EXHIBIT 10.2
ASSET PURCHASE AGREEMENT
This Purchase Agreement (the "AGREEMENT") is made and entered into on
this 15th day of December, 2003 by and between U.S. PLASTIC LUMBER LTD., a
Delaware corporation (hereinafter referred to as "SELLER"), and ILLINOIS TOOL
WORKS INC., a Delaware corporation, or its nominee wholly owned subsidiary
(hereinafter referred to as "BUYER").
RECITALS:
1. SELLER is in the business of manufacturing and selling tier sheets and
slipsheets (the "Business").
2. BUYER wishes to purchase substantially all of the assets which are used by
the SELLER to conduct the Business, other than the Chicago, Illinois operating
facility noted below, for the purchase price set forth herein and upon and
subject to the terms and conditions hereinafter set forth. BUYER shall assume no
trade obligations, interest bearing debt, bank drafts or other liabilities of
the SELLER.
3. BUYER and SELLER are entering into a lease of the same date as this
Agreement, for lease of a portion of SELLER's Chicago, Illinois operating
facility ("Lease").
W I T N E S S E T H:
NOW, THEREFORE, in consideration of the premises and of the
representations, warranties, covenants and agreements herein contained, the
parties hereto agree as follows:
SECTION 1 - PURCHASE AND SALE.
1.1 PURCHASED ASSETS. At the Closing hereunder as defined in Article
2.1 hereof, SELLER will, validly and effectively, grant, sell, convey and assign
to BUYER, upon and subject to the terms and conditions of this Agreement, all
right, title and interest in and to all the assets, properties and rights,
tangible and intangible, which are used in, are necessary for, or otherwise
constitute the Business ("Purchased Assets"), other than Excluded Assets
identified in Section 1.9 hereof, free and clear of all liens, pledges, security
interests, charges, claims, restrictions and other encumbrances or defects of
title of any nature whatsoever. The Purchased Assets shall include, but not be
limited to, those assets in the categories set forth below:
(a) all of the SELLER Business inventory, including without limitation
finished goods, work-in-process, raw materials, supplies and spare
parts of SELLER (the "Inventory") as listed on Schedule 1.1(a) as it
may change in the ordinary course of business between the date of this
Agreement and Closing;
(b) all machinery and equipment used or usable in the SELLER Business,
including without limitation the machinery and equipment listed on
Schedule 1.1(b);
(c) all written product and technical information possessed by SELLER
(whether or not located at SELLER's facilities) of every nature
relating to the design, manufacture and distribution of the products
produced by the Business or intended or contemplated to be produced in
the future, including any and all sales and promotional literature,
product warranties, marketing data, technical literature and data,
engineering drawings, manufacturing drawings, prototypes, plans,
manufacturing process sheets, computer test data, production data,
purchasing data, parts lists, instruction manuals, and other data and
material, whether in written form or in other reproducible form, which
is as of the date hereof used or contemplated to be used at a future
date in the production or sale of products (all assets included in this
clause (c) being hereinafter collectively referred to as the ("PRODUCT
INFORMATION"));
(d) all patents and patent applications, if any, relating to or used in
the Business, all rights to trademarks and trade names as described in
Schedule 1.1(d), service marks, domain names, processes, inventions,
formulas, copyrights and trade secrets, or applications therefor, if
any, and all licenses, agreements or royalty rights relating to the
patents and trademarks used in or relating to the Business, or relating
to the products and described more particularly in Schedule 1.1(d);
(e) all contracts relating to the Business, described more particularly
in Schedule 1.1(e);
(f) access to all SELLER's business records, including customer, client
and supplier lists, raw material records (including suppliers,
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composition and pricing), and all other documents, records and files
relating thereto or relating primarily to the Purchased Assets or the
Business, all of which BUYER can make copies as it chooses;
(g) all of SELLER's prepaid expenses relating to the Business;
(h) the benefits, including all rights to defense and indemnity
coverage, under any and all policies of liability insurance issued to
SELLER prior to the date hereof with respect to insurance coverage for
claims, suits, actions or proceedings against BUYER arising from the
operations, activities or conduct of the Business prior to the date
hereof. The benefits transferred herein relate to benefits under any
and all insurance policies providing coverage fo r liability of any
kind, including without limitation, general liability, umbrella and
other excess coverage liability insurance policies. (Schedule 1.1(h) is
a list of SELLER's liability insurance policies for the 20 years
preceding the date of this Agreement.) It is the intent of the parties
that the insurance benefits be conveyed to BUYER only to the extent
claims, suits, actions or proceedings are threatened or brought against
BUYER subsequent to the date hereof which arise from the operation's
activities or conduct of Business prior to the date hereof. Nothing
provided for hereunder shall operate to deny the SELLER its right to a
defense or coverage for claims otherwise available under said policies;
and
(i) All of SELLER's customer deposits and accounts receivable as of the
Closing Date relating to the Business.
1.2 PURCHASE PRICE. In consideration for the purchase of the Purchased
Assets set forth above, BUYER will pay at Closing a sum equal to Eight Million
Four Hundred and Twenty Nine Thousand Six Hundred and Sixty three Dollars
($8,429,663) plus $652,275, which the parties have agreed is compensation for
accounts payable and accrued expenses, all of which are being retained by SELLER
(collectively, "Purchase Price"). The Purchase Price shall be adjusted as set
forth below.
1.3 PURCHASE PRICE ADJUSTMENT. The Purchase Price above reflects
adjustment as follows:
(a) The Purchase Price assumed an accounts receivable valuation of at
least $1,128,280 and an inventory valuation at Closing of at least
$396,298.
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(b) SELLER shall conduct a physical inventory on the day immediately
preceding the Closing, in accordance with generally accepted accounting
principles and agreed upon valuation methods ("Closing Inventory").
BUYER observed the Closing Inventory. If the inventory on hand of an
stock keeping unit (SKU) exceeded the amount of inventory used within
the 6 month period prior to the Closing Inventory, and if there had
been some usage within the 12 month period prior to the Closing
Inventory, then the inventory on hand was valued at 50% of full value.
If there had been no usage of inventory on hand of an SKU within the 12
month period prior to the Closing Inventory, all inventory on hand was
considered obsolete and of no value. Seller utilized a detailed
inventory sales history to enable such determination.
(c) The Purchase Price adjustment was determined as shown on the Funds
Flow Schedule of Exhibit 1.8.
1.4 EXCLUDED LIABILITIES. BUYER will assume no liabilities, obligations
or commitments of SELLER, including without limitation any trade obligations or
bank debt, except as provided in Schedule 1.1(e), it shall assume any and all
obligations or commitments from and after the Closing Date respecting any
contracts set forth in Schedule 1.1(e). SELLER retains all other liabilities
that relate to the Business or the Purchased Assets that result from or arise
out of any event, occurrence, transaction, action or inaction occurring prior to
the Closing, including without limitation liabilities under any "employee
pension benefit plan" or "employee welfare benefit plan" as those terms are
defined in Sections 3(1) and 3(2) of the Employee Retirement Income Security Act
of 1974 as amended, any product liability, warranty or other claims arising out
of or relating to any product manufactured, distributed or sold by SELLER at any
time before Closing, any claims by any third party under any bulk sales law, and
any claims relating to patent or trademark infringement, taxes, workers
compensation, real estate or environmental, health or safety matters.
1.5 EMPLOYEES.
(a) TRANSFEREES. Effective as of the Closing Date, except as stated in
this Section 1.5 hereof, all employees of the Business as listed in
Schedule 1.5 shall be offered employment with the BUYER ("Transferees")
and employees who accept such offer shall become employees of BUYER.
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BUYER shall have no obligation to offer employment to any employee of
the Business who is absent from employment on the Closing Date due to a
leave of absence. If BUYER does offer employment to any such absent
person, such person shall not become an employee of BUYER until he or
she returns to active employment without restrictions or with only such
restrictions as are required to be accommodated under applicable law.
(b) ACCRUED VACATION PAY. After the Closing Date, SELLER shall be
liable and responsible for the payment of accrued but unpaid vacation
pay for the Transferees, as set forth in Schedule 1.5, which SELLER
represents is in accordance with its vacation pay records and policies
included in Schedule 3.1.22 with respect to the Transferee and in
effect on the Closing Date.
(c) BENEFIT PLANS. BUYER shall not assume sponsorship of or
responsibility for the employee benefit plans of the Business, and
shall have no responsibility to continue such plans. BUYER intends to
include Transferees in employee benefit plans sponsored by BUYER at
times it deems appropriate. SELLER shall provide BUYER with such
information as BUYER may require to facilitate the inclusion of
Transferees into such plans.
1.6 THIRD PARTY BENEFICIARIES. This Agreement is between the parties
hereto only and nothing herein shall establish any enforceable rights, legal or
equitable, in any person other than BUYER and SELLER, including any employee of
either such party. Any claim, including claims for benefits asserted by any
person with respect to his or her employment with BUYER after the Closing Date
shall be governed by the applicable employment policies and such benefits plans
that BUYER may establish and maintain for its employees. Nothing in this
Agreement shall be deemed to restrict the right of BUYER to deal with
Transferees as employees at will in the same manner as it would be free to deal
with such employees in the absence of this Agreement and to terminate the
employment of such Transferees at any time after the Closing.
