UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities and Exchange Act of 1934
Date of Report: May 31, 1996
(Date of earliest event reported)
Engelhard Corporation
------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 1-8142 22-1586002
------------ ---------- --------------
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
101 Wood Avenue, Iselin, New Jersey 08830
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(908) 205-5000
--------------------------------
(Registrant's telephone number, including area code)
No change
---------------------------------
(Former name or former address, if changed since last report)
1
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On May 31, 1996, Engelhard Corporation, a Delaware corporation (the
"Company"), consummated the acquisition of The Mearl Corporation, a New Jersey
corporation ("Mearl"), from the stockholders of Mearl pursuant to a Stock
Purchase Agreement (the "Purchase Agreement") dated as of April 22, 1996, as
amended and restated as of May 15, 1996.
The purchase price for the acquisition was $272.7 million in cash. The
purchase price is subject to certain post-closing adjustments. The Company
initially financed the acquisition with bank borrowings.
Mearl manufactures and supplies the automotive, cosmetics and industrial
markets with pearlescent pigments. Mearl also manufactures and supplies
iridescent film and other products to a variety of markets. In 1995, Mearl had
sales of approximately $134 million and operating earnings of approximately $23
million.
For a more complete description of the acquisition, reference is hereby
made to the Purchase Agreement (a copy of which is filed as an exhibit hereto).
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements of Business Acquired
As of the date of filing of this Current Report on Form 8-K, it is
impracticable for the Registrant to provide the financial statements required by
this Item 7(a). In accordance with Item 7(a)(4) of Form 8-K, such financial
statements shall be filed by amendment to this Form 8-K no later than 60 days
after June 7, 1996.
(b) Pro Forma Financial Information
As of the date of filing of this Current Report on Form 8-K, it is
impracticable for the Registrant to provide the pro forma financial information
required by this Item 7(b). In accordance with Item 7(b) of Form 8-K, such
financial statements shall be filed by amendment to this Form 8-K no later than
60 days after June 7, 1996.
(c) Exhibit
2.1 Stock Purchase Agreement dated as of April 22, 1996, as amended and
restated as of May 15, 1996.
2
SIGNATURE
Pursuant to the requirements of the Securities and Exchange act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
ENGELHARD CORPORATION
Date: June 7, 1996 By: /s/ William E. Nettles
-------------------------------
Name: William E. Netttles
Title: Vice President and
Chief Financial Officer
3
EXHIBIT INDEX
Engelhard Corporation
Form 8-K
May 31, 1996
Exhibit Item Pages
- ------------ -----
2.1 Stock Purchase Agreement by
and among Engelhard Corporation,
The Mearl Corporation and the
Stockholders of The Mearl Corporation 5 - 61
4
=============================================================
STOCK PURCHASE AGREEMENT
among
ENGELHARD CORPORATION,
THE MEARL CORPORATION
and the
STOCKHOLDERS
of
THE MEARL CORPORATION
Amended and Restated
as of May 15, 1996
=============================================================
5
TABLE OF CONTENTS
Page
1. Definitions..................................................... 10
2. Sale and Purchase of Shares..................................... 14
2.1 Sale of Shares........................................ 14
2.2 Transaction Price and Payment for Shares.............. 15
2.3 Transaction Price Adjustment.......................... 15
2.4 Escrow................................................ 17
2.5 Delivery of Shares.................................... 17
3. Closing; Closing Date........................................... 18
4. Representations and Warranties of the Company................... 18
4.1 Organization; Standing and Authority.................. 18
4.2 Authority; Execution and Delivery..................... 18
4.3 Governmental Consents and Approvals................... 18
4.4 No Breach............................................. 19
4.5 Capital Stock; Title.................................. 19
4.6 Options or Other Rights............................... 19
4.7 Charter Documents and By-laws......................... 20
4.8 Financial Statements.................................. 20
4.9 No Material Adverse Effect............................ 20
4.10 Compliance With Laws.................................. 20
4.11 Litigation............................................ 21
4.12 Contracts and Other Agreements........................ 21
4.13 Real Estate........................................... 22
4.14 Personal Property..................................... 23
4.15 Liens................................................. 23
4.16 Insurance............................................. 23
4.17 Operations of the Company............................. 23
4.18 Brokers............................................... 24
4.19 Employee Benefit Plans; ERISA......................... 25
4.20 Taxes................................................. 27
4.21 Environmental Matters................................. 28
4.22 Absence of Undisclosed Liabilities.................... 32
4.23 Labor Matters......................................... 32
4.24 Patents and Trademarks................................ 32
4.25 Inventory............................................. 32
4.26 Balance Sheet Reserves................................ 33
5. Representations and Warranties of each Selling Stockholder...... 33
5.1 Authority............................................. 33
5.2 Governmental Consents and Approvals................... 33
5.3 No Breach............................................. 33
5.4 Title................................................. 33
5.5 Brokers............................................... 33
6. Representations and Warranties of the Purchaser................. 34
6.1 Organization, Standing and Authority.................. 34
6.2 Execution and Delivery................................ 34
6.3 Governmental Consents and Approvals................... 34
6.4 No Breach............................................. 34
6.5 Financing............................................. 34
6.6 Purchase not for Distribution......................... 34
6.7 Brokers............................................... 35
6
Page
7. Covenants and Agreements........................................ 35
7.1 Conduct of Business................................... 35
7.2 Corporate Examinations and Investigations............. 36
7.3 Regulatory Approvals.................................. 37
7.4 Further Assurances.................................... 37
7.5 Amendment of Disclosure Schedules..................... 38
7.6 Assignment of Family Trust Notes...................... 38
7.7 Guarantee............................................. 38
7.8 No Solicitation....................................... 38
7.9 Environmental Supplemental Review..................... 39
8. Conditions Precedent to the Obligations of the Purchaser........ 40
8.1 Representations and Warranties; Covenants and
Agreements.......................................... 40
8.2 Governmental Permits and Approvals; Illegality........ 40
8.3 Litigation............................................ 41
8.4 Third Party Consents.................................. 41
8.5 No Material Adverse Effect............................ 41
8.6 Opinion of Counsel to Company......................... 41
8.7 Corporate Action...................................... 41
8.8 Discharge of Certain Indebtedness..................... 41
8.9 Escrow Agreement...................................... 41
8.10 Hart-Scott Rodino..................................... 42
9. Conditions Precedent to the Obligations of the Selling
Stockholders and the Company.................................. 42
9.1 Representations and Warranties; Covenants and
Agreements.......................................... 42
9.2 Governmental Permits and Approvals; Illegality........ 42
9.3 Litigation............................................ 42
9.4 Third Party Consents.................................. 43
9.5 Opinion of Counsel to the Purchaser................... 43
9.6 Corporate Action...................................... 43
9.7 Hart-Scott Rodino..................................... 43
10. Survival of Representations and Warranties..................... 43
11. Tax Matters.................................................... 43
11.1 Tax Indemnification.................................. 43
11.2 Other Tax Matters.................................... 46
12. Indemnification................................................ 49
12.1 Indemnification by Selling Stockholders.............. 49
12.2 Indemnification by the Purchaser..................... 52
13. Termination.................................................... 53
13.1 Termination and Abandonment.......................... 53
13.2 Survival; Expenses................................... 53
14. Miscellaneous.................................................. 54
14.1 Transfer Taxes....................................... 54
14.2 Notices.............................................. 54
14.3 Entire Agreement..................................... 57
14.4 Waivers and Amendments; Noncontractual Remedies;
Preservation of Remedies........................... 57
14.5 Governing Law and Submission to Jurisdiction......... 57
14.6 Binding Effect; Assignment Limited................... 58
14.7 No Third-Party Beneficiaries......................... 58
7
Page
14.8 Counterparts......................................... 58
14.9 Exhibits and Schedules............................... 58
14.10 Headings............................................. 58
14.11 Remedies............................................. 58
14.12 Invalidity of Provision.............................. 59
14.13 Grammatical Construction............................. 59
SCHEDULES
Seller Disclosure Schedule
Purchaser Disclosure Schedule
EXHIBITS
Exhibit A - Share Ownership
Exhibit B - Form of Opinion of Counsel to Company
Exhibit C - Form of Opinion of Counsel to Purchaser
Annex A - Escrow Agreement
8
AMENDED AND RESTATED STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT, dated as of April 22, 1996, and amended and
restated as of May 15, 1996 (the "Agreement"), by and among (i) The Mearl
Corporation, a New Jersey corporation (the "Company"), (ii) Christina L. Mattin
("Mattin"), (iii) Christina L. Mattin, David P. Geis and Michael H. Penniman,
not individually but solely in their capacity as trustees ("Trustee A") of The
Christina Mattin Family 1995 Charitable Remainder Unitrust A, created and
existing under the laws of the State of New York pursuant to the Trust Agreement
dated as of October 3, 1995, between Christina Mattin, as Donor, and Christina
Mattin, David P. Geis and Michael H. Penniman, as Trustees ("CRUT A"), (iv)
Christina L. Mattin, Anthony J. Colavita and Michael H. Penniman, not
individually but solely in their capacity as trustees ("Trustee B") of The
Christina Mattin Family 1995 Charitable Remainder Unitrust B, created and
existing under the laws of the State of New York pursuant to the Trust Agreement
dated as of September 29, 1995, between Christina Mattin, as Donor, and
Christina Mattin, Anthony J. Colavita and Michael H. Penniman, as Trustees
("CRUT B"), (v) Christina L. Mattin, not individually but solely in her capacity
as trustee ("Trustee C") of The Christina Mattin 1996 Charitable Remainder
Unitrust, created and existing under the laws of the State of New York pursuant
to the Trust Agreement dated as of April 11, 1996, between Christina Mattin, as
Donor, and Christina Mattin, as Trustee ("CRUT C"), (vi) Christina L. Mattin,
Dominick A. Pinciaro and David R. Safer, not individually but solely in their
capacity as trustees ("Trustee D") of the trust created and existing under the
laws of the State of New York pursuant to Article SIXTH of the Will, dated
October 3, 1986, of Harry E. Mattin (the "Testamentary Trust"), (vii) Dominick
A. Pinciaro, not individually but solely in his capacity as trustee ("Pinciaro")
of the trust for the benefit of Christina L. Mattin created and existing under
the laws of the State of New York pursuant to Article FIFTH of the Will, dated
January 8, 1959, of Henry L. Mattin (the "Pinciaro Trust"), (viii) Jerome S.
Grubin, not individually but solely in his capacity as trustee ("Grubin") of the
trust for the benefit of Helen Mattin created and existing under the laws of the
State of New York pursuant to Article EIGHTH of the Will, dated December 23,
1968, of Edith Mattin (the "Grubin Trust"), (ix) Christina L. Mattin and Morgan
Guaranty Trust Company of New York, not individually but solely in their
capacity as trustees ("Trustee E") of the trust created and existing under the
laws of the State of New York pursuant to the Trust Agreement dated December 21,
1995 (the "Mattin Family Trust A"), (x) Christina L. Mattin and Morgan Guaranty
Trust Company of New York, not individually but solely in their capacity as
trustees ("Trustee F", and together with Mattin, Trustee A, Trustee B, Trustee
C, Trustee D, Pinciaro, Grubin and Trustee E, the "Trustees") of the trust
created and existing under the laws of the State of New York pursuant to the
Trust Agreement dated December 21, 1995 (the "Mattin Family Trust B", and
together with CRUT A, CRUT B, CRUT C, the Testamentary Trust, the Pinciaro
Trust, the Grubin trust and the Mattin Family Trust A, the "Trusts") and (x)
Engelhard Corporation, a Delaware corporation (the "Purchaser").
RECITALS:
WHEREAS, as of the date hereof, the Company has (i) 20,687.4075 shares of
common stock, no par value per share ("Common Stock"), (ii) 118.12 shares of
preferred stock, $100 par value per share ("1st Preferred Stock") and (iii)
5,535.0 shares of preferred stock, $100 par value per share ("2nd Preferred
Stock") issued and outstanding;
9
WHEREAS, each of Mattin, CRUT A, CRUT B, CRUT C, the Testamentary Trust,
the Pinciaro Trust, the Grubin Trust, Mattin Family Trust A and Mattin Family
Trust B owns 2,297.8607 shares, 5,386.49475 shares, 5,386.49475 shares,
3,446.7910 shares, 75.0 shares, 1,212.6052 shares, 727.5632 shares, 1,615.9484
shares and 538.6495 shares of Common Stock, respectively;
WHEREAS, CRUT C owns 118.12 shares of 1st Preferred Stock;
WHEREAS, each of CRUT C, the Pinciaro Trust and the Grubin Trust owns
4,514.50 shares, 865.50 shares, 155.0 shares of 2nd Preferred Stock,
respectively;
WHEREAS, each Selling Stockholder desires to sell all such shares of Common
Stock, 1st Preferred Stock and/or 2nd Preferred Stock owned by such Selling
Stockholder (collectively, the "Shares"), and the Purchaser desires to purchase
such Shares, subject to the terms and conditions and for the consideration set
forth in this Agreement;
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth herein and in reliance upon the representations and warranties contained
herein, the Selling Stockholders and the Purchaser agree as follows:
1. Definitions. Except as the context shall otherwise require, the
following terms when used in this Agreement shall have the following
meanings, the definitions to be applicable to both the singular and
plural forms of each term defined to the extent that such forms of
such terms are used in this Agreement:
"affiliate" means, with respect to any person, at the time in
question, any other person controlling, controlled by or under common
control with such person.
"Agreement" means this Stock Purchase Agreement, including the
exhibits and schedules attached hereto.
"Business Day" means any day which is neither a Saturday nor a Sunday,
nor a day on which banking institutions in the City of New York, New
York, shall be permitted or required by law or executive order to be
closed.
"Closing" means the closing of the sale and purchase of the Shares
contemplated by this Agreement.
"Closing Date" means the fifth Business Day following the day on which
the last to be received of all authorizations, approvals, consents,
Permits and licenses from governmental and regulatory bodies set forth
in Section 4.3 of the Seller Disclosure Schedule or Section 6.3 of the
Purchaser Disclosure Schedule that are conditions to the consummation
of the transactions contemplated hereby have been obtained.
"Code" means the Internal Revenue Code of 1986, as amended (including
any successor code), and the rules and regulations promulgated
thereunder.
"Company" has the meaning set forth in the first paragraph hereof.
"Company Plan" has the meaning set forth in Section 4.19.
10
"contracts and other agreements" means all contracts, agreements,
undertakings, indentures, notes, bonds, loans, instruments, leases,
mortgages, commitments or other binding agreements.
"control" (including the terms "controlling", "controlled by" and
"under common control with") means the possession, direct or indirect,
of the power to direct or cause the direction of the management and
policies of a person whether through the ownership of voting
securities or otherwise.
"CRUT A" has the meaning set forth in the first paragraph hereof.
"CRUT B" has the meaning set forth in the first paragraph hereof.
"CRUT C" has the meaning set forth in the first paragraph hereof.
"Dividend" means any distribution on or in respect of the capital
stock of any person and any amount paid by any such person in respect
of the purchase, redemption, retirement or other acquisition of any
share of its capital stock.
"Environmental Estimate" has the meaning set forth in Section 7.9.
"ERISA" has the meaning set forth in Section 4.19.
"Escrow Agreement" means the Escrow Agreement among the escrow agent
named therein (to be mutually agreed upon by the parties hereto prior
to the Closing Date), the Purchaser and the Selling Stockholders
substantially in the form of Annex A attached hereto.
"Escrow Deposit" means $23,650,000 delivered to the escrow agent on
the Closing Date to be held pursuant to the Escrow Agreement.
"Executive Officers" means, with respect to any corporation, the
chairman of the Board of Directors, the president, any executive or
senior vice president, and the treasurer of such corporation (and
other individuals, if any, performing comparable functions), and with
respect to any partnership, the individuals performing comparable
functions on behalf of such partnership.
"Federal" means of or pertaining to the government of the United
States of America.
"FTC" means the Federal Trade Commission of the United States of
America.
"GAAP" means United States generally accepted accounting principles
consistently applied throughout the specified period and in the
immediately prior comparable period, except for normal recurring
year-end adjustments and except as disclosed in the auditors' report
and the notes to the Combined Financial Statements.
"Combined Financial Statements" has the meaning set forth in Section
4.8.
"governmental or regulatory body" means any government or political
subdivision thereof, whether Federal, state, local or foreign, or any
agency or instrumentality of any such government or political
subdivision.
11
"Grubin" has the meaning set forth in the first paragraph hereof.
"Grubin Trust" has the meaning set forth in the first paragraph
hereof.
"herein," "hereof," "hereto," "hereunder" and other words of similar
import shall be construed to refer to this Agreement as a whole, and
not to any particular section, paragraph or other subdivision.
"HSR" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended, and the rules and regulations promulgated thereunder.
