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EXHIBIT 10.10
STOCK PURCHASE AGREEMENT
BETWEEN
WINSLOEW FURNITURE, INC.
AND
VERTIFLEX COMPANY
(Sale of Continental Engineering Group, Inc.)
Dated as of June 30, 1998
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TABLE OF CONTENTS
PAGE
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1. Definitions 1
2. PURCHASE AND SALE OF COMPANY SHARES 8
(a) BASIC TRANSACTION 8
(b) PURCHASE PRICE 8
(c) PAYMENT OF PURCHASE PRICE 8
(d) SATISFACTION OF FUNDED INDEBTEDNESS 9
(e) THE CLOSING 9
(f) DELIVERIES AT THE CLOSING 9
(g) POST-CLOSING PURCHASE PRICE ADJUSTMENT 10
3A. REPRESENTATIONS AND WARRANTIES OF THE SELLER AS TO SELLER MATTERS 12
(a) ORGANIZATION 12
(b) AUTHORIZATION OF TRANSACTION 12
(c) NONCONTRAVENTION 12
(d) OWNERSHIP OF COMMON STOCK 13
(e) BROKERS FEES 13
3B. REPRESENTATIONS AND WARRANTIES OF THE SELLER WITH RESPECT TO THE COMPANY 13
(a) ORGANIZATION AND STANDING 13
(b) AUTHORITY TO DO BUSINESS 13
(c) CHARTER AND BYLAWS; CORPORATE RECORDS 13
(d) NO SUBSIDIARIES 14
(e) CAPITALIZATION 14
(f) FINANCIAL STATEMENTS 14
(g) ABSENCE OF CERTAIN DEVELOPMENTS 15
(h) UNDISCLOSED LIABILITIES 17
(i) TANGIBLE PERSONAL PROPERTY 17
(j) REAL PROPERTY 18
(k) INSURANCE 18
(l) LABOR RELATIONS 18
(m) COMPANY PERMITS; COMPLIANCE WITH LAW 19
(n) LITIGATION 19
(o) LIST OF ACCOUNTS 19
(p) LIST OF PERSONNEL 19
(q) EMPLOYEE BENEFITS 20
(r) TAX MATTERS 22
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(s) ENVIRONMENTAL MATTERS 23
(t) INTELLECTUAL PROPERTY 24
(u) MATERIAL CONTRACTS 25
(v) TRANSACTIONS WITH AFFILIATES 25
(w) POWERS OF ATTORNEY 25
(x) INVENTORY 25
(y) ACCOUNTS RECEIVABLE 26
(z) CUSTOMERS AND SUPPLIERS 26
(aa) TRAILING SALES COMMISSIONS 26
(bb) FULL DISCLOSURE 26
4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER 26
(a) ORGANIZATION 26
(b) AUTHORIZATION OF TRANSACTION 26
(c) NONCONTRAVENTION 26
(d) BROKERS FEES 27
(e) ACQUISITION OF SHARES FOR INVESTMENT 27
(f) FULL DISCLOSURE 27
5. POST-CLOSING COVENANTS 27
(a) GENERAL 27
(b) LITIGATION SUPPORT 27
(c) PUBLICITY 27
(d) CERTAIN TAX MATTERS 28
(e) FINANCIAL REPORTING COOPERATION 30
(f) 401(K) PLAN 30
(g) NON-COMPETITION 30
6. CONDITIONS TO OBLIGATION TO CLOSE 31
(a) CONDITIONS TO OBLIGATION OF THE PURCHASER 31
(b) CONDITIONS TO OBLIGATION OF THE SELLER 33
7. REMEDIES FOR BREACHES OF THIS AGREEMENT 34
(a) SURVIVAL OF REPRESENTATIONS AND WARRANTIES 34
(b) INDEMNIFICATION 34
(c) LIMITATION OF RECOURSE 37
8. DISPUTE RESOLUTION 38
(a) DISPUTE DEFINED 38
(b) DISPUTE RESOLUTION PROCEDURES 38
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(c) PROVISIONAL REMEDIES 39
(d) TOLLING STATUTE OF LIMITATIONS 39
(e) PERFORMANCE TO CONTINUE 39
(f) EXTENSION OF DEADLINES 39
(g) ENFORCEMENT 39
(h) COSTS 39
(i) REPLACEMENT 40
9. MODIFICATION AND WAIVERS 40
(a) MODIFICATION 40
(b) WAIVERS 40
10. ADDITIONAL AGREEMENTS 40
(a) PROPORTIONATE SHARE 41
(b) STOCK ADJUSTMENTS 41
(c) SELLER'S GUARANTEE OF ACCOUNTS RECEIVABLE 42
(d) SEVERANCE OBLIGATIONS 43
(e) MICROCENTRE DISPUTE 43
(f) PRE-CLOSING WORKERS COMPENSATION CLAIMS 43
(g) VACATION ACCRUAL 43
11. MISCELLANEOUS 44
(a) NO THIRD-PARTY BENEFICIARIES 44
(b) ENTIRE AGREEMENT 44
(c) SUCCESSION AND ASSIGNMENT 44
(d) COUNTERPARTS 44
(e) HEADINGS 44
(f) NOTICES 44
(g) GOVERNING LAW; VENUE 46
(h) AMENDMENTS AND WAIVERS 46
(i) SEVERABILITY 46
(j) EXPENSES 46
(k) CONSTRUCTION 46
(l) INCORPORATION OF DISCLOSURE SCHEDULE 46
(m) WAIVER OF JURY TRIAL 47
(n) PREVAILING PARTIES 47
(o) EQUITABLE REMEDIES 47
EXHIBIT A -- Escrow Agreement
Schedule I -- Shares
Schedule II -- Accounting Policies and Procedures
Disclosure Schedule
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STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement is made and entered into as of
June 30, 1998, by and between VERTIFLEX COMPANY, an Illinois corporation (the
"PURCHASER"), and WINSLOEW FURNITURE, INC., a Florida corporation (the
"SELLER"). The Purchaser and the Seller are each referred to in this Agreement
as a "PARTY" and collectively as the "PARTIES".
The Seller directly owns all of the outstanding capital stock of
Continental Engineering Group, Inc., a California corporation (the "COMPANY").
This Agreement contemplates a transaction in which the Purchaser will
purchase from the Seller, and the Seller will sell to the Purchaser, all of the
outstanding capital stock of the Company.
NOW, THEREFORE, in consideration of the premises and the mutual
promises herein made, and in consideration of the representations, warranties
and covenants herein contained, the Parties agree as follows.
1. DEFINITIONS.
"ACCOUNTING FIRM" has the meaning set forth in section 2(g)(ii) below.
"ACCOUNTS RECEIVABLE" means all accounts, instruments, drafts,
acceptances and other forms of receivables relating to the Company's business,
and all rights earned under the Company's contracts to sell goods or render
services.
"ACQUIRED BUSINESS" has the meaning set forth in section 5(g)(ii)
below.
"ACTUAL AMOUNT" has the meaning set forth in section 2(g)(ii)(C) below.
"AFFILIATE" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Securities Exchange Act.
"AFFILIATED GROUP" means any affiliated group within the meaning of
section 1504 of the Code.
"AUTHORITY" means any federal, state, local or foreign governmental
regulatory agency, commission, bureau, authority, court or arbitration tribunal.
"AGREEMENT" means this Stock Purchase Agreement together with all
exhibits and schedules contemplated hereby.
"ASSIGNED RECEIVABLES" has the meaning set forth in section 10(c)(ii)
below.
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"BASIS" means any past or present fact, situation, circumstance,
status, condition, activity, practice, plan, occurrence, event, incident,
action, failure to act, or transaction that forms or could form the basis for
any specified consequences.
"BASKET" has the meaning set forth in section 7(b)(i) below.
"CERCLA" has the meaning set forth in section 3B(s)(iV) below.
"CHANGE OF CONTROL" has the meaning set forth in section 5(g)(i) below.
"CHARTER" and "BYLAWS," respectively, mean with respect to any
corporation, those instruments that, among other things, (a) define its
existence, as filed or recorded with the applicable Authority, including,
without limitation, such corporation's Articles or Certificate of Incorporation,
and (b) otherwise govern its internal affairs, in each case as amended,
supplemented, or restated.
"CLOSING" has the meaning set forth in section 2(e) below.
"CLOSING BALANCE SHEET" has the meaning set forth in section 2(g)(i)
below.
"CLOSING DATE" has the meaning set forth in section 2(e) below.
"CODE" means the Internal Revenue Code of 1986, as amended, and the
regulations promulgated thereunder.
"COMMON STOCK" means the Common Stock of the Company, no par value.
"COMPANY" has the meaning set forth in the preface above.
"COMPANY PERMITS" means all licenses, franchises, permits, orders,
approvals, registrations, authorizations, qualification filings with all
Authorities required in connection with the operation of the business of the
Company.
"COMPANY FINANCIAL STATEMENTS" has the meaning set forth in section
3B(f)(i) below.
"COMPANY INTERIM FINANCIAL STATEMENTS" has the meaning set forth in
section 3B(f)(i) below.
"COMPETING BUSINESS" has the meaning set forth in section 5(g)(ii)
below.
"CONFIDENTIALITY AGREEMENT" has the meaning set forth in section 11(b)
below.
"CONTROLLED GROUP OF CORPORATIONS" has the meaning set forth in section
1563 of the Code.
"CPR" has the meaning set forth in section 8(b)(ii) below.
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"DISPUTE" has the meaning set forth in section 8(a) below.
"EMPLOYEE BENEFIT PLAN" has the meaning set forth in section 3B(q)
below.
"EMPLOYEE PENSION BENEFIT PLAN" has the meaning set forth in ERISA
section 3(2).
"EMPLOYEE WELFARE BENEFIT PLAN" has the meaning set forth in ERISA
section 3(1).
"ENVIRONMENTAL, HEALTH AND SAFETY REQUIREMENTS" means all federal,
state, local and foreign statutes, regulations, ordinances and judicial and
administrative orders and determinations to which the Company is a party
concerning workplace 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 Materials of Environmental
Concern.
"ENVIRONMENTAL CLAIM" means any written notice or claim by any person
or any Authority alleging potential liability (including, without limitation,
potential liability for investigatory costs, cleanup costs, governmental
response costs, natural resources damages, property damages, personal injuries
or penalties) arising out of, based on or resulting from (i) the presence,
release or threatened release into the environment, of any Material of
Environmental Concern at any location, whether or not owned, leased or operated
by the Company, or (ii) any violation, or alleged violation, of any
Environmental, Health and Safety Requirement.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA AFFILIATE" means any Person that would be aggregated with the
Company under section 414(b), (c), (m) or (o) of the Code.
"ESCROW ACCOUNT" has the meaning set forth in section 2(c)(ii) below.
"ESCROW AGREEMENT" means the Escrow Agreement, in the form of EXHIBIT A
hereto, to be entered into on the Closing Date by the Purchaser, the Seller and
the Escrow Agent.
"ESCROW AGENT" has the meaning set forth in section 2(c)(ii) below.
"ESCROW FUNDS" has the meaning set forth in section 2(c)(ii) below.
"FINAL CLOSING BALANCE SHEET DETERMINATION DATE" has the meaning set
forth in section 2(g)(ii) below.
"FUNDED INDEBTEDNESS" means the aggregate amount (including the current
portions thereof) of all (i) indebtedness for money borrowed from others and
purchase money indebtedness (other than
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accounts payable in the ordinary course) of the Company, (ii) indebtedness of
the type described in clause (i) above guaranteed, directly or indirectly, 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 for the purpose of enabling the debtor to
make payment of the indebtedness or to assure the owners of the indebtedness
against loss, but excluding endorsements of checks and other instruments in the
ordinary course, (iii) indebtedness of the type described in clause (i) above
secured by any Lien upon property owned by the Company, even though the Company
has not in any manner become liable for the payment of such indebtedness, and
interest expense accrued but unpaid, and all prepayment premiums, on or relating
to any of such indebtednesection
"GAAP" means United States generally accepted accounting principles as
in effect from time to time.
"HIGH AMOUNT" has the meaning set forth in section 2(g)(ii)(B) below.
"INCOME TAX" means any federal, state, local or foreign Tax based on,
measured by or with respect to income, net worth or capital, including any
interest, penalty or addition thereto.
"INDEMNIFIED PARTY" has the meaning set forth in section 7(b)(v) below.
"INDEMNIFYING PARTY" has the meaning set forth in section 7(b)(v)
below.
"INITIAL PAYMENT" has the meaning set forth in section 2(c)(i) below.
"INTELLECTUAL PROPERTY" has the meaning set forth in section 3B(t)
below.
"INTELLECTUAL PROPERTY LICENSES" has the meaning set forth in section
3B(t) below.
"IRS" means the Internal Revenue Service.
"INVENTORY" means all of the Company's inventories, including without
limitation, raw materials, work in progress, finished goods, spare parts,
supplies, packaging goods and other like items.
"KNOWLEDGE" (and the related phrase "TO THE KNOWLEDGE OF"), (a) when
applied to the Seller means the actual knowledge of Xxxxx Xxxxxx, Xxxxxxx X.
Xxxxxxxxx, Xx., Xxxxx Xxxx and Xxxx Xxx, after reasonable investigations and
inquiries of the officers and responsible employees of the Company (including,
without limitation, Xxxxxx Xxxxxx, Xxxxx Xxxxxxxx, Xxxxx Xxxx, Xxxx Xxxxx and
Xxxxx Xxxxxxxxx), and (b) when applied to the Purchaser means the actual
knowledge after reasonable investigation of the executive officers of the
Purchaser.
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"LABOR DISPUTE" has the meaning set forth in section 7(b)(iii) below.
"LIEN" means any lien, charge, claim, restriction, encumbrance,
security interest or pledge of any kind whatsoever.
"LISTED INTELLECTUAL PROPERTY" has the meaning set forth in section
3B(t) below.
"LOSS" or "LOSSES" means all damages, dues, penalties, fines,
reasonable amounts paid in settlement, Taxes, costs, obligations, losses,
expenses, and fees (including court costs and reasonable attorneys' fees and
expenses), including, as the context may require, any of the foregoing which
arise out of or in connection with any actions, suits, proceedings, hearings,
investigations, charges, complaints, claims, demands, injunctions, judgments,
orders, decrees or rulings.
"LOW AMOUNT" has the meaning set forth in section 2(g)(ii)(A) below.
"MATERIAL ADVERSE CHANGE" or "MATERIAL ADVERSE EFFECT" means any change
or effect that is materially adverse to the business, assets, financial
condition or results of operations of the Company.
