EXHIBIT 10.29
EXECUTION COPY
PURCHASE AGREEMENT
dated as of August 31, 2000
by and among
PGI ACQUISITION INC.,
THE PROVIDENCE GROUP, INC.
and
XXXXXXX X. XXXXXX
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS.................................................................... 1
1.1 Definitions....................................................... 1
ARTICLE II
PURCHASE AND SALE.............................................................. 8
2.1 Purchase and Sale................................................. 8
2.2 Minimum Book Value................................................ 8
2.3 Closing Balance Sheet............................................. 9
ARTICLE III
CONSIDERATION.................................................................. 9
3.1 Consideration..................................................... 9
3.2 Purchase Price Adjustments........................................ 9
3.3 Allocation of Purchase Price...................................... 11
ARTICLE IV
CLOSING........................................................................ 11
4.1 Closing........................................................... 11
4.2 Closing Deliveries................................................ 11
4.3 Further Assurances; Post-Closing Cooperation...................... 11
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF SELLER AND THE COMPANY....................... 12
5.1 Organization, Good Standing, Power, Etc........................... 12
5.2 Capital Stock..................................................... 12
5.3 Subsidiaries, Divisions and Affiliates............................ 13
5.4 Equity Investments................................................ 13
5.5 Authorization of Agreement........................................ 13
5.6 No Violation...................................................... 14
5.7 Restrictions...................................................... 14
5.8 Governmental and Other Consents................................... 14
5.9 Financial Statements.............................................. 14
5.10 Absence of Certain Changes or Events.............................. 15
5.11 Title to Assets; Absence of Liens and Encumbrances................ 15
Page
5.12 Equipment......................................................... 16
5.13 Insurance......................................................... 16
5.14 Contracts......................................................... 17
5.15 Real Property..................................................... 19
5.16 Tangible Personal Property........................................ 22
5.17 Intellectual Property Rights...................................... 22
5.18 Permits, Licenses, Etc............................................ 23
5.19 Compliance with Applicable Laws................................... 23
5.20 Litigation........................................................ 23
5.21 No Interest in Competitors........................................ 24
5.22 Customers, Suppliers, Distributors and Agents..................... 24
5.23 Books and Records................................................. 24
5.24 Employee Benefit Plans............................................ 25
5.25 Powers of Attorney................................................ 26
5.26 Sufficiency of Assets............................................. 26
5.27 Employees; Labor Relations........................................ 26
5.28 Past Due Obligations.............................................. 26
5.29 Environmental Matters............................................. 27
5.30 Taxes............................................................. 28
5.31 Recent Dividends and Other Distributions.......................... 30
5.32 Inventory......................................................... 30
5.33 Purchase and Sale Obligations..................................... 30
5.34 Other Information................................................. 30
5.35 Accounts Receivable and Accounts Payable.......................... 30
5.36 Brokers and Finders............................................... 31
5.37 No Undisclosed Liabilities........................................ 31
5.38 Book Value; EBIT.................................................. 31
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF PURCHASER.................................... 31
6.1 Organization...................................................... 31
6.2 Authorization of Agreement........................................ 31
6.3 No Violation...................................................... 31
6.4 Litigation........................................................ 32
ARTICLE VII
COVENANTS OF SELLER AND THE COMPANY............................................ 32
7.1 Conduct of Business Until Closing Date............................ 32
7.2 Approvals, Consents and Further Assurances........................ 34
7.3 Access to Properties, Records, Suppliers, Agents, Etc............. 34
7.4 Advice of Changes................................................. 34
7.5 Conduct........................................................... 34
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7.6 Employee Benefit Plans............................................ 35
7.7 Satisfaction of Conditions by Seller.............................. 35
7.8 Non-competition................................................... 35
7.9 Indebtedness...................................................... 35
ARTICLE VIII
COVENANTS OF PURCHASER......................................................... 36
8.1 Satisfaction of Conditions by Purchaser........................... 36
ARTICLE IX
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF PURCHASER........................... 36
9.1 Accuracy of Representations and Warranties........................ 36
9.2 Performance of Agreements......................................... 36
9.3 Litigation, Etc................................................... 36
9.4 Approvals and Consents............................................ 37
9.5 Officer's Certificate............................................. 37
9.6 Good Standing Certificate......................................... 37
9.7 No Material Adverse Change........................................ 37
9.8 Actions, Proceedings, Etc......................................... 37
9.9 Opinions of Counsel to Seller and the Company..................... 38
9.10 Licenses, Permits, Consents, Etc.................................. 38
9.11 Documentation of Rights........................................... 38
9.12 Employment Agreement.............................................. 38
9.13 Real Property and Other Matters................................... 38
9.14 Indebtedness...................................................... 39
9.15 Book Value; EBIT.................................................. 39
9.16 Environmental Condition........................................... 39
9.17 2000 Balance Sheet................................................ 39
ARTICLE X
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF SELLER.............................. 39
10.1 Accuracy of Representations and Warranties........................ 39
10.2 Performance of Agreements......................................... 39
10.3 No Injunction..................................................... 40
10.4 Opinion of Counsel to Purchaser................................... 40
ARTICLE XI
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION.................... 40
11.1 Survival.......................................................... 40
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11.2 Indemnification by Seller......................................... 40
11.3 Indemnification by Purchaser...................................... 41
11.4 Method of Asserting Claims........................................ 41
11.5 Subrogation....................................................... 43
11.6 Indemnity Payment................................................. 43
11.7 Offset............................................................ 43
ARTICLE XII
TAX MATTERS.................................................................... 43
12.1 Allocation of Certain Taxes....................................... 43
12.2 Preparation and Filing of Tax Returns............................. 44
12.3 Transfer Taxes.................................................... 44
12.4 Tax Sharing Agreements............................................ 44
ARTICLE XIII
MISCELLANEOUS.................................................................. 44
13.1 Expenses.......................................................... 44
13.2 Termination....................................................... 45
13.3 Waivers........................................................... 45
13.4 Binding Effect; Benefits.......................................... 46
13.5 Assignment........................................................ 46
13.6 Notices........................................................... 46
13.7 Entire Agreement.................................................. 47
13.8 Headings; Certain Terms........................................... 47
13.9 Arbitration of Claims............................................. 47
13.10 Counterparts...................................................... 48
13.11 Governing Law..................................................... 48
13.12 Severability...................................................... 48
13.13 Amendments........................................................ 49
13.14 Section References................................................ 49
ANNEXES
Annex I - Ownership of Shares
EXHIBITS
Exhibit A - Form of Opinion of Counsel to Seller
Exhibit B - Form of Opinion of Counsel to Company
Exhibit C - Form of Employment Agreement
iv
Exhibit D - Form of FIRPTA Certificate
Exhibit E - Form of Estoppel Certificate
Exhibit F - Form of Opinion of Counsel to Purchaser
SCHEDULES
v
This PURCHASE AGREEMENT, dated as of August 31, 2000, is made and
entered into by and among PGI ACQUISITION INC., a Delaware corporation
("Purchaser"), THE PROVIDENCE GROUP, INC., a Delaware corporation (the
"Company"), and XXXXXXX X. XXXXXX ("Seller"). Capitalized terms not otherwise
defined herein have the meanings set forth in Article I.
WHEREAS, the Company is engaged in the business of environmental
remediation including in-tank retrieval and removal of hazardous waste (the
"Business");
WHEREAS, Seller collectively owns all of the issued and outstanding
shares of capital stock of the Company as set forth on Annex I (the "Shares");
and
WHEREAS, Seller desires to sell, transfer and assign to Purchaser,
and Purchaser desires to purchase and acquire from Seller, the Shares, on the
terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth in this Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. (a) As used in this Agreement, the following defined
terms shall have the meanings indicated below:
"Actions or Proceedings" means any action, suit, proceeding, arbitration
or Governmental or Regulatory Authority investigation or audit.
"Affiliate" means, as applied to any person, any other person directly or
indirectly controlling, controlled by, or under common control with, that
person. For purposes of this definition, "control" (including with correlative
meanings, the terms "controlling," "controlled by," and "under common control
with") as applied to any person, means the possession, directly or indirectly,
of the power to direct or cause the direction of the management or policies of
that person or entity, whether through the ownership of voting securities, by
contract, or otherwise.
"Assets and Properties" of any person means all assets and properties of
every kind, nature, character and description (whether real, personal or mixed,
whether tangible or intangible, whether absolute, accrued, contingent, fixed or
otherwise and wherever situated), including, without limitation, the goodwill
related to any of the foregoing, operated, owned or leased by or in the
possession of such person.
"Books and Records" of any person means all files, documents, instruments,
papers, books and records relating to the business, operations, condition of
(financial or other), results of operations and assets and properties of such
person, including, without limitation, financial statements, Tax Returns and
related work papers and letters from accountants, budgets, pricing guidelines,
ledgers, journals, deeds, title policies, minute books, stock certificates and
books, stock transfer ledgers, Contracts, Licenses, customer and subscription
lists, computer files and programs, retrieval programs, editorial files,
operating data and plans and environmental studies and plans
"Claim Notice" means a written notification pursuant to Section 11.4(a) of
a Third Party Claim as to which indemnity under Section 11.2 or Section 11.3 is
sought by an Indemnified Party, enclosing a copy of all papers served, if any,
on the Indemnified Party in connection with such Third Party Claim.
"Code" means the Internal Revenue Code of 1986, as amended.
"Contract" means any agreement, lease (other than the Real Property
Leases), evidence of Indebtedness, mortgage, indenture, security agreement or
other contract (whether written or oral).
"Environment" means all air, surface water, groundwater, or land,
including land surface or subsurface, including all fish, wildlife, biota and
all other natural resources.
"Environmental Claim" means any and all administrative or judicial
actions, suits, orders, claims, liens, notices, notices of violations,
investigations, complaints, requests for information, proceedings, or other
communication (written or oral), whether criminal or civil, pursuant to or
relating to any applicable Environmental Law by any person (including but not
limited to any Governmental or Regulatory Authority, private person and
citizens' group) based upon, alleging, asserting, or claiming any actual or
potential (i) violation of or liability under any Environmental Law, (ii)
violation of any Environmental Permit, or (iii) liability for investigatory
costs, cleanup costs, removal costs, remedial costs, response costs, natural
resource damages, property damage, personal injury, fines, or penalties arising
out of, based on, resulting from, or related to the presence, Release, or
threatened Release into the Environment, of any Hazardous Materials at any
location, including but not limited to any off-Site location to which Hazardous
Materials or materials containing Hazardous Materials were sent for handling,
storage, treatment, or disposal.
"Environmental Clean-up Site" means any location which is listed or
proposed for listing on the National Priorities List, the Comprehensive
Environmental Response, Compensation and Liability Information System, or on any
similar state list of sites requiring investigation or cleanup, or which is the
subject of any pending or threatened action, suit, proceeding, or investigation
related to or arising from any alleged violation of any Environmental Law.
2
"Environmental Law" means any and all federal, state, local, provincial
and foreign, civil and criminal laws, statutes, ordinances, orders, common law,
codes, rules, regulations, Environmental Permits, policies, guidance documents,
judgments, decrees, injunctions, or agreements with any Governmental or
Regulatory Authority, relating to the protection of health and the Environment,
worker health and safety, and/or governing the handling, use, generation,
treatment, storage, transportation, disposal, manufacture, distribution,
formulation, packaging, labeling, or Release of Hazardous Materials, whether now
existing or subsequently amended or enacted, including but not limited to: the
Clean Air Act, 42 U.S.C.ss.7401 et seq.; the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, 42 X.X.X.xx. 9601 et seq.; the
Federal Water Pollution Control Act, 33 U.S.C.ss.1251 et seq.; the Hazardous
Material Transportation Act 49 U.S.C.ss.1801 et seq.; the Federal Insecticide,
Fungicide and Rodenticide Act 7 U.S.C.ss.136 et seq.; the Resource Conservation
and Recovery Act of 1976, 42 U.S.C.ss.6901 et seq.; the Toxic Substances Control
Act, 15 U.S.C.ss.2601 et seq.; the Occupational Safety & Health Act of 1970, 29
U.S.C.ss.651 et seq.; the Oil Pollution Act of 1990, 33 U.S.C.ss.2701 et seq.;
and the state analogies thereto, all as amended or superseded from time to time;
and any common law doctrine, including but not limited to, negligence, nuisance,
trespass, personal injury, or property damage related to or arising out of the
presence, Release, or exposure to a Hazardous Material.
"Environmental Permit" means any federal, state, local, provincial, or
foreign permits, licenses, approvals, consents or authorizations required by any
Governmental or Regulatory Authority under or in connection with any
Environmental Law and includes any and all orders, consent orders or binding
agreements issued or entered into by a Governmental or Regulatory Authority
under any applicable Environmental Law.
"GAAP" means generally accepted accounting principles as currently in
effect and applied in a consistent manner.
"Governmental or Regulatory Authority" means any court, tribunal,
arbitrator, authority, agency, commission, official or other instrumentality of
the United States, any foreign country or any domestic or foreign state, county,
city or other political subdivision.
"Hazardous Material" means petroleum, petroleum hydrocarbons or petroleum
products, petroleum by-products, radioactive materials, asbestos or
asbestos-containing materials, gasoline, diesel fuel, pesticides, radon, urea
formaldehyde, lead or lead-containing materials, polychlorinated biphenyls; and
any other chemicals, materials, substances or wastes in any amount or
concentration which are now or hereafter become defined as or included in the
definition of "hazardous substances," "hazardous materials," "hazardous wastes,"
"extremely hazardous wastes," "restricted hazardous wastes," "toxic substances,"
"toxic pollutants," "pollutants," "regulated substances," "solid wastes," or
"contaminants" or words of similar import, under any Environmental Law.
"Indebtedness" of any person means all obligations of such person (i) for
borrowed money, (ii) evidenced by a note, bond, debenture or similar instrument,
(iii) for the deferred purchase price of goods or services (other than trade
payables or accruals incurred in the ordinary course of business), (iv) under
any capital lease or (v) in the nature of a guarantee of any obligation of any
other person of a type described in any of clauses (i) through (iv) above.
3
"Indemnified Party" means any Person claiming indemnification under any
provision of Article XI.
"Indemnity Dispute Notice" means any written notice by an Indemnifying
Party pursuant to Section 11.4(c) of a dispute with respect to an Indemnity
Notice, specifying the nature of and basis for such a dispute.
"Indemnity Dispute Period" means the period ending thirty (30) calendar
days following receipt by an Indemnifying Party of either a Claim Notice or an
Indemnity Notice.
"Indemnity Notice" means written notification pursuant to Section 11.4(c)
of a claim for indemnity under Article XI by an Indemnified Party specifying the
nature of and basis for such claim, together with the amount or, if not then
reasonably ascertainable, the estimated amount, determined in good faith, of
such claim.
"Indemnifying Party" means any Person against whom a claim for
indemnification is being asserted under any provision of Article XI.
"Indemnity Resolution Period" means the period ending thirty (30) calendar
days following receipt by an Indemnified Party of an Indemnity Dispute Notice.
