ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "AGREEMENT") is made on this 28th
day of September, 2001, by and between SunSource Technology Services, LLC, a
Delaware limited liability company ("SELLER") and STS Operating, Inc., a
Delaware corporation ("BUYER").
RECITALS:
WHEREAS, Seller is in the business of assembling, distributing,
marketing, and selling hydraulic, pneumatic, electronic and filtration parts and
equipment, and related parts and equipment, to industrial customers and of
providing engineering design, equipment repair, product upgrades, and assembly
of subsystems services, and related services, to industrial customers
(collectively, the "BUSINESS"); and
WHEREAS, Buyer desires to purchase from Seller, and Seller desires to
sell to Buyer, substantially all of Seller's assets used in the Business.
NOW, THEREFORE, in consideration of the premises, the mutual promises
set forth herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:
ARTICLE I
SALE OF ASSETS; LIABILITIES
1.1 Acquired Assets to be Sold at the Closing.
Except as otherwise provided in Section 1.2, at the Closing (as
defined in Section 3.1 below), Seller shall sell, transfer, assign, convey and
deliver to Buyer all of the assets, properties and other rights of Seller
relating to, arising from or used or usable in the Business of every type and
description, real, personal and mixed, tangible and intangible, known or
unknown, fixed or unfixed, xxxxxx or inchoate, accrued, absolute, contingent or
otherwise, wherever located and whether or not reflected on the books and
records of Seller (all of such assets, properties and rights hereinafter
collectively referred to as the "ACQUIRED ASSETS"), including but not limited
to:
(a) all of Seller's inventories as of the Closing, including
all raw materials, finished goods, work in progress, marketing materials and
production, shipping and packaging supplies (the "INVENTORY");
(b) all of Seller's leasehold interest in the real property
leased by Seller in connection with the Business identified in Schedule 4.8(d)
(the "LEASED PROPERTY"), together with the furniture, fixtures, leasehold
improvements, furnishings, machinery and other property maintained, owned or
held by Seller and which are used in connection with the operation of the
Business or the Acquired Assets;
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(c) all of Seller's right, title and interest in the equipment,
computer hardware and software, telecommunications equipment, office supplies,
machine shop supplies and other tangible assets maintained, owned, leased or
held by Seller as of the Closing Date (as defined in Section 3.1 below);
(d) all of Seller's right, title and interest in and to the
outstanding securities of its wholly-owned Subsidiaries, as set forth in Section
4.4 below;
(e) all of Seller's rights, title and interest in and to all of
the patents, trade secrets, know-how, service marks, copyrights, franchises,
licenses, domain names, trademarks, logos, and trade names maintained, owned or
held by Seller, and any derivatives and formatives thereof, which are used in
connection with the Business (including, without limitation and as applicable,
any and all applications, registrations, extensions and renewals relating
thereto) as set forth in Schedule 4.10 and all of the rights associated
therewith;
(f) all bank accounts, deposits, credits, deferred charges,
security deposits, advances, escrows and prepaid expenses in connection with the
Business;
(g) all restrictive covenants, rights to subordination and
other contract rights which exist under the Assumed Contracts (as defined in
Section 1.3(a) below) or which otherwise inure to the benefit of Seller related
to the Business or the Acquired Assets;
(h) all accounts receivable, notes receivable and other rights
to payment of money arising from the Business existing as of the Closing Date
(the "RECEIVABLES");
(i) all claims, causes of action, judgments and demands related
to the Business, including claims against third party payors for services
rendered and all defenses with respect to Assumed Environmental Liabilities (as
defined in Section 1.3(a) below) and other matters;
(j) all letterheads, graphics, logos, telephone numbers and
post office boxes used in or relating to the Business;
(k) all customer accounts relating to the Business and all of
Seller's rights to service such customer accounts;
(l) all customer, supplier and prospect lists, contacts and
files relating to the Business;
(m) all sales materials, catalogs, brochures, pricing and other
marketing information and all similar data of all kinds used in or relating to
the Business;
(n) all business records and other books, papers, files and
records pertaining to the operations of the Business (including but not limited
to operations manuals, accounting records (including work papers related
thereto), advertising data, contracts, purchase orders, files,
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books, forms, correspondence, any other papers and documents having to do in any
way with the Business), but not the certificate of formation, bylaws, minute
books, interest transfer records, or other limited liability company records of
Seller; and
(o) all goodwill and going concern value of Seller.
1.2 Excluded Assets.
Anything in Section 1.1 to the contrary notwithstanding, the
assets set forth in Schedule 1.2 shall be excluded from the Acquired Assets to
be transferred to Buyer hereunder.
1.3 Liabilities.
(a) Buyer assumes and shall be liable for the following
liabilities and obligations relating to the Business (collectively, the "ASSUMED
LIABILITIES"):
(i) all of Seller's unpaid accounts payable (trade)
related to the Business and reflected in the balance sheet of Seller dated as of
August 25, 2001 (the "8/25/01 BALANCE SHEET"), as set forth in Schedule 4.5,
together with all such unpaid accounts payable arising thereafter in the
ordinary course of business consistent with past practices, through and
including the Closing Date (the "ASSUMED ACCOUNTS PAYABLE");
(ii) all of Seller's unpaid (A) capital lease obligations
(current and long term), (B) accrued salaries, wages and bonuses, and (C) other
accrued liabilities (current and non-current) related to the Business and
reflected in the 8/25/01 Balance Sheet, together with all such unpaid capital
lease obligations, accrued salaries, wages and bonuses, and other accrued
liabilities arising after August 25, 2001 in the ordinary course of business
consistent with past practices, through and including the Closing Date (the
"ASSUMED ACCRUED EXPENSES");
(iii) Seller's accrued taxes (other than United States
federal, state and local income taxes, but including the taxes assessed by all
Canadian taxing authorities) related to the Business, reflected in the 8/25/01
Balance Sheet and detailed in Schedule 1.3(a)(iii), together with such accrued
taxes arising after August 25, 2001 in the ordinary course of business
consistent with past practices, through and including the Closing Date (the
"ASSUMED ACCRUED TAXES");
(iv) all unperformed or unfulfilled liabilities and
obligations arising from and after Closing under the contracts, leases,
agreements, arrangements or understandings (including purchase orders) to which
Seller is a party or which relate to the Business that are set forth in Schedule
1.3(a)(iv) hereto, in each case whether or not there are any written contracts
with respect thereto (the "ASSUMED CONTRACTS");
(v) all liabilities and obligations of SunSource Group
related to the Business of any type whatsoever (whether past, current or future,
or known or unknown to Seller) arising out of or related to any Environmental
Law or Hazardous Material, including,
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without limitation, all matters set forth in Schedule 4.16 ("ASSUMED
ENVIRONMENTAL LIABILITIES"). For purposes of this Agreement, "ENVIRONMENTAL LAW"
means any federal, state, foreign, provincial or local law, ordinance, rule,
regulation, code, duty under common law or order, including, without limitation,
any requirement imposed under any permit, license, approval, authorization,
judgment, consent decree, registration, agreement, recorded covenant,
restriction or easement, the purpose of which is to regulate or protect human
health, the environment, safety or natural resources, including, without
limitation, those relating to the use, handling, generation, transportation,
treatment, storage, disposal, release or discharge of any Hazardous Material.
For purposes of this Agreement, "HAZARDOUS MATERIAL" means petroleum or
petroleum products, petroleum by-products or petroleum breakdown products,
radioactive materials, asbestos-containing materials, polychlorinated biphenyls,
radon gas and any other chemicals, materials, substances or media designated,
classified or regulated as hazardous or toxic or as a pollutant or contaminant
under Environmental Law. For purposes of this Section 1.3(a)(v), "SUNSOURCE
GROUP" means Seller, SunSource Inc., SunSource Investment Company, Inc., The
Xxxxxxx Group, Inc., SunSub A, Inc., SunSub B, Inc. and any predecessor entities
to which any of the foregoing succeed by merger, asset purchase or otherwise;
(vi) Seller's obligations with respect to the claims,
actions and proceedings set forth in Schedule 4.11 (the "ASSUMED LITIGATION");
and
(vii) any liability or obligation to: (A) provide notices
and continuation coverage as required by the Consolidated Omnibus Budget
Reconciliation Act of 1985 ("COBRA"), to the Employees (as defined below in
Section 4.14), and their COBRA qualified beneficiaries, who have a COBRA
qualifying event on or after the Closing Date; and (B) provide continuation
coverage on and after the Closing Date, as required by COBRA, to Employees and
former Employees, and their COBRA qualified beneficiaries, who have a COBRA
qualifying event prior to the Closing Date or in connection with the
transactions contemplated under this Agreement and who are entitled to COBRA
continuation coverage on and after the Closing Date.
(b) Other than Assumed Liabilities, Buyer shall not assume, or
in any way be responsible for, and Seller shall remain liable for, any
liabilities or obligations arising out of, relating to or in connection with the
Business prior to the Closing, including, without limitation, the following:
(i) any liability or obligation of any type whatsoever
(whether in tort, contract or otherwise) arising out of or relating to
decisions, actions, omissions or occurrences taking place in connection with the
Business on or prior to the Closing, whether or not Seller has received notice
of any such liabilities or obligations;
(ii) any liability or obligation of or relating to
Seller's dealings or relations with its employees, agents, consultants or
contractors;
(iii) any United States or Canadian federal, state,
provincial county, local and foreign income, excise, sales, use, transfer,
payroll, withholding, real or personal
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property, franchise, gross receipts, ad valorem, business, occupation or other
taxes, duties, or governmental charges and assessments of any type whatsoever,
including any assessments, interest or penalties thereon, accrued for,
applicable to or arising from any period ending prior to or on the Closing Date
or which arise out of or relate to the consummation and performance of the
transaction contemplated hereby;
(iv) any liability or obligation of Seller arising out of
or in connection with the negotiation and preparation of this Agreement and the
consummation and performance of the transaction contemplated hereby, including
without limitation any income, sales, transfer, recordation or other tax or bulk
sales liability so arising (including any such liabilities or obligations which
under the law or practices of the location of the Business normally are borne by
Buyer unless the contractual arrangement provides otherwise);
(v) any liability or obligation owed by Seller to its
members, managers, employees or their affiliates;
(vi) any liability or obligation for (A) wages, bonuses,
insurance benefits, pension funds, stock options, employment agreements, or
other amounts owed to or payable on behalf of any employees, agents, or
contractors of Seller other than the Employees, including without limitation any
accrued vacation, sick pay, severance pay or other payments on account of
termination of former employees, or any contribution under any multi-employer
pension or other qualified benefit plan or plans, or (B) insurance benefits,
pension funds, stock options, employment agreements or other amounts owed to or
payable on behalf of any Employees;
(vii) except as expressly assumed by Buyer, all claims,
actions, proceedings and obligations arising prior to or on the Closing Date
under Seller's insurance and self-insurance programs, including, without
limitation, workmen's compensation, automobile and general liability; or
(viii) any other liability, obligation or commitment of
Seller, whether known or unknown and whether fixed or contingent, not
specifically constituting an Assumed Liability, it being specifically understood
that the obligations referenced in the 8/25/01 Balance Sheet under the line
items "Inter-company receivable (payable)," "Accrued interest payable
inter-company debt," "Accrued management fee payable," and "Inter-Company debt"
are not Assumed Liabilities.
1.4 Title and Risk of Loss.
Seller shall assume and bear all risk of loss or damage to, or
destruction of, the Acquired Assets due to theft, expropriation, seizure,
destruction, damage, fire, flood or other cause or casualty until title is
passed to Buyer as of the Closing.
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ARTICLE II
PURCHASE PRICE; ALLOCATION
2.1 Purchase Price.
(a) The purchase price for the purchase of the Acquired Assets
(the "PURCHASE PRICE") shall be $25,546,000, subject to adjustment as set forth
in Section 2.2.
(b) Subject to the terms and conditions of this Agreement, the
Purchase Price shall be paid as follows. Buyer shall, at Closing:
(i) pay $19,546,000 to Seller in cash (the "CASH
PAYMENT") by wire transfer of U.S. currency in immediately available funds to an
account designated in writing by Seller to Buyer not less than two business days
prior to the Closing Date;
(ii) pay 1,000,000 shares of the Series A Preferred
Stock, par value $1.00 per share, of Buyer (the "STOCK PAYMENT") to Seller by
delivery to Seller of a stock certificate evidencing the Stock Payment;
(iii) pay $1,000,000 in cash (the "ESCROW CASH"); and
(iv) pay 4,000,000 shares of the Series A Preferred
Stock, par value $1.00 per share, of Buyer (the "ESCROW SHARES") into an escrow
(the "INDEMNITY ESCROW") in accordance with the terms of an Escrow Agreement
substantially in the form of Exhibit F hereto (the "ESCROW AGREEMENT"). In
accordance with the Escrow Agreement, and as set forth in Article IX below, the
Escrow Cash and the Escrow Shares will be available to satisfy the obligations
of Seller to indemnify Buyer, as well as to provide reimbursement to Buyer for
certain identified expenses.
2.2 Purchase Price Adjustment.
(a) Within forty five days after the Closing Date, Buyer shall
deliver to Seller a balance sheet of the Business as of the Closing Date (the
"CLOSING DATE BALANCE SHEET"). The Closing Date Balance Sheet shall set forth
the net tangible asset value of the Business (the "CLOSING DATE NET TANGIBLE
ASSET VALUE"), which shall be calculated by subtracting the following from total
assets: goodwill, accounts payable, current lease obligations, accrued salary,
foreign income taxes, other accrued obligations and long term lease obligations.
Buyer shall prepare the Closing Date Balance Sheet in accordance with: (i) the
same practice standards and procedures used in the preparation of the Financial
Statements (as defined in Section 4.5 below); and (ii) all books, records and
accounts of Seller. Any extraordinary or non-recurring material liabilities,
including, without limitation, any liabilities associated with Buyer's
post-Closing decision to sublease or assign the lease relating to Seller's
Addison, Illinois Facility, shall not be reflected in the Closing Date Balance
Sheet without the prior written consent of Seller, which may be withheld in
Seller's sole discretion.
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(b) For the purposes of preparing the Closing Date Balance
Sheets, following the Closing, Buyer shall take the appropriate actions and use
appropriate accounting methods, consistent with generally accepted accounting
principles and Seller's past practices and perpetual inventory records and
inventory valuation methodologies consistent with past practices to determine
the Inventory transferred on the Closing Date by Seller, and Seller (or its
representatives) shall be permitted to observe such actions and review such
methods. Each party shall bear its own expense in connection therewith.