"MATERIAL CONTRACT" means any contract or agreement whether written or
oral (including any and all amendments thereto) to which the Company is a party,
or by which the Company or any of its assets is bound, and which (a) relates to
Funded Indebtedness or is a letter of credit, pledge, bond or similar
arrangement running to the account of or for the benefit of the Company, (b)
relates to the purchase, maintenance or acquisition, or sale or furnishing of
materials, supplies, merchandise, machinery, equipment, parts or any other
property or services (excluding any such contract made in the Ordinary Course of
Business and which is expected to be fully performed within 30 days of the date
hereof or which involves revenues or expenditures of less than $25,000), (c) is
a collective bargaining agreement, (d) obligates the Company not to compete with
any business, or to conduct any business with only certain parties, or which
otherwise restrains or prevents the Company from carrying on any lawful business
or which restricts the right of the Company to use or disclose any information
in its possession, (e) relates to (i) employment, compensation, severance, or
consulting between the Company and any of its officers or directors, or (ii)
other employees or consultants who are entitled to compensation thereunder in
excess of $25,000 per annum, (f) is a lease or sublease of real property, or a
lease, sublease or other title retention agreement or conditional sales
agreement for any machinery, equipment, vehicle or other tangible personal
property (whether the Company is a lessor or lessee), (g) is a contract for
capital expenditures or the acquisition or construction of fixed assets for or
in respect of any real property involving payments in excess of $25,000, (h) is
a contract granting any Person a Lien on any of the assets of the Company, in
whole or in part (other than Permitted Liens), (i) is a contract by which the
Company retains any manufacturer's representatives, broker or other sales agent,
distributor or representative, or advertising or marketing entity or through
which the Company is appointed or authorized as a sales agent, distributor or
representative, (j) is a contract under which the Company has granted or
received a license or sublicense or under which the Company is obligated to pay
or has the right to receive a royalty,
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license fee or similar payment (other than software licenses for purchased
software), (k) is a joint venture or partnership contract or a limited liability
company operating agreement, (l) is (i) an agreement for the storage,
transportation, treatment and disposal of any materials subject to regulation
under any Environmental Health and Safety Requirements, or (ii) a contract for
storage, transportation or similar services with carriers or warehousemen
(excluding any such contract entered into in the Ordinary Course of Business and
involving annual expenditures not exceeding $50,000), (m) is an agreement or
arrangement with the Seller or any Affiliate of the Seller, or (n) other than
the insurance policies and binders set forth in section 3B(k) of the Disclosure
Schedule, is otherwise material to the assets, business, operations or financial
condition of the Company.
"MATERIALS OF ENVIRONMENTAL CONCERN" means chemicals, toxic chemicals,
pollutants, contaminants, wastes, toxic substances, hazardous substances,
petroleum and petroleum products, pesticides, asbestos, polychlorinated
biphenyls, in each case with respect to which liability or standards of conduct
are imposed pursuant to any Environmental, Health and Safety Requirements.
"MEDIATION REQUEST" has the meaning set forth in section 8(b)(ii)
below.
"MOST RECENT BALANCE SHEET" means the balance sheet contained within
the Most Recent Financial Statements.
"MULTIEMPLOYER PLAN" has the meaning set forth in ERISA section 3(37).
"NET WORKING CAPITAL" means the total current assets of the Company
(which current assets shall exclude the current portion of deferred tax assets,
cash (except the Company's cash in its payroll account and its bank account in
England and the Company's xxxxx cash), and prepaid insurance) and (b) the total
current liabilities of the Company (which current liabilities shall exclude the
current portion of any Funded Indebtedness, income taxes and accrued insurance),
in each case determined as of the close of business on June 26, 1998 and by
reference to the amounts set forth on the face (but not the notes) of the
Closing Balance Sheet..
"90 AND OVER ACCOUNTS RECEIVABLE" has the meaning set forth in section
10(c) below.
"NON-COMPETITION AREA" has the meaning set forth in section 5(g)(i)
below.
"NOTICE OF DISAGREEMENT WITH CLOSING BALANCE SHEET" has the meaning set
forth in section 2(g)(ii) below.
"OPINION OF SELLER'S COUNSEL" means the opinion of Xxxxxx & Einstein,
Ltd., counsel to the Seller, dated as of the Closing Date, addressed to the
Purchaser, in form and substance reasonably satisfactory to the Purchaser and
its lender.
"ORDINARY COURSE OF BUSINESS" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
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"OTHER TAXES" means all Taxes other than Income Taxes.
"PARTY" has the meaning set forth in the preface above.
"PERMITTED INVESTMENT" has the meaning set forth in section 5(g)(ii)
below.
"PERMITTED LIENS" means (a) Liens set forth on the Disclosure Schedule
and which are identified as Permitted Liens, (b) Liens for Taxes not yet due and
payable and as to which appropriate reserves have been reflected on the Company
Interim Financial Statements, (c) workers or unemployment compensation Liens
arising in the Ordinary Course of Business and as to which appropriate reserves
have been reflected on the Most Recent Balance Sheet or adequate provision has
been made therefor by the Seller, and (d) mechanic's, materialman's, supplier's,
vendor's or landlord's Liens arising in the ordinary course of business securing
amounts which are not delinquent or being contested.
"PERSON" means any natural person, corporation, limited liability
company, unincorporated organization, partnership, association, joint-stock
company, joint venture, trust or government, or any agency or political
subdivision of any government.
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"PRE-CLOSING TAX PERIOD" means any tax period (including partial
periods) that ends on or prior to the Closing Date.
"PROPORTIONATE SHARE" has the meaning set forth in section 10(a)(i)
below.
"PURCHASED BUSINESS" has the meaning set forth in section 5(g)(i)
below.
"PURCHASER" has the meaning set forth in the preface above.
"PURCHASE PRICE" has the meaning set forth in section 2(b) below.
"PURCHASE PRICE ADJUSTMENT" has the meaning set forth in section
2(g)(iii) below.
"REAL PROPERTY" has the meaning set forth in section 3B(j) below.
"REPLACEMENT" has the meaning set forth in section 8(i) below.
"RETURN" means any return, declaration (including any declaration of
estimated Taxes), report, claim for refund, or information return or statement
relating to Taxes with respect to any income, assets or properties of the
Company, including any schedule or attachment thereto.
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"SECURITIES ACT" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"SELLER" has the meaning set forth in the preface above.
"SHARES" has the meaning set forth in section 2(a) below.
"SUBSIDIARY" means any corporation with respect to which a specified
Person (or a Subsidiary thereof) owns, directly or indirectly, a majority of the
common stock or has the power to vote or direct the voting of sufficient
securities to elect a majority of the directors.
"TAX ASSESSMENT" has the meaning set forth in section 5(d) below.
"TAX NOTICE" has the meaning set forth in section 5(d) below.
"TAXES" means all federal, state, local and foreign taxes (including,
without limitation, income or profits taxes, premium taxes, excise taxes, sales
taxes, use taxes, gross receipts taxes, franchise taxes, ad valorem taxes,
severance taxes, capital levy taxes, transfer taxes, value added taxes,
employment and payroll-related taxes, property taxes, real estate taxes,
business license taxes, occupation taxes, import duties and other governmental
charges and assessments), of any kind whatsoever, including interest, additions
to tax and penalties with respect thereto.
"THIRD PARTY CLAIM" has the meaning set forth in section 7(b)(v) below.
"UNRESTRICTED REPRESENTATIONS AND WARRANTIES" has the meaning set forth
in section 7(a) below.
2. PURCHASE AND SALE OF COMPANY SHARES.
(a) BASIC TRANSACTION. On and subject to the terms and conditions of
this Agreement, the Purchaser agrees to purchase from the Seller, and the Seller
agrees to sell to the Purchaser, free and clear of any and all restrictions on
transfer, Liens, claims and demands, all of the shares of Common Stock owned by
the Seller (the "SHARES") as set forth in SCHEDULE I hereto, for the
consideration specified below in this section 2.
(b) PURCHASE PRICE. The aggregate purchase price to be paid by the
Purchaser for all of the Shares (the "PURCHASE PRICE") shall be (i) $7,875,000,
plus or MINUS (ii) any Purchase Price Adjustment made pursuant to section 2(g)
below.
(c) PAYMENT OF PURCHASE PRICE. On the Closing Date, the Purchaser shall
make payment of the Purchase Price as follows:
(i) To the Seller, by wire transfer of immediately available
funds, the sum of $6,874,250 (the "INITIAL PAYMENT"), to the account
designated in writing by the Seller on the
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Closing Date. The Seller may direct the Purchaser to deliver a portion
of the Initial Payment to certain third parties for fees, expenses,
costs or other obligations arising out of or in connection with the
transactions contemplated in this Agreement.
(ii) To American National Bank and Trust Company of Chicago,
as escrow agent (the "ESCROW AGENT") pursuant to the terms of the
Escrow Agreement, the sum of $1,000,000 (the "ESCROW FUNDS"), together
with $750.00, representing the Seller's share of the first 12 months'
escrow fees, for a total payment to the Escrow Agent of $1,000,750. As
provided in the Escrow Agreement, the Escrow Funds shall be held in an
account (the "ESCROW ACCOUNT") to provide indemnification to the
Purchaser as provided in section 7(b) hereof.
(d) SATISFACTION OF FUNDED INDEBTEDNESS. On the Closing Date, the
Seller, at its expense, shall take such steps as shall be necessary such that,
concurrently with the Closing, there will be no further obligations of the
Company, monetary or otherwise, with respect to any Funded Indebtedness
outstanding immediately prior to the Closing. The Seller will make arrangements
reasonably satisfactory to the Purchaser for all holders of Funded Indebtedness
outstanding immediately prior to the Closing to provide to the Purchaser
recordable form mortgage and lien releases, canceled notes, trademark and patent
assignments and other documents reasonably requested by the Purchaser
simultaneously with or promptly following the Closing. If, after the Closing,
the Purchaser discovers that the Seller failed to eliminate, concurrently with
the Closing, all obligations of the Company, monetary or otherwise, with respect
to any Funded Indebtedness outstanding immediately prior to the Closing, the
Seller, at its expense, will take those actions reasonably requested by the
Purchaser to remove such obligations.
(e) THE CLOSING. The closing of the transactions contemplated by this
Agreement (the "CLOSING") shall take place at the offices of Xxxxxxxx & Xxxxxxx,
000 Xxxxx Xxxxxxxx, Xxxxx 0000, Xxxxxxx, Xxxxxxxx 00000 (or at such other
location as the Parties may agree), commencing at 10:00 a.m. local time on June
30, 1998 or such other date as the Seller and the Purchaser may mutually
determine (the "CLOSING DATE"). The Closing when completed shall be deemed to
have been effective at 11:59 p.m. on June 26, 1998.
(f) DELIVERIES AT THE CLOSING. At the Closing, (i) the Seller will
deliver to the Purchaser the various certificates and documents referred to in
section 6(a) below, (ii) the Purchaser will deliver to the Seller the various
certificates and documents referred to in section 6(b) below, (iii) the Seller
will deliver to the Purchaser stock certificates representing all of the Shares
being purchased pursuant to section 2(a) above, duly endorsed in blank or
accompanied by duly executed assignment documents, sufficient in form and
substance to convey to the Purchaser good title to such Shares, free and clear
of all restrictions on transfer, Liens, claims and demands and (iv) the
Purchaser will deliver to the Seller the Initial Payment.
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(g) POST-CLOSING PURCHASE PRICE ADJUSTMENT.
(i) At the Closing, the Seller shall prepare and deliver to
the Purchaser (A) a balance sheet of the Company as of June 26, 1998
(the "CLOSING BALANCE SHEET") and (B) the Seller's calculation of the
Net Working Capital of the Company as of such time. The Seller shall
deliver to Purchaser a draft of the Closing Balance Sheet and its
calculation of Net Working Capital two days prior to the Closing Date.
Except as provided in SCHEDULE II hereto, the Closing Balance Sheet
(including, without limitation, such calculation of Net Working
Capital) shall be prepared (A) in accordance with GAAP applied in a
manner consistent with the same accounting principles and methodologies
used in preparing the Company Financial Statements and (B) in
accordance with the principles and procedures set forth on SCHEDULE II
hereto.
(ii) During the 45 days immediately following receipt of the
Closing Balance Sheet by the Purchaser, the Purchaser and its
accountants shall be entitled to review the Closing Balance Sheet and
the calculation of Net Working Capital and any working papers, trial
balances and similar materials relating thereto prepared by the Seller
or its accountants, and the Seller shall provide the Purchaser and its
accountants with timely access, during the Company's normal business
hours, to the Company's personnel, properties, books and records and to
the Seller's personnel, properties, books and records to the extent
related to the preparation of the Closing Balance Sheet's calculation
of Net Working Capital. The Seller shall use reasonable commercial
efforts to cause its accountants to make available to the Purchaser any
working papers, trial balances and similar materials prepared by such
accountants in connection with the preparation of the Closing Balance
Sheet's calculation of Net Working Capital; PROVIDED, HOWEVER, that the
Purchaser acknowledges and agrees that such accountants may require the
Purchaser to execute customary undertakings in connection with such
accesection The Closing Balance Sheet's calculation of Net Working
Capital shall become final and binding upon the Parties on the 46th day
following delivery thereof unless the Purchaser gives written notice to
the Seller of its disagreement with the Closing Balance Sheet's
calculation of Net Working Capital (a "NOTICE OF DISAGREEMENT WITH
CLOSING BALANCE SHEET") prior to such date. Any Notice of Disagreement
With Closing Balance Sheet shall specify in reasonable detail the
nature of any disagreement so asserted. If a timely Notice of
Disagreement With Closing Balance Sheet is received by the Seller with
respect to the Closing Balance Sheet's calculation of Net Working
Capital , then the Closing Balance Sheet's calculation of Net Working
Capital (as revised in accordance with clause (A) or (B) below), shall
become final and binding as to the calculation of Net Working Capital
upon the Parties on the earlier of (A) the date the Purchaser and the
Seller resolve in writing any differences they have with respect to any
matter specified in a Notice of Disagreement With Closing Balance
Sheet, or (B) the date any matters in dispute are finally resolved in
writing by the Accounting Firm in the manner described below (the date
on which the Closing Balance Sheet's calculation of Net Working Capital
becomes final and binding being hereinafter referred to as the "FINAL
CLOSING BALANCE SHEET DETERMINATION DATE"). During the 30 days
immediately following the delivery of any Notice of
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15
Disagreement With Closing Balance Sheet, the Purchaser and the Seller
shall seek in good faith to resolve in writing any differences which
they may have with respect to any matter specified in such Notice of
Disagreement With Closing Balance Sheet. During such period, the
Purchaser and its accountants shall each have access to the Seller's
and the Company's working papers, trial balances and similar materials
(including the working papers, trial balances and similar materials of
their respective accountants) prepared in connection with the
preparation of the Closing Balance Sheet and the calculation of Net
Working Capital. At the end of such 30 day period, the Seller and the
Purchaser shall submit to an Accounting Firm for review and resolution
any and all matters which remain in dispute and which were included in
any Notice of Disagreement With Closing Balance Sheet (it being
understood that the Accounting Firm shall act as an arbitrator to
determine, based solely on presentations by the Purchaser and the
Seller (and not by independent review), only those matters which remain
in dispute), and the Accounting Firm shall reach a final, binding
resolution of all matters which remain in dispute, which final
resolution shall be (A) in writing, (B) furnished to the Purchaser and
the Seller as soon as practicable after the items in dispute have been
referred to the Accounting Firm, (C) made in accordance with this
Agreement, and (D) conclusive and binding upon the Parties and not
subject to collateral attack for any reason. The Closing Balance Sheet,
with any adjustments necessary to reflect the Accounting Firm's
resolution of the matters in dispute, shall become final and binding as
to the calculation of Net Working Capital on the Parties on the date
the Accounting Firm delivers its final resolution to the Parties, which
shall be no later than 90 days after the Closing Date. The Accounting
Firm shall be mutually selected by the Purchaser and the Seller, or, if
the Purchaser and the Seller cannot so agree within the 30-day period
referred to above, by lot from among the independent "Big 6" public
accounting firms (after excluding the Seller's independent public
accountants and the Purchaser's independent public accountants) willing
to act (the "ACCOUNTING FIRM"). Each Party shall pay its own costs and
expenses incurred in connection with such arbitration, provided that
the fees and expenses of the Accounting Firm shall be borne as follows:
(A) if the Accounting Firm resolves all of
the remaining objections in favor of the Purchaser (the amount
of the Net Working Capital so determined is referred to herein
as the "LOW AMOUNT"), the Seller will be responsible for all
of the fees and expenses of the Accounting Firm;
(B) if the Accounting Firm resolves all of
the remaining objections in favor of the Seller (the amount of
the Net Working Capital so determined is referred to herein as
the "HIGH AMOUNT"), the Purchaser will be responsible for all
of the fees and expenses of the Accounting Firm; and
(C) if the Accounting Firm resolves some of
the remaining objections in favor of the Purchaser and the
rest of the remaining objections in favor of the Seller (the
amount of the Net Working Capital so determined is referred to
herein as "ACTUAL AMOUNT"), the Seller will be responsible for
that fraction of the fees
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and expenses of the Accounting Firm equal to (i) the
difference between the High Amount and the Actual Amount over
(ii) the difference between the High Amount and the Low
Amount, and the Purchaser will be responsible for the
remainder of the fees and expenses.
