PURCHASE AGREEMENT
BY AND AMONG
XXXXX BROS. INC.
SUNNYLAND, INC.
PREMIUM PORK, INC.
LMJ DISTRIBUTION CENTER, INC.
AND
SMITHFIELD FOODS, INC.
November 4, 1996
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TABLE OF CONTENTS
ARTICLE I
DEFINITIONS..........................................................................
ARTICLE II
BASIC TRANSACTION....................................................................
Section 2.1. Purchase and Sale of Assets...........................................
Section 2.2. Assumption of Liabilities.............................................
Section 2.3. Preliminary Purchase Price............................................
Section 2.4. Payment of the Preliminary Purchase Price.............................
Section 2.5. Post Closing Adjustment of Preliminary
Purchase Price......................................................
Section 2.6. Allocation............................................................
Section 2.7. Employee Matters......................................................
Section 2.8. Related Agreements....................................................
Section 2.9. Subsidiary Excluded Assets............................................
ARTICLE III
THE CLOSING..........................................................................
Section 3.1. The Closing...........................................................
Section 3.2. Deliveries at the Closing.............................................
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE SELLER.........................................
Section 4.1. Organization of the Seller............................................
Section 4.2. Authorization of Transaction..........................................
Section 4.3. Noncontravention......................................................
Section 4.4. Brokers' Fees.........................................................
Section 4.5. Personal Property.....................................................
Section 4.6. Subsidiaries..........................................................
Section 4.7. Financial Statements..................................................
Section 4.8. Events Subsequent to the Date of the Option
Agreement...........................................................
Section 4.9. Undisclosed Liabilities...............................................
Section 4.10. Licenses, Approvals, and Permits; Compliance
with Laws...........................................................
Section 4.11. Tax Matters...........................................................
Section 4.12. Real Property.........................................................
Section 4.13. Intellectual Property.................................................
Section 4.14. Tangible Assets.......................................................
Section 4.15. Inventory.............................................................
Section 4.16. Contracts.............................................................
Section 4.17. Notes and Accounts Receivable.........................................
Section 4.18. Powers of Attorney....................................................
Section 4.19. Insurance.............................................................
Section 4.20. Litigation............................................................
Section 4.21. Product Warranty......................................................
Section 4.22. Product Liability.....................................................
Section 4.23. Employees; Labor Relations............................................
Section 4.24. Employee Benefits.....................................................
Section 4.25. Guaranties............................................................
Section 4.26. Environmental Laws; Hazardous Materials...............................
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Section 4.27. Certain Business Relationships with the
Division and the LMG Subsidiaries...................................
Section 4.28. Disclosure............................................................
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE BUYER..........................................
Section 5.1. Organization of the Buyer.............................................
Section 5.2. Authorization of Transaction..........................................
Section 5.3. Noncontravention......................................................
Section 5.4. Brokers' Fees.........................................................
Section 5.5. Litigation............................................................
Section 5.6. Financing.............................................................
Section 5.7. Sophisticated Purchaser...............................................
Section 5.8. Investigation by the Buyer............................................
Section 5.9. Employees.............................................................
ARTICLE VI
[Intentionally Omitted].....................................................
ARTICLE VII
TAX MATTERS..........................................................................
Section 7.1. Allocation Agreement..................................................
Section 7.2. Tax Returns for Which the Seller is
Responsible.........................................................
Section 7.3. Tax Returns for Which the Buyer is
Responsible.........................................................
Section 7.4. Taxes of Other Persons................................................
Section 7.5. Returns for Periods Through the Closing Date..........................
Section 7.6. Audits................................................................
Section 7.7. Intentionally Omitted.................................................
Section 7.8. Retention of Carryovers...............................................
Section 7.9. Section 338(h)(10) Election...........................................
Section 7.10. Carryover Tax Attributes..............................................
ARTICLE VIII
POST-CLOSING COVENANTS...............................................................
Section 8.1. General...............................................................
Section 8.2. Litigation Support and Other Access...................................
Section 8.3. Cooperation...........................................................
Section 8.4. Transition............................................................
Section 8.5. Accounts Receivable...................................................
Section 8.6. Covenant Not to Compete...............................................
Section 8.7. Employees.............................................................
Section 8.8. Further Assurances and Assistance.....................................
ARTICLE IX
[Intentionally Omitted]..............................................................
ARTICLE X
[Intentionally Omitted]..............................................................
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ARTICLE XI
INDEMNIFICATION......................................................................
Section 11.1. Survival of Representations and Warranties............................
Section 11.2. Indemnification Provisions for Benefit of the
Buyer...............................................................
Section 11.3. Indemnification Provisions for Benefit of the
Seller..............................................................
Section 11.4. Indemnification Provisions - Environmental
Matters.............................................................
Section 11.5. Matters Involving Third Parties.......................................
Section 11.6. Limitations on Indemnification........................................
Section 11.7. Determination of Adverse Consequences.................................
ARTICLE XII
[Intentionally Omitted]..............................................................
ARTICLE XIII.
MISCELLANEOUS........................................................................
Section 13.1. No Third Party Beneficiaries..........................................
Section 13.2. Entire Agreement......................................................
Section 13.3. Succession and Assignment.............................................
Section 13.4. Counterparts..........................................................
Section 13.5. Headings..............................................................
Section 13.6. Notices...............................................................
Section 13.7. Radon Gas Disclosure..................................................
Section 13.8. Recording Without Consent of all Parties..............................
Section 13.9. Governing Law.........................................................
Section 13.10. Amendments and Waivers................................................
Section 13.11. Severability..........................................................
Section 13.12. Expenses..............................................................
Section 13.13. Construction..........................................................
Section 13.14. Incorporation of Exhibits and Schedules...............................
Section 13.15. Specific Performance..................................................
Section 13.16. Joint Obligations.....................................................
Section 13.17. Bulk Transfer Laws....................................................
Exhibits
A: Support Services Agreement
B: Licensing Agreement
C: Financial Statements
Schedules
Disclosure Schedule
1.1: Excluded Assets
1.2: Litigation Matters
2.5: Accounting Adjustments
3.2: Deliveries at Closing
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PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT (the "Agreement") is entered into November 4,
1996, by and among SMITHFIELD FOODS, INC., a Delaware corporation (the "Buyer"),
XXXXX BROS. INC., a Florida corporation (the "Seller"), SUNNYLAND, INC., a
Georgia corporation, PREMIUM PORK, INC., a Georgia corporation, and LMJ
DISTRIBUTION CENTER, INC., a Georgia corporation. The foregoing five parties are
referred to collectively herein as the "Parties".
RECITALS
1. The Seller operates a meat processing and distribution business
generally known as the Xxxxx Meat Group, which the Buyer wishes to buy.
2. Certain assets of the Xxxxx Meat Group are owned by the Seller, and
other assets of the Xxxxx Meat Group are owned by Sunnyland, Inc., Premium Pork,
Inc. and LMJ Distribution Center, Inc.
3. The Seller owns all of the stock of Sunnyland, Inc., Premium Pork,
Inc. and LMJ Distribution Center, Inc.
4. Under this agreement, the Buyer will (i) purchase the assets of the
Xxxxx Meat Group that are owned directly by the Seller; (ii) assume certain of
the Seller's liabilities that are associated with the Xxxxx Meat Group; and
(iii) purchase all of the stock of Sunnyland, Inc., Premium Pork, Inc. and LMJ
Distribution Center, Inc.
Now, therefore, in consideration of the mutual promises,
representations, warranties, and covenants herein contained, the Parties agree
as follows:
ARTICLE I
DEFINITIONS
Section 1.1. Definitions. As used in this Agreement, the following
terms have the meanings set forth below:
"Accounting Adjustments" has the meaning set forth in Section
2.5 below.
"Acquired Assets" means all of the assets which are necessary to
conduct or are used in the operation of the portion of the Business conducted or
operated by the Division, or are reflected on the books and records of the
Division as of the Closing Date, or are ordinarily located at or associated with
the Plant City, Florida, facility of the Business including
(A) all (a) real property, leaseholds and subleaseholds
therein, improvements, fixtures, and fittings thereon, and
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easements, rights-of-way, and other appurtenances thereto (such as appurtenant
rights in and to public streets), (b) tangible personal property (such as
machinery, equipment, inventories of raw materials and supplies, manufactured
and purchased parts, goods in process and finished goods, furniture,
automobiles, vehicles and tools), (c) Intellectual Property, goodwill associated
therewith, licenses and sublicenses granted and obtained with respect thereto,
and rights thereunder, remedies against infringements thereof, and rights to
protection of interests therein under the laws of all jurisdictions, (d) leases,
subleases, and rights thereunder, (e) consent orders, settlements, agreements,
contracts, instruments, Security Interests, guaranties, other similar
arrangements, and rights thereunder, (f) accounts, notes, and other receivables,
(g) securities, (h) claims, deposits, prepayments, refunds, causes of action,
choses in action, rights of recovery, rights of set off, and rights of
recoupment (except, in each case, those relating to a liability or claim which
is not an Assumed Liability), (i) franchises, approvals, permits, licenses,
orders, registrations, certificates, variances, and similar rights obtained from
governments and governmental agencies, (j) cash and cash equivalents, and (k)
books, records, ledgers, files, documents, correspondence, lists, plats,
architectural plans, drawings, and specifications, creative materials,
advertising and promotional materials, studies, reports, and other printed or
written materials; and
(B) the capital stock and all other incidents of ownership of
the LMG Subsidiaries;
provided, however, that the Acquired Assets shall not include (i) the Xxxxx
name, or any trademark, trade name, trade dress, service xxxx, corporate name,
copyright or logo containing the Xxxxx name, except as they shall be licensed to
the Buyer in accordance with the Licensing Agreement, (ii) any of the rights of
the Seller under this Agreement (or under any side agreement between the Seller
on the one hand and the Buyer (or LMG, Inc.) on the other hand), (iii) the
personnel and medical files of the employees of the Division except as provided
in Section 2.7(b), (iv) the Confidentiality Agreement, (v) original books,
records and documents of the Seller associated with the Division relating to any
Liability of the Seller which is not an Assumed Liability and as to which the
Seller shall have met its obligations, if any, under Article XI hereof, (vi) any
trade accounts receivable of the Division which, as of the Closing Date, are
more than 30 days past due, or (vii) any of the Excluded Assets.
"Adverse Consequences" means all actions, suits, proceedings, hearings,
investigations, charges, complaints, claims, demands, injunctions, judgments,
orders, decrees, rulings, damages, dues, penalties, fines, costs, amounts paid
in settlement, Liabilities, obligations, Taxes, liens, losses, expenses, and
fees, including
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court costs and reasonable attorneys' fees and expenses through all appeals, and
expressly including any such Adverse Consequences that arise under theories of
strict liability.
"Affiliate" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Securities Exchange Act.
"Affiliated Group" means any affiliated group within the meaning of
Code Section 1504(a).
"Assumed Liabilities" means (a) all Liabilities of the Division set
forth on the Interim Balance Sheet of the Seller, unless satisfied prior to the
Closing Date in the Ordinary Course of Business, (b) all Liabilities of the
Seller associated with the Division of the types shown on the Interim Balance
Sheet of the Seller which have arisen after the Interim Balance Sheet of the
Seller in the Ordinary Course of Business and to the extent set forth on the
Closing Balance Sheet (other than any Liability resulting from, arising out of,
relating to, in the nature of, or caused by any breach of contract, breach of
warranty, tort, infringement, or violation of law), (c) all obligations of the
Seller associated with the Division under the agreements, contracts, consent
orders, settlements, leases, licenses, and other arrangements referred to in the
definition of Acquired Assets (d) the obligations of the Seller, if any, not in
excess of $1,000,000, under the WARN Act or any similar state or local law
arising solely out of the Seller's business operations at the Moultrie, Georgia
plant, plus any and all fines and penalties assessed against the Seller under
the WARN Act or any state or similar law arising out of any actions or inactions
of Buyer, (e) all obligations of the Seller associated with the Division under
any collective bargaining agreements, agreements to contribute to fringe benefit
funds under such agreements and employment agreements, and (f) all other
Liabilities and obligations of the Seller associated with the Division set forth
in the Disclosure Schedule under an express statement to the effect that the
definition of Assumed Liabilities will include the Liabilities and obligations
so disclosed; provided, however, the foregoing notwithstanding, that the Assumed
Liabilities shall not include (i) any Liability of the Seller for unpaid Taxes
(with respect to the Division or otherwise) for periods prior to the Closing,
except to the extent set forth in (a) or (b) above, (ii) any Liability of the
Seller for income, transfer, sales, use, and other Taxes arising in connection
with the consummation of the transactions contemplated hereby (including any
income Taxes arising because the Seller is transferring the Acquired Assets,
because any of the LMG Subsidiaries is deemed to be transferring its assets
pursuant to a Section 338(h)(10) Election, because the Seller has an Excess Loss
Account in the stock of any of its Subsidiaries, or because the Seller has
deferred gain on any Deferred Intercompany Transaction), (iii) any Liability of
the Seller for the unpaid Taxes of any Person other
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than the Seller under Treas. Reg. Section 1.1502-6 (or any similar provision of
state, local, or foreign law), as a transferee or successor, by contract or
otherwise, (iv) any obligation of the Seller to indemnify any Person by reason
of the fact that such Person was a director, officer, employee, or agent of the
Seller or was serving at the request of the Seller as a partner, trustee,
director, officer, employee, or agent of another entity (whether such
indemnification is for judgments, damages, penalties, fines, costs, amounts paid
in settlement, losses, expenses, or otherwise and whether such indemnification
is pursuant to any statute, charter document, bylaw, agreement, or otherwise),
(v) any Liability of the Seller for costs and expenses incurred in connection
with this Agreement and the transactions contemplated hereby except as set forth
herein, (vi) any Liability or obligation of the Seller under this Agreement (or
under any side agreement between the Seller on the one hand and the Buyer on the
other hand), (vii) any Liability or obligation of the Seller with respect to any
Employee Benefit Plan, (viii) any Liability or obligation of the Seller or any
of the Seller's Affiliates set forth on Schedule 1.2 except to the extent set
forth in (a) or (b) above or (ix) any Liability or obligation of the Seller
expressly excluded under the Disclosure Schedule.
