Exhibit 2.1
Execution Copy
================================================================================
RECAPITALIZATION AGREEMENT
================================================================================
Among
FORSTMANN LITTLE & CO. SUBORDINATED DEBT AND EQUITY
MANAGEMENT BUYOUT PARTNERSHIP-VI, L.P.,
YANKEE CANDLE HOLDINGS CORP.,
THE YANKEE CANDLE COMPANY, INC.,
and
XXXXXXX XXXXXXXXX
Dated March 25, 1998
TABLE OF CONTENTS
ARTICLE I DEFINITIONS........................................................1
1.01 Definitions...........................................................1
1.02 Other Defined Terms...................................................9
ARTICLE II RECAPITALIZATION TRANSACTIONS....................................11
2.01 Aggregate Recapitalization Price.....................................11
2.02 Recapitalization Transactions........................................12
2.03 Closing..............................................................14
2.04 Purchase Price Adjustment............................................14
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE SELLER....................17
3.01 Organization.........................................................17
3.02 Authority............................................................17
3.03 Capitalization; Title to Shares......................................18
3.04 Organizational Documents and Records.................................18
3.05 Subsidiaries and Portfolio Interests.................................19
3.06 Financial Statements.................................................19
3.07 Compliance with Laws; Permits........................................19
3.08 Consents; No Violations..............................................20
3.09 Commitments..........................................................20
3.10 Absence of Undisclosed Liabilities...................................23
3.11 Absence of Certain Changes...........................................23
3.12 Brokers and Finders; Fees............................................23
3.13 Real Estate..........................................................23
3.14 Sufficiency of Assets................................................24
3.15 Tangible Property....................................................24
3.16 Inventory............................................................25
3.17 Accounts and Notes Receivable; Commissions...........................25
3.18 Litigation and Orders................................................26
3.19 Intellectual Properties..............................................26
3.20 Tax Returns, Audits and Liabilities..................................27
3.21 Insurance............................................................28
3.22 Employee Benefits....................................................29
3.23 Suppliers and Customers..............................................33
3.24 Products.............................................................33
3.25 Environmental Matters................................................33
3.26 Interest in Competitors, Etc.........................................35
3.27 Customs and Trade Regulation.........................................35
3.28 Intercompany Transactions............................................36
3.29 Banking Facilities...................................................36
-i-
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE PURCHASER..................37
4.01 Organization.........................................................37
4.02 Authority............................................................37
4.03 Consents; No Violation...............................................37
4.04 Brokers and Finders..................................................38
4.05 Financing............................................................38
ARTICLE V COVENANTS.........................................................38
5.01 No Solicitation......................................................38
5.02 Interim Operations...................................................38
5.03 Access and Information...............................................41
5.04 Compliance with Antitrust Laws; Regulatory and Other Consents........41
5.05 Best Efforts.........................................................42
5.06 Employee Matters.....................................................42
5.07 Notice...............................................................42
5.08 Cash Management......................................................43
5.09 Tax Provisions.......................................................43
5.10 Non-Competition Agreement............................................46
5.11 Further Assurances...................................................47
5.12 Closing Resolutions..................................................47
5.13 Amendment to the Company's Articles of Organization..................47
5.14 Pre-Closing Transactions.............................................48
5.15 Acquisition of Rights to Confidentiality.............................48
5.16 Xxxxxxxx'x Tavern, Inc...............................................49
ARTICLE VI CONDITIONS.......................................................49
6.01 Conditions to the Obligations of MBO-VI, the Purchaser and
the Seller ..........................................................49
6.02 Conditions to the Obligations of MBO-VI and the Purchaser............49
6.03 Conditions to the Obligations of the Seller..........................51
ARTICLE VII TERMINATION PRIOR TO THE EFFECTIVE TIME.........................51
7.01 Termination..........................................................51
7.02 Effect on Obligations................................................52
7.03 Right to Proceed.....................................................52
ARTICLE VIII INDEMNIFICATION................................................53
8.01 Survival.............................................................53
8.02 Indemnification for the Benefit of the Seller........................53
8.03 Indemnification by the Seller........................................54
8.04 Materiality..........................................................55
8.05 Indemnification Procedures...........................................56
ARTICLE IX MISCELLANEOUS....................................................57
9.01 Entire Agreement.....................................................57
9.02 Successors and Assigns...............................................57
9.03 Counterparts.........................................................58
-ii-
9.04 Construction.........................................................58
9.05 Acknowledgment.......................................................58
9.06 Modification and Waiver..............................................58
9.07 Severability.........................................................59
9.08 Specific Performance.................................................59
9.09 Public Announcements.................................................59
9.10 Expenses.............................................................59
9.11 Notices..............................................................59
9.12 Governing Law........................................................60
-iii-
EXHIBITS
Exhibit 1.01 Retained Assets
Exhibit 2.02(a) Form of Escrow Agreement
Exhibit 2.02(f) Form of Employee Stockholder's Agreement
Exhibit 5.02(a) Capital Expenditure Forecast
Exhibit 5.02(b)(vi) Bonus Payments
Exhibit 5.02(b)(viii) Forecasts of Inventory, Receivables, Payables,
and Liabilities
Exhibit 5.16 Form of Asset Purchase Agreement
Exhibit 6.02(d) Form of Stockholder's Agreement
Exhibit 6.02(i) Form of Non-Competition Agreement
-iv-
Schedules
Schedule Section
-------- -------
2.01(b) Existing Indebtedness
2.02(a) Account Designated by Company for Wire Transfer
2.02(b) Account Designated by Seller for Wire Transfer
2.02(f) Employee Bonus Payments
3.03(a) Capitalization; Title to Shares
3.05 Subsidiaries and Portfolio Interests
3.06 Financial Statements
3.07 Compliance with Law; Permits
3.08 Consents; No Violations
3.09 Commitments
3.10 Undisclosed Liabilities
3.11 Certain Changes
3.13(a) Owned Real Property
3.13(b) Leased Real Property
3.13(c) Real Property; No violations
3.15 Tangible Property
3.17 Accounts Receivable; Commissions
3.18 Litigation; Orders
3.19 Intellectual Property
3.20 Tax Returns, Audits and Liabilities
3.21(a) Insurance
3.21(b) Certain Claims
3.22(a) Employee Benefits
3.23 Major Suppliers; Major Customers
3.24 Products
3.25(a) Environmental Matters
3.26 Interests in Competitors, Etc.
3.27 Customs and Trade Regulation
3.28 Intercompany Transactions
3.29 Banking Facilities
5.02(b)(ix) Affiliate Transactions
5.10 Exceptions to Non-Compete
6.02 Required Consents
6.02(i) List of Individuals Executing Non-Competition Agreements
-v-
RECAPITALIZATION AGREEMENT (the "Agreement"), dated as of March 25,
1998, by and among FORSTMANN LITTLE & CO. SUBORDINATED DEBT AND EQUITY
MANAGEMENT BUYOUT PARTNERSHIP-VI, L.P., a Delaware limited partnership
("MBO-VI"), YANKEE CANDLE HOLDINGS CORP., a Delaware corporation (the
"Purchaser"), THE YANKEE CANDLE COMPANY, INC., a Massachusetts corporation (the
"Company") and XXXXXXX XXXXXXXXX, an individual resident in the State of Florida
(the "Seller").
WHEREAS, the Seller owns all the issued and outstanding shares of
common stock, no par value per share (the "Common Stock"), of the Company;
WHEREAS, the Seller, the Purchaser, MBO-VI and the Company desire to
effect a recapitalization of the Company on the terms and subject to the
conditions set forth herein; and
WHEREAS, it is intended that the transactions contemplated hereby
qualify as a recapitalization for financial reporting purposes.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements and covenants hereinafter set forth, MBO-VI, the Purchaser, the
Company and the Seller hereby agree as follows:
ARTICLE I
DEFINITIONS
1.01 Definitions. The following terms, as used herein, shall have
the following meanings:
"1997 Balance Sheet" shall mean the balance sheet of the
Company as of December 31, 1997, a copy of which is attached in Schedule 3.06.
"1997 Balance Sheet Date" shall mean December 31, 1997.
"Affiliate" shall mean any Person directly or indirectly
controlling, controlled by, or under common control with the Person of which it
is an Affiliate.
"Ancillary Documents" shall mean all Commitments, certificates
and other documents delivered simultaneously with this Agreement or to be
delivered at the Closing in connection with the transactions contemplated hereby
including, without limitation, the Escrow Agreement, the Notes, the
Non-Competition Agreements, the Employee Stockholder's Agreements and the
Stockholder's Agreement.
-1-
"Books and Records" shall mean all the books of account and
other financial records pertaining to the Company.
"Business" shall mean the business conducted by the Company,
relating to the design, production, marketing, distribution and sale (at retail
or wholesale) of candles and related products (including, without limitation,
tapers, votives, pillars, wax potpourri and other seasonal products), as well as
all operations currently carried on by the Company at its South Deerfield,
Massachusetts "flagship" location.
"Business Day" shall mean any day excluding Saturday, Sunday
and any day on which banks in the State of New York are authorized or required
by Law or other governmental action to close.
"Cash" shall mean the amount, as of the close of business on
the day immediately preceding the Closing Date, that would be classified as cash
on a balance sheet prepared in accordance with U.S. GAAP, except that
Outstanding Checks shall not be deducted in determining the amount of Cash and
Cash shall not include amounts classified as "Register Cash", and "Xxxxx Cash",
"GSB Trustee Account", "GSB Flex Plan" and "Investments -- NQP" on the "Summary
Trial Balance as of December 1997".
"Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time, and the applicable regulations thereunder.
"Commitments" shall mean all leases, sales orders, purchase
orders and other contracts, agreements, arrangements, understandings and
commitments of any nature whatsoever, whether written or oral, and including all
amendments thereof and supplements thereto.
"Company Employee Plan" shall mean each Employee Plan (other
than an Employee Agreement) which is now or previously has been sponsored,
maintained, contributed to, or required to be contributed to, or with respect to
which any withdrawal liability (within the meaning of Section 4201 of ERISA) has
been incurred, by the Company or any ERISA Affiliate for the benefit of any
Employee, and pursuant to which the Company or any ERISA Affiliate has or may
have any liability, contingent or otherwise.
"Company Material Adverse Effect" shall mean any adverse
effect or change in the business, condition (financial or otherwise), assets,
net assets, Liabilities, properties, operations, results of operations or
prospects of the Company that is material to the Company or the Business.
"Competitive Activity" shall mean engaging in any of the
following activities: (i) serving as a director of any Competitor; (ii) directly
or indirectly
-2-
(x) controlling any Competitor or (y) owning any equity or debt interests in any
Competitor (other than equity or debt interests which are publicly traded and do
not exceed 5% of the particular class of interests then outstanding) (it being
understood that, if any such interests in any Competitor are owned by an
investment vehicle or other entity in which the Seller owns an equity interest,
a portion of the interests in such Competitor owned by such entity shall be
attributed to the Seller, such portion determined by applying the percentage of
the equity interest in such entity owned by the Seller to the interests in such
Competitor owned by such entity); (iii) directly or indirectly soliciting,
diverting, taking away, appropriating or otherwise interfering with any of the
customers or suppliers of the Company or any Affiliate controlled by the
Company; or (iv) employment by (including serving as an officer of), or
providing consulting services to, any Competitor.
"Competitor" shall mean any Person that is engaged in a
business similar to the Business, without regard to size (including giftware and
related merchandise) or is engaged in owning, operating or acquiring directly or
indirectly (through a corporation, trust, partnership or other Person) one or
more entities engaged in a business similar to the Business, without regard to
size (including giftware and related merchandise).
"control" (and the correlative term "controlling") shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of any Person, whether through the
ownership of equity interests, by contract or otherwise.
"Copyrights" shall have the meaning ascribed to such term in
the definition of Intellectual Property.
"Employee" shall mean each current, former, or retired
employee, officer, consultant, independent contractor, agent or director of the
Company.
"Employee Agreement" shall mean each management, employment,
severance, consulting, non-compete, confidentiality, or similar agreement or
contract between the Company and any Employee pursuant to which the Company has
or may have any liability contingent or otherwise.
"Employee Plan" shall mean each plan, program, policy, payroll
practice, contract, agreement or other arrangement providing for compensation,
severance, termination pay, performance awards, stock or stock-related awards,
fringe benefits or other employee benefits of any kind, whether formal or
informal, funded or unfunded, written or oral and whether or not legally
binding, including, without limitation, each "employee benefit plan," within the
meaning of Section 3(3) of ERISA and each "multi-employer plan"
within the meaning of Sections 3(37) or 4001(a)(3) of ERISA.
-3-
"Encumbrance" shall mean any lien, pledge, charge, assessment,
security interest, mortgage, claim, option, easement, imperfection of title,
tenancy or other legal or equitable right of others, or other encumbrance of any
character whatsoever (including, without limitation, any right of first
refusal).
"Environmental Costs" shall mean, without limitation, any
actual or potential cleanup costs, remediation, removal, or other response costs
(including without limitation costs to cause the Company or any Subsidiary, or
any of the Company's or any Subsidiary's properties or assets, to come into
compliance with Environmental Laws), investigation costs (including without
limitation fees of consultants, counsel, and other experts in connection with
any environmental investigation, testing, audits or studies), losses,
liabilities or obligations (including, without limitation, liabilities or
obligations under any lease or other contract), payments, damages (including,
without limitation, any actual, punitive, consequential and/or business
interruption damages under any statutory laws, common law cause of action or
contractual obligations, and any damages (a) of third parties for personal
injury or property damage, or (b) to natural resources), civil or criminal fines
or penalties, judgments, amounts paid in settlement and fees (including, without
limitation, fees of consultants, counsel, and other experts in connection with
any action or proceeding), arising out of, relating to, or resulting from any
Environmental Matter.
"Environmental Laws" shall mean, without limitation, the
Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C.
xx.xx. 9601 et seq., the Emergency Planning and Community Right-to-Know Act of
1986, 42 U.S.C. xx.xx. 11001 et seq., the Resource Conservation and Recovery
Act, 42 U.S.C. xx.xx. 6901 et seq., the Toxic Substances Control Act, 15 U.S.C.
xx.xx. 2601 et seq., the Federal Insecticide, Fungicide, and Rodenticide Act, 7
U.S.C. xx.xx. 136 et seq., the Clean Air Act, 42 U.S.C. xx.xx. 7401 et seq., the
Clean Water Act (Federal Water Pollution Control Act), 33 U.S.C. xx.xx. 1251 et
seq., the Safe Drinking Water Act, 42 U.S.C. xx.xx. 300f et seq., the
Occupational Safety and Health Act, 29 U.S.C. xx.xx. 641, et seq., the Hazardous
Materials Transportation Act, 49 U.S.C. xx.xx. 1801, et seq., as any of the
above statutes have been or may be amended from time to time, all rules and
regulations promulgated pursuant to any of the above statutes, and any other
foreign, federal, state or local law, statute, ordinance, rule or regulation
governing Environmental Matters, as the same have been or may be amended from
time to time, including any common law cause of action (including, without
limitation, nuisance and trespass causes of action) providing any right or
remedy relating to Environmental Matters, all indemnity agreements and other
contractual obligations (including without limitation leases, asset purchase
agreements and merger agreements) relating to Environmental Matters, and all
applicable judicial and administrative decisions, orders, and decrees relating
to Environmental Matters.
-4-
"Environmental Matters" shall mean any matter arising out of,
relating to, or resulting from pollution, contamination, protection of the
environment, human health or safety, or health or safety of employees, and any
matter relating to emissions, discharges, disseminations, releases or threatened
releases of Hazardous Substances into the air (indoor or outdoor), surface
water, groundwater, soil, buildings, facilities, real or personal property or
fixtures, or otherwise arising out of, relating to, or resulting from the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport, handling, release or threatened release of Hazardous Substances.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended, and the applicable regulations thereunder.
"ERISA Affiliate" shall mean each business or entity which is
a member of a "controlled group of corporations," under "common control" or an
"affiliated service group" with the Company within the meaning of Sections
414(b), (c) or (m) of the Code, or required to be aggregated with the Company
under Section 414(o) of the Code, or is under "common control" with the Company,
within the meaning of Section 4001(a)(14) of ERISA.
"Governmental Entity" shall mean any foreign or domestic
(federal, state or local) government, governmental instrumentality or
governmental or other regulatory or administrative authority, agency or
commission or court.
"Hazardous Substances" shall mean any pollutants,
contaminants, substances, materials, wastes, constituents, compounds, chemicals,
natural or man-made elements or forces (including, without limitation, petroleum
or any by-products or fractions thereof, any form of natural gas, lead, asbestos
or asbestos-containing materials ("ACM"), building construction materials and
debris, polychlorinated biphenyls ("PCBs") or PCB-containing equipment, radon
and other radioactive elements, electromagnetic field and other types of
radiation, sonic forces, infectious, carcinogenic, mutagenic, or etiologic
agents, pesticides, defoliants, explosives, flammables, corrosives and urea
formaldehyde foam insulation) that are regulated by, or may now or in the future
form the basis of liability under, any Environmental Laws.
"HSR Act" shall mean the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976, as amended.
"Income Tax" or "Income Taxes" shall mean any federal, state,
local or foreign Tax or Taxes (i) based upon, measured by, or calculated with
respect to, net income or net receipts, proceeds or profits, or (ii) based upon,
measured by, or calculated with respect to multiple bases (including, but not
limited to, corporate franchise or occupation Taxes) if such Tax may be based
upon, measured by, or calculated with respect to one or more bases described in
(i) above.
-5-
"Intellectual Property" shall mean (a) all inventions (whether
patentable or unpatentable and whether or not reduced to practice), all
improvements thereto, and all patents, patent applications and patent
disclosures, together with all reissuances, continuations,
continuations-in-part, revisions, extensions and reexaminations thereof
("Patents"), (b) all trademarks, service marks, trade dress, logos, trade names
and corporate names, together with all translations, adaptations, derivations
and combinations thereof and including all goodwill associated therewith, and
all applications, registrations and renewals in connection therewith
("Trademarks"), (c) all copyrightable works, all copyrights and all
applications, registrations and renewals in connection therewith ("Copyrights"),
(d) all mask works and all applications, registrations and renewals in
connection therewith, (e) all trade secrets and confidential business
information (including ideas, research and development, know-how, formulas,
compositions, manufacturing and production processes and techniques, technical
data, designs, drawings, specifications, customer and supplier lists, pricing
and cost information and business and marketing plans and proposals), (f) all
computer software (including data and related documentation), (g) all other
proprietary rights, (h) all copies and tangible embodiments thereof (in whatever
form or medium) and (i) all licenses or agreements in connection with the
foregoing.