(iii) Upon the final determination of the Closing Balance
Sheet in accordance with this section 2(g), the following amounts will
be payable:
(A) if Net Working Capital is greater than
$2,800,000.00, the Purchaser shall pay to
the Seller the amount by which the amount of
the Net Working Capital exceeds such amount;
and
(B) if Net Working Capital is less than
$2,800,000.00, the Seller shall pay to the
Purchaser the amount by which the amount of
the Net Working Capital is less than such
amount.
Any required adjustment to the Purchase Price pursuant to this section
2(g) shall be referred to as the "PURCHASE PRICE ADJUSTMENT".
(iv) Within 48 days after the receipt by the Purchaser of the
Closing Balance Sheet in accordance with section 2(g)(i) above, the
Seller, if section 2(g)(iii)(B) is applicable, shall make the payment
required by section 2(g)(iii)(B) above with respect to any undisputed
amounts constituting a portion of the Purchase Price Adjustment. If
section 2(g)(iii)(A) is applicable, the Purchaser shall make payments
to Seller of the Purchase Price Adjustment out of 60% of its collection
of accounts receivable until the Purchase Price Adjustment is paid in
full. With respect to any items that are the subject of a Notice of
Disagreement With Closing Balance Sheet, payment shall be made within
three business days after the Final Closing Balance Sheet Determination
Date.
3A. REPRESENTATIONS AND WARRANTIES OF THE SELLER AS TO SELLER MATTERS.
The Seller represents and warrants to the Purchaser as follows:
(a) ORGANIZATION. The Seller is a corporation duly organized, validly
existing, and in good standing under the laws of Florida.
(b) AUTHORIZATION OF TRANSACTION. The Seller has full corporate power
and authority to execute and deliver this Agreement and the Escrow Agreement and
to perform its obligations hereunder and thereunder. This Agreement constitutes
and the Escrow Agreement, when executed and delivered, will constitute the valid
and legally binding obligations of the Seller, enforceable in accordance with
their respective terms.
(c) NONCONTRAVENTION. Neither the execution and the delivery of this
Agreement or the Escrow Agreement, nor the consummation of the transactions
contemplated hereby or thereby, will
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(i) violate any statute, regulation, rule, injunction, judgment, order, decree
or ruling of any Authority to which the Seller is subject or any provision of
its charter or bylaws or other organizational document, as the case may be, or
(ii) except as set forth under section 3A(c) of the Disclosure Schedule conflict
with, result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate, terminate, modify
or cancel, or require any notice under any agreement, contract, lease, license
or instrument to which the Seller is a party or by which it is bound or to which
any of its assets is subject. The Seller is not required to give any notice to,
make any filing with, or obtain any authorization, consent or approval of any
Authority in order for it to consummate the transactions contemplated by this
Agreement.
(d) OWNERSHIP OF COMMON STOCK. The Seller holds of record and owns
beneficially the number of Shares set forth on SCHEDULE I attached hereto and
has good title to such Shares, free and clear of any restrictions on transfer,
Liens, claims, and demands. The Seller is not a party to any option, warrant,
purchase right, or other contract or commitment that could require the Seller to
sell, transfer, or otherwise dispose of any capital stock of the Company (other
than this Agreement). The Seller is not a party to any voting trusts, proxies,
or other agreements or understandings with respect to the voting of any capital
stock of the Company. The Shares represent all of the issued and outstanding
capital stock of the Company.
(e) BROKERS FEES. The Seller does not have any liability or obligation
to pay any fees or commissions to any broker, finder or agent with respect to
the transactions contemplated by this Agreement for which the Company or the
Purchaser could become liable or obligated. Without limitation as to the
foregoing, the Seller shall pay all fees and expenses of Xxxx, Xxxxxxxxx &
Xxxxxxxx, Ltd. in connection with the transactions contemplated hereby.
3B. REPRESENTATIONS AND WARRANTIES OF THE SELLER WITH RESPECT TO THE
COMPANY. The Seller represents and warrants to the Purchaser as follows:
(a) ORGANIZATION AND STANDING. The Company is a corporation duly
organized, validly existing and in good standing under the laws of its state of
incorporation.
(b) AUTHORITY TO DO BUSINESS The Company has all requisite corporate
power and authority to own, lease and operate its properties and to conduct its
business in the manner where now conducted and is duly licensed or qualified to
do business as a foreign corporation and is in good standing in each
jurisdiction in which the nature of its properties and assets or the conduct of
its business requires it to be so licensed or qualified, except where the
failure to be in good standing or to be duly licensed or qualified to do
business would not have a Material Adverse Effect. section 3B(b) of the
Disclosure Schedule sets forth a list of each jurisdiction in which the Company
is licensed or qualified to do business as a foreign corporation. The Company is
not required to be licensed or qualified to transact business as a foreign
corporation in the District of Columbia or England.
(c) CHARTER AND BYLAWS; CORPORATE RECORDS. Copies of the Charter and
bylaws of the Company and all amendments thereto as in effect on the date hereof
have been delivered to the
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Purchaser and are complete and correct as of the date hereof. A copy of the
corporate minutes and stock records of the Company have been delivered to the
Purchaser. With respect to all periods from and after March 24, 1995, such
corporate minutes contain a complete record of the meetings of the sole
shareholder and the board of directors (and any committees thereof) of the
Company. With respect to all periods prior to March 24, 1995, to the Knowledge
of the Seller such corporate minutes contain a complete record of the meetings
of the sole shareholder and the board of directors (and any committees thereof)
of the Company.
(d) NO SUBSIDIARIES. The Company has no direct or indirect equity
interest by stock ownership or otherwise in any other corporation, partnership,
joint venture, firm, association or business enterprise.
(e) CAPITALIZATION. The Company's authorized capital stock consists
solely of 1,000,000 shares of Common Stock, of which 1,000 shares are issued and
outstanding. All of the issued and outstanding shares of capital stock of the
Company (i) are duly authorized, validly issued, fully paid and nonassessable,
(ii) are held beneficially and of record by the Seller, and (iii) were not
issued in violation of the preemptive rights of any person or any agreement or
law by which the Company at the time of issuance was bound. No shares of Common
Stock are held by the Company in its treasury. There are no outstanding or
authorized subscriptions, warrants, options or, except for this Agreement, other
agreements or rights of any kind to purchase or otherwise receive or be issued,
or securities or obligations of any kind convertible into, any shares of capital
stock or any other security of the Company; there is no outstanding contract or
other agreement of the Seller, the Company or any other person to purchase,
redeem or otherwise acquire any outstanding shares of the capital stock of the
Company, or securities or obligations of any kind convertible into any shares of
the capital stock of the Company; there are no dividends which have accrued or
been declared but are unpaid on the capital stock of the Company, and there are
no outstanding or authorized stock appreciation, phantom stock, profit sharing,
stock plans or similar rights with respect to the Company.
(f) FINANCIAL STATEMENTS.
(i) The Seller has delivered to the Purchaser copies of the
Company's unaudited balance sheet at March 27, 1998 (the "MOST RECENT
BALANCE SHEET") and the related statements of income, stockholders'
equity and cash flow for the three fiscal months then ended (the
"COMPANY INTERIM FINANCIAL STATEMENTS"), and for the fiscal years ended
December 31, 1995, December 31, 1996 and December 31, 1997, which
financial statements together with the Company Interim Financial
Statements are collectively referred to herein as the "COMPANY
FINANCIAL STATEMENTS". The Company Financial Statements (i) have been
prepared from the books and records of the Company, (ii) present fairly
the financial condition of the Company and its results of operations as
at and for the respective periods then ended, and (iii) have been
prepared in accordance with GAAP applied consistently throughout the
periods indicated; PROVIDED, HOWEVER, that the Interim Company Interim
Financial Statements are subject to normal, non-material year-end
adjustments and lack footnotes and other presentation items.
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(ii) The Seller has delivered to the Purchaser copies of (i)
the unaudited consolidated balance sheet and related consolidated
statements of income, stockholders' equity and cash flows of the Seller
and its subsidiaries for the three fiscal months ended March 27, 1998,
and (ii) the audited consolidated balance sheets of the Seller and its
subsidiaries as of December 31, 1997 and 1996, and the related
consolidated statements of income, stockholders' equity and cash flows
for each of the three years in the period ended December 31, 1997, with
the report thereon of Ernst & Young LLP.
(g) ABSENCE OF CERTAIN DEVELOPMENTS. Except as otherwise contemplated
by this Agreement, since the date of the Most Recent Balance Sheet, the Company
has conducted its business only in the Ordinary Course of Business and there has
not been any Material Adverse Change with respect to the Company. Without
limiting the generality of the foregoing, since that date, the Company has not,
except as set forth in section 3B(g) of the Disclosure Schedule:
(i) borrowed any amount or incurred any liabilities, except
liabilities incurred in the Ordinary Course of Business (none of which
results from, arises out of, relates to, is in the nature of or was
caused by any breach of contract, breach of warranty, tort,
infringement or violation of law);
(ii) mortgaged, pledged or subjected to any Lien any of its
assets, except for Permitted Liens, or entered into any conditional
sale or other title retention agreement with respect to any property or
asset;
(iii) sold, assigned or transferred any of its tangible
assets, except for (A) sales of Inventory in the Ordinary Course of
Business and (B) sales of immaterial assets (having an aggregate value
of not more than $10,000) not used nor useful in the business of the
Company;
(iv) sold, assigned, transferred or granted any interest
(other than Liens in respect of Funded Indebtedness) in any patents,
trademarks or trade names or any material copyrights, trade secrets or
other intangible assets;
(v) made any capital expenditures or commitments therefor in
excess of $25,000 individually or $100,000 in the aggregate (all
capital expenditures being in the Ordinary Course of Business), except
for the purchase of the packaging line which, except for amounts
included in accounts payable on the Closing Balance Sheet, has been
paid for in full
(vi) entered into any agreement, contract, lease or license
outside the Ordinary Course of Business or involving in excess of
$25,000;
(vii) suffered any theft, damage, destruction or casualty loss
(in excess of $25,000 in the aggregate) to its property, whether or not
covered by insurance;
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(viii) entered into any agreement with any labor union or
association representing any employee, or made any wage or salary
increase or bonus, or increase in any other direct or indirect
compensation, for or to any of its officers, directors or employees;
(ix) made any change in its accounting methods, principles or
practices;
(x) made any increase in or established any bonus, insurance,
deferred compensation, pension, retirement, profit-sharing, stock
option (including the granting of stock options, stock appreciation
rights, performance awards or restricted stock awards or the amendment
of any existing stock options, stock appreciation rights, performance
awards or restricted stock awards), stock purchase or other employee
benefit plan or agreement or arrangement;
(xi) reclassified, combined, split, subdivided or redeemed or
otherwise repurchased any capital stock of the Company, or created,
authorized, issued, sold, delivered, pledged or encumbered any
additional capital stock (whether authorized but unissued or held in
treasury) or other securities equivalent to or exchangeable for capital
stock, or granted or otherwise issued any options, warrants or other
rights with respect thereto;
(xii) acquired or agreed to acquire by merging or
consolidating with, or by purchasing any portion of the capital stock,
partnership interests or assets of, or by any other manner, any
business or any corporation, partnership, limited liability company,
association or other business organization or division thereof;
(xiii) made any loan or advance (whether in cash or other
property), or made any investment in or capital contribution to, or
extended any credit to, any Person, except (i) short-term investments
pursuant to customary cash management policies, and (ii) advances made
in the Ordinary Course of Business to employees;
(xiv) cancelled, compromised, waived or released any right or
claim (or series of related rights and claims) outside the Ordinary
Course of Business or involving more than $25,000 in the aggregate;
(xv) made or pledged to make any charitable contribution;
(xvi) (A) except in the Ordinary Course of Business liquidated
Inventory or accepted product returns, (B) accelerated receivables or
(C) delayed payables;
(xvii) declared or set aside or paid any dividend in kind or
made any distribution in kind with respect to its capital stock or
redeemed, purchased or otherwise acquired any of its capital stock;
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(xviii) incurred any obligation to pay any management fee or
other fees or reimbursements to Affiliates of the Company, except for
obligations which will be paid prior to Closing; or
(xix) committed to do any of the foregoing.
(h) UNDISCLOSED LIABILITIES. The Company does not have any liability
(whether asserted or unasserted, whether absolute or contingent, whether accrued
or unaccrued, whether liquidated or unliquidated, and whether due or to become
due, including any liability for Taxes) (and, to the Knowledge of the Seller,
there is no Basis for any present or future action, suit, proceeding, hearing,
investigation, charge, complaint, claim or demand against the Company giving
rise to any liability), except for (i) liabilities reflected in the Company
Financial Statements, (ii) contractual obligations of the Company which are to
be performed in the Ordinary Course of Business under agreements, contracts,
leases, licenses and other arrangements to which the Company or any of its
assets are bound (none of which results from, arises out of, relates to, is in
the nature of or was caused by any breach of contract, breach of warranty, tort,
infringement or violation of law), (iii) liabilities reflected in section 3B(h)
of the Disclosure Schedule and (iv) liabilities which have arisen in the
Ordinary Course of Business since the date of the Most Recent Balance Sheet
(none of which results from, arises out of, relates to, is in the nature of or
was caused by any breach of contract, breach of warranty, tort, infringement or
violation of law). The Company has received no notice of any potential returns
from customers; however, based upon the past custom and practice of the Company,
there may be returns from United Stationers, X.X. Xxxxxxxx and Office Depot.
