STOCK PURCHASE AGREEMENT
AMONG
QUALITY PRODUCTS, INC.,
XXXXXXXX XXXX CORPORATION,
AND
XXXXXX X. XXXXXXX
April 26, 2001
TABLE OF CONTENTS
Page
----
BACKGROUND INFORMATION.......................................................1
STATEMENT OF AGREEMENT.......................................................1
ARTICLE I STOCK PURCHASE AND SALE..........................................1
ss.1.1. Stock Purchase and Sale............................................1
ss.1.2. Closing............................................................3
ss.1.3. Transfer Documents.................................................3
ss.1.4. CJC Packaging Division.............................................3
ss.1.5. Purchase of Packard Shares.........................................4
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE PARTIES....................4
ss.2.1. Representations and Warranties of Buyer............................4
ss.2.2. Representations and Warranties of Xx. X. Xxxxxxx...................4
ARTICLE III COVENANTS OF THE PARTIES........................................4
ss.3.1 Mutual Covenants...................................................4
(a) General..............................................................4
(b) Governmental Matters.................................................4
(c) CJC Packaging Division...............................................4
(c) Hockey and Football Tickets..........................................5
(d) Expense Reimbursement................................................5
ss.3.2. Covenants of Xx. X. Xxxxxxx........................................5
(a) Consulting Agreement.................................................5
(b) Opinion of Counsel...................................................5
(c) Director Resignations................................................5
(d) Authority............................................................5
(e) Financial Statements.................................................6
(f) Employee Plans and Benefit Arrangements..............................6
(g) Books and Records....................................................6
(h) Disclosures..........................................................6
(i) Noncompetition.......................................................6
(j) Injunctive Relief....................................................7
(k) Assignment...........................................................7
(m) Xxxx Xxxxxxx Consulting and Non-Competition Agreement................7
ss.3.3. Covenants of Buyer.................................................7
(a) Consulting Agreement.................................................7
(b) Opinion of Counsel...................................................8
(c) Firstar Guaranty.....................................................8
(d) Authority............................................................8
(e) [Intentionally Omitted]..............................................8
(f) Board of Directors...................................................8
(g) [Intentionally Omitted]..............................................8
(h) Stock Pledge; Additional Security....................................8
ARTICLE IV INDEMNIFICATION..................................................9
ss.4.1. Survival of Representations, Warranties and Agreements.............9
ss.4.2. Indemnification....................................................9
ss.4.3. Limitations on Indemnification....................................10
ss.4.4. Procedure for Indemnification with Respect to Third Party Claims..11
ss.4.5. Procedure For Indemnification with Respect to Non-Third Party
Claims ...........................................................12
ss.4.6. [Intentionally Omitted]...........................................12
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ss.4.7. Indemnification of the Shareholders...............................12
ARTICLE V MISCELLANEOUS...................................................12
ss.5.1. Notices...........................................................12
ss.5.2. Non-Waiver........................................................13
ss.5.3. Genders and Numbers...............................................13
ss.5.4. Headings..........................................................13
ss.5.5. Counterparts......................................................13
ss.5.6. Entire Agreement..................................................13
ss.5.7. No Third Party Beneficiaries......................................14
ss.5.8. Governing Law.....................................................14
ss.5.9. Successors; Assignment............................................14
ss.5.10. Remedies........................................................14
ss.5.11. Expenses........................................................14
ss.5.12. Announcements...................................................15
ss.5.13. Severability....................................................15
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DEFINED TERMS LOCATOR LIST
Term Section
---- -------
2000 Financial Statements Exhibit B,ss.B.7(a)
Additional Documents 4.1(a)
Affiliate Exhibit B,ss.B.19(a) (xxxxx.B.19 only);
ss.B.21 for rest of Agreement)
Affiliated Company 3.2(i)
Agreement Introduction
Buyer Introduction
Applicable Laws Exhibit B,ss.B.11
Benefit Arrangements Exhibit B,ss.B.19(e)
Buyer Stock Exhibit A,ss.A.2(a)
CJC Introduction
CJC Schedules 2.2
CJC Shares Background Information
CJF Background Information
CJF Shares Background Information
Closing 1.2
Closing Date 1.2
Code Exhibit B,ss.B.19(a)
Contract 9311 Exhibit B,ss.B.18
Current CJC Customers Exhibit B,ss.B.20
Damages 4.2(a)
X. Xxxxxxx Consulting Agreement 3.2(a)
X. Xxxxxxx Shares Background Information
Emess Exhibit B,ss.B.20
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Employee Plans Exhibit B,ss.B.19(a)
entity Exhibit B,ss.B.3
Environmental Laws Exhibit B,ss.B.11
ERISA Exhibit B,ss.B.19(a)
Exhibit A 2.1
Exhibit B 2.2
Financial Statements Exhibit B,ss.B.7(a)
Firstar 3.3(c)
Firstar Loan Agreement 3.3(c)
Firstar Loan Guaranty 3.3(c)
Granville Solvents Excluded Liabilities 4.2(b)(ii)
Incorporated Documents 5.6
Indemnifiable Claims 4.2(b)(i)
Indemnifying Party 4.4(a)
Liens 3.3(h)(ii)
Material Adverse Effect Exhibit B,ss.B.9(a)
Xx. X. Xxxxxxx Introduction
Xx. Xxxxxxx 1.5
Xxxx Xxxxxxx Consulting Agreement 3.2(l)
Xxxx Machine Exhibit B,ss.B.6
Xxxx Machine Assets Exhibit B,ss.B.6
Notes 3.3(c)
Packard Deferred Payments 1.5
Packard Purchase Agreement 1.5
Packard Shares Background Information
Parties Background Information
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Pension Plans Exhibit B,ss.B.19(a)
Permits Exhibit B,ss.B.11
Proprietary Rights Exhibit B,ss.B.12
Purchase Price 1.1
Related Party Payables Exhibit B,ss.B.21
Related Party Receivables Exhibit B,ss.B.21
Response Period 4.4(a)
Restricted Customer 3.2(i)
Restricted Goods and Services 3.2(i)
Restricted Period 3.2(i)
RHE Columbus Limited Exhibit B,ss.B.20
Securities Act Exhibit B,ss.B.28
Settlement Agreement Exhibit B,ss.B.18
Software Exhibit B,ss.B.12
Stock Pledge Agreement 3.3(h)
Stock Power 1.3
Stock Purchase Background Information
Third-Party Claim 4.4(a)
To the best of Xx. X.
Xxxxxxx'x knowledge 2.2
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STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (this "Agreement") is made effective April
26, 2001, among Quality Products, Inc., a Delaware corporation ("Buyer"),
Xxxxxxxx Xxxx Corporation, an Ohio corporation ("CJC"), and Xxxxxx X. Xxxxxxx
("Xx. X. Xxxxxxx").
BACKGROUND INFORMATION
A. There are 500 shares of issued and outstanding capital stock of CJC
(the "CJC Shares"), of which Xx. X. Xxxxxxx owns 455 common shares, without par
value (the "X. Xxxxxxx Shares"), and the Columbus Jewish Foundation ("CJF") owns
45 common shares, without par value (the "CJF Shares").
B. Xx. X. Xxxxxxx desires to sell, and Buyer desires to purchase (the
"Stock Purchase"), all of the X. Xxxxxxx Shares for the consideration described
inss.1.1, below. Concurrently with the execution of this Agreement, Buyer is
entering into separate agreements for the purchase of the Packard Shares and the
CJF Shares. Buyer, CJC, and Xx. X. Xxxxxxx (the "Parties") also desire to
consummate the other transactions contemplated by this Agreement.
STATEMENT OF AGREEMENT
The Parties acknowledge the foregoing Background Information and hereby
agree as follows:
ARTICLE I
STOCK PURCHASE AND SALE
ss.1.1. Stock Purchase and Sale. On the terms and subject to the
conditions described in this Agreement, Xx. X. Xxxxxxx shall sell, assign,
transfer, and deliver to Buyer, and Buyer shall purchase from Xx. X. Xxxxxxx,
all of the X. Xxxxxxx Shares, for a total purchase price (collectively, the
"Purchase Price") payable as follows:
(a) At the Closing, Buyer shall pay $440,000 to Xx. X. Xxxxxxx;
(b) Not later than December 31, 2001, Buyer shall cause CJC, as its
wholly-owned subsidiary, to pay to Xx. X. Xxxxxxx cash in an amount equal
to 25% of the amount (if any) by which the net income of CJC for the
fiscal year ended September 30, 2001 exceeds $150,000;
(c) Not later than December 31, 2002, Buyer shall cause CJC, as its
wholly-owned subsidiary, to pay to Xx. X. Xxxxxxx cash in an amount equal
to the sum of $162,000 (subject to offset pursuant to ss.1.5, below) and
25% of the amount (if any) by which the net income of CJC for the fiscal
year ended September 30, 2002 exceeds $150,000;
(d) Not later than December 31, 2003, Buyer shall cause CJC, as its
wholly-owned subsidiary, to pay to Xx. X. Xxxxxxx cash in an amount equal
to the sum of $162,000 (subject to offset pursuant to ss.1.5, below) and
25% of the amount (if any) by which the net income of CJC for the fiscal
year ended September 30, 2003 exceeds $150,000, provided that if the total
payment actually made to Xx. X. Xxxxxxx under this ss.1(d) is less than
$175,000, then, concurrently with such payment, Buyer shall issue to Xx.
X. Xxxxxxx that number of shares of common stock of Buyer (determined as
described below) having an aggregate fair market value as of the end of
such fiscal year equal to the amount by which $175,000 exceeds the cash
payment made to Xx. X. Xxxxxxx under this ss.1(d);
(e) Not later than December 31, 2004, Buyer shall cause CJC, as its
wholly-owned subsidiary, to pay to Xx. X. Xxxxxxx cash in an amount equal
to the sum of $162,000 (subject to offset pursuant to ss.1.5, below) and
25% of the amount (if any) by which the net income of CJC for the fiscal
year ended September 30, 2004 exceeds $150,000, provided that if the total
payment actually made to Xx. X. Xxxxxxx under this ss.1(e) is less than
$200,000, then, concurrently with such payment, Buyer shall issue to Xx.
X. Xxxxxxx that number of shares of common stock of Buyer (determined as
described below) having an aggregate fair market value as of the end of
such fiscal year equal to the amount by which $200,000 exceeds the cash
payment made to Xx. X. Xxxxxxx under this ss.1(e);
(f) Not later than December 31, 2005, Buyer shall cause CJC, as its
wholly-owned subsidiary, to pay to Xx. X. Xxxxxxx cash in an amount equal
to the sum of $162,000 (subject to offset pursuant to ss.1.5, below) and
25% of the amount (if any) by which the net income of CJC for the fiscal
year ended September 30, 2005 exceeds $150,000, provided that if the total
payment actually made to Xx. X. Xxxxxxx under this ss.1(f) is less than
$225,000, then, concurrently with such payment, Buyer shall issue to Xx.
X. Xxxxxxx that number of shares of common stock of Buyer (determined as
described below) having an aggregate fair market value as of the end of
such fiscal year equal to the amount by which $225,000 exceeds the cash
payment made to Xx. X. Xxxxxxx under this ss.1(f); and
(g) Not later than December 31, 2006, Buyer shall cause CJC, as its
wholly-owned subsidiary, to pay to Xx. X. Xxxxxxx cash in an amount equal
to the sum of $162,000 (subject to offset pursuant to ss.1.5, below) and
25% of the amount (if any) by which the net income of CJC for the fiscal
year ended September 30, 2006 exceeds $150,000, provided that if the total
payment actually made to Xx. X. Xxxxxxx under this ss.1(g) is less than
$250,000, then, concurrently with such payment, Buyer shall issue to Xx.
X. Xxxxxxx that number of shares of common stock of Buyer (determined as
described below) having an aggregate fair market value as of the end of
such fiscal year equal to the amount by which $250,000 exceeds the cash
payment made to Xx. X. Xxxxxxx under this ss.1(g).
Payment of the Purchase Price shall be subject to the following: (i) all
obligations to make cash payments to Xx. X. Xxxxxxx shall be the joint and
several obligations of Buyer and CJC, as Buyer's wholly-owned subsidiary, and
all cash payments to Xx. X. Xxxxxxx shall be made by certified or bank cashier's
check or wire transfer; (ii) the net income of CJC for any given fiscal year of
CJC shall be determined in accordance with generally accepted accounting
principles and the audited financial statements of CJC for such fiscal year;
(iii) if CJC has no net income for any given fiscal year (i.e., its net income
for such fiscal year equals zero or it has a net loss for such fiscal year),
then, for purposes of this ss.1, the net income of CJC for such fiscal year
shall be deemed to be zero; (iv) in no event shall Buyer or CJC have any
obligation under this ss.1 to pay to Xx. X. Xxxxxxx an aggregate sum, whether in
cash, common stock of Buyer, or any combination thereof, in excess of
$2,870,000; and (v) if, under any of the foregoing ss.ss.1(d), (e), (f), or (g),
Buyer has an obligation to issue shares of its common stock to Xx. X. Xxxxxxx,
Buyer shall have no obligation to register such shares with the Securities and
Exchange Commission or any state securities commission, such shares shall be
voting shares of the same class as those described in ss.A.2 of Exhibit A
attached hereto and, upon issuance, shall be subject to such restrictions on
transfer as are required under applicable federal and state securities laws, and
the number of shares to be issued pursuant to such ss.ss.1(d), (e), (f), or (g),
as applicable, shall be determined by (A) dividing the aggregate fair market
value called for by such ss.ss.1(d), (e), (f), or (g), as applicable, by the
fair market value of one share of common stock of Buyer as of the end of the
applicable fiscal year of CJC, (B) rounding the resulting quotient to the
nearest whole number, and (C) if but only if, since the end of the applicable
fiscal year of CJC but prior to the actual issuance of such shares, Buyer has
changed its outstanding shares of common stock by reason of stock splits, stock
dividends, or any other increase or
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reduction of the number of outstanding shares of common stock without receiving
consideration in the form of money, services, or property, adjusting the result
obtained in (B) in proportion to such change.