"Intellectual Property" means all patents and patent rights, trademarks
and trademark rights, trade names and trade name rights, service marks and
service xxxx rights, service names and service name rights, brand names,
inventions, processes, formulae, copyrights and copyright rights, trade dress,
business and product names, logos, slogans, trade secrets, industrial models,
designs, specifications, data, technology, methodologies, computer programs
(including all source codes), confidential and proprietary information, whether
or not subject to statutory registration (including client and business leads
and contacts), and all related technical information, manufacturing, engineering
and technical drawings, know-how and all pending applications for and
registrations of patents, trademarks, service marks and copyrights, and all
goodwill associated with the foregoing, including the right to xxx for past
infringement, if any, in connection with any of the foregoing, and all
documents, disks and other media on which any of the foregoing is stored.
"Inventory" means all inventories of raw materials, work-in-process,
finished goods, parts, components, works of authorship, products or materials
under research and development, returned or repossessed products, demonstration
equipment, office and other supplies, containers, shipping and packaging
materials and other accessories related thereto wherever located and whether or
not consigned, which are owned or held for use by the Company, including any of
the foregoing purchased subject to any conditional sales or title retention
agreement in favor of any other person, together with all rights of the Company
against suppliers of such inventories.
4
"Laws" means all laws, statutes, rules, regulations, ordinances and other
pronouncements having the effect of law of the United States, any foreign
country or any domestic or foreign state, county, city or other political
subdivision or of any Governmental or Regulatory Authority.
"Liabilities" means all Indebtedness, obligations and other liabilities of
a person (whether absolute, accrued, contingent, fixed or otherwise, or whether
due or to become due).
"Licenses" means all licenses, permits, certificates of authority,
authorizations, approvals, registrations, memberships, franchises and similar
consents granted or issued by any Governmental or Regulatory Authority.
"Lien" means any mortgage, pledge, assessment, security interest, lease,
lien, adverse claim, levy, charge or other encumbrance of any kind, whether
voluntary or involuntary (including any conditional sale Contract, title
retention Contract or other Contract to give any of the foregoing).
"Loss" means any and all damages, fines, Taxes, fees, penalties,
deficiencies, losses and expenses including, without limitation, interest,
expenses of investigation, court costs, fees and expenses of attorneys,
accountants and other experts or other expenses of litigation or other
proceedings or of any claim, default or assessment
"Operative Agreements" means the Employment Agreement and any supporting
or other agreements to be entered into in connection with the transactions
contemplated by this Agreement.
"Permitted Lien" means (i) any Lien for Taxes not yet due or delinquent or
being contested in good faith by appropriate proceedings for which adequate
reserves have been established in accordance with GAAP, and (ii) any minor
imperfection of title or similar Lien which individually or in the aggregate
with other such Liens does not impair or adversely affect the value or
marketability of the property subject to such Lien or interfere with or
adversely affect the use of such property in the conduct of the Business and
which does not secure obligations for money borrowed.
"Post-Closing Period" means any taxable period or portion thereof
beginning after the Closing Date or, as the context may require, all such
periods. If a taxable period begins on or before the Closing Date and ends after
the Closing Date, then the portion of the taxable period that begins on the day
following the Closing Date shall constitute a Post-Closing Period.
"Pre-Closing Period" means any taxable period or portion thereof ending on
or before the Closing Date or, as the context may require, all such periods. If
a taxable period begins on or before the Closing Date and ends after the Closing
Date, then the portion of the taxable period to the end of the Closing Date
shall constitute a Pre-Closing Period.
5
"Release" means any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, dumping, or disposing of a
Hazardous Material into the Environment.
"Site" means any of the real properties currently or previously owned,
leased or operated by the Company, any predecessors of the Company or any
entities previously owned by the Company, including all soil, subsoil, surface
waters and groundwater thereat.
"Tangible Personal Property" means all furniture, fixtures, equipment,
machinery and other tangible personal property of the Company, wherever located,
owned or held for use by the Company, including any of the foregoing purchased
subject to any conditional sales or title retention agreement in favor of any
other person;
"Taxes" means all taxes, including without limitation all federal, state,
local, foreign and other income, franchise, sales, use, Transfer Taxes, payroll,
withholding, environmental, alternative or add-on minimum and other taxes,
assessments, charges, duties, fees, levies or other governmental charges of any
kind whatsoever, and all estimated taxes, deficiency assessments, additions to
tax, penalties, and interest, and any contractual or other obligation to
indemnify or reimburse any person with respect to any such assessment.
"Taxing Authority" means any governmental agency, board, bureau, body,
department or authority of any federal, state, local or foreign jurisdiction,
having jurisdiction with respect to any Tax.
"Tax Return" means any report, statement, return, declaration of estimated
tax or other information required to be supplied by or on behalf any person to a
taxing authority in connection with Taxes, or with respect to grants of tax
exemption, including any consolidated, combined, unitary, joint or other return
filed by any person that properly includes the income, deductions or other tax
information concerning any person.
"Transfer Taxes" means sales, use, value added, transfer, real property
transfer, recording, stock transfer, registration, documentary stamp and other
similar taxes and fees.
"Treasury Regulations" means the regulations promulgated by the U.S.
Treasury under the Code.
6
"Year 2000 Compliant" means that (i) data structures (i.e., databases and
data files) provide a four-digit date century, (ii) stored data contains date
century recognition, (iii) calculations and program logic (i.e., sort
algorithms, calendar generations and event recognition) accommodate both same
century and multi-century formulas and data, (iv) interfaces to and from other
systems or organizations prevent the entrance and exit of non-compliant dates
and data, (v) user interfaces (i.e., screens and reports) show four-digit years
if critical to business functions, and (vi) the year 2000 is correctly treated
as a leap year within all calculation and calendar logic, such that such systems
and technology do not and will not, without requiring any modifications,
experience any malfunctions, premature cancellation or expiration of contractual
rights or deletion of data, or any other problems in connection with the year
2000 (as distinct from 1900's years), the date February 29, 2000 (and all
subsequent leap years), and/or any other date after January 1, 2000.
(b) The following terms, when used in this Agreement, shall have
the meanings defined for such terms in the Section set forth below (such
definitions to be equally applicable to both singular and plural forms of the
terms defined):
Term Section
---- -------
"1998 Balance Sheet" 5.9
"1999 Balance Sheet" 5.9
"2000 Balance Sheet" 5.9
"AAA" 13.9(c)
"Annual Amount" 3.2(b)
"Approvals" 5.15(l)
"Arbitration Notice" 13.9(b)
"Balance Sheet Notice of Disagreement" 2.3(b)
"Book Value" 2.2
"Book Value Adjustment" 3.2(a)
"Business" Recitals
"Closing" 4.1
"Closing Balance Sheet" 2.3(a)
"Closing Date" 4.1
"Company" Recitals
"Dispute" 13.9(a)
"EBIT Notice" 3.2(b)(ii)
"EBIT Notice of Disagreement" 3.2(b)(iii)
"Employee Benefit Plans" 5.24
"Employment Agreement" 9.12
"ERISA" 5.24
"Final Closing Balance Sheet" 2.3(b)
"Financial Statements" 5.9
"Initiating Party" 13.9(b)
"Leased Real Property" 5.15(a)
"Minimum Book Value" 2.2
"PGI Acquisition Inc." Recitals
"Post-Closing Year" 3.2(b)
"Purchaser" Recitals
"Purchaser Indemnitees" 11.2
"Real Property Leases" 5.15(a)
"Review Period" 7.9(c)
"Seller" Recitals
"Shares" Recitals
"The Providence Group, Inc." Recitals
"Third Party Claim" 11.4(a)
"Three-Year Amount" 3.2(b)
"Three-Year Period" 3.2(b)
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(c) Unless the context of this Agreement otherwise requires: (i)
words of any gender include each other gender; (ii) words using the singular or
plural number also include the plural or singular number, respectively; (iii)
the terms "hereof," "herein," "hereby," "hereto" and derivative or similar words
refer to this entire Agreement; and (iv) the terms "Article" or "Section" refer
to the specified Article or Section of this Agreement. All accounting terms used
herein and not expressly defined herein shall have the meanings given to them
under GAAP.
ARTICLE II
PURCHASE AND SALE
2.1 Purchase and Sale. On the terms and subject to the conditions set
forth in this Agreement, at the Closing, (i) Seller shall sell, transfer,
convey, assign and deliver to Purchaser, and Purchaser will purchase from
Seller, free and clear of all Liens, all of Seller's right, title and interest
in and to the Shares owned by Seller as set forth opposite Seller's name on
Annex I hereto.
2.2 Minimum Book Value. Each of Purchaser, Seller and the Company agrees
that, as of the Closing Date and immediately prior to the Closing, the aggregate
book value ("Book Value") of the Company shall be equal to at least One Million
Dollars ($1,000,000) ("Minimum Book Value"), which amount shall include
sufficient cash with which to operate the Business post-Closing in a manner
consistent with past practice. The Book Value shall be the amount equal to (i)
the value of the Assets and Properties of the Company, to the extent required to
be set forth on a balance sheet prepared in accordance with GAAP, minus (ii) the
value of the Liabilities of the Company, to the extent required to be set forth
on a balance sheet prepared in accordance with GAAP. In determining the Book
Value and the Minimum Book Value of the Company for purposes of this Agreement,
there shall be added to the Liabilities of the Company an amount equal to the
incremental United States federal, state and local tax cost (on a
dollar-for-dollar, rather than a present value, basis) to which the Company will
become subject by reason of the application of Section 481 of the Code (and any
equivalent state or local laws or rules) to the Company's change of method of
accounting for Tax purposes from the cash method to the accrual method as of the
Closing Date.
8
2.3 Closing Balance Sheet.
(a) Within 60 days after the Closing, Seller, at Seller's cost and
if requested by Purchaser, shall prepare and cause the Company's regularly
engaged certified public accountant to audit, report on, certify and deliver to
Purchaser the balance sheet ("Closing Balance Sheet") of the Company as of the
Closing Date. The Closing Balance Sheet shall be prepared in accordance with
GAAP, and in a manner consistent with the Company's Financial Statements. If
Purchaser requests a post-closing audit, Purchaser shall, at its expense,
provide assistance to help facilitate such required audit.
(b) Unless Purchaser objects in writing to Seller ("Balance Sheet
Notice of Disagreement") within 30 days of Purchaser's receipt of the Closing
Balance Sheet, the Closing Balance Sheet shall become final and binding on the
parties. During the 25-day period following Purchaser's receipt of the Closing
Balance Sheet, Purchaser and its representatives will be permitted to review all
work papers, schedules and calculations used in the preparation thereof. Seller
will cooperate with Purchaser and its representatives in facilitating any such
review. Any Balance Sheet Notice of Disagreement shall specify in reasonable
detail the nature of any disagreement so asserted. If a Balance Sheet Notice of
Disagreement is delivered to Seller in a timely manner, then the Closing Balance
Sheet shall become final and binding upon the parties on the earlier of: (i) the
date the parties resolve in writing dispute matters, and (ii) the date disputed
matters are resolved in the manner prescribed in Section 13.9 hereof. The
Closing Balance Sheet that becomes final and binding on the parties is referred
to as the "Final Closing Balance Sheet."
ARTICLE III
CONSIDERATION
3.1 Consideration. The aggregate purchase price (the "Purchase Price")
for the Shares and for the covenant contained in Section 7.8 hereof, shall
consist of (i) Three Million and One Hundred Thousand Dollars ($3,100,000),
subject to adjustment as described in Section 3.2.
3.2 Purchase Price Adjustments. (a) In the event that the Book Value as
reflected on the Final Closing Balance Sheet shall be less than the Minimum Book
Value, the Purchase Price shall be reduced dollar for dollar by an amount equal
to the excess of the Minimum Book Value over the Book Value reflected on the
Final Closing Balance Sheet (the "Book Value Adjustment"). For purposes of this
Section 3.2, Book Value shall include certain assets of M&B Leasing Partnership
as set forth on Schedule 3.2 hereto and valued at $175,000, which assets shall
be transferred to the Company on or before the Closing. The Book Value
Adjustment shall be satisfied by the payment by Seller of the amount of such
adjustment by certified check or wire transfer of immediately available funds to
such account as Purchaser may reasonably direct by written notice delivered to
Seller by Purchaser within ten (10) days of the determination of the Final
Closing Balance Sheet.
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(b) (i) In the event that, during the three fiscal years ending on
the last day of the third full fiscal year following the Closing Date (the
"Three-Year Period"), the Company generates cumulative EBIT (as defined below)
in excess of Two Million and One Hundred Thousand Dollars ($2,100,000),
Purchaser shall pay Seller Eight Hundred Thousand Dollars ($800,000) (the
"Three-Year Amount") as additional purchase price. As used herein, EBIT shall
mean, for any period, earnings before interest and taxes (as calculated
according to GAAP), and shall exclude any corporate overhead of Purchaser and
its Affiliates except the Company's pro-rata accounting fees, and further, shall
exclude any amortization expense, including but not limited to, amortization of
goodwill, resulting from any allocation relating to the transactions
contemplated by this Agreement.
(ii) In the event the Company generates EBIT in excess of Eight
Hundred Thousand Dollars ($800,000) in any Post-Closing Year, Purchaser shall
pay Seller an amount (each, an "Annual Amount") equal to 20% of such excess as
additional purchase price. For purposes of this Agreement "Post-Closing Year"
means any of the first five full fiscal years of the Company commencing after
the Closing Date. Any amount due pursuant to this subsection (ii) shall be in
addition to any amount due and owing pursuant to subsection (i) above.
(iii) Promptly upon calculation of EBIT with respect to the
Three-Year Period (referred to in Section 3.2(b)(i)) or any Post-Closing Year
(referred to in Section 3.2(b)(ii)), as the case may be, Purchaser shall deliver
to Seller a notice (the "EBIT Notice") setting forth:
(A) EBIT attributable to the Company during the Three-Year Period
(referred to in Section 3.2(b)(i)) or any Post-Closing Year (referred to in
Section 3.2(b)(ii)), as the case may be; and
(B) a calculation of the Three-Year Amount or the Annual Amount,
if any, due pursuant to this Section 3.2(b).
(iv) Unless Seller shall object in writing to Purchaser ("EBIT
Notice of Disagreement") within ninety (90) days of receipt of the EBIT Notice
from Purchaser, the EBIT Notice shall become final and binding on the parties.
During the ninety (90) day period following Seller<180>s receipt of the EBIT
Notice, Seller's accountants will be permitted to review the workpapers of
Purchaser's accountants relating to the EBIT Notice and back-up documentation
solely for the purpose of verifying EBIT calculations. Any EBIT Notice of
Disagreement shall specify in reasonable detail the nature of any disagreement
so asserted. During the forty five (45) day period following the delivery of any
EBIT Notice of Disagreement, the parties shall attempt in good faith to amicably
resolve their differences specified in the EBIT Notice of Disagreement. If, at
the end of such 45-day period, the parties have not reached agreement on such
matters, either Purchaser or Seller shall submit the matters which remain in
dispute for arbitration pursuant to Section 13.9 hereof. If an EBIT Notice of
Disagreement is received by Purchaser in the manner prescribed herein, then the
EBIT Notice shall become final and binding upon the parties on the earlier of
(i) the date the parties resolve in writing disputed matters, and (ii) the date
disputed matters are resolved in the manner prescribed in Section 13.9 hereof.
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3.3 Allocation of Purchase Price. The Purchase Price shall be allocated
among the Shares and the covenant contained in Section 7.8 hereto, as set forth
on Schedule 3.3 hereto. In the event of any payments under Section 3.2 herein
such payments shall be allocated to the Shares or as otherwise agreed to by the
parties hereto. The allocations in this Section 3.3 shall be used by Purchaser
and Seller for all relevant Tax purposes.
