EXHIBIT 2
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (the "Agreement"), dated as of March 18,
1997, among Xxxxxxx International, Inc., a Delaware corporation ("Seller"), and
Xxxxxx International, Inc., a Michigan corporation ("Purchaser"),
W I T N E S S E T H :
WHEREAS, Seller, through its Xxxxxx Division ("Xxxxxx"), is engaged in the
business of designing, manufacturing, distributing and selling machinery and
related equipment, dies and support services for the package printing and
consumer products industries, which is conducted at Seller's facility in
Rochester Hills, Michigan (the "Business");
WHEREAS, Seller utilizes the Xxxxxx Assets (as hereinafter defined) in the
conduct of the Business;
WHEREAS, Seller desires to sell, and Purchaser desires to purchase, the
Xxxxxx Assets; and
WHEREAS, Seller believes the consideration received in exchange for the
Xxxxxx Assets is an amount not less than the fair market value of the Xxxxxx
Assets.
NOW, THEREFORE, in consideration of the mutual representations, warranties
and covenants herein contained, and on the terms and subject to the conditions
herein set forth, the parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 DEFINITIONS. As used in this Agreement, the following terms
shall have the meanings set forth below:
(a) "Affiliate" means a person that directly or indirectly, through one or
more intermediaries, controls, is controlled by, or is under common control with
the first mentioned person.
(b) "Assigned Contracts" shall mean those Contracts listed on Exhibit
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1.1(b) which are to be assigned to, and assumed by, Purchaser.
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(c) "Assumed Liabilities" shall mean (i) all executory obligations of
continued performance of Seller assigned to and assumed by Purchaser as Assigned
Contracts which become
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performable or payable on, or subsequent to, the Effective Date; (ii) all
Warranty Obligations; (iii) all real estate, personal property and ad valorem
taxes relating to the Xxxxxx Assets which have been accrued and relate to
periods before the Effective Date and are not payable prior to the Effective
Date to the extent classified and in the amounts shown as current liabilities on
the Closing Balance Sheet, or which accrue after the Effective Date and (iv)
those liabilities reflected on and in the amounts shown in the Closing Balance
Sheet.
(d) "Xxxxxx" shall have the meaning set forth in the preamble hereto.
(e) "Xxxxxx Assets" shall mean all assets and properties owned by, leased
to or otherwise used by Seller in the conduct of the Business, whether tangible
or intangible, and wherever located (other than Excluded Assets) on the
Effective Date, including (without limitation) all of the following:
(i) the Xxxxxx Real Property Interests;
(ii) the Xxxxxx Personal Property;
(iii) the Xxxxxx Proprietary Rights;
(iv) all inventories of raw materials, work-in-process and finished
goods of Xxxxxx as of the Effective Date;
(v) all trade accounts receivable and other rights to receive
payments from customers of Xxxxxx to the extent classified as current
assets on the Closing Balance Sheet and more fully described on Exhibit
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1.1(e);
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(vi) all of Seller's interest in (including all rights, benefits and
privileges) all contracts entered into or in connection with the Business
including, but not limited to those Assigned Contracts described on Exhibit
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1.1(b).
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(vii) all operating data and records of the Business, including
client and customer lists and records, referral sources, research and
development reports and records, production reports and records, equipment
logs, operating guides and manuals, copies of financial, accounting and
personnel records, correspondence and other similar documents and records;
(viii) all claims of Xxxxxx against third parties relating to the
Business or the Xxxxxx Assets, whether known or unknown, contingent or
otherwise; and
(ix) those prepaid expenses relating to the Xxxxxx Assets described
on Exhibit 1.1(e).
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(f) "Xxxxxx Financial Statements" shall have the meaning set forth in
Section 3.5.
(g) "Xxxxxx Personal Property" shall have the meaning set forth in Section
3.9(b).
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(h) "Xxxxxx Real Property Interests" shall have the meaning set forth in
Section 3.9(a).
(i) "Xxxxxx Proprietary Rights" shall have the meaning set forth in
Section 3.12.
(j) "best knowledge", "have no knowledge of", or "do not know of" and
similar phrases shall mean (i) in the case of a natural person, the particular
fact was known, or not known, as the context requires, to such person after
diligent investigation and inquiry by such person, and (ii) in the case of an
entity, the particular fact was known, or not known, as the context requires, to
executive officer of such entity after diligent investigation and inquiry by the
principal executive officer of such entity; provided that with respect to the
representations and warranties contained in Section 3.12, the limitation in (ii)
above shall be further limited to whether the fact was known, or not known, as
the context requires, by Xxxx Xxxxxx, Vice President and General Manager of the
Xxxxxx Division.
(k) "Xxxx of Sale, Assignment and Assumption Agreement" shall have the
meaning set forth in Section 8.1(a).
(l) "Business" shall have the meaning set forth in the preamble hereto.
(m) "Closing" shall mean the closing of the transactions contemplated by
this Agreement, which shall occur at 10:00 a.m., local time, on the Closing Date
in the offices of Dickinson, Wright, Moon, Van Dusen & Xxxxxxx, Suite 4000, 000
Xxxxxxxx Xxxxxx, Xxxxxxx, Xxxxxxxx 00000, or at such other time and place as
shall be mutually agreed in writing by the parties hereto.
(n) "Closing Balance Sheet" shall mean a balance sheet of the Business
showing the Xxxxxx Assets and the Assumed Liabilities as the same actually exist
as of the Effective Date, prepared in accordance with GAAP and on a basis
consistent with that used in preparing the Xxxxxx Financial Statements.
(o) "Closing Date" shall mean March 17, 1997 or such other date as may be
mutually agreed in writing by the parties hereto; provided that the date may not
be later than March 18, 1997.
(p) "Closing Working Capital" shall mean the difference, as of the
Effective Date as reflected in the Closing Balance Sheet, between Xxxxxx Assets
classified as current assets and Assumed Liabilities classified as current
liabilities as determined in accordance with GAAP.
(q) "Code" shall have the meaning set forth in Section 2.3(e).
(r) "Compensation Plans" shall have the meaning set forth in Section
3.7(b).
(s) "Contracts" shall have the meaning set forth in Section 3.10.
(t) "Damages" shall have the meaning set forth in Section 9.1.
(u) "Designated Employees" shall have the meaning set forth in Section
11.1.
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(v) "Effective Date" means February 28, 1997.
(w) "Environmental Laws" means the (i) Toxic Substances Control Act, 15
U.S.C. (S)(S)2601 et seq., (ii) National Historic Preservation Act, 16 U.S.C.
(S)(S)470 et seq., (iii) Coastal Zone Management Xxxx Xxx xx 0000, 00 X.X.X.
(X)(X)0000 et seq., (iv) Rivers and Harbors Act of 1899, 33 U.S.C. (S)(S)1401
et seq., (v) Clean Xxxxx Xxx, 00 X.X.X. (X)(X)0000 et seq., (vi) Flood Disaster
Xxxxxxxxxx Xxx, 00 X.X.X. (X)(X)0000 et seq., (vii) National Environmental
Policy Act. 42 U.S.C. (S)(S)4321 et seq., (viii) Resource Conservation and
Recovery Act of 1976, 42 U.S.C. (S)(S)6901 et seq. ("RCRA"), (ix) Clean Air Act,
42 U.S.C. (S)(S)4701 et seq., (x) Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C. (S)(S)9601 et seq., ("CERCLA"), (xi)
Hazardous Materials Transportation Act, 49 U.S.C. (S)(S)1801 et seq., (xii) Safe
Drinking Water Act, 42 U.S.C. (S)(S)300f et seq., (xiii) Emergency Planning and
Community Right-to-Know Act 42 U.S.C. (S)(S)11001 et seq., (xiv) Federal
Insecticide, Fungicide and Rodenticide Act, 7 U.S.C. (S)(S)136 et seq., and (xv)
all other federal, state, county, municipal and local statutes, laws regulations
and ordinances which relate to or deal with protection of the environment, all
as may be from time to time amended.
(x) "Excluded Assets" shall mean the following assets and properties:
(i) all rights of Seller arising under this Agreement and the
consummation of the transactions contemplated hereby, (ii) all cash, bank
deposits and marketable securities, (iii) all corporate minute books, stock
records, and tax returns of Seller and such other similar corporate books and
records of Seller as may exist on the Effective Date, including records of
Seller's Affiliates; provided, however, that Purchaser shall be entitled to
obtain copies of such records of Seller relating to the Xxxxxx Assets as
Purchaser may reasonably require in connection with the operation of the
Business or use of the Xxxxxx Assets subsequent to the Effective Date, (iv) all
interests in and to the corporate names of any Affiliates of Seller (other than
Xxxxxx), including Xxxxxxx International, Inc. and all variances thereof and all
rights to the use of such names as trademarks; all listings pertaining to any of
Seller's Affiliates (other than Xxxxxx) in all telephone books and directories;
and stationary, forms, labels, shipping material, catalogs, brochures, artwork,
photographs and advertising and promotional materials relating to Seller and any
of Seller's Affiliates (other than Xxxxxx), (v) all computer programs, hardware
and software (including documentation and related object and source codes) and
like property and all records thereof owned by Seller and used by Seller or any
Seller's Affiliates (other than those used exclusively in the Business which
includes the MRP software on location at the Xxxxxx offices), (vi) all rights to
refunds of taxes applicable to periods prior to the Effective Date, (vii) all
intercompany receivables from any of Seller or Seller's Affiliates, (viii) all
assets of Seller not used or useful in the Business, (ix) assets located at
Seller's Zerand Division in New Berlin, Wisconsin (other than the Product
Drawings which shall be licensed to Purchaser as set forth in Section 11.3), (x)
computer software or other MIS programs used at Seller's corporate headquarters
in Fort Worth, Texas, and not used exclusively in connection with the Business,
and (xi) the Cincinnati T-50 machining center, the Okuma grinder (model GP57E)
and related tools and equipment to be identified on Exhibit 1.1(x).
