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AGREEMENT AND PLAN OF REORGANIZATION
AMONG
BPC HOLDING CORPORATION,
PESCOR INC.,
PESCOR PLASTICS, INC.,
AND
THE SHAREHOLDERS OF PESCOR PLASTICS, INC.
MAY 14, 2001
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PAGE
ARTICLE I DEFINITIONS.............................................................................................1
ARTICLE II GENERAL................................................................................................2
2.1 THE MERGER..............................................................................................2
2.2 EFFECTIVE TIME OF THE MERGER............................................................................2
2.3 EFFECT OF THE MERGER....................................................................................2
2.4 CHARTER, BY-LAWS, OFFICERS AND DIRECTORS OF SURVIVING CORPORATION.......................................2
2.5 TAKING OF NECESSARY ACTION; FURTHER ASSURANCES..........................................................3
2.6 AUTHORIZATION OF THE MERGER, THIS AGREEMENT AND THE CERTIFICATE OF MERGER...............................3
2.7 CLOSING.................................................................................................3
2.8 CLOSING DELIVERIES......................................................................................3
ARTICLE III PAYMENT OF PURCHASE PRICE; EFFECT OF MERGER ON CAPITAL STOCK OF CONSTITUENT CORPORATIONS..............5
3.1 EFFECT ON CAPITAL STOCK.................................................................................5
3.2 DELIVERY OF FUNDS; SURRENDER OF CERTIFICATES............................................................8
3.3 PAYMENT OF FUNDED INDEBTEDNESS AND CAPITAL LEASES.......................................................9
3.4 NO FURTHER OWNERSHIP RIGHTS IN COMPANY COMMON STOCK.....................................................9
ARTICLE IV PURCHASE PRICE ADJUSTMENTS.............................................................................9
4.1 WORKING CAPITAL ADJUSTMENT..............................................................................9
4.2 CAPX ADJUSTMENT........................................................................................11
4.3 EARNOUT................................................................................................12
4.4 ADDITIONAL PROVISIONS FOR ADJUSTMENTS..................................................................13
ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS....................................................14
5.1 TITLE TO THE MERGER SHARES.............................................................................14
5.2 AUTHORITY; NONCONTRAVENTION; CONSENTS..................................................................14
1.3 INVESTMENT BY THE SHAREHOLDERS.........................................................................15
ARTICLE VI REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS AND THE COMPANY...................................17
6.1 ORGANIZATION; GOOD STANDING; QUALIFICATION AND POWER...................................................17
6.2 EQUITY INVESTMENTS.....................................................................................17
6.3 CAPITAL STOCK..........................................................................................17
6.4 AUTHORITY; NONCONTRAVENTION; CONSENTS..................................................................17
6.5 FINANCIAL STATEMENTS; FUNDED INDEBTEDNESS..............................................................18
6.6 ABSENCE OF UNDISCLOSED LIABILITIES.....................................................................19
6.7 ABSENCE OF CHANGES.....................................................................................19
6.8 TAX MATTERS............................................................................................20
6.9 TITLE TO ASSETS, PROPERTIES AND RIGHTS AND RELATED MATTERS.............................................21
6.10 REAL PROPERTY-OWNED OR LEASED..........................................................................22
6.11 INTELLECTUAL PROPERTY..................................................................................23
6.12 AGREEMENTS, NO DEFAULTS, ETC...........................................................................23
6.13 LITIGATION, ETC........................................................................................25
6.14 COMPLIANCE; GOVERNMENTAL AUTHORIZATIONS................................................................25
6.15 LABOR RELATIONS; EMPLOYEES.............................................................................25
6.16 ERISA COMPLIANCE.......................................................................................26
6.17 ENVIRONMENTAL MATTERS..................................................................................28
6.18 BROKERS................................................................................................29
(i)
6.19 RELATED TRANSACTIONS...................................................................................30
6.20 ACCOUNTS AND NOTES RECEIVABLE..........................................................................30
6.21 ACCOUNTS AND NOTES PAYABLE.............................................................................30
6.22 INVENTORIES............................................................................................30
6.23 SUPPLIERS AND VENDORS..................................................................................31
6.24 CUSTOMERS..............................................................................................31
6.25 INSURANCE..............................................................................................31
6.26 BOOKS AND RECORDS......................................................................................32
6.27 DISCLOSURE.............................................................................................32
ARTICLE VII REPRESENTATIONS AND WARRANTIES OF THE PURCHASER AND ACQUISITION SUB..................................32
7.1 ORGANIZATION; GOOD STANDING; QUALIFICATION AND POWER...................................................32
7.2 AUTHORITY; NONCONTRAVENTION; CONSENTS..................................................................33
7.3 CAPITAL STOCK..........................................................................................34
7.4 SEC DOCUMENTS..........................................................................................34
7.5 ABSENCE OF CHANGES.....................................................................................34
7.6 BROKERS................................................................................................35
ARTICLE VIII CONDUCT AND TRANSACTIONS PRIOR TO THE CLOSING; ADDITIONAL PRE-CLOSING AGREEMENTS...................35
8.1 AFFIRMATIVE COVENANTS OF THE COMPANY...................................................................35
8.2 NEGATIVE COVENANTS OF THE COMPANY......................................................................36
8.3 CONFIDENTIALITY........................................................................................37
8.4 CONSENTS...............................................................................................37
8.5 EFFORTS TO CONSUMMATE..................................................................................37
8.6 NOTICE OF PROSPECTIVE BREACH...........................................................................38
8.7 PUBLIC ANNOUNCEMENTS...................................................................................38
8.8 NEGOTIATION WITH OTHERS; DISPOSITION AND VOTING OF SECURITIES..........................................38
8.9 RELEASE................................................................................................39
8.10 RELATIONSHIPS WITH VENDORS AND CUSTOMERS...............................................................40
ARTICLE IX CONDITIONS............................................................................................40
9.1 CONDITIONS TO EACH PARTY'S OBLIGATIONS.................................................................40
9.2 CONDITIONS TO OBLIGATIONS OF THE PURCHASER AND ACQUISITION SUB.........................................40
9.3 CONDITIONS TO OBLIGATIONS OF THE COMPANY AND THE SHAREHOLDERS..........................................42
ARTICLE X INDEMNIFICATION........................................................................................43
10.1 INDEMNIFICATION GENERALLY; ETC.........................................................................43
10.2 LIMITATIONS ON INDEMNIFICATION.........................................................................45
10.3 ASSERTION OF CLAIMS; PAYMENT OF CLAIMS; RIGHT OF SETOFF................................................46
10.4 NOTICE AND DEFENSE OF THIRD PARTY CLAIMS...............................................................47
10.5 SURVIVAL OF REPRESENTATIONS AND WARRANTIES.............................................................48
10.6 NO THIRD PARTY RELIANCE................................................................................48
10.7 ADJUSTMENTS TO PURCHASER PREFERRED STOCK...............................................................49
10.8 CLOSING CONSIDERATION ADJUSTMENT.......................................................................50
ARTICLE XI ADDITIONAL AGREEMENTS.................................................................................50
11.1 EXPENSES...............................................................................................50
11.2 NONCOMPETITION; NON-SOLICITATION.......................................................................51
11.3 USE OF NAME............................................................................................52
11.4 RELATIONSHIPS WITH VENDORS AND CUSTOMERS...............................................................52
11.5 TERMINATION OF AFFILIATE TRANSACTIONS..................................................................53
11.6 7-ELEVEN CONSENT.......................................................................................53
11.7 CERTAIN TAX MATTERS....................................................................................53
(ii)
ARTICLE XII TERMINATION; EFFECT OF TERMINATION...................................................................54
12.1 TERMINATION............................................................................................54
12.2 EFFECT OF TERMINATION..................................................................................55
ARTICLE XIII MISCELLANEOUS PROVISIONS............................................................................55
13.1 MODIFICATION AND AMENDMENT.............................................................................55
13.2 EXTENSION; WAIVER......................................................................................55
13.3 ENTIRE AGREEMENT.......................................................................................56
13.4 SEVERABILITY...........................................................................................56
13.5 NO THIRD-PARTY BENEFICIARIES; SUCCESSORS AND ASSIGNS...................................................56
13.6 NOTICES................................................................................................56
13.7 COUNTERPARTS AND FACSIMILE EXECUTION...................................................................58
13.8 GOVERNING LAW..........................................................................................58
13.9 INCORPORATION OF EXHIBITS AND SCHEDULES................................................................58
13.10 CONSTRUCTION........................................................................................58
13.11 REMEDIES............................................................................................58
13.12 WAIVER OF JURY TRIAL................................................................................59
13.13 INDEPENDENCE OF COVENANTS AND REPRESENTATIONS AND WARRANTIES........................................59
13.14 INTERPRETATION......................................................................................59
(iii)
AGREEMENT AND PLAN OF
REORGANIZATION (this "AGREEMENT") dated as
of May 14, 2001, among BPC
HOLDING CORPORATION, a Delaware corporation (the
"PURCHASER"), PESCOR, INC., a Delaware
corporation and wholly-owned subsidiary of the
Purchaser (the "ACQUISITION SUB"), PESCOR
PLASTICS, INC., a Texas corporation (the
"COMPANY"), and the shareholders of the Company
named on SCHEDULE I attached hereto (collectively,
the "SHAREHOLDERS").
The Company is engaged in the business of manufacturing,
marketing and selling plastic cups, drink vessels, mugs, and plastic promotional
items (the "SUBJECT BUSINESS"). The respective Boards of Directors of each of
Acquisition Sub and the Company have duly approved and adopted this Agreement,
the Certificate of Merger to be filed with the Delaware Secretary of State in
substantially the form of EXHIBIT A attached hereto (the "DELAWARE CERTIFICATE
OF MERGER"), the Articles of Merger to be filed with the Texas Secretary of
State (the "Texas Articles of Merger," and together with the Delaware
Certificate of Merger, the "CERTIFICATES OF MERGER") and the proposed merger
(the "MERGER") of the Company with and into Acquisition Sub in accordance with,
and subject to, the terms and conditions of this Agreement, the Certificate of
Merger, the Delaware General Corporation Law (the "DELAWARE STATUTE") and the
Texas Business Corporation Act (the "Texas Statute") whereby, among other
things, each issued and outstanding share of common stock, $10.00 par value (the
"COMPANY COMMON Stock"), of the Company not owned of record by the Company or
any of its subsidiaries will be converted into the right to receive cash and
certain securities of the Purchaser in the manner set forth in Article 2 of this
Agreement and the Certificates of Merger. Capitalized terms used but not defined
herein have the meanings set forth in ANNEX I hereto.
NOW, THEREFORE, in consideration of the premises and the
mutual benefits to be derived from this Agreement and the Certificates of Merger
and the representations, warranties, covenants, agreements and conditions
contained herein and in the Certificates of Merger, the parties hereto hereby
agree as follows:
ARTICLE I
DEFINITIONS
Capitalized terms used but not defined herein have the
meanings set forth in ANNEX I hereto.
ARTICLE II
GENERAL
2.1 THE MERGER.
In accordance with, and subject to, the provisions of this Agreement,
the Certificates of Merger, the Delaware Statute and the Texas Statute, the
Company shall be merged with and into Acquisition Sub, which, at and after the
Effective Time, shall be and is hereinafter sometimes referred to as the
"SURVIVING CORPORATION." Acquisition Sub and the Company are hereinafter
sometimes collectively referred to as the "CONSTITUENT CORPORATIONS."
2.2 EFFECTIVE TIME OF THE MERGER.
The Merger shall become effective upon the filing by Acquisition Sub of
the Delaware Certificate of Merger with the Secretary of State of the State of
Delaware and the Texas Articles of Merger with the Secretary of State of the
State of Texas. The Certificates of Merger shall be executed and delivered in
the manner provided under the Delaware Statute and the Texas Statute. The date
and time when the Merger shall become effective is referred to herein as the
"EFFECTIVE TIME."
2.3 EFFECT OF THE MERGER.
Except as specifically set forth herein or in the Certificate of
Merger, at the Effective Time, the identity, existence, corporate organization,
purposes, powers, objects, franchises, privileges, rights, immunities,
restrictions, debts, liabilities and duties (collectively, the "CORPORATE
RIGHTS") of Acquisition Sub shall continue in effect and be unimpaired by the
Merger, and the Corporate Rights of the Company shall be merged with and into
Acquisition Sub, which shall, as the Surviving Corporation, be fully vested
therewith. At the Effective Time, the separate existence and corporate
organization of the Company shall cease, and the Company shall be merged with
and into the Surviving Corporation.
2.4 CHARTER, BY-LAWS, OFFICERS AND DIRECTORS OF SURVIVING CORPORATION.
From and after the Effective Time, (a) the certificate of incorporation
of Acquisition Sub shall be the certificate of incorporation of the Surviving
Corporation until altered, amended or repealed as provided in the Delaware
Statute and such certificate of incorporation, (b) the By-laws of Acquisition
Sub shall become the By-laws of the Surviving Corporation, unless and until
altered, amended or repealed as provided in the Delaware Statute, the Surviving
Corporation's certificate of incorporation or such By-laws; and (c) the officers
and directors of Acquisition Sub shall become the officers and directors of the
Surviving Corporation, respectively, unless and until removed or until their
respective terms of office shall have expired in accordance with the Delaware
Statute or the Surviving Corporation's certificate of incorporation or By-laws,
as applicable.
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2.5 TAKING OF NECESSARY ACTION; FURTHER ASSURANCES.
Prior to the Effective Time, and subject to the terms and conditions
contained in this Agreement, the parties hereto shall take or cause to be taken
all such actions as may be necessary or appropriate in order to effectuate, as
expeditiously as reasonably practicable, the Merger.
2.6 AUTHORIZATION OF THE MERGER, THIS AGREEMENT AND THE CERTIFICATE OF
MERGER.
(a) Simultaneously with the execution and delivery of this
Agreement, the Shareholders, being the holders of all of the issued and
outstanding Company Common Stock, shall execute a written consent in lieu of a
meeting, and the Purchaser, as the sole shareholder of Acquisition Sub, shall
execute a written consent in lieu of a meeting, each of which written consents
shall include resolutions approving and adopting the Merger, this Agreement, the
Certificates of Merger and consummation of the transactions contemplated hereby,
in each case as required by the Delaware Statute and the Texas Statute.
(b) The Company shall take, as promptly as practicable, all such
other actions as may be necessary or advisable under the Delaware Statute and
the Texas Statute and any other applicable law or regulation in connection with
this Agreement, the Merger or the Certificates of Merger. The Company shall
prepare and distribute any written notice or other materials relating to the
shareholder action contemplated by SECTION 2.6(a) required to be delivered
pursuant to the Company's Fundamental Documents, the Delaware Statute, the Texas
Statute or any other Federal or state law applicable to this Agreement, the
Merger, the Certificates of Merger or such shareholder action (collectively, the
"SHAREHOLDER MATERIALS"); PROVIDED, HOWEVER, that the Purchaser, Acquisition Sub
and its counsel shall have a reasonable opportunity to review all Shareholder
Materials and all Shareholder Materials shall be reasonably satisfactory in form
and substance to the Purchaser, Acquisition Sub and their counsel.
2.7 CLOSING.
The closing (the "CLOSING") of the consummation of the transactions
contemplated by this Agreement, unless another date or place is agreed to by the
parties, shall take place at the offices of X'Xxxxxxxx Graev & Karabell, LLP, 00
Xxxxxxxxxxx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000, as soon as practicable, but no more
than five Business Days after the satisfaction or waiver (to the extent the same
may be waived) of the conditions set forth in ARTICLE IX (such date on which the
Closing is consummated being referred to herein as the "CLOSING DATE").
2.8 CLOSING DELIVERIES.
(a) At the Closing, the Company and the Shareholders, as
applicable, shall deliver, or cause to be delivered, the following to the
Purchaser and Acquisition Sub:
(i) counterparts of the Certificates of Merger, duly executed
by the Company;
(ii) counterparts of the Stub Period Exchange Agreement, duly
executed by each of the Shareholders;
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(iii) the Joinder Agreement, duly executed by each of the
Shareholders;
(iv) counterparts of the Employment Agreements, duly executed
by each of Xxxxxxx Xxxxxxxxxx and Xxxxx Xxxxxxxxxx and the Company;
(v) counterparts of the Invention Assignment Agreement, duly
executed by each of Xxxxxxx Xxxxxxxxxx and Xxxxx Xxxxxxxxxx;
(vi) counterparts of the Lease Amendment, duly executed by KVL
and the Company;
(vii) a copy of the Shareholders Materials, certified as being
such by an executive officer of the Company;
(viii) legal opinion required under SECTION 9.2(d);
(ix) certified copies of the resolutions of the Company's
Board of Directors and the Shareholders, approving the Merger, this
Agreement, the Related Documents and all other agreements and documents
contemplated hereby and the consummation of the transactions
contemplated hereby;
(x) an officer's certificate (A) attaching and certifying the
Company's Fundamental Documents as complete and current as of the
Closing Date and (B) certifying the incumbency of each officer
executing this Agreement, the Related Documents or any other agreement
or instrument contemplated hereby;
(xi) certificates of the Secretaries of State (or other
applicable office) in which the Company is organized and qualified to
do business, if applicable, dated as of the Closing Date (or as close
thereto as reasonably practicable), certifying as to the good standing
and non-delinquent status of such entity;
(xii) an officer's certificate as required under SECTION
9.2(a) and SECTION 9.2(b);
(xiii) a certificate of the Company, dated as of the Closing
Date, certifying that neither the Company nor any Subsidiary is, and
has not in the last five years been, a U.S. real property holding
corporation within the meaning of Code Section 897(c)(2);
(xiv) corporate minute books and stock register/transfer
ledgers of the Company; and
(xv) a receipt, duly executed by each of the Shareholders.
(b) At the Closing, the Purchaser and Acquisition Sub shall
deliver the following to the Shareholders:
(i) counterparts of the Certificates of Merger, duly executed
by Acquisition Sub;
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(ii) the Closing Cash Consideration and Closing Stock
Consideration, payable in accordance with SECTION 3.2;
(iii) a copy of the Certificate of Designation, Preferences
and Rights of the Purchaser Preferred Stock, substantially in the form
attached hereto as EXHIBIT B (the "CERTIFICATE OF DESIGNATION");
(iv) legal opinion required under SCHEDULE 9.3(d);
(v) certified copies of the resolutions of the board of
directors of each of the Purchaser and Acquisition Sub authorizing and
approving the Merger, this Agreement, the Related Documents to which
such Person is a party and all other agreements and instruments
contemplated hereby to be entered into by such Person and the
consummation of the transactions contemplated hereby;
(vi) counterparts of the Related Documents to which the
Purchaser is a party, duly executed by such Person;
(vii) an officer's certificate of each of the Purchaser and
Acquisition Sub certifying such Person's Fundamental Documents and the
incumbency of each officer of such Person executing this Agreement, the
Related Documents or any other agreement or instrument contemplated
hereby;
(viii) certificates of the Secretary of State of Delaware
dated as of the Closing Date (or as close thereto as reasonably
practicable) certifying as to the good standing and non-delinquent
status of the Purchaser and Acquisition Sub; and
(ix) an officer's certificate as required under SCHEDULE
9.3(a) and SCHEDULE 9.3(b).
ARTICLE III
PAYMENT OF PURCHASE PRICE;
EFFECT OF MERGER ON CAPITAL STOCK
OF CONSTITUENT CORPORATIONS
3.1 EFFECT ON CAPITAL STOCK.
(a) As used herein, the terms set forth below shall have the
respective meanings allocated below.
"ADDITIONAL CONSIDERATION" means the sum of (i) the
Underpayment Amount, if any, payable to the holders of Merger Shares pursuant to
Section 4.1(c)(i) hereof, (ii) the CapX Excess Amount, if any, payable to the
holders of Merger Shares pursuant to Section 4.2(b)(i) and (iii) the Earnout
Amount, if any, payable to the holders of Merger Shares under Section 4.3(b).
"CAPITAL LEASE OBLIGATIONS" means the obligations of the
Company, on a consolidated basis, to pay rent or other amounts under any lease
of (or other arrangement
-5-
covering the right to use) real or personal property, which obligations are
required to be classified and accounted for as capital leases on a consolidated
balance sheet of the Company, as of such date computed in accordance with GAAP.
"CHANGE OF CONTROL AMOUNT" means the aggregate amount of all
payments required to be made by the Company to any current or former employee,
whether pursuant to an employment agreement, employee or executive incentive or
bonus arrangements, or otherwise, as a result of the transactions contemplated
by this Agreement, and which have not been paid prior to the Closing Date.
"CLOSING CASH CONSIDERATION" means the net amount of $12.0
million MINUS the amount of Shareholders' Expenses, MINUS the aggregate amount
of Funded Indebtedness, MINUS the aggregate amount of Capital Lease Obligations,
MINUS the Change of Control Amount, MINUS the amount of Third Party Payments,
PLUS an amount equal to the KVL Receivable; PROVIDED, HOWEVER, that if the
Closing Cash Consideration exceeds $3.5 million, the actual payment of Closing
Cash Consideration shall be limited to $3.5 million in cash and the amount of
such excess shall be paid by increasing the Liquidation Preference pursuant to
Section 10.7.
"CLOSING CONSIDERATION" means, collectively, the Closing Cash
Consideration and the Closing Stock Consideration.
"CLOSING STOCK CONSIDERATION" means the shares of Purchaser
Preferred Stock.
"FUNDED INDEBTEDNESS" means the aggregate amount (including
the current portions thereof), without duplication, of all (i) indebtedness for
money borrowed from others including long-term bank financing (including,
without limitation, lines of credit), and purchase money indebtedness (other
than accounts payable in the ordinary course), (ii) indebtedness of the type
described in clause (i) above guaranteed in any manner by the Company, or in
effect guaranteed, directly or indirectly, in any manner by the Company through
an agreement, contingent or otherwise, to supply funds to, or in any other
manner invest in, the debtor, or to purchase indebtedness, or to purchase and
pay for property if not delivered or pay for services if not performed,
primarily or exclusively, for the purpose of enabling the debtor to make payment
of the indebtedness or to assure the owners of the indebtedness against loss
(any such arrangement being hereinafter referred to as a "GUARANTY"), but
excluding endorsements of checks and other instruments in the ordinary course
and any Guaranty by the Company of indebtedness of the type described in clause
(i) above of the Company, (iii) indebtedness of the type described in clause (i)
above secured by any Encumbrance upon property owned by the Company, even though
the Company has not in any manner become liable for the payment of such
indebtedness, and (iv) interest expense accrued but unpaid, and all prepayment
premiums on, or relating to, any of such indebtedness. Notwithstanding the
foregoing, Funded Indebtedness shall not include accounts and notes payable set
forth in SCHEDULE 6.21 or any deferred Taxes of the Company.
"KVL RECEIVABLE" means the amount receivable under that
certain promissory note payable by KVL to the Company in the principal amount of
$1,025,000.
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"MAXIMUM CONSIDERATION" means an amount equal to the sum of
(i) the Closing Consideration plus (ii) the Additional Consideration, if any.