For purposes of this ss.1, the fair market value of a share of common
stock of Buyer (a "Share") shall mean, as of the end of any given fiscal year of
CJC, the (1) last reported sale price of the Shares on the New York Stock
Exchange or the American Stock Exchange on the last trading day of such fiscal
year, (2) last reported sale price of the Shares on the NASDAQ National Market
System on the last trading day of such fiscal year, (3) last reported sale price
of the Shares on any other stock exchange on which the Shares are listed on the
last trading day of such fiscal year, (4) mean between the bid and asked prices
for the Shares at the close of business, as reported by the National Association
of Securities Dealers, Inc. ("NASD"), on the last trading day of such fiscal
year, or (5) if not reported by the NASD, the mean between the bid and asked
prices for the Shares at the close of business on the last trading day of such
fiscal year as reported by the OTC Bulletin Board or as reported in The Wall
Street Journal or, if such prices are not reported by the OTC Bulletin Board or
in The Wall Street Journal, as verified by another reputable publication or
authoritative source, whichever is applicable; provided that if none of the
foregoing is applicable, then the fair market value of a Share shall be the
value determined by the board of directors of CJC, in its sole discretion.
ss.1.2. Closing. The closing of the Stock Purchase (the "Closing") is
being held on the date of this Agreement (the "Closing Date") and shall be
effective as of 12:01 a.m. on the Closing Date, unless otherwise agreed to in
writing by the Parties.
ss.1.3. Transfer Documents. At the Closing, Xx. X. Xxxxxxx shall assign
and transfer the X. Xxxxxxx Shares to Buyer by delivering to Buyer at the
Closing each certificate evidencing the X. Xxxxxxx Shares, together with a stock
power relating to the X. Xxxxxxx Shares duly executed by Xx. X. Xxxxxxx in the
form agreed upon by the Parties (the "Stock Power").
If consents or approvals of any other parties are required for the
transfer of the X. Xxxxxxx Shares to Buyer, Xx. X. Xxxxxxx shall have obtained
those consents and approvals prior to the Closing. All transfer taxes or other
similar taxes, assessments, or charges related to the sale of the X. Xxxxxxx
Shares to Buyer shall be paid by Xx. X. Xxxxxxx.
ss.1.4. CJC Packaging Division. As additional consideration, at the
Closing, CJC shall sell, assign, transfer, and deliver to Xx. X. Xxxxxxx, or his
designee, substantially all of rights, interests, and business operations of
CJC's packaging division located at 0000 Xxxxxxxx Xxxxxx, Xxxxxxxx, Xxxx
(collectively, the "Packaging Division"), as follows:
(a) At the Closing, CJC shall execute and deliver to Xx. X. Xxxxxxx
or his designee a xxxx of sale to effect the transfer of title to the
tangible personal property used in the Packaging Division, such xxxx of
sale to include a listing of the individual items of such tangible
personal property; and
(b) At the Closing, CJC and Xx. X. Xxxxxxx or his designee shall
enter into an assignment and assumption agreement, in the form agreed upon
by them, to effect the assignment by CJC and the assumption by Xx. X.
Xxxxxxx or his designee of (i) all accounts receivable of CJC generated by
the Packaging Division, (ii) the lease with The Xxxxx Xxxxx Group LLC
dated December 4, 2000 for approximately 12,000 square feet of space at
0000 Xxxxxxxx Xxxxxx, Xxxxxxxx, Xxxx used by the Packaging Division, (iii)
the lease with U.S. Financial Services, Inc. dated December 27, 2000 for
the Xxxxx forklift used by the Packaging Division, (iv) the At-Will
Employment, Non-Disclosure, and Non-Competition Agreement with Xxxxx
Xxxxxx dated December 13, 2000, and (v) all other liabilities incurred by
the Packaging Division, including
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without limitation all accounts payable and other trade payables.
ss.1.5. Purchase of Packard Shares. The Parties acknowledge and agree that
the X. Xxxxxxx Shares include 50 common shares, without par value, of CJC (the
"Packard Shares") purchased by Xx. X. Xxxxxxx from P. Xxx Xxxxxxx ("Xx.
Xxxxxxx") pursuant to a Stock Purchase Agreement dated the same date as this
Agreement (the "Packard Purchase Agreement"). The Packard Purchase Agreement
provides, in part, that Xx. X. Xxxxxxx shall make deferred payments to Xx.
Xxxxxxx in the amount of $12,000 on each of December 31, 2002, 2003, 2004, 2005,
and 2006 (the "Packard Deferred Payments"). Concurrently with the execution of
this Agreement, the Parties shall execute and deliver a separate assumption
agreement pursuant to which Xx. X. Xxxxxxx shall agree to a $12,000 reduction in
each of the five $162,000 payments described inss.1.1, above, in exchange for
the assumption by Buyer, jointly and severally with CJC as its wholly-owned
subsidiary, of Xx. X. Xxxxxxx'x obligation to make the Packard Deferred
Payments. Such reduction and assumption shall be subject to and conditioned upon
the complete release by Xx. Xxxxxxx of Xx. X. Xxxxxxx from any obligation to
make the Packard Deferred Payments.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE PARTIES
ss.2.1. Representations and Warranties of Buyer. In order to induce CJC
and Xx. X. Xxxxxxx to enter into this Agreement, Buyer hereby represents and
warrants to Xx. X. Xxxxxxx that the statements contained in Exhibit A attached
hereto ("Exhibit A") are true, correct and complete.
ss.2.2. Representations and Warranties of Xx. X. Xxxxxxx. In order to
induce Buyer to enter into this Agreement, Xx. X. Xxxxxxx hereby represents and
warrants to Buyer that the statements contained in Exhibit B attached hereto
("Exhibit B") are true, correct and complete, except as disclosed in the
Schedules referred to in Exhibit B and delivered by Xx. X. Xxxxxxx to Buyer on
or prior to the date of this Agreement (collectively, the "CJC Schedules").
Whenever used in any representation or warranty set forth in Exhibit B, the
phrase "to the best of Xx. X. Xxxxxxx'x knowledge" or similar language signifies
that no information has come to the attention of Xx. X. Xxxxxxx, or upon due
inquiry would have come to his attention, which gives him, or upon such inquiry
would have given him, actual knowledge contrary to such representation or
warranty.
ARTICLE III
COVENANTS OF THE PARTIES
ss.3.1. Mutual Covenants.
(a) General. Each Party shall use all reasonable efforts to take all
actions and do all things necessary, proper or advisable to consummate the
Stock Purchase and the other transactions contemplated by this Agreement,
including without limitation using all reasonable efforts to cause the
obligations set forth in this Agreement for which such Party is
responsible to be satisfied as soon as reasonably practicable and to
prepare, execute, acknowledge or verify, deliver, and file such additional
documents, and take or cause to be taken such additional actions as any
other Party may reasonably request.
(b) Governmental Matters. Each Party shall use all reasonable
efforts to take any action that may be necessary, proper or advisable in
connection with any notices to, filings with, and authorizations, consents
and approvals of any court, administrative agency or commission, or other
governmental authority or instrumentality that it may be required to give,
make or obtain.
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(c) Hockey and Football Tickets. The Parties acknowledge and agree
that CJC has already purchased tickets to the Ohio State University home
football games for the 2001-02 season and that Xx. X. Xxxxxxx shall have
the exclusive right to the use of such tickets. The Parties further
acknowledge and agree that the right to purchase and use such tickets for
subsequent football seasons shall be vested exclusively in CJC (regardless
of whether the name on the account maintained by the Ohio State University
athletic ticket office is that of CJC or Xx. X. Xxxxxxx), and Xx. X.
Xxxxxxx hereby waives any such right that he may have. Finally, the
Parties acknowledge and agree that, beginning with the 2001-02 National
Hockey League season, CJC and Xx. X. Xxxxxxx shall share on an equal basis
the Columbus Blue Jackets hockey tickets purchased from year to year
pursuant to the seat licenses which have been granted to CJC by the
operator of Nationwide Arena. CJC's obligations under the foregoing
sentence shall terminate immediately and automatically upon the death of
Xx. X. Xxxxxxx, and the foregoing sentence shall apply only to seat
licenses which have been granted to CJC and are in full force and effect
as of the date of this Agreement.
(d) Expense Reimbursement. To the best of Xx. X. Xxxxxxx'x
knowledge, as of the Closing, he has been reimbursed by CJC for all
reimbursable expenses incurred by or charged to him prior to the Closing.
In the event that, after the Closing, Xx. X. Xxxxxxx receives a xxxx or is
otherwise charged for any reasonable, direct, out-of-pocket expense
incurred in the ordinary course of CJC's business prior to the Closing,
Xx. X. Xxxxxxx shall pay such expense, and, promptly thereafter, Buyer
shall cause CJC to reimburse Xx. X. Xxxxxxx for such expense, subject to
such reasonable record-keeping, reporting, and other expense documentation
procedures as are customary for the reimbursement of business expenses.
ss.3.2. Covenants of Xx. X. Xxxxxxx. Xx. X. Xxxxxxx hereby agrees that:
(a) Consulting Agreement. Concurrently with the execution of this
Agreement, Xx. X. Xxxxxxx shall execute and deliver to CJC, as Buyer's
subsidiary, an consulting and non-competition agreement in the form agreed
upon by Buyer and Xx. X. Xxxxxxx (the "X. Xxxxxxx Consulting Agreement"),
and, concurrently with or prior to the Closing, Xx. X. Xxxxxxx shall have
terminated all employment agreements or arrangements between him and CJC,
including without limitation any "tax gross-up bonus" or similar agreement
or arrangement, without any remaining liability relating thereto on the
part of CJC.
(b) Opinion of Counsel. Concurrently with the execution of this
Agreement, Xx. X. Xxxxxxx shall deliver to Buyer the legal opinion of
Xxxxxx, Xxxxxxxx & Xxxxxxx, counsel to CJC and Xx. X. Xxxxxxx, in the form
agreed upon by Buyer and Xx. X. Xxxxxxx.
(c) Director Resignations. Concurrently with the execution of this
Agreement, Xx. X. Xxxxxxx shall deliver to Buyer the written resignation,
effective as of the Closing Date, of each member of the boards of
directors of CJC and its subsidiaries (subject toss.3.3(f), below).
(d) Authority. Concurrently with or prior to the execution of this
Agreement, Xx. X. Xxxxxxx shall have provided Buyer with evidence
reasonably satisfactory to Buyer that this Agreement and the transactions
contemplated by this Agreement have been properly authorized by CJC. Such
evidence shall include, without limitation, (i) certificates of good
standing for CJC and its subsidiaries issued not more than 15 days prior
to the Closing Date by the secretary of state of CJC's state of
incorporation, the state of incorporation of each subsidiary of CJC, and
any other state in which CJC or any of its subsidiaries is qualified to do
business, and (ii) a certificate
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from CJC in the form agreed upon by Buyer and Xx. X. Xxxxxxx, dated as of
the Closing Date and signed by the secretary of CJC.
(e) Financial Statements. Not less than five business days prior to
the execution of this Agreement, Xx. X. Xxxxxxx shall have delivered to
Buyer the Financial Statements.
(f) Employee Plans and Benefit Arrangements. Not less than 15 days
prior to the execution of this Agreement, Xx. X. Xxxxxxx shall have
delivered to Buyer copies of all Employee Plans and copies or descriptions
of all Benefit Arrangements.
(g) Books and Records. Concurrently with the execution of this
Agreement, Xx. X. Xxxxxxx shall deliver to Buyer all books and records of
CJC and any of its subsidiaries, including without limitation CJC's
corporate record book, financial ledgers, books of account, bank account
lists, and tax returns and records.
(h) Disclosures. After the date of this Agreement, Xx. X. Xxxxxxx
shall neither: (i) disclose to any person, association, firm, corporation
or other entity (other than Buyer and its representatives, attorneys,
accountants, and agents or those designated in writing by Buyer) in any
manner, directly or indirectly, any proprietary information or data
relevant to the business of CJC, whether of a technical or commercial
nature, nor (ii) use, or permit or assist, by acquiescence or otherwise,
any person, association, firm, corporation or other entity (other than
Buyer and its representatives, attorneys, accountants, and agents or those
designated in writing by Buyer) to use, in any manner, directly or
indirectly, any such information or data, excepting only (A) use of such
data or information as is at the time generally known to the public and
which did not become generally known through any breach of any provision
of this section by Xx. X. Xxxxxxx, and (B) disclosures of information to
employees, representatives, attorneys, accountants, and agents of CJC who
need to know such information and use of such information by employees,
representatives, attorneys, accountants, and agents of CJC who need to use
such information, in each use only to the extent necessary for the benefit
of CJC or Buyer.
(i) Noncompetition. During the Restricted Period (as defined below),
Xx. X. Xxxxxxx shall not, directly or indirectly (whether individually or
as a shareholder (except as a shareholder owning 1% or less of the
outstanding capital stock of a publicly traded corporation), partner,
member, director, officer, employee, consultant, creditor, or agent of any
person, association, or other entity):
(i) Other than on behalf of an Affiliated Company (as defined
below), enter into, engage in, or promote or assist (financially or
otherwise), directly or indirectly, any business which provides any
Restricted Goods and Services (as defined below) to any Restricted
Customer (as defined below);
(ii) Induce or encourage any employee, officer, director,
agent, supplier, or independent contractor of any Affiliated Company
to terminate its relationship with any such Affiliated Company, or
otherwise interfere or attempt to interfere in any way with any
Affiliated Company's relationships with its employees, officers,
directors, agents, suppliers, or independent contractors; or
(iii) Employ or engage any person who, at any time within the
one-year period immediately preceding such employment or engagement,
was an employee, officer, director, or agent of any Affiliated
Company; provided that Xx. X. Xxxxxxx may
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employ or engage such a person if such person's relationship with
such Affiliated Company was terminated by such Affiliated Company.