"Auditors" shall mean the public accounting firm of Coopers & Xxxxxxx
L.L.P., unless the Parties shall agree upon another independent certified public
accounting firm.
"Baseline Balance Sheet" means the unaudited Xxxxx Meat Group
consolidated balance sheet for the fiscal year ended September 30, 1996, based
on nine months actual and three months forecasted.
"Basis" means any past or present fact, situation, circumstance,
status, condition, activity, practice, plan, occurrence, event, incident,
action, failure to act, or transaction that forms or could form the basis for
any specified consequence.
"Business" means, collectively, the xxxxxxxxx and meat processing
businesses operated by the Seller and the warehousing and distribution functions
relating thereto, generally known as the Xxxxx Meat Group, including the
Division and the LMG Subsidiaries, and including the businesses customarily
operated at or associated with the Real Property but expressly excluding any
business of processing or warehousing any agricultural products other than meat,
such as citrus, fertilizer or sugar, and excluding Seller's or Xxxxx Transport,
Inc.'s transportation business.
"Buyer" has the meaning set forth in the preface above.
"Cleanup" means any cleanup or corrective action, including any
investigation, cleanup, removal, containment or other remediation or response
actions required by applicable
4
Environmental Law (whether or not such action has been required or requested by
any governmental body or any other Person), to a level deemed acceptable by the
governmental body having jurisdiction thereof.
"Closing" has the meaning set forth in Section 3.1 below.
"Closing Balance Sheet" has the meaning set forth in Section
2.5 below.
"Closing Date" has the meaning set forth in Section 3.1 below.
"Closing Date TIB" has the meaning set forth in Section 2.5 below.
"Code" means the Internal Revenue Code of 1986, as amended.
"Confidentiality Agreement" means the confidentiality agreement between
the Seller and the Buyer dated July 19, 1996.
"Controlled Group of Corporations" has the meaning set forth
in Code Section 1563.
"Deferred Intercompany Transaction" has the meaning set forth
in Treas. Reg. Section 1.1502-13.
"Disclosure Schedule" has the meaning set forth in Article IV
below.
"Division" means the Seller's unincorporated operating division engaged
in the business of meat processing and warehousing, which comprises a portion of
the Business.
"Employee Benefit Plan" means any (a) nonqualified deferred
compensation or retirement plan or arrangement which is an Employee Pension
Benefit Plan, (b) qualified defined contribution retirement plan or arrangement
which is an Employee Pension Benefit Plan, (c) qualified defined benefit
retirement plan or arrangement which is an Employee Pension Benefit Plan
(including any Multiemployer Plan), or (d) Employee Welfare Benefit Plan or
material fringe benefit plan or program.
"Employee Pension Benefit Plan" has the meaning set forth in
ERISA Section 3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in
ERISA Section 3(1).
"Employees on Leave" means employees who are on disability, leave of
absence, or on a worker's compensation leave of absence.
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"Environmental Laws" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, the Resource Conservation and Recovery
Act of 1976, the Occupational Safety and Health Act of 1970, the Clean Water
Act, the Clean Air Act, the Emergency Planning and Community Right-to-Know Act,
and the Toxic Substance Control Act, each as amended, together with all other
laws (including rules, regulations, codes, plans, injunctions, judgments,
orders, decrees, rulings, and charges thereunder) of federal, state, local, and
foreign governments (and all agencies thereof) concerning pollution or
protection of the environment, public health and safety, or employee health and
safety, including laws relating to emissions, discharges, releases, or
threatened releases of pollutants, contaminants, or chemical, industrial,
hazardous, or toxic materials or wastes into ambient air, surface water, ground
water, or lands or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport, or handling of
pollutants, contaminants, or chemical, industrial, hazardous, or toxic materials
or wastes, all as in effect on the date of this Agreement.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"Excess Loss Account" has the meaning set forth in Treas. Reg.
Section 1.1502-19.
"Excluded Assets" shall mean those assets listed on Schedule
1.1.
"Fiduciary" has the meaning set forth in ERISA Section 3(21).
"GAAP" means United States generally accepted accounting principles as
in effect from time to time.
"Xxxx-Xxxxx-Xxxxxx Act" means the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976, as amended.
"Hazardous Activities" means the distribution, generation, handling,
importing, management, manufacturing, processing, production, refinement,
Release, storage, transfer, transportation, treatment, or use (including any
withdrawal or other use of groundwater) of Hazardous Materials in, on, under,
about, or from the Properties or any part thereof into the environment.
"Hazardous Materials" shall mean any substance, material, waste, gas or
particulate matter as defined and within the context used under any applicable
Environmental Law including, but not limited to, any material or substance which
is: (i) defined as a "hazardous waste", "hazardous material", "hazardous
substance", "extremely hazardous waste", or "restricted hazardous waste" or
words of similar import under any provision of any applicable
6
Environmental Law; (ii) petroleum or petroleum products; (iii) asbestos; (iv)
polychlorinated biphenyl; (v) radioactive material; (vi) radon gas; (vii)
designated as a "hazardous substance" pursuant to Section 311 of the Clean Water
Act, as in effect on the date hereof, (viii) defined as a "hazardous waste"
pursuant to Section 1004 of the Resource Conservation and Recovery Act, as in
effect on the date hereof, or (ix) defined as a "hazardous substance" pursuant
to Section 101 of the Comprehensive Environmental Response, Compensation and
Liability Act, as in effect on the date hereof.
"Indemnified Party" and "Indemnifying Party" have the meanings set
forth in Section 11.5 below.
"Intellectual Property" means (a) all inventions (whether patentable or
unpatentable and whether or not reduced to practice), all improvements thereto,
and all patents, patent applications, and patent disclosures, together with all
reissuances, continuations, continuations-in-part, revisions, extensions, and
reexaminations thereof, (b) all trademarks, service marks, trade dress, logos,
trade names, and corporate names, together with all translations, adaptations,
derivations, and combinations thereof and including all goodwill associated
therewith, and all applications, registrations, and renewals in connection
therewith, (c) all copyrightable works, all copyrights, and all applications,
registrations, and renewals in connection therewith, (d) all mask works and all
applications, registrations, and renewals in connection therewith, (e) all trade
secrets and confidential business information (including ideas, research and
development, know-how, formulas, compositions, manufacturing and production
processes and techniques, technical data, designs, drawings, specifications,
customer and supplier lists, pricing and cost information, and business and
marketing plans and proposals), (f) all computer software (including data and
related documentation), (g) all other proprietary rights, and (h) all copies and
tangible embodiments thereof (in whatever form or medium).
"Interim Balance Sheets" has the meaning set forth in Section
4.7 below.
"Knowledge" means with respect to an individual that (i) such
individual is actually aware of a particular fact or matter, or (ii) a
reasonable individual could be expected to discover or otherwise become aware of
such fact or other matter in the course of conducting a reasonably comprehensive
investigation concerning the existence of such fact or other matter. With
respect to a Person (other than an individual), such Person will be deemed to
have Knowledge of a particular fact or other matter if any individual who is
serving as a director, officer, partner, executor, or trustee of such Person (or
in any similar capacity) or
7
as an individual employee of such Person whose responsibilities include knowing
such fact or other matter, has Knowledge thereof.
"LMG Subsidiary" means each of Sunnyland, Inc., Premium Pork,
Inc., and LMJ Distribution Center, Inc. (collectively, the "LMG
Subsidiaries").
"Liability" means any liability (whether known or unknown, whether
asserted or unasserted, whether absolute or contingent, whether accrued or
unaccrued, whether liquidated or unliquidated, and whether due or to become
due), including any liability for Taxes.
"Licensing Agreement" has the meaning set forth in Section 2.8
below.
"Multiemployer Plan" has the meaning set forth in ERISA
Section 3(37).
"Option Agreement" means the letter agreement between the Seller and
the Buyer dated September 21, 1996.
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
"Parties" has the meaning set forth in the preface above.
"Person" means an individual, a partnership, a corporation, a limited
liability company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization, or a governmental entity (or any
department, agency, or political subdivision thereof).
"Preliminary Purchase Price" means $35,000,000.
"Prime Rate" means the Chase Manhattan Bank prime interest rate as in
effect from time to time.
"Prohibited Transaction" has the meaning set forth in ERISA Section 406
and Code Section 4975.
"Properties" means the real property component of the Acquired Assets
and the Subsidiaries Assets, whether owned or leased, including all
improvements, equipment, and fixtures located thereon and all other
appurtenances thereto, including the Real Property.
"Purchase Price" has the meaning set forth in Section 2.5
below.
8
"Real Property" means that real property set forth in Sections 4.12(a)
and 4.12(b) of the Disclosure Schedule.
"Related Agreements" has the meaning set forth in Section 2.8
below.
"Release" means any spilling, leaking, emitting, discharging,
depositing, escaping, leaching, dumping, or other releasing into the
environment, whether intentional or unintentional.
"Reportable Event" has the meaning set forth in ERISA Section
4043.
"Section 338(h)(10) Election" has the meaning set forth in
Section 7.9 below.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Exchange Act" means the Securities Exchange Act of
1934, as amended.
"Security Interest" means any equitable interest, lien, option, pledge,
security interest, right of first refusal, or restriction on ownership,
including any mortgage, lien or pledge granted under applicable sections of the
Uniform Commercial Code or real property law.
"Seller" has the meaning set forth in the preface above.
"Seller's 401(k) Plan" means the Xxxxx Retirement Savings
Plan.
"Subsidiary" means any corporation with respect to which a specified
Person (or a Subsidiary thereof) owns a majority of the common stock or has the
power to vote or direct the voting of sufficient securities to elect a majority
of the directors.
"Subsidiary Assets" (collectively, the "Subsidiaries Assets") means
with respect to each LMG Subsidiary, all of the assets which are necessary to
conduct or are used in the operation of the portion of the Business conducted or
operated by such LMG Subsidiary, or are reflected on its books and records as of
the Closing Date, or are ordinarily located at or associated with the plants at
Thomasville, Moultrie or Quitman, Georgia, as the case may be, including all (a)
real property, leaseholds and subleaseholds therein, improvements, fixtures, and
fittings thereon, and easements, rights-of-way, and other appurtenances thereto
(such as appurtenant rights in and to public streets), (b) tangible personal
property (such as machinery, equipment, inventories of raw materials and
supplies, manufactured and purchased parts, goods in process and finished goods,
furniture,
9
automobiles, vehicles and tools), (c) Intellectual Property, goodwill associated
therewith, licenses and sublicenses granted and obtained with respect thereto,
and rights thereunder, remedies against infringements thereof, and rights to
protection of interests therein under the laws of all jurisdictions, (d) leases,
subleases, and rights thereunder, (e) consent orders, settlements, agreements,
contracts, instruments, Security Interests, guaranties, other similar
arrangements, and rights thereunder, (f) accounts, notes, and other receivables,
(g) securities, (h) claims, deposits, prepayments, refunds, causes of action,
choses in action, rights of recovery, rights of setoff, and rights of recoupment
(including any such item relating to the payment of Taxes), (i) franchises,
approvals, permits, licenses, orders, registrations, certificates, variances,
and similar rights obtained from governments and governmental agencies, (j) cash
and cash equivalents, and (k) books, records, ledgers, files, documents,
correspondence, lists, plats, architectural plans, drawings, and specifications,
creative materials, advertising and promotional materials, studies, reports, and
other printed or written materials.
"Subsidiary Excluded Assets" means all trade accounts receivable which,
as of the Closing Date, are more than 30 days past due.
"Tax" means any federal, state, local, or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental (including taxes under Code Section
59A), customs duties, capital stock, franchise, profits, withholding, social
security (or similar), unemployment, disability, real property, personal
property, sales, use, transfer, registration, value added, alternative or add-on
minimum, estimated, or other tax of any kind whatsoever, including any interest,
penalty, or addition thereto, whether disputed or not.
"Tax Return" means any return, declaration, report, claim for refund,
or information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
"Third Party Claim" has the meaning set forth in Section 11.5
below.
"WARN Act" means the Worker Adjustment and Retraining
Notification Act, as amended.
ARTICLE II
BASIC TRANSACTION
Section 2.1. Purchase and Sale of Assets. On and subject to the terms
and conditions of this Agreement, the Buyer agrees to
10
purchase from the Seller, and the Seller agrees to sell, transfer, convey, and
deliver to the Buyer, all of the Acquired Assets at the Closing for the
consideration specified below in this Article II.
Section 2.2. Assumption of Liabilities. On and subject to the terms and
conditions of this Agreement, the Buyer agrees to assume and become responsible
for all of the Assumed Liabilities at the Closing. The Buyer will not assume or
have any responsibility, however, with respect to any other obligation or
Liability of the Seller not included within the definition of Assumed
Liabilities.
Section 2.3. Preliminary Purchase Price. The Buyer agrees to pay the
Preliminary Purchase Price to the Seller for the Acquired Assets. The
Preliminary Purchase Price shall be adjusted as set forth in Section 2.5.