"MERGER SHARES" means the shares of Company Common Stock that
are issued and outstanding immediately prior to the Effective Time that are NOT
owned directly or indirectly by the Company or any of its subsidiaries (whether
as treasury stock or otherwise).
"PER SHARE ADDITIONAL AMOUNT" means an amount equal to the
quotient obtained by dividing (A) the Additional Consideration by (B) the Share
Number, rounded to the nearest $.0001.
"PER SHARE CLOSING AMOUNT" means an amount equal to the
quotient obtained by dividing (A) the Closing Cash Consideration by (B) the
Share Number, rounded to the nearest $.0001.
"PER SHARE PURCHASER STOCK NUMBER" means that number of shares
of Purchaser Preferred Stock equal to the quotient obtained by dividing the
Closing Stock Consideration by the Share Number, rounded to the nearest .0001.
"PROPORTIONATE PERCENTAGE" means, as to each Shareholder, the
percentage figure that expresses the ratio between (i) the number of Merger
Shares owned by such Shareholder immediately prior to the Effective Time, and
(ii) the Share Number. The Proportionate Percentage of each Shareholder is as
follows: Xxxxxxx Xxxxxxxxxx - 3.11487%; Xxxxx Xxxxxxxxxx - 0.03474%; KVL -
49.75683%; KSR Family, Ltd. - 25.09264%; and KMK Family, Ltd. - 22.00093%.
"PURCHASER PREFERRED STOCK" means (i) 3,063 shares of Series
C-1 Preferred Stock, $.01 par value per share, (ii) 1,910 shares of Series C-2
Preferred Stock, $.01 par value per share, (iii) 2,135 shares of Series C-3
Preferred Stock, $.01 par value per share, (iv) 3,033 shares of Series C-4
Preferred Stock, $.01 par value per share, and (v) 3,027 shares of Series C-5
Preferred Stock, $.01 par value per share, in each case, of Purchaser.
"SHARE NUMBER" means the aggregate number of Merger Shares.
"SHAREHOLDERS' EXPENSES" means all fees and expenses that are
unpaid as of the Effective Time that are incurred by the Company and (to the
extent reimbursable by the Company) any Shareholder in connection with the
preparation for, and consummation of, the transactions contemplated hereby and
by the other agreements referred to herein; the amount of such Shareholders'
Expenses as of the date hereof being set forth in SCHEDULE 3.1 of the Disclosure
Schedule (it being understood that such Schedule will be updated, as necessary,
on the Closing Date).
"THIRD PARTY PAYMENTS" means the aggregate amount of all
payments required to be made by the Company to third parties as a direct result
of the consummation of the transactions proposed hereby.
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(b) Anything contained in this Agreement or the Certificates of
Merger to the contrary notwithstanding, the entire consideration payable in the
Merger with respect to all Merger Shares shall not exceed the Maximum
Consideration.
(c) The manner and basis of converting, exchanging or canceling
the shares of capital stock of each of the Constituent Corporations into or for
cash and/or securities of the Surviving Corporation (or the contingent right to
receive cash or such securities) shall be as follows:
(i) each share of common stock, $.01 par value, of Acquisition
Sub issued and outstanding immediately prior to the Effective Time
shall be converted into one share of common stock, $.01 par value, of
the Surviving Corporation;
(ii) each share of Company Common Stock issued and outstanding
immediately prior to the Effective Time and owned directly or
indirectly by the Company or any of its subsidiaries (whether as
treasury stock or otherwise) shall, by virtue of the Merger and without
any action on the part of the holder thereof, be canceled and no
consideration shall be delivered in exchange therefor;
(iii) each Merger Share shall, by virtue of the Merger and
without any action on the part of the holder thereof, cease to be
outstanding and be converted into the right for such holder to receive,
(A) at the Effective Time, an amount equal to the Per Share Closing
Amount, PLUS (B) subject to the terms of SECTIONS 4.1, 4.2 and 4.3, the
Per Share Additional Amount, if any, PLUS (C) a number of shares of
Purchaser Preferred Stock equal to the Per Share Purchaser Stock
Number; PROVIDED, HOWEVER, that in no event shall the aggregate
consideration for the Merger Shares exceed the Maximum Consideration;
and
(iv) each authorized but unissued share of Company Common
Stock immediately prior to the Effective Time shall be canceled.
3.2 DELIVERY OF FUNDS; SURRENDER OF CERTIFICATES.
At the Effective Time, upon surrender by each Shareholder to the
Surviving Corporation of the certificate(s) which, immediately prior to the
Effective Time, represented Merger Shares, such Shareholder shall, from and
after the Effective Time in accordance with the provisions hereof, be entitled
to receive in exchange therefor the cash and/or securities which such
Shareholder is entitled to receive pursuant to SECTION 3.1(c) above. The cash
portion of the Per Share Closing Amount payable pursuant to the preceding
sentence shall be paid on the Closing Date by the Surviving Corporation or its
designee by wire transfer to an account designated by such Shareholder to
Acquisition Sub not later than three Business Days prior to the Closing Date.
The certificates representing the aggregate Per Share Purchaser Stock Number
deliverable to Shareholders shall be delivered on the Closing Date by the
Surviving Corporation or its designee. No interest will be paid or will accrue
on the cash portion of the Per Share Closing Amount payable upon the surrender
of any certificates representing Merger Shares. Until surrendered as
contemplated by this SECTION 3.2 and the Certificates of Merger, each
certificate representing Merger Shares shall be deemed, at and after the
Effective Time, to represent only
-8-
the right to receive upon such surrender cash and/or securities as contemplated
by this SECTION 3.2, the Certificates of Merger and the Delaware Statute.
3.3 PAYMENT OF FUNDED INDEBTEDNESS AND CAPITAL LEASES.
(a) On the Closing Date, the Purchaser shall cause the lenders who
will be providing the financing for the transactions contemplated hereby to
deliver, on behalf of the Company, to the holders of Funded Indebtedness and
Capital Lease Obligations (subject to SECTION 3.3(b)) an amount sufficient to
repay all Funded Indebtedness and Capital Lease Obligations outstanding as of
the Closing Date, with the result that immediately following the Closing there
will be no further monetary obligations of the Company with respect to any
Funded Indebtedness or Capital Lease Obligations outstanding immediately prior
to the Closing. On the Closing Date, the Company will provide the Purchaser and
such lenders with customary pay-off letters from all holders of Funded
Indebtedness and Capital Lease Obligations in form and substance satisfactory to
the Purchaser, and make arrangements satisfactory to the Purchaser for such
holders to provide to the Purchaser recordable form mortgage and lien releases,
canceled notes, trademark and patent assignments and other documents requested
by the Purchaser simultaneously with or promptly following the Closing.
`
(b) In the event that the Purchaser and the Company mutually agree
to not pay off one or more Capital Lease Obligations at the Closing, then such
Capital Lease Obligation(s) shall not be paid off, and the aggregate amount
required to pay off such Capital Lease Obligation(s) as of the Closing Date
shall be used to decrease the purchase price and determine the Closing
Consideration pursuant to the provisions of SECTION 3.1.
3.4 NO FURTHER OWNERSHIP RIGHTS IN COMPANY COMMON STOCK.
The Maximum Consideration paid in respect of the surrender of
certificates representing shares of Company Common Stock in accordance with the
provisions of this SECTION 3.4 and the Certificates of Merger shall be deemed to
have been paid in full satisfaction of all rights pertaining to such shares of
Company Common Stock. At and after the Effective Time, the stock transfer books
of the Surviving Corporation shall be closed with respect to the capital stock
of the Company, and there shall be no further registration of transfers of the
capital stock of the Company thereafter on the records of the Surviving
Corporation. If, after the Effective Time, certificates representing shares of
Company Common Stock are presented to the Surviving Corporation for any reason,
they shall be canceled and exchanged as provided in this Article III and the
Certificates of Merger.
ARTICLE IV
PURCHASE PRICE ADJUSTMENTS
4.1 WORKING CAPITAL ADJUSTMENT.
(a) PREPARATION OF WORKING CAPITAL STATEMENT. As promptly as
practicable following the Closing Date, the Purchaser shall prepare a statement
(the "FINAL NET WORKING CAPITAL STATEMENT") setting forth the computation of the
Final Net Working Capital as of the close of business on the Closing Date (or
such other date mutually agreed upon by the parties),
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which statement shall be prepared in accordance with generally accepted
accounting principles ("GAAP") consistently applied with the Financial
Statements and the methods used in calculating the Net Working Capital Target
(it being understood, however, that in the event of any conflict, GAAP shall
control). For purposes of preparing the Final Net Working Capital Statement,
"FINAL NET WORKING CAPITAL" shall mean the total consolidated current assets of
the Company MINUS the total consolidated current liabilities of the Company
(including in current assets accounts receivable, unbilled receivables,
inventory and prepaid expenses, and excluding from current assets all cash and
cash equivalents, all amounts loaned to the Shareholders, all split-dollar
insurance policies and any assets the benefit of which will not be realized by
the Company post-closing, and including in current liabilities accounts payable
and accrued expenses (including any potential post-closing cash costs for
restructuring or taxes, $7,500 for remediation and abatement of regulated
asbestos containing material in the Company's facilities, and the amount
required (not to exceed $8,000) to construct the resin spillage containment
system in a manner required by law and to obtain the requisite permit, if any),
and excluding from current liabilities non-cash reserves for restructuring and
purchase accounting and the current portions of Funded Indebtedness and Capital
Lease Obligations).
(b) REVIEW BY THE SHAREHOLDERS.
(i) Upon completion of the Final Net Working Capital
Statement, the Purchaser shall promptly deliver the same to the
Shareholders with a notice (the "NOTICE OF ADJUSTMENT") of the
Purchaser setting forth its proposed adjustment, if any, of the Closing
Consideration as contemplated hereby. During the preparation of and
after the completion of the Final Net Working Capital Statement until
the Final Determination Date, the Purchaser shall provide the
Shareholders and its advisors with timely access to the work papers,
trial balances and similar materials used in connection with the
preparation of the Final Net Working Capital Statement.
(ii) Following receipt of the Notice of Adjustment, the
Shareholders will be afforded a period of 15 Business Days (the "15-DAY
PERIOD") to review the Notice of Adjustment. At or before the end of
the 15-Day Period, the Shareholders will either (A) accept the Final
Net Working Capital (as set forth in the Notice of Adjustment) in its
entirety, in which case the Final Net Working Capital will be as set
forth in the Notice of Adjustment or (B) deliver to the Purchaser a
written notice (the "OBJECTION NOTICE") containing a detailed written
explanation of those items in the Final Net Working Capital Statement
(as set forth in the Notice of Adjustment) which the Shareholders
dispute, in which case the items identified by the Shareholders shall
be deemed to be in dispute. The failure by the Shareholders to deliver
the Objection Notice within the 15-Day Period shall constitute the
Shareholders' acceptance of the Final Net Working Capital as set forth
in the Notice of Adjustment. If the Shareholders deliver the Objection
Notice in a timely manner, then, within a further period of 20 Business
Days from the end of the 15-Day Period the parties and, if desired,
their accountants will attempt to resolve in good faith any disputed
items and reach a written agreement (the "SETTLEMENT AGREEMENT") with
respect thereto. Failing such resolution, the unresolved disputed items
will be referred for final binding resolution to Deloitte & Touche (the
"ARBITRATING ACCOUNTANTS"), the fees and expenses of which shall be
borne equally by the Shareholders, on the one hand, and the Company, on
the other hand. If issues in dispute are submitted to the Arbitrating
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Accountants for resolution, each party will furnish to the Arbitrating
Accountants such work papers, documents and information relating to the
disputed issues as the Arbitrating Accountants may request and are
available to that party or its independent accountants and will be
afforded the opportunity to present to the Arbitrating Accountants any
material relating to the determination and to discuss the determination
with the Arbitrating Accountants. The Final Net Working Capital will be
deemed to be as determined by the Arbitrating Accountants. Such
determination (the "ACCOUNTANTS' DETERMINATION") shall be (A) in
writing, (B) furnished to the Shareholders and Purchaser as soon as
practicable after the items in dispute have been referred to the
Arbitrating Accountants, (C) made in accordance with the terms set
forth in SECTION 4.1(a) and (D) binding and conclusive on the
Shareholders, the Company, the Purchaser and each of their respective
Affiliates and successors and not subject to collateral attack for any
reason other than manifest error or fraud.
(iii) For purposes of SECTION 4.1, the "FINAL DETERMINATION
DATE" shall mean the earliest to occur of (A) the sixteenth day
following the receipt by the Shareholders of the Notice of Adjustment
if the Shareholders shall have failed to deliver the Objection Notice
to the Purchaser within the 15-Day Period, (B) the date on which either
the Shareholders or the Purchaser gives the other a written notice to
the effect that such party has no objection to the other party's
determination of the Final Net Working Capital, (C) the date on which
the Shareholders and the Purchaser execute and deliver a Settlement
Agreement and (D) the date as of which the Shareholders and the
Purchaser shall have received the Accountants' Determination.
(c) ADJUSTMENT.
(i) If the Final Net Working Capital is greater than
$5,300,000 (the "NET WORKING CAPITAL TARGET") (the amount of such
excess being referred to herein as the "UNDERPAYMENT AMOUNT"), then the
Closing Consideration shall be increased by the amount of the
Underpayment Amount, and such increase shall be effected by increasing
the Liquidation Preference pursuant to Section 10.7 by an amount equal
to the Underpayment Amount.
(ii) If the Final Net Working Capital is less than the Net
Working Capital Target (the amount of such shortfall being referred to
herein as the "OVERPAYMENT AMOUNT"), then the Closing Consideration
shall be decreased by the amount of the Overpayment Amount, and such
decrease shall be effected by decreasing the Liquidation Preference
pursuant to Section 10.7 by an amount equal to the Overpayment Amount.
The Shareholders shall be jointly and severally liable for the
obligations of the Shareholders under this SECTION 4.1(c)(ii).
4.2 CAPX ADJUSTMENT.
(a) PREPARATION OF CAPX STATEMENT. As soon as practicable after
the Closing, the Purchaser shall prepare and deliver to the Shareholders a
statement (the "CAPX STATEMENT") setting forth the determination of the Actual
CapX Amount. The Actual CapX Amount shall be determined in accordance with GAAP
consistently applied with the financial statements and the
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methods used to determine the CapX Target (it being understood, however, that in
the event of any conflict, GAAP shall control). Actual CapX Amount means the
aggregate amount of capital expenditures actually made or accrued for by the
Company during the 12-month period ending on April 30, 2001 (excluding any
capital expenditures in excess of $50,000 made by the Company after December 21,
2000 which were not approved by the Purchaser).
(b) CAPX ADJUSTMENT.
(i) If the Actual CapX Amount is greater than $1,250,000 (the
"CAPX TARGET") (the amount of such excess being referred to herein as
the "CAPX EXCESS AMOUNT"), then the Closing Consideration shall be
increased by the amount of the CapX Excess Amount, and such increase
shall be effected by increasing the Liquidation Preference pursuant to
Section 10.7 by an amount equal to the Cap X Excess Amount (subject,
however, to the terms of SECTION 4.4).
(ii) If the Actual CapX Amount is less than the CapX Target
(the amount of such shortfall being referred to herein as the "CAPX
SHORTFALL AMOUNT"), then the Closing Consideration shall be decreased
by the amount of the CapX Shortfall Amount, and such decrease shall be
effected by decreasing the Liquidation Preference pursuant to Section
10.7 in an amount equal to the Cap X Shortfall Amount (subject,
however, to the terms of SECTION 4.4). The Shareholders shall be
jointly and severally liable for the obligations of the Shareholders
under this SECTION 4.2(b).
4.3 EARNOUT.
(a) PREPARATION OF NET SALES STATEMENT. In addition to the
adjustments to the Closing Consideration under SECTIONS 4.1 and 4.2 above, the
Closing Consideration shall be increased by the Earnout Amount, if any, payable
in accordance with the chart set forth below based on the Company's attainment
of specified Net Sales levels. Within 30 days following the conclusion of the
relevant assessment period set forth in the chart provided below, the Purchaser
shall prepare and deliver to the Shareholders a statement (the "NET SALES
STATEMENT") setting forth the determination of the Net Sales. The Net Sales
shall be determined in accordance with GAAP consistently applied with the
financial statements (it being understood, however, that in the event of any
conflict, GAAP shall control). As used herein "NET SALES" means, with respect to
any period, the aggregate gross sales of the Company of the contour cups, double
cups and splitzo cups during such period less returns, allowances, credits,
freight, discounts and any other offsets with respect to such product sales.
(b) EARNOUT ADJUSTMENT. The Purchaser or Xxxxx Plastics shall pay,
or cause to be paid, to each Shareholder its respective Proportionate Percentage
of the Earnout Amount payable with respect to such period, if any, no later than
15 Business Days following delivery of the Net Sales Statement; PROVIDED,
HOWEVER, in the event that the parties determine at any time that Net Sales
during a period has exceeded the minimum threshold amount for such period that
would result in an Earnout Amount being payable, the Purchaser or Xxxxx Plastics
shall pay the Earnout Amount payable with respect to such minimum threshold
amount promptly after such determination has been made (which would be an
advance towards the aggregate Earnout Amount payable for such period following
delivery of the Net Sales Statement). Such amounts
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shall be payable by wire transfer of immediately available funds to an account
designated by such Shareholder.
NET SALES FOR THE 12-MONTH PERIOD: EARNOUT AMOUNT
Beginning on May 1, 2001 and
ending on April 30, 2002:
$7,000,000 or greater $1,000,000
at least $5,600,000 but less than $7,000,000 $500,000
less than $5,600,000 $0
Beginning on May 1, 2002 and ending on April 30, 2003:
$8,500,000 or greater $1,000,000
at least $6,800,000 but less than $8,500,000 $500,000
less than $6,800,000 $0
Beginning on May 1, 2003 and ending on April 30, 2004:
$8,500,000 or greater $1,000,000
at least $6,800,000 but less than $8,500,000 $500,000
less than $6,800,000 $0
4.4 ADDITIONAL PROVISIONS FOR ADJUSTMENTS.
Notwithstanding anything to the contrary contained herein, in the event
the party that owes a payment under SECTION 4.1 is owed an amount by the other
party in SECTION 4.2, then the adjustments shall be netted. Nothing contained in
ARTICLE IV shall be construed as an election of remedies by the Purchaser and
the Shareholders, and the Purchaser and the Shareholders shall have and retain
all other rights and remedies existing in its favor at law or in equity for a
breach of the provisions of ARTICLE IV.
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ARTICLE V
REPRESENTATIONS AND WARRANTIES OF
THE SHAREHOLDERS
Each Shareholder severally represents and warrants to the
Purchaser and Acquisition Sub, as of the date hereof and as of the Closing Date,
as set forth below.
5.1 TITLE TO THE MERGER SHARES.
Such Shareholder is the lawful owner of record and beneficially, of
those Merger Shares and/or other equity securities of the Company set forth
opposite his or her name on SCHEDULE I attached hereto and has good and
marketable title to such securities, free and clear of any Encumbrances
whatsoever and with no restriction on the voting rights and other incidents of
record and beneficial ownership pertaining thereto. Except for this Agreement
and as set forth on SCHEDULE 5.1 of the disclosure letter dated the date of this
Agreement (the "DISCLOSURE LETTER") certified by the Chief Executive Officer of
the Company, or any other duly authorized officer, and delivered by the Company
to the Purchaser, there are no agreements or understandings between such
Shareholder and any other Person with respect to the acquisition, disposition or
voting of or any other matters pertaining to any of the capital stock or other
securities of the Company. Such Shareholder acquired the Merger Shares and other
equity securities in one or more transactions exempt from registration under the
Securities Act and state securities laws.
5.2 AUTHORITY; NONCONTRAVENTION; CONSENTS.
(a) Such Shareholder has the requisite power and authority to
enter into this Agreement, each Related Document to which it is a party and any
and all instruments necessary or appropriate in order to effectuate fully the
terms and conditions of this Agreement, each Related Document to which it is a
party and all transactions contemplated hereby and thereby and to perform its
obligations hereunder and thereunder. The execution, delivery and performance of
this Agreement and each Related Document to which it is a party and the
consummation of the transactions contemplated hereby and thereby have been duly
and validly authorized by all necessary action on the part of such Shareholder
and this Agreement and each Related Document to which it is a party has been
duly and validly executed and delivered by such Shareholder and this Agreement
and each Related Document to which it is a party is the valid and binding
obligation of such Shareholder enforceable against such Shareholder in
accordance with its terms.
(b) Neither the execution, delivery and performance of this
Agreement and the Related Documents to which such Shareholder is a party nor the
consummation of the transactions contemplated hereby or thereby nor compliance
by such Shareholder with any of the provisions hereof or thereof will (i)
conflict with, or result in any violations of, or cause a default (with or
without notice or lapse of time, or both) under, or give rise to a right of
termination, amendment, cancellation or acceleration of any obligations
contained in or the loss of any material benefit under (x) the Fundamental
Documents of such Shareholder, as applicable, or (y) any term, condition or
provision of any Contract to which such Shareholder is a party, or by which such
Shareholder's properties may be bound; (ii) violate any Law applicable to such
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Shareholder, or any of its properties, which conflict or violation would prevent
the consummation of the transactions contemplated by this Agreement and the
Related Documents to which it is a party or result in an Encumbrance on or
against any assets, rights or properties of the Company or on or against any
capital stock of the Company or give rise to any claim against the Company, the
Purchaser, or any Affiliate of the Purchaser or have any Material Adverse Effect
on the Company or the Purchaser; (iii) cause the Purchaser or the Company to
become subject to or to become liable for the payment of any taxes due, or (iv)
cause any assets owned by the Company to be reassessed or revalued by any
Governmental Entity or taxing authority.
(c) Except as contemplated by this Agreement, no Permit,
authorization, consent or approval of or by, or any notification of or filing
with, any Person (governmental or private) is required in connection with the
execution, delivery and performance by such Shareholder of this Agreement and
the Related Documents to which it is a party or the consummation by such
Shareholder of the transactions contemplated hereby or thereby.