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(y) "Financial Statements" shall have the meaning set forth in Section
3.5.
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(z) "GAAP" shall mean generally accepted accounting principles
consistently applied from period to period and throughout any period in
accordance with the past practices of Seller as it relates to the Business. For
purposes of this Agreement it is hereby acknowledged and agreed that the agreed
upon accounting conventions expressed on Exhibit 1.1(z) shall also apply for
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purposes of calculating the change in working capital.
(aa) "Governmental Authority" shall mean any board, bureau, department,
commission, legislative body, officer, official, agency, court, tribunal,
division, or instrumentality of the government of: (i) the United States of
America; (ii) any state, territory, or other subdivision of the United States of
America; or (iii) any county, township, city, town, village, or other local unit
of government located in the United States of America.
(ab) "Hazardous Substance(s)" shall mean (i) any flammable or combustible
substance, explosive, and/or radioactive material, hazardous waste, toxic
substance, pollutant, contaminant or substance regulated by any of the
Environmental Laws, and (ii) asbestos, polychlorinated biphenyls, urea
formaldehyde, explosives, petroleum products and by-products (including fraction
thereof) and radon to the extent regulated by Environmental Laws.
(ac) "Independent Accounting Firm" shall mean a "Big Six" accounting firm,
other than Deloitte & Touche, L.L.P. and Coopers & Xxxxxxx, LLP, or such other
nationally recognized firm of independent public accountants as Seller and
Purchaser may agree upon.
(ad) "Liability Threshold" shall have the meaning set forth in Section 9.3.
(ae) "Net Adjustment Amount" means the positive or negative difference
between (a) the Year-end Working Capital, and (b) the Closing Working Capital.
(af) "Noncompetition Agreement" shall have the meaning set forth in Section
7.1(b).
(ag) "Ordinary Course of Business" means the usual and customary way in
which Seller has conducted its business in the past.
(ah) "Product Drawings" shall mean those certain systems related product
drawings of Seller set forth in Exhibit 11.3.
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(ai) "Property" means, with respect to the Business, any parcel of real
estate now or heretofore owned by Seller or in which Seller has or had any
interest, including any lessee's interest held as security for any obligation.
(aj) "Purchase Price" shall have the meaning set forth in Section 2.3(a).
(ak) "Purchaser" shall have the meaning set forth in the preamble hereto.
(al) "Retained Liabilities" shall have the meaning set forth in Section
2.5.
(am) "Seller" shall have the meaning set forth in the preamble hereto.
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(an) "Seller Financial Statements" shall have the meaning set forth in
Section 3.5.
(ao) "Seller's Estimate" shall have the meaning set forth in Section
2.2(c).
(ap) "Warranty Obligations" shall mean Seller's contractual obligations to
repair or replace Seller's products of the Business sold by Seller to the
purchaser thereof or the original retail buyer, and such obligations of Seller
under any implied warranties that may be imposed by operation of law.
(aq) "Year-end Working Capital" shall mean the difference as reflected in
the Xxxxxx Financial Statements, between the Xxxxxx Assets (other than Excluded
Assets) classified as current assets and Assumed Liabilities classified as
current liabilities of the Business, as determined in accordance with GAAP as
set forth on Exhibit 1.1(aq).
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ARTICLE II
PURCHASE AND SALE
SECTION 2.1. PURCHASE AND SALE OF THE XXXXXX ASSETS. Subject to and upon
the terms and conditions contained herein, at the Closing effective the
Effective Date, Seller shall sell, transfer, assign, convey and deliver to
Purchaser free and clear of all security interests, liens, claims and
encumbrances and Purchaser shall purchase, accept and acquire from Seller, the
Xxxxxx Assets.
SECTION 2.2. ASSIGNMENT OF RIGHTS BY SELLER. On the Closing Date Seller
shall assign to Purchaser all of Seller's rights under the Assigned Contracts
which become or continue to be performable or payable on or subsequent to the
Effective Date; provided that there shall not be assigned to Purchaser any
Assigned Contracts if an attempted assignment thereof without the consent of the
other party or parties thereto would constitute a breach thereof or any way
adversely affect the rights of Seller thereunder and such consent is not
obtained, or if an attempted assignment would be ineffective or would affect the
rights of Seller thereunder so that Purchaser would not, in fact, receive the
benefits thereof. Seller covenants and agrees that the beneficial interest in
and to any such agreements shall to the extent permitted by the relevant
agreement and/or by law, pass to Purchaser, and Seller will covenant and agree:
(a) that it will hold and declare that it holds such agreements in trust for the
benefit of the Purchaser, its successors and assigns, from and after the closing
date; (b) to use commercially reasonable efforts to obtain and secure any and
all consents and approvals that may be necessary to effect such assignment or
assignments of the same; (c) to make or complete such assignment or assignments
as soon as reasonably possible; and (d) to cooperate with Purchaser in other
reasonable arrangement designed to provide for actions necessary to enable
Seller to fulfill any such agreements until effective assignment thereof to
Purchaser can be obtained. Purchaser shall use commercially reasonable efforts
to assist Seller in its efforts to obtain and secure any and all consents and
approvals that may be necessary to affect the assignment or assignments of the
contracts, leases, licenses and rights. Notwithstanding the foregoing,
Purchaser shall not be obligated to close the transaction contemplated by this
Agreement if Seller has not obtained the consents listed on Exhibit 2.2 or is
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unable to assign the contracts listed on Exhibit 2.2.
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SECTION 2.3 PURCHASE PRICE.
(a) PURCHASE PRICE. The total purchase price for the Xxxxxx Assets (the
"Purchase Price") shall be an amount of cash equal to $15,000,000, as adjusted
as provided in Section 2.3(c) and the assumption of Assumed Liabilities.
(b) PAYMENT OF PURCHASE PRICE. The Purchase Price shall be paid on the
Closing Date by certified or cashiers check payable to Seller or by wire
transfer in immediately available funds to an account designated by Seller in an
amount equal to the Purchase Price as adjusted pursuant to Section 2.3(d).
(c) ESTIMATE OF NET ADJUSTMENT AMOUNT. At Closing, Seller shall provide
Purchaser with Seller's good faith estimate of the Net Adjustment Amount, which
estimate shall be based upon Seller's review of the financial statements and
information with respect to the Business and discussions with members of the
management of the Business ("Seller's Estimate"). Seller shall consult with
Purchaser concerning the preparation of Seller's Estimate, and shall provide
Purchaser with reasonably detailed backup information supporting the computation
of Seller's Estimate. If Seller's Estimate is a positive amount (an increase in
Closing Working Capital compared to Year-End Working Capital), Purchaser shall
add such amount to the Purchase Price, and if Seller's Estimate is a negative
amount (a decrease in Closing Working Capital compared to Year-End Working
Capital), Purchaser shall deduct such amount from the Purchase Price.
(d) FINAL CALCULATION OF NET ADJUSTMENT AMOUNT.
(i) As promptly as practicable after the Closing Date, but in no
event later than 90 days after the Closing Date, Seller shall prepare and
deliver to the Purchaser the Closing Balance Sheet. Purchaser shall have
the opportunity to observe and consult with Seller during the preparation
of the Closing Balance Sheet.
(ii) The Purchaser may dispute any amounts reflected on the Closing
Balance Sheet by notifying Seller in writing (specifying each disputed
item, specifying the amount thereof in dispute, and setting forth, in
reasonable detail, the basis for such dispute) within 15 days after
Purchaser receives the Closing Balance Sheet. In the event of such a
dispute, the Purchaser and Seller shall attempt in good faith to reconcile
their differences, and any resolution by them as to any disputed amounts
shall be final, binding and conclusive on the parties. If the Purchaser
and Seller are unable to reach a resolution of such dispute within 15 days
after the receipt by Seller of Purchaser's written notice of dispute, the
Purchaser and Seller shall submit the items remaining in dispute for
resolution to the Independent Accounting Firm, which shall act as
arbitrator and shall promptly as practicable after submission, determine
and report to the parties upon such remaining disputed items, and such
report shall be final, binding and conclusive on the parties. Purchaser
and Seller shall provide the Independent Accounting Firm with such
information, and shall afford such accountants such access to Purchaser's
and Seller's books and records, as such accountants may reasonably request
in connection with their determination of the Net Adjustment Amount. The
fees of the Independent Accounting Firm in connection with such
determination shall be shared equally by the Purchaser and Seller.