"including" and other forms of such terms, with respect to any matter
or thing, shall be construed to mean "including but not limited to"
such matter or thing.
"Indemnitee" has the meaning set forth in Section 11.3.
"Indemnitor" has the meaning set forth in Section 11.3.
"IRS" means the Internal Revenue Service of the United States of
America.
"Justice" means the Antitrust Division of the Department of Justice of
the United States of America.
"knowledge" means, with respect to any entity, the actual knowledge,
after due inquiry, of any of the Executive Officers of such entity.
"lien or other encumbrance" means any lien, pledge, mortgage, security
interest, claim, lease, charge, option, right of first refusal,
easement, servitude, transfer restriction under any shareholder or
similar agreement or encumbrance.
"Litigation" means any claim, action, suit, proceeding, arbitration or
investigation.
"Losses" means all losses, liabilities, damages (excluding
consequential damages), deficiencies, costs, fines and assessments,
penalties, claims, actions, injuries, suits, judgments and expenses
(including interest and reasonable attorneys' fees and disbursements),
howsoever arising, net of any insurance proceeds (from insurance in
effect on or prior to the Closing) recovered in respect of such Loss.
"Material Adverse Effect" means an effect which is either (i)
materially adverse to the Permits, business, condition (financial or
otherwise), assets, liabilities or results of operations or prospects
of the Company and its subsidiaries, taken as a whole, or (ii) adverse
to the ability of any Selling Stockholder to consummate the
transactions contemplated by this Agreement, provided that general
economic conditions or conditions affecting other companies in the
automotive business generally are not Material Adverse Effects.
"Mattin" has the meaning set forth in the first paragraph hereof.
"Mattin Family Trust A" has the meaning set forth in the first
paragraph hereof.
12
"Mattin Family Trust B" has the meaning set forth in the first
paragraph hereof.
"Net Worth Amount" means the amount equal to the excess of
consolidated assets over consolidated liabilities of the Company and
all of its subsidiaries, calculated consistently with the 1995
Combined Financial Statements.
"Notice" has the meaning set forth in Section 11.3.
"Permits" means all licenses, permits, orders, approvals,
registrations, authorizations and qualifications with and under all
Federal, state, local or foreign laws and governmental or regulatory
bodies and all industry or other nongovernmental self-regulatory
organizations that are necessary for the conduct of the applicable
person's business and the ownership of its properties.
"person" means and includes any natural person, corporation,
partnership, firm, joint venture, association, joint-stock company,
trust, business trust, unincorporated organization, governmental or
political subdivision, regulatory body or other entity.
"Pinciaro" has the meaning set forth in the first paragraph hereof.
"Pinciaro Trust" has the meaning set forth in the first paragraph
hereof.
"Pre-Closing Tax Period" means all taxable periods ending on the
Closing Date and the portion of any Straddle Period ending on the
Closing Date.
"property" means real, personal or mixed property, tangible or
intangible.
"pro rata share" means, with respect to Mattin, CRUT A, CRUT B, CRUT
C, the Testamentary Trust, the Pinciaro Trust, the Grubin Trust, the
Mattin Family Trust A and the Mattin Family Trust B, 11.08%, 25.98%,
25.98%, 16.08%, 0.36%, 5.88%, 3.52%, 7.80% and 2.60%, respectively.
"Purchaser" has the meaning set forth in the first paragraph hereof.
"Purchaser Disclosure Schedule" means the disclosure schedule
delivered by the Purchaser to each of the Selling Stockholders in
connection with the execution and delivery hereof.
"Remedial Action" means any action taken to investigate, evaluate,
assess, test, monitor, remove, respond to, treat, neutralize, contain,
isolate or otherwise remediate the presence, Release (as defined in
Section 4.21) or threatened Release of any Hazardous Materials (as
defined in Section 4.21).
"Seller Disclosure Schedule" means the disclosure schedule delivered
by the Selling Stockholders to the Purchaser in connection with the
execution and delivery hereof.
"Selling Stockholders" means each of the Trusts and Mattin.
"Shares" has the meaning set forth in the recitals hereof.
"Straddle Period" means any taxable period beginning before and ending
after the Closing Date.
13
"subsidiary" of any person means a person who owns 50% or more of the
outstanding voting stock, general partnership interests or other
ownership interests of which are owned, directly or indirectly, by
such person or one or more other subsidiaries of such person. For the
purposes of this definition, "voting stock" means stock that
ordinarily has voting power for the election of directors, whether at
all times or only so far as no senior class of stock has such voting
power by reason of any contingency.
"Taxes" means all taxes, charges, fees, levies, or other similar
assessments, including without limitation (i) income, gross receipts,
ad valorem, premium, excise, real property, personal property,
windfall profit, sales, use, transfer, licensing, withholding,
employment, payroll, estimated and franchise taxes imposed by the
United States of America, any state, local, or foreign government, or
any subdivision, agency, or other similar person of the United States,
or any such government; and (ii) any interest, fines, penalties,
assessments, or additions to tax resulting from, attributable to, or
incurred in connection with any Tax or any contest, dispute, or refund
thereof.
"Tax Returns" means any report, return, statement, or other
information required to be supplied to a taxing authority in
connection with Taxes.
"Testamentary Trust" has the meaning set forth in the first paragraph
hereof.
"Trustee A" has the meaning set forth in the first paragraph hereof.
"Trustee B" has the meaning set forth in the first paragraph hereof.
"Trustee C" has the meaning set forth in the first paragraph hereof.
"Trustee D" has the meaning set forth in the first paragraph hereof.
"Trustee E" has the meaning set forth in the first paragraph hereof.
"Trustee F" has the meaning set forth in the first paragraph hereof.
"1995 Combined Financial Statements" means the consolidated balance
sheet of the Company and all of its subsidiaries as at December 31,
1995, and the related statements of income, shareholders' equity and
cash flows, for the 12 month period then ended, delivered to the
Purchaser pursuant to Section 4.8.
2. Sale and Purchase of Shares.
2.1 Sale of Shares. At the Closing, each of the Selling Stockholders
agrees to sell the number of Shares set forth opposite its name
on Exhibit A hereto to the Purchaser, and the Purchaser agrees to
purchase from the Selling Stockholders, such number of Shares
owned by such Selling Stockholders, upon the terms and subject to
the conditions set forth herein.
2.2 Transaction Price and Payment for Shares. (a) The aggregate
purchase price for the Shares shall be an amount equal to
$272,650,000 (the "Transaction Price"), representing $100 per
14
share of 1st Preferred Stock, $100 per share of Second Preferred
Stock, and $13,152.19 per share of Common Stock, subject to
adjustment in the case of Common Stock as provided in Section 2.3
below. The purchase price due to Mattin, CRUT A, CRUT B, CRUT C,
the Testamentary Trust, the Pinciaro Trust, the Grubin Trust, the
Mattin Family Trust A and the Mattin Family Trust B shall be an
amount equal to $30,221,898, $70,844,196, $70,844,196,
$45,796,107, $986,414, $16,034,962, $9,584,549, $21,253,258 and
$7,084,420, respectively, in each case, subject to such Selling
Stockholder's pro rata share of any adjustment in the price of
Common Stock as provided in Section 2.3 below.
(b) At the Closing, the Purchaser shall pay to each of the
Selling Stockholders the Transaction Price specified in
Section 2.2(a), in immediately available funds by wire
transfer to such account or accounts as the Selling
Stockholders shall have designated to the Purchaser, in the
manner specified herein for the delivery of notices, not
less than one Business Day prior to the Closing Date.
2.3 Transaction Price Adjustment.
(a) As soon as practicable, but in no event later than 60
days following the Closing Date, the Company shall
prepare and deliver to the Selling Stockholders and the
Purchaser (i) a consolidated balance sheet of the
Company and all of its subsidiaries as of the close of
business on the Closing Date, and the related
consolidated statements of income, shareholders' equity
and cash flows for the Company and all of its
subsidiaries for the period from January 1, 1996 to the
Closing Date, (ii) the audited consolidated balance
sheets of the Company and its U.S. subsidiary as of the
close of business on the Closing Date, and the related
statements of income, shareholders' equity and cash
flows (including the footnotes thereto), for the period
from January 1, 1996 to the Closing Date, which shall
be audited by Coopers & Lybrand LLP, together with the
related audit report of such firm, and (iii) a
calculation of the Net Worth Amount (collectively, the
"Closing Date Statements"). The Closing Date Statements
shall be prepared consistently with the Combined
Financial Statements, subject to year-end audit
adjustments consistent with GAAP. In connection with
the preparation of the Closing Date Statements, on a
date not more than six days prior to Closing Date,
which date is a date acceptable to the Purchaser, the
Selling Stockholders and the Purchaser, including their
respective representatives, shall have the right to
observe a full physical count by Coopers & Lybrand LLP
of all inventory of the Company and its subsidiaries.
(b) During the preparation of the Closing Date Statements
and the period of any dispute within the contemplation
of this Section 2.3, the Company shall (i) provide the
Selling Stockholders and the Selling Stockholders'
authorized representatives with reasonable access to
the books, records, facilities and employees of the
15
Company but without unreasonably interfering with the
operations of the Company, (ii) provide the Selling
Stockholders as soon as reasonably practicable after
the Closing Date (but in no event later than 30 days
after the Closing Date) with financial information
comparable to normal month-end closing financial
information for the period ending on the Closing Date
and (iii) cooperate with the Selling Stockholders'
authorized representatives, including the provision on
a timely basis of all information reasonably necessary
or useful in preparing the Closing Date Statements.
(c) The Selling Stockholders and the Purchaser shall have 30
days to review the Closing Date Statements after receipt
thereof. The Selling Stockholders and their authorized
representatives shall have reasonable access to all relevant
books and records, employees and accountants of the Company
to the extent required to complete its review of the Closing
Date Statements. Unless the Selling Stockholders or the
Purchaser deliver written notice to the Company on or prior
to the 30th day after receipt of the Closing Date Statements
of the Selling Stockholders' or the Purchaser's objection to
the Closing Date Statements and specifying in reasonable
detail all disputed items and the basis therefor, the
Selling Stockholders or the Purchaser shall be deemed to
have accepted and agreed to the Closing Date Statements. If
the Selling Stockholders or the Purchaser so notify the
Company of their objection to the Closing Date Statements,
the Selling Stockholders and the Purchaser shall, within 30
days following such notice (the "Resolution Period"),
attempt to resolve their differences, and any resolution by
them as to any disputed amounts shall be final, binding and
conclusive.
(d) If, at the conclusion of the Resolution Period, any amounts
remain in dispute, then all such amounts remaining in
dispute shall be submitted to KPMG Peat Marwick LLP (the
"Neutral Auditors"). Each of the Selling Stockholders, the
Purchaser and the Company agrees to execute, if requested by
the Neutral Auditors, a reasonable engagement letter. In the
event that the Selling Stockholders, the Purchaser and the
Company are unable to engage the Neutral Auditors within
five days after the conclusion of the Resolution Period then
they shall engage Deloitte & Touche LLP to act as
alternative neutral auditors (the "Alternative Neutral
Auditors"). All fees and expenses relating to the work, if
any, to be performed by the Neutral Auditors or the
Alternative Neutral Auditors, as the case may be, shall be
borne (i) 50% by the Selling Stockholders and (ii) 50% by
the Company. The Neutral Auditors or the Alternative Neutral
Auditors, as the case may be, shall act as an arbitrator to
determine, based solely on presentations by the Selling
Stockholders and the Purchaser, and not by independent
review, only those issues still in dispute. The Selling
Stockholders and the Purchaser shall use their reasonable
best efforts to cause the determination of the Neutral
Auditors or the Alternative Neutral Auditors, as the case
may be, to be made within 30 days of submission as provided
above, whether or not such presentation by the Selling
Stockholders and the Company have been made within such
period, and shall be set forth in a written statement
16
delivered to the Selling Stockholders and the Company and
shall be final, binding and conclusive. The term "Adjusted
Closing Date Statements", as hereinafter used, shall mean
the definitive Closing Date Statements agreed to by the
Company and the Selling Stockholders in accordance with
Section 2.3(c) or the definitive Closing Date Statements
resulting from the determinations made by the Neutral
Auditors or the Alternative Neutral Auditors' determination,
as the case may be, in accordance with this Section 2.3(d)
(in addition to those items theretofore agreed to by the
Selling Stockholders and the Company), in each case,
prepared in the manner set forth in the second sentence of
Section 2.3(a) hereof.
(e) The Transaction Price shall be increased or decreased, as
the case may be, dollar for dollar, to the extent the Net
Worth Amount reflected in the Adjusted Closing Date
Statements is greater than or less than, as the case may be,
$128,754,000. The amount of any net increase or decrease of
the Transaction Price pursuant to this Section 2.3(e) shall
bear interest from the Closing Date through the date of
payment at the rate of 30-day LIBOR plus 50 basis points.
The amount of any net increase of the Transaction Price
pursuant to this Section 2.3(e), together with interest
thereon, shall be allocated to Common Stock and shall be
paid by the Company by wire transfer in immediately
available funds to the account designated by the Selling
Stockholders within five Business Days after the Adjusted
Closing Date Statements are agreed to or any remaining items
are ultimately determined by the Neutral Auditors or the
Alternative Neutral Auditors, as the case may be. The amount
of any net decrease of the Transaction Price pursuant to
this Section 2.3(e), together with interest thereon, shall
be allocated to Common Stock and shall be paid by the
Selling Stockholders by wire transfer in immediately
available funds to the account specified by the Company
within five Business Days after the Adjusted Closing Date
Statements are agreed to or any remaining disputed items are
ultimately determined by the Neutral Auditors or the
Alternative Neutral Auditors, as the case may be.
2.4 Escrow. On the Closing Date, each Selling Stockholder shall place
with the Escrow Agent its pro rata share of the Escrow Deposit.
In the event the Purchaser is entitled to indemnification
pursuant to Section 11.1 or 12.1 hereof, then the Purchaser shall
be entitled to receive such indemnification amount from the
Escrow Deposit. To the extent that the Escrow Deposit is not so
applied, the Escrow Deposit, plus accrued interest thereon, shall
be returned to the respective Selling Stockholders pursuant to
the Escrow Agreement.
2.5 Delivery of Shares. At the Closing, each of the Selling
Stockholders shall deliver to the Purchaser certificates
representing all of the Shares owned by such Selling Stockholder,
duly endorsed in blank for transfer or accompanied by duly
executed blank stock powers together with all necessary stock
transfer stamps affixed thereto at the expense of such Selling
Stockholder and such other instruments as shall reasonably be
required by the Purchaser to transfer to the Purchaser all right,
17
title and interest in and to the Shares, free and clear of any
lien or other encumbrance. All such certificates, stock powers
and instruments shall be in form and content reasonably
satisfactory to the Purchaser and its counsel.
3. Closing; Closing Date. The Closing shall take place at the offices of
Simpson Thacher & Bartlett, 425 Lexington Avenue, New York, New York
beginning at 10:00 a.m., New York time, on the Closing Date.
4. Representations and Warranties of the Company. The Company represents
and warrants to the Purchaser as follows:
4.1 Organization; Standing and Authority.
(a) The Company is a corporation duly organized, validly
existing and, on or prior to the Closing Date, will be in
good standing under the laws of the State of New Jersey and
has all requisite corporate power and authority to execute
and deliver this Agreement, to perform its obligations
hereunder and to consummate the transactions contemplated
hereby. Each of the Company's subsidiaries is a corporation
duly organized under the laws of jurisdiction of
incorporation.
(b) Each of the Company and its subsidiaries has all requisite
corporate power and authority to own, lease and operate its
assets, properties and business and to carry on its business
as now being conducted by it. Except as set forth in Section
4.1 of the Seller Disclosure Schedule, each of the Company
and its subsidiaries is duly qualified or otherwise
authorized or admitted to transact business and is in good
standing in each jurisdiction set forth in Section 4.1 of
the Seller Disclosure Schedule, which are the only material
jurisdictions in which such qualification, authorization or
admission is required by law.
4.2 Authority; Execution and Delivery. The execution, delivery and
performance of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly
authorized by all necessary corporate action on the part of the
Company. This Agreement has been duly executed and delivered by
the Company and constitutes the valid and binding obligation of
the Company, enforceable against the Company in accordance with
its terms, subject to the effects of bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and other
similar laws relating to or affecting creditors' rights
generally, general equitable principles (whether considered in a
proceeding in equity or at law) or an implied covenant of good
faith and fair dealing.
4.3 Governmental Consents and Approvals. The execution and delivery
of this Agreement by the Company, the performance by the Company
of its obligations hereunder and the consummation by the Company
of the transactions contemplated hereby do not and will not
require any of the Company or any subsidiary of the Company to
obtain any material consent, approval or action of, or make any
material filing with or give any notice to, any governmental or
regulatory body or judicial authority, except as set forth in
Section 4.3 of the Seller Disclosure Schedule.
