SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) November 9, 2001
----------------
UNIROYAL TECHNOLOGY CORPORATION
(Exact name of registrant as specified in its charter)
Delaware
- ----------------------------------------------------------------------------
(State of other jurisdiction of incorporation)
0-20686 65-0341868
- ------------------------ ------------------------------------
(Commission File Number) (IRS Employer Identification No.)
Sarasota Tower, Suite 900
Two North Tamiami Trail
Sarasota, Florida 34236
- ------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (941) 366-5282
--------------
(Former name or former address, if changed since last report)
Item 2. Acquisition or Disposition of Assets.
-------------------------------------
Pursuant to an Asset Purchase Agreement, dated August 24,
2001, between Royal Adhesives, LLC ("Royal") and Uniroyal Engineered Products,
LLC ("UEP"), UEP sold substantially all of the net assets of its Specialty
Adhesives segment to Royal for approximately $21.6 million, consisting of cash
In the amount of approximately $14.6 million, $3.5 million in subordinated
promissory notes of Royal, up to $2.0 million in contingent payments, and
preferred stock of the parent of Royal in the amount of $1.5 million. The
transaction closed on November 9, 2001. A copy of the Asset Purchase Agreement,
without exhibits, and the two amendments to the Asset Purchase Agreement are
appended to this report as Exhibit 10.66. Unaudited proforma condensed
financial information is not required to be filed herewith pursuant to Rule
11-01 of Regulation S-X.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
UNIROYAL TECHNOLOGY CORPORATION
By:/s/ Oliver J. Janney
Oliver J. Janney
Executive Vice President, General
Counsel and Secretary
Dated: November 20, 2001
Microsoft Word 10.0.2627;
Exhibit 10.66
ASSET PURCHASE AGREEMENT
THIS AGREEMENT ("Agreement") is made the 24th day of August, 2001,
between SAS Acquisition Inc., a Delaware corporation ("Purchaser"), and Uniroyal
Engineered Products, LLC, a Delaware limited liability company ("Seller").
R E C I T A L:
- - - - - - -
Purchaser desires to purchase, and Seller desires to sell to Purchaser,
substantially all of the business, assets, and goodwill of the Specialty
Adhesives & Sealants division of Seller (the "Division"), in exchange for cash,
shares of the preferred stock of Purchaser and the assumption of certain of
Seller's liabilities and obligations, as expressly provided in this Agreement.
NOW, THEREFORE, Purchaser and Seller agree as follows:
ARTICLE 1
TRANSFER OF ASSETS AND ASSUMPTION OF LIABILITIES
1.1. Transfer of Assets. On the terms and subject to the conditions set
forth in this Agreement, Seller will convey, transfer, assign and deliver to
Purchaser on the Closing Date (defined below) all of the business, assets, and
goodwill of the Division owned by Seller on the Closing Date of every kind and
description, wherever located, known or unknown, tangible or intangible,
including, without limitation, all assets listed on the Division's Balance Sheet
dated February 25, 2001 attached as Schedule 2.2(a) to this Agreement (the
"Initial Balance Sheet") and all other property, real, personal or mixed,
accounts receivable, deposits on contractual obligations or otherwise, claims
and rights under contracts and leases, licenses, customer lists, trade secrets,
know-how, Seller's rights to use the name "Specialty Adhesives & Sealants," any
derivative or combination of that name and all other slogans used by Seller
and/or the Division in connection with the business or products of the Division,
all product catalogs and other advertising materials, all files, books and
records of Seller and/or the Division relating to the business of the Division,
and all computer programs used in the business of the Division for which Seller
has ownership or licenses other than the SAP system, all as the same exist on
the Closing Date (collectively, the "Subject Assets").
1.2. Excluded Assets. Notwithstanding the provisions of Section 1.1,
Seller shall retain and shall not transfer to Purchaser (i) cash, (ii) to the
extent not comprising Specified Items (as defined in Section 3.25), any and all
proprietary or confidential business or technical information, records and
policy statements of Seller (other than copies of Seller's policy and procedures
manuals which are located on the Real Property (as defined in Section 3.5) or
are presently used by the Division), which relate directly to a business unit of
Seller other than the Division and not directly, indirectly or exclusively to
the Division, such as accounting procedures, instructions, organizational
manuals, strategic plans and other documents of a general nature; provided,
however, that copies thereof or copies of the portion thereof related directly
to the Division are provided to Purchaser as of the Closing Date or from time to
time thereafter as requested by Purchaser as a portion of the Subject Assets,
(iii) originals of all books and records directly relating to the Division or
relating to the Division and other operations of Seller which Seller shall be
required to retain pursuant to any statute, rule or regulation; provided,
however, that copies thereof (or copies of the portions thereof relating
directly to the Division) are provided to Purchaser as a portion of the Subject
Assets, (iv) any and all cash and cash equivalents (other than petty cash or
cash in bank accounts in the name of the Division) and corporate lock box
accounts held in the name of Seller other than rights in respect of any lock box
account created for the exclusive use of the Division, which shall constitute a
portion of the Assets, (v) all insurance policies and claims thereunder, (vi)
refunds of taxes in respect of periods prior to the Closing Date; and (vii)
those other assets listed in Schedule 1.2. All of the foregoing are hereinafter
referred to as the "Excluded Assets". Nothing in this Agreement shall be
construed as granting to Purchaser any right or privilege to use in any manner
whatsoever the trademark or trade name "Uniroyal" in logo type or in any other
type or style or any trademarks or trade names owned, used by, belonging to or
registered in the name of Seller or any of the Seller's subsidiaries, except for
those Specified Items included on Schedule 3.25 hereto and except as otherwise
expressly provided in Section 11.
1.3. Assumption of Liabilities.
-------------------------
(a) On the Closing Date, Purchaser shall assume, and
thereafter shall pay, perform or otherwise discharge the Assumed
Liabilities, subject to the terms and conditions set forth in this
Agreement.
(b) The "Assumed Liabilities" consist solely of the
following liabilities and obligations of Seller existing as of the
Closing Date:
(i) All liabilities and obligations of Seller under
the contracts listed on Schedule 3.18 and any other contracts
entered into by the Division or Seller on behalf of the
Division in the ordinary course of business consistent with
past practices between the date hereof and the Closing;
(ii) All product warranties arising from or
related to any products manufactured or
services provided by the Division after the Closing Date;
(iii) All accounts payable and accrued liabilities
related to the business of the Division as and to the extent
properly reflected on the Initial Balance Sheet and arising
after the date of the Initial Balance Sheet in the ordinary
course of business, but excluding all of the Retained
Liabilities (as defined below) and liabilities and obligations
of Seller to the extent not assumed hereunder by Purchaser;
and
(iv) All liabilities and obligations relating to or
arising from ownership or use of the Real Property or the
Leased Premises after the Closing Date, but excluding the
Retained Liabilities.
Except as expressly provided in this Section 1.3, Purchaser does not
assume, agree to pay, perform or discharge or otherwise have any
responsibility for any liability or obligation of Seller, fixed or
contingent, and whether arising or to be performed prior to, on or
after the Closing.
(c) Notwithstanding anything herein to the contrary, Purchaser
shall not assume, and Seller shall expressly retain and does not
delegate, transfer or assign to Purchaser, any of the following
liabilities or obligations of or relating to the Division
(collectively, the "Retained Liabilities"), and, notwithstanding any
implication to the contrary, none of the following liabilities or
obligations are "Assumed Liabilities" for purposes of this Agreement:
(i) All liabilities and obligations for Taxes (as
defined in Section 3.12(f)) of all types attributable to
periods prior to the Closing Date, whether or not arising out
of or relating to the operations, properties and business of
the Division;
(ii) all liabilities and obligations for unpaid Taxes
of all types of any person other than Seller under Treasury
Regulation Section 1.1502-6 (or any similar provision of any
state, local or foreign law), as a transferee or successor, by
contract or otherwise;
(iii) all liabilities and obligations arising out of
or relating to the Controlled Group Plans (as defined in
Section 3.26(a)), including without limitation retiree medical
benefits (except for (A) accrued vacation pay and sick pay
liabilities as set forth on the Closing Date Balance Sheet to
the Transferred Employees, (B) any liability which Purchaser
may have to Seller in respect of services provided by Seller
pursuant to the Computer Support Agreement (as defined in
Section 5.17) and (C) any ongoing obligations provided for
under the collective bargaining agreements covering employees
of the Division as of the Closing Date;
(iv) all liabilities and obligations under the
key employee continuation incentive arrangements plan
entered into by Seller with certain Division personnel;
(v) all liabilities and obligations for
intercompany payables to Seller;
(vi) all liabilities and obligations arising
out of or relating to any Requirements
of Law (as defined in Section 3.27(a)(ii))
prior to the Closing, except as otherwise
provided in this Agreement;
(vii) except as specifically provided for as a
product warranty reserve on the Initial Balance Sheet (as
defined below), all liabilities and obligations arising out of
or relating to any products liability or related claims
(including any claim for personal injury, property damage or
economic loss) resulting from or relating to any product or
service manufactured and/or sold or provided by the Division
on or prior to the Closing Date;
(viii) any obligation for borrowed money, funded
debt, or guarantees thereof, except for capital leases which
shall comprise a portion of the Assumed Liabilities;
(ix) all liabilities and obligations relating to or
arising from the ownership or use of the Real Property prior
to the Closing Date, including all charges, operating expenses
and costs or payments due in respect of such Real Property and
Leased Property, or with respect to Seller's action or
inactions related thereto, and including all charges,
expenses, costs, payments or penalties due in respect of any
environmental remediation on such Real Property and Leased
property, except to the extent properly reflected on the
Closing Balance Sheet; and
(x) all obligations for retiree medical
benefits to the persons, and on the terms set forth on
Schedule 1.3.
1.4. Method of Conveyance and Transfer. The conveyance, transfer and
delivery of the Subject Assets will be effected by general warranty deeds,
bills of sale, endorsements, assignments (including, but not limited to,
assignments of leases, accompanied by all requisite landlord consents, and
assignments of all rights of Seller under any nondisturbance agreements from
holders of mortgages on the fee simple titles to any leased property) and other
instruments of transfer, all in such form as Purchaser reasonably requests,
vesting in Purchaser good and marketable title to the Subject Assets, free and
clear of all covenants (that have not been removed after reasonable notice to
Seller), conditions, easements (other than customary utility and governmental
rights of way), liens, charges, security interests, adverse claims,
encumbrances, demands or other title defects or restrictions of any kind (that
have not been removed after reasonable notice to Seller), excepting those which
are reasonably acceptable to Purchaser and excepting the lien of non-delinquent
real estate taxes.
1.5. Further Assurances. Seller, at any time and from time to time
after the Closing Date, upon request of Purchaser, will do, execute,
acknowledge and deliver, all such further acts, deeds, assignments, transfers,
conveyances, powers of attorney and assurances as may be reasonably required
for the better conveying, transferring, assigning, and delivering to Purchaser,
or to its successors and assigns, and for aiding and assisting in collecting
and reducing to possession, all the Subject Assets.
ARTICLE 2
PAYMENT OF PURCHASE PRICE
2.1. Payment by Purchaser. At the Closing, Purchaser will pay to
Seller the purchase price of Twenty-Seven Million Dollars ($27,000,000.00) (the
"Purchase Price") for the Subject Assets (and the goodwill included therein)
and for the covenant not to compete set forth in Section 16.1 below, payable as
follows and adjusted as provided in Section 2.2 below, as follows:
(a) Twenty-Five Million Five Hundred Thousand Dollars
($25,500,000.00) by, at Seller's option, certified or bank check in
immediately available funds or wire transfer to one or more accounts
designated by Seller; and
(b) Purchaser will issue to Seller that number of shares of
Purchaser's 12% Preferred Stock which will have a value on the Closing
Date of One Million Five Hundred Thousand Dollars ($1,500,000.00).
2.2. Purchase Price Adjustment. The cash portion of the
Purchase Price to be paid at the Closing pursuant to Section 2.1(a)
(the "Cash Purchase Price") will be adjusted in respect of the
Division's Working Capital and "EBITDA" as follows:
(a) Initial Adjusted Cash Purchase Price. Seller will provide
Purchaser at the Closing with (i) an estimated closing balance sheet
(the "Initial Closing Balance Sheet") as of the Closing Date and (ii)
Seller's estimate of "EBITDA" of the Division for the twelve (12)
month period ending on August 26, 2001 (the "Trailing EBITDA"),
adjusted only to remove a 3.5% corporate overhead charge "the "EBITDA
Estimate"). "EBITDA" means the earnings of the Division before income
taxes, depreciation and amortization, as determined in accordance with
generally accepted accounting principles applied and consistent with
past practice. The Cash Purchase Price of $25,500,000.00 will be (i)
increased or decreased dollar for dollar to the extent that working
capital on the Initial Closing Balance Sheet is more than or less than
working capital on the February 25, 2001 balance sheet attached to
this Agreement as Schedule 2.2(a) (the "February 2001 Balance Sheet")
and (ii) increased or decreased dollar for dollar by a multiple of 4.4
times the amount by which the Division's Trailing EBITDA is over or
under Five Million Eight Hundred Thousand Dollars ($5,800,000.00).
This result will be the "Initial Adjusted Cash Purchase Price", which
amount will be paid at the Closing. "Working Capital" means (i)
current assets including, without limitation, accounts receivable aged
90 days or less generated in the ordinary course of the Division's
business for value received, prepaid expenses and usable inventory
less (ii) current liabilities generated in the ordinary course of
business in accordance with past practice and not in violation of this
Agreement including, without limitation, accounts payable, customer
advances and non-tax accrued liabilities; provided, however, that
"Working Capital" will not include cash, receivables owed by Seller to
the Division, deferred taxes and obligations for borrowed money.
Working Capital will be determined in accordance with generally
accepted accounting principles applied on a basis consistent with the
Initial Balance Sheet and with past practices.
(b) Final Cash Purchase Price. Sixty (60) days after the
Closing, Seller will produce a final closing balance sheet (the "Final
Closing Balance Sheet") and the Division's profit and loss statement
for the 12 months ended August 26, 2001, and the Cash Purchase Price
of $25,500,000.00 will be recalculated based thereon. The Cash
Purchase Price will be (i) increased or decreased dollar for dollar to
the extent that Working Capital on the Final Closing Balance Sheet is
more or less than Working Capital on the February 2001 Balance Sheet
and
(ii) increased or decreased dollar for dollar by a multiple of 4.4
times the amount by which the Division's Trailing EBITDA (adjusted
only to remove the 3.5% corporate overhead charge) is over or under
Five Million Eight Hundred Thousand Dollars ($5,800,000.00). The
result of this calculation will be the "Final Cash Purchase Price." To
the extent the Final Cash Purchase Price is greater than the Initial
Adjusted Cash Purchase Price, Purchaser will pay the difference, in
cash, to Seller. To the extent the Final Cash Purchase Price is less
than the Initial Adjusted Cash Purchase Price, Seller will pay the
difference, in cash, to Purchaser. 2.3. Allocation of Purchase Price.
The parties agree that the purchase price paid for the Subject Assets, the
Assumed Liabilities and all of the capitalized costs shall be allocated in
accordance with Section 1060 of the Internal Revenue Code of 1986,
as amended (the "Code") for all purposes (including financial, accounting and
tax purposes) in accordance with the fair market value of the Subject Assets
set forth in the appraisal referred to in Section 5.15 of this Agreement.
Seller and Purchaser will report the sale and purchase of the Subject Assets in
accordance with the allocations to be mutually agreed upon after the Closing
for all federal, state and local tax purposes. Seller's tax identification
number is 59-3728109, and Purchaser's tax identification number will be
provided to Seller by no later than the Closing Date.
2.4. Transfer Taxes. All applicable sales and transfer taxes,
if any, arising by reason of the transfer of the Subject Assets under this
Agreement will be borne by Seller.
2.5. [Intentionally omitted.]
ARTICLE 3
REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF SELLER
Seller represents and warrants to, and agrees with, Purchaser as
follows:
3.1. Organization and Standing.
(a) Seller is a limited liability company duly organized,
validly existing and in full force and effect under the laws of the
state of Delaware. Seller has full power and authority to carry on the
Division's business as and where now conducted and to own or lease and
operate the Division's properties at and where now owned or leased and
operated by it. Seller is qualified to do business in every
jurisdiction in which the Division (or Seller on behalf of the
Division) owns or leases property or conducts business except where the
failure to be so qualified would not have a material adverse effect on
Seller.
3.2. Authority of Seller; Consents. The execution, delivery and
consummation of this Agreement by Seller has been duly authorized by the board
of managers and the members of Seller in accordance with all applicable laws and
the Certificate of Formation and Operating Agreement of Seller, and at the
Closing Date no further action will be necessary on the part of Seller or its
members to make this Agreement valid and binding on Seller and enforceable
against Seller in accordance with its terms, except as such enforceability may
be limited by applicable bankruptcy, insolvency, moratorium, reorganization and
other laws of general applicability related to or affecting creditors' rights.
The execution, delivery and consummation of this Agreement by Seller (i) is not
contrary to the Certificate of Formation or Operating Agreement of Seller, (ii)
does not now and will not, with the passage of time, the giving of notice or
otherwise, result in a violation or breach of, or constitute a default under,
any term or provision of any indenture, mortgage, deed of trust, lease,
instrument, order, judgment, decree, rule, regulation, law, contract, agreement
or any other restriction to which Seller and/or the Division is a party or to
which Seller and/or the Division or any of their respective assets are subject
or bound, (iii) will not result in the creation of any lien or other charge
upon any assets of Seller and/or the Division, and (iv) will not result in any
acceleration or termination of any loan or security interest agreement to which
Seller and/or the Division is a party or to which Seller and/or the Division or
any of their respective assets are subject or bound. Except as may be listed on
Schedule 3.2, no approval or consent of any person, firm or other entity or
governmental body is or was required to be obtained by Seller for the
authorization of this Agreement or the consummation by Seller of the
transactions contemplated in this Agreement.
