1
Exhibit 2
AMENDMENT NO. 1 TO PURCHASE AGREEMENT
2
AMENDMENT NO. 1 TO PURCHASE AGREEMENT
Amendment No. 1 to the PURCHASE AGREEMENT (the "Agreement"), dated as
of the 11th day of September, 1998, among Xxxxx Xxxxxxxx, Inc., a Delaware
corporation ("SMI"), BIB Holdings (Bermuda) Ltd., a Bermuda corporation ("BIB"),
the other stockholders of SMI, all of whom are signatories hereto (the
"Stockholders"), Xxxxx Xxxxxxxx, LLC, a Delaware limited liability company (the
"Company"), The Xxxx and Xxxxxxx Xxxxxx Generation Skipping Trust ("The Xxxxxx
Trust"), Bahrain International Bank (E.C.), an exempt joint stock company
organized under the laws of Bahrain ("Parent") and The Dial Corporation, a
Delaware corporation ("Buyer"). (BIB, The Xxxxxx Trust and the Stockholders are
sometimes collectively referred to herein as "Sellers.") This Agreement hereby
amends and restates in its entirety the Purchase Agreement dated as of August
26, 1998, among SMI, BIB, the Stockholders, the Company, The Xxxxxx Trust,
Parent and Buyer (the "Original Agreement").
WITNESSETH
WHEREAS, the Company is engaged in the Business (as defined in
Section 10.11);
WHEREAS, SMI is the sole record and beneficial owner of all of the
issued and outstanding Class A Units of the Company;
WHEREAS, The Xxxxxx Trust is the sole record and beneficial owner of
all of the issued and outstanding Class B Units of the Company;
WHEREAS, Xxxxxxx Xxxxxx, Xxxxxx Xxxxxxxxx and Xxxxxxx Xxxxxx are the
sole record and beneficial owners of all of the issued and outstanding options
to purchase Class C Units of the Company;
WHEREAS, BIB and the Stockholders are the sole record and beneficial
owners of all of the issued and outstanding shares of capital stock of SMI (the
"Shares");
WHEREAS, La Loren, Inc. ("La Loren") contributed all of its assets to
the Company pursuant to an Asset Contribution Agreement dated March 28, 1997;
WHEREAS, each of the Sellers (excluding The Xxxxxx Trust) wishes to
sell and Buyer wishes to purchase all of the outstanding Shares;
WHEREAS, The Xxxxxx Trust wishes to sell and Buyer wishes to purchase
all of the outstanding Class B Units of the Company;
NOW, THEREFORE, in consideration of the mutual promises, covenants,
representations and warranties made herein and of the mutual benefits to be
derived herefrom, the parties hereto agree as follows:
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ARTICLE 1. SALE AND PURCHASE OF CAPITAL STOCK OF SMI AND CLASS B
UNITS OF THE COMPANY
1.1 Sale and Purchase of Capital Stock of SMI and Class B Units of
the Company. Subject to the terms and conditions hereof, and in reliance on the
representations and warranties set forth herein, at the Closing (as defined in
Section 1.2) on the Closing Date (as defined in Section 1.2), (i) each of the
Sellers (excluding The Xxxxxx Trust) shall sell the number of Shares set forth
opposite their respective names on Schedule I annexed hereto to Buyer, and Buyer
shall purchase all of such Shares from each of the Sellers (excluding The Xxxxxx
Trust) and (ii) The Xxxxxx Trust shall sell 200,000 Class B Units of the Company
to Buyer and Buyer shall purchase 200,000 Class B Units of the Company from The
Xxxxxx Trust.
1.2 Time and Place of Closing. Subject to the terms and conditions
hereof, the closing of the purchase and sale referred to in Section 1.1 above
(the "Closing") shall be held at the offices of Squadron, Ellenoff, Plesent &
Xxxxxxxxx, LLP ("Squadron"), 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, on the
date which is one (1) Business Day following the later to occur of (i) the
expiration or termination of the applicable waiting periods under the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended (the "HSR Act")
or (ii) the satisfaction or waiver of all other conditions set forth in Sections
6 and 7 hereof, or such later date as may be agreed to by Buyer and the
Representative (as defined in Section 10.11) but in no event on any date prior
to September 14, 1998, unless otherwise agreed by BIB and Buyer in writing. The
date on which the Closing shall occur is hereinafter referred to as the "Closing
Date." At the Closing, (i) each of the Sellers (excluding The Xxxxxx Trust)
shall deliver to Buyer stock certificates representing all of the Shares, duly
endorsed in blank or accompanied by stock powers duly executed in blank, in
proper form for transfer and (ii) The Xxxxxx Trust shall deliver to Buyer a
certificate representing 200,000 Class B Units of the Company duly endorsed in
blank or accompanied by an assignment document executed in blank, in proper form
for transfer.
1.3 Purchase Price; Repayment of Indebtedness Purchase of Options.
As consideration for the Shares and the Class B Units, at the Closing, Buyer
shall pay a purchase price in an amount in cash equal to (a) $185 million, minus
(b) the sum of (i) the Closing Deficit (as defined in Section 1.4(c)) plus (ii)
the amount representing the outstanding Xxxxxx Indebtedness (as defined in
Section 10.11) as of the Closing Date (which amount shall be set forth in a
certificate of the Representative, on behalf of the Sellers, delivered to Buyer
at least three (3) Business Days (as defined in Section 10.11) prior to Closing
(the "Representative's Certificate")), plus (iii) the amount representing the
outstanding indebtedness of SMI as of the Closing Date to Dilmun Financial
Services ("Dilmun") under the Subordinated Debt Agreement between SMI and Dilmun
dated April 4, 1997 (the "Subordinated Debt Agreement") (which amount shall be
set forth in the Representative's Certificate) plus (iv) the amount representing
the aggregate payment obligations of SMI and the Company with respect to the
redemption of all of the outstanding options to purchase Class C Units, such
amount constituting the "Purchase Price." The Purchase Price shall be subject to
post-closing adjustment pursuant to Section 1.4. At Closing, Buyer shall
disburse the Purchase Price as follows: (a) $5.0 million (the "Escrow Amount")
to U.S. Trust Company, National Association (the "Escrow Agent") to be held and
disposed of by the Escrow Agent in accordance with the Escrow Agreement in
substantially the form attached hereto as Exhibit 6.15 and (b) the remainder of
the Purchase Price
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to the Representative, as agent for the Sellers, to (i) pay the SMI Transaction
Expense Payments (as defined in Section 10.11) and (ii) to disburse the
remaining amount, after payment of all such SMI Transaction Expense Payments by
the Representative, to the Sellers. For purposes of distribution of the Purchase
Price to the Sellers, The Xxxxxx Trust shall be treated as if it were the owner
of 20,000 shares of Common Stock. In addition, at the Closing, Buyer shall pay
or cause to be paid: (a) an amount to Xxxxxx Financial, Inc. ("Xxxxxx"), in
satisfaction of all outstanding Xxxxxx Indebtedness as of the Closing Date and
Buyer shall assume or replace the Letters of Credit (as defined in Section
10.11) under the Credit Agreement (as defined in Section 10.11) on the Closing
Date (which shall be set forth in the Representative's Certificate), (b) an
amount to Dilmun, in satisfaction of all outstanding indebtedness of SMI to
Dilmun under the Subordinated Debt Agreement as of the Closing Date (which
amount shall be set forth in the Representative's Certificate), and (c) amount
to the holders of the Class C Units in the amounts set forth on Section 1.3 of
the Disclosure Schedules in satisfaction of all obligations of the Company or
SMI in connection with the redemption of all of the options to purchase Class C
Units. The amounts payable pursuant to this Section 1.3 shall be payable by
Buyer in cash by wire transfer in immediately available funds to such accounts
as the Representative shall have designated in writing to Buyer not less than
two (2) Business Days prior to the Closing Date.
1.4 Final Negative Tangible Net Worth; Purchase Price Adjustment
(a) For purposes of this Agreement, the following terms
shall have the meanings set forth below:
(i) "Final Negative Tangible Net Worth" means
Final Total Tangible Assets minus Final Total Liabilities.
(ii) "Final Total Tangible Assets" means total
tangible assets of SMI as reflected on the Closing Balance
Sheet, as adjusted pursuant to Section 1.4(b).
(iii) "Final Total Liabilities" means total
liabilities of SMI as reflected on the Closing Balance
Sheet, as adjusted pursuant to Section 1.4(b).
(b) At least three (3) Business Days prior to the Closing
Date, the Representative shall prepare, or cause to be prepared, and deliver to
the Buyer an estimated balance sheet (the "Closing Balance Sheet") which shall
set forth the estimated consolidated assets and liabilities of SMI and the
Company as of the close of business on the day immediately prior to the Closing
Date and a schedule setting forth the calculation of Final Negative Tangible Net
Worth as of such date (the "Tangible Net Worth Schedule"). The Closing Balance
Sheet shall be prepared in accordance with U.S. GAAP (as defined in Section
10.11), determined as if the Closing Date were SMI's normal year end and applied
on a consistent basis with the Audited Financial Statements (as defined in
Section 2.1(g)) and a physical inventory shall be observed by Buyer's Accountant
(as defined in Section 10.11) and SMI's Accountant (as defined in Section 10.11)
on the close of business on September 30, 1998 in a manner consistent with past
practice. In the event that the Closing occurs on a date after September 30,
1998, the inventory balance from such physical inventory shall be rolled forward
to the Closing Date. In the event that the Closing occurs on a date prior to
September
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30, 1998, the inventory balance from such physical inventory shall be rolled
back to the Closing Date. Any adjustments to the estimated inventory balance as
of September 30, 1998 that are identified as a result of the physical inventory
shall be deemed to have existed as of the Closing and shall be reflected in the
inventory balance on the Audited Closing Balance Sheet (whether resulting from
the actions of Buyer, SMI, the Company or otherwise), and SMI, the Company,
Parent and the Representative, on behalf of Sellers, hereby waive any
objections, claims, causes of action, and/or demands that they may have now or
in the future involving or arising out of or relating to any such adjustments
(whether resulting from the actions of Buyer, SMI, the Company or otherwise).
The Tangible Net Worth Schedule shall be prepared using the amounts in the
Closing Balance Sheet except that (i) other than assets acquired after June 30,
1998, any asset required to be included in the Base Balance Sheet to the extent
not included shall not be included in the balance of Final Total Tangible Assets
and (ii) no Goodwill (as defined in Section 10.11) or other intangible asset
(including, without, limitation, deferred organization costs and debt issuance
costs) shall be reflected in the balance of Final Total Tangible Assets. Each of
SMI's Accountant and Buyer's Accountant shall receive access to and the right to
review the relevant Books and Records (as defined in Section 10.11) of SMI and
the Company to aid in their conduction, or review, of the post-closing audit.
(c) If the estimated Final Negative Tangible Net Worth is
more negative than ($27,917,000) (such deficit, the "Closing Deficit"), then the
Purchase Price shall be reduced by an amount in cash equal to the Closing
Deficit. If the estimated Final Negative Tangible Net Worth is less negative
than ($27,917,000), such difference shall be deemed to constitute a "Closing
Surplus." No adjustment to the Purchase Price shall be made on the Closing Date
as a result of any Closing Surplus (such adjustment, if any, to be made upon
final resolution of the amount of the Audit Adjustment pursuant to Section
1.4(f)).
(d) Within sixty (60) days after the Closing Date, Buyer
shall cause SMI to retain SMI's Accountant to conduct an audit at the expense of
Buyer, in accordance with U.S. GAAP and the practices and procedures required to
be utilized in preparing the Tangible Net Worth Schedule pursuant to paragraph
(b) above, of the Closing Balance Sheet, and shall use its good faith efforts to
cause such audit to be completed as soon thereafter as practicable. Such audited
balance sheet is referred to herein as the "Audited Closing Balance Sheet." The
Tangible Net Worth Schedule shall be delivered to the Representative and Buyer
promptly after such audit is completed. The (i) amount of any difference between
the amount shown for (A) Final Negative Tangible Net Worth as computed from the
estimated Closing Balance Sheet compared to (B) Final Negative Tangible Net
Worth on the Audited Closing Balance Sheet and (ii) amount of any difference
between the final aggregate balance of the Xxxxxx Indebtedness and the
indebtedness in connection with the Subordinated Debt Agreement, as reflected on
the Audited Closing Balance Sheet, and the final aggregate balance of the Xxxxxx
Indebtedness and the indebtedness in connection with the Subordinated Debt
Agreement as reflected on the estimated Closing Balance Sheet and (iii) amount
of any difference between the amount necessary to redeem all outstanding options
to purchase Class C Units and the amount necessary to redeem all outstanding
options to purchase Class C Units reflected on the estimated Closing Balance
Sheet, is referred to herein as the "Audit Adjustment."
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(e) The Audited Closing Balance Sheet as prepared by SMI's
Accountant and delivered to the Representative and Buyer shall be deemed to be
accepted by and shall be conclusive for the purposes of the Audit Adjustment
provided herein, except to the extent that Buyer or Buyer's Accountant or
another independent firm of public accountants selected by Buyer for such
purpose shall have delivered, within ninety (90) days following receipt of the
Audited Closing Balance Sheet by Buyer, a written notice to the Representative
setting forth the items which Buyer disputes as not being in accordance with
U.S. GAAP, consistently applied with prior periods, as not being in accordance
with the requirements of this Agreement or as having computational errors,
specifying in reasonable detail the nature and extent of any such exception. If
any change proposed by Buyer is disputed by the Representative, then Buyer and
the Representative shall negotiate in good faith to resolve such dispute. If,
after a period of twenty (20) days, any proposed change remains disputed, Buyer
and the Representative shall together choose an independent firm of public
accountants of nationally recognized standing (the "Independent Auditor") to
resolve any remaining dispute. The determination of the Independent Auditor
shall be conclusive and binding on all parties. Buyer and the Representative
each shall pay one-half of the expenses and fees of the Independent Auditor.
(f) Any Audit Adjustment payable by the Sellers to Buyer
pursuant to Section 1.4(d) and/or 1.4(e) shall be paid by the Sellers to Buyer
together with interest thereon at an annual rate equal to the reference rate
from time to time of Chase Manhattan Bank N.A. (the "Reference Rate") from and
including the Closing Date to but not including the date of payment, promptly,
but in any event within five (5) Business Days, following final resolution of
the amount of the Audit Adjustment. Payment with respect to such Audit
Adjustment shall be made by the Sellers to Buyer (i) first, from the Escrow
Account (as defined in the Escrow Agreement) to Buyer and (ii) thereafter, to
the extent available funds in the Escrow Account are not sufficient to make full
payment in respect of the Audit Adjustment, by wire transfer of immediately
available funds from the Representative to an account designated by Buyer. If
the Audit Adjustment or the final Closing Balance Sheet reflects any amount
payable by Buyer to the Sellers, including any amount payable as a result of an
Audit Adjustment or resulting from the existence of a Closing Surplus, Buyer
shall pay such amount to the Representative, on behalf of the Sellers, together
with interest thereon at the Reference Rate from and including the Closing Date
to but not including the date of payment by wire transfer of immediately
available funds to an account or accounts designated by the Representative.
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ARTICLE 2. REPRESENTATIONS AND WARRANTIES OF SMI, THE COMPANY AND
BIB.
2.1 Representations and Warranties of SMI, the Company and BIB. Each
of SMI, the Company and BIB, jointly and severally, represents and warrants to
Buyer as to the matters set forth in this Section 2.1. For the purposes of this
Agreement, references to the "knowledge of SMI" shall be deemed to be the actual
knowledge of Xxxxxx Xxxxxxx, Xxxx Xxxxxx, Xxxx Xxxxxx, Xxxxxxx Xxxxxx, Xxxxxx
Xxxxxxxxx and/or Xxxxxxx Xxxxxx, after making reasonable inquiry within such
individuals' respective areas of responsibility and after a review by such
individuals of this Agreement and the Disclosure Schedules and such individuals
shall not assume any personal liabilities or obligations by reason of the
foregoing with respect thereto. For purposes of this Agreement, references to
the "Disclosure Schedules" shall mean the Disclosure Schedules delivered to
Buyer on the date hereof.
(a) Organization and Qualification. SMI is a corporation duly
organized, validly existing and in good standing under the
laws of the State of Delaware with full corporate power and
authority to own or lease its properties and to conduct its
business in the manner and in the places where such
properties are owned or leased or such business is
currently conducted or proposed to be conducted. The copy
of the certificate of incorporation of SMI, as amended to
date and certified by the Secretary of State of Delaware,
and of the by-laws of SMI, as amended to date, certified by
its Secretary, copies of which have been provided to Buyer,
are complete and correct, and no amendments thereto are
pending, and SMI is not in violation thereof. The Company
is a limited liability company duly organized, validly
existing and in good standing under the laws of the State
of Delaware with full power and authority to own or lease
its properties and to conduct its business in the manner
and in the places where such properties are owned or leased
or such business is currently conducted or proposed to be
conducted. The copy of the certificate of formation of the
Company, as amended to date, and of the Amended and
Restated Limited Liability Company Operating Agreement, as
amended to date, certified by its Secretary, copies of
which have been provided to Buyer, are complete and correct
and no amendments thereto are pending, and the Company is
not in violation thereof. Each of SMI and the Company is
duly qualified to do business as a foreign entity in the
states or jurisdictions listed in Section 2.1(a) of the
Disclosure Schedules, and is not required to be licensed or
qualified to conduct its business or own its properties in
any other jurisdiction in which the failure to be so
qualified would have, individually or in the aggregate, a
Material Adverse Effect (as defined in Section 10.11).
(b) Capital Stock and Units. SMI is authorized to issue (i)
1,000,200 shares of Common Stock, $.01 par value per share
(the "Common Stock"), of which 80,000 shares are issued and
outstanding, (ii) 55,000 shares of Class A Common Stock,
$.01 par value per share (the "Class A Common Stock"),
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none of which are issued and outstanding, and (iii)
2,400,000 shares of Preferred Stock, $.01 par value per
share (the "Preferred Stock," and collectively with the
Common Stock and the Class A Common Stock, the "Capital
Stock"), all of which are outstanding. As of the date
hereof, all of the Capital Stock is owned of record and
beneficially by the Stockholders in the amounts set forth
on Schedule I. Except as set forth on Schedule I, there are
no shares of capital stock of SMI issued or outstanding. At
Closing, all of the Shares will be owned of record and
beneficially by the Stockholders in the amounts set forth
on Schedule I, and there will be no other shares of capital
stock of SMI issued or outstanding, nor will there be any
options, subscriptions, warrants, rights, stock-based or
stock-related awards, convertible or exchangeable
securities, preemptive rights or other Commitments (as
defined in Section 10.11) to purchase capital stock of SMI.
The Company is authorized to issue (i) 800,000 Class A
Units, all of which are issued and outstanding, (ii)
200,000 Class B Units, all of which are issued and
outstanding and (iii) 55,000 Class C Units, none of which
are outstanding, (the Class A Units, Class B Units and
Class C Units, collectively referred to herein as the
"Units"). SMI is the record and beneficial owner of 800,000
Class A Units, The Xxxxxx Trust is the record and
beneficial owner of 200,000 Class B Units, and there are no
other Units issued or outstanding. Immediately prior to the
Closing, all of the Class A Units will be owned of record
and beneficially by SMI and all of the Class B Units will
be owned of record and beneficially by The Xxxxxx Trust,
and other than options to purchase 20,000 Class C Units
which will be terminated at the Closing, there will be no
other Units issued or outstanding, nor will there be any
options, subscriptions, warrants, rights, stock-based or
stock-related awards, convertible or exchangeable
securities, preemptive rights or other Commitments to
purchase any Units of, or any other interest in, the
Company. As of the date of this Agreement and at Closing,
all of the Shares and Units which are issued and
outstanding are validly issued, fully paid and
nonassessable and were not issued in violation of any
preemptive rights of any stockholders, members or any other
Person (as defined in Section 10.11). Except as set forth
in the Stockholders' Agreement among the stockholders of
SMI, dated as of April 7, 1997, the Amended and Restated
Limited Liability Company Operating Agreement of the
Company, dated April 7, 1997, and options to purchase
20,000 Class C Units of the Company pursuant to the Equity
Participation Plan and LLC Unit Option Agreements set forth
in Section 2.1(b) of the Disclosure Schedules, all of the
Shares and Units are, and at the Closing will be, owned
free and clear of any Encumbrances (as defined in Section
10.11) (other than any Encumbrances which will be canceled
prior to the Closing) and there are no outstanding
subscriptions, options, warrants, rights, stock-based or
stock-related awards, convertible or exchangeable
securities, preemptive rights or other Commitments to which
SMI, the Company or any of the Sellers may be bound of any
character relating to, or obligating SMI, the Company, or
any Seller to issue, grant,
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award, transfer or sell, any issued or unissued shares or
membership interests or other equity interests of SMI or
the Company. Except as set forth in Section 2.1(b) of the
Disclosure Schedules, there are no voting trusts, proxies
or other Commitments with respect to the voting of the
Capital Stock or the Units.
(c) Authority. Each of SMI and the Company has the requisite
right, power and authority to enter into this Agreement and
each agreement, document and instrument to be executed and
delivered by it pursuant to this Agreement and to carry out
the transactions contemplated hereby and thereby. The
execution, delivery and performance by each of SMI and the
Company of this Agreement and each such other agreement,
document and instrument have been duly authorized by all
necessary corporate or limited liability company action, as
the case may be, and no other such action is required in
connection therewith. This Agreement and each agreement,
document and instrument executed and delivered by SMI or
the Company pursuant to this Agreement, upon execution and
delivery, will constitute valid and binding obligations of
SMI or the Company, as the case may be, enforceable in
accordance with their respective terms against SMI or the
Company, as the case may be, except as such enforceability
may be limited by applicable bankruptcy, insolvency,
moratorium, reorganization or other similar laws affecting
creditors rights generally or by general principles of
equity regardless of whether asserted in equity or at law.
(d) Subsidiaries. Other than the Company, neither SMI nor the
Company has any Subsidiaries (as defined in Section 10.11)
and neither owns any securities issued by any other
business organization or governmental authority. Other than
the Company, neither SMI nor the Company has any direct or
indirect interest in Commitments to contribute to the
capital of, make loans to or share in the profits, expenses
or losses of, or Control (as defined in Section 10.11) of
any Person.
(e) Status of Property.
(i) Real Property. Neither the Company nor SMI
owns any real property.
(ii) Leased Real Property. All of the real
property leased or used in connection with the Business is
set forth in Section 2.1(e) of the Disclosure Schedules
(collectively referred to herein as the "Leased Real
Property").