ARTICLE IV
CLOSING
4.1 Closing. Subject to the provisions of this Agreement, the
consummation of the transactions contemplated by this Agreement (the "Closing")
shall be held in Knoxville, Tennessee at 10:00 A.M. (New York, New York time),
on August 31, 2000, or at such later date, place or time as the parties shall
otherwise mutually agree upon (the date of the Closing being referred to herein
as the "Closing Date"). All Closing transactions shall be deemed to take place
simultaneously, and no Closing transaction shall be deemed consummated until all
transactions to take place at the Closing have been consummated.
4.2 Closing Deliveries. At the Closing, Purchaser will pay the Purchase
Price by certified check or wire transfer of immediately available funds to such
account as Seller may reasonably direct by written notice delivered to Purchaser
by Seller at least two (2) Business Days before the Closing Date.
Simultaneously, Seller will deliver or cause to be delivered to Purchaser (i)
stock certificates evidencing the Shares, duly endorsed in blank or accompanied
by stock powers duly executed in blank and (ii) the minute books, stock transfer
books and corporate seal of the Company. At the Closing, there shall also be
delivered to Seller and Purchaser the opinions, certificates and other documents
and instruments required to be delivered under Articles IX and X.
4.3 Further Assurances; Post-Closing Cooperation. (a) At any time or
from time to time after the Closing, at Purchaser's request and without further
consideration, Seller shall execute and deliver to Purchaser such other
instruments of sale, transfer, conveyance, assignment and confirmation, provide
such materials and information and take such other actions as Purchaser may
reasonably deem necessary or desirable in order more effectively to transfer,
convey and assign to Purchaser, and to confirm Purchaser's title to, all of the
Shares, and, to the fullest extent permitted by Law, to put Purchaser in actual
possession and operating control of the Business and to assist Purchaser in
exercising all rights with respect to the Shares, and otherwise to cause Seller
and the Company to fulfill their respective obligations under this Agreement and
the Operative Agreements.
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(b) At any time after the Closing, for litigation, Tax or
accounting purposes, upon the written request of Purchaser to Seller, or Seller
to Purchaser, stating the need therefor, the party receiving such request shall
(i) make or cause to be made available to the other party, its related companies
or successors, and permit such other party and its agents to inspect and copy
the Books and Records of the party receiving such request and (ii) assist in
arranging discussions with (and calling as witnesses) officers, employees and
agents of the party receiving such request on matters relating to the Shares
subject to the reimbursement of the party receiving such request for any actual
out-of-pocket expenses incurred by the party receiving such request in the
performance of its obligations under this Section 4.3.
(c) Notwithstanding anything to the contrary contained in this
Section 4.3, if the parties are in an adversarial relationship in litigation or
arbitration, the furnishing of information, documents or records in accordance
with Section 4.3(b) shall be subject to applicable rules relating to discovery.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF SELLER AND THE COMPANY
As an inducement to Purchaser to enter into this Agreement and perform its
obligations hereunder, each of Seller and the Company jointly and severally
represents and warrants to Purchaser as follows, each of which representation
and warranty is material and is being relied upon by Purchaser, and each of
which is true as of the date hereof and shall be true as of the Closing, with
the same effect as if said representations and warranties had been made at and
as of the Closing Date:
5.1 Organization, Good Standing, Power, Etc. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of Delaware. The Company is authorized or licensed to do business as a foreign
corporation and is in good standing in each jurisdiction (set forth in Schedule
5.1 hereto) in which the character and location of its Assets and Properties or
the nature of the Business makes such qualification necessary. The Company has
all requisite corporate power and authority to (i) execute, deliver and perform
its obligations under this Agreement and the Operative Agreements and to
consummate the transactions contemplated hereby and thereby and (ii) to own or
lease and operate its properties and assets, and carry on the Business as it is
presently being conducted. Seller has full power and authority to execute,
deliver and perform its obligations under this Agreement and each of the
Operative Agreements to which it is a party and to consummate the transactions
contemplated hereby and thereby.
5.2 Capital Stock.
(a) The Company has authorized capital stock consisting of One
Thousand and Five Hundred (1,500) shares of common stock, $1.00 par value (the
"Common Stock"), of which One Thousand and Five Hundred (1,500) shares are
issued and outstanding. The Shares constitute all of the authorized, issued and
outstanding shares of capital stock of the Company.
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(b) All of the Shares (i) are duly authorized, validly issued,
fully paid and non-assessable, (ii) were not issued in violation of any
preemptive or other rights, and (iii) were issued in compliance with all federal
and applicable state securities laws.
(c) Except as set forth in Schedule 5.2(a) hereto, there are no
outstanding offers, options, warrants, rights, calls, commitments, obligations
(verbal or written), conversion rights, plans or other agreements (conditional
or unconditional) of any character providing for, requiring or permitting the
offer, sale, purchase or issuance of any shares of capital stock of the Company
or any other securities (as such term is defined in the Securities Act of 1933,
as amended). Except as set forth in Schedule 5.2, there are no equity securities
of the Company that are reserved for issuance or are outstanding.
(d) Except as set forth in Schedule 5.2(d) hereto, Seller owns of
record and beneficially all of the Shares, free and clear of all Liens,
subscriptions, options, warrants, calls, proxies, rights, commitments,
restrictions or agreements of any kind and has full power and legal right to
sell, assign, transfer and deliver the same. Neither Seller nor the Company is a
party to any voting trust, proxy or other agreement with respect to any capital
stock of the Company. Assuming Purchaser has the requisite power and authority
to be the lawful owner of the Shares, upon delivery to Purchaser of certificates
representing the Shares (duly endorsed for transfer or with properly executed
stock powers attached thereto), and upon Seller's receipt of the Purchase Price,
good and valid title to the Shares will pass to Purchaser, free and clear of all
Liens, subscriptions, options, warrants, calls, proxies, rights, commitments,
restrictions or agreements of any kind.
5.3 Subsidiaries, Divisions and Affiliates. Except as set forth on
Schedule 5.3 hereto, there are no subsidiaries, divisions or Affiliates of the
Company. Except as set forth on Schedule 5.3, the Business has been conducted
solely by the Company and not through any Affiliate, joint venture or other
entity, person or under any other name.
5.4 Equity Investments. Except as set forth in Schedule 5.4 hereto, the
Company neither owns nor has any rights to any equity interest, directly or
indirectly, in any corporation, partnership, joint venture, firm or other
entity.
5.5 Authorization of Agreement. The execution, delivery and performance
of this Agreement has been, and each of the Operative Agreements will be, duly
authorized, no other corporate or other action being necessary, and the
Agreement and Operative Agreements, when executed and delivered in the manner
contemplated herein and therein, will be duly and validly executed and delivered
by Seller and the Company. This Agreement constitutes a valid and binding
obligation of Seller and the Company enforceable against each of them in
accordance with its terms, except as such enforcement may be limited by
bankruptcy, insolvency or other similar laws affecting the enforcement of
creditor's rights generally.
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5.6 No Violation. The execution and delivery of this Agreement do not,
the execution and delivery of the Operative Documents will not, and the
performance of this Agreement and each of the Operative Documents by Seller and
the Company and the consummation by Seller and the Company of the transactions
contemplated hereby and thereby will not, with or without the giving of notice
and the lapse of time, or both, (a) violate any provision of law, statute, rule,
regulation or executive order to which Seller or the Company is subject; (b)
violate any judgment, order, writ or decree of any court applicable to Seller or
the Company; or (c) result in the breach of or conflict with any term, covenant,
condition or provision of, result in the modification or termination of,
constitute a default under, or result in the creation or imposition of any lien,
security interest, charge or encumbrance upon Seller's or the Company's Assets
and Properties pursuant to any corporate charter, by-law, commitment, contract
or other agreement or instrument, including any Contracts and Real Property
Leases, to which Seller or the Company is a party or by which Seller, the
Company or any of the Company's Assets and Properties is or may be bound or
affected or from which the Company derives benefit, which breach, conflict,
modification, termination, default or encumbrance described in this clause (c)
would be material to the Business or any of the Company's Assets and Properties.
5.7 Restrictions. Except as set forth on Schedule 5.7 hereto, the
Company is not a party to any Contract or Real Property Lease, nor is the
Company, the Shares or any of the Company's Assets and Properties subject to, or
bound or affected by, any provision of the Company's Articles of Incorporation,
By-Laws or other corporate restriction, or any order, judgment, decree, law,
statute, ordinance, rule, regulation or other restriction of any kind or
character, which would, individually or in the aggregate, materially adversely
affect the Business, the Shares or the Company's Assets and Properties.
5.8 Governmental and Other Consents. Except as set forth on Schedule 5.8
hereto, no consent, authorization or approval of, or exemption by, any
governmental or public body or authority is required in connection with the
execution, delivery and performance by Seller and the Company of this Agreement
and the Operative Agreements or of any of the instruments or agreements herein
or therein referred to, the taking of any action herein or therein contemplated,
or the ownership or operation of the Business or Assets and Properties by
Purchaser on or after the Closing Date.
5.9 Financial Statements. Seller has delivered to Purchaser, and
included in Schedule 5.9 hereto, correct and complete copies of (i) the audited
balance sheet of the Company for the fiscal year ended December 31, 1999 and
related statements of income and retained earnings and changes in financial
position for the fiscal year ended on such date, together with supporting
schedules (the "1999 Balance Sheet") and (ii) the audited balance sheet of the
Company for the fiscal year ended December 31, 1998 and related statements of
income and retained earnings and changes in financial position for the fiscal
year ended on such date, together with supporting schedules (the "1998 Balance
Sheet") (collectively, the "Financial Statements"). The Financial Statements are
in accordance with the Books and Records of the Company, have been prepared in
accordance with GAAP consistently applied and accurately present the financial
position of the Company and the results of operations and cash flows at their
respective dates and for the respective periods covered thereby and all items
that could have a material adverse effect on the willingness of a prospective
purchaser to acquire the Company have been disclosed in the Financial Statements
or in the Schedules to this Agreement.
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5.10 Absence of Certain Changes or Events. Except as set forth on
Schedule 5.10 hereto, since May 31, 2000, the Company has not: (a) suffered any
adverse change in, or the occurrence of any events which, individually or in the
aggregate, has or have had, or might reasonably be expected to have, a material
adverse effect on, the Company's financial condition, results of operations or
business or the value of its Assets and Properties; (b) incurred damage to or
destruction of any material Assets and Properties or material portion thereof,
whether or not covered by insurance; (c) incurred any material obligation or
liability (fixed or contingent) except (i) current trade or business obligations
incurred in the ordinary course of business, none of which were entered into for
grossly inadequate consideration, (ii) obligations or liabilities under any
Contracts to the extent required thereby, and (iii) obligations and liabilities
under this Agreement; (d) made or entered into contracts or commitments to make
any capital expenditures in excess of Ten Thousand Dollars ($10,000); (e)
mortgaged, pledged or subjected to Lien or any other encumbrance (other than
Permitted Liens) any of the Assets and Properties of the Company; (f) sold,
transferred or leased any of its material Assets and Properties or material
portion thereof, or canceled or compromised any debt or material claim, except,
in each case, in the ordinary course of business; (g) sold, assigned,
transferred or granted any rights under or with respect to any Intellectual
Property; (h) amended or terminated any of the contracts, agreements, leases or
arrangements which otherwise would have been set forth on Schedule 5.14 hereto;
(i) waived or released any other rights of material value; or (j) entered into
any transaction not in the ordinary course of business which would, individually
or in the aggregate, materially adversely affect its Assets and Properties or
the Business.
5.11 Title to Assets; Absence of Liens and Encumbrances. Except as set
forth on Schedule 5.11 hereto, the Company has good and marketable title to, and
owns outright, all of its Assets and Properties (including, without limitation,
all real property), which include substantially all of the Assets and Properties
reflected in the most recent Financial Statements (except (i) as sold, used or
otherwise disposed of in the ordinary course of business, and (ii) as otherwise
disclosed in the Financial Statements), free and clear of all mortgages, claims,
liens, options, rights of first refusal, charges, encumbrances, security
interests, restrictions on use or transfer or other defects of any nature. The
leases and other agreements or instruments under which the Company holds, leases
or is entitled to the use of any personal property included in its Assets and
Properties are in full force and effect and all rentals, royalties or other
payments accruing thereunder prior to the date hereof have been duly paid. The
Company enjoys peaceable and undisturbed possession under all such leases and
the change in ownership of the Company will not adversely affect any such lease,
other agreement or instrument. The Company's Assets and Properties are in
conformance with all applicable zoning and other laws, ordinances, rules and
regulations; and no notice of violation of any law, ordinance, rule or
regulation thereunder has been received by Seller or the Company. All buildings,
structures, appurtenances and material items of machinery, equipment and other
material tangible assets used by the Company are in good operating condition and
repair, reasonable wear and tear excepted, are usable in the ordinary course of
business, are adequate and suitable for the uses to which they are being put and
conform in all respects to all applicable statutes, laws, regulations,
ordinances, codes, rules, judgments, orders, decrees, agreements or governmental
restrictions relating to their construction, use and operation. The Assets and
Properties of the Company are sufficient to operate and conduct the Business as
presently conducted.
15
5.12 Equipment. Set forth on Schedule 5.12 hereto is a correct and
complete list as of May 31, 2000 of all of the machinery and equipment (in
excess of a fair market value of $3,000) of the Company, indicating for each
piece of machinery and equipment whether it is owned or leased and setting forth
where it is located. Except as set forth on Schedule 5.12, none of such
machinery and equipment has been disposed of since May 31, 2000. Except as noted
on Schedule 5.12, all such machinery and equipment (a) is in good working
condition, with no material defects, and generally has been suitable to the
Company for the uses for which it was designed or has been employed by the
Company and (b) conforms in all material respects with any laws, ordinances,
regulations, orders or other similar governmental requirements relating to its
use, as the same are currently in effect.
5.13 Insurance. There are no outstanding or unsatisfied written
requirements or verbal recommendations imposed or made by the Company's current
insurance companies with respect to current policies covering the Company's
Assets and Properties, or by any Governmental or Regulatory Authority requiring
or recommending, with respect to the Company's Assets and Properties, that any
repairs or other work be done on or with respect to, or requiring or
recommending any equipment or facilities be installed on or in connection with,
the Company's Assets and Properties. Except as set forth on Schedule 5.13
hereto, the Company carries, and (with respect to any period for which a claim
against the Company may still arise) has always carried, product liability
insurance, worker's compensation insurance in reasonable amounts, and other
insurance which is reasonably necessary to the conduct of the Business. Schedule
5.13 sets forth a correct and complete list of (a) all currently effective
insurance policies and bonds of the Company covering the Assets and Properties
of the Business, and their respective annual premiums (as of the most recent
renewal or purchase of new insurance), and (b) for the five-year period ending
on the date hereof, (i) all accidents, casualties or damage occurring on or to
any of the Company's Assets and Properties or relating to the Business which in
the aggregate are in excess of Ten Thousand Dollars ($10,000), and (ii) claims
for product liability, damages, contribution or indemnification and settlements
(including pending settlement negotiations) relating thereto which individually
or in the aggregate exceed Ten Thousand Dollars ($10,000). Except as set forth
on Schedule 5.13, as of the date hereof there are no disputes with underwriters
of any such policies or bonds, and all premiums due and payable have been paid.