(c) Seller and its representatives shall have the right to
review all work papers and procedures used to prepare the Closing Date Balance
Sheet and shall have the right to perform any other reasonable procedures
necessary to verify the accuracy thereof. Unless Seller, within thirty days
after delivery to Seller of the Closing Date Balance Sheet, notifies Buyer in
writing that it objects to the Closing Date Balance Sheet, and specifies the
basis for such objection in writing, the Closing Date Balance Sheet shall become
final, binding and conclusive upon the parties for all purposes. If Buyer and
Seller are unable to resolve any objections to the Closing Date Balance Sheet
within ten days after any such notification has been given, the dispute shall be
referred to Ernst & Young LLP (the "DESIGNATED ACCOUNTANT") for resolution (or,
if the Designated Accountant is unavailable, to another nationally recognized
public accounting firm mutually agreed upon by Buyer and Seller within five days
from the date upon which the Designated Accountant notifies the parties that it
is not available). If Buyer and Seller are unable to agree upon the designation
of such an accounting firm within such time, either party may thereafter request
that the President of the American Arbitration Association make such
designation. The accounting firm so designated will make a determination as to
each of the items in dispute, which determination shall be final, conclusive and
binding upon each of the parties hereto. Buyer and Seller shall cooperate with
each other and with each other's authorized representatives in order to resolve
any and all matters in dispute under this Section 2.2(c) as soon as practicable
and shall share the fees and expenses of the Designated Accountant and, as
necessary, of the American Arbitration Association, equally.
(d) (i) For the purposes hereof, the term "BASE ASSET AMOUNT"
means $33,546,000.
(ii) If the Closing Date Net Tangible Asset Value is less
than the Base Asset Amount, then the Purchase Price shall be decreased dollar
for dollar in an amount equal to the difference between the Base Asset Amount
and Closing Date Net Tangible Asset Value (such difference being the "PURCHASE
PRICE REDUCTION"). Seller shall remit the amount of such Purchase Price
Reduction, with interest at the rate specified in Section 2.2(f) below, from the
Closing Date to the date of payment, to Buyer within five days after delivery to
Seller of the Closing Date Balance Sheet as provided in subsection (c) above
(the date of such remittance to be referred to herein as the "PURCHASE PRICE
REDUCTION REMITTANCE DATE"); provided, however, that the making of such payment
by Seller shall not constitute a waiver of Seller's right to object to the
Closing Date Balance Sheet during the thirty day period following its delivery.
If Seller does raise an objection and if the resolution of such objection
results in a reduction in the size of the Purchase Price Reduction after Seller
has remitted the Purchase Price Reduction to Buyer,
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Buyer shall remit the amount of any such reduction in the amount of the
Purchase Price Reduction, with interest, from the Purchase Price Reduction
Remittance Date, to Buyer within five days following final resolution of the
objection.
(iii) If the Base Asset Amount is less than the
Closing Date Net Tangible Asset Value, then the Purchase Price shall be
increased dollar for dollar by an amount equal to the difference between the
Closing Date Net Tangible Asset Value and the Base Asset Amount (such
difference being the "PURCHASE PRICE INCREASE"). Buyer shall remit the amount
of such Purchase Price Increase, with interest at the rate specified in
Section 2.2(f) below, from the Closing Date to the date of payment, to Seller
within five days after delivery to Seller of the Closing Date Balance Sheet as
provided in subsection (c) above (the date of such remittance to be referred
to herein as the "PURCHASE PRICE INCREASE REMITTANCE DATE"); provided,
however, that the acceptance of such payment by Seller shall not constitute a
waiver of Seller's right to object to the Closing Date Balance Sheet during
the thirty day period following its delivery. If Seller does raise an
objection and if the resolution of such objection results in an increase in
the size of the Purchase Price Increase after Buyer has remitted the Purchase
Price Increase to Seller, Buyer shall remit the amount of any such increase in
the amount of the Purchase Price Increase, with interest, from the Purchase
Price Increase Remittance Date, to Seller within five days following final
resolution of the objection.
(e) On the Purchase Price Reduction Remittance Date, or the
Purchase Price Increase Remittance Date, as the case may be, Buyer shall pay
to Seller (or its affiliate, as designated by Seller) an amount of money equal
to the sum of (i) the post-Closing cost of fees for the Seller Letters of
Credit maintained by Seller (or its affiliate) until Buyer fulfills its
obligations under Section 6.10(a)(ii) below; plus (ii) any amounts issued
under any of the Seller Letters of Credit that is drawn post-Closing before
Buyer fulfils its obligations under Section 6.10(a)(ii) below; plus (iii) the
post-Closing costs and expenses with respect to the guaranties maintained by
Seller (or its affiliates) that are described in Section 6.10(a) below.
(f) Any undisputed or resolved amounts shall be payable within
five days of the date such amount is determined to be undisputed or resolved,
with interest, even if other amounts continue to be disputed and unresolved.
Interest for purposes of this Section 2.2 shall be equal to the prime rate of
interest published in The Wall Street Journal on the first day of each month
during the period that such interest is due.
2.3 Allocation of the Purchase Price.
The Purchase Price shall be allocated among the Acquired Assets
in the manner set forth in Schedule 2.3 for all purposes, and each of the
parties shall make all appropriate tax and other filings on a basis consistent
with such allocation. The parties shall exchange drafts of any information
returns required by Section 1060 of the Internal Revenue Code of 1986, as
amended (the "CODE"), and all similar state statutes, at least 30 days prior
to filing any such return. Each party agrees not to assert, in connection with
any tax return, audit or other similar
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proceeding, any allocation of the Purchase Price which differs from the
allocation determined hereunder.
ARTICLE III
THE CLOSING
3.1 Closing.
(a) The closing of the sale and purchase of the Acquired
Assets (the "CLOSING") shall take place at the offices of Xxxxx Xxxxxxx
Xxxxxxx & Xxxxx LLP, 0000 00xx Xxxxxx, X.X., Xxxxxxxxxx, X.X. 00000, at 11:00
a.m., on __________________ (the "CLOSING DATE").
(b) Seller's Obligations at Closing. At the Closing, Seller
will deliver to Buyer, or will cause to be delivered to Buyer, the following:
(i) a duly executed Warranty Xxxx of Sale in the form
of Exhibit A hereto;
(ii) a duly executed assignment and assumption
agreement relating to the Assumed Liabilities, including the Assumed Contracts
(the "ASSIGNMENT AND ASSUMPTION AGREEMENT"), substantially in the form of
Exhibit B attached hereto;
(iii) a duly executed assignment with respect to the
trademarks and tradenames listed in Schedule 4.10 (the "TRADEMARK
ASSIGNMENT"), substantially in the form of Exhibit C attached hereto;
(iv) a duly executed assignment with respect to
copyrights listed in Schedule 4.10 (the "COPYRIGHTS ASSIGNMENT"),
substantially in the form of Exhibit D attached hereto;
(v) a duly executed assignment with respect to rights
to the domain names listed in Schedule 4.10 (the "ASSIGNMENT OF DOMAIN NAMES"),
substantially in the form of Exhibit E attached hereto;
(vi) a duly executed Escrow Agreement substantially in
the form of Exhibit F hereto;
(vii) releases, satisfactions or terminations of all
mortgages, financing statements or other evidences of liens with respect to
the Acquired Assets (except as to those obligations specifically to be assumed
by Buyer);
(viii) the opinion of counsel to Seller, dated as of the
Closing Date, addressed to Buyer, and substantially in the form of Exhibit G
attached hereto;
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(ix) a good standing certificate of the Secretary of
State of Delaware, dated no earlier than ten calendar days prior to the
Closing Date, certifying that Seller is in good standing in the State of
Delaware;
(x) a certificate of status of the Director of
Companies Branch, Ministry of Consumer and Commercial Relations of Ontario,
Canada, dated no earlier than ten calendar days prior to the Closing Date,
certifying that 1394066 Ontario Inc. is in good standing in the Province of
Ontario, Canada;
(xi) a certificate of status of The Registrar of Joint
Stock Companies of Nova Scotia, Canada, dated no earlier than ten calendar
days prior to the Closing Date, certifying that SunSource Technology Services
Canada Ltd., f/k/a X.X. Xxxxxx Canada Ltd., is in good standing in the
Province of Nova Scotia, Canada;
(xii) certificates of the appropriate officers of the
state in which Seller is headquartered, dated no earlier than ten calendar
days prior to the Closing Date, certifying that Seller is qualified to do
business and is in good standing as a foreign corporation in such state;
(xiii) copies of resolutions of the managers of Seller,
certified by the appropriate officer or manager of Seller, authorizing the
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated hereby;
(xiv) copies of resolutions of the sole member of
Seller, certified by the appropriate officer or manager of Seller, authorizing
the execution, delivery and performance of this Agreement and the consummation
of the transactions contemplated hereby;
(xv) a termination and release agreement between
Seller and each of Xxxxxx Xxxxxx, Xxxxxxx Xxxxxxx, Xxxxx Xxxxxx, Xxx Xxxxxxx,
Xxx Xxxxx, and Xxxx Xxxxxxxxx, substantially in the form of Exhibit H hereto
(the "TERMINATION AND RELEASE AGREEMENTS");
(xvi) an executive employment agreement between Buyer
and each of Xxxxxx Xxxxxx, Xxxxxxx Xxxxxxx, Xxxxx Xxxxxx, Xxx Xxxxxxx, Xxx
Xxxxx, and Xxxx Xxxxxxxxx, substantially in the form of Exhibit I hereto (the
"EXECUTIVE EMPLOYMENT AGREEMENTS");
(xvii) a consulting agreement between Buyer and Xxxxxxx
X. Xxxxxxx, Xx. substantially in the form of Exhibit J hereto (the "CONSULTING
AGREEMENT");
(xviii) a letter agreement between Seller and SunSource,
Inc., as the contributing sponsor of the X.X. Xxxxxx Company Retirement Income
Plan, relating to an employer reversion, substantially in the form of Exhibit
K hereto (the "REVERSION TRANSFER LETTER");
(xix) an agreement between Seller and Buyer,
substantially in the form of Exhibit L hereto (the "AGREEMENT TO TRANSFER
REIMBURSEMENT ACCOUNTS");
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(xx) a letter agreement between Seller and SunSource
Investment Company, Inc., substantially in the form of Exhibit M hereto (the
"FORM 5500 COMPLIANCE LETTER");
(xxi) an executed copy of resolutions of the sole
director of SunSource Investment Company, Inc. spinning off and merging the
account balances of participants in the SunSource Industrial Services
Companies Savings and Investment Plan who are not Employees or former
Employees into the Xxxxxxx Group Inc. Retirement Savings and Profit Sharing
Plan;
(xxii) stock certificate(s) representing all of the
issued and outstanding stock of 1394066 Ontario Inc., together with stock
power(s) covering said stock duly endorsed in blank;
(xxiii) the certificate set forth in Section 7.1(c)
below;
(xxiv) evidence that Seller has obtained consents and
landlord waivers as required in Section 7.4(b) below; and
(xxv) such other documents and instruments as shall be
required to consummate the transaction contemplated hereunder.
(c) Buyer's Obligations at Closing. At the Closing, Buyer will
deliver to Seller, or cause to be delivered to Seller, the following (except
in the case of the Escrow Cash and the Escrow Shares, which Buyer shall
deliver to the escrow agent identified in the Escrow Agreement):
(i) the Cash Payment;
(ii) the Stock Payment;
(iii) the Escrow Cash;
(iv) the Escrow Shares;
(v) a duly executed Assignment and Assumption
Agreement, substantially in the form of Exhibit B attached hereto;
(vi) a duly executed Escrow Agreement, substantially
in the form of Exhibit F attached hereto;
(vii) a good standing certificate of the Secretary of
State of Delaware, dated no earlier than ten calendar days prior to the
Closing Date, certifying that Buyer is in good standing in the State of
Delaware;
(viii) the opinion of counsel to Buyer, dated as of the
Closing Date, addressed to Seller, and substantially in the form of Exhibit N
attached hereto;
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(ix) a duly executed Agreement to Transfer
Reimbursement Accounts, substantially in the form of Exhibit L;
(x) copies of resolutions of the Board of Directors
of Buyer, certified by the Secretary of Buyer, authorizing the execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby, including the issuance of the Stock Payment
and the Escrow Shares;
(xi) the certificate set forth in Section 8.1(c)
below; and
(xii) such other documents and instruments as may be
required to consummate the transactions contemplated hereunder.
(d) Accounts Receivable. Seller agrees that it will promptly
transfer and deliver to Buyer any cash or other property which it may receive
after the Closing Date from customers of the Business who have an outstanding
Receivable in respect of the Receivables transferred to Buyer as of the
Closing.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to Buyer, and covenants and
agrees with Buyer, as of the Closing, other than as set forth in the
disclosure schedules attached hereto, as follows:
4.1 Due Incorporation; Qualification.
Seller is a limited liability company duly organized, validly
existing and in good standing under the laws of the State of Delaware. Seller
has full power and authority to carry on its Business as it is now conducted
and to own, lease and operate the property and assets related thereto that it
now owns, leases and operates and to enter into, consummate and perform the
transactions contemplated hereby. Seller has qualified as a foreign limited
liability company and is in good standing in all jurisdictions where the
failure to so qualify would have a materially adverse effect on the business,
operations, management, condition, or prospects, financial or otherwise, of
Seller with respect to the Business or cause or may cause a material
impairment of the ability of Seller to perform any of its obligations under
this Agreement or any other agreement executed in connection herewith
(collectively, a "MATERIAL ADVERSE EFFECT").