(iii) Leases. All of the leases, subleases,
licenses or other rights of occupancy of any of the Leased
Real Property (collectively, the "Leases"), together with
any and all guarantees thereof, are in writing and are set
forth in Section 2.1(e) of the Disclosure Schedules. There
are no Commitments or understandings, written or oral, with
the lessor under any of these Leases, other than as set
forth in Section 2.1(e) of the Disclosure Schedules. The
copies of the written Leases heretofore
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delivered or furnished by BIB to Buyer are complete,
accurate, true and correct copies of each of the written
Leases as in effect at the date hereof. With respect to
each of the Leases:
(A) each of the Leases is in
full force and effect on the
terms set forth therein and
has not been modified,
amended or altered, in
writing or otherwise;
(B) all obligations of the
landlord or lessor under the
Leases which have accrued
have been performed, and to
the knowledge of SMI, no
landlord or lessor is in
default under or in arrears
in the payment of any sum or
in the performance of any
obligation required of it
under any Lease, and to the
knowledge of SMI, no
circumstance presently
exists which, with notice or
the passage of time, or
both, would give rise to a
default by the landlord or
lessor under any Lease,
except for any defaults
which, individually or in
the aggregate, would not
have a Material Adverse
Effect;
(C) all obligations of the
tenant or lessee under the
Leases which have accrued
have been performed, and
neither SMI nor the Company
is in default under or in
arrears in the payment of
any sum or in the
performance of any
obligation required of it
under any Lease, and, to the
knowledge of SMI, no
circumstance presently
exists which, with notice or
the passage of time, or
both, would give rise to a
default by SMI or the
Company;
(D) no lessor under a Lease has
delivered a written notice
of termination of its Lease.
(iv) Title and Description. The Company holds a
valid and enforceable leasehold interest in the Leased Real
Property leased by it pursuant to the Leases.
(v) Compliance with Law; Government Approvals.
None of SMI, the Company or La Loren has received notice
from any municipal state, federal or other governmental
authority of any violation of any zoning, building, fire,
water, use, health, or other Law (as defined in Section
10.11), license, permit or authorization issued in respect
of any of the Leased Real Property that has not been
heretofore corrected, and to the knowledge of SMI, no such
violation or violations now exist which, individually or in
the aggregate, would have a Material Adverse Effect. To the
knowledge of SMI, improvements located on or constituting a
part of the Leased Real Property that were constructed by
SMI, the Company, La Loren or any Affiliate (as defined in
Section 10.11) of SMI, the Company or La Loren are now in
compliance, in all material respects, with all applicable
municipal, state, federal or other governmental Laws,
ordinances, codes, regulations, licenses, permits and
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authorizations, including, without limitation, applicable
zoning, building, fire, water, use, minimum access or
health Laws, ordinances, codes, regulations, licenses,
permits and authorizations, and there are presently in
effect all certificates of occupancy, licenses, permits,
and authorizations required by Law, ordinance, code or
regulation or by any governmental or private authority
having jurisdiction over any of the Leased Real Property or
any portion thereof, or the occupancy thereof or any
present use thereof which are necessary or otherwise
material to the conduct of the Business, except where such
non-compliance, individually or in the aggregate, would not
have a Material Adverse Effect.
(vi) Real Property Taxes. None of SMI, the
Company or La Loren has received a written notice of any
pending or threatened reassessment of all or any portion of
any of the Leased Real Property and, to the knowledge of
SMI, there are no such pending or threatened reassessments.
(vii) Condemnation. None of SMI, the Company or
La Loren has received written notice of any pending or
threatened condemnation proceedings affecting any portion
of any of the Leased Real Property and, to the knowledge of
SMI, no such condemnation proceedings are pending or
threatened.
(f) Personal Property. Except as set forth in Section 2.1(f) of the
Disclosure Schedules, the Company has good, valid and (if applicable) marketable
title to or a valid leasehold or contractual right to use all of the personal
property used or held for use in connection with the conduct of the Business,
free and clear of all Encumbrances. The Base Balance Sheet reflects all personal
property used in connection with the conduct of the Business, subject to
dispositions and additions in the ordinary course of business in a manner
consistent with past practices, and otherwise consistent with the
representations, warranties, covenants and terms of this Agreement. The assets
which are owned or leased by SMI and the Company include all of the assets which
are used in, or which are necessary to permit SMI and the Company to continue
and carry on, the Business; provided, however, that none of SMI, the Company or
BIB makes any representation with regard to the adequacy of the financing
obtained by Buyer for the purposes of conducting the Business after the Closing.
Except as otherwise set forth in Section 2.1(f) of the Disclosure Schedules, the
assets which are owned or leased by SMI and the Company consisting of tangible
personal property, are in generally good operating condition and repair, normal
wear and tear excepted, have been well maintained, and conform in all material
respects with all applicable Laws, except where such non-conformance,
individually or in the aggregate, would not have a Material Adverse Effect.
(g) Financial Statements; Undisclosed Liabilities.
(i) Section 2.1(g) the Disclosure Schedules sets
forth the consolidated balance sheet of SMI and the Company
as of December 31, 1997, and the related statements of
income and retained earnings and cash flows for the period
from April 7, 1997 to December 31, 1997 (including the
notes thereto (the "Audited Financial Statements"). Xxxxxx
Xxxxxxxx LLP audited the Financial Statements for the
period from April 7, 1997 to December 31, 1997. Section
2.1(g) of the Disclosure Schedules also sets forth the
unaudited consolidated balance sheet of SMI and the
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Company as of June 30, 1998 (the "Base Balance Sheet") and
the related unaudited statements of income, retained
earnings and cash flows for the six month period then ended
(together with the Base Balance Sheet, the "Interim
Financial Statements"). The Audited Financial Statements
and Interim Financial Statements (A) are in accordance with
the Books and Records of SMI and the Company, (B) fairly
present the financial position, results of operations and
cash flows of SMI and the Company and (C) were prepared in
accordance with U.S. GAAP, and, in the case of the Interim
Financial Statements, were applied on a basis consistent
with the Audited Financial Statements, except that the
Interim Financial Statements are subject to normal year-end
adjustments, none of which are expected to be material. The
Books and Records of SMI and the Company relating to
financial and corporate matters are complete and correct in
all material respects and have been (and, with respect to
SMI and the Company, until the Closing Date will be)
maintained in accordance with sound business practices and
prepared on a consistent basis with the accounting
principles and practices used to prepare the Audited
Financial Statements and the Interim Financial Statements.
(ii) As of the date hereof, neither SMI nor the
Company has any Liabilities or obligations (which, where
taken individually or in the aggregate, are material) of
any nature, whether accrued, absolute, contingent or
otherwise, asserted or unasserted, known or unknown, except
(A) Liabilities or obligations stated or adequately
reserved against on the Audited Financial Statements, the
notes thereto, or the Base Balance Sheet, (B) Liabilities
or obligations specifically disclosed in the Disclosure
Schedules furnished to Buyer hereunder on the date hereof,
or (C) Liabilities or obligations incurred in the ordinary
course of business in a manner consistent with past
practices and otherwise consistent with the
representations, warranties, covenants and terms of this
Agreement.
(h) Taxes.
(i) Definitions.
(A) "Code" means the Internal Revenue Code of
1986, as amended, and any successor statute.
(B) "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 Sec. 59A), customs duties, capital
stock, franchise, profits, withholding, social
security (or similar employment or payroll related
taxes), 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, however denominated, including any fine,
interest, penalty, or addition thereto, and
including any Taxes of another person which SMI or
the Company owes by contract as transferee or
successor, under Treas. Reg. Section 1.1502-6 or
analogous state, local or foreign Tax provision, or
otherwise.
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13
(C) "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.
(ii) Representations and Warranties.
(A) Each of SMI, La Loren and the
Company has, in accordance with applicable law,
filed all Tax Returns required to be filed
through the date hereof, and has paid or caused
to be paid all material Taxes which are due and
payable (whether or not shown as due on any Tax
Return).
(B) Each of SMI, La Loren and the
Company 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 and complied with all
information reporting and backup withholding
requirements.
(C) Copies of all federal, state,
local and foreign income Tax Returns filed with
respect to La Loren and each of SMI and the
Company, as applicable, for taxable periods ended
on December 31, 1993, December 31, 1994, and
December 31, 1995, and December 31, 1996, which
are complete and correct in all material
respects, have been previously provided to Buyer,
together with any examination reports and
statements of deficiencies assessed against or
agreed to with respect to said returns.
(D) Neither the Internal Revenue
Service nor any other governmental authority is
now asserting or, to the knowledge of SMI,
threatening to assert against La Loren, SMI or
the Company any deficiency or claim for
additional Taxes. No claim has ever been made by
an authority in a jurisdiction where SMI, La
Loren or the Company does not file reports and
returns that SMI, La Loren or the Company is or
may be subject to taxation by that jurisdiction.
There are no security interests on any of the
assets of SMI, the Company or La Loren that arose
in connection with any failure (or alleged
failure) to pay any Tax. None of La Loren, SMI or
the Company has entered into a closing agreement
pursuant to Section 7121 of the Code.
(E) Except as set forth in Section
2.1(h)(ii)(E) of the Disclosure Schedules, there
has not been any audit of any Tax Return or any
Tax related matter with respect to La Loren, SMI
or the Company, no audit of any Tax Return or any
Tax related matter of La Loren, SMI or the
Company is in progress, and none of La Loren, SMI
or the Company has been notified by any tax
authority that any such audit is contemplated or
pending. Except as
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set forth in Section 2.1(h)(ii)(E) of the
Disclosure Schedules, no extension of time with
respect to any date on which a Tax Return was or
is to be filed by La Loren, SMI or the Company is
in force, and no waiver or agreement by La Loren,
SMI or the Company is in force for the extension
of time for the assessment or payment of any
Taxes.
(F) None of La Loren, SMI or the
Company has ever been (and none has had any
liability for unpaid Taxes because it once was) a
member of an "affiliated group" (as defined in
Section 1504(a) of the Code). None of La Loren,
SMI or the Company has ever filed, or been
required to file, a consolidated, combined or
unitary tax return with any other entity. Other
than the Company, none of La Loren, SMI or the
Company owns or has owned a direct or indirect
interest in any trust, partnership, corporation
or other entity. Neither SMI nor the Company is a
party to any Tax sharing agreement.
(G) None of La Loren, SMI or the
Company has agreed and none is required to make
any adjustment under Section 481(a) of the Code
by reason of a change in accounting method or
otherwise. Neither SMI nor the Company has any
"tax exempt use" property within the meaning of
Section 168(h) of the Code. None of SMI, La Loren
or the Company 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).
(H) The accruals and reserves for
Taxes (not including any such accruals and
reserves for deferred Taxes) on the Base Balance
Sheet are complete and adequate in all respects
to cover the liability of SMI and the Company for
Taxes through the date thereof.
(I) The accruals and reserves for
Taxes (not including any such accruals and
reserves for deferred Taxes) on the final Closing
Balance Sheet after all adjustments pursuant to
Article 1 (the "Final Closing Balance Sheet")
will be complete and adequate in all respects to
cover the liability of SMI and the Company for
Taxes through the date of such Final Closing
Balance Sheet.
(J) The accruals and reserves for
deferred Taxes on the Base Balance Sheet are
consistent in all respects with U.S. GAAP.
(K) To SMI's knowledge, there is no
fact or condition which, if known to any taxing
authority having jurisdiction, would likely
result in the issuance of a notice of proposed
deficiency or similar notice of intention to
assess Taxes against SMI, the Company or La Loren
which would, if resolved contrary to the position
taken by such entity, have a Material
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Adverse Effect and no issue has arisen in any
examination of SMI, the Company or La Loren by
any taxing authority that if raised with respect
to the period so examined would result in a
material deficiency for any other period not so
examined.
(L) SMI has not made an election under
Section 341(f) of the Code.
(M) As of December 31, 1997, the
depreciable tax basis of each category of assets
of the Company set forth in Section 2.1(h)(ii)(M)
of the Disclosure Schedules was equal to the
amount set forth in that Section of the
Disclosure Schedules.
(N) For purposes of this Agreement,
all references to Sections of the Code shall
include any predecessor provisions to such
Sections and any similar provisions of federal,
state, local or foreign law.
(i) Accounts and Notes Receivable. Section 2.1(i) of the Disclosure
Schedules contains a complete and accurate summary by account of the amount of
notes and accounts receivable of SMI or the Company as of July 31, 1998 for each
such customer, as well as the aggregate of all accounts and notes receivables as
of such date (the "Receivables"). All of the accounts receivable relating to the
Business, whether shown or reflected on the Base Balance Sheet or otherwise
through the Closing Date, represent and will represent bona fide completed sales
made in the ordinary course of business in a manner consistent with past
practices (including, without limitation, past practice with respect to not
providing extended payment terms), and otherwise consistent with the
representations, warranties, covenants and terms of this Agreement, are valid
and enforceable claims, are subject to no set-offs or counterclaims, and are
fully collectible in the normal course of business after deducting the reserve
set forth in the Base Balance Sheet, which reserve is a reasonable estimate of
SMI and the Company's uncollectible accounts, sales discounts, cash and
anticipation discounts, freight allowances, xxxx xxxxx, returns and allowances.
Such uncollectible accounts, sales discounts, cash and anticipation discounts,
freight allowances, xxxx downs, returns and allowances reflected on the income
statements which are part of the Audited Financial Statements and Interim
Financial Statements were granted or arose in the ordinary course of business,
consistent with past practices and provision for such items together with the
provision for uncollectible accounts have been determined in accordance with
U.S. GAAP. The Receivables do not include any accounts or loans receivable from
any person, firm or corporation which is affiliated with BIB or the Xxxxxx Trust
or from any stockholder, director, officer or employee of SMI or the Company or
any Affiliate thereof and no such Receivables have been or will be created from
July 31, 1998 to the Closing Date.
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(j) Inventories; Returns. All of the inventory items relating to the
Business are of a quality and quantity salable in the ordinary course of
business in a manner consistent with past practices and otherwise consistent
with the representations, warranties, covenants and terms of this Agreement, and
at gross margins consistent with the experience of SMI, the Company, in prior
years. All inventory items have been recorded, and through the Closing Date will
continue to be recorded at, the lower of cost or market in the ordinary course
of business in a manner consistent with past practices and otherwise consistent
with the representations, warranties, covenants and terms of this Agreement. The
values of the inventories reflected in the Balance Sheets have been adjusted for
markdowns and provision for obsolescence and shrinkage and reflect the normal
inventory valuation policies of the Business and were determined in accordance
with U.S. GAAP. Except as set forth in Section 2.1(j) of the Disclosure
Schedules, since the date of the Base Balance Sheet, no inventory items have
been sold or disposed of except through sales in the ordinary course of business
and consistent with past practices and at gross margins consistent with past
practices and otherwise consistent with the representations, warranties,
covenants and terms of this Agreement, and all sales Commitments made for the
products of the Business are at prices reflecting gross margins consistent with
past practices.
The quantity of the inventory of SMI and the Company on hand or in
transit at the Closing Date will be at levels substantially customary for SMI,
the Company and La Loren for that time of year or, if at greater than customary
levels, then substantially consistent with the requirements of then outstanding
sales Commitments or current sales projections of SMI or the Company, subject to
reserves reflected on the Base Balance Sheet. Subject to the first sentence in
the first paragraph of this Section 2.1(j) and subject to the reserve reflected
in the Base Balance Sheet, as of the Closing Date, there will be no inventory
items (i.e., SKU) in excess of eight (8) months of supply (excluding new Product
introductions in 1998) based upon average monthly sales by SKU for the trailing
twelve (12)-month period (plus 15%). Neither SMI nor the Company has received
any notice that and, to the knowledge of SMI, will not experience any difficulty
in obtaining, in the desired quantity and quality and at prices and upon terms
and conditions consistent with past practice, inventory or materials used in the
manufacturing of the inventory of SMI or the Company. The aggregate amount of
gross sales lost due to the return of products to Buyer, SMI or the Company
during the six (6) months following the Closing of Products sold by SMI or the
Company prior to the Closing will not exceed $1,200,000, which approximates the
reserve for sales returns reflected on the Base Balance Sheet (it being
understood that the foregoing representation is predicated upon Buyer
maintaining The Dial Corporation Return Goods Policy as set forth on Exhibit
2.1(j)).
(k) Absence of Certain Changes. Except as disclosed in the
Disclosure Schedules or on the Base Balance Sheet, since December 31, 1997,
there has not been:
(i) Any adverse effect on or change in the
business, condition (financial or otherwise), assets,
Liabilities, business, operations, or results of operations
of the Business, whether or not arising in the ordinary
course of business in a manner consistent with past
practices and otherwise consistent with the
representations, warranties, covenants and terms of this
Agreement which, individually or in the aggregate, would
have a Material Adverse Effect;
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(ii) Any contingent Liability or obligation
relating to the Business as guarantor or otherwise with
respect to the obligations of others (or any modification
thereof) or any cancellation of any debt or claim of
$50,000 or more owing to, or waiver of any material right
of, the Business, or any amendment or termination of any
Commitment except in the ordinary course of business in a
manner consistent with past practices, and otherwise
consistent with the representations, warranties, covenants
and terms of this Agreement;
(iii) Any mortgage, Encumbrance or lien placed on
any of the properties used in the Business which remains in
existence on the date hereof;
(iv) Any obligation or Liability (as defined in
Section 10.11) of any nature, whether accrued, absolute,
contingent or otherwise, asserted or unasserted, incurred
in connection with the Business other than obligations and
Liabilities incurred in the ordinary course of business in
a manner consistent with past practices, and otherwise
consistent with the representations, warranties, covenants
and terms of this Agreement;
(v) Any purchase, sale or other disposition, or
any Commitment or other arrangement for the purchase, sale
or other disposition, of any of the properties or assets
relating to the Business involving the payment or receipt
of more than $50,000 or which has not occurred in the
ordinary course of business in a manner consistent with
past practices, and otherwise consistent with the
representations, warranties, covenants and terms of this
Agreement;
(vi) Any damage, destruction or loss, whether or
not covered by insurance, which, individually or in the
aggregate, would have a Material Adverse Effect;
(vii) Any declaration, setting aside or payment
of any dividend by SMI or the Company, or the making of any
other distribution in respect of the capital stock or other
equity interest of SMI or the Company or any direct or
indirect redemption, purchase or other acquisition by SMI
or the Company of its own capital stock or other equity
interest, except as described in Section 2.1(k) of the
Disclosure Schedules;
(viii) Any strikes, labor disputes or unfair
labor practice charges involving the Business;
(ix) Any change in the compensation (in the form
of salaries, wages, incentive arrangements or otherwise)
payable or to become payable by SMI or the Company to any
officers, employees, agents or independent contractors of
SMI or the Company, other than normal merit increases in
the ordinary course of business
-16-
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in accordance with its past practices, or any bonus payment
or arrangement made to or with any such person or entity;
(x) Any entering into or amendment of any
employment, deferred compensation or severance agreement or
any other agreement with any officer, director or employee,
including any employee that earned $100,000 or more in
fiscal year ended December 31, 1997 or is scheduled as of
the date hereof and through the Closing Date to earn
$100,000 or more in fiscal year ended December 31, 1998
(each a "Highly Compensated Employee") of SMI or the
Company other than normal merit increases, or any
establishment, adoption or entering into or amendment of
any collective bargaining, bonus, incentive, deferred
compensation, profit sharing, stock option or purchase,
other equity-based rewards, insurance, pension, retirement,
post-retirement, severance or other employee benefit plan;
(xi) Any change, or the obtaining of information
concerning a prospective change, with respect to any
officers or management employees involved in the Business,
any grant of any severance or termination pay to any
officer, employee, agent, independent contractor or other
Person involved in the Business or any increase in benefits
payable under any existing severance or termination pay
policies or employment agreement or relationship;
(xii) Any payment or discharge of a material
Encumbrance or Liability relating to the Business which was
not shown on the Base Balance Sheet or incurred in the
ordinary course of business in a manner consistent with
past practices, and otherwise consistent with the
representations, warranties, covenants and terms of this
Agreement;
(xiii) Any payment made or obligation or
Liability incurred by SMI or the Company to, or any other
transaction by SMI or the Company with, any of its
officers, managers, directors, stockholders, members,
Highly Compensated Employees or independent contractors, or
any loans or advances made by SMI or the Company to any of
its Affiliates, officers, directors, managers,
stockholders, members, Highly Compensated Employees or
independent contractors, except normal compensation and
expense allowances consistent with past practice, or any
prepayment of any loans from stockholders, members,
officers, directors or managers (if any) in the ordinary
course of business in a manner consistent with past
practices;
(xiv) Any change in accounting methods or
practices, return policies, credit practices, collection
policies or payment policies used in the operation of the
Business including, without limitation, any change in the
recognition of income, the collection of accounts
receivable or the discharge or recording of payables
relative to past practices, the increase or change in any
assumptions underlying or methods of calculating any bad
debt, contingency or other reserves, or any failure to pay
accounts payable in the ordinary course of business and in
a manner consistent with past practice and otherwise
consistent with the representations, warranties, covenants
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and terms of this Agreement, and in any event within
forty-five (45) days of the due date thereof unless they
are being disputed in good faith and unless appropriate
reserves are maintained with respect to such disputed
items;
(xv) Any cancellation or loss of any material
right or asset, or waiver of any right, of the Business or
any making of any tax election or settling or compromising
of any federal, state, local or foreign income tax
liability;
(xvi) Any factoring of receivables;
(xvii) Any amendment to the organizational
documents of SMI or the Company or the authorized or issued
capital stock or equity interests of SMI or the Company, or
any acquisition of any securities issued by any other
business organization other than short-term investments in
the ordinary course of business in a manner consistent with
past practices, and otherwise consistent with the
representations, warranties, covenants and terms of this
Agreement;
(xviii) To the knowledge of SMI, any
investigation by a Governmental Entity (as defined in
Section 10.11) or Litigation (as defined in Section 10.11)
threatened or commenced since such date;
(xix) Any change in the relationships with
suppliers, distributors, brokers, sales representatives,
licensees, licensors, customers or others with whom the
Business has business relationships which, individually or
in the aggregate, would have a Material Adverse Effect;
(xx) Any alteration or change in the methods of
operation employed by the Business, including without
limitation, any markdowns or discounts, including future
concessions or special arrangements associated or
negotiated with respect to goods sold or to be sold which,
individually or in the aggregate, would have a Material
Adverse Effect;
(xxi) Any Product sold by SMI or the Company
which includes significantly different decorative labeling
or decorative cartons that had not been previously used by
SMI or the Company, other than the Company's new
aromatherapy product line; or
(xxii) Any agreement or understanding, whether in
writing or otherwise, that would result in any of the
transactions or events or require SMI or the Company to
take any of the actions specified in paragraphs (i) through
(xxi) above.
