1
EXHIBIT 10.2
------------
-----------------------------------
STOCK PURCHASE AGREEMENT
-----------------------------------
DATED AS OF DECEMBER 19, 1996
BETWEEN
GEC INCORPORATED, AS SELLER
AND
PARAGON CORPORATE HOLDINGS, INC., AS PURCHASER
-----------------------------------
OF ALL OUTSTANDING SHARES OF
A. B. DICK COMPANY
-----------------------------------
2
TABLE OF CONTENTS
ARTICLE I DEFINITIONS.......................................................................... 1
SECTION 1.01. Certain Defined Terms....................................................... 1
ARTICLE II PURCHASE AND SALE.................................................................... 8
SECTION 2.01. Purchase and Sale........................................................... 8
SECTION 2.02. Purchase Price.............................................................. 8
SECTION 2.03. Closing..................................................................... 10
ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLER............................................. 10
SECTION 3.01. Incorporation and Authority of Seller....................................... 10
SECTION 3.02. Incorporation and Qualification of A. B. Dick............................... 10
SECTION 3.03. Capital Stock of A. B. Dick................................................. 11
SECTION 3.04. Subsidiaries................................................................ 11
SECTION 3.05. No Conflict................................................................. 12
SECTION 3.06. Consents and Approvals...................................................... 12
SECTION 3.07. Financial Information....................................................... 12
SECTION 3.08. Intentionally Omitted....................................................... 12
SECTION 3.09. Absence of Litigation....................................................... 13
SECTION 3.10. Compliance with Laws........................................................ 13
SECTION 3.11. Licenses and Permits........................................................ 13
SECTION 3.12. Brokers..................................................................... 13
SECTION 3.13. Absence of Certain Changes.................................................. 13
SECTION 3.14. Taxes....................................................................... 15
SECTION 3.15. Proprietary Rights.......................................................... 16
SECTION 3.16. Title to and Condition of Properties........................................ 17
SECTION 3.17. Environmental Matters....................................................... 18
SECTION 3.18. Employee Benefit Plans...................................................... 20
SECTION 3.19. Contracts................................................................... 22
SECTION 3.20. Accounts Receivable......................................................... 23
SECTION 3.21. Labor Relations............................................................. 23
SECTION 3.22. Business of A. B. Dick...................................................... 23
SECTION 3.23. Customers................................................................... 23
SECTION 3.24. Suppliers................................................................... 24
SECTION 3.25. Product Liability........................................................... 24
SECTION 3.26. Credit Terms; Product Warranties............................................ 24
SECTION 3.27. Insurance................................................................... 24
SECTION 3.28. Projections................................................................. 24
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PURCHASER.......................................... 25
SECTION 4.01. Incorporation and Authority of Purchaser.................................... 25
SECTION 4.02. No Conflict................................................................. 25
SECTION 4.03. Consents and Approvals...................................................... 25
SECTION 4.04. Absence of Litigation....................................................... 25
SECTION 4.05. Brokers..................................................................... 26
i
3
ARTICLE V ADDITIONAL AGREEMENTS................................................................ 26
SECTION 5.01. Conduct of Business Prior to the Closing.................................... 26
SECTION 5.02. Confidentiality............................................................. 26
SECTION 5.03. Regulatory and Other Authorizations; Consents............................... 27
SECTION 5.04. Pre-Closing Transfer of Assets.............................................. 27
SECTION 5.05. U.S. Accounts Receivable.................................................... 28
SECTION 5.06. Relocation Cost Reimbursement............................................... 30
SECTION 5.07. Intra-Company Accounts...................................................... 30
SECTION 5.08A. U.S. Pension Plans.......................................................... 30
SECTION 5.08B. Non-U.S. Pension Plans...................................................... 31
SECTION 5.09A. U.S. Welfare Plans and Other Benefit Plans.................................. 32
SECTION 5.09B. Non-U.S. Welfare Plans and Other Benefit Plans.............................. 33
SECTION 5.10. Severance Allowance......................................................... 34
SECTION 5.11. Additional Agreements....................................................... 34
SECTION 5.12. Environmental Permit Transfers.............................................. 35
SECTION 5.13. Further Action.............................................................. 35
SECTION 5.14. Accounts Receivable......................................................... 35
SECTION 5.15. Tax Sharing Agreement....................................................... 35
SECTION 5.16. Pre-Closing Claims by A.B. Dick............................................. 35
SECTION 5.17. GEC plc Guarantee........................................................... 36
SECTION 5.18. 3500 Inventory.............................................................. 36
ARTICLE VI TAX MATTERS.......................................................................... 37
SECTION 6.01. Tax Indemnities............................................................. 37
SECTION 6.02. Refunds and Tax Benefits.................................................... 39
SECTION 6.03. Contests.................................................................... 39
SECTION 6.04. Preparation of Tax Returns.................................................. 40
SECTION 6.05. Section 338(h)(10) Election................................................. 41
SECTION 6.06. Cooperation and Exchange of Information..................................... 42
SECTION 6.07. Conveyance Taxes............................................................ 42
SECTION 6.08. Miscellaneous............................................................... 43
ARTICLE VII CONDITIONS TO CLOSING................................................................ 43
SECTION 7.01. Conditions to Obligations of Seller......................................... 43
SECTION 7.02. Conditions to Obligations of Purchaser...................................... 44
ARTICLE VIII INDEMNIFICATION...................................................................... 45
SECTION 8.01. Survival.................................................................... 45
SECTION 8.02. Indemnification by Purchaser................................................ 46
SECTION 8.03. Indemnification by Seller................................................... 48
SECTION 8.04. Environmental Indemnification............................................... 50
SECTION 8.05. Indemnification by Seller for Liabilities Relating to Pension
Plans, Other Benefit Plans, Retiree Medical Benefits and
Breach of Employee Benefit Plan Representations............................. 54
SECTION 8.06. Exclusive Remedies; Waiver.................................................. 55
ARTICLE IX TERMINATION AND WAIVER............................................................... 55
ii
4
SECTION 9.01. Termination................................................................. 55
SECTION 9.02. Effect of Termination....................................................... 56
SECTION 9.03. Waiver...................................................................... 56
ARTICLE X GENERAL PROVISIONS................................................................... 57
SECTION 10.01. Expenses.................................................................... 57
SECTION 10.02. Notices..................................................................... 57
SECTION 10.03. Public Announcements........................................................ 58
SECTION 10.04. Headings.................................................................... 58
SECTION 10.05. Severability................................................................ 58
SECTION 10.06. Entire Agreement............................................................ 58
SECTION 10.07. Assignment; Binding Effect.................................................. 58
SECTION 10.08. No Third-Party Beneficiaries................................................ 59
SECTION 10.09. Amendment................................................................... 59
SECTION 10.10. Governing Law............................................................... 59
SECTION 10.11. Arbitration................................................................. 59
SECTION 10.12. Counterparts................................................................ 60
SECTION 10.13. Waiver of Jury Trial........................................................ 60
EXHIBITS
Exhibit 2.02(a) Note
Exhibit 5.04(a) Transfer Agreement
Exhibit 5.11(a)(i) Distributor Agreement
Exhibit 5.11(b) Distributor Agreement
Exhibit 5.11(c) Distributor Agreement
Exhibit 5.11(d) Supply Agreement
Exhibit 5.17 GEC plc Guarantee
Exhibit 7.01(e) Form of Opinion of Purchaser's Counsel
Exhibit 7.02(d) Lease of Niles Facility
Exhibit 7.02(h)(i) Form of Opinion of Seller's Counsel
Exhibit 7.02(h)(ii) Form of Opinion of GEC plc's Counsel
Exhibit 7.02(i) Assumption Agreement
DISCLOSURE SCHEDULE
1.01(b) Seller's Accounting Policies
2.02(b)(A) Reference Statement
2.02(b)(B) Interim Working Capital
3.02 Incorporation and Qualification
3.04 Subsidiaries
3.06 Consents and Approvals
3.07 Company's Financial Data
iii
5
3.09 Absence of Litigation
3.10 Compliance with Laws
3.13 Absence of Certain Changes
3.14 Taxes
3.15 Proprietary Rights
3.16 Title To and Condition Of Property
3.17 Environmental Matters
3.18A ERISA Compliance
3.18B A. B. Dick Non-U.S. Benefit Plans
3.19 Contracts
3.20 Accounts Receivable
3.21 Labor Relations
3.23 Customers
3.24 Suppliers
3.25 Product Liability
3.26 Credit Terms
3.27 Insurance
5.01 Conduct of Business Prior to the Closing
5.03(b) Certain Contracts
5.04(c) Niles Personal Property Retained
5.04(d) Transfer of Other Assets
5.09A(c) A. B. Dick Welfare Plans Retained by A. B. Dick
5.09B(c) A. B. Dick Non-U.S. Welfare Plans Retained by
Purchaser Retained Subsidiaries
6.05 Allocation of Purchase Price
9.01(b) Immaterial Obligations
iv
6
THIS STOCK PURCHASE AGREEMENT, dated as of December 19, 1996,
between GEC INCORPORATED, a Delaware corporation ("Seller"), and PARAGON
CORPORATE HOLDINGS, INC., a Delaware corporation ("Purchaser").
