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EXHIBIT 2.1
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (this "Agreement") is made and entered
into as of February 17, 1999 by and among Plastron Industries, Inc., a Delaware
corporation ("Buyer"), Plastron Industries, L.P., a Delaware limited partnership
("Seller"), Summa Industries, a Delaware corporation and the parent of Buyer
("Parent"), and Plastron Management, Inc., an Illinois corporation and the
general partner of Seller ("PMI").
RECITALS
WHEREAS, Seller is engaged in the business of manufacturing precision
thermoplastic parts for wound electronic components such as transformers, relays
and coils, often referred to as "bobbins," and conducting related molding and
insertion operations at its facilities in Bensenville, Illinois (collectively,
the "Business");
WHEREAS, Seller owns all of the Transferred Assets (as defined in
Section 1.1), which Transferred Assets are used or useful in the conduct of the
Business; and
WHEREAS, Seller, with the assistance of PMI, desires to sell and assign
to Buyer, and Buyer desires to purchase and assume from Seller, the Transferred
Assets and the Assumed Obligations (as defined in Section 1.2) on the terms and
subject to the conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual covenants set forth herein and for other good and valuable consideration,
the parties hereto, intending to be legally bound, hereby agree as follows:
ARTICLE I
SALE AND TRANSFER OF ASSETS
1.1 Transferred Assets. Subject to the terms and conditions set forth
herein, at the Closing (as defined in Section 2.5), Seller shall sell, convey,
transfer, assign and deliver to Buyer, and Buyer shall purchase, assume and
acquire from Seller, all of the assets, properties and rights of Seller of every
kind, character and description used or useful in the conduct of the Business,
whether tangible or intangible and wherever located, as of the Closing Date (as
defined in Section 2.5) (collectively referred to herein as the "Transferred
Assets"), including, without limitation, the following Transferred Assets (of
which each item with a fair market or net book value in excess of $100 under
subsections (a) through (c) below is described in detail in the "Transferred
Assets Schedule" attached hereto as Schedule 1.1):
(a) All real property, buildings, structures, fixtures and leasehold and
other improvements;
(b) All machinery, equipment, vehicles, tooling, molds, cranes, tables,
spare parts and tools;
(c) All office supplies and equipment, computers, maintenance supplies
and other similar items;
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(d) All inventories;
(e) All accounts and notes receivable;
(f) All prepaid assets other than prepaid insurance;
(g) All of Seller's right, title and interest in and to those contracts
and agreements (including proprietary agreements with suppliers) set forth on
Schedule 1.1(g), and all right, title and interest in and to purchase or sales
orders, quotes or commitments related to the Transferred Assets or the Business,
whether written or oral;
(h) Copies of all of Seller's books, records, accounts, correspondence,
production records, employment, payroll, personnel and workers' compensation
records, environmental control records and any other documents relating to the
Transferred Assets or the Business;
(i) All of Seller's rights under any and all express or implied
warranties from Seller's suppliers with respect to the Transferred Assets, to
the extent such warranties are transferable by Seller;
(j) All of Seller's right, title and interest in and to patents,
trademarks, service marks, trade names and all variants thereof, copyrights,
inventions, customer lists, trade secrets (including processes and software
programs), registrations and applications therefor and works in progress, and
past, present and future causes of action and remedies therefor, including those
set forth on Schedule 3.11;
(k) All of Seller's right, title and interest in computer programs to
the extent assignable, and other intangibles owned or used by Seller relating to
the Transferred Assets or the Business and all of the related goodwill;
(l) All claims as to which Seller is a judgment creditor; and
(m) To the extent assignable, all of Seller's licenses, permits and
governmental authorizations relating to the Transferred Assets or the Business.
1.2 Retained Assets. Notwithstanding the terms of Section 1.1, the
following assets (collectively, the "Retained Assets") shall be retained by
Seller and or its affiliates, and shall not be sold, transferred or assigned to
Buyer:
(a) All cash and cash equivalents of Seller received prior to the
Closing Date, including the bank accounts of Seller which constitute an asset of
the Business;
(b) All minutes books and other ownership records of Seller;
(c) Such licenses, permits or other certificates of authority which, by
their terms, are not assignable;
(d) All insurance policies of Seller obtained in connection with the
Business and all rights of Seller under and arising out of such insurance
policies, including right to receive dividends and refunds of prepaid insurance;
provided that, Seller shall deliver copies of all such policies to Buyer and
shall use best
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efforts to assist Buyer in obtaining reimbursement under such policies following
the Closing for claims that may be covered thereunder;
(e) Rights to receive refunds with respect to any and all taxes paid by
Seller in connection with the Business, including interest thereon;
(f) Rights to receive payment from the promissory note from Ms. Alice
Buechele;
(g) Any rights under that certain Asset Purchase Agreement dated
September 15, 1997, by and between Plastron Corp., an Illinois corporation,
Seller, Phyllis G. Linning and Laura A. Linning and all documents executed in
connection therewith; provided that, at Buyer's request, Seller will use
reasonable efforts to enforce the representations and warranties and
noncompetition agreements contained therein against the other parties thereto;
and
(h) Any rights of Seller under this Agreement and any related agreement.
1.3 Customer Assets. Notwithstanding the terms of Section 1.1, Seller
shall sell, convey, assign and transfer only such rights as it may have at the
Closing, if any, to those molds, toolings and inserts used in the Business which
are owned by customers of Seller ("Customer Assets").
1.4 Assumed Obligations. Effective as of the Closing Date, Buyer and
Parent shall assume and shall thereafter pay, discharge or perform in the
ordinary course the following (collectively, the "Assumed Obligations"):
(a) Those trade payables and accrued obligations incurred by Seller in
the ordinary course of business on or before the Closing Date and, unless not
known, set forth on the Assumed Obligations Schedule attached hereto as Schedule
1.4;
(b) Seller's obligations arising under those contracts and agreements
included in the Transferred Assets as set forth on Schedule 1.1(g) and under
those purchase or sales orders, quotes or commitments which constitute the
Transferred Assets or the Business, whether written or oral;
(c) Liabilities and obligations of the Business with respect to any
claims, grievances, lawsuits, arbitrations or other legal proceedings for
product liability occurrences on or after the Closing Date;
(d) Liabilities and obligations of the Business with respect to any
claims, grievances, lawsuits, arbitrations or other legal proceedings for claims
for product warranty made on or after the Closing Date, regardless of when such
products were manufactured or sold, and for liability for recalls on or after
the Closing Date; and
(e) Those additional obligations, if any, listed on Schedule 1.4. Other
than the Assumed Obligations, Buyer shall not assume or be obligated to pay,
discharge or perform any liability or obligation of Seller, whether direct or
indirect, known or unknown, absolute or contingent, and all such liabilities and
obligations shall remain with Seller.
1.5 No Other Debts, Obligations or Liabilities Assumed. Buyer and Parent
do not assume and shall not be liable for, and Seller and PMI shall indemnify
Buyer and Parent pursuant to Article IX
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against, any debts, obligations or liabilities of Seller or PMI of any nature
whatsoever other than the Assumed Obligations (the "Retained Obligations").
ARTICLE II
PURCHASE PRICE AND PAYMENT
2.1 Purchase Price. In exchange and as consideration for the Transferred
Assets and in full payment of the purchase price therefor, Parent shall cause
Buyer to pay, and Buyer shall pay, in the manner provided in Section 2.3, an
aggregate purchase price of Twenty Million Dollars ($20,000,000.00), subject to
adjustment pursuant to the terms of Section 2.4 below and the exercise of
Buyer's and Parent's indemnification rights set forth in Article IX (the
"Purchase Price").
2.2 Allocation of Purchase Price. The parties shall allocate the
Purchase Price for tax purposes amongst the Transferred Assets as set forth on
Schedule 2.2. The parties shall file their respective tax returns in accordance
with such allocation and shall not take any position or action inconsistent with
such allocation.
2.3 Payment of Purchase Price. The Purchase Price shall be paid as
follows:
(a) At the Closing, Parent shall cause Buyer to pay, and Buyer shall pay
to Seller in cash, by wire transfer of immediately available funds, the
aggregate amount of Nineteen Million Dollars ($19,000,000.00); and
(b) At the Closing, Parent shall execute and deliver to Seller a
four-year warrant exercisable for the purchase from time to time of 200,000
shares of the Common Stock, $.001 par value, of Parent at an exercise price of
$11.75 per share, containing one demand registration right on Form S-3,
transferable in its entirety, and containing such other terms and conditions as
are mutually acceptable to the parties (the "Warrant").
(c) At the Closing, Parent shall cause Buyer to deliver, and Buyer shall
deliver to American National Bank and Trust Company of Chicago ("Escrow Agent")
by wire transfer of immediately available funds, the aggregate amount of One
Million Dollars ($1,000,000.00) (the "Escrow Funds"). The Escrow Funds shall be
held in escrow pursuant to the terms and conditions of an escrow agreement in
the form attached hereto as Exhibit A (the "Escrow Agreement").
2.4 Working Capital Adjustment.
(a) The Purchase Price shall be subject to a one-time adjustment (the
"Adjustment") to reflect the amount by which Seller's Working Capital (as
defined in subsection (c) below) at Closing is greater or less than One Million
Eight Hundred and Fifty Thousand Dollars ($1,850,000.00) ("Minimum Working
Capital"). If Working Capital at Closing is greater than Minimum Working
Capital, the Purchase Price shall be increased by the amount of such excess by
deposit of the excess amount into the Escrow Fund by Buyer, and if Working
Capital is less than Minimum Working Capital at Closing, the Purchase Price
shall be reduced by the amount of such shortfall by removal of the shortfall
amount from the Escrow Fund by Buyer.
(b) Buyer shall initially calculate the Adjustment and, within ninety
(90) days of the Closing Date, deliver to the Seller (collectively, the
"Adjustment Notice"): (i) a written report setting forth the amount of the
Adjustment, the Working Capital and the components thereof in reasonable detail
and (ii) copies of the work papers, schedules and other documents prepared by
Buyers and its accountants in
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connection with its determination of the Working Capital and the Adjustment.
From and after the date of delivery of the Adjustment Notice, Buyer shall give
Seller and its accountants such assistance and access to the books and records
of Buyer as Seller and its accountants shall reasonably request during normal
business hours in order to enable them to evaluate Buyer's determination of the
Working Capital and the Adjustment.
