STOCK PURCHASE AGREEMENT
POLYFIBRON TECHNOLOGIES, INC.
AND
XXX ENTERPRISES, INCORPORATED
January 3, 1997
TABLE OF CONTENTS
ARTICLE I--Certain Definitions
Section 1.1 Certain Definitions
Section 1.2 Interpretation
ARTICLE II--PURCHASE AND SALE OF COMPANY SHARES
Section 2.1 The Purchase and Sale of Company Shares
Section 2.2 Purchase Price
Section 2.3 Purchase Price Adjustment
Section 2.4 The Closing
Section 2.5 Deliveries at the Closing
ARTICLE III--Representations and Warranties of the Seller
Section 3.1 Organization and Qualification
Section 3.2 Authorization
Section 3.3 Non-contravention
Section 3.4 No Consents
Section 3.5 Organization and Qualification
Section 3.6 Non-contravention
Section 3.7 Capitalization of the Company and its Subsidiaries
Section 3.8 Title to Assets
Section 3.9 Financial Statements
Section 3.10 Absence of Certain Developments
Section 3.11 Governmental Authorizations; Licenses; Etc.
Section 3.12 Litigation
Section 3.13 Undisclosed Liabilities
Section 3.14 Taxes
Section 3.15 Environmental and Safety Matters
Section 3.16 Employee Matters
Section 3.17 Employee Benefit Plans
Section 3.18 Proprietary Rights
Section 3.19 Contracts
Section 3.20 Books and Records
Section 3.21 Insurance
Section 3.22 Real Property
Section 3.23 Transaction With Affiliates
Section 3.24 Accounts Receivable
Section 3.25 Inventory
Section 3.26 Product Warranty
Section 3.27 Sufficiency of Assets
Section 3.28 Brokers
Section 3.29 Accuracy of Representations
ARTICLE IV--Representations and Warranties of the Buyer
Section 4.1 Organization
Section 4.2 Authorization
Section 4.3 Non-contravention
Section 4.4 No Consents
ARTICLE V--Covenants and Agreements
Section 5.1 Access and Information
Section 5.2 Pre-Closing Affirmative Covenants
Section 5.3 Pre-Closing Negative Covenants
Section 5.4 Closing Documents
Section 5.5 Best Efforts; Further Assurances
Section 5.6 Third Party Proposals
Section 5.7 Mutual Post-Closing Covenants
Section 5.8 Tax Matters
Section 5.9 Non-Compete
Section 5.10 Affiliate Transactions
Section 5.11 Interim Financials
Section 5.12 Employee Benefits
ARTICLE VI--Conditions to Closing
Section 6.1 Mutual Conditions
Section 6.2 Conditions to the Obligations of the Buyer
Section 6.3 Conditions to the Obligations of the Seller
ARTICLE VII--Termination, Amendment and Waiver
Section 7.1 Termination
Section 7.2 Effect of Termination
Section 7.3 Amendments
Section 7.4 Extension; Waiver
ARTICLE VIII . SURVIVAL AND INDEMNIFICATION
Section 8.1 Survival of Representations and Warranties
Section 8.2 Indemnification Obligations of the Seller
Section 8.3 Indemnification Obligations of the Buyer
Section 8.4 Indemnification Procedures
Section 8.5 Special Offsite Disposal Indemnity
ARTICLE IX-- Miscellaneous
Section 9.1 Notices
Section 9.2 Expenses
Section 9.3 Governing Law; Consent to Jurisdiction
Section 9.4 Assignment; Successors and Assigns; No Third Party Rights
Section 9.5 Counterparts
Section 9.6 Entire Agreement
Section 9.7 Public Announcement
Section 9.8 Severability
Section 9.9 No Strict Construction
Section 9.10 Specific Performance
Section 9.11 Waiver of Jury Trial
Exhibit 6.2(m) Form of Transition Services Agreement
Exhibit 6.3(d) Form of Plate Supply Agreement
Schedule 3.4 Seller Consents
Schedule 3.7 Capitalization of the Company and its Subsidiaries
Schedule 3.9 Financial Statements
Schedule 3.10 Absence of Certain Developments
Schedule 3.11 Government Authorizations
Schedule 3.12 Litigation
Schedule 3.14 Taxes
Schedule 3.15 Environmental Matters
Schedule 3.16 Employee Matters
Schedule 3.17 Employee Benefit Plans
Schedule 3.18 Proprietary Rights
Schedule 3.19 Contracts
Schedule 3.21 Insurance
Schedule 3.22 Real Property
Schedule 3.23 Transactions with Affiliates
Schedule 3.24 Accounts Receivable
Schedule 3.28 Brokers
Schedule 4.4 Buyer Consents
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT entered into as of January 3, 1997, by and
between POLYFIBRON TECHNOLOGIES, INC., a Delaware corporation (the "Buyer"), and
XXX ENTERPRISES, INCORPORATED, a Delaware corporation (the "Seller"). The Buyer
and the Seller are referred to collectively herein as the "Parties."
W I T N E S S E T H
WHEREAS, the Seller indirectly owns all of the outstanding capital
stock of NAPP Systems Inc., an Iowa corporation (the "Company").
WHEREAS, the Seller wishes to sell and the Buyer wishes to purchase all
of the outstanding shares of capital stock of the Company (the "Shares") for
cash.
NOW, THEREFORE, in consideration of the mutual covenants,
representations, and warranties contained herein, and intending to be legally
bound, the Parties hereto agree as follows:
ARTICLE I.--Certain Definitions
Section 1.1. Certain Definitions. As used in this Agreement,
the following terms have the respective meanings set forth below.
"Adjusted Working Capital" means the current assets less the current
liabilities of the Company and its Subsidiaries on a consolidated basis as
reflected on the Closing Date Balance Sheet adjusted to exclude (i) from current
assets income tax refunds receivable and the current portion of deferred income
tax charges and (ii) from current liabilities Funded Debt and the current
portion of the liability for the Company's facility in the United Kingdom,
federal and state income taxes payable for the period through the Closing Date
and the current portion of deferred income tax credits.
"Affected Property" has the meaning ascribed to such term in Section
3.15.
"Affiliate" means, with respect to any Person, any other Person who
directly or indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with, such Person but excludes, in the
case of the Seller, BASF. The term "control" means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of a Person, whether through the ownership of voting securities, by
contract or otherwise, and the terms "controlled" and "controlling" have
meanings correlative thereto.
"Antitrust Division" has the meaning ascribed to such term in Section
5.7.
"BASF" means BASF Lacke + Farben, AG, a corporation established under
the laws of the Federal Republic of Germany.
"BASF Contracts" means the Distribution Agreements made between the
Company and BASF and dated February 12, 1993 and August 25, 1995 respectively.
"Business Day" means a day, other than a Saturday or Sunday, on which
commercial banks in New York City are open for the general transaction of
business.
"Closing" has the meaning ascribed to such term in Section 2.4.
"Closing Date" has the meaning ascribed to such term in Section 2.4.
"Closing Date Balance Sheet" has the meaning ascribed to such term in
Section 2.3.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company Financial Statements" has the meaning ascribed to such term
in Section 3.9.
"Company Securities" has the meaning ascribed to such term in Section
3.7.
"Contracts" has the meaning ascribed to such term in Section 3.19.
"Employee Benefit Plan" has the meaning ascribed to such term in
Section 3.17.
"Encumbrances" means any lien, claim, charge, mortgage, pledge,
security interest, restriction or other encumbrance.
"Environmental and Safety Requirements" means all federal, state, local
and foreign statutes, regulations, ordinances and similar provisions having the
force or effect of law to which the Company, any of its Subsidiaries or their
respective assets is subject, all judicial and administrative orders and
determinations to which the Company, any of its Subsidiaries or their respective
assets is subject, all contractual obligations and all common law concerning
public health and safety, worker health and safety, and pollution or protection
of the environment, including without limitation all those relating to the
presence, use, production, generation, handling, transportation, treatment,
storage, disposal, distribution, labeling, testing, processing, discharge,
release, threatened release, control, or cleanup of any hazardous materials,
substances or wastes, chemical substances or mixtures, pesticides, pollutants,
contaminants, toxic chemicals, petroleum products or byproducts, asbestos,
polychlorinated biphenyls, noise or radiation, as enacted or in effect prior to
the Closing Date.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"FTC" has the meaning ascribed to such term in Section 5.7.
"Funded Debt" as applied to any Person means all indebtedness for
borrowed money, all obligations under leases which in accordance with GAAP
constitute capital leases, all notes payable and drafts accepted representing
extensions of credit and any guarantee obligation with respect to any of the
foregoing.
"GAAP" means generally accepted accounting principles as in effect in
the United States on the date of this Agreement.
"Governmental Authority" means any national, federal, state,
provincial, county, municipal or local government, foreign or domestic, or the
government of any political subdivision of any of the foregoing, or any entity,
authority, agency, ministry or other similar body exercising executive,
legislative, judicial, regulatory or administrative authority or functions of or
pertaining to government, including any authority or other quasi-governmental
entity established to perform any of such functions.
"HSR Act" means the Xxxx-Xxxxx-Xxxxxx Anti-Trust Improvements Act of
1976, as amended.
"Indemnifiable Claim" means a claim with respect to which a person is
indemnified pursuant to the provisions of Section 8.2(a) or 8.3(a).
"Losses" means any claims, liabilities, losses, damages, deficiencies,
assessments, judgments, remediations and costs or expenses (including reasonable
attorneys', consultants' and experts' fees and expenses but excluding
consequential losses and damages).
"Material Adverse Change" means a material adverse change in the
condition (financial or otherwise), business, assets or results of operations of
the Company and the Subsidiaries, taken as a whole.
"Person" includes, without limitation, an individual, partnership,
corporation, limited liability company, joint stock company, unincorporated
organization or association, trust or joint venture.
"Proceeding" has the meaning ascribed to such term in Section 8.3.
"Proprietary Rights" has the meaning ascribed to such term in Section
3.18.
"Purchase Price" has the meaning ascribed to such term in Section 2.2.
"Securities Act" means the Securities Act of 1933 as amended.
"Seller's Knowledge" means the actual knowledge of any individual who
is an officer of, or person having substantially equivalent authority within,
the Seller, the Company or any of their respective Affiliates, and any knowledge
which should have come to the attention of any such individual in the diligent
exercise of that person's employment responsibilities.
"Subsidiary" means, with respect to any Person, any corporation of
which in excess of 50% of the outstanding capital stock having ordinary voting
power to elect a majority of the board of directors of such corporation
(irrespective of whether any other class or classes of capital stock of such
corporation may have such voting power by reason of the happening of any
contingency) is directly or indirectly owned by such Person and/or one or more
Subsidiaries of such Person.
"Surviving Agreements" means the Transition Services Agreement and
Plate Supply Agreement, each between the Seller and the Company and dated the
Closing Date.
"Tax" means any federal, state, local or foreign income, gross
receipts, franchise, estimated, alternative minimum, add-on minimum, sales, use,
transfer, real property or other capital gains, registration, value added,
excise, natural resources, severance, stamp, occupation, windfall profits,
environmental (under Section 59A of the Code), customs duties, real property,
personal property, capital stock, social security (or similar), unemployment,
disability, payroll, license, employee or other withholding, or other tax, of
any kind whatsoever, including any interest, penalties or additions to tax or
similar items in respect of the foregoing (whether disputed or not).
"Tax Return" means any return, report, declaration, claim for refund,
information return or other document (including any related or supporting
schedule, statement or information) filed or required to be filed in connection
with the determination, assessment or collection of any Tax of any party or the
administration of any laws, regulations or administrative requirements relating
to any Tax (including any amendment thereof).
Section 1.2. Interpretation. Unless otherwise indicated to the contrary
herein by the context or use thereof: (i) the words, "herein," "hereto,"
"hereof" and words of similar import refer to this Agreement as a whole and not
to any particular Section or paragraph hereof; (ii) the word "including" means
"including, but not limited to"; (iii) masculine gender shall also include the
feminine and neutral genders, and vice versa; and (iv) words importing the
singular shall also include the plural, and vice versa.
ARTICLE II.--PURCHASE AND SALE OF COMPANY SHARES
Section 2.1. The Purchase and Sale of Company Shares. Upon the terms
and subject to the conditions of this Agreement, the Buyer agrees to purchase
from the Seller, and the Seller agrees to sell, transfer, convey, and deliver to
the Buyer or its nominee free and clear of all Encumbrances, all of the Shares
at the Closing for the consideration specified in Section 2.2 below.
Section 2.2. Purchase Price. The Buyer agrees to pay to the Seller at
the Closing $55,000,000 (the "Purchase Price"). The Purchase Price is payable by
delivery of cash payable by wire transfer or delivery of other immediately
available funds to such account as the Seller may specify.
Section 2.3. Purchase Price Adjustment. (a) The Purchase Price shall be
reduced by the amount (if any) by which the Adjusted Working Capital determined
in accordance with this Section 2.3 is less than $15,084,000. The Purchase Price
shall be increased by the amount (if any) by which the Adjusted Working Capital
determined in accordance with this Section 2.3 exceeds $15,084,000. The amount
of any such reduction or increase together with interest thereon at the rate of
9% per annum based on days elapsed from the Closing Date to the date of payment
and a 365 day year, shall be payable to the Buyer or Seller, as the case may be,
within three Business Days after the date on which the Adjusted Working Capital
is determined in accordance with the procedures which follow.
(b). On or before the 60th day after the Closing Date, personnel of the
Buyer and an accounting firm engaged by the Buyer (the "Buyer's Accountant,")
will prepare a balance sheet as of the close of business on the Closing Date
(the "Closing Date Balance Sheet") and a statement setting forth the Buyer's
determination of the Adjusted Working Capital, and the Buyer will deliver a copy
of the Closing Date Balance Sheet together with such determination and an
opinion stating that the same has been prepared in accordance with the terms of
this Section 2.3 to the Seller. The Closing Date Balance Sheet shall be prepared
in accordance with the accounting principles set forth in subsection (e) below.
On or prior to the 30th day after receipt of the Closing Date Balance Sheet, the
Seller may give the Buyer a written notice stating in reasonable detail its
objections (an "Objection Notice") to the Closing Date Balance Sheet and stating
what the Seller believes the Adjusted Working Capital of the Company as at the
Closing Date to be. If the Seller does not give the Buyer an Objection Notice
within such 30-day period, then the Closing Date Balance Sheet and the Adjusted
Working Capital determined as of the Closing Date will be conclusive and binding
on the Parties for purposes of Section 2.3(a).
(c). If the Seller timely gives an Objection Notice, then the Seller
and the Buyer will attempt amicably to resolve their disputes as reflected in
the Objection Notice, and any amount agreed to in writing will be conclusive and
binding upon the Parties for purposes of Section 2.3(a).
(d). If the Seller and the Buyer do not resolve all disputes as
reflected in the Objection Notice on or prior to the 30th day after the
Objection Notice is given, then the Seller and the Buyer will retain a firm of
certified public accountants that is mutually acceptable (if they are unable to
agree on a mutually acceptable accounting firm prior to the 40th day following
delivery of the Objection Notice, then such firm will be chosen randomly by lot
from among the "big six" accounting firms but excluding the Buyer's Accountant
and any accountant retained by the Seller) (the "Independent Accounting Firm")
to determine the Adjusted Working Capital within 15 days, all in accordance with
subsection (e) below. The Adjusted Working Capital determined by the Independent
Accounting Firm will be conclusive and binding upon the Parties for purposes of
Section 2.3(a); provided that the Independent Accounting Firm (i) delivers its
determination to the Parties in writing and (ii) uses the definitions and
accounting principles set forth in this Agreement. The fees and expenses of the
Independent Accounting Firm will be paid 50% by the Buyer and 50% by the Seller.
(e). Each accounting term used herein shall have the meaning that is
applied thereto in accordance with GAAP and each account included in the Closing
Date Balance Sheet shall be calculated in accordance with GAAP and shall be
consistent with the books and records of the Company in all material respects
and the Company's past custom and practice in preparing its annual financial
statements; provided, that all known errors and adjustments shall be taken into
account in the calculation of each account set forth above, regardless of their
materiality.
Section 2.4. The Closing. The closing of the transactions contemplated
by this Agreement (the "Closing") shall take place at the offices of Xxxxxxxx &
Xxxxx in New York commencing at 9:00 a.m. local time on the second Business Day
following the satisfaction or waiver of all conditions to the obligations of the
Parties to consummate the transactions contemplated hereby (other than
conditions with respect to actions the respective Parties will take at the
Closing itself) or such other date as the Parties may mutually determine (the
"Closing Date").
Section 2.5. Deliveries at the Closing. At the Closing, (i) the Seller
will deliver to the Buyer the certificates in respect of the Shares together
with executed stock powers in relation thereto and the documents referred to in
Section 6.2 below; and (ii) the Buyer will deliver to the Seller the Purchase
Price and the documents referred to in Section 6.3 below.
ARTICLE III - Representations and Warranties of the Seller
The Seller represents and warrants to the Buyer as follows. Each of the
following representations and warranties will be deemed repeated by the Seller
on the Closing Date by reference to the facts and circumstances then existing.
Section 3.1. Organization and Qualification. The Seller is a
corporation duly organized, validly existing and in good standing under the laws
of its jurisdiction of incorporation and has the corporate power and authority
to own or lease its property and assets and to carry on its business as
presently conducted.
Section 3.2. Authorization. The Seller has the corporate power and
authority to execute and deliver this Agreement and each other agreement or
instrument to be executed in connection herewith and to perform its obligations
hereunder and thereunder, all of which have been duly authorized by all
requisite corporate action. This Agreement and each other agreement or
instrument to be executed in connection herewith has been duly authorized,
executed and delivered by the Seller and constitutes a valid and binding
agreement of the Seller, enforceable against the Seller in accordance with its
terms.
Section 3.3. Non-contravention. Neither the execution and delivery of
this Agreement, the consummation of the transactions contemplated hereby nor the
fulfillment of and the performance by the Seller of its obligations hereunder
will (i) contravene any provision contained in the Seller's certificate of
incorporation or by-laws, (ii) conflict with, violate or result in a breach
(with or without the lapse of time, the giving of notice or both) of, or
constitute a default (with or without the lapse of time, the giving of notice or
both) under (A) any contract, agreement, commitment, indenture, mortgage, lease,
pledge, note, bond, license, permit or other instrument or obligation or (B) any
judgment, order, decree, statute, law, rule or regulation or other restriction
of any Governmental Authority, in each case to which the Seller is a party or by
which it is bound or to which any of its assets or properties (excluding the
Company and its Subsidiaries) are subject, (iii) result in the creation or
imposition of any Encumbrance on the Shares, or (iv) result in the acceleration
of, or permit any Person to terminate, modify, cancel, accelerate or declare due
and payable prior to its stated maturity, any material obligation of the Seller.
Section 3.4. No Consents. Except for (i) filings and approvals as
required by the HSR Act and (ii) those set forth in Schedule 3.4, no notice to,
filing with, or authorization, registration, consent or approval of any
Governmental Authority or other Person is necessary for the execution, delivery
or performance of this Agreement or the consummation of the transactions
contemplated hereby by the Seller.
Section 3.5. Organization and Qualification. Each of the Company and its
Subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation and has the
corporate power and authority to own or lease its property and assets and to
carry on its business as presently conducted and is duly qualified to do
business as a foreign corporation and is in good standing in each jurisdiction
where the failure to be so qualified and in good standing would have a material
adverse effect on it. The Seller has previously provided to the Buyer true and
complete copies of (i) each of the Company's and its Subsidiaries' articles of
incorporation and all amendments thereto and (ii) each of the Company's and its
Subsidiaries' by-laws as currently in effect.
Section 3.6. Non-contravention. Neither the execution, delivery and
performance by the Seller of this Agreement nor the consummation of the
transactions contemplated hereby will (i) contravene any provision contained in
the Company's and its Subsidiaries' articles of incorporation or by-laws, (ii)
conflict with, violate or result in a breach (with or without the lapse of time,
the giving of notice or both) of, or constitute a default (with or without the
lapse of time, the giving of notice or both) under (A) any contract, agreement,
commitment, indenture, mortgage, lease, pledge, note, bond, license, permit or
other instrument or obligation (other than the BASF Contracts) or (B) any
judgment, order, decree, statute, law, rule or regulation or other restriction
of any Governmental Authority, in each case to which any of the Company and its
Subsidiaries is a party or by which it is bound or to which any of its assets or
properties are subject, (iii) result in the creation or imposition of any
material Encumbrance on any of the Company's and its Subsidiaries' assets or
properties, including but not limited to its Proprietary Rights, or (iv) result
in the acceleration of, or permit any Person to terminate, modify, cancel,
accelerate or declare due and payable prior to its stated maturity, any material
obligation of any of the Company and its Subsidiaries.
Section 3.7. Capitalization of the Company and its Subsidiaries. (a)
The Company's authorized capital stock consists solely of 5,000,000 authorized
shares of common stock, of which 1,000,000 shares are presently issued and
outstanding, all of which will be held beneficially and of record on the Closing
Date by the Seller and are represented by the Shares. No shares of the Company's
capital stock are held as treasury shares. Except as set forth in Schedule 3.7,
the Company does not have (i) any shares of common stock or preferred stock
reserved for issuance, or (ii) any outstanding or authorized option, warrant,
right, call or commitment relating to its capital stock or any outstanding
securities or obligations convertible into or exchangeable for, or giving any
Person any right to subscribe for or acquire from it, any shares of its capital
stock (collectively, "Company Securities"). There are no (i) outstanding
obligations of the Company or any of its Subsidiaries to repurchase, redeem or
otherwise acquire any Company Securities or (ii) authorized or outstanding stock
appreciation, phantom stock or similar rights with respect to the Company or any
of its Subsidiaries. Except as set forth in Schedule 3.7, there are no
preemptive or other subscription rights with respect to any shares of the
Company's capital stock and all of the issued and outstanding shares of capital
stock of the Company have been duly authorized, validly issued, are fully paid
and are nonassessable. There are no voting trusts, proxies or any other
agreements or understandings with respect to the voting of the capital stock of
the Company or any of its Subsidiaries which will survive the Closing.
(b) Subsidiaries of the Company are listed on Schedule 3.7. Except as
otherwise disclosed in Schedule 3.7, neither the Company nor any Subsidiary owns
any shares of stock of any corporation or any equity interest in a partnership,
joint venture or other business entity, and neither the Company nor any of its
Subsidiaries controls any other corporation, partnership, joint venture or other
business entity by means of ownership, management contract or otherwise. Except
for directors' qualifying shares listed on Schedule 3.7, if any, all of the
outstanding capital stock of, or other ownership interests in, each Subsidiary
of the Company is owned beneficially and of record by the Company, directly or
indirectly, is validly issued, fully paid and nonassessable and free and clear
of any preemptive rights, restrictions on transfer, Taxes or Encumbrances or any
other limitation or restriction except as provided under the Securities Act or
state securities laws. There are no authorized or outstanding securities of the
Company or any of its Subsidiaries convertible into or exchangeable for, no
options, warrants, or other rights to acquire from the Company or any of its
Subsidiaries, and no other contract, understanding or arrangement (whether or
not contingent) granting to any Person the right to subscribe for, or providing
for the issuance or sale of, any capital stock or other ownership interest in,
or any other securities of, any such Subsidiary. There are no outstanding
obligations of the Company or any of its Subsidiaries to repurchase, redeem or
otherwise acquire any outstanding shares of capital stock or other ownership
interests in any such Subsidiary.
Section 3.8. Title to Assets. The Company and its Subsidiaries have
good and marketable title to, or a valid leasehold interest in, the properties
and assets used by them, located on their premises, or shown on the 1996 Company
Financial Statements, free and clear of all material Encumbrances, except for
properties and assets disposed of in the ordinary course of business consistent
with past custom and practice.