Section 2.4. Payment of the Preliminary Purchase Price. Pursuant to the
Option Agreement, the Buyer paid the Seller One Million Dollars ($1,000,000)
which shall be applied to the Preliminary Purchase Price. At the Closing the
Buyer shall pay the Seller the balance of the Preliminary Purchase Price by wire
transfer or delivery of other immediately available funds.
Section 2.5. Post Closing Adjustment of Preliminary Purchase Price. The
Preliminary Purchase Price shall be adjusted after the Closing as follows:
(a) Within 90 days after the Closing, the Seller shall prepare
and deliver to the Buyer for review a balance sheet as of the Closing Date (the
"Closing Balance Sheet"), and the Buyer shall give the Seller reasonable access
to all records in the Buyer's possession reasonably necessary to prepare the
Closing Balance Sheet and provide reasonable assistance in preparing same. The
Closing Balance Sheet shall be calculated in accordance with the same accounting
methods, practices, procedures and policies, and using the same estimates and
judgments, used by the Seller in preparing the Baseline Balance Sheet, except
that the Closing Balance Sheet shall be based upon actual results, shall be
calculated in accordance with GAAP (except as provided on Schedule 2.5), shall
be calculated as though the Parties had not consummated the transactions
contemplated under this Agreement, and shall be adjusted by the Accounting
Adjustments. Any disagreements between the Buyer and the Seller with respect to
the Closing Balance Sheet shall be resolved by the Auditors, whose decision in
such matter shall be final. The fee for the Auditors shall be evenly divided by
the Buyer and the Seller. The Buyer shall be entitled, at its expense, at or
near the Closing Date, to make or have made on its behalf such confirmations,
observations and other verifications of assets and liabilities, and the amounts
thereof, as it shall reasonably request.
(b) As used in this Section 2.5:
11
(i) the term "Accounting Adjustments" shall
mean the accounting adjustments to the Closing Balance Sheet
described on Schedule 2.5; and
(ii) the term "Closing Date TIB" shall mean the
amount shown on the Closing Balance Sheet as total investment in
business.
(c) If the Closing Date TIB exceeds $38,488,000, then the
Buyer shall pay the excess to the Seller within 5 business days following: (i)
the date on which the Seller delivers the Closing Balance Sheet to the Buyer, in
the case of any amount as to which there are no disagreements between the Buyer
and the Seller with respect to the Closing Balance Sheet, or (ii) the date on
which all such disagreements between the Buyer and the Seller with respect to
the Closing Balance Sheet have been resolved by the Auditors, in the case of any
amount as to which there is disagreement. If $38,488,000 exceeds the Closing
Date TIB, then the Seller shall pay the excess to the Buyer within 5 business
days following: (i) the date on which the Seller delivers the Closing Balance
Sheet to the Buyer, in the case of any amount as to which there are no
disagreements between the Buyer and the Seller with respect to the Closing
Balance Sheet, or (ii) the date on which all such disagreements between the
Buyer and the Seller with respect to the Closing Balance Sheet have been
resolved by the Auditors, in the case of any amount as to which there is
disagreement.
(d) Any payments pursuant to this Section 2.5 shall include
interest from the Closing Date to the date of payment at a fluctuating rate
equal to the Prime Rate.
(e) The Preliminary Purchase Price as so adjusted pursuant to
this Section 2.5 is referred to herein as the "Purchase Price".
Section 2.6. Allocation. The Parties shall allocate the Purchase Price
and the Assumed Liabilities among the Acquired Assets based upon the fair market
value of the Acquired Assets in accordance with Code Section 1060. The Buyer
shall prepare and propose to the Seller a draft of IRS Form 8594 setting forth
such allocation. The Buyer and the Seller shall report the federal, state and
local and other Tax consequences of the transactions contemplated hereby
consistent with such allocation, unless the Seller objects to such allocation
within ten business days of receiving such draft, specifying in reasonable
detail the respects in which it believes such allocation is not substantially
based upon the fair market value of the Acquired Assets. If such objection is
made, the Parties shall negotiate in good faith toward an agreement that will
permit the Seller to prepare and file its Form 8594 consistent with Buyer's Form
8594.
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Section 2.7. Employee Matters.
(a) The Buyer agrees to take such action with respect to
retention of employees (except in the case of employees at the Moultrie, Georgia
facility) as is necessary to avoid a violation of the WARN Act and to avoid any
requirement to give any notice under the WARN Act in connection with this
transaction and to take no action which would impose any obligation upon Seller
or any of the LMG Subsidiaries arising out of termination of any employee,
including the retention of Employees on Leave.
(b) In the case of employees of the Division, personnel and
medical files shall be transferred to the Buyer in the case of those employees
who agree in writing (in connection with their application for employment with
Buyer or otherwise), to release such files.
(c) The Seller and the Buyer will work cooperatively to
transfer within 30 days after the Closing Date assets of the Seller's 401(k)
Plan to the 401(k) plan that the Buyer will establish equal to the account
balances of the employees of the Division who are hired by the Buyer. Such
transfer will occur as soon as practicable after the Closing Date pending the
Buyer's and the Seller's reasonable determination that the transfer can be
accomplished in accordance with all applicable law. Prior to such transfer, the
Buyer and the Seller shall exchange reasonable representations and warranties to
such effect. The transfer will be made in cash via a trustee-to- trustee
transfer except that any outstanding plan loans to such employees shall be
transferred with the underlying accounts. The accounts will be valued as of such
date as agreed to by the Buyer and the Seller and transferred as soon as
practicable thereafter.
Section 2.8. Related Agreements. In connection with the consummation
of the transactions contemplated hereby, the Seller and the Buyer shall enter
into each of the following agreements, (collectively, the "Related Agreements")
on the Closing Date:
(a) a Support Services Agreement in substantially the form
attached as Exhibit A; and
(b) a Licensing Agreement in substantially the form attached
as Exhibit B.
Section 2.9. Subsidiary Excluded Assets. Contemporaneously with the
Closing, each LMG Subsidiary has transferred to the Seller its Subsidiary
Excluded Assets.
ARTICLE III
THE CLOSING
Section 3.1. The Closing. The Closing of the transactions contemplated
by this Agreement (the "Closing") shall take place simultaneously with the
execution and delivery of this Agreement on November 4, 1996 and shall be
effective as of 12:01 a.m. E.S.T. on
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November 4, 1996, unless the Parties shall mutually determine a different date
(the "Closing Date").
Section 3.2. Deliveries at the Closing. At the Closing, (i) the Seller
will deliver to the Buyer the various certificates, instruments, and documents
set forth in Schedule 3.2; (ii) the Buyer will deliver to the Seller the various
certificates, instruments, and documents set forth in Schedule 3.2; (iii) the
Seller will execute, acknowledge (if appropriate), and deliver to the Buyer
assignments (including real property and Intellectual Property transfer
documents) and such other instruments of sale, transfer, conveyance, and
assignment in such form as the Buyer and its counsel reasonably may request;
(iv) the Buyer will execute, acknowledge (if appropriate), and deliver to the
Seller an assumption agreement in such form as the Seller and its counsel
reasonably may request; and (v) the Buyer will deliver to the Seller the
consideration specified in Section 2.4 above.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE SELLER
The Seller represents and warrants to the Buyer that the statements
contained in this Article IV are correct and complete as of the date of this
Agreement, except as set forth in the disclosure schedule accompanying this
Agreement (the "Disclosure Schedule"). The Disclosure Schedule will be arranged
in sections corresponding to the lettered and numbered sections contained in
this Article IV.
Section 4.1. Organization of the Seller. The Seller is a corporation
duly incorporated and organized, validly existing, and in good standing under
the laws of the jurisdiction of its incorporation.
Section 4.2. Authorization of Transaction. The Seller has full power
and authority (including full corporate power and authority) to execute and
deliver this Agreement and the Related Agreements and to perform its obligations
hereunder and thereunder. No action by the Seller's stockholders is necessary to
authorize this Agreement. The board of directors of the Seller has duly
authorized the execution, delivery, and performance of this Agreement by the
Seller. This Agreement and the Related Agreements constitute valid and legally
binding obligations of the Seller, enforceable in accordance with their terms
and conditions.
Section 4.3. Noncontravention. Neither the execution and the delivery
of this Agreement, nor the consummation of the transactions contemplated hereby
will (i) violate any constitution, statute, regulation, rule, injunction,
judgment, order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which the Seller or any of the LMG
14
Subsidiaries is subject or any provision of the charter or bylaws of the Seller
or of any of the LMG Subsidiaries or (ii) conflict with, result in a breach of,
constitute a default under, result in the acceleration of, create in any party
the right to accelerate, terminate, modify, or cancel, or require any notice
under any agreement, contract, lease, license, instrument, or other arrangement
to which the Seller or any of the LMG Subsidiaries is a party or by which any of
them is bound or to which any of their assets is subject (or result in the
imposition of any Security Interest upon any of their assets). Neither the
Seller nor any of the LMG Subsidiaries is required to give any notice to, make
any filing with, or obtain any authorization, consent, or approval of any third
party or any government or governmental agency in order for the Parties to
consummate the transactions contemplated by this Agreement.
Section 4.4. Brokers' Fees. Neither the Seller nor any of the LMG
Subsidiaries has any Liability or obligation to pay any fees or commissions to
any broker, finder, or agent with respect to the transactions contemplated by
this Agreement.
Section 4.5. Personal Property. Except as limited by the
representations and warranties of the Seller and the LMG Subsidiaries as to
specific classes of the Acquired Assets contained elsewhere in this Article IV,
and except as otherwise disclosed in the Disclosure Schedule, the Seller and the
LMG Subsidiaries have good title to all of the personal property, tangible and
intangible, which is included within the Acquired Assets, free and clear of any
Security Interests, except for minor liens or other encumbrances which will not
materially impair the value or utility of any material component of the personal
property from and after the Closing Date.
Section 4.6. Subsidiaries. Section 4.6 of the Disclosure Schedule sets
forth for each LMG Subsidiary (i) its name and jurisdiction of incorporation,
(ii) the number of shares of authorized capital stock of each class of its
capital stock, (iii) the number of issued and outstanding shares of each class
of its capital stock, (iv) the number of shares of its capital stock held in
treasury, and (v) its directors and officers. Each LMG Subsidiary is a
corporation duly organized, validly existing, and in good standing under the
laws of the jurisdiction of its incorporation. Each LMG Subsidiary is duly
authorized to conduct business and is in good standing under the laws of each
jurisdiction where such qualification is required. The Seller has delivered to
the Buyer correct and complete copies of the charter and bylaws of each LMG
Subsidiary (as amended to date). All of the issued and outstanding shares of
capital stock of each LMG Subsidiary have been duly authorized and are validly
issued, fully paid, and nonassessable. The Seller holds of record and owns
beneficially all of the outstanding shares of each LMG Subsidiary,
15
free and clear of any restrictions on transfer (other than restrictions under
the Securities Act and state securities laws), Taxes, Security Interests,
options, warrants, purchase rights, contracts, commitments, equities, claims,
and demands. There are no outstanding or authorized options, warrants, purchase
rights, subscription rights, conversion rights, exchange rights, or other
contracts or commitments that could require the Seller or any of its
Subsidiaries to sell, transfer, or otherwise dispose of any capital stock of any
of the LMG Subsidiaries or that could require any LMG Subsidiary to issue, sell,
or otherwise cause to become outstanding any of its own capital stock (other
than this Agreement). There are no outstanding stock appreciation, phantom
stock, profit participation, or similar rights with respect to any LMG
Subsidiary. There are no voting trusts, proxies, or other agreements or
understandings with respect to the voting of any capital stock of any LMG
Subsidiary. The minute books (containing the records of meetings of the
stockholders, the board of directors, and any committees of the board of
directors), the stock certificate books, and the stock record books of each LMG
Subsidiary are correct and complete and at Closing will be in the possession of
the LMG Subsidiaries. None of the LMG Subsidiaries is in default under or in
violation of any provision of its charter or bylaws. None of the LMG
Subsidiaries controls directly or indirectly or has any direct or indirect
equity participation in any corporation, partnership, trust, or other business
association.
Section 4.7. Financial Statements. Attached hereto as Exhibit C are the
following financial statements: (i) the unaudited consolidated balance sheet of
the Business as of September 30, 1996 (the "Interim Balance Sheets"); and (ii)
the Baseline Balance Sheet. Except as set forth on Schedule 2.5, the Interim
Balance Sheets have been prepared in accordance with GAAP applied on a
consistent basis, presents fairly the financial condition of the Division and
the LMG Subsidiaries as of such date, is correct and complete, and is consistent
with the books and records of the Division and the LMG Subsidiaries (which books
and records are correct and complete).
Section 4.8. Events Subsequent to the Date of the Option Agreement.