For purposes of this ss.3.2(i), (A) "Affiliated Company" shall mean
Buyer and all of its subsidiaries and affiliates (including, after the
Closing, CJC); (B) "Restricted Period" shall mean the period beginning on
the Closing Date and ending on the later of (i) the third anniversary of
the Closing Date or (ii) the second anniversary of the date Xx. X. Xxxxxxx
is no longer employed or otherwise retained by any Affiliated Company
(provided that, for purposes of determining the Restricted Period, Xx. X.
Xxxxxxx shall not be deemed to be employed or otherwise retained by any
Affiliated Company if his only employment or retention by an Affiliated
Company is exclusively for the purpose of satisfying the next-to-last
paragraph of ss.5 of the X. Xxxxxxx Consulting Agreement or as a result of
his service on the board of directors of an Affiliated Company, and
provided further that the Restricted Period shall end immediately and
automatically upon a default (which remains uncured) by Buyer or CJC with
respect to their respective payment or stock issuance obligations under
ss.1.1, above); (C) "Restricted Goods and Services" shall mean goods and
services of the type provided by any Affiliated Company at any time or
from time to time during the Restricted Period; and (D) "Restricted
Customer" shall mean, as of any given time, any person, firm, association,
corporation, or other entity which is then a customer of an Affiliated
Company, which was a customer of an Affiliated Company during the two-year
period immediately preceding such time, which is then being actively
solicited by or on behalf of an Affiliated Company to be a customer of
such Affiliated Company, or which was being actively solicited by or on
behalf of an Affiliated Company to be a customer of such Affiliated
Company during the one-year period immediately preceding such time.
(j) Injunctive Relief. Xx. X. Xxxxxxx acknowledges and agrees that
Buyer's remedies at law for any violation or attempted violation of any of
Xx. X. Xxxxxxx'x obligations under this Agreement would be inadequate, and
agrees that in the event of any such violation or attempted violation,
Buyer shall be entitled to a temporary restraining order, temporary and
permanent injunctions, and other equitable relief, without the necessity
of posting any bond or proving any actual damage, in addition to all other
rights and remedies which may be available to Buyer from time to time.
(k) Assignment. Concurrently with the execution of this Agreement,
Xx. X. Xxxxxxx shall deliver to Buyer an assignment and assumption
agreement, in the form agreed upon by Buyer and Xx. X. Xxxxxxx, whereby
CJC assigns its rights, and Xx. X. Xxxxxxx assumes CJC's obligations,
under: (i) Pacific Life Insurance Policy No. VP60122810; and (ii) the
motor vehicle lease agreement between Xxxx Xxxxxx Leasing, Inc. and CJC,
and related Optional Purchase Agreement between the same parties, for a
1996 Honda Civic LX, V.I.N. 0XXXX0000XX000000.
(l) Xxxx Xxxxxxx Consulting and Non-Competition Agreement. Prior to
the Closing, Xx. X. Xxxxxxx shall have caused CJC to terminate all
consulting agreements or arrangements between CJC and Xxxx X. Xxxxxxx,
including without limitation the Consulting and Non-Competition Agreement
dated January 30, 1992 (the "Xxxx Xxxxxxx Consulting Agreement"), without
any remaining liability relating thereto on the part of CJC.
ss.3.3. Covenants of Buyer. Buyer hereby agrees that:
(a) Consulting Agreement. Concurrently with the execution of this
Agreement, Buyer shall cause CJC, as Buyer's subsidiary, to execute and
deliver to Xx. X. Xxxxxxx the X. Xxxxxxx Consulting Agreement.
7
(b) Opinion of Counsel. Concurrently with the execution of this
Agreement, Buyer shall deliver to Xx. X. Xxxxxxx the legal opinion of
Xxxxx & Xxxxxxxxx LLP, counsel to Buyer, in the form agreed to by the
Parties.
(c) Firstar Guaranty. Concurrently with the execution of this
Agreement, Buyer shall execute and deliver to Firstar Bank, NA ("Firstar")
a guaranty, in the form agreed upon by Firstar and Buyer (the "Firstar
Loan Guaranty"), of the payment and performance of CJC's obligations to
Firstar under the Notes (as defined in the Revolving Credit and Term Loan
and Security Agreement between CJC and Firstar dated June 26, 1998, as
amended prior to the date hereof (as so amended, the "Firstar Loan
Agreement")). The terms of the Firstar Loan Guaranty shall include the
termination of the Unconditional Continuing Guaranty of Xx. X. Xxxxxxx
delivered by him to Firstar in connection with the Firstar Loan Agreement.
(d) Authority. Concurrently with or prior to the execution of this
Agreement, Buyer shall have provided Xx. X. Xxxxxxx with evidence
reasonably satisfactory to him that this Agreement and the transactions
contemplated by this Agreement have been properly authorized by Buyer.
Such evidence shall include, without limitation, (i) a certificate of good
standing for Buyer issued not more than 15 days prior to the Closing Date
by the secretary of state of Buyer's state of incorporation and any other
state in which Buyer is qualified to do business, and (ii) a certificate
from Buyer in the form agreed upon by the Parties, dated as of the Closing
Date and signed by the secretary of Buyer.
(e) [Intentionally Omitted].
(f) Board of Directors. For as long as any payment required
underss.1.1, above (including any issuance of stock required underss.1.1),
remains unpaid, Buyer shall, at Xx. X. Xxxxxxx'x option (i) cause Xx. X.
Xxxxxxx to remain on the CJC board of directors, which shall have no more
than four members, and (ii) provide to Xx. X. Xxxxxxx the same notice of
regular and special meetings of Buyer's board of directors as Buyer
provides to its directors and permit Xx. X. Xxxxxxx to attend such
meetings (provided that Xx. X. Xxxxxxx shall have none of the rights of a
director of Buyer unless he is duly elected as a director of Buyer).
(g) [Intentionally Omitted].
(h) Stock Pledge; Additional Security. Concurrently with the
Closing, as security for obligations described inss.1.1, above, Buyer
shall, subject to Firstar's consent, execute and deliver to Xx. X. Xxxxxxx
a stock pledge agreement relating to the CJC Stock in the form agreed upon
by Buyer and Xx. X. Xxxxxxx (the "Stock Pledge Agreement"). As further
security for the obligations described in ss.1.1, above, during the period
beginning on the Closing Date and continuing through and including the
fulfillment by Buyer and CJC of the obligations described in ss.1.1,
above, Buyer shall not, without the prior written consent of Xx. X.
Xxxxxxx (which shall not be unreasonably withheld), permit CJC, as Buyer's
subsidiary, to:
(i) Incur, create, assume, or otherwise become liable for any
indebtedness, other than (A) unsecured indebtedness owing to trade
creditors arising in the ordinary course of CJC's business, and (B)
the guaranty of Buyer's repayment obligations with respect to
amounts drawn against Buyer's line of credit with Firstar and
contributed by Buyer to CJC;
8
(ii) Grant any mortgage, pledge, lien, security interest,
encumbrance, or restriction of any nature with respect to any asset
of CJC (collectively, "Liens"), other than (A) Liens existing on the
date hereof, (B) Liens for taxes, assessments, or charges imposed on
CJC or any of its property by any governmental authority which are
not yet due or which are being contested in good faith and by
appropriate proceedings (if adequate reserves with respect thereto
are maintained on the books of CJC, in accordance with generally
accepted accounting principles), (C) statutory Liens of carriers,
warehousemen, mechanics, materialmen, repairmen, or other like Liens
arising in the ordinary course of CJC's business, (D) pledges or
deposits required in connection with workers' compensation,
unemployment insurance, and other social security legislation, (E)
Liens incurred on deposits to secure the performance of tenders,
bids, trade contracts (other than for borrowed money), leases,
statutory obligations, surety and appeal bonds, performance bonds
and return-of-money bonds, and other obligations of a like nature
incurred in the ordinary course of CJC's business, (F) easements,
rights-of-way, restrictions and other similar encumbrances incurred
in the ordinary course of CJC's business, and encumbrances
consisting of zoning restrictions, easements, licenses, restrictions
on the use of property or minor imperfections in title thereto,
which, in the aggregate, are not material in amount, and which do
not in any case materially detract from the value of the property
subject thereto or interfere with the ordinary conduct of the
business of CJC, (G) Liens in favor of customs and revenue
authorities arising as a matter of law and to secure payment of
customs duties in connection with the importation of goods, (H)
Liens securing obligations of CJC either (1) in respect of goods
purchased for resale in the ordinary course of CJC's business as
long as no UCC financing statements are filed concerning such goods
or (2) under true consignment arrangements in which CJC is the
consignee (pursuant to which UCC financing statements may be filed),
(I) Liens of landlords or mortgagees of landlords on fixtures and
movable property located on premises leased in the ordinary course
of CJC's business, and (J) Liens relating to judgments; or
(C) Issue equity securities of any type or class in addition
to the 500 currently issued and outstanding CJC Shares.
ARTICLE IV
INDEMNIFICATION
ss.4.1. Survival of Representations, Warranties and Agreements.
(a) Subject to the limitations set forth in ss.4.3, below, and
notwithstanding any investigation conducted at any time by or on behalf of
Buyer, all representations, warranties, covenants and agreements of Xx. X.
Xxxxxxx in this Agreement and in any other documents executed or delivered
by Xx. X. Xxxxxxx pursuant to this Agreement or in connection with the
transactions contemplated by the Agreement (the "Additional Documents")
shall survive the execution, delivery and performance of this Agreement
and the Additional Documents.
(b) As used in this Article, any reference to a representation,
warranty or covenant contained in any section of this Agreement shall
include any CJC Schedule relating to such section.
ss.4.2. Indemnification.
9
(a) Subject to the limitations set forth in ss.4.3, below, Xx. X.
Xxxxxxx shall indemnify and hold Buyer harmless from and against any and
all losses, liabilities, damages, demands, claims, suits, actions,
judgments or causes of action, assessments, costs and expenses, including
without limitation interest, penalties, attorneys' fees, any and all
expenses incurred in investigating, preparing or defending against any
litigation, commenced or threatened, or any claim whatsoever, and any and
all amounts paid in settlement of any claim or litigation (collectively,
"Damages"), asserted against, resulting to, imposed upon, or incurred or
suffered by Buyer, directly or indirectly, as a result of or arising from:
(i) any inaccuracy in or breach or nonfulfillment of any of the
representations, warranties, covenants or agreements made by Xx. X.
Xxxxxxx in this Agreement or the Additional Documents; (ii) any and all
claims of any current or former holder of any legal or beneficial
ownership interest in or to CJC, other than Xx. Xxxxxxx, which are based
upon, relate to, or arise out of any agreements, transactions, acts, or
omissions made or occurring at or prior to the Closing, excepting only any
claims against Buyer arising out of the failure of Buyer to perform its
obligations under this Agreement; or (iii) the Granville Solvents Excluded
Liabilities (as defined below).
(b) For purposes of this Agreement: (i) the term "Indemnifiable
Claims" shall mean the matters with respect to which Buyer is entitled to
indemnification under ss.4.2(a); (ii) the term "Granville Solvents
Excluded Liabilities" shall mean Damages asserted against, resulting to,
imposed upon, or incurred or suffered by Buyer or CJC, directly or
indirectly, as a result of or arising from the Granville Solvents Site
Cleanup (as defined below), but only after the aggregate amount of all
payments made on or after the Closing Date by Buyer and CJC on account of
such Damages reaches $120,000 (including any arrearages owed as of the
Closing Date by CJC pursuant to the PRP Group Agreement (as defined below)
but excluding $32,777.83 paid by CJC prior to the Closing Date); (iii) the
term "Granville Solvents Site Cleanup" shall mean the federal, state, and
local environmental enforcement authority response to the release of
hazardous substances from the Granville Solvents, Inc. facility located at
or about Xxxxxx Xxxx, Granville, Licking County, Ohio, including without
limitation the performance of any and all cleanup, remedial, removal, and
emergency designs or actions and reimbursement for response costs
incurred; and (iv) the term "PRP Group Agreement" shall mean the Agreement
to Develop Response Actions at the Granville Solvents Site dated February
1, 1994, among CJC and other potentially responsible parties, and any
successor agreement or agreements thereto.
(c) For purposes of this Article, all Damages shall be computed net
of any insurance coverage which reduces the Damages that would otherwise
be sustained, provided that in all cases the timing of the receipt or
realization of insurance proceeds shall be taken into account in
determining the amount of reduction of Damages.
(d) Buyer shall be deemed to have suffered Damages arising out of or
resulting from the matters referred to in ss.4.2(a), above, if the same
shall be suffered by any parent, subsidiary or affiliate of Buyer,
including without limitation, after the Closing, CJC.
ss.4.3. Limitations on Indemnification. Rights to indemnification
underss.ss.4.2(a) are subject to the following limitations:
(a) The obligation of indemnity with respect to the representations
and warranties set forth in ss.B.10 of Exhibit B shall terminate on the
expiration of the respective periods of limitations applicable to
assessment and collection of taxes under laws then applicable to such
taxes, with respect to the representations and warranties as to the
absence of unpaid or undisclosed taxes (including any interest, penalties
or expenses) of CJC.
10
(b) The obligation of indemnity with respect to the representations
and warranties set forth in ss.B.19 of Exhibit B shall terminate upon
expiration of the respective statutes of limitation applicable to the
items addressed in such section.
(c) The obligation of indemnity with respect to the representations
and warranties contained in ss.ss.B.2, B.3, B.5, and B.11 of Exhibit B
shall not expire.
(d) The obligation of indemnity with respect to the representations
and warranties set forth in Exhibit B other than those addressed in the
immediately preceding subsections (a), (b), and (c) shall terminate on the
second anniversary of the Closing Date.