5.3 INVESTMENT BY THE SHAREHOLDERS.
Such Shareholder understands that the issuance of the
Purchaser Preferred Stock hereunder has not been registered under the Securities
Act, but is intended to be transferred pursuant to an exemption therefrom. Such
Shareholder further represents and warrants, as to himself or itself, that:
(a) such Shareholder is acquiring the Purchaser Preferred Stock
for investment, solely for his own account and not with a view to, or for resale
in connection with, the distribution or other disposition thereof;
(b) such Shareholder understands that the Purchaser Preferred
Stock has not been registered under the Securities Act;
(c) such Shareholder has been advised that the certificates
representing the Purchaser Preferred Stock will bear a restrictive legend and
that a notation will be made in the appropriate records of the Purchaser
indicating that such securities are subject to restrictions on transfer and, if
the Purchaser should in the future engage the services of a securities transfer
agent, appropriate stop-transfer instructions will be issued to such agent with
respect to such securities;
(d) such Shareholder is aware of and familiar with the
restrictions imposed on the transfer of the Purchaser Preferred Stock set forth
therein and herein, including, without limitation, the restrictions contained in
the Joinder Agreement, and will not, directly or indirectly, offer, sell,
transfer, assign, pledge, hypothecate or otherwise dispose of, or solicit any
offers to purchase or otherwise acquire or take a pledge of, any of the
Purchaser Preferred Stock except in accordance with the Securities Act and all
applicable state securities and "blue sky" laws and the terms of this Agreement
and the applicable Related Documents;
(e) such Shareholder's financial situation is such that he or it
can afford to bear the economic risk of holding the Purchaser Preferred Stock
for an indefinite period of time and suffer complete loss of such Shareholder's
investment in such securities, and such Shareholder has adequate means for
providing for his or its current needs and personal contingencies;
-15-
(f) such Shareholder has such knowledge and experience in
financial and business matters that he or it is capable of evaluating the merits
and risks relating to such Shareholder's purchase of the Purchaser Preferred
Stock;
(g) such Shareholder, and his or its representatives, if any, have
been given the opportunity to examine all documents relating to the Purchaser
and Acquisition Sub and to ask questions of, and receive answers from,
Purchaser, Acquisition Sub and their representatives concerning the terms and
conditions of the acquisition of the Purchaser Preferred Stock and to obtain any
additional information necessary to verify the accuracy of the information
delivered to such Shareholder by Purchaser, Acquisition Sub or any Affiliate
thereof;
(h) such Shareholder is aware that the Purchaser Preferred Stock
must be held indefinitely and such Shareholder must continue to bear the
economic risk of the investment in Purchaser Preferred Stock unless such
securities are subsequently registered under the Securities Act and all
applicable state securities laws or an exemption from such registration is
available;
(i) in making his or its decision to acquire the Purchaser
Preferred Stock, such Shareholder has relied upon independent investigations
made by him or it and, to the extent believed by him or it to be appropriate,
his or its representatives, including professional, financial, tax and other
advisors in addition to the representations and warranties of the Purchaser and
Acquisition Sub in Article VII hereof;
(j) such Shareholder is familiar with the business, operations and
finances of the Purchaser and Acquisition Sub;
(k) such Shareholder has reviewed the filings made by the
Purchaser with the SEC pursuant to the rules and regulations of the Securities
Act and the Exchange Act, which have been previously delivered to such
Shareholder, and he or it understands the risks related to the acquisition of
the Purchaser Preferred Stock, and no representations or warranties have been
made to such Shareholder or such Shareholder's representatives concerning the
Purchaser Preferred Stock, the Purchaser or their prospects or other matters
except as set forth herein; and
(l) such Shareholder acknowledges that the Purchaser and
Acquisition Sub are entering into this Agreement in reliance upon such
Shareholder's representations and warranties contained herein.
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ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF
THE SHAREHOLDERS AND THE COMPANY
The Shareholders and the Company jointly and severally
represent and warrant to the Purchaser and Acquisition Sub, as of the date
hereof and as of the Closing Date, as set forth below.
6.1 ORGANIZATION; GOOD STANDING; QUALIFICATION AND POWER.
The Company is duly organized, validly existing and is in good standing
under the Laws of its jurisdiction of incorporation. The Company has all
requisite power and authority (corporate or otherwise) to own, lease and operate
its properties and to carry on its business as now being conducted, and, except
as set forth on SCHEDULE 6.1 of the Disclosure Letter, is duly qualified and in
good standing to do business in each jurisdiction in which the nature of its
business or the ownership or leasing of its properties makes such qualification
necessary, each of which jurisdictions is set forth on SCHEDULE 6.1 of the
Disclosure Letter. The Company has delivered to the Purchaser true and complete
copies of the Company's Fundamental Documents, in each case as amended to the
date hereof.
6.2 EQUITY INVESTMENTS.
Except as set forth on SCHEDULE 6.2, the Company does not own or hold,
directly or indirectly, any equity interest in any Person and the Shareholders
do not own or hold, directly or indirectly, any equity interest in any Person
which is engaged in any of the activities included in the Subject Business.
6.3 CAPITAL STOCK.
The authorized capital stock of the Company consists of 101,000 shares
of common stock, $10.00 par value (the "COMMON STOCK"), of which (i) 1,000
shares are designated Class A Voting Common Stock, of which 6 shares are issued
and outstanding and (ii) 100,000 shares are designated Class B Nonvoting Common
Stock, of which 6,130 shares are issued and outstanding. The foregoing
outstanding shares constitute all the Merger Shares and all of which are owned
of record and beneficially by the Shareholders, free and clear of any
Encumbrances. Other than the securities described above, there are no
outstanding securities, options, warrants, rights or agreements or other
commitments pursuant to which the Company is or may become obligated to issue
any shares of its capital stock, or any securities convertible into or
exercisable or exchangeable for such capital stock.
6.4 AUTHORITY; NONCONTRAVENTION; CONSENTS.
(a) The Company has all the requisite power and authority to enter
into this Agreement, each Related Document to which it is a party and any and
all instruments necessary or appropriate in order to effectuate fully the terms
and conditions of this Agreement, each Related Document to which it is a party
and all transactions contemplated hereby and thereby and to perform their
respective obligations hereunder and thereunder; the execution, delivery and
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performance of this Agreement and each Related Document to which it is a party
and the consummation of the transactions contemplated hereby and thereby have
been duly and validly authorized by all necessary corporate action on the part
of the Company; and this Agreement and each Related Document to which it is a
party has been duly and validly executed and delivered by the Company and is the
valid and binding obligation of the Company, enforceable against the Company in
accordance with its terms.
(b) Neither the execution, delivery and performance of this
Agreement and the Related Documents to which the Company is a party nor the
consummation by the Company of the transactions contemplated hereby or thereby
nor compliance by the Company with any provision hereof will (i) conflict with,
or result in any violations of, or cause a default (with or without notice or
lapse of time, or both) under, or give rise to a right of termination,
amendment, cancellation or acceleration of any obligation contained in or the
loss of any benefit under, or result in the creation of any Encumbrance upon any
asset of the Company under any term, condition or provision of (x) the Company's
Fundamental Documents, or (y) except as set forth on SCHEDULE 6.4 of the
Disclosure Letter, any Contract to which the Company is a party or by which any
of its properties or assets are bound, or (ii) violate any Laws applicable to
the Company or any of its properties.
(c) Except as set forth on SCHEDULE 6.4 of the Disclosure Letter,
no consent, approval, Order or authorization of, registration, declaration or
filing with, or notification to any Governmental Entity or any other third party
is required in connection with the execution, delivery and performance by the
Company of this Agreement or the Related Documents to which it is a party or the
consummation of the transactions contemplated hereby or thereby.
6.5 FINANCIAL STATEMENTS; FUNDED INDEBTEDNESS.
(a) The Company has previously delivered to the Purchaser and
Acquisition Sub (i) the audited balance sheets of the Company as of March 31,
2000 and March 31, 1999 and the related statements of operations, retained
earnings and cash flows for the fiscal years then ended; and (ii) the unaudited
balance sheet of the Company as of December 31, 2000 and the related statements
of operations, retained earnings and cash flows for the nine-month period then
ended (collectively, the "FINANCIAL STATEMENTS," and the balance sheet as of
December 31, 2000 being the "LATEST BALANCE SHEET" and the date thereof being
the "LATEST BALANCE SHEET DATE"). Except as set forth on SCHEDULE 6.5 of the
Disclosure Letter, the Financial Statements (i) are in accordance with the books
and records of the Company, (ii) are true, complete and correctly present the
financial condition of the Company on a consolidated basis as of the respective
dates indicated and the results of operations, stockholders' equity and cash
flows of the Company for the respective periods indicated and (iii) have been
prepared in accordance with GAAP consistently applied throughout the periods
covered thereby, except with respect to the unaudited Financial Statements, for
normal year-end adjustments (none of which will be material) and for the absence
of footnotes.
(b) SCHEDULE 6.5 of the Disclosure Letter sets forth the Funded
Indebtedness and Capital Lease Obligations owed by the Company to any third
party (whether or not an Affiliate), calculated as of the date hereof in
accordance with GAAP, consistently applied.
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(c) All representations and warranties made by the Company in each
document evidencing Funded Indebtedness (the "INDEBTEDNESS DOCUMENTS") are true
and correct in all material respects. The Company and/or the Shareholders have
performed in all material respects all of their respective obligations required
to be performed by it under the Indebtedness Documents and there is no
continuing event of default under any Indebtedness Document.
6.6 ABSENCE OF UNDISCLOSED LIABILITIES.
Except as set forth on SCHEDULE 6.6 of the Disclosure Letter, the
Company has no Liabilities, except for (i) Liabilities reflected in the
Liabilities section of the Latest Balance Sheet, (ii) Liabilities under
Contracts which have arisen in the ordinary course of business (none of which
relates to a breach of contract), and (iii) Liabilities that have arisen since
the Latest Balance Sheet Date in the ordinary course of business (none of which
relates to breach of contract, breach of warranty, tort, infringement, violation
of Law, or any action, suit or Proceeding (including any Liability under any
Environmental, Health and Safety Laws)). Since the Latest Balance Sheet Date,
the Company has not experienced any loss contingencies (as such term is used in
Statement of Financial Accounting Standards No. 5 issued by the Financial
Accounting Standards Board in March 1975). Except as set forth on SCHEDULE 6.6
of the Disclosure Letter, the Company has not, either expressly or by operation
of law, assumed or undertaken any Liability of any other Person, including,
without limitation, any obligation for corrective or remedial action relating to
Environmental, Health and Safety Laws.
6.7 ABSENCE OF CHANGES.
Since the Latest Balance Sheet Date, there has not been any Material
Adverse Change with respect to the Company. Since that date, except as set forth
on SCHEDULE 6.7 of the Disclosure Letter, the Company has been operated in the
ordinary course, consistent with past practice, and:
(a) the Company has not declared, set aside or paid any dividends
on or made any other distribution in respect of any of its capital stock, or
made any payment or transfer of consideration of any kind to any affiliate,
shareholder, director or officer of the Company or any affiliate or relative of
any such affiliate, shareholder, director or officer other than salary and
ordinary course expense reimbursement (which reimbursements have not exceeded
$5,000);
(b) the Company has not split, combined or reclassified any of its
capital stock or issued or authorized or proposed the issuance or authorization
of any securities in respect of, in lieu of, or in substitution for shares of
its capital stock or repurchased, redeemed or otherwise acquired any shares of
its capital stock;
(c) the Company has not issued, delivered, pledged encumbered or
sold, or authorized or proposed the issuance, delivery, pledge, encumbrance or
sale of, any shares of its capital stock or securities convertible into, or
rights, warrants or options to acquire, any such shares of capital stock or
other convertible securities or proposed any change in its equity
capitalization;
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(d) the Company has not sold, transferred, licensed, pledged,
mortgaged or otherwise disposed of tangible or intangible assets, other than
inventory in the ordinary course of business;
(e) the Company has not amended any of its Fundamental Documents;
(f) other than as contemplated under this Agreement and the
Related Documents, the Company has not acquired or agreed to acquire by merging
or consolidating with, or by purchasing any material portion of the capital
stock or assets of, or by any other manner, any business or any corporation,
partnership, association or other business organization or division thereof;
(g) no party (including the Company) has accelerated, terminated,
modified, or cancelled any Contract (or series of related Contracts) involving
more than $50,000 to which the Company is a party or by which the Company is
bound and, to the Best Knowledge of the Company, no party intends to take any
such action, and no modification in excess of $5,000 has been made to any such
Contract;
(h) the Company has not experienced any material damage,
destruction, or loss (whether or not covered by insurance) to its property;
(i) there has not been any material action or failure to act by
the Company or any other material occurrence, event, incident or transaction
outside the ordinary course of business involving the Company;
(j) the Company has not taken any action that would violate any of
the negative covenants set forth in SECTION 8.2;
(k) the Company has not terminated the services of any officer or
any employee having an annual base salary in excess of $40,000; or
(l) there has been no agreement, understanding or authorization,
whether in writing or otherwise, for the Company to take any of the actions
specified in items (a) through (k) above.
6.8 TAX MATTERS.
Except as set forth on SCHEDULE 6.8 of the Disclosure Letter, the
Company (a) has paid all Taxes required to be paid by it through the date hereof
(including any Taxes shown due on any Tax Return) and (b) has filed or caused to
be filed in a timely manner (within any applicable extension periods) all Tax
Returns with appropriate Governmental Entities in all jurisdictions in which the
Tax Returns are required to be filed, and all such Tax Returns are true, correct
and complete. The Company has not requested or caused to be requested any
extension of time within which to file any Tax Return, which Tax Return has not
since been filed. Except as set forth on SCHEDULE 6.8 of the Disclosure Letter,
the Company is not, nor has it ever been, included in any consolidated or
combined Tax Return for Federal, state or local Tax purposes or is a member of
an affiliated group within the meaning of Section 1504 of the Code other than
the affiliated group of which the Company is the parent corporation. Except as
set forth on SCHEDULE
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6.8 of the Disclosure Letter, no Tax liens have been filed and neither the
Company nor any Shareholder has been notified by the Internal Revenue Service or
any other taxing authority that any deficiencies, assessments or adjustments
have been proposed (and are currently pending) by the Internal Revenue Service
or any other taxing authority in connection with any Tax Return, and no waivers
of statutes of limitation have been given or requested with respect to the
Company. Except as set forth on SCHEDULE 6.8 of the Disclosure Letter, there are
no pending Tax audits of any Tax Returns. No unresolved deficiencies or
additions to Taxes have been proposed, asserted or assessed against the Company
or any member of any affiliated or combined group of which the Company or any
member of any affiliated or combined group of which the Company was or is a
member. The Company has, in accordance with GAAP, consistently applied with the
Financial Statements, made full and adequate provision on the Latest Balance
Sheet and, for the period following the Latest Balance Sheet Date through the
Closing Date, on its books and records, for all Taxes payable by it for all
periods prior to the date thereof. The Company has not incurred any Tax
Liability since the Latest Balance Sheet Date, except for Taxes incurred in the
ordinary course of business. The Company has not made an election to be treated
as a "consenting corporation" under Section 341(f) of the Code and the Company
is not nor has it ever been a "personal holding company" within the meaning of
Section 542 of the Code or a United States real property holding corporation
within the meaning of Section 897 of the Code and no property is "tax-exempt use
property" within the meaning of Section 168(h) of the Code. The Company and each
of its predecessors have complied with all applicable Laws relating to the
payment and withholding of Taxes and has withheld and paid over all amounts
required by Law to be withheld and paid from the wages or salaries of employees,
and the Company is not liable for any Taxes for failure to comply with such
Laws. The Company is not, nor has it ever been, a party to any Tax sharing,
indemnity or similar agreement. The Company has not agreed to, nor is it
required to make any adjustments pursuant to, Section 481 of the Code, and the
Internal Revenue Service has not proposed any such adjustments or changes in the
Company's accounting method. There is no Contract covering any Person that
individually or collectively could, as a result of the transactions contemplated
hereby, or otherwise, give rise to the payment of any amount being
non-deductible by the Company by reason of Section 280G of the Code.
6.9 TITLE TO ASSETS, PROPERTIES AND RIGHTS AND RELATED MATTERS.
The Company has good title to the assets, properties and interests in
properties, real, personal or mixed, reflected on the Latest Balance Sheet or
acquired after the Latest Balance Sheet Date (except inventory or other property
sold or otherwise disposed of since the Latest Balance Sheet Date in the
ordinary course of business and accounts receivable and notes receivable paid in
full subsequent to the Latest Balance Sheet Date), free and clear of all
Encumbrances, of any kind or character, except for those Encumbrances set forth
in SCHEDULE 6.9 of the Disclosure Letter and Permitted Encumbrances. Other than
as set forth in SCHEDULE 6.9 of the Disclosure Letter and Permitted
Encumbrances, there does not exist any condition which interferes with the
economic value or use of any such assets. Except for inventory and supplies in
transit in the ordinary course of business, all material tangible personal
property is located on the premises of the Company. Except as set forth on
SCHEDULE 6.9 of the Disclosure Letter, the fixed assets of the Company are in
good operating condition (ordinary wear and tear excepted). Except as set forth
on SCHEDULE 6.9 of the Disclosure Letter, the assets, properties and interests
in properties of the Company to be owned by the Company after the Closing shall
include all
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assets, properties and interests in properties (real, personal and mixed,
tangible and intangible) necessary to enable the Company to carry on the Subject
Business as presently conducted by the Company.
6.10 REAL PROPERTY-OWNED OR LEASED.
(a) SCHEDULE 6.10 of the Disclosure Letter contains a list and
brief description of all of the owned real property of the Company (the "OWNED
REAL PROPERTY") and all real property in which the Company has a leasehold
interest held under leases (the "LEASED PROPERTY"), including the name of the
lessor and any requirement of consent of the lessor to consummate the
transactions contemplated hereby. The Owned Real Property and the Leased
Property (together, the "REAL PROPERTY") constitute all real properties used or
occupied by the Company in connection with the Subject Business.
(b) With respect to the Real Property, except as set forth on
SCHEDULE 6.10 of the Disclosure Letter:
(i) no portion thereof is subject to any pending condemnation
Proceeding or Proceeding by any public or quasi-public authority and,
to the Best Knowledge of the Company, there is no threatened
condemnation or Proceeding with respect thereto;
(ii) the physical condition of the Real Property is sufficient
to permit the continued conduct of the Subject Business as presently
conducted subject to the provision of usual and customary maintenance
and repair performed in the ordinary course with respect to similar
properties of like age and construction;
(iii) with respect to the Leased Property, the Company is the
owner and holder of all the leasehold estates purported to be granted
by such lease and each lease is in full force and effect and
constitutes a valid and binding obligation of the Company;
(iv) no notice of any increase in the assessed valuation of
the Real Property and no notice of any contemplated special assessment
has been received by the Company and, to the Best Knowledge of the
Company, there is no threatened special assessment pertaining to any of
the Real Property;
(v) there are no Contracts, written or oral, to which the
Company is a party, granting to any party or parties the right of use
or occupancy of any portion of the parcels of the Real Property;
(vi) there are no parties (other than the Company or its
lessees disclosed pursuant to paragraph (v) above) in possession of the
Real Property; and
(vii) with respect to the Leased Property, there have been no
discussions or correspondence with the landlord concerning renewal
terms for those leases scheduled to expire within 12 months of the date
of this Agreement.
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6.11 INTELLECTUAL PROPERTY.
Except in each case as set forth on SCHEDULE 6.11 of the Disclosure
Letter:
(a) the Company owns, has the right to use, sell, license and
dispose of, and has the right to bring actions for the infringement of, and,
where necessary, has made timely and proper application for, all Intellectual
Property Rights necessary or required for the conduct of the Subject Business as
currently conducted and as currently proposed to be conducted (such Intellectual
Property Rights, collectively, the "REQUISITE RIGHTS"), and such rights to use,
sell, license, dispose of and bring actions are exclusive with respect to
Requisite Rights developed by the Company (which rights are so identified in the
Disclosure Letter) and are sufficient for such conduct of the Subject Business
in the case of all other Requisite Rights;
(b) there are no royalties, honoraria, fees or other payments
payable by the Company to any Person by reason of the ownership, use, license,
sale or disposition of Requisite Rights;
(c) no Shareholder or Affiliate of any Shareholder owns any
Intellectual Property Rights used by the Company;
(d) no activity, service or procedure currently conducted or
proposed to be conducted by the Company violates or will violate any Contract of
the Company with any third party or infringe any Intellectual Property Right of
any other party;
(e) the Company has not received from any third party (other than
the Purchaser or any Affiliate thereof) in the past five years any notice,
charge, claim or other assertion that the Company is infringing any Intellectual
Property Right of any third party or committed any acts of unfair competition,
and have not received an offer to license from a third party under a claim of
use; and
(f) the Company has no knowledge of or sent to any Person (other
than the Purchaser or any Affiliate thereof) in the past five years any notice,
charge, claim or other assertion of any present, impending or threatened
infringement by, or misappropriation of, any Intellectual Property Right of the
Company by such other Person or any acts of unfair competition by such other
Person.
SCHEDULE 6.11 of the Disclosure Letter contains a true and complete list of all
license agreements, non-competition agreements, confidentiality agreements,
other agreements that relate to Requisite Rights, applications, filings and
other formal actions made or taken pursuant to Federal, state, local and foreign
Laws by the Company to perfect or protect their interest in the Requisite
Rights, including, without limitation, all patents, patent applications,
trademarks, trademark applications, service marks and service xxxx applications.
6.12 AGREEMENTS, NO DEFAULTS, ETC.
(a) Except as set forth on SCHEDULE 6.12(a) of the Disclosure
Letter, the Company is not a party to any:
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(i) Contract for the employment of any officer, individual
employee or other Person on a full-time, part-time, consulting or other
basis or agreement with any Affiliates;
(ii) Contract relating to the borrowing of money or to the
mortgaging, pledging or otherwise placing an Encumbrance on any asset
or group of assets of the Company;
(iii) Contract relating to any guarantee of any obligation for
borrowed money or otherwise;
(iv) Contract with respect to the lending or investing of
funds;
(v) Contract or indemnification with respect to any form of
intangible property, including any Intellectual Property Rights or
confidential information;
(vi) Contract that prohibits it from freely engaging in
business anywhere in the world;
(vii) Contract or group of related Contracts with the same
party for the purchase or sale of products or services under which the
undelivered balance of such products and services has a selling price
in excess of $50,000;
(viii) other Contract not disclosed in items (i) through (vii)
above (x) that is not terminable by either party without penalty upon
advance notice of 30 days or less and involves aggregate consideration
in excess of $50,000 or (y) that involves aggregate consideration in
excess of $100,000; or
(ix) other Contract which could reasonably be determined to be
material to the Subject Business.
(b) Except as set forth on SCHEDULE 6.12(b) of the Disclosure
Letter, and except for automobiles provided as a benefit to executive officers
of the Company, there are no vehicles, boats, aircraft, apartments or other
residential or recreational properties or facilities owned or operated by the
Company or any Subsidiary for executive, administrative or sales purposes or any
social club memberships owned or paid for by it. Except as set forth on SCHEDULE
6.12(b) of the Disclosure Letter, the Company has in all material respects
performed all the obligations required to be performed by it to date and is not
in default or alleged to be in default in any material respect under any
Contract, and there exists no event, condition or occurrence which, after notice
or lapse of time, or both, would constitute such a default by the Company of any
of the foregoing. The Company has furnished to the Purchaser and Acquisition Sub
true and complete copies of all Contracts listed in the Disclosure Letter or
complete descriptions of all material terms of any oral Contracts listed in the
Disclosure Letter.
(c) SCHEDULE 6.12(c) sets forth all open sales orders in excess of
$50,000, and all of such sales orders have arisen in arms length transactions
occurring in the ordinary course of business. Except as set forth on SCHEDULE
6.12(c) of the Disclosure Letter, the Company has not received a written request
from a customer to delay shipment of any such sales order that has a
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specific delivery date or is void or subject to termination at the option of
such customer upon a change in control.