(l) Ordinary Course . Since December 31, 1997, SMI and the Company
have conducted the Business (including inventory policies) only in the ordinary
course and in a manner consistent with past practices and otherwise consistent
with the representations, warranties, covenants and terms of this Agreement.
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(m) Banking Relations . All of the arrangements with any banking
institution relating to the Business are set forth in Section 2.1(m) of the
Disclosure Schedules, indicating with respect to each of such arrangements the
type of arrangement maintained (such as checking account, borrowing
arrangements, safe deposit box, etc.) and the person or persons authorized in
respect thereof.
(n) Intellectual Property
(i) Except and as described in Section 2.1(n) of
the Disclosure Schedules, the Company and SMI owns or has
the right or license to use all Intellectual Property (as
defined in Section 10.11) used in the Business as presently
conducted or as contemplated to be conducted ("SMI
Intellectual Property"), including, without limitation, all
rights to the "Xxxxx Xxxxxxxx" trademark and to use the
"Xxxxx Xxxxxxxx" name. Except as described in Section
2.1(n)(i) of the Disclosure Schedules, no proceedings have
been instituted in the five year period prior to the date
hereof, which challenge the rights of SMI, the Company or
La Loren in respect of any SMI Intellectual Property. No
proceedings are pending, or to the knowledge of SMI,
threatened, which challenge the rights of SMI, the Company
or La Loren in respect of any SMI Intellectual Property,
and to the knowledge of SMI, no other person has or alleges
any rights in or to the SMI Intellectual Property. SMI and
the Company have the right to use, free and clear of claims
or rights of other persons made or asserted, to the
knowledge of SMI, all SMI Intellectual Property.
(ii) All SMI Intellectual Property which is
material to the conduct of the Business as presently
conducted or contemplated to be conducted is listed in
Section 2.1(n) of the Disclosure Schedules ("Material SMI
Intellectual Property"). Such Material SMI Intellectual
Property has been duly registered in, filed in or issued by
the United States Patent and Trademark Office, the United
States Register of Copyrights, or the corresponding offices
of other jurisdictions as identified on the Disclosure
Schedules, is valid, enforceable and in good standing and
has been properly maintained and renewed in accordance with
all applicable provisions of law and administrative
regulations in the United States and each such jurisdiction
as set forth in Section 2.1(n) of the Disclosure Schedules.
(iii) All licenses or other agreements under
which the Company and SMI have been granted rights in
Intellectual Property or have granted such rights to others
are listed in Section 2.1(n) of the Disclosure Schedules.
All said licenses or other agreements are in full force and
effect, there is no default by SMI, the Company or La
Loren, or to the knowledge of SMI, any other party thereto,
and, to the knowledge of SMI, no condition, event or fact
exists which, with notice, passage of time or both would
constitute a material default by SMI, the Company or La
Loren or to the knowledge of SMI, by any other party
thereto, and all rights thereunder are freely assignable.
True and complete copies of all such licenses or other
agreements, and any amendments thereto, have been provided
to Buyer.
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(iv) SMI, the Company and La Loren have taken all
commercially reasonable steps required in accordance with
sound business practice to establish and preserve their
ownership of all Material SMI Intellectual Property.
Without limiting the foregoing Sections 2.1(n)(i) through
(iii), none of the Company, SMI or La Loren, has received
notice of, nor, to the knowledge of SMI, has there been,
any infringement by others of any Material SMI Intellectual
Property or, to the knowledge of SMI, any facts, events or
circumstance which would give rise to an infringement. None
of SMI, the Company or La Loren has received notice of,
nor, to the knowledge of SMI, has there been, any claim by
any employee or consultant of SMI, the Company or La Loren
of any ownership right in Material SMI Intellectual
Property.
(v) Without limiting the foregoing Sections
2.1(n)(i) through (iv), to the knowledge of SMI, the
conduct of the Business does not infringe and, except as
described in Section 2.1(n)(v) of the Disclosure Schedules,
in the five-year period prior to the date hereof, has not
been alleged in writing to infringe any Intellectual
Property of any other person. No proceeding charging SMI,
the Company or La Loren with infringement of any
Intellectual Property of any other person are currently
pending, or to the knowledge of SMI, is threatened to be
filed. To the knowledge of SMI, there exists no unexpired
patent which includes claims that would be infringed by the
conduct of the Business or otherwise adversely affect the
Business. To the knowledge of SMI, the conduct of the
Business does not involve the unauthorized use of any
confidential information or trade secrets of any Person,
including without limitation any former employer of any
past or present employee of SMI, the Company or La Loren.
None of SMI, the Company or La Loren, or, to the knowledge
of SMI, any of their employees, has any agreements or
arrangements with any Person other than the Company related
to confidential information or trade secrets of such
persons or restricting any such employee's engagement in
business activities of any nature.
(vi) Except as set forth in Section 2.1(n) of
the Disclosure Schedules, to the knowledge of SMI, the
computer software included in the Intellectual Property
performs in all material respects in accordance with the
documentation and other written material used in connection
with the software and is free of material defects in
programming.
(o) Commitments.
(i) Except for contracts, plans, policies,
agreements and licenses and other Commitments described in
Section 2.1(o)(i) of the Disclosure Schedules (true and
complete copies of which have been delivered to Buyer),
neither SMI nor the Company is a party to and neither is
bound by or subject to, or has assets bound by or subject
to:
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(A) any employee benefit plan or
policy providing for
bonuses, pensions, options
or other equity-based
awards, stock purchases,
deferred compensation,
retirement payments,
severance, post-retirement
benefits or profit sharing;
(B) any employment contract, any
other contract for services
which requires the payment
of more than $100,000
annually or which is not
terminable within 30 days
without liability for any
penalty or severance
payment, or any collective
bargaining or like agreement
with any labor organization;
(C) any Commitment for the
purchase or sale of any real
or personal property,
commodity, material,
equipment or service except
purchase orders in the
ordinary course of business
in a manner consistent with
past practices and otherwise
consistent with the
representations, warranties,
covenants and terms of this
Agreement for less than
$100,000 each, such orders
not exceeding $500,000 in
the aggregate;
(D) any Commitment creating an
obligation of $100,000 or
more with respect to any
such Commitment;
(E) any Commitment providing for
the purchase or sale of a
stated portion of
requirements or outputs of a
particular product;
(F) any Commitment creating an
obligation of $50,000 or
more which by its terms does
not terminate or is not
terminable without penalty
upon sixty (60) days notice;
(G) any Commitment with any
sales agent, broker,
representative, independent
contractor or distributor,
excluding Commitments with
employees, for the
distribution of the
Company's products;
(H) any Commitment containing
covenants limiting the
freedom of SMI, the Company
or La Loren to compete in
any line of business, in any
geographical area, or with
any person or entity or to
disclose certain
information;
(I) any Commitment in respect of
licenses or Commitments
relating to Intellectual
Property (as licensor or
licensee) other than routine
software licenses to end
users entered into in the
ordinary course of business
in a manner consistent with
past practices and otherwise
consistent with the
representations,
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warranties, covenants and
terms of this Agreement, for
a total consideration not
exceeding $50,000 for any
one such license;
(J) any agreement involving a
lease, sublease, assignment,
license or other Commitment
pursuant to which SMI or the
Company has the right to use
any real or personal
property or is the lessor of
any real personal property
or any "capitalized" or
"financing" lease or which
grants any option or
preferential rights to
purchase any such personal
or real property;
(K) any indenture, mortgage,
promissory note, loan
agreement, guaranty, letter
of credit, bankers
acceptances or other
Commitment relating to the
borrowing of money and any
related security agreement;
(L) any Commitment with any
officer, employee, director,
or stockholder or with any
persons or organizations
Controlled by or Affiliated
with any of them;
(M) any Commitment providing for
the indemnification of other
Persons or the sharing of
the tax liability of others;
(N) any Commitment with any
Governmental Entity,
including Orders (as defined
in Section 10.11);
(O) any power of attorney;
(P) any Commitment or Order
relating to any Litigation;
(Q) any Commitment for the
construction, modification
or repair of any building,
structure or facility or for
the incurrence of any
capital expenditures or for
the acquisition of fixed
assets, in each case
providing for aggregate
payments in excess of
$50,000;
(R) any Commitment relating to
the acquisition by SMI or
the Company of any business
or the capital stock of any
other entity that has not
been consummated or that has
been consummated but contain
representations, covenants,
guaranties, indemnities or
other obligations that
remain in effect;
(S) any Commitment relating to
clean-up, abatement or other
actions in connection with
the remediation of any
conditions relating to
Hazardous Substances (as
defined in Section
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24
10.11) or to achieve
compliance with
Environmental Laws (as
defined in Section 10.11);
(T) any Commitment relating to
product promotion or coupon
redemption in any such case
which has an aggregate
future liability to any
party in excess of $10,000;
(U) any Commitment to purchase
or acquire advertising or
other product promotion or
brand support, other than
(A) spot orders purchased in
the ordinary course of
business in a manner
consistent with past
practices not exceeding
$50,000 or (B) involving, in
each case, Commitments by
SMI or the Company of less
than $25,000; or
(V) any Commitment currently in
negotiation by SMI or the
Company of a type which if
entered into would be
required to be listed on
Section 2.1(o)(i) of the
Disclosure Schedules or to
be disclosed on any other
Disclosure Schedule hereto.
(ii) Section 2.1(o)(ii) of the Disclosure
Schedules sets forth certain information concerning
purchase Commitments for the 1997 and 1998 Christmas
Holiday Seasons.
(iii) All Commitments to which either SMI or the
Company is a party, or to which SMI or the Company's assets
are subject, are valid and are in full force and effect and
constitute legal, valid and binding obligations of SMI and
the Company and, to the knowledge of SMI, the other parties
thereto, enforceable in accordance with their respective
terms, except as the enforceability thereof may be limited
by the effect of applicable bankruptcy, insolvency,
moratorium, reorganization or other similar laws affecting
creditors rights generally or by general principles of
equity regardless of whether asserted in equity or at law.
Neither SMI, the Company or La Loren (solely as to Section
2.1(o)(i)(I)) or, to the knowledge of SMI, any other party
to any Commitment to which either SMI or the Company is a
party, to which SMI or the Company's assets are subject or
to any Order applicable to the Business is in default in
complying with any provisions thereof, and no condition or
event or facts exist which, with notice, passage of time or
both would constitute a default, breach, violation, or give
rise to an Encumbrance or right of termination,
modification, cancellation, prepayment, suspension,
limitation, revocation or acceleration thereof on the part
of SMI, the Company, La Loren or, to the knowledge of SMI,
on the part of any other party thereto under, any
Commitment or Order listed on Section 2.1(o)(i) or
2.1(o)(ii) of the Disclosure Schedules, except for
breaches, violations and defaults, Encumbrances or rights
of termination, modification, cancellation, prepayment,
suspension, limitation, revocation or acceleration which,
individually or in the aggregate, would not have a Material
Adverse Effect. Complete copies (or if oral, a summary of
the material terms) of all Commitments or Orders required
to
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25
be listed in Section 2.1(o)(i) or 2.1(o)(ii) of the
Disclosure Schedules, including, without limitation, all
amendments and supplements thereto, and complete copies of
all standard form Commitments used by the Company in the
conduct of the Business, have been delivered to Buyer.
(p) Litigation . Section 2.1(p) of the Disclosure Schedules lists all
currently pending Litigation against, affecting or involving SMI, the Company or
La Loren or any of their respective rights or properties, or which seeks to
prevent or challenge the transactions contemplated hereby. Except for matters
described in Section 2.1(p) of the Disclosure Schedules, there is no Litigation
pending or, to the knowledge of SMI, threatened against, affecting or involving
SMI, the Company or La Loren or any of their respective rights or properties, or
which seeks to prevent or challenge the transactions contemplated hereby, which,
individually or in the aggregate, would have any Material Adverse Effect or
which could prevent or hinder the consummation of the transactions contemplated
by this Agreement. With respect to each matter set forth therein, Section 2.1(p)
of the Disclosure Schedules sets forth a description of the forums for the
matter, the parties thereto and the type and amount of relief sought.
(q) Permits; Compliance with Laws.
(i) Each of SMI and the Company has all
franchises, authorizations, approvals, orders, consents,
licenses, certificates, permits, registrations,
certificates, approvals, qualifications or other rights and
privileges (collectively "Permits") necessary to permit the
ownership of the properties involved therein and the
conduct of the Business as the same is presently conducted,
except to the extent that the absence of any such Permit,
individually or in the aggregate, would not have a Material
Adverse Effect. A listing of such Permits is set forth in
Section 2.1(q) of the Disclosure Schedules. All such
Permits are valid and in full force and effect, and SMI and
the Company are in compliance with their obligations under
such Permits, except to the extent the absence of any such
Permit or the failure to so be in compliance, individually
or in the aggregate, would not have a Material Adverse
Effect. Except as set forth in Section 2.1(q) of the
Disclosure Schedules, no Permit is subject to termination
or would be adversely affected as a result of the
performance of the obligations arising pursuant to the
Agreement or consummation of the transactions contemplated
hereby.
(ii) Except as set forth in Section 2.1(q) of the
Disclosure Schedules, to the knowledge of SMI, each of SMI,
the Company and La Loren is presently in compliance in all
respects, and during the past four years has been in
compliance, with all applicable Laws, except where the
failure to so comply, individually or in the aggregate,
would not have a Material Adverse Effect. Neither SMI nor
the Company has received notice of a violation or alleged
violation of any such Law. Neither SMI nor the Company has
entered into or been subject to any judgment, injunction,
ruling, consent decree, stipulation, compliance, order or
administrative order with respect to any Law or received
any request for information, notice, demand letter,
administrative inquiry or formal or informal complaint or
claim with respect to any Law.
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26
(r) Insurance . The physical properties and assets relating to the
Business are insured to the extent disclosed in Section 2.1(r) of the Disclosure
Schedules. Such insurance policies and arrangements are in full force and
effect, all premiums with respect thereto are currently paid, and each of SMI
and the Company is in compliance in all material respects with the terms
thereof. To the knowledge of SMI, such insurance is adequate and customary for
the Business and is sufficient for compliance with all requirements of law.
Except as disclosed in Section 2.1(r) of the Disclosure Schedules, the Company
or SMI may terminate each of its insurance policies or binders at or after the
date hereof and would incur no penalties or other costs in doing so. No notice
of cancellation or non-renewal of any such policies or binders has been received
by the Company or SMI, nor, to the knowledge of SMI, is any cancellation or
non-renewal threatened.
(s) Warranty and Related Matters. Except as disclosed in Section
2.1(s) of the Disclosure Schedules, there are no existing or, to the knowledge
of SMI, threatened product liability, warranty or other similar claims, against
SMI, the Company or La Loren for products or services which are defective or
fail to meet any product or service warranties which, individually or in the
aggregate, would have a Material Adverse Effect. Neither SMI, the Company, nor
La Loren has received any statements, citations or decisions or Orders by any
Governmental Entity stating that any product manufactured, sold, designed,
marketed or distributed at any time by SMI, the Company or La Loren
("Products"), is defective or unsafe or fails to meet any product warranty or
any standards promulgated by any such Governmental Entity. Except as set forth
on Section 2.1(s) of the Disclosure Schedules to the knowledge of SMI, there is
no (i) latent or overt design, manufacturing or other defect in any Product that
would be expected, individually or in the aggregate, to have a Material Adverse
Effect or (ii) material Liability for warranty claims or returns with respect to
any Product. None of the Products has been subject to recall. To the knowledge
of SMI, all Products sold by SMI, the Company or La Loren comply in all material
respects with all industry and trade association standards and legal standards
applicable to such Products, including, without limitation, consumer product,
manufacturing, labeling, quality, purity and safety Laws of the United States
and each state in which SMI, the Company or La Xxxxx xxxxx the Products and each
other jurisdiction (including foreign jurisdictions) in which SMI, the Company
or La Xxxxx xxxxx the Products. No claim has been asserted against SMI, the
Company or La Loren for renegotiation or price redetermination of any business
transaction, and, to the knowledge of SMI, there are no facts upon which any
such claim could be based. None of SMI, the Company or La Loren, makes or has
made any warranties, other than those, if any, arising by operation of law with
respect to the Products.
(t) Finder's Fees. None of the Sellers, SMI or the Company has
incurred or become liable for any broker's commission or finder's fee relating
to or in connection with the transactions contemplated by this Agreement or the
transactions contemplated hereby, except a fee payable to Xxxxxxx Xxxxx & Co.,
Inc., payment of which fee is the sole and exclusive responsibility of the
Sellers. Buyer has been provided with a true and correct copy of the engagement
letter with Xxxxxxx Xxxxx & Co., including, without limitation, all amendments
and supplements thereto.
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27
(u) Transactions with Interested Persons. Except as set forth in
Section 2.l(u) of the Disclosure Schedules and employment at will arrangements
which are terminable without payment or penalty by SMI or the Company, no
present, or to the knowledge of SMI, former supervisory employee, officer,
director, stockholder or independent contractor and no Affiliate of any such
Person, is currently a party to any transaction with SMI or the Company,
including, without limitation any Commitment or other arrangement providing for
the employment of, loan to or from, furnishing of services by or to, rental or
real or personal property to or from or otherwise requiring payments to any such
person, and to the knowledge of SMI, no such person owns directly or indirectly
on an individual or joint basis any material interest in, or serves as an
officer or director or in another similar capacity of, any competitor or
supplier of SMI or the Company or any organization which has a contract or
arrangement with SMI or the Company. Except as set forth in Section 2.1(u) of
the Disclosure Schedules, there are no Commitments to, and no income reflected
in the Financial Statements has been derived from, any affiliate of SMI or the
Company and neither the Company nor SMI has any obligation of any kind or
description to any such Affiliate. No present or, to the knowledge of SMI,
former employee, officer, director, stockholder or independent contractor of SMI
or the Company and no Affiliate of any such Person owns directly or indirectly
on an individual or joint basis any interest in, or serves as an officer or
director or in another similar capacity of L&N Packaging ("L&N"). The
Commitments between L&N or its Affiliates on the one hand, and SMI or the
Company or their Affiliates, on the other hand, were made on an arm's-length
basis.
(v) Employee Benefit Programs.
(i) Neither SMI, the Company nor La Loren maintains or contributes to
any employee benefit plan (as such term is defined in Section 3(3) of
the Employee Retirement Income Security Act of 1974, as amended
("ERISA")), compensation, stock option bonus or incentive plan,
severance pay policy or agreement, deferred compensation agreement,
or any similar plan, policy or agreement (an "Employee Benefit Plan")
other than the Employee Benefit Plans identified in Section 2.1(v) of
the Disclosure Schedules.
(A) The terms, establishment and
operation of each Employee Benefit Plan comply in
all material respects with its terms and all
applicable Laws and regulations relating to such
Employee Benefit Plans and any Employee Benefit
Plan that is a group health plan within the
meaning of Code Section 4980B(g)(2) meets the
requirements of Code Section 4980B(f).
(B) Each Employee Benefit Plan
intended to qualify under Section 401 of the Code
is, and since its inception has been, so
qualified and a determination letter has been
issued by the IRS to the effect that each such
Employee Benefit Plan is so qualified and that
each trust forming a part of any such Employee
Benefit Plan is exempt from tax pursuant to
Section 501(a) of the Code and no circumstances
exist which would adversely affect this
qualification or exemption. Each Employee Benefit
Plan can be amended, terminated or otherwise
discontinued without liability to
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SMI or the Company. SMI and the Company and each
of their Affiliates have made all payments
required by each Employee Benefit Plan, each
related trust, each collective bargaining
agreement or by law to be made to, or with
respect to, each Employee Benefit Plan. There are
no unfunded obligations of SMI, the Company or La
Loren under any retirement, pension, profit
sharing, deferred compensation plan or similar
program or any other Employee Benefit Plan.
Neither SMI nor the Company is required to make
any payments or contributions to any Employee
Benefit Plan pursuant to any collective
bargaining agreement or any applicable labor
relations law. Except as set forth in Section
2.1(v) of the Disclosure Schedules, none of SMI,
the Company or La Loren has ever maintained or
contributed to any Employee Benefit Plan
providing or promising any health or other
nonpension benefits to terminated employees
(including retired employees) or has ever
promised to provide such post-termination
benefits. There is no action, audit, suit or
claim, pending or, to the knowledge of SMI,
threatened, relating to any Employee Benefit Plan
or fiduciary of such Employee Benefit Plan or
assets of any such Employee Benefit Plan.
(ii) None of SMI, the Company, La Loren or any
ERISA Affiliate has ever (A) sponsored, maintained,
contributed to, or been required to contribute to, an
employee pension benefit plan (as defined under Section
3(2) of ERISA) which is subject to Title IV of ERISA or (B)
contributed to or been required to contribute to, or
incurred any withdrawal liability (within the meaning of
Section 4201 of ERISA) to any multiemployer plan (as
defined in Section 3(37) of ERISA). "ERISA Affiliate" means
each business or entity which is a member of a "controlled
group of corporations," under "common control" or an
"affiliated service group" with the Company within the
meaning of Sections 414(b), (c) or (m) of the Code, or
required to be aggregated with SMI, the Company or La Loren
under Section 414(o) of the Code, or is under "common
control" with SMI, the Company or La Loren, within the
meaning of Section 4001(a)(14) of ERISA.
(iii) The execution of, and performance of the
transactions contemplated in, this Agreement will not
(either alone or upon the occurrence of any additional or
subsequent events) (A) constitute an event under any
Employee Benefit Plan, trust or loan that will or may
result in any payment, acceleration, forgiveness of
indebtedness, vesting, distribution, increase in benefits
or obligation to fund benefits with respect to any
employee, (B) result in the triggering or imposition of any
restrictions or limitations on the right of SMI, the
Company or La Loren, or the Buyer to amend or terminate any
Employee Benefit Plan, or (C) result in any payment or
benefit, which will or may be made by SMI, the Company or
La Loren, the Buyer or any of their respective Affiliates
with respect to any employee, being characterized as an
"excess parachute payment," within the meaning of Section
280G(b)(1) of the Code.
(w) Environmental Matters.
