PURCHASE AGREEMENT
by and between
TOOTSIE ROLL INDUSTRIES, INC. ("Buyer")
and
CONCORD CONFECTIONS INC.
TERRA ROUGE ESTATES INC.
ALPHARETTA CONFECTIONS, INC.
CONCORD WAX LLC
(the "Sellers")
and
HOWARD SMUSCHKOWITZ
SERGE NUSBAUM
BRUCE WEINER
BAY-CHARLES INVESTMENTS LTD.
ONWARD INVESTMENTS LIMITED
JS NUSBAUM HOLDINGS INC.
973031 ONTARIO LIMITED
973032 ONTARIO LIMITED
973033 ONTARIO LIMITED
and
THE TRUST STOCKHOLDERS
(the "Stockholders")
August 11, 2004
TABLE OF CONTENTS
PAGE
1. Definitions...........................................................1
2. Purchase and Sale of Assets..........................................11
3. Representations and Warranties of Sellers and Stockholders...........15
4. Representations and Warranties of Buyer..............................35
5. Pre-Closing Covenants................................................35
6. Post-Closing Covenants...............................................42
7. Conditions to Obligation to Close....................................49
8. Survival; Indemnification............................................53
9. Termination..........................................................56
10. Miscellaneous........................................................57
-i-
PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT is made and entered into as of this 11th day of
August, 2004, by and between Tootsie Roll Industries, Inc., a Virginia
corporation ("Buyer"), Concord Confections Inc., an Ontario corporation
("Concord"), Terra Rouge Estates Inc., an Ontario corporation ("Terra Rouge"),
Alpharetta Confections, Inc., a Delaware corporation ("Alpharetta"), Concord Wax
LLC, an Alabama limited liability company ("Wax" and together with Concord,
Terra Rouge and Alpharetta, the "Sellers") and Bay-Charles Investments Ltd., an
Ontario corporation, Onward Investments Limited, an Ontario corporation, JS
Nusbaum Holdings Inc., an Ontario corporation, 973031 Ontario Limited, an
Ontario corporation, 973032 Ontario Limited, an Ontario corporation, 973033
Ontario Limited, an Ontario corporation, and Bruce Weiner (collectively the
"Direct Stockholders") and Howard Smuschkowitz , Serge Nusbaum and Bruce Weiner
and the trusts identified as Trust Stockholders on the signature page hereof
(collectively, the "Trust Stockholders" and together with Howard Smuschkowitz,
Serge Nusbaum and Bruce Weiner, collectively the "Holding Company Stockholders"
and together with the Direct Stockholders, the "Stockholders"). Buyer, Sellers
and Stockholders are referred to collectively herein as the "Parties."
WITNESSETH:
WHEREAS, Stockholders, directly or indirectly, own all of the outstanding
capital stock of Sellers.
WHEREAS, Sellers are engaged in the business of the manufacture, sale and
distribution of sugar, wax and confectionery products, gum and related products
(collectively, the "Business"); and
WHEREAS, this Agreement contemplates a transaction in which (i) Buyer will
purchase from Sellers, and Sellers will sell to Buyer, certain assets used in
the Business, and (iii) Buyer will assume certain liabilities related to the
Business all on the terms set forth herein.
NOW, THEREFORE, in consideration of the premises and the mutual promises
herein made, and in consideration of the representations, warranties, and
covenants herein contained, the Parties agree as follows:
1. Definitions.
"AAA" has the meaning set forth in ss.10(j) below.
"Accounts Receivable" has the meaning set forth in ss.3(q) below.
"Acquired Assets" means all right, title and interest in and to all of the
assets of Sellers (other than the Excluded Assets), including: (a) accounts,
notes and other receivables, (b) tangible personal property (such as machinery,
equipment, inventories of raw materials and supplies, manufactured and purchase
parts, goods in process and finished goods, furniture, automobiles, trucks,
tractors, trailers, tools, jigs, dies and plates), (c) Owned Real Property and
Leased Property, (d) Intellectual Property (including the name "Concord
Confections"), goodwill associated therewith, licenses and sublicense granted
and obtained with respect thereto, and rights thereunder, remedies against
infringement thereof, and rights to protection of interests therein under the
laws of all jurisdictions, (e) agreements, contracts (including futures
contracts related to ingredients, including sugar, and noncompetition agreements
entered into in connection with the prior purchase of businesses), instruments,
Security Interests, guaranties, other similar arrangements, and rights
thereunder, (f) franchises, approvals, permits, licenses, orders, registrations,
certificates and similar rights obtained from governments and government
agencies (to the extent assignable), (g) prepayments, prepaid expenses and
charges (including any such charges and expenses with respect to leases and
rentals), and deferred items, claims, deposits, refunds, causes of action,
choses in action, rights of recovery, rights of set off, and rights of
recoupment (excluding any such term related to payment of Taxes), (h) whether in
hard copy or computer format, books, records, ledgers, files, documents,
correspondence, lists of present customers, suppliers, sales representatives and
distributors, surveys, manuals and data, catalogs, quality control records,
drawings, specifications, creative materials, advertising and promotional
materials, studies, reports, and other printed or written materials, (i) UPC
codes and (j) the IMI Shares.
"Acquisition Transaction" has the meaning set forth in ss.5(f)(i) below.
"Adverse Consequences" means all actions, suits, proceedings, hearings,
investigations, charges, audits, complaints, claims, demands, injunctions,
judgments, orders, decrees, rulings, damages, dues, penalties, fines, costs,
amounts paid in settlement, Liabilities, obligations, Taxes, liens, losses,
expenses, and fees, including court costs and attorneys' fees and expenses.
"Affiliate" has the meaning with respect to Persons in the United States as
set forth in Rule 12b-2 of the regulations promulgated under the Securities
Exchange Act of 1934, as amended, and with respect to Persons in Canada has the
meaning as set forth in the Competition Act (Canada).
"Affiliated Group" means any affiliated group within the meaning of Code
ss.1504(a) or any similar group defined under a similar provision of federal,
provincial, state, local or foreign law.
"Alpharetta" has the meaning set forth in the preface above.
"Arbitrator" has the meaning set forth in ss.10(j) below.
"Assumed Liabilities" means: (a) all Liabilities for accounts payable which
arose or arise in the ordinary course of business for goods or services actually
received or to be received by Sellers prior to the Closing Date but only to the
extent accrued on the Statement of Net Working Capital in accordance with GAAP,
(b) all Liabilities for salary, bonuses, benefits, incentive payments,
commissions, accrued vacation, sick leave and holiday pay to Transferred
Employees, including all employer deductions at source and all employee
contributions relating thereto, but only to the extent accrued on the Statement
of Net Working Capital in accordance with GAAP (but specifically excluding
compensation related to phantom stock and profit sharing arrangements, if any)
up to the Closing Date and (c) all liabilities and obligations of Sellers under
the agreements, contracts and licenses included in the Acquired Assets but
excluding those agreements, contracts and licenses required to be disclosed in
ss.ss. 3(n), 3(o), and 3(s) of the Disclosure Schedule but which are not so
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disclosed (unless otherwise agreed to by Buyer in writing). Any Liability under
an agreement that is listed on the Disclosure Schedules but has not been
delivered to Buyer as requested by Buyer within 12 business days after the date
hereof shall not be an Assumed Liability.
"Books and Records" has the meaning set forth in ss.3(bb) below.
"Business" has the meaning set forth in the preface above.
"Business Employees" has the meaning set forth in ss.3(x) below.
"Buyer" has the meaning set forth in the preface above.
"Buyer Welfare Plan" has the meaning set forth in ss.6(b)(ii) below.
"Canadian Property" means all property of Sellers that is taxable Canadian
property, a life insurance policy in Canada, a Canadian resource property, a
timber resource property or any interest in or option in respect of the
foregoing, all within the meaning of the Income Tax Act (Canada).
"Canadian Tire" means Canadian Tire Corporation Limited.
"Canadian Tire Lease" means that certain Indenture dated October 31, 2002
between Terra Rouge and Canadian Tire, as amended.
"Cash" means cash and cash equivalents (including marketable securities and
short term investments) calculated in accordance with GAAP.
"CERCLA" has the meaning set forth in ss.3(aa)(v) below.
"Closing" has the meaning set forth in ss.2(c) below.
"Closing Date" has the meaning set forth in ss.2(c) below.
"COBRA" has the meaning set forth in ss.3(y)(vii) below.
"Code" means the Internal Revenue Code of 1986, as amended.
"Concord" has the meaning set forth in the preface above.
"Confidential Information" means information Sellers have not disclosed to
the public or to the trade with respect to Sellers' present or future business,
operations, services, products, research, inventions, discoveries, drawings,
designs, plans, processes, models, technical information, facilities, methods,
trade secrets, copyrights, software, source code, systems, patents, procedures,
manuals, specifications, any other Intellectual Property, confidential reports,
price lists, pricing formulas, customer lists, financial information (including
the revenues, costs, or profits associated with any of Seller's products or
services), business plans, lease structure, projections, prospects,
opportunities or strategies, acquisitions or mergers, advertising or promotions,
personnel matters, legal matters, any other confidential and proprietary
information, and any other information not generally known outside Sellers that
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may be of value to Sellers but excludes any information already properly in the
public domain. "Confidential Information" also includes confidential and
proprietary information and trade secrets that third parties entrust to Sellers
in confidence.
"Direct Stockholders" has the meaning set forth in the preface above.
"Disclosure Schedule" has the meaning set forth in ss.3 below.
"Dispute Notice" means a written notice from the Representatives indicating
disagreement with the Statement of Net Working Capital and summarizing the items
in dispute.
"Dividend Adjustment" has the meaning set forth in ss.2(g) below.
"Employee Benefit Plan" means any (a) nonqualified deferred compensation or
retirement plan or arrangement, registered retirement savings plan, registered
pension plan or supplemental pension or retirement plan, (b) qualified defined
contribution retirement plan or arrangement which is an Employee Pension Benefit
Plan, (c) qualified defined-benefit retirement plan or arrangement which is an
Employee Pension Benefit Plan (including any Multiemployer Plan), or (d)
Employee Welfare Benefit Plan or medical, dental, leave or fringe benefit or
other retirement, bonus, incentive or equity compensation plan or program.
"Employee Pension Benefit Plan" has, in respect of any United States
Employee Benefit Plan, the meaning set forth in ERISA ss.3(2) and means, in
respect of any Canadian Employee Benefit Plan, any plan or program which
provides for a pension or retirement income, whether registered or unregistered,
including any registered pension plan, supplemental pension plan, deferred
profit sharing plan or registered retirement savings plan.
"Employee Welfare Benefit Plan" has the meaning set forth in ERISA ss.3(l).
"Environmental, Health, and Safety Requirements" shall mean all federal,
state, provincial, local and foreign statutes, regulations, ordinances, permits
and other provisions having the force or effect of law, all judicial and
administrative orders and determinations, all contractual obligations and all
common law obligations or requirements, concerning food manufacture and safety,
public health and safety, worker health and safety, pollution and the protection
of the environment and natural resources, including without limitation all those
relating to the presence, use, production, generation, handling, transportation,
treatment, storage, disposal, distribution, labeling, testing, processing,
discharge, release, threatened release, control, or cleanup of any hazardous or
toxic materials or substances, wastes, chemical substances or mixtures,
pesticides, pollutants, contaminants, toxic chemicals, toxic mold or fungus,
petroleum products or byproducts, asbestos, polychlorinated biphenyls, urea
formaldehyde, lead-based paint, noise or radiation (collectively "Hazardous
Substances"), each as amended and as now or hereafter in effect, including any
breakdown products or constituents related to any of the above.
"Environmental Investigations" has the meaning set forth in ss.5(i) below.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
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"ERISA Affiliate" means each entity which is treated as a single employer
with a Seller for purposes of Code ss.414.
"Escrow Account" has the meaning set forth in the Escrow Agreement.
"Escrow Agent" means Bank of America or such other bank designated by Buyer
and the Representatives.
"Escrow Agreement" has the meaning set forth in ss.2(j) below.
"Excluded Assets" means (a) the corporate charter, qualifications to
conduct business as a foreign corporation, arrangements with registered agents
relating to foreign qualifications, taxpayer and other identification numbers,
seals, minute books, stock transfer books, blank stock certificates, and other
documents relating to the organizations, maintenance, and existence of a Seller
as a corporation or a limited liability company, (b) all Cash and bank accounts,
(c) the Owned Real Property owned by Wax and located in Selma, Alabama, (d) the
membership interests of Wax, (e) personal items identified by the
Representatives to the Buyer prior to Closing, (f) any information which is not
permitted to be conveyed under Privacy Legislation, (g) Tax deferrals and Tax
refunds, (h) professional sports season tickets, (i) financial, tax and other
records of Sellers not pertaining exclusively or primarily or directly related
to the Business, (j) all prepayments, pre-paid expenses and charges in respect
of contracts not assumed by Buyer and (k) any of the rights of Sellers under
this Agreement.
"Excluded Liabilities" means all Liabilities (other than the Assumed
Liabilities), including (a) any Liability of Sellers, Stockholders and their
Affiliates and any other Person for Taxes (as a transferee or successor, by
contract, or otherwise), (b) any obligation of Sellers, Stockholders and their
Affiliates to indemnify any other Person by reason of the fact that such Person
was a director, officer, employee, or agent of any of Sellers or their
Affiliates or was serving at the request of Sellers or their Affiliates as a
partner, trustee, director, officer, employee, or agent of another entity
(whether such indemnification is for judgments, damages, penalties, fines,
costs, amounts paid in settlement, losses, expenses, or otherwise and whether
such indemnification is pursuant to statute, charter document, bylaw, agreement,
or otherwise) unless Buyer has expressly agreed otherwise in this Agreement, (c)
all Liabilities of Sellers, Stockholders and their Affiliates with respect to
environmental, health or safety matters, including those arising under
Environmental, Health and Safety Requirements in respect of the period through
Closing, (d) any Liability (including accrued interests and prepayment
penalties) under any indebtedness for borrowed money or guarantee thereof, (e)
all Liabilities of Sellers, Stockholder and their Affiliates related to Business
Employees or Employee Benefit Plans, except to the extent that such liability is
an Assumed Liability, (f) any Liability of Sellers, Stockholders and their
Affiliates, whether currently in existence or arising hereafter, owed by Sellers
to any of their Affiliates relating to any intercompany account, any asset that
is not an Acquired Asset, or with respect to any current or former employee
which is not an Assumed Liability, (g) any Liability of Sellers, Stockholder and
their Affiliates arising out of any injury to individuals or property as a
result of the ownership, possession, or use of any product sold or delivered by
the Business prior to the Closing or the Excluded Assets, (h) the Liabilities of
Sellers, Stockholder and their Affiliates under any express and implied
warranties with respect to products manufactured by the Business prior to the
Closing or related to Excluded Assets, (i) any Liability of Sellers or
5
Stockholders for income, transfer, sales, use, and other Taxes arising in
connection with the consummation of the transactions contemplated hereby, (j)
all obligations of Sellers, Stockholders and their Affiliates in respect of
fees, costs, broker's commissions, and expenses arising out of or in connection
with this Agreement, or the transactions hereby contemplated, (k) any Liability
of Sellers, Stockholders and their Affiliates for any misuse, misrepresentation,
or infringement relating to the Intellectual Property, (l) any Liability for
orders, judgments, injunctions, awards, decrees, proceedings, actions, suits,
injuries, investigations or claims with respect to the Business prior to the
Closing or related to the Excluded Assets (including the matters set forth in
ss.3(u) of the Disclosure Schedule) unless Buyer has expressly agreed to assume
such Liability under this Agreement, (m) any Liability of Sellers, Stockholders
and their Affiliates owed the selling parties under that certain Asset Purchase
Agreement dated June 26, 2003 in respect of the purchase of the assets of the
Philadelphia Chewing Gum Co., (n) any Liability of Sellers, Stockholders and
their Affiliates under this Agreement (or under any side agreement between
Sellers, Stockholders and their Affiliates on the one hand and Buyer on the
other hand entered into on or after the date of this Agreement) and (o) any
Liability of IMI prior to Closing.
"Financial Information" has the meaning set forth in ss.3(i)(ii) below.
"Financial Statements" has the meaning set forth in ss.3(i)(i) below.
"Fleer" means Fleer Espanola, S.A., a corporation constituted under the
laws of Spain.
"Fleer Shares" means the 17,434 Series B shares of the share capital of
Fleer owned by IMI, as represented by share numbers 17,435 to 34,868
(inclusive).
"GAAP" means Canadian generally accepted accounting principles in effect
from time to time in respect of Concord and Terra Rouge, United States generally
accepted accounting principles as in effect from time to time in respect of
Alpharetta and Spanish generally accepted accounting principles in effect from
time to time in respect of the Spanish Subsidiaries.
"GST Legislation" means Part IX of the Excise Tax Act (Canada).
"Hazardous Substances" has the meaning set forth in the definition of
Environmental, Health and Safety Requirements above.
"HIPAA" has the meaning set forth in ss.3(y)(vii) below.
"Holding Company Stockholders" has the meaning set forth in the preface
above.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended.
"ICA" has the meaning set forth in ss.3(hh) below.
"IMI" shall mean Impel Movieline Inc., a Delaware corporation.
"IMI Shares" means all of the issued and outstanding shares of IMI.
6
"Improvements" has the meaning set forth in ss.3(n)(iv) below.
"Indemnified Party" has the meaning set forth in ss.8(d)(i) below.
"Indemnifying Party" has the meaning set forth in ss.8(d)(i) below.
"Independent Auditor" means a national public accounting firm with no
material relationship to any of the Parties or their respective Affiliates
chosen by agreement of the Parties, or if they are unable to agree, shall mean a
national firm with no such material relationship chosen by lot.
"Intellectual Property" means (a) all trademark applications and
registrations, unregistered trademarks, trademark rights, trade names, trade
name rights, trade dress, logos, corporate names, together with all
translations, adaptations, derivations, and combinations thereof and including
all goodwill associated therewith; (b) all issued patents, patent rights and
patent applications; (c) all copyrightable works, copyright registrations and
applications, and unregistered copyrights; (d) all software, computer programs,
computer systems, modules and related data; (e) all internet domain names and
internet web-sites and the content thereof; (f) all categories of confidential
and proprietary information, including, without limitation, trade secrets,
ideas, research and development, know-how, formulas, compositions, manufacturing
and production processes and techniques, technical data, designs, drawings,
specifications, customer and supplier lists and data, pricing and cost
information, business and marketing plans and proposals, inventions, invention
disclosures (whether or not patentable and whether or not reduced to practice),
inventor rights, reports, quality records, engineering notebooks, models,
processes, procedures, drawings, designs, ingredient or component lists, plans,
proposals, financial and marketing data, and all other confidential and
proprietary rights information and (g) all copies and tangible embodiments of
the foregoing (in whatever form or medium).
"Knowledge" means actual knowledge after reasonable investigation.
"Leased Real Property" means all leasehold and subleasehold estates, land,
buildings, structures, improvements, fixtures or other interests in real
property held by Sellers.
"Leases" means all leases, subleases, licenses, concessions and other
agreements (written or oral), including all amendments, extensions, renewals,
guaranties and other agreements with respect thereto, pursuant to which any of
Sellers holds any Leased Real Property, including the right to all security
deposits and other amounts and instruments deposited by or on behalf of any of
Sellers thereunder.
"Liability" means any liability (whether known or unknown, whether asserted
or unasserted, whether absolute or contingent, whether accrued or unaccrued,
whether liquidated or unliquidated and whether due or to become due), including
any liability for Taxes.
"Material Adverse Change" and Material Adverse Effect" means any change,
event or effect that, individually or when taken together with all other
changes, events and effects that have occurred prior to the date of
determination is or is reasonably likely to be material and adverse to the
operations, prospects, assets, liabilities, business, financial condition or
results of operations of Sellers, taken as a whole.
7
"Most Recent Balance Sheet" means the balance sheet contained within the
Most Recent Financial Statements.
"Most Recent Financial Statements" has the meaning set forth in ss.3(i)(i)
below.
"Most Recent Fiscal Month End" means June 30, 2004.
"Most Recent Fiscal Year End" means December 31, 2003.
"Multiemployer Plan" has the meaning set forth in ERISA ss.3(37) or
applicable Canadian pension legislation.
"Net Working Capital Value" shall mean only in respect of Concord, Terra
Rouge, Alpharetta and Wax, the amount equal to the prepaid amounts (including
deposits, but not deposits in respect of machinery or other capital assets) in
respect of contracts assumed by Buyer, inventory and Accounts Receivable
included in the Acquired Assets (net of reserves for such items prepared in
accordance with GAAP) less the Assumed Liabilities as of the Closing Date
calculated in accordance with GAAP, but excluding contractual commitments for
goods or equipment delivered and services provided on or after the Closing date;
provided (i) that such amount shall be reduced further, if necessary, by the
value of any raw materials, goods in process and finished goods included in the
Acquired Assets in excess of quantities adequate and sufficient to operate the
Business for a period of four (4) months in the Ordinary Course of Business (for
each SKU in respect of goods in process and finished goods) and by the value of
any packaging included in the Acquired Assets in excess of quantities adequate
and sufficient to operate the Business for a period of twelve (12) months in the
Ordinary Course of Business for each SKU, and (ii) such amount shall be reduced
by any bad debts, including subsequent bankruptcies, and subsequent customer
deductions, including unsaleables, fines and penalties, markdowns, price
adjustments and rebates occurring within one hundred twenty (120) days of the
Closing Date to the extent that such amounts have not already been included in
the calculation of Accounts Receivable. For greater certainty, the Real Property
Adjustments shall not be included in connection herewith.
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency) of Sellers.
"Owned Real Property" means all land, together with all buildings,
structures, improvements and fixtures located thereon, including all electrical,
mechanical, plumbing and other building systems, fire protection, security and
surveillance systems, telecommunications, computer, wiring and cable
installations, utility installations, water distribution systems, and
landscaping, together with all easements and other rights and interests
appurtenant thereto owned by Sellers.
"Party(ies)" has the meaning set forth in the preface above.
"Permitted Encumbrances" means with respect to each parcel of Real
Property: (a) real estate Taxes, assessments and other governmental levies, fees
or charges imposed with respect to such Real Property which are not due and
payable as of the Closing Date; (b) zoning, building codes and other land use
laws regulating the use or occupancy of such Real Property of the activities
8
conducted thereon which are imposed by any governmental authority having
jurisdiction over such Real Property which are not violated by the current use
or occupancy of such Real Property, or the operation of the Business as
currently conducted thereon; (c) easements, restrictions and covenants
registered against title to such Real Property, provided that such are complied
with and do not and would not impair the use or occupancy of such Real Property
in the operation of the Business as currently conducted thereon, (d) any
registered municipal agreements and registered agreements with publicly
regulated utilities provided such have been complied with, or security has been
posted to ensure compliance and completion and (e) Instrument No. YR266116 being
a Notice of Lease registered February 10, 2003 between Terra Rouge Estates Inc.
and Canadian Tire Corporation Limited.
"Person" means an individual, a partnership, a corporation, an association,
a joint stock company, a trust, a joint venture, an unincorporated organization,
or a governmental entity (or any department, agency, or political subdivision
thereof).
"Personal Information" has the meaning set forth in the Privacy Act.
"Privacy Act" means the Personal Information Protection and Electronic
Documents Act (Canada) as it may be amended or supplemented from time to time,
and any successor legislation thereto.
"Privacy Legislation" means all laws, regulations, bylaws and ordinances
that regulate the collection, use or disclosure of Personal Information or
information about entities other than identifiable individuals in each
jurisdiction in which a Seller carries on the Business, and includes any
guidelines or directives of any governmental agency or regulatory authority to
which a Seller adhere in order to qualify to carry on the Business in, or in
connection with, any jurisdiction.
"Purchase Price" has the meaning set forth in ss.2(b) below.
"Real Property" has the meaning set forth in ss.3(n)(iii) below.
"Real Property Adjustments" has the meaning set forth in ss.2(f) below.
"Real Property Laws" has the meaning set forth in ss.3(n)(vi) below.
"Representatives" has the meaning set forth in ss.2(j) below.
"SEC" has the meaning set forth in ss.5(j) below.
"Security Interest" means any mortgage, pledge, lien, encumbrance, charge,
or other security interest, other than mechanic's, materialmen's, and workmen's
liens.
"Sellers" has the meaning set forth in the preface above.
"Sellers Accrued Vacation" has the meaning set forth in ss.6(b)(iii) below.
"Shares" means collectively the Fleer Shares and the Torrents Shares.
9
"Significant Customers" has the meaning set forth in ss.3(ee) below.
"Significant Vendors" has the meaning set forth in ss.3(ee) below.
"Spanish Subsidiaries" means Fleer and Torrents.
"Statement of Net Working Capital" has the meaning set forth in ss.2(h)
below.
"Stockholders" has the meaning set forth in the preface above.
"Surveys" has the meaning set forth in ss.5(g)(iii) below.
"SWDA" has the meaning set forth in ss.3(aa)(v) below.
"Tax" means any federal (US or Canadian), state, provincial, local, or
foreign income, gross receipts, license, payroll, employment excise, severance,
stamp, occupation, premium, windfall profits, environmental (including taxes
under Code ss.59A), customs duties, capital stock, franchise, profits,
withholding, social security (or similar), unemployment, disability, real
property, personal property, sales, use, transfer, registration, value added,
alternative or add-on minimum, estimated, or other tax of any kind whatsoever,
including any interest, penalty, or addition thereto, whether disputed or not.
"Tax Return" means any return, declaration, report, claim for refund, or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
"Terra Rouge" has the meaning set forth in the preface above.
"Territory" has the meaning set forth in ss.6(d)(i) below.
"Third Party Claim" has the meaning set forth in ss.8(d)(i) below.
"Thompson Severance Payment" has the meaning set forth in ss.6(b)(viii)
below.
"Title Commitment" has the meaning set forth in ss.5(g)(i) below.
"Title Company" has the meaning set forth in ss.5(g)(i) below.
"Title Policy" has the meaning set forth in ss.5(g)(ii) below.
"Torrents" means Dr. Torrents, S.A., a corporation constituted under the
laws of Spain.
"Torrents Shares" means the 500 Series B shares of the share capital of
Torrents owned by IMI, as represented by share numbers 501 to 1000 (inclusive).
"Transferred Employees" means those employees of Sellers listed on ss.5(h)
of the Disclosure Schedule who accept Buyer's offer of employment.
"Trust Stockholders" has the meaning set forth in the preface above.
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"Wax" has the meaning set forth in the preface above.
2. Purchase and Sale of Assets.
(a) Purchase and Sale; Assumption of Liabilities. At the Closing, on and
subject to the terms and conditions of this Agreement, Buyer agrees to purchase,
and Sellers agree to sell to Buyer, the Acquired Assets and Buyer agrees to
assume, pay or discharge all of the Assumed Liabilities. The Buyer will not
assume or have any responsibility with respect to any other Liability of
Sellers, IMI, Stockholders or their Affiliates.
(b) Purchase Price. The Buyer agrees to pay Sellers at Closing US
$217,210,500 subject to adjustment as set forth below (the "Purchase Price").
The Purchase Price is payable by Buyer as follows:
(i) US $197,210,500 in immediately available funds shall be paid to
Sellers in accordance with instructions provided by the Representatives to
Buyer no fewer than two (2) business days prior to Closing;
(ii) US $20,000,000 in immediately available funds shall be deposited
with the Escrow Agent to be held and dispersed in accordance with the
Escrow Agreement.
(c) The Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of McDermott Will &
Emery LLP at 227 West Monroe Street, Chicago, Illinois, commencing at 9:00 a.m.
local time as soon as practicable following the satisfaction or waiver of all
conditions to the obligations of the Parties to consummate the transactions
contemplated hereby (other than conditions with respect to actions the
respective Parties will take at the Closing itself) or such other date as Buyer
and Sellers may mutually determine (the "Closing Date"). The Closing shall be
effective as of 12:01 a.m. on the Closing Date.
(d) Deliveries at the Closing. At the Closing, (i) Sellers will deliver to
Buyer the various certificates, instruments, and documents referred to in
ss.7(a) below, (ii) Buyer will deliver to Sellers the various certificates,
instruments, and documents referred to in ss.7(b) below, (iii) Sellers will
execute and deliver to Buyer assignments with respect to the Acquired Assets and
such other instruments of sale, transfer, conveyance, and assignment as Buyer
and its counsel reasonably may request, (iv) Concord will deliver to Buyer stock
certificates representing the IMI Shares, endorsed in blank and accompanied by
duly executed stock powers or other such assignment documents or other evidence
demonstrating conveyance of the IMI Shares to Buyer, (v) Buyer will execute and
deliver to Sellers an assumption with respect to the Assumed Liabilities and
such other instruments of assumption as Sellers and their counsel reasonably may
request, and (iv) Buyer will deliver to Sellers the Purchase Price specified in
ss.2(b) above.
(e) Allocation. The Parties agree to allocate the Purchase Price among the
Acquired Assets for all purposes (including financial accounting and tax
purposes) in accordance with the allocation schedule attached hereto as Exhibit
A and to file all Tax Returns consistent with such allocation).
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(f) Real Property Adjustments. The Purchase Price will be adjusted at
Closing by apportioning as between the Buyer on the one hand and Sellers on the
other hand as of the Closing Date all adjustments which are customarily made in
transactions of purchase and sale of commercial real property including, all
rents, profits, and other income (including prepaid rent and other amounts, if
any, prepaid by tenants, in the nature of accounts of tenants for real property
taxes, utilities and operating costs) and all real property taxes, service
contracts, local improvement rates, utilities and other outgoings; with the
result and effect that all costs relating to the Owned Real Property included in
the Acquired Assets and all rents and other income and profits therefrom
together with all other amounts recovered from tenants including, without
limitation, recoveries for taxes, maintenance expenses, common area costs, for
or in respect of periods up to but not including the Closing Date, will be to or
for the account of Sellers, and for the account of the Buyer thereafter (the
"Real Property Adjustments"). Sellers will prepare a written draft statement of
the Real Property Adjustments to the Purchase Price hereunder and submit it to
the Buyer at least five (5) business days before the Closing Date. Sellers and
Buyer agree to readjust and recalculate the Real Property Adjustments made on
Closing, if necessary, and in accordance with ss.2(h)(v) below. Arrears of rents
and local improvement rates will be the responsibility of Sellers and will not
be adjusted.
(g) Dividend Adjustment. The Purchase Price will be reduced by any
dividends or distributions made by the Spanish Subsidiaries to Sellers on or
after June 30, 2004 (the "Dividend Adjustment"), which adjustment will be made
at Closing and further adjusted, if necessary, in accordance with ss.2(h)(v),
below.
(h) Purchase Price Adjustments.
(i) Within one hundred twenty (120) days after the Closing Date, Buyer
shall deliver to the Representatives a statement of Net Working Capital
Value prepared in the same manner as a year end audited balance sheet would
be prepared ("Statement of Net Working Capital"). The United States
dollar/Canadian dollar exchange rate used in the preparation of the
Statement of Net Working Capital shall be the average United States
dollar/Canadian dollar exchange rate as reported in The Wall Street Journal
on the Closing Date and for the four preceding business days. In connection
therewith, from and after Closing, Buyer shall provide the Representatives
with reasonable access to all records and work papers necessary to compute
and verify the Statement of Net Working Capital. The Statement of Net
Working Capital as delivered to the Representatives shall be final and
binding on the Parties for purposes of determining the Net Working Capital
Value unless, within thirty (30) days after delivery to the
Representatives, the Representatives deliver to Buyer a Dispute Notice.
After delivery of a Dispute Notice, the Representatives and Buyer shall
promptly negotiate in good faith with respect to the subject of the Dispute
Notice, and if they are unable to reach an agreement within ten (10)
business days after delivery to Buyer of the Dispute Notice, the dispute
shall be submitted to the Independent Auditor. The Independent Auditor
shall be directed to issue a final and binding decision within thirty (30)
days of submission of the Dispute Notice, as to the issues of disagreement
referred to in the Dispute Notice and not resolved by the Buyer and the
Representatives. The Statement of Net Working Capital and the resulting
calculation of the Net Working Capital Value, as so adjusted by agreement
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or by the Independent Auditor (if required), shall be final and binding on
the Parties.
(ii) The fees and expenses of the Independent Auditor retained as a
result of any dispute related to any statement shall be allocated equally
between Buyer on the one hand and Sellers and Stockholders (excluding the
Trust Stockholders), as a group, on the other hand. The full force and
effect of the representations and warranties shall in no way be diminished
by the adjustment to the Purchase Price pursuant to the Statement of Net
Working Capital.
(iii) To the extent the Net Working Capital Value is less than CDN
$19,300,000, an amount equal to the deficiency shall be transferred from
the Escrow Account to the Buyer within five (5) business days after the
final determination of the Statement of Net Working Capital and the
resulting calculation of the Net Working Capital Value.
(iv) To the extent the Net Working Capital Value is greater than CDN
$21,300,000, an amount equal to the excess shall be paid by Buyer in
immediately available funds to Sellers as directed by and to an account(s)
designated by the Representatives within five (5) business days after the
final determination of the Statement of Net Working Capital and the
resulting calculation of the Net Working Capital Value.
(v) The Statement of Net Working Capital shall also include a
recalculation of the Real Property Adjustments and the Dividend Adjustment.
Any dispute as to the recalculation of the Real Property Adjustment or the
Dividend Adjustment and the timing of payments due the Buyer or Sellers
resulting therefrom shall be treated in the same manner as determination
and payment of the Net Working Capital Value set forth above in this
ss.2(h).
(i) Nonassignable Contracts.
(i) To the extent that the assignment by Sellers of any sales order,
purchase order, lease or other contract included in the Assumed Liabilities
or Acquired Assets is not permitted without (A) the consent of the other
party to the contract, (B) the approval of Buyer as a source of the
products or services called for by such contract or (C) the approval of
Buyer as a lessee, then this Agreement shall not be deemed to constitute an
assignment or an attempted assignment of the same, if such assignment or
attempted assignment would constitute a breach thereof. However, unless
otherwise agreed as to any particular contract or order (or class thereof),
Sellers and Stockholders (excluding the Trust Stockholders) shall use their
best efforts to obtain any and all such consents, approvals and novations
before and after Closing.
(ii) If any necessary consent, approval or novation is not obtained,
Sellers and Stockholders shall cooperate with Buyer in any reasonable
arrangement designed to provide Buyer with all of the benefits under such
contract, lease or order as if such consent, approval or novation had been
obtained, including subleases from Sellers and, undertakings by Buyer of
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the work necessary to complete contracts as the agent of Sellers, including
Buyer performing in the name of Sellers all obligations and benefits
thereunder for the benefit and account of Buyer, and with the understanding
that Sellers shall then invoice the customer for services rendered and
promptly remit the amount of the receivable to Buyer. Nothing herein shall
excuse Sellers and Stockholders (excluding the Trust Stockholders) from
responsibility for any of their representations and warranties or covenants
hereunder.
(j) Appointment of Representatives. Each Stockholder hereby appoints a
committee consisting of Howard Smuschkowitz, Serge Nusbaum, and Bruce Weiner
(the "Representatives") the attorney-in-fact of such Stockholder, with full
power and authority, including power of substitution, acting in the name of and
for and on behalf of such Stockholder to (i) give and receive notices and
communications made pursuant to this Agreement, (ii) to amend or waive any
provision to this Agreement, (iii) to execute a consent pursuant to the
corporate and limited liability company statutes in respect of Sellers and any
Stockholder that is an entity in connection with any such amendment or waiver as
proxy for such Stockholders, (iv) to terminate this Agreement, (v) to execute
and deliver the Escrow Agreement in the form attached as Exhibit B (the "Escrow
Agreement") with such changes as the Representatives deem necessary or
appropriate and shall have all of the rights and shall perform all of the
obligations of the Representatives as set forth in the Escrow Agreement, (vi) to
pursue, defend, and settle on behalf of all Stockholders any indemnification
claims after the Closing, or (vii) to do all other things and to take all other
action under or related to this Agreement which, in its discretion, it may
consider necessary or proper to effectuate the acquisition of the Acquired
Assets as contemplated under the Agreement and to resolve any dispute with Buyer
over any aspect of this Agreement or any other agreement entered into by the
Parties pursuant to this Agreement, and on behalf of such Stockholder, to enter
into any agreement to effectuate any of the foregoing, which shall have the
effect of binding such Stockholder as if such Stockholder had personally entered
into such an agreement; provided, however, that all actions taken or decisions
made by the Representatives on behalf of Stockholders shall be taken or made in
a manner which is ratably and equitably amongst all Stockholders. The
Representatives shall act by a majority vote of the members of the committee.
This appointment and power of attorney shall be deemed as coupled with an
interest and all authority conferred hereby shall be irrevocable and shall not
be subject to termination by operation of law, whether by the death or
incapacity or liquidation or dissolution of any Stockholder or the occurrence of
any other event or events and the Representatives may not terminate this power
of attorney with respect to any Stockholder or such Stockholder's successors or
assigns without the consent of Buyer. Each Stockholder agrees to hold the
Representatives harmless from any and all loss, damage or Liability and expenses
(including legal fees) which such Stockholder may sustain as a result of any
action taken in good faith by the Representatives. No bond shall be required of
the Representatives, and the Representatives shall receive no compensation for
his or her services. Upon the death, disability or resignation of Howard
Smuschkowitz, his successor shall be David Smuschkowitz; upon the death,
disability or resignation of Serge Nusbaum, his successor shall be Diane
Nusbaum; and upon the death, disability or resignation of Bruce Weiner, his
successor shall be L. Jeanine Weiner.
(k) Stockholder Consent. Each Stockholder hereby consents to and approves
the execution and delivery of this Agreement and the sale of the Acquired Assets
in accordance with the applicable corporate and limited liability company
statutes that govern Sellers and Stockholders that are entities. Notwithstanding
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anything contained in this Agreement, the Trust Stockholders have executed and
delivered this Agreement only for the purposes of (i) providing their consent
and approval as provided in this ss.2(k) and (ii) providing certain
indemnification as set out in ss.8 hereof. For greater certainty, the trustees
of the Trust Stockholders shall have no personal liability in their capacity as
trustees.
(l) Uncollected Accounts Receivable. In the event that in connection with
determination of the Net Working Capital Value Buyer has written-off (excluding
any write-off for customer and similar deductions as set out in ss.3(q) hereof)
an Account Receivable by reason of uncollectibility then, upon written request
from Sellers, Buyer agrees to re-assign and convey to Sellers such Account
Receivable.
(m) Mortgages. The Owned Real Property is subject to charges/mortgages
which are not to be assumed by the Buyer on completion. If discharge(s) are not
available in registrable form on Closing, the Buyer agrees to accept Sellers'
lawyer's personal undertaking to obtain, out of the funds payable on Closing, a
discharge of each mortgage in registrable form and to register same on title
within 60 days after Closing, provided that on or before Closing Sellers shall
provide to Buyer a mortgage statement prepared by each mortgagee setting out the
balance required to obtain the discharge, together with a direction executed by
Sellers directing payment to each such mortgagee of the amount required to
obtain the relevant discharge out of the balance due on Closing.
3. Representations and Warranties of Sellers and Stockholders. Each Seller
and Stockholder, jointly and severally, represents and warrants to Buyer that
the statements contained in this ss.3 are correct and complete as of the date of
this Agreement and will be correct and complete as of the Closing Date (as
though made then and as though the Closing Date were substituted for the date of
this Agreement throughout this ss.3), except as set forth in the Disclosure
Schedule attached hereto as Exhibit C (the "Disclosure Schedule").
(a) Organization, Qualification, and Corporate Power. Each Seller, IMI and
Stockholder that is an entity is a corporation or limited liability company duly
organized, validly existing, and in good standing (in respect of any entities
organized under the laws of the United States) under the laws of the
jurisdictions of its organization. Each Seller and IMI is duly authorized and
qualified to conduct business and is in good standing under the laws of each
jurisdiction where such qualification is required. Except as otherwise
specifically set out in this Agreement, each Seller and IMI has full corporate
power and authority and all licenses, permits, and authorizations necessary to
operate and carry on the businesses in which it is engaged and to own and use
the properties owned and used by it.
(b) Authorization of Transaction. Each Seller and Stockholder has full
power and authority (including full corporate power and authority, as
applicable) to execute and deliver this Agreement and to perform its obligations
hereunder. This Agreement has been duly and validly authorized by each Seller
and Stockholder that is an entity and has been duly and validly executed and
delivered by each Seller and each Stockholder. This Agreement constitutes the
valid and legally binding obligation of each Seller and Stockholder, enforceable
in accordance with its terms and conditions except as may be limited by (a)
bankruptcy, insolvency and other laws of general application, and (b) general
equitable principles. Except as set out in this Agreement, no Seller or
15
Stockholder need give any notice to, make any filing with, or obtain any
authorization, consent, or approval of any government, governmental agency or
court, or any other Person in order to consummate the transactions contemplated
by this Agreement.
(c) Noncontravention. Except as set forth in ss.3(c) of the Disclosure
Schedule, neither the execution and the delivery of this Agreement, nor the
consummation of the transactions contemplated hereby, will (i) violate any law,
constitution, statute, regulation, rule, injunction, judgment, order, decree,
ruling, charge, or other restriction of any government, governmental agency or
court to which a Seller or Stockholder or IMI is subject or any provision of the
charter or bylaws of such Seller or Stockholder which is an entity or IMI, (ii)
conflict with, result in a breach of, constitute a default under, result in the
acceleration of, create in any Person the right to accelerate, terminate,
modify, or cancel, or require any notice under any agreement, contract, note,
bond, mortgage, lease, license, instrument, or other arrangement or instrument
to which a Seller or Stockholder or IMI is a party or by which it is bound or to
which any of its assets is subject and which is required to be disclosed in
ss.ss.3(n), 3(o), and 3(s), (iii) result in the creation or imposition of any
Security Interest on the Acquired Assets, (iv) result in termination or any
impairment of or result in the imposition of any material restriction or expense
on the Business or any of the Acquired Assets under, any permit, license,
franchise, certificate, consent, authorizations or approvals issued to Sellers
or IMI, or (v) constitute an event which, after notice or lapse of time or both,
would result in any conflict, breach, violation, default, requirement, loss,
creation or imposition of any Security Interest, termination or impairment or
similar event described in (i) through (iii).
(d) Brokers' Fees. No Seller or Stockholder or Affiliate thereof has any
Liability or obligation to pay any fees or commissions to any broker, finder, or
agent with respect to the transactions contemplated by this Agreement for which
Buyer could become liable or obligated.
(e) Ownership of Sellers. The entire authorized capital stock of each of
the Sellers and each Direct Stockholder that is an entity is set forth in
ss.3(e) of the Disclosure Schedule. The Persons that hold of record or
beneficially own the issued and outstanding shares of capital stock of each
Seller and Direct Stockholder that is an entity, together with the number of
shares so held or owned, are set forth in ss.3(e) of the Disclosure Schedule.
(f) IMI and Spanish Subsidiaries. The entire authorized capital stock of
IMI is set forth on ss.3(f) of the Disclosure Schedule. All of the issued and
outstanding capital stock of IMI has been duly authorized and validly issued,
fully paid and nonassessable, and have been issued in compliance with applicable
securities laws. The IMI Shares are held of record by Concord and at Closing
will be free and clear of all Security Interests. Other than the Shares, IMI
holds, owns or has no other interest in any other assets and has no liabilities
other than arising through the ownership of the Shares. IMI has not conducted
any business over the past five (5) years other than the holding of the Shares.
The Shares represent and constitute a fifty percent (50%) ownership interest in
each of the Spanish Subsidiaries. The Shares have been duly authorized, are
validly issued, fully paid-in, and the Shares are held of record by IMI free and
clear of all Security Interests (or will be free and clear of all Security
Interests at Closing). The Shares are subject to those restrictions set out in
the Spanish corporate law ("Ley de Sociedadas Anominas") and as set out in the
By-laws of the Spanish Subsidiaries. The transfer of the IMI Shares will not be
subject to the consent or right of first refusal of any shareholder of the
Spanish Subsidiaries. There are no outstanding or authorized options, warrants,
16
purchase rights, subscription rights, conversion rights, exchange rights, or
other contracts or commitments of any character, whether written or oral, that
would require IMI or the Spanish Subsidiaries to issue, sell, redeem, acquire or
otherwise cause to become issued any additional capital stock or shares,
respectively. There are no outstanding or authorized stock appreciation, phantom
stock, profit participation, or similar rights or obligations to pay any
dividend or make any distribution on the issued shares of IMI or the Spanish
Subsidiaries. ss.3(f) of the Disclosure Schedule sets forth any and all
dividends or distributions made on the Shares since January 1, 2001. There are
no voting trusts, proxies, or other agreements or understandings with respect to
the voting of the capital stock of IMI or the Shares. To the Knowledge of
Stockholders and Sellers, there are no obligations of or for any Seller to make
or contribute additional capital or assets to the Spanish Subsidiaries or any
outstanding capital call with respect to the Shares. To the Knowledge of
Stockholders and Sellers, neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, will
(i) violate any law of any government, government agency or court to which the
Spanish Subsidiaries is subject or any provision of the bylaws of the Spanish
Subsidiaries or (ii) conflict with, result in a breach of, constitute a default
under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice under any
agreement, contract, lease, license, instrument, or other arrangement to which
the Spanish Subsidiaries is a party or by which it is bound or to which any of
its assets is subject (or result in the imposition of any Security Interest upon
any of its assets). To the Knowledge of Stockholders and Sellers, none of the
Spanish Subsidiaries needs to give any notice to, make any filing with, or
obtain any authorization, consent, or approval of any government, government
agency or court or any other Person in order for the Parties to consummate the
transactions contemplated by this Agreement.
(g) Title to Assets. Each Seller has good and marketable beneficial title
to, or a valid leasehold interest in, the properties and assets (including IMI
Shares) used by them, located on their premises, or shown on the Most Recent
Balance Sheet or acquired after the date thereof, which at Closing will be free
and clear of all Security Interests, except for Permitted Encumbrances and
properties and assets disposed of in the Ordinary Course of Business since the
date of the Most Recent Balance Sheet or as otherwise provided in this
Agreement. Without limiting the generality of the foregoing, except for
Permitted Encumbrances Sellers have good and marketable title to all of the
Acquired Assets, which at Closing will be free and clear of any Security
Interest or restriction on transfer. Except for the Excluded Assets, the
Acquired Assets are all of the assets used to operate the Business as presently
being conducted.
(h) Subsidiaries. Other than a Seller, IMI or a Spanish Subsidiary, none of
the Sellers has any subsidiaries, nor do they own or control, directly or
indirectly, any shares of capital stock of any other corporation or any interest
in any partnership, joint venture or other non-corporate business enterprise.
(i) Financial Statements.
(i) Attached as ss.3(i)(i) of the Disclosure Schedule are the
following financial statements (collectively the "Financial Statements"):
(i) audited financial statements as of and for the fiscal years ended
December 31, 2001, December 31, 2002 and December 31, 2003 for each of
Concord (and its consolidated subsidiaries), Torrents and Fleer, (ii)
17
unaudited financial statements as of and for the fiscal years ended
December 31, 2001, December 31, 2002 and December 31, 2003 for Terra Rouge,
(iii) unaudited balance sheets and income statements as of and for the
fiscal years ended December 31, 2001, December 31, 2002 and December 31,
2003 for Alpharetta, (iv) unaudited balance sheets and statements of income
as of and for the six months ended June 30, 2004 for each of Concord (and
its consolidated subsidiaries), Terra Rouge and Alpharetta and (v)
unaudited balance sheets and statements of income as of and for the five
months ended May 31, 2004 for each of Torrents and Fleer (collectively, the
"Most Recent Financial Statements"). Except as set forth on ss.3(i)(i) of
the Disclosure Schedule, the Financial Statements (including the notes
thereto) have been prepared in accordance with GAAP applied on a consistent
basis throughout the periods covered thereby, present fairly in all
material respects the financial condition of each Seller and its
subsidiaries as of such dates and the results of operations of each Seller
and its subsidiaries for such periods are correct and complete, and are
consistent with the books and records of Sellers (which books and records
are correct and complete).
(ii) Attached as ss.3(i)(ii) of the Disclosure Schedule is certain
additional financial information (the "Financial Information"). The
Financial Information presents fairly in all respects the financial results
and information included therein and is correct and complete, and are
consistent with the books and records of Sellers (which books and records
are correct and complete) and recorded as expenses in the Financial
Statements in the applicable years.
(j) Events Subsequent to Most Recent Fiscal Year End. Except as set forth
in ss.3(j) of the Disclosure Schedule, since December 31, 2003, each Seller has
operated its Business in the Ordinary Course of Business and there has not been
a Material Adverse Change with respect to the Business. Without limiting the
generality of the foregoing, with respect to the Business, since December 31,
2003:
(i) no Seller has sold, leased, transferred, or assigned (or entered
into any agreement to do the foregoing) any of its assets or property,
tangible or intangible, other than for a fair consideration in the Ordinary
Course of Business;
(ii) no Seller has entered into any agreement, contract, lease, or
license (or series of related agreements, contracts, leases, and licenses)
involving more than US $50,000, which has not otherwise been fully
satisfied or terminated;
(iii) no Seller has accelerated, terminated, modified, or cancelled
any agreement, contract, lease, or license (or series of related
agreements, contracts, leases, and licenses) involving more than US $50,000
to which any Seller is a party or by which it is bound, which has not
otherwise been fully satisfied or terminated;
(iv) no Seller has imposed any Security Interest upon any of its
assets, tangible or intangible, property, personal or real;
18
(v) no Seller has made any capital expenditure (or series of related
capital expenditures) involving more than US $50,000;
(vi) no Seller has made any capital investment in, any loan to, or any
acquisition of the securities, property or assets of, any other Person (or
series of related capital investments, loans, and acquisitions) involving
more than US $50,000;
(vii) no Seller has issued any note, bond, or other debt security or
created, incurred, assumed, or guaranteed any indebtedness for borrowed
money or capitalized lease obligation;
(viii) no Seller has delayed or postponed the payment of accounts
payable and other Liabilities or accelerated the payment of receivables;
(ix) no Seller has cancelled, compromised, waived, or released any
right or claim (or series of related rights and claims) involving more than
US $50,000;
(x) no Seller has granted any license or sublicense of any rights
under or with respect to any Intellectual Property;
(xi) there has been no change made or authorized in the charter or
bylaws of a Seller;
(xii) the Sellers have not experienced damage, destruction, or loss
(whether or not covered by insurance) to its real or personal property in
an aggregate amount greater than US $10,000;
(xiii) no Seller has made any loan to, or entered into any other
transaction with, any of its directors, officers, and employees;
(xiv) no Seller has entered into any employment contract which
provides for base compensation in excess of US $50,000 or collective
bargaining agreement, written or oral, or modified the terms of any
existing such contract or agreement;
(xv) no Seller has granted any increase in excess of five percent (5%)
in the compensation, bonus, sales commissions or fee arrangements payable
to any of its directors, officers, employees, consultants or agents;
(xvi) no Seller has adopted, amended, modified, or terminated any
bonus, profit-sharing, incentive, equity compensation, severance, or other
plan, contract, or commitment for the benefit of any of its directors,
officers, and employees or made any commitment to do so (or taken any such
action with respect to any other Employee Benefit Plan);
(xvii) no Seller has made any other change in employment terms for any
of its directors, officers, and employees who receive base compensation in
excess of US $50,000;
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(xviii) there has been no change in accounting or tax accounting
methods or practices (including any change in depreciation or amortization
or capitalization rates or policies) by a Seller or the revaluation of any
assets;
(xix) to the Knowledge of Sellers and Stockholders, there has been no
commencement of or notice to or the threat of commencement of any lawsuit
or proceeding against or investigation of a Seller; and
(xx) no Seller or any officer, director, employee or agent thereof has
negotiated agreed or committed to do any of the foregoing which would bind
any of the Parties.
(k) Undisclosed Liabilities. No Seller or IMI has any Liability except for
(i) Liabilities reflected in the Financial Statements (including the notes
thereto) in accordance with GAAP, (ii) Liabilities which have arisen after the
Most Recent Fiscal Month End in the Ordinary Course of Business (none of which
results from, arises out of, relates to, is in the nature of, or was caused by
any breach of contract, breach of warranty, tort, infringement, or violation of
law) and (iii) Liabilities under this Agreement disclosed or permitted in this
Agreement or incurred in connection with the transactions contemplated hereby.
(l) Legal Compliance. Each Seller and their respective predecessors and
Affiliates has complied, and is in compliance, in all material respects with all
applicable Laws (including rules, regulations, codes, plans, injunctions,
judgments, orders, decrees, rulings, and charges thereunder) of federal,
provincial, state, local and foreign governments, and no action, suit,
proceeding, hearing, investigation, charge, complaint, claim, demand, or notice
has, to the Knowledge of Sellers or Stockholders, been threatened, filed or
commenced against it alleging any failure so to comply (which is outstanding or
has not been fully satisfied).
(m) Tax Matters.
(i) Each Seller and IMI has filed all Tax Returns that it was required
to file. All such Tax Returns were correct and complete in all material
respects. All Taxes owed by any of Sellers and IMI (whether or not shown on
any Tax Return) have been paid. None of Sellers or IMI currently is the
beneficiary of any extension of time within which to file any Tax Return.
No claim has ever been made by an authority in a jurisdiction where any of
Sellers or IMI does not file Tax Returns that it is or may be subject to
taxation by that jurisdiction. There are no Security Interests on any of
the assets of any of Sellers or IMI that arose in connection with any
failure (or alleged failure) to pay any Tax.
(ii) Each Seller and IMI has withheld and paid all Taxes required to
have been withheld and paid in connection with amounts paid or owing to any
employee, independent contractor, creditor, stockholder, or other third
party.
(iii) No Stockholder or director or officer (or employee responsible
for Tax matters) of any of Sellers or IMI is aware of any authority
assessing or proposing to assess any additional Taxes for any period for
which Tax Returns have been filed. There is no dispute or claim concerning
any Tax Liability of any of Sellers or IMI either (A) claimed or raised by
20
any authority in writing or (B) as to which any of the Stockholders and the
directors and officers (and employees responsible for Tax matters) of
Sellers or IMI has Knowledge based upon personal contact with any agent of
such authority.
(iv) Sellers have delivered to Buyer copies of all federal, state,
local, and foreign income Tax Returns filed with respect to IMI for taxable
periods ended on or after December 31, 2000. ss.3(m)(iv) of the Disclosure
Schedule lists all Tax Returns of IMI for taxable periods ended on or after
December 31, 2000 that have been audited or that currently are the subject
of audit. Sellers have delivered to Buyer correct and complete copies of
all examination reports, and statements of deficiencies assessed against,
or agreed to by IMI since December 31, 2000. IMI has not waived any statute
of limitations in respect of Taxes or agreed to any extension of time with
respect to a Tax assessment or deficiency.
(v) The unpaid Taxes of IMI (A) did not, as of the Most Recent Fiscal
Month End, exceed the reserve for Tax Liability (rather than any reserve
for deferred Taxes established to reflect timing differences between book
and Tax income) set forth on the face of the Most Recent Balance Sheet
(rather than in any notes thereto) and (B) do not exceed that reserve as
adjusted for the passage of time through the Closing Date in accordance
with the past custom and practice of IMI in filing its Tax Returns.
(vi) IMI is not a "United States real property holding corporation"
within the meaning of Code ss.897(c)(2).
(vii) IMI will not be required, as a result of (A) a change in
accounting method for a taxable period beginning on or before the Closing
Date, to include any adjustment under Code ss.481(c) (or any similar
provision of state, local or foreign law) in taxable income for any taxable
period beginning on or after the Closing Date, or (B) any "closing
agreement" as described in Code ss.7121 (or any similar provision of state,
local or foreign law), to include any item of income in or exclude any item
of deduction from any taxable period beginning on or after the Closing
Date.
(viii) IMI is not a party to any Tax allocation or sharing agreement.
Except as set forth in ss.3(m) of the Disclosure Schedule, since its
acquisition by Concord in 1998 IMI has never (A) been a member of an
Affiliated Group filing a consolidated federal income Tax Return or (B) had
any Liability for the Taxes of any Person under Reg. ss.1.1502-6 (or any
similar provision of state, local, or foreign law), as a transferee or
successor, by contract, or otherwise.
(ix) Sellers which are organized or operating in Canada are registered
for purposes of the GST Legislation.
(x) With respect to each Acquired Asset, either the particular
Acquired Asset is owned and being sold under this Agreement by a person who
is not a non-resident of Canada for purposes of the Income Tax Act (Canada)
or is not Canadian Property of a Seller who is a non-resident of Canada for
purposes of that Act.
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(n) Real Property.
(i) ss.3(n)(i) of the Disclosure Schedule sets forth the address and
legal description of the Owned Real Property. With respect to the Owned
Real Property:
(1) A Seller has good and marketable beneficial fee simple title,
free and clear of all liens and encumbrances, except Permitted
Encumbrances;
(2) Except as set forth in ss.3(n)(i) of the Disclosure Schedule, no
Seller has leased or otherwise granted to any Person the right to
use or occupy such Owned Real Property or any portion thereof;
and
There are no outstanding contracts, options, rights of first offer or
rights of first refusal or other rights to purchase such Owned Real
Property or any portion thereof or interest therein.
(ii) ss.3(n)(ii) of the Disclosure Schedule sets forth the address of
the Leased Real Property, and a true and complete list of all Leases for
each such Leased Real Property (including the date and name of the parties
to the lease document). Each Seller has delivered to Buyer a true and
complete copy of the Leases (including any amendments, addendums, or other
modifications thereto). Except as set forth in ss.3(n)(ii) of the
Disclosure Schedule, with respect to each Lease:
(1) The Lease is legal, valid, binding, enforceable and in full force
and effect;
(2) The transaction contemplated by this Agreement does not require
the consent of any other party to the Lease, will not result in a
breach of or default under the Lease, and will not otherwise
cause the Lease to cease to be legal, valid, binding, enforceable
and in full force and effect on identical terms following the
Closing;
(3) The Seller's possession and quiet enjoyment of the Leased Real
Property under the Lease has not been disturbed, and Sellers do
not have, and to the Knowledge of Sellers and Stockholders, no
other party has any disputes with respect to such Lease;
(4) Sellers are not and, to the Knowledge of Sellers, no other party
to the Lease is in breach or default under the Lease, and no
event has occurred or circumstance exists which, with the
delivery of notice, the passage of time or both, would constitute
such a breach or default, or permit the termination, modification
or acceleration of rent under the Lease;
(5) No Seller owes, nor will owe in the future, any brokerage
commissions or finder's fees with respect to the Lease;
(6) The other party to the Lease is not an Affiliate of, and
otherwise does not have any economic interest in, a Seller;
22
(7) No Seller has subleased, licensed or otherwise granted any Person
the right to use or occupy the Leased Real Property or any
portion thereof; and
(8) As of Closing, no Seller will have collaterally assigned or
granted any other Security Interest in the Lease or any interest
therein and such Seller's leasehold interest will be free and
clear of all Security Interests.
(iii) The Owned Real Property identified in ss.3(n)(i) of the
Disclosure Schedule, the Leased Real Property identified in ss.3(n)(ii)
(collectively, the "Real Property") comprise all of the real property used
in the Business, and no Seller is a party to any agreement or option to
purchase or lease any real property or interest therein.
(iv) All buildings, structures, fixtures, building systems and
equipment, and all components thereof, including the roof, foundation,
load-bearing walls and other structural elements thereof, heating,
ventilation, air conditioning, mechanical, electrical, plumbing and other
building systems, environmental control, remediation and abatement systems,
sewer, storm and waste water systems, irrigation and other water
distribution systems, parking facilities, fire protection, security and
surveillance systems, and telecommunications, computer, wiring and cable
installations, included in the Real Property (the "Improvements") were in
compliance with all applicable laws at the time of installation and are in
good condition and repair (reasonable wear and tear excepted) and
sufficient for the operation of the Business. There are no facts or
conditions affecting any of the Improvements which would, individually or
in the aggregate, interfere with the use or occupancy of the Improvements
or any portion thereof in the operation of the Business as currently
conducted thereon. All Improvements are served with utilities and other
services necessary for the operation of the Business, including gas,
electric, water, sewer (sanitary and storm) and telephone, all of which are
adequate and in compliance with all applicable Laws and are provided in
public roads or via permanent, irrevocable, appurtenant easements
benefiting the parcel of Real Property. Each parcel of the Real Property
abuts on and has direct access to a public road, or has access thereto via
a permanent, irrevocable appurtenant easement benefiting the parcel of Real
Property.
(v) There is no condemnation, expropriation or other proceeding in
eminent domain pending or threatened, affecting any parcel of Real Property
or any portion thereof or interest therein. There is no injunction, decree,
order, writ or judgment outstanding, nor any claims, litigation,
administrative actions or similar proceedings, pending or threatened,
relating to the ownership, lease, use or occupancy of the Real Property or
any portion thereof, or the operation of Sellers' business as currently
conducted thereon.
(vi) The Real Property is in material compliance with all applicable
building, zoning, subdivision, environmental, health and safety and other
land use laws, and all insurance requirements affecting the Real Property
(collectively, the "Real Property Laws"), and the current use and occupancy
of the Real Property and operation of Seller's business thereon does not
violate any Real Property Laws or is in legal non-compliance therewith. No
23
Seller has received any notice of violation of any Real Property Law which
is outstanding or remains unsatisfied and to the Knowledge of Sellers there
is no basis for the issuance of any such notice or the taking of any action
for such violation. To the Knowledge of Sellers and Stockholders there is
no pending or anticipated change in any Real Property Law that will have a
Material Adverse Effect on the ownership, lease, use or occupancy of any
Real Property or any portion thereof in the continued operation of the
Seller's business as currently conducted thereon.
(vii) Terra Rouge and/or Concord maintains, and is in good standing in
respect of such fire, boiler, public liability, property damage and rental
insurance covering the Real Property owned or leased by it as would be
maintained by a prudent owner of a similar class building, which insurance
in respect of loss or damage to the buildings forming a part of the Real
Property is in an amount at least equal to the replacement value thereof.
(viii) No portion of the buildings located on the Real Property
encroaches upon any land owned by an adjacent land owner, except as
disclosed in the Surveys. There are no restrictive covenants, municipal
by-laws or other laws or regulations which in any way restrict or prohibit
the use of the Real Property for the purposes for which it is presently
being used or permit such use as legally non-conforming, other than the
Permitted Encumbrances.
(ix) The buildings and all other structures located on the Owned Real
Property have been constructed in accordance with plans and specifications
approved by all relevant governmental authorities.
(o) Intellectual Property.
(i) Other than as provided in ss.3(o)(i) of the Disclosure Schedule,
no Seller has interfered with, infringed upon, misappropriated, or
otherwise come into conflict with any Intellectual Property rights of third
parties, and, in the past six (6) years no Seller has received or made any
charge, complaint, claim, demand, or notice alleging any such interference,
infringement, misappropriation, re-examination, cancellation, opposition,
or violation (including any invitation to license or claim that any of
Sellers must license or refrain from using any Intellectual Property rights
of any third party). To the Knowledge of each Seller, Stockholder and
officer and director of Sellers, no third party has interfered with,
infringed upon, misappropriated, or violated any Intellectual Property.
(ii) ss.3(o)(ii) of the Disclosure Schedule identifies each patent,
trademark or copyright registration which is currently used by any of
Sellers with respect to any of its Intellectual Property, identifies each
pending patent application, trademark application or copyright application
for registration which any of Sellers own with respect to any of such
Intellectual Property, and identifies each license, agreement, or other
permission which any of Sellers has granted to any third party with respect
to any of its Intellectual Property (together with any exceptions). To the
extent Sellers and their agents and Affiliates are in possession of the
same, Sellers have delivered or made available to the Buyer correct and
24
complete copies of all such patents, trademarks, copyrights, registrations,
applications, licenses, agreements, and permissions (as amended to date)
and has made available to the Buyer correct and complete copies of all
other written documentation evidencing ownership and prosecution (if
applicable) of each such item. ss.3(o)(ii) of the Disclosure Schedule also
identifies each trade name, domain name or unregistered trademark used by
any of Sellers in connection with any of its businesses. Except as set
forth in ss.3(o)(ii) of the Disclosure Schedule, with respect to such
patent, trademark, copyright, registration, trade name, domain name or
unregistered trademark of Sellers in the United States and Canada, and to
the Knowledge of Sellers and Stockholders with respect to the other
countries listed in ss.3(o)(ii) of the Disclosure Schedule:
(1) Sellers possess all right, title, and interest in and to the
Intellectual Property, free and clear of any Security Interest
(or will be free and clear of any Security Interest at Closing),
license, or other restriction;
(2) the item is not subject to any outstanding injunction, judgment,
order, decree, ruling, or charge, and has not been cancelled,
adjusted invalid or lapsed;
(3) no action, suit, proceeding, hearing, investigation, charge,
complaint, claim, or demand is pending or, to the Knowledge of
Sellers, is threatened which (i) challenges the legality,
validity, enforceability, use, or ownership of the item, or (ii)
questions any of Sellers' title to or claims any ownership of any
of the rights thereto;
(4) Seller has never agreed to indemnify any Person for or against
any interference, infringement, misappropriation, or other
conflict with respect to the item;
(5) each of the trademarks identified in ss.3(o)(ii) of the
Disclosure Schedule as being "in use" is in use in its respective
country; and
(6) each pending or issued patent or trademark identified in
ss.3(o)(ii) of the Disclosure Schedule as being used by any of
Sellers is recorded with the appropriate governing body as owned
by that Seller or otherwise such Seller shall provide documents
to permit such recordation.
(iii) In connection with the Business, Sellers do not use any
Intellectual Property that is owned by a third party, except for software
licensed in the Ordinary Course of Business.
(p) Tangible Assets. Each tangible asset of Sellers used in the Business
with a value in excess of US $500 is free from material defects (patent and
latent), has been maintained in accordance with normal industry practice, is in
good operating condition and repair (subject to normal wear and tear), and is
suitable for the purposes for which it presently is used.
(q) Accounts Receivable. Attached hereto as Schedule ss.3(q) is an accurate
and complete list of all Accounts Receivable (as hereafter defined) of Sellers
as of June 30, 2004. All accounts receivable and notes payable of Sellers
25
relating to the Business that are reflected on the Books and Records of Sellers
as of the Closing Date (net of reserves for such accounts prepared in accordance
with GAAP)(collectively, the "Accounts Receivable") represent or will represent
on the Closing Date valid obligations arising from sales actually made or
services actually performed by Sellers in the Ordinary Course of Business. The
pricing and invoices for each of the products sold by Sellers represent the full
amounts due in connection with the sale of such products and no payment or
remuneration for such products is to be made to any Person other than Sellers.
There is no contest, claim, penalties or right of set-off with any maker of an
Accounts Receivable relating to the amount or validity of such Accounts
Receivable (in excess of current reserves). Accounts Receivable are stated net
of reserves made in accordance with GAAP for bad debt, returns, rebates and all
other customer deductions.
(r) Inventories. The inventory of Sellers consists of raw materials and
packaging, manufactured and purchased parts, goods in process and finished
goods, all of which is merchantable quality and quantity usable or salable at
regular list prices (less the applicable customer discounts in the Ordinary
Course of Business, as applicable) are salable at prevailing market prices that
are not less than the book value amounts thereof or the price customarily
charged by Sellers therefor, materially conform to the specifications
established therefor, and have been manufactured in accordance with applicable
regulatory requirements. The quantities of all inventories, materials, and
packaging of Sellers are not obsolete, discontinued, damaged, slow-moving,
defective, or excessive, and are reasonable and balanced in the circumstances of
Sellers.
(s) Contracts. ss.3(s) of the Disclosure Schedule lists the following
contracts and other agreements to which any Seller is a party:
(i) any agreement (or group of related agreements) for the lease of
personal or real property to or from any Person;
(ii) any agreement (or group of related agreements) for the furnishing
or receipt of services, the performance of which will extend over a period
of more than one (1) year, result in a material loss to any of Sellers,
with respect to the Business, or involve consideration in excess of US
$50,000;
(iii) any agreement concerning a partnership, joint venture,
cooperative development or other similar arrangement;
(iv) any agreement (or group of related agreements) under which it has
created, incurred, assumed, or guaranteed any indebtedness for borrowed
money, or any capitalized lease obligation, in excess of US $50,000 or
under which it has imposed a Security Interest on any of its assets,
tangible or intangible, or property, real or personal;
(v) any agreement concerning confidentiality or noncompetition other
than Sellers' standard employee agreement;
(vi) any agreement with any of Stockholders and their Affiliates;
26
(vii) any profit sharing, stock option, stock purchase, stock
appreciation, deferred compensation, severance, or other material plan or
arrangement for the benefit of its current or former directors, officers,
and employees;
(viii) any collective bargaining or union contract or agreement;
(ix) any written agreement for the employment of any individual on a
full-time, part-time or consulting basis or for any retention bonus,
indemnification, severance or any change of control or golden parachute
agreement;
(x) any agreement under which it has advanced or loaned any amount to
any of its directors, officers, and employees;
(xi) any agreement under which the consequences of a default or
termination could have a Material Adverse Effect on the business, financial
condition, operations, results of operations, or future prospects of the
Business;
(xii) any agreement for the purchase of any machinery or capital
assets, or the incurrence of any capital expenditure (including, but not
limited to, expenditures for the construction or material modification of
any structure) involving in excess of US $50,000 per agreement;
(xiii) any purchase order or other agreement for the purchase of
materials, supplies or services other than in the Ordinary Course of
Business;
(xiv) any license, distribution, dealership, marketing, sales agent,
sales representative, franchise or similar agreements relating to or
providing for the marketing and/or sale of the products or services;
(xv) any indenture, mortgage, note, bond or other evidence of
indebtedness, or any credit or similar agreement; and any guarantee of or
agreement to acquire any such obligation of any other Person; and any
letters of credit or performance bonds other than those in favor of
Sellers;
(xvi) any agreement which restricts Sellers from entering into any
line of business or any agreement which contains geographic restrictions on
the ability of Sellers to conduct business activities;
(xvii) any contract, license or other agreement with respect to the
Intellectual Property, including any which create obligations to make
royalty payments in respect of the Intellectual Property;
(xviii) any contract giving any party the right to renegotiate or
require a reduction in price or refund of payments previously made other
than in the operation of the Business in the Ordinary Course of Business;
(xix) contracts with any government or government agency or with any
Person in connection with such Person's contract with any government or
government agency;
27
(xx) any agreement for the sale of products or services containing
warranty or guarantee obligations which represent material deviations from
those which are included in the standard terms and conditions of sale in
connection with the Business;
(xxi) all contracts relating to the cleanup, abatement or other
actions in connection with any Hazardous Material, the remediation of any
existing environmental liabilities, violation of any Environmental Laws or
relating to the performance of any environmental study or audit; or
(xxii) any other agreement (or group of related agreements) the
performance of which involves consideration in excess of US $50,000.
Sellers have delivered or made available to Buyer a correct and complete
copy of each written agreement listed in ss.3(s) of the Disclosure Schedule
(as amended to date) and a written summary setting forth the terms and
conditions of each oral agreement referred to in ss.3(s) of the Disclosure
Schedule. With respect to each such agreement, except as set forth in
ss.3(s) of the Disclosure Schedule (subject to bankruptcy, insolvency and
other laws of general application): (A) the agreement is legal, valid,
binding, enforceable, and in full force and effect; (B) the agreement will
continue to be legal, valid, binding, enforceable, and in full force and
effect on identical terms following the consummation of the transactions
contemplated hereby (including the assignments and assumptions referred to
in ss.2 above, subject to consent to assignment as identified); (C) Sellers
are not and, to the Knowledge of Sellers and Stockholders, any other party
thereto is not in breach or default, and no event has occurred which with
notice or lapse of time would constitute a breach or default, or permit
termination, modification, or acceleration, under the agreement; and (D) no
party has repudiated any provision of the agreement.
Except as provided in ss.3(s) of the Disclosure Schedule none of the
Sellers is currently a party to any agreement with any of the current or
former officers, directors, stockholders, managers, members or employees of
Sellers, Stockholders or any relative or any relation or Affiliate of such
Persons.
IMI is not a party to any agreement other than agreements in respect of the
Shares.
(t) Insurance. ss.3(t) of the Disclosure Schedule sets forth the following
information with respect to each insurance policy (including, without
limitation, policies providing property, casualty, liability, and workers'
compensation coverage and bond and surety arrangements) with respect to which
any of Sellers is a party, a named insured, or otherwise the beneficiary of
coverage at any time within the past two (2) years:
(i) the name, address, and telephone number of the agent;
(ii) the name of the insurer, the name of the policyholder, and the
name of each covered insured;
(iii) the policy number of the period of coverage; and
28
(iv) the scope (including an indication of whether the coverage is as
a claims make, occurrence, or other basis) and amount (including a
description of how deductibles and ceilings are calculated and operate) of
coverage and all insurance loss runs for the past three years.
With respect to each such insurance policy: (A) the policy is legal, valid,
binding, enforceable, and in full force and effect; (B) the policy will continue
to be legal, valid, binding, enforceable, and in full force and effect on
identical terms following the consummation of the transactions contemplated
hereby (including the assignments and assumptions referred to in ss.2 above);
(C) neither any of Sellers nor any other party to the policy is in breach or
default (including with respect to the payment of premiums or the giving of
notices), and no event has occurred which, with notice or the lapse of time,
would constitute such a breach or default, or permit termination, modification,
or acceleration, under the policy; and (D) no party to the policy has repudiated
any provision thereof. Each of Sellers has been covered during the past two (2)
years by insurance in scope and amount customary and reasonable for the
businesses in which it has engaged during the aforementioned period. ss.3(t) of
the Disclosure Schedule describes any self insurance arrangements affecting
Sellers.
(u) Litigation. Except as set forth on ss.3(u) of the Disclosure Schedule,
there are no outstanding orders, judgments, injunctions, awards or decrees of
any government, government agency or court against or involving Sellers,
Stockholders or against or involving any of the properties, assets or business
of Sellers. Except as set forth on ss.3(u) of the Disclosure Schedule, there are
no actions, suits, proceedings, inquiries, investigations or claims or legal,
administrative or arbitrative proceedings or investigations (including claims
for workers' compensation) pending or, to the Knowledge of Sellers and
Stockholders, threatened against or involving Sellers, Stockholders, or any of
its or their present directors, or any of the assets or business of Sellers.
There are no actions, suits, labor disputes or other litigation, legal or
administrative proceedings or governmental investigations pending or, to the
Knowledge of Sellers and Stockholders, threatened against or affecting Sellers,
Stockholders or any of their present or officers, directors, or any of the
assets or business of Sellers relating to the transactions contemplated by this
Agreement. Except as set forth on ss.3(u) of the Disclosure Schedule (and for
litigation and claims involving Intellectual Property set forth on ss.3(o)(i))
of the Disclosure Schedule, all litigation and claims identified on ss.3(u) of
the Disclosure Schedule are covered in full by the liability insurance of
Sellers (subject to applicable deductibles) and are being defended by and at the
sole cost of the liability insurance carrier of Sellers. No complaint,
grievance, claim, work order or investigation has been filed, made or commenced
against Sellers and is currently outstanding in respect of or affecting the
Business pursuant to the Ontario Human Rights Code, the Occupational Health &
Safety Act, the Workplace Safety and Insurance Act (Ontario), the Employment
Standards Act or the Pay Equity Act, in each case of the Province of Ontario, or
any similar legislation of Canada, the Province of Ontario or of any other
jurisdiction.
(v) Product Warranty. ss.3(v) of the Disclosure Schedule includes copies of
the standard terms and conditions of sale for each of Sellers (containing
applicable guaranty, warranty, and indemnity provisions). No product
manufactured, sold, leased, or delivered by any of Sellers is subject to any
guaranty, warranty, or other indemnity beyond the applicable standard terms and
conditions of sale or lease.
29
(w) Product Liability. The Sellers collectively, do not have Liabilities in
excess of $10,000 in the aggregate arising out of any injury to individuals or
property as a result of the ownership, possession, or use of any product
manufactured, sold, leased, or delivered by the Business.
(x) Employees. Set forth in ss.3(x) of the Disclosure Schedule is a
complete and correct list of each employee of Sellers (collectively, the
"Business Employees") together with the following information for each such
non-union employee: name, age, position, number of years of service, 2003 base
compensation, 2003 bonus compensation, 2004 base compensation, any special
compensation arrangements, vacation entitlement and whether such employee is on
any approved or statutory leave. Except as set forth in ss.3(x) of the
Disclosure Schedule, to the Knowledge of any of Sellers and Stockholders and the
directors and officers (and employees with responsibility for employment
matters) of Sellers, no executive, key employee, or group of employees has any
plans to terminate employment with any of Sellers. Except as set forth in
ss.3(x) of the Disclosure Schedule, the employment of each employee of Seller
working in the United States is at will and the employment of each employee of
Seller working in Canada is terminable at any time on statutory notice and
notice in accordance with applicable law. Except as set forth in ss.3(x) of the
Disclosure Schedule, no Seller is a party to or bound by any collective
bargaining agreement, nor has it experienced any strikes, lock outs, work
disruptions, grievances, claims of unfair labor practices, or other collective
bargaining disputes with respect to the Business. No Seller has Knowledge of any
organizational effort presently being made or threatened by or on behalf of any
labor union with respect to any employees of the Business. Sellers comply and
have complied in all material respects with all applicable laws respecting
employment and employment practices, terms and conditions of employment and
wages and hours, including without limitation any such laws respecting
employment standards, employment discrimination, employee classification, unfair
labor practices, workers' compensation, family and medical leave, the
Immigration Reform and Control Act, pay equity and occupational safety and
health requirements and have complied with all employment agreements, and no
claims, controversies, investigations, or suits are pending or, to the Knowledge
of Sellers, threatened with respect to such laws or agreements, either by
private individuals or by governmental agencies.
(y) Employee Benefits. ss.3(y) of the Disclosure Schedule lists each
Employee Benefit Plan that each Seller maintains or to which a Seller
contributes or that covers employees of Sellers:
(i) Each such Employee Benefit Plan (and each related trust, insurance
contract, or fund) has been established, maintained, funded, invested and
administered in accordance with the terms of such Employee Benefit Plan and
any applicable collective agreement and complies in form and in operation
in all material respects with the applicable requirements of ERISA and the
Code for employees in the United States and other applicable laws.
(ii) All contributions (including all employer contributions and
employee salary reduction contributions) which are due have been timely
made to each such Employee Benefit Plan which is a qualified Employee
30
Pension Benefit Plan. All premiums or other payments which are due have
been paid with respect to each such Employee Benefit Plan.
(iii) For employees in the United States, each such Employee Benefit
Plan which is intended to meet the requirements of a "qualified plan" under
Code ss.401(a) has received a determination letter from the Internal
Revenue Service to the effect that it meets the requirements of Code
ss.401(a) and each remains so qualified; nothing has occurred with respect
to the operation of any qualified plan that could cause a loss of such
qualification or exemption or the imposition of any material liability
under ERISA or the Code; each such Employee Benefit Plan has been timely
amended for the Economic Growth and Tax Relief Reconciliation Act of 2001
and tested to ensure compliance with the qualification requirements under
the Code (in a manner that takes into account the affiliations among
Sellers).
(iv) No action, suit, proceeding, hearing, or investigation with
respect to the administration or the investment of the assets of any such
Employee Benefit Plan (other than routine claims for benefits) is pending.
(v) For employees in the United States, none of the Employee Benefit
Plans is a Multiemployer Plan, or is subject to Title IV of ERISA.
(vi) No Employee Benefit Plan contains any provision that would
accelerate or vest any benefit or require severance, termination or other
payments or trigger any liabilities or any full or partial wind-up as a
result of the transactions this Agreement contemplates; Sellers have not
declared or paid any bonus or incentive compensation related to the
transactions this Agreement contemplates.
(vii) In respect of employees in the United States, all group health
plans of Sellers and their ERISA Affiliates comply and have complied with
the requirements of Part 6 of Title I of ERISA ("COBRA") and Part 7 of
Title I of ERISA ("HIPAA"); no current or former employee of Sellers (or
beneficiary of such employee) is entitled to receive any benefits,
including, without limitation, death or medical benefits (whether or not
insured) beyond retirement or other termination of employment, other than
as applicable law requires.
(viii) In respect of employees in Canada, none of the Employee Benefit
Plans is a defined benefit or supplemental retirement plan under the
pension laws under applicable Canadian laws.
(z) Guarantees. None of Sellers is a guarantor or otherwise is liable for
any Liability pertaining to the Business or obligation (including indebtedness)
of any other Person pertaining to the Business.
(aa) Environmental, Health, and Safety Matters.
(i) Each of Sellers, and their respective predecessors and Affiliates
has complied and is in compliance in all material respects with all
Environmental, Health, and Safety Requirements.
31
(ii) Without limiting the generality of the foregoing, each Seller and
their respective Affiliates has obtained or made and complied with, and is
in compliance with, in all material respects all permits, licenses, other
authorizations and registrations that are required pursuant to
Environmental, Health, and Safety Requirements for the occupation of its
facilities and the operation of its business; a list of all such permits,
licenses and other authorizations is set forth on the ss.3(aa)(ii) of the
Disclosure Schedule.
(iii) No Seller, or, to the Knowledge of Sellers and Stockholders,
their respective predecessors or Affiliates has received any written or
oral notice, report or other information regarding any actual or alleged
violation of Environmental, Health, and Safety Requirements, or any
liabilities or potential liabilities (whether accrued, absolute,
contingent, unliquidated or otherwise), including any investigatory,
remedial or corrective obligations, relating to any of them or its
facilities arising under or related to Environmental, Health, and Safety
Requirements, which has not otherwise been fully satisfied.
(iv) Except as set forth in ss.3(aa) of the Disclosure Schedule, none
of the following exists at any property or facility owned or operated by
Sellers: (1) underground storage tanks (including any fully or partially
buried tanks or vessels), (2) asbestos-containing material in any form or
condition, (3) materials or equipment containing polychlorinated biphenyls,
or (4) landfills, surface impoundments, or waste disposal areas, including
any area where waste has been deposited such that the use of property could
be restricted.
(v) Except as set forth on ss.3(aa) of the Disclosure Schedule, no
Seller, or their respective predecessors or Affiliates has treated, stored,
disposed of, arranged for or permitted the disposal of, transported,
handled, or released any Hazardous Substances, including without limitation
any Hazardous Substances, or owned or operated any property or facility
(and no such property or facility is contaminated by any such substance) in
a manner that has given or would give rise to liabilities, including any
liability for response costs, corrective action costs, personal injury,
property damage, natural resources damages or attorney fees, pursuant to
the Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended ("CERCLA"), the Solid Waste Disposal Act, as amended
("SWDA") or any other Environmental, Health, and ------ ---- Safety
Requirements.
(vi) Neither this Agreement nor the consummation of the transaction
that is the subject of this Agreement will result in any obligations for
site investigation or cleanup, or notification to or consent of government
agencies or third parties, pursuant to any of the so-called
"transaction-triggered" or "responsible property transfer" provisions
arising under any Environmental, Health, and Safety Requirements.
(vii) No Seller or its Affiliates, or, to the Knowledge of Sellers and
the Stockholders, or any of their respective predecessors has, either
expressly or by operation of law, assumed or undertaken any Liability,
including without limitation any obligation for investigation, corrective
32
or remedial action (including monitoring), of any other Person relating to
Environmental, Health, and Safety Requirements.
(viii) No facts, events or conditions relating to the past or present
facilities, properties or operations of Sellers or its Affiliates, or, to
the Knowledge of Sellers and the Stockholders, or any of their respective
predecessors will prevent, hinder or limit continued compliance with
Environmental, Health, and Safety Requirements, give rise to any
investigatory, remedial or corrective obligations pursuant to
Environmental, Health, and Safety Requirements, or give rise to any other
liabilities (whether accrued, absolute, contingent, unliquidated or
otherwise) pursuant to Environmental, Health, and Safety Requirements,
including without limitation any relating to onsite or offsite presence,
release or threatened release of any Hazardous Substances, personal injury,
property damage or natural resources damage.
(ix) Copies of all material information, data, reports, material
correspondence (including to and from government agencies, banks or
financial institutions) and other documents relating to environmental,
health and safety matters with respect to the facilities and the operation
of the Business have been provided or made available to Buyer.
(bb) Books and Records. Each Seller has made and kept (and given Buyer
access to) business records, minutes, financial books and records, sales order
files, purchase order files, engineering order files, warranty and repair files,
supplier lists, customer lists, dealer, representative and distributor lists,
which, in reasonable detail, and fairly and in all material respects, reflect
the activities of such Seller (the "Books and Records"). No Seller has engaged
in any transaction, maintained any bank account or used any corporate funds
except for transactions, bank accounts and funds which have been and are
reflected in its normally maintained Books and Records.
(cc) Unlawful Payments. No Seller, nor any officer, employee, stockholder,
agent or representative of a Seller, nor, any Person associated with or acting
for or on behalf of a Seller, has directly or indirectly (a) made any
contribution, gift, bribe, rebate, payoff, influence payment, kickback, or other
payment to any Person, private or public, regardless of what form, whether in
money, property, or services (i) to obtain favorable treatment for the Business
for contracts secured, (ii) to pay for favorable treatment for the Business for
business or contracts secured, (iii) to obtain special concessions or for
special concessions already obtained for the Business, or (iv) in violation of
any legal requirement, or (b) established or maintained any fund or asset that
has not been recorded in the Books or Records of Sellers.
(dd) Backlog. ss.3(dd) of the Disclosure Schedule lists all pending
customer orders relating to the Business for Sellers as of the date set forth on
ss.3(dd) of the Disclosure Schedule. All such customer orders were entered into
in the Ordinary Course of Business, consistent with past practice. No such
customer orders are at prices which, based on the past experience of Sellers and
current and anticipated costs, are or can reasonably be expected to result in
(i) a material loss to Sellers or (ii) a five percent (5%) or more reduction in
gross margins for every SKU relative to the gross margins for such SKU on sales
to the same or similar customers on and after January 1, 2004 (or otherwise
33
consistent with the Ordinary Course of Business if such sales information is not
available).
(ee) Suppliers and Customers. ss.3(ee) of the Disclosure Schedule sets
forth (i) the twenty-five (25) largest customers by gross purchases from Sellers
during 2003 and the six month period ended June 30, 2004 (the "Significant
Customers"), and (ii) the twenty-five (25) largest vendors and suppliers by
gross sales to Sellers during 2003 and the six-month period ended June 30, 2004,
as well as all vendors and suppliers of Sellers who are the sole source of such
supply, other than public utilities and service providers (collectively, the
"Significant Vendors"). Since December 31, 2003, no Significant Customer or
Significant Vendor has: (a) stopped or indicated its intention to stop trading
with or supplying Sellers, (b) materially reduced its trading with or provision
of goods or services to Sellers, or (c) changed materially the terms and
conditions on which it is prepared to trade with or supply Sellers. Sellers have
no Knowledge of any facts, conditions or events that would give rise to a
material claim by a Seller against any of its Significant Customers or
Significant Suppliers or any material claim by a Significant Customer or
Significant Supplier against a Seller.
(ff) Competition Matters. Sellers, together with their Affiliates, do not
have assets in Canada, or gross revenues from sales in, from or into Canada,
that exceed CDN $200,000,000, all as determined in accordance with Part IX of
the Competition Act (Canada) and the Notifiable Transaction Regulations
promulgated thereunder.
(gg) Privacy Matters.
(i) The representations and warranties contained in section 3(u) apply
and are true in respect of the collection, use and disclosure by Sellers of
all Personal Information that is included in the Acquired Assets, and the
representations and warranties contained in ss.3(l) apply to the compliance
of Sellers with the Privacy Legislation.
(ii) Each Seller complies in all material respects with all applicable
Privacy Legislation. Sellers are in compliance with the privacy policies
adopted in accordance with the Privacy Legislation.
(iii) The representations and warranties contained in ss.ss. 3(c),
3(g) and 3(ee) apply and are true in respect of the sale of Personal
Information by Sellers under this Agreement.
(hh) ICA. The value of the Acquired Assets, determined in accordance with
the Investment Canada Act and the Investment Canada Regulations (collectively,
the "ICA"), does not exceed Cdn $237 million. The Business does not provide any
"transportation service" (as that term is defined in the ICA).
(ii) Disclosure Schedules. The Disclosure Schedule shall be divided into
sections corresponding to the sections and subsections of this Agreement.
Disclosure of any fact or item in any section or subsection of the Disclosure
Schedule shall, should the existence of the fact or item or its contents be
relevant to any other Section of the Disclosure Schedule, be deemed to be
disclosed with respect to such other section or subsection.
34
4. Representations and Warranties of Buyer. Buyer represents and warrants
to Sellers and the Stockholders that the statements contained in this ss.4 are
correct and complete as of the date of this Agreement and will be correct and
complete as of the Closing Date (as though made then and as though the Closing
Date were substituted for the date of this Agreement throughout this ss.4),
except as set forth in the Disclosure Schedule.
(a) Organization of Buyer. Buyer is a corporation duly organized, validly
existing, and in good standing under the laws of the jurisdiction of its
incorporation.
(b) Authorization of Transaction. Buyer has full power and authority
(including full corporate power and authority) to execute and deliver this
Agreement and to perform its obligations hereunder. This Agreement has been duly
and validly authorized by Buyer and has been duly and validly executed and
delivered by Buyer. This Agreement constitutes the valid and legally binding
obligation of Buyer, enforceable in accordance with its terms and conditions,
except as may be limited by (a) bankruptcy, insolvency, reorganization or other
similar laws now or hereafter in effect relating to creditor's rights generally
and (b) general equitable principles. Except for the approval under the HSR Act,
Buyer need not give any notice to, make any filing with, or obtain any
authorization, consent, or approval of any government or governmental agency or
any other Person in order to consummate the transactions contemplated by this
Agreement.
(c) Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, will
(A) violate any law, constitution, statute, regulation, rule, injunction,
judgment, order, decree, ruling change or other restriction of any government,
governmental agency or court to which Buyer is subject or any provision of its
charter or bylaws or (B) conflict with, result in a breach of, constitute a
default under, result in the acceleration of, create in any Person the right to
accelerate, terminate, modify, or cancel, or require any notice under any
agreement, contract, lease, license, instrument, or other arrangement to which
Buyer is a party or by which it is bound or to which any of its assets is
subject.
(d) Competition Matters. The Buyer, together with its Affiliates, does not
have assets in Canada, or gross revenues from sales in, from or into Canada,
that exceed US $20,000,000, all as determined in accordance with Part IX of the
Competition Act (Canada) and the Notifiable Transaction Regulations promulgated
thereunder.
(e) Brokers' Fees. Buyer has no Liability or, obligation to pay any fees or
commissions to any broker, finder, or agent with respect to the transactions
contemplated by this Agreement for which any Seller could become liable or
obligated.
5. Pre-Closing Covenants. The Parties agree as follows with respect to the
period between the execution of this Agreement and the Closing.
(a) General. Each of the Parties will use his or its reasonable best
efforts to take all action and to do all things necessary, proper, or advisable
in order to consummate and make effective the transactions contemplated by this
Agreement (including satisfaction, but not waiver, of the closing conditions set
forth in ss.7 below, defense of all actions, suits or proceedings challenging
35
this Agreement or the consummation of the transactions contemplated hereunder,
and the execution and delivery of additional instruments necessary to consummate
the transactions contemplated by this Agreement).
(b) Notices and Consents. Sellers will give any notices to third parties,
and will use its reasonable best efforts to obtain all third party consents,
referred to in ss.3(c) of the Disclosure Schedule. Each of the Parties will give
any notices to, make any filings with, and use its reasonable best efforts to
obtain any authorizations, consents, and approvals of any Governmental Authority
in connection with the matters referred to in ss.2(i) and ss.3(c) of the
Disclosure Schedule. This Agreement will be effective to create an interest in
the Real Property only if the Subdivision control provisions of the Planning Act
(Ontario) are complied with by Sellers on or before Closing. Sellers hereby
covenant to proceed diligently at their expense to obtain any required severance
consent under the Planning Act (Ontario) on or before Closing.
(c) Conduct of Business Prior to the Closing Date. Except as otherwise
permitted or required by the terms of this Agreement, as set forth in Schedule
ss.5(c) of the Disclosure Schedule (including permitting Sellers to terminate
their rights under foreign exchange contracts, as permitted pursuant the terms
thereof), as consented to by Buyer in writing (which consent shall not be
unreasonably withheld or delayed) from the date hereof until the Closing or
earlier termination of this Agreement, Sellers shall operate the Business in the
Ordinary Course of Business and preserve the value of the Business and the
assets thereof. Without limiting the generality of ss.5(c), except as otherwise
permitted or required by the terms of this Agreement, as set forth in ss.5(c) of
the Disclosure Schedule or as consented to by Buyer in writing (which consent
shall not be unreasonably withheld), from the date hereof until the Closing or
termination of this Agreement, Sellers shall not:
(i) amend the Certificate of Incorporation or Bylaws or comparable
charter documents of a Seller thereof, except as otherwise required by law;
(ii) make any disposition of stock or assets of any entity that is
material to the operations of a Seller, taken as a whole;
(iii) merge or consolidate with any corporation or other entity;
(iv) fail to maintain the Acquired Assets in reasonable and customary
repair, order and condition and maintain insurance reasonably comparable to
that in effect on the date of this Agreement;
(v) enter into any material transaction or commitment binding on the
Business other than in the Ordinary Course of Business;
(vi) make any capital expenditure or acquire any property or assets,
other than in the Ordinary Course of Business;
(vii) acquire or agree to acquire by merging or consolidating with, or
by purchasing a substantial equity interest in or a substantial portion of
the assets of, or by any other manner, any business or any Person;
36
(viii) incur or assume any Liability for borrowed money, or otherwise
assume, guarantee, endorse or otherwise become liable or responsible
(whether directly, contingently or otherwise) for an obligation (absolute,
accrued, contingent or otherwise) of any Person, or make any loans,
advances or capital contributions to, or investments in, any Person;
(ix) grant any increase in the compensation or benefits of any officer
or employee (including any such increase pursuant to any bonus, pension,
profit sharing or other plan or commitment) or any increase in the
compensation or benefits payable, or to become payable, to any officer or
employee, or make any commitment to do so, except in the Ordinary Course of
Business;
(x) adopt, enter into or amend, any employment, severance, bonus,
profit sharing, compensation, equity interest, option, pension,
requirement, deferred compensation, health care, employment or other,
employee benefit plan, agreement, trust, fund or arrangement for the
benefit or welfare of any employee or retiree, or make any commitment to do
so, except as required to comply with changes in any applicable law
occurring after the date hereof;
(xi) sell, lease, encumber, transfer or dispose of any assets,
properties or rights, or acquire any assets, properties or rights, unless
in the Ordinary Course of Business;
(xii) sell or dispose of any inventories, goods or products at a per
unit price less than ninety-five percent (95%) of the average per unit
price, excluding the impact of currency fluctuations, for such item for the
period from January 1, 2004 to June 30, 2004;
(xiii) permit any Acquired Asset to suffer any Security Interest
thereupon;
(xiv) grant any license or sublicense of any rights under or with
respect to any Business Intellectual Property;
(xv) make any change in any tax or accounting principle, method,
estimate or practice;
(xvi) accelerate the collection of any receivables or delay or
postpone the payment of any payables, except in the Ordinary Course of
Business;
(xvii) settle, release or forgive any claim or litigation or waive any
right thereto which relates to a material asset, except in the Ordinary
Course of Business for amounts involving less than US $50,000;
(xviii) modify, amend in any material respect or terminate any
contract, or make or enter into any new contract in respect of the purchase
of raw materials or packaging except in the Ordinary Course of Business or
purchase orders received in the Ordinary Course of Business;
37
(xix) modify, amend in any material respect or terminate any contract
(other than for raw materials and packaging), or make or enter into any new
contract (other than for raw materials and packaging) with respect to the
Business or the Acquired Assets, except new contracts involving less than
US $50,000; or
(xx) take, or agree in writing or otherwise to take, any of the
foregoing actions or any action which would make any representation or
warranty of Sellers and Stockholders contained in this Agreement untrue or
incorrect as of the date when made or as of any future date or which could
prevent the satisfaction of any condition to Closing.
Sellers shall promptly inform Buyer upon the occurrence of any of the following:
(i) the issuance or agreement to issue (by the issuance or granting of
options, warrants or rights to purchase shares or otherwise), transfer,
sell or deliver any capital stock, or other membership or ownership
interests in, or other equity securities of Sellers, or any securities
exchangeable for or convertible into such capital stock, or other
membership or ownership interests in, or other equity securities;
(ii) the split, combination or reclassification of any capital stock,
or other membership or ownership interests in, or other equity securities
of Sellers, including the Shares, or declare, set aside or pay any
dividends or make any other distributions (whether in cash, stock or other
property) in respect of such capital stock, or other membership or
ownership interests in, or other equity securities; and
(iii) the redemption, purchase or other acquisition of any outstanding
shares of capital stock, or other membership or ownership interests in, or
other equity securities of Sellers, or any other securities which are
convertible into or exchangeable or exercisable therefore.
(d) Full Access. Each Seller will permit representatives of Buyer to have
full access at all reasonable times during normal business hours, and in a
manner so as not to materially interfere with the normal business operations of
Sellers, to all premises, offices properties, personnel, books, records
(including tax records), contracts, and documents of or pertaining to each of
the Sellers with respect to the Business, including access to Sellers'
independent auditors and their audit work papers. Sellers will assist with the
processing and transferring such data and information with respect to the
Business in the format specified by the Buyer to the Buyer's information and
data systems. Buyer will treat and hold as such any information it receives from
any Seller in the course of the reviews contemplated by this ss.5(d) as
Confidential Information, will not use any of the Confidential Information
except in connection with this Agreement, and, if this Agreement is terminated
for any reason whatsoever, will return to Sellers or cause to be destroyed all
tangible and intangible embodiments (and all copies) of the Confidential
Information which are in its possession. Sellers shall furnish Buyer with all
information, documents and records relating to the Business and each Seller as
Buyer may reasonably request.
(e) Notification of Certain Matters. Buyer shall use reasonable best
efforts to give prompt notice to Sellers, and Sellers shall use their reasonable
best efforts to give prompt notice to Buyer, of: (i) the occurrence, or
38
non-occurrence, of any event the occurrence, or non-occurrence, of which it is
aware and which would be reasonably likely to cause (x) any representation or
warranty contained in this Agreement and made by it to be untrue or inaccurate
in any material respect or (y) any covenant, condition or agreement contained in
this Agreement and made by it not to be complied with or satisfied in all
material respects, (ii) any failure of Buyer or Sellers, as the case may be, to
comply in a timely manner with or satisfy any covenant, condition or agreement
to be complied with or satisfied by it hereunder or (iii) any change or event
which would be reasonably likely to have a Material Adverse Effect on Sellers.
(f) No Solicitation.
(i) Sellers and Stockholders shall, and shall cause other Affiliates
and their respective officers, directors, employees, representatives and
agents to, immediately cease any existing discussions or negotiations, if
any, with any parties conducted heretofore with respect to any Acquisition
Transaction (as hereinafter defined). Each Seller and Stockholder agrees
that, prior to the Closing, it shall not, and shall not authorize or permit
any of Sellers' directors, officers, employees, agents or representatives,
directly or indirectly, to solicit, initiate or encourage, or to furnish or
disclose non-public information in furtherance of, any inquiries or the
making of any proposal with respect to any merger, liquidation,
recapitalization, consolidation or other business combination involving a
Seller or acquisition of any capital stock or any material portion of the
assets of Sellers, or any combination of the foregoing (other than the
transactions contemplated hereby) (an "Acquisition Transaction"), or to
negotiate, explore or otherwise engage in substantive discussions with any
Person (other than the Buyer or its directors, officers, employees, agents,
representatives or permitted assigns) with respect to any Acquisition
Transaction or enter into any agreement, arrangement or understanding
requiring it to abandon, terminate or fail to consummate the transactions
contemplated hereby. Without limiting the foregoing, any violation of the
restrictions set forth in this ss.5(f) by any officer, director, affiliate,
employee, agent, investment banker, attorney or other advisor or
representative of Sellers, the Stockholders or any Affiliate thereof shall
be deemed to be a breach of this ss.5(f).
(ii) From and after the execution of this Agreement, each Seller shall
immediately advise Buyer in writing of the receipt, directly or indirectly,
of any inquiry or proposal with respect to an Acquisition Transaction, and
of any discussions, negotiations or proposals relating to an Acquisition
Transaction, identify the offeror and furnish to Buyer a copy of any such
proposal, if it is in writing, or a written summary of any such proposal
relating to an Acquisition Transaction if it is not in writing. Each Seller
shall promptly advise Buyer of all developments relating to such proposal,
including the results of any discussions or negotiations with respect
thereto.
39
(g) Title Insurance and Survey.
(i) Prior to Closing, Buyer shall have received from a title insurance
company satisfactory to the Buyer (the "Title Company"), a title commitment
(the "Title Commitment") for an owner's policy of insurance reasonably
acceptable to the Buyer for the Owned Real Property, which will include
such endorsements as the Buyer may reasonably require and as are normally
acquired by buyers of real property in the context of commercial
transaction, and all documents identified on Schedule B, Part II of such
Title Commitment;
(ii) Prior to Closing, Buyer shall have received from the Title
Company a title insurance policy in a form satisfactory to the Buyer,
including such endorsements as the Buyer may reasonably require and as are
normally acquired by buyers of real property in the context of commercial
transaction, (which may be in the form of a mark-up of a pro forma of the
Title Commitment) in accordance with the Title Commitment, insuring Buyer's
fee simple title to the Owned Real Property as of the Closing Date in the
amount of the Purchase Price allocated to the Owned Real Property as
provided in ss.2(e) (the "Title Policy") subject only to Permitted
Encumbrances; and
(iii) Prior to Closing, Buyer shall have received from Sellers surveys
(the "Surveys") for the Owned Real Property, and Seller's affidavit
(adequate to cause the Title Company to delete from the Title Policy any
exceptions or exclusions which may customarily be stricken from a title
policy upon presentation of a current survey) affirming that no exterior
improvements have been made to the Owned Real Property or to any adjacent
real property that affect the Owned Real Property and are not depicted on
the Survey. If the Title Company rejects the "no-change affidavit," the
Seller, at Seller's sole cost and expense, will cause an updated Survey to
be prepared and delivered to Buyer not later than ten (10) days prior to
Closing.
(h) Employment to Business Employees. Buyer shall offer employment (subject
to acceptance prior to, and subject to and upon Closing) with Buyer or one of
its subsidiaries, effective on the Closing Date, to the Business Employees of
the Seller listed on ss.5(h) of the Disclosure Schedule. Sellers agree to
release from their employment those Business Employees who are offered and
accept employment with Buyer or one of its subsidiaries to enable them to
commence their employment with Buyer or one of its subsidiaries. Each offer of
employment made by Buyer will be on no less favorable terms and conditions
(including salary and wages) (except for any compensation related to phantom
stock and profit sharing arrangements, if any) provided by a Seller to the
Business Employee immediately prior to the Closing Date and such employee
benefits as set forth in ss.6(b), below; provided that Buyer, with the consent
of the Representatives, may offer different terms of employment to certain
executives of Sellers. Prior to the Closing Date, Sellers agree to use their
best efforts to maintain and retain the Business Employees at substantially
similar levels as of the date of this Agreement; provided that Sellers shall
terminate one (1) employee as designated by Buyer and the Representatives and
Buyers shall be obligated to reimburse Sellers for any severance payments,
losses or expenses in connection with such termination in an aggregate amount
not to exceed CDN $972,000.
40
(i) Environmental Investigations. Prior to the Closing, Sellers shall grant
Buyer and the environmental consultants and/or engineers selected by Buyer,
reasonable, non-exclusive access, to the Owned Real Property and Leased Real
Property for the purpose of allowing Buyer to conduct environmental due
diligence, including, but not limited to, Phase I Environmental Site
Assessments, in accordance with Canadian Standards Association standard Z768-01
(as amended by update No. 1, April 2003) or ASTM Standard E1527-00, as
applicable, assessments or audits of environmental, health and safety
compliance, and Phase 2 Environmental Investigations with regard to any material
and/or recognized environmental conditions identified during the Phase I
Environmental Site Assessments on the Owned Real Property and the Leased Real
Property (collectively, the "Environmental Investigations"). Sellers' agree to
cooperate with respect to the Environmental Investigations and to provide Buyer
and Buyer's environmental consultants and/or engineers access to documents,
information and employees. Sellers and/or their designee(s) shall have the
right, but not the obligation, to observe the Environmental Investigations
(j) SEC Regulations
(i) On and after the date hereof (including following the Closing),
Sellers shall use commercially reasonable efforts to assist and cooperate
with Buyer in Buyer's preparation of audited and unaudited financial
statements of the Business for such periods and containing such information
sufficient to permit Buyer to comply with the requirements of Regulations
S-K and S-X promulgated by the U.S. Securities and Exchange Commission,
(the "SEC"). Sellers shall, in connection therewith, engage Deloitte &
Touche LLP to conduct the audits with respect to the audited financial
statements to be included in such financial statements. Buyer shall be
responsible for and shall promptly reimburse Sellers upon written request
for the fees and expenses of Deloitte & Touche LLP in connection with such
audits.
(ii) With respect to any registration statement or other filings with
the SEC, including Form 8-K, that Buyer shall determine to make after the
date hereof (including following the Closing), Sellers shall use
commercially reasonable efforts to timely furnish, cause to be timely
furnished, or grant access to Buyer, its Affiliates, its accountants and
auditors, upon reasonable request of Buyer, the following: (A) consents of
Sellers' independent public accountants with respect to audited financial
statements as required by SEC Regulation S-X; (B) such information,
assistance and cooperation (including information, assistance and
cooperation from Sellers' independent auditors) as is reasonably necessary
for Buyer and its Affiliates to (1) prepare such registration statement or
other SEC filing, (2) address and resolve any SEC comments related to
Sellers' financial statements (including any required modification of such
financial statements or footnotes thereto); (C) such information,
assistance and cooperation as is reasonably necessary for Buyer to prepare
any unaudited pro forma balance sheets or income statements required to be
included in any such registration statement or other SEC filing; and (D)
such information, assistance and cooperation as is reasonably necessary for
Buyer to accumulate five years of historical unaudited financial
information of Sellers as required for inclusion in any such registration
statement or other filing with the SEC.
41
6. Post-Closing Covenants. The Parties agree as follows with respect to the
period following the Closing.
(a) Litigation Support. In the event and for so long as any Party actively
is contesting or defending against any action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand in connection with (i) any
transaction contemplated under this Agreement or (ii) any fact, situation,
circumstance, status, condition, activity, practice, plan, occurrence, event,
incident, action, failure to act, or transaction on or prior to the Closing Date
involving any Party, if requested, the other Party will cooperate with the
contesting or defending such Party and its counsel in the contest or defense,
make available its personnel, and provide such testimony and access to its books
and records as shall be necessary in connection with the contest or defense, all
at the sole cost and expense of the contesting or defending such Party (unless
the contesting or defending Party is entitled to indemnification therefor under
ss.8 below). Sellers shall consult with Buyer regarding the defense of any
proceedings or litigation against Sellers relating to the transactions
contemplated by this Agreement. Buyer shall maintain, store and keep the books
and records included in the Acquired Assets hereunder at Buyer's offices in
Chicago, Illinois or in the greater Toronto, Ontario area for such period of
time in accordance with applicable law (and at least for seven (7) years) and
shall grant the Representatives access to and the right to make copies of (at
the Representatives' cost) such books and records at such facility during
regular business hours for such location.
(b) Employee Matters.
(i) Employee Benefit Plans. Effective on the Closing Date, each of the
Transferred Employees shall be deemed to have terminated employment with
Sellers for all purposes under the Employee Benefit Plans of Sellers.
(ii) Buyer Employee Benefit Plans. Following the Closing, Buyer shall
cause the Transferred Employees to be covered under Employee Benefit Plans
that are, (A) with respect to the Transferred Employees in Canada, no less
favorable, (B) with respect to the Transferred Employees in the United
States employed by Alpharetta, offered by Buyer under Buyer's Employee
Benefit Plans to Buyer's employees in comparable positions and employment
status, and, (C) with respect to the Transferred Employees in the United
States located in Selma, Alabama, comparable when taken in the aggregate,
to the Employee Benefit Plans under which such Transferred Employees were
covered immediately prior to the Closing. Buyer shall cause service with
Sellers to be recognized as eligibility and vesting service for purposes of
all applicable Employee Benefit Plans and compensation plans and
arrangements applicable to the Transferred Employees after the Closing, to
the extent such service was credited under comparable plans and
arrangements of Sellers prior to the Closing. From and after the Closing
Date, in the case of any Employee Benefit Plan of Buyer that is an employee
health or life insurance plan and in which the Transferred Employees become
eligible to participate (any such plan, a "Buyer Welfare Plan"), Buyer
shall cause such Buyer Welfare Plan to waive any pre-existing conditions of
any such Transferred Employee that were covered under the Employee Benefit
Plan in which such Transferred Employee was a participant immediately prior
to commencement of participation in Buyer Welfare Plan.
42
(iii) Vacation Pay. Buyer will recognize a Transferred Employee's
service with the Business for purposes of determining the Transferred
Employee's eligibility for and amount of vacation benefits. The Assumed
Liabilities will include the aggregate liability as of the Closing Date for
the Transferred Employees' vacation pay for vacation accrued but not taken
or paid for by Sellers (the "Sellers Accrued Vacation"). Sellers Accrued
Vacation will be paid to the Transferred Employees by Buyer through
vacation actually taken by a particular Transferred Employee in accordance
with applicable law.
(iv) Sellers shall retain responsibility for all amounts payable by
reason of or in connection with any and all claims incurred by Transferred
Employees (and their eligible dependants) under any Employee Benefit Plans
before the Closing (and Buyer shall have responsibility thereafter) and for
all claims by employees of Sellers who are not Transferred Employees
whether incurred before, on or after Closing. For the purposes of this
section, a claim shall be deemed to have been incurred:
(1) with respect to all death or dismemberment claims, on the actual
date of death or dismemberment;
(2) with respect to all income replacement and long term disability
claims, on the first date the Employee became disabled as
determined in accordance with the applicable plan; and
(3) with respect to all health care, vision and dental claims, on the
date the service or supply was purchased or received by the
employee or his/her eligible dependant.
(v) COBRA. Wax and Alpharetta will be responsible for liability for
any group health continuation coverage or coverage rights for United States
employees under Code Section 4980B and ERISA Section 606 which relate to
current or former Employees of the Business (and their dependents) and
exist prior to the Closing Date or which arise as a result of the
transactions contemplated by this Agreement and Wax and Alpharetta agree to
maintain a group health plan for at least six (6) months from the Closing
Date.
(vi) Other Employee Benefit Plans. Except as expressly provided in
this ss.6(b), Buyer will not adopt, assume or otherwise become responsible
for, either primarily or as a successor employer, any assets or liabilities
of any Employee Benefit Plans, arrangements, commitments or policies
currently provided by Sellers or by any member of their controlled group of
corporations (including any phantom stock or profit sharing arrangements).
(vii) General Employee Provisions.
(1) Each Seller and Buyer will give notices required by law and take
whatever other actions with respect to the Employee Benefit
Plans, programs and policies described in this ss.6(b) as may be
necessary to carry out the arrangements described in this
ss.6(b).
43
(2) Each of the Sellers and Buyer will provide the other with such
Employee Benefit Plan documents and descriptions, employee data
or other information as may be reasonably required to carry out
the arrangements described in this ss.6(b).
(3) No provision of this Agreement will create any third party
beneficiary rights to any person, including any Transferred
Employee or any dependent of a Transferred Employee, in respect
of continued employment or resumed employment, and no provision
of this Agreement will create any third party beneficiary rights
in any person, including any Transferred Employee or any
dependent of a Transferred Employee, in respect of any Employee
Benefit Plan or arrangement or any other arrangement which may be
maintained from time to time by Buyer.
(4) Buyer shall indemnify and hold Sellers harmless from any Adverse
Consequence by a Transferred Employee that arises after the
Closing in connection with the employment of such persons by the
Buyer as employer. Sellers shall indemnify and hold the Buyer
harmless from any Adverse Consequence by a Transferred Employee
that arises on or before the Closing, even if such claim is made
after the Closing Date, including any Adverse Consequence by a
Business Employee who did not receive or did not accept an offer
of employment by the Buyer for any reason and any Adverse
Consequence by an employee of Sellers who is not a Transferred
Employee whether arising before, on or after the Closing.
(5) Access to Employee Information. After the Closing Date, the
Parties hereto will reasonably cooperate with each other in the
administration of any applicable Employee Benefit Plans and
programs. To the extent permitted by law, within thirty (30) days
after the Closing Date, each Seller will provide to Buyer the
necessary employee data, including personnel, payroll and benefit
information, maintained with respect to the Transferred Employees
by the Seller or by its independent contractors, such as
insurance companies recordkeepers, administrators and actuaries.
(viii) Offers of Employment.
(1) With respect to Mr. David Thompson, Buyer shall (i) offer
employment on the following terms and conditions: (A) base
compensation equal to his current base compensation until the
earlier of the 6-month anniversary of his employment with Buyer
or his termination of employment with Buyer for any reason, (B) a
retention bonus in an amount agreed to by Buyer and Sellers (the
"Thompson Severance Payment") which Buyer shall pay on the
earlier of (Y) six (6) months after the Closing or (Z) the date
Buyer terminates him without cause and (C) Mr. Thompson waives
all his rights to any other bonus or severance payments and takes
the Thompson Severance Payment conditional on his executing a
full release for the benefit of Buyer, or (ii) terminate his
employment and pay him the Thompson Severance Payment conditioned
44
on Mr. Thompson executing a full release for the benefit of
Buyer.
(2) In the event Mr. Edward P. Fenimore is not employed by Buyer or
an affiliate of Buyer within 30 days after Closing, Buyer will be
obligated to reimburse Alpharetta on such 30th day $200,000 of
the total amount that Alpharetta is obligated to pay Mr. Fenimore
under his existing employment agreement. In the event Mr.
Fenimore is employed by Buyer or an affiliate of Buyer within
such 30 day period (i) Buyer will assume and agree to pay up to
US $200,000 of Alpharetta's obligation to make certain payments
upon Mr. Fenimore's termination of employment under Mr.
Fenimore's existing employment agreement and (ii) Sellers shall
enter a new agreement with Mr. Fenimore pursuant to which Sellers
shall agree to pay to Mr. Fenimore any and all such amounts as
are necessary so that upon Mr. Fenimore's termination of
employment with Buyer, Mr. Fenimore will receive an aggregate
amount from both Buyer under his new employment agreement and
Sellers under such agreement in the same amount Mr. Fenimore
would have received under his existing employment agreement with
Alpharetta, if any.
(c) Tax Matters.
(i) IMI Pre-Closing Taxes. The Sellers shall jointly and severally
indemnify the Buyer from and against all Taxes of IMI attributable to
taxable periods (or portions thereof) ending before the Closing Date. For
this purpose, Taxes of IMI that relate to taxable periods that begin before
and end after the Closing Date shall be treated as attributable to taxable
periods ending on or before the Closing Date as follows: (A) in the case of
Taxes that are either (1) based upon or related to income, capital or net
worth or (2) imposed in connection with any sale or other transfer or
assignment of property (real or personal, tangible or intangible), such
Taxes shall be deemed equal to the amount which would be payable if the
taxable period of IMI (and, for purposes of allocating subpart F income as
defined in Code ss.952, as if the taxable years of the Spanish
Subsidiaries) ended on the Closing Date; and (B) in the case of Taxes
imposed on a periodic basis, such Taxes shall be deemed to be the amount of
such Taxes for the entire period, multiplied by a fraction the numerator of
which is the number of calendar days in the period ending on the Closing
Date and the denominator of which is the number of calendar days in the
entire period. The Buyer shall file or cause to be filed when due all Tax
Returns of IMI that are required to be filed after the Closing Date. The
Sellers shall pay the Buyer the Taxes for which the Sellers are liable
pursuant to this ss.6(c)(i) within fifteen (15) days after notice from
Buyer of the amount due from the Sellers with respect to such Tax Returns.
(ii) Transfer Taxes. Except to the extent otherwise provided in
ss.6(c)(ii) below, each of the Parties shall be liable for and shall pay
all sales, use, stamp, documentary, filing, recording, transfer or similar
fees or Taxes or governmental charges, including real property transfer
gains Taxes, as levied against such Party by any taxing authority or
governmental agency in connection with the transactions contemplated by
45
this Agreement (and the other Parties shall be indemnified by such Party
for any Liability in respect of such Tax) and such Party shall remit to
such other parties amounts necessary to satisfy such Taxes which are
required by law to be collected or remitted by such other party. Each Party
will, at their own expense, file all necessary Tax Returns and other
documents with respect to such Taxes and, if required by applicable law,
the other Party will, and cause its Affiliates to, join in the execution of
any such Tax Returns and other documents.
(iii) Real Property and Sales Taxes. The Buyer will be liable for and
will pay all land transfer taxes and federal, state, provincial, and local
sales taxes, if any, payable upon or in connection with the conveyance or
transfer of the Owned Real Property by the Seller to the Buyer.
(iv) GST Legislation. The Parties agree to make such filings and
elections as may validly be made to elect that no tax be payable pursuant
to the GST Legislation with respect to the sale under this Agreement. To
the extent as may be permitted by applicable law, the Buyer will file an
election pursuant to the GST Legislation, made jointly by the Parties, in
compliance with the requirements of the GST Legislation. Prior to the
Closing Buyer or any of its Affiliates purchasing the Acquired Assets shall
have registered for purposes of the GST Legislation, as required.
(v) Section 22 Election. The Buyer and the Sellers shall, as soon as
possible after the Closing, jointly execute an election under Section 22 of
the Income Tax Act (Canada) as to the sale of the Accounts Receivable,
shall designate therein the applicable portion of the Purchase Price
referred to in ss.2(b) as the consideration paid by the Buyer therefor and
shall each file such election with the Canada Customs and Revenue Agency
forthwith after execution thereof to make such election effective.
(d) Covenant Not to Compete. As further consideration for the purchase and
sale of the Acquired Assets and assumption of the Assumed Liabilities and the
other transactions contemplated by this Agreement, each Seller and each
Stockholder (excluding the Trust Stockholders) covenants and agrees with Buyer
that it shall not, for a period of ten (10) years following the Closing Date,
for any reason whatsoever, directly or indirectly, for itself or himself or on
behalf of or in conjunction with any other Person:
(i) engage anywhere in the world (the "Territory"), as an officer,
director, stockholder, owner, partner, member, joint venturer, investor,
employee, independent contractor, consultant, adviser, sales representative
or otherwise, in any business, or in selling, manufacturing, distributing
or marketing any product or service, that competes directly or indirectly,
or is reasonably likely to compete directly or indirectly, with Business;
provided however, that the ownership of less than five percent (5%) of the
outstanding stock of any publicly traded corporation shall not be deemed to
be engaging the Business;
(ii) call upon, solicit, employ or hire away any Person who is, at
that time, within the Territory, an employee, contractor, subcontractor,
independent consultant, sales representative or vendor of the Buyer thereof
for the purpose or with the intent of enticing such employee, contractor,
46
subcontractor, independent consultant, sales representative or vendor away
from the Buyer; or
(iii) call upon or solicit any Person who is, at that time, or that
has been, within ten (10) years prior to that time, a customer of Buyer's
Business within the Territory for the purpose of soliciting or selling
products or services in competition with Business.
For purposes of this ss.6(d), the term "Buyer" means Buyer and all current and
future Affiliates of Buyer directly or indirectly engaged in the Business. The
necessity of each of the restrictions set forth above and the nature and scope
of each such restriction has been carefully considered, bargained for and agreed
to by the Parties. The Parties hereby agree and acknowledge that the duration,
scope and geographic area applicable to each of the restrictions set forth above
are fair, reasonable and necessary. The consideration provided for in this
Agreement is sufficient and adequate to compensate each Seller and each
Stockholder (excluding the Trust Stockholders) for agreeing to each of the
restrictions contained above. However, in the event that any of portion of the
restrictions set forth above shall be determined by any court of competent
jurisdiction to be unenforceable, including by reason of their being extended
over too great a period of time or too large a geographic area or over too great
a range of activities, it shall be interpreted to extend only over the maximum
period of time, geographic area, or range of activities as to which it may by be
enforceable. Each provision and part of a provision herein shall be deemed a
separate and severable covenant. It is the desire and intent of the Parties that
the provisions of this Agreement be enforced to the fullest extent permissible
under the laws and public policies applied in each jurisdiction in which such
enforcement is sought. Accordingly, a court of competent jurisdiction is
directed to modify any provision to the extent necessary to render such
provision enforceable and if such cannot lawfully be done, then to sever any
such portion of a provision, but only such portion of a provision necessary to
cause the remaining provisions or portions of provisions to be enforceable. If
the final judgment of a court of competent jurisdiction declares that any term
or provision of this ss.6(d) is invalid or unenforceable, the Parties agree that
the court making the determination of invalidity or unenforceability shall have
the power to reduce the scope, duration, or area of the term or provision, to
delete specific words or phrases, or to replace any invalid or unenforceable
term or provision with a term or provision that is valid and enforceable and
that comes closest to expressing the intention of the invalid or unenforceable
term or provision, and this Agreement shall be enforceable as so modified after
the expiration of the time within which the judgment may be appealed.
(e) Commercial Insurance. From and after the Closing Date, each Seller
shall make available to the Buyer the benefits of insurance purchased from
outside companies, if any, against all losses covered under fire, liability, or
other commercial insurance relating to the Business, to the extent that any
Acquired Asset, is entitled to coverage thereunder, in the amounts recovered in
connection with such losses and in accordance with the terms of the applicable
insurance policies; provided, that (a) such losses relate to occurrences (with
respect to occurrence-based policies) or claims made (with respect to
claims-made-based policies) which arose on or prior to the Closing Date, and (b)
such amounts are actually paid by such insurers to a Seller (exclusive of any
self insured retention or deductible and exclusive of amounts paid any Affiliate
in any self insured arrangement). Each Seller shall use its best efforts to
pursue all claims for insurance in accordance with this ss.6(e) but shall not be
obliged to litigate against any insurer. Each Seller shall have the exclusive
47
right to manage any such claim; provided, however, that (i) such Seller shall
consult with Buyer with respect to the pursuit of such insurance and shall
promptly advise Buyer as to the progress thereof, (ii) Buyer shall have the
right to monitor the defense of any such claim and (iii) Buyer shall have the
right to assume the management of any such claim if, in Buyer's sole discretion,
the Buyer determines that any claim negatively impacts the Business.
(f) Transition Assistance. Without payment of any further consideration
other than the consideration expressly set forth in this Agreement, (i) for a
period of ninety (90) days from the Closing Date, Messrs. Smuschkowitz, Nusbaum
and Weiner shall provide to Buyer and its Affiliates such reasonable assistance
as Buyer shall request in order to effect the transition of the Business to
Buyer, including by providing contact information for counsel representing
Sellers for each item of Intellectual Property and (ii) thereafter Weiner shall
provide reasonable assistance for up to nine (9) months after the Closing Date
but shall be reimbursed by Buyer for any reasonable out of pocket costs incurred
in connection therewith.
(g) Confidentiality. Each Seller and each Stockholder recognizes that, by
reason of its ownership of the Business thereof, and by reason of the fact that
information is being provided by Buyer to Sellers and Stockholders in connection
with the transactions contemplated hereby, such Seller and Stockholder may have
acquired and/or may acquire Buyer Confidential Information, the use or
disclosure of which could cause the Buyer substantial loss and damages that
could not be readily calculated and for which no remedy at law would be
adequate. Accordingly, each Seller and Stockholder covenants and agrees with
Buyer that it will not at any time, except in performance of its obligations to
Buyer, directly or indirectly, use, disclose or publish, or permit other Persons
(including without limitation Affiliates of each Seller) to use, disclose or
publish, any Confidential Information, unless (i) such information is or becomes
known to the public generally through no breach of this Agreement or any other
Contract, or (ii) disclosure is required by applicable law or Governmental
Order; provided, that prior to disclosing any information pursuant to clause (i)
or (ii) above, each Seller shall give prior written notice thereof to Buyer and
provide Buyer with the opportunity to contest such disclosure and shall
cooperate with efforts to prevent such disclosure. Buyer shall treat all
personal information of Sellers and Stockholders as Confidential Information,
unless otherwise required by law.
(h) Name Change. Following the Closing, Sellers agree not to use any
Intellectual Property which is part of the Acquired Assets, or adopt any
trademark, tradename, image, text or other item which is similar to any
Intellectual Property of the Acquired Assets. On or prior to the Closing Date,
Sellers shall change their names or tradenames to such other names and to do
such other things as shall be necessary or desirable to permit Buyer to assume
and use exclusively the Intellectual Property included in the Acquired Assets.
(i) Further Assurances. At any time or from time to time after the Closing,
Sellers shall, at the request of Buyer and at no additional cost or expense,
execute and deliver any further instruments or documents and take all such
further action as Buyer may reasonably request in order to evidence or effect
the consummation of the transactions contemplated hereby, including the transfer
of information and data (in such format as reasonably specified by the Buyer)
included in the Acquired Assets . At any time or from time to time after the
Closing, Buyer shall, at the reasonable request of Sellers and at no additional
cost or expense, execute and deliver any further instruments or documents and
48
take all such further action as Sellers may reasonably request in order to
evidence or effect the consummation of the transactions contemplated hereby.
7. Conditions to Obligation to Close.
(a) Conditions to Obligation of Buyer. The obligation of Buyer to
consummate the transactions to be performed by it in connection with the Closing
is subject to satisfaction of the following conditions:
(i) the representations and warranties set forth in ss.3 above that
are qualified as to materiality or Material Adverse Effect shall be true
and correct as of the date hereof and as of the Closing Date as if made on
the Closing Date and the representations and warranties that are not so
qualified shall be true and correct in all material respects;
(ii) each Seller shall have performed and complied with all of its
covenants hereunder in all material respects to the extent they are to be
performed on or prior to the Closing Date;
(iii) there shall not be any injunction, judgment, order, decree,
ruling, or charge in effect or threatened preventing, enjoining or
materially restraining consummation of any of the transactions contemplated
by this Agreement;
(iv) the applicable waiting period, if any, under the HSR Act shall
have expired or been terminated and all consents, authorizations, orders
and approvals of, or filings or registrations with any government,
government agency or court or any other Person required in connection with
the execution, delivery and performance of this Agreement and the
transactions contemplated hereby, or necessary to provide for the
continuation in full force and effect of each of the contracts and permits,
(including without limitation third party consents) shall have been
obtained or made and shall be in full force and effect;
(v) since the date of this Agreement, there shall not have occurred a
Material Adverse Effect, or any event or circumstance or combination of
events or circumstances that individually or in the aggregate are
reasonably likely to result in a Material Adverse Effect;
(vi) all indebtedness for borrowed money of Sellers (together with any
accrued interest or prepayment penalties) shall have been paid in full, and
any and all Security Interests granted by Sellers in respect of the
Acquired Assets shall have been terminated and all letters of credit issued
in respect of the Business shall have been terminated;
(vii) Buyer shall have received an opinion of counsel to Sellers and
Stockholders, in form and substance reasonably satisfactory to Buyer;
(viii) Wax shall have entered into a lease in form satisfactory to
Buyer for the lease of the premises located in Selma, Alabama for a period
of three (3) years, which lease will provide, without limitation, that (A)
49
the rent shall be limited to payment of real estate taxes, utilities and
insurance costs for the term of the lease, (B) that Buyer may terminate the
lease at any time on thirty (30) days notice and (C) that Buyer shall have
an option to purchase Sellers' premises located in Selma, Alabama for US $1
at any time during the term of the lease;
(ix) the license agreements between Concord and National Candy & Toy,
Inc. shall have been amended to provide for termination of such agreements
by Buyer within one hundred eighty (180) days after Closing without any
payment or other obligation by or on behalf of Buyer to licensee in
connection with such termination;
(x) the Escrow Agreement, substantially in the form attached hereto as
Exhibit B, has been fully executed and delivered by the Escrow Agent and
the Representatives;
(xi) the delivery, findings and conclusions of the Environmental
Investigations are acceptable to Buyer;
(xii) Sellers shall have delivered to the Buyer evidence satisfactory
to the Buyer:
(1) Section 6 clearance certificate that all amounts to be withheld
and remitted by Sellers in respect of the Business under the
Retail Sales Tax Act (Ontario) and similar legislation of other
jurisdictions have been paid;
(2) that an order of a court of competent jurisdiction has been
obtained with respect to each of Concord and Terra Rouge to the
effect that the purchase and sale of the Acquired Assets of such
Seller is exempt from the requirements of the Bulk Sales Act
(Ontario) and similar legislation of other jurisdictions; and
(3) that all amounts required to be paid in respect of the Business
by Sellers under the Workplace Safety and Insurance Act (Ontario)
and similar legislation of other jurisdictions have been paid.
(xiii) the Title Commitment, Title Policy and Survey in form and
substance as set out in ss.5(g) above, shall have been delivered or
obtained.
(xiv) Sellers shall have delivered to the Buyer:
(1) an executed transfer/deed in registrable form in favor of the
Buyer or as the Buyer may otherwise direct containing the
statements required by clauses (a) and (b) of subsection 50(22)
of the Planning Act (Ontario);
(2) statutory declarations of an officer of Concord and Terra Rouge
confirming that each of Concord and Terra Rouge, respectively, is
not a non-resident of Canada within the meaning of Section 116 of
the Income Tax Act (Canada);
50
(3) an assignment to the Buyer of the Canadian Tire Lease and of all
rents accruing due thereunder from and after the Closing, which
assignment shall contain a covenant to the effect that the Seller
will indemnify and save harmless the Buyer from and against all
actions, suits, costs, losses, charges, demands and expenses
arising as a result of any default on its part as landlord
pursuant to the Leases prior to the Closing Date;
(4) a written direction from the Seller to Canadian Tire directing
such Tenant to pay all future rentals to the Buyer or to whom the
Buyer will direct;
(5) executed acknowledgements in a form provided by the Buyer's
Counsel from Canadian Tire confirming that:
a. the Canadian Tire Lease is in full force and effect,
unmodified;
b. Canadian Tire is in possession of the premises;
c. no sums on account of advance rent have been paid
except as specified in the acknowledgment;
d. to the best of the knowledge of Canadian Tire, there is
no default on the part of Terra Rouge and, no event of
any kind has occurred which would permit Canadian Tire
to terminate the Canadian Tire Lease or withhold
payment of rent;
e. no default on the part of Canadian Tire has occurred
and is continuing unremedied; and
f. Canadian Tire has no right of set off against Terra
Rouge or against any rent payable thereunder;
(6) all post dated checks from Canadian Tire which will be endorsed
without recourse in favor of the Buyer;
(7) an assignment to the Buyer of all warranties and guarantees of
workmanship and material received from any Person supplying work
and material with respect to the buildings forming part of the
Owned Real Property, and of any and all rights and recourses
arising out of any defect in construction;
(8) a statutory declaration of the Seller confirming that the
premises have never been occupied and are not occupied at Closing
by any shareholder of the Seller as a family residence and that
the premises have never been used in conjunction with a family
residence;
51
(9) evidence satisfactory to the Buyer's Counsel, acting reasonably,
that the Permitted Encumbrances have been complied with to the
date of Closing;
(xv) the Spanish Subsidiaries shall have agreed to provide such
information as is necessary for Buyer to prepare and file any and all
quarterly and annual financial information with the SEC in a timely manner;
(xvi) the agreement between Concord and Mr. Edward P. Fenimore
referred to in ss.6(b)(viii)(2) has been fully executed and delivered;
(xvii) each Seller and Stockholder shall have delivered to Buyer a
certificate to the effect that each of the conditions specified above in
ss.7(a)(i)-(xvi) is satisfied in all respects; and
(xviii) all actions to be taken by Sellers in connection with
consummation of the transactions contemplated hereby and all certificates,
opinions, instruments, and other documents required to effect the
transactions contemplated hereby will be reasonably satisfactory in form
and substance to Buyer.
Buyer may waive any condition specified in this ss.7(a) if it executes a writing
so stating at or prior to the Closing.
(b) Conditions to Obligation of Sellers. The obligation of Sellers and
Stockholders to consummate the transactions to be performed by them in
connection with the Closing is subject to satisfaction of the following
conditions:
(i) the representations and warranties set forth in ss.4 above shall
be true and correct in all material respects at and as of the Closing Date;
(ii) Buyer shall have performed and complied with all of its covenants
hereunder in all material respects through the Closing,
(iii) there shall not be any injunction, judgment, order, decree,
ruling, or charge in effect or threatened preventing consummation of any of
the transactions contemplated by this Agreement;
(iv) the applicable waiting period, if any, under the HSR Act shall
have expired or been terminated;
(v) the Escrow Agreement, substantially in the form attached hereto as
Exhibit B, has been fully executed and delivered by the Escrow Agent and
Buyers;
(vi) Buyer shall have delivered to Seller a certificate to the effect
that each of the conditions specified above in ss.7(b)(i)-(v) is satisfied
in all respects; and
(vii) all actions to be taken by Buyer in connection with consummation
of the transactions contemplated hereby and all certificates, opinions,
instruments, and other documents required to effect the transactions
52
contemplated hereby will be reasonably satisfactory in form and substance
to Sellers.
Sellers may waive any condition specified in this ss.7(b) if it executes a
writing so stating at or prior to the Closing.
8. Survival; Indemnification.
(a) Survival of Representations and Warranties. All of the representations
and warranties of Sellers and Stockholders on the one hand and Buyer on the
other hand contained in ss.3 and ss.4, respectively, above shall survive the
Closing hereunder and continue in full force and effect thereafter until the
18-month anniversary of the Closing Date; provided that the representations and
warranties contained in ss.ss.3(a), (b), (e), (f), (g), (m)(as to IMI only),
4(a) and (b) shall survive the Closing and continue in full force and effect
forever (subject to any applicable statute of limitations); provided further,
that the representations and warranties contained in ss.ss.3(l) and (aa) shall
survive the Closing and continue in full force and effect thereafter until the
fourth anniversary of the Closing Date (subject to any applicable statute of
limitations). All of the covenants of the Parties contained in this Agreement
shall survive the Closing and continue in full force and effect forever
thereafter (subject to any applicable statutes of limitations).
(b) Indemnification Provisions for Benefit of Buyer.
(i) In the event Sellers and the Stockholders breach any of their
representations, warranties, and covenants contained above, and, provided
that Buyer makes a written claim for indemnification against Sellers and
Stockholders within the survival period set forth in ss.8(a) above, then
Sellers and Stockholders, jointly and severally, agree to indemnify Buyer
(including its Affiliates) from and against any Adverse Consequences
arising prior to, on or after the Closing Date that Buyer (including its
Affiliates) shall suffer that have been caused by such breach; provided,
however, that as to breaches of the covenants contained above in ss.ss.6(d)
and (g) above shall be several and not joint with respect to Sellers and
Stockholders; provided, further, that Sellers and the Stockholders shall
not have any obligation to indemnify Buyer from and against any Adverse
Consequences caused by the breach of any representation or warranty of
Sellers and Stockholders contained in ss.3 above until the Buyer has
suffered Adverse Consequences by reason of a breach in each occurrence
equal to or in excess of a US $10,000 threshold in the aggregate (after
which Sellers and Stockholders will be obligated to indemnify the Buyer
from and against any and all Adverse Consequences in respect of such breach
without regard to the US $10,000 threshold); provided, further, that
Sellers and the Stockholders shall not have any obligation to indemnify
Buyer from and against any Adverse Consequences caused by the breach of any
representation or warranty or covenant of Sellers contained herein until
Buyer has suffered Adverse Consequences by reason of all such breaches in
excess of a US $100,000 aggregate threshold (after which Sellers will be
obligated to indemnify Buyer from and against any and all Adverse
Consequences in respect of all such breaches without regard to the US
$100,000 threshold back to the first dollar). For purposes of
clarification, any Adverse Consequence by reason of a breach in each
occurrence less than a US $10,000 threshold in the aggregate shall not give
53
rise to any indemnification to Buyer pursuant to this ss.8(b) and shall not
be counted in determining the US$100,000 aggregate threshold referenced
above in this section.
(ii) Sellers and the Stockholders, jointly and severally, agree to
indemnify the Buyer (including its Affiliates) from and against the
entirety of any Adverse Consequences arising prior to, on or after the
Closing Date that the Buyer (including its Affiliates) shall suffer
resulting from, arising out of, relating to, in the nature of, or caused by
any Liability of Sellers, Stockholders or their Affiliates which is not an
Assumed Liability.
(iii) Sellers and the Stockholders, jointly and severally, agree to
indemnify the Buyer (including its Affiliates) from and against any and all
Adverse Consequences arising prior to, on or after the Closing Date in
respect of the period prior to the Closing that the Buyer (including its
Affiliates) shall suffer resulting from, arising out of, related to, in the
nature of, or caused by any Liability (including Taxes) of IMI.
(iv) Sellers and the Stockholders, jointly and severally, agree to
indemnify the Buyer (including its Affiliates) from and against the
entirety of any Adverse Consequences arising prior to, on or after the
Closing Date with respect to the period prior to Closing and any and all
defense costs associated with such matters arising after the Closing Date
that the Buyer (including its Affiliates) shall suffer resulting from,
arising out of, relating to, in the nature of, or caused by any and all
matters set forth on ss.3(u) of the Disclosure Schedule; provided however,
that as to the intellectual property matters disclosed in ss.3(u) of the
Disclosure Statement Sellers and Stockholders shall be responsible for and
shall indemnify Buyer for any monetary damages related to such claims for
the period on and prior to the Closing Date and Buyer shall be responsible
for and shall indemnify Sellers and Stockholders for any monetary damages
related to such claims for the period after the Closing Date; provided
further; that in the event a third party with respect to any intellectual
property matter set forth on ss.3(u) of the Disclosure Schedule is prepared
or proposes to resolve such claims on the condition that Buyer cease sales
or reengineer the alleged infringing product, Buyer shall have the option
in its sole discretion to do one of the following: (1) cease and desist
sales of such products in accordance with such third party's proposal, (2)
reengineer such products in accordance with such third party's proposal or
(3) assume defense of such claim at that time from Sellers, including all
defense costs associated therewith from and after the date Buyer assumes
the defense of such claim.
(v) Each Seller and Stockholder shall have no personal liability to
the Buyer (or its Affiliates) pursuant to this ss.8(i), (ii) and (iii)
unless and until all amounts held in the Escrow Account have been expended
or released to the Representatives. Except with respect to breaches of
ss.ss.6(d) and (g), whenever Buyer (or its Affiliates) seeks
indemnification hereunder, Buyer agrees to name each of the Stockholders in
such claim; provided that, subject to ss.8(b)(1), Buyer may collect all or
any part of such Adverse Consequences from any one or more of the
Stockholders.
54
(c) Indemnification Provisions for Benefit of Seller.
(i) In the event Buyer breaches any of its representations,
warranties, and covenants contained herein, then Buyer agrees to indemnify
Sellers and the Stockholders from and against the Adverse Consequences that
Sellers shall suffer that have been caused by such breach.
(ii) The Buyer agrees to indemnify Sellers and Stockholders from and
against the entirety of any Adverse Consequences Sellers and Stockholders
shall suffer caused resulting from, arising out of, relating to, in the
nature of, or caused by any Assumed Liability.
(d) Matters Involving Third Parties.
(i) If any third party shall notify any Party (the "Indemnified
Party") with respect to any matter (a "Third Party Claim") which may give
rise to a claim for indemnification against any other Party (the
"Indemnifying Party") under this ss.8, then the Indemnified Parties shall
promptly notify each Indemnifying Party thereof in writing; provided,
however, that no delay on the part of the Indemnified Party in notifying
any Indemnifying Party shall relieve the Indemnifying Party from any
obligation hereunder unless (and then solely to the extent) the
Indemnifying Party thereby is prejudiced.
(ii) Any Indemnifying Party will have the right to defend the
Indemnified Party against the Third Party Claim with counsel of its choice
reasonably satisfactory to the Indemnified Party so long as (A) the
Indemnifying Party notifies the Indemnified Party in writing within fifteen
(15) days after the Indemnified Party has given notice of the Third Party
Claim that the Indemnifying Party will indemnify the Indemnified Party from
and against the entirety of any Adverse Consequences the Indemnified Party
may suffer resulting from, arising out of, relating to, in the nature of,
or caused by the Third Party Claim, (B) the Indemnifying Party provides the
Indemnified Party with evidence reasonably acceptable to the Indemnified
Party that the Indemnifying Party will have the financial resources to
defend against the Third Party Claim and fulfill its indemnification
obligations hereunder, (C) the Third Party Claim involves only money
damages and does not seek an injunction or other equitable relief, (D)
settlement of, or an adverse judgment with respect to, the Third Party
Claim is not, in the good faith judgment of the Indemnified Party, likely
to establish a precedential custom or practice materially adverse to the
continuing business interests of the Indemnified Party, and (E) the
Indemnifying Party conducts the defense of the Third Party Claim actively
and diligently.
(iii) So long as the Indemnifying Party is conducting the defense of
the Third Party Claim in accordance with ss.8(d)(ii) above, (A) the
Indemnified Party may retain separate co-counsel at its sole cost and
expense and participate in the defense of the Third Party Claim, (B) the
Indemnified Party will not consent to the entry of any judgment or enter
into any settlement with respect to the Third Party Claim without the prior
written consent of the Indemnifying Party (not to be withheld
unreasonably), and (C) the Indemnifying Party will not consent to the entry
55
of any judgment or enter into any settlement with respect to the Third
Party Claim without the prior written consent of the Indemnified Party (not
to be withheld unreasonably).
(iv) In the event any of the conditions in ss.8(d)(ii) above is or
becomes unsatisfied, however, (A) the Indemnified Party may defend against,
and consent to the entry of any judgment or enter into any settlement with
respect to, the Third Party Claim in any manner it may deem appropriate
(and the Indemnified Party need not consult with, or obtain any consent
from, any Indemnifying Party in connection therewith), (B) the Indemnifying
Parties will reimburse the Indemnified Party promptly and periodically for
the costs of defending against the Third Party Claim (including attorneys'
fees and expenses), and (C) the Indemnifying Parties will remain
responsible for any Adverse Consequences the Indemnified Party may suffer
resulting from, arising out of, relating to, in the nature of, or caused by
the Third Party Claim to the fullest extent provided in this ss.8.
(e) Determination of Adverse Consequences. Solely for the purposes of
determining Adverse Consequences pursuant to this ss.8, any requirement in a
representation or warranty that an event or fact be material or have a Material
Adverse Effect or Material Adverse Change, which is a condition to such event or
fact constituting an inaccuracy or breach of such representation or warranty,
shall be ignored and any and all Adverse Consequences arising out of the
inaccuracy or breach of such representation or warranty shall be taken into
account for purposes of determining the rights of the Parties to indemnification
pursuant to this ss.8. All indemnification payments under this ss.8 shall be
deemed adjustments to the Purchase Price.
9. Termination.
(a) Termination of Agreement. Notwithstanding anything contained in this
Agreement to the contrary, the Parties may terminate this Agreement as provided
below:
(i) The Buyer and the Representatives may terminate this Agreement by
mutual written consent at any time prior to the Closing;
(ii) Buyer may terminate this Agreement by giving written notice to
the Representatives on or before the twelfth business day after the date
hereof in the event Buyer's investigation of the Business and operations of
Sellers is not satisfactory to Buyer, in its sole discretion;
(iii) The Buyer may terminate this Agreement by giving written notice
to the Representatives at any time prior to the Closing (A) in the event
Sellers have breached any representation, warranty, or covenant contained
in this Agreement, Buyer has notified the Representatives of the breach,
and the breach has continued without cure for a period of ten (10) business
days after the notice of breach or (B) if the Closing shall not have
occurred on or before ninety (90) days after the date of this Agreement
(unless the failure results primarily from Buyer itself breaching any
representation, warranty, or covenant contained in this Agreement); and
56
(iv) The Representatives may terminate this Agreement by giving
written notice to Buyer at any time prior to the Closing (A) in the event
Buyer has breached any material representation, warranty, or covenant
contained in this Agreement in any material respect, the Representatives
have notified Buyer of the breach, and the breach has continued without
cure for a period of ten (10) business days after the notice of breach or
(B) if the Closing shall not have occurred on or before ninety (90) days
after the date of this Agreement by reason of the failure of any condition
precedent under ss.7(b) hereof (unless the failure results primarily from
Sellers themselves breaching any representation, warranty, or covenant
contained in this Agreement).
(b) Effect of Termination. If any Party terminates this Agreement pursuant
to ss.9(a) above upon written notice to the other Party, all rights and
obligations of the Parties hereunder shall terminate and be of no further force
and effect and without any Liability of any Party to any other Party (except for
any liability of any Party then in breach); provided, however, that ss.6(h),
ss.8, ss.9(b), ss.10 above shall survive the termination.
10. Miscellaneous.
(a) Press Releases and Public Announcements. No Party shall issue any press
release or make any public announcement relating to the subject matter of this
Agreement without the prior consent of Buyer and the Representatives; provided,
however, that Buyer may make any public disclosure it believes is required by
applicable law or any listing or trading agreement concerning its
publicly-traded securities (in which case the disclosing Party will use its good
faith efforts to advise the other Parties prior to making the disclosure).
(b) No Third-Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any Person other than the Parties and their respective
successors and permitted assigns.
(c) Entire Agreement. This Agreement (including the documents referred to
herein) constitutes the entire agreement among the Parties and supersedes any
prior understandings, agreements, or representations by or among the Parties,
written or oral, to the extent they related in any way to the subject matter
hereof.
(d) Succession and Assignment. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective successors
and permitted assigns. No Party may assign either this Agreement or any of his
or its rights, interests, or obligations hereunder without the prior written
approval of Buyer and the Representatives; provided, however, that Buyer may (i)
assign any or all of its rights and interests hereunder to one or more of its
Affiliates and (ii) designate one or more of its Affiliates to perform its
obligations hereunder (in any or all of which cases Buyer nonetheless shall
remain responsible for the performance of all of its obligations hereunder);
provided, further, that Buyer may collaterally assign its rights hereunder to
any financial institution providing financing in connection with this Agreement.
57
(e) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
(f) Headings. The section headings contained in this Agreement are inserted
for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(g) Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be addressed to the intended recipient as
set forth below:
If to Sellers:
Bruce Weiner
515 Heards Ferry Road
Atlanta, Georgia 30328
U.S.A.
Facsimile: (404) 843-3304
and
Howard Smuschkowitz
4 Frybrook Road
Toronto, Ontario M4V 2R2
Canada
Facsimile: (416) 483-0882
and
Serge Nusbaum
8 Fifeshire Road
North York, Ontario M2L 2G5
Canada
Facsimile: (416) 222-5441
Copy to (which shall not constitute notice):
Heenan Blaikie LLP
Suite 2600, P.O. Box 185
South Tower, Royal Bank Plaza
Toronto, Ontario M5J 2J4
Attention: Stanley W. L. Freedman, Esq.
Facsimile: (416) 360-8425
58
If to Buyer:
Tootsie Roll Industries, Inc.
7401 South Cicero Avenue
Chicago, Illinois 60629
Attention: Ellen R. Gordon, President
Facsimile: (773) 838-3534
Copy to (which shall not constitute notice):
McDermott Will & Emery LLP
227 West Monroe Street
Chicago, Illinois 60606
Attention: Bernard S. Kramer, Esq.
Facsimile: (312) 984-7700
Any Party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail, or electronic mail), but no such notice,
request, demand, claim, or other communication shall be deemed to have been duly
given unless and until it actually is received by the intended recipient. Any
Party may change the address to which notices, requests, demands, claims, and
other communications hereunder are to be delivered by giving the other Parties
notice in the manner herein set forth.
(h) Expenses. Each of Buyer on the one hand and Seller and Stockholders on
the other hand will bear its own costs and expenses (including legal fees and
expenses) incurred in connection with this Agreement and the transactions
contemplated hereby.
(i) Governing Law. This Agreement and all disputes, claims or controversies
relating to, arising out of, or in connection with this Agreement, including any
question regarding its formation, existence, validity, enforceability,
performance, interpretation, breach or termination, shall be governed by and
construed in accordance with the domestic laws of the State of Illinois without
giving effect to any choice or conflict of law provision or rule (whether of the
State of Illinois or any other jurisdiction) that would cause the application of
the laws of any jurisdiction other than the State of Illinois.
(j) Arbitration.
(i) Except for claims barred by the applicable survival period in
ss.8(a) (which may not be pursued by the Parties) and except for claims for
preliminary or provisional injunctive relief (which may be pursued in
federal or state court), any and all disputes between the Parties that
relate to this Agreement or the transactions contemplated hereby, and which
cannot be amicably settled, shall be determined solely and exclusively by
arbitration administered by the American Arbitration Association ("AAA") in
Chicago, Illinois under the then-effective Commercial Arbitration Rules of
the AAA, in accordance with the Illinois Uniform Arbitration Act. There
shall be one (1) arbitrator (the "Arbitrator") who is approved with AAA and
appointed by mutual agreement of Buyer and the Representatives. In the
59
event the Buyer and Representatives are unable mutually to appoint an
Arbitrator, any Party may request the AAA to appoint an Arbitrator that the
AAA reasonably believes has the expertise and experience necessary to
resolve such dispute.
(ii) Discovery and discovery procedures (including, but not limited
to, the timing and permissibility of interrogatories, document requests and
depositions) shall be in the sole discretion of the Arbitrator. The Parties
shall be allowed to serve subpoenas on third parties. The subpoenas may
seek to compel the production of documents, appearance at a deposition
and/or attendance at the arbitration hearing. The Arbitrator shall issue
such subpoenas at the request of any of the Parties and the Party serving
the subpoenas shall be responsible for compelling the enforcement of such
subpoenas. Each Party shall bear its own costs and expenses incurred in
connection with the discovery and discovery procedures hereunder unless
otherwise determined by the Arbitrator.
(iii) The Arbitrator shall have the authority to award any remedy or
relief that a court in the State of Illinois with competent jurisdiction
could order or grant, including specific performance of any obligation
created under this Agreement, the issuance of injunctive or other
provisional relief, and the imposition of sanctions for abuse or
frustration of the arbitration process. The arbitration award shall be in
writing and specify the factual and legal basis for the award. Judgment on
the award rendered by the Arbitrator may be entered in any court having
jurisdiction thereof.
(iv) It is the intent of the Parties that any arbitration shall be
concluded as quickly as reasonably practicable. Subject to the availability
of the Arbitrator, unless the parties otherwise agree, once commenced, the
hearing on the disputed matters shall be held at least four (4) days a week
until concluded, with each hearing date to begin at 9:00 a.m. and to
conclude at 5:00 p.m., or at such times agreed to by the Arbitrator. The
Arbitrator shall use its best efforts to issue the final award or awards
within a period of five (5) business days after closure of the proceedings.
Failure of the Arbitrator to meet the time limits of delivering its
judgment shall not be a basis for challenging the award. Unless otherwise
agreed to by the Parties, all arbitration Parties' proceedings, not
including issuance of a final award, shall conclude no later than one
hundred twenty (120) days after notice of such claim for arbitration.
(v) Each Party shall bear such Party's own costs and pay one-half of
the fees and expenses of the Arbitrator equally divided between Buyer, on
the one hand, and Sellers and Stockholders, on the other hand unless
otherwise determined by the Arbitrator.
(vi) If there shall be a dispute between the Parties that relates to
this Agreement or the transactions contemplated hereby, each Party shall
keep confidential the existence and the nature of any information
concerning such dispute. In addition, if any action or other proceeding is
held with respect to such dispute, the Parties shall use their reasonable
efforts to cause such action or other proceeding to be conducted in
confidence and the results thereof to be maintained in confidence (subject
to the rules of the forum of the dispute). Nothing in this ss.10(j) shall
60
prohibit a Party from disclosing information concerning a dispute to its
advisors, provided that (A) such disclosure is reasonably necessary for the
advisor to assist the Party in connection with the dispute, and (B) the
Party informs its advisor of the confidential nature of the information.
(k) Amendments and Waivers. No amendment of any provision of this Agreement
shall be valid unless the same shall be in writing and signed by Buyer and the
Representatives. No waiver by any Party of any default, misrepresentation, or
breach of warranty or covenant hereunder, whether intentional or not, shall be
deemed to extend to any prior or subsequent default, misrepresentation, or
breach of warranty or covenant hereunder or affect in any way any rights arising
by virtue of any prior or subsequent such occurrence.
(l) Severability. Any term or provision of this Agreement that is invalid
or unenforceable in any situation in any jurisdiction shall not affect the
validity or enforceability of the remaining terms and provisions hereof or the
validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
(m) Construction. The Parties have participated jointly in the negotiation
and drafting of this Agreement. In the event an ambiguity or question of intent
or interpretation arises, this Agreement shall be construed as if drafted
jointly by the Parties and no presumption or burden of proof shall arise
favoring or disfavoring any Party by virtue of the authorship of any of the
provisions of this Agreement. Any reference to any federal, state, provincial,
local, or foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
word "including" shall mean including without limitation.
(n) Incorporation of Disclosure Schedules and Exhibits. The Disclosure
Schedule and Exhibits identified in this Agreement are incorporated herein by
reference and made a part hereof.
* * *
61
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of
the date first above written.
BUYER:
- ------
TOOTSIE ROLL INDUSTRIES, INC.
By. /s/ Ellen R. Gordon
--------------------------------------------------
Name: Ellen R. Gordon
------------------------------------------------
Title: President
------------------------------------------------
SELLERS:
- --------
CONCORD CONFECTIONS INC.
By. /s/ Bruce Weiner
--------------------------------------------------
Name: Bruce Weiner
------------------------------------------------
Title: Vice President
------------------------------------------------
By. /s/ Howard Smuschkowitz
--------------------------------------------------
Name: Howard Smuschkowitz
------------------------------------------------
Title: President
------------------------------------------------
By. /s/ Serge Nusbaum
--------------------------------------------------
Name: Serge Nusbaum
------------------------------------------------
Title: Secretary-Treasurer
------------------------------------------------
TERRA ROUGE ESTATES INC.
By. /s/ Bruce Weiner
--------------------------------------------------
Name: Bruce Weiner
------------------------------------------------
Title: Secretary
------------------------------------------------
By. /s/ Howard Smuschkowitz
--------------------------------------------------
Name: Howard Smuschkowitz
------------------------------------------------
Title: President
------------------------------------------------
By. /s/ Serge Nusbaum
--------------------------------------------------
Name: Serge Nusbaum
------------------------------------------------
Title: Vice President
------------------------------------------------
ALPHARETTA CONFECTIONS, INC.
By. /s/ Bruce Weiner
--------------------------------------------------
Name: Bruce Weiner
------------------------------------------------
Title: CEO and Secretary
------------------------------------------------
CONCORD WAX LLC
By. /s/ Bruce Weiner
--------------------------------------------------
Name: Bruce Weiner
------------------------------------------------
Title: Manager
------------------------------------------------
By. /s/ Howard Smuschkowitz
--------------------------------------------------
Name: Howard Smuschkowitz
------------------------------------------------
Title: Manager
------------------------------------------------
By. /s/ Serge Nusbaum
--------------------------------------------------
Name: Serge Nusbaum
------------------------------------------------
Title: Manager
------------------------------------------------
SIGNATURE PAGE TO PURCHASE AGREEMENT
STOCKHOLDERS:
- -------------
/s/ Howard Smuschkowitz
- -----------------------------------------------------
Howard Smuschkowitz
/s/ Serge Nusbaum
- -----------------------------------------------------
Serge Nusbaum
/s/ Bruce Weiner
- -----------------------------------------------------
Bruce Weiner
Bay-Charles Investments Ltd.
By: /s/ Bruce Weiner
--------------------------------------------------
Name: Bruce Weiner
------------------------------------------------
Title: President and Secretary
------------------------------------------------
ONWARD INVESTMENTS LIMITED
By: /s/ Howard Smuschkowitz
-------------------------------------------------
Name: Howard Smuschkowitz
-----------------------------------------------
Title: President, Secretary and Treasurer
----------------------------------------------
JS Nusbaum Holdings inc.
By: /s/ Serge Nusbaum
-------------------------------------------------
Name: Serge Nusbaum
-----------------------------------------------
Title: President
----------------------------------------------
973031 Ontario Limited
By: /s/ Bruce Weiner
-------------------------------------------------
Name: Bruce Weiner
-----------------------------------------------
Title: President and Secretary
----------------------------------------------
SIGNATURE PAGE TO PURCHASE AGREEMENT
973032 Ontario Limited
By: /s/ Howard Smuschkowitz
-------------------------------------------------
Name: Howard Smuschkowitz
-----------------------------------------------
Title: President and Secretary
----------------------------------------------
973033 Ontario Limited
By: /s/ Serge Nusbaum
-------------------------------------------------
Name: Serge Nusbaum
-----------------------------------------------
Title: President and Secretary
----------------------------------------------
TRUST STOCKHOLDERS:
- ------------------
ONWARD VOTING TRUST
By: /s/ Howard Smuschkowitz
-------------------------------------------------
Howard Smuschkowitz, as trustee
SMUSCHKOWITZ FAMILY TRUST
By: /s/ Howard Smuschkowitz
-------------------------------------------------
Howard Smuschkowitz, as trustee
By: /s/ Bruce Weiner
--------------------------------------------------
Bruce Weiner, as trustee
By: /s/ Dora Kichler
--------------------------------------------------
Dora Kichler, as trustee
HOWARD SMUSCHKOWITZ TRUST
By: /s/ Howard Smuschkowitz
-------------------------------------------------
Howard Smuschkowitz, as trustee
By: /s/ Bruce Weiner
--------------------------------------------------
Bruce Weiner, as trustee
By: /s/ Dora Kichler
--------------------------------------------------
Dora Kichler, as trustee
SIGNATURE PAGE TO PURCHASE AGREEMENT
NUSBAUM VOTING TRUST
By: /s/ Serge Nusbaum
-------------------------------------------------
Serge Nusbaum, as trustee
NUSBAUM FAMILY TRUST
By: /s/ Serge Nusbaum
-------------------------------------------------
Serge Nusbaum, as trustee
By: /s/ Diane Nusbaum
--------------------------------------------------
Diane Nusbaum, as trustee
By: /s/ Ron Gabbay
--------------------------------------------------
Ron Gabbay, as trustee
SIGNATURE PAGE TO PURCHASE AGREEMENT
Exhibit Index
-------------
Pursuant to Item 601(b) of Regulation S-K, the Exhibits have been omitted from
this Agreement. The registrant will furnish a copy of any omitted Exhibit to the
Commission upon request.
Exhibit A - Purchase Price Allocation
Exhibit B - Escrow Agreement
Exhibit C - Disclosure Schedule to Purchase Agreement
o Section 3(c) - Noncontravention
o Section 3(e) - Ownership of Sellers
o Section 3(f) - Impel Movieline Inc.
o Section 3(i)(i) - Financial Statements
o Section 3(i)(ii) - Additional Financial Information
o Section 3(j) - Events Subsequent to December 31, 2003
o Section 3(m) - Tax Matters of Impel Movieline Inc.
o Section 3(m)(iv) - Audits of Impel Movieline Inc.
o Section 3(n)(i) - Owned Real Property
o Section 3(n)(ii) - Leased Real Property
o Section 3(o)(i) - IP Infringement
o Section 3(o)(ii) - IP Registrations
o Section 3(q) - Accounts Receivable
o Section 3(s) - Contracts
o Section 3(t) - Insurance
o Section 3(u) - Litigation
o Section 3(v) - Product Warranty
o Section 3(x) - Employees
o Section 3(y) - Employee Benefits
o Section 3(aa) - Tanks and Equipment
o Section 3(aa)(ii) - Permits, Licenses, Authorizations
o Section 3(dd) - Backlog
o Section 3(ee) - Suppliers and Customers
o Section 5(c) - Exceptions to Operation in Ordinary Course
o Section 5(h) - Transferred Employees