1.7 ESCROW. $250,000 of the Purchase Price shall be placed in escrow
under the terms an escrow agreement ("Escrow Agreement") substantially in the
form of Exhibit A attached hereto.
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1.8 FUNDS FLOW SCHEDULE. Exhibit 1.8 sets forth the disbursement of
funds on the Closing Date.
1.9 EXCLUDED ASSETS. Cash on Hand at Closing ("Excluded Assets") is
excluded from this transaction.
SECTION 2 - CLOSING.
2.1 CLOSING. The Closing (the "CLOSING") of the sale and purchase of
the Purchased Assets shall take place via telephone and fax on December 15, 2003
at the offices of SELLER, 0000 Xxxxxx Xxxx, Xxxxx 000X, Xxxx Xxxxx, XX, 00000
and BUYER, 0000 Xxxx Xxxx Xxxxxx, Xxxxxxxx, Xxxxxxxx, or at such other time and
place as the parties may mutually agree upon in writing. The date of the Closing
is herein referred to as the "CLOSING DATE".
2.2 ITEMS TO BE DELIVERED AT CLOSING. At the Closing and subject to the
terms and conditions herein contained:
(a) SELLER will deliver to BUYER the following:
(i) a general instrument of sale, and conveyance, assignment,
transfer and delivery with respect to all of the Purchased
Assets, such instrument to be in the form of Schedule
2.2(a)(i) hereto;
(ii) releases of all liens and other encumbrances on Purchased
Assets;
(iii) assignment of all patents, trademarks, services marks, and
applications for any of them, showing SELLER as assignor and
BUYER as assignee, in a form recordable with the appropriate
government authority;
(iv) all of the Purchased Assets;
(v) the Escrow Agreement;
(vi) the Lease for SELLER's Chicago, Illinois operating facility;
(vii) consents required (i) from SELLERS's Landlord at the
Chicago, Illinois operating facility to the Lease, and (ii)
from SELLER's Landlord at the Denver, Colorado operating
facility for an assumption of the Denver lease;
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(viii) certificates of insurance required by Section 3.1.15; and
(ix) an assignment of the Purchase and Sale Agreement dated
August 1, 2002 between SELLER and Coors Brewing Company, and
Amendment Number One dated December 4, 2003 between the same
parties.
(b) BUYER will deliver to SELLER:
(i) the Purchase Price less escrow and Lienholder Payments,
disbursed by certified check or wire transfer as directed by
SELLER;
(ii) the Escrow Agreement; and
(iii) the Lease Agreement
2.3 FURTHER ASSURANCES. SELLER from time to time after the Closing, at
BUYER's reasonable request and at BUYER's expense, will execute, acknowledge and
deliver to BUYER such other instruments of conveyance and transfer and will take
such other actions and execute and deliver such other documents, certifications
and further assurances as BUYER may reasonably request in order to vest more
effectively in BUYER, or to put BUYER more fully in possession of any of the
Purchased Assets.
SECTION 3 - REPRESENTATIONS AND WARRANTIES.
Notwithstanding any investigation or audit conducted before or after
the Closing Date or the decision of any party to complete the Closing, each
party shall be entitled to rely upon the representations, warranties, covenants
and agreements set forth herein.
3.1 REPRESENTATIONS AND WARRANTIES OF SELLER. SELLER hereby represents
and warrants to BUYER as of the date of this Agreement and as of Closing as
follows:
3.1.1 CORPORATE EXISTENCE. SELLER is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and has the power to carry on its business as it is now being conducted. SELLER
is duly qualified as a foreign corporation to do business, and is in good
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standing, in each jurisdiction where the failure to be so qualified would have
an adverse effect on the Business, assets, results of operations or financial
condition. A list of each such jurisdiction is attached hereto as Schedule
3.1.1.
3.1.2 CORPORATE POWER AND AUTHORITY. SELLER has the full power,
authority and legal right to execute, deliver and perform this Agreement. This
Agreement constitutes, and when executed and delivered will constitute, legal,
valid and binding agreements of SELLER enforceable against SELLER in accordance
with their respective terms, except as may be limited by bankruptcy, insolvency
and other similar laws affecting creditors' rights generally and by general
equity principles.
3.1.3 INVENTORY. All items of SELLER's inventory and related supplies
(including raw materials, work-in-process and finished goods) are accurately
valued and properly reflected on the Financial Statements; are merchantable, or
suitable and usable for the production or completion of merchantable products,
for sale in the ordinary course of business as first quality goods at normal
xxxx-ups; except as reserved for on the Financial Statements, are not obsolete,
slow-moving or below standard quality and are valued at the lower of cost or
market in accordance with generally accepted accounting principles as
consistently applied by SELLER.
3.1.4 EXISTING CONDITION. Since September 30, 2003, SELLER has not with
respect to SELLER, the Purchased Assets or the Business:
(a) sold, assigned or transferred any of its assets or properties
except in the ordinary course of its business;
(b) suffered any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting its business, operations,
assets, properties or prospects;
(c) suffered any material adverse change in its business, operations,
assets, properties or prospects or any material adverse change arising
from changes in the economy or the Business' industry;
(d) received notice or had knowledge of any actual or threatened labor
trouble, strike, change in the economy or in the Business' industry or
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other occurrence, event or condition of any similar character which has
had or might have a material adverse effect on its business,
operations, assets, properties or prospects;
(e) made any capital expenditure or capital addition or betterment
except such as may be involved in the ordinary course of business;
(f) entered into any material transaction other than in the ordinary
course of its business consistent with past practice;
(g) operated the Business other than in the ordinary course consistent
with past practice, and granted no general or individual increase in
compensation.
3.1.5 TITLE TO AND SUFFICIENCY OF PROPERTIES. The Purchased Assets
comprise all of the property, tangible and intangible, owned or used by SELLER
in the conduct of the Business and necessary for BUYER`s conduct of the Business
on the Closing Date, except for the Excluded Assets referred to in Section 1.9
hereof. SELLER has good, valid and marketable title to all of the Purchased
Assets free and clear of all liens, pledges, security interests, charges,
claims, restrictions and other encumbrances and defects of title of any nature
whatsoever, except as disclosed on Schedule 3.1.5 hereto. SELLER has the
unrestricted right to sell the Purchased Assets as herein provided.
3.1.6 CONDITION AND LOCATION OF TANGIBLE ASSETS. The machinery,
equipment and other tangible Purchased Assets are in good working order and
repair (reasonable wear and tear excepted); are in conformity with all
applicable ordinances, regulations and other laws; to the best of SELLER's
knowledge, their operation does not violate any applicable federal, state or
local law, statute, ordinance or regulation relating to the protection of the
environment or condition of employment, nor has any written notice of any
claimed violation of any such laws, statutes, ordinances or regulations been
served on SELLER; and, the machinery, equipment and other tangible Purchased
Assets are either owned by SELLER free and clear of all liens, claims or
encumbrances whatsoever or are leased under valid leases which will not be
affected by the consummation of the acquisition contemplated by this Agreement.
All of the tangible Purchased Assets purchased hereunder are located at SELLER's
facility in Denver, Colorado and Chicago, Illinois and other locations set out
in Schedule 3.1.6 hereof.
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3.1.7 LITIGATION. Except as disclosed on Schedule 3.1.7 hereto, there
is no litigation, arbitration, investigation or other proceeding of or before
any court, arbitrator or governmental or regulatory official, body or authority
pending or threatened against SELLER which relates to any of the Purchased
Assets, the Business or the transactions contemplated by this Agreement, nor
does SELLER know of any basis for such litigation, arbitration, investigation or
other proceeding. SELLER is not a party to any judgment, order, writ,
injunction, decree or award of any court, arbitrator or governmental or
regulatory official, body or authority which affects the Purchased Assets or the
Business or the transactions contemplated by this Agreement.
3.1.8 VALIDITY OF CONTEMPLATED TRANSACTIONS. Except as set forth on
Schedule 3.1.8, the execution, delivery and performance of this Agreement and
the transactions contemplated hereby by SELLER will not contravene or violate
(a) any law, rule or regulation to which the SELLER is subject, (b) any
judgment, order, writ, injunction, decree or award of any court, arbitrator or
governmental or regulatory official, body or authority which is applicable to
SELLER, or (c) the charter documents of SELLER or any securities issued by
SELLER; nor will such execution, delivery or performance violate, be in conflict
with or result in the breach (with or without the giving of notice or lapse of
time, or both) of any term, condition or provision of, or require the consent of
any other party, to, any indenture, agreement, contract, commitment, lease,
plan, license, permit, authorization or other instrument, document or
understanding, oral or written, to which SELLER is a party, by which SELLER may
have rights or by which any of the Purchased Assets may be bound or affected, or
give any party with rights thereunder the right to terminate, modify, accelerate
or otherwise change the existing rights or obligations of SELLER thereunder
except in each case for any such item which would not have a material adverse
effect. No authorization, approval or consent, and no registration or filing
with any governmental or regulatory official, body or authority is required in
connection with the execution, delivery and performance of this Agreement by
SELLER.