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29
(i) Except as disclosed on Section 2.1(w) of the
Disclosure Schedules, and except for any of the following,
individually or in the aggregate, that would not result in
a Material Adverse Effect:
(A) SMI, the Company and La Loren have
been operated at all times, and are, in
compliance with applicable Environmental Laws and
have obtained, are in compliance with, and have
made all required filings for issuance or renewal
of, all permits, licenses, authorizations,
registrations and other governmental consents
required under any applicable Environmental Laws
("Environmental Permits"), and all such
Environmental Permits are in full force and
effect;
(B) there are no claims, notices,
civil, criminal or administrative actions, suits,
hearings, investigations, inquiries, proceedings
or any other Litigation pending or, to the
knowledge of SMI, threatened, against SMI, the
Company or La Loren that are based on or related
to any actual or alleged release of Hazardous
Substances or any actual or alleged violation
under Environmental Laws;
(C) there are no past or present
facts, conditions (including, without limitation,
releases of Hazardous Substances), actions or
omissions, in each case attributable to SMI, the
Company or La Loren, or, to the knowledge of SMI,
otherwise occurring or existing at or prior to
the Closing, that would (x) give rise to any
Liability or other obligation of SMI, the Company
or La Loren under any Environmental Laws, (y)
form the basis of any claim, action, suit,
proceeding, hearing, investigation, inquiry or
any other Litigation under any Environmental Laws
against SMI, the Company or La Loren, or (z)
interfere with or prevent continued compliance by
SMI or the Company with Environmental Laws or
Environmental Permits;
(D) SMI, the Company or BIB has
delivered to Buyer true and complete copies of
any reports, studies, analyses, tests, or
monitoring data possessed or initiated by any of
BIB, SMI, the Company or La Loren pertaining to
Hazardous Substances at, on, under or affecting
any real property currently or formerly owned,
leased or operated by SMI, the Company or La
Loren concerning compliance by SMI, the Company,
or La Loren or any other Person for whose conduct
any SMI, the Company or La Loren are or may be
held responsible, under Environmental Laws.
(x) Certain Suppliers. Section 2.1(x) of the
Disclosure Schedules sets forth a list of all suppliers to whom the Company, SMI
or La Loren made payments aggregating $100,000 or more during the fiscal year
ended December 31, 1997 showing, with respect to each, the name, address and
dollar volume involved (the "Suppliers"). Except as disclosed in Section 2.1(x)
of the Disclosure Schedules, (i) no Supplier has canceled or otherwise
terminated its relationship with SMI or the Company, (ii) during the last twelve
(12) months, the services, supplies or materials of any Supplier to SMI or the
Company has not decreased materially or (iii) no Supplier has given SMI or the
Company written notice of its intention to cancel or otherwise terminate its
relationship with SMI or the Company or decrease materially its services,
supplies or materials to SMI or the Company, nor, to the knowledge of SMI, has
any Supplier threatened to do so. Neither
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30
SMI nor the Company has received written notice that there will be any change in
the business relationships with any Supplier or the triggering of any right of
termination, cancellation or penalty or other payment in connection with, or as
a result of the transactions contemplated by this Agreement, which individually,
or in the aggregate, would have a Material Adverse Effect.
(y) Employees; Labor Matters. As of June 30, 1998, SMI and the
Company employed an aggregate of approximately 110 full-time employees. Neither
SMI nor the Company is delinquent in payments to any of its employees for any
wages, salaries, commissions, bonuses or other compensation for any services
performed for it to the date hereof or amounts required to be reimbursed to such
employees. Except as disclosed in Section 2.1(y) of the Disclosure Schedules,
neither SMI nor the Company has (i) any formal policy of paying any employee for
vacation or sick leave accrued at the time of termination or (ii) any policy,
practice, plan or program of paying severance pay or any form of severance
compensation in connection with the termination of employment or services. Each
of SMI and the Company is in compliance with all applicable Laws and regulations
respecting labor, employment (including Laws respecting discrimination, sexual
harassment and workers' compensation), fair employment practices, terms and
conditions of employment, wage withholding and wages and hours, except where
such non-compliance, individually or in the aggregate, would not result in a
material Liability to SMI or the Company. Except as disclosed in Section 2.1(y)
of the Disclosure Schedules, there are no charges of employment discrimination,
sexual harassment or unfair labor practices, nor are there any strikes,
slowdowns, stoppages of work, or any over concerted interference with normal
operations existing, pending or to the knowledge of SMI, threatened against or
involving the Business. No question concerning representation exists or, to the
knowledge of SMI, is threatened or asserted respecting the employees of SMI or
the Company. Except as disclosed in Section 2.1(y) of the Disclosure Schedules,
to the knowledge of SMI, there are no grievances, complaints or charges that
have been filed under any arbitration or other alternative dispute resolution
procedure (including, but not limited to, any proceedings under any dispute
resolution procedure under any collective bargaining agreement) or any other
Litigation relating to employment matters that individually or in the aggregate,
would result in a material Liability to SMI or the Company. No collective
bargaining agreement is in effect or is currently being negotiated with respect
to the Business. Each of SMI, the Company and La Loren is and at all times since
June 1, 1996 each of them has been, in compliance with the requirements of the
Immigration Reform Control Act of 1986, except where such non-compliance,
individually or in the aggregate, would not have a Material Adverse Effect. To
the knowledge of SMI, there are no changes pending or threatened with respect to
(including, without limitation, resignation of) the senior management of either
SMI or the Company nor has SMI or the Company received any notice concerning any
prospective change with respect to such senior management.
Section 2.1(y) of the Disclosure Schedules contains a list
of all managers, employees and consultants and independent contractors of SMI,
the Company or La Loren who, individually, have received or are scheduled as of
the date hereof and through the Closing Date to receive compensation or payments
for the fiscal years ended December 31, 1997 and ending December 31, 1998,
respectively, in excess of $100,000. In each case such Disclosure Schedule
includes the current job title and aggregate annual compensation of each such
Person.
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31
(z) Sales Representatives. Section 2.1(z) of the Disclosure
Schedules sets forth each sales representative, agent, broker, distributor of
SMI or the Company or other person who has received commissions or other
consideration in respect of the sale of any product of SMI, the Company or La
Loren from January 1, 1997 to the date hereof ("Sales Representatives"), and,
with respect to each Sales Representative (i) the commission rate and any other
consideration paid or payable with respect to such sales, and (ii) any
geographic territory or customer with respect to which such Sales Representative
held exclusive rights. Except as set forth in Section 2.1(z) of the Disclosure
Schedules, each Sales Representative listed therein was an independent
contractor and not an employee of SMI or the Company during the period in which
such Sales Representative generated the sales listed on therein. Except as set
forth in Section 2.1(z) of the Disclosure Schedule, any Commitment in effect on
the date hereof between any Sales Representative listed in Section 2.1(z) of the
Disclosure Schedules and SMI or the Company is terminable by SMI or the Company
upon no more than thirty (30) days notice, without any additional obligation by
SMI or the Company, except for commissions or payments earned but not yet paid
through the date of any such termination.
(aa) Customers, Distributors and Brokers. Section 2.1(aa) of the
Disclosure Schedules also sets forth each customer, distributor and/ or broker
of SMI or the Company who accounted for more than 2% of sales of SMI or the
Company for the twelve (12) months ended December 31, 1997 or of SMI or the
Company for the six (6) months ended June 30, 1998 (collectively, the
"Customers, Distributors and Brokers"). Except as disclosed in Section 2.1(aa)
of the Disclosure Schedules, no Customer, Distributor or Broker has canceled or
otherwise limited or terminated its relationship with the Company, or has during
the last twelve (12) months decreased materially its usage or purchases of the
services or products of the Business or given SMI or the Company notice stating
its intention to do so, or, to the knowledge of SMI, has any Customer,
Distributor or Broker threatened to do so. Except as set forth in Section
2.1(aa) of the Disclosure Schedules, no Customer, Distributor or Broker has, or
currently is, requiring the payment of any fees or other amounts, the return of
any portion of amounts due to SMI or the Company or any other arrangement
whereby SMI or the Company must compensate any Customer, Distributor or Broker
for displaying the products of the Business. Neither SMI nor the Company has
received any written notice that there will be any such change in relations with
any Customer, Distributor or Broker or the triggering of any right of
termination, cancellation or penalty or other payment in connection with, or as
a result of transactions contemplated by this Agreement, which, individually or
in the aggregate, would have a Material Adverse Effect.
(bb) Foreign Corrupt Practices Act. None of the Company, SMI, La
Loren or any of their respective officers or directors or, to SMI's knowledge,
any of the Sellers has at any time made or committed to make any payments for
illegal political contributions or made any bribes, kickback payments or other
illegal payments. None of the Company, SMI or La Loren, or, to SMI's knowledge,
any of the Sellers has offered or agreed to offer anything of value to any
governmental official political party or candidate for governmental office (or
any person that the Company, SMI or La Loren, to SMI's knowledge, any of the
Sellers knows or has reason to know, will offer anything of value to any
governmental official, political party or candidate for political office), such
that the Company, SMI or La Loren or, to SMI's knowledge, any of the Sellers has
violated the Foreign Corrupt Practices Act of 1977, as amended from time to
time, and all applicable rules and
-30-
32
regulations promulgated thereunder. There is not now nor has there ever been any
employment by the Company, SMI or La Loren, or, to the knowledge of SMI, any of
the Sellers of any governmental or political official in any country while such
official was in office.
(cc) Customs and Trade Regulation. Except as set forth in Section
2.1(cc) of the Disclosure Schedules:
(i) There is no dispute, audit, investigation,
inquiry or other Litigation pending or, to the knowledge of
SMI, threatened against SMI, the Company, La Loren or any
of their respective officers or directors with respect to
customs duties or other customs liabilities (including,
without limitation, fees, fines, penalties, forfeitures,
liquidated damages claims and notices of redelivery imposed
by or owed to the U.S. Customs Service) in regard of
merchandise imported by the Company, SMI or La Loren into
the United States or exported by the Company, SMI or La
Loren;
(ii) There is no dispute, audit, investigation,
inquiry or other Litigation pending or, to the knowledge of
SMI, threatened against, the Company, SMI or La Loren with
respect to the provision to overseas suppliers of
merchandise imported into the United States of "assists"
(within the meaning of 19 U.S.C. 1401a) or other property
or services the value of which was not declared in customs
entries;
(iii) None of the Company, SMI or La Loren has on
deposit or is depositing, any "antidumping" duty with
respect to merchandise imported by it into the United
States; and
(iv) To the knowledge of SMI, none of SMI, the
Company or La Loren has paid or is obligated to pay any
amounts in excess of bona fide selling price to any
unaffiliated third party with respect to any merchandise or
services purchased or sold by it.
2.2 Representations and Warranties of BIB and Parent. BIB and Parent
represents and warrants to Buyer as to the matters set forth in this Section
2.2. For purposes of this Agreement, references to the "knowledge of BIB and
Parent" shall be deemed to be the actual knowledge of Xxxxxx Xxxxxxx, Xxxxx
Xxxxxx and Xxxxx Xxxxxxx, after reasonable inquiry and after a review by such
individuals of this Agreement and the Disclosure Schedules and such individuals
shall not assume any personal liabilities or obligations by reason of the
foregoing.
(a) Organization and Qualification. Each of BIB and Parent is a
corporation duly organized, validly existing and in good standing under the laws
of its jurisdiction of incorporation with corporate power and authority to own
or lease its properties and to conduct its business in the manner and in the
places where such properties are owned or leased or such business is currently
conducted or proposed to be conducted.
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33
(b) Capital Stock. BIB is the beneficial and record owner of, and
has good and marketable title to, the Shares owned by it as set forth on
Schedule I. Except as set forth in Section 2.2(b) of the Disclosure Schedules,
all such Shares are owned free and clear of any Encumbrances, and there are no
outstanding options, warrants, rights, commitments, pre-emptive rights or
agreements of any kind for the issuance or sale of, or outstanding securities
convertible into, any additional shares of capital stock of SMI owned by BIB.
Except as set forth in Section 2.2(b) of the Disclosure Schedules, there are no
voting trusts, proxies or other Commitments with respect to the voting of the
Shares. At the Closing, BIB will deliver the Shares to Buyer free and clear of
any Encumbrances other than Encumbrances created by Buyer.
(c) Authority of BIB and Parent. Each of BIB and Parent has full
corporate power and authority to enter into this Agreement and each agreement,
document and instrument to be executed and delivered by it pursuant to this
Agreement and to carry out the transactions contemplated hereby and thereby. BIB
is duly authorized by irrevocable powers of attorney validly executed by the
Stockholders to execute this Agreement on their behalf and bind them to all of
the representations, warranties, covenants and terms of this Agreement relating
to the Stockholders. The execution, delivery and performance by each of BIB and
Parent of this Agreement and each such other agreement, document and instrument
have been duly authorized by all necessary action of the Board of Directors of
each of BIB and Parent and no other such action is required in connection
therewith. This Agreement and each such other agreement, document and instrument
executed and delivered by each of BIB and Parent pursuant to this Agreement,
upon execution and delivery, will constitute valid and binding obligations of
each of BIB and Parent enforceable in accordance with their respective terms,
except as the enforceability thereof may be limited by the effect of applicable
bankruptcy, insolvency, moratorium, reorganization or other similar laws
affecting creditors rights generally or by general principles of equity
regardless of whether asserted in equity or at law. The execution, delivery and
performance by each of BIB and Parent of this Agreement and each such agreement,
document and instrument contemplated by this Agreement to which either BIB or
Parent is a party:
(i) do not and will not violate any provision of the
charter or by-laws or other constitutive documents
of BIB, Parent or SMI or the Certificate of
Formation or the Amended and Restated Limited
Liability Company Operating Agreement of the
Company;
(ii) do not and will not violate any laws of the United
States, Bermuda or any state or other jurisdiction
applicable to BIB, SMI, Parent or the Company or
require BIB, SMI, Parent or the Company to obtain
any approval, consent or waiver of, or make any
filing with, any Person that has not been obtained
or made (provided, however, no representation is
being made with respect to the HSR Act); and
(iii) except as set forth in Section 2.2(c) of the
Disclosure Schedules, do not and will not result
in a breach of, constitute
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a default under, accelerate any obligation under,
or give rise to a right of termination of any
indenture or loan or credit agreement or any other
agreement, contract, instrument, mortgage, lien,
lease, Permit, authorization, order, writ,
judgment, injunction, decree, determination or
arbitration award, whether written or oral,
relating to BIB, Parent, SMI or the Company or by
which any property of BIB, Parent, SMI or the
Company is bound or affected, or result in the
creation or imposition of any mortgage, pledge,
lien, security interest or other charge or
Encumbrance on any asset of BIB, Parent, SMI or
the Company.
(d) Litigation. There is no Litigation or governmental or
administrative proceeding or investigation pending or, to the knowledge of BIB,
threatened which could prevent or hinder the consummation of the transactions
contemplated by this Agreement.
2.3 Representations and Warranties of the Stockholders and The Xxxxxx
Trust. Each of the Stockholders and The Xxxxxx Trust, severally and not
jointly, represents and warrants to Buyer as to the matters set forth in this
Section 2.3. For purposes of this Agreement, references to the "knowledge of
each Stockholder and/or The Xxxxxx Trust" shall be deemed to be (i) in the case
of Stockholders who are individuals, the actual knowledge of each such
Stockholder after reasonable inquiry and after review of this Agreement and the
Disclosure Schedules, and such individuals shall not assume any personal
liabilities or obligations by reason of the foregoing, (ii) in the case of
Stockholders who are not individuals, the actual knowledge of any general
partner, manager, officer or director of such Stockholders, after reasonable
inquiry and after a review of this Agreement and the Disclosure Schedules and
such individuals shall not assume any personal liabilities or obligations by
reason of the foregoing, and (iii) in the case of The Xxxxxx Trust, the actual
knowledge of Xxxx Xxxxxx, Xxxxx Xxxxxx and Xxxxxxx Xxxxxx, after reasonable
inquiry and after a review of this Agreement and the Disclosure Schedules, but
without any other obligations of inquiry on the part of such individuals and
such individuals shall not assume any personal liabilities or obligations by
reason of the foregoing.
(a) Organization and Qualification. Each of the Stockholders that is
a corporation, is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation. Xxxxx Xxxxxx and
Xxxxxxx Xxxxxx are the currently acting trustees of The Xxxxxx Trust, a trust
duly organized and validly existing and governed by the laws of the Commonwealth
of Massachusetts. Each of the Stockholders that is a partnership, is a
partnership duly organized and validly existing and in good standing under the
laws of its jurisdiction of organization.
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(b) Capital Stock. Each of the Stockholders is the beneficial and
record owner of, and has good and marketable title to, the Shares owned by it as
set forth in Schedule I. The Xxxxxx Trust is the beneficial and record owner of,
and has good and marketable title to, 200,000 Class B Units of the Company.
Except as set forth in Section 2.3(b) of the Disclosure Schedules, all such
Shares and Class B Units are owned, or will be at Closing owned, free and clear
of any and all Encumbrances, and there are no, and will be at Closing no,
outstanding options, warrants, rights, commitments, pre-emptive rights or
agreements of any kind for the issuance or sale of, or outstanding securities
convertible into, any additional shares of capital stock of SMI or Units of the
Company owned by such Stockholder or The Xxxxxx Trust. Except as set forth in
Section 2.3(b) of the Disclosure Schedules, there are no voting trusts, proxies
or other Commitments with respect to the voting of the Shares or the Class B
Units of the Company. At the Closing, the Stockholders and The Xxxxxx Trust will
deliver the Shares and Class B Units to Buyer free and clear of any Encumbrances
other than Encumbrances created by Buyer.
(c) Authority of Stockholders and The Xxxxxx Trust. Each of the
Stockholders and The Xxxxxx Trust has the full power and authority to enter into
this Agreement and each agreement, document and instrument to be executed and
delivered by each Stockholder or The Xxxxxx Trust, as the case may be. BIB is
duly authorized by irrevocable powers of attorney validly executed by the
Stockholders to execute this Agreement on their behalf and bind them to all of
the representations, warranties, covenants and terms of this Agreement relating
to the Stockholders. The execution, delivery and performance by each Stockholder
and The Xxxxxx Trust of this Agreement and each such other agreement, document
and instrument have been duly authorized by all necessary corporate, partnership
or other action of each Stockholder and The Xxxxxx Trust, as the case may be,
and no other such action is required in connection therewith. This Agreement and
each agreement, document and instrument executed and delivered by each
Stockholder or The Xxxxxx Trust, as the case may be, will, upon execution and
delivery, constitute valid and binding obligations of each Stockholder or The
Xxxxxx Trust, as the case may be, enforceable in accordance with their
respective terms, except as the enforceability thereof may be limited by the
effect of applicable bankruptcy, insolvency, moratorium, reorganization or other
similar laws affecting creditors rights generally or by general principles of
equity regardless of whether asserted in equity or at law. The execution,
delivery and performance by each Stockholder or The Xxxxxx Trust of this
Agreement and each such agreement, document and instrument contemplated by this
Agreement to which each Stockholder or The Xxxxxx Trust is a party:
(i) do not and will not violate any provision of the
charter, by-laws, partnership agreement, Trust
Agreement or other constitutive documents of each
Stockholder that is not an individual or the
certificate of incorporation or by-laws of SMI or
the Certificate of Formation or Amended and
Restated Limited Liability Company Operating
Agreement of the Company;
(ii) do not and will not violate any laws of the United
States or any state or other jurisdiction
applicable to The Xxxxxx Trust, each Stockholder,
SMI or the Company or require The
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Xxxxxx Trust, such Stockholder, SMI or the Company
to obtain any approval, consent or waiver of, or
make any filing with, any Person that has not been
obtained or made (provided, however, no
representation is being made with respect to the
HSR Act); and
(iii) except as set forth in Section 2.3(c) of the
Disclosure Schedules, do not and will not result
in a breach of, constitute a default under,
accelerate any obligation under, or give rise to a
right of termination of any indenture or loan or
credit agreement or any other agreement, contract,
instrument, mortgage, lien, lease, permit,
authorization, order, writ, judgment, injunction,
decree, determination or arbitration award,
whether written or oral, by which any property of
The Xxxxxx Trust, such Stockholder, SMI or the
Company is bound or affected, or result in the
creation or imposition of any mortgage, pledge,
lien, security interest or other charge or
Encumbrance on any asset of The Xxxxxx Trust, such
Stockholder, SMI or the Company.
(d) Litigation. There is no Litigation or governmental or
administrative proceeding or investigation pending or, to the knowledge of each
Stockholder and/or The Xxxxxx Trust, threatened which could prevent or hinder
the consummation of the transactions contemplated by this Agreement.
(e) Spousal Status. Each Stockholder represents and warrants that:
(i) such Stockholder's spouse, if any, does not have any interest in the Shares
or (ii) if such Stockholder's spouse, if any, does have an interest in the
Shares, the spouse of such Stockholder has executed a spousal consent, a true
and correct copy of which is attached hereto as Section 2.3(e) of the Disclosure
Schedules.
ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF BUYER.
3.1 Representations and Warranties of Buyer. Buyer hereby represents
and warrants to each Seller as to the matters set forth in this Section 3.1.
(a) Organization of Buyer. Buyer is a corporation duly organized,
validly existing and in good standing under the laws of Delaware with full
corporate power and authority to own or lease its properties and to conduct its
business in the manner and in the places where such properties are owned or
leased or such business is conducted by it.
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(b) Authority of Buyer. Buyer has full corporate power and
authority to enter into this Agreement and each agreement, document and
instrument to be executed and delivered by Buyer pursuant to this Agreement and
to carry out the transactions contemplated hereby and thereby. The execution,
delivery and performance by Buyer of this Agreement and each such agreement,
document and instrument have been duly authorized by all necessary corporate
action of Buyer and no other action on the part of Buyer is required in
connection therewith. This Agreement and each such agreement, document and
instrument executed and delivered by Buyer, pursuant to this Agreement will,
upon execution and delivery, constitute valid and binding obligations of Buyer
enforceable in accordance with their terms, except as the enforceability hereof
may be limited by the effect of applicable bankruptcy, insolvency, moratorium,
reorganization or other similar laws affecting creditors rights generally or by
general principles of equity regardless of whether asserted in equity or law.
The execution, delivery and performance by Buyer of this Agreement and each such
agreement, document and instrument:
(i) do not and will not violate any provision of the
Certificate of Incorporation or by-laws of Buyer;
(ii) do not and will not violate any laws of the United
States or any state or other jurisdiction applicable
to Buyer or require Buyer to obtain any approval,
consent or waiver of, or make any filing with, any
Person which has not been obtained or made (provided,
however, no representation is being made with respect
to the HSR Act); and
(iii) do not and will not result in a breach of,
constitute a default under, accelerate any
obligation under, or give rise to a right of
termination of any indenture, loan or credit
agreement or other agreement mortgage, lease,
permit, order, judgment or decree to which Buyer
is a party or by which the property of Buyer
is bound or affected.
(c) Litigation. There is no Litigation pending or, to the knowledge of
Buyer, threatened against Buyer which would prevent or hinder the consummation
of the transactions contemplated by this Agreement.
(d) Finder's Fees. Buyer has not incurred or become liable for any
broker's commission or finder's fee for which Sellers will be responsible
relating to or in connection with the transactions contemplated by this
Agreement to which Buyer is a party.
(e) Investment Purpose. Buyer is buying the Shares for investment only
and not with a view to resale in connection with any distribution thereof,
except in compliance with the Securities Act of 1933, as amended (the
"Securities Act"), and all other applicable securities laws. Buyer is an
"accredited investor" within the meaning of the Securities Act.