(e) The foregoing provisions of this ss.4.3 notwithstanding, if,
prior to the termination of any obligation of indemnity, written notice of
a claimed breach or other occurrence or matter giving rise to a claim of
indemnification is given by Buyer to Xx. X. Xxxxxxx, or a suit, action, or
other proceeding based upon a claimed breach is commenced against Xx. X.
Xxxxxxx, Buyer shall not be precluded from pursuing such claimed breach,
occurrence, other matter, or suit or action, or from recovering from Xx.
X. Xxxxxxx (whether through the courts or otherwise) on the claim, suit,
action, or proceeding, by reason of the termination otherwise provided for
above.
ss.4.4. Procedure for Indemnification with Respect to Third Party Claims.
(a) If Buyer desires to seek indemnification under this Article with
respect to an Indemnifiable Claim resulting from the assertion of
liability by a third party (a "Third-Party Claim"), it shall give notice
to Xx. X. Xxxxxxx (hereinafter, the "Indemnifying Party") within a
reasonable period of time of Buyer's becoming aware of any such
Third-Party Claim, which notice shall set forth such material information
with respect to such Third-Party Claim as is then reasonably available to
Buyer. If any Third-Party Claim is asserted against Buyer and Buyer
notifies the Indemnifying Party of such Third-Party Claim, the
Indemnifying Party shall be entitled, if he so elects by written notice
delivered to Buyer within a reasonable period of time (not to exceed 10
days in any event) after receiving Buyer's notice (the "Response Period"),
to assume the defense of such Third-Party Claim with counsel reasonably
satisfactory to Buyer. Notwithstanding the foregoing: (i) Buyer shall not
have any obligation to give any notice of any Third-Party Claim unless
such assertion is in writing; (ii) the rights of Buyer to be indemnified
in respect of Indemnifiable Claims resulting from the assertion of any
Third-Party Claim shall not be adversely affected by its failure to give
notice pursuant to the foregoing provisions unless, and, if so, only to
the extent that, the Indemnifying Party is materially prejudiced by such
failure; and (iii) each Party shall cooperate with any other Party in all
ways reasonably requested by such other Party in connection with the
defense of any such Third-Party Claims. With respect to any Third-Party
Claim that results in a claim for indemnification under this Article, the
Parties shall make available to each other all relevant information in
their possession which is material to any such Third-Party Claim.
(b) In the event that the Indemnifying Party fails to assume the
defense of Buyer against any Third-Party Claim within the Response Period,
Buyer shall have the right to defend, compromise or settle such
Third-Party Claim on behalf, for the account, and at the risk of the
Indemnifying Party.
(c) Notwithstanding anything in this ss.4.4 to the contrary, (i) if
there is a reasonable probability that a Third-Party Claim may materially
and adversely affect Buyer, its subsidiaries or affiliates, including
without limitation, after the Closing, CJC, other than as a result of
money damages or other money payments, then Buyer shall have the right, at
the cost and expense of the
11
Indemnifying Party, to defend, compromise or settle such Third-Party
Claim; and (ii) the Indemnifying Party shall not, without Buyer's prior
written consent, settle or compromise any Third-Party Claim or consent to
entry of any judgment in respect of any Third-Party Claim unless such
settlement, compromise or consent includes as an unconditional term the
giving by the claimant or the plaintiff to Buyer (and its subsidiaries and
affiliates, including without limitation, after the Closing, CJC) of a
release from all liability in respect of such Third-Party Claim.
ss.4.5. Procedure For Indemnification with Respect to Non-Third Party
Claims. In the event that Buyer asserts the existence of an Indemnifiable Claim
giving rise to Damages other than an Indemnifiable Claim resulting from a
Third-Party Claim, it shall give written notice to the Indemnifying Party
specifying the nature and amount of the Indemnifiable Claim asserted. If the
Indemnifying Party, within 15 days after the receipt of such notice by Buyer,
has not given written notice to Buyer announcing its intention to contest such
assertion by Buyer, such assertion shall be deemed accepted and the amount of
the Indemnifiable Claim shall be deemed a valid Indemnifiable Claim. If,
however, the Indemnifying Party contests the assertion of an Indemnifiable Claim
by giving such written notice to Buyer within such 15-day period, then the
Parties, acting in good faith, shall attempt to negotiate a resolution of such
Indemnifiable Claim during the 15-day period following such notice from the
Indemnifying Party, but, if they are unable to do so, then each Party may pursue
any rights or remedies available to it.
ss.4.6. [Intentionally omitted].
ss.4.7. Indemnification of Xx. X. Xxxxxxx. Subject to the limitation
contained in the following paragraph, Buyer shall indemnify and hold Xx. X.
Xxxxxxx harmless from and against any and all Damages asserted against,
resulting to, imposed upon, or incurred or suffered by Xx. X. Xxxxxxx, directly
or indirectly, as a result of or arising from any inaccuracy in or breach or
nonfulfillment of any of the representations, warranties, covenants, or
agreements made by Buyer in this Agreement.
The representations and warranties of Buyer contained in Exhibit A and the
obligations of indemnity of Buyer with respect to those representations and
warranties shall terminate on the second anniversary of the Closing Date;
provided that if, prior to termination of any obligation of indemnity with
respect to any such representation or warranty, written notice of a claimed
breach of same is given by Xx. X. Xxxxxxx to Buyer, or a suit, action, or other
proceeding based upon the claimed breach is commenced against Buyer, Xx. X.
Xxxxxxx shall not be precluded from pursuing such claimed breach, or from
recovering from Buyer (whether through the courts or otherwise) on that claim,
by reason of the termination otherwise provided for above.
ARTICLE V
MISCELLANEOUS
ss.5.1. Notices. All notices and other communications under this Agreement
to any Party shall be in writing and shall be deemed given when delivered
personally, telecopied (which is confirmed) to that Party at the telecopy number
for that Party set forth below, mailed by certified mail (return receipt
requested) to that Party at the address for that Party (or at such other address
for such Party as such Party shall have specified in notice to the other
Parties), or delivered to Federal Express, UPS, or any similar express delivery
service for delivery to that Party at that address:
(a) If to Buyer or CJC:
Quality Products, Inc.
000 Xxxx Xxxxxxxxxx Xxxxxxxxx
Xxxxxxxx, Xxxx 00000
12
Attention: Xxxxx Xxxxxx, President
Telecopy No.: (000) 000-0000
with a copy to:
Xxxxx & Xxxxxxxxx LLP
00 Xxxx Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxx, Xxxx 00000
Attention: Xxxxxx X. Xxxx, Esq.
Telecopy No.: (000) 000-0000
(b) If to Xx. X. Xxxxxxx:
Xxxxxx X. Xxxxxxx
Telecopy No.: (614) ______________
with a copy to:
Xxxxxx, Xxxxxxxx & Xxxxxxx
000 Xxxxx Xxxxx Xxxxxx
Xxxxxxxx, Xxxx 00000
Attention: Xxxxxx Xxxxxxxx, Esq.
Telecopy No.: (000) 000-0000
ss.5.2. Non-Waiver. No failure by any Party to insist upon strict
compliance with any term or provision of this Agreement, to exercise any option,
to enforce any right, or to seek any remedy upon any default of any other Party
shall affect, or constitute a waiver of, any other Party's right to insist upon
such strict compliance, exercise that option, enforce that right, or seek that
remedy with respect to that default or any prior, contemporaneous, or subsequent
default. No custom or practice of the Parties at variance with any provision of
this Agreement shall affect or constitute a waiver of, any Party's right to
demand strict compliance with the provisions of this Agreement.
ss.5.3. Genders and Numbers. Where permitted by the context, each pronoun
used in this Agreement includes the same pronoun in other genders and numbers,
and each noun used in this Agreement includes the same noun in other numbers.
ss.5.4. Headings. The headings of the various articles and sections of
this Agreement are not part of the context of this Agreement, are merely labels
to assist in locating such articles and sections, and shall be ignored in
construing this Agreement.
ss.5.5. Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed to be an original, but all of which
taken together shall constitute one and the same agreement.
ss.5.6. Entire Agreement. This Agreement (including all exhibits,
schedules, and other documents referred to in this Agreement (the "Incorporated
Documents"), all of which are hereby incorporated by reference) constitutes the
entire agreement and supersedes all prior agreements and understandings, both
written and oral, among the Parties with respect to the subject matter of this
Agreement. All obligations of any Party under any Incorporated Document shall
constitute an obligation
13
of such Party under this Agreement. Any capitalized terms used in any
Incorporated Document which are not otherwise defined therein shall have the
respective meanings given such terms in this Agreement.
ss.5.7. No Third Party Beneficiaries. Nothing contained in this Agreement,
expressed or implied, is intended or shall be construed to confer upon or give
to any person, firm, corporation or legal entity, other than the Parties, any
rights, remedies or other benefits under or by reason of this Agreement.
ss.5.8. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Ohio without regard to principles of
conflicts of law.
ss.5.9. Successors; Assignment. This Agreement shall be binding upon,
inure to the benefit of and be enforceable by and against the Parties and their
respective heirs, personal representatives, successors, and assigns. Neither
this Agreement nor any of the rights, interests or obligations under this
Agreement shall be transferred or assigned by any of the Parties without the
prior written consent of the other Parties.
ss.5.10. Remedies. Subject to the right of Buyer to exercise the remedies
described in ss.ss.3.2(j) of this Agreement in any court having jurisdiction,
and to the rights of the Parties under Article IV of this Agreement, all
disagreements and controversies arising with respect to this agreement, or with
respect to its application to circumstances not clearly set forth in this
agreement, shall be settled by binding arbitration to be held, and the award
made, in Columbus, Ohio, pursuant to the then-applicable Commercial Arbitration
Rules of the American Arbitration Association. In any such arbitration, the
arbitrators shall consist of a panel of three arbitrators, which shall act by
majority vote and which shall consist of one arbitrator selected by the Party on
one side of the issue subject to the arbitration, one arbitrator selected by the
Party on the other side of the issue, and a third arbitrator selected by the two
arbitrators so selected, who shall be either a certified public accountant or an
attorney at law licensed to practice in the State of Ohio and who shall act as
chairman of the arbitration panel; provided that if the Party on one side of the
issue selects its arbitrator for the panel and the other Party fails so to
select its arbitrator within 10 business days after being requested by the first
Party to do so, then the sole arbitrator shall be the arbitrator selected by the
first Party. A decision in any such arbitration shall apply both to the
particular question submitted and to all similar questions arising thereafter
and shall be binding and conclusive upon both Parties and shall be enforceable
in any court having jurisdiction over the Party to be charged.
All costs and expenses of arbitration shall be borne by the Parties as
determined by the arbitrator or arbitration panel, except that the fees and
expenses of any arbitrator on an arbitration panel who is selected individually
by a Party shall be borne separately by the Party appointing the arbitrator;
provided that if one Party fails to select an arbitrator for a panel, and the
sole arbitrator is the arbitrator selected by the other Party, then the fees of
that arbitrator shall be borne by the Parties as determined by that arbitrator.
This ss.5.10 contemplates that there will only be two sides to any particular
issue. If any contention is made that there are more than two sides to an issue,
that contention shall be resolved by dividing the Parties into two sides by
grouping together those Parties most closely aligned with each other.
All rights and remedies of each Party under this Agreement shall be
cumulative and in addition to all other rights and remedies which may be
available to that Party from time to time, whether under any other agreement, at
law, or in equity.
ss.5.11. Expenses. Except as otherwise specifically provided in this
Agreement, each Party shall bear his, her, or its respective legal, accounting,
and other costs and expenses associated with the transactions contemplated by
this Agreement (including without limitation the costs of any brokers and
14
financial advisors); provided that Buyer shall, within 30 days after receipt of
reasonable documentation thereof from Xx. X. Xxxxxxx, reimburse Xx. X. Xxxxxxx
for his reasonable legal and accounting fees incurred in connection with the
Stock Purchase, up to $25,000, in the aggregate; provided that the Parties
acknowledge and agree that, as of the execution and delivery of this Agreement,
Buyer has already reimbursed Xx. X. Xxxxxxx for $7,500 of his legal fees
incurred in connection with the Stock Purchase, which counts against the $25,000
limit.
ss.5.12. Announcements. This Agreement and the transactions contemplated
herein shall be confidential and no Party shall disclose any information
relating to the transactions contemplated by this Agreement without the prior
written consent of the other Parties, except for such disclosures to such
professional advisors as may be necessary or appropriate in order to enter into
this Agreement and consummate the transactions contemplated by this Agreement.
Each Party and its representatives shall exercise all reasonable efforts to
maintain confidentiality with respect to such transactions at all times prior to
the public announcement, if any, of this Agreement. The provisions of this
section shall be subject to each Party's obligation to comply with applicable
requirements of federal or state laws or any governmental order or regulation.
ss.5.13. Severability. With respect to any provision of this Agreement
finally determined by a court of competent jurisdiction to be unenforceable,
such court shall have jurisdiction to reform such provision so that it is
enforceable to the maximum extent permitted by applicable law, and the Parties
shall abide by such court's determination. In the event that any provision of
this Agreement cannot be reformed, such provision shall be deemed to be severed
from this Agreement, but every other provision of this Agreement shall remain in
full force and effect.
Each of the undersigned confirms that it or he has read and fully understands
this Agreement and the exhibits attached hereto including without limitation the
representations and warranties contained in Exhibits A and B.