3.1.9 CONTRACTS AND COMMITMENTS. Except as may be disclosed on Schedule
3.1.9, each of the agreements, contracts and commitments listed on Schedule 1.4
hereof is a legal, valid and binding agreement enforceable in accordance with
its terms, except as such enforceability may be limited by bankruptcy,
insolvency, moratorium, or similar laws now or hereafter in effect relating to
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or limiting creditors' rights generally and to the knowledge of SELLER, the
parties thereto are in compliance with the provisions thereof, no party has made
or received any prepayments or credits with respect thereto, to the knowledge of
SELLER, no party is in default in the performance, observance or fulfillment of
any material obligation, covenant or condition contained therein, and to the
knowledge of SELLER, no event has occurred which with or without the giving of
notice or lapse of time, or both, would constitute a default thereunder.
3.1.10 INTELLECTUAL PROPERTY Schedule 1.1(d) hereto contains an
accurate list and summary description of all patents, if any, and all registered
trademarks, trade names, service marks, domain names and copyrights and
applications for any of the foregoing, owned, held, possessed, licensed to or
used by SELLER and all licenses or agreements or royalty obligations pertaining
thereto. SELLER owns all trademarks, trade names, patents, copyrights, service
marks, domain names, software, inventions, trade secrets, know-how, formulas and
processes and other proprietary rights necessary to the conduct of its business
and such use does not conflict with or infringe the rights of others. All
patents and trademark registrations and domain names have been recorded in
SELLER's name and are valid and enforceable.
3.1.11 CONFLICTING RIGHTS. Except as disclosed on Schedule 3.1.11,
SELLER has not entered into any patent or trademark license, technology transfer
or non-competition agreement relating to the Business. SELLER has performed all
of the obligations required to be performed by it to date and is not in default
under any license agreement. SELLER has complied and is in compliance with all
applicable registered user laws or regulations.
3.1.12 NO INFRINGEMENTS. Except as set forth on Schedule 3.1.11, to the
best knowledge of SELLER none of the SELLER's products, processes or Purchased
Assets conflict with, or infringe upon, any patent, trademark, trade name,
service xxxx, domain name, copyright or trade secret owned or claimed by another
and no person owns, claims or has any proprietary, financial or other interest,
direct or indirect, in any design, process or device which SELLER is using or
the use of which is useful or necessary in the operation of the Business as now
or heretofore conducted.
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3.1.13 ENVIRONMENTAL MATTERS. Except as set forth in Schedule 3.1.13:
(a) SELLER has not discharged or caused to be discharged, on, under or
about any facility of its business, including without limitation into
the ambient air, surface water, groundwater, land surface, or
subsurface strata, any solvents, pollutants, chemicals, flammables,
contaminants, gasoline, petroleum products, crude oil, explosives,
radioactive materials, hazardous materials or other hazardous or toxic
materials, substances, or wastes, or polychlorinated biphenyls or
related or similar materials, asbestos or any material containing
asbestos, (collectively, the "Hazardous Substances").
(b) SELLER has not used any facility owned or leased by it to generate,
manufacture, refine, transport, treat, store, handle, dispose,
transfer, produce, process or in any manner deal with Hazardous
Substances, except in compliance with applicable Environmental Laws, as
defined herein, including, but not limited to any applicable federal,
state or local governmental law, rule, regulation or ordinance,
including, without limitation, the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, as amended (42
U.S.C. Sections 9601, et seq.), the Hazardous Materials Transportation
Act, as amended (49 U.S.C. Section 1801, et seq.), the Resource
Conservation and Recovery Act, as amended (42 U.S.C. Sections 6901 et
seq.), the Federal Water Pollution Control Act, as amended (33 U.S.C.
Sections 1251 et seq.), the Clean Air Act, as amended (42 U.S.C.
Sections 7401 et seq.) the Toxic Substances Control Act, as amended (15
U.S.C. Sections 2601 et. seq.), the Clean Water Act, as amended (33
U.S.C. Sections 1251 et. seq.) (collectively all such laws, rules,
ordinances or regulations called herein, "Environmental Laws");
(c) SELLER has obtained all required registrations, permits, licenses,
and other authorizations which are required under federal, state and
local laws and regulations relating to pollution or protection of the
environment, including but not limited to all Environmental Laws and
including all laws relating to emissions, discharges, releases, or
threatened releases of Hazardous Substances or otherwise relating to
the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Substances;
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(d) SELLER is in compliance in all material respects with all terms and
conditions of such required registrations, permits, licenses and
authorizations, and is also in compliance with all other limitations,
restrictions, conditions, standards, prohibitions, requirements,
obligations, schedules and timetables contained in the Environmental
Laws or contained in any regulation, code, plan, order, decree,
judgment, injunction, notice or demand letter issued, entered,
promulgated or approved thereunder;
(e) there is no civil, criminal, or administrative action, suit,
demand, claim, hearing, notice of violation, investigation, proceeding,
notice or demand letter pending, or threatened relating in any way to
(i) the Environmental Laws or any regulation, code, plan, order,
decree, judgment, injunction, notice or demand letter applicable to it
issued, entered, promulgated, or approved thereunder, or (ii) relating
to the release into the environment by SELLER of any Hazardous
Substances whether or not occurring at or on a site owned, leased or
operated by SELLER; and
(f) SELLER has timely filed all reports, obtained all required
approvals, generated and maintained all required data, documentation
and records required by the Environmental Laws or any regulation, code,
plan, order, decree, judgment, injunction, notice or demand letter
issued, entered, promulgated, or approved thereunder.
3.1.14 TAX LIABILITIES. SELLER has filed all federal, state, county,
local and foreign income, excise, property, sales and other tax returns relating
to the Business which are required to be filed up to and including the date
hereof and has paid all taxes which have become due, or any assessment which has
become payable relating to the Business. SELLER shall be responsible for any
transfer taxes which are payable as a result of the sale of the Purchased Assets
of SELLER to BUYER.
3.1.15 INSURANCE. SELLER has disclosed in Schedule 3.1.15 a list of all
insurance policies maintained by SELLER on properties, assets, business and
personnel relating to the Business (specifying the insurer, the amount and
duration of the coverage, the type of insurance including, but not limited to
whether each such policy is based on claims made or occurrence, premium
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allocation, the policy number and any pending claims thereunder). True and
complete copies of each such policy have been delivered to BUYER. Schedule
3.1.15 also contains all claims for insurance losses in excess of $10,000 per
occurrence relating to the Business, filed by the SELLER but not limited to
Workers Compensation, automobile, general and product liability. SELLER has not
received written notice that it is in default with respect to any provision
contained in any insurance policy, nor has SELLER failed to pay any premiums
thereunder or to give any notice or present any claim thereunder in due and
timely fashion and, to the best of the SELLER's knowledge, SELLER is not in
default with respect to any such policies. SELLER knows of no occurrence
potentially giving rise to a claim in excess of ten thousand dollars ($10,000)
against or by the SELLER. Adequate reserves have been provided in the Financial
Statements with respect to any self insured claims pending and any such claims
which may be reasonably expected based upon the SELLER's prior experience. At
Closing SELLER shall have BUYER named as an additional insured of such policies.
3.1.16 FINANCIAL STATEMENTS Attached hereto as Schedule 3.1.16 are true
and complete copies of SELLER's internally prepared financial statements as of
September 30, 2003, consisting of the balance sheet and related statements of
income, for the year (the foregoing financial statements are hereinafter
referred to as the "Financial Statements"). The Financial Statements have been,
and the Closing Date Financials will be, prepared in accordance with generally
accepted accounting principles consistently applied throughout the periods
indicated. The Financial Statements and the Closing Date Financials present
fairly the financial position of SELLER as of the respective dates and the
results of operations for the periods therein set forth.
3.1.17 EMPLOYEE BENEFIT PLANS. Set forth in Schedule 3.1.17 is a list
of all pension, profit sharing, bonus, disability, welfare or group insurance,
deferred compensation, stock option, paid vacation and all other presently
effective employee benefit plans, agreements or commitments, written or oral (if
any), of the SELLER ("Employee Benefit Plans"). A copy of each Employee Benefit
Plan as amended to the date hereof, has been delivered to BUYER, together with
audited financial statements and actuarial reports, if any, and Form 5500, if
required, for the most recent fiscal year of each such plan and a copy of each
Internal Revenue Service determination letter with respect to any such plan.
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(a) Except as set forth in Schedule 3.1.17 each employee pension,
stock bonus and profit sharing plan is qualified under Section
401(a) of the Internal Revenue Code (the "Code") and such fact
is evidenced by a favorable letter within the meaning of
Section 5.02 of IRS Notice 98-22, and each related trust is
exempt from taxation pursuant to Section 501(a) of the Code.