3.3. Subject Assets. The Subject Assets include all assets and
property shown on the Initial Balance Sheet, and all assets and property
acquired by the Division or by Seller on behalf of the Division after the date
of the Initial Balance Sheet, except such of the assets and properties of
Seller or the Division with a fair market value of Thirty Thousand Dollars
($30,000.00) or less as may have been (i) disposed of prior to the date of this
Agreement in the ordinary course of business and (ii) otherwise disposed of
prior to the Closing Date at the written request or with the consent in writing
of Purchaser.
3.4. Business Relations. Seller is not required, in the ordinary
course of the Division's business, to provide any bonding or any other
financial security arrangements in connection with any transactions with any
customers or suppliers of the Division. Neither Seller nor the Division has
received any notice of any disruption (including, without limitation, delayed
deliveries or allocations by suppliers) in the availability of any materials or
products used in the Division's business and has no reason to believe that any
such disruption will occur. Except as listed on Schedule 3.4, there are no sole
source suppliers of goods, equipment or services used by the Division (other
than public utilities) with respect to which practical alternative sources of
supply are unavailable. Except as listed on Schedule 3.4, since January 1,
1999, the Division has not had a customer or a supplier that accounted for in
excess of One Hundred Thousand Dollars ($100,000.00) per year in sales or
purchases terminate its relationship with the Division.
3.5. Real Property.
(a) Schedule 3.5.(a) is a true and complete list of (i) all
real property used by the Division that is owned by Seller, including,
without limitation, all buildings, structures and improvements thereon
and all appurtenances thereto and the rights and privileges of Seller
in all rights of way, licenses or easements, (ii) all real property
leases for property used by the Division to which Seller is a party
and (iii) all options, deeds of trust, deeds of declaration, mortgages
and land contracts pursuant to or in which Seller has any interest on
behalf of the Division (collectively, the "Real Property"). Seller has
furnished to Purchaser or its counsel true and complete copies of each
written contract and a written description of each oral contract
relating to the list set forth on Schedule 3.5.(a).
(b) With respect to the Real Property, except as set
forth on Schedule 3.5.(b):
(i) There is no condemnation proceeding or
eminent domain proceeding of any kind pending or, to the
best knowledge of Seller, threatened against any of the Real
Property;
(ii) The Real Property is occupied under valid and
current certificates of occupancy or the like, and the
transactions contemplated by this Agreement will not require
the issuance of any new or amended certificates of occupancy
or the like; there are no facts known to Seller which would
prevent each location from being occupied after the Closing
Date in substantially the same manner as before;
(iii) The Real Property does not violate, and all
improvements are constructed in compliance in all material
respects with, any applicable federal, state or local
statutes, laws, ordinances, regulations, rules, codes, orders
or requirements, including, without limitation, any building,
zoning, fire or environmental laws or codes (the "Laws and
Ordinances") and Seller will convey, transfer and assign the
Real Property free from any such material violations;
(iv) Seller has obtained all appropriate
licenses, permits, building permits and occupancy permits
that are required by the Laws and Ordinances;
(v) There are no outstanding variances or special
use permits affecting the Real Property or its uses and none
of the Real Property constitutes an existing non-conforming
use under the applicable zoning code;
(vi) No notice of a violation of any Laws and
Ordinances, or of any covenant, condition, easement or
restriction affecting the Real Property or relating to its
use or occupancy has been given, nor is Seller aware of any
such violation;
(vii) The Real Property has and will have as of the
Closing Date water supply, storm and sanitary sewage
facilities, telephone, gas, electricity, fire protection,
means of ingress and egress to and from public streets and,
without limitation, other required public utilities, all of
which are adequate for purposes of the Division's present use
of the Real Property. All utility lines and facilities
presently serving the Real Property are serviced and
maintained by the appropriate entity. All utilities enter the
Real Property through adjoining public streets or, if they
pass through adjoining private land, they do so in accordance
with valid public easements. Seller has no knowledge of any
increase in the applicable rate for any utility service being
furnished to the Real Property from the rate in effect for
the most recent bill that Seller has received for such
service;
(viii) Seller has no knowledge of improvements made
or contemplated to be made by any public or private authority,
the costs of which are to be assessed as special taxes or
charges against the Real Property, and there are no present
assessments;
(ix) All improvements constituting the Real Property
(including all building systems) are without structural
defects, are in operating condition and repair serviceable
and suitable for use subject only to routine maintenance,
were constructed in conformity with all plans and
specifications, are located entirely within the boundary
lines of the Real Property and do not encroach upon any
street or land of others;
(x) The Real Property (a) is freely accessible
directly from all public streets on which it abuts, or (b)
uses adjoining private land to access the same in accordance
with valid public easements. Seller has no knowledge of any
condition which would result in the termination of such
access;
(xi) Seller has no boundary or water drainage
disputes with the owners of any premises adjacent to the Real
Property and has no knowledge of any such dispute involving
former owners of the Real Property;
(xii) Neither the Division nor Seller has notice of
outstanding requirements or recommendations by the insurance
companies who issued the insurance policies insuring the Real
Property, or by any board of fire underwriters or other body
exercising similar functions requiring or recommending any
repairs or work to be done on the Real Property that would
involve a material cost to the Division;
(xiii) Seller will obtain from all lessors of any
leasehold interests comprising the Real Property a so-called
"estoppel certificate" (the "Estoppel Certificates") in the
form attached as Exhibit "A" to this Agreement;
(xiv) Seller occupies all of the Real Property
and no other person or entity has any rights to use or occupy
any of the Real Property.
(c) With respect to the leased property comprising
the Real Property including all leasehold improvements
(collectively, the "Leased Property"), except as set forth on
Schedule 3.5.(c)):
(i) All leases are in writing and are
duly executed and, where required, witnessed,
acknowledged and recorded to make them valid and binding and
all leases in full force and effect for their full term, and
none have been modified, amended, sublet or assigned;
(ii) The rental set forth in each such lease is the
actual rental being paid, and there are no separate
agreements or understandings with respect to the same not set
forth on Schedule 3.5.(c);
(iii) Where Seller or the Division is the lessee,
the lessee under each such lease has the full right to
exercise any renewal option and on due exercise will be
entitled to enjoy the use of the leased premises for the full
term of such renewal option, and such renewal option does not
terminate on assignment of such lease;
(iv) There is no default by Seller or the
Division or any other party which affects the Leased
Property;
(v) Where Seller or the Division is the lessee, on
performance by the lessee of the terms of each lease (all of
which terms have been fully performed by the lessee as of the
date of this Agreement and will have been fully performed as
of the Closing Date), the lessee has the full right to enjoy
the use of the premises demised for the full term of the
lease without disturbance by any other party, and there are
no written or oral contracts between Seller or the Division
and any third party relating to any claim by such third party
of any right to all or any part of the interest of Seller or
the Division in any leasehold estate or otherwise relating to
the use and occupancy by Seller or the Division of such
estate;
(vi) Except as set forth on Schedule 3.5.(c), all
security deposits required by such leases have been made and
have not been refunded or returned, or their forfeiture
claimed, in whole or in part, by any lessor;
(vii) Where Seller or the Division is the lessee,
all leasehold improvements are in good operating or working
condition and repair, serviceable and suitable for use, after
taking into account ordinary wear and tear, and are adequate
for the operation of the business of Seller as presently
conducted.
All contributions required to have been paid by any lessor of property in
respect of any leasehold improvements have been paid.
3.6. FIRPTA. Seller is not a nonresident alien individual, foreign
person, or foreign corporation for purposes of the provisions of Code Sections
871, 882 or 1445. On or before the Closing Date Seller will deliver to Purchaser
qualifying statements as defined in Code Section 1445 or executed and delivered
to Purchaser affidavits pursuant to Code Section 1445.
3.7. Investments in Other Entities. The Division does not
have any direct or indirect equity interest, or debt convertible into any
equity interest, in any entity (including any subsidiaries), corporation or
otherwise, or any right, warrant or option to acquire any such interest.
3.8. Title to and Condition of Assets. Seller owns and possesses and
will own and possess as of the Closing Date all right, title and interest in
and to Subject Assets, including, without limitation (i) good and marketable
title in fee simple to all its Real Property, (ii) valid and subsisting
leasehold interests in all leasehold estates comprising the Real Property, and
(iii) good and merchantable title to all properties and assets other than the
Real Property, in each case free and clear of all conveyances, conditions,
easements, liens, charges, security interests, adverse claims, encumbrances,
encroachments, reservations, easements, limitations, servitudes, other title
defects or restrictions of any nature. Seller has and will have as of the
Closing Date the right, power and capacity to convey, transfer, assign and
deliver the Subject Assets free and clear of any title defect or restriction,
including, without limitation, those enumerated in this Section
3.8. All tangible Subject Assets of Seller are in Seller's possession
or under its control, and all equipment included in the Subject Assets is in
operating condition and repair, serviceable and suitable for use subject only
to routine maintenance, and is fit and adequate for the purposes intended.
Seller enjoys peaceful and quiet possession of the Subject Assets pursuant to
or by all of the deeds, bills of sale, leases, licenses and other agreements
under which it is operating its business. The Subject Assets comprise all
assets of any kind or character necessary for the operation of the Division's
business as it is presently conducted.
3.9. Financial Statements.
(a) Prior to the date of this Agreement, Seller provided
Purchaser with the Financial Statements of the Division listed below
and will provide to Purchaser monthly Financial Statements for the
months after February 25, 2001 (the "New Monthly Financial Statements")
as soon as practicable after the end of each month:
(i) the unaudited Initial Balance Sheet;
(ii) the unaudited Balance Sheet, Income Statement
and Related Statements of Operation and Cash Flows for the
years ended October 1, 2000, September 26, 1999, September 27,
1998, September 28, 1997 and September 29, 1996; and
(iii) the unaudited Balance Sheet, Income Statement
and Related Statements of Operation and Cash Flows for the
ten months ended July 29, 2001. The Financial Statements
(i) have been (and, with respect to the New Monthly
Statements, when delivered, will have been) prepared in
accordance with generally accepted accounting principles
applied on a consistent basis during the periods, (ii)
present fairly (and, with respect to the New Monthly
Statements, when so delivered, will present fairly) the
Division's consolidated financial position, results of its
operations and changes in its financial position at and for
the periods therein specified, (iii) are (and, with respect
to the New Monthly Statements, when so delivered, will be)
true and complete, (iv) are (and, with respect to
the New Monthly Statements, when so delivered, will be)
consistent with the books and records of the Division, and
(v) with respect to all of the unaudited Financial Statements
include (and, with respect to the New Monthly Statements,
when so delivered, will include) all adjustments, consisting
only of normal recurring adjustments, required for a fair
presentation of the business and operations of the Division.
The Financial Statements will be deemed to include any
accompanying notes and schedules.
3.10. Absence of Certain Changes. Since October 1, 2000, the Division
has actively conducted its business in the ordinary and regular course
consistent with past practice. Since such date, there has not been any material
adverse change in the business, condition (financial or otherwise), assets,
liabilities, results of operations or prospects of the Division. To Seller's
knowledge, there has not occurred any event or governmental regulation or order
which could cause such a change, nor, to Seller's knowledge, is the occurrence
of any such event, regulation or order threatened. Except as set forth on
Schedule 3.10, without limiting the generality of the foregoing, since December
31, 2000, there has not been:
(a) Any increase made or promised in the compensation
or other remuneration payable or to become payable by the Division
to any of its employees, agents or partners;
(b) Any mortgage or pledge of, or any other lien,
charge or encumbrance of any kind, on any of the assets, tangible
or intangible, of the Division;
(c) Any sale or transfer of any assets of the Division,
except for sales of inventory in the ordinary course of business, or
settlement, cancellation or release of any indebtedness owing to the
Division or of any other claims of the Division;
(d) Any sale, license, assignment or transfer by Seller
and/or the Division of any patents, trademarks, trade names or other
similar intangible assets used by the Division;
(e) Any termination of (other than by expiration of its term),
or any material amendments to, any material contract, agreement or
license to which the Division (or Seller on behalf of the Division) is
a party or to which the Division (or Seller on behalf of the Division)
or any of the Division's assets are subject or bound;
(f) Any material commitment made (through
negotiations or otherwise) or any liability incurred to any labor
organization by the Division (or Seller on behalf of the Division);
(g) Any distribution by the Division of any cash or other
assets to Seller in discharge or cancellation in whole or in part of
any indebtedness owing (whether in payment of principal, interest or
otherwise) to Seller other than in the ordinary course of business
consistent with past practices;
(h) Any discharge or satisfaction by the Division (or
Seller on behalf of the Division) of any lien, encumbrance, obligation
or liability (accrued, absolute, fixed or contingent), other than
those shown on the Initial Balance Sheet that have been discharged or
satisfied in the ordinary course without acceleration and other than
those incurred and discharged in the ordinary course of business
consistent with past practice;
(i) Any transaction entered into by the Division (or Seller
on behalf of the Division) other than in the ordinary course of
business consistent with past practice;
(j) Any institution by the Division (or Seller on behalf of
the Division) of a bonus, stock option, profit-sharing, pension plan
or similar arrangement or any changes in any such existing plans;
(k) Any incurrence (whether discharged or not) of any
obligation or liability (whether accrued, absolute, fixed or
contingent) other than current liabilities incurred, and obligations
entered into, in the ordinary course of business consistent with past
practice;
(l) Any adverse change in collection loss experience;
(m) Any material loss, damage or destruction to any of
the Division's properties (whether or not covered by insurance) or
any labor trouble;
(n) Any change in accounting principles or
practices from those utilized in the preparation of the
Financial Statements; or
(o) Any notice (oral or written) or other indication
that any customer or supplier of the Division that accounted for
in excess of Thirty Thousand Dollars ($30,000.00) per year in
sales or purchases intends to reduce or discontinue its relationship
with the Division.
3.11. Absence of Undisclosed Liabilities. Except as set forth
on the Initial Balance Sheet or on Schedule 3.11, neither the Division nor
Seller is obligated for, nor are any of the Division's assets or properties
subject to, any material liabilities or adverse claims or obligations, absolute
or contingent, except those incurred in the ordinary course of business since
February 25, 2001, and neither the Division nor Seller is in material default
with respect to any terms or conditions of any liability or obligation. There
are no facts known to Seller that might reasonably serve as a basis, in whole
or in part, for any material liabilities or obligations of Seller with respect
to the Division not disclosed in this Agreement, in the Financial Statements
or in the Schedules.
3.12. Taxes.
(a) Seller has filed all income, franchise, sales and other
Tax Returns (as defined below) and reports of every nature required to
be filed by it accurately reflecting all Taxes (as defined below)
owing to the United States or any other government or any government
subdivision, state or local, or any other taxing authority, has paid
in full all Taxes that are due and owing (regardless of whether shown
on a Tax Return) and has made (or will timely make) adequate provision
for the payment of all Taxes not yet due, including, without
limitation, Taxes payable to any jurisdiction by reason of the
transfer of the Subject Assets pursuant to this Agreement. Seller has
no knowledge of any unassessed Tax deficiency proposed or threatened
against Seller as a result of the operation of its business. There are
no liens on the Subject Assets as a result of any Tax liabilities
except for Taxes not yet due and payable. There are, and after the
date of this Agreement will be, no Tax deficiencies (including
penalties and interest) of any kind assessed against or relating to
Seller with respect to any taxable periods ending on or before, or
including, the Closing Date of a character or nature that would result
in liens or claims on any of the Subject Assets or on Purchaser's
title to or use of the Subject Assets, or that would result in any
claim against Purchaser.
(b) Except as set forth on Schedule 3.12, there are no
outstanding agreements or waivers extending the statutory period of
limitations applicable to any federal, state, local, or foreign Tax
Return of Seller for any period. Except as set forth on Schedule 3.12,
neither the Internal Revenue service nor any state, local or foreign
taxing or governmental authority has audited any Tax Return or report
filed by Seller for any taxable period beginning after December 31,
1995 or otherwise commenced any action or proceeding for the
assessment or collection of Taxes, nor to Seller's knowledge has any
such event been threatened.
Seller has made available to Purchaser for its review,
complete and correct copies of all federal, state and foreign Tax
Returns of Seller for each of its fiscal years beginning after
December 31, 1998. Seller has furnished to Purchaser complete and
correct copies of all audit reports received by Seller from the U.S.
Treasury Department, or from any state, local or foreign taxing
authority, with respect to the audit of any federal, state, local or
foreign Tax Returns of Seller for any taxable period beginning after
December 31, 1995.
(c) Seller has never been a member of a consolidated,
combined or unitary group for federal, state, local or foreign Tax
purposes, except as a subsidiary of Uniroyal Technology Corporation,
and Seller has no liability or potential liability for the Taxes of
any person under Treasury Regulation Section 1.1502-6 (or any similar
provision of state, local or foreign law), as a transferee or
assumed liabilities is an obligation to make a payment that will not
be deductible under Section 280G or the law.
(d) [Intentionally omitted]
(e) Seller has complied in all material respects with all
applicable laws, rules and regulations relating to the payment and
withholding of Taxes, and has, within the time and manner prescribed
by law, withheld and paid over to the proper governmental authorities,
all amounts required to be so withheld and paid over pursuant to
applicable laws.