6.13 LITIGATION, ETC.
Except as set forth on SCHEDULE 6.13 of the Disclosure Letter and
except for any litigation involving the Purchaser, Acquisition Sub or its
Affiliates, there are no (i) Proceedings pending or, to the Best Knowledge of
the Company, threatened against the Company, whether at law or in equity, or
before or by any Governmental Entity or arbitrator or (ii) Orders of any
Governmental Entity or arbitrator against the Company. The Company has delivered
to Purchaser and Acquisition Sub all material documents and correspondence
relating to such matters referred to in SCHEDULE 6.13 of the Disclosure Letter
and such matters, individually or in the aggregate, will not have a Material
Adverse Effect on the Company.
6.14 COMPLIANCE; GOVERNMENTAL AUTHORIZATIONS.
(a) Except as set forth on SCHEDULE 6.14 of the Disclosure Letter,
the business of the Company has not and is not being conducted in violation of
any Law, Order or Permit, including, without limitation, Environmental, Health
and Safety Laws. Except as set forth on SCHEDULE 6.14 of the Disclosure Letter,
no investigation or review by any Governmental Entity with respect to the
Company is pending or, to the Best Knowledge of the Company, threatened, nor has
any Governmental Entity notified the Company of its intention to conduct the
same. The Company has all Permits necessary for the conduct of the Subject
Business, including those required under any Environmental, Health and Safety
Laws, such Permits are in full force and effect, no violations are or have been
recorded in respect of any thereof and no Proceeding is pending or, to the Best
Knowledge of the Company, threatened to revoke or limit any thereof. SCHEDULE
6.14 of the Disclosure Letter contains a true and complete list of all material
Permits under which the Company is operating or bound, and the Company has
furnished to Purchaser true and complete copies thereof.
(b) No Governmental Entity regulating the design, manufacture,
production, marketing, distribution, sale or advertising of any of the products
currently sold, distributed or used in connection with the Subject Business has
requested that any such product be removed from the market, removed from any
installation of any product or recalled, or that substantial new product testing
be undertaken as a condition to the continued manufacturing, production,
selling, distribution or use of any such product or that such product be
modified in a way likely to have a Material Adverse Effect on the Company.
6.15 LABOR RELATIONS; EMPLOYEES.
Except as set forth on SCHEDULE 6.15 of the Disclosure Letter, (i) the
Company is not delinquent in payments to any of its employees for any wages,
salaries, commissions, bonuses or other direct compensation for any services
performed by them to date or amounts required to be reimbursed to such
employees, (ii) upon termination of the employment of any such employees, none
of the Company, the Purchaser or Acquisition Sub will by reason of any action
taken or not taken prior to the Closing be liable to any of such employees for
severance pay or any other payments, (iii) the Company has complied with all
Laws relating to the hiring and retention of all
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employees, leased employees and independent contractors relating to wages,
hours, equal opportunity, collective bargaining and the payment of social
security and other taxes, (iv) there is no unfair labor practice complaint
against the Company pending before the National Labor Relations Board or any
other Governmental Entity, (v) there is no labor strike, material dispute or
grievance, slowdown or stoppage actually pending or, to the Best Knowledge of
the Company, threatened against or involving the Company, (vi) no labor union
currently represents the employees of the Company and, to the Best Knowledge of
the Company, no labor union has taken any action with respect to organizing the
employees of the Company and (vii) no key employee has informed the Company, the
Shareholders or any senior executive of the Company that such employee will or
may terminate his or her employment or engagement with the Company. The Company
is not a party to or bound by any collective bargaining agreement, union
Contract or similar agreement.
6.16 ERISA COMPLIANCE.
(a) EMPLOYEE BENEFIT PLANS. SCHEDULE 6.16(A) of the Disclosure
Letter contains a true, correct and complete list of Employee Benefit Plans
(collectively, the "EMPLOYEE PLANS") (i) that cover any employees, contract
employees or former employees of the Company or any spouses, family members or
beneficiaries thereof (A) that are maintained, sponsored or contributed to by
the Company or (B) with respect to which the Company is obligated to contribute
or has any actual or potential Liability, or (ii) with respect to which the
Company has any actual or potential Liability or obligation on account of the
maintenance or sponsorship thereof or contribution thereto by any present or
former ERISA Affiliate of the Company.
(b) ADMINISTRATION AND COMPLIANCE OF THE EMPLOYEE PLANS. Except as
set forth on SCHEDULE 6.16(b) of the Disclosure Letter, with respect to each
Employee Plan:
(i) such Employee Plan has been established, maintained,
operated and administered in accordance with its terms and in
substantial compliance with ERISA, the Code, and other applicable Laws
(including with respect to reporting and disclosure);
(ii) all required, declared or discretionary (in accordance
with historical practices) payments, premiums, contributions,
reimbursements or accruals for all periods ending prior to, or as of,
the date hereof have been made or properly accrued on the Latest
Balance Sheet, or with respect to accruals properly made after the
Balance Sheet Date, on the books and records of the Company and all
amounts withheld from employees have been timely deposited into the
appropriate trust or account;
(iii) there is no unfunded actual or potential Liability
relating to such Employee Plan which is not reflected on the Latest
Balance Sheet, or with respect to accruals properly made after the
Latest Balance Sheet Date, on the books and records of the Company;
(iv) neither the Company, any of its ERISA Affiliates nor any
other "disqualified person" or "party in interest" (as such terms are
defined in Section 4975 of the Code and Section 3(14) of ERISA,
respectively) with respect to such Employee Plan, has breached the
fiduciary rules of ERISA or engaged in a prohibited transaction that
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could subject any of the foregoing Persons to any material tax or
penalty imposed under Section 4975 of the Code of Section 502(i), (j)
or (l) of ERISA;
(v) no Proceedings (other than routine claims for benefits)
are pending or, to the Best Knowledge of the Company, threatened
against or relating to any Employee Plan or any fiduciary thereof, and
there is, to the Best Knowledge of the Company, no basis for any such
Proceeding against any Employee Plan;
(vi) any Employee Plan which is intended to be "qualified"
within the meaning of Section 401(a) of the Code has been determined by
the Internal Revenue Service to be so qualified and the related trusts
are exempt from Tax under Section 501(a) of the Code, and to the Best
Knowledge of the Company nothing has occurred that has or could
reasonably be expected to have an adverse effect on such qualification
or exemption;
(vii) except as may be required under Laws of general
application, such Employee Plan does not obligate the Company to
provide any employee or former employee, or their spouses, family
members or beneficiaries, any post-employment or post-retirement health
or life insurance, accident or other "welfare-type" benefits;
(viii) each Employee Plan which is subject to the requirements
of the Consolidated Omnibus Budget Reconciliation of 1985 ("COBRA") and
the Health Insurance Portability and Accountability Act ("HIPAA") has
been maintained in substantial compliance with COBRA and HIPAA,
including all notice requirements, and no tax payable on account of
Section 4980B or any other section of the Code has been or is expected
to be incurred;
(ix) neither the Company nor any of its ERISA Affiliates is or
has ever maintained or been obligated to contribute to a Multiemployer
Plan (as defined in Section 3(37) of ERISA), a Multiple Employer Plan
(as defined in Section 413 of the Code) or a Defined Benefit Pension
Plan (as defined in Section 3(35) of ERISA);
(x) each Employee Plan which is intended to meet the
requirements of Section 125 of the Code meets such requirements and
each program of benefits for which employee contributions are provided
pursuant to elections made under such Employee Plan meets the
requirements of the Code applicable thereto;
(xi) with respect to any Employee Plan, there has not been any
act or omission by the Company or any of its ERISA Affiliates that has
given rise to or could give rise to any fines, penalties or related
charges under ERISA or the Code for which the Company or any of its
ERISA Affiliates could be liable;
(xii) no benefit payable or which may become payable by the
Company, or its ERISA Affiliates pursuant to any Employee Plan shall
constitute an "excess parachute payment," within the meaning of Section
280G of the Code, which is or may be subject to the imposition of an
excise tax under Section 4999 of the Code or which would not be
deductible by reason of Section 280G of the Code;
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(xiii) neither Company nor its ERISA Affiliates have made nor,
to the Best Knowledge of the Company, agreed to make, nor are required
to make (in order to bring any Plan into compliance with ERISA or the
Code) any changes in benefits that would materially increase the costs
of maintaining any of the Employee Plans;
(xiv) the Company has timely deposited and transmitted all
amounts withheld from employees for contributions or premium payments
for such Employee Plan into the appropriate trusts or accounts;
(xv) any such Employee Plan that allows loans to plan
participants has been operated in accordance with its terms, the plan's
written loan policy and all applicable laws, and all outstanding loans
from such Employee Plans are current as of the date hereof, and will be
current as of the Closing Date, and none of such loans in default; and
(xvi) no individual who has been classified by the Company as
a non-employee (such as an independent contractor, leased employee or
consultant) shall have a claim against the Company for eligibility to
participate in any such Employee Plan, if such individual is later
reclassified as an employee of the Company.
The Purchaser and Acquisition Sub have been provided with true and complete
copies, to the extent applicable, of all documents pursuant to which such
Employee Plan is maintained and administered, the two most recent annual reports
(Form 5500 and attachments) and financial statements therefor, all governmental
rulings, determinations, and opinions (and pending requests therefor), and, if
such Employee Plan provides post-employment or post-retirement health and life
insurance, accident or other "welfare-type" benefits, the most recent valuation
of the present and future obligations under such Employee Plan; and the
foregoing documents accurately reflect all of the terms of such Employee Plan
(including, without limitation, any agreement or provision which would limit the
ability of the Company to make any prospective amendments or terminate such
Employee Plan).
6.17 ENVIRONMENTAL MATTERS.
(a) Except as set forth on SCHEDULE 6.17 of the Disclosure Letter,
neither the Company, the Real Property nor any of the Company's past owned or
leased property or operations are subject to, or the subject of, any Proceeding,
Order, settlement, or other Contract arising under Environmental, Health and
Safety Laws, nor has any investigation been commenced or is any Proceeding
threatened against the Company under Environmental, Health and Safety Laws
alleging any failure to comply with any Environmental, Health and Safety Laws.
For purposes of SECTION 6.17, the term "COMPANY" shall include the Company and
any predecessor of the Company, where such predecessor was a Person whose
liabilities for environmental matters the Company has succeeded, in whole or in
part, pursuant to Environmental, Health and Safety Laws, Contract, common Law or
the operation of Law.
(b) Except as set forth on SCHEDULE 6.17 of the Disclosure Letter,
the Company has complied and is in compliance with all Environmental, Health and
Safety Laws.
(c) Except as set forth on SCHEDULE 6.17 of the Disclosure Letter,
neither the Company nor any of the Shareholders has received any written or oral
notice, report or other
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information that the Company has violated, or has any Liability under,
Environmental, Health and Safety Laws, and the Company has not treated, stored,
disposed of, arranged for or permitted the disposal of, transported, handled, or
released any Hazardous Material, or owned or operated the Subject Business, the
Real Property or any other property or facility (and no such property or
facility is contaminated by any such substance) in a manner that has given or
would give rise to Liabilities, including any liability for response costs,
corrective action costs, personal injury, property damage, natural resources
damages or attorney fees, or any investigative, corrective or remedial
obligations, pursuant to CERCLA or any other Environmental, Health and Safety
Laws.
(d) SCHEDULE 6.17 of the Disclosure Letter sets forth a complete
and accurate list of all properties and facilities previously owned or operated
by the Company. Except as set forth on SCHEDULE 6.17 of the Disclosure Letter,
none of the following has existed at any of the Real Property or any former
property or facility of the Company: solid or hazardous waste treatment, storage
or disposal facilities; asbestos-containing material; underground storage tanks;
or article or equipment containing polychlorinated biphenyls.
(e) The Company has provided the Purchaser and Acquisition Sub
with correct and complete copies of all reports and studies performed by or on
behalf of, or otherwise within the possession or control of, the Company with
respect to past or present environmental conditions or events relating to the
Subject Business or any of the Real Property or any property formerly owned,
leased, or operated by the Company. SCHEDULE 6.17 of the Disclosure Letter sets
forth a complete list of environmental reports or studies with respect to such
properties of which the Company is aware, but which were not performed by or on
behalf of the Company or within the Company's control.
(f) Except as set forth on SCHEDULE 6.17 of the Disclosure Letter,
the Company has not by Contract, consent order, other agreement, or operation of
Law assumed (i) any obligations or liabilities of any other Person arising under
Environmental, Health and Safety Laws or (ii) responsibility for, either
directly or indirectly, the remediation of any condition arising from or
relating to the release or threatened release of Hazardous Materials.
(g) Without limiting the foregoing, except as set forth on
SCHEDULE 6.17 of the Disclosure Letter, no facts, events or conditions relating
to the Real Property, the Subject Business or any past or present facilities,
properties or operations of the Company will prevent, hinder or limit continued
compliance by the Subject Business with Environmental, Health and Safety Laws,
give rise to any investigatory, remedial or corrective obligations pursuant to
Environmental, Health or Safety Laws, or give rise to any other Liabilities
pursuant to Environmental, Health or Safety Laws.
6.18 BROKERS.
Except as set forth on SCHEDULE 6.18 of the Disclosure Letter, none of
the Shareholders, the Company or any of their respective officers, directors or
employees (or any Affiliate of the foregoing) have employed any broker or finder
or incurred any Liability for any brokerage fees, commissions or finders' fees
in connection with the transactions contemplated hereby.
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6.19 RELATED TRANSACTIONS.
Except as set forth on SCHEDULE 6.19 of the Disclosure Letter, and
except for compensation paid or payable to regular employees of the Company in
the ordinary course of business and consistent with past practice, no
Shareholder, officer of the Company or current or former Affiliate of the
Company or any such officer or Shareholder is now, or has been during the last
five fiscal years, a party to any transaction or Contract with the Company, or
the direct or indirect owner of an interest in any Person which is a present or
potential competitor, supplier or customer of the Company (other than
non-affiliated holdings in publicly-held companies). SCHEDULE 6.19 of the
Disclosure Letter sets forth all inter-company accounts, if any, between the
Company, on the one hand, and any Shareholder or its Affiliates, on the other
hand (the "INTER-COMPANY ACCOUNTS").
6.20 ACCOUNTS AND NOTES RECEIVABLE.
Except as set forth on SCHEDULE 6.20 of the Disclosure Letter, all the
accounts receivable and notes receivable owing to the Company as of the date
hereof constitute, and as of the Closing will constitute, valid and enforceable
claims arising from bona fide transactions in the ordinary course of business,
and there are no known or asserted claims, refusals to pay or other rights of
set-off against any thereof. Except as set forth on SCHEDULE 6.20 of the
Disclosure Letter, as of the date hereof, there is (i) no account debtor or note
debtor delinquent in its payment by more than 45 days, (ii) no account debtor or
note debtor that has refused or, to the Best Knowledge of the Company,
threatened to refuse to pay its obligations for any reason, (iii) to the Best
Knowledge of the Company, no account debtor or note debtor that is insolvent or
bankrupt and (iv) no account receivable or note receivable pledged to any third
party by the Company.
6.21 ACCOUNTS AND NOTES PAYABLE.
Except as set forth on SCHEDULE 6.21 of the Disclosure Letter, all
accounts payable and notes payable by the Company to third parties as of the
date hereof arose, and as of the Closing will have arisen, in the ordinary
course of business, and, except as set forth on SCHEDULE 6.21 of the Disclosure
Letter, there is no such account payable or note payable delinquent in its
payment, except those contested in good faith and already disclosed on such
SCHEDULE 6.21.
6.22 INVENTORIES.
The inventories of the Company, whether or not reflected on the Final
Net Working Capital Statement, as of the date hereof are of good, usable and
merchantable quality. Such inventory includes no items which are below customary
quality control standards of the Company's industry and any applicable
governmental quality control, or of a quality or quantity not usable or, in the
case of finished goods, salable in the normal course of business (it being
understood that inventory not usable or saleable within one year constitutes
obsolete inventory except for items purchased in connection with long-term
contracts with existing customers). Except as set forth on SCHEDULE 6.22, such
inventory does not include any (a) items that have not been sold by the Company
during the 12 months prior to the date of this Agreement (unless such item
became a product for the first time in such 12-month period), (b) items of a
quantity that exceeds the aggregate amount of such item sold by the Company
during the 12-month period
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ended December 31, 2000 or (c) any items that were manufactured by the Company
more than 12 months prior to the date of this Agreement. The aggregate value of
the inventory has been written down on the books of account of the Company to
realizable market value or adequate reserves have been provided in accordance
with GAAP, consistently applied with the Financial Statements, and reasonable
and prudent commercial practices in the Company's industry.
6.23 SUPPLIERS AND VENDORS.
Except in the ordinary course of business, since the Latest Balance
Sheet Date, no material supplier or vendor of the Company has canceled or
otherwise terminated, or threatened to cancel or otherwise terminate, its
relationship with the Company or has decreased, limited or otherwise modified,
or threatened to decrease, limit or otherwise modify, the services, supplies or
materials it provides to the Company and the transactions contemplated hereby
will not affect the relationship of the Company with any such supplier or
vendor.
6.24 CUSTOMERS.
(a) Except to the extent any such business relationship is
impaired solely by virtue of an account or note receivable past 45 days due as
disclosed in the Disclosure Letter, the business relationship of the Company
with its customers is generally good and no material disagreement or problem
exists between the Company and any customer. No customer to which more than
$50,000 of the Company's annual sales are attributable has threatened, or has
notified the Company that it intends, to terminate its relationship and dealings
with the Company, whether as a result of the transactions contemplated by this
Agreement or otherwise.
(b) The Company has provided the Purchaser with copies of all
Contracts, written correspondence and written summaries of all oral
correspondence pertaining to financial or economic issues or other material
matters having a financial or economic impact (positive or negative) on the
Company between the Company and each of its five largest customers, as
calculated by gross sales over the last 12 months.
6.25 INSURANCE.
(a) SCHEDULE 6.25 of the Disclosure Letter contains a true and
complete list of all material policies of liability, theft, fidelity, business
interruption, life, fire, product liability, worker's compensation, health and
other material forms of insurance held by the Company for the benefit of the
Company (specifying the insurer, amount of coverage, type of insurance, policy
number, and any material pending claims thereunder). The Company has maintained
such or similar types of insurance coverage at all times during the last five
years.
(b) With respect to each policy of insurance listed on SCHEDULE
6.25 of the Disclosure Letter: (i) all premiums due through the date of this
Agreement with respect thereto are currently paid and are not subject to
adjustment other than as a result of normal policy year audits, and no Person is
in default in any respect with respect to its obligations under any such policy,
and, to the Best Knowledge of the Company and the Shareholders, no basis exists
that would give any insurer under any such policy the right to cancel or
unilaterally reduce or limit the stated coverages contained in such policy; (ii)
there are no outstanding claims currently pending under any such policy as of
the date of this Agreement that could be reasonably
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expected to cause a material increase in the insurance rates of the Company, and
no facts or circumstances exist as of the date of this Agreement that might
reasonably be expected to (A) relieve the insurer under any such policy of its
obligations to satisfy in full any claim thereunder or (B) give rise to any
claim thereunder; and (iii) the Company has not received any notice that such
policy has been or shall be canceled or terminated or will not be renewed on
substantially the same terms as are now in effect or the premium on such policy
shall be materially increased on the renewal thereof. With respect to any facts
or circumstances giving rise to any claim specified in clause (ii)(B) and set
forth on SCHEDULE 6.25 of the Disclosure Letter, such claim has been reported to
the applicable insurance carrier in compliance with all applicable claims made
reporting procedures.
6.26 BOOKS AND RECORDS.
Except as disclosed on SCHEDULE 6.26, the books of account, minute
books, stock record books and other records of the Company, all of which have
been made available to Purchaser and Acquisition Sub, are complete and correct
and have been maintained in accordance with commercially reasonable business
practices. The minute books of the Company contain accurate and complete records
of all corporate actions taken by, the stockholders, the Board of Directors, and
committees of the Board of Directors of the Company and no resolutions or
authorizations have been approved or adopted by any such stockholders, Board of
Directors or committee thereof which are not contained in such minute books. As
of the Closing, all of those books and records will be in the possession of the
Company.
6.27 DISCLOSURE.
Neither this Agreement, any of the schedules, attachments or exhibits
hereto (including the Disclosure Letter), nor any other written material
delivered to the Purchaser, Acquisition Sub or any of their respective
directors, officers, employees, representatives or agents contains any untrue
statement of a material fact or omits a material fact necessary to make the
statements contained herein or therein, taken as a whole, in light of the
circumstances in which they were made, not misleading. There is no fact that has
not been disclosed to the parties referred to above of which the Company, any
Shareholder or any of the officers or directors of the Company is aware and
which constitutes or could reasonably be anticipated to result in a Material
Adverse Change with respect to the Company.
Article VII
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER AND ACQUISITION SUB
The Purchaser and Acquisition Sub represent and warrant to the
Shareholders, as of the date hereof and as of the Closing Date, as set forth
below.
7.1 ORGANIZATION; GOOD STANDING; QUALIFICATION AND POWER.
Each of the Purchaser and Acquisition Sub is a corporation, duly
organized, validly existing and in good standing under the Laws of the State of
Delaware, has all requisite corporate power and authority to own, lease and
operate its properties and to carry on its business as now
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being conducted, and is duly qualified and in good standing to do business in
each jurisdiction in which the nature of its business or the ownership or
leasing of its properties makes such qualification necessary and the failure to
be so qualified or in good standing would have a Material Adverse Effect on the
Purchaser and Acquisition Sub, taken as a whole.
7.2 AUTHORITY; NONCONTRAVENTION; CONSENTS.
(a) Each of the Purchaser and Acquisition Sub has all the
requisite corporate power and authority to enter into this Agreement, each
Related Document to which it is a party and any and all instruments necessary or
appropriate in order to effectuate fully the terms and conditions of this
Agreement, each Related Document to which the Purchaser or Acquisition Sub is a
party and all transactions contemplated hereby and thereby and to perform its
obligations hereunder and thereunder. The execution, delivery and performance of
this Agreement and each Related Document to which it is a party and the
consummation of the transactions contemplated hereby and thereby have been duly
and validly authorized by all necessary corporate action on the part of such
Person, and this Agreement and each Related Document to which the Purchaser or
Acquisition Sub is a party has been duly and validly executed and delivered by
such Person and is the valid and binding obligation of such Person, enforceable
against such Person in accordance with its terms, except as such enforceability
thereof may be limited by any applicable bankruptcy, reorganization, insolvency
or other Laws affecting creditor's rights generally or by general principles of
equity.