Except for transactions with the Buyer, since the date of the Option Agreement,
there has not been any material adverse change in the business, financial
condition, operations, results of operations, or future prospects of the
Division or any of the LMG Subsidiaries. Without limiting the generality of the
foregoing, since that date:
(a) neither the Seller, in the course of operating the
Business, nor any of the LMG Subsidiaries has sold, leased, transferred, or
assigned any of its assets, tangible or intangible, other than for a fair
consideration in the Ordinary Course of Business;
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(b) except for agreements with the Buyer, neither the Seller,
in the course of operating the Business, nor any of the LMG Subsidiaries has
entered into any agreement, contract, lease, or license (or series of related
agreements, contracts, leases, and licenses) either involving more than $25,000
or outside the Ordinary Course of Business;
(c) no party (including the Seller, in the course of operating
the Business, or any of the LMG Subsidiaries) has accelerated, terminated,
modified, or canceled any agreement, contract, lease, or license (or series of
related agreements, contracts, leases, and licenses) involving more than $25,000
to which the Seller or any of the LMG Subsidiaries is a party or by which any of
them is bound;
(d) neither the Seller, in the course of operating the
Business, nor any of the LMG Subsidiaries has imposed any Security Interest upon
any of its assets, tangible or intangible;
(e) neither the Seller, in the course of operating the
Business, nor any of the LMG Subsidiaries has made any capital expenditure (or
series of related capital expenditures) either involving more than $25,000 or
outside the Ordinary Course of Business;
(f) neither the Seller, in the course of operating the
Business, nor any of the LMG Subsidiaries has made any capital investment in,
any loan to, or any acquisition of the securities or assets of, any other Person
(or series of related capital investments, loans, and acquisitions) either
involving more than $10,000 or outside the Ordinary Course of Business;
(g) neither the Seller, in the course of operating the
Business, nor any of the LMG Subsidiaries has issued any note, bond, or other
debt security or created, incurred, assumed, or guaranteed any indebtedness for
borrowed money or capitalized lease obligation either involving more than
$25,000 singly or $100,000 in the aggregate;
(h) neither the Seller, in the course of operating the
Business, nor any of the LMG Subsidiaries has delayed or postponed the payment
of accounts payable and other Liabilities outside the Ordinary Course of
Business;
(i) neither the Seller, in the course of operating the
Business, nor any of the LMG Subsidiaries has canceled, compromised, waived, or
released any right or claim (or series of related rights and claims) either
involving more than $25,000 or outside the Ordinary Course of Business;
17
(j) neither the Seller, in the course of operating the
Business, nor any of the LMG Subsidiaries has granted any license or sublicense
of any rights under or with respect to any Intellectual Property;
(k) there has been no change made or authorized in the
charter or bylaws of any of the LMG Subsidiaries;
(l) none of the LMG Subsidiaries has issued, sold, or
otherwise disposed of any of its capital stock, or granted any options,
warrants, or other rights to purchase or obtain (including upon conversion,
exchange, or exercise) any of its capital stock;
(m) none of the LMG Subsidiaries has declared, set aside, or
paid any dividend or made any distribution with respect to its capital stock
(whether in cash or in kind) or redeemed, purchased, or otherwise acquired any
of its capital stock;
(n) neither the Seller, in the course of operating the
Business, nor any of the LMG Subsidiaries has experienced any damage,
destruction, or loss (whether or not covered by insurance) to its property;
(o) neither the Seller, in the course of operating the
Business, nor any of the LMG Subsidiaries has made any loan to, or entered into
any other transaction with, any of the directors, officers, and employees of the
Seller and its Subsidiaries (including the LMG Subsidiaries) outside the
Ordinary Course of Business;
(p) neither the Seller, in the course of operating the
Business, nor any of the LMG Subsidiaries has entered into any written
employment contract or collective bargaining agreement, or modified in writing
the terms of any existing such contract or agreement;
(q) neither the Seller, in the course of operating the
Business, nor any of the LMG Subsidiaries has granted any increase in the base
compensation of any of the directors, officers, and employees of the Business
outside the Ordinary Course of Business;
(r) neither the Seller nor any of the LMG Subsidiaries has
adopted, amended, modified, or terminated any bonus, profit-sharing, incentive,
severance, or other plan, contract, or commitment for the benefit of any of the
directors, officers, and employees of the Seller and its Subsidiaries (including
the LMG Subsidiaries), or taken any such action with respect to any other
Employee Benefit Plan;
(s) neither the Seller, in the course of operating the
Business, nor any of the LMG Subsidiaries has made any other change
18
in employment terms for any of the directors, officers, and employees of the
Seller and its Subsidiaries (including the LMG Subsidiaries) outside the
Ordinary Course of Business;
(t) neither the Seller, in the course of operating the
Business, nor any of the LMG Subsidiaries has made or pledged to make any
charitable or other capital contribution outside the Ordinary Course of
Business;
(u) there has not been any other material occurrence, event,
incident, action, failure to act, or transaction outside the Ordinary Course of
Business involving the Division or any of the LMG Subsidiaries; and
(v) neither the Seller nor any of the LMG Subsidiaries
has committed to any of the foregoing.
Section 4.9. Undisclosed Liabilities. Neither the Seller, in the course
of operating the Business, nor any of the LMG Subsidiaries has any Liability
(and there is no Basis for any present or future action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or demand against any of them
giving rise to any Liability), except for (i) Liabilities set forth on the face
of the Interim Balance Sheets and (ii) Liabilities which have arisen after the
date of the Interim Balance Sheets in the Ordinary Course of Business (none of
which results from, arises out of, relates to, is in the nature of, or was
caused by any breach of contract, breach of warranty, tort, infringement, or
violation of law).
Section 4.10. Licenses, Approvals, and Permits; Compliance with Laws.
The Seller and the LMG Subsidiaries have obtained or applied for all licenses,
approvals and permits required to use the Acquired Assets and the Subsidiaries
Assets as they are now being used by the Division and the LMG Subsidiaries, or
necessary to operate the Business, including, without limitation, those required
pursuant to the applicable Environmental Laws, and are in compliance with the
terms and conditions of all such licenses, approvals and permits. All such
licenses, approvals and permits, or applications therefor, are listed on the
Disclosure Schedule. The Seller and the LMG Subsidiaries have owned and operated
the Acquired Assets and the Subsidiaries Assets in compliance with all laws and
regulations of federal, state and local governmental authorities applicable
thereto. Neither the Seller nor any of the LMG Subsidiaries has received notice
of, or is aware of, any facts, events or conditions which interfere with,
prevent, or with the passage of time could interfere with or prevent the
Division's, the LMG Subsidiaries' or, postclosing, the Buyer's continued
compliance with the terms and conditions of the aforementioned licenses and
permits, or such laws and regulations.
19
Section 4.11. Tax Matters.
(a) The Seller and each of the LMG Subsidiaries have filed all
Tax Returns which any of them was required to file with respect to the Business
. All such Tax Returns were correct and complete in all material respects. All
Taxes owed by the Seller and any of the LMG Subsidiaries (whether or not shown
on any Tax Return) have been paid or accrued. Neither the Seller nor any of the
LMG Subsidiaries currently is the beneficiary of any extension of time within
which to file any Tax Return. No claim currently is being made by an authority
in a jurisdiction where either the Seller or any of the LMG Subsidiaries files
Tax Returns that it is or may be subject to taxation by that jurisdiction. There
are no Security Interests on any of the Acquired Assets or Subsidiaries Assets
that arose in connection with any failure (or alleged failure) to pay any Tax.
(b) The Seller and each of the LMG Subsidiaries has withheld
and paid all Taxes required to have been withheld and paid in connection with
amounts paid or owing to any employee, independent contractor, creditor,
stockholder, or other third party.
(c) There is no dispute or claim concerning any Tax Liability
of the Seller or any of the LMG Subsidiaries either (A) claimed or raised by any
authority in writing or (B) as to which any Affiliate of the Seller and its
Subsidiaries has Knowledge. Section 4.11 of the Disclosure Schedule lists all
federal, state, local, and foreign income Tax Returns filed with respect to the
Seller and any of the LMG Subsidiaries for taxable periods ended on or after
September 30, 1992, indicates those Tax Returns that have been audited, and
indicates those Tax Returns that currently are the subject of audit. The Seller
has delivered to the Buyer correct and complete copies of all federal income Tax
Returns, examination reports, and statements of deficiencies assessed against or
agreed to by the Seller with respect to the Division and any of the LMG
Subsidiaries since September 30, 1992.
(d) Neither the Seller nor any of the LMG Subsidiaries has
filed a consent under Code Section 341(f) concerning collapsible corporations.
Neither the Seller nor any of the LMG Subsidiaries has made any payments, is
obligated to make any payments, or is a party to any agreement that under
certain circumstances could obligate it to make any payments that will not be
deductible under Code Section 280G.
(e) Neither the Seller nor any of the LMG Subsidiaries has
been a United States real property holding corporation within the meaning of
Code Section 897(c)(2) during the applicable period specified in Code Section
897(c)(1)(A)(ii).
20
(f) The Seller and each of the LMG Subsidiaries has disclosed
on its federal income Tax Returns all positions taken therein that could give
rise to a substantial understatement of federal income Tax within the meaning of
Code Section 6662.
(g) The Seller has no written Tax allocation or sharing
agreement with any of the LMG Subsidiaries.
(h) Neither the Seller nor any of the LMG Subsidiaries (A) has
been a member of an Affiliated Group filing a consolidated federal income Tax
Return (other than a group the common parent of which was the Seller) or (B) has
any Liability for the Taxes of any Person (other than the Seller and any of its
Subsidiaries) under Treas. Reg. Section 1.1502-6 (or any similar provision of
state, local, or foreign law), as a transferee or successor, by contract, or
otherwise.
(i) The Net Operating Losses (as such term is generally
defined for federal tax purposes without regard to alternative minimum tax) that
will be available to the Buyer (subject to applicable limitations upon use under
Code Section 382 and the separate return limitation year regulations) to reduce
the consolidated taxable income of the Buyer as a result of its acquisition of
the stock of the LMG Subsidiaries will be at least $8 million after the effect
of deconsolidation and the tax effects of the transactions hereunder. All of
such losses can be carried forward for at least ten tax years following the
Closing. In the event less than $8 million of Net Operating Losses are available
to the Buyer as set forth above, then the Seller shall pay an amount to the
Buyer computed as follows: (i) $8 million minus the amount of the available Net
Operating Losses multiplied by (ii) thirty-five (35%) percent; and such product
reduced by the minimum tax credit and general business credits available to the
Buyer as a result of its acquisition of the LMG Subsidiaries, to the extent such
credits will be available to offset the Buyer's federal regular income tax. This
amount shall be paid by the Seller to the Buyer sixty (60) days after notice
thereof.
(j) The tax basis on September 30, 1996, of the assets of the
LMG Subsidiaries reflected on the Interim Balance Sheets is, in the aggregate,
equal to at least 95% of the book basis in such assets, as set forth on such
Interim Balance Sheets.
Section 4.12. Real Property.
(a) Section 4.12(a) of the Disclosure Schedule lists and
describes briefly all real property owned by the Seller and used in the Business
or owned by any of the LMG Subsidiaries. With respect to each such parcel of
owned real property and except as disclosed on Schedule 4.12(a) of the
Disclosure Schedule:
21
(1) to the best of the Seller's Knowledge, the
identified owner has good and marketable title to the parcel of real
property, free and clear of any Security Interest, easement, covenant,
or other restriction, except for real estate taxes and installments of
special assessments not yet delinquent and recorded easements,
covenants, and other restrictions which do not impair the current use,
occupancy, or the marketability of title, or materially impair the
value, of the property subject thereto;
(2) there are no pending or, to the best of the
Seller's Knowledge, threatened condemnation proceedings, lawsuits, or
administrative actions relating to the property, or other matters
affecting adversely the current use, occupancy, or value thereof;
(3) to the best of the Seller's Knowledge, the
buildings and improvements are not in violation of applicable setback
requirements, zoning laws, and ordinances (and to the best of the
Seller's Knowledge, none of the properties or buildings or improvements
thereon are subject to "permitted non-conforming use" or "permitted
non-conforming structure" classifications), and, to the best of the
Seller's Knowledge, the land does not serve any adjoining property for
any purpose inconsistent with the use of the land, and to the best of
the Seller's Knowledge, the property is not located within any flood
plain or subject to any similar restriction for which any permits or
licenses necessary to the use thereof have not been obtained;
(4) to the best of the Seller's Knowledge, all
facilities have received all approvals of governmental authorities
(including licenses and permits) required in connection with the
ownership or operation thereof and have been operated and maintained in
accordance with applicable laws, rules, and regulations;
(5) there are no leases, subleases, licenses,
concessions, or other agreements, written or oral, entered into by or
known to the Seller granting to any party or parties the right of use
or occupancy of any portion of the parcel of real property;
(6) there are no outstanding options or rights of
first refusal to purchase the parcel of real property, or any portion
thereof or interest therein entered into by or known to the Seller;
(7) to the best of the Seller's Knowledge, there
are no parties (other than the Seller and the LMG Subsidiaries) in
possession of the parcel of real property,
22
other than tenants under any leases disclosed in Section 4.12 of the
Disclosure Schedule who are in possession of space to which they are
entitled;
(8) all facilities located on the parcel of real
property are supplied with utilities and other services necessary for
the operation of such facilities, all of which services are adequate in
accordance with all applicable laws, ordinances, rules, and regulations
and, to the best of the Seller's Knowledge, are provided via public
roads or via permanent, irrevocable, appurtenant easements benefitting
the parcel of real property.
(b) Section 4.12(b) of the Disclosure Schedule lists all real
property leased or subleased to the Seller and used in the Business or leased or
subleased to any of the LMG Subsidiaries. Section 4.12(b) of the Disclosure
Schedule also identifies the leased or subleased properties for which title
insurance policies have been procured. The Seller has delivered to the Buyer
correct and complete copies of the leases and subleases listed in Section
4.12(b) of the Disclosure Schedule. With respect to each lease and sublease
listed in Section 4.12(b) of the Disclosure Schedule:
(1) the lease or sublease is legal, valid,
binding, enforceable, and in full force and effect;
(2) the lease or sublease will continue to be
legal, valid, binding, enforceable, and in full force and effect on
identical terms following the consummation of the transactions
contemplated hereby;
(3) to the best of the Seller's Knowledge, no party
to the lease or sublease is in breach or default, and no event has
occurred which, with notice or lapse of time, would constitute a breach
or default or permit termination, modification, or acceleration
thereunder;
(4) to the best of the Seller's Knowledge, no party
to the lease or sublease has repudiated any provision thereof;
(5) to the best of the Seller's Knowledge, there
are no disputes, oral agreements, or forbearance programs in
effect as to the lease or sublease;
(6) with respect to each sublease, the
representations and warranties set forth in subsections (1) through (5)
above are true and correct with respect to the underlying lease;
(7) neither the Seller nor any of the LMG
Subsidiaries has assigned, transferred, conveyed, mortgaged,
23
deeded in trust, or encumbered any interest in the leasehold
or subleasehold;
(8) to the best of the Seller's Knowledge, all
facilities leased or subleased thereunder have received all approvals
of governmental authorities (including licenses and permits) required
in connection with the operation thereof and have been operated and
maintained in accordance with applicable laws, rules, and regulations;
(9) all facilities leased or subleased thereunder
are supplied with utilities and other services necessary for the
current operation of said facilities; and
(10) to the best of the Seller's Knowledge, the
owner of the facility leased or subleased has good and marketable title
to the parcel of real property, free and clear of any Security
Interest, easement, covenant, or other restriction, except for
installments of special assessments not yet delinquent and recorded
easements, covenants, and other restrictions which do not impair the
current use, occupancy, or value, or the marketability of title, of the
property subject thereto.