"IRS" shall mean the Internal Revenue Service.
"knowledge" shall mean, with respect to the Company, the
knowledge of the Seller, Xxxxxxx X. Xxxxx, Xxxxx X. Xxxxx, Xxxxxxx X. Xxxxxxxx,
Xxxxx X. Xxxxxxxxx, Xxxx X. Xxxxx, Xxx Xxxxxxxxx, Xxxxxx Xxxxx, Esq., Xxxxx
Xxxxxxxxxx and Xxxxx Pittitieri.
"Law" shall mean any foreign or domestic (federal, state or
local) law, statute, ordinance, rule or regulation or body of law or Order.
"Leased Real Property" shall mean the real property leased by
the Company, as tenant, together with, to the extent leased by the Company, all
buildings and other structures, facilities or improvements currently or
hereafter located thereon, all fixtures, systems, equipment and items of
personal property of the Company attached or appurtenant thereto, and all
easements, licenses, rights and appurtenances relating to the foregoing.
"Liability" shall mean any debt, liability or obligation,
whether known or unknown, asserted or unasserted, accrued, absolute, contingent
or otherwise, whether due or to become due.
"Litigation" shall mean any claim, demand, notice, action,
suit, proceeding, arbitration, investigation, audit, inquiry or hearing by or
before any Governmental Entity or private arbitration tribunal.
-6-
"Multiemployer Plan" shall mean any Pension Plan which is a
"multiemployer plan," as defined in Section 3(37) or 4001(a)(3) of ERISA.
"Order" shall mean any judgment, order, injunction, ruling,
decree, stipulation or award of any Governmental Entity or private arbitration
tribunal.
"Owned Real Property" shall mean the real property owned by
the Company, together with all buildings and other structures, facilities or
improvements currently or hereafter located thereon, all fixtures, systems,
equipment and items of personal property of the Company attached or appurtenant
thereto and all easements, licenses, rights and appurtenances relating to the
foregoing.
"Patents" shall have the meaning ascribed thereto in the
definition of Intellectual Property.
"PBGC" shall mean the Pension Benefit Guaranty Corporation.
"Pension Plan" shall refer to each Company Employee Plan which
is an "employee pension benefit plan," within the meaning of Section 3(2) of
ERISA (the term "Pension Plan" as used herein shall not refer to a Multiemployer
Plan).
"Permit" shall mean any license, permit, consent,
registration, certificate, franchise, approval, order or other authorization of
any Governmental Entity.
"Permitted Encumbrances" shall mean: (a) liens for Taxes,
assessments and charges and other claims, the validity of which are being
contested in good faith and for which appropriate reserves in accordance with
U.S. GAAP have been recorded on the Company's balance sheet; (b) imperfections
of title or Encumbrances the existence of which, individually or in the
aggregate (i) do not materially impair the value of, or materially interfere
with the use of, the asset subject thereto or have a Company Material Adverse
Effect or (ii) pose a threat of forfeiture or reversion of title to any of the
Owned Real Property (other than the risk of forfeiture due to the failure to pay
Taxes not yet due); (c) inchoate mechanics' and materialmen's liens for
construction in progress incurred in the ordinary course of business; and (d)
workmen's, repairmen's warehousemen's and carriers' lien arising in the ordinary
course of business, but in the cases of clauses (c) and (d), only liens that
secure amounts not yet overdue.
"Person" shall mean an individual, a corporation, a limited
liability company, a partnership, an association, a trust or any other entity or
organization, including a Governmental Entity.
"Pre-Closing Tax Periods" shall mean all taxable periods, or
portions of periods, of the Company (and any predecessors thereto) ending on or
before the Closing Date.
-7-
"Purchaser's Accountant" shall mean Deloitte & Touche LLP.
"Retained Assets" shall mean those assets listed on Exhibit
1.01 hereto.
"Return" shall mean any report, return, statement, claim,
estimate, declaration, notice, form or other information supplied or required to
be supplied to a taxing authority in connection with Taxes.
"Seller's Accountant" shall mean Ernst & Young, LLP.
"Shareholder's Equity" shall mean the total assets of the
Company minus the total liabilities of the Company, in each case as reflected on
the Closing Balance Sheet.
"Subsidiary" shall mean, with respect to any Person, any other
Person more than 10% of whose outstanding capital stock or equity interests is
owned directly or indirectly by such Person.
"Tax" or "Taxes" means taxes of any kind, levies or other like
assessments, customs, duties, imposts, charges or fees, including, without
limitation, Income Taxes, gross receipts, ad valorem, value added, excise, real
or personal property, asset, sales, use, license, payroll, transaction, capital,
net worth and franchise taxes, estimated taxes, withholding, employment, social
security, workers compensation, utility, severance, production, unemployment
compensation, occupation, premium, excise, severance, windfall profits, taxes
imposed as a transferee or successor, pursuant to a Tax indemnity or other
contract or pursuant to any Tax Law (including, without limitation, Code Section
6901 and analogous provisions of state, local and foreign Law), transfer and
gains taxes or other governmental taxes imposed by or payable to the United
States, or any state, county, local or foreign government or subdivision or
agency thereof, and in each instance such term shall include any interest,
penalties or additions to tax attributable to any such Tax.
"Trademarks" shall have the meaning ascribed thereto in the
definition of Intellectual Property.
"U.S. GAAP" shall mean generally accepted accounting
principles required to be followed by registrants under the rules, regulations
and pronouncements of the United States Securities and Exchange Commission and
interpretations thereof by the staff of the Securities and Exchange Commission.
"Welfare Plan" shall mean each Company Employee Plan that
is an "employee welfare benefit plan" within the meaning of Section 3(1) of
ERISA.
-8-
1.02 Other Defined Terms.
(a) The following terms shall have the meanings defined for such
terms in the sections set forth below:
Term: Section:
---- -------
"Actual Overdraft" 5.08
"Affiliated Transaction" 3.28
"Aggregate Recapitalization Price" 2.01(a)
"Agreement" Preamble
"Antitrust Division" 5.04(a)
"Asset Purchase Agreement" 5.17
"Bonus Payments" 2.01(b)(ii)
"Xxxxxxxx'x Tavern" 5.17
"Class B Shares" 2.02(f)
"Closing" 2.03
"Closing Balance Sheet" 2.04(b)
"Closing Date" 2.03
"Closing Deficit" 2.04(e)
"Common Stock" Recitals
"Company" Preamble
"Company Balance Sheets" 3.06
"Confidentiality Agreement" 7.02
"Credit Agreement" 2.02(c)
"Disbursement Accounts" 5.08
"Employee Bonus Payments 2.01(b)
"Environmental Permits" 3.25(a)(ii)
"Escrow Agent" 2.02(a)
"Escrow Agreement" 2.02(a)
"Estimated Overdraft" 5.08
"Existing Indebtedness" 2.01(b)
"Facilities" 3.25(a)(vii)
"Final Balance Sheet" 2.04(c)
"Final Shareholders' Equity" 2.04(a)
"Final Total Assets" 2.04(a)
"Final Total Liabilities" 2.04(a)
"Financial Statements" 3.06
"Fleet" 5.14(b)
"Fleet Lease" 5.14(b)
"FTC" 5.04(a)
"GECC" 5.14(a)
"GECC Lease" 5.14(a)
"Gulfstream" 5.14(b)
"Gulfstream Contract" 5.14(b)
-9-
"HMO" 3.22(k)
"Indebtedness Payment" 2.01(b)(i)
"Indemnification Claim Notice" 8.05(a)
"Indemnified Party" 8.05(a)
"Indemnifying Party" 8.05(a)
"Independent Accounting Firm" 2.04(c)
"Losses" 8.02(a)
"MADSP" 5.09(b)
"Major Customers" 3.23
"Major Suppliers" 3.23
"MBO - VI" Preamble
"Notes" 2.02(d)
"Notice" 9.11
"Obligations" 5.15
"Outstanding Checks" 5.15
"Products" 3.24
"Purchaser" Preamble
"Purchaser's Objection" 2.04(c)
"Purchaser Indemnified Party" 8.03(a)
"Recapitalization Shares" 2.02(b)
"Redeemed Shares" 2.02(a)
"Redemption Price" 2.02(a)
"Regulatory Agencies" 5.04(a)
"Requesting Party" 5.11
"Required Consent" 5.04(b)
"Reserve" 3.16
"Section 338(h)(10) Elections" 5.09(b)
"Seller" Preamble
"Seller Indemnified Party" 8.02(a)
"Settlement Account" 5.08
"Shareholder Note Receivable" 2.01(a)
"Shareholder's Equity Schedule" 2.04(b)
"Stockholder's Agreement 6.02(d)
"Tangible Property" 3.15
"Tax Indemnified Parties 5.09
"Termination Date" 7.01(b)
"Transaction Expense Payments" 2.01(b)(iii)
"Transfer Purchase Price" 2.02(b)
"Transferred Shares" 2.02(b)
"Withheld Amount" 2.02(b)
"Withheld Redemption Amount" 2.02(a)
"Withheld Transfer Amount" 2.02(b)
-10-
(b) Any accounting term not defined in this Article I shall
have the meaning given to it under U.S. GAAP.
ARTICLE II
RECAPITALIZATION TRANSACTIONS
2.01 Aggregate Recapitalization Price.
(a) The "Aggregate Recapitalization Price" payable at the
Closing in connection with the consummation of the transactions described in
Sections 2.02(a) and 2.02(b) hereof shall be an amount in cash equal to (i) $500
million, minus (ii) the sum of (A) the Indebtedness Payment plus (B) the Bonus
Payments plus (C) the Transaction Expense Payments (each of the foregoing terms
as defined in Section 2.01(b)) plus (D) as of the Closing Date, the outstanding
principal of, accrued and unpaid interest on, any prepayment penalties or
premiums on, and any other amounts payable with respect to, the Demand
Promissory Note, dated December 29, 1995, in an original principal amount of
$760,699.76 (and an existing principal amount, as of February 28, 1998, of
$1,636,400) made by the Seller in favor of the Company (the "Shareholder Note
Receivable") the amount of which Shareholder Note Receivable will be set forth
in a certificate of the Company delivered to the Purchaser at least three
Business Days prior to the Closing. The Aggregate Recapitalization Price shall
be subject to adjustment pursuant to Section 2.04.
(b) For purposes of this Agreement, the following terms shall
have the meanings set forth below:
(i) "Indebtedness Payment" shall mean an amount in cash
equal to, as of the Closing Date, the outstanding principal of, accrued
and unpaid interest on, any prepayment penalties or premiums on, and any
other amounts payable with respect to, all indebtedness of the Company
under the credit facilities listed in Schedule 2.01(b) (the "Existing
Indebtedness").
(ii) "Bonus Payments" shall mean an amount in cash equal
to the sum of (A) $60,377,358.47 plus (B) $875,471.70, which amount
represents the employeer's portion of the hospital insurance tax.
(iii) "Transaction Expense Payments" shall mean the
aggregate amount of fees and expenses payable to Geneva Corporate Finance,
Inc., Ernst & Young, LLP and Peabody & Xxxxx by the Company in connection
with
-11-
the transactions contemplated hereby, which amount (and the fees and
expenses of each such entity which comprise such amount) shall be set
forth in a certificate of the Seller delivered to the Purchaser at least
three Business Days prior to the Closing.
2.02 Recapitalization Transactions. Upon the terms and subject to
the conditions of this Agreement, at the Closing, the following transactions
will take place simultaneously:
(a) The Seller shall sell to the Company, and the Company
shall redeem, 615.3846 shares of Common Stock (the "Redeemed Shares") for an
aggregate purchase price (the "Redemption Price"), payable in cash, equal to the
product of (i) a fraction, the numerator of which is the number of shares of
Common Stock being redeemed pursuant to this Section 2.02(a) and the denominator
of which is the aggregate number of Recapitalization Shares and (ii) the
Aggregate Recapitalization Price.
The Company shall pay to the Seller the Redemption Price
net of a sum of $6.4 million in cash (the "Withheld Redemption Amount"), by wire
transfer in immediately available funds to an account designated by the Seller
in Schedule 2.02(a).
The Company shall deposit the Withheld Redemption Amount
with The Chase Manhattan Bank, N.A. (the "Escrow Agent") on the Closing Date, to
be held and disposed of by the Escrow Agent in accordance with the Escrow
Agreement, in the form attached herewith as Exhibit 2.02(a) (the "Escrow
Agreement"), entered into by and among the Seller, the Company, the Purchaser
and the Escrow Agent, dated the Closing Date. In exchange for the payment of the
Redemption Price, net of the Withheld Redemption Amount, the Seller shall
deliver to the Company stock certificates evidencing the Redeemed Shares duly
endorsed in blank or accompanied by stock powers duly executed in blank.
(b) The Seller shall sell to the Purchaser, and the Purchaser
shall purchase, 346.1538 shares of Common Stock (the "Transferred Shares", and
together with the Redeemed Shares, the "Recapitalization Shares") for an
aggregate purchase price (the "Transfer Purchase Price"), payable in cash, equal
to the product of (i) a fraction, the numerator of which is the number of shares
of Common Stock being sold pursuant to this Section 2.02(b) and the denominator
of which is the aggregate number of Recapitalization Shares and (ii) the
Aggregate Recapitalization Price.
The Purchaser shall pay to the Seller the Transfer
Purchase Price, net of a sum of $3.6 million in cash (the "Withheld Transfer
Amount", and together with the Withheld Redemption Amount, the "Withheld
Amount"), by wire transfer in immediately available funds to an account
designated by the Seller in Schedule 2.02(b) of the Disclosure Schedule.
-12-
The Purchaser shall deposit the Withheld Transfer Amount
with the Escrow Agent on the Closing Date, to be held and disposed of by the
Escrow Agent in accordance with the Escrow Agreement. In exchange for the
payment of the Transfer Purchase Price, the Seller shall deliver to the
Purchaser stock certificates evidencing the Transferred Shares duly endorsed in
blank or accompanied by stock powers duly executed in blank.
(c) The Company shall enter into a credit agreement with The
Chase Manhattan Bank N.A. to provide working capital to the Company and for
other corporate purposes following the Closing (the "Credit Agreement").
(d) The Company shall issue and sell to MBO-VI, and MBO-VI
shall purchase from the Company, Series A Subordinated Notes, Series B
Subordinated Notes and Series C Subordinated Notes (the "Notes").
MBO-VI shall pay to the Company by wire transfer in
immediately available funds the purchase price for the Notes and the Company
shall deliver to MBO-VI Series A Subordinated Notes, Series B Subordinated Notes
and Series C Subordinated Notes, in each case, dated the Closing Date and
registered in MBO-VI's name, in the principal amounts designated by MBO-VI in
writing prior to the Closing.
(e) The Company shall prepay in full all outstanding
indebtedness and other obligations of the Company as of the Closing Date under
the Existing Indebtedness. All such Existing Indebtedness shall be prepaid in
full, the Company shall receive a release, in form and substance reasonably
satisfactory to the Purchaser, executed by all lenders thereunder evidencing
such repayment and the termination of all Encumbrances and guarantees related
thereto and all right, title and interest in any Intellectual Property
previously assigned to any lender in connection with Existing Indebtedness shall
be reconveyed to the Company.
(f) The Company shall pay to each individual listed in
Schedule 2.02(f), after deducting any required withholding Taxes and other
amounts reflected on such Schedule, by wire transfer in immediately available
funds, the amount set forth opposite such individual's name under the column
entitled "Net to Recipient" on Schedule 2.02(f), minus the amount payable by
each such individual pursuant to the immediately succeeding sentence. Each
such individual shall purchase from the Purchaser, and the Purchaser shall
issue and sell to each such individual, for a per share purchase price of
$346.154, the number of shares of Series B Common Stock of the Purchaser, par
value $.01 per share ("Class B Shares") for the aggregate purchase price, in
each case set forth opposite such individual's name on Schedule 2.02(f), upon
the terms and subject to the conditions set forth in the Stockholder's
Agreement in the form attached hereto as Exhibit 2.02(f) (the "Employee
Stockholder's Agreement").
-13-
(g) The parties thereto shall execute and deliver the
Ancillary Documents.
(h) The Shareholder Note Receivable shall be marked "canceled"
and shall cease to be outstanding.
2.03 Closing. The consummation of the transactions contemplated by
this Agreement shall take place at a closing (the "Closing") to be held at the
offices of Fried, Frank, Harris, Xxxxxxx & Xxxxxxxx, Xxx Xxx Xxxx Xxxxx, Xxx
Xxxx, Xxx Xxxx at 10:00 A.M. New York time, on the fifth Business Day following
the satisfaction or waiver of all conditions to the obligations of the parties
set forth in Article VI, or at such other place or at such other time or on such
other date as the Seller and the Purchaser mutually agree upon in writing (the
day on which the Closing takes place being the "Closing Date").
2.04 Purchase Price Adjustment.
(a) For purposes of this Section 2.04, the following terms
shall have the meanings set forth below:
(i) "Final Shareholder's Equity" means Final Total
Assets minus Final Total Liabilities.
(ii) "Final Total Assets" means total assets of the
Company as reflected on the Final Balance Sheet.
(iii) "Final Total Liabilities" means total liabilities
of the Company as reflected on the Final Balance Sheet.