(i) TANGIBLE PERSONAL PROPERTY.
(i) Except as set forth in section 3B(i) of the
Disclosure Schedule and except for Inventory disposed of in the
Ordinary Course of Business since the date of the Most Recent Balance
Sheet, the Company has (x) good and marketable title to all of the
tangible personal property and assets which are used in the operation
of its business and which it owns or purports to own, and (y) valid
leasehold interests in all leases of tangible personal property which
it leases or purports to lease, in each case free and clear of any
Liens, other than Permitted Liens. The Company owns or leases all
buildings, machinery, equipment, and other tangible assets necessary
for the conduct of its businesses as presently conducted. Each such
tangible asset has been maintained in accordance with normal industry
practice, is in good operating condition and repair (subject to normal
wear and tear), and is suitable for the purposes for which it presently
is used.
(ii) The Company enjoys peaceful and undisturbed
possession under all of such leases of personal property under which it
is operating. There are no existing defaults, or events which with the
passage of time or the giving of notice, or both, would constitute
defaults by the Company or, to the Knowledge of the Seller, by any
other party to any such lease, except defaults which could not
reasonably be expected to have a Material Adverse Effect.
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(j) REAL PROPERTY.
(i) The Company does not own any real property. section 3B(j)
of the Disclosure Schedule sets forth a list of all real property
leased, subleased or otherwise occupied by the Company, indicating the
nature of its interest therein and setting forth a brief description of
the buildings and improvements located thereon (collectively, the "REAL
PROPERTY"). The Seller has delivered a complete copy of all leases to
the Purchaser. The Company has valid leasehold interests in all leases
of Real Property which it leases or purports to lease, free and clear
of any Liens, other than Permitted Liens. To the Knowledge of the
Seller, there are no pending condemnation, expropriation, eminent
domain or similar proceedings affecting all or any portion of such Real
Property and, to the Knowledge of Seller, no such proceedings are
contemplated.
(ii) The Company enjoys peaceful and undisturbed possession
under all of such Real Property leases under which it is operating. All
of such leases are valid, subsisting and in full force and effect, no
notice of termination has been received by the Company with respect
thereto, and there are no existing defaults, or events which with the
passage of time or the giving of notice, or both, would constitute
defaults by the Company or, to the Knowledge of the Seller, by any
other party thereto, except for defaults which could not reasonably be
expected to have a Material Adverse Effect.
(iii) The Real Property is in compliance with the American
with Disabilities Act.
(k) INSURANCE. Section 3B(k) of the Disclosure Schedule sets forth a
list of all insurance policies currently in effect which are owned or held by
the Company, insuring the products, properties, assets, business and operations
of the Company and its potential liabilities to third parties, and all general
liability policies maintained by the Company. All such policies are in full
force and effect and all premiums due and payable in respect thereof have been
paid, except to the extent set forth in section 3B(k) of the Disclosure
Schedule. Since the respective dates of such policies, no notice of cancellation
or non-renewal with respect to any such policy has been received by the Company.
Such policies are sufficient for compliance with all requirements of law and
Material Contracts to which the Company is a party. Since the respective dates
of such policies, no notice of cancellation or non-renewal with respect to any
such policy has been received by the Company. Section 3B(k) of the Disclosure
Schedule sets forth a list of all pending claims with respect to all such
policies.
(l) LABOR RELATIONS.
(i) The Company is not now, nor has it ever been, a party to
or otherwise bound by any labor or collective bargaining agreement.
Except as set forth in section 3B(l) of the Disclosure Schedule, as of
the date hereof (A) the Company is not involved in or, to the Knowledge
of the Seller, threatened with any labor dispute, strike, slowdown,
work stoppage, grievance, unfair labor practice charge, arbitration,
suit or administrative
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23
proceeding relating to labor matters involving its employees, (B) there
are no actions, proceedings or claims pending or, to the Knowledge of
the Seller, threatened against the Company under any laws relating to
employment, including any provisions thereof relating to wages, hours,
collective bargaining, withholding or the payment of social security or
other Taxes, and (C) the Company has not conducted negotiations with
respect to any future contract with or commitment to any labor union or
association and, to the Knowledge of the Seller, there are no current
or threatened attempts to organize or establish any labor union or
association or employee association with respect to the Company.
(ii) The Company is not involved in or, to the Knowledge of
the Company, threatened with any grievance, unfair labor practice
charge, arbitration, suit or administrative proceeding relating to
labor matters involving its employees or independent contractors
(including, without limitation, any dispute, grievance, charge or
proceeding relating to sexual harassment or age, sex, race or other
discrimination).
(m) COMPANY PERMITS; COMPLIANCE WITH LAW. The Company holds and is in
compliance with all Company Permits and is in substantial compliance with all
requirements of law. Except as set forth in section 3B(m) of the Disclosure
Schedule, no notice, citation, summons or order has been received by the
Company, no complaint has been filed and served on it, no penalty has been
assessed and, to the Knowledge of the Seller, no investigation, proceeding or
review is pending or threatened (i) with respect to any alleged violation by the
Company of any law or Company Permit, or (ii) with respect to any alleged
failure by the Company to have any Permit. A true and correct list of all
Company Permits is set forth in section 3B(m) of the Disclosure Schedule.
(n) LITIGATION. Section 3B(n) of the Disclosure Schedule sets forth a
list of all actions, suits, claims or proceedings pending or, to the Knowledge
of the Seller, threatened against or involving the Company, or any of its assets
or properties. There are no outstanding orders, judgments, injunctions,
stipulations, awards or decrees of any Authority against the Company, or any of
its assets or properties.
(o) LIST OF ACCOUNTS. Section 3B(o) of the Disclosure Schedule sets
forth a list of all bank and securities accounts, and all safe deposit boxes,
maintained by the Company and a listing of the persons authorized to draw
thereon or make withdrawals therefrom or, in the case of safe deposit boxes,
with access thereto.
(p) LIST OF PERSONNEL. Section 3B(p) of the Disclosure Schedule sets
forth (i) the name and total compensation of each officer and director of the
Company and each other employee of the Company whose total compensation for the
twelve months ended December 31, 1997 exceeded $25,000, (ii) all wage or salary
increases or bonuses received by such persons since December 31, 1997, and any
accrual for such increases or bonuses, and (iii) all commitments or agreements
by the Company to increase the wages or modify the conditions or terms of
employment of any of its employees.
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24
(q) EMPLOYEE BENEFITS. Section 3B(q) of the Disclosure Schedule sets
forth (i) all of the current Employee Pension Benefit Plans, Employee Welfare
Benefit Plans and all other employee benefit, fringe benefit plans and programs
maintained or contributed to by the Company or any ERISA Affiliate with respect
to current or former employees of the Company (the "EMPLOYEE BENEFIT PLANS").
(i) With respect to each Employee Benefit Plan:
(1) each such Employee Benefit Plan (and each
related trust, insurance contract or fund)
complies in form and, to the Knowledge of
the Seller, in operation with the applicable
requirements of ERISA, the Code and other
applicable laws (including, without
limitation, all reporting and disclosure
requirements), and has been operated in all
material respects in accordance with its
terms;
(2) all contributions (including all employer
contributions and employee salary reduction
contributions, if any) which are due have
been paid to each such Employee Benefit Plan
which is an Employee Pension Benefit Plan,
and there are no accumulated funding
deficiencies with respect to any such
Employee Pension Benefit Plan;
(3) each such Employee Benefit Plan which is an
Employee Pension Benefit Plan intended to so
qualify under section 401(a) of the Code so
qualifies and has received a favorable
determination letter from the IRS as to its
qualification under section 401(a) of the
Code;
(4) no "prohibited transaction" (as such term is
defined in section 406 of ERISA or section
4975 of the Code) has occurred with respect
to any such Employee Benefit Plan which is
an Employee Pension Benefit Plan (or its
related trust) which could subject the
Company or any officer, director or employee
of the Company, to any Tax or penalty
imposed under section 4975 of the Code or
liability under section 406 of ERISA;
(5) the Company has delivered to the Purchaser
correct and complete copies of the plan
documents and summary plan descriptions
which implement each such Employee Benefit
Plan;
(6) no such Employee Benefit Plan which is an
Employee Pension Benefit Plan has been
completely or partially terminated or has
been the subject of a "reportable event" (as
defined in section 4043 of ERISA) as to
which notices would be required to be filed
with the PBGC. To the Knowledge of the
Seller, no proceeding by the PBGC to
terminate
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any such Employee Pension Benefit Plan
(other than a Multiemployer Plan) has been
instituted;
(7) the Company has not incurred, and will not
incur as a result of any existing condition
or the transactions contemplated by this
Agreement, any liability to the PBGC (except
for required premium payments, if any), or
otherwise under Title IV of ERISA (including
any withdrawal liability) or under the Code
with respect to any such Employee Benefit
Plan which is an Employee Pension Benefit
Plan and, as of the Closing Date, the assets
of each such Employee Pension Benefit Plan
are at least equal in value to the present
value of accrued benefits of the Plan, based
on actuarial methods, tables and assumptions
reasonably satisfactory to the Purchaser;
and
(8) no action, suit, proceeding, hearing or
investigation with respect to the
administration or the investment of assets
of any such Employee Benefit Plan (other
than routine claims for benefits) is pending
or, to the Knowledge of the Seller,
threatened.
(ii) The Company does not contribute to any Multiemployer Plan
or have any liability (including withdrawal liability) under any
Multiemployer Plan.
(iii) The Company does not have any obligation to provide
health or other welfare benefits to former, retired or terminated
employees, except as specifically required under section 4980B of the
Code. With respect to all of its past and present employees, the
Company has complied in all material respects with the notice and
continuation requirements of Part 6 of Subtitle B of Title I of ERISA
and of section 4980B of the Code.
(iv) The Company has no liability for or relating to any
Employee Benefit Plan or arrangement sponsored, maintained or
contributed to by an ERISA Affiliate.
(v) The consummation of the transactions contemplated by this
Agreement will not entitle any individual to any severance pay, and
will not accelerate the time of payment or vesting, or increase the
amount of any compensation due to any individual, and will not be the
direct or indirect cause of any amount payable under any Employee
Benefit Plan being classified as an "excess parachute payment" under
section 280G of the Code.
(vi) The Company has no obligation under any dental plan to
pay any portion of its employees' dental insurance or deductible.
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(r) TAX MATTERS.
(i) All Income Tax Returns and all material Other Tax Returns
required to be filed with respect to the business and assets of the
Company have been duly and timely (within any applicable extension
periods) filed with the appropriate Authorities in all jurisdictions in
which such Returns are required to be filed. The Company has paid all
Taxes required to be paid by it (without regard to whether a Tax Return
is required), except Taxes which are not delinquent and for which an
adequate reserve has been established on the Company Interim Financial
Statements.
(ii) The unpaid Taxes of the Company (i) did not as of the
date of the Most Recent Balance Sheet, exceed the reserve for Tax
liability (rather than any reserve for deferred Taxes established to
reflect timing differences between book and tax income) disclosed on
the face of the Most Recent Balance Sheet, and (ii) do not exceed that
reserve as adjusted for the passage of time through the Closing Date in
accordance with the custom of the Company.
(iii) Except as set forth in section 3B(r) of the Disclosure
Schedule, there is no claim or assessment pending or, to the Knowledge
of the Seller, threatened against the Company for any alleged
deficiency in Income Taxes or any material alleged deficiency in Other
Taxes.
(iv) Except as set forth in section 3B(r) of the Disclosure
Schedule, the Company has not (a) filed any consent to the application
of Section 341(f) of the Code, (b) executed a waiver or consent
extending any statute of limitations for the assessment or collection
of any Income Taxes or Other Taxes which remain outstanding, (c)
applied for a ruling relative to Income Taxes or Other Taxes, (d)
entered into a closing agreement with any Tax Authority, or (e) filed
an election under Section 338(g) or 338(h)(10) of the Code or caused or
permitted a deemed election under Section 338(e) of the Code.
(v) Except as set forth in section 3B(r) of the Disclosure
Schedule, no Income Tax Return or Other Tax Return of the Company has
been audited by any Tax Authority at any time since March 24, 1995 and
to the Seller's Knowledge, no Income Tax Return or Other Tax Return of
the Company was audited prior to March 24, 1995.
(vi) The Company is not a party to any written agreement
providing for the allocation or sharing of Taxes.
(vii) The Company has no liability for the Income Taxes of any
other Person other than the Seller and its subsidiaries under Treasury
Regulations Section 1.1502-6 (or any similar provision of state,
foreign or local law).
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(viii) The Company has not been a member of an Affiliated
Group filing a consolidated federal Income Tax Return other than an
Affiliated Group of which the common parent is the Seller.
(ix) The Company has not changed its tax method of accounting
or tax practice from January 1, 1997 through the Closing Date, except
for the adoption of xxxx to market rules for accounts receivable. The
Company's taxable income for the year ending December 31, 1998
attributable to the adoption of such xxxx to market rules will not
exceed $50,000.
(s) ENVIRONMENTAL MATTERS. Except as disclosed in section 3B(s) of the
Disclosure Schedule:
The Company has not disposed of or released any substance,
arranged for the disposal of any substance, knowingly exposed any employee or
other individual to any substance or condition, or owned or operated its
businesses or any property or facility so as to give rise to any liability or
corrective or remedial obligation of the Company under any Environmental, Health
and Safety Requirement.
(i) The Company has not, since March 24, 1995 and, to the
Knowledge of the Seller, in any period prior thereto, disposed of or
released any substance, arranged for the disposal of any substance,
knowingly exposed any employee or other individual to any substance or
condition, or owned or operated its businesses or any property or
facility so as to give rise to any liability or corrective or remedial
obligation of the Company under any Environmental, Health and Safety
Requirement. The Company is in compliance with all Environmental Health
and Safety Requirements and, to the Knowledge of the Seller, has been
in compliance with all Environmental Health and Safety Requirements
since March 24, 1995.
(ii) There is no Environmental Claim of which the Company has
received written notice or, to the Knowledge of the Seller, threatened
or filed since March 14, 1995 against the Company or against any Person
whose liability for any Environmental Claim the Company has retained or
assumed either contractually or by operation of law, or against any
real or personal property or operations which the Company owns, leases
or operates.
(iii) There are no environmental Liens on any of the Real
Property arising as a result of any actions taken or omitted to be
taken by the Company and, to the Knowledge of the Seller, no actions
have been taken by any Authority with respect to any of the Real
Property or are in process or pending, to impose an environmental Lien
with respect to the Real Property as a result of any such actions.
(iv) No Real Property presently or heretofore owned or
operated by the Company is currently listed on the National Priorities
List or the Comprehensive Environmental Response, Compensation and
Liability Information System, both promulgated under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as
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amended ("CERCLA"), or on any comparable state list, and the Company
has not received any written notice of potential liability from any
Person under or relating to CERCLA or any comparable state or local
law.
(v) To the Knowledge of the Seller, no underground storage
tanks, friable and damaged asbestos-containing materials, or
pcb-containing equipment or fluids are present on any of the Real
Property.
(vi) To the Knowledge of the Seller, no off-site location at
which the Company has disposed or arranged for the disposal of any
waste is listed on the National Priorities List or on any comparable
state list and the Company has not received any written notice from any
Person with respect to any such off-site location, of potential or
actual liability or a written request for information from any Person
under or relating to CERCLA or any comparable state or local law.
(vii) The Company has investigated all recommendations in the
Phase I Environmental Assessment and Environmental Compliance Audit
dated December 20, 1994 prepared by The Xxxxxxxxx Group, Inc. and the
Seller has determined either that the Company has complied with or was
in compliance with all such recommendations. The Company has not
changed its environmental compliance and procedures except to come into
compliance with such recommendations and Environmental, Health and
Safety Requirements and has not taken any action which would cause it
not to be in compliance with such recommendations.
(t) INTELLECTUAL PROPERTY. Section 3B(t) of the Disclosure Schedule
hereto sets forth a list of all patents, pending patent applications,
trademarks, service marks, pending trademark or service xxxx applications and
trade names licensed to, applied for or registered in the name of, the Company,
or in which the Company has or purports to have any rights, and all material
copyright registrations or pending applications for registrations of the
Company, or in which the Company has or purports to have any rights, including
the nature (E.G., patent, trademark, etc.) of the intellectual property, the
application or registration number, the jurisdiction and the record owner (the
"LISTED INTELLECTUAL PROPERTY"). Except as set forth in section 3B(t) of the
Disclosure Schedule, with respect to the ListeD Intellectual Property, no
registration relating thereto (if any) has lapsed, expired or been abandoned or
canceled or is the subject of cancellation proceedings. The Company owns or
possesses adequate and enforceable licenses (free of Liens other than Permitted
Liens) to use all Listed Intellectual Property and any other material
intellectual property rights (including, without limitation, drawings, trade
secrets, know-how and confidential information) currently used by the Company,
or necessary to permit the Company to conduct its business as now conducted (the
Listed Intellectual Property and the other intellectual property rights are
collectively called the "INTELLECTUAL PROPERTY"). Section 3B(t) of the
Disclosure Schedule sets forth all licenses to which the Company is a party
relating to the Intellectual Property (the "INTELLECTUAL PROPERTY LICENSES").
Except as set forth in section 3B(t) of the Disclosure Schedule, to the
Knowledge of the Seller the Company has not infringed on or misappropriated and
is not now infringing on or misappropriating any Intellectual Property right
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belonging to any Person, and no claim is pending or, to the Knowledge of the
Seller, threatened to the effect that any Intellectual Property is invalid or
unenforceable. To the Knowledge of the Seller, except as set forth section 3B(t)
of the Disclosure Schedule, no Person is infringing upon or violating any of the
Listed Intellectual Property. Each item of Intellectual Property owned or used
by the Company prior to the Closing hereunder (other than any intellectual
property rights owned by the Seller or any Subsidiary of the Seller other than
the Company and not necessary or useful to the conduct of the Company's business
as now conducted) will be owned or available for use by the Company on identical
terms and conditions immediately subsequent to the Closing hereunder. Except as
set forth section 3B(t) of the Disclosure Schedule, to the Knowledge of the
Seller, since 1991 the Company has never received any charge, complaint, claim,
demand or notice alleging any such interference, infringement, misappropriation
or violation with any intellectual property rights of third parties except as
disclosed in section 3B(n) of the Disclosure Schedule. The loss of the
Microcentre name will not cause a breach or default by the Company under any
Material Contract.
(u) MATERIAL CONTRACTS. Section 3B(u) of the Disclosure Schedule sets
forth a list of all Material Contracts. Except as set forth section 3B(u) of the
Disclosure Schedule, all of the Material Contracts are valid and binding and in
full force and effect and there are no defaults thereunder or events which with
notice or the passage of time would constitute a default by the Company or, to
the Knowledge of the Seller, by any other party thereto, except for defaults
which could not reasonably be expected to have a Material Adverse Effect. The
Seller has delivered to the Purchaser a correct and complete copy of each
Material Contract.
(v) TRANSACTIONS WITH AFFILIATES. Except as set forth in section 3B(v)
of the Disclosure Schedule and except for normal advances to employees
consistent with past practices, payment of compensation for employment to
employees consistent with past practices, and participation in Employee Benefit
Plans by employees, the Company has not purchased, acquired or leased any
property or services from, or sold, transferred or leased any property or
services to, or loaned or advanced any money to, or borrowed any money from or
entered into or been subject to any management, consulting or similar agreement
with, any officer, director or shareholder of the Company or any of their
respective Affiliates. No Affiliate of the Company is indebted to the Company
for money borrowed or other loans or advances, and the Company is not indebted
to any such Affiliate.
(w) POWERS OF ATTORNEY. Except as set forth in section 3B(w) of the
Disclosure Schedule, the Company has not granted any power of attorney to any
Person for any purpose whatsoever, which power of attorney is currently in
force.
(x) INVENTORY. The Inventory consists in all material respects of items
usable and saleable in the ordinary and usual course of business, subject to the
reserve for Inventory writedown set forth on the Most Recent Balance Sheet as
adjusted for the passage of time through the Closing Date in accordance with the
past custom and practice of the Company. The Inventory is valued on the Most
Recent Balance Sheet at the lower of cost (on a first-in-first-out basis) or
market pursuant to GAAP, consistently applied with prior periods.
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(y) ACCOUNTS RECEIVABLE. All of the Accounts Receivable are properly
reflected on the books and records of the Company, arose from bona fide
transactions in the ordinary course of business and are valid receivables
subject to no setoffs or counterclaims, subject only to the reserves set forth
on the Most Recent Balance Sheet. section 3B(y) of the Disclosure Schedule sets
forth a current aging of the Company's accounts receivable.
(z) CUSTOMERS AND SUPPLIERS. Section 3B(z) of the Disclosure Schedule
sets forth a list of the names and addresses of the 10 largest (by volume)
customers and suppliers of the Company for the fiscal years ended December 31,
1997 and December 31, 1996. The Company maintains satisfactory relations with
each of such customers and suppliers. Except as set forth in section 3B(z) of
the Disclosure Schedule, no customer, or group of customers, which accounted for
more than 5% of the Company's aggregate sales revenues during the last twelve
months has canceled, terminated or, to the Knowledge of the Seller, made any
threat to the Company to cancel or otherwise terminate, or to materially
decrease its usage of the Company's services or products, and no supplier, or
any group of suppliers, which accounted for more than 5% of the aggregate
supplies purchased by the Company during the last twelve months, has canceled,
terminated or, to the Knowledge of the Seller, made any threat to the Company to
cancel or otherwise terminate, or to materially decrease the provision of
services or supplies to the Company.
(aa) TRAILING SALES COMMISSIONS. If any independent sales
representative of the Company is terminated after Closing, he shall not be
entitled to any commissions for any sales which are made after the date of
termination of such sales representative.
(bb) FULL DISCLOSURE. The representations and warranties of the Seller
contained in this Agreement do not contain any untrue statement of a material
fact and do not omit to state any material fact required to be stated to make
the statements contained herein not false or misleading.
4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. The Purchaser
represents and warrants to the Seller as follows:
(a) ORGANIZATION. The Purchaser is a corporation duly organized,
validly existing, and in good standing under the laws of Illinois.
(b) AUTHORIZATION OF TRANSACTION. The Purchaser has full corporate
power and authority to execute and deliver this Agreement and the Escrow
Agreement and to perform its obligations hereunder and thereunder. This
Agreement constitutes and the and the Escrow Agreement, when executed and
delivered, will constitute the valid and legally binding obligations of the
Purchaser, enforceable in accordance with their respective terms.
(c) NONCONTRAVENTION. Neither the execution and the delivery of this
Agreement or the Escrow Agreement, nor the consummation of the transactions
contemplated hereby or thereby, will (i) violate any statute, regulation, rule,
injunction, judgment, order, decree or ruling of any Authority to which the
Purchaser is subject or any provision of its charter or bylaws or other
organizational
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document, as the case may be, or (ii) except as set forth under section 4(c) of
the Disclosure Schedule conflict with, result in a breach of, constitute a
default under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify or cancel, or require any notice under any
agreement, contract, lease, license or instrument to which the Purchaser is a
party or by which it is bound or to which any of its assets is subject. The
Purchaser is not required to give any notice to, make any filing with, or obtain
any authorization, consent or approval of any Authority in order for it to
consummate the transactions contemplated by this Agreement.
(d) BROKERS FEES. The Purchaser does not have any liability or
obligation to pay any fees or commissions to any broker, finder or agent with
respect to the transactions contemplated by this Agreement for which the Seller
or the Company (prior to the Closing) could become liable or obligated.
(e) ACQUISITION OF SHARES FOR INVESTMENT. The Shares to be purchased by
the Purchaser pursuant to this Agreement are being acquired for investment only
and not with a view to any public distribution thereof, and the Purchaser will
not offer to sell or otherwise dispose of the Shares so acquired by it in
violation of any of the registration requirements of the Securities Act or any
comparable state laws.
(f) FULL DISCLOSURE. The representations and warranties of the
Purchaser contained in this Agreement do not contain any untrue statement of a
material fact and do not omit to state any material fact required to be stated
to make the statements contained herein not false or misleading.
5. POST-CLOSING COVENANTS. The Parties agree as follows with respect to
the period following the Closing.
(a) GENERAL. In the event that at any time after the Closing any
further action is necessary to carry out the purposes of this Agreement, each of
the Parties will take such further action (including the execution and delivery
of such further instruments and documents) as any other Party may reasonably
request, all at the sole cost and expense of the requesting Party.
(b) LITIGATION SUPPORT. In the event and for so long as any Party
actively is contesting or defending against any action, suit, proceeding,
hearing, investigation, charge, complaint, claim or demand in connection with
(i) any transaction contemplated under this Agreement, or (ii) any fact,
situation, circumstance, status, condition, activity, practice, occurrence,
event, incident, action, failure to act, or transaction on or prior to the
Closing Date involving the Company, each of the Parties will cooperate with the
contesting or defending Party and its counsel in the contest or defense, all at
the sole cost and expense of the contesting or defending Party (except to the
extent that the contesting or defending Party is entitled to indemnification
therefor under this Agreement).
(c) PUBLICITY. No publicity release or announcement concerning this
Agreement or the transactions contemplated hereby shall be made without advance
approval thereof by the Purchaser and the Seller (which shall not be
unreasonably withheld or delayed). The Parties agree to cooperate
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in issuing any press release or other public announcement concerning this
Agreement or the transactions contemplated hereby. Whenever practicable, each
Party shall furnish to the other Party drafts of all such press releases or
announcements prior to their release. Nothing contained in this section 5(c)
shall prevent either Party from at any time furnishing any information to any
Authority or from making any disclosures required under the Securities Exchange
Act of 1934, as amended, or under the rules and regulations of any national
securities exchange on which such Party's shares of capital stock are listed.
(d) CERTAIN TAX MATTERS.
(i) Upon the condition that the Closing be effected, the
Seller will indemnify and hold harmless the Purchaser and the Company
from, against and in respect of any Losses the Purchaser or the Company
may suffer resulting from, arising out of, relating to, in the nature
of, or caused by any liability of the Company for Income Taxes of any
other Person under Treasury Regulation Section 1.1502-6 (or any similar
provision of state, local or foreign law).
(ii) The Seller will include the income of the Company
(including any deferred income included in income pursuant to Treasury
Regulation Sections 1.1502-13 and 1.1502- 14 and any excess loss
accounts taken into income under Treasury Regulation Section 1.1502-19)
on the Seller's consolidated federal Income Tax Returns for all Pre-
Closing Tax Periods and will pay all federal Income Taxes attributable
to such income. The Seller shall be responsible for and shall pay all
Taxes which relate to the period prior to the Closing Date, including
any transfer, sales or use tax caused by the sale of the Shares to the
Purchaser. The Purchaser will cause the Company to provide, or cause to
be provided, to the Seller, without charge (except for reasonable
out-of-pocket expenses), such information as may reasonably be
requested by the Seller in connection with the preparation of any such
Tax Returns relating to Pre-Closing Tax Periods. The income of the
Company will be apportioned to the period up to and including the
Closing Date and the period after the Closing Date by closing the books
of the Company as of the end of the Closing Date.
(iii) If a notice shall be given by any Tax Authority with
respect to a potential Tax liability of the Company which, if
sustained, would result in a payment by the Seller to the Purchaser
pursuant to section 7(b)(ii) below (a "TAX ASSESSMENT"), the Purchaser
shall, after receipt of such notice, promptly notify the Seller in
writing (a "TAX NOTICE"). The Seller may, by written notice to the
Purchaser given within 30 days after the receipt by the Seller of a Tax
Notice, at the Seller's sole cost and expense (except as hereinafter
provided), participate fully in the defense of all Tax Assessments with
respect to which the Seller may become liable pursuant to the Seller's
indemnification obligations hereunder. The Purchaser shall diligently
prosecute such defense in cooperation and consultation with the Seller
and shall provide written notice to the Seller of all conferences,
meetings, proceedings and appearances before all Authorities with
respect to the defense of any such Tax Assessment. If the Seller elects
to participate in the defense of a Tax Assessment, the Purchaser shall
provide, or shall cause
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the Company to provide, to the Seller (at no cost to the Seller, except
for reasonable out-of-pocket expenses) such information as may be
required in connection with such defense as reasonably requested by the
Seller. If the Seller elects to participate in the defense of a Tax
Assessment, the Purchaser shall give the Seller written notice of any
proposed resolution or settlement of such Tax Assessment not less than
15 business days before the Purchaser accepts or intends to accept such
proposed resolution or settlement. The Purchaser shall have the right
to settle or otherwise to resolve any Tax Assessment for which the
Seller would become liable pursuant to its indemnification obligations
hereunder upon the written consent of the Seller, which consent shall
not be unreasonably withheld or delayed.
(iv) The Seller shall have no liability with respect to any
Taxes resulting by reason of any election made or deemed to be made by
the Purchaser or the Company subsequent to the Closing, whether express
or implied, under Section 338 of the Code. Upon the condition that the
Closing be effected, the Purchaser and the Company, jointly and
severally, will indemnify and hold harmless the Seller from, against
and in respect of any Losses the Seller may suffer resulting from,
arising out of, relating to, in the nature of, or caused by any
election made or deemed to be made by the Purchaser or the Company
subsequent to the Closing, whether express or implied, under Section
338 of the Code.
(v) The Seller shall be entitled to any and all refunds of
Taxes attributable to any Pre-Closing Tax Period. If the Purchaser or
the Company voluntarily amends any Return (other than as required by
any Tax Authority) for a taxable period which includes any Pre- Closing
Tax Period, or, without the Seller's consent, enters into any agreement
or settlement with any Tax Authority relating to a taxable period
ending after the Closing Date, and such agreement or settlement affects
any item of deduction, loss, credit, income or gain with respect to any
Pre-Closing Tax Period, then notwithstanding any provision of this
Agreement which may be to the contrary, the Seller shall have no
liability for any Losses with respect to any Taxes attributable to any
change in tax liability effected by such amended Return, agreement or
settlement.