18
4.4 No Breach.
(a) The execution, delivery and performance by the Company of
this Agreement and the consummation by the Company of the
transactions contemplated hereby in accordance with the
terms and conditions hereof will not, except as set forth in
Section 4.4 of the Seller Disclosure Schedule: (i) violate
any provision of the articles or certificate of
incorporation or by-laws or other charter or organizational
documents of the Company, (ii) violate, conflict with or
result in the breach of any of the provisions of, any
material contract or other agreement (including any
indenture) to which the Company or any subsidiary of the
Company is a party or by or to which the Company or any
subsidiary of the Company or any of their respective assets
or properties may be bound or subject, (iii) upon receipt of
the approvals referred to in Section 4.3 of the Seller
Disclosure Schedule, violate any existing term or provision
of any material law, regulation, order, writ, judgment,
injunction or decree applicable to the Company or any
subsidiary of the Company or any of their respective assets
or properties, or (iv) upon receipt of the approvals
referred to in Section 4.3 of the Seller Disclosure
Schedule, result in the breach of any of the material terms
or conditions of, constitute (with or without notice or
lapse of time or both) a default under, or otherwise cause
an impairment of, any material Permit.
(b) As of the date hereof, the Company and its subsidiaries are
not in any material respect in violation or default under
(i) their respective charter or bylaws and (ii) except as
set forth in Section 4.4 of the Seller Disclosure Schedule,
any material note, bond, mortgage, indenture or deed of
trust, or any license, lease, agreement or other instrument
or obligation to which the Company or any such subsidiary is
a party or to which they or any of their respective
properties or assets may be subject.
4.5 Capital Stock; Title. Section 4.5 of the Seller Disclosure
Schedule accurately sets forth the authorized capital stock of
each of the Company and its subsidiaries and the number of shares
of each class of capital stock of the Company and each of such
subsidiaries that are issued and outstanding as of the date
hereof. The Shares and all of the issued and outstanding shares
of capital stock of the subsidiaries of the Company are duly
authorized, validly issued, fully paid and non-assessable and are
owned beneficially and of record as set forth in Section 4.5 of
the Seller Disclosure Schedule, free and clear of any lien or
other encumbrance.
4.6 Options or Other Rights. (i) There is no outstanding right,
subscription, warrant, call, unsatisfied preemptive right, option
or other agreement of any kind to purchase or otherwise to
receive from the Company or any subsidiary of the Company, any of
the outstanding, authorized but unissued, unauthorized or
treasury shares of the capital stock or any other equity security
of the Company or any subsidiary of the Company (or any interest
therein), (ii) there is no outstanding security of any kind
convertible into or exchangeable for the capital stock of the
Company or any subsidiary of the Company (or any interest
19
therein) and (iii) there is no outstanding contract or other
agreement of or binding upon the Company to purchase, redeem or
otherwise acquire any outstanding shares of the capital stock of
the Company. There is no agreement of any kind that gives any
person any right to participate in the equity, value or income
of, or to vote (i) in the election of directors or officers of or
(ii) otherwise with respect to the affairs of, the Company or any
of its subsidiaries.
4.7 Charter Documents and By-laws. The Company has heretofore made
available to the Purchaser true and complete copies of the
Articles of Incorporation and By-laws of the Company and will
make available or deliver true and complete copies of the charter
and by-laws of each subsidiary of the Company, in each case as in
effect on the date hereof. The minute books of each of the
Company and each subsidiary of the Company accurately reflect in
all material respects all formal actions taken at all meetings
and consents in lieu of meetings of stockholders of such persons
since its incorporation and all formal actions taken at all
meetings and all consents in lieu of meetings of the Board of
Directors of each of such persons and all committees thereof. The
minute books of the Company since 1991 have previously been made
available for inspection by the Purchaser.
4.8 Financial Statements. (a) (i) The consolidating balance sheets of
the Company and all of its subsidiaries as at December 31, 1993,
1994 and 1995, and the related statements of income,
shareholders' equity and cash flows, for the periods then ended,
and (ii) the audited consolidated balance sheets of the Company
and its U.S. subsidiary as at December 31, 1993, 1994 and 1995,
and the related statements of income, shareholders' equity and
cash flows (including the footnotes thereto), for the periods
then ended, all of which have been delivered to the Purchaser
(collectively, the "Combined Financial Statements"), present
fairly in all material respects the financial position and
results of operations and cash flows of such entities as at each
such date and for each such period in accordance with GAAP,
except as set forth therein.
(b) The financial records, ledgers and account books of the
Company and its subsidiaries have been kept in the ordinary
course of business and are true, complete and accurate in
all material respects. Such account books reflect in all
material respects items of income and expense and assets and
liabilities and accruals required to be reflected therein in
accordance with the accounting practices prescribed or
permitted by the laws or administrative regulations of the
jurisdiction in which such person is domiciled (which have
been applied on a consistent basis, except as expressly set
forth therein or in the Combined Financial Statements).
4.9 No Material Adverse Effect. Except as set forth in Section 4.9 of
the Seller Disclosure Material Adverse Effect or any event that,
individually or in the aggregate, could reasonably be expected to
result in a Material Adverse Effect.
4.10 Compliance With Laws. Except for such compliance as to which
representations and warranties have been made elsewhere in this
Agreement, each of the Company and its subsidiaries is in
20
compliance in all material respects with all Federal, state,
local or foreign laws, ordinances or regulations and other
requirements (including any writ, judgment, decree, injunction,
or similar order applicable to any of such persons or the
business or assets of such persons) of any governmental or
regulatory body, court or arbitrator applicable to its business.
4.11 Litigation. There is no material Litigation pending to which the
Company or any subsidiary of the Company is a party or by which
any of such persons or their respective assets or properties are
or may be bound by or before any Federal, state, municipal,
foreign or other court or governmental or regulatory body, or, to
the knowledge of the Company, threatened against the Company or
any subsidiary of the Company.
4.12 Contracts and Other Agreements. Section 4.12 of the Seller
Disclosure Schedule sets forth as of the date of this Agreement a
listing of all of the following contracts and other agreements
(except for contracts or agreements which have been or will be
fully performed prior to or as of the Closing Date) either (i)
with a term of more than 12 months or (ii) with a term of less
than 12 months and which require payments in excess of $1,000,000
to which any of the Company or any of its subsidiaries is a party
or by or to which the Company or any of its subsidiaries or any
of their respective assets or properties are bound or subject:
(i) contracts and other agreements with any current or
former director or contract or other agreement with any
current or former consultant, agent or other
representative (other than (A) contracts and other
agreements that are terminable by the Company upon no
more than 30 days' notice without a termination payment
or penalty and (B) contracts and other agreements that
provide for or can be reasonably expected to provide
for an obligation to pay and/or accrue compensation of
less than $100,000 per annum, or provide for the
payment of fees or other consideration of less than
$100,000 in the aggregate to any such person), or with
any other person in which any such person has a
material interest;
(ii) contracts and other agreements with any labor union or
association representing any employee;
(iii) contracts and other agreements for the sale or lease
(other than where the Company or any subsidiary of the
Company is a lessor) of any assets or properties (other
than in the ordinary course of business) or for the
grant to any person (other than to the Company or any
subsidiary) of any preferential rights to purchase any
assets or properties;
(iv) contracts and other agreements (other than in the
ordinary course of business with respect to the
purchase of investment securities) providing for an
aggregate purchase price or payments of more than
$50,000 in any one case (or in the aggregate, in the
case of any related series of contracts and other
agreements);
21
(v) contracts and other agreements relating to the
acquisition by the Company or any subsidiary of the
Company of any operating business or block of business
of any other person;
(vi) contracts relating to the disposition or acquisition of
any investment or any interest in any person outside
the ordinary course of business if such investment or
interest has a book value of, or the disposition or
acquisition price of such investment or interest is,
$50,000 or more;
(vii) contracts or other agreements under which the Company
or any subsidiary of the Company agrees to indemnify
any party, other than in the ordinary course of
business, consistent with past practice, or to share a
Tax liability of any party;
(viii) contracts and other agreements containing covenants
restricting the Company or any subsidiary of the
Company from competing in any line of business or with
any person in any geographical area or requiring the
Company or any subsidiary of the Company to engage in
any line of business or containing covenants of any
other person not to compete with the Company or any
subsidiary of the Company in any line of business or in
any geographical area;
(ix) contracts and other agreements containing restrictions
on the incurrence of indebtedness by the Company or any
subsidiary of the Company;
(x) contracts and other agreements relating to the making
of any loan or advance by the Company or any subsidiary
of the Company (other than investments in the ordinary
course of business);
(xi) investment advisory contracts and investment company
distribution agreements entered into by the Company or
any subsidiary of the Company; and
(xii) any other material contract or other agreement not
made in the ordinary course of business.
4.13 Real Estate.
(i) All real property owned by each of the Company and its
subsidiaries and all buildings and other structures
located on such real property are listed and described
in Section 4.13(i) of the Seller Disclosure Schedule;
and (ii) all leases, subleases or other agreements or
arrangements under which either the Company or any
subsidiary of the Company is lessee, lessor (other than
such agreements or arrangements under which neither the
Company nor any subsidiary of the Company will be
lessor following the Closing and the agreement relating
to a sales office in Istanbul, Turkey) or occupier of
any real property are listed and described in Section
4.13(ii) of the Seller Disclosure Schedule.
22
4.14 Personal Property. (a) Section 4.14(a) of the Seller Disclosure
Schedule includes a description as of December 31, 1995 of each item
of tangible personal property (other than policy loans) owned or
leased (by company) by each of the Company and its subsidiaries that
is carried as either an admitted or non-admitted asset on the books of
the Company or such subsidiary (including all bonds, stocks, mortgage
loans and other investments and identifying, in the case of
securities, whether such securities are registered under Federal
securities laws or were purchased in a transaction not involving a
public offering), as the case may be, and (other than with respect to
investments) which has an admitted book value on such books of more
than $100,000.
(b) Each of the Company and its subsidiaries has, and on the Closing
Date will have, good and valid title to the bonds, stocks, mortgage
loans and other investments purported to be owned by it and reflected
in the financial statements of the Company or its subsidiaries, in
each case free and clear of any lien or other encumbrance. None of
such investments is in default on the date of this Agreement on the
payment of principal or interest.
4.15 Liens. Each of the Company's subsidiaries has good and valid
title to all of its assets and real and personal properties, in each
case free and clear of any lien or other encumbrance (other than the
requirements of Federal and state securities laws), except for (i)
liens or other encumbrances for Taxes or securing claims of
materialmen, carriers, landlords and like persons, all of which are
not yet due and payable or which are being contested in good faith, or
(ii) liens or other encumbrances of a character that do not
substantially impair the value, marketability or insurability of any
assets or properties of the Company or any subsidiary of the Company
or detract materially from the business of the Company or any
subsidiary of the Company.
4.16 Insurance. Section 4.16 of the Seller Disclosure Schedule
contains a true, complete and correct list on the date of this
Agreement of all policies of insurance and fidelity bonds issued to
the Company or any subsidiary of the Company showing the insurers,
limits, type of coverage, annual premium, deductibles and expiration
dates. All such policies and bonds are in full force and effect as of
the date of this Agreement and, in the Company's opinion, provide
adequate coverage and limits for the operations, properties and assets
of the Company or such subsidiary of the Company, as the case may be.
Neither the Company nor any such subsidiary is in default with respect
to any such policy or bond. Section 4.16 of the Seller Disclosure
Schedule lists all claims for insurance losses or uninsured losses in
excess of $100,000.00 per occurrence which are pending or which were
filed or incurred by the Company or any subsidiary of the Company
during the three year period immediately preceding the date of this
Agreement, including workers' compensation, automobile, fire and
general and product liability claims. Neither the Company nor any of
its subsidiaries has received written notice of any threatened
cancellation, denial or reduction of any of such insurance coverage.
4.17 Operations of the Company.
Except as may be set forth in the Seller Disclosure Schedule, since
December 31, 1995, none of the Company or any of its subsidiaries has:
23
(i) incurred any indebtedness for borrowed money;
(ii) declared or paid any Dividends or declared or made any
other distributions of any kind to its stockholders or
made any direct or indirect redemption, retirement,
purchase or other acquisition of any shares of its
capital stock;
(iii) made or permitted any material amendment, material
termination, material waiver or material lapse of any
right of the Company or any subsidiary of the Company
under any material contract or agreement or
governmental license, authorization or Permit of the
Company or such subsidiaries;
(iv) made any material change in the terms of the material
marketing and distribution relationships of the Company
or its subsidiaries, other than in the ordinary course
of business;
(v) made any loan or advance to its stockholders or to any
of its directors, officers or employees, consultants,
agents or other representatives (other than advances
made in the ordinary course of business), or made any
other loan or advance other than in the ordinary course
of business;
(vi) entered into any lease (as lessee) under which the
Company or any subsidiary of the Company would be
obligated to make payments in any one year of $50,000
or more, sold, abandoned or made any other disposition
of any of its assets or properties, or granted or
suffered any lien or other encumbrance on any of its
assets or properties other than liens or other
encumbrances permitted by Section 4.15;
(vii) made any material acquisition of assets, properties,
securities or business of any other person, other than
investments in the ordinary course of business;
(viii) entered into any contract or other agreement to do
any of the foregoing;
(ix) made any change in accounting methods, principles or
practices of the Company or its subsidiaries; or
(x) except in the ordinary course of business and for
amounts which are not material, made any revaluation of
any of their respective assets, including, without
limitation, writing down the value of inventory or
writing off notes or accounts receivable.
4.18 Brokers.
Except for Deutsche Morgan Grenfell/C.J. Lawrence Inc. and Gleacher
Natwest (the fees of which will be paid by the Selling Stockholders),
no broker or finder has acted directly or indirectly for the Company
or any subsidiary of the Company and neither the Company nor any
subsidiary of the Company has incurred any obligation to pay any
brokerage, finder's fee or other commission in connection with the
transactions contemplated by this Agreement.
24
4.19 Employee Benefit Plans; ERISA.
Except as set forth in Section 4.19 of the Seller Disclosure Schedule:
(a) There are no "employee pension benefit plans" as defined in
Section 3(2) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA") ("Pension Benefit Plans"), "welfare benefit
plans" as defined in Section 3(1) of ERISA ("Welfare Plans"), or stock
bonus, stock option, restricted stock, stock appreciation right, stock
purchase, bonus, incentive, deferred compensation, severance, or
vacation plans, or any other employee benefit plan, program, policy or
arrangement, covering employees (or former employees) employed in the
United States, maintained or contributed to by the Company or any of
its subsidiaries of any of their ERISA Affiliates (as hereinafter
defined), or to which the Company or any of its subsidiaries or any of
their ERISA Affiliates contributes or is obligated to make payments
thereunder or otherwise may have any liability (collectively, the
"Employee Benefit Plans"). For purposes of this Agreement, "ERISA
Affiliate" shall mean any person (as defined in Section 3(9) of ERISA)
that is or has been a member of any group of persons described in
Section 414(b), (c), (m), or (o) of the Code including the Company or
a subsidiary.
(b) The Company and each of its subsidiaries, and each of the Pension
Benefit Plans and Welfare Plans, are in material compliance with the
applicable provisions of ERISA and other applicable laws.
(c) All contributions to, and payments from, the Pension Benefit Plans
which are required to have been made in accordance with the Pension
Benefit Plans and, when applicable, Section 302 of ERISA or Section
412 of the Code have been timely made. All contributions required to
have been made in accordance with Section 302 of ERISA or Section 412
of the Code to any employee pension benefit plan (as defined in
Section 3(2) of ERISA) maintained by an ERISA Affiliate of the Company
or any of its subsidiaries have been timely made.
(d) The Pension Benefit Plans intended to qualify under Section 401 of
the Code are so qualified and have been determined by the Internal
Revenue Service ("IRS") to be so qualified and nothing has occurred
with respect to the operation of such Pension Benefit Plans which
would cause the loss of such qualification or exemption or the
imposition of any material liability, penalty or tax under ERISA or
the Code. Such plans have been or will be, on a timely basis, (i)
amended to comply with changes to the Code made by the Tax Reform Act
of 1986, the Unemployment Compensation Amendments of 1992, the Omnibus
Budget Reconciliation Act of 1993, and other applicable legislative,
regulatory or administrative requirements; and (ii) submitted to the
Internal Revenue Service for a determination of their tax
qualification, as so amended; and no such amendment will adversely
affect the qualification of such plans.
(e) Each Welfare Plan that is intended to qualify for exclusion of
benefits thereunder from the income of participants or for any other
tax-favored treatment under any provisions of the Code (including,
without limitation, Sections 79, 105, 106, 125 or 129 of the Code) is
and has been maintained in material compliance with all pertinent
provisions of the Code and Treasury Regulations thereunder.