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(iii) Within 10 days of the expiration after the earlier of 1) the
expiration of the time for the Purchaser to object to the Closing Balance
Sheet under Section 2.3(d)(ii) or 2) the date the Purchaser gives Seller
written notice that it has no objections to the Closing Balance Sheet, or,
as the case may be, within 10 days following resolution of any dispute
pursuant to 2.3(d)(ii):
A) if the difference between i) Seller's Estimate and ii) the
Net Adjustment Amount is a positive amount, Purchaser shall pay to
Seller an amount equal to such difference; or
B) if the difference between i) Seller's Estimate and ii) Net
Adjustment Amount is a negative amount, Seller shall pay to Purchaser
an amount equal to such difference.
(e) ALLOCATION OF PURCHASE PRICE. The Purchase Price shall be allocated
among the Xxxxxx Assets as set forth in the Form 8594 (Asset Acquisition
Statement Under Section 1060) as provided by Purchaser to Seller and as provided
in Section 1060 of the Internal Revenue Code of 1986 (the "Code"). Purchaser
and Seller shall each file Form 8594 on a timely basis reporting the allocation
of the Purchase Price consistent with the allocation in the Form 8594 provided
by Purchaser to Seller. Purchaser and Seller shall file on a timely basis any
amendments required to such Form 8594 as a result of a subsequent increase or
decrease of the Purchase Price. Purchaser and Seller shall not take any
position on their respective income tax returns that is inconsistent with the
allocation of the Purchase Price as provided by Purchaser to Seller in the Form
8594 or as adjusted as a result of a subsequent increase or decrease in the
Purchase Price.
SECTION 2.4. ASSUMED LIABILITIES. On the Closing Date effective as of the
Effective Date, Purchaser shall assume the Assumed Liabilities from Seller.
SECTION 2.5. RETAINED LIABILITIES. Except as otherwise specifically set
forth in Section 2.4 of this Agreement, Purchaser shall not assume any
liabilities or obligations of Seller of any kind, whether such liabilities or
obligations relate to payment, performance or otherwise, are matured or
unmatured, are known or unknown, are contingent or otherwise, are fixed or
absolute, or are present, future or otherwise including, but not limited to
Seller's obligations in the Assigned Contracts which become performable or
payable prior to the Effective Date (the "Retained Liabilities"), it being
understood that all of the Retained Liabilities shall remain the sole
responsibility and obligation of, and shall be retained, paid, performed and/or
discharged solely by, Seller.
SECTION 2.6. EXCLUDED ASSETS. Seller shall retain ownership and
possession of the Excluded Assets.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants that the following are true and correct as
of the date hereof and will be materially true and correct through the Closing
Date as if made on that date:
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SECTION 3.1. ORGANIZATION AND GOOD STANDING; QUALIFICATION. Seller is a
corporation duly organized, validly existing and in good standing under the laws
of its state of incorporation, with all requisite corporate power and authority
to carry on the business in which it is engaged, to own the properties it owns,
to execute and deliver this Agreement and to consummate the transactions
contemplated hereby. Seller is duly qualified and licensed to do business in
all jurisdictions where the nature of its business makes such qualification
necessary, except where the failure to be qualified or licensed would not have a
material adverse affect on Seller or the Business.
SECTION 3.2. AUTHORIZATION AND VALIDITY. The execution, delivery and
performance by Seller of this Agreement and the other agreements contemplated
hereby, and the consummation of the transactions contemplated hereby and
thereby, have been duly authorized by Seller. This Agreement and each other
agreement contemplated hereby have been or will be as of the Closing Date duly
executed and delivered by Seller and constitute or will constitute legal, valid
and binding obligations of Seller, enforceable against Seller in accordance with
their respective terms, except as may be limited by applicable bankruptcy,
insolvency or similar laws affecting creditors' rights generally or the
availability of equitable remedies.
SECTION 3.3. NO VIOLATION. Neither the execution, delivery or performance
of this Agreement or the other agreements contemplated hereby nor the
consummation of the transactions contemplated hereby or thereby will (i)
conflict with, or result in a violation or breach of the terms, conditions or
provisions of, or constitute a default under, the Certificate of Incorporation
or Bylaws of Seller or any agreement, indenture or other instrument under which
Seller is bound or to which any of the Xxxxxx Assets are subject, or result in
the creation or imposition of any security interest, lien, charge or encumbrance
upon any of the Xxxxxx Assets or (ii) to the knowledge of Seller violate or
conflict with any judgment, decree, order, statute, rule or regulation of any
court or any public, governmental or regulatory agency or body having
jurisdiction over Seller or the Xxxxxx Assets, which violation would have a
material adverse affect on the Business.
SECTION 3.4. CONSENTS. Except as set forth in Exhibit 3.4, no consent of
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any governmental or public body or authority, any lender or lessor or any other
person or entity is required to authorize, or is required in connection with,
the execution, delivery and performance of this Agreement or the other
agreements contemplated hereby on the part of Seller.
SECTION 3.5. FINANCIAL STATEMENTS. Seller has furnished to Purchaser
Seller's unaudited balance sheet and related audited statements of income,
retained earnings and cash flows for the year ended December 31, 1996, including
the notes thereto (the "Seller Financial Statements"), as well as compiled
financial statements of the Business as of December 31, 1996 (the "Xxxxxx
Financial Statements" and together with Seller Financial Statements the
"Financial Statements"). The Xxxxxx Financial Statements fairly present the
financial condition and results of operations of the Business as of the dates
and for the periods indicated and have been prepared in conformity with GAAP.
SECTION 3.6 LIABILITIES AND OBLIGATIONS. Except as set forth in Exhibit
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3.6, in accordance with GAAP, to the knowledge of Seller, the Xxxxxx Financial
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Statements reflect all
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liabilities of Seller, accrued, contingent or otherwise (known or unknown and
asserted or unasserted), arising out of transactions effected or events
occurring on or prior to the date hereof.
SECTION 3.7. EMPLOYEE MATTERS.
(a) CASH COMPENSATION. Exhibit 3.7(a) contains a complete and accurate
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list of the names and cash compensation of all employees of Seller working in
the Business who are currently compensated at a rate in excess of $50,000 per
year and who earned in excess of such amount during Seller's preceding fiscal
year.
(b) COMPENSATION PLANS. Exhibit 3.7(b) contains a complete and accurate
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list of all compensation plans, arrangements or practices sponsored by or to
which Seller contributes on behalf of its employees working in the Business (the
"Compensation Plans"). The Compensation Plans include without limitation plans,
arrangements or practices that provide for severance pay, deferred compensation,
incentive, bonus or performance awards, and stock ownership or stock options.
(c) EMPLOYMENT AGREEMENTS. Exhibit 3.7(c) contains a complete and
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accurate list of all employment agreements to which Seller is a party with
respect to its employees working in the Business.
(d) ERISA.
(i) Seller is not now and never has been a party to nor obligated
to contribute to: (a) an employee pension benefit plan (as defined in
Section 3(2) of the Employee Retirement Income Security Act of 1974; as
amended ("ERISA") which is subject to the plan termination provisions of
Title IV of ERISA except as disclosed in Exhibit 3.7(d); or (b) a
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multiemployer plan as defined in Sections 3(37) or 4001(a)(3) or ERISA or a
multiple employer plan as defined in Section 413(c) of the Code, nor shall
the Closing cause Seller nor any member of a group determined pursuant to
(ii) below to have any withdrawal liability (either as contributing
employer or as part of a controlled group which includes a contributing
employer) to any multiemployer plan or to any multiple employer plan.
(ii) Except as disclosed in Exhibit 3.7(d), Seller is not now nor
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has ever a member of (a) a controlled group of corporations as described in
Section 414(b) of the Code; (b) a group of trades or businesses under
common control as defined in Section 414(c) of the Code; (c) an affiliated
service group as defined in Section 414(m) of the Code; (d) a group of
corporations or trades or businesses under common control as defined in
Section 4001(b)(1) of ERISA; or (e) a controlled group as defined under
Section 4001(a)(14) or ERISA.
(iii) Except as disclosed in Exhibit 3.7(d), no Compensation Plan
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which is a qualified plan under Section 401(a) of the Code and no trust
created thereunder has incurred an "accumulated funding deficiency" as
defined in Section 412 of the Code or Section 302 of ERISA (whether or not
waived), and there have been no "reportable events" as defined in Section
4043 of ERISA, with respect to any such Plan.
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(iv) No plan which is a qualified plan under Section 401(a) of the
Code and no trust created thereunder has been terminated, partially
terminated, curtailed, discontinued, or merged into another plan or trust
except with full and complete notice to all participants and beneficiaries,
the Internal Revenue Service and any other relevant governmental agency as
required by ERISA or the Code; and any such termination, partial
termination, curtailment, discontinuance, or merger had been accompanied,
to the extent require by applicable law, by the issuance of a current,
favorable determination letter by the Internal Revenue Service and by any
other relevant governmental agency including, but not limited to the
Pension Benefit Guaranty Corporation ("PBGC").
(v) From and after their employment date with Purchaser, Purchaser
shall provide its standard benefits to those employees of Seller who are
hired and employed by Purchaser after the Closing, provided that Purchaser
shall not be responsible or liable for benefits to such employees which
become payable during or by reason of employment by Seller other than those
assumed as Assumed Liabilities. Provided further, that Purchaser will not
be responsible for costs, fees, claims, expenses and benefits arising under
any Seller plan, arrangement or program relating to persons who are
employees or prior employees of Seller on the Closing Date or who are not
employed by Purchaser after the Closing (all of which costs, fees, claims,
expenses and benefits shall be the sole responsibility of Seller other than
those assumed as Assumed Liabilities).