There are no pending or, to the knowledge of Seller or the Company, threatened
terminations or premium increases with respect to any of such policies or bonds
and there is no condition or circumstance applicable to the Business which may
result in such termination or increase. The Company and the Company's Assets and
Properties are in compliance with all conditions contained in such policies or
bonds, except for noncompliance which, individually or in the aggregate, would
not have a material adverse affect on the Business or the Company's Assets and
Properties.
16
5.14 Contracts.
(a) Except as set forth on Schedule 5.14 hereto, the Company is
not a party to, nor are any of its Assets and Properties bound by any:
(i) lease agreement (whether as lessor or lessee);
(ii) license agreement, assignment or contract (whether as
licensor or licensee, assignor or assignee) relating to trademarks, trade
names, patents, or copyrights (or applications therefor), unpatented
designs or processes, formulae, know- how or technical assistance, or
other proprietary rights;
(iii) employment or other contract or agreement with an
employee or independent contractor which (A) may not be terminated without
liability to the Company upon notice to the employee or independent
contractor of not more than 30 days, or (B) provides payments (contingent
or otherwise) of more than $30,000 per year (including all salary, bonuses
and commissions);
(iv) agreement, contract or order with any buying agent,
supplier or other individual or entity who assists, provides or is
otherwise involved in the acquisition, supply or provision of Assets and
Properties or other goods to the Company;
(v) non-competition, secrecy or confidentiality
agreement;
(vi) agreement or other arrangement for the sale of goods
or services by the Company to any third party (including any Governmental
or Regulatory authority);
(vii) agreement with any labor union;
(viii) policy of insurance (including any bond) in force
with respect to the Company or any of its operations, properties, assets
or executive officers;
(ix) agreement, contract or order with any distributor,
dealer, leasing company, sales agent or representative, other than
contracts or orders for the purchase, sale or license of goods made in the
usual and ordinary course of business at an aggregate price per contract
or more than $10,000 and a term of more than six months under any such
contract or order;
17
(x) agreement, contract or order with any manufacturer,
leasing company, supplier or customer (including any agreement which
allows discounts or allowances or extended payment terms);
(xi) agreement with any distributor or brokerage company,
leasing company, management company or any other individual or entity who
assists, places, brokers or otherwise is involved with the marketing or
distribution of the Company's goods and/or services to its customers;
(xii) joint venture, limited liability company or
partnership agreement with any other person or entity;
(xiii) agreement guaranteeing, indemnifying or otherwise
assuming liability for the obligations or liabilities of another;
(xiv) agreement with any bank or other person, other than
an employee or employees, for the borrowing or lending of money or payment
or repayment of draws on letters of credit or currency swap or exchange
agreement (other than purchase money security interests which may, under
the terms of invoices from any supplier, be granted to such supplier with
respect to goods so purchased);
(xv) agreement with any bank, finance company or similar
organization which acquires from the Company receivables or contracts for
sales on credit;
(xvi) agreement granting any person a Lien on any of its
Assets and Properties, including, without limitation, any factoring or
other agreement for the assignment of receivables or inventory;
(xvii) agreement with respect to any capital expenditure in
excess of $10,000;
(xviii) advertising, publication or printing agreement;
(xix) agreement which restricts the Company from doing
business anywhere in the world;
(xx) agreement or statute or regulation giving any party
the right to renegotiate or require a reduction in prices or the repayment
of any amount previously paid; or
(xxi) other agreement or contract, not included in or
expressly excluded from the terms of the foregoing clauses (i) through
(xx), materially affecting the Company's Assets and Properties or the
Business, except contracts or purchase orders for the purchase or sale of
goods or services made in the usual and ordinary course of business.
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Correct and complete copies of all Contracts required to be shown on
Schedule 5.14 have been separately delivered to Purchaser prior to the date
hereof.
(b) Each of the Contracts required to be shown on Schedule 5.14 is
valid, in full force and effect and enforceable by the Company in accordance
with its terms.
(c) Except as set forth on Schedule 5.14, the Company has
fulfilled, or has taken all action reasonably necessary to enable it to fulfill
when due, all of its obligations under the Contracts required to be shown on
Schedule 5.14, except where the failure to do so would not, individually or in
the aggregate, have a material adverse affect on the Business or the Company's
Assets and Properties. Furthermore, there has not occurred any default by the
Company or any event which, with the lapse of time or the election of any person
other than the Company, will become a default, nor has there occurred any
default by others or any event which, with the lapse of time or the election of
the Company, will become a default under any of such Contracts, except for such
defaults, if any, which (i) have not resulted and will not result in any
material loss to or liability of the Company or any of its successors or assigns
or (ii) have been indicated on Schedule 5.14. The Company is not in arrears in
any material respect with respect to the performance or satisfaction of the
terms or conditions to be performed or satisfied by it under any of the
Contracts required to be shown on Schedule 5.14 and no waiver or variance has
been granted by any of the parties hereto.
5.15 Real Property.
(a) Neither the Company nor any Affiliate owns any real property.
Schedule 5.15(a) contains a true, correct and complete list of all oral and
written leases, subleases, and other use and occupancy agreements (and any
amendments, renewals, supplements, modifications or extensions thereto)
affecting or relating to real property to which the Company or its Affiliates
are a party or by which any of them is bound (as so modified, extended or
amended, the "Real Property Leases"), including the date of each such Real
Property Lease, and a description of the premises demised thereunder (the
"Leased Real Property").
(b) The Company or its Affiliate has a valid and subsisting
leasehold estate in and the right to quiet enjoyment of the Leased Real
Properties subject to the Real Property Leases for the full term thereof. Each
Real Property Lease is a legal, valid and binding agreement, enforceable in
accordance with its terms, of the Company or its Affiliate, and, to Seller's and
the Company's knowledge, of each other person that is a party thereto, and
except as set forth in Schedule 5.15(b), there is no, nor has Seller or the
Company received any notice of any, default (or any condition or event which,
after notice or lapse of time or both, would constitute a default) by the
Company or its Affiliate, or to Seller's or the Company's knowledge, by any
party thereunder. The Company or its Affiliate is in possession of the Leased
Real Property. No landlord or tenant under any Real Property Lease has exercised
any option to (i) terminate the same or shorten the term thereof, (ii) lease
additional space or (iii) reduce or relocate the leased premises. The Company
does not owe any brokerage commissions or finders fees with respect to any Real
Property Lease or renewal or extension thereof. The Company has not assigned,
sublet, transferred, hypothecated or otherwise disposed of its interest in any
Real Property Lease. No penalties are accrued and unpaid under any Real Property
Lease.
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(c) The Company has delivered to Purchaser prior to the date
hereof true and complete copies of all Real Property Leases (including any
amendments and renewal letters).
(d) Each Leased Real Property is (i) in good operating condition
and in a state of good maintenance and repair, reasonable wear and tear
excepted, is adequate and suitable for the purposes for which it is presently
being used and there are no condemnation, appropriation or other proceedings
pending or, to the knowledge of Seller and the Company, threatened against any
of such, (ii) is in compliance with all applicable Laws and (iii) is subject to
all necessary governmental permits and approvals (which permits and approvals
have been duly paid for, issued and are in full force and effect). The Company
has not received any notice that it is in default under a Permitted Lien (if
any).
(e) The Real Property Leases are subject to no Liens (including,
without limitation, leases, occupancy agreements, possessory rights, options and
rights of first refusal) except as set forth on Schedule 5.15(e).
(f) Neither Seller nor the Company has any knowledge of any claim,
action or proceeding, actual or threatened, against the Company, any Leased Real
Property or any Real Property Lease by any Person which would adversely affect
the future use, occupancy or value of any Leased Real Property, any Real
Property Lease or the property subject thereto (and no such claim, action or
proceeding is pending).
(g) None of the rights of the Company under any Real Property
Lease will be subject to termination or modification as the result of the
consummation of the transactions contemplated by this Agreement.
(h) Schedule 5.15(h) contains a true, correct and complete list of
all service contracts, equipment leases, maintenance contracts, management
agreements and other agreements, oral or written, including, without limitation,
all amendments, modifications or extensions thereof (as so amended, modified and
extended, the "Service Contracts") which pertain to or affect any parcel of
Leased Real Property. True, correct and complete copies of the Service Contracts
have been delivered by the Company to Purchaser. The Company is party to all the
Service Contracts and the same are in full force and effect and are enforceable
in accordance with their respective terms, except as such enforceability may be
subject to or limited by bankruptcy, insolvency, reorganization or similar laws,
now or hereafter in effect, affecting the enforcement of creditors' rights
generally. The Company has not assigned, pledged, mortgaged, hypothecated or
otherwise transferred any Service Contract and there is no default (and, no
event which with the passage of time or the giving of notice, or both, would
constitute a default) under any Service Contract by any party thereto.
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(i) There is no material construction at any parcel of Leased Real
Property. The Company does not owe any monies to any contractor, subcontractor
or materialman for labor or materials performed, rendered or supplied to or in
connection with any parcel of Leased Real Property for which such person could
claim a Lien.
(j) There are no condemnation or appropriation proceedings pending
against any parcel of Leased Real Property.
(k) The Company has not received (i) any written notice from any
Governmental or Regulatory Authority having jurisdiction regarding any material
adverse change in the specific application to any Leased Real Property of any
applicable Laws, relating to a change in the permitted use of all or any portion
of each Leased Real Property or the business conducted thereon, or (ii) any
written notice from adjacent landowners regarding unrecorded easements and/or
agreements or encroachments in respect of all or any portion of any Leased Real
Property that would materially adversely affect the applicable property or the
use thereof or the business conducted thereon.
(l) All licenses, permits, variances, approvals, special
exemptions and permanent certificates of occupancy (the "Approvals"), if any,
needed in connection with the construction, use, occupancy and maintenance of
any parcel of Leased Real Property are set forth in Schedule 5.15(l). The
Approvals have been duly issued and paid for and are in full force and effect in
accordance with the respective terms thereof. The Approvals have not been
amended or modified. The Company or any Affiliate has not assigned, pledged,
mortgaged, hypothecated or otherwise transferred any Approval. Each parcel of
Leased Real Property has been and is being operated in accordance with all the
terms, covenants and conditions of the Approvals. Seller has delivered to
Purchaser true and correct copies of the Approvals.
(m) Public utilities currently adequately serve all utility
requirements of each parcel of Leased Real Property. All such public utilities
enter directly through adjoining public streets and do not pass through
adjoining private land. All such public utilities are installed and operating
and all installation and connection charges have been paid for in full.
(n) The streets, roads, highways and avenues in front of or
adjoining any parcel of Leased Real Property have been dedicated to the proper
municipal authority and such municipal authority has accepted such dedication
and the same provide ingress and egress adequate for the business of the Company
or any Affiliate.
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5.16 Tangible Personal Property. The Company is in possession of and has
good title to, or has valid leasehold interests in or valid rights under
Contract to use, all the Tangible Personal Property, which includes all tangible
personal property reflected on the 1999 Balance Sheet and tangible personal
property acquired since the date of the 1999 Balance Sheet other than tangible
personal property disposed of since such date in the ordinary course of business
consistent with past practice. All of the Company's rights in Tangible Personal
Property are free and clear of all Liens, and the Tangible Personal Property is
in all material respects in good working order and condition, ordinary wear and
tear excepted (excepting only miscellaneous items of immaterial value), and, to
the knowledge of Seller and the Company, its use complies in all material
respects with all applicable Laws.
5.17 Intellectual Property Rights. (a) Schedule 5.17(a) hereto sets forth
all items of Intellectual Property used or needed by the Company in the
operation of the Business, including (i) the registered and beneficial owner and
the expiration date, to the extent applicable, for each item of Intellectual
Property set forth on such Schedule and (ii) the product or service, (or
products or services) of the Company which makes use of, or are sold, licensed
or made under, each such item of Intellectual Property. All of the items of
Intellectual Property set forth on such Schedule constitute all Intellectual
Property necessary for the conduct of the Business, as such business is
currently being conducted. Except as set forth on Schedule 5.17(a) hereto, the
Company has not sold, assigned, transferred, licensed, sub-licensed or conveyed
the Intellectual Property, or any interest in the Intellectual Property, to any
person, and there are no restrictions on the direct or indirect transfer of any
such Intellectual Property. Except as set forth on Schedule 5.17(a), the
Intellectual Property owned by or licensed to the Company has not been used, and
no use is now being made, by any entity except the Company and other entities
duly licensed to use the same. The Company has the entire right, title and
interest (free and clear of all security interests, liens and encumbrances of
every nature) in and to each item of Intellectual Property necessary to the
conduct of the Business as currently being conducted.
(b) (i) All applications and registrations for such Intellectual
Property are valid and in full force and effect and are not subject to the
payment of any taxes or maintenance fees or the taking of any other actions by
Seller or the Company to maintain their validity or effectiveness; (ii) Seller
and the Company have made available to Purchaser, prior to the execution of this
Agreement, documentation with respect to any invention, process, design,
computer software and program or other know-how or trade secret included in such
Intellectual Property, which documentation is accurate in all material respects
and reasonably sufficient in detail and content to identify and explain such
invention, process, design, computer software and program or other know-how or
trade secret; (iii) Seller and the Company have taken reasonable security
measures to protect the secrecy, confidentiality and value of the Intellectual
Property owned or licensed by the Company; (iv) the Company is not, nor has the
Company or Seller received any notice that the Company is, in default (or with
the giving of notice or lapse of time or both, would be in default) under any
license to use any such Intellectual Property; (v) neither Seller nor the
Company has any knowledge that any such Intellectual Property is being infringed
by any other person; and (vi) neither Seller nor the Company is infringing any
Intellectual Property of any other person, and no claim is pending or, to the
knowledge of Seller or the Company, has been threatened with respect to the
ownership, validity, license or use of, or any infringement resulting from,
either the Intellectual Property owned or licensed by the Company or the sale of
any products or services by the Company.
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(c) All information systems (including but not limited to computer
software and files and related equipment) and technology (including but not
limited to information technology, embedded systems or any other
electro-mechanical or processor-based system) relating to the Business owned,
licensed or otherwise used by the Company are Year 2000 Compliant, have
accurately processed date data (including but not limited to calculating,
comparing, valuing, recognizing, validating and sequencing) without error
before, during and after the twentieth and twenty-first centuries, and will
continue to do so after February 29, 2000 and all subsequent leap years. In the
event of any recognition, calculation, or indication of century problems related
to the year 2000, the Company shall make all adjustments necessary at no cost to
the Purchaser in order to ensure that all such information systems and
technology are and remain Year 2000 Compliant.
5.18 Permits, Licenses, Etc. The Company has all Licenses required to
permit it to carry on its Business as currently conducted, other than Licenses
the failure to obtain which would not, individually or in the aggregate, have a
material adverse affect on the Company's Assets and Properties or on the
Business.
5.19 Compliance with Applicable Laws. The conduct by the Company of the
Business does not violate or infringe, and there is no basis for any claim of
violation or infringement of, any law, statute, ordinance, regulation or
executive order (including, without limitation, the Occupational Safety and
Health Act and the Foreign Corrupt Practices Act and the respective regulations
thereunder and similar applicable state laws and regulations) currently in
effect, except in each case for violations or infringements which do not and
will not, individually or in the aggregate, have a material adverse affect on
the Company's Assets and Properties or the Business. The Company is not in
default under any License issued to it, under any governmental or administrative
order or demand directed to it, or with respect to any order, writ, injunction
or decree of any court, and no such License, order, writ, injunction or decree
could reasonably be expected to materially and adversely affect the Business,
the financial condition, results of operations or business of the Company or the
value of its Assets and Properties.