QUALITY PRODUCTS, INC. XXXXXXXX XXXX CORPORATION
By____________________________________ By____________________________________
Xxxxx Xxxxxx, President Xxxxxx X. Xxxxxxx, President
______________________________________
XXXXXX X. XXXXXXX
15
INDEX OF EXHIBITS AND ADDITIONAL DOCUMENTS
Exhibits:
Exhibit A Representations and Warranties of Buyer - ss.2.1
Exhibit B Representations and Warranties of Xx. X. Xxxxxxx - ss.2.2
Additional Documents:
Stock Power - ss.1.3
Xxxx of Sale (Packaging Division Assets) - ss.1.4
Assignment and Assumption Agreement (Packaging Division) - ss.1.4
CJC Schedules - ss.2.2
X. Xxxxxxx Consulting Agreement - ss.3.2(a)
Opinion of Xxxxxx, Xxxxxxxx & Xxxxxxx - ss.3.2(b)
CJC Director Resignation - ss.3.2(c)
CJC Certificate of Good Standing - ss.3.2(d)(i)
CJC Secretary's Certificate - ss.3.2(d)(ii)
CJC Financial Statements - ss.3.2(e)
CJC Employee Plans - ss.3.2(f)
CJC Benefit Arrangements - ss.3.2(f)
CJC Books and Records - ss.3.2(g)
Assignment and Assumption of Life Insurance Policy and Motor Vehicle
Lease - ss.3.2(k)
Opinion of Xxxxx & Xxxxxxxxx LLP - ss.3.3(b)
Firstar Loan Guaranty -ss.3.3(c)
Buyer Certificate of Good Standing - ss.3.3(d)(i)
Buyer Secretary's Certificate - ss.3.3(d)(ii)
Election of New CJC Board of Directors - ss.3.3(f)
Election of New CJC Officers - ss.3.3(f)
Stock Pledge Agreement - ss.3.3(h)
16
EXHIBIT A
REPRESENTATIONS AND WARRANTIES OF BUYER
ss.A.1. Organization and Standing. Buyer is a corporation duly organized,
validly existing, and in good standing under the laws of the State of Delaware.
Buyer has full corporate power and authority to own, lease, use and operate its
properties and to conduct its business as and where now owned, leased, used,
operated and conducted and is duly qualified or licensed as a foreign
corporation and is in good standing in each jurisdiction in which the character
or location of the property owned, leased or operated by it or the nature of the
business conducted by it makes such qualification necessary, except where the
failure to be so qualified or licensed would not have a material adverse effect
on Buyer and its subsidiaries, taken as a whole.
ss.A.2. Capitalization. Buyer's authorized capital stock (the "Buyer
Stock") consists solely of: (a) 20,000,000 shares of common stock, par value
$0.00001 per share, of which 2,551,333 were issued and outstanding as of
February 5, 2001; and (b) 10,000,000 shares of preferred stock, par value
$0.00001 per share, none of which are issued and outstanding. Each outstanding
share of Buyer Stock is, and all Shares to be issued in connection with the
Stock Purchase will be, duly authorized, validly issued, fully paid and
nonassessable, and have not been and will not be issued in violation of any
preemptive or similar rights. The issuance of the Shares to Xx. X. Xxxxxxx as
contemplated by this Agreement will be (subject to Exhibit B, ss.B.28, below) in
compliance in all material respects with all applicable federal and state
securities laws.
ss.A.3. Power and Authority. Buyer has all requisite corporate power and
authority to enter into this Agreement and to perform its obligations under this
Agreement. This Agreement and the transactions contemplated by this Agreement
have been duly and validly authorized by all necessary corporate action on the
part of Buyer. This Agreement has been duly executed and delivered by Buyer and
constitutes the legal, valid and binding obligation of Buyer, enforceable
against Buyer in accordance with its terms.
ss.A.4. Conflicts; Consents and Approvals. The execution and delivery of
this Agreement by Buyer and the consummation by Buyer of the transactions
contemplated in this Agreement will not:
(a) Violate or conflict with, or result in a breach of any provision
of, or constitute a default (or an event which, with the giving of notice,
the passage of time or otherwise, would constitute a default) under, or
entitle any third party (with the giving of notice, the passage of time or
otherwise) to terminate, accelerate or call a default under, or result in
the creation of any lien, security interest, charge or encumbrance upon
any of the properties or assets of Buyer under any of the terms,
conditions or provisions of the certificate of incorporation or bylaws,
each as amended to date, of Buyer, or any note, bond, mortgage, indenture,
deed of trust, license, contract, undertaking, agreement, lease or other
instrument or obligation to which Buyer is a party and which is material
to Buyer and its subsidiaries, taken as a whole;
(b) Violate any order, writ, injunction, decree, statute, rule or
regulation, applicable to Buyer or its properties or assets; or
(c) Require any action or consent or approval of, or review by, or
registration with any third party, court or governmental body or other
agency, instrumentality or authority, other than such actions taken in
respect of federal and state securities laws as are contemplated by this
Agreement.
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ss.A.5. Litigation. There is no suit, claim, action, proceeding or
investigation pending or, to the best of Buyer's knowledge, threatened against
Buyer which, individually or in the aggregate, is reasonably likely to have a
material adverse effect on Buyer and its subsidiaries, taken as a whole, or a
material adverse effect on the ability of Buyer to consummate the transactions
contemplated in this Agreement. Buyer is not subject to any outstanding order,
writ, injunction or decree which, insofar as can be reasonably foreseen,
individually or in the aggregate, would have a material adverse effect on it or
its ability to consummate the transactions contemplated by this Agreement.
ss.A.6. Brokerage and Finder's Fees. Neither Buyer nor any of its
subsidiaries, shareholders, directors, officers or employees has incurred, or
will incur on behalf of Buyer, any brokerage, finder's or similar fee in
connection with the transactions contemplated by this Agreement.
ss.A.7. No Liens. Neither the execution and delivery of this Agreement by
Buyer nor compliance by Buyer with the terms and provisions of this Agreement,
including without limitation the consummation by Buyer of the transactions
contemplated hereby, will result in the creation of any lien with respect to any
asset of CJC pursuant to any agreement, deed, contract, undertaking, mortgage,
indenture, writ, order, decree, restriction, legal obligation, or instrument to
which Buyer was already a party, or by which Buyer or any of its assets was
already bound or affected, prior to the execution and delivery by Buyer of this
Agreement and compliance by Buyer with the terms and conditions of this
Agreement.
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EXHIBIT B
REPRESENTATIONS AND WARRANTIES OF XX. X. XXXXXXX
ss.B.1. Organization and Standing. CJC is a corporation duly organized,
validly existing, and in good standing under the laws of the State of Ohio with
full corporate power and authority to own, lease, use and operate its properties
and to conduct its business as and where now owned, leased, used, operated and
conducted. CJC is duly qualified to do business in each jurisdiction listed in
Schedule B.1, is not qualified to do business in any other jurisdiction, and
neither the nature of the business conducted by CJC nor the properties it owns,
leases or operates requires it to qualify to do business in any other
jurisdiction. CJC has not received any written notice or assertion within the
last three years from any governmental official in any jurisdiction to the
effect that it is required to be qualified or authorized to do business in any
such jurisdiction, in which it is not so qualified or has not obtained such
authorization. CJC is not in default in the performance, observation or
fulfillment of any provision of its articles of incorporation, bylaws, or other
organizational documents, each as amended to date. Set forth on Schedule B.1
are, for CJC and for each of its subsidiaries: (a) the number of seats on the
board of directors, the name of each director currently serving, and the number
of vacancies on the board of directors, if any; and (b) each office and the name
of the person holding such office or, if such office is vacant, a statement to
that effect.
ss.B.2. Capitalization and Security Holders.
(a) Stock. The authorized capital stock of CJC consists solely of
750 common shares, without par value, of which 500 are issued and
outstanding and zero are held in treasury.
(b) Stock Ownership; Due Authorization and Issuance. Xx. X. Xxxxxxx
owns beneficially and of record 455 CJC Shares, and, to the best of Xx. X.
Xxxxxxx'x knowledge, CJF owns beneficially and of record 45 CJC Shares.
Each outstanding CJC Share has been duly authorized and validly issued, is
fully paid and non-assessable, and has not been issued in violation of any
preemptive or similar rights.
(c) No Other Commitment. There are no outstanding subscriptions,
options, warrants, puts, calls, agreements, understandings, claims or
other commitments or rights of any type relating to the issuance, sale or
transfer by CJC or Xx. X. Xxxxxxx of any capital stock or other securities
of CJC nor are there outstanding any securities which are convertible into
or exchangeable for any shares of capital stock of CJC, and CJC has no
obligation of any kind to issue any additional securities.
(d) Compliance with Laws; Liens. The issuance, sale, and transfer by
CJC of all of the CJC Shares have been in full compliance with all
applicable federal and state securities laws and other laws. Any sale and
transfer by Xx. X. Xxxxxxx of CJC Shares have been in full compliance with
all applicable federal and state securities laws and other laws. The X.
Xxxxxxx Shares are free and clear of all liens, security interests,
encumbrances, pledges, charges, claims, voting trusts and restrictions on
transfer of any nature whatsoever, except restrictions on transfer imposed
by or pursuant to federal and state securities laws. Neither CJC nor Xx.
X. Xxxxxxx has agreed to register any securities under the Securities Act
of 1933, as amended, and the rules and regulations thereunder or under any
state securities law.
ss.B.3. Subsidiaries. Except as set forth on Schedule B.3, CJC owns no
subsidiary corporations, nor does CJC own, directly or indirectly, any equity or
other ownership interest in any corporation,
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partnership, joint venture or other entity or enterprise (hereinafter, simply
"entity"). Set forth on Schedule B.3, with respect to each entity listed
thereon, is a description of CJC's relationship with such entity, including
without limitation, if CJC has an equity interest in such entity, a detailed
description of such equity interest (including the title and amount of
securities held and CJC's percentage equity interest in such entity). CJC is not
subject to any obligation or requirement to provide funds to or make any
investment (in the form of a loan, capital contribution or otherwise) in any
entity.
ss.B.4. Business. CJC is and has been engaged in the business of
manufacturing and distributing aircraft jacks and related ground support
equipment and is engaged in no other business whatsoever except as may be
incidental to the foregoing.
ss.B.5. Power and Authority; Capacity. CJC has all requisite corporate
power and authority to enter into this Agreement and to perform its obligations
under this Agreement. This Agreement and the transactions contemplated by this
Agreement have been duly and validly authorized by all necessary corporate
action on the part of CJC. Xx. X. Xxxxxxx has full legal capacity, power, and
authority to enter into this Agreement and perform his obligations under this
Agreement. This Agreement has been duly executed and delivered by CJC and Xx. X.
Xxxxxxx and constitutes the legal, valid and binding obligation of CJC and Xx.
X. Xxxxxxx enforceable against each of them, respectively, in accordance with
its terms. No other action or proceeding by or in respect of CJC or Xx. X.
Xxxxxxx is or was necessary to authorize this Agreement or the consummation of
the transactions contemplated by this Agreement.
ss.B.6. Consents and Approvals. Except as described in Schedule B.6,
neither the execution and delivery of this Agreement by CJC or Xx. X. Xxxxxxx
nor the consummation by them of the transactions contemplated by this Agreement
require or will require any action, consent, or approval of, or review by, or
registration with, any third party, court, or governmental body or other agency,
instrumentality, or authority. In connection with CJC's acquisition from Xxxx
Machine Corporation, an Ohio corporation ("Xxxx Machine"), of certain assets of
Xxxx Machine (the "Xxxx Machine Assets") pursuant to the Asset Purchase
Agreement dated July 1, 1998 between CJC and Xxxx Machine, (a) CJC obtained
Firstar's prior written consent to CJC's grant to Xxxx Machine of a security
interest in the Xxxx Machine Assets and to the first priority security interest
of Bank One, Lima, NA, in the Xxxx Machine Assets, and (b) Bank One, Lima, NA
gave its prior written consent to the transfer of such acquired assets to CJC
and released its security interest in the Xxxx Machine Assets.
ss.B.7. Financial Statements. CJC has furnished to Buyer, for each of
CJC's three most recently ended fiscal years, the balance sheet for CJC as of
the end of such fiscal year and the related statements of income and retained
earnings and cash flows, including, in each case, the related notes, all of
which have been compiled by an independent firm of certified public accountants
(collectively, the "Financial Statements"). The Financial Statements as at and
for CJC's most recently ended fiscal year are sometimes hereinafter referred to
separately as the "2000 Financial Statements." The Financial Statements were
prepared in accordance with generally accepted accounting principles applied on
a consistent basis, were prepared from and are in accordance with the books and
records of CJC, and fairly present the financial condition of CJC as of the
dates stated and the results of operations of CJC for the periods then ended in
accordance with such practices.
ss.B.8. Undisclosed Liabilities. Except as set forth in Schedule B.8, CJC
has no liability or obligation of any nature (whether liquidated, unliquidated,
accrued, absolute, contingent or otherwise and whether due or to become due)
except:
(a) Those set forth in the 2000 Financial Statements which have not
been paid or discharged since the date thereof;
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(b) Those arising from and after the date of this Agreement under
agreements or other commitments specifically identified in Schedule B.20;
and
(c) Current liabilities (determined in accordance with generally
accepted accounting principles) incurred since December 31, 1999, in
transactions in the ordinary course of business consistent with past
practices which are properly reflected on CJC's books and records and are
not inconsistent with the other representations, warranties and agreements
of Xx. X. Xxxxxxx and CJC set forth in this Agreement.
