ASSET PURCHASE AGREEMENT
among
XXXXXXX WORLDWIDE ASSOCIATES, INC.
a Wisconsin corporation
("PURCHASER"),
SONIFORM, INC.,
a California corporation
("SELLER"),
and
MERIDIAN SPORTS INCORPORATED,
a Delaware corporation
("PARENT")
Date: October 8, 1997
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS
1.1 Definitions..................................................... 1
ARTICLE II
SALE AND PURCHASE OF ASSETS
2.1 Purchase of Assets.............................................. 10
2.2 Excluded Assets................................................. 12
2.3 Assumed Liabilities............................................. 13
2.4 Closing/Closing Conditions...................................... 14
2.5 Payment of Purchase Price....................................... 17
2.6 Consistent Treatment............................................ 20
2.7 Procedures for Purchased Assets Not
Transferable.................................................... 20
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND SELLER
3.1 Due Incorporation; Subsidiaries................................. 21
3.2 Due Authorization............................................... 21
3.3 Consents and Approvals.......................................... 21
3.4 Financial Statements............................................ 22
3.5 No Adverse Effects or Changes................................... 22
3.6 Title to Properties............................................. 23
3.7 ................................................................ 24
3.8 Personal Property............................................... 25
3.9 Inventories..................................................... 25
3.10 No Third Party Options.......................................... 25
3.11 Intellectual Property........................................... 25
3.12 Contracts....................................................... 26
3.13 Permits......................................................... 29
3.14 Insurance....................................................... 29
3.15 Employee Benefit Plans and Employment
Agreements...................................................... 29
3.16 Employees....................................................... 32
3.17 Taxes .......................................................... 32
3.18 No Defaults or Violations....................................... 33
3.19 Environmental Matters........................................... 34
3.20 Litigation; Product Liabilities................................. 35
3.21 Intentionally omitted........................................... 36
3.22 Related Parties................................................. 36
3.23 Intercompany Services and Transactions.......................... 36
3.24 Product Warranties.............................................. 36
3.25 Brokers......................................................... 36
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Page
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PURCHASER
4.1 Due Incorporation............................................... 37
4.2 Due Authorization............................................... 37
4.3 Consents and Approvals.......................................... 37
ARTICLE V
COVENANTS
5.1 Noncompetition; Confidentiality................................. 38
5.2 Exclusivity..................................................... 39
5.3 Use of Name..................................................... 39
5.4 Product Liability............................................... 40
5.5 Employees and Employee Benefits................................. 40
5.6 Access ......................................................... 45
5.7 Production of Witnesses and Individuals......................... 46
5.8 Environmental Matters........................................... 46
5.9 Accounts Receivable............................................. 46
6.1 Survival........................................................ 47
6.2 Indemnification by Parent and Seller............................ 48
6.3 Indemnification by Purchaser.................................... 49
6.4 Claims ......................................................... 49
6.5 Third Party Claims; Assumption of Defense....................... 50
6.6 Payment......................................................... 51
6.7 Effect of Investigation......................................... 52
6.8 Indemnification for Environmental Matters....................... 52
7.2 Amendment....................................................... 52
7.3 Notices......................................................... 52
7.4 Waivers......................................................... 53
7.5 Counterparts.................................................... 54
7.6 Interpretation.................................................. 54
7.7 Applicable Law.................................................. 54
7.8 Binding Agreement............................................... 54
7.9 No Third Party Beneficiaries.................................... 55
7.10 Publicity....................................................... 55
7.11 Further Assurances.............................................. 55
7.12 Severability.................................................... 55
7.13 Remedies Cumulative............................................. 55
7.14 Liability of Parent and Seller.................................. 55
7.15 Allocation of Taxes............................................. 56
7.16 Assignment...................................................... 56
7.17 Entire Understanding............................................ 56
EXHIBITS
A - Intentionally omitted
B - Intentionally omitted
C - Form of Lease
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SCHEDULES
1.1(e) - Permitted Exceptions
2.2(a) - Excluded Assets -- Contracts and
Agreements
2.6 - Purchase Price Allocation
3.1 - Jurisdictions
3.3 - Consents and Approvals
3.4 - Financial Statements
3.5 - Adverse Effects or Changes
3.6 - Title to Properties -- Personal and Real
Property Leases
3.7(a) - Real Property Leases
3.7(b) - Maintenance of Leased Premises and Mexican
Premises
3.8(a) - Personal Property -- Equipment and
Vehicles
3.8(b) - Personal Property -- Tooling
3.9 - Inventory Exceptions
3.11 - Intellectual Property
3.11(a) - Intellectual Property - Licenses
3.11(b) - Intellectual Property - Patent and Trade-
xxxx Disputes
3.12 - Contracts
3.12(b) - Contracts -- Not in the Ordinary Course of
the Business
3.13 - Permits
3.14 - Insurance
3.15(a) - Employee Benefit Plans and Employment
Agreements
3.15(b) - Employee Benefit Plans and Employment
Agreements -- Exception to "Employee
Pension Benefit Plan" Qualifications
3.16 - Employees
3.17(b) - Tax Audits
3.17(c) - Tax Elections
3.18 - No Defaults of Violations
3.19 - Environmental Matters
3.20(a) - Litigation and Product Matters
3.22 - Related Parties
3.23 - Intercompany Services and Transactions
3.24 - Product Warranties
5.5(a) - Employees not Offered Employment
5.5(f) - Employees who are not Transferred Employees
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ASSET PURCHASE AGREEMENT
THIS AGREEMENT is made as of the 8th day of October, 1997, by and
among Xxxxxxx Worldwide Associates, Inc., a Wisconsin corporation
("PURCHASER"), Soniform, Inc., a California corporation ("SELLER"), and
Meridian Sports Incorporated, a Delaware corporation ("PARENT"). Certain
capitalized terms used herein are defined in Article I below.
W I T N E S S E T H:
WHEREAS, Purchaser wishes to purchase from Seller, and Seller desires
to sell to Purchaser, and Parent desires to cause Seller to sell to Purchaser
all of the Purchased Assets (as defined below).
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants, agreements and warranties herein contained, the parties agree as
follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. The following terms shall have the following meanings
for the purposes of this Agreement:
"ACTIVE EMPLOYEE" shall have the meaning set forth in Section 5.5
hereof.
"AFFILIATE" shall mean, with respect to any specified Person, (a) any
other Person which, directly or indirectly, owns or controls, is under common
ownership or control with, or is owned or controlled by, such specified Person,
(b) any other Person which is a director, officer or partner or is, directly or
indirectly, the beneficial owner of fifty (50) percent or more of any class or
series of equity securities of the specified Person or a Person described in
clause (a) of this paragraph, or (c) any other Person of which the specified
Person is a director, officer or partner or is, directly or indirectly, the
beneficial owner of fifty (50) percent or more of any class or series of equity
securities.
"AGREEMENT" shall mean this Asset Purchase Agreement, including all
exhibits and schedules hereto, as it may be amended in writing and signed by
the parties hereto from time to time.
"AMENDED ARTICLES OF INCORPORATION" shall mean the Articles of
Incorporation, as amended, of Seller, as in effect on the date hereof.
"ASSIGNMENT AND ASSUMPTION AGREEMENT" means that certain assignment
and assumption agreement and xxxx of sale, to be dated the Closing Date.
"ASSUMED LIABILITIES" shall have the meaning set forth in Section 2.3
hereof.
"BENEFIT ARRANGEMENT" shall have the meaning set forth in Section 3.15
hereof.
"BUSINESS" shall mean the business conducted by Seller as of the date
of this Agreement and during the one (1) year period prior to the date hereof,
including, without limitation, the manufacture and marketing of buoyancy
compensators and related scuba diving products and accessories.
"BUSINESS DAY" shall mean any day other than (a) any Saturday or
Sunday or (b) any other day on which banks located in New York City generally
are closed for business.
"BY-LAWS" shall mean the By-laws of the Seller, as in effect on the
date hereof.
"CLOSING" shall mean the consummation of the transactions contemplated
herein.
"CLOSING DATE" shall mean the date on which the Closing occurs or is
to occur.
"CLOSING NET TANGIBLE EQUITY" shall have the meaning set forth in
Section 2.5 hereof.
"CLOSING SCHEDULE" shall have the meaning set forth in Section 2.5
hereof.
"CODE" shall mean the Internal Revenue Code of 1986, as amended.
"CONTRACT" shall mean any contract, lease, commitment, understanding,
sales order, purchase order, agreement, indenture, mortgage, note, bond, right,
warrant, instrument, plan, permit or license, whether written or oral, which is
intended or purports to be binding and enforceable.
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"EMPLOYEE PENSION BENEFIT PLAN" shall have the meaning set forth in
Section 3.15 hereof.
"EMPLOYEE PLAN" shall have the meaning set forth in Section 3.15
hereof.
"ENVIRONMENTAL LAW" shall mean any applicable Laws pertaining to (a)
the protection of human health, the environment (including air, surface water,
ground water, land surface or subsurface strata), or the protection of natural
resources; (b) the treatment, storage, disposal, generation, transportation or
Release of Hazardous Substances; (c) the protection of wetlands; (d)
underground or other storage tanks or vessels, abandoned or discarded barrels,
containers and other closed receptacles; and including without limitation (e)
the Comprehensive Environmental Response, Compensation, and Liability Act
("CERCLA") (42 U.S.C. ss. 9601 et seq.), the Resource Conservation and Recovery
Act ("RCRA") (42 U.S.C. ss. 6901 et seq.), the Clean Water Act (33 U.S.C. ss.
1251 et seq.), the Clean Air Act (33 U.S.C. ss. 7401 et seq.), the Toxic
Substances Control Act (15 U.S.C. ss. 7401 et seq.) and the Federal
Insecticide, Fungicide, and Rodenticide Act (7 U.S.C. ss. 136 et seq.), and the
regulations promulgated pursuant to any of the foregoing, and any such
applicable foreign, state or local statutes, and the regulations promulgated
pursuant thereto, as such laws have been and may be amended or supplemented
through the Closing Date.
"ENVIRONMENTAL PERMIT" shall mean any permit, license, approval,
consent or other authorization required by or pursuant to any applicable
Environmental Law.
"EQUIPMENT" shall have the meaning set forth in Section 2.1 hereof.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"ERISA AFFILIATE" shall have the meaning set forth in Section 3.15
hereof.
"EXCLUDED ASSETS" shall have the meaning set forth in Section 2.2
hereof.
"FINANCIAL STATEMENTS" shall mean, collectively, Seller's unaudited
statement of net assets at December 31, 1996, unaudited statement of
operations, unaudit-
3
ed statement of changes in net investment, and unaudited statement of cash
flows, for the twelve (12) month period ended December 31, 1996, the respective
notes thereto, and the Interim Financial Statements.
"GAAP" shall mean U.S. generally accepted accounting principles in
effect on the date hereof.
"GOVERNMENTAL AUTHORITY" shall mean the government of the United
States or any foreign country, any state or political subdivision thereof, or
any entity, body or authority exercising executive, legislative, judicial,
regulatory, administrative or other governmental functions or any court,
department, commission, board, agency, instrumentality or administrative body
of any of the foregoing.
"HAZARDOUS SUBSTANCE" shall mean any substance, material or waste
which is regulated or identified as hazardous or toxic under any provision of
any Environmental Law.
"INTELLECTUAL PROPERTY" shall have the meaning set forth in Section
2.1 hereof.
"INTELLECTUAL PROPERTY ASSIGNMENT" shall mean the assignment of the
Intellectual Property, to be dated the Closing Date.
"INTERIM FINANCIAL STATEMENTS" shall mean, collectively, Seller's
unaudited statement of operations and unaudited statement of cash flows, each
for the eight (8) month period ended August 31, 1997, the unaudited statement
of net assets at August 31, 1997 (the "INTERIM BALANCE SHEET"), and the
respective notes thereto.
"INVENTORIES" shall have the meaning set forth in Section 2.1 hereof.
"IRS" shall have the meaning set forth in Section 5.5 hereof.
"LAW" shall mean any law, statute, regulation, ordinance, rule, order,
decree, judgment, consent decree, settlement agreement or governmental
requirement enacted, promulgated or entered into, agreed to or imposed by any
Governmental Authority.
"LEASED PREMISES" shall mean the property subject to the Leases.
4
"LEASES" shall mean the leases described on Schedule 3.7(a) hereto.
"LIEN" shall mean any mortgage, lien, charge, restriction, pledge,
security interest, option, claim, easement, encroachment or encumbrance.
"LOSS" or "LOSSES" shall mean all liabilities, losses (excluding
consequential damages), costs, claims, damages, penalties and expenses
(including reasonable attorneys' fees and expenses and reasonable investigation
and litigation costs incurred in relation to the indemnified matter or in
enforcing such indemnity).
"MATERIAL ADVERSE CHANGE" shall mean a change in the business,
operations, assets, liabilities, results of operations, cash flows or financial
condition of Seller or the Business, which could reasonably be expected to be
materially adverse, other than the adverse reaction of any customer or supplier
of Seller to the fact that Purchaser is acquiring the Purchased Assets.
"MATERIAL CONTRACTS" shall mean all of the Contracts to which Seller
is a party or to which its assets are subject which are listed, described or
required to be listed or described in Section 3.12 (a) of this Agreement or any
schedule thereto except Contracts calling for aggregate payments of less than
$25,000.
