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EXHIBIT 2.2
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement ("Agreement") is made as of January 1, 1997, by
Selfix, Inc., a Delaware corporation ("Buyer"), Xxxxxxx X. Xxxxx, Xxxxxxx X.
Xxxxx, Xxxxxxxx X. Tata, Xxxxxxx X. Tata and Xxxxxxx X. Tata (collectively
"Sellers").
RECITALS
Sellers desire to sell, and Buyer desires to purchase, all of the issued and
outstanding shares (the "Shares") of capital stock of Tamor Plastics Corp., a
Massachusetts corporation (the "Company"), for the consideration and on the
terms set forth in this Agreement.
AGREEMENT
The parties, intending to be legally bound, agree as follows:
1. DEFINITIONS
For purposes of this Agreement, the following terms have the meanings specified
or referred to in this Section 1:
"ADJUSTMENT AMOUNT"--as defined in Section 2.3.
"APPLICABLE CONTRACT"--any Contract (a) under which the Company has or may
acquire any rights, (b) under which the Company has or may become subject to
any obligation or liability, or (c) by which the Company or any of the assets
owned or used by it is or may become bound.
"BALANCE SHEET"--as defined in Section 3.4.
"BEST EFFORTS"--the efforts that a prudent Person desirous of achieving a
result would use in similar circumstances to ensure that such result is
achieved as expeditiously as possible.
"BREACH"--a "Breach" of a representation, warranty, covenant, obligation, or
other provision of this Agreement or any instrument delivered pursuant to this
Agreement will be deemed to have occurred if there is or has been (a) any
inaccuracy in or breach of, or any failure to perform or comply with, such
representation, warranty, covenant, obligation, or other provision, or (b) any
claim (by any Person) or other occurrence or circumstance that is or was
inconsistent with such representation, warranty, covenant, obligation, or other
provision, and the term "Breach" means any such inaccuracy, breach, failure,
claim, occurrence, or circumstance.
"BUYER"--as defined in the first paragraph of this Agreement.
"CLOSING"--as defined in Section 2.4.
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"CLOSING DATE"--the date and time as of which the Closing actually takes place.
"COMPANY"--as defined in the Recitals of this Agreement.
"CONSENT"--any approval, consent, ratification, waiver, or other authorization
(including any Governmental Authorization).
"CONTEMPLATED TRANSACTIONS"--all of the transactions contemplated by this
Agreement, including:
(a) the sale of the Shares by Sellers to Buyer;
(b) the execution, delivery, and performance of the Noncompetition
Agreements;
(c) the performance by Buyer and Sellers of their respective covenants
and obligations under this Agreement; and
(d) Buyer's acquisition and ownership of the Shares and exercise of
control over the Company.
"CONTRACT"--any agreement, contract, obligation, promise, or undertaking
(whether written or oral and whether express or implied) that is legally
binding.
"DAMAGES"--as defined in Section 10.2.
"DISCLOSURE LETTER"--the disclosure schedules delivered by Sellers to Buyer
concurrently with the execution and delivery of this Agreement.
"ENCUMBRANCE"--any charge, claim, community property interest, condition,
equitable interest, lien, option, pledge, security interest, right of first
refusal, or restriction of any kind, including any restriction on use, voting,
transfer, receipt of income, or exercise of any other attribute of ownership.
"ENVIRONMENT"--soil, land surface or subsurface strata, surface waters
(including navigable waters, ocean waters, streams, ponds, drainage basins, and
wetlands), groundwaters, drinking water supply, stream sediments, ambient air
(including indoor air), plant and animal life, and any other environmental
medium or natural resource.
"ENVIRONMENTAL, HEALTH, AND SAFETY LIABILITIES"--any cost, damages, expense,
liability, obligation, or other responsibility arising from or under
Environmental Law or Occupational Safety and Health Law and consisting of or
relating to:
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(a) any environmental, health, or safety matters or conditions (including
on-site or off-site contamination, occupational safety and health, and
regulation of chemical substances or products);
(b) fines, penalties, judgments, awards, settlements, legal or
administrative proceedings, damages, losses, claims, demands and
response, investigative, remedial, or inspection costs and expenses
arising under Environmental Law or Occupational Safety and Health Law;
(c) financial responsibility under Environmental Law or Occupational
Safety and Health Law for cleanup costs or corrective action, including
any investigation, cleanup, removal, containment, or other remediation or
response actions ("Cleanup") required by applicable Environmental Law or
Occupational Safety and Health Law (whether or not such Cleanup has been
required or requested by any Governmental Body or any other Person) and
for any natural resource damages; or
(d) any other compliance, corrective, investigative, or remedial measures
required under Environmental Law or Occupational Safety and Health Law.
The terms "removal," "remedial," and "response action," include the types of
activities covered by the United States Comprehensive Environmental Response,
Compensation, and Liability Act, 42 U.S.C. Section 9601 et seq., as amended
("CERCLA").
"ENVIRONMENTAL LAW"--any Legal Requirement that requires or relates to:
(a) advising appropriate authorities, employees, and the public of
intended or actual releases of pollutants or hazardous substances or
materials, violations of discharge limits, or other prohibitions and of
the commencements of activities, such as resource extraction or
construction, that could have significant impact on the Environment;
(b) preventing or reducing to acceptable levels the release of pollutants
or hazardous substances or materials into the Environment;
(c) reducing the quantities, preventing the release, or minimizing the
hazardous characteristics of wastes that are generated;
(d) assuring that products are designed, formulated, packaged, and used
so that they do not present unreasonable risks to human health or the
Environment when used or disposed of;
(e) protecting resources, species, or ecological amenities;
(f) reducing to acceptable levels the risks inherent in the
transportation of hazardous substances, pollutants, oil, or other
potentially harmful substances;
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(g) cleaning up pollutants that have been released, preventing the threat
of release, or paying the costs of such clean up or prevention; or
(h) making responsible parties pay private parties, or groups of them,
for damages done to their health or the Environment, or permitting
self-appointed representatives of the public interest to recover for
injuries done to public assets.
"ERISA"--the Employee Retirement Income Security Act of 1974 or any successor
law, and regulations and rules issued pursuant to that Act or any successor
law.
"ESCROW AGREEMENT"--as defined in Section 10.3.
"FACILITIES"--any real property, leaseholds, or other interests currently or
formerly owned or operated by the Company and any buildings, plants,
structures, or equipment (including motor vehicles, tank cars, and rolling
stock) currently or formerly owned or operated by the Company.
"GAAP"--generally accepted United States accounting principles, applied on a
basis consistent with the basis on which the Balance Sheet and the other
financial statements referred to in Section 3.4(b) were prepared.
"GOVERNMENTAL AUTHORIZATION"--any approval, consent, license, permit, waiver,
or other authorization issued, granted, given, or otherwise made available by
or under the authority of any Governmental Body or pursuant to any Legal
Requirement.
"GOVERNMENTAL BODY"--any:
(a) nation, state, county, city, town, village, district, or other
jurisdiction of any nature;
(b) federal, state, local, municipal, foreign, or other government;
(c) governmental or quasi-governmental authority of any nature (including
any governmental agency, branch, department, official, or entity and any
court or other tribunal);
(d) multi-national organization or body; or
(e) body exercising, or entitled to exercise, any administrative,
executive, judicial, legislative, police, regulatory, or taxing authority
or power of any nature.
"HAZARDOUS ACTIVITY"--the distribution, generation, handling, importing,
management, manufacturing, processing, production, refinement, Release,
storage, transfer, transportation, treatment, or use (including any withdrawal
or other use of groundwater) of Hazardous
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Materials in, on, under, about, or from the Facilities or any part thereof into
the Environment, and any other act, business, operation, or thing that
increases the danger, or risk of danger, or poses an unreasonable risk of harm
to persons or property on or off the Facilities, or that may affect the value
of the Facilities or the Company.
"HAZARDOUS MATERIALS"--any waste or other substance that is listed, defined,
designated, or classified as, or otherwise determined to be, hazardous,
radioactive, or toxic or a pollutant or a contaminant under or pursuant to any
Environmental Law, including any admixture or solution thereof, and
specifically including petroleum and all derivatives thereof or synthetic
substitutes therefor and asbestos or asbestos-containing materials.
"HOUSEWARES TRANSACTION"--the contemplated merger of Housewares Sales, Inc.
with and into Buyer.
"HSR ACT"--the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976 or any
successor law, and regulations and rules issued pursuant to that Act or any
successor law.
"INTELLECTUAL PROPERTY ASSETS" --as defined in Section 3.22.
"INTERIM BALANCE SHEET"--as defined in Section 3.4.
"INTERIM BALANCE SHEET DATE"--September 30, 1996.
"IRC"--the Internal Revenue Code of 1986 or any successor law, and regulations
issued by the IRS pursuant to the Internal Revenue Code or any successor law.
"IRS"--the United States Internal Revenue Service or any successor agency, and,
to the extent relevant, the United States Department of the Treasury.
"KNOWLEDGE"--an individual will be deemed to have "Knowledge" of a particular
fact or other matter if:
(a) such individual is actually aware of such fact or other matter; or
(b) such individual knows or should be expected to know the possible
existence of such fact or other matter which could be learned by a
reasonably comprehensive investigation.
A Person (other than an individual) will be deemed to have "Knowledge" of a
particular fact or other matter if any individual who is serving, or who has at
any time served, as a director, officer, partner, executor, or trustee of such
Person (or in any similar capacity) has, or at any time had, Knowledge of such
fact or other matter.
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"LEGAL REQUIREMENT"--any federal, state, local, municipal, foreign,
international, multinational, or other administrative order, constitution, law,
ordinance, principle of common law, regulation, statute, or treaty.
"NONCOMPETITION AGREEMENTS"--as defined in Section 2.5(a)(iv) and (v).
"OCCUPATIONAL SAFETY AND HEALTH LAW"--any Legal Requirement designed to provide
safe and healthful working conditions and to reduce occupational safety and
health hazards, and any program, whether governmental or private (including
those promulgated or sponsored by industry associations and insurance
companies), designed to provide safe and healthful working conditions.
"ORDER"--any award, decision, injunction, judgment, order, ruling, subpoena, or
verdict entered, issued, made, or rendered by any court, administrative agency,
or other Governmental Body or by any arbitrator.
"ORDINARY COURSE OF BUSINESS"--an action taken by a Person will be deemed to
have been taken in the "Ordinary Course of Business" only if:
(a) such action is consistent with the past practices of such Person and
is taken in the ordinary course of the normal day-to-day operations of
such Person;
(b) such action is not required to be authorized by the board of
directors of such Person (or by any Person or group of Persons exercising
similar authority); and
(c) such action is similar in nature and magnitude to actions customarily
taken, without any authorization by the board of directors (or by any
Person or group of Persons exercising similar authority), in the ordinary
course of the normal day-to-day operations of other Persons that are in
the same line of business as such Person.
"ORGANIZATIONAL DOCUMENTS"--(a) the articles or certificate of incorporation
and the bylaws of a corporation; and (b) any amendment to any of the
foregoing.
"PERSON"--any individual, corporation (including any non-profit corporation),
general or limited partnership, limited liability company, joint venture,
estate, trust, association, organization, labor union, or other entity or
Governmental Body.
"PLAN"--as defined in Section 3.13.
"PROCEEDING"--any action, arbitration, audit, hearing, investigation,
litigation, or suit (whether civil, criminal, administrative, investigative, or
informal) commenced, brought, conducted, or heard by or before, or otherwise
involving, any Governmental Body or arbitrator.
"PROMISSORY NOTES"--as defined in Section 2.5(b)(i).
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"RELATED PERSON"--with respect to a particular individual:
(a) each other member of such individual's Family;
(b) any Person that is directly or indirectly controlled by such
individual or one or more members of such individual's Family;
(c) any Person in which such individual or members of such individual's
Family hold (individually or in the aggregate) a Material Interest; and
(d) any Person with respect to which such individual or one or more
members of such individual's Family serves as a director, officer,
partner, executor, or trustee (or in a similar capacity).
With respect to a specified Person other than an individual:
(a) any Person that directly or indirectly controls, is directly or
indirectly controlled by, or is directly or indirectly under common
control with such specified Person;
(b) any Person that holds a Material Interest in such specified Person;
(c) each Person that serves as a director, officer, partner, executor, or
trustee of such specified Person (or in a similar capacity);
(d) any Person in which such specified Person holds a Material Interest;
(e) any Person with respect to which such specified Person serves as a
general partner or a trustee (or in a similar capacity); and
(f) any Related Person of any individual described in clause (b) or (c).
For purposes of this definition, (a) the "Family" of an individual includes (i)
the individual, (ii) the individual's spouse, (iii) any other natural person
who is related to the individual or the individual's spouse within the second
degree, and (iv) any other natural person who resides with such individual, and
(b) "Material Interest" means direct or indirect beneficial ownership (as
defined in Rule 13d-3 under the Securities Exchange Act of 1934) of voting
securities or other voting interests representing at least 10% of the
outstanding voting power of a Person or equity securities or other equity
interests representing at least 10% of the outstanding equity securities or
equity interests in a Person.
"RELEASE"--any spilling, leaking, emitting, discharging, depositing, escaping,
leaching, dumping, or other releasing into the Environment, whether intentional
or unintentional.
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"REPRESENTATIVE"--with respect to a particular Person, any director, officer,
employee, agent, consultant, advisor, or other representative of such Person,
including legal counsel, accountants, and financial advisors.
"SECURITIES ACT"--the Securities Act of 1933 or any successor law, and
regulations and rules issued pursuant to that Act or any successor law.
"SELLERS"--as defined in the first paragraph of this Agreement.
"SHARES"--as defined in the Recitals of this Agreement.
"SUBSIDIARY"--with respect to any Person (the "Owner"), any corporation or
other Person of which securities or other interests having the power to elect a
majority of that corporation's or other Person's board of directors or similar
governing body, or otherwise having the power to direct the business and
policies of that corporation or other Person (other than securities or other
interests having such power only upon the happening of a contingency that has
not occurred) are held by the Owner or one or more of its Subsidiaries; when
used without reference to a particular Person, "Subsidiary" means a Subsidiary
of the Company.
"TAX RETURN"--any return (including any information return), report, statement,
schedule, notice, form, or other document or information filed with or
submitted to, or required to be filed with or submitted to, any Governmental
Body in connection with the determination, assessment, collection, or payment
of any Tax or in connection with the administration, implementation, or
enforcement of or compliance with any Legal Requirement relating to any Tax.
"THREAT OF RELEASE"--a substantial likelihood of a Release that may require
action in order to prevent or mitigate damage to the Environment that may
result from such Release.