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(f) Financing. On the Closing Date, Buyer will have sufficient funds
necessary to consummate the transactions contemplated by this Agreement.
ARTICLE 4. SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
All representations and warranties herein or in any schedule, exhibit,
certificate or document delivered by any party to the other party pursuant to
this Agreement shall survive for a period of twelve (12) months after the
Closing regardless of any investigation except that:
(a) the representations set forth in Sections 2.1(h), 2.1(v)
and 2.1(w) shall survive the Closing Date until three (3) months after the
expiration of the applicable statute of limitations (including any extensions
thereof);
(b) the representations and warranties set forth in Sections
2.1(b), 2.1(c), 2.1(d), 2.2(b), 2.2(c), 2.3(b), 2.3(c) and 2.3(e) of this
Agreement shall survive indefinitely; and
(c) the covenants, obligations and agreements of the parties
in this Agreement shall survive until performed or otherwise discharged in
accordance with their terms.
ARTICLE 5. COVENANTS OF THE PARTIES.
The parties hereby covenant and agree as follows:
5.1 No Solicitation. From the date of this Agreement until the Closing
or earlier termination of this Agreement, other than in connection with the
transactions contemplated hereby, none of the Sellers, the Company or SMI shall
solicit, propose or facilitate (including, without limitation, by way of
providing information regarding the Business, SMI or the Company to any Person
other than in the ordinary course of the Business in a manner consistent with
past practice), directly or indirectly, any inquiries, discussions or proposals
for, continue or enter into negotiations looking toward, or enter into or
consummate any agreement or understanding in connection with any proposal
regarding any purchase or other acquisition of all or any portion of the
Business (other than the ordinary course of the Business sale of inventory or
replacement of assets), SMI, the Company or any of the equity securities
(whether newly issued or currently outstanding) of SMI, the Company, or any
merger, business combination or recapitalization involving the Business, SMI or
the Company, each of the Sellers will use their commercially reasonable efforts
to cause SMI and the Company's officers, directors, representatives, agents and
Affiliates to refrain from any of the above.
5.2 Conduct of Business Pending Closing. From the date hereof until
the Closing Date, BIB shall cause, and the other Sellers shall use their
commercially reasonable efforts to cause, SMI and the Company to:
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(a) maintain their existence in good standing;
(b) maintain the general character of the Business and conduct
the Business in the ordinary course of business consistent with past practices
subject to seasonal fluctuations, general economic conditions and variations in
customer order levels;
(c) maintain proper business and accounting records consistent
with past practices;
(d) maintain the properties relating to the Business in
substantially the same repair and condition, as on the date of this Agreement,
subject to normal wear and use;
(e) maintain the Goodwill and ongoing operations of the
Business;
(f) maintain the current relationships of the Company and SMI
with their customers, suppliers, distributors, agents, officers and employees
and other Persons with which the Company or SMI has business relationships;
(g) maintain all of the assets (including, without limitation,
the inventory) owned or used by the Business in the ordinary course of business
consistent with past practice;
(h) maintain insurance in full force and effect with respect
to the Business with responsible companies, comparable in amount, scope and
coverage to that in effect on the date of this Agreement;
(i) perform and comply in all material respects with their
obligations under the Commitments; and
(j) use commercially reasonable efforts to preserve the
Business intact consistent with past practices.
5.3 Prohibited Actions Pending Closing. Unless otherwise provided for
herein or approved by Buyer in writing, from the date hereof until the Closing
Date, BIB shall cause, and the other Sellers shall use their commercially
reasonable efforts to cause, SMI and the Company not to:
(a) amend or otherwise change their respective Certificates of
Incorporation, By-Laws, Certificate of Formation or Amended and Restated Limited
Liability Company Operating Agreement;
(b) repurchase, redeem or otherwise acquire or exchange any
shares of their capital stock, membership interests, or any other of their
securities or equity interests;
(c) issue or sell or authorize for issuance or sale, or grant
any options or make other agreements with respect to, any shares of their
capital stock, membership interests, or any other of their securities or equity
interests;
(d) declare, set aside, make or pay any dividend or other
distribution (whether in cash, stock or property or any combination thereof);
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(e) other than under the Xxxxxx Indebtedness pursuant to the
terms thereof as in effect on the date hereof, issue any debt securities or make
any loans, advances or capital contributions to, or investments in any Person;
(f) authorize or incur any additional debt for money borrowed
other than in the ordinary course of business consistent with past practices;
(g) mortgage, pledge or subject to lien or other Encumbrance
any of their material properties or agree to do so, except for liens set forth
in Section 5.3(g) of the Disclosure Schedules;
(h) enter into or agree to enter into any material Commitment
other than in the ordinary course of business;
(i) enter into or adopt or amend any existing Commitment
relating to severance, enter into or adopt or amend any existing severance plan,
enter into or adopt or amend any employment agreement or employee plan
(including, without limitation, the plans, programs, agreements and arrangements
referred to in Section 2.1(v)) or increase or agree to increase, the
compensation of any of their officers, directors or employees (other than
scheduled increases in salary in the ordinary course of business consistent with
past practices), by means of salary increase, bonus or otherwise;
(j) sell, assign, transfer, lease or otherwise dispose of, or
agree to sell or dispose of, any of their material assets or properties (other
than the sale and replacement of inventory in the ordinary course of business in
a manner consistent with past practices at customary gross margins and except
for assets replaced by other assets of comparable value and for comparable use);
(k) amend or terminate any lease, contact, undertaking or
other Commitment listed in any Disclosure Schedules to which any of them is a
party, or to take action or fail to take any action, constituting any event of
material default thereunder;
(l) assume, guarantee or otherwise become responsible for the
obligations of any other Person or agree to so do except in the ordinary course
of business consistent with past practices;
(m) acquire (by merger, consolidation or acquisition of stock)
any Person or substantially all of, or any material portion of, the assets of
any Person;
(n) change any method of accounting or accounting practice
used by the Company or SMI, other than such changes required by U.S. GAAP and
changes of tax accounting methods to the extent the Code requires conformity of
financial and tax accounting methods;
(o) make, revoke or change any Tax election, compromise or
settle any federal, state, local, foreign or other Tax liability or make any
payment under any Tax sharing, allocation or indemnity agreement;
(p) accelerate or delay the purchase of raw materials, the
manufacture, shipment or sale of inventory (including, but not limited to, any
delay in the manufacture of inventory
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necessary for sales expected to be made by SMI or the Company in the fourth
fiscal quarter of 1998), the collection of accounts or notes receivable or the
payment of bank indebtedness (including, but not limited to, the Xxxxxx
Indebtedness), accounts or notes payable or accrued liabilities or expenses or
otherwise operate the Business, in each case, in a manner that would be outside
the ordinary course of business or inconsistent with past practices;
(q) except as set forth in Section 5.3(q) of the Disclosure
Schedules engage in any transaction with any of the Sellers or any of their
Affiliates;
(r) allow the lapse of any of the rights of ownership of
Intellectual Property of SMI, the Company or La Loren or use by a third party of
any Intellectual Property which are necessary for the Company or SMI to conduct
the Business;
(s) make any sales of Products with payment terms, discounts,
promotional incentives, shipment or other terms more favorable to customers than
customarily offered to such customers for products of the Business;
(t) take any action prior to the Closing Date which would
breach any of the representations, warranties or covenants contained in this
Agreement;
(u) sell any Product which includes significantly different
decorative labeling or decorative cartons that have not been previously used by
SMI or the Company, other than the Company's new aromatherapy product line;
(v) except as contemplated regarding prepayment penalties in
Section 6.18, request Dilmun or Xxxxxx or any of their respective Affiliates to
waive, forfeit, forgive or otherwise discharge any obligations owed to Dilmun or
Xxxxxx;
(w) agree to take any of the actions specified in this Section
5.3.
5.4 Notices of Certain Events.
(a) Notice by Sellers. The applicable Seller shall promptly
notify Buyer of:
(i) any notice or other communication of which such
Seller has knowledge from any Person (other than as set forth
in Section 2.2(c) or 2.3(c) of the Disclosure Schedules)
alleging that the consent of such Person is or may be required
in connection with the transactions contemplated by this
Agreement;
(ii) any notice or other communication of which such
Seller has knowledge from any Governmental Entity in
connection with the transactions contemplated by this
Agreement;
(iii) any actions, suits, charges, complaints,
claims, investigations or proceedings commenced or, to the
knowledge of SMI, BIB, the Stockholders and/ or The Xxxxxx
Trust, threatened against, relating to, involving or otherwise
affecting, the Business or which relate to the consummation of
the transactions contemplated by this Agreement;
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(iv) any event, condition or circumstance which,
individually or in the aggregate, would be reasonably likely
to result in a Material Adverse Effect including, without
limitation, any variance in customer order levels which,
individually, or, in the aggregate, would be reasonably likely
to result in a Material Adverse Effect (other than seasonal
fluctuations or general economic conditions), or which would
impair such Seller's ability to perform its obligations under
this Agreement
(v) any failure of any Seller, the Company or SMI to
comply with or satisfy any covenant, condition or agreement to
be complied with or satisfied by it under this Agreement, or
any exhibit or schedule hereto.
(b) Buyer's Notice. Buyer shall promptly notify the
Representative of:
(i) any notice or other communication of which Buyer
has knowledge from any Person alleging that the consent of
such Person is or may be required in connection with the
transactions contemplated by this Agreement;
(ii) any notice or other communication of which Buyer
has knowledge from any Governmental Entity in connection with
the transactions contemplated by this Agreement;
(iii) any actions, suits, charges, complaints,
claims, investigations or proceedings commenced or, to Buyer's
knowledge, threatened against, relating to, involving or
otherwise affecting, Buyer which relate to the consummation of
the transactions contemplated by this Agreement; or
(iv) any event, condition or circumstance which is
reasonably likely to have, or does have, the effect of
materially impairing the ability of Buyer to consummate the
transactions contemplated by this Agreement; or
(v) any failure of Buyer to comply with or satisfy
any covenant, condition or agreement to be complied with or
satisfied by it under this Agreement, or any exhibit or
schedule hereto or thereto.
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5.5 Company Access; Independent Investigation. Prior to the Closing
Date, Buyer shall be entitled, through its employees and representatives, to
gain access to the assets, properties, business and operations of SMI, the
Company and La Loren, and such examination of the books, records and financial
condition of SMI and the Company as Buyer requests upon reasonable notice to the
Representative. Any such access shall be at reasonable times and under
reasonable circumstances, and the Representative shall cause SMI and the Company
to cooperate fully therein. Any and all information or documents obtained by
Buyer from SMI and the Company, concerning their respective assets, properties,
businesses and operations pursuant to this Section 5.5 shall at all times be
subject to the confidentiality provisions set forth in Section 5.9 hereof. If
this Agreement terminates, any documents obtained from SMI and the Company or
otherwise in Buyer's possession or under Buyer's control shall be promptly
returned to the Representative upon written request. Buyer acknowledges and
agrees that Buyer has made its own inquiry and investigation into, and, based
thereon and upon representations and warranties of the Sellers in this
Agreement, will have formed an independent judgment concerning the Shares, SMI
and the Company. Nothing in the immediately preceding sentence shall limit in
any manner whatsoever Buyer's rights to rely on or seek indemnification for
breach of any of the representations, warranties, covenants or terms in this
Agreement.
5.6 Consent to Jurisdiction and Service of Process. Any legal action,
suit or proceeding arising out of or relating to this Agreement or the
transactions contemplated hereby may be instituted in any state or federal court
location in New York County, State of New York, and each party agrees not to
assert, by way of motion, as a defense, or otherwise, in any such action, suit
or proceeding, any claim that it is not subject personally to the jurisdiction
of such court, that its property is exempt or immune from attachment or
execution, that the action, suit or proceeding is brought in an inconvenient
forum, that the venue of the action, suit or proceeding is improper or that this
Agreement or the subject matter hereof may not be enforced in or by such court,
and hereby waives any offsets or counterclaims in any such action, suit or
proceeding. Each party further irrevocably submits to the jurisdiction of any
such court in any such action, suit or proceeding. Any and all service of
process and any other notice in any such action, suit or proceeding shall be
effective against any party if given in accordance with Section 10.3 hereof.
Nothing herein contained shall be deemed to affect the right of any party to
serve process in any manner permitted by law. No party to this Agreement or any
of its Affiliates shall be entitled to commence legal proceedings or otherwise
proceed against any other party in any jurisdiction other than New York. Each
party agrees not to challenge in any way, under the laws of any jurisdiction or
country, anywhere in the world, the enforceability of, or execution on, a
judgment (no longer subject to direct appeal or certiorari proceeding) entered
in or as a result of any legal action, suit or proceeding arising out of or
relating to this Agreement.
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5.7 Expenses. The Sellers, Parent, SMI and the Company, on the one
hand, and Buyer, on the other hand, shall bear their respective expenses
incurred in connection with the preparation, execution and performance of this
Agreement and the transactions contemplated hereby, including, without
limitation, all fees and expenses of agents, representatives, counsel and
accountants. The Sellers shall bear sole responsibility for any expenses of the
Company, SMI or any Affiliate of any Seller with respect to this Agreement and
the transactions contemplated hereby, including, without limitation, fees and
expenses of the financial consultants, advisors, brokers, accountants and
counsel of Sellers, Parent, SMI and the Company, regardless of whether such
expenses are payable prior to, on, at or after the Closing.
5.8 Equity. Prior to the Closing, none of the Sellers, the Company or
SMI shall sell, transfer, pledge or otherwise encumber any of the Shares or
Units or grant any option, warrant or other right to acquire any of the Shares
or Units, or enter into any agreement to take any of the foregoing actions.
5.9 Confidentiality. The terms of the letter agreement dated as of
October 15, 1997 (the "Confidentiality Agreement") between SMI and Buyer are
hereby incorporated by reference and shall continue in full force and effect and
be binding on all parties to this Agreement until the Closing, at which time
such Confidentiality Agreement and the obligations of Buyer, SMI, the Company
and Sellers under this Section 5.9 shall terminate; provided, however, that the
Confidentiality Agreement shall terminate only in respect of that portion of the
Confidential Information (as defined in the Confidentiality Agreement)
exclusively relating to the transactions contemplated by this Agreement. If this
Agreement is, for any reason, terminated prior to the Closing, the
Confidentiality Agreement and this Section 5.9 shall continue in full force and
effect in respect of such Information.
5.10 Regulatory and Other Authorizations; Consents. Each party hereto
will use its commercially reasonable efforts to obtain all authorizations,
consents, orders and approvals of all Government Entities that may be or become
necessary for its execution and delivery of, and the performance of its
obligations pursuant to, this Agreement and will cooperate fully with the other
parties hereto in promptly seeking to obtain all such, authorizations, consents,
orders and approvals. Each party hereto agrees to make an appropriate filing of
a Notification and Report Form pursuant to the HSR Act with respect to the
transactions contemplated hereby as promptly as practicable; provided however,
that nothing herein shall require Buyer to divest, sell or hold separate any of
its assets or properties, or require that Buyer take any action that could
affect the normal and regular operations of Buyer, SMI or the Company after
Closing. The parties hereto will not take any action that will have the effect
of delaying, impairing or impeding the receipt of any required approvals. Each
Seller and Buyer will use commercially reasonable efforts to assist each other
in obtaining the consents of those parties referred to in Sections 2.2(c) and
2.3(c) of the Disclosure Schedules.
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5.11 Further Assurances. From and after the Closing, each Seller, on
the one hand, and Buyer, on the other, agree to execute and deliver such further
documents and instruments and to do such other acts and things as Buyer or the
Representative, as the case may be, may reasonably request in order to
effectuate the transactions contemplated by this Agreement. Nothing herein shall
require Buyer to divest, sell or hold separate any of its assets or properties,
nor require that Buyer take any action that could affect the normal and regular
operations of Buyer, SMI or the Company after Closing
5.12 Press Release. None of the Sellers, the Company, SMI or Buyer
shall issue any press release or otherwise make public any information with
respect to this Agreement or the transactions contemplated hereby, prior to the
Closing Date, without the prior written consent of Buyer on the one hand, and
the Representative on the other hand. Each Seller hereby acknowledges that Buyer
intends to issue a press release on the date hereof, announcing the transactions
contemplated by this Agreement and each Seller hereby consents to the issuance
of such press release by Buyer. Each Seller also acknowledges that Buyer intends
to disclose the terms of the transactions contemplated by this Agreement to
securities analysts who cover Buyer, who report on Buyer, or both, and in
filings to be made by Buyer with the Securities and Exchange Commission, and
each Seller hereby consents to such disclosure.
5.13 Payments. Each of the Sellers shall promptly deliver to Buyer any
moneys, checks or other instruments of payment relating to the Business which
may be received by any Sellers after the Closing Date.
5.14 Tax Matters.
(a) Responsibility for Taxes.
(i) Parent and BIB shall, jointly and severally,
bear, and shall indemnify and hold harmless the Buyer Indemnified
Parties (as defined in Section 8.1 hereof) from and against (A) any
Losses (as defined in Section 8.1) with respect to all Taxes of SMI,
the Company and La Loren for any taxable period (or portion of a
taxable period) ending on or before the Closing Date, including,
without limitation, any liability which SMI, the Company or La Loren
owes under a transferee liability, successor liability, or related
theory; (B) any Losses (without duplication of clause C below) arising
as a result of the failure of the net operating losses of SMI and the
Company as of the Closing Date to be at least equal to the amount of
net operating losses taken into account in computing the amount of any
deferred tax asset on the Final Closing Balance Sheet; and (C) any
Losses arising as a result of a breach of the representation in Section
2.1(h)(ii)(M). For purposes of the indemnification under Section
5.14(a)(i)(A) and (B), the amount of any Loss resulting from a decrease
in the tax basis of any category of assets addressed by the
representation in Section 2.1(h)(ii)(M) shall be reduced (without
duplication) by the present value of any correlative future tax
benefits to SMI, the Company or their respective successors, determined
under the principles applicable to indemnification under Section
5.14(a)(i)(C). For purposes of indemnification under Section
5.14(a)(i)(C), (i) the amount of Loss resulting from a breach of the
representation of Section 2.1(h)(ii)(M) shall be reduced (without
duplication) by the present value, to the taxable period to which such
Loss relates (i.e., the taxable period with respect
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to which the shift in depreciable tax basis referred to herein results
in an increased liability for Tax), of the benefit in future periods
from the depreciation shifted from the taxable period of the Loss to
such future taxable periods, (ii) depreciation shifted from a taxable
period shall be considered shifted on a FIFO basis to future taxable
periods in which there is an excess of Revised Depreciation (as defined
below) over Assumed Depreciation (as defined below) and (iii) the
present values referred to in clause (i) shall be computed assuming an
effective tax rate of 37% (35% federal and an effective 2% state tax
rate) and using a discount rate of the Reference Rate on the last day
of the taxable period to which the Loss relates. For this purpose the
amount of depreciation shifted from or to any taxable period shall be
determined by comparing the Assumed Depreciation to the Revised
Depreciation for such taxable period. Notwithstanding anything to the
contrary in this Agreement (i) if upon the expiration of 5 years from
the Closing Date neither the IRS nor any other taxing authority has
made any written assertion or threat (in the form of a notice of
deficiency, 30 day letter, revenue agent's report, proposed audit
adjustment, IDR or other written notification) that would, if
sustained, result in a breach of the representation in Section
2.1(h)(ii)(M) involving a shift of a material amount of tax basis from
one category of assets listed on Schedule 2.1(h)(ii)(M) to another
category (whether listed or unlisted) (it being understood that a shift
of 10% or more of the amount of basis with respect to any asset in such
category shall be deemed material), which assertion or threat has not
theretofore been withdrawn or otherwise favorably resolved in favor of
the taxpayer, then Parent's and BIB's obligation to make indemnity
payments from Losses resulting from a breach of this representation
shall cease, but (ii) if the IRS or other taxing authority has made
such a written assertion or threat, BIB and Parent shall remain liable
for all Losses resulting from a breach of this representation,
regardless of whether such Losses relate to periods covered by the
assertion, including all past, present and future periods for which the
statute of limitations has not run. The Assumed Depreciation for any
period shall equal the total amount of amortization and depreciation
deductions for such taxable period allowable for federal and/or state
income tax purposes (as appropriate) with respect to the assets of the
Company calculated using the same basis, useful life and other methods
and conventions for calculating amortization and depreciation as were
used in the federal income Tax Returns of the Company for the period
ended December 31, 1997, prepared in a manner consistent with the
representation in Section 2.1(h)(ii)(M) herein. The Revised
Depreciation for a taxable period shall equal the total amount of
amortization and depreciation deductions allowable for such taxable
period as determined by the IRS and/or applicable state taxing
authority or pursuant to a judicial proceeding (as appropriate),
including any changes to the basis, useful life and other depreciation
methods or conventions (other than changes based on statutory changes
after the Closing). The provisions of this Section 5.14 shall govern
all claims with respect to the breach of the representation in Section
2.1(h)(ii)(M) herein.
(ii) For purposes of making computations with respect
to taxable periods beginning prior to and ending subsequent to the
Closing Date, the portion of such Taxes allocable to the taxable period
up to and including the Closing Date shall be determined using the same
methodologies as are applied for purposes of preparing the Final
Closing Balance Sheet, it being understood that income taxes will be
allocated as if the taxable year of SMI and the Company ended at the
close of business on the Closing Date.
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(iii) The obligation of Parent and BIB to indemnify
Buyer Indemnified Parties (including the Company and SMI after the
Closing) for any Tax under this Section shall apply only to the extent
the Losses incurred with respect to any such Tax exceed the reserves
and accrued current liabilities for any such Tax on the Final Closing
Balance Sheet.
(iv) The Buyer shall be liable for, shall pay and
indemnify and hold Seller Indemnified Parties harmless against (i) any
and all Losses with respect to Taxes of SMI and the Company for any
taxable period or portion thereof after the Closing Date (except for
any such Losses arising with respect to a breach of any representation
in Section 2.1(h) herein or any covenant in Section 5.14 herein); and
(ii) any Losses with respect to Taxes of SMI and the Company not
incurred in the ordinary course of business attributable to the acts of
the Buyer, SMI or the Company occurring on the Closing Date but after
the Closing.