ss.B.9. Absence of Certain Changes. Except as set forth in Schedule B.9,
since December 31, 2000, there has not been:
(a) Any material adverse change in or effect on the business,
operations, assets, properties, prospects, rights or condition (financial
or otherwise) of CJC, or the ability of CJC or Xx. X. Xxxxxxx to
consummate the transactions contemplated by this Agreement, or, to the
best of Xx. X. Xxxxxxx'x knowledge, any occurrence, circumstance, or
combination thereof which reasonably could be expected to result in any
such material adverse change or effect (a "Material Adverse Effect");
(b) Any declaration, setting aside or payment of any distribution or
payment (in cash or in kind) by CJC to any shareholder of CJC or any
direct or indirect redemption, purchase or other acquisition by CJC of any
of its capital stock or other securities or any rights or agreements to
purchase or acquire any of its capital or stock or other securities;
(c) Any increase in amounts payable by CJC to or for the benefit of,
or committed to be paid by CJC to or for the benefit of, any shareholder
of CJC or any director or officer of CJC, or any consultant, agent or
employee of CJC, or any relatives of any such person, or any increase in
any benefits granted under any bonus, profit-sharing, pension, retirement,
deferred compensation, insurance, or other direct or indirect benefit
plan, payment or arrangement made to, with or for the benefit of any such
person, excepting only (i) reimbursement, in the ordinary course of
business consistent with past practices, of out-of-pocket expenses
incurred by employees of CJC directly in connection with CJC's business,
and (ii) compensation (including bonuses) or distributions to the
shareholders of CJC in amounts consistent with past practices;
(d) Any transaction entered into or carried out by CJC other than in
the ordinary and usual course of its business;
(e) Any borrowing or agreement to borrow funds by CJC, any incurring
by CJC of any other obligation or liability (contingent or otherwise),
except current liabilities incurred in the usual and ordinary course of
business (consistent with past practices), or any endorsement, assumption
or guarantee of payment or performance of any loan or obligation of any
other individual, firm, corporation or other entity by CJC;
(f) Any material change in CJC's method of doing business or any
change in CJC's accounting principles or practices or its method of
application of such principles or practices;
(g) Any mortgage, pledge, lien, security interest, hypothecation,
charge or other encumbrance imposed or agreed to be imposed on or with
respect to the property or assets of CJC;
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(h) Any sale, lease or other disposition of, or any agreement to
sell, lease or otherwise dispose of any of the properties or assets of
CJC, other than in the usual and ordinary course of business consistent
with past practices;
(i) Any purchase of or any agreement to purchase assets (other than
inventory purchased in the ordinary course of business consistent with
past practices) for an amount in excess of $10,000 for any one purchase
made by CJC or $25,000 for all such purchases made by CJC or any lease or
any agreement to lease, as lessee, any capital assets with payments over
the term thereof to be made by CJC exceeding an aggregate of $10,000;
(j) Any loan or advance made by CJC to any individual, firm,
corporation or other entity;
(k) Any modification, waiver, change, amendment, release, rescission
or termination of, or accord and satisfaction with respect to, any
material term, condition or provision of any contract, agreement, license
or other instrument to which CJC is a party, other than any satisfaction
by performance in accordance with the terms thereof in the usual and
ordinary course of business;
(l) Any labor dispute or disturbance adversely affecting the
business operations or condition (financial or otherwise) of CJC,
including without limitation the filing of any petition or charge of
unfair labor practice with any governmental or regulatory authority,
efforts to effect a union representation election, actual or threatened
employee strike, work stoppage or slow down; or
(m) Any disciplinary or other similar action, proceeding, or
investigation taken by any governmental or accrediting board, agency, or
authority against or with respect to CJC, Xx. X. Xxxxxxx, or any employee
or, to the best of Xx. X. Xxxxxxx'x knowledge, independent contractor of
CJC.
ss.B.10. Taxes.
(a) To the best of Xx. X. Xxxxxxx'x knowledge, CJC has duly,
properly, and timely filed all federal, state, local and foreign tax
returns and tax reports required to be filed by it, all such returns and
reports are true, correct and complete, none of such returns and reports
have been amended, and any and all taxes, assessments, fees and other
governmental charges due from CJC, including without limitation those
arising under such returns and reports, have been fully paid or are fully
accrued as liabilities in the 2000 Financial Statements and will be timely
paid. No claim has been made by authorities in any jurisdiction where CJC
did not file tax returns that it is or may be subject to taxation or to
reporting therein.
(b) CJC has delivered to Buyer copies of all federal, state, local,
and foreign income tax returns filed for taxable periods ended on or after
December 31, 1998. Schedule B.10-1 sets forth the dates and results of any
and all audits conducted by taxing authorities against CJC within the last
five years or otherwise with respect to any tax year for which assessment
is not barred by any applicable statute of limitations. No waivers of any
applicable statute of limitations for the filing of any tax returns or
payment of any taxes or assessments of any deficient or unpaid taxes are
outstanding. Except as set forth in Schedule B.10-1, all deficiencies
resulting from any audits have been paid or settled. There are no pending
or, to the best of Xx. X. Xxxxxxx'x knowledge, threatened federal, state,
local or foreign tax audits or assessments affecting CJC and
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no agreement with any federal, state, local or foreign taxing authority
that may affect the subsequent tax liabilities of CJC.
(c) CJC is not liable for taxes, assessments, fees or governmental
charges for which it has not made adequate provision, including setting
aside a sufficient reserve to cover that potential liability in full in
the 2000 Financial Statements (except those disclosed in the handwritten
tax matters memo from Xxxxx Xxxx dated April 25, 2001, with respect to
which Buyer and Xx. X. Xxxxxxx agree to negotiate in good faith on a
post-closing basis).
(d) There exists no tax-sharing agreement or arrangement pursuant to
which CJC is obligated to pay the tax liability of any other person or
entity, or to indemnify any other person or entity with respect to any
tax.
(e) Schedule B.10-2 includes a list of all states, territories and
jurisdictions to which any tax is properly payable by CJC or in which a
tax report must be filed.
ss.B.11. Compliance with Law. Except as set forth in Schedule B.11-1, to
the best of Xx. X. Xxxxxxx'x knowledge, CJC has complied and is in compliance in
all material respects, except where non-compliance would have no adverse effect
on the business or assets of CJC, with all applicable laws, statutes, orders,
rules, regulations, policies and guidelines promulgated, and all judgments,
decisions and orders entered, by any federal, state, local or foreign court or
governmental authority, agency, or instrumentality relating to CJC, or its
business or properties, including without limitation all zoning, fire, safety,
building, and asbestos laws, ordinances, regulations and requirements,
Environmental Laws (defined below), Title VII of the Civil Rights Act of 1964,
as amended, the Health Portability and Accountability Act of 1996, as amended,
the Fair Labor Standards Act, as amended, the Occupational Safety and Health Act
of 1970, as amended, the Americans with Disabilities Act of 1990, all applicable
federal, state and local laws, rules and regulations relating to employment, and
all applicable laws, rules and regulations governing payment of minimum wages
and overtime rates, and the withholding and payment of taxes from compensation
of employees; all federal or state laws and regulations relating to fraud and
abuse; and all related laws, ordinances, regulations and requirements
(collectively, the "Applicable Laws"). Except as set forth in Schedule B.11-1,
CJC has not been charged with or given notice of any violation of any of the
Applicable Laws which violation has not been remedied in full (without any
remaining liability of CJC).
Schedule B.11-2 includes a list of all franchises, licenses, permits,
consents, authorizations, approvals and certificates which are, to the best of
Xx. X. Xxxxxxx'x knowledge, necessary for CJC to carry on its business as
presently conducted (collectively, the "Permits"), each of which currently is
owned by CJC and is valid and in full force and effect. Except as set forth in
Schedule B.11-2, CJC is not in violation of any of the Permits, and there are no
pending or, to the best of Xx. X. Xxxxxxx'x knowledge, threatened proceedings
which could result in the revocation, cancellation or inability of CJC to renew
any Permit.
Except as set forth on Schedule B.11-3, (i) CJC has never disposed of, or
contracted for the disposal of, hazardous wastes, hazardous substances,
infectious or medical waste, radioactive waste or sewage sludge, and (ii) to the
best of Xx. X. Xxxxxxx'x knowledge, no such wastes, substances, or sludge
generated by CJC have finally come to be located on any site which is or has
been (including as a potential or suspect site) included in any published
federal, state, or local "superfund" or other list of hazardous or toxic waste
sites.
For purposes of this Agreement, "Environmental Laws" shall mean all
federal, state, and local environmental laws, statutes, ordinances, and codes
relating to the protection of public health or the
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environment (including without limitation any water, land, subsurface, air,
fish, wildlife, and other natural resources) or governing the use, storage,
treatment, generation, transportation, processing, handling, management,
production, or disposal of solid wastes, medical wastes, toxic substances,
hazardous wastes, hazardous substances, petroleum, petroleum-based products,
radio-nuclides, or other radioactive materials and the rules, regulations,
policies, guidelines, interpretations, decisions, orders, and directives of
federal, state, and local government agencies and authorities with respect
thereto.
ss.B.12. Proprietary Rights. Schedule B.12-1 sets forth:
(a) All material names, patents, inventions, trade secrets,
proprietary rights, computer software, trademarks, trade names, service
marks, logos, copyrights and franchises, and all applications therefor,
registrations thereof and licenses, sublicenses or agreements in respect
thereof which CJC owns or has the right to use or to which CJC is a party;
and
(b) All filings, registrations or issuances of any of the foregoing
with or by any federal, state, local or foreign regulatory, administrative
or governmental office or offices (all items in (a) and (b) of this
section being sometimes hereinafter referred to collectively as the
"Proprietary Rights").
Except as set forth in Schedule B.12-2, CJC is the sole and exclusive
owner of all right, title and interest in and to all Proprietary Rights free and
clear of all liens, claims, charges, equities, rights of use, encumbrances and
restrictions whatsoever, and there is no pending or, to the best of Xx. X.
Xxxxxxx'x knowledge, threatened investigation, proceeding, inquiry or other
review by any federal, state, local or foreign regulatory, administrative or
governmental office or offices with respect to CJC's right, title or interest in
any Proprietary Right.
Other than those Proprietary Rights listed in Schedule B.12-1, no name,
patent, invention, trade secret, proprietary right, computer software,
trademark, trade name, service xxxx, logo, copyright, franchise, license,
sublicense, or other such right is necessary for the operation of the business
of CJC in substantially the same manner as such business is presently conducted.
No business of CJC has been or is now being conducted in contravention of any
trademark, copyright or other proprietary right of any third party.
Except as set forth in Schedule B.12-3, none of the Proprietary Rights:
(i) has been hypothecated, sold, assigned or licensed by CJC, or any other
person, corporation, firm or other entity; (ii) to the best of Xx. X. Xxxxxxx'x
knowledge, infringes upon or violates the rights of any person, firm,
corporation, or other entity; (iii) to the best of Xx. X. Xxxxxxx'x knowledge,
is subject to challenge, claims of infringement, unfair competition or other
claims; or (iv) to the best of Xx. X. Xxxxxxx'x knowledge, is being infringed
upon or violated by any person, firm, corporation or other entity.
Except as set forth in Schedule B.12-4: (A) CJC has not given, directly or
indirectly, any indemnification against patent, trademark or copyright
infringement as to any equipment, materials, products, services or supplies
which CJC uses, licenses or sells; (B) to the best of Xx. X. Xxxxxxx'x
knowledge, no product, process, method or operation presently sold, engaged in
or employed by CJC infringes upon any rights owned by any other person, firm,
corporation or other entity; and (C) there is no pending or, to the best of Xx.
X. Xxxxxxx'x knowledge, threatened claim or litigation against CJC contesting
the right of CJC to sell, engage in or employ any such product, process, method,
or operation.
Except as set forth in Schedule B.12-5, CJC has exclusive rights to own,
use and license others to use the computer software used by it (the "Software").
Schedule B.12-1 lists and briefly describes, and CJC has provided to Buyer true,
correct and complete copies of, all material licenses, agreements,
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documents and other materials relating to the Software and to the rights of CJC
therein. CJC has not licensed or otherwise authorized any other person to use or
make use of all or any part of the Software, nor has it granted, assigned or
otherwise conveyed any right in or to the Software.
ss.B.13. Restrictive Documents or Laws. With the exception of the matters
listed in Schedule B.13, to the best of Xx. X. Xxxxxxx'x knowledge, neither CJC
nor Xx. X. Xxxxxxx is a party to or bound under any mortgage, lien, lease,
agreement, contract, instrument, law, order, judgment or decree, or any similar
restriction not of general application, which materially and adversely affects,
or reasonably could be expected so to affect: (a) the condition of CJC
(financial or otherwise) or its assets; (b) the continued operation of CJC's
assets after the Closing on substantially the same basis as such assets are
currently operated; or (c) the consummation of the transactions contemplated by
this Agreement.
ss.B.14. Insurance. CJC has been and is insured with respect to its
property and the conduct of its business in such amounts and against such risks
as are sufficient for compliance with Applicable Laws and as are adequate to
protect the properties and businesses of CJC in accordance with normal industry
practice. Such insurance is and has been provided by insurers unaffiliated with
CJC, which insurers are, to the best of Xx. X. Xxxxxxx'x knowledge, financially
sound and reputable. Set forth in Schedule B.14 is a true, correct and complete
list of all insurance policies and bonds, if any, in force for which CJC or any
person employed or otherwise retained by CJC is named as an insured party, or
for which CJC or any person employed or otherwise retained by CJC has paid any
premiums, and such lists correctly state the name of the insurer, the name of
each insured party, the type and amount of coverage, deductible amounts, if any,
the expiration date and the premium amount of each such policy or bond. Except
as disclosed in Schedule B.14, all such policies or bonds are currently in full
force and effect and no notice of cancellation or termination has been received
by CJC with respect to any such policy or bond. CJC will continue all such
policies and bonds in full force and effect through the Closing. All premiums
due and payable on such policies and bonds have been paid. Except as disclosed
in Schedule B.14, CJC is not a co-insurer under any term of any insurance
policy.
ss.B.15. Bank Accounts, Depositories; Powers of Attorney. Set forth in
Schedule B.15 is a true, correct and complete list of the names and locations of
all banks or other depositories in which CJC has one or more accounts or safe
deposit boxes, and the names of the persons authorized to draw thereon, borrow
therefrom or have access thereto. Except as set forth in such Schedule B.15, no
person or entity has a power of attorney from CJC.
ss.B.16. Title to and Condition of Properties. Except as set forth in
Schedule B.16-1, CJC has good, valid and marketable title to all of its assets
of every kind, nature and description, tangible or intangible, wherever located,
which constitute all of the property now used in and necessary for the conduct
of its business as presently conducted (including without limitation all assets
shown or reflected on the 2000 Financial Statements). Except as set forth in
Schedule B.16-2, to the best of Xx. X. Xxxxxxx'x knowledge, all such assets are
owned free and clear of all mortgages, pledges, liens, security interests,
encumbrances and restrictions of any nature whatsoever, including without
limitation: (a) rights or claims of parties in possession; (b) easements or
claims of easements; (c) encroachments, overlaps, boundary line or water
drainage disputes or any other matters; (d) any lien or right to a lien for
services, labor or material furnished; (e) special tax or other assessments; (f)
options to purchase, leases, tenancies, or land contracts; (g) contracts,
covenants, or reservations which restrict the use of such properties; and (h)
violations of Environmental Laws and zoning, fire safety, building, and other
laws, ordinances and regulations applicable to such properties. To the best of
Xx. X. Xxxxxxx'x knowledge, the current uses of all such assets are in
compliance with all federal, state, local or other governmental building,
zoning, health, safety, platting, subdivision or other law, ordinance or
regulation, or any applicable private restriction, and such uses are legal
conforming uses. Except as set forth in Schedule B.16-3, CJC is not a party to
or bound under any agreement or legal obligation authorizing any party to file
any such financing
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statement. Schedule B.16-4 contains a complete and accurate description of all
of the real property owned or leased by CJC (organized by category). CJC owns or
leases no other real property.