(b) Neither the execution, delivery and performance of this
Agreement and the Related Documents to which the Purchaser or Acquisition Sub is
a party nor the consummation by the Purchaser and Acquisition Sub of the
transactions contemplated hereby or thereby nor compliance by the Purchaser and
Acquisition Sub with any provision hereof will (i) conflict with, or result in
any violations of, or cause a default (with or without notice or lapse of time,
or both) under, or give rise to a right of termination, amendment, cancellation
or acceleration of any obligation contained in or the loss of any material
benefit under, or result in the creation of any Encumbrance upon any asset of
the Purchaser or Acquisition Sub under any term, condition or provision of its
Fundamental Documents, or, except as set forth on SCHEDULE 7.2 of the Disclosure
Letter, any Contract to which such Person is a party or by which any of its
properties or assets are bound, or (ii) violate any Laws applicable to the
Purchaser or Acquisition Sub or any of its properties, which, in each case,
would prevent the consummation of the transactions contemplated hereby.
(c) Except as set forth on SCHEDULE 7.2 of the Disclosure Letter,
no consent, approval, Order or authorization of, registration, declaration or
filing with, or notification to any Governmental Entity or any other third party
is required in connection with the execution, delivery and performance by the
Purchaser or Acquisition Sub of this Agreement or the Related Documents to which
it is a party or the consummation of the transactions contemplated hereby or
thereby, which, in each case, would prevent the consummation of the transactions
contemplated hereby.
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7.3 CAPITAL STOCK.
The authorized capital stock of the Purchaser is as set forth on
SCHEDULE 7.3 hereto. All of the issued and outstanding capital stock of
Acquisition Sub is owned of record and beneficially by the Purchaser. Except as
set forth on SCHEDULE 7.3, there are no outstanding securities, options,
warrants, rights or agreements or other commitments pursuant to which the
Purchaser is or may become obligated to issue any shares of its capital stock,
or any securities convertible into or exercisable or exchangeable for such
capital stock.
7.4 SEC DOCUMENTS.
The Purchaser has furnished the Shareholders with a correct and
complete copy of each report, schedule, and final registration statement filed
by the Purchaser with the SEC on or after January 1, 2001 (the "SEC Documents"),
which are all the documents (other than preliminary materials) that the
Purchaser was required to file with the SEC on or after January 1, 2001. As of
their respective dates or, in the case of registration statements, their
effective dates, none of the SEC Documents (including all exhibits and schedules
thereto) contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading, and the SEC Documents complied when filed in all material
respects with the then applicable requirements of the Securities Act or the
Exchange Act, as the case may be, and the rules and regulations promulgated by
the SEC thereunder. The financial statements of the Purchaser included in the
SEC Documents complied as to form in all material respects with the then
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto, were prepared in accordance with generally
accepted accounting principles applied on a consistent basis during the periods
involved (except as may have been indicated in the notes thereto or, in the case
of the unaudited statements, as permitted by Form 10-Q promulgated by the SEC)
and fairly present (subject, in the case of the unaudited statements, to normal
year-end audit adjustments) the consolidated financial position of the Purchaser
and its consolidated subsidiaries as at the dates thereof and the consolidated
results of its operations and cash flows for the periods then ended. The
Purchaser has filed all documents and agreements which were required to be filed
as exhibits to the SEC Documents. SCHEDULE 7.4 sets forth a correct and complete
list of all documents or agreements, if any, which would be included as exhibits
to an Annual Report on Form 10-K and which have not heretofore been filed as an
exhibit to any of the SEC Documents, if the Purchaser were required to file such
Form 10-K for the period ended on the date immediately preceding the date of
this Agreement and long-term debt agreements which are not required to be filed
pursuant to Item 601(b)(4)(iii)(A) of Regulation S-K promulgated by the SEC.
7.5 ABSENCE OF CHANGES.
Since the date of the most recently filed Annual Report on Form 10-K of
the Purchaser, there has not been any Material Adverse Change with respect to
the Purchaser or Acquisition Sub and other subsidiaries of the Purchaser, taken
as a whole.
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7.6 BROKERS.
Neither the Purchaser, Acquisition Sub nor any of their respective
officers, directors, stockholders or employees (or any Affiliate of any of the
foregoing) 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.
ARTICLE VIII
CONDUCT AND TRANSACTIONS PRIOR TO THE CLOSING;
ADDITIONAL PRE-CLOSING AGREEMENTS
8.1 AFFIRMATIVE COVENANTS OF THE COMPANY.
From and after the date of this Agreement until the Closing or the
earlier termination of this Agreement pursuant to SECTION 12.1 (the "TRANSITION
PERIOD"), except as otherwise consented to in writing by the Purchaser and
Acquisition Sub, the Company shall, and the Shareholders shall cause the Company
to:
(a) conduct the operations of the Company according to the
ordinary and usual course of business consistent with past custom and practice
(including the collection of receivables, the payment of payables and the
maintenance of supplies) and use best efforts to maintain and preserve intact
its business organization, make capital expenditures in a manner consistent with
historical practice (subject to SECTION 8.2(i) below), keep available the
services of officers and employees, and maintain satisfactory relationships with
licensors, franchisees, licensees, suppliers, customers, contractors,
distributors, labor unions and others having business relationships with the
Company;
(b) maintain the assets of the Company in customary repair, order
and condition, maintain insurance reasonably comparable to that in effect on the
Latest Balance Sheet Date, replace in accordance with past practice inoperable
or worn out assets with modern assets of comparable quality and, in the event of
a casualty, loss or damage to any of such assets or properties prior to the
Closing Date for which the Company is insured or the condemnation of any assets
or properties, either repair or replace such assets or property or, if the
Purchaser and Acquisition Sub agree, cause the Company to retain such insurance
or condemnation proceeds;
(c) promptly inform the Purchaser and Acquisition Sub in writing
of any material variances from the representations and warranties contained in
ARTICLE VI; and
(d) cause its independent certified public accountants to afford
the Purchaser and Acquisition Sub, its officers, independent certified public
accountants, counsel and other representatives and agents (i) reasonable access
to the properties, books, records (including Tax Returns filed and those in
preparation) and executive personnel of the Company in order to permit the
Purchaser and Acquisition Sub full opportunity to make such investigation of the
Company and the Subject Business as it reasonably desires, (ii) full access to
the audit work papers and other records of the independent certified public
accountants of the Company, (iii) access to the customers of the Company, (iv)
upon reasonable notice by the Purchaser and Acquisition Sub and at times and in
accordance with procedures to be mutually agreed by the
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Company, the Purchaser and Acquisition Sub, permit the Purchaser and Acquisition
Sub and its representatives to make such reasonable inspections of the Company
and its operations as the Purchaser and Acquisition Sub may reasonably require
and (v) the opportunity to review such financial and operating data and other
information with respect to the Company as the Purchaser and Acquisition Sub may
from time to time reasonably request.
8.2 NEGATIVE COVENANTS OF THE COMPANY.
During the Transition Period, without the prior written consent of the
Purchaser and Acquisition Sub, except as expressly contemplated by this
Agreement or the Related Documents, the Company shall not, and the Shareholders
shall cause the Company not to:
(a) make any distribution in respect of any of its capital stock,
or make any payment or transfer consideration of any kind to any affiliate,
director or officer of the Company or any affiliate or relative of any such
affiliate, director or officer of the Company, other than (A) salary and
ordinary course expense reimbursement; and (B) management bonuses payable in the
ordinary course of business; provided that the Company will have the ability to
pay cash dividends and agrees to inform the Purchaser and Acquisition Sub of the
payment of those dividends;
(b) split, combine or reclassify any of its capital stock or issue
or authorize or propose the issuance or authorization of any securities in
respect of, in lieu of, or in substitution for shares of its capital stock or
repurchase, redeem or otherwise acquire any shares of its capital stock;
(c) issue, deliver, pledge, encumber or sell, or authorize or
propose the issuance, delivery, pledge, encumbrance or sale of, any shares of
its capital stock or securities convertible into, or rights, warrants or options
to acquire, any such shares of capital stock or other convertible securities or
authorize or propose any change in its equity capitalization;
(d) amend its Fundamental Documents;
(e) acquire or agree to acquire by merging or consolidating with,
or by purchasing any material portion of the capital stock or assets of, or by
any other manner, any business or any corporation, partnership, association or
other business organization or division thereof;
(f) sell, transfer, lease, license, pledge, mortgage or otherwise
dispose of any material asset (tangible or intangible);
(g) delay or postpone the payment of accounts payable and other
obligations and Liabilities or accelerate the collection of accounts receivable,
other than in the ordinary course of business consistent with past custom and
practice;
(h) enter into any material Contract or any amendment to any
material Contract or agreement, other than in the ordinary and usual course (it
being agreed that ordinary course shall include, but not be limited to,
agreements with customers providing for normal profit margins, renewal and
extensions of existing debt and financing obligations, and purchases of raw
materials or other inventory at prevailing prices);
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(i) make any single capital expenditure or commitment therefor
exceeding $50,000 for addition to property, plant or equipment;
(j) enter into any employment Contract or collective bargaining
agreement, written or oral, or modify the terms of any such existing Contract;
(k) make any Tax elections or settle or compromise any Tax
liability;
(l) grant any increase in the base compensation of any officer or
employee of the Company, other than in the ordinary course of business
consistent with past custom and practice;
(m) adopt, amend, modify or terminate any bonus, profit-sharing,
incentive, severance or other plan, Contractor commitment for the benefit of any
officer or employee of the Company;
(n) other than as contemplated by this Agreement or any Related
Document, enter into any transaction with any officer, employee or Affiliate of
the Company (or any director, officer or employees of such Affiliate), other
than ordinary course employment arrangements entered into in accordance with
past custom or practice;
(o) intentionally take any action which would require disclosure
under SECTION 8.1(c); or
(p) authorize any of the foregoing or enter into any agreement to
do any of the foregoing.
8.3 CONFIDENTIALITY.
Each of the Shareholders agrees that all confidential or proprietary
information or work products relating to the Subject Business that are known to
such Shareholder as of the Closing Date are the sole property of the Company.
The Shareholders agree that they will not use or disclose such information or
work product except for the benefit of the Company, and the Shareholders will
take reasonable steps to protect such information and work product from misuse,
loss, theft or accidental disclosure.
8.4 CONSENTS.
Each party shall use its reasonable best efforts, and the other parties
shall cooperate with such efforts, to obtain any consents and approvals of, or
effect the notification of or filing with, each Person or authority, whether
private or governmental, whose consent or approval is required in order to
permit the consummation of the transactions contemplated hereby.
8.5 EFFORTS TO CONSUMMATE.
Subject to the terms and conditions herein provided, the parties shall
use their best efforts and shall do, or cause to be done, all such reasonable
acts and things as may be necessary, proper or advisable, consistent with all
applicable Laws, to consummate and make effective the transactions contemplated
hereby as soon as reasonably practicable.
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8.6 NOTICE OF PROSPECTIVE BREACH.
Each party shall immediately notify the other parties in writing upon
the occurrence, or failure to occur, of any event, which occurrence or failure
to occur would be reasonably likely to cause (a) any representation or warranty
of such notifying party contained in this Agreement to be untrue or inaccurate
in any material respect at any time during the Transition Period as if such
representation and warranty were made at such time or (b) any material failure
of such notifying party or any officer, director, employee or agent thereof, to
comply with or satisfy any covenant, condition or agreement to be complied with
or satisfied by it under this Agreement.
8.7 PUBLIC ANNOUNCEMENTS.
Each party agrees that, except (a) as otherwise required by Law and (b)
for disclosure to its respective directors, officers, employees, financial
advisors, potential financing sources and their advisors, legal counsel,
independent certified public accountants or other agents, advisors or
representatives on a need-to-know basis, at all times prior to the Closing Date
it will not issue any reports, statements or releases, in each case pertaining
to this Agreement or the transactions contemplated hereby, without the prior
written consent of the Company or the Purchaser and Acquisition Sub, as the case
may be, which consent shall not unreasonably be withheld or delayed; PROVIDED,
HOWEVER, that with respect to any disclosure made pursuant to clause (a) above,
each party shall provide the other party with a copy of such disclosure prior to
its dissemination.
8.8 NEGOTIATION WITH OTHERS; DISPOSITION AND VOTING OF SECURITIES.
(a) During the Transition Period, the Company and the Shareholders
shall deal exclusively with the Purchaser and Acquisition Sub regarding the
acquisition of or investment in the Company, whether by way of merger, purchase
of capital stock, purchase of assets or otherwise (a "POTENTIAL TRANSACTION")
and, without the prior written consent of the Purchaser and Acquisition Sub,
neither the Company nor the Shareholders shall, directly or indirectly, (i)
solicit, initiate discussions with or engage in negotiations with any Person
(whether such negotiations are initiated by the Company, the Shareholders or
otherwise), other than the Purchaser, Acquisition Sub and its Affiliates or a
party designated by the Purchaser and Acquisition Sub, relating to a Potential
Transaction, (ii) provide information or documentation with respect to the
Company or the Subject Business, to any Person, other than the Purchaser,
Acquisition Sub or a party designated by the Purchaser and Acquisition Sub,
relating to a Potential Transaction or (iii) enter into an agreement with any
Person, other than the Purchaser, Acquisition Sub or any Affiliate thereof,
providing for any Potential Transaction. If the Company or any Shareholder
receives an unsolicited inquiry, offer or proposal relating to any of the above,
the Company or such Shareholder shall immediately notify the Purchaser and
Acquisition Sub thereof, including information as to the content and terms of
such proposal.
(b) During the Transition Period, each Shareholder, as to itself,
shall:
(i) without the prior written consent of the Purchaser and
Acquisition Sub, refrain from transferring, selling or assigning to any
Person, or agreeing in any manner to transfer, sell or assign to any
Person, or pledge, encumber, deposit in a voting trust or
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grant a proxy with respect to, any securities of the Company presently
or hereafter owned or controlled by him, her or it;
(ii) refrain from soliciting or entering into any agreement or
arrangement with any Person with respect to any transfer, sale or
assignment of any securities of the Company other than with respect to
the transactions contemplated hereby; and
(iii) other than with respect to the transactions contemplated
hereby, vote the shares of capital stock of the Company presently or
hereafter owned or controlled by such Shareholder against any merger,
consolidation, sale of assets, reorganization, recapitalization,
liquidation or winding up of the Company at every meeting of
Shareholders of the Company called therefor and at every adjournment
thereof (or withhold consent in writing to any such action proposed to
be taken by written consent in lieu of a meeting).
(c) The parties recognize and acknowledge that a breach by the
Company or any Shareholder of SECTION 8.8 will cause irreparable and material
loss and damage to the Purchaser and Acquisition Sub as to which it will not
have an adequate remedy at law or in damages. Accordingly, each party
acknowledges and agrees that the issuance of an injunction or other equitable
remedy is an appropriate remedy for any such breach; PROVIDED, HOWEVER; that the
remedies provided for herein shall be cumulative and shall not preclude
Purchaser and the Acquisition Sub from seeking any other remedies against the
Company.
8.9 RELEASE.
(a) Anything contained herein to the contrary notwithstanding,
effective as of the Closing Date, in consideration of the mutual covenants and
agreements contained herein, including, without limitation, the cash and
securities to be received by the Shareholders hereunder, each Shareholder hereby
irrevocably releases and forever discharges the Company (for the benefit of the
Company, the Purchaser and their respective parents, subsidiaries, Affiliates,
divisions and predecessors and respective past and present directors, officers,
employees and agents, and each of their respective successors, heirs, assigns,
executors and administrators (collectively, the "RELEASED PERSONS")) of and from
all manner of action and actions, cause and causes of action, suits, rights,
debts, dues, sums of money, accounts, bonds, bills, covenants, Contracts,
controversies, omissions, promises, variances, trespasses, damages, Liabilities,
judgments, executions, claims and demands whatsoever, in law or in equity which
against the Released Persons such Shareholder ever had, now has or which it
hereafter can, shall or may have, whether known or unknown, suspected or
unsuspected, matured or unmatured, fixed or contingent, for, upon or by reason
of any matter or cause arising at any time on or prior to the Closing Date.
(b) Each Shareholder specifically represents and warrants to the
Released Persons that such Shareholder has not assigned any such claim set forth
in paragraph (a) above, and agrees to indemnify and hold harmless the Released
Persons from and against any and all losses or damages arising from or in any
way related to (i) any such assignment, and (ii) any action by any third party
arising from or in any way related to the relationship among such Shareholders
and the Released Persons, which is the subject of SECTION 8.9.
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8.10 RELATIONSHIPS WITH VENDORS AND CUSTOMERS.
From and after the date hereof, neither the Company nor any Shareholder
shall take or fail to take any action which could reasonably be expected to,
directly or indirectly, have an adverse effect on the business or operations of
the Company after the Closing, or on the business relationship between the
Company or the Purchaser and any vendor, supplier or customer thereof.
ARTICLE IX
CONDITIONS
9.1 CONDITIONS TO EACH PARTY'S OBLIGATIONS.
The respective obligations of each party to effect the transactions
contemplated hereby are subject to the satisfaction prior to the Closing Date of
the conditions set forth below, unless waived (to the extent such conditions can
be waived) by the Purchaser, Acquisition Sub, the Company or the Shareholders,
as applicable.
(a) APPROVALS. All authorizations, consents, Orders or approvals
of, or declarations or filings with, or expiration of waiting periods imposed
by, any Governmental Entity necessary for the consummation of the transactions
contemplated hereby shall have been obtained or made.
(b) NO INJUNCTIONS OR RESTRAINTS. No temporary restraining order,
preliminary or permanent injunction or other Order issued by any Governmental
Entity nor other legal restraint or prohibition preventing the consummation of
the transactions contemplated hereby shall be in effect.
(c) STATUTES. No action shall have been taken or threatened, and
no Law or Order shall have been enacted, promulgated or issued or deemed
applicable to the transactions contemplated hereby by any Governmental Entity
that would (i) make the consummation of the transactions contemplated hereby
illegal or substantially delay the consummation of any material aspect of the
transactions contemplated hereby, (ii) compel the Company, the Shareholders,
Acquisition Sub or the Purchaser to dispose or hold separate all or a material
portion of the business or assets of such Person as a result of the consummation
of the transactions contemplated hereby (iii) render any party unable to
consummate the transactions contemplated hereby.
9.2 CONDITIONS TO OBLIGATIONS OF THE PURCHASER AND ACQUISITION SUB.
The obligations of the Purchaser and Acquisition Sub to consummate the
transactions contemplated hereby are subject to the satisfaction of the
conditions set forth below, unless waived (to the extent such conditions can be
waived) by the Purchaser and Acquisition Sub.
(a) ACCURACY OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties made by the Company and the Shareholders in this
Agreement (including the Disclosure Letter) shall be true and correct in all
material respects (except for such
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representations and warranties which are qualified by their terms by a reference
to materiality, which representations and warranties as so qualified shall be
true in all respects) at and as of the Closing Date with the same effect as if
such representations and warranties had been made at and as of the Closing Date,
and the Purchaser and Acquisition Sub shall have received a certificate signed
by the Shareholders and the Chief Executive Officer, or any other duly appointed
officer, of the Company to that effect.
(b) PERFORMANCE OF OBLIGATIONS. The Company and the Shareholders
shall have performed and complied with in all material respects all obligations
and covenants required to be performed and complied with by them under this
Agreement as of the Closing Date, and the Purchaser and Acquisition Sub shall
have received a certificate signed by the Shareholders and the Chief Executive
Officer, or any other duly appointed officer, of the Company to that effect.
(c) AUTHORIZATION. All action necessary to authorize the
execution, delivery and performance of this Agreement and the Related Documents
by the Company and the Shareholders and the consummation of the transactions
contemplated hereby and thereby, including, without limitation, the requisite
shareholder approvals, shall have been duly and validly taken by the Company and
the Shareholders, and the Company and the Shareholders shall have full power and
right to consummate the transactions contemplated hereby and thereby on the
terms provided herein.
(d) OPINION OF THE COUNSEL TO THE COMPANY AND THE SHAREHOLDERS.
The Purchaser and Acquisition Sub shall have received an opinion of Xxxxxxx &
Xxxxxx, counsel for the Company and the Shareholders, dated the Closing Date, in
substantially the form attached hereto as EXHIBIT C.
(e) CONSENTS AND APPROVALS. The Purchaser and Acquisition Sub
shall have received duly executed copies of all consents and approvals in form
and substance satisfactory to the Purchaser and Acquisition Sub and its counsel,
that are (i) required for consummation of the transactions contemplated hereby
or (ii) that are required in order to prevent a breach of or a default under or
a termination of any Contract to which the Company is a party or to which any
portion of property of the Company is subject.
(f) GOVERNMENT CONSENTS, AUTHORIZATIONS, ETC. All consents,
authorizations, Orders or approvals of, and filings or registrations with, any
Governmental Entity which are required for or in connection with the execution
and delivery by the Company, and the Shareholders of this Agreement and the
Related Documents and the consummation by the Company, and the Shareholders of
the transactions contemplated hereby and thereby shall have been obtained or
made.
(g) ABSENCE OF MATERIAL ADVERSE CHANGE. Since the Latest Balance
Sheet Date, there shall have been no Material Adverse Change with respect to the
Company.
(h) CLOSING DOCUMENTS. The Purchaser and Acquisition Sub shall
have received duly executed copies of the closing deliverables set forth in
SECTION 2.8(a), and such documents shall be in full force and effect.
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(i) FINANCING. The Purchaser shall have obtained on terms and
conditions satisfactory to Purchaser in its sole discretion all of the financing
needed in order to consummate the transactions contemplated hereby.
(j) ENVIRONMENTAL. The Purchaser and Acquisition Sub and their
representatives shall have satisfactorily completed the environmental audits and
analyses with respect to the Real Property and other potential liability under
Environmental, Health and Safety Laws, and the results of such audits and
analyses shall be satisfactory to the Purchaser and Acquisition Sub in its sole
discretion.
(k) 401(k) PLAN. The Company shall have terminated its 401(k) plan
effective immediately prior to the Closing, and a copy of the resolutions of the
board of directors terminating such plan shall have been delivered to the
Purchaser and Acquisition Sub.
(l) SHAREHOLDERS' EXPENSES. The Company and the Shareholders shall
have delivered to the Purchaser a correct and complete schedule of all
Shareholders' Expenses incurred by or on behalf of the Company and the
Shareholders through the Closing Date that are unpaid as of the Closing Date to
be deducted from the Closing Consideration, and the Purchaser shall have
received a certificate signed by a duly authorized officer of the Company and
the Shareholders certifying as to the accuracy thereof.
(m) PAYMENT AND CANCELLATION OF THE FUNDED INDEBTEDNESS AND
CAPITAL LEASE OBLIGATIONS. The Company shall have delivered to the Purchaser
duly executed letter agreements in form and substance reasonably satisfactory to
the Purchaser and its counsel, providing for (i) the payment and cancellation of
all of the Funded Indebtedness and Capital Lease Obligations as of the Closing
Date and (ii) the release of any Encumbrances on the assets of the Company
relating thereto.
(n) KVL PROMISSORY NOTE. The arrangements made with respect to the
payment in full by KVL to the Company of the aggregate amount outstanding under
that certain promissory note in the principal amount of $1,025,000, shall be
satisfactory to the Purchaser in its sole discretion.
9.3 CONDITIONS TO OBLIGATIONS OF THE COMPANY AND THE SHAREHOLDERS.
The obligations of the Company and the Shareholders to consummate the
transactions contemplated hereby are subject to the satisfaction of the
conditions set forth below, unless waived (to the extent such conditions can be
waived) by the Shareholders and the Company.