25
(f) There are (i) no investigations pending, to the best knowledge of
the Company, by any governmental entity involving the Pension Benefit
Plans or Welfare Plans, (ii) no termination proceedings involving the
Pension Benefit Plans and (iii) no pending or, to the best of the
Company's knowledge, threatened claims (other than routine claims for
benefits), suits or proceedings against any Pension Benefit or Welfare
Plan, against the assets of any of the trusts under any Pension
Benefit or Welfare Plan or against any fiduciary of any Pension
Benefit or Welfare Plan with respect to the operation of such plan or
asserting any rights or claims to benefits under any Pension Benefit
or Welfare Plan or against the assets of any trust under such plan,
nor, to the best of the Company's knowledge, are there any facts which
would give rise to any liability in the event of any such
investigation, claim, suit or proceeding.
(g) None of the Company, any of its subsidiaries or any employee of
the foregoing, nor any trustee, administrator, other fiduciary or any
other "party in interest" or "disqualified person" with respect to the
Pension Benefit Plans or Welfare Plans, has engaged in a "prohibited
transaction" (as such term is defined in Section 4975 of the Code or
Section 406 of ERISA) which would be reasonably likely to result in a
tax or penalty on the Company or any of its subsidiaries under Section
4975 of the Code or Section 502(i) of ERISA.
(h) Neither the Pension Benefit Plans subject to Title IV of ERISA nor
any trust created thereunder has been terminated nor have there been
any "reportable events" (as defined in Section 4043 of ERISA and the
regulations thereunder) other than those events as to which the 30 day
notice period is waived under subsections .13, .14, .16, .18, .19 or
.20 of the Pension Benefit Guaranty Corporation (the "PBGC") Reg.
ss.2615, with respect to either thereof nor has there been any event
with respect to any Pension Benefit Plan requiring disclosure under
Section 4063(a) of ERISA or any event with respect to any Pension
Benefit Plan requiring disclosure under Section 4041(c)(3)(C) of
ERISA.
(i) Neither the Company nor any subsidiary or ERISA Affiliate of the
Company has incurred any currently outstanding liability to the PBGC
or to a trustee appointed under Section 4042(b) or (c) of ERISA other
than for the payment of premiums, all of which have been paid when
due. No Pension Benefit Plan has applied for, or received, a waiver of
the minimum funding standards imposed by Section 412 of the Code. The
information supplied to the actuary by the Company or any of its
subsidiaries for use in preparing the most recent actuarial report for
Pension Benefit Plans is complete and accurate in all material
respects.
(j) With respect to each of the Employee Benefit Plans, true, correct
and complete copies of the following documents have been made
available to the Purchaser: (i) the current plans and related trust
documents or summaries thereof, including amendments thereto, (ii) any
current summary plan descriptions, (iii) the most recent Forms 5500,
financial statements and actuarial reports, if applicable, (iv) the
most recent IRS determination letter, if applicable; and (v) if any
application for an IRS determination letter is pending, copies of all
such applications for determination including attachments, exhibits
and schedules thereto.
26
(k) Neither the Company, any of its subsidiaries, any organization to
which the Company is a successor or parent corporation, within the
meaning of Section 4069(b) of ERISA, nor any of their ERISA Affiliates
has engaged in any transaction, within the meaning of Section 4069(a)
of ERISA.
(l) None of the Welfare Plans maintained by the Company or any of its
subsidiaries are retiree life or retiree health insurance plans which
provide for continuing benefits or coverage for any participant or any
beneficiary of a participant following termination of employment,
except as may be required under the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended ("COBRA"), or except at the
expense of the participant or the participant's beneficiary. The
Company and each of its subsidiaries which maintain a "group health
plan" within the meaning of Section 5000(b)(1) of the Code have
complied with the notice and continuation requirements of Section
4980B of the Code, COBRA, Part 6 of Subtitle B of Title I of ERISA and
the regulations thereunder.
(m) No liability under any Pension Benefit or Welfare Plan has been
funded nor has any such obligation been satisfied with the purchase of
a contract from an insurance company as to which the Company or any of
its subsidiaries has received notice that such insurance company is in
rehabilitation.
(n) Except pursuant to the agreements which may be fully performed by
the Company prior to or as of the Closing, the consummation of the
transactions contemplated by this Agreement will not result in an
increase in the amount of compensation or benefits or accelerate the
vesting or timing of payment of any benefits or compensation payable
to or in respect of any employee of the Company or any of its
subsidiaries. Neither the Company nor any of its subsidiaries is
obligated to make any payment or transfer, accelerate any payment or
transfer, or otherwise provide any benefit that would constitute an
"excess parachute payment" under Section 280G of the Code.
(o) Neither the Company, any subsidiary nor any of the ERISA
Affiliates have announced an intention to withdraw, but have not yet
completed withdrawal, from a "multiemployer pension plan" (as defined
in Section 4001(a)(3) of ERISA). No action has been taken, and no
circumstances exist, that could reasonably result in either a partial
or complete withdrawal from such a multiemployer pension plan by the
Company, any subsidiary or any of their ERISA Affiliates.
(p) Except as disclosed in the Combined Financial Statements, as of
the most recent valuation date for each Employee Benefit Plan that is
a "defined benefit pension plan" (as defined in Section(35) of ERISA
(hereinafter a "Defined Benefit Plan")), there was not any amount of
"unfunded benefit liabilities" (as defined in Section 4001(a)(18) of
ERISA) under such Defined Benefit Plans, and the Company is not aware
of any facts or circumstances that would materially change the funded
status of any such Defined Benefit Plan.
4.20 Taxes.
Except as disclosed in Section 4.20 of the Seller Disclosure Schedule:
(i) the Company and its subsidiaries have prepared and timely filed or
will timely file with the appropriate governmental agencies all
27
franchise, income and all other material Tax returns and reports
required to be filed for any period ending on or before the Closing
Date, taking into account any extension of time to file granted to or
obtained on behalf of the Company and/or its subsidiaries; (ii) all
material Taxes of the Company and its subsidiaries in respect of the
Pre-Closing Tax Period have been paid in full to the proper
authorities, other than such Taxes as are being contested in good
faith by appropriate proceedings and/or are adequately reserved for in
accordance with generally accepted accounting principles; (iii) all
material deficiencies resulting from Tax examinations of federal,
state and foreign income, sales and franchise and all other material
Tax returns filed by the Company and its subsidiaries have either been
paid or are being contested in good faith by appropriate proceedings;
(iv) to the best knowledge of the Company, no material deficiency has
been asserted or assessed against the Company or any of its
subsidiaries, and no examination of the Company or any of its
subsidiaries is pending or threatened for any material amount of Tax
by any taxing authority; (v) no extension of the period for assessment
or collection of any material Tax is currently in effect and no
extension of time within which to file any material Tax return has
been requested, which Tax return has not since been filed; (vi) no
material Tax liens have been filed with respect to any Taxes; (vii) to
the best knowledge of the Company, there are no transfer pricing
agreements made with any taxation authority involving the Company and
its subsidiaries; (viii) none of the Selling Stockholders is a foreign
person within the meaning of Section 1445 of the Code; (ix) the
Company and each of its subsidiaries will not make any voluntary
adjustment by reason of a change in their accounting methods for any
Pre-Closing Tax Period that would affect the taxable income or
deductions of the Company or any of its subsidiaries for any period
ending after the Closing Date; and (x) the Company and its
subsidiaries have made timely payments of the Taxes required to be
deducted and withheld from the wages paid to their employees.
4.21 Environmental Matters.
(a) Except as set forth in Section 4.21 of the Seller Disclosure
Schedule:
(i) each of the Company and its subsidiaries, and the
properties and assets owned by them, and to the Actual
Knowledge of the Company, all properties operated,
leased, managed or used by the Company and its
subsidiaries are in material compliance with all
applicable Environmental Laws;
(ii) there is no Environmental Claim that is (1) pending or,
to the Actual Knowledge of the Company, threatened
against the Company or any of its subsidiaries or (2)
pending or, to the Actual Knowledge of the Company,
threatened against any person or entity whose liability
for such Environmental Claim has been retained or
assumed by contract or otherwise by the Company or any
of its subsidiaries or can be imputed or attributed by
law to the Company or any of its subsidiaries;
(iii) there are no material past or present actions,
activities, circumstances, conditions, events or
incidents arising out of, based upon, resulting from or
relating to the ownership, operation, lease or use of
any property or assets currently or formerly owned,
28
operated, leased or used by the Company or any of its
subsidiaries (or any predecessor in interest of any of
them), including, without limitation, the generation,
storage, treatment or transportation of any Hazardous
Materials, or the emission, discharge, disposal or
other Release or threatened Release of any Hazardous
Materials into the Environment which is presently
expected to result in an Environmental Claim;
(iv) no lien has been recorded under any Environmental Law
with respect to any material property, facility or
asset owned by the Company or any of its subsidiaries;
and to the Actual Knowledge of the Company, no lien has
been recorded under any Environmental Law with respect
to any material property, facility or asset, operated,
leased or managed or used by the Company or its
subsidiaries and relating to or resulting from the
Company's or its subsidiaries' operations, lease,
management or use and for which the Company or its
subsidiaries may be legally responsible;
(v) neither the Company nor any of its subsidiaries has
received written notice that it has been or may be
identified as a potentially responsible party or any
request for information under the Comprehensive
Environmental Response, Compensation and Liability Act
of 1980, as amended ("CERCLA"), or any comparable state
or local law nor has the Company or any of its
subsidiaries received any written notification that any
Hazardous Materials that it or any of their respective
predecessors in interest has used, generated, stored,
treated, handled, transported or disposed of, or
arranged for transport for treatment or disposal of, or
arranged for disposal or treatment of, has been found
at any site at which any person is conducting or plans
to conduct an investigation or other action pursuant to
any Environmental Law;
(vi) to the Actual Knowledge of the Company, there has been
no Release of Hazardous Materials at, on, upon, under,
from or into any real property in the vicinity of any
property currently owned by the Company or any of its
subsidiaries that, through soil, air, surface water or
groundwater migration or contamination, has become
located on, in or under such owned properties and, to
the Actual Knowledge of the Company, there has been no
Release of Hazardous Materials at, on, upon, under or
from any property currently or formerly operated,
leased, managed or used by the Company or any of its
subsidiaries that through soil, air, surface water or
groundwater migration or contamination has become
located on, in or under such operated, leased, managed
or used properties as resulting from or relating to the
Company's or any of its subsidiaries' operations,
lease, management or use thereof of for which in each
case the Company and any of its subsidiaries may be
legally responsible;
29
(vii) no asbestos or asbestos containing material or any
polychlorinated biphenyls are contained within products
presently manufactured and, to the best knowledge of
the Company manufactured at any time by the Company or
any of its subsidiaries and, to the Actual Knowledge of
the Company there is no friable asbestos or asbestos
containing material or any polychlorinated biphenyl in,
on or at any property or any facility or equipment
owned, operated, leased, managed or used by the Company
or any of its subsidiaries;
(viii) no property owned by the Company or any of its
subsidiaries and to the Actual Knowledge of the
Company, no property operated, leased, managed or used
by the Company or any of its subsidiaries is (A) listed
or proposed for listing on the National Priorities List
under CERCLA or (B) listed in the Comprehensive
Environmental Response, Compensation, Liability
Information System List promulgated under CERCLA, or on
any comparable list published by any governmental or
regulatory body;
(ix) no underground storage tank or related piping is
located at, under or on any property owned by the
Company or any of its subsidiaries or to the Actual
Knowledge of the Company, any property operated,
leased, managed or used by the Company, nor to the
actual knowledge of the Company, has any such tank or
piping been removed or decommissioned from or at such
property;
(x) all material environmental investigations, studies,
audits, or assessments conducted of which the Company
has actual knowledge and custody or control in relation
to the current or prior business or assets owned,
operated, leased, managed or used of the Company or any
of its subsidiaries or any real property, assets or
facility now or previously owned, operated, leased,
managed or used by the Company or any of its
subsidiaries have been delivered to the Purchaser; and
(xi) each of the Company and its subsidiaries has obtained
all permits, licenses and other authorizations
("Authorizations") required under any Environmental Law
with respect to the operation of its assets and
business and its use, ownership and operation of any
real property, and each such Authorization is in full
force and effect; and
(xii) to the Actual Knowledge of the Company, none of the
Company, nor any of its subsidiaries nor any of their
respective predecessors in interest has sent any
Hazardous Materials off-site for treatment, storage or
disposal that is presently expected to result in an
Environmental Claim.
30
(b) For purposes of Section 4.21(a):
(i) "Actual Knowledge of the Company" means the actual
knowledge of individuals at the corporate management
level of the Company and its subsidiaries;
(ii) "Environment" means any surface water, ground water,
drinking water supply, land surface or subsurface
strata, ambient air and including, without limitation,
any indoor location;
(iii) "Environmental Claim" means (A) any written notice or
claim by any person, including without limitation any
governmental or regulatory body, alleging potential
liability (including, without limitation, potential
liability for investigatory costs, cleanup costs,
response costs, governmental costs, or harm, injuries
or damages to any person, property or natural
resources, and any fines or penalties) arising out of,
based upon, resulting from or relating to (1) the
emission, discharge, disposal or other Release or
threatened Release in or into the Environment of any
Hazardous Materials or (2) circumstances forming the
basis of any violation, or alleged violation, of any
applicable Environmental Law or (B) any Losses arising
out of, based upon, resulting from or relating to any
Remedial Action undertaken by the Purchaser as required
by Environmental Laws and arising out of, based upon,
resulting from or relating to the operations of the
Company or any of its subsidiaries or any condition or
circumstances relating to the Company or any of its
subsidiaries, in each case, as existing on or prior to
the Closing Date;
(iv) "Environmental Laws" means all currently applicable
federal, state, and local laws, codes, and regulations
relating to pollution, occupational safety or health,
the protection of the Environment or the emission,
discharge, disposal or other Release or threatened
Release of Hazardous Materials in or into the
Environment;
(v) "Hazardous Materials" means pollutants, contaminants or
chemical, industrial, hazardous or toxic materials or
wastes, and includes, without limitation, asbestos or
asbestos-containing materials, PCBs and petroleum, oil
or petroleum or oil products, derivatives or
constituents; and
(vi) "Release" means any past or present spilling, leaking,
pumping, pouring, emitting, emptying, discharging,
injecting, escaping, leaching, dumping or disposing of
Hazardous Materials into the Environment (including the
abandonment or discarding into the Environment of
barrels, containers or other closed receptacles
containing any Hazardous Materials).
31
4.22 Absence of Undisclosed Liabilities.
Neither the Company nor any of its subsidiaries has any liabilities or
obligations of any nature, whether absolute, accrued, unmatured,
contingent or otherwise, or any unsatisfied judgments or any leases of
personalty or realty or unusual or extraordinary commitments, that
would be required to be listed as liabilities on the liability side of
a balance sheet prepared in accordance with GAAP or disclosed in the
notes thereto, without regard to materiality, except for (i) the
liabilities recorded on the Combined Financial Statements and the
notes thereto, (ii) liabilities or obligations incurred in the
ordinary course of business and consistent with past practice since
December 31, 1995, (iii) liabilities, obligations, leases or
commitments described on the Seller Disclosure Schedule and (iv)
liabilities which will be fully performed by the Company prior to or
as of the Closing.
4.23 Labor Matters.
Each of the Company and its subsidiaries is in compliance in all
material respects with all applicable laws respecting employment and
employment practices, terms and conditions of employment and wages and
hours, and neither the Company nor any of its subsidiaries is engaged
in any unfair labor practice. There is no labor strike, slowdown or
stoppage pending (or, to the best knowledge of the Company, any labor
strike or stoppage threatened) against or affecting the Company or any
of its subsidiaries. No petition for certification has been filed and
is pending before the National Labor Relations Board with respect to
any employees of the Company or any of its subsidiaries who are not
currently organized.
4.24 Patents and Trademarks.
The Company and its subsidiaries own or have the right to use all
patents, patent applications, trademarks, trademark applications,
trade names, inventions, processes, know-how and trade secrets
necessary to the conduct of their respective businesses ("Proprietary
Rights"). All material issued patents and trademark registrations and
pending patent and trademark applications of the Proprietary Rights
have previously been made available to the Purchaser. No rights or
licenses to use Proprietary Rights have been granted by the Company or
its subsidiaries except those listed in Section 4.24 of the Seller
Disclosure Schedule; and no contrary assertion has been made to the
Company or any of its subsidiaries or notice of conflict with any
asserted right of others has been given by any person. The Company has
not yet given notice of any asserted claim or conflict to a third
party with respect to the Company's Proprietary Rights. True and
complete copies of all material license agreements under which the
Company or any of its subsidiaries is a licensor or licensee have been
made available to the Purchaser.
