EXHIBIT 2.3
ASSET PURCHASE AGREEMENT
BY AND AMONG
SPINNAKER ELECTRICAL TAPE COMPANY,
SPINNAKER INDUSTRIES, INC.
AND
INTERTAPE POLYMER GROUP INC.
DATED AS OF
APRIL 9, 1999
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TABLE OF CONTENTS
PAGE
ARTICLE I -- SALE OF ASSETS AND ASSUMPTION OF LIABILITIES.............. 64
1.1 Sale of Assets by Seller.................................... 64
1.2 Excluded Assets............................................. 66
1.3 Assumed Liabilities......................................... 66
1.4 Excluded Liabilities........................................ 66
1.5 Time and Place of Closing................................... 67
ARTICLE II -- PURCHASE PRICE........................................... 67
2.1 Purchase Price.............................................. 67
2.2 Allocation of Purchase Price................................ 67
ARTICLE III -- REPRESENTATIONS AND WARRANTIES OF THE SELLER............ 68
3.1 Organization; Approvals..................................... 68
3.2 Certificate of Incorporation and Bylaws..................... 68
3.3 Authority................................................... 68
3.4 No Conflict; Required Filings and Consents.................. 68
3.5 Compliance; Permits......................................... 69
3.6 Inventory................................................... 69
3.7 Accounts Receivable......................................... 69
3.8 Financial Statements........................................ 69
3.9 Absence of Certain Changes or Events........................ 70
3.10 Absence of Litigation....................................... 70
3.11 Employee Benefit Plans...................................... 70
3.12 Labor and Employment Matters................................ 71
3.13 Tangible Personal Property.................................. 72
3.14 Environmental Matters....................................... 72
3.15 Absence of Agreements....................................... 73
3.16 Taxes....................................................... 73
3.17 Insurance................................................... 74
3.18 Brokers..................................................... 74
3.19 Material Contracts.......................................... 74
3.20 Substantial Customers and Suppliers......................... 74
3.21 Intellectual Property....................................... 74
3.23 Year 2000 Representation.................................... 76
3.24 Real Property............................................... 76
3.25 Disclosure.................................................. 76
3.26 Material Adverse Effect..................................... 76
ARTICLE IV -- REPRESENTATIONS AND WARRANTIES OF BUYER.................. 77
4.1 Organization; Approvals..................................... 77
4.2 Authority................................................... 77
4.3 No Conflict; Required Filings and Consents.................. 77
4.4 Absence of Litigation....................................... 77
4.5 Brokers..................................................... 78
4.6 Disclosure.................................................. 78
ARTICLE V -- CERTAIN COVENANTS......................................... 78
5.1 Affirmative Covenants....................................... 78
5.2 Negative Covenants.......................................... 79
5.3 Exclusivity................................................. 79
5.4 Access and Information...................................... 80
5.5 Update Disclosure; Breaches................................. 80
5.6 Expenses.................................................... 81
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PAGE
5.7 Retention of Records........................................ 81
ARTICLE VI -- ADDITIONAL AGREEMENTS.................................... 81
6.1 Appropriate Action; Consents; Filings....................... 81
6.2 Employee Benefit Matters.................................... 81
6.3 Notification of Certain Matters............................. 82
6.4 Public Announcements........................................ 83
6.5 Customer Retention.......................................... 83
6.6 Tax Cooperation and Indemnification......................... 83
6.7 Bulk Transfer Laws.......................................... 84
6.8 Non-Competition............................................. 84
6.9 Further Transfer Matters.................................... 86
6.10 Prorations.................................................. 86
6.11 Release of Liens............................................ 86
ARTICLE VII -- CONDITIONS OF CLOSING................................... 86
7.1 Conditions to Obligation of Each Party...................... 86
7.2 Additional Conditions to Obligations of Buyer............... 86
7.3 Additional Conditions to Obligations of the Seller.......... 88
ARTICLE VIII -- TERMINATION, AMENDMENT AND WAIVER...................... 88
8.1 Termination................................................. 88
8.2 Effect of Termination....................................... 89
8.3 Waiver...................................................... 89
ARTICLE IX -- INDEMNIFICATION.......................................... 89
9.1 Indemnification............................................. 89
9.2 Procedures for Indemnification.............................. 90
ARTICLE X -- GENERAL PROVISIONS........................................ 91
10.1 Survival of Representations, Warranties, Covenants and
Agreements.................................................. 91
10.2 Notices..................................................... 91
10.3 Certain Definitions......................................... 92
10.4 Headings.................................................... 92
10.5 Severability................................................ 92
10.6 Entire Agreement............................................ 93
10.7 Assignment.................................................. 93
10.8 Parties In Interest......................................... 93
10.9 Governing Law; Venue........................................ 93
10.10 Counterparts................................................ 93
10.11 Time Is of the Essence...................................... 93
10.12 Amendment................................................... 93
10.13 Waiver of Jury Trial........................................ 93
10.14 Consent to Jurisdiction..................................... 93
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ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (this "AGREEMENT"), dated as of April 9, 1999,
by and among Spinnaker Electrical Tape Company, a Delaware corporation
("SELLER"), Spinnaker Industries, Inc., a Delaware corporation ("Parent"), and
Intertape Polymer Group Inc., a corporation organized under the Canada Business
Corporations Act ("BUYER").
WITNESSETH:
WHEREAS, Seller is engaged in the business of the design, development,
manufacture and sale of industrial tapes (the "BUSINESS"); and
WHEREAS, Buyer desires to acquire from Seller the Business through a
purchase of certain of the assets of Seller, and Seller desires to sell, assign,
transfer, convey and deliver to Buyer, on the terms and subject to the
conditions of this Agreement, all of its rights, title and interest in, or to,
all of the assets, rights, properties, claims and contracts owned or used by
Seller in the conduct of the Business and, in connection therewith, Buyer has
agreed to assume certain liabilities of Seller relating to the Business, all on
the terms set forth in this Agreement; and
WHEREAS, concurrently with the execution and delivery of this Agreement,
Buyer is entering into an agreement of even date herewith (the "STOCK PURCHASE
AGREEMENT") with Parent, pursuant to which Parent shall sell to Buyer, and Buyer
shall purchase and acquire from Parent, all of the capital stock of Central
Products Company, a Delaware corporation ("CPC") and an affiliate of Seller
engaged in the business of the design, development, manufacture and sale of
industrial tapes.
NOW, THEREFORE, in consideration of the foregoing premises and the
representations, warranties and agreements contained in this Agreement, and
subject to the terms and conditions set forth in this Agreement, the parties
agree as follows:
ARTICLE I
SALE OF ASSETS AND ASSUMPTION OF LIABILITIES
1.1 SALE OF ASSETS BY SELLER. Subject to the satisfaction or waiver of the
conditions set forth in this Agreement, at the Closing (as defined in
SECTION 1.5), Seller shall sell, assign, transfer, convey and deliver to Buyer,
and Buyer shall purchase and accept from Seller, all of the following assets
associated with the Business (but excluding the Excluded Assets described in
SECTION 1.2) (collectively, the "PURCHASED ASSETS"):
(a) REAL PROPERTY. All of the parcels of real property used, occupied
or operated by Seller in connection with the Business described in
SCHEDULE 1.1(a) (the "REAL PROPERTY"), and all of the rights arising out of
the ownership of the Real Property or appurtenant thereto, together with all
buildings, structures, facilities, fixtures and other improvements to the
Real Property (together with such Real Property, the "FACILITIES");
(b) LEASED PROPERTY. All leases, including capitalized leases, for
real property leased or used by Seller in connection with the Business
described in SCHEDULE 1.1(b) (the "REAL PROPERTY LEASES");
(c) PERSONAL PROPERTY LEASES. All leases, including capitalized
leases, for personal property leased or used by Seller in connection with
the Business, including without limitation those described in
SCHEDULE 1.1(c) (the "PERSONAL PROPERTY LEASES");
(d) MACHINERY AND EQUIPMENT. The machinery, equipment, computer
hardware, tooling, office equipment, telephone, telecopy and communications
equipment, furniture and other items of tangible personal property owned or
licensed (to the extent transferable) by Seller that are used in connection
with the Business and all leasehold improvements (to the extent of Seller's
interest therein) the principal items of which as of December 31, 1998 are
listed in SCHEDULE 1.1(d) (the "EQUIPMENT"), and all warranties and
guarantees, if any, express or implied, existing for the benefit of Seller
in connection with the Equipment (to the extent transferable);
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(e) INVENTORY. The finished products and all work-in-progress, raw
materials, waste materials, scrap, samples, stores and spares, components,
goods in transit from suppliers or manufacturers, goods held on consignment
by any third party for Seller (excluding goods held on consignment for any
third party by Seller), supplies, and packaging and promotional materials
used in connection therewith, owned by Seller on the Closing Date, together
with all rights of Seller against suppliers that relate to the Purchased
Assets (the "INVENTORY");
(f) VEHICLES. All motor vehicles owned or leased by Seller in
connection with the operation of the Business, including without limitation
those described in SCHEDULE 1.1(f);
(g) INTELLECTUAL PROPERTY. All right, title and interest of Seller in
and to any and all Intellectual Property (as defined in SECTION 3.22) used
by Seller in connection with the Business or being developed by Seller in
connection with the Business as of the Closing Date, including without
limitation the Intellectual Property described in SCHEDULE 1.1(g);
(h) BUSINESS INFORMATION AND FILES. Any and all business information,
market research studies, customer lists, customer records and information,
supplier lists, technical manuals, specifications, data, designs, blueprints
and drawings, technical papers, sales and promotional materials, catalogs,
advertising and marketing materials and related books, records and files
currently used by Seller in connection with the Business, but excluding such
information that is related to the sale of the Business;
(i) CONTRACTS. To the extent transferable, all commitments, orders,
quotations, bids, supply agreements, procurement agreements, service
agreements, contracts and agreements, written or oral, to which Seller is a
party or by which Seller is bound (the "CONTRACTS");
(j) ACCOUNTS RECEIVABLE. All accounts receivable of the Business owned
by Seller and reflected on the books and records of Seller as of the Closing
Date;
(k) SECURITY DEPOSITS. All security deposits deposited by or on behalf
of Seller as lessee or sublessee under any lease included in the Business
and other transferable deposits;
(l) LICENSES, CERTIFICATIONS AND PERMITS. To the extent transferable,
the licenses, permits, certificates of authority, authorizations, approvals,
registrations, franchises and similar consents granted or issued by any
governmental or regulatory authority to Seller, including without limitation
those set forth in SCHEDULE 1.1(l) (the "PERMITS");
(m) CORPORATE NAMES, TRADE NAMES, ETC. The use of the name "Spinnaker
Electrical Tape Company," including the goodwill attached to such name, and
the trade names and marks descriptive of and associated with such name for a
period not to exceed nine months;
(n) BANK ACCOUNTS, CASH, ETC. All cash, checks, negotiable
instruments, short-term investments, bank accounts, deposits, securities,
investments (and all interest thereon, to the extent applicable) and all
other cash equivalents of Seller;
(o) BOOKS AND RECORDS. All written or recorded information used by
Seller in connection with the Business, including without limitation
employee payroll and personnel records and customer lists, credit
information, supplier lists and all books and records containing purchasing,
sales, marketing and advertising information of the Business, or relating to
the Purchased Assets or Assumed Liabilities (as defined in SECTION 1.3);
(p) INSURANCE POLICIES. To the extent assignable, any insurance
policy, bonds, or other similar items, or any cash surrender value in regard
thereof, or any security or other deposits, and all insurance proceeds
received by Seller, or rights to receive insurance proceeds, to the extent
any of the foregoing relate to damage to any item of personalty or realty or
property of the Business which has suffered damage or becomes damaged
between the date of this Agreement and the Closing Date, except to the
extent such proceeds were utilized to repair any such damaged item; and
(q) CAUSES OF ACTION. All causes of action and other claims of Seller
of every kind or description which Seller may have against any person or
entity arising out of or relating to the Purchased Assets and the
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Assumed Liabilities (both relating to periods on or after the Closing Date,
except with respect to claims relating to product warranties assumed
hereunder, which relate to all periods);
in each case as of the Closing Date, subject to changes made from the date
of this Agreement to the Closing Date and reflected on appropriate updated
Schedules, as applicable. To the extent assets are used by Parent in
connection with the Business and its other businesses, the parties shall use
good faith efforts to separate such assets in accordance with their
respective uses.
1.2 EXCLUDED ASSETS. Notwithstanding any other provision of this
Agreement, the following assets of Seller are excluded from the sale and shall
not be sold, assigned, transferred, conveyed or delivered by Seller to Buyer,
and Buyer shall not acquire any of Seller's right, title or interest therein
(such assets collectively, the "EXCLUDED ASSETS"):
(a) TAX REFUNDS. Any refunds, credits or other assets or rights
(including interest thereon or claims therefor) with respect to any Taxes
(as defined in SECTION 3.16) of Seller;
(b) CAUSES OF ACTION. All causes of action and other claims of every
kind or description that Seller may have against any person or entity
arising out of or relating to (i) the Excluded Assets or the Excluded
Liabilities (as defined below) and (ii) the Purchased Assets or Assumed
Liabilities (as defined below) (in the case of (ii) relating to periods
prior to the Closing Date);
(c) INTERCOMPANY RECEIVABLES. All intercompany receivables of Seller;
and
(d) OTHER EXCLUDED ASSETS. Such other specific assets used in the
Business as are listed in SECTION 1.2(c) of the Seller Disclosure Schedule.
1.3 ASSUMED LIABILITIES. Buyer shall assume the following liabilities of
the Seller (the "ASSUMED LIABILITIES"):
(a) all obligations under the terms of any outstanding warranty (except
those relating to any Excluded Asset);
(b) liabilities arising on and after the Closing Date (except as otherwise
herein expressly agreed) under the Contracts, the Real Property Leases,
the Personal Property Leases and other assets included in the Purchased
Assets;
(c) all liabilities for accounts payable and accrued and unpaid expenses of
the Business;
(d) all insurance claims, including without limitation automobile liability,
general liability and casualty claims, made on or after the Closing Date
relating to the Purchased Assets or Assumed Liabilities, except as
provided in SECTION 1.4(g);
(e) all liabilities of Seller pursuant to that collective bargaining
agreement between Seller and the Laborers' International Union of North
America, AFL-CIO, Local No. 994, effective from March 7, 1998 through
March 2, 2001;
(f) all liabilities arising from the ownership of the Purchased Assets on
and after the Closing Date;
(g) liabilities relating to the Plans (as defined in SECTION 3.11(a)), but
only to the extent provided in SECTION 6.2; and
(h) liabilities relating to all causes of action and other claims which a
third party may assert in respect of any of the Purchased Assets (but
only to the extent such causes of action or claims relate to liabilities
assumed hereunder).
1.4 EXCLUDED LIABILITIES. Seller shall retain and Buyer shall not assume
any liabilities or obligations (other than the Assumed Liabilities) of Seller
with respect to the Business, whether known or unknown, fixed or contingent,
including without limitation the following obligations or liabilities, as well
as the liabilities in SECTION 1.4 of the Seller Disclosure Schedule (the
"EXCLUDED LIABILITIES"):
(a) all obligations and liabilities arising out of or relating to the
Excluded Assets;
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(b) all financial indebtedness of Seller and any liabilities of Seller
arising under any agreement for borrowed money, including without
limitation, pursuant to any of the following (but exclusive of any
capitalized leases, which shall be Assumed Liabilities):
(i) the Credit Agreement by and among Seller and the other parties
thereto dated as of July 30, 1998 (the "TESA CREDIT FACILITY");
(ii) the Nonnegotiable Subordinated Promissory Note dated as of
July 30, 1998 issued by Seller in the original principal amount of
$500,000 (the "TESA NOTE"); and
(c) all intercompany debt;
(d) all liabilities of Seller, Parent or any affiliate of Parent for Taxes
accruing prior to the Closing Date and Taxes relating to the conduct of
the Business prior to the Closing Date;
(e) all other liabilities of the Business not expressly included in the
Assumed Liabilities, including all liabilities of either Parent or Seller
in connection with the Business arising under or pursuant to
Environmental Laws (as defined in SECTION 3.14) arising from events
occurring prior to the Closing Date;
(f) all overdrafts;
(g) except as expressly provided herein, all liabilities relating to the
employment by Seller of any employee, agent, contractor or consultant, or
the termination of such employment prior to the Closing Date, including
liabilities for compensation and benefits (except, as to the Plans, to
the extent provided in SECTION 6.2); and
(h) all liabilities relating to, resulting from or arising out of employee
exposure to Hazardous Materials in excess of applicable Occupational,
Safety and Health Administration Act and analogous state law standards
and/or requirements at the Carbondale, Illinois facility ("CARBONDALE")
as of or prior to the Closing Date.
1.5 TIME AND PLACE OF CLOSING. The closing of the transactions
contemplated hereby (the "CLOSING") will take place on the Closing Date (defined
below), or at such other time as the parties agree. The Closing shall be held at
the law offices of Morgan, Lewis & Bockius LLP located at 101 Park Avenue,
New York, New York 10178 or such location as may be agreed upon by the parties.
The parties shall use reasonable efforts to cause the Closing to occur on the
first business day following the later to occur of (i) the effective date
(including expiration of any applicable waiting period) of the last required
consent of any regulatory authority having authority over and approving or
exempting the contemplated transaction or (ii) after all the remaining
conditions set forth in ARTICLE VII are satisfied or waived (the "CLOSING
DATE").
ARTICLE II
PURCHASE PRICE
2.1 PURCHASE PRICE. The aggregate purchase price for the Business shall be
(i) Twenty-Three Million United States Dollars (US $23,000,000) (the "CASH
PURCHASE PRICE") and (ii) the assumption by Buyer of the Assumed Liabilities
(collectively, the "PURCHASE PRICE"). The Cash Purchase Price shall be made to
Seller at Closing by wire transfer in immediately available federal funds to an
account designated by Seller by written notice to Buyer at least two days prior
to the Closing Date. The portion of the Purchase Price allocable to the
non-competition provision of SECTION 6.8 shall be US $3,000,000.
2.2 ALLOCATION OF PURCHASE PRICE.
(a) Within sixty (60) days following the Closing Date, Buyer shall prepare
and deliver to Seller and Parent an allocation of the Purchase Price (set
forth as provided in SCHEDULE 2.2) among asset classes as specified by
Section 1060 of the Code and the Treasury regulations thereunder (the
"NOTICE OF ALLOCATION"). This allocation shall be binding upon Seller
unless Seller shall provide a written notice of objection within fifteen
(15) days after receipt of the Notice of Allocation in which event Seller
and Buyer shall negotiate in good faith to resolve such dispute as
expeditiously as possible. Buyer and Seller
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agree that such allocation is in accordance with the rules in
Section 1060 of the Code and the Treasury regulations promulgated
thereunder. Buyer and Seller recognize that the Purchase Price does not
include Buyer's acquisition expenses and that Buyer will allocate such
expenses appropriately.
(b) Seller and Buyer agree to prepare and file on a timely basis any
relevant Tax Returns required to be filed pursuant to Section 1060 of the
Code, the Treasury regulations thereunder or any provisions of local,
state and foreign law (including, without limitation, Asset Acquisition
Statements on IRS Form 8594), setting forth an allocation of the Purchase
Price, pursuant to Section 1060 of the Code and the Treasury regulations
thereunder, in a manner entirely consistent with the allocation set forth
in SCHEDULE 2.2 and agree to act in accordance with such allocation in
the preparation of financial statements and the filing of all Tax Returns
and in the course of any Tax audit, Tax review or Tax litigation relating
thereto. None of Buyer, Parent and Seller will assert that the allocation
reflected in the Notice of Allocation was not separately bargained for at
arm's-length and in good faith.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SELLER
Except as set forth in the Disclosure Schedule delivered by Seller to Buyer
attached to and incorporated in this Agreement (the "SELLER DISCLOSURE
SCHEDULE"), which Seller Disclosure Schedule shall reference disclosure items by
section, Seller and Parent jointly and severally represent and warrant to Buyer
as follows:
3.1 ORGANIZATION; APPROVALS. Parent is a corporation validly existing and
in good standing under the laws of the State of Delaware. Seller is a
corporation validly existing and in good standing under the laws of the State of
Delaware. Seller has the requisite corporate power and authority and is in
possession of all franchises, grants, authorizations, licenses, permits,
easements, consents, certificates, approvals and orders ("SELLER APPROVALS")
necessary to own, lease and operate its properties and to carry on its business
as it is now being conducted, and Seller has not received any notice of
proceedings relating to the revocation or modification of any Seller Approvals,
except where the failure to be so organized, existing and in good standing or to
have such power, authority, Seller Approvals and revocations or modifications
would not, individually or in the aggregate, have a Material Adverse Effect (as
defined in SECTION 10.3) with respect to the Business.
3.2 CERTIFICATE OF INCORPORATION AND BYLAWS. Seller previously has
furnished to Buyer a true, complete and accurate copy of its current Certificate
of Incorporation and Bylaws, as amended or restated (the "SELLER CERTIFICATE" or
"SELLER BYLAWS"). Such Seller Certificate and Seller Bylaws are in full force
and effect. Seller is not in violation of any of the provisions of the Seller
Certificate or Seller Bylaws.
3.3 AUTHORITY. Each of Parent and Seller has the requisite corporate power
and authority to execute and deliver this Agreement, to perform its obligations
under this Agreement and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement by Seller and Parent and the
consummation by each of Seller and Parent of the transaction contemplated hereby
have been duly and validly authorized by all necessary corporate action and no
other corporate proceedings on the part of Seller or Parent are necessary to
authorize this Agreement or to consummate the transactions contemplated hereby
(other than applicable stockholder approvals). This Agreement has been duly
executed and delivered by, and constitutes a valid and binding obligation of,
Seller and Parent and, assuming due authorization, execution and delivery by
Buyer, is enforceable against Seller and Parent in accordance with its terms,
except as enforcement may be limited by general principles of equity whether
applied in a court of law or a court of equity and by bankruptcy, insolvency and
similar laws affecting creditors' rights and remedies generally.
3.4 NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) The execution and delivery of this Agreement by Seller and Parent does
not, and the performance of this Agreement and the transactions
contemplated hereby by Seller and Parent shall not, (i) conflict with or
violate the Seller Certificate or Seller Bylaws or the Certificate of
Incorporation or Bylaws of Parent, (ii) conflict with or violate any
federal or state law, statute, ordinance, rule, regulation, order,
judgment or decree (collectively, "LAWS") applicable to Seller or Parent
or by which it or any of their properties are bound or affected, or
(iii) result in any breach of or constitute a default (or an event that
with notice or lapse of time or both would become a default) under, or
give to others any rights of
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termination, amendment, acceleration or cancellation of, or result in the
creation of a Lien (as defined in SECTION 10.3) on any of the Purchased
Assets pursuant to any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or
obligation to which Seller or Parent are parties or by which they or any
of their properties are bound or affected, except in the case of
clauses (ii) and (iii) for any such conflicts, violations, breaches,
defaults or other occurrences that, individually or in the aggregate,
would not have a Material Adverse Effect with respect to the Business.
Seller is not a "restricted subsidiary" under the terms of that certain
Indenture dated as of October 23, 1996, by and among Parent, CPC and the
other parties thereto.
(b) The execution and delivery of this Agreement by Seller and Parent does
not, and the performance of this Agreement by Seller or Parent shall not,
require any consent, approval, authorization or permit of, or filing with
or notification to any governmental or regulatory authority or any third
party except for applicable requirements, if any, of the Securities Act
of 1933, as amended (the "SECURITIES ACT"), the Securities Exchange Act
of 1934, as amended (the "EXCHANGE ACT"), state securities or blue sky
laws ("BLUE SKY LAWS"), the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended (the "HSR ACT"), the filing of other documents as
required by applicable Law, applicable transfer tax filings and where the
failure to obtain such consents, approvals, authorizations or permits
would not prevent or delay consummation of the transactions contemplated
hereby, or otherwise prevent Seller or Parent from performing its
obligations under this Agreement and would not have a Material Adverse
Effect with respect to the Business.
3.5 COMPLIANCE; PERMITS. Seller is not in conflict with, or in default or
violation of, (i) any Law applicable to Seller or by which the Business is bound
or affected, or (ii) any note, bond, mortgage, indenture, contract, agreement,
lease, license, permit, franchise or other instrument or obligation to which
Seller is a party or by which the Business is bound or affected, except for any
such conflicts, defaults or violations which would not, individually or in the
aggregate, have a Material Adverse Effect with respect to the Business.
3.6 INVENTORY. The inventory of Seller consists of raw materials and
supplies, manufactured and processed parts, work-in-progress and finished goods,
all of which is merchantable and fit for the purpose for which it was procured
or manufactured, and none of which is slow moving, obsolete, damaged or
defective, subject to the reserve for inventory writedown set forth on Seller's
balance sheet at December 31, 1998 (or in any notes thereto), and as adjusted
for operations and transactions through the Closing Date in accordance with the
past custom and practice of Seller.
3.7 ACCOUNTS RECEIVABLE. The accounts receivable of Seller are reflected
properly on its books and records, are valid receivables subject to no setoffs
or counterclaims, are current and collectible, and will be collected in
accordance with their terms at their recorded amounts, subject to the reserve
for bad debts set forth on Seller's balance sheet at December 31, 1998 (or in
any notes thereto), and as adjusted for operations and transactions through the
Closing Date in accordance with the past custom and practice of Seller. All
accounts receivable of Seller are listed in SECTION 3.7 of the Seller Disclosure
Schedule.
3.8 FINANCIAL STATEMENTS.
(a) Prior to the execution of this Agreement, Seller has delivered to Buyer
complete and correct copies of Seller's unaudited balance sheet and
income statement for the period ended December 31, 1998, and Parent's
audited consolidated balance sheet and income statement for the year
ended December 31, 1998 (the "FINANCIAL STATEMENTS"). All such Financial
Statements are complete and correct in all material respects and were
(i) prepared from the books of account or other financial records of
Seller and Parent, (ii) prepared in accordance with GAAP applied on a
consistent basis throughout the periods involved (except as may be
indicated in the notes to such financial statements), and (iii) fairly
present in all material respects the consolidated financial position of
Seller and Parent at the respective dates and the consolidated results of
operations and cash flows for the periods indicated, except that the
interim consolidated financial statements were or are subject to normal
and recurring year-end adjustments which were not or are not expected to
be material in amount or effect and do not have any footnote disclosures.
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(b) Except (i) for the liabilities that are fully reflected or reserved
against in the Financial Statements (including any related notes thereto)
or not required to be reflected or reserved against in accordance with
GAAP and (ii) for the liabilities incurred in the ordinary course of
business consistent with past practice since December 31, 1998, neither
Parent nor Seller has incurred any liability that, either alone or when
combined with all similar liabilities, has had or would have a Material
Adverse Effect with respect to the Business.
3.9 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed in the
Financial Statements or reports filed by Parent pursuant to the Securities Act
or Exchange Act (the "PARENT REPORTS") filed prior to the date of this
Agreement, since December 31, 1998 to the date of this Agreement, Seller has
conducted the Business only in the ordinary course and in a manner consistent
with past practice and, since December 31, 1998, there has not been (i) any
change in the financial condition, results of operations or business of Seller
having a Material Adverse Effect with respect to the Business, (ii) any damage,
destruction or loss not covered by insurance with respect to any assets of
Seller having a Material Adverse Effect with respect to the Business, (iii) any
declaration, setting aside or payment of any dividends or distributions in
respect of shares of capital stock of Seller or any redemption, purchase or
other acquisition of any of its securities, (iv) any entering into of any new,
or modification, amendment or termination (partial or complete) of any existing
collective bargaining agreement, contract or other agreement or understanding
with a labor union or similar organization to which Seller has been, or is, a
party or Plan (as defined below), or other increase in the salary, bonus, rate
of commission or rate of consulting fees payable or to become payable to any
directors, officers, employees or consultants of Seller, or employment or
severance agreement or other employee compensation arrangement with any of its
directors, officers or employees (whether new hires or existing employees), in
each case where such compensation or arrangement exceeds $75,000, or (v) any
union organizing activities relating to employees of Seller or any entering into
of any other material transaction involving or affecting each Seller outside the
ordinary course of business of Seller consistent with past practice.
3.10 ABSENCE OF LITIGATION. Neither Seller nor Parent is a party to any,
and there are no pending or, to the knowledge of Seller and Parent, threatened,
legal, administrative, arbitral or other proceedings, claims, actions or
governmental or regulatory investigations of any nature against Seller or Parent
challenging the validity or propriety of the transactions contemplated by this
Agreement which if unfavorably determined would prevent the consummation of the
transactions contemplated hereby. There are no claims and judgments pending with
respect to which Seller has been duly served or otherwise received notice as of
the date of this Agreement, or, to the knowledge of either Seller or Parent,
threatened against Seller or outstanding against Seller or affecting the
Business, that in the aggregate would have a Material Adverse Effect on the
Business. No injunction, order, judgment, decree or regulatory restriction has
been imposed on Parent, Seller or the assets of Seller which has had or
reasonably could be expected to have a Material Adverse Effect with respect to
the Business.
3.11 EMPLOYEE BENEFIT PLANS.
(a) PLANS OF SELLER. SECTION 3.11(a) of the Seller Disclosure Schedule
lists (i) all employee benefit plans (as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA")), and
all bonus, stock option, stock purchase, restricted stock, incentive,
deferred compensation, retiree medical or life insurance, supplemental
retirement, severance or other benefit plans, programs or arrangements and
all employment termination, severance or other employment contracts or
employment agreements, with respect to which Seller has any obligation and
which benefit any of its employees (collectively, the "PLANS"). Seller has
furnished or made available to Buyer a copy of each Plan (or a description
of the Plans, if the Plans are not in writing) and a copy of (i) each trust
or other funding arrangement, (ii) each summary plan description and summary
of material modifications, (iii) any IRS Forms 5500 and related schedules
filed since August 1998, (iv) any IRS determination letter for each such
Plan issued since August 1998, (v) any actuarial and financial statements in
connection with each such Plan issued since August 1998, and (vi) any other
material information relating to each such Plan as requested by Buyer, to
the extent it is available to the Company.
(b) ABSENCE OF CERTAIN TYPES OF PLANS. No plan is described in
Section 401(a)(1) of ERISA. SECTION 3.11(b) of the Seller Disclosure
Schedule lists all Plans that obligate Seller to pay separation, severance,
termination or similar-type benefits solely as a result of any transactions
contemplated by this
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Agreement or as a result of a "change in control," within the meaning of
such term under Section 280G of the Code (as defined below).
(c) COMPLIANCE WITH APPLICABLE LAW. Except as set forth in
SECTION 3.11(c) of the Seller Disclosure Schedule, each Plan has been
operated in all material respects in accordance with the requirements of all
applicable Law and all persons who participate in the operation of such
Plans and all Plan "fiduciaries" (within the meaning of Section 3(21) of
ERISA) have acted in all material respects in accordance with the provisions
of all applicable Law. Seller has performed in all material respects all
obligations required to be performed by it under the Plans, is not in
material default under or in material violation of the Plans and Seller has
no knowledge of any such default or violation by any party to the Plans.
(d) QUALIFICATION OF CERTAIN PLANS. Each Plan that is intended to be
qualified under Section 401(a) of the Code or Section 401(k) of the Code
(including each trust established in connection with such a Plan that is
intended to be exempt from Federal income taxation under Section 501(a) of
the Code) has received a favorable determination letter from the Internal
Revenue Service ("IRS") that it is so qualified, and to Seller's knowledge
no material fact or event has occurred since the date of such determination
letter from the IRS to adversely affect the qualified status of any such
Plan. No trust, if any, maintained or contributed by Seller to fund any Plan
is intended to be qualified as a voluntary employees' beneficiary
association or is intended to be exempt from federal income taxation under
Section 501(c)(9) of the Code.
(e) ABSENCE OF CERTAIN LIABILITIES AND EVENTS. Seller has not incurred
any material liability under Title IV of ERISA or for any excise tax arising
under Section 4971 through 4980E of the Internal Revenue Code of 1986, as
amended (the "CODE") with respect to any Plan, and to the knowledge of
Seller no fact or event exists that could give rise to any such liability.
(f) PLAN CONTRIBUTIONS. All contributions, premiums or payments
required to be made with respect to any Plan have been made.
(g) MULTIEMPLOYER PLANS. Each Plan that is a multiemployer plan
(within the meaning of Section 3(37) of ERISA) is disclosed in
SECTION 3.11(g) of the Seller Disclosure Schedule. With respect to each such
plan, (i) no withdrawal liability has been incurred by Seller and Seller has
no reason to believe that any such liability will be incurred prior to the
Closing Date, (ii) to Seller's knowledge no such plan is in "reorganization"
(within the meaning of Section 4241 of ERISA), no proceedings have been
instituted by the Pension Benefit Guaranty Corporation against the plan,
there is no contingent liability for withdrawal liability by reason of a
sale of assets pursuant to Section 4204 of ERISA, and any withdrawal under
Section 4203 of ERISA that will occur by reason of the Closing will not
result in the imposition of withdrawal liability on Seller, and (iii) no
notice has been received that increased contributions may be required to
avoid a reduction in plan benefits or the imposition of an excise tax, or
that the plan is or may become "insolvent" (within the meaning of
Section 4245 of ERISA).
(h) POST-RETIREMENT MEDICAL. No Plan provides medical or life benefits
beyond an employee's termination of employment (other than as required by
applicable Law).
3.12 LABOR AND EMPLOYMENT MATTERS.
(a) Except for confidentiality, noncompetition, consulting or other similar
contracts with any employees, consultants, officers or directors of
Seller set forth in SECTION 3.12(a) of the Seller Disclosure Schedule,
Seller is not a party to any such contracts. Each such contract is in
full force and effect and neither Seller nor Parent or, to the knowledge
of Seller or Parent, any other party to such contract has received notice
that Seller is in violation or breach of or default in any material
respect under any such contract (or with notice or lapse of time or both,
would be in violation or breach of or default in any material respect
under any such contract).
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(b) Except as set forth in SCHEDULE 3.12(b) of the Seller Disclosure
Schedule: (i) Seller's current employees are not represented by a labor
union or organization, no labor union or organization has been certified
or recognized as a representative of any such current employees, and
Seller is not a party to and/or has any obligation under any collective
bargaining agreement or other labor union contract, white paper or side
agreement with any labor union or organization or any obligation to
recognize or deal with any labor union or organization, and there are no
such contracts, white papers or side agreements pertaining to or which
determine the terms or conditions of employment of any current employees
of Seller; (ii) there are no pending or threatened representation
campaigns, elections or proceedings or questions concerning union
representation involving any current employees; (iii) neither Seller nor
Parent has knowledge of any activities or efforts of any labor union or
organization (or representatives thereof) to organize any current
employees of Seller, nor of any demands for recognition or collective
bargaining, nor of any strikes, slowdowns, work stoppages or lock-outs of
any kind, or threats thereof, by or with respect to any current employees
or any actual or claimed representatives thereof, and no such activities,
efforts, demands, strikes, slowdowns, work stoppages or lock-outs
occurred since July 15, 1998 (and, to the knowledge of Seller and Parent,
for the past 24 months); (iv) Seller has not engaged in, admitted
committing or been held in any administrative or judicial proceeding to
have committed any unfair labor practice under the National Labor
Relations Act, as amended; (v) Seller is not involved in any industrial
or trade dispute or any dispute or negotiations regarding a claim of
material importance with any labor union or organization; and (vi) there
are no controversies, claims, demands or grievances of material
importance pending or, so far as Seller or Parent is aware, threatened,
between Seller, on the one hand, and any of its employees or any actual
or claimed representative thereof, on the other hand.
(c) Seller is in material compliance with all Laws relating to the
employment of labor, including but not limited to such Laws relating to
wages, hours, the Worker Adjustment Retraining and Notification Act of
1988 ("WARN"), collective bargaining, discrimination, civil rights,
safety and health, worker's compensation and the collection and payment
of withholding and/or social security taxes and any similar tax.
3.13 TANGIBLE PERSONAL PROPERTY. Seller has good and indefeasible title to
all of its owned tangible personal property and assets, free and clear of all
Liens, except liens for Taxes not yet due and payable, pledges to secure
deposits and such minor imperfections of title, if any, as do not materially
detract from the value of or interfere with the present use of such property or
which, individually or in the aggregate, would not have a Material Adverse
Effect with respect to the Business. All leases pursuant to which Seller leases
from others tangible or personal property are in good standing, valid and
effective in accordance with their respective terms. All items of tangible
personal property are listed in SECTION 3.13 of the Seller Disclosure Schedule,
indicating which such tangible personal property is owned or leased. All such
tangible personal property is adequate and suitable for the conduct of the
Business and is in good working order and condition, ordinary wear and tear
excepted.
3.14 ENVIRONMENTAL MATTERS. Seller and Parent represent and warrant as
follows: (i) Seller and all Real Property and real property subject to Real
Property Leases are in compliance with all applicable Environmental Laws (as
defined below); (ii) there is no amount of asbestos or ureaformaldehyde material
in or on any property owned, leased or operated by Seller or Parent in
connection with the Business; (iii) there are no underground storage tanks
located on, in or under any properties currently owned, leased or operated by
Seller or Parent in connection with the Business that violate or result in
liability under any Environmental Law (as defined below); (iv) neither Seller
nor Parent have been notified by any governmental agency or third party of any
pending or threatened Environmental Claim (as defined below) against Seller or
Parent in connection with the Business; (v) neither Seller nor Parent have been
notified by any governmental agency or any third party that either Seller or
Parent in connection with the Business may be a potentially responsible party
for environmental contamination or any Release (as defined below) of Hazardous
Materials (as defined below) in connection with the Business; (vi) Seller has
obtained and holds all permits, licenses and authorizations required under
applicable Environmental Laws relating to the Business ("ENVIRONMENTAL
PERMITS"); (vii) Seller is in compliance with all terms, conditions and
provisions of all applicable Environmental Permits; (viii) no Releases of
Hazardous Materials have occurred at, from, in, on, or under any property
currently or formerly owned,
72
operated or leased by Seller or Parent in connection with the Business or any
predecessors of the Seller or Parent in connection with the Business and no
Hazardous Materials are present in, on or about any such property that could
give rise to an Environmental Claim by a third party (including any governmental
entity or private party) against Seller; and (ix) neither Seller nor Parent in
connection with the Business have transported or arranged for the treatment,
storage, handling, disposal or transportation of any Hazardous Material to any
location which could result in an Environmental Claim against or liability to
Seller; and (x) there have been no environmental investigations, studies, audits
or tests conducted by, on behalf of or which are in the possession of any Seller
or the Parent with respect to any property currently or formerly owned, leased
or operated by either Seller or Parent in connection with the Businesses thereof
which have not been delivered to Buyer prior to execution of this Agreement,
except in each case where such event or condition would not have a Material
Adverse Effect on the Business.
For purposes of this Section, "ENVIRONMENTAL CLAIMS" shall mean any and all
administrative, regulatory, judicial or private actions, suits, demands,
notices, claims, investigations, injunctions or similar proceedings that may
create liability for Seller in any way relating to: (i) any Environmental Law;
(ii) any Hazardous Material, including without limitation any investigation,
monitoring, abatements, removal, remedial, corrective or other response action
in connection with any Hazardous Material, Environmental Law or order or notice
of liability or violation of a governmental entity or Environmental Law; or
(iii) any actual or alleged damage, injury, threat or harm to the environment.
"HAZARDOUS MATERIALS" shall mean any and all chemicals, pollutants,
contaminants, wastes, toxic substances, compounds, products, solid, liquid, gas,
petroleum, asbestos, asbestos-containing materials, polychlorinated biphenyls or
other regulated substances or materials which are hazardous, toxic or otherwise
harmful to the environment.
"ENVIRONMENTAL LAW" shall mean any and all federal and state civil and
criminal laws, statutes, ordinances, orders, codes, rules or regulations of any
governmental or regulatory authority relating to the protection of health, the
environment, natural resources, worker health and safety and/or governing the
handling, use, generation, treatment, storage, transportation, disposal,
manufacture, distribution, formulation, packaging, labeling, or Release of
Hazardous Materials, including but not limited to: the Clean Air Act, 42 U.S.C.
Section7401 ET SEQ.; the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, 42 U.S.C. Section9601 ET SEQ.; the Federal Water
Pollution Control Act, 33 U.S.C. Section1251 ET SEQ.; the Hazardous Material
Transportation Act, 49 U.S.C. Section1801 ET SEQ.; the Federal Insecticide,
Fungicide and Rodenticide Act, 7 U.S.C. Section136 ET SEQ.; the Resource
Conservation and Recovery Act of 1976 ("RCRA"), 42 U.S.C. Section6901 ET SEQ.;
the Toxic Substances Control Act, 15 U.S.C. Section2601 ET SEQ.; the
Occupational Safety & Health Act of 1970, 29 U.S.C. Section651 ET SEQ.; the Oil
Pollution Act of 1990, 33 U.S.C. Section2701 ET SEQ.; and the state analogies
thereto, all as amended or superseded from time to time, on or before, but not
after, the Closing Date.
"RELEASE" shall mean any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, dumping or disposing of a
Hazardous Material into the environment.
3.15 ABSENCE OF AGREEMENTS. Seller is not a party to any agreement, order,
directive, memorandum of understanding or similar arrangement that restricts
materially the conduct of the Business, except for those the existence of which
has been disclosed in writing to Buyer prior to the date of this Agreement, nor
has Seller been advised, that any person or governmental authority is
contemplating issuing or requesting any such agreement, order, directive,
memorandum of understanding or similar arrangement.
3.16 TAXES.
(a) The Seller and Parent jointly and severally represent and warrant as
follows, limited, however, in each case, to Taxes, Tax Returns or other
Tax matters (i) that include, relate to or otherwise affect the Business
or the Purchased Assets, (ii) that could result in the imposition of a
lien on, or the assertion of a claim against, the Buyer with respect to
any Purchased Asset or (iii) that could affect the computation of the
taxable income or the Tax liability of Buyer or any affiliate thereof for
any Post-Closing Period. Parent and Seller have duly and timely filed all
federal, state, local and other returns and reports (the "TAX RETURNS")
with respect to Seller or any affiliated, combined, consolidated, unitary
or similar group of which Seller or any subsidiary is or was a member (a
"RELEVANT GROUP")
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which are required to be filed with respect to all federal, state, local
or foreign net or gross income, gross receipts, net proceeds, sales, use,
ad valorem, transfer, value added, franchise, withholding, payroll,
employment, disability, excise, property, alternative or add-on minimum,
environmental or other taxes, assessments, duties, fees, levies or other
governmental charges of any nature whatever, except to the extent in
dispute and set forth in SECTION 3.16(a) of the Seller Disclosure
Schedule, together with any interest, penalties, additions to tax or
additional amounts with respect thereto (the "TAXES"); all Taxes shown on
the Tax Returns have been fully and timely paid and all such Tax Returns
are complete and correct. There are no pending or, to the knowledge of
Parent and Seller, threatened examinations, claims, liens, assessments or
deficiencies to which Seller or the Purchased Assets may be subject; all
Taxes due and payable by Parent or Seller with respect to the Purchased
Assets have been fully and timely paid.
(b) Seller is not a party to any agreement extending the time within which
to file any Tax Return. To Seller's knowledge, no claim has been made by
a jurisdiction in which Seller does not file Tax Returns that Seller is
or may be subject to taxation by that jurisdiction.
(c) Seller has not waived any statute of limitations in respect of Taxes or
agreed to any extension of time with respect to any Tax assessment or
deficiency.
3.17 INSURANCE. SECTION 3.17 of the Seller Disclosure Schedule lists all
policies of insurance of Seller currently in effect. Each policy listed on such
Schedule is valid and in full force and effect. To Parent's and Seller's
knowledge, Seller has no liability for unpaid premiums or premium adjustments
not properly reflected on the applicable financial statements.
3.18 BROKERS. No broker, finder or investment banker is entitled to any
brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of Parent or Seller, except as provided in that certain letter
agreement between Parent and Schroder & Co. Inc. regarding such fees and such
fees are the sole responsibility of, and are to be paid by, Parent.
3.19 MATERIAL CONTRACTS. Except as included as exhibits in Parent Reports,
Seller is not a party to or obligated under any material contract, agreement or
other instrument or understanding that is not terminable by Seller without
additional payment or penalty within 90 days.
3.20 SUBSTANTIAL CUSTOMERS AND SUPPLIERS. SECTION 3.20 of the Seller
Disclosure Schedule lists the 5 largest customers or clients of Seller on the
basis of revenues for goods sold or services provided in the fiscal year ended
1997 and the 10 largest customers or clients in the fiscal year ended 1998.
SECTION 3.20 of the Seller Disclosure Schedule lists the 10 largest suppliers of
Seller on the basis of cost of goods or services purchased in the fiscal years
ended 1997 and 1998. For each such customer or supplier set forth in such
Schedule, a copy of such supplier or customer contract, agreement or
understanding with Seller or Parent has been delivered to Buyer prior to
execution of this Agreement. No such customer, client or supplier has ceased or
materially reduced its purchases from or sales or provision of services to
Seller since December 31, 1998, or to the knowledge of Seller or Parent, has
threatened to cease or materially reduce such purchases or sales or provision of
services after the date of this Agreement. Except for deposits or other
nonmaterial amounts paid in the ordinary course of business consistent with past
practice, Seller has not accepted any prepayment of any sales price or fee from
any client or customer that relates to products not yet delivered or services
not yet performed by Seller.
3.21 INTELLECTUAL PROPERTY.
(a) Seller owns all right, title and interest in or possesses adequate
licenses or other rights to use (i) all discoveries and inventions
(whether patentable or unpatentable and whether or not reduced to
practice), all improvements thereto, and all patents, patent applications
(either filed or in preparation for filing), and patent disclosures,
together with all reissuance, continuations, continuations-in-part,
revisions, extensions and reexaminations thereof, (ii) all trademarks,
service marks, trade dress, brand names, logos, trade names, Internet
domain names, and corporate names, together with all translations,
adaptations, derivations and combinations thereof and including all
goodwill associated therewith, and all applications (either filed or in
preparation for filing), registrations and renewals in
74
connection therewith, (iii) all copyrightable works, all copyrights and
all applications (either filed or in preparation for filing),
registrations and renewals in connection therewith, (iv) all trade
secrets and confidential business information (including ideas, research
and development, know-how, formulas, compositions, recipes, manufacturing
and production processes and techniques, technical data, designs,
drawings, specifications, customer and supplier lists, pricing and cost
information and business and marketing plans and proposals), (v) all
computer software (including source code, data and related
documentation), (vi) all other proprietary rights, (vii) all copies and
tangible embodiments of all the foregoing (in whatever form or medium)
("INTELLECTUAL PROPERTY") used in or material to conduct the Business
without conflict with the rights of others. Seller Disclosure Schedule
SECTION 3.21(a) sets forth a description of (i) all Intellectual Property
currently owned by or licensed to Seller and (ii) all licenses,
royalties, assignments and other similar agreements relating to the
foregoing to which Seller is a party and all agreements relating to
technology, know-how or processes that Seller is licensed or authorized
to use by others, or which it licenses or authorizes others to use, and
which Seller uses (the "INTELLECTUAL PROPERTY AGREEMENTS"). No other
Intellectual Property is used in or material to the conduct of the
Business.
(b) The Intellectual Property does not infringe or violate the intellectual
property or contractual rights of any third parties in any country where
Seller does Business; to Seller's knowledge, no claim has been asserted
or threatened by any person to the ownership of or right to use any
Intellectual Property or challenging or questioning the validity or
effectiveness of any such license or agreement, and neither Parent nor
Seller has knowledge of a valid basis for any such claim; Parent and
Seller have no knowledge of any claim that any product, activity or
operation of Seller infringes upon or involves, or has resulted in the
infringement of, any intellectual property rights of any other person,
and no proceedings have been instituted, are pending or, to the best of
the knowledge of Parent and Seller, are threatened which challenge the
rights of Seller with respect thereto, and neither Parent nor Seller has
knowledge of a valid basis for any such claim.
(c) To Seller's knowledge, no Intellectual Property is being infringed by
any third party; no action has been asserted or threatened that any
Intellectual Property is being infringed by any third party.
(d) All of the registrations and applications set forth in SECTION 3.21(d)
of the Seller Disclosure Schedule are in full force and effect and all
necessary registration, maintenance and renewal fees in connection
therewith have been made and all necessary documents and certificates in
connection therewith have been filed with the relevant patent, copyright,
trademark or other authority in the United States or foreign
jurisdictions, as the case may be, for the purpose of maintaining the
registrations or applications for registration of such Intellectual
Property or updating record title thereto, except where such events,
either individually or in the aggregate, would not, or be reasonably
likely to, have a Material Adverse Effect on the Business.
(e) All of the Intellectual Property is free and clear of any and all Liens.
There are no restrictions on the direct or indirect transfer of the
Intellectual Property, except as disclosed in any agreements licensing
such Intellectual Property to Seller.
(f) The Intellectual Property Agreements are valid and binding and in full
force and effect, and true and correct copies have been provided to the
Buyer; Seller has not granted any license, agreement or other permission
to use such Intellectual Property except as disclosed on SECTION 3.21(f)
of the Seller Disclosure Schedule; the consummation of the transactions
contemplated by this Agreement will not violate nor result in the breach,
modification, cancellation, termination or suspension of the Intellectual
Property Agreements, and Seller is in compliance with, and has not
breached any term of, any Intellectual Property Agreement, and, to the
knowledge of Seller, all of the other parties to such Intellectual
Property Agreements are in compliance with, and have not breached, any of
the terms thereof; there is no dispute between Seller and any other party
to any Intellectual Property Agreement regarding the scope of the license
or performance under any applicable Intellectual Property Agreement,
including with respect to any payments to be made by the Seller
thereunder, except where such events, either individually or in the
aggregate, would not have, or be reasonably likely to have, a Material
Adverse Effect on the Business.
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(g) Seller has made available to Buyer prior to the execution of this
Agreement any available documentation with respect to any invention,
process, design, computer software and program or other know-how or trade
secret or proprietary information included in such Intellectual Property,
which documentation, if any, is accurate in all material respects and
reasonably sufficient in detail and content to identify and explain such
invention, process, design, computer software and programs or other
know-how or trade secret or proprietary information. Seller has taken
reasonable security measures to protect the secrecy, confidentiality and
value of their trade secrets and proprietary information (including the
reasonable enforcement by Seller of a policy requiring each employee or
contractor to execute proprietary information and confidentiality
agreements in substantially Seller's standard form, and to Seller's
knowledge all current and former employees and contractors of Seller have
executed such an agreement).
3.23 YEAR 2000 REPRESENTATION. No technology owned, developed or licensed
by the Company or used in connection with the business (including, but not
limited to, information systems and technology, commercial and noncommercial
hardware and software, firmware, mechanical or electrical products, embedded
systems, or any other electro-mechanical or processor-based system, whether as
part of a desktop system, office system, building system or otherwise)
(collectively, the "TECHNOLOGY") will experience any malfunctions, premature
cancellation or expiration of contractual rights or deletion of data, or any
other problems in connection with (i) the year 2000 (and all subsequent years)
as distinguished from 1900 years, (ii) the date February 29, 2000, and all
subsequent leap years, and (iii) the date September 9, 1999, except where such
problems, either individually or in the aggregate, would not have a Material
Adverse Effect on the Business.
3.24 REAL PROPERTY. The Real Property listed on SECTION 1.1(a) of the
Seller Disclosure Schedule and Real Property Leases listed on SECTION 1.1(b) of
the Seller Disclosure Schedule are the only property of similar type used by
Seller in the Business. Seller owns the Real Property in fee subject to no
Liens, except for those set forth in SECTION 3.24 of the Seller Disclosure
Schedule. Seller's interest in the Real Property Leases is subject to no Liens,
except for those set forth in SECTION 3.24 of the Seller Disclosure Schedule.
True and correct copies of the Real Property Leases have been delivered or made
available to Buyer by Seller. Subject to the terms of the respective Real
Property Leases, Seller has a valid and subsisting leasehold estate in and the
right to quiet enjoyment to the property subject thereto for the full term of
the respective Real Property Lease. The Real Property Leases are in full force
and effect and are enforceable in accordance with their respective terms, except
as such enforceability may be subject to or limited by bankruptcy, insolvency,
reorganization or other similar Laws, now or hereafter in effect, affecting the
enforcement of creditors' rights generally. Seller has not assigned, pledged,
mortgaged, hypothecated or otherwise transferred any Real Property Lease. Seller
has not sublet all or any portion of any Leased Real Property. Seller has not
received any written notice of default under any Real Property Lease, and to
Seller's knowledge there is no material default by any tenant or landlord under
any Real Property Lease, and no event has occurred or failed to occur which,
with the giving of notice or the passage of time, or both, would constitute a
material default under any Real Property Lease. No portion of any parcel of Real
Property or real property subject to a Real Property Lease is located in an area
designated as a flood zone by any governmental entity, except to the extent such
property is adequately insured by a policy of flood insurance. The Facilities
are adequate and suitable for the conduct of the Business and are in good
working order and condition, ordinary wear and tear excepted.
3.25 DISCLOSURE. No representation or warranty of Seller or Parent
contained in this Agreement, and no statement contained in the Seller Disclosure
Schedule or in any certificate, list or other writing furnished to Buyer
pursuant to any provision of this Agreement contains any untrue statement of a
material fact or omits to state a material fact necessary in order to make the
statements herein or therein, in light of the circumstances under which they
were made, not misleading.
3.26 MATERIAL ADVERSE EFFECT. Since December 31, 1998, there has been no
Material Adverse Effect with respect to the Business.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Except as set forth in the Disclosure Schedule delivered by Buyer to Seller
and Parent attached to this Agreement (the "BUYER DISCLOSURE SCHEDULE"), which
Buyer Disclosure Schedule shall reference disclosure items by section, Buyer
represents and warrants to Seller and Parent as follows:
4.1 ORGANIZATION; APPROVALS. Buyer is a corporation validly existing and
in good standing under the Canada Business Corporations Act. Buyer has the
requisite corporate power and authority and is in possession of all franchises,
grants, authorizations, licenses, permits, easements, consents, certificates,
approvals and orders ("BUYER APPROVALS") necessary to own, lease and operate its
properties and to carry on its business as it is now being conducted, and Buyer
has not received any notice of proceedings relating to the revocation or
modification of any Buyer Approvals, except where the failure to be so
organized, existing and in good standing or to have such power, authority, Buyer
Approvals and revocations or modifications would not, individually or in the
aggregate, have a Material Adverse Effect with respect to Buyer.
4.2 AUTHORITY. Buyer has the requisite corporate power and authority to
execute and deliver this Agreement, to perform its obligations under this
Agreement and to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement by Buyer and the consummation by Buyer of the
transactions contemplated hereby have been duly and validly authorized by all
necessary corporate action and no other corporate proceedings on the part of
Buyer are necessary to authorize this Agreement or to consummate the
transactions contemplated hereby. This Agreement has been duly executed and
delivered by, and constitutes a valid and binding obligation of, Buyer and,
assuming due authorization, execution and delivery by Seller and Parent, is
enforceable against Buyer in accordance with its terms, except as enforcement
may be limited by general principles of equity whether applied in a court of law
or a court of equity and by bankruptcy, insolvency and similar laws affecting
creditors' rights and remedies generally.
4.3 NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) The execution and delivery of this Agreement by Buyer does not, and the
performance of this Agreement and the transactions contemplated hereby by
Buyer shall not, (i) conflict with or violate the charter documents of
Buyer, (ii) conflict with or violate any Laws applicable to Buyer or by
which it or any of its properties are bound or affected, or (iii) result
in any breach of or constitute a default (or an event that with notice or
lapse of time or both would become a default) under, or give to others
any rights of termination, amendment, acceleration or cancellation of, or
result in the creation of a Lien on any of the properties or assets of
Buyer pursuant to any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or
obligation to which Buyer is a party or by which it or any of its
properties is bound or affected, except in the case of clauses (ii) and
(iii) for any such conflicts, violations, breaches, defaults or other
occurrences that, individually or in the aggregate, would not have or be
reasonably likely to have a Material Adverse Effect with respect to
Buyer.
(b) The execution and delivery of this Agreement by Buyer does not, and the
performance of this Agreement by Buyer shall not, require any consent,
approval, authorization or permit of, or filing with or notification to
any governmental or regulatory authority or any third party except for
applicable requirements, if any, of the Securities Act, the Exchange Act,
the Blue Sky Laws, the HSR Act, and filing of other documents as required
by applicable law, applicable transfer tax filings and where the failure
to obtain such consents, approvals, authorizations or permits would not
prevent or delay consummation of the transactions contemplated hereby or
otherwise prevent Buyer from performing its obligations under this
Agreement and would not have a Material Adverse Effect with respect to
Buyer.
4.4 ABSENCE OF LITIGATION. Buyer is not a party to any, and there are no
pending or, to the knowledge of Buyer, threatened, legal, administrative,
arbitral or other proceedings, claims, actions or governmental or regulatory
investigations of any nature against Buyer challenging the validity or propriety
of the transactions contemplated by this Agreement which if unfavorably
determined would prevent the consummation of the transactions contemplated
hereby.
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4.5 BROKERS. No broker, finder or investment banker is entitled to any
brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of Buyer, except as provided in that certain letter agreement between
Buyer and Downer & Company L.L.C. regarding such fees, which fees are the sole
responsibility of, and are to be paid by, Buyer.
4.6 DISCLOSURE. No representation or warranty of Buyer contained in this
Agreement, and no statement contained in the Buyer Disclosure Schedule or in any
certificate, list or other writing furnished to Seller or Parent pursuant to any
provision of this Agreement contains any untrue statement of a material fact or
omits to state a material fact necessary in order to make the statements herein
or therein, in light of the circumstances under which they were made, not
misleading.
ARTICLE V
CERTAIN COVENANTS
5.1 AFFIRMATIVE COVENANTS. Seller and Parent covenant and agree with Buyer
that from and after the date of this Agreement and prior to the Closing Date,
unless the prior written consent of Buyer shall have been obtained and except as
otherwise contemplated herein, Seller will, and Parent shall cause Seller to:
(a) operate its business only in the ordinary course consistent with past
practices;
(b) use reasonable efforts to preserve intact its business organization and
assets, maintain its rights and franchises, retain the services of its
officers and key employees and maintain its relationships with customers;
(c) use reasonable efforts to maintain and keep its properties in good
repair and condition, ordinary wear and tear excepted;
(d) use reasonable efforts to keep in full force and effect insurance and
bonds comparable in amount and scope of coverage to that now maintained
by it;
(e) perform in all material respects all obligations required to be
performed by it under all material contracts, leases and documents
relating to or affecting the Business;
(f) maintain its Books and Records in the usual, regular or ordinary manner
consistent with past practice and provide Buyer access to such materials
at a reasonable time and place as Buyer and Seller may agree;
(g) use reasonable efforts to obtain all authorizations, consents, orders
and approvals from all governmental or regulatory authorities that may be
or become necessary for its execution and delivery of and the performance
of its obligations under this Agreement;
(h) take such reasonable action as shall be required to fulfill any and all
contractual or statutory obligations Seller may have to any unions or
labor organizations or otherwise as a result of or relating to the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby;
(i) take such reasonable actions required pursuant to the terms of any
contracts and agreements to address the consequences of the transactions
contemplated by this Agreement, and to obtain necessary consents and
required releases; and
(j) use best efforts to obtain from the City of Carbondale (the "City") an
amendment to the Lease Agreement listed on SCHEDULE 1.1(b), whereby the
City waives its termination rights pursuant to the provisions of
Article XIV of such Lease Agreement.
In addition, Parent will vote all of its shares of stock of Seller to authorize
the transactions contemplated by this Agreement pursuant to the terms and
conditions set forth in this Agreement.
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5.2 NEGATIVE COVENANTS. Except as specifically contemplated by this
Agreement, from the date of this Agreement until the Closing Date, Seller shall
not, and Parent shall cause Seller not to, without the prior written consent of
Buyer, do any of the following:
(a) except as required by applicable Law or to maintain qualification
pursuant to the Code, adopt, amend, renew or terminate any Plan or any
agreement, arrangement, plan or policy between Seller and one or more of
Seller's current or former directors, officers or employees, or except
for normal increases in the ordinary course of business consistent with
past practice or except as required by applicable Law, increase in any
manner the base salary, bonus incentive compensation or fringe benefits
of any director, officer or employee or pay any benefit not required by
any Plan or agreement as in effect as of the date of this Agreement
(including without limitation the granting of stock options, stock
appreciation rights, restricted stock, restricted stock units or
performance units or shares);
(b) (i) merge with or into any other corporation, permit any other
corporation to merge into it or consolidate with any other corporation,
or effect any reorganization or recapitalization; (ii) purchase or
otherwise acquire any substantial portion of the assets or stock of any
corporation; or (iii) liquidate, sell, dispose of, or encumber any assets
or acquire any assets, other than in the ordinary course of its business
consistent with past practice;
(c) propose or adopt any amendments to the Seller Certificate or Seller
Bylaws in any way adverse to Buyer;
(d) change any of its methods of accounting in effect at December 31, 1998
or change any of its methods of reporting income or deductions for
federal income tax purposes from those employed in the preparation of the
federal income tax returns for the taxable year ended December 31, 1998,
except as may be required by Law or GAAP;
(e) change in any material respect any material policies concerning the
Business, except as required by Law, including without limitation:
(i) sell, assign, transfer, pledge, mortgage or otherwise encumber any of
its assets, except for those sales, assignments, transfers, pledges,
mortgages and encumbrances (A) currently existing or provided for in
existing agreements, (B) incurred in individual amounts of less than
$75,000 and in an aggregate amount of no more than $750,000 or
(C) incurred in the ordinary course of business consistent with past
practice; (ii) enter into any agreement with respect to any acquisition
of a material amount of assets or any discharge, waiver, satisfaction,
release or relinquishment of any material contract rights, liens,
encumbrances, debt or claims, not in the ordinary course of business and
consistent with past practices; (iii) settle any claim, action, suit,
litigation, proceeding, arbitration, investigation or controversy of any
kind, for any amount in excess of $75,000, net of any insurance proceeds,
that would restrict in any material respect the Business; (iv) make any
capital expenditure in excess of $500,000, except in the ordinary course
and consistent with past practice; (v) make any investment of more than
$100,000; or (vi) take any action or fail to take any action which
individually or in the aggregate would have a Material Adverse Effect
with respect to Seller or the Business; PROVIDED, HOWEVER, nothing in
this Section shall prevent Seller from eliminating intercompany assets
and liabilities prior to the Closing; and
(f) agree in writing or otherwise to do any of the foregoing.
5.3 EXCLUSIVITY
For the period commencing on the date hereof and ending on the earlier of
the termination of this Agreement, the date specified in SECTION 8.1(e) or the
Closing (the "EXCLUSIVITY PERIOD"), except for discussions with Buyer and its
representatives, Parent will not, directly or indirectly through any director,
officer, shareholder, employee, agent, adviser or otherwise, orally or in
writing, initiate, solicit, encourage, respond to, discuss, negotiate or accept
any inquiries, indications of interest, proposals or offers from, or make any
inquiries, indications of interest, proposals, offers, counter proposals or
counteroffers to, or furnish any information to, any other person with respect
to (i) an acquisition of shares of Seller, (ii) additional equity or convertible
debt financing for Seller, (iii) an acquisition of all or a substantial part of
the assets of Seller, or (iv) a merger, consolidation or any other transaction
which would result in a change in control in Seller or a substantial change in
the business of Seller. Further, during such Exclusivity Period Parent will
promptly forward to Buyer any
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expressions of interest or other communications or inquiries received by it in
any such regard. During the Exclusivity Period, Parent will make the books,
records of Parent and Seller and management of Parent available during normal
business hours to Buyer and its representatives for due diligence and valuation
purposes.
In addition, during the Exclusivity Period, Buyer agrees that it will not,
except for discussions with Parent and its representatives, directly or
indirectly through any director, officer, shareholder, employee, agent, adviser
or otherwise, orally or in writing, initiate, solicit, encourage, respond to,
discuss, negotiate or make any inquiries, indications of interest, proposals,
offers, counterproposals or counteroffers to, or furnish any information to, any
other person with respect to a material transaction with or in respect of such
person.
5.4 ACCESS AND INFORMATION.
(a) From the date of this Agreement until the Closing Date and upon
reasonable notice, and subject to applicable Law relating to the exchange
of information, Parent and Seller shall afford to Buyer's officers,
employees, accountants, legal counsel and other representatives, access
during normal business hours to all its properties, books, contracts,
commitments and records relating to the Business, but excluding any
books, contracts, commitments and records in any way related to the sale
of the Business.
(b) From the date of this Agreement and until the Closing Date, Seller shall
furnish promptly to Buyer (i) a copy of each nonconfidential filing made
by Parent with the Securities and Exchange Commission (the "SEC"), under
the HSR Act or under any other applicable Laws promptly after such
documents are available, (ii) a copy of each Tax Return filed by Parent
for the three most recent years available with respect to or containing
information pertaining to the Business, a copy of any correspondence
received from the IRS or any other governmental entity or taxing
authority or agency and any other correspondence relating to Taxes
payable with respect to the Business, and (iii) all other information
concerning the Business as Buyer may reasonably request, other than in
each case reports or documents which neither Seller nor Parent is
permitted to disclose under applicable Law or binding agreement entered
into prior to the date of this Agreement. The parties will make
appropriate substitute disclosure arrangements under circumstances in
which the restrictions of the preceding sentence apply.
(c) Unless otherwise required by Law, the parties will hold any such
information which is nonpublic in confidence until such time as such
information becomes publicly available through no wrongful act of either
party, and in the event of termination of this Agreement for any reason
each party shall promptly return all nonpublic documents obtained from
any other party, and any copies made of such documents, to such other
party or destroy such documents and copies. From the date hereof until
the earlier of the Closing Date or the termination of this Agreement, and
subject to the other provisions of this Agreement, the parties agree that
they will take no actions outside of the ordinary course of business to
harm the value of the Business conducted by Seller; provided, however,
that this limitation shall not limit the ability of the parties to engage
in normal competition with each other (including, to the extent
applicable, effecting price adjustments to their respective products).
5.5 UPDATE DISCLOSURE; BREACHES.
(a) From and after the date of this Agreement until the Closing Date, the
parties shall update their respective Disclosure Schedules by written
notice to the other party to reflect any matters which have occurred from
and after the date of this Agreement which, if existing on the date of
this Agreement, would have been required to be described therein;
provided that, (i) to the extent that any information that would be
required to be included in an update under this Section would have in the
past been contained in internal reports prepared in the ordinary course,
such update may occur by delivery of such internal reports prepared in
accordance with past practice, and (ii) to the extent that updating
required under this Section is unduly burdensome, Seller and Buyer will
use their best efforts to develop alternate updating procedures
utilizing, wherever possible, existing reporting systems.
(b) Each party shall, in the event it becomes aware of the impending or
threatened occurrence of any event or condition which would cause or
constitute a material breach (or would have caused or constituted a
material breach had such event occurred or been known prior to the date
of this Agreement) of any of
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its representations or agreements contained or referred to herein, given
prompt written notice thereof to the other party and use its best efforts
to prevent or promptly remedy the same.
5.6 EXPENSES. All Expenses (as defined below) incurred by Buyer, on the
one hand, and Parent and/or Seller, on the other hand, shall be borne solely and
entirely by Buyer, on the one hand, and Parent, on the other hand. "EXPENSES" as
used in this Agreement shall include all reasonable fees and out-of-pocket
expenses (including without limitation all fees and expenses of counsel,
accountants, investment bankers, experts and consultants to the party and its
affiliates) incurred by a party or on its behalf in connection with or related
to the authorization, preparation and execution of this Agreement, the
solicitation of stockholder approvals and all other matters related to the
closing of the transactions contemplated hereby. Parent shall be liable for and
shall assume and pay the broker's fees of Schroder & Co. Inc. and Buyer shall be
liable for and shall assume and pay the broker's fees of Downer & Company.
5.7 RETENTION OF RECORDS. Buyer shall retain all books and records of
Seller that Buyer receives from Seller for a period of six years following the
Closing Date. After the Closing, Seller and Parent and their respective
representatives shall have reasonable access to all such books and records
during normal business hours. In addition, Buyer shall upon reasonable request
furnish to Seller or Parent, without charge, copies of any such books or
records.
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 APPROPRIATE ACTION; CONSENTS; FILINGS. The parties shall use
reasonable efforts to (i) do all things appropriate under applicable Law to
consummate and make effective the transactions contemplated by this Agreement,
(ii) obtain all consents, licenses, permits, waivers, approvals, authorizations
or orders required under Law required in connection with the authorization,
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby, and (iii) make all necessary filings, and
thereafter make any other required submissions, with respect to this Agreement
required under the Securities Act and the Exchange Act and the rules and
regulations thereunder, any other applicable federal or state securities laws
and any other applicable Law; provided that, Buyer and Seller shall cooperate
with each other in connection with the making of all such filings that relate
specifically to the transactions contemplated by this Agreement, including
providing copies of all such documents to the nonfiling party and its advisors
prior to filing and, if requested, to accept all reasonable additions, deletions
or changes suggested in connection therewith.
6.2 EMPLOYEE BENEFIT MATTERS.
(a) RETENTION OF LIABILITY. Except as provided in this Section, or as
required pursuant to any collective bargaining agreement, neither Buyer nor
any of its affiliates shall adopt, become a sponsoring employer of, nor have
any obligations under or with respect to any Plan and Seller shall retain
all liabilities thereunder.
(b) WELFARE BENEFITS. Buyer shall be responsible for all (i) claims
for medical, dental and prescription drug benefits incurred by or with
respect to the Transferred Employees and former employees of the Seller (and
their dependents), and (ii) claims relating to COBRA coverage attributable
to "qualifying events" incurred by or with respect to any Transferred
Employee or former employee of Seller (and any dependent thereof), Seller
shall be responsible for any and all claims for workers compensation
benefits for all Transferred Employees and former employees of the Seller
with respect to all work-related injuries which occurred prior to the
Closing, provided Buyer notifies Seller (directed to the attention of Craig
Jennings) within three (3) business days of any report of such injury to
Buyer (or one of its affiliates) by the employee. In addition, on the
Closing Date and for the balance of the 1999 calendar year, Buyer (or one of
its affiliates) shall cause to be maintained for the benefit of all
Transferred Employees and all former employees of the Seller for whom
benefits are being provided under the Spinnaker Industries Flexible Benefits
Plan (the "FLEX PLAN") as of the Closing Date (together with the Transferred
Employees, the "FLEX EMPLOYEES"), a plan substantially identical to the Flex
Plan. As soon as practicable thereafter, the Seller shall cause to be
transferred to the Buyer the credit or debit balances in the various
spending accounts under the Flex Plan along with any net cash amount
attributable to those balances for the Flex Employees.
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Following such transfer, Buyer (or one of its affiliates) shall be
responsible for all liabilities for all Flex Employees under the Buyer's
Plan. Further, Buyer shall be responsible for all severance payments owing
to any Transferred Employee except that Seller, promptly after receiving
written notice from Buyer (or one of its affiliates) shall reimburse Buyer
(or one of its affiliates) for all costs (including payroll taxes) relating
to the provision of any severance benefits and payments made to any
Transferred Employee, up to a maximum reimbursement, when combined with any
reimbursement of severance pursuant to Section 7.2(a) of the Stock Purchase
Agreement, of $700,000.00. Buyer also shall be responsible for all
disability claims filed after Closing with respect to the Transferred
Employees, except that Seller shall remain responsible for any long term or
short term disability benefits payable under the Spinnaker Industries Short
Term and Long Term Disability Plans, to the extent such benefits are
insured, the disability began or is found to have begun prior to the Closing
Date, and the disability claim was not filed by a former employee of the
Buyer (or one of its affiliates) after such Employee was involuntarily
terminated from employment by the Buyer (or one of its affiliates). Seller
shall cooperate with Buyer in effecting an assignment to Buyer of any
policies of insurance for the provision of health or welfare benefits to the
Transferred Employees and former employees of Seller and any other
individual who is not a Transferred Employee or former employee of Seller
and administrative contracts relating thereto, if requested by Buyer.
(c) 401(k) PLAN. On or as soon as practicable after the Closing Date,
Buyer (or one of its affiliates) shall cause to be maintained for the
benefit of Transferred Employees and all former employees of the Seller for
whom benefits are owing under the Spinnaker Industries Affiliates' 401(k)
Plan (the "PARENT'S 401(k) PLAN") (together referred to as the "401(k)
EMPLOYEES") a defined contribution plan intended to be qualified under
Section 401(k) of the Code ("BUYER'S 401(k) PLAN"). As soon as practicable
after the Closing Date, but in any event prior to the transfer referred to
herein, Buyer shall deliver to Seller a copy of the most recent favorable
determination letter for the Buyer's 401(k) Plan, or evidence that such
determination letter is not necessary, or evidence of an application timely
filed with the IRS for such a letter with respect to a newly adopted plan.
In addition, if the Buyer's 401(k) Plan is a newly adopted plan for which a
determination letter is necessary, Buyer shall make or cause to be made
timely any and all amendments requested by the IRS in order to ensure that
the Buyer's 401(k) Plan meets the requirements to ensure it receives a
favorable determination letter. As soon as practicable thereafter, Seller
shall direct the trustee of the trust funding Parent's 401(k) Plan to
transfer to the trustee of the trust funding Buyer's 401(k) Plan the
aggregate individual account balances of the 401(k) Employees (whether or
not vested). Individual account balances shall be valued as of the date of
transfer, and the transfer shall be in cash or in kind, as determined by
Buyer, except that outstanding loan balances shall be transferred in the
form of notes or other appropriate documents evidencing such loans. Prior to
the date of the transfer, Seller or its affiliates shall have contributed
all contributions (including salary deferral and matching contributions)
attributable to service performed by the 401(k) Employees through the
Closing Date. Following such transfer, Buyer or one of its affiliates shall
be responsible for liabilities attributable to 401(k) Employees under the
Buyer's 401(k) Plan. In the event that the Buyer fails to obtain a favorable
determination letter from the IRS in respect of the Buyer's 401(k) Plan, the
Buyer shall indemnify Seller and Parent, from and after the Closing Date,
against, and agrees to hold Seller and Parent harmless from, any and all
damages incurred or suffered by Seller and Parent as a result of the Buyer's
failure to satisfy the requirements of this SECTION 6.2(c).
(d) NO RIGHTS. Nothing in this Section shall be construed to give any
employee or former employee of Seller (or any beneficiary thereof) any
rights of any kind, including any right to continued employment with Buyer
or the right to any particular terms of employment, nor shall anything
contained in this Section be construed to prevent Buyer or any of its
affiliates from terminating or modifying any benefit plan that they may
establish or assume.
(e) EMPLOYEES. Buyer shall offer employment to all of Seller's
employees effective as of the Closing Date on terms and, for the balance of
the 1999 calendar year, with compensation and benefits substantially similar
to those in force immediately prior to the Closing Date (the "TRANSFERRED
EMPLOYEES").
6.3 NOTIFICATION OF CERTAIN MATTERS. Parent and Seller shall give prompt
notice to Buyer, and Buyer shall give prompt notice to Parent and Seller, of
(i) the occurrence or non-occurrence of any event, the occurrence or
nonoccurrence of which would be likely to cause any representation or warranty
contained in this Agreement to be untrue or inaccurate and (ii) any failure of
Parent or Seller or Buyer, as the case may be, to comply with or
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satisfy any covenant, condition or agreement to be complied with or satisfied by
it hereunder; provided, however, that the delivery of any notice pursuant to
this Section shall not limit or otherwise affect the remedies available
hereunder to the party receiving such notice.
6.4 PUBLIC ANNOUNCEMENTS. Buyer and Seller shall consult with each other
before issuing any press release or otherwise making any public statements with
respect to the transactions contemplated hereby and shall not issue any such
press release or make any such public statement prior to such consultation,
except as may be required by Law or any listing agreement with or rule of the
National Association of Securities Dealers, Inc.
6.5 CUSTOMER RETENTION. To the extent permitted by law or applicable
regulation, Parent and Seller shall use reasonable efforts to assist Buyer in
its efforts to retain Seller's customers. Such efforts may include making
introductions of Buyer's employees to such customers, assisting in the mailing
of information prepared by Buyer and reasonably acceptable to Parent and Seller,
to such customers and actively participating in any "transitional marketing
programs as the parties may agree upon.
6.6 TAX COOPERATION AND INDEMNIFICATION.
(a) Seller, Parent and Buyer shall each, and shall cause their respective
affiliates to, provide the other party with such cooperation, assistance
and information as any of them may reasonably request in respect of Taxes
of the Business or the Purchased Assets, the preparation of any Tax
Return, including Tax Returns relating to transfer Taxes, amended Tax
Return or claim for refund in respect of the Purchased Assets, or the
participation in or conduct of any audit or other examination by any
taxing authority or judicial or administrative proceeding relating to
liability for Taxes of the Purchased Assets. Such cooperation and
information shall include (i) providing copies of all relevant portions
of relevant Tax Returns, together with relevant accompanying schedules
and relevant workpapers, relevant documents relating to rulings or other
determinations by taxing authorities and relevant records concerning the
ownership and Tax basis of property, which any such party may possess,
and (ii) making employees available on a mutually convenient basis to
provide explanations of any documents or information provided.
(b) From and after the Closing Date, to the extent a Tax is imposed on Buyer
with respect to the Purchased Assets or Business for any period ending on
or before the Closing Date ("PRE-CLOSING PERIOD"), Parent and Seller
jointly and severally agree to pay the amount of such Tax, on a
Grossed-Up Basis, plus any additional penalties and interest incurred in
the payment of such Tax, to the appropriate Taxing Authority or to Buyer,
as appropriate, within the later of 30 days of receipt of notice of such
Tax or final resolution of any dispute relating to such Tax. If such Tax
is paid by Buyer, Parent and Seller jointly and severally agree to
reimburse Buyer the amount of such Tax, on a Grossed-Up Basis, plus any
additional penalties and interest incurred in the payment of such Tax.
(c) From and after the Closing Date, to the extent a Tax (other than a Tax
described in the first sentence of SECTION 6.6(b)) is imposed on Parent
or Seller with respect to the Purchased Assets or Business for any period
after the Closing Date ("POST-CLOSING PERIOD"), Buyer agrees to pay the
amount of such Tax, on a Grossed-Up Basis, plus any additional penalties
and interest incurred in the payment of such Tax, to the appropriate
Taxing Authority within the later of 30 days of receipt of notice of such
Tax or final resolution of any dispute relating to such Tax. If such Tax
is paid by Parent or Seller, Buyer agrees to reimburse Seller the amount
of such Tax, on a Grossed-Up Basis, plus any additional penalties and
interest incurred in the payment of such Tax.
(d) (i) If any Taxing Authority or other person asserts a claim with respect
to Taxes of the Purchased Assets or Business (a "TAX CLAIM"), then the
party hereto first receiving notice of such Tax Claim properly payable by
another party to this Agreement (the "RESPONSIBLE PARTY") shall provide
written notice thereof to the Responsible Party within 30 days of having
received such notice; PROVIDED, HOWEVER, that the failure of a party to
give such prompt notice to the Responsible Party shall not relieve such
Responsible Party of any of its obligations under this SECTION 6.6. Such
notice shall specify in reasonable detail the basis for such Tax Claim
and shall include a copy of any relevant correspondence received from the
Taxing Authority or other person.
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(ii) If within 60 days after receiving a Tax Claim or written notice of
such a Tax Claim with respect to Pre-Closing Period Taxes from the
Buyer, Parent or Seller notifies the Buyer that Parent or Seller
desires to defend Buyer with respect to the Tax Claim, then Parent
or Seller shall have the right to defend or prosecute, at its sole
cost, expense and risk, such Tax Claim by all appropriate
proceedings, which proceedings shall be defended or prosecuted
diligently by Parent or Seller; PROVIDED, HOWEVER, Parent or Seller
shall not, without the prior written consent of Buyer, enter into
any compromise or settlement of such Tax Claim that would result in
any Tax detriment to Buyer; and PROVIDED FURTHER, that Buyer may,
at the sole cost and expense of Buyer, at any time prior to its
delivery of the notice referred to in the first sentence of
SECTION 6.6(d)(i) file any motion, answer or other pleadings or
take any other action that Buyer reasonably believes to be
necessary or appropriate to protect its interests. So long as
Parent or Seller is defending or prosecuting a Tax Claim, Buyer
shall provide or cause to be provided to Parent or Seller any
information reasonably requested by Parent or Seller relating to
such Tax Claim, and Buyer shall otherwise cooperate with Parent or
Seller and its representatives in good faith in order to contest
effectively such Tax Claim. Parent or Seller shall inform Buyer of
all developments and events relating to such Tax Claim (including
without limitation, providing to Buyer copies of all written
materials relating to such Tax Claim), and Buyer or its authorized
representatives shall be entitled, at the expense of Buyer, to
participate in, all conferences, meetings and proceedings relating
to such Tax Claim.
(iii) If Parent or Seller fails to notify Buyer within 60 days after
receiving a Tax Claim or a written notice of such a Tax Claim with
respect to Pre-Closing Period Taxes from Buyer that Parent or
Seller desires to defend the Tax Claim pursuant to this
SECTION 6.6(d) or, if after delivery of such notice, Parent or
Seller fails to reasonably defend or prosecute such Tax Claim, then
Buyer shall at any time thereafter have the right (but not the
obligation) to defend or prosecute, at the sole cost, expense and
risk of Buyer, such Tax Claim. Buyer shall have full control of
such defense or prosecution and such proceedings, including any
settlement or compromise thereof. If requested by Buyer, Parent or
Seller shall cooperate in good faith with Buyer and its authorized
representatives in order to contest effectively such Tax Claim.
Parent or Seller may participate in, but not control any defense,
prosecution, settlement or compromise of any Tax Claim controlled
by Buyer pursuant to this SECTION 6.6(d)(iii), and shall bear its
own costs and expenses with respect thereto.
(e) Parent and Seller shall pay all transfer, real property transfer, stock
transfer and other similar taxes and fees ("TRANSFER TAXES") arising out
of or in connection with the transactions effected pursuant to this
Agreement, and shall indemnify, defend, and hold harmless Buyer and its
respective affiliates with respect to such Transfer Taxes. Parent or
Seller shall file all necessary documentation and Tax Returns with
respect to such Transfer Taxes.
(f) No amounts of indemnity for Tax payments shall be payable as a result of
a claim under this Section unless and until the party seeking indemnity
has suffered, incurred, sustained or become subject to Taxes, penalties
or interest in excess of $25,000, in which case such party shall be
entitled to seek indemnity for all Taxes, penalties or interest in excess
of such $25,000 amount. All such indemnification payments shall be made
on a Grossed-Up Basis.
(g) All rights and obligations of the parties with respect to
indemnification under this Section shall survive for the applicable
statute of limitations (including any extensions) for the Tax for which
such claim of indemnification is based upon.
6.7 BULK TRANSFER LAWS. Buyer hereby waives compliance by Seller and
Parent with the laws of any jurisdiction relating to bulk transfers which may be
applicable in connection with the transfer of the Purchased Assets to Buyer;
PROVIDED, HOWEVER, that Seller and Parent shall indemnify, defend and hold Buyer
and its affiliates and representatives harmless from and against any and all
Losses (as defined in SECTION 10.3) directly or indirectly arising out of, or
resulting from, or relating to any failure to comply with such laws.
6.8 NON-COMPETITION.
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(a) For a period commencing on the Closing Date and terminating on the third
anniversary thereof (the "PERIOD"), as an inducement to Buyer to execute
this Agreement and complete the transactions contemplated hereby, and in
order to preserve the goodwill associated with the Business, Parent and
Seller will not (1) engage in, continue in, participate in or have any
material interest in any sole proprietorship, partnership, corporation or
business that is engaged primarily or in any material respect in the
business of the manufacture, sale or distribution of pressure sensitive
and water activated tape and industrial electrical tape serving either
the retail or industrial end markets (the "PROHIBITED BUSINESS") in North
America (the "TERRITORY"), (2) consult with, advise or assist in any way,
whether or not for consideration, any corporation, partnership, firm or
other business organization which is now or becomes a competitor of Buyer
in any aspect with respect to the Prohibited Business, including, but not
limited to, with respect to the Prohibited Business, advertising or
otherwise endorsing the products of any such competitor, soliciting
customers or otherwise serving as an intermediary for any such
competition or engaging in any form of business transaction on other than
an arms'-length basis with any such competitor; or (3) unless Buyer has
terminated such Transferred Employee, solicit for employment any
Transferred Employee that has been employed by Buyer, without the prior
consent of Buyer; PROVIDED, HOWEVER, that nothing herein shall be deemed
to prevent (i) Parent or Seller from acquiring through market purchases
and owning, solely as an investment, less than five percent of the equity
securities of any class of any issuer whose shares are registered under
Section 12(b) or 12(g) of the Exchange Act, and are listed or admitted
for trading on any United States national securities exchange or are
quoted on the Nasdaq National Market, or any similar system of automated
dissemination of quotations of securities prices in common use, so long
as neither Parent nor Seller is a member of any "control group" (within
the meaning of the rules and regulations of the United States Securities
and Exchange Commission) of any such issuer, (ii) any offer by Parent or
Seller to employ a person in the Prohibited Business (except as set forth
in this Section), or (iii) Parent or Seller from being acquired by a
person engaged in any business in competition with the Prohibited
Business of Seller.
The parties agree that Buyer may sell, assign or otherwise transfer this
covenant not to compete, in whole or in part, to any person, corporation, firm
or entity that succeeds to the Business. The parties further agree that the
geographic scope of this covenant not to compete shall extend to any city,
county or other political subdivision of any country in the Territory, each of
which is deemed to be separately named herein. Recognizing the specialized
nature of the Purchased Assets transferred to Buyer and the scope of
competition, Seller and Parent each acknowledge the geographic scope of this
covenant not to compete to be reasonable. The parties intend that the covenant
contained in this Section shall be construed as a series of separate covenants,
one for each city, county or political subdivision of each country in the
Territory, each of which is deemed to be separately named herein, each for a
series of one-year periods within the Period. Except for geographic coverage and
periods of effectiveness, each such separate covenant shall be identical in
terms. If in any judicial proceeding a court shall refuse to enforce any of the
separate covenants deemed included in this Section, then such unenforceable
covenant shall be deemed eliminated for the purpose of that proceeding to the
extent necessary to permit the remaining separate covenants to be enforced.
In the event a court of competent jurisdiction determines that the
provisions of this covenant not to compete are excessively broad as to duration,
geographic scope or activity, it is expressly agreed that this covenant not to
compete shall be construed so that the remaining provisions shall not be
affected, but shall remain in full force and effect, and any such over broad
provisions shall be deemed, without further action on the part of any person, to
be modified, amended and/or limited, but only to the extent necessary to render
the same valid and enforceable in such jurisdiction.
(b) Parent and Seller each agree with Buyer that the provisions and
restrictions contained in this Section are necessary to protect the
legitimate continuing interests of Buyer in acquiring the Purchased
Assets, and that any violation or breach of these provisions will result
in irreparable injury to Buyer for which a remedy at law would be
inadequate. Parent and Seller each agrees with Buyer that in the event of
a violation or breach and regardless of any other provision contained in
this Agreement, Buyer shall be entitled to injunctive and other equitable
relief, including specific performance, as a court may grant
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after considering the intent of this Section, and Buyer shall not be
entitled to any other form of relief from such violation or breach.
6.9 FURTHER TRANSFER MATTERS. Effective on the Closing Date, Seller and
Parent hereby constitute and appoint Buyer the true and lawful attorney-in-fact
of Seller or Parent, with full power of substitution, in the name of Seller or
Parent, but on behalf of and for the sole benefit of Buyer: (i) to demand and
receive from time to time any and all of the Purchased Assets and to make
endorsements and give receipts and releases for and in respect of the same and
any part thereof and for the Business, (ii) to institute, prosecute, compromise
and settle any and all actions or proceedings that Buyer may deem proper in
order to collect, assert or enforce any claim, right or title of any kind in or
to the Purchased Assets or Business, (iii) to defend or compromise any or all
actions or proceedings in respect of any of the Purchased Assets or Business,
and (iv) to do all such acts and things in relation to the matters set forth in
the preceding clauses (i) through (iii) as Buyer shall deem desirable. Seller
and Parent hereby acknowledges that the appointment hereby made and the powers
hereby granted are coupled with an interest and are not and shall not be
revocable by it in any manner or for any reason. At Closing, Seller shall
provide Buyer with a written power of attorney in form and substance appropriate
to authorize and carry out the above.
6.10 PRORATIONS. The following prorations relating to the Purchased Assets
and the ownership and operation of the Business will be made as of the Closing
Date, with Seller liable to the extent such items relate to any time period
prior to the Closing Date and Buyer liable to the extent such items relate to
periods beginning with and subsequent to the Closing Date: (a) real estate taxes
on or with respect to the Real Property; (b) rents, additional rents, taxes and
other items payable by or to Seller under the Real Property Leases; (c) the
amount of charges for sewer, water, telephone, electricity and other utilities
relating to the Real Property and the real property subject to the Real Property
Leases; and (d) all other items (excluding personal property taxes and other
Taxes) normally adjusted in connection with similar transactions. Except as
otherwise agreed by the parties, the net amount of all such prorations will be
settled and paid on the Closing Date. If the Closing shall occur before a real
estate tax rate is fixed, the apportionment of taxes shall be based upon the tax
rate for the preceding year applied to the latest assessed valuation.
6.11 RELEASE OF LIENS. Seller, at or before Closing, shall release of
record, the liens listed on SCHEDULE 3.24 of the Seller Disclosure Schedule.
ARTICLE VII
CONDITIONS OF CLOSING
7.1 CONDITIONS TO OBLIGATION OF EACH PARTY. The respective obligations of
each party to effect the transactions contemplated hereby shall be subject to
the satisfaction at or prior to the Closing Date of the following conditions:
(a) NO ORDER. No federal or state governmental or regulatory authority
or other agency or commission, or federal or state court of competent
jurisdiction, shall have enacted, issued, promulgated, enforced or entered
any statute, rule, regulation, executive order, decree, injunction or other
order (whether temporary, preliminary or permanent) which restricts,
prevents or prohibits consummation of the transactions contemplated by this
Agreement.
(b) HART-SCOTT-RODINO ACT. Early termination shall have been granted
or applicable waiting periods shall have expired under the HSR Act.
(c) CONSENT OF MUNICIPALITY. Seller shall have received consent from
any municipality required to provide consent to the transfer of Real
Property pursuant to this Agreement.
7.2 ADDITIONAL CONDITIONS TO OBLIGATIONS OF BUYER. The obligations of
Buyer to effect the transactions contemplated hereby are also subject to the
following conditions:
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(a) REPRESENTATIONS AND WARRANTIES. Each of the representations and
warranties of Seller and Parent contained in this Agreement, including
giving effect to any update to the Seller Disclosure Schedule, shall be true
and correct in all material respects (except that where any such statement
in a representation or warranty expressly includes a standard of
materiality, such statement shall be true and correct in all respects) as of
the Closing Date (except to the extent such representations and warranties
speak as of an earlier date) as though made on and as of the Closing Date,
and Buyer shall have received a certificate signed on behalf of Seller by
the Chief Executive Officer or President and the Chief Financial Officer of
Seller to the foregoing effect.
(b) AGREEMENTS AND COVENANTS. Seller shall have performed or complied
in all material respects with all agreements and covenants required by this
Agreement to be performed or complied with by it on or prior to the Closing
Date.
(c) CONSENTS OBTAINED. All consents, waivers, approvals,
authorizations or orders required to be obtained and all filings required to
be made by Seller for the authorization, execution and delivery of this
Agreement and the consummation by it of the transactions contemplated hereby
shall have been obtained and made by Seller, except those for which failure
to obtain such approvals or make such filings would not individually or in
the aggregate have a Material Adverse Effect with respect to the Business.
(d) NO CHALLENGE. There shall not be pending any action, proceeding or
investigation before any court or administrative agency or by a government
agency (i) challenging or seeking material damages in connection with the
transactions hereby contemplated, (ii) seeking to restrain, prohibit or
limit the exercise of full rights of ownership or operation by Buyer of all
or any portion of the Purchased Assets, or (iii) seeking to recover against
the proceeds of the transactions contemplated hereby, which in any case is
reasonably likely to have a Material Adverse Effect with respect to the
Purchased Assets.
(e) NO MATERIAL ADVERSE CHANGES. Since the date of the Agreement,
there has not been any change in the financial condition, results of
operations or business of Seller or the Business, taken as a whole, that
either individually or in the aggregate would have a Material Adverse Effect
with respect to the Purchased Assets, and Buyer shall have received a
certificate of the Chief Executive Officer or President and the Chief
Financial Officer of Seller to such effect.
(f) OPINION OF COUNSEL. Buyer shall have received from Jenkens &
Gilchrist, a Professional Corporation, independent counsel to Seller
("SELLER'S COUNSEL"), an opinion dated the Closing Date, substantially in
the form attached as EXHIBIT A.
(g) REAL PROPERTY MATTERS.
(i) Buyer shall have received an estoppel and consent certificate
(dated not more than 30 days prior to the Closing Date) from
each landlord under a Real Property Lease reasonably acceptable
in form to Buyer;
(ii) Buyer shall have received, at Seller's sole cost and expense, a
policy of title insurance, dated as of the Closing Date and
issued by Buyer's title insurance company, insuring the owner
or tenant of the applicable parcel of Real Property or real
property subject to a Real Property Lease, free of all Liens
including, without limitation, all liens listed on
SECTION 3.24 of the Seller Disclosure Schedule, together with,
at Seller's sole cost and expense, an ALTA/ACSM survey for each
such parcel reasonably acceptable to Buyer. Seller shall
deliver to Buyer's title insurance company a title affidavit
sufficient to allow Buyer's title insurance company to omit the
customary standard exceptions from the policy of title
insurance;
(iii) Buyer shall have received a nondisturbance agreement, in form
reasonably acceptable to Buyer, from each holder of a mortgage
or deed of trust affecting any Real Property Lease;
(iv) Buyer shall have received special warranty deeds in proper
statutory form for recording and otherwise in form and
substance reasonably satisfactory to Buyer conveying title to
the Real Property, if any, in accordance with this Agreement
and an assignment of each Real Property Lease conveying title
to each Real Property Lease in accordance with this Agreement
in a form reasonably acceptable to Buyer;
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(h) FINANCING AND EMPLOYMENT RELEASES. Buyer shall have received
releases or other documentation in form reasonably satisfactory to Buyer
evidencing the satisfaction of obligations of Seller under or pursuant to
the tesa Credit Agreement, any relevant employment agreements and the tesa
Note; and
(i) WARRANTY CLAIM. On or before April 30, 1999, Seller shall have
asserted in writing a warranty claim in respect of the repair of the floor
and foundation at the Carbondale, Illinois facility and shall have assigned
all its rights under such warranty claim to Buyer.
7.3 ADDITIONAL CONDITIONS TO OBLIGATIONS OF THE SELLER. The obligations of
Parent and Seller to effect the transactions contemplated hereby are also
subject to the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. Each of the representations and
warranties of Buyer set forth in this Agreement, including giving effect to
any update to the Buyer Disclosure Schedule, shall be true and correct in
all material respects (except that where any such statement in a
representation or warranty expressly includes a standard of materiality,
such statement shall be true and correct in all respects) as of the Closing
Date (except to the extent such representation and warranties speak as of an
earlier date), as though made on and as of the Closing Date, and Seller
shall have received a certificate signed on behalf of Buyer by the Chief
Executive Officer or President and the Chief Financial Officer of Buyer to
the foregoing effect.
(b) AGREEMENTS AND COVENANTS. Buyer shall have performed or complied
in all material respects with all agreements and covenants required by this
Agreement to be performed or complied with by it on or prior to the Closing
Date.
(c) CONSENTS UNDER AGREEMENTS. All consents, waivers, approvals,
authorizations or orders required to be obtained, and all filings required
to be made by Buyer for the authorization, execution and delivery of this
Agreement and the consummation by it of the transactions contemplated hereby
shall have been obtained and made by Buyer, except where failure to obtain
any consents, waivers, approvals, authorizations or orders required to be
obtained or any filings required to be made would not have a Material
Adverse Effect with respect to Buyer.
(d) NO CHALLENGE. There shall not be pending any action, proceeding or
investigation before any court or administrative agency or by a government
agency (i) challenging or seeking material damages in connection with
transactions hereby contemplated or (ii) seeking to restrain, prohibit or
limit the exercise of full rights of ownership or operation by Buyer of all
or any portion of the Purchased Assets, which in either case would have a
Material Adverse Effect with respect to the Purchased Assets.
(e) NO MATERIAL ADVERSE CHANGES. Since the date of the Agreement,
there has not been any change in the financial condition, results of
operations or business of Buyer that either individually or in the aggregate
would have a Material Adverse Effect with respect to Buyer. Seller shall
have received a certificate of the Chief Executive Officer or President and
the Chief Financial Officer of Buyer to such effect.
(f) OPINION OF COUNSEL. Seller and Parent shall have received from
Morgan, Lewis & Bockius LLP, independent counsel to Buyer ("BUYER'S
COUNSEL"), an opinion dated the Closing Date, substantially in the form
attached as EXHIBIT B.
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 of Buyer, Seller and Parent;
(b) by either Parent, Buyer or Seller if any approval of stockholders
required for the consummation of the transactions contemplated hereby
shall not have been obtained by reason of the failure to obtain the
required vote at a duly held meeting of such stockholders or at any
adjournment or postponement thereof;
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(c) by Seller, Parent or Buyer if there has been a breach in any material
respect (except that where any statement in a representation or warranty
expressly includes a standard of materiality, such statement shall have
been breached in any respect) of any representation, warranty, covenant
or agreement, set forth in this Agreement, on the part of any party,
which breach has not been cured within 10 business days following receipt
by the nonterminating party of notice of such breach or other condition,
or which breach by its nature, cannot be cured prior to the Closing Date;
PROVIDED, HOWEVER, this Agreement may not be terminated pursuant to this
clause (c) by the breaching party;
(d) by either Buyer, Parent or Seller if any permanent injunction preventing
the consummation of the transactions contemplated hereby shall have
become final and nonappealable or if any applicable Law or any rule or
regulation thereunder shall hereafter be enacted or becomes applicable
that makes the transactions contemplated hereby or the consummation of
the Closing illegal;
(e) by either Buyer, Parent or Seller if the transactions contemplated
hereby shall not have been consummated by July 31, 1999, for a reason
other than the failure of the party seeking termination to comply with
its obligations under this Agreement; PROVIDED, HOWEVER, that in the
event early termination shall not have been granted or applicable waiting
periods shall not have expired under the HSR Act as of such date, the
parties may agree to extend such date for up to two additional 30 day
periods, with such agreement not to be unreasonably withheld, and,
further, provided, if the Put Right in SECTION 10.2 of the Stock Purchase
Agreement has been exercised, the parties shall in good faith close the
transaction contemplated hereby as soon as possible after such exercise.
(f) by either Buyer, Parent or Seller if any regulatory authority has denied
approval of the transactions contemplated hereby, and neither Buyer nor
Seller has, within 30 days after the entry of such order denying
approval, filed a petition seeking review of such order as provided by
applicable law; or
(g) by Buyer in the event it shall have notified Parent and Seller of its
intention to terminate this Agreement pursuant to SECTION 6.11 within the
time period set forth therein.
8.2 EFFECT OF TERMINATION. In the event of the termination of this
Agreement pursuant to SECTION 8.1, this Agreement shall forthwith become void
and all rights and obligations of any party shall cease except as set forth in
SECTION 5.4(c) of this Agreement; PROVIDED, HOWEVER, nothing herein shall
relieve any party from liability for any willful breach of this Agreement or
shall restrict either party's rights in the case thereof.
8.3 WAIVER. At any time prior to the Closing Date, the parties may
(a) extend the time for the performance of any of the obligations or other acts
of the other party, (b) waive any inaccuracies in the representations and
warranties contained herein or in any document delivered pursuant hereto and
(c) waive compliance with any of the agreements or conditions contained herein.
Any such extension or waiver shall be valid only if set forth in a written
instrument signed on behalf of such party, but such extension or waiver or
failure to insist on strict compliance with an obligation, covenant, agreement
or condition shall not operate as a waiver of, or estoppel with respect to, any
subsequent or other failure.
ARTICLE IX
INDEMNIFICATION
9.1 INDEMNIFICATION. Subject to the provisions of this Article, Seller
shall indemnify Buyer, its stockholders, officers, directors, employees, agents
and affiliates (collectively, the "BUYER INDEMNITEES") in respect of, and hold
each of them harmless from and against, and shall pay the full amount of, on a
Grossed-Up Basis (as defined in SECTION 10.3), any and all Losses suffered,
incurred or sustained by any of them or to which any of them becomes subject
resulting from, arising out of or relating to: (i) any causes of action asserted
or other legal proceedings initiated on the part of any of the stockholders of
Seller relating in any way to claims based on the failure to obtain shareholder
approval of the sale of Parent's assets; (ii) any employee pension benefit plan
subject to Title IV of ERISA that is maintained by Seller or any of its
"controlled group," within the meaning of Section 4001(a)(15) of ERISA, other
than any Plans; (iii) severance obligations occurring within six months of the
Closing Date in connection with the agreements described on EXHIBIT C; and
(iv) the nonfulfillment of or failure to perform any covenant or agreement on
the part of Seller contained in SECTIONS 5.6 and 6.7.
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9.2 PROCEDURES FOR INDEMNIFICATION. Any claims for indemnification by any
party entitled to indemnification hereunder (an "INDEMNIFIED PARTY") from any
party hereunder (an "INDEMNITOR") under this ARTICLE IX shall be made by an
Indemnified Party by delivery of a written notice to the Indemnitor requesting
indemnification (an "INDEMNIFICATION CLAIM") and specifying the basis on which
indemnification is sought and the amount of asserted Losses. Indemnitor shall
have 30 days after the date on which the Indemnitor receives the notice of an
Indemnification Claim to object to such Indemnification Claim by delivery of a
written notice of such objection to the Indemnified Party specifying in
reasonable detail the basis for such objection. If within 30 days after the date
on which the Indemnitor receives the notice of the Indemnification Claim, the
Indemnitor has not delivered to the Indemnified Party a notice objecting to all
or any portion of the claimed Loss and setting forth the amount of such claimed
indemnification for such Loss objected to and the reasons for such objection,
the Indemnified Party shall be entitled to indemnification for such Loss, and
the Indemnitor shall promptly pay the full amount of such Loss. If, within
30 days after the date on which the Indemnitor receives the notice of an
Indemnification Claim, the Indemnitor delivers to the Indemnified Party an
objection to all or any portion of the claimed Loss, setting forth the amount of
such Loss objected to and the reasons for such objection, the Indemnified Party
shall be entitled to reimbursement for the portion of such Loss not objected to
by the Indemnitor and the Indemnitor shall promptly pay the full amount of so
much of the Loss as to which the Indemnitor did not object.
(a) Upon determination of the amount of an Indemnification Claim, whether by
agreement between the Indemnitor and the Indemnified Party or by any
final adjudication, the Indemnitor shall pay the amount of such
Indemnification Claim within 5 days of the date such amount is
determined.
(b) The rights accorded to Indemnified Parties hereunder shall be in
addition to any rights that any Indemnified Party may have at law or in
equity.
(c) Any payment under this Article shall be treated for Tax purposes as an
adjustment of the Purchase Price to the extent such characterization is
proper and permissible under the applicable U.S. Tax law, including the
Code, Treasury regulations, court decisions and administrative
promulgations or, alternatively, by Buyer as an offset to a Tax benefit
item, if such characterization is permissible under such Tax law.
(d) In no event shall the aggregate liability of Seller and Parent for
claims asserted pursuant to Section 9.1(i) and 9.1(iii) of this Agreement
and Section 11.1(i) and 11.1(iii) of the Stock Purchase Agreement
(excluding indemnification with respect to the payment of Taxes,
penalties, Brighton Governmental Claims, interest and collection costs
thereof) exceed $700,000.
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ARTICLE X
GENERAL PROVISIONS
10.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS AND
AGREEMENTS. Except as otherwise set forth herein, the representations and
warranties of the parties shall expire at Closing. The covenants and agreements
of the parties shall expire at Closing; PROVIDED, HOWEVER, that the covenants
and agreements contained in SECTIONS 5.4(c), 5.6, 5.7, 6.2, 6.6, 6.8 and 6.9
shall survive Closing and expire in accordance with their respective terms,
provided that to the extent obligations require repeated performance or
performance from time to time, expiration shall occur only upon the final
performance of the obligation.
10.2 NOTICES. All notices and other communications given or made pursuant
to this Agreement shall be in writing and shall be deemed given if delivered
personally, telecopied (with confirmation), mailed by certified mail (postage
prepaid, return receipt requested) to the parties at the following addresses (or
at such other address for a party as shall be specified by like notice) and
shall be effective upon receipt:
(a) If to Parent or Seller:
Spinnaker Industries, Inc.
1700 Pacific Ave., Suite 1600
Dallas, Texas 75201
Telecopier: (214) 855-0093
Attention: President
With copies to:
Jenkens & Gilchrist, a Professional Corporation
1445 Ross Ave., Suite 3200
Dallas, Texas 75202
Telecopier: (214) 855-4300
Attention: Ronald J. Frappier
Crouch & Hallett, L.L.P.
717 North Harwood Street
Suite 1400
Dallas, Texas 75201
Telecopier: (214) 922-4193
Attention: Timothy R. Vaughan
(b) If to Buyer:
Intertape Polymer Group Inc.
110E Montee de Liesse
St. Laurent, Quebec H4T IN4
Canada
Telecopier: (514) 731-5477
Attention: Andrew M. Archibald
With a copy to:
Morgan, Lewis & Bockius LLP
101 Park Avenue
New York, New York 10178
Telecopier: (212) 309-6273
Attention: Nancy H. Corbett
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10.3 CERTAIN DEFINITIONS. For purposes of this Agreement, the term:
(a) "AFFILIATE" means a person that directly or indirectly, through one or
more intermediaries, controls, is controlled by, or is under common
control with, the first mentioned person; including, without limitation,
any partnership or joint venture in which any person (either alone, or
though or together with any other subsidiary) has, directly or
indirectly, an interest of 5% or more;
(b) "BUSINESS DAY" means any day other than a day on which
federally-chartered banks are required or authorized to be closed;
(c) "CONTROL" (including the terms "controlled by" and "under common control
with") means the possession, directly or indirectly or as trustee or
executor, of the power to direct or cause the direction of the management
or policies of a person, whether through the ownership of stock or as
trustee or executor, by contract or credit arrangement or otherwise;
(d) "GROSSED-UP BASIS" means, when used to describe the basis on which the
payment of a specified sum is to be made, a basis such that the amount of
such payment, after being reduced by the amount of all Taxes imposed on
the recipient of such payment as a result of the receipt or accrual of
such payment and after taking into account the Tax benefit of any
deductions attributable to such Taxes and/or payments that are currently
available to the recipient of such payment, will equal the specified sum;
(e) "LIEN" shall mean any conditional sale agreement, default of title,
easement, encroachment, encumbrance, hypothecation, infringement, lien,
mortgage, pledge, reservation, restriction, security interest, title
retention or other security arrangement, or any adverse right or
interest, charge, or claim of any nature whatsoever of, on, or with
respect to any property or property interest, other than (i) liens for
current property Taxes not yet due and payable, and (ii) liens which do
not materially impair the use of, or title to, or value of the assets
subject to such lien;
(f) "LOSS" shall mean any and all demands, claims, actions or causes of
action, assessments, damages, liabilities, costs and expenses, including
interest and penalties, and reasonable attorneys' fees and expenses
relating thereto (but excluding lost profits or consequential or
incidental damages);
(g) "MATERIAL ADVERSE EFFECT" means, with respect to Buyer, Parent, Seller
or Business, (i) any adverse effect on the business, assets, properties,
liabilities, prospects, results of operations or financial condition of,
and which is material with respect to, such party (or the Business), or
(ii) any effect that materially impairs the ability of such party to
consummate the transactions contemplated hereby; PROVIDED, HOWEVER, that
Material Adverse Effect shall not be deemed to include the impact of
(A) actions contemplated by this Agreement, (B) changes in laws and
regulations or interpretations thereof that are generally applicable to
the manufacturing industry and (C) changes in generally accepted
accounting principles that are generally applicable to the manufacturing
industry;
(h) "PERSON" means an individual, corporation, partnership, association,
trust, unincorporated organization, other entity or group (as defined in
Section 13(d) of the Exchange Act); and
(i) "SUBSIDIARY" or "SUBSIDIARIES" of Seller, Parent, Buyer or any other
person, means any corporation, partnership, joint venture or other legal
entity of which either Seller, Parent, Buyer, or such other person, as
the case may be (either alone or through or together with any other
subsidiary), owns, directly or indirectly, 50% or more of the stock or
other equity interests the holders of which are generally entitled to
vote for the election of the board of directors or other governing body
of such corporation or other legal entity.
10.4 HEADINGS. The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
10.5 SEVERABILITY. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner adverse to
any party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good
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faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in an acceptable manner to the end that
transactions contemplated hereby are fulfilled to the extent possible.
10.6 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement of
the parties and supersedes all prior agreements and undertakings, both written
and oral, between the parties, or any of them, with respect to the subject
matter hereof and, except as otherwise expressly provided herein, are not
intended to confer upon any other person any rights or remedies hereunder.
10.7 ASSIGNMENT. This Agreement shall not be assigned by operation of law
or otherwise, except that Buyer may assign all or any of its rights hereunder to
any affiliate provided that no such assignment shall relieve Buyer of its
obligations hereunder.
10.8 PARTIES IN INTEREST. This Agreement shall be binding upon and inure
solely to the benefit of each party and nothing in this Agreement, express or
implied, is intended to or shall confer upon any other person any right, benefit
or remedy of any nature whatsoever under or by reason of this Agreement.
10.9 GOVERNING LAW; VENUE. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware, regardless of
the laws that might otherwise govern under applicable principles of conflicts of
law.
10.10 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, and by the different parties in separate counterparts, each of
which when executed shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
10.11 TIME IS OF THE ESSENCE. Time is of the essence with respect to this
Agreement.
10.12 AMENDMENT. This Agreement may be amended by the agreement of the
parties and in accordance with their applicable charter documents and applicable
Law.
10.13 WAIVER OF JURY TRIAL. Each of Seller and Buyer waive their
respective rights to a trail by jury of any claim or cause of action based upon
or arising out of or related to this agreement, any assignment or the
transactions contemplated hereby, in any action, proceeding or other litigation
of any type brought by any party against the other parties, whether with respect
to contract claims, tort claims, or otherwise. Each of Seller and Buyer agree
that any such claim or cause of action shall be tried by a court trial without a
jury. Without limiting the foregoing, the parties further agree that their
respective right to a trial by jury is waived by operation of this Section as to
any action, counterclaim or other proceeding which seeks, in whole or in part,
to challenge the validity or enforceability of this Agreement, any assignment or
any provision hereof or thereof. This waiver shall apply to any subsequent
amendments, renewals, supplements or modifications to this Agreement or any
assignment.
10.14 CONSENT TO JURISDICTION. The parties hereto each hereby irrevocably
submit to the exclusive jurisdiction of the state courts of the State of
Delaware and to the jurisdiction of the United States District Court of Delaware
for the purposes of any suit, action or other proceeding arising out of or based
upon this Agreement or the subject matter hereto brought by any other party
hereto. Each party hereto, to the extent permitted by applicable law, hereby
waives and agrees not to assert, by way of motion, as a defense, or otherwise,
in any such suit, action or proceeding brought in such courts, any claim that it
is not subject personally to the jurisdiction of the above-named courts, that
its property is exempt or immune from attachment or execution, that the venue of
the suit, action or proceeding is improper or that this Agreement or the subject
matter hereof may not be enforced in or by such Court.
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IN WITNESS WHEREOF, Seller, Parent and Buyer have caused this Agreement to
be executed as of the date first written above by their respective officers
thereunto duly authorized.
SPINNAKER INDUSTRIES, INC. ("Parent")
By: /s/ Ned M. Fleming, III
Name: Ned M. Fleming, III
Title: President
SPINNAKER ELECTRICAL TAPE COMPANY ("Seller")
By: /s/ Mark R. Matteson
Name: Mark R. Matteson
Title: Vice President
INTERTAPE POLYMER GROUP INC. ("Buyer")
By: /s/ Andrew M. Archibald
Name: Andrew M. Archibald
Title: CFO, Vice President Administration
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