"THREATENED"--a claim, Proceeding, dispute, action, or other matter will be
deemed to have been "Threatened" if any demand or statement has been made
(orally or in writing) or any notice has been given (orally or in writing), or
if any other event has occurred or any other circumstances exist, that would
lead a prudent Person to conclude that such a claim, Proceeding, dispute,
action, or other matter is likely to be asserted, commenced, taken, or
otherwise pursued in the future.
2. SALE AND TRANSFER OF SHARES; CLOSING
2.1 SHARES
Subject to the terms and conditions of this Agreement, at the Closing, Sellers
will sell and transfer the Shares to Buyer, and Buyer will purchase the Shares
from Sellers.
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2.2 PURCHASE PRICE
The purchase price (the "Purchase Price") for the Shares will be Twenty-Four
Million, Nine Hundred Ninety Thousand Dollars ($24,990,000) less the Adjustment
Amount. Buyer will pay the sum of $300,000 of the Purchase Price to the escrow
agent referred to in the Escrow Agreement. The balance of the Purchase Price
shall be deferred and payable pursuant to the Promissory Notes.
2.3 ADJUSTMENT AMOUNT
The Adjustment Amount will be equal to the sum of the following:
(i) the amount of any prepayment penalty incurred by the Company as a
result of the repayment of the Company's obligations to Phoenixcor or any
other party equipment financing.
(ii) the amount which would be payable to Xxxxxxx upon termination of his
employment with the Company, pursuant to a certain employment agreement
between Xxxxxxx and the Company dated March 25, 1993, being $500,000;
(iii) the amount of all dividends and S distributions paid to Sellers
from June 30, 1996 to the Closing Date; and
(iv) one-half (1/2) of the sum of the principal balance and all interest
accruing from June 30, 1996, of the Company's note payable to the estate
of Xxxxxxx X. Tata dated September 27, 1996, as of the Closing Date.
2.4 CLOSING
The purchase and sale (the "Closing") provided for in this Agreement will take
place at the offices of Seller's counsel at 10:00 a.m. (local time) on the date
that is five (5) business days following the delivery to Buyer of audited
financial statements of the Company for the year ended December 31, 1996; which
date is anticipated to be January 27, 1997. The Closing will be effective at
12:01 a.m. on January 1, 1997, and Buyer shall assume and enjoy the risk and
benefits from the operation of the Sellers from January 1, 1997. Buyer shall
report all income and pay all applicable federal and state taxes with respect
to income of the Company beginning January 1, 1997.
2.5 CLOSING OBLIGATIONS
At the Closing:
(a) Sellers will deliver to Buyer:
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(i) certificates representing the Shares, duly endorsed (or
accompanied by duly executed stock powers), for transfer to Buyer;
(ii) noncompetition agreement and a two year employment letter
agreement for a salary of $178,000, plus the Management Incentive
Plan bonus and other prerequisites of an executive of Selfix in the
form of Exhibit 2.5(a)(ii), executed by Xxxxxxx X. Xxxxx;
(iii) noncompetition agreement in the form of Exhibit 2.5(a)(iii),
executed by Xxxxxxx X. Xxxxx (such agreement, together with the
noncompetition agreement described in (iv) above, shall be referred
to collectively as the "Noncompetition Agreements"); and
(iv) a certificate executed by Sellers representing and warranting
to Buyer that each of Sellers' representations and warranties in
this Agreement was accurate in all respects as of the date of this
Agreement and is accurate in all respects as of the Closing Date as
if made on the Closing Date (giving full effect to any supplements
to the Disclosure Letter that were delivered by Sellers to Buyer
prior to the Closing Date in accordance with Section 5.5).
(b) Buyer will deliver:
(i) to Sellers promissory notes in the form of Exhibit 2.5(b) in
the following amounts:
Xxxxxxx X. Xxxxx $
Xxxxxxx X. Xxxxx $
Xxxxxxxx X. Tata $
Xxxxxxx X. Tata $
Xxxxxxx X. Tata $
(ii) to Sellers a certificate executed by Buyer to the effect that,
except as otherwise stated in such certificate, each of Buyer's
representations and warranties in this Agreement was accurate in
all respects as of the date of this Agreement and is accurate in
all respects as of the Closing Date as if made on the Closing Date;
and
(iii) to Xxxxxxx X. Xxxxx and Xxxxxxx X. Xxxxx the Noncompetition
Agreements and a two year employment agreement for a salary of
$178,000, plus the Management Incentive Plan bonus and other
prerequisites of an executive employee of Selfix executed by Buyer;
and
(iv) to the escrow agent referred to in the Escrow Agreement, the
sum of $100,000.
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(c) Buyer and Sellers will enter into the Escrow Agreement described in
Section 10.3.
(d) Buyer intends to make a Section 338(h)(10) election pursuant to the
Internal Revenue Code in connection with the Contemplated Transactions.
Sellers agree to cooperate with Buyer in making such election, including
filing, and causing the Company to file, any necessary elections with the
Internal Revenue Service. In that regard, each of the Sellers agree to execute
a power of attorney in the form of Exhibit 2.5(d). Buyer agrees to reimburse
the Seller and the Seller's shareholders for any taxes incurred by the Seller
or its shareholders by reason of making an election pursuant to IRC Section
338(h)(10) in excess of the amount of taxes that would have been incurred in
the absence of making the election. The taxes which Buyer agrees to reimburse
above if caused by the IRC Section 338(h)(10) election shall include but not be
limited to the Massachusetts Corporate Excise Tax, any Massachusetts income tax
or capital gains tax assessed or imposed on the shareholder Xxxxxxx X. Tata and
Xxxxxxx X. Tata as well as any American or Foreign federal, state, municipal or
local income, gross receipts, windfall profits, severance, property,
production, sales, use, value added, license, excise, franchise, employment,
withholding, capital stock, levies, imposts, duties, transfer and registration
fees or similar taxes or charges imposed on, or measured by, the income,
payroll, properties or operations of Tamor, together with any interest,
additions or penalties, deficiencies, or assessments with respect thereto and
any interest in respect of such additions or penalties.
2.6 PURCHASE OF INSURANCE.
At the Closing, each of the Sellers, upon notice to Buyers at least 10 days
prior to the Closing Date, shall have the right to purchase from the Company
any life insurance on their lives which are owned by the Company (other than
certain policies designated by the Company as Key Man Insurance on the lives of
Xxxxxxx and Xxxxxxx). The purchase price of any such policy shall be equal to
the then cash value of the policy plus any prepaid premiums on such policy.
3. REPRESENTATIONS AND WARRANTIES OF SELLERS
Sellers represent and warrant to Buyer as follows:
3.1 ORGANIZATION AND GOOD STANDING
(a) Part 3.1 of the Disclosure Letter contains a complete and accurate
list for the Company of jurisdictions in which it is authorized to do
business, and its capitalization (including the identity of each
stockholder and the number of shares held by each). The Company is a
corporation duly organized, validly existing, and in good standing under
the laws of the State of Massachusetts, with full corporate power and
authority to conduct its business as it is now being conducted, to own or
use the properties and assets that it purports to own or use, and to
perform all its obligations under Applicable Contracts. The Company is
duly qualified to do business as a foreign corporation and is
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in good standing under the laws of each state or other jurisdiction in
which either the ownership or use of the properties owned or used by it,
or the nature of the activities conducted by it, requires such
qualification. The Company has no subsidiaries.
(b) Sellers have delivered to Buyer copies of the Organizational
Documents of the Company, as currently in effect.
3.2 AUTHORITY; NO CONFLICT
(a) This Agreement constitutes the legal, valid, and binding obligation
of Sellers, enforceable against Sellers in accordance with its terms.
Upon the execution and delivery by Sellers of the Noncompetition
Agreements (collectively, the "Sellers' Closing Documents"), the Sellers'
Closing Documents will constitute the legal, valid, and binding
obligations of Sellers, enforceable against Sellers in accordance with
their respective terms. Sellers have the absolute and unrestricted right,
power, authority, and capacity to execute and deliver this Agreement and
the Sellers' Closing Documents and to perform their obligations under
this Agreement and the Sellers' Closing Documents.
(b) Except as set forth in Part 3.2 of the Disclosure Letter, neither the
execution and delivery of this Agreement nor the consummation or
performance of any of the Contemplated Transactions will, directly or
indirectly (with or without notice or lapse of time):
(i) contravene, conflict with, or result in a violation of (A) any
provision of the Organizational Documents of the Company, or (B)
any resolution adopted by the board of directors or the
stockholders of the Company;
(ii) contravene, conflict with, or result in a violation of, or
give any Governmental Body or other Person the right to challenge
any of the Contemplated Transactions or to exercise any remedy or
obtain any relief under, any Legal Requirement or any Order to
which the Company or any Seller, or any of the assets owned or used
by the Company, may be subject;
(iii) contravene, conflict with, or result in a violation of any of
the terms or requirements of, or give any Governmental Body the
right to revoke, withdraw, suspend, cancel, terminate, or modify,
any Governmental Authorization that is held by the Company or that
otherwise relates to the business of, or any of the assets owned or
used by, the Company;
(iv) cause Buyer or the Company to become subject to, or to become
liable for the payment of, any Tax;
(v) cause any of the assets owned by the Company to be reassessed
or revalued by any taxing authority or other Governmental Body;
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(vi) contravene, conflict with, or result in a violation or breach
of any provision of, or give any Person the right to declare a
default or exercise any remedy under, or to accelerate the maturity
or performance of, or to cancel, terminate, or modify, any
Applicable Contract; or
(vii) result in the imposition or creation of any Encumbrance upon
or with respect to any of the assets owned or used by the Company.
Except as set forth in Part 3.2 of the Disclosure Letter, no Seller or the
Company is or will be required to give any notice to or obtain any Consent from
any Person in connection with the execution and delivery of this Agreement or
the consummation or performance of any of the Contemplated Transactions.
3.3 CAPITALIZATION
The authorized equity securities of the Company consist of 100 shares of common
stock, no par value per share, of which 38.771 shares are issued and
outstanding and constitute the Shares. Sellers are and will be on the Closing
Date the record and beneficial owners and holders of all of the Shares, free
and clear of all Encumbrances. No legend or other reference to any purported
Encumbrance appears upon any certificate representing equity securities of the
Company. All of the outstanding equity securities of the Company have been duly
authorized and validly issued and are fully paid and nonassessable. There are
no Contracts relating to the issuance, sale, or transfer of any equity
securities or other securities of the Company. None of the outstanding equity
securities or other securities of the Company was issued in violation of the
Securities Act or any other Legal Requirement. The Company does not own, or has
no Contract to acquire, any equity securities or other securities of any Person
(other than Company) or any direct or indirect equity or ownership interest in
any other business.
3.4 FINANCIAL STATEMENTS
Sellers have delivered to Buyer: (a) audited balance sheet of the Company as
of December 31, 1995 ("Balance Sheet") and the related audited statements of
income, for the fiscal year then ended, and (b) an unaudited consolidated
balance sheet of the Company as at September 30, 1996 (the "Interim Balance
Sheet") and the related unaudited consolidated statements of income for the 9
months then ended, including in each case the notes thereto. Such financial
statements and notes fairly present the financial condition and the results of
operations, changes in stockholders' equity, and cash flow of the Company as at
the respective dates of and for the periods referred to in such financial
statements, all in accordance with GAAP; the financial statements referred to
in this Section 3.4 reflect the consistent application of such accounting
principles throughout the periods involved. No financial statements of any
Person is required by GAAP to be included in the consolidated financial
statements of the Company. Sellers have also delivered to Buyer certain
financial projections of the Company for the periods ended December 31, 1996
and December 31, 1997. The financial projections delivered by Sellers to
Buyers have been prepared by Sellers
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and represent a good faith estimate of the financial results of the Company for
the periods shown.
3.5 BOOKS AND RECORDS
The books of account, minute books, stock record books, and other records of
the Company, all of which have been made available to Buyer, are complete and
correct and have been maintained in accordance with sound business practices,
including the maintenance of an adequate system of internal controls. The
minute books of the Company contain accurate and complete records of all
meetings held of, and corporate action taken by, the stockholders, the Boards
of Directors, and committees of the Boards of Directors of the Company, and no
meeting of any such stockholders, Board of Directors, or committee has been
held for which minutes have not been prepared and are not contained in such
minute books. At the Closing, all of those books and records will be in the
possession of the Company.
3.6 TITLE TO PROPERTIES; ENCUMBRANCES
Part 3.6 of the Disclosure Letter contains a complete and accurate list of all
real property, leaseholds, or other interests therein owned by the Company.
Sellers have delivered or will make available to Buyer copies of the deeds and
other instruments (as recorded) by which the Company acquired such real
property and interests, and copies of all title insurance policies, opinions,
abstracts, and surveys in the possession of Sellers or the Company and relating
to such property or interests. The Company owns (with good and marketable title
in the case of real property, subject only to the matters permitted by the
following sentence) all the properties and assets (whether real, personal, or
mixed and whether tangible or intangible) that they purport to own located in
the Facilities owned or operated by the Company or reflected as owned in the
books and records of the Company, including all of the properties and assets
reflected in the Balance Sheet and the Interim Balance Sheet (except for assets
held under capitalized leases disclosed or not required to be disclosed in Part
3.6 of the Disclosure Letter and personal property sold since the date of the
Balance Sheet and the Interim Balance Sheet, as the case may be, in the
Ordinary Course of Business), and all of the properties and assets purchased or
otherwise acquired by the Company since the Balance Sheet (except for personal
property acquired and sold since the Balance Sheet in the Ordinary Course of
Business and consistent with past practice), which subsequently purchased or
acquired properties and assets (other than inventory and short-term
investments) are listed in Part 3.6 of the Disclosure Letter. All material
properties and assets reflected in the Balance Sheet and the Interim Balance
Sheet are free and clear of all Encumbrances and are not, in the case of real
property, subject to any rights of way, building use restrictions, exceptions,
variances, reservations, or limitations of any nature except, with respect to
all such properties and assets, (a) mortgages or security interests shown on
the Balance Sheet or the Interim Balance Sheet as securing specified
liabilities or obligations, with respect to which no default (or event that,
with notice or
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lapse of time or both, would constitute a default) exists, (b) mortgages or
security interests incurred in connection with the arm's length purchase of
property or assets after the date of the Interim Balance Sheet (such mortgages
and security interests being limited to the property or assets so acquired),
with respect to which no default (or event that, with notice or lapse of time
or both, would constitute a default) exists, (c) liens for current taxes not
yet due, and (d) with respect to real property, (i) minor imperfections of
title, if any, none of which is substantial in amount, materially detracts from
the value or impairs the use of the property subject thereto, or impairs the
operations of the Company, and (ii) zoning laws and other land use restrictions
that do not impair the present or anticipated use of the property subject
thereto. All buildings, plants, and structures owned by the Company lie wholly
within the boundaries of the real property owned by the Company and do not
encroach upon the property of, or otherwise conflict with the property rights
of, any other Person.