Section 4.13. Intellectual Property.
(a) The Seller and the LMG Subsidiaries own or have the right
to use pursuant to license, sublicense, agreement, or permission all
Intellectual Property used in the operation of the Business as presently
conducted.
(b) Neither the Seller in the course of operating the Business
nor any LMG Subsidiary has within the last three (3) years interfered with,
infringed upon, misappropriated, or otherwise come into conflict with any
Intellectual Property rights of third parties, and neither the Seller nor any
LMG Subsidiary has within the last three (3) years received any charge,
complaint, claim, demand, or notice alleging any such interference,
infringement, misappropriation, or violation relating to the Business (including
any claim that the Seller in the course of operating the Division or the LMG
Subsidiaries must license or refrain from using any Intellectual Property rights
of any third party). To the Knowledge of the Seller and the LMG Subsidiaries, no
third party has within the last three (3) years interfered with, infringed upon,
misappropriated, or otherwise come into conflict with any Intellectual Property
used in the Business.
(c) Section 4.13(c) of the Disclosure Schedule identifies each
patent or registration which has been issued to the Seller relating to the
Business, or which has been issued to any of the LMG Subsidiaries with respect
to any of its Intellectual
24
Property; identifies each pending patent application or application for
registration which any of them has made with respect to any of its Intellectual
Property; and identifies each license, agreement, or other permission which any
of them has granted to any third party with respect to any of its Intellectual
Property (together with any exceptions). The Seller has delivered to the Buyer
correct and complete copies of all such patents, registrations, applications,
licenses, agreements, and permissions (as amended to date) and has made
available to the Buyer correct and complete copies of all other written
documentation evidencing ownership and prosecution (if applicable) of each such
item. Section 4.13(c) of the Disclosure Schedule also identifies each trade name
or unregistered trademark used by the Business. With respect to each item of
Intellectual Property required to be identified in Section 4.13(c) of the
Disclosure Schedule:
(1) either the Seller or one of the LMG
Subsidiaries possesses all right, title, and interest in and to the
item, free and clear of any Security Interest, license, or other
restriction;
(2) the item is not subject to any outstanding
injunction, judgment, order, decree, ruling, or charge;
(3) no action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand is pending or is
threatened which challenges the legality, validity, enforceability,
use, or ownership of the item; and
(4) neither the Seller nor any of the LMG
Subsidiaries has ever agreed to indemnify any Person for or against any
interference, infringement, misappropriation, or other conflict with
respect to the item.
(d) Section 4.13(d) of the Disclosure Schedule identifies each
item of Intellectual Property that any third party owns and that is used in the
Business pursuant to license, sublicense, agreement, or permission. The Seller
has delivered to the Buyer correct and complete copies of all such licenses,
sublicenses, agreements, and permissions (as amended to date). With respect to
each item of Intellectual Property required to be identified in Section 4.13(d)
of the Disclosure Schedule and except as set forth on Section 4.13(d) of the
Disclosure Schedule:
(1) the license, sublicense, agreement, or
permission covering the item is legal, valid, binding, enforceable, and
in full force and effect;
(2) no party to the license, sublicense, agreement,
or permission is in breach or default, and no event has occurred which
with notice or lapse of time would
25
constitute a breach or default or permit termination,
modification, or acceleration thereunder;
(3) no party to the license, sublicense,
agreement, or permission has repudiated any provision thereof;
(4) with respect to each sublicense, the
representations and warranties set forth in subsections (1) through (3)
above are true and correct with respect to the underlying license;
(5) the underlying item of Intellectual Property
is not subject to any outstanding injunction, judgment, order,
decree, ruling, or charge;
(6) no action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand is pending or is
threatened which challenges the legality, validity, or enforceability
of the underlying item of Intellectual Property; and
(7) neither the Seller nor any of the LMG
Subsidiaries has granted any sublicense or similar right with respect
to the license, sublicense, agreement, or permission.
Section 4.14. Tangible Assets. The Buyer has inspected the buildings,
structure, plants and equipment of the Division and the LMG Subsidiaries and
such assets are being sold and purchased "as is, where is", subject to no
express or implied representations or warranties of any kind except as set out
herein. ALL IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR
PURPOSE ARE EXPRESSLY DISCLAIMED.
Section 4.15. Inventory. The inventory of the Division and the LMG
Subsidiaries consists of raw materials and supplies, manufactured and purchased
parts, goods in process, and finished goods, all of which is usable and salable
in the Ordinary Course of Business, except for items which are obsolete,
damaged, or defective, all of which have been written off or written down to net
realizable value in the Interim Balance Sheets or the Closing Balance Sheet, as
the case may be.
Section 4.16. Contracts. Section 4.16 of the Disclosure Schedule lists
the following contracts and other executory agreements to which either the
Seller in connection with the Business or any of the LMG Subsidiaries is a
party:
(a) any agreement (or group of related agreements) for
the lease of personal property to or from any Person providing for
lease payments;
26
(b) any agreement (or group of related agreements) for the
purchase or sale of raw materials, commodities, supplies, products, or other
personal property, or for the furnishing or receipt of services, the performance
of which will extend over a period of more than one year, result in a loss
either to the Seller in connection with the Business or to the LMG Subsidiaries,
or involve consideration in excess of $10,000;
(c) any agreement concerning a partnership or joint
venture;
(d) any agreement (or group of related agreements) under which
the Seller or any of the LMG Subsidiaries has created, incurred, assumed, or
guaranteed any indebtedness for borrowed money, or any capitalized lease
obligation, or under which the Seller or any of the LMG Subsidiaries has imposed
a Security Interest on any of its assets, tangible or intangible;
(e) any agreement concerning confidentiality or
noncompetition or Intellectual Property;
(f) any agreement involving any Affiliate (including the
Seller and its Subsidiaries other than the LMG Subsidiaries);
(g) any collective bargaining agreement;
(h) any agreement for the employment of any individual
on a full-time, part-time, consulting, or other basis or providing
severance benefits;
(i) any agreement under which the Seller or any of the LMG
Subsidiaries has advanced or loaned any amount to any of the directors,
officers, and employees of the Seller or its Subsidiaries (including the LMG
Subsidiaries) outside the Ordinary Course of Business;
(j) any agreement under which the consequences of a default or
termination could have a material adverse effect on the business, financial
condition, operations, results of operations, or future prospects of the
Business; or
(k) any other agreement (or group of related agreements) the
performance of which involves consideration in excess of $10,000.
The Seller has delivered to the Buyer a correct and complete copy of each of the
written agreements listed in Section 4.16 of the Disclosure Schedule (as amended
to date except for immaterial unwritten amendments arising in the Ordinary
Course of Business) and a written summary setting forth the material terms and
conditions of each oral agreement listed in Section 4.16 of the
27
Disclosure Schedule. With respect to each such agreement: (A) the agreement is
legal, valid, binding, enforceable, and in full force and effect; (B) the
agreement will continue to be legal, valid, binding, enforceable, and in full
force and effect on identical terms following the consummation of the
transactions contemplated hereby; (C) no party is in breach or default, and no
event has occurred which with notice or lapse of time would constitute a breach
or default, or permit termination, modification, or acceleration, under the
agreement; and (D) no party has repudiated any provision of the agreement.
Section 4.17. Notes and Accounts Receivable. All notes and accounts
receivable of the Seller with respect to the Division and of each of the LMG
Subsidiaries represent valid obligations from sales actually made in the
Ordinary Course of Business, are reflected properly on their books and records,
are valid receivables subject to no setoffs or counterclaims, are current and
collectible, and will be collected in accordance with their terms at their
recorded amounts, subject only to the reserve for bad debts set forth on the
face of the Interim Balance Sheets as adjusted for the passage of time through
the Closing Date in accordance with the past custom and practice of the Seller
and the LMG Subsidiaries. Section 4.17 of the Disclosure Schedule contains a
complete and accurate list of all notes and accounts receivable as of the date
of the Interim Balance Sheets, which list sets forth the aging of such notes and
accounts receivable.
Section 4.18. Powers of Attorney. There are no outstanding powers of
attorney executed on behalf of either the Seller in connection with the Business
or any of the LMG Subsidiaries.
Section 4.19. Insurance. The Buyer has been provided with the following
information with respect to each insurance policy (including policies providing
property, casualty, liability, and workers' compensation coverage and bond and
surety arrangements) to which the Seller in connection with the Business or any
of the LMG Subsidiaries is currently a party, a named insured, or otherwise is
currently the beneficiary of coverage:
(a) the name, address, and telephone number of the
agent;
(b) the name of the insurer, the name of the
policyholder, and the name of each covered insured;
(c) the policy number and the period of coverage; and
(d) the scope (including an indication of whether the coverage
was on a claims made, occurrence, or other basis) and amount (including a
description of how deductibles and ceilings are calculated and operate) of
coverage.
28
The Business has been covered during the past ten years by insurance in scope
and amount customary and reasonable for the businesses in which it has engaged
during such period.
Section 4.20. Litigation. Section 4.20 of the Disclosure Schedule sets
forth each instance in which the Seller, with respect to the Business, or any of
the LMG Subsidiaries (i) is subject to any outstanding injunction, judgment,
order, decree, ruling, or charge or (ii) is a party or is threatened to be made
a party to any action, suit, proceeding, hearing, or investigation of, in, or
before any court or quasi-judicial or administrative agency of any federal,
state, local, or foreign jurisdiction or before any arbitrator.
Section 4.21. Product Warranty. Neither the Seller nor any of the LMG
Subsidiaries has any Liability (and there is no Basis for any present or future
action, suit, proceeding, hearing, investigation, charge, complaint, claim, or
demand against any of them giving rise to any Liability) for replacement of any
products manufactured, sold, leased or delivered by the Division or by the LMG
Subsidiaries or other damages in connection therewith except as set forth on the
Baseline Balance Sheet, an Interim Balance Sheet or the Closing Balance Sheet.
No product manufactured, sold, leased, or delivered either by the Division or by
any of the LMG Subsidiaries is subject to any guaranty, warranty, or other
indemnity beyond the applicable standard terms and conditions of sale or lease.
Section 4.21 of the Disclosure Schedule includes copies of the standard terms
and conditions of sale or lease for the Division and the LMG Subsidiaries
(containing applicable guaranty, warranty, and indemnity provisions).
Section 4.22. Product Liability. Neither the Seller nor any of the LMG
Subsidiaries has any Liability (and there is no Basis for any present or future
action, suit, proceeding, hearing, investigation, charge, complaint, claim, or
demand against any of them giving rise to any Liability) arising out of any
injury to individuals or property as a result of the ownership, possession, or
use of any product manufactured, sold, leased, or delivered by the Seller in the
course of operating the Business, or by the LMG Subsidiaries.
Section 4.23. Employees; Labor Relations.
(a) Section 4.23 of the Disclosure Schedule contains a
complete and accurate list of the following information for each employee of the
Division and the LMG Subsidiaries, including each employee on leave of absence
or layoff status: employer; name; job title; current compensation paid or
payable and most recent prior rate of pay.
29
(b) No employee of the Division or any of the LMG Subsidiaries
is a party to, or is otherwise bound by, any agreement or arrangement, including
any confidentiality, noncompetition, or proprietary rights agreement, between
such employee or director and any other Person that in any way adversely affects
or will affect (i) the performance of his duties as an employee, or (ii) the
ability of the Business to conduct its business, including any such agreement or
arrangement with the Seller or any of the LMG Subsidiaries by any such employee
or director. To the Knowledge of the Seller and the LMG Subsidiaries, no officer
or other key employee of the Business intends to terminate his employment with
the Business.
(c) Neither the Division nor any of the LMG Subsidiaries is a
party to or bound by any collective bargaining agreement, nor has any of them
experienced any strikes, grievances or claims of unfair labor practices within
the last three (3) years. To the best of Sellers' Knowledge, neither the Seller
in the course of operating the Business nor any of the LMG Subsidiaries has
committed any unfair labor practice within the last three (3) years. Neither the
Seller nor any of the directors and officers (and employees with responsibility
for employment matters) of the Seller and its Subsidiaries has any Knowledge of
any organizational effort presently being made or threatened by or on behalf of
any labor union with respect to employees of the Business. No Equal Employment
Opportunity Commission charges or other claims of employment discrimination have
been made against the Seller, with respect to the Business, or against the LMG
Subsidiaries within the last three (3) years. No Wage and Hour Department
investigation has been made of the Seller, with respect to the Business, or of
the LMG Subsidiaries within the last three (3) years. In addition to the above,
neither the Seller nor any of the LMG Subsidiaries is now nor has been, within
the last three (3) years, in violation of the Fair Labor Standards Act, Service
Contract Act, Work Hours Safety Act and/or the Occupational Safety and Health
Act.