4.2 Authorization; Approval.
The execution, delivery and performance of this Agreement and
the transactions contemplated hereby by Seller has been duly authorized by all
necessary limited liability company action, and this Agreement and the
documents to be executed and delivered herewith by Seller are valid, legally
binding obligations of Seller, enforceable in accordance with their respective
terms. The execution, delivery, and performance of this Agreement and the
consummation of the transactions contemplated hereby by Seller will not: (a)
violate any
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provision of Seller's or any Subsidiary's organic documents, including,
without limitation, their respective certificates of formation, limited
liability company agreement, charter and bylaws; (b) violate, conflict with or
result in a modification of the effect of, or otherwise give any other
contracting party the right to terminate, or constitute (or with notice or
lapse of time or both, constitute) a default under, or result in the
termination of, or accelerate the performance required by, or cause the
acceleration of the maturity of any liability or obligation pursuant to, or
result in the creation or imposition of any security interest, lien, charge or
other encumbrance upon Seller or any Subsidiary with respect to the Business
or the Acquired Assets that would have a Material Adverse Effect under (i) any
statute or law or any judgment, decree, order, award, writ, injunction,
regulation or rule of any court, arbitrator or governmental or regulatory
authority, or (ii) except as set forth in Schedule 4.2(b)(ii) hereto, any
note, bond, mortgage, indenture, deed of trust, license, lease, instrument,
contract, commitment, understanding, arrangement, agreement or restriction of
any kind or character; or (c) materially violate any statute, law or
regulation as such statute, law or regulation relates to Seller, the
Subsidiaries, the Business, or the Acquired Assets.
4.3 Capitalization of Seller; Options and Other Equity Rights.
One hundred percent of the equity interests of Seller are owned
by its sole member, The Xxxxxxx Group, Inc. As of the date hereof there are no
holders of bonds, debentures, notes or other indebtedness having the right to
vote on any matters on which Seller's sole member may vote. There is no (i)
outstanding option, warrant, call, unsatisfied preemptive right or other
agreement of any kind binding upon Seller to purchase or otherwise to receive
from Seller any of the outstanding, authorized but unissued, unauthorized or
treasury shares of the equity or any security of Seller, (ii) outstanding
security of any kind binding upon Seller convertible into any security of
Seller, and (iii) outstanding contract or other agreement binding upon Seller
or any of its Subsidiaries to purchase, redeem or otherwise acquire any
outstanding securities of Seller.
4.4 Subsidiaries.
(a) Schedule 4.4(a) sets forth (i) the name of each
subsidiary of Seller (the "SUBSIDIARIES"); (ii) the name of each corporation,
limited liability company, partnership, joint venture or other entity (other
than such Subsidiaries) in which Seller or any of its Subsidiaries has, or
pursuant to any agreement has the right or obligation to acquire at any time
by any means, directly or indirectly, an equity interest or investment; (iii)
in the case of each such entity described in clauses (i) or (ii) above, (A)
the jurisdiction of organization and (B) the capitalization thereof and the
percentage of each class of capital stock or other equity interest (including
any rights, options, warrants or convertible securities outstanding or other
agreements to acquire shares of capital stock or other equity interest) and
issuance of outstanding debt owned by Seller or any of it Subsidiaries and by
any other person.
(b) Except as set forth in Schedule 4.4(b), each Subsidiary
of Seller has been duly organized, is validly existing and in good standing
under the laws of the jurisdiction of its organization, has the corporate,
limited liability company, partnership or similar power and
- 13 -
authority to own and lease its properties and to conduct its business and is
duly registered, qualified and authorized to transact business and is in good
standing in each jurisdiction in which the conduct of its business or the
nature of its properties requires such registration, qualification or
authorization, except where the failure to be so qualified would not
reasonably be expected to have a Material Adverse Effect. All of the issued
and outstanding equity or other participating interests of each Subsidiary
have been duly authorized and validly issued, are fully paid and
nonassessable, and, are owned free and clear of any mortgage, pledge, lien,
encumbrance, security interest, claim or equity, except as set forth in
Schedule 4.4(b).
(c) As of the date hereof, except as listed in Schedule
4.4(c), Seller has not made any investments in, and does not own, directly or
indirectly, any securities of or other interests in, any other entity.
4.5 Financial Statements.
Seller has delivered to Buyer true, complete and accurate
copies of the financial statements of the Business for the year ended December
31, 2000, the 8/25/01 Balance Sheet (attached hereto as Schedule 4.5), and the
statements of income of Seller as of August 25, 2001 (collectively, the
"FINANCIAL STATEMENTS"). The Financial Statements: (a) were prepared in all
material respects in accordance with the books, records and accounts of
Seller; (b) are true, complete and correct in all material respects; and (c)
present fully and fairly the results of operations for the Business for the
periods referred to in the Financial Statements. Seller's books, records and
accounts are accurate and complete in all material respects. The Financial
Statements are true and correct and have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis
throughout the periods indicated.
4.6 Accounts Receivable; Inventory.
(a) The Receivables (i) are valid obligations which have
arisen only in the ordinary course of business consistent with past practices
for goods sold and delivered or bona fide services provided, (ii) are
collectible in full within 180 days after the Closing Date at the recorded
amounts thereof, net of allowances for doubtful accounts recorded in the
Financial Statements, and (iii) are free of any defenses, setoffs or
counterclaims.
(b) All of the Inventory held for sale or used in connection
with the Business was purchased in the ordinary course of business consistent
with past practices and is owned by Seller, free and clear of all liens,
defects, restrictions and encumbrances. The Inventory consists of new and used
items of a quality and quantity usable or saleable in the ordinary course of
business and none of the inventory is damaged, defective or obsolete except
for items which have been written off or written down to net realizable value
on the Financial Statements. All of the Inventory is carried on the Financial
Statements at the lower of Seller's cost or market value, net of reserves for
obsolete and excess Inventory as recorded in the Financial Statements,
consistent with generally accepted accounting principles and Seller's past
practices.
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4.7 Absence of Changes.
Except as set forth in Schedule 4.7, since June 30, 2001:
(a) the Acquired Assets have not been mortgaged, pledged or
subjected to any lien or encumbrance;
(b) the value of any of the Acquired Assets has not been
materially written down or materially written up other than in the ordinary
course of business;
(c) the Acquired Assets have not been sold or transferred
other than sales of Inventory and disposal of obsolete, damaged or defective
inventory or other Acquired Assets in the ordinary course of business;
(d) there has not been any payment or increase by Seller of
any bonuses, salaries, or other compensation to any stockholder, director,
officer, or (except in the ordinary course of business) employee, contractor or
consultant involved in the Business or entry into any employment, severance, or
similar contract or agreement with any director, officer or employee involved in
the Business;
(e) there has not been any material change in the customary
methods used in operating the Business (including its marketing, selling and
pricing practices and policies);
(f) there has not been any transaction, contract, commitment,
obligation by Seller relating to the Acquired Assets or the Business (including
the acquisition or disposition of any assets), other than in the ordinary course
of business or as contemplated by this Agreement;
(g) the Business and the Acquired Assets have been operated in
the ordinary course;
(h) there has not been any amendment of any of the Assumed
Contracts or entering into of any new material contracts or agreements,
excluding purchase orders for inventory entered into in the ordinary course of
business;
(i) there has not been any waiver of any material right of
Seller or cancellation of any material debt or claim held by Seller with respect
to the Business;
(j) there has not been any loan by Seller to any officer,
director, employee or stockholder of Seller involved in the Business;
(k) neither Seller nor any Affiliate (as defined in Section
4.15 below) thereof has entered into, adopted or amended any Benefit Plan (as
defined in Section 4.15 below) with respect to Employees;
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(l) there has not been any other event or condition of any
character (whether or not covered by insurance) that has materially affected or
will or is likely to so affect the properties, business or prospects of the
Business or the Acquired Assets or the financial position, results of
operations, or net worth of Seller with respect to the Business, apart from
events or conditions affecting the economy generally; and
(m) no offers, commitments or agreements have been entered
into whether in writing or otherwise to take any of the actions set forth in
this Section 4.7.
4.8 Acquired Assets.
Except as set forth in Schedule 4.8:
(a) Seller holds good, valid and marketable title to, or a
valid leasehold interest in, all of the Acquired Assets to be sold by Seller, in
each case free and clear of all liens, defects, restrictions, encumbrances and
claims whatsoever and has the complete and unrestricted power, right and
authority to sell, transfer, assign and deliver, and following the Closing,
Buyer will have good, valid and marketable title to, or a valid leasehold
interest in, all of the Acquired Assets, free and clear of all liens, defects,
restrictions, encumbrances and claims whatsoever. Seller is not in violation of
any zoning, building or safety ordinance, regulation or requirement or other law
or regulation applicable to its properties, nor has it received any notice of
violation with which it has not complied.
(b) The Acquired Assets include all assets, properties,
licenses and other agreements necessary for the continued conduct of Business
after the Closing in substantially the same manner as conducted prior to the
Closing.
(c) The tangible property constituting a portion of the
Acquired Assets is in good operating condition and repair, subject to normal
wear and tear, and have been maintained and serviced in accordance with the
usual and customary practices of the Business, and Seller has not received any
notice that any of such tangible property is in violation of any existing law or
any building, zoning, health, safety or other ordinance, code or regulation.
(d) Schedule 4.8(d) sets forth a list of all of real property
leases (the "LEASES") in effect as of the date hereof under which Seller or a
Subsidiary is a lessee or a successor or assignee of the tenancy interest
therein, which leased real property is utilized in connection with the Business.
All Leases are currently in full force and effect and constitute legal valid and
binding obligations of Seller or a Subsidiary, and, to Seller's Knowledge, the
other parties thereto. Except as otherwise provided in this Agreement, "SELLER'S
KNOWLEDGE" shall mean the actual knowledge of Seller and each of Xxxxxxx X.
Xxxxxxx, Xx., Xxxxxx X. Xxxxxxx, Xxxxxx Xxxxxx, Xxxxxxx Xxxxxxx, Xxxxx Xxxxxx,
Xxx Xxxxxxx, Xxx Xxxxx, and Xxxx Xxxxxxxxx. Seller has made available to Buyer
true, correct and complete copies of all Leases, including all amendments,
modifications and renewals thereof. To Seller's Knowledge, there are no defaults
by the landlord under any of the Leases; neither Seller nor any Subsidiary has
waived any rights
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under any of the Leases; and there is no pending or, to Seller's Knowledge,
threatened action or proceeding which could adversely affect Buyer's use of the
premises after consummation of the transactions contemplated hereby. No other
party to a Lease has notified Seller or any Subsidiary of its intention to cease
to perform any services required to be performed by it or withhold any payment
required to be made to it thereunder. Except as have been obtained on or prior
to the date hereof or the delivery of which has been waived in writing by Buyer
prior to the date hereof, none of the Leases would require the consent or
approval of any party thereto other than Seller or a Subsidiary or the consent
or approval of any third party in connection with the consummation of the
transactions contemplated hereby or contains any provision that, as a result of
the consummation of the transactions contemplated by this Agreement, causes one
or more of the following to occur: (i) Seller or a Subsidiary is deemed to be in
default, or there exists a lapse of time which would result in default, under
such Lease (with or without the giving of notice and any cure period); (ii)
automatically voids such Lease or renders voidable, by any party other than
Seller or a Subsidiary, the Lease or provides any party other than Seller or a
Subsidiary with a right to terminate or rescind such Lease; (iii) imposes any
fine, penalty, charge or increase in payments or other charges required to be
made by Seller or a Subsidiary under such Lease; or (iv) otherwise modifies any
of the material terms of such Lease.
(e) Schedule 4.8(e) sets forth a list of all of the locations
where any of the Acquired Assets that are personal property are located.
4.9 No Undisclosed Liabilities.
Except as set forth in Schedule 4.9 or as reflected or reserved
against in the 8/25/01 Balance Sheet, and except for obligations incurred in the
ordinary course of business and consistent with past practices since that date,
Seller has no material debts, liabilities or other obligations (including,
without limitation, obligations for federal, state or local taxes or other
governmental assessments or penalties, and obligations and advances, directly or
indirectly, to Seller), absolute or contingent, due or to become due related to
the Business or the Acquired Assets, and Seller does not know or have reasonable
grounds for knowing the basis for any assertion against Seller of any liability
(including any tax liability) of any nature or in any amount. Consistent with
past practices, Seller is current in the payment of all of its obligations and
liabilities related to the Business or the Acquired Assets, including those
shown on the Financial Statements, and there are no obligations due or to become
due, or liabilities, fixed or contingent, related to the Business or the
Acquired Assets that Seller will not be able to satisfy in the ordinary course
of business. To Seller's Knowledge, there are no material omissions to the
Financial Statements.
4.10 Patents, Trademarks, Trade Names, Trade Secrets, Etc.
(a) Schedule 4.10 contains an accurate and complete list of:
(i) all patents, trademarks (registered or unregistered), service marks, trade
names, assumed names, material copyrights, domain names and all applications
therefor, owned, used or filed by Seller which are used in or necessary for the
Business; and (ii) all licenses, permissions, software and other
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agreements relating to technology, know-how or processes used in or necessary
for the Business, which Seller is licensed or authorized to use by others ((i) -
(ii) above collectively referred to herein as the "INTELLECTUAL PROPERTY"). In
regard to the Intellectual Property, the patents, the registered trademarks, the
service marks and the copyrights are valid, subsisting and enforceable, and are
duly recorded in the name of Seller or the Subsidiaries, and, to Seller's
Knowledge, can be recorded in the name of Buyer.
(b) Except as set forth in Schedule 4.10: (i) Seller has,
directly or indirectly through the Subsidiaries, and after the Closing under
this Agreement, Buyer will have, except as set forth in this Agreement, the sole
and exclusive ownership and right (or, with respect to software, sufficient
license rights), free from any liens, mortgages, security interests, charges,
encumbrances or claims whatsoever, to use the Intellectual Property and all
trade secrets required for or incident to the conduct of the Business, and the
consummation of the transactions contemplated hereby will not alter or impair
any such rights; and (ii) within the last three years, no written claims have
been asserted by any entity or person with respect to the ownership, validity,
enforceability or use of or challenging or questioning the validity or
effectiveness of any of the Intellectual Property, nor, to Seller's Knowledge,
is there a valid basis for any such claim. Furthermore, to Seller's Knowledge,
the use or other exploitation of such Intellectual Property by Seller does not
infringe or dilute the rights of any other entity or person.
4.11 Litigation; Orders.
Except as set forth in Schedule 4.11: (a) there are no claims,
actions, suits, proceedings, arbitrations, investigations or inquiries pending
or, to the Seller's Knowledge, threatened by or against Seller or any Subsidiary
which affect or which may affect the Business or any of the Acquired Assets or
the transactions contemplated by this Agreement at law or in equity or before or
by any federal, state, local, foreign or other governmental department, board,
agency, instrumentality or authority; nor, to the Seller's Knowledge, is there
any valid basis for any such claim, action, suit, proceeding, inquiry or
investigation; and (b) neither Seller nor any Subsidiary is subject to any
judgment, arbitration award, order or decree.