Section 3.9. Financial Statements. Attached as Schedule 3.9 are true
and complete (excepting only specific financial information in relation to the
BASF Contracts) copies of the consolidated audited balance sheets of the Company
and its Subsidiaries as of, and the consolidated audited statements of earnings,
shareholders' equity and cash flows of the Company and its Subsidiaries for the
fiscal years ended September 30, 1994, September 30, 1995 and September 30, 1996
including the notes thereto, in each case audited by and accompanied by the
report of McGladrey & Xxxxxx, L.L.P., independent public accountants (the
aforementioned financial statements referred to as the "Company Financial
Statements"). The Company Financial Statements (including the notes thereto)
have been prepared from the books and records of the Company and its
Subsidiaries in accordance with past custom and practice and present fairly the
consolidated financial position and consolidated results of operations and cash
flows of the Company and its Subsidiaries as of the dates and for the periods
indicated, in each case in conformity with GAAP.
Section 3.10. Absence of Certain Developments. Except as specifically
disclosed in the 1996 Company Financial Statements (including the notes thereto)
or as set forth in Schedule 3.10, since September 30, 1996 there has not been
any Material Adverse Change. Except as specifically disclosed in the 1996
Company Financial Statements (including the notes thereto) or as set forth in
Schedule 3.10, and except for this Agreement and the transactions contemplated
hereby, since September 30, 1996, each of the Company and its Subsidiaries has
conducted its business in the ordinary and usual course consistent with past
practices. Without limiting the generality of the foregoing, except as set forth
on Schedule 3.10 or as expressly contemplated by this Agreement, since September
30, 1996, none of the Company nor any of its Subsidiaries has:
(a) experienced any material adverse change in any relationship with
its suppliers, customers, distributors, brokers, lessors or others, other than
changes in the ordinary course of business consistent with past custom and
practice;
(b) sold, leased, transferred, or assigned any of its assets, tangible
or intangible, other than for fair consideration in the ordinary course of
business consistent with past custom and practice;
(c) entered into any agreement, contract, lease, or license (or series
of related agreements, contracts, leases or licenses) involving more than
$50,000 individually to which it is a party or by which it is bound nor modified
the terms of any such existing contract or agreement, other than in the ordinary
course of business consistent with past custom and practice;
(d) engaged in any activity which has resulted in any delay of the
collection of its accounts or notes receivables or any delay in the payment of
its accounts payables, in each case other than in the ordinary course of
business consistent with past custom and practice;
(e) (nor has any other party) accelerated, terminated, modified or
cancelled any permit or agreement, contract, lease or license involving more
than $50,000 individually to which it is a party or by which it is bound;
(f) suffered any damage, destruction or loss, whether or not covered by
insurance, affecting any material property or assets owned or used by it;
(g) adopted, modified, amended or terminated any bonus, profit-sharing,
incentive, severance, or other similar plan (including any Employee Benefit
Plan), contract, or commitment for the benefit of any of its directors,
officers, or employees, or otherwise made any change in the employment terms
(including any increase in the base compensation) for any of its officers and
employees described in Section 3.16(a)(i) which will, in each case, survive the
Closing other than, in each case, in the ordinary course of business consistent
with past custom and practice;
(h) made any capital expenditure or any other investment (or series of
related investments) in excess of $50,000 other than in the ordinary course of
business consistent with past custom and practice;
(i) issued any note, bond, or other debt security or created, incurred,
assumed, or guaranteed any indebtedness for borrowed money involving more than
$10,000 individually other than in the ordinary course of business consistent
with past custom and practice;
(j) cancelled, compromised, waived, or released any right or claim (or
series of related rights and claims) either involving more than $50,000 or
outside the ordinary course of business consistent with past custom and
practice;
(k) made or authorized any change in its articles of incorporation or
by-laws;
(l) issued, sold, or otherwise disposed of any of its capital stock, or
granted, modified or amended any options, warrants, stock appreciation rights,
or other rights to purchase or obtain (including upon conversion, exchange, or
exercise) any of its capital stock or participate in any change in the value
thereof;
(m) made or been subject to any change in its accounting practices,
procedures or methods or in its cash management practices;
(n) entered into or become party to any agreement, arrangement or
transaction with any of its Affiliates or any of their respective directors,
officers, employees or stockholders, including, without limitation, any (i) loan
or advance of funds, or made any other payments, to any of its directors,
officers, employees, stockholders or Affiliates, (ii) creation or discharge of
any intercompany account, other than, in each case, in the ordinary course of
business consistent with past custom and practice, or (iii) any payment or
declaration of any dividend, redemption or other distribution with respect to
their respective capital stock which is not paid in cash in full prior to the
Closing Date;
(o) experienced any material adverse changes with respect to the
Proprietary Rights;
(p) experienced any material adverse changes in the amount or scope of
coverage of insurance now carried by them; or
(q) committed to do any of the foregoing.
Section 3.11. Governmental Authorizations; Licenses; Etc. Except as set
forth in Schedule 3.11, to the Seller's Knowledge the business of each of the
Company and its Subsidiaries has been operated in compliance with all applicable
laws, rules, regulations, codes, ordinances, orders, policies and guidelines of
all Governmental Authorities in all material respects and, without limiting the
generality of the foregoing, none of the Company, any of its Subsidiaries or any
of their respective officers, directors, employees or agents or other Persons
acting on behalf of any of them have used any corporate or other funds for
unlawful contributions, payments, gifts or entertainment, or made any unlawful
expenditures relating to political activity to government officials or others.
Except as set forth in Schedule 3.11, each of the Company and its Subsidiaries
has all material permits, licenses, approvals, certificates and other
authorizations, and has made all material notifications, registrations,
certifications and filings with all Governmental Authorities, necessary or
advisable for the operation of its business as currently conducted. Except as
set forth in Schedule 3.11, to the Seller's Knowledge there is no action, case
or proceeding pending or threatened by any Governmental Authority with respect
to (i) any alleged violation by the Company or its Affiliates of any statute,
law, rule, regulation, code, ordinance, order, policy or guideline of any
Governmental Authority, or (ii) any alleged failure by the Company or its
Affiliates to have any permit, license, approval, certification or other
authorization required in connection with the operation of the business of each
of the Company and its Subsidiaries.
Section 3.12. Litigation. Except as set forth in Schedule 3.12 to the
Seller's Knowledge (i) there are no judgments, decrees, lawsuits, actions,
proceedings, claims, complaints, injunctions, orders or investigations by or
before any Governmental Authority pending or threatened against the Company or
its Subsidiaries (x) relating to the Company, any Subsidiary, their respective
businesses, the Proprietary Rights, or any product alleged to have been
manufactured or sold by the Company or any of its Subsidiaries, or (y) seeking
to enjoin the transactions contemplated hereby and (ii) there are no existing
facts or circumstances which reasonably give any reason to believe that any such
action, suit, proceeding, hearing or investigation may be brought or threatened
against the Company or any of its Subsidiaries.
Section 3.13. Undisclosed Liabilities. Other than those specifically
reflected in the 1996 Company Financial Statements (including the notes thereto)
or specifically disclosed in any Schedule to this Agreement, to the Seller's
Knowledge there are no liabilities of the Company or its Subsidiaries of any
kind or nature whatsoever, whether known or unknown, absolute, accrued,
contingent or otherwise, or whether due or to become due, other than liabilities
incurred in the ordinary course of business consistent with past practices since
September 30, 1996, which are liabilities for breach of contract, breach of
warranty, tort, infringement, violation of law, or an environmental liability or
liabilities which individually or in aggregate (if related) exceed $10,000.
Nothing in this Section 3.13 diminishes the extent of or liability under any
other representation or warranty made by the Seller in this Agreement.
Section 3.14. Taxes. (a) Except as set forth on Schedule 3.14, each of
the Company and its Subsidiaries has duly and timely filed all Tax Returns
required to be filed by it, all such Tax Returns have been prepared in
compliance with all applicable laws and regulations and are true, correct and
complete in all material respects. Except as set forth in Schedule 3.14, all
Taxes owed by each of the Company and its Subsidiaries, whether or not shown on
any Tax Return, have been timely paid. The Company and its Subsidiaries have
maintained adequate provision for, and adequate funds to pay, Taxes payable by
the Company and its Subsidiaries as of September 30, 1996, and such provision
and funds (as adjusted for the passage of time through the Closing Date in
accordance with the past custom and practices of each of the Company and its
Subsidiaries in filing its Tax Returns) will be adequate for Taxes payable by
the Company and its Subsidiaries as of the Closing Date. There are no
Encumbrances on any of the assets of the Company or any of its Subsidiaries that
arose in connection with any failure (or alleged failure) to pay any Tax. The
Seller has made available to the Buyer correct and complete copies of (i) the
Seller's federal income Tax Returns for the last five (5) taxable years (to the
extent such returns relate to the Company and its Subsidiaries) or the Company's
and its Subsidiaries' federal income Tax Returns for such periods and the
corresponding balance sheets of the Company and its Subsidiaries as of the end
of such years and (ii) other Tax Returns as requested by the Buyer.
(b) Except as set forth on Schedule 3.14:
(i) each taxable period of the Company and each of its
Subsidiaries either (A) has been audited by the relevant taxing
authority or (B) has closed, so that no further assessment or
collection of Tax may occur and such taxable period is not subject to
review by any relevant taxing authority;
(ii) neither the Company nor any of its Subsidiaries is the
subject of a Tax audit or examination, has consented to extend the
time, or is the beneficiary of any extension of time, in which any Tax
may be assessed or collected by any taxing authority;
(iii) neither the Company nor any of its Subsidiaries has
received, or expects to receive, from any taxing authority any written
notice of proposed adjustment, deficiency, underpayment of Taxes or any
other such notice which has not been satisfied by payment or been
withdrawn, and no claims have been asserted relating to such Taxes
against the Company or any such Subsidiary;
(iv) the Company and each of its Subsidiaries has withheld and
paid all required Taxes in connection with amounts paid or owing to any
employee, independent contractor, creditor, stockholder, or other
similar third party;
(v) neither the Company nor any of its Subsidiaries has filed a
consent to the application of Section 341(f) of the Code;
(vi) neither the Company nor any of its Subsidiaries will be
required, as a result of (A) a change in accounting method for a Tax
period beginning on or before the Closing Date, to include any
adjustment under Section 481(c) of the Code (or any corresponding
provision of state, local or foreign Tax law) in taxable income for any
Tax period beginning on or after the Closing Date, or (B) any "closing
agreement," as described in Section 7121 of the Code (or any
corresponding provision of state, local or foreign Tax law), to include
any item or income in or exclude any item of deduction from any Tax
period beginning on or after the Closing Date;
(vii) each of the Company and its Subsidiaries has disclosed on
its income Tax Returns all positions taken therein that could give rise
to an accuracy-related penalty under Section 6662 of the Code (or any
corresponding provision of Tax law);
(viii) neither the Company nor any of its Subsidiaries has made
any payments, is obligated to make any payments, or is a party to any
agreement that under certain circumstances could obligate it to make
any payments that will not be deductible under Section 280G or Section
162(m) of the Code;
(ix) no claim has ever been made by a taxing authority in a
jurisdiction where any of the Company or its Subsidiaries does not pay
Taxes or file Tax Returns that such entity is or may be subject to
Taxes assessed by such jurisdiction;
(x) neither the Company nor any of its Subsidiaries has been a
United States real property holding corporation within the meaning of
Code Section 897(c)(2) during the applicable period specified in Code
Section 897(c)(1)(A)(ii);
(xi) neither the Company nor any of its Subsidiaries is a party to
any Tax allocation or sharing agreement; and
(xii) neither the Company nor any of its Subsidiaries (A) has been
a member of an affiliated group filing a consolidated federal income
Tax Return (other than a group the common parent of which was the
Seller) or (B) has any liability for the Taxes of any Person (other
than the Company and its Subsidiaries) under Treas. Reg. ss.1.1502-6
(or any similar provision of state, local, or foreign law), as a
transferee or successor, by contract, or otherwise.
Section 3.15. Environmental and Safety Matters. Except as set forth on
Schedule 3.15, to the Seller's Knowledge (a) the Company and its Subsidiaries
have complied and are in compliance in all material respects with all
Environmental and Safety Requirements; (b) without limiting the generality of
the foregoing, the Company and its Subsidiaries have obtained and complied with,
and are in compliance in all material respects with, all permits, licenses and
other authorizations that may be required pursuant to Environmental and Safety
Requirements for the occupation of their respective facilities and the operation
of their respective businesses, and all such permits, licenses and
authorizations may be relied upon by Buyer for the lawful operation of such
businesses and facilities on and after the Closing without transfer, reissuance
or other governmental action; a list of all such permits, licenses and other
authorizations is set forth on the attached Schedule 3.15; (c) neither the
Company nor its Subsidiaries have received any unresolved written or oral
notice, report or other information regarding any actual or alleged violation of
Environmental and Safety Requirements or any liabilities or potential
liabilities (whether accrued, absolute, contingent, unliquidated or otherwise),
including any investigatory, remedial or corrective obligations, relating to
their respective businesses or Facilities and arising under Environmental and
Safety Requirements; (d) none of the following exists at any property or
facility owned by the Company or its Subsidiaries or at any Leased Property (as
defined in Section 3.22) operated by the Company or its Subsidiaries: (i)
underground storage tanks; (ii) asbestos-containing material in any form or
condition; (iii) materials or equipment containing polychlorinated biphenyls; or
(iv) landfills, surface impoundments, or disposal areas; (e) neither the Company
nor any of its Subsidiaries has treated, stored, disposed of, arranged for or
permitted the disposal of, transported, handled, or released any substance,
including without limitation any hazardous substance, or owned or leased any
property or facility (and no such property or facility is contaminated by any
such substance) in a manner that has given or would give rise to liabilities,
including any material liability for response costs, corrective action costs,
personal injury, property damage, natural resources damages or attorney fees, or
any investigative, corrective or remedial obligations, pursuant to the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended ("CERCLA") or the Solid Waste Disposal Act, as amended ("SWDA") or any
other Environmental and Safety Requirements; (f) neither this Agreement nor the
consummation of the transaction that is the subject of this Agreement will
result in any obligations for site investigation or cleanup, or notification to
or consent of government agencies or third parties, pursuant to any of the
so-called "transaction-triggered" or "responsible property transfer"
Environmental and Safety Requirements; (g) neither the Company nor any of its
Subsidiaries has, either expressly or by operation of law, assumed or undertaken
any liability, including without limitation any obligation for corrective or
remedial action, of any other person relating to Environmental and Safety
Requirements.
Section 3.16. Employee Matters. (a) Schedule 3.16 contains a true and
complete list as of September 30, 1996 of (i) the employees currently employed
by the Company and its Subsidiaries having an annual base salary as of November
1, 1996 of $50,000 (or its equivalent in foreign currency) or more, indicating
the title of and a description of any agreements concerning such employees ,
(ii) the rate of all current compensation payable by the Company or its
Subsidiaries to each such employee and (iii) the directors of each of the
Company and its Subsidiaries.
(b) Except as set forth on Schedule 3.16 or 3.17, (i) neither the
Company nor any of its Subsidiaries has entered into any collective bargaining
agreements with respect to the employees, 3.11.16.11.0.5. there are no written
personnel policies applicable to the employees generally, other than employee
manuals, true and complete copies of which have previously been provided to the
Buyer, (ii) there is no labor strike, dispute, slowdown or work stoppage or
lockout pending or, to the Company's best knowledge after due investigation,
threatened against or affecting the Company or any of its Subsidiaries and
during the past two years there has been no such action, (iii) to the Company's
best knowledge after due investigation, no union organization campaign is in
progress with respect to any of the employees, and no question concerning
representation exists respecting such employees, (iv) there is no unfair labor
practice, charge or complaint pending or, to the Company's best knowledge after
due investigation, threatened against the Company or any Subsidiary of it, and
(v) neither the Company nor any Subsidiary has entered into any agreement,
arrangement or understanding restricting its ability to terminate the employment
of any or all of its employees at any time, for any lawful or no reason, without
penalty or liability other than unemployment compensation assessed by a
Governmental Authority. Neither the Company nor any Subsidiary of it has engaged
in any plant closing or employee layoff activities within the last two (2) years
that would violate or in any way implicate the Worker Adjustment Retraining and
Notification ("WARN") Act of 1988, as amended, or any similar state or local
plant closing or mass layoff statute, rule or regulation.
Section 3.17. Employee Benefit Plans. (a) Schedule 3.17 lists all
bonus, deferred compensation, pension, retirement, profit-sharing, thrift,
savings, employee stock ownership, stock bonus, stock purchase, restricted stock
and stock option plans, all employment or severance contracts, health and
medical insurance plans, life insurance and disability insurance plans and other
employee benefit plans, policy contracts, agreements or arrangements, whether
written or, if material, oral, which cover employees or former employees of the
Company and its Subsidiaries or with respect to which the Company or any of its
Subsidiaries has any material actual or potential liability, including, but not
limited to, "employee benefit plans" within the meaning of Section 3(3) of ERISA
(the "Employee Benefit Plans"). No Employee Benefit Plan is a multiemployer plan
(as defined in Section 4001(a)(3) of ERISA), and, except as set forth in
Schedule 3.17, no Employee Benefit Plan provides health or other welfare
benefits to former employees other than in compliance with Part 6 of Title I of
ERISA or Section 4980B of the Code or similar State law ("COBRA").
(b) Each Employee Benefit Plan has been maintained and administered in
compliance in all material respects with the applicable provisions of ERISA, the
Code and any other laws (including compliance with all reporting and disclosure
obligations). Each Employee Benefit Plan which is intended to be qualified under
Section 401(a) of the Code has received a favorable determination letter that it
is so qualified (which favorable determination letter covers changes mandated by
the Tax Reform Act of 1986 and subsequent related regulations) and none of the
Company or its Subsidiaries is aware of any facts of circumstances which could
adversely affect any of such favorable determination letters.
(c) No liability under Subtitle C or D of Title IV of ERISA has been or
is expected to be incurred by the Company or any Subsidiary with respect to any
ongoing, frozen or terminated "single-employer plan", within the meaning of
Section 4001(a)(15) of ERISA, currently or formerly maintained or contributed to
by any of them. Except as disclosed on Schedule 3.17, the fair market value of
the assets of each single-employer plan equals or exceeds the accrued benefit
liabilities thereunder. With respect to each Employee Benefit Plan which is an
employee pension benefit plan (as defined in Section 3(2) of ERISA), all
required contributions which are due for all periods ending prior to or as of
the Closing Date will have been made, all such contributions which are not due
as of the Closing Date have been properly accrued, and none of the Company or
any of its Subsidiaries has incurred any funding deficiency (as defined in
ERISA). With respect to each other Employee Benefit Plan, all contributions,
premiums or other payments which are due have been made or, if not due as of the
Closing Date, have been properly accrued. With respect to each Employee Benefit
Plan which is maintained pursuant to Section 401(k) of the Code, the Company and
each of its Subsidiaries contribute all employee pre-tax contributions to the
appropriate trust within the time required by applicable law and regulations.
(d) The Company and each of its Subsidiaries has complied with the
requirements of COBRA.
(e) None of the Company, any Subsidiary of it or, to the Company's best
knowledge, any other Person has engaged in any transaction with respect to any
Employee Benefit Plan which could subject the Company or any of its Subsidiaries
to any Tax or penalty (civil or otherwise) imposed by ERISA, the Code or other
applicable law. No actions, suits, investigations or claims with respect to the
Employee Benefit Plans (other than routine claims for benefits) are pending or
to the Company's best knowledge, threatened and none of the Company or any of
its Subsidiaries has any knowledge of any facts which could give rise to or be
reasonably expected to give rise to any such actions, suits or claims.
(f) No liability to the Pension Benefit Guaranty Corporation ("PBGC")
(except for routine payment of premiums) has been or is expected to be incurred
with respect to any Employee Benefit Plan that is subject to Title IV of ERISA,
no reportable event within the meaning of Section 4043 of ERISA has occurred
with respect to any such Employee Benefit Plan and the PBGC has not commenced or
threatened to commence the termination of any Employee Benefit Plan. None of the
assets of the Company or any of its Subsidiaries is the subject of any
Encumbrance arising under Section 302(f) of ERISA or Section 412(n) of the Code,
neither the Company nor any of its Subsidiaries has been required to post any
security under Section 307 of ERISA of Section 401(a)(29) of the Code, and none
of the Company or any of its Subsidiaries has any knowledge of any facts which
could reasonably be expected to give rise to such Encumbrance or such posting of
security.
(g) Except as disclosed above, none of the Company or any of its
Subsidiaries has any actual or potential liability with respect to any employee
pension or welfare benefit plan which is maintained or sponsored by a member of
the controlled group of companies (within the meaning of Section 414 of the
Code) that includes the Company or any of its Subsidiaries.
Section 3.18. Proprietary Rights. Except as set forth in Schedule 3.18,
the Company and its Subsidiaries own and possess all right, title and interest
in, free and clear of all Encumbrances, or have a valid, enforceable and
effective written license to use, all patents, patent registrations, patent
applications, trademarks, service marks, trademark and service xxxx
registrations and applications therefor, and all goodwill associated therewith,
copyrights, copyright registrations, copyright applications, mask works, trade
names, corporate names, trade dress, technology, inventions, computer software,
data and documentation (including electronic media), product drawings, trade
secrets, know-how, customer lists, processes, and all other intellectual
property and proprietary information or rights used in, necessary for, or
developed by the Company, any of its Subsidiaries or any of their respective
employees in the course of, the operation of the business of the Company and its
Subsidiaries as presently conducted (collectively, the "Proprietary Rights").
Schedule 3.18 contains a complete and accurate list of (i) all patented and
registered Proprietary Rights; (ii) all pending patent applications and
applications for the registration of other Proprietary Rights; (iii) all
material unregistered trademarks and copyrights included among the Proprietary
Rights; (iv) all trade and corporate names owned or used by the Company or any
of its Subsidiaries; (v) all computer software (other than mass-marketed
software) owned or used by the Company or any Subsidiary and (vi) all licenses
or other agreements to or from third parties regarding any of the Proprietary
Rights. Except as set forth in Schedule 3.18, to the Seller's Knowledge, there
is not pending or threatened against the Company or any of its Subsidiaries any
claim by any third party contesting the validity, enforceability, use or
ownership of any Proprietary Right, and, to the knowledge of the Company or any
of its Subsidiaries, there are no grounds for any such claim. Except as set
forth in Schedule 3.18, neither the Company nor any of its Subsidiaries has
received any notice of, nor is aware of any facts which indicate a likelihood
of, any infringement or misappropriation by, or conflict with, any third party
with respect to any of the Proprietary Rights not disposed of or resolved
without liability to the Company or any of its Subsidiaries prior to the Closing
Date. The Company and its Subsidiaries are not aware of any infringement,
misappropriation or conflict with any proprietary rights of any Person which has
occurred or will occur as a result of continued operation of the business of the
Company and its Subsidiaries as presently conducted. Except as noted on Schedule
3.18 there is no individual Proprietary Right the loss or expiration of which
would cause a Material Adverse Change in the business of the Company or any of
its Subsidiaries. All Proprietary Rights owned or used by the Company and its
Subsidiaries prior to the Closing Date, including all pending patent
applications and license agreements set forth in Schedule 3.18, will be owned or
available for use on identical terms and conditions immediately after the
Closing Date.
