NCH CORPORATION AND SUBSIDIARIES
EXHIBIT 10.1.4 ASSET PURCHASE AGREEMENT BY AND AMONG CARLTON-BATES
COMPANY, NCH CORPORATION AND RESOURCE ELECTRONICS, INC. DATED AS OF
OCTOBER 29, 1999
ASSET PURCHASE AGREEMENT
by and among
CARLTON-BATES COMPANY
NCH CORPORATION
and
RESOURCE ELECTRONICS, INC.
dated as of
October 29, 1999
TABLE OF CONTENTS
ARTICLE I DEFINITIONS 1
1.1 Definitions 1
ARTICLE II PURCHASE AND SALE OF ASSETS 6
2.1 Purchase and Sale of Certain Assets 6
2.2 Excluded Assets 8
2.3 Assumption of Liabilities 9
2.4 Purchase Price 10
2.5 Allocation of Purchase Price 11
2.6 Possession And Risk Of Loss 12
2.7 Prorations 12
2.8 Taxes 13
2.9 Closing Costs; Transfer Taxes and Fees 13
2.10 Closing 13
2.11 Closing Deliveries by Seller 13
2.12 Closing Deliveries by Buyer 15
ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLER AND NCH 16
3.1 Organization, Power and Authority 16
3.2 Authority, Approvals and Consents 16
3.3 Good Title to Purchased Assets 16
3.4 Financial Statements 16
3.5 Events Subsequent to Latest Balance Sheet 17
3.6 Condition of Equipment 17
3.7 Tax Matters 17
3.8 Contracts 17
3.9 Insurance 18
3.10 Litigation 19
3.11 Environmental Matters 19
3.12 Labor Relations 20
3.13 Employees 20
3.14 Product Warranties 21
3.15 Leased Property 21
3.16 Intellectual Property 21
3.17 Entire Business 22
3.18 Customers and Suppliers 22
3.19 Brokers' Fees 22
3.20 Inventory 22
3.21 Accounts Receivable 22
3.22 No Undisclosed Liabilities 22
3.23 Year 2000 Compliance 23
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER 23
4.1 Organization 23
4.2 Corporate Authorization 23
4.3 Brokers' Fees 23
4.4 Financing 23
ARTICLE V ADDITIONAL COVENANTS OF SELLER 24
ARTICLE VI ADDITIONAL COVENANTS OF BUYER 25
6.2 Financing 26
6.3 No Disclosure 26
ARTICLE VII OTHER COVENANTS 26
7.1 Bulk Sales Law 26
7.2 Payments Received 26
7.3 Notice and Remittance of Payments Received 26
7.4 Additional Actions 26
7.5 Reserve Inventory 27
7.6 Hold Area Inventory 28
7.7 Offers of Employment 29
7.8 Termination by Buyer After Closing 30
ARTICLE VIII CONDITIONS 30
8.1 Conditions to Each Party's Obligation to Close 30
8.2 Conditions to Buyer's Obligation to Close 30
8.3 Conditions to Seller's Obligation to Close 31
ARTICLE IX SURVIVAL AND REMEDY; INDEMNIFICATION 31
9.1 Obligation of Parties to Indemnify 31
9.2 Indemnification Procedures - Third Party Claims 32
9.3 Direct Claims 33
9.4 Survival of Covenants, Representations and Warranties 33
9.5 Liability Cap 34
9.6 Transfer Taxes; Filing Fees 34
9.7 Tax Related Adjustments 34
ARTICLE X TERMINATION 35
10.1 Termination 35
10.2 Effect of Termination 36
ARTICLE XI MISCELLANEOUS 36
11.1 Expenses of the Parties 36
11.2 Amendment and Modification 36
11.3 Extensions and Waivers 36
11.4 Assignment 36
11.5 Entire Agreement 37
11.6 Headings 37
11.7 Execution in Counterpart 37
11.8 Notices 37
11.9 Governing Law 38
11.10 Publicity 38
11.11 Access to Information 38
11.12 Access to Excluded Books and Records 38
11.13 Severability 39
11.14 No Third Party Beneficiaries 39
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement ("Agreement") is dated as of October 29,
1999 by and among Carlton-Bates Company, an Arkansas corporation ("Buyer"),
Resource Electronics, Inc., a Delaware corporation, a wholly-owned
subsidiary of NCH Corporation ("Seller"), and NCH Corporation, a Delaware
corporation ("NCH").
WHEREAS, Seller wishes to sell to Buyer, and Buyer wishes to purchase
from Seller, substantially all of the assets of Seller that are used or
held for use by Seller in its electronic parts distribution business (the
"Business"); and
WHEREAS, in connection with such purchase and sale, Buyer will assume
certain liabilities and obligations of Seller as more fully described
herein.
NOW, THEREFORE, in consideration of the mutual covenants, agreements,
representations and warranties herein contained, the parties agree as
follows:
ARTICLE I
DEFINITIONS
I.1 Definitions. The following terms shall have the meanings for the
purposes of this Agreement.
"Accounts Payable" has the meaning set forth in Section 2.3(a).
"Accounts Receivable" has the meaning set forth in Section 2.1(d).
"Accounts Receivable Reserve" means $313,943.00, as determined in
accordance with the formula set forth on Annex A hereto.
"Active Inventory With Less Than a Two Time Turn" means the Inventory of
the category described on Annex B hereto and shall include the Inventory
described on Annex B hereto.
"Adjusted Inventory Reserve Deduction" means the book value of all Active
Inventory With Less Than a Two Time Turn and Inactive Inventory on hand as
of the Effective Time.
"Affiliate" means, with respect to any specified Person, a Person that
directly or indirectly, through one or more intermediaries, controls or is
controlled by, or is under common control with, the Person specified.
"Agreement" means this Asset Purchase Agreement, including all exhibits
and schedules hereto, as it may be amended from time to time.
"Annual Statement" has the meaning set forth in Section 7.5(e).
"Antitrust Division" has the meaning set forth in Section 5.1(b).
"Applicable Law" means any law, statute, regulation, ordinance, rule,
order, decree, judgment, consent decree, settlement agreement or
governmental requirement enacted, promulgated, entered into, agreed or
imposed by any Authority.
"Assumed Contracts" has the meaning set forth in Section 2.1(e).
"Authority" means any governmental, regulatory or administrative body,
agency, subdivision or authority, any court or judicial authority, any
public regulatory authority, whether foreign, national, federal, state or
local or otherwise, or any Person lawfully empowered by any of the foregoing
to enforce or seek compliance with any regulation.
"Base Purchase Price" has the meaning set forth in Section 2.4(a).
"Business" has the meaning set forth in the Preamble.
"Business Records" has the meaning set forth in Section 2.1(f).
"Buyer" has the meaning set forth in the Preamble.
"Closing" has the meaning set forth in Section 2.10.
"Closing Date" has the meaning set forth in Section 2.10.
"COBRA" has the meaning set forth in Section 7.7(e).
"Code" means the Internal Revenue Code of 1986, as amended.
"Confidentiality Agreement" means that certain Confidentiality
Agreement, dated August 3, 1999 among Buyer and certain of its
Affiliates and Seller.
"Contract" has the meaning set forth in Section 2.1(e).
"Copyright" has the meaning set forth in Section 2.1(i).
"Deferred Payment Term" has the meaning set forth in Section 7.5(a).
"Deferred Purchase Price" has the meaning set forth in Section 7.5(a).
"Effective Time" has the meaning set forth in Section 2.1(e).
"Employee Benefit Plans" means any "employee benefit plan" within
the meaning of Section 3(3) of ERISA and any bonus, deferred compensation,
incentive compensation, stock ownership, stock purchase, stock option,
phantom stock, vacation, severance, disability, death benefit,
hospitalization or insurance plan providing benefits to any present or
former employee or contractor of Seller or any other trades or businesses
under common control (within the meaning of Section 4001(b)(1) of the ERISA)
with Seller that is maintained by any such Person or as to which any such
entity has any liability or obligation.
"Environmental Laws" means all Federal, state and local statutes,
regulations, ordinances and other provisions having the force or effect of
law, all judicial and administrative orders and determinations, all
contractual obligations and all common law concerning public health and
safety, worker health and safety, and pollution or protection of the
environment, including without limitation all those relating to the
presence, use, production, generation, handling, transportation, treatment,
storage, disposal, distribution, labeling, testing, processing, discharge,
release, threatened release, control, or cleanup of any Hazardous
Substances, materials or wastes, chemical substances or mixtures,
pesticides, pollutants, contaminants, toxic chemicals, petroleum products
or byproducts, asbestos, polychlorinated biphenyls, noise or radiation, each
as amended and as now or hereafter in effect, including, without limitation,
the Comprehensive Environmental Response, Compensation and Liability Act of
1980, the Superfund Amendments and Reauthorization Act of 1986, as amended,
the Resource Conservation and Recovery Act of 1976, as amended, the Toxic
Substances Control Act of 1976, as amended, the Federal Water Pollution
Control Act Amendments of 1972, the Clean Water Act of 1977, as amended, any
so-called "Superlien" law, and any other similar Federal, state or local
statutes.
"Equipment" has the meaning set forth in Section 2.1(b).
"Excluded Assets" has the meaning set forth in Section 2.2.
"Excluded Books and Records" has the meaning set forth in Section 2.2(c).
"FTC" has the meaning set forth in Section 5.1(b).
"Final Purchase Price" has the meaning set forth in Section 2.4(b).
"Financial Statements" has the meaning set forth in Section 3.4.
"GAAP" means United States generally accepted accounting principles as
in effect from time to time.
"HSR Act" has the meaning set forth in Section 3.2.
"Hazardous Substance" means any material or substance which (a)
constitutes a hazardous substance, toxic substance or pollutant (as such
terms are defined by or pursuant to any Environmental Laws) or (b) is
regulated or controlled as a hazardous substance, toxic substance,
pollutant or other regulated or controlled material, substance or matter
pursuant to any Environmental Laws.
"Hold Area Inventory" means Inventory described on Annex C hereto.
"Hold Area Purchase Commitments" means existing commitments or agreements
to purchase Hold Area Inventory.
"Inactive Inventory" means the Inventory of the category described on
Annex D hereto and shall include the Inventory described on Annex D hereto.
"Income Taxes" has the meaning set forth in Section 2.2(h).
"Indemnified Party" has the meaning set forth in Section 9.2(a).
"Indemnifying Party" has the meaning set forth in Section 9.2(a).
"Intellectual Property" has the meaning set forth in Section 2.1(i).
"Inventory" has the meaning set forth in Section 2.1(c).
"Inventory Reserve Deduction" means the book value of the Active
Inventory With Less Than a Two Time Turn and the Inactive Inventory, which
the parties have agreed is equal to $7,541,304.86 as of September 30, 1999.
"Interest Rate" means the prime rate as published from time to time in
the Wall Street Journal, Southwest Edition on the date interest is to first
accrue on any obligation of a party hereto to any other party or parties to
this Agreement.
Leased Property" has the meaning set forth in Section 2.1(a).
"Liability" means 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.
"Lien" means any mortgage, lien charge, restriction, pledge, security
interest, option, lease or sublease, claim, easement, encroachment or
encumbrance.
"Like Inventory" means inventory items in the Reserve Inventory and in
the inventory maintained by Buyer or its Affiliates with common vendor part
numbers. Within thirty (30) days after Closing Buyer will furnish an Annex
F describing the Like Inventory that exists as of the Effective Time. At
the end of each twelve-month period (commencing twelve months after the
last day of the month in which the Closing Date occurred), Buyer shall
furnish a revised Annex F describing the Like Inventory that exists as of
the end of such twelve-month period. Such revised Annex F shall supersede
the previous Annex F and shall be deemed to be the Annex F referred to in
this Agreement until a new Annex F is furnished by Buyer at the end of the
subsequent twelve-month period.
"Losses" has the meaning set forth in Section 9.1(a).
"Material Adverse Effect" means any change or effect that would be, or
would reasonably be expected to be, materially adverse to the properties,
assets, condition (financial or otherwise) or results of operations of the
Business.
"Most Recent Financial Statements" has the meaning set forth in Section
3.4.
"Most Recent Fiscal Month End" has the meaning set forth in Section 3.4.
"Most Recent Fiscal Year End" has the meaning set forth in Section 3.4.
"Offer to Purchase" has the meaning set forth in Section 7.5(g).
"Ordinary Course of Business Contracts" has the meaning set forth in
Section 3.8(a).