4.12 Status of Contracts.
(a) Set forth in Schedule 4.12(a) is a list of: (i) Seller's
and its Subsidiaries' agreements and arrangements with the 15 largest suppliers
and vendors of Seller and the Subsidiaries, measured by the dollar volume of
Seller's and its Subsidiaries' purchases during the period beginning January 1,
2001 and ending June 30, 2001; (ii) all personal property leases related to the
Business or the Acquired Assets under which Seller or any Subsidiary is either
lessor or lessee that involve annual payments or receipts of more than $100,000
for any one lease or $200,000 in the aggregate; (iii) all other orders, leases,
commitments, agreements, mortgages, indentures and other agreements and
instruments related to the Business or the Acquired Assets relating to
indebtedness for borrowed money to which Seller or any Subsidiary is a party or
by which it or its properties is bound, that may or will require annual payments
by Seller or any Subsidiary of more than $100,000; (iv) all contracts or
agreements binding on Seller or any
- 18 -
Subsidiary which contain provisions requiring a party thereto or their
affiliates not to engage in the Business or activity, including, without
limitation, non-compete, non-solicitation, or other such provisions; (v) all
government contracts and all other agreements with customers that involve an
annual payment to Seller or any Subsidiary in connection with the Acquired
Assets or the Business of more than $100,000 for any one contract or $200,000 in
the aggregate; (vi) Seller's and its Subsidiaries' agreements and arrangements
with the 20, 5 and 5 largest customers of Seller and the Subsidiaries with
respect to the Business in the Mobile, North and South regions (as described in
Section 4.23 below), respectively, all measured by the dollar volume of Seller's
and its Subsidiaries' sales to such customers during the period beginning
January 1, 2001 and ending July 31, 2001; (vii) all employment or other
agreements entered into with Management Employees (as defined in Section 4.14
below); (viii) all agreements relating to the Intellectual Property; (ix) all
agreements or arrangements relating to the consignment of Seller's or any
Subsidiary's inventory; and (x) all other material written agreements or
contracts to which Seller or any Subsidiary in connection with the Business or
the Acquired Assets is a party or which are binding on Seller or any Subsidiary;
in all cases with respect to the contracts set forth in clauses (i) through (x),
whether or not such contracts are in writing (the "MATERIAL CONTRACTS").
(b) Except as set forth in Schedule 4.12(b): (i) the
enforceability of the Material Contracts will not be affected in any manner by
the execution and delivery of this Agreement, the performance by Seller or any
Subsidiary of its respective obligations hereunder or the consummation of the
transactions contemplated hereby; (ii) neither Seller nor any Subsidiary is in
default, nor does there exist any event that, with notice or lapse of time or
both, would constitute an event of default by Seller or any Subsidiary under any
Material Contract; (iii) each Material Contract is valid and in full force and
effect; there is no material breach or default by any other party to any
Material Contract; and (iv) no other party has notified Seller or any Subsidiary
of its intention to cease to perform any services required to be performed by it
or withhold any payment required to be made to it thereunder.
(c) Except as set forth in Schedule 4.12(c), Seller has
delivered to Buyer complete and accurate copies of all of the Material Contracts
to which Seller or any Subsidiary is a party and all amendments thereto (or
Schedule 4.12(c) includes an accurate and complete summary description of any
such item that is not in writing).
(d) Except as set forth in Schedule 4.12(d), to Seller's
Knowledge: (i) none of Seller's or any Subsidiary's employees, officers or
directors, is a party to any oral or written contract or agreement prohibiting
it or them from freely competing or engaging in the Business except for any such
agreements between Seller or any Subsidiary and its employees; (ii) no employee
of Seller or any Subsidiary is a party to any outstanding contract, obligation
or commitment with any prior employer; and (iii) no employee of Seller or any
Subsidiary is in default under any contract, obligation or commitment with any
of his or her former employers, in all cases, the effect of which default has or
may have a Material Adverse Effect, and there is no state of facts that upon
notice or lapse of time or both would constitute such a default.
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(e) Except as set forth in Schedule 4.12(e), each of the
Material Contracts is freely terminable by Seller or any Subsidiary upon not
more than thirty days' written notice or less without the payment of any
termination fee, premium, or penalty.
4.13 Taxes.
Except as set forth in Schedule 4.13: (a) all federal, state,
local and foreign tax returns and tax reports required to be filed by Seller or
its affiliates on or before the date hereof have been timely filed with the
appropriate governmental agencies in all jurisdictions in which such returns and
reports are required to be filed or appropriate extensions have been filed and
all amounts shown as owing thereon have been paid; (b) all taxes (including,
without limitation, income, accumulated earnings, property, sales, use,
franchise, value added, fuel, employees' income withholding and social security
taxes), including estimated tax payments, which have become due or payable or
required to be collected by Seller or its affiliates or as otherwise
attributable to any periods ending on or before the date hereof and the Closing
and all interest and penalties thereon, whether disputed or not, (i) have been
paid or will be paid in full on or prior to the Closing or (ii) are reflected in
the 8/25/01 Balance Sheet, with appropriate reserves shown therein; (c) all
deposits required by law to be made by Seller or their affiliates with respect
to employees' withholding taxes have been duly made, and as of the Closing all
such deposits will have been made; (d) there is no action, deficiency, suit,
proceeding, investigation, audit or claim now pending, or to Seller's Knowledge
proposed or threatened, with respect to any tax due with respect to any return
and Seller has no reason to believe that any such action, deficiency, suit,
proceeding, investigation, audit or claim will be proposed or initiated; (e)
Seller is not on the date hereof, nor will it be as of the Closing, liable for
the payment of any taxes (other than taxes not yet due and payable), and Buyer
shall have no liability for any taxes related to the ownership or operation of
the Acquired Assets prior to the Closing; (f) Seller has delivered to Buyer true
and complete copies of its sales and use tax returns relating to the Business
for the fiscal period ended December 31, 1998, through December 31, 2000; (g)
Seller has not incurred any tax liabilities except in the ordinary course of
business; and (h) Seller has not agreed to extend or waive, and to Seller's
Knowledge, there are no extensions or waivers of, any statute of limitations
applicable to any tax liability of Seller.
4.14 Employees; Officers.
(a) Listed in Schedule 4.14(a) are the names of all officers
and all senior management employees of Seller engaged on a full-time basis in
the operation of the Business whose annual base salaries and bonuses exceed
$150,000 (the "MANAGEMENT EMPLOYEES"), together with their respective rates of
total compensation. As used herein, the term "EMPLOYEES" means all employees of
Seller engaged on a full or part-time basis in the operation of the Business,
including the Management Employees. Schedule 4.14(a) also lists all employment
contracts (but does not include independent contractor agreements) and all
pension, bonus, profit sharing, stock option or other agreements or
arrangements, including vacation and sick pay policies, providing for employee
benefits to which Seller is a party in connection with the operation of the
Seller's Business or by which Seller is bound. Seller has accrued or paid in
full
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to its Employees all wages, salaries, commissions, bonuses and other direct
compensation for all services performed by them.
(b) Seller has complied in all material respects with all
applicable laws relating to the employment of labor, including provisions
relating to wages, laws, equal opportunity, collective bargaining, the payment
of social security and other taxes, nondiscrimination, and termination.
(c) None of the Employees is represented by any labor union or
covered by any collective bargaining agreements, and to Seller's Knowledge there
has not been any effort to establish a labor union or bargaining unit or similar
organizational effort with respect to the Employees, and there is no labor
strike or other labor trouble pending or threatened and with respect to Seller.
(d) Except as set forth in Schedule 4.14(d), no Employee or
contractor or consultant of Seller has filed a lawsuit or administrative action
against Seller for any reason in the past three years, or has otherwise filed a
complaint with or, to Seller's Knowledge, about Seller. To Seller's Knowledge,
there are no pending or threatened suits or claims against Seller from any
current or former employee, consultant or contractor.
(e) To Seller's Knowledge, during the past three years no
director or officer of Seller has been arrested or convicted for any crime
material to an evaluation of such person's ability or integrity, including,
without limitation, any violation of any federal or state law that currently or
has previously regulated the types of business in which Seller is currently or
has previously been engaged.
4.15 Benefit Plans.
(a) Schedule 4.15 provides a complete and correct list of all
Benefit Plans which are maintained by Seller for the benefit of the Employees.
For purposes of this Section 4.15, "BENEFIT PLANS" means all employee benefit
plans as defined in Section 3(3) of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA") (other than multiemployer plans as defined in
Section 3(37) of ERISA) and all other compensation and employee benefit
arrangements, obligations, customs, or practices (including but not limited to a
payroll practice), whether or not legally enforceable, to provide benefits,
other than salary, as compensation for services rendered, to current or former
directors, employees or agents of Seller in the Business, including, without
limitation, employment agreements, severance agreements, executive compensation
arrangements, incentive programs or arrangements, sick leave, vacation pay,
severance pay policies, plant closing benefits, salary continuation for
disability, consulting or other compensation arrangements, workers'
compensation, deferred compensation, bonus, stock option or purchase,
hospitalization, medical insurance, life insurance, tuition reimbursement or
scholarship programs, any plans providing benefits or payments in the event of a
change of control, change in ownership, or sale of a substantial portion
(including all or substantially all) of the assets of any business of Seller,
maintained by either of Seller or any Affiliate thereof or to which either of
Seller or any
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Affiliate thereof has contributed or is or was obligated to make payments, in
each case with respect to any current or former employees, directors or agents
of Seller in the Business, in the six year period before the date of this
Agreement. For purposes of this Section 4.15, "AFFILIATE" means any trade or
business which, together with Seller, is treated as a single employer under
Section 414(b), (c), (m) or (o) of the Code.
(b) Except as set forth in Schedule 4.15: (i) each Benefit
Plan is in material compliance with the applicable provisions of ERISA and of
the Code and all other applicable laws (and all regulations promulgated under
such laws); (ii) neither Seller nor any Affiliate thereof has ever maintained,
contributed to or had any obligation to contribute to (A) any plan subject to
the minimum funding standards of Section 302 of ERISA or Section 412 of the
Code, or (B) any multiemployer plans as defined in Section 3(37) of ERISA; and
(iii) all Benefit Plans which are "pension plans" (as defined in Section 3(2) of
ERISA) have received favorable determination letters from the Internal Revenue
Service as to their tax-qualified status and the tax-exempt status of any
related trust under Sections 401(a) and 501 of the Code, respectively, which
determinations are currently in effect, and to the Seller's Knowledge, no event
has occurred or circumstance exists that will or could give rise to the
disqualification of such Benefit Plans or the loss of the exempt status of the
related trusts.
(c) Except as set forth in Schedule 4.15:
(i) No material claims, lawsuits, proceedings,
hearings, investigations or demands have been asserted or instituted by or
against a Benefit Plan, against the assets of a trust thereunder or by or
against the plan sponsor, administrator or fiduciary thereof (other than routine
claims for benefits), and Seller has no knowledge of any fact which could form
the basis for any such claim or lawsuit;
(ii) Seller has no material liability (whether actual or
contingent) with respect to any Employee under any employee benefit plan,
program or arrangement which is not a Benefit Plan;
(iii) There are no Benefit Plans which provide welfare
benefits after the participants' retirement or other termination of employment,
other than benefits in the form of continuation coverage under a group health
plan as required by Section 4980B of the Code or Sections 601 through 608 of
ERISA if paid 100% by the participant or beneficiary to any Employee; and
(iv) Neither the Seller nor any affiliate has incurred
any liability to the Pension Benefit Guaranty Corporation, except for required
premium payments. As of the date of the most recent actuarial report, the excess
of the aggregate present value of accrued benefits over the aggregate value of
the assets of any defined benefit plan (within the meaning of Section 3(35) of
ERISA), computed both on a termination basis and on an ongoing basis, is not
more
- 22 -
than $-0-, and there are no unfunded vested benefits (within the meaning of PBGC
Reg. Section 4211.2) with respect to any defined benefit plan.
(d) Except as provided in Schedule 4.15 attached hereto, Buyer
shall not, as a result of the transactions contemplated by this Agreement (or
any employment by Buyer of the Employees):
(i) become liable for any contribution, tax, lien,
penalty, cost, interest, claim, loss, action, suit, damage, cost assessment or
other similar type of liability or expense of Seller with regard to any Benefit
Plan, including, without limitation, withdrawal liability arising under Title
IV, Subtitle E of ERISA, or liabilities under Section 412 of the Code or Section
302(a)(2) of ERISA; or
(ii) be, become a party to or have any obligation or
liability under or in connection with any Benefit Plan.
(e) Seller, each Benefit Plan and each Benefit Plan "sponsor"
or "administrator" (within the meaning of section 3(16) of ERISA) has complied
in all material respects with the applicable requirements of Part 6 of Subtitle
B of title I of ERISA and Section 4980B of the Code (such statutory provisions
and predecessors thereof are referred to herein collectively as "COBRA").
4.16 Environmental Matters.
(a) To Seller's Knowledge, Schedule 4.16 sets forth those
reports, documents and disclosures relating to Environmental Laws and Hazardous
Materials that were disclosed in connection with the reorganization and merger
of Seller in June 2001. Schedule 4.16 sets forth Seller's Knowledge with respect
to Seller's compliance with Environmental Law and releases of Hazardous
Material. There may also be other Assumed Environmental Liabilities arising from
or relating to real estate currently or formerly owned or leased by Sellers or
its predecessors for which Seller currently does not have Knowledge.
(b) Except as disclosed in Schedule 4.16, neither the Business
nor the Seller has received from any governmental or regulatory body or any
private party any written request for information, notice of claim, demand or
other notification that it is potentially responsible with respect to any
investigation or cleanup of any site or location under any Environmental Law or
concerning Hazardous Material. Except as disclosed in Schedule 4.16: (i)
Seller's use of the Leased Property, and, to Seller's Knowledge, the Leased
Property, comply in all material respects with applicable Environmental Law;
(ii) to Seller's Knowledge, Seller has not disposed of Hazardous Materials in or
on the Leased Property and, to Seller's Knowledge, there is no Hazardous
Material disposed in or on the Leased Property; (iii) to Seller's Knowledge,
none of the Leased Property has been used as a waste disposal site, nor are
there any underground storage tanks in or under any such property, nor is any
asbestos containing material located within the Leased Property; (iv) Seller
holds and is in compliance with all material licenses required under
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all Environmental Laws applicable to the operations of the Business as currently
conducted; (v) neither the Seller nor, to Seller's Knowledge, the Leased
Property, is subject to any lien, charge, encumbrance or other claim imposed
pursuant to any Environmental Law; (vi) there has been no release of any
Hazardous Materials at any Leased Property by Seller or any other person under
Seller's direction or control that is in violation of or is reasonably likely to
lead to any liability arising under any Environmental Law; (vii) Seller has not
transported or arranged for the treatment, storage, or disposal of any Hazardous
Materials to any off-site location in connection with the operation of the
Business that has resulted or is reasonably likely to result in a liability to
the Seller under applicable Environmental Laws; (viii) none of the properties
constituting the Leased Property is listed in the National Priorities List,
promulgated under CERCLA, or on the Comprehensive Environmental Response,
Compensation and Liability Information System list or in any state or local list
of sites requiring removal, remedial response or corrective action pursuant to
any Environmental Law; and (ix) there are no written claims asserted by any
customer against the Seller pursuant to any Environmental Law, and there are no
grounds to reasonably believe that such a claim could be asserted.