Without limiting the generality of the preceding provisions of this
ss.B.16: (i) all security interests granted by CJC to Banc Ohio National Bank
(or any successor entity) in connection with Asset Purchase Agreement among
Xxxxxxxx Xxxx Corporation, Coljak Corporation, and Xxxxxx X. Xxxxxxx dated
January 30, 1992, have been terminated, and all UCC-3 Termination Statements
related to the termination of such security interests have been duly and
properly filed; and (ii) all security interests in the Xxxx Machine Assets
granted by Xxxx Machine to any secured party have been terminated, and all UCC-3
Termination Statements related to the termination of such security interests
have been duly and properly filed.
To the best of Xx. X. Xxxxxxx'x knowledge, no hazardous waste or toxic
material has been disposed of, discharged on, or leaked from, or has otherwise
contaminated, any real property owned, leased, or used by CJC, and, other than
hazardous waste generated and temporarily stored in the ordinary course of CJC's
business, no hazardous waste or toxic material is stored upon or in any real
property owned, leased, or used by CJC (including without limitation any
underground storage tanks). CJC has not received any notice of non-compliance or
violations or threatened non-compliance or violations of any Environmental Laws
relating to any real property owned, leased or used by CJC. The utilities
servicing the real properties owned or used by CJC are adequate to permit the
continued operation of the business of CJC, and there are no pending or, to the
best of Xx. X. Xxxxxxx'x knowledge, threatened zoning, condemnation or eminent
domain proceedings, building, utility or other moratoria, or injunctions or
court orders which would materially affect such continued operation.
ss.B.17. Brokers, Finders. The transactions contemplated by this Agreement
were not submitted to CJC or Xx. X. Xxxxxxx by any broker or other person
entitled to a commission, finder's fee or like payment thereon and were not,
with the consent of CJC or Xx. X. Xxxxxxx, submitted to Buyer by any broker or
other person, and none of the actions of CJC or Xx. X. Xxxxxxx has given rise to
any claim by any person for a commission, finder's fee or like payment against
any of the Parties.
ss.B.18. Legal Proceedings, etc. Except as listed and described in
Schedule B.18, there are no (and over the last five years there have been no)
claims, proceedings, suits or investigations pending or, to the best of Xx. X.
Xxxxxxx'x knowledge, threatened against or relating to CJC (or Xx. X. Xxxxxxx,
or any of the employees or, to the best of Xx. X. Xxxxxxx'x knowledge,
independent contractors of CJC in connection with the business or affairs of
CJC), by or before any federal, state, local or foreign court or governmental
body, agency, or authority. There are no such claims, proceedings, suits or
investigations pending or, to the best of Xx. X. Xxxxxxx'x knowledge, threatened
for the purpose of enjoining or preventing the consummation of the Stock
Purchase or any other transaction contemplated by this Agreement or otherwise
challenging the validity or propriety of the transactions contemplated by this
Agreement. Except as disclosed in Schedule B.18, neither CJC nor Xx. X. Xxxxxxx
is subject to any judgment, order or decree, or any governmental restriction
applicable to him or it, which has a reasonable probability of having a Material
Adverse Effect, or which may materially adversely affect the ability of CJC to
acquire any property or conduct CJC's business as it is currently being
conducted. Except as listed and described in Schedule B.18, to the best of Xx.
X. Xxxxxxx'x knowledge, there are no facts, circumstances, or occurrences which
may give rise to any claims, proceedings, or suits against CJC, Xx. X. Xxxxxxx,
or any of the employees or independent contractors of CJC.
CJC has fulfilled all of its obligations and has no remaining liability
under United States v. Xxxxxxxx Xxxx Corporation, No. C2-95-396 (S.D. Ohio), the
Dismissal of Complaint and Settlement Agreement and Mutual Release dated July
23, 1996 entered into by CJC pursuant thereto (the "Settlement Agreement"), or
Contract 9311 (as defined in the Settlement Agreement).
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ss.B.19. ERISA.
(a) Schedule B.19 identifies each "employee benefit plan," as
defined in Section 3(3) of the Employee Retirement Income Security Act of
1974 ("ERISA") which (i) is subject to any provision of ERISA and (ii) is
or was at any time during the last five years maintained, administered or
contributed to by CJC or any affiliate (as defined below) and covers the
shareholders of CJC, any current or former employee of CJC or any
affiliate or under which CJC or any affiliate has any liability. Copies of
such plans (and, if applicable, related trust agreements) and all
amendments thereto and written interpretations thereof have been furnished
to Buyer together with the three most recent annual reports (Form 5500)
prepared in connection with any such plan. Such plans are referred to
collectively herein as the "Employee Plans." For purposes of this section,
"affiliate" of any person or entity means any other person or entity
which, together with such person or entity, would be treated as a single
employer under Section 414 of the Internal Revenue Code of 1986, as
amended (the "Code"), or is an "affiliate," whether or not incorporated,
as defined in Section 407(d)(7) of ERISA, of such person or entity. The
only Employee Plans which individually or collectively would constitute an
"employee pension benefit plan" as defined in Section 3(2) of ERISA (the
"Pension Plans") are identified as on Schedule B.19.
(b) Except as disclosed in Schedule B.19, no Employee Plan
constitutes a "multiemployer plan," as defined in Section 3(37) of ERISA,
or a "defined benefit plan," as defined in Section 3(35) and subject to
Title IV of ERISA, and no Employee Plan is maintained in connection with
any trust described in Section 501(c)(9) of the Code. To the best of Xx.
X. Xxxxxxx'x knowledge, no "accumulated funding deficiency," as defined in
Section 412 of the Code, has been incurred with respect to any Pension
Plan, whether or not waived. To the best of Xx. X. Xxxxxxx'x knowledge,
except as disclosed in Schedule B.19, full payment has been made of all
amounts which CJC or any affiliate is required to have paid as
contributions to or benefits under any Employee Plan as of the end of the
most recent plan year thereof and there are no unfunded obligations under
any Employee Plan that have not been disclosed to Buyer in writing prior
to the Closing. Neither CJC nor Xx. X. Xxxxxxx knows of any "reportable
event," within the meaning of Section 4043 of ERISA, and no event
described in Section 4041, 4042, 4062 or 4063 of ERISA has occurred in
connection with any Employee Plan. To the best of Xx. X. Xxxxxxx'x
knowledge, no condition exists and no event has occurred that could
constitute grounds for termination of any Employee Plan, and to the best
of Xx. X. Xxxxxxx'x knowledge, neither CJC nor any of its affiliates has
incurred any material liability under Title IV of ERISA arising in
connection with the termination of, or complete or partial withdrawal
from, any plan covered or previously covered by Title IV of ERISA. To the
best of Xx. X. Xxxxxxx'x knowledge, nothing done or omitted to be done and
no transaction or holding of any asset under or in connection with any
Employee Plan has or will make CJC subject to any liability under Title I
of ERISA or liable for any tax pursuant to Section 4975 of the Code. There
is no pending or, to the best of Xx. X. Xxxxxxx'x knowledge, threatened
litigation, arbitration, disputed claim, adjudication, audit, examination
or other proceeding with respect to any Employee Plan or any fiduciary or
administrator thereof in their capacities as such.
(c) To the best of Xx. X. Xxxxxxx'x knowledge, each Employee Plan
which is intended to be qualified under Section 401(a) of the Code is so
qualified and has been so qualified during the period from its adoption to
date, and each trust forming a part thereof is exempt from tax pursuant to
Section 501(a) of the Code. CJC has furnished to Buyer copies of the most
recent Internal Revenue Service determination letters with respect to each
such Employee Plan. To the best of Xx. X. Xxxxxxx'x knowledge, each
Employee Plan has been maintained, from the time of
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such Plan's inception up to and including the performance of any or all
transactions contemplated in this Agreement, in compliance with its terms
and the requirements and fiduciary standards prescribed by any and all
statutes, orders, rules and regulations, including but not limited to
ERISA and the Code, which are applicable to such Employee Plan.
(d) There is no contract, agreement, plan or arrangement covering
any employee or former employee, any current or former shareholder of CJC,
or any of its affiliates that, individually or collectively, could give
rise to the payment of any amount that would not be deductible pursuant to
the terms of the Code.
(e) Schedule B.19 identifies each employment, severance or other
similar contract, arrangement or policy and each plan or arrangement
(written or oral) providing for insurance coverage (including any
self-insured arrangements), workers' compensation, disability benefits,
supplemental unemployment benefits, vacation benefits, retirement benefits
or for deferred compensation, profit-sharing, bonuses, stock options,
stock appreciation or other forms of incentive compensation or
post-retirement insurance, compensation or benefits which (i) is not an
Employee Plan, (ii) is entered into, maintained or contributed to, as the
case may be, by CJC or any of its affiliates, and (iii) covers any current
or former employee or any current or former shareholder of CJC or any of
its affiliates. Such contracts, plans and arrangements as are described
above, copies or descriptions of all of which have been furnished
previously to Buyer, are referred to collectively herein as the "Benefit
Arrangements." To the best of Xx. X. Xxxxxxx'x knowledge, each Benefit
Arrangement has been maintained in substantial compliance with its terms
and with requirements prescribed by any and all statutes, orders, rules
and regulations that are applicable to such Benefit Arrangement.
(f) Except as set forth in Schedule B.19, to the best of Xx. X.
Xxxxxxx'x knowledge, there is no liability in respect of post-retirement
health and medical benefits for retired employees of CJC or any of its
affiliates, determined using assumptions that are reasonable in the
aggregate, over the fair market value of any fund, reserve or other assets
segregated for the purpose of satisfying such liability (including for
such purposes any fund established pursuant to Section 401(h) of the
Code). CJC has reserved its right to amend or terminate any Employee Plan
or Benefit Arrangement providing health or medical benefits in respect of
Xx. X. Xxxxxxx or other active employee of CJC under the terms of any such
plan and descriptions thereof given to employees. With respect to any of
the Employee Plans which are "group health plans" under Section 4980B of
the Code and Section 607(1) of ERISA, there has been timely compliance in
all material respects with all requirements imposed thereunder so that CJC
and its affiliates have no (and will not incur any) loss, assessment, tax
penalty, or other sanction with respect to any such Plan.
(g) Except as set forth in Schedule B.19, there has been no
amendment to, written interpretation or announcement (whether or not
written) by CJC or any of its affiliates relating to, or change in
employee participation or coverage under, any Employee Plan or Benefit
Arrangement which would increase the expense of maintaining such Employee
Plan or Benefit Arrangement above the level of the expense incurred in
respect thereof for the plan year ended immediately prior to the Closing.
(h) Except as set forth in Schedule B.19, CJC is not a party or
subject to any union contract or any employment contract or arrangement
providing for annual future compensation to Xx. X. Xxxxxxx or any employee
or independent contractor of CJC.
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(i) The execution and consummation of the transactions contemplated
by this Agreement will not constitute a triggering event under any
Employee Plan, whether or not legally enforceable, which (either alone or
upon the occurrence of any additional or subsequent event) will or may
result in any payment (of severance pay or otherwise), acceleration,
increase in vesting, or increase in benefits to any current or former
participant in such Employee Plan or current or former employee or
director of CJC that has not been specifically disclosed on Schedule B.19
or which is not material to the financial condition or business of CJC.
(j) Any reference to ERISA or the Code or any section thereof shall
be construed to include all amendments thereto and applicable regulations
and administrative rulings issued thereunder.
ss.B.20. Contracts. Schedule B.20-1 lists and briefly describes each
contract, purchase order, agreement, lease, executory commitment, arrangement
and understanding (written or oral) to which CJC is a party which (a)(i)
involves payments or commitments in excess of $10,000 (in the aggregate) for any
purchase order or $10,000 (in the aggregate) for any other contract, agreement,
lease, commitment, arrangement, or understanding, or (ii) extends beyond one
year (or both), or is otherwise material to the condition, operations, assets,
or business of CJC, unless cancelable on 60 or fewer days' notice without any
liability, penalty or premium, (b) is with any current or former shareholder,
employee, agent or independent contractor of CJC, or any person related by blood
or marriage to any such person or any person or entity controlling, controlled
by or under common control with any such person not terminable at will, (c)
provides for the future purchase by CJC of any materials, equipment, services or
supplies and either (i) continues for a period of more than 12 months (including
periods covered by any option to renew by either party), (ii) provides for a
price materially in excess of current market prices, or (iii) is in excess of
normal operating requirements over its remaining term, or (d) involves any of
the following: (i) any borrowings or guarantees; (ii) any contracts containing
covenants purporting to limit the freedom of CJC to compete in any line of
business or provide any of its services in any geographic area; (iii) any
obligation or commitment which limits the freedom of CJC to sell, lease, license
or otherwise provide its services; (iv) any contract or agreement the
performance of which can reasonably be expected to result in a loss to CJC; or
(v) any obligation or commitment providing for indemnification or responsibility
for the obligations or losses of any person. All of such contracts, agreements,
leases, commitments, and other arrangements and understandings are valid and
binding, in full force and effect and enforceable in accordance with their
respective provisions.