(a) ACCURACY OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties made by the Purchaser and Acquisition Sub in this
Agreement shall be true and correct in all material respects (except for such
representations and warranties which are qualified by their terms by a reference
to materiality, which representations and warranties as so qualified shall be
true in all respects) at and as of the Closing Date with the same effect as if
such representations and warranties had been made at and as of the Closing Date,
and the Shareholders shall have received a certificate signed by a duly
authorized officer of the Purchaser and Acquisition Sub to that effect.
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(b) PERFORMANCE OF OBLIGATIONS. The Purchaser and Acquisition Sub
shall have performed and complied with in all material respects its obligations
and covenants required to be performed and complied with under this Agreement
prior to or as of the Closing Date, and the Shareholders ' Representative shall
have received a certificate signed by a duly authorized officer of the Purchaser
and Acquisition Sub to that effect.
(c) AUTHORIZATION. All action necessary to authorize the
execution, delivery and performance of this Agreement and the Related Documents
by the Purchaser and Acquisition Sub and the consummation of the transactions
contemplated hereby and thereby shall have been duly and validly taken by the
Purchaser and Acquisition Sub and the Purchaser and Acquisition Sub shall have
the full power and right to consummate the transactions contemplated hereby and
thereby on the terms provided herein.
(d) OPINION OF COUNSEL THE PURCHASER AND ACQUISITION SUB. The
Shareholders shall have received an opinion of X'Xxxxxxxx Graev & Karabell, LLP,
counsel for the Purchaser and Acquisition Sub, dated the Closing Date, in
substantially the form attached hereto as EXHIBIT D.
(e) GOVERNMENT CONSENTS, AUTHORIZATIONS, ETC. All consents,
authorizations, Orders or approvals of, and filings or registrations with, any
Governmental Entity which are required for or in connection with the execution
and delivery of this Agreement and the Related Documents by the Purchaser and
Acquisition Sub and the consummation by the Purchaser and Acquisition Sub of the
transactions contemplated hereby and thereby shall have been obtained or made.
(f) CLOSING DOCUMENTS. The Company and the Shareholders shall have
received duly executed copies of the closing documents set forth in SECTION
2.8(b), and such documents shall be in full force and effect.
ARTICLE X
INDEMNIFICATION
10.1 INDEMNIFICATION GENERALLY; ETC.
From and after the Closing Date:
(a) BY THE SHAREHOLDER GROUP IN FAVOR OF THE PURCHASER. Each
member of the Shareholder Group jointly and severally agrees to indemnify and
hold harmless the Purchaser Group for any and all Losses they may suffer,
sustain or incur as a result of:
(i) the inaccuracy or breach of any representation or warranty
of the Company contained in ARTICLE VI or in the Disclosure Letter, any
Related Document or any certificate delivered in connection herewith at
or before the Closing; or
(ii) the breach of any agreement or covenant of the Company
contained in this Agreement or in the Disclosure Letter or any Related
Document; or
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(iii) any and all Shareholders' Expenses not deducted from the
Closing Consideration pursuant to SECTION 3.1 hereof; or
(iv) the assertion of any claim, demand or Liability against
any member of the Purchaser Group arising from or in connection with
any assertion by any current or former shareholders (excluding the
Purchaser), warrantholder, optionholder or other securityholder of the
Company or the heirs, representatives or estate thereof, of any
impropriety with respect to (A) any actions or transactions of or
involving the Company prior to or at the Closing and (B) the
transactions contemplated by this Agreement and the Related Documents
(other than breach by the Purchaser of its obligations hereunder); or
(v) the assertion of any claim, demand or Liability against
any member of the Purchaser Group arising from or in connection with
any product sold or distributed by the Company prior to or on the
Closing Date; or
(vi) (A) any Liability arising pursuant to any Environmental,
Health, or Safety Laws, whether or not set forth in the Disclosure
Letter, with respect to any environmental condition existing, or event
occurring, (1) on or before the Closing Date with respect to the Real
Property, or (2) at any time with respect to any property owned,
leased, or used by the Company, or any predecessor of the Company other
than the Real Property, or (B) any Liability arising pursuant to any
Environmental, Health or Safety Laws with respect to the generation,
storage, treatment, disposal, transportation, shipment offsite, or
other management of Hazardous Materials by the Company or any
predecessor of the Company on or before the Closing Date, where such
predecessor was a Person whose liabilities for environmental matters
the Company has succeeded, in whole or in part, pursuant to
Environmental, Health or Safety Laws, Contract, common Law or operation
of Law;
(vii) the assertion of any claim, demand or Liability against
any member of the Purchaser Group arising from or in connection with
the existence of regulated asbestos containing material in any area of
the Company's facilities located in Fort Worth, Texas; or
(viii) any amount in excess of $7,500 incurred by the
Purchaser Group in connection with the remediation and abatement of
regulated asbestos containing material in the Company's facilities
located in Fort Worth, Texas; or
(ix) the late transmittal of employee contributions from the
Company to the investment manager of its 401(k) plan; or
(x) the assertion of any claim, demand or Liability in excess
of $5,000 arising from or relating to the claims by Xxxxxx X. Xxxxxxxxx
against the Company.
(xi) Pre-Closing Taxes or the breach of a Tax Representation.
(b) BY THE SHAREHOLDERS IN FAVOR OF THE PURCHASER GROUP. Each
Shareholder and his, her or its successors, assigns, heirs, representatives and
estate, as the case may be, agrees
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(severally and not jointly) to indemnify and hold harmless the Purchaser Group
for any and all Losses they may suffer, sustain or incur as a result of:
(i) the untruth, inaccuracy or breach of any representation or
warranty of such Shareholder contained in ARTICLE V of this Agreement
or in the Disclosure Letter, any Related Document to which such
Shareholder is a party or any certificate delivered by such Shareholder
in connection herewith at or before the Closing; or
(ii) the breach by such Shareholder of any agreement or
covenant to be performed by such Shareholder contained in this
Agreement or in any Related Document to which such Shareholder is a
party.
(c) BY PURCHASER AND ACQUISITION SUB IN FAVOR OF THE SHAREHOLDERS.
The Purchaser and Acquisition Sub agree to indemnify and hold harmless the
Shareholders for any and all Losses they may suffer, sustain or incur as a
result of:
(i) the inaccuracy or breach of any representation or warranty
of the Purchaser or Acquisition Sub contained in ARTICLE VII or in any
Related Document to which the Purchaser is a party or any certificate
delivered by the Purchaser or Acquisition Sub in connection herewith or
therewith at or before the Closing; or
(ii) the breach of any agreement or covenant of the Purchaser
or Acquisition Sub to be performed by the Purchaser or Acquisition Sub
contained in this Agreement or in any Related Document to which the
Purchaser is a party.
10.2 LIMITATIONS ON INDEMNIFICATION.
Anything contained herein to the contrary notwithstanding:
(a) INDEMNITY BASKETS FOR THE SHAREHOLDER GROUP. The Purchaser
Group shall not have the right to be indemnified pursuant to SECTION 10.1(A)(I)
for breaches of representations and warranties unless and until the Purchaser
Group shall have incurred on a cumulative basis since the Closing Date aggregate
Losses in an amount exceeding $250,000, in which event the right to be
indemnified shall apply only to the extent such Losses exceed $250,000;
PROVIDED, HOWEVER, that in no event shall the limitations set forth in this
SECTION 10.2(a) apply to the rights of the Purchaser to be indemnified pursuant
to (i) SECTION 10.1(a)(i) with respect to the representations and warranties set
forth in SECTIONS 6.3, 6.4(a), 6.8, 6.17, 6.18, 6.19 and willful breaches and
(ii) SECTIONS 10.1(a)(ii) THROUGH (iv) AND (vi) THROUGH (xi).
(b) INDEMNITY LIMITATIONS FOR THE SHAREHOLDER GROUP. The sum of
all Losses pursuant to which indemnification is payable by the Shareholder Group
pursuant to SECTION 10.1(a)(i) shall not exceed $5,000,000 in the aggregate;
PROVIDED, HOWEVER, that in no event shall the limitations set forth in this
SECTION 10.2(b) apply to the rights of the Purchaser Group to be indemnified
pursuant to (i) SECTION 10.1(a)(i) with respect to the representations and
warranties set forth in SECTIONS 6.3, 6.4(a), 6.8, 6.17, 6.18, 6.19 and willful
breaches and (ii) SECTIONS 10.1(a)(ii) THROUGH (iv) AND (vi) THROUGH (xi).
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(c) INDEMNITY BASKETS FOR THE PURCHASER GROUP. The Shareholders
shall not have the right to be indemnified pursuant to SECTION 10.1(c)(i) for
breaches of representations and warranties unless and until the Shareholders
shall have incurred on a cumulative basis since the Closing Date aggregate
Losses in an amount exceeding $250,000 in which event the right to be
indemnified shall apply only to the extent such Losses exceed $250,000;
PROVIDED, HOWEVER, that in no event shall the limitations set forth in this
SECTION 10.2(c) apply to the rights of the Shareholders to be indemnified
pursuant to SECTION 10.1(c)(i) with respect to the representations and
warranties set forth in SECTIONS 7.2(a) and 7.6 and willful breaches.
(d) INDEMNITY LIMITATIONS FOR THE PURCHASER GROUP. The sum of all
Losses pursuant to which indemnification is payable by the Purchaser and
Acquisition Sub pursuant to SECTION 10.1(c)(i) shall not exceed $5,000,000 in
the aggregate; PROVIDED, HOWEVER, that in no event shall the limitations set
forth in this SECTION 10.2(d) apply to the rights of the Shareholders to be
indemnified pursuant to (i) SECTION 10.1(c)(i) with respect to the
representations and warranties set forth in SECTIONS 7.2(a) and 7.6 and willful
breaches and (ii) SECTION 10.1(c)(ii).
10.3 ASSERTION OF CLAIMS; PAYMENT OF CLAIMS; RIGHT OF SETOFF.
(a) No claim shall be brought under SECTION 10.1 unless the
Indemnified Persons, or any of them, at any time prior to the applicable
Survival Date, give the Indemnifying Persons (i) written notice of the existence
of any such claim, specifying the nature and basis of such claim and the amount
thereof, to the extent known or (ii) written notice pursuant to SECTION 10.4 of
any Third Party Claim, the existence of which might give rise to such a claim.
Upon the giving of such written notice as aforesaid, the Indemnified Persons, or
any of them, shall have the right to commence legal proceedings subsequent to
the Survival Date for the enforcement of their rights under SECTION 10.1.
(b) Any obligation of any Shareholder or the Shareholder Group, as
applicable, to indemnify the Purchaser Group shall be satisfied, to the extent
available, from the Earnout Amount, if any, or, at the option of the Purchaser,
by decreasing the Liquidation Preference pursuant to SECTION 10.7 by an amount
equal to the amount of the indemnification obligation. In the event that the
Preferred Stock has been redeemed, the indemnification obligation exceeds the
amount of the Liquidation Preference or satisfying the indemnification
obligation by decreasing the Liquidation Preference is not otherwise permitted
(by reason of SECTION 10.7 or otherwise), then the indemnification obligation
shall be satisfied by payment of cash. Any obligation of the Purchaser,
Acquisition Sub or the Purchaser Group, as applicable, to indemnify the
Shareholders shall be satisfied by, at the option of the Purchaser, (i)
increasing the Liquidation Preference of the Purchaser Preferred Stock in
accordance with SECTION 10.7 below or (ii) payment of cash by the Purchaser or
any Affiliate. Anything contained in this SECTION 10.3(b) to the contrary
notwithstanding, the settlement of the adjustments set forth in SECTIONS 4.1(c)
and 4.2(b) shall be made by adjustment to the Liquidation Preference as set
forth therein, and not by offset to the Earnout Amount.
(c) The Purchaser Group shall have the right to set-off against
amounts owed by any member of the Purchaser Group for (i) any amount owed by the
Shareholder Group to any member of the Purchaser Group under this Agreement or
otherwise and (ii) any Losses incurred as a result of the indemnification events
set forth in SECTIONS 10.1(a). In the event of the election
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by any member of the Purchaser Group to exercise any right of set-off under this
paragraph, the appropriate member of the Purchaser Group shall deliver a written
notice to the Shareholders specifying the specific right of set-off to be
exercised and the amount thereof.
(d) Notwithstanding the foregoing, an indemnity claim with respect
to Taxes (made pursuant to SECTION 10.1(a)(xi) or otherwise) shall be due and
payable in cash upon the sooner of (i) the filing of a Tax return that requires
payment of indemnified Taxes or (ii) the receipt of notice from a Taxing
authority that indemnified Taxes are due and payable.
10.4 NOTICE AND DEFENSE OF THIRD PARTY CLAIMS.
The obligations and Liabilities of an Indemnifying Person with respect
to Losses resulting from the assertion of Liability by third parties (other than
with respect to Taxes) (each, a "THIRD PARTY CLAIM") shall be subject to the
terms and conditions set forth below.
(a) The Indemnified Persons shall promptly give written notice to
the Indemnifying Persons of any Third Party Claim which might give rise to any
Loss by the Indemnified Persons, stating the nature and basis of such Third
Party Claim, and the amount thereof to the extent known; PROVIDED, HOWEVER, that
no delay on the part of the Indemnified Persons in notifying any Indemnifying
Persons shall relieve the Indemnifying Persons from any Liability or obligation
hereunder unless (and then solely to the extent) the Indemnifying Persons
thereby is prejudiced by the delay. Such notice shall be accompanied by copies
of all relevant documentation with respect to such Third Party Claim, including,
without limitation, any summons, complaint or other pleading which may have been
served, any written demand or any other document or instrument.
(b) If the Indemnifying Persons shall acknowledge in a writing
delivered to the Indemnified Persons that the Indemnifying Persons shall be
obligated under the terms of their indemnification obligations hereunder in
connection with such Third Party Claim, then the Indemnifying Persons shall have
the right to assume the defense of any Third Party Claim at their own expense
and by their own counsel, which counsel shall be reasonably satisfactory to the
Indemnified Persons; PROVIDED, HOWEVER, that the Indemnifying Persons shall not
have the right to assume the defense of any Third Party Claim, notwithstanding
the giving of such written acknowledgment, if (i) the claim seeks only an
injunction or other equitable relief, (ii) the Indemnified Persons shall have
been advised by counsel that there are one or more legal or equitable defenses
available to them which are different from or in addition to those available to
the Indemnifying Persons, and, in the reasonable opinion of the Indemnified
Persons, counsel for the Indemnifying Persons could not adequately represent the
interests of the Indemnified Persons because such interests could be in conflict
with those of the Indemnifying Persons, (iii) such action or Proceeding
involves, or could have a material effect on, any material matter beyond the
scope of the indemnification obligation of the Indemnifying Persons, (iv) the
Indemnifying Persons shall not have assumed the defense of the Third Party Claim
in a timely fashion, or (v) the Indemnifying Persons do not possess the
requisite financial capacity to conduct the defense and provide indemnification
if it is unsuccessful.
(c) If the Indemnifying Persons shall assume the defense of a
Third Party Claim (under circumstances in which the proviso to the first
sentence of SECTION 10.4(b) is not
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applicable), the Indemnifying Persons shall not be responsible for any legal or
other defense costs subsequently incurred by the Indemnified Persons in
connection with the defense thereof. If the Indemnifying Persons do not exercise
their right to assume the defense of a Third Party Claim by giving the written
acknowledgement referred to in SECTION 10.4(b), or are otherwise restricted from
so assuming by the proviso to the first sentence of SECTION 10.4(b), the
Indemnifying Persons shall nevertheless be entitled to participate in such
defense with their own counsel and at their own expense; and in any such case,
the Indemnified Persons may assume the defense of the Third Party Claim, with
counsel which shall be reasonably satisfactory to the Indemnifying Persons, and
shall act reasonably and in accordance with their good faith business judgment
and shall not effect any settlement without the consent of the Indemnifying
Persons, which consent shall not unreasonably be withheld or delayed.
(d) If the Indemnifying Persons exercise their right to assume the
defense of a Third Party Claim, they shall not make any settlement of any claims
without the written consent of the Indemnified Persons, which consent shall not
be unreasonably withheld.
10.5 SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
Subject to the further provisions of this SECTION 10.5, the
representations and warranties of the Shareholders contained in ARTICLE V, the
representations and warranties of the Shareholders and the Company contained in
ARTICLE VI and the representations and warranties of the Purchaser contained in
ARTICLE VII shall survive the Closing Date until May 14, 2002; PROVIDED,
HOWEVER, that (i) the representations and warranties of the Shareholders and the
Company contained in SECTIONS 5.1, 5.2(a), 6.3, 6.4(a), 6.17, 6.18 and 6.19 and
the representations and warranties of the Purchaser contained in SECTIONS 7.2(a)
and 7.6 shall survive the Closing Date without any time limit and (ii) the
representations and warranties set forth in SECTIONS 6.8 and 6.16 shall survive
the Closing Date until the expiration of the statute of limitations, if any,
applicable to the matters set forth therein. The covenants and other agreements
of the parties contained in this Agreement shall survive the Closing Date until
they are otherwise terminated, whether by their terms or as a matter of
applicable law. For convenience of reference, the date upon which any
representation, warranty, covenant or other agreement contained herein shall
terminate, if any, is referred to herein as the "SURVIVAL DATE".
10.6 NO THIRD PARTY RELIANCE.
Anything contained herein to the contrary notwithstanding, the
representations and warranties of the Company and the Shareholders contained in
this Agreement (including, without limitation, the Disclosure Letter) (a) are
being given by the Company and the Shareholders as an inducement to the
Purchaser and Acquisition Sub to enter into this Agreement (and the Company and
the Shareholders acknowledge that the Purchaser and Acquisition Sub have
expressly relied thereon) and (b) are solely for the benefit of the Purchaser,
Acquisition Sub, their Affiliates, successors and assigns. Accordingly, no third
party or anyone acting on behalf of any thereof other than the Indemnified
Persons, and each of them, shall be a third party or other beneficiary of such
representations and warranties and no such third party shall have any rights of
contribution against the Company with respect to such representations or
warranties or any matter subject to or resulting in indemnification under this
ARTICLE X, or otherwise.
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10.7 ADJUSTMENTS TO PURCHASER PREFERRED STOCK.
(a) ADJUSTMENT OF LIQUIDATION PREFERENCE. In the event that this
Agreement requires an increase or decrease in the Liquidation Preference of the
Purchaser Preferred Stock, such increase or decrease shall be made pro rata,
with respect to each share of Purchaser Preferred Stock that has not been
converted into Class B Non-Voting Common Stock, in a manner so that each such
share's Liquidation Preference is increased or decreased, as the case may be, by
the same percentage. For example, if the aggregate Liquidation Preference prior
to an adjustment is $10,000,000, and the Liquidation Preference is to be
decreased by the aggregate amount of $1,000,000, then each share of outstanding
Purchaser Preferred Stock shall have its Liquidation Preference decreased by
10%.
(b) ADJUSTMENT IN NUMBER OF SHARES OF COMMON STOCK. In addition,
in the event that this Agreement requires an increase or decrease in the
Liquidation Preference of the Purchaser Preferred Stock, then, as promptly as
practicable following the determination of the amount by which the Liquidation
Preference is to be increased or decreased, the number of shares of Class B
Non-Voting Common Stock into which the shares of Purchaser Preferred Stock are
convertible shall be adjusted to such number of shares such that the aggregate
anticipated return on the ownership of the Purchaser Preferred Stock will
approximate those returns set forth on SCHEDULE 10.7 hereto (calculated in a
manner consistent with the procedures set forth on SCHEDULE 10.7, including the
use of the assumed valuations for the Class B Non-Voting Common Stock as set
forth therein). The Shareholders acknowledge and agree that SCHEDULE 10.7
includes forward-looking projections with respect to the value of the
Purchaser's capital stock, and the Shareholders acknowledge and agree that
neither the Purchaser, any of its affiliates nor any of their respective
officers, representatives or employees have made any representation or warranty,
express or implied, as to the achievement of such projections. The Shareholders
and their successors, assigns, heirs, representatives and estate acknowledge and
agree that the Purchaser, its affiliates and their respective officers,
representatives and employees shall not be subject to any liability to the
Shareholders or any other Person for the failure of the Purchaser's capital
stock to achieve the anticipated return or the value or values set forth on
SCHEDULE 10.7.
(c) LEGEND. Each certificate evidencing shares of Purchaser
Preferred Stock issued pursuant to this Agreement shall be stamped or otherwise
imprinted with a legend in substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
AN ADJUSTMENT TO THE LIQUIDATION PREFERENCE AND CERTAIN OTHER
TERMS PURSUANT TO THE AGREEMENT AND PLAN OF REORGANIZATION
DATED AS OF MAY 14, 2001, AMONG THE ISSUER OF SUCH SECURITIES
(THE "ISSUER") AND THE OTHER PARTIES THERETO. A COPY OF SUCH
TERMS WILL BE FURNISHED WITHOUT CHARGE BY THE ISSUER TO THE
HOLDER HEREOF UPON WRITTEN REQUEST.
(d) In the event that (i) the parties are not in agreement as to
whether, or the amount by which, the Liquidation Preference is to be increased
or decreased, and/or (ii) the parties are not in agreement as to the number of
shares of Class B Non-Voting Common Stock into which the Purchaser Preferred
Stock is then convertible (the "Conversion Shares"), then, if
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such disagreement exists at the time of a Sale of the Corporation (as defined in
the Certificates of Designation for the Purchaser Preferred Stock), the parties
shall, upon the consummation of the Sale of the Corporation, establish an escrow
account. The Purchaser, on one hand, and the Shareholders, on the other hand,
shall propose the amount of the aggregate Liquidation Preference and/or number
of Conversion Shares that such party believes to be the correct amount. The
proposal which contains the higher amount of Liquidation Preference and/or
number of Conversion Shares, as applicable, shall be referred to as the "Maximum
Proposal", and the lower amount shall be referred to as the "Minimum Proposal".
For purposes of the Sale of the Corporation, the Maximum Proposal shall be
deemed to be the proper amounts, and out of their proceeds from the Sale of the
Corporation the Shareholders shall place in escrow an amount of cash equal to
the difference between the actual amount of proceeds received by the
Shareholders in the Sale of the Corporation and the actual amount of proceeds
that the Shareholders would have received if the Liquidation Preference and the
number of Conversion Shares contained in the Minimum Proposal had been used for
purposes of the Sale of the Corporation. Upon final resolution of the dispute
regarding the Liquidation Preference and/or the amount of Conversion Shares, the
escrow amount (plus earnings thereon, if any) shall be distributed to those
parties who would have been entitled to such amount upon the consummation of the
Sale of the Corporation if the dispute had been resolved prior to the Sale of
the Corporation, or in such other manner as the recipients of such proceeds
shall otherwise agree. Anything contained in this Agreement to the contrary
notwithstanding, the Shareholders hereby consent to the assignment by the
Purchaser to its shareholders (other than the Shareholders) or any
representative thereof the rights of the Purchaser hereunder to resolve the
dispute referred to in this paragraph.