4.17 Insurance.
Schedule 4.17 sets forth all policies or binders of fire,
liability, workmen's compensation, vehicular, directors' and officers'
liability, employee liability or other insurance held by Seller relating to, on
behalf of or covering the Business. Such policies and binders are in full force
and effect. All premiums have been paid through the Closing Date. Seller is not
in default with respect to any provision contained in any such policy or binder
and has not failed to give any notice or present any claim under any such policy
or binder in due and timely fashion. Except for claims set forth in Schedule
4.17, which claims have been reported to the applicable insurance provider on a
timely basis, there are no outstanding unpaid claims under any such policy or
binder. Seller has not received any notice of cancellation or non-renewal of any
such policy or binder. To Seller's Knowledge, there is no material inaccuracy in
any application for such policies or binders or any similar state of facts which
might form the basis for termination of any such insurance. There is no failure
to pay premiums when due. No casualty loss has occurred that is uninsured or
that is not provided for under Seller's self-insurance program.
4.18 No Other Pending Transactions.
There is no outstanding right, option or other agreement of any
kind to purchase or otherwise receive from Seller any ownership interest in
Seller or the Acquired Assets, and there is no outstanding right or security of
any kind convertible into such ownership interest.
4.19 Broker's or Finder's Fees.
No agent, broker, person or firm acting on behalf of Seller is,
or will be, entitled to any commission for broker's or finder's fees, nor shall
there by any basis for a claim to any commission or broker's or finder's fees,
from any of the parties hereto, or from any person
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controlling, controlled by or under common control with any of the parties
hereto, in connection with any of the transactions contemplated herein.
4.20 Government Licenses and Approvals.
Attached hereto as Schedule 4.20 is a true and complete list of
all of the material government certificates, licenses, permits or other
approvals required or obtained by Seller or any Subsidiary in connection with
the operation of the Business (collectively, the "LICENSES AND APPROVALS").
Seller has provided Buyer with true and complete copies of all of the Licenses
and Approvals. All of the Licenses and Approvals are in full force and effect
and neither Seller nor any Subsidiary is in violation with respect to any of
them. No proceedings are pending nor, to Seller's Knowledge, threatened by any
applicable authority to revoke or limit the scope of any of the Licenses and
Approvals. There are no other material licenses or approvals necessary for the
conduct of the Business as it is currently being conducted. Except as described
in Schedule 4.20, none of the Licenses and Approvals would be rendered
ineffective or be required to be reissued as a result of the consummation of the
transactions contemplated hereby.
4.21 Books and Records.
The books of account and other financial and accounting records
of Seller, all of which have been made available to Buyer, are complete and
correct and have been maintained in accordance with sound business practices and
accurately reflect the basis for the financial position and results of
operations of Seller and the Business. At the Closing, all of such books and
records with respect to the Acquired Assets and the Assumed Liabilities will be
in the possession of Seller.
4.22 Correct Information.
All agreements, schedules, exhibits, documents, certificates,
reports or statements furnished or to be furnished to Buyer by or on behalf of
Seller in connection with this Agreement or the transactions contemplated hereby
are true, complete and accurate in all material respects, and no representation
or warranty by Seller in this Agreement or any Exhibit or Schedule hereto
contains any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statement contained herein or therein, in
light of the circumstances under which they were made, not misleading.
4.23 Customers and Suppliers.
(a) Schedule 4.23 contains a complete and accurate list
of each of Seller's 15 largest vendors and suppliers with respect to the
Business (measured by the dollar volume of Seller's and its Subsidiaries'
purchases during the period beginning January 1, 2001 and ending June 30, 2001)
and the dollar amount of such purchases.
(b) Seller accounts for sales to its customers in three
different regions, known as the Mobile, North and South regions. Schedule 4.23
contains a complete and accurate list of
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each of Seller's (i) 20 largest Mobile region customers with respect to the
Business, (ii) five largest North region customers with respect to the Business,
and (iii) five largest South region customers with respect to the Business, all
measured by the dollar volume of Seller's and its Subsidiaries' sales to such
customers during the period beginning January 1, 2001 and ending July 31, 2001.
(c) Seller has not received any notice that, and has no
Knowledge or reason to believe that, any supplier, vendor or customer listed in
Schedule 4.23 does not plan to continue to do business with Buyer, or plans to
reduce its supplies to or volume of orders from Buyer or will not do business on
substantially the same terms and conditions with Buyer subsequent to the Closing
Date as such supplier, vendor or customer did with Seller before the Closing
Date.
4.24 Interested Party Transactions.
Except as set forth in Schedule 4.24, no officer, director,
employee of Seller involved in the Business nor any Related Person thereof (the
"INTERESTED PARTIES") has, or since July 1, 1998, has had, any interest in any
property (whether real, personal or mixed and whether tangible or intangible)
used in or pertaining to the Business. No Interested Party owns, of record or as
a beneficial owner, any equity interest or any other financial or profit
interest in any person or entity that has (a) had business dealings or a
material financial interest in any transaction with Seller or (b) engaged in
competition with Seller with respect to the Business. No Interested Party is a
party to any contract with, or has any claim or right against, Seller with
respect to the Business or the Acquired Assets. For purposes of this Section
4.24, "RELATED PERSON" with respect to an individual means (i) the individual,
the individual's spouse and former spouses, any other natural person who is
related to the individual or the individual's spouse within the second degree
and any other natural person who resides with such individual (being referred to
collectively herein as an individual's "FAMILY"), (ii) any person or entity that
is directly or indirectly controlled by any one or more members of such
individual's Family, (iii) any person or entity in which the members of such
individual's Family hold (individually or in the aggregate) direct or indirect
beneficial ownership (as defined in Rule 13d-3 of the Securities Exchange Act of
1934, as amended) of voting securities or other voting interests representing at
least 30% of the outstanding voting power of a person or entity or equity
securities or other equity interests representing at least 30% of the
outstanding equity securities or equity interests in a person or entity and (d)
any person with respect to which one or more members of such individual's Family
serves as a director, officer, partner, executor or trustee (or in a similar
capacity).
4.25 Investor Status.
(a) Seller is an "accredited investor" as such term is defined
in Rule 501(a) promulgated under the Securities Act of 1933, as amended (the
"SECURITIES ACT").
(b) (i) The Stock Payment and the Escrow Shares (collectively,
the "CONSIDERATION SHARES") are being acquired for Seller's own account for
investment only, and
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not with a view to, or for sale in connection with, any distribution of the
Consideration Shares in violation of the Securities Act, the applicable
securities laws of any state, or any rule or regulation under the Securities Act
or State securities laws; (ii) Seller has had an adequate opportunity to obtain
such information as is necessary to permit Seller to evaluate the merits and
risks of an investment in Buyer; Seller further understands and acknowledges
that: (A) the Consideration Shares have not been registered under the Securities
Act and are, and will be, "restricted securities" within the meaning of Rule 144
under the Securities Act; (B) the Consideration Shares cannot be sold,
transferred or otherwise disposed of until they are registered under the
Securities Act or unless an exemption from registration is then available; and
(C) there is now no registration statement on file with the Securities and
Exchange Commission with respect to any stock of Buyer and Buyer has no
obligation or current intention to register its securities under the Securities
Act.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Seller as follows:
5.1 Due Incorporation.
Buyer is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware, has full power and
authority to carry on its businesses as it is now conducted and to own, lease
and operate the property and assets that it now owns, leases and operates and to
perform the transactions contemplated hereby.
5.2 Authority.
The execution, delivery and performance of this Agreement and the
transactions contemplated hereby by Buyer have been duly and effectively
authorized by all necessary action of Buyer, and this Agreement and the
documents to be executed and delivered herewith by Buyer are the valid, legally
binding obligations of Buyer, enforceable in accordance with their terms.
5.3 No Conflict.
The execution, delivery, and performance of this Agreement and
the consummation of the transactions contemplated hereby by Buyer will not: (i)
violate any provision of its Articles of Incorporation or Bylaws; (ii) violate,
conflict with or result in a modification of the effect of, or otherwise give
any other contracting party the right to terminate, or constitute (or with
notice or lapse of time or both, constitute) a default under, or result in the
termination of, or accelerate the performance required by, or cause the
acceleration of the maturity of any liability or obligation pursuant to, or
result in the creation or imposition of any security interest, lien, charge or
other encumbrance upon Buyer's business or assets, under (a) any statute or law
or any judgment, decree, order, award, writ, injunction, regulation or rule of
any court, arbitrator or governmental or regulatory authority, or (b) any note,
bond, mortgage,
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indenture, deed of trust, license, lease, instrument, contract, commitment,
understanding, arrangement, agreement or restriction of any kind or character;
or (iii) violate any statute, law or regulation as such statute, law or
regulation relates to Buyer.
5.4 Consideration Shares.
The issuance, sale and delivery of the Consideration Shares have
been duly authorized by all requisite action of Buyer, and, when issued, sold
and delivered in accordance with this Agreement, the Consideration Shares will
be validly issued and outstanding, fully paid and nonassessable.
5.5 Broker's or Finder's Fees.
No agent, broker, person or firm acting on behalf of Buyer is, or
will be, entitled to any commission or broker's or finder's fees, nor shall
there be any basis for a claim to any commission for broker's or finder's fees
from any of the parties hereto, or from any person controlling, controlled by or
under common control with any of the parties hereto, in connection with any of
the transactions contemplated herein.
5.6 Correct Information.
All agreements, schedules, exhibits, documents, certificates,
reports or statements furnished or to be furnished to Seller by or on behalf of
Buyer in connection with this Agreement or the transactions contemplated hereby
are true, complete and accurate in all material respects, and no representation
or warranty by Buyer in this Agreement or any Exhibit or Schedule hereto
contains any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statement contained herein or therein, in
light of the circumstances under which they were made, not misleading.
ARTICLE VI
COVENANTS
6.1 Access to Records.
For a period of five years after the Closing Date, Buyer shall
permit Seller, at Seller's expense, upon Seller's reasonable request with at
least ten days' notice, to inspect records, books and other documents that
existed at or prior to the Closing Date and that relate to the Acquired Assets
or the Business, wherever located, for business reasons, in each case solely
with respect to matters arising prior to the Closing Date.
6.2 Tax Returns.
Seller shall cause to be prepared and timely filed, at its sole
expense, all of Seller's required tax returns for all periods up to and
including the Closing Date. Seller shall be responsible for the payment of, and
will indemnify, defend and hold Buyer harmless against all
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taxes due and assessed which relate to the operations of Seller for all periods
up to and including the Closing Date. Buyer shall assist Seller in the
preparation and filing of all such tax returns required to be filed with all tax
authorities.
6.3 Seller Non-Compete.
(a) The following terms when used in this Section 6.3 or
Section 6.4 below shall have the following meanings:
"AFFILIATE" means a Person who, directly or indirectly
through one or more intermediaries, controls, is controlled by, or is under
common control with, the Person specified.
"COMPETITION" means any business which is competitive with
the Business as it is now operated.
"DIRECTLY OR INDIRECTLY" means as an individual, partner,
shareholder, director, officer, principal, agent or employee.
"PERSON" means an individual, corporation, partnership,
joint venture, trust or other entity.
"RESTRICTED TERRITORY" means the United States and Canada.
(b) Neither Seller nor any of its Affiliates shall, for a
period of five years after the date hereof, directly or indirectly, engage in
any Competition in the Restricted Territory.
(c) Neither Seller nor any of its Affiliates shall, directly
or indirectly, for itself or on behalf of any other Person induce or attempt to
induce any Employee to leave his or her employment with Buyer at any time within
three years from the Closing Date.
(d) Seller acknowledges that in view of the nature of the
Business and the business objectives of Buyer in acquiring the Acquired Assets,
and the consideration paid to Seller therefor, the foregoing territorial and
time limitations and those set forth in Section 6.4 below are reasonable and
properly required for the adequate protection of Buyer and that in the event
that any such territorial or time limitation is deemed to be unreasonable and is
then reduced by a court of competent jurisdiction, then, as reduced, the
territorial and/or time limitation shall be enforced.
(e) Seller further acknowledges that the foregoing territorial
and time restrictions and those set forth in Section 6.4 below are essential to
protect the goodwill and going concern value of the Business, and comprise an
essential portion of the consideration received by Buyer under this Agreement.
Seller acknowledges that the remedy at law for any breach by Seller or any
affiliate of the agreements contained in this Section 6.3 or in Section 6.4 will
be inadequate and that Buyer will be entitled to seek injunctive relief without
being required to prove actual damages or post bond. Each of Section 6.3 and
Section 6.4 constitutes an
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independent and severable covenant and if any or all of the provisions of this
Section 6.3 or Section 6.4 are held to be unenforceable for any reason
whatsoever, it will not in any way invalidate or affect the remainder of this
Agreement which will remain in full force and effect.
6.4 Non-Interference Agreement.
Seller covenants and agrees that neither Seller nor any of its
affiliates will, for a period of three years after the date hereof, directly or
indirectly, for whatever reason, whether for its own account or for the account
of any other person, firm, corporation or other organization: (i) solicit, deal
with or otherwise interfere with the Business or Buyer's existing or potential
contracts or relationships with any affiliate, employee, officer, director or
any independent contractor whether the person is employed by or associated with
the Business or with Buyer on the Closing Date or at any time thereafter; (ii)
interfere with the continuance of supplies to Buyer (or the terms relating to
such supplies), from any suppliers who have been supplying goods, materials or
services to Seller related to the Business or the Acquired Assets at any time
during the last three years prior to the date of this Agreement; (iii) interfere
with the Business or Buyer's existing or potential contracts or relationships
with any independent contractor, customer, client or consultant of the Business
or Buyer, or any person who is a bona fide or prospective independent
contractor, customer, client or consultant thereof; or (iv) interfere with any
existing or proposed contract between the Business or Buyer and any other party
whatsoever.
6.5 Cooperation.
(a) (i) Seller agrees both before and for a period of three
years after the Closing hereunder: (A) to give reasonable cooperation to Buyer
(including without limitation giving written notice as requested by Buyer and
referring all telephone inquiries regarding, relating to or in connection with
the Business to Buyer) to assure that each supplier and customer of Seller will
continue to do business with Buyer on substantially the same terms and
conditions subsequent to the Closing Date as such supplier or customer did with
Seller before such date and (B) subject to the provisions of Section 6.5(b), to
use its best efforts to cooperate with Buyer in order to effect the transfer of,
and assure Buyer of the continued benefit and full enjoyment of, the Acquired
Assets and the Business.
(ii) To the extent any third party consents have not
been obtained by Seller as of the Closing Date, then any claim, right, or
benefit (collectively, the "INTERESTS") arising under any related Acquired Asset
shall be deemed not to be assigned to Buyer at the Closing, and Seller shall
continue to use its reasonable efforts, and Buyer shall cooperate with Seller in
such efforts, to obtain such consents. Buyer shall cooperate with Seller in any
reasonable and lawful arrangements under which Buyer would obtain the benefits
of, and assume the post-Closing obligations under, such Interests. Seller shall
enforce for the account of Buyer any rights of Seller arising from such
Interests against the other party or parties thereto (including the right to
elect to terminate any such Interests in accordance with the terms thereof upon
the written advice of Buyer). Seller will promptly pay (or cause to be paid) to
Buyer when received all amounts received by Seller under any Interest. If,
within three months after the Closing Date, any material third party
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consents have not been obtained regarding the Interests, Buyer and Seller will
cooperate in any commercially reasonable arrangement to obviate the need for
such consents.
(b) In addition to the specific cooperation obligations set
forth in Section 6.10(b) below, Buyer will cooperate in good faith with Seller
to accommodate Seller's requests, post-Closing, to obtain releases of Seller and
its affiliates under the leases and related documents relating to the Leased
Property.
(c) Seller has requested that it be permitted to continue to
use certain of the trademarks, servicemarks and trade names of the Business (the
"IDENTIFIED MARKS") for a limited period of time and for limited uses following
the Closing. The Identified Marks are set forth in Schedule 6.5(c) attached
hereto. Buyer hereby agrees to license to Seller the use of the Identified Marks
in accordance with the terms and provisions set forth in Schedule 6.5(c).
6.6 Easton Xxxx Capital Partners, L.P. as Agent to Enforce this
Agreement.
(a) Buyer hereby appoints Easton Xxxx Capital Partners, L.P.
("EASTON") to be Buyer's agent for the purposes of administering this Agreement
and enforcing Buyer's rights and remedies under this Agreement, in all cases for
the benefit of, and in the name of Buyer.
(b) Seller hereby acknowledges that as of the Closing, Easton
will be the owner of a significant portion of the outstanding equity securities
of Buyer, and Seller hereby accepts and agrees to such appointment. Without
limiting the generality of the foregoing statement, Seller agrees not to
challenge Easton's ability to administer this Agreement and standing to make any
claim or to bring any action in any forum specified herein in the name and on
behalf of Buyer.
(c) Easton hereby evidences its acceptance of such appointment
by executing this Agreement solely for this limited purpose. Easton agrees to
consult with Buyer in connection with all actions taken in such role.
6.7 Creditors.
Seller and Buyer understand that Seller will not be making the
applicable bulk sales filings. Seller covenants and agrees to discharge in full,
or to cause to be discharged in full, all of Seller's and the Subsidiaries'
debts to their respective creditors, other than debts assumed by Buyer under
this Agreement.
6.8 Employees and Employee Benefits.
(a) Effective as of the Closing, Buyer shall hire all of the
Employees, and effective immediately prior to the Closing, the employment of the
Employees will be terminated by Seller. With the exception of any applicable
Assumed Liabilities, Seller shall remain responsible for all benefits of
Employees, and their respective beneficiaries, accruing prior to the Closing,
including without limitation (i) any obligations under any employee benefit
plan,
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program or arrangement maintained by or contributed to or by Seller; (ii) any
continuation coverage rights under Seller's health plan to which Employees may
be entitled; and (iii) any severance obligations and bonus retention or related
obligations; in all cases, whether or not any such benefits are under the terms
of specific employment agreements between Seller and any of the Employees.
(b) For a period of 12 months after Closing, Buyer shall offer
medical, dental, vision, life insurance and accidental death and dismemberment
coverage to Employees hired by Buyer. Such coverage shall be substantially
similar to the coverage such Employees were receiving immediately prior to the
Closing, except that Buyer shall, in its sole discretion, determine the cost of
all such benefits to Employees.
(c) Buyer shall offer retiree medical coverage to those
individuals participating in the X.X. Xxxxxx Retiree Medical Insurance Plan
immediately prior to the Closing, on such terms and conditions as Buyer shall
establish. Buyer shall, in its sole discretion, determine the cost to such
individuals for retiree medical coverage.
(d) Buyer shall establish a cafeteria plan (as defined in
Section 125 of the Internal Revenue Code) and continue the flexible spending
accounts and dependent care assistance accounts established for participating
Employees in the SunSource Flexible Benefits Plan for the remainder of the plan
year.
(e) Buyer shall establish a severance pay policy substantially
similar to the policy covering the Employees immediately prior to the Closing,
except that Buyer may establish maximum amounts of severance benefits, and may
require Employees to sign releases before they are eligible to obtain any
benefits. Such severance pay policy shall take into account years of service
with Seller in determining severance benefits.
(f) Buyer shall assume the SunSource Industrial Services
Companies Savings and Investment Plan, other than accounts that are being
transferred to the Xxxxxxx Group Retirement Savings and Profit Sharing Plan
pursuant to the resolutions of the sole director of SunSource Investment
Company, Inc. referenced in Section 3.1(b)(xxi) (the "XXXXXXX PLAN ACCOUNTS").
Buyer shall cooperate with Seller to effect a transfer of the Xxxxxxx Plan
Accounts as expeditiously as possible.
(g) (i) Pursuant to the Reversion Transfer Letter,
SunSource, Inc. shall transfer, as soon as practicable after the amount of the
employer reversion (as described in Internal Revenue Code section 4980(d)) from
the X.X. Xxxxxx Company Retirement Income Plan is finally determined, an amount
equal to 25% of such reversion from the X.X. Xxxxxx Company Retirement Income
Plan to the SunSource Industrial Services Companies Savings and Investment Plan.
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(ii) Buyer shall be responsible for matching
contributions due from Seller to the SunSource Industrial Services Companies
Savings and Investment Plan for the 2001 plan year.
(iii) As a condition of Closing, Seller shall have
contributed to the SunSource Industrial Services Companies Savings and
Investment Plan all matching contributions for the 2000 plan year.
(iv) At or prior to the Closing, Seller shall ensure
that all accounts in the SunSource Industrial Services Companies Savings and
Investment Plan belong to Employees and former Employees, or are Xxxxxxx Plan
Accounts. At Closing, Seller shall certify such facts to Buyer. Seller shall use
its best efforts to effect a transfer of the Xxxxxxx Plan Accounts as
expeditiously as possible.
(h) Seller shall cooperate with Buyer in transferring to
Buyer's cafeteria plan the flexible spending accounts and dependent care
assistance accounts established for participating Employees in the SunSource
Flexible Benefits Plan. Seller and Buyer shall execute a transfer agreement
detailing the treatment of the accounts. Pursuant to such agreement, Buyer shall
be entitled to all amounts forfeited from the flexible spending accounts and
dependent care assistance accounts at the end of the plan year, and Buyer shall
bear the risk that, by the end of the plan year, a participating Employee may
have made insufficient contributions to cover flexible spending account
expenditures.
(i) Seller shall cause the missing accountant's reports for
the 1999 Form 5500 for the SunSource Industrial Services Companies Savings and
Investment Plan, the 1999 Form 5500 for the Activation Retirement Savings Plan,
and the 1998 and 1999 Forms 5500 for the Air-Dreco 401(k) Profit Sharing Plan to
be filed with the Department of Labor as soon as possible, and shall use its
best efforts to have any penalties associated with nontimely or incomplete Form
5500 filings abated, and shall pay or cause to be paid in full any penalties and
assessments associated with such nontimely or incomplete Form 5500 filings.
Pursuant to the Form 5500 Compliance Letter, Seller shall cause SunSource
Investment Company, Inc. to use its best efforts in assisting Seller with filing
such missing accountant's reports and having any penalties associated with
nontimely or incomplete Form 5500 filings abated.
6.9 Domain Names.
Seller covenants and agrees to take such steps as may be
necessary in order that the registrar of each the domain names described in
Schedule 4.10 (the "DOMAIN NAMES") may effectuate the transfer of the Domain
Names as expeditiously as possible, including but not limited to executing any
and all necessary documents as Buyer may reasonably request in order to
implement this Agreement. Until the registrar of each of the Domain Names
transfers ownership of the Domain Names to Buyer, Seller agrees to work with its
Internet service provider so that visitors will be able to access the Buyer web
site by using the Domain Names as of the Closing Date. Seller covenants and
agrees that it will not (i) directly or indirectly oppose
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or take any other action challenging Buyer's right to use the Domain Names or
(ii) register or use any domain name that is substantially similar to, or may
reasonably be confused with, any of the Domain Names.
6.10 Existing Letters of Credit and Lease Guaranties; Obligation to
Purchase Additional Shares of Series A Preferred Stock of Buyer.
(a) Seller or an affiliate of Seller delivered the irrevocable
letters of credit listed in Schedule 6.10 (the "SELLER LETTERS OF CREDIT") to
certain lessors pursuant to the real property leases and related documents set
forth in Schedule 6.10 (the "SECTION 6.10 LEASES"). In addition, Seller or an
affiliate of Seller provided performance guaranties to certain lessors pursuant
to the real property leases and related documents set forth in Schedule 6.10
(for purposes hereof, the Seller and its affiliates identified in Schedule 6.10
are the "SELLER LEASE PARTIES").
(i) Concurrently with Closing, Buyer shall obtain
letters of credit (the "REPLACEMENT LCS") to replace the Seller Letters of
Credit on such terms and conditions as the real property leases and related
documents identified in Schedule 6.10 may require.
(ii) No later than 45 days after the Closing Date,
Buyer shall deliver, or cause to be delivered to Seller, the Seller Letters of
Credit.
(iii) No later than 45 days after the Closing Date, Buyer
shall cause the lessors under the Savage, MN Lease and the Homewood, AL Lease
(as identified in Schedule 6.10) to release, as of the Closing Date, the Seller
Lease Parties from any and all obligations and liabilities as guarantors under
the Savage, MN Lease and the Homewood, AL Lease, respectively, and deliver to
Seller evidence of the foregoing releases, reasonably satisfactory to Seller.
(iv) Buyer shall use its commercially reasonable efforts
to cause, no later than 45 days after the Closing Date, the lessors under the
Savage, MN Lease and the Homewood, AL Lease (as identified in Schedule 6.10) to
release, as of the Closing Date, the Seller Lease Parties from any and all
obligations and liabilities as tenants under the Savage, MN Lease and the
Homewood, AL Lease, respectively, and deliver to Seller evidence of the
foregoing releases, reasonably satisfactory to Seller.
(b) Buyer shall use its commercially reasonable efforts to
satisfy each of Buyer's obligations set forth in Section 6.10(a). Buyer shall
provide to Seller and its agents access to each of the lessors under the Section
6.10 Leases to allow Seller and its agents to work directly with such lessors
and to enable Seller to assist Buyer in Buyer's efforts to satisfy Buyer's
obligations under Section 6.10(a).
(c) After Buyer has satisfied each of the obligations set
forth in Section 6.10(a), in accordance with the terms thereof, Seller shall
purchase from Buyer 1,000,000 shares of the Series A Preferred Stock of Buyer,
par value $1.00 per share, for an aggregate purchase price of $1,000,000. Seller
shall have the obligation to consummate this
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stock purchase within five business days after Buyer's satisfaction of its
obligations under Section 6.10(a).
(d) Time is of the essence with respect to the provisions of
this Section 6.10.
ARTICLE VII
CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS
Unless waived in writing by Buyer in its sole discretion, the
obligations of Buyer hereunder shall be subject to the fulfillment, prior to or
at the Closing, of each of the following conditions precedent:
7.1 Representations and Warranties of Seller to Be True; Covenants
to be Performed.
(a) The representations and warranties of Seller contained in
this Agreement shall be true and correct on the date hereof and as of the
Closing Date with the same effect as though such representations and warranties
had been made or given again at and as of the Closing Date, except for any
representation or warranty expressly stated to have been made or given as of a
specified date, which, at the Closing Date, shall be true and correct as of the
date expressly stated.
(b) Seller shall have performed and complied in all respects
with all of its agreements, covenants and conditions required by this Agreement
to be performed or complied with by it prior to or at the Closing Date.
(c) Seller shall have delivered to Buyer a certificate of its
manager or appropriate officer certifying the fulfillment of the conditions set
forth in this Section 7.1.
7.2 No Material Adverse Effect.
Since August 25, 2001, there shall not have occurred an event or
condition which has resulted in a Material Adverse Effect and Seller shall not
have suffered any loss (whether or not insured) by reason of physical damage
caused by fire, earthquake, flood, wind, accident or other calamity which
affects the value of the Business or any of the Acquired Assets.
7.3 No Proceeding or Litigation.
(a) No preliminary or permanent injunction or other order
issued by any governmental or regulatory body, whether federal, state or
foreign, shall have been issued and remain in effect, nor shall any statute,
rule, regulation or executive order be promulgated or enacted by any
governmental or regulatory body, whether federal, state or foreign, in each case
which prevents the consummation of the transactions contemplated in this
Agreement.
(b) No suit, action, claim, proceeding or investigation before
any governmental or regulatory body, whether federal, state or foreign shall
have been commenced
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and be pending against Buyer or any of its affiliates, associates, officers or
directors seeking to prevent the sale of the Acquired Assets to Buyer or
asserting that the sale of the Acquired Assets to Buyer would be illegal.
7.4 Financing.
(a) Buyer shall have, or shall receive, substantially
concurrently with the Closing, (i) paid in equity capital in the amount of at
least $7,000,000 and (ii) debt financing in the amount of at least $40,000,000.
(b) There shall have been obtained consents to assignment of
the Leased Property and lien waivers from the landlords thereof for Leased
Property at which is located at least 60% of the inventory of the Business to be
included as collateral under that certain Loan and Security Agreement by and
among STS Operating, Inc., as Borrower, the Obligors that are Signatories
thereto, as Obligors, the Lenders that are Signatories thereto, as the Lenders,
and Foothill Capital Corporation, as the Arranger and Administrative Agent,
dated as of September __, 2001.
7.5 Closing Deliveries.
Seller shall have delivered to Buyer, or shall have caused to be
delivered to Buyer, all deliveries to be made to Buyer pursuant to Section
3.1(b).
7.6 Executive Employment Agreements and Consulting Agreement.
Buyer shall have entered into the Executive Employment Agreements
with each of Xxxxxx Xxxxxx, Xxxxxxx Xxxxxxx, Xxxxx Xxxxxx, Xxx Xxxxxxx, Xxx
Xxxxx, and Xxxx Xxxxxxxxx, substantially in the form of Exhibit I hereto, and
the Consulting Agreement with Xxxxxxx X. Xxxxxxx, Xx. substantially in the form
of Exhibit J hereto.
7.7 Completion of Merger.
The merger set forth in the Agreement and Plan of Merger dated as
of June 18, 2001, by and among Allied Capital Corporation, Allied Capital Lock
Acquisition Corporation and SunSource Inc. shall have been completed before the
Closing.
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ARTICLE VIII
CONDITIONS PRECEDENT TO SELLER'S OBLIGATIONS
Unless waived in writing by Seller, the obligations of Seller hereunder
shall all be subject to the fulfillment, prior to or at the Closing, of each of
the following conditions precedent:
8.1 Representations and Warranties of Buyer to Be True; Covenants to
be Performed.
(a) The representations and warranties of Buyer contained in
this Agreement shall be true and correct on the date hereof and as of the
Closing Date with the same effect as though such representations and warranties
had been made or given again at and as of the Closing Date, except for any
representation or warranty expressly stated to have been made or given as of a
specified date, which, at the Closing Date, shall be true and correct as of the
date expressly stated.
(b) Buyer shall have performed and complied in all respects
with all of its agreements, covenants and conditions required by this Agreement
to be performed or complied with by it prior to or at the Closing Date.
(c) Buyer shall have delivered to Seller a certificate of its
president or any vice president dated the Closing Date and certifying the
fulfillment of the conditions set forth in this Section 8.1.
8.2 No Proceeding or Litigation.
(a) No preliminary or permanent injunction or other order
issued by any governmental or regulatory body, whether federal, state or
foreign, shall have been issued and remain in effect, nor shall any statute,
rule, regulation or executive order be promulgated or enacted by any
governmental or regulatory body, whether federal, state or foreign, in each case
which prevents the consummation of the transactions contemplated in this
Agreement.
(b) No suit, action, claim, proceeding or investigation before
any governmental or regulatory body, whether federal, state or foreign shall
have been commenced and be pending against Seller or any of their respective
affiliates, associates, officers or directors seeking to prevent the sale of the
Acquired Assets to Buyer or asserting that the sale of the Acquired Assets to
Buyer would be illegal.
8.3 Closing Deliveries.
Buyer shall have delivered to Seller all deliveries to be made to
it pursuant to Section 3.1(c).
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8.4 Completion of Merger.
The merger set forth the in the Agreement and Plan of Merger
dated as of June 18, 2001, by and among Allied Capital Corporation, Allied
Capital Lock Acquisition Corporation and SunSource Inc. shall have been
completed before the Closing.
8.5 Termination and Release Agreements.
Seller shall have entered into the Termination and Release
Agreements with each of Xxxxxx Xxxxxx, Xxxxxxx Xxxxxxx, Xxxxx Xxxxxx, Xxx
Xxxxxxx, Xxx Xxxxx, and Xxxx Xxxxxxxxx.
8.6 Financing.
(a) Buyer shall have, or shall receive, substantially
concurrently with the Closing, (i) paid in equity capital in the amount of at
least $7,000,000 and (ii) debt financing in the amount of at least $40,000,000.
(b) There shall have been obtained consents to assignment of
the Leased Property and lien waivers from the landlords thereof for Leased
Property at which is located at least 60% of the inventory of the Business to be
included as collateral under that certain Loan and Security Agreement by and
among STS Operating, Inc., as Borrower, the Obligors that are Signatories
thereto, as Obligors, the Lenders that are Signatories thereto, as the Lenders,
and Foothill Capital Corporation, as the Arranger and Administrative Agent,
dated as of September __, 2001.
ARTICLE IX
INDEMNIFICATION
9.1 Indemnification by Seller.
Except as otherwise limited by this Article IX, Buyer and its
officers, directors, employees, agents, successors and assigns (each, a "BUYER
INDEMNIFIED PERSON") shall be indemnified and held harmless, jointly and
severally, by Seller from any and all liabilities, losses, damages, claims,
costs and expenses, interest, awards, judgments and penalties (including,
without limitation, reasonable legal costs and expenses) actually suffered or
incurred by it (hereinafter a "BUYER LOSS"), arising out of or resulting from:
(a) the breach of any representation or warranty by Seller
contained herein or in any document delivered hereunder at the Closing;
(b) the breach of any covenant or agreement by Seller
contained herein or in any document delivered hereunder at the Closing;
(c) the nontimely or incomplete Form 5500 filings described
in Section 6.8(i);
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(d) any and all liabilities and obligations of, or claims
against, Seller not expressly assumed by Buyer pursuant to this Agreement, fixed
or contingent, known or unknown, including, without limitation, any tax
liabilities of Seller not expressly assumed by Buyer under this Agreement and
all taxes for which indemnity has been provided in Section 6.2;
(e) the ownership or use of the Acquired Assets or the
operation of the Business prior to the Closing (except to the extent assumed by
Buyer hereunder); or
(f) any investigation, suit, action or other proceeding by or
before any court or governmental or regulatory agency which seeks to restrain,
modify, prohibit or revoke, or seeks damages or other relief in connection with
the consummation of this transaction.
9.2 Indemnification by Buyer.
Except as otherwise limited by this Article IX, Seller and its
officers, directors, employees, agents, successors and assigns (and, solely with
respect to Buyer's covenants under Section 2.2(e), Seller's affiliate that
issued the Letters of Credit), shall be indemnified and held harmless by Buyer
from any and all liabilities, losses, damages, claims, costs and expenses,
interest, awards, judgments and penalties (including, without limitation,
reasonable legal costs and expenses) actually suffered or incurred by them
(hereinafter, a "SELLER LOSS") arising out of or resulting from:
(a) the breach of any representation or warranty by Buyer
contained herein or in any document delivered hereunder at the Closing;
(b) the breach of any covenant or agreement by Buyer contained
herein or in any document delivered hereunder at the Closing;
(c) any and all liabilities and obligations of, or claims
against, Seller expressly assumed by Buyer pursuant to this Agreement,
including, without limitation, Assumed Environmental Liabilities; or
(d) the ownership or use of the Acquired Assets or the
operation of the Business after the Closing.
9.3 General Indemnification Provisions.
(a) For the purposes of this Section 9.3, the term
"INDEMNITEE" shall refer to the person indemnified, or entitled, or claiming to
be entitled to be indemnified, pursuant to the provisions of Section 9.1 or 9.2,
as the case may be; the term "INDEMNITOR" shall refer to the person having the
obligation to indemnify pursuant to such provisions; and "LOSSES" shall refer to
the "SELLER LOSSES" or the "BUYER LOSSES," as the case may be.
(b) An Indemnitee shall give written notice (a "NOTICE OF
CLAIM") to the Indemnitor within ten business days after the Indemnitee has
actual knowledge of any claim
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(including a Third Party Claim, as hereinafter defined) which an Indemnitee has
determined has given or could give rise to a right of indemnification under this
Agreement. No failure to give such Notice of Claim shall affect the
indemnification obligations of the Indemnitor hereunder, except to the extent
Indemnitor can demonstrate such failure materially prejudiced such Indemnitor's
ability to successfully defend the matter giving rise to the claim. The Notice
of Claim shall state the nature of the claim, the amount of the Loss, if known,
and the method of computation thereof, all with reasonable particularity and
containing a reference to the provisions of this Agreement in respect of which
such right of indemnification is claimed or arises.
(c) The obligations and liabilities of an Indemnitor under
this Article IX with respect to Losses arising from claims of any third party
that are subject to the indemnification provisions provided for in this Article
IX ("THIRD PARTY CLAIMS") shall be governed by and contingent upon the following
additional terms and conditions: the Indemnitee at the time it gives a Notice of
Claim to the Indemnitor of the Third Party Claim shall advise the Indemnitor
that it shall be permitted, at its option, to assume and control the defense of
such Third Party Claim at its expense and through counsel of its choice and upon
consent of Indemnitor which consent will not be unreasonably withheld if it
gives prompt notice to Indemnitee within ten (10) days of its intention to do so
to the Indemnitee and confirms that the Third Party Claim is one with respect to
which the Indemnitor is obligated to indemnify. In the event the Indemnitor
exercises its right to undertake the defense against any such Third Party Claim
as provided above, the Indemnitee shall cooperate with the Indemnitor in such
defense and make available to the Indemnitor all witnesses, pertinent records,
materials and information in its possession or under its control relating
thereto as is reasonably required by the Indemnitor upon reasonable notice to
Indemnitee. Similarly, in the event the Indemnitee is, directly or indirectly,
conducting the defense against any such Third Party Claim, the Indemnitor shall
cooperate with the Indemnitee in such defense and make available to it all such
witnesses, records, materials and information in its possession or under its
control relating thereto as is reasonably required by the Indemnitee upon
reasonable notice to Indemnitor. If defendants in any action include the
Indemnitee and the Indemnitor, and the Indemnitee shall have been advised by its
counsel that there may be legal defenses available to the Indemnitee which are
reasonably different from or in addition to those available to the Indemnitor,
the Indemnitee shall have the right to employ its own counsel in such action,
and, in such event, the reasonable fees and expenses of such counsel shall be
borne by the Indemnitor. If the Indemnitor shall not notify the Indemnitee
within the required ten (10) day period of its intention to assume, or fails to
take necessary action to assume, the defense of any such claim or litigation
resulting therefrom, the Indemnitee may defend against any such claim or
litigation, at the cost and expense of Indemnitor and in such manner as it may
deem appropriate and the Indemnitee may settle such claim or litigation on such
terms as it may deem appropriate. Except for the settlement of a Third Party
Claim which involves the payment of money only and for which the Indemnitee is
totally indemnified by the Indemnitor, no Third Party Claim may be settled by
the Indemnitor without the written consent of the Indemnitee, which consent
shall not be unreasonably withheld. Similarly, no Third Party Claim may be
settled by the Indemnitee without the written consent of the Indemnitor, which
consent shall not be unreasonably withheld.
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9.4 Escrow.
(a) All claims for Buyer Losses payable hereunder shall be
satisfied first by release to Buyer of the Escrow Cash held in the Indemnity
Escrow pursuant to the Escrow Agreement, and second by release to Buyer of the
Escrow Shares held in the Indemnity Escrow pursuant to the Escrow Agreement.
Only after the Indemnity Escrow has been exhausted will Buyer have the right to
pursue any other remedies against Seller permitted hereunder.
(b) In accordance with the terms of the Escrow Agreement,
Buyer shall be entitled to receive reimbursement from the Escrow Cash and the
Escrow Shares for Buyer's actual costs and expenses arising out of or resulting
from Assumed Environmental Liabilities that: (i) are not disclosed in Schedule
4.16, and (ii) do not arise out of or result from: (A) Buyer's, its
Subsidiaries', or any of their successors' construction, reconstruction,
refurbishment, renovation, substantial modification, restoration, conversion,
structural alteration, relocation or enlargement of any building or structure or
any clearing, grading or other movement of land by human intervention for any
purpose other than the operation, maintenance, repair or expansion of the
Business that, in any case, substantially disturbs the surface or subsurface,
surface water or ground water of any portion of any Leased Property; or (B) any
voluntary action, program or expense incurred by Buyer, its Subsidiaries or any
of their successors under or related to Environmental Law other than: (1) the
continuation in a prudent manner in the ordinary course of business of
established programs of the Business existing prior to the date of this
Agreement to comply with Environmental Law; or (2) any action in response to a
requirement of a governmental authority, law, rule or regulation that requires
remedial action with respect to a Hazardous Material on the part of Buyer; or
(C) any voluntary disclosure to a third party of information or data by Buyer,
its Subsidiaries or any of their successors, except to the extent that Buyer
reasonably believes in good faith that a reportable quantity of Hazardous
Material has been released or it would otherwise be unlawful not to disclose
such information or data.
9.5 Exclusive Remedy.
From and after the Closing, neither party hereto shall be liable
or responsible in any manner whatsoever to the other party, whether for
indemnification or otherwise, except for indemnity as expressly provided in this
Article IX which provides the exclusive remedy and cause of action of the
parties hereto with respect to any matter arising out of or in connection with
this Agreement, except for equitable remedies arising under the provisions of
any breaches of Sections 6.3, 6.4 and 6.5, and agreements with third parties
referenced herein.
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ARTICLE X
SURVIVAL
10.1 Survival.
All representations, warranties, covenants and agreements made by any
party in this Agreement or pursuant hereto shall survive for a period of 18
months from the Closing Date, except for:
(a) the representations and warranties set forth in Sections
4.13, 4.15 and 4.16, which shall survive the Closing Date until the expiration
of the applicable statute of limitations; and
(b) the covenants and agreements set forth in this Agreement
until fully performed in accordance with their terms including, without
limitation, the covenants contained in Sections 6.1, 6.3, 6.4, 6.5, 6.6, 9.1(d),
9.1(e), 9.2(c), 9.2(d), 9.4, and 13.4, which shall survive the Closing Date and
continue in effect in accordance with their respective terms.
10.2 Notice of Claims.
If written notice of a claim has been given by a party prior to the
tolling of the survival period set forth in Section 10.1, then the relevant
representations, warranties, covenants and/or agreements shall survive as to
such claim until such claim has been finally resolved.
ARTICLE XI
CONDUCT OF SELLER PRIOR TO CLOSING
The Seller hereby represents, covenants and agrees with the Buyer that,
except as hereafter consented to in writing by the Buyer, from and after the
date hereof and until the Closing Date, the Seller has not and shall not:
(a) Make a purchase, sale or lease in respect of the Seller or
introduce any method of management, accounting or operation in respect of the
Seller, other than in the ordinary course of business consistent with prior
practice.
(b) Fail to maintain sales, accounts receivable or accounts
payable on a normal and customary basis or change the cash equivalent accounts
or the methods or procedures for billing, collecting, or recording customer
accounts receivable or reserves for doubtful accounts, or change the methods,
procedures or timing for paying or recording accounts payable.
(c) In any way encumber, or fail to maintain, repair, service
or preserve, the Acquired Assets, other than supplies used in the ordinary
course of business after the date hereof.
(d) Make any loans or advances, debt forgiveness, or grant pay
raises, bonuses or awards, or unusual salary or other payments, disbursements or
other distributions, directly or
- 42 -
indirectly, in any form to any management personnel, employee, director, officer
or stockholder of the Seller, or any relative of any such person, or entities or
persons affiliated with or related to any such management personnel, employee,
director, officer or stockholder of the Seller.
(e) Fail to use its best efforts to (i) keep available the
services of the present employees of the Seller, subject to Seller's personnel
termination decisions discussed with Buyer and (ii) preserve present
relationships and goodwill with entities or persons having business dealings
with the Seller, including, without limitation, existing customers of the
Seller.
(f) Fail to maintain the books and records of the Seller in
accordance with good business practices, on a basis consistent with prior
practice.
(g) Fail to use its reasonable efforts to comply in all
material respects with all statutes, ordinances, regulations, orders, judgments
and decrees of every court or governmental entity or agency applicable to the
Seller and to the conduct of the Business and perform all of its obligations
with respect thereto without default.
(h) Make any change adverse to the Seller in the terms of any
Material Contract or fail to perform any of its material obligations with
respect thereto without default.
(i) Fail to xxxx for services rendered or permit any account
payable or accrued expense of the Seller to be outstanding for periods
inconsistent with past practices, other than accounts payable or accrued
expenses being diligently contested in good faith by the Seller and as to which
the Buyer shall have consented in writing.
(j) Enter into any contract, contractual obligation, bank
debt, lease, loan or other commitment, written or oral, or agreement for amounts
to be due to third parties, other than in the ordinary course of business, or
except as provided herein.
(k) Fail to make available to Buyer the books of account,
records, tax returns, leases, contracts and other documents or agreements of the
Seller as Buyer, its counsel, accountants or its authorized representatives may
from time to time request.
(l) Fail to do all things reasonably requested to assist Buyer
or fail to use its reasonable efforts to obtain all consents and approvals
necessary for the transfer of the Acquired Assets.
ARTICLE XII
TERMINATION
12.1 Termination.
This Agreement may be terminated at any time prior to the Closing
Date:
(a) by mutual consent of Buyer and Seller; or
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(b) by either Buyer or Seller if (i) the Closing shall not
have occurred on or before December 31, 2001, not due to any breach by the
terminating party; (ii) any governmental entity, the consent of which is a
condition to the obligations of Buyer and Seller to consummate the transactions
contemplated hereby, shall have determined not to grant its consent and all
appeals of such determination shall have been taken and have been unsuccessful;
or (iii) any court of competent jurisdiction in the United States or any State
shall have issued an order, judgment or decree (other than a temporary
restraining order) restraining, enjoining or otherwise prohibiting the
transactions contemplated herein and such order, judgment or decree shall have
become final and nonappealable.
12.2 Effect of Termination.
In the event of termination of this Agreement by either Buyer or
Seller as provided in Section 12.1, this Agreement shall forthwith become void
and there shall be no liability on the part of either Buyer or Seller, or their
respective officers, directors, managers, or equity holders, other than
liability, if any, for breach of this Agreement.
ARTICLE XIII
MISCELLANEOUS
13.1 Assignments.
No assignment by any of the parties of their respective rights
nor delegation by any of the parties of their respective duties shall be
permitted hereunder without the consent of the other party. The parties hereby
acknowledge their consent to the collateral assignment of this Agreement
required under that certain Assignment of Contract executed and delivered in
connection with that certain Loan and Security Agreement by and among STS
Operating, Inc., as Borrower, the Obligors that are Signatories thereto, as
Obligors, the Lenders that are Signatories thereto, as the Lenders, and Foothill
Capital Corporation, as the Arranger and Administrative Agent, dated as of
September 28, 2001.
13.2 Intended Beneficiaries.
Seller and Buyer agree that no other person is intended to be a
beneficiary of this Agreement.
13.3 Costs.
(a) Except as otherwise provided in this Agreement, each party
hereto shall pay all fees and expenses incurred by it in connection with the
negotiation, preparation, and performance of this Agreement.
(b) Without limiting the generality of the foregoing paragraph
13.3(a), at Closing, Buyer shall pay all costs associated with the formation and
capitalization of Buyer, including, without limitation, (i) the legal fees and
costs of Xxxxx Xxxxxxx Xxxxxxx & Xxxxx LLP
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as counsel to Buyer with respect to this Agreement, the issuance of equity
securities of Buyer and borrowing from Foothill Capital Corporation in an amount
not to exceed $300,000, and (ii) the legal fees and costs of Torys as counsel to
Easton with respect to this Agreement and the issuance of equity securities of
Buyer in an amount not to exceed $80,000, and (iii) all fees, costs and expenses
of Foothill Capital Corporation.
13.4 Confidentiality.
For a period of three years from the date of this Agreement,
Buyer and Seller will hold, and will cause their employees, representatives,
agents and affiliated persons to hold in strict confidence, and not disclose to
any other party, and not use in any way except in connection with the
transactions contemplated hereby, without the prior written consent of the other
party, all confidential information obtained from the other party in connection
with the transactions contemplated by this Agreement (including the existence of
this Agreement, any of the terms hereof, and the negotiations between the
parties hereto), except such information may be disclosed: (a) where necessary,
to any potential lenders or investors (or others providing debt or equity
financing to Buyer in connection with the acquisition of the Acquired Assets);
(b) to applicable governmental or regulatory authorities and, where necessary,
to any other person in connection with the obtaining of the Licenses and
Approvals and the consents or waivers contemplated or required by the terms of
this Agreement; (c) if required by court order or decree or any applicable law;
(d) if it is publicly available through no act or failure to act of such party;
(e) was already known to such party on a confidential basis on the date of
receipt; (f) during the course of or in connection with any litigation,
governmental investigation, arbitration or other proceedings based upon or in
connection with the subject matter of this Agreement, including the failure of
the transactions contemplated hereby to be consummated; (g) in connection with a
public offering of Buyer's securities; or (h) if it is otherwise expressly
provided for herein.
13.5 Parties in Interest.
This Agreement shall be binding upon, inure to the benefit of,
and be enforceable by the respective successors, heirs, personal
representatives, and assigns permitted under the terms of this Agreement.
13.6 Entire Agreement; No Oral Modifications or Waivers.
This Agreement, the Exhibits, Schedules and other writings
referred to herein or delivered pursuant hereto which form a part hereof contain
the entire understanding of the parties with respect to its subject matter and
supersede all prior oral and written agreements and understandings between the
parties with respect to its subject matter. This Agreement may be modified and
any of its provisions may only be waived in a writing signed by the party
against whom such modification or waiver is sought to be enforced.
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13.7 Headings.
The Article and Section headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
13.8 Notices.
All notices, claims, certificates, requests, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given if delivered personally or if sent by facsimile, recognized overnight
courier service (e.g. Federal Express) or if sent by U.S. registered or
certified mail, postage prepaid, return receipt requested, as follows:
If to Buyer:
STS Operating, Inc.
c/o Allied Capital Corporation
0000 Xxxxxxxxxxxx Xxxxxx, 0xx Xxxxx
Xxxxxxxxxx, XX 00000
Fax: (000) 000-0000
Attn: Xxxxxx X. Xxxxxxx
- 46 -
With a copy to:
Xxxxx Xxxxxxx Xxxxxxx & Xxxxx LLP
0000 00xx Xxxxxx, X.X.
Xxxxxxxxxx, X.X. 00000
Fax: (000) 000-0000
Attn: Xxxxxxx X. Xxxxxxx, Esq.
And a copy to:
Easton Xxxx Capital Partners, L.P.
000 Xxxxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Fax: (000) 000-0000
Attn: Xxxxx Xxxxxxxx
And a copy to:
Torys
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Fax: (000) 000-0000
Attn: Xxxxxxx X. Xxxxxx, III, Esq.
If to Seller:
SunSource Technology Services, LLC
0000 Xxx Xxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
Fax: (000) 000-0000
Attn: Xxxxxxx X. Xxxxxxx, Xx.
or to such other address as the person to whom notice is to be given may have
previously furnished to the other in writing in the manner set forth above,
provided that notice of a change of address shall be deemed given only upon
receipt.
13.9 Counterparts.
This Agreement may be executed simultaneously in several
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
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13.10 Governing Law.
This Agreement is governed by and construed and enforced in
accordance with the laws of the State of Delaware (excluding conflicts of laws
rules).
13.11 Specific Performance.
Seller and Buyer each acknowledge that, in view of the uniqueness
of Business, Buyer would not have an adequate remedy at law for money damages in
the event that this Agreement were not performed in accordance with its terms,
and therefore each of them agree that Buyer shall be entitled to specific
enforcement of the terms hereof in addition to any other remedy to which it may
be entitled at law or in equity.
13.12 Severability.
A determination that any provision of this Agreement is invalid
or unenforceable shall not affect the validity or enforceability of any other
provision hereof. If it shall be determined by any court or governmental agency
or authority that any provision of this Agreement is invalid for any reason,
such provision shall be considered to be reduced to the extent required to cure
such invalidity.
13.13 Further Assurances.
From time to time, at Buyer's request and without further
consideration, Seller shall execute and deliver to Buyer such documents and take
such other action as Buyer may reasonably request in order to consummate more
effectively the transactions contemplated hereby.
13.14 No Drafting Presumption.
Each of the parties hereto shall be deemed to have participated
equally in the drafting and preparation of this Agreement and, accordingly, no
presumption shall arise concerning the interpretation of any of the provisions
hereof with respect to the party or parties responsible for its preparation.
13.15 Consent to Jurisdiction.
Each party to this Agreement, by its execution hereof, (i) hereby
irrevocably submits to the exclusive jurisdiction of the state courts of the
State of Delaware or the United States District Court located in the State of
Delaware for the purpose of any action arising out of or based upon this
Agreement or any agreement executed in connection herewith, or relating to the
subject matter hereof or thereof, in each case whether now existing or hereafter
arising, (ii) hereby waives, to the extent not prohibited by applicable law, and
agrees not to assert, by way of motion, as a defense or otherwise, in any such
action, any claim that it is not subject personally to the jurisdiction of the
above-named courts, that its property is exempt or immune
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from attachment or execution, that any such action brought in one of the
above-named courts may be removed to any federal court, should be dismissed on
grounds of forum non conveniens, should be transferred to any court other than
one of the above-named courts, or should be stayed by reason of the pendency of
some other proceeding in any other court other than one of the above-named
courts, or that this Agreement, the other agreements executed in connection
herewith or the subject matter hereof or thereof, in each case whether now
existing or hereafter arising, may not be enforced in or by such court, or that
this Agreement, the other agreements executed in connection herewith or the
subject matter hereof or thereof may not be enforced in or by such court and
(iii) hereby agrees not to commence any action arising out of or based upon this
Agreement, the other agreements executed in connection herewith or relating to
the subject matter hereof or thereof, in each case whether now existing or
hereafter arising, other than before one of the above-named courts nor to make
any motion or take any other action seeking or intending to cause the transfer
or removal of any such action to any court other than one of the above-named
courts whether on the grounds of inconvenient forum or otherwise. Each party
hereby: (x) consents to service of process in any such action in any manner
permitted by Delaware law; (y) agrees that service of process made in accordance
with clause (x) or by registered or certified mail, return receipt requested, at
its address specified pursuant to Section 13.8, is reasonably calculated to give
actual notice of any such action; and (z) waives and agrees not to assert (by
way of motion, as a defense, or otherwise) in any such action any claim that
service of process made in accordance with clause (x) or (y) does not constitute
good and sufficient service of process.
13.16 Enforceability.
If any provision of this Agreement shall be found by a court with
proper jurisdiction to be invalid or unenforceable, in whole or in part, then
such provision shall be deemed to be modified, narrowed, or restricted only to
the limited extent and in the manner necessary to render the same valid and
enforceable, as the case may require, and this Agreement shall be construed and
enforced to the maximum extent permitted by law as if such provision had been
originally incorporated herein as so modified, narrowed, or restricted.
13.17 Transfer Taxes.
All excise, sales, value added, use, registration, stamp,
transfer and similar taxes, levies, charges and fees (including all real estate
transfer taxes) incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by Seller. Buyer and Seller shall cooperate in
providing each other appropriate resale exemption certificates and other
appropriate tax documentation.
13.18 Incorporation by Reference, Use of Certain Terms.
All Exhibits and Schedules attached to this Agreement shall be
deemed incorporated herein by reference as if fully set forth herein. Use of the
term "including" shall be deemed to mean "including but not limited to."
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IN WITNESS WHEREOF, this Agreement has been duly executed and delivered
by the parties hereto on the date first above written.
WITNESS/ATTEST: BUYER:
STS Operating, Inc.,
a Delaware corporation
/s/ Xxxxxxxxxx Garagie By: /s/ Xxxxxx Xxxxxx (SEAL)
----------------------- --------------------
Name: Xxxxxx Xxxxxx
--------------------
Title: President
--------------------
WITNESS/ATTEST: SELLER:
SunSource Technology Services, LLC,
a Delaware limited liability company
By: /s/ Xxxxxx X. Xxxxxxx (SEAL)
----------------------- --------------------
Name:
--------------------
Title:
--------------------
WITNESS/ATTEST: JOINDER SOLELY FOR THE PURPOSES
SET FORTH IN SECTION 6.6:
Easton Xxxx Capital Partners, L.P.
/s/ Xxxxxxxx X. Xxxxxx By: /s/ Xxxxx X. Xxxxxxxx (SEAL)
----------------------- --------------------
Name: Xxxxx X. Xxxxxxxx
--------------------
Title: Vice President
--------------------
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