(c) Within thirty (30) days following the delivery of the Adjustment
Notice, Seller shall deliver to Buyer a notice of objection (an "Objection
Notice") or a notice of acceptance (an "Acceptance Notice") with respect to the
amount of the Working Capital and the Adjustment set forth in the Adjustment
Notice. If an Acceptance Notice is delivered to Buyer or if no Objection Notice
is delivered to Buyer within such thirty (30) day period, the Adjustment as set
forth in the Adjustment Notice shall be final and binding on the parties. Any
Objection Notice shall specify in reasonable detail the components of the
Working Capital disputed and shall describe in reasonable detail the basis for
the objection and all information in the possession of Seller which forms the
basis thereof, as well as the amount in dispute. If an Objection Notice is
given, the parties shall attempt to reach a resolution of the dispute during the
twenty (20) day period following delivery of the Objection Notice. If the
parties are unable to reach agreement within such period, any unresolved
disputed items shall be promptly referred to a mutually acceptable accounting
firm (the "Unrelated Accounting Firm"). The Unrelated Accounting Firm shall be
directed to render a written report on the unresolved disputed issues with
respect to the Working Capital and the Adjustment as promptly as practicable and
to resolve only those issues of dispute set forth in the Objection Notice. If
unresolved disputed issues are submitted to the Unrelated Accounting Firm, Buyer
and Seller will each furnish to the Unrelated Accounting Firm such work papers,
schedules and other documents relating to the unresolved disputed issues as the
Unrelated Accounting Firm may request. The resolution of the dispute by the
Unrelated Accounting Firm shall be final and binding on the parties. The fees
and expenses of the Unrelated Accounting Firm shall be borne by Buyer and Seller
based on the inverse proportion of the respective percentages of the dollar
value of unresolved disputed issues determined in favor of Seller and Buyer.
(d) "Working Capital" shall mean, as of 12:01 a.m. on the Closing Date,
the difference between those Transferred Assets which are recorded as current
assets in accordance with generally accepted accounting principles ("GAAP") and
consistent with Seller's past practices (offset by reserves in accordance with
GAAP and consistent with Seller's past practices but not less than those
recorded on the Balance Sheet (as defined below)) and those Assumed Obligations
which are recorded as current liabilities in accordance with GAAP and consistent
with Seller's past practices.
2.5 Closing. The consummation of the transactions contemplated by this
Agreement (the "Closing") shall take place on March 1, 1999 or as soon
thereafter as possible upon satisfaction of the conditions set forth in Article
VII (the "Closing Date"), at the offices of Katten Muchin & Zavis, 525 West
Monroe Street, Chicago, Illinois, or at such other date, time and place as may
be mutually agreed upon in writing by the parties. All proceedings to take place
at the Closing shall take place simultaneously, and no delivery shall be
considered to have been made until all such proceedings have been completed. The
Closing shall be deemed to have taken place at12:01 a.m. CST on the Closing
Date. At the Closing:
(a) Parent shall cause Buyer to pay, and Buyer shall pay to Seller the
portion of the Purchase Price set forth in Section 2.3(a) and (b);
(b) Parent shall cause Buyer to deliver, and Buyer shall deliver to the
Escrow Agent the portion of the Purchase Price set forth in Section 2.3(c); and
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(c) Seller shall execute and deliver to Buyer a General Instrument of
Conveyance, Transfer and Assignment in the form attached hereto as Exhibit B and
all such other instruments and documents of conveyance and assignment as are
requested by Buyer to vest in Buyer title to the Transferred Assets. Buyer and
Parent shall execute and deliver to Seller an Assumption Agreement in the form
attached hereto as Exhibit C, and Seller, Buyer, Parent and PMI shall execute
and deliver officers' certificates regarding the representations, warranties and
covenants contained herein.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER AND PMI
Seller and PMI hereby jointly and severally represent and warrant to
Buyer and Parent as follows:
3.1 Organization and Qualification - Seller. Seller is a limited
partnership duly organized, validly existing and in good standing under the laws
of the State of Delaware, is duly qualified to do business as a foreign entity
and is in good standing in each jurisdiction in which the character of its
properties or the nature of its business makes such qualification necessary.
Seller has the requisite partnership power and authority to own, use or lease
its properties and to carry on its business as it is now being conducted and as
it is now proposed to be conducted Seller's partnership agreement, as amended to
date, is in full force and effect. Seller is not in default in any material
respect in the performance, observation or fulfillment of any provision of its
partnership agreement.
3.2 Organization and Qualification - PMI. PMI is the general partner of
Seller and is a corporation duly organized, validly existing and in good
standing under the laws of the State of Illinois, is duly qualified to do
business as a foreign corporation and is in good standing in each jurisdiction
in which the character of its properties or the nature of its business makes
such qualification necessary. PMI has the requisite corporate power and
authority to own, use or lease its properties and to carry on its business as it
is now being conducted and as it is now proposed to be conducted. PMI is not in
default in any material respect in the performance, observation or fulfillment
of any provision of its articles of incorporation or bylaws.
3.3 Ownership. Other than as relates to the Business, Seller does not
own any assets or conduct any operations.
3.4 Authority Relative to this Agreement. Each of Seller and PMI has all
requisite power and authority to execute and deliver this Agreement and all
related agreements and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and all related agreements and the
consummation of the transactions contemplated hereby on the part of Seller and
PMI has been duly and validly authorized and no other proceedings on the part of
Seller or PMI are necessary, as a matter of law or otherwise, to authorize this
Agreement, the related agreements or to consummate the transactions so
contemplated. This Agreement has been duly and validly executed and delivered by
Seller and PMI and, assuming this Agreement constitutes a valid and binding
obligation of Buyer, this Agreement constitutes a valid and binding agreement of
Seller and PMI, enforceable against each of them in accordance with its terms,
except as such enforcement may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general application affecting
enforcement of creditors' rights or by general principles of equity. The
undersigned representative of PMI has been specifically authorized to execute
this Agreement and all related agreements and to consummate the
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transactions contemplated hereby on behalf of Seller by a requisite vote of the
partners of Seller, if necessary.
3.5 Consents and Approvals; No Violation. Except as set forth on
Schedule 3.5, the execution and delivery of this Agreement and any related
agreements by Seller and PMI, the consummation of the transactions contemplated
hereby and/or the performance by Seller and PMI of their obligations hereunder
will not:
(a) conflict with any provision of the partnership agreement, articles
of incorporation, bylaws or other organizational documents of Seller or PMI;
(b) require any consent, approval, authorization or permit of, or filing
with or notification to, any governmental or regulatory authority;
(c) conflict with, result in the breach of or constitute a default (or
give rise to any right of termination, cancellation or acceleration or
guaranteed payments) under any of the terms, conditions or provisions of any
material note, lease, mortgage, license, agreement or other instrument or
obligation to which Seller and/or PMI is a party or by which Seller and/or PMI
or any of their assets may be bound, including the Business, except for such
defaults (or rights of termination, cancellation or acceleration) as to which
requisite waivers or consents have been obtained in writing;
(d) conflict with or violate the provisions of any order, writ,
injunction, judgment, decree, statute, rule or regulation; or
(e) result in the creation of any lien, charge or encumbrance upon any
of the Transferred Assets.
3.6 Financial Statements. The audited balance sheet of Seller as of
December 31, 1998 (the "Balance Sheet") and the related audited statements of
income and cash flows for the twelve-month period then ended (collectively, the
"Financial Statements") are attached hereto as Schedule 3.6. The Financial
Statements have been prepared in accordance with GAAP applied on a consistent
basis throughout the period indicated, and present fairly in all material
respects the financial position of Seller as of the end of such fiscal year and
the results of operations and cash flows for such year. From and after the date
hereof until the Closing, PMI shall cause Seller to deliver to Buyer, within
fifteen (15) days after each month end, monthly unaudited balance sheets and
income statements which, at the time they are delivered to Buyer, will present
fairly in all material respects the assets and liabilities and results of
operations of Seller as of their respective dates.
3.7 Absence of Certain Changes. Except as set forth on Schedule 3.7,
since December 31, 1998, (i) Seller has conducted its business only in, and
since such date, has not engaged in any transaction other than according to, the
ordinary and usual course of such business, and, (ii) there has not been (a) any
event, circumstance, condition, development or occurrence causing, resulting in
or having a material adverse effect on the financial condition, business,
prospects, properties or results of operations of either Seller, the Business or
the Transferred Assets (a "Material Adverse Change"); (b) any material change by
Seller in accounting principles, practices or methods; (c) any labor dispute or
difficulty which is reasonably likely to result in any Material Adverse Change,
and to the Knowledge of Seller, no such dispute or difficulty is now threatened;
(d) any asset material to the Business sold or disposed of (except inventory
sold in the ordinary course of business), or any material asset mortgaged,
pledged or subjected to any lien, charge or other encumbrance; (e) any increase
in excess of $10,000, individually or in the
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aggregate, in the compensation payable or which could become payable by Seller
to employees, distributors, dealers or sales representatives of the Business;
(f) any amendment by Seller of any employee benefit plan; (g) any indebtedness
incurred by Seller with respect to the Business, except for indebtedness that
will be repaid in full by Seller prior to the Closing; (h) any loan made or
agreed to be made by Seller with respect to the Business, nor has Seller become
liable or agreed to become liable as a guarantor with respect to any such loan;
or (i) any waiver by Seller of any right or rights of material value related to
the Business.
3.8 Absence of Undisclosed Liabilities. Seller and the Business has and
will have no indebtedness, obligations or liabilities, whether accrued,
absolute, contingent or otherwise and whether due or to become due, known or
unknown, as of date of the Balance Sheet and as of the Closing Date, which are
not reflected or reserved for in the Balance Sheet or set forth on Schedule 3.8.
3.9 Title to Assets. Each Transferred Asset of the type set forth in
Section 1.1(a) to 1.1(f) with a fair market or net book value in excess of $100
is set forth and described in detail on Schedule 1.1. Seller has and at Closing
will have good and marketable title to all Transferred Assets. The Transferred
Assets constitute all of the assets and interests in assets that are owned or
used in the conduct of the Business as currently being conducted, other than
leased or licensed assets set forth on Schedule 3.9, the Retained Assets and the
Customer Assets. All of the Transferred Assets will be conveyed to Buyer free
and clear of restrictions on or conditions to transfer or assignment, and free
and clear of mortgages, liens, leases, security interests, pledges, charges,
encumbrances, equities, claims, easements, rights of way, covenants, conditions
or restrictions or any other adverse claims or rights whatsoever (collectively,
"Liens"), other than (i) those items set forth on Schedule 3.9, (ii) liens for
property taxes not yet due and payable, (iii) rights of customers with respect
to work-in-process under orders or contracts entered into in the ordinary course
of business, and (iv) immaterial imperfections of title, easements,
restrictions, rights of way and encumbrances (collectively, "Permitted Liens").
Seller has the absolute and unrestricted right, power, authority and capacity to
transfer the Transferred Assets to Buyer and, upon the Closing, Buyer will
acquire from Seller legal and beneficial ownership of, good and valid title to,
the Transferred Assets, free from any Lien other than Permitted Liens. At the
Closing, except as set forth on Schedule 3.9, none of the Transferred Assets
will be subject to any leasing arrangement. Except for partnership interests in
Seller, no partner, agent, owner or employee of Seller, nor any spouse, child,
sibling or other relative of any of these persons, owns or has any interest,
directly or indirectly, in any of the Transferred Assets.