Section 3.19. Contracts. (a) Schedule 3.19 lists all contracts (except
for usual and ordinary purchase orders and customer contracts executed in the
normal course of business and contracts specifically described on other
Schedules to this Agreement), agreements, leases, commitments, instruments,
plans, permits or licenses, whether written or oral, to which the Company or any
of its Subsidiaries is a party or is otherwise bound, of the type described
below (the "Contracts"):
(i) all agreements or commitments for the purchase by the Company
and its Subsidiaries of machinery, equipment or other personal property
other than those that are for amounts not to exceed $5,000;
(ii) all capitalized leases, pledges, conditional sale or title
retention agreements involving the payment of more than $5,000;
(iii) all employment agreements and commitments, all consulting or
severance agreements or arrangements and all other agreements between
the Company or any of its Subsidiaries and any Affiliate of the Company
or such Subsidiary or any officer, director or employee of the Company
or such Subsidiary;
(iv) all agreements relating to the consignment or lease of
personal property (whether the Company or any of its Subsidiaries is
lessee, sublessee, lessor or sublessor), other than such agreements
that provide for annual payments of less than $5,000;
(v) all distribution agreements pursuant to which the Company's
and its Subsidiaries' products are distributed by the Seller or other
Person or pursuant to which any of the Company and its Subsidiaries
distributes the products of the Seller or other Person;
(vi) all license, royalty or other agreements relating to the
Proprietary Rights;
(vii) all agreements containing commitments of suretyship,
guarantee or indemnification (except for guarantees, warranties and
indemnities provided by the Company or any of its Subsidiaries in the
ordinary course of business and those having a contract value in the
aggregate of $5,000 or less);
(viii) all agreements prohibiting the Company or any of its
Subsidiaries from freely engaging in the business presently conducted
by the Company and its Subsidiaries in any geographic area;
(ix) any agreement other than those covered by clauses (i) through
(viii) above involving payment or receipt of more than $25,000 in the
aggregate in any calendar year; and
(x) any agreement other than those covered by clauses (i) through
(viii) involving non-competition agreements or nondisclosure covenants
intended to protect the Proprietary Rights of the Company and its
Subsidiaries.
(b) None of the other parties to any such Contract has given written
notice to the Company or any of its Subsidiaries that it intends to terminate or
materially alter the provisions of such Contracts either as a result of
transactions contemplated hereby or otherwise, except as disclosed in Schedule
3.19, and neither the Company nor any of its Subsidiaries has given notice to
any other party to any such Contract that it intends to terminate or materially
alter the provisions of any such Contract. Except as set forth in Schedule 3.19
all Contracts, including all license agreements and distribution agreements set
forth in Schedule 3.19, will continue to be legal, valid, binding, enforceable,
and in full force and effect on identical terms following the Closing and the
consummation of the transactions contemplated hereby.
(c) Except as set forth in Schedule 3.19 neither the Company nor any of
its Subsidiaries has received notice that it is in, nor has either the Company
or any of its Subsidiaries given notice of, any default or claimed, purported or
alleged default, and neither the Company nor any of its Subsidiaries is aware of
any facts that, with notice or lapse of time, or both, would constitute a
default (or give rise to a termination right) on the part of any party in the
performance of any obligation to be performed under any of the Contracts.
(d) True and complete copies of all written Contracts (other than the
BASF Contracts with respect to which certain pricing information was withheld)
including any amendments thereto, have been delivered to the Buyer and such
documents constitute the legal, valid and binding obligation of the Company or
any of its Subsidiaries party thereto and, to the Company's best knowledge, each
other party purportedly obligated thereunder.
(e) Except as specifically set forth in Schedules 3.16 or 3.19, neither
the Company nor any of its Subsidiaries is a party to any contract, agreement or
understanding which contains a "change in control," "potential change in
control" or similar provision.
Section 3.20. Books and Records. The stock records of the Company and
its Subsidiaries fairly and accurately reflect in all material respects the
record ownership of all of the outstanding shares of the Company's and its
Subsidiaries' capital stock. The other books and records of the Company and its
Subsidiaries, including financial records and books of account, are complete and
accurate in all material respects.
Section 3.21. Insurance. Schedule 3.21 contains an accurate and
complete list of all policies of fire, liability, workmen's compensation and
other forms of insurance held by or providing coverage to the Company and its
Subsidiaries. Each of such policies is issued, valid, existing and binding and
will terminate at Closing except as noted in Schedule 3.21.
Section 3.22. Real Property. (a) Schedule 3.22 sets forth a legal
description of each parcel of real property owned, in whole or in part, by the
Company or any of its Subsidiaries (the "Owned Property"). Schedule 3.22 also
sets forth a list of all leases or other agreements for occupancy, including all
amendments, extensions and other modifications (the "Leases") for real property
(the "Leased Property"; the "Owned Property" and the "Leased Property"
collectively the "Real Property") to which the Company or any of its
Subsidiaries is a party. The Real Property constitutes all of the real property
owned, leased or occupied in connection with the business of the Company and its
Subsidiaries and used and useful to conduct such business in the ordinary course
consistent with past custom and practice as at September 30, 1996 and at the
date hereof.
(b) The Company or one of its Subsidiaries, as applicable, has good and
marketable fee simple title to each Owned Property and a good and valid
leasehold interest in each Leased Property, in each case, free and clear of all
Encumbrances except as is set forth on Schedule 3.22, in the title reports
referred to in Section 6.2(i) or in the Leases (the "Permitted Encumbrances").
The Company has delivered to the Buyer true and complete copies of all Permitted
Encumbrances referred to in Schedule 3.22.
(c) Each Lease is in full force and effect and is enforceable against
the landlord which is a party thereto in accordance with its terms. There exists
no default or event of default or any event which, with the giving of notice,
the passage of time or both could result in a default or event of default under
any Lease on the part of the Company or any of its Subsidiaries. The Seller has
delivered to Buyer true and complete copies of all Leases. Other than the
Company and its Subsidiaries, there are no parties in possession or parties
having any rights to occupy any of the Real Property except as described in
Schedule 3.22.
(d) The Real Property is in good condition and repair in all material
respects. There exist no pending or threatened condemnation proceedings of or
relating to the Owned Property or any part thereof. There exist no outstanding
options or rights of first refusal to purchase the Owned Property or any portion
thereof or any rights or interests therein. The Owned Property and all plants,
buildings and improvements located thereon conform to all applicable building,
zoning and other laws, ordinances, rules and regulations. All material permits,
licenses and other approvals necessary to the current occupancy and use by the
Company or any Subsidiary as owner or lessee of the Owned Property have been
obtained, are in full force and effect and are not subject to any uncured
violation. There exists no violation of any covenant, condition, restriction,
easement, agreement or order affecting any portion of the Owned Property. All
improvements located on the Owned Property have direct access to a public road
adjoining such Owned Property. No such improvements or accessways encroach on
land not included in the Owned Property and no such improvement is dependent for
its access, operation or utility on any land, building or other improvement not
included in the Owned Property.
Section 3.23. Transaction With Affiliates. Except as set forth on
Schedule 3.23, none of the Seller, the Seller's officers, directors nor their
relatives nor any of their respective Affiliates is involved in any business
arrangement or relationship with the Company or its Subsidiaries (whether
written or oral) which will survive the Closing, and none of the Seller's
Affiliates (other than the Company or its Subsidiaries) owns any property or
right, tangible or intangible, which is used by the Company or its Subsidiaries.
Section 3.24. Accounts Receivable. Except as listed on Schedule 3.24
hereto, all accounts and notes receivable of the Company and its Subsidiaries
reflected on the 1996 Company Financial Statements, and all accounts and notes
receivable arising subsequent to the date of the 1996 Company Financial
Statements, in each case, have arisen in the ordinary course of business
consistent with past custom and practice.
Section 3.25. Inventory. The inventory stocks of the Company and its
Subsidiaries held on account of the Company and its Subsidiaries to the extent
reflected on the 1996 Company Financial Statements are or were, prior to the
sale thereof, in good and merchantable condition, and suitable and usable or
salable in the ordinary course of business for the purposes for which intended
subject only to the reserve for inventory write-down reflected on the 1996
Company Financial Statements as adjusted for the passage of time through the
Closing Date in accordance with past custom and practice in the preparation of
the Company's annual financial statements.
Section 3.26. Product Warranty. Substantially all of the products
manufactured, sold, leased, and delivered by the Company and its Subsidiaries
have conformed in all material respects with all applicable contractual
commitments and all express and implied warranties, and none of the Company and
its Subsidiaries has any material liability (whether known or unknown, absolute,
accrued, contingent or otherwise, or whether due or to become due) for
replacement or repair thereof or other damages in connection therewith, subject
only to the reserve for product warranty claims set forth on the face of (rather
than in any notes thereto) the most recent balance sheet included in the 1996
Company Financial Statements, as adjusted for operations and transactions
through the Closing Date in accordance with past custom and practice of the
Company and its Subsidiaries in the preparation of the Company's annual
financial statements.
Section 3.27. Sufficiency of Assets. The assets currently owned by the
Company or any of its Subsidiaries, or leased by the Company or any such
Subsidiary pursuant to any lease agreement entered into in the ordinary course
of business or otherwise disclosed to the Buyer, constitute all of the assets
used and useful to conduct the business of the Company and its Subsidiaries in
the ordinary course and consistent with past custom and practice as at September
30, 1996 and at the date hereof. Each such asset has been maintained in
accordance with normal industry practice, is in good operating condition and
repair (subject to normal wear and tear), and is suitable for the purposes for
which it presently is used.
Section 3.28. Brokers. Except as set forth on Schedule 3.28, no Person
is or will be entitled to a broker's, finder's, investment banker's, financial
adviser's or similar fee from the Company or any of its Subsidiaries in
connection with this Agreement or any of the transactions contemplated hereby.
Section 3.29. Accuracy of Representations. No representation or
warranty made by the Seller in this Agreement or any document delivered, or to
be delivered, by or on behalf of the Seller pursuant hereto contains or, as of
the Closing Date, will contain any untrue statement of a material fact or omits
or, as of the Closing Date, will omit to state a material fact necessary to make
the statements contained herein or therein not misleading; provided, that the
Seller may submit, at any time up to the end of the Business Day two Business
Days prior to the Closing Date, revised versions of the Schedules referred to in
this Section 3, which shall amend the relevant Schedule only upon being accepted
by the Buyer in writing. The Buyer acknowledges that its sole remedy for any
breach of a representation or warranty caused by the Buyer's refusal to accept
an amended Schedule shall be termination of this Agreement in accordance with
Section 7.1(c).
ARTICLE IV - Representations and Warranties of the Buyer
The Buyer represents and warrants to the Seller as follows. Each of the
following representations and warranties will be deemed repeated by the Buyer on
the Closing Date by reference to the facts and circumstances then existing.
Section 4.1. Organization. The Buyer is a corporation duly organized,
validly existing and in good standing under the laws of its jurisdiction of
incorporation and has the corporate power and authority to own or lease its
property and assets and to carry on its business as presently conducted.
Section 4.2. Authorization. The Buyer has the corporate power and
authority to execute and deliver this Agreement and each other agreement or
instrument to be executed in connection herewith and to perform its obligations
hereunder and thereunder, all of which have been duly authorized by all
requisite corporate action. This Agreement and each other agreement or
instrument to be executed in connection herewith has been duly authorized,
executed and delivered by the Buyer and constitutes a valid and binding
agreement of the Buyer, enforceable against the Buyer in accordance with its
terms.
Section 4.3. Non-contravention. Neither the execution, delivery and
performance by the Buyer of this Agreement nor the consummation of the
transactions contemplated hereby will (i) contravene any provision contained in
its certificate of incorporation or by-laws, or (ii) conflict with, violate or
result in a material breach (with or without the lapse of time, the giving of
notice or both) of or constitute a material default (with or without the lapse
of time, the giving of notice or both) under (A) any contract, agreement,
commitment, indenture, mortgage, lease, pledge, note, bond, license, permit or
other instrument or obligation or (B) any judgment, order, decree, statute, law,
rule or regulation or other restriction of any Governmental Authority, in each
case to which the Buyer is a party or by which it is bound or to which any of
its assets or properties are subject. The Buyer has previously delivered to the
Seller true and complete copies of its certificate of incorporation (and all
amendments thereto) and by-laws (as currently in effect).
Section 4.4. No Consents. Except for (i) filings and approvals as
required by the HSR Act and (ii) those set forth in Schedule 4.4 or referred to
in Section 6.2(g), no notice to, filing with, or authorization, registration,
consent or approval of any Governmental Authority or other Person is necessary
for the execution, delivery or performance of this Agreement or the consummation
of the transactions contemplated hereby by the Buyer.
ARTICLE V - Covenants and Agreements
Section 5.1 Access and Information. Prior to the Closing, the Buyer
shall be entitled to make or cause to be made such reasonable investigation of
the Company and its Subsidiaries, and the financial, legal and environmental
condition thereof, as the Buyer deems reasonably necessary or advisable, and the
Seller shall cooperate with any such investigation to the extent not limited by
legal or contractual restrictions on disclosure; provided that the Seller shall
make its best efforts to obtain a waiver of any contractual restrictions.
Subject to and in furtherance of the foregoing, but not in limitation thereof,
the Seller shall permit the Buyer, its agents and representatives and the agents
and representative of any prospective financing sources for the transactions
contemplated hereby or cause them to be permitted to have reasonable access to
the management personnel, premises, books and records of the Company and the
Subsidiaries upon reasonable notice during regular business hours and shall
furnish such financial and operating data, business plans, strategic plans and
other data relating to the Company and its Subsidiaries and their respective
businesses as the Buyer shall reasonably request from time to time. No
investigation by the Buyer heretofore or hereafter made shall modify or
otherwise affect any representations and warranties of the Seller, which shall
survive any such investigation, or the conditions to the obligation of the Buyer
to consummate the transactions contemplated hereby.
Section 5.2. Pre-Closing Affirmative Covenants. Prior to the Closing,
except as otherwise expressly provided herein, the Seller shall (with respect to
sub-clauses (e) and (i) only), and shall cause the Company and its Subsidiaries
to:
(a) conduct its business only in the ordinary and regular course of
business wholly consistent with past customs and practices;
(b) use its reasonable best efforts to keep in full force and effect
its corporate existence and all material rights, franchises, Proprietary Rights
and goodwill relating or obtaining to its business;
(c) use its reasonable best efforts to retain its employees and
preserve its present relationships with customers, suppliers, contractors,
distributors and such employees, and continue to compensate such employees
consistent with past practices;
(d) maintain the Proprietary Rights so as not to affect adversely any
registration or application for registration thereof or the validity or
enforcement thereof, maintain its other assets in customary repair, order and
condition and maintain insurance reasonably comparable to that in effect on the
date of this Agreement; and in the event of any casualty, loss or damage to any
of such assets repair or replace such assets with assets of comparable quality
and value;
(e) use its reasonable best efforts to obtain all authorizations,
consents, waivers, approvals or other actions necessary to consummate the
transactions contemplated hereby and to cause the other conditions to the
Buyer's obligation to close to be satisfied;
(f) perform in all material respects all of its obligations under all
notes, bonds, mortgages, indentures, licenses, contracts, agreements or other
instrument or obligation to which the Company or any of its Subsidiaries is a
party or by which any of them or any of their respective properties or assets
may be bound and not enter into, assume or amend any such contract or commitment
other than in the ordinary course of business in accordance with past custom and
practice;
(g) prepare and file all Tax Returns and other Tax reports, filings and
amendments thereto required to be filed by it, on a timely basis; provided, that
the Seller will not file or amend any income Tax returns (except for any returns
amended for the purpose of claiming or amending a claim for foreign tax credits)
without the prior written consent of the Buyer (which will not be unreasonably
withheld) and provided further, that the Seller shall be allowed to cause the
Company's tax period beginning September 14, 1990 through September 30, 1990 to
be included in the Seller's consolidated tax return which includes such period,
if necessary and allowable, to settle a tax dispute of the Seller with the
Internal Revenue Service, as set forth on Schedule 3.14;
(h) maintain insurance policies providing insurance coverage for the
Company and its Subsidiaries of the kinds, in the amounts and against the risks
as are presently provided pursuant to the policies set forth on Schedule 3.21;
and
(i) promptly inform the Buyer in writing of any breach of any
representation or warranty contained in Article III hereof.
Section 5.3. Pre-Closing Negative Covenants. Prior to the Closing,
without the prior written consent of the Buyer or as otherwise expressly
provided herein, the Seller will cause each of the Company and its Subsidiaries
not to:
(a) enter into any contract, agreement or commitment or take any other
action (other than in the ordinary course of business) which, if entered into or
taken prior to the date of this Agreement, would cause any representation or
warranty of the Seller to be untrue in any material respect;
(b) incur, create or suffer to exist any Encumbrance on the Shares;
(c) incur any indebtedness for borrowed money which will not be
reflected in the Adjusted Working Capital shown in the Closing Date Balance
Sheet; and
(d) take or omit to be taken any action, or permit its Affiliates to
take or to omit to take any action, which would result in a Material Adverse
Change.
Section 5.4. Closing Documents. The Seller shall, prior to or on the
Closing Date, execute and deliver, or cause to be executed and delivered to the
Buyer, the documents or instruments described in Section 6.2. The Buyer shall,
prior to or on the Closing Date, execute and deliver, or cause to be executed
and delivered, to the Seller, the documents or instruments described in Section
6.3.
Section 5.5. Best Efforts; Further Assurances. Subject to the terms and
conditions herein provided, each of the parties hereto shall use its
commercially reasonably best efforts to take, or cause to be taken, all action,
and to do, or cause to be done, all things reasonably necessary, proper or
advisable under applicable laws and regulations to consummate and make effective
the transactions contemplated by this Agreement. Each of the Seller and the
Buyer will use their respective commercially reasonable best efforts to obtain
consents of all Governmental Authorities and third parties necessary to the
consummation of the transactions contemplated by this Agreement. All costs
incurred in connection with obtaining such consents shall be borne by the
Seller.
Section 5.6. Third Party Proposals. Neither the Seller, the Company,
any of its Subsidiaries nor any officer, director, employee, agent,
representative or Affiliate of the Seller, the Company and any of its
Subsidiaries shall initiate, solicit, entertain, negotiate, accept or engage in
substantive discussion, directly or indirectly, or encourage inquiries or
proposals (each, an "Acquisition Proposal") with respect to, or furnish any
information relating to or participate in any negotiations or discussions
concerning, or enter into any agreement with respect to, any acquisition or
purchase of all or a substantial portion of the assets of, or of a substantial
equity interest in, the Company or any of its Subsidiaries or any business
combination with the Company or any of its Subsidiaries other than as
contemplated by this Agreement. The Seller shall notify the Buyer immediately if
any Acquisition Proposal is received by, any such information is requested from,
or any such negotiations or discussions are sought to be initiated with, the
Seller, the Company, any of its Subsidiaries or any of their respective
officers, directors, employees, agents, representatives or Affiliates. The
Seller shall, and shall cause its Affiliates to, immediately cease and cause to
be terminated any existing activities, including discussions or negotiations
with any parties, conducted prior to the date hereof with respect to any
Acquisition Proposal. The Seller shall cause its officers, directors, agents,
advisors and Affiliates to comply with the provisions of this Section 5.6.
Section 5.7. Mutual Post-Closing Covenants. Following the
Closing, except as otherwise expressly provided herein, the Parties agree as
follows:
(a) In case at any time after the Closing any further action is
necessary or desirable to carry out the purposes of this Agreement, each of the
Parties will take such further action (including the execution and delivery of
such further instruments and documents by such Party or any of its Affiliates)
as any other Party reasonably may request, at the sole cost and expense of the
requesting Party (unless the requesting Party is entitled to indemnification
therefor under Article VIII below). The Seller acknowledges and agrees that from
and after the Closing the Buyer will be entitled to possession of all documents,
books, records (including Tax records), agreements, and financial data of any
sort relating to any of the Company and its Subsidiaries; provided that copies
of all such documents shall be made available to the Seller from time to time as
the Sellers may reasonably request.
(b) In the event and for so long as any Party actively is contesting or
defending against any action, suit, proceeding, hearing, investigation, charge,
complaint, claim, or demand in connection with (i) any transaction contemplated
under this Agreement or (ii) any fact, situation, circumstance, status,
condition, activity, practice, plan, occurrence, event, incident, action,
failure to act, or transaction on or prior to the Closing Date involving the
Seller, each of the other Parties will cooperate with the contesting or
defending Party and its counsel in the contest or defense, make available its
personnel, and provide such testimony and access to its books and records as
shall be necessary in connection with the contest or defense, all at the sole
cost and expense of the contesting or defending Party (unless the contesting or
defending Party is entitled to indemnification therefor under Article VIII
below).
(c) The Seller will not take any action that is designed or intended to
have the effect of discouraging any lessor, licensor, customer, supplier, or
other business associate of any of the Company and its Subsidiaries from
maintaining the same business relationships with any of the Company and its
Subsidiaries after the Closing as it maintained with any of the Company and its
Subsidiaries prior to the Closing. The Seller will refer all customer inquiries
relating to the business of any of the Company and its Subsidiaries to any of
the Company and its Subsidiaries from and after the Closing.
(d) All information disclosed in writing, whether before or after the
date hereof, pursuant to this Agreement or in connection with the transactions
contemplated by, or the discussions and negotiations preceding, this Agreement
to any other Party (or its representatives) shall be kept confidential by such
other Party and its representatives and shall not be used by any Persons other
than potential financing sources of the Buyer and otherwise as contemplated by
this Agreement, except to the extent that (i) such information is known by the
recipient when received, (ii) such information is or hereafter becomes lawfully
obtainable from other sources, (iii) it is necessary or appropriate to disclose
such information to a Governmental Authority having jurisdiction over the Party
from whom disclosure is sought, (iv) any requirement of law or governmental rule
or regulation requires otherwise, or (v) such duty as to confidentiality is
waived in writing by the other Party. If this Agreement is terminated, each
Party shall use all reasonable best efforts to return upon written request from
any other Party all documents and reproductions (including all compilations,
abstracts, analyses, summaries or other writings in any medium in respect of all
or any part thereof) received by it or its representatives from such other Party
(and, in the case of reproductions, all such reproductions made by the receiving
party) that include information not within the exceptions contained in the first
sentence of this Section 5.9(d), unless the recipients provide assurances
reasonably satisfactory to the requesting party that such documents and
reproductions have been destroyed.
Section 5.8. Tax Matters.
(a) Returns for Periods Through the Closing Date. The Seller will
include the income of the Company and its Subsidiaries (including any deferred
income triggered into income by Treas. Reg. ss.1.1502-13 and Treas. Reg. ss.1.
1502-14 and any excess loss accounts taken into income under Treas. Reg.
ss.1.1502-19) on the Seller's consolidated federal income Tax Returns for all
periods through the Closing Date and pay any federal income Taxes attributable
to such income. The Company and its Subsidiaries will furnish Tax information to
the Seller for inclusion in the Seller's federal consolidated income Tax Return
for the period which includes the Closing Date in accordance with the Company's
past custom and practice. The Seller will allow the Buyer an opportunity to
review and comment upon such Tax Returns (including any amended returns) to the
extent that they relate to the Company and its Subsidiaries. The Seller will
take no position on such returns that relate to the Company and its Subsidiaries
that would adversely affect the Company and its Subsidiaries after the Closing
Date except to the extent allowable by law and consistent with past custom and
practice. The income and any tax credits of the Company and its Subsidiaries
will be apportioned to the period up to and including the Closing Date and the
period after the Closing Date by closing the books of the Company and its
Subsidiaries as of the end of the Closing Date.
(b) Audits. The Seller will allow the Company and its counsel to
participate (at the Company's expense) in any audits of the Seller's
consolidated federal income Tax Returns to the extent that such returns relate
to the Company and its Subsidiaries. The Seller will not settle any such audit
in a manner which would cause the Company and its Subsidiaries to incur an
increase in any liability for Taxes, or would have a material adverse effect on
the Company and its Subsidiaries for any period after the Closing Date.
(c) Tax Refunds. All refunds of Taxes (including interest thereon) with
respect to taxable periods of the Company for which the Seller is responsible
for the payment of liabilities for Taxes which are received by the Company or
credited against liabilities for Taxes of the Company for periods for which the
Seller is not so responsible (or against any other liability for which the
Seller is not responsible) shall be paid in cash by wire transfer of immediately
available funds by Buyer or the Company (as determined by Buyer) to the Seller
promptly after receipt. Amounts paid pursuant to this paragraph (c) shall be
treated as additional Purchase Price for the Shares.
(d) Foreign Sales Corporation. One of the Subsidiaries of the Company
is a foreign sales corporation (FSC) organized in the U.S. Virgin Islands
pursuant to Section 922 of the Code. The Company will determine a commission on
foreign sales in a manner consistent with past practice for the period of the
tax year up to the Closing and will reflect the commission in the Company's
portion of the tax year that will be included in the Seller's consolidated Tax
Return in which the Closing falls. The Company will also cause appropriate tax
deposits to be made on behalf of the FSC related to such commission income. All
parties agree to take the necessary actions both before and after the Closing to
maintain the qualified status of the FSC. The Seller shall reimburse the Company
for (or incur directly) all expenses of meeting this obligation after the
Closing to the extent the Company does not realize a Tax benefit at least equal
to such expenses, as reasonably determined by the Buyer.
(e) Post-Closing Covenants of Buyer. The Buyer agrees that (i) on the
Closing Date, all of the Shares of the Company shall be acquired by a domestic
corporation, (ii) such corporation shall not make an election for the Company
pursuant to Section 338(g) of the Code, and (iii) the Buyer, not the Seller,
shall be responsible for all taxes arising from any sale or disposition of the
assets of the Company or its Subsidiaries in any transaction that is consummated
after the Closing.
Section 5.9. Non-Compete. For a period of five years from and after the
Closing Date, neither the Seller nor any of its Affiliates will engage directly
or indirectly in any business substantially similar to that in which the Company
is presently engaged; provided, however, that ownership of less than 5% of the
outstanding stock of any publicly traded corporation shall not of itself
constitute the owner of such stock as being engaged in any of that corporation's
businesses. Further, neither the Seller nor any of its Affiliates will solicit
the employment or services of any of the employees referred to in Section
3.16(a)(i) during the five year period commencing on the Closing Date. If the
final judgment of a court of competent jurisdiction declares that any term or
provision of this Section 5.11 is invalid or unenforceable, the Parties agree
that the court making the determination of invalidity or unenforceability shall
have the power to reduce the scope, duration, or area of the term or provision,
to delete specific words or phrases, or to replace any invalid or unenforceable
term or provision with a term or provision that is valid and enforceable and
that comes closest to expressing the intention of the invalid or unenforceable
term or provision, and this Agreement shall be enforceable as so modified after
the expiration of the time within which the judgment may be appealed.
Notwithstanding that the parties regard this Section 5.9 as an integral part of
the consideration offered by the Seller to induce the Buyer to enter into this
Agreement, the Buyer and Seller each agree that neither of them will at any time
for any tax, accounting or other purpose make any specific allocation of any
part of the Purchase Price to this Section 5.9.
Section 5.10. Affiliate Transactions. The Seller shall cause all trade
payables, principal, interest, premiums, fees, expenses, and other obligations
of any nature, of the Company or any of its Subsidiaries to the Seller or any of
its Affiliates (including all obligations arising under any consulting
agreements or any other agreement between the Company or any of its Subsidiaries
and the Seller or any of its Affiliates but excluding the Surviving Agreements)
to be paid in full and satisfied as of the Closing Date.
Section 5.11. Interim Financials. During the period commencing on the
date hereof and ending on the Closing Date, the Seller shall deliver to the
Buyer, with respect to the last month end in such period, an unaudited interim
consolidated balance sheet of the Company and its Subsidiaries and related
statements of income for the portion of the fiscal year then ended.
Section 5.12 Employee Benefits.
(a) Defined Contribution Plan. Effective as of the Closing Date,
employees of the Company and its Subsidiaries (the "Transferred Employees")
shall cease participation in the "Xxx Enterprises, Incorporated Employees'
Retirement Account Plan" (the "Seller's 401(k) Plan"), and the Seller shall
cause the Transferred Employees to be fully vested in their account balances
thereunder. The Seller shall make a contribution to the Seller's 401(k) Plan of
the amounts of any salary reduction contributions, employer matching
contributions, and profit-sharing contributions attributable to or payable on
account of any Transferred Employee under the terms of the Seller's 401(k) Plan
for any time period ending on the Closing Date within the time period prescribed
by law or the terms of the Seller's 401(k) Plan.
(b) Welfare Benefit Plans. Effective as of the Closing Date, the
Transferred Employees shall cease being covered under the Employee Benefit Plans
that are "employee welfare benefit plans" (as such term is defined in Section
3(1) of ERISA) (collectively, the "Welfare Plans"). On and after the Closing
Date, the Seller shall retain and have sole responsibility for: (i) all
liabilities under the Welfare Plans for any unpaid claims incurred but not
reported thereunder prior to the Closing Date by the Transferred Employees (and
the dependents of the Transferred Employees); (ii) all liabilities, obligations
and commitments arising under Part 6 of Subtitle B of Title I of ERISA and
Section 4980B of the Code relating to any "qualifying event" (as such term is
defined in Section 603 of ERISA) occurring with respect to any employee of the
Company or its Subsidiaries at any time prior to the Closing Date; (iii) all
liabilities, obligations and commitments for any post-retirement medical, dental
or life insurance coverage for any individuals (and the dependents of such
individuals) who are or have been participants in the Welfare Benefit Plans at
any time on or prior to the Closing Date to the extent such individuals (or
dependents) are entitled thereto under the terms of the Welfare Benefit Plans;
and (iv) all liabilities, obligations and commitments for the payment of any
life and disability insurance benefits to all employees and former employees of
the Company and its Subsidiaries (other than the Transferred Employees) who,
immediately prior to the Closing Date, are receiving or entitled to receive any
such benefits under the Welfare Benefit Plans.
ARTICLE VI - Conditions to Closing
Section 6.1. Mutual Conditions. The respective obligations of each
party to consummate the transactions contemplated by this Agreement shall be
subject to the fulfillment at or prior to the Closing of the following
conditions:
(a) No Governmental Authority of competent jurisdiction shall have (i)
enacted, issued, promulgated, enforced or entered any statute, rule, regulation,
judgment, decree, injunction or other order which is in effect or (ii) commenced
or overtly threatened any action or proceeding, which in either case would
prohibit consummation of the transactions contemplated by this Agreement.
(b) All material consents, authorizations, orders or approvals of, and
filings or registrations with, any Governmental Authority (other than as
required with respect to any Contract) which are required in connection with the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby shall have been obtained or made and shall be
in full force and effect.
Section 6.2. Conditions to the Obligations of the Buyer. The
obligations of the Buyer to consummate the transactions contemplated by this
Agreement shall be subject to the fulfillment prior to or at the Closing of each
of the following conditions:
(a) All representations and warranties made by the Seller in this
Agreement and the Schedules hereto shall be true, correct and complete in all
material respects on the date hereof and as of the Closing Date (by reference to
the Schedules hereto as amended pursuant to Section 3.29), and the Seller shall
have duly performed or complied with, in all material respects, all of the
covenants, obligations and conditions to be performed or complied with by it
under the terms of this Agreement on or prior to or at Closing.
(b) There shall have been no Material Adverse Change since the date of
the 1996 Company Financial Statements.
(c) Prior to or at the Closing, the Seller shall have delivered the
following closing documents in form and substance reasonably acceptable to the
Buyer's counsel:
(i) a certificate of the President or a Vice President of the
Seller, dated the Closing Date, to the effect that (1) the Person
signing such certificate is familiar with this Agreement and (2) the
conditions specified in Section 6.2(a) and (b) have been satisfied;
(ii) a certificate of the Secretary or Assistant Secretary of the
Seller, dated the Closing Date, as to the incumbency of any officer of
the Seller executing this Agreement or any document related thereto and
covering such other matters as the Buyer may reasonably request;
(iii) a certified copy of the resolutions of the Seller's Board of
Directors authorizing the execution, delivery and consummation of this
Agreement and the transactions contemplated hereby;
(iv) copies of, or other proof in a form acceptable to the Buyer,
all authorizations, registrations, consents and approvals as necessary
for the execution, delivery or performance of this Agreement or the
consummation of the transactions contemplated hereby by the Buyer; and
(v) such other documents or instruments as the Buyer reasonably
requests to effect the transactions contemplated hereby.
(d) The Buyer shall have received an opinion of Lane & Xxxxxxxx, dated
the Closing Date, in a form approved by the Buyer's counsel.
(e) The Buyer shall have received the cash proceeds of financings in an
amount necessary to consummate the purchase of the Shares and the other
transactions contemplated hereby and to pay all fees and expenses in connection
therewith and to provide adequate working capital, all on terms and conditions
satisfactory to the Buyer.
(f) All material consents of any Person under any Contract which are
required in connection with the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby shall have been obtained or
made and shall be in full force and effect.
(g) A title insurance company selected by Buyer (the "Title Company")
shall be willing to insure at standard rates the Company's or the applicable
Subsidiary's marketable title in and to the Owned Property in fee simple, the
Company's leasehold estate in any financable Leased Property (a "Financable
Leasehold") and Lender's mortgage lien on the Owned Property and each Financable
Leasehold free and clear of all Encumbrances other than the Permitted
Encumbrances, including such endorsements and affirmative coverages as Buyer and
Lender shall reasonably require including without limitation non-imputation
endorsements. Seller shall provide all such affidavits and indemnities as the
Title Company reasonably shall require in order to afford such coverages.
(h) The Buyer shall have received a survey of each Owned Property and
each Leased Property to which the Company holds a Financable Leasehold
conforming to the Minimum Standard Detail Requirements jointly established and
approved in 1992 by ALTA and ACSM certified to the Company, Lender and the Title
Company and showing no defects, encroachments or encumbrances other than other
than the matters disclosed on Schedule 3.22.
(i) All Real Property shall be in substantially the same condition and
repair as that on the date of this Agreement, reasonable wear and tear excepted.
(j) The Buyer shall have received from each landlord under a Lease an
estoppel certificate in form and substance satisfactory to Buyer and Lender
shall have received from each landlord under a Lease designated by Lender an
agreement regarding the subordination to Lender of such landlord's lien against
personal property on the applicable demised premises and such other matters as
Lender reasonably may require.
(k) The Seller shall have timely paid any and all real property
transfer, transfer gains, recording stamp and other similar taxes, if any,
assessed in connection with the transactions contemplated by this Agreement and
shall have delivered evidence satisfactory to Buyer and the Title Company of the
payment of such taxes.
(l) The Buyer shall have received from the Seller an affidavit (1)
stating that the Seller is not a "foreign person", as defined in Section
1445(f)(3) of the Internal Revenue Code, (2) setting forth the Seller's taxpayer
identification number, and (3) granting the Buyer permission to furnish a copy
of such affidavit to the Internal Revenue Service.
(m) The Buyer shall have received from Seller a Transition Services
Agreement in the form attached as Exhibit 6.2(m) duly executed by the Seller,
and such agreement shall be in full force and effect.
Section 6.3. Conditions to the Obligations of the Seller. The
obligations of the Seller to consummate the transactions contemplated by this
Agreement shall be subject to the fulfillment at or prior to the Closing of each
of the following conditions:
(a) All representations and warranties made by the Buyer in this
Agreement shall be true, correct and complete in all material respects on the
date hereof and as of the Closing Date as though such representations and
warranties were made as of the Closing Date (or on the date when made in the
case of any representation or warranty which specifically relates to an earlier
date), and the Buyer shall have duly performed or complied with, in all material
respects, all of the covenants, obligations and conditions to be performed or
complied with by each of them under the terms of this Agreement on or prior to
or at the Closing.
(b) Prior to or at the Closing, the Buyer shall have delivered to the
Seller the following closing documents in form and substance reasonably
acceptable to its counsel:
(i) certificates of the President or a Vice President of the
Buyer, dated the Closing Date, to the effect that (1) the Person
signing such certificate is familiar with this Agreement and (2) the
conditions specified in Section 6.3(a) have been satisfied;
(ii) certificates of the Secretary or Assistant Secretary of the
Buyer, dated the Closing Date, as to the incumbency of any officer of
the Buyer, executing this Agreement or any document related thereto and
covering such other matters as the Seller may reasonably request; and
(iii) certified copies of the resolutions of the Buyer's Board of
Directors authorizing the execution, delivery and consummation of this
Agreement and the transactions contemplated hereby and thereby.
(c) The Seller shall have received an opinion of Xxxxxxxx & Xxxxx dated
the Closing Date, in form approved by the Seller's counsel.
(d) The Seller shall have received from the Company a Plate Supply
Agreement in the form attached as Exhibit 6.3(d) duly executed by the Company,
and such agreement shall be in full force and effect.
ARTICLE VII - Termination, Amendment and Waiver
Section 7.1. Termination. This Agreement may be terminated at
any time prior to the Closing Date:
(a) by mutual written consent of the Seller and Buyer;
(b) by either the Seller or Buyer, if the purchase of the Shares
hereunder shall not have been consummated on or before January 31, 1997; or
(c) as provided in Section 3.29.
Section 7.2. Effect of Termination. If this Agreement is terminated
pursuant to Section 7.1 hereof, all rights and obligations of the parties
hereunder shall terminate and no Party shall have any liability to the other
Party, except for obligations of the Parties in Sections 5.7(d), 9.2 and 9.7,
which shall survive the termination of this Agreement, and except that nothing
in Article V will relieve any party from liability for any breach of any
agreement or covenant contained in Article V prior to such termination.
Section 7.3. Amendments. This Agreement may be amended or modified, at
any time prior to the Closing Date, only by an instrument in writing signed on
behalf of the Buyer and the Seller.
Section 7.4. Extension; Waiver. At any time prior to the Closing Date,
the parties hereto may (i) extend the time for performance of any of the
obligations or other acts of the other parties hereto, (ii) waive any
inaccuracies in the representations and warranties of the other parties hereto
contained herein or in any document delivered pursuant hereto, and (iii) waive
compliance with any of the agreements of the other parties hereto or
satisfaction of any of the conditions to such party's obligations contained
herein. Any agreement on the part of a party hereto to any such extension or
waiver shall be valid only if set forth in an instrument in writing signed on
behalf of such party. The failure of a party hereto to assert any of its rights
hereunder shall not constitute a waiver of such rights.
ARTICLE VIII - SURVIVAL AND INDEMNIFICATION
Section 8.1. Survival of Representations and Warranties. The
representations and warranties of the Seller contained herein or in any
certificates or other documents delivered in connection herewith shall not be
deemed waived or otherwise affected by any investigation made by any party
hereto. The representations and warranties provided for in this Agreement and in
any certificate or document delivered in connection herewith shall survive for
two years beyond the Closing except that the representations and warranties
contained in Sections 3.1 through 3.8 and 4.1 through 4.4 shall survive forever,
and the representations and warranties contained in Sections 3.14 and 3.15 shall
survive for the statute of limitations and 3 years beyond Closing, respectively;
provided, that, in any case, in the event that either party gives written notice
to the other party that either (x) a Proceeding (as defined in Section 8.4) has
been commenced by the receipt of a written notice of such Proceeding by the
notifying party or (y) the notifying party has become aware of facts, events or
circumstances, not specifically disclosed by the other party in this Agreement
(including its Schedules), which the notifying party believes may give rise to a
Proceeding, prior to the expiration of the survival period for the
representation or warranty to which such Proceeding relates or may relate, such
representation or warranty shall continue with respect only to such Proceeding
until such Proceeding or, as the case may be, prospective Proceeding is finally
resolved. A party's written notice to the other party of such Proceeding or
prospective Proceeding under this Section 8.1 shall include a copy of any
written notice received by the notifying party, or specification of the
undisclosed facts, events or circumstances and prospective Proceeding on which
the notifying party's claim for an extended survival period is based. The
provisions of this Section 8.1 shall not limit any covenant or agreement of the
parties hereto which, by its terms, contemplates performance after the Closing.
The indemnification provisions contained in this Article VIII are in addition
to, and not in derogation of, any statutory, equitable, or common law remedy any
party hereto may have for any breach of any condition, covenant or agreement.
Section 8.2. Indemnification Obligations of the Seller . (a) The Seller
hereby indemnifies the Buyer and its Affiliates, stockholders, officers,
directors, employees, agents, representatives and successors and assigns
(collectively, the "Indemnitees") in respect of, and saves and holds each
Indemnitee harmless against and agrees to pay on behalf of or reimburse each
Indemnitee as and when incurred, any Losses which any Indemnitee suffers,
sustains or becomes subject to as a result of or by virtue of, without
duplication:
(i) any breach of any representation or warranty by the Seller set
forth in this Agreement;
(ii) any nonfulfillment or breach of any condition, covenant or
agreement of the Seller set forth in this Agreement;
(iii) the Company or any of its Subsidiaries remaining liable
after the Closing Date for any Funded Debt not specifically disclosed
in the 1996 Company Financial Statements; or
(iv) the establishment, sponsorship or termination of the "NAPP
Systems (Europe) Ltd. 1988 Retirement Benefits Scheme."
(b) Notwithstanding the foregoing, the Seller shall not be required to
indemnify the Buyer in respect of any Losses the Buyer suffers, sustains or
becomes subject to as a result of or by virtue of any of the occurrences
referred to in Section 8.2(a) above (other than Losses arising pursuant to
Section 8.2(a)(iii) or (iv)) except to the extent that the aggregate of all such
Losses exceeds $150,000.
(c) The Seller acknowledges that the agreement contained in this
Article VIII is an integral part of the transactions contemplated by this
Agreement and that, without such agreement, the Buyer would not enter into the
Agreement; accordingly, if the Seller fails to pay promptly the amounts due
pursuant to this Article VIII and in order to obtain such amounts, the Buyer
commences a suit against Seller to collect the amounts provided for herein, the
Seller shall also be liable to pay to the Buyer its costs and expenses
(including attorneys' fees) in connection with such suit.
Section 8.3. Indemnification Obligations of the Buyer . (a) The Buyer
hereby indemnifies the Seller and its Affiliates, stockholders, officers,
directors, employees, agents, representatives and successors and assigns
(collectively, the "Indemnitees") in respect of, and save and hold each
Indemnitee harmless against and pay on behalf of or reimburse each Indemnitee as
and when incurred, any Losses which any Indemnitee suffers, sustains or becomes
subject to as a result of or by virtue of, without duplication:
(i) any breach of any representation or warranty by the Buyer set
forth in this Agreement; or
(ii) any nonfulfillment or breach of any condition, covenant or
agreement of the Buyer set forth in this Agreement.
(b) Notwithstanding the foregoing, the Buyer shall not be required to
indemnify the Seller in respect of any Losses the Seller suffers, sustains or
becomes subject to as a result of or by virtue of any of the occurrences
referred to in Section 8.3(a) above except to the extent that the aggregate of
all such Losses exceeds $150,000.
(c) The Buyer acknowledges that the agreement contained in this Article
VIII is an integral part of the transactions contemplated by this Agreement and
that, without such agreement, the Seller would not enter into the Agreement;
accordingly, if the Buyer fails to pay promptly the amounts due pursuant to this
Article VIII and in order to obtain such amounts, the Seller commences a suit
against Buyer to collect the amounts provided for herein, the Buyer shall also
be liable to pay to the Seller its costs and expenses (including attorneys'
fees) in connection with such suit.
Section 8.4. Indemnification Procedures. (a) Any Person making a claim
for indemnification pursuant to Sections 8.2 or 8.3 above (an "Indemnified
Party") must give the Party from whom indemnification is sought (an
"Indemnifying Party") written notice of such claim (an "Indemnification Claim
Notice") promptly after the Indemnified Party receives any written notice of any
action, lawsuit, proceeding, investigation or other claim (a "Proceeding")
against or involving the Indemnified Party by a Governmental Authority or other
third party or otherwise discovers the liability, obligation or facts giving
rise to such claim for indemnification; provided, that the failure to notify or
delay in notifying an Indemnifying Party will not relieve the Indemnifying Party
of its obligations pursuant to Sections 8.2 or 8.3 above, as applicable, except
to the extent that such failure actually xxxxx the Indemnifying Party (it being
understood that any claim for indemnity pursuant to Sections 8.2 or 8.3 above
must be made by notice given within the applicable time period specified in
Section 8.1). Such notice must contain a description of the claim and the nature
and amount of such Loss (to the extent that the nature and amount of such Loss
is known at such time).
(b) With respect to the defense of any Proceeding against or involving
an Indemnified Party in which the Governmental Authority or other third party in
question seeks only the recovery of a sum of money for which indemnification is
provided in Sections 8.2 or 8.3 above, as applicable, at its option an
Indemnifying Party may appoint as lead counsel of such defense any legal counsel
selected by the Indemnifying Party; provided, that before the Indemnifying Party
assumes control of such defense it must first:
(i) enter into an agreement with the Indemnified Party (in form
and substance satisfactory to the Indemnified Party) pursuant to which
the Indemnifying Party agrees to be fully responsible (with no
reservation of any rights other than the right to be subrogated to the
rights of the Indemnified Party) for all Losses relating to such
Proceeding and unconditionally guarantees the payment and performance
of any liability or obligation which may arise with respect to such
Proceeding or the facts giving rise to such claim for indemnification;
and
(ii) furnish the Indemnified Party with evidence that the
Indemnifying Party, in the Indemnified Party's sole judgment, is and
will be able to satisfy any such liability.
(c) Notwithstanding Section 8.4(b) above: (i) the Indemnifying Party
must obtain the prior written consent of the Indemnified Party (which the
Indemnified Party will not unreasonably withhold) prior to entering into any
settlement of such claim or Proceeding or ceasing to defend such claim or
Proceeding; (ii) the Indemnified Party will be entitled to participate in the
defense of such claim and to employ counsel of its choice for such purpose at
its own expense (provided, that the Indemnifying Party will bear the reasonable
fees and expenses of such separate counsel incurred prior to the date upon which
the Indemnifying Party effectively assumes control of such defense), and (iii)
the Indemnifying Party will not be entitled to assume control of the defense of
such claim, and will pay the reasonable fees and expenses of legal counsel
retained by the Indemnified Party, if:
(1) the Indemnified Party reasonably believes that an adverse
determination of such Proceeding could be detrimental to or injure the
Indemnified Party's reputation or future business prospects;
(2) the Indemnified Party reasonably believes that there exists or
could arise a conflict of interest which, under applicable principles
of legal ethics, could prohibit a single legal counsel from
representing both the Indemnified Party and the Indemnifying Party in
such Proceeding; or
(3) a court of competent jurisdiction rules that the Indemnifying
Party has failed or is failing to prosecute or defend vigorously such
claim.
(d) All indemnification payments hereunder shall be computed after
taking into account the Tax consequences of the Loss and the receipt of
indemnification payments hereunder and all such payments shall be limited to the
actual Loss, reduced by any offsetting Tax benefit or insurance proceeds
received by the Indemnified Party or its Affiliate. For purposes of determining
an indemnification obligation hereunder, the amount of such obligation shall be
reduced by the sum of any savings of Taxes reasonably projected to be realized
by the Indemnified Party (and its Affiliates and assigns) in respect of (i) the
accrual or payment of the expense or other item which resulted in the Loss and
(ii) correlative adjustments resulting from a Loss which constitutes a Tax
claim. For the purposes of the foregoing sentence, the amount of savings of
Taxes projected to be realized by an Indemnified Party (and its Affiliates and
assigns) shall be calculated on the assumptions that (A) all items of loss,
deduction and credit can be utilized by them at the highest applicable marginal
tax rate in each applicable jurisdiction, and (B) no sales of assets of the
Company are made after the Closing Date outside the ordinary course of business;
and the amount of savings of Taxes with respect to such adjustments, if any,
shall be deemed to be the savings of Taxes actually realized by the Indemnified
Party (and its Affiliates and assigns). In calculating projected savings in
Taxes as of any date, future projected savings shall be discounted to the date
of determination at a discount rate of 9%. To the extent not inconsistent with
the particular circumstances, all indemnity payments by the Seller shall be
treated for Tax purposes as a Purchase Price reduction. In the event the receipt
of any indemnity payment will result in a Tax detriment to the Indemnified Party
or its Affiliates and assigns, the amount of such detriment, determined in a
manner consistent with the determination of Tax savings shall be taken into
account in determining the Tax consequences of a Loss.
(e) The Buyer and Seller each agree that (i) if the Closing occurs, the
rights to indemnification set forth in Section 8.2 or 8.3 shall except as
otherwise required by law be the sole and exclusive remedy that any Indemnified
Party (as defined in Section 8.4(a)) has against the other party with respect to
breaches of representations or warranties under this Agreement; (ii) prior to
the Closing, the sole and exclusive remedies of the Buyer and the Seller for
breaches of representations or warranties hereunder shall be either but both of
the following: (A) to enforce its rights set forth in Section 9.10 or (B) to
terminate this Agreement as provided in Section 7.1(c); and (iii) at the Closing
each party will confirm to the other in writing whether it has actual knowledge
of an Indemnifiable Claim existing at the Closing and a description of any such
claim. Neither party shall have any obligation to the other under Section 8.2 or
8.3 with respect to any Indemnifiable Claim actually known to the other party
and not so disclosed.
Section 8.5. Special Offsite Disposal Indemnity. (a) Seller shall
indemnify the Indemnitees and pay on behalf of or reimburse such party as and
when incurred for any Losses (including without limitation any Losses arising
under the Comprehensive Environmental, Response, Compensation, and Liability Act
of 1980, as amended ("CERCLA"), and Losses for personal injury, property damage,
cleanup costs, or damage to natural resources, and any obligation to
investigate, remediate, or otherwise address contamination of land, surface
water or ground water), irrespective of whether or not set forth on Schedule
3.15 hereto, which any Indemnitee may suffer, sustain or become subject to as a
result of, in connection with, incidental to, or by virtue of the release,
treatment or disposal, or the arrangement for treatment or disposal, at any real
property other than the Owned Property and Leased Property, prior to the Closing
Date, of any material, substance or waste used or generated by the Company, or
any predecessor or Affiliate of the Company, except to the extent such Losses
are caused by Buyer's conduct in connection with the ownership or operation of
the business after the Closing Date.
(b) Notwithstanding Section 8.5(a), Seller shall not be required to
indemnify Indemnitees in respect of any Losses pursuant to Section 8.5(a) above
except to the extent that the aggregate of all such Losses exceeds $1,000,000,
in which case Seller shall indemnify Indemnitees for the next $500,000 of such
Losses. In no event shall the Seller's liability under this Section 8.5 exceed
$500,000.
(c) The indemnity set forth in this Section 8.5 shall survive for 3
years beyond the Closing; provided, that, in the event that the Buyer gives
written notice to the Seller that either (x) a Proceeding (as defined in Section
8.4) has been commenced by the receipt of a written notice of such Proceeding by
the Buyer or (y) the Buyer has become aware of facts, events or circumstances,
not specifically disclosed by the Seller in this Agreement (including its
Schedules), which the Buyer believes may give rise to a Proceeding, prior to the
expiration of such 3 year period, this indemnity shall continue with respect
only to such Proceeding until such Proceeding or, as the case may be,
prospective Proceeding is finally resolved. A written notice under this Section
8.5 shall include a copy of any written notice received by the Buyer, or
specification of the undisclosed facts, events or circumstances and prospective
Proceeding on which the Buyer's claim for an extended survival period is based.
(d) The indemnity in this Section 8.5 shall be governed by the
procedures set forth in Section 8.4.
ARTICLE IX - Miscellaneous
Section 9.1. Notices. All notices or other communications required or
permitted hereunder shall be in writing and shall be delivered personally, by
facsimile or sent by certified, registered or express air mail, postage prepaid,
and shall be deemed given when so delivered personally, or by facsimile, or if
mailed, two days after the date of mailing, as follows:
If to Buyer: Polyfibron Technologies, Inc.
000 Xxxxxxxxx Xxxxxxxx
Xxxxxxxx 0
Xxxxxxxxx, XX 00000-0000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxx X. Xxxxxxxxx, President/CEO
With a copy to: Xxxxxxxx & Xxxxx
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000-0000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxx X. Xxxxx, Esq.
If to the Seller: Xxx Enterprises, Incorporated
400 Xxxxxx Building
000 Xxxxx Xxxx Xxxxxx
Xxxxxxxxx, Xxxx 00000-0000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxxxx, President/CEO
With a copy to: Lane & Xxxxxxxx
000 Xxxxxxx Xxxx Xxxxxxxx
Xxxxxxxxx, Xxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: C. Xxxx Xxxxxxxx III, Esq.
or to such other address as any party hereto shall notify the other parties
hereto (as provided above) from time to time.
Section 9.2. Expenses. Regardless of whether the transactions provided
for in this Agreement are consummated, except as otherwise provided herein, each
party hereto shall pay its own expenses incident to this Agreement and the
transactions contemplated herein. The Parties agree to each pay half of all
filing fees associated with HSR Act filings. The Buyer agrees to pay up to
$35,000 of the auditor's fees associated with the preparation of the Company
Financial Statements and up to $5,000 of the fees of the Company's special
intellectual property counsel associated with the filing of patent applications
with respect to certain direct-to-plate printing technology.
Section 9.3. Governing Law; Consent to Jurisdiction. This Agreement
shall be governed by, and construed in accordance with, the internal laws of the
State of California, with the exception of Section 5.9, which will be governed
by, and construed in accordance with, the laws of the State of New York, and in
each case, the choice of law principles of the laws of the States referred to
shall be disregarded.
Section 9.4. Assignment; Successors and Assigns; No Third Party Rights.
Except as otherwise provided herein, this Agreement may not be assigned by
operation of law or otherwise, and any attempted assignment shall be null and
void; provided, however, that Buyer may, without written consent assign,
directly or indirectly, any or all of its rights and obligations hereunder to
any of its Affiliates, to any subsequent purchaser of the Buyer, the Company or
any of its Subsidiaries or all or substantially all of the Buyer's or the
Company's consolidated assets, or to any Person which provides financing to the
Buyer in connection with the purchase of the Shares hereunder (or any
refinancing thereof). No assignment of this Agreement shall relieve any party
hereto of its obligations hereunder. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective heirs,
successors, assigns and legal representatives. This Agreement shall be for the
sole benefit of the parties to this Agreement and their respective heirs,
successors, assigns and legal representatives and is not intended, nor shall be
construed, to give any Person, other than the parties hereto and their
respective heirs, successors, assigns and legal representatives, any legal or
equitable right, remedy or claim hereunder.
Section 9.5. Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original agreement, but all of
which together shall constitute one and the same instrument.
Section 9.6. Entire Agreement. This Agreement, including the Schedules
attached hereto, constitutes the entire agreement among the parties with respect
to the matters covered hereby and supersedes all previous written, oral or
implied understandings among them with respect to such matters.
Section 9.7. Public Announcement. Except as may be required by law,
neither the Seller nor the Buyer shall issue any press release or otherwise
publicly disclose this Agreement or the transactions contemplated hereby or any
dealings between or among the parties in connection with the subject matter
hereof without the prior approval of the other. In the event that any such press
release or other public disclosure shall be required, the party required to
issue such release or other disclosure shall consult in good faith with the
other party hereto with respect to the form and substance of such release or
other disclosure prior to the public dissemination thereof.
Section 9.8. Severability. The invalidity of any portion hereof shall
not affect the validity, force or effect of the remaining portions hereof. If it
is ever held that any restriction hereunder is too broad to permit enforcement
of such restriction to its fullest extent, such restriction shall be enforced to
the maximum extent permitted by law.
Section 9.9. No Strict Construction. Each of the parties hereto
acknowledge that this Agreement has been prepared jointly by the parties hereto,
and shall not be strictly construed against either party.
Section 9.10. Specific Performance. Each of the Seller and Buyer
acknowledges that the rights of each party to consummate the transactions
contemplated hereby are unique and recognizes and affirms that in the event of a
breach of this Agreement by any party, money damages may be inadequate and the
non-breaching party may have no adequate remedy at law. Accordingly, the parties
agree that such non-breaching party shall have the right, in addition to any
other rights and remedies existing in their favor at law or in equity, to
enforce their rights and the other party's obligations hereunder not only by an
action or actions for damages but also by an action or actions for specific
performance, injunctive and/or other equitable relief (without posting of bond
or other security).
Section 9.11. Waiver of Jury Trial. Each of the parties hereby waives,
to the extent permitted by applicable law, trial by jury in any litigation in
any court with respect to, in connection with, or arising out of this agreement
or the validity, protection, interpretation, collection or enforcement thereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
ATTEST: POLYFIBRON TECHNOLOGIES, INC.
By: By:
Name: Name:
Title: Title:
ATTEST: XXX ENTERPRISES, INCORPORATED
By: By:
Name: Name:
Title: Title:
Exhibit 6.2(m)
TRANSITION SERVICES AGREEMENT
THIS AGREEMENT is made on January ____, 1997 by and among NAPP Systems
Inc., an Iowa corporation (the "Company") and Xxx Enterprises, Incorporated, a
Delaware corporation (the "Contractor").
The Contractor owned and operated the Company prior to the date hereof
and provided certain services to the Company necessary for the Company's
operation. The Contractor has sold the Company to Polyfibron Technologies, Inc.
pursuant to a Stock Purchase Agreement dated January 3, 1997 (the "Purchase
Agreement") and it is a condition precedent to the sale of the Company that the
Contractor continues to provide those services to the Company on the terms set
out herein.
For good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the Contractor and the Company hereby agree as
follows:
Section 1. Definitions. Terms defined in the Purchase Agreement and not
otherwise defined herein have the meanings given to those terms in the Purchase
Agreement when used herein.
Section 2. Term. The term of this Agreement shall commence on the date
hereof and end at the end of the Company's 1997 financial year unless earlier
terminated by the Company, which the Company may do at any time on giving 15
days written notice to the Contractor.
Section 3. Services. During the term of this Agreement, the Contractor
shall provide to the Company the hardware, software and data processing services
(collectively, the "Services") necessary to ensure that the Company has the same
level of payroll processing service and to the same extent as used by the
Company during the twelve (12) months preceding the date of this Agreement and
as may be necessary to enable the Company to carry on its business as the same
has been carried on to the date hereof. The Contractor will arrange payment of
net pay and/or such deductions from an account to be funded by the Company as
required to meet such payments. The Company will be exclusively responsible for
all tax payments relating to the payroll tax liabilities. The Contractor will
prepare quarterly reports to the Company and all other reports (including
pursuant to Section 941 of the Tax Code) required by law or contract; provided,
that the Company will take sole responsibility for signing and filing the same.
Section 4. Charges and Payment. The Services shall be provided free of
charge by the Contractor to the Company for the first 3 months from the date
hereof. Thereafter, the Company shall pay to the Contractor for the provision of
Services under this Agreement $1,000 per month. The Company will reimburse the
Contractor for any long distance line charges incurred in transmitting the data
necessary for the operation of the Company's payroll system. Any and all taxes,
fees, duties and other governmental charges imposed in connection with payment
hereunder for the provision of any or all the Services hereunder shall be for
the Contractor's account. Charges for Services shall be invoiced monthly to the
Company and are due and payable within fourteen (14) days of the date of receipt
of the invoice.
Section 5. Assignment. This Agreement shall not be assigned by either
party without the prior written consent of the other party. Subject to the
foregoing, this Agreement shall be binding upon and enure to the benefit of the
parties and their respective successors and assigns.
Section 6. Notice. Any notice or other writing required or permitted to
be given under this Agreement shall be in writing and shall be given in
accordance with Section 9.1 of the Purchase Agreement.
Section 7. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of California, excluding any
choice or conflict of law rules.
IN WITNESS WHEREOF the parties have duly executed this Agreement.
NAPP SYSTEMS INC.
By:___________________________
Its:
XXX ENTERPRISES, INCORPORATED
By:___________________________
Its:
Exhibit 6.3(d)
PLATE SUPPLY AGREEMENT
XXX ENTERPRISES, INCORPORATED, Davenport, Iowa (Buyer), and NAPP
SYSTEMS INC., San Marcos, CA (Seller), agree to the following terms and
conditions:
Section 1. Term. This agreement shall become effective on January 17,
1997 and shall continue in full force and effect through December 31, 2001.
Section 2. Quantities and Purchase Orders. The Seller agrees to supply
to Buyer the following NAPPFLEX(R) plates and NAPPLATE(R) plates (all of which
are collectively referred to as the "Plates"):
A. Single-size prepunched NAPPFLEX(R) Plates in the correct size,
thickness, and punch configuration for each of the Buyer's newspaper
flexographic printing presses in sufficient quantities to meet one
hundred percent (100%) of the Buyer's needs;
B. Double-truck size prepunched NAPPFLEX(R) Plates in the correct
size, thickness and punch configuration for each of the Buyer's
newspaper flexographic printing presses in sufficient quantities to
meet one hundred percent (100%) of the Buyer's needs; and
C. Single-size prepunched NAPPLATE(R) Plates in the correct size,
thickness, and punch configuration for each of the Buyer's newspaper
letterpress printing presses in sufficient quantities to meet one
hundred percent (100%) of the Buyer's needs.
Section 3. Purchase Order. From time to time during the term of this
Agreement, Buyer shall deliver a purchase order to Seller stating the quantities
and types of Plates and shipping and delivery instructions; and containing
standard terms and conditions set forth in Attachment A hereto. In all other
respects any purchase order delivered to Seller during the term of this
Agreement shall be governed by the terms of this Agreement.
Section 4. Prices. The price of the Plates to be sold to Buyer as
provided in paragraph 2 shall be as follows:
A. Single-size NAPPFLEX(R) Plates -- $3.84 per plate.
B. Double-truck size NAPPFLEX(R) Plates -- $10.76 per plate.
C. Single-size NAPPLATE(R) Plates -- $4.00 per plate.
These prices shall remain in effect (without any increase) through
December 31, 1997. On January 1, 1998 and each January 1 thereafter, the prices
for the Plates may be increased by the lesser of (i) the average price increase
announced by Seller to its customers for Plates of comparable quantities in the
domestic United States market or (ii) five percent (5%) per annum.
Section 5. Inspection and Rejection of Plates. All Plates shall be
received by Buyer subject to Buyer's inspection and right of rejection. Plates
shall be considered accepted 180 days after shipment or when, on inspection,
testing or use, they are found to be in accordance with Buyer's specifications
and Seller's warranties, whichever is earlier. If any Plates are found at any
time to be defective in design, manufacture, material or workmanship or
otherwise not in conformity with Buyer's specifications, Buyer, in addition to
any other rights which it may have under warranties or otherwise, shall have the
right to reject those Plates in whole or in part. Rejected Plates shall be held
at Seller's risk for a reasonable time after their rejection and shall be
returned at Seller's expense according to Seller's instruction.
Section 6. Entire Agreement. This Agreement contains the entire
understanding of the terms and conditions of sale and cannot be modified except
by written instrument signed by both parties hereto.
Section 7. Assignment. Buyer may assign this Agreement to any successor
in interest to Buyer, to any of Buyer's divisions or to any entity in which
Buyer has an ownership interest; provided, however, that the obligations of
Seller shall be limited to those divisions owned by Buyer at the date of this
Agreement. Seller may assign this Agreement only to a successor in interest to
all or substantially all of the business of Seller.
Section 8. Further Assurances. From time to time after the date of this
Agreement, each party hereto will execute all such instruments and take all such
actions as any other party shall reasonably request in connection with carrying
out and effectuating the intent and purpose hereof and all transactions and
things contemplated by this Agreement, including, without limitation, the
execution and delivery of any and all confirmatory and other instruments and any
and all actions which may reasonably be necessary or desirable to complete the
transactions contemplated hereby.
Section 9. Waiver. No waiver by any party of any condition or any
breach of any provision, term, covenant, representation, or warranty contained
in this Agreement, whether by conduct or otherwise, in any one or more instances
shall be deemed to be or construed as a further or continuing waiver of any such
condition or of the breach of any other provision, term, covenant,
representation or warranty.
Section 10. Notices. Any notice or purchase order required or permitted
by this Agreement shall be given to the parties as follows:
Xxx Enterprises, Incorporated
400 Xxxxxx Building
000 X. Xxxx Xxxxxx
Xxxxxxxxx, XX 00000
Attn: Vice President - Newspapers
Fax: (000) 000-0000
NAPP Systems Inc.
000 X. Xxxxxxx Xxxxxx
Xxx Xxxxxx, XX 00000
Attn: President
Fax: (000) 000-0000
Any notice or purchase order required or permitted to be given to a
party shall be in writing and shall be given by the other party by personal
delivery to a person designated by each party or shall be sent by facsimile or
next-day guaranteed delivery by a nationally recognized overnight delivery
service to the facsimile numbers and addresses and to the attention of the
officers set forth above.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed by their duly authorized officers, all as of the day and year first
above written.
NAPP SYSTEMS INC.
By _________________________
Its _________________________
XXX ENTERPRISES, INCORPORATED
By __________________________
Its __________________________
ATTACHMENT A
NAPP SYSTEMS INC.
ORDER FORM
STANDARD TERMS & CONDITIONS
1. All payments shall be free from deduction or set-off of any kind. Amounts
not paid when due shall bear interest at the maximum legal rate, if any, or
if less, 1 1/2% per month, until paid in full.
2. Shipments, generally made within 60 days from receipt of customer signed
order, are made without guaranteed shipment dates. Trans-shipments are
permitted if no published through routes are available at the time of
shipment.
3. Seller warrants to Buyer only that the Plates shall be free from defects in
materials and workmanship for a period of 180 days from the date of
shipment. Seller disclaims all other warranties, express or implied,
including the warranty of fitness for a particular purpose and the warranty
of merchantability.
4. Buyer's sole remedy for breach of warranty is to return the defective
Plates to Seller for replacement. Under no circumstance, including breach
of warranty or other breach of this Purchase Order, negligence, strict
liability, failure of the essential purposes of any remedy or any other
legal theory, shall Seller be liable to Buyer or any third party for
special, incidental or consequential damages, including lost profits, or
for exemplary damages.
5. Seller shall not be liable for any damages for any nondelivery or delay in
delivery of Plates arising directly or indirectly from any events beyond
Seller's control, whether such events were foreseeable, including without
limitation, acts of God, labor disputes, governmental actions or the
inability or failure to obtain raw materials, or other supplies.
6. Once Seller accepts this Purchase Order, no changes in quantities, or
shipping windows may be made without Seller's consent. Seller manufactures
to order and does not accept cancellations.
7. This Purchase Order contains the entire agreement of the parties relating
to the subject matter hereof and supersedes any agreements arising by
course of dealing, course of performance or trade usage. The Purchase Order
can only be modified by written agreement signed by both parties.
8. Purchase Orders may be accepted only upon the standard terms and conditions
of this Purchase Order. terms in any Purchase Order submitted by Buyer in
addition to or not identical to such terms and conditions are hereby
rejected and shall not become part of the Purchase Order.
9. The interpretation and performance of the Purchase Order shall be governed
by the internal laws of the State of California. The United Nations
Convention on the International Sale of Goods shall not apply to this
Purchase Order. The Purchase Order has been negotiated in the English
language and the English language shall govern interpretation of this
Purchase Order. Any litigation under this Purchase Order shall be brought
exclusively in a court sitting in San Diego County, California. At Seller's
option, any dispute relating to this Purchase Order may be settled by
arbitration under the Rules of International Chamber of Commerce.
NAPP SYSTEMS INC.
POLYFIBRON STOCK PURCHASE AGREEMENT
SCHEDULE:
3.4 Governmental Consents, etc.
The BASF Contracts (as defined in the Stock Purchase Agreement) impose
certain restrictions upon the disclosure of confidential information. BASF
has to date withheld authorization to release such confidential information
to the Buyer pending negotiation of a confidentiality agreement
satisfactory to the parties.
NAPP SYSTEMS INC.
POLYFIBRON STOCK PURCHASE AGREEMENT
SCHEDULE:
3.7 Capitalization of the Company and Its Subsidiaries.
(a) None.
(b) List of Napp subsidiaries:
Napp Systems (Europe) Ltd.
Napp Printing Plate Distribution Inc.
Napp FSC Inc.
The Sleeve System Inc. (dissolution pending)
List of stock owned by Napp:
No. of shares
Xxx Communications Inc. (class A) 11
Fresenius Nat'l Medical Care Inc. (class D preferred) 20
Fresenius Medical Care ADR 20
Gannett Co. 10
Xxxx X. Xxxxxxx Co. 10
Knight Ridder Inc. 20
Times Mirror Co. (new preferred serial B) 20
Tribune Co. (new) 00
X X Xxxxx & Xx. 00
Xxxxxxxxxx Xxxx Xx. X 5
No directors' qualifying shares.
NAPP SYSTEMS INC.
POLYFIBRON STOCK PURCHASE AGREEMENT
SCHEDULE:
3.9 Company Financial Statements
NAPP SYSTEMS INC.
AND SUBSIDIARIES
FINANCIAL REPORT
SEPTEMBER 30, 1996
CONTENTS
----------------------------------------------------------------------------
INDEPENDENT AUDITOR'S REPORT
----------------------------------------------------------------------------
FINANCIAL STATEMENTS
Consolidated balance sheets
Consolidated statements of income
Consolidated statements of stockholder's equity
Consolidated statements of cash flows
Notes to consolidated financial statements
----------------------------------------------------------------------------
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
Xxx Enterprises, Incorporated
Davenport, Iowa
We have audited the accompanying consolidated balance sheets of NAPP Systems
Inc. and subsidiaries, a wholly-owned subsidiary of Xxx Enterprises,
Incorporated, as of September 30, 1996, 1995, and 1994, and the related
consolidated statements of income, stockholder's equity, and cash flows for the
years then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of NAPP Systems Inc.
and subsidiaries as of September 30, 1996, 1995, and 1994, and the results of
their operations and their cash flows for the years then ended, in conformity
with generally accepted accounting principles.
/s/ McGLADREY & XXXXXX, LLP
Davenport, Iowa
December 18, 1996
NAPP SYSTEMS INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
September 30, 1996, 1995, and 1994
(In Thousands)
ASSETS 1996 1995 1994
-------------------------------------------------------------------------------
Current Assets:
Cash and cash equivalents ....................... $ 2,029 $ 1,636 $ 977
Receivables, less allowance for doubtful
accounts 1996 $375; 1995 $435;
1994 $565 .................................... 9,459 7,986 7,913
Inventories ..................................... 12,606 14,721 10,804
Prepaid expenses ................................ 210 181 202
Deferred income taxes ........................... 1,102 1,167 1,167
-------------------------
Total current assets ................. 25,406 25,691 21,063
-------------------------
Property and Equipment:
Land and improvements ........................... 1,931 1,931 1,931
Buildings and improvements ...................... 10,038 10,038 10,038
Equipment ....................................... 16,804 16,716 16,699
-------------------------
28,773 28,685 28,668
Less accumulated depreciation ................... 23,777 23,185 22,459
-------------------------
4,996 5,500 6,209
-------------------------
Intangibles ........................................ 52,751 56,152 59,894
-------------------------
$83,153 $87,343 $87,166
=========================
See Notes to Consolidated Financial Statements.
LIABILITIES AND STOCKHOLDER'S
EQUITY 1996 1995 1994
-------------------------------------------------------------------------------
Current Liabilities:
Current maturities of long-term debt ............ $ 77 $ 72 $ 69
Accounts payable ................................ 3,508 6,893 2,763
Compensation .................................... 1,349 1,379 1,331
Other accrued liabilities, including accrued
warranty claims 1996 $555; 1995 $472;
1994 $570 .................................... 1,749 2,656 2,337
-------------------------
Total current liabilities ............ 6,683 11,000 6,500
-------------------------
Long-Term Debt, less current maturities ............ 1,427 1,529 1,601
-------------------------
Deferred Items:
Compensation .................................... 151 354 492
Income taxes .................................... 799 367 355
-------------------------
950 721 847
-------------------------
Stockholder's equity:
Common stock; $1 par value; authorized
5,000 shares; 1,000 shares issued and
outstanding .................................. 1,000 1,000 1,000
Additional paid-in capital ...................... 73,093 73,093 77,218
-------------------------
74,093 74,093 78,218
-------------------------
$83,153 $87,343 $87,166
=========================
NAPP SYSTEMS INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Years Ended September 30, 1996, 1995, and 1994
(In Thousands)
1996 1995 1994
------------------------------------------------------------------------
Net sales ............................... $65,552 $59,448 $61,310
Cost of goods sold ...................... 37,183 34,708 37,123
----------------------------
Gross profit .............. 28,369 24,740 24,187
Operating expenses ...................... 13,530 12,898 13,347
----------------------------
Operating income .......... 14,839 11,842 10,840
Other income (expense), primarily foreign
currency transaction adjustments ..... (327) 30 350
----------------------------
Income before income taxes 14,512 11,872 11,190
Income taxes ............................ 6,787 5,740 5,473
----------------------------
Net income ................ $ 7,725 $ 6,132 $ 5,717
============================
See Notes to Consolidated Financial Statements.
NAPP SYSTEMS INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
Years Ended September 31, 1996, 1995, and 1994
(In Thousands)
Additional
Common Paid-in Retained
Stock Capital Earnings Total
-------------------------------------------------------------------------
Balance, September 30, 1993 $ 1,000 $84,500 $ 1,399 $86,899
Net income ............. - - - - 5,717 5,717
Dividends to parent .... - - (7,282) (7,116) (14,398)
------------------------------------------
Balance, September 30, 1994 1,000 77,218 - - 78,218
Net income ............. - - - - 6,132 6,132
Dividends to parent .... - - (4,125) (6,132) (10,257)
------------------------------------------
Balance, September 30, 1995 1,000 73,093 - - 74,093
Net income ............. - - - - 7,725 7,725
Dividends to parent .... - - - - (7,725) (7,725)
------------------------------------------
Balance, September 30, 1996 $ 1,000 $73,093 $ - - $74,093
==========================================
See Notes to Consolidated Financial Statements.
NAPP SYSTEMS INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended September 30, 1996, 1995, and 1994
(In Thousands)
1996 1995 1994
--------------------------------------------------------------------------------
Cash Provided by Operating Activities:
Net income .................................... $7,725 $ 6,132 $5,717
Adjustments to reconcile net income to net cash
cash provided by operating activities:
Depreciation ............................... 794 772 900
Amortization ............................... 3,768 3,742 3,742
Deferred income taxes ...................... 497 12 (419)
Change in assets and liabilities:
(Increase) decrease in:
Receivables ........................... (1,473) (73) 238
Inventories ........................... 2,115 (3,917) (2,531)
Prepaid expenses ...................... (29) 21 (8)
Increase (decrease) in accounts payable
and accrued expenses .................. (4,525) 4,359 1,350
----------------------------
Net cash provided by operating
activities ......................... 8,872 11,048 8,989
----------------------------
Cash (Required for) Investing Activities:
Acquisitions .................................. (367) - - - -
Purchase of property and equipment ............ (290) (63) (170)
----------------------------
Net cash (required for) investing
activities ......................... (657) (63) (170)
----------------------------
Cash (Required for) Financing Activities:
Dividend to parent ............................ (7,725) (10,257) (14,398)
Other ......................................... (97) (69) 70
----------------------------
Net cash (required for) financing
activities ......................... (7,822) (10,326) (14,328)
----------------------------
Net increase (decrease) in cash and
cash equivalents ................... 393 659 (5,509)
Cash and cash equivalents:
Beginning ..................................... 1,636 977 6,486
----------------------------
Ending ........................................ $2,029 $ 1,636 $ 977
============================
See Notes to Consolidated Financial Statements.
NAPP SYSTEMS INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
Note 1. Nature of Business and Significant Accounting Policies
Nature of business:
The Company is engaged in the development, manufacture, and marketing of
proprietary expendable products and processing equipment for imaging systems
primarily for use in the newspaper industry and distributes expendable
products and processing equipment to the commercial printing industry.
Significant accounting policies:
Accounting estimates: The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amount of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Basis of accounting: On September 14, 1990, Xxx Enterprises, Incorporated
(Xxx) acquired the remaining 50% of the Company's outstanding common stock
from Nippon Paint Co. Ltd. and a previously existing joint venture agreement
between the owners was terminated. In connection with this acquisition, the
accounts of the Company have been adjusted using the push down basis of
accounting to reflect the allocation of the consideration paid for the
additional 50% interest in the net assets acquired by Xxx.
Principles of consolidation: The consolidated financial statements include
the accounts of the Company and its wholly-owned subsidiaries, NAPP Systems
(Europe), Ltd., NAPP FSC, Inc., The Sleeve System, Inc., and NAPP Printing
Plate Distribution, Inc. All material intercompany balances and transactions
have been eliminated in consolidation.
Inventories: Inventories are valued at the lower of standard cost (which
approximates cost on a first-in, first-out method) or market.
Property and equipment: Property and equipment is carried at cost.
Depreciation on manufacturing and other property and equipment is computed
primarily by declining-balance methods. Substantially all other property and
equipment is depreciated by the straight-line method. Estimated useful lives
are as follows:
Years
----------------
Land improvements 15 - 25
Buildings and improvements 7 - 25
Manufacturing equipment 5 - 8
Other property and equipment 3 - 8
Intangibles: Intangibles consist primarily of the excess of Xxx'x cost to
purchase 50% of the Company over the fair value of the additional 50%
interest in the identifiable net assets acquired at the date purchased.
Amortization is computed by the straight-line method over a period of 20
years.
The Company reviews its intangibles and other long-lived assets annually to
determine potential impairment. In performing the review, the Company
estimates the future cash flows expected to result from the use of the asset
and its eventual disposition. If the sum of the expected future cash flows
(undiscounted and without interest charges) is less than the carrying amount
of the asset, an impairment is recognized.
Foreign currency translation: The accounting records of the Company's
subsidiaries are maintained in the local currency of their respective
domiciles. Since the subsidiaries are primarily distributors of the Company's
products, the U.S. dollar is the functional currency; therefore, translation
gains and losses, which have not been material, are included as adjustments
to net income.
Cash and cash equivalents: For purposes of reporting cash flows, the Company
considers all highly liquid debt instruments purchased with an original
maturity of three months or less to be cash equivalents.
Income taxes: Deferred taxes are provided on a liability method whereby
deferred tax assets are recognized for deductible temporary differences and
loss carryforwards and deferred tax liabilities are recognized for taxable
temporary differences. Temporary differences are the differences between the
reported amounts of assets and liabilities and their tax bases. Deferred tax
assets are reduced by a valuation allowance when, in the opinion of
management, it is more likely than not that some portion or all of the
deferred tax assets will not be realized. Deferred tax assets and liabilities
are adjusted for the effects of changes in tax laws and rates on the date of
enactment.
Advertising costs: Advertising costs, which are not material, are expensed as
incurred.
Fair value of financial instruments: The carrying amount of cash and cash
equivalents, receivables, and accounts payable approximates fair value
because of the short maturity of these instruments.
Note 2. Acquisition
On April 1, 1996 the Company acquired for cash 100% of the outstanding stock of
The Sleeve System, Inc., a Canadian company that was the owner of a patent
application for a printing plate mounting device. The entire purchase price of
the acquisition, $367,000, has been allocated to the patent application. The
intangible is being amortized by the straight-line method over 7 years.
Note 3. Transactions with Parent
The Company is a wholly-owned subsidiary of Xxx Enterprises, Incorporated (Xxx).
Xxx purchases plates, equipment, and parts from the Company. Transactions with
Xxx included in the accompanying consolidated financial statements are
summarized as follows:
1996 1995 1994
------------------------------
(In Thousands)
------------------------------
Sales .......................... $ 710 $ 685 $ 530
Receivables .................... 77 45 83
Income taxes paid .............. 6,290 5,728 5,892
Note 4. Composition of Inventories
Inventories as of September 30, 1996, 1995, and 1994 consist of the following:
1996 1995 1994
---------------------------
(In Thousands)
Raw materials ...................................... $ 6,075 $ 7,554 $ 5,684
Finished goods:
Expendable products ............................. 5,182 5,254 3,979
Processing equipment ............................ 843 1,398 861
Other ........................................... 506 515 280
---------------------------
$12,606 $14,721 $10,804
===========================
Note 5. Long-Term Debt
The long-term debt as of September 30, 1996 represents the present value due in
future years for a warehouse under a noncancelable lease agreement. The Company
has discontinued the use of the warehouse and the related asset was written off.
The liability is payable in quarterly installments through December 2009.
The following is a schedule by years of the approximate future minimum lease
payments under the lease together with the present value of the net minimum
lease payments as of September 30, 1996:
(In Thousands)
Year ending September 30:
1997 $ 153
1998 153
1999 153
2000 153
2001 153
Later years 1,318
------
Total minimum lease payments 2,083
Less amount representing interest 579
------
Present value of net minimum lease payments $1,504
======
Note 6. Income Tax Matters
Components of income tax expense consist of the following:
Year Ended
September 30,
-----------------------
1996 1995 1994
-----------------------
(In Thousands)
Paid or payable on currently taxable income:
Federal ........................................... $5,377 $4,854 $5,004
State ............................................. 913 874 888
Net increase (decrease) in deferred income
taxes ............................................. 497 12 (419)
-----------------------
$6,787 $5,740 $5,473
=======================
Income tax expense for the years ended September 30, 1996, 1995, and 1994 is
different than the amount computed by applying the U.S. federal income tax rate
to income before income taxes. The reasons for these differences are as follows:
% of Pre-Tax
Income
-----------------------
1996 1995 1994
-----------------------
Computed "expected" income tax expense ............ 35.0% 35.0% 35.0%
State income taxes, net of federal tax benefit .... 4.0 4.0 4.0
Goodwill amortization ............................. 10.1 12.3 13.0
Other ............................................. (2.3) (3.0) (3.1)
-----------------------
46.8% 48.3% 48.9%
=======================
Foreign taxes are not material.
Net deferred tax liabilities consist of the following components as of September
30, 1996, 1995, and 1994:
1996 1995 1994
-----------------------
(In Thousands)
Deferred tax liabilities:
Property and equipment ............................ $1,264 $1,293 $1,351
Other ............................................. 294 - - - -
----------------------
1,558 1,293 1,351
----------------------
Deferred tax assets:
Accrued compensation .............................. 157 152 145
Receivable allowance .............................. 148 172 223
Accrued warranty .................................. 219 186 225
Inventory reserves ................................ 384 455 556
Long-term lease ................................... 594 618 660
Other ............................................. 359 510 354
----------------------
1,861 2,093 2,163
----------------------
$ 303 $ 800 $ 812
======================
The components giving rise to the net deferred tax assets described above have
been included in the accompanying balance sheets as of September 30, 1996, 1995,
and 1994 as follows:
1996 1995 1994
------------------------
(In Thousands)
Current assets .................................. $1,102 $1,167 $1,167
Noncurrent liabilities .......................... (799) (367) (355)
------------------------
$ 303 $ 800 $ 812
========================
The Company is a member of a group that files consolidated federal and state tax
returns. Accordingly, income taxes payable to the tax authorities are recognized
on the financial statements of the parent company, who is the taxpayer for
income tax purposes. The members of the consolidated group allocate payments to
any member of the group for the income tax reduction resulting from the member's
inclusion in the consolidated return, or the member makes payments to the parent
company for its allocated share of the consolidated income tax liability. This
allocation approximates the amounts that would be reported if the Company was
separately filing its tax returns.
Note 7. Retirement Plan
The Company's qualified employees are participants in the Xxx Employee's
Retirement Account Plan, a defined contribution plan. The costs charged to
operations for the years ended September 30, 1996, 1995, and 1994 were
approximately $801,530, $829,169, and $844,837, respectively.
Note 8. Research and Development Expenses
Research and development expenses for the years ended September 30, 1996, 1995,
and 1994 were approximately $495,000, $1,894,000, and $2,797,000, respectively.
Note 9. Foreign Operations and Export Sales
Included in the net sales for the years ended September 30, 1996, 1995, and 1994
are export sales totaling approximately $23,061,000, $25,769,000, and
$30,282,000, respectively. The geographic areas of these sales are summarized as
follows:
1996 1995 1994
-------------------------
(In Thousands)
Europe .............................................. $13,464 $15,430 $16,881
Asia ................................................ 3,354 4,231 3,800
Canada .............................................. 3,288 1,827 2,328
Other ............................................... 2,955 4,281 7,273
-------------------------
$23,061 $25,769 $30,282
=========================
Note 10. Material Contracts
During 1993, the Company appointed BASF Lacke & Farben AG (BASF) as its
distributor of letterpress printing plates for the European market. The
distribution agreement provides for the payment in U.S. dollars subject to
periodic pricing revisions. Absent a defined terminating event, the agreement
provides for a three year contract with automatic one year renewal terms. The
current one year extension will expire on December 31, 1997.
During 1995, BASF appointed the Company as its U.S. distributor of commercial
letterpress printing plates. Absent a defined terminating event, the agreement
expires on January 1, 2001, provides for periodic pricing revisions and
automatically extends for successive three year renewal terms.
The financial statements include the following transactions with BASF:
1996 1995 1994
--------------------------------
(In Thousands)
Net sales .................. $4,114 $6,502 $10,754
Purchases .................. 4,770 4,763 365
Accounts receivable ........ 68 202 531
Accounts payable ........... 1,043 5,012 21
Note 11. Subsequent Event
On November 4, 1996, Xxx signed a letter of intent to sell the Company. It is
anticipated that the closing will occur by January 17, 1997.
[GRAPHIC OMITTED]
NAPP SYSTEMS INC.
POLYFIBRON STOCK PURCHASE AGREEMENT
SCHEDULE:
3.10 Absence of Certain Developments.
(a) The Company is party to a sales agreement with ZED Instruments Ltd.,
Surrey, England, dated August 15, 1995, for the development of a
photopolymer exposing machine. Immediately following the public
announcement of the proposed transaction between Seller and Buyer, the
Company was advised by Xxxxx XxXxxxx, CFO of xxx Xxxxx Xxxxx, of
Westerly, R.I., parent company of ZED, that he was uncertain whether
ZED would complete its obligations under the sales agreement due to
competitive concerns expressed by another Xxxxx Group subsidiary and
competitor of Buyer, FULLFLEX, Inc. ZED has since completed work under
the sales agreement, but the exposing machine has not performed to the
specifications originally contemplated by ZED and the Company.
(e) See (a) above.
(g) The Napp Systems (Europe) retirement benefit plan is being terminated.
The Company increased the compensation of its senior officers on
October 1, 1996. The compensation adjustments were, in the opinion of
the Company, consistent with past practice in timing and amount.
(l) The Company has commenced proceedings for the dissolution of The Sleeve
System Inc. under the laws of the province of Ontario.
(o) See (a) above.
NAPP SYSTEMS INC.
POLYFIBRON STOCK PURCHASE AGREEMENT
SCHEDULE:
3.11 Governmental Authorizations; Licenses; Etc.
NAPP is currently disputing the U.S. Customs Service's reclassification of TA
906 (synthetic rubber) from duty-free status and seeks a refund of excess
duties paid as a consequence of such reclassification. The Company has
engaged the services of Xxxx X. Xxxx, Esq. of White & Case, Washington, D.C.
to pursue the matter on its behalf.
See Schedules 3.14 and 3.15, incorporated herein by reference.
NAPP SYSTEMS INC.
POLYFIBRON STOCK PURCHASE AGREEMENT
SCHEDULE:
3.12 Litigation
See Schedules 3.11, 3.14, 3.15 and 3.18, incorporated herein by reference.
NAPP SYSTEMS INC.
POLYFIBRON STOCK PURCHASE AGREEMENT
SCHEDULE 3.14
Federal income tax returns remain open for federal examination for taxable
years ended September 30, 1993 and subsequent years. Returns for the states
in which the Company files either separately or as part of a
combined/consolidated return with the Seller are also open for those periods
subject to any specific state variations relative to the statute of
limitations.
Inland Revenue in the United Kingdom has been examining the Company's income
tax returns for the years ended September 30, 1992 through 1994. The Company
has been advised It appears that the additional income tax for fiscal years
1992 and 1993 will be approximately (pound)85,500, plus interest. There may
be foreign tax credits available to offset against the Company's federal
income taxes which cannot be determined at this time. The accounting firm
involved with the examination has indicated that no adjustments are
anticipated for fiscal years 1994 and subsequent years, although no agreement
with Inland Revenue has been reached with respect to those years.
The Company also files income tax returns in Germany to reportable taxable
income from the Company's branch operations there. Those returns would be
open for examination subject to applicable laws. The Company has not agreed
to any extensions of the statutory period. The status of examinations, open
tax years and other taxes are explained in the attached letter from Xxxxx &
XxXxxxxx dated January 2, 1997.
No other income tax returns are filed in foreign jurisdictions.
The Company joins in the filing of the Seller's income tax return (either
consolidated or combined, depending on the particular state) in the following
states:
California
Colorado
Hawaii
Illinois
Minnesota
Montana
Nebraska
North Dakota
Oregon (including the City of Portland and Multnomah County returns)
The Company also files a separate income tax return in the State of Iowa.
The Company has not filed income/franchise tax returns in the Commonwealth of
Pennsylvania. The Department of Revenue has assessed tax in the amount of
$192,000 for taxable years ended September 30, 1974 through September 30,
1993. The Company has not agreed with these assessments.
The Iowa Department of Revenue has proposed changes in the Company's Iowa
income tax returns for years ended September 30, 1993 through 1995 which
would result in additional Iowa income tax of $11,257 in total plus
applicable penalties and interest. The Company has filed income tax returns
with the State of Iowa for these years but has apportioned no taxable income
to Iowa. Sales made in Iowa by the Company for these years have not been
treated as Iowa sales and have been treated as California sales under the
throwback provisions of the California statute. Accordingly, should these
sales ultimately be treated as Iowa sales, the California income tax returns
could be amended to reduce the income apportioned to that state. This should
result in tax refunds that would significantly reduce the net tax obligation
resulting from Iowa's proposed adjustments.
During 1996 the Company has received correspondence from the State of New
York requesting that a questionnaire be completed to determine if the Company
is subject to tax in that state. The Company has not complied with that
request.
The nature of the Company's activities in the states where customers exist
could be sufficient to cause income tax nexus in those states. Although the
Company files as part of a consolidated/combined return or files separately
in the states listed above the Company's sales in those states are not
included in the numerator of the sales factor of the respective states
(except California).
NAPP Printing Plate Distribution, Inc. was created in the year ended
September 30, 1996 to distribute plates manufactured by BASF. The Company has
not yet determined the state returns required for that entity.
The Company acquired The Sleeve Systems Inc. during the year ended September
30, 1996. The Company has not determined the income tax returns that are
required to be filed for that entity.
Regarding Section 5.2(g), the tax dispute of the Seller involves the
taxability of a dividend paid by the Company to the Seller in a period during
which the Company and the Seller had not filed as members of a consolidated
income tax return.
The Company is seeking recovery and reclassification of customs duties
imposed on TA-906 (synthetic rubber) as more particularly described in
Schedule 3.10(a).
Xxx Xxxxx
McGladrey & Xxxxxx, LLP
Certified Public Accountants
and Consultants
Fax Number 000 000 000 0000
cc: Xxxxxx X. Xxxxxx
Xxxx Systems, Inc.
January 2, 1997
Napp Systems (Europe) Ltd. - German tax issues
Dear Ray,
Thank you for your facsimile of December 31, 1996 on the captioned matter. I
should like to reply to your queries as follows:
ad 1) It is correct that the tax returns for fiscal 1994 were accepted as filed.
I should like to add, however, that German tax authorities are entitled to
perform a tax audit in order to verify the factual and legal bases for tax to be
levied. As a rule such audits cover a time period of three years. Napp Systems
(Europe) Ltd ("Ltd") was audited for fiscal years up to 1992. Therefore, it is
in the discretion of the tax authorities to audit the fiscal years from 1993
onwards.
ad 2) The tax returns for 1995 are to be filed by February 28, 1997. The
corporate income tax and trade tax on income of fiscal 1995 will be less than
the prepayments made. The corporate income tax will amount to approx. DM 25,000,
prepayments have been made in the amount of DM 36,150; trade tax on income will
amount to approx. DM 9,000, prepayments to DM 9,918.
The 1995 tax returns were not finalized yet since the German Federal Ministry of
Finance has published its letter on reciprocity of US sales taxes to German VAT
dated November 28, 1996 late in December, only. Reciprocity is a condition
precedent either to continue invoicing Napp Systems, Inc. ("Inc") with German
VAT for the services rendered by the German permanent establishment of Ltd as
originally required by Ltd's local tax office and complied with by December 1995
or to go on in further discussing with Ltd's tax office whether they finally
accept that the so-called zero-rule applies. The zero-rule applies if a foreign
enterprise renders services deemed to be effected in German (to a German
recipient), only, but has been suggested to analogously apply to the case at
hand by a tax official who called me. Reciprocity being stated, Ltd's VAT
liability will be equilibrised by Inc's claim for refund if Ltd is held to have
to invoice VAT to Inc.
ad 3) As stated above Ltd may be requested to continue invoiving Inc. with VAT
(15%) for services rendered from January 1996 onwards, Ltd's VAT liability
resulting from such invoicing towards its German tax office may be settled by
assigning Inc's VAT refund claim.
Employment taxes - ie wages taxes and social security - have been declared and
paid on a monthly basis currently. Wage taxes were audited in 1996. All wage tax
declarations filed up to December 1995 are final.
As to customs duties, please contact Xxxxx Xxxxxx. As far as I learned either
duty is not to accrue or duties will be settled by Inc. or the German customers.
The tax returns for fiscal 1996 are to be filed by February 28, 1998 at the
latest.
Sincerely yours,
/s/ Xxxxx xxx Xxxxxxxxxx
Xxxxx xxx Xxxxxxxxxx
NAPP SYSTEMS INC.
POLYFIBRON STOCK PURCHASE AGREEMENT
SCHEDULE: 3.15 Environmental and Safety Matters
(a) (Compliance)
NAPP Systems, Inc. (NAPP) is currently not in compliance with California
Health & Safety Code, Division 20, Chapter 10.4 ("Asbestos Notification"),
because the company has not adopted and implemented an Asbestos Management Plan
as required by Health & Safety Code Sec. 25915.1. NAPP's plan is still in draft
form pending a final internal review. Some elements of the plan have not yet
been implemented.
During 1996, NAPP operated some plate processing equipment while air
pollution permit application #950286 was pending but before startup
authorizations #950114 & 950115 were received. During this period NAPP had
variance petition #3306 pending. Startup authorizations were issued before
action was taken on this petition.
In July 1985 the California Water Quality Control Board for the San Diego
Region issued Cleanup and Abatement Order #85-70, in connection with
contamination associated with an Underground Storage Tank. The Order has been
satisified, and was rescinded in March 1996.
NAPP has received the following Notices of Violation from the San Diego Air
Pollution Control District. All of these matters have been resolved.
5/16/80, re: Violation of Rule 10(a)&(b) for installation/operation of a
boiler and presensitized printing plate manufacturing line.
8/15/84, re: Violatioin of Rule 21, failure to comply with a permit
condition (operating temperature too low for an incinerator).
5/24/90, re: Violation of Rule 21, failure to comply with a permit
condition (record keeping)
6/26/91, re: Violation of Rule 21, 67.4 and 10(a), failure to comply with a
permit condition (records keeping), failure to obtain written
pre-authorization to alter equipment.
All other prior non-compliance within Seller's Knowledge has been the
subject of agency notices set out in subsection (c) below.
(b) (Permits)
NAPP's current permits will not need to be transferred or reissued so long
as NAPP Systems, Inc. remains the permitted operator of record for NAPP's
permitted facilities. These permits will need to be modified to change the
listed owner.
As of 12-16-96, NAPP held the following permits and registrations:
San Diego Air Pollution Control District
1. Permit No. 5167, Presensitized print plate mfg. line (Letterpress,
NS-2, fume condensers/scrubbers).
2. Xxxxxx Xx. 000000, XXXXXxxx Coil coating line (extruder, mixers);
Startup Authorization 950806.
3. Permit No. 7164, Xxxx Xxxx Converting system (small press).
4. Permit Nos. 1611, 6973 & 1610, 12.5 MM BTU/hr Boilers and Application
No. 960175.
5. Permit No. 880855, Pilot metal coating line (R&D).
6. Permit No. 930480, Parts degreaser (mechanics).
7. Permit No. 930686, Parts degreaser (electricians).
8. Permit Nos. 950114 & 950115, Startup Authorization 950286 Plate
processors (BASF equipment).
9. Emission Reduction Credit Certificate 860894-02, 17.35 tons per year.
10. Cooling Tower Registrations, Towers #1, 2, 3, 5, 6, & 7.
Department of Health Services, County of San Diego
Hazardous Material Establishment #H06217, EPA Generator ID# CAD063237341
including: Underground fuel tank (diesel), Chemical Business Plan/Hazardous
Material REsponse
Risk Management and Prevention Program - Acutely Hazardous Materials
Registration X-0000
Xxxxxxxxxxx monitoring well closure plan acceptance 7/96.
U.S. Environmental Protection Agency
Hazardous Water Generator ID #CAD063237341
TRI Facility ID# 92069-NPPSY-360SO
TSCA Premanufacture Notices:
- Polymer Exemption 4-85-51 for MAR 70-3
- Polymer Exemption Y-87-32 for MAR 123A
- Polymer Exemption Y-87-33 for MAR 151
- Polymer Exemption Y-89-140 for MAR 195
State of California EPA/Department of Toxic Substances Control
Hazardous Waste Generator ID #HAHQ36006067
Tiered Permits:
- Conditional Authorization for pH neutralization
- Conditional Exemption for Special Waste - Drum handling
State of California, Water Quality Control Board, San Diego Region
Cleanup and Abatement Order #85-70, issued 7/85, rescinded 3/96.
Encina Wastewater Authority/Vallecitos Water District
Wastewater Discharge Permit #5010
Cal-OSHA
Permit to Operate Air Pressure Tank - P10913, 12173 & A25419 (boiler room),
A25519 (backlot), 22343-87 (NS-3A) and 21990-92 (R&D)
Permit to Operate Steam Boiler - 03899, 03900 & 10058
Elevator Permit #057145
Department of Transportation
Hazardous Material Registration #051396 017 031E
In addition to these specific permits and registrations, NAPP has prepared
and maintains the plans and reports required under various federal, state and
local regulations. Examples of these include: Air Toxics Inventory Xxxx/Xxxxxx
XX 0000; Air Pollution Emergency Traffic Abatement Plan File No. 721 C;
Hazardous Waste Resource Reduction and Management Review Act (SB 14) Report,
Plan and Summary; UST Management Plan, Chemical Hygiene Plan; and Injury and
Illness Prevention Plan (SB 198).
(c) (Notice to NAPP of actual or alleged violations)
Chromium in Wastewater: U.S. EPA Finding of Violation and Order, Docket No.
CWA-IX-FY95-29, Related EPA Notices; and Encina Wastewater Authority Notices of
Violation
In 1994, in response to a U.S. EPA suggestion, The Encina Wastewater
Authority (EWA) set out to enforce EPA's categorical effluent pretreatment
standards for coil coating (40 C.F.R. Part 465) and NAPP Systems. These
regulations set discharge limits on a mass basis, in proportion to the surface
area of material being coated. The monitoring regime specified in NAPP's permit,
when applied to NAPP's partly-continuous, partly batch waste water management
processes, did not provide the data required to determine whether NAPP was in
compliance with these standards.
In both May and June, 1994 EWA issued a Notice of Violation for excess
chromium discharge from XXXX'x XX-2 pretreatment line. In February 1995, while
these EWA notices were being discussed with EWA, the U.S. EPA conducted a
facility inspection at NAPP. EPA's inspection report, dated March 23, 1995
alleged violations of categorical pretreatment standards for wastewater that are
applicable to NAPP. NAPP disputed those allegations in a letter dated April 26,
1995. EPA proceed to issue its Finding of Violation and Order, #CWA-IX-FY95-029,
on May 31, 1995.
In this order, EPA ordered NAPP to implement a special monitoring regime to
provide additional data concerning its treatment system and effluent. The
monitoring regime specified by EPA requires separatae testing of higher-chromium
wash waters and lower-chromium but higher volume rinse waters. These sample
values are weighted by flows to calculate chromium discharges per square meter
of material processed.
In a May 10, 1996 letter to NAPP the U.S. EPA alleged, based on data from
this added monitoring, that NAPP had been in violation of effluent discharge
limits in July and September 1995. This letter also modified and clarified EPA's
order, and extended the special monitoring period through December 1996. NAPP
responded by letter dated June 4, 1996, stating that July 1995 was a shakedown
period for new monitoring procedures, and that the apparent September 1995
exceedance was the result of a specific data processing error by EPA.
EPA also raised an issued in this letter as to whether NAPP was in
violation of 40 CFR 403.6(d) which prohibits dilution. EWA echoed this concern
in its May 29, 1996 letter, discussed further below. This concern was based on
the agencies' opinoins that soap usage at NAPP had increased. After discussions
with legal counsel, NAPP concluded there had been no violation of the dilution
prohibition and that EPA had no authority to limit NAPP's soap use. NAPP
communicated these posisions to these agencies by letter dated June 4, 1996.
Neither EPA nor EWA has ever issued a finding or notice of violation for
dilution.
In May 29, 1996 letter, the EWA sent NAPP an EWA analysis of monitoring
data, and stated that this analysis showed six daily and five monthly chromium
limit violations between July 1995 and March 1996. This letter was not a formal
notice or finding of violation. NAPP responded in a June 21, 1996 letter by
noting several errors in EWA's data analysis, and by discussing the impacts on
calculated chromium discharges of some accidential mixing of wash water and the
rinse water prior to rinse water sampling. EWA orally agreed on June 6, 1996 to
re-examine its calculations and conclusions. No results of this re-evaluation
have been received to date.
In the May 29, 1996 letter, EWA also expressed concerns about sampling
integrity, after NAPP reported that some samples NAPP was required to collect
were missing. NAPP responded by taking additional stepts to ensure sample
collection and sample integrity.
On September 8, 1996, EWA issued a Notice of Violation to NAPP for
excessive chromium discharges associated with a production run that ended in
June 1996. NAPP responded by letter dated September 13, 1996 showing that the
data underlying the calculation had again been affected by wash water
contamination of a rinse water sample.
NAPP's Response to These EPA and EWA Notices
NAPP believes data collected prior to July 1995 are inadequate to permit a
determination of whether NAPP was in violation of categorical pretreatment
standards. NAPP also believes that it can operate, and with the possible
exceptions discussed below has operated, in compliance with these limits.
Therefore, NAPP initially responded to the EPA finding and order by collecting
data to demonstrate that it could comply with applicable limits without
installing new treatment equipment.
Some EPA and EWA notices during the special monitoring period were due
principally to the accidential mixing of wash water and rinse water in sump
upstream of the rinse water sample point. NAPP therefore proposed to EPA and EWA
that new berms and an additional sump be installed to prevent such mixing. These
physical modiciations have been completed.
NAPP's analysis of available monitoring data indicates that chromium
discharges for two shorter than average steel production runs in February-March,
1996 were above established limits. There was also a close call in June 1996.
Therefore, NAPP has decided to install additional waste water treatment
equipment to ensure compliance with chromium loading limits. The contracts for
installation of that equipment have been issued. NAPP has also begun segregating
discharges from different production runs, has provided more specific operator
training on sampling and data collection, and will continue to take samples more
frequently after the special monitoring period ends than it did before that
special monitoring began.
Neither EPA nor EWA have proposed any penalties or taken any other
enforcement actions based on the alleged violations discussed above. These
agencies could do so in the future.
Encina Wastewater Authority - Notices of Violations of TDS Limits
In 19940-1995 NAPP violated the 1,500 mg/liter total dissolved solids (TDS)
limit in the EPA-approved version of the general ordinance for the Encina
Wastewater Authority (EWA). Local limits violation dates (notices issued):
November 23, 1994 (1/17/95), February 8, 1995 (2/24/95), May 19, 1995 (6/26/95)
and June 22, 1995 (7/17/95).
NAPP is not required to monitor TDS. These notices of violation from EWA
were based on occasional EWA testing that has since been discontinued. The TDS
limit at issue was enacted to pave the way for an anticipated EWA water
reclamation project. EWA has not taken or proposed any enforement action against
NAPP or other dischargers based on TDS exceedances, and NAPP anticipates that
this limit will be changed fore any enforcement action is taken. The EWA board
has already directed its staff to prepare a change in its general ordinance that
will replace the current TDS gross concetration limit with a mass-based loading
limit that NAPP expects to be able to meet. That change has not been enacted and
must be approved by the San Diego Regional Water Quality Control Board before it
will be effective.
County Department of Environmental Health Services Notices
Violations noted during routine annual hazardous materials and hazardous
waste inspections of NAPP by the County Department of Environmental Health (DEH)
and its predecessor agency on inspection reports since 1986 are listed below.
Early violations have been resolved by expiration of teh applicable statute of
limitations. Later violations are legally "unresolved" because the County has
authority to seek civil penalties for these kinds of violations. However, the
County has never sought such penalties against NAPP or, to NAPP's knowledge
against anyone else. NAPP has always corrected problems noted by DEH during the
agency inspection, or shortly thereafter.
"CCR" references are to Title 22 California Code of Regulations, section as
indicated. "H&SC" references are to the California Health and Safety Code.
CCR 66508/66262.34 - Storage time 1986, 1993
CCR 67243/66265.173 - Closed container 1986, 1986, 1996
CCR 67105 - Training of personnel 1986
H&SC 25503.5/25505, CCR 67140 - Contingency/Business plan 186, 1989, 1993
CCR 66482 - Complete manifest 1987
CCR 66262.34/66508/H&SC 25124 - Complete label 1987, 1989, 1993, 1994, 1996
CCR 67106/66265.31 - Grounded waste 1987, 1989, 1994
CCR 66265.35 - Aisle space obstructed 1993, 1994
CCR 2635 - Written UST Response plan 1993
H&SC 25292.2 UST Financial coverage 1994
CCR 2712 - UST monitoring records 1994, 1996
CCR 2651 - UST Release log 1994
CCR 2652 - UST Action report 1994
CCR 2632 - UST Written procedures/plan 1994
CCR 66266.81 - Used Oil filters 1996
H&SC 25504 - Incomplete inventory 1996
Employee Disability Claim
In 1988, a NAPP employee filed a workmen's compensation disability claim,
and also sued a NAPP supplier, alleging that she had been injured by exposure to
fumes released during a drying operation at NAPP. Other employee complaints were
also received concerning these fumes. The disability claim was settled, the
lawsuit was dismissed, and the employee was placed into a vocational
rehabilitation program. Therefore, this matter has been resolved.
NAPP has since improved its fume capture and ventilation systems. A
consultant firm, Xxx X. Xxxxxx Inc. did a plant-wide evaluation of industrial
ventilation/exhausts systems. Recommendations made by the consultants resulted
in physical changes to stack locations, heights and intakes that improved the
air quality.
Other Worker's Compensation Claims
Open claims for former and current employees exist for policy years 1992
through the current policy year, 1996. Approximately twenty-three open claims
are identified in the current loss runs represented as attachment number 1.
(d)(i) (Underground Storage Tanks)
In Use:
One 20,000 underground diesel fuel storage tank
One 1,000 stanless steel underground catchment tank
Closed:
Two USTs were closed in place by concrete filling in 1985 and 1993 - 12,000
and 15,000 gallons. One diesel UST was removed in 1985 (30,000 gallons) - all
under permit with the County of San Diego.
(d)(ii) (Asbestos)
Asbestos-containing materials are present in parts of the NAPP facility.
Known asbestos containing materials (ACM) are as follows:
NS-1 cathobar woven cloth insulation material
Resin kettle oven cloth insulation material, kettle #5
Oven exhaust duct, vertical, woven-material - NS-1
Molding ovens thin cord gasket material
Roof mastic around various air handling units
Suspected ACM consists of boiler gaskets, and cloth insulation in various areas.
(e) (Potential Liability for Cleanup)
Off-Site Storage, Treatment, Disposal, and Recycling
NAPP has arranged for various substances to be taken from the San Marcos
facility to other locations for disposal, treatment or recycling. A list of
offsite facilities that have been used by NAPP to manage chemical wastes is
provided in attachment number 2. NAPP believes all such substances have been
managed legally and appropriately, and has no knowledge of any environmental
contamination or personal injury caused by these substances. However, NAPP could
be identified as a potentially responsible party in any contamination that might
be dected at any of these sites in the future.
Attachments
1. Worker's Compensation schedule - open claims 1992-1996.
2. NAPP transport, disposal and treatment facilities.
NAPP SYSTEMS INC.
POLYFIBRON STOCK PURCHASE AGREEMENT
SCHEDULE:
3.16 a (i,ii) Employee Matters
All Employees with Annual Base Salaries of $50,000 and Over
November 1, 1996
Employee Name Title Base Salary
------------------- -------------------------------- -----------
Xxxxxxxx, Xxxx Director-Manufacturing Tech $102,197
Xxxxxxx, Xxxxx Dir-Research & Development 94,660
Xxxxxxx, Xxxx X. Director-Manuf Operations 94,193
Xxxxxxx, Xxxxxx X. Senior Technical Specialist 77,434
Xxxx, Xxxx Electronic Pre-Press Specialist 75,000
Xxxxx, Xxxxxx X. Senior Flexo Mktg Specialist 73,546
Xxxxxxx, Xxxxxxxx W. Manager-Key Accounts 73,496
Xxxxxxxxxxx, D E Senior Electrical Engineer 72,037
Xxxxxxxxx, Xxxxx X. Senior Technical Sales Rep. 70,600
Xxxxxxxx, Xxxxx Manager-Finance 70,600
Xxxx, Xxxxx X. Senior Technical Sales Rep. 70,600
Xxxxxxx, Xxxx X. Manager-Env. Compliance/Safety 69,821
Xxxxxxx, Xxx X. Senior Technical Sales Rep. 69,457
Xxxxxxx, Xxxxx X. Mgr Manuf Oper-Prnt Plt/Facil 67,783
Xxxxxx, Xxxxxx X. Senior Design Engineer 67,079
Xxxx, Xxxx X. Senior Mechanical Engineer 66,071
Xxxxxxxx, Xxxxxx X. Senior Mechanical Engineer 65,708
Xxxx, Xxxxx Mgr-Manufacturing Technical 64,539
Xxxxxxx, Xxxxxxx X. Senior Optical Engineer 64,116
Xxxxxxx, Xxxxxxx X. Research Associate 63,300
Xxxxxx, Xxxx X. Research Associate 63,076
Xxxxxxx, Xxxxxx Technical Specialist/Trainer 62,606
Xxxxxxxxx, Xxxxxx X. Product Specialist 62,550
Xxxxxx, Xxxxx X. Research Associate 62,527
Xxxxxxx, Xxxxxx Manager-Human Resources 61,805
Xxxxxxxxxx, Xxxx Mgr Manuf Oper-Prod/Plan/Cntrl 61,053
Xxxxxx, Xxxxxx X. Senior Technical Sales Rep 60,941
Xxxxxx, Xxxxx X. Senior Electrical Engineer 60,715
Xxxxx, Xxxxxxx Mgr-Distribution/Customer Serv 59,734
Coop, Xxxx X. Senior Technical Sales Representativ 58,417
Xxxxxx, Xxxxxxx X. Process Engineer 58,300
Xxxxxxxx, Xxxxxx X. Senior Equipment Rep 57,606
Xxxxxx, Xxxxxxx X. Senior Scientist 56,169
Xxxxx, Xxxxxxx X. Supervisor-Purchasing 52,900
Xxxxxxxxx, Xxxxxx Supvr Manuf-Prnt Plt/1st 52,900
Xxxxxx, Xxxxxxx X. Supvr Manuf-Prnt Plt/3rd 52,880
Xxxxxxxx, Xxxxxx X. Supervisor-Maintenance 52,431
Xxxxx, Xxxxx X. Senior Cost Accountant 52,376
Xxxxxx, Xxxxxx X. Supervisor-Equipment Services 51,707
Xxxxxxx, Xxxx X. Product Specialist 51,063
All employees are paid biweekly up to the date when checks are issued.
No employment agreements exist for any of the above employees.
For bonus information, see Section 3.17a.
Sales Representatives on a Base Plus Commission Plan
With Potential to Earn Over $50,000 Per Year
November 1, 1996
Employee Name Title Base Salary
------------------- ------------------------------ -----------
Xxxxxxx, Xxxxxx Technical Sales Representative $31,275
Xxxxx, Xxxxxx X. Technical Sales Representative 31,275
Xxxxxx, Xxxxxxx X. Technical Sales Representative 31,275
Xxxxx, Xxxx X. Technical Sales Representative 31,275
Xxxxx, Xxxxxx X. Technical Sales Representative 31,275
Xxxxx, Xxxxxxx X. Technical Sales Representative 31,275
Base salary is paid biweekly up to the date when checks are issued.
Compensation agreements exist for the following employees:
Xxx Xxxxx: Guarantee of at least $3,333.33 per month through 4/31/1998
Xxxx Xxxxx: Guarantee of at least $1,250.00 per month through 4/31/1997
No employment agreements exist for any of the other employees listed.
For incentive information, refer to the attached Sales Compensation Plan.
a(i)-(ii)
CURRENT
NAME TITLE SALARY TERMS OF PAYMENT
---------------- -------------------- ---------- -----------------------
Xxx Xxxx-Xxxxx President and COO $173,250 paid monthly in advance
Xxxxx Xxxxxx VP Finance & CFO $132,650 paid monthly in advance
Xxxxxx Xxxxxxxx VP newspaper sales $119,680 paid monthly in advance
& Human Resources
Xxxxxx Xxxxx Managing Director $237,790DM paid monthly in advance
Europe
note:
Contracts exist for all of the above. See schedule 3.19(a)(3)
For bonus information see schedule 3.17(a)
a(iii) Directors of the Company and its Subsidiaries:
NAPP Systems Inc. Xxxxxxx X. Xxxxxxxx
Xxxx Xxx Xxxxxxxxx
X.X. Xxxxxx
Xxxx Xxxxx
XXXX Systems (Europe) Ltd. Xxxx XxxXxxxxxxxx
Xxxxxx X. Xxxxxx
X.X. Xxxxxx
NAPP Printing Plate Distribution, Inc. Xxxx XxxXxxxxxxxx
Xxxx Xxxxx
The Sleeve System Inc. Xxxxx X. Xxxxxx
X.X. Xxxxxx
NAPP SYSTEMS INC.
POLYFIBRON STOCK PURCHASE AGREEMENT
SCHEDULE:
3.17 EMPLOYEE BENEFIT PLANS
(a)
HEALTH MEDICAL INSURANCE PLANS (all provided previously):
Xxx PPO Medical
Xxx Comprehensive Medical
Health Net HMO
Xxx Dental
United Dental Care/National Dental Health Prepaid Dental
LIFE INSURANCE:
Life Insurance Co. of North America Group LIfe and AD&D Insurance
(provided previously)
Travelers Insurance
DISABILITY INSURANCE PLAN:
Life Insurance Co. of North America Long Term Disability program
OTHER BENEFIT PLANS:
Flexible Spending Account-Principal Mutual Life Insurance Co.
Health and Human Resources Employee Assistance Program
Child/Elder Care Referral Program
Short Term Disability Program
Computer Purchase Program
Annual physicals for Directors/VPs'/President
Auto lease program for Managing Dir., Europe/VPs'/President
NAPP Bonus Plan
Employee OTS/TQY
Newspaper Sales Incentive Plan
APP Sales Compensation Plan
DEFERRED COMPENSATION:
None
PENSION/RETIREMENT/PROFIT SHARING PLANS:
Xxx Retirement Account Plan
Supplemental Executive Retirement Plan - Rabbi Trust (officers
only)
Annuity Plan for X. Xxxxxx and X. Xxxxxxxx
THRIFT PLANS:
none
SAVINGS PLANS:
none
EMPLOYEE STOCK OWNERSHIP, STOCK BONUS, STOCK PURCHASE, RESTRICTED AND
STOCK OPTION PLANS:
Xxx Employee Stock Purchase Plan (ESPP)
EMPLOYMENT OR SEVERANCE CONTRACTS:
Employment and Consulting Contracts - See Schedule 3.19(a)(3),
incorporated by reference
Severance procedure
NAPP SYSTEMS INC.
POLYFIBRON STOCK PURCHASE AGREEMENT
SCHEDULE:
3.18 Proprietary Rights
i) See attachment 1 A and attachment 1 B.
ii) See attachment 2 A and attachment 2 B.
iii) None.
iv) See attachment 3.
v) VMS 5.0 by the Digital Equipment Corporation Userbase Version 4.2
by Xxxx System
vi) See attachment 4. The termination of any of the agreements noted
in attachment 4 may cause a Material Address Change in the
business of the Company.
NAPP has been advised that another company has appropriated the name of
the Company in its Internet communications. The Company is seeking to
acquire the exclosure rights to its name for Internet use.
ATTACHMENT 1A
PATENTED PROPRIETARY RIGHTS
December 30, 1996
PSB&C
Docket Serial Number Date Filed
Number Country Title Inventor (Patent Number) (Issued) Status
--------- ------- --------------------------- ---------- --------------- ----------- ---------------------------
P41 9345 US Water-Developable Xxxxxx and 08/036,984 3/25/93 First Maintenance Fee Due
Photosensitive Plate Kelsall (5,350,661) (09/27/94) 03/27/98; Expires 03/25/13
Especially Suited for
Commerical Flexographic
Printing
P41 9842 US Apparatus and Process for Xxxxxx X. 07/783,267 10/28/91 First Maintenance Fee Due
processing Printing Plates Xxxxxx (5,223,041) (06/29/93) 12/29/96; Expires 10/28/11
FP41 0000 Xxxxxx Apparatus and Process for Xxxxxx X. 601,185 5/30/89 Expires 2/22/11
Processing Printing Plates Xxxxxx (1,327,156) (2/22/94)
P41 9824 US Water Developable Kiyomi 06/649,905 9/12/84 Third Maintenance Fee Due
Photopolymerizable Sakurai (4,540,649) (9/10/85) 3/10/97; Expires 9/12/04
Composition and Printing
Plate Element Containing
Same
FP41 United Water Developable Xxxxxx 0000000 7/15/85 Expires 7/15/05
9826 Kingdom Composition and Printing Sakurai (2164347) (9/10/87)
Plate Element Containing
Same
FP41 Japan Water Developable Kiyomi 169656/1985 7/30/85 Expires 7/30/05
9828 Composition and Printing Sakurai (1893100) (12/26/94)
Plate Element Containing
Same
FP41 Belgium Photosensitive Compositions Xxxxxx X. PVO/167,002 5/13/76 Expires 5/13/96
9832 Xxxxxxx (841,797) (5/31/76)
FP41 Canada Photosensitive Compositions Xxxxxx X. 249,489 4/2/76 Expires 12/23/00
9833 Xxxxxxx (1,091,969) (12/23/80)
FP41 United Photosensitive Compositions Xxxxxx X. 14886/76 4/12/76 Expires 4/12/96
0000 Xxxxxxx Xxxxxxx (1548764) (4/12/76)
P41 9835 US Photosensitive Graphic Arts Xxxxxx X. 06/442,515 11/18/82 Third Maintenance Fee Due
Article Xxxxxxx (4,522,910) (6/11/85) 12/11/96; Expires 11/18/02
FP41 United Photosensitive Compositions Okai and 23983/1977 6/8/77 Expires 6/8/97
9836 Kingdom Kimoto (1,568,104) (5/21/80)
P41 9837 US Bilayer Photosensitive Xxxxxx X. 06/395,289 7/6/82 Expires 7/6/02
Imaging Article Xxxxxxx (4,472,494) (9/18/84)
FP41 Canada Bilayer Photosensitive Xxxxxx X. 385,805 9/14/81 Expires 1/15/02
9840 Imaging Article Xxxxxxx (1,180,931) (1/15/85)
FP41 Japan Bilayer Photosensitive Xxxxxx X. 503143/1981 9/15/81 Expires 9/15/01
9839 Imaging Article Xxxxxxx (1,564,222) (6/12/90)
FP41 United Desensitizing Solution and Xxxxxx X. 7931698 2/06/79 Expires 2/06/99
9838 Kingdom Process for Treating Xxxxxxxx (2036993) (3/09/83)
Photosensitive Printing
Plate
P41 9841 US Apparatus and Method for Xxxxxxxx X. 06/269,561 6/02/81 Expires 6/02/01
Removing Soluble Portions of Xxxxxx (4,428,659) (1/31/84)
Coating
XX00 Xxxxxxxxx Photosensitive Polymeric Xxxxxxx X. 88466/91 12/2/91 Expires 12/2/06
90034 Printing Medium and Water Xxxxxx (650697) 9/11/94
Developable Printing Plates
ATTACHMENT 1B
REGISTERED PROPRIETARY RIGHTS
December 30, 1996
PSB&C Serial
Docket (Application) Date Registration Registration
Number Country Xxxx Date Filed Number Date Status
------------------------------------------------------------------------------------------------------------------------------------
T41 9667 US Flexcel 490,357 2/11/94 1,934,084 11/7/95 8 & 15 Affidavit Due
1/7/01; Renewal Due
11/7/05
FT41 9779 Canada Flexcel 759,809 7/20/94 Declaration of Use Due
7/20/97
FT41 0000 Xxxxxx Flexcel 94/531874 8/4/94 94/531874 0/0/00 Xxxxxxx Xxx 0/00/00
XX00 0000 Xxxxxxx Flexcel N 26 810/7Wz 7/21/94 2 904 247 6/21/95 Renewal Due 7/21/04
FT41 9786 United Flexcel 1579165 7/21/94 1579165 6/30/95 Renewal Due 2/14/01
Xxxxxxx
X00 00000 XX Titan 246,825 1/21/80 1,160,772 7/14/81 Renewal Due 7/14/01
X00 00000 XX Hydroseal 145,422 10/20/77 1,091,611 5/23/78 Renewal Due 5/23/98
X00 00000 XX Nappprint 283,458 10/27/80 1,241,712 6/14/83 Renewal Due 6/14/03
X00 00000 XX Take Advantage 138,154 8/19/77 1,122,525 7/17/79 Renewal Due 7/13/99
of XX
X00 00000 XX NAPP Logo 101,286 9/27/76 1,087,637 3/21/78 Renewal Due 3/21/98
X00 00000 XX NP 346,667 1/22/82 1,259,128 11/29/83 Renewal Due 11/29/03
X00 00000 XX NAPPlate 797,112 5/1/89 1,578,465 1/23/90 Renewal Due 1/23/00
X00 00000 XX NAPPflex 147,814 11/8/77 1,101,236 0/0/00 Xxxxxxx Xxx 0/0/00
XX00 00000 Xxxxxxx NAPPflex 360,970 0/0/00 Xxxxxxx Xxx 0/0/00
XX00 00000 Xxxxxxx NAPPflex 3595/79 8/30/79 1086-1980 2/22/80 Renewal Due 2/22/00
FT41 00000 Xxxxxxx NAPPflex 4232/79 8/29/79 79963 12/21/01 Renewal Due 12/21/01
FT41 00000 Xxxxxx NAPPflex 1,544,996 0/0/00 Xxxxxxx Xxx 0/0/00
XX00 00000 Xxxxxxx NAPPflex 16672/1WZ 9/10/79 1007260 9/5/80 Renewal Due 9/30/99
FT41 00000 Xxxxx NAPPflex 20882C/79 9/17/79 376.129 00/0/00 Xxxxxxx Xxx 0/00/00
XX00 00000 Xxxxxx NAPPflex 1980-02-15 8/29/79 171,092 2/15/80 Renewal Due 2/15/00
FT41 00000 Xxxxxxx- NAPPflex 4661 9/10/79 302063 9/10/79 Renewal Due 9/10/99
xxxx
X00 00000 XX NAPP 426,981 6/12/72 999,390 12/10/94 Renewal Due 12/10/04
FT41 00000 Xxxxxxxxx NAPP 261976 9/19/72 B261976 9/19/93 Renewal Due 9/19/07
FT41 00000 Xxxxxxxxx NAPP 272,342 9/19/72 B272,342 9/19/93 Renewal Due 9/19/07
FT41 00000 Xxxxxxx NAPP AM2328/79 8/30/79 93163 2/20/80 Renewal Due 2/20/00
FT41 90135 Benelux NAPP 593629 9/28/72 314316 1/30/73 Renewal Due 9/28/02
FT41 00000 Xxxxxxxx NAPP 1296 11/1/79 12,207 Renewal Due 11/1/99
FT41 00000 Xxxxxx NAPP 353,363 5/16/72 219947 0/0/00 Xxxxxxx Xxx 0/0/00
XX00 00000 Xxxxx NAPP 164342 9/6/79 164342 2/27/80 Renewal Due 9/6/99
Republic
FT41 90139 Denmark NAPP 3557/72 9/21/72/75 VR 02806.1975 7/11/75 Renewal Due 7/11/05
FT41 00000 Xxxxx NAPP 57042 2/28/80 57042 1/24/81 Renewal Due 1/30/00
FT41 00000 Xxxxx NAPP 57043 2/28/80 57043 1/24/81 Renewal Due 1/30/00
FT41 00000 Xxxxxxx NAPP 4788/72 9/29/72 66348 0/0/00 Xxxxxxx Xxx 0/0/00
XX00 00000 Xxxxxxx NAPP 4789/72 9/29/72 66349 6/6/77 Renewal Due 6/6/97
FT41 00000 Xxxxxx NAPP 1212390 8/6/92 1212390 0/0/00 Xxxxxxx Xxx 0/0/00
XX00 00000 Xxxxxxx NAPP 5617915 9/25/79 643008 4/11/80 Renewal Due 9/30/99
FT41 00000 Xxxxxxx NAPP 9/22/72 911499 1/13/93 Renewal Due 9/30/02
FT41 00000 Xxxxxx NAPP K13250 9/17/79 64543 9/17/89 Renewal Due 9/17/99
FT41 00000 Xxxxxxx NAPP 2253/1123/79 8/31/79 122096 2/22/80 Renewal Due 8/31/99
FT41 00000 Xxxxx NAPP 254.677 10/16/89 Renewal Due 10/16/99
FT41 00000 Xxxxxxx NAPP 8/29/79 B96398 00/0/00 Xxxxxxx Xxx 0/00/00
XX00 00000 Xxxxxxx NAPP 8/29/79 B96399 10/4/82 Renewal Due 8/28/00
FT41 00000 Xxxxx NAPP 410036/72 9/28/72 635635 11/23/94 Renewal Due 9/28/02
FT41 00000 Xxxxx NAPP 56102/1969 7/2/69 940928 12/11/71 Renewal Due 12/11/01
FT41 00000 Xxxxx NAPP 56103/1969 7/2/69 923802 8/23/71 Renewal Due 8/23/01
FT41 00000 Xxxxx NAPP 734901/1995 10/19/95 1166787 10/27/75 Renewal Due 10/27/05
FT41 90156 South NAPP 41339 1/20/75 Awaiting Certificate of
Korea Renewal
FT41 00000 Xxxxxxxx NAPP m/60761 9/28/72 Renewal Due 9/28/07
FT41 90159 New NAPP 5/9/74 108180 4/29/76 Renewal Due 5/9/09
Zealand
1
FT41 90160 New NAPP 9/22/72 101951 0/0/00 Xxxxxxx Xxx 0/0/00
Xxxxxxx
XX00 00000 Xxxxxx NAPP 792429 8/28/79 110364 1/14/82 Renewal Due 1/14/02
FT41 00000 Xxxxxx NAPP 78682 10/29/79 57752 9/9/80 Renewal Due 10/29/99
FT41 00000 Xxxxxxxx NAPP 9/6/79 203743 1/30/85 Renewal Due 1/30/05;
Declaration of Intent to
Use Due 1/30/00
FT41 00000 Xxxxxxxx NAPP 9/6/79 203744 12/17/86 Renewal Due 12/17/96;
Declaration of Intent to
Use Due 12/17/01
FT41 00000 Xxxxxxx NAPP 9738 9/15/79 12127 9/15/89 Renewal Due 9/15/99
FT41 00000 Xxxxxxxxx NAPP 9/27/92 B55872 1/18/80 Renewal Due 9/27/03
FT41 90168 South NAPP 79/4577 8/28/79 79/4577 3/3/89 Renewal Due 8/28/99
Africa
FT41 00000 Xxxxx NAPP 919405 9/5/80 Renewal Due 9/5/00
FT41 00000 Xxxxx NAPP 947451 0/0/00 Xxxxxxx Xxx 0/0/00
XX00 00000 Xxxxxx NAPP 709/1973 10/26/73 145669 1/18/74 Renewal Due 1/18/04
FT41 00000 Xxxxxxx- XXXX 400799 9/20/92 Renewal Due 9/20/12
land
FT41 00000 Xxxxxx NAPP 5/1/83 63322 5/1/93 Renewal Due 4/30/03
T41 00000 Xxxxxxxx NAPP 238,988 12/26/72 KOR5189 8/16/93 Renewal Due 12/25/02
FT41 00000 Xxxxxxxx NAPP Combined with FT 90174
When Renewed 8/16/93
FT41 00000 Xxxxxxxx NAPP 244781 5/25/73 KOR3536 7/1/93 Renewal Due 5/24/03
FT41 00000 Xxxxxx NAPP 68,609 3/31/80 118,447 3/31/90 Renewal Due 3/31/00
FT41 90178 Yugosla- NAPP Z-652/79 9/6/79 35846 7/25/91 Renewal Due 9/6/99
via
FT41 00000 Xxxxxx Waterplate 236,839 3/10/95 Renewal Due 10/26/09
ATTACHMENT 2A
PENDING PATENT APPLICATIONS
December 30, 1996
PSB&C Serial Number Date
Docket (Patent Filed
Number Country Title Inventor Number) (Issued) Status
------------------------------------------------------------------------------------------------------------------------------------
FP41
9708 PCT Water-Developable Kelsall and US94/03024 3/21/94 Commenced National Stage
Photosensitive Plate Xxxxxx 9/25/95 Published as WO
Especially Suited For 94/22057
Commercial Flexographic
Printing
FP41
90032 Europe Water-Developable Kelsall and 94912816.9 3/21/94 Awaiting Further Examination
Photosensitive Plate Xxxxxx
Especially Suited For
Commerical Flexographic
Printing
P41 9394 US Water-Soluble Compositions Xxxxxxx 08/122,906 09/16/93 Abandoned in Favor of CIP
For Preparation of Xxxxxxxx P41 90084
Letterpress Printing Plates Xxxxxxx
and Methods For the Use
Therefor
P41
90084 US Water-Soluble Compositions Xxxxxxx 08/546,112 10/20/95 Awaiting Further Examination
For Preparation of Xxxxxxxx
Letterpress Printing Plates Xxxxxxx
and Methods For the Use
Thereof (CIP of 9394)
P41 9715 US Water-Soluble Compositions Xxxxxxx 08/342,172 11/18/94 Abandoned in Favor of File
For Preparation of Durable, and Xxxxxxxx Wrapper Continuation
High-Resolution Printing P41 90194
Plates and Methods For the
Use Thereof
P41 US Water-Soluble Compositions Xxxxxxx and 08/621,508 3/25/96 Awaiting First Office
90194 For Preparation of Durable, Xxxxxxxx Action
High-Resolution Printing
Plates and Methods For the
Use Thereof (FWC of P41
9715)
FP41 Europe Apparatus and Process for Xxxxxx X. 89906937.1 6/26/89 Awaiting Further Examination
9821 Processing Printing Plates Xxxxxx
FP41 Japan Apparatus and Process for Xxxxxx X. 1-506483 5/26/89 Awaiting Further Office
9831 Processing Printing Plates Xxxxxx Action
FP41 Germany Water Developable Kiyomi P3525901.9 7/19/85 Awaiting Further Examination
9827 Composition and Printing Xxxxxxx
Xxxxx Xxxxxxx Xxxxxxxxxx
Xxxx
X00 0000 US Method for Reducing the Idacavage and 08/460,245 6/2/95 Response to Office Action
Level of Diluent in Diluent- Kelsall Due 12/27/96
Containing Resins Using
Microwave Energy
FP41 PCT Method for Reducing the Idacavage and US96/07344 5/21/96 Chapter II Deadline
90236 Level of Diluent in Diluent- Kelsall 01/02/97; National Stage
Containing Resins Using Deadline 02/02/97
Microwave Energy
FP41 Canada Photosensitive Polymeric Xxxxxxx X. 2,056,762-7 12/2/91 Awaiting Further Examination
90035 Printing Medium and Water Xxxxxx
Developable Printing Plates
FP41 Europe Photosenstive Polymeric Xxxxxxx X. 91311120.9 11/29/91 Awaiting Further Examination
90036 Printing Medium and Water Xxxxxx
Developable Printing Plates
P41 US Methods to Increase the Xxxxxxx 08/650,920 05/15/96 Awaiting Further Examination
90076 Exposure Sensitivity of Male
Photopolymerizable Matrices Xxxxxxx
and Apparatus Useful
Therefore
P41 US Flexographic Printing Plate Xxx Xxxx- Not Yet Filed
90188 Mounting System Xxxxx
P41 US Highly Sensitive Xxxxxxx ET Not Yet Filed
90197 Photopolymerizable AL.
Compositions Useful for
Laser Imaging
P41 US Printing Plate Mounting Chmielnik 08/350,100 11/29/94 Issue Fee Paid 7/18/96;
90231 Device Awaiting Patent Number and
Issue Date
P41 US Printing Plate Mounting Chmielnik 08/452,535 05/30/95 Issue Fee Due 1/1/97
90232 Device (CIP of 08/350,100)
FP41 PCT Printing Plate Mounting Chmielnik CA95/00584 10/18/95 Response Due 11/22/96; New
90233 Device National Stage Deadline
5/29/97
ATTACHMENT 2B
PENDING PROPRIETARY RIGHTS REGISTRATION
December 30, 1996
PSB&C Serial
Docket (Application) Date Registration Registration
Number Country Xxxx Date Filed Number Date Status
------------------------------------------------------------------------------------------------------------------------------------
FT41 0000 Xxxxxx Flexcel 817935479 8/11/94 Opposition Filed
FT41 0000 Xxxxx Flexcel T094C002176 8/3/94 Awaiting Examination
FT41 0000 Xxxxx Flexcel 77502/94 7/29/94 Awaiting Publication;
Decision of Publication
Received 8/5/96
FT41 0000 Xxxxxx Flexcel 206,838 7/28/94 Awaiting Further Examination
FT41 90157 Former NAPP PZ-1542/94 3/8/94 Awaiting Examination
Yugoslav
Republic
of
Macedonia
FT41 00000 Xxxxxxxx NAPP Z-7980652 2/21/94 Pending - Not Yet Issued;
Awaiting Further Action
T41 90354 US The Boxer 10/4/96 Awaiting Filing Particulars
ATTACHMENT 3
PRINTING PLATES
NAPPLATE V COLOR PLATE WR
NAPPLATE WH-8 WRPLATE-E
NAPPLATE CLP NAPPFLEX II
NAPPLATE C NAPPFLEX HS
NAPPLATE VI SPEEDPLATE V
FLEXCEL WATERPLATE
EQUIPMENT
FP-I NP-20
FP-II NP-40
FP-F XX-00
XX-X XX-000
XX-XX X-000
XX-XXXX X-000
NEWSPRINTER C-220
TITAN THE BOXER
NEW STAR
STAR LITE
MISCELLANEOUS
NAPP TAKE ADVANTAGE OF US
FP-III CLEANER NP
HYDROSEAL NAPP LOGO
NAPPRINT
ATTACHMENT 4
1) Assignment and License Agreement between Nippon Paint Co., Ltd. and NAPP
SYSTEMS, INC., effective 1/1/91
2) Amended and Substituted Assignement and License Agreement between Nippon
Paint Co., LTD., and NAPP SYSTEMS, INC., effective 1/1/95
3) JSR Distribution Agreement
4) BASF 1995 Distribution Agreement
NAPP SYSTEMS INC.
POLYFIBRON STOCK PURCHASE AGREEMENT
SCHEDULE:
3.19 Contracts.
(a)
(1) Open equipment purchase orders as of
Nov. 25, 1996 greater than $5,000:
Advanced Chemical Systems - wastewater
treatment system costing $39,750
(2) Capital Leases - None
(3) Employment and Consulting Agreements:
Xxx Xxxx-Xxxxx
Xxxxxx Xxxxxx
Xxxxxx Xxxxxxxx
Xxxxxx Xxxxx
Xxxxx Xxxxxx
Xxxxx Xxxxxx
Xxxxxxx Xxxxxxx
Xxxxx Xxxxxxxxxx
(4) Personal property leases greater than $5,000:
Mercedes-Benz auto lease
Oldsmobile Aurora auto lease
Acura auto lease
Various office equipment leases
(5) Distribution agreements:
BASF Lacke & Farben AG - 2/12/93 - Europe
BASF Lacke & Farben AG - 8/25/95 - USA
NIPPE Graphics Co. Ltd. - Asia
Majori - Brazil
Penews Inc. - South America
R.G. s.r.l. - Italy
XX Xxxxx & Co. - Northeast U.S.
XX Xxxxx Canada, Ltd. - Canada
Expressline LLC - U.S., Canada and Mexico
KBA Xxxxxx representative agreement - Europe
NAPP SYSTEMS INC.
POLYFIBRON STOCK PURCHASE AGREEMENT
SCHEDULE:
3.19 Contracts (cont.)
(a)
(6) License agreements:
Nippon Paint License Agreement
Western Lithotech License Agreement
(7) Suretyship, guarantee or indemnification commitments
Escrow Indemnity Agreement with Xxxxxxxx and
Xxxxxxxxx Xxxxxxxxx and Montreal Trust Company
of Canada
(8) Prohibition from doing business agreements
BASF Contracts
(9) Any other agreements greater than $25,000:
Ricon Resins joint development agreement
Transaction distribution Ltd. - London warehouse
Zed Instruments Ltd. - sales agreement for laser
exposing system. Currently subject to renegotiation.
(10) Any other non-competition agreements or nondisclosure
covenants - None
(b) Representatives of BASF have notified the Company and the
Seller of BASF's desire to modify the BASF Contracts with
regard to nondisclosure and minimum purchase requirements to
be effective after the Closing.
(e) Change in control provisions - The employment agreements
between the Company and Messrs. Xxxx-Xxxxx and Xxxxxx
and Xx. Xxxxxxxx contain ceertain provisions which
become operative upon the occurrence of a "change of
control" as defined herein.
NAPP SYSTEMS INC.
POLYFIBRON STOCK PURCHASE AGREEMENT
SCHEDULE 3.21
SUMMARY OF INSURANCE COVERAGES
COVERAGE INSURANCE CARRIER POLICY YEAR TYPE LIMITS DEDUCTIBLES
------------------------------------------------------------------------------------------------------------------------------------
A. ALL RISK PROPERTY, ARKWRIGHT 06/96-06/97 OCCURRENCE $750MM $10,000 PROPERTY DAMAGE
BOILER, AND MACH- $10,000 BUSINESS INTER
INERY (INCLUDING ALSO VARIOUS DEDUCTIBL
BUSINESS INTERRUP-
TION & REPLACEMENT
VALUE COVERAGE)
B. DIFFERENCE IN RLI INS 06/96-06/97 OCCURRENCE $5MM 5% SEPARATE PROPERTY
CONDITIONS (INCL PRIMARY 5% SEPARATE TIME ELEM
CALIFORNIA
EARTHQUAKE)
C. EARTHQUAKE AGRI INS 06/96-06/97 OCCURRENCE $5 MM
X OF $5MM
D. EARTHQUAKE FRONTIER INS 06/96-06/97 OCCURRENCE $5MM
X OF $10MM
E. GENERAL LIABILITY LIBERTY MUTUAL 06/96-06/97 OCCURRENCE $1 MM PER NONE
OCCURRENCE,
$2MM AGGREGATE
F. UMBRELLA LIABILITY LIBERTY MUTUAL 06/96-06/97 OCCURRENCE $10MM NONE
EXCESS CASUALTY)
G. AUTO LIABILITY LIBERTY MUTUAL 06/96-06/97 OCCURRENCE $1MM NONE
H. WORKER'S COMPEN- ALLIANZ INS. CO. 02/96-02/97 OCCURRENCE STATUTORY NONE
SATION
I. DIRECTOR & OFFICERS CHUBB 06/96-06/97 CLAIMS MADE $20MM D&O $350,000 CORP. REIMB.
LIABILITY $5MM NONE FOR DIRECTORS
FIDUCIARY
J. BLANKET CRIME CHUBB 03/96-03/97 OCCURRENCE $1MM $50,000 EMPLOYEE THEFT
EMPLOYEE $1,000 CREDIT CARD FOR
THEFT $25,000 OTHER COVERAGE
$100,000
CREDIT CARD
$500,000 OTHER
K. OCEAN MARINE ROYAL EXCHANGE 06/96-06/97 OCCURRENCE $1MM NONE
L. INTERNATIONAL CHUBB 06/96-06/97 OCCURRENCE $1MM NONE
LIABILITY
*Terminates at closing
See also Schedule 3.17, by reference incorporated herein, with regard to
insurance coverages under Employee Benefit Plans.
NAPP SYSTEMS INC.
POLYFIBRON STOCK PURCHASE AGREEMENT
SCHEDULE:
3.22 Real Property
(a)
(1) Owned real estate - legal descriptions
Manufacturing building - 1972 R & D building - 1979
Unimproved land - 1982
(2) Real Property Leases:
Xxxxxxxx Properties - Xxxxxxxxx warehouse
Skillbond Limited - High Wycombe lease
Oberursel office lease
(c) NAPP is currently to sub-lease the High
Wycombe facility.
NAPP SYSTEMS INC.
POLYFIBRON STOCK PURCHASE AGREEMENT
SCHEDULE:
3.23 TRANSACTION WITH AFFILIATES
Plate Supply Agreement
Transition Services Agreement
NAPP SYSTEMS INC.
POLYFIBRON STOCK PURCHASE AGREEMENT
SCHEDULE:
3.24 Account Receivable
(a) Employee and other receivables as of 9/30/96:
AMOUNT
--------
employee computer purchase program $ 46,393
executive auto leases 692
duty drawback claim - 1995 314,899
duty drawback claim - 1996 170,000
refundable duty on MAR TA 906 261,000
scrap metal sales 3,331
--------
$796,315
========
NAPP SYSTEMS INC.
POLYFIBRON STOCK PURCHASE AGREEMENT
SCHEDULE:
3.28 Brokers
None.
Schedule 4.4
Buyer Consents
Consent is required pursuant to (i) the Credit Agreement dated December 29, 1994
as amended, by and among the Buyer, its subsidiary Xxxxxxx, X.X., Banque Paribas
for itself and as agent for the lenders party thereto and certain other lenders
(the "Credit Agreement") and certain other Loan Documents as therein defined and
(ii) the Subordinated Credit Agreement (as defined in the Credit Agreement).
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to by
duly executed as of the day and year first above written.
ATTEST: POLYFIBRON TECHNOLOGIES, INC.
By: /s/ Xxxxxx X. Xxxxxx By: /s/ Xxxxx X. Xxxxxxxxx
------------------------ ---------------------------
Name: Xxxxxx X. Xxxxxx Name: Xxxxx X. Xxxxxxxxx
Title: Chief Financial Officer Title: President/CEO
ATTEST XXX ENTERPRISES, INCORPORATED
By: /s/ X.X. Xxxxxxxx III By: /s/ Xxxxxxx X. Xxxxxxxx
----------------------- ---------------------------
Name: X. X. Xxxxxxxx III Name: Xxxxxxx X. Xxxxxxxx
Title: Secretary Title: President/CEO