(b) Except as set forth as a part of Schedule 3.1.17, all Employee
Benefit Plans are in compliance with the terms of the
applicable plan documents and the provisions of the Employee
Retirement Income Security Act of 1974 ("ERISA") and have
complied with the reporting and disclosure requirements of
applicable federal and state laws and regulations.
(c) Except as set forth as a part of Schedule 3.1.17 (i) no
Employee Benefit Plan or related trust has had a "reportable
event" as such term is defined in ERISA nor has any such plan
or any "fiduciary" or "party-in-interest" or "disqualified
person" entered into any "prohibited transaction" as such
terms are defined in ERISA or the Code; (ii) no partial or
complete termination, or permanent discontinuance of
contributions has occurred; (iii) no amendments have been made
which were not the subject of a favorable determination
letter; (iv) all reports, together with all supporting
statements, opinions, certifications and schedules, required
pursuant to ERISA or the Code have been duly and timely filed
with the appropriate governmental agencies; (v) all notices
required to be provided to participants and beneficiaries by
SELLER pursuant to ERISA or the Code have been duly and timely
provided; and (vi) each Employee Benefit Plan has been
administered and operated in accordance with its terms and
applicable laws.
(d) There are no third party contracts, agreements or arrangements
with respect to any Employee Benefit Plan which may not be
canceled or liquidated with no more than 60 days advance
notice or which, upon liquidation assesses a surrender charge,
penalty, back-end load or marked value adjustment.
15
(e) SELLER has no liability, jointly or otherwise, for any
withdrawal liability demanded or yet to be demanded under
Title IV of ERISA by any multi-employer plan for a complete or
partial withdrawal from such plan by any member of a control
group of employers (within the meaning of Section 4001(b) of
ERISA) of which SELLER is a member.
(f) There are no actions, suits, or claims (other than routine
claims for benefits) pending or threatened or, to the best
knowledge of SELLER, any facts which could give rise to any
such actions, suits or claims against any Employee Benefit
Plan or the assets thereof.
(g) There are no third party contracts, agreements or arrangements
with respect to any Employee Benefit Plan which may not be
cancelled or liquidated with no more than 60 days advance
notice or which, upon liquidation assesses a surrender charge,
penalty, back-end load or market value adjustment.
3.1.18 LEASES. There are no leases or agreements under which SELLER is
a lessee of, or holds or operates any real property owned by any third party
relating to the Business.
3.1.19 RECEIVABLES. All receivables of SELLER (including accounts
receivable, loans receivable and advances) that are reflected in the Financial
Statements and all such receivables of SELLER which will have arisen since the
date thereof, shall have arisen only from bona fide transactions in the ordinary
course of SELLER's operation and shall be (or have been) fully collected when
due, or in the case of each account receivable within 180 days after it arose,
without resort to litigation, in the aggregate face amounts thereof except to
the extent of the normal allowance for doubtful accounts with respect to
accounts receivable computed as a percentage of sales consistent with SELLER's
prior practices and as reflected on the most recent annual Financial Statement.
3.1.20 COMPLIANCE WITH APPLICABLE LAWS. SELLER has complied with all
laws, regulations, injunctions, decrees and orders applicable the Business and
has received no written notice of any alleged violation of any such law,
16
regulation, injunction, decree or order for which the failure to comply would,
in any individual case or in the aggregate, have an adverse effect on the
Business. Neither the ownership or the use of SELLER's properties in the
Business nor the conduct of the Business conflicts with the rights of any other
person, firm or corporation or violates, with or without the giving of notice or
the passage of time, or both, or will violate, conflict with or result in a
default, right to accelerate or loss of rights under, any terms or provisions of
its Articles of Incorporation or By-Laws as presently in effect, or any lien,
encumbrance, mortgage, deed of trust, lease, license, agreement, understanding,
law, ordinance, rule or regulation, or any order, judgment or decree to which
SELLER is a party or by which SELLER may be bound or affected.
3.1.22 LABOR MATTERS.
(a) Schedule 3.1.22 sets forth an accurate and complete list of
all incentive plans or policies, employment policies and
handbooks, employment agreements, collective bargaining
agreements, union contracts or similar types of agreements
(including, without limitation, any side letters) by which
SELLER is bound or covered relating to the Business. Accurate
and complete copies of all such agreements and contracts have
been delivered to BUYER prior to the date of this Agreement.
(b) Except as set forth on Schedule 3.1.22, there is no strike or
union organizational activity or any allegation, charge or
complaint of employment discrimination, unfair labor practice
or other similar occurrence, pending or threatened against
SELLER relating to the Business, nor, has SELLER operated the
Business in such a way which, to the best of its knowledge,
would give rise to any such allegation, charge, or complaint.
(c) SELLER does not have any leased employees in the United States
relating to the Business within the meaning of Section 414 (n)
of the Internal Revenue Code without regard to subsection
(2)(b) thereof.
17
(d) The SELLER has no liabilities under any plan or arrangement
described in Statement of Financial Accounting Standards #87,
#106 or #112 relating to the Business which have not been
included in the SELLER's financial statements, regardless of
materiality. Copies of actuarial analysis of any such
liabilities and accompanying assumptions have been provided to
BUYER prior to the date of this Agreement.
(e) All employees of the Business have been properly classified
and no person is treated as an independent contractor or third
party agency employee who should be treated as an employee
under the laws of the country in which such individual
performs services.
3.1.24 NO UNDISCLOSED LIABILITIES. Except as set forth on Schedule
3.1.24, to the SELLER's knowledge, the Business has no liability of any nature
other than liabilities reasonably incurred in the ordinary course of its
business.
3.1.23 DISCLOSURE. No representation or warranty by SELLER contained in
this Agreement, nor any statement or certificate furnished or to be furnished by
SELLER to BUYER or its representatives in connection herewith or pursuant
hereto, contains or will contain any untrue statement of material fact, or omits
to state any material fact required to make the statements herein or therein
contained not misleading or necessary in order to provide a prospective BUYER of
the Business with adequate information as to SELLER and its condition (financial
and otherwise), properties, assets, liabilities, and business, and SELLER have
disclosed to BUYER in writing all material adverse facts known to them relating
to the same. The representation and warranties contained in this Section 3 or
elsewhere in this Agreement or any document delivered pursuant hereto shall not
be affected or deemed waived by reason of the fact that BUYER and/or its
representative knew or should have known that any such representation or
warranty is or might be inaccurate in any respect.
3.2 REPRESENTATIONS AND WARRANTIES OF BUYER. BUYER hereby represents
and warrants to SELLER as of the date of this Agreement and as of Closing as
follows:
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3.2.1 CORPORATE EXISTENCE. BUYER is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
3.2.2 CORPORATE POWER AND AUTHORITY. BUYER has the power, authority and
legal right to execute, deliver and perform this Agreement. The execution,
delivery and performance of this Agreement by BUYER and any document to be
delivered at Closing have been duly authorized by all necessary corporate
action. This Agreement has been, and any document to be delivered at Closing
will be, duly executed and delivered by BUYER and constitutes the legal, valid
and binding agreement of BUYER enforceable against it in accordance with its
terms, except as may be limited by bankruptcy, insolvency and other similar laws
affecting creditors' rights generally and by general equity principles.
3.2.3. VALIDITY OF CONTEMPLATED TRANSACTIONS. The execution, delivery
and performance of this Agreement by BUYER will not contravene or violate (a)
any law, rule or regulation to which BUYER is subject, (b) any judgment, order,
writ, injunction, decree or award of any court, arbitrator or governmental or
regulatory official, body or authority which is applicable to BUYER, or (c) the
charter documents or By-Laws of BUYER or any securities issued by BUYER; nor
will such execution, delivery or performance violate, be in conflict with or
result in the breach (with or without the giving of notice or lapse of time, or
both) of any term, condition or provision of, or require the consent of any
other party, to, any indenture, agreement, contract, commitment, lease, plan,
license, permit, authorization or other instrument, document or understanding,
oral or written, to which BUYER is a party, by which BUYER may have rights or by
which any of the Purchased Assets may be bound or affected, or give any party
with rights thereunder the right to terminate, modify, accelerate or otherwise
change the existing rights or obligations of BUYER thereunder. No authorization,
approval or consent, and no registration or filing with any governmental or
regulatory official, body or authority is required in connection with the
execution, delivery and performance of this Agreement by BUYER except in each
case for any item which would not have a material adverse effect.
19
3.2.4 LITIGATION. Except as disclosed on Schedule 3.2.4 hereto, there
is no litigation, arbitration, investigation or other proceeding of or before
any court, arbitrator or governmental or regulatory official, body or authority
pending or threatened against BUYER which affects the ability of the BUYER to
enter into the transactions contemplated by this Agreement.
3.2.5 NO CONFLICTS.
The execution, delivery and performance by BUYER of this
Agreement and the consummation of the transactions contemplated hereby will not
(a) conflict with or result in a breach or violation of any term or provision
of, or constitute a default under (with or without notice or passage of time, or
both), or otherwise give any Person a basis for accelerated or increased rights
or termination or nonperformance under, any indenture, mortgage, deed of trust,
loan or credit agreement, lease, license or other agreement or instrument of
which BUYER is a party or by which BUYER is bound or affected (b) result in the
violation of the provisions of the certificate of incorporation or bylaws of
BUYER or (c) otherwise adversely affect the contractual or other legal rights or
privileges of BUYER as it relates to its ability to consummate the transactions
contemplated by this Agreement.