W I T N E S S E T H :
WHEREAS, Seller owns all the issued and outstanding shares of
capital stock (the "Shares") of A. B. Dick Company ("A. B. Dick"), a Delaware
corporation; and
WHEREAS, Seller desires to sell the shares on the terms
hereinafter expressed, and Purchaser desires to purchase the shares on the terms
hereinafter expressed;
NOW, THEREFORE, in consideration of the premises and of the
mutual agreements and covenants hereinafter set forth, Purchaser and Seller
hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. CERTAIN DEFINED TERMS. As used in this
Agreement, the following terms shall have the following meanings:
"3500 INVENTORY" means all raw material, work-in-progress and
finished goods inventory relating to the Century 3500S, 3500W and 3500SW series
of printing presses.
"A. B. DICK" has the meaning specified in the recitals of this
Agreement.
"A. B. DICK BENEFIT PLANS" has the meaning specified in
Section 3.18(a).
"A. B. DICK PENSION PLANS" has the meaning specified in
Section 3.18(a).
"A. B. DICK WELFARE PLANS" has the meaning specified in
Section 3.18(a).
"AFFILIATE" means, when used with respect to a specified
Person, another Person that either directly or indirectly, through one or more
intermediaries, controls or is controlled by or is under common control with the
Person specified and, for purposes of Article VIII only, their respective
owners.
"AGREEMENT" means this Stock Purchase Agreement, dated as of
December 19, 1996, between Seller and Purchaser (including the Disclosure
Schedule).
"ALLOCATION" has the meaning specified in Section 6.05(c).
"ASSUMPTION AGREEMENT" has the meaning specified in Section
7.02(i).
7
"BUSINESS" means the business of A. B. Dick and the Purchaser
Retained Subsidiaries as conducted as of the date hereof, after giving effect to
the transfers provided for in Section 5.04.
"BUSINESS DAY" means any day that is not a Saturday, a Sunday
or other day on which banks are required or authorized by law to be closed in
the City of Chicago.
"CERCLIS" has the meaning specified in Section 3.17(a)(ii).
"CLOSING" has the meaning specified in Section 2.03(a).
"CLOSING DATE" has the meaning specified in Section 2.03(a).
"COMMONLY CONTROLLED ENTITY" has the meaning specified in
Section 3.18(a).
"CONFIDENTIALITY AGREEMENT" has the meaning specified in
Section 5.02.
"CONSEQUENTIAL DAMAGES" means any consequential, incidental,
special, punitive or exemplary damages including, but not limited to, lost
profits, loss of revenue and loss of use or diminution in value of property.
"CONTEST" has the meaning specified in Section 6.03(b).
"DESIGNATED LIABILITIES" means the following liabilities of A.
B. Dick and the Purchaser Retained Subsidiaries:
(a) all liabilities reflected in Final Working Capital
(including (i) subject to clause (iv) below, all Reserves therein, but only up
to the aggregate amount of all such Reserves, (ii) the Tax Basket, but only up
to the amount of such Tax Basket, (iii) the Service Liability reflected therein,
but only up to the amount of such Service Liability and (iv) all other
liabilities reflected in the Final Working Capital but, except as set forth in
clause (e), only to the extent of the amount of such liability included in the
Final Working Capital);
(b) obligations under the agreements listed in Schedule 3.19
and purchase orders, sales orders and Other Contracts entered into in the
ordinary course of operating the Business, but excluding therefrom, subject to
clause (a) above, any damages resulting from any default occurring prior to
Closing or any default resulting from the execution of this Agreement or the
consummation of the transactions contemplated by this Agreement;
(c) all liabilities relating to claims for severance asserted
against A. B. Dick or Seller or its Affiliates by employees of A. B. Dick or the
Purchaser Retained Subsidiaries who are terminated from employment after the
Closing; and
(d) liabilities to the extent arising as a result of the
operation of the Business by A.B. Dick and the Purchaser Retained Subsidiaries,
or any other occurrence with regard to A. B. Dick and the Purchaser Retained
Subsidiaries, after the Closing; provided, however, that Designated Liabilities
shall exclude:
2
8
(i) all liabilities covered by Seller's indemnity
obligations under Article VI, Section 8.04 and Section 8.05,
(ii) all liabilities relating to conditions of the
businesses of A. B. Dick or any Subsidiary to the extent any such
condition is in existence prior to the Closing to the extent such
liabilities are not included in clause (a) or clause (b) above, or
(iii) subject to clause (a) above and clause (e) below,
all liabilities for claims made by third parties for injury or
damages including, but not limited to, product liability and
worker's compensation claims, with respect to A. B. Dick and the
Subsidiaries, in existence prior to the Closing or to the extent
arising from any event taking place or arising prior to the Closing
(including any liability relating to products sold prior to the
Closing except to the extent such liability relates to damages
caused by modifications made or instructed to be made by A. B. Dick
or any of its Affiliates after the Closing); or
(iv) all past, present and future liabilities of A.B.
Dick and the Subsidiaries, whether fixed or contingent, known or
unknown, or of any nature whatsoever, in any way related to the
Niles Facility or the Seller Retained Subsidiaries, other than
obligations specifically assumed by Purchaser pursuant to the Lease
and, subject to clause (i), (ii) and (iii) above, other than
liabilities related to the Niles Facility resulting from the
operations of A. B. Dick after the Closing.
(e) all liabilities for product warranty claims for damage to,
or repair or replacement of, products sold by A. B. Dick or any Purchaser
Retained Subsidiary but excluding any liability for injury or damage to Persons
or other property.
"DISCLOSURE SCHEDULE" means the Disclosure Schedule dated as
of the date hereof delivered to Purchaser by Seller.
"DISTRIBUTOR AGREEMENTS" means the agreements to be entered
into pursuant to Sections 5.11(a), (b), (c) and (d).
"ENVIRONMENTAL LAWS" has the meaning specified in Section
3.17(b).
"ENVIRONMENTAL LOSS" has the meaning specified in Section
8.04(a).
"ENVIRONMENTAL PERMITS" has the meaning specified in Section
3.17(a)(i).
"ERISA" has the meaning specified in Section 3.18(a).
"ESTIMATED WORKING CAPITAL ADJUSTMENT" means an adjustment to
the consideration paid by Purchaser in connection with the transactions
contemplated hereby equal to the Interim Working Capital less the Reference
Working Capital.
"EXCLUDED LIABILITIES" means:
3
9
(a) all past and present liabilities of A. B. Dick and the
Purchaser Retained Subsidiaries, whether fixed or contingent, known or unknown,
or of any nature whatsoever, other than the Designated Liabilities;
(b) all past, present and future liabilities of A.B. Dick and
the Subsidiaries, whether fixed or contingent, known or unknown, or of any
nature whatsoever, relating to
(i) all liabilities covered by Seller's indemnity
obligations under Article VI, Section 8.04 and Section 8.05, and
(ii) the Niles Facility, other than obligations
specifically assumed by Purchaser pursuant to the Lease and as set
forth in clause (d)(iv) of the definition of Designated Liabilities;
(c) all liabilities relating to claims asserted against
Purchaser, A. B. Dick, the Purchaser Retained Subsidiaries or their respective
Affiliates by employees of A. B. Dick or the Purchaser Retained Subsidiaries who
are terminated from employment prior to Closing or who claim rights to severance
solely from the transfer of the Shares by Seller to Purchaser under this
Agreement; and
(d) all past, present and future liabilities whether fixed or
contingent, known or unknown, or of any nature whatsoever, of or relating to the
Seller Retained Subsidiaries.
Seller and Purchaser hereby acknowledge and agree that
Seller's indemnification obligation with respect to those Excluded Liabilities
identified in clause (b)(i) above shall be governed by Section Article VI,
Section 8.04 and Section 8.05, respectively, and shall not be governed by
Section 8.03(a)(iv).
"FINAL 3500 INVENTORY" shall mean the book value of the 3500
Inventory under Seller's Accounting Policies as reflected in the Final Working
Capital, not taking into account the adjustments described in Section
2.02(b)(i). Even though for purposes of the Final Working Capital Adjustment the
Final 3500 Inventory shall be deemed to be zero, the parties shall determine
such value under Seller's Accounting Policies pursuant to the procedures set
forth in Section 2.02(c).
"FINAL WORKING CAPITAL" means Working Capital calculated as of
the open of business on the Closing Date; provided, however, that such
calculation shall be made on a "roll forward" basis from March 31, 1996 to the
open of business on the Closing Date, it being agreed that Working Capital was
$30,514,000 at March 31, 1996 as set forth on the Reference Statement after
making the adjustments described in Section 2.02(b); and provided further that,
with respect to any adjustment required under Seller's Accounting Policies to be
made at the end of the March 31 fiscal year, the Closing Date shall be treated
as the end of the fiscal year for purposes of such calculation of Final Working
Capital.
"FINAL WORKING CAPITAL ADJUSTMENT" means an adjustment to the
consideration paid by Purchaser in connection with the transactions contemplated
hereby equal to Final Working Capital less Interim Working Capital.
4
10
"HAZARDOUS SUBSTANCES" has the meaning specified in Section
3.17(c).
"HSR ACT" means the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended, and the rules and regulations thereunder.
"INTERIM WORKING CAPITAL" has the meaning specified in Section
2.02(b).
"INTERNAL REVENUE CODE" means the Internal Revenue Code of
1986, as amended.
"IRS" means the Internal Revenue Service.
"KNOWLEDGE OF PURCHASER" means the knowledge, after reasonable
inquiry, of Robert J. Tomsich, John H. Fountain and David M. Sweeney.