5.20 Litigation. Except as set forth on Schedule 5.20 hereto, there is no
claim, action, suit, proceeding, arbitration, reparation, investigation or
hearing or notice of hearing, pending or, to the knowledge of Seller or the
Company, threatened, before any court or governmental, administrative or other
competent authority or private arbitration tribunal against or relating to or
affecting (directly or indirectly, including by way of indemnification) the
Business or any of the Company's Assets and Properties, or the transactions
contemplated by this Agreement; nor are any facts known to Seller or the Company
which it believes could reasonably give rise to any such claim, action, suit,
proceeding, arbitration, reparation, investigation or hearing, which may have
any adverse affect, individually or in the aggregate, in excess of Ten Thousand
Dollars ($10,000) upon the Business, the value of the Company's Assets and
Properties or the transactions contemplated by this Agreement. The Company has
not waived any statute of limitations or other affirmative defense with respect
to any of its obligations. There is no continuing order, injunction or decree of
any court, arbitrator or governmental, administrative or other competent
authority to which the Company is a party, or to which the Company is subject.
Neither Seller nor the Company, nor any current officer, director, partner or
employee of the Company or any Affiliate of the Company has been permanently or
temporarily enjoined or barred by order, judgment or decree of any Governmental
or Regulatory Authority from engaging in or continuing any conduct or practice
in connection with the Business.
23
5.21 No Interest in Competitors. Set forth on Schedule 5.21 hereto is a
list describing the extent to which Seller or the Company or any officer or
director of the Company or any Affiliate of any of the foregoing, directly or
indirectly, owns more than a five percent (5%) interest in or controls or is an
employee, officer, director, or partner of or participant in (but only to the
extent such a participation exceeds one percent), or consultant to any
corporation, partnership, limited partnership, limited liability company, joint
venture, association or other entity which is a competitor, supplier or customer
of the Company or has any type of business or professional relationship with the
Company.
5.22 Customers, Suppliers, Distributors and Agents. Except as set forth
on Schedule 5.22 hereto, neither Seller nor the Company has any knowledge or
reason to believe that any customer, client, distributor, supplier or any other
person or entity with material business dealings with the Company, will or may
cease to continue such relationship with the Company, or will or may
substantially reduce the extent of such relationship, at any time prior to or
after the Closing Date. Except for such common public information, neither
Seller nor the Company has any knowledge of (1) any other existing or
contemplated modification or change in the business relationship of the Company
with, or (2) any existing condition or state of facts which has affected
adversely, will adversely affect (in a material manner), or has a reasonable
likelihood of adversely affecting the business of the Company with any of its
customers, clients, suppliers or other persons or entities having material
business dealings with the Company or which has prevented or will prevent such
Business from being carried on under its new ownership after the Closing in
essentially the same manner as it is currently carried on. Schedule 5.22 hereto
sets forth the Company's (i) the ten largest (in dollar value) purchasers of its
goods and/or services and (ii) the ten largest (in dollar value) providers of
goods and/or services to it, in each case with respect to each of the fiscal
years ended December 31, 1999 and 1998.
5.23 Books and Records. The Books and Records of the Company are in all
material respects complete, correct and up to date, with all necessary
signatures, and are in all material respects accurately reflected in the
Financial Statements.
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5.24 Employee Benefit Plans. Schedule 5.24 sets forth a correct and
complete list of each and every benefit plan, including but not limited to each
pension, profit sharing, welfare, stock bonus, stock option, stock appreciation,
bonus, deferred compensation, severance, change in control, stock purchase,
"pay-to-stay" or similar agreement or plan, individual employment agreement,
multiemployer plan, phantom stock, leave of absence, layoff, vacation, day or
dependent care, legal services, cafeteria, life, health, accident, disability,
workmen's compensation or other arrangement or policy, including but not limited
to any "employee benefit plan" within the meaning of Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), covering,
or which covered, current or former employees or consultants of the Company (the
"Employee Benefit Plans"), and except as described in Schedule 5.24 hereto, the
Company has no Employee Benefit Plans. No Employee Benefit Plan is a
multiemployer plan within the meaning of Section 3(37) of ERISA, nor a "defined
benefit plan" within the meaning of section 414(j) of the Code. No benefit under
any Employee Benefit Plan, including, without limitation, any severance or
parachute payment plan or agreement, will be established or become accelerated,
vested or payable by reason of any transaction contemplated under this
Agreement. For each Employee Benefit Plan which is an employee pension plan or
welfare plan as those terms are defined in Section 3 of ERISA, and for each
Employee Benefit Plan with respect to which the Company is a "party in interest"
as defined in Section 3 of ERISA, or a "disqualified person" as defined in
Section 4975 of the Code, the Company has delivered to Purchaser complete and
accurate copies of (i) all plan documents and all amendments thereto; (ii) the
trust instrument or insurance contract, if any, forming a part of each such
plan, and all amendments thereto; (iii) the most recent and preceding year's
Internal Revenue Service Form 5500 and all schedules thereto; (iv) the most
recent Internal Revenue Service determination letter, or if no letter has been
issued, any pending application to the Internal Revenue Service for a
determination letter regarding qualified status; (v) any bond required by
Section 412 of ERISA; and (vi) the summary plan description. The Company has
complied with all of the Laws governing each of the Employee Benefit Plans,
including, without limitation, rules and regulations promulgated pursuant to
ERISA and the Code, by the Department of Treasury, Department of Labor, and the
Pension Benefit Guaranty Corporation, and each of the Employee Benefit Plans
has, since its inception, been operated in accordance with its provisions and is
in compliance with such Laws. Neither Seller, the Company, nor any Employee
Benefit Plan or any fiduciaries thereof have engaged in any prohibited
transaction, as that term is defined in Section 406 of ERISA or Section 4975 of
the Code, nor have any of them committed any breach of fiduciary responsibility
with respect to any of the Employee Benefit Plans, and neither Seller nor the
Company has any knowledge that any other person has not complied with such Laws.
No Employee Benefit Plan provides health or death benefit coverage beyond the
termination of an employee's employment, except as required by Part 6 of
Subtitle B of Title I of ERISA or section 4980B of the Code or any State law
requiring continuation of benefits coverage following termination of employment.
Each Employee Benefit Plan intended to qualify under Section 401(a) of the Code
has at all times since its adoption been so qualified, and each trust which
forms a part of any such plan has at all times since its adoption been
tax-exempt under Section 501(a) of the Code. All contributions to Employee
Benefit Plans that were required to be made under such Employee Benefit Plans
have been made, and all benefits accrued under any unfunded Employee Benefit
Plan have been paid, accrued or otherwise adequately reserved in accordance with
GAAP, all of which accruals under unfunded Employee Benefit Plans are disclosed
in Schedule 5.24, and each of Seller, the Company and each of their Affiliates
has performed all material obligations required to be performed by any of them
under all Employee Benefit Plans.
25
5.25 Powers of Attorney. Except as set forth on Schedule 5.25 hereto, no
person has been granted or given any power of attorney to act on behalf of the
Company in connection with any of the Company's properties or business affairs
other than such powers to so act as may have been granted or given to officers
of the Company.
5.26 Sufficiency of Assets. Except as set forth in Schedule 5.26 hereto,
the Assets and Properties of the Company, taken in the aggregate, are
sufficient, and constitute all of the property and rights necessary, for the
continuation of the Business and all operations of the Company on a basis
consistent with its past operation.
5.27 Employees; Labor Relations. (a) Schedule 5.27 contains a list of the
names of all employees and consultants who are employed by or perform services
for the Company together with each such person's position or function, annual
base salary or wages or other compensation and any incentives or bonus
arrangement with respect to each such person. Neither Seller nor the Company has
received any information that would lead it to believe that any of such persons
will or may cease to be employed as employees or engaged as consultants, or will
refuse offers of employment or to consult, as the case may be, from the
Purchaser.
(b) Except as disclosed in Schedule 5.27, (i) no employee of the
Company is presently a member of a collective bargaining unit and, during the
last five years, the Company has not been involved in, and, to the knowledge of
Seller and the Company, there are no threatened or contemplated attempts to
organize for collective bargaining purposes by any of the employees of the
Company and (ii) no unfair labor practice complaint or sex or age discrimination
claim has been brought during the last five years against the Company before the
National Labor Relations Board or any other Governmental or Regulatory
Authority. There has been no work stoppage, strike or other concerted action by
employees of the Company. The Company has complied in all material respects with
all applicable Laws relating to the employment of labor, including, without
limitation, those relating to wages, hours and collective bargaining.
5.28 Past Due Obligations. Except as set forth on Schedule 5.28 hereto,
no past due obligations of the Company over $5,000 have given rise or shall give
rise within 5 days after the Closing Date (except as such will be performed by
Seller prior to the Closing Date so as to relieve Purchaser of all liability
therefor) to any additional liability to the Company on account of their being
past due.
26
5.29 Environmental Matters.
(a) The Company has obtained and holds all necessary Environmental
Permits; such Environmental Permits will remain valid and in full force and
effect after the Closing Date, and no notice or consent from any Governmental or
Regulatory Authority is required for the Company to continue to operate the
Business or own, use or operate the Assets and Properties after the Closing
Date;
(b) The Company is and has been in compliance with all terms,
conditions and provisions of all applicable (i) Environmental Permits, and (ii)
Environmental Laws;
(c) There are no past, pending, or threatened Environmental Claims
against the Company, and neither Seller nor the Company is aware of any facts or
circumstances which could reasonably be expected to form the basis for any
Environmental Claim against the Company;
(d) No Releases of Hazardous Materials have occurred at, from, in,
to, on, or under any Site and no Hazardous Materials are present in, on, about
or migrating to or from any Site that could give rise to an Environmental Claim
against the Company;
(e) Neither the Company, nor any predecessor of any of the
Company, nor any entity previously owned by Seller (in connection with the
Business) or the Company, has transported or treated, stored, handled, disposed
of any Hazardous Material or arranged for such activities, at or to any off-Site
location which could result in an Environmental Claim against the Company;
(f) No Site is a current or proposed Environmental Clean-up Site;
(g) There are no Liens arising under or pursuant to any
Environmental Law on any Site and there are no facts, circumstances, or
conditions that could reasonably be expected to restrict, encumber, or result in
the imposition of special conditions under any Environmental Law with respect to
the ownership, occupancy, development, use, or transferability of any Site;
(h) There are no (i) underground storage tanks, active or
abandoned, (ii) polychlorinated biphenyl containing equipment, or (iii) asbestos
containing material at any Site;
(i) Except as set forth on Schedule 5.29(i), there have been no
environmental investigations, studies, audits, tests, reviews or other analyses
conducted by, on behalf of, or which are in the possession of Seller or the
Company with respect to any Site;
(j) The Company has not, either expressly or by operation of law,
assumed or undertaken, or agreed to assume or undertake, responsibility for any
liability or obligation of any other person or entity, arising under or relating
to Environmental Laws, including but not limited to, any obligation for
investigation, corrective or remedial action;
27
(k) Neither this Agreement nor the transaction that is the subject
of this Agreement will result in any obligations for site investigation, cleanup
or remediation or notification to or consent of any Governmental or Regulatory
Authority pursuant to any Environmental Law or Environmental Permit; and
(l) Schedule 5.29(l) lists all claims pending under insurance
policies with respect to Environmental Claims against the Company.
5.30 Taxes. (a) All Tax Returns required to have been filed on or before
the Closing Date by or with respect to the Company have been duly and timely
filed. Such Tax Returns, including amendments thereto, have been prepared in
good faith without negligence or willful misrepresentation and are complete and
accurate in all material respects. All Taxes owed by the Company (whether or not
shown on any Tax Return) have been paid;
(b) Adequate provision has been made in the Books and Records of
the Company and in the Financial Statements for all Taxes of the Company whether
or not due and payable and whether or not disputed;
(c) At and as of the Closing Date, the unpaid Tax liabilities of
the Company, being current Taxes not yet due and payable, will be no greater
than the reserve for Taxes (rather than any reserve for deferred Taxes
established to reflect timing differences between book and Tax income) shown on
the Closing Balance Sheet;
(d) Except as set forth in Schedule 5.30 hereto, no governmental
entity has, during the past three years, examined or is in the process of
examining any Tax Returns of the Company;
(e) Except as set forth in Schedule 5.30 hereto, no Governmental
or Regulatory Authority has proposed (tentatively or definitively) or asserted
or threatened to propose or assert, any deficiency, assessment, lien or other
claim for Taxes against the Company and there would be no basis for any such
delinquency, assessment, lien or claim;
(f) There are no agreements, waivers or other arrangements
providing for an extension of time with respect to the assessment of any Taxes
or deficiency against the Company or with respect to any Tax Return filed or to
be filed by the Company;
(g) Except as set forth on Schedule 5.30 hereto, no claim has ever
been made by any Taxing Authority in any jurisdiction in which the Company does
not file Tax Returns that the Company is or may be subject to taxation by that
jurisdiction;
28
(h) The Company has withheld and paid over all Taxes required to
have been withheld and paid over under applicable Law, and complied with all
information reporting and record-keeping requirements under applicable Law with
respect to any amounts paid or owing to any employee, creditor, independent
contractor or other third party;
(i) The Company is not the beneficiary of any extension of time in
which to file a Tax Return except that extensions of time to file the Federal
and state income Tax Returns for the Company for the tax year ended December 31,
1999 until September 15, 2000 have been obtained;
(j) None of the Company's Assets and Properties constitute
tax-exempt bond financed property or tax-exempt use property within the meaning
of Section 168 of the Code;
(k) There are no liens or other encumbrances on the Company's
Assets and Properties relating or attributable to Taxes (other than liens for
Taxes not yet due and payable);
(l) No consent has been filed under Section 341(f) of the Code
with respect to the Company;
(m) The Company has no liability for the Taxes of any other
corporation (A) as a transferee or successor, (B) by contract or (C) otherwise;
(n) The Company has delivered to Purchaser correct and complete
copies of all federal, state, local and foreign income Tax Returns (including
consolidated returns of any Relevant Group), filed by or including the Company
since December 31, 1996;
(o) The Company is not a party to any Tax allocation or sharing
agreement;
(p) The Company is not, nor at any time has it been, a "United
States real property holding corporation" within the meaning of Section
897(c)(2) of the Code;
(q) The Company is not a member, partner or party to or of any
joint venture, limited liability company, partnership, or other arrangement that
is treated as a partnership for federal income tax purposes;
(r) No accounting method changes of the Company have occurred, or
been proposed or threatened by any Taxing Authority, prior to the Closing Date,
that could give rise to an adjustment under Section 481 of the Code for periods
after the Closing Date;
(s) The Company has not made any payments, is not obligated to
make any payments, nor is a party to any agreement that under certain
circumstances could require it to make any payments, that are not deductible
under Section 280G of the Code; and
29
(t) The Company was a validly electing S Corporation within the
meaning of Section 1361 and 1362 of the Code from the time of its incorporation
until January 1, 2000, at which time it elected to cease such status.
5.31 Recent Dividends and Other Distributions. Except as set forth on
Schedule 5.31 hereto, there has been no dividend or other distribution of assets
or securities whether consisting or money, property or any other thing of value,
declared, issued or paid to or for the benefit of any of the shareholders of the
Company subsequent to the date of the most recent Financial Statements.