3.2.6 ABILITY TO CLOSE.
BUYER has the ability and financial wherewithal to close the
transactions contemplated by this Agreement on the Closing Date.
3.2.7 CONSENTS.
All consents, authorizations and approvals of any person or
entity to or as a result of the consummation of the transactions contemplated
hereby, that are necessary or advisable in connection with the operations and
business of BUYER as currently conducted and as proposed to be conducted, or for
which the failure to obtain the same might have, individually or in the
aggregate, a material adverse effect on BUYER, have been lawfully and validly
obtained by BUYER.
20
3.2.8 BROKERS' FEES.
No broker, finder or similar agent has been employed by or on behalf of BUYER in
connection with this Agreement or the transactions contemplated hereby, and
BUYER has not entered into any agreement or understanding of any kind with any
person or entity for the payment of any brokerage commission, finder's fee or
any similar compensation in connection with this Agreement or the transactions
contemplated hereby.
3.2.9 DISCLOSURE. No representation or warranty by SELLER contained in
this Agreement, nor any statement or certificate furnished or to be furnished by
SELLER to BUYER or its representatives in connection herewith or pursuant
hereto, contains or will contain any untrue statement of material fact, or omits
to state any material fact required to make the statements herein or therein
contained not misleading or necessary in order to provide a prospective BUYER of
the Business with adequate information as to SELLER and its condition (financial
and otherwise), properties, assets, liabilities, and business, and SELLER have
disclosed to BUYER in writing all material adverse facts known to them relating
to the same. The representation and warranties contained in this Section 3 or
elsewhere in this Agreement or any document delivered pursuant hereto shall not
be affected or deemed waived by reason of the fact that BUYER and/or its
representative knew or should have known that any such representation or
warranty is or might be inaccurate in any respect.
3.3 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations,
warranties and agreements made by the parties to this Agreement or in any
certificate, schedule, document or instrument furnished hereunder or in
connection with the execution and performance of this Agreement shall survive
the Closing for a period of three (3) years, except that the representations and
warranties of Sections 3.1.1 (Corporate Existence), 3.1.2 (Corporate Power and
Authorization), 3.1.5 (Title to and Sufficiency of Properties), 3.1.8 (Validity
of Contemplated Transactions), 3.2.1 (Corporate Existence), 3.2.2 (Corporate
Power and Authority), 3.2.3 (Validity of Contemplated Transactions) and 3.3
(Survival of Representations and Warranties) shall be perpetual. If, prior to
21
the expiration of any of the survival periods, Claimant makes a Claim setting
forth in reasonable detail facts and circumstances supporting the Claim, the
survival period with respect to that Claim shall be extended until the Claim
shall have been satisfied or otherwise resolved.
SECTION 4 - CONDITIONS PRECEDENT TO THE CLOSING.
4.1. CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS. All obligations of
BUYER under this Agreement are subject to the fulfillment or satisfaction, prior
to or at the Closing, of each of the following conditions precedent:
4.1.1 COMPLIANCE WITH THIS AGREEMENT. SELLER shall have performed and
complied in all material respects, with all agreements and conditions required
by this Agreement to be performed by it prior to or at the Closing.
4.1.2 NO THREATENED OR PENDING LITIGATION. On the Closing Date, no
suit, action or other proceeding, or injunction or final judgment relating
thereto, shall be threatened or be pending before any court or governmental or
regulatory official, body or authority in which it is sought to restrain or
prohibit or to obtain damages or other relief in connection with this Agreement
or the consummation of the transactions contemplated hereby, and no
investigation that might result in any such suit, action or proceeding shall be
pending or threatened.
4.1.3 NO MATERIAL DAMAGE. The Purchased Assets shall not have been
damaged or destroyed (other than sales of inventory in the ordinary course of
business).
4.1.4 CONSENTS. Seller shall have obtained all consents from its
lenders, landlords or other persons or entities necessary to the consummation of
the transaction contemplated hereby.
4.1.5 ESCROW. SELLER shall have executed the Escrow Agreement.
22
4.1.6 ACCURACY OF REPRESENTATIONS AND WARRANTIES. Except for changes
contemplated or permitted by this Agreement, the representations and warranties
of SELLER included in this Agreement and in any Exhibit or other document
delivered by SELLER pursuant hereto, shall be true and correct in all material
respects on and as of the Closing with the same effect as through such
representations and warranties are being been made on as of such date. BUYER in
its sole discretion, shall have the right to waive or defer compliance by SELLER
at Closing with any representation or warranty.
4.1.7 PERFORMANCE OF COVENANTS AND AGREEMENTS. Each agreement, covenant
or obligation of SELLER to be performed at or before Closing under the terms
hereof shall have been duly performed in all material respects or waived by
BUYER in its sole discretion.
4.1.8 NO MATERIAL ADVERSE CHANGE. Between the date of this Agreement
and the Closing Date, there has been no material adverse change affecting the
Purchased Assets or the Business, its financial condition or prospects.
4.2 CONDITIONS PRECEDENT TO SELLER'S OBLIGATIONS. All obligations of
SELLER under this Agreement are subject to the fulfillment or satisfaction,
prior to or at the Closing, of each of the following conditions precedent:
4.2.1 COMPLIANCE WITH THIS AGREEMENT. BUYER shall have performed and
complied in all material respects, with all agreements and conditions required
by this Agreement to be performed by it prior to or at the Closing.
4.2.2 NO THREATENED OR PENDING LITIGATION. On the Closing Date, no
suit, action or other proceeding, or injunction or final judgment relating
thereto, shall be threatened or be pending before any court or governmental or
regulatory official, body or authority in which it is sought to restrain or
prohibit or to obtain damages or other relief in connection with this Agreement
or the consummation of the transactions contemplated hereby, and no
investigation that might result in any such suit, action or proceeding shall be
pending or threatened.
23
4.2.3 ACCURACY OF REPRESENTATIONS AND WARRANTIES. The representations,
warranties and agreements made by BUYER herein shall be true in all material
respects on and as of the Closing Date with the same effect as though such
representations and warranties are being made or given on and as of the Closing
Date, except as affected by transactions contemplated hereby.
4.2.4 PERFORMANCE OF COVENANTS AND AGREEMENTS. Each agreement, covenant
or obligation of BUYER to be performed at or before Closing under the terms
hereof shall have been duly performed in all material respects or waived by
SELLER in its sole discretion.
4.2.5 COMPLIANCE WITH THIS AGREEMENT. BUYER shall have performed and
complied in all material respects, with all agreements and conditions required
by this Agreement to be performed by it prior to or at the Closing.
SECTION 5 - INDEMNIFICATION.
5.1 GENERAL INDEMNIFICATION OBLIGATION OF SELLER. SELLER will
reimburse, indemnify and hold harmless BUYER, and its officers, directors and
shareholders, (each such person is referred to herein as "BUYER" or as a "SELLER
Indemnified Party") against and in respect of:
(a) any and all actions, suits and claims, or legal, administrative,
arbitral, governmental or other proceedings or investigations against
any SELLER Indemnified Party, that relate to SELLER, the Business or
the Purchased Assets and which result from or arise out of any event,
occurrence, action, inaction or transaction occurring on or prior to
the Closing Date;
(b) any and all liabilities and obligations of any nature whatsoever of
or relating to SELLER or to the Business or the Purchased Assets on or
prior to the Closing, including any employee severance or similar
benefits and liabilities and obligations arising out of occurrences or
actions on or prior to the Closing Date under any "employee pension
benefit plan" or "employee welfare benefit plan" as those terms are
defined in Sections 3(1) and 3(2) of the Employee Retirement Income
Security Act of 1974, as amended, any product liability, warranty or
24
other claims arising out of or relating to any product manufactured,
distributed or sold by SELLER at any time before Closing, any claims by
any third party under any bulk sales law, and any claims relating to
patent or trademark infringement, taxes, workers compensation, real
estate or environmental, health or safety matters;
(c) any and all damages, losses, settlement payments, deficiencies,
liabilities, costs and expenses suffered, sustained, incurred or
required to be paid by any SELLER Indemnified Party because of or that
result from, relate to or arise out of the untruth, inaccuracy or
breach of, or the failure to fulfill, any representation, warranty,
agreement, covenant or statement (i) of SELLER contained in this
Agreement or (ii) contained in any certificate, or schedule, document
or instrument furnished to the BUYER by or on behalf of SELLER at the
Closing;
(d) any and all actions, suits, claims or legal, administrative,
arbitral, governmental or other proceedings against any SELLER
Indemnified Party that relate to any alleged claim or right of third
persons by virtue of the application of the Florida or other Bulk Sales
Laws which may be asserted against any of the Purchased Assets;
(e) any product liability claims made against BUYER arising out of or
relating to any product manufactured or sold by SELLER prior to the
date of Closing;
(f) any and all uncollected accounts receivable regardless of any
reserves therefore which remain outstanding 180 days after the Date of
Closing, and BUYER shall have the right to deduct such amounts from
Escrow or require payment from SELLER (at BUYER's election);
(g) any and all actions, suits, claims or legal, administrative,
arbitral, governmental or other proceedings involving SELLER
Indemnified Party that relate to environmental, safety or health
matters arising from SELLER's ownership, use, operation, or occupancy
of any real property or improvements at any time, except as caused by
BUYER, directly or indirectly, after the Closing Date; and
(h) any and all actions, suits, claims, proceedings, assessments,
fines, judgments, costs and other expenses (including, without
limitation, reasonable legal fees and expenses) incident to any of the
foregoing or to the enforcement of this Section 5.1. to the extent
BUYER prevails in such enforcement action. BUYER shall promptly notify
SELLER, of the existence of any matter to which the obligations set
forth in this paragraph shall apply, and shall give SELLER reasonable
opportunity to defend any claim or litigation at its own expense, with
counsel of its own selection approved by BUYER (which shall not be
25
unreasonably withheld); provided that BUYER shall also at all times
have the right fully to participate in such defense at its own expense.