4.25 Inventory.
Except as disclosed in Section 4.25 of the Seller Disclosure Schedule,
all inventory reflected on the Combined Financial Statements and all
inventory acquired since December 31, 1995, in either instance, other
than inventory sold in the ordinary course of business consistent with
past practice (the "Business Inventory") is, as of the date hereof,
32
the property of the Company and its subsidiaries, free and clear of
any lien, has not been pledged as collateral, and is not held on
consignment from others.
4.26 Balance Sheet Reserves.
As of the Closing Date, the reserves for accounts receivable reflected
in the Closing Date Statements have been established in accordance
with GAAP and such reserves, taken as a whole, are adequate to cover
any losses relating to collectability of accounts receivable; provided
that no material change in the reserve accrual policies or collection
policies of the Company and its subsidiaries is instituted by the
Purchaser which affects the adequacy of such reserves on the Closing
Date Statements.
5. Representations and Warranties of each Selling Stockholder. Each Selling
Stockholder, severally and not jointly, represents and warrants to the
Purchaser as follows:
5.1 Authority. Each Selling Stockholder has the legal capacity to
execute and deliver this Agreement and to perform its or her
obligations hereunder and to consummate the transactions contemplated
hereby.
5.2 Governmental Consents and Approvals. The execution and delivery of
this Agreement by each Selling Stockholder, the performance by each
Selling Stockholder of its or her obligations hereunder and the
consummation by each Selling Stockholder of the transactions
contemplated hereby do not and will not require any Selling
Stockholder to obtain any material consent, approval or action of, or
make any filing material with or give any notice to, any governmental
or regulatory body or judicial authority, except as set forth in
Section 5.2 of the Seller Disclosure Schedule.
5.3 No Breach. The execution, delivery and performance by each Selling
Stockholder of this Agreement and the consummation by each Selling
Stockholder of the transactions contemplated hereby in accordance with
the terms and conditions hereof will not, except as set forth in
Section 5.3 of the Seller Disclosure Schedule: (i) violate, conflict
with or result in the breach of any of the provisions of any material
contract or other agreement to which any Selling Stockholder is a
party or by or to which any Selling Stockholder or any of its or her
respective assets or properties may be bound or subject or, (ii) upon
receipt of the approvals referred to in Section 5.2 of the Seller
Disclosure Schedule, violate any existing term or provision of any
material law, regulation, order, writ, judgment, injunction or decree
applicable to any Selling Stockholder or any of its or her respective
assets or properties.
5.4 Title. Upon delivery of the payment for the Shares as herein
provided, the Purchaser will acquire good title to the Shares
delivered by each Selling Stockholder, free and clear of any lien or
other encumbrance (other than (i) liens or other encumbrances created
by the Purchaser and (ii) the requirements of the Federal and state
securities laws and state insurance laws respecting limitations on the
subsequent transfer thereof).
5.5 Brokers. Except for Deutsche Morgan Grenfell/C.J. Lawrence Inc.
and Gleacher Natwest, no broker or finder has acted directly or
indirectly for any Selling Stockholder, nor has any Selling
33
Stockholder incurred any obligation to pay any brokerage, finder's fee
or other commission in connection with the transactions contemplated
by this Agreement.
6. Representations and Warranties of the Purchaser. The Purchaser represents
and warrants to each of the Selling Stockholders and the Company as
follows:
6.1 Organization, Standing and Authority. The Purchaser is a
corporation duly organized, validly existing and in good standing
under the laws of its jurisdiction of incorporation and has all
requisite corporate power and authority to execute and deliver this
Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated hereby.
6.2 Execution and Delivery. The execution, delivery and performance of
this Agreement and the consummation of the transactions contemplated
hereby have been duly and validly authorized by all necessary
corporate action on the part of the Purchaser. This Agreement has been
duly executed and delivered by the Purchaser and constitutes the valid
and binding obligation of the Purchaser, enforceable against the
Purchaser in accordance with its terms, subject to the effects of
bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws relating to or affecting creditors'
rights generally, general equitable principles (whether considered in
a proceeding in equity or at law) or an implied covenant of good faith
and fair dealing.
6.3 Governmental Consents and Approvals. The execution and delivery of
this Agreement by the Purchaser, the performance by the Purchaser of
its obligations hereunder and the consummation of the transactions
contemplated hereby do not and will not require the Purchaser to
obtain any material consent, approval or action of, or make any filing
with or give any notice to, any person, governmental or regulatory
body or judicial authority except (i) as set forth in Section 6.3 of
the Purchaser Disclosure Schedule and (ii) those which, if not
obtained, could not, individually or in the aggregate, reasonably be
expected to have a material adverse effect on the Purchaser's ability
to consummate the transactions contemplated hereby.
6.4 No Breach. The execution, delivery and performance by the
Purchaser of this Agreement and the consummation of the transactions
contemplated hereby in accordance with the terms and conditions hereof
will not: (i) violate any provision of the Articles of Incorporation
or By-laws of the Purchaser, (ii) violate, conflict with or result in
the breach of any of the provisions of any material contract or other
agreement to which the Purchaser is a party or by or to which it or
any of its assets or properties may be bound or subject or (iii) upon
receipt of the approvals referred to in Section 6.3 of the Purchaser
Disclosure Schedule, violate any existing term or provision of any
material law, regulation, order, writ, judgment, injunction or decree
applicable to the Purchaser.
6.5 Financing. The Purchaser has sufficient funds to purchase the
Shares in accordance with the terms of this Agreement and to pay all
related fees and expenses.
6.6 Purchase not for Distribution. The Shares to be acquired under the
terms of this Agreement will be acquired by the Purchaser for its own
account and not with a view to distribution. The Purchaser will not
34
resell, transfer, assign or distribute the Shares, except in
compliance with the registration requirements of the Securities Act of
1933, as amended, or pursuant to available exemption therefrom.
6.7 Brokers. No broker or finder has acted directly or indirectly for
the Purchaser, nor has the Purchaser incurred any obligation to pay
any brokerage, finder's fee or other commission in connection with the
transactions contemplated by this Agreement.
7. Covenants and Agreements. The parties covenant and agree as follows:
7.1 Conduct of Business. From the date hereof through the Closing
Date, except as may otherwise be expressly required or permitted by
this Agreement, each of the Selling Stockholders and the Company
covenant that:
(a) The Company will, and will cause each of the Company
and its subsidiaries to, (i) conduct the business of
the Company and its subsidiaries only in the ordinary
course of business, and (ii) use all commercially
reasonable efforts to (A) preserve intact in all
material respects the present business organization,
reputation, and policyholder relations of each of the
Company and its subsidiaries, and (B) maintain, in the
ordinary course of business, in full force and effect
all contracts and agreements referred to in Section
4.12 other than such contracts and agreements (1) that
expire in accordance with their terms or (2) are
terminated by any party thereto other than the Company
or any subsidiary of the Company and other than
contracts and agreements, the failure to so maintain
does not have and cannot reasonably be expected to have
a Material Adverse Effect.
(b) The Company will, and will cause each of its
subsidiaries to, use commercially reasonable efforts to
(i) maintain all material Permits (including licenses,
qualifications, and authorizations) of each of the
Company and its subsidiaries to do business in each
jurisdiction in which it is licensed, qualified, or
authorized and (ii) continue in all material respects
and consistent with practice on the date hereof all
marketing and selling activities relating to the
business, operations, and affairs of each of the
Company and its subsidiaries.
(c) Neither the Company nor any of its subsidiaries will
take any action that would result in a breach of any
representation, warranty or covenant of this Agreement
(including without limitation Section 4.17 hereof).
(d) Neither the Selling Shareholders, the Company, nor any
of its subsidiaries shall without the consent of the
Purchaser, (i) increase in any manner the compensation
of any of the Company's or its subsidiaries' directors
or officers or employees, except in the ordinary course
of business and consistent with past practice; (ii)
other than the fulfillment of existing obligations, pay
or agree to pay any pension, retirement allowance or
35
other employee benefit, or enter into or amend any
contract, agreement or understanding with any of the
Company's or its subsidiaries' past or present
employees relating to any such pension, retirement
allowance or other employee benefit; (iii) enter into
or amend any employment, consulting or severance
agreement with, any person; (iv) enter into or amend
any contract, agreement or understanding with any of
the Company's or its subsidiaries' past or present
employees; and (v) except in the ordinary course of
business and consistent with past practice or as may be
required to comply with applicable law, become
obligated under any new pension plan, welfare plan,
multiemployer plan, employee benefit plan, benefit
arrangement, or similar plan or arrangement or amend
any such plans, or arrangements. To the extent reserved
against in the 1995 Consolidated Financial Statements,
payment of cash compensation in lieu of unused vacation
time shall not be considered an increase in
compensation for purposes of the foregoing.
7.2 Corporate Examinations and Investigations. Prior to the Closing
Date, the Purchaser shall be entitled, through its employees and
representatives, to make such reasonable investigation of the assets,
liabilities, properties, business and operations of the Company and
its subsidiaries, and such reasonable examination of their books,
records and financial condition as the Purchaser wishes. Any such
investigation and examination shall be conducted at reasonable times
and under reasonable circumstances, and each of the Selling
Stockholders, the Company and its subsidiaries shall cooperate fully
therein. In order that the Purchaser may have full opportunity to make
such business, accounting and legal review, examination or
investigation as it may wish of the business and affairs of the
Company and its subsidiaries, each of the Selling Stockholders shall
furnish and shall cause the Company and its subsidiaries to furnish
the representatives of the Purchaser during such period with all such
information and copies of such documents concerning the affairs of the
Company and its subsidiaries as such representatives may reasonably
request and shall cause their officers, employees, consultants,
agents, accountants and attorneys to cooperate fully with such
representatives in connection with such review and examination,
provided, that such review and examination shall not unreasonably
interfere with the operation of the business of the Company and its
subsidiaries. If this Agreement terminates, the Purchaser shall keep
confidential and shall not use in any manner any information or
documents obtained from any Selling Stockholder, the Company or any of
its subsidiaries concerning the Company or any of its subsidiaries,
their respective assets, liabilities, properties, business and
operations, unless readily ascertainable from public or published
information, or trade sources, or already known or subsequently
developed by the Purchaser or any of its affiliates independently of
any investigation of any of the Selling Stockholders, the Company and
its subsidiaries or received from a third party not known by the
Purchaser to be under an obligation to any of the Selling
Stockholders, the Company or any of its subsidiaries to keep such
information confidential. If this Agreement terminates, any documents
obtained by the Purchaser from the Selling Stockholders, the Company
or any of its subsidiaries shall promptly be returned.
36
7.3 Regulatory Approvals.
(a) The Purchaser shall (i) take all reasonable steps
necessary or appropriate, and use all commercially
reasonable efforts, to obtain as promptly as
practicable all necessary approvals, authorizations and
consents of governmental and regulatory bodies required
to be obtained by the Purchaser to consummate the
transactions contemplated by this Agreement and (ii)
cooperate with the Company in seeking to obtain all
such approvals, authorizations and consents. The
Purchaser shall use its reasonable best efforts to
provide such information to governmental and regulatory
bodies as such bodies or the Company may reasonably
request.
(b) Each of the Selling Stockholders and the Company shall
(i) take all reasonable steps necessary or appropriate,
and use all commercially reasonable efforts, to obtain
as promptly as practicable all necessary approvals,
authorizations and consents of governmental and
regulatory bodies required to be obtained by them to
consummate the transactions contemplated by this
Agreement and (ii) cooperate with the Purchaser in
seeking to obtain all such approvals, authorizations
and consents. Each of the Selling Stockholders and the
Company shall, and the Company shall cause its
subsidiaries to, use their reasonable best efforts to
provide such information and communications to
governmental and regulatory bodies as such agencies or
the Purchaser may reasonably request.
(c) Each of the parties shall provide to the other party
copies of all applications in advance of filing or
submission of such applications to governmental or
regulatory bodies in connection with this Agreement.
7.4 Further Assurances. Each of the parties shall execute such
documents and other papers and take such further actions as may be
reasonably required or desirable prior to and after the Closing Date
to carry out the provisions of this Agreement and the transactions
contemplated hereby. Each such party shall use its reasonable best
efforts to fulfill or obtain the fulfillment of the conditions to the
Closing as promptly as practicable. The Company and the Selling
Stockholders acknowledge that the Purchaser will be required to file
with the Securities and Exchange Commission a report on Form 8-K which
must include audited financial statements of the Company and its
subsidiaries. The Company will use its reasonable best efforts to
cooperate with the Purchaser and the Purchaser's accountants in
preparing such audited financial statements prior to the Closing.
Without limiting the generality of the foregoing, the parties shall
use their reasonable best efforts to file promptly with the FTC and
Justice complete and accurate notification and report forms with
37
respect to the transactions contemplated hereby pursuant to HSR, and
to file such additional information and documentary materials as may
be requested pursuant to HSR, sufficiently in advance of the Closing
Date to allow the period of time specified by HSR, and any extensions
thereof, to expire prior to the Closing Date. Notwithstanding any
provision of this Agreement, the Purchaser shall not be obligated to
contest in court or before any governmental or regulatory body any
action or decision taken by the FTC or Justice or any other
governmental or regulatory body challenging the consummation of the
transactions contemplated by this Agreement, and nothing contained in
this Agreement shall require the Purchaser or its affiliates to agree
to hold separate or to divest the Shares or any of the assets,
properties or businesses of the Company or the Purchaser or any of its
affiliates or otherwise agree to the imposition of any limitation on
the ability of the Purchaser to exercise full rights of ownership of
the Shares or the ability of the Purchaser to conduct the businesses
conducted by the Company or the businesses contemplated hereby.
7.5 Amendment of Disclosure Schedules. From time to time prior to the
Closing Date, any of the parties hereto may deliver to the other a
written supplement or amendment to the sections of the Disclosure
Schedules relating to their respective representations and warranties
in this Agreement with respect to any matter, condition or occurrence
hereafter arising which, if existing or occurring on the date hereof,
would have been required to be set forth or described in their
respective sections of the Disclosure Schedules. In the event that the
Purchaser, on the one hand, or the other parties hereto, on the other
hand, so supplement or amend sections of the Disclosure Schedules, no
such supplement or amendment will be effective prior to the Closing,
including for purposes of determining whether the conditions to any
party's obligations under Section 8 or 9 hereof have been satisfied,
but the Disclosure Schedules as so supplemented and amended shall, as
of the Closing and thereafter, be the Disclosure Schedules for
purposes of applying Section 12 hereof. In the event the Closing does
not occur, the initial Disclosure Schedules shall constitute the
Disclosure Schedules for determining any inaccuracy in, or breach of,
any representations and warranties of any party.
7.6 Assignment of Family Trust Notes. The Company agrees not to assign
any of its rights and interests in the Notes listed on Section 7.6 of
the Seller Disclosure Schedule without the prior written consent of
Trustee D, which consent shall not be unreasonably withheld.
7.7 Guarantee. If requested by the Board of Directors of the Company,
the Purchaser agrees to provide a full and unconditional guarantee
(subject to the Purchaser's right to offset against amounts owing to
the Company from the Notes listed on Section 7.6 of the Seller
Disclosure Schedule) relating to the Company's obligations under the
Notes listed on Section 7.7 of the Seller Disclosure Schedule.
7.8 No Solicitation. Each of the Company and the Selling Stockholders
agrees that, prior to the Closing Date, it shall not, and shall not
authorize or permit any of the Company's subsidiaries or any of
directors, officers, employees, agents or representatives of the
Company or its subsidiaries or any agents or representatives of the
Selling Stockholders to, directly or indirectly, solicit, initiate or
38
encourage (including by way of furnishing or disclosing non-public
information) any inquiries or the making of any proposal with respect
to any merger, consolidation or other business combination involving
the Company or its subsidiaries or acquisition of any kind of all or
substantially all of the assets or capital stock of the Company and
its subsidiaries taken as a whole (an "Acquisition Transaction") or
negotiate, explore or otherwise communicate in any way with any third
party (other than the Purchaser) with respect to any Acquisition
Transaction or enter into any agreement, arrangement or understanding
requiring it to abandon, terminate or fail to consummate the
transactions contemplated hereby.