3.7 CONDITION AND SUFFICIENCY OF ASSETS
The buildings, plants, structures, and equipment of the Company are
structurally sound, are in good operating condition and repair, and are
adequate for the uses to which they are being put, and none of such buildings,
plants, structures, or equipment is in need of maintenance or repairs except
for ordinary, routine maintenance and repairs that are not material in nature
or cost. The building, plants, structures, and equipment of the Company are
sufficient for the continued conduct of the Company's businesses after the
Closing in substantially the same manner as conducted prior to the Closing.
3.8 ACCOUNTS RECEIVABLE
All accounts receivable of the Company that are reflected on the Balance Sheet
or the Interim Balance Sheet or on the accounting records of the Company as of
the Closing Date (collectively, the "Accounts Receivable") represent or will
represent valid obligations arising from sales actually made or services
actually performed in the Ordinary Course of Business. Unless paid prior to the
Closing Date, the Accounts Receivable are or will be as of the Closing Date
current and collectible net of the respective reserves shown on the Balance
Sheet or the Interim Balance Sheet or on the accounting records of the Company
as of the Closing Date (which reserves are adequate and calculated consistent
with past practice and, in the case of the reserve as of the Closing Date, will
not represent a greater percentage of the Accounts Receivable as of the Closing
Date than the reserve reflected in the Interim Balance Sheet represented of the
Accounts Receivable reflected therein and will not represent a material adverse
change in the composition of such Accounts Receivable in terms of aging).
Subject to such reserves, each of the Accounts Receivable either has been or
will be collected in full, without any set-off, within ninety days after the
day on which it first becomes due and payable. There is no contest, claim, or
right of set-off, other than returns in the Ordinary Course of Business, under
any Contract with any obligor of an Accounts Receivable relating to the amount
or validity of such Accounts Receivable. Part 3.8 of the Disclosure Letter
contains a complete and accurate list of all Accounts Receivable as of the date
of the Interim Balance Sheet, which list sets forth the aging of such Accounts
Receivable.
3.9 INVENTORY
All inventory of the Company, whether or not reflected in the Interim Balance
Sheet, consists of a quality and quantity usable and salable in the Ordinary
Course of Business, except for
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obsolete items and items of below-standard quality, all of which have been
written off or written down to net realizable value in the Interim Balance
Sheet or on the accounting records of the Company as of the Closing Date, as
the case may be. All inventories not written off have been priced at the lower
of cost or market. The quantities of each item of inventory (whether raw
materials, work-in-process, or finished goods) are not excessive, but are
reasonable in the present circumstances of the Company, and in no event
represent more than 180 days' supply of any item.
3.10 NO UNDISCLOSED LIABILITIES
Except as set forth in Part 3.10 of the Disclosure Letter, the Company has no
liabilities or obligations of any nature (whether known or unknown and whether
absolute, accrued, contingent, or otherwise) except for liabilities or
obligations reflected or reserved against in the Interim Balance Sheet and
current liabilities incurred in the Ordinary Course of Business since the
respective dates thereof.
3.11 TAXES
(a) The Company has filed or caused to be filed all Tax Returns that are
or were required to be filed by or with respect to it, pursuant to
applicable Legal Requirements. Sellers have delivered to Buyer copies of,
and Part 3.11 of the Disclosure Letter contains a complete and accurate
list of, all such Tax Returns relating to income or franchise taxes with
respect to all periods since January 1, 1993. The Company have paid, or
made provision for the payment of, all Taxes that have or may have become
due pursuant to those Tax Returns or otherwise, or pursuant to any
assessment received by Sellers or the Company, except such Taxes, if any,
as are listed in Part 3.11 of the Disclosure Letter and are being
contested in good faith and as to which adequate reserves (determined in
accordance with GAAP) have been provided in the Balance Sheet and the
Interim Balance Sheet.
(b) The United States federal and state income Tax Returns of the Company
subject to such Taxes have been audited by the IRS or relevant state tax
authorities or are closed by the applicable statute of limitations for
all taxable years through 1992. Part 3.11 of the Disclosure Letter
contains a complete and accurate list of all audits of all such Tax
Returns. All deficiencies proposed as a result of such audits have been
paid, reserved against, settled, or, as described in Part 3.11 of the
Disclosure Letter, are being contested in good faith by appropriate
proceedings. Part 3.11 of the Disclosure Letter describes all adjustments
to the United States federal income Tax Returns filed by the Company for
all taxable years since January 1, 1993, and the resulting deficiencies
proposed by the IRS. Except as described in Part 3.11 of the Disclosure
Letter, no Seller or the Company has given or been requested to give
waivers or extensions (or is or would be subject to a waiver or extension
given by any other Person) of any statute of limitations relating to the
payment of Taxes of the Company or for which the Company may be liable.
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(c) The charges, accruals, and reserves with respect to Taxes on the
books of the Company are adequate (determined in accordance with GAAP)
and are at least equal to the Company's liability for Taxes. There exists
no proposed tax assessment against the Company except as disclosed in the
Interim Balance Sheet. No consent to the application of Section 341(f)(2)
of the IRC has been filed with respect to any property or assets held,
acquired, or to be acquired by the Company. All Taxes that the Company is
or was required by Legal Requirements to withhold or collect have been
duly withheld or collected and, to the extent required, have been paid to
the proper Governmental Body or other Person.
(d) All Tax Returns filed by the Company are true, correct, and complete.
There is no tax sharing agreement that will require any payment by the
Company after the date of this Agreement. During the consistency period
(as defined in Section 338(h)(4) of the IRC with respect to the sale of
the Shares to Buyer, neither the Company nor any target affiliate (as
defined in Section 338(h)(6) of the IRC with respect to the sale of the
Shares to Buyer) has sold or will sell any property or assets to Buyer or
to any member of the affiliated group (as defined in Section 338(h)(5) of
the IRC) that includes Buyer. Part 3.11 of the Disclosure Letter lists
all such target affiliates.
3.12 NO MATERIAL ADVERSE CHANGE
Since the Interim Balance Sheet Date, there has not been any material adverse
change in the business, operations, properties, prospects, assets, or condition
of the Company, and no event has occurred or circumstance exists that may
result in such a material adverse change.
3.13 EMPLOYEE BENEFITS
(a) As used in this Section 3.13, the following terms have the meanings
set forth below.
"COMPANY OTHER BENEFIT OBLIGATION" means an Other Benefit Obligation owed,
adopted, or followed by the Company or an ERISA Affiliate of the Company.
"COMPANY PLAN" means all Plans of which the Company or an ERISA Affiliate of
the Company is or was a Plan Sponsor, or to which the Company or an ERISA
Affiliate of the Company otherwise contributes or has contributed, or in which
the Company or an ERISA Affiliate of the Company otherwise participates or has
participated. All references to Plans are to Company Plans unless the context
requires otherwise.
"COMPANY VEBA" means a VEBA (hereinafter defined) whose members include
employees of the Company or any ERISA Affiliate of the Company.
"ERISA AFFILIATE" means, with respect to the Company, any other person that,
together with the Company, would be treated as a single employer under IRC
Section 414.
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"MULTI-EMPLOYER PLAN" has the meaning given in ERISA Section 3(37)(A).
"OTHER BENEFIT OBLIGATIONS" means all obligations, arrangements, or customary
practices, whether or not legally enforceable, to provide benefits, other than
salary, as compensation for services rendered, to present or former directors,
employees, or agents, other than obligations, arrangements, and practices that
are Plans. Other Benefit Obligations include consulting agreements under which
the compensation paid does not depend upon the amount of service rendered,
sabbatical policies, severance payment policies, and fringe benefits within the
meaning of IRC Section 132.
"PBGC" means the Pension Benefit Guaranty Corporation, or any successor
thereto.
"PENSION PLAN" has the meaning given in ERISA Section 3(2)(A).
"PLAN" has the meaning given in ERISA Section 3(3).
"PLAN SPONSOR" has the meaning given in ERISA Section 3(16)(B).
"QUALIFIED PLAN" means any Plan that meets or purports to meet the
requirements of IRC Section 401(a).
"TITLE IV PLANS" means all Pension Plans that are subject to Title IV of ERISA,
29 U.S.C. Section 1301 et seq., other than Multi-Employer Plans.
"VEBA" means a voluntary employees' beneficiary association under IRC Section
501(c)(9).
"WELFARE PLAN" has the meaning given in ERISA Section 3(1).
(b)
(i) Part 3.13(i) of the Disclosure Letter contains a complete and
accurate list of all Company Plans, Company Other Benefit
Obligations, and Company VEBAs, and identifies as such all Company
Plans that are (A) defined benefit Pension Plans, (B) Qualified
Plans, (C) Title IV Plans, or (D) Multi-Employer Plans.
(ii) Part 3.13(ii) of the Disclosure Letter contains a complete and
accurate list of (A) all ERISA Affiliates of the Company, and (B)
all Plans of which any such ERISA Affiliate is or was a Plan
Sponsor, in which any such ERISA Affiliate participates or has
participated, or to which any such ERISA Affiliate contributes or
has contributed.
(iii) Part 3.13(iii) of the Disclosure Letter sets forth, for each
Multi-Employer Plan, as of its last valuation date, the amount of
potential withdrawal liability of
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the Company and its other ERISA Affiliates, calculated according to
information made available pursuant to ERISA Section 4221(e).
(iv) Part 3.13(iv) of the Disclosure Letter sets forth a
calculation of the liability of the Company for post-retirement
benefits other than pensions, made in accordance with Financial
Accounting Statement 106 of the Financial Accounting Standards
Board, regardless of whether the Company is required by this
Statement to disclose such information.
(v) Part 3.13(v) of the Disclosure Letter sets forth the financial
cost of all obligations owed under any Company Plan or Company
Other Benefit Obligation that is not subject to the disclosure and
reporting requirements of ERISA.
(c) Sellers have delivered to Buyer, or will make available to Buyer
within ten days of the date of this Agreement:
(i) all documents that set forth the terms of each Company Plan,
Company Other Benefit Obligation, or Company VEBA and of any
related trust, including (A) all plan descriptions and summary plan
descriptions of Company Plans for which Sellers or the Company are
required to prepare, file, and distribute plan descriptions and
summary plan descriptions, and (B) all summaries and descriptions
furnished to participants and beneficiaries regarding Company
Plans, Company Other Benefit Obligations, and Company VEBAs for
which a plan description or summary plan description is not
required;
(ii) all personnel, payroll, and employment manuals and policies;
(iii) all collective bargaining agreements pursuant to which
contributions have been made or obligations incurred (including
both pension and welfare benefits) by the Company and the ERISA
Affiliates of the Company, and all collective bargaining agreements
pursuant to which contributions are being made or obligations are
owed by such entities;
(iv) a written description of any Company Plan or Company Other
Benefit Obligation that is not otherwise in writing;
(v) all registration statements filed with respect to any Company
Plan;
(vi) all insurance policies purchased by or to provide benefits
under any Company Plan;
(vii) all contracts with third party administrators, actuaries,
investment managers, consultants, and other independent contractors
that relate to any Company Plan, Company Other Benefit Obligation,
or Company VEBA;
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(viii) all reports submitted within the four years preceding the
date of this Agreement by third party administrators, actuaries,
investment managers, consultants, or other independent contractors
with respect to any Company Plan, Company Other Benefit Obligation,
or Company VEBA;
(ix) all notifications to employees of their rights under ERISA
Section 601 et seq. and IRC Section 4980B;
(x) the Form 5500 filed in each of the most recent three plan years
with respect to each Company Plan, including all schedules thereto
and the opinions of independent accountants;
(xi) all notices that were given, pursuant to statute, by the
Company or any ERISA Affiliate of the Company or any Company Plan
to the IRS, the PBGC, or any participant or beneficiary within the
four years preceding the date of this Agreement, including notices
that are expressly mentioned elsewhere in this Section 3.13;
(xii) all notices that were given by the IRS, the PBGC, or the
Department of Labor to the Company, any ERISA Affiliate of the
Company, or any Company Plan within the four years preceding the
date of this Agreement;
(xiii) with respect to Qualified Plans and VEBAs, the most recent
determination letter for each Plan of the Company that is a
Qualified Plan; and
(xiv) with respect to Title IV Plans, the Form PBGC-1 filed for
each of the three most recent plan years.
(d) Except as set forth in Part 3.13(vi) of the Disclosure Letter:
(i) The Company has performed all of their respective obligations
under all Company Plans, Company Other Benefit Obligations, and
Company VEBAs. The Company has made appropriate entries in their
financial records and statements for all obligations and
liabilities under such Plans, VEBAs, and Obligations that have
accrued but are not due.
(ii) The Company, with respect to all Company Plans, Company Other
Benefits Obligations, and Company VEBAs, are, and each Company
Plan, Company Other Benefit Obligation, and Company VEBA is, in
full compliance with ERISA, the IRC, and other applicable Laws
including the provisions of such Laws expressly mentioned in this
Section 3.13, and with any applicable collective bargaining
agreement.
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(A) No transaction prohibited by ERISA Section 406 and no
"prohibited transaction" under IRC Section 4975(c) have
occurred with respect to any Company Plan.
(B) No Seller or the Company has any liability to the IRS
with respect to any Plan, including any liability imposed by
Chapter 43 of the IRC.
(C) No Seller or the Company has any liability to the PBGC
with respect to any Plan or has any liability under ERISA
Section 502 or Section 4071.
(D) All filings required by ERISA and the IRC as to each Plan
have been timely filed, and all notices and disclosures to
participants required by either ERISA or the IRC have been
timely provided.
(E) All contributions and payments made or accrued with
respect to all Company Plans, Company Other Benefit
Obligations, and Company VEBAs are deductible under IRC
Section 162 or Section 404. No amount, or any asset of any
Company Plan or Company VEBA, is subject to tax as unrelated
business taxable income.
(iii) Since January 1, 1995, there has been no establishment or
amendment of any Company Plan, Company VEBA, or Company Other
Benefit Obligation.
(iv) No event has occurred or circumstance exists that could result
in a material increase in premium costs of Company Plans and
Company Other Benefit Obligations that are insured, or a material
increase in benefit costs of such Plans and Obligations that are
self-insured.
(v) Other than claims for benefits submitted by participants or
beneficiaries, no claim against, or legal proceeding involving, any
Company Plan, Company Other Benefit Obligation, or Company VEBA is
pending or, to Sellers' Knowledge, is Threatened.
(vi) No Company Plan is a stock bonus, pension, or profit-sharing
plan within the meaning of IRC Section 401(a).
(vii) Each Qualified Plan of the Company is qualified in form and
operation under IRC Section 401(a); each trust for each such Plan
is exempt from federal income tax under IRC Section 501(a). Each
Company VEBA is exempt from federal income tax. No event has
occurred or circumstance exists that will or could give rise to
disqualification or loss of tax-exempt status of any such Plan or
trust.