(b) Within 90 Business Days following the Closing, the
Seller shall prepare, or cause to be prepared, and deliver to the Purchaser a
balance sheet (the "Closing Balance Sheet") which shall set forth the assets
and liabilities of the Company as of the close of business on the day
immediately preceding the Closing Date and a schedule setting forth the
calculation of Shareholder's Equity as of such day (the "Shareholder's Equity
Schedule"). The Closing Balance Sheet shall be prepared in accordance with
U.S. GAAP, determined as if the day immediately preceding the Closing Date
were the Company's normal year end and applied on a consistent basis with the
Financial Statements and a physical inventory shall be taken as of the close
of business on the day immediately preceding the Closing Date in a manner
consistent with past practice, except that (i) no reserves, liabilities,
asset valuation allowances or similar items reflected on the 1997 Balance
Sheet shall be reversed or shall be reallocated to cover any other reserve,
liability, asset valuation allowance or similar item required to be provided
for on the Closing Balance Sheet, (ii) except for assets acquired after March
31, 1998,
-14-
any asset required to be included in the March 31, 1998 projected balance
sheet (the amounts reflected in such balance sheet having been projected on a
pro forma basis in conformity with the rules set forth in this Section
2.04(b)) to the extent not included, shall not be included in the Closing
Balance Sheet, (iii) no Existing Indebtedness shall be included in the
Closing Balance Sheet, (iv) no LIFO inventory reserve shall be included in
the Closing Balance Sheet, (v) no Retained Asset or related Liabilities shall
be included in the Closing Balance Sheet, (vi) no deferred financing fee
shall be included in the Closing Balance Sheet, (vii) no Cash or Outstanding
Checks shall be included in the Closing Balance Sheet, (viii) no deferred
income tax asset or deferred income tax liability shall be included in the
Closing Balance Sheet, (ix) no Income Tax asset or Income Tax Liability shall
be included in the Closing Balance Sheet, (x) no deferred interest expense
shall be included in the Closing Balance Sheet, (xi) no Transaction Expense
Payments or Employee Bonus Payments shall be included in the Closing Balance
Sheet, (xii) the manufactured inventory of the Company will be costed using
the standard costs used by the Company in costing its December 31, 1997
inventory plus $400,000, (xiii) no asset for the Shareholder Note Receivable
from the Seller shall be included in the Closing Balance Sheet, (xiv) the
assets acquired, net of any reserves, liabilities, asset valuation allowances
or similar items assumed or to which such assets are subject, from Xxxxxxxx'x
Tavern shall be included in the Closing Balance Sheet, at Xxxxxxxx'x Tavern's
historic cost less reserves, allowances and accumulated depreciation and
amortization and similar items, (xv) the reserves or liabilities created by
reason of the Fringe Benefit/Payroll Surcharge Expense accrual provision
shall not be reversed, and (xvi) Classic Vehicles will be recorded at
$984,457 in the Closing Balance Sheet.
(c) The Purchaser and the Purchaser's Accountants shall,
within 20 Business Days after the delivery by the Seller of the Closing
Balance Sheet and the Shareholder's Equity Schedule, complete their review of
the Closing Balance Sheet and the Shareholder's Equity Schedule. In the event
that the Purchaser determines that the Closing Balance Sheet has not been
prepared on the basis set forth in Section 2.04(b) or disagrees with the
calculation contained in the Shareholder's Equity Schedule, the Purchaser
shall inform the Seller in writing (the "Purchaser's Objection"), setting
forth a description in reasonable detail of the basis of his objection and
the adjustments to the Closing Balance Sheet or the Shareholder's Equity
Schedule which the Purchaser believes should be made, on or before the last
day of such 20-day period. The Seller shall then have 20 Business Days to
review and respond to the Purchaser's Objection. During such 20-day review
period and the subsequent 10-day period referred to below, the parties shall
seek in good faith to resolve any differences which they may have with
respect to any matter specified in the Purchaser's Objection. If the
Purchaser and the Seller are unable to resolve all of their disagreements
with respect to the Purchaser's Objection within 10 Business Days following
the completion of the Seller's review of the Purchaser's Objection, they
shall refer their remaining differences to the dispute resolution department
of Price Waterhouse LLP's New York City office or other nationally recognized
firm of independent public accountants as to which the Purchaser
-15-
and the Seller mutually agree (or, in the event the parties cannot agree, as
chosen by the American Arbitration Association) (for purposes of this Section
2.04, such accounting firm, the "Independent Accounting Firm"), which shall
determine on the basis of the standards set forth in Sections 2.04(a) and
(b), and only with respect to the remaining differences so submitted, whether
and to what extent, if any, the Closing Balance Sheet or the Shareholder's
Equity Schedule requires adjustment. The parties shall instruct the
Independent Accounting Firm to deliver its written determination to the
Purchaser and the Seller no later than the 20th Business Day after the
remaining differences underlying the Purchaser's Objection are referred to
the Independent Accounting Firm. The Independent Accounting Firm's
determination shall be conclusive and binding upon the Seller and the
Purchaser, and shall be based solely on presentations by the Purchaser and
the Seller and not by independent review. The Independent Accounting Firm
shall address only those issues in dispute, and may not assign a value to any
item greater than the greatest value for such item claimed by either party or
less than the smallest value for such item claimed by either party. The fees,
costs and expenses of the Independent Accounting Firm (i) shall be borne by
the Company in the proportion that the aggregate dollar amount of such
disputed items so submitted that are unsuccessfully disputed by the Purchaser
(as finally determined by the Independent Accounting Firm) bears to the
aggregate dollar amount of such items so submitted and (ii) shall be borne by
the Seller in the proportion that the aggregate dollar amount of such
disputed items so submitted that are successfully disputed by the Purchaser
(as finally determined by the Independent Accounting Firm) bears to the
aggregate dollar amount of such items so submitted. The Seller and the
Purchaser shall make available to the Independent Accounting Firm all
relevant books and records and any work papers (including those of the
parties' respective accountants) relating to the 1997 Balance Sheet and the
Closing Balance Sheet and all other items reasonably requested by the
Independent Accounting Firm. In acting under this Agreement, the Independent
Accounting Firm shall be entitled to the privileges and immunities of
arbitrators in accordance with the American Bar Association rules. The "Final
Balance Sheet" shall be and the related Final Shareholder's Equity shall be
determined from (i) the Closing Balance Sheet, in the event that (x) the
Purchaser's Objection is not delivered to the Seller during the 20-day period
specified above or (y) the Purchaser and the Seller so agree, (ii) the
Closing Balance Sheet adjusted in accordance with the Purchaser's Objection,
in the event that (x) the Seller does not respond to the Purchaser's
Objection within the 20-day period following receipt by the Seller of the
Purchaser's Objection or (y) the Seller agrees with the Purchaser's
Objection, or (iii) the Closing Balance Sheet as adjusted by either (x) the
mutual agreement of the Purchaser and the Seller or (y) the Independent
Accounting Firm.
(d) The Seller shall provide the Purchaser and the Purchaser's
Accountants reasonable access to the books and records of the Company, to any
other information, including work papers of the Seller's Accountants, and to any
employees of the Company to the extent reasonably necessary for the Purchaser to
prepare the Purchaser's Objection, if any, to respond to any objections the
Seller has with respect to
-16-
the Purchaser's Objection and, if applicable, to present the Purchaser's
Objection to the Independent Accounting Firm.
(e) If the Final Shareholder's Equity is less than $60,600,000
(such deficit, the "Closing Deficit"), then the Seller shall pay to the Company
an amount in cash equal to the Closing Deficit.
(f) Any amount payable pursuant to Section 2.04(e) shall be
paid together with interest thereon at an annual rate equal to the reference
rate from time to time of The Chase Manhattan Bank N.A. from and including the
Closing Date to but not including the date of payment, promptly, but in any
event within five Business Days, following issuance of the Final Balance Sheet,
by wire transfer of immediately available funds to a bank account or accounts
designated by the Purchaser.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SELLER
The Seller represents and warrants to the Purchaser as follows:
3.01 Organization. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the Commonwealth of
Massachusetts and has the requisite corporate power and authority to carry on
its business as it is now being conducted. The Company is duly qualified and
licensed as a foreign corporation to do business, and is in good standing (and
has paid all relevant franchise or analogous Taxes), in each jurisdiction where
the character of its properties owned or held under lease or the nature of its
activities makes such qualification necessary, except where the failure to be so
qualified and in good standing would not, individually or in the aggregate, have
or result in a Company Material Adverse Effect.
3.02 Authority. Each of the Seller and the Company has the
requisite right, power and authority (and, in the case of the Seller, legal
capacity) to enter into this Agreement and any Ancillary Documents to which
he or it, as the case may be, is a party and to carry out its obligations
hereunder and thereunder. This Agreement has been, and each of the Ancillary
Documents to which he or it, as the case may be, is a party has been or will
be, duly and validly executed and delivered by each of the Seller and the
Company and constitutes, and each of the Ancillary Documents to which he or
it, as the case may be, is a party constitutes or will upon execution and
delivery constitute, a valid and binding obligation of such Person,
enforceable against it in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
moratorium or other similar laws affecting creditors rights generally or by
general principles of equity. All corporate proceedings or other actions on
the part of the
-17-
Company necessary to authorize this Agreement or any of the Ancillary
Documents to which it is a party and the transactions contemplated hereby or
thereby have been taken.
3.03 Capitalization; Title to Shares.
(a) The authorized capital stock of the Company consists of
1,000 shares of Common Stock, of which 1,000 shares are issued and outstanding
and owned of record and beneficially by the Seller. Except as set forth on
Schedule 3.03(a), all the issued and outstanding shares of Common Stock are
validly issued, fully paid and nonassessable and are owned free and clear of all
Encumbrances. Except for this Agreement and except as set forth on Schedule
3.03(a), there are no shares of capital stock of the Company authorized, issued
or outstanding, and there are no outstanding subscriptions, options, warrants,
rights, stock-based or stock-related awards or convertible or exchangeable
securities or other Commitments to which the Company or the Seller is a party or
by which the Company or the Seller may be bound of any character relating to, or
obligating the Company or the Seller to issue, grant, award, transfer or sell,
any issued or unissued shares of the Company's capital stock or other securities
of the Company. There are no voting trusts, proxies or other agreements or
understandings to which the Company or the Seller is a party with respect to the
voting of capital stock of the Company.
(b) The Seller has full individual power and authority to
deliver the Redeemed Shares to the Company pursuant to Section 2.02(a) and
the Transferred Shares to the Purchaser pursuant to Section 2.02(b), and to
transfer to the Company or the Purchaser, as applicable, upon the Closing,
good and valid title to such Redeemed Shares or Transferred Shares, as
applicable, free and clear of all Encumbrances, without obtaining the consent
or approval of any third party and such Redeemed Shares and Transferred
Shares are without restriction on the right of transfer thereof. Upon such
Seller's delivery of such Redeemed Shares and Transferred Shares at the
Closing, the Company or the Purchaser, as applicable, will acquire good and
valid title to such Redeemed Shares or Transferred Shares, as applicable,
free and clear of all Encumbrances. The Seller is not a "foreign person"
within the meaning of Treasury Regulation ss. 1.1445-2(b)(2)(i) and the
Seller will furnish the Purchaser at Closing an affidavit described in
Treasury Regulation ss. 1.1445-2(b)(2)(iii).
3.04 Organizational Documents and Records. The Purchaser has been
provided with true and complete copies of the Articles of Organization and
By-laws of the Company, as amended and in effect on the date hereof. The
stock books of the Company, which have been made available to the Purchaser
for its inspection, are true and complete, and the minute books of the
Company, as previously made available to the Purchaser, contain records
accurate in all material respects of all meetings of and resolutions of, or
written consents by, the shareholders or Board of Directors (or committee
thereof) of the Company since the date of corporate organization.
-18-
3.05 Subsidiaries and Portfolio Interests. The Company does not
have and has never had any Subsidiary, and, except as set forth on Schedule
3.05, the Company does not own and has never owned directly or indirectly any
interest in any corporation, partnership, joint venture or other business
association or Person.
3.06 Financial Statements. Schedule 3.06 sets forth the balance
sheets of the Company as of December 31, 1997, December 31, 1996 and December
31, 1995 (collectively, the "Company Balance Sheets"), and the related
statements of income and retained earnings and cash flows for the periods then
ended, including the notes thereto, audited by Fisk, Bilton, Xxxxx & Co., P.C.
or Ernst & Young, LLP as indicated therein (collectively, the "Financial
Statements"). The Financial Statements (i) are in accordance with the books and
records of the Company, (ii) fairly present the financial position, results of
operations and cash flows of the Company as of the respective dates and for the
respective periods referred to therein and (iii) were prepared in accordance
with U.S. GAAP, applied on a basis consistent with that of prior years or
periods. The books of account and other financial and corporate records of the
Company are complete and correct in all material respects.
3.07 Compliance with Laws; Permits. Except as set forth on
Schedule 3.07, the Company is in compliance with all Laws, except where
instances of noncompliance, individually or in the aggregate, would not have
or result in a Company Material Adverse Effect. Except as set forth on
Schedule 3.07, since January 1, 1992, the Company has not received any notice
of any alleged violation of Law applicable to it. A complete and correct list
of Permits held by the Company is set forth on Schedule 3.07, and a true and
complete copy of each such Permit has previously been made available to the
Purchaser for its inspection. Except as set forth on Schedule 3.07, the
Company has all Permits required for the conduct of its business as presently
conducted and the ownership, lease or operation of its properties, except for
those Permits the absence of which would not result in a Company Material
Adverse Effect. All of such Permits are valid and in full force and effect,
and the Company has duly performed and is in material compliance with all of
its obligations under such Permits. No event has occurred with respect to
such Permits which allows, or after notice or lapse of time or both would
allow, the suspension, limitation, revocation, non-renewal or termination
thereof or would result in any other material impairment of the rights of the
holder thereof in and under any of such Permits, and no terminations thereof
or proceedings to suspend, limit, revoke or terminate any material Permit
have been threatened.
3.08 Consents; No Violations. Except as set forth on Schedule 3.08,
neither the execution, delivery or performance of this Agreement or the
Ancillary Documents by the Company or the Seller nor the consummation of the
transactions contemplated hereby or thereby will (a) conflict with, or result in
a breach or a violation of, any provision of the Articles of Organization or
By-laws of the Company;
-19-
(b) constitute, with or without notice or the passage of time or both, a
breach, violation or default, create an Encumbrance, or give rise to any
right of termination, modification, cancellation, prepayment, suspension,
limitation, revocation or acceleration, under (i) any Law, or (ii) any Permit
or Commitment of either the Seller or the Company, or to which they or either
of them or any of their, his or its properties is subject, except, with
respect to the matters set forth in clause (ii), for breaches, violations,
defaults, Encumbrances, or rights of termination, modification, cancellation,
prepayment, suspension, limitation, revocation or acceleration, which,
individually or in the aggregate, would not have or result in a Company
Material Adverse Effect or adversely affect the ability of any of them to
consummate the transactions contemplated hereby; or (c) except for any
required filing under the HSR Act, require any consent, approval or
authorization of, notification to, filing with, or exemption or waiver by,
any Governmental Entity or either other Person on the part of either of the
Seller or the Company.
3.09 Commitments. (a) Schedule 3.09 sets forth a true and complete
list of all of the following Commitments to which (i) the Company is a party
and/or (ii) the Seller is a party in connection with the Business, or, in either
case, by or to which the Company or any of its properties may be bound or
subject:
(i) Commitments for the sale of any real or personal
(tangible or intangible) properties other than in the ordinary course of
business, or for the grant of any option or preferential rights to
purchase any such properties;
(ii) Commitments for the construction, modification or
repair of any building, structure or facility or for the incurrence of any
capital expenditures or for the acquisition of fixed assets, in each case
providing for aggregate payments in excess of $100,000 or to achieve
compliance with any Environmental Laws;
(iii) Commitments relating to the acquisition by the
Company of any operating business or the capital stock of any other Person
that have not been consummated or that have been consummated but contain
representations, covenants, guaranties, indemnities or other obligations
that remain in effect;
(iv) Commitments pursuant to which any party is required
to purchase or sell a stated portion of its requirements or output to
another party;
(v) Commitments relating to any Litigation;
(vi) Commitments relating to the lending or borrowing of
money, including loan agreements, guarantees of Liabilities of any Person,
-20-
performance bonds, letters of credit, bankers acceptances and similar
instruments or arrangements;
(vii) Commitments under which the Company agrees to
indemnify any Person;
(viii) Commitments containing covenants of the Company
or any successor thereto or the Seller not to compete, do business in any
line of business or in any geographical area or with any Person, or to
disclose certain information, or covenants of any other Person not to
compete with the Company in any line of business or in any geographical
area or disclose information concerning the Company;
(ix) Commitments pursuant to which the Company (A)
leases, subleases, licenses or otherwise has the right to use any personal
property or (B) is the lessor of any personal property;
(x) Commitments in respect of licenses or Commitments
relating to Intellectual Properties;
(xi) Commitments in respect of any joint venture,
partnership or other similar arrangement (including, without limitation,
any joint development agreement);
(xii) Commitments with any Governmental Entity,
including without limitation, the United States Department of Treasury
Customs Service;
(xiii) Commitments relating to clean-up, abatement or
other actions in connection with the remediation of any liabilities
relating to Hazardous Materials;
(xiv) Commitments relating to general or special powers
of attorney (whether as grantor or grantee);
(xv) Commitments relating to outstanding letters of
credit or performance bonds or creating any obligation or liability as
guarantor, surety, co-signer, endorser, co-maker, indemnitor or otherwise
in respect of the obligation of any Person, except as endorser or maker of
checks or letters of credit endorsed or made in the ordinary course of
business;
(xvi) Commitments (other than those specified in any of
clauses (i) through (xv) of this paragraph (a)) which relate to or affect
the Business or any of the assets or properties of the Company in any way,
except those
-21-
(A) which are specifically not required to be scheduled pursuant to the
provisions of any of clauses (i) through (xv) of this paragraph (a),
(B) which are cancellable by the Company on 90 days' or less notice
without any penalty or other financial obligation and which involve
payments of less than $100,000 in such 90 day period, or (C) which
involve annual aggregate payments of $100,000 or less, and, in any
case, are not material to the business or financial condition of the
Company; and
(xvii) Commitments currently in negotiation by the
Company of a type which if entered into would be required to be listed on
Schedule 3.09 or to be disclosed on any other Schedule hereto.
(b) Except as set forth on Schedule 3.09, all of the
Commitments referred to in the preceding paragraph (a) are valid, binding, in
full force and effect and enforceable in accordance with their terms against
the Company and the Seller (as the case may be), and to the knowledge of the
Company and the Seller, against the respective counterparties to such
Commitments. Complete copies (or, if oral, full written descriptions) of all
Commitments required to be so listed, including all amendments thereto, and
complete copies of all standard form Commitments used by the Company in the
conduct of the Business, have been delivered to the Purchaser. Except as set
forth on Schedule 3.09, (i) there is no breach, violation or default and no
event which, with notice or lapse of time or both, would constitute a breach,
violation or default, or give rise to any Encumbrance or right of
termination, modification, cancellation, prepayment, suspension, limitation,
revocation or acceleration under, any Commitment listed on Schedule 3.09,
except for breaches, violations and defaults, or Encumbrances or rights of
termination, modification, cancellation, prepayment, suspension, limitation,
revocation or acceleration which, individually or in the aggregate, do not
and will not have a Company Material Adverse Effect and (ii) neither the
Company nor, to the knowledge of the Company and the Seller, any other party
to any of the Commitments listed on Schedule 3.09 is in material arrears in
respect of the performance or satisfaction of the terms and conditions on its
part to be performed or satisfied under any of such Commitments and no
material waiver or material indulgence has been granted by any of the parties
thereto.