"MEXICAN AGREEMENT" shall mean collectively the Subcontracting
Services Agreement effective January 2, 1996 by and between North American
Product Sharing, Inc. ("NAPS") and Seller, the letter dated April 7, 1994 from
NAPS to Seller, the letter dated April 17, 1996 from North American Product
Sharing de Mexico, S.A. de C.V. ("NAPS DE MEXICO"), and the Comadatum Agreement
dated as of November 5, 1993 between Seller and NAPS de Mexico.
"MEXICAN PREMISES" shall mean the facility located at Calle E No. 4
Fracc. Xxxxx, Edificio E-1, Desarollo Industrial de Xxxxxxx Xx Xxxx, Tijuana,
Baja California, Mexico, where the Seller conducts manufacturing operations.
"MOST RECENT NET TANGIBLE EQUITY" shall have the meaning set forth in
Section 2.5 hereof.
"MULTIEMPLOYER PLAN" shall have the meaning set forth in Section 3.15
hereof.
5
"NET TANGIBLE EQUITY" shall mean the tangible assets included in the
Purchased Assets reduced by the amount of the Assumed Liabilities, as at the
date of determination, determined in accordance with Section 2.5 hereof.
"OTHER TRANSACTION DOCUMENTS" shall mean the lease attached as Exhibit
C hereto in the form executed by the parties.
"PARENT SAVINGS PLAN" shall have the meaning set forth in Section 3.15
hereof.
"PERMITS" shall have the meaning set forth in Section 2.1 hereof.
"PERMITTED EXCEPTIONS" shall mean (a) taxes and general and special
assessments not yet due and payable and not in default on the date of
determination and payable without penalty and interest and (b) Liens set forth
on Schedule 1.1(e), hereto, if any, provided that such Liens shall be released
on or prior to the Closing Date and shall not constitute Permitted Exceptions
following the Closing Date.
"PERSON" shall mean any individual, corporation, proprietorship, firm,
partnership, limited partnership, limited liability company, trust,
association, Governmental Authority or other entity.
"PRIME RATE" shall have the meaning set forth in Section 2.5 hereof.
"PRODUCT" shall have the meaning set forth in Section 3.20(b) hereof.
"PURCHASE PRICE" shall mean the Net Tangible Equity minus $500,000, as
subject to adjustment in accordance with Section 2.5 hereof.
"PURCHASED ASSETS" shall have the meaning set forth in Section 2.1
hereof.
"PURCHASER SAVINGS PLAN" shall have the meaning set forth in Section
5.5 hereof.
"PURCHASER'S AUDITORS" shall have the meaning set forth in Section 2.5
hereof.
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"PURCHASER'S ENVIRONMENTAL OBLIGATIONS" shall mean any liability under
any Environmental Law to the extent resulting from Purchaser's operations on
the Leased Premises after the Closing Date.
"PURCHASER'S PLANS" shall have the meaning set forth in Section 5.5
hereof.
"RECEIVABLES" shall have the meaning set forth in Section 2.2 hereof.
"REFEREE" shall have the meaning set forth in Section 2.5 hereof.
"RELEASE" shall mean any release, spill, effluent, emission,
leaking, pumping, injection, deposit, disposal, discharge, dispersal, leaching
or migration into the environment or movement through or in the air, soil,
surface water or ground water or other property.
"REMEDIAL ACTION" shall mean all actions, including any studies,
investigations, capital expenditures and/or operational expenditures, required
by a Governmental Authority or required under any Environmental Law, to (a)
clean up, remove, treat, or in any other way ameliorate or address any
Hazardous Substances or other substance in the environment; (b) prevent the
Release or threat of Release, or minimize the further Release of any Hazardous
Substances so it does not endanger or threaten to endanger the public health or
environment; or (c) bring a Person into compliance with any Environmental Law.
"SAVINGS TRANSFER DATE" shall have the meaning set forth in Section
5.5 hereof.
"SEC" shall have the meaning set forth in Section 3.3 hereof.
"SELLER ASSIGNED CONTRACTS" shall have the meaning set forth in
Section 2.1 hereof.
"SELLER'S AUDITORS" shall have the meaning set forth in Section 2.5
hereof.
"SELLER'S ENVIRONMENTAL OBLIGATIONS" shall mean any liability under
any Environmental Law other than a Purchaser's Environmental Obligation which
relates in any way to the operation of the business prior to the Closing
7
Date or ownership of any real property on or prior to the Closing Date.
"SELLER'S LIABILITIES" shall mean all debts, claims, obligations or
other liabilities of Seller or any of its Affiliates, absolute or contingent,
known or unknown, including, without limitation:
(a) all liabilities with respect to any Taxes, including
state, local or federal Taxes (including interest, penalties and
additions to such Taxes) for, or properly attributable to, any periods
ending on or prior to the Closing Date (including, with respect to any
taxable period that includes but does not end on the Closing Date,
Taxes with respect to the portion of such period that includes and
ends on the Closing Date calculated as if such taxable period ended at
the consummation of the Closing on the Closing Date), including any
Taxes payable by Seller as a result of the consummation of the
transactions contemplated by this Agreement (except to the extent that
Purchaser expressly assumes responsibility for taxes pursuant to
Section 7.1 hereof);
(b) subject to the provisions of Section 5.8 hereof, all
liabilities arising from Seller's Environmental Obligations;
(c) all accounts payable not constituting Assumed
Liabilities and all liabilities for borrowed funds;
(d) all liabilities (i) not specifically assumed by Purchaser
pursuant to this Agreement or (ii) related to any Excluded Asset;
(e) all liabilities and obligations for product liability
matters to the extent that Seller retains such liabilities and
obligations pursuant to Section 5.4(a) hereof;
(f) all liabilities relating to any litigation arising out of
or in any way relating to or resulting from the Seller's conduct of
the Business on or prior to the Closing Date including, without
limitation, the matters set forth on Schedule 3.20(a) hereto, except
for litigation (i) to the extent arising out of warranty claims and
(ii) as otherwise provided for in this Agreement;
8
(g) all liabilities to a third party for infringement by a
product manufactured or sold prior to the Closing Date of such party's
Intellectual Property rights;
(h) all liabilities of Seller arising from or
relating to this Agreement;
(i) all liabilities of Seller for any violation of or failure
to comply prior to the Closing Date with any law, order, writ,
injunction of any Governmental Authority;
(j) all royalty liability, if any, with respect to any
alleged infringement, during the period commencing with the Closing
Date and ending two months after the Closing Date, of U.S. Patent No.
5,641,247 by reason of sales by Purchaser of allegedly infringing
product designed and/or manufactured by Seller.
"TAX RETURN" shall mean any report, return or other information
required to be supplied to a Governmental Authority in connection with any
Taxes.
"TAXES" shall mean all taxes, charges, fees, duties (including customs
duties), levies or other assessments, including without limitation, income,
gross receipts, net proceeds, ad valorem, turnover, real and personal property
(tangible and intangible), sales, use, franchise, excise, value added, stamp,
leasing, lease, user, transfer, fuel, excess profits, occupational, interest
equalization, windfall profits, severance, license, payroll, environmental,
capital stock, disability, employee's income withholding, other withholding,
unemployment and Social Security taxes, which are imposed by any Governmental
Authority, and such term shall include any interest, penalties or additions to
tax attributable thereto.
"THRESHOLD" shall have the meaning set forth in Section 6.2(a) hereof.
"TOOLING" shall have the meaning set forth in Section 2.1 hereof.
"TRANSFERRED EMPLOYEES" shall have the meaning set forth in Section
5.5 hereof.
9
"VEHICLES" shall have the meaning set forth in Section 2.1 hereto.
ARTICLE II
SALE AND PURCHASE OF ASSETS
2.1 Purchase of Assets. Subject to the terms and conditions of this
Agreement, at the Closing, Seller shall sell, assign, convey, transfer and
deliver to Purchaser, and Purchaser shall purchase, acquire and take assignment
and delivery of, the Purchased Assets. The "PURCHASED ASSETS" shall mean all
assets of Seller at the Closing Date other than the Excluded Assets, wherever
located and in whatever form, real, personal, tangible or intangible,
including, without limitation, all of Seller's right, title and interest in and
to the following:
(a) Equipment. All machinery, equipment, furniture,
telephones, spare and replacement parts, supplies, maintenance
equipment, computer equipment, materials and other personal property
located or usually located at the Leased Premises or the Mexican
Premises or otherwise used in connection with or necessary to the
Business (collectively, the "EQUIPMENT"), including the Equipment
described on Schedule 3.8(a) hereto;
(b) Vehicles. All trucks, trailers, automobiles and other
vehicles of Seller used in connection with the Business (collectively,
the "VEHICLES"), including the Vehicles described on Schedule 3.8(a)
hereto;
(c) Inventories. All inventories, wherever
located, including all raw materials, work in process, finished
goods and supplies inventories (the "INVENTORIES");
(d) Information and Records. All records, files, notebooks,
confidential and nonconfidential information (including electronic
information), price lists, marketing information, sales records,
customer lists and files (including customer credit and collection
information), legal and accounting records, personnel and labor
relations records, employee benefits and compensation plans and
records, environmental control, monitoring and test records,
equipment, tax records, historical and financial
10
records and files, and all other proprietary information related to,
or used in connection with, the Business;
(e) Intellectual Property. All trade names, trade dress,
corporate names and logos, trademarks, service marks, patents,
copyrights (and any registrations with any Governmental Authority of,
and applications for registration pending with respect to, any of the
foregoing), trade secrets, mask works, technology, inventions,
processes, designs, know-how, computer software and data, formulas,
prototypes, enhancements, improvements, or other tangible work product
or technology or process developed, created or otherwise acquired in
connection with the design, research and development, market research
or marketing of products of the Business, goodwill, any licenses
related to any of the foregoing, to the extent assignable, and all
other intangible intellectual property assets related to the Business,
including (without limitation) those items described on Schedule 3.11
hereto, including such rights to xxx and recover for past infringement
or misappropriation thereof, whether presently pending or not, and to
receive all income, royalties, damages and payments for past and
future infringements thereof (collectively, the "INTELLECTUAL
PROPERTY");
(f) Permits. To the extent assignable, all licenses, permits,
variances, interim permits, permit applications, approvals or other
authorizations under any Law applicable to the Business or otherwise
required in connection with the Business or the ownership or operation
of the Purchased Assets, including those listed on Schedule 3.13
hereto (the "PERMITS");
(g) Contracts. All contracts of the Seller related to the
Business ("SELLER ASSIGNED CONTRACTS"), (i) set forth on Schedule 3.12
hereto other than items 5, 6 and 7 of Schedule 3.12 which are Excluded
Assets, (ii) the leases set forth on Schedule 3.7(a) hereto, (iii) the
Mexican Agreement, (iv) the leases set forth on Schedule 3.6 hereto
and (v) all marketing or promotional contracts, all contracts for the
purchase of goods, services and materials entered into in the ordinary
course of the Business, contracts for the sale of goods or services
entered into in the ordinary course of the Business and all customer
deposits relating thereto, so
11
long as any contract under this Section 2.1(g)(v) does not
individually involve consideration or other expenditure by Seller
payable on or after the Closing Date in excess of $75,000 or
performance by Seller over a period of more than one year after the
Closing Date;
(h) Intentionally omitted.
(i) Tooling. All tools, dies, molds, plugs and castings
(collectively, the "TOOLING") used in connection with the Business,
including, without limitation, the Tooling described on Schedule
3.8(b) hereto;
(j) Phone Numbers. All phone numbers and
facsimile numbers used in the Business;
(k) Other Assets. To the extent not included
in the foregoing, any assets which were included in the Interim
Balance Sheet.
2.2 Excluded Assets. Notwithstanding the foregoing Section 2.1, Seller
shall not assign and transfer, and Purchaser shall not take assignment of (a)
any Contract or agreement listed on Schedule 2.2(a) hereto, (b) all books and
records of Seller to the extent related to the other Excluded Assets or the
Seller's Liabilities and not to the Purchased Assets or Assumed Liabilities,
(c) all claims of Seller for refunds, credits, carrybacks or carryforwards in
connection with any Taxes for tax periods ending on or prior to the Closing
Date and the proceeds thereof, (d) all insurance policies, binders and related
prepaid expenses and any amounts receivable in respect of such insurance
policies other than insurance policies providing benefits to employees of the
Business to the extent such policies are assigned, (e) all rights, claims,
demands and causes of action which Seller or any of its Affiliates may have
against any Person to the extent related to any of the Seller's Liabilities or
any Excluded Assets, including all proceeds remitted to Seller or any of its
Affiliates from claims, rights, demands and causes of action with respect
thereto, or to any Assumed Liability to the extent Purchaser has been fully
indemnified by Seller with respect to such Assumed Liability, (f) all of
Seller's cash and cash equivalents on hand and all xxxxx cash located at
operating facilities of the Business (g) any and all claims, rights, demands
and causes of action in respect of the account receivable of the Business due
from Diverite, (h) the
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Lease between Soniform and San Diego County dated October 17, 1978, as
amended on January 3, 1984 and April 6, 1994 and any leasehold improvements to
the property which is subject of such lease and (i) all accounts receivables,
notes receivables and other receivables as of the Closing Date (the
"RECEIVABLES") arising from the operation of the Business (collectively, the
"EXCLUDED ASSETS"). The Excluded Assets shall be retained by Seller and are not
being sold or assigned to Purchaser hereunder.