"KNOWLEDGE OF SELLER" means the knowledge, after reasonable
inquiry, of the Chief Executive Officer, Chief Legal Officer, and Chief
Financial Officer of A. B. Dick, the Vice President and Secretary of Seller,
Fred Wood, David LeSage and Phillippe Gilles.
"LEASE" means the lease agreement described in Section
7.02(d).
"LOSSES" of a Person means any and all losses, liabilities,
damages (excluding Consequential Damages), claims, awards, judgments, costs and
expenses (including reasonable attorneys' and consultants' fees) actually
suffered or incurred by such Person.
"NILES FACILITY" means the real property, plant and office
facility located at 5700 West Touhy Avenue, Niles, Illinois.
"NOTE" has the meaning specified in Section 2.02(a).
"OTHER CONTRACTS" means (a) all written contracts of A. B.
Dick or any Purchaser Retained Subsidiary (other than the contracts required to
be set forth in Schedule 3.19), (b) oral contracts of A. B. Dick or any
Purchaser Retained Subsidiary requiring payments or assumption of liability by
A. B. Dick or any Purchaser Retained Subsidiary of less than $15,000 in the
aggregate with respect to any individual oral contract and $150,000 in the
aggregate with respect to all such oral contracts and (c) any oral contract that
may be terminated by A. B. Dick immediately upon delivery of notice to the other
party. Notwithstanding the foregoing, subject to clause (a) of the definition of
Designated Liabilities, Other Contracts shall not include any agreement with
respect to any claim by a third party for damages as a result of any occurrence
prior to the Closing Date.
"PCBS" has the meaning specified in Section 3.17(a)(i).
"PERMITTED ENCUMBRANCES" means such of the following as to
which no enforcement, collection, execution, levy or foreclosure proceeding
shall have been commenced: (a) liens for taxes, assessments and governmental
charges or levies not yet due and payable; (b) encumbrances imposed by law, such
as materialmen's, mechanics', carriers', workmen's and repairmen's liens and
other similar liens, arising in the ordinary course of business and reflecting
5
11
items not yet due and payable; (c) pledges or deposits to secure obligations
under workers' compensation laws or similar legislation or to secure statutory
obligations; and (d) minor survey exceptions, reciprocal easement agreements and
other customary encumbrances on title to real property that (i) were not
incurred in connection with any indebtedness, (ii) do not render title to the
property encumbered thereby unmarketable and (iii) do not, individually or in
the aggregate, materially adversely affect the use of such property for its
current purposes.
"PERSON" means any individual, corporation, partnership,
limited liability company, firm, joint venture, trust, association, governmental
or regulatory body or other entity.
"PRE-CLOSING TAX PERIOD" shall mean all taxable periods ending
on or before the Closing Date and, in the case of any taxable period that begins
before the Closing Date but does not end on or prior to the Closing Date, the
portion of such period ending on the Closing Date.
"PROPRIETARY RIGHTS" has the meaning specified in Section
3.15(a)(ii).
"PURCHASER" has the meaning specified in the preamble to this
Agreement.
"PURCHASER RETAINED SUBSIDIARY" means any Subsidiary that is
not a Seller Retained Subsidiary.
"PURCHASER'S THRESHOLD AMOUNT" has the meaning specified in
Section 8.02(b).
"REAL PROPERTY" has the meaning specified in Section 3.16(a).
"REFERENCE STATEMENT" has the meaning specified in Section
2.02(b).
"REFERENCE WORKING CAPITAL" has the meaning specified in
Section 2.02(b).
"REMEDIAL ACTIVITIES" has the meaning specified in Section
8.04.
"REMOVED ASSETS" has the meaning specified in Section 3.13(i).
"RESERVES" means all reserves, accruals or provisions
reflected in Working Capital, excluding the Tax Basket, Service Liability, trade
accounts payable, liability for capital leases and any reserves, accruals or
provisions relating to product warranty, and any other items that the parties
agree in writing will be treated as separate items and not aggregated for
purposes of clause (a) of the definition of Designated Liabilities. As part of
the computation of Final Working Capital, the parties shall use the procedures
set forth in Section 2.02(c) to determine the aggregate amount of Reserves as of
the Closing.
"SECTION 338 ELECTIONS" has the meaning specified in Section
6.05(a).
"SELLER" has the meaning specified in the preamble to this
Agreement.
"SELLER RETAINED SUBSIDIARIES" has the meaning specified in
Section 5.04(b).
6
12
"SELLER'S ACCOUNTING POLICIES" means the accounting
principles, policies, practices, bases, methods, judgments and estimations used
by A. B. Dick and the Purchaser Retained Subsidiaries for the preparation of the
Reference Statement which, as to the matters set forth in Section 1.01(b) of the
Disclosure Schedule, are as set forth on the Disclosure Schedule to the extent
set forth therein; provided, however, that any accounting principle, policy,
practice, base, method, judgment or estimation not disclosed in Section 1.01(b)
of the Disclosure Schedule shall not conflict with the principles, policies,
practices, bases, methods, judgments and estimations set forth in such Section
for purposes of this definition.
"SELLER'S THRESHOLD AMOUNT" has the meaning specified in
Section 8.03(b).
"SERVICE LIABILITY" means the account maintained for
prepayments received under customer service contracts for services to be
performed in the future.
"SHARES" has the meaning specified in the recitals to this
Agreement.
"SUBSIDIARY" or "SUBSIDIARIES" means any and all corporations,
partnerships, joint ventures, associations, and other entities in which the
majority of voting common stock or other equity interest is held or controlled
by A. B. Dick directly or indirectly through one or more intermediaries.
"TAX" or "TAXES" means all income, gross receipts, sales, use,
employment, franchise, profits, property, transfer or other taxes, fees, stamp
taxes and duties, contributions, assessments or charges of any kind whatsoever
(whether payable directly or by withholding), together with any interest and any
penalties, additions to tax or additional amounts imposed by any taxing
authority with respect thereto.
"TAX ASSET" means any net operating loss, net capital loss,
investment tax credit, foreign tax credit, charitable deduction or any other
credit or tax attribute which could reduce Taxes (including, without limitation,
deductions and credits related to alternative minimum Taxes);
"TAX BASKET" has the meaning specified in Section 6.01(a).
"THIRD-PARTY CLAIMS" has the meaning specified in Section
8.04(f).
"UK SUBSIDIARY" means A. B. Dick-Itek Limited.
"U. S. ACCOUNTS RECEIVABLE" has the meaning specified in
Section 5.04(a).
"UNOCCUPIED LEASED PROPERTIES" means the real property that is
not occupied by A.B. Dick or any Purchaser Retained Subsidiary but is leased by
A. B. Dick or a Purchaser Retained Subsidiary pursuant to the leases identified
in or required to be identified in Section 3.16 of the Disclosure Schedule.
"WORKING CAPITAL" means, subject to Section 2.02(b), the
excess of (a) all current assets of A. B. Dick and the Purchaser Retained
Subsidiaries (or the long-term portion of such
7
13
assets to the extent taken into account in connection with the preparation of
the Reference Statement) other than the Removed Assets, but including all U. S.
Accounts Receivable (except for intra-GEC accounts) excluding the $1,500,000
required to be in a cash account pursuant to Section 5.10, over (b) the current
portion of all Designated Liabilities (or the long-term portion of such
Designated Liabilities to the extent taken into account in connection with the
preparation of the Reference Statement). Working Capital shall be calculated
using Seller's Accounting Policies and the same level of prudence actually used
by A. B. Dick for the preparation of the Reference Statement.
ARTICLE II
PURCHASE AND SALE
SECTION 2.01. PURCHASE AND SALE. Upon the terms and subject to
the conditions set forth in this Agreement, Seller agrees to sell to Purchaser,
and Purchaser agrees to purchase from Seller, the Shares.
SECTION 2.02. PURCHASE PRICE. (a) In consideration of the
transfer of the Shares and the assumption of liabilities and indemnifications
undertaken by Seller in the Assumption Agreement; and in addition to the
retention of U. S. Accounts Receivable hereinafter provided for by Seller,
Purchaser shall at Closing deliver to Seller an unsecured promissory note in the
principal amount of Six Million Dollars ($6,000,000.00) in the form attached
hereto as Exhibit 2.02(a) (the "Note"). The consideration for the Shares shall
be adjusted as provided below.
(b) Section 2.02(b)(A) of the Disclosure Schedule attached
hereto (the "Reference Statement") contains a calculation of Working Capital as
of March 31, 1996 ("Reference Working Capital"). Attached hereto as Section
2.02(b)(B) of the Disclosure Schedule is a calculation of Working Capital as of
October 26, 1996 with respect to A. B. Dick and as of October 31, 1996 with
respect to the Purchaser Retained Subsidiaries ("Interim Working Capital"). For
purposes of calculating the Estimated Working Capital Adjustment and the Final
Working Capital Adjustment, the Reference Working Capital and the Interim
Working Capital were prepared, and the Final Working Capital shall be prepared,
subject to the following adjustments:
(i) The parties agree that solely for purposes of
computing the Estimated Working Capital Adjustment and the Final
Working Capital Adjustment, the value of the 3500 Inventory in the
Interim Working Capital and the Final Working Capital shall be deemed
to be zero.
(ii) The parties agree that the Service Liability
shall be included in the Reference Working Capital, the Interim Working
Capital and the Final Working Capital for all purposes of computing the
adjustments described in Section 2.02(c). The parties acknowledge that
the Service Liability amount included in the Reference Working Capital
is $9,099,000 and that such amount shall be utilized in the Reference
Working Capital for purposes of computing the Estimated and Final
Working Capital Adjustments. If the parties determine, utilizing the
procedures set forth in Section 2.02(c), prior to the final
8
14
and binding determination of the Final Working Capital Adjustment, that
the amount of the Service Liability that should have been included in
the Reference Working Capital is greater than $9,099,000 under Seller's
Accounting Policies, the outstanding principal balance of the Note
shall be reduced by treating the amount of such excess as a prepayment
under the Note; provided, however, that the amount of such reduction
shall not exceed $1,000,000.
(iii) The Reference Working Capital and the Interim
Working Capital excluded, and the Final Working Capital shall exclude,
(A) all Excluded Liabilities, including, but not limited to, any
accrued liability for real estate taxes with respect to the Niles
Facility, any accrued liability or reserve for retiree medical benefits
or pension benefits, or any accrued liability or reserves for
environmental matters for which Seller is required to indemnify
Purchaser and its Affiliates pursuant to Section 8.04, (B) all
inter-GEC accounts, including (1) any inter-GEC debts or accounts
payable described in Section 5.07 including, without limitation any
inter-GEC debts or accounts payable which arise in the ordinary course
of business, and (2) any inter-GEC receivables described in Section
5.04(d) of the Disclosure Schedule and any inter-GEC receivables which
arise in the ordinary course of business, it being understood that no
amounts in respect thereof shall be owing between A. B. Dick and its
Affiliates, on one hand, and Seller and its Affiliates, on the other
hand, immediately after the Closing, (C) estimated and prepaid Taxes,
and (D) any refund or credit of Taxes payable to Seller pursuant to
Section 6.02.
(iv) Cash has been excluded for purposes of computing
the Reference Working Capital and Interim Working Capital, but shall be
included in computing Final Working Capital to the extent not removed
by Seller prior to the Closing. A liability for the A.B. Dick Company
Executive Share Unit Plan, the A.B. Dick Company Executive Compensation
Plan and the A. B. Dick Company Contingent Compensation Plan has been
excluded for purposes of computing the Reference Working Capital and
Interim Working Capital, but the accrued liability for such plans in an
amount not to exceed $60,000 shall be taken into account to compute the
Final Working Capital.
(c) At the Closing, a cash settlement will be made in the
amount of the Estimated Working Capital Adjustment, which is $6,679,000 by
Seller to Purchaser. As soon as practicable, but not later than 60 days after
the Closing Date, Seller shall provide Purchaser with a calculation of the Final
Working Capital and the Final Working Capital Adjustment (including the
calculation provided for in Section 5.05(a)). The Final Working Capital
calculation and the Final Working Capital Adjustment calculation shall be
conclusive and binding on the parties hereto unless Purchaser shall deliver to
Seller notice in writing of an objection to any item within 30 days following
Purchaser's receipt of such calculations. In the event of such a dispute,
Purchaser, Seller and their respective accountants shall negotiate in good faith
among themselves for a period of 15 Business Days in an attempt to resolve such
dispute. If no resolution is reached within such period, Purchaser and Seller
shall submit such disputed items for arbitration by KPMG Peat Marwick (Chicago),
or such other public accounting firm jointly selected by Purchaser and Seller,
as arbitrator (the "Arbitrator"), within five Business Days after the end of
that period and the decision of the Arbitrator shall be given within 30 days
thereafter and will be conclusive and binding on the parties. The decision of
the Arbitrator shall constitute an arbitral award that is final, binding and
unappealable and upon which a judgment may be
9
15
entered by any court having jurisdiction thereof. Purchaser and Seller will each
pay one-half of the fees and expenses charged by the Arbitrator in connection
therewith. Upon the later of (i) 30 days following Purchaser's receipt of the
Final Working Capital calculation and the Final Working Capital Adjustment
calculation, or (ii) two Business Days following resolution of any dispute or
receipt of the final decision of the Arbitrator, a final cash settlement will be
made in the amount of the Final Working Capital Adjustment by Purchaser to
Seller, if positive, and by Seller to Purchaser, if negative. In connection with
the foregoing, Purchaser shall provide Seller with reasonable access during
normal business hours to records, work papers and personnel of A. B. Dick.
SECTION 2.03. CLOSING. (a) Subject to the terms and conditions
of this Agreement, the sale and purchase of the Shares contemplated hereby shall
take place at a closing (the "Closing") to be held at 10:00 a.m., local time, no
later than January 17, 1997 at the offices of McDermott, Will & Emery, 227 West
Monroe Street, Chicago, IL or at such other time or on such other date or at
such other place as Seller and Purchaser may mutually agree upon in writing (the
day on which the Closing takes place being the "Closing Date").
(b) At the Closing, Seller shall deliver or cause to be
delivered to Purchaser (i) stock certificates evidencing the Shares duly
endorsed in blank or accompanied by stock powers duly executed in blank, (ii)
the opinions, certificates and other documents required to be delivered pursuant
to Section 7.02, (iii) the Assumption Agreement, (iv) the Distributor
Agreements, and (v) the Lease.
(c) At the Closing, Purchaser shall deliver to Seller (i) the
Note, (ii) the Distributor Agreements, (iii) the Lease and (iv) the opinions,
certificates and other documents required to be delivered pursuant to Section
7.01.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Purchaser as follows:
SECTION 3.01. INCORPORATION AND AUTHORITY OF SELLER. Seller is
a corporation duly incorporated, validly existing and in good standing under the
laws of Delaware, and has all necessary corporate power and authority to enter
into this Agreement, to carry out its obligations hereunder and to consummate
the transactions contemplated hereby. The execution and delivery of this
Agreement by Seller, the performance by Seller of its obligations hereunder and
the consummation by Seller of the transactions contemplated hereby have been
duly authorized by all requisite corporate action on the part of Seller. This
Agreement has been duly executed and delivered by Seller, and (assuming due
authorization, execution and delivery by Purchaser) this Agreement constitutes a
legal, valid and binding obligation of Seller enforceable against Seller in
accordance with its terms.
SECTION 3.02. INCORPORATION AND QUALIFICATION OF A. B. DICK.
A. B. Dick is a corporation duly organized, validly existing and in good
standing under the laws of Delaware
10
16
and has the corporate power and authority to own, operate or lease the
properties and assets now owned, operated or leased by A. B. Dick. A. B. Dick is
duly qualified, licensed or registered as a foreign corporation to do business
and is in good standing, to the extent applicable, in each jurisdiction listed
in Section 3.02 of the Disclosure Schedule and is duly qualified, licensed or
registered as a foreign corporation to do business and is in good standing, to
the extent applicable, in each jurisdiction where the character of its
properties owned, operated or leased or the nature of its activities makes such
qualification, license or registration necessary.
SECTION 3.03. CAPITAL STOCK OF A. B. DICK. The Shares
constitute all the authorized, issued and outstanding shares of capital stock of
A. B. Dick. The Shares have been duly authorized and validly issued and are
fully paid and nonassessable and were not issued in violation of any preemptive
rights. There are no options, warrants or rights of conversion or other rights,
agreements, arrangements or commitments relating to the capital stock of A. B.
Dick obligating A. B. Dick to issue or sell any of its shares of capital stock.
Seller owns the Shares free and clear of all pledges, security interests and all
other liens, encumbrances and adverse claims, except for any liens, encumbrances
or adverse claims arising out of, under or in connection with this Agreement.
There are no voting trusts, stockholder agreements, proxies or other agreements
in effect with respect to the voting or transfer of the Shares.
SECTION 3.04. SUBSIDIARIES. Section 3.04 of the Disclosure
Schedule sets forth a true and complete list of all Subsidiaries, listing for
each Subsidiary its name, the jurisdiction of its incorporation or organization,
and, in addition, for each Purchaser Retained Subsidiary, the type of entity,
its authorized capital stock, partnership capital or equivalent, the number and
type of its issued and outstanding shares of capital stock, partnership
interests or similar ownership interests and A. B. Dick's current ownership of
such shares, partnership interests or similar ownership interests. There are no
options, warrants or rights of conversion or other rights, agreements,
arrangements or commitments relating to the capital stock of any Purchaser
Retained Subsidiary obligating any Purchaser Retained Subsidiary to issue or
sell any of its shares of capital stock. Except for the nominee share set forth
in Schedule 3.04 of the Disclosure Schedule, which shall be transferred at
Closing to Buyer for no additional consideration in accordance with Section
7.02(j), A. B. Dick owns all of the outstanding shares of capital stock of each
Purchaser Retained Subsidiary, free and clear of all pledges, security interests
and all other liens, encumbrances or adverse claims, except for liens,
encumbrances or adverse claims arising out of, under or in connection with this
Agreement. There are no voting trusts, stockholder agreements, proxies or other
agreements in effect with respect to the voting or transfer of the shares of
capital stock of any Purchaser Retained Subsidiary. Each Purchaser Retained
Subsidiary listed in Section 3.04 of the Disclosure Schedule is duly organized
and validly existing under the laws of its respective jurisdiction of
organization and has the requisite power and authority to own, operate or lease
the properties and assets now owned, operated or leased by such Purchaser
Retained Subsidiary and to carry on its business as currently conducted by such
Subsidiary. Section 3.04 of the Disclosure Schedule lists all jurisdictions in
which each Purchaser Retained Subsidiary is qualified to do business. Each
Purchaser Retained Subsidiary is qualified, licensed or registered to do
business and is in good standing, to the extent applicable, in each jurisdiction
where the character of its properties owned, operated or leased or the nature of
its activities makes such qualification, license or registration necessary.
Except as set forth in Section 3.04 of the Disclosure Schedule, neither A. B.
Dick nor any Purchaser Retained Subsidiary is subject to any obligation or
requirement
11
17
to make any investment in or advance to (in the form of a loan, capital
contribution, other contribution or otherwise) any Person. Seller has heretofore
delivered to Purchaser complete and correct copies of the charter, articles or
by-laws (which terms shall be deemed to also include comparable governing
instruments with different names) of each Purchaser Retained Subsidiary, as
amended and presently in effect, and no Purchaser Retained Subsidiary is in
default in the performance, observation or fulfillment of its charter, articles
or by-laws.
SECTION 3.05. NO CONFLICT. Assuming all consents, approvals,
authorizations and other actions described in Section 3.06 have been obtained
and all filings and notifications listed in Section 3.06 of the Disclosure
Schedule have been made, and except as may result from any facts or
circumstances relating solely to Purchaser, the execution, delivery and
performance of this Agreement by Seller does not and will not (a) violate or
conflict with the certificate of incorporation or by-laws (or similar
organizational documents) of Seller, (b) conflict with or violate any law, rule,
regulation, order, writ, judgment, injunction, decree, determination or award
applicable to Seller, A. B. Dick, the Business or any Purchaser Retained
Subsidiary or (c) result in any breach of, or constitute a default (or event
which with the giving of notice or lapse of time, or both, would become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, or result in the creation of any lien or other
encumbrance on the Shares or on any of the assets or properties of A. B. Dick or
any Purchaser Retained Subsidiary pursuant to any note, bond, mortgage or
indenture, or pursuant to any material contract, agreement, lease, license,
permit, franchise or other instrument relating to such assets or properties to
which Seller, A. B. Dick or any Purchaser Retained Subsidiary are a party or by
which any of such assets or properties is bound or affected.
SECTION 3.06. CONSENTS AND APPROVALS. The execution and
delivery of this Agreement by Seller does not, and the performance of this
Agreement by Seller will not, require any consent, approval, authorization or
other action by, or filing with or notification to, any governmental or
regulatory authority, except (a) as described in Section 3.06 of the Disclosure
Schedule, (b) the notification requirements of the HSR Act, and (c) as may be
necessary as a result of any facts or circumstances relating solely to
Purchaser.
SECTION 3.07. FINANCIAL INFORMATION. Attached hereto as
Section 3.07 of the Disclosure Schedule is a true and complete copy of a
financial internal report on the standard form of Seller from A. B. Dick and the
Purchaser Retained Subsidiaries setting forth their data for the fiscal years
ended March 31, 1995 and 1996 (hereinafter called the "Company's Financial
Data"). The Company's Financial Data has been prepared for incorporation in the
financial statements of Seller's parent which are prepared in accordance with
U.K. generally accepted accounting principles ("U.K. GAAP"). The Company's
Financial Data presents in accordance with U.K. GAAP the financial position and
the assets and liabilities of A. B. Dick and the Purchaser Retained Subsidiaries
as of the dates reflected therein, and of the income, expenses and results of
the operations of A. B. Dick and the Purchaser Retained Subsidiaries for the
periods reflected therein. Seller has also delivered to Buyer a financial
schedule setting forth the Company's Financial Data for the year ended March 31,
1996, as adjusted for the matters identified in such schedule.
SECTION 3.08. INTENTIONALLY OMITTED.
12
18
SECTION 3.09. ABSENCE OF LITIGATION. Except as set forth in
Section 3.09 of the Disclosure Schedule, there are no material claims, actions,
proceedings or investigations pending (or, to the Knowledge of Seller,
threatened) against A. B. Dick or any Purchaser Retained Subsidiary or any of
the assets or properties of A. B. Dick or any Purchaser Retained Subsidiary,
before any court, arbitrator or administrative, governmental or regulatory
authority or body. Except as set forth in Section 3.09 of the Disclosure
Schedule, neither A. B. Dick nor any Purchaser Retained Subsidiary nor any of
their respective assets or properties are subject to any order, writ, judgment,
injunction, decree, determination or award. No claim, action, proceeding or
investigation involving Seller or any Seller Retained Subsidiary is pending (or,
to the Knowledge of Seller, is threatened) before any court, arbitrator or
administrative, governmental or regulatory authority or body which seeks to
delay or prevent the consummation of the transactions contemplated hereby or
which would be reasonably likely to materially and adversely affect or restrict
Seller's ability to consummate the transactions contemplated hereby.
SECTION 3.10. COMPLIANCE WITH LAWS. Neither A. B. Dick nor any
Purchaser Retained Subsidiary is in violation of any material law, rule,
regulation, order, judgment or decree applicable to A. B. Dick or any Purchaser
Retained Subsidiary or by which any of the properties of A. B. Dick or any
Purchaser Retained Subsidiary is bound or affected, except as set forth in
Section 3.10 of the Disclosure Schedule. This Section shall not apply to
environmental matters which are exclusively the subject of Section 3.17.
SECTION 3.11. LICENSES AND PERMITS. A. B. Dick and the
Purchaser Retained Subsidiaries hold all permits (excluding Environmental
Permits), franchises, licenses, consents, authorizations, approvals and
certificates of any regulatory, administrative or other governmental agency or
body material to and used primarily in conducting the Business required to
conduct the Business in compliance with material applicable law (collectively,
the "Permits"). To the knowledge of Seller each of the Permits is currently
valid and in full force and effect. A. B. Dick and the Purchaser Retained
Subsidiaries have been in material compliance with the Permits. There is no
pending or, to the Knowledge of Seller, threatened proceeding against A. B. Dick
or any Purchaser Retained Subsidiaries or change in law or regulation which
could reasonably be expected to result in the revocation or cancellation of, or
inability of A. B. Dick or any Purchaser Retained Subsidiary to renew, or comply
with any Permit. True and complete copies of all Permits with respect to the
Niles Facility, the Roxdale, Ontario facility and the Rochester, New York
facility have been delivered to or made available for review by Purchaser.
SECTION 3.12. BROKERS. No broker, finder or investment banker
is entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of Seller.
SECTION 3.13. ABSENCE OF CERTAIN CHANGES. Except as set forth
in Section 3.13 of the Disclosure Schedule, since the date of the Reference
Statement, neither A. B. Dick nor any Purchaser Retained Subsidiary has:
(i) granted any material pledge, lien, security
interest, mortgage, charge, adverse claim of ownership or use, or
other encumbrance of any kind on any properties or assets (whether
tangible or intangible) of A. B. Dick or any Purchaser Retained
13
19
Subsidiary other than the properties or assets to be removed prior
to Closing as contemplated by Section 5.04 (the "Removed Assets");
(ii) established or materially increased any bonus,
insurance, severance, deferred compensation, pension, retirement,
profit sharing, stock option (including, without limitation, the
granting of stock options, stock appreciation rights, performance
awards or restricted stock awards), stock purchase or other employee
benefit plan, or otherwise materially increased the compensation
payable to or to become payable to any officers or key employees of
A. B. Dick or any Purchaser Retained Subsidiary, except in any case
described above as may be required by law or applicable collective
bargaining agreement or covered by Seller's indemnity obligations
set forth in Section 8.05;
(iii) entered into any material employment or severance
agreement with any of the employees of A. B. Dick or any Purchaser
Retained Subsidiary;
(iv) sold, assigned, transferred, leased or otherwise
disposed of any fixed assets of A. B. Dick or any Purchaser Retained
Subsidiary having an aggregate value exceeding $100,000 or any of
the other assets or properties of A. B. Dick or any Purchaser
Retained Subsidiary having an aggregate value exceeding $75,000,
other than the Removed Assets (including Scriptomatic Inc.,
Scriptomatic S.A., Refac Marketing Services, Inc. and Itek Graphix
Pty. Limited), sales of inventory in the usual and ordinary course
of business and payments of cash;
(v) (A) acquired (by merger, consolidation or
acquisition of stock or assets) any corporation, partnership or
other business organization or division thereof, (B) incurred any
indebtedness for borrowed money or issued any debt securities or
assumed, granted, guaranteed or endorsed, or otherwise as an
accommodation become responsible for, the obligations of any person
(other than by A. B. Dick with respect to obligations of its
Purchaser Retained Subsidiaries), (C) made loans or advances (other
than by A. B. Dick to the Subsidiaries), or (D) declared, set aside
or paid any dividend or distribution (in cash or in kind) other than
those contemplated by this Agreement or made any direct or indirect
redemption, purchase or other acquisition of any of its capital
stock or entered into any option, right, warrant or agreement to
purchase or acquire such stock, the aggregate value of any matter
set forth in this Section 3.13(v) which exceeds $50,000;
(vi) materially changed any method of accounting or
accounting practice used by A. B. Dick or any Purchaser Retained
Subsidiary other than such changes as were required by generally
accepted accounting principles;
(vii) issued or sold any additional shares of the
capital stock of, or other equity interests in, A. B. Dick or any
Purchaser Retained Subsidiary, or securities convertible into or
exchangeable for such shares or equity interests, issued or granted
any options, warrants, calls, subscription rights or other rights of
any kind to acquire additional shares of such capital stock, such
other equity interests, or such securities, capitalized any
14
20
profits or reserves in the form of shares or debt or redeemed or
purchased any shares of such capital stock;
(viii) amended A. B. Dick's certificate of incorporation
or by-laws or amended the certificate of incorporation, by-laws or
other organizational documents of any Purchaser Retained Subsidiary;
(ix) entered into an agreement to do any of the
foregoing;
(x) made any purchase of or any agreement to purchase
assets (other than materials, supplies and inventory purchased in
the ordinary course of business) for an amount in excess of $50,000
for any one purchase or $250,000 for all such purchases or entered
into any lease or any agreement to lease, as lessor or lessee, any
capital assets with payments over the term thereof to be made by A.
B. Dick or any Purchaser Retained Subsidiary exceeding an aggregate
of $75,000;
(xi) made or agreed to any material modification,
waiver, change, amendment, release, rescission or termination of, or
accord and satisfaction with respect to, any contract, agreement,
license or other instrument identified in Section 3.19 of the
Disclosure Schedule, other than any satisfaction by performance in
accordance with the terms thereof in the usual and ordinary course
of business.
SECTION 3.14. TAXES. (a) Except as set forth in Schedule 3.14,
(i) Seller has duly filed all federal, state, local and foreign tax returns and
tax reports required to be filed with respect to A. B. Dick and its
Subsidiaries, (ii) all taxes, assessments, fees and other governmental charges
of A. B. Dick or any Subsidiary shown to be payable under such returns and
reports have been fully paid or are not delinquent and are fully accrued as
liabilities in the Reference Statement and (iii) no written claim has been made
by authorities in any jurisdiction where Seller did not file tax returns that A.
B. Dick or any Subsidiary is or may be subject to taxation therein.
(b) Seller has delivered to Purchaser copies of all federal,
state, local, and foreign income tax returns filed with respect to A. B. Dick or
any Purchaser Retained Subsidiary for taxable periods ended on or after March
31, 1993. Section 3.14 of the Disclosure Schedule sets forth the dates and
results of any and all audits and investigations finalized within the last year
and for which a payment was made. No waivers of any applicable statute of
limitations for the filing of any tax returns or payment of any taxes or
assessments of any deficient or unpaid taxes are outstanding. Except as
disclosed in Section 3.14 of the Disclosure Schedule, all deficiencies proposed
as a result of any audits and investigations have been paid or settled. There is
no pending or, to the Knowledge of Seller, threatened federal, state, local or
foreign tax audit or assessment of Seller, A. B. Dick or any Subsidiary and
except as disclosed in Section 3.14 of the Disclosure Schedule, there is no
agreement with any federal, state, local or foreign taxing authority that may
affect the subsequent tax liabilities of Seller, A. B. Dick or any Subsidiary.
(c) In relation to the UK Subsidiary only:
15
21
(i) The UK Subsidiary is resident in the United Kingdom for
Tax purposes and will be so resident at Closing and is not and never
has been during the past six (6) years resident for Tax purposes in any
other territory and does not have and has never had any taxable branch,
agency or permanent establishment in any other country;
(ii) No Tax Asset has been claimed by and/or given to the UK
Subsidiary, or taken into account in determining the provision or
amount stated in respect of Tax in the Reference Statement or the
audited accounts of the UK Subsidiary for the accounting period ended
31st March 1996, which could be withdrawn, postponed or restricted as a
result of any act, omission, or circumstance arising or occurring at or
at any time after Closing, unless caused by an action taken after the
Closing by Purchaser, Purchaser's Affiliates, A.B. Dick or the
Purchaser Retained Subsidiaries, other than any action taken by
Purchaser or its Affiliates pursuant to this Agreement;
(iii) No debt owed by the UK Subsidiary has been waived or
released in whole or in part since 31st March 1996 nor is it entitled
to such a waiver or release; and
(iv) The Company: (A) has been separately registered for the
purposes of value added tax since November 24, 1996, and was registered
as a member of a VAT group before November 24, 1996, and such
registrations are not subject to any conditions imposed by or agreed
with HM Customs and Excise, and (B) has complied with the value added
tax legislation in all material respects and has maintained and
obtained at all time complete, correct and up to date records, invoices
and other documents appropriate or requisite for the purposes of value
added tax and has retained such records, invoices and other documents
as required by the applicable legislation.
(d) Neither A.B. Dick nor any Purchaser Retained Subsidiary
(other than the UK Subsidiary) is (or has been at any time during the past two
(2) years) resident in the United Kingdom for any Tax purpose and none of them
has (or has at any time during the past two (2) years) any branch, agency or
permanent establishment in the United Kingdom for any Tax purpose.
(e) A.B. Dick is not a member of a Value Added Tax Group.
SECTION 3.15. PROPRIETARY RIGHTS. (a) Section 3.15 of the
Disclosure Schedule sets forth:
(i) All patents, trademarks, trade names, service marks,
logos and copyrights and franchises and licenses, sublicenses or
material agreements in respect thereof which A. B. Dick or any
Purchaser Retained Subsidiary owns or has the right to use or to
which A. B. Dick or any Purchaser Retained Subsidiary is a party;
and
(ii) all registrations or issuances (or applications therefor)
of any of the foregoing with or by any federal, state, local or foreign
regulatory, administrative or governmental office or offices (all items
in (i) and (ii) of this Section 3.15(a) collectively, "Proprietary
Rights").
16
22
(b) Except as disclosed in Section 3.15 of the Disclosure
Schedule, (i) all of the Proprietary Rights are owned by or licensed to A. B.
Dick or a Purchaser Retained Subsidiary; (ii) no person or entity has a right to
receive a royalty or similar payment in respect of any Proprietary Rights
pursuant to any arrangements entered into by A. B. Dick or any Purchaser
Retained Subsidiary; and (iii) no claim, action, suit or proceeding has been
made during the last year or is pending (or, to the Knowledge of Seller,
threatened) against A. B. Dick or any Purchaser Retained Subsidiary either (A)
challenging or seeking to deny or restrict the use by A. B. Dick or any
Purchaser Retained Subsidiary of any of the Proprietary Rights or (B) alleging
that any services are being provided or products are being manufactured or sold,
or Proprietary Rights are being used, by A. B. Dick or any Purchaser Retained
Subsidiary, in violation of any intellectual property rights of any third
Person. Except as disclosed in Section 3.15 of the Disclosure Schedule, (x)
there are no uses of the Proprietary Rights in the ordinary course of the
Business that, to the Knowledge of Seller, materially violate or materially
infringe upon any intellectual property right owned by any third Person (y)
Seller is not aware of any infringement or violation of A. B. Dick's or any
Subsidiary's rights in or to the Proprietary Rights by any third Person and (z)
other than the Proprietary Rights, to the Knowledge of Seller there are no items
or rights of the nature of those included in the Proprietary Rights that are
necessary for the operation of the Business in the manner in which the Business
is currently conducted.
(c) Except as disclosed on Section 3.15 of the Disclosure
Schedule, neither Seller nor any of its Affiliates (other than A. B. Dick and
the Purchaser Retained Subsidiaries) owns or has any interest in any Proprietary
Rights used by A. B. Dick or the Purchaser Retained Subsidiaries in connection
with the Business.
SECTION 3.16. TITLE TO AND CONDITION OF PROPERTIES. (a) Except
as set forth in Section 3.16 of the Disclosure Schedule, A. B. Dick or a
Purchaser Retained Subsidiary has valid and subsisting leasehold estates in all
Real Property leased by A. B. Dick or any Purchaser Retained Subsidiary and
owns, leases or has legal right to use all of its other assets and properties of
every kind, nature and description, tangible or intangible, wherever located,
which constitute all of the material property now used in its business as
presently conducted (including, without limitation, all property and assets
shown or reflected on the Reference Working Capital, except inventory sold in
the ordinary course of business and other assets sold in compliance with this
Agreement). Except as set forth in Section 3.16 of the Disclosure Schedule and
except for Permitted Encumbrances, all Real Property owned by A. B. Dick or a
Purchaser Retained Subsidiary is held free and clear of all mortgages, pledges,
liens, security interests, encumbrances and similar restrictions. Except as set
forth in Section 3.16 of the Disclosure Schedule, the Real Property is usable
for its current uses without violating any material federal, state, local,
foreign or other governmental building, zoning, health, safety, platting,
subdivision or other material law, ordinance or regulation, or any applicable
material private restriction, and such uses are legal conforming uses in all
material aspects and neither A. B. Dick nor any Purchaser Retained Subsidiary
has received in the last year any written notice of any such violation or
noncompliance nor are there any such continuing unresolved violations or
noncompliances. Section 3.16 of the Disclosure Schedule contains a complete and
accurate list of all real property, other than the Niles Facility, currently
owned or leased by A. B. Dick or any Purchaser Retained Subsidiary in the
conduct of its business (all such real property other than the Niles Facility,
collectively the "Real Property") and identifies any real property leased
17
23
as of the date hereof by A.B. Dick or any Purchaser Retained Subsidiary that is
not currently occupied by A.B. Dick or any Purchaser Retained Subsidiary.
(b) Except as set forth in Section 3.16 of the Disclosure Schedule, to
the Knowledge of Seller, all Real Property and the structures and other
improvements thereon and all machinery and equipment and tangible personal
property owned or leased by A. B. Dick or any Purchaser Retained Subsidiary
(other than the Removed Assets) and material to the operation of the Business
are suitable for the purpose or purposes for which they are being used and are
in reasonable condition and repair in light of their age and prior use. To the
Knowledge of Seller, without conducting any inquiry, except as set forth on
Section 3.16 of the Disclosure Schedule, there are no material structural
defects in the exterior walls or the interior bearing walls, the foundation or
the roof of any plant, building, garage or other such structure owned by A. B.
Dick or any Purchaser Retained Subsidiary and material to the operation of the
Business, and the electrical, plumbing, heating systems, and air-conditioning
systems of any such plant, building, garage or structure are in reasonable
operating condition in light of their age and prior use. The utilities servicing
the Real Property are adequate to permit the continued operation of the business
of A. B. Dick or such Purchaser Retained Subsidiary, as the case may be, and
there are no pending or, to the Knowledge of Seller, threatened zoning,
condemnation or eminent domain proceedings, building, utility or other
moratoria, or injunctions or court orders which would materially affect such
continued operation. Seller has furnished or made available to Purchaser copies
of, all material engineering, geologic and environmental reports with respect to
the Real Property of which A. B. Dick or any Purchaser Retained Subsidiary has a
copy.
SECTION 3.17. ENVIRONMENTAL MATTERS. (a) (i) Except as
disclosed in Section 3.17 of the Disclosure Schedule, A. B. Dick and its
Purchaser Retained Subsidiaries are in compliance in all material respects with,
and conduct their operations and processes in compliance in all material
respects with, Environmental Laws (defined below); to the Knowledge of Seller,
there is no condition on, under or in any Real Property or personal property
owned, operated or leased or used by A. B. Dick which would give rise to a
material liability; no lien has been attached to any real or personal property
of A. B. Dick or any Purchaser Retained Subsidiary pursuant to any Environmental
Laws; to the Knowledge of Seller, A. B. Dick and its Purchaser Retained
Subsidiaries have utilized only haulers and transporters which are in possession
of all applicable authorizations or permits to operate to dispose of any
Hazardous Substance (as defined below); to the Knowledge of Seller, there has
been no treatment, storage, disposal or release of any Hazardous Substance by
any person on any property which currently or at any time was owned, operated or
leased by A. B. Dick or any Purchaser Retained Subsidiary in any manner that
could reasonably be expected to lead to a material liability of A. B. Dick or
any Purchaser Retained Subsidiary; there are no sites or locations at which A.
B. Dick or any Purchaser Retained Subsidiary is currently undertaking, or has
completed, any investigation, assessment, remedial or response action relating
to the treatment, storage, disposal or release of any Hazardous Substance that
could reasonably be expected to lead to a material liability; A. B. Dick and its
Purchaser Retained Subsidiaries have obtained, and are in compliance with, all
material permits, licenses, authorizations, registrations and other governmental
consents required by Environmental Laws ("Environmental Permits"); neither A. B.
Dick nor any Purchaser Retained Subsidiary has received written notice of any
civil, criminal or administrative claims, actions, suits, hearings,
investigations, or proceedings pending or threatened that are based on or
related to any Environmental Laws (including without limitation
18
24
written notices regarding requests for information or potentially responsible
party designations, in each case, in connection with the off-site disposal of
Hazardous Substances); all underground storage tanks and solid waste disposal
facilities regulated pursuant to Environmental Laws and owned or operated by or
under the control of A. B. Dick or any Purchaser Retained Subsidiary are used
and operated in compliance in all material respects with all Environmental Laws;
to Seller's knowledge there are no sites, locations or operations at which A. B.
Dick or any Purchaser Retained Subsidiary is currently undertaking or has
completed an underground storage tank removal or remediation or a closure or
remediation of a solid waste disposal facility regulated pursuant to
Environmental Laws; there are no polychlorinated biphenyls ("PCBs") in any
article, container or equipment on, about, under or within the Real Property in
violation of Environmental Laws or which would subject Purchaser, A. B. Dick or
any Purchaser Retained Subsidiary to material liability; and to the Knowledge of
Seller, there is no friable asbestos at, on, about, under or within the Real
Property in violation of applicable Environmental Laws.
(ii) Section 3.17 of the Disclosure Schedule sets forth every
site that is listed on either (A) the Comprehensive Environmental Response,
Compensation and Liability Act Information System ("CERCLIS") database or (B) a
similar state, provincial, regional, territorial, municipal, local or foreign
law list with respect to which A. B. Dick or any Purchaser Retained Subsidiary
has received notice from the United States Environmental Protection Agency or a
state, provincial, regional, territorial, municipal, local or foreign agency
that it is or may be considered to be a potentially responsible party.
(b) For the purposes of this Section 3.17, the term "Environmental
Laws" means any applicable federal, state, provincial, regional, territorial,
county, municipal, local or foreign statute, code, ordinance, rule, regulation,
common law doctrine, enforceable policy or guideline, and any permit, consent,
approval, license, judgment, order, writ, decree or consent order, injunction or
other authorization, including the requirement to register underground storage
tanks, relating to any environmental, health or safety matter, in each case as
currently in effect or as hereafter amended or adopted, including but not
limited to those related to:
(i) emissions, discharges, releases or threatened releases of
Hazardous Substances into the environment, including, without
limitation, into air, soil, sediments, land surface or subsurface,
buildings or facilities, surface water, groundwater, publicly-owned
treatment works, septic systems or land;
(ii) the generation, treatment, storage, disposal, use,
handling, manufacture, transportation or shipment of Hazardous
Substances; or
(iii) the pollution or protection of health or safety or the
environment including without limitation the Occupational Health &
Safety Act, 29 U.S.C. Section 651 ET SEQ., and any state, provincial,
regional, territorial, county, municipal or local counterpart thereof,
solid waste handling, treatment or disposal of mine waste, or operation
or reclamation of mines, operation of drinking water supplies, dredging
or filling of wetlands or testing of chemicals prior to their entry
into commerce.
(c) The term "Hazardous Substances" means (i) hazardous materials,
contaminants, pollutants, constituents, solid wastes, hazardous wastes,
hazardous substances and toxic
19
25
substances as those terms are defined in the following statutes and their
implementing regulations, as amended: the Hazardous Materials Transportation
Act, 49 U.S.C. Section 1801 ET SEQ.; the Resource Conversation and Recovery Act,
42 U.S.C. Section 6901 ET SEQ.; the Comprehensive Environmental Response,
Compensation and Liability Act, as amended by the Superfund Amendments and
Reauthorization Act ("CERCLA"), 42 U.S.C. Section 9601 ET SEQ.; the Clean Air
Act, 42 U.S.C. ss. 7401 ET SEQ.; the Clean Water Act, 33 U.S.C. Section 1251 ET
SEQ.; and, the Toxic Substances Control Act, 15 U.S.C. Section 2601 ET SEQ.;
(ii) petroleum, including crude oil and any fractions thereof; (iii) natural
gas, synthetic gas and any mixtures thereof; (iv) asbestos and/or
asbestos-containing materials; (v) PCBs, or PCB-containing materials or fluids;
and (vi) any other substance subject to regulation under Environmental Law.
SECTION 3.18. EMPLOYEE BENEFIT PLANS. (a) Section 3.18A of the
Disclosure Schedule contains a list of each "employee pension benefit plan" (as
defined in Section 3(2) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), and hereinafter an "A. B. Dick Pension Plan"), "employee
welfare benefit plan" (as defined in Section 3(1) of ERISA, and hereinafter an
"A. B. Dick Welfare Plan"), stock option, stock purchase, deferred compensation
plan or arrangement, and other employee fringe benefit plan or arrangement
maintained, contributed to or required to be maintained or contributed to by A.
B. Dick or any other person or entity that, together with A. B. Dick, is treated
as a single employer under Section 414(b), (c), (m) or (o) of the Internal
Revenue Code (each a "Commonly Controlled Entity") for the benefit of any
present or former officers, employees, directors or independent contractors of
A. B. Dick in the United States as of the date of this Agreement (all the
foregoing being herein called "A. B. Dick Benefit Plans"). Seller has made
available to Purchaser true, complete and correct copies of (i) each A. B. Dick
Benefit Plan (or, in the case of any unwritten A. B. Dick Benefit Plans,
descriptions thereof), (ii) the most recent annual report on Form 5500 filed
with the Internal Revenue Service with respect to each A. B. Dick Benefit Plan
(if any such report was required by applicable law), (iii) the most recent
summary plan description for each A. B. Dick Benefit Plan for which such a
summary plan description is required by applicable law or was otherwise provided
to plan participants and (iv) each trust agreement and insurance or annuity
contract relating to any A. B. Dick Benefit Plan. Section 3.18B of the
Disclosure Schedule contains a list of each retirement plan (providing benefits
similar to those described in Section 3(2) of ERISA, and hereinafter an "A. B.
Dick Non-U.S. Pension Plan"), welfare benefit plan (providing benefits similar
to those described in Section 3(1) of ERISA, and hereinafter an "A. B. Dick
Non-U.S. Welfare Plan"), stock option, stock purchase, deferred compensation
plan or arrangement, and other employee fringe benefit plan or arrangement
(other than a governmental plan) maintained or contributed to by any Purchaser
Retained Subsidiary for any present or former officers, employees, directors or
independent contractors of the Purchaser Retained Subsidiaries outside of the
United States as of the date of this Agreement (all the foregoing being herein
called "A. B. Dick Non-U.S. Benefit Plans").
(b) Each A. B. Dick Benefit Plan has been administered in all
material respects in accordance with its terms and in compliance in all material
respects with the applicable provisions of ERISA and the Internal Revenue Code,
as well as any other applicable laws of any jurisdiction. There are no
investigations by any governmental agency, termination proceedings or other
claims (except claim for benefits payable in the normal operation of the A. B.
Dick Benefit Plans), suits or proceedings against or involving any A. B. Dick
Benefit Plan or asserting any rights or claims to benefits under any A. B. Dick
Benefit Plan that could give
20
26
rise to any material liability, and there are not any facts that could
reasonably be expected to give rise to any material liability to A. B. Dick or
Purchaser in the event of any such investigation, claim, suit or proceeding.
(c) Except as disclosed in Section 3.18A of the Disclosure
Schedule, (i) all contributions to, and payments from, the A. B. Dick Benefit
Plans that may have been required to be made in accordance with the terms of the
A. B. Dick Benefit Plans, any applicable collective bargaining agreement and,
when applicable, Section 302 of ERISA or Section 412 of the Internal Revenue
Code or any other applicable laws, have been timely made, (ii) there has been no
application for or waiver of the minimum funding standards imposed by Section
412 of the Internal Revenue Code with respect to any A. B. Dick Pension Plan,
and (iii) no A. B. Dick Pension Plan had an "accumulated funding deficiency"
within the meaning of Section 412(a) of the Internal Revenue Code as of the end
of the most recently completed plan year.
(d) Section 3.18A of the Disclosure Schedule discloses
whether: (i) any "prohibited transaction" (as defined in Section 4975 of the
Internal Revenue Code or Section 406 of ERISA) has occurred to the Knowledge of
Seller that involves the assets of any A. B. Dick Benefit Plan; (ii) any
prohibited transaction has occurred that could reasonably be expected to subject
A. B. Dick or any of its employees, or, to the Knowledge of Seller, a trustee,
administrator or other fiduciary of any trust created under any A. B. Dick
Benefit Plan to any material tax or penalty on prohibited transactions imposed
by Section 4975 of ERISA or the sanctions imposed under Title I of ERISA; and
(iii) any of the A. B. Dick Pension Plans has been terminated or has been the
subject of a "reportable event" (as defined in Section 4043 of ERISA and the
regulations thereunder).
(e) No Commonly Controlled Entity has incurred any material
liability to an A. B. Dick Pension Plan (other than for contributions not yet
due) or to the Pension Benefit Guaranty Corporation (other than for the payment
of premiums not yet due), which material liability has not been fully paid as of
the date hereof.
(f) No Commonly Controlled Entity has (i) engaged in a
transaction described in Section 4069 of ERISA that could reasonably be expected
to subject A. B. Dick or Purchaser to material liability at any time after the
date hereof or (ii) acted in a manner that could, or failed to act so as to,
result in material fines, penalties, taxes or related charges under (A) Section
502(c), (i) or (1) of ERISA, (B) Section 4071 of ERISA or (C) Chapter 43 of the
Internal Revenue Code, that could reasonably be expected to be imposed on A. B.
Dick or Purchaser.
(g) Except as disclosed in Section 3.18A of the Disclosure
Schedule, A. B. Dick has not incurred, nor could it reasonably be expected to
incur, any material withdrawal liability with respect to a "multiemployer plan"
(as defined in Section 4001(a)(3) of ERISA).
(h) The list of A. B. Dick Welfare Plans described in the
Disclosure Schedule discloses whether each A. B. Dick Welfare Plan is (i)
unfunded, (ii) funded through a "welfare benefit fund," as such term is defined
in Section 419(e) of the Internal Revenue Code, or other funding mechanism, or
(iii) insured. A. B. Dick complies in all material respects with the applicable
requirements of Section 4980B(f) of the Internal Revenue Code with respect to
each
21
27
A. B. Dick Welfare Plan that is a group health plan, as such term is defined in
Section 5000(b)(1) of the Internal Revenue Code.
(i) Except as described in Sections 5.08A(a)(ii) and 5.09A(b)
of this Agreement, no employee of A. B. Dick will be entitled to any additional
benefits or any acceleration of the time of payment or vesting of any benefits
under any A. B. Dick Benefit Plan solely as a result of the transactions
contemplated by this Agreement.
(j) Seller has provided Purchaser with an estimate of the
liability of A. B. Dick and, if applicable, each Purchaser Retained Subsidiary
for post-retirement health care benefits as described in Financial Accounting
Standards No. 106 as of March 31, 1996.
(k) In case of each A. B. Dick Non-U.S. Benefit Plan which is
subject to the laws of any foreign country, such A. B. Dick Non-U.S. Benefit
Plan is in compliance in all material respects with all applicable laws of such
foreign jurisdiction. Except as disclosed in Section 3.18B of the Disclosure
Schedule, (i) all contributions to, and payments from, each A. B. Dick Non-U.S.
Benefit Plan that may have been required to be made in accordance with the terms
of the A. B. Dick Non-U.S. Benefit Plan, any applicable labor agreement and any
applicable law, have been timely made; and (ii) except as described in Section
5.08B(b) of this Agreement, no employee of any Purchaser Retained Subsidiary
will be entitled to any additional benefits or any acceleration of the time of
payment or vesting of any benefits under any A. B. Dick Non-U.S. Benefit Plan
solely as a result of the transactions contemplated by this Agreement.
SECTION 3.19. CONTRACTS. Section 3.19 of the Disclosure
Schedule lists all contracts, agreements, leases, executory commitments,
arrangements and understandings (written or, to the Knowledge of Seller, oral)
to which A. B. Dick or any Purchaser Retained Subsidiary is a party, including
all amendments and supplements thereto, (a) that require payments in excess of
$75,000, extend beyond one year from Closing or are otherwise material to the
condition, operations, assets or business of A. B. Dick or any Purchaser
Retained Subsidiary (other than unfilled purchase orders to purchase goods of A.
B. Dick or any Purchaser Retained Subsidiary), unless cancelable on 60 or fewer
days' notice without any liability, penalty or premium, (b) with any present or
former stockholder, director or officer of A. B. Dick or any Purchaser Retained
Subsidiary, or any Person controlling, controlled by or under common control
with any such person, or with any employee, agent or consultant of A. B. Dick or
any Purchaser Retained Subsidiary (or any person related by family to any such
person) not terminable at will, (c) which provide for the future purchase in
excess of $100,000 by A. B. Dick or any Purchaser Retained Subsidiary of any
materials, equipment, services or supplies, which continue for a period of more
than twelve months (including periods covered by any option to renew by either
party) unless cancelable on 60 or fewer days' notice without any liability,
penalty or premium or (d) which involve any of the following: (i) any borrowing
or guarantees of any amount in excess of $100,000; (ii) any contracts containing
covenants purporting to limit the freedom of A. B. Dick or any Purchaser
Retained Subsidiary to compete in any line of business in any geographic area;
or (iii) any material obligation or commitment providing for indemnification or
responsibility for the obligations or losses of any person. Except as set forth
in Section 3.19 of the Disclosure Schedule, all of such contracts, agreements,
leases, commitments, arrangements and understandings are valid and binding, in
full force and effect and enforceable in accordance
22
28
with their respective provisions against A. B. Dick or the Purchaser Retained
Subsidiaries. Neither A. B. Dick or the Purchaser Retained Subsidiaries nor, to
the Knowledge of Seller, any other party thereto is in violation of, in default
in respect of nor has there occurred an event or condition with respect to A.B.
Dick or the Purchaser Retained Subsidiaries or, to the Knowledge of Seller, any
other party thereto which, with the passage of time or giving of notice (or
both) would constitute a default of any such contract, agreement, lease,
commitment, arrangement or understanding.
SECTION 3.20. ACCOUNTS RECEIVABLE. Except as set forth in
Section 3.20 of the Disclosure Schedule, all accounts and notes receivable of A.
B. Dick and each Purchaser Retained Subsidiary as of the Closing Date (other
than the U.S. Accounts Receivable) will be valid and subsisting and will
represent sales actually made (net of all applicable credits and/or rebates) in
the ordinary course of business.
SECTION 3.21. LABOR RELATIONS. Except as set forth in Section
3.21 of the Disclosure Schedule, A. B. Dick and each Purchaser Retained
Subsidiary has complied in all respects with all applicable material federal,
state, local or foreign laws, rules, regulations and Executive Orders relating
to employment, and all applicable material laws, rules and regulations governing
payment of minimum wages and overtime rates, and withholding and payment of
taxes from compensation of employees and the payment of premiums or benefits
under applicable worker compensation laws. Except as set forth in Section 3.21
of the Disclosure Schedule, there is no unfair labor practice complaint against
A. B. Dick or any Purchaser Retained Subsidiary pending before the National
Labor Relations Board. There is no labor strike, collectively organized dispute,
slowdown or stoppage, or any union organizing campaign actually pending or, to
the Knowledge of Seller, threatened against or involving A. B. Dick or any
Purchaser Retained Subsidiary. Except as set forth in Section 3.21 of the
Disclosure Schedule, no labor grievance has been filed with A. B. Dick or any
Purchaser