3.10 Real Property. Set forth in Schedule 3.10 is a complete and
accurate description of each parcel of real property owned by and/or occupied by
Seller, including any easement, covenants, rights of way or similar restrictions
(collectively the "Real Property"), and, except as set forth in Schedule 3.10,
Seller does not lease, sublease, own nor occupy any other real property nor is
any other real property used in or related to the Business. Except as indicated
in Schedule 3.10:
(a) Seller has, and at the Closing Date will have, good and marketable
fee simple absolute title in and to all Real Property owned by it, free and
clear of all title defects, mortgages, pledges, security interests, easements,
conditional sales agreements, liens, restrictions or encumbrances whatsoever
other than Permitted Liens;
(b) Seller does not lease any Real Property, nor is any leased Real
Property used in the Business;
(c) Each of the buildings and all fixtures and improvements located on
the Real Property are in good operating condition, ordinary wear and tear
excepted;
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(d) Seller has not received any notice, nor is it aware, that any of the
buildings, structures or other improvements erected on the Real Property, or the
present use thereof, (i) do not conform in all respects with all applicable
zoning and building laws (or does not constitute a legal nonconforming use),
ordinances, regulations or other laws and applicable deed restrictions, or (ii)
encroach on property of others;
(e) Seller has not received any written or oral notice of any pending
(i) change of such zoning and building laws, ordinances, regulations or other
laws affecting any of such properties, or (ii) condemnation of any such
properties; and
(f) Seller has not received any notice from any municipal body or other
public authority requiring work to be done or improvements to be made upon any
of the Real Property and has no Knowledge of the enactment or adoption of any
ordinance or resolution by any such body or authority authorizing work or
improvements for which any of the Real Property may be assessed.
3.11 Intellectual Property.
(a) Except as set forth on Schedule 3.11, Seller does not have any
right, title or interest in any Intellectual Property (as defined below) and no
such Intellectual Property is necessary for or used in the Business as now
conducted. With respect to registered patents and trademarks, Schedule 3.11
contains a list of all jurisdictions in which such patents and trademarks are
registered or applied for and all registration and application numbers.
(b) "Intellectual Property" includes United States and foreign
inventions, invention disclosures, patents, inventors' certificates, utility
models, trademarks, service marks, trade names, copyrights, mask work
registrations, trade secrets (including processes and software programs),
registrations and applications therefor and works in progress, and past, present
and future causes of action and remedies therefor, customer lists and
proprietary arrangements with vendors of Seller.
(c) Except as disclosed on Schedule 3.11, Seller owns or has the
unrestricted right to use, free and clear of any rights of others and without
payment to any other party, the Intellectual Property listed on such Schedule
3.11, and the consummation of the transactions contemplated hereby will not
alter or impair any such items nor the right of the Business to use such items.
(d) Except as disclosed on Schedule 3.11, Seller has not received any
communications alleging that Seller has violated any other person's Intellectual
Property rights or has engaged in unfair competition against such person. Except
as disclosed on Schedule 3.11, to the Knowledge of Seller, Seller does not now
infringe or misappropriate any third party's Intellectual Property rights and
does not have any liability for any past infringement or misappropriation.
Except as disclosed on Schedule 3.11, no dispute or disagreement involving
Seller exists or is, to the Knowledge of Seller, threatened with regard to any
third party's Intellectual Property rights, including any allegation of
Intellectual Property infringement or misappropriation or of any breach or
default of an Intellectual Property license or similar agreement.
(e) To Seller's Knowledge, (i) no third party is now infringing or
misappropriating any Intellectual Property rights of Seller or the Business, and
(ii) there has not been any past such infringement or misappropriation.
3.12 Accounts Receivable. The accounts receivable reflected on the
Balance Sheet constituted all accounts receivable of the Business as of the date
thereof, other than accounts receivable fully written
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off as uncollectible as of such date in accordance with consistently applied
prior practice, except as may be reserved on the Balance Sheet. All such
accounts receivable arose from valid sales made (as opposed to consignments) or
services rendered in the ordinary course of business, and are not subject to any
return privileges, set-off or counterclaim, except as may be reserved on the
Balance Sheet. Except as disclosed on Schedule 3.12 hereto, such accounts
receivable have been collected in full since the date of the Balance Sheet or
remain valid, binding and legally enforceable obligations at their full
respective amounts (net of allowance for doubtful accounts established in
accordance with consistently applied prior practice). All accounts receivable
created after the date of the Balance Sheet up to the Closing will arise from
valid transactions in the ordinary course of business, and will be valid,
binding and legally enforceable obligations at their full respective amounts
(net of the allowance for doubtful accounts established with consistently
applied prior practice).
3.13 Inventories. Seller has good and marketable title to all of its
inventories of raw materials, work-in-process and finished goods, free and clear
of all Liens, other than Permitted Liens. Except to the extent reserved for on
the Balance Sheet, all such inventories (i) consist of items that are usable in
the ordinary course of business for an amount at least equal to the book value
thereto, and (ii) represent quantities, individually and in the aggregate, not
in excess of eighteen month's requirements for the Business as currently
conducted.
3.14 Contracts. Neither Seller nor the Business has any contract,
agreement, obligation or commitment, written or oral, expressed or implied,
which was not incurred in the ordinary course of business, or involves a
commitment or liability in excess of $10,000, or is for a term of more than one
year or whose terms do not permit cancellation without liability on 30 days'
notice or less (other than obligations which are included in accounts payable),
and has no union contracts, employee, representative or consultant contracts,
loan, credit or other financing agreements, inventory flooring arrangements,
debtor or creditor arrangements, security agreements, licenses, franchise,
manufacturing, distributorship or dealership agreements, leases, or bonus,
health or stock option plans, except for those described in Schedule 3.14 hereto
(collectively, the "Contracts"), copies of all of which have been delivered to
Buyer prior to the execution hereof. As of the date hereof, there exists no
circumstances on Seller's part and, to Seller's Knowledge, on the part of any
third party, which would affect the validity or enforceability of any such
Contracts in accordance with their respective terms. Seller has performed and
complied in all material respects with all obligations required to be performed
to date under, and is not in default (without giving effect to any required
notice or grace period) under, or in breach of, the terms, conditions or
provisions of any Contract. Except for consents to assignment required as set
forth on Schedule 3.5, the validity and enforceability of each Contract
described herein has not been and shall not in any manner be affected by the
execution and delivery of this Agreement or any related agreement or the
consummation of the transactions contemplated hereby. Neither Seller nor the
Business has any customer sales contract which in the ordinary course would
require future expenditures (including internal costs and overhead) in excess of
reasonably anticipated receipts.
3.15 Employee and Labor Matters.
(a) Employee. Except as set forth in Schedule 3.15 hereto, no partner,
stockholder, director, officer or employee of Seller or PMI is presently a party
to any transaction involving the Business, including without limitation any
contract, loan or other agreement or arrangements providing for the furnishing
of services by, the rental of real or personal property from or to, or otherwise
requiring loans or payments to, any such partner, stockholder, director, officer
or employee, or to any member of the family of any of the foregoing, or to
Seller's and PMI's Knowledge, to any corporation, partnership, trust or other
entity in which any partner, stockholder, director, officer or employee or any
member of the family of any of them has a substantial interest or is a partner,
officer, director, trustee, or employee. There is set forth in Schedule 3.15 a
list showing (i) the name, title, date and amount of last compensation
11
increase, and aggregate compensation, including amounts paid or accrued pursuant
to any bonus, pension, profit sharing, commission, deferred compensation or
other plans or arrangements in effect as of the date of this Agreement, of each
officer or employee of the Business whose salary and other compensation, in the
aggregate, received or accrued is at an annual rate (or aggregated for the most
recently completed fiscal year) in excess of $40,000, as well as any written or
oral employment and/or severance agreements relating to any such persons; (ii) a
description of any and all bonus, pension, profit sharing, commission, deferred
compensation, retirement, savings, thrift, severance, performance, vacation,
holiday, medical, disability life or other welfare, retiree welfare plan or
policy or other plans or arrangements in effect for any employees of the
Business as of the date of this Agreement, except as may be set forth in
Schedule 3.16 (ERISA Plans); (iii) a description of any noncompetition or
similar agreements to which Seller or the Business or any general partner,
officer or employee of either is a party; (iv) all powers of attorney from
Seller or the Business to any person or entity; and (v) the name of each person
or entity authorized to borrow money or incur or guarantee indebtedness on
behalf of Seller or the Business. Seller has delivered to Buyer copies of all
written personnel policies, including without limitation vacation, severance,
bonus, profit sharing and commission policies, applicable to any employees of
the Business. To Seller's Knowledge, all current employees of Seller are legally
entitled to work in the United States, and Seller has retained all required
documentation in its records related thereto. Except as set forth on Schedule
3.15, neither the execution and delivery of this Agreement by Seller or PMI, nor
the consummation by either of any of the transactions contemplated hereby, or
compliance by Seller and PMI with any of the provisions hereof, shall create any
obligation or liability on the part of the Business under any bonus, profit
sharing, deferred compensation or other plan or arrangement in effect as of the
date of this Agreement and the Closing Date.
(b) Labor. Except as set forth on Schedule 3.15, none of the facilities
or operations of Seller or the Business has been the subject of any strike, work
stoppage, boycott, union organizational effort, unfair labor practice charge or
employment discrimination charge; and, to the Knowledge of Seller and PMI, no
such action is pending or threatened.
3.16 ERISA Plans.
(a) Each employee pension benefit plan, program, agreement or
arrangement maintained or contributed to by Seller or PMI and related in any
manner to the Business or the Transferred Assets ("Plan") which is subject to
the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), if
any, is set forth on Schedule 3.16 and such Plan(s) conform in all material
respects to all applicable federal laws; no liability under ERISA or the
Internal Revenue Code of 1986, as amended (the "Code") has been or will be
incurred by Seller or PMI with respect to any Plan (other than for benefits
under such Plan); full payment has been made of all amounts required to have
paid as contributions to such Plan(s); the cost of providing all retirement and
post-termination benefits has been properly accrued and is reflected in the
Financial Statements in accordance with GAAP, including without limitation,
Statements of Financial Accounting Standards 87, 106 and 112; there is not in
the aggregate any accumulated funding deficiency with respect to such Plan(s);
and the current value of accrued benefits of each such Plan(s) does not exceed
the current value of such Plan's' assets.
(b) Seller has provided Buyer with copies of the following documents
relating to Plans, or any other plan terminated by Seller during its existence,
which are subject to ERISA: (i) copies of the plan documents and all amendments
relating thereto; (ii) the most recent Form 5500 filed with respect to such
plans, including all schedules and attachments relating thereto; (iii) where
applicable, the most recent determination letters received with respect thereto
from the Internal Revenue Service; (iv) the most
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recent financial statements and actuarial reports, where applicable, prepared
with respect to such plans; and (v) copies of all correspondence with the
Internal Revenue Service, Pension Benefit Guaranty Corporation, Department of
Labor, or any other governmental agency regarding any pending dispute or any
pending or threatened audit or investigation relating to any such plan.
3.17 Permits. Seller holds all permits, licenses, franchises,
certificates and authorizations that are required by any governmental agency to
permit it to conduct the Business as now conducted, and all such permits,
licenses, franchises, certificates and authorizations are valid and in full
force and effect. To Seller's Knowledge, no suspension, cancellation or
termination of any of such permits, licenses, franchises, certificates and
authorizations is threatened or imminent.