(f) For purposes of this Agreement, "Taxes" shall mean any
and all taxes, charges, fees, levies or other assessments, including,
without limitation, income, gross receipts, value added, excise, real
or personal property, sales, withholding, social security, retirement,
unemployment, occupation, use, service, service use, license, net
worth, payroll, franchise, transfer and recording taxes, customs and
import dues, fees and charges, imposed by the Internal Revenue Service
or any taxing authority (whether domestic or foreign including,
without limitation, any state, county, local or foreign government or
any subdivision or taxing agency thereof), whether computed on a
separate, consolidated, unitary, combined or any other basis; and such
term shall include any interest whether paid or received, fines,
penalties or additional amounts attributable to, or imposed upon , or
with respect to, any such taxes, charges, fees, levies or other
assessments. "Tax Return" shall mean any report, return, document,
declaration or other information or filing required to be supplied to
any taxing authority or jurisdiction (foreign or domestic) with
respect to Taxes, including, without limitation, information returns,
any documents with respect to or accompanying payments of estimated
Taxes, or with respect to or accompanying requests for the extension
of time in which to file any such report, return, document,
declaration or other information.
3.13. Brokerage and Finder's Fees. Seller has not incurred any
liability to any broker, finder or agent for any brokerage fees, finder's fees,
or commissions with respect to the transactions contemplated by this Agreement
except for Seller's liability for commissions to Jesup & Lamont Capital Markets,
Inc.
3.14. Accounts Receivable. Seller has previously delivered to
Purchaser an aging schedule as of a date not more than thirty (30) days prior
to the date of this Agreement, which, is true, correct and complete, of the
accounts receivable of the Division as of that date. Seller will update the
list as of a date not more than five (5) days prior to the Closing Date. The
reserves for doubtful receivables and uncollectible accounts that will be
reflected on the books of the Division as of the Closing Date will not exceed
five percent (5%) of the then aggregate accounts receivable, and will be
sufficient to provide for any losses that may arise in connection with the
collection of the accounts receivable. The accounts receivable as reflected on
the books of the Division as of the Closing Date, net of such reserves, will
be fully collectible in the ordinary course of business within ninety (90) days
after the Closing Date, without resort to legal proceedings. All of such
accounts receivable will represent valid claims that have arisen in the
ordinary course of business.
3.15. Employment Matters.
(a) Except as set forth on Schedule 3.15, neither the
Division (nor Seller on behalf of the Division) is a party to,
participant in, or bound by, any collective bargaining agreement,
union contract or employment, bonus, deferred compensation, insurance,
pension, profit sharing or similar personnel arrangement, any stock
purchase, stock option or other stock plans or programs or any
employee termination or severance arrangement.
(b) Except as set forth on Schedule 3.15, the employment by
the Division of any person (whether or not there is a written
employment agreement) may be terminated for any reason whatsoever not
inconsistent with current law, without penalty or liability of any
kind other than earned salary or wages and accrued vacation pay.
(c) Except as set forth on Schedule 3.15, there are no active,
pending or, to the best of Seller's knowledge, threatened
administrative or judicial proceedings under Title VII of the Civil
Rights Act of 1964, the Age Discrimination in Employment Act, the Fair
Labor Standards Act, the Occupational Safety and Health Act, the
National Labor Relations Act or any other foreign, federal, state or
local law (including common law), ordinance or regulation relating to
employees of the Division.
(d) The relation of the Division with its employees
is good and there are no pending or threatened labor difficulties.
3.16. No Defaults. Neither the Division nor Seller is in default (
nor is any such default alleged to exist) under the terms of any Material
Contract (as defined in Section 3.18 below) to which it is a party or to which
any of the Division's assets, business or operations is subject, nor has any
condition or event occurred, nor, to Seller's knowledge is any condition or
event threatened, which, after notice or the passage of time, or both, would
constitute a default under any Material Contract. To Seller's knowledge, no
such default, condition or event exists or is alleged to exist with respect to
the performance of any obligation of any other party to any of the Material
Contracts.
3.17. Non-Trade Accounts Receivable. Schedule 3.17 is a true
and correct list of all of accounts
receivable of the Division in each case other than trade accounts receivable.
3.18. Material Contracts. Schedule 3.18 is a true and correct list of
each contract involving in excess of Thirty Thousand Dollars ($30,000.00) to
which the Division (or Seller on behalf of the Division) is a party or by which
any of the Division's assets, businesses or operations is bound or affected
(collectively, "Material Contracts"). Schedule 3.18 includes a description of
any consents or approvals required of third parties under the terms of such
Material Contracts for the consummation of the transactions contemplated by
this Agreement. A true, correct and complete copy of each written, and a
description of each oral, Material Contract, so listed has been delivered to
Purchaser or its counsel.
3.19. Purchase Orders. Schedule 3.19 is a true and complete list
of all purchase orders under which the Division is obligated to pay any
particular vendor an aggregate sum in excess of Thirty Thousand Dollars
($30,000.00).
3.20. Indebtedness. Schedule 3.20 is a true and complete list of all
indebtedness, including, without limitation, trade accounts payable owed by the
Division, including a description of the terms of payment, and, if such
indebtedness is secured, a description of all properties or other assets
pledged, mortgaged or otherwise hypothecated (voluntarily or involuntarily) as
security.
3.21. Litigation. Schedule 3.21 is a true and complete list of all
administrative or judicial proceedings to which Seller or the Division is a
party or to which it is threatened to be made a party which relate, directly or
indirectly, to any of the Subject Assets, including, without limitation,
proceedings that could affect title to or interests in the Subject Assets.
There is no action, suit, claim, demand, arbitration or other proceeding or
investigation, administrative or judicial, pending or threatened against or
affecting Seller or the Division or any of the Division's assets, including,
without limitation, any relating to so-called product liability, which, if
adversely determined or resolved, would have a material adverse effect on the
business, assets, condition (financial or otherwise), results of operations or
prospects of the Division, or any provisions of, or the validity of, or rights
under, any leases or other operating agreements, licenses, permits or grants of
authority of the Division. Neither the Division nor Seller has received notice
that the Division is the subject of any governmental investigation and neither
the Division nor Seller is subject to, nor is it or has it been in default with
respect to, any order, writ, injunction or decree of any court, or of any
federal, state, local or other governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign, relating to the
Division. Schedule 3.21 indicates which of the matters listed are covered by
valid insurance and the extent of such coverage.
3.22. Insurance. Schedule 3.22 is a true and correct list of all the
policies of liability or casualty insurance covering the business, properties
and assets of the Division (or Seller on behalf of the Division) presently in
force (including as to each (i) risk insured against, (ii) name of carrier,
(iii) policy number, (iv) amount of coverage, (v) amount of premium, (vi)
expiration date and (vii) the property, if any, insured, indicating as to each
whether it insures on an "occurrence" or a "claims made" basis. The insurance
described on Schedule 3.22 does and will, up to the Closing Date, insure the
Division (or Seller on behalf of the Division) in the amounts and against such
perils as are generally maintained for comparable businesses. All of the
insurance policies listed on Schedule 3.22 are in full force and effect and all
premiums, retention amounts and other related expenses due have been paid, and
the Division (or Seller on behalf of the Division) has not received any notice
of cancellations with respect to any of the policies. The Division (or Seller
on behalf of the Division) has not been refused any insurance by any insurance
carrier to which it has applied for insurance during the last five (5) years.
To the best of Seller's knowledge and belief, there are no circumstances
existing which would enable any insurer to avoid liability under any of the
Division's or Seller's policies.
3.23. Transactions with Officers, Etc.
(a) Schedule 3.23(a) is a true and correct list of the
ownership of Seller in any entity that has any existing contractual
relationship, oral or written, or other business relationship with the
Division.
(b) Schedule 3.23(b) is a true and correct list of all
Contracts (oral or written), including, but not limited to, any loans
or leases, to which Seller is a party and to which any of the officers
or other employees of Seller, or members of their immediate families
or other corporations, partnerships or other entities in which any of
them has a material interest, is also a party.
(c) Except as set forth on Schedule 3.23(c) neither Seller nor
any officer, director, employee or shareholder of Seller, or members of
their immediate families or other corporations, partnerships or other
entities in which any of them has a material interest, has any direct
or indirect interest in any competitor, supplier or customer of the
Division or in any person, firm or entity from whom or to whom the
Division leases any property, or in any other person, firm or entity
with whom the Division transacts business of any nature.
3.24. Employees. Schedule 3.24 is a true and correct list of all
employees of the Division (as used in this Agreement, the term "employees"
includes employees, salesmen, agents, sales representatives and all other
persons associated with the Division in an employment relationship but excludes
independent contractors), their accrued vacation and sick pay, the nature of
their duties and the date and amount of their last increase in compensation. A
true, correct and complete copy of each written employment contract with any
employee has been delivered to Purchaser or its counsel.
3.25. Trademarks, Copyrights and Similar Matters.
(a) The Division (or Seller as a result of its ownership of
the Division) has never been charged with infringement or violation of
any patent, trademark, service mark, trade name or copyright. The
Division is not using or has not in any way made use of any patentable
or unpatentable invention, or any confidential information or trade
secret, of any present or past employee of Seller, which invention,
information or trade secret has not been assigned to the Division or
Seller. All patents, trademarks, service marks, trade names,
copyrights, brandmarks, brand names, and trade dress (the "Specified
Items"), and all applications or registrations (including those whose
use is limited to one or more states of the United States), owned or
used by the Division are listed on Schedule 3.25 and, to the extent
indicated, have been duly registered in, filed in or issued by the
United States Patent Office or the corresponding agency or office of
each of such states. Except as indicated on Schedule 3.25, the
Division (or Seller on behalf of the Division) is the sole and
exclusive owner of, or has the sole and exclusive right to use, the
Specified Items, except for the rights of licensees (whose names and
addresses are listed on Schedule 3.25). Except as set forth on
Schedule 3.25, the Division does not use any of the Specified Items by
consent of any other party and the same are free and clear of any
attachments, liens, claims, encumbrances or agreements. Except as
listed on Schedule 3.25, there are no claims or demands of any other
person, firm or corporation pertaining to any of the Specified Items,
and no proceedings have been instituted, are pending or, to the
knowledge of Seller, are threatened which challenge the right of
Seller in respect of any of the Specified Items. None of the Specified
Items infringes on, or, to the knowledge of Seller, is being infringed
on by others, and none of the Specified Items is subject to any
outstanding order, decree, judgment, stipulation or agreement
restricting the scope of its use.
[(b) True, correct and complete copies of all patents,
trademarks, service marks, trade names and copyrights, and of all
related applications or registrations, that are listed on Schedule
3.25 have been delivered to Purchaser or its counsel.
3.26. Employee Benefit Plans and Other Plans.
(a) Schedule 3.26(a) is a true and correct list of all
deferred compensation, pension, profit-sharing and retirement plans,
including multi-employer plans, all plans, arrangements or policies
for the provision of bonuses and/or severance benefits, all "employee
benefit plans" (as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")) and all fringe
benefit plans (including, without limitation, any hospitalization,
insurance, stock option or stock purchase plans) which a Controlled
Group Member maintains, contributes to, has liability with respect to,
or has an obligation to contribute to for the benefit of any employees
of the Division (collectively, the "Controlled Group Plans"). For
purposes of this Section 3.26, the term "Controlled Group Member"
means Seller and each other person or entity required to be aggregated
with Seller under Sections 414(b), (c), (m) or (o) of the Code.
Schedule 3.26(a) also identifies the Controlled Group Plans that
Seller maintains, contributes to, has liability with respect to, or
has an obligation to contribute to (collectively, the "Corporation
Plans").
(b) Schedule 3.26(b) is a true and correct list of each
Corporation Plan that is an "employee pension benefit plan," as such
term is defined in ERISA Section 3(2), but not including any
multi-employer plan within the meaning of ERISA Section 3(37)
(collectively, the "ERISA Pension Plans"). Except as set forth on
Schedule 3.26(b):
(i) Each ERISA Pension Plan that is funded or that
is required to be funded under ERISA, and its associated
trust, if any, complies in all material respects with Code
Section 401(a), has received a favorable determination letter
from the Internal Revenue Service stating that the plan
qualifies under Code Section 401(a) and that the associated
trust qualifies under Code Section 501(a) and, if applicable,
that any cash or deferred arrangement qualifies under Code
Section 401(k), has been timely amended (and the amendment
has been timely submitted to the Internal Revenue Service for
a favorable determination letter) with respect to changes
required by the Tax Equity and Fiscal Responsibility Act of
1982, the Retirement Equity Act of 1984 and the Tax Reform
Act of 1984, and is being maintained in accordance with the
requirements of each Act and all subsequent Acts, including,
without limitation, all regulations and notices pertaining to
such requirements;
(ii) No ERISA Pension Plan has an "accumulated
funding deficiency," as defined in ERISA Section 302(a)(2)
or Code Section 412, whether or not waived;
(iii) No "reportable event," within the meaning of
ERISA Section 4043(b), has occurred with respect to any ERISA
Pension Plan;
(iv) No notice of intent to terminate any ERISA
Pension Plan has been filed with the Pension Benefit Guaranty
Corporation ("PBGC") under ERISA Section 4041, nor has the
PBGC instituted or, to the knowledge of Seller, threatened to
institute any proceedings under ERISA Section 4042 to
terminate any ERISA Pension Plan;
(v) There has been no complete or partial
termination of any ERISA Pension Plan within the meaning
of Code Section 411(d)(3);
(vi) Schedule 3.26(b) sets forth with respect to
each ERISA Pension Plan that is required to be funded under
ERISA or that is subject to Subtitle B of Title IV of ERISA
the present value of accrued benefits under each Plan as of
the end of the Plan year most recently ended and the value of
the assets funding each Plan as of the most recent date for
which information is available but not prior to the last day
of the Plan year most recently ended.
(vii) All applicable ERISA and Code requirements
with respect to each ERISA Pension Plan as to the filing of
reports, documents and notices with the Secretary of Labor
and the Secretary of the Treasury, or the furnishing of such
documents to participants or beneficiaries, have been
complied with in all material respects by the Plan or its
administrators;
(viii) No "prohibited transaction," as such term is
defined in Code Section 4975 or ERISA Section 406, has
occurred with respect to any ERISA Pension Plan which could
subject the Plan, Seller, any director, officer, shareholder,
employee or agent of Seller, or any fiduciary of any ERISA
Pension Plan or associated trust, directly or indirectly, to
a tax or penalty for such prohibited transaction imposed by
either ERISA Section 502 or Code Section 4975;
(ix) There are no material actions, suits or claims
pending (other than routine claims for benefits) or, to the
knowledge of Seller, threatened against any ERISA Pension
Plan or against the assets of any such Plan, or against any
fiduciary of an ERISA Pension Plan;
(x) Any bonding required by applicable
provisions of ERISA with respect to any ERISA Pension Plan
has been obtained and is in full force and effect;
(xi) Each ERISA Pension Plan, the administrators and
fiduciaries of each ERISA Pension Plan and each of the
Controlled Group Members have at all times complied in all
material respects with all applicable requirements of ERISA
with respect to each ERISA Pension Plan and any other
applicable law (including regulations and rulings) governing
each ERISA Pension Plan and each ERISA Pension Plan has at
all times been properly administered in all material respects
in accordance with all requirements of law and in accordance
with its terms to the extent consistent with all requirements
of law;
(xii) No trust associated with any ERISA Pension
Plan has earned any "unrelated trade or business income" (as
such term is defined in Code Section 513 and its regulations)
or "unrelated debt financed income" (as such term is defined
in Code Section 514 and its regulations) with respect to
which a federal income tax return has not been filed;
(xiii) None of the Controlled Group Members, any
ERISA Pension Plan or any administrator or fiduciary of any
ERISA Pension Plan has taken any action, or failed to take
any action, which action or failure could subject it or any
other person or entity to any liability for any excise tax or
for breach of any fiduciary duty with respect to or in
connection with any ERISA Pension Plan; and
(xiv) Each ERISA Pension Plan that is intended to be
qualified under Code Section 401 is in compliance with the
requirements of Code Section 410(b) at all times prior to the
transaction contemplated by this Agreement.
(c) Schedule 3.26(c) is a true and correct list of each
Corporation Plan which is an "employee welfare benefit plan," as such
term is defined in ERISA Section 3(1), but not including any employee
welfare benefit plan satisfying the requirements of Subsections (i)
and (ii) of ERISA Section 37(A) (collectively, the "ERISA Welfare
Plans"). Except as disclosed on Schedule 3.26(c):
(i) Each ERISA Welfare Plan that is subject to the
requirements of Part 6 of Subtitle B of Title I of ERISA has
complied with such requirements and with the requirements of,
as applicable, Code Sections 106, 162(k) and 4980B;
(ii) All applicable ERISA and Code requirements with
respect to each ERISA Welfare Plan as to the filing of
reports, documents and notices with the Secretary of Labor
and the Secretary of the Treasury, or the furnishing of such
documents to participants or beneficiaries, have been
complied with in all material respects by the Plan or its
administrators;
(iii) None of the Controlled Group Members, any
ERISA Welfare Plan, any administrator or fiduciary of any
ERISA Welfare Plan, has taken any action, or failed to take
any action, which action or failure could subject it or any
other person to any liability for any excise tax or for
breach of any fiduciary duty with respect to or in connection
with any ERISA Welfare Plan;
(iv) There are no material actions, suits or claims
pending (other than routine claims for benefits) or, to the
knowledge of Seller, threatened against any ERISA Welfare
Plan or against the assets of any such Plan or against any
fiduciary of any ERISA Welfare Plan;
(v) Any bonding required by applicable
provisions of ERISA with respect to any ERISA Welfare Plan
has been obtained and is in full force and effect;
(vi) Each ERISA Welfare Plan, the administrators and
fiduciaries of each ERISA Welfare Plan and each of the
Controlled Group Members have at all times complied in all
material respects with all applicable requirements of ERISA
with respect to each ERISA Welfare Plan and any other
applicable law (including regulations and rulings) governing
each ERISA Welfare Plan and each ERISA Welfare Plan has at
all times been properly administered in all material respects
in accordance with all requirements of law and in accordance
with its terms to the extent consistent with all requirements
of law;
(vii) None of the ERISA Welfare Plans provide for
non-terminable or non-alterable medical or life benefits for
employees or retirees or irrevocably or unalterably commits a
Controlled Group Member to provide such benefits or any other
benefits for any party upon or following retirement or other
termination of employment;
(viii) With respect to each ERISA Welfare Plan that
has been or is required to be funded, such Plan has been
fully funded based on reasonable and proper actuarial
assumptions;
(ix) With respect to each ERISA Welfare Plan that is
not required to be funded, Seller has established adequate
reserves in accordance with generally accepted accounting
principles;
(x) No trust associated with any ERISA Welfare Plan
has earned any unrelated trade or business income or
unrelated debt financed income with respect to which a
Federal income tax return has not been filed; and
(xi) Any trust associated with any ERISA
Welfare Plan that is intended to be tax eempt under Code
Section 501(c)(9) meets the requirements of such Section and
Code Section 505.