Section 4.24. Employee Benefits.
(a) Section 4.24 of the Disclosure Schedule lists each
Employee Benefit Plan that any of the LMG Subsidiaries solely maintains separate
from Seller. With respect thereto:
(1) Each such Employee Benefit Plan (and each
related trust, insurance contract, or fund) complies in form and in
operation in all respects with the applicable requirements of ERISA,
the Code, and other applicable laws.
(2) All required reports and descriptions
(including Form 5500 Annual Reports, Summary Annual Reports and Summary
Plan Descriptions) have been filed or distributed appropriately with
respect to each such Employee Benefit Plan.
30
The requirements of Part 6 of Subtitle B of Title I of ERISA and of
Code Section 4980B have been met with respect to each such Employee
Benefit Plan which is an Employee Welfare Benefit Plan.
(3) All premiums or other payments for all periods
ending on or before the Closing Date have been paid with respect to
each such Employee Benefit Plan which is an Employee Welfare Benefit
Plan.
(4) The Seller has delivered to the Buyer correct
and complete copies of the plan documents and summary plan
descriptions, the most recent determination letter received from the
Internal Revenue Service, the Form 5500 Annual Reports for the last
three years, and all related trust agreements, insurance contracts, and
other funding agreements which implement each such Employee Benefit
Plan.
(b) With respect to each Employee Benefit Plan that any of the
LMG Subsidiaries solely maintains separate from the Seller or has ever so
separately maintained, there have been no Prohibited Transactions with respect
to any such Employee Benefit Plan. No Fiduciary has any Liability for breach of
fiduciary duty or any other failure to act or comply in connection with the
administration or investment of the assets of any such Employee Benefit Plan. No
action, suit, proceeding, hearing, or investigation with respect to the
administration or the investment of the assets of any such Employee Benefit Plan
(other than routine claims for benefits) is pending or threatened. The Seller
has no Knowledge or any Basis for any such action, suit, proceeding, hearing, or
investigation.
(c) Other than contributions made to the United Food and
Commercial Workers Local 1625 Health and Welfare Fund, during the past five
years neither the Seller nor any of the LMG Subsidiaries has maintained or
contributed, or has been required to contribute to any Employee Welfare Benefit
Plan providing medical, health, or life insurance or other welfare-type benefits
for current retired or terminated or future retired or terminated employees of
the LMG Subsidiaries, their spouses, or their dependents (other than in
accordance with Code Section 4980B).
(d) No event has occurred and no condition exists, with
respect to any Employee Benefit Plan solely maintained by any of the LMG
Subsidiaries separate from Seller that could subject the Buyer to any tax, fine,
or penalty. No Employee Benefit Plan is or will be directly or indirectly
binding on the Buyer except to the extent specifically set forth in this
Agreement. Each such Employee Benefit Plan which may be assumed by the Buyer may
be amended and terminated in accordance with its terms, and, each such plan
provides for the unrestricted right of the sponsor to amend or terminate such
Employee Plan, subject to the provisions of the Code and ERISA with respect to
amendments or termination.
31
(e) No LMG Subsidiary maintains an Employee Pension Benefit
Plan separate from a Seller's plan.
Section 4.25. Guaranties. None of the LMG Subsidiaries is a guarantor
or otherwise is liable for any Liability or obligation (including indebtedness)
of any other Person.
Section 4.26. Environmental Laws; Hazardous Materials. To Seller's
Knowledge, except for cleaning, pest control, weed control, office and
maintenance supplies used, generated and stored in compliance with the
applicable Environmental Laws and ordinary and necessary quantities of Hazardous
Materials contained in or de minimis quantities discharged from the ordinary
operation of motor vehicles on the Properties, there have been no Releases of
Hazardous Materials in, on, under, at or migrating to or from the Properties in
quantities requiring investigation, remediation or notification to governmental
authorities under applicable Environmental Laws or regulations promulgated
thereunder; there has been no Release or threat of Release of any such Hazardous
Materials in quantities requiring investigation, remediation or notification to
governmental authorities under applicable Environmental Laws or regulations
promulgated thereunder; none of the Properties are subject to enforcement action
by any governmental entity as a result of the presence or former presence of
leaked or spilled petroleum products, aboveground or underground storage tanks,
or an accumulation of rubbish, debris or other solid waste in violation of
applicable Environmental Laws, no environmental condition exists on any of the
Properties that either (i) requires the owner of such Properties to report such
condition to any federal, state or local governmental authority or agency
thereof or (ii) requires the owner of such Properties to make a notation of such
condition in any public records or conveyancing instrument upon the conveyance
of any of such Properties. To its Knowledge, neither the Seller nor any of the
LMG Subsidiaries has generated any Hazardous Materials that have been disposed
of, whether lawfully or unlawfully, in any offsite facility (as defined in
ss.101(9) of the Comprehensive Environmental Response, Compensation and
Liability Act, 42 U.S.C.ss.9601(9)) that could subject the Buyer to Liability
under any Environmental Law.
Section 4.27. Certain Business Relationships with the Division and the
LMG Subsidiaries. None of the Seller's Affiliates has been involved in any
business arrangement or relationship with the Division or any of the LMG
Subsidiaries within the past 12 months, except (i) as shown on the Disclosure
Schedule or (ii) for arrangements terminable by the Division or the LMG
Subsidiaries upon no more than 30 days notice, and no Affiliate of the Seller
other than the LMG Subsidiaries owns any asset, tangible or intangible, which is
used in the Business, except as shown on the Disclosure Schedule.
32
Section 4.28. Disclosure. The representations and warranties contained
in this Article IV do not contain any untrue statement of a material fact or
omit to state any material fact necessary in order to make the statements and
information contained in this Article IV not misleading.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE BUYER
The Buyer represents and warrants to the Seller that the statements
contained in this Article V are correct and complete as of the date of this
Agreement.
Section 5.1. Organization of the Buyer. The Buyer is a corporation duly
organized, validly existing, and in good standing under the laws of the
jurisdiction of its incorporation.
Section 5.2. Authorization of Transaction. The Buyer has full power and
authority (including full corporate power and authority) to execute and deliver
this Agreement and the Related Agreements and to perform its obligations
hereunder and thereunder. No action by the Buyer's stockholders is necessary to
authorize this Agreement. The board of directors of the Buyer has duly
authorized the execution, delivery and performance of this Agreement by the
Buyer. This Agreement and the Related Agreements constitute valid and legally
binding obligations of the Buyer, enforceable in accordance with their terms and
conditions.
Section 5.3. Noncontravention. Neither the execution and the delivery
of this Agreement, nor the consummation of the transactions contemplated hereby
will (i) violate any constitution, statute, regulation, rule, injunction,
judgment, order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which the Buyer is subject or any provision of
its charter or bylaws or (ii) conflict with, result in a breach of, constitute a
default under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice under any
agreement, contract, lease, license, instrument, or other arrangement to which
the Buyer is a party or by which it is bound or to which any of its assets is
subject. The Buyer is not required to give any notice to, make any filing with,
or obtain any authorization, consent, or approval of any third party or
government or governmental agency in order for the Parties to consummate the
transactions contemplated by this Agreement other than filings under the
Xxxx-Xxxxx-Xxxxxx Act.
Section 5.4. Brokers' Fees. The Buyer has no Liability or obligation to
pay any fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which the Seller could become
liable or obligated.
33
Section 5.5. Litigation. No litigation or proceeding is pending, or to
the Knowledge of the Buyer threatened, against or related to the Buyer, which
may impair its obligations under this Agreement or the Related Agreements.
Section 5.6. Financing. The Buyer has on the date of this Agreement
immediately available funds sufficient in the aggregate to enable the Buyer to
pay the Preliminary Purchase Price on the Closing Date and all related fees and
expenses.
Section 5.7. Sophisticated Purchaser. The transactions being
consummated hereby are for the Buyer's own account for the purposes of operating
the Business as a going concern and not with a view towards resale or
distribution of the same. The Buyer acknowledges that, in reliance on the
foregoing, the transactions contemplated hereby have not been registered under
the Securities Act or any state securities laws.
Section 5.8. Investigation by the Buyer. The Buyer acknowledges that it
has inspected the Business, the Acquired Assets, and the Subsidiary Assets, and
that it has reviewed all documents referred to herein or in the Schedules and
Exhibits hereto. The Buyer expressly acknowledges that, except as expressly
provided herein or in the Schedules and Exhibits hereto, neither the Seller nor
any agent or representative of the Seller has made, and the Seller is not liable
for or bound in any manner by, any express or implied warranties, guarantees,
promises, statements, inducements, representations or information.
Section 5.9. Employees. Buyer has not offered employment to any
employee or contractor of the Seller or any Affiliate of the Seller (other than
the Division or the LMG Subsidiaries) except as set forth on Section 5.9 of the
Disclosure Schedule.
ARTICLE VI
[Intentionally Omitted]
ARTICLE VII
TAX MATTERS
Section 7.1. Allocation Agreement. Any agreement between the Seller
and any of the LMG Subsidiaries regarding allocation or payment of Taxes or
amounts in lieu of Taxes shall be deemed terminated at and as of the Closing.
Section 7.2. Tax Returns for Which the Seller is Responsible. The
Seller will be responsible for the preparation and filing of all Tax Returns for
the Seller for all periods as to which Tax Returns are due after the Closing
Date (including the
34
consolidated, unitary, and combined Tax Returns for the Seller which include the
operations of the Division and the LMG Subsidiaries for any period ending on or
before the Closing Date). The Seller shall also be responsible for the
preparation and filing of all Tax Returns for the LMG Subsidiaries for all
periods ending on or before September 30, 1996. The Seller will make all
payments required with respect to any such Tax Returns.
Section 7.3. Tax Returns for Which the Buyer is Responsible. The Buyer
will be responsible for the preparation and filing of all Tax Returns with
respect to the Division and the LMG Subsidiaries for all periods as to which Tax
Returns are due after the Closing Date (other than for Taxes with respect to
periods for which the consolidated, unitary, and combined Tax Returns of the
Seller will include the operations of the Division and the LMG Subsidiaries and
for Taxes for the periods ending on or before September 30, 1996). The Buyer
will make all payments required with respect to any such Tax Return. The Buyer
agrees to indemnify the Seller from and against any Adverse Consequences the
Seller may suffer resulting from, arising out of, or relating to such Taxes or
such Tax Returns.
Section 7.4. Taxes of Other Persons. The Seller agrees to indemnify the
Buyer from and against any Adverse Consequences the Buyer may suffer resulting
from, arising out of, relating to, in the nature of, or caused by any Liability
of the Seller or any LMG Subsidiary arising out of events occurring prior to the
Closing Date for Taxes of any Person other than the Seller or any LMG Subsidiary
(i) under Reg. Section 1. 1502-6 (or any similar provision of state, local or
foreign law), (ii) as a transferee or successor, (iii) by contract, or (iv)
otherwise.
Section 7.5. Returns for Periods Through the Closing Date. The Seller
will include the income of the Division and the LMG Subsidiaries (including any
deferred income triggered into income by Reg. Section 1.1502-13 and Reg. Section
1.1502-14 and any Excess Loss Accounts taken into income under Reg. Section
1.1502-19) on its consolidated federal income Tax Returns for all periods
through the Closing Date and pay any federal income Taxes attributable to such
income. The Seller will take no position on such returns that relate to the LMG
Subsidiaries that would materially adversely affect the LMG Subsidiaries after
the Closing Date unless such position would be reasonable in the case of a
Person that owned the Division and the LMG Subsidiaries both before and after
the Closing Date. The income of the Division and the LMG Subsidiaries will be
apportioned to the period up to and including the Closing Date and the period
after the Closing Date by closing the books of the Division and the LMG
Subsidiaries as of the end of the Closing Date.
35
Section 7.6. Audits. The Seller will keep the Buyer and its counsel
reasonably informed with respect to any audits of the Seller's consolidated
federal income Tax Returns to the extent that such returns relate to the
Division or the LMG Subsidiaries.
Section 7.7. Intentionally Omitted.
Section 7.8. Retention of Carryovers. The Seller will not elect to
retain any net operating loss carryovers or capital loss carryovers attributable
to any LMG Subsidiary under Reg. Section 1.1502-20(g), and neither the Seller
nor any Affiliate will take any other action or make any election which
adversely impacts upon the availability of or the amount of such carryovers
except Seller shall be permitted to utilize any such carryovers on its
consolidated federal income Tax Return for its tax year ending September 30,
1997, as required by the regulations under the Code.
Section 7.9. Section 338(h)(10) Election. At the Buyer's option, the
Seller will join with the Buyer in making an election under Section 338(h)(10)
of the Code (and any corresponding elections under state, local, or foreign tax
law) (collectively a "Section 338(h)(10) Election") with respect to the purchase
and sale of the stock of the LMG Subsidiaries hereunder. The Seller will pay any
Tax attributable to the making of the Section 338(h)(10) Election and will
indemnify the Buyer and its Subsidiaries against any Adverse Consequences
arising out of any failure to pay such Tax. The Seller will also pay any state,
local, or foreign Tax (and indemnify the Buyer and its Subsidiaries against any
Adverse Consequences arising out of any failure to pay such Tax) attributable to
an election under state, local, or foreign law similar to the election available
under Section 338(g) of the Code (or which results from the making of an
election under Section 338(g) of the Code) with respect to the purchase and sale
of the stock of the LMG Subsidiaries hereunder.