3.18 Taxes. Except as set forth on Schedule 3.18:
(a) Seller, PMI and PMI's stockholders ("Filers") have timely filed all
returns, declarations, reports, or information returns or statements relating to
Taxes (as defined below) with respect to the Business or the Transferred Assets,
including any schedule or attachment thereto and including any amendment thereof
("Tax Returns") that are required to be filed under federal, state, local or
foreign law. All such Tax Returns were complete in all material respects. All
Taxes owed by Filers with respect to the Business (whether or not shown on any
of said Tax Returns) have been paid for all periods for which Tax Returns have
been filed. Neither the Business, Seller nor PMI is currently the beneficiary of
any extension of time within which to file any Tax Return. To the Knowledge of
Seller and PMI, no outstanding claim has been made by any authority in a
jurisdiction where Filers do not file Tax Returns that Seller, the Business or
the Transferred Assets may be subject to taxation by that jurisdiction.
(b) Seller has withheld and paid all Taxes required to have been
withheld and paid in connection with amounts paid or owing to any employee,
creditor, independent contractor, or other third party.
(c) There is no dispute or claim concerning any Tax liability relating
in any manner to the Business either (i) claimed or raised by any authority or
(ii) as to which Seller or PMI has Knowledge based upon personal contact or
correspondence with any agent of such authority. Seller has provided to Buyer
all federal, state, local and foreign Tax Returns filed with respect to Seller
or the Business for taxable periods ended on or after December 31, 1997, and has
disclosed to Buyer those of such Tax Returns, if any, that have been audited,
and those of such Tax Returns, if any, that currently are the subject of audit.
Seller has delivered to Buyer correct and complete copies of all Tax Returns,
examination reports and statements of deficiencies assessed against or agreed to
by Seller with respect to Seller or the Business since December 31, 1997.
(d) Seller has not waived in writing any statute of limitations in
respect of Taxes or agreed to any extension of time with respect to a Tax
assessment or deficiency pertaining to it, which waiver or extension is still in
effect.
(e) For purposes of this Agreement, "Tax" or "Taxes" means any federal,
state, county, local or foreign income, gross receipts, license, payroll,
employment, excise, severance, stamp, occupation, premium, windfall profits,
environmental (including taxes under Code Section 59A), customs duties, capital
stock, franchise, profits, withholding, social security (or similar),
unemployment, disability, real property, personal property, sales, use,
transfer, registration, value added, alternative or add-on
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minimum, estimated, or other tax of any kind whatsoever, including any interest,
penalty, or addition thereto, whether disputed or not.
3.19 Litigation. Except as set forth on Schedule 3.19, there is no
claim, action or proceeding pending or, to Seller's Knowledge, threatened
against or relating to Seller, PMI, the Business or any of the Transferred
Assets before any federal, state, municipal or other governmental department,
commission, court, board, bureau, agency, instrumentality or other person acting
in an adjudicative capacity, domestic or foreign. To the Knowledge of Seller and
PMI, there is no basis for any claim, action or proceeding against or relating
to Seller, PMI, the Business or the Transferred Assets. Neither Seller, nor, to
the Knowledge of Seller or PMI, any employee of Seller, has been permanently or
temporarily enjoined by any order, judgment or decree of any court or any other
governmental or regulatory authority from engaging in or continuing any conduct
or practice in connection with the Business or the Transferred Assets nor, to
the Knowledge of Seller or PMI, is any employee of Seller or PMI under
investigation by any governmental or regulatory authority. There is not in
existence any order, judgment or decree of any court or other tribunal or other
agency enjoining or requiring Seller or PMI to take any action of any kind with
respect to the Business or the Transferred Assets. Except as set forth in
Schedule 3.19, to their Knowledge, neither Seller, PMI nor the Business have,
since September 20, 1997, been threatened with any action, suit, proceedings or
claim (including actions, suits, proceedings or claims where its liabilities may
be adequately covered by insurance) for personal injuries allegedly attributable
to products sold or services performed by the Business asserting a particular
defect or hazardous property in any of products of the Business, services or
business practices or methods, nor has Seller, PMI or the Business been a party
to or threatened with proceedings brought by or before any federal or state
agency; and Seller and PMI have no Knowledge of any defect or hazardous
property, claimed or actual, in any such product, service, business practice or
method, except as reserved for in the Balance Sheet. Neither Seller, PMI nor the
Business is subject to any voluntary or involuntary proceeding under the United
States Bankruptcy Code and neither has made an assignment for the benefit of
creditors.
3.20 Compliance with Applicable Laws. Seller holds, and has at all times
held, all licenses, permits and authorizations then necessary for the lawful
conduct of the Business, as now conducted and all such licenses, permits and
authorizations are valid and sufficient for all business now conducted by
Seller. Seller has complied with, and is in material compliance with, all
applicable laws, orders, rules and regulations promulgated by any federal,
state, municipal or other governmental authority relating to the operation and
conduct of the Business and its properties, and, since September 20, 1997, there
have not been and are not any material violations of any such law, order, rule
or regulation, existing or, to Seller's Knowledge, threatened. Except as set
forth on Schedule 3.20, Seller and PMI have not received any notice from any
authority or person that the Business has been or is being, conducted in
violation of any applicable zoning regulation or order, or other law, order,
regulation or requirement relating to the operation of its business or to its
properties.
3.21 Environmental Matters.
(a) Except as set forth on Schedule 3.21 hereto:
(i) Seller and the Business have complied with all applicable
Environmental Laws;
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(ii) The Property (including soils, groundwater, surface water,
buildings or other structures) is not contaminated with any Hazardous Substances
that may subject Seller, Buyer, the Business or the Transferred Assets to
liability under any Environmental Law;
(iii) All properties formerly owned or operated by the Seller are
not contaminated with Hazardous Substances that may subject Seller, Buyer, the
Business or the Transferred Assets to liability under any Environmental Law;
(iv) Neither Seller nor the Business are subject to liability
under any Environmental Law for any Hazardous Substance disposal or
contamination on any third party property;
(v) Neither Seller nor the Business have caused or contributed to
any release or threat of release of any Hazardous Substance that may subject
Seller, Buyer, the Business or the Transferred Assets to liability under any
Environmental Law;
(vi) Seller has not received any notice, demand, letter, claim or
request for information alleging that Seller or the Business may be in violation
of, or liable under, any Environmental Law;
(vii) Neither Seller nor the Business are subject to any orders,
decrees, injunctions or other arrangements with any governmental entity, nor
subject to any indemnity or other agreement with any third party relating to
liability under any Environmental Law or relating to Hazardous Substances;
(viii) There are no circumstances or conditions involving Seller
or the Business that could reasonably be expected to result in any claims,
liability, investigations, costs or restrictions on the ownership, use or
transfer of any of Property pursuant to any Environmental Law; and
(ix) The Property has not and does not contain any underground
storage tanks, asbestos-containing material (other than materials incidentally
used in Seller's buildings which, at Closing, are not exposed), lead-based
products (other than materials incidentally used in Seller's buildings which, at
Closing, are not exposed), halogenated solvents or polychlorinated biphenyls.
(b) "Environmental Law" means any federal, state, local or foreign law,
statute, ordinance, rule, regulation, or treaty; all judicial administrative,
and regulatory orders, judgments, decrees, permits, and authorizations; and
common law relating to: (i) the protection of human health, the environment or
natural resources, (ii) the investigation, remediation or restoration of the
environment or natural resources, (iii) the handling, use, storage, treatment,
disposal, release or threatened release of any Hazardous Substance; or (iv)
noise, odor, pollution, contamination, land use, or any injury or threat of
injury to persons or property related thereto.
(c) "Hazardous Substance" means any substance, material or waste that
is: (i) listed, classified or regulated in any concentration pursuant to any
Environmental Law; (ii) any petroleum product or by-product, asbestos-containing
material, lead-containing paint or plumbing, polychlorinated biphenyls,
radioactive materials; or (iii) any other substance, material or waste which may
be the subject of regulatory action by any governmental entity pursuant to any
Environmental Law.
(d) "Property" means any real property and improvements owned, leased,
used, operated or occupied by Seller or the Business.
15
3.22 Relationships with Customers and Suppliers. Except as set forth in
Schedule 3.22, no present customer or substantial supplier to the Business has
indicated an intention to terminate or adversely alter its existing business
relationship therewith, and Seller and PMI have no reason to believe that any of
the present customers of or substantial suppliers to the Business intends to do
so.
3.23 Warranties; Product Returns. Except as described in Schedule 3.23
hereto, Seller does not offer any warranties for its products and services.
Seller's warranty reserve reflected in the allowance for doubtful accounts in
the Financial Statements is and will be adequate to cover all warranty claims
pending as of the date hereof and pending as of the Closing Date. Since
September 20, 1997, none of the products manufactured by the Business have been
subject to recall.
3.24 Insurance. Seller maintains insurance with reputable insurance
companies on such of its equipment, tools, machinery, inventory and properties
as are usually insured by companies similarly situated in the same geographic
location and to the extent customarily insured, and maintains products and
personal liability insurance, and such other insurance against hazards, risks
and liability to persons and property as is customary for companies similarly
situated in the same geographic location. Schedule 3.24 sets forth a true and
correct list and a general description of all insurance policies of any nature
whatsoever maintained by Seller pertaining to the Business, including all
policies of life, group medical and/or dental insurance. Such policies will be
in full force and effect through the Closing Date and, except as otherwise set
forth on Schedule 3.24, such policies, or other policies covering the same
risks, have been in full force and effect, without gaps, continuously for the
past five (5) years. Copies of all such policies were made available to Buyer
for its inspection. Seller is not in default under any of such policies or
binders and has not failed to give any notice or to present any material claim
under any such policy or binder in a due and timely fashion.
3.25 Bank Accounts. All bank and savings accounts, and other accounts at
similar financial institutions, of Seller or relating to the Business are listed
in Schedule 3.25 hereto.
3.26 Broker's Commission or Finder's Fees. Except for Goldsmith, Agio,
Helms and Company, no person or entity has acted for Seller and/or PMI in
connection with the transactions provided for in this Agreement in a way which
would entitle such person to, and no person or entity is entitled to, any
broker's commissions or finder's fees (or other similar fees or commissions) in
connection with this Agreement. Seller shall be solely responsible for payment
of all such commissions and fees.
3.27 Third Party Benefits. Neither PMI, Madison Capital Partners, nor
any other related third party has provided, directly or indirectly, any benefit,
service, good or product to the Business other than as has been fully and fairly
allocated to Seller and expensed by Seller at fair value in the cost of sales or
selling, general and administrative sections of Seller's income statements.
3.28 Definition of Knowledge. As used in this Agreement, "Knowledge"
means, with respect to an entity, such knowledge as would be obtained after
reasonable inquiry by the officers or partners of that entity and, with respect
to an individual, such knowledge as would be obtained by that individual after
reasonable inquiry.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER AND PARENT
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Buyer and Parent hereby jointly and severally represent and warrant to
Seller and PMI as follows:
4.1 Organization. Buyer and Parent are corporations duly organized,
validly existing and in good standing in the State of Delaware. Buyer and Parent
have the requisite corporate power to own, use or lease their respective
properties and to carry on their business as such are now being conducted.
4.2 Authority Relative to this Agreement. Subject only to approval and
ratification by Parent's board of directors, Buyer and Parent have all requisite
corporate power and authority to execute and deliver this Agreement and any
related agreements and to consummate the transactions contemplated hereby.