2.3 Assumed Liabilities. At the Closing, Purchaser shall assume, and
agree to pay, perform, fulfill and discharge, the following obligations of
Seller:
(a) all liabilities and obligations of Seller under the
Seller Assigned Contracts and Permits (other than to the extent such
obligations would be a violation of Law);
(b) all liabilities and obligations of Seller for warranty
claims for goods sourced, manufactured or sold by Seller on or before
the Closing Date;
(c) all employment-related liabilities and obligations of a
nature disclosed on the Closing Date Balance Sheet other than any FAS
106 liabilities as of the Closing Date for post-retirement welfare
benefits with respect to current or former employees of Seller and
those assumed pursuant to Section 5.5 hereof;
(d) (i) all accounts payable and liabilities of Seller that
are reflected on the Interim Balance Sheet unless such liabilities and
obligations have been paid or discharged prior to the Closing Date but
only to the extent reflected or reserved against on the Closing Date
Balance Sheet, and (ii) such categories of liabilities and obligations
incurred in the ordinary course of the Business consistent with past
practice since the date of the Interim Balance Sheet, including,
without limitation, all accounts payable, accrued expenses and trade
obligations;
(e) any liabilities arising from any Purchaser's
Environmental Obligations at the Leased Premises;
13
(f) liabilities and obligations for product liability matters
to the extent that Purchaser assumes such liabilities and obligations
pursuant to Section 5.4(b) hereof.
The obligations of Purchaser under this Section 2.3 shall be referred to
collectively as the "ASSUMED LIABILITIES" and shall not include the Seller's
Liabilities which are being retained by Seller. Except as specifically set
forth above, neither Purchaser nor any of its Affiliates shall assume or
otherwise be liable in respect of any debt, claim, obligation or other
liability of Seller or any of its Affiliates whatsoever, including any payable,
debt, tort, violation of Law or breach of any Contract.
2.4 Closing/Closing Conditions.
(a) The Closing shall take place at the offices of Xxxxx &
Lardner, San Diego, California at 10:00 a.m., local time, on October 8, 1997 or
at such other time and place as shall be agreed upon in writing by the parties
hereto. The Closing, and all transactions to occur at the Closing, shall be
deemed to have taken place at, and shall be effective as of, the close of
business on the Closing Date.
(b) The obligations of Purchaser under this Article II are
subject to the satisfaction or waiver of the following conditions precedent on
or prior to the Closing Date:
(i) Representations and Warranties True on the
Closing Date. Each of the representations and warranties made
by Seller and Parent in this Agreement, and the statements
contained in the Disclosure Schedule or in any instrument,
list, certificate or writing delivered by Seller pursuant to
this Agreement, shall be true and correct in all material
respects when made and shall be true and correct in all
material respects at and as of the Closing Date as though
such representations and warranties were made or given on and
as of the Closing Date, except for any changes permitted by
the terms of this Agreement or consented to in writing by
Purchaser. For purposes of determining whether the condition
set forth in this paragraph has been complied with, the
Disclosure Schedule attached to this Agreement as executed by
the parties shall be true and correct in all mate-
14
rial respects at and as of the Closing Date. To the extent
that the Disclosure Schedule is amended or supplemented after
execution of this Agreement and prior to the Closing, such
amended and supplemented Disclosure Schedule shall govern
whether there has been a breach of any representation or
warranty by Parent or Seller.
(ii) Compliance with Agreement. Seller and Parent
shall have in all material respects performed and complied
with all of their agreements and obligations under this
Agreement which are to be performed or complied with by them
prior to or on the Closing Date, including the delivery of a
lease for the Leased Premises in the form of Exhibit C
hereto.
(iii) Absence of Litigation. No litigation shall
have been commenced, and no investigation by any Government
Entity shall have been commenced, against Purchaser, Seller
or any of the affiliates, officers or directors of any of
them, with respect to the transactions contemplated hereby.
(iv) Consents and Approvals. All material approvals,
consents and waivers that are required to effect the
transactions contemplated hereby shall have been received,
and executed counterparts thereof shall have been delivered
to Purchaser not less than one business day prior to the
Closing.
(v) Environmental Audit. The results of the
environmental audit conducted by Purchaser shall not have
disclosed any past or present condition, process or practice
with respect to Seller or any property owned, occupied or
operated by Seller which is not in material compliance with
all applicable Environmental Laws or which otherwise requires
remediation under any Environmental Law, if a reasonable
estimate by Purchaser of the cost of remediation, or the
potential liability to third persons (including statutory
liability) arising from such condition, process or practice,
or the cost of bringing Seller or such property into full
compliance with all applicable Environmental Laws, would
exceed $500,000 in the aggregate
15
with respect to all matters described in this paragraph.
(vi) No Material Adverse Change. No Material Adverse
Change shall have occurred since the date of this Agreement.
(c) The obligations of Seller and Parent under this Article
II are subject to the satisfaction or waiver of the following conditions on or
prior to the Closing Date:
(i) Representations and Warranties True on the
Closing Date. Each of the representations and warranties made
by Purchaser in this Agreement, and the statements contained
in any instrument, list, certificate or writing delivered by
Purchaser pursuant to this Agreement, shall be true and
correct in all material respects when made and shall be true
and correct in all material respects at and as of the Closing
Date as though such representations and warranties were made
or given on and as of the Closing Date, except for any
changes permitted by the terms of this Agreement or consented
to in writing by Seller.
(ii) Compliance with Agreement. Purchaser shall have
in all material respects performed and complied with all of
its agreements and obligations under this Agreement which are
to be performed or complied with by them prior to or on the
Closing Date.
(iii) Absence of Litigation. No litigation shall
have been commenced or threatened, and no investigation by
any Government Entity shall have been commenced, against
Seller, Purchaser or any of the affiliates, officers or
directors of any of them, with respect to the transactions
contemplated hereby.
(iv) Consents and Approvals. All approvals, consents
and waivers that are required to effect the transactions
contemplated hereby shall have been received, and executed
counterparts thereof shall have been delivered to Seller not
less than two business days prior to the Closing.
16
2.5 Payment of Purchase Price.
(a) In consideration for the transfer of the Purchased Assets
to Purchaser, Purchaser shall pay Seller, by electronic bank transfer directly
to Parent an amount equal to 90% the Purchase Price calculated as of the end of
the calendar month most recently closed preceding the month in which the
Closing Date occurs, and prepared on a basis consistent with the Interim
Balance Sheet (the "MOST RECENT NET TANGIBLE EQUITY").
(b) As soon as practicable and in no event later than
forty-five (45) days after the Closing Date, Seller shall deliver to Purchaser
a balance sheet of the Company as of the close of business on the Closing Date
(the "CLOSING BALANCE SHEET DATE"), prepared in accordance with GAAP
consistently applied and a schedule setting forth the Net Tangible Equity,
determined in accordance with GAAP as of such date, provided that, in
determining the Net Tangible Equity (i) Inventories will be stated on a
first-in, first-out basis based upon the physical inventory count of August 29,
1997 rolled forward to the Closing Balance Sheet Date in accordance with past
practice and (ii) all reserves and accruals relating to the Assumed Liabilities
as stated on Seller's balance sheet as of the Closing Balance Sheet Date shall
be in accordance with GAAP consistently applied. Notwithstanding anything
herein to the contrary, the parties agree that the inventory reserve on the
Closing Schedule shall be $100,000. In addition, in the event that any cash is
included in the Purchased Assets, Purchaser shall remit such cash to Seller as
promptly as possible. In the event such cash is not remitted to Seller, the
parties agree that such cash shall be included as a Purchased Asset for
purposes of the calculation of Net Tangible Equity on the Closing Schedule.
Purchaser and Seller and their respective representatives have jointly observed
and participated in, all physical inventories taken in connection with
preparation of such schedule. The schedule delivered pursuant to this section
shall be audited and accompanied by a report of Ernst & Young LLP, Seller's
independent accountants ("SELLER'S AUDITORS"), to the effect that such schedule
and any related notes thereto were prepared in accordance with GAAP
consistently applied and this Agreement. In rendering the foregoing audit and
report, Seller's Auditors shall permit KPMG Peat Marwick, LLP, Purchaser's
independent accountants ("PURCHASER'S AUDITORS"), to review, at their request,
following receipt of the report of Seller's Auditors, all
17
work papers, schedules and calculations of Seller's Auditors related thereto.
(c) If Purchaser does not dispute such audited schedule and
report, such audited schedule shall be the "CLOSING SCHEDULE." If Purchaser
disputes such audited schedule or report or any item included therein, such
dispute shall be resolved in the following manner:
(i) Purchaser shall notify Seller in writing within
twenty-one (21) days after Purchaser's receipt of the audited
schedule, which notice shall specify in reasonable detail the
nature of the dispute;
(ii) during the thirty (30) day period following
Seller's receipt of such notice, Seller and Purchaser shall
attempt to resolve such dispute; and
(iii) if at the end of such thirty (30) day period
Seller and Purchaser shall have failed to resolve such
dispute in writing, the matter shall be referred to the
offices of Xxxxxx Xxxxxxxx & Co. (the "REFEREE"). The Referee
shall act as an arbitrator and shall issue its report
resolving all disputes as to the audited schedule within
thirty (30) days after such dispute is referred to it. The
audited schedule, as modified by any adjustments determined
to be appropriate by the Referee, shall then be the Closing
Schedule. Each of the parties hereto shall bear all costs and
expenses incurred by it in connection with such arbitration,
except that the fees and expenses of the Referee hereunder
shall be borne equally by Seller and Purchaser. This
provision for arbitration shall be specifically enforceable
by the parties. The decision of the Referee in accordance
with the provisions hereof shall be final and binding (absent
manifest error) and there shall be no right of appeal
therefrom.
(d) From the Closing Date until the final determination of
the Closing Schedule, each party hereto will grant to the other and its
respective representatives reasonable access during usual business hours to the
agents and employees of such party and to the books, records and files of the
business in its possession to enable such party to review and otherwise satisfy
itself
18
as to the accuracy of the Closing Schedule and the preparation thereof.
(e) In the event that the Net Tangible Equity as reflected on
the Closing Schedule (the "CLOSING NET TANGIBLE EQUITY") is less than the Most
Recent Net Tangible Equity used for purposes of calculating the Purchase Price
pursuant to Section 2.5(a) hereof, then the amount of the Purchase Price, as
previously calculated pursuant to Section 2.5(a) hereof, shall be decreased by
the amount by which the Closing Net Tangible Equity is less than the Most
Recent Net Tangible Equity. In the event that the Closing Net Tangible Equity
is more than the Most Recent Net Tangible Equity used for purposes of
calculating the Purchase Price pursuant to Section 2.5(a) hereof, then the
amount of the Purchase Price, as previously calculated pursuant to Section
2.5(a) hereof, shall be increased by the amount by which the Closing Net
Tangible Equity is more than the Most Recent Net Tangible Equity. No later than
five (5) days after the date of the final determination of the Closing
Schedule, Seller shall pay Purchaser or Purchaser shall pay Seller, as
appropriate, by wire transfer of immediately available funds, the amount of
such deficiency or excess, as the case may be, with interest thereon at a per
annum rate equal to the Prime Rate, accrued from the Closing Date to the date
of payment. The amount so paid shall take into account the 10% of the Purchase
Price not paid by the Purchaser on the Closing Date, which amount also shall be
paid and bear interest at the Prime Rate from the Closing Date to the date
paid. The "PRIME RATE" shall mean the rate announced by The Chase Manhattan
Bank, N.A., as its corporate base interest rate at New York, New York on the
Closing Date.
(f) If upon final determination of the Closing Schedule in
accordance with Section 2.5, Purchaser has submitted a claim for
indemnification under Section 6.4 which remains unresolved, Purchaser shall
have the right in lieu of paying such amount as required under Section 2.5(e)
to pay a portion of the amount payable pursuant to Section 2.5(e) to an escrow
agent to be mutually agreed upon. The amount payable to the escrow agent shall
be the amount of the claim but not to exceed 10% of the Purchase Price. In the
event that an amount is paid to an escrow agent pursuant to this paragraph,
such funds shall be held in escrow pursuant to an escrow agreement which shall
provide terms and conditions typical for a transaction of this type, shall
provide that interest on the funds held in escrow shall follow principal when
ulti-
19
mately released from the escrow and contain such other terms and conditions as
may be agreed upon by the parties. The parties each shall pay one-half of any
expenses associated with the escrow provided for herein.
2.6 Consistent Treatment. The parties hereto shall allocate the
Purchase Price among the Purchased Assets and the covenant not to compete set
forth in Section 5.1 hereof in accordance with Schedule 2.6 hereto, and shall
treat and report the transactions contemplated by this Agreement in all
respects consistently with such allocation upon all Tax Returns and for
purposes of any Taxes and not take any action inconsistent with such
obligation.