"Payment Date" has the meaning set forth in Section 7.5(c).
"Pension Plan" means any Employee Pension Benefit Plans (as defined in
Section 3(2) of ERISA), which Seller or any other trades or businesses under
common control (within the meaning of Section 4001(b)(1) of ERISA) with
Seller maintains, or to which Seller or any such Person is or has been
obligated to contribute.
"Permitted Liens" means and shall include: (i) only to the extent that
they do not impair in any material respect the conduct of the Business or
the use of the Transferred Assets in the manner currently used by Seller,
the following: (A) Liens for Taxes, assessments or governmental charges or
levies not yet due or delinquent, (B) statutory Liens of carriers,
warehousemen, mechanics, materialmen and the like arising in the ordinary
course of business and for obligations not yet due and payable, (C)
easements, restrictive covenants, rights of way and other similar
restrictions of records that do not materially adversely affect the use of
the property subject thereto, (D) zoning, building and other similar
restrictions, (E) minor imperfections of title that do not materially
adversely affect the use of the property subject thereto and (F) in the
case of Leased Property, all matters affecting the title of the lessor
(and any underlying lessor) thereof and (ii) Seller's Liens to the extent
that such are released in full at or prior to the Closing
("Seller's Liens").
"Person" means an individual, a partnership, a corporation, a limited
liability company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization or a governmental entity (or any
department, agency or political subdivision thereof).
"Permits" has the meaning set forth in Section 2.1(g).
"Purchase Notice" has the meaning set forth in Section 7.5(g).
"Purchased Assets" has the meaning set forth in Section 2.1.
"Reserve Inventory" means and shall include the Active Inventory With
Less Than a Two Time Turn and the Inactive Inventory.
"Retained Liabilities" has the meaning set forth in Section 2.3(b).
"Seller" has the meaning set forth in the Preamble.
"Seller's Liens" means the Liens described on Annex D.
"Tax" means any federal, state, local, or foreign income, gross receipts,
license, payroll, employment, excise, severance, stamp, occupation, premium,
windfall profits, environmental, customs duties, capital stock, franchise,
profits, withholding, social security, unemployment, disability, real
property, personal property, sales, use, transfer, registration, value
added, alternative or add-on minimum estimated, or other tax of any kind
whatsoever, including any interest, penalty, or addition thereto, whether
disputed or not.
"Tax Return" means any return, declaration, report, claim for refund or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
"Third Party Claims" has the meaning set forth in Section 9.2(a).
"Trademarks" has the meaning set forth in Section 2.1(h).
"Transition Services Agreement" means the Transition Services Agreement
among Buyer, Seller and NCH attached hereto as Exhibit A.
"Vendor's Contracts" has the meaning set forth in Section 3.8(a).
"WARN Act" has the meaning set forth in Section 7.7.
ARTICLE II
PURCHASE AND SALE OF ASSETS
II.1 Purchase and Sale of Certain Assets. At the Closing, subject
to Section 2.2, Seller shall sell, transfer and deliver to Buyer, and Buyer
shall purchase, acquire and accept from Seller, all of Seller's right,
title and interest in and to the assets and properties (the "Purchased
Assets") of Seller of every kind, type or designation that are used in,
or held for use in, the operation of the Business, whether tangible or
intangible, real, personal or mixed, wherever located, free and clear of
all Liens other than Permitted Liens, including, without limitation:
(a) all parcels of land and all buildings, structures, improvements
and fixtures thereon, together with all rights of way, easements,
privileges and other appurtenances pertaining or belonging thereto, leased
by Seller (the "Leased Property");
(b) all machinery and equipment and spare parts, furniture, office
equipment and other personal property of any kind or type, whether
physically located on the Leased Property or elsewhere (the "Equipment");
(c) all inventories (including the Reserve Inventory and the Hold
Area Inventory), including all finished products, wrapping, supply, labels
and packaging items, in each case wherever located (the "Inventory");
(d) all of the trade notes or accounts receivable arising out of
Inventory sold or shipped or services performed in connection with the
operation of the Business ("Accounts Receivable");
(e) all rights under (i) all contracts, commitments, understandings,
binding arrangements, leases of real and personal property, licenses,
purchase orders and all other legally binding arrangements to which Seller
is a party or to which Seller or any of the Purchased Assets is subject, and
which relate to the operation of the Business, except to the extent any of
the foregoing relate to the Excluded Assets or the Retained Liabilities,
(collectively, the "Contracts"), to the extent that such are described on
Schedule 2.1(e), (ii) all Contracts relating to the Business that are
entered into or assumed by Seller between the date of this Agreement and
12:01 a.m. on the Closing Date (the "Effective Time") in accordance with
the terms of this Agreement and (iii) all Ordinary Course of Business
Contracts (collectively, the "Assumed Contracts");
(f) all of the books and records of the Business, wherever located,
relating to the Business, including, but not limited to, the following:
sales records, books of account, files, invoices, inventory records,
accounting records, product specifications, drawings, engineering,
maintenance, operating and production records, advertising materials,
customer lists, cost and pricing information, supplier lists, business
plans, catalogs, quality control records and manuals, blueprints, research
and development files, laboratory books, patent and trademark files and
litigation files, other than records kept solely for Tax purposes and
excluding any of the foregoing relating to the Excluded Assets or the
Retained Liabilities (collectively, the "Business Records");
(g) to the extent transfer is permitted under Applicable Law, all
permits, approvals, franchises, licenses or other rights granted by any
Authority and necessary for the lawful ownership of the Purchased Assets
or other lawful conduct of the Business as currently conducted (the
"Permits");
(h) all U.S. trademarks, U.S. trademark applications, U.S.
trademark registrations, U.S. trade names and U.S. service marks
(including, without limitation, the names set forth on Schedule 2.1(h),
together with the goodwill associated therewith and all rights deriving
therefrom (the "Trademarks");
(i) all U.S. registered copyrights or unregistered copyrights and
all rights deriving therefrom (the "Copyrights" and together with the
Trademarks, the "Intellectual Property");
(j) all goodwill of the Business, including the name "Resource
Electronics" and the right to represent oneself as the successor to the
Business;
(k) all rights under manufacturers' and vendors' warranties relating
to items included in the Purchased Assets and all similar rights against
third parties relating to items included in the Purchased Assets;
(l) all refunds, deposits, prepayments and prepaid expenses; and
(m) all claims, causes of action, choses in action, rights of
recovery and rights of set-off of any kind against any Person arising out of
or relating to the Business.
II.2 Excluded Assets. Notwithstanding anything to the contrary
contained in this Agreement, Seller shall retain all its right, title and
interest in and to, and there shall be excluded from the sale, transfer,
assignment and delivery to Buyer hereunder, the following assets and
properties (the "Excluded Assets"):
(a) all cash, bank accounts, cash equivalents and other similar types
of investments, certificates of deposit, U.S. Treasury bills and other
marketable securities;
(b) all contracts, commitments, understandings, binding arrangements,
leases of real and personal property licenses, purchase orders and all other
legally binding arrangements to which Seller is a party which do not
directly relate to the Business, including but not limited to any contract
or arrangement relating to the business of Resource Satellite, Inc., as
such has been historically conducted;
(c) all of the books and records of Seller, wherever located, which
do not directly relate to the Business, including but not limited to any
books or records of Seller relating to the business of Resource Satellite,
Inc., as such as been historically conducted ("Excluded Books and Records");
(d) all parcels of land and all buildings, structures, improvements
and fixtures thereon, together with all rights of way, easements, privileges
and other appurtences pertaining or belonging thereto owned in fee by
Seller or its Affiliate;
(e) the AS400 computer, storage devices, communication devices,
system software and leases described in Schedule 2.2(e);
(f) all claims, causes of action, choses in action, rights of
recovery and rights of set-off of any kind against any person or entity
solely arising out of or relating to the Excluded Assets;
(g) all insurance policies, programs, reserves and related bonds of
any nature (and any claims payable in respect thereof) covering the Business
prior to the Effective Time;
(h) any refunds, claims for refunds or rights to receive refunds from
any Authority with respect to income, franchise or other Taxes measured by
or based upon income or profits or interest or penalties thereon ("Income
Taxes") paid or to be paid by Seller or any of its affiliates relating to a
period, or portions thereof, ending on or prior to the Closing;
(i) any records or copies thereof (including accounting records)
related to Income Taxes paid or payable by Seller or any of its Affiliates;
(j) Seller's organizational documents;
(k) such records as relate exclusively to (i) the items set forth in
the foregoing subsections of this Section 2.2, (ii) the Retained Liabilities
or (iii) the negotiation and consummation of the transactions contemplated
by this Agreement;
(l) rights under this Agreement and under any Contract that is not
an Assumed Contract; and
(m) all rights to the name "Resource" and any variations thereof,
other than as used as a part of the name "Resource Electronics".
II.3 Assumption of Liabilities.
(a) Subject to Section 2.3(b), at the Closing, Buyer shall assume
and thereafter pay, honor and discharge when due and payable the following
obligations, liabilities and commitments of Seller (the "Assumed
Liabilities"):
(i) all liabilities, obligations and commitments of Seller
accruing with respect to periods commencing on and after the Effective
Time under the Assumed Contracts;
(ii) to the extent that such are unpaid, all trade accounts
payable arising from Inventory purchased or services performed for the
Business in the ordinary course of business ("Accounts Payables") and
which either (x) are set forth on the balance sheet contained in the
Most Recent Financial Statements or (y) have been incurred since
July 31, 1999 in the ordinary course of business; and
(iii) all other liabilities and obligations (other indebtedness
for borrowed funds that do not constitute Accounts Payables) occurring,
arising out of or related to the ownership or operation of the Business
or the Purchased Assets that (x) are attributable to events occurring on
and after the Effective Time or (y) are attributable to events occurring
or in existence prior to the Effective Time and that do not relate to an
event (1) that constitutes a breach of a representation or warranty of
NCH or Seller made herein and (2) as to which Buyer is entitled to
indemnification as to such breach under Article IX.
(b) Buyer does not assume and shall not be deemed to have assumed
hereunder any of the following obligations, liabilities and commitments of
Seller (the "Retained Liabilities"):
(i) all liabilities, obligations and commitments accruing, arising
out of or related to the employment by Seller or its affiliates of any
current or past employees prior to the Effective Time for accrued but
unpaid wages, salary or other similar compensation and all claims and
benefits under any Pension Plans or Employee Benefit Plans, including,
but not limited to, obligations under COBRA;
(ii) all liabilities, obligations and commitments arising under any
Contracts which are not Assumed Contracts;
(iii) all liabilities, obligations and commitments arising under any
of the actions, suits and proceedings described on Schedule 3.10 and that
are currently pending against Seller;
(iv) all liabilities, obligations and commitments arising from the
ownership or operation of any of the Excluded Assets;
(v) those liabilities, obligations and commitments in connection
with any product warranties, indemnities or guarantees for products
shipped or sold prior to the Effective Time, including, but not limited
to, those claims arising under the items disclosed on Schedule 3.14 or
statutory or common law; and
(vi) all liabilities, obligations and commitments of Seller that
are not Assumed Liabilities.
II.4 Purchase Price.
(a) In addition to Deferred Purchase Price payments that may be made
in accordance with Section 7.5, in consideration of the sale, transfer,
assignment and delivery of the Purchased Assets, Buyer agrees, subject to
the terms, conditions and limitations set forth in this Agreement, to pay
Seller at the Closing an amount equal to Twenty-One Million One Hundred
Twenty-One Thousand Dollars ($21,121,000) reduced by the sum of (i) the
Inventory Reserve Deduction and (ii) an Accounts Receivable Reserve in
the amount of $313,943.00 (the "Base Purchase Price").
(b) Subsequent to the Closing, the Base Purchase Price shall be
adjusted as follows (the "Final Purchase Price");
(i) The Base Purchase Price shall be increased, on a dollar for
dollar basis, in the amount that the adjusted book value of the
Purchased Assets reduced by the book value of Accounts Payable, each
determined as of the Effective Time, exceeds $21,121,000;
(ii) The Base Purchase Price shall be decreased, on a dollar for
dollar basis, in the amount that the adjusted book value of the Purchased
Assets reduced by the book value of Accounts Payable, each determined as
of the Effective Time, is less than $21,121,000; and
(iii) For purposes of clauses (i) and (ii) above, the book value of
the Purchased Assets shall be (x) calculated giving effect to the
Accounts Receivable Reserve determined as of the Effective Time and
(y) increased or decreased, on a dollar for dollar basis, by the amount
that the Adjusted Inventory Reserve Deduction is greater than (a
decrease) or less than (an increase) the Inventory Reserve Deduction (it
being understood that in calculating the Adjusted Inventory Reserve
Deduction, the parties will redetermine the Active Inventory With Less
Than a Two Time Turn and the Inactive Inventory as of the Effective
Time).
(c) Within thirty (30) days after the Closing Date, Seller shall
deliver a statement setting forth the adjustments to the Base Purchase Price
as contemplated by this Section 2.4, prepared as described herein (the
"Statement of Adjustment"). The Statement of Adjustment shall be prepared
in accordance with consistently applied accounting procedures which conform
to GAAP and shall reflect the accounting adjustment derived from the books
and records maintained by Seller in the ordinary course of business;
provided, however, that in preparing the Statement of Adjustment (i) all
reserves for doubtful accounts contained in the Financial Statements shall
be ignored and reversed and the Accounts Receivable Reserve shall be used in
lieu of any such reserves and (ii) all reserves in respect of Inventory
contained in the Financial Statements shall be ignored and reversed and the
Adjusted Inventory Reserve Deduction shall be used in lieu of any such
reserves.
(d) Unless Buyer, within 30 days after receipt of the Statement of
Adjustment, notifies Seller that it objects to the computation contained
therein, specifying the basis for such objection, Seller's calculation of
the adjustments to the Base Purchase Price and the calculation of the Final
Purchase Price shall be binding upon the parties. If Buyer and Seller are
unable to agree upon the Statement of Adjustment within 30 days after any
such notification has been given by Buyer stating Buyer's objections to the
Statement of Adjustment or within a mutually agreed upon extended time
period, the controversy shall be referred to an independent certified public
accounting firm mutually acceptable to the parties for a final determination
thereof. In the event the parties are unable to agree on an independent
certified public accounting firm, then the names of the Big 5 national
accounting firms (other than those that have provided services to either
party within the twelve month period preceding the Closing Date) shall be
placed in a blind pool and NCH shall draw (in Buyer's presence) a name from
the pool identifying the accounting firm to make a final determination
with respect to the Statement of Adjustment. Such determination shall be
binding upon the parties, absent manifest error. The parties shall share
equally the fees and expenses of such firm.
(e) Any Base Purchase Price adjustment payment required under this
Section 2.4 shall be delivered by Buyer to Seller, or by Seller to Buyer,
as appropriate, in accordance with the instructions of the appropriate
recipient, together with interest thereon for each day from and including
the Closing Date at a rate per annum equal to the Interest Rate, (i) within
the lesser of 35 days after delivery by Seller of the Statement of
Adjustment, or five days after Buyer notifies Seller that it does not object
to the Statement of Adjustment; or (ii) if Buyer shall have objected to the
Statement of Adjustment, within five days following final determination of
the disputed items pursuant to this Section 2.4.
II.5 Allocation of Purchase Price. Seller and Buyer hereby allocate
the Purchase Price among the Purchased Assets and the Assumed Liabilities in
compliance with Section 1060 of the Code with respect to the allocation of
the Purchase Price, and in accordance with the formula set forth on
Schedule 2.5.
II.6 Possession And Risk Of Loss.
(a) The risk of any loss, damage, impairment, confiscation, or
condemnation of any of the Purchased Assets from any cause whatsoever shall
be borne by Seller at all times prior to the Effective Time. In the event
of any such loss, damage, impairment, confiscation, or condemnation, whether
or not covered by insurance, Seller shall promptly notify Buyer of such
loss, damage, impairment, confiscation, or condemnation.
(b) If Seller, at its expense, repairs, replaces, or restores such
Purchased Assets to their prior condition to the reasonable satisfaction of
Buyer before the Closing, Seller shall be entitled to all insurance proceeds
and condemnation awards, if any, by reason of such award or loss.
(c) If Seller does not or cannot restore or replace lost, damaged,
impaired, confiscated or condemned Purchased Assets or informs Buyer that
it does not intend to restore or replace such Purchased Assets, Buyer may at
its option:
(i) terminate this Agreement by notice forthwith without any
further obligation hereunder; or
(ii) proceed to the Closing of this Agreement without Seller
completing the restoration and replacement of such Purchased Assets,
provided that Seller shall assign all rights under applicable insurance
policies and condemnation awards, if any, to Buyer; and in such event,
Seller shall have no further liability with respect to the condition of
the Purchased Assets directly attributable to the loss, damage,
impairment, confiscation, or condemnation.
(d) Buyer will notify Seller of a decision under the options
described in Section 2.6(c)(i) or 2.6(c)(ii) above within ten days after
Seller's notice to Buyer of the damage or destruction of Purchased Assets
and the estimate of the costs to repair or replace; provided, however, that
if Seller states that it intends to restore the damaged Purchased Assets and
if Seller has not restored such damaged Purchased Assets immediately prior
to the Closing Date, notwithstanding Buyer's prior delivery of a notice to
proceed pursuant to this Section 2.6(d), Buyer shall have the right to
either postpone the Closing or terminate this Agreement by notice forthwith.
II.7 Prorations. On the Closing Date, or as promptly as practicable
following the Closing Date, but in no event later than 60 days thereafter,
the real and personal property Taxes, water, gas, electricity and other
utilities, common area maintenance reimbursements to lessors, local business
or other license fees, merchants' association dues and other similar
periodic charges payable with respect to the Purchased Assets or the
Business shall be prorated between Buyer, on the one hand, and Seller, on
the other hand, effective as of the Effective Time with Seller being
responsible for amounts related to the period before the Effective Time and
Buyer being responsible for amounts related to the period on and after the
Effective Time. To the extent practicable, utility meter readings shall be
determined as of the Effective Time. If the final real property Tax rate
or final assessed value for the current Tax year is not established by the
Closing Date, the prorations shall be made on the basis of the rate or
assessed value in effect for the preceding Tax year and shall be adjusted
when the exact amounts are determined. All such prorations shall be based
upon the most recent available assessed value of the Leased Property prior
to the Closing Date.
II.8 Taxes. All Income Taxes in respect of the Purchased Assets and
income of the Business for the period or portions of periods ending prior to
the Effective Time shall be borne by Seller. Except as otherwise provided
in this Agreement, all Income Taxes in respect of the Purchased Assets and
income of the Business for the period or portions of periods beginning on
and after the Effective Time shall be borne by Buyer.
II.9 Closing Costs; Transfer Taxes and Fees.
(a) Each Party shall pay the cost of all sales and use Taxes arising
out of the transfer of the Purchased Assets pursuant to this Agreement
normally paid by such party in accordance with local practices in the State
of Texas. Buyer and Seller shall equally pay all costs and expenses
(including, without limitation, recording fees and real estate transfer
Taxes and real estate transfer stamps) incurred in connection with obtaining
or recording title to the Purchased Assets. Seller shall be responsible for
all costs and expenses in obtaining and recording releases of Seller's Liens
on the Purchased Assets. The sales, use and transfer Tax returns required
by reason of said transfer shall be timely prepared and filed by the party
normally obligated by law or regulation to make such filing. The parties
agree to cooperate with each other in connection with the preparation and
filing of such returns, in obtaining all available exemptions from such
sales, use and transfer Taxes, and in timely providing each other with
resale certificates and any other documents necessary to satisfy any
such exemptions.
(b) If Buyer, on the one hand, or Seller, on the other hand, pays
any Tax agreed to be borne by the other party under this Agreement, such
other party shall promptly (within 10 days) reimburse the paying party for
the amounts so paid. If any party receives any refund or credit to which
another party is entitled under this Agreement, the receiving party shall
promptly (within 10 days) pay such amounts to the party entitled thereto.
II.10 Closing. Subject to the conditions set forth in Article VIII,
the closing of the transactions contemplated hereby (the "Closing") shall
be held at 10:00 a.m. on November 12, 1999, or on such other date and time
upon which the parties may agree. The date on which the Closing takes
place is referred to herein as the "Closing Date." The Closing shall be
deemed to be effective as of the Effective Time.
II.11 Closing Deliveries by Seller.
(a) At the Closing, Seller shall deliver to Buyer the following:
(i) an assumption agreement providing for the assumption by
Buyer of the Assumed Liabilities (the "Assumption Agreement") in the
form of Exhibit B hereto;
(ii) a bill of sale and assignment covering all Purchased Assets,
but specifically excluding the Excluded Assets, in the form of Exhibit C
hereto;
(iii) a duly executed Transition Services Agreement;
(iv) an amendment to Seller's certificate of incorporation changing
the name of the corporation from "Resource Electronics, Inc." to another
name selected by NCH;
(v) a certificate of Seller to the effect that (A) the
representations and warranties of Seller contained herein were true and
correct in all material respects when made and are true and correct at
and as of the Closing Date except that any representation or warranty
that by its terms is stated to be true as of a particular date need be in
all material respects only as of such date and (B) Seller has performed
in all material respects all obligations and complied with all covenants
required by this Agreement to be performed or complied with by Seller on
or prior to the Closing Date;
(vi) an opinion of Seller's counsel opining as to due
authorization, execution and enforceability of this Agreement (other than
enforceability of Section 2.13 hereof) and otherwise reasonably
satisfactory to Buyer;
(vii) estoppel certificates from the lessors under the Leased
Property, and from the other parties to any of the Assumed Contracts, in
a form reasonably acceptable to Buyer, to the effect that such leases and
other contracts are in full force and effect, and Seller is not in breach
or default thereunder; and
(viii) as Buyer may reasonably request, any additional assignments or
other instruments of transfer, assignment or conveyance reasonably
necessary to convey, transfer and assign title together with possession
to the Purchased Assets to Buyer as contemplated by this Agreement, all
in form and substance reasonably satisfactory to Buyer and such other
documents and instruments reasonably necessary in order to consummate the
transactions contemplated hereby upon the terms contained herein.
(b) At the Closing, NCH shall deliver to Buyer the following:
(i) a duly executed Transition Services Agreement; and
(ii) a certificate of NCH to the effect that (A) the
representations and warranties of NCH contained herein were true and
correct in all material respects when made and are true and correct at
and as of the Closing Date except that any representation or warranty
that by its terms is stated to be true as of a particular date need be
in all material respects only as of such date and (B) NCH has performed
in all material respects all obligations and complied with all covenants
required by this Agreement to be performed or complied with by NCH on or
prior to the Closing Date.
II.12 Closing Deliveries by Buyer. At the Closing, Buyer shall deliver
to Seller the following:
(a) a wire transfer of immediately available funds in an amount equal
to the Base Purchase Price;
(b) a duly executed Assumption Agreement;
(c) a duly executed Transition Services Agreement;
(d) a certificate of Buyer to the effect that (A) the representations
and warranties of Buyer contained herein were true and correct in all
material respects when made and are true and correct at and as of the
Closing Date except that any representation or warranty that by its terms
is stated to be true as of a particular date need be in all material
respects only as of such date and (B) Buyer has performed in all material
respects all obligations and complied with all covenants required by this
Agreement to be performed or complied with by Buyer on or prior to the
Closing Date;
(e) an opinion of Buyer's counsel opining as to due authorization,
execution and enforceability of this Agreement and otherwise reasonably
satisfactory to Seller; and
(f) as Seller may reasonably request, any other agreements or
instruments of assumption reasonably necessary to effect the assumption by
Buyer of the Assumed Liabilities as contemplated by this Agreement and such
other documents and instruments reasonably necessary in order to consummate
the transactions contemplated hereby upon the terms contained herein.
II.13 Noncompetition Agreement. As additional consideration for the
payment of the Purchase Price, Seller and NCH, jointly and severally, agree
that they will not for a period of three (3) years following the Closing
Date, directly or indirectly, own, manage, operate, advise, control or
otherwise establish, engage in, affiliate with, participate in, be connected
with, assist others in connection with, whether as a partner, creditor,
guarantor, advisor, consultant, owner, shareholder or otherwise, any
corporation, partnership or other entity, occupation, business, trade or
enterprise engaged in the electronic parts distribution business the same
as or similar to the Business heretofore operated by Seller within a one
hundred (100) mile radius of any location constituting part of the Leased
Property being assumed by Buyer under this Agreement; provided, however,
the foregoing shall not apply to (a) the ownership by Seller or the
stockholders of not more than five percent (5%) of the outstanding
securities of any publicly held corporation engaged in such business, (b)
the business of Resource Satellite, Inc., as historically conducted prior
to the date hereof, and (c) any repurchase and the subsequent distribution,
marketing, sale or other disposition by NCH of Hold Area Inventory pursuant
to Section 7.6(b) hereof.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER AND NCH
In order to induce Buyer to enter into this Agreement and to consummate
the transactions contemplated hereunder, Seller and NCH, jointly and
severally, represent and warrant to Buyer as follows):
III.1 Organization, Power and Authority. Seller and NCH are each
corporations duly organized, legally existing and in good standing under
the laws of Delaware and Seller has full corporate power and authority to
carry on the Business as it has been conducted prior to the Closing Date.
Except where the failure to be so registered would have a Material Adverse
Effect, Seller is registered as a foreign corporation in good standing in
each of the states listed on Schedule 3.1 and such states represent all of
the states that Seller is required to be registered in connection with the
operation of the Business.
III.2 Authority, Approvals and Consents. Seller and NCH each have the
corporate power and authority to enter into this Agreement and to perform
their respective obligations hereunder. This Agreement has been duly
authorized, executed and delivered by, and constitutes a valid and binding
obligation of, Seller and NCH enforceable against Seller and NCH in
accordance with its terms (except as enforceability may be limited by
applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium or similar laws affecting creditors' rights generally or by the
principles governing the availability of equitable remedies). The
execution, delivery and performance of this Agreement do not and will not
contravene any provisions of either Seller's or NCH's Articles of
Incorporation or Bylaws or, any of the terms, conditions or provisions of
any agreement or instrument to which Seller or NCH is a party, and Seller
and NCH have no reason to believe that it will result in a violation of
any Applicable Law. Except for (i) approvals required under the
Hart-Scott-Rodino Act ("HSR Act"), (ii) required consents under the Permits,
and (iii) required consents of third parties to the Assumed Contracts,
which consents are listed on Schedule 3.2, no notice, declaration, report
or other filing or registration with, and no waiver, consent, approval or
authorization of, any Authority or any other Person is required to be made
or obtained by Seller in connection with the execution and delivery of
this Agreement by it or the consummation by it of the transactions
contemplated hereby, including the assignment of the Permits and the Assumed
Contracts as contemplated herein.
III.3 Good Title to Purchased Assets. Except as set forth on Schedule
3.3 hereto, Seller has good, valid and marketable title to all of the
Purchased Assets, free and clear of any Lien except Permitted Liens.
III.4 Financial Statements. Attached hereto as Part I of Schedule 3.4
are the following financial statements (collectively the "Financial
Statements"): (a) unaudited consolidated balance sheets and statements of
income (including all notes thereto) as of and for the fiscal year ended
April 30, 1999 (the "Most Recent Fiscal Year End") for Seller, (b) unaudited
consolidated balance sheets and statements of income (including all notes
thereto) as of and for the fiscal year ended April 30, 1997, and 1998,
and (c) unaudited consolidated balance sheets and statements of income
(including all notes thereto) (the "Most Recent Financial Statements") as
of and for the 4 months ended August 31, 1999 (the "Most Recent Fiscal Month
End") for Seller. Except as described in the Financial Statements or on
Part II of Schedule 3.4, the Financial Statements (including the notes
thereto) have been prepared in accordance with accounting procedures which
conform to GAAP applied on a consistent basis throughout the periods covered
thereby and present fairly the financial condition of Seller as of such
dates and the results of operations of Seller for such periods.
III.5 Events Subsequent to Latest Balance Sheet. Except as set forth
on Schedule 3.5 hereto, since the Most Recent Fiscal Month End, there has
not been any:
(a) transaction by Seller except in the ordinary course of business
as conducted on that date;
(b) damage, destruction or loss, of any Purchased Asset of a material
value;
(c) sale, transfer, lease, assignment, abandonment or other
disposition of, or any agreement or other arrangement for the sale,
transfer, lease, assignment, abandonment or other disposition of any
Purchased Asset, except in the ordinary course of business;
(d) agreement or commitment by Seller to do any of the things
described in this Section 3.5; or
(e) other change, condition or event of any character having a
Material Adverse Effect.
III.6 Condition of Equipment. All of the Equipment is in good working
order and condition, normal wear and tear excepted and is suitable and fit
for the uses and purposes for which it is currently being used.
III.7 Tax Matters. Except as set forth in Schedule 3.7, Seller has
duly and timely filed (taking into account all valid extension of filing
dates) all Tax Returns that it has been required to file for all periods
through and including the Closing Date. All such Tax Returns are correct
and complete in all material respects. All material Taxes owed by Seller
(whether or not shown on any Tax Return) have been timely paid, except for
Taxes being contested in good faith by appropriate proceedings.
III.8 Contracts.
(a) Schedule 3.8(a) sets forth a list of all Contracts in effect on
the date of this Agreement, except (i) orders for the purchase of Inventory
or supplies used in the Business and entered into in the ordinary course of
business; (ii) orders for the sale of finished products of the Business to
customers, entered into in the ordinary course of business; (iii) contracts
for routine maintenance of the Leased Property or any part thereof or any of
the Equipment, entered into in the ordinary course of business; (iv)
vendor's franchise contracts entered into in the ordinary course of business
("Vendor's Contracts"); and (v) leases of personal property entered into in
the ordinary course of business and requiring an annual expenditure
thereunder of $10,000 or less (collectively, the "Ordinary Course of
Business Contracts"). All of the Contracts set forth on Schedule 3.8(a),
which excludes the Ordinary Course of Business Contracts, are collectively
referred to herein as the "Material Contracts." Seller has delivered or
made available to Buyer copies of all Material Contracts. Seller is not a
party to any oral Material Contract.
(b) Each Assumed Contract is valid and enforceable in accordance with
its terms. Seller is in compliance with the provisions of all Assumed
Contracts. Neither Seller, nor to Seller's knowledge, any other parties
thereto are in default in the performance, observance or fulfillment of any
obligation, covenant or condition contained in an Assumed Contract.
(c) Except notices, consents and approvals under any Vendor's
Contracts and as otherwise set forth in Schedule 3.2, no notice to, or
consent or approval by, any third party is required under any of the
Assumed Contracts as a result of or in connection with the execution,
delivery or performance of this Agreement or the consummation of the
transactions contemplated hereby and, assuming the consents set forth on
Schedule 3.2 are obtained prior to Closing, each Assumed Contract will
continue in full force and effect upon the consummation of the transactions
contemplated hereby and will not be cancelable by the other party without
liability to such other party due to the consummation of the transactions
contemplated hereby.
(d) Schedule 3.8(d) lists each Contract, plan or other arrangement
(i) relating to the employment or consulting services of any person which is
not terminable without liability or penalty on 30 days or less notice,
(ii) relating to the provision of benefits upon, or resulting from, the
occurrence of a transaction involving Seller of the nature of any of the
transactions contemplated by this Agreement, (iii) providing severance or
other benefits after the termination of employment or other contractual
relationship regardless of the reason for such termination and regardless of
whether such termination is before or after a change of control, (iv) under
which any person may receive payments subject to the tax imposed by Section
4999 of the Code or (v) any of the benefits of which will be increased, or
the vesting of benefits of which will be accelerated, by the occurrence of
any of the transactions contemplated by this Agreement or the value of any
of the benefits of which will be calculated on the basis of any of the
transactions contemplated by this Agreement.
III.9 Insurance. Seller has insurance policies in full force and
effect for such amounts as are sufficient for material compliance with all
Applicable Law and of all Contracts to which Seller is a party or by which
it is bound. Set forth in Schedule 3.9 is a list of all fire, liability and
other forms of insurance and all fidelity bonds held by or applicable to
Seller or the Business, setting forth, in respect of each such policy, the
policy name, policy number, carrier, term, type of coverage and annual
premium. No event relating to Seller or the Business has occurred which
can reasonably be expected to result in a retroactive upward adjustment in
premiums under any such insurance policies or which is likely to result in
a prospective upward adjustment in such premiums. Excluding insurance
policies that have expired and been replaced in the ordinary course of
business, no insurance policy has been canceled within the last two years
and, to Seller's knowledge, no threat has been made to cancel any insurance
policy of Seller during such period. Seller has not received notice, and
has no reason to believe (except as may result from the consummation of the
transactions contemplated herein) that any policy of insurance will not be
renewed at the expiration of its then current term or that any significant
premium increase is anticipated for such coverage in the immediately
succeeding term. All such insurance will remain in full force and effect
with respect to periods before the Closing. No event has occurred,
including, without limitation, the failure by Seller to give any notice or
information or the giving of any inaccurate or erroneous notice or
information by Seller, which limits or impairs the rights of Seller under
any such insurance policies.
III.10 Litigation. Except as set forth on Schedule 3.10, there is no
claim, action, suit, inquiry, judicial or administrative proceeding,
grievance, or arbitration pending or, to the knowledge of Seller, threatened
against Seller or any of the Purchased Assets by or before any arbitrator or
Authority, nor are there any investigations relating to Seller or any of the
Purchased Assets pending or, to the knowledge of Seller, threatened by or
before any Authority. There is no judgment, decree, injunction, order,
determination, award, finding, or letter of deficiency of any Authority or
arbitrator outstanding against Seller or any of the Purchased Assets. There
is no action, suit, inquiry, judicial or administrative proceeding pending
or, to the knowledge of Seller, threatened against any Seller relating to
the transactions contemplated by this Agreement.
III.11 Environmental Matters. Except as set forth in Schedule 3.11:
(a) To the knowledge of Seller, Seller:
(i) has compiled and is in compliance with all Environmental Laws
(and no action, suit, proceeding, hearing, investigation, charge,
compliant, claim, demand or notice has been filed or commenced against
any of them alleging any such failure to comply) except where the failure
to comply would not be reasonably expected to have a Material Adverse
Effect;
(ii) has obtained and complied with, and is in compliance with, all
permits, licenses and other authorizations that are required pursuant to
Environmental Laws except where the failure to comply or obtain
authorizations, as the case may be, would not be reasonably expected to
have a Material Adverse Effect; and
(iii) has complied in all respects with all other limitations,
restrictions, conditions, standards, prohibitions, requirements,
obligations, schedules and timetables which are contained in the
Environmental Laws; except, where the failure to comply or obtain
authorizations, as the case may be, would not be reasonably expected to
have a Material Adverse Effect.
(b) Seller has not received any written or oral notice, report or
other information from an Authority or third party regarding any unresolved
actual or alleged material violation of Environmental Laws.
(c) To the knowledge of Seller, Seller has not handled or disposed
of any substance, arranged for the disposal of any substance, exposed any
employee or other individual to any substance or condition or owned or
operated any property or facility in any manner that could give rise to any
material Liability under Environmental Laws for damage to any site, location
or body of water.
(d) To the knowledge of Seller, none of the following exists at any
property or facility owned or operated by Seller: (i) underground storage
tanks, (ii) asbestos-containing material in any form or condition,
(iii) material or equipment containing polychlorinated byphenyls, or
(iv) landfills, surface impoundments or Hazardous Substance disposal areas.
(e) To the knowledge of Seller, Seller has not treated, stored,
disposed of, arranged for or permitted the disposal of, transported,
handled, or released any substance, including without limitation any
Hazardous Substance, or owned or operated any property or facility (and no
such property or facility is contaminated by any such substance) in a
manner that has given or would reasonably by expected to give rise to
material Liabilities under Environmental Laws.
III.12 Labor Relations. Except as set forth in Schedule 3.12 attached,
Seller is not a party to or bound by any collective bargaining agreement or
any other agreement with a labor union, and, to Seller's knowledge, there
has been no effort by any labor union during the 24 months prior to the
date hereof to organize any employees of Seller into one or more collective
bargaining units. There is not pending or, to the best of Seller's
knowledge, threatened any labor dispute, strike or work stoppage which
affects or which may affect the Business or which may interfere with its
continued operation. During the 24 months prior to the date hereof, there
has been no strike, walkout or work stoppage involving any of the employees
of Seller.
III.13 Employees.
(a) Prior to the date hereof, Seller has provided to Buyer a complete
and accurate list of the names of all individuals who are employees of
Seller as of August 31, 1999, specifying:
(i) with respect to the hourly employees, the rate of hourly pay,
the date and amount of last increase in rate of pay, and whether or not
such employee is absent for any reason such as lay-off, leave of absence
or workers' compensation;
(ii) with respect to salaried employees, the length of service,
title, rate of base salary for each such employee and the date and amount
of last increase in rate of pay; and
(iii) with respect to each employee listed, the employer, the date
of hire and a list of all agreements affecting such person's employment,
including a description of the material compensation arrangements.
(b) There are no complaints or proceedings of any kind involving
Seller before any Authority, except as disclosed on Schedule 3.13(b). There
are no outstanding orders or charges against Seller in respect of any
employee of Seller under any Applicable Laws relating to health and safety.
(c) To the knowledge of Seller, all current employees of Seller are
lawfully authorized to work in the jurisdictions in which they are working
according to applicable immigration laws.
III.14 Product Warranties. Except as set forth on Schedule 3.14, Seller
has not extended to its Customers any product warranties, indemnities or
guarantees except those imposed by Applicable Law, or in the Assumed
Contracts.
III.15 Leased Property.
(a) Schedule 3.15 sets forth a list of all Leased Property and
includes an accurate description thereof. Seller is the sole person in
possession of the premises of all Leased Property, and each lease related to
the Leased Property is valid, unencumbered (except for Permitted Liens) and
without any default thereunder by Seller.
(b) Seller neither has received notice of nor has any knowledge of
any condemnation, zoning, environmental or other land use regulation
proceedings, either instituted or planned to be instituted, that would
detrimentally affect the use, occupancy or operation of the Leased Property
for their respective current uses or affect the ability of Buyer to continue
to use the Leased Property for such uses. All necessary licenses, permits
and approvals for Seller's current use of each Leased Property, including
certificates of occupancy, have been issued, are in possession of such
Seller and remain in full force and effect.
(c) Seller has delivered to Buyer true, complete and correct copies
of all leases, as amended, for the Leased Property, together with all other
agreements relating thereto, including but not limited to rights of first
refusal, subordination agreements, and non-disturbance agreements.
(d) Neither Seller, nor to Seller's knowledge, any other parties to
the leases are in material default in the performance, observance or
fulfillment of any obligation, covenant or condition contained in any
lease covering the Leased Property.
III.16 Intellectual Property. All Trademarks, Copyrights and other
Intellectual Property used or held for use in connection with the Business
are listed in Schedule 3.16. The Intellectual Property comprises all trade
or brand names, business names, trademarks, trade dress, service marks,
copyrights, patents, trade secrets, know-how, inventions, designs and other
industrial or intellectual property currently used to conduct the Business.
Seller beneficially owns all rights to such Intellectual Property free and
clear of all Liens, and Seller has not granted to any third party any
license or other right to any of such Intellectual Property and Seller is
not a party to or bound by any Contract or any other obligation whatsoever
that limits or impairs its ability to use, sell, transfer, assign or convey
the Intellectual Property. None of the trade or brand names, business
names, trademarks, trade dress or service marks that constitute the
Intellectual Property are being used by Seller or any affiliate thereof in
connection with conducting any business other than the Business. No claim
is pending or, to the knowledge of Seller, threatened against Seller
asserting that its use of the Intellectual Property infringes the patent,
trademark or copyright rights of any person and, to the knowledge of
Seller, the use of such Intellectual Property does not infringe any such
rights. To the knowledge of Seller, no other person or entity is infringing
Seller's rights in its Intellectual Property. There is, to the knowledge
of Seller, no reasonable basis upon which any claim may be asserted against
Seller for infringement or misappropriation of any domestic or foreign
letters patent, patents, patent applications, patent licenses, software
licenses, and know-how licenses, trade names, trademark registrations and
applications, trademarks, service marks, copyrights, copyright registrations
or applications, trade secrets, technical knowledge, know-how or other
confidential proprietary information. All letters patent, registration and
certificates issued by any Authority relating to any of the Intellectual
Property and all licenses and other agreements pursuant to which Seller
uses any of the Intellectual Property are valid and subsisting, have been
properly maintained and neither Seller, nor, to the knowledge of Seller,
any other person, is in default or violation thereunder.
III.17 Entire Business. Except for the Excluded Assets, the Purchased
Assets include all the properties, assets and rights necessary for the
operation of the Business as presently conducted by Seller.
III.18 Customers and Suppliers. Schedule 3.18 sets forth a list of
(i) the ten largest customers of the Business based on sales during the
fiscal year 1998 and (ii) the ten largest customers of the Business during
the 12 months ended April 30, 1999, showing the approximate total sales
to each such customer during such periods, (iii) the ten largest suppliers
of the Business based on purchases during the fiscal year 1998, and (iv)
the ten largest suppliers of the Business based on purchases during the 12
months ended April 30, 1999, showing the approximate total purchases by
the Business from each such supplier during such periods.
III.19 Brokers' Fees. Neither NCH nor Seller has engaged the services
of any broker, finder or agent in connection with the transactions
contemplated hereby, and no obligation of Buyer to any such party will
arise as a result of this Agreement and the transactions contemplated
hereby.
III.20 Inventory. The Inventory included as part of the Purchased
Assets are of good and reliable quality, free from damage or defects and
except for the Reserve Inventory, are fit for resale in the ordinary course
of business at normal prices.
III.21 Accounts Receivable. All accounts receivable of Seller have
arisen from bona fide transactions in the ordinary course of business and
reflect in all material respects amounts properly due and owed to Seller.
To Seller's knowledge, none of the Accounts Receivable are subject to any
counterclaim, right of offset, defense or other adverse interest whatsoever.
III.22 No Undisclosed Liabilities. Except as otherwise expressly
disclosed in this Agreement, the Assumed Contracts or the leases covering
the Leased Property, or reflected or reserved against in the Financial
Statements or as to matters covered by Sections 3.10, 3.11, 3.14, or 3.16,
Seller has no debts, liabilities or obligations of any nature (whether
accrued or unaccrued, fixed, contingent or otherwise), except accounts
payable to trade creditors and other liabilities or obligations incurred
in the ordinary course of business since the date of the Financial
Statements and those liabilities which are unknown or not required by GAAP
to be accrued in the Financial Statements.
III.23 Year 2000 Compliance. To Seller's knowledge, any software
programs to be transferred to Buyer as part of the Purchased Assets (other
than Inventory) are Year 2000 Compliant. For purposes of this Agreement
"Year 2000 Compliant" shall mean such software will, in all material
respects, (i) accurately address, present, produce, store and calculate
data involving dates beginning with January 1, 2000 and will not produce
abnormally ending or incorrect results involving such dates as used in any
forward or regression date based function; and (ii) provide that all "date"
related functionalities and data fields include the indication of century
and millennium, and will perform calculations which involve a four-digit
year field. The foregoing Year 2000 Compliant warranty of Seller shall not
apply to Year 2000 problems caused by such external sources, or if a any
software program has been modified subsequent to its transfer and delivery
to Buyer, or if such software is used in a system or with other products
which are not Year 2000 Compliant.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
In order to induce NCH and Seller to enter into this Agreement and to
consummate the transactions contemplated hereunder, Buyer represents and
warrants to NCH and Seller as follows:
IV.1 Organization. Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the State of Arkansas, and
has full corporate power and authority to own or lease its properties and to
carry on its business as it is presently being conducted.
IV.2 Corporate Authorization. Buyer has the corporate power and
authority to enter into this Agreement and to perform its obligations
hereunder. This Agreement has been duly authorized, executed and delivered
by, and constitutes a valid and binding obligation of, Buyer enforceable
against Buyer in accordance with its terms (except as enforceability may be
limited by applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium or similar laws affecting creditors' rights
generally or by the principles governing the availability of equitable
remedies). The execution, delivery and performance of this Agreement do
not and will not contravene any provisions of Buyer's Articles of
Incorporation or By-laws or, any of the terms, conditions, or provisions
of any agreement or instrument to which Buyer is a party and will not
result in a violation of any Applicable Law. Except for the filing of a
premerger notification report under the HSR Act, and the expiration or
termination of any waiting period in connection therewith, no
authorization, consent, order, permit or approval of, notice to, or
filing with any Person, including any Authority, is necessary to be
obtained or made for the execution, delivery and performance of this
Agreement.
IV.3 Brokers' Fees. Buyer has not engaged the services of any
broker, finder or agent in connection with the transactions contemplated
hereby, and no obligation of Seller or NCH to any such party will arise
as a result of this Agreement or the transactions contemplated hereby.
IV.4 Financing. Buyer has obtained a financing commitment from Bank
of America for a senior lending facility under which Buyer contemplates that
it will receive the debt financing for the transactions contemplated hereby
(the "Financing Facilities). As of the date of this Agreement and subject
to the conditions set forth in the commitment as a condition to funding,
there is sufficient capacity under the Financing Facilities for the
borrowing of funds thereunder to pay or cause to be paid the Base Purchase
Price and any adjustment thereto and all related fees and expenses. As of
the date of this Agreement, Buyer is not aware of any facts or circumstances
that create a reasonable basis for Buyer to believe that Buyer will not be
able to obtain financing in accordance with the terms of the Financing
Facilities.
ARTICLE V
ADDITIONAL COVENANTS OF SELLER
V.1 Seller covenants and agrees that, except as otherwise provided
in this Agreement or consented to in writing by Buyer, between the date of
this Agreement and the Closing:
(a Seller will use and will cause NCH to use its reasonable
efforts to take all action and to do all things necessary in order to
consummate and make effective the transactions contemplated by this
Agreement and to cause to be satisfied as soon as practicable and prior
to the Closing Date all of the conditions set forth herein to the
obligation of Buyer pursuant to this Agreement to the extent that
the fulfillment of such is within the control of NCH or Seller.
(b Seller shall use and will cause NCH to use reasonable
efforts (i) to file as soon as practicable with the Federal Trade
Commission (the "FTC") and the Antitrust Division of the Department of
Justice (the "Antitrust Division") such notifications and other
information and documents as may be required under the HSR Act, in
order to permit consummation of the transactions contemplated by this
Agreement, and (ii) to respond as promptly as practicable to any
inquiries received from the FTC and the Antitrust Division for
additional information or documentation related thereto. Seller
shall reimburse Buyer for one-half of the filing fees paid by Buyer
to the FTC in connection with the filings to be made by Buyer
pursuant to Section 6.1(b).
(c Seller will conduct the Business and operations thereof
in the manner in which the same have heretofore been conducted, and it
will use its reasonable efforts to (i preserve its current business
relationships with its customers and suppliers, (ii) keep and maintain
all of the Purchased Assets in good working order and condition, normal
wear and tear excepted, and in, suitable and fit condition for the uses
and purposes for which they are currently being used, and (iii) preserve
the goodwill of the Business.
(d From and after the execution and delivery of this Agreement,
Seller will afford to the authorized representatives of Buyer access,
during normal business hours (or such other times as may be agreed by
the parties hereto) and upon reasonable notice, to Seller's books and
records relating to the Business, and Seller will furnish to such
representatives during such period all such information relating to the
foregoing investigation as Buyer may reasonably request; provided that
any furnishing of such information to Buyer and any investigation by
Buyer shall not affect the right of Buyer to rely on the representations
and warranties made by Seller in or pursuant to this Agreement, and
provided further that Buyer will hold in confidence all documents and
information concerning Seller so furnished in accordance with the
Confidentiality Agreement.
(e From and after the execution and delivery of this Agreement,
Seller will use its reasonable efforts to obtain all consents of any of
the lessors under the leases for the Leased Property and all other
material third party consents required or otherwise necessary in
connection with the consummation of the transactions contemplated
herein; provided, that Seller will not be required to obtain or provide
any notices, consents or approvals under any Vendor's Contracts.
(f At or prior to the Closing, Seller shall cause all Seller's
Liens to be released in full.
(g Seller shall notify Buyer, and Buyer shall notify Seller, of
any litigation, arbitration or administrative proceeding pending, or,
to its knowledge, threatened against Seller or Buyer, as the case may
be, which challenges the transactions contemplated hereby.
(h Seller shall give prompt written notice to Buyer of (i) the
occurrence, or failure to occur, of any event of which it becomes aware
that has caused or that would be likely to cause any representation or
warranty of Seller contained in this Agreement to be untrue or
inaccurate in any material respect at any time from the date hereof to
the Closing Date, and (ii) the failure of Seller to comply with or
satisfy in any material respect any covenant, condition, or agreement
to be complied with or satisfied by it hereunder. No such notification
shall affect the representations or warranties of the parties or the
conditions to their respective obligations hereunder.
(i From the date hereof through the Closing Date, Seller shall
maintain its Inventory in the ordinary course of business, consistent
with good and sound business practices and in a manner consistent in
all material respects with past practices, and will not take any
extraordinary action with respect to its Inventory without the prior
written consent of Buyer.
ARTICLE VI
ADDITIONAL COVENANTS OF BUYER
VI.1 Performance of Conditions. Buyer covenants and agrees that
except as otherwise provided in this Agreement or consented to in writing by
Seller between the date of this Agreement and the Closing:
(a Buyer will use its reasonable efforts to take all action and
to do all things necessary in order to consummate and make effective
the transactions contemplated by this Agreement and to cause to be
satisfied as soon as practicable and prior to the Closing Date all of
the conditions set forth herein to the obligations of NCH and Seller
pursuant to this Agreement to the extent that the fulfillment of such
is within the control of Buyer.
(b Buyer shall use reasonable efforts (i) to file as soon as
practicable with the FTC and the Antitrust Division such notifications
and other information and documents as may be required under the HSR
Act, in order to permit consummation of the transactions contemplated
by this Agreement, and (ii) to respond as promptly as practicable to
any inquiries received from the FTC and the Antitrust Division for
additional information or documentation related thereto.
VI.2 Financing. Buyer shall (a) use reasonable efforts to obtain
the debt financing contemplated by Section 4.4 in accordance with the
terms and conditions of the Financing Facilities necessary to fund its
obligations hereunder, and (b) not voluntarily take any action which would
have a material adverse effect on its ability to obtain such debt financing.
VI.3 No Disclosure. Buyer will not disclose the existence of or any
term or condition of this Agreement to any Person without the written
consent of NCH.
ARTICLE VII
OTHER COVENANTS
VII.1 Bulk Sales Law. Buyer hereby waives compliance by NCH and
Seller with any bulk sales law applicable to the transitions
contemplated hereby.
VII.2 Payments Received. Seller and Buyer agree that after the
Closing they will hold and will promptly transfer and deliver to the
other, from time to time as and when received by either of them, any cash,
checks with appropriate endorsements (using their reasonable efforts not
to convert such checks into cash), or other property that they may
receive on or after the Closing which properly belongs to the other party.
VII.3 Notice and Remittance of Payments Received. As may be requested
by Buyer, after the Closing, Seller shall give notice of the Closing to
the customers of the Business and shall instruct such customers to remit to
Buyer all payments thereafter made in respect of Accounts Receivable. On
and after the Closing Date, Seller shall, and shall cause its Affiliates to,
remit to Buyer on the 1st and 15th day of each month all amounts received
by Seller, or any of its Affiliates, relating to any Accounts Receivable,
together with the corresponding invoice or payment statement.
VII.4 Additional Actions. If at any time after the Closing Date, any
further action is necessary or desirable to carry out the purposes of this
Agreement, the parties to this Agreement and their duly authorized
representatives shall use reasonable efforts to take all such action. At
the end of each calendar quarter, commencing on December 31, 1999, (a) NCH
and Seller shall submit to Buyer statements or other documentation
evidencing (i) all payments made by NCH or Seller on Buyer's behalf in
connection with any of the Assumed Liabilities and (ii) all amounts received
by NCH or Seller on behalf of Buyer in connection with any of the Purchased
Assets, and (b) Buyer shall submit to NCH and Seller statements or other
documentation evidencing (i) all payments made by Buyer on NCH's or Seller's
behalf in connection with any of the Excluded Liabilities and (ii) all
amounts received by Buyer on behalf of NCH or Seller in connection with
any of the Excluded Assets. NCH shall remit or cause to be remitted to
Buyer any amounts received by NCH or Seller in connection with any of the
Purchased Assets or any payments made by Buyer on NCH's or Seller's behalf
in connection with any of the Excluded Liabilities, and Buyer shall remit
or cause to be remitted to NCH any amounts received by Buyer in connection
with any of the Excluded Assets or any payments made by NCH or Seller on
Buyer's behalf in connection with any of the Assumed Liabilities.
VII.5 Reserve Inventory.
(a From and after the Closing Date, Seller shall pay to Buyer the
amounts as determined in accordance with this Section 7.5 (the "Deferred
Purchase Price"), and Buyer shall hold and offer for sale the Reserve
Inventory for a period ending three (3) years from and after the last
day of the month in which the Closing Date occurred (the "Deferred
Payment Term"). The items of Like Inventory shall be offered for sale
by Buyer and each of its Affiliates who are, from time to time, engaged
in the Business, and will be deemed sold, on a FIFO basis as sales of
Like Inventory are made in the Business. For purposes of this Section
7.5, sales shall include a return of Reserve Inventory or Like Inventory
to a vendor for credit and the amount of the proceeds realized from any
such sale shall be the amount of such credit.
(b Buyer shall, and shall cause its Affiliates to, maintain
proper and complete records regarding the Reserve Inventory, Like
Inventory and sales transactions and NCH (or its authorized
representative), with reasonable notice, shall have the right, from time
to time, to audit such records and Buyer shall, and shall cause its
Affiliates to, fully cooperate in connection with any such audit.
(c Within sixty (60) days of the end of each twelve-month period
occurring during the Deferred Payment Term (commencing twelve months
after the last day of the month in which the Closing Date occurred)
(the "Payment Date"), Buyer shall remit or cause to be remitted to NCH
for items of Reserve Inventory sold or deemed sold by Buyer or its
Affiliates prior to the immediately preceding twelve-month period
(commencing twelve months after the last day of the month in which
the Closing Date occurred), (i) at a price above cost, the Seller's
cost of the Reserve Inventory sold or deemed sold, less five percent
(5%) of the gross proceeds realized from such sale or deemed sale as
Buyer's cost of handling such Reserve Inventory, or (ii) at a price
equal to or below cost, the gross proceeds realized from the sale or
deemed sale of the Reserve Inventory less ten percent (10%) of the
gross proceeds realized from such sale or deemed sale as Buyer's cost
of handling such Reserve Inventory.
(d Buyer shall use, and shall cause all of its Affiliates who
are from time to time engaged in the Business to use, their respective
normal selling and promotional activities to market and sell the
Reserve Inventory and the Like Inventory.
(e On each Payment Date, Buyer shall deliver to NCH a full
accounting setting forth the date, price and quantity of all items of
Reserve Inventory sold or deemed sold during the relevant period together
with an inventory of the remaining items of Reserve Inventory still held
by Buyer or its Affiliates as of the immediately preceding twelve-month
period (commencing twelve months after the last day of the month in which
the Closing Date occurred) (an "Annual Statement"). The Annual Statement
shall be prepared based upon the books and records maintained by Buyer
and its Affiliates in the ordinary course of business.
(f Within sixty (60) days after receipt of the Annual Statement,
NCH may notify Buyer that it objects to the computation contained
therein, specifying the basis for such objection. If NCH and Seller are
unable to agree upon the Annual Statement within sixty (60) days after
any such notification has been given by NCH stating NCH's objections to
the Annual Statement or within a mutually agreed extended time period,
the controversy shall be referred to an independent certified public
accounting firm mutually acceptable to the parties for a final
determination thereof. In the event the parties are unable to agree on
an independent certified public accounting firm, then the names of the
Big 5 national accounting firms (other than those that have provided
services to either party within the twelve month period preceding the
Closing Date) shall be placed in a blind pool and NCH shall draw (in
NCH's presence) a name from the pool identifying the accounting firm to
make a final determination with respect to the Annual Statement. Such
determination shall be binding upon the parties, absent manifest error.
The parties shall share equally the fees and expenses of such firm.
(g Within sixty (60) days after receipt of the Annual Statement,
NCH may make an offer to purchase the remaining items of Reserve
Inventory from Buyer (the "Offer to Purchase") by delivery written
notice to Buyer (the "Purchase Notice") stating NCH's proposed purchase
price. Unless Buyer, within thirty (30) days after receipt of the
Purchase Notice, notifies NCH of its acceptance of the Offer to Purchase
contained therein, Buyer shall be deemed to have rejected the Offer to
Purchase and the Offer to Purchase shall be deemed withdrawn by NCH.
(h NCH shall have the right to terminate the Deferred Payment
Term at any time upon 90 days' prior notice. Upon termination or
expiration of the Deferred Payment Term Buyer shall or shall cause all
Reserve Inventory not sold or deemed sold to be promptly assigned and
delivered to NCH free and clear of all Liens and at no additional cost
to NCH.
VII.6 Hold Area Inventory.
(a For a period of eighteen (18) months from and after the
Closing Date (the "Hold Area Term"), Buyer shall use, and shall cause
all of its Affiliates who are from time to time engaged in the Business
to use their reasonable business efforts to sell the Hold Area Inventory,
in accordance with the terms and conditions of the Hold Area Purchase
Commitments.
(b Upon termination of the Hold Area Term, NCH shall repurchase
at price equal to the book value thereof any unsold Hold Area Inventory
and Buyer shall or shall cause any such Hold Area Inventory to be
promptly delivered to NCH free and clear of all Liens, together with the
assignment from Buyer to NCH of any unfulfilled Hold Area Purchaser
Commitments. Notwithstanding the provisions of Section 2.13, NCH shall
have the right to distribute, market, sell or otherwise dispose of any
repurchased Hold Area Inventory in any way and in NCH's sole discretion.
VII.7 Offers of Employment.
(a Buyer shall extend a sufficient number of offers of
employment to employees of Seller under terms such that the termination
of employees of Seller as a result of the transactions contemplated by
this Agreement will not constitutes a "plant closing" or "mass layoff",
or otherwise create obligations for Seller, under the Worker Adjustment
and Retaining Notification (the "WARN Act") or any similar state law.
In the event that Buyer's offers of employment to employees of Seller
are not sufficient either in number or terms such that obligations are
imposed on Seller under the WARN Act or a similar state law, then Buyer
hereby assumes all liability for any such obligations of Seller arising
under the WARN Act or any similar state law.
(b Except as contemplated by Section 7.7(a), any offers of
employment so extended by Buyer shall be on such terms and conditions
that Buyer shall determine in its sole discretion. Seller waives any
claims against Buyer and any employees of Seller who are extended an
offer of employment by Buyer arising from such employment by Buyer
including any claims arising under any employment agreement,
confidentiality agreement or non-competition agreement between such
Person and Seller.
(c Seller shall not directly or indirectly in any way
discourage or influence or attempt to discourage or influence any of
its employees with respect to such employee's acceptance of any offer
of employment to be made by Buyer.
(d Subsequent to the Closing, Seller shall remain liable for
(i) all accrued but unpaid wages, salary or other compensation,
including all incentive compensation to the extent accrued, in accordance
with GAAP, through and as of the Effective Time, (ii) all vacation
benefits and vacation pay, in each case to the extent that such are
deemed owing or otherwise accrued as of the Effective Time and (iii) all
severance pay, if any, and other amounts or benefit due, in respect
of all employees of Seller, including past employees and contract
labor or employees of Seller.
(e Except as provided in the last sentence hereof, Seller
hereby retains liability for and agrees to pay, indemnify, defend and
hold Buyer harmless from and against and with respect to any and all
losses, liabilities, claims, obligations, costs, damages, and expenses
that arise under the Consolidated Omnibus Budget Reconciliation Act of
1985 ("COBRA") and the Internal Revenue Code of 1986 (the "Code")
imposed upon, incurred or assessed by reason of or relating to any
failure by Seller to comply with the continuation health care coverage
requirements of COBRA or Sections 601 through 608 of ERISA which occur
with respect to any current or prior employee of Seller or any qualified
beneficiary of such employee (as defined in COBRA). Except as provided
in the last sentence hereof, Seller agrees to provide to all its
employees terminated by Seller in connection with the transactions
described in this Agreement with all information that is necessary or
required under the continuation health care requirements of COBRA, as
such requirements have applied to any group health plan maintained by or
for Seller, with respect to any current or former employee of Seller or
any spouse, former spouse, dependent child or former dependent child of
any such employee. Such information shall include, without limitation,
the identification of all covered employees, as defined in COBRA, and
their qualified beneficiaries, as defined in COBRA, the identification
of all qualifying events with respect to which such covered employees
are qualified beneficiaries, as defined in COBRA, and information
otherwise demonstrating compliance with all the continuation health
care coverage requirements of COBRA or in Sections 601-608 of ERISA.
Notwithstanding the above, Seller shall not retain any liability and
Buyer shall pay, indemnify, defend and hold Seller harmless from and
against and with respect to any and all losses, liabilities, claims,
obligations, costs, damages, and expenses of Seller that arise under
COBRA with respect to any person to whom an offer of employment has
been extended by Buyer pursuant to Section 7.7(a) and accepted by such
person.
VII.8 Termination by Buyer After Closing. Buyer shall assume
responsibility for all severance pay and other amounts or benefits due
any employee of Buyer whose employment is terminated by Buyer after the
Closing.
ARTICLE VIII
CONDITIONS
VIII.1 Conditions to Each Party's Obligation to Close. The obligations
of Buyer, NCH and Seller to consummate the transactions contemplated
hereby shall be subject to the satisfaction, at or before the Closing, of
the following conditions:
(a All authorizations, consents, orders, or approvals of, or
declarations or filings with, or expirations of waiting periods
imposed by, any Authority necessary for the consummation of the
transactions contemplated by this Agreement shall have been filed,
occurred, or been obtained (including expiration of the applicable
waiting period under the HSR Act).
(b No temporary restraining order, preliminary or permanent
injunction, or other order issued by any court of competent
jurisdiction or other legal restraint or prohibition preventing the
consummation of the transactions contemplated hereby shall be in effect.
(c No action shall have been taken nor any Applicable Law shall
have been enacted by any Authority that makes the consummation of the
transactions contemplated hereby illegal.
VIII.2 Conditions to Buyer's Obligation to Close. The obligation of
Buyer to consummate the transactions contemplated hereby shall be subject
to the satisfaction (or waiver by Buyer), at or before the Closing, of the
following conditions:
(a Seller and NCH shall have performed in all material respects
each of the covenants and obligations required under this Agreement to
be respectively performed by them at or prior to the Closing and each of
the representations and warranties of Seller and NCH contained herein
shall have been true and correct in all material respects when made and
shall be true and correct in all material respects at and as of the
Closing Date with the same force and effect as if such representations
and warranties were made at and as of such time, except that any
representation or warranty that by its terms is stated to be true as of
a particular date need be true and correct in all material respects only
as of such date; provided that any such representation or warranty that
by its terms is qualified by a materiality standard or a Material
Adverse Effect qualification shall not be further qualified by the
above reference to "all material respects." Seller shall have delivered
to Buyer a certificate, dated the Closing Date and signed by an officer
of Seller, as to the satisfaction of the above conditions.
(b Seller and NCH shall have delivered to Buyer the Closing
documents referred to in Sections 2.11(a) and 2.11(b).
(c Each of the third party consents listed on Schedule 3.2
shall have been obtained except where the failure to obtain such
consent would not result in a Material Adverse Effect.
(d Buyer shall have received the debt financing for the
transaction contemplated herein pursuant to the terms of the Financing
Facilities.
(e There shall not have occurred any Material Adverse Effect.
VIII.3 Conditions to Seller's Obligation to Close. The obligation of
Seller and NCH to consummate the transactions contemplated hereby shall be
subject to the satisfaction (or waiver by Seller), at or before
the Closing, of the following conditions:
(a Buyer shall have performed in all material respects each of
the covenants and the obligations required under this Agreement to be
performed by it at or prior to the Closing and each of the
representations and warranties of Buyer contained herein shall have been
true and correct in all material respects when made and shall be true
and correct in all material respects at and as of the Closing Date with
the same force and effect as if such representations and warranties were
made at and as of such time, except that any representation or warranty
that by its terms is stated to be true as of a particular date need be
true and correct in all material respects only as of such date; provided
that any such representation or warranty that by its terms is qualified
by a materiality standard of a Material Adverse Effect qualification
shall not be further qualified by the above reference to "all material
respects". Buyer shall have delivered to Seller a certificate, dated
the Closing Date and signed by an officer of Buyer, as to the
satisfaction of the above conditions.
(b Buyer shall have delivered to Seller the Closing documents
and tendered payment of the amounts referred to in Section 2.12.
ARTICLE IX
SURVIVAL AND REMEDY; INDEMNIFICATION
IX.1 Obligation of Parties to Indemnify.
(a Indemnification by Seller. Subject to the limitations set
forth in this Article 9, Seller and NCH shall, jointly and severally,
indemnify, defend and hold harmless Buyer and its Affiliates from and
against any and all claims, losses, damages, liabilities, deficiencies,
obligations or expenses of any kind or type including reasonable
third-party legal fees and expenses (collectively, "Losses") to the
extent arising or resulting from any of the following:
(i the failure of Seller to pay or otherwise discharge when
due and payable the Retained Liabilities;
(ii the material nonfulfillment or nonperformance by Seller
or NCH of any agreement or covenant of Seller or NCH hereunder; and
(iii the material inaccuracy or breach of any representation
or warranty made by Seller or NCH herein.
(b Indemnification by Buyer. Subject to the limitations set
forth in this Article 9, Buyer shall indemnify, defend and hold
harmless Seller and NCH from and against any and all Losses to the
extent arising or resulting from any of the following:
(i the failure of Buyer to pay or otherwise discharge when
due and payable the Assumed Liabilities;
(ii the material non-fulfillment or non-performance by Buyer
of any agreement or covenant of Buyer hereunder;
(iii the material inaccuracy or breach of any representation
or warranty made by Buyer herein.
IX.2 Indemnification Procedures - Third Party Claims.
(a If any party (the "Indemnified Party") receives written
notice of the commencement of any action or proceeding or the assertion
of any claim by a third party or the imposition of any penalty or
assessment for which indemnity may be sought under this Article IX (a
"Third Party Claim"), and such Indemnified Party intends to seek
indemnity pursuant to this Article IX, the Indemnified Party shall
promptly provide the other party (the "Indemnifying Party") with notice
of such Third Party Claim. The Indemnifying Party shall be entitled to
participate in or, at its option, assume the defense, appeal or
settlement of such Third Party Claim. Such defense or settlement shall
be conducted through counsel selected by the Indemnifying Party and
approved by the Indemnified Party, which approval shall not be
unreasonably withheld or delayed, and the Indemnified Party shall fully
cooperate with the Indemnifying Party in connection therewith. In the
event that the Indemnifying Party fails to assume the defense or
settlement of any Third Party Claim within 20 days (or such shorter
period if a response is required prior to the expiration of said 20 days
in order to protect the Indemnified Party's interests) after receipt of
notice thereof from the Indemnified Party, the Indemnified Party shall
have the right to undertake the defense, appeal or settlement of such
Third Party Claim at the expense and for the account of the Indemnifying
Party.
(b The Indemnified Party shall be entitled, at its own expense,
to participate in the defense of such Third Party Claim (provided,
however, that the Indemnifying Parties shall pay the attorneys' fees of
the Indemnified Party if (i) the employment of separate counsel shall
have been authorized in writing by any such Indemnifying Party in
connection with the defense of such Third Party Claim, (ii) the
Indemnifying Parties shall not have employed counsel reasonably
satisfactory to the Indemnified Party to have charge of such Third
Party Claim, (iii) the Indemnified Party shall have reasonably
concluded that there may be defenses available to such Indemnified
Party that are different from or additional to those available to
the Indemnifying Party, or (iv) the Indemnified Party's counsel
shall have advised the Indemnified Party in writing, with a copy
delivered to the Indemnifying Party, that there is a conflict of
interest that could make it inappropriate under applicable standards of
professional conduct to have common counsel).
(c The Indemnifying Party shall obtain the prior written
approval of the Indemnified Party (which approval shall not be
unreasonably withheld) before entering into or making any settlement,
compromise, admission, or acknowledgment of the validity of any Third
Party action or any liability in respect thereof if, pursuant to or as a
result of such settlement, compromise, admission, or acknowledgment,
injunctive or other equitable relief would be imposed against the
Indemnified Party or if, in the opinion of the Indemnified Party, such
settlement, compromise, admission, or acknowledgment could have a
material adverse effect on its business.
(d No Indemnifying Party shall consent to the entry of any
judgment or enter into any settlement that does not include as an
unconditional term thereof the giving by each claimant or plaintiff to
each Indemnified Party of a release from all liability in respect of such
third-party action.
(e Notwithstanding Section 9.2(a), the Indemnifying Party shall
not be entitled to control (but shall be entitled to participate at its
own expense in the defense of), and the Indemnified Party shall be
entitled to have sole control over, the defense or settlement,
compromise, admission, or acknowledgment of any Third Party Claim (i) as
to which the Indemnifying Party fails to assume the defense within 20
days after receipt of notice thereof from the Indemnified Party or (ii)
to the extent the Third Party Claim seeks an order, injunction, or other
equitable relief against the Indemnified Party which, if successful,
would materially adversely affect the business, operations, assets, or
financial condition of the Indemnified Party; provided, however, that
the Indemnified Party shall make no settlement, compromise, admission,
or acknowledgment that would give rise to liability on the part of any
Indemnifying Party without the prior written consent of such Indemnifying
Party.
IX.3 Direct Claims. In any case in which an Indemnified Party seeks
indemnification hereunder which is not subject to Section 9.2 because no
Third Party Claim is involved, the Indemnified Party shall notify the
Indemnifying Party in writing of any Losses which such Indemnified Party
claims are subject to indemnification under the terms hereof. Subject to
the limitations set forth in this Article IX, the failure of the
Indemnified Party to exercise promptness in such notification shall not
amount to a waiver of such claim unless the resulting delay materially
prejudices the position of the Indemnifying Party with respect to such
claim.
IX.4 Survival of Covenants, Representations and Warranties. The
covenants, representations and warranties contained in this Agreement and
in all certificates and documents delivered pursuant to or contemplated by
this Agreement shall survive the Closing and shall continue for the
applicable limitation period notwithstanding such Closing or any
investigation made by or on behalf of the party entitled to the benefit
thereof or any knowledge of such party; provided, however, that the
representations and warranties set out in Article III and Article IV and
the corresponding representations and warranties set out or incorporated
in the certificates to be delivered pursuant to Section 8.2(a) and Section
8.3(a) (other than those contained in Sections 3.2 (only as to the HSR Act),
3.3 and 3.11, which shall each survive indefinitely, and those contained in
Section 3.7, which shall each survive as described below) shall terminate
as of 18 months from the Closing Date. The representations and warranties
contained in Section 3.7 shall, in respect of any particular Tax, survive
the Closing and continue in full force and effect for the benefit of Buyer
until the expiry of the period during which any Authority may, under any
Applicable Law, assess, re-assess or otherwise levy such Tax. Any claim
by Buyer in respect of such representations and warranties shall be made
in writing within 90 days from the expiration of such period. Any claim
for breach of a representation or warranty, to be effective, must be
asserted in writing prior to the applicable expiration date.
IX.5 Liability Cap.
(a From and after the Closing no claim for indemnification may be
made under Section 9.1(a) unless and until the aggregate amount of Losses
of the Indemnified Party that may be claimed under Section 9.1(a) exceeds
$200,000, and the Indemnifying Party shall be liable to the Indemnified
Party under Section 9.1(a) only to the extent such Losses suffered by the
Indemnified Party exceed $200,000; provided, however, that indemnification
claims by Buyer with respect to Sections 3.2 (only as to the HSR Act), 3.3,
3.8 and 3.12 (x) shall not be subject to this limitation and (y) shall not
be applied towards the aggregate amount of Losses in determining whether
this limitation applies with respect to indemnification claims by Buyer in
respect of any other provision of this Agreement; provided further,
indemnification claims by Buyer with respect to the last sentence of Section
3.21 may be made only to the extent that Losses incurred by the Indemnified
Party as a result of a breach thereof exceed the Accounts Receivable Reserve
determined as of the Effective Date, and any such indemnification claim
shall not be applied towards the aggregate amount of Losses in determining
whether the above limitation applies with respect to indemnification claims
by Buyer in respect of any other provision of this Agreement. No Losses
which involve less than $10,000 shall be included in determining whether
the amount of such indemnification exceeds the applicable threshold amount.
For purposes of determining whether a Loss involves at least $10,000, all
Losses arising out of or related to the same event or circumstance or a
series of related events or circumstances shall be treated as one Loss.
(b In addition, notwithstanding anything to the contrary contained
herein, in no event shall the liability of Seller and NCH to any Person
under this Article IX or otherwise exceed the amount of the Final Purchase
Price.
IX.6 Transfer Taxes; Filing Fees. The parties hereto agree that any
payment of an indemnification claim made hereunder will be treated by the
parties on their Tax Returns as an adjustment to the Purchase Price.
IX.7 Tax Related Adjustments. The parties hereto agree that any
payment of an indemnification claim made hereunder will be treated by the
parties on their Tax Returns as an adjustment to the Purchase Price.
Notwithstanding such treatment by the parties, the amount of any
indemnification due hereunder shall be fairly and equitably reduced (or
increased) by the amount of the actual reduction (or increase) in liability
for Taxes of the Indemnified Party after giving effect to the incurrence by
the Indemnified Party of the liability giving rise to the claim for
indemnification, the payment by the Indemnified Party of such claim, and
the receipt by the Indemnified Party of any indemnity payment with respect
to such claim. In determining the actual reduction (or increase) in
liability for Taxes payable by the Indemnified Party or any Affiliate
thereof, the parties shall use an assumed marginal tax rate equal to the
highest marginal tax rate then in effect for corporate taxpayers in the
relevant jurisdiction.
ARTICLE X
TERMINATION
X.1 Termination.
(a This Agreement may be terminated and the transactions
contemplated hereby abandoned at any time prior to the Closing:
(i by mutual consent of Buyer and Seller;
(ii by Buyer pursuant to the provisions of Section 2.6(c);
(iii by either Buyer or Seller if the Closing shall not have
occurred by December 15, 1999, (as such date may be extended by the
10 day cure period provided for in clause (v) below); provided,
however, that this right to terminate this Agreement shall not be
available to any party whose breach of this Agreement has been the
cause of, or resulted in, the failure of the Closing to occur on or
before such date;
(iv by either Buyer or Seller if a court of competent
jurisdiction or other Authority shall have issued an order, decree,
or ruling or taken any other action, in each case permanently
restraining, enjoining, or otherwise prohibiting the transactions
contemplated by this Agreement, and such order, decree, ruling, or
other action shall have become final and nonappealable; or
(v by either Buyer or Seller if the terminating party is
not then in material breach of this Agreement and if (x) with respect
to a termination by Buyer, there shall have been any material breach
(provided that any representation or warranty of Seller or NCH
contained herein that is qualified by a materiality standard or a
Material Adverse Effect qualification shall not be further qualified
by the above reference to "material") of one or more representations
or warranties of Seller or NCH (which has not been waived) or
material breach of one or more covenants or agreements set forth in
this Agreement by Seller or NCH (which has not been waived), or (y)
with respect to a termination by Seller, there shall have been a
material breach (provided that any representation or warranty of
Buyer contained herein that is qualified by a materiality standard or
a Material Adverse Effect qualification shall not be further
qualified by the above reference to "material") of one or more
representations or warranties of Buyer (which has not been waived) or
material breach of one or more covenants or agreements set forth in
this Agreement by Buyer (which has not been waived), which breach or
breaches, in the case of clause (x) or (y) above, shall not have been
cured within 10 days following receipt by the breaching party of
written notice of such breach;
(b The right of any party hereto to terminate this Agreement
pursuant to this Section 10.1 shall remain operative and in full force
and effect regardless of any investigation made by or on behalf of any
party hereto, any person controlling any such party or any of their
respective officers, directors, employees, accountants, consultants,
legal counsel, agents, or other representatives whether prior to or
after the execution of this Agreement. Any termination of this
Agreement by Seller shall be deemed to be a termination of this
Agreement by NCH.
X.2 Effect of Termination. Upon termination of this Agreement
pursuant to Section 10.1, the undertakings of the parties set forth herein
shall forthwith be of no further force and effect; provided, however,
that this Section 10.2 and Sections 11.2 and 11.9 and rights and remedies
for any breaches of this Agreement occurring prior to such termination, in
each case, shall survive any such termination.
ARTICLE XI
MISCELLANEOUS
XI.1 Expenses of the Parties. Except as otherwise provided herein,
all expenses incurred by or on behalf of the parties hereto, including all
fees and expenses of agents, representatives, counsel and accountants
employed by the parties hereto in connection with the authorization,
preparation, execution and performance of this Agreement, shall be borne
solely by the party who shall have incurred the same and the other parties
shall have no liability in respect thereof.
XI.2 Amendment and Modification. The parties hereto may amend, modify
and supplement this Agreement in such manner as may be agreed upon by
them in writing.
XI.3 Extensions and Waivers. Any party to this Agreement may (a)
extend the time for or waive the performance of any of the obligations or
other acts to be performed under this Agreement by any other party, (b)
waive any inaccuracies in the representations of any other party contained
in this Agreement, or (c) waive compliance with any of the covenants made
by any other party in this Agreement. No waiver shall be effective unless
it is in writing executed by the party making such waiver. No waiver of
any provision of this Agreement shall be deemed, or shall constitute, a
waiver of any other provision, whether or not similar, nor shall any waiver
constitute a continuing waiver.
XI.4 Assignment. None of NCH, Seller or Buyer may assign any
provision of this Agreement, any portion thereof, or any related document
without the prior written consent of the other parties hereto. The
foregoing notwithstanding, Buyer may assign its rights and interests under
this Agreement to a wholly-owned subsidiary of Buyer on or before the
Effective Time; provided, however, that such assignment shall not relieve or
release Buyer from any duty, liability or obligation to NCH or Seller under
this Agreement. Subject to the preceding sentence, this Agreement and all
of the provisions hereof shall be binding upon and inure to the benefit of
the parties hereto and their respective successors, assigns, heirs and
legal representatives.
XI.5 Entire Agreement. This Agreement, including all Exhibits and
Schedules attached hereto, contains the entire agreement of the parties
hereto with respect to the Purchased Assets and the other transactions
contemplated hereby, and supersedes all prior understandings and agreements
of the parties with respect to the subject matter hereof. The Schedules
delivered pursuant to this Agreement and Exhibits attached hereto shall be
construed with and as an integral part of this Agreement to the same extent
as if the same had been set forth verbatim herein.
XI.6 Headings. The descriptive headings in this Agreement are
inserted for convenience only and do not constitute a part of this
Agreement.
XI.7 Execution in Counterpart. This Agreement may be executed in any
number of counterparts, each of which shall be deemed an original.
XI.8 Notices. Any notice, request, information or other document to
be given hereunder to any of the parties by any other party shall be in
writing and delivered by (a) facsimile and overnight courier, or (b)
certified or registered U.S. mail, postage prepaid, as follows:
If to Seller or NCH, addressed to:
c/o NCH Corporation
2727 Chemsearch Boulevard
Irving, Texas 75062
Attn: Jack B. Rubin
Joe Cleveland
with a copy to:
Vinson & Elkins L.L.P.
2001 Ross Avenue, Suite 3700
Trammell Crow Center
Dallas, Texas 75201
Attn: A. Winston Oxley
If to Buyer, addressed to:
Carlton-Bates Company
3600 West 69th Street
Little Rock, Arkansas 72209
Attn: William P. Carlton
Steve Allen
with a copy to:
Friday, Eldredge & Clark, L.L.P.
400 West Capital Avenue, Suite 2000
Little Rock, AR 72201
Attn: Price C. Gardner
Any party may change the address to which notices hereunder are to be
sent to it by giving written notice of such change of address in the manner
herein provided. Any notice delivered by facsimile and overnight courier
shall be deemed to have been given on the date it is so received by
facsimile or delivered by courier, and any notice delivered by registered
or certified mail shall be deemed to have been given when deposited in the
U.S. mail.
XI.9 Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of Texas
without reference to its choice of law provisions.
XI.10 Publicity. No press release or other public announcement
related to this Agreement or the transactions contemplated hereby will be
issued by any party hereto or other employee, agent or representative of
NCH, Seller or Buyer without the prior approval of all other parties, except
that any party may make such public disclosure which it believes in good
faith to be required by Applicable Law or exchange rule or regulation (it
being acknowledged and understood by Buyer, that NCH may determine, in its
sole discretion, whether disclosure of this Agreement and the
transactions contemplated hereby is required pursuant to the reporting
obligations of NCH under the Securities Exchange Act of 1934 or any
applicable exchange rule or regulation).
XI.11 Access to Information. After the Closing Date, each of the
parties shall grant to the other such access to financial records and other
information in their possession related to their conduct of the Business
and such cooperation and assistance as shall be reasonably required to
enable each of them to complete their legal, regulatory, stock exchange and
financial reporting requirements and to complete their Tax returns. In the
event that any such Tax return becomes the subject of any audit or
investigation, each of the parties shall give the other all reasonable
cooperation, access and assistance as needed during normal business hours
with respect to books and records and other financial data of such party to
enable such first party to defend any such audit or investigation. Each
party shall, for a period of six years after the Closing Date plus any
additional time during which a party advises the other party that there
is an ongoing Tax audit or investigation with respect to such periods,
keep such materials reasonably accessible and not destroy or dispose of
such materials without the written consent of the other party; provided no
party shall not be responsible or liable to the other party for, or as a
result of, any accidental loss or destruction of or damage to any such
records or information. Each party shall promptly reimburse the other for
such other party's reasonable out-of-pocket expenses associated with
requests made by such first party under this Section 11.11, but no other
charges shall be payable by the requesting party to the other party in
connection with such requests. Any party receiving information pursuant to
this Section 11.11 shall maintain such information in strict confidence
and not disclose such information except as otherwise required by
Applicable Law.
XI.12 Access to Excluded Books and Records. Buyer recognizes that
Excluded Books and Records may have been intermingled with the Business
Records. Buyer shall, for a period of six years after the Closing Date plus
any additional time during which Seller advises Buyer that there is an
ongoing audit, investigation or legal dispute of any kind relating to such
Excluded Books and Records, keep such Excluded Books and Records reasonably
accessible and not destroy or dispose of such materials without the written
consent of Seller. Seller shall promptly reimburse Buyer for Buyer's
reasonable out-of-pocket expenses associated with requests made by Seller
under this Section 11.12, but no other charges shall be payable by Seller in
connection with such requests.
XI.13 Severability. If any one or more of the provisions of this
Agreement shall be held to be invalid, illegal or unenforceable, the
validity, legality or enforceability of the remaining provisions of this
Agreement shall not be affected thereby. To the extent permitted by
Applicable Law, each party waives any provision of law which renders any
provision of this Agreement invalid, illegal or unenforceable in any respect
to the extent of the invalidity, illegality or unenforceability.
XI.14 No Third Party Beneficiaries. This Agreement shall not confer
any rights or remedies upon any person other than the parties hereto and
their respective successors and permitted assigns.
XI.15 Unassignable Contracts. If (i) any third party consent to the
assignment or other transfer to Buyer of an Assumed Contract listed on
Schedule 3.2 is not obtained on or before the Closing and Buyer waives
obtaining such consent as a condition to the Closing or (ii) any other third
party consent to the assignment or other transfer to Buyer of an Assumed
Contract listed on Schedule 3.2 is not obtained on or before the Closing
and does not give rise to a condition to the Closing, then as to the
rights, benefits or remedies under or pursuant to such Assumed Contracts
(collectively, the "Rights") not assignable to Buyer because such consent
has not been obtained:
(a) Seller will hold the Rights in trust for Buyer, for the
account and benefit of Buyer;
(b) Seller will, at the request and under the direction of Buyer
in the name of Seller or otherwise as Buyer shall specify, take all such
actions and do all such things, at Seller's expense, as shall in the
opinion of Buyer, be necessary or desirable in order that the obligations
of Seller under such Assumed Contracts may be performed in a manner such
that the value of the Rights shall be preserved and shall enure to the
benefit of Buyer and such that all moneys receivable under the Assumed
Contracts may be received by Buyer;
(c) Seller will promptly pay over to Buyer all such moneys
collected by Seller in respect of such Assumed Contracts; and
(d) to the extent permitted by the third party, Buyer will perform
the obligations under such Assumed Contracts on behalf of Seller, and
will indemnify Seller against all liabilities, costs and expenses
incurred by Seller in connection with Buyer performing such
obligations; Seller hereby appoints Buyer as its attorney-in-fact to
act in the name of Seller to carry out all such matters, such appointment
being a power coupled with an interest.
[Signatures are on the following page]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed in multiple originals as of the day and year first above
written. The parties agree that a facsimile copy of this Agreement, when
duly signed and transmitted, will be deemed as an original for all purposes.
NCH CORPORATION
By: /s/ Jack B. Rubin
------------------------------------
Jack B. Rubin, Senior Vice President
RESOURCE ELECTRONICS, INC.
By: /s/ Jack B. Rubin
------------------------------------
Its: Jack B. Rubin, Senior Vice President
CARLTON-BATES COMPANY
By: /s/ William P. Carlton
-----------------------------
William P. Carlton, President