(viii) Each Acquired Company and each ERISA Affiliate of the
Company has met the minimum funding standard, and has made all
contributions required, under ERISA Section 302 and IRC Section
402.
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(ix) No Company Plan is subject to Title IV of ERISA.
(x) The Company have paid all amounts due to the PBGC pursuant to
ERISA Section 4007.
(xi) Neither the Company nor any ERISA Affiliate of the Company has
ceased operations at any facility or has withdrawn from any Title
IV Plan in a manner that would subject to any entity or Sellers to
liability under ERISA Section 4062(e), Section 4063, or Section
4064.
(xii) Neither the Company nor any ERISA Affiliate of the Company
has filed a notice of intent to terminate any Plan or has adopted
any amendment to treat a Plan as terminated. The PBGC has not
instituted proceedings to treat any Company Plan as terminated. No
event has occurred or circumstance exists that may constitute
grounds under ERISA Section 4042 for the termination of, or the
appointment of a trustee to administer, any Company Plan.
(xiii) No amendment has been made, or is reasonably expected to be
made, to any Plan that has required or could require the provision
of security under ERISA Section 307 or IRC Section 401(a)(29).
(xiv) No accumulated funding deficiency, whether or not waived,
exists with respect to any Company Plan; no event has occurred or
circumstance exists that may result in an accumulated funding
deficiency as of the last day of the current plan year of any such
Plan.
(xv) The actuarial report for each Pension Plan of the Company and
each ERISA Affiliate of the Company fairly presents the financial
condition and the results of operations of each such Plan in
accordance with GAAP.
(xvi) Since the last valuation date for each Pension Plan of the
Company and each ERISA Affiliate of the Company, no event has
occurred or circumstance exists that would increase the amount of
benefits under any such Plan or that would cause the excess of Plan
assets over benefit liabilities (as defined in ERISA Section 4001)
to decrease, or the amount by which benefit liabilities exceed
assets to increase.
(xvii) No reportable event (as defined in ERISA Section 4043 and
in regulations issued thereunder) has occurred.
(xviii) No Seller or the Company has Knowledge of any facts or
circumstances that may give rise to any liability of any Seller,
the Company, or Buyer to the PBGC under Title IV of ERISA.
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(xix) Neither the Company nor any ERISA Affiliate of the Company
has ever established, maintained, or contributed to or otherwise
participated in, or had an obligation to maintain, contribute to,
or otherwise participate in, any Multi-Employer Plan.
(xx) Neither the Company nor any ERISA Affiliate of the Company has
withdrawn from any Multi-Employer Plan with respect to which there
is any outstanding liability as of the date of this Agreement. No
event has occurred or circumstance exists that presents a risk of
the occurrence of any withdrawal from, or the participation,
termination, reorganization, or insolvency of, any Multi-Employer
Plan that could result in any liability of either the Company or
Buyer to a Multi-Employer Plan.
(xxi) Neither the Company nor any ERISA Affiliate of the Company
has received notice from any Multi-Employer Plan that it is in
reorganization or is insolvent, that increased contributions may be
required to avoid a reduction in plan benefits or the imposition of
any excise tax, or that such Plan intends to terminate or has
terminated.
(xxii) No Multi-Employer Plan to which the Company or any ERISA
Affiliate of the Company contributes or has contributed is a party
to any pending merger or asset or liability transfer or is subject
to any proceeding brought by the PBGC.
(xxiii) Except to the extent required under ERISA Section 601 et
seq. and IRC Section 4980B, the Company does not provide health or
welfare benefits for any retired or former employee and is not
obligated to provide health or welfare benefits to any active
employee following such employee's retirement or other termination
of service.
(xxiv) The Company has the right to modify and terminate benefits
to retirees (other than pensions) with respect to both retired and
active employees.
(xxv) Sellers and the Company have complied with the provisions of
ERISA Section 601 et seq. and IRC Section 4980B.
(xxvi) The consummation of the Contemplated Transactions will not
result in the payment, vesting, or acceleration of any benefit.
3.14 COMPLIANCE WITH LEGAL REQUIREMENTS; GOVERNMENTAL AUTHORIZATIONS
(a) Except as set forth in Part 3.14 of the Disclosure Letter:
(i) the Company is, and at all times has been in full compliance
with each Legal Requirement that is or was applicable to it or to
the conduct or operation of its business or the ownership or use of
any of its assets;
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(ii) no event has occurred or circumstance exists that (with or
without notice or lapse of time) (A) may constitute or result in a
violation by the Company of, or a failure on the part of the
Company to comply with, any Legal Requirement, or (B) may give rise
to any obligation on the part of the Company to undertake, or to
bear all or any portion of the cost of, any remedial action of any
nature; and
(iii) the Company has not received any notice or other
communication (whether oral or written) from any Governmental Body
or any other Person regarding (A) any actual, alleged, possible, or
potential violation of, or failure to comply with, any Legal
Requirement, or (B) any actual, alleged, possible, or potential
obligation on the part of the Company to undertake, or to bear all
or any portion of the cost of, any remedial action of any nature.
(b) Part 3.14 of the Disclosure Letter contains a complete and accurate
list of each Governmental Authorization that is held by the Company or
that otherwise relates to the business of, or to any of the assets owned
or used by, the Company. Each Governmental Authorization listed or
required to be listed in Part 3.14 of the Disclosure Letter is valid and
in full force and effect. Except as set forth in Part 3.14 of the
Disclosure Letter:
(i) the Company is, and at all times has been, in full compliance
with all of the terms and requirements of each Governmental
Authorization identified or required to be identified in Part 3.14
of the Disclosure Letter;
(ii) no event has occurred or circumstance exists that may (with or
without notice or lapse of time) (A) constitute or result directly
or indirectly in a violation of or a failure to comply with any
term or requirement of any Governmental Authorization listed or
required to be listed in Part 3.14 of the Disclosure Letter, or (B)
result directly or indirectly in the revocation, withdrawal,
suspension, cancellation, or termination of, or any modification
to, any Governmental Authorization listed or required to be listed
in Part 3.14 of the Disclosure Letter;
(iii) the Company has not received, at any time, any notice or
other communication (whether oral or written) from any Governmental
Body or any other Person regarding (A) any actual, alleged,
possible, or potential violation of or failure to comply with any
term or requirement of any Governmental Authorization, or (B) any
actual, proposed, possible, or potential revocation, withdrawal,
suspension, cancellation, termination of, or modification to any
Governmental Authorization; and
(iv) all applications required to have been filed for the renewal
of the Governmental Authorizations listed or required to be listed
in Part 3.14 of the Disclosure Letter have been duly filed on a
timely basis with the appropriate Governmental Bodies, and all
other filings required to have been made with
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respect to such Governmental Authorizations have been duly made on
a timely basis with the appropriate Governmental Bodies.
The Governmental Authorizations listed in Part 3.14 of the Disclosure Letter
collectively constitute all of the Governmental Authorizations necessary to
permit the Company to lawfully conduct and operate their businesses in the
manner they currently conduct and operate such businesses and to permit the
Company to own and use their assets in the manner in which they currently own
and use such assets, except for those which individually or in the aggregate
would not have a material adverse effect on the Company.
3.15 LEGAL PROCEEDINGS; ORDERS
(a) There is no pending Proceeding:
(i) that has been commenced by or against the Company or that
otherwise relates to or may affect the business of, or any of the
assets owned or used by, the Company; or
(ii) that challenges, or that may have the effect of preventing,
delaying, making illegal, or otherwise interfering with, any of the
Contemplated Transactions.
To the Knowledge of Sellers and the Company, (1) no such Proceeding has been
Threatened, and (2) no event has occurred or circumstance exists that may give
rise to or serve as a basis for the commencement of any such Proceeding.
Sellers have delivered to Buyer copies of all pleadings, correspondence, and
other documents relating to each Proceeding listed in Part 3.15 of the
Disclosure Letter. The Proceedings listed in Part 3.15 of the Disclosure Letter
will not have a material adverse effect on the business, operations, assets,
condition, or prospects of the Company.
(b) (i) there is no Order to which any of the Company, or any of
the assets owned or used by the Company, is subject;
(ii) no Seller is subject to any Order that relates to the business
of, or any of the assets owned or used by, the Company; and
(iii) no officer, director, agent, or employee of the Company is
subject to any Order that prohibits such officer, director, agent,
or employee from engaging in or continuing any conduct, activity,
or practice relating to the business of the Company.
(iv) the Company is, and at all times has been, in full compliance
with all of the terms and requirements of each Order to which it,
or any of the assets owned or used by it, is or has been subject;
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(v) no event has occurred or circumstance exists that may
constitute or result in (with or without notice or lapse of time) a
violation of or failure to comply with any term or requirement of
any Order to which the Company, or any of the assets owned or used
by the Company, is subject; and
(vi) the Company has received no notice or other communication
(whether oral or written) from any Governmental Body or any other
Person regarding any actual, alleged, possible, or potential
violation of, or failure to comply with, any term or requirement of
any Order to which the Company, or any of the assets owned or used
by the Company, is or has been subject.
3.16 ABSENCE OF CERTAIN CHANGES AND EVENTS
Except as set forth in Part 3.16 of the Disclosure Letter or as specifically
permitted by this Agreement, since the Interim Balance Sheet Date, the Company
have conducted their businesses only in the Ordinary Course of Business and
there has not been any:
(a) change in the Company's authorized or issued capital stock; grant of
any stock option or right to purchase shares of capital stock of the
Company; issuance of any security convertible into such capital stock;
purchase, redemption, retirement, or other acquisition by the Company of
any shares of any such capital stock; or declaration or payment of any
dividend or other distribution or payment in respect of shares of capital
stock;
(b) amendment to the Organizational Documents of the Company;
(c) payment or increase by the Company of any bonuses, salaries, or other
compensation to any stockholder, director, officer, or (except in the
Ordinary Course of Business) employee or entry into any employment,
severance, or similar Contract with any director, officer, or employee;
(d) adoption of, or increase in the payments to or benefits under, any
profit sharing, bonus, deferred compensation, savings, insurance,
pension, retirement, or other employee benefit plan for or with any
employees of the Company;
(e) damage to or destruction or loss of any asset or property of the
Company, whether or not covered by insurance, materially and adversely
affecting the properties, assets, business, financial condition, or
prospects of the Company, taken as a whole;
(f) entry into, termination of, or receipt of notice of termination of
(i) any license, distributorship, dealer, sales representative, joint
venture, credit, or similar agreement, or (ii) any Contract or
transaction involving a total remaining commitment by or to the Company
of at least $50,000;
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(g) sale (other than sales of inventory in the Ordinary Course of
Business), lease, or other disposition of any asset or property of the
Company or mortgage, pledge, or imposition of any lien or other
encumbrance on any material asset or property of the Company, including
the sale, lease, or other disposition of any of the Intellectual Property
Assets;
(h) cancellation or waiver of any claims or rights with a value to the
Company in excess of $50,000;
(i) material change in the accounting methods used by the Company; or
(j) agreement, whether oral or written, by the Company to do any of the
foregoing.
3.17 CONTRACTS; NO DEFAULTS
(a) Part 3.17(a) of the Disclosure Letter contains a complete and
accurate list, and Sellers have delivered to Buyer true and complete
copies, of:
(i) each Applicable Contract that involves performance of services
or delivery of goods or materials by the Company of an amount or
value in excess of $50,000;
(ii) each Applicable Contract that involves performance of services
or delivery of goods or materials to the Company of an amount or
value in excess of $50,000;
(iii) each Applicable Contract that was not entered into in the
Ordinary Course of Business and that involves expenditures or
receipts of the Company in excess of $50,000;
(iv) each lease, rental or occupancy agreement, license,
installment and conditional sale agreement, and other Applicable
Contract affecting the ownership of, leasing of, title to, use of,
or any leasehold or other interest in, any real or personal
property (except personal property leases and installment and
conditional sales agreements having a value per item or aggregate
payments of less than $25,000);
(v) each licensing agreement or other Applicable Contract with
respect to patents, trademarks, copyrights, or other intellectual
property, including agreements with current or former employees,
consultants, or contractors regarding the appropriation or the
non-disclosure of any of the Intellectual Property Assets;
(vi) each collective bargaining agreement and other Applicable
Contract to or with any labor union or other employee
representative of a group of employees;
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(vii) each joint venture, partnership, and other Applicable
Contract (however named) involving a sharing of profits, losses,
costs, or liabilities by the Company with any other Person;
(viii) each Applicable Contract containing covenants that in any
way purport to restrict the business activity of the Company or any
Affiliate of the Company or limit the freedom of the Company or any
Affiliate of the Company to engage in any line of business or to
compete with any Person;
(ix) each Applicable Contract providing for payments to or by any
Person based on sales, purchases, or profits, other than direct
payments for goods;
(x) each power of attorney that is currently effective and
outstanding;
(xi) each Applicable Contract entered into other than in the
Ordinary Course of Business that contains or provides for an
express undertaking by the Company to be responsible for
consequential damages;
(xii) each Applicable Contract for capital expenditures in excess
of $50,000;
(xiii) each written warranty, guaranty, and or other similar
undertaking with respect to contractual performance extended by the
Company other than in the Ordinary Course of Business; and
(xiv) each amendment, supplement, and modification (whether oral or
written) in respect of any of the foregoing.
Part 3.17(a) of the Disclosure Letter sets forth reasonably complete details
concerning such Contracts, including the parties to the Contracts, the amount
of the remaining commitment of the Company under the Contracts, and the
Company' office where details relating to the Contracts are located.
(b) Except as set forth in Part 3.17(b) of the Disclosure Letter:
(i) no Seller (and no Related Person of any Seller) has or may
acquire any rights under, and neither Seller has or may become
subject to any obligation or liability under, any Contract that
relates to the business of, or any of the assets owned or used by,
the Company; and
(ii) no officer, director, agent, employee, consultant, or
contractor of the Company is bound by any Contract that purports to
limit the ability of such officer, director, agent, employee,
consultant, or contractor to (A) engage in or continue any conduct,
activity, or practice relating to the business of the Company, or
(B) assign to the Company or to any other Person any rights to any
invention, improvement, or discovery.
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(c) Each Contract identified or required to be identified in Part 3.17(a)
of the Disclosure Letter is in full force and effect and is valid and
enforceable in accordance with its terms.
(d) Except as set forth in Part 3.17(d) of the Disclosure Letter:
(i) the Company is, and at all times has been, in full compliance
with all applicable terms and requirements of each Contract under
which the Company has or had any obligation or liability or by
which the Company or any of the assets owned or used by the Company
is or was bound;
(ii) each other Person that has or had any obligation or liability
under any Contract under which the Company has or had any rights
is, and at all times has been, in full compliance with all
applicable terms and requirements of such Contract;
(iii) no event has occurred or circumstance exists that (with or
without notice or lapse of time) may contravene, conflict with, or
result in a violation or breach of, or give the Company or other
Person the right to declare a default or exercise any remedy under,
or to accelerate the maturity or performance of, or to cancel,
terminate, or modify, any Applicable Contract; and
(iv) no Acquired Company has given to or received from any other
Person, at any time any notice or other communication (whether oral
or written) regarding any actual, alleged, possible, or potential
violation or breach of, or default under, any Contract.
(e) There are no renegotiations of, attempts to renegotiate, or
outstanding rights to renegotiate any material amounts paid or payable to
the Company under current or completed Contracts with any Person and no
such Person has made written demand for such renegotiation.
(f) The Contracts relating to the sale, design, manufacture, or provision
of products or services by the Company have been entered into in the
Ordinary Course of Business and have been entered into without the
commission of any act alone or in concert with any other Person, or any
consideration having been paid or promised, that is or would be in
violation of any Legal Requirement.
3.18 INSURANCE
(a) Sellers have delivered to Buyer:
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(i) true and complete copies of all policies of insurance to which
the Company is a party or under which the Company, or any director
of the Company, is covered; and
(ii) true and complete copies of all pending applications for
policies of insurance.
(b) Part 3.18(b) of the Disclosure Letter describes:
(i) any self-insurance arrangement by or affecting the Company,
including any reserves established thereunder;
(ii) any contract or arrangement, other than a policy of insurance,
for the transfer or sharing of any risk by the Company; and
(iii) all obligations of the Company to third parties with respect
to insurance (including such obligations under leases and service
agreements) and identifies the policy under which such coverage is
provided.
(c) Part 3.18(c) of the Disclosure Letter sets forth, by year, for the
current policy year and each of the two (2) preceding policy years:
(i) a summary of the loss experience under each policy;
(ii) a statement describing each claim under an insurance policy
for an amount in excess of $10,000, which sets forth:
(A) the name of the claimant;
(B) a description of the policy by insurer, type of
insurance, and period of coverage; and
(C) the amount and a brief description of the claim; and
(iii) a statement describing the loss experience for all claims
that were self-insured, including the number and aggregate cost of
such claims.
(d) Except as set forth on Part 3.18(d) of the Disclosure Letter or as
contemplated by this Agreement:
(i) All policies to which the Company is a party or that provide
coverage to any Seller, the Company, or any director or officer of
the Company:
(A) are valid, outstanding, and enforceable;
(B) are issued by an insurer that is financially sound and
reputable;
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(C) taken together, provide adequate insurance coverage for
the assets and the operations of the Company;
(D) are sufficient for compliance with all Legal Requirements
and Contracts to which the Company is a party or by which any
of them is bound;
(E) will continue in full force and effect following the
consummation of the Contemplated Transactions; and
(F) do not provide for any retrospective premium adjustment
or other experienced-based liability on the part of the
Company.
(ii) No Seller or the Company has received (A) any refusal of
coverage or any notice that a defense will be afforded with
reservation of rights, or (B) any notice of cancellation or any
other indication that any insurance policy is no longer in full
force or effect or will not be renewed or that the issuer of any
policy is not willing or able to perform its obligations
thereunder.
(iii) The Company has paid all premiums due, and have otherwise
performed all of their respective obligations, under each policy to
which the Company is a party or that provides coverage to the
Company or director thereof.
(iv) The Company has given notice to the insurer of all claims that
may be insured thereby.
3.19 ENVIRONMENTAL MATTERS
Except as set forth in Part 3.19 of the Disclosure Letter:
(a) To the Sellers knowledge and except as reported by ENSR Phase I and
II Reports, the Company is, and at all times has been, in full compliance
with, and has not been and is not in violation of or liable under, any
Environmental Law. No Seller or the Company has any basis to expect, nor
has any of them or any other Person for whose conduct they are or may be
held to be responsible received, any actual or Threatened order, notice,
or other communication from (i) any Governmental Body or private citizen
acting in the public interest, or (ii) the current or prior owner or
operator of any Facilities, of any actual or potential violation or
failure to comply with any Environmental Law, or of any actual or
Threatened obligation to undertake or bear the cost of any Environmental,
Health, and Safety Liabilities with respect to any of the Facilities or
any other properties or assets (whether real, personal, or mixed) in
which the Company has had an interest, or with respect to any property or
Facility at or to which Hazardous Materials were generated, manufactured,
refined, transferred, imported, used, or processed by the Company, or any
other Person for whose conduct the Company is or
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may be held responsible, or from which Hazardous Materials have been
transported, treated, stored, handled, transferred, disposed, recycled,
or received.
(b) To the Sellers knowledge and except as reported by ENSR Phase I and
II Reports, there are no pending or, to the Knowledge of Sellers and the
Company, Threatened claims, Encumbrances, or other restrictions of any
nature, resulting from any Environmental, Health, and Safety Liabilities
or arising under or pursuant to any Environmental Law, with respect to or
affecting any of the Facilities or any other properties and assets
(whether real, personal, or mixed) in which the Company has or had an
interest.
(c) To the Sellers knowledge and except as reported by ENSR Phase I and
II Reports, no Seller or the Company has any basis to expect, nor has any
of them or any other Person for whose conduct they are or may be held
responsible, received, any citation, directive, inquiry, notice, Order,
summons, warning, or other communication that relates to Hazardous
Activity, Hazardous Materials, or any alleged, actual, or potential
violation or failure to comply with any Environmental Law, or of any
alleged, actual, or potential obligation to undertake or bear the cost of
any Environmental, Health, and Safety Liabilities with respect to any of
the Facilities or any other properties or assets (whether real, personal,
or mixed) in which the Company had an interest, or with respect to any
property or facility to which Hazardous Materials generated,
manufactured, refined, transferred, imported, used, or processed by the
Company, or any other Person for whose conduct the Company is or may be
held responsible, have been transported, treated, stored, handled,
transferred, disposed, recycled, or received.
(d) To the Sellers knowledge and except as reported by ENSR Phase I and
II Reports, no Seller or the Company, or any other Person for whose
conduct they are or may be held responsible, has any Environmental,
Health, and Safety Liabilities with respect to the Facilities or with
respect to any other properties and assets (whether real, personal, or
mixed) in which the Company (or any predecessor), has or had an interest,
or at any property geologically or hydrologically adjoining the
Facilities or any such other property or assets.
(e) To the Sellers knowledge and except as reported by ENSR Phase I and
II Reports, there are no Hazardous Materials present on or in the
Environment at the Facilities or at any geologically or hydrologically
adjoining property, including any Hazardous Materials contained in
barrels, above or underground storage tanks, landfills, land deposits,
dumps, equipment (whether moveable or fixed) or other containers, either
temporary or permanent, and deposited or located in land, water, sumps,
or any other part of the Facilities or such adjoining property, or
incorporated into any structure therein or thereon. Neither the Company
nor any other Person for whose conduct the Company is or may be held
responsible, or to the Knowledge of Sellers and the Company, any other
Person, has permitted or conducted, or is aware of, any Hazardous
Activity conducted with respect to the Facilities or any other properties
or assets (whether real, personal, or mixed) in which the Company has or
had an interest.
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(f) To the Sellers knowledge and except as reported by ENSR Phase I and
II Reports, there has been no Release or, to the Knowledge of Sellers
and the Company, Company, Threat of Release, of any Hazardous Materials
at or from the Facilities or at any other locations where any Hazardous
Materials were generated, manufactured, refined, transferred, produced,
imported, used, or processed from or by the Facilities, or from or by any
other properties and assets (whether real, personal, or mixed) in which
the Company has or had an interest, or to the Knowledge of Sellers and
the Company any geologically or hydrologically adjoining property,
whether by the Company, or any other Person, however Sellers will have no
liability for any geological or hydrological adjoining property. In
addition, Sellers will have no liability for any release, threat of
release, environmental hazard or communication except as provided in
paragraph 5.9 and paragraph 10.4 herein. It is acknowledged and
understood that Sellers make no representation or warranty pursuant to
Section 3.19 with respect to any properties adjoining any of the
Facilities as well as the property located at 000 Xxxxxxxx Xx.,
Xxxxxxxxx, Xxxxxxxxxxxxx.
(g) Sellers have delivered to Buyer true and complete copies and results
of any reports, studies, analyses, tests, or monitoring possessed or
initiated by Sellers or the Company pertaining to Hazardous Materials or
Hazardous Activities in, on, or under the Facilities, or concerning
compliance by Sellers, the Company, or any other Person for whose conduct
they are or may be held responsible, with Environmental Laws.
3.20 EMPLOYEES
(a) Part 3.20 of the Disclosure Letter contains a complete and accurate
list of the following information for each employee or director of the
Company, including each employee on leave of absence or layoff status:
name; job title; current compensation paid or payable and any change in
compensation since January 1, 1996; vacation accrued; and service
credited for purposes of vesting and eligibility to participate under the
Company's pension, retirement, profit-sharing, thrift-savings, deferred
compensation, stock bonus, stock option, cash bonus, employee stock
ownership (including investment credit or payroll stock ownership),
severance pay, insurance, medical, welfare, or vacation plan, other
Employee Pension Benefit Plan or Employee Welfare Benefit Plan, or any
other employee benefit plan or any Director Plan.
(b) To the knowledge of Sellers and the Company, no employee or director
of the Company is a party to, or is otherwise bound by, any agreement or
arrangement, including any confidentiality, noncompetition, or
proprietary rights agreement, between such employee or director and any
other Person ("Proprietary Rights Agreement") that in any way adversely
affects or will affect (i) the performance of his duties as an employee
or director of the Company, or (ii) the ability of the Company to conduct
its business, including any Proprietary Rights Agreement with Sellers or
the Company by
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any such employee or director. To Sellers' Knowledge, no director,
officer, or other key employee of the Company intends to terminate his
employment with the Company.
3.21 LABOR RELATIONS; COMPLIANCE
Except as disclosed on Part 3.21 of the Disclosure Letter, the Company has not
been and is not a party to any collective bargaining or other labor Contract.
There has not been, there is not presently pending or existing, and there is
not Threatened, (a) any strike, slowdown, picketing, work stoppage, or employee
grievance process, (b) any Proceeding against or affecting the Company relating
to the alleged violation of any Legal Requirement pertaining to labor relations
or employment matters, including any charge or complaint filed by an employee
or union with the National Labor Relations Board, the Equal Employment
Opportunity Commission, or any comparable Governmental Body, organizational
activity, or other labor or employment dispute against or affecting any of the
Company or their premises, or (c) any application for certification of a
collective bargaining agent. No event has occurred or circumstance exists that
could provide the basis for any work stoppage or other labor dispute. There is
no lockout of any employees by the Company, and no such action is contemplated
by the Company. The Company has complied in all respects with all Legal
Requirements relating to employment, equal employment opportunity,
nondiscrimination, immigration, wages, hours, benefits, collective bargaining,
the payment of social security and similar taxes, occupational safety and
health, and plant closing. The Company is not liable for the payment of any
compensation, damages, taxes, fines, penalties, or other amounts, however
designated, for failure to comply with any of the foregoing Legal Requirements.
3.22 INTELLECTUAL PROPERTY
(a) The term "Intellectual Property Assets" includes:
(i) the name Tamor Plastics Corp., all fictional business names,
trading names, registered and unregistered trademarks, service
marks, and applications (collectively, "Marks");
(ii) all patents, patent applications, and inventions and
discoveries that may be patentable (collectively, "Patents");
(iii) all copyrights in both published works and unpublished works
(collectively, "Copyrights"); and
(iv) all know-how, trade secrets, confidential information,
customer lists, software, technical information, data, process
technology, plans, drawings, and blue prints (collectively, "Trade
Secrets"); owned, used, or licensed by the Company as licensee or
licensor.
(b) Part 3.22(b) of the Disclosure Letter contains a complete and
accurate list and summary description, including any royalties paid or
received by the Company, of all
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Contracts relating to the Intellectual Property Assets to which the
Company is a party or by which the Company is bound, except for any
license implied by the sale of a product and perpetual, paid-up licenses
for commonly available software programs with a minimal value under which
the Company is the licensee. There are no outstanding and, to Sellers'
Knowledge, no Threatened disputes or disagreements with respect to any
such agreement.
(c) (i) The Intellectual Property Assets are all those necessary
for the operation of the Company's Business as it is currently
conducted. The Company is the owner of all right, title, and
interest in and to each of the Intellectual Property Assets, free
and clear of all liens, security interests, charges, encumbrances,
equities, and other adverse claims, and has the right to use without
payment to a third party all of the Intellectual Property Assets.
(ii) Except as set forth in Part 3.22(c) of the Disclosure Letter,
all former and current employees of the Company have executed
written Contracts with the Company that assign to the Company all
rights to any inventions, improvements, discoveries, or information
relating to the business of the Company. No employee of the Company
has entered into any Contract that restricts or limits in any way
the scope or type of work in which the employee may be engaged or
requires the employee to transfer, assign, or disclose information
concerning his work to anyone other than one or more of the
Company.
(d) (i) Part 3.22(d) of the Disclosure Letter contains a complete
and accurate list and summary description of all Patents. The
Company is the owner of all right, title, and interest in and to
each of the Patents, free and clear of all liens, security
interests, charges, encumbrances, entities, and other adverse
claims.
(ii) All of the issued Patents are currently in compliance with
formal legal requirements (including payment of filing,
examination, and maintenance fees and proofs of working or use),
are valid and enforceable, and are not subject to any maintenance
fees or taxes or actions falling due within ninety days after the
Closing Date.
(iii) No Patent has been or is now involved in any interference,
reissue, reexamination, or opposition proceeding. To Sellers'
Knowledge, there is no potentially interfering patent or patent
application of any third party.
(iv) No Patent is infringed or has been challenged or threatened in
any way. None of the products manufactured and sold, nor any
process or know-how used, by the Company infringes or is alleged to
infringe any patent or other proprietary right of any other Person.
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(v) All products made, used, or sold under the Patents have been
marked with the proper patent notice.
(e) (i) Part 3.22(e) of Disclosure Letter contains a complete and
accurate list and summary description of all Marks. The Company is
the owner of all right, title, and interest in and to each of the
Marks, free and clear of all liens, security interests, charges,
encumbrances, equities, and other adverse claims.
(ii) All Marks that have been registered with the United States
Patent and Trademark Office are currently in compliance with all
formal legal requirements (including the timely post-registration
filing of affidavits of use and incontestability and renewal
applications), are valid and enforceable, and are not subject to
any maintenance fees or taxes or actions falling due within ninety
days after the Closing Date.
(iii) No Xxxx has been or is now involved in any opposition,
invalidation, or cancellation and, to Sellers' Knowledge, no such
action is Threatened with the respect to any of the Marks.
(iv) To Sellers' Knowledge, there is no potentially interfering
trademark or trademark application of any third party.
(v) No Xxxx is infringed or has been challenged or threatened in
any way. None of the Marks used by the Company infringes or is
alleged to infringe any trade name, trademark, or service xxxx of
any third party.
(vi) All products and materials containing a Xxxx xxxx the proper
federal registration notice where permitted by law.
(f) (i) Part 3.22(f) of the Disclosure Letter contains a complete
and accurate list and summary description of all Copyrights. The
Company is the owner of all right, title, and interest in and to
each of the Copyrights, free and clear of all liens, security
interests, charges, encumbrances, equities, and other adverse
claims.
(ii) All the Copyrights have been registered and are currently in
compliance with formal legal requirements, are valid and
enforceable, and are not subject to any maintenance fees or taxes
or actions falling due within ninety days after the date of
Closing.
(iii) To the Knowledge of Sellers and the Company, no Copyright is
infringed or has been challenged or threatened in any way. None of
the subject matter of any of the Copyrights infringes or is
alleged to infringe any copyright of any third party or is a
derivative work based on the work of a third party.
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(iv) All works encompassed by the Copyrights have been marked with
the proper copyright notice.
(g) (i) With respect to each Trade Secret, the documentation
relating to such Trade Secret is current, accurate, and sufficient
in detail and content to identify and explain it and to allow its
full and proper use without reliance on the knowledge or memory of
any individual.
(ii) Sellers and the Company have taken all reasonable precautions
to protect the secrecy, confidentiality, and value of their Trade
Secrets.
(iii) To the Knowledge of Sellers and the Company, the Company has
good title and an absolute right to use the Trade Secrets. The
Trade Secrets are not part of the public knowledge or literature,
and have not been used, divulged, or appropriated either for the
benefit of any Person (other than one or more of the Company) or to
the detriment of the Company. No Trade Secret is subject to any
adverse claim or has been challenged or threatened in any way.
3.23 CUSTOMERS AND SUPPLIERS
(a) Part 3.23 of the Disclosure Letter contains a complete and accurate
list of
(i) the 25 largest customers of the Company in terms of sales, and
the amount of such sales to each such customer, during the last
fiscal year, and
(ii) the 15 largest suppliers of Seller in terms of purchases, and
the amount of such purchases from each such Supplier, during the
last fiscal year.
(b) The Sellers have provided to buyer its internal open order report
and open purchase order report as of December 31, 1996, and will
provide such reports as of the Closing. Such reports are and will
be accurate in all respects.
(c) (i) There exists no actual or threatened termination,
cancellation, limitation or any modification or change in the
business relationship of the Company with any customer or group of
customers;
(ii) There is no customer who accounts for more than three percent
of sales who has filed (or has had a filing made on its behalf) for
protection under Chapter 7 or 11 of the Bankruptcy Code, and the
Company has not received written notice that any customers filed
for any such protection;
(iii) There has been no notice from any supplier of an item
material to the Company that such supplier will not continue to
make deliveries on the same
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price, quality and delivery terms and conditions consistent with
past practices of such suppliers;
(iv) No condition or state of facts exists concerning the customers
or suppliers of the Company which would materially and adversely
affect the business of the Company or prevent the Company from
conducting its business after the consummation of the Contemplated
Transactions;
(v) There are no claims against the Company to return merchandise
by reason of alleged overshipments, defective merchandise or
otherwise, in excess of $10,000 except for a $50,000 return from
K-Mart which is being resold to Builder's Square; and
(vi) There is no merchandise in the hands of customers under an
understanding that such merchandise would be returned.
3.24 CERTAIN PAYMENTS
Neither the Company nor any director, officer, agent, or employee of the
Company, or any other Person associated with or acting for or on behalf of the
Company, has directly or indirectly (a) made any contribution, gift, bribe,
rebate, payoff, influence payment, kickback, or other payment to any Person,
private or public, regardless of form, whether in money, property, or services
(i) to obtain favorable treatment in securing business, (ii) to pay for
favorable treatment for business secured, (iii) to obtain special concessions
or for special concessions already obtained, for or in respect of the Company
or any Affiliate of the Company, or (iv) in violation of any Legal Requirement,
(b) established or maintained any fund or asset that has not been recorded in
the books and records of the Company.
3.25 DISCLOSURE
(a) No representation or warranty of Sellers in this Agreement and no
statement in the Disclosure Letter omits to state a material fact
necessary to make the statements herein or therein, in light of the
circumstances in which they were made, not misleading.
(b) No notice given pursuant to Section 5.5 will contain any untrue
statement or omit to state a material fact necessary to make the
statements therein or in this Agreement, in light of the circumstances in
which they were made, not misleading.
(c) There is no fact known to any Seller that has specific application to
any Seller or the Company (other than general economic or industry
conditions) and that materially adversely affects or, as far as Sellers
can reasonably foresee, materially threatens, the assets, business,
prospects, financial condition, or results of operations of the Company
that has not been set forth in this Agreement or the Disclosure Letter.
3.26 RELATIONSHIPS WITH RELATED PERSONS
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No Seller or any Related Person of Sellers or of the Company has, or since July
1, 1996 has had, any interest in any property (whether real, personal, or mixed
and whether tangible or intangible), used in or pertaining to the Company'
businesses. No Seller or any Related Person of Sellers or of the Company is, or
since January 1, 1996 has owned (of record or as a beneficial owner) an equity
interest or any other financial or profit interest in, a Person that has (i)
had business dealings or a material financial interest in any transaction with
the Company or (ii) engaged in competition with the Company with respect to any
line of the products or services of the Company (a "Competing Business") in any
market presently served by the Company. Except as set forth in Part 3.26 of the
Disclosure Letter, no Seller or any Related Person of Sellers or of the Company
is a party to any Contract with, or has any claim or right against, the
Company.
3.27 BROKERS OR FINDERS
The Company, Sellers and their agents have incurred no obligation or liability,
contingent or otherwise, for brokerage or finders' fees or agents' commissions
or other similar payment in connection with this Agreement.
4. REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Sellers as follows:
4.1 ORGANIZATION AND GOOD STANDING
Buyer is a corporation duly organized, validly existing, and in good standing
under the laws of the State of Delaware.
4.2 AUTHORITY; NO CONFLICT
(a) This Agreement constitutes the legal, valid, and binding obligation
of Buyer, enforceable against Buyer in accordance with its terms. Upon
the execution and delivery by Buyer of the Employment Agreements, and the
Research Agreements (collectively, the "Buyer's Closing Documents"), the
Buyer's Closing Documents will constitute the legal, valid, and binding
obligations of Buyer, enforceable against Buyer in accordance with their
respective terms. Buyer has the right, power, and authority to execute
and deliver this Agreement and the Buyer's Closing Documents and to
perform its obligations under this Agreement and the Buyer's Closing
Documents.
(b) Except as set forth in Schedule 4.2, neither the execution and
delivery of this Agreement by Buyer nor the consummation or performance
of any of the Contemplated Transactions by Buyer will give any Person the
right to prevent, delay, or otherwise interfere with any of the
Contemplated Transactions pursuant to:
(i) any provision of Buyer's Organizational Documents;
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(ii) any resolution adopted by the board of directors or the
stockholders of Buyer;
(iii) any Legal Requirement or Order to which Buyer may be subject;
or
(iv) any Contract to which Buyer is a party or by which Buyer may
be bound.
Except as set forth in Schedule 4.2, Buyer is not and will not be required to
obtain any Consent from any Person in connection with the execution and
delivery of this Agreement or the consummation or performance of any of the
Contemplated Transactions.
4.3 INVESTMENT INTENT
Buyer is acquiring the Shares for its own account and not with a view to their
distribution within the meaning of Section 2(11) of the Securities Act.
4.4 CERTAIN PROCEEDINGS
There is no pending Proceeding that has been commenced against Buyer and that
challenges, or may have the effect of preventing, delaying, making illegal, or
otherwise interfering with, any of the Contemplated Transactions. To Buyer's
Knowledge, no such Proceeding has been Threatened.
4.5 BROKERS OR FINDERS
Buyer and its officers and agents have incurred no obligation or liability,
contingent or otherwise, for brokerage or finders' fees or agents' commissions
or other similar payment in connection with this Agreement and will indemnify
and hold Sellers harmless from any such payment alleged to be due by or through
Buyer as a result of the action of Buyer or its officers or agents. Buyer
acknowledges that it has received a telephone call from one Xxxxxx Xxxxxxxxx
claiming a brokerage commission with respect to this Agreement, which claim for
which Buyer agrees to be fully responsible.
5. COVENANTS OF SELLERS PRIOR TO CLOSING DATE
5.1 ACCESS AND INVESTIGATION
Between the date of this Agreement and the Closing Date, Sellers will, and will
cause the Company and its Representatives to, (a) afford Buyer and its
Representatives and prospective lenders and their Representatives
(collectively, "Buyer's Advisors") full and free access to the Company's
personnel, properties (including subsurface testing), contracts, books and
records, and other documents and data, (b) furnish Buyer and Buyer's Advisors
with copies of all such contracts, books and records, and other existing
documents and data as Buyer may
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reasonably request, and (c) furnish Buyer and Buyer's Advisors with such
additional financial, operating, and other data and information as Buyer may
reasonably request. Buyer's investigation of the Company pursuant to the
foregoing shall not modify, diminish, alter nor in any way affect the scope,
content or legal effect of the Sellers' representations and warranties set
forth in this Agreement.
5.2 OPERATION OF THE BUSINESSES OF THE ACQUIRED COMPANIES
Between the date of this Agreement and the Closing Date, Sellers will, and will
cause the Company to:
(a) conduct its business only in the Ordinary Course of Business;
(b) use their Best Efforts to preserve intact the current business
organization of the Company, keep available the services of the current
officers, employees, and agents of the Company, and maintain the
relations and good will with suppliers, customers, landlords, creditors,
employees, agents, and others having business relationships with the
Company;
(c) confer with Buyer concerning operational matters of a material
nature; and
(d) otherwise report periodically to Buyer concerning the status of the
business, operations, and finances of the Company.
5.3 NEGATIVE COVENANT
Except as otherwise expressly permitted by this Agreement, between the date of
this Agreement and the Closing Date, Sellers will not, and will cause the
Company not to, without the prior consent of Buyer, take any affirmative
action, or fail to take any reasonable action within their or its control, as a
result of which any of the changes or events listed in Section 3.16 is likely
to occur.
5.4 REQUIRED APPROVALS
As promptly as practicable after the date of this Agreement, Sellers will, and
will cause the Company to, make all filings required by Legal Requirements to
be made by them in order to consummate the Contemplated Transactions. Between
the date of this Agreement and the Closing Date, Sellers will, and will cause
the Company to cooperate with Buyer with respect to all filings that Buyer
elects to make or is required by Legal Requirements to make in connection with
the Contemplated Transactions and in obtaining all consents identified in
Schedule 4.2.
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5.5 NOTIFICATION
Between the date of this Agreement and the Closing Date, each Seller will
promptly notify Buyer in writing if such Seller or the Company becomes aware of
any fact or condition that causes or constitutes a Breach of any of Sellers'
representations and warranties as of the date of this Agreement, or if such
Seller or the Company becomes aware of the occurrence after the date of this
Agreement of any fact or condition that would (except as expressly contemplated
by this Agreement) cause or constitute a Breach of any such representation or
warranty had such representation or warranty been made as of the time of
occurrence or discovery of such fact or condition. Should any such fact or
condition require any change in the Disclosure Letter if the Disclosure Letter
were dated the date of the occurrence or discovery of any such fact or
condition, Sellers will promptly deliver to Buyer a supplement to the
Disclosure Letter specifying such change. During the same period, each Seller
will promptly notify Buyer of the occurrence of any Breach of any covenant of
Sellers in this Section 5 or of the occurrence of any event that may make the
satisfaction of the conditions in Section 7 impossible or unlikely.
5.6 PAYMENT OF INDEBTEDNESS BY RELATED PERSONS
Except as expressly provided in this Agreement, Sellers will cause all
indebtedness owed to the Company by either Seller or any Related Person of any
Seller to be paid in full prior to Closing.
5.7 NO NEGOTIATION
Until such time, if any, as this Agreement is terminated pursuant to Section 9,
Sellers will not, and will cause the Company and each of their Representatives
not to, directly or indirectly solicit, initiate, or encourage any inquiries or
proposals from, discuss or negotiate with, provide any non-public information
to, or consider the merits of any unsolicited inquiries or proposals from, any
Person (other than Buyer) relating to any transaction involving the sale of the
business or assets (other than in the Ordinary Course of Business) of the
Company, or any of the capital stock of the Company, or any merger,
consolidation, business combination, or similar transaction involving the
Company.
5.8 BEST EFFORTS
Between the date of this Agreement and the Closing Date, Sellers will use
their Best Efforts to cause the conditions in Sections 7 and 8 to be satisfied.
5.9 ENVIRONMENTAL MATTERS
Buyer has retained ENSR to conduct Phase I and Phase II examinations of
the Facilities of the Company, copies of which are and will be attached as
Exhibit 5.9. Sellers agree that all clean-up or other remedial or other work
required to be done at the Facilities and all costs and expenses related
thereto as disclosed in Exhibit 5.9, will be at Sellers' sole cost.
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The payments made by Sellers pursuant to this Section 5.9 shall not be subject
to the Damage Threshold described in Article X. Any such work shall be
controlled jointly by Buyer and Sellers. Buyer and Sellers agree to retain
ENSR to complete the necessary work. To secure Sellers' obligation pursuant to
this Section, the sum of $200,000 will be deposited with the escrow agent
described in the Escrow Agreement, to be held and distributed as provided in
the Escrow Agreement. The Phase II examinations for the Leominster, MA;
Thomasville, GA; and Louisiana, MO facilities will be complete grid borings.
Sellers shall not be liable for remediation of the Fitchburg, MA Facility.
Sellers liability shall be limited to as provided in this paragraph. Sellers
will have no future liability for any environmental issue whether known,
unknown or existing at the time of this Agreement except to the specific and
express remediation, clean-up or other remediation or other work as provided by
the above studies. Sellers liability after closing with respect to Section
3.19 shall be limited to the shareholders actual knowledge with respect to the
representations and warranties of Section 3.19. It is acknowledged and
understood that Sellers make no representation or warranty pursuant to Section
3.19 with respect to any properties adjoining any of the Facilities as well as
the property located at 000 Xxxxxxxx Xx., Xxxxxxxxx, XX.
