EXHIBIT 10.3
ASSET PURCHASE AGREEMENT
by and among
ALLIANCE PACKAGING, INC.,
SCP POOL CORPORATION,
SOUTH CENTRAL POOL SUPPLY, INC.
and
BIO-LAB, INC.
September 26, 1996
TABLE OF CONTENTS
Page
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ARTICLE I PURCHASE AND SALE OF THE ASSETS................................. 1
1.1 Asset Purchase..................................................... 1
1.2 Purchase Price..................................................... 4
1.3 Inventory.......................................................... 5
1.4 Closing Transactions............................................... 6
ARTICLE II COVENANTS PRIOR TO CLOSING..................................... 7
2.1 Affirmative Covenants of Seller.................................... 7
2.2 Negative Covenants of Seller....................................... 7
2.3 Exclusivity........................................................ 8
ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLER...................... 9
3.1 Organization and Corporate Power................................... 9
3.2 Authorization of Transactions...................................... 9
3.3 Subsidiaries; Investments.......................................... 9
3.4 Absence of Conflicts............................................... 9
3.5 Financial Statements............................................... 10
3.6 Absence of Undisclosed Liabilities................................. 10
3.7 Absence of Certain Developments.................................... 11
3.8 Title to Properties................................................ 12
3.9 Environmental and Safety Matters................................... 13
3.10 Taxes.............................................................. 14
3.11 Contracts and Commitments.......................................... 15
3.12 Litigation; Proceedings............................................ 16
3.13 Brokerage.......................................................... 16
3.14 Governmental Licenses, Permits and Consents........................ 16
3.15 Employees.......................................................... 16
3.16 Employee Benefit Plans............................................. 16
3.17 Affiliate Transactions............................................. 17
3.18 Compliance with Laws............................................... 17
3.19 Inventory.......................................................... 17
3.20 Closing Date....................................................... 18
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER........................ 18
4.1 Corporate Organization and Power................................... 18
4.2 Authorization...................................................... 18
4.3 No Violation....................................................... 18
4.4 Governmental Authorities and Consents.............................. 18
4.5 Brokerage.......................................................... 19
4.6 Closing Date....................................................... 19
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TABLE OF CONTENTS
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ARTICLE V TERMINATION..................................................... 19
5.1 Termination........................................................ 19
5.2 Effect of Termination.............................................. 19
ARTICLE VI SURVIVAL; INDEMNIFICATION...................................... 19
6.1 Survival; Etc...................................................... 19
6.2 Indemnification.................................................... 19
6.3 General Qualifications on Indemnification.......................... 22
6.4 Arbitration Procedure.............................................. 23
6.5 Remedies........................................................... 23
ARTICLE VII ADDITIONAL AGREEMENTS......................................... 24
7.1 Employees and Employee Benefit Plans............................... 24
7.2 Press Releases and Announcements................................... 25
7.3 Further Agreements and Transfers................................... 25
7.4 Tax Matters........................................................ 25
7.5 Transition Assistance.............................................. 26
7.6 Investigation and Confidentiality.................................. 26
7.7 Expenses........................................................... 27
7.8 Waiver of Compliance with Bulk Sales Laws.......................... 27
7.9 Prorations......................................................... 27
7.10 Guaranty........................................................... 28
7.11 Operating Losses and Net Income.................................... 28
7.12 Asset Removal Damage............................................... 29
7.13 Misdirected Remittances............................................ 29
7.14 Costs to Restore Leased Premises................................... 30
7.15 Other Reimbursements............................................... 30
7.16 FIFRA.............................................................. 31
ARTICLE VIII MISCELLANEOUS................................................ 31
8.1 Amendment and Waiver............................................... 31
8.2 Notices............................................................ 31
8.3 Binding Agreement; Assignment...................................... 33
8.4 Severability....................................................... 33
8.5 No Strict Construction............................................. 33
8.6 Captions and Headings.............................................. 33
8.7 Entire Agreement................................................... 33
8.8 Counterparts....................................................... 33
8.9 Governing Law...................................................... 34
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8.10 Parties in Interest............................................... 34
ARTICLE IX CERTAIN DEFINITIONS............................................ 34
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ASSET PURCHASE AGREEMENT
AGREEMENT made as of September 26, 1996 by and among Alliance Packaging,
Inc., a Delaware corporation ("Seller"), Bio-Lab, Inc., a Delaware corporation
("Buyer"), and, for purposes of Section 7.10 only, SCP Pool Corporation, a
Delaware corporation ("SCP Pool"), and South Central Pool Supply, Inc., a
Delaware corporation ("SCP"). Certain capitalized terms used herein are defined
in Article IX hereof.
Subject to the terms and conditions set forth in this Agreement, Buyer
desires to acquire from Seller and Seller desires to sell to Buyer certain of
its assets used in its business or operations and certain of Seller's related
liabilities as specifically provided herein. The business of Seller as
presently conducted, which generally is the conversion, reformulating,
tableting, blending and repackaging of swimming pool and spa chemicals, is
hereinafter referred to as the "Business."
Seller and Buyer acknowledge that, from the date of this Agreement until
the Closing Date, Seller will be reducing its production in preparation for the
transfer of certain assets to Buyer pursuant to this Agreement, and that such
reduction of production will be conducted pursuant to the plan described in
Exhibit A attached hereto (the "Transition Plan").
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
PURCHASE AND SALE OF THE ASSETS
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1.1 ASSET PURCHASE.
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(a) Purchased Assets. On the terms and subject to the conditions set forth
in this Agreement, at the Closing (as defined in Section 1.4 below), Buyer shall
purchase from Seller, and Seller shall sell, convey, assign, transfer and
deliver to Buyer, all properties, assets, rights and interests of every kind and
nature, whether tangible or intangible, wherever located and by whomever
possessed, owned by Seller as of the Closing Date (as defined in Section 1.4
below), but excluding all Excluded Assets as defined in subsection (b) below
(the "Purchased Assets"), free and clear of all Liens including, without
limitation, the following:
(i) subject to the provisions of Section 1.1(b)(iv) below, all raw
material, work in process and finished goods inventory which complies (or, with
appropriate notice given to the United States Environmental Protection Agency
pursuant to applicable requirements under the Federal Insecticide, Fungicide and
Rodenticide Act, would comply) with the representations and warranties set forth
in Section 3.19(b) and (c) of this Agreement (the "Inventory");
(ii) subject to the provisions of Section 1.1(b)(iv) below, all fixed
assets, including machinery, equipment, tooling and dies, trucks, tractors,
trailers, tools, spare
parts, supplies, pallet racks, office furniture, copiers, fax machines,
telephone systems, computer equipment, chemical lab equipment and other
tangible personal property;
(iii) all cleaning, office and printing supplies, catalogs, and other
trade literature;
(iv) subject to the provisions of Section 1.1(b)(v) below, all
rights existing under the leases, contracts, licenses, supply and
distribution agreements, sales and purchase orders and agreements and other
agreements;
(v) all goodwill as a going concern of Seller, and all goodwill
associated with the Purchased Assets;
(vi) $89,521 of Seller's Organizational Costs;
(vii) all lists and records pertaining to customers, suppliers,
distributors and agents and all computer programs; and
(viii) subject to the provisions of Section 1.1(b)(xi) below, all
creative materials (including, without limitation, photographs, films, art
work, color separations and the like), advertising and promotional
materials and all other printed or written materials.
(b) Excluded Assets. Notwithstanding the foregoing, the following as
(the "Excluded Assets") are expressly excluded from the purchase and sale
contemplated hereby and, as such, are not Purchased Assets:
(i) all cash and cash equivalents, bank deposits and marketable and
other investment securities;
(ii) all of Seller's rights in real property;
(iii) the properties and assets listed on Schedule 1.1(b)(iii)
attached hereto;
(iv) all raw material, work in process, finished goods inventory,
tooling, spare parts, components and packing which is exclusively related
to Seller's chemical feeder products;
(v) all rights under the contracts, leases and agreements listed on
Schedule 1.1(b)(v) attached hereto ("Excluded Agreements");
(vi) all prepayments, prepaid expenses, deposits and other tangible
prepaid assets;
(vii) except as otherwise provided in Section 1.1(a)(vi) above, all
intangible property, including without limitation all of the following
which are owned by or licensed to Seller, together with all income,
royalties, damages and payments due or payable as of the Closing or
thereafter: patents, patent applications and inventions and any reissue,
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continuation, continuation-in-part, division, extension or reexamination
thereof; trademarks, service marks, trade dress, logos, trade names and
corporate names, together with all goodwill associated therewith and
adaptions and deviations thereof (including, without limitation, the
"Alliance Packaging, Inc.", "Regal", "Clear Choice" and "EZ-Clor"
trademarks and trade names); copyrights; and all registrations,
applications and renewals for any of the foregoing; trade secrets and
confidential and proprietary information (including, ideas, know-how,
drawings, sketches, patterns, specifications and designs) (collectively,
"Proprietary Rights");
(viii) all accounts and notes receivable and other evidence of
indebtedness and rights to receive payments arising out of sales occurring
in the conduct of the Business prior to the Closing Date and actions or
proceedings commenced in connection therewith in existence as of the
Closing Date (the "Accounts Receivable");
(ix) all franchises, approvals, permits, licenses, orders,
registrations, certificates, variances, and similar rights obtained from
governments and governmental agencies, including without limitation, those
obtained pursuant to Environmental and Safety Requirements;
(x) subject to the provisions of Section 7.13 below, all rights to
receive and retain mail and other communications;
(xi) all advertising and promotional materials relating to Seller's
chemical feeder products and to all of Seller's "Regal", "Clear Choice" and
"EZ-Clor" brand products;
(xii) all lists and records pertaining to personnel and all other
books, ledgers, files, documents, correspondence, drawings and
specifications, and business records of every kind and nature;
(xiii) all monies to be received by Seller from Buyer and all other
rights of Seller under this Agreement; and
(xiv) Seller's corporate charter and all qualifications of Seller 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 and blank
stock certificates and other documents relating to the organization,
maintenance and existence of Seller as a corporation.
(c) Assumed Liabilities. On the terms and subject to the conditions
specified in this Agreement, at the Closing, Buyer will assume and agree to pay,
perform and discharge when due, subject to Buyer's right to dispute the
obligations in good faith, all of the Seller's obligations under the agreements,
leases, contracts and commitments marked with an asterisk (*) on Schedule 3.11
attached hereto (the "Assumed Contracts"), and under sales and purchase orders
entered into in the ordinary course of business consistent with the Transition
Plan which can be filled with the Inventory purchased hereunder (other than
obligations resulting from, arising out of,
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relating to, in the nature of, or caused by, breach of contract, breach of
warranty, tort, infringement or violation of law relating to facts or
circumstances existing prior to the Closing Date), but in each case only to the
extent that such agreements, leases, contracts, commitments and sales and
purchase orders constitute Purchased Assets and have been validly assigned to
Buyer hereunder or Buyer is otherwise able to assume the benefits thereof
(collectively, the "Assumed Liabilities"). At least 2 and no more than 5
business days prior to the Closing Date, Seller will provide to Buyer a list of
open sales and purchase orders entered into in the ordinary course of business,
consistent with the Transition Plan, as of the most recent practicable date.
(d) Excluded Liabilities. Notwithstanding anything to the contrary
contained in this Agreement or otherwise, Buyer will not assume or in any way
become liable for Seller's debts, Taxes, liabilities or obligations of any
nature whatsoever, whether accrued, absolute or contingent, whether known or
unknown, whether disclosed or undisclosed, whether due or to become due and
whether related to the Purchased Assets or otherwise, and regardless of when or
by whom incurred, other than the Assumed Liabilities and any liabilities or
obligations of any nature whatsoever to the extent such liabilities or
obligations are caused by or arise out of Buyer's use of the Purchased Assets
after the Closing (collectively, the "Excluded Liabilities"). Without limiting
the generality of the foregoing, Excluded Liabilities shall include, without
limitation, all liabilities and obligations arising under Environmental and
Safety Requirements relating to Seller, the Purchased Assets, or the Business
and relating to facts or circumstances existing prior to the Closing Date; all
liabilities and obligations arising under the Leases and all liabilities and
obligations related to the transportation, treatment, storage, disposal or other
management of wastes generated by Seller, any predecessor or affiliate, or the
Business prior to the Closing Date, including all such liabilities and
obligations arising pursuant to CERCLA or any other Environmental and Safety
Requirements.
1.2 PURCHASE PRICE.
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(a) The total purchase price payable by Buyer to Seller for the
Purchased Assets (the "Purchase Price") shall be the assumption by Buyer of the
Assumed Liabilities plus an amount equal to the Base Purchase Price.
(b) At the Closing, Buyer shall assume the Assumed Liabilities and
shall deliver to Seller cash in an amount equal to the Base Purchase Price by
wire transfer of immediately available funds to an account designated by Seller
to Buyer no less than 2 business days before the Closing Date.
(c) The "Base Purchase Price" shall equal the sum of the book value
of the Inventory as of the Closing Date, net of vendor rebates applicable
thereto, plus the depreciated book value of the Purchased Assets other than
Inventory as of the Closing Date. Attached hereto as Schedule 1.2(c) is a
schedule of the Inventory, net of vendor rebates applicable thereto, and the
other Purchased Assets reflecting such book values as of September 24, 1996 (in
the case of the Inventory) and September 19, 1996 (in the case of the other
Purchased Assets). Within 2 business days prior to the Closing Date, Seller
will provide to Buyer a revised Schedule 1.2(c) which (i) has been adjusted for
depreciation of the Purchased Assets other than Inventory and (ii) includes a
good faith estimate of the book value of the Inventory, net of vendor rebates
applicable thereto, as of the
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Closing determined in accordance with GAAP (the "Estimated Inventory Balance").
The sum of such adjusted amounts will be the Base Purchase Price.
1.3 INVENTORY.
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(a) On the business day prior to the Closing Date, Seller and its
representatives will conduct a physical count of the Inventory as of such date,
which Buyer and its representatives shall be entitled to observe. Within 30
days after the Closing Date, Seller shall prepare and deliver to Buyer a
schedule (the "Inventory Statement") reflecting Seller's determination of the
book value of the Inventory, net of vendor rebates applicable thereto, as of the
Closing Date consistent with GAAP (the "Actual Inventory Balance"), which
determination shall be based upon the physical count taken on the business day
prior to the Closing Date. Seller shall make available to Buyer all information
necessary in order for Buyer to review Seller's determination of the Actual
Inventory Balance.
(b) If Buyer disagrees with Seller's determination of the Actual
Inventory Balance, Buyer shall notify Seller in writing of such disagreement
within 15 days from the date Buyer receives the Inventory Statement. Such
writing shall be accompanied by a written notice from Buyer's accountants
setting forth the basis for such disagreement in reasonable detail. Buyer and
Seller thereafter shall negotiate in good faith to resolve any such
disagreements. If Buyer and Seller are unable to resolve any such disagreements
within 15 days after delivery of Buyer's objection letter, Buyer and Seller
shall submit such dispute to an independent "Big Six" accounting firm mutually
agreeable to Buyer and Seller for resolution consistent with GAAP. If Buyer and
Seller are unable to mutually agree on such an accounting firm, a "Big Six"
accounting firm will be selected by lot after eliminating one firm designated as
objectionable by each of Buyer and Seller (any accounting firm so selected or
agreed upon shall be referred to herein as the ("Independent Auditor")).
(c) Buyer and Seller shall use their best efforts to cause the
Independent Auditor to resolve all disagreements over the Actual Inventory
Balance as soon as practicable, but in any event within 45 days after submission
of the disputes to the Independent Auditor. The resolution of such
disagreements and the determination of the Actual Inventory Balance shall be
final and binding on Buyer and Seller.
(d) The Independent Auditor shall determine the allocation of its
costs and expenses in determining the Actual Inventory Balance based upon the
percentage which the portion of the contested amount not awarded to each party
bears to the amount actually contested by such party. Buyer and Seller shall
pay the Independent Auditor's fees and expenses based on such allocation.
(e) As soon as practicable (but in no event later than five
business days) after the Actual Inventory Balance is determined pursuant to this
Section 1.3, Buyer shall pay to Seller or Seller shall pay to Buyer, as the case
may be, in immediately available funds the sum of (i) the difference between the
Estimated Inventory Balance and the Actual Inventory Balance and (ii) interest
on the amount described in clause (i) at a per annum rate equal to the prime
rate, as
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reported by The Wall Street Journal on the day which is two business days prior
to the date of such payment, for the period between the Closing Date and the
date on which such payment is made.
1.4 CLOSING TRANSACTIONS.
--------------------
(a) Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") will take place at the offices of Kirkland & Ellis,
200 East Randolph Drive, Chicago, Illinois 60601, at 9:00 a.m. local time on
October 31, 1996, or such earlier date, time or place as is mutually agreeable
to Buyer and Seller (the "Closing Date").
(b) Closing Deliveries. Subject to the conditions set forth in this
Agreement, the parties agree to consummate the following "Closing Transactions"
at the Closing:
(i) Seller will convey to Buyer good and marketable title to all of
the Purchased Assets, free and clear of all Liens, and deliver to Buyer a
bill of sale in the form of Exhibit B attached hereto and all other
instruments of conveyance, all in form and substance reasonably
satisfactory to Buyer and its counsel (collectively, "Conveyance
Documents"), which are necessary or reasonably required by Buyer to effect
the transfer to Buyer of the Purchased Assets;
(ii) Buyer will deliver to Seller an assignment and assumption in
the form of Exhibit C attached hereto and such other instruments of
assumption in form and substance reasonably satisfactory to Seller and its
counsel as are required in order for Buyer to assume the Assumed
Liabilities;
(iii) Buyer will deliver to Seller certified copies of the
resolutions of Buyer's and Great Lakes Chemical Corporation's boards of
directors approving the transactions contemplated by this Agreement;
(iv) Seller will deliver to Buyer certified copies of the
resolutions of Seller's, SCP's, and SCP Pool's boards of directors
approving the transactions contemplated by this Agreement; and
(v) Seller, SCP and SCP Pool will enter into a Noncompetition
Agreement with Buyer in the form of Exhibit D attached hereto (the
"Noncompetition Agreement"), and such agreement will be in full force and
effect.
ARTICLE II
COVENANTS PRIOR TO CLOSING
2.1 AFFIRMATIVE COVENANTS OF SELLER. Following the execution of
this Agreement and prior to the Closing, unless Buyer otherwise agrees in
writing, Seller will, except as otherwise contemplated by the Transition Plan:
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(a) use commercially reasonable efforts to conduct its business
(including, without limitation, its cash management practices, the collection of
receivables, payment of payables, incurrence of capital expenditures and
purchase of Inventory) in order to minimize Operating Losses, to the extent
possible, and consistent with the Transition Plan;
(b) use commercially reasonable efforts to maintain the Purchased
Assets and the Real Property in good operating condition (reasonable wear and
tear excepted) and repair, maintain insurance reasonably comparable to that in
effect on the date hereof (and notify Buyer promptly in the event Seller is not
able to maintain such insurance), maintain Inventory, supplies and spare parts
at levels consistent with the Transition Plan and, in the event of a casualty,
loss or damage to any of the Purchased Assets prior to the Closing Date for
which Seller is insured, transfer the proceeds of such insurance to Buyer at the
Closing, but only to the extent that the amount of such proceeds does not exceed
the depreciated book value of such assets;
(c) maintain its books, accounts (including working capital) and
records in accordance with GAAP;
(d) comply in all material respects with all legal requirements and
contractual obligations applicable to the operations and business of Seller and
pay all applicable Taxes then due and payable and relating to the Purchased
Assets; and
(e) promptly inform Buyer in writing of any variances from the
representations and warranties of which Seller becomes aware contained in
Article III or elsewhere in this Agreement or any breach of any covenants
hereunder by Seller.
2.2 NEGATIVE COVENANTS OF SELLER. Following the execution of this
Agreement and prior to the Closing, without Buyer's prior written consent, which
shall not be unreasonably withheld, Seller will not:
(a) take any action that would require disclosure under Section 3.7
below, except for actions that would require disclosure under Section 3.7(h) or
(i) and were taken in accordance with the Transition Plan;
(b) enter into any transaction with respect to the Business with
any of its officers or directors;
(c) enter into any transactions with respect to the Business with
any of its Affiliates (other than its officers and directors) except in
connection with the Transition Plan;
(d) sell, lease, license or otherwise dispose of any interest in
any of the Purchased Assets, other than Inventory in accordance with the
Transition Plan, or permit, allow or suffer any of the Purchased Assets to be
subjected to any Lien other than Liens in favor of The First National Bank of
Chicago, as Agent, in connection with SCP's bank credit facility (the "FNBC
Liens");
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(e) terminate, modify or amend any existing material contracts,
leases or agreements to be assumed by Buyer; or
(f) enter into any new material contracts, leases, agreements or
commitments, other than commitments for materials made in accordance with the
Transition Plan.
2.3 EXCLUSIVITY. Neither SCP, SCP Pool nor Seller will, directly or
indirectly, through any officer, director, employee, agent or otherwise
(including through any investment banker, attorney or accountant retained by any
of the foregoing), solicit, initiate any discussions or negotiations regarding,
or furnish to any other Person any information with respect to, or otherwise
cooperate in any way with, any proposal or offer from any Person (including any
of such Person's officers, directors, employees, agents or other
representatives) relating to any liquidation (other than as contemplated
hereby), dissolution, recapitalization or refinancing of Seller or any
acquisition of the capital stock or other securities of Seller or any
substantial portion of the assets of Seller or the Business (including any
acquisition structured as a merger, consolidation or share exchange) (an
"Acquisition Proposal"). Seller will immediately cease and cause to be
terminated any and all contacts, discussions and negotiations with third parties
regarding any Acquisition Proposal. Each of Seller, SCP and SCP Pool hereby
agrees to notify Buyer immediately upon the receipt of any proposal, offer,
inquiry or contract with respect to any of the foregoing and will promptly
provide Buyer with copies of and disclose to Buyer the details concerning any
such proposal, inquiry or contract.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF SELLER
As a material inducement to Buyer to enter into this Agreement Seller
hereby represents and warrants to Buyer, that:
3.1 ORGANIZATION AND CORPORATE POWER. Each of Seller, SCP and SCP
Pool is a corporation duly organized, validly existing and in good standing
under the laws of the state of Delaware. Seller is qualified to do business in
every jurisdiction in which the nature of its business or its ownership of
property requires it to be qualified, except where the failure to be so
qualified would not have a Material Adverse Effect. (All such jurisdictions in
which Seller is qualified are set forth on Schedule 3.1 hereto.) Seller has full
corporate power and other necessary power and authority and all licenses,
permits and authorizations necessary to own and operate its properties,
necessary to own and operate its business and to conduct its business as
presently conducted, except where the failure to have such licenses, permits and
authorizations would not have a Material Adverse Effect.
3.2 AUTHORIZATION OF TRANSACTIONS. Each of Seller, SCP and SCP Pool
has full power and authority to execute, deliver and perform its obligations
under this Agreement and the Noncompetition Agreement and to consummate the
transactions contemplated hereby and thereby. The execution, performance and
delivery of this Agreement and the Noncompetition Agreement by
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each of Seller, SCP and SCP Pool and the consummation of the transactions
contemplated hereby and thereby have been duly and validly authorized by all
requisite corporate action. No other corporate proceedings on the part of
Seller, SCP or SCP Pool are necessary to approve and authorize the execution and
delivery of this Agreement or the Noncompetition Agreement. This Agreement has
been duly executed and delivered by Seller, SCP and SCP Pool and constitutes the
valid and binding agreement of Seller, SCP and SCP Pool, enforceable against
Seller, SCP and SCP Pool in accordance with its terms, subject to the effect of
bankruptcy, insolvency, reorganization or other similar laws and to general
principles of equity (whether considered in proceedings at law or in equity).
The Noncompetition Agreement shall have been duly executed and delivered by
Seller, SCP and SCP Pool.
3.3 SUBSIDIARIES; INVESTMENTS. Seller does not own or control
(directly or indirectly), hold or have any rights or options to subscribe for,
purchase or acquire any shares of stock, partnership interest, joint venture
interest, equity participation or any other security or interest in any other
Person and Seller has never had any Subsidiary.
3.4 ABSENCE OF CONFLICTS. Except as set forth in Schedule 3.4
hereto:
(a) the execution, delivery and performance of this Agreement and
the consummation of the transactions contemplated hereby do not and will not (i)
conflict with or result in any breach of any of the provisions of, (ii)
constitute a default under, (iii) result in a violation of, (iv) give any third
party the right to terminate or to accelerate any obligation under, (v) result
in the creation of any Lien upon the Purchased Assets under, or (vi) require any
authorization, consent, approval, exemption or other action by or notice to any
court or other governmental body under, the provisions of the certificate of
incorporation or by-laws of Seller, SCP or SCP Pool or any indenture, mortgage,
lease, loan agreement or other agreement or instrument to which Seller, SCP or
SCP Pool is bound or affected, or any law, statute, rule or regulation or any
judgment, order or decree to which Seller, SCP or SCP Pool is subject; and
(b) the execution, delivery and performance of the Noncompetition
Agreement and the consummation of the transactions contemplated thereby do not
and will not (i) conflict with or result in any breach of any of the provisions
of, (ii) constitute a default under, (iii) result in a violation of, (iv) give
any third party the right to terminate or to accelerate any obligation under,
(v) result in the creation of any Lien upon the Purchased Assets under, or (vi)
require any authorization, consent, approval, exemption or other action by or
notice to any court or other governmental body under, the provisions of the
certificate of incorporation or by-laws of Seller, SCP or SCP Pool or any
indenture, mortgage, lease, loan agreement or other agreement or instrument to
which Seller, SCP or SCP Pool is bound or affected.
3.5 FINANCIAL STATEMENTS. Seller has furnished Buyer with copies of
an unaudited balance sheet as of June 30, 1996, for Seller (the "Latest Balance
Sheet") and the related unaudited statements of income and cash flow for the
six-month period then ended and copies of the unaudited balance sheet of Seller
as of December 31, 1995 and the related unaudited statement of income and cash
flow for the period then ended. Each of the foregoing financial statements
(including in all cases the notes thereto, if any) (collectively, the "Financial
Statements") and
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Schedule 1.2(c) attached hereto were prepared from Seller's books and records,
and the Financial Statements present fairly Seller's financial condition and
results of operations as of the times and for the periods referred to therein,
and, except as set forth on Schedule 3.5 attached hereto, have been prepared in
accordance with GAAP, subject to normal year-end adjustments and the absence of
footnote disclosure. The amounts reflected on Schedule 1.2(c) have been
determined in accordance with GAAP. The amounts reflected on (or to be reflected
on) Schedule 1.2(c) have been (or will be) determined based on Seller's books
and records, which are true and correct in all material respects with respect to
such amounts.
3.6 ABSENCE OF UNDISCLOSED LIABILITIES. To Seller's knowledge,
Seller has no material obligations or liabilities (whether accrued, absolute,
contingent, unliquidated or otherwise, whether or not known, whether due or to
become due and regardless of when or by whom asserted) arising out of
transactions entered into at or prior to the Closing, or any action or inaction
at or prior to the Closing, or any state of facts existing at or prior to the
Closing, except (a) obligations under contracts or commitments described in
Schedule 3.11 hereto or under contracts and commitments entered into in the
ordinary course of business which are not required to be disclosed thereon (but
not liabilities for breaches thereof), (b) liabilities reflected on the
liability side of the Latest Balance Sheet, (c) liabilities which have arisen
after the date of the Latest Balance Sheet in the ordinary course of business or
otherwise in accordance with the terms and conditions of this Agreement (none of
which is a liability for breach of contract, breach of warranty, tort or
infringement, or a claim or lawsuit, or an environmental liability), and (d)
liabilities otherwise expressly set forth in Schedule 3.6 hereto.
3.7 ABSENCE OF CERTAIN DEVELOPMENTS. Seller has not, except as set
forth in Schedule 3.7 hereto, since December 31, 1995:
(a) suffered a change or development in the business, financial
condition, operating results, earnings, assets, customer, supplier, employee and
sales representative relations or financing arrangements of the Business which
has had, or is likely to have, a Material Adverse Effect;
(b) borrowed any amount or issued or exchanged any notes or other
evidences of any indebtedness for borrowed money or incurred or become subject
to any obligations or liabilities (whether absolute or contingent), except
current liabilities incurred in the ordinary course of business consistent with
past practice and liabilities under contracts entered into in the ordinary
course of business consistent with past practices;
(c) discharged or satisfied any Lien involving indebtedness
exceeding $50,000 or paid any obligation or liability, other than liabilities
paid in the ordinary course of business, or prepaid any amount of indebtedness
for borrowed money;
(d) mortgaged, pledged or subjected to any Lien any portion of its
properties or assets with a value in excess of $50,000;
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(e) sold, leased, assigned or transferred (including, without
limitation, transfers to any employees or Affiliates of Seller) any tangible
assets (other than Inventory in the ordinary course of business), Proprietary
Rights or other intangible assets, or canceled without fair consideration any
debts or claims owing to or held by it, or, to its knowledge, disclosed any
proprietary confidential information to any Person, other than disclosures of
such information to Buyer and its Affiliates and representatives or in the
ordinary course of business pursuant to appropriate confidentiality agreements;
(f) suffered any theft, damage, destruction or casualty loss to its
tangible assets exceeding $75,000, whether or not covered by insurance;
(g) entered into, amended or terminated any lease, contract,
agreement or commitment, or taken any other action or entered into any other
transaction other than in the ordinary course of business and in accordance with
past custom and practice, or entered into any transaction with any Insider (as
defined in Section 3.17 below) (other than with Affiliates of SCP or SCP Pool in
the ordinary course of business and in accordance with past custom and
practice), or changed any business practice or manner of dealing with any
customer, supplier, subcontractor, Insider, sales representative, or other
person or entity with whom Seller engages in any business activity, or entered
into any other material transaction, whether or not in the ordinary course of
business;
(h) entered into any employment contract or collective bargaining
agreement, written or oral, or changed the employment terms for any employee or
agent or made or granted any bonus or any wage, salary or compensation increase
to any director, officer, employee or sales representative, group of employees
or consultant or made or granted any increase in any employee benefit plan or
arrangement, or amended or terminated any existing employee benefit plan or
arrangement or adopted any new employee benefit plan or arrangement, except for
normal compensation increases or bonuses consistent with past practice;
(i) conducted its business (including the collection of
receivables, purchase of inventory, payment of payables, incurrence of capital
expenditures, and maintenance and repair of assets) other than in the usual and
ordinary course of business in accordance with past custom and practice;
(j) made any capital expenditures (or commitments therefor) that
aggregate in excess of $75,000;
(k) made any loans or advances to, or guarantees for the benefit
of, any persons;
(l) delayed or postponed in a material way the payment of accounts
payable and other liabilities;
(m) entered into any lease of capital equipment or real estate
involving rental in excess of $50,000 per annum;
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(n) made any charitable contributions or pledges in excess of
$10,000 in the aggregate; or
(o) entered into any other transaction that is material to the
Business other than in the ordinary course of business.
3.8 TITLE TO PROPERTIES.
(a) Owned Properties. Seller does not own any real property.
(b) Leased Properties. Schedule 3.8 sets forth a list of all of the
leases and subleases ("Leases") and each leased and subleased parcel of real
property in which Seller has a leasehold and subleasehold interest (the "Real
Property"), including, without limitation, the lease for the premises located at
4653 Leston Avenue, Suite 701, Dallas, Texas (the "Distribution Facility
Lease").
(c) Real Property Disclosure. Except as disclosed on Schedule 3.8,
there is no real property leased or owned by the Seller used in the Seller's
business.
(d) Condition and Operation of Improvements. To Seller's knowledge,
all buildings and all components of all buildings, structures and other
improvements included within the Real Property covered by the Distribution
Facility Lease (the "Improvements"), are in good condition and repair and
adequate to operate such facilities as currently used; to Seller's knowledge,
there are no facts or conditions affecting any of the Improvements which would,
individually or in the aggregate, interfere in any material respect with the
use, occupancy or operation thereof as currently used, occupied or operated.
(e) Except as set forth on Schedule 3.8, Seller owns good and
marketable title, free and clear of all Liens other than the FNBC Liens, to all
of the Purchased Assets which are personal property.
(f) The Purchased Assets will include all assets reflected in the
Latest Balance Sheet (except for changes in Inventory in accordance with the
Transition Plan) and used by Seller in conducting the Business as presently
conducted, other than the Excluded Assets and the Real Property. To Seller's
knowledge, all Purchased Assets are in good condition and repair in all
respects, except for ordinary wear and tear not caused by neglect, and are
useable in the ordinary course of the Business.
3.9 ENVIRONMENTAL AND SAFETY MATTERS.
(a) Except as set forth on Schedule 3.9, Seller has, to its
knowledge, complied and is in compliance with all Environmental and Safety
Requirements, except where the failure to comply would not have a Material
Adverse Effect.
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(b) Without limiting the generality of the foregoing, Seller has,
to its knowledge, obtained and complied with, and is in material compliance
with, all permits, licenses and other authorizations that may be required
pursuant to Environmental and Safety Requirements for the occupation of its
respective facilities and the operation of the Business and which are material
to the Business, a list of all such permits, licenses and other authorizations
is set forth on Schedule 3.9 hereto.
(c) Seller has not received any written notice, report or other
information regarding any actual or alleged violation of Environmental and
Safety Requirements, including any investigatory, remedial or corrective
obligations, relating to the Real Property or the Business and arising under
Environmental and Safety Requirements where such actual or alleged violation is
or may be material to the Real Property or the Business.
(d) Except as set forth on Schedule 3.9, to Seller's knowledge,
none of the following exists at any property or facility owned or operated by
Seller: 1) underground storage tanks, landfills, surface impoundments or waste
disposal areas; 2) asbestos-containing material in any form or condition; or 3)
materials or equipment containing polychlorinated biphenyls.
(e) To the knowledge of Seller, Seller has not treated, stored,
disposed of, arranged for or permitted the disposal of, transported, handled, or
released any substance, including without limitation any hazardous substance 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 could give
rise to liability, including any liability for corrective action costs, response
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") or the Resource Conservation and
Recovery Act ("RCRA"), or any other Environmental and Safety Requirements where
such liability may have a Material Adverse Effect.
(f) "Environmental and Safety Requirements" means all federal,
state, local and foreign statutes, regulations, ordinances and similar
provisions having the force or effect of law, all judicial and administrative
orders and determinations, all contractual obligations and all common law
concerning public health and safety, worker health and safety, and pollution or
protection of the environment, 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
materials, substances or wastes, chemical substances or mixtures, pesticides,
insecticides, biocides, pollutants, contaminants, toxic chemicals, carcinogens,
reproductive toxins, petroleum products or byproducts, asbestos, polychlorinated
biphenyls, noise or radiation, in each case as in effect and as amended through
the Closing Date.
(g) This Section 3.9 constitutes Seller's sole and exclusive
representations and warranties as to matters covered by this Section.
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3.10 TAXES.
(a) All Tax Returns required to be filed by Seller have been
prepared in material compliance with all applicable laws and regulations, and
all such Tax Returns are true and accurate in all material respects. All Taxes
shown as due and payable by Seller on all such Tax Returns have been paid or
appropriate reserves have been established.
(b) No deficiency or proposed adjustment which has not been settled
or otherwise resolved for any amount of Tax has been proposed, asserted or
assessed by any taxing authority against Seller (or any Affiliated Group of
which Seller is or has been a member and for which Seller would be responsible
for payment) and there is no action, suit, taxing authority proceeding or audit
now in progress, pending or, to Seller's, SCP's or SCP Pool's knowledge,
threatened against or with respect to Seller.
(c) To the knowledge of Seller, Seller has withheld and paid all
employment taxes required to have been withheld and paid in connection with
amounts paid or owing to any employee, independent contractor, or other third
party.
(d) No written claim has been made within the previous three years
by a taxing authority in a jurisdiction where Seller does not file Tax Returns
that Seller is or may be subject to Taxes assessed by such jurisdiction with
respect to the Purchased Assets.
3.11 CONTRACTS AND COMMITMENTS.
(a) Except as set forth in Schedule 3.11 hereto, Seller is not a
party to or bound by, whether written or oral, any: (i) collective bargaining
agreement or contract with any labor union, whether formal or informal; (ii)
contract for the employment of any officer, individual employee or other person
on a full-time, part-time or consulting basis or any severance agreements; (iii)
agreement or indenture relating to the borrowing of money or to mortgaging,
pledging or otherwise placing a Lien on any of the Purchased Assets; (iv)
license or royalty agreements; (v) lease or agreement under which Seller is
lessee of, or holds or operates, any personal property owned by any other party
for which annual rental exceeds $50,000; (vi) lease or agreement under which
Seller is lessor of or permits any third party to hold or operate any property,
real or personal, owned or controlled by it for which annual rental exceeds
$50,000; (vii) contract or group of related contracts with the same party for
the purchase or sale of raw materials, commodities, supplies, products or other
personal property or for the furnishing or receipt of services which either
calls for performance over a period of more than six months or involves a sum in
excess of $50,000 or which may not be terminable with less than six months'
notice; (viii) contract relating to the distribution, marketing or sales of its
products or services (including contracts to provide advertising allowances or
promotional services) involving more than $50,000; (ix) franchise agreements,
(x) agreements, contracts or understandings pursuant to which Seller
subcontracts work to third parties; (xi) contract or agreement prohibiting it
from freely engaging in any business or competing anywhere in the world; or
(xii) any other agreement which Seller deems material to the Business taken as a
whole whether or not entered into in the ordinary course of business.
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(b) Except as disclosed in Schedule 3.11, (i) all of the Assumed
Contracts are in full force and effect, have not been amended or modified as of
the Closing, and are valid, binding and enforceable in accordance with their
respective terms, (ii) to the knowledge of Seller, no Assumed Contract has been
breached or canceled by the other party since December 31, 1995, and (iii)
Seller has, to its knowledge, performed all of the obligations required to be
performed by Seller in connection with the Assumed Contracts and is not in
receipt of any claim of default under any such contract or commitment.
(c) Seller has provided Buyer with a true and correct copy of all
Assumed Contracts, and has made available to Buyer those written contracts
referred to on Schedule 3.11 which are not Assumed Contracts, in each case
together with all amendments, waivers or other changes thereto. To Seller's
knowledge, Schedule 3.11 contains an accurate and complete description of all
material terms of all oral contracts referred to therein.
3.12 LITIGATION; PROCEEDINGS. Except as set forth in Schedule 3.12
hereto, there are no material actions, suits, proceedings (including eminent
domain proceedings), orders, claims or investigations pending or, to the
knowledge of Seller, overtly threatened against or affecting Seller at law or in
equity, or before or by any federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, and there is no basis known to Seller for any of the foregoing.
3.13 BROKERAGE. There are no claims for brokerage commissions,
finders fees or similar compensation in connection with the transactions
contemplated by this Agreement, based on any arrangement or agreement made by or
on behalf of Seller.
3.14 GOVERNMENTAL LICENSES, PERMITS AND CONSENTS. To the knowledge
of Seller, Schedule 3.14 hereto contains a complete listing and summary
description of all material permits, licenses, franchises, certificates,
approvals and other authorizations of foreign, federal, state and local
governments owned, possessed or used by Seller in the conduct of the Business
(collectively, the "Licenses"). Except as indicated on Schedule 3.14, Seller is
the licensee, permittee, or beneficiary of the Licenses. To the knowledge of
Seller, no loss or expiration of any License is pending or threatened in writing
other than expiration in accordance with the terms thereof.
3.15 EMPLOYEES. There is no unfair labor practice charge or
complaint pending or, to the knowledge of Seller, threatened against Seller
before the National Labor Relations Board or any similar state or local body.
Seller has not, within the two-year period preceding the date of the Agreement,
experienced any union organization attempts, labor disputes or work stoppage or
slowdowns due to labor disagreements or any strikes, grievances, unfair labor
practice claims or other material employee disputes. There is no labor strike,
dispute, work stoppage or slowdown pending or, to the knowledge of Seller,
threatened. There is no request for representation pending and, to the knowledge
of Seller, no question concerning representation has been raised. There is no
grievance or arbitration proceeding pending against Seller which might have a
Material Adverse Effect.
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3.16 EMPLOYEE BENEFIT PLANS.
(a) Schedule 3.16 attached hereto contains a list of each
significant employee benefit plan and policy maintained or contributed to by
Seller or any of its Affiliates on behalf of the employees of the Business,
including each (i) employee pension benefit plan (as defined in Section 3(2) of
ERISA) (the "Employee Pension Plans") and (ii) employee welfare benefit plan (as
defined in Section 3(1) of ERISA) ("Employee Welfare Plans"), and lists each
compensation, incentive, bonus, severance or other termination plan, program or
arrangement (all items listed on Schedule 3.16 are referred to as "Plans"). All
Plans (and related trusts and insurance contracts) comply in form and in
operation in all material respects with all applicable laws, including the
requirements of ERISA and the Code. Seller has furnished or made available to
Buyer with respect to each Plan, true and complete copies of the plan documents,
summary plan descriptions and all related trust agreements, insurance contracts
or other funding agreements which implement the Plans.
(b) Neither Seller nor any member of Seller's controlled group (as
defined in Section 414 of the Code) have incurred any material liability to the
PBGC, the Internal Revenue Service, the Department of Labor, any other
governmental agency, or any Multiemployer Plan with respect to any Plan
currently or previously maintained by Seller or Controlled Group member that has
not been satisfied in full, and, to Seller's knowledge, no condition exists that
presents a material risk to Seller of incurring such a liability, other than
liability for premiums due the PBGC.
3.17 AFFILIATE TRANSACTIONS. To the knowledge of Seller and except
as set forth on Schedule 3.17, no officer, director or employee of Seller or any
person related by blood or marriage to any such Person or any entity in which
any such Person owns any beneficial interest (collectively, the "Insiders"), is
a party to any agreement, contract, commitment or transaction with Seller or
which is pertaining to the Business or has any interest in any property, real or
personal or mixed, tangible or intangible, relating to the Business.
3.18 COMPLIANCE WITH LAWS. Except as set forth on Schedule 3.18
hereto, Seller and its officers, directors, agents and employees have complied
with all applicable laws and regulations of foreign, federal, state and local
governments and all agencies thereof where the failure to comply would have a
Material Adverse Effect, and no claims have been filed against Seller alleging a
material violation of any such laws or regulations. Seller has not given or
agreed to give any money, gift or similar benefit (other than incidental gifts
of articles of nominal value or entertainment of customers in the normal course
of business) to any actual or potential customer, supplier, governmental
employee, Insider or any other person in a position to assist or hinder Seller
in connection with any actual or proposed transaction concerning the Business.
3.19 INVENTORY.
(a) The Inventory of Seller shown on the Latest Balance Sheet and
the Inventory of Seller shown on the Inventory Statement or otherwise included
in the Purchased Assets, net of the reserves applicable thereto determined in
accordance with GAAP, is owned by Seller, and is
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salable in the ordinary course of business, consistent with past practice,
except for Inventory which is damaged and unsalable, as set forth in the
Inventory Statement.
(b) The finished goods Inventory meets the applicable
specifications set forth in Exhibit 6.1 to the Supply Agreement to be executed
on the date hereof among Buyer, SCP and SCP Pool which is attached as Exhibit C-
1 to the Asset Purchase Agreement of even date herewith among SCP Pool, SCP, The
B-L Network, Inc. and Buyer.
(c) The raw materials Inventory meets the applicable specifications
provided by the suppliers thereof.
3.20 CLOSING DATE. All of the representations and warranties
contained in this Article III and elsewhere in this Agreement and all
information delivered in any Schedule, attachment or Exhibit hereto are true and
correct on the date of this Agreement and will be true and correct on the
Closing Date (except for representations and warranties which speak expressly as
of a different date, which representations and warranties will have been true
and correct as of such date).
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
As a material inducement to Seller, SCP and SCP Pool to enter into
this Agreement, Buyer hereby represents and warrants to Seller that:
4.1 CORPORATE ORGANIZATION AND POWER. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. Buyer is qualified to do business in every jurisdiction in which the
nature of its business or its ownership of property requires it to be qualified,
except where the failure to be so qualified would not have a material adverse
effect on the business, financial condition, operating results, assets or
operations of Buyer. Buyer has full corporate power and authority to enter into
this Agreement and the other agreements contemplated hereby and perform its
obligations hereunder and thereunder.
4.2 AUTHORIZATION. Buyer has full power and authority to deliver
this Agreement and the Noncompetition Agreement and to consummate the
transactions contemplated hereby and thereby. The execution, delivery and
performance of this Agreement and the Noncompetition Agreement by Buyer and the
consummation of the transactions contemplated hereby and thereby have been duly
and validly authorized by all requisite corporate action on the part of Buyer,
and no other corporate proceedings on its part are necessary to authorize the
execution, delivery or performance of this Agreement or the Noncompetition
Agreement. This Agreement has been and the Noncompetition Agreement shall have
been duly executed and delivered by Buyer. This Agreement constitutes a valid
and binding agreement of Buyer, enforceable against Buyer in accordance with its
terms, subject to the effect of bankruptcy, insolvency, reorganization or other
similar laws and to general principles of equity (whether considered in
proceedings at law or in equity).
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4.3 NO VIOLATION. The execution, delivery or performance of this
Agreement and the other agreements contemplated hereby and the consummation of
the transactions contemplated hereby or thereby will not breach or violate
Buyer's certificate of incorporation or its bylaws, any applicable law, rule or
regulation of any governmental authority, or any agreement or instrument, or any
license, franchise or permit, or subject Buyer to any order, writ, injunction or
decree.
4.4 GOVERNMENTAL AUTHORITIES AND CONSENTS. No permit, consent,
approval or authorization of, or declaration to or filing with, any governmental
or regulatory authority or any other party or Person is required in connection
with the execution, delivery or performance of this Agreement and the other
agreements contemplated hereby by Buyer, or the consummation by Buyer of the
transactions contemplated hereby and thereby.
4.5 BROKERAGE. There are no claims for brokerage commissions,
finders' fees or similar compensation in connection with the transactions
contemplated by this Agreement based on any arrangement or agreement made by or
on behalf of Buyer.
4.6 CLOSING DATE. All of the representations and warranties
contained in this Article IV and elsewhere in this Agreement and all information
delivered in any Schedule, attachment or Exhibit hereto are true and correct on
the date of this Agreement and will be true and correct on the Closing Date.
ARTICLE V
TERMINATION
5.1 TERMINATION. This Agreement may be terminated at any time prior
to the Closing only by mutual written consent of Buyer and Seller.
5.2 EFFECT OF TERMINATION. In the event of termination of this
Agreement by either Buyer or Seller as provided above, this Agreement will
forthwith become void and there will be no liability on the part of any party
hereto to any other party hereto or its shareholders or directors or officers in
respect thereof, except for the obligations of the parties hereto in Sections
7.2, 7.6 and 7.7 and except that nothing herein will relieve any party from any
breach of this Agreement prior to such termination.
ARTICLE VI
SURVIVAL; INDEMNIFICATION
6.1 SURVIVAL; ETC. All representations, warranties, covenants and
agreements set forth in this Agreement or in any writing delivered in connection
with this Agreement will survive the Closing Date and the consummation of the
transactions contemplated hereby and will not be affected by any examination
made for or on behalf of Buyer or Seller, the knowledge of any of their
respective officers, directors, stockholders, employees or agents, or the
acceptance of any certificate
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or opinion from Buyer or Seller, their respective officers, directors,
stockholders, employees or agents.
6.2 INDEMNIFICATION.
(a) Subject to the limitations set forth in this Section 6.2,
Seller agrees to indemnify Buyer, its Affiliates, officers, directors,
stockholders, employees, agents, representatives, successors and permitted
assigns (collectively, the "Buyer Parties") and hold each of them harmless
against and pay on behalf of or reimburse such Buyer Parties in respect of any
loss, liability, demand, claim, action, cause of action, cost, damage,
deficiency, tax, penalty, fine or expense, whether or not arising out of third
party claims (including, without limitation, interest, penalties, reasonable
attorneys' fees and expenses, all amounts paid in settlement of any of the
foregoing and all reasonable amounts paid in investigation or defense of any of
the foregoing) (collectively, "Losses") which any such Buyer Party may suffer,
sustain or become subject to, as a result of, in connection with, relating or
incidental to or by virtue of: (i) the breach of any representation or warranty
of Seller contained in this Agreement; (ii) the breach of any covenant or
agreement of Seller contained in this Agreement; (iii) any claims of any brokers
or finders claiming by, through or under Seller, SCP or SCP Pool; (iv) the
assertion or recovery against any of the Buyer Parties of any liability or
obligation of any of the Seller Parties not to be assumed or performed by Buyer
hereunder (including, without limitation, the Excluded Liabilities) and (v) the
assertion or recovery against any of the Buyer Parties of any liability or
obligation under the Workers Adjustment and Retraining Notification Act.
(b) The indemnification provided for in Section 6.2(a) above is
subject to the following limitations:
(i) Seller will be liable to Buyer with respect to claims arising
from breaches of (w) the representations and warranties set forth in
Section 3.9 only if Buyer gives to Seller written notice thereof within
three years after the Closing Date; (x) the representations and warranties
set forth in Sections 3.10 and 3.16 only if Buyer gives to Seller written
notice thereof prior to the expiration of the applicable statute of
limitation with respect thereto plus 60 days;(y) the representations and
warranties set forth in Section 3.19 only if Buyer gives Seller written
notice thereof within 60 days after the expiration of any statute of
limitations applicable to claims by third parties (including without
limitation governmental authorities) against any Buyer Party relating to
the representations and warranties set forth in Section 3.19; and (z) the
covenants contained in Sections 2.1 and 2.2 and all other representations
and warranties contained in this Agreement only if Buyer gives Seller
written notice thereof within two years after the Closing Date;
(ii) Seller will not be liable to Buyer for any Loss arising with
respect to claims arising from breaches of the representations and
warranties set forth in this Agreement (other than breaches of the
representations and warranties set forth in Section 3.19, to which the
limitation set forth in this Section 6.2(b)(ii) shall not apply) unless the
aggregate amount of all such Losses relating to all such breaches exceeds
$50,000 in the aggregate (the "Buyer's
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Threshold"), in which case Seller and SCP Pool shall be liable for the
amount of such Losses in excess of Buyer's Threshold; and
(iii) the aggregate amount required to be paid by Seller with respect
to claims arising from breaches of the representations and warranties set
forth in this Agreement (other than breaches of the representations and
warranties set forth in Section 3.19, to which the limitation set forth in
this Section 6.2(b)(iii) shall not apply) shall not exceed the Purchase
Price.
Notwithstanding any implication to the contrary contained in this Agreement, so
long as Buyer delivers written notice of a claim to Seller within the foregoing
respective survival period, Seller shall be required to indemnify Buyer for all
damages with respect to such matter that Buyer may suffer though the date of the
claim, the end of the survival period, and beyond, subject to the limitations
set forth in Section 6.2(b)(ii) and (iii).
(c) Buyer agrees to indemnify Seller, its Affiliates, officers,
directors, stockholders, employees, agents, representatives, successors and
permitted assigns (collectively, the "Seller Parties") and hold each of them
harmless against and pay on behalf of and or reimburse such Seller Parties in
respect of any Losses which any Seller Party may suffer, sustain or become
subject to, as a result of, in connection with, relating or incidental to or by
virtue of (i) a breach of any representation, warranty, covenant, or agreement
by Buyer contained in this Agreement; provided, however, that Buyer will not be
liable for any Loss relating to breaches of Buyer's representations and
warranties contained in Article IV (except Sections 4.1, 4.2 and 4.3) hereof
unless written notice of such breach is given by Seller to Buyer within two
years of the Closing Date, (ii) the assertion or recovery against any of the
Seller Parties of any of the Assumed Liabilities, (iii) the assertion or
recovery against any of the Seller Parties of any liability or obligation
arising out of, in connection with, relating or incidental to or by virtue of
the Buyer's use of the Purchased Assets or operation of its business (including
the Business) after the Closing, except to the extent such liability constitutes
an Excluded Liability, or (iv) any claims of any brokers or finders claiming by,
through or under Buyer. Nothing contained in this Section 6.2(c) shall abrogate
or nullify the indemnification given by Seller to the Buyer Parties under
Section 6.2(a).
(d) If a party hereto seeks indemnification under this Section 6.2,
such party (the "Indemnified Party") shall give written notice to the other
party (the "Indemnifying Party") of the facts and circumstances giving rise to
the claim. In that regard, if any suit, action, claim, liability or obligation
shall be brought or asserted by any third party which, if adversely determined,
would entitle the Indemnified Party to indemnity pursuant to this Section 6.2,
the Indemnified Party shall promptly notify the Indemnifying Party of the same
in writing, specifying in detail the basis of such claim and the facts
pertaining thereto and the Indemnifying Party, if it so elects, shall assume and
control the defense thereof (and shall consult with the Indemnified Party with
respect thereto), including the employment of counsel reasonably satisfactory to
the Indemnified Party and the payment of all necessary expenses. If the
Indemnifying Party elects to assume and control the defense, the Indemnified
Party shall have the right to employ counsel separate from counsel employed by
the Indemnifying Party in any such action and to participate in the defense
thereof, but the fees and expenses of such counsel employed by the Indemnified
Party shall be at the expense
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of the Indemnified Party unless (i) the employment thereof has been specifically
authorized by the Indemnifying Party in writing or (ii) the Indemnifying Party
has failed to assume the defense and employ counsel, in which case the fees and
expenses of the Indemnified Party's counsel shall be paid by the Indemnifying
Party. If the Indemnifying Party elects to assume and control the defense, the
Indemnifying Party shall be entitled to settle or compromise any such action or
proceeding, provided, however, such settlement or compromise shall be effected
only with the written consent of the Indemnified Party, which consent shall not
be unreasonably withheld; provided, further however, that if the Indemnified
Party rejects a settlement that would have included a complete release of the
Indemnified Party from any further liability without any admission on the part
of the Indemnified Party of any wrongdoing, negligence, or liability whatsoever
and would not have required the Indemnified Party to perform or refrain from any
action in the future, its right to indemnification from the Indemnifying Party
shall be limited to the amount that would have been payable by the Indemnifying
Party under such settlement or compromise.
(e) If the Indemnified Party controls the defense, the Indemnified
Party shall be entitled to settle or compromise any such action or proceeding;
provided, however, that such a settlement or compromise which involves the
payment of money damages shall be effected only with the written consent of the
Indemnifying Party, which consent shall not be unreasonably withheld and
provided, further, however that if the Indemnifying Party rejects a settlement
and such action or proceeding is subsequently settled or a judgment is rendered
with respect thereto for an amount which exceeds the amount of the settlement
rejected by the Indemnifying Party, then the Indemnifying Party shall be
obligated to pay the full amount of such excess, in addition to its other
obligations under this Agreement.
(f) The Indemnifying Party shall pay the Indemnified Party in
immediately available funds promptly after the Indemnified Party provides the
Indemnifying Party with written notice of a claim hereunder and the parties
reasonably agree that there is a reasonable basis for such claim or a final
result, determination, finding and/or award is made pursuant to the terms of
Section 6.4 below.
(g) Any indemnification payments paid under this Section 6.2 will
be considered an adjustment to the Purchase Price.
(h) Subject to the terms and conditions set forth in this Section
6.2, in the event of a breach of any representation, warranty, covenant or
agreement contained in this Agreement, Buyer or Seller, as the case may be, may,
following final determination of the amount of the Losses sustained as a result
thereof pursuant to Section 6.4(e) or upon mutual agreement between Buyer and
Seller as to the appropriate amount of the Losses sustained as a result thereof,
setoff all or any portion of the Losses which such party suffers, sustains or
becomes subject to as a result of such breach against any amounts due or to
become due to Seller or Buyer (or their respective successors), as the case may
be, whether pursuant to this Agreement or otherwise.
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6.3 GENERAL QUALIFICATIONS ON INDEMNIFICATION. Notwithstanding any
provision of this Article VI to the contrary, the right of any Indemnified Party
to indemnification from the Indemnifying Party shall be subject to the
following:
(a) The liability of an Indemnifying Party with respect to any
indemnification claim shall be reduced by the amount of any tax benefit actually
realized or received by the Indemnified Party as a result of any Loss upon which
such claim is based, and shall include any tax detriment actually suffered by
the Indemnified Party as a result of such Loss. The amount of such tax benefit
or detriment shall be determined by taking into account the effect, if any, and
to the extent determinable, of timing differences resulting from the
acceleration or deferral of items of gain or loss resulting from such Loss.
(b) A Loss shall include actual damages only and shall not include
any special, punitive, consequential or multiplied damages, or lost profits,
except to the extent the same are included in a third party judgment against or
settlement with the Indemnified Party.
(c) Upon payment in full of any indemnification claim, the
Indemnifying Party shall be subrogated to the extent of such payment to the
rights of the Indemnified Party against any person or entity with respect to the
subject matter of such indemnification claim.
6.4 ARBITRATION PROCEDURE.
(a) Except as otherwise expressly provided herein, any dispute or
controversy arising under or in connection with Section 6.2 or 6.3 will be
settled by arbitration in Atlanta, Georgia.
(b) Whenever an arbitrable dispute arises, Buyer and Seller will
use their best efforts to agree upon an independent third-party arbitrator
within 14 days with due regard in the selection process for the nature of the
dispute and the circumstances surrounding same. In the event the parties are
unable to agree on the selection of such an arbitrator, either party may then
proceed in accordance with the rules and procedures of the American Arbitration
Association ("AAA") then in effect.
(c) Buyer and Seller agree that any dispute or controversy that is
to be arbitrated shall be arbitrated in accordance with AAA rules and procedures
then in effect, and discovery in the nature of that allowed under the rules and
procedures of the AAA then in effect will be afforded each party, and any
dispute with respect to such discovery shall also be settled by the arbitrator.
(d) The costs of arbitration shall be allocated by the arbitrator,
having due regard for the nature of the dispute, the contentions of the parties
and his or her decision on the merits of the dispute.
(e) Judgment may be entered on the arbitrator's award in any court
having jurisdiction.
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6.5 REMEDIES. Notwithstanding the provisions of Section 6.4 hereof
regarding the requirements of using the arbitration procedure set forth therein
for resolving and remedying claims for money damages arising out of the
provisions of Section 6.2, Buyer and Seller each have and retain all equitable
rights and remedies existing in their favor including, without limitation, any
actions for specific performance and/or injunctive or other equitable relief.
Except for equitable remedies, and except in the case of common law fraud, the
indemnification set forth in this Article VI shall be the exclusive remedies of
the Buyer Parties and Seller Parties for any misrepresentations, breaches of any
representations or warranties or the non-fulfillment or failure to perform any
covenant or agreement contained in this Agreement; provided, that recision shall
be available only in the case of common law fraud.
ARTICLE VII
ADDITIONAL AGREEMENTS
7.1 EMPLOYEES AND EMPLOYEE BENEFIT PLANS.
(a) Employees. Buyer shall have no obligation to offer employment
to any of the employees of Seller as of the Closing Date and no employees of
Seller (other than any employees of Seller who are employed by Buyer or any of
its Affiliates at any time after the Closing) shall under any circumstances be
considered as an employee of Buyer.
(b) Benefit Liabilities. Unless otherwise specifically set forth
herein to the contrary, Seller shall retain and be fully responsible for (i) all
liabilities, obligations and commitments relating to all wages, salaries,
bonuses and other forms of compensation and related expenses and (ii) all
employee benefits incurred or accrued under any and all plans, programs or
arrangements maintained or contributed to by Seller or any Affiliate.
(c) Buyer's COBRA Expense. Buyer agrees to pay to Seller on a
quarterly basis an amount equal to (i) the sum of (A) the aggregate amounts paid
by Seller with respect to claims for medical and dental treatment which occurs
after the date of this Agreement with respect to Seller's employees who elect
COBRA coverage after the date of this Agreement (the "COBRA Employees") plus (B)
the aggregate amounts paid by Seller since the date of this Agreement for excess
or stop-loss medical and dental insurance for the COBRA Employees less (ii) the
sum of (x) an amount equal to all applicable reserves of Seller that would
relate to medical and dental claims by COBRA Employees and that have not
previously been applied to any such medical and dental claims, plus (y) the
aggregate amount of all premiums received by Seller for COBRA coverage since the
date of this Agreement with respect to the COBRA Employees, plus (z) the
aggregate amount of all payments made by Buyer to Seller pursuant to this
Section 7.1(c) since the date of this Agreement; provided, that the amount
determined pursuant to this paragraph 7.1(c) shall never be less than zero and
further provided, that Buyer shall not be required to reimburse Seller for such
amount to the extent that such amount is included in the calculation of
Operating Losses pursuant to Section 7.11. Seller shall use commercially
reasonable efforts to maintain excess or stop-loss medical and dental insurance
reasonably comparable to that in effect on the date hereof until such time as
all COBRA Employees have terminated their coverage through Seller or ceased to
become
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eligible for continued COBRA coverage. For so long as Seller maintains such
excess or stop-loss medical and dental insurance, Buyer's obligations to
reimburse Seller pursuant to this Section 7.1(c) shall not exceed the sum of the
aggregate premium amounts paid by Seller for such excess or stop-loss insurance
plus the aggregate Seller-funded portion of the COBRA coverage under such
policy. Seller shall promptly notify Buyer if it is unable to maintain such
insurance.
7.2 PRESS RELEASES AND ANNOUNCEMENTS. Buyer, Seller, SCP and SCP
Pool shall consult with each other prior to issuing any press release or
otherwise making any public statement with respect to the contents of this
Agreement or the transactions contemplated hereby, and none of the parties
hereto shall issue any such press release or make any such public statement
prior to such consultation except which any party hereto in good faith believes
is required by law or applicable regulations or requirements of the New York
Stock Exchange or the NASDAQ Stock Market (in which case the disclosing party
will use its reasonable best efforts to advise the other party prior to making
the disclosure). Prior to the Closing, all other announcements to the employees,
customers or suppliers of Seller will be prepared by Seller in consultation with
Buyer and will be issued by Seller in accordance with past custom and practice,
except any public disclosure which any party hereto in good faith believes is
required by law or regulation (in which case the disclosing party will use its
best efforts to advise the other party prior to making the disclosure). After
the Closing Date, no other announcements to the employees, customers or
suppliers of the Business will be issued without Buyer's consent.
7.3 FURTHER AGREEMENTS AND TRANSFERS. Seller will execute and
deliver such further instruments of conveyance and transfer and take such
additional action as may be necessary to effect, consummate, confirm or evidence
the transfer to Buyer of the Purchased Assets and any other transactions
contemplated hereby. Seller will execute such documents as may be necessary to
assist Buyer in preserving or perfecting its rights in the Purchased Assets.
7.4 TAX MATTERS. The following provisions will govern the
allocation of responsibility as between Buyer and Seller for certain Tax matters
following the Closing Date:
(a) Certain Taxes. All transfer, documentary, sales, use, stamp,
registration and other such Taxes and fees (including any penalties and
interest) incurred in connection with this Agreement (i) shall be borne by Buyer
or Seller in accordance with local law; and (ii) shall be paid by Buyer or
Seller, as applicable, when due. Buyer or Seller, as applicable, will, at its
own expense, file all necessary Tax Returns and other documentation with respect
to all such transfer, documentary, sales, use, stamp, registration and other
Taxes and fees, and, if required by applicable law, the non-paying party will,
and will cause its affiliates to, join in the execution of any such Tax Returns
and other documentation.
(b) Allocation of Purchase Price. Each of Buyer and Seller shall,
and shall cause their respective Affiliates to, allocate the Purchase Price
among the Purchased Assets in a manner mutually agreed upon by Buyer and Seller
pursuant to Section 1060 of the Code in accordance with the fair market values
of the assets. Each of Buyer and Seller shall file Internal Revenue Service Form
8594 in a timely manner. In the absence of such a mutual agreement each of Buyer
and Seller
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shall make its own assessment of the fair market values of the assets for
purposes of filing Form 8594.
(c) Cooperation on Tax Matters. Buyer and Seller shall, and shall
cause their respective Affiliates to, cooperate fully, as and to the extent
reasonably requested by the other party, in connection with any audit,
litigation, preparation and filing of Tax Returns or other proceeding with
respect to Taxes. Such cooperation shall include the retention and (upon the
other party's request) the provision of records and information which are
reasonably relevant to any such audit, litigation or other proceeding and making
employees available on a mutually convenient basis to provide additional
information and explanation of any material provided hereunder. Buyer and Seller
agree (A) to retain all books and records with respect to Tax matters pertinent
to the Seller relating to any taxable period beginning before the Closing Date
until the expiration of the statute of limitations (and, to the extent notified
by Buyer or Seller, any extensions thereof) of the respective taxable periods,
and to abide by all record retention agreements entered into with any taxing
authority, and (B) to give the other party reasonable written notice prior to
transferring, destroying or discarding any such books and records and, if the
other party so requests, Buyer or Seller, as the case may be, shall allow the
other party to take possession of such books and records.
7.5 TRANSITION ASSISTANCE. Except in connection with the Transition
Plan, and only to the extent related to the Purchased Assets, neither Seller nor
Buyer will in any manner take any action which is designed, intended, or might
be reasonably anticipated to have the effect of discouraging customers,
suppliers, lessors, licensors and other business associates from maintaining the
same business relationships with Seller prior to the Closing Date or with Buyer
after the Closing Date as were maintained with Seller prior to and at the date
of this Agreement.
7.6 INVESTIGATION AND CONFIDENTIALITY.
(a) Prior to the Closing Date, Buyer may make or cause to be made
such investigation of Seller and the Purchased Assets as it deems necessary or
advisable to familiarize itself therewith. Seller will, and will cause its
officers, directors, employees and agents (including attorneys and accountants)
("Seller's Agents") to permit Buyer and its employees, agents, environmental
consultants, accounting and legal representatives and other representatives, and
potential lenders (and such lenders' audit staff) and their representatives to
have full and complete access (in a manner which does not materially disrupt the
Business) at all reasonable times, to the Business' facilities and to such
Seller's books, records, invoices, contracts, leases, personnel, independent
accountants, property, facilities, equipment and other data and information that
Seller may legally provide. Seller will, and will cause the Seller's Agents to
permit Buyer to inspect any of the Purchased Assets and to discuss the affairs,
finances and accounts of Seller with the directors, officers, independent
accountants, key employees, key customers, key sales representatives and key
suppliers of Seller.
(b)(i) If the transactions contemplated by this Agreement are
consummated, Seller agrees to use its best efforts to maintain the
confidentiality of all proprietary and other non-public information
regarding the Business for a period of 5 years from the Closing Date,
except as required to file tax returns and as required by law, and to turn
over to Buyer at the
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Closing copies of all such materials they have in its possession which
constitute Purchased Assets. In the event of the breach of any of the
provisions of this Section 7.6, the non-breaching party, in addition and
supplementary to other rights and remedies existing in its favor, may apply
to any court of law or equity of competent jurisdiction for specific
performance and/or injunctive or other relief (without the posting of bond
or other security) in order to enforce or prevent any violations of the
provisions hereof.
(ii) In the event that Seller reasonably believes after consultation
with counsel that it is required by law to disclose any confidential
information described in this Section 7.6(b), Seller will (A) provide Buyer
with prompt notice before such disclosure in order that Buyer may attempt
to obtain a protective order or other assurance that confidential treatment
will be accorded such confidential information and (B) cooperate with Buyer
in attempting to obtain such order or assurance. The provisions of this
Section 7.6 shall not apply to any information, documents or materials
which are, as shown by appropriate written evidence, in the public domain
or, as shown by appropriate written evidence, shall come into the public
domain, other than by reason of default by the applicable party bound
hereunder or its Affiliates.
7.7 EXPENSES. Buyer and Seller will each pay all of their own
expenses (including fees and expenses of legal counsel, investment bankers,
brokers or other representatives and consultants and appraisal fees and
expenses) incurred in connection with the negotiation of this Agreement and the
other agreements contemplated hereby and the performance of its or their
obligations hereunder and thereunder, and the consummation of the transactions
contemplated hereby and thereby (whether consummated or not).
7.8 WAIVER OF COMPLIANCE WITH BULK SALES LAWS. Buyer hereby waives
compliance by Seller with the requirements of any bulk sales or transfers laws
of any jurisdiction in connection with the sale of the Purchased Assets to Buyer
(if and to the extent such laws are applicable to such sale); provided that such
waiver shall not affect the obligation of Seller under Section 6.2 to indemnify
Buyer and hold Buyer harmless from and against any Losses which Buyer may
suffer, sustain or become subject to as a result of the assertion or recovery
against Buyer of the Excluded Liabilities set forth in Section 1.1(d) hereof.
7.9 PRORATIONS.
(a) The expenses and obligations set forth below shall be prorated
as of 11:59 p.m. on the business day immediately preceding the Closing Date,
with Seller being responsible for that portion arising prior thereto and Buyer
being responsible for that portion arising subsequent thereto: all real property
taxes, personal property taxes, ad valorem obligations and similar taxes imposed
on a periodic basis, in each case levied with respect to the Purchased Assets
(if any) shall be prorated on the basis of the number of days of the relevant
Tax year or period which have elapsed through the Closing Date.
(b) If any item described in this Section 7.9 cannot be prorated,
adjusted or determined as of the Closing Date, then it shall be separately
prorated, adjusted and determined as
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soon as possible thereafter with payment of an amount equal to the amount
charged against any party being paid by such party to any other party by check
within five (5) days after determination of the charge.
7.10 GUARANTY. Each of SCP and SCP Pool hereby guaranties the
payment and performance of the obligations of Seller under this Agreement and
each of the other agreements and instruments referred to herein. The obligations
of SCP and SCP Pool under this Section 7.10 are absolute and unconditional,
irrespective of any substitution, release or exchange of any other guarantee of
or security for any of the obligations of Seller under this Agreement or any
other agreement or instrument referred to herein, and, to the fullest extent
permitted by applicable law, irrespective of any other circumstance whatsoever
that might otherwise constitute a legal or equitable discharge or defense of a
surety or guarantor. Each of SCP and SCP Pool hereby expressly waives diligence,
presentment, demand of payment, protest and all notices whatsoever, and any
requirement that Buyer exhaust any right, power or remedy or proceed against
Seller under this Agreement or any other agreement or instrument referred to
herein, or against any other Person under any other guarantee of, or security
for, any of the obligations of Seller under this Agreement or any other
agreement or instrument referred to herein.
7.11 OPERATING LOSSES AND NET INCOME.
(a) In the event Seller incurs cash operating losses ("Operating
Losses") for the period beginning on the date hereof and ending on the Closing
Date (the "Pre-Closing Period"), Buyer agrees to reimburse Seller for the amount
of such Operating Losses in accordance with this Section 7.11, provided that the
aggregate amount reimbursed pursuant to this Section 7.11 shall not exceed
$100,000.
(b) If Seller determines that it has incurred Operating Losses for
the Pre-Closing Period, then within 60 days after the Closing Date Seller shall
prepare and deliver a net income and expense statement for the Pre-Closing
Period (the "Net Income Statement") reflecting Seller's determination of the
Operating Losses, which statement shall be prepared in a manner consistent with
GAAP and in accordance with Schedule 7.11 attached hereto. Seller shall promptly
make available to Buyer all information used by Seller in preparing the Net
Income Statement and such other information as Buyer reasonably deems necessary
in order for Buyer to review Seller's determination of the Operating Losses.
(c) If Buyer disagrees with Seller's determination of the Operating
Losses, Buyer shall notify Seller in writing of such disagreement within 30 days
from the date Buyer receives the Net Income Statement. Such writing shall be
accompanied by a written notice from Buyer's accountants setting forth the basis
for such disagreement in reasonable detail. Buyer and Seller thereafter shall
negotiate in good faith to resolve any such disagreements. If Buyer and Seller
are unable to resolve any such disagreements within 15 days after delivery of
Buyer's objection letter, Buyer and Seller shall submit such dispute to an
independent "Big Six" accounting firm mutually agreeable to Buyer and Seller for
resolution consistent with GAAP and in accordance with Schedule 7.11 attached
hereto. If Buyer and Seller are unable to mutually agree on such an accounting
firm, a "Big Six" accounting firm will be selected by lot after eliminating one
firm designated as
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objectionable by each of Buyer and Seller (any accounting firm so selected or
agreed upon shall be referred to herein as the ("Independent Auditor")).
(d) Buyer and Seller shall use their best efforts to cause the
Independent Auditor to resolve all disagreements over the Operating Losses as
soon as practicable, but in any event within 45 days after submission of the
disputes to the Independent Auditor. The resolution of such disagreements and
the determination of the Operating Losses shall be final and binding on Buyer
and Seller.
(e) The Independent Auditor shall determine the allocation of its
costs and expenses in determining the Operating Losses based upon the percentage
which the portion of the contested amount not awarded to each party bears to the
amount actually contested by such party. Buyer and Seller shall pay the
Independent Auditor's fees and expenses based on such allocation.
(f) As soon as practicable (but in no event later than five
business days) after the Operating Losses have been determined pursuant to this
Section 7.11, Buyer shall reimburse Seller in immediately available funds for
the amount of such Operating Losses.
(g) In the event that Seller has net income for the Pre-Closing
period ("Net Income") then the aggregate amount required to be paid by Buyer to
Seller pursuant to Section 7.15 shall be reduced by the amount of such Net
Income. Net Income shall be calculated in a manner consistent with Schedule
7.11, except that all depreciation and amortization expenses of Seller shall be
included in the calculation of Net Income.
7.12 ASSET REMOVAL DAMAGE. Buyer agrees to promptly repair any
damage to any of Seller's facilities resulting from the removal of the Purchased
Assets from Seller's facilities provided such damage is required to be repaired
pursuant to the terms of the applicable Lease.
7.13 MISDIRECTED REMITTANCES. In the event that Buyer receives any
remittance from or on behalf of any account debtor with respect to any sale made
by Seller prior to the Closing Date, Buyer shall endorse such remittance to the
order of Seller and forward same to Seller promptly upon receipt thereof. In the
event that Seller receives any remittance from or on behalf of any account
debtor with respect to any sale made by Buyer on or after the Closing Date,
Seller shall endorse such remittance to the order of Buyer and forward same to
Buyer promptly upon receipt thereof.
7.14 COSTS TO RESTORE LEASED PREMISES. Seller shall notify Buyer in
advance of any work to be performed in order to restore the Real Property to the
condition required pursuant to the applicable Lease. Buyer shall promptly, upon
receipt of a request for payment from Seller which includes a report, in
reasonable detail, regarding the restoration work performed, reimburse Seller
for all costs and expenses incurred by Seller in restoring the Real Property to
the condition required pursuant to the applicable Lease; provided, that the
aggregate amount of reimbursements from Buyer to Seller pursuant to this Section
7.14 shall not exceed $150,000. Seller shall use commercially reasonable efforts
to mitigate the restoration costs for which Buyer is required to reimburse
Seller pursuant to this Section 7.14.
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7.15 OTHER REIMBURSEMENTS.
(a) Buyer shall promptly, upon receipt of a request for payment, reimburse
Seller for all payments made, and costs and expenses incurred, by Seller with
respect to Seller's obligations:
(i) for rent, utilities, insurance and taxes required to be paid under
the Leases from the date of this Agreement to the earliest applicable
termination date under each such Lease;
(ii) under the agreements, leases, contracts and commitments marked with a
cross(+) on Schedule 3.11 attached hereto (the "Designated
Services") from the date of this Agreement to the Closing Date and,
after the Closing Date, at Buyer's request to the extent that any of
the Designated Services are provided at any of the facilities covered
by the Leases during Buyer's removal of the Purchased Assets from
such facilities, following the Closing Date;
(iii) for any severance claims by persons who were Seller's employees as of
the date of this Agreement, provided that Buyer's liability for each
such severance claim shall not exceed the amount of severance pay
which would be available to such person pursuant to the Seller's
severance policy in effect as of the date of this Agreement, a copy
of which has been provided to Buyer;
(iv) for medical and dental claims for covered treatment which occurs
between the date of this Agreement and the Closing Date under
Seller's medical and dental insurance plans, less an amount equal to
any applicable reserves of Seller that would relate to such claims
and which have not yet been applied with respect to any such claim;
(v) for workers compensation claims for events which occur between the
date of this Agreement and the Closing Date, less an amount equal to
any applicable reserves of Seller that would relate to such claims
and which have not yet been applied with respect to any claim;
(vi) claims made by or on behalf of persons who were employees of Seller
as of the date of this Agreement and who are employed by or on behalf
of Buyer in connection with Buyer's removal of the Purchased Assets
from Seller's facilities with respect to personal injury sustained or
entitlement to benefits following the Closing Date; and
(vii) profit sharing contributions made to Seller's profit sharing plan for
the 1996 plan year, to the extent earned by employees of Seller from
the date of this Agreement to the Closing Date;
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provided, that Seller shall not be required to reimburse Buyer for any amount
with respect to any of the items listed above to the extent that such amount is
included in the calculation of Operating Losses pursuant to Section 7.11.
(b) Seller shall make available to Buyer all information in Seller's
possession which is necessary to verify the reimbursements due pursuant to this
Section 7.15.
7.16 FIFRA. Seller represents and warrants within the meaning of the
Federal Insecticide, Fungicide and Rodenticide Act ("FIFRA") (S) 12(b) that each
item of Inventory which qualifies as a pesticide under FIFRA and which is
purchased and received in good faith by Buyer in the same unbroken package as
shipped by Seller, will be lawfully registered at the time of such sale and
delivery and will comply with all other requirements established under FIFRA.
ARTICLE VIII
MISCELLANEOUS
--------------
8.1 AMENDMENT AND WAIVER. This Agreement may be amended and any provision
of this Agreement may be waived, provided that any such amendment or waiver will
be binding upon a party only if such amendment or waiver is set forth in a
writing executed by Buyer and Seller. No course of dealing between or among any
persons having any interest in this Agreement will be deemed effective to
modify, amend or discharge any part of this Agreement or any rights or
obligations of any party under or by reason of this Agreement.
8.2 NOTICES. All notices, demands and other communications given or
delivered under this Agreement will be in writing and will be deemed to have
been given when personally delivered, mailed by first class mail, return receipt
requested, delivered by express courier service or telecopied. Notices, demands
and communications to Seller and Buyer will, unless another address is specified
in writing, be sent to the address indicated below:
Notices to Buyer:
----------------
Bio-Lab, Inc.
627 East College Avenue
Decatur, Georgia 30030
Attention: Larry Bloom, President
Telecopy: (404) 370-7499
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with a copy to:
--------------
Great Lakes Chemical Corporation
Post Office Box 2200
One Great Lakes Boulevard
West Lafayette, Indiana 47906
Attention: Louis T. Bolognini
Telecopy: (317) 497-6123
and to
Smith, Gambrell & Russell
3343 Peachtree Road, N.E.
Suite 1800
Atlanta, Georgia 30326
Attention: Robert I. Paller
Telecopy: (404) 264-2652
Notices to Seller, SCP and SCP Pool:
-----------------------------------
South Central Pool Supply, Inc.
128 Northpark Boulevard
Covington, Louisiana 70433-5077
Attention: W.B. Sexton
Telecopy: (504) 892-1657
with a copy to:
--------------
Code, Hennessy & Simmons, Inc.
Suite 3175
10 South Wacker Drive
Chicago, Illinois 60606
Attention: Peter M. Gotsch
Telecopy: (312) 876-3884
and to
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Attention: Stephen L. Ritchie
Telecopy: (312) 861-2200
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8.3 BINDING AGREEMENT; ASSIGNMENT. This Agreement and all of the
provisions hereof will be binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted assigns (including all
successors and assigns in the event of a liquidation or dissolution of Buyer or
Seller), except that neither this Agreement nor any of the rights, interests or
obligations hereunder may be assigned or delegated by Buyer or Seller without
the prior written consent of the other party, which shall not be unreasonably
withheld.
8.4 SEVERABILITY. Whenever possible, each provision of this
Agreement will be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision will be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of such provisions or the remaining provisions of this Agreement.
8.5 NO STRICT CONSTRUCTION. The language used in this Agreement
shall be deemed to be the language chosen by the parties hereto to express their
collective mutual intent, and no rule of strict construction shall be applied
against any person. The term "including" as used herein shall be by way of
example and shall not be deemed to constitute a limitation of any term of
provision contained herein.
8.6 CAPTIONS AND HEADINGS. The captions and headings used in this
Agreement are for convenience of reference only and do not constitute a part of
this Agreement and will not be deemed to limit, characterize or in any way
affect any provision of this Agreement, and all provisions of this Agreement
will be enforced and construed as if no caption had been used in this Agreement.
8.7 ENTIRE AGREEMENT. This Agreement, including the exhibits and
schedules hereto, and the agreements and instruments referred to herein and
therein and the other written agreements entered into contemporaneously herewith
contain the entire agreement between the parties and supersede any prior
understandings, agreements or representations by or between the parties, written
or oral, which may have related to the subject matter hereof in any way.
8.8 COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original but all of which taken
together will constitute one and the same instrument.
8.9 GOVERNING LAW. THE LAW OF THE STATE OF GEORGIA SHALL GOVERN ALL
QUESTIONS CONCERNING THE CONSTRUCTION, VALIDITY, INTERPRETATION AND
ENFORCEABILITY OF THIS AGREEMENT AND THE EXHIBITS AND SCHEDULES HERETO, AND THE
PERFORMANCE OF THE OBLIGATIONS IMPOSED BY THIS AGREEMENT, WITHOUT GIVING EFFECT
TO ANY CHOICE OF LAW OR CONFLICT OF LAW RULES OR PROVISIONS (WHETHER OF THE
STATE OF GEORGIA OR ANY OTHER JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF
THE LAWS OF ANY JURISDICTION OTHER THAN THE STATE OF GEORGIA.
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8.10 PARTIES IN INTEREST. Nothing in this Agreement, express or
implied, is intended to confer on any person other than the parties and their
respective successors and assigns any rights or remedies under or by virtue of
this Agreement.
ARTICLE IX
CERTAIN DEFINITIONS
--------------------
For purposes of this Agreement, the following terms shall have the
meanings set forth below:
"Agreement" means this Agreement and the schedules and Exhibit A
attached hereto.
"Affiliate" of any particular Person means any other Person
controlling, controlled by or under common control with such particular Person,
where "control" means the possession, directly or indirectly, of the power to
direct the management and policies of a Person whether through the ownership of
voting securities, contract or otherwise.
"Affiliated Group" means an affiliated group as defined in Section
1504 of the Code (or any analogous combined, consolidated or unitary group
defined under state, local or foreign income Tax law).
"Code" means the Internal Revenue Code of 1986, as amended.
"GAAP" means generally accepted accounting principles, consistently
applied.
"knowledge" means, with respect to Seller, the actual knowledge of the
operations director or general manager of Seller or any officer of Seller.
"Liens" means any mortgage, pledge, security interest, encumbrance,
lien or charge of any kind (including, without limitation, any conditional sale
or other title retention agreement or lease in the nature thereof), any sale of
receivables of Seller with recourse against Seller, any filing or agreement to
file a financing statement as debtor under the Uniform Commercial Code or any
similar statute other than to reflect ownership by a third party of property
leased to Seller under a lease which is not in the nature of a conditional sale
or title retention agreement, or any subordination arrangement in favor of
another Person (other than any subordination arising in the ordinary course of
business); provided that Liens shall not include any Permitted Encumbrance.
"Material Adverse Effect" means a material adverse effect on the
business, financial condition, operating results, assets or operations of the
Business.
"Permitted Encumbrances" means (a) statutory liens for current taxes
or other governmental charges with respect to the Real Property not yet due and
payable or the amount or validity of which is being contested in good faith by
appropriate proceedings by Seller and for which appropriate reserves have been
established in accordance with GAAP; (b) mechanics, carriers,
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workers, repairers and similar statutory liens arising or incurred in the
ordinary course of business for amounts which are not delinquent and which are
not, individually or in the aggregate, material to the Business; (c) zoning,
entitlement, building and other land use regulations imposed by governmental
agencies having jurisdiction over the Real Property which are not violated by
the current use and operation of the Real Property; and (d) covenants,
conditions, restrictions, easements and other similar matters of record
affecting title to the Real Property which do not materially impair the
occupancy or use of the Real Property for the purposes for which it is currently
used in connection with the Business.
"Person" means an individual, a partnership, a corporation, an
association, a limited liability company, a joint stock company, a trust, a
joint venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof.
"Subsidiary" means, with respect to any Person, any corporation,
partnership, association or other business entity of which (i) if a corporation,
a majority of the total voting power of shares of stock entitled (without regard
to the occurrence of any contingency) to vote in the election of directors,
managers or trustees thereof is at the time owned or controlled, directly or
indirectly, by that Person or one or more of the other Subsidiaries of that
Person or a combination thereof, or (ii) if a partnership, association or other
business entity, a majority of the partnership or other similar ownership
interest thereof is at the time owned or controlled, directly or indirectly, by
any Person or one or more Subsidiaries of that Person or a combination thereof.
For purposes hereof, a Person or Persons shall be deemed to have a majority
ownership interest in a partnership, association or other business entity if
such person or Persons shall be allocated a majority of partnership, association
or other business entity gains or losses or shall be or control the managing
director or general partner of such partnership, association or other business
entity.
"Tax" means any (A) federal, state, local or foreign income, gross
receipts, franchise, estimated, alternative minimum, add-on minimum, sales, use,
transfer, registration, value added, excise, natural resources, severance,
stamp, occupation, premium, windfall profit, environmental, customs, duties,
real property, personal property, capital stock, social security, unemployment,
disability, payroll, license, employee or other withholding, or other tax, of
any kind whatsoever, including any interest, penalties or additions to tax or
additional amounts in respect of the foregoing; (B) liability of Seller for the
payment of any amounts of the type described in clause (A) arising as a result
of being (or ceasing to be) a member of any Affiliated Group (or being included
(or required to be included) in any Tax Return relating thereto); and (C)
liability of Seller for the payment of any amounts of the type described in
clause (A) as a result of any express or implied obligation to indemnify or
otherwise assume or succeed to the liability of any other person;
"Tax Returns" means returns, declarations, reports, claims for refund,
information returns or other documents (including any related or supporting
schedules, statements or information) filed or required to be filed in
connection with the determination, assessment or collection of Taxes of any
party or the administration of any laws, regulations or administrative
requirements relating to any Taxes.
* * * *
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
BIO-LAB, INC.
/s/ Larry J. Bloom
-----------------------------------
By: Larry J. Bloom
--------------------------------
Its: President
-------------------------------
ALLIANCE PACKAGING, INC.
/s/ Wilson B. Sexton
-----------------------------------
By: Wilson B. Sexton
--------------------------------
Its: President
-------------------------------
SCP POOL CORPORATION
/s/ Wilson B. Sexton
-----------------------------------
By: Wilson B. Sexton
--------------------------------
Its: Chariman
-------------------------------
SOUTH CENTRAL POOL SUPPLY, INC.
/s/ Wilson B. Sexton
-----------------------------------
By: Wilson B. Sexton
--------------------------------
Its: Chairman
-------------------------------
SCHEDULES AND EXHIBITS
----------------------
Schedule 1.1(b)(iii) - Excluded Assets
Schedule 1.1(b)(v) - Excluded Agreements
Schedule 1.2(c) - Fixed Asset Purchase Price
Schedule 3.1 - Qualification/Incorporation
Schedule 3.4 - Conflicts
Schedule 3.5 - Financial Statements
Schedule 3.6 - Undisclosed Liabilities
Schedule 3.7 - Developments
Schedule 3.8 - Real Property; Title to Purchased
Assets
Schedule 3.9 - Environmental and Safety Matters
Schedule 3.11 - Contracts
Schedule 3.12 - Litigation
Schedule 3.14 - Governmental Licenses, Permits and
Consents
Schedule 3.16 - Employee Benefit Matters
Schedule 3.17 - Affiliate Transactions
Schedule 3.18 - Compliance with Laws
Schedule 7.11 - Net Income Statement Calculation
Exhibit A - Transition Plan
Exhibit B - Form of Bill of Sale
Exhibit C - Form of Assignment Agreement
Exhibit D - Noncompetition Agreement