5.32 Inventory. Except as set forth in Schedules 5.32(a) and (b) hereto,
all of the Inventory of the Company has been received within six months of May
31, 1999, and is of a quantity and quality saleable at regular prices or usable
in the ordinary course of business during 2000. Schedule 5.32(a) specifies all
Inventory of the Company that was received more than 12 months before the
Closing Date, the calendar month in which such Inventory was received, and the
quality and product family of such Inventory. Schedule 5.32(b) specifies all
Inventory of the Company which is not of a quality or quantity saleable or
usable in the ordinary course of business during calendar year 2000.
5.33 Purchase and Sale Obligations. All purchases, sales and orders and
all other commitments for purchases, sales and orders made by or on behalf of
the Company have been made in the usual and ordinary course of its business in
accordance with its past and normal practices. On the Closing Date, Seller and
the Company shall deliver to Purchaser a schedule of all such uncompleted
purchase and sale orders and other commitments with respect to any of the
Company's obligations as of a date not earlier than ten (10) days prior to the
Closing.
5.34 Other Information. None of the information which has been or may be
furnished by Seller or the Company or any of their representatives to Purchaser
or any of its representatives in connection with the transactions contemplated
hereby, which is contained in this Agreement (including the Exhibits and
Schedules hereto) or any Operative Agreement or any certificate or instrument
delivered or to be delivered by or on behalf of Seller and the Company in
connection with the transactions contemplated hereby or thereby, does or will
contain any untrue statement of a material fact or omit a material fact
necessary to make the information contained herein or therein not misleading.
5.35 Accounts Receivable and Accounts Payable. All of the accounts
receivable of the Company are actual and bona fide accounts receivable
representing obligations for the total dollar amount thereof reflected in the
Books and Records of the Company, and the accounts receivable are not and will
not be subject to any recoupments, set-offs or counter-claims. Except as
otherwise reflected in the Financial Statements, such accounts receivable are
collectible in the ordinary course of business. Schedule 5.35 hereto sets forth
a true and correct aged (00-00-00-000 days) list of all accounts receivable and
accounts payable of the Company as of the end of the calendar month preceding
the date hereof.
30
5.36 Brokers and Finders. Except as set forth on Schedule 5.36 hereto,
neither Seller nor the Company has engaged or employed any person in connection
with the negotiations relative to this Agreement and the transactions
contemplated hereby that would result in any claim against Purchaser for a
finder's fee, brokerage commission or like payment.
5.37 No Undisclosed Liabilities. Except as reflected or reserved against
in the Financial Statements or as disclosed in Schedule 5.37 hereto, there are
no liabilities of, relating to or affecting the Company or any of its respective
Assets and Properties, other than liabilities incurred in the ordinary course of
business consistent with past practice.
5.38 Book Value; EBIT. (i) The Company's Book Value as of the Closing
Date equals or exceeds One Million Dollars ($1,000,000), and (ii) the Company's
EBIT for the twelve (12) month period ended June 30, 2000 shall be as set forth
on Schedule 5.38 hereto.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to Seller and the Company as
follows, each of which representation and warranty shall be true as of the
Closing Date:
6.1 Organization. Purchaser is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware. Purchaser
has all requisite corporate power and authority to execute, deliver and perform
its obligations under this Agreement and to consummate the transactions
contemplated hereby.
6.2 Authorization of Agreement. The execution, delivery and performance
of this Agreement and the Operative Agreements by Purchaser, and the
consummation of the transactions contemplated hereby and thereby, have been duly
and effectively authorized by the Board of Directors of Purchaser. This
Agreement has been duly and validly authorized, executed and delivered on behalf
of Purchaser. This Agreement constitutes a valid and binding obligation of
Purchaser, enforceable in accordance with its terms, except that such
enforcement may be limited by bankruptcy, insolvency or other similar laws
affecting the enforcement of creditors, rights generally.
6.3 No Violation. The execution, delivery and performance of this
Agreement and the Operative Agreements by Purchaser, and the consummation of the
transactions contemplated hereby and thereby, will not, with or without the
giving or notice and the lapse of time, or both, (a) violate any provision of
law, statute, rule, regulation or executive order to which Purchaser is subject;
(b) violate any judgment, order, writ or decree of any court applicable to
Purchaser; or (c) result in the breach of or conflict with any term, covenant,
condition or provision of the organizational documents of Purchaser or any
commitment, contract or other agreement or instrument to which Purchaser is a
party.
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6.4 Litigation. To the best knowledge of Purchaser, there are no
actions, suits, proceedings or governmental investigations or inquiries pending
or threatened against it which, in its reasonable judgment, would prevent the
consummation of the transactions contemplated hereby.
ARTICLE VII
COVENANTS OF SELLER AND THE COMPANY
Each of Seller and the Company hereby covenants and agrees with Purchaser
that each of them shall do, or cause to be done, the following:
7.1 Conduct of Business Until Closing Date. From the date hereof until
the Closing, except as permitted or required hereby or as set forth on Schedule
7.1 hereto, Seller shall:
(a) operate, or cause to be operated, the business of the Company
only in the usual, regular and ordinary manner, and use their best efforts to
(i) preserve the present business organization of the Company intact, (ii) keep
available the services of the present employees of the Company, and (iii)
preserve the current business relationships of the Company with customers,
clients, suppliers, distributors and others having business dealings with it;
(b) bear the risk of loss or damage to the Company's Assets and
Properties on and prior to the Closing Date where such risk of loss is not the
legal obligation of another, and maintain, or cause to be maintained, all
properties necessary for the conduct of the business of the Company, whether
owned or leased;
(c) maintain, or cause the Company to maintain, the Books and
Records and accounts of the Company in the usual, regular and ordinary manner,
on the basis consistent with prior periods;
(d) duly comply, and cause the Company to duly comply, with all
laws, rules and regulations applicable to the Company and to the conduct of its
business;
(e) perform, or cause to be performed, all of the obligations of
the Company without default, unless such default is of no significance to the
Company and could have no adverse impact on the Company, its Assets and
Properties or the Business;
(f) neither (a) amend the Company's Articles of Incorporation or
By-Laws; (b) merge with or into, consolidate, amalgamate or otherwise combine
with, any other entity, or cause the Company to do any of the foregoing; or (c)
change, or permit the Company to change, the character of the business of the
Company;
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(g) not, with respect to the Company, nor permit the Company in
its own right to (a) encumber, mortgage, or voluntarily subject to Lien any of
the Company's existing Assets and Properties or the Common Stock; (b) transfer,
sell, lease, license or otherwise dispose of any of, or any part of, Company's
Assets and Properties (other than in the ordinary course of business); (c)
convey, transfer or acquire any material Asset and Property to, for or on behalf
of the Company other than in the ordinary course of business; (d) enter into any
arrangement, agreement or undertaking, with respect to any of the employees
relating to the payment of bonus, severance, profit-sharing or special
compensation or any increase in the compensation payable or to become payable to
any such employee; or (e) incur any material fixed or contingent obligation or
enter into any agreement, commitment, contract or other transaction or
arrangement relating to the business of the Company or its Assets and
Properties;
(h) not, with respect to the Company, nor permit the Company in
its own right to make or change any Tax election, amend any Tax Return or take
or omit to take any other action not in the ordinary course of business and
consistent with past practice that would have the effect of increasing any Taxes
of the Company or Purchaser for any taxable period ending after the Closing
Date;
(i) not, with respect to the Company, nor permit the Company in
its own right to (A) make any distributions or dividends of Assets and
Properties or securities, or any changes to the capital structure of the
Company; or (B) agree to make or make any sales of the Company's securities
including the issuance of any additional capital stock or rights or options or
contracts to acquire, or instruments convertible into, Common Stock;
(j) administer, or cause the Company to administer in accordance
with past practice, each Benefit Plan, or cause the same to be so administered,
in all material respects in accordance with the applicable provisions of the
Code, ERISA and all other applicable Laws, and, except as required by Law, not
adopt any plan, arrangement or policy which would become a Benefit Plan or amend
any such plan to the extent such adoption or amendment would result in a
material increase in the benefits payable to any current or former employee of
the Company or of Seller;
(k) use its best efforts to maintain in full force and effect
substantially the same levels of coverage as the insurance afforded under the
policies listed in Schedule 7.1(k);
(l) neither modify, change nor terminate (nor permit the Company
to modify, change or terminate) any of the Company's material obligations other
than in the ordinary course of business, nor grant any power of attorney with
respect to the business of the Company or its Assets and Properties to any party
except Purchaser;
(m) not, with respect to the Company, nor permit the Company in
its own right to (except in the ordinary course of business) (a) exercise or
cause or permit to be exercised any right or option under any Real Property
Lease, or extend or renew any Real Property Lease; (b) enter into or cause or
permit to be entered into any amendment, modification, extension, waiver,
termination, assignment, mortgage or hypothecation of any Real Property Lease or
Approval or sublet or encumber all or any portion of any property subject to a
Real Property Lease; or (c) acquire or purchase or cause or permit to be
acquired or purchased any interest in real property, including, without
limitation, fee and leasehold interests; and
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(n) deliver or cause to be delivered to Purchaser a copy of any
material notice related to any Real Property Lease.
7.2 Approvals, Consents and Further Assurances. Each of Seller and the
Company shall use its best efforts to obtain in writing as promptly as possible
all approvals, consents and waivers required in order to effectuate the
transactions contemplated hereby, including but not limited to, any approvals or
consents required in connection with any Environmental Permit or arising out of
Environmental Laws, and shall deliver to Purchaser copies, reasonably
satisfactory in form and substance to counsel to Purchaser, of such approvals
and consents.
7.3 Access to Properties, Records, Suppliers, Agents, Etc. Seller and
the Company shall give to Purchaser and to Purchaser's counsel, financiers,
accountants, environmental consultants and other representatives access to and
copies of such of the Company's properties (including but not limited to the
opportunity to conduct soil, groundwater, surface water or air sampling or
monitoring), personnel, Books and Records, Tax Returns, Contracts, commitments
and records as such relate to the Assets and Properties, suppliers, agents,
distributors or other aspects of the business of the Company; and shall furnish
to Purchaser and such representatives all such additional instruments,
contracts, documents or other written obligations (certified by officers of the
Company, if so requested) and financial and other information concerning such
business, Assets and Properties, suppliers and agents as Purchaser or its
representatives may from time to time request.
7.4 Advice of Changes. If Seller or the Company becomes aware of any
fact or facts which, if known at the date hereof, would have been required to be
set forth or disclosed in or pursuant to this Agreement or which, individually
or in the aggregate, could materially adversely affect the Business, Assets and
Properties or Common Stock of the Company, such person shall promptly advise
Purchaser in writing thereof.
7.5 Conduct. Except as permitted or required hereby or as Purchaser may
otherwise consent in writing, neither Seller nor the Company shall enter into
any transaction or take any action which would result in any of the
representations and warranties of Seller or the Company contained in this
Agreement or in any Operative Agreement not to be true and correct as of the
time immediately after such transaction has been entered into or such event has
occurred and on the Closing Date.
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7.6 Employee Benefit Plans. Except for payment of the Company's
obligations at the rates and at the times established immediately prior to the
date of this Agreement, the Company shall not incur (nor shall Seller incur on
behalf of the Company) any additional obligations or liabilities with respect to
the compensation and benefits of the Company's employees, consultants or
independent contractors, or under the Employee Benefit Plans, including with
respect to (i) all liabilities for all claims incurred, whether or not reported,
on or before the Closing Date under all "employee welfare benefit plans," within
the meaning of Section 3(l) of ERISA (including but not limited to severance and
severance-type benefits), (ii) all liabilities or obligations for vacations or
sick leave or retiree, medical or life benefits to employees or former employees
of the Company, and (iii) all liabilities of the Company for all benefits
accrued under any "employee pension benefit plan," within the meaning of Section
3(2) of ERISA.
7.7 Satisfaction of Conditions by Seller. Each of Seller hereby
covenants and agrees with Purchaser that, between the date of this Agreement and
the Closing Date or date of termination of this Agreement, as the case may be,
it shall use its best efforts to assure that the conditions set forth in Article
IX hereof are satisfied by the Closing Date.
7.8 Non-competition. From the Closing Date and for a period of five (5)
years, neither Seller nor any Affiliates will (i) compete directly or indirectly
with the Business, or participate, as an officer, director, employee, agent,
representative, stockholder, partner or joint-venturer, or have any direct or
indirect financial interest in any form, including without limitation the
interest of a creditor for money borrowed, in any business competing directly or
indirectly with the Business; (ii) employ, engage or seek to employ or engage
any person who within the prior twelve (12) months had been an employee of the
Business or Purchaser; (iii) cause or attempt to cause (A) any client, customer
or supplier of the Business or Purchaser to terminate or materially reduce its
business with the Business or Purchaser or (B) any officer, employee or
consultant of the Business or Purchaser to resign or sever a relationship with
the Business or Purchaser; (iv) disclose (unless compelled by judicial or
administrative process or as otherwise required by law) or using any
confidential or secret information relating to the Business or Purchaser or any
client, customer or supplier of Purchaser; or (v) participate or engage in
(other than through the ownership of five percent (5%) or less of any class of
securities registered under the Securities Exchange Act of 1934, as amended), or
otherwise lending assistance (financial or otherwise) to any person
participating or engaged in any activity or business competitive to the Business
within the United States or elsewhere in the world. Notwithstanding anything
herein to the contrary, this Section 7.8 does not apply to Xxxxx Xxxxxx whose
non-compete shall be covered in his employment contract.
7.9 Indebtedness. Except as set forth on Schedule 7.9 hereto, Seller and
the Company covenant and agree that as of the Closing Date, the Company shall be
free of all Indebtedness.
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ARTICLE VIII
COVENANTS OF PURCHASER
8.1 Satisfaction of Conditions by Purchaser. Purchaser hereby covenants
and agrees with Seller that, between the date of this Agreement and the Closing
Date or date of termination of this Agreement, as the case may be, Purchaser
shall use its best efforts to cause the conditions set forth in Article X hereof
to be satisfied by the Closing Date.
ARTICLE IX
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF PURCHASER
The obligations of Purchaser pursuant to this Agreement are subject to the
satisfaction at the Closing of each of the following conditions, any or all of
which conditions may be waived by Purchaser in its sole discretion:
9.1 Accuracy of Representations and Warranties. All representations and
warranties made by Seller or the Company (contained in this Agreement, any
Exhibit or Schedule hereto, any Operative Agreement or any certificate or
instrument delivered to Purchaser or its representatives by Seller or the
Company or any of their representatives) shall be true on and as of the Closing
Date with the same force and effect as though made on and as of the Closing Date
(i.e., with respect to representations that a state of facts exist on or as of
the date hereof, it is a condition that such state of facts exist on or as of
the Closing Date; and with respect to a representation that a state of facts has
or has not changed between a date prior to the date hereof and the date hereof,
it is a condition that such state of facts has or has not changed between such
prior date and the Closing Date), except as affected by transactions
contemplated hereby.
9.2 Performance of Agreements. Seller and the Company shall have
performed and complied with all covenants, obligations and agreements to be
performed or complied with by them on or before the Closing Date pursuant to
this Agreement.