If SELLER shall fail, within a reasonable time after such notice, to
defend such claim or litigation, BUYER or any successor to the business
and assets of BUYER shall have the right, but not the obligation, to
defend, compromise or settle any such claim or litigation.
5.2 GENERAL INDEMNIFICATION OBLIGATION OF BUYER. Except to the extent
SELLER has agreed to be liable to a BUYER Indemnified Party, BUYER will
indemnify and hold harmless SELLER, and its officers, directors, and
shareholders, (each such person is referred to herein as a "SELLER" or as a
"BUYER Indemnified Party") against and in respect of:
(a) any and all actions, suits, claims or legal, administrative,
arbitration, governmental or other proceedings or investigations,
against any BUYER Indemnified Party that relate to BUYER, the Business
or the Purchased Assets and which result from or arise out of any
event, occurrence, action, inaction or transaction occurring after the
Closing Date;
(b) any and all damages, losses, settlement payments, deficiencies,
liabilities, costs and expenses suffered, sustained, incurred or
required to be paid by any BUYER Indemnified Party because of or that
result from, relate to or arise out of the untruth, inaccuracy or
breach of, or the failure to fulfill, any representation, warranty,
agreement, covenant or statement (i) of BUYER contained in this
Agreement or (ii) contained in any certificate, schedule, statement,
document or instrument furnished to SELLER by or on behalf of BUYER at
the Closing;
(c) any product liability claims made against SELLER arising out of or
relating to any product manufactured by BUYER after the Closing Date;
and
(d) any and all actions, suits, claims, proceedings, investigation,
demands, assessments, audits, fines, judgments, costs and other
expenses (including, without limitation, reasonable legal fees and
expenses) incident to any of the foregoing or to the enforcement of
this Section 5.2 to the extent SELLER prevails in such enforcement
action. SELLER shall promptly notify BUYER of the existence of any
matter to which the obligations set forth in this paragraph shall
apply, and shall give BUYER reasonable opportunity to defend any claim
or litigation at its own expense, with counsel of its own selection
approved by SELLER; provided that SELLER shall also at all times have
the right fully to participate in such defense at its own expense. If
BUYER shall fail, within a reasonable time after such notice, to defend
26
such claim or litigation, SELLER, or any successor to the business and
assets of BUYER, shall have the right, but not the obligation, to
defend, compromise or settle any such claim or litigation.
5.3 CLAIMS PROCEDURES FOR INDEMNIFICATION.
5.3.1 NOTICE. If following Closing a party to this Agreement (a
"Claimant") wishes to make a claim for indemnity (the "Claim") against another
party (the "Indemnitor"), the Claimant shall promptly give the Indemnitor
written notice of the basis for and existence of the Claim ("Claim Notice"),
setting forth all specifics of the Claim then known by the Claimant.
5.3.2 RESPONSE. If the Claim derives from a third-party claim or action
against the Claimant, the Indemnitor (i) may within ten (10) days of receiving
the Claim Notice stipulate in writing that it is obligated to indemnify for the
Claim, and (ii) if it does so, may thereafter promptly defend against the Claim
in Claimant's name and on it's behalf, at Indemnitor's own cost and expense,
with counsel reasonably satisfactory to the Claimant.
5.3.3 ASSUMPTION OF CLAIM. If Indemnitor assumes the Claim, Claimant
may at his sole cost and expense retain counsel of its own choosing, and
(subject to negotiation of a joint defense agreement) Indemnitor will share
relevant information with Claimant's counsel and consult with it as to
disposition of the Claim. However, Indemnitor will retain ultimate control over
the defense or settlement of the Claim (in which the Claimant will cooperate),
with the proviso that Indemnitor may not without Claimant's consent agree to the
entry of any order for non-monetary relief which will be binding on Claimant,
its assets or operations. Each party as a potential Claimant agrees that it will
27
make available to any Indemnitor all of his relevant books and records and will,
at the Indemnitor's request and expense, reasonably cooperate (and cause his
officers, directors and employees to cooperate) with the Indemnitor in the
defense of the Claim.
5.3.4 REJECTION OF CLAIM. If Indemnitor fails to respond affirmatively
within ten days of receipt of a Claim Notice, it will be deemed to have denied
responsibility for the Claim. If Indemnitor denies responsibility for the Claim
(or if it assumes the defense of the Claim, but subsequently fails to pursue the
defense in good faith) the Claimant may assume the defense of the Claim with
counsel of his own choosing, and the cost of counsel will then be subject to
possible indemnity pursuant to this Section 5. If Claimant assumes the defense
of a Claim, it shall have the sole right and authority to conduct the defense
and/or settle the Claim on such terms as it deems appropriate, but (subject to
negotiation of a joint defense agreement) shall share information concerning the
Claim with Indemnitor or his counsel.
5.3.5 SETTLEMENT OF CLAIMS. Unless otherwise agreed to by the parties
in writing, an Indemnitor shall not be obligated to settle a Claim, nor shall a
Claimant be entitled to its settlement (whether from the escrow, by set-off
against Contingent Payments or directly from the Indemnitor) prior to the
Determination Date. For purposes of this Agreement, the "Determination Date"
shall mean the first date on which a court order, arbitration award or
settlement stipulation that an event has occurred for which the Claimant is
entitled to indemnity hereunder becomes final, binding and non-appealable. The
escrow will not be utilized for satisfaction of Claims prior to the
Determination Date.
5.4 LIMITATIONS ON DOLLAR AMOUNT OF INDEMNIFICATION.
5.4.1 BASKET. There shall be a threshold for all Claims asserted by
either party against the other. The Claimant shall be entitled to
indemnification or to reimbursement of associated costs and expenses if and then
only to the extent that the aggregate amount of all such Claims and associated
costs and expenses asserted against the other party equal or exceed Fifteen
Thousand Dollars ($15,000) ("Basket"). The Basket shall not apply to the
Purchase Price adjustment or to claims relating to inventory, accounts
receivable or taxes.
28
5.4.2 CAP. The maximum amount of indemnification owed to either party
to the other, plus associated costs and expenses, shall not exceed, in the
aggregate, the sum of Eight Million Four Hundred and Twenty Nine Thousand Six
Hundred and Sixty three Dollars ($8,429,663), before giving effect to the
threshold under clause (a) above. This maximum limitation on indemnification
liability of SELLER shall not in any way limit SELLER's liability for breaches
of the representations and warranties made in Sections 3.1.1 (Corporate
Existence), 3.1.2 (Corporate Power and Authorization), or (d) SELLER's liability
for fraud or intentional misrepresentation.
5.4.3 MATERIALITY. Where a matter must be "material" in order to
constitute a breach of a warranty or representation in this Agreement, the cost
of the immaterial matter shall be counted toward satisfaction of the "basket"
and "cap" described in this Section 5.7.
5.5 EXCLUSIVITY. Except in the case of fraud, willful misconduct or
criminal conduct, the remedies provided in this 5 shall be exclusive of any
other rights or remedies which might be available to a party upon the occurrence
of any event described in Sections 5.1 or 5.2 hereof, either under this
Agreement or at law or in equity. Nothing contained herein, however, shall
preclude a party from seeking injunctive or other equitable relief under
circumstances where such relief is available, with the proviso that the moving
party shall not be entitled to ancillary relief in the nature of damages or fee
awards unless specifically provided for in this Agreement.
5.6 INSURANCE COVERAGE. A Claim for indemnification shall be reduced to
the extent that the Claim is covered by insurance from a financially-responsible
insurer which will respond to the Claim. All applicable insurance coverage shall
be the primary resource for paying covered Claims; and all rights of subrogation
are hereby waived.
SECTION 6 - COVENANTS OF THE PARTIES.