10.8 CLOSING CONSIDERATION ADJUSTMENT.
The parties hereto agree that any indemnity payment made under this
Agreement shall, to the extent permitted by Law, be treated by the parties
hereto as an adjustment to the Closing Consideration.
ARTICLE XI
ADDITIONAL AGREEMENTS
11.1 EXPENSES.
Except as otherwise expressly provided herein, each of the Company and
the Shareholders, on one hand, and the Purchaser and Acquisition Sub, on the
other hand, shall bear their own expenses in connection with the preparation for
and consummation of the transactions contemplated hereby (the "TRANSACTION
EXPENSES"); PROVIDED, HOWEVER, that if the transactions contemplated hereby are
consummated, all Transaction Expenses incurred by the Company (whether incurred
on behalf of the Company and/or the Shareholders) shall be borne by the
Shareholders, be deemed to be Shareholders' Expenses and be deducted from the
Closing Consideration in accordance with the terms of SECTION 3.1 (or, to the
extent not determinable at the Closing, the Shareholders shall pay such expenses
after the Closing), and such expenses shall not in any event be the
responsibility of the Company, the Purchaser, Acquisition Sub or any Affiliate
of the Purchaser. In the event of termination of this Agreement, the obligation
of each
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party to pay its own expenses will be subject to any rights of such party
arising from a breach of this Agreement by another party.
11.2 NONCOMPETITION; NON-SOLICITATION.
(a) The Shareholders acknowledge that the Subject Business has
been conducted by the Company, and substantial sales and offers of the Company's
products have been made, throughout North America, and acknowledges and
recognizes the highly competitive nature of the industry in which the Subject
Business is involved. Accordingly, in consideration of the premises contained
herein, the consideration to be received hereunder and in consideration of and
as an inducement to the Purchaser and Acquisition Sub to consummate the
transactions contemplated hereby, the Shareholders shall not, during the period
of time beginning on the Closing Date and ending on the fifth anniversary of the
Closing Date (the "NON-COMPETE PERIOD"), directly or indirectly, own, manage,
control, participate in, consult with, render services for, or in any manner
engage in or represent (whether for profit or not) any business within any
Restricted Territory that is competitive with the Subject Business or any
product of the Subject Business as the Subject Business is conducted or proposed
to be conducted from and after the Closing Date. Notwithstanding anything to the
contrary contained herein, in the event that Xxxxxxx Xxxxxxxxxx or Xxxxx
Xxxxxxxxxx is terminated by Xxxxx Plastics without "cause" (as such term is used
and defined in the Employment Agreements), the provisions of this SECTION
11.2(A) shall terminate with respect to such terminated employee on the first
anniversary of the Termination Date (as defined in the Employment Agreements),
provided that for so long as either (i) the Purchaser directs Xxxxx Plastics to
extend the duration of severance compensation payments under SECTION 8(b)(ii) of
such terminated employee's Employment Agreement, and Xxxxx Plastics does so
extend and pay, or (ii) the Purchaser pays dividends on the Purchaser Preferred
Stock in an amount equal to or greater than the amount of the severance payments
described in SECTION 8(b)(ii) of such Employment Agreement (either of which
actions in clause (i) or (ii) may be taken in the Purchaser's sole discretion),
the provisions of this SECTION 11.2(a) shall continue to apply to such
terminated employee; provided further, that if the Purchaser Preferred Stock
held by the Shareholders is redeemed at any time, in full or in part, the
provisions of this SECTION 11.2(a) shall continue to apply to such terminated
employee, and neither the Purchaser nor Xxxxx Plastics need take any of the
actions described in clauses (i) and (ii) above. As used in this Agreement,
"RESTRICTED TERRITORY" means any portion of the United States, Canada and Mexico
in which any product, process, good or service has heretofore been manufactured,
provided, sold or offered or promoted for sale by the Company or the Subject
Business during the three-year period preceding the Closing Date or with respect
to which the Company or the Subject Business has devoted substantial expense in
anticipation of launching into such geographic area a portion of the Subject
Business at any time prior to the Closing Date. Nothing herein shall prohibit
any Shareholder from investing in mutual funds or being a passive owner of not
more than 5% of the outstanding stock of any class of a corporation which is
publicly traded, so long as such Shareholder has no active participation in the
business of such corporation.
(b) During the Non-Compete Period, no Shareholder shall directly
or indirectly through another Person (i) induce or attempt to induce any
employee of the Purchaser or the Surviving Corporation to leave the employ of
the Purchaser or the Surviving Corporation or in any way interfere with the
relationship between the Purchaser or the Surviving Corporation, on
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the one hand, and any employee thereof, on the other hand, (ii) hire any person
who was an employee of the Purchaser or until six months after such individual's
employment relationship with the Purchaser or the Surviving Corporation has been
terminated or (iii) induce or attempt to induce any customer, supplier, licensee
or other business relation of the Purchaser or the Surviving Corporation to
cease doing business with the Purchaser or the Surviving Corporation, or in any
way interfere with the relationship between any such customer, supplier,
licensee or business relation, on the one hand, the Purchaser or the Surviving
Corporation, on the other hand.
(c) If, at the time of enforcement of this SECTION 11.2, a court
holds that the restrictions stated herein are unreasonable under the
circumstances then existing, the parties hereto agree that the maximum period,
scope or geographical area reasonable under such circumstances shall be
substituted for the stated period, scope or area. The parties hereto acknowledge
that money damages would be an inadequate remedy for any breach of this SECTION
11.2. Therefore, in the event of a breach or threatened breach of this SECTION
11.2, the Purchaser or its successors or assigns may, in addition to other
rights and remedies existing in their favor, apply to any court of competent
jurisdiction for specific performance and/or injunctive or other relief in order
to enforce, or prevent any violations of, the provisions of this SECTION 11.2
(without posting a bond or other security).
11.3 USE OF NAME.
None of the Shareholders shall allege or assert that the name "Pescor"
or any variant thereof (the "Names") has become distinctive and unique and the
Shareholders shall not allege or assert that the Names have not obtained
secondary meaning, identifying the Names or any variant thereof as the source of
goods associated with such Name. Each of the Shareholders undertakes in this
Agreement as a matter of contract to refrain from (a) owning any interest,
directly or indirectly, in, or becoming associated with or otherwise lending any
aid or support to, any Person (other than the Company, the Purchaser or any
Affiliate thereof) using the Names or (b) performing any service or offering any
goods identified with the Names in a manner that is likely to cause confusion in
the minds of ordinary purchasers, except on behalf of the Surviving Corporation,
the Purchaser or any Affiliate thereof. In connection therewith, it is agreed
that the undertaking under this SECTION 11.3 is of a special and unique nature,
the loss of which cannot be adequately compensated for in damages by an action
at law, and that the breach or threatened breach of the provisions of this
SECTION 11.3 would cause the Company, the Purchaser and their Affiliates
irreparable harm. In the event of any such breach, the Company and the Purchaser
shall be entitled, as a matter of right, to injunctive and other equitable
relief without waiving any other rights which they may have to damages or
otherwise.
11.4 RELATIONSHIPS WITH VENDORS AND CUSTOMERS.
From and after the date hereof, neither the Company nor the
Shareholders shall take or fail to take any action which could reasonably be
expected to, directly or indirectly, have an adverse effect on the business or
operations of the Surviving Corporation as of the Effective Time, or on the
business relationship between the Surviving Corporation or the Purchaser and any
vendor, supplier or customer thereof.
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11.5 TERMINATION OF AFFILIATE TRANSACTIONS.
The Shareholders agree that, effective as of the Effective Time and
without any further action by the Company or the Shareholders, the Company shall
be released from any and all obligations and liabilities under (a) the
agreements set forth in the Disclosure Letter in response to SECTION 6.19 and
(ii) any and all agreements that were not, but by their terms should have been,
set forth on SCHEDULE 6.19 to the Disclosure Letter, and all such agreements
shall have no further force or effect as of the Closing; provided that the
provisions of this SECTION 11.5 shall not apply to those arrangements set forth
on SCHEDULE 11.5 to the Disclosure Letter.
11.6 7-ELEVEN CONSENT.
The Shareholders shall exercise best efforts to obtain, within 30 days
after the Closing Date, obtain, and cooperate with the Company in obtaining, the
7-Eleven Assignment which consent and assignment shall be in form and substance
satisfactory to the Purchaser and the Surviving Corporation and their counsel.
11.7 CERTAIN TAX MATTERS.
(a) All transfer, documentary, sales, use, registration and other
such Taxes (including, but not limited to, all applicable real estate transfer
or gains taxes and stock transfer Taxes), any penalties, interest and additions
to Tax and fees resulting from or incurred in connection with this Agreement and
the consummation of the transactions contemplated hereby shall be paid by the
Shareholders. Each party to this Agreement shall cooperate in the timely making
of all filings, returns, reports and forms as may be required in connection
therewith.
(b) The parties to this Agreement intend and agree that the Merger
shall be taxed as a "reorganization" pursuant to SECTION 368(a)(1)(A) AND
368(a)(2)(d) of the Code and that each of the Company, Acquisition Sub and the
Purchaser shall be a party to such reorganization. Each such party (i)
represents that it does not believe that any conditions exist with respect to
any facts or circumstances relating to such party that could reasonably be
expected to prevent the Merger from qualifying as a "reorganization," and (ii)
covenants to report the Merger as a "reorganization" on all Tax returns. If the
aggregate consideration paid or to be paid to the Shareholders pursuant to this
Agreement (taking into account any adjustments pursuant to SECTION 4.1(c),
4.2(b), 4.3(b), Article 10 or otherwise) is such that the proportion of cash
exceeds an amount that could reasonably be expected to cause the Merger to fail
to qualify as a "reorganization" for Federal tax purposes, then the parties
shall adjust such consideration so that the Merger so qualifies.
(c) The Shareholders jointly and severally represent and warrant
(the "TAX REPRESENTATION") to the Purchaser and Acquisition Sub:
(i) Acquisition Sub will acquire at least 90 percent of the
fair market value of the net assets and at least 70 percent of the fair
market value of the gross assets held by the Company immediately prior
to the Merger. For purposes of this representation, amounts paid by the
Company to dissenters, amounts paid by the Company to shareholders who
receive cash or other property, Company assets used to pay its Merger
related expenses, and all redemptions and distributions (except for
regular, normal
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dividends) made by the Company immediately preceding the Merger, will
be included as assets of the Company held immediately prior to the
transaction.
(ii) No Shareholder has any plan or intention to sell to the
Purchaser any Purchaser Preferred Stock acquired pursuant to the
Merger.
(iii) The liabilities of the Company assumed by Acquisition
Sub and the liabilities to which the transferred assets of the Company
are subject were incurred by the Company in the ordinary course of its
business.
(iv) The Shareholders and the Company will each pay their
respective expenses incurred in connection with the Merger.
(v) The Company is not an investment company as defined in
Section 368(a)(2)(F)(iii) and (iv) of the Code.
(vi) The Company is not under the jurisdiction of a court in a
Title 11 or similar case within the meaning of Section 368(a)(3)(A) of
the Code.
ARTICLE XII
TERMINATION; EFFECT OF TERMINATION
12.1 TERMINATION.
This Agreement may be terminated at any time prior to the Closing by:
(a) the mutual consent of the Purchaser and the Shareholders; or
(b) the Purchaser, if there has been a breach by the Company or
any Shareholder of any representation, warranty, covenant or agreement set forth
in this Agreement on the part of the Company or the Shareholders, which breach
is material and which such party fails to cure within 10 Business Days after
notice thereof is given by the Purchaser (except no cure period shall be
provided for a breach which by its nature cannot be cured); or
(c) the Shareholders, if there has been a breach by the Purchaser
or Acquisition Sub of any representation, warranty, covenant or agreement set
forth in this Agreement on the part of the Purchaser or Acquisition Sub, which
breach is material and which such party fails to cure within 10 Business Days
after notice thereof is given by the Shareholders (except no cure period shall
be provided for a breach which by its nature cannot be cured); or
(d) the Purchaser or the Shareholders, if the conditions set forth
in SECTION 9.1 shall not have been satisfied or waived (to the extent they may
be waived) by May 31, 2001; or
(e) the Purchaser, if the conditions set forth in SECTION 9.2
shall not have been satisfied or waived (to the extent they may be waived) by
May 31, 2001; or
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(f) the Shareholders, if the conditions set forth in SECTION 9.3
shall not have been satisfied or waived (to the extent they may be waived) by
May 31, 2001; or
(g) the Purchaser or the Shareholders, if any permanent injunction
or other Order of a court or other competent authority preventing the Closing
shall have become final and nonappealable;
PROVIDED, HOWEVER, that neither the Purchaser nor the Shareholders shall be
entitled to terminate this Agreement pursuant to SECTION 12.1(d), (e) or (f) if
such party's intentional breach (or, with respect to the Shareholders, the
Company's intentional breach) of this Agreement has prevented the satisfaction
of a condition. Any termination pursuant to SECTION 12.1(a) shall be effected by
a written instrument signed by the Purchaser and the Shareholders, and any
termination pursuant to SECTION 12.1 (other than a termination pursuant to
SECTION 12.1(a)) shall be effected by written notice from the party or parties
so terminating to the other parties hereto, which notice shall specify the
Section hereof pursuant to which this Agreement is being terminated.
12.2 EFFECT OF TERMINATION.
In the event of the termination of this Agreement as provided in
SECTION 12.1, this Agreement shall be of no further force or effect, except for
SECTION 8.7, SECTION 11.1, this SECTION 12.2 and ARTICLE XIII, each of which
shall survive the termination of this Agreement; PROVIDED, HOWEVER, that the
Liability of any party for any breach by such party of the representations,
warranties, covenants or agreements of such party set forth in this Agreement
occurring prior to the termination of this Agreement shall survive the
termination of this Agreement and, in addition, in the event of any action for
breach of contract in the event of a termination of this Agreement, the
prevailing party shall be reimbursed by the other party to the action for
reasonable attorneys' fees and expenses relating to such action.
ARTICLE XIII
MISCELLANEOUS PROVISIONS
13.1 MODIFICATION AND AMENDMENT.
This Agreement may not be amended or modified except by an instrument
in writing signed on behalf of the Shareholders and the Purchaser.
13.2 EXTENSION; WAIVER.
At any time prior to the Closing, the parties may (a) extend the time
for the performance of any of the obligations or other acts of the other
parties, (b) waive any inaccuracies in the representations and warranties
contained in this Agreement or in any document delivered pursuant to this
Agreement and (c) waive compliance with any of the agreements or conditions
contained in this Agreement. Any agreement on the part of a party to any such
extension or waiver shall be valid only if set forth in an instrument in writing
signed on behalf of such party, and any such waiver shall not operate or be
construed as a waiver of any subsequent breach by the other party.
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13.3 ENTIRE AGREEMENT.
This Agreement and the other agreements and documents referenced herein
(including, but not limited to, the Disclosure Letter, the Related Documents and
the Exhibits (in their executed form), attached hereto) contain all of the
agreements among the parties hereto with respect to the transactions
contemplated hereby and supersede all prior agreements or understandings among
the parties with respect thereto (including, but not limited to, the Amended and
Restated Letter of Intent dated as of December 21, 2000 among the Purchaser, the
Company, the Shareholders and KVL).
13.4 SEVERABILITY.
It is the desire and intent of the parties that the provisions of this
Agreement be enforced to the fullest extent permissible under the Law and public
policies applied in each jurisdiction in which enforcement is sought.
Accordingly, in the event that any provision of this Agreement would be held in
any jurisdiction to be invalid, prohibited or unenforceable for any reason, such
provision, as to such jurisdiction, shall be ineffective, without invalidating
the remaining provisions of this Agreement or affecting the validity or
enforceability of such provision in any other jurisdiction. Notwithstanding the
foregoing, if such provision could be more narrowly drawn so as not to be
invalid, prohibited or unenforceable in such jurisdiction, it shall, as to such
jurisdiction, be so narrowly drawn, without invalidating the remaining
provisions of this Agreement or affecting the validity or enforceability of such
provision in any other jurisdiction.
13.5 NO THIRD-PARTY BENEFICIARIES; SUCCESSORS AND ASSIGNS.
Except as expressly provided herein, this Agreement shall not confer
any rights or remedies upon any Person other than the parties hereto and their
respective successors and permitted assigns. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns, representatives, heirs and estates, as the
case may be. Subject to the consent granted by the Shareholders in the last
sentence of SECTION 10.7(d), this Agreement shall not be assignable by any party
hereto without the consent of the other parties hereto; PROVIDED, HOWEVER, that
anything contained herein to the contrary notwithstanding, the Purchaser and
Acquisition Sub may, without the prior written consent of any other party,
assign any or all of its rights and interests hereunder to any lender or lenders
providing financing for the transactions contemplated hereby and/or to any
wholly-owned subsidiary of the Purchaser.
13.6 NOTICES.
All notices or other communications pursuant to this Agreement shall be
in writing and shall be deemed to be sufficient if delivered personally,
telecopied, sent by nationally-recognized, overnight courier or mailed by
registered or certified mail (return receipt requested), postage prepaid, to the
parties at the following addresses (or at such other address for a party as
shall be specified by like notice):
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(i) if, prior to the Closing Date, to the Company, to:
Pescor Plastics, Inc.
0000 X. Xxxx
Xxxx Xxxxx, Xxxxx 00000
Attention: Xxxxxxx Xxxxxxxxxx
Facsimile: 000-000-0000
Telephone: 000-000-0000
with a copy to:
Xxxxxxx & Waters
0000 X. Xxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxxxxx, Xxxxx 00000
Attention: Xxxxxxx X. Xxxxxxx, Esq.
Facsimile: 000-000-0000
Telephone: 000-000-0000
(ii) if to any Shareholder, to such Person at the address set
forth on SCHEDULE I hereto
with a copy to:
Xxxxxxx & Xxxxxx
0000 X. Xxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxxxxx, Xxxxx 00000
Attention: Xxxxxxx X. Xxxxxxx, Esq.
Facsimile: 000-000-0000
Telephone: 000-000-0000; and
(iii) if to the Purchaser, the Surviving Corporation or
Acquisition Sub, to:
BPC Holding Corporation
c/o
Berry Plastics Corporation
000 Xxxxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxx 00000
Attention: Xxxxxx X. Xxxxxx
Facsimile: 000-000-0000
Telephone: 000-000-0000
with a copy to:
X'Xxxxxxxx Graev & Karabell, LLP
00 Xxxxxxxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx X. X'Xxxxx, Esq.
Facsimile: (000) 000-0000
Telephone: (000) 000-0000.
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All such notices and other communications shall be deemed to have been given and
received (i) in the case of personal delivery, on the date of such delivery,
(ii) in the case of delivery by facsimile, on the date of such delivery, (iii)
in the case of delivery by nationally-recognized, overnight courier, on the
Business Day following dispatch, and (iv) in the case of mailing, on the third
Business Day following such mailing.
13.7 COUNTERPARTS AND FACSIMILE EXECUTION.
This Agreement may be executed in two or more counterparts, all of
which shall be considered one and the same agreement and shall become effective
when one or more counterparts have been signed by each of the parties and
delivered (by facsimile or otherwise) to the other party, it being understood
that all parties need not sign the same counterpart. Any counterpart or other
signature to this Agreement or any Related Document that is delivered by
facsimile shall be deemed for all purposes as constituting good and valid
execution and delivery by such party of this Agreement or such Related Document.
13.8 GOVERNING LAW.
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE DOMESTIC LAWS OF THE STATE OF
NEW YORK WITHOUT GIVING EFFECT TO ANY CHOICE
OR CONFLICT OF LAW PROVISION OR RULE (WHETHER OF THE STATE OF
NEW YORK OR ANY
OTHER JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY
JURISDICTION OTHER THAN THE STATE OF
NEW YORK.
13.9 INCORPORATION OF EXHIBITS AND SCHEDULES.
The Exhibits, Schedules and the Disclosure Letter identified in this
Agreement are incorporated herein by reference and made a part hereof.
13.10 CONSTRUCTION.
Where specific language is used to clarify by example a general
statement contained herein, such specific language shall not be deemed to
modify, limit or restrict in any manner the construction of the general
statement to which it relates. The language used in this Agreement shall be
deemed to be the language chosen by the parties to express their mutual intent,
and no rule of strict construction shall be applied against any party.
13.11 REMEDIES.
Subject to the provisions of SECTION 12.2, the parties shall each have
and retain all other rights and remedies existing in their favor at law or
equity, including, without limitation, any actions for specific performance
and/or injunctive or other equitable relief (including, without limitation, the
remedy of rescission) to enforce or prevent any violations of the provisions of
this Agreement.
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13.12 WAIVER OF JURY TRIAL.
EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL
BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO
THIS AGREEMENT.
13.13 INDEPENDENCE OF COVENANTS AND REPRESENTATIONS AND WARRANTIES.
All covenants hereunder shall be given independent effect so that if a
certain action or condition constitutes a default under a certain covenant, the
fact that such action or condition is permitted by another covenant shall not
affect the occurrence of such default, unless expressly permitted under an
exception to such initial covenant. In addition, all representations and
warranties hereunder shall be given independent effect so that if a particular
representation or warranty proves to be incorrect or is breached, the fact that
another representation or warranty concerning the same or similar subject matter
is correct or is not breached will not affect the incorrectness of or a breach
of a representation and warranty hereunder. Each representation, warranty and
covenant shall be given independent effect so that if a particular
representation, warranty or covenant is breached the fact that another
representation, warranty or covenant pertaining to the same or similar subject
matter is not breached will not affect the breach or enforceability of such
representation, warranty or covenant.
13.14 INTERPRETATION.
(a) The headings of the sections of this Agreement are inserted as
a matter of convenience and for reference only and in no way define, limit or
describe the scope of this Agreement or the meaning of any provision of this
Agreement.
(b) The words "hereof", "herein", and "hereunder" and words of
similar import, when used in this Agreement, shall refer to this Agreement as a
whole and not to any particular provision of this Agreement.
(c) Unless otherwise specifically stated to the contrary,
references to sections, schedules and exhibits contained herein refer to the
respective sections, schedules and exhibits in this Agreement.
(d) Whenever the words "included", "includes" or "including" are
used in this Agreement, they shall be deemed to be followed by the words
"without limitation".
(e) Terms defined in the singular shall have a comparable meaning
when used in the plural, and vice versa.
(f) Whenever the context may require, any pronouns used herein
shall indicate the corresponding masculine, feminine or neuter forms, and the
singular form of nouns and pronouns shall include the plural and vice-versa.
**********
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IN WITNESS WHEREOF, each of the parties hereto has duly
executed this Agreement and Plan of Reorganization as of the date first written
above.
BPC HOLDING CORPORATION
By: /s/ Xxxxx X. Xxxxxxxxxx
---------------------------------------------
Name: Xxxxx X. Xxxxxxxxxx
Title: Vice President and Secretary
PESCOR, INC.
By: /s/ Xxxxx X. Xxxxxxxxxx
---------------------------------------------
Name: Xxxxx X. Xxxxxxxxxx
Title: Vice President and Secretary
PESCOR PLASTICS, INC.