(b) Tax Returns. (1) BIB shall prepare and cause SMI and the Company
to timely file all Tax Returns and pay all Taxes shown as due thereon of SMI or
the Company required to be filed on or prior to the Closing Date. (2) BIB shall
be responsible for the preparation of all income and franchise Tax Returns of
SMI and the Company for taxable periods ending on or before the Closing Date,
which are required to be filed subsequent to the Closing Date. (3) Buyer shall
be responsible for the preparation and timely filing of all Tax Returns of SMI
and the Company for taxable periods beginning prior to and ending after the
Closing Date. BIB shall provide Buyer with copies of the Tax Returns referenced
in clauses (1) and (2) above and any work papers prepared in connection thereto
at least 10 days prior to the due date for filing of such Tax Returns, for
Buyer's review and consent, which shall not be unreasonably withheld. Buyer
shall be responsible for the timely filing of the Tax Returns referenced in
clause (2) above. The Tax Returns referenced in clauses (1) and (2) herein shall
be prepared in a manner consistent with SMI, the Company and their predecessors'
most recent past practice, and shall be consistent with the representation in
Section 2.1(h)(ii)(M) herein. With respect to an income or franchise Tax Return
of SMI or the Company prepared by the Buyer which includes a taxable period or
portion thereof before the Closing Date, BIB shall have a reasonable opportunity
to review and approve such return (such approval not to be unreasonably withheld
or delayed) and such return shall be filed on a basis consistent with Tax
Returns filed by SMI and the Company for the taxable period ended December 31,
1997 and prepared in a manner consistent with the representation in Section
2.1(h)(ii)(M). Buyer shall provide BIB with copies and drafts of the Tax Returns
for such periods and copies of work papers relating to such returns. With
respect to the Tax Returns referenced in clauses (2) and (3) above, BIB shall
timely pay over to Buyer the portion of the Taxes shown as due on such Tax
Returns which are the responsibility of BIB and Parent under the provisions of
Section 5.14 herein at least 10 days prior to the due date for filing such Tax
Returns.
(c) Tax Audits.
(i) BIB shall, at its election, control any audit,
dispute or similar proceeding with respect to Taxes of SMI,
the Company or La Loren for taxable periods ending on or
before the Closing Date; provided, however, that (a) BIB shall
not control any such proceeding unless it has first
acknowledged in writing its obligation to indemnify Buyer for
the full amount of the Taxes at issue in such
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proceeding; (b) any settlement or other disposition of any
such proceeding shall require Buyer's consent (which shall not
be unreasonably withheld) if such settlement or disposition
could reasonably be expected to adversely effect the Tax
position of SMI or the Company in a taxable period ending
subsequent to the Closing Date, provided, however, that (i)
the settlement of an issue for which indemnification is
provided under Section 5.14(a)(i)(C) shall not be considered
to have such an adverse effect to the extent the limitations
upon indemnification provided by Article 8 herein has no
application to the Buyer Indemnified Parties' rights to
indemnification with respect to the Losses arising as a result
of such settlement and (ii) any settlement of an issue other
than an issue addressed in (i) above shall not be considered
to have an adverse effect to the extent Parent and BIB
indemnify Buyer for any and all Losses incurred with respect
to taxable periods subsequent to the Closing Date arising as a
result of such settlement; (c) Buyer shall have the right to
attend and participate in any such proceeding (including
through counsel of its choice) and (d) Buyer and BIB shall
jointly control any proceeding with respect to Taxes if there
is a reserve for the Taxes at issue in the proceeding on the
Final Closing Balance Sheet, unless such reserve is not in
excess of $20,000 and does not exceed 20% of the likely
exposure arising as a result of the proceeding. BIB and Buyer
shall jointly control any proceeding with respect to a taxable
period commencing prior to and ending subsequent to the
Closing Date, provided that BIB shall not have any control
rights with respect to such proceeding unless it first
delivers the written acknowledgment referenced in (i)(a)
above.
(ii) Buyer shall have the sole right to settle and
control all audits, contests, or similar proceedings relating
to Taxes of SMI or the Company other than proceedings
described in (c)(i) above; provided however that, with respect
to any proceeding relating to a matter for which BIB and
Parent are required to indemnify the Buyer Indemnified Parties
pursuant to Section 5.14(a)(i)(C), (a) BIB shall have the
right to attend and participate (but not control) any portion
of such proceeding relating to such matter at its own expense,
including with counsel of its own choice; (b) Buyer shall, in
resolving any such audit or proceeding consider in good faith
the interests of BIB and Parent in the resolution of such
proceeding and (c) Buyer shall not settle any such matter
without the consent of BIB, which shall not be unreasonably
withheld provided that if BIB objects to a proposed settlement
then, notwithstanding the limitations on indemnification of
Section 8.3(a)(iv), BIB and Parent shall be liable for and
indemnify Buyer for all Losses in excess of the amount of
Losses that Buyer would have been liable for had the proposed
settlement been effectuated and (d) Buyer shall promptly
provide BIB with copies of all correspondence received from
the applicable taxing authority with respect to such matter
and shall obtain BIB's consent (which shall not be
unreasonably withheld) with respect to all material
submissions made to such taxing authority with respect to such
matter.
(d) Cooperation.
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(i) From and after the Closing Date, to the extent
reasonably requested by the other party, the Representative
and Buyer shall assist and cooperate with the other party in
the preparation of any Tax Return which the other party is
responsible to file pursuant to Section 5.14(b) herein and
shall assist and cooperate with the other party in preparing
for any audits or disputes relating to Taxes for which the
other party is responsible pursuant to this Agreement. From
and after the Closing Date, the Representative and Buyer
shall, pursuant to the other party's reasonable request, make
available to the other party all information, records and
documents reasonably available to that party which are
necessary for the preparation of any Tax Return or resolution
of any audit or dispute. In all such cases, the party seeking
assistance or cooperation shall bear the expenses of the other
party incurred in connection with respect thereto.
(ii) From and after the Closing Date, the
Representative and Buyer shall provide timely notice to the
other in writing of any pending or threatened tax audits or
assessments of SMI, the Company or La Loren for taxable
periods for which the other is liable under this Agreement,
and shall timely furnish the other with copies of all
correspondence received from any taxing authority in
connection with any tax audit or information request with
respect to any such taxable period. The failure to give such
notice or provide copies of such correspondence on a timely
basis shall limit the indemnification obligations provided
herein to the extent such failure results in a detriment to
the indemnifying party, in which case the indemnity payment
shall be reduced by the amount of such detriment.
(e) Refunds. Subject to the next sentence, if Buyer receives a
refund with respect to income Taxes or a refund in excess of $10,000 with
respect to any other Tax, in each case with respect to a period (or portion of a
taxable period) ending on or before the Closing Date, Buyer shall promptly pay
the amount of such Tax refund to the Representative. Notwithstanding the
foregoing, the amount of any such refund payable to the Representative shall be
reduced by (i) any Tax cost, net of any associated Tax benefit, to Buyer, SMI or
the Company arising, directly or indirectly, as a result of or with respect to
the receipt of such refund, (ii) any costs or expenses of Buyer, SMI or the
Company incurred in obtaining such refund and (iii) the amount of any reserves
with respect to such refunded Tax on the Final Closing Balance Sheet.
(f) Section 754 Election. At Buyer's request, the Company will
file an election under Section 754 of the Code for the taxable year of the
Company commencing on January 1, 1998.
(g) Continuation of the Company's Partnership Status. Buyer
agrees that for a period of at least three years from the Closing Date it will
not cause or permit the Company to liquidate, dissolve or become a limited
liability company with less than two members and will not cause or permit the
Company to elect to be taxed other than as a partnership; it being understood
that this Agreement shall not restrict in any way, after the Closing, transfers
of interests in the Company or entities owning interests in the Company,
including transfers which result in a deemed termination of the Company under
Section 708(b)(1)(B) of the Code, as long as the Company thereafter remains an
entity with at least two members.
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5.15 Appointment of the Representative for Parent and the Sellers. As
the exclusive representative to act on each Seller's and Parent's behalf with
respect to any and all issues arising under this Agreement or the Escrow
Agreement, Representative is authorized to negotiate, communicate and receive
notices required to be delivered to Parent or the Sellers under this Agreement
or the Escrow Agreement make and receive deliveries of the funds and other items
required to be delivered or received by Parent or the Sellers under this
Agreement (including at the Closing and following the Closing pursuant to the
Escrow Agreement), assert all indemnification claims under Article 8, conduct
negotiations with Buyer and its representatives regarding such claims, perform
obligations under this Agreement on behalf of Parent or the Sellers, and take
any and all other actions of any Parent or Seller specified in or contemplated
by this Agreement. Buyer shall have the right to rely upon all actions taken or
omitted to be taken by the Representative in respect of this Agreement and the
Escrow Agreement or the transactions contemplated hereby or thereby, all of
which actions or omissions shall be legally binding upon, and are hereby
irrevocably ratified and approved by, Parent and each of the Sellers.
5.16 Confidentiality. Beginning on the date hereof, and at any time
hereafter, each of the Sellers and Parent shall treat as confidential any
proprietary or secret information relating to the Business of SMI or the
Company, including, without limitation, the operations, business plans,
processes, inventions, trade secrets, customer lists, or other work product
developed by or for SMI or the Company, whether on the premises of SMI or the
Company or elsewhere ("Confidential Materials"). Beginning on the date hereof,
and at any time hereafter, none of the Sellers or Parent shall disclose, utilize
or make accessible in any manner or in any form any Confidential Materials
without the prior written consent of Buyer, other than, in the case of Xxxx
Xxxxxx, as required in connection with his performance of services pursuant to
his Employment Agreement with SMI, and other than in the ordinary course of
business in connection with the performance of employment services in connection
with the management of the Business unless (i) such information otherwise
becomes generally available to the public other than as a result of disclosure
by the disclosing party or any of its Affiliates, (ii) was already known by such
parties prior to its contact with SMI or the Company (as established by written
records) or (iii) is at any time furnished to such party by a third party who is
lawfully in possession of such information and who lawfully conveys such
information; or (iv) upon the written opinion of independent counsel, the
disclosing party is required by applicable law to do so; provided, however, that
the disclosing party shall have previously given Buyer prompt written notice of
the need to make such disclosure such that Buyer and/or SMI or the Company had
adequate time to seek an appropriate protective order or other remedy and the
disclosing party shall have used reasonable efforts to cooperate with SMI, the
Company and/or Buyer.
5.17 Waiver of Redemption of Preferred Stock. None of the Sellers shall
make an election under Article IV(A), Section 3(a)(ii) of the Certificate of
Incorporation of SMI to have their shares of Preferred Stock redeemed in
connection with the consummation of the transactions contemplated hereby.
5.18 Assignment of Rights under Purchase Agreement; Subrogation. Upon
consummation of the transactions contemplated hereby, Buyer, through SMI, will
have all of the rights of SMI under the Purchase Agreement dated as of April 7,
1997 among La Loren, Xxxx Xxxxxx and SMI
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(the "Purchase Agreement"), which Purchase Agreement has not been changed,
modified, or amended in any manner. In the event that Buyer actually receives
indemnification from BIB pursuant to this Agreement for a matter that Buyer or
SMI could have received indemnification from La Loren and/or Xxxx Xxxxxx under
the Purchase Agreement, then BIB shall be subrogated to the rights of SMI with
respect to the Purchase Agreement to the extent of any indemnification payments
made by BIB, including, without limitation, the right to seek indemnification
thereunder with respect to such matter but nothing herein shall be deemed to
alter or amend the Purchase Agreement, or increase or diminish the rights or
obligations of the parties thereto. Nothing in this Section 5.18 shall require
Buyer or any Buyer Indemnified Party to seek indemnification from BIB, Parent,
Xxxx Xxxxxx, La Loren or any other entity prior to pursuing indemnification from
any such other Person.
5.19 Subordinated Debt Agreement. Except as contemplated regarding
prepayment penalties in Section 6.18, BIB and Parent shall cause Dilmun to
enforce the terms of the Subordinated Debt Agreement in accordance with its
terms as in effect on the date hereof, including, without limitation, the
obligation to pay principal, interest and all other fees, charges and expenses
thereunder.
5.20 Delivery of Schedules 2.1(n)(i) and 2.1(n)(v). As of the date
hereof, the Disclosure Schedules do not include information with respect to
Section 2.1(n)(i) and Section 2.1(n)(v) of the Disclosure Schedules. Within
three (3) Business Days of the date hereof, BIB shall deliver to Buyer Section
2.1(n)(i) and Section 2.1(n)(v) of the Disclosure Schedules, which shall be
prepared in good faith and shall contain solely the information required to be
described therein. Upon delivery of such Sections of the Disclosure Schedules by
BIB to Buyer, such Sections shall be deemed to be accepted by Buyer and,
together with the other Sections of the Disclosure Schedules delivered to Buyer
on the date hereof, shall constitute the final Disclosure Schedules. In no event
shall such Sections 2.1(n)(i) or 2.1(n)(v) of the Disclosure Schedules modify in
any manner whatsoever the other representations, warranties, covenants or terms
of this Agreement or the other Sections of the Disclosure Schedules.
5.21 Consolidated Financial Statements. The Representative, on behalf
of the Sellers, shall deliver to Buyer on or before October 16, 1998, audited
consolidated financial statements of SMI and the Company for the nine (9) months
ended December 31, 1997 in a form and with content sufficient to satisfy the
requirements of Regulation S-X of the Securities Exchange Act of 1934.
ARTICLE 6. CONDITIONS PRECEDENT TO THE OBLIGATION OF BUYER TO CLOSE.
The obligation of Buyer to enter into and complete the Closing is
subject, at its option, to the fulfillment on or prior to the Closing Date of
the following conditions, any one or more of which may be waived by it:
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6.1 Effect of Laws. No Governmental Entity shall have enacted, issued,
promulgated, enforced or entered any statute, rule, regulation, injunction or
other Law which is in effect and (a) has the effect of making the transactions
contemplated by this Agreement illegal or otherwise restraining or prohibiting
consummation of such transactions or (b) would materially restrict or interfere
with the operation of the Business after the Closing or would have a Material
Adverse Effect.
6.2 Representations and Warranties True as of the Closing Date. The
representations and warranties of each of SMI, the Company, Parent and each of
the Sellers contained in this Agreement shall be true in all material respects
when made and on and as of the Closing Date with the same force and effect as
though made on and as of the Closing Date, except as expressly stated herein or
therein to be as of a date other than the date of this Agreement; provided,
however, that if a representation or warranty has a reference to "materially,"
"material," "Material Adverse Effect," "in all material respects" or similar
expressions, such representation or warranty shall be true and correct in all
respects.
6.3 Compliance with this Agreement. Each of SMI, the Company, Parent
and each of the Sellers shall have performed and complied in all material
respects with all covenants and agreements required by this Agreement to be
performed or complied with by such party on or prior to the Closing Date.
6.4 Certificates. Each of SMI, the Company, Parent and each Seller
shall have delivered to Buyer a certificate, dated the Closing Date and signed
by such Seller, or an officer thereof, in the case of each Seller that is not an
individual, certifying that the conditions specified in Sections 6.2 and 6.3
have been fulfilled.
6.5 Opinion of Counsel to SMI and the Company. Buyer shall have
received the opinion of Squadron, Ellenoff, Plesent & Xxxxxxxxx, LLP, counsel to
SMI and the Company, dated the Closing Date, addressed to Buyer, substantially
in the form of Exhibit 6.5 annexed hereto.
6.6 Opinion of Counsel to The Xxxxxx Trust. Buyer shall have received
the opinion of Xxxxx & Xxxxxxxx LLP, counsel to The Xxxxxx Trust, dated the
Closing Date, addressed to Buyer, substantially in the form of Exhibit 6.6
annexed hereto.
6.7 Opinion of Counsel to BIB. Buyer shall have received the opinion
of Xxxxxxx, Xxxx & Xxxxxxxx counsel to BIB, dated the Closing Date, addressed to
Buyer, substantially in the form of Exhibit 6.7 annexed hereto.
6.8 Opinion of Counsel to Parent. Buyer shall have received the opinion
of counsel to Parent, dated the Closing Date, addressed to Buyer, substantially
in the form of Exhibit 6.8 annexed hereto.
6.9 Resignations of Directors. Buyer shall have received the
resignation, dated the Closing Date, of each officer and director of SMI or the
Company.
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6.10 Litigation. No Litigation shall have been instituted before any
court or governmental or regulatory body, or instituted or threatened by any
governmental or regulatory body, to restrain, modify or prevent the carrying out
of the transactions contemplated hereby, or to seek damages or a discovery order
in connection with such transactions.
6.11 Xxxx-Xxxxx-Xxxxxx. The waiting period under the HSR Act shall
have expired or been terminated and no suit, action, proceeding or investigation
shall have been instituted or threatened by any governmental agency, and no
injunction shall have been issued and then outstanding, to restrain, prohibit or
otherwise challenge the legality or validity of the transactions contemplated by
this Agreement.
6.12 Consents. Each Seller, SMI, Parent and the Company shall have
received each consent or approval required to be given by any Person, including
any Governmental Entity, in connection with the consummation of the transactions
contemplated hereby, including, without limitation, the consents and approvals
set forth in Sections 2.2(c) and 2.3(c).
6.13 Stockholders Agreement. The Stockholders Agreement among the
stockholders of SMI dated as of April 7, 1997 shall have been terminated on or
prior to the Closing.
6.14 Capital Stock. All outstanding options to purchase any capital
stock in SMI or equity interest in the Company, including without limitation the
options disclosed in Section 2.1(b) of the Disclosure Schedules, shall have been
redeemed by SMI or the Company, as the case may be, on or prior to the Closing
such that there are no outstanding options at the Closing.
6.15 Escrow Agreement. Each of SMI, the Escrow Agent and the Sellers
shall have duly executed and delivered to Buyer the Escrow Agreement
substantially in the form attached hereto as Exhibit 6.15.
6.16 Intellectual Property. SMI or the Company shall have instituted
the procedure for recordation of all assignments of the Intellectual Property
set forth on Exhibit 6.16(A) from La Loren to the Company with the United States
Patent and Trademark Office and the equivalent foreign intellectual property
registration offices. All items set forth in Exhibit 6.16(B) are released or are
in the process of being released, and all releases of security interests or
agreements regarding the Intellectual Property set forth on Exhibit 6.16(B)
shall have been executed and in the process of recording with the United States
Patent and Trademark Office, the equivalent foreign intellectual property
registration offices, and anywhere else such security interests or agreements
may be recorded.
6.17 Acknowledgment of Employment Agreement. Each of Xxxx Xxxxxx and
Xxxxxxx Xxxxxx shall have executed the acknowledgment attached as Exhibit 6.17
(which condition was satisfied simultaneously with the execution of this
Agreement).
6.18 Xxxxxx Indebtedness and Senior Subordinated Debt Agreement. Each
of Xxxxxx and Dilmun shall have delivered such documents as are necessary to
evidence the waiver of any prepayment penalties, and the payment in full of all
outstanding obligations under the Xxxxxx Indebtedness and Subordinated Debt
Agreement and to release any liens, pledges or other Encumbrances in connection
therewith.
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6.19 Employment Policies. Buyer shall have received from the employees
set forth on Exhibit 6.19 of SMI and the Company written acknowledgment that
after the Closing, such employees will be bound by Buyer's Code of Ethics and
Business Conduct (which condition was satisfied simultaneously with the
execution of this Agreement).
6.20 Delivery of Stock Certificates and Class B Unit Certificate. (i)
Each of BIB and the other Stockholders shall have delivered to Buyer stock
certificates representing all of the Shares, duly endorsed in blank or
accompanied by stock powers executed in blank, in proper form for transfer and
(ii) The Xxxxxx Trust shall have delivered to Buyer a certificate representing
200,000 Class B Units of the Company duly endorsed in blank or accompanied by an
assignment document executed in blank, in proper form for transfer.
6.21 Material Adverse Effect. No event or events shall have occurred or
have failed to occur during the period from the date hereof through the Closing
Date which would, individually or in the aggregate, have a Material Adverse
Effect.
ARTICLE 7. CONDITIONS PRECEDENT TO THE OBLIGATION OF SELLERS TO CLOSE.
The obligations of each Seller under this Agreement are subject, at the
option of each Seller acting in accordance with provisions of this Agreement
with respect to termination hereof, to the satisfaction on or prior to the
Closing Date of the following conditions, any one or more of which may be
waived:
7.1 Effect of Laws. No Governmental Entity shall have enacted, issued,
promulgated, enforced or entered any statute, rule, regulation, injunction or
other Law which is in effect and (a) has the effect of making the transactions
contemplated by this Agreement illegal or otherwise restraining or prohibiting
consummation of such transactions or (b) would materially restrict or interfere
with the operation of the Business after the Closing or would have a Material
Adverse Effect.
7.2 Representations and Warranties True as of the Closing Date. The
representations and warranties of Buyer contained in this Agreement shall be
true in all material respects when made and on and as of the Closing Date with
the same force and effect as though made on and as of the Closing Date, except
as expressly stated herein or therein to be as of a date other than the date of
this Agreement; provided, however that if a representation or warranty has a
reference to "materially," "material," "Material Adverse Effect," "in all
material respects" or similar expressions, such representation or warranty shall
be true and correct in all respects.
7.3 Compliance with This Agreement. Buyer shall have performed and
complied in all material respects with all covenants and agreements required by
this Agreement to be performed or complied with by it on or prior to the Closing
Date.
7.4 Officer's Certificate. Buyer shall have delivered to each Seller a
certificate, dated as of the Closing Date and signed by an officer of Buyer,
certifying that the conditions specified in Sections 7.2 and 7.3 have been
fulfilled.
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7.5 Opinion of Counsel to Buyer. Each Seller shall have received the
opinion of Fried, Frank, Harris, Xxxxxxx & Xxxxxxxx, counsel to Buyer, dated the
date of the Closing, addressed to each Seller, substantially in the form of
Exhibit 7.5 annexed hereto.
7.6 Litigation. No action, suit or proceeding shall have been
instituted before any court or governmental or regulatory body, or instituted or
threatened by any governmental or regulatory body, to restrain, modify or
prevent the carrying out of the transactions contemplated hereby, or to seek
damages or a discovery order in connection with such transaction.
7.7 Xxxx-Xxxxx-Xxxxxx. The waiting period under the HSR Act shall have
expired and no suit, action, proceeding or investigation shall have been
instituted or threatened by any governmental agency, and no injunction shall
have been issued and then outstanding, to restrain, prohibit or otherwise
challenge the legality or validity of the transactions contemplated by this
Agreement.
7.8 Payment of Purchase Price. Buyer shall have paid to each of BIB,
in its individual capacity and as Representative, the Escrow Agent, the
Contingent Payment Escrow Agent, Xxxxxx and Dilmun the respective payments in
immediately available funds in accordance with Article 1 of this Agreement.
7.9 Consents. Buyer shall have received each consent or approval
required to be given by any Person in connection with the consummation of the
transactions contemplated hereby, where the failure to receive such consent or
approval, individually or in the aggregate, would have a material adverse effect
on Buyer's ability to consummate the transactions contemplated hereby.