3.10 Absence of Undisclosed Liabilities. Except as set forth on
Schedule 3.10 or incurred in connection with the transactions contemplated
hereby, the Company is not subject to any Liabilities other than (i) Liabilities
reflected, reserved against or otherwise disclosed in the 1997 Balance Sheet and
(ii) Liabilities arising since the date of the 1997 Balance Sheet in the
ordinary course of business consistent (in amount and kind) with past practice
and which do not, individually or in the aggregate, have a Company Material
Adverse Effect.
-22-
3.11 Absence of Certain Changes. Except as set forth on Schedule
3.11 or as contemplated by this Agreement, since the 1997 Balance Sheet Date:
(i) the business of the Company has been conducted in the ordinary course of
business, (ii) the Company has not (a) suffered any change, event or development
or series of changes, events or developments which has or could reasonably be
expected to have a Company Material Adverse Effect, (b) suffered any damage,
destruction or casualty loss to its physical properties (whether or not covered
by insurance) which has or could reasonably be expected to result in a Company
Material Adverse Effect, or (c) been the subject of any investigation by a
Governmental Entity or Litigation threatened or commenced since such date which
could have a Company Material Adverse Effect, and (iii) to the knowledge of the
Company and the Seller, there has not been any transaction, act, circumstance or
event that if it occurred on or after the date of this Agreement without the
prior consent of the Purchaser would constitute a breach of Section 5.02(b).
3.12 Brokers and Finders; Fees. Except for Geneva Corporate Finance,
Inc., neither the Company nor the Seller has employed any broker or finder or
incurred any liability for any brokerage fees, commissions or finders' fees in
connection with the transactions contemplated hereby.
3.13 Real Estate.
(a) Schedule 3.13(a) sets forth a list of all the Owned Real
Property. With respect to the Owned Real Property, (i) the Company has good and
marketable title in fee simple to the Owned Real Property, free and clear of all
Encumbrances except (A) as disclosed in Schedule 3.13(a) and (B) Permitted
Encumbrances, (ii) there are no outstanding options or rights of first refusal
in favor of any other party to purchase the Owned Real Property or any portion
thereof or interest therein, (iii) there are no leases, subleases, licenses,
options, rights, concessions or other agreements, affecting any portion of the
Owned Real Property, (iv) all existing water, sewer, gas, electricity, telephone
and other utilities required for the construction, use, occupancy, operation and
maintenance of the Owned Real Property are adequate in all material respects for
the use, occupancy, operation and maintenance thereof, as currently conducted or
currently exists, and (v) the Company has all rights of access necessary for
ingress to and egress from the Owned Real Property from or to public streets.
(b) Schedule 3.13(b) sets forth a list of all Leased Real
Property. The Seller has made available to the Purchaser true and complete
copies of all leases and subleases relating to the Leased Real Property. With
respect to the Leased Real Property, (i) the Company has good and valid
leasehold estates in the Leased Real Property, free and clear of all
Encumbrances except Permitted Encumbrances, (ii) all existing water, sewer, gas,
electricity, telephone and other utilities required for the construction, use,
occupancy, operation and maintenance of the Leased Real Property are adequate
for the use, occupancy, operation and maintenance thereof, as currently
-23-
conducted or currently exists, and (iii) the Company has all rights of access
necessary for ingress to and egress from the Leased Real Property. Except as set
forth on Schedule 3.13(b), (A) each such lease or sublease is legal, valid,
binding and enforceable and in full force and effect and (B) the consummation of
the transactions contemplated by this Agreement will not cause a material breach
or require any third party consent under any such lease or sublease.
(c) Except as set forth on Schedule 3.13(c), (i) neither
the Seller nor the Company has, since January 1, 1992, received written
notice of any pending or, to the knowledge of the Company and the Seller,
threatened condemnation or eminent domain proceedings or their local
equivalent with respect to the Owned Real Property or the Leased Real
Property, (ii) the Owned Real Property, the use and occupancy thereof by the
Company, and the conduct of the Business thereon and therein do not violate
any deed restrictions, applicable law consisting of building codes, zoning,
subdivision or other land use or similar laws the violation of which would
adversely affect the use, value or occupancy of any such property or the
conduct of the Business thereon, (iii) neither the Seller nor the Company
has, since January 1, 1992, received written notice of a material violation
of the restrictions or Laws described in the foregoing clause (ii), and (iv)
none of the structures or improvements on any of the Owned Real Property
encroaches upon real property of another Person, and no structure or
improvement of another Person encroaches upon any of the Owned Real Property
or Leased Real Property, which would materially interfere with the use
thereof in the ordinary course of business.
3.14 Sufficiency of Assets. The assets, rights, and properties
owned, leased or licensed by the Company constitute all assets, rights, and
properties used or held for use in the conduct of the Business as presently
conducted.
3.15 Tangible Property. Except as set forth on Schedule 3.15, to the
knowledge of the Company and the Seller, the buildings, facilities, machinery,
equipment, furniture, leasehold and other improvements, fixtures, vehicles,
structures, any related items and other tangible property required to properly
operate the Business, or material to the financial condition or prospects of the
Company (the "Tangible Property") are in good operating condition and repair
(normal wear and tear excepted), free of any material structural or engineering
defects, are being maintained and replaced in accordance with past practice, and
are suitable for their current use. The Company has good and marketable title
to, or a valid leasehold interest in or contractual right to use, all Tangible
Property, free and clear of all Encumbrances except (A) as disclosed in Schedule
3.15 and (B) Permitted Encumbrances.
3.16 Inventory. All of the Company's inventory reflected on the
1997 Balance Sheet is (or was prior to the sale thereof) substantially
suitable, usable, or (in the case of finished goods and products) salable at
market prices in the ordinary course of
-24-
business, except to the extent reserved against (after giving effect to the
elimination of $610,000 of the LIFO reserve) on the 1997 Balance Sheet (the
"Reserve"). The markdowns and provisions for obsolescence and shrinkage
reflected in the income statements which are part of the Financial Statements
have been adequately provided for in accordance with U.S. GAAP. The Reserve,
reflected on the 1997 Balance Sheet, has been determined in accordance with
U.S. GAAP and is adequate to provide for obsolete, excess, slow moving,
defective, damaged or missing inventory. The quantity of the Company's
inventory on hand or in transit at the Closing Date will be at levels
substantially customary for the Company for that time of year or, if at
greater than customary levels, then substantially consistent with the
requirements of then outstanding sales Commitments or current sales
projections of the Company, subject to reserves reflected on the Closing
Balance Sheet.
3.17 Accounts and Notes Receivable; Commissions. The accounts and
notes receivable reflected on the 1997 Balance Sheet and those accounts and
notes receivable of the Company acquired or created after the date of the 1997
Balance Sheet through the Closing Date, (a) were, are and shall be bona fide
accounts and notes receivable created in the ordinary and usual course of
business in connection with bona fide transactions and consistent with past
practice, including past practice with respect to the provision of extended
payment terms, (b) have been collected in full or, except as set forth on
Schedule 3.17, are current and will be collectible when due at their face
amounts, except to the extent of the allowance for doubtful accounts, as
allocated to uncollectible accounts, reflected on the 1997 Balance Sheet. Sales
discounts, cash and anticipation discounts, freight allowances, and returns and
allowances reflected on the income statements which are part of the Financial
Statements were granted or arose in the ordinary course of business, consistent
with past practices and provision for such items together with the provision for
uncollectible accounts have been determined in accordance with U.S. GAAP. The
allowance for doubtful accounts reflected on the 1997 Balance Sheet has been
fairly determined consistent with past practices and is adequate to provide, in
accordance with U.S. GAAP, for sales discounts, cash and anticipation discounts,
freight allowances, uncollectible accounts and returns and allowances related to
sales occurring prior to the date of such balance sheet. Commissions reflected
on the income statements which are part of the Financial Statements were granted
or arose in the ordinary course of business, consistent with past practices and
have been fairly determined consistent with past practices in accordance with
U.S. GAAP. Commissions payable reflected on the 1997 Balance Sheet have been
fairly determined consistent with past practices in accordance with U.S. GAAP
and are adequate to provide for commissions payable at such date.
3.18 Litigation and Orders. Except as set forth on Schedule 3.18:
(a) There is no Litigation pending or, to the knowledge of
the Company or the Seller, threatened against, affecting or involving the
Company or any of
-25-
its rights or properties, or which seek to prevent or challenge the
transactions contemplated hereby; and
(b) No product liability, Litigation or Order against or
involving the Company or any products sold, designed or manufactured by the
Company has been settled, adjudicated or otherwise disposed of since January 1,
1992.
3.19 Intellectual Properties. Schedule 3.19 sets forth a correct
and complete list of all registered Intellectual Property and all
Intellectual Property which is material to the Business, in each case, which
is owned or possessed by the Company or used in the conduct of the Business.
Except as set forth on Schedule 3.19, the Company owns or possesses adequate
licenses to (without the making of any payment to others or the obligation to
grant rights to others in exchange) all Intellectual Property necessary to
the conduct of the Business as presently conducted. Each item of Intellectual
Property owned or used by the Company immediately prior to the Closing will
be owned or available for use by the Company on identical terms and
conditions immediately subsequent to the Closing. The Company has taken all
necessary and desirable action to maintain and protect each item of
Intellectual Property that it owns or uses and which is material to the
Business. The validity, ownership, enforceability, use or legality of the
Intellectual Property is not being questioned or opposed in any claim,
demand, Litigation or Order to which the Company, or any Person who has
granted a license of Intellectual Property to the Company, is a party or
subject, nor, to the knowledge of either the Company or the Seller, is any
such claim, demand or Litigation threatened. The conduct of the Business as
currently conducted does not infringe, conflict with, interfere with,
infringe upon, misappropriate or otherwise come into conflict with any
Intellectual Property rights of third parties, and the Company has not within
the past six years received any charge, complaint, claim, demand or notice
alleging any such interference, infringement, misappropriation or violation
(including any claim that the Company must license or refrain from using any
Intellectual Property rights of any third party). All licenses of
Intellectual Property granted by the Company to others are legal, valid,
binding, enforceable and in full force and effect and no party to the license
is in breach or default, and no event has occurred which with notice or lapse
of time would constitute a breach or default or permit termination,
modification or acceleration thereunder, nor has any party repudiated any
provision thereof. All Patents, patent applications, rights to inventions and
other Intellectual Property heretofore owned or held by the Seller or any
Employee and used in the Business in any manner have been duly and
effectively transferred to the Company. The consummation of the transactions
contemplated hereby will not alter or impair the rights and interests of the
Company in any of the items listed on Schedule 3.19. With respect to each
item of Intellectual Property required to be identified in Schedule 3.19, the
Company possesses all right, title and interest in and to the item, free and
clear of any Encumbrance or other restriction. The computer software owned or
used by, or licensed to, the Company is adequate for its current use.
-26-
3.20 Tax Returns, Audits and Liabilities. Except as set forth on
Schedule 3.20, the Company has (i) timely filed in accordance with all
applicable Laws (taking into account valid extensions), all Returns required
to be filed by it, (ii) paid all Taxes shown to have become due pursuant to
such Returns, and (iii) paid all Taxes (other than those being contested in
good faith, all of which are disclosed on Schedule 3.20) for which a notice
of, or assessment or demand for, payment has been received or which are
otherwise due and payable. All Returns filed by the Company with respect to
Taxes were true, correct and complete as of the date on which they were filed
or as subsequently amended to the date hereof. Except as set forth on
Schedule 3.20, complete copies of (i) federal Income Tax Returns for the
Company and (ii) state, local and foreign Income Tax and other Returns of the
Company, that have been filed from and after December 31, 1993 through the
date hereof, have been delivered or made available to the Purchaser prior to
the date hereof. Prior to the date hereof, the Company has provided to the
Purchaser copies of all revenue agent's reports and other written assertions
of deficiencies or other Liabilities for Taxes of the Company with respect to
past periods for which the limitations period has not run. Except as set
forth on Schedule 3.20, (A) there is no Litigation or assessment pending or,
to the knowledge of the Company or the Seller proposed or threatened with
respect to any Liability for Tax that relates to the Company, (B) all amounts
required to be collected or withheld by the Company with respect to Taxes
have been duly collected or withheld and any such amounts that are required
to be remitted to any taxing authority have been duly remitted, (C) no
extension of time within which to file any Return that relates to the Company
has been requested, which Return has not since been filed, (D) there are no
waivers or extensions of any applicable statute of limitations for the
assessment or collection of Taxes with respect to any Return that relates to
the Company which remain in effect, (E) there are no tax rulings, requests
for rulings, or closing agreements relating to the Company which could affect
its liability for Taxes for any period after the Closing, (F) all federal,
state, local and foreign Income Tax Returns of the Company with respect to
taxable periods through the year ended December 31, 1993 have been examined
and closed or are Returns with respect to which the applicable statute of
limitations has expired without extension or waiver, (G) no power of attorney
has been granted by the Company with respect to any matter relating to Taxes
which is currently in force, (H) the Company is not a party to, nor is it
bound by, any Tax allocation or Tax sharing agreement or arrangement and has
no current contractual obligation to indemnify any other Person with respect
to Taxes, (I) no taxing authority in a jurisdiction where the Company or any
shareholder of the Company does not file Returns has made a claim, assertion
or threat that the Company is or may be subject to taxation by such
jurisdiction, (J) the states, territories and jurisdictions (whether foreign
or domestic) in which the Company has filed income, franchise, sales and use
Tax Returns for taxable periods ending after December 31, 1993 are set forth
on Schedule 3.20, (K) the Company and the Seller do not have knowledge of any
fact or condition which, if known to any taxing authority having
jurisdiction, would likely result in the issuance of a notice of proposed
deficiency or similar notice of intention to assess
-27-
Taxes against the Company, and no issue has arisen in any examination of the
Company by any taxing authority that if raised with respect to the period so
examined would result in a material deficiency for any other period not so
examined, if upheld, (L) any adjustment of Taxes of the Company made by the
IRS in any examination which is required to be reported to the appropriate
state, local or foreign taxing authorities has been reported, and any
additional Taxes due with respect thereto have been paid except for amounts
that the Company is contesting in good faith, as set forth on Schedule 3.20,
and (M) none of the assets of the Company (1) is property that is required to
be treated as being owned by any other person pursuant to the "safe harbor
lease" provisions of Section 168(f)(8) of the Internal Revenue Code of 1954,
(2) is "tax-exempt use property" within the meaning of Code Section 168(h),
or (3) directly or indirectly secures any debt the interest of which is tax
exempt under Code Section 103(a). For federal Income Tax purposes, the
Company is, since its formation has been, and will be until the Closing
Date, properly qualified as an "S corporation" under Code Section 1361(a),
and the Company is, since its formation has been, and will be until the
Closing Date so properly qualified for state and local Income Tax purposes
pursuant to analogous state or local provisions in the jurisdictions set
forth on Schedule 3.20.
3.21 Insurance. Schedule 3.21(a) sets forth a list of all
policies or binders of fire, liability, product liability, workers
compensation, vehicular and other insurance held by or on behalf of the
Company or the Business, including the amounts of such insurance and annual
premiums with respect thereto. Such policies and binders are in full force
and effect. The Company has obtained and maintained in full force and effect
insurance with responsible and reputable insurance companies or associations
in such amounts, on such terms, with such deductibles, and covering such
risks, including fire and other risks insured against by extended coverage,
as is customarily carried by reasonably prudent Persons conducting businesses
or owning assets similar to those of the Company, and has maintained in full
force and effect liability insurance against claims for personal injury or
death or property damage occurring in connection with the activities of the
Company or any properties owned, occupied or controlled by the Company in
such amount as is customarily carried by reasonably prudent Persons
conducting businesses or owning assets similar to those of the Company. The
Company may terminate each of its insurance policies or binders at or after
the date hereof and would incur no penalties or other costs in doing so. None
of such policies or binders was obtained through the use of false or
misleading information or the failure to provide the insurer with all
material information requested in order to evaluate the liabilities and
risks. There is no default with respect to any provision contained in any
such policy or binder, nor has the Company failed to give any notice or
present any claim under any such policy or binders in due and timely fashion.
There are no billed but unpaid premiums past due under any such policy or
binder, the failure of which to be paid would result in the cancellation of
such policy or binder. Except as set forth on Schedule 3.21(b), (i) there are
no outstanding Company claims in excess of normal retentions that are not
covered under any such policies or binders and there has not
-28-
occurred any event that might reasonably form the basis of any claim in
excess of normal retentions that is not covered against or relating to the
Company that is not covered by any of such policies or binders and (ii) no
notice of cancellation or non-renewal of any such policies or binders has
been received by the Company.
3.22 Employee Benefits.
(a) Schedule 3.22(a) contains a true and complete list of each
Company Employee Plan and each Employee Agreement. Neither the Company nor
any ERISA Affiliate has any plan or commitment, whether legally binding or
not, to establish any new Company Employee Plan, to enter into any Employee
Agreement or to modify or to terminate any Company Employee Plan or Employee
Agreement (except to the extent required by Law or to conform any such
Company Employee Plan or Employee Agreement to the requirements of any
applicable Law, in each case as previously disclosed to the Purchaser, or as
required by this Agreement), nor has any intention to do any of the foregoing
been communicated to Employees.
(b) The Company has provided, or has caused to be provided,
to the Purchaser (i) current, accurate and complete copies of all documents
embodying or relating to each Company Employee Plan and each Employee
Agreement, including all amendments thereto, written interpretations thereof
and trust or funding agreements with respect thereto; (ii) the two (2) most
recent annual actuarial valuations, if any, prepared for each Company Benefit
Plan; (iii) the two (2) most recent annual reports (Series 5500 and all
schedules thereto), if any, required under ERISA in connection with each
Company Employee Plan or related trust; (iv) a statement of alternative form
of compliance pursuant to Department of Labor Regulation ss.2520.104-23, if
any, filed for each Company Employee Plan which is an "employee pension
benefit plan" as defined in Section 3(2) of ERISA for a select group of
management or highly compensated employees; (v) the most recent determination
letter received from the IRS, if any, for each Company Employee Plan and
related trust which is intended to satisfy the requirements of Section 401(a)
of the Code; (vi) if the Company Employee Plan is funded, the most recent
annual and periodic accounting of Company Employee Plan assets; (vii) the
most recent summary plan description together with the most recent summary of
material modifications, if any, required under ERISA with respect to each
Company Employee Plan; and (viii) all material communications to any Employee
or Employees relating to each Company Employee Plan.