(vi) Notwithstanding any provision of this Agreement which may
be to the contrary, the Purchaser and the Company shall preserve all
Returns, books and records in their control relating to any liabilities
for Taxes due with respect to any Pre-Closing Tax Period until the
expiration of all applicable statutes of limitation and extensions
thereof with respect to Taxes for any such period.
(vii) In the event of any inconsistency between the provisions
of this section 5(d) and section 7(b) below, the provisions of this
section 5(d) shall be controlling.
(viii) If a notice shall be given by any Tax Authority to the
Seller with respect to a potential Tax liability of the Company, the
Seller shall, after receipt of such notice, promptly notify the
Purchaser in writing.
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(e) FINANCIAL REPORTING COOPERATION. The Purchaser shall cause to be
prepared and delivered to the Seller, to the extent not already prepared and
delivered, in the normal time frame followed by the Seller consistent with past
practice, the financial reporting package for the Company (but only in respect
of periods ending on or prior to the Closing Date) for the closing for the
Seller's fiscal quarter ending June 26, 1998.
(f) 401(K) PLAN. The Seller shall retain all liability for the
Company's existing 401(k) Plan.
(g) NON-COMPETITION.
(i) In order to induce the Purchaser to enter into this
Agreement, the Seller expressly covenants and agrees that for a period
of three years from and after the Closing Date, neither it nor any of
its Subsidiaries will, except in the case of a Permitted Investment,
directly or indirectly own, manage, operate, join, control, or
participate in the management, control or operation of, any Person that
engages in the manufacture, sale or distribution of ergonomically
designed space savers, which consist of ready to assemble computer work
stations as currently manufactured by the Company (the "PURCHASED
BUSINESS") in the continental United States (the "NON-COMPETITION
AREA"). The obligations of the Seller and its Subsidiaries under this
section 5(g)(i) shall terminate and be of no further force or effect
upon the occurrence of a Change in Control. For purposes hereof, the
term "CHANGE OF CONTROL" shall mean the occurrence of any event whereby
Affiliates of Trivest, Inc., collectively, cease to beneficially own
(within the meaning of Rule 13d-3 under the Securities Exchange Act) at
least 5% of the outstanding shares of common stock of the Seller
(determined on a fully diluted basis, giving effect to the conversion,
exchange or exercise of any rights to acquire shares from the Seller,
other than any such rights owned by such Persons).
(ii) For purposes of this section 5(g), a "PERMITTED
INVESTMENT" means an acquisition after the date hereof of a Person, all
or any portion of its equity interests or certain of its businesses
(the entity or businesses acquired being herein called the "ACQUIRED
BUSINESS"), if that portion of the Acquired Business that competes with
the Purchased Business or any portion thereof (the "COMPETING
BUSINESS") accounted for 15% or less of the total revenues of the
Acquired Business during the most recently completed fiscal year of the
Acquired Business preceding the date of the acquisition; PROVIDED,
HOWEVER, that if such Competing Business generated more than $5,000,000
in total revenues during such fiscal year, the Seller shall be required
to use its best efforts to sell, transfer, divest or otherwise dispose
of (or cause its Subsidiary proposing to acquire the Acquired Business
to use its best efforts to sell, transfer, divest or otherwise dispose
of) such Competing Business to an unaffiliated third party within 12
months of such acquisition.
(iii) The Parties acknowledge and agree that no portion of the
Purchase Price shall be allocated to the covenants and agreements of
the Seller set forth in this section 5(g). To the extent that any part
of this section 5(g) may be invalid, illegal or unenforceable for any
reason, it
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is intended that such part shall be enforceable to the extent that a
court of competent jurisdiction shall determine that such part if more
limited in scope would have been enforceable and such part shall be
deemed to have been so written and the remaining parts shall as written
be effective and enforceable in all events.
(iv) In the event of the Seller's breach of the provisions of
section 5(g)(i), and provided that, if the Seller has a Dispute with
the Purchaser whether such a breach has occurred that the Dispute is
fully and finally resolved in accordance with the provisions of section
8 of this Agreement, then the Purchaser shall be entitled to recover
its Losses from the Escrow Funds; PROVIDED, HOWEVER, that such payments
shall not be subject to the Basket; PROVIDED, FURTHER, that if no
Escrow Funds remain (either because the Escrow Agreement has terminated
or Losses for which the Purchaser is entitled to indemnification under
section 7(b)(i), together witH amounts paid from the Escrow Account
pursuant to this section 5(g) and sections 10(a), 10(b), 10(c)
And 10(d) exceed $1,000,000), the Purchaser shall be entitled to
recover its Losses from the Seller.
6. CONDITIONS TO OBLIGATION TO CLOSE.
(a) CONDITIONS TO OBLIGATION OF THE PURCHASER. The obligation of the
Purchaser to consummate the transactions to be performed by it in connection
with the Closing is subject to satisfaction of the following conditions:
(i) the representations and warranties set forth in section 3A
and section 3B above that are qualified as to their materiality shall
be true and correct and any such representations and warranties that
are not so qualified shall be true and correct in all material respects
at and as of the Closing Date;
(ii) the Seller shall have performed and complied with all of
the covenants to be performed by it hereunder in all material respects
through the Closing;
(iii) there shall not be any injunction, judgment, order,
decree, ruling or charge in effect preventing consummation of any of
the transactions contemplated by this Agreement, and no action, suit,
claim or proceeding shall be pending before any Authority which seeks
to prohibit or enjoin the consummation of the transactions contemplated
by this Agreement or which could reasonably be expected to adversely
impact the Company's right to own it assets and operate its business as
presently conducted;
(iv) the Seller shall have delivered to the Purchaser a
certificate to the effect that the conditions specified above in
section section 6(a)(i) and (ii) have been satisfied in all respects;
(v) all of the directors and officers of the Company shall
have delivered duly signed resignations effective at the time of the
Closing (or the Seller shall have taken such
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other action as is necessary to ensure that such persons are not
directors and officers of the Company at the time of the Closing);
(vi) all filings that are required to have been made by the
Company with any Authority in order to carry out the transactions
contemplated by this Agreement and in order for the Purchaser to
operate the business of the Company in the ordinary course after the
Closing Date shall have been made; all authorizations, consents,
approvals and permits from all Authorities required for the Company to
carry out the transactions contemplated by this Agreement and in order
for the Purchaser to operate the business of the Company in the
Ordinary Course of Business after the Closing Date shall have been
received and all statutory waiting periods (or extensions thereof) in
respect thereof shall have expired;
(vii) the Purchaser shall have received a certificate issued
by the Secretary of State of the State of Florida, as of a date
reasonably acceptable to the Purchaser, as to the good standing of the
Seller in such state;
(viii) the Purchaser shall have received a certificate issued
by the Secretary of State of the State of California and of each state
in which the Company is qualified as a foreign entity, as of a date
reasonably acceptable to the Purchaser, as to the good standing (or
non- dissolution, as applicable) of the Company in such states;
(ix) the Seller shall have delivered to the Purchaser (a) a
copy of the Company's Charter, as amended to date, certified as of the
recent date by the Secretary of State of the State of California, and
(b) all minute books, stock transfer books, blank stock certificates
and corporate seals of the Company;
(x) all proceedings, corporate or other, to be taken in
connection with the transactions contemplated by this Agreement by the
Seller, and all documents incident thereto, shall be reasonably
satisfactory in form and substance to the Purchaser, and the Seller
shall have made available to the Purchaser for examination the
originals or true and correct copies of all documents the Purchaser may
reasonably request in connection with the transactions contemplated by
this Agreement;
(xi) all conditions precedent to the funding of the loans
contemplated by the financing commitments heretofore issued to
Purchaser for the financing of the transactions contemplated hereby
shall have been satisfied;
(xii) the Seller and the Escrow Agent shall have executed and
delivered the Escrow Agreement;
(xiii) the Purchaser shall have received the Opinion of
Seller's counsel; and
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(xiv) the Seller shall have received a consent to the
assignment of the Real Property lease of the Company's facility located
at 0000 X. Xxxxxxxxx Xxxxxx, Xxxxxxxxx, Xxxxxxxxxx, together with an
estoppel certificate, in form and substance reasonably satisfactory to
the Purchaser and its counsel.
The Purchaser may waive any condition specified in this section 6(a) if it
executes a writing so stating at or prior to the Closing.
(b) CONDITIONS TO OBLIGATION OF THE SELLER. The obligation of the
Seller to consummate the transactions to be performed by it in connection with
the Closing is subject to satisfaction of the following conditions:
(i) the representations and warranties set forth in section 4
above that are qualified as to their materiality shall be true and
correct and any such representations and warranties that are not so
qualified shall be true and correct in all material respects at and as
of the Closing Date;
(ii) the Purchaser shall have performed and complied with all
of its covenants hereunder in all material respects through the
Closing;
(iii) there shall not be any injunction, judgment, order,
decree, ruling or charge in effect preventing consummation of any of
the transactions contemplated by this Agreement, and no action, suit,
claim or proceeding shall be pending before any Authority which seeks
to prohibit or enjoin the consummation of the transactions contemplated
by this Agreement;
(iv) the Purchaser shall have delivered to the Seller a
certificate to the effect that each of the conditions specified above
in sections 6(b)(i) and (ii) has been satisfied in all respects;
(v) all filings that are required to have been made by the
Purchaser with any Authority in order to carry out the transactions
contemplated by this Agreement shall have been made; all
authorizations, consents and approvals from all Authorities required
for the Purchaser to carry out the transactions contemplated by this
Agreement shall have been received and all statutory waiting periods
(or extensions thereof) in respect thereof shall have expired;
(vi) the Seller shall have received a certificate issued by
the Secretary of State of the State of Illinois, as of a date
reasonably acceptable to the Seller, as to the good standing (or
non-dissolution, as applicable) of the Purchaser in such state;
(vii) the Purchaser shall have delivered to the Seller a copy
of the Purchaser's Charter, as amended to date, certified as of the
recent date by the Secretary of State of the State of Illinois;
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(viii) all proceedings, corporate or other, to be taken in
connection with the transactions contemplated by this Agreement by the
Purchaser, and all documents incident thereto, shall be reasonably
satisfactory in form and substance to the Seller, and the Purchaser
shall have made available to the Seller for examination the originals
or true and correct copies of all documents the Seller may reasonably
request in connection with the transactions contemplated by this
Agreement; and
(ix) the Purchaser and the Escrow Agent shall have executed
and delivered the Escrow Agreement.
The Seller may waive any condition specified in this section 6(b) if they
execute a writing so stating at or prior to the Closing.
7. REMEDIES FOR BREACHES OF THIS AGREEMENT.
(a) SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Seller contained in section 3A, section 3B(d), section 3B(e),
section 3B(l)(ii), section 3B(q) and section 3B(R) (the "UNRESTRICTED
REPRESENTATIONS AND WARRANTIES"), and of the Purchaser contained in section 4
shall survive the Closing and continue in full force and effect for the statute
of limitations applicable thereto. The representations and warranties of the
Company contained in section 3B (other than the Unrestricted Representations and
Warranties) shall survive the Closing and continue in full force and effect
until December 31, 1999. Any claim (including a then unliquidated claim which a
Party asserts (in the good faith discretion of such Party) could reasonably be
expected to become owing (taking into account any applicable statutes of
limitations)) for which any Party shall have given proper notice in accordance
with the terms of this Agreement (and the Escrow Agreement) on or prior to the
expiration of the applicable survival period shall survive until such claim is
resolved pursuant to the terms of this Agreement or the Escrow Agreement. To
preserve any claim for breach of any such representation or warranty, the Party
claiming a breach shall be obligated to notify the Party claimed to be in breach
in writing of any such breach, or facts that can reasonably be expected to give
rise to such breach, before termination of the applicable survival period in
respect of such representation or warranty; otherwise, such Party's claim for
breach shall be forever barred.
(b) INDEMNIFICATION.
(i) Pursuant to the terms of the Escrow Agreement and subject
to section 7(a) above and the conditions set forth in this section
7(b), subsequent to the Closing Date the Seller shall indemnify, defend
and hold harmless the Purchaser and the Company from, against and in
respect of any Losses which Purchaser or the Company shall suffer,
sustain or become subject to by virtue of or which arise out of, or
result from, any breach of the representations and warranties of the
Seller set forth in this Agreement (other than the Unrestricted
Representations and Warranties); PROVIDED, HOWEVER, that: (A) the
Company's right to indemnification with respect to such breaches under
this section 7(b)(i) shall be satisfied only by recourse to the funds
deposited and remaining in the Escrow Account and the Seller shall not
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have any personal liability to the Purchaser or the Company with
respect to any such breach, (B) neither the Purchaser nor the Company
shall be entitled to indemnification with respect to any Losses under
this section 7(b)(i) until all such Losses exceed, in the aggregate,
$75,000 (the "BASKET")in which case the Purchaser or the Company, as
the case may be, shall be entitled to indemnification (subject to
clause (A) hereof) to the full extent such Losses relating back to the
first dollar. As provided in the Escrow Agreement and in section 7(a)
hereof, the Purchaser may assert a then unliquidated claim (in the good
faith discretion of the Purchaser) which could reasonably be expected
to become owing (taking into account any applicable statutes of
limitations).
(ii) Subject to section 7(a) above and the conditions set
forth in this section 7(b), subsequent to the Closing Date the Seller
shall indemnify, defend and hold harmless the Purchaser and the Company
from, against and in respect of any Losses which Purchaser or the
Company shall suffer, sustain or become subject to by virtue of or
which arise out of, or result from, any breach of any of the
Unrestricted Representations and Warranties. If the Purchaser or the
Company has experienced any Losses which it is entitled to
indemnification under this section 7(b)(ii), subject to final
resolution of the amount of such Losses pursuant to section 8, the
Purchaser may withhold its consent to the release of funds from the
Escrow until the Purchaser receives the indemnification to which the
Purchaser is entitled.
(iii) Subject to section 7(a) above and the conditions set
forth in this section 7(b), subsequent to the Closing Date the Seller
shall indemnify, defend and hold harmless the Purchaser and te Company
from, against and in respect of any Losses which Purchaser or the
Company shall suffer, sustain or become subject to by virtue of or
which arise out of, or result from any breach by the Seller of its
covenants and agreements set forth in this Agreement including, but not
limited to, section 10 hereof. If, after the Closing, any grievance,
unfair labor practice charge, arbitration, suit or administrative
proceeding relating to labor matters involving employees or independent
contractors of the Company (including, without limitation, any dispute,
grievance, charge or proceeding relating to sexual harassment or age,
sex, race or other discrimination) (the foregoing is collectively
referred to herein as a "LABOR DISPUTE") is filed against the Company
as a result of any alleged action, alleged omission to act or alleged
circumstances existing or occurring prior to Closing, the Seller shall
indemnify, defend and hold harmless the Purchaser and the Company from,
against and in respect of any Losses which Purchaser or the Company
shall suffer, sustain or become subject to by virtue of such Labor
Dispute. If the Purchaser or the Company has experienced any Losses
which it is entitled to indemnification under this section 7(b)(iii),
subject to final resolution of the amount of such Losses pursuant to
section 8, the Purchaser may withhold its consent to the release of
funds from the Escrow until the Purchaser receives the indemnification
to which the Purchaser is entitled.