SELLER will conduct the Business prior to the Closing Date in the
normal course and will use reasonable efforts to preserve the business
organization of SELLER intact and retain the services of its present officers,
29
employees and agents to the end that it may retain its goodwill and preserve its
business relationships with customers, suppliers and others. In addition, SELLER
covenants that, from the date hereof until the Closing:
(a) the Business will be conducted only in the ordinary course, and
none of its properties or assets will be sold or otherwise disposed of,
mortgaged, pledged or otherwise hypothecated, except in the ordinary
course of business;
(b) no general increase or individual increase will be made in the
compensation payable or to become payable by SELLER to any of its
officers, employees or agents, except for payments to SELLER's sole
shareholder;
(c) no contract, obligation or commitment will be entered into or
assumed by or on behalf of SELLER extending beyond the Closing, except
normal commitments for the purchase of raw materials, supplies,
licenses and other assets used in the ordinary course of business, and
for commitments to customers incurred in the ordinary course of
business;
(d) no change, other than those required in the ordinary course of
business, will be made affecting SELLER's personnel or agents;
(e) SELLER will maintain its properties in the same operating condition
and repair as of the date of the Agreement, using its customary
standards of maintenance, reasonable wear and tear excepted;
(f) SELLER will continue until the Closing to carry insurance in the
forms and in the amounts now carried;
(g) SELLER will permit BUYER to have access to its books and records
with respect to the assets, the business, and other aspects of the
Business; and
(h) SELLER will make the SELLER Business available for observation by
BUYER between the date of this Agreement and Closing, during normal
working hours, to assist BUYER in learning the SELLER Business.
SECTION 7 - ALLOCATION OF PURCHASE PRICE
7.1 The Purchase Price shall be allocated among the acquired assets in
accordance with a mutually acceptable allocation schedule which will be prepared
after Closing and, which schedule will be prepared in accordance with the
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Internal Revenue Code. In connection with the determination of the foregoing
allocation schedule, the parties shall cooperate with each other and provide
such information as any of them shall reasonably request. The parties will each
report the federal, state and local and other tax consequences of the purchase
and sale contemplated hereby (including the filing of Internal Revenue Service
Form 8594) in a manner consistent with such allocation.
SECTION 8 - POST CLOSING MATTERS.
8.1 ACCESS TO RECORDS AND PERSONS. SELLER and BUYER agree that, both
before and after the Closing, each will have access, upon prior reasonable
written request and at any reasonable time during normal business hours, to the
other's officers and employees and to its books and records relating to the
assets, properties and operations of SELLER, and each shall have the right to
make copies of such books and records; provided, however, that such access shall
be solely for the purpose of enabling such party to prepare financial statements
and tax returns, and any litigation, claims, collection or arbitration matters
and for such other business purposes as SELLER and BUYER may agree. Neither
party to this Agreement shall destroy or discard any books and records of SELLER
for a period of five (5) years after the date of Closing without first providing
the other party adequate opportunity to retrieve such books and records.
8.2 ACCOUNTS RECEIVABLE INCLUDED IN PURCHASED ASSETS. At Closing,
SELLER shall provide to BUYER (a) an accounting of all accounts receivable
relating to the Business, listing for each customer the amount outstanding as of
Closing and the payment due dates; and (b) letters on SELLER's letterhead,
signed by an officer of SELLER, addressed to each such customer, for mailing by
BUYER, requesting that all payments on accounts receivable be directed
immediately to BUYER. BUYER shall have the right to audit SELLER's records
relating to purchased accounts receivable until 60 days after receipt by BUYER
of payment in full. After the Closing, SELLER shall remit to BUYER by Tuesday of
each week any accounts receivable included in the Purchased Assets which SELLER
may collect, without deduction, set-off or counterclaim by SELLER. BUYER shall
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notify SELLER within 110 days after Closing of any accounts receivable included
in the Purchased Assets which remain uncollected by BUYER 90 days after the
Closing. Such accounts receivable shall be repurchased by SELLER from BUYER at
face value, or deducted from the escrow, at BUYER's election, upon demand of
BUYER, and thereafter SELLER may proceed to collect the same.
8.3 COVENANT NOT-TO-COMPETE.
(a) In consideration of the payment of the Purchase Price, and in order
to induce BUYER to enter into this Agreement and to consummate the
transactions contemplated hereby, the SELLER, on behalf of itself and
its parent, subsidiaries, and other affiliates (such entities
collectively referred to in this Section 8.3 as "SELLER"), hereby
covenants and agrees that the SELLER for a period of five (5) years
from and after the Closing Date shall not directly or indirectly, (a)
own, manage, operate, control, provide financing or otherwise engage
directly or indirectly with a business that competes with the Business
(the "Competitive Business"), or (b) solicit any customers of BUYER
listed on Schedule 8.3(a), except if such solicitation is for any
product other than the Business. The foregoing shall not be deemed to
prevent the SELLER from owning up to three percent (3%) in value or in
voting power of the stock of any corporation which is engaged in any
business competitive with the Business after the Closing if the stock
of such corporation is listed on any national securities exchange or
traded in the over-the-counter market in the United States of America.
(b) SELLER acknowledges that BUYER would not have an adequate remedy at
law for a breach of this covenant and hereby consents to the
enforcement of this covenant by BUYER by means of a temporary and/or
permanent injunction issued by any court having jurisdiction thereof
and agrees that in any such court proceeding BUYER shall be entitled to
assert any claim it may have for damages resulting from the breach of
this covenant in addition to seeking injunctive relief.
(c) This covenant shall be construed as covering competition in each of
the separate states, countries and other geographic areas in which
BUYER engages in the Business. To the extent it is legally
unenforceable in any state, country, or other geographic area, this
covenant shall not thereby be affected with respect to any other state,
country or geographic area.
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8.4 CASH RECEIPTS. SELLER agrees to receive as custodian of BUYER and
promptly forward on a weekly basis to BUYER all payments SELLER receives on or
after Closing relating to business conducted by BUYER after Closing, without
deduction, set-off or counterclaim by SELLER. BUYER shall provide SELLER with
wire transfer instructions. In the event BUYER receives payments from SELLER's
customers relating to accounts receivable or other Assets not purchased
hereunder, BUYER shall promptly forward such payments to SELLER, without
deduction, set-off or counterclaim by BUYER.
8.5 EMPLOYEE RECORDS. By 8am of the day after Closing, SELLER will
provide to BUYER a current payroll register for Transferees, including name,
address and number of exemptions claimed.
8.6 BENEFITS COVERAGE AND PAYROLL. SELLER shall administer benefits for
Transferees under SELLER's existing Employee Benefit Plans, excluding the 401k
plan, through the end of January 2004 and BUYER shall reimburse SELLER $22,732
per month. SELLER shall handle payroll administration for Transferees until
December 26, 2003, and BUYER shall reimburse SELLER promptly after receipt of
Seller's invoice.
8.7 LOANED EMPLOYEES. SELLER shall make available to BUYER the services
of each of the following employees for the following portions of their weekly
time, at the following BiWeekly rates, for as long as BUYER requires.
EMPLOYEE PORTION OF TIME BIWEEKLY RATE
-------- --------------- -------------
Mr. Xxx Xxxxxxxx 50% $1,947.01
Manufacturing
Xx. Xxxx Xxxx 20% $579.37
Controller
Mr. Xxxxxx Xxxxxxxxx 50% $939.84
Quality Control
For each of the above employees, BUYER will pay the above BiWeekly rates until
BUYER notifies SELLER that the services of such employee is no longer required,
at which time BUYER shall pay to SELLER, for the last payment in which services
are provided, a pro-rata amount calculated as the number of days in that two
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week period. BUYER shall also reimburse SELLER for any travel and related living
expenses incurred by such employees of SELLER, and SELLER shall remain
responsible for all employee compensation and benefits.
SECTION 9 - TERMINATION OF AGREEMENT.
This Agreement may be terminated at any time:
(a) by mutual consent of the parties;
(b) by either party if the Closing shall not have occurred by December
15, 2003, and the party seeking termination is ready, willing and able
to close and not in material default of its obligations under this
Agreement;
(c) by either party if there shall have been a material
misrepresentation or breach of warranty or a breach of a material
covenant on the part of the other party in the representations and
warranties or covenants set forth herein or in any Schedule, Exhibit or
other instrument delivered in connection herewith, which
misrepresentation or breach is not cured prior to the Closing;
(d) by either party if any material claim, investigation or litigation
relating to the assets or the Business or the transaction is pending as
of the date of termination.
SECTION 10 - DISPUTE RESOLUTION.
10.1 EXCLUSIVITY AND CONFIDENTIALITY. Any dispute arising out of or
relating to this Agreement or any document delivered at Closing, including, but
not limited to, claims for indemnification pursuant to Section 5 shall be
resolved in accordance with the procedures specified in this Section 10, which
shall be the sole and exclusive procedures for the resolution of any such
disputes; provided, that all disputes with respect to the Purchase Price
adjustment of Section 1.3 hereof shall be resolved solely as set forth in
Section 1.3. All negotiations pursuant to this section are confidential and
shall be treated as compromise and settlement negotiations for purposes of the
Federal Rules of Evidence and State Rules of Evidence.