2.7 Procedures for Purchased Assets Not Transferable. If, either by
virtue of the provisions thereof or under applicable Law, any of the Contracts
or any other property or rights included in the Purchased Assets are not
assignable or transferable without the consent of some other Person, Seller
shall diligently use all commercially reasonable efforts to obtain such consent
prior to the Closing Date and Purchaser shall use all commercially reasonable
efforts to assist in that endeavor. If any such consent cannot be obtained
prior to the Closing Date and the Closing occurs, this Agreement and the
related instruments of transfer shall not constitute an assignment or transfer
thereof, but Seller shall diligently use all commercially reasonable efforts
for a period of nine (9) months following the Closing Date to obtain such
consent as soon as possible after the Closing Date or otherwise obtain for
Purchaser the practical benefit of such property or rights and Purchaser shall
use all commercially reasonable efforts to assist in that endeavor. With
respect to each Contract for which a necessary consent has not been obtained
prior to the Closing, Seller shall obtain for Purchaser, at no additional cost
to Purchaser, the benefits of such Contract (including all payments due to
Seller thereunder) until such consent is obtained. With respect to any right
under such Contract (including any right to payment), at Purchaser's request,
Seller shall institute legal proceedings to enforce such rights; provided that
such litigation shall be at the sole cost of Purchaser and Purchaser shall
control the conduct of such litigation. Except as so requested, Seller shall
have no obligation to take such action. Furthermore, until such consent is
obtained, Purchaser shall not assume Seller's obligations with respect to such
Contract but shall, as Seller's agent and on behalf of Seller, pay, perform and
discharge
20
fully Seller's obligations thereunder to the extent that such obligations would
have otherwise constituted Assumed Liabilities. Without Purchaser's prior
written consent, Seller shall take no action to terminate or modify any such
Contract.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND SELLER
Parent and Seller jointly and severally represent and warrant to
Purchaser, as of the date of this Agreement, as follows:
3.1 Due Incorporation; Subsidiaries. Parent and Seller are duly
organized, validly existing and in good standing under the laws of their
respective jurisdictions of incorporation and possess all requisite power and
authority to own, lease and operate their respective properties and to carry on
their respective businesses as they are now being owned, leased, operated and
conducted. Seller has no subsidiaries and is duly licensed or qualified to do
business and is in good standing as a foreign corporation in each jurisdiction
set forth on Schedule 3.1 hereto, which are the only jurisdictions
where the nature of the properties owned, leased or operated by it or the
Business requires such licensing or qualification.
3.2 Due Authorization. Parent and Seller have full power and authority
to enter into this Agreement and to consummate the transactions contemplated
hereby. The execution, delivery and performance by Parent and Seller of this
Agreement have been duly and validly approved by all necessary corporate action
and by any necessary action of its stockholders. Parent and Seller have duly
and validly executed and delivered this Agreement. This Agreement constitutes
and the Other Transaction Documents when executed and delivered by Seller and
Parent as contemplated hereby will constitute the legal, valid and binding
obligation of Parent and Seller, enforceable in accordance with its terms,
except as such enforceability may be limited by (a) applicable bankruptcy,
insolvency, moratorium, reorganization or similar laws in effect which affect
the enforcement of creditors' rights generally, or (b) equitable limitations on
the availability of specific remedies.
3.3 Consents and Approvals. No consent, authorization or approval of,
filing or registration with, or cooperation from, any Governmental Authority or
21
any other Person not a party to this Agreement is necessary in connection with
the execution and delivery of this Agreement and the Other Transaction
Documents and the consummation by Parent and Seller of the transactions
contemplated hereby, other than (a) the consents set forth on Schedule 3.3
hereto, (b) as required by applicable requirements of the Securities and
Exchange Commission (the "SEC") or the National Association of Securities
Dealers, and (c) filings and consents that may be required under any
Environmental Law necessitated by the transactions contemplated herein. Except
for matters set forth on Schedule 3.3 hereto, the execution, delivery and
performance by Seller and Parent of this Agreement does not and will not (i)
violate or conflict with, result in a breach or termination of, constitute a
default under or permit cancellation of any Seller Assigned Contract, (ii)
result in the creation of any Lien upon any of the Purchased Assets or (iii)
violate or conflict with any provision of the Amended Articles of Incorporation
or Bylaws of Seller.
3.4 Financial Statements. Except as set forth on Schedule 3.4 hereto
and except as otherwise provided in this Agreement, the Financial Statements
have been prepared in accordance with GAAP consistently applied and present
fairly the financial position, assets and liabilities of Seller as of the dates
thereof and the revenues, expenses, results of operations and cash flows of
Seller, for the periods covered thereby. The Financial Statements are in
accordance with the books and records of Seller and do not reflect any
transactions which are not bona fide transactions. Except as set forth on
Schedule 3.4 hereto or in the respective Financial Statements, Seller does not
have any liabilities, debts, claims or obligations, whether accrued, absolute,
contingent or otherwise, whether due or to become due, other than trade
payables to third parties and accrued expenses incurred in the ordinary course
of business since the date of the Interim Balance Sheet. Schedule 3.4 hereto
sets forth true and correct copies of the Financial Statements. Except as set
forth on Schedule 3.4, since the date of the Interim Balance Sheet, no
liabilities relating to the Business (absolute, accrued, contingent or
otherwise) have been incurred, except liabilities relating to the Business
incurred in the ordinary course of business consistent with past practice.
3.5 No Adverse Effects or Changes. Except as listed on Schedule 3.5
hereto, since the date of the Interim Balance Sheet, Seller has not (a)
suffered any
22
damage or destruction to, or loss of, any of its assets or properties (whether
or not covered by insurance) in excess of $50,000; (b) permitted the imposition
of a Lien (other than Permitted Exceptions) on, or disposed of, any of its
material assets (other than sales of Inventories in the ordinary course of the
Business, consistent with past practice); (c) terminated or entered into any
Material Contract; (d) cancelled, waived, released or otherwise compromised any
trade debt, receivable or claim exceeding $50,000 individually or $100,000 in
the aggregate; (e) made or committed to make any capital expenditures or
capital additions or betterments in excess of $50,000 in the aggregate, whether
individually or as a part of related transactions; (f) entered into, adopted,
amended (except as may be required by Law and except for immaterial amendments)
or terminated any bonus, profit sharing, compensation, termination, stock
option, stock appreciation right, restricted stock, performance unit, pension,
retirement, deferred compensation, employment, severance or other employee
benefit agreements, trusts, plans, funds or other arrangements for the benefit
or welfare of any director, officer or employee, or increased in any manner the
compensation or fringe benefits of any director, officer or employee or paid
any benefit not required by any existing plan and arrangement (except for
normal salary increases consistent with past practice) or entered into any
contract, agreement, commitment or arrangement to do any of the foregoing; (g)
disposed of or permitted the lapse in registration of any Intellectual
Property; (h) experienced any Material Adverse Change in the accounts
receivable or accounts payable; (i) changed its accounting methods, systems,
policies, principles or practices; (j) incurred indebtedness (other than trade
payables in the ordinary course of the Business); or (k) otherwise experienced
a Material Adverse Change.
3.6 Title to Properties. Except as disclosed on Schedule 3.6 hereto
and except for Permitted Exceptions, Seller has good and marketable title to,
and is the lawful owner of, the Purchased Assets, free and clear of any Lien.
Except as set forth on Schedule 3.6 or 3.12 hereto, no other Person (including
Parent or any of its Affiliates) owns any assets, properties or rights relating
to or used in the Business, performs or furnishes services for the benefit of
the Business, or is a party to or otherwise enjoys rights under any Contracts
or arrangements pertaining to the operation of Seller or the Business. Subject
to the provisions of Section 2.7 hereof, the Assignment and Assumption
Agreement, endorse-
23
ments and other instruments of transfer delivered at the Closing by Seller to
Purchaser will be sufficient to transfer to Purchaser the entire right, title
and interest, legal and beneficial, in the Purchased Assets, free and clear of
any Lien (except as set forth on Schedule 3.6 hereto and except for Permitted
Exceptions). Except as set forth on Schedule 3.6 hereto, all tangible personal
property of Seller (including all tooling, molds and dies) is located at the
Leased Premises or the Mexican Premises. The Purchased Assets and the Excluded
Assets constitute all of the assets used or held for use in connection with the
Business and material to the production by Seller of the income shown on the
statement of operations of Seller for the eight months ended August 31, 1997
(but the foregoing shall not constitute a representation of the prospective
income production of Purchaser using the Purchased Assets). Seller enjoys
peaceful and undisturbed possession under all leases set forth on Schedules 3.6
and 3.7(a) hereto, subject to the terms thereof.
3.7 Leased Premises and Mexican Premises.
(a) Seller operates the Business at the Leased Premises and
the Mexican Premises. Except as set forth on Schedule 3.7(b) hereto,
no written notice has been received by Seller or Parent from any
Governmental Authority requiring any alteration of the Leased Premises
or the Mexican Premises that has not been fully complied with. Other
than the Leases set forth on Schedule 3.7(a), Seller has no interest
in any real property. The Leases and the Mexican Premises cover all of
the real estate leased, used or occupied by Seller in connection with
the Business. Each of the Leases and the Mexican Premises is in full
force and effect and Seller holds a valid and existing leasehold
interest under each of the Leases. Seller is not in default, and no
circumstances exist which would result in such default (including upon
the giving of notice or the passage of time, or both), under any of
the Leases, and no other party to the Leases has the right to
terminate or accelerate performance under or otherwise modify any of
the Leases, provided, however, Seller is making no representation or
warranty concerning the assignment of the Leases to Purchaser in
connection with the transaction contemplated hereby (or any default
thereunder in connection with such assignment). To Seller's knowledge,
no lessor under any of the Leas-
24
es is in default under any of such Leases in its duties to the lessee.
(b) Except as set forth on Schedule 3.7(b) hereto, to the
knowledge of Seller, the buildings, plants, facilities, fixtures,
structures and improvements on the Leased Premises and Mexican
Premises are in good operating condition and repair (normal wear and
tear excepted).
3.8 Personal Property. Set forth on Schedule 3.8(a) hereto are the
Equipment and Vehicles used or held for use in connection with the Business.
Set forth on Schedule 3.8(b) hereto is a description of the Tooling used in
connection with the Business. Except as disclosed on Schedule 3.7(b) hereto,
all of the tangible assets (whether owned or leased) included in the Purchased
Assets (a) are suitable for the purposes for which such assets are presently
used in the Business, and (b) have been maintained and are in good operating
condition and repair (normal wear and tear excepted).
3.9 Inventories. All of the Inventory, whether spare parts, finished
goods, work in process, raw materials or supplies, was produced or acquired by
Seller in the ordinary course of the Business and, except for inventory set
forth on Schedule 3.9, is of a quality and type which has been used or sold in
the ordinary course of the Business during the twelve months ended on the date
hereof. All Inventories of Seller are fairly reflected in the inventory
accounts of the Interim Balance Sheet valued on a first-in, first-out basis
consistent with past practice. Inventories, net of reserves, on the Closing
Schedule will be as set forth in Section 2.5(b).
3.10 No Third Party Options. There are no agreements, options,
commitments or rights with, of or to any Person (other than Purchaser) to
acquire any of Seller's assets, properties or rights or shares except for those
Contracts entered into for the sale of Inventories in the ordinary course of
the Business, consistent with past practice.
3.11 Intellectual Property. Schedule 3.11 hereto includes a true and
complete list as of the date of this Agreement, of all of the patents, patent
applications, trade names, trademark registrations, trademark applications,
copyright registrations, copyright applications and licenses therefor included
in the Intellectual Property and used in the conduct of the Business.
25
(a) Except as disclosed on Schedule 3.11(a) hereto and except
for consumer off-the-shelf software used in the Business, all of the
Intellectual Property is owned by Seller, free and clear of all Liens
(other than Permitted Exceptions), is valid and enforceable and is not
subject to any license, royalty or other agreement, and Seller has not
granted any license or agreed to pay or receive any royalty in respect
of any of such Intellectual Property. All registration and maintenance
fees that have become due and payable to any Governmental Authority
with respect to any Intellectual Property set forth on Schedule 3.11
hereto have been paid and no act or omission has occurred to cancel,
impair, dedicate to the public or entitle any Governmental Authority
to cancel, modify, forfeit or hold abandoned any such Intellectual
Property except for any of the foregoing which is not reasonably
likely to cause a Material Adverse Change. Except as set forth on
Schedule 3.11(a), Seller owns or possesses, and Seller will transfer
to the Purchaser at the Closing valid and enforceable rights, or, in
the case of applications pending, adequate rights to, all Intellectual
Property necessary to conduct the Business as presently conducted.
(b) Except as set forth on Schedule 3.11(b) hereto, the
products manufactured or sold by Seller and any process, method, part,
design, material or other Intellectual Property it employs, and the
marketing and use by Seller of any such product, service or other
intellectual property, do not infringe any Intellectual Property or
confidential or proprietary rights of another and Seller has not
received any notice contesting its right to use the Intellectual
Property. To the knowledge of Seller and Parent, except as set forth
on Schedule 3.11(b) hereto, no products manufactured or activities
conducted by any other Person infringe on the Intellectual Property.
3.12 Contracts.
(a) Schedule 3.12 hereto lists, as of the date hereof, all
the Contracts and arrangements of the following types to which Seller
is a party, by which it is bound, or to which any of its assets or
properties is subject:
26
(i) any labor agreement;
(ii) any Contract or arrangement of any kind with
any employee, officer, director or stockholder of Seller or
any of the Affiliates of such individuals, or any Contract or
other arrangement of any kind with Parent or any Affiliate of
Parent;
(iii) any Contract or arrangement with a sales
representative, manufacturer's representative, distributor,
dealer, broker, sales agency, advertising agency or other
Person engaged in sales, distribution or promotional
activities, or any Contract to act as one of the foregoing on
behalf of any Person (other than purchase and sales orders
and other Contracts of a type listed in clause (iv) below);
(iv) any Contract or arrangement of any nature
having an aggregate value in excess of $50,000 or not
terminable on notice of thirty (30) days or less;
(v) any indenture, credit agreement, loan agreements
note, mortgage, security agreement, letter of credit, loan
commitment, guaranty, repurchase agreement or other Contract
or arrangement relating to the borrowing of funds, an
extension of credit or financing, pledging of assets or
guarantying the obligations of any Person;
(vi) any Contract or arrangement involving Seller as
a participant in a partnership, joint venture or other
cooperative undertaking;
(vii) any Contract or arrangement involving any
restrictions on Seller with respect to the geographical area
of operations or scope or type of business of Seller;
(viii) any power of attorney or agency agreement or
arrangement pursuant to which a Person is granted the
authority to act for or on behalf of Seller, or Seller is
granted the authority to act for or on behalf of any Person;
27
(ix) any Contract granting to any Person a right at
such Person's option to purchase or acquire any asset (other
than Inventory in the ordinary course of the Business) or
property of Seller (or interest therein);
(x) any Contract for capital improvements or
expenditures in excess of $50,000 individually or $100,000 in
the aggregate;
(xi) any Contract for which the full performance
thereof may extend beyond sixty (60) days from the date of
this Agreement (other than purchase and sales orders in the
ordinary course of the Business);
(xii) any Contract not made in the ordinary course
of the Business which is to be performed in whole or in part
at or after the date of this Agreement other than the
Contracts described on Schedule 3.14 hereto;
(xiii) the Mexican Agreement;
(xiv) any Contract or arrangement relating to
management support, facilities support or similar
arrangement; and
(xv) any Contract whereby any Person agrees (A) not
to compete with Seller or (B) to maintain the confidentiality
of any information of Seller.
(b) All of the Material Contracts are in full force and
effect and constitute the legal, valid and binding obligations of
Seller and, to the knowledge of Seller, the other parties thereto. All
of the Material Contracts are enforceable in accordance with their
respective terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, moratorium, reorganization or
similar laws affecting the rights of creditors generally and by
equitable limitations on the availability of specific remedies. No
termination notice has been delivered by any party to a Material
Contract to any other party to such Material Contract with respect to
such Material Contract. Seller has delivered to Purchaser true and
complete copies of each written Material Contract and a complete and
accurate written description of any Material Contract not reduced
28
to writing. Notwithstanding anything to the contrary in this Section
3.12, accounts receivable and product warranties shall be deemed not
to be Material Contracts or Contracts for purposes of this Section
3.12. Except as set forth on Schedule 3.12(b) hereto, since the date
of the Interim Balance Sheet, Seller has not entered into any Contract
other than in the ordinary course of the Business, consistent with
past practice.
3.13 Permits. Schedule 3.13 hereto is an accurate and complete list as
of the date hereof of all Permits held by Seller and used in the Business.
Except for such Permits, to Seller's knowledge, there are no permits, licenses,
consents or authorizations, whether federal, state, local or foreign, which are
necessary for the lawful operation of the Business. Seller is in full
compliance in all material respects with all requirements and limitations under
such Permits. No employee, officer, director or Affiliate of Seller owns or has
any interest in any such Permit.
3.14 Insurance. Schedule 3.14 hereto contains an accurate and complete
list as of the date hereof of all policies, currently in force, of fire,
liability, worker's compensation, public and product liability, title and other
forms of insurance owned, held by or applicable to Seller, its assets or the
Business. Seller has heretofore delivered to Purchaser an accurate summary
description of all such policies, including all occurrence-based policies
applicable to Seller or the Business for all periods prior to the Closing Date.
All such policies are in full force and effect.
3.15 Employee Benefit Plans and Employment Agreements. The following
terms, as used herein, have the following meanings:
"BENEFIT ARRANGEMENT" means an employment, severance or
similar contract, arrangement or policy and each plan or arrangement
providing for severance, insurance coverage (including any
self-insured arrangements), worker's compensation, disability
benefits, supplemental unemployment benefits, vacation benefits,
pension or retirement benefits or for deferred compensation,
profit-sharing, bonuses, stock options, stock appreciation rights or
other forms of incentive compensation or post-retirement insurance,
compensation or benefits that (i) is not
29
an Employee Plan and (ii) is maintained or contributed to by Seller
or any of its ERISA Affiliates.
"EMPLOYEE PENSION BENEFIT PLAN" means each "employee pension
benefit plan" as that term is defined in Section 3(2) of ERISA, that
is an Employee Plan, as defined below.
"EMPLOYEE PLAN" means each "employee benefit plan", as such
term is defined in Section 3(3) of ERISA, that (i) is subject to any
provision of ERISA and (ii) is maintained or contributed to by Seller
or any of its ERISA Affiliates, as the case may be.
"ERISA" means the Employee Retirement Income
Security Act of 1974, as amended.
"ERISA AFFILIATE" of any entity means any other entity that,
together with such entity, would be treated as a single employer under
Section 414 of the Code.
"MULTIEMPLOYER PLAN" means each Employee Plan that is a
multiemployer plan, as defined in Section 3(37) of ERISA.
(a) ERISA Representations. Seller hereby represents and
warrants to Purchaser that Schedule 3.15(a) hereto lists each Employee
Plan and each Benefit Arrangement that covers any employee or former
employee of Seller and copies or descriptions of all of which have
previously been furnished or made available to Purchaser. With respect
to each Employee Plan, Seller has provided an accurate summary
description of such plan. With respect to the Meridian Sports
Incorporated Retirement Incentive Savings Plan (the "PARENT SAVINGS
PLAN"), Seller has also provided to Purchaser the most recently filed
Form 5500 and Internal Revenue Service determination letter.
(b) With respect to the Parent Savings Plan, except as set
forth on Schedule 3.15(b) hereto:
(i) the Parent Savings Plan is intended to be tax
qualified under Section 401(a) and 501(a) of the Code,
complies and has been administered in form and in operation
in all material respects with all applicable requirements of
law, including Sections 401(a) and
30
501(a) of the Code, and no event has occurred which is
reasonably expected to cause the Parent Savings Plan to fail
to so comply with such requirements;
(ii) there are no material actions, suits or claims
(other than routine claims for benefits) pending or, to the
knowledge of Seller, threatened involving the Parent Savings
Plan or the assets thereof and Seller has no knowledge of any
facts which are reasonably expected to give rise to any such
actions, suits or claims (other than routine claims for
benefits); and
(iii) no "prohibited transaction" as defined in
Section 406 of ERISA or Section 4975 of the Code has
occurred.
(c) With respect to each of the Employee Plans or Benefit
Arrangements, as applicable:
(i) no material tax under Section 4980B of the Code
has been incurred in respect of any Employee Plan that is a
group health plan, as defined in Section 5000(b)(1) of the
Code; and
(ii) all contributions and payments accrued under
the Parent Savings Plan, determined in accordance with prior
funding and accrual practices, as adjusted to include
proportional accruals for the period ending on the Closing
Date, will be discharged and paid on or prior to the Closing
Date except to the extent (i) reflected on the Final Balance
Sheet or (ii) retained by Seller.
(d) With respect to each of Seller's Employee Plans which is
either a Multiemployer Plan or a plan subject to Title IV of ERISA:
(i) no accumulated funding deficiency, whether or
not waived, exists with respect to any such Employee Plan;
and
(ii) Seller has not incurred nor reasonably expects
to incur any liability under such Employee Plans which could
become a liability of Purchaser.
31
3.16 Employees. Schedule 3.16 hereof contains a true, complete and
accurate list of the names, titles, annual compensation and all bonuses and
similar payments made for the current and preceding two (2) years for each
director and officer of Seller and each employee of Seller who has an annual
base salary of $75,000 or more. Except as disclosed on Schedule 3.16 hereof,
there is no, and during the past two (2) years there has been no, labor strike,
picketing, dispute, slow-down, work stoppage, union organization effort,
grievance filing or proceeding, or other labor difficulty actually pending or,
to the knowledge of Seller, threatened against or involving Seller. Seller is
not a party to any collective bargaining agreement and no such agreement
determines the terms and conditions of the employment of employees of Seller.
No collective bargaining agent has been certified as a representative of any
employees of Seller and no representation campaign or election is now in
progress with respect to any employees of Seller. As of August 31, 1997, Seller
had approximately 69 full-time employees and approximately 1 temporary employee
not including Mexican employees of North American Product Sharing, Inc. No
employee subject to an employment contract listed on Schedule 3.15(a) hereto
serves, or has served within the past two (2) years, as an officer, director,
employee or agent of any Affiliate of Seller. Except as set forth on Schedule
3.16 hereto, Seller has not received notice that any of its executive employees
intends to terminate his employment with Seller or would not be willing to work
for Purchaser. Schedule 3.16 sets forth a list of employees of the Seller who
are on disability leave or on temporary lay-off with rights to recall.
3.17 Taxes.
(a) Except for current Taxes not due and payable through the
Closing (such Taxes to be paid when due by Seller), Seller has paid to, and
where necessary collected or withheld and remitted to, the proper Governmental
Authority all Taxes related to taxable periods or portions thereof ending on
the Closing Date (including governmental charges, assessments and required
contributions of Seller with respect to the Business) that may result in the
filing of a Lien on the Purchased Assets or that may result in the imposition
of transferee or other liability on Purchaser for the payment of such Taxes.
(b) The federal and state income tax returns of Seller have
been audited by the Internal Revenue
32
Service and appropriate state taxing authorities for the periods and to the
extent set forth in Schedule 3.17(b), and Seller has not received from the
Internal Revenue Service or from the tax authorities of any state, county,
local or other jurisdiction any notice of underpayment of taxes or other
deficiency which has not been paid nor any objection to any return or report
filed by Seller. There are outstanding no agreements or waivers extending the
statutory period of limitations applicable to any tax return or report.
(c) Except as set forth in Schedule 3.17(c), since 1993,
Seller has not (i) filed any consent or agreement under Section 341(f) of the
Code, (ii) applied for any tax ruling, (iii) entered into a closing agreement
with any taxing authority, (iv) filed an election under Section 338(g) or
Section 338(h)(10) of the Code (nor has a deemed election under Section 338(e)
of the Code occurred), (v) made any payments, or been a party to any agreement
(including this Agreement) that under any circumstances could obligate it to
make payments that will not be deductible because of section 280G of the Code,
or (vi) been a party to any tax allocation or tax sharing agreement.
3.18 No Defaults or Violations. Except as disclosed on Schedule 3.18
hereto:
(a) Seller is not in breach or default under the terms of any
Material Contract to which it is a party or by which it is bound, no
event has occurred or circumstance exists which, with notice or lapse
of time or both, would constitute a breach or default by Seller under
any such Material Contract, and, to the knowledge of Seller, no other
party to any such Material Contract is in breach or default under any
such Material Contract.
(b) Except for environmental matters (which are covered by
Section 3.19 hereof), Seller is in compliance in all material respects
with, and no material violation exists under, any Laws applicable to
Seller or the Business, and Seller is not aware that any event has
occurred or circumstance exists which, with or without notice or lapse
of time or both, would constitute a material violation under any such
Law.
(c) No notice from any Governmental Authority has been
received within the past two years claiming
33
any material violation of any Law or requiring any material work,
construction or expenditure, or asserting any Tax, assessment or
penalty, with respect to Seller. Schedule 3.18 hereto sets forth a
description of any uncompleted improvement program required by any
Governmental Authority with respect to the Leased Premises.
3.19 Environmental Matters. Except as disclosed on Schedule 3.19
hereto:
(a) Seller has not used or stored any, and there are no,
Hazardous Substances in, on, at, under, emanating from or migrating
onto the Leased Premises except for substances which are used or are
to be used in the ordinary course of business (which inventories have
been stored and used in accordance with all applicable Environmental
Laws and Environmental Permits). There is not now at the Leased
Premises any (i) underground storage tank or surface impoundments,
(ii) asbestos-containing materials or (iii) polychlorinated biphenyls,
except in compliance with applicable Environmental Laws.
(b) No notice has been received from any Governmental
Authority or any other Person that Seller is responsible (or
potentially responsible) for any Remedial Action at any location or
that the Leased Premises is required or may be required to be subject
to Remedial Action. Included within the Permits are all Environmental
Permits necessary for the operation of the Business as presently
operated. There is no (i) civil, criminal or administrative claim,
suit, proceeding or investigation (including a request for
information) pending or, to the knowledge of Seller, threatened with
respect to the Business or the Leased Premises relating in any way to
any Environmental Laws or Environmental Permits and Seller does not
know of any fact or circumstance which would give rise to any such
claim, suit, proceeding or investigation, or (ii) outstanding written
orders or Contracts with any Governmental Authority relating in any
way to Environmental Laws or Environmental Permits. Seller has timely
filed all reports and notifications required to be filed with respect
to, and obtained and maintained all Environmental Permits required
for, the Leased Premises, all improvements on the foregoing and all
operations conducted therein, and has generated and maintained all
required reports, filings, records and data
34
under all applicable Environmental Laws, and all operations conducted
therein are in compliance with such Environmental Laws.
(c) No condition has existed or event, act or omission has
occurred with respect to the Leased Premises that could, with or
without notice, passage of time or both, give rise to any present or
future liability with respect to the Leased Premises pursuant to any
Environmental Law.
3.20 Litigation; Product Liabilities.
(a) Except as disclosed on Schedule 3.20(a) hereto, as of the
Closing Date, there are no actions, suits, arbitrations, regulatory
proceedings or other litigation, proceedings or governmental
investigations pending or, to the knowledge of Seller, threatened
against or affecting Seller or any of its officers, directors,
employees, agents or stockholders in their capacity as such, or any of
its properties or businesses. There are no facts or circumstances
which may give rise to any of the foregoing. Except as set forth on
Schedule 3.20(a) hereto, all of the proceedings pending or threatened
against Seller are covered by insurance policies and are being
defended by Seller, subject to such deductibles, self-insured
retention or similar arrangements as are set forth in such policies.
Schedule 3.20(a) hereto is a complete and accurate list as of the date
hereof of all pending actions asserted by Seller. Except as disclosed
on Schedule 3.20(a) hereto, Seller is not subject to any order,
judgment, decree, injunction, stipulation or consent order of or with
any court or other Governmental Authority. Seller has not entered into
any agreement to settle or compromise any proceeding pending or
threatened against it which has involved any obligation other than the
payment of money or for which Seller has any continuing obligation. As
of the date hereof, there are no claims, actions, suits, proceedings
or investigations pending or, to the knowledge of Seller or Parent,
threatened by or against Seller or Parent relating to this Agreement
or the transactions contemplated hereby or thereby.
(b) Schedule 3.20(a) hereto sets forth a summary of all
product liability claims currently pending or, to the knowledge of
Seller, threatened against Seller. There are no defects in design,
35
construction or manufacture of Products which would adversely affect
performance or create an unusual risk of injury to persons or
property. Except as set forth on Schedule 3.20(a), none of the
Products has been the subject of any replacement, field fix, retrofit,
modification or recall campaign and, to Seller's or Parent's
knowledge, no facts or conditions exist which could reasonably be
expected to result in such a recall campaign. The Products have been
designed and manufactured so as to meet and comply with any and all
governmental standards and specifications currently applicable to the
Products when manufactured and have received any and all governmental
approvals necessary to allow their sale and use. As used in this
Section 3.20, the term "Products" means any and all products currently
or at any time previously manufactured, distributed or sold by Seller
or by any predecessor of Seller under any brand name or xxxx under
which products are or have been manufactured, distributed or sold by
Seller.
3.21 Intentionally omitted
3.22 Related Parties. Except as disclosed on Schedule 3.22 hereto,
neither Parent nor any of its Affiliates have or claim to have any direct or
indirect interest in any other Person which conducts a business similar to, has
any Contract or arrangement with, or does business or is involved in any way
with, Seller. Schedule 3.22 hereto contains a complete and accurate description
as of the date hereof of all such Persons, interests, arrangements and other
matters.
3.23 Intercompany Services and Transactions. Schedule 3.23 hereto
contains a complete and accurate list, as of the date hereof, of all agreements
or arrangements (whether written or unwritten) relating to all intercompany
services and a complete and accurate description of transactions existing
between Seller and any of its Affiliates during the past two (2) years.
3.24 Product Warranties. Schedule 3.24 hereto sets forth copies of all
product warranties issued for Seller's products sold during the past two (2)
years.
3.25 Brokers. Neither Purchaser nor any Affiliate of Purchaser has or
shall have any liability or otherwise suffer or incur any Loss as a result of
or in connection with any brokerage or finder's fee or other
36
commission of any Person retained by Parent, Seller or any of their respective
Affiliates in connection with any of the transactions contemplated by this
Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to Parent and Seller, as of the date
of this Agreement and as of the Closing Date (such representations and
warranties being remade on the Closing Date), as follows:
4.1 Due Incorporation. Purchaser is a corporation duly organized,
validly existing and in good standing under the laws of its jurisdiction of
organization with all requisite power and authority to own, lease and operate
its properties and to carry on its business as they are now being owned,
leased, operated and conducted.
4.2 Due Authorization. Purchaser has full power and authority to enter
into this Agreement and to consummate the transactions contemplated hereby. The
execution, delivery and performance by Purchaser of this Agreement have been
duly and validly approved by all necessary corporate action. Purchaser has duly
and validly executed and delivered this Agreement. This Agreement constitutes
the legal, valid and binding obligation of Purchaser, enforceable in accordance
with its terms, except as such enforceability may be limited by (a) applicable
bankruptcy, insolvency, moratorium, reorganization or similar laws in effect
which affect the enforcement of creditors' rights generally or (b) equitable
limitations on the availability of specific remedies.
4.3 Consents and Approvals. No consent, authorization or approval of,
filing or registration with, or cooperation from, any Governmental Authority or
any other Person not a party to this Agreement is necessary in connection with
the execution, delivery and performance by Purchaser of this Agreement and the
consummation by Purchaser of the transactions contemplated hereby or thereby,
other than (a) [intentionally omitted], (b) as required by applicable
requirements of the SEC and (c) filings and consents that may be required under
any environmental, health or safety law or regulation necessitated by the
transactions contemplated herein. The execution, delivery and performance by
Purchaser of this Agreement does not and will not (i) violate or
37
conflict with, result in a breach or termination of, constitute a default under
or permit cancellation of any material contract to which Purchaser is a party
or to which any of its assets is subject, or (ii) violate or conflict with any
provision of Purchaser's Certificate of Incorporation or By-laws.
ARTICLE V
COVENANTS
5.1 Noncompetition; Confidentiality.
(a) In order to induce Purchaser to enter into this
Agreement, each of Parent and Seller expressly covenants and agrees
that for a period of three (3) years from and after the Closing Date,
neither Seller, Parent, nor, in the case of clauses (i) or (ii), any
of their respective Subsidiaries (for so long as they remain
Subsidiaries) will directly or indirectly, without the prior express
written consent of Purchaser, (i) own, manage, operate, join, control,
consult with or participate in or be connected with any business,
individual, partnership, firm, corporation or other entity which is
engaged in the Business, wholly or partly, in Canada, Mexico, the
United States, Europe or Asia, (ii) disturb or attempt to disturb any
business relationship between any third party and Purchaser or any of
its Affiliates in connection with the Business, or (iii) solicit, hire
or encourage any officer or employee employed by the Business to leave
the employ or retention of the Business. Nothing in Section 5.1(a)(i)
or (ii) above shall limit, prohibit or restrict (A) the operation of
the respective businesses of the present Subsidiaries of Meridian
Sports Incorporated other than Seller in substantially the same manner
as such businesses are operated on the date hereof, provided, however,
that neither Parent, Seller nor any of their Subsidiaries will engage
in the manufacture or marketing of Buoyancy Compensators and (B) the
bona fide arm's-length sale of products or provision of services, each
in the ordinary course of business, to any non-affiliated Person
engaged in the Business.
(b) Except to the extent expressly required by Law, Parent
and Seller shall, and shall cause their Affiliates to, keep secret and
confidential indefinitely all non-public information concerning Pur-
38
chaser, the Business, the Intellectual Property and the Purchased
Assets and not disclose the same, either directly or indirectly, to
any other Person, or use the same in any way.
(c) Parent and Seller expressly agree that the remedies at
law for any breach of the provisions of this Section 5.1 would be
inadequate and that, in addition to any other remedies that Purchaser
may have, Purchaser shall be entitled to temporary and permanent
injunctive relief without the necessity of proving actual damages or
posting bond. To the extent that any part of this Section 5.1 may be
invalid, illegal or unenforceable for any reason, it is intended that
such part shall be enforceable to the extent that a court of competent
jurisdiction shall determine that such part, if more limited in scope,
would have been enforceable. Parent and Seller acknowledge that
Purchaser would not enter into this Agreement unless Parent and Seller
agreed to the provisions of this Section 5.1.
5.2 Exclusivity. Neither Parent, Seller, nor any of their respective
directors, officers, employees, representatives, agents or Affiliates shall,
directly or indirectly, (a) take any action which would have the effect of
preventing or impairing the performance by Parent or Seller of their
obligations under this Agreement or (b) solicit, initiate, encourage, respond
favorably to, permit or condone inquiries or proposals from, or provide any
information to, or participate in any discussions or negotiations with, any
Person (other than Purchaser and its representatives) concerning (i) any
merger, sale of assets (other than inventory in the ordinary course of business
consistent with past practice), acquisition, business combination, change of
control or other similar transaction involving Seller, (ii) any purchase or
other acquisition by any Person of any shares of capital stock of Seller or
(iii) any debt financing involving Seller or any of its assets. Parent and
Seller will promptly advise Purchaser of, and communicate to Purchaser in
writing the terms and conditions of (and the identity of the Person making),
any such inquiry, proposal or offer received.
5.3 Use of Name. From and after the Closing Date, Parent, Seller,
their respective Affiliates and any provider of services to Seller, Parent or
their respective Affiliates will not directly or indirectly use in any manner
any name, trade name, trademark, service xxxx
39
or logo used by the Business or any word or logo that is similar in sound or
appearance. Promptly after the Closing Date, Seller shall file an amendment to
its Amended Articles of Incorporation changing its name to a name which does
not resemble "Soniform" in any way.
5.4 Product Liability.
(a) Seller is and shall be solely responsible for any and all
claims for injury (including, without limitation, death) or claims for
damage, direct or consequential, resulting from or connected with
goods manufactured or sold or products-related services provided by
Seller, to the extent that such claims for injury or damage are made
on or before the second anniversary of the Closing Date.
(b) Purchaser is and shall be solely responsible for any and
all claims for injury (including, without limitation, death) or claims
for damage, direct or consequential, resulting from or connected with
goods manufactured or sold or products-related services provided by
Seller, to the extent that such claims for injury or damage are made
after the second anniversary of the Closing Date.
5.5 Employees and Employee Benefits.
(a) On or prior to the Closing Date, Purchaser shall offer
employment to active employees of the Business other than the
employees set forth on Schedule 5.5(a); provided that, subject to this
Section 5.5, Purchaser may terminate at any time after the Closing
Date the employment of any employee who accepts such offer. For
purposes of this Section 5.5, the term "ACTIVE EMPLOYEE" shall mean
any Person who, on the Closing Date, is actively employed by Seller or
who is on disability leave, authorized leave of absence, military
service or lay-off with recall rights as of the Closing Date, but
shall exclude any former employee or any other Person who has been on
unauthorized leave of absence or who has terminated his or her
employment, retired or died before the Closing Date. Any such offers
shall be at such employee's current salary or wage levels and on such
other terms and conditions substantially comparable to the terms and
conditions of Seller's employment of such employees immediately prior
to the Closing Date. The employees who accept and commence employment
with Purchaser immediately follow-
40
ing the Closing Date (or, if applicable, as provided above, the
expiration of leave, completion of military service, etc.) are
hereinafter collectively referred to as the "TRANSFERRED EMPLOYEES."
Seller will not take any action that would impede, hinder, interfere
or otherwise compete with Purchaser's effort to hire any Transferred
Employees. Purchaser shall not assume responsibility for any
Transferred Employee until such employee commences employment with
Purchaser, which assumption shall be retroactive to the Closing.
(b) Except as expressly set forth herein, Seller shall retain
all obligations and liabilities under the Employee Plans and Benefit
Arrangements in respect of each employee or former employee (including
any beneficiary or dependent thereof) who is not a Transferred
Employee. Except as expressly set forth herein, Seller or its
designated Affiliate shall retain all liabilities and obligations in
respect of benefits accrued prior to the Closing Date by Transferred
Employees under the Employee Plans and Benefit Arrangements, and
neither Purchaser nor any of its Affiliates shall have any liability
with respect thereto. Except as expressly set forth herein, no assets
of any Employee Plan or Benefit Arrangement shall be transferred to
Purchaser or any of its Affiliates or to any plan of Purchaser or any
of its Affiliates.
(c) With respect to the Transferred Employees (including any
beneficiary or dependent thereof), except as otherwise assumed
pursuant to Section 2.3 hereof or this Section 5.5, Seller shall
retain (i) all liabilities and obligations arising under any group
life, accident, medical, dental or disability plan or similar
arrangement (whether or not insured) to the extent that such liability
or obligation relates to contributions or premiums accrued (whether or
not payable), or to claims incurred (whether or not reported), prior
to the Closing Date, (ii) all liabilities and obligations arising
under any worker's compensation arrangement to the extent such
liability or obligation relates to the period prior to the Closing
Date, including liability for any retroactive worker's compensation
premiums attributable to such period and (iii) all other liabilities
and obligations arising under the Employee Plans and the Benefit
Arrangements to the extent any such liability or obligation relates to
the period prior
41
to the Closing Date. It is the intention of the parties that Purchaser
shall not be obligated to provide COBRA coverage for any employee who
does not become a Transferred Employee. Seller shall be solely
responsible to provide COBRA coverage to the extent required by law.
(d) The Parent Savings Plan covers current and former
employees of Parent and certain of its Affiliates, including the
Seller. Effective as of the Closing Date, Parent shall amend the
Parent Savings Plan to cease all accruals of benefits in respect of
the Transferred Employees. As soon as practicable after the Closing
Date, the account balances including earnings thereon through the date
of transfer, of the Transferred Employees under the Parent Savings
Plan, shall be transferred to a defined contribution plan of Purchaser
(the "Purchaser Savings Plan"). Such transfer shall be effected in
accordance with applicable law and regulations and Purchaser shall
make or cause to be made, and Seller shall make or cause to be made,
any required filings in connection therewith. Purchaser or one of its
Affiliates may require, as a condition to the acceptance of any such
transfer, evidence satisfactory to Purchaser of the qualified status
of the Parent Savings Plan, including, without limitation, a copy of a
favorable determination letter from the Internal Revenue Service (the
"IRS") and an opinion of counsel that the Parent Savings Plan
continues in form to remain qualified at all relevant times. In
consideration of such transfer, Purchaser or one of its Affiliates
shall assume liability for the payment of the Transferred Employees
account balances to Transferred Employee under the Parent Savings
Plan. Each of the parties hereto shall pay its own expenses in
connection with such transfer. Neither Purchaser nor any of its
Affiliates shall assume any other obligations or liabilities arising
under or attributable to the 401(k) Plan, the same to be retained or
assumed by Seller.
Purchaser and Parent agree that for the period from the
Closing Date to the date of the actual transfer of assets provided for
under this Section 5.5(d) (the "SAVINGS TRANSFER DATE"), the Parent
Savings Plan shall be liable for any benefit payment that becomes due
to a Transferred Employee under such plan, and that after the transfer
of assets provided for under this Section 5.5(d), the Purchas-
42
er Savings Plan shall be liable for any benefit payment that becomes
due to any Transferred Employee. In the event that benefit payments
are made when they become due from the Parent Savings Plan to a
Transferred Employee under this Section 5.5(d), the amount of assets
to be transferred from such plan shall be reduced by an amount equal
to such benefit payment. For the period from the Closing Date to the
Savings Transfer Date, the amount of such transfer shall be equitably
adjusted to reflect gains or losses allocable to such amount (as
determined by the actuary for the Parent Savings Plan in its sole
discretion).
Upon the transfer of cash or such other assets provided
hereunder, Parent shall have no further liability to the Transferred
Employees or to the Purchaser in connection with the accrued benefits
transferred.
(e) To the extent applicable, Transferred Employees (and
their eligible dependents) shall be given credit under employee
benefit plans, programs, policies and arrangements, including vacation
pay plans, that are established or maintained by Purchaser for the
benefit of Transferred Employees (the "PURCHASER'S PLANS") for their
service with Seller (i) for purposes of eligibility to participate and
vesting (but not benefit accrual (except for vacation pay, severance,
other fringe benefits and the Purchaser Savings Plan)) to the extent
such service was taken into account under a corresponding Seller's
Plan, and (ii) for purposes of satisfying any waiting periods,
evidence of insurability requirements or the application of any
pre-existing conditions limitations and shall be given credit for
amounts paid under a corresponding Seller's Plan during the same
period for purposes of applying deductibles, copayments and
out-of-pocket maximums as though such amounts had been paid in
accordance with the terms and conditions of the plans, programs,
policies and arrangements maintained by Purchaser.
(f) The parties hereto expressly acknowledge that Purchaser
shall be obligated to pay all liabilities in respect of any
Transferred Employee terminated for any reason on or after the Closing
Date, including without limitation, any severance benefits triggered
as a result of the transactions contem-
43
plated under this Agreement, COBRA, any liability triggered under any
unemployment compensation or other government-mandated benefits
relating to the termination of any Transferred Employee's employment
on or after the Closing Date, including, without limitation, the
Worker Adjustment and Retraining Notification Act of 1988.
(g) To the extent requested by Purchaser in writing prior to
the Closing Date, Seller agrees to use its best efforts to continue
coverage to Transferred Employees under the Employee Plans and Benefit
Arrangements that currently provide for fully insured welfare plan
coverage for the period commencing on the Closing Date and ending on
December 31, 1997 or until such earlier time as Purchaser or its
designated Affiliate can assume responsibility for such insurance in
an orderly manner. Purchaser shall pay all premium costs directly to
the insurer and shall, upon 10 days notice, reimburse Seller for
Seller's costs reasonably incurred in continuing to provide such
insurance. Such continuation of insurance shall not affect the
allocation of liabilities and obligations as set forth in this Section
5.5. Purchaser shall use all reasonable efforts to arrange for such
insurance coverage as promptly as possible in order to avoid using
Seller's services under this section.
(h) Seller and Purchaser agree to take all actions reasonably
necessary to accomplish the transactions contemplated by this Section
5.5.
(i) Except as provided in this Section 5.5, nothing in this
Agreement shall limit or restrict in any way the rights of Purchaser
to modify, amend, terminate or establish employee benefit plans,
programs, policies or arrangements, in whole or in part, at any time
after the Closing Date.
(j) All provisions contained in this Agreement with respect
to employee benefit plans or employee compensation are included for
the sole benefit of the respective parties hereto and do not and shall
not create any right in any other person, including, but not limited
to, any Transferred Employee, any participant in any benefit or
compensation plan or any beneficiary thereof.
44
(k) Seller shall not discourage any employee from accepting
employment with Purchaser.
(l) Seller agrees to make a clean cut-off of payroll and
payroll tax reporting with respect to the Transferred Employees paying
over to the federal, state and city governments those amounts
respectively withheld for periods ending on or prior to the Closing
Date. Seller also agrees to issue, by the date prescribed by IRS
Regulations, Form W-2 for wages paid through the Closing Date. Except
as set forth in this Agreement, Purchaser shall be responsible for all
payroll and payroll tax obligations after the Closing Date for
Transferred Employees.
5.6 Access.
(a) From and after the Closing Date, Purchaser will permit
Seller and Seller's representatives and agents to have reasonable
access, at all reasonable times, to the books, accounts, records,
properties, operations, facilities and personnel pertaining to the
Business and will furnish Seller with such financial and operating
data concerning the Business as Seller shall from time to time
reasonably request in connection with, but not limited to (i) the
preparation of any tax return, (ii) any audit or other investigation
by any taxing authority or any required reports or submissions to
governmental bodies with respect to Seller or the Business relating to
periods prior to the Closing Date, (iii) any third party claims and
investigations and insurance relating thereto and (iv) the preparation
of the Closing Schedule.
(b) From and after the Closing Date, Seller will make
available to Purchaser and Purchaser's representatives and agents all
books and records of Seller to the extent related to the Excluded
Assets or the Seller's Liabilities as may be reasonably requested by
Purchaser in connection with the preparation of financial statements
relating to the Business. In addition, at Purchaser's request and at
its sole cost and expense, Seller will use its best efforts to cause
Seller's Auditors to provide Purchaser with information or material
regarding the Business, including, but not limited to, financial
statements, trial balances or other accounting records relating to the
Business, reasonably requested from Seller's Auditors by Purchaser.
45
5.7 Production of Witnesses and Individuals.
(a) From and after the Closing Date, Purchaser shall use
reasonable efforts to make available to Seller, upon written request
and upon reasonable notice, the employees of the Business for fact
finding, consultation and interviews and, if required, as witnesses,
in each case to the extent that any such person may reasonably be
required in connection with any action, claim, suit, arbitration,
subpoena, discovery request, proceeding or investigation in which
Seller may from time to time be involved relating to the Business,
Seller's Liabilities or the Excluded Assets. Seller agrees to
reimburse Purchaser for all reasonable out-of-pocket expenses (but not
labor charges or salary payments) incurred by Purchaser in connection
with providing employees pursuant to this Section 5.7.
(b) From and after the Closing Date, Parent and Seller shall
use reasonable efforts to make available to Purchaser, upon written
request and upon reasonable notice, the employees of Parent or Seller
for fact finding, consultation and interviews and, if required, as
witnesses to the extent that any such person may reasonably be
required in connection with any action, claim, suit, arbitration,
subpoena, discovery request, proceeding or investigation in which
Purchaser may from time to time be involved relating to the Business,
the Assumed Liabilities or the Purchased Assets. Purchaser agrees to
reimburse Parent for all reasonable out-of-pocket expenses (but not
labor charges or salary payments) incurred by Parent or Seller in
connection with provided employees pursuant to this Section 5.7.
5.8 Environmental Matters. Purchaser shall provide Seller with notice
of any Seller's Environmental Obligation within thirty (30) days of Purchaser's
receipt of written notice of the facts giving rise to such liability, or, in
the case of third-party claims, Purchaser's receipt of written notice from a
third party of a claim with respect to a Seller's Environmental Obligation. The
failure of Purchaser to give notice pursuant to this Section 5.8 shall not
relieve the Seller of its obligations hereunder except to the extent Seller has
been prejudiced thereby.
5.9 Accounts Receivable. No later than fifteen (15) days after the
Closing Date, Purchaser will
46
furnish to Seller an aging report of all Receivables reflecting for each
account the name of the customer, the age and outstanding balance as of the
Closing Date and any underlying detail comprising the outstanding balance as of
the Closing Date. Purchaser shall, for a period of 90 days following the
Closing Date, collect the Receivables. Purchaser covenants and agrees to use
its normal collection practices in the ordinary course of business to collect
the Receivables. Purchaser does not guarantee collection of such Receivables.
Purchaser shall apply any and all amounts received from each account debtor in
accordance with the instructions of the account debtor, or if none is given
then to the repayment of outstanding accounts receivable existing as of the
time of this Agreement, unless the customer has directed Purchaser not so to
apply such amount because it has a bona fide claim that such Receivables
existing on the Closing Date is not payable by it. Notwithstanding the
foregoing, the application of payments received by Purchaser shall be applied
to the Receivables and remitted to Seller on a first-in, first-out basis except
to the extent that a bona fide dispute exists with respect to such Receivables.
To the extent that deducts are taken by customers in respect of liabilities
assumed by Purchaser, Purchaser shall reimburse Seller for such deducts when
remittances are made. Purchaser shall remit to Seller all such Receivables
collected on a bi-weekly basis except that to the extent that there is in
excess of $10,000 to be paid at the end of any week such amount shall be
remitted at the end of such week. Any Receivables not collected by Purchaser in
the 90 day period shall then be transferred to Seller.
ARTICLE VI
INDEMNIFICATION
6.1 Survival. The representations and warranties of the parties in
this Agreement or in any document delivered pursuant hereto shall survive the
Closing until eighteen (18) months after the Closing Date, provided, however,
that such time limitation shall not apply to the representations and warranties
set forth in (a) Section 3.6 hereof (such representations and warranties to
survive forever), (b) Section 3.17 hereof (such representations and warranties
to survive until the applicable statute of limitations) and (c) Section 3.19
hereof (such representations and warranties to survive until five (5) years
after the Closing Date). After the end of the relevant survival period
specified above, Seller's and Parent's obligations to Purchaser and its
Affiliates
47
under this Article VI with respect to such representations and warranties shall
expire and terminate. Notwithstanding anything in this Agreement to the
contrary, Purchaser's obligation to indemnify Seller against the Assumed
Liabilities shall survive forever and the obligation of Seller and Parent to
indemnify Purchaser against the Seller's Liabilities shall survive forever.
6.2 Indemnification by Parent and Seller. Parent and Seller jointly
and severally agree to indemnify, defend and hold harmless each of the
Purchaser and its Affiliates against any Losses relating to or arising out of:
(a) any breach of any representation or warranty made by
Parent or Seller in this Agreement or any document delivered to
Purchaser at the Closing pursuant to this Agreement, provided,
however, that neither Parent nor Seller shall have any liability under
this Section 6.2(a) with respect to breaches of such representations
and warranties until the Losses arising out of such breaches equal or
exceed $100,000 (the "THRESHOLD") in the aggregate, at which point
Purchaser shall be entitled to recover all Losses in full for all
breaches of representations and warranties, provided, further, that no
Loss which is less than $5,000 shall be considered in determining
whether the Threshold has been met, provided, further, that (i) Losses
arising out of any breaches of the representations and warranties set
forth at Sections 3.6, 3.17, and 3.19 hereof shall be fully
indemnified and not subject to the Threshold except that no Loss under
Section 3.19 shall be indemnified to the extent that the amount of
such Loss is $1,000 or less, and (ii) Seller shall have no
indemnification obligation pursuant to this Section 6.2(a) for Losses
in excess of $2 million in the aggregate, provided that the foregoing
limitation shall not apply to Losses arising out of any breaches of
the representations and warranties set forth at Sections 3.6, 3.17 and
3.19 hereof;
(b) any breach of any covenant made by Parent or Seller in
this Agreement or any document delivered to Purchaser at the Closing
pursuant to this Agreement;
(c) the bulk sales Laws of any jurisdiction
applicable to the transactions contemplated herein,
and any Laws of any jurisdiction imposing liability
48
on Purchaser for Seller's Taxes, including the failure to comply with
any such Laws;
(d) Seller's Liabilities, including any Remedial Action taken
by Purchaser with respect to Pre-Seller's Environmental Obligations;
and
(e) any damage to any Purchased Assets relating to the
removal of any Excluded Assets from the Leased Premises.
(f) any Loss or claim which is or relates to
Seller's Liabilities.
6.3 Indemnification by Purchaser. Purchaser agrees to indemnify,
defend and hold harmless Parent and Seller and each of their respective
Affiliates against any Losses relating to or arising out of:
(a) any breach of any representation or warranty made by
Purchaser in this Agreement or any document delivered to Seller at the
Closing pursuant to this Agreement, provided, however, that Purchaser
shall have no liability under this Section 6.3(a) with respect to
breaches of such representations and warranties until the Losses
arising out of such breaches equal or exceed $100,000 in the
aggregate, at which point Parent and Seller shall be entitled to
recover all Losses in full for all breaches or representations and
warranties, provided, further, that no Loss which is less than $5,000
shall be considered in determining whether the Threshold has been met,
provided, further, that Purchaser shall have no indemnification
obligation pursuant to this Section 6.3(a) for Losses in excess of $2
million in the aggregate;
(b) any breach of any covenant made by Purchaser in this
Agreement or any document delivered to Seller at the Closing pursuant
to this Agreement; and
(c) any Assumed Liability.
6.4 Claims. The provisions of this Section shall be subject to Section
6.5 below. As soon as is reasonably practicable after becoming aware of a claim
for which indemnification may be sought under this Agreement (including a claim
or suit by a third party) the indemnified Person shall give notice to the
indemnifying
49
Person of such claim. The failure of the indemnified Person to give notice
shall not relieve the indemnifying Person of its obligations under this Article
VI except to the extent that the indemnifying Person shall have been prejudiced
thereby. If the indemnifying Person does not object in writing to such
indemnification claim within 60 calendar days of receiving notice thereof, the
indemnified Person shall be entitled to recover from the indemnifying Person
the amount of such claim, and no later objection by the indemnifying Person
shall be permitted. If the indemnifying Person agrees that it has an
indemnification obligation but objects that it is obligated to pay only a
lesser amount, the indemnifying Person shall promptly pay to the indemnified
Person the lesser amount, without prejudice to the indemnified Person's claim
for the difference. Upon receipt of an indemnification notice pursuant to this
Section 6.4 of a claim requiring Remedial Action, the indemnifying party shall
have the right to assume the management and control of such Remedial Action.
All such management and control actions taken shall be subject to the approval
of Purchaser which shall not be unreasonably withheld. In addition, following
the Closing, Purchaser agrees to give prompt notice to Seller of the assertion
of any claim, or the commencement of any suit, action, proceeding,
investigation or audit with respect to any Tax Return for any period or portion
thereof ending on or before the Closing Date, and shall cooperate fully in any
such action by, among other things, providing access as set forth in Section
5.6 and taking such other actions as may be reasonably necessary or helpful for
the defense against the assertions of any taxing authority as to any
consolidated, combined or separate Tax Return for such periods.
6.5 Third Party Claims; Assumption of Defense. The indemnifying Person
may, at its own expense, (a) defend, contest or otherwise protect the
indemnified party against any claim, suit, action or proceeding and (b) upon
notice to the indemnified Person, and the indemnifying Person's delivering to
the indemnified Person a written agreement that the indemnified Person is
entitled to indemnification pursuant to Section 6.2 or 6.3 above for all Losses
arising out of such claim, suit, action or proceeding and that the indemnifying
Person shall be liable for the entire amount of any Loss, may at any time
during the course of any such claim, suit, action or proceeding, assume the
defense thereof and, in the event of a claim requiring Remedial Action, assume
the management and control of such Remedial Action (any actions taken in the
course of such management and control shall
50
be subject to the approval of Purchaser which shall not be unreasonably
withheld); provided, however, that (i) the indemnifying Person's counsel is
reasonably satisfactory to the indemnified Person, and (ii) the indemnifying
Person shall thereafter consult with the indemnified Person upon the
indemnified Person's reasonable request for such consultation from time to time
with respect to such claim, suit, action or proceeding. If the indemnifying
Person assumes such defense, the indemnified Person shall have the right (but
not the duty) to participate in the defense thereof and to employ counsel, at
its own expense, separate from the counsel employed by the indemnifying Person.
If representation by the indemnifying Person's counsel of both the indemnifying
Person and the indemnified Person would present such counsel with a conflict of
interest, then such indemnified Person may employ separate counsel reasonably
satisfactory to the indemnifying Person to represent or defend it in any such
claim, action, suit or proceeding and the indemnifying Person shall pay the
fees and disbursements of such separate counsel. Whether or not the
indemnifying Person chooses to assume the defense of any such claim, suit,
action or proceeding, all of the parties hereto shall cooperate in the defense
or prosecution thereof. Any settlement or compromise made or caused to be made
by the indemnified Person or the indemnifying Person, as the case may be, of
any such claim, suit, action or proceeding of the kind referred to in this
Section 6.5 shall also be binding upon the indemnifying Person or the
indemnified Person, as the case may be, in the same manner as if a final
judgment or decree had been entered by a court of competent jurisdiction in the
amount of such settlement or compromise. The indemnifying Person shall not be
permitted to settle or compromise any claim, suit, action or proceeding without
obtaining the prior written consent of the indemnified Person, which shall not
be unreasonably withheld or delayed; provided, however, in the event that the
settlement offer will result in the indemnified Person having no losses
(monetary or otherwise) or continuing obligations with respect to the claim,
suit, action or proceeding, the indemnifying Person shall be permitted to
settle or compromise such claim, suit, action or proceeding without the prior
written consent of the indemnified Person.
6.6 Payment. The Indemnifying Person shall promptly pay the
Indemnified Person any amounts due hereunder after receipt of satisfactory
documentation.
51
6.7 Effect of Investigation. Any due diligence review, audit or other
investigation or inquiry undertaken or performed by or on behalf of Purchaser
shall not limit, qualify, modify or amend the representations, warranties or
covenants of, or indemnities by, Parent or Seller made pursuant to this
Agreement, irrespective of the knowledge and information received (or which
should have been received) therefrom by Purchaser.
6.8 Indemnification for Environmental Matters. Without limiting the
generality of the foregoing, Parent and Seller each, jointly and severally
agree to indemnify, reimburse, hold harmless and defend Purchaser for, from and
against all Losses asserted against or imposed on Purchaser in connection with
Hazardous Substances at the Leased Premises that is not related to Purchaser's
activities on the Leased Premises.
ARTICLE VII
MISCELLANEOUS
7.1 Expenses. Except as otherwise expressly provided in this
Agreement, each party hereto shall bear its own expenses with respect to the
transactions contemplated hereby. Purchaser shall pay all sales, use, stamp,
transfer, service, recording, real estate and like taxes or fees, if any,
imposed in connection with the transfer of the Purchased Assets, provided, that
Seller shall promptly reimburse Purchaser for one-half of all such taxes and
fees upon request therefor.
7.2 Amendment. This Agreement may be amended, modified or supplemented
only by written agreement of the parties.
7.3 Notices. Any notice, request, instruction or other document to be
given hereunder by a party hereto shall be in writing and shall be deemed to
have been given, (a) when received if given in person or by courier or a
courier service, (b) on the date of transmission if sent by telex, facsimile or
other wire transmission or (c) three (3) Business Days after being deposited in
the U.S. mail, certified or registered mail, postage prepaid:
52
(a) If to Parent or Seller,
addressed as follows:
Meridian Sports Incorporated
000 Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: General Counsel
Facsimile No.: (000) 000-0000
with a copy to:
Meridian Sports Incorporated
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: J. Xxxx Xxxxxx
Facsimile No.: 212-572-8514
(b) If to Purchaser, addressed as follows:
Xxxxxxx Worldwide Associates, Inc.
0000 Xxxxxx Xxxx
Xxxxxxxxxx, Xxxxxxxxx 00000
Attention: Xxxx Xxxxxxx
Facsimile No.: 000-000-0000
with a copy to:
Xxxxx & Xxxxxxx
000 Xxxx Xxxxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxx 00000
Attention: Xxxxx X. Xxxxx
Facsimile No.: 000-000-0000
or to such other individual or address as a party hereto may designate for
itself by notice given as herein provided.
7.4 Waivers. The failure of a party to require performance of any
provision shall not affect its right at a later time to enforce the same. No
waiver by a party of any condition or of any breach of any term, covenant,
representation or warranty contained in this Agreement shall be effective
unless in writing. No waiver in any one or more instances shall be deemed to be
a further or continuing waiver of any such condition or breach in other
instances or a waiver of any other condition or breach of any other term,
covenant, representation or warranty. Consummation of the transactions
contemplated herein shall not be deemed a waiver of a
53
breach of or inaccuracy in any representation, warranty or covenant or of any
party's rights and remedies with regard thereto, unless such breach or
inaccuracy was waived in accordance with the second sentence of this Section
7.5.
7.5 Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
7.6 Interpretation. The headings preceding the text of Articles and
Sections included in this Agreement and the headings to Schedules attached to
this Agreement are for convenience only and shall not be deemed part of this
Agreement or be given any effect in interpreting this Agreement. The use of the
masculine, feminine or neuter gender shall not limit any provision of this
Agreement. The use of the terms "including" or "include" shall in all cases
herein mean "including, without limitation" or "include, without limitations"
respectively. If any representation or warranty is qualified by knowledge, the
party making such representation or warranty hereby confirms that it has made a
diligent inquiry into the matter addressed by the representation or warranty.
No specific representation, warranty or covenant contained herein shall limit
the generality or applicability of a more general representation, warranty or
covenant contained herein. A breach of or inaccuracy in any representation,
warranty or covenant shall not be affected by the fact that any more general or
less general representation, warranty or covenant was not also breached or
inaccurate. The language in all parts of this Agreement shall be construed, in
all cases, according to its fair meaning. The parties acknowledge that each
party and its counsel have reviewed and revised this Agreement and that any
rule of construction to the effect that any ambiguities are to be resolved
against the drafting party shall not be employed in the interpretation of this
Agreement.
7.7 Applicable Law. This Agreement shall be governed by and construed
and enforced in accordance with the internal laws of the State of New York
without giving effect to the principles of conflicts of law thereof.
7.8 Binding Agreement. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and
assigns.
54
7.9 No Third Party Beneficiaries. This Agreement is solely for the
benefit of the parties hereto and no provision of this Agreement shall be
deemed to confer rights upon any other Person.
7.10 Publicity. The parties shall cooperate on the form, content,
timing and manner of any press release or releases issued in respect of this
Agreement. Nothing in this Section shall prevent such parties from discussing
such transactions with those Persons whose approval, agreement or opinion, as
the case may be, is required for consummation of such transactions.
7.11 Further Assurances. Upon the request of Purchaser, Parent and
Seller will, on and after the Closing Date, execute and deliver to Purchaser
such other documents, further releases, assignments and other instruments as
may be required or deemed appropriate by Purchaser and Seller to effect or
evidence transfer and assignment to Purchaser of all or any of the Purchased
Assets and to otherwise carry out the purposes of this Agreement. At the
request of Seller or Parent, the Purchaser will, on or after the Closing Date,
execute and deliver such other documents, further releases, assignments and
other instruments as may be required or deemed appropriate by Seller in order
effectively to assume from Seller all of the Assumed Liabilities, to confirm
Seller's right, title and interest in and to the Excluded Assets and to
otherwise carry out the purposes of this Agreement. To the extent requested in
writing, Purchaser shall, at Seller's cost and expense, provide Seller with
copies of records relating to the Purchased Assets related to the period prior
to Closing.
7.12 Severability. If any provision of this Agreement shall be held
invalid, illegal or unenforceable, the validity, legality or enforceability
of the other provisions hereof shall not be affected thereby, and there shall
be deemed substituted for the provision at issue a valid, legal and enforceable
provision as similar as possible to the provision at issue.
7.13 Remedies Cumulative. The remedies provided in this Agreement
shall be cumulative and shall not preclude the assertion or exercise of any
other rights or remedies available by law, in equity or otherwise.
7.14 Liability of Parent and Seller. Whenever this Agreement requires
Seller or Parent to take any action, such requirement will be deemed to include
an
55
undertaking on the part of each of Parent and Seller. Parent and Seller shall
be jointly and severally liable for all of the obligations to be performed by
any of them under this Agreement and any representation or warranty made by any
of them.
7.15 Allocation of Taxes. Real, personal and intangible property Taxes
for any portion of a taxable year or period that begins before and ends after
the Closing Date shall be apportioned between Seller and Purchaser in
accordance with the principles set forth in Section 164(d) of the Code.
7.16 Assignment. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns.
Purchaser may assign this Agreement or any of its rights hereunder to any of
its direct or indirect wholly owned subsidiaries. In the event of such
assignment, Purchaser shall be responsible for all obligations of such
subsidiary and shall continue to be bound in all respects by the provisions
hereof. Neither Seller nor Parent may assign this Agreement without the written
consent of Purchaser.
7.17 Entire Understanding. This Agreement sets forth the entire
agreement and understanding of the parties hereto and supersedes any and all
prior agreements, arrangements and understandings among the parties.
* * * *
56
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed and delivered as of the date first above written.
XXXXXXX WORLDWIDE ASSOCIATES, INC.
By: /s/ Xxxx X. Xxxxxxx
-------------------------------
Name: Xxxx X. Xxxxxxx
Title: Senior VP and CFO
SONIFORM, INC.
By: /s/ Xxxxxx X. Xxxxx
-------------------------------
Xxxxxx X. Xxxxx
Vice President
MERIDIAN SPORTS INCORPORATED
By: /s/ Xxxxxx X. Xxxxx
-------------------------------
Xxxxxx X. Xxxxx
Vice President and Controller
57