(iv) Subject to section 7(a) above and the conditions set
forth in this section 7(b), subsequent to the Closing Date the
Purchaser shall indemnify, defend and hold harmless the Seller and its
successors and assigns from, against and in respect of, any Losses
which any such Person shall suffer, sustain or become subject to by
virtue of or which arise out of, or result from,
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any breach by the Purchaser of any of representations, warranties or
covenants set forth in this Agreement.
(v) A Party (which, if the Purchaser is to be indemnified,
shall be deemed to include the Company) seeking indemnification
pursuant to this section 7(b) (the "INDEMNIFIed PARTY") shall
immediately notify the Party from whom such indemnification is sought
(the "INDEMNIFYING PARTY") in the event that any person not a Party to
this Agreement shall make any demand or claim, or file or threaten to
file any lawsuit (a "THIRD PARTY CLAIM"), which Third Party Claim may
cause liability to the Indemnifying Party pursuant to the
indemnification provisions of this Agreement. In any such event, the
Indemnifying Party shall have the right, exercisable by notice to the
Indemnified Party within 20 days after notice by the Indemnified Party
to the Indemnifying Party of the commencement or assertion of such
Third Party Claim, to retain counsel, at the cost and expense of the
Indemnifying Party, to defend any such Third Party Claim. The
Indemnified Party shall be permitted to employ separate counsel and to
participate in the defense of such Third Party Claim, but the fees and
expenses of such counsel shall be borne by the Indemnified Party. In
the event that the Indemnifying Party shall fail to respond within 20
days after receipt of notice from the Indemnified Party of the
commencement or assertion of any such Third Party Claim, then the
Indemnified Party shall retain counsel and conduct the defense of such
Third Party Claim as it or he may in its or his discretion deem proper,
at the cost and expense of the Indemnifying Party.
(vi) Unless and until an Indemnifying Party assumes the
defense of a Third Party Claim as provided in section (v), the
Indemnified Party may defend against the Third Party Claim in any
manner it may reasonably deem appropriate.
(vii) The Indemnifying Party, if it shall have assumed the
defense of any Third Party Claim, shall not have the right to consent
to the entry of judgment with respect to, or otherwise settle such
Third Party Claim without the prior written consent of the Indemnified
Party (which consent shall not be unreasonably withheld or delayed),
unless the judgment or proposed settlement involves only the payment of
money damages and does not impose an injunction or other equitable
relief upon the Indemnified Party. In no event will the Indemnified
Party consent to the entry of any judgment with respect to, or
otherwise settle any such Third Party Claim without the prior written
consent of the Indemnifying Party (which consent shall not be
unreasonably withheld or delayed).
(viii) The Parties shall cooperate in the defense of any Third
Party Claim and shall furnish such records, information and testimony,
and attend at such conferences, discovery proceedings, hearings, trials
and appeals as may be reasonably requested in connection therewith.
(ix) The amount of any Losses subject to indemnification under
section 7(b)(i), (ii) or (iii) shall be calculated net of any amounts
which have been previously recovered by the
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Indemnified Party under insurance policies or other collateral sources
(such as contractual indemnities of any Person which are contained
outside this Agreement), and each of the Parties hereby covenants that
it will not release any such collateral sources from any obligations
they may have. In the event any such amounts recovered or recoverable
under insurance policies or other collateral sources are not received
before any claim for indemnification is paid pursuant to this section
7(b) and the Escrow Agreement, then the Indemnified Party shall pursue
such insurance policies or collateral sources with reasonable diligence
(unless the Indemnified Party determines that it is not in its best
interests to do so, in which case the Indemnified Party shall permit
the Indemnifying Party to pursue such recoveries on its behalf), and in
the event it receives any recovery, the amount of such recovery shall
be applied FIRST, to reimburse the Indemnified Party for its
out-of-pocket expenses (including reasonable attorneys' fees) expended
in pursuing such recovery, SECOND, to refund any payments made by the
Indemnifying Party pursuant to this section 7(b) and the Escrow
Agreement which would not have been so paid had such recovery been
obtained prior to such payment, and THIRD, any excess to the
Indemnifying Party. If the Indemnified Party fails or elects not to
pursue any such insurance policies or collateral sources with
reasonable diligence, then the Indemnifying Party shall have the right
of subrogation to pursue such insurance policies or collateral sources
and may take any reasonable actions necessary to pursue such rights of
subrogation in its name or the name of the party from whom subrogation
is obtained. The Indemnified Party shall reasonably cooperate with the
Indemnifying Party to pursue a subrogation claim. Any recovery obtained
by the Indemnifying Party shall be applied FIRST, to reimburse the
Indemnifying Party for its out-of-pocket expenses (including reasonable
attorney's fees) expended in pursuing such recovery, SECOND, to refund
any payments made by the Indemnifying Party pursuant to this Section
9.2 with respect to the Losses for which the collateral source was also
responsible, and THIRD, any excess to the Indemnified Party. In
addition, all Losses subject to indemnification hereunder shall be
calculated net of any tax benefits which have been actually realized by
the Indemnified Party as a result thereof.
(x) Any payment made by the Seller pursuant to its
indemnification obligations under section 5(d)(i) above or this section
7(b) shall constitute a reduction in the Purchase Price hereunder. Any
payment made by the Purchaser pursuant to the Purchaser's
indemnification obligations under this section 7(b) or section 5(d)(iv)
above shall constitute an addition to the Purchase Price hereunder.
(c) LIMITATION OF RECOURSE. The rights of the Parties for
indemnification relating to this Agreement or the transactions contemplated
hereby shall be strictly limited to those contained in section 5(d) and section
7(b) hereof, and subject to the last sentence hereof, such indemnification
rights shall be the exclusive remedies of the Parties subsequent to the Closing
Date with respect to any matter in any way relating to this Agreement or arising
in connection herewith. To the maximum extent permitted by law, the Purchaser
hereby waives and shall cause its Affiliates to waive all other rights and
remedies with respect to any such matter, whether under any laws (including,
without limitation, any right or remedy under CERCLA or any other Environmental
Health and Safety Requirements),
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at common law or otherwise. Except as provided in this Agreement, no claim,
action or remedy shall be brought or maintained subsequent to the Closing Date
by the Purchaser or the Company or their respective Affiliates, successors or
permitted assigns against the Seller, and no recourse shall be brought or
granted against the Seller, by virtue of or based upon any alleged misstatement
or omission respecting an inaccuracy in or breach of any of the representations,
warranties or covenants of the Seller set forth or contained in this Agreement,
except to the extent that the same shall have been the result of fraud by any
such Person.
8. DISPUTE RESOLUTION
(a) DISPUTE DEFINED. As used in this Agreement, "DISPUTE"
shall (i) mean any dispute or disagreement between the Parties concerning the
interpretation of this Agreement, the validity of this Agreement, any breach or
alleged breach by any Party under this Agreement, any claim by either Party for
indemnification under this Agreement or any other matter relating in any way to
this Agreement, and (ii) exclude any dispute or disagreement between the
Purchaser and the Seller concerning the determination of Net Working Capital as
of the Closing Date, which shall be resolved pursuant to the provisions of
section 2(g) of this Agreement.
(b) DISPUTE RESOLUTION PROCEDURES.
(i) If a Dispute arises, the Parties shall follow the
procedures specified in this section 8. The Parties shall promptly
attempt to resolve any Dispute by negotiations between themselves.
Either the Purchaser or the Seller may give the other Party written
notice of any Dispute not resolved in the normal course of
businesection The Purchaser and the Seller shall meet at a mutually
acceptable time and place within 15 calendar days after delivery of
such notice, and thereafter as often as they reasonably deem necessary,
to exchange relevant information and to attempt to resolve the Dispute.
If the Dispute has not been resolved by the Parties within 30 calendar
days of the disputing Party's notice, or if the Parties fail to meet
within such 15 calendar days, either the Purchaser or the Seller may
initiate mediation in Chicago, Illinois as provided in Section section
8(b)(ii) of this Agreement. If a negotiator intends to be accompanied
at a meeting by legal counsel, the other negotiator shall be given at
least three business days' notice of such intention and may also be
accompanied by legal counsel.
(ii) If the Dispute is not resolved by negotiations pursuant
to section 8(b)(i), the Purchaser and the Seller shall attempt in good
faith to resolve any such Dispute by nonbinding mediation. Either the
Purchaser or the Seller may initiate a nonbinding mediation proceeding
by a request in writing to the other Party (the "MEDIATION REQUEST"),
and both disputing Parties will then be obligated to engage in a
mediation. The proceeding will be conducted in accordance with the then
current Center for Public Resources ("CPR") Model Procedure for
Mediation of Business Disputes, with the following exceptions:
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(A) if the Parties have not agreed within 30 calendar
days of the Mediation Request on the selection of a mediator
willing to serve, CPR, upon the request of either the
Purchaser or the Seller, shall appoint a member of the CPR
Panels of Neutrals as the mediator; and
(B) efforts to reach a settlement will continue until
the conclusion of the proceedings, which shall be deemed to
occur upon the earliest of the date that: (1) a written
settlement is reached, or (2) the mediator concludes and
informs the Parties in writing that further efforts would not
be useful, or (3) the Purchaser and the Seller agree in
writing that an impasse has been reached, or (4) a period of
60 calendar days has passed since the Mediation Request and
none of the events specified in the foregoing clauses (1) (2)
or (3) has occurred. No Party may withdraw before the
conclusion of the proceeding.
(iii) If a Dispute is not resolved by negotiation pursuant to
section 8(b)(i) of this Agreement or by mediation pursuant to section
8(b)(ii) of this Agreement within 100 calendar days after initiation of
the negotiation process pursuant to section 8(b)(i), such Dispute and
any other claims arising out of or relating to this Agreement may be
heard, adjudicated and determined in an action or proceeding filed in
any state or federal court specified in section 11(g).
(c) PROVISIONAL REMEDIES. At any time during the procedures specified
in sections 8(b)(i) and 8(b)(ii) of this Agreement, a Party may seek a
preliminary injunction or other provisional judicial relief if in its judgment
such action is necessary to avoid irreparable damage or to preserve the status
quo. Despite such action, the parties will continue to participate in good faith
in the procedures specified in sections 8(b)(i) and 8(b)(ii). .
(d) TOLLING STATUTE OF LIMITATIONS. All applicable statutes of
limitation and defenses based upon the passage of time shall be tolled while the
procedures specified in sections 8(b)(i) and 8(b)(ii) of this Agreement
are pending. The Parties will take such action, if any, as is required to
effectuate such tolling.
(e) PERFORMANCE TO CONTINUE. Each Party shall continue to perform its
or his obligations under this Agreement pending final resolution of any Dispute.
(f) EXTENSION OF DEADLINES. All deadlines specified in this section 8
may be extended by mutual agreement between the parties.
(g) ENFORCEMENT. The Parties regard the obligations in this section 8
to constitute an essential provision of this Agreement and one that is legally
binding on them. In case of a violation of the obligations in this section 8 by
either Party hereto, the other Party may bring an action to seek enforcement of
such obligations in any state or federal court specified in section 11(g).
(h) COSTS. The Parties shall pay their own costs, fees, and expenses
incurred in connection with the application of the provisions of sections
8(b)(i) and 8(b)(ii) of this Agreement. In addition, the fees and expenses of
CPR and the mediator in connection with the application of the provisions of
section 8(b)(ii) of this Agreement shall be borne 50% by the Purchaser and 50%
by the Seller.
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(i) REPLACEMENT. If CPR is no longer in business or is unable or
refuses or declines to act or to continue to act under section 8(b)(ii) of this
Agreement for any reason, then the functions specified in section 8(b)(ii) to be
performed by CPR shall be performed by another Person engaged in a business
equivalent to that conducted by CPR as is agreed to by the Purchaser and the
Seller (the "REPLACEMENT"). If the Purchaser and the Seller cannot agree on the
identity of the Replacement within 10 calendar days after a Request, the
Replacement shall be selected by the Chief Judge of the United States District
Court for the Northern District of Illinois upon application. If a Replacement
is selected by either means, section 8(b)(ii) shall be deemed appropriately
amended to refer to such Replacement.
9. MODIFICATION AND WAIVERS.
(a) MODIFICATION. The Parties may, by mutual consent, amend, modify or
supplement this Agreement in such manner as may be agreed upon by them in
writing at any time.
(b) WAIVERS. The Purchaser, by an instrument in writing, may extend the
time for or waive the performance of any of the obligations of the Seller or
waive compliance by the Seller with any of the covenants or conditions of the
Seller contained herein, and the Seller, by an instrument in writing, may extend
the time for or waive the performance of any of the obligations of the Purchaser
or waive compliance by the Purchaser with any of the covenants or conditions of
the Purchaser contained herein.
10. ADDITIONAL AGREEMENTS. The Parties agree that any claim for payment
pursuant to sections 10(a), 10(b) and 10(c) must be made by the Purchaser
on or before April 15, 1999. To preserve any claim for payment, the Purchaser
shall be obligated to notify the Seller in writing of any claim, together with
supporting documentation, on or before April 15, 1999, otherwise, the
Purchaser's claim shall be forever barred. The Parties further agree that any
payments required to be made pursuant to sections 10(a), 10(b), 10(c) and
10(d) may be made from funds deposited in the Escrow Account; PROVIDED, HOWEVER,
that such payments shall not be subject to the Basket; PROVIDED, FURTHER, that
to the extent Losses for which the Purchaser is entitled to indemnification
under section 7(b)(i), together with amounts paid from the Escrow Account
pursuant to sections 5(g)(iv), 10(a), 10(b), 10(c) and 10(d) exceed
$1,000,000, Seller shall pay the Purchaser the deficiency within 30 days of the
Purchaser's request. The following are provided by way of example and not by way
of limitation:
Assume that $250,000 in payments required to be made pursuant to this
section 10(a) are paid from funds deposited in the Escrow Account and
the Purchaser is entitled to indemnification for $800,000 in Losses
which arise out of the representations and warranties of the Seller set
forth in this Agreement (other than the Unrestricted Representations
and Warranties) under section 7(b)(i). In addition to the $250,000
already paid from funds deposited in the Escrow Account, the Seller
shall be required to pay the Purchaser the difference between $800,000
and the funds remaining in the Escrow Account ($750,000 and any accrued
earnings thereon) and the Purchaser shall receive the funds remaining
in the Escrow Account.
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Assume that $250,000 in payments required to be made pursuant to this
section 10(a) are paid from funds deposited in the Escrow Account and
the Purchaser incurs $1,100,000 in Losses which arise out of the
representations and warranties of the Seller set forth in this
Agreement (other than the Unrestricted Representations and Warranties).
Since the Purchaser's indemnification under section 7(b)(i) is limited
to $1,000,000, in addition to the $250,000 already paid from funds
deposited in the Escrow Account, the Seller shall only be required to
pay the Purchaser the difference between $1,000,000 and the funds
remaining in the Escrow Account ($750,000 and any accrued earnings
thereon) and the Purchaser shall receive the funds remaining in the
Escrow Account.