(c) With respect to each Company Employee Plan (i) the Company
and each ERISA Affiliate have performed all obligations required to be performed
by them under each Company Employee Plan and Employee Agreement and neither the
Company nor any ERISA Affiliate is in default under or in violation of, any
Company Employee Plan, (ii) each Company Employee Plan has been established and
maintained in accordance with its terms and in compliance with all applicable
laws,
-29-
statutes, orders, rules and regulations, including but not limited to ERISA
and the Code, including without limiting the foregoing, the timely filing of
all required reports, documents and notices, where applicable, with the IRS
and the Department of Labor; (iii) each Company Employee Plan intended to
qualify under Section 401 of the Code is, and since its inception has been,
so qualified and a determination letter has been issued by the IRS to the
effect that each such Company Employee Plan is so qualified and that each
trust forming a part of any such Company Employee Plan is exempt from tax
pursuant to Section 501(a) of the Code and no circumstances exist which would
adversely affect this qualification or exemption; (iv) no "prohibited
transaction," within the meaning of Section 4975 of the Code or Section 406
of ERISA, has occurred with respect to any Company Employee Plan; (v) no
action or failure to act and no transaction or holding of any asset by, or
with respect to, any Company Employee Plan has or may subject the Company or
any ERISA Affiliate or any fiduciary to any tax, penalty or other liability,
whether by way of indemnity or otherwise; (vi) there are no actions,
proceedings, arbitrations, suits or claims pending, or to the knowledge of
the Company or any ERISA Affiliate, threatened or anticipated (other than
routine claims for benefits) against the Company or any ERISA Affiliate or
any administrator, trustee or other fiduciary of any Company Employee Plan
with respect to any Company Employee Plan or Employee Agreement, or against
any Company Employee Plan or against the assets of any Company Employee Plan;
(vii) no event or transaction has occurred with respect to any Company
Employee Plan that would result in the imposition of any tax under Chapter 43
of Subtitle D of the Code; (viii) each Company Employee Plan can be amended,
terminated or otherwise discontinued without liability to the Company or any
ERISA Affiliate; (ix) the Company and each ERISA Affiliate have made all
payments with respect to all periods through the date hereof, and will make a
pro-rata payment for the period ending as of the Closing Date, in each case
which are required by each Company Employee Plan, each related trust, each
collective bargaining agreement or by-law to be made to, or with respect to
each Company Employee Plan (including all insurance premiums or intercompany
charges with respect to each Company Employee Plan); (x) no Company Employee
Plan is under audit or investigation by the IRS, the Department of Labor or
the PBGC, and to the knowledge of the Company or any ERISA Affiliate, no such
audit or investigation is pending or threatened; and (xi) no liability under
any Company Employee Plan has been funded nor has any such obligation been
satisfied with the purchase of a contract from an insurance company as to
which the Company has received notice that such insurance company is
insolvent or is in rehabilitation or any similar proceeding.
(d) Neither the Company nor any ERISA Affiliate presently
sponsors, maintains, contributes to, nor is the Company or any ERISA Affiliate
required to contribute to, nor has the Company or any ERISA Affiliate ever
sponsored, maintained, contributed to, or been required to contribute to, a
Pension Plan which is subject to Title IV of ERISA.
-30-
(e) At no time since September 25, 1980 has the Company or any
ERISA Affiliate contributed to or been required to contribute to, or incurred
any withdrawal liability (within the meaning of Section 4201 of ERISA) to any
Multiemployer Plan.
(f) Neither the Company nor any ERISA Affiliate (i) maintains
or contributes to any Company Employee Plan which provides, or has any
liability to provide, life insurance, medical, severance or other employee
welfare benefits to any Employee upon his retirement or termination of
employment, except as may be required by Section 4980B of the Code; or (ii)
has ever represented, promised or contracted (whether in oral or written
form) to any Employee (either individually or to Employees as a group) that
such Employee(s) would be provided with life insurance, medical, severance or
other employee welfare benefits upon their retirement or termination of
employment, except to the extent required by Section 4980B of the Code.
(g) The execution of, and performance of the transactions
contemplated by, this Agreement will not (either alone, in the aggregate or
upon the occurrence of any additional or subsequent events) (i) constitute an
event under any Company Employee Plan, Employee Agreement, trust or loan that
will or may result in any payment (whether of severance pay or otherwise),
acceleration, forgiveness of indebtedness, vesting, distribution, increase in
benefits or obligation to fund benefits with respect to any Employee, or (ii)
result in the triggering or imposition of any restrictions or limitations on
the right of the Company or the Purchaser to amend or terminate any Company
Employee Plan and receive the full amount of any excess assets remaining or
resulting from such amendment or termination, subject to applicable taxes. No
payment or benefit which will or may be made by the Company, the Purchaser,
the Seller or any of their respective affiliates with respect to any Employee
will be characterized as an "excess parachute payment," within the meaning of
Section 280G(b)(1) of the Code.
(h) The Company (i) is in compliance with all applicable
federal, state and local laws, rules and regulations (domestic and foreign)
respecting employment, employment practices, labor, terms and conditions of
employment and wages and hours, in each case, with respect to Employees; (ii)
has withheld all amounts required by Law or by agreement to be withheld from
the wages, salaries and other payments to Employees; (iii) is not liable for
any arrears of wages or any taxes or any penalty for failure to comply with
any of the foregoing; and (iv) is not liable for any payment to any trust or
other fund or to any governmental or administrative authority, with respect
to unemployment compensation benefits, social security or other benefits for
Employees.
(i) No work stoppage or labor strike against the Company by
Employees is pending or threatened. The Company (i) is not involved in or
threatened with any labor dispute, grievance, or litigation relating to labor
matters involving any
-31-
Employees, including, without limitation, violation of any federal, state or
local labor, safety or employment laws (domestic or foreign), charges of
unfair labor practices or discrimination complaints; (ii) has not engaged in
any unfair labor practices within the meaning of the National Labor Relations
Act or the Railway Labor Act; or (iii) is not presently, nor has it been in
the past a party to, or bound by, any collective bargaining agreement or
union contract with respect to Employees and no such agreement or contract is
currently being negotiated by the Company or any of its Affiliates. No
Employees are currently represented by any labor union for purposes of
collective bargaining and no activities the purpose of which is to achieve
such representation of all or some of such Employees are threatened or
ongoing.
(j) No Company Employee Plan or Employee Agreement is funded
by a trust described in Section 501(c)(9) of the Code.
(k) With respect to each Welfare Plan, all claims incurred
(including claims incurred but not reported) by Employees thereunder for which
the Company is, or will become, liable are (i) insured pursuant to a contract of
insurance whereby the insurance company bears any risk of loss with respect to
such claims; (ii) covered under a contract with a health maintenance
organization (an "HMO") pursuant to which the HMO bears the liability for such
claims, or (iii) reflected as a liability or accrued for on the 1997 Balance
Sheet.
(l) The Company has no liability, contingent or otherwise, to,
or with respect to any Employee Plan (other than the Company Employee Plans and
Employee Agreements which are listed on Schedule 3.22(a)), which is now or
previously has been sponsored, maintained, contributed to, or required to be
contributed to, by any Subsidiary or any ERISA Affiliate.
(m) To the knowledge of the Company or the Seller, no key
Employee or group of Employees had, immediately prior to the date hereof, any
plans to terminate employment with the Company.
3.23 Suppliers and Customers. Schedule 3.23 sets forth a list of (i)
the suppliers of $1,000,000 or more in materials or services to the Company
during the last twelve months ("Major Suppliers") and (ii) the wholesale
customers of $200,000 or more in products or services of the Company during the
last twelve months (the "Major Customers"). Except as set forth on Schedule
3.23, no Major Supplier, Major Customer or other customers purchasing, in the
aggregate, during the last twelve months, $500,000 or more in products or
services of the Company has during the last twelve months decreased materially
or, to the knowledge of the Company or the Seller, threatened to decrease or
limit materially its provision of services or supplies to the Company. Neither
the Company nor the Seller has any knowledge of any termination, cancellation or
limitation of, or any material modification or change in, the business
relationships of the
-32-
Company, with any Major Supplier, Major Customer or such other customers. To
the knowledge of the Company and the Seller, there will not be any such
change in relations with material suppliers or customers of the Company or
triggering of any right of termination, cancellation or penalty or other
payment in connection with, as a result of transactions contemplated by this
Agreement which could have or result in a Company Material Adverse Effect.
3.24 Products. Except as set forth on Schedule 3.24, there are no
statements, citations or decisions by any Governmental Entity stating that any
product manufactured, sold, designed, distributed or marketed at any time by the
Company ("Products") is defective or unsafe or fails to meet any standards
promulgated by any Governmental Entity. Except as set forth on Schedule 3.24,
there is no (i) fact relating to any Product that, to the knowledge of the
Company or the Seller, may impose upon the Company a duty to recall any Product
or a duty to warn customers of a defect in any Product, (ii) latent or overt
design, manufacturing or other defect in any Product that could reasonably be
expected to have a Company Material Adverse Effect or (iii) material Liability
for warranty claims or returns with respect to any Product.
3.25 Environmental Matters. (a) Except as set forth on Schedule
3.25(a):
(i) the Company has been operated at all times, and is,
in compliance with all applicable Environmental Laws, including all
limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules and timetables contained in all
applicable Environmental Laws;
(ii) the Company has obtained, is in compliance with,
and has made all appropriate filings for issuance or renewal of, all
permits, licenses, authorizations, registrations and other governmental
consents required by any applicable Environmental Laws ("Environmental
Permits"), including, without limitation, those regulating the use,
storage, treatment, transportation, release, emission or disposal of
Hazardous Substances, and all such Environmental Permits are in full force
and effect;
(iii) there are no claims, notices, civil, criminal or
administrative actions, suits, hearings, investigations, inquiries or
proceedings pending or threatened against the Company or any of its
predecessors, and no requests from any Governmental Entity to perform any
investigatory or remedial activity have been made to the Company or any of
its predecessors, that are based on or related to any actual or alleged
release of Hazardous Substances or any other Environmental Matters or the
failure to have any required Environmental Permits;
(iv) there are no past or present conditions, events,
circumstances, facts, activities, practices, incidents, actions or
omissions that
-33-
(x) may give rise to any liability or other obligation under any
Environmental Laws that may require the Company to incur any
Environmental Costs, (y) may form the basis of any claim, action, suit,
proceeding, hearing, investigation or inquiry against the Company or
any of its predecessors that may require the Company to incur any
Environmental Costs, or (z) may interfere with or prevent continued
compliance by the Company with Environmental Laws and/or Environmental
Permits;
(v) there are no, and have never been any, underground
or aboveground storage tanks, incinerators or surface impoundments at, on,
under, about, or within any of the Company's owned, leased or operated
real property;
(vi) the Company has not received any notice (written or
oral) or other communication that the Company or any of its predecessors
is or may be a potentially responsible party or otherwise liable in
connection with any waste disposal site allegedly containing, or other
location used for the disposal of, any Hazardous Substances. Schedule
3.25(a) contains a list of all sites or locations used by or on behalf of
the Company or any of its predecessors for the disposal of any waste
containing Hazardous Substances; and
(vii) there have been no releases (i.e., any past or
present releasing, spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, disposing or
dumping) of Hazardous Substances by the Company or any of its predecessors
on, at, upon, into or from any facilities or properties owned, leased or
operated by any of them ("Facilities") and such Facilities are free of all
contamination arising from, relating to, or resulting from any release
discharge or emission of Hazardous Substances, other than such releases
and contamination that are permitted by, and could not result in any
liability under, Environmental Laws.
(b) The Seller has delivered to the Purchaser true and
complete copies and results of any reports, studies, analyses, tests, or
monitoring possessed or initiated by the Seller or the Company pertaining to
Hazardous Substances at, on, about, under or within any real property owned,
leased, operated or controlled by any predecessor of the Company, or concerning
compliance by the Seller, the Company, or any other Person for whose conduct
they are or may be held responsible, with Environmental Laws.
3.26 Interest in Competitors, Etc. Except as set forth on Schedule
3.26, to the knowledge of the Company or the Seller, neither the Seller nor any
Employee of the Company, and no spouse or lineal descendant of any such Person,
and no Person controlled by one or more of the foregoing Persons shall, on and
immediately after the Closing:
-34-
(a) own, directly or indirectly, any equity or debt
interest in (excepting less than 5% stockholdings for investment purposes in
securities of publicly held and traded companies), or serve as an officer,
director, employee or consultant of, any Person which is a Competitor,
lessor, lessee, supplier, distributor, sales agent or customer of the Company;
(b) own, directly or indirectly, in whole or in part, any
property that the Company uses in the conduct of its business; or
(c) have any cause of action or other claim whatsoever
against, or owe any amount to, the Company, except for claims for accrued
salary, bonus, commissions, and vacation pay and accrued benefits under employee
benefit plans.
3.27 Customs and Trade Regulation. Except as set forth on Schedule
3.27:
(a) There is no dispute, audit, investigation, inquiry or
other Litigation pending or, to the knowledge of the Company or the Seller,
threatened involving the Company with respect to customs duties or other customs
Liabilities (including, without limitation, fees, fines, penalties, forfeitures,
liquidated damages claims and notices of redelivery imposed by or owed to the
U.S. Customs Service) in regard of merchandise imported by the Company into the
United States or exported by the Company;
(b) There is no dispute, audit, investigation, inquiry or
other Litigation pending or, to the knowledge of the Company or the Seller,
threatened against, affecting or involving the Company with respect to the
provision to overseas suppliers of merchandise imported into the United States
of "assists" (within the meaning of 19 U.S.C. 1401a) or other property or
services the value of which was not declared in customs entries;
(c) The Company does not have on deposit, and is not
depositing, any "antidumping" duty with respect to merchandise imported by it
into the United States;
(d) The Company has all Permits, and is in compliance with all
of its obligations under such Permits and all Laws, applicable, in each case, to
the importation or exportation of merchandise; and
(e) To the knowledge of the Company and the Seller, the
Company has not paid and is not obligated to pay any amounts in excess of bona
fide selling price to any unaffiliated third party with respect to any
merchandise or services purchased or sold by it.
-35-
3.28 Intercompany Transactions. Schedule 3.28 sets forth (a) all
transactions between the Company and the Seller or any of their respective
Affiliates since January 1, 1997, (b) all assets, properties and services of
the Company used by the Seller or any of their respective Affiliates, or vice
versa, at any time since January 1, 1997 and (c) all Commitments between the
Company and the Seller or any of their respective Affiliates, or vice versa
(any such transaction being an "Affiliated Transaction"). All ongoing
Affiliated Transactions will be terminated at or prior to the Closing, except
for Affiliated Transactions contemplated by this Agreement or the Ancillary
Documents.
3.29 Banking Facilities. Schedule 3.29 sets forth:
(a) each bank, savings and loan or similar financial
institution in which the Company has an account, lockbox collection account,
escrow deposit or safety deposit box and the numbers of such accounts or boxes
maintained by the Company thereat; and
(b) the names of all persons authorized to draw on each such
account or to have access to any such escrow or safety deposit box facilities.
Such accounts and escrow or safety box facilities are
only used by the Company. The individual bank accounts and safety deposit boxes
used by the Seller for its own account not related to the Business are not
commingled with those of the Company.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser represents and warrants to the Seller as follows:
4.01 Organization. The Purchaser is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and has the requisite right, power and authority to carry on its business as it
is now being conducted and to perform its obligations under this Agreement and
any Ancillary Documents to which it is a party.
4.02 Authority. The Purchaser has the requisite corporate power
to enter into this Agreement and any Ancillary Documents to which it is a
party and to carry out its obligations hereunder and thereunder. The
execution and delivery of this Agreement and any Ancillary Document to which
it is a party and the consummation of the transactions contemplated hereby
and thereby have been, with respect to this Agreement, and will be, with
respect to such Ancillary Documents, duly authorized by the Purchaser, and no
other proceedings on the part of the Purchaser are, with respect to this
-36-
Agreement, and will be, with respect to such Ancillary Documents, necessary
to authorize this Agreement or such Ancillary Documents and the transactions
contemplated hereby and thereby. This Agreement has been, and each Ancillary
Document to which the Purchaser is a party will be, duly and validly executed
and delivered by the Purchaser and constitute or will constitute, as the case
may be, a valid and binding obligation of the Purchaser, enforceable against
it in accordance with its terms, except as such enforceability may be limited
by applicable, bankruptcy, insolvency, moratorium or other similar laws
affecting creditors' rights generally or by general principles of equity.
4.03 Consents; No Violation. Neither the execution, delivery and
performance of this Agreement by the Purchaser nor the consummation of the
transactions contemplated hereby will (a) conflict with, or result in any breach
or violation of, any provision of the Certificate of Incorporation or By-laws of
the Purchaser; (b) constitute, with or without the passage of time, a breach,
violation or default, create an Encumbrance, or give rise to any right of
termination, modification, cancellation, prepayment or acceleration, under (i)
any Law, or (ii) any Commitment or Permit of the Purchaser, or to which the
Purchaser or any of its properties is subject, except, with respect to the
matters set forth in clause (ii), for breaches, violations, defaults,
Encumbrances, or rights of termination, modification, cancellation, prepayment
or acceleration which would not, individually or in the aggregate, adversely
affect the ability of the Purchaser to consummate the transactions contemplated
hereby; or (c) except for any required filing under the HSR Act, require any
consent, approval or authorization of, notification to, filing with, or
exemption or waiver by, any Governmental Entity, on the part of the Purchaser,
other than consents, approvals, authorizations, notifications, filings,
exemptions or waivers which, if not obtained or made would not, individually or
in the aggregate, materially adversely affect the ability of the Purchaser to
consummate the transactions contemplated hereby.
4.04 Brokers and Finders. Except for Xxxxxxx, Xxxxx & Co., the
Purchaser has not employed any broker or finder or incurred any liability for
any brokerage fees, commissions or finders' fees in connection with the
transactions contemplated hereby.
4.05 Financing. On the Closing Date, the Purchaser will have
sufficient funds to consummate the transactions contemplated hereby.
ARTICLE V
COVENANTS
5.01 No Solicitation. From the date of this Agreement until the
Closing, other than in connection with the transactions contemplated hereby,
neither the Seller
-37-
nor the Company shall solicit, propose or facilitate (including by way of
providing information regarding the Business or the Company to any Person),
directly or indirectly, any inquiries, discussions or proposals for, continue
or enter into negotiations looking toward, or enter into or consummate any
agreement or understanding in connection with any proposal regarding any
purchase or other acquisition of all or any portion of the Business (other
than the ordinary course of business sale of inventory or replacement of
assets), the Company or any of the equity securities (whether newly issued or
currently outstanding) of the Company, or any merger, business combination or
recapitalization involving the Business or the Company, and the Seller will
cause the Company's officers, directors, representatives, agents and
Affiliates to refrain from any of the above.
5.02 Interim Operations.
(a) Unless the Purchaser otherwise agrees in writing and
except as otherwise expressly contemplated by this Agreement (including Section
5.14 hereof), between the date of this Agreement and the Closing, the Seller
will cause the Company to (i) conduct the Business only in the ordinary course
and consistent with past practice; (ii) use reasonable best efforts to preserve
and maintain its properties and the current relationships of the Company with
its customers, suppliers, distributors, agents, officers and employees and other
persons with which the Company has significant business relationships; (iii) use
reasonable best efforts to maintain all of the assets owned or used by the
Business in the ordinary course of business consistent with past practice; (iv)
continue capital expenditures in accordance with the timing and amounts forecast
for capital expenditures as set forth on Exhibit 5.02(a) hereto; (v) maintain
insurance in full force and effect with respect to the Business with responsible
companies, comparable in amount, scope and coverage to that in effect on the
date of this Agreement; (vi) use reasonable best efforts to preserve the
goodwill and ongoing operations of the Business; (vii) maintain the Books and
Records in the usual, regular and ordinary manner, on the basis consistent with
prior years; and (viii) perform and comply in all material respects with their
obligations under the Commitments.
(b) Except as expressly contemplated by this Agreement,
between the date of this Agreement and the Closing, the Seller will cause the
Company not to do any of the following without the prior written consent of the
Purchaser:
(i) create any Encumbrance on any properties or assets
(whether tangible or intangible) of the Company;
(ii) (A) except for inventory in the ordinary course of
business sell, assign, transfer, lease or otherwise dispose of or agree to
sell, assign, transfer, lease or otherwise dispose of any assets of the
Company or (B) cancel any indebtedness owed to the Company;
-38-
(iii) acquire (by merger, consolidation, or acquisition
of stock or assets) any Person;
(iv) (A) issue any debt securities, (B) incur any
additional indebtedness (other than Existing Indebtedness), (C) assume,
grant, guarantee or endorse, or make any other accommodation or
arrangement making the Company responsible for, the Liabilities of any
other Person or (D) make any loans, advances or capital contributions to,
or investments in any Person;
(v) change any method of accounting or accounting
practice used by the Company, other than such changes required by U.S.
GAAP and changes of tax accounting methods to the extent the Code requires
conformity of financial and tax accounting methods; provided that the
Seller shall give the Purchaser prompt written notice of any such change;
(vi) (A) enter into or adopt or amend any existing
agreement or arrangement relating to severance, (B) enter into or adopt or
amend any existing severance plan, (C) enter into or adopt or amend any
Company Employee Plan or Employee Agreement (including, without
limitation, the plans, programs, agreements and arrangements referred to
in Section 3.22) or (D) grant any increases in compensation, except
compensation increases associated with promotions and annual reviews in
the ordinary course of business and the payment of bonuses to the
individuals in the amounts listed on Exhibit 5.02(b)(vi) hereto;
(vii) make, revoke or change any Tax election,
compromise or settle any federal, state, local, foreign or other Tax
liability or make any payment under any Tax sharing, allocation or
indemnity agreement;
(viii) accelerate or delay the purchase of raw
materials, the manufacture, shipment or sale of inventory, the collection
of accounts or notes receivable or the payment of accounts or notes
payable or accrued liabilities or expenses or otherwise operate the
Business, in each case, in a manner that would be inconsistent with past
practices or the forecast of inventory, accounts and notes receivable,
accounts and notes payable and accrued liabilities and expenses previously
provided to the Purchaser and attached hereto as Exhibit 5.02(b)(viii);
(ix) except as set forth in Schedule 5.02(b)(ix) engage
in any transaction with the Seller or any of his Affiliates;
(x) enter into, modify, terminate, amend or grant any
waiver in respect of any Commitment;
(xi) allow the lapse of any of the Company's rights of
ownership or use of any Intellectual Property right;
-39-
(xii) repurchase, redeem or otherwise acquire or
exchange any share of Common Stock, issue or sell any additional shares of
the capital stock of, or other equity interests in, the Company, or
securities convertible into or exchangeable for such shares or equity
interests, or issue or grant any options, warrants, calls, subscription
rights or other rights of any kind to acquire additional shares of such
capital stock, such other equity interests or such securities;
(xiii) amend the Company's articles of incorporation or
bylaws or equivalent organization documents;
(xiv) declare, set aside, make or pay any dividend or
other distribution (whether in cash, stock or property or any combination
thereof); or
(xv) take any action that is reasonably likely to result
in the representations and warranties set forth in Articles III becoming
false or inaccurate in any material respect as of the Closing Date; or
(xvi) agree to take any of the actions specified in this
Section 5.02(b).
5.03 Access and Information. (a) From the date hereof until the
Closing, each of the Company and the Seller shall, and shall cause the Company's
officers, directors, employees and agents to, afford to the Purchaser and its
officers, directors, employees, counsel, accountants, advisors, representatives
and agents access to the officers, employees, agents, customers, suppliers,
properties, offices and other facilities, and to the Company's Books and Records
(including, without limitation, Returns and work papers of its independent
auditors) and Commitments, and shall furnish the Purchaser and such others all
financial, operating, technical and other data and information which the
Purchaser, through its officers, employees, representatives or agents, may from
time to time reasonably request.
(b) Without limiting the generality of the foregoing, the
Purchaser shall have the right to (i) inspect records, reports, permits,
applications, monitoring results, studies, correspondence data and any other
information or documents relevant to Environmental Matters, (ii) inspect all
buildings and equipment at the Owned and Leased Real Properties, and (iii)
conduct tests of the soil surface or subsurface waters at, in, on, beneath or
about the Owned and Leased Real Properties as may be recommended by an
environmental consultant engaged by the Purchaser; provided that in each
case, such tests and inspections shall be conducted only (x) during regular
business hours and upon reasonable notice and (y) in a manner that will not
unduly disrupt or interfere with the operation of the business of the Company.
(c) In connection with the continuing operation of the
business of the Company between the date of this Agreement and the Closing, the
Company shall
-40-
use all reasonable best efforts to consult in good faith on a regular and
frequent basis with representatives of the Purchaser to report material
operational developments and the general status of ongoing operations. The
Seller acknowledges that any such consultation shall not constitute a waiver
by the Purchaser of any rights it may have under this Agreement and that the
Purchaser shall not have any liability or responsibility for any actions of
the Company or any of its officers, directors, employees, agents or
Affiliates with respect to matters which are the subject of such
consultations.
5.04 Compliance with Antitrust Laws; Regulatory and Other Consents.
(a) Each of the Purchaser and the Seller shall cooperate with the other in
making filings under the HSR Act and shall use its best efforts to take, or
cause to be taken, all actions necessary, proper or advisable to consummate and
make effective as promptly as practicable the transactions contemplated by this
Agreement, including using its best efforts to resolve such objections, if any,
as the Antitrust Division of the Department of Justice (the "Antitrust
Division") or the Federal Trade Commission (the "FTC") or state antitrust
enforcement or other Governmental Entities (collectively, the "Regulatory
Agencies") may assert under the antitrust laws with respect to the transactions
contemplated hereby. In the event an action is instituted by any Person
challenging the transactions contemplated hereby as violative of the antitrust
laws, each of the Purchaser and the Seller shall use its best efforts to resist
or resolve such action.
(b) The parties agree to cooperate in obtaining any consents
of any third parties (in addition to the Antitrust Division, the FTC or other
parties or agencies, whose consents or approvals are covered elsewhere herein)
required in connection with the transactions contemplated hereunder (each, a
"Required Consent"). The parties agree that in the event such a Required Consent
is not obtained prior to the Closing and the Closing occurs, the Seller will,
subsequent to the Closing, cooperate with the Purchaser and the Company in
attempting to obtain the Required Consent.
5.05 Best Efforts. Subject to the terms and conditions in this
Agreement, each of the parties hereto shall use its reasonable best efforts
to take promptly, or cause to be taken, all actions and to do promptly, or
cause to be done, all things necessary, proper or advisable under applicable
Laws to consummate and make effective the transactions contemplated hereby.
Each of the corporate parties agrees to provide all necessary cooperation in
connection with the arrangement of the borrowings under the Credit Agreement,
including without limitation, the execution and delivery of any commitment
letters, underwriting or placement agreements, pledge and security documents,
other definitive financing documents, or other requested certificates or
documents.
5.06 Employee Matters. The Purchaser shall cause the Company (i)
to continue in effect, until December 31, 1998, The Yankee Candle Company,
Inc. 401(k) and Profit Sharing Plan and (ii) to honor the Company's
obligations under each of the Company Employee Plans and deferred
compensation agreements listed on
-41-
Schedule 3.22(a) (or such amended or alternative Plans and agreements which
are substantially comparable in the aggregate to the Plans and agreements
listed on Schedule 3.22(a)), in accordance with their respective terms.
5.07 Notice. Each party shall give prompt written notice to the
other of (a) the occurrence, or failure to occur, of any event which occurrence
or failure would be likely to cause any representation or warranty of the Seller
or the Purchaser, as the case may be, contained in this Agreement to be untrue
or inaccurate in any material respect at any time from the date hereof to the
Closing or that will or may result in the failure to satisfy any of the
conditions specified in Article VI, and (b) any failure of any party hereto to
comply with or satisfy any covenant, condition or agreement to be complied with
or satisfied by it hereunder.
5.08 Cash Management. As part of the cash management program of
the Company, the Company maintains disbursement checking accounts (the
"Disbursement Accounts") from which checks and drafts in respect of the
Business are drawn and are funded by the Company. No later than one Business
Day prior to the Closing Date, the Company shall deliver to the Purchaser a
written estimate (the "Estimated Overdraft") of the checks and drafts in
respect of the Business that will have been written on the Disbursement
Accounts but not presented for payment as of the close of business on the day
immediately preceding the Closing Date (the "Outstanding Checks"). At the
Closing, the Seller shall transfer to a separate interest bearing account
(the "Settlement Account"), opened by the Company at the Company's bank where
the Disbursement Accounts are open, an amount equal to the Estimated
Overdraft. The Settlement Account shall be exclusively used to pay any
Outstanding Checks presented for payment after the Closing. Within ten
Business Days after the Closing, the Company shall advise the Purchaser and
the Seller in writing as to the actual amount of the Outstanding Checks that
have been duly honored for payment (the "Actual Overdraft"). If the Actual
Overdraft exceeds the Estimated Overdraft, the Seller shall pay to the
Purchaser, within two Business Days of receipt of such advice, the amount of
such excess. Within two Business Days of the determination of the Actual
Overdraft, the Company shall close the Settlement Account and pay to the
Seller the balance, if any, of such account, as reflected on the closing
statement delivered by the Company's bank. Such closing statement shall be
accompanied by a certificate signed by an authorized officer of the Company
stating that the Settlement Account has been exclusively used to pay for
Outstanding Checks. The Seller will be responsible for any Outstanding Checks
subsequently presented for payment. The Seller shall be responsible to fund
the Disbursement Accounts in amounts sufficient to pay all checks and drafts
in respect of the Business that are written but not presented for payment
prior to the close of business on the day immediately preceding the Closing
Date. In the event that Outstanding Checks are presented for payment
following the determination of the Actual Overdraft, the Company shall send a
notice to the Seller of the amount of such Outstanding Checks funded by the
Company and duly honored for payment, and the Seller shall pay to the
-42-
Company two Business Days after receipt of such notice the amount set forth
in such notice.
5.09 Tax Provisions. (a) The Seller shall indemnify and hold
harmless, without duplication, the Purchaser and the Company (collectively, the
"Tax Indemnified Parties") from and against any and all Liabilities and Losses
of the Company or the Purchaser based upon, resulting from or arising out of (i)
Taxes relating to Pre-Closing Tax Periods, including, without limitation, any
and all Taxes attributable to the Section 338(h)(10) Elections and any other
elections pursuant to Code Section 338 or analogous provisions of state or local
law that are made or deemed to be made automatically as a result of the Section
338(h)(10) Elections, but only to the extent the amount of the Liability
(including, without limitation, Losses with respect thereto) for any such Tax
exceeds the amount of the reserves (if any) for such Tax reflected on the Final
Balance Sheet; (ii) the failure of the Seller to perform its obligations
pursuant to Section 5.09(d); and (iii) the ineffectiveness or invalidity of the
Section 338(h)(10) Elections (including, without limitation, the invalidity or
ineffectiveness of the Section 338(h)(10) Elections resulting, in whole or in
part, from the inability of the Company or the purchase of the Transferred
Shares to qualify for treatment under Section 338(h)(10)), unless such
ineffectiveness or invalidity is the result of (i.e., would not have occurred
but for) (1) Purchaser's failure to timely and properly prepare and file such
forms as are necessary to make the Section 338(h)(10) Elections, except to the
extent that such failure is caused by Seller, or (2) the inaccuracy or
incompleteness of information provided by Purchaser in connection with such
forms, except to the extent caused by Seller. In the case of any Tax relating to
a taxable period of the Company that includes but does not end on the Closing
Date, the portion of such Tax relating to the portion of such taxable period
which ends on the Closing Date shall be computed for purposes of clause (i) of
this Section 5.09(a) in a manner which is consistent with the same computation
undertaken for purposes of the preparation of the Final Balance Sheet.
(b) (i) With respect to the purchase and sale of the
Transferred Shares, the Seller shall join with the Purchaser in making a
timely election under Section 338(h)(10) of the Code, and the regulations
promulgated thereunder, and any corresponding elections under state, local
or foreign tax law ("Section 338(h)(10) Elections"). Seller shall
cooperate with Purchaser to take all actions necessary and appropriate
(including timely preparing and filing such additional forms, Returns,
elections, schedules and other documents separately or jointly with
Purchaser) as may be required to effect and preserve timely Section
338(h)(10) Elections in accordance with Code Section 338(h)(10), and the
regulations promulgated thereunder, and any corresponding provisions of
state, local or foreign tax law. Seller shall report the purchase by Buyer
of the Transferred Shares in a manner consistent with the Section
338(h)(10) Elections and shall take no position inconsistent therewith in
any Return or audit or any proceeding before any taxing authority.
-43-
(ii) The Seller shall prepare and deliver to the
Purchaser, prior to the Closing, a validly executed IRS form 8023-A (and,
as applicable, analogous forms required pursuant to state, local or
foreign tax law) providing for a Section 338(h)(10) election with respect
to the purchase and sale of the Transferred Shares, with such portions of
the forms as relate to the Company and the Seller properly completed. The
Purchaser shall be responsible for the filing of such forms. The Seller
shall be responsible for the preparation of the Company's federal and
state Income Tax Returns for the taxable years which end on or prior to
the Closing Date and such Income Tax Returns shall be prepared in a manner
consistent with the prior practice of the Company. The Seller shall
provide the Purchaser with an opportunity to review and comment on such
Income Tax Returns at least 10 days prior to the date that such Returns
are due to be filed (taking into account extensions of the due date
thereof). Any Tax due with respect to such Income Tax Returns or, in the
case of any Income Tax Returns for taxable years which include the Closing
Date, the portions of such Tax relating to Pre-Closing Tax Periods
(including in each case payments of estimated Tax) shall be paid by the
Seller to the Company on the later of two days before the first date on
which such Tax becomes due and payable without interest or penalties or
two days after the Purchaser's request for such payment, and upon receipt
by the Company shall be promptly paid over by the Company to the relevant
taxing authority. If the amount due pursuant to the immediately preceding
sentence is not paid by the Seller by the due date specified therein, the
same shall carry interest, without duplication of interest included in the
definition of Taxes, from (and including) such due date to (but not
including) the date of payment at an annual rate equal to the reference
rate from time to time of the Chase Manhattan Bank N.A. The parties shall
cooperate with each other to timely prepare and file such Income Tax
Returns and such forms and the Seller shall promptly execute and deliver
to the Purchaser such documents or forms as are required in connection
with such Returns and the Section 338(h)(10) Elections.
(iii) The Purchaser shall reasonably determine the
"modified aggregate deemed sales price" ("MADSP") of the assets of the
Company and shall reasonably allocate the MADSP among the assets of the
Company, in each case in accordance with Code Section 338 and the
regulations promulgated thereunder, and any comparable provisions of
state, local or foreign law, as appropriate. Such determination of MADSP
and allocations shall be set forth on a schedule to be prepared by the
Purchaser and delivered to the Seller within 180 days of the Closing for
the Seller's review and comment. The Seller and the Purchaser (x) shall be
bound by, (y) shall file all Returns on a basis consistent with, and (z)
shall take no position in any Return or audit or proceeding before any
taxing authority which is inconsistent with, such determination of MADSP
and such allocations.
-44-
(c) After the Closing Date, the Seller shall make reasonably
available to the Purchaser, and the Purchaser shall make reasonably available to
the Seller, all information, records or documents within their possession or
control relating to Tax Liabilities or potential Tax Liabilities of the Company
with respect to Pre-Closing Tax Periods, and shall preserve all such
information, records and documents until the expiration of any applicable
statute of limitations or extensions thereof. The Seller shall afford the
Purchaser, and the Purchaser shall afford the Seller, the right to take extracts
therefrom and to make copies thereof to the extent reasonably necessary to
permit the Purchaser or the Seller to prepare Returns, to conduct negotiations
with tax authorities, and to implement the provisions of, and to investigate any
claims between the parties arising under this Agreement. The Seller and the
Purchaser shall also cooperate, in all other respects, with each other as is
reasonably necessary for the Purchaser or the Seller to prepare such Returns,
conduct any such negotiations, and investigate any such claims referred to
herein.
(d) All transfer, transfer gains, documentary, sales, use,
stamp, registration and other such Taxes and fees (including any penalties,
interest, additions to tax, and costs and expenses relating to such Taxes)
incurred in connection with the purchase and sale of Common Stock under this
Agreement shall be borne 50% by the Seller and 50% by the Purchaser. The Seller,
at his own expense, shall file all necessary Returns and other documentation
with respect to all such transfer, transfer gains, documentary, sales, use,
stamp, registration and other Taxes and fees. The Purchaser shall cooperate with
the Seller in the preparation of such Returns.
(e) (i) Subject to the provisions of this subsection (e) of
this Section 5.09, the Seller shall have the right, at his own expense,
to control, manage and be responsible for any audit, contest, claim,
proceeding or inquiry with respect to Taxes of the Company for any
Pre-Closing Tax Period and shall have the right to settle or contest in
his discretion any such audit, contest, claim, proceeding or inquiry;
provided, however, that (i) the Seller shall not have the right to
control any such proceeding unless he first acknowledges in writing his
obligation to fully indemnify the Tax Indemnified Parties for the Taxes
at issue in the proceeding; (ii) no settlement or disposition of any
such proceeding shall be made without the Purchaser's prior written
consent, which shall not be unreasonably withheld, if the same
reasonably could be expected to affect the Company's liability for Tax
in any taxable period or portion of a taxable period ending after the
Closing Date and (iii) the Purchaser shall have the right to attend and
participate in, at its own expense, any such proceeding controlled by
the Seller pursuant to this Section 5.09(e) (it being understood that
the Purchaser shall not unreasonably withhold its consent if Seller
requests that certain limited meetings with agents of a Taxing
authority be held without Purchaser's representative in attendance,
provided that Purchaser is kept fully informed with respect to any such
meeting).
-45-
(ii) The Company shall, at its own expense, control,
manage and solely be responsible for any audit, contest, claim, proceeding
or inquiry with respect to Taxes for any taxable year or period ending
after the Closing Date, and shall have the exclusive right to settle or
contest any such audit, contest, claim, proceeding or inquiry without the
consent of any other party.
(f) The Company shall promptly pay over to the Seller any
refunds of Income Tax received with respect to Pre-Closing Periods, net of any
Income Tax imposed on the Company as the result of the receipt of such refunds.
5.10 Non-Competition Agreement. The Seller agrees that for a
period of ten years immediately following the Closing, the Seller shall not,
without the prior written consent of the Company, (a) engage in any
Competitive Activity anywhere in the world (including, without limitation,
anywhere in the United States of America) or (b) directly or indirectly
solicit for employment, including, without limitation, recommending to any
subsequent employer the solicitation for employment of, any employee of the
Company (other than the Seller's secretary or administrative assistant or any
other Person listed on Schedule 5.10). Notwithstanding the foregoing, the
Seller may, directly or indirectly, through a corporation or other business
entity own, operate, invest in or become employed or engaged by a luxury
automobile dealership, winery or vineyard, or a retail gift shop ancillary to
any of the foregoing, provided that, if such gift shop sells candles or other
home fragrancing products, such products must be manufactured solely by the
Company. The parties hereto acknowledge and agree that (x) the Seller will
receive substantial and valuable benefits under this Agreement in
consideration of the covenants and agreements of the Seller set forth in this
Section 5.10, (y) the Purchaser would not have executed and delivered this
Agreement, or agreed to consummate the transactions contemplated hereby upon
the terms and conditions set forth in this Agreement, if the Seller had not
entered into the covenants and agreements set forth in this Section 5.10 and
(z) the parties intend that such agreements and covenants be enforceable and
that it would be grossly inequitable if a court or judicial tribunal were to
not enforce such covenants and agreements to the fullest extent provided
herein.
5.11 Further Assurances. After the Closing, each of the parties
hereto will, at the request of any other party hereto (a "Requesting Party"),
execute, acknowledge and deliver to such Requesting Party, at the sole expense
of such Requesting Party, all such further assignments, conveyances,
endorsements, deeds, powers of attorney, consents and other documents and take
such other action as a Requesting Party may reasonably request to consummate the
transactions contemplated hereby.
5.12 Closing Resolutions. Simultaneously with the Closing, (a) each
of the directors of the Company in office on the date hereof (or appointed after
the date
-46-
hereof but prior to the Closing Date) shall resign effective immediately on
the Closing Date, (b) the Seller shall (i) pursuant to Article VIII of the
Company's bylaws amend Article III, Section 2 of the Company's bylaws to
permit stockholders of the Company to appoint directors and (ii) designate
three directors who are nominees of the Purchaser to fill the vacancies
created thereby, and (c) the newly appointed members of the board of
directors shall authorize the redemption of the Redeemed Shares and the
issuance of the Notes to MBO-VI, in each case, as contemplated by this
Agreement and the execution, delivery and performance of the Credit Agreement.
5.13 Amendment to the Company's Articles of Organization. Prior to
the Closing, the Seller shall have caused the Company to amend its articles of
organization and to take the corporate actions necessary to authorize such
amendment, to delete the restrictions on the transfer of shares of Common Stock
set forth in Article 5 thereof.
5.14 Pre-Closing Transactions. (a) At or prior to the Closing,
the Company shall assign to the Seller or an entity controlled by the Seller,
and the Seller or such entity shall assume, all rights and obligations under
that certain Aircraft Lease Agreement, dated as of February 6, 1996, between
General Electric Capital Corporation ("GECC") and the Company (the "GECC
Lease") and the Company shall receive a release, in form and substance
satisfactory to the Purchaser, executed by GECC consenting to such assignment
and assumption, releasing the Company of all obligations in connection with
the GECC lease and terminating all Encumbrances and guarantees, if any,
related thereto.
(b) At or prior to the Closing, the Company shall assign to
the Seller or an entity controlled by the Seller, and the Seller or such entity
shall assume, all rights and obligations under that certain (i) Outfitted
Gulfstream IV-SP Sales Agreement, together with all Riders and Addendums
thereto, dated as of December 5, 1997, by and between the Company and Gulfstream
Aerospace Corporation ("Gulfstream") (the "Gulfstream Contract") and (ii)
Aircraft Lease Agreement, together with all associated Commitments (including,
without limitation, commitments in respect of indebtedness to Fleet Capital
Corporation and all associated security interests), dated as of January 28, 1998
between Fleet National Bank ("Fleet") and the Company (the "Fleet Lease"), and,
the Company shall receive releases, in form and substance satisfactory to
Purchaser, consenting to such assignments and assumptions, and releasing the
Company of all obligations in connection with the Gulfstream Contract and the
Fleet Lease and terminating all Encumbrances and guarantees, if any, related
thereto.
(c) At or prior to the Closing, the Company shall transfer the
Retained Assets to the Seller. On the Closing Date, the Company shall make
distributions to the Seller of Cash and deliver to the Purchaser a certificate
of the Company setting forth the amount of Cash distributed to the Seller
between January 1, 1998 and the Closing Date and supporting calculations.
-47-
5.15 Acquisition of Rights to Confidentiality. At the Closing, the
Seller shall assign to the Company, to the extent assignable, all rights of the
Seller under any confidentiality agreements between the Seller and Persons other
than the Purchaser that were entered into in connection with or relating to the
possible purchase or sale of all or any portion of the Business (other than the
ordinary course of business sale of inventory or replacement of assets), the
Company or any equity securities of the Company, or any merger, business
combination or recapitalization involving the Business or the Company,
including, without limitation, the right to enforce all terms of such
confidentiality agreements. At the Closing, the Seller shall, and shall cause
Geneva Corporate Finance Inc. to, deliver to the Purchaser the original executed
copies of all such confidentiality agreements. If the Seller's rights under any
confidentiality agreement are not assignable, the Seller shall cooperate with
the Purchaser in taking any action reasonably requested by the Purchaser,
including instituting litigation, to enforce for the benefit of the Purchaser
any and all rights of the Seller against a third party thereto.
5.16 Xxxxxxxx'x Tavern, Inc. (a) Within five Business Days after
the date hereof, the Purchaser shall, and the Seller shall cause Xxxxxxxx'x
Tavern, Inc., a Massachusetts corporation ("Xxxxxxxx'x Tavern") wholly-owned
by the Seller to, duly execute and deliver the Asset Purchase Agreement
substantially in the form attached hereto as Exhibit 5.16 (the "Asset
Purchase Agreement").
(b) Within one Business Day after the Closing Date, the Purchaser
shall, and the Seller shall cause Xxxxxxxx'x Tavern to, consummate the
transactions contemplated by the Asset Purchase Agreement.
ARTICLE VI
CONDITIONS
6.01 Conditions to the Obligations of MBO-VI, the Purchaser and
the Seller. The obligations of MBO-VI, the Purchaser and the Seller to
consummate the transactions contemplated hereby shall be subject to the
satisfaction (or waiver by each of MBO-VI, the Purchaser, and the Seller) at
or prior to the Closing of each of the following conditions:
(a) No Law of any Governmental Entity shall be in effect which
prohibits any party from consummating the transactions contemplated hereby.
(b) The waiting period applicable to the consummation of the
transactions contemplated hereby under the HSR Act shall have expired or been
terminated.
6.02 Conditions to the Obligations of MBO-VI and the Purchaser. The
obligations of MBO-VI and the Purchaser to consummate the transactions
contemplated
-48-
hereby shall be subject to the satisfaction (or waiver by MBO-VI
and the Purchaser) at or prior to the Closing of each of the following
conditions:
(a) (i) The representations and warranties of the Seller
contained in this Agreement shall be true and correct in all material respects
as of the Closing, with the same force and effect as if made as of the Closing
(or, in the case of representations and warranties of the Seller which address
matters only as of a particular date, as of such date), disregarding all
references in such representations and warranties to "materially", "material
adverse change", "Company Material Adverse Effect", "in all material respects"
or similar expressions; (ii) the covenants and agreements contained in this
Agreement to be complied with by the Company or the Seller at or prior to the
Closing shall have been complied with in all material respects; and (iii) the
Purchaser shall have received a certificate of the Seller as to the matters set
forth in clauses (i) and (ii) above signed by the Seller.
(b) All consents, approvals, orders or clearances of any
Governmental Entity or any other Person, the granting of which is required
for the consummation of the transactions contemplated hereby, including those
listed in Schedule 6.02, shall have been obtained in form and substance
reasonably satisfactory to the Purchaser.
(c) (i) No Governmental Entity shall have enacted, issued,
promulgated, enforced or entered any statute, rule, regulation, injunction or
other Order which is in effect and (x) has the effect of making the transactions
contemplated by this Agreement illegal or otherwise restraining or prohibiting
consummation of such transactions or (y) would materially restrict or interfere
with the operation of the Business after the Closing or would have a Company
Material Adverse Effect, and (ii) there shall be no Litigation pending that is
reasonably expected to be successful before any Governmental Entity of competent
jurisdiction seeking a remedy that would have the effect of the foregoing.
(d) The Seller and the Company shall have duly executed and
delivered to the Purchaser the Stockholder's Agreement, dated as of the Closing
Date, by and between the Seller and the Company, substantially in the form
attached hereto as Exhibit 6.02(d) (the "Stockholder's Agreement") and each
individual listed in Schedule 2.02(f) and each other individual acquiring Class
B Shares at the Closing shall have duly executed and delivered to the Purchaser
the Employee Stockholder's Agreement with respect to such individual.
(e) Each of the Seller, the Purchaser, the Company and the
Escrow Agent shall have duly executed and delivered the Escrow Agreement.
-49-
(f) The Seller shall have prepared and delivered to the
Purchaser a validly executed IRS form 8023-A (and, as applicable, analogous
forms required pursuant to state, local or foreign tax law) pursuant to Section
5.09(b)(ii).
(g) No change (or any condition, event or development
involving a prospective change) shall have occurred or be threatened in the
business, properties, assets, Liabilities, capitalization, stockholders' equity,
financial condition, operations, licenses, results of operations or prospects of
the Company which is reasonably likely to be materially adverse to the Company.
(h) Each of GECC, Gulfstream and Fleet shall have duly
executed and delivered to the Company the consents, releases and other documents
referred to in Section 5.14(a) and (b).
(i) Each of the individuals listed in Schedule 6.02(i) shall
have executed and delivered to the Company a Non-Competition Agreement in the
form attached hereto as Exhibit 6.02(i).
6.03 Conditions to the Obligations of the Seller. The obligations of
the Seller to consummate transactions contemplated hereby shall be subject to
the satisfaction (or waiver by the Seller) at or prior to the Closing of the
following conditions:
(a) (i) The representations and warranties of the Purchaser
contained in this Agreement shall be true and correct in all material respects
as of the Closing, with the same force and effect as if made as of the Closing
(or, in the case of representations and warranties of the Purchaser which
address matters only as of a particular date, as of such date), disregarding all
references in such representations and warranties to "materially", "material
adverse change", "in all material respects" or similar expressions; (ii) the
covenants and agreements contained in this Agreement to be complied with by the
Purchaser at or prior to the Closing shall have been complied with in all
material respects; and (iii) the Seller shall have received a certificate of the
Purchaser as to the matters set forth in clauses (i) and (ii) above signed by a
duly authorized officer of the Purchaser.
(b) No Governmental Entity shall have enacted, issued,
promulgated, enforced or entered any Order which is in effect and has the effect
of making the transactions contemplated by this Agreement illegal or otherwise
restraining or prohibiting consummation of such transactions.
(c) The Company shall have duly executed and delivered the
Stockholder's Agreement.
(d) Each of the Purchaser, the Company and the Escrow Agent
shall have duly executed and delivered the Escrow Agreement.
-50-
ARTICLE VII
TERMINATION PRIOR TO THE EFFECTIVE TIME
7.01 Termination. This Agreement may be terminated and the
transactions contemplated hereby may be abandoned at any time prior to the
Closing Date:
(a) by mutual written consent of the Purchaser and the Seller;
or
(b) by either the Seller or the Purchaser by giving written
notice to the other party, if any Governmental Entity with jurisdiction over
such matters shall have issued an Order restraining, enjoining or otherwise
prohibiting any of the transactions contemplated by this Agreement and such
order, decree, ruling or other action shall have become final and
unappealable; provided, however, that the provisions of this Section 7.01(b)
shall not be available to a party unless such party shall have complied with
its obligations under Section 5.04 or otherwise used its reasonable best
efforts to oppose any such Order or to have such Order vacated or made
inapplicable to the transactions contemplated by this Agreement; or
(c) by either the Purchaser or the Seller by giving written
notice to the other party if the Closing shall not occurred on or prior
to April 30, 1998 (the "Termination Date"), provided that if the Closing
shall not have occurred on or prior to the Termination Date solely as a
result of the failure of the Seller to satisfy the condition set forth in
Section 6.02(b), the Termination Date shall automatically, and without any
further action by the parties hereto, be extended to May 31, 1998, and
provided further that the terminating party is not in breach of its
obligations under this Agreement; or
(d) by written notice given by the Seller or the Purchaser to
the other party, if there shall have been a breach by the Purchaser or the
Seller, as the case may be, of its representations, warranties, covenants or
agreements contained herein and such breach would, if not cured, cause the
conditions contained in Section 6.02 or 6.03, as applicable, not to be satisfied
and such breach has not been cured to the reasonable satisfaction of the other
party within 15 Business Days after receiving written notice thereof.
7.02 Effect on Obligations. Termination of this Agreement pursuant
to this Article VII shall terminate all obligations of the parties hereunder,
except for the obligations under Sections 5.15, 9.10 and 9.11 hereof and under
that certain Confidentiality Agreement, dated as of January 14, 1998, by and
between Forstmann Little & Co. and Geneva Corporate Finance, Inc. (the
"Confidentiality Agreement"); provided, however, that nothing herein shall
relieve the defaulting or breaching party from any Liability to any other party
hereto.
-51-
7.03 Right to Proceed. Anything in this Agreement to the contrary
notwithstanding, if the condition specified in Section 6.02(a)(i) has not
been satisfied at the Closing, the Purchaser and MBO-VI shall have the right
to proceed with the transactions contemplated hereby; if the condition
specified in Section 6.03(a)(i) hereof has not been satisfied at the Closing,
the Seller shall have the right to proceed with the transactions contemplated
hereby; and if any such right to proceed is exercised with actual knowledge,
acquired after the date hereof, of the unsatisfied condition, the party
exercising such right shall be deemed to have waived such unsatisfied
condition and any such representation or warranty the failure of which to be
true and correct as contemplated by Section 6.02(a)(i) or 6.03(a)(i), as
applicable, has been so waived shall be deemed amended to reflect those facts
of which the Purchaser or the Seller, as applicable, has actual knowledge,
which facts shall be set forth with specificity in a writing to be executed
by the waiving party.
ARTICLE VIII
INDEMNIFICATION
8.01 Survival. The representations and warranties of the parties
hereto contained herein or in any Ancillary Document shall expire on the last
day of the eighteenth month following the Closing Date, except that the
representations and warranties set forth in Sections 3.20, 3.22 and 3.25 of
this Agreement shall survive the Closing Date until the expiration of the
applicable statute of limitations (including any extensions thereof) and the
representations and warranties set forth in Section 3.03 of this
Agreement shall survive indefinitely. After the expiration of such
periods, any claim by a party hereto based upon any such representation or
warranty shall be of no further force and effect, except to the extent a
party has asserted a claim in accordance with this Article VIII for breach of
any such representation or warranty prior to the expiration of such period,
in which event any representation or warranty to which such claim relates
shall survive with respect to such claim until such claim is resolved as
provided in this Article VIII. The covenants and agreements of the parties
hereto shall survive the Closing until performed in accordance with their
terms, provided that the Seller's indemnification obligations set forth in
Section 8.03(a)(iii) shall survive until the fifth anniversary of the Closing
Date, except to the extent a Purchaser Indemnified Party has asserted a claim
in accordance with this Article VIII pursuant to Section 8.03(a)(iii) prior
to the fifth anniversary of the Closing Date, in which event the Seller's
indemnification obligations with respect to such claim shall survive until
such claim is resolved as provided in this Article VIII.
8.02 Indemnification for the Benefit of the Seller. (a) The
Company agrees to indemnify, from and after the Closing Date, the Seller
against and hold him harmless, from
-52-
and against all Liabilities, losses, damages, claims, costs, interest,
judgments, fines, amounts paid in settlement and expenses (including
reasonable attorney's fees) (collectively, "Losses") incurred by him
based upon, resulting from or arising out of (i) the breach of any
representation or warranty of the Purchaser contained in this Agreement or
any of the Ancillary Documents, (ii) the breach of any covenant or agreement
of the Purchaser contained in this Agreement or any of the Ancillary Documents.
Anything in Section 8.02 to the contrary notwithstanding, no claim may be
asserted nor may any action be commenced against the Company, unless prompt
written notice of such claim or action is received by the Purchaser
describing in reasonable detail the facts and circumstances with respect to
the subject matter of such claim or action, provided that the failure of the
Seller to give the Company prompt notice as provided herein shall not relieve
the Company of any of its obligations hereunder except to the extent that the
Company is prejudiced thereby.
(b) No claim may be made against the Company for
indemnification pursuant to Section 8.02(a)(i), unless the aggregate
liability of the Company pursuant to Section 8.02(a)(i) of the Asset Purchase
Agreement, exceeds $5,000,000, and the Company shall then only be liable for
Losses under this Agreement in excess of such $5,000,000 amount. The maximum
amount recoverable, in the aggregate, under Section 8.02(a)(i) of the Asset
Purchase Agreement for breaches of representations and warranties shall be
$50,000,000.
(c) The Seller acknowledges and agrees that, except to the
extent any Losses are incurred by such party resulting from any fraudulent
misrepresentation by the Purchaser, the Seller's sole and exclusive remedy
with respect to any and all claims based upon, resulting from or arising out
of the breach of any representation or warranty of the Purchaser contained in
this Agreement or any Ancillary Document shall be pursuant to the
indemnification provisions of this Article VIII.
8.03 Indemnification by the Seller. (a) The Seller agrees to
indemnify, defend and hold harmless the Company and the Purchaser and each of
their respective Affiliates,
-53-
officers, directors, employees, members, agents, successors, transferees and
assigns (each of the foregoing a "Purchaser Indemnified Party") from and
against all Losses incurred by any of them based upon, resulting from or
arising out of (i) the breach of any representation or warranty of the Seller
contained in this Agreement or any of the Ancillary Documents, (ii) the
breach of any covenant or agreement of the Seller contained in this Agreement
or any of the Ancillary Documents, (iii) Environmental Costs in excess of
$250,000, whenever incurred, based upon, arising from or related to any
conditions, events, circumstances, facts, activities, practices, incidents,
actions or omissions occurring or existing on or prior to the Closing Date
(x) at, on, under, about, within or migrating from or onto any property
currently or formerly owned, leased or operated by the Company or any of its
predecessors, or (y) otherwise related to the Company, or any other related
entity of the Company or any of its subsidiaries, or any divested entity,
business, facility or property of the Company or any of their predecessors or
related entities, in each case regardless of whether such Environmental Costs
are known, unknown, disclosed, undisclosed, fixed or contingent, and in each
case including, without limitation, any such Environmental Costs arising from
the use, storage, handling, treatment, processing, disposal, generation,
transportation or release of any Hazardous Substances at any on-site or
off-site location on or prior to the Closing Date or (iv) the GECC Lease, the
Gulfstream Contract, the Fleet Lease and any other Retained Asset. Anything
in Section 8.03 to the contrary notwithstanding, no claim may be asserted nor
may any action be commenced against the Seller for breach of any
representation or warranty contained in this Agreement or any of the
Ancillary Documents, unless prompt written notice of such claim or action is
received by the Seller describing in reasonable detail the facts and
circumstances with respect to the subject matter of such claim or action;
provided that the failure of the Company to give the Seller prompt notice as
provided herein shall not relieve the Seller of its obligations hereunder,
except to the extent that the Seller is prejudiced thereby.
(b) No claim may be made against the Seller for
indemnification pursuant to Section 8.03(a)(i), unless the aggregate
liability of the Seller, when aggregated with the aggregate liability of the
"Seller" (as defined therein) pursuant to Section 8.03(a)(i) of the Asset
Purchase Agreement, exceeds $5,000,000, and the Seller shall then only be
liable for Losses under this Agreement in excess of $5,000,000. The maximum
amount recoverable, in the aggregate, under Section 8.03(a)(i) hereof and
Section 8.03(a)(i) of the Asset Purchase Agreement for breaches of
representations and warranties shall be $50,000,000.
(c) The Company and the Purchaser each acknowledge and
agree that, except to the extent any Losses are incurred by such party
resulting from any fraudulent misrepresentation by the Seller, the Company's
and the Purchaser's sole and exclusive remedy with respect to any and all
claims based upon, resulting from or arising out of the breach of any
representation or warranty of the Seller contained in this Agreement or any
Ancillary Document shall be pursuant to the indemnification provisions of
this Article VIII.
-54-
8.04 Materiality. The Company Material Adverse Effect, and
materiality (or correlative meaning) qualifications included in the
representations, warranties and covenants shall have no effect on any
provisions in this Article VIII concerning the indemnities of the Seller or
the Company with respect to such representations, warranties and covenants,
each of which is given as though there were no Company Material Adverse
Effect or materiality qualification for purposes of such indemnities.
8.05 Indemnification Procedures. (a) A Purchaser Indemnified
Party or the Seller, as the case may be (for purposes of this Section 8.05,
an "Indemnified Party"), shall give the indemnifying party under Section 8.02
or 8.03, as applicable (for purposes of this Section 8.05, an "Indemnifying
Party"), prompt written notice (the "Indemnification Claim Notice") of any
claim, assertion, event or proceeding by or in respect of a third party of
which such Indemnified Party has knowledge concerning any Loss as to which
such Indemnified Party may request indemnification hereunder; provided that
failure of the Indemnified Party to give the Indemnifying Party prompt notice
as provided herein shall not relieve the Indemnifying Party of any of its
obligations hereunder except to the extent that the Indemnifying Party is
prejudiced thereby. The Indemnifying Party shall have the right to direct,
through counsel of its own choosing, which counsel shall be reasonably
satisfactory to the Indemnified Party, the defense or settlement of any claim
or proceeding the subject of indemnification hereunder at its own expense. If
the Indemnifying Party elects to assume the defense of any such claim or
proceeding, the Indemnified Party may participate in such defense, but in
such case the expenses of the Indemnified Party shall be paid by the
Indemnified Party. The Indemnified Party shall, upon reasonable notice,
provide the Indemnifying Party with access to its records and personnel
relating to any such claim, assertion, event or proceeding during normal
business hours and shall otherwise cooperate with the Indemnifying Party in
the defense or settlement thereof, and the Indemnifying Party shall reimburse
the Indemnified Party for all its reasonable out-of-pocket expenses in
connection therewith. If the Indemnifying Party elects to direct the defense
of any such claim or proceeding, the Indemnified Party shall not pay, or
permit to be paid, any part of any claim or demand arising from such asserted
liability unless the Indemnifying Party consents in writing (which consent
shall not be unreasonably withheld) to such payment or unless the
Indemnifying Party withdraws from or fails to maintain the defense of such
asserted liability or unless a final judgment from which no appeal may be
taken by or on behalf of the Indemnifying Party is entered against the
Indemnified Party for such liability. No settlement in respect of any third
party claim may be effected by the Indemnifying Party without the Indemnified
Party's prior written consent (which consent shall not be unreasonably
withheld) unless the settlement involves a full and unconditional release of
the Indemnified Party. If the Indemnifying Party shall fail to undertake or
maintain any such defense within 30 days of receipt of the Indemnification
Claim Notice, the Indemnified Party shall have the right to undertake the
defense or settlement thereof, at the Indemnifying Party's expense. If the
Indemnified Party assumes
-55-
the defense of any such claim or proceeding pursuant to this Section 8.05 it
may conduct such defense as it reasonably deems appropriate (without regard
to the availability of indemnification hereunder), and the Indemnifying Party
shall be responsible for and pay all costs and expenses of such defense,
including its compromise or settlement, if the Indemnifying Party consents
thereto (which consent shall not be unreasonably withheld).
(b) Notwithstanding the foregoing, with respect to any claim
or demand that the Indemnifying Party is defending, the Indemnified Party shall
have the right to retain separate counsel to represent it and the Indemnifying
Party shall pay the fees and expenses of such separate counsel if there are
conflicts that make it reasonably necessary for separate counsel to represent
the Indemnified Party and the Indemnifying Party.
(c) The parties agree to treat any indemnification payments
made by the Seller pursuant to Section 5.09(a) or 8.03 for all Tax purposes
as adjustments to the Redemption Price or Transfer Purchase Price or as
capital contributions, as appropriate. As security for the payment of the
indemnities owed by the Seller, each Purchaser Indemnified Party shall have
recourse first to the Withheld Amount in accordance with the terms of the
Escrow Agreement, then, once the Withheld Amount and any interest thereon
have been fully used, to the Seller, who shall be liable for any such
indemnities.
(d) The amounts for which an Indemnifying Party shall be
liable under Sections 8.02 and 8.03 of this Agreement shall be net of any
insurance proceeds received by the Indemnified Party in connection with the
circumstances giving rise to the right of indemnification.
(e) The obligation of the Indemnifying Party pursuant to
Section 8.02(a)(i) or 8.03(a)(i) shall be limited to actual damages and shall
not include lost profits or consequential damages whether arising in contract,
tort (including negligence and strict liability), warranty, statute or
otherwise; provided that any lost profits or consequential damages recovered by
a third party (including any governmental or quasi-Governmental Entities)
against a party entitled to indemnity pursuant to this Article VIII shall be
included in the damages recoverable under such indemnity.
ARTICLE IX
MISCELLANEOUS
9.01 Entire Agreement. This Agreement, the Ancillary Documents and
the Confidentiality Agreement constitute the sole understanding of the parties
with respect to the subject matter hereof and thereof and supersede all prior
agreements among the parties with respect to the subject matter hereof and
thereof.
9.02 Successors and Assigns. Except as otherwise expressly provided
herein, the terms and provisions of this Agreement shall inure to the benefit
of, and be binding upon, the successors, assigns, heirs, executors and
administrators of the parties
-56-
hereto; provided, however, that no party hereto will assign its rights or
delegate its obligations under this Agreement without the express prior
written consent of each other party hereto, except that all or any of the
rights of the parties hereto may be assigned to any corporation newly-formed
and wholly owned by the Purchaser for the purpose of effecting the
transactions contemplated hereby, provided that no such assignment shall
relieve the Purchaser of any of its liabilities hereunder. Nothing in this
Agreement, express or implied, is intended to, or shall, confer on any Person
(other than, with respect to Section 9.13 hereof, Geneva Corporate Finance,
Inc.), other than any of the parties hereto, any rights, benefits or remedies
of any nature whatsoever under or by reason of this Agreement.
9.03 Counterparts. This Agreement may be executed in counterparts,
each of which shall for all purposes be deemed to be an original and all of
which shall constitute the same instrument.
9.04 Construction. The headings of the Articles, Sections and
paragraphs of this Agreement are inserted for convenience only and shall not be
deemed to constitute part of this Agreement or to affect the construction
hereof. All section and article references are to this Agreement, unless
otherwise expressly provided. As used in this Agreement, (a) "hereof",
"hereunder", "herein" and words of like import shall be deemed to refer to this
Agreement in its entirety and not just a particular section of this Agreement,
and (b) unless the context otherwise requires, words in the singular number or
in the plural number shall each include the singular number or the plural
number, words of the masculine gender shall include the feminine and neuter,
and, when the sense so indicates, words of the neuter gender shall refer to any
gender.
9.05 Acknowledgment. The Seller acknowledges that the
representations and warranties contained in this Agreement, any Ancillary
Document and in any certificate or other document delivered to MBO-VI or the
Purchaser shall not be deemed waived or otherwise affected by any
investigation by MBO-VI or the Purchaser, or their respective officers,
directors, employees, counsel, accountants, advisors, representatives and
agents.
9.06 Modification and Waiver. No amendment, modification or
alteration of the terms or provisions of this Agreement shall be binding
unless the same shall be in writing and duly executed by the Company, the
Seller, MBO-VI and the Purchaser. Any of the terms or provisions of this
Agreement may be waived in writing at any time by the party which is entitled
to the benefits of such waived terms or provisions. No waiver of any of the
provisions of this Agreement shall be deemed to or shall constitute a waiver
of any other provision hereof (whether or not similar). No delay on the part
of any party in exercising any right, power or privilege hereunder shall
operate as a waiver thereof.
-57-
9.07 Severability. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement (including, without limitation, Section 5.10) is so broad as to be
unenforceable, the provision shall be interpreted to be only so broad as is
enforceable.
9.08 Specific Performance. The parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
(including, without limitation, Section 5.10) were not performed in accordance
with their specific terms or were otherwise breached. It is accordingly agreed
that the parties shall be entitled to an injunction or injunctions to prevent
breaches of this Agreement (including, without limitation, Section 5.10) and to
enforce specifically the terms and provisions hereof in any court of the United
States or any state having jurisdiction, this being in addition to any other
remedy to which they are entitled at law or in equity.
9.09 Public Announcements. Prior to the Closing, none of MBO-VI,
the Purchaser, the Company or the Seller shall make any press release with
respect to this Agreement or the transactions contemplated hereby, except as
may be required by Law (in which case, the nature of the statement shall be
described to each other party prior to dissemination to the public) or as
otherwise agreed to by the Seller and the Purchaser.
9.10 Expenses. Except as otherwise provided in this Section 9.10,
each of the parties hereto shall pay all costs and expenses incurred by it in
connection with this Agreement and the transactions contemplated hereby, in each
case including, without limiting the generality of the foregoing, fees and
expenses of such Person's own financial consultants, advisors, brokers,
accountants and counsel. The Seller agrees that all costs and expenses
incurred by him or the Company in connection with this Agreement and the
transaction contemplated hereby, including, without limitation, those fees and
expenses enumerated in the previous sentence, to the extent not included in
the calculation of Transaction Expense Payments, will be paid by the Seller
and will not be allocated to the Company.
9.11 Notices. Any notice, request, instruction or other document to
be given hereunder (a "Notice") by any party hereto to any other party shall be
in writing and delivered personally, sent by a recognized worldwide or
nationwide (whichever is applicable) overnight delivery service with charges
prepaid, sent by registered or certified mail with postage prepaid, or sent by
facsimile transmission:
-58-
if to MBO-VI or the Purchaser to:
Yankee Candle Holdings Corp.
c/o Forstmann Little & Co.
000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile: (000) 000-0000
Confirmation: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxx
with a copy to:
Fried, Frank, Harris, Xxxxxxx & Xxxxxxxx
Xxx Xxx Xxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile: (000) 000-0000
Confirmation: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxxxx, Esq.
if to the Seller or the Company to:
The Yankee Candle Company, Inc.
000 Xxxxxxxxx Xxxx
Xxxxxxx, Xxxxxxxxxxxxx 00000
Facsimile: (000) 000-0000
Confirmation: (000) 000-0000
Attention: Xxxxx X. Xxxxx
with a copy to:
Peabody & Xxxxx
000 Xxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Facsimile: (000) 000-0000
Confirmation: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxx, Esq.
or at such other address for a party as shall be specified by like Notice. Any
Notice which is delivered in the manner provided herein shall be deemed to have
been duly given to the party to whom it is directed upon actual receipt by such
party, except that any Notice delivered by facsimile transmission shall be
deemed to have been given upon confirmation of transmission; provided that
Notice so delivered is promptly followed by duplicate Notice to that same party
sent by registered or certified mail, postage prepaid.
9.12 Governing Law. This Agreement shall be construed in
accordance with and governed by the laws of the State of New York applicable
to agreements made and to be performed wholly within such jurisdiction. Each
of the parties hereby irrevocably and unconditionally consents to submit to
the jurisdiction of the courts of the State of New York and of the United
States of America, in each case located in the County of New York, for any
Litigation arising out of or relating to this Agreement and the transactions
contemplated hereby, and further agrees that service of any process,
-59-
summons, notice or document by U.S. registered mail to its respective address
set forth in this Agreement shall be effective service of process for any
Litigation brought against it in any such court. Each of the parties hereto
hereby irrevocably and unconditionally waives any objection to the laying of
venue of any Litigation arising out of this Agreement or the transactions
contemplated hereby in the courts of the State of New York or the United
States of America, in each case, located in the County of New York, and
hereby further irrevocably and unconditionally waives and agrees not to plead
or claim in any such court that any such Litigation brought in any such court
has been brought in an inconvenient forum.
9.13 Representations and Warranties. The Purchaser acknowledges
that none of the Seller, Geneva Corporate Finance, Inc. or the Company has
made any representation or warranty, expressed or implied, as to the Company,
not included in this Agreement, the Schedules hereto or the Ancillary
Documents. Without limiting the foregoing, the Purchaser acknowledges that
none of the Seller, Geneva Corporate Finance, Inc. or the Company has made
any representations or warranty, express or implied, with respect to the
Confidential Business Review concerning the Company prepared by Geneva
Corporate Finance, Inc. or any projections or forward looking statements
contained therein.
-60-
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
to be duly executed on its behalf as of the date first above written.
FORSTMANN LITTLE & CO.
SUBORDINATED DEBT AND EQUITY
MANAGEMENT BUYOUT PARTNERSHIP
VI, L.P.
By: FLC XXIX Partnership
its general partner
By: /s/ Xxxxxx X. Xxxxxxx
----------------------------------
Name: Xxxxxx X. Xxxxxxx
Title: a general partner
YANKEE CANDLE HOLDINGS CORP.
By: /s/ Xxxxxx X. Xxxxxxx
----------------------------------
Name: Xxxxxx X. Xxxxxxx
Title: President
THE YANKEE CANDLE COMPANY, INC.
By: /s/ Xxxxx X. Xxxxx
----------------------------------
Name: Xxxxx X. Xxxxx
Title: Treasurer
/s/ Xxxxxxx Xxxxxxxxx
----------------------------------
Xxxxxxx Xxxxxxxxx
-61-
GUARANTEE
Each of MBO-VI and Forstmann Little & Co. Equity Partnership-V, L.P.
("EP-V") agrees to cause Yankee Candle Holdings Corp. (including any assignee of
Yankee Candle Holdings Corp.) to fully perform and observe its covenants and
other obligations under the foregoing Recapitalization Agreement and shall be
entitled to enforce directly any benefit of the Recapitalization Agreement
accruing to Yankee Candle Holdings Corp. The foregoing agreement of each of
MBO-VI and EP-V shall terminate at the Closing.
Dated: March 25, 1998
FORSTMANN LITTLE & CO. SUBORDINATED DEBT
AND EQUITY MANAGEMENT BUYOUT
PARTNERSHIP-VI, L.P.
By: FLC XXIX Partnership,
its general partner
By: /s/ Xxxxxx X. Xxxxxxx
-------------------------------
Xxxxxx X. Xxxxxxx,
a general partner
FORSTMANN LITTLE & CO. EQUITY
PARTNERSHIP-V, L.P.
By: FLC XXX Partnership,
its general partner
By: /s/ Xxxxxx X. Xxxxxxx
-------------------------------
Xxxxxx X. Xxxxxxx,
a general partner
-62-