(d) Schedule 3.26(d) is a true and correct list of
each Controlled Group Plan that is a "multi-employer pension
plan," as such term is defined in ERISA Section 3(37) or Code
Section 414(f) (collectively, the "Multi-employer Pension
Plans"). Except as set forth on Schedule 3.26(d):
(i) No withdrawal liability under Code Section 4201
has been incurred by or asserted against a Controlled Group
Member with respect to any Multi-employer Pension Plan and,
to the knowledge of Seller, none is threatened or expected
and no action is contemplated which could expose a Controlled
Group Member to such withdrawal liabilities;
(ii) No "prohibited transaction," as such term is
defined in Code Section 4975 or ERISA Section 406, has
occurred with respect to any Multi-employer Pension Plan
which could subject Seller or any director, officer, employee
or agent of Seller, directly or indirectly, to a tax or
penalty for such prohibited transaction imposed by either
ERISA Section 502 or Code Section 4975;
(iii) The total potential complete withdrawal
liability under ERISA Section 4201 to Controlled Group Members
under each Multi-employer Pension Plan, based on an assumed
occurrence of a complete withdrawal from each such Plan as of
the end of the most recent plan year for which withdrawal
information is available, is set forth on Schedule 3.26(d)
together with the plan year for which the withdrawal liability
has been computed.
(e) Schedule 3.26(e) is a true and correct list of each
Controlled Group Plan which is an ERISA Welfare Plan that
satisfies the requirements of Subsections (i) and (ii) of
ERISA Section 37(A) (collectively, the "Multi-employer
Welfare Plans"). Except as set forth on Schedule 3.26(e), each
Multi-employer Welfare Plan that is subject to the requirements
of Part 6 of Subtitle B of Title I of ERISA has complied with such
requirements and with the requirements of, as applicable, Code
Sections 106, 162(k) and 4980B.
(f) Except as set forth on Schedule 3.26(f), full payment has
been made of all amounts that a Controlled Group Member is required,
under applicable law or under any Controlled Group Plan, to have paid
as a contribution thereto for the plan years of each such Controlled
Group Plan ended prior to the date of this Agreement, and each
Controlled Group Member has made adequate provision for reserves to
meet contributions that have not been made because they are not yet
due under the terms of any Controlled Group Plan or related agreements.
Benefits under all Controlled Group Plans are as represented and have
not been increased subsequent to the date as of which documents have
been provided.
(g) No events have occurred or, to the knowledge of Seller,
are threatened or expected to occur with respect to any Corporation
Plan that would cause a material change in the cost of providing the
benefits under such Corporation Plans or would cause a material change
in the cost of providing for other liabilities of such Plan.
(h) Neither entry into this Agreement nor the consummation of
the transactions contemplated by it will violate any law, regulation,
or contract relating to any Controlled Group Plan.
(i) The consummation of the transactions contemplated by this
Agreement will not (i) entitle any current or former employee or
officer of a Controlled Group Member to severance pay, unemployment
compensation or any other payment, except as expressly provided in this
Agreement or in any documents executed in connection with this
Agreement, (ii) accelerate the time of payment or vesting, or increase
the amount of compensation due any such employee or officer, (iii)
directly or indirectly cause a Controlled Group Member to transfer or
set aside any assets to fund or otherwise provide for benefits for any
current or former employee or officer, or (iv) result in any
non-exempt prohibited transaction described in ERISA Section 406 or
Code Section 4975.
(j) Except as set forth on Schedule 3.26(j), no Controlled
Group Member has any commitment, whether formal or informal and
whether legally binding or not, to:
(i) create any additional agreement, plan,
arrangement or practice that would constitute a Corporation
Plan had such agreement, plan, arrangement or practice been
effective on the date of this Agreement;
(ii) modify or change any Corporation Plan; or
(iii) maintain for any period of time any
Corporation Plan.
(k) Seller has delivered or made available to Purchaser or
its counsel true and correct copies of the following with
respect to each Corporation Plan:
(i) A copy of each of the Corporation Plans
and all amendments;
(ii) A copy of each trust agreement and
insurance contract pertaining to the investment of the
assets of any of the Corporation Plans or the payment of
benefits to them, including all amendments to such documents;
(iii) The most recent determination letter issued by
the Internal Revenue Service with respect to each of the
ERISA Pension Plans and ERISA Welfare Plans for which a
determination letter has been issued and any pending
determination letter requests with respect to such Plans;
(iv) The most recent actuarial valuation report and
asset valuation report for each of the ERISA Pension Plans
and ERISA Welfare Plans for which an actuarial valuation
report or asset valuation report is, or is required to be,
prepared;
(v) The three most recent Internal Revenue Service
Forms 5500, including Schedules A, B and plan audits, filed
with respect to each of the ERISA Pension Plans and ERISA
Welfare Plans; and
(vi) A copy of the latest summary plan description
(within the meaning of ERISA Section 101(a)(1)) for each of
the ERISA Pension Plans and ERISA Welfare Plans and each
summary of material modifications (within the meaning of
ERISA Section 101(b)(2)) to such plans, that has been
provided to employees or filed with the Department of Labor.
(l) Each Controlled Group Member has timely provided or will
timely provide all notices and any continuation of health benefit
coverage (including, without limitation, medical and dental coverage)
required to be provided to employees, former employees, or the
beneficiaries or dependents of such employees or former employees,
under Part 6 of Subtitle B of Title I of ERISA or, as applicable,
Code Section 162(k) or 4980B (collectively, "COBRA") to the extent
such notices and continuation of health benefit coverage are required
to be provided by reason of the events occurring prior to or on the
Closing Date or by reason of the transactions contemplated by this
Agreement. For the purposes of the foregoing, Seller must treat all
employees (and such employees' dependents and beneficiaries) of the
Division as of the Closing Date as having incurred a "qualifying
event" (within the meaning of ERISA Section 603 and, as applicable,
Code Section 162(k)(3) or 4980B(f)(3)) on the Closing Date and Seller
must continue the health benefit coverage required by COBRA and the
provisions of this Agreement irrespective of the elimination of any
medical or dental plan of Seller. Seller will upon request provide
Purchaser with evidence, to the satisfaction of Purchaser, of
compliance with the above provision. Seller will hold Purchaser and
any entity required to be combined with Purchaser under
Code Section 414 (collectively, the "Affected Parties") harmless from,
and to fully indemnify such Affected Parties against, any costs,
expenses, losses, damages and liabilities incurred or suffered by such
Affected Parties, directly or indirectly, including, without
limitation, reasonable legal fees and expenses, with respect to any
failure of any Controlled Group Member to comply with the requirements
of this Section or COBRA.
(m) With respect to each Corporation Plan, each Controlled
Group Member has complied with the applicable requirements of the Age
Discrimination in Employment Act of 1967, as amended. With respect to
each Corporation Plan providing health or medical benefits, each
Controlled Group Member has complied with the applicable requirements
of the Health Maintenance Organization Act of 1973, as amended, the
Social Security Act, as amended (including, without limitation, the
requirements making Medicare the secondary payer under Section 1862 of
such Act) and Code Section 5000. 3.27. Environmental Matters.
(a) Definitions. For purposes of this Section:
(i) "Contaminant" means any substance or waste
containing hazardous substances, pollutants or contaminants
as those terms are defined in the Comprehensive Environmental
Response, Compensation and Liability Act, 42 U.S.C. ss.
U.S.C. 9601 et seq., and any other substance similarly
defined or identified in any other federal, state or local
laws, rules or regulations governing the manufacture, import,
use, handling, storage, processing, release or disposal of
substances or wastes deemed hazardous, toxic, dangerous or
injurious to public health or to the environment. This
definition includes asbestos-containing material and
petroleum or petroleum-based products.
(ii) "Requirements of Law" means any federal, state
or local law, rule, regulation, permit, agreement, order or
other binding determination of any governmental authority
relating to the environment, public health or safety.
(iii) "Release" has the same meaning as in the
Comprehensive Environmental Response, Compensation and
Liability Act, 42 U.S.C.ss. U.S.C. 9601 et seq.
(b) Except as set forth on Schedule 3.27(b):
(i) Seller has not caused or allowed any Contaminant
to be used, manufactured, stored, placed, processed or
released on or off-site of any of the Real Property listed on
Schedule 3.5(a), except in compliance with Requirements of
Law;
(ii) the Real Property is in compliance with all
applicable Requirements of Law;
(iii) neither Seller nor the Division nor the
Real Property, nor any real property owned or leased by the
Division (or by Seller on behalf of the Division) in the past
or in which the Division or Seller has had any interest in
the past, are the subject of any investigation, notice, order
or agreement regarding any remedial action or the Release,
threatened Release or presence of a Contaminant; and
(iv) Seller, the Division and the Real Property are
subject to no contingent liability in connection with the
Release, threatened Release, or presence of any Contaminants
on or off-site of the Real Property.
(c) Except as set forth on Schedule 3.27(c):
(i) Seller and the Division have obtained
all environmental, health and safety permits necessary,
and made all notifications necessary, for the current use
of the Subject ASsets;
(ii) all such permits and notifications are
in good standing and Seller has made timely application for
renewal of such permits where necessary;
(iii) Seller and the Division are in compliance
with all terms and conditions of
such permits and notifications; and
(iv) the Subject Assets are in compliance with
all applicable Requirements of Law and the Subject Assets
are subject to no contingent liability in connection with
the Release, threatened Release or presence of any
Contaminants on or off-site of the Subject Assets.
(d) There is not now on or in the Subject Assets,
including but not limited to, the Real Property comprising
the Subject Assets:
(i) any treatment, storage, recycling, disposal or
arrangement therefor, of any hazardous waste as that term is
defined under 40 CFR Parts 260-261 or any state equivalent,
except in compliance with Requirements of Law;
(ii) any underground storage tanks, in use or
abandoned;
(iii) any asbestos-containing material;
(iv) any polychlorinated biphenyls (PCBs) in
any hydraulic oils, transformers,
capacitors or other electrical equipment; and
(v) naturally occurring radioactive material in
violation of Requirements of Law.
3.28. Bank Accounts.
Schedule 3.28 is a true and correct list of the name of each bank,
savings and loan, or other financial institution in which the Division (or
Seller on behalf of the Division) has an account or safe deposit box, the names
of all persons authorized to draw on each account or to have access to each box,
the number of signatures required to be given for a withdrawal and a
description of the type of account.
3.29. Compliance with Laws. Seller and the Division have complied in
all material respects with all laws, regulations, rules and orders of any
governmental department or agency or any other commission, board, agency or
instrumentality, federal, state or local, or other requirements of law
affecting the business and operations of the Division and are not in default
under or in violation in any material respect of any provision of any federal,
state or local law, regulation, rule or order.
3.30. [Intentionally omitted]
3.31. Licenses and Rights. Seller and the Division possess all
franchises, licenses, easements, permits and other authorizations from
governmental or regulatory authorities and from all other persons or entities
that are necessary to permit them to engage in the business of the Division as
presently conducted in and at all locations and places where the Division is
presently operating. Such franchises, licenses, permits and other
authorizations are listed on Schedule 3.31.
3.32. Schedule of Government Reports. Schedule 3.32 is a true and
correct list, and Seller has furnished to Purchaser or its counsel complete
copies of all reports, if any, filed on behalf of or with respect to the
Division since January 1, 2000, by Seller or the Division with the Department
of Labor, Equal Employment Opportunity Commission, Federal Trade Commission,
Department of Justice, Occupational Safety and Health Administration, Internal
Revenue Service (other than tax returns and standard forms relating to
compensation or remuneration of employees), Environmental Protection Agency,
Securities and Exchange Commission or Pension Benefit Guaranty Corporation, or
any similar state agency with respect to the Division.
3.33. Products.
(a) The products sold by the Division conform to and meet or
exceed the standards required by all applicable laws, ordinances and
regulations now in effect and, to Seller's knowledge, there is no
pending legislation, ordinance or regulation which if adopted or
enacted would have a material adverse effect on such products or the
Division's business.
(b) Schedule 3.33 contains a written statement accurately
describing the Division's warranties and customer service policies and
any recurring warranty problems. The Division does not have any
outstanding contracts or proposals that depart from the warranty and
customer service policy and practice described in such Schedule.
Seller will convey to Purchaser all its rights in manufacturers'
warranties for products sold by the Division (which will be deemed a
part of the Subject Assets) and will deliver to Purchaser copies of
all such warranties in the Division's possession of Seller or the
Division.
Except as described in Schedule 3.33, no claims of customers or others
based on an alleged or admitted defect of material, workmanship or
design or otherwise in or in respect of any of the Division's products
are presently pending or, to Seller's knowledge, threatened. 3.34.
Casualty Occurrences. Schedule 3.34 is a true and correct list of
occurrences during the last
three (3) years of damages to persons or property in excess of One Thousand
Dollars ($1,000.00) involving any defects or alleged defects in any of the
Division's products or their design. All such occurrences have been adequately
covered by insurance or customary retention.
3.35. Inventory. The inventory of the Division consists only of items
of a quality and quantity usable and saleable in the ordinary course of
business, consistent with past practice, and does not include any item of
inventory which has previously been written off by the Division. Items of
below-standard quality and items not previously readily saleable in the
ordinary course of business have been written down in value in accordance with
generally accepted accounting principles to estimated net realizable market
values. The value at which the inventory is carried on the Division's books
reflects the lower of cost (on a FIFO basis) or estimated net realizable market
value, and is based on quantities determined by physical count.
3.36. Quality and Delivery Records. Seller has provided Purchaser with
the quality and delivery records of the Division received from customers for
the years ended October 1, 2000, September 26, 1999 and September 27, 1998 and
for the ten (10) months ended July 29, 2001. All of such quality records are
true and complete in all material respects.
3.37. Material Misstatements or Omissions. No representations or
warranties made by Seller in this Agreement or in any document, statement,
certificate, Schedule, chart, list, letter, compilation or other document
furnished or to be furnished to Purchaser or its counsel pursuant to this
Agreement (collectively, the "Documents"), contain or will contain any untrue
statement of a material fact, or omit or will omit to state a material fact
necessary to make the statements of fact contained therein not misleading. All
statements of fact made and data presented by Seller in any Document are deemed
to be representations and warranties made under this Agreement by Seller.
References in any Document, or in any Contract, a copy of which has been
provided to Purchasers or its counsel, to any other Document or Contract as to
which Seller prior to the date of this Agreement has not provided to Purchaser
or its counsel a true copy or, if oral, a written summary, will not be deemed
for any purposes of this Agreement to be a disclosure of any term, provision or
statement of fact of, or relating to, such other Document or Contract.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser warrants and represents to, and agrees with, Seller as
follows:
4.1. Organization and Good Standing of Purchaser. Purchaser is a
corporation duly organized, validly existing and in full force and effect under
the laws of the State of Delaware, has full corporate power and authority to
carry on its business as and where now conducted and to own or lease and
operate its properties at and where now owned or leased and operated by it, and
is duly qualified to do business and is in good standing in every jurisdiction
in which the property owned, leased or operated by it, or the nature of the
business conducted by it, makes such qualification necessary.
4.2. Authority of Purchaser. The execution, delivery and consummation
of this Agreement by Purchaser has been (or will be by the Closing Date)
authorized by the board of directors and shareholders of Purchaser in
accordance with all applicable laws and the Certificate of Incorporation and
By-laws of Purchaser and at the Closing Date no further action will be
necessary on the part of Purchaser or its members to make this Agreement valid
and binding on Purchaser and enforceable against Purchaser in accordance with
its terms. No approval or consent of any person, firm or other entity or
governmental body other than the board of directors of Purchaser is or was
required to be obtained by Purchaser for the authorization of this Agreement or
the consummation by Purchaser of the transactions contemplated in this
Agreement.
4.3. Authority of Purchaser. Purchaser has the power and authority to
enter into and perform its obligations under this Agreement. The execution and
delivery of this Agreement by Purchaser and the consummation by Purchaser of
the transactions contemplated hereby will not (i) violate any provisions of the
Certificate of Incorporation and By-laws of Purchaser, (ii) violate any law or
regulation applicable to Purchaser or (iii) violate, result in a breach of or
constitute a default under any mortgage, deed of trust, indenture or other
agreement or instrument to which Purchaser is a party, or any order, judgment
or decree to which Purchaser is party or by which it or its assets are bound.
4.4. Enforceability. This Agreement is the valid and binding agreement
of Purchaser, enforceable against Purchaser in accordance with its terms,
except as such enforceability may be limited by applicable bankruptcy,
insolvency, moratorium, reorganization and other laws of general applicability
related to or affecting creditors' rights.
4.5. Governmental Approval. No consent, approval, waiver,
order, authorization, registration or declaration of, exemption by, or
filing with, any governmental agency is required in connection with the
execution and delivery by Purchaser of this Agreement and the
consummation by Purchaser of the transactions contemplated hereby.
4.6. Commissions and Fees. Purchaser has utilized no finder,
broker or similar source in connection with the transactions contemplated by
this Agreement.