Section 7.10. Carryover Tax Attributes. The Seller will provide to the
Buyer within sixty days after the Closing Date Seller's best estimates of (i)
the basis of each LMG Subsidiary in its assets as of the Closing Date and (ii)
the amount of any carryover tax attributes (such as net operating losses, net
capital losses, unused investment or other credits) allocable to each LMG
Subsidiary that are available to the Buyer as a result of its acquisition of the
stock of the LMG Subsidiaries.
ARTICLE VIII
POST-CLOSING COVENANTS
The Parties agree as follows with respect to the period following the
Closing:
36
Section 8.1. General. In case at any time after the Closing any further
action is necessary or desirable to carry out the purposes of this Agreement,
each of the Parties will take such further action (including the execution and
delivery of such further instruments and documents) as another Party reasonably
may request, at the sole cost and expense of the requesting Party (unless the
requesting Party is entitled to indemnification therefor under Article XI
below). The Seller acknowledges and agrees that from and after the Closing the
Buyer will be entitled to possession of all documents, books, records (including
Tax records), agreements, and financial data of any sort relating to the
Division and the LMG Subsidiaries, except as expressly set forth herein, subject
to the right of access set forth in 8.2 hereof and excluding personnel and
medical files of the Division except as released to the Buyer under Section
2.7(b) hereof.
Section 8.2. Litigation Support and Other Access.
(a) In the event and for so long as any Party actively is
contesting or defending against any action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand in connection with (i) any
transaction contemplated under this Agreement or (ii) any fact, situation,
circumstance, status, condition, activity, practice, plan, occurrence, event,
incident, action, failure to act, or transaction on or prior to the Closing Date
involving the Division or any of the LMG Subsidiaries, the other Party will
cooperate with the contesting or defending Party and its counsel in the contest
or defense, make available its personnel, and provide such testimony and access
to its documents, books, records (including Tax records), agreements, and
financial data as shall be reasonably necessary in connection with the contest
or defense, all at the sole cost and expense of the contesting or defending
Party (unless the contesting or defending Party is entitled to indemnification
therefor under Article XI below).
(b) In addition to Subsection (a) hereof, on and after the
Closing Date and on reasonable prior notice, Buyer shall make available to
Seller such documents, books, records (including Tax records), agreements and
financial data of any sort relating to the Division and the LMG Subsidiaries as
Seller may reasonably request for any proper business purpose or reason,
including but not limited to the preparation and filing of any necessary
reports, returns or instruments. Buyer agrees to retain and not destroy such
documents, books, records (including Tax records), agreements and financial data
for the longer of (i) five years following the Closing Date or (ii) the periods
of time required by applicable law or regulation.
37
Section 8.3. Cooperation. In accordance with Section 11.2 hereof,
Seller shall defend any workers' compensation claims made by employees of the
Division or the LMG Subsidiaries arising from any injuries incurred on or prior
to the Closing Date. Buyer shall cooperate with Seller in minimizing all such
claims, including providing the cooperation set forth in Section 8.2 hereof and
by offering such employees continued employment and/or alternative duties, if
reasonably possible.
Section 8.4. Transition. The Seller agrees that it will not take any
action that is designed or intended to have the effect of discouraging any
lessor, licensor, customer, supplier, or other business associate of the
Division or any of the LMG Subsidiaries from maintaining the same business
relationships with the Buyer and the LMG Subsidiaries after the Closing as it
maintained with the Division and the LMG Subsidiaries prior to the Closing. The
Seller will refer all customer inquiries relating to the businesses of the
Division and the LMG Subsidiaries to the Buyer from and after the Closing.
Section 8.5. Accounts Receivable. In the event any accounts receivable
of the Seller or any LMG Subsidiary included in the definition of Acquired
Assets or Subsidiary Assets are not collected within ninety days after the
Closing Date, then upon notice from the Buyer to the Seller, Seller shall buy
such uncollected accounts receivable for their uncollected face value. The Buyer
shall retransfer such uncollected accounts receivable to the Seller, and Seller
shall pay the purchase price to the Buyer, within ten days of such notice.
Section 8.6. Covenant Not to Compete. For a period of five years from
and after the Closing Date, the Seller agrees that it will not engage directly
or indirectly in any business that the Business conducts as of the Closing Date
in any geographic area in which the Business operates as of the Closing Date;
provided, however, that no owner of less than 1% of the outstanding stock of any
publicly traded corporation shall be deemed to engage solely by reason thereof
in any of its businesses. If the final judgment of a court of competent
jurisdiction declares that any term or provision of this Section 8.5 is invalid
or unenforceable, the Parties agree that the court making the determination of
invalidity or unenforceability shall have the power to reduce the scope,
duration, or area of the term or provision, to delete specific words or phrases,
or to replace any invalid or unenforceable term or provision with a term or
provision that is valid and enforceable and that comes closest to expressing the
intention of the invalid or unenforceable term or provision, and this Agreement
shall be enforceable as so modified after the expiration of the time within
which the judgment may be appealed.
38
Section 8.7. Employees. Buyer shall not for a period of two years after
the Closing Date solicit, directly or indirectly, any employee or contractor of
the Seller or any Affiliate of the Seller (other than the Division or the LMG
Subsidiaries) to leave his employment. Seller shall not for a period of two
years after the Closing Date solicit, directly or indirectly, any employee of
the Division, the LMG Subsidiaries, the Buyer or any Affiliate of the Buyer to
leave his employment.
Section 8.8. Further Assurances and Assistance. The Seller and the
Buyer shall, from time to time, at the request of the other, execute and deliver
such further instruments of transfer and assignment and take such other action
as may be reasonably necessary in order to vest in the Buyer title to all of the
Acquired Assets, to transfer the Assumed Liabilities to the Buyer, to transfer
the Excluded Assets and Subsidiary Excluded Assets to Seller, to assist in
acquiring third-party consents or assist the other party in securing the
benefits to which it is reasonably entitled hereunder.
ARTICLE IX
[Intentionally Omitted]
ARTICLE X
[Intentionally Omitted]
ARTICLE XI
INDEMNIFICATION
Section 11.1. Survival of Representations and Warranties.
The representations and warranties of the Buyer and the Seller
contained in this Agreement, except for those contained in Sections 4.1 through
4.6, 4.11, 4.26 and 5.1 through 5.8, shall survive the Closing (even if the
damaged Party knew or had reason to know of any misrepresentation or breach of
warranty at the time of Closing) until May 30, 1998, (subject to any applicable
statutes of limitations which expire prior to such date), at which time they
shall be of no further force or effect, unless (and to the extent that) written
notice of a claim based on such representations and warranties shall have been
theretofore given. The representations and warranties of the Seller contained in
Section 4.11 hereof shall survive (even if the damaged Party knew or had reason
to know of any misrepresentation or breach of warranty at the time of Closing)
for the applicable statute of limitations and for ninety (90) days thereafter,
at which time they shall be of no further force or effect, unless (and to the
extent that) written notice of a claim based on such representations and
warranties shall have
39
been theretofore given. The representations and warranties of the Seller
contained in Section 4.26 hereof shall survive (even if the damaged Party knew
or had reason to know of any misrepresentation or breach of warranty at the time
of Closing) until November 1, 2001, at which time they shall be of no further
force and effect, unless (and to the extent that) written notice of a claim
based upon such representations and warranties shall have been theretofore
given. The representations of the Buyer and the Seller contained in Sections 4.1
through 4.6 and 5.1 through 5.8 hereof shall survive (even if the damaged Party
knew or had reason to know of any misrepresentation or breach of warranty at the
time of Closing) indefinitely.
Section 11.2. Indemnification Provisions for Benefit of the Buyer.
(a) In the event the Seller breaches (or in the event any
third party alleges facts that, if true, would mean the Seller has breached) any
of its representations, warranties, and covenants contained in this Agreement,
then the Seller agrees to indemnify the Buyer from and against any Adverse
Consequences the Buyer may suffer through and after the date of the claim for
indemnification (including any Adverse Consequences the Buyer may suffer after
the end of any applicable survival period) resulting from, arising out of,
relating to, in the nature of, or caused by the breach (or the alleged breach).
(b) The Seller agrees to indemnify the Buyer from and against
any Adverse Consequences the Buyer may suffer resulting from, arising out of,
relating to, in the nature of, or caused by:
(1) any Liability of the Seller which is not an
Assumed Liability (including any Liability of the Seller that
becomes a Liability of the Buyer under any bulk transfer law
of any jurisdiction, under any common law doctrine of de facto
merger or successor liability, or otherwise by operation of
law); or
(2) any Liability of any of the LMG Subsidiaries
for unpaid Taxes with respect to any Tax year or portion
thereof ending on or before the Closing Date (or for any Tax
year beginning before and ending after the Closing Date to the
extent allocable to the portion of such period beginning
before and ending on the Closing Date); or
(3) any Liability of any of the LMG Subsidiaries
for the unpaid Taxes of any Person (including the Seller
and its Subsidiaries) under Treas. Reg. Section 1.1502-6
(or any similar provision of state, local, or foreign
40
law), as a transferee or successor, by contract, or
otherwise; or
(4) any product shipped or manufactured by, or any
services provided by, the Seller in the course of operating
the Business or the LMG Subsidiaries before the Closing Date;
or
(5) any Liability of any LMG Subsidiary to the
extent not set forth on the Closing Balance Sheet.
(c) The Seller agrees to indemnify the Buyer from and against
any Adverse Consequences in excess of $1,000,000 that the Buyer may suffer under
the WARN Act, (or any similar state or local law) resulting from, arising out
of, or relating to, the Seller's or any LMG Subsidiary's operations at the
Moultrie, Georgia plant; provided, however, such indemnity shall not include any
indemnity from or against fines or penalties imposed under the WARN Act (or any
similar state or local law) arising out of any actions or inactions of Buyer.
Section 11.3. Indemnification Provisions for Benefit of the Seller.
(a) In the event the Buyer breaches (or in the event any third
party alleges facts that, if true, would mean the Buyer has breached) any of its
representations, warranties, and covenants contained in this Agreement, then the
Buyer agrees to indemnify the Seller from and against any Adverse Consequences
the Seller may suffer through and after the date of the claim for
indemnification (including any Adverse Consequences the Seller may suffer after
the end of any applicable survival period) resulting from, arising out of,
relating to, in the nature of, or caused by the breach (or the alleged breach).
(b) The Buyer agrees to indemnify the Seller from and against
any Adverse Consequences the Seller may suffer resulting from, arising out of,
relating to, in the nature of, or caused by any Assumed Liability.
(c) The Buyer agrees to indemnify the Seller from and against
any Adverse Consequences the Seller may suffer resulting from, arising out of,
relating to, in the nature of, or caused in any manner by the operation of the
Business after the Closing Date or the assets purchased hereunder.
(d) The Buyer agrees to indemnify the Seller from and against
any Adverse Consequences the Seller may suffer resulting from, arising out of,
relating to, in the nature of, or caused by:
41
(1) any Taxes the Buyer agreed to pay pursuant
to Section 7.3 hereto; or
(2) any Taxes relating to the operation of the
Business after the Closing Date.
Section 11.4. Indemnification Provisions - Environmental Matters.
(a) In addition to the provisions of Section 11.2, the Seller
will indemnify and hold harmless the Buyer from and against any Adverse
Consequences the Buyer may suffer (including costs of Cleanup, containment, or
other remediation) arising, directly or indirectly, from or in connection with
the following, provided that, and only if, Buyer gives Seller written notice of
such claim on or before November 1, 2001:
(1) any Liabilities under any Environmental Laws
arising out of or relating to: (i) (A) the ownership,
operation, or condition at any time on or prior to the Closing
Date during which time the Properties were owned or operated
by the Seller or any LMG Subsidiary has or had an interest, or
(B) any Hazardous Materials or other contaminants that were
present on the Properties at any time on or prior to the
Closing Date; or (ii) (A) any Hazardous Materials or other
contaminants, wherever located, that were, or were allegedly,
generated, transported, stored, treated, Released, or
otherwise handled by the Seller or any LMG Subsidiary or by
any other Person for whose conduct they are or may be held
responsible at any time on or prior to the Closing Date that
Seller or any LMG Subsidiary owned or operated the Properties,
or (B) any Hazardous Activities that were, or were allegedly,
conducted by the Seller or any LMG Subsidiary or by any other
Person for whose conduct they are or may be held responsible
on or prior to the Closing Date; or
(2) any bodily injury (including illness,
disability, and death, and regardless of when any such bodily
injury occurred, was incurred, or manifested itself), personal
injury, property damage (including trespass, nuisance,
wrongful eviction, and deprivation of the use of real
property), or other damage of or to any Person, including any
employee or former employee of the Seller or any LMG
Subsidiary or any other Person for whose conduct they are or
may be held responsible, in any way arising from or allegedly
arising from any Hazardous Activity conducted prior to the
Closing Date or allegedly conducted with respect to the
Properties or the operation of the Business prior to the
Closing Date by the Seller
42
or any LMG Subsidiary, or from Hazardous Material that was
Released or allegedly Released by the Seller or any LMG
Subsidiary or any other Person for whose conduct they are or
may be held responsible, at any time on or prior to the
Closing Date.
(b) The Seller will be entitled to control any Cleanup, and
any related legal proceeding, and, any other legal proceeding with respect to
which Seller provides indemnity under this Section 11.4, but any such Cleanup
shall be conducted through qualified environmental engineers in such manner, to
the extent possible, as will not unreasonably interfere with the operation of
the Business. The Seller shall keep the Buyer reasonably informed with respect
to such Cleanup.
Section 11.5. Matters Involving Third Parties.