(a) PROPORTIONATE SHARE. The percentage used to calculate certain
bonuses to independent sales representatives of the Company increases after
certain dollar thresholds are exceeded or the bonus does not become effective
until certain thresholds are exceeded.. In addition, the percentage used to
calculate rebates for certain of the Company's customers increases as the
customer's volume of purchases increases or the rebate is not effective until
certain thresholds are exceeded. It is the intent of the parties that the Seller
and the Purchaser share in the cost of such items based on the proportion of
sales prior to and after Closing. To the extent the accrual on the Company's
Closing Balance Sheet for such rebates and bonuses is less than the Seller's
Proportionate Share of such rebates and bonuses, the Seller shall pay the
Purchaser the deficiency within 30 days of the Purchaser's request provided such
request contains supporting documentation and provided that any Dispute
regarding payment is first resolved pursuant to section 8 of this Agreement. By
way of example, if a customer is entitled to a two percent (2%) rebate for
purchases up to $1,000,000 and a three percent (3%) rebate for all subsequent
purchases and the customer purchased $1,000,000 in products prior to Closing and
$1,000,000 after Closing, the Seller and the Purchaser are each responsible for
$25,000 of the rebate. To the extent the accrual on the Company's Closing
Balance Sheet was less than $25,000, the Seller shall pay the Purchaser for the
deficiency. Seller's "PROPORTIONATE SHARE" shall equal the amount of sales for
the applicable period prior to Closing divided by the total sales for the
applicable period.
(b) STOCK ADJUSTMENTS. It is customary, from time to time, for the
Company to provide stock adjustments (returned merchandise which is discontinued
or after the end of the catalog season) and for the Company to resell such
returned merchandise. To the extent the accrual on the Company's Closing Balance
Sheet for stock adjustments was insufficient for (1) the difference between the
original sales price of the returned merchandise and the resale price thereof,
(2) re-work costs and shipping costs, but specifically excluding any commissions
due on the resale of the returned merchandise which shall be the obligation of
the Company and which shall not be the responsibility of the Seller under this
section 10(b), and (3) the cost of any returned merchandise which was sold prior
to Closing and which is not resold by the Company, Seller shall pay Purchaser
the deficiency within thirty (30) days of Purchaser's request, provided that (i)
the Purchaser causes the Company to use its best efforts to resell the returned
merchandise in the Ordinary Course of Business, (ii) such request contains
supporting documentation, including evidence of the Purchaser's compliance with
the immediately preceding subparagraph (i), and (iii) any Dispute regarding
payment is first resolved pursuant to section 8 of this Agreement.
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(c) SELLER'S GUARANTEE OF ACCOUNTS RECEIVABLE.
(i) With respect to accounts receivable on the Closing Balance
Sheet which as of the Closing are 90 days or over (the "90 AND OVER
ACCOUNTS RECEIVABLE"), Seller guarantees the collectibility of $60,000
of the 90 and Over Accounts Receivable in full.
(ii) The Purchaser agrees to use efforts consistent with the
Company's past custom and practice to cause the Company to collect all
90 and Over Accounts Receivable, but shall not be obligated to resort
to litigation. Any sums payable by account debtors on account of any
accounts receivable of such account debtors shall be credited to the
earliest invoices of the Company to such account debtors, unless
specifically directed otherwise by the account debtor. Subject to the
foregoing, to the extent any 90 and Over Accounts Receivable existing
at the Closing are unpaid for a period of 60 days after the Closing,
the Purchaser shall send written notice to the Seller indicating the
specific account debtors, the amount of the unpaid invoices
representing 90 and Over Accounts Receivable to each such account
debtor and the total of all such unpaid 90 and Over Accounts
Receivable. The Seller shall pay the amount of all 90 and Over Accounts
Receivable, not to exceed $60,000 within 30 days of the receipt of any
notice pursuant to this section 10(c)(ii) on the condition that the
Purchaser shall simultaneously cause the Company to assign such unpaid
90 and Over Accounts Receivable (the "ASSIGNED RECEIVABLES") to the
Seller. Such assignment shall include the right to xxx as an assignee
of the Company. In the event that after such assignment the Company
receives any payment on the Assigned Receivables, the Purchaser shall
cause the Company to promptly remit such amount to the Seller.
Thereafter, the Seller, as owner of the Assigned Receivables, may take
any action the Seller deems necessary to collect the Assigned
Receivables and any collections shall be the property of the Seller.
The Purchaser agrees to cooperate and shall cause the Company to
cooperate with the Seller in any action the Seller wishes to take to
collect the Assigned Receivables consistent with the Company's past
custom and practice . In the event the Purchaser does not want to
assign any Account Receivable to the Seller because it does not want
the Seller to initiate collection action thereon, the Seller shall be
relieved of any liability under this section 10(c) with respect to such
90 and Over Account Receivable.
(iii) In the event any 90 and Over Account Receivable is
subject to a valid dispute by the account debtor and/or the Purchaser
wishes to grant a discount on any 90 and Over Account Receivable, the
Purchaser shall send written notice or notices to the Seller indicating
the specific account debtors and the amount of the dispute or discount.
The Purchaser shall consult with the Seller with respect to the
resolution of any dispute and/or the amount of any discount and shall
not settle any such dispute or grant any discount without the consent
of the Seller, which consent shall not be unreasonably withheld. Where
consent is given to the settlement of any dispute and/or the granting
of any discount, subject to the total amount paid by the Seller
pursuant to section 10(c) not exceeding $60,000, the Seller shall pay
the Purchaser the difference between the original amount of the 90 and
Over Account Receivable and the amount actually received by the
Purchaser after settlement or discount, with payment to be made within
30 days after the settlement or granting of the
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discount. Where consent is withheld by the Seller, the Purchaser may
either assign the 90 and Over Account Receivable, or settle the dispute
or grant the discount at its own expense and the Seller shall be
relieved of any liability under this section 10(c) with respect to such
90 and Over Account Receivable.
(d) SEVERANCE OBLIGATIONS.
(i) If the Purchaser terminates any of the Company's employees
after Closing, none of such employees are entitled to any severance
packages, except (A) as provided in section 10(d)(ii) and except as may
be required under applicable law as a result of action taken by the
Purchaser or the Company after Closing.
(ii) At the Purchaser's request, the Seller will cause the
Company to terminate Xxxx Xxx immediately prior to Closing. The Seller
agrees (A) to be responsible for and to pay any severance obligation to
Xxxx Xxx and (B) to indemnify, defend and hold the Purchaser and the
Company harmless from any Losses incurred as a result of any claim by
Xxxx Xxx resulting from such termination; PROVIDED, HOWEVER, if the
Purchaser or the Company retains Xxxx Xxx as an employee or consultant
to the Company following Closing, such indemnification shall not apply
with respect to any obligations of the Company to Xxxx Xxx under such
employment or consulting arrangement or any Losses incurred by the
Company or the Purchaser as a result of its termination of such
employment or consulting arrangement.
(e) MICROCENTRE DISPUTE. The Seller agrees to continue to try to
resolve the pending disputes between the Company and Micro Electronics, Inc.
regarding the Company's trademark "MICROCENTRE" on the basis of the current
settlement terms being discussed by the Company and Micro Electronics, Inc., and
shall be responsible for all costs of resolving such disputes, including,
without limitation, attorneys' fees and court costs. In the event the disputes
cannot be resolved on the basis of the current draft of the Settlement
Agreement, as modified by the terms of the attachment to the Xxxxxx & Xxxxxxxx,
Ltd. letter dated June 29, 1998, the Seller agrees to continue to defend the
litigation at its sole cost and expense and to indemnify, defend and hold the
Purchaser and the Company harmless with respect to all Losses incurred in
connection with such disputes. Upon resolution of the dispute on substantially
the same terms as set forth in the current draft of the Settlement Agreement, as
modified by the terms of the attachment to Xxxxxx & Einstein, Ltd.'s letter
dated June 29, 1998, the Purchaser agrees to immediately cause the Company to
execute the Settlement Agreement submitted by the Seller or its counsel.
(f) PRE-CLOSING WORKERS COMPENSATION CLAIMS. The Seller agrees to be
responsible for and to cause to be paid all workers compensation claims which
relate to pre-Closing periods.
(g) VACATION ACCRUAL. To the extent the accrual on the Company's
Closing Balance Sheet for vacation is less than the amount which should have
properly been accrued in accordance with GAAP, the Purchaser shall be entitled
to indemnification for the deficiency in accordance with and subject to the
provisions of Section 7(b)(i).
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11. MISCELLANEOUS.
(a) NO THIRD-PARTY BENEFICIARIES. This Agreement shall not confer any
rights or remedies upon any Person other than the Parties and their respective
successors and permitted assigns.
(b) ENTIRE AGREEMENT. This Agreement (including the documents referred
to herein) constitutes the entire agreement among the Parties and supersedes any
prior understandings, agreements, or representations by or among the Parties,
written or oral, to the extent they related in any way to the subject matter
hereof, other than the confidentiality agreement between the Purchaser and Xxxx
Xxxxxxxxx & Xxxxxxxx, Ltd. executed in connection with the transactions
contemplated hereby (the "CONFIDENTIALITY AGREEMENT"), which shall remain in
full force and effect until the Closing has occurred.
(c) SUCCESSION AND ASSIGNMENT. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective successors
and permitted assigns. No Party may assign either this Agreement or any of its
rights, interests or obligations hereunder without the prior written approval of
the other Parties; PROVIDED, HOWEVER, that, the Purchaser may (i) assign any or
all of its rights and interests hereunder to one or more of its wholly-owned
Subsidiaries and (ii) designate one or more of its wholly-owned Subsidiaries to
perform its obligations hereunder and (iii) after the Closing is effected, any
or all of the rights and interests of Purchaser hereunder (A) may be assigned to
any purchaser of substantially all of the assets of Purchaser, (B) may be
assigned as a matter of law to the surviving entity in any merger of the
Purchaser, and (C) may be assigned as collateral security to any lender or
lenders (including any agent for any such lender or lenders) providing financing
to the Purchaser in connection with the transactions contemplated hereby, or to
any assignee or assignees of any such lender, lenders or agent (it being
understood that in any or all of the cases described in clauses (i), (ii) and
(iii) above the Purchaser nonetheless shall remain responsible for the
performance of all of its obligations hereunder).
(d) COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
(e) HEADINGS. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(f) NOTICES. All notices, requests, demands, claims and other
communications hereunder will be in writing. Any notice, request, demand, claim
or other communication hereunder shall be deemed duly given if (and then two
business days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient as set forth
below:
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If to the Seller:
WinsLoew Furniture, Inc.
000 Xxxxxx Xxxxxx Xxxxxxx
Xxxxxx, Xxxxxxx 00000
Attention: Xx. Xxxxx Xxxxxx, President and
Chief Executive Officer
Fax: (000) 000-0000
With copies to (which shall not constitute notice to the Seller):
Xxxxx X. Xxxxx, Esq.
Managing Director and General Counsel
Trivest, Inc.
0000 Xxxxx Xxxxxxxx Xxxxx
Xxxxx 000
Xxxxx, Xxxxxxx 00000
Fax: (000) 000-0000
If to the Purchaser:
Vertiflex Company
000 Xxxx 00xx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000-0000
Attention: Xx. Xxxxxxx X. Xxxxxx, Executive Vice President
Fax: (000) 000-0000
With copies to (which shall not constitute notice to the Purchaser):
Xxxxxx Xxxx, Esq.
Xxxxxxxx & Xxxxxxx
Suite 1900
000 Xxxxx Xxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Fax: (000) 000-0000
Any Party may send any notice, request, demand, claim or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail or electronic mail), but no such notice, request,
demand, claim or other communication shall be deemed to have been duly given
unless and until it actually is received by the intended recipient. Any Party
may change the address to which notices, requests, demands, claims and other
communications hereunder are to be delivered by giving the other Parties notice
in the manner herein set forth.
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(g) GOVERNING LAW; VENUE. This Agreement shall be governed by and
construed in accordance with the domestic laws of the State of Illinois without
giving effect to any choice or conflict of law provision or rule (whether of the
State of Illinois or any other jurisdiction) that would cause the application of
the laws of any jurisdiction other than the State of Illinois. The Parties agree
that any and all actions arising under or in respect of this Agreement shall be
litigated in any federal or state court of competent jurisdiction located in the
County of Xxxx, State of Illinois. By execution and delivery of this Agreement,
each Party irrevocably submits to the personal and exclusive jurisdiction of
such courts for itself or himself, and in respect of its or his property with
respect to such action. Each Party agrees that venue would be proper in any of
such courts, and hereby waives any objection that any such court is an improper
or inconvenient forum for the resolution of any such action.
(h) AMENDMENTS AND WAIVERS. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by the
Purchaser and the Seller. No waiver by any Party of any default,
misrepresentation or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation or breach of warranty or covenant hereunder or affect
in any way any rights arising by virtue of any prior or subsequent such
occurrence.
(i) SEVERABILITY. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
(j) EXPENSES. Except as otherwise provided in this Agreement, each of
the Parties will bear their own costs and expenses (including legal and
investment advisory fees and expenses) incurred in connection with this
Agreement and the transactions contemplated hereby.
(k) CONSTRUCTION. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any Party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
specification of any dollar amount in the representations and warranties or
otherwise in this Agreement or in the Disclosure Schedule is not intended and
shall not be deemed to be an admission or acknowledgment of the materiality of
such amounts or items, nor shall the same be used in any dispute or controversy
between the Parties to determine whether any obligation, item or matter (whether
or not described herein or included in any schedule) is or is not material for
purposes of this Agreement.
(l) INCORPORATION OF DISCLOSURE SCHEDULE. The Disclosure Schedule
identified in this Agreement is incorporated herein by reference and made a part
hereof.
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(m) WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT SUCH PARTY MAY LEGALLY AND
EFFECTIVELY DO SO, TRIAL BY JURY IN ANY SUIT, ACTION OR PROCEEDING ARISING
HEREUNDER.
(n) PREVAILING PARTIES. In the event of any litigation with regard to
this Agreement, the prevailing Party or Parties shall be entitled to receive
from the nonprevailing Party or Parties and the nonprevailing Party or Parties
shall pay all reasonable fees and expenses of counsel for the prevailing Party
or Parties.
(o) EQUITABLE REMEDIES. The Seller acknowledges and agrees that the
Purchaser would not have an adequate remedy at law in the event any of the
provisions of section 5(g) of this Agreement are not performed in accordance
with their specific terms or are breached. Accordingly, the Seller agrees that
the Purchaser shall be entitled to an injunction or injunctions to prevent
breaches of section 5(g) of this Agreement and to enforce specifically the terms
and provisions thereof in any action instituted in any court of competent
jurisdiction, in addition to any other remedies which may be available to it.
SIGNATURES APPEAR ON FOLLOWING PAGE
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IN WITNESS WHEREOF, the Parties hereto have each executed and delivered
this Agreement as of the day and year first above written.
WINSLOEW FURNITURE, INC.
By: /s/ Xxxxx Xxxxxx
-------------------------------------
Xxxxx Xxxxxx
President and Chief Executive Officer
VERTIFLEX COMPANY
By: /s/ Xxxxxxx X. Xxxxxx
-------------------------------------
Xxxxxxx X. Xxxxxx
Executive Vice President
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