9.3 Litigation, Etc.
(a) Except as set forth on Schedule 5.20 hereto, no claim, action,
suit, proceeding, arbitration, investigation or hearing or note of hearing shall
be pending or threatened against or affecting the Business, the Company or any
of its Assets and Properties, which (a) might result either in an action or
enjoin or prevent the consummation of the transactions contemplated by this
Agreement; or (b) would materially adversely affect the Business or the ability
of Purchaser to consummate the transactions contemplated by this Agreement or to
operate the Business.
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(b) The Company shall not be in violation of any law, statute,
ordinance, rule, regulation or executive order, the enforcement of which would,
individually or in the aggregate, materially adversely affect its Assets and
Properties or the Business; or which would individually or in the aggregate,
materially adversely affect the ability of Seller or Purchaser to consummate the
transactions contemplated by this Agreement or of Purchaser or the Company to
operate the Business.
(c) No law, regulation or decree shall have been proposed, adopted
or promulgated, or have become effective, the enforcement of which would
materially adversely affect the ability of Purchaser to consummate the
transactions contemplated by this Agreement or to operate the Business.
9.4 Approvals and Consents. Seller and the Company shall have obtained,
and Purchaser shall have received copies of, all of the approvals and consents
referred to in Section 7.2, each of which approvals and consents shall be in
full force and effect and reasonably satisfactory in form and substance to
Purchaser and its counsel.
9.5 Officer's Certificate. Purchaser shall have received an accurate
certificate of Xxxxx Xxxxxx, President of the Company, dated the Closing Date,
satisfactory in form and substance to Purchaser and its counsel, certifying (a)
as to the fulfillment of the matters specified in Sections 9.1 through 9.3, (b)
any changes that Purchaser is required to be notified of pursuant to Section
7.4, or that previously had not been disclosed to Purchaser, and (c) stating,
among other things, that he is not aware of any material omissions or facts that
would materially alter any of the Financial Statements, nor is he aware of any
facts or factors that are reasonably likely to occur, or if known to other
parties, that could have a material adverse effect on the condition (financial
and otherwise), business, operations, Assets and Properties, liabilities,
management or prospects of the Company.
9.6 Good Standing Certificate. Purchaser shall have received a
certificate of the office of the Secretary of State of the jurisdiction of
incorporation of the Company, dated within 10 days before the Closing Date,
certifying that the records of such state regarding the Company reflect neither
a certificate of dissolution, a court order declaring dissolution, a merger or
consolidation which terminated its existence, nor suspension of its corporate
powers, rights and privileges, and that in accordance with the records of such
state, such corporation is authorized to exercise all of its corporate powers,
rights and privileges in such state.
9.7 No Material Adverse Change. There shall have been no material
adverse change in the condition (financial and otherwise), business, operations,
assets, liabilities, management or prospects of the Company.
9.8 Actions, Proceedings, Etc. All actions, proceedings, instruments and
documents required to carry out the transactions contemplated by this Agreement
shall have been completed.
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9.9 Opinions of Counsel to Seller and the Company. Purchaser shall have
received opinions of K. Xxx Xxxxxxxxx, P.C., special counsel to Seller and the
Company, addressed to Purchaser, dated the Closing Date, substantially in the
forms attached hereto as Exhibit A and Exhibit B, respectively.
9.10 Licenses, Permits, Consents, Etc. Purchaser shall have received
evidence, in form and substance reasonably satisfactory to counsel for
Purchaser, that such licenses, permits, consents, approvals, authorizations or
orders of governmental authorities (including but not limited to Environmental
Permits) as are necessary to the consummation of the transactions contemplated
by this Agreement and the continued operation of the business of the Company
have been obtained.
9.11 Documentation of Rights. Seller and the Company shall have delivered
to Purchaser true and complete copies of all of the documentation held by the
Company relating to all Intellectual Property set forth on Schedule 5.17(a)
hereto.
9.12 Employment Agreement. Purchaser and X.X. Xxxxxx shall have executed
an Employment Agreement in substantially the form attached hereto as Exhibit C
(the "Employment Agreement").
9.13 Real Property and Other Matters. (a) The Company shall have paid any
and all applicable real property transfer, documentary stamp and similar taxes
(and the Company shall have properly executed all forms and returns required in
connection therewith) in connection with transactions contemplated hereby.
(b) Purchaser shall have received an affidavit pursuant to the
Foreign Investment in Real Property Tax Act (in substantially the form attached
hereto as Exhibit D).
(c) Purchaser shall have received a non-disturbance agreement, in
form acceptable to Purchaser, from each holder of a mortgage or deed of trust
affecting any real property subject to a Real Property Lease.
(d) Purchaser shall have received a consent to the transactions
contemplated hereby from each landlord under a Real Property Lease.
(e) Purchaser shall have received an estoppel certificate (dated
not more than 15 days prior to the Closing) from each landlord under a Real
Property Lease (in substantially the form attached hereto as Exhibit E).
(g) If prior to the Closing any portion of any Owned Real Property
or Leased Real Property shall be taken (or any public announcement shall be made
of an intent to take) by condemnation or eminent domain or shall be damaged or
destroyed by fire or other casualty, Purchaser shall have the right to cancel
this Agreement by giving notice to Seller within 15 days following notice of the
taking or fire or other casualty. Seller, the Company and Purchaser waive the
provisions of any applicable law governing the subject matter of this Section,
and agree that their respective rights in the event of a taking or damage or
destruction shall be governed by this Section. If Purchaser shall not cancel
this Agreement, all insurance proceeds and condemnation awards shall be paid
(or, if not then collected, assigned) to Purchaser at the Closing.
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9.14 Indebtedness. Except as set forth on Schedule 9.14 hereto, all
Indebtedness of the Company shall have been paid or satisfied.
9.15 Book Value; EBIT. (i) The Book Value of the Company (as reflected on
the 2000 Balance Sheet) shall equal or exceed the Minimum Book Value and (ii)
the Company's EBIT for the twelve month period ending June 30, 2000 is set forth
on Schedule 5.38 hereto and all parties shall agree to the contents of such
Schedule prior to Closing.
9.16 Environmental Condition. Purchaser shall be satisfied, in its sole
discretion, with the environmental condition of the Sites.
9.17 2000 Balance Sheet. Seller shall have delivered to Purchaser the
unaudited balance sheet of the Company covering the period January 1, 2000
through the Closing, and related statements of income and retained earnings and
changes in financial position for such period, together with supporting
Schedules (the "2000 Balance Sheet"). The 2000 Balance Sheet shall be prepared
from the Books and Records of the Company, shall be prepared in accordance with
GAAP consistently applied and shall fairly present in all material respects the
financial position of the Company and the results of operations and cash flow
for the period covered thereby.
ARTICLE X
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF SELLER
The obligations of Seller under this Agreement are subject to the
satisfaction at the Closing of each of the following conditions:
10.1 Accuracy of Representations and Warranties. All representations and
warranties by Purchaser in this Agreement shall be true as of the Closing Date
with the same force and effect as though made on and as of the Closing Date.
10.2 Performance of Agreements. Purchaser shall have performed and
complied in all material respects with all covenants, obligations and agreements
to be performed or complied with by it on or before the Closing Date pursuant to
this Agreement.
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10.3 No Injunction. No third party injunction, stay or restraining order
shall be in effect prohibiting the consummation of the transactions contemplated
hereby.
10.4 Opinion of Counsel to Purchaser. Seller shall have received an
opinion of Xxxxxx, Xxxxx & Bockius LLP, counsel to Purchaser, addressed to
Seller, dated as of the Closing Date, in substantially the form attached hereto
as Exhibit F.
ARTICLE XI
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION
11.1 Survival. The representations and warranties set forth in this
Agreement, in any Exhibit or Schedule hereto and in any certificate or
instrument delivered in connection herewith shall survive for a period of two
(2) years after the Closing Date and shall thereupon terminate and expire and
shall be of no force or effect thereafter, except (i) with respect to any claim,
written notice of which shall have been delivered to Purchaser, on the one hand,
or Seller, on the other hand, as the case may be, such claim shall survive the
termination of such period and shall survive for as long as such claim is
unsettled, and (ii) with respect to any litigation which shall have been
commenced to resolve such claim on or prior to such date. Notwithstanding the
foregoing, with respect to Taxes and Employee Benefit Plans, the period shall be
the applicable statute of limitations plus sixty (60) days, and with respect to
customer claims and any environmental matters under Sections 5.29 and 11.2(iii),
the period shall be ten (10) years.
11.2 Indemnification by Seller. Seller hereby covenants and agrees with
Purchaser that, regardless of any investigation made at any time by or on behalf
of Purchaser or any information Purchaser may have and, regardless of the
Closing hereunder, Seller shall, indemnify Purchaser and the directors,
officers, employees and Affiliates of Purchaser, and each of their successors
and assigns (collectively, the "Purchaser Indemnitees"), and hold them harmless
from, against and in respect of any and all Losses suffered, incurred or
sustained by any of them resulting from (i) any misrepresentation, breach of
warranty or nonfulfillment of any agreement, covenant or obligation by Seller or
the Company made in this Agreement (including without limitation any Exhibit or
Schedule hereto and any certificate or instrument delivered in connection
herewith), (ii) any Tax imposed upon or relating to the Company for any Pre-
Closing Period in excess of the amount shown on the Closing Balance Sheet as a
Liability or reserve for current Taxes not yet due and payable (excluding any
reserve for deferred Taxes established to reflect timing differences between
book and Tax income and the accrual on the Closing Balance Sheet described in
the last sentence of Section 2.2), but only if and to the extent that that such
excess would have caused the Minimum Book Value of the Company to fall below (or
further below) one million dollars ($1,000,000) if such liability had existed on
the Closing Date, and (iii) (A) the presence, Release or threatened Release, of
any Hazardous Materials existing as of or prior to the Closing Date at, from,
in, to, on, or under any Site; (B) the transportation, treatment, storage,
handling, or disposal or arrangement for transportation, treatment, storage,
handling or disposal of any Hazardous Materials by or on behalf of Seller (in
connection with the Business) or the Company, any predecessors of Seller (in
connection with the Business) or the Company or any entities previously owned by
the Company at or to any off-Site location prior to the Closing Date; (C) any
violation of Environmental Law or any Environmental Permit by Seller (in
connection with the Business) or the Company as of or prior to the Closing Date;
or (D) any Environmental Claims relating to (1) the Business as conducted on or
prior to the Closing Date; (2) any Contract executed by the Company on or prior
to the Closing Date; (3) any express or implied warranty obligations with
respect to products or services sold or otherwise provided by or on behalf of
the Company on or prior to the Closing Date; or (4) any liability or obligation
assumed or undertaken (either expressly or by operation of law) by the Company
on or prior to the Closing Date.
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11.3 Indemnification by Purchaser. Subject to the limitations set forth
in Section 11.1, Purchaser hereby covenants and agrees with Seller that
Purchaser shall indemnify Seller and hold it harmless from, against and in
respect of any and all Losses suffered, incurred or sustained by it resulting,
from any misrepresentation, breach of warranty or the nonfulfillment of any
agreement, covenant or obligation by Purchaser made in this Agreement (including
without limitation any Exhibit or Schedule hereto and any certificate or
instrument delivered in connection herewith).
11.4 Method of Asserting Claims. All claims for indemnification by any
Indemnified Party under Section 11.2 or 11.3 will be asserted and resolved as
follows:
(a) In order for an Indemnified Party to be entitled to any
indemnification provided for under Section 11.2 or 11.3 in respect of, arising
out of or involving a claim or demand made by any person not a party to this
Agreement against the Indemnified Party (a "Third Party Claim"), the Indemnified
Party must deliver a Claim Notice to the Indemnifying Party within thirty (30)
Business Days after receipt by such Indemnified Party of written notice of the
Third Party Claim; provided, however, that failure to give such Claim Notice
shall not affect the indemnification provided hereunder except to the extent the
Indemnifying Party shall have been actually prejudiced as a result of such
failure.
(b) If a Third Party Claim is made against an Indemnified Party,
the Indemnifying Party shall be entitled to participate in the defense thereof
and, if it so chooses, to assume and control the defense thereof with counsel
selected by the Indemnifying Party. Should the Indemnifying Party so elect to
assume the defense of a Third Party Claim, the Indemnifying Party shall not be
liable to the Indemnified Party for legal expenses incurred by the Indemnified
Party in connection with the defense thereof. If the Indemnifying Party assumes
such defense, the Indemnified Party shall have the right to participate in (but
not control) the defense thereof and to employ counsel, at its own expense,
separate from the counsel employed by the Indemnifying Party. If (i) the
Indemnifying Party shall not assume the defense of a Third Party Claim within
five (5) Business Days of any Claim Notice, (ii) legal counsel for the
Indemnified Party notifies the Indemnifying Party that there are or may be legal
defenses available to the Indemnified Party or to other Indemnified Parties
which are different from or additional to those available to the Indemnifying
Party, which, if the Indemnified Party and the Indemnifying Party were to be
represented by the same counsel, would constitute a conflict of interest for
such counsel or prejudice prosecution of the defenses available to such
Indemnified Party, or (iii) the Indemnifying Party shall assume the defense of a
Third Party Claim and fail to diligently prosecute such defense, then in each
such case the Indemnified Party, by notice to the Indemnifying Party, may employ
its own counsel and control the defense of the Third Party Claim and the
Indemnifying Party shall be liable for the reasonable fees, charges and
disbursements of counsel employed by the Indemnified Party, and the Indemnified
Party shall be promptly reimbursed for any such fees, charges and disbursements,
as and when incurred, upon its request (accompanied by written support with
respect thereto). Whether the Indemnifying Party or the Indemnified Party
controls the defense of any Third Party Claim, the parties hereto shall
cooperate in the defense thereof. Such cooperation shall include the retention
and provision to the counsel of the controlling party of records and information
which are reasonably relevant to such Third Party Claim, and making employees
available on a mutually convenient basis to provide additional information and
explanation of any material provided hereunder. The Indemnifying Party shall
have the right to settle, compromise or discharge a Third Party Claim without
the Indemnified Party's consent if such settlement, compromise or discharge (A)
constitutes a complete and unconditional discharge and release of the
Indemnified Party and (B) provides for no relief other than the payment of
monetary damages and such monetary damages are paid in full by the Indemnifying
Party.
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(c) In the event any Indemnified Party shall have a claim under
Section 11.2 or 11.3 against any Indemnifying Party that does not involve a
Third Party Claim, the Indemnified Party shall deliver an Indemnity Notice with
reasonable promptness to the Indemnifying Party. The failure by any Indemnified
Party to give the Indemnity Notice shall not impair such party's rights
hereunder except to the extent that an Indemnifying Party demonstrates that it
has been materially prejudiced thereby. If the Indemnifying Party notifies the
Indemnified Party that it does not dispute the claim described in such Indemnity
Notice or fails to notify the Indemnified Party within the Indemnity Dispute
Period whether the Indemnifying Party disputes the claim described in such
Indemnity Notice, the Loss in the amount specified in the Indemnity Notice will
be conclusively deemed a Liability of the Indemnifying Party under Section 11.2
or 11.3 and the Indemnifying Party shall pay the amount of such Loss to the
Indemnified Party on demand. If the Indemnifying Party has timely disputed its
liability with respect to such claim, the Indemnifying Party and the Indemnified
Party will proceed in good faith to negotiate a resolution of such dispute, and
if not resolved through negotiations within the Indemnity Resolution Period,
such dispute shall be resolved in accordance with the provisions of Section 13.9
hereof.