(a) If any third party shall notify any Party (the
"Indemnified Party") with respect to any matter (a "Third Party Claim") which
may give rise to a claim for indemnification against the other Party (the
"Indemnifying Party") under this Article XI, then the Indemnified Party shall
promptly notify the Indemnifying Party thereof in writing; provided, however,
that no delay on the part of the Indemnified Party in notifying the Indemnifying
Party shall relieve the Indemnifying Party from any obligation hereunder unless
(and then solely to the extent) the Indemnifying Party thereby is prejudiced.
(b) The Indemnifying Party shall have the right to defend the
Indemnified Party against the Third Party Claim with counsel of its choice
reasonably satisfactory to the Indemnified Party so long as (A) the Indemnifying
Party notifies the Indemnified Party in writing within 15 days after the
Indemnified Party has given notice of the Third Party Claim that the
Indemnifying Party will indemnify the Indemnified Party from and against any
Adverse Consequences the Indemnified Party may suffer resulting from, arising
out of, relating to, in the nature of, or caused by the Third Party Claim, (B)
the Indemnifying Party provides the Indemnified Party with evidence reasonably
acceptable to the Indemnified Party that the Indemnifying Party will have the
financial resources to defend against the Third Party Claim and fulfill its
indemnification obligations hereunder, (C) the Third Party Claim involves only
money damages and does not seek an injunction or other equitable relief, (D)
settlement of, or an adverse judgment with respect to, the Third Party Claim is
not, in the good faith judgment of the Indemnified Party, likely to establish a
precedential custom or practice materially adverse to the continuing business
interests of the Indemnified Party, and (E) the Indemnifying Party conducts the
defense of the Third Party Claim actively and diligently.
43
(c) So long as the Indemnifying Party is conducting the
defense of the Third Party Claim in accordance with Section 11.5(b), (A) the
Indemnified Party may retain separate co-counsel at its sole cost and expense
and participate in the defense of the Third Party Claim, (B) the Indemnified
Party will not consent to the entry of any judgment or enter into any settlement
with respect to the Third Party Claim without the prior written consent of the
Indemnifying Party (not to be withheld unreasonably), and (C) the Indemnifying
Party will not consent to the entry of any judgment or enter into any settlement
with respect to the Third Party Claim without the prior written consent of the
Indemnified Party (not to be withheld unreasonably).
(d) In the event any of the conditions in Section 11.5 above
is or becomes unsatisfied, however, (A) the Indemnified Party may defend
against, and consent to the entry of any judgment or enter into any settlement
with respect to, the Third Party Claim in any manner it reasonably may deem
appropriate (and the Indemnified Party need not consult with, or obtain any
consent from, the Indemnifying Party in connection therewith), (B) the
Indemnifying Party will reimburse the Indemnified Party promptly and
periodically for the costs of defending against the Third Party Claim (including
reasonable attorneys' fees and expenses), and (C) the Indemnifying Party will
remain responsible for any Adverse Consequences the Indemnified Party may suffer
resulting from, arising out of, relating to, in the nature of, or caused by the
Third Party Claim to the fullest extent provided in this Article XI.
(e) In the event and during such period that Seller is
defending the Indemnified Party against any Third Party Claim arising from,
related to or in connection with, any action or inaction prior to the Closing
Date, by any of the LMG Subsidiaries, and performs its other indemnification
obligations hereunder with respect to such action or inaction, then Buyer shall
retransfer (or shall cause the LMG Subsidiary to retransfer) to Seller all
defenses, causes of action, choses in action, rights of recovery, rights of
setoff and rights of recoupment (including any such item relating to the payment
of Taxes) and all original books, records and documents relating to such Third
Party Claim.
Section 11.6. Limitations on Indemnification.
(a) Except for any indemnification obligation of Seller
arising out of or in relation to (i) the failure of Seller to pay any amounts to
the Buyer pursuant to Section 2.5 hereof, or (ii) any matter set forth in
Sections 4.11 (i), 4.17, 11.2(b)(2), 11.2(b)(3), 11.2(c), or 11.7 hereof, no
amounts shall be due to Buyer from Seller under this Article XI with respect to
the first Two Hundred Thousand Dollars ($200,000) in the aggregate of any
Adverse Consequences to the Buyer and no amounts shall be due to
44
Buyer from Seller under this Article XI in excess of an aggregate of Fifteen
Million Dollars ($15,000,000).
(b) Except for any indemnification obligation of Buyer arising
out of or in relation to (i) the failure of Buyer to pay any amounts to the
Seller pursuant to Sections 2.4 or 2.5 hereof, (ii) any matter set forth in
Sections 11.3(b), 11.3(c), 11.3(d), or 11.7 hereof, or (iii) any matter set
forth in Section 2.7 hereof, no amounts shall be due to Seller from Buyer under
this Article XI with respect to the first Two Hundred Thousand Dollars
($200,000) in the aggregate of any Adverse Consequences to the Seller and no
amounts shall be due to Seller from Buyer under this Article XI in excess of
Fifteen Million Dollars ($15,000,000).
Section 11.7. Determination of Adverse Consequences. The Parties shall
take into account the time cost of money (using the Prime Rate as the discount
rate) in determining Adverse Consequences for purposes of this Article XI.
ARTICLE XII
[Intentionally Omitted]
ARTICLE XIII.
MISCELLANEOUS
Section 13.1. No Third Party Beneficiaries. This Agreement shall not
confer any rights or remedies upon any Person other than the Parties and their
respective successors and permitted assigns.
Section 13.2. Entire Agreement. This Agreement (including the documents
referred to herein) constitutes the entire agreement between the Parties and
supersedes any prior understandings, agreements, or representations by or
between the Parties, written or oral, to the extent they have related in any way
to the subject matter hereof, including the Option Agreement, but excluding the
Confidentiality Agreement, which shall remain in effect.
Section 13.3. Succession and Assignment. This Agreement shall be
binding upon and inure to the benefit of the Parties named herein and their
respective successors and permitted assigns. No Party may assign either this
Agreement or any of its rights, interests, or obligations hereunder without the
prior written approval of the other Parties; provided however, that the Buyer
may (i) assign any or all of its rights and interests hereunder to one or more
of its Affiliates and (ii) designate one or more of its Affiliates to perform
its obligations hereunder (in any or all of which cases the Buyer nonetheless
shall remain responsible for the performance of all of its obligations
hereunder).
45
Section 13.4. Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
Section 13.5. Headings. The section headings contained in this
Agreement are inserted for convenience only and shall not affect in any way the
meaning or interpretation of this Agreement.
Section 13.6. Notices. All notices, requests, demands, claims, and
other communications hereunder shall be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly given if (and then
the next business day after) it is sent by recognized overnight courier service,
prepaid for next-day delivery, addressed to the intended recipient as set forth
below:
If to the Seller: Xx. Xxx X. Xxxxxx
Xxxxx Bros. Inc.
000 Xxxx Xxxxxxx Xxxxxx
Xxxxx, XX 00000
Telefax No.: 000-000-0000
Copies to: Xxxxxx X. Xxxx, Esq.
Xxxxx Bros. Inc.
000 Xxxx Xxxxxxx Xxxxxx
Xxxxx, XX 00000
and
Xxxxxx X. Xxxxxxx, Esq.
Macfarlane Xxxxxxxx & XxXxxxxx
000 Xxxx Xxxxxxx Xxxxxx
Xxxxx, XX 00000
Telefax No.: 000-000-0000
If to the Buyer: Xxxx X. Xxxxxxx
President
Smithfield Foods, Inc.
000 Xxxxxxxx Xxxxx
000 Xxxxxxxxx Xxxxx
Xxxxxxx, XX 00000
Telefax No.: 000-000-0000
46
Copies to: Xxxxx X. Xxxx, Esq.
Smithfield Foods, Inc.
000 Xxxxxxxx Xxxxx
000 Xxxxxxxxx Xxxxx
Xxxxxxx, XX 00000
Telefax No.: 000-000-0000
and
Xxxxxx X. Xxxxxxxx, Esq.
McGuire, Woods, Battle & Xxxxxx, L.L.P.
Xxxxxx Xxxxxx, Xxxxx 000
0000 Xxxxxxxxxx Xxxxx
XxXxxx, XX 00000
Telefax No.: 000-000-0000
Any Party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telefax, telex, ordinary mail, or electronic mail), but no such notice, request,
demand, claim, or other communication shall be deemed to have been duly given
unless and until it actually is received by the intended recipient. Any Party
may change the address to which notices, requests, demands, claims, and other
communications hereunder are to be delivered by giving the other Party notice in
the manner herein set forth.
Section 13.7. Radon Gas Disclosure. Radon is a naturally occurring
radioactive gas that, when it has accumulated in a building in sufficient
quantities, may present health risks to persons who are exposed to it over time.
Levels of Radon that exceed federal and state guidelines have been found in
buildings in Florida. Additional information regarding radon and radon testing
may be obtained from your county health unit.
Section 13.8. Recording Without Consent of all Parties. This Agreement
shall not be recorded in the public records of any governmental entity without
the written consent of all parties hereto, except as may be required by law.
Section 13.9. Governing Law. This Agreement shall be governed by and
construed in accordance with the domestic laws of the State of Florida without
giving effect to any choice or conflict of law provision or rule (whether of the
State of Florida or any other jurisdiction) that would result in the application
of the laws of any jurisdiction other than the State of Florida, except that
matters solely relating to the Real Properties (or any Cleanup thereof) shall be
governed by and construed in accordance with the laws of the jurisdiction where
such Real Property is located.
47
Section 13.10. Amendments and Waivers. No amendment of any provision of
this Agreement shall be valid unless the same shall be in writing and signed by
the Buyer and the Seller. No waiver by any Party of any default,
misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent such
occurrence.
Section 13.11. Severability. Any term or provision of this Agreement
that is invalid or unenforceable in any situation in any jurisdiction shall not
affect the validity or enforceability of the remaining terms and provisions
hereof or the validity or enforceability of the offending term or provision in
any other situation or in any other jurisdiction.
Section 13.12. Expenses. Each of the Buyer and the Seller shall bear
its own costs and expenses (including legal fees and expenses) incurred in
connection with this Agreement and the transactions contemplated hereby. The
Seller shall pay any and all fees or costs arising from and in connection with
the assignment of all software licensing agreements includible as Acquired
Assets and Subsidiary Assets hereunder. The Seller agrees that the Division and
the LMG Subsidiaries have not borne and will not bear any of the costs and
expenses of the Seller (including any of their legal fees and expenses) in
connection with this Agreement or any of the transactions contemplated hereby.
The Seller also agrees that the Division and the LMG Subsidiaries have not paid
any amount to any third party, and will not pay any amount to any third party,
with respect to any of the costs and expenses of the Seller (including any of
their legal fees and expenses) in connection with this Agreement or any of the
transactions contemplated hereby outside of the Ordinary Course of Business.
Section 13.13. Construction. The Parties have participated jointly in
the negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any Party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local, or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
word "including" shall mean including without limitation. Nothing in the
Disclosure Schedule shall be deemed adequate to disclose an exception to a
representation or warranty made herein unless the Disclosure Schedule identifies
the exception with reasonable particularity and describes the relevant facts in
reasonable detail. Without limiting the generality of the foregoing, the mere
listing (or inclusion of
48
a copy) of a document or other item shall not be deemed adequate to disclose an
exception to a representation or warranty made herein (unless the representation
or warranty has to do with the existence of the document or other item itself).
The Parties intend that each representation, warranty, and covenant contained
herein shall have independent significance. If any Party has breached any
representation, warranty, or covenant contained herein in any respect, the fact
that there exists another representation, warranty, or covenant relating to the
same subject matter (regardless of the relative levels of specificity) which the
Party has not breached shall not detract from or mitigate the fact that the
Party is in breach of the first representation, warranty, or covenant.
Section 13.14. Incorporation of Exhibits and Schedules. The Exhibits
and Schedules identified in this Agreement are incorporated herein by reference
and made a part hereof.
Section 13.15. Specific Performance. Each of the Parties acknowledges
and agrees that the other Parties would be damaged irreparably in the event any
of the provisions of this Agreement are not performed in accordance with their
specific terms or otherwise are breached. Accordingly, each of the Parties
agrees that the other Parties shall be entitled to an injunction or injunctions
to prevent breaches of the provisions of this Agreement and to enforce
specifically this Agreement and the terms and provisions hereof in any action
instituted in any court of the United States or any state thereof having
jurisdiction over the Parties and the matter, in addition to any other remedy to
which it may be entitled, at law or in equity.
Section 13.16. Joint Obligations. Any obligation of the Seller
hereunder shall be deemed to include the obligation to cause the LMG
Subsidiaries, in appropriate cases, to carry out such obligation. The LMG
Subsidiaries have joined in this Agreement to evidence their joint and several
guarantee of each and every obligation, representation and warranty, and
covenant of the Seller in this Agreement. Seller hereby releases any claim for
indemnification or contribution it may have against any of the LMG Subsidiaries
arising out of the transactions contemplated by this Agreement, except for those
arising from any breach or default by Buyer hereunder.
Section 13.17. Bulk Transfer Laws. The Buyer acknowledges that the
Seller will not comply with the provisions of any bulk transfer laws of any
jurisdiction in connection with the transactions contemplated by this Agreement.
49
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on
the date first above written.
SMITHFIELD FOODS, INC.
By: /s/ XXXXX X. XXXX
Title: Vice President, Secretary
and Treasurer
XXXXX BROS. INC.
By: /s/ XXX X. XXXXXX
Title: President
SUNNYLAND, INC.
By: /s/ XXX X. XXXXXX
Title: President
PREMIUM PORK, INC.
By: /s/ XXX X. XXXXXX
Title: President
LMJ DISTRIBUTION CENTER, INC.
By: /s/ XXX X. XXXXXX
Title: President
50
SCHEDULES AND EXHIBITS
[The schedules and exhibits to this Agreement have been omitted]
51