7.9 Environmental Supplemental Review. To supplement the Environmental
Assessment of the Mearl Corporation Facilities prepared for Simpson
Thacher & Bartlett on behalf of Mearl Corporation by ENVIRON
Corporation ("Environ"), dated March 8, 1996 (the "Environ Report") to
the extent necessary to develop the Environmental Estimate, the
Company and the Purchaser shall jointly retain Environ to undertake a
review of the following matters to the extent they are reasonably
likely to result in an Environmental Claim: (i) the Company's and each
of the subsidiaries' currently owned, leased or operated real property
and facilities, which review may include, without limitation, sampling
and testing of soil and ground-water to the extent reasonably
necessary to identify and estimate actual and potential liability
arising from any past Releases and threatened Releases of Hazardous
Materials into the Environment at, under, or impacting such real
property and facilities; (ii) the Company's and each of the
subsidiaries' formerly owned, operated or leased real property and
facilities, which review may include, as appropriate, any of the
following but shall be limited to the following: interviews with
former and current employees of the Company and each of its
subsidiaries, review of records of the Company and each of its
subsidiaries, review of environmental databases and other publicly
available information, contacts with any relevant governmental or
regulatory body and review of relevant documents maintained or
generated by such body; (iii) the Company's and each of its
subsidiaries' actual or alleged disposal of, arranging for disposal or
treatment of, or arranging for transportation for disposal or
treatment of Hazardous Materials at any location other than a
currently or formerly owned, operated or leased real property or
facility, which review may include, as appropriate, any of the
following but shall be limited to the following: interviews with
former and current employees of the Company and each of its
subsidiaries, review of records of the Company and each of its
subsidiaries, review of environmental databases and other publicly
available information, contacts with any relevant governmental or
regulatory body and review of relevant documents maintained or
generated by such body; and (iv) the Company and each of its
subsidiaries' compliance with Environmental Laws with respect to
current and former operations, which review may include, as
appropriate, any of the following but shall be limited to the
following: site visits to the Company's and each of its subsidiaries'
currently owned, operated or leased real property and facilities,
interviews with current and former employees of the Company and each
of its subsidiaries, review of records of the Company and each of its
39
subsidiaries, review of environmental databases and other publicly
available information, contacts with any relevant governmental or
regulatory body and review of relevant documents maintained or
generated by such body (collectively, the "Supplemental Review"). The
Selling Stockholders, the Company and the Purchaser shall use their
reasonable best efforts to cause Environ to complete the Supplemental
Review within sixty (60) days after the Closing Date and, promptly
following such completion, to estimate the total of all Losses which
could reasonably be expected to result from any Environmental Claim
against or relating to the Company or any of its subsidiaries within
five (5) years after the Closing Date (the "Environmental Estimate").
The fees and expenses of Environ shall be borne (i) 50% by the Company
(and such expense shall be paid or accrued on the Closing Date
Statements to the extent unpaid) and (ii) 50% by the Purchaser.
8. Conditions Precedent to the Obligations of the Purchaser. The obligation
of the Purchaser to consummate the transactions contemplated by this
Agreement shall be subject to the satisfaction or waiver by the Purchaser
of the following conditions:
8.1 Representations and Warranties; Covenants and Agreements. (a) The
representations and warranties of the Selling Stockholders and the
Company contained in this Agreement and in any certificate or document
executed and delivered by the Selling Stockholders and the Company
pursuant to this Agreement shall be true, accurate and complete in all
respects except where the failure to be true, accurate and complete in
all respects would not result in a Material Adverse Effect on and as
of the Closing Date with the same force and effect as though made on
and as of the Closing Date (except that any such representations and
warranties that are given as of a specified date and relate solely to
a specified date or period shall be true, accurate and complete in all
respects except where the failure to be true, accurate and complete in
all respects would not result in a Material Adverse Effect as of such
date or period). The Company shall have delivered to the Purchaser a
certificate, dated the Closing Date and signed on its behalf by one of
its Executive Officers, to the foregoing effect. Each Selling
Stockholder shall have delivered to the Purchaser a certificate, dated
the Closing Date, to the foregoing effect.
(b) Each of the Selling Stockholders and the Company shall
have performed and complied in all material respects
with all covenants and agreements required by this
Agreement to be performed or complied with by them on
or prior to the Closing Date. The Company shall have
delivered to the Purchaser a certificate, dated the
Closing Date and signed on its behalf by one of its
Executive Officers, to the foregoing effect.
8.2 Governmental Permits and Approvals; Illegality. (a) All approvals,
authorizations, consents, Permits and licenses from governmental and
regulatory bodies set forth in Section 4.3 of the Seller Disclosure
Schedule and Section 6.3 of the Purchaser Disclosure Schedule required
for the transactions contemplated by this Agreement shall have been
obtained and shall be in full force and effect and shall no longer be
subject to any conditions or limitations other than the occurrence of
the Closing (and other than customary conditions uniformly imposed by
regulatory authorities in connection with similar acquisitions), and
the Purchaser shall have been furnished with appropriate evidence,
reasonably satisfactory to it and its counsel, of the granting of such
approvals, authorizations, consents, Permits and licenses.
40
(b) There shall not be in effect any statute, rule,
regulation or order of any court, governmental or
regulatory body which prohibits or makes illegal the
transactions contemplated by this Agreement.
8.3 Litigation. There shall be no Litigation pending or threatened
which seeks to enjoin, restrain or prohibit the consummation of the
transactions contemplated by this Agreement or to impose limitations
on the ability of the Purchaser to exercise full rights of ownership
of the Shares or to require the divestiture by the Purchaser of the
Shares or by the Company, the Purchaser or any of its affiliates of
any assets or businesses, which the Purchaser reasonably believes
presents a material risk that it or its affiliates (including the
Company and its subsidiaries after the Closing Date) would not realize
substantially all of the benefits of the transactions contemplated by
this Agreement or would suffer substantial monetary damages (without
regard to whether such Litigation is being indemnified against under
this Agreement).
8.4 Third Party Consents. There shall have been obtained all consents
and approvals from parties to contracts or other agreements with any
of the Selling Stockholders and the Company and its subsidiaries that
are required in connection with the performance by any of the Selling
Stockholders and the Company and its subsidiaries of their obligations
under this Agreement, except for such consents and approvals the
failure of which so to have obtained could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.
8.5 No Material Adverse Effect. Since December 31, 1995, there shall
not have been a Material Adverse Effect or any event that,
individually or in the aggregate, could reasonably be expected to
result in a Material Adverse Effect.
8.6 Opinion of Counsel to Company. The Purchaser shall have received
the opinion of Simpson Thacher & Bartlett, counsel to the Company, and
a special New Jersey counsel to the Company, dated the Closing Date,
addressed to the Purchaser, substantially in the form of Exhibit B-1
and B-2, respectively.
8.7 Corporate Action. The Purchaser shall have received: (i) a copy of
the resolution or resolutions duly adopted by the Board of Directors
(or a duly authorized committee thereof) of the Company authorizing
the execution, delivery and performance by the Company of this
Agreement, certified by the Secretary or an Assistant Secretary of the
Company, (ii) a certificate of the Secretary or an Assistant Secretary
of the Company as to the incumbency and signatures of the officers of
the Company executing this Agreement and
(iii) evidence reasonably satisfactory to the Purchaser that
all directors of the Company have resigned from their
respective positions.
8.8 Discharge of Certain Indebtedness. At or prior to the Closing, the
outstanding indebtedness of certain affiliates to the Company listed
on Section 8.8 of the Seller Disclosure Schedule shall have been
repaid in full.
8.9 Escrow Agreement. The Selling Stockholders shall have executed and
delivered the Escrow Agreement.
41
8.10 Hart-Scott Rodino. The waiting period under HSR, including any
extension thereof, shall have expired or been terminated.
9. Conditions Precedent to the Obligations of the Selling Stockholders and
the Company. The obligations of each of the Selling Stockholders and the
Company to consummate the transactions contemplated by this Agreement
shall be subject to the fulfillment or, where permissible, waiver by
each of the Selling Stockholders and the Company of the following
conditions:
9.1 Representations and Warranties; Covenants and Agreements. (a) The
representations and warranties of the Purchaser contained in this
Agreement and in any certificate or document executed and delivered by
it pursuant to this Agreement shall be true, accurate and complete in
all material respects on and as of the Closing Date with the same
force and effect as though made on and as of the Closing Date (except
that any such representations and warranties that are given as of a
specified date and relate solely to a specified date or period shall
be true, accurate and complete in all material respects as of such
date or period). The Purchaser shall have delivered to each of the
Selling Stockholders and the Company a certificate, dated the Closing
Date and signed on its behalf by one of its Executive Officers to the
foregoing effect.
(b) The Purchaser shall have performed and complied in all
material respects with all covenants and agreements
required by this Agreement to be performed or complied
with by it on or prior to the Closing Date, except for
failures to perform and comply which could not,
individually or in the aggregate, reasonably be
expected to have a material adverse effect on the
Purchaser's ability to consummate the transactions
contemplated hereby. The Purchaser shall have delivered
to each of the Selling Stockholders and the Company a
certificate, dated the Closing Date and signed by one
of its Executive Officers, to the foregoing effect.
9.2 Governmental Permits and Approvals; Illegality. (a) All approvals,
authorizations, consents, Permits and licenses from governmental and
regulatory bodies set forth in Section 4.3 of the Seller Disclosure
Schedule and Section 6.3 of the Purchaser Disclosure Schedule required
for the transactions contemplated by this Agreement shall have been
obtained and be in full force and effect and shall no longer be
subject to any conditions or limitations other than the occurrence of
the Closing (and other than customary conditions uniformly imposed by
regulatory authorities in connection with similar acquisitions), and
each of the Selling Stockholders and the Company shall have been
furnished with appropriate evidence, reasonably satisfactory to it and
its counsel, of the granting of such approvals, authorizations,
consents, Permits and licenses.
(b) There shall not be in effect any statute, rule,
regulation or order of any court, governmental or
regulatory body which prohibits or makes illegal the
transactions contemplated by this Agreement.
9.3 Litigation. There shall be no Litigation pending or threatened
which seeks to enjoin, restrain or prohibit the consummation of the
transactions contemplated by this Agreement, which any Selling
42
Stockholder or the Company believes presents a material risk that it
or its affiliates (not including the Company and its subsidiaries
after the Closing Date) would suffer substantial monetary damages
(without regard to whether such Litigation is being indemnified
against under this Agreement).
9.4 Third Party Consents. There shall have been obtained all consents
and approvals from parties to contracts or other agreements with the
Purchaser that are required in connection with the performance by the
Purchaser of its obligations under this Agreement, except for such
consents and approvals the failure of which so to have obtained could
not, individually or in the aggregate, reasonably be expected to have
a material adverse effect on the Purchaser's ability to consummate the
transactions contemplated hereby.
9.5 Opinion of Counsel to the Purchaser. Each of the Selling
Stockholders and the Company shall have received the opinion of Cahill
Gordon & Reindel, Counsel to the Purchaser, dated the Closing Date,
addressed to each of the Selling Stockholders and the Company,
substantially in the form of Exhibit C.
9.6 Corporate Action. Each of the Selling Stockholders and the Company
shall have received: (i) a copy of the resolution or resolutions duly
adopted by the Board of Directors (or a duly authorized committee
thereof) of the Purchaser authorizing the execution, delivery and
performance by the Purchaser of this Agreement, certified by the
Secretary or an Assistant Secretary of the Purchaser; and (ii) a
certificate of the Secretary or an Assistant Secretary of the
Purchaser as to the incumbency and signatures of the officers of the
Purchaser executing this Agreement.
9.7 Hart-Scott Rodino. The waiting period under HSR, including any
extension thereof, shall have expired or been terminated.
10. Survival of Representations and Warranties. The Purchaser has the right
to rely fully upon the representations, warranties, covenants and
agreements of each of the Selling Stockholders and the Company contained
in this Agreement. Each of the Selling Stockholders and the Company has
the right to rely fully upon the representations, warranties, covenants
and agreements of the Purchaser contained in this Agreement. All such
representations and warranties shall survive three years from the
Closing Date, except that (i) if the Environmental Estimate is more than
$10,000,000, the representations and warranties contained in Section
4.21 shall survive five years from the Closing Date and (ii)
representations and warranties contained in Section 4.20 (such matters
being provided for by Section 11 hereof) shall not survive the Closing.
11. Tax Matters.
11.1 Tax Indemnification.
(a) Following the Closing and until the expiration of the
applicable statute of limitations, subject to Section
11(f), the Selling Stockholders, severally and not
jointly, shall indemnify the Purchaser and hold it
harmless from and against any and all liability for
Taxes of the Company and its subsidiaries for the
Pre-Closing Tax Period. Notwithstanding the foregoing,
the Selling Stockholders shall not indemnify and hold
43
harmless the Purchaser from any liability for Taxes
attributable to (i) Taxes of the Company and its
subsidiaries for the Pre-Closing Tax Period to the
extent of the accrual, if any, established therefor in
the Closing Date Statements or (ii) any action taken
after the Closing by the Purchaser (a "Purchaser Tax
Act") or attributable to a breach by the Purchaser of
any covenant contained in Section 11.2 of this
Agreement. Estimated Taxes paid by the Company and its
subsidiaries on or prior to the Closing Date shall be
credited to Taxes with respect to the Pre-Closing Tax
Period. The Selling Stockholders' responsibility under
this Section 11.1 to indemnify and hold harmless the
Purchaser against, or to pay or cause to be paid, any
Taxes shall not include any such responsibility with
respect to the amount of any Taxes collected or
withheld by the Company and its subsidiaries
(including, without limitation, all sales and use taxes
and all withholding or employment taxes) with respect
to events occurring through the Closing Date, the
proceeds of which are held by the Company or any of its
subsidiary on the Closing Date.
(b) Following the Closing and until the expiration of the
applicable statute of limitations, subject to Section
11.1(f), the Purchaser shall, and shall cause the
Company and each subsidiary to, indemnify the Selling
Stockholders and hold them harmless from (i) all
liability for Taxes of the Company or any subsidiary of
the Company for any taxable period ending after the
Closing Date (except to the extent such taxable period
began before the Closing Date, in which case the
Purchaser's indemnity will cover only that portion of
any such Taxes that are not attributable to the
Pre-Closing Tax Period), (ii) all liability for Taxes
attributable to a Purchaser Tax Act or to a breach by
the Purchaser of any covenant contained in Section
11.2, and (iii) all liability for Taxes of the Company
or any subsidiary of the Company for the Pre-Closing
Tax Period to the extent of the accrual, if any,
established therefor in the Closing Date Statements.
(c) In the case of any Straddle Period:
(i) real, personal and intangible property Taxes
("property Taxes") of the Company or any subsidiary of
the Company for the Pre-Closing Tax Period shall be
equal to the amount of such property Taxes for the
entire Straddle Period multiplied by a fraction, the
numerator of which is the number of days during the
Straddle Period that are in the Pre-Closing Tax Period
and the denominator of which is the total number of
days in the Straddle Period; and
(ii) the Taxes of the Company or any subsidiary of the
Company (other than property Taxes) for the Pre-Closing
Tax Period shall be computed as if such taxable period
ended as of the close of business on the Closing Date.
44
(d) The Selling Stockholders' indemnity obligation in
respect of Taxes for a Straddle Period shall initially
be effected by payment to the Purchaser of the excess
of (i) such Taxes for the Pre-Closing Tax Period over
(ii) the amount of such Taxes paid by the Company or
any subsidiary of the Company on or prior to the
Closing Date. Each of the Selling Stockholders shall
initially pay its pro rata portion of such excess to
the Purchaser within 30 days after written demand
thereof is made by the Purchaser (but no earlier than
the date on which the Taxes for the relevant taxable
period are required to be paid to the relevant Taxing
Authority). If the amount of such Taxes paid by the
Selling Stockholders at any time plus the amount of
such Taxes paid by the Company or any subsidiary of the
Company on or prior to the Closing Date exceeds the
amount of such Taxes for the Pre-Closing Tax Period,
the Purchaser shall pay to the Selling Stockholders the
amount of such excess (i) in the case of property
Taxes, at the Closing (the "Closing Tax Adjustment
Amount") and (ii) in all other cases, within 30 days
after the Return with respect to the final liability
for such Taxes is required to be filed with the
relevant Taxing Authority. The payments to be made
pursuant to this paragraph by the Selling Stockholders
or the Purchaser with respect to a Straddle Period
shall be appropriately adjusted to reflect any final
determination (which shall include the execution of
Form 870-AD or successor form) with respect to Straddle
Period Taxes.
(e) Procedures Relating to Indemnification of Tax Claims.
If a claim shall be made by any Taxing Authority,
which, if successful, might result in an indemnity
payment to a party or parties (the "First Party"),
pursuant to this Section 11.1(e), the First Party shall
promptly and in any event no more than 30 days
following the First Party's receipt of such claim, give
notice to the other party (the "Second Party") in
writing of such claim (a "Tax Claim"); provided,
however, the failure of the First Party to give such
notice shall not affect the indemnification provided
hereunder except to the extent the Second Party has
been actually prejudiced as a result of such failure
(except the Second Party shall not be liable for any
expenses incurred during the period in which the First
Party failed to give such notice).
With respect to any Tax Claim relating to a taxable period ending on or
prior to the Closing Date, Mattin, on behalf of the Selling Stockholders, shall
control all proceedings and may make all decisions taken in connection with such
Tax Claim (including selection of counsel) and, without limiting the foregoing,
may in her sole discretion pursue or forego any and all administrative appeals,
proceedings, hearings and conferences with any Taxing Authority with respect
thereto, and may, in her sole discretion, either pay the Tax claimed and sue for
a refund where applicable law permits such refund suits or contest the Tax Claim
in any permissible manner. Mattin, on behalf of the Selling Stockholders, and
the Purchaser shall jointly control all proceedings taken in connection with any
Tax Claim relating solely to Taxes of the Company or any subsidiary of the
45
Company for a Straddle Period. The Purchaser shall control all proceedings with
respect to any Tax Claim relating to a taxable period beginning after the
Closing Date.
Mattin, on behalf of the Selling Stockholders, the Purchaser, the Company
and each subsidiary of the Company shall reasonably cooperate with each other in
contesting any Tax Claim, which cooperation shall include the retention and,
upon the request of the party or parties controlling proceedings relating to
such Tax Claim, the provision to such party or parties of records and
information which are reasonably relevant to such Tax Claim, and making
employees available on a mutually convenient basis to provide additional
information or explanation of any material provided hereunder or to testify at
proceedings relating to such Tax Claim.
In no case shall any of the Purchaser, the Company or any subsidiary of the
Company settle or otherwise compromise any Tax Claim relating to a taxable
period ending on or prior to the Closing Date without the prior written consent
of Mattin on behalf of the Selling Stockholders. None of the Selling
Stockholders, the Purchaser, the Company or any subsidiary of the Company shall
settle a Tax Claim relating to Taxes of the Company or any subsidiary of the
Company for a Straddle Period without the prior written consent of both Mattin,
on behalf of the Selling Stockholders and the Purchaser. In no case shall Mattin
settle or otherwise compromise any Tax Claim relating to or which could affect a
taxable period beginning after the Closing Date without the Purchaser's prior
written consent. In the event that any party violates the provisions of this
paragraph (relating to the settlement or compromise of Tax Claims), such party
shall not be entitled to any indemnity payments with respect to any
indemnifiable claim (relating to such Tax Claims) pursuant to this Section 11.1.
(f) Neither any Selling Stockholder nor the Purchaser shall
be liable under Section 11 unless the aggregate amount
of all Tax liabilities (which, individually, shall be
at least $50,000) and all liabilities under Section
12.1(a) and (b) equal or exceed $1 million, in which
case it shall be liable only for such liability or
liabilities in excess of $1 million, and (ii) (A) in
the case of a Selling Stockholder, the maximum amount
of any indemnity pursuant to Section 11, 12.1(a) and
12.1(b) for which any Selling stockholder is liable
shall be limited to its pro rata share of $23,650,000
and (B) in the case of the Purchaser, the maximum
amount of any indemnity pursuant to Section 11 and 12.2
for which the Purchaser is liable shall be limited to
$23,650,000.
11.2 Other Tax Matters.
(a) The Purchaser and the Selling Stockholders agree that
to the extent permissible, they will elect to close the
taxable years of the Company and each subsidiary of the
Company on the Closing Date. For any Straddle Period of
the Company or any subsidiary of the Company, the
Purchaser shall timely prepare and file with the
appropriate authorities all Tax Returns required to be
filed and shall pay all Taxes due with respect to such
Tax Returns, and such Tax Returns shall be prepared
consistently with past practices; provided, however,
that each of the Selling Stockholders, severally and
not jointly, shall reimburse the Purchaser (in
46
accordance with the procedures set forth in Section
11.1 (c)) for any amount owed by it pursuant to Section
11.1 with respect to any Straddle Period covered by
such Tax Returns to the extent such amount exceeds the
accrual for Taxes, if any, established therefor in the
Closing Date Statements. For any taxable period of the
Company or any subsidiary of the Company that ends on
or before the Closing Date, Mattin, on behalf of the
Selling Stockholders, shall timely prepare and file
with the appropriate authorities all Tax Returns
required to be filed and shall pay all Taxes due with
respect to such Tax Returns to the extent such amount
exceeds the accrual for Taxes, if any, established
therefor in the Closing Date Statements.
(b) The Selling Stockholders, the Company, each subsidiary
of the Company and the Purchaser shall reasonably
cooperate, and shall cause their respective affiliates,
officers, employees, agents, auditors and other
representatives reasonably to cooperate, in preparing
and filing all Tax Returns, including maintaining and
making available to each other all records necessary in
connection with Taxes and in resolving all disputes and
audits with respect to all taxable periods relating to
Taxes. The Purchaser and the Selling Stockholders
recognize that Mattin, on behalf of the Selling
Stockholders, and her agents and other representatives
will need access, from time to time, after the Closing
Date, to certain accounting and Tax records and
information held by the Company and its subsidiaries to
the extent such records and information pertain to
events occurring prior to the Closing Date; therefore,
the Purchaser agrees, and agrees to cause the Company
and each Subsidiary, (i) to use its best efforts to
properly retain and maintain such records until such
time as Mattin agrees that such retention and
maintenance is no longer necessary and (ii) to allow
Mattin and her agents and other representatives, at
times and dates mutually acceptable to the parties, to
inspect, review and make copies of such records as
Mattin, her agents and other representatives may deem
necessary or appropriate from time to time, such
activities to be conducted during normal business hours
and at the Selling Stockholders' expense. None of the
Purchaser, the Company or any subsidiary of the Company
shall file or cause to be filed any amended Return of
the Company or any subsidiary of the Company for any
Pre-Closing Tax Period without the prior written
consent of Mattin, on behalf of the Selling
Stockholders, which consent may be withheld in her sole
discretion; provided, however that if an amended Return
of the Company or any subsidiary of the Company for a
Pre-Closing Tax Period must be filed (i) to carry back
a Tax attribute generated after the Closing Date to a
taxable period ending on or before the Closing Date and
(ii) the Code does not permit an election to waive the
right to carry back such Tax attribute, then Mattin's
consent to the filing of such amended return shall not
be unreasonably withheld.
47
(c) The amount or economic benefit of any refunds, credits
or offsets of Taxes of the Company or any subsidiary of
the Company for any taxable period ending on or before
the Closing Date shall be for the account of the
Selling Stockholders. The amount or economic benefit of
any refunds, credits or offsets of Taxes of the Company
or any subsidiary of the Company for any taxable period
beginning after the Closing Date shall be for the
account of the Purchaser. The amount or economic
benefit of any refunds, credits or offsets of Taxes of
the Company or any subsidiary of the Company for any
Straddle Period shall be equitably apportioned between
the Selling Stockholders and the Purchaser. Provided
that the non-requesting party, acting in good faith,
determines that there is a reasonable basis for filing
a claim with the relevant Taxing Authority, each party
shall, if the other party so requests and at such other
party's expense, cause the Company and each subsidiary
of the Company to file for and obtain any refunds,
credits or offsets to Taxes to which the requesting
party is entitled under this Section 11.2(c). The
Purchaser shall permit Mattin, on behalf of the Selling
Stockholders, to control the prosecution of any such
claim relating solely to one or more taxable periods
ending on or before the Closing Date and, where deemed
appropriate by Mattin, shall cause the Company and each
subsidiary of the Company to authorize by appropriate
powers of attorney such persons as Mattin shall
designate to represent the Company or such subsidiary
of the Company with respect to such refund claim. Each
party shall forward, and shall cause its affiliates to
forward, to the party entitled pursuant to this Section
11.2(c) to receive the amount or economic benefit of a
refund, credit or offset to Tax, the amount of such
refund, or the economic benefit of such credit or
offset to Tax, within ten days after such refund is
received or after such credit or offset is allowed or
applied against other Tax liability, as the case may
be. The Purchaser agrees that it shall not cause or
permit the Company or any subsidiary of the Company to
carry back to any taxable period ending on or prior to
the Closing Date any net operating loss, loss from
operations or other Tax attribute, and further agrees
that the Selling Stockholders have no obligation under
this Agreement to return or remit any refund or other
Tax benefit attributable to a breach by the Purchaser
of the foregoing undertaking. The Selling Stockholders
agree, however, that to the extent that the Company or
any subsidiary of the Company realizes any Tax
attribute after the Closing Date that must be carried
back to a taxable period ending on or prior to the
Closing Date, to permit such carryback, and to
cooperate in the filing of any required returns or
claims for refund (in which case any Tax Benefit or
refund shall be for the benefit of the Purchaser).
(d) In calculating the amount of any claim for
indemnification under Section 11.1 or 12.1 hereunder,
any amount payable shall be reduced by (i) any Tax
48
Benefit realized in connection with the payment,
incurrence or accrual of the indemnified loss,
calculated at the Effective Tax Rate, and (ii) by any
Offsetting Tax Benefit, calculated at the Effective Tax
Rate. The term "Tax Benefit" means the amount by which
the liability for Taxes payable and owing to the
appropriate taxing authority by the Purchaser, the
Company or any subsidiary of the Company is or would be
reduced by loss, deduction, refund or credit,
determined as set forth below. The term "Offsetting Tax
Benefit" means the amount of any Tax Benefit realized
by the Purchaser, the Company or any subsidiary of the
Company in a taxable period as to which the Purchaser
is responsible for Taxes attributable to an adjustment
resulting in an additional liability for Taxes in a
taxable period as to which Sellers are responsible for
Taxes hereunder, determined as set forth below. The
"Effective Tax Rate" means the sum of (i) the maximum
federal income tax rate imposed on corporations for the
period in question plus (ii) the product of (A) the
weighted average of the maximum state and local income
tax rates imposed by all jurisdictions entitled to tax
income of the Purchaser, the Company or any subsidiary
of the Company, as the case may be, times (B) one minus
the maximum federal income tax rate referred to in
clause (i). For purposes of the determination of any
Tax Benefit and any Offsetting Tax Benefit, it shall be
assumed that (i) any Tax Benefit of the Purchaser, the
Company or any subsidiary of the Company (including any
Offsetting Tax Benefit) will currently reduce income
that is taxable at the Effective Tax Rate, (ii) the
Purchaser, the Company or any subsidiary of the Company
shall have sufficient taxable income to use any Tax
Benefit (including any Offsetting Tax Benefit) in the
respective taxable periods in which such Tax Benefit
(including any Offsetting Tax Benefit) first arose or
will first arise and (iii) the failure of the
Purchaser, the Company or any subsidiary of the Company
to claim a Tax Benefit or an Offsetting Tax Benefit
shall not preclude an indemnifying party from receiving
the benefit hereunder.
(e) each of the Selling Stockholders hereby appoints Mattin
as its agent and attorney-in-fact to take any actions
to be taken by such Selling Stockholder pursuant to
this Section 11 and authorizes Mattin, in her sole
discretion, to refrain from taking any such action.
12. Indemnification.
12.1 Indemnification by Selling Stockholders.
(a) Subject to Sections 11.2(d) and 12.1(c) and (d), each
of the Selling Stockholders, severally and not jointly,
shall indemnify and hold harmless the Purchaser from
and against any and all Losses incurred or suffered by
the Purchaser and its officers, directors, affiliates,
employees, agents and representatives arising out of or
resulting from or relating to (i) any breach of any of
49
the representations or warranties made by the Company
in this Agreement (except for representations or
warranties contained in Sections 4.20 and 4.21),(ii)
any breach of any of the representations or warranties
made by the Company in Section 4.21 of this Agreement
(such breach being determined for purposes of this
Section 12.1(a)(ii) without regard to whether or not
the conditions or events giving rise to such breach
were disclosed in Section 4.21 of the Seller Disclosure
Schedule and whether or not the Company had Actual
Knowledge of the conditions or events giving rise to
such breach) but only to the extent that such breach
results in Losses arising from (A) Environmental Claims
not reserved against in the 1995 Combined Financial
Statements or the Closing Date Statements relating to
the disposal or Release of Hazardous Materials at any
location not owned or leased by the Company or any
subsidiary but only to the extent that such Losses
exceed $1,100,000 or (B) any other Environmental Claims
not reserved against in the 1995 Combined Financial
Statements or the Closing Date Statements but only to
the extent that such Losses exceed $1,000,000 or (iii)
any failure by the Company to perform any of its
respective covenants or agreements contained in this
Agreement (except for covenants or agreements contained
in Section 11); provided that the Selling Stockholders
shall not be liable after three years from the date
hereof for any claim unless the Selling Stockholders
have received written notice of such claim prior to the
expiration of the three year period, setting forth the
claimed misrepresentation or breach of warranty or
failure to perform covenants or agreements, and such
claim is still pending and outstanding.
(b) Subject to Section 12.1(d), each of the Selling
Stockholders, severally and not jointly, shall
indemnify and hold harmless the Purchaser from and
against any and all Losses incurred or suffered from
and until three years after the Closing by the
Purchaser and its officers, directors, affiliates,
employees, agents and representatives arising out of or
resulting from or relating to (i) any breach of any of
the representations or warranties made by it or on its
behalf in this Agreement, or (ii) any failure by it to
perform any of its covenants or agreements contained in
this Agreement (except for covenants or agreements
contained in Section 11); provided that the Selling
Stockholders shall not be liable after three years from
the date hereof for any claim hereunder unless the
Selling Stockholders have received written notice of
such claim prior to the expiration of the three year
period, setting forth the claimed misrepresentation or
breach of warranty or failure to perform covenants of
agreements, and such claim is still pending and
outstanding.
(c) If the Environmental Estimate exceeds $10,000,000, each
of the Selling Stockholders severally and not jointly
shall indemnify and hold harmless the Purchaser and its
50
officers, directors, affiliates, employees and agents,
subject to Section 12.1(d)(i), in a maximum aggregate
amount of $22,500,000 solely in respect of its pro rata
share of Losses indemnifiable under Section 12.1(a)(ii)
in addition to their obligations under Section 12.1(a);
provided that the Selling Stockholders shall not be
liable in respect of such additional Losses (i) after
five years from the date hereof unless the Selling
Stockholders have received written notice of the
Environmental Claim giving rise to such Loss prior to
the expiration of such five year period, setting forth
the Environmental Claim, and such claim is still
pending and outstanding , and (ii) except to the extent
such additional Losses exceed $666,666. Mattin hereby
unconditionally guarantees payment by the other Selling
Stockholders of their pro rata share of their
obligations under this Section 12.1(c). The Purchaser,
the Company and any other indemnified person shall be
entitled to collect against Mattin in respect of
Environmental Claims without first having to seek
recourse against the other Selling Stockholders.
(d) (i) No Selling Stockholder shall be liable under
Section 12.1(a), (b) or (c) unless the aggregate amount
of all Losses (which, individually, shall be at least
$50,000) and all liabilities under Section 11.1 equal
or exceed $1 million (the "Threshold Amount"), in which
case it shall be liable only for such Loss or Losses in
excess of the Threshold Amount, and (ii) the maximum
amount of any indemnity pursuant to Sections 11.1,
12.1(a) and 12.1(b) for which it is liable shall be
limited to its pro rata share of the Escrow Deposit.
Solely for the purposes of Sections 12.1(a)(i),
12.1(a)(ii) and 12.1(c), any materiality standard set
forth in the representations or warranties made by the
parties hereto shall be disregarded in determining
whether a representation or warranty has been breached
and in calculating the amount of Losses indemnifiable
thereunder.
(e) Any Losses relating to any Remedial Action shall be
subject to indemnification hereunder only to the extent
that such Remedial Action is (i) required under
Environmental Laws, (ii) required by a governmental or
regulatory body or undertaken by the Purchaser or the
Company in a commercially reasonable manner (without
regard to the availability of indemnification
hereunder) and (iii) consistent with remedial standards
and procedures applicable to properties used for
industrial purposes unless other remedial standards and
procedures are required by the governmental or
regulatory body with jurisdiction over the remedial
action.
(f) Except as provided in Section 12.1(c), the Purchaser
shall look only to the Escrow Deposit to satisfy its
rights under Section 12.1(a) and (b). This Section 12.1
and any other indemnification provided for under this
Agreement shall be the sole and exclusive remedy of the
51
Purchaser under this Agreement with respect to any
matter covered by the representations, warranties,
covenants and agreements in this Agreement, other than
claims arising out of fraud or willful misconduct. The
Purchaser expressly waives any statutory, common law,
or other claims with respect to such matters.
12.2 Indemnification by the Purchaser. From and until three years
after the Closing, the Purchaser shall indemnify and hold harmless
each of the Selling Stockholders from and against any and all Losses
incurred or suffered by them and their respective affiliates and their
respective officers, directors, employees, agents and representatives
arising out of, resulting from, or relating to (i) any breach of any
of the representations or warranties made by the Purchaser in this
Agreement, or (ii) any failure by the Purchaser to perform any of its
covenants or agreements contained in this Agreement; provided, that
the Purchaser shall not be liable under this Section 12.2 unless the
aggregate amount of all such Losses (which, individually, shall be at
least $50,000) equals or exceeds the Threshold Amount, in which case
the Purchaser shall be liable only for such Loss or Losses in excess
of such Threshold Amount and that the maximum amount of any indemnity
pursuant to Section 11.1 and this Section 12.2 shall be limited to
$23,650,000. For the purposes of calculating the amount of Losses
indemnifiable under Section 12.2(i), such amount shall be calculated
without reference to any materiality standard set forth in the
applicable representations or warranties.
12.3 Procedure. (a) In the event that any person shall incur or suffer
any Losses in respect of which indemnification may be sought hereunder
by the Purchaser or any of the Selling Stockholders, the party seeking
to be indemnified hereunder (the "Indemnitee") shall assert a claim
for indemnification by written notice (the "Notice") to the party from
whom indemnification is being sought (the "Indemnitor") stating the
nature and basis of such claim. In the case of Losses arising or which
may arise by reason of any third party claim, promptly after receipt
by an Indemnitee of written notice of the assertion or the
commencement of any Litigation with respect to any matter in respect
of which indemnification may be sought by such party hereunder, the
Indemnitee shall give Notice to the Indemnitor and shall thereafter
keep the Indemnitor reasonably informed with respect thereto, provided
that failure of the Indemnitee to give the Indemnitor prompt notice as
provided herein shall not relieve the Indemnitor of any of its
obligations hereunder, except to the extent that the Indemnitor is
materially prejudiced by such failure. In case any such Litigation is
brought against any Indemnitee, the Indemnitor shall be entitled to
assume the defense thereof, by written notice of its intention to do
so to the Indemnitee within 30 days after receipt of the Notice and
have the sole control of defense and settlement thereof (but only,
with respect to any settlement, if such settlement involves an
unconditional release of the Indemnitee in respect of such claim). As
long as the Indemnitor is contesting any such Litigation in good faith
and on a timely basis, the Indemnitee shall not pay or settle any
claims brought under such Litigation.
(b) If the Indemnitor shall fail to notify the Indemnitee
of its desire to assume the defense of any such
Litigation within the prescribed period of time and as
required above, or shall notify the Indemnitee that it
will not assume the defense of any such Litigation,
52
then the Indemnitee may assume the defense of any such
Litigation, in which event it may do so in such manner
as it reasonably determines, and the Indemnitor shall
be bound by any reasonable determination made in such
Litigation or any settlement thereof effected by the
Indemnitee, provided that any such determination or
settlement shall not affect the right of the Indemnitor
to dispute the Indemnitee's claim for indemnification
and provided that the Indemnitee shall not effect any
such settlement without the prior written consent of
the Indemnitor (such consent not to be unreasonably
withheld). The failure of the Indemnitor to assume the
defense of any such Litigation shall not be deemed a
concession that it is required to indemnify the
Indemnitee for the subject matter of such Litigation.
Upon reasonable notice, the Indemnitor shall be
entitled to assume the defense of such Litigation and
to employ counsel at its own expense.
13. Termination.
13.1 Termination and Abandonment. This Agreement may be terminated and
the transactions contemplated by this Agreement may be abandoned at
any time prior to the Closing:
(a) by mutual written consent of the Purchaser and each of
the Selling Stockholders; or
(b) by the Purchaser or any of the Selling Stockholders if
the Closing shall not have occurred on or before
September 30, 1996; provided, however, that the right
to terminate this Agreement under this Section 13.1(b)
shall not be available to any party whose failure to
fulfill any obligation under this Agreement has been
the cause of, or resulted in, the failure of the
Closing to occur on or before such date; or
(c) by the Purchaser or any of the Selling Stockholders if
any court of competent jurisdiction shall have issued
an order, decree or ruling or taken any other action
enjoining or otherwise prohibiting the transactions
contemplated under this Agreement and such order,
decree, ruling or other action shall have become final
and nonappealable.
13.2 Survival; Expenses. (a) If this Agreement is terminated and the
transactions contemplated hereby are not consummated as described
above, this Agreement shall become void and of no further force and
effect, except for the obligations of the Purchaser pursuant to the
last two sentences of Section 7.2 and except for the provisions of
this Section 13.2 and Sections 14.2, 14.3, 14.4, 14.5, 14.6, 14.7,
14.8, 14.9, 14.11 and 14.12. None of the parties hereto shall have any
liability in respect of a termination of this Agreement, except to the
extent that such termination results from a breach of the
representations, warranties, covenants or agreements of the Selling
Stockholders and the Company, on the one hand, or the Purchaser, on
the other hand, under this Agreement.
53
(b) Except as otherwise specifically provided herein, the
parties shall bear their respective expenses incurred
in connection with the preparation, execution and
performance of this Agreement and the transactions
contemplated hereby, including all fees and expenses of
agents, representatives, counsel, actuaries and
accountants.
14. Miscellaneous.
14.1 Transfer Taxes. All transfer Taxes (including, without
limitation, the New York State Real Property Transfer Gains Tax and
the New York State Real Estate Transfer Tax) imposed as a result of
the sale of Shares hereunder shall be paid one-half by the Selling
Stockholders and one-half by the Purchaser regardless of whether such
transfer Taxes are imposed on the Selling Stockholders, the Company or
the Purchaser.
14.2 Notices. Any notice or other communication required or permitted
hereunder shall be in writing and shall be delivered personally, sent
by facsimile transmission or sent by certified, registered or express
mail, postage prepaid. Any such notice shall be deemed given when so
delivered, personally or sent by facsimile transmission or, if mailed,
two days after the date of deposit in the United States mails as
follows:
if to the Purchaser, to:
Engelhard Corporation
101 Wood Avenue
Iselin, NJ 08830
Attention: President
Telecopier Number: (908) 203-6525
with copies to:
James J. Clark, Esq.
Cahill Gordon & Reindel
80 Pine Street
New York, NY 10005
Telecopier Number: (212) 269-5420
if to Christina L. Mattin, to:
c/o Richard A. Miller, Esq.
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, NY 10017
Telecopy: (212) 455-2502
with a copy to:
Richard A. Miller, Esq.
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Telecopy: 212-455-2502
54
if to CRUT A:
Christina L. Mattin, Trustee
c/o Richard A. Miller, Esq.
Michael H. Penniman, Trustee
10 Wetherby Place
London, England SW7 4ND
Telecopy: 011-44-171-244-7838
David P. Geis, Trustee
c/o Hall, Dickler, Lawler, Kent
& Friedman
11 Martine Avenue
White Plains, NY 10709
Telecopy: (914) 428-1660
with a copy to:
Richard A. Miller, Esq.
if to CRUT B:
Christina L. Mattin, Trustee
Michael H. Penniman, Trustee
Anthony J. Colavita, Trustee
575 White Plains Road
Eastchester, New York 10709
Telecopy: (914) 793-0624
with a copy to:
Richard A. Miller, Esq.
if to the Testamentary Trust:
Christina L. Mattin, Trustee
Dominick A. Pinciaro, Trustee
c/o The Mearl Corporation
320 Old Briarcliff Road
Briarcliff Manor, New York 10510
Telecopy: (914) 941-2546
David R. Safer, Trustee
c/o Joel E. Sammet & Co.
19 Rector Street
New York, New York 10006
Telecopy: (212) 809-6185
55
with a copy to:
Richard A. Miller, Esq.
Edwin R. Eisen, Esq.
Eisen, Hershcopf & Schulman
609 Fifth Avenue, Suite 600
New York, New York 10017
Telecopy: (212) 832-4191
Morton Freilicher, Esq.
Phillips, Nizer, Benjamin,
Krim & Ballon
666 Fifth Avenue
New York, New York 10103
Telecopy: (212) 262-5152
if to the Pinciaro Trust to:
Dominick A. Pinciaro, Trustee
with a copy to:
Edwin R. Eisen, Esq.
if to the Grubin Trust to:
Jerome S. Grubin, Trustee
19 Rector Street
New York, New York 10006
Telecopy: (212) 809-6185
if to the Mattin, Family Trust A:
Christina L. Mattin, Trustee
Morgan Guaranty Trust Company of
New York, Trustee
Attention: Helen H. McCleary
9 West 57th Street
New York, New York 10019
Telecopy: (212) 837-3601
with a copy to:
Richard A. Miller, Esq.
if to the, Mattin Family Trust B:
Christina L. Mattin, Trustee
Morgan Guaranty Trust Company
of New York
56
with a copy to:
Richard A. Miller, Esq.
if to the Company to:
The Mearl Corporation
320 Old Briarcliff Road
Briarcliff Manor, New York 10510
Attention: President
Telecopy: (914) 941-2546
with a copy to:
Richard A. Miller, Esq.
Any party may by notice given in accordance with this Section to the other
parties designate another address or person for receipt of notices hereunder.
14.3 Entire Agreement. This Agreement (including the Exhibits and
Schedules) contains the entire agreement among the parties with
respect to the transactions contemplated hereby, and supersede all
prior agreements and understandings, written or oral, with respect
thereto.
14.4 Waivers and Amendments; Noncontractual Remedies; Preservation of
Remedies. This Agreement may be amended, superseded, cancelled,
renewed or extended, and the terms hereof may be waived, only by a
written instrument signed by the parties or, in the case of a waiver,
by the party waiving compliance. No delay on the part of any party in
exercising any right, power or privilege hereunder shall operate as a
waiver thereof. No waiver on the part of any party of any such right,
power or privilege, and no single or partial exercise of any such
right, power or privilege, shall preclude any further exercise thereof
or the exercise of any other such right, power or privilege. The
rights and remedies herein provided are cumulative and, except as
provided in Section 13.2, are not exclusive of any rights or remedies
that any party may otherwise have at law or in equity; provided, that
the indemnification provided for in Sections 11 and 12 shall
constitute the sole remedy of any party for any breach of a
representation, warranty or covenant by the other party hereto.
14.5 Governing Law and Submission to Jurisdiction. (a) This Agreement
and the rights and obligations of the parties hereto shall be governed
by, and construed and enforced in accordance with, the laws of the
State of New York, without giving effect to the conflicts of laws
principles thereof.
(b) Each of the parties by its execution hereof (i) hereby
irrevocably submits to the jurisdiction of the federal
and state courts located in the Southern District of
New York for the purpose of any suit, action or other
proceeding arising out of or based upon to this
Agreement or any other agreement contemplated hereby
(including without limitation the Escrow Agreement) or
relating to the subject matter hereof or thereof and
(ii) hereby waives to the extent not prohibited by
applicable law, and agrees not to assert by way of
57
motion, as a defense or otherwise, in any such
jurisdiction of the above-named courts, that its
property is exempt or immune from attachment or
execution, that any such proceeding brought in one of
the above-named courts is improper, or that any right
or remedy relating to this Agreement or any other
agreement contemplated hereby, or the subject matter
hereof or thereof may not be enforced in or by such
court. Each of the parties hereby consents to service
of process in any such proceeding in any manner
permitted by the laws of the State of New York, and
agrees that service of process by registered or
certified mail, return receipt requested, at its
address specified pursuant to Section 14.2 hereof is
reasonably calculated to give actual notice.
14.6 Binding Effect; Assignment Limited. (a) This Agreement shall be
binding upon and inure to the benefit of and be enforceable by the
parties hereto and their respective successors and assigns and legal
representatives.
(b) Neither this Agreement, nor any right hereunder, may be
assigned by any party without the written consent of
the other parties hereto, except that the Purchaser may
assign its entire interest in this Agreement to any
direct or indirect wholly-owned subsidiary of the
Purchaser pursuant to an assignment under which such
assignee assumes and agrees to perform all of the
obligations of the Purchaser hereunder; provided, that,
notwithstanding any such assignment, the Purchaser
shall remain liable to perform all obligations
hereunder.
14.7 No Third-Party Beneficiaries. Nothing in this Agreement is
intended or shall be construed to give any person, other than the
parties hereto and the other persons referred to in Section 12 hereof,
any legal or equitable right, remedy or claim under or in respect of
this Agreement or any provision contained herein.
14.8 Counterparts. This Agreement may be executed by the parties
hereto in separate counterparts, each of which when so executed and
delivered shall be deemed to be an original and which together shall
constitute one and the same instrument. Each counterpart may consist
of a number of copies hereof each signed by less than all, but
together signed by all of the parties hereto.
14.9 Exhibits and Schedules. The Exhibits and Schedules are a part of
this Agreement as if fully set forth herein.
14.10 Headings. The article, section and paragraph headings in this
Agreement are for convenience only, and shall not control or affect
the meaning or construction of any provision of this Agreement.
14.11 Remedies. The parties hereto agree that money damages or other
remedy at law would not be sufficient or adequate remedy for any
breach or violation of, or a default under, this Agreement by them and
that, in addition to all other remedies available to them, each of
them shall be entitled to an injunction restraining such breach,
violation or default or threatened breach, violation or default and to
58
any other equitable relief, including without limitation specific
performance, without bond or other security being required.
14.12 Invalidity of Provision. The invalidity or unenforceability of
any provision of this Agreement in any jurisdiction shall not affect
the validity or enforceability of the remainder of this Agreement in
that jurisdiction or the validity or enforceability of this Agreement,
including that provision, in any other jurisdiction. If any
restriction or provision of this Agreement is held unreasonable,
unlawful or unenforceable in any respect, such restriction or
provision shall be interpreted, revised or applied in a manner that
renders it lawful and enforceable to the fullest extent possible under
law.
14.13 Grammatical Construction. Whenever the context may require, any
pronouns used herein shall include the corresponding masculine,
feminine or neuter forms, and the singular form of nouns and pronouns
shall include the plural and vice versa.
ACKNOWLEDGEMENT AND AGREEMENT
The undersigned Trustees hereby acknowledge the terms hereof and accept
this Agreement in their capacity as Trustees (and not in their individual
capacities). Notwithstanding anything contained herein to the contrary, the
execution and delivery of this Agreement by the Trustees shall not bee deemed to
create any individual liability or obligation of the Trustees.
IN WITNESS WHEREOF, the parties have executed this Agreement on the date
first above written.
THE MEARL CORPORATION
By:/s/Dominick A. Pinciaro
--------------------------------------
Name: Dominick A. Pinciaro
Title: President, CEO/COB
CHRISTINA L. MATTIN
/s/Christina L. Mattin
-----------------------------------------
CRUT A
/S/Christina L. Mattin
-----------------------------------------
Christina L. Mattin, as Trustee of CRUT A
/s/David P. Geis
-----------------------------------------
David P. Geis, as Trustee of CRUT A
/s/Michael H. Penniman
-----------------------------------------
Michael H. Penniman, as Trustee of CRUT A
59
CRUT B
/s/Christina L. Mattin
-----------------------------------------
Christina L. Mattin, as Trustee of CRUT B
/s/Anthony J. Colavita
-----------------------------------------
Anthony J. Colavita, as Trustee of CRUT B
/s/Michael H. Penniman
-----------------------------------------
Michael H. Penniman, as Trustee of CRUT B
CRUT C
/s/Christina L. Mattin
-----------------------------------------
Christina L. Mattin, as Trustee of CRUT C
TESTAMENTARY TRUST
/s/Christina L. Mattin
-----------------------------------------
Christina L. Mattin, as Trustee of the Testamentary Trust
/s/Dominick A. Pinciaro
-----------------------------------------
Dominick A. Pinciaro, as Trustee of the Testamentary Trust
/s/David R. Safer
-----------------------------------------
David R. Safer, as Trustee of the Testamentary Trust
PINCIARO TRUST
/s/Dominick A. Pinciaro
-----------------------------------------
Dominick A. Pinciaro, as Trustee of the Pinciaro Trust
GRUBIN TRUST
/s/Jerome S. Grubin
-----------------------------------------
Jerome S. Grubin, as Trustee of the Grubin Trust
60
MATTIN FAMILY TRUST A
/s/Christina L. Mattin
-----------------------------------------
Christina L. Mattin, as Trustee of the Mattin Family
Trust A
MORGAN GUARANTY TRUST COMPANY OF
NEW YORK, as Trustee of the Mattin
Family Trust A
/s/Helen Hendel McCleary
-----------------------------------------
Name: Helen Hendel McCleary
Title: Vice President
MATTIN FAMILY TRUST B
/s/Christina Mattin
-----------------------------------------
Christina Mattin, as Trustee of the Mattin Family
Trust B
MORGAN GUARANTY TRUST COMPANY OF
NEW YORK, as Trustee of the Mattin
Family Trust B
/s/Helen Hendel McCleary
-----------------------------------------
Name: Helen Hendel McCleary
Title: Vice President
ENGELHARD CORPORATION
By:/s/Barry W. Perry
--------------------------------------
Name: Barry W. Perry
Title: Group Vice President
61