By: /s/ Xxxxxxx X. Xxxxxxxxxx
---------------------------------------------
Name: Xxxxxxx X. Xxxxxxxxxx
Title: President and Secretary
THE SHAREHOLDERS:
/s/ Xxxxxxx X. Xxxxxxxxxx
------------------------------------------------------
Xxxxxxx X. Xxxxxxxxxx
/s/ Xxxxx X. Xxxxxxxxxx
------------------------------------------------------
Xxxxx X. Xxxxxxxxxx
KSR FAMILY, LTD.
BY AND THROUGH ITS GENERAL PARTNER,
XXXXX X. XXXXXXXXXX
By: /s/ Xxxxx X. Xxxxxxxxxx
---------------------------------------------
Name: Xxxxx X. Xxxxxxxxxx
Title: General Partner
KMK FAMILY, LTD.
BY AND THROUGH ITS GENERAL PARTNER,
XXXXXXX X. XXXXXXXXXX
By: /s/ Xxxxxxx X. Xxxxxxxxxx
---------------------------------------------
Name: Xxxxxxx X. Xxxxxxxxxx
Title: General Partner
XXXXXXXXXX VENTURES, LTD.
BY AND THROUGH ITS GENERAL PARTNER,
SHAMROCK INVESTMENTS, L.L.C.
By: /s/ XXXXXXX X. XXXXXXXXXX
---------------------------------------------
Name: Xxxxxxx X. Xxxxxxxxxx
Title: Vice President
ANNEX I
DEFINITIONS
The following terms used in the Agreement shall have the
respective meanings set forth below.
"15-DAY PERIOD" has the meaning set forth in SECTION
4.1(b)(ii).
"7-ELEVEN ASSIGNMENT" means the assignment of the License
Agreement dated September 9, 1999, among 7-Eleven, Inc., the Company and KVL.
"ACCOUNTANTS' DETERMINATION" has the meaning set forth in
SECTION 4.1(b)(ii).
"ACCOUNTANTS' EARNOUT DETERMINATION" has the meaning set forth
in SECTION 4.3(b)(ii).
"ACQUISITION SUB" has the meaning set forth in the caption.
"ACTUAL CAPX AMOUNT" has the meaning set forth in SECTION
4.2(a).
"ADDITIONAL CONSIDERATION" has the meaning set forth in
SECTION 3.1(a).
"AFFILIATE" means, with respect to any Person, (i) a director,
officer or stockholder of such Person, (ii) a spouse, parent, sibling or
descendant of such Person (or spouse, parent, sibling or descendant of any
director or executive officer of such Person), and (iii) any other Person that,
directly or indirectly through one or more intermediaries, Controls, or is
Controlled by, or is under common Control with, such Person.
"AGREEMENT" has the meaning set forth in the Preamble.
"ARBITRATING ACCOUNTANTS" has the meaning set forth in SECTION
4.1(b)(ii).
"XXXXX PLASTICS" means Xxxxx Plastics Corporation, a wholly
owned subsidiary of the Purchaser.
"BEST KNOWLEDGE" of any Person shall mean and include (i)
actual knowledge and (ii) that knowledge which a prudent businessperson could
have obtained in the management of his business affairs after making due inquiry
and exercising due diligence which a prudent businessperson should have made or
exercised, as applicable, with respect thereto. In connection therewith, the
knowledge (both actual and constructive) of Xxxxxxx Xxxxxxxxxx, Xxxxx
Xxxxxxxxxx, Xxxxxxx Xxxxxxxx, Xxxx Xxxxxxxxx, Xxxxxxx O'Hair and Xxxxxxxx
Xxxxxxxxx shall be imputed to be the knowledge of the Company.
"BUSINESS DAY" means any day that is not a Saturday, Sunday or
a day on which banking institutions in
New York,
New York are not required to be
open.
"CAPITAL LEASE OBLIGATIONS" has the meaning set forth in
SECTION 3.1(a).
A-1
"CAPX AMOUNT" has the meaning set forth in SECTION 4.2(b).
"CAPX EXCESS AMOUNT" has the meaning set forth in SECTION
4.2(b)(i).
"CAPX SHORTFALL AMOUNT" has the meaning set forth in SECTION
4.2(b)(ii).
"CAPX STATEMENT" has the meaning set forth in SECTION 4.2(b).
"CAPX TARGET" has the meaning set forth in SECTION 4.2(b)(i).
"CERCLA" means the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended.
"CERTIFICATE OF DESIGNATION" shall have the meaning set forth
in SECTION 2.8(b)(iii).
"CERTIFICATES OF MERGER" has the meaning set forth in the
Preamble.
"CHANGE OF CONTROL AMOUNT" has the meaning set forth in
SECTION 3.1(a).
"CLOSING CASH CONSIDERATION" has the meaning set forth in
SECTION 3.1(a).
"CLOSING CONSIDERATION" has the meaning set forth in SECTION
3.1(a).
"CLOSING DATE" has the meaning set forth in SECTION 2.7.
"CLOSING STOCK CONSIDERATION" has the meaning set forth in
SECTION 3.1(a).
"CLOSING" has the meaning set forth in SECTION 2.7.
"COBRA" has the meaning set forth in SECTION 6.16(b)(viii).
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMMON STOCK" has the meaning set forth in SECTION 6.3.
"COMPANY COMMON STOCK" has the meaning set forth in the
Preamble.
"COMPANY" has the meaning set forth in the caption.
"COMPENSATION AMOUNT" has the meaning set forth in SECTION
3.1.
"CONFIDENTIAL INFORMATION" means Intellectual Property Rights
of the Company and all information of a proprietary or confidential nature
relating to the Company or the Subject Business, excluding any information that
(i) as of the Closing Date, is in the public domain, (ii) after the Closing Date
enters the public domain through no wrongful action or inaction on the part of
any Shareholder, and (iii) is communicated to a Shareholder by a third party
under no duty of secrecy or confidentiality to any Person.
"CONSTITUENT CORPORATIONS" has the meaning set forth in
SECTION 2.1.
A-2
"CONTRACT" means any written or oral loan or credit agreement,
note, bond, mortgage, indenture, lease, sublease, purchase order or other
agreement, instrument, permit, concession, franchise or license.
"CONTROL" means, with respect to any Person, the possession,
directly or indirectly, of the power to direct or cause the direction of the
management or policies of a Person, whether through the ownership of voting
securities, by contract or otherwise.
"CORPORATE RIGHTS" has the meaning set forth in SECTION 2.3.
"DELAWARE CERTIFICATE OF MERGER" has the meaning set forth in
the Preamble.
"DELAWARE STATUTE" has the meaning set forth in the Preamble.
"DISCLOSURE LETTER" has the meaning set forth in SECTION 5.1.
"EFFECTIVE TIME" has the meaning set forth in SECTION 2.2.
"EMPLOYEE BENEFIT PLAN" means any (a) qualified or
non-qualified Employee Pension Benefit Plan (including any MULTIPLE EMPLOYER
PLANS (as defined in Section 413 of the code) or MULTI-EMPLOYER PLANS (as
defined in Section 3(37) of ERISA)), (b) Employee Welfare Benefit Plan, or (c)
employee benefit, fringe benefit, bonus plan or other plan, program or
arrangement, whether or not subject to ERISA and whether or not funded.
"EMPLOYEE PENSION BENEFIT PLAN" shall have the meaning set
forth in SECTION 3(2) of ERISA.
"EMPLOYEE PLANS" has the meaning set forth in SECTION 6.16(a).
"EMPLOYEE WELFARE BENEFIT PLAN" shall have the meaning set
forth in SECTION 3(1) of ERISA.
"EMPLOYMENT AGREEMENTS" means each of the Employment
Agreements to be dated as of the Closing Date between Xxxxx Plastics and Xxxxxxx
X. Xxxxxxxxxx and Xxxxx X. Xxxxxxxxxx substantially in the form of EXHIBIT E
attached hereto.
"ENCUMBRANCES" means and includes security interests,
mortgages, liens, pledges, charges, easements, reservations, restrictions,
clouds, equities, rights of way, options, rights of first refusal and all other
encumbrances, whether or not relating to the extension of credit or the
borrowing of money.
"ENVIRONMENTAL, HEALTH AND SAFETY LAWS" means all federal,
state, local and foreign statutes, regulations, ordinances and similar
provisions having the force or effect of law, all judicial and administrative
orders and determinations, all contractual obligations and all common law
concerning public health and safety, worker health and safety, and pollution or
protection of the environment, including without limitation all those relating
to the presence, use, production, generation, handling, transportation,
treatment, storage, disposal, distribution, labeling, testing, processing,
discharge, release, threatened release, control, or cleanup of any
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hazardous materials, substances or wastes, chemical substances or mixtures,
pesticides, pollutants, contaminants, toxic chemicals, petroleum products or
byproducts, asbestos, polychlorinated biphenyls, noise or radiation, as such of
the foregoing are enacted or in effect, prior to, on, or after the Closing Date.
"ERISA AFFILIATE" means, with respect to any Person, any
entity that is a member of a "controlled group of corporations" with, or is
under "common control" with, or is a member of the same "affiliated service
group" with such Person as defined in Section 414(b), 414(c) or 414(m) of the
Code.
"ERISA" means the Employment Retirement Income Security Act of
1974, as amended.
"FINAL DETERMINATION DATE" has the meaning set forth in
SECTION 4.1(b)(iii).
"FINAL NET WORKING CAPITAL STATEMENT" has the meaning set
forth in SECTION 4.1(a).
"FINAL NET WORKING CAPITAL" has the meaning set forth in
SECTION 4.1(a).
"FINANCIAL STATEMENTS" has the meaning set forth in SECTION
6.5(a).
"FUNDAMENTAL DOCUMENTS" means the documents by which any
Person (other than an individual) establishes its legal existence or which
govern its internal affairs. For example, the "FUNDAMENTAL DOCUMENTS" of a
corporation would be its certificate of incorporation and by-laws.
"FUNDED INDEBTEDNESS" has the meaning set forth in SECTION
3.1(a).
"GAAP" has the meaning set forth in SECTION 4.1(a).
"GOVERNMENTAL ENTITY" means any court, administrative agency
or commission or other governmental authority or instrumentality, domestic or
foreign, Federal, state or local.
"GUARANTY" has the meaning set forth in SECTION 3.1(a).
"HAZARDOUS MATERIALS" means any chemicals, materials or
substances with respect to which any Liability or standards of conduct may be
imposed pursuant to any Environmental, Health and Safety Law).
"HIPAA" has the meaning set forth in SECTION 6.16(b)(viii).
"INDEBTEDNESS DOCUMENTS" has the meaning set forth in SECTION
6.5(c).
"INDEMNIFIED PERSONS" means the Purchaser Group, the Company,
or the Shareholders, as the case may be.
"INDEMNIFYING PERSONS" means the Purchaser, Acquisition Sub,
the Shareholders or the Shareholder Group, as the case may be.
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"INTELLECTUAL PROPERTY RIGHTS" means all industrial and
intellectual property rights, including, without limitation, patents, patent
applications, patent rights, trademarks, trademark applications, trade names,
service marks, service xxxx applications, copyrights, copyright applications,
know-how, trade secrets, proprietary processes and formulae, confidential
information, franchises, licenses, inventions, instructions, marketing
materials, trade dress, logos and designs and all documentation and media
constituting, describing or relating to the foregoing, including, without
limitation, manuals, memoranda and records.
"INTER-COMPANY ACCOUNTS" has the meaning set forth in SECTION
6.19.
"INVENTION ASSIGNMENT AGREEMENTS" means, collectively, the
Invention Assignment Agreement to be dated as of the Closing Date between Xxxxx
Plastics and each of Xxxxxxx Xxxxxxxxxx and Xxxxx Xxxxxxxxxx.
"JOINDER AGREEMENT" means the Joinder Agreement to the
Stockholders Agreement dated as of June 18, 1996 among the Purchaser and the
other parties thereto to be delivered by the Shareholders.
"KVL" means Xxxxxxxxxx Ventures, Ltd.
"LATEST BALANCE SHEET DATE" has the meaning set forth in
SECTION 6.5(a).
"LATEST BALANCE SHEET" has the meaning set forth in SECTION
6.5(a).
"LAW" means any law, statute, treaty, rule, directive or
regulation or Order of any Governmental Entity.
"LEASE AMENDMENT" means the First Amendment to Lease Agreement
to be entered into between KVL and the Surviving Corporation, in the form
attached hereto as EXHIBIT F.
"LEASED PROPERTY" has the meaning set forth in SECTION
6.10(a).
"LIABILITY" means any liability or obligation, whether known
or unknown, asserted or unasserted, absolute or contingent, accrued or
unaccrued, liquidated or unliquidated and whether due or to become due,
regardless of when asserted.
"LIQUIDATION PREFERENCE" of a share of Purchaser Preferred
Stock has the meaning set forth in the Certificate of Designation.
"LOSSES" means any and all losses, claims, shortages, damages,
liabilities, expenses (including reasonable attorneys' and accountants' and
other professionals' fees), assessments, Tax deficiencies and Taxes incurred in
connection with the receipt of indemnification payments (including interest or
penalties thereon) arising from or in connection with any such matter that is
the subject of indemnification under SECTION 9.1.
"MATERIAL ADVERSE CHANGE" means, with respect to any Person,
any material adverse change in the business, operations, assets (including
levels of working capital and
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components thereof), condition (financial or otherwise), operating results,
Liabilities, employee relations or business prospects of such Person or any
material casualty loss or damage to the assets of such Person, whether or not
covered by insurance.
"MATERIAL ADVERSE EFFECT" on any Person means a material
adverse effect on the business, operations, assets (including levels of working
capital and components thereof), condition (financial or otherwise), operating
results, Liabilities, employee relations or business prospects of such Person.
"MAXIMUM CONSIDERATION" has the meaning set forth in SECTION
3.1(a).
"MERGER SHARES" has the meaning set forth SECTION 3.1(a).
"MERGER" has the meaning set forth in the Preamble.
"NAMES" has the meaning set forth in SECTION 11.3.
"NET SALES STATEMENT" has the meaning set forth in SECTION
4.3(a).
"NET WORKING CAPITAL TARGET" has the meaning set forth in
SECTION 4.1(c)(i).
"NON-COMPETE PERIOD" has the meaning set forth in SECTION
11.2(a).
"NOTICE OF ADJUSTMENT" has the meaning set forth in SECTION
4.1(b)(i).
"OBJECTION NOTICE" has the meaning set forth in SECTION
4.1(b)(ii).
"ORDERS" means judgments, writs, decrees, compliance
agreements, injunctions or orders of any Governmental Entity or arbitrator.
"OVERPAYMENT AMOUNT" has the meaning set forth in SECTION
4.1(c)(ii).
"OWNED REAL PROPERTY" has the meaning set forth in SECTION
6.10(a).
"PER SHARE ADDITIONAL AMOUNT" has the meaning set forth in
SECTION 3.1(a).
"PER SHARE CLOSING AMOUNT" has the meaning set forth in
SECTION 3.1(a).
"PER SHARE PURCHASER STOCK NUMBER" has the meaning set forth
in SECTION 3.1(a).
"PERMITS" means all permits, licenses, authorizations,
registrations, franchises, approvals, certificates, variances and similar rights
obtained, or required to be obtained, from Governmental Entities.
"PERMITTED ENCUMBRANCES" means (i) Encumbrances for Taxes not
yet due and payable or being contested in good faith by appropriate proceedings
and for which there are adequate reserves on the books, (ii) workers or
unemployment compensation liens arising in the ordinary course of business; and
(iii) mechanic's, materialman's, supplier's, vendor's or similar liens arising
in the ordinary course of business securing amounts that are not delinquent.
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"PERSON" shall be construed broadly and shall include an
individual, a partnership, a corporation, a limited liability company, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization or a governmental entity (or any department, agency or political
subdivision thereof).
"POTENTIAL TRANSACTION" has the meaning set forth in SECTION
8.8(a).
"PRE-CLOSING TAXES" means (i) all Taxes and liability to pay
Taxes for any taxable period that ends on or prior to the Closing Date, (ii) for
taxable periods that begin before and end after the Closing Date (A) all Taxes
and liability to pay Taxes based on the net or gross income of the Company that
was earned on or accrued prior to the Closing Date based on a closing of the
Company's books on the Closing Date and (B) for all other Taxes, the total
amount of such Taxes for the applicable taxable period multiplied by a fraction,
the numerator of which is the number of days of such period before and including
the Closing Date, and the denominator of which is the total number of days in
such period and (iii) all expenses associated with the Taxes and liability to
pay Taxes described in (i) and (ii) above.
"PROCEEDINGS" means actions, suits, claims, investigations or
legal or administrative or arbitration proceedings.
"PROPORTIONATE PERCENTAGE" has the meaning set forth in
SECTION 3.1(a).
"PURCHASER GROUP" means the Purchaser, Acquisition Sub and,
following the Closing, the Surviving Corporation, and each of their respective
successors and assigns, officers, directors, employees, representatives and
Affiliates, other than any Shareholder and any Person who is an officer or
employee of the Company prior to the Effective Time.
"PURCHASER PREFERRED STOCK" has the meaning set forth in
SECTION 3.1(a).
"PURCHASER" has the meaning set forth in the caption.
"REAL PROPERTY" has the meaning set forth in SECTION 6.10(a).
"RELATED DOCUMENTS" means any and all other agreements entered
into on the Closing Date in connection with the transactions contemplated
hereby.
"RELEASED PERSONS" has the meaning set forth in SECTION
8.9(a).
"REQUISITE RIGHTS" has the meaning set forth in SECTION
6.11(a).
"RESTRICTED TERRITORY" has the meaning set forth in SECTION
11.2(a).
"SEC DOCUMENTS" has the meaning set forth in SECTION 7.4.
"SECURITIES ACT" means the Securities Act of 1933, as amended,
and the rules and regulations of the Securities and Exchange Commission
promulgated thereunder.
"SETTLEMENT AGREEMENT" has the meaning set forth in SECTION
4.1(b)(ii).
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"SHARE NUMBER" has the meaning set forth in SECTION 3.1(a).
"SHAREHOLDER GROUP" means, collectively, the Shareholders and
their respective successors and assigns, heirs, administrators and estate.
"SHAREHOLDER MATERIALS" has the meaning set forth in SECTION
2.6(b).
"SHAREHOLDERS' EXPENSES" has the meaning set forth in SECTION
3.1(a).
"SHAREHOLDERS" has the meaning set forth in the caption.
"STUB PERIOD EXCHANGE AGREEMENT" means the Stub Period
Exchange Agreement to be dated as of the Closing Date among the Purchaser and
the Shareholders.
"SUBJECT BUSINESS" has the meaning set forth in the preamble.
"SURVIVAL DATE" has the meaning set forth in SECTION 10.5.
"SURVIVING CORPORATION" has the meaning set forth in SECTION
2.1.
"TAX REPRESENTATION" has the meaning set forth in SECTION
11.7(c).
"TAX RETURNS" means Federal, state, local and foreign tax
returns, reports, statements, declarations of estimated tax and forms.
"TAX" means any of the Taxes.
"TAXES" means, with respect to any entity, (i) all income
taxes (including any tax on or based upon net income, gross income, income as
specially defined, earnings, profits or selected items of income, earnings or
profits) and all gross receipts, sales, use, ad valorem, transfer, franchise,
license, withholding, payroll, employment, excise, severance, stamp, occupation,
premium, property or windfall profits taxes, alternative or add-on minimum
taxes, customs duties and other taxes, fees, assessments or charges of any kind
whatsoever, together with all interest and penalties, additions to tax and other
additional amounts imposed by any taxing authority (domestic or foreign) on such
entity (if any) and (ii) any liability for the payment of any amount of the type
described in the immediately preceding clause (i) as a result of (A) being a
"transferee" (within the meaning of Section 6901 of the Code or any other
applicable law) of another entity, (B) being a member of an affiliated or
combined group or (C) any contractual obligation.
"TEXAS ARTICLES OF MERGER" has the meaning set forth in the
Preamble.
"TEXAS STATUTE" has the meaning set forth in the Preamble.
"THIRD-PARTY CLAIM" has the meaning set forth in SECTION 10.4.
"THIRD-PARTY PAYMENTS" has the meaning set forth in SECTION
3.1(a).
"TRANSACTION EXPENSES" has the meaning set forth in SECTION
11.1.
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"TRANSITION PERIOD" has the meaning set forth in SECTION 8.1.
"UNDERPAYMENT AMOUNT" has the meaning set forth in SECTION
4.1(c)(i).
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ANNEX, SCHEDULES AND EXHIBITS
Annex I Definitions
SCHEDULES TO THE DISCLOSURE LETTER
Schedule 3.1 - Shareholders' Expenses
Schedule 5.1 - Title to Merger Shares
Schedule 6.1 - Organization; Good Standing; Qualification
Schedule 6.2 - Equity Interests
Schedule 6.4 - Authority; Noncontravention; Consents
Schedule 6.5 - Financial Statements; Funded Indebtedness
Schedule 6.6 - Absence of Undisclosed Liabilities
Schedule 6.7 - Absence of Changes
Schedule 6.8 - Tax Matters
Schedule 6.9 - Title to Assets; Properties and Rights
Schedule 6.10 - Real Property - Owned and Leased
Schedule 6.11 - Intellectual Property
Schedule 6.12(a) - Agreements
Schedule 6.12(b) - No Defaults
Schedule 6.12(c) - Purchase Orders
Schedule 6.13 - Litigation, Etc.
Schedule 6.14 - Compliance; Governmental Authorization
Schedule 6.15 - Labor Relations; Employees
Schedule 6.16(a) - Employee Benefit Plans
Schedule 6.16(b) - ERISA Compliance
Schedule 6.17 - Environmental Matters
Schedule 6.18 - Brokers
Schedule 6.19 - Related Transactions
Schedule 6.20 - Accounts and Notes Receivable
Schedule 6.21 - Accounts and Notes Payable
Schedule 6.22 - Inventories
Schedule 6.25 - Insurance
Schedule 6.26 - Books and Records
Schedule 7.2 - Authority; Noncontravention; Consents
Schedule 7.3 - Capital Stock
Schedule 7.4 - SEC Documents
Schedule 10.7 - Purchaser Preferred Stock
Schedule 11.5 - Termination of Affiliate Transactions
Schedule I - Shareholders
EXHIBITS
Exhibit A Certificate of Merger
Exhibit B Form of Certificate of Designation
Exhibit C Form of Opinion of the Counsel to the Company and the Shareholders
Exhibit D Form of Opinion of Counsel to the Purchaser and Acquisition Sub
Exhibit E Form of Employment Agreement
Exhibit F Form of Lease Amendment
Exhibit A
Certificate of Merger
Exhibit B
Form of Certificate of Designation
Exhibit C
Form of Opinion of the Counsel to the Company and the Shareholders
Exhibit D
Form of Opinion of Counsel to the Purchaser and Acquisition Sub
Exhibit E
Form of Employment Agreement
Exhibit F
Form of Lease Amendment