(vi) Purchaser shall have no obligation to assume any of Seller's
Compensation Plans or make any contributions to any of such plans following
the sale contemplated by this Agreement. Purchaser shall not be responsible
for any liability under ERISA or the Code with respect to any Seller plan,
arrangement or program which may be incurred as a result of the sale
contemplated by this Agreement and/or the employment by Purchaser of
persons employed by Seller and covered by any such plan, arrangement or
program prior to the closing of such sale. Seller agrees to indemnify and
hold harmless Purchaser against any liability under ERISA or the Code with
respect to any Seller plan, arrangement or program which may be asserted
against Purchaser as a result of such sale, and/or any related
transactions.
(vii) Except as disclosed on Exhibit 3.7(d), there is no litigation,
--------------
disputed claim or governmental proceeding pending or threatened with
respect to any Compensation Plan, its related trust, or any fiduciary,
administrator, or sponsor of any Compensation Plan.
(viii) With respect to any Seller group health plan subject to
"COBRA" requirements (within the meaning of Code Section 5000(b)(1), Seller
has provided and agrees to provide all general notifications to its
employees of their rights under Section 4980B of the Code and all
notifications required by the occurrence of a qualifying event described
under Section 4980B of the Code, including, but not limited to termination
of such employees' employment by Seller, even if such employee is employed
by Purchaser after the Closing Date. Seller acknowledges that it has full
responsibility to provide Section 4980B coverage to all existing qualified
elected coverage in a manner consistent with applicable law. Any violation
of COBRA requirements with respect to such Seller group health plan shall
remain the sole responsibility of Seller and Seller agrees to hold
-xiv-
Purchaser harmless from any damages, costs, fees, claims and expenses
arising from such violations.
(ix) All workers' compensation claims of Seller's employees
relating to events occurring prior to any such employee's employment by
Purchaser, whether or not filed by such date or employment shall remain the
sole responsibility of Seller. All severance claims of Seller's employees
relating to service with Seller shall remain the sole responsibility of
Seller.
(x) Up to the time of Closing, Seller accepts full responsibility
with respect to and agrees to abide by all provisions of the Worker
Adjustment and Retraining Notification Act (29 USC Sections 2101-2109) and
regulations or interpretative rules promulgated thereunder, including, but
not limited to the providing of any notices required thereunder.
SECTION 3.8 ABSENCE OF CERTAIN CHANGES. Except as set forth in Exhibit
-------
3.8, since December 31, 1996, Seller in connection with the Business and the
---
Xxxxxx Assets has not
(a) suffered any material adverse change, whether or not caused by any
deliberate act or omission of Seller, in its condition (financial or otherwise),
operations, assets, liabilities, business or prospects;
(b) contracted for the purchase of any capital assets having a cost in
excess of $25,000 or paid any capital expenditures in excess of $25,000;
(c) incurred or discharged any liabilities or obligations except in the
ordinary course of business;
(d) mortgaged, pledged or subjected to any security interest, lien, lease
or other charge or encumbrance any of Xxxxxx Assets;
(e) suffered any damage or destruction to or loss of any Xxxxxx Assets
(whether or not covered by insurance) that has materially and adversely
affected, or could materially and adversely affect, the Business;
(f) acquired or disposed of any Xxxxxx Assets except in the ordinary
course of business;
(g) written up or written down the carrying value of any of the Xxxxxx
Assets;
(h) changed the costing system or depreciation methods of accounting for
the Xxxxxx Assets;
(i) waived any material rights or forgiven any material claims;
-xv-
(j) lost or terminated any Xxxxxx employee, customer or supplier, the loss
or termination of which has materially and adversely affected, or could
materially and adversely affect, Business or Xxxxxx Assets;
(k) increased the compensation of any Xxxxxx employee except in the
ordinary course of business;
(l) entered into, adopted or amended any Compensation Plan; or
(m) entered into any other commitment or transaction or experienced any
other event that is material to this Agreement or to any of the other agreements
and documents executed or to be executed pursuant to this Agreement or to the
transactions contemplated hereby or thereby, or that has materially and
adversely affected, or could materially and adversely affect, the condition
(financial or otherwise), operations, assets, liabilities, business or prospects
of the Business.
SECTION 3.9. TITLE; LEASED ASSETS.
(a) XXXXXX REAL PROPERTY. Seller does not own any real property used in
connection with the Business. The leased real property referred to in Section
3.9(c) constitutes the only real property used in the conduct of the Business
("Xxxxxx Real Property Interests").
(b) XXXXXX PERSONAL PROPERTY. A description of all tangible and
intangible personal property owned by Seller and used in the Business
(collectively, the "Xxxxxx Personal Property") is set forth in Exhibit 3.9(b).
--------------
Except as set forth in Exhibit 3.9(b), Seller has good and valid title to all
--------------
the Xxxxxx Personal Property. The Xxxxxx Personal Property and the leased
personal property referred to in Section 3.9(c) constitute the only personal
property used in the conduct of the Business. Upon consummation of the
transactions contemplated hereby and subject to Section 2.1, Purchaser shall
receive good and valid title to the Xxxxxx Personal Property free and clear of
all security interests, liens, claims and encumbrances other than those
described in Exhibit 3.9(b) (except for tax liens not yet due and payable but
--------------
accrued on the Closing Balance Sheet).
(c) LEASES. A list of all material leases of real and personal property
used in the Business is set forth in Exhibit 3.9(c). All such leases are valid
--------------
and enforceable in accordance with their respective terms except as may be
limited by applicable bankruptcy, insolvency or similar laws affecting
creditors' rights generally or the availability of equitable remedies.
(d) RIGHT TO USE ASSETS. Except for those assets acquired since December
31, 1996, which are listed in Exhibit 3.9(d), all tangible assets used in the
--------------
conduct of the Business are reflected in the Xxxxxx Financial Statements in a
manner that is in conformity with GAAP. Seller owns, leases or otherwise
possesses a transferable right to use all the Xxxxxx Assets used in the conduct
of the Business, and except for the Excluded Assets, will transfer all of such
rights to Purchaser effective as of the Effective Date.
-xvi-
SECTION 3.10. CERTAIN CONTRACTS. Exhibit 3.10 contains a complete and
------------
accurate list of material contracts of the following types relating to any of
the Xxxxxx Assets to which Seller is a party or by which it is bound (the
"Contracts"):
(a) All material contracts with any distributor, manufacturer, broker,
franchisor, franchisee, dealer, sales representative, consultant, agent or
management entity, including without limitation, distribution contracts,
manufacturer representative contracts, management, agency contracts and bonus
contracts;
(b) All material contracts relating to any joint venture, licensing
arrangement, partnership or sharing of profits or losses with any person or
entity or permitting any person or entity to utilize any technology, know-how or
proprietary information of Seller;
(c) All contracts containing covenants purporting to materially limit
Seller's freedom to compete in the Business, with any person or entity or in any
geographic area;
(d) All contracts that contain an obligation of confidentiality with
respect to any information furnished by Seller to a third party or received by
it from a third party and relating to the Business;
(e) All real property leases, and all personal property leases which
involve or are reasonably expected to involve expenditures in excess of $25,000
during any fiscal year of Seller;
(f) All material contracts relating to the Xxxxxx Proprietary Rights;
(g) All purchase orders and contracts for the purchase of materials,
products or supplies which are for a term of more than twelve (12) months or
which involve or are reasonably expected to involve aggregate payments by Seller
to any one party of more than $25,000 during any fiscal year of Seller or which
were entered into other than in the ordinary course of Business;
(h) All contracts for the purchase of equipment, machinery and other items
which under GAAP constitute capital expenditures or which involve or are
reasonably expected to involve expenditures in excess of $25,000 (in the
aggregate with respect to contracts with a single third party) during any fiscal
year of Seller;
(i) All contracts with any single party or person with any other division
of Seller or any Affiliate thereof;
(j) All contracts that involve or may involve the payment or receipt by
Seller (whether in payment of debt, as a result of a guarantee or
indemnification, for goods or services or otherwise) in excess of $25,000 (in
the aggregate with respect to contracts with a single third party) over the term
thereof or which are cancelable by Seller only after giving at least thirty (30)
days notice without any penalty or other financial obligation; and
(k) All contracts with unions.
-xvii-
SECTION 3.11. INSURANCE. With respect to the Xxxxxx Assets and the
Business, Seller carries property, liability, workers' compensation and such
other types of insurance as is customary in Seller's industry. A list of such
insurance policies are set forth in Exhibit 3.11. All of such policies are
------------
valid and enforceable policies, issued by insurers of recognized responsibility
in amounts and against such risks and losses as is customary in Seller's
industry. Such insurance shall be outstanding and duly in force without
interruption up to and including the Closing Date.
SECTION 3.12. PATENTS, TRADE-MARKS, SERVICE MARKS AND COPYRIGHTS. Exhibit
-------
3.12 is a list of all trademarks, trade names, patents and copyrights, patent
----
applications and all licenses and other rights related thereto which are owned
or used by Seller in the Business and relate primarily thereto (hereinafter
referred to collectively as the "Xxxxxx Proprietary Rights"). To the best of
Seller's knowledge, except as set forth in Exhibit 3.12, each Xxxxxx Proprietary
------------
Right is owned free and clear of all encumbrances or has been duly licensed for
use by Seller for use in the Business. To the best of Seller's knowledge, except
as set forth on Exhibit 3.12, none of the Xxxxxx Proprietary Rights has been or
------------
is the subject of any pending adverse claim, or, to the best of Seller's
knowledge, any threatened litigation or claim of infringement.