(d) The rights accorded to Indemnified Parties hereunder shall be
in addition to any rights that any Indemnified Party may have at law or in
equity, under federal and state securities Laws, by separate agreement,
including under the Operative Agreements or otherwise.
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11.5 Subrogation. If any Indemnified Party receives payment or other
indemnification from any Indemnifying Party hereunder, the Indemnifying Party
shall be subrogated to the extent of such payment or indemnification to all
rights in respect of the subject matter of such claim to which the Indemnified
Party may be entitled, to institute appropriate action for the recovery thereof,
and the Indemnified Party agrees reasonably to assist and cooperate with the
Indemnifying Party at no expense to the Indemnified Party in enforcing such
rights; provided, however, that the rights provided hereby shall not be so
construed as to permit Seller (as Indemnifying Party) to claim over against the
Company in respect of any loss of Purchaser (as Indemnified Party) that is or
may be the subject of a claim for indemnification hereunder.
11.6 Indemnity Payment. Any indemnity payment under this Agreement shall
be treated by the parties hereto as an adjustment to the Purchase Price for Tax
purposes.
11.7 Offset. Any indemnification of the Purchaser Indemnitees may, but is
not required to, be effected by one or more offsets of any amount payable to
Seller pursuant to Section 3.2 hereof in the event that Seller fails to
indemnify the Purchaser Indemnitees within 30 days of notice of entitlement of
indemnification by a Purchaser Indemnitee. The remedies available to any
Purchaser Indemnitee pursuant to this Article XI shall in no way be limited to
such right of offset and the Purchaser Indemnitees shall have all other rights
and remedies available, now or hereafter, at law or in equity or otherwise. It
is understood and agreed that Purchaser may take such offsets with respect to
any Loss alleged in good faith to arise from any claim for indemnification made
by any Purchaser Indemnitee.
ARTICLE XII
TAX MATTERS
12.1 Allocation of Certain Taxes.
(a) If the Company is permitted but not required under applicable
state, local or foreign income tax laws to treat the Closing Date as the last
day of a taxable period, then the parties shall cause the Company to treat that
day as the last day of a taxable period.
(b) In the case of Taxes arising in a taxable period of the
Company that includes but does not end on the Closing Date, except as provided
in Section 12.1(c), the allocation of such Taxes between the Pre-Closing Period
and the Post-Closing Period shall be made on the basis of an interim closing of
the books as of the end of the Closing Date. For the avoidance of doubt, for
purposes of this Section 12.1, any Tax resulting from the transactions
contemplated by this Agreement is attributable to the Pre-Closing Period.
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(c) In the case of (i) franchise Taxes based on capitalization,
debt or shares of stock authorized, issued or outstanding and (ii) ad valorem
Taxes, in either case attributable to any taxable period that includes but does
not end on the Closing Date, the portion of such Taxes attributable to the
Pre-Closing Period shall be the amount of such Taxes for the entire taxable
period, multiplied by a fraction the numerator of which is the number of
calendar days in such taxable period ending on and including the Closing Date
and the denominator of which is the entire number of calendar days in such
taxable period; provided, however, that if any property, asset or other right of
the Company is sold or otherwise transferred prior to the Closing Date, then ad
valorem Taxes pertaining to such property, asset or other right shall be
attributed entirely to the Pre-Closing Period.
12.2 Preparation and Filing of Tax Returns.
Purchaser shall file or cause to be filed all Tax Returns of the
Company that are required to be filed after the Closing Date, including the Tax
Returns for the taxable period ending on the Closing Date. The Company shall pay
all Taxes shown to be due thereon, and Seller shall reimburse the Company for
all Taxes attributable to the Pre-Closing Period required to be paid with Tax
Returns filed by the Purchaser in excess of the amount shown on the Closing
Balance Sheet as a Liability or reserve for current Taxes not yet due and
payable (excluding any reserve for deferred Taxes established to reflect timing
differences between book and Tax income and the accrual on the Closing Balance
Sheet described in the last sentence of Section 2.2), but only if and to the
extent that that such excess would have caused the Minimum Book Value of the
Company to fall below (or further below) one million dollars ($1,000,000) if
such liability had existed on the Closing Date.
12.3 Transfer Taxes. Any Transfer Taxes incurred as a result of the
transactions contemplated herein (excluding the Taxes described in Section
9.13(a) herein) shall be borne or reimbursed, as the case may be, equally by
Seller, on the one hand, and Purchaser, on the other. Seller and Purchaser agree
to cooperate in good faith with each other, and to use their commercially
reasonable efforts, to minimize such Transfer Taxes.
12.4 Tax Sharing Agreements. All Tax sharing agreements or similar
agreements with respect to or involving the Company shall be terminated as of
the Closing Date and, after the Closing Date, the Company shall not be bound
thereby or have any liability thereunder.
ARTICLE XIII
MISCELLANEOUS
13.1 Expenses. Except as and to the extent otherwise provided in this
Agreement, whether or not the transactions contemplated by this Agreement are
consummated, Seller, on the one hand, and Purchaser, on the other hand, shall
each pay their own respective expenses and the fees and expenses of their
respective counsel and other experts.
44
13.2 Termination. (a) This Agreement may be terminated, and the
transactions contemplated hereby may be abandoned:
(i) at any time before the Closing, by mutual written
consent of Purchaser and Seller;
(ii) at any time after the close of business on August 31,
2000, by Purchaser, on the one hand, or Seller, on the other hand, upon
notification of the non- terminating party by the terminating party if the
Closing shall not have occurred on or before such date and such failure to
consummate is not caused by a breach of this Agreement by the terminating
party;
(iii) at any time before the Closing, in the event that
Purchaser shall have delivered written notice to Seller that it has
elected to terminate the Agreement; or
(iv) at any time before the Closing, by Purchaser, on the
one hand, or Seller, on the other hand, (A) in the event of a material
breach hereof by the non- terminating party if such non-terminating party
fails to cure such breach within five (5) Business Days following
notification thereof by the terminating party or (B) upon notification of
the non-terminating party by the terminating party that the satisfaction
of any condition to the terminating party's obligations under this
Agreement becomes impossible or impracticable with the use of commercially
reasonable efforts if the failure of such condition to be satisfied is not
caused by a breach hereof by the terminating party.
(b) If this Agreement is validly terminated pursuant to Section
13.2(a), this Agreement will forthwith become null and void, and there will be
no liability or obligation on the part of Purchaser, Seller or any of their
respective Affiliates (or any of the direct or indirect stockholders, officers,
directors, employees or agents of the Purchaser, Seller or such Affiliates),
except that the provisions of the next succeeding sentence and this Article XIII
will continue to apply following any such termination. In the event that this
Agreement is terminated pursuant to Section 13.2(a)(iii), Purchaser shall, as
liquidated damages and not as penalty, pay to Seller within ten days following
such termination by wire transfer of immediately available funds the amount of
$50,000. The parties agree that such amount is reasonable under all
circumstances existing at the time of execution of this Agreement, and
represents a genuine and reasonable attempt by the parties to pre-estimate the
loss which would flow from such termination.
13.3 Waivers. No action taken pursuant to this Agreement, including any
investigation by or on behalf of any party, shall be deemed to constitute a
waiver by the party taking such action of compliance with any representation,
warranty, covenant or agreement contained herein or in any other documents. The
waiver by any party hereto of a breach of any provision of this Agreement shall
not operate or be construed as a waiver of any subsequent breach. Any party
hereto may, at or before the Closing, waive any conditions to its obligations
hereunder which are not fulfilled.
45
13.4 Binding Effect; Benefits. This Agreement shall inure to the benefit
of the parties hereto and shall be binding upon the parties hereto and their
respective successors and assigns. Except as otherwise set forth herein, nothing
in this Agreement, expressed or implied, is intended to confer on any person
other than the parties hereto or their respective successors and assigns any
rights, remedies, obligations, or liabilities under or by reason of this
Agreement.
13.5 Assignment. No party to this Agreement may assign its rights or
obligations hereunder without the prior written consent of all of the other
parties; provided, however, that Purchaser may assign this Agreement to an
affiliate of Purchaser (which shall not relieve Purchaser of any obligation
hereunder) without the consent of Seller and the Company.
13.6 Notices. All notices, requests, demands and other communications
which are required to be or may be given under this Agreement shall be in
writing and shall be deemed to have been duly given when delivered in person or
upon receipt when transmitted by facsimile or telex or after dispatch by
certified or registered first class mail, postage prepaid, return receipt
requested, to the party to whom the same is so given or made:
If to Purchaser, to:
PGI Acquisition Inc.
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx Xxxxxxxxx
Fax: 000-000-0000
With a copy to:
Xxxxxx, Xxxxx & Bockius LLP
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx X. Xxxxxxx, Xx.
Fax: 000-000-0000
If to Seller, to:
Xxxxxxx X. Xxxxxx
X.X. Xxx 00000
Xxxxxxxxx, Xxxxxxxxx 00000-0000
With a copy to:
K. Xxx Xxxxxxxxx
X.X. Xxx 00000
Xxxxxxxxx, Xxxxxxxxx 00000-0000
Fax: 000-000-0000
46
13.7 Entire Agreement. This Agreement (including the Exhibits and
Schedules hereto) and the Operative Agreements constitute the entire agreement
and supersede all prior agreements and understandings, oral and written, among
the parties hereto with respect to the subject matter hereof and supersede all
prior agreements, representations, warranties, statements, promises and
understandings, whether written or oral, with respect to the subject matter
hereof. No party hereto shall be bound by or charged with any written or oral
arguments, representations, warranties, statements, promises or understandings
no specifically set forth in this Agreement or in any Exhibit or Schedule hereto
or any Operative Agreements, or in certificates and instruments to be delivered
pursuant hereto on or before the Closing.
13.8 Headings; Certain Terms. The section and other headings contained in
this Agreement are for reference purposes only and shall not be deemed to be a
part of this Agreement or to affect the meaning or interpretation of this
Agreement. As used in this Agreement, the term "including" means "including, but
not limited to" unless otherwise specified; the word "or" means "and/or," and
the word "person" means and refers to any individual, corporation, trust,
partnership, joint venture, government or governmental authority, or any other
entity; and the plural and singular forms are used interchangeably.
13.9 Arbitration of Claims. (a) Any dispute, claim, controversy or
difference between or among the parties arising out of this Agreement or the
transactions contemplated hereby (a "Dispute"), including without limitation any
dispute between an Indemnified Party and any Indemnifying Party under Article
XI, which the parties are unable to resolve themselves shall be submitted to and
resolved by arbitration as herein provided:
(b) A party demanding arbitration under this Agreement (an
"Initiating Party") shall initiate such arbitration by delivering written notice
(the "Arbitration Notice") to the party with whom arbitration is sought. Any
Arbitration Notice shall contain a statement setting forth the nature of the
Dispute, the amount involved, if any, and the remedy sought.
47
(c) Any Dispute subject to arbitration shall be arbitrated in
Knoxville, Tennessee under the commercial rules then in effect of the American
Arbitration Association (the "AAA"). Each party to such arbitration agrees that
any award of the arbitrator shall be final, conclusive and binding and that they
will not contest any action by any other party thereto in accordance with an
award of the arbitrator. It is specifically understood and agreed that any party
may enforce any award rendered pursuant to the arbitration provisions of this
Section 13.9 by bringing suit in any court of competent jurisdiction. The
Initiating Party shall request the AAA to designate one arbitrator who shall be
qualified as an arbitrator under the standards of the AAA and who is not
affiliated with any party in interest to such arbitration and who has
substantial professional experience with regard to corporate legal matters. The
arbitrator shall consider the dispute at issue at a mutually agreed upon time
within thirty (30) days (or such longer period as may be acceptable to the
parties or as directed by the arbitrator) of the designation of the arbitrator.
The arbitration proceeding shall include an opportunity for the parties to
conduct discovery in advance of the proceeding. Notwithstanding the foregoing,
the parties agree that they will attempt, and they intend that they and the
arbitrator should use their best efforts in that attempt, to conclude the
arbitration proceeding and have a final decision from the arbitrator within
forty-five (45) days from the date of selection of the arbitrator; provided,
however, that the arbitrator shall be entitled to extend such 45-day period for
a total of two forty-five (45) day periods. The arbitrator shall immediately
deliver a written report with respect to the dispute to each of the parties who
shall promptly act in accordance therewith.
(d) All fees, costs and expenses (including reasonable attorneys'
fees and expenses) incurred by the party that prevails in any such arbitration
commenced pursuant to this Section 13.9, or any judicial action or proceeding
seeking to enforce the agreement to arbitrate disputes as set forth in this
Section 13.9 or seeking to enforce any order or award of any arbitration
commenced pursuant to this Section 13.9 may be assessed against the party or
parties that do not prevail in such arbitration in such manner as the arbitrator
or the court in such judicial action, as the case may be, may determine to be
appropriate under the circumstances. All costs and expenses attributable to the
arbitrator shall be allocated among the parties to the arbitration in such
manner as the arbitrator shall determine to be appropriate under the
circumstances.
(e) Notwithstanding the foregoing, it is hereby agreed that no
arbitrator shall have any power to add to, alter or modify the terms and
conditions of this Agreement or any other agreement executed and delivered in
connection herewith or to decide any issue which does not arise from the
interpretation or application of the provisions of this Agreement.
13.10 Counterparts. This Agreement may be executed in any number of
counterparts, each of which when executed, shall be deemed to be an original and
all of which together shall be deemed to be one and the same instrument.
13.11 Governing Law. This Agreement shall be construed in accordance with
the laws of the State of New York, without giving effect to the choice of law
principles thereof.
13.12 Severability. If any term or provision of this Agreement shall to
any extent be invalid or unenforceable, the remainder of this Agreement shall
not be affected thereby, and each term and provision of the agreement shall be
valid and enforced to the fullest extent permitted by law.
48
13.13 Amendments. This Agreement may not be modified or changed except by
an instrument or instruments in writing signed by the party or parties against
whom enforcement of any such modification or amendment is sought.
13.14 Section References. All references contained in this Agreement to
any section number are references to sections of this Agreement unless otherwise
specifically stated.
[Remainder of page intentionally left blank]
49
IN WITNESS WHEREOF, the parties hereto have signed this Agreement, or have
caused this Agreement to be signed in their respective names by an officer
thereunder duly authorized, on the date first above written.
PGI ACQUISITION INC.
By:
-----------------------------------
Name:
Title:
THE PROVIDENCE GROUP, INC.
By:
-----------------------------------
Name:
Title:
-----------------------------------
Xxxxxxx X. Xxxxxx
ANNEX I
-------
OWNERSHIP OF SHARES
--------------------------------------------------------------------------------
Name of Seller Number and Class of Shares
--------------------------------------------------------------------------------
Xxxxxxx X. Xxxxxx 1,500 shares of $1.00 par value common stock
--------------------------------------------------------------------------------
EXHIBIT A
OPINION OF COUNSEL TO SELLER
EXHIBIT B
OPINION OF COUNSEL TO THE COMPANY
EXHIBIT C
FORM OF EMPLOYMENT AGREEMENT
EXHIBIT D
FORM OF FIRPTA CERTIFICATE
EXHIBIT E
FORM OF ESTOPPEL CERTIFICATE
EXHIBIT F
OPINION OF COUNSEL TO PURCHASER