7.10 Escrow Agreement. Each of the Escrow Agent and Buyer shall have
duly executed and delivered to Representative the Escrow Agreement and the
Contingent Payment Escrow Agreement.
7.11 Acknowledgment of Bonus and other Arrangements. Buyer shall have
executed the acknowledgment attached as Exhibit 7.11 (which condition was
satisfied simultaneously with the execution of the Agreement).
ARTICLE 8. INDEMNIFICATION.
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8.1 Indemnification by BIB and Parent. Each of BIB and Parent, jointly
and severally, agrees to defend, indemnify and hold Buyer, all Subsidiaries and
Affiliates of Buyer (including without limitation, SMI and the Company from and
after the Closing Date and persons serving as officers, directors, managers,
members, employees or agents of Buyer, SMI the Company or such Subsidiaries or
Affiliates thereof, in each case other than BIB, Parent or any Seller or other
successors (individually a "Buyer Indemnified Party" and collectively the "Buyer
Indemnified Parties"), harmless from and against any and all liabilities in
connection with or relating to actions, suits, claims, proceedings, demands,
assessments, judgments, costs, losses, liabilities, damages, deficiencies,
disposal costs, obligations, liens, fines and expenses (whether or not arising
out of third party claims), including, without limitation, interest, penalties,
reasonable attorneys', accountants', engineers' and experts' fees, as the same
are incurred, of every kind or nature whatsoever, and all amounts paid in
investigation, defense or settlement of any of the foregoing, whether or not
arising out of third-party claims, and including all amounts paid in
investigation, defense or settlement of the foregoing, of any kind or nature
whatsoever which may be sustained or suffered by any such Buyer Indemnified
Party (collectively, "Losses"), based upon, arising out of, by reason of or
otherwise in respect of or in connection with (a) any inaccuracy in or breach of
any representation or warranty contained in Sections 2.1, 2.2 or 2.3 of this
Agreement, the Disclosure Schedules or any certificate delivered pursuant to
this Agreement; or (b) any breach of any covenant or agreement contained in this
Agreement (including, without limitation, the covenants and indemnification
obligations in Section 5.14, any Disclosure Schedules or any certificate or
agreement delivered pursuant to this Agreement, and (c) any Losses arising from
actions, events or circumstances occurring prior to the Closing and relating to
(i) any claim made pursuant to the Civil Rights Act of 1964, 42 U.S.C. 2000(e)
et seq. or similar state or local Laws and (ii) any claim arising from alleged
sexual, racial or other employment discrimination or harassment other than
claims relating to those matters disclosed in Section 2.1(p) of the Disclosure
Schedules but including claims arising from the two letters attached in Section
8.1(c) of the Disclosure Schedules except to the extent that such claim involves
the same allegations and persons as any of the pending Litigations set forth in
Section 2.1(p) of the Disclosure Schedule (such matters under clauses (a)
through (c) being hereinafter collectively referred to as "Buyer Indemnifiable
Claims"). The rights of Buyer Indemnified Parties to recover indemnification in
respect of any occurrence referred to in clauses (b) or (c) of this Section 8.1
shall not be limited by the fact that such occurrence may not constitute an
inaccuracy in or breach of any representation or warranty referred to in clauses
(a) of this Section 8.1.
8.2 [Intentionally Omitted]
8.3 Limitations on Indemnification
(a) The right of Buyer Indemnified Parties to indemnification
under Section 8.1(a) shall be subject to the following provisions:
(i) Indemnification with respect to all Buyer
Indemnifiable Claims shall expire twelve (12) months after the
Closing; provided, however, that the limitations of this
clause 8.3(a)(i) shall not apply to:
(A) Buyer Indemnifiable Claims (1) involving
or arising from fraud or intentional
misrepresentation, (2) arising under Sections 8.1(b)
(including,
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without limitation, where the underlying claim
results from a breach of the covenants in Sections
5.14, except as otherwise provided in clause (4)
below, or Section 8.1(c)), or (3) arising under
Section 8.1(a) if the underlying claim results from a
breach of the representations and warranties in
Sections 2.1(h), 2.1(v), or 2.1(w), for which the
period for making such claims shall expire on the
date which is three (3) months after the termination
of the applicable statute of limitations, including
any extension thereof, relating thereto or (4) from a
breach of the representations and warranties in
Section 2.1(h)(ii)(M) for which the period for making
such claims shall expire in accordance with Section
5.14(a); or
(B) Buyer Indemnifiable Claims arising under
Section 8.1(a), if the underlying claim results from
a breach of the representations and warranties made
in Sections 2.1(b), 2.1(c), 2.1(d), 2.2(b), 2.2(c),
2.3(b), 2.3(c) or 2.3(e) for which the period for
making such claims shall be indefinite.
(ii) If prior to the relevant date of expiration a
specific state of facts shall have become known which may
constitute or give rise to any Buyer Indemnifiable Claim as to
which indemnity may be payable and a Buyer Indemnified Party
shall have given notice of such facts to BIB or any such
Stockholder, as the case may be, then the right to
indemnification with respect thereto shall remain in effect
without regard to when such matter shall have been finally
determined and disposed of, according to the date on which
notice of the applicable claim is given.
(iii) No indemnification shall be payable to Buyer
Indemnified Parties with respect to Buyer Indemnifiable Claims
not involving fraud or intentional misrepresentation if such
Buyer Indemnifiable Claims arise solely under Section 8.1(a)
unless the total of all Buyer Indemnifiable Claims shall
exceed $500,000 (the "Basket") in the aggregate, whereupon the
amount of such claims in excess of $500,000 shall be
recoverable in accordance with the terms hereof. The Basket
shall not be applicable to Buyer Indemnifiable Claims
resulting from fraud or intentional misrepresentation or
arising under Sections 8.1(b), 5.14 or 8.1(c). The Basket also
shall not be applicable to amounts recoverable under Section
8.1(a) if the underlying claim arises as a result of a breach
of the representations and warranties in Sections 2.1(b),
2.1(c), 2.1(d), 2.2(b), 2.2(c), 2.3(b), 2.3(c), 2.3(e),
2.1(h), 2.1(v) or 2.1(w).
(iv) None of BIB or Parent shall be obligated to
indemnify Buyer Indemnified Parties in respect of Buyer
Indemnifiable Claims not involving fraud or intentional
misrepresentation if such Buyer Indemnifiable Claims arise
solely under Sections 8.1(a) or 5.14(a) after the cumulative
amount of all Buyer Indemnifiable Claims exceeds $20,000,000
("Maximum Liability Amount"). The limitations on liability of
the Maximum Liability Amount shall not be applicable to and
shall be calculated exclusive of any recovery under (A) Buyer
Indemnifiable Claims arising under Sections 8.1(b) (including,
without limitation, where the underlying claim results from a
breach of the covenants in Sections 5.14(b), (c), (d), (e),
(f) or (g), but not including Section 5.14(a)) or 8.1(c) or
(B) amounts recoverable under Section
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8.1(a) if the underlying claim arises as a result of a breach
of the representations and warranties in Sections 2.1(b),
2.1(c), 2.2(b), 2.2(c), 2.3(b), 2.3(c), 2.3(e).
(v) Any indemnification payable with respect to a
Buyer Indemnifiable Claim shall be (A) net of any insurance
proceeds actually received by Buyer, SMI or the Company with
respect to such Loss and (B) net of any tax benefits actually
realized (through receipt of a refund or actual reduction of
tax liability) as a result of (i.e. which would not have been
received or credited but for) the Loss to which such
indemnification payment relates. Notwithstanding the
foregoing, the provisions of this Section 8.3(a)(v) shall not
apply to claims arising with respect to the breach of the
representation in Section 2.1(h)(ii)(M) or a decrease in tax
basis of any category of assets addressed in that
representation, in each case which shall be governed by
Section 5.14(a).
(b) Notwithstanding anything to the contrary in the foregoing
section, except for a claim of infringement of proprietary rights with respect
to any Intellectual Property, none of BIB, or Parent shall in any event be
liable to any Buyer Indemnified Party for any consequential, special or indirect
damages suffered by any Buyer Indemnified Party under any provision of this
Agreement, even if advised of the possibility of such.
(c) Except to the extent any Losses are incurred by the Buyer
Indemnified Party resulting from any fraudulent or intentional misrepresentation
by any of the Sellers, SMI or the Company (prior to the Closing Date in the case
of SMI or the Company), the sole and exclusive monetary remedy of any Buyer
Indemnified Party with respect to any and all claims relating to the subject
matter of this Agreement shall be pursuant to the indemnification provisions set
forth in Section 5.14 and in this Article 8. In furtherance of the foregoing,
each Buyer Indemnified Party hereby waives, to the fullest extent permitted
under applicable law, any and all rights, claims and causes of action it may
have against BIB, each Seller, or Parent arising under or based upon any Law
(including, without limitation, any such rights, claims or causes of action
arising under or based upon common law or otherwise). Notwithstanding the
foregoing, nothing in this Agreement shall operate as a waiver of any right or
remedy that any Buyer Indemnified Party may have under Environmental Laws with
respect to real property currently or formerly owned, operated or leased by The
Xxxxxx Trust.
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8.4 Indemnification by Buyer. Buyer agrees to defend, indemnify and
hold BIB and each Seller and the persons serving as officers, directors or
employees of BIB and each Seller (individually a "Seller Indemnified Party" and
collectively the "Seller Indemnified Parties") harmless from and against any and
all Losses, whether or not arising out of third-party claims and including all
amounts paid in investigation, defense or settlement of the foregoing based
upon, arising out of, by reason of or otherwise in respect of or in connection
with (a) any inaccuracy in or breach of any representation or warranty made by
Buyer in this Agreement or certificate delivered under or in connection with
this Agreement; (b) any breach of any covenant or agreement made by Buyer in
this Agreement or any certificate or agreement delivered by Buyer pursuant to
this Agreement; and (c) the operation of the Business which may hereafter arise
or be brought against any Seller Indemnified Party based upon events occurring
after the Closing Date and not attributable to the acts of any Seller
Indemnified Party (such claims under clauses (a), (b) and (c) being hereinafter
collectively referred to as "Seller Indemnifiable Claims"). Notwithstanding
anything in the foregoing to the contrary, Buyer hereby agrees, from and after
the Closing, to indemnify and to hold each Seller Indemnified Party harmless
from, and to reimburse each Seller (and such persons) for any Loss resulting
from the failure by Buyer or any successor or assign thereof to pay or perform
any liabilities associated with the Business arising on or after the Closing
Date, and without the limitations of Section 8.5.
8.5 Limitations on Indemnification by Buyer.
(a) The right of Seller Indemnified Parties to indemnification
under Section 8.4(a) shall be subject to the following provision:
(i) Indemnification with respect to all Seller
Indemnifiable Claims shall expire twelve (12) months after the
Closing; provided, however, that the limitations of this
clause shall not apply to:
(A) Seller Indemnifiable Claims (1)
involving or arising from fraud or intentional
misrepresentation or (2) arising under Sections 8.4(b) or
8.4(c) for which the period for making such claims shall
expire on the date which is three (3) months after the
termination of the applicable statute of limitations,
including any extension thereof, relating thereto; or
(B) Seller Indemnifiable Claims arising
under Section 8.4(a) if the underlying claim results from a
breach of the representations and warranties in Section 3.1(b)
for which the period for making such claims shall be
indefinite.
(ii) If prior to the relevant date of expiration a
specific state of facts shall have become known which may
constitute or give rise to any Seller Indemnifiable Claim as
to which indemnity may be payable and a Seller Indemnified
Party shall have given notice of such facts to Buyer, then the
right to indemnification with respect thereto shall remain in
effect without regard to when such matter shall have
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been finally determined and disposed of, according to the date
on which notice of the applicable claim is given.
(iii) No indemnification shall be payable with
respect to Seller Indemnifiable Claims not involving fraud or
intentional misrepresentation if such Seller Indemnifiable
Claims arise solely under Section 8.4(a) unless the total of
all Seller Indemnifiable Claims shall exceed $500,000 in the
aggregate (the "Buyer Basket"), whereupon the amount of such
claim in excess of $500,000 shall be recovered in accordance
with the terms hereof; provided, however, that Seller
Indemnifiable Claims arising under Sections 8.4(b), 5.14 and
8.4(c) shall not be subject to such Buyer Basket and provided
further that the Buyer Basket shall not be applicable to
amounts recoverable under Section 8.4(a) if the underlying
claim arises as a result of a breach of the representations
and warranties in Section 3.1(b).
(iv) Buyer shall not be obligated to indemnify Seller
Indemnified Parties in respect of Seller Indemnifiable Claims
not involving fraud or intentional misrepresentation if such
Seller Indemnifiable Claims arise solely under Sections 8.4(a)
or 5.14(a) after the cumulative amount of all Seller
Indemnifiable Claims exceeds $20,000,000 (the "Maximum Buyer
Liability Amount"). The limitations on liability of the
Maximum Buyer Liability Amount shall not be applicable and
shall be calculated exclusive of any recovery under (A) Seller
Indemnifiable Claims arising under Sections 8.4(b) (including,
without limitation, where the underlying claim results from a
breach of the covenants in Section 5.14(b), (c), (d), (e), (f)
or (g) but not including Section 5.14(a)) or 8.4(c) or (B)
amounts recoverable under Section 8.4(a) if the underlying
claim arises as a result of breach of the representations and
warranties in Section 3.1(b).
(v) Any indemnification payable with respect to a
Seller Indemnifiable Claim shall be (A) net of any insurance
proceeds actually received by Seller with respect to such Loss
and (B) net of any tax benefits actually realized (through
receipt of a refund or actual reduction of tax liability) as a
result of (i.e., which would not have been received or
credited but for) the Loss to which such indemnification
payment relates.
(b) Notwithstanding anything to the contrary in the foregoing
section, Buyer shall in no event be liable to BIB or any Stockholder for any
consequential, special or indirect damages suffered by BIB or any Stockholder
under any provision of this Agreement, even if advised of the possibility of
such.
(c) Except to the extent any Losses are incurred by the Seller
Indemnified Party resulting from any fraudulent or intentional misrepresentation
by any of the Buyer (prior to the Closing Date), the sole and exclusive monetary
remedy of any Seller Indemnified Party with respect to any and all claims
relating to the subject matter of this Agreement shall be pursuant to the
indemnification provisions set forth in this Article 8. In furtherance of the
foregoing, each Seller Indemnified Party hereby waives, to the fullest extent
permitted under applicable law, any and all rights, claims and causes of action
it may have against Buyer arising under or based upon any Law
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(including, without limitation, any such rights, claims or causes of action
arising under or based upon common law or otherwise).
8.6 Notice; Defense of Claims. Promptly after receipt by an indemnified
party of notice of any Loss to which the indemnification obligations hereunder
would apply, the indemnified party shall promptly give notice thereof in writing
to the indemnifying party (Buyer with respect to claims by Seller Indemnified
Parties and BIB or a Seller, as the case may be, with respect to claims by Buyer
Indemnified Parties), but the omission to so notify the indemnifying party
promptly will not relieve the indemnifying party from any liability except to
the extent that the indemnifying party shall have been prejudiced as a result of
the failure or delay in giving such notice. Such notice shall state the
information then available regarding the amount and nature of the Loss and shall
specify the provision or provisions of this Agreement under which the Loss is
asserted. If within 20 days after receiving such notice the indemnifying party
gives written notice to the indemnified party stating that it intends to defend
against such Loss at its own cost and expense and confirms that it will be
responsible for the Loss under Article 8 if such defense is not successful, then
counsel for the defense shall be selected by the indemnifying party, which
counsel shall be reasonably satisfactory to the indemnified party, and the
indemnifying party shall not be required to make any payment with respect to
such Loss prior to resolution of such Loss as long as the indemnifying party is
conducting a good faith and diligent defense at its own expense; provided,
however, that the assumption of defense of any such matters by the indemnifying
party shall relate solely to the Loss that is subject or potentially subject to
indemnification. The indemnified party shall cooperate in all reasonable
respects, at the indemnifying party's request and cost, risk and expense, with
the indemnifying party and its attorneys in the investigation, trial and defense
of such Loss and any resulting suit, proceeding or enforcement action and any
appeal therefrom. The indemnifying party shall have the right, with the consent
of the indemnified party, which consent shall not be unreasonably withheld, to
settle all indemnifiable matters related to claims by third parties which are
susceptible to being settled. The indemnifying party shall keep the indemnified
party apprised of the status of the Loss and any resulting suit, proceeding or
enforcement action, shall furnish the indemnified party with all documents and
information that the indemnified party shall reasonably request and shall
consult with the indemnified party prior to acting on major matters, including
settlement discussions. Notwithstanding anything herein stated, the indemnified
party shall at all times have the right to fully participate in such defense at
its own expense directly or through counsel; provided, however, if the named
parties to the action or proceeding include both the indemnifying party and the
indemnified party and representation of both parties by the same counsel would
be inappropriate under applicable standards of professional conduct, the expense
of separate counsel for the indemnified party shall be paid by the indemnifying
party. If no such notice of intent to dispute and defend is given by the
indemnifying party, or if such diligent good faith defense is not being or
ceases to be conducted, the indemnified party shall, at the expense of the
indemnifying party, undertake the defense of (with counsel selected by the
indemnified party), and shall have the right to compromise or settle such Loss.
If such Loss is one that by its nature cannot be defended solely by the
indemnifying party, then the indemnified party shall make available all
information and assistance that the indemnifying party may reasonably request
and shall cooperate with the indemnifying party in such defense. Notwithstanding
the foregoing, BIB shall have the right at its expense to control the defense of
any action in connection with the two letters attached in Section 8.1(c) of the
Disclosure Schedules, except to the extent that such matters involve the same
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allegations and persons as any of the pending litigations set forth in Section
2.1(p) of the Disclosure Schedules, using counsel selected by BIB and shall have
the right in its sole discretion to defend, compromise or settle any such
action. Notwithstanding the foregoing, all matters relating to the defense of
Tax audits shall be governed by Section 5.14(c).
8.7 Satisfaction of Indemnification Obligations. Any Buyer
Indemnifiable Claim shall be paid from the Escrow Account, pursuant to the terms
of the Escrow Agreement, to the extent the Escrow Account contains a sufficient
amount to pay such indemnification obligation. To the extent there are not
sufficient funds available in the Escrow Account to make payment in respect of
any Buyer Indemnifiable Claim, the Sellers shall pay any unpaid amount to the
Buyer. Any indemnity payable pursuant to this Article 8 shall be paid within the
later of (a) ten (10) days after the indemnified party's request therefor or (b)
ten (10) days prior to the date on which the Loss upon which the indemnity is
based is required to be satisfied by the indemnified party.
8.8 Acknowledgment of the Xxxxxx Trust. The Xxxxxx Trust hereby
acknowledges and agrees that the $1,000,000 deposited into the Escrow Account on
behalf of The Xxxxxx Trust shall be available to satisfy any obligations of BIB
and Parent under this Agreement or under the terms of the Escrow Agreement.
8.9 Tax Effect. The parties agree to treat all indemnity payments made
under this Agreement as adjustments to the Purchase Price (or, as appropriate,
contributions to the capital of SMI or the Company) for all Tax purposes, except
as otherwise required by law.
ARTICLE 9. TERMINATION OF AGREEMENT
9.1 Termination. This Agreement may be terminated and the transactions
contemplated herein may be abandoned
(i) by mutual consent of the Representative and Buyer;
(ii) by the Representative or Buyer by either giving written
notice to the other if the Closing Date shall not have occurred on or before
September 30, 1998; provided, however, that the right to terminate this
Agreement under this Section 9.1 shall not be available to any party whose
failure to fulfill any obligation under this Agreement shall have been the cause
of, or shall have resulted in, the failure of the Closing to occur prior to such
date;
(iii) by the Representative or Buyer by either giving written
notice to the other party, if any Governmental Entity with jurisdiction over
such matters shall have issued an Order restraining, enjoining or otherwise
prohibiting any of the transactions contemplated by this Agreement and such
Order shall have become final and unappealable; or
(iv) by the Representative or Buyer by giving written notice
to the other party, if there shall have been a material breach by Buyer or any
of the Sellers, as the case may be, of his, her or its representations,
warranties, covenants or agreements contained herein or a failure of a condition
set forth herein in Articles 6 and 7, as applicable, and such breach has not
been cured to the reasonable satisfaction of the other party within fifteen (15)
Business Days after receiving written notice thereof.
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9.2 No Liabilities in the Event of Termination. In the event of any
termination of this Agreement as provided in Section 9.l above, this Agreement
shall forthwith become wholly void and of no further force and effect and there
shall be no Liability on the part of any of the parties hereto or their
respective Affiliates, officers or directors by reason of the execution hereof
(i) except as set forth in Sections 5.6, 5.7, 5.9, and 10.2 of this Agreement
which Sections shall survive the termination of this Agreement, as will the
obligations under the Confidentiality Agreement and (ii) nothing herein shall
relieve any party hereto from Liability for any breach hereof.
9.3 Specific Performance. In the event of a default hereunder by Buyer
or any of the Sellers, including, without limitation, a default or breach of
Section 5.16, or if the Closing fails to occur by reason of Buyer or any of the
Sellers' failure or refusal to perform its obligations hereunder then the
parties agree that, in addition to any other remedies available at law or in
equity, the non-defaulting party shall be entitled, at its option, to institute
and prosecute proceedings in any court of competent jurisdiction, either at law
or in equity, to enforce the specific performance of the terms and conditions of
this Agreement, it being acknowledged by the parties hereto that irreparable
damage would occur in the event that the provisions of this Agreement were not
performed in accordance with the terms hereof.
ARTICLE 10. MISCELLANEOUS.
10.1 Certain Taxes. Except as agreed to by Buyer and the
Representative or as otherwise required by Law, Buyer shall not cause SMI or the
Company to file an amended Tax Return for a taxable period ending on or prior to
the Closing Date or for a taxable period beginning prior to and ending after the
Closing Date. Each of Buyer on the one hand and the Sellers on the other, shall
pay one half of any documentary stamp and other similar transfer taxes arising
as a result of the Buyer's purchase of the Shares under this Agreement.
10.2 Governing Law. This Agreement shall be construed under and
governed by the internal laws of the State of New York without regard to its
conflict of laws provisions.
10.3 Notices. Any notice, request, demand other communication required
or permitted hereunder shall be in writing and shall be deemed to have been
given if delivered or sent by facsimile transmission, upon receipt, if sent by a
recognized worldwide or nationwide (whichever is applicable) overnight delivery
service with charges prepaid, the following day after deposited with such
carrier, or if sent by registered or certified mail upon the sooner of the
expiration of three days after deposit in United States post office facilities
properly addressed with postage prepaid or acknowledgment of receipt. All
notices and payments to a party will be sent to the addresses set forth below or
to such other address or person as such party may designate by notice to each
other party hereunder. Notice given to the Representative shall be deemed to be
notice to each of the Sellers.
TO BUYER: The Dial Corporation
00000 Xxxxx Xxxx Xxxxxxxxx
Xxxxxxxxxx, Xxxxxxx 00000-0000
Attn: Sr. Vice President and General Counsel
Fax: (000) 000-0000
With a copy to: Fried, Frank, Harris, Xxxxxxx & Xxxxxxxx
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Xxx Xxx Xxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Attn: Xxxxxxx X. Xxxxxxx, Esq.
Fax: (000) 000-0000
TO BIB or Parent: c/o Dilmun Investments, Inc.
Metro Center
Xxx Xxxxxxx Xxxxx
Xxxxxxxx, XX 00000
Attn: Xxxxxx Xxxxxxx
Fax: (000) 000-0000
With a copy to: Squadron, Ellenoff, Plesent & Xxxxxxxxx, LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxx X. Xxxxxx, Esq.
Fax: (000) 000-0000
TO REPRESENTATIVE: BIB Holdings (Bermuda) Ltd.
(as Attorney-in-Fact)
c/o Dilmun Investments, Inc.
Metro Center
Xxx Xxxxxxx Xxxxx
Xxxxxxxx, XX 00000
Attn: Xxxxxx Xxxxxxx
Fax: (000) 000-0000
To The Xxxxxx Trust: 00 Xxx Xxxx Xxxx
Xxxxxx, XX 00000
Attn: Xxxx Xxxxxx
With a copy to: Xxxxx & Xxxxxxxx, LLP
000 Xxxxxx Xxxxxx
Xxxxxx, XX 00000
Attn: Xxxxx X. Xxxxxx, Esq.
Fax: (000) 000-0000
Any notice given hereunder may be given on behalf of any party by his counsel or
other authorized representatives.
10.4 Entire Agreement; Severability. This Agreement, including the
Disclosure Schedules and the Confidentiality Agreement referred to herein and
the other writings specifically identified herein or contemplated hereby or
delivered in connection with the transactions contemplated hereby, is complete,
reflects the entire agreement of the parties with respect to its subject matter,
and supersedes all previous written or oral negotiations, commitments and
writings (including, without limitation, the Original Agreement). Whenever
possible, each provision of this Agreement shall be interpreted in such a manner
as to be effective and valid under applicable law, but if any provision of this
Agreement shall be deemed prohibited or invalid under such applicable law, such
provision shall be ineffective to the extent of such prohibition or invalidity,
and such prohibition or invalidity shall not invalidate the remainder of such
provision or the other provisions of this Agreement.
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10.5 Assignability; Binding Effect. This Agreement shall not be
assignable by any party hereto, without the prior written consent of the other
party, except that all or any of the rights of Buyer may be assigned to any
corporation newly-formed and wholly owned by Buyer for the purpose of effecting
the transactions contemplated hereby, provided that no such assignment shall
relieve Buyer of any of its liabilities hereunder. This Agreement shall be
binding upon and enforceable by, and shall inure to the benefit of, the parties
hereto and their respective successors, heirs and permitted assigns (including
without limitation the estate, administrators, executors and heirs of any
Stockholder that is an individual in the event of his death).
10.6 Construction. The captions in this Agreement are for convenience
only and shall not affect the construction or interpretation of any term or
provision hereof. The use in this Agreement of the masculine pronoun in
reference to a party hereto shall be deemed to include the feminine or neuter
pronoun, as the context may require. Unless the context otherwise requires,
words in the singular or in the plural, whether used in Section 10.11 or
elsewhere in this Agreement, shall each include the singular or the plural.
10.7 Execution in Counterparts. For the convenience of the parties and
to facilitate execution, this Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same document.
10.8 Amendments. This Agreement may not be amended or modified, nor
may compliance with any condition or covenant set forth herein be waived, except
by a writing duly and validly executed by Buyer and the Representative, on
behalf of the Sellers, or in the case of a waiver, the party or parties waiving
compliance.
10.9 No Third Party Beneficiaries. Nothing in this Agreement will
confer any rights upon any person or entity which is not a party or a successor
or permitted assignee of a party to this Agreement.
10.10 Remedies. It is specifically understood and agreed that any
breach of the provisions of this Agreement by any person subject hereto may
result in irreparable injury to the other parties hereto, that the remedy at law
alone may be an inadequate remedy for such breach, and that, in addition to any
other remedies which they may have, such other parties shall be entitled to seek
the remedy of specific performance and in addition to, and not in lieu of, any
and all other rights and remedies hereunder and under applicable law.
10.11 Certain Definitions. For purposes of this Agreement, the term:
"Affiliate" or "Affiliates" shall mean (i) with respect to a
person, any member of such person's family (including any child, step-child,
parent, step-parent, spouse, sibling, mother-in-law, father-in-law, son-in-law,
daughter-in-law, brother-in-law or sister-in-law); (ii) with respect to an
entity, any officer, director, stockholder, partner or investor in such entity
or of or in any affiliate of such entity; and (iii) with respect to a person or
entity, any person or entity which directly or indirectly Controls, is
Controlled by, or is under common Control with such person or entity.
"Agreement" shall have the meaning defined in the Recitals.
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"Assumed Depreciation Benefit" shall have the meaning defined
in Section 5.14(a).
"Audit Adjustment" shall have the meaning defined in Section
1.4(d).
"Audited Closing Balance Sheet" shall have the meaning defined
in Section 1.4(d).
"Audited Financial Statements" shall have the meaning defined
in Section 2.1(g)(i).
"Base Balance Sheet" shall have the meaning defined in Section
2.1(g)(i).
"Basket" shall have the meaning defined in Section
8.3(a)(iii).
"BIB" shall have the meaning defined in the Recitals.
"Books and Records" shall mean all the books of account and
other financial records pertaining to SMI or the Company regardless of the form
in which such records are maintained and shall expressly include, without
limitation, all such records maintained on computers and computer diskettes.
"Business" shall mean the business engaged in by SMI or the
Company and the business which SMI or the Company presently has plans to be
engaged in within the twelve (12) month period commencing on the date of this
Agreement. Such Business includes, without limitation, the selling of a branded
line of premium specialty bath and body, home and fragrance, aromatherapy and
gift products under the trade name Xxxxx Xxxxxxxx.
"Business Day" or "Business Days" shall mean any day excluding
Saturday, Sunday and any day on which banks in the State of New York are
authorized or required by Law or other governmental action to close.
"Buyer" shall have the meaning defined in the Recitals.
"Buyer Basket" shall have the meaning defined in Section
8.5(a)(iii).
"Buyer Indemnifiable Claims" shall have the meaning defined in
Section 8.1.
"Buyer Indemnified Parties" shall have the meaning defined in
Section 8.1.
"Buyer Indemnified Party" shall have the meaning defined in
Section 8.1.
"Buyer's Accountant" shall mean Deloitte & Touche LLP.
"Capital Stock" shall have the meaning defined in Section
2.1(b).
"Claim Amount" shall have the meaning defined in Section 8.7.
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"Class A Common Stock" shall have the meaning defined in
Section 2.1(b).
"Closing" shall have the meaning defined in Section 1.2.
"Closing Balance Sheet" shall have the meaning defined in
Section 1.4(b).
"Closing Date" shall have the meaning defined in Section 1.2.
"Closing Deficit" shall have the meaning defined in Section
1.4(c).
"Closing Surplus" shall have the meaning defined in Section
1.4(c).
"Code" shall have the meaning defined in Section 2.1(h)(i)(A).
"Commitment" or "Commitments" shall mean all leases, sales
orders, purchase orders and other contracts and agreements and commitments of
any nature whatsoever, whether written or oral, and including, without
limitation, all amendments thereof and supplements thereto.
"Common Stock" shall have the meaning defined in Section
2.1(b).
"Company" shall have the meaning defined in the Recitals.
"Confidential Materials" shall have the meaning defined in
Section 5.16.
"Confidentiality Agreement" shall have the meaning defined in
Section 5.9.
"Control" (including the terms "controlled by" and "under
common control with") means the possession, directly or indirectly or as trustee
or executor, of the power to direct or cause the direction of the management
policies of a person, whether through the ownership of stock, as trustee or
executor, by contract or credit arrangement or otherwise.
"Credit Agreement" shall mean the Credit Agreement between SMI
and Xxxxxx dated June 30, 1997, as amended.
"Customers, Distributors and Brokers" shall have the meaning
defined in Section 2.1(aa).
"Dilmun" shall have the meaning defined in Section 1.3.
"Disclosure Schedules" shall have the meaning defined in
Section 2.1.
"Employee Benefit Plan" shall have the meaning defined in
Section 2.1 (v)(i).
"Encumbrance" or "Encumbrances" shall mean any lien, pledge,
charge, assessment, security interest, mortgage, claim, option, easement,
imperfection of title, tenancy or other legal or equitable right of others, or
other encumbrance of any character whatsoever (including, without limitation,
any right of first refusal).
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"Environmental Law" or "Environmental Laws" shall mean,
without limitation, the Comprehensive Environmental Response, Compensation and
Liability Act, 42 U.S.C. Sections 9601 et seq., the Emergency Planning and
Community Right-to-Know Act of 1986, 42 U.S.C. Sections 11001 et seq., the
Resource Conservation and Recovery Act, 42 U.S.C. Sections 6901 et seq.,
the Toxic Substances Control Act, 15 U.S.C. Sections 2601 et seq., the
Federal Insecticide, Fungicide, and Rodenticide Act, 7 U.S.C. Sections 136
et seq., the Clean Air Act, 42 U.S.C. Sections 7401 et. seq., the Clean
Water Act, 33 U.S.C. Sections 1251 et seq., the Safe Drinking Water Act,
42 U.S.C. Sections 300f et seq., the Occupational Safety and Health Act,
29 U.S.C. Sections 651, et seq., the Hazardous Materials Transportation
Act, 49 U.S.C. Sections 1801, et seq., as any of the above statutes have
been or may be amended from time to time, all rules and regulations promulgated
pursuant to any of the above statutes, and any other foreign, federal, state or
local law, statute, ordinance, rule or regulation governing environmental,
health or safety matters, as the same have been or may be amended from time to
time, including any common law cause of action, all indemnity agreements and
other contractual obligations relating to environmental, health and safety
matters.
"Environmental Permits" shall have the meaning defined in
Section 2.1(w)(i)(A).
"ERISA" shall have the meaning defined in Section 2.1(v)(i).
"ERISA Affiliate" shall have the meaning defined in Section
2.1(v)(ii).
"Escrow Agent" shall have the meaning defined in Section 1.3.
"Escrow Amount" shall have the meaning defined in Section 1.3.
"Final Closing Balance Sheet" shall have the meaning defined
in Section 2(h)(ii)(I).
"Final Negative Tangible Net Worth" shall have the meaning
defined in Section 1.4(a)(i).
"Final Total Liabilities" shall have the meaning defined in
Section 1.4(a)(iii).
"Final Total Tangible Assets" shall have the meaning defined
in Section 1.4(a)(ii).
"Goodwill" shall mean all goodwill associated with the
Business, as that term is understood under U.S. GAAP.
"Governmental Entity" or "Governmental Entities" shall mean
any foreign or domestic (federal, state or local) government, governmental
instrumentality or governmental or other regulatory or administrative authority,
agency, commission or court.
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"Hazardous Substance" or "Hazardous Substances" shall mean any
pollutants, contaminants, substances, materials, wastes, constituents,
compounds, chemicals (including, without limitation, petroleum or any
by-products or fractions thereof, any form of natural gas, lead, asbestos or
asbestos-containing materials, polychlorinated biphenyls ("PCBs") or
PCB-containing equipment, radon and other radioactive elements, pesticides,
defoliants, and urea formaldehyde foam insulation) that are regulated by, or may
form the basis of liability under, any Environmental Laws.
"Xxxxxx" shall mean Xxxxxx Financial, Inc.
"Xxxxxx Indebtedness" shall mean all loans of SMI and the
Company from Xxxxxx, including without limitation, all indebtedness (including,
without limitation, principal, interest, fees, prepayment penalties and all
other charges, costs and expenses with respect thereto) of SMI or the Company
under the Credit Agreement between SMI and Xxxxxx, dated June 30, 1997, as
amended, and any additions thereto or refinancing thereof prior to the Closing
Date.
"Highly Compensated Employee" shall have the meaning defined
in Section 2.1 (k)(x).
"HSR Act" shall have the meaning defined in Section 1.2.
"Independent Auditor" shall have the meaning defined in
Section 1.4(e).
"Intellectual Property" shall mean (A) all inventions which
are patentable and all rights in all improvements or enhancements thereto or
derivatives therefrom, 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, without limitation, 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,
confidential and/or proprietary business information (including, without
limitation, ideas, research and development, know-how, formulas, compositions,
manufacturing and production processes and techniques, technical data, designs,
drawings, specifications, universal product codes, customer and supplier lists,
pricing and cost information and business and marketing plans and proposals),
(F) all computer software (including, without limitation, data and related
documentation), (G) all other proprietary rights, (H) all copies and tangible
embodiments of the foregoing (in whatever form or medium) and (I) all licenses
or agreements in connection with the foregoing.
"Interim Financial Statements" shall have the meaning defined
in Section 2.1(g)(i).
"The Xxxxxx Trust" shall have the meaning defined in the
Recitals.
"Knowledge of BIB" shall have the meaning defined in Section
2.2.
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"Knowledge of Each Stockholder and/or The Xxxxxx Trust" shall
have the meaning defined in Section 2.3.
"Knowledge of SMI" shall have the meaning defined in Section
2.1.
"Law" or "Laws" shall mean any foreign or domestic (federal,
state or local) law, statute, ordinance, rule or regulation or body of law or
Order.
"Leased Real Property" shall have the meaning defined in
Section 2.1(e)(ii).
"Leases" shall have the meaning defined in Section
2.1(e)(iii).
"Letters of Credit" shall mean the Risk Participation
Liability (as defined in the Credit Agreement) under the Credit Agreement,
including without limitation, all trade letters of credit, banker's acceptances
and the stand by letter of credit issued in connection with the guaranty of
lease payments with respect to the lease of the Company's facility in Dedham,
Massachusetts a recent summary of which is set forth in Exhibit 1.3, including
any additional Risk Participation Liability procured by SMI or the Company in
the ordinary course of business consistent with past practice after the date of
such summary and through the Closing Date.
"Liability" or "Liabilities" shall mean any debt, liability or
obligation, whether known or unknown, asserted or unasserted, accrued, absolute,
contingent or otherwise, whether due or to become due.
"Litigation" shall mean any notice, action, suit, proceeding,
mediation, arbitration, audit or hearing by or before any Governmental Entity or
private mediation or arbitration tribunal.
"Losses" shall have the meaning defined in Section 8.1.
"Material Adverse Effect" shall mean any material adverse
effect on or change in the business, condition (financial or otherwise), assets,
Liabilities, operations, results of operations of, SMI or the Company that is
material to SMI or the Company or the Business (other than changes or
circumstances affecting general market conditions or which are generally
applicable to the industry in which SMI or the Company engages, provided that
such affect does not adversely effect SMI or the Company in a disproportionate
manner).
"Material Intellectual Property" shall have the meaning
defined in Section 2.1(n)(ii).
"Maximum Buyer Liability Amount" shall have the meaning
defined in Section 8.5(a)(iv).
"Maximum Liability Amount" shall have the meaning defined in
Section 8.3(a)(iv).
"Order" or "Orders" shall mean any judgment, order,
injunction, ruling, decree, stipulation or award of any Governmental Entity or
private mediation or arbitration tribunal.
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"Parent" shall have the meaning defined in the Recitals.
"Permits" shall have the meaning defined in 2.1(q)(i).
"Person" or "Persons" means an individual, corporation,
limited liability company, partnership, association, trust, any unincorporated
organization or any other entity or organization, including, without limitation,
a Governmental Entity.
"Preferred Stock" shall have the meaning defined in Section
2.1(b).
"Products" shall have the meaning defined in Section 2.1(s).
"Purchase Agreement" shall have the meaning defined in Section
5.18.
"Purchase Price" shall have the meaning defined in Section
1.3.
"Reference Rate" shall have the meaning defined in Section
1.4(f).
"Representative" shall mean BIB.
"Representative's Certificate" shall have the meaning defined
in Section 1.3.
"Revised Depreciation Benefit" shall have the meaning defined
in Section 5.14(a).
"Sales Representatives" shall have the meaning defined in
Section 2.1(z).
"Securities Act" shall have the meaning defined in Section
3.1(e).
"Seller Indemnifiable Claims" shall have the meaning defined
in Section 8.4.
"Seller Indemnified Parties" shall have the meaning defined in
Section 8.4.
"Seller Indemnified Party" shall have the meaning defined in
Section 8.4.
"Sellers" shall have the meaning defined in the Recitals.
"Shares" shall have the meaning defined in the Recitals.
"SMI" shall have the meaning defined in the Recitals.
"SMI Intellectual Property" shall have the meaning defined in
Section 2.1(n)(i).
"SMI Transaction Expense Payments" shall mean the aggregate
amount of fees and expenses of the Sellers, SMI, and/or the Company or their
respective Affiliates in connection with the transactions contemplated by this
Agreement, including without limitation, the sale of the Company (whether due
and payable prior to, on or after the Closing Date).
"SMI's Accountant" shall mean Xxxxxx Xxxxxxxx LLP.
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"Squadron" shall have the meaning defined in Section 1.2.
"Stockholders" shall have the meaning defined in the Recitals.
"Subordinated Debt Agreement" shall have the meaning defined
in Section 1.3.
"Subsidiary" of a person means any corporation more than 50
percent of whose outstanding voting securities, or any partnership, joint
venture or other entity more than 50 percent of whose total equity interest, is
directly or indirectly owned by such person.
"Suppliers" shall have the meaning defined in Section 2.1(x).
"Tangible Net Worth Schedule" shall have the meaning defined
in Section 1.4(b).
"Tax" shall have the meaning defined in Section 2.1(h)(i)(B).
"Tax Return" shall have the meaning defined in Section
2.1(h)(i)(C).
"U.S. GAAP" shall mean generally accepted United States
accounting principles.
"Units" shall have the meaning defined in Section 2.1(b).
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IN WITNESS WHEREOF the parties hereto have executed this Agreement or
caused this Agreement to be executed as of the date set forth above by their
duly authorized representatives.
BUYER:
THE DIAL CORPORATION
By: /s/ Xxxx X. Xxxxx
---------------------------------------
Name: Xxxx X. Xxxxx
Title: Vice President, General Counsel
& Secretary
XXXXX XXXXXXXX, INC.
By: /s/ Xxxxxx Xxxxxxx
---------------------------------------
Name: Xxxxxx Xxxxxxx
Title: President
XXXXX XXXXXXXX L.L.C., by
its Managing Member, Xxxxx
Xxxxxxxx, Inc.
By: /s/ Xxxxxx Xxxxxxx
---------------------------------------
Name: Xxxxxx Xxxxxxx
Title: President
SELLERS:
BIB HOLDINGS (BERMUDA) LTD., as
representative of the Sellers
By: /s/ Xxxxxx Xxxxxxx
---------------------------------------
Name: Xxxxxx Xxxxxxx
Title: Authorized Signatory
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THE XXXX AND XXXXXXX XXXXXX
GENERATION SKIPPING TRUST
By: /s/ Xxxxx X. Xxxxxx
-------------------------------------
Name: Xxxxx X. Xxxxxx
Title: Trustee and not individually
By: /s/ Xxxxxxx Xxxxxx
-------------------------------------
Name: Xxxxxxx Xxxxxx
Title: Trustee and not individually
Xxxxx Xxxxxxxx Investment Partnership,
by its Member SMIP, LLC
By: /s/ Xxxxxx Xxxxxxx
-------------------------------------
Name:Xxxxxx Xxxxxxx
Title:
Telcap Limited
By: /s/ Xxxxxx Xxxxxxx
-------------------------------------
Name: Xxxxxx Xxxxxxx
Title:
Xxxxx Xxxxx Xxxxxx
By: /s/ Xxxxxx Xxxxxxx
-------------------------------------
Al Nabah Trading Co.
By: /s/ Xxxxxx Xxxxxxx
-------------------------------------
Xx Xxxxxxx United Commercial Co.
By: /s/ Xxxxxx Xxxxxxx
-------------------------------------
Xxxx Xxxxxxxx Fakhro
By: /s/ Xxxxxx Xxxxxxx
-------------------------------------
Xxxxx Xxxxxx Xx Xxxxxx
By: /s/ Xxxxxx Xxxxxxx
-------------------------------------
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Xxxxx Xxxx Xxxxxx Al Xxxxx Xxxxxx
By: /s/ Xxxxxx Xxxxxxx
----------------------------
Xxxxx Xxxx Xxxxxx Xx Xxxxx
By: /s/ Xxxxxx Xxxxxxx
----------------------------
Xxxxxxx X. Xxxxxx
By: /s/ Xxxxxx Xxxxxxx
----------------------------
Xxxx Xxxxxx
By: /s/ Xxxxxx Xxxxxxx
----------------------------
Xxxxxx X./Xxxxxx X. Xxxxxxxxx
By: /s/ Xxxxxx Xxxxxxx
----------------------------
Sameer Xxxxxx Xx Xxxxx
By: /s/ Xxxxxx Xxxxxxx
----------------------------
Xxxxxx Xxxxx Xxxxx Xxxxx
By: /s/ Xxxxxx Xxxxxxx
----------------------------
Xxxxxxxx Xxxx
By: /s/ Xxxxxx Xxxxxxx
----------------------------
Xxxxx Xxxxxx
By: /s/ Xxxxxx Xxxxxxx
----------------------------
Xxxxxxx Xxxxxx Xxxxxx
By: /s/ Xxxxxx Xxxxxxx
----------------------------
Xxxx Xxxxx
By: /s/ Xxxxxx Xxxxxxx
----------------------------
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Xxxxxxx X. Xxxxxxxxx
By: /s/ Xxxxxx Xxxxxxx
------------------------
Xxxxxxx Xxxxxx
By: /s/ Xxxxxx Xxxxxxx
------------------------
Xxxxxx Xxxxxxxx Hoodbhoy
By: /s/ Xxxxxx Xxxxxxx
------------------------
Xxxxx X. Knights
By: /s/ Xxxxxx Xxxxxxx
------------------------
Xxxxxx Xxxxxx
By: /s/ Xxxxxx Xxxxxxx
------------------------
BIB HOLDINGS (BERMUDA) LTD., as
Attorney-in-Fact
By: Xxxxxx Xxxxxxx
BAHRAIN INTERNATIONL BANK (E.C.)
By: /s/ Xxxxx X. XxXxxxxxx
------------------------
Name: Xxxxx X. XxXxxxxxx
Title: Chief Executive
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