Schedule B.20-2 lists and briefly describes each contract, agreement,
arrangement and understanding (written or oral) to which CJC is a party, under
which CJC receives revenue, and which (i) involves payments or commitments to
CJC in excess of $10,000 (in the aggregate), or (ii) is otherwise material to
the condition, operations, assets, or business of CJC.
CJC is not in violation of nor in default in respect of nor has there
occurred an event or condition which, with the passage of time or giving of
notice (or both), would constitute a default of any contract, agreement, lease,
commitment, arrangement or understanding of the type described in the preceding
two paragraphs of this section.
CJC has delivered to Buyer a correct and complete copy of all price lists
or fee schedules which are currently in effect for goods or services provided by
CJC.
Schedule B.20-3 sets forth an accurate and complete list of CJC's 10
largest customers, in terms of revenue generation for CJC for the 12-month
period ended December 31, 2000. CJC has delivered to Buyer an accurate and
complete list of all customers of CJC to which CJC provided goods or services
during the 12-month period ended December 31, 2000 (the "Current CJC
Customers"). Except as set
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forth in Schedule B.20-4, CJC has not received any notice from any Current CJC
Customer to the effect that such Current CJC Customer will terminate its
relationship or unilaterally modify any terms of that relationship, where
applicable, with CJC as a result of any transaction contemplated by this
Agreement or otherwise.
The following agreements and covenants are of no further force or effect
and have been terminated without any remaining liability relating thereto on the
part of CJC: (1) the Benefits Agreement between CJC and Xxxx Machine dated
January 30, 1992; (2) the Security Agreement dated January 30, 1992 between CJC,
as debtor, and Xxxx X. Xxxxxxx, as creditor; (3) the Security Agreement dated
January 30, 1992 between CJC, as debtor, and Emess Corporation, an Ohio
corporation formerly known as Xxxxxxxx Xxxx Corporation ("Emess"), as creditor;
(4) the $500,000 Promissory Note dated January 30, 1992 from CJC to Emess; (5)
the $400,000 Promissory Note dated January 30, 1992 from Xx. X. Xxxxxxx to
Emess; (6) the Unconditional Guaranty dated January 30, 1992 from CJC to Emess;
(7) the motor vehicle lease agreement between Xxxx Xxxxxx Leasing, Inc. and CJC,
and related Optional Purchase Agreement between the same parties, for a 1996
Honda Accord EX, V.I.N. 0XXXX000XXX000000; and (8) the Xxxx Xxxxxxx Consulting
Agreement.
There is no consulting or other agreement or arrangement between CJC and
Xxxx Xxxxxxxxxxxxx (or any entity owned or controlled by Xxxx Xxxxxxxxxxxxx) or
between CJC and RHE Columbus Limited, a private limited company incorporated
under England and Wales law ("RHE Columbus Limited"), which cannot be terminated
by CJC upon 30 days prior written notice to Xxxx Xxxxxxxxxxxxx or RHE Columbus
Limited, as applicable, without any remaining liability relating thereto on the
part of CJC.
ss.B.21. Accounts Receivable. CJC has delivered to Buyer a correct and
complete list of its accounts receivable and notes receivable as of March 31,
2001. Except as set forth in Schedule B.21-1, to the best of Xx. X. Xxxxxxx'x
knowledge, all accounts and notes receivable of CJC as of such date, and any
accounts and notes receivable arising between such date and the Closing, are or
will be collectible in the ordinary course of business consistent with past
practices and are or will be valid and subsisting and represent or will
represent sales actually made or services actually provided in the ordinary and
usual course of business of CJC consistent with past practices.
Since March 31, 2001, there have been no accounts receivable of CJC
converted to notes receivable or otherwise extended, except as listed in
Schedule B.21-2, and from the date of this Agreement through the Closing Date,
no accounts receivable of CJC will be converted to notes receivable, written off
or otherwise extended without the prior written consent of Buyer.
Schedule B.21-3 includes a list of all amounts payable to CJC by any
Affiliate of CJC (the "Related Party Receivables") and all amounts payable by
CJC to any Affiliate of CJC (the "Related Party Payables") as of March 31, 2001,
specifying the payor, payee, and amount of each Related Party Receivable and
Related Party Payable. For purposes of this Agreement, other than for ss.B.19,
above, an "Affiliate" of CJC shall mean any shareholder, employee,
representative, independent contractor or other agent of CJC, any person related
by blood or marriage to any such person, or any person or entity, which,
directly or indirectly, controls, is controlled by, or is under common control
with CJC or any such other person or entity.
ss.B.22. No Conflict or Default. Except as described in Schedule B.22, to
the best of Xx. X. Xxxxxxx'x knowledge, neither the execution and delivery of
this Agreement by CJC and Xx. X. Xxxxxxx, nor compliance by CJC and Xx. X.
Xxxxxxx with the terms and provisions of this Agreement, including without
limitation the consummation of the transactions contemplated by this Agreement,
will violate in any manner any Applicable Laws or Permits or conflict with or
result in the breach of any term, condition or provision of the articles of
incorporation, by-laws, or other organizational documents of CJC or of any
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agreement, deed, contract, undertaking, mortgage, indenture, writ, order,
decree, restriction, legal obligation or instrument to which CJC or Xx. X.
Xxxxxxx is a party or by which CJC or Xx. X. Xxxxxxx, or any of their respective
assets, is or may be bound or affected, or constitute a default (or an event
which, with the giving of notice, the passage of time, or otherwise, would
constitute a default) thereunder, or result in the creation or imposition of any
lien, security interest, charge or encumbrance, or restriction of any nature
whatsoever with respect to any assets of CJC, or give to others any interest or
rights, including rights of termination, acceleration or cancellation, in or
with respect to any of the assets, contracts or business of CJC.
ss.B.23. Books of Account; Records. CJC's general ledgers, corporate
record book and other records relating to the material assets, contracts and
outstanding legal obligations of CJC are, in all material respects, complete and
correct, and have been maintained in accordance with good business practices,
and the matters contained therein are appropriate and accurately reflected in
the 2000 Financial Statements.
ss.B.24. Compensation. Schedule B.24 sets forth the total salary, bonus,
other corporate fringe benefits, perquisites, dividends and distributions
allocated to or paid to Xx. X. Xxxxxxx during or with respect to 12-month period
ended December 31, 2000, and any changes to the foregoing which have occurred
subsequent to December 31, 2000. Schedule B.24 also lists and describes the
current compensation of all employees of CJC (other than Xx. X. Xxxxxxx) whose
total current salary and bonus exceeds $35,000 annually and any consultant,
advisor, or independent contractor whose compensation exceeds $5,000 annually.
No changes will be made by CJC in the amount or kind of any compensation being
paid or provided to any individual listed in Schedule B.24 from the amounts and
kinds of compensation described therein prior to the Closing Date without
Buyer's prior written consent. Except as disclosed in Schedule B.24, there are
no other forms of compensation paid to Xx. X. Xxxxxxx or other employees or
independent contractors of CJC. Except as disclosed in Schedule B.24, the
provisions for wages and salaries accrued in the 2000 Financial Statements are
adequate for wages and salaries and other compensation to CJC's employees,
including without limitation vacation pay, sick pay, accrued compensation to any
employee, and all commissions and other fees payable to agents, salesmen,
independent contractors, and representatives of CJC. Except as set forth in
Schedule B.24, CJC has not become obligated, directly or indirectly, to Xx. X.
Xxxxxxx or any of the other employees or independent contractors of CJC or any
person related to such person by blood or marriage, except for current liability
for such compensation. Except as set forth in Schedule B.24, neither Xx. X.
Xxxxxxx or any other employee or independent contractor of CJC or any person
related to such person by blood or marriage holds any position or office with or
has any material financial interest, direct or indirect, in any supplier,
customer or account of, or other outside business which has material
transactions with, CJC. CJC has no agreement or understanding with any of its
employees, representatives or independent contractors which would influence any
such person not to become associated with Buyer from and after the Closing or
from serving Buyer after the Closing in a capacity similar to the capacity
presently served. Except as set forth in Schedule B.24, to the best of Xx. X.
Xxxxxxx'x knowledge, no employee of CJC has a present intention to leave the
employ of CJC or has taken any action indicative of leaving the employ of CJC.
ss.B.25. Labor Relations. Except as set forth in Schedule B.25, no
employee of CJC is represented by any labor union or covered under any
collective bargaining agreement, and there is no unfair labor practice complaint
against CJC pending before the National Labor Relations Board. There is no labor
strike, dispute, slowdown or stoppage, or any union organizing campaign,
actually pending or, to the best of Xx. X. Xxxxxxx'x knowledge, threatened
against or involving CJC. No labor grievance has been filed with CJC; no
arbitration proceeding which has had or may have such an effect has arisen out
of or under a collective bargaining or other labor agreement and is pending; and
no claim therefor has been asserted. No collective bargaining or other labor
agreement is currently being negotiated by CJC and no
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union or collective bargaining unit represents CJC's employees. CJC has
experienced no work stoppage or other material labor difficulty during the past
five years.
ss.B.26. Suppliers and Third Party Payors. Except as set forth in Schedule
B.26, no supplier of products or services to CJC has indicated that it shall
stop, or decrease the rate of, or substantially increase its fees for, supplying
products or services to CJC either prior to, or following the consummation of,
any of the transactions contemplated by this Agreement. Schedule B.26 sets forth
(a) each customer of CJC which has terminated its relationship with CJC since
December 31, 2000, or has notified CJC or Xx. X. Xxxxxxx since December 31,
2000, that it intends to terminate its relationship with CJC, and (b) the gross
receipts received from such customer for the 12-month period ending on December
31, 2000. Except as set forth in Schedule B.26, neither CJC nor Xx. X. Xxxxxxx
knows of any loss of a relationship with any customer that alone or in the
aggregate comprises more than 1% of fiscal year 2000 actual revenues of CJC as
shown in the 2000 Financial Statements, or knows of any customer that has
indicated that it is considering discontinuing its use of, or plans to
discontinue using, CJC as a provider of the services described in ss.B.4, above,
as a result of any of the transactions contemplated by this Agreement.
ss.B.27. Disciplinary Actions. Except as set forth in Schedule B.27,
during the three year period ending on the Closing Date, there have been no
disciplinary or other similar actions, proceedings, or investigations taken by
any governmental or accrediting board, agency, or authority against or with
respect to CJC, Xx. X. Xxxxxxx, or any employee or, to the best of Xx. X.
Xxxxxxx'x knowledge, independent contractor of CJC or any of its Affiliates.
ss.B.28. Investment Intent. Xx. X. Xxxxxxx is a resident of the State of
Ohio, has received copies of Buyer's Forms 10-KSB for its two most recently
completed fiscal years and Buyer's Form 10-QSB for its most recently completed
quarter, each as filed with the Securities and Exchange Commission, and is an
"accredited investor," as that term is defined in Regulation D promulgated under
the Securities Act of 1933, as amended (the "Securities Act"). Xx. X. Xxxxxxx
(a) by reason of his business and financial experience, and the business and
financial experience of those persons advising him with respect to his
investment in the Shares, has, together with such advisors, such knowledge,
sophistication, and experience in business and financial matters so as to be
able to evaluate the merits and risks of his prospective investment in the
Shares; (b) to his satisfaction, has been provided the opportunity to ask
questions, receive answers, and obtain information from Buyer concerning Buyer,
its business, and the terms and conditions of the Shares, has had all such
questions answered, and has been supplied all additional information deemed
necessary by him to verify the accuracy of all information provided; (c) is
acquiring the Shares acquired by him for his own account for investment purposes
only and without any view towards resale or other distribution; (d) except for
the representations and warranties of Buyer set forth in Exhibit A of this
Agreement, no representations or warranties have been made to him by or on
behalf of Buyer in connection with this transaction, and in making his
investment in the Shares, he is relying on the results of his own independent
investigation; (e) understands that an investment in the Shares is a speculative
investment and has determined that he can bear the economic risks of his
investment in the Shares, can afford a complete loss of such investment, and is
not relying upon any representation or warranty made by Buyer, or any officer,
director, shareholder, employee, agent, or representative of Buyer regarding the
value of the Shares; (f) understands that the issuance of the Shares as a result
of this Agreement is intended to be exempt from registration under the
Securities Act and applicable state law and that the Shares are not and will not
be registered under the Securities Act or any state securities laws; (g) agrees
that any certificates evidencing the Shares shall contain a legend to the effect
that such shares have not been registered under the Securities Act or any state
securities laws and may not be sold without registration as required by the
Securities Act and applicable state securities laws or exemptions therefrom, and
in the case of such an exemption, requiring delivery to Buyer of a legal opinion
of or satisfactory to Buyer's legal counsel that such exemption is applicable;
and (h) agrees that
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Buyer can issue stop transfer instructions to its transfer agent prohibiting
transfer of the Shares except in compliance with the provisions of the
Securities Act, applicable state securities laws, and this Agreement.
ss.B.29. Complete Disclosure. No representation or warranty by Xx. X.
Xxxxxxx in this Agreement or the CJC Schedules contains any untrue statement of
a material fact or omits a material fact necessary to make the statements
contained herein or therein not misleading.
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