6. COVENANTS OF BUYER PRIOR TO CLOSING DATE
6.1 APPROVALS OF GOVERNMENTAL BODIES
As promptly as practicable after the date of this Agreement, Buyer will, and
will cause each of its Related Persons to, make all filings required by Legal
Requirements to be made by them to consummate the Contemplated Transactions.
Between the date of this Agreement and the Closing Date, Buyer will, and will
cause each Related Person to, cooperate with Sellers with respect to all
filings that Sellers are required by Legal Requirements to make in connection
with the Contemplated Transactions, and (ii) cooperate with Sellers in
obtaining all consents identified in Part 3.2 of the Disclosure Letter;
provided that this Agreement will not require Buyer to dispose of or make any
change in any portion of its business or to incur any other burden to obtain a
Governmental Authorization.
6.2 BEST EFFORTS
Except as set forth in the proviso to Section 6.1, between the date of this
Agreement and the Closing Date, Buyer will use its Best Efforts to cause the
conditions in Sections 7 and 8 to be satisfied.
7. CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE
Buyer's obligation to purchase the Shares and to take the other actions
required to be taken by Buyer at the Closing is subject to the satisfaction, at
or prior to the Closing, of each of the following conditions (any of which may
be waived by Buyer, in whole or in part):
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7.1 ACCURACY OF REPRESENTATIONS
All of Sellers' representations and warranties in this Agreement (considered
collectively), and each of these representations and warranties (considered
individually), must have been accurate in all material respects as of the date
of this Agreement, and must be accurate in all material respects as of the
Closing Date as if made on the Closing Date, without giving effect to any
supplement to the Disclosure Letter.
7.2 SELLERS' PERFORMANCE
(a) All of the covenants and obligations that Sellers are required to
perform or to comply with pursuant to this Agreement at or prior to the
Closing (considered collectively), and each of these covenants and
obligations (considered individually), must have been duly performed and
complied with in all material respects.
(b) Each document required to be delivered pursuant to Section 2.5 must
have been delivered, and each of the other covenants and obligations in
Sections 5.4 must have been performed and complied with in all material
respects.
7.3 INTENTIONALLY DELETED
7.4 ADDITIONAL DOCUMENTS
Each of the following documents must have been delivered to Buyer:
(a) an opinion of Xxxxxxx & Xxxxxxx, counsel for Sellers, dated the
Closing Date, in the form of Exhibit 7.4(a);
(b) such estoppel certificates as Buyer shall reasonably request, dated
as of a date not more than 5 days prior to the Closing Date, each in the
form of Exhibit 7.4(b);
(c) resignations of the Sellers and all of the Sellers' appointees from
their respective positions as officers and directors of the Company and
as Trustees of any plan; and
(d) such other documents as Buyer may reasonably request for the purpose
of (i) enabling its counsel to provide the opinion referred to in Section
8.4(a), (ii) evidencing the accuracy of any of Sellers' representations
and warranties, (iii) evidencing the performance by either Seller of, or
the compliance by either Seller with, any covenant or obligation required
to be performed or complied with by such Seller, (iv) evidencing the
satisfaction of any condition referred to in this Section 7, or (v)
otherwise facilitating the consummation or performance of any of the
Contemplated Transactions.
7.5 NO PROCEEDINGS
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Since the date of this Agreement, there must not have been commenced or
Threatened against Buyer, or against any Person affiliated with Buyer, any
Proceeding (a) involving any challenge to, or seeking damages or other relief
in connection with, any of the Contemplated Transactions, or (b) that may have
the effect of preventing, delaying, making illegal, or otherwise interfering
with any of the Contemplated Transactions.
7.6 NO CLAIM REGARDING STOCK OWNERSHIP OR SALE PROCEEDS
There must not have been made or Threatened by any Person any claim asserting
that such Person (a) is the holder or the beneficial owner of, or has the right
to acquire or to obtain beneficial ownership of, any stock of, or any other
voting, equity, or ownership interest in, any of the Company, or (b) is
entitled to all or any portion of the Purchase Price payable for the Shares.
(See Release amongst Sellers regarding a certain stock redemption agreement
dated January 2, 1995).
7.7 NO PROHIBITION
Neither the consummation nor the performance of any of the Contemplated
Transactions will, directly or indirectly (with or without notice or lapse of
time), materially contravene, or conflict with, or result in a material
violation of, or cause Buyer or any Person affiliated with Buyer to suffer any
material adverse consequence under, (a) any applicable Legal Requirement or
Order, or (b) any Legal Requirement or Order that has been published,
introduced, or otherwise proposed by or before any Governmental Body.
7.8 DUE DILLIGENCE
The Purchaser obtains a satisfactory report, based on reasonable objective
standards, from its Due Diligence Investigation; provided, however, that if
buyer does not provide notice to Sellers of dissatisfaction by December 16,
1996, this condition shall be deemed waived and satisfied.
7.9 MATERIAL CHANGE
Between the date of this Agreement and the Closing, there shall not be a
material adverse change in the assets, prospects, condition (financial or
otherwise, or properties of the Company or the Company's business. There also
shall not have occurred any material damage to the assets or properties of the
Company, regardless of insurance, nor shall any legislation have been enacted
which materially and adversely affects the Company.
8. CONDITIONS PRECEDENT TO SELLERS' OBLIGATION TO CLOSE
Sellers' obligation to sell the Shares and to take the other actions required
to be taken by Sellers at the Closing is subject to the satisfaction, at or
prior to the Closing, of each of the following conditions (any of which may be
waived by Sellers, in whole or in part):
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8.1 ACCURACY OF REPRESENTATIONS
All of Buyer's representations and warranties in this Agreement (considered
collectively), and each of these representations and warranties (considered
individually), must have been accurate in all material respects as of the date
of this Agreement and must be accurate in all material respects as of the
Closing Date as if made on the Closing Date.
8.2 BUYER'S PERFORMANCE
(a) All of the covenants and obligations that Buyer is required to
perform or to comply with pursuant to this Agreement at or prior to the
Closing (considered collectively), and each of these covenants and
obligations (considered individually), must have been performed and
complied with in all material respects.
(b) Buyer must have delivered each of the documents required to be
delivered by Buyer pursuant to Section 2.5 and must have made the cash
payments required to be made by Buyer pursuant to Section 2.5.
8.3 PAYMENT OF NOTE
Buyer pays or causes the Company to pay an amount equal to 50 percent of the
sum of the principal balance and accrued interest of the Company's Note payable
to the Estate of Xxxxxx X. Tata, dated September 27, 1996.
8.4 ADDITIONAL DOCUMENTS
Buyer must have caused the following documents to be delivered to Sellers:
(a) an opinion of Much Shelist Freed Xxxxxxxxx Xxxxx Xxxx & Xxxxxxxxxx,
P.C. , dated the Closing Date, in the form of Exhibit 8.4(a); and
(b) such other documents as Sellers may reasonably request for the
purpose of (i) enabling their counsel to provide the opinion referred to
in Section 7.4(a), (ii) evidencing the accuracy of any representation or
warranty of Buyer, (iii) evidencing the performance by Buyer of, or the
compliance by Buyer with, any covenant or obligation required to be
performed or complied with by Buyer, (iv) evidencing the satisfaction of
any condition referred to in this Section 8, or (v) otherwise
facilitating the consummation of any of the Contemplated Transactions.
8.5 NO INJUNCTION
There must not be in effect any Legal Requirement or any injunction or other
Order that (a) prohibits the sale of the Shares by Sellers to Buyer, and (b)
has been adopted or issued, or has otherwise become effective, since the date
of this Agreement.
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9. TERMINATION
9.1 TERMINATION EVENTS
This Agreement may, by notice given prior to or at the Closing, be terminated:
(a) by either Buyer or Sellers if a material Breach of any provision of
this Agreement has been committed by the other party and such Breach has
not been waived;
(b) (i) by Buyer if any of the conditions in Section 7 has not been
satisfied as of the Closing Date or if satisfaction of such a condition
is or becomes impossible (other than through the failure of Buyer to
comply with its obligations under this Agreement) and Buyer has not
waived such condition on or before the Closing Date; or (ii) by Sellers,
if any of the conditions in Section 8 has not been satisfied of the
Closing Date or if satisfaction of such a condition is or becomes
impossible (other than through the failure of Sellers to comply with
their obligations under this Agreement) and Sellers have not waived such
condition on or before the Closing Date; or
(c) by mutual consent of Buyer and Sellers.
9.2 EFFECT OF TERMINATION
Each party's right of termination under Section 9.1 is in addition to any other
rights it may have under this Agreement or otherwise, and the exercise of a
right of termination will not be an election of remedies. If this Agreement is
terminated pursuant to Section 9.1, all further obligations of the parties
under this Agreement will terminate, except that the obligations in Sections
11.1 and 11.3 will survive. However, if this Agreement is terminated by a
party because of the material Breach of the Agreement by the other party (which
Breach is not cured within a reasonable period after notice thereof)or because
one or more of the conditions to the terminating party's obligations under this
Agreement is not satisfied as a result of the other party's failure to comply
with its material obligations (after a reasonable period to comply after the
receipt of notice thereof) under this Agreement, the terminating party shall be
entitled to collect from the defaulting party as liquidated damages and as its
sole remedy under this Agreement, the sum of $500,000, payable immediately upon
termination.
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10. INDEMNIFICATION; REMEDIES; RELEASE
10.1 SURVIVAL; RIGHT TO INDEMNIFICATION NOT AFFECTED BY KNOWLEDGE
All representations, warranties, covenants, and obligations in this Agreement,
the Disclosure Letter, the supplements to the Disclosure Letter, the
certificate delivered pursuant to Section 2.5(a)(v), and any other certificate
or document delivered pursuant to this Agreement will survive the Closing.
Except as set forth in Section 2.4 hereof: (a) the right to indemnification,
payment of Damages or other remedy based on such representations, warranties,
covenants, and obligations will not be affected by any investigation conducted
with respect to, or any Knowledge acquired (or capable of being acquired) at
any time, whether before or after the execution and delivery of this Agreement
or the Closing Date, with respect to the accuracy or inaccuracy of or
compliance with, any such representation, warranty, covenant, or obligation;
and (b) the waiver of any condition (except an express written waiver) based on
the accuracy of any representation or warranty, or on the performance of or
compliance with any covenant or obligation, will not affect the right to
indemnification, payment of Damages, or other remedy based on such
representations, warranties, covenants, and obligations.
10.2 INDEMNIFICATION AND PAYMENT OF DAMAGES BY SELLERS
Sellers, jointly and severally, will indemnify and hold harmless Buyer, the
Company, and their respective Representatives, and affiliates (collectively,
the "Indemnified Persons") for, and will pay to the Indemnified Persons the
amount of, any loss, liability, claim, damage (including incidental and
consequential damages), expense (including costs of investigation and defense
and reasonable attorneys' fees and, with respect to claims relating to
environmental matters, costs of cleanup, containment or other remediation) or
diminution of value, whether or not involving a third-party claim
(collectively, "Damages"), arising, directly or indirectly, from or in
connection with:
(a) any Breach of any representation or warranty made by Sellers in this
Agreement (without giving effect to any supplement to the Disclosure
Letter), the Disclosure Letter, the supplements to the Disclosure Letter,
or any other certificate or document delivered by Sellers pursuant to
this Agreement;
(b) any Breach by any Seller of any covenant or obligation of such Seller
in this Agreement;
(c) any claim by any Person for brokerage or finder's fees or commissions
or similar payments based upon any agreement or understanding alleged to
have been made by any such Person with either Seller or the Company (or
any Person acting on their behalf) in connection with any of the
Contemplated Transactions.
Notwithstanding the foregoing: (a) Sellers will not have any obligation to
indemnify Buyer against Damages until Buyer has suffered aggregate Damages by
reason of all such Breaches of Seventy-Five Thousand Dollars (the "Damage
Threshold"). Sellers iindemnification
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obligation will only extend to those Damages in excess of the Damage Threshold,
but not to exceed an aggregate of Ten Million Dollars ($10,000,000). Each of
Sellers shall not be liable for an indemnity for more than 150% of their
several shares. Buyer agrees to proceed and use reasonable collection efforts
against all of the Sellers. The remedies provided in this Section 10.2 will
not be exclusive of or limit any other remedies that may be available to Buyer
or the other Indemnified Persons.
10.3 ESCROW
To secure the obligations of Sellers pursuant to Section 10.2, the parties
shall enter into an escrow agreement in the form of Exhibit 10.3 (the "Escrow
Agreement"). Buyer shall deposit $100,000 of the Purchase Price with the
escrow agent described in the Escrow Agreement, to be held and distributed
pursuant to the terms of the Escrow Agreement.
10.4 INDEMNIFICATION AND PAYMENT OF DAMAGES BY BUYER
Buyer will indemnify and hold harmless Sellers, and will pay to Sellers the
amount of any Damages arising, directly or indirectly, from or in connection
with (a) any Breach of any representation or warranty made by Buyer in this
Agreement or in any certificate delivered by Buyer pursuant to this Agreement,
(b) any Breach by Buyer of any covenant or obligation of Buyer in this
Agreement, (c) any claim by any Person for brokerage or finder's fees or
commissions or similar payments based upon any agreement or understanding
alleged to have been made by such Person with Buyer (or any Person acting on
its behalf) in connection with any of the Contemplated Transactions. or (d) any
environmental liability whether known or unknown; resulting from activities
now, in the past or future for which the Sellers could be answerable: except
the Sellers' responsibilities and liabilities pursuant to Section 5.9. Sellers
liability is limited to correcting only those matter for the Facilities defined
in paragraph 5.9 and only to the extent provided in those reports. Buyer shall
deduct from the purchase $150,000 as full consideration for this
indemnification and limitation.
10.5 TIME LIMITATIONS
If the Closing occurs, Sellers will have no liability (for indemnification or
otherwise) with respect to any representation or warranty, or covenant or
obligation to be performed and complied with prior to the Closing Date, other
than those in Sections 3.2, 3.3, 3.6, 3.10, 3.11, 3.13, and 3.19, unless on or
before July 1, 1998 Buyer notifies Sellers of a claim specifying the factual
basis of that claim in reasonable detail to the extent then known by Buyer. A
claim with respect to Section 3.2, 3.3, 3.6, or 3.19, or a claim for
indemnification or reimbursement not based upon any representation or warranty
or any covenant or obligation to be performed and complied with prior to the
Closing Date, may be made at any time. A claim with respect to Sections 3.10,
3.11, and 3.13 may be made at any time during the applicable statute of
limitations. If the Closing occurs, Buyer will have no liability (for
indemnification or otherwise) with respect to any representation or warranty,
or covenant or obligation to be performed and complied with prior
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to the Closing Date, unless on or before July 1, 1998 Sellers notify Buyer of a
claim specifying the factual basis of that claim in reasonable detail to the
extent then known by Sellers.
10.6 PROCEDURE FOR INDEMNIFICATION--THIRD PARTY CLAIMS
(a) Promptly after receipt by an indemnified party under Section 10.2 or
10.4, of notice of the commencement of any Proceeding against it, such
indemnified party will, if a claim is to be made against an indemnifying
party under such Section, give notice to the indemnifying party of the
commencement of such claim, but the failure to notify the indemnifying
party will not relieve the indemnifying party of any liability that it
may have to any indemnified party, except to the extent that the
indemnifying party demonstrates that the defense of such action is
prejudiced by the indemnifying party's failure to give such notice.
(b) If any Proceeding referred to in Section 10.6(a) is brought against
an indemnified party and it gives notice to the indemnifying party of the
commencement of such Proceeding, the indemnifying party will be entitled
to participate in such Proceeding and, to the extent that it wishes
(unless (i) the indemnifying party is also a party to such Proceeding and
the indemnified party determines in good faith that joint representation
would be inappropriate, or (ii) the indemnifying party fails to provide
reasonable assurance to the indemnified party of its financial capacity
to defend such Proceeding and provide indemnification with respect to
such Proceeding), to assume the defense of such Proceeding with counsel
satisfactory to the indemnified party and, after notice from the
indemnifying party to the indemnified party of its election to assume the
defense of such Proceeding, the indemnifying party will not, as long as
it diligently conducts such defense, be liable to the indemnified party
under this Section 10 for any fees of other counsel or any other expenses
with respect to the defense of such Proceeding, in each case subsequently
incurred by the indemnified party in connection with the defense of such
Proceeding, other than reasonable costs of investigation. If the
indemnifying party assumes the defense of a Proceeding, (i) it will be
conclusively established for purposes of this Agreement that the claims
made in that Proceeding are within the scope of and subject to
indemnification; (ii) no compromise or settlement of such claims may be
effected by the indemnifying party without the indemnified party's
consent unless (A) there is no finding or admission of any violation of
Legal Requirements or any violation of the rights of any Person and no
effect on any other claims that may be made against the indemnified
party, and (B) the sole relief provided is monetary damages that are paid
in full by the indemnifying party; and (iii) the indemnified party will
have no liability with respect to any compromise or settlement of such
claims effected without its consent. If notice is given to an
indemnifying party of the commencement of any Proceeding and the
indemnifying party does not, within ten days after the indemnified
party's notice is given, give notice to the indemnified party of its
election to assume the defense of such Proceeding, the indemnifying party
will be bound by any determination made in such Proceeding or any
compromise or settlement effected by the indemnified party.
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(c) Notwithstanding the foregoing, if an indemnified party determines in
good faith that there is a reasonable probability that a Proceeding may
adversely affect it or its affiliates other than as a result of monetary
damages for which it would be entitled to indemnification under this
Agreement, the indemnified party may, by notice to the indemnifying
party, assume the exclusive right to defend, compromise, or settle such
Proceeding, but the indemnifying party will not be bound by any
determination of a Proceeding so defended or any compromise or settlement
effected without its consent (which may not be unreasonably withheld).
(d) Sellers hereby consent to the non-exclusive jurisdiction of any court
in which a Proceeding is brought against any Indemnified Person for
purposes of any claim that an Indemnified Person may have under this
Agreement with respect to such Proceeding or the matters alleged therein,
and agree that process may be served on Sellers with respect to such a
claim anywhere in the world.
10.7 INTENTIONALLY DELETED
10.8 RELEASE
(a) Each Seller on behalf of himself or herself and each of his or her
Related Persons, hereby releases and forever discharges the Buyer, the
Company and each of their respective past, present and future
Representatives, affiliates, successors and assigns (individually, a
"Releasee" and collectively, "Releasees") from any and all claims,
demands, Proceedings, causes of actions, Orders, obligations, contracts,
agreements, debts and liabilities whatsoever, whether known or unknown,
at law and in equity, which each of the Sellers or any of their
respective Related Persons now has, ever had or may hereafter have
against the Releasees arising contemporaneously with or prior to the
Closing Date or on account of or arising out of any matter, cause or
event occurring contemporaneously with or prior to the Closing Date,
including, but not limited to, any rights to indemnification or
reimbursement from the Company, whether pursuant to its Organizational
Documents, contract or otherwise and whether or not relating to claims
pending on or asserted after the Closing Date; provided, however, that
nothing contained herein shall operate to release any obligations of
Buyer arising under this Agreement or any obligation of the Company with
respect to Sellers which is to remain in effect after the Closing as
specifically provided in this Agreement. Each Seller hereby irrevocably
covenants to refrain from, directly or indirectly, asserting any claim or
demand, or commencing, instituting or causing to be commenced, any
proceeding of any kind against any Releasee, based upon any matter
purported to be released hereby. Each Seller's indemnification
obligation pursuant to Section 10.2 shall extend to any Damages arising
directly or indirectly from or in connection with the assertion by or on
behalf of the Sellers or any of their Related Persons of any claim or
other matter purported to be released pursuant to this Section and the
assertion of any third party of any claim or demand against any Releasee
which arises directly or indirectly from or in connection with any
assertion by or on behalf of the Sellers or any of their Related
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Persons against such third party with any claims or other matters
purported to be released hereby.
(b) Each Seller on behalf of himself or herself and each of his or her
Related Persons hereby releases and forever discharges each of the other
Sellers from any and all claims demands, Proceedings, causes of actions,
debts and liabilities whatsoever, whether known or unknown, at law and in
equity, which any such Seller or any of their respected Related Persons
now has, ever had or may hereafter have against any other Seller arising
out of any matter relating to the Company arising contemporaneously with
or prior to the Closing Date or with respect to the Contemplated
Transactions or the Housewares Transaction. Each Seller hereby
irrevocably covenants to refrain from, directly or indirectly, asserting
any claim or demand, or commencing, instituting or causing to be
commenced, any proceeding of any kind against any other Seller based upon
any matter purported to be released hereby.
11. GENERAL PROVISIONS
11.1 EXPENSES
Except as otherwise expressly provided in this Agreement, each party to this
Agreement will bear its respective expenses incurred in connection with the
preparation, execution, and performance of this Agreement and the Contemplated
Transactions, including all fees and expenses of agents, representatives,
counsel, and accountants. Sellers will cause the Company not to incur any
out-of-pocket expenses in connection with this Agreement. In the event of
termination of this Agreement, the obligation of each party to pay its own
expenses will be subject to any rights of such party arising from a breach of
this Agreement by another party.
11.2 PUBLIC ANNOUNCEMENTS
Any public announcement or similar publicity with respect to this Agreement or
the Contemplated Transactions will be issued, if at all, at such time and in
such manner as Buyer determines. Unless consented to by Buyer in advance or
required by Legal Requirements, prior to the Closing Sellers shall, and shall
cause the Company to, keep the terms and conditions of this Agreement strictly
confidential and may not make any disclosure of the terms and conditions of
this Agreement to any Person. Sellers and Buyer will consult with each other
concerning the means by which the Company' employees, customers, and suppliers
and others having dealings with the Company will be informed of the
Contemplated Transactions, and Buyer will have the right to be present for any
such communication.
11.3 CONFIDENTIALITY
Between the date of this Agreement and the Closing Date, Buyer and Sellers will
maintain in confidence, and will cause the directors, officers, employees,
agents, and advisors of Buyer and the Company to maintain in confidence, any
written, oral, or other information obtained in
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confidence from another party or the Company in connection with this Agreement
or the Contemplated Transactions, unless (a) such information is already known
to such party or to others not bound by a duty of confidentiality or such
information becomes publicly available through no fault of such party, (b) the
use of such information is necessary or appropriate in making any filing or
obtaining any consent or approval required for the consummation of the
Contemplated Transactions, or (c) the furnishing or use of such information is
required in connection with legal proceedings.
If the Contemplated Transactions are not consummated, each party will return or
destroy as much of such written information as the other party may reasonably
request. Whether or not the Closing takes place, Sellers waive, and will upon
Buyer's request cause the Company to waive, any cause of action, right, or
claim arising out of the access of Buyer or its representatives to any trade
secrets or other confidential information of the Company except for the
intentional competitive misuse by Buyer of such trade secrets or confidential
information.
11.4 NOTICES
All notices, consents, waivers, and other communications under this Agreement
must be in writing and will be deemed to have been duly given when (a)
delivered by hand (with written confirmation of receipt), (b) sent by
telecopier (with written confirmation of receipt), provided that a copy is
mailed by registered mail, return receipt requested, or (c) when received by
the addressee, if sent by a nationally recognized overnight delivery service
(receipt requested), in each case to the appropriate addresses and telecopier
numbers set forth below (or to such other addresses and telecopier numbers as a
party may designate by notice to the other parties):
If to Sellers: If to Buyers:
-------------- -------------
Selfix, Inc.
0000 Xxxx 00xx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: ----------------- Attention: Xxxxx X. Xxxxxxx
Facsimile No.: ----------------- Facsimile No.: 000-000-0000
-----------------
with a copy to: Bodanza & Xxxxxxx with a copy to: Much Shelist Freed
00 Xxxxxx Xxxxxx Xxxxxxxxx Xxxxx Xxxx &
Xxxxxxxxxx, XX 00000 Xxxxxxxxxx, P.C.
000 Xxxxx XxXxxxx Xx.,
Xxxxx 0000
Xxxxxxx, XX 00000
Attention: Xxxx X. Xxxxxxx Attention: Xxxxxxx X. Xxxxxxxxxx
Facsimile No.: 508-840-1222 Facsimile No.: 000-000-0000
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11.5 ARBITRATION
In the event a dispute arises between the parties in connection with this
Agreement, the parties shall cause such dispute to be submitted for
determination by arbitration in accordance with the commercial rules of the
American Arbitration Association ("AAA") then in effect. Such arbitration
proceeding shall be conducted in Harrisburg, Pennsylvania. All disputes within
the scope of the Federal Arbitration Act of the United States shall be governed
by that Act. The arbitrator shall have the right to award or include in any
award such relief which the arbitrator deems proper in the circumstances
included, without limitations, money damages, specific performance, injunctive
relief and legal fees and costs. The award and decision of the arbitrator
shall be conclusive and binding upon all of the parties, and judgment upon the
award may be entered in any court of competent jurisdiction. Each of the
parties reserves the right in a proper case to obtain temporary restraining
orders and temporary or preliminary injunctive relief from a court of competent
jurisdiction, provided such party promptly submits the dispute for arbitration
on the merits as provided by this Section.
11.6 FURTHER ASSURANCES
The parties agree (a) to furnish upon request to each other such further
information, (b) to execute and deliver to each other such other documents, and
(c) to do such other acts and things, all as the other party may reasonably
request for the purpose of carrying out the intent of this Agreement and the
documents referred to in this Agreement.
11.7 WAIVER
The rights and remedies of the parties to this Agreement are cumulative and not
alternative. Neither the failure nor any delay by any party in exercising any
right, power, or privilege under this Agreement or the documents referred to in
this Agreement will operate as a waiver of such right, power, or privilege, and
no single or partial exercise of any such right, power, or privilege will
preclude any other or further exercise of such right, power, or privilege or
the exercise of any other right, power, or privilege. To the maximum extent
permitted by applicable law, (a) no claim or right arising out of this
Agreement or the documents referred to in this Agreement can be discharged by
one party, in whole or in part, by a waiver or renunciation of the claim or
right unless in writing signed by the other party; (b) no waiver that may be
given by a party will be applicable except in the specific instance for which
it is given; and (c) no notice to or demand on one party will be deemed to be a
waiver of any obligation of such party or of the right of the party giving such
notice or demand to take further action without notice or demand as provided in
this Agreement or the documents referred to in this Agreement.
11.8 ENTIRE AGREEMENT AND MODIFICATION
This Agreement supersedes all prior agreements between the parties with respect
to its subject matter (including the Agreement between Buyer and Sellers dated
October 29, 1996) and constitutes (along with the documents referred to in this
Agreement) a complete and
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exclusive statement of the terms of the agreement between the parties with
respect to its subject matter. This Agreement may not be amended except by a
written agreement executed by the party to be charged with the amendment.
11.9 DISCLOSURE LETTER
In the event of any inconsistency between the statements in the body of this
Agreement and those in the Disclosure Letter, the statements in the body of the
Disclosure Letter will control.
11.10 ASSIGNMENTS, SUCCESSORS, AND NO THIRD-PARTY RIGHTS
Neither party may assign any of its rights under this Agreement without the
prior consent of the other parties except that Buyer may assign any of its
rights under this Agreement to any Subsidiary of Buyer. Subject to the
preceding sentence, this Agreement will apply to, be binding in all respects
upon, and inure to the benefit of the successors and permitted assigns of the
parties. Nothing expressed or referred to in this Agreement will be construed
to give any Person other than the parties to this Agreement any legal or
equitable right, remedy, or claim under or with respect to this Agreement or
any provision of this Agreement. This Agreement and all of its provisions and
conditions are for the sole and exclusive benefit of the parties to this
Agreement and their successors and assigns.
11.11 SEVERABILITY
If any provision of this Agreement is held invalid or unenforceable by any
court of competent jurisdiction, the other provisions of this Agreement will
remain in full force and effect. Any provision of this Agreement held invalid
or unenforceable only in part or degree will remain in full force and effect to
the extent not held invalid or unenforceable.
11.12 SECTION HEADINGS, CONSTRUCTION
The headings of Sections in this Agreement are provided for convenience only
and will not affect its construction or interpretation. All references to
"Section" or "Sections" refer to the corresponding Section or Sections of this
Agreement. All words used in this Agreement will be construed to be of such
gender or number as the circumstances require. Unless otherwise expressly
provided, the word "including" does not limit the preceding words or terms.
11.13 GOVERNING LAW
This Agreement will be governed by the laws of the State of Massachusetts
without regard to conflicts of laws principles.
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11.14 COUNTERPARTS
This Agreement may be executed in one or more counterparts, each of which will
be deemed to be an original copy of this Agreement and all of which, when taken
together, will be deemed to constitute one and the same agreement.
SELLERS:
/s/ Xxxxxxx X. Xxxxx
----------------------------
Xxxxxxx X. Xxxxx
/s/ Xxxxxxx X. Xxxxx
----------------------------
Xxxxxxx X. Xxxxx
/s/ Xxxxxxxx X. Tata
----------------------------
Xxxxxxxx X. Tata
/s/ Xxxxxxx X. Tata
----------------------------
Xxxxxxx X. Tata
/s/ Xxxxxxx X. Tata
----------------------------
Xxxxxxx X. Tata
BUYER:
Selfix, Inc., a Delaware Corporation
By: /s/ Xxxxx X. Xxxxxxx
-------------------------
Xxxxx X. Xxxxxxx, President