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10.2 NEGOTIATION. The parties shall attempt in good faith to resolve
any dispute arising out of or relating to this Agreement promptly by negotiation
between representative of the SELLER and executives of BUYER. Any party may give
the other party written notice of any dispute not resolved in the normal course
of business. Within fifteen days after delivery of the notice, the receiving
party shall submit to the other a written response. The notice and response
shall include (a) a statement of each party's position, and (b) the name and
title of the executive who will accompany the representative. Within 30 days
after delivery of the disputing party's notice, the representatives of Purchaser
and Seller shall meet at a mutually acceptable time and place, and thereafter as
often as they reasonably deem necessary to attempt to resolve the dispute. All
reasonable requests for information made by one party to the other will be
honored.
10.3 MEDIATION. If the dispute has not been resolved by negotiation
within 60 days of the disputing party's notice, or if the parties fail to meet
within 30 days of such notice, either party may initiate mediation under the
then current Center for Public Resources ("CPR") Model Procedure for Mediation
of Business Disputes. The neutral third party will be selected from the CPR
Panels of Neutrals, with the assistance of CPR, unless the parties agree
otherwise. If a party refuses to mediate, then that party may not recover its
attorneys' fees or costs in any litigation brought to construe or enforce this
Agreement. Otherwise, if mediation is unsuccessful, then the prevailing party
shall be entitled to recover reasonable attorneys' fees and expenses, including
the cost of the unsuccessful mediation, but only if the prevailing party offered
to settle in mediation in an amount equal to or less than the award in
litigation.
10.4 LITIGATION. If the dispute has not been resolved by mediation as
provided herein within 60 days of the initiation of mediation, either party may
initiate litigation (upon 30 days written notice to the other party); provided,
however, that if one party has requested the other to participate in mediation
and the other has failed to participate, the requesting party may initiate
litigation before expiration of the above period. Nothing herein shall be
construed to prevent any party from seeking equitable relief in any court of
competent jurisdiction to restrain or prohibit any breach or threatened breach
of any covenant or agreement of the parties set forth in this Agreement.
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10.5 JURISDICTION. Each of the parties hereby irrevocably and
unconditionally (i) consents to submit to the exclusive jurisdiction of the
courts of the State of Florida and the courts of the United States of America
located in the State of Florida for any actions, suits or proceedings arising
out of or relating to this Agreement and the transactions contemplated hereby
and agrees not to commence any action, suit or proceeding relating thereto
except in such courts, (ii) agrees that service of any process, summons, notice
or document by United States registered or certified mail, to a party's address
in effect pursuant to Section 11.6, shall be effective service of process for
any action, suit or proceeding brought in any such court, (iii) waives any
objection to personal jurisdiction and the laying of venue of any action, suit
or proceeding arising out of this Agreement or the transactions contemplated
hereby in said courts, and (iv) waives and agrees not to plead or claim in any
such court that any such action, suit or proceeding brought in any such court
has been brought in an inconvenient forum. Notwithstanding the foregoing, a
party shall be entitled to seek injunctive or similar relief in the courts of
any jurisdiction to protect such party's rights and interests ancillary to such
litigation.
10.6 LEGAL AND OTHER FEES. Notwithstanding any other provision of this
Agreement, in any litigation arising out of this Agreement as provided in this
Section 10, the court shall assess legal and accounting fees and expenses
against the unsuccessful party and in favor of the successful party, such
assessment to be in whole or part as the court evaluates such success in the
matter.
SECTION 11 - MISCELLANEOUS.
11.1 EXPENSES. The parties hereto shall pay their own expenses,
including without limitation their legal fees and expenses, incidental to the
preparation of this Agreement, the carrying out of the provisions of this
Agreement and the consummation of the transactions contemplated hereby.
11.2 CONTENTS OF AGREEMENT; PARTIES IN INTEREST. This Agreement, the
Escrow Agreement and the Lease set forth the entire understanding of the parties
hereto with respect to the transactions contemplated hereby. This Agreement
shall not be amended or modified except by written instrument duly executed by
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each of the parties hereto. Any and all previous agreements and understandings
between or among the parties regarding the subject matter hereof, whether
written or oral, are superseded by this Agreement.
11.4 ASSIGNMENT AND BINDING EFFECT. All of the terms and provisions of
this Agreement shall be binding upon and inure to the benefit of and be
enforceable by the successors and assigns of SELLER and BUYER. No party may
assign its rights hereunder, except BUYER may assign its rights to a wholly
owned subsidiary if it unconditionally guarantees such subsidiaries' obligation
hereunder.
11.5 WAIVER. Any term or provision of this Agreement may be waived at
any time by the party or parties entitled to the benefit thereof but only by a
written instrument duly executed by such party or parties.
11.6 NOTICES. Any notice, request, demand, waiver, consent, approval or
other communication which is required or permitted hereunder shall be in writing
and shall be deemed given only if delivered personally or sent by registered or
certified mail, postage prepaid, as follows:
If to BUYER: Illinois Tool Works Inc.
0000 Xxxx Xxxx Xxxxxx
Xxxxxxxx, XX 00000
Attn: Corporate Secretary
If to SELLER: U.S. Plastic Lumber Corp.
0000 Xxxxxx Xxxx, Xxxxx 000X
Xxxx Xxxxx, XX 00000
or to such other address as the addressee may have specified in a notice duly
given to the sender as provided herein. Such notice, request, demand, waiver,
consent, approval or other communication will be deemed to have been given as of
the date so delivered, facsimiled or mailed.
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11.7 NO BENEFIT TO OTHERS. The representations, warranties, covenants
and agreements contained in this Agreement are for the sole benefit of the
parties hereto and their successors and assigns, and they shall not be construed
as conferring any rights on any other persons.
11.8 SCHEDULES AND EXHIBITS. All Exhibits and Schedules referred to
herein are intended to be and hereby are specifically made a part of this
Agreement. If a document or matter is disclosed in any Exhibit or Schedule of
this Agreement, it shall be deemed to be disclosed for all purposes of this
Agreement without the necessity of specific repetition or cross-reference.
11.9 SEVERABILITY. Any provision of this Agreement which is invalid or
unenforceable in any jurisdiction shall be ineffective to the extent of such
invalidity or unenforceability without invalidating or rendering unenforceable
the remaining provisions hereof, and any such invalidity or unenforceability in
any jurisdiction shall not invalidate or render unenforceable such provision in
any other jurisdiction.
11.10 COOPERATION. Each party to this Agreement shall cooperate and
take such action as may be reasonably requested by any other party in order to
carry out the provisions and purposes of this Agreement.
11.11 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, any party hereto may execute any such counterpart, each of which
when executed and delivered shall be deemed to be an original and all of which
counterparts taken together shall constitute but one and the same instrument.
This Agreement shall become binding when one or more counterparts taken together
shall been executed and delivered by the parties. It shall not be necessary in
making proof of this Agreement or any counterpart hereof to produce or account
for any of the other counterparts. Signatures delivered by facsimile for this
Agreement or any document delivered at Closing shall be binding to the same
extent as an original.
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11.12 GOVERNING LAW. This Agreement shall be governed by the laws of
the State of Florida, without reference to its conflict of laws provisions.
11.13 TIME IS OF THE ESSENCE. Time shall be of the essence in this
transaction with regard to every date or time period set forth herein.
11.14 DELIVERY BY FACSIMILE. This Agreement and any signed agreement or
instrument entered into in connection herewith or contemplated hereby, and any
amendments hereto or thereto, to the extent signed and delivered by means of a
facsimile machine, shall be treated in all manner and respects as an original
agreement or instrument and shall be considered to have the same binding legal
effects as if it were the original signed version thereof delivered in person.
At the request of any party hereto or to any such other agreement or instrument,
each other party hereto or thereto shall re-execute original forms thereof and
deliver them to all other parties. No party hereto or to any such agreement or
instrument shall raise the use of a facsimile machine to deliver a signature or
the fact that any signature or agreement or instrument was transmitted or
communicated through the use of facsimile machine as a defense to the formation
of a contract and each such party forever waives any such defense. To the extent
that a signature of a shareholder of SELLER is required under this Agreement,
SELLER shall secure such shareholder's agreement and conformity to this
provision.
11.15 PUBLICITY. Neither BUYER nor SELLER shall, without the approval
of the other, make any press release or other public announcement concerning the
transactions contemplated by this Agreement prior to Closing, except as and to
the extent that any such party shall be so obligated by law, in which case the
other party shall be advised and the parties shall use their best efforts to
cause a mutually agreeable release or announcement to be issued.
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IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement on the date first written.
ATTEST: ILLINOIS TOOL WORKS INC.
BY: /s/ Xxxxxxx Xxxxxxxx
--------------------- --------------------------------------
TITLE: Vice President, General Manager
ATTEST: U. S. PLASTIC LUMBER LTD.
BY: /s/ Xxxxxxx X. Xxxxxxx
--------------------- --------------------------------------
TITLE: Treasurer
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