Subject only to approval and ratification by Parent's board of directors, the
execution and delivery of this Agreement, any related agreements and the
consummation of the transactions contemplated hereby on the part of Buyer and
Parent have been duly and validly authorized by Buyer and Parent and no other
corporate proceedings on the part of Buyer or Parent are necessary, as a matter
of law or otherwise, to authorize this Agreement or to consummate the
transactions so contemplated. This Agreement has been duly and validly executed
and delivered by Buyer and Parent and, assuming this Agreement constitutes a
valid and binding obligation of Seller and PMI, this Agreement constitutes a
valid and binding agreement of Buyer and Parent, enforceable against Buyer and
Parent in accordance with its terms, except as such enforcement may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium or other laws
of general application affecting enforcement of creditors' rights or by general
principles of equity.
4.3 Consent and Approvals; No Violation. The execution and delivery of
this Agreement by Buyer and Parent, the consummation of the transactions
contemplated hereby and the performance by each of Buyer and Parent of its
obligations hereunder, will not:
(a) conflict with any provision of the certificate of incorporation or
bylaws of Buyer or Parent;
(b) require any consent, approval, authorization or permit of, or filing
with or notification to, any governmental or regulatory authority other than the
post-Closing filing by Parent on Form S-8 with the Securities and Exchange
Commission (the "Commission");
(c) conflict with, result in the breach of or constitute a default (or
give rise to any right of termination, cancellation or acceleration or
guaranteed payments) under any of the terms, conditions or provisions of any
material note, lease, mortgage, license, agreement or other instrument or
obligation to which Buyer or Parent is a party or by which Buyer or Parent or
any of their assets may be bound, except for such defaults (or rights of
termination, cancellation or acceleration) as to which requisite waivers or
consents have been obtained in writing; or
(d) conflict with or violate the provisions of any order, writ,
injunction, judgment, decree, statute, rule or regulation applicable to Buyer or
Parent.
4.4 Broker's Commission or Finder's Fees. Except for Crown Capital, no
person or entity has acted for Buyer and/or Parent in connection with the
transactions provided for in this Agreement in a way which would entitle such
person to, and no person or entity is entitled to, any broker's commissions or
finder's fees (or other similar fees or commissions) in connection with this
Agreement or the transactions contemplated hereby. Buyer and Parent shall be
solely responsible for payment of all such commissions and fees.
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ARTICLE V
COVENANTS OF SELLER AND PMI
During the period from the date of this Agreement until the Closing Date
or the earlier termination of this Agreement, Seller and PMI each agree (except
as expressly contemplated by this Agreement or to the extent that Buyer shall
otherwise consent in writing) as follows:
5.1 Access to Information.
(a) Seller shall (i) give Buyer and its authorized representatives
reasonable access upon reasonable notice during normal business hours in such a
manner as not unduly to disrupt normal business activities to the Transferred
Assets and to all plants, offices, warehouses and other facilities of the
Business and to all contracts, internal reports, data processing files and
records, federal, state, local and foreign tax returns and records, commitments,
books, records and affairs of Seller related to the Business, whether located on
the premises of the Business, the office facilities of Seller or at another
location, (ii) permit Buyer to make such inspections and inquiries as it may
require, and (iii) cause its officers to furnish Buyer such financial,
operating, technical and product data and other information with respect to the
Business and Transferred Assets as Buyer from time to time may reasonably
request, including without limitation financial statements and schedules;
provided, however, that no investigation pursuant to this Section 5.1 shall
affect or be deemed to modify any representation or warranty made by Seller or
PMI herein and, provided further, that neither Buyer nor any of its
representatives may contact in any manner any customer, supplier or employee
(other than officers) of Seller or the Business on or before the Closing, other
than Products Unlimited and that certain customer survey conducted by
representatives of Buyer with the assistance of officers of the Business.
(b) Seller shall give prompt notice to Buyer of any material breach of
any of its covenants hereunder or the occurrence of any event that is reasonably
likely to cause any of its representations and warranties hereunder to become
incomplete or untrue in any material respect.
5.2 Ordinary Course. Seller shall (a) carry on its business in the
usual, regular and ordinary course, in substantially the same manner as
heretofore conducted and use all reasonable efforts consistent with past
practice and policies to preserve its present business organizations, keep
available the services of its present officers and key employees (other than
employees terminated for cause) and preserve its relationships with customers,
suppliers, lessors, lessees and others having business dealings with it, (b)
maintain its books and records in accordance with existing practices, (c) not
pay distributions of any type other than cash distributions to its partners for
taxes, (d) except in the ordinary course, not hire additional employees nor
become obligated for additional rental payments, (e) except in the ordinary
course (excluding management employees), not modify the compensation or benefits
paid to any employee, and (f) except in the ordinary course, not undertake
material expenditures, including, without limitation, the purchase or lease of
equipment; provided that, expenditures less than $50,000 individually and
$75,000 in the aggregate shall not be deemed material.
5.3 Exclusive Negotiations.
(a) Neither Seller nor PMI shall, directly or indirectly through any
employee, agent or representative (including without limitation investment
bankers, attorneys, accountants and consultants), or otherwise:
18
(i) solicit, initiate, discuss or further the submission of
proposals or offers from, or enter into any agreement with, any firm,
corporation, partnership, association, group (as defined in Section 13(d)(3) of
the Securities Exchange Act of 1934, as amended) or other person or entity,
individually or collectively (including without limitation any managers,
employees or independent contractors of Seller or any of its affiliates), other
than Buyer (a "Third Party"), relating to any acquisition or purchase of all or
a material portion of the Transferred Assets of, or any equity interest in,
Seller (or the Business) or any merger, consolidation or business combination
with Seller;
(ii) participate in any discussions or negotiations regarding, or
furnish to any Third Party any confidential information with respect thereto; or
(iii) otherwise cooperate in any way with, or assist or
participate in, facilitate or encourage, any effort or attempt by any Third
Party to do or seek to do any of the foregoing.
(b) Seller and/or PMI shall promptly notify Buyer in writing if any such
proposal or offer, or any inquiry or contact with any Third Party with respect
thereto, is made.
(c) Seller shall immediately cease and cause to be terminated any
existing activities, discussions or negotiations with any Third Party conducted
prior to the date of this Agreement with respect to any of the foregoing.
(d) The terms set forth in this Section 5.3 shall remain in effect from
the date of this Agreement until such time, if ever, as terminated in writing by
Seller by delivery to Buyer of a termination notice referencing this Section.
5.4 No Dispositions. Except for the sale of inventory in the ordinary
course of business and other than as may be required by existing contracts,
Seller shall not sell, lease or otherwise dispose of any Transferred Assets and
shall promptly notify Buyer in writing of any dispositions of material
non-inventory items.
5.5 Indebtedness. Seller shall not incur, become subject to, or agree to
incur or become subject to any obligation or liability (absolute or contingent),
except (a) current liabilities incurred, and obligations under existing
contracts, in the ordinary course of business consistent with prior practice,
and (b) revolving loan advances in the ordinary course of business consistent
with past practice.
5.6 Benefit Plans. Seller shall not:
(a) pay, agree to pay or make any accrual or arrangement for payment of
any pension, retirement allowance or other employee benefit pursuant to any
existing plan, agreement or arrangement to any employee except in the ordinary
course of business and consistent with past practice or as permitted by this
Agreement;
(b) commit itself to adopt or pay, grant, issue or accrue salary or
benefits pursuant to any additional pension, profit-sharing, bonus, extra
compensation, incentive, deferred compensation, group insurance, severance pay,
retirement or other employee benefit plan, agreement or arrangement, or any
employment or consulting agreement with or for the benefit of any employee,
agent or consultant, whether past or present; or
(c) amend in any material respect any such existing plan, agreement or
arrangement.
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5.7 Maintenance of Non-Cash Working Capital. Consistent in all respects
with past practices, Seller shall (a) timely pay when due all accounts payable
and other expenses, and (b) collect all accounts receivable and convert or use
all other non-cash assets in the ordinary course.
5.8 Cash Management. Seller and PMI agree that all cash, whether in
currency, check or wire form, and all other property received by Seller or PMI
on or after the Closing Date and related in any manner to the Business or the
Transferred Assets shall be for the account of Buyer, and Seller and/or PMI
shall promptly deliver all such cash to Buyer with a written accounting thereof.
If requested, Seller and PMI shall provide reasonable assistance to Buyer in
identifying and notifying certain customers of changes in bank accounts for the
Business.
5.9 Change of Names. Both Seller and PMI shall take all necessary
actions and make all necessary filings to modify their respective names to
exclude any and all references to "Plastron" effective as of the Closing Date.
In addition, both Seller and PMI shall cease use of any items referencing
"Plastron" in any manner as of the Closing, including without limitation,
stationary and brochures.
5.10 Tax and Real Estate Matters. All Tax Returns which relate to any
Taxes with respect to the Business or the Transferred Assets for periods prior
to the Closing Date shall be prepared and filed by Seller on a timely basis, and
Seller shall be responsible for the payment of all Taxes related to the Business
or the Transferred Assets attributable to periods prior to the Closing. Except
as set forth in Section 6.4, Buyer shall pay all sales, use and transfer taxes,
if any, payable to the State of Illinois, any subdivision thereof or to any
other governmental entity in connection with the transactions contemplated by
this Agreement and the Closing; including any real estate stamp tax or other
real estate tax imposed on the transfer of title. If requested by Buyer, Seller
shall furnish a completed real estate transfer declaration signed by Seller in
the form required by the Real Estate Transfer Tax Act of the State of Illinois
and shall furnish any other required documents. Seller shall pay any costs and
expenses incurred in connection with Seller obtaining title policies, conducting
searches and surveys (if required for issuance of title policies) and all
related issues on each item of real estate in the Transferred Assets other than
environmental assessments.
5.11 Insurance. Seller and/or PMI shall take all necessary actions to
maintain in force all of its existing insurance policies (or replacements
therefor), subject only to variations in amounts required by the ordinary
operation of the Business.
ARTICLE VI
MUTUAL COVENANTS
6.1 Confidentiality. Between the date hereof and the Closing Date, the
parties hereto agree that no party shall, without the prior written consent of
the others as to substance, existence and timing, disclose publicly or to any
third party (except Seller's limited partners on a no-names basis and such
party's professional advisors) the existence of this Agreement or the terms and
conditions hereof, or any prior correspondence or any subsequent negotiations
between the parties, including any confidential information obtained thereby,
except to the extent required by law. The parties will cooperate with each other
to coordinate any and all public statements and releases with respect to the
transactions contemplated hereby. From the date hereof until the Closing,
neither Seller nor PMI nor any of their representatives shall purchase, directly
or indirectly, in the public marketplace or otherwise, any of Summa's
securities. Following the Closing, Seller and PMI shall keep confidential and
shall not disclose
20
to any third party all information not then in the public domain relating in any
manner to the Business. Buyer and Parent further agree that, until the Closing
or in the event of termination pursuant to Section 8.1 for a period of five
years thereafter, any confidential information concerning the Business will be
used solely for the purpose of evaluating a possible transaction between the
parties hereto, and such confidential information will not be used in the
operation of Buyer's, Parent's or any of their affiliates businesses or in any
other respect.
6.2 Satisfaction of Conditions. Each party will use all reasonable
efforts to cause all conditions to its obligations under this Agreement to be
timely satisfied and to perform and fulfill all covenants and obligations on its
part to be performed and fulfilled under this Agreement, to the end that the
transactions contemplated by this Agreement shall be effected substantially in
accordance with its terms as soon as reasonably practicable. The parties shall
cooperate with each other in such actions and in securing requisite approvals.
6.3 Further Assurances. Each party shall execute and deliver, both
before and after the Closing, such further certificates, agreements and other
documents and take such other actions as may be necessary or appropriate to
consummate or implement the transactions contemplated hereby, including without
limitation the transfer of all Transferred Assets to Buyer, or to evidence such
events or matters.
6.4 Bulk Sales Compliance. Subject to the indemnities set forth in this
Agreement, the parties agree to waive compliance with all applicable bulk
transfer laws. Seller and PMI shall indemnify, defend and hold harmless Buyer
from and against any and all Losses (as defined in Section 9.1(c)) arising or
resulting from, or connected with, this waiver or the failure or alleged failure
of any party hereto to comply, in connection with the transactions contemplated
hereby, with the bulk transfer laws and requirements of any jurisdiction.
Nothing in this Section 6.4 shall operate or be construed to estop or prevent
any party hereto from asserting as a bar or defense to any action or proceeding
brought under any bulk sales law that such law does not apply to the transfer
contemplated under this Agreement. If required, Seller shall deliver to Buyer
any bulk sale stop orders, shall escrow any funds required thereby, and shall
pay such escrowed amounts to the appropriate governmental entity.
6.5 Certain Defaults. Seller and PMI, on the one hand, and Buyer and
Parent, will give prompt notice to each other of:
(a) any notice of default received by such party subsequent to the date
of this Agreement and prior to the Closing Date under any material instrument or
material agreement to which any such party is a party or by which it is bound,
which default in the case of Seller or PMI, would, if not remedied, result in a
Material Adverse Change or which, in the case of any such party, would render
incomplete or untrue any representation made herein; and
(b) any suit, action or proceeding instituted or, to the knowledge of
Seller, PMI, Buyer or Parent, threatened against or affecting any such party
subsequent to the date of this Agreement and prior to the Closing Date which
would render incorrect any representation made herein.
6.6 Brokers or Finders. Neither Seller, PMI, Buyer or Parent shall enter
into any agreement or arrangement not existing as of the date hereof with any
agent, broker, investment banker or other firm or person pursuant to which such
person shall be entitled to any broker or finder's fee or any other commission
or similar fee in connection with any of the transactions contemplated by this
Agreement.
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6.7 No Equitable Conversion. Prior to the Closing Date, neither the
execution of this Agreement nor the performance of any provision contained
herein shall cause either Seller and PMI, on the one hand, or Buyer and Parent,
on the other hand, to be or become liable for or in respect of the operations or
business of the other, for the cost of any labor or materials furnished to or
purchased by the other, for compliance with any laws, requirements or
regulations of, or taxes, assessments or other charges now or hereafter due to,
any governmental authority, or for any other charges or expenses whatsoever
pertaining to the conduct of the business or the ownership, title, possession,
use or occupancy of the property of the other.
6.8 Product Liability Insurance. For a period of seven (7) years
following the Closing, or such shorter period as Buyer or any affiliate of Buyer
or Parent shall own the Transferred Assets, Buyer shall purchase and maintain
products liability insurance from such carriers and with such limits of
liability and other terms as are reasonably comparable to the insurance
coverages heretofore maintained by Seller. At Seller's sole cost and expense, if
any, Seller shall be named as an additional insured on the foregoing insurance
coverages.
6.9 Certain Employee Issues.
(a) On the Closing Date, Buyer shall offer at will employment to all
employees of Seller as of the Closing (the "Affected Employees") on such terms
and conditions as Buyer shall determine; provided that, in the aggregate, such
terms and conditions shall be comparable to those now in effect with respect to
the employment of such employees by Seller. All employees of Seller shall
receive credit for all service with Seller, to the same extent as credited by
Seller as of the Closing, under employee benefit plans, programs and policies
and fringe benefits of Buyer under which they become participants, other than
any option or equity appreciation plan, for the purpose of eligibility and
vesting, but not benefit accrual; provided that, Buyer shall have no obligation
to continue any such plans, programs, policies or benefits following the Closing
Date.
(b) Buyer shall waive all limitations as to preexisting conditions ,
exclusions and waiting periods with respect to participation and coverage
requirements applicable to the Affected Employees under any welfare benefits
plans that such employees may be eligible to participate in after the Closing
Date, other than limitations or waiting periods already in effect.
(c) Nothing in this Section shall be deemed to require the employment
of any Affected Employee or the continuation of any benefits for any particular
time after the Closing Date.
ARTICLE VII
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE PARTIES
7.1 Conditions to the Obligations of Buyer and Seller. The respective
obligations of Buyer, Parent, Seller and PMI set forth in this Agreement shall
be subject to the satisfaction on or prior to the Closing Date of the following
conditions, unless waived by each such party in writing:
(a) Legal Action. No temporary restraining order, preliminary injunction
or permanent injunction or other order preventing the consummation of the
transactions contemplated by this Agreement shall have been issued by any
federal, state or foreign court or other governmental or
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regulatory authority and remain in effect, and no litigation seeking the
issuance of such an order or injunction, or seeking substantial damages against
Buyer or Seller if the transactions contemplated by this Agreement are
consummated, shall be pending which, in the reasonable good faith judgment of
the party against whom such damages or injunction is sought, have a reasonable
probability of resulting in such order, injunction or substantial damages. In
the event any such order or injunction shall have been issued, each party agrees
to use its reasonable efforts to have any such injunction lifted.
(b) Statutes. No federal, state, local or foreign statute, rule or
regulation shall have been enacted which would make the consummation of the
transactions contemplated by this Agreement illegal.
7.2 Further Conditions to the Obligations of Buyer and Parent. The
obligations of Buyer and Parent set forth in this Agreement are subject to the
satisfaction on or prior to the Closing Date of the following conditions, unless
waived by Buyer in writing:
(a) Representations and Warranties. The representations and warranties
of Seller and PMI set forth in Article III shall be true and correct as of the
date of this Agreement and, except as set forth on schedules to the Seller
Officers' Certificate (as defined below), as of the Closing Date as though made
at and as of the Closing Date, except as otherwise contemplated by this
Agreement, and Buyer shall have received a certificate dated the Closing Date
signed by an authorized officer of Seller and PMI to such effect ("Seller
Officers' Certificate"). If the schedules to the Seller Officers' Certificate
reflect a Material Adverse Change from the schedules attached hereto, Buyer and
Parent shall have no obligation to consummate the transactions contemplated by
this Agreement.
(b) Performance of Obligations of Other Parties. Seller and PMI shall
have satisfied all of the conditions set forth in this Section 7.2 and performed
all obligations required to be performed by them under this Agreement prior to
the Closing Date and Buyer shall have received a certificate signed by an
authorized officer of Seller and PMI to such effect.
(c) Opinion of Counsel to Seller. Buyer shall have received an opinion
dated as of the Closing Date of counsel to Seller containing the opinions set
forth in Exhibit D attached hereto.
(d) No Litigation. Since the date hereof, there shall not have been
instituted and be continuing or threatened against Seller or PMI, any claims,
actions or proceedings relating in any manner to the Business or the Transferred
Assets which, if adversely determined, could, individually or in the aggregate,
reasonably be expected to result in a Material Adverse Change.
(e) No Adverse Change. No Material Adverse Change shall have occurred
since the date of this Agreement.
(f) Third-Party Approvals. Any and all material consents required from
third parties relating to licenses, leases and other agreements and instruments
that are part of the Transferred Assets shall have been obtained.
(g) Noncompetition and Nonsolicitation Agreement. Each officer of Seller
shall have entered into a noncompetition and nonsolicitation agreement with
Buyer substantially in the form attached hereto as Exhibit E-1, and Messrs.
Larry Gies and Scott Murray shall have entered into similar agreements in the
form attached hereto as Exhibit E-2.
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(h) Debt; Guarantees. There shall be no agreements or instruments
evidencing loans to or interest bearing indebtedness incurred by Seller or PMI
or related in any manner to the Business or Transferred Assets, and Seller and
PMI, on or prior to the Closing, shall have paid in full all interest bearing
indebtedness and loans of any type, including current portions thereof. All
guarantees by Seller or PMI of any type of obligation shall have been
terminated.
(i) Termination of Encumbrances. All liens and encumbrances on the
Transferred Assets shall have been terminated, and Seller shall have received
and delivered to Buyer duly executed UCC termination statements with respect to
any and all UCC financing statements covering such assets and property.
(j) Approval by Summa Board. The Board of Directors of Summa shall have
approved consummation of the transactions contemplated hereby in their sole and
absolute discretion by February 24, 1999.
(k) Receipt of Transfer Documents. Buyer shall have received the
executed General Instrument of Conveyance, Transfer and Assignment in the form
attached hereto as Exhibit A and all other documents required by Buyer to
transfer title of the Transferred Assets to Buyer.
7.3 Further Conditions to the Obligations of Seller and PMI. The
obligations of Seller and PMI set forth in this Agreement are subject to the
satisfaction on or prior to the Closing Date of the following conditions, unless
waived by Seller in writing:
(a) Representations and Warranties. The representations and warranties
of Buyer and Parent set forth in Article IV shall be true and correct in all
material respects as of the date of this Agreement and, except as set forth on
schedules to the Buyer Officers' Certificate (as defined below), as of the
Closing Date as though made at and as of the Closing Date, except as otherwise
contemplated by this Agreement, and Seller shall have received a certificate
dated the Closing Date signed by an authorized officer of Buyer to such effect
("Buyer Officers' Certificate"). If the schedules to the Buyer Officers'
Certificate reflect an adverse change or changes from the representations made
and schedules delivered as of the execution of this Agreement, Seller and PMI
shall have no obligation to consummate the transactions contemplated by this
Agreement.
(b) Performance of Obligations of Other Parties. Buyer and Parent shall
have satisfied all of the conditions set forth in this Section 7.3 and performed
in all material respects all obligations required to be performed by them under
this Agreement prior to or on the Closing Date, and Seller shall have received a
certificate signed by an authorized officer of Buyer and Parent to such effect.
(c) Receipt of Assumption Agreement. Seller shall have received the
executed Assumption Agreement in the form attached hereto as Exhibit C.
(d) Receipt of Consideration. Seller shall have received the portion of
the Purchase Price as set forth in Section 2.3(a), and the Escrow Agent shall
have received the portion of the Purchase Price set forth in Section 2.3(b).
(e) Opinion of Counsel to Buyer and Parent. Seller shall have received
an opinion dated as of the Closing Date of counsel to Buyer and Parent
containing the opinions set forth in Exhibit F attached hereto.
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(f) Warrant. Parent shall have executed and delivered to Seller the
Warrant.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
8.1 Termination. This Agreement may be terminated at any time prior to
the Closing Date:
(a) By Mutual Consent. By the mutual written consent of Buyer and
Seller;
(b) By Buyer or Seller. By either Buyer or Seller:
(i) if the transactions contemplated by this Agreement shall not
have been consummated on or before March 15, 1999; provided that the failure of
the transactions to be consummated by such date is not caused by any breach of
this Agreement by the party seeking such termination;
(ii) if a court of competent jurisdiction or other governmental
or regulatory authority shall have issued an order, decree or ruling or taken
any other action, in each case permanently restraining, enjoining or otherwise
prohibiting the consummation of the transactions contemplated by this Agreement;
or
(iii) if any statute, rule or regulation is enacted, promulgated
or deemed applicable to the transactions contemplated by this Agreement by any
competent governmental or regulatory authority which makes the consummation of
the transactions illegal.
(c) By Buyer. By Buyer, if a material default under or a material breach
of this Agreement by Seller and/or PMI shall have occurred and be continuing ten
(10) days after receipt of written notice thereof from Buyer.
(d) By Seller. By Seller, if a material default under or a material
breach of this Agreement by Buyer shall have occurred and be continuing ten (10)
days after receipt of written notice thereof from Seller.
Any action taken to terminate this Agreement pursuant to this Section
8.1 shall become effective when written notice of such termination is delivered
by the terminating party to the other party in accordance with the provisions of
Section 10.1 below.
8.2 Effect of Termination. In the event of termination of this Agreement
by either Buyer or Seller in accordance with Section 8.1 above, this Agreement
shall forthwith become void and there shall be no liability or obligation on the
part of the terminating party or its respective partners, officers, directors or
employees, except that (a) Section 6.1 relating to the obligations to keep
confidential certain information and data, (b) Section 10.3 relating to certain
expenses, (c) Section 10.8 relating to attorneys' fees and expenses, (d)
Sections 3.26 and 4.4 relating to finder's fees and broker's fees, (e) Section
10.9 relating to jurisdiction and forum selection, and (f) this Article VIII
shall survive any termination and that nothing set forth herein shall relieve a
party hereto from liability for its willful breach of this Agreement. Without
limitation, if all of the conditions to a party's obligations set forth in
Article VII have been satisfied or waived by March 15, 1999, the failure of such
party to perform its obligations on or before such date shall be deemed to be a
willful breach of this Agreement by such party.
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8.3 Amendment. This Agreement may not be amended except by an instrument
in writing signed on behalf of each of the parties hereto.
8.4 Extension; Waiver. At any time prior to or on the Closing Date, to
the extent legally allowed, any party hereto (a) may extend the time for the
performance of any of the obligations owed to such party by the other parties
hereto, (b) may waive any inaccuracies in the representations and warranties
made to such party contained herein or in any document delivered pursuant
hereto, or (c) may waive compliance with any of the agreements or conditions for
the benefit of such party contained herein. Any agreement on the part of a party
hereto to any such extension or waiver shall be valid if set forth in an
instrument in writing signed on behalf of such party and shall be effective only
to the extent set forth in such instrument. No extension or waiver of any single
condition, covenant, agreement, representation, warranty, breach, default or
other matter hereunder shall be deemed an extension or waiver of such or any
other condition, covenant, agreement, representation, warranty, breach, default
or other matter theretofore or thereafter occurring. The rights, remedies,
powers and privileges herein provided are cumulative and not exclusive of any
rights, remedies, powers and privileges provided by law. The failure of any
party to insist upon a strict performance of any of the terms or provisions of
this Agreement, or to exercise any option, right or remedy herein contained,
shall not be construed as a waiver or as a relinquishment for the future of such
term, provision, option, right or remedy, but the same shall continue and remain
in full force and effect.
ARTICLE IX
INDEMNIFICATION
9.1 Indemnification.
(a) Indemnification by Seller and PMI. Subject to any limitations set
forth in Sections 9.6 through 9.8, Seller and PMI shall jointly and severally
indemnify and hold harmless Buyer, its affiliates (including without limitation
parent and sister corporations), and their respective directors, officers,
employees, agents and assigns from and against any and all "Losses" (as defined
below) incurred by, imposed on, borne by or asserted against any of such
indemnified parties in any way relating to, arising out of or resulting from:
(i) The breach of any of the representations or warranties made
by Seller and/or PMI in this Agreement or in any agreement delivered in
connection herewith or pursuant hereto (each, a "Related Agreement");
(ii) The breach or the failure of performance by Seller and/or
PMI of any of the covenants, promises or agreements that either is to perform
under this Agreement or any Related Agreement; and
(iii) The failure by Seller to discharge or perform the Retained
Obligations.
(b) Indemnification by Buyer and Parent. Subject to any limitations set
forth in Sections 9.6 through 9.8, Buyer and Parent shall indemnify and hold
harmless Seller and PMI and their respective affiliates (including without
limitation general and limited partners), and their respective directors,
officers, employees, agents and assigns from and against any and all "Losses"
(as defined below) incurred
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by, imposed on, borne by or asserted against any of such indemnified parties in
any way relating to, arising out of or resulting from:
(i) The breach of any of the representations or warranties made
by Buyer and/or Parent in this Agreement or in any Related Agreement;
(ii) The breach or the failure of performance by Buyer and/or
Parent of any of the covenants, promises or agreements that either is to perform
under this Agreement or any Related Agreement;
(iii) The failure by Buyer or Parent to discharge or perform the
Assumed Obligations; and
(iv) Buyer's operation of the Business and Transferred Assets
after the Closing Date.
(c) Definition of Losses. For purposes of this Agreement, "Losses" shall
mean any and all liabilities, obligations, losses, damages, claims,
deficiencies, penalties, taxes, levies, actions, judgments, settlements, suits,
reasonable costs, reasonable legal fees, reasonable accountants' fees,
reasonable experts' fees, reasonable disbursements and expenses.
9.2 Third Party Claims, Notice and Opportunity to Settle.
(a) Within thirty (30) days after the receipt by the party entitled to
indemnity hereunder (the "Indemnified Party") of any claim or demand (including
but not limited to, notice of any action, suit or proceeding) by any third party
against an Indemnified Party which gives rise to a right to indemnification for
a Loss hereunder (a "Third Party Claim"), the affected Indemnified Party shall
give each party who may be obligated to provide indemnity hereunder (the
"Indemnifying Party") written notice of such claim or demand; provided, however,
that the failure to give such notice shall not relieve the Indemnifying Party of
its obligations hereunder except and only to the extent that such failure is
materially prejudicial to the Indemnifying Party.
(b) The Indemnifying Party shall (without prejudice to the right of any
Indemnified Party to participate at its own expense through counsel of its own
choosing) defend against such claim or demand at its expense and through counsel
of its own choosing (the choice of such counsel to be subject to the consent of
the affected Indemnified Parties, which consent shall not be unreasonably
withheld) and shall give written notice confirming its assumption of the defense
within ten (10) days of the receipt of the notice referred to in Section 9.2(a)
above. If the Indemnifying Party fails to assume the defense of such claim or
demand, the affected Indemnified Parties shall have the right to assume control
of such defense at the expense of the Indemnifying Party. The Indemnified
Parties shall cooperate fully in the defense of such claim or demand, at the
Indemnifying Party's expense, and shall make available to the Indemnifying Party
or its counsel all pertinent information under their control relating thereto.
The Indemnifying Party agrees to cooperate with the Indemnified Parties in order
to enable their counsel to participate in the defense and to deliver to the
Indemnified Parties copies of all pleadings and other information within the
Indemnifying Party's knowledge or possession (other than privileged information)
reasonably requested by the Indemnified Parties that is relevant to the defense
of any such claim or demand.
(c) The Indemnifying Party shall have the right to elect to settle all
such claims or demands, for monetary damages only (within the aggregate limits
set forth in Section 9.6) and including an
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unconditional release, subject to the consent of the affected Indemnified
Parties, which consent shall not be unreasonably withheld.
(d) The Indemnified Parties shall have the right to assume control of
the defense of any claim or demand from the Indemnifying Party at any time and
to elect to settle such claim or demand; provided, however, that in such case
the Indemnifying Party shall have no indemnification obligations with respect to
such claim, demand or settlement except for the costs and expenses of such
Indemnifying Party incurred prior to the assumption of the defense of the claim
or demand by the Indemnified Parties.
9.3 Claims Against Escrow Funds. In the event of any claim pursuant to
Section 9.1(a), the Indemnified Party shall first recoup all of its Losses to
which it is entitled under this Agreement (including, but not limited to, any
amount owed to Buyer and/or Parent arising from Article IX) from the Escrow
Funds then existing prior to recouping Losses directly from Seller and/or PMI.
9.4 Non-Third Party Claims. In the event any Indemnified Party should
have a claim against any Indemnifying Party hereunder which does not involve a
Third Party Claim, the Indemnified Party shall transmit to the Indemnifying
Party a written notice (the "Indemnity Notice") describing in reasonable detail
the nature of the claim, an estimate of the amount of damages attributable to
such claim, and the basis of the Indemnified Party's request for indemnification
under this Agreement. If the Indemnifying Party does not notify the Indemnified
Party within thirty (30) days from the Indemnifying Party's receipt of the
Indemnity Notice that the Indemnifying Party disputes such claim and the reasons
therefor, the claim specified by the Indemnified Party in the Indemnity Notice
shall be deemed admitted in full and a liability of the Indemnifying Party
hereunder; and the Indemnified Party shall recoup all or any part of its Losses
as provided in Section 9.3.
9.5 Payments. Payments of all amounts owed by an Indemnifying Party
pursuant to this Article IX relating to a Third Party Claim shall be made within
fifteen (15) days after the latest of (i) the settlement of such Third Party
Claim, (ii) the final adjudication of such Third Party Claim or (iii) the final
adjudication of the Indemnifying Party's liability to the Indemnified Party
under this Agreement. Subject to Section 9.3, payments of all amounts owed by an
Indemnifying Party pursuant to Section 9.4 shall be made within fifteen (15)
days after the later of (i) the expiration of the 30-day Indemnity Notice period
or (ii) the agreement or final adjudication of the Indemnifying Party's
liability to the Indemnified Party under this Agreement. The Indemnified Party
shall reimburse the Indemnifying Party for recoveries, if any, received by the
Indemnified Party from insurance entities under any insurance policies
applicable to the Loss, net of all costs and expenses incurred by the
Indemnified Party. The Indemnified Party shall submit all claims for
reimbursement under all applicable insurance policies, if any, and shall use
reasonable efforts to prosecute such claim.
9.6 Classification of Claims.
(a) Tier I Claims. Claims for indemnity made under the following
Sections of this Agreement and under Related Agreements relating to the
following sections of this Agreement shall be "Tier I Claims": 3.10(c)
(Buildings); 3.14 (Contracts); 3.12 (Accounts Receivable); 3.13 (Inventory);
3.23 (Warranties; Product Returns); and 3.25 (Bank Accounts).
(b) Tier II Claims. Claims for indemnity made under any Section of this
Agreement not referenced in this Section 9.6 or the following Sections of this
Agreement and under Related Agreements relating to the following sections of
this Agreement shall be "Tier II Claims": 3.5 (Consents and
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Approvals; No Violation); 3.6 (Financial Statements); 3.7 (Absence of Certain
Changes); 3.8 (Absence of Undisclosed Liabilities); 3.10(b) and (d)-(f) (Real
Property); 3.11 (Intellectual Property); 3.15 (Employee and Labor Matters); 3.16
(ERISA Plans); 3.17 (Permits); 3.18 (Taxes); 3.19 (Litigation); 3.20 (Compliance
with Applicable Laws); 3.21 (Environmental Matters); 3.22 (Relationships with
Customers and Suppliers); and 3.24 (Insurance).
(c) Tier III Claims. Claims for indemnity made under the following
Sections of this Agreement shall be "Tier III Claims": 3.1 (Organization and
Qualification - Seller); 3.2 (Organization and Qualification -PMI); 3.3
(Ownership); 3.4 (Authority Relative to this Agreement); 3.9 (Title to Assets);
3.10(a) (Real Property - Title); and 3.26 (Broker's Commission or Finder's
Fees).
(d) Tier IV Claims. Claims for fraud, claims for breach of contract
(solely for failure to consummate the transactions contemplated hereby within
the time periods set forth herein and after all conditions to closing in Article
VII above have been satisfied or waived), and claims made under Sections 6.1
(Confidentiality); 9.1(a)(iii); 9.1(b)(iii) and 9.1(b)(iv) brought against any
party hereto shall be "Tier IV Claims."
(e) Tier V Claims. Claims of any nature brought against Buyer or Parent
under this Article IX, other than Tier IV Claims, shall be "Tier V Claims."
9.7 Limitations on Indemnification. The aggregate liability of the
Indemnifying Parties for Losses shall be as follows:
(a) Tier I and II Claims. The Indemnified Party shall have no right to
recover based upon a Tier I or Tier II Claims for indemnification unless and
until the aggregate Losses attributable to Claims under the subject Tier exceed
$25,000 (each, a "Floor"); and recovery of all amounts in excess of the Floors
shall be subject only to a maximum aggregate recovery from the Indemnifying
Parties for Tier I and II Claims of $2,000,000.
(b) Tier III and IV Claims. The Indemnified Party shall have the right
to recover based upon Tier III or Tier IV Claims for indemnification; provided
that, recovery from the Indemnifying Parties for Tier I, II and III Claims
collectively shall be limited to the Purchase Price. There shall be no limit on
recovery for Tier IV Claims.
(c) Tier V Claims. The Indemnified Party shall have no right to recover
based upon Tier V Claims for indemnification unless and until the aggregate
Losses on a cumulative basis attributable to all such Claims exceed the "Floor";
provided that, if such aggregate liability exceeds the Floor, the Indemnified
Party shall be entitled to full recovery of all amounts subject only to a
maximum recovery from the Indemnifying Parties for Tier V Claims of $500,000.
9.8 Survival. Regardless of the investigations, if any, made by any
party prior to the Closing, the representations and warranties and covenants
contained herein are made as of the date hereof and as of the Closing Date and
shall survive the Closing for the following periods: (a) six (6) months for Tier
I Claims; (b) twelve (12) months for Tier II and Tier V Claims; and (c)
indefinitely for Tier III and IV Claims; provided that, a representation or
warranty related to any claim asserted pursuant to Article IX within the
applicable time period set forth in this Section shall survive as to such claim
until resolved.
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9.9 Adjustment to Purchase Price. Any indemnification received under
this Article IX shall be, to the extent permitted by law, an adjustment to the
Purchase Price.
9.10 Sole and Exclusive Remedy. After the Closing, the rights set forth
in this Article IX shall be each party's sole and exclusive remedy against the
other parties hereto for any claim or dispute relating to the subject matter of
this Agreement.
ARTICLE X
GENERAL PROVISIONS
10.1 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given upon personal delivery, facsimile transmission
(with written or facsimile confirmation of receipt), or on the first day
following delivery by a reputable overnight commercial delivery service
(delivery, postage or freight charges prepaid), or on the third day following
deposit in the United States mail (if sent by registered or certified mail,
return receipt requested, delivery, postage or freight charges prepaid),
addressed to the parties at the following addresses (or at such other address
for a party as shall be specified by like notice):
If to Buyer or Parent: With copy to:
Plastron Industries, Inc. Summa Industries
c/o Summa Industries One Park Plaza, Sixth Floor
21250 Hawthorne Blvd., Suite 500 Irvine, CA 92614
Torrance, CA 90503 Fax: (949) 852-7316
Fax: (310) 792-7024 Attn: Trygve M. Thoresen
Attn: James R. Swartwout
If to Seller or PMI: With copy to:
Plastron Industries, L.P. Katten Muchin & Zavis
c/o Plastron Management, Inc. 525 West Monroe Street
150 N. Wacker Dr., Suite 2360 Chicago, IL 60661
Chicago, IL 60606 Fax: (312) 902-1061
Fax: (312) 236-4367 Attn: David Shevitz, Esq.
Attn: Larry Gies and Scott Murray and Brian Richards, Esq.
10.2 Interpretation. When a reference is made in this Agreement to an
Article, Section, Exhibit or Schedule, such reference shall be to an Article,
Section, Exhibit or Schedule to this Agreement unless otherwise indicated. The
words "include," "includes" and "including" when used herein shall be deemed in
each case to be followed by the words "without limitation." The table of
contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement.
10.3 Expenses. Whether or not the transactions contemplated hereby are
consummated, and except as otherwise provided in this Agreement, all fees, costs
and expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such fees, costs or
expenses.
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10.4 Integration. This Agreement and the Exhibits, Schedules, documents,
instruments and other agreements among the parties hereto that are referred to
herein constitute the entire agreement among the parties with respect to the
subject matter set forth herein or therein and supersede all prior agreements
and understandings, both written and oral, among the parties with respect to the
subject matter hereof or thereof, including, without limitation, any term sheets
or letters of intent.
10.5 Assignment. No party hereto shall assign or transfer or permit the
assignment or transfer of this Agreement without the prior written consent of
the other parties; provided, however, that Buyer may assign any of its rights
and obligations hereunder to any entity that, directly or indirectly, through
one or more intermediaries, controls, or is controlled by, or is under common
control with Buyer. No such assignment by Buyer will relieve Buyer of any of its
obligations or duties under this Agreement.
10.6 Severability. Any portion or provision of the Agreement which is
invalid, illegal or unenforceable in any jurisdiction shall, as to that
jurisdiction, be ineffective to the extent of such invalidity, illegality or
unenforceability, without affecting in any way the remaining portions or
provisions hereof in such jurisdiction or, to the extent permitted by law,
rendering that or any other portion or provision of the Agreement invalid,
illegal or unenforceable in any other jurisdiction.
10.7 Governing Law. This Agreement and the rights and obligations of the
parties hereunder shall be governed in all respects, including validity,
interpretation and effect, by the laws of the State of Delaware, without regard
to its rules of conflicts of law.
10.8 Attorneys' Fees. If any party to this Agreement shall bring any
action, suit, counterclaim or appeal for any relief against any other party,
declaratory or otherwise, to enforce the terms hereof or to declare rights
hereunder (collectively, an "Action"), the prevailing party shall be entitled to
recover as part of any such Action its reasonable attorneys' fees and costs,
including any fees and costs incurred in bringing and prosecuting such Action
and/or enforcing any order, judgment, ruling or award granted as part of such
Action. "Prevailing party" within the meaning of this section includes, without
limitation, a party who agrees to dismiss an Action upon the other party's
payment of all or a portion of the sums allegedly due or performance of the
covenants allegedly breached, or who obtains substantially the relief sought by
it.
10.9 Consent to Jurisdiction: Forum Selection. The parties agree that
all actions or proceedings arising in connection with this Agreement (other than
the arbitration contemplated under Section 2.4(b)) shall be tried and litigated
exclusively in the Federal courts located in the County of Los Angeles, State of
California. The aforementioned choice of venue is intended by the parties to be
mandatory and not permissive in nature, thereby precluding the possibility of
litigation between the parties with respect to or arising out of this Agreement
in any jurisdiction other than those specified in this section. Each party
hereby waives any right it may have to assert the doctrine of forum non
conveniens or similar doctrine or to object to venue with respect to any
proceeding brought in accordance with this section, and stipulates that the
Federal courts located in the County of Los Angeles, State of California shall
have in personam jurisdiction and venue over each of them for the purpose of
litigating any dispute, controversy or proceeding arising out of or related to
this Agreement. Each party hereby authorizes and accepts service of process
sufficient for personal jurisdiction in any action against it as contemplated by
this section by registered or certified mail, return receipt requested, postage
prepaid, to its address for the giving of notices as set forth in this
Agreement, or in the manner set forth in Section 10.1 of this Agreement for the
giving of notice. Any final judgment rendered against a party in any action
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or proceeding shall be conclusive as to the subject of such final judgment and
may be enforced in other jurisdictions in any manner provided by law.
10.10 No Third-Party Beneficiaries. Except as provided in Article IX as
to Indemnified Parties, this Agreement is for the sole benefit of the parties
hereto and their permitted assigns and nothing herein expressed or implied shall
give or be construed to give to any person or entity, other than the parties
hereto and such assigns, any legal or equitable rights hereunder.
10.11 Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed an original, and all of which taken together shall
constitute one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
BUYER: SELLER:
PLASTRON INDUSTRIES, INC., PLASTRON INDUSTRIES, L.P.,
a Delaware corporation a Delaware limited partnership
By: PLASTRON MANAGEMENT, INC.,
By: /s/ James R. Swartwout an Illinois corporation, its
------------------------------ General Partner
James R. Swartwout, President
By: /s/ Larry Gies
--------------------------------
Larry Gies, President
PARENT:
PMI:
SUMMA INDUSTRIES,
a Delaware corporation
PLASTRON MANAGEMENT, INC.,
an Illinois corporation
By: /s/ James R. Swartwout
------------------------------
James R. Swartwout, President
By: /s/ Larry Gies
--------------------------------
Larry Gies, President
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SCHEDULES
1.1 Transferred Assets
1.1(g) Assumed Contracts
1.4 Assumed Obligations
2.2 Allocation of Purchase Price
3.5 Consents and Approvals; No Violation
3.6 Financial Statements
3.7 Absence of Certain Changes
3.8 Absence of Undisclosed Liabilities
3.9 Leased and Licensed Transferred Assets
3.10 Real Property
3.11 Intellectual Property
3.12 Accounts Receivable
3.14 Contracts
3.15 Employment and Labor Matters
3.16 ERISA Plans
3.18 Taxes
3.19 Litigation
3.20 Compliance With Applicable Laws
3.21 Environmental Matters
3.22 Customers and Suppliers
3.23 Warranties; Product Returns
3.24 Insurance
3.25 Bank Accounts
EXHIBITS
A. Form of Escrow Agreement
B. General Instrument of Conveyance, Transfer and Assignment
C. Assumption Agreement
D. Form of Opinion of Counsel to Seller
E-1. Form of Noncompetition and Nonsolicitation Agreement, Management
E-2. Form of Noncompetition and Nonsolicitation Agreement, Messrs. Gies and
Murray
F. Form of Opinion of Counsel to Buyer