SECTION 3.13. LITIGATION. To the best of Seller's knowledge, except as set
forth on Exhibit 3.13, there are no legal actions, suits or other legal
------------
proceedings pending or threatened, against or affecting Seller or relating to
the Business, which if determined in a manner adverse to Seller, would result in
a material adverse effect on the Business or financial condition of Seller. To
the best of Seller's knowledge, Seller is not (i) subject to any continuing
court or administrative order, writ, injunction or decree applicable
specifically to the Business, Xxxxxx Assets, or Xxxxxx employees or (ii) in
default with respect to any such order, writ, injunction or decree.
SECTION 3.14. ENVIRONMENTAL MATTERS.
(a) To the knowledge of Sellers, except as described in Exhibit 3.14
------------
hereto and matters that would not have a material adverse effect on the
Business, (i) Seller is in compliance with all Environmental Laws, and (ii) no
Hazardous Substances have been released, emitted or disposed of, or otherwise
deposited by Seller, on or in the Property except in compliance with
Environmental Law.
(b) To the knowledge of Seller, no activity has been undertaken on the
Property that has caused or contributed to:
(i) the Property becoming a treatment, storage or disposal
facility as defined in RCRA or any similar state law or local ordinance;
(ii) a release or threatened release of any Hazardous Substances in
violation of Environmental Law; or
(iii) the discharge of pollutants or effluents into any water source
or system or into the air, or the dredging or filling of any waters, that
would require a permit under
-xviii-
the Federal Water Pollution Control Act, 33 U.S.C. (S)1251 et seq., the Clean
-- ---
Air Act, as amended, 42 U.S.C. (S)7401 et seq., or any similar foreign or state
-- ---
law or local ordinance.
(c) Except as described in Exhibit 3.14 hereto Seller has not received any
------------
written notice from a Governmental Authority or third party that there are
substances or conditions in or on the Property that may support a claim or cause
of action under any Environmental Law.
(d) To the knowledge of Seller, there are not, and never have been any
Underground Storage Tanks (as defined in RCRA) located in or under the Property.
(e) Seller has obtained all permits required by all applicable
Environmental Laws, all such permits are in full force and effect, and Seller is
in material compliance with all such permits.
(f) Except as described in Exhibit 3.14 hereto, there are no pending or,
------------
to the knowledge of Seller, threatened claims, investigations, administrative
proceedings, litigation, regulatory hearings or requests or demands for remedial
or response actions or for compensation, with respect to the Property, alleging
noncompliance with or violation of any Environmental Law or seeking relief under
any Environmental Law.
SECTION 3.15 TAXES. Except as described in Exhibit 3.15, all income,
------------
excise, corporate, franchise, property, sales, use, payroll, withholding and
other taxes related to taxable periods or portions thereof ending prior to or on
the Effective Date, including without limitation governmental charges,
assessments and required contributions of Seller with respect to the Business
that may result in the filing of a lien on the Assets or that may result in the
imposition of transferee or other liability on Purchaser for the payment of such
taxes, have been accurately recorded and duly paid or accrued in the Year-End
Balance Sheet, collected or withheld and remitted to the appropriate
governmental agency, except for current taxes not due and payable prior to or on
the Effective Date, which Seller shall pay when due.
SECTION 3.16. COMPLIANCE WITH LAWS. Except as described on Exhibit 3.16,
------------
Seller has complied with all laws, regulations and licensing requirements and
has filed with the proper authorities all necessary statements and reports.
There are no existing violations by Seller of any federal, state or local law or
regulation except for such violations that would not result in a material
adverse effect upon the Business.
SECTION 3.17. NO IMPLIED WARRANTY. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED
IN THIS ARTICLE III, SELLER IS MAKING NO REPRESENTATION OR WARRANTY AS TO THE
XXXXXX ASSETS OR THE BUSINESS.
SECTION 3.18 USE OF PURCHASE PRICE. Seller intends to use the proceeds
received from the Purchase Price to pay the costs and expenses associated with
the transactions contemplated by the Agreement, to repay borrowings from its
secured lenders and to pay trade accounts payable.
SECTION 3.19 BULK SALE INFORMATION. Seller has prepared a list of names and
business addresses of all creditors and claimants of Seller known to Seller as
of March 4, 1997 and
-xix-
delivered same to Purchaser. The claims set forth therein include claims that
are admitted and claims that may be in dispute.
SECTION 3.20 APPLICATION OF REVENUES. For the period of time between the
Effective Date and the Closing Date, Seller has applied all revenues, receipts
and other proceeds of Xxxxxx and the Business for the benefit of the Business to
pay and discharge the Assumed Liabilities.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants that the following are true and correct
as of the date hereof and will be materially true and correct through the
Closing Date as if made on that date:
SECTION 4.1. ORGANIZATION AND GOOD STANDING. Purchaser is a corporation
duly organized, validly existing and in good standing under the laws of the
state of its incorporation, with all requisite corporate power and authority to
carry on the business in which it is engaged, to own the properties it owns, to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby.
SECTION 4.2. AUTHORIZATION AND VALIDITY. The execution, delivery and
performance by Purchaser of this Agreement and the other agreements contemplated
hereby, and the consummation of the transactions contemplated hereby and
thereby, have been duly authorized by Purchaser. This Agreement and each other
agreement contemplated hereby have been or will be as of the Closing Date duly
executed and delivered by Purchaser and constitute or will constitute legal,
valid and binding obligations of Purchaser, enforceable against Purchaser in
accordance with their respective terms, except as may be limited by applicable
bankruptcy, insolvency or similar laws affecting creditors' rights generally or
the availability of equitable remedies.
SECTION 4.3 NO VIOLATION. Neither the execution, delivery or performance
of this Agreement or the other agreements contemplated hereby nor the
consummation of the transactions contemplated hereby or thereby will (i)
conflict with, or result in a violation or breach of the terms, conditions and
provisions of, or constitute a default under, the Articles of Incorporation or
Bylaws of Purchaser or any agreement, indenture or other instrument under which
Purchaser is bound or (ii) violate or conflict with any judgment, decree, order,
statute, rule or regulation of any court or any public, governmental or
regulatory agency or body having jurisdiction over Purchaser or the properties
or assets of Purchaser.
SECTION 4.4 FINDER'S FEE. Except for fees payable to Xxxxx & Co.,
purchaser has not incurred any obligation for any finder's, broker's or agent's
fee in connection with the transactions contemplated hereby.
-xx-
SECTION 4.5 FINANCIAL CONDITION OF SELLER. Purchaser has reviewed the
Financial Statements, has been informed by Seller and understands the
deteriorating financial condition of the Business.
SECTION 4.6 BREACH OF REPRESENTATIONS AND WARRANTIES. Purchaser has no
actual knowledge of any breach of, or any inaccuracy of the representations and
warranties of Seller in this Agreement.
SECTION 4.7. XXXX-XXXXX-XXXXXX ANTITRUST IMPROVEMENTS ACT OF 1976. No
entity controls Purchaser, directly or indirectly. Purchaser does not meet the
threshold provided for in Section 7A.(a)(2) of the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976, as amended, 15 U.S.C. Section 18a.
ARTICLE V
SELLER'S COVENANTS
Seller agrees that between the date hereof and the Closing:
SECTION 5.1 CONSUMMATION OF AGREEMENT. Seller shall use its best efforts
to cause the consummation of the transactions contemplated hereby in accordance
with their terms and conditions.
SECTION 5.2. ACCESS. Seller shall afford Purchaser and its accountants and
auditors, legal counsel and other representatives reasonable access to the
books, records, contracts, documents, properties and facilities of Seller
pertaining to the Xxxxxx Assets and the Business, and Seller shall instruct its
officers, employees, accountants, auditors, legal counsel and other
representatives to reasonably cooperate with such investigations and to furnish
all such information as Purchaser may from time to time reasonably request. In
particular, upon the prior consent of Seller given on a specified party-by-party
basis, Seller shall cooperate with Purchaser in introducing Purchaser to the key
customers, suppliers, secured and unsecured creditors and other parties having
significant business relations with Xxxxxx, and Purchaser shall be authorized to
negotiate with said parties to confirm and/or modify terms and conditions under
which said parties shall continue to do business with the Business following the
Closing.
SECTION 5.3. APPROVALS OF THIRD PARTIES. Seller shall use its best efforts
to secure, as soon as practicable after the date hereof, all necessary approvals
and consents of third parties to the consummation of the transactions
contemplated hereby.
SECTION 5.4. PRESERVATION OF BUSINESS. Seller shall have, until the
Closing Date, continued in all respects the ordinary and usual conduct of the
Business and shall have sought to preserve for Purchaser Seller's relations
through the Business with its customers, suppliers, employees and others
conducting business with Seller and the Business subject to the financial
constraints and conditions presently experienced by Seller and the Business.
SECTION 5.5. CONDUCT OF BUSINESS. Seller, with respect to the Business,
will not incur any material liabilities, or enter into any material contracts or
obligation other than in the
-xxi-
ordinary course of business, except with the written consent of Purchaser, which
consent shall not be unreasonably withheld.
SECTION 5.6. ACQUISITION PROPOSALS. Purchaser and Seller acknowledge and
agree that Seller may, prior to Closing, solicit, directly or indirectly, or
negotiate with other parties concerning the sale of the Xxxxxx Assets, and enter
into an agreement to sell the Xxxxxx Assets to a third party other than
Purchaser; provided, however, in the event Seller enters into any agreement,
arrangement, commitment or understanding during said period with any other party
concerning the sale of the Xxxxxx Assets, the sale of stock of Seller, any
business combination involving Seller or any other transaction that, if
consummated, would have the effect of prohibiting, restricting or impairing
Seller's ability to sell the Xxxxxx Assets to Purchaser as herein contemplated,
or conditioning the sale of the Xxxxxx Assets upon any such other party's
consent or approval, Seller agrees to pay to Purchaser, at the closing of such
alternative transaction, as liquidated damages and not as a penalty, a sum equal
to the lesser of: (i) all of Purchaser's costs, expenses, fees and commissions
incurred with respect to this contemplated transaction, or (ii) $100,000.
ARTICLE VI
PURCHASER'S COVENANTS
Purchaser agrees that between the date hereof and the Closing:
SECTION 6.1. CONSUMMATION OF AGREEMENT. Purchaser shall use its best
efforts to cause the consummation of the transactions contemplated hereby in
accordance with their terms and conditions.
SECTION 6.2. USE OF SELLER MATERIALS. Purchaser agrees to treat as
confidential during and after its investigations related to the transactions
contemplated hereby all information and materials divulged pursuant thereto and,
in the event the transactions are not consummated, Purchaser agrees to return to
Seller all information and materials.
ARTICLE VII
CLOSING CONDITIONS
SECTION 7.1. CONDITIONS TO OBLIGATIONS OF EACH PARTY UNDER THIS AGREEMENT.
The respective obligations of each party to affect the transactions contemplated
by this Agreement will be subject to the satisfaction at or prior to the Closing
Date of the following conditions, any or all of which may be waived in writing
by the parties, in whole or in part, to the extent permitted by applicable law:
(a) APPROVALS. The transactions contemplated by this Agreement shall have
been approved by the Board of Directors of Purchaser, the Board of Directors of
Seller and the secured lenders of Seller, to the extent required, and all
necessary regulatory authorities and all applicable waiting periods with respect
thereto shall have expired; and
-xxii-
(b) NONCOMPETITION AGREEMENT. The parties shall have entered into a
noncompetition agreement in the form attached hereto as Exhibit 7.1(b) (the
--------------
"Noncompetition Agreement").
(c) LITIGATION. No action, suit, proceeding or investigation shall be
pending before any court or governmental body or agency, or instituted by a
governmental body or agency to restrain or prevent the carrying out of the
transactions contemplated by this Agreement.
(d) CONSENTS AND ASSIGNMENTS. Seller shall have obtained the necessary
consents and assignments set forth on Exhibit 2.2.
-----------
SECTION 7.2. PURCHASER'S CONDITIONS PRECEDENT. Except as may be waived in
writing by Purchaser, the obligations of Purchaser hereunder are subject to the
fulfillment at or prior to the Closing Date of each of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties of
Seller contained herein shall be true and correct in all material respects on
the Closing Date effective as of the Effective Date; and Purchaser shall have
received an officer's certificate of Seller, dated as of the Closing Date, to
the foregoing effect.
(b) COVENANTS AND CONDITIONS. Seller shall have performed and complied in
all material respects with all covenants and conditions required by this
Agreement to be performed and complied with by Seller prior to the Closing Date;
and Purchaser shall have received an officer's certificate of Seller, dated as
of the Closing Date, to the foregoing effect.
(c) OPINION. Counsel to Seller shall have delivered to Purchaser its
opinion, dated as of the Closing Date, in form and substance to the effect set
forth in Exhibit 7.2(c).
--------------
(d) MESC FORM 1027. Seller shall have provided to Purchaser a fully
executed Michigan Employment Security Commission Form 1027.
(e) NFPA. Seller shall have provided Purchaser with a fully executed Non-
Foreign Person Affidavit.
(f) NO MATERIAL ADVERSE CHARGE. There shall have been no material adverse
change to the Xxxxxx Assets or the liabilities, financial condition or prospects
of the Business prior to the Effective Date.
(g) CLOSING DELIVERIES. Purchaser shall have received all documents, duly
executed, referred to in Section 8.1.
SECTION 7.3. SELLER'S CONDITIONS PRECEDENT. Except as may be waived in
writing by Seller, the obligations of Seller hereunder are subject to
fulfillment at or prior to the Closing Date of each of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties of
Purchaser contained herein shall be true and correct in all material respects on
the Closing Date
-xxiii-
effective as of the Effective Date; and Purchaser shall have delivered to Seller
an officer's certificate of Purchaser, dated as of the Closing Date, to the
foregoing effect.
(b) COVENANTS AND CONDITIONS. Purchaser shall have performed and complied
in all material respects with all covenants and conditions required by this
Agreement to be performed and complied with by it prior to the Closing Date; and
Purchaser shall have delivered to Seller an officer's certificate of Purchaser,
dated as of the Closing Date, to the foregoing effect.
(c) OPINION. Counsel to Purchaser shall have delivered to Seller its
opinion, dated as of the Closing Date, in form and substance to the effect set
forth on Exhibit 7.3(c).
--------------
(d) CLOSING DELIVERIES. Seller shall have received all documents, duly
executed, referred to in Section 8.2.
ARTICLE VIII
CLOSING DELIVERIES
SECTION 8.1. DELIVERIES OF SELLER. At the Closing, Seller shall deliver to
Purchaser the following:
(a) the Xxxx of Sale, Assignment and Assumption Agreement in the form
attached as Exhibit 8.1(a);
--------------
(b) an officer's certificate of Seller, dated the Closing Date, as to the
material truth and correctness of the representations and warranties of Seller
contained herein dated the Closing Date and effective as of the Effective Date
pursuant to Section 7.2(a);
(c) an officer's certificate of Seller, dated the Closing Date, (i) as to
the material performance of and compliance by Seller with all covenants
contained herein dated the Closing Date and effective as of the Effective Date
and (ii) certifying that all material conditions precedent of Seller to the
Closing have been satisfied pursuant to Section 7.2(b);
(d) an opinion of Xxxxxxx & Xxxxxx, L.L.P., counsel to Seller, dated as of
the Closing Date, pursuant to Section 7.2(c);
(e) the Noncompetition Agreement;
(f) the Product Drawings in computer readable format; and
(g) automobile titles for vehicles.
SECTION 8.2. DELIVERIES OF PURCHASER. At the Closing, Purchaser shall
deliver to Seller:
(a) the Purchase Price in immediately available funds;
-xxiv-
(b) the Xxxx of Sale, Assignment and Assumption Agreement;
(c) an officer's certificate of Purchaser, dated the Closing Date, as to
the material truth and correctness of the representations and warranties of
Purchaser contained herein dated the Closing Date and effective as of the
Effective Date pursuant to Section 7.3(a);
(d) an officer's certificate of Purchaser, dated the Closing Date, (i) as
to the material performance and compliance by Purchaser with all covenants
contained herein on and as of the Closing Date and (ii) certifying that all
material conditions precedent of Purchaser to the Closing have been satisfied
pursuant to Section 7.3(b); and
(e) an opinion of Miller, Canfield, Paddock and Stone, P.L.C., counsel to
Purchaser, dated as of the Closing Date pursuant to Section 7.3(c).
ARTICLE IX
REMEDIES
SECTION 9.1. INDEMNIFICATION BY SELLER. Subject to the terms and
conditions of this Article, Seller agrees for the one year period beginning on
the Closing Date to indemnify, defend and hold Purchaser and its directors,
officers, agents, attorneys and affiliates harmless from and against all losses,
claims, obligations, demands, assessments, penalties, liabilities, costs,
damages, attorneys' fees and expenses (collectively, "Damages"), asserted
against or incurred by such indemnitees by reason of or resulting from (i) a
material breach of Sections 3.1, 3.2, 3.3, 3.5., 3.6, 3.7(d), 3.9, 3.12, 3.15
and 3.20; provided, however, that Seller shall not indemnify Purchaser for any
Warranty Obligations and (ii) failure to pay or discharge any of the Retained
Liabilities; provided, however, that such indemnification pertaining to the
Retained Liabilities shall not be limited to a certain time period, but shall be
for an indefinite period.
SECTION 9.2. INDEMNIFICATION BY PURCHASER. Subject to the terms and
conditions of this Article, Purchaser agrees to indemnify, defend and hold
Seller and its respective directors, officers, agents, attorneys and affiliates
harmless from and against all Damages asserted against or incurred by any of
such indemnitees by reason of or resulting from (i) the failure of Purchaser to
pay, perform and discharge when due any of the Assumed Liabilities and (ii) the
operation of the Business by Purchaser after the Effective Date.
SECTION 9.3. LIMITATIONS ON SELLER'S INDEMNITY. Seller shall not be liable
for claims for Damages covered under Section 9.1 until the aggregate of such
claims for Damages for which Seller is liable are in excess of $175,000 (the
"Liability Threshold") and then only to the extent that such amount exceeds the
Liability Threshold. Notwithstanding the foregoing, Seller's aggregate liability
shall not exceed $2,000,000 until the six month anniversary of the Closing Date,
and shall not exceed $1,000,000 until the one year anniversary of the Closing
Date; provided, however, that the foregoing limitation on Seller's indemnity
shall not apply to Seller's indemnification regarding Retained Liabilities or to
the representations contained in Section 3.20. After the one year anniversary of
the Closing Date Seller shall not be liable for claims for Damages under Section
9.1 with respect to Retained Liabilities.
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SECTION 9.4 CONDITIONS OF INDEMNIFICATION. The respective obligations and
liabilities of Seller and Purchaser (the "indemnifying party") to the other (the
"party to be indemnified") under Sections 9.1 and 9.2 with respect to claims
resulting from the assertion of liability by third parties shall be subject to
the following terms and conditions:
(a) Within 20 days (or such earlier time as might be required to avoid
prejudicing the indemnifying party's position) after receipt of notice of
commencement of any action evidenced by service of process or other legal
pleading, the party to be indemnified shall give the indemnifying party written
notice thereof together with a copy of such claim, process or other legal
pleading, and the indemnifying party shall have the right to undertake the
defense thereof by representatives of its own choosing and at its own expense;
provided that the party to be indemnified may participate in the defense with
counsel of its own choice, the fees and expenses of which counsel shall be paid
by the party to be indemnified unless (i) the indemnifying party has agreed to
pay such fees and expenses, (ii) the indemnifying party has failed to assume the
defense of such action or (iii) the named parties to any such action (including
any impleaded parties) include both the indemnifying party and the party to be
indemnified and the party to be indemnified has been advised by counsel that
there may be one or more legal defenses available to it that are different from
or additional to those available to the indemnifying party (in which case, if
the party to be indemnified informs the indemnifying party in writing that it
elects to employ separate counsel at the expense of the indemnifying party, the
indemnifying party shall not have the right to assume the defense of such action
on behalf of the party to be indemnified, it being understood, however, that the
indemnifying party shall not, in connection with any one such action or separate
but substantially similar or related actions in the same jurisdiction arising
out of the same general allegations or circumstances, be liable for the
reasonable fees and expenses of more than one separate firm of attorneys at any
time for the party to be indemnified, which firm shall be designated in writing
by the party to be indemnified).
(b) In the event that the indemnifying party, by the 30th day after
receipt of notice of any such claim (or, if earlier, by the 10th day preceding
the day on which an answer or other pleading must be served in order to prevent
judgment by default in favor of the person asserting such claim), does not elect
to defend against such claim, the party to be indemnified will (upon further
notice to the indemnifying party) have the right to undertake the defense,
compromise or settlement of such claim on behalf of and for the account and risk
of the indemnifying party and at the indemnifying party's expense, subject to
the right of the indemnifying party to assume the defense of such claims at any
time prior to settlement, compromise or final determination thereof.
(c) Notwithstanding the foregoing, the indemnifying party shall not settle
any claim without the consent of the party to be indemnified unless such
settlement involves only the payment of money and the claimant provides to the
party to be indemnified a release from all liability in respect of such claim.
If the settlement of the claim involves more than the payment of money, the
indemnifying party shall not settle the claim without the prior consent of the
party to be indemnified.
(d) The party to be indemnified and the indemnifying party will each
cooperate with all reasonable requests of the other.
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SECTION 9.5. WAIVER. No waiver by any party of any default or breach by
another party of any representation, warranty, covenant or condition contained
in this Agreement, any exhibit or any document, instrument or certificate
contemplated hereby shall be deemed to be a waiver of any subsequent default or
breach by such party of the same or any other representation, warranty, covenant
or condition. No act, delay, omission or course of dealing on the part of any
party in exercising any right, power or remedy under this Agreement or at law or
in equity shall operate as a waiver thereof or otherwise prejudice any of such
party's rights, powers and remedies. All remedies, whether at law or in equity,
shall be cumulative and the election of any one or more shall not constitute a
waiver of the right to pursue other available remedies.
SECTION 9.6. REMEDIES NOT EXCLUSIVE. The remedies provided in this Article
shall not be exclusive of any other rights or remedies available to one party
against the other, either at law or in equity.
SECTION 9.7. TAX EFFECT OF INDEMNIFICATION. Notwithstanding any term or
provision of this Agreement to the contrary, any indemnity payments owed by one
party ot another party to this Agreement shall be reduced by any tax benefits to
the party claiming indemnity hereunder and increased by any tax detriments to
the party claiming idemnity hereunder.
SECTION 9.8. PRODUCT LIABILITY. Purchaser and Seller mutually agree as
follows:
(a) PRODUCT LIABILITY OF SELLER. Seller is solely responsible for any and
all claims for injury (including death) or claims for Damages direct or
consequential, resulting from or connected with finished products or services of
the Business shipped before the Closing Date (excluding Warranty Obligations).
(b) PRODUCT LIABILITY OF BUYER. Purchaser is solely responsible for any
and all claims for injury (including death) or claims for Damages direct or
consequential, resulting from or connected with finished products or services of
the Business (whenever manufactured) shipped on or after the Closing Date
(excluding Warranty Obligations).
SECTION 9.9. SURVIVAL. The representations and warranties of Seller
contained in Sections 3.1, 3.2, 3.3, 3.5, 3.6, 3.7(d), 3.9, 3.12, 3.15 and 3.20
shall survive the Closing for a period of one (1) year at which time they shall
expire except for claims previously made with respect to breaches of such
representations and warranties. All other representations and warranties set
forth in Article III shall expire at the Closing.
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ARTICLE X
TERMINATION
SECTION 10.1. TERMINATION. This Agreement may be terminated:
(a) at any time after March 18, 1997 by either Purchaser or Seller if the
Closing has not occurred by that date.
(b) at any time prior to the Closing Date by mutual agreement of all
parties.
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(c) at any time prior to the Closing Date by Purchaser if any
representation or warranty of Seller contained in this Agreement or in any
certificate or other document executed and delivered by Seller pursuant to this
Agreement is or becomes untrue or breached in any material respect or if Seller
fails to comply in any material respect with any covenant contained herein, and
any such misrepresentation, noncompliance or breach is not cured, waived or
eliminated within 6 days.
(d) at any time prior to the Closing Date by Seller if any representation
or warranty of Purchaser contained in this Agreement or in any certificate or
other document executed and delivered by Purchaser pursuant to this Agreement is
or becomes untrue or breached in any material respect or if Purchaser fails to
comply in any material respect with any covenant contained herein, and any such
misrepresentation, noncompliance or breach is not cured, waived or eliminated
within 6 days.
(e) at the Closing Date by Purchaser if the conditions stated in Section
7.2 have not been satisfied.
(f) at the Closing Date by Seller if the conditions stated in Section 7.3
have not been satisfied.
In the event this Agreement is terminated pursuant to subparagraph (c), (d), (e)
or (f) above, Purchaser and Seller shall each be entitled to pursue, exercise
and enforce any and all remedies, rights, powers and privileges available at law
or in equity. In the event of a termination of this Agreement under the
provisions of this Article, a party not then in material breach of this
Agreement shall stand fully released and discharged of any and all obligations
under this Agreement.
ARTICLE XI
OTHER AGREEMENTS
SECTION 11.1. EMPLOYEES. Purchaser will offer employment to those employees
working in the Business set forth on Exhibit 11.1 (the "Designated Employees")
------------
effective as of the Effective Date on an at-will basis, at competitive wage
levels and benefit packages (provided that Purchaser shall not be obligated to
offer pension plan retirement benefits). Immediately prior to the Closing Date,
Seller shall terminate all employees of Seller working in the Business. Seller
shall be responsible for fully funding all pension liabilities and for payment
and satisfaction of all termination or severance benefits, if any, and other
obligations to employees in respect thereof.
SECTION 11.2 FURTHER ASSURANCES. Seller agrees, before and after Closing,
at Purchaser's sole cost and expense to provide to Purchaser such other
documents and instruments as shall be reasonably necessary to effect the intent
of this Agreement and the transactions contemplated hereby.
SECTION 11.3. PRODUCT DRAWING LICENSE. Seller hereby grants to Purchaser a
perpetual, nonexclusive, nonassignable, nontransferable, non sublicensable
royalty free license to use the Product Drawings solely in connection with the
conduct of the Business; provided,
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however, Purchaser may assign the license granted hereunder to a third party in
connection with the sale of all or substantially all of the assets of Purchaser.
Purchaser acknowledges that, to Purchaser's knowledge, Seller owns the Product
Drawings and that nothing in this Agreement shall be construed as an assignment
or grant to Purchaser of any right, title or interest in or to the Product
Drawings except for the license granted pursuant to this Section 11.3. Purchaser
further acknowledges and agrees that (a) Seller has not made, and is not making,
any representation or warranty with respect to the Product Drawings, expressed
or implied, including, without limitation, merchantability, the accuracy of the
Product Drawings, or sufficiency or fitness of the Product Drawings for any
particular purpose, and (b) Seller may continue to use the Project Drawings in
connection with its ongoing business subject to the provisions of the
Noncompetition Agreement. Purchaser agrees that it will not disclose or make the
Product Drawings generally available to third parties except for those
disclosures as are reasonably necessary in order for Purchaser to conduct the
Business.
11.4 CHANGSHAU RUST CLAIM. Seller is pursuing a claim against a contract
packager and/or freight forwarder for recovery of costs and lost profits in
connection with rust and/or insecure packaging damage to certain machinery and
equipment shipped to a customer of Seller, Changshau. As part of the claim and
settlement of such claim, Seller may require Purchaser to repair or provide
additional dies for current dies which may not be usable due to rust or other
problems. To the extent that Seller requires replacement dies or services,
Purchaser agrees to sell such dies and services to Seller at Purchaser's fully
absorbed manufacturing cost plus travel and living expenses, if required, at
Purchaser's actual out-of-pocket cost. Purchaser acknowledges that it has no
claim with respect to this potential claim and settlement and shall have no
right to share or participate in any settlement or recovery proceeds obtained by
Seller.
11.5 CHANGSHAU DIE CONFIGURATION. The Xxxxxx Division has manufactured and
delivered dies for Seller's Changshau project to a design and configuration
agreed upon between the parties. The Xxxxxx Division has fulfilled its
obligations in this regard and Purchaser agrees to provide additional services
against purchase orders to be issued at the time such services are requested by
Seller, at Purchaser's fully absorbed manufacturing cost plus travel and living
expenses, if required, at Purchaser's actual out-of-pocket cost.
11.6 CHAMPION DIES. The Xxxxxx Division presently has certain dies for
Champion that may require certain tasks for completion. If these dies are not
shipped complete as of the Closing Date, Purchaser agrees that Purchaser will
furnish the manufacturing of such dies and ship as directed by Seller at no
additional cost to Seller or Champion, except for modifications as otherwise
agreed by Champion.
11.7 XXXXX RIVER ORDER. Seller is negotiating with Xxxxx River for a
folding carton system sale which includes certain equipment to be produced by
the Xxxxxx Division. Seller may provide components exclusive of the cutter
directly from its Zerand Division and Seller is not obligated to purchase such
components from Purchaser. Assuming the contract with Xxxxx River is executed
within 90 days of the Closing Date, if Seller elects to purchase components from
Purchaser for such order Purchaser will sell such components to Seller at the
current management accounting transfer price less a 10% O.E.M. discount.
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11.8 FUTURE SALES AMONG COMPANIES. Future sales prices by Seller to
Purchaser and by Purchaser to Seller shall be based on standard list prices (or
standard prices offered to customers if no list price is in effect) less a 10%
O.E.M. discount. Pricing may also be further negotiated by Purchaser and Seller
in those situations where collectively the price must be lowered to meet the
customer expectations or special requirements.
11.9 TRADE SHOW BOOTH. Purchaser will allow Seller to use the trade show
booth under a non-assignable, non-transferable license for up to two (2) times
over the 24 month period following the Closing Date. Seller acknowledges that
Purchaser shall have first right to use the trade show booth for any Converting
Machinery and Manufacturers Association trade show and Seller shall have first
right to use the trade show booth for any other trade show. If Seller elects to
use the trade show booth, Seller shall provide Purchaser with sixty (60) days
advance written notice of the proposed dates of use by Seller, and Seller
accepts responsibility for the full cost of moving, set-up, modification,
restoration and any other cost incurred in connection with such use and
returning the trade show booth to storage after use.
11.10 COLLECTION OF MONIES AFTER THE CLOSING DATE. All monies received by
Seller with respect to the Business from the Xxxxxx lock box shall be promptly
turned over to Purchaser and until so remitted shall be held in trust for
Purchaser. Seller agrees that for a period of sixty (60) days following the
Closing Date Seller will send all such monies to Purchaser by overnight delivery
on a daily basis.
ARTICLE XII
MISCELLANEOUS
SECTION 12.1. AMENDMENT. This Agreement may be amended, modified or
supplemented only by an instrument in writing executed by all the parties
hereto.
SECTION 12.2. ASSIGNMENT. Neither this Agreement nor any right created
hereby or in any agreement entered into in connection with the transactions
contemplated hereby shall be assignable by any party hereto.
SECTION 12.3. PARTIES IN INTEREST; NO THIRD PARTY BENEFICIARIES. Except as
otherwise provided herein, the terms and conditions of this Agreement shall
inure to the benefit of and be binding upon the respective heirs, legal
representatives, successors and assigns of the parties hereto. Neither this
Agreement nor any other agreement contemplated hereby shall be deemed to confer
upon any person not a party hereto or thereto any rights or remedies hereunder
or thereunder.
SECTION 12.4. ENTIRE AGREEMENT. This Agreement and the agreements
contemplated hereby constitute the entire agreement of the parties regarding the
subject matter hereof, and supersede all prior agreements and understandings,
both written and oral, among the parties, or any of them, with respect to the
subject matter hereof.
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SECTION 12.5. SEVERABILITY. If any provision of this Agreement is held to
be illegal, invalid or unenforceable under present or future laws effective
during the term hereof, such provision shall be fully severable and this
Agreement shall be construed and enforced as if such illegal, invalid or
unenforceable provision never comprised a part hereof; and the remaining
provisions hereof shall remain in full force and effect and shall not be
affected by the illegal, invalid or unenforceable provision or by its severance
herefrom. Furthermore, in lieu of such illegal, invalid or unenforceable
provision, there shall be added automatically as part of this Agreement a
provision as similar in its terms to such illegal, invalid or unenforceable
provision as may be possible and be legal, valid and enforceable.
SECTION 12.6. GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS
OF THE PARTIES HERETO SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN
ACCORDANCE WITH THE SUBSTANTIVE LAWS (BUT NOT THE RULES GOVERNING CONFLICTS OF
LAWS) OF THE STATE OF MICHIGAN.
SECTION 12.7. CAPTIONS. The captions in this Agreement are for convenience
of reference only and shall not limit or otherwise affect any of the terms or
provisions hereof.
SECTION 12.8. GENDER AND NUMBER. When the context requires, the gender of
all words used herein shall include the masculine, feminine and neuter and the
number of all words shall include the singular and plural.
SECTION 12.9. REFERENCE TO AGREEMENT. Use of the words "herein", "hereof",
"hereto" and the like in this Agreement shall be construed as references to this
Agreement as a whole and not to any particular Article, Section or provision of
this Agreement, unless otherwise noted.
SECTION 12.10. CONFIDENTIALITY; PUBLICITY AND DISCLOSURES. Each party shall
keep this Agreement and its terms confidential, and shall make no press release
or public disclosure, either written or oral, regarding the transactions
contemplated by this Agreement without the prior knowledge and consent of the
other parties hereto; provided that the foregoing shall not prohibit any
disclosure (i) by press release, filing or otherwise that is required by federal
securities laws or the rules of American Stock Exchange, (ii) to attorneys,
accountants, investment bankers or other agents of the parties assisting the
parties in connection with the transactions contemplated by this Agreement (iii)
by Purchaser in connection with obtaining financing for the transactions
contemplated by this Agreement and conducting an examination of the operations
and assets of Seller and (iv) of information that was or becomes generally
available to the public other than as a result of an unauthorized disclosure. In
the event that the transactions contemplated hereby are not consummated for any
reason whatsoever, the parties hereto agree not to disclose or use any
confidential information they may have concerning the affairs of the other
parties, except for information that is required by law to be disclosed.
Confidential information includes, but is not limited to: financial records,
surveys, reports, plans, proposals, financial information, information relating
to personnel, contracts, stock ownership, liabilities and litigation; provided
that should the transactions contemplated hereby not be consummated, nothing
contained in this Section shall be construed to prohibit the parties hereto from
operating businesses in competition with each other.
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SECTION 12.11. NOTICE. Any notice or communication hereunder or in any
agreement entered into in connection with the transactions contemplated hereby
must be in writing and given by depositing the same in the United States mail,
addressed to the party to be notified, postage prepaid and registered or
certified with return receipt requested, or by delivering the same in person.
Such notice shall be deemed received on the date on which it is hand-delivered
or on the third business day following the date on which it is so mailed. For
purposes of notice, the addresses of the parties shall be:
If to Purchaser: Xxxxxx International, Inc.
Attn: Xxxxxxx X. Xxxxxx
000 X. Xxxx Xxxxxx
Xxxxx 0X, Xxxxxxxx Xxxxxxxx
Xxxxxx, Xxxxxxxx 00000
with a copy to: J. Xxxxx Xxxxxxx
Miller, Canfield, Paddock and Stone, P.C.
0000 Xxxxx Xxxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxxx Xxxxx, Xxxxxxxx 00000
If to Seller: Xxxxxxx International, Inc.
0000 Xxxxxxx Xxxxxxx
Xxxx Xxxxx, Xxxxx 00000
Attn: Chairman and Chief Executive Officer
with a copy to: Xxxxxxx X. Xxxxxxx, Xx.
Xxxxxxx & Xxxxxx, L.L.P.
000 Xxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
Any party may change its address for notice by written notice given to the other
parties in accordance with this Section.
SECTION 12.12 EXPENSES. The parties hereto shall each pay their own
expenses in connection with this Agreement.
SECTION 12.13 COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument.
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PURCHASER
XXXXXX INTERNATIONAL, INC.
By: /s/ Xxxxxxx X. Xxxxxx
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Its: President
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SELLER
XXXXXXX INTERNATIONAL, INC.
By: /s/ Xxxxxxx X. Xxxx
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Its: Vice President
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