4.7. Governmental Orders. Purchaser is not a party or subject
to or bound by any law, judgment, order, writ, injunction, ruling, or decree
of any jurisdiction, court or governmental body that will or is likely
to affect adversely Purchaser's ability to consummate the transactions
contemplated by this Agreement.
4.8. Litigation. There is no lawsuit, arbitration, investigation,
litigation or proceeding pending or, to the best of Purchaser's knowledge,
threatened against or affecting the Purchaser which, if adversely determined,
would have a material adverse effect on Purchaser's ability to consummate the
transactions contemplated by this Agreement.
4.9. Issuance of Shares. The Preferred Stock of Purchaser
to be delivered pursuant to this Agreement, when so delivered, will have
been validly authorized and validly issued, fully paid and nonassessable.
4.10. Material Misstatements or Omissions. No representations or
warranties made by Purchaser in this Agreement contain or will contain any
untrue statement of a material fact, or omit or will omit to state a material
fact necessary to make the statements of fact contained therein not misleading.
4.11. Brokers and Finders. Purchaser has not incurred any
liability to any broker, finder or agent for any brokerage fees, finder's
fees or commissions with respect to the transactions contemplated by this
Agreement.
ARTICLE 5
CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER
The obligations of Purchaser under this Agreement are, at its option,
subject to satisfaction of the following conditions at or prior to the Closing
Date:
5.1. Representations True, Schedules Complete. The representations and
warranties of Seller contained in this Agreement are true, complete and
accurate in all material respects on and as of the Closing Date to the same
extent and with the same force and effect as if made on such date, except as
affected by the transactions contemplated under this Agreement. The Schedules
attached hereto and as further amended pursuant to Section 11.7 are acceptable
to Purchaser in its sole discretion.
5.2. All Consents Obtained. All necessary approvals or consents
required to be obtained by Seller or Purchaser have been obtained from all
local, state and federal departments and agencies, from all other commissions,
boards, agencies and from any other person or entity whose approval or consent
is necessary to consummate the transactions contemplated under this Agreement
including, without limitation, such consents as may be listed or required to be
listed on Schedule 3.2.
5.3. Performance and Obligations. Seller has duly
performed all obligations, covenants and agreements undertaken by Seller
in this Agreement to be performed and complied with on or before the Closing
Date.
5.4. Receipt of Documents by Purchaser. Purchaser has received:
(a) a certificate executed by the President and Secretary or
Treasurer of the Seller certifying as to the fulfillment of the
matters contained in Sections 5.1, 5.2, 5.3 and 5.5.
(b) the Initial Closing Date Balance Sheet and the
EBITDA Estimate.
(c) a written opinion from the General Counsel of Seller
dated as of the Closing Date, addressed to Purchaser (and with
express rights of reliance thereon granted to Purchaser's Senior and
Mezzanine Lenders), satisfactory to Purchaser and its counsel in form
and substance, to the effect that:
(i) Seller is duly organized, validly existing and
is in good standing under the laws of the state of Delaware,
has full power and authority to carry on the Division's
business as and where now conducted, and to own or lease and
operate the Division's properties at and where now owned or
leased and operated by it, and is qualified to do business in
every jurisdiction in which the property owned, leased or
operated by the Division (or by it on behalf of the Division)
or the nature of the business conducted by the Division,
makes such qualification necessary;
(ii) Seller has full right and lawful authority to
convey, transfer and assign the Subject Assets to Purchaser
as provided in this Agreement, and the instruments of
transfer delivered by Seller to Purchaser at the Closing are
sufficient to transfer to Purchaser all right, title and
interest of Seller in and to the Subject Assets;
(iii) Seller has all requisite power to execute,
deliver and carry out its obligations under this Agreement
and the execution, delivery and performance of this Agreement
by Seller have been duly authorized by all requisite action,
including, without limitation, the requisite authorization by
the members of Seller;
(iv) This Agreement constitutes the legal, valid and
binding obligation of Seller, and is enforceable against
Seller in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy,
insolvency, moratorium, reorganization and other laws of
general applicability related to or affecting creditors'
rights;
(v) Except as set forth in this Agreement or in any
Schedule to this Agreement, the execution and delivery of this
Agreement and the consummation of the transactions
contemplated under this Agreement by Seller (a) are not in
conflict with the Certificate of Formation or Operating
Agreement of Seller, (b) do not (with or without notice or
the passage of time or both) constitute a default under, and
are not in conflict with, any Material Contract known to such
counsel to which Seller is a party or to which any of its
assets are subject, (c) do not violate any order, judgment or
decree or any rule, regulation or law, or any other
restriction known to such counsel to which Seller is a party
or to which any of its assets are subject and (d) will not
(with or without notice or the passage of time or both)
result in the creation of any lien or any charge on or any
loss of any assets of the Division or Seller or in the
acceleration or termination of any loan, security interest or
other agreement known to such counsel to which the Division
or Seller is a party or to which any of the Division's assets
are subject;
(vi) Except with respect to those matters as may be
disclosed in any Schedule to this Agreement, such counsel has
no knowledge of any action, suit, claim, demand, arbitration
or other proceeding or investigation, administrative or
judicial, pending or threatened against or affecting the
Division or any of the Division's assets at law or in equity,
or before or by any federal, state, municipal or other
governmental department or by any other commission, board,
agency or instrumentality, domestic or foreign, that can
reasonably be expected to have any adverse effect on the
business, assets, or financial condition of the Division; and
(vii) Such other material matters which Purchaser or
its counsel reasonably requests;
(d) certified copies of resolutions duly adopted by the board of
managers and by the members of Seller approving this Agreement and the
transactions contemplated under it; (e) with respect to all
Real Property, ALTA preliminary commitments for title
insurance, containing commitments to issue (in form and
substance reasonably acceptable to Purchaser in its sole
discretion) as applicable (a) fee owner's title insurance policies on
ALTA Form B, 1970, (b) leasehold owner's title insurance policies on
ALTA Form 1975 and (c) loan policies for the benefit of any lender
supplying financing for Purchaser's acquisitions, on ALTA Loan Policy
Form 1970, and Purchaser receives at Closing all such policies of
title insurance in form and substance reasonably acceptable to
Purchaser. Purchaser and Seller shall each pay one-half (1/2) of the
cost of issuing such policies of title insurance. Each such policy of
title insurance must contain the following:
(i) an endorsement deleting all standard
printed exceptions;
(ii) an access endorsement, insuring, among other
matters, that the property subject to the policy and all
entrances, exits, driveways and access roads have free access
to and from a public road or highway;
(iii) affirmative assurance that the parcels
comprising the property subject to the policy are contiguous
to each other without any strips, gores or other parcels of
land intervening;
(iv) affirmative assurance of title to all
easements benefiting the property subject to the policy;
(v) affirmative assurance of the state of facts
shown on the survey delivered to Purchaser pursuant to
Section 5.4.(f), which must be read into and form a part of
each such commitment and the policies to be issued on account
of such commitments;
(vi) any other endorsements or assurances
reasonably requested by Purchaser;
(f) surveys of all Real Property prepared at Seller's
cost by a land surveyor licensed in the state in which the property
is located, showing the perimeter of the property and the location of
all improvements, easements and other matters affecting the property
subject to the survey. The surveys are to be in form and substance
acceptable to Purchaser, are to have the seal and registration number
of the surveyor affixed to the survey and must include the date on
which the actual field survey was concluded. The surveys must contain
a certificate, in form and substance acceptable to Purchaser, its
counsel, the title company, any lender supplying financing to
Purchaser and any other parties designated by Purchaser certifying
that the survey is an accurate representation of the property, made in
accordance with the "Minimum Standard Detail Requirements for Land
Title Surveys" adopted by the American Title Association. The surveys
must show which portion of the property, if any, is located within a
flood plain or flood way area as designated by the United States
Federal Emergency Management Agency.
(g) the parties shall enter into an option agreement for the
ground underlying the building and other improvements to the Real
Property prior to or on the Closing Date in such form and substance as
acceptable to the parties; and
(h) the parties shall enter into a Lease for the ground
underlying the building and other improvements to the Real Property
prior to or on the Closing Date in such form and substance as
acceptable to the parties.
5.5. No Litigation. No suit, action, or other proceeding is threatened
or pending before any court or governmental agency in which it will be or it is
sought to restrain or prohibit or to obtain material damages or relief in
connection with this Agreement or the consummation of the transactions
contemplated by this Agreement, or which is likely to materially and adversely
affect the value of the business or assets of the Division.
5.6. Employment Agreement. Each of James Elgin, Randall R.
Greenlee, Joseph Miller, Donald Perkins
and Steven Zens has entered into an Employment Agreement with Purchaser
on terms no less favorable than his employment arrangements with the Division
at the time of the Closing.
5.7. Delivery of Books and Records. Seller has delivered or made
available to Purchaser all books and records of the Division relating to or
reasonably required for the operation of the business of the Division,
including, without limitation, copies of all Material Contracts, financial and
accounting records, files and records relating to employees, and all related
correspondence.
5.8. Instruments of Transfer. Seller has executed and delivered to
Purchaser good and sufficient instruments of transfer transferring to Purchaser
title to all of the Subject Assets as required pursuant to Section 1.1. The
instruments of transfer must be in form and substance reasonably satisfactory to
Purchaser and its counsel, which form is usual and customary for transferring
the type of property involved under the laws of the jurisdictions applicable to
such transfer. All of such instruments must contain general warranties of title
and good right to convey.
5.9. Guaranty. Uniroyal Technology Corporation, the parent
corporation of Seller, has executed and delivered a guaranty in favor of
Purchaser of Seller's obligations under Article 9.
5.10. Confidentiality and Non-Compete Agreements. Seller has (i)
assigned to Purchaser any and all rights of Seller and/or the Division under
any confidentiality agreement covering confidential information concerning the
Division's business or the Subject Assets and under any non-compete or similar
agreement in favor of Seller restricting activities competitive with those of
the Division's business, (ii) provided Purchaser with a list of such agreements,
and (iii) delivered copies of such agreements of Purchaser.
5.11. Absence of Changes. There has been no material adverse
change in the business (financial or otherwise), assets, liabilities,
results of operations or prospects of the Division since the date of this
Agreement.
5.12. Purchaser's Review. Purchaser and its representatives have
conducted a review, inspection or investigation of the business, assets, books
and records of the Division and have not discovered any facts or circumstances
which, in Purchaser's sole discretion, fail to support the representations and
warranties of Seller set forth herein or could have a material adverse effect
on the purchase and sale of the Subject Assets or the operations or financial
condition of the Division and have not been corrected by Seller after
reasonable notice of the same by Purchaser to Seller.
5.13. Phase I Audit. Purchaser has obtained a Phase I environmental
audit ("Phase I Audit") of the Division's facilities and operations and, if the
Phase I Audit so recommends, Seller has obtained a Phase II environmental audit
of the Division's facilities and operations ("Phase II Audit"), and has found
the results of such audit(s) to be satisfactory to Purchaser and Purchaser's
lenders, in their sole discretion.
5.14. Financial Statements. Purchaser has received unaudited
financial statements of the Division for the fiscal year ended October 1, 2000
and for the ten (10) months ended July 29, 2001.
5.15. Firestone Extension. Seller has received a fully executed
extension of the terms of its Memorandum of Understanding and Confidentiality
Agreement dated February 23, 1995 with Firestone Building Products Company, as
heretofore amended, for a period which expires no earlier than December 31,
2005, on terms reasonably satisfactory to Purchaser.
5.16. Financing. Purchaser has received financing for its
acquisition of the Subject Assets on terms satisfactory to Purchaser, in its
sole discretion.
5.17. Computer Support Agreement. Purchaser and Seller have entered
into a computer support agreement (the "Computer Support Agreement") which
provides, among other things, that Seller shall perform certain MIS and
accounting services to Purchaser for a period of up to two (2) years.
ARTICLE 6
CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER
The obligations of Seller under this Agreement are, at its option,
subject to satisfaction of the following conditions at or prior to the Closing
Date:
6.1. Representations True. The representations and warranties of
Purchaser contained in this Agreement are true, complete and accurate in all
material respects on and as of the Closing Date to the same extent and with the
same force and effect as if made on such date, except as affected by the
transactions contemplated under this Agreement.
6.2. All Consents Obtained. All necessary approvals or consents
required to be obtained by Seller have been obtained from all local, state and
federal departments and agencies, from all other commissions, boards, agencies
and from any other person or entity whose approval or consent is necessary to
consummate the transactions contemplated by this Agreement.
6.3. Performance of Obligations. Purchaser has duly
performed all obligations, covenants and agreements undertaken by
Purchaser in this Agreement to be performed or complied with on or before the
Closing Date.
6.4. Receipt of Documents by Seller. Seller has received:
(a) the purchase price (i.e., cash and certificate(s)
for shares of the Preferred Stock) for the Subject Assets as
provided in Section 2.1;
(b) a certificate executed by the President and
Secretary or Treasurer of Purchaser certifying as to the
fulfillment of the matters contained in Sections 6.1, 6.2, 6.3
and 6.5 of this Article;
(c) a written opinion from counsel for Purchaser, dated as of
the Closing Date, addressed to Seller satisfactory to Seller and its
counsel in form and substance, to the effect that:
(i) Purchaser is duly incorporated, validly existing
and is in good standing under the laws of the State of
Delaware, has full corporate power and authority to carry on
its business as and where now conducted, and to own or lease
and operate its properties at and where now owned or leased
and operated by it;
(ii) Purchaser has all corporate power to execute,
deliver and carry out its obligations under this Agreement
and the execution, delivery and performance of this Agreement
by Purchaser have been duly authorized by all requisite
corporate action;
(iii) The execution and delivery of this Agreement
and the consummation of the transactions contemplated under
this Agreement by Purchaser (a) are not in conflict with the
Certificate of Incorporation and the By-laws of Purchaser, (b)
do not (with or without notice or the passage of time or both)
constitute default under, and are not in conflict with, any
agreement known to such counsel to which Purchaser is a party
or to which any of its assets are subject, and (c) do not
violate any order, judgment or decree or any rule, regulation
or law, or any other restriction known to such counsel to
which Purchaser is a party;
(iv) This Agreement constitutes the legal,
valid, and binding obligation of Purchaser, and is
enforceable against Purchaser in accordance with its terms;
and
(v) The Preferred Stock of Purchaser to be delivered
pursuant to this Agreement, when so delivered, will have been
validly authorized and validly issued, fully paid and
nonassessable.
(d) certified copies of resolutions duly adopted by
the Board of Directors of Purchaser approving this Agreement and the
transactions contemplated under it.
6.5. No Litigation. No suit, action, or other proceeding is
threatened or pending before any court or governmental agency in which it will
be or it is sought to obtain material damages from Seller in connection with
this Agreement or the consummation of the transactions contemplated by this
Agreement.
ARTICLE 7
CLOSING
The closing of the transactions contemplated by this Agreement (the
"Closing") will take place at the offices of Benesch, Friedlander, Coplan &
Aronoff, LLP, 200 Public Square, 2300 BP Building, Cleveland, Ohio 44114 on
September 17, 2001 at 10:00 A.M. Eastern Time or such other date mutually
agreeable to the parties (the "Closing Date"). If the Closing has not taken
place by such date by reason of failure of fulfillment of any condition or
conditions contained in this Agreement, then the non-breaching party may, by
written notice to the other party, extend the Closing Date for a period of
fifteen (15) days to permit fulfillment of such condition or conditions. Unless
the parties otherwise agree in writing, if the Closing has not occurred by
October 31, 2001, then this Agreement will be deemed to have been terminated <
and abandoned, subject to the legal rights and remedies of either party arising
out of the other party's breach of any of the provisions of this Agreement. The
parties will in good faith use all reasonable efforts to achieve the Closing.
All prorations will be made as of 12:01 a.m. Eastern Time on the Closing Date.
ARTICLE 8
TERMINATION OF AGREEMENT
8.1 Termination.
(a) This Agreement and the transactions
contemplated under it may be terminated and abandoned at any
time prior to the Closing Date:
(i) by mutual consent in writing of Purchaser
and Seller;
(ii) by Purchaser or Seller if, in the case of
Purchaser, there has been a material misrepresentation or
breach of warranty in the representations and warranties of
Seller made under this Agreement or if, in the case of Seller,
there has been a material misrepresentation or breach of
warranty in the representations and warranties of Purchaser
made under this Agreement, provided that, in each instance,
the party alleged to have made such misrepresentation or
breach has not corrected such misrepresentation or breach
promptly after notice from the other party;
(iii) by Purchaser if all or a material
portion of the Subject Assets have been materially damaged
or destroyed before the Closing;
(iv) by Purchaser if any of the Real Property has
been taken, or is in the process of being taken, in whole or
in part, by eminent domain or by conveyance in lieu of
eminent domain;
(v) by Purchaser, if any of the conditions
contained in Article 5, or by Seller, if any of the
conditions contained in Article 6, respectively, have not
been fulfilled in all material respects on the Closing Date.
Any termination pursuant to this Article 8 will not affect the
obligations of the parties under Article 12 or Section 16.2, and will
be without prejudice to the terminating party's legal rights and
remedies by reason of any breach of this Agreement occurring prior to
such termination.
(b) Notwithstanding anything in this Agreement to the
contrary, if, on the Closing Date, Purchaser (i) has complied with all
of the conditions to Closing contained in Article 6, (ii) has notified
Seller of its intention to consummate the transactions contemplated
under this Agreement, and (iii) is ready and able to pay Seller the
Purchase Price and furnishes evidence to that effect to Seller, and if
the Closing does not then occur due to the refusal of Seller to
consummate the transactions contemplated under this Agreement,
Purchaser will be entitled to specifically enforce the terms of this
Agreement in a court of competent jurisdiction, it being acknowledged
that monetary damages due Purchaser in such case cannot be adequately
determined at law.
(c) Notwithstanding anything in this Agreement to the
contrary, if Seller breaches Section 10.1(i) of this Agreement and
Seller terminates this Agreement pursuant to the provisions of Section
8.1(a)(ii) or (v) and, within twelve (12) months of such termination,
Seller sells the assets and/or business of the Division in whole or in
part, whether through direct purchase, merger, consolidation or other
business combination (other than sales in the ordinary course), Seller
shall pay Purchaser the sum of Three Hundred Thousand Dollars
($300,000.00) not as a penalty but as liquidated damages.
ARTICLE 9
SURVIVAL OF REPRESENTATIONS
AND WARRANTIES; INDEMNIFICATION; DISPUTES
9.1. Survival of Representations and Warranties. Notwithstanding the
Closing of the transactions contemplated under this Agreement, or any
investigation made by or on behalf of Seller or Purchaser, the representations
and warranties of Seller and Purchaser contained in this Agreement or in any
certificate, Schedule, chart, list, letter, compilation or other document
furnished or to be furnished pursuant to this Agreement, will survive the
Closing for a period of three (3) years; provided, however, that the
representations and warranties of Seller contained in Sections 3.12 and 3.26
will survive the Closing for the applicable statute of limitations plus 60 days
and Section 3.27 will survive the Closing for ten (10) years. However, as to
any breach of, or misstatement in, any such representation or warranty as to
which Purchaser has given notice to Seller on or prior to the expiration of the
applicable period, as above set forth, the same will continue to survive beyond
said period, but only as to the matters contained in such notice.
9.2. Seller's Indemnification. (a) Seller will indemnify and save
harmless Purchaser and its subsidiaries, shareholders, directors, officers,
employees and agents from any and all costs, expenses, losses, damages and
liabilities incurred or suffered, directly or indirectly, by any of them
(including, without limitation, reasonable legal fees and expenses) resulting
from or attributable to (i) the breach of, or misstatement in, any one or more
of the representations or warranties of Seller made in or pursuant to this
Agreement, (ii) any claims, suits, proceedings or actions by any third party
containing or relating to allegations that, if true, would constitute a breach
of, or misstatement in, any one or more of the representations or warranties of
Seller made in or pursuant to this Agreement, (iii) Seller's treatment,
transport, recycling, storage or disposal, or any arrangement for any of same,
done or made prior to the Closing, of any Contaminant generated and transported
off-site from any facility owned or operated by the Division (or by Seller on
behalf of the Division) or any of its predecessors, (iv) Seller's failure to
discharge any of the Retained Liabilities, (v) Seller's noncompliance with any
provision of law regarding bulk transfers or similar laws or any liability of
Purchaser attributable to its failure to withhold a portion of the Purchase
Price pursuant to any applicable law.
9.3. Purchaser's Indemnification. Purchaser covenants and agrees to
indemnify and save harmless Seller from any and all costs, expenses, losses,
damages and liabilities incurred or suffered by Seller (including reasonable
legal fees and costs) resulting from or attributable to (i) the breach of, or
misstatement in, any one or more of the representations or warranties of
Purchaser made in or pursuant to this Agreement, or (ii) purchaser's failure to
discharge any of the Assumed Liabilities, provided however, any and all recourse
in respect of and indemnification, if any, in respect of the purchase and sale
of the Preferred Stock shall be as provided for in the documents of conveyance
related thereto.
9.4. Indemnification Limitations. A party entitled to indemnification
hereunder (an "Indemnified Party") shall not be entitled to indemnification
under this Article 9 unless the aggregate of the indemnification obligations of
the other party hereto (the "Indemnifying Party") to the Indemnified party
pursuant to this Article 9 exceeds $100,000.00 ("Basket"); and, in such event,
the Indemnified Party shall be entitled to indemnification in full for all
indemnification claims made hereunder which exceed $100,000.00; provided,
however, that the Basket shall not apply to the failure of Seller to discharge
any of the Retained Liabilities. In no event shall the maximum aggregate
indemnification payable to Purchaser under this Article 9 exceed (a)
$25,500,000.00 for a breach of, or misstatement in, any one or more of the
representations and warranties of Seller made in Sections 3.12, 3.26 or 3.27 of
this Agreement, and (b) $12,750,000.00 for a breach of, or misstatement in, any
other representations or warranties of Seller in this Agreement.
9.5. Defense of Claim. In case an Indemnified Party has received
actual notice of any claim asserted or any action or administrative or other
proceeding commenced in respect of which claim, action or proceeding indemnity
properly may be sought against the Indemnifying Party, the Indemnified Party
will give notice in writing to the Indemnifying Party. Within ten (10) days
after the earlier of (i) receipt of such notice or (ii) receipt of actual
notice by the Indemnifying Party from sources other than the Indemnified Party,
the Indemnifying Party may give the Indemnified Party written notice of its
election to conduct the defense of such claim, action or proceeding at its own
expense. If the Indemnifying Party has given the Indemnified Party such notice
of election to conduct the defense, the Indemnifying Party may conduct the
defense at its expense, but the Indemnified Party will nevertheless have the
right to participate in the defense, but such participation will be solely at
the expense of the Indemnified Party, without a right of further reimbursement.
If the Indemnifying Party has not so notified the Indemnified Party in writing
(within the time above provided) of its election to conduct the defense of such
claim, action or proceeding, the Indemnified Party may (but need not) conduct
(at the Indemnifying Party's expense) the defense of such claim, action or
proceeding. The Indemnified Party may at any time notify the Indemnifying Party
of the Indemnified Party's intention to settle, compromise or satisfy any such
claim, action or proceeding (the defense of which the Indemnifying Party has
not previously elected to conduct) and may make such settlement, compromise or
satisfaction (at the Indemnifying Party's expense) unless the Indemnifying
Party notifies the Indemnified Party in writing (within ten (10) days after
receipt of such notice of intention to settle, compromise or satisfy) of its
election to assume (at its sole expense) the defense of any such claim, action
or proceeding and promptly take appropriate action to implement such defense.
Any settlement, compromise or satisfaction made by the Indemnified Party, or
any such final judgment or decree entered in, any claim, action or proceeding
defended only by the Indemnified Party, regardless of the amount or terms, will
be deemed to have been consented to by, and will be binding on, the
Indemnifying Party as fully as though it alone had assumed the defense and a
final judgment or decree had been entered in such proceeding or action by a
court of competent jurisdiction in the amount of such settlement, compromise,
satisfaction, judgment or decree. If the Indemnifying Party has elected under
this Section 9.5 to conduct the defense of any claim, action or proceeding,
then the Indemnifying Party will be obligated to pay the amount of any adverse
final judgment or decree rendered with respect to such claim, action or
proceeding. If the Indemnifying Party elects to settle, compromise or
satisfy any claim, action or proceeding defended by it, the cost of any such
settlement, compromise or satisfaction will be borne entirely by the
Indemnifying Party and may be made only with the consent of the Indemnified
Party, which consent will not be unreasonably withheld, delayed or conditioned.
The Indemnified Party and the Indemnifying Party will use all reasonable
efforts to cooperate fully with respect to the defense of any claim, action or
proceeding covered by this Section 9.5.
9.6. Resolution of Disputes.
(a) General. Except in the event of any litigation or
proceeding commenced by any third party against Purchaser or Seller in
which the other party is an indispensable party or potential third
party defendant, or in the event of a dispute as to which exclusive
jurisdiction is vested in a particular court by applicable law,
disputes arising under or in connection with this Agreement will be
resolved in accordance with this Section 9.6.
(b) Resolution by Negotiation. In the event of any dispute or
disagreement between the parties either with respect to the
interpretation of any provision of this Agreement or with respect to
the performance by Seller or Purchaser, then upon the written request
of either party, each of the parties will appoint a designated officer
whose task it will be to meet for the purpose of endeavoring to
resolve such dispute. The designated officers will meet at a mutually
agreeable location as often as the parties reasonably deem necessary
in order to gather and furnish to the other all information that the
parties believe to be appropriate and germane in connection with the
resolution of the matter in issue. The officers will discuss the
problem and negotiate in good faith in an effort to resolve the
dispute without the necessity of any formal proceeding. During the
course of such negotiation, all reasonable requests made by one party
to the other for information will be honored in order that each of the
parties may be fully advised. The specific format for such discussions
will be left to the discretion of the designated officers, but may
include the preparation of agreed upon statements of fact or of
positions furnished to the other party. All oral and written
communications between the parties and issued or prepared in
connection with this Subsection (b) will be deemed prepared and
communicated in furtherance, and in the context, of dispute
settlement, and will be exempt from discovery and production, and
will not be admissible in evidence (whether as an admission or
otherwise) in any proceedings for the resolution of the dispute.
Except as provided in Subsection (c) below, no formal proceedings for
the arbitration of such dispute will be commenced until either of the
designated officers concludes in good faith that continued
negotiation of the matter in ually acceptable resolution.
(c) Full Arbitration. Any dispute, controversy or claim
arising out of or relating to this Agreement which is not resolvable
pursuant to Subsection (b) will be settled by arbitration held in
Cleveland, Ohio in accordance with the Commercial Arbitration Rules of
the American Arbitration Association then in effect except as
specifically provided below.
(i) If the matter in controversy appears, at the
time of the demand, to exceed Five Hundred Thousand Dollars
($500,000.00) then the panel to be appointed will consist of
three (3) neutral arbitrators (collectively, the
"arbitrator"); if not in excess of such amount, it will
consist of one (1) neutral arbitrator.
(ii) The arbitrator will allow such discovery as the
arbitrator determines appropriate under the circumstances and
will resolve the dispute as expeditiously as practicable. If
reasonably practicable, the arbitrator will resolve the
dispute and give the parties written notice of the
arbitrator's decision, with the arbitrator's reasons set out
in full, within one hundred twenty (120) days after the
selection of the arbitrator and will have thirty (30)
additional days to reconsider and modify the decision if
either party so requests within ten (10) days after the
decision. Thereafter, the decision of the arbitrator shall be
final, binding and nonappealable.
(iii) The arbitrator will have authority to award
relief under legal or equitable principles, including interim
or preliminary relief but excluding punitive or consequential
damages, and to allocate responsibility for the costs of the
arbitration and to award recovery of attorneys' fees and
expenses in such manner as is determined to be appropriate by
the arbitrator.
(iv) Judgment upon the award rendered by the
arbitrator may be entered in any court having in personam
and subject matter jurisdiction. Each party will submit to
the in personam jurisdiction of the federal and state
courts in the county which the prevailing party is
located, for the purpose of confirming and entering judgment
on any such award.
(d) Continued Performance. The fact that the dispute
resolution procedures specified in this Section 9.6 have
been or may be invoked will not excuse either party from
performing its obligations under this Agreement. During the
resolution of any such dispute both parties will continue to
perform their respective obligations in good faith, subject
to any rights to terminate this Agreement that may be
available to either of them under
this Agreement.
ARTICLE 10
CONDUCT PRIOR TO CLOSING DATE
10.1. Continuation of Business. Until the Closing Date, Seller will
continue to conduct the Division's business in the ordinary and usual course
consistent with past practice, and, without limiting the generality of this
undertaking, Seller will not do or suffer to be done any of the following with
respect to the Division and the Division's business, outside the ordinary and
usual course, without the prior written consent of Purchaser, which consent will
not be unreasonably withheld, delayed or conditioned:
(a) Dispose or contract to dispose of, or acquire
or contract to acquire, any Real Property or other assets, or any
interest in any Real Property or other capital assets;
(b) Borrow any money;
(c) Enter into any lease;
(d) Encumber any assets;
(e) Enter into any contract, commitment or
arrangement of the type required by Section 3.18 above to be listed
on Schedule 3.18;
(f) Increase the rate or amount of compensation
or the amount or type of other remuneration to any of the
Division's employees, agents or other representatives, or agree to do
so;
(g) Make any new commitments or agree to make commitments for
capital improvements or significantly alter standing commitments for
capital improvements in an amount which exceeds, singly or in the
aggregate, Fifty Thousand Dollars ($50,000.00);
(h) Make any single expenditure or agree to make any
ingle expenditure, or series of expenditures in excess of One
Hundred Thousand Dollars ($100,000.00) in the aggregate;
(i) Negotiate with anyone other than Purchaser for, or
participate with anyone other than Purchaser in, the acquisition of
all or any part of the Subject Assets; or
(j) Make any material change in accounting methods.
10.2. Preservation of Business. Seller will use commercially
reasonable efforts to (i) preserve intact the Division's present business
organization and personnel, (ii) preserve the Division's business, actual and
potential, and the Division's advantageous relationships with all persons
having business dealings with it, and (iii) preserve and maintain in force all
the Division's licenses, certificates, leases, contracts, permits,
registrations, franchises, confidential information, patents, trademarks,
trade names, service marks and copyrights, and applications for any of the
same, and other similar rights. Seller will maintain in force or renew on
similar terms all property, casualty, crime, life, directors, officers and
other forms of insurance and bonds which it presently carries on behalf of the
Division through the Closing Date and the giving of full possession to
Purchaser of all of the Subject Assets.
10.3. Consents and Approvals. Seller will use all reasonable
efforts to obtain all necessary consents and approvals of all persons,
firms, entities and governmental authorities to the consummation of the
transactions contemplated by this Agreement.
10.4 Notice of Dissatisfaction. Purchaser will give Seller prompt
written notice of any facts that might give Purchaser a right to terminate this
Agreement with reference to the provisions of Article 5 of this Agreement,
including, without limitation, Section 5.12 and will give Seller a reasonable
opportunity to correct any such situation.
ARTICLE 11
POST-CLOSING OBLIGATIONS.
11.1. Payment of Liabilities. Seller shall pay or perform when due all
obligations and liabilities of the Division arising or accrued prior to the
Closing Date, except as expressly assumed by Purchaser under Section 1.3(b)
above. Purchaser shall pay or perform when due or otherwise discharge all
Assumed Liabilities and all obligations and liabilities arising after the
Closing with respect to the assets, other than the Retained Liabilities and
other than liabilities to the extent not assumed by Purchaser pursuant to
Section 1.3(c) hereof.
11.2. Trademarks and Trade Names. Purchaser understands and agrees
that it shall not, from and after the Closing Date, use any trademark, service
mark or trade name owned by or licensed to Seller or with respect to which
Seller possesses any rights, including, without limitation, "Uniroyal"
(collectively, "Seller's Marks"), except the proprietary rights assigned to
Purchaser hereunder and except that it may, for a period of 180 days after the
Closing Date and without any payment therefor to Seller, use the Division's
remaining inventory of packaging materials, literature, catalogs, forms,
stationery, brochures and similar materials (collectively "Supplies") which
contain any of Seller's Marks, provided (i) such Supplies are used only in
connection with the sale of the Division's products, (ii) Seller will use its
best efforts to mark Supplies conspicuously with the tradename used by Seller
for the business of the Division and (iii) provided further that all products
sold in connection with the use of such Supplies shall be of a quality at least
equal to that of similar products produced by Seller prior to the Closing
Date. Purchaser shall remove all traces of Seller's Marks from any of the
Assets to which any such Seller's Marks has been affixed and from any label,
placard, sign, sales literature or other printed material that may be used on
or in connection with the Assets as promptly as possible following the Closing
and in any event not more than 180 days after the Closing Date. Purchaser
agrees to indemnify and hold Seller harmless from and against any loss, damage,
claim,
cost, liability or expense incurred by Seller as a result or by virtue of
Purchaser's use of any of Seller's Marks in violation of this Section 11.2.
Purchaser agrees that, in the event of any material breach by Purchaser of any
of its obligations under this Section 11.2(i) Seller shall be irreparably
injured in the event of such breach; (ii) monetary damages might not be an
adequate remedy for such breach; and (iii) Seller shall be entitled to seek
injunctive relief, in addition to any other remedy which it may have hereunder.
11.3. Further Assurance and Assistance. After the Closing Date, Seller
shall, from time to time, upon the reasonable request of Purchaser, execute,
acknowledge and deliver in proper form any instrument of conveyance or further
assurance necessary or reasonably desirable to perfect in Purchaser, or its
nominees, successors or assigns, as the case may be, title to the Subject
Assets. After the Closing Date, Purchaser shall, from time to time, upon the
reasonable request of Seller and without further consideration therefor,
execute, acknowledge and deliver in proper form any instrument of assumption
and assignment necessary or reasonably desirable to create in purchaser the
obligation to assume, pay, perform or discharge the Assumed Liabilities.
11.4. Litigation Support. In the event and for so long as either
Purchaser or Seller actively is contesting or defending against any action,
suit, proceeding, hearing, investigation, charge, complaint, claim, or demand
in connection with (i) any transaction contemplated under this Agreement or
(ii) any fact, situation, circumstance, status, condition, activity, practice,
plan, occurrence, event, incident, action, failure to act, or transaction on or
prior to the Closing Date involving the Division, the other party will
cooperate with the contesting or defending party and its counsel in the contest
or defense, make available its personnel, and provide such testimony and
access to its books and records as shall be necessary in connection with the
contest or defense, all at the sole cost and expense of the contesting or
defending party (unless the contesting or defending party is entitled to
indemnification therefor under Article 9 above). Buyer and Seller each agree to
maintain all applicable books and records relating to the Division or copies
thereof until the expiration of all applicable statutes of limitations.
11.5. Amounts Received. Seller agrees that any and all funds or items
of value received or collected by it after the Closing Date which under the
terms of this Agreement are the property of Purchaser (including the proceeds
of Accounts Receivable constituting a portion of the Subject Assets) shall be
promptly (and in no event later than ten (10) business days after receipt
thereof) remitted to Purchaser or its designees, and Purchaser agrees that any
and all funds or items of value received or collected by it after the Closing
Date which under the terms of this Agreement are the Property of Seller shall
be promptly (and in no event later than ten (10) business days) remitted to
Seller or its designees.
11.6. Confidentiality. If the transactions contemplated by this
Agreement are not consummated, Purchaser's obligations under those certain
Confidentiality Agreements, dated August 24, 2001, between Purchaser and
Seller, dated April 11, 2001, among Uniroyal Technology Corporation, Seller and
Quinn Industries, and dated June 15, 2001, among Seller and Edgewater Advisors,
LLC shall continue in accordance with the terms thereof.
11.7. Supplementing Schedules. Seller agrees that, with respect to its
representations and warranties made in this Agreement, it will have a
continuing obligation promptly to supplement or amend its representations and
warranties contained herein (including the Schedules hereto) with respect to
any matter hereinafter arising or discovered which, if existing or known at the
date of this Agreement, would have been required to be set forth or described
in this Agreement. Notwithstanding the continuing obligation to supplement the
Schedules, no such amendment, change or supplement to these Schedules after the
date hereof shall serve to alter the representations and warranties made with
respect to the subject matter thereof or to prevent or cure any
misrepresentation, breach of warranty, or breach of covenant without the
consent of Purchaser.
ARTICLE 12
ASSIGNMENT, THIRD PARTIES, BINDING EFFECT
The rights under this Agreement are not assignable nor are the duties
delegable by a party without the written consent of the other party first
having been obtained, which assignment shall not be unreasonably withheld,
delayed or conditioned, and any attempted assignment or delegation without such
consent will be null and void, provided however, Purchaser shall have the right
to assign its rights under this Agreement for the benefit of its lenders.
Nothing contained in this Agreement is intended to convey upon any person or
entity, other than the parties and their successors in interest and permitted
assigns, any rights or remedies under or by reason of this Agreement unless
expressly stated. All covenants, agreements, representations and warranties of
the parties contained in this Agreement are binding on and will inure to the
benefit of Purchaser and Seller, respectively, and their respective successors
and permitted assigns.
ARTICLE 13
EXPENSES
Purchaser and Seller will bear their own respective expenses,
including, without limitation, counsel and accountants' fees, in connection
with the preparation and negotiation of, and transactions contemplated under,
this Agreement; provided, however, that if, as a result of the items referred
to in Sections 5.12, 5.13 and 5.15 respectively, Purchaser is made aware of
Material Facts (as hereinafter defined) inconsistent with those represented by
Seller in Article 3 herein, which permit termination of this Agreement by
Purchaser and Seller pursuant to Article 8 herein and Seller and Purchaser are
unable to agree on a revised Purchase Price, Seller will indemnify Purchaser
for costs incurred by Purchaser in connection with the transactions
contemplated by this Agreement in an amount which shall not exceed Two Hundred
Fifty Thousand Dollars ($250,000.00). For purposes of this Agreement,
"Material Facts" shall be defined as items affecting revenues, expenses,
earnings, assets or liabilities that, in the aggregate, (i) negatively affect
EBITDA of the Division by an amount in excess of Two Hundred Thousand Dollars
($200,000.00); or (ii) negatively affect long-term assets of the Division by
an amount in excess of Six Hundred Thousand Dollars ($600,000.00).
ARTICLE 14
NOTICES
All notices, requests, demands and other communications under this
Agreement must be in writing and will be deemed duly given, unless otherwise
expressly indicated to the contrary in this Agreement, (i) when personally
delivered, (ii) upon receipt of a telephonic facsimile transmission with a
confirmed telephonic transmission answer back or e-mail transmission with a
confirmation of receipt, (iii) three (3) days after having been deposited in
the United States mail, certified or registered, return receipt requested,
postage prepaid, or (iv) one (1) business day after having been dispatched by a
nationally recognized overnight courier service, addressed to the parties or
their permitted assigns at the following addresses (or at such other address or
number as is given in writing by either party to the other) as follows:
To Purchaser: SAS Acquisition, LLC
c/o Edgewater Capital Partners
100 North Main Street
Suite 235
Chagrin Falls, Ohio 44022
Facsimile No.: (440) 893-9060
Email: cchildres@edgewatercapital.com
Attention: Christopher F. Childres
With a copy to: Frederick A. Quinn
22 Gunnison Road
Boxford, Massachusetts 01921
Facsimile No.: (603) 474-7122
Email: Faqboxford@aol.com
Benesch, Friedlander, Coplan & Aronoff LLP
2300 BP Tower
200 Public Square
Cleveland, Ohio 44114
Facsimile No.: (216) 363-4588
Attention: James M. Hill and Joseph G. Tegreene
To Seller: George J. Zulanas, Jr.
Executive Vice President and Chief
Financial Officer
Uniroyal Engineered Products, LLC.
2 North Tamiami Trail, Suit 900
Sarasota, Florida 34236
Facsimile No.: (941) 361-2218
Email: george.zulanas@uniroyaltech.com
With a copy to: Oliver J. Janney, Esq.
General Counsel
Uniroyal Technology Corporation
2 North Tamiami Trail, Suite 900
Sarasota, Florida 34236
Facsimile No.: (941) 361-2214
Email: oliver.janney@uniroyaltech.com
ARTICLE 15
REMEDIES NOT EXCLUSIVE
No remedy conferred by any of the specific provisions of this Agreement is
intended to be exclusive of any other remedy, and each and every remedy will be
cumulative and will be in addition to every remedy given under this Agreement
or now or subsequently existing, at law or in equity, by statute or otherwise.
The election of any one or more remedies by Purchaser or Seller will not
constitute a waiver of the right to pursue other available remedies.
Notwithstanding the foregoing, the resolution of disputes as provided in
Section 9.6 will be the exclusive manner in which such disputes are to be
resolved, subject to (a) the applicable provisions of the laws of the State of
Ohio relating to arbitration and (b) Sections 8.1(b), 11.2 and 16.1(b) of this
Agreement.
ARTICLE 16
NON-COMPETITION
16.1. Non-Competition Agreement.
(a) For a period of five (5) years from and after the Closing
Date, but as to clauses (iv) and (v) at any time after the Closing
Date, Seller will not, directly or indirectly:
(i) engage in, carry on, have any interest, consult
with or assist in a business substantially similar to the
business as carried on by the Division on the Closing Date
and being acquired by Purchaser (the "Division Business"),
(ii) enter into, engage in, or be employed by
or consult with any business in, competition with
Purchaser on matters substantially similar to the Division
Business,
(iii) employ, assist in employing or otherwise
associate in any business similar to the Division Business
with any present, former or future employee of Purchaser or
any of its Subsidiaries now or subsequently existing until a
period of at least two (2) years has expired since such
employee was employed by Purchaser or any Subsidiary,
(iv) induce or assist others with inducing any
person who is a present or future employee, officer, agent,
affiliate or customer of Purchaser or any of its Subsidiaries
now or subsequently existing to terminate the relationship,
and
(v) induce or assist others to induce any customer
of the Division to refuse to do business with Purchaser on as
favorable terms as previously done with the Business, or
induce or assist others to induce any customer of the
Division to do business with a competitor of Purchaser.
The prohibitions in clauses (i) and (ii) will apply only to the United
States of America. Seller acknowledges that the length of time and
geographic restriction pertaining to all prohibitions in this
non-competition covenant both are reasonable and necessary for the
legitimate protection of Purchaser's business and interests. Nothing
in this Article 16 will prevent Seller from (A) holding not more than
five percent (5%) of the shares in any company whose shares are quoted
on any stock exchange or the Nasdaq National Market even though such
company carries on activities which would violate one or more of the
foregoing provisions if carried on by Seller or (B) from temporarily
owning a business engaged in the foregoing activities which is part of
an entity acquired by Seller provided that the business portion of the
entity engaged in such activities constitutes not more than ten
percent (10%) of the assets or revenues of such entity.
(b) Seller expressly agrees and understands that the remedy
at law for any breach by Seller of this Article 16 will be inadequate
and that the damages flowing from such breach are not readily
susceptible to being measured in monetary terms. Accordingly, it is
acknowledged that upon adequate proof of Seller's violation of this
Article 16, Purchaser will be entitled, among other remedies, to
immediate injunctive relief and may seek a temporary restraining order
restraining any threatened or further breach. Nothing in this
subsection (b) or in Section 9.6 or Article 15 will be deemed to limit
Purchaser's remedies at law or in equity for any breach by Seller of
any of the provisions of this Agreement which may be pursued or
availed of by Purchaser.
(c) In the event any court of competent jurisdiction or
arbitrator determines that the specified time period or geographical
area set forth in this Section 16.1 is unreasonable, arbitrary or
against public policy, then a lesser time period or geographical area
that is determined by the court or arbitrator, or by Purchaser and
Seller, to be reasonable, non-arbitrary and not against public policy
may be enforced.
(d) In the event Seller violates any legally enforceable
provision of this Section 16.1 as to which there is a specific time
period during which Seller is prohibited from taking certain actions
or engaging in certain activities, then, in such event the violation
will toll the running of the time period from the date of the violation
until the violation ceases.
16.2. Disclosure of Confidential Information. Except as may be
required by law or necessary in connection with any dealings with any
public agency or authority, from and after the Closing Date, Seller will not
disclose, disseminate, divulge, discuss, copy or otherwise use or suffer to be
used, in competition with, or harmful to the interests of, Purchaser, any
customer lists, trade secrets, know-how, and other similar proprietary
information included with the Subject Assets.
ARTICLE 17
MISCELLANEOUS
17.1. Counterparts. This Agreement may be executed in one or
more counterparts, each of which will be deemed to be an original but all of
which together will constitute one and the same document.
17.2. Captions and Section Headings. Captions and section
headings are for convenience only, are not a part of this Agreement and may
not be used in construing it.
17.3. Possession of Subject Assets. Possession of the Subject Assets
will be given to Purchaser on the Closing Date. Purchaser will not acquire any
title to the Subject Assets until possession has been given to it in accordance
with this Section 17.3 and, accordingly, all risk and loss with respect to the
Subject Assets will be borne by Seller until possession has been given to
Purchaser. For purposes of this Section 17.3, possession will be deemed to have
been given to Purchaser when Seller delivers or causes to be delivered to
Purchaser good and sufficient instruments of transfer and conveyance as
provided in this Agreement.
17.4. Waivers. Any failure by any of the parties to comply with any of
the obligations, agreements or conditions set forth in this Agreement may be
waived by the other party or parties, but any such waiver will not be deemed a
waiver of any other obligation, agreement or condition contained herein.
17.5. Right of Inspection. From and after the date of this Agreement
to the Closing Date, Seller will give to Purchaser and its counsel, accountants
and other representatives, full access during normal business hours to the
Division's offices, properties, agreements, records and affairs, and will
furnish copies of all Contracts and other instruments as Purchaser or its
counsel may reasonably request. Such investigation will not affect the
warranties and representations of Seller under this Agreement. All such
information will be treated confidentially and will be used only for the
purposes of Purchaser's due diligence review in connection with the
transactions contemplated by this Agreement. If the transactions contemplated
under this Agreement do not take place, all documents and other property of
Seller will be returned and all disclosures and information given to Purchaser
as contemplated under this Agreement will be treated as confidential and not
disclosed to others unless disclosed publicly by Seller or other third parties
without fault on the part of Purchaser, or unless otherwise required by law.
17.6. Amendments, Supplements or Modifications. Each of the parties
agrees to cooperate in the effectuation of the transactions contemplated under
this Agreement and to execute any and all additional documents to take such
additional action as is reasonably necessary or appropriate for such purposes.
17.7. Entire Agreement. This Agreement, including any certificate,
schedule, exhibit or other document delivered pursuant to its terms, constitutes
the entire agreement between the parties. There are no oral agreements,
representations, warranties, undertakings or agreements between the parties
that are not incorporated in this Agreement, and this Agreement may not be
amended or modified in any respect, except by a written instrument signed by
the parties to this Agreement.
17.8. Governing Laws. This Agreement is to be governed by and
construed in accordance with the internal laws of the State of Ohio.
17.9. Knowledge. All references to "knowledge" or "best knowledge" of
a party means the actual knowledge of a party after reasonable investigation
and due diligence. Failure to so investigate or exercise due diligence may
result in the imputation of knowledge to a party if the circumstances, in the
opinion of a trier of the facts, so warrants. Actual knowledge of any officer,
director or department head of a party will be imputed to, and deemed to be
actual knowledge of, that party.
17.10. Press Releases. Prior to the Closing, neither party will issue
or cause the publication of any press release or other public announcement with
respect to this Agreement or the transactions contemplated under this Agreement
without the prior consent of the other party first obtained; which consent will
not be unreasonably withheld or delayed; provided, however, that nothing in
this Agreement will prohibit either party from issuing or causing publication
of any press release or public announcement to the extent that such party
determines, on advice on counsel, that such action is required by law, in which
case the party making such determination will, if practicable under the
circumstances, use reasonable efforts to allow the other party reasonable time
to comment on such release or announcement in advance of its issuance.
17.11. Bulk Sales Waiver; Indemnification.
Purchaser hereby waives compliance by Seller with the provisions of
bulk sales and similar laws applicable to this transaction, if any; provided,
however, that any loss, Liability, obligation, expense or cost suffered by
Purchaser as a result of the failure by Seller to comply therewith shall be
borne by Seller and that Seller shall indemnify and hold Purchaser harmless
therefrom, notwithstanding any other provision of this Agreement to the
contrary.
IN WITNESS WHEREOF, the parties have duly executed this Agreement on
the date first above written.
SAS ACQUISITION, INC.
By: /s/ Christopher F. Childres
-----------------------------------------------
Christopher F. Childres, President
"PURCHASER"
UNIROYAL ENGINEERED PRODUCTS, LLC
By: /s/ Howard R. Curd
--------------------
Howard R. Curd, Chairman
"SELLER"
FIRST AMENDMENT TO ASSET PURCHASE AGREEMENT
This First Amendment to Asset Purchase Agreement (this "First
Amendment") is made this 15th day of October, 2001 by and between Royal
Adhesives and Sealants, Inc. (f/k/a SAS Acquisition, Inc.), a Delaware
corporation ("Purchaser"), and Uniroyal Engineered Products, LLC, a Delaware
limited liability company ("Seller").
R E C I T A L S
1. Purchaser and Seller are parties to an Asset Purchase Agreement dated August
24, 2001 (the "Agreement") which provides for the purchase by Purchaser of
substantially all of the business, assets and goodwill of the Specialty
Adhesives & Sealants Division of Seller.
2. Purchaser and Seller desire to amend the Agreement by modifying
certain provisions thereof.
3. Each term used herein shall be defined in accordance with the
Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein and for other valuable consideration, Purchaser and Seller
agree as follows:
Section 2.1 is amended and restated in its entirety as follows:
2.1 Payment by Purchaser. At the Closing, Purchaser will pay
to Seller a purchase price of up to Twenty-One Million Nine Hundred
Twenty Thousand Dollars ($21,920,000.00) (the "Purchase Price") for
the Subject Assets (and the goodwill included therein) and for the
covenant not to compete set forth in Section 16.1 below, adjusted as
provided in Sections 2.2 and 2.3 below, and payable as follows:
(a) Fourteen Million Nine Hundred Twenty Thousand Dollars
($14,920,000.00) by, at Seller's option, certified or bank
check in immediately available funds or wire transfer to one
or more accounts designated by Seller;
(b) Three Million Five Hundred Thousand Dollars ($3,500,000.00)
by way of two Subordinated Notes in the principal amounts of
$2,500,000.00 and $1,000,000.00, in the form of Exhibits A-1
and A-2, respectively, to this Agreement (the "Subordinated
Notes"), along with Warrants to purchase five percent (5%) of
the issued and outstanding common stock of Purchaser,
calculated as of the Closing Date in the form of Exhibit B to
this Agreement (the "Warrants");
(c) One Million Five Hundred Thousand Dollars ($1,500,000.00) by
way of Purchase's issuance to Seller of that number of shares
of Purchaser's 12% Preferred Stock which will have a value on
the Closing Date of One Million Five Hundred Thousand Dollars
($1,500,000.00); and
(d) Up to Two Million Dollars ($2,000,000.00) by way of the
contingent payments provided for in Section 2.3 below.
Section 2.2 is amended and restated in its entirety as follows:
2.2 Purchase Price Adjustment. The cash portion of the
Purchase Price to be paid at the Closing pursuant to Section 2.1(a)
(the "Cash Purchase Price") will be adjusted in respect of the
Division's Working Capital and "EBITDA" as follows:
Initial Adjusted Cash Purchase Price. Seller will
provide Purchaser at the Closing with (i) an estimated
closing balance sheet (the "Initial Closing Balance Sheet")
as of the Closing Date and (ii) Seller's estimate of "EBITDA"
of the Division for the twelve (12) month period ending on
September 30, 2001 (the "Trailing EBITDA"), adjusted only to
remove a 3.5% corporate overhead charge (the "EBITDA
Estimate"). "EBITDA" means the earnings of the Division
before income taxes, depreciation and amortization, as
determined in accordance with generally accepted accounting
principles applied and consistent with past practice. The
Cash Purchase Price of $14,920,000.00 will be (i) increased
or decreased dollar for dollar to the extent that working
capital on the Initial Closing Balance Sheet is more than or
less than working capital on the February 25, 2001 balance
sheet attached to this Agreement as Schedule 2.2(a) (the
"February 2001 Balance Sheet") and (ii) increased or
decreased dollar for dollar by a multiple of 4.4 times the
amount by which the Division's Trailing EBITDA is over or
under Five Million One Hundred Thousand Dollars
($5,100,000.00). This result will be the "Initial Adjusted
Cash Purchase Price", which amount will be paid at the
Closing. "Working Capital" means (i) current assets
including, without limitation, accounts receivable aged 90
days or less generated in the ordinary course of the
Division's business for value received, prepaid expenses and
usable inventory less (ii) current liabilities generated in
the ordinary course of business in accordance with past
practice and not in violation of this Agreement including,
without limitation, accounts payable, customer advances and
non-tax accrued liabilities; provided, however, that "Working
Capital" will not include cash, receivables owed by Seller to
the Division, deferred taxes and obligations for borrowed
money. Working Capital will be determined in accordance with
generally accepted accounting principles applied on a basis
consistent with the Initial Balance Sheet and with past
practices.
Final Cash Purchase Price. Sixty (60) days after the
Closing, Seller will produce a final closing balance sheet
(the "Final Closing Balance Sheet") and the Division's profit
and loss statement for the 12 months ended September 30, 2001,
and the Cash Purchase Price of $14,920,000.00 will be
recalculated based thereon. The Cash Purchase Price will be
(i) increased or decreased dollar for dollar to the extent
that Working Capital on the Final Closing Balance Sheet is
more or less than Working Capital on the February 2001
Balance Sheet and (ii) increased or decreased dollar for
dollar by a multiple of 4.4 times the amount by which the
Division's Trailing EBITDA (adjusted only to remove the 3.5%
corporate overhead charge) is over or under Five Million One
Hundred Thousand Dollars ($5,100,000.00). The result of this
calculation will be the "Final Cash Purchase Price." To the
extent the Final Cash Purchase Price is greater than the
Initial Adjusted Cash Purchase Price, Purchaser will pay the
difference, in cash, to Seller. To the extent the Final Cash
Purchase Price is less than the Initial Adjusted Cash
Purchase Price, Seller will pay the difference, in cash, to
Purchaser.
Sections 2.3 ("Allocation of Purchase Price") and 2.4 ("Transfer
Taxes") are renumbered as Sections 2.4 and 2.5, respectively. Section 2.5
("[Intentionally Omitted.] is deleted in its entirety.
A new Section 2.3 is added to the Purchase Agreement as follows:
2.3 Contingent Payments.
-------------------
In addition to the payments referred to in Section
2.1(a), (b) and (c), and with respect to each of the two (2)
twelve (12) month periods ending on the first and second
anniversaries of the Closing Date (the "Earnout Periods"),
Purchaser shall pay to Seller up to Two Million Dollars
($2,000,000.00) based on the EBITDA of Purchaser for each of
the two (2) Earnout Periods. In no event shall the aggregate
amount paid by Purchaser pursuant to this Section 2.3 exceed
(i) One Million Dollars ($1,000,000.00) in one (1) Earnout
Period nor (ii) Two Million Dollars ($2,000,000.00) in the
aggregate. In determining Purchaser's EBITDA for each of the
Earnout Periods, solely for purposes of this Section 2.3, no
effect shall be given to (i) compensation paid by Purchaser
to senior managers hired by Purchaser following the Closing
Date, (ii) equity fees paid by Purchaser to third parties,
(iii) additional selling, general and administrative costs
directly attributable to the acquisition of any business or
portion thereof following the Closing Date, (iv) additional
contribution margin directly attributable to the acquisition
of any business or portion thereof following the Closing Date,
(v) any costs incurred in connection with the acquisition
disposition of any business or portion thereof, and (vi) any
other expenses outside the ordinary course of business.
If Purchaser's EBITDA in an Earnout Period is
greater than Five Million Dollars ($5,000,000.00), Purchaser
shall pay to Seller an amount (an "Earnout Amount") equal to
Two Dollars ($2.00) for every One Dollar ($1.00) of EBITDA in
excess of Five Million Dollars ($5,000,000.00). Purchaser
shall provide Seller with a copy of Purchaser's audited
financial statements within ten (10) days after receiving
same from its independent auditors, which shall not be later
than seventy (70) days after the end of the Earnout Period.
The audited financial statements shall be accompanied by
Purchaser's computation of the Earnout Amount, if any, to be
paid to Seller (the "Earnout Statement").
Seller shall have thirty (30) days from the date of
the Earnout Statement is received to furnish Purchaser with a
letter requesting access to the books and records of
Purchaser necessary to compute Purchaser's EBITDA. Upon
receipt of such request, Purchaser shall promptly make
available such books and records to Seller and its
representatives. If Seller disagrees with the computation of
EBITDA delivered by Purchaser, and if Seller's computation
results in an Earnout Amount that is greater than five
percent (5%) higher than Purchaser's calculation, then Seller
shall have ten (10) days after access to the Purchaser's
books and records is granted to furnish Purchaser with a
letter setting forth those items with which it disagrees and
the reasons for each such disagreement. If the discrepancy
in the computations by Purchaser and Seller of Purchaser's
EBITDA is equal to or less than five percent (5%) of the
Earnout Amount calculated by Purchaser, then Seller will have
no right to dispute the computation of Purchaser's EBITDA.
Purchaser and Seller shall promptly seek to reconcile any
disagreement; if they fail to reach an agreement within
thirty (30) days of receipt by Purchaser of Seller's letter,
then an independent public accounting firm shall be retained
by the parties to settle any remaining disagreement, and the
decision of said firm shall be final and binding on all
parties to this Agreement. The fees of the independent
accounting firm involved shall be divided equally between
Purchaser and Seller.
Purchaser shall pay the Earnout Amount to Seller on
the forty-fifth (45th) day following Purchaser's delivery of
its audited financial statements and the Earnout Statement to
Seller; provided, however, that if Seller notifies Purchaser
that Seller disagrees with Purchaser's computation of an
Earnout Amount, Purchaser will pay the undisputed amount to
Seller on the forty-fifth (45th) day following Purchaser's
delivery of its audited financial statements and the Earnout
Statement to Seller and will pay any balance of the Earnout
Amount determined to be payable to Seller within ten (10)
days of a final determination thereof as provided in Section
2.3(c) of this Agreement.
Purchaser shall pay each Earnout Amount as follows:
(i) fifty percent (50%) in cash, and (ii) fifty percent (50%)
by way of a subordinated, two-year promissory note in the
form of Exhibit C to this Agreement.
Section 5.14 is amended and restated in its entirety as follows:
5.14 Financial Statements. Purchaser has received
unaudited financial statements of the Division for the fiscal years
ended September 30, 2001 and October 1, 2000.
Section 6.4(a) is amended and restated in its entirety as follows:
The purchase price (i.e., cash, the Subordinated
Notes, the Warrants and certificate(s) for shares of the
Preferred Stock) for the Subject Assets as provided in
Section 2.1;
Article 7 is amended and restated in its entirety as follows:
Article 7
Closing
The closing of the transactions contemplated by this Agreement (the
"Closing") will take place at the office of Benesch, Friedlander, Coplan &
Aronoff, LLP, 200 Public Square, 2300 BP Building, Cleveland, Ohio 44114 on
October 31, 2001 at 10:00 A.M. Eastern Time or such other date mutually
agreeable to the parties (the "Closing Date"). If the Closing has not taken
place by such date by reason of the failure of Purchaser to receive funding (on
terms satisfactory to Purchaser, in its sole discretion) for its acquisition of
the Subject Assets by October 31, 2001, then the documents to be delivered by
Purchaser and Seller pursuant to Article 5 of this Agreement will be executed
by the party or parties thereto and deposited in escrow with counsel to
Purchaser until Purchaser has received such financing. If the Closing has not
taken place by October 31, 2001 (or such later date as may be agreed upon by
Purchaser and Seller) by reason of failure of fulfillment of any material
condition or conditions contained in this Agreement (other than the funding
condition described in the preceding sentence) , then the non-breaching party
may, by written notice to the other party, extend the Closing Date for a period
of up to fifteen (15) days to permit fulfillment of such material condition or
conditions. Unless the parties otherwise agree in writing, if the Closing has
not occurred by November 9, 2001, then this Agreement will be deemed to have
been terminated and abandoned, subject to the legal rights and remedies of
either party arising out of the other party's breach of any of the provisions
of this Agreement. The parties will in good faith use all reasonable efforts to
achieve the Closing. All prorations will be made as of 12:01 a.m. Eastern Time
on the Closing Date.
Section 9.4 is amended by deleting the last sentence thereof in its
entirety and inserting the following:
In no event shall the maximum aggregate indemnification
payable to Purchaser under this Article 9 exceed (a) the
Final Cash Purchase Price, for any breach of, or misstatement
in, any one or more of the representations and warranties of
Seller made in Sections 3.12, 3.26 or 3.27 of this Agreement,
or (b) fifty percent (50%) of the Final Cash Purchase Price
for a breach of, or misstatement in, any other
representations or warranties of Seller in this Agreement.
Each reference that is made to the Agreement, in the Agreement or in
any other writing shall hereafter be construed as a reference to the Agreement
as amended hereby. Except as herein otherwise specifically provided, all
provisions of the Agreement shall remain in full force and effect and shall be
unaffected hereby.
This Amendment may be executed in any number of counterparts by
different parties hereto in separate counterparts and by a fixed facsimile
signature, each of which when so executed and delivered shall be deemed to be
an original and all of which taken together shall constitute but one and the
same agreement.
IN WITNESS WHEREOF, the Parties have executed this First Amendment on
the date first written above.
ROYAL ADHESIVES AND SEALANTS, INC.
By: /s/ Christopher F. Childres
-------------------------------------------------
Its: President
------------------------------------------------
UNIROYAL ENGINEERED PRODUCTS, LLC
By: /s/ George J. Zulanas, Jr.
-----------------------------------------
Its: Executive Vice President
----------------------------------------
SECOND AMENDMENT TO ASSET PURCHASE AGREEMENT
This Second Amendment to Asset Purchase Agreement (this "Second
Amendment") is made as of the 23rd day of October, 2001 by and between Royal
Adhesives and Sealants, Inc. (f/k/a SAS Acquisition, Inc.), a Delaware
corporation ("Purchaser"), and Uniroyal Engineered Products, LLC, a Delaware
limited liability company ("Seller").
R E C I T A L S
1. Purchaser and Seller are parties to an Asset Purchase Agreement dated August
24, 2001, as amended by the First Amendment to Asset Purchase Agreement (the
"First Amendment") dated October 15, 2001 (as amended, the "Agreement"), which
provides for the purchase by Purchaser of substantially all of the business,
assets and goodwill of the Specialty Adhesives & Sealants Division of Seller.
2. Purchaser and Seller desire to amend the Agreement by modifying certain
provisions thereof. In addition, Purchaser desires to assign all of its rights
and obligations under the Agreement to Royal Adhesives and Sealants, LLC, a
Delaware limited liability company, and Seller is willing to consent to such
assignment.
3. Each term used herein shall be defined in accordance with the
Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein and for other valuable consideration, Purchaser and Seller
agree as follows:
1. Section 1.3 (c) (x) is amended and restated in its entirety as follows:
(x) all obligations for retiree medical and life
insurance benefits under any arrangements, contracts,
agreements, or understandings in effect on the
Closing Date or at any time prior to the Closing
Date.
2. Section 2.1 is amended and restated in its entirety as follows:
2.1 Payment by Purchaser. At the Closing, Purchaser will pay
to Seller a purchase price of up to Twenty-One Million Nine Hundred
Twenty Thousand Dollars ($21,920,000.00) (the "Purchase Price") for
the Subject Assets (and the goodwill included therein) and for the
covenant not to compete set forth in Section 16.1 below, adjusted as
provided in Sections 2.2 and 2.3 below, and payable as follows:
(a) Fourteen Million Six Hundred Twenty Thousand Dollars ($14,620,000.00)
by wire transfer and distributed as follows:
(i) to CIT, the amount of indebtedness owed by
Seller to CIT through the Closing
Date; and
(ii) to Seller, $14,620,000.00 less the amount
paid to CIT pursuant to subsection (i) above.
(b) Three Million Five Hundred Thousand Dollars ($3,500,000.00) by way of two
Subordinated Notes in the principal amounts of $2,500,000.00 and $1,000,000.00,
in the form of Exhibits A-1 and A-2, respectively, to this Agreement (the
"Subordinated Notes"), along with Warrants to purchase five percent (5%) of the
issued and outstanding common stock of Quest Specialty Chemicals, Inc., a
Delaware corporation and the parent corporation of Purchaser ("Quest"),
calculated as of the Closing Date in the form of Exhibit B to this Agreement
(the "Warrants");
(c) One Million Five Hundred Thousand Dollars ($1,500,000.00) by way of the
delivery to Seller of One Thousand (1,000) shares of the 12% Preferred Stock of
Quest;
(d) Up to Two Million Dollars ($2,000,000.00) by way of the contingent
payments provided for in Section 2.3 below; and
(e) Three Hundred Thousand Dollars ($300,000.00) by wire transfer to an escrow
agent designated by Purchaser and Seller pursuant to the terms of an
Environmental Escrow Agreement to be executed and delivered by Purchaser and
Seller at the Closing (the `Environmental Escrow Agreement").
3. Exhibits A-1, A-2 and B to the First Amendment are deleted and
replaced by Exhibits A-1, A-2 and B to this Second Amendment.
4. Section 2.2, subsections (a) and (b), are amended by deleting in each
subsection "$14,920,000" and inserting in lieu thereof "$14,620,000" as the
Cash Purchase Price.
5. Section 3.4 is amended by adding the following as the last sentence of such
Section 3.4: "There is no basis for a material claim by a customer or former
customer of the Division to repayment or recoupment of any material amounts
paid to Seller or the Division by such customer in respect of products or
services provided by the Division."
6. Section 4.1 is amended by adding a new sentence at the end to read in its
entirety as follows: "The authorized capital stock of Quest Holdings consist of
(i) 2,000 shares of common stock, $.01 par value per share, of which _____
shares are issued and outstanding, and (ii) 1,000 shares of preferred stock,
$.01 par value per share, of which 1,000 shares will be issued and outstanding
on the Closing Date after consummation of the transactions contemplated by this
Agreement. All outstanding shares of the capital stock of Quest have been duly
and validly issued and are fully paid and non-assessable. Quest does not have
outstanding any securities convertible into or exchangeable for its capital
stock or outstanding any rights to subscribe for or to purchase, or any options
for the purchase of, or any agreement providing for the issuance (contingent or
otherwise) of, or any calls, commitments or claims of any character relating to,
its capital stock, other than: warrants to purchase shares of Quest's common
stock which have been issued to (i) Seller, and (ii) Madison Capital Funding
LLC.
7. Section 5.4 is amended by amending and restating subsections (g) and
(h) thereof and by adding a new subsection (i) as follows:
(g) the parties shall enter into an option agreement for
the purchase by Purchaser of the ground, building and
other improvements to the Real Property in such form
and substance as acceptable to the parties;
(h) the parties shall enter into a Lease for the ground, building
and other improvements to the Real Property in such form and
substance as acceptable to the parties; and
(i) the parties shall enter into the Environmental Escrow
Agreement in such form and substance as acceptable
to the parties.
8. Section 9.2(a) ("Seller's Indemnification") is amended by amending and
restating subsection (ii) and by adding a new subsection (vi) as follows:
-
(ii) any claims, suits, proceedings, actions, assertions
or allegations by any third party containing or
relating to allegations that, if true would
constitute a breach of, or misstatement in, (A) any
one or more of the representations or warranties of
Seller made in or pursuant to this Agreement, or (B)
any one or more of the representations or warranties
made by Purchaser to any lender in reliance on the
representations or warranties of Seller made in or
pursuant to the Agreement . . .
(vi) any environmental remediation, or third party claims,
in each case pertaining to environmental matters
existing as of the Closing Date in connection with
the Real Property.
9. Article 11 ("Post-Closing Obligations") is amended by adding a new
Section 11.8 as follows:
11.8 Phase II Audit. Within thirty (30) days following the Closing
Date, Seller shall initiate at its expense a Phase II environmental
audit of the Division's facilities and operations by a nationally
recognized environmental auditor satisfactory to Purchaser and
Purchaser's lenders, in their reasonable discretion. Seller shall
complete at its expense any and all remedial action recommended in the
Phase I Audit and the Phase II Audit and shall commence such remedial
action not later than thirty (30) days after its receipt of the Phase
II Audit, subject to reasonable availability of contractors and to
weather conditions.
10. Seller consents to (i) the assignment by Purchaser of all of its rights and
obligations under the Agreement to Royal Adhesives and Sealants, LLC, and (ii)
the assumption by Royal Adhesives and Sealants, LLC of all of Purchaser's rights
and obligations under the Agreement. Immediately upon execution and delivery of
this Second Amendment by Purchaser and Seller, (i) the term "Purchaser" in the
Agreement shall mean Royal Adhesives and Sealants, LLc; and (ii) Royal Adhesives
and Sealants, Inc. shall be unconditionally released from all of its
obligations under the Purchase Agreement.
11. Each reference that is made to the Agreement, in the Agreement or in any
other writing shall hereafter be construed as a reference to the Agreement as
amended hereby. Except as herein otherwise specifically provided, all
provisions of the Agreement shall remain in full force and effect and shall be
unaffected hereby.
12. This Amendment may be executed in any number of counterparts by different
parties hereto in separate counterparts and by a fixed facsimile signature,
each of which when so executed and delivered shall be deemed to be an original
and all of which taken together shall constitute but one and the same
agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the Parties have executed this Second Amendment on
the date first written above.
ROYAL ADHESIVES AND SEALANTS, INC.
By: /s/ Christopher F. Childres
-------------------------------------------------
Its:
------------------------------------------------
UNIROYAL ENGINEERED PRODUCTS, LLC
By: /s/ George J. Zulanas, Jr.
-----------------------------------------
Its: Executive Vice President
----------------------------------------
The assignment by Royal Adhesives and Sealants, Inc. of all of its rights and
obligations under that certain Asset Purchase Agreement dated August 24, 2001,
as amended by the First Amendment to Asset Purchase Agreement dated October 15,
2001 and the Second Amendment to Asset Purchase Agreement dated as of October
23, 2001 to the undersigned is hereby acknowledged by the undersigned. The
undersigned hereby unconditionally assumes all of the obligations of Royal
Adhesives and Sealants, Inc. under such Asset Purchase Agreement, as amended.
ROYAL ADHESIVES AND SEALANTS, LLC
By: /s/ Christopher F. Childres
Its: