifying Party shall have the
right to compromise or settle, but for money damages only, any
third party claim giving rise to any obligation for
indemnification hereunder. Any third party claim compromised or
settled by the Indemnified Party without the prior written
consent of the Indemnifying Party shall not be subject to
indemnification hereunder.
13. MISCELLANEOUS
13.1. Modification, Amendment and Waiver. No modification,
amendment or waiver of this Agreement shall be binding unless
executed in writing by the parties hereto, or in the case of a
waiver, by the party granting such waiver. No waiver of any
provisions of this Agreement shall constitute a waiver of any
other provisions (whether or not similar), nor shall such waiver
constitute a continuing waiver unless otherwise expressly
provided. No failure or delay by either party in exercising any
right, power or privilege hereunder shall operate as a waiver
thereof nor shall any single or partial exercise thereof preclude
any other or further exercise thereof or the exercise of any
other right, power or privilege.
13.2. Authorizations; Consents and Further Documentation.
Prior to the Closing Date, (i) Seller shall, and shall cause each
Company to, request and/or make, and use its reasonable efforts
to timely obtain or complete each written consent or waiver of
rights any Person may have (by reason of the execution, delivery
or performance of this Agreement) to modify, terminate or
accelerate any Material Contract, and (ii) each of the parties
shall request and/or make, and use its reasonable efforts to
timely obtain or complete all registrations or filings with, and
all consents, authorizations or approvals of, all Governmental
Bodies which are required or necessary to consummate the trans-
actions contemplated hereby. If after the Closing Date, any
further action is necessary or desirable to carry out the
purposes of this Agreement or implement expeditiously the
transactions contemplated hereby, the parties hereto shall take
or cause to be taken all such reasonable and necessary action
including without limitation executing and delivering documents,
certificates, agreements or other writings.
13.3. Notices. Any notice or other communication required or
permitted hereunder shall be in writing, and shall be deemed
given when delivered personally, or when sent by telecopier (with
receipt confirmed), provided that in each case a copy is sent by
Federal Express or posted by United States registered or
certified mail with postage prepaid, to the parties addressed as
follows:
If to Seller: Devon Group, Inc.
000 Xxxxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxxxx, XX 00000
Attention: Xx. Xxxxx Xxxx Fax No. (000) 000-0000
Executive Vice President
with a copy to: X'Xxxxxxxx Graev & Karabell, LLP
00 Xxxxxxxxxxx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxxxx X. Xxxxx, Esq. Fax No. (000) 000-0000
If to Purchaser: BGJ Enterprises, Inc.
0000 Xxxxxxxx
Xxx Xxxx, XX 00000
Attention: Xx. Xxxx X. Xxxxx Fax No. (000) 000-0000
President
with a copy to: Bertelsmann, Inc.
0000 Xxxxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxxxxxx Xxxxxx, Esq. Fax No. (000) 000-0000
Vice President - Legal
with a copy to: Xx. Xxxx Xxxxxxxx Fax No. (000) 000-0000
with a copy to: Fox & Xxxxx Fax No. (000) 000-0000
Xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxxx X. Xxxxxxxx, Xx., Esq.
Each of the foregoing shall be entitled to specify a different address by
giving notice as aforesaid to the others, provided that notices of a change
of address shall be effective only upon receipt thereof.
13.4. Headings. Section and subsection headings are not to be
considered part of this Agreement and are included solely for convenience
and are not intended to be full or accurate descriptions of the content
thereof.
13.5. Exhibits. Exhibits, schedules (including the Schedule),
certificates, financial statements and other documents referred to or
delivered in connection with this Agreement are an integral part of this
Agreement.
13.6. Partial Invalidity. If one or more of the provisions
of this Agreement shall for any reason be held invalid, illegal
or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision of this
Agreement, and this Agreement shall be construed as if such invalid,
illegal or unenforceable provision had never been contained herein.
13.7. Successors and Assigns. All of the terms, provisions,
covenants, representations, warranties and conditions of this
Agreement shall be binding upon, and shall inure to the benefit
of, the parties hereto and their respective successors and
assigns. Neither party may assign, delegate or otherwise
transfer any of its rights or obligations under this Agreement
without the consent of the other party hereto except that
Purchaser may transfer or assign, in whole or from time to time
in part, to one or more of its Affiliates, the right to purchase
all or a portion of the Shares, but no such transfer or
assignment shall relieve Purchaser of its obligations hereunder.
13.8. Governing Law. The parties hereby agree that this
Agreement shall be governed by the substantive laws of the State
of New York applicable to contracts made and to be performed in
such State, without regard to principles of conflicts of law.
13.9. Consent to Jurisdiction and Venue. Each of Seller and
Purchaser irrevocably (i) agrees that any suit, action or other
legal proceeding arising out of or relating to this Agreement may
be brought in a court of record in the State of New York or in
the Federal District Court for the Southern District of New York
(assuming such Court otherwise has subject matter jurisdiction),
(ii) consents to the personal jurisdiction of each such court in
any such suit, action or proceeding and (iii) waives any
objection which it may have to the laying of venue of any such
suit, action or proceeding in any of such courts and any claim
that any such suit, action or proceeding has been brought in an
inconvenient forum. Nothing in this Section 13.9 shall affect
the right to bring any suit, action or proceeding against Seller
or Purchaser or their respective properties in any other court
having jurisdiction.
13.10. Interest on Outstanding Amounts. Except as otherwise
specifically set forth herein as to the payment of interest, if
one party shall owe the other party any amounts of money, such
amounts outstanding from time to time shall accrue interest at
the Interest Rate as may be applicable from time to time, from
the date that any notice is given that such amount is owed until
the date of payment of the amount owed in full.
13.11. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument.
13.12. Entire Agreement. This Agreement constitutes the entire
agreement among the parties hereto pertaining to the subject
matter hereof and supersedes all prior and contemporaneous
agreements (except those contemplated hereunder), understandings,
negotiations and discussions, whether oral or written, of the
parties hereto.
IN WITNESS WHEREOF, this Agreement has been duly executed
and delivered by Seller and by Purchaser by their respective duly
authorized officers, all on the date first above written.
BGJ ENTERPRISES, INC. DEVON GROUP, INC.
By: s/Xxxx X. Xxxxx By: s/Xxxxx Xxxxxxxxx, Xx.
Name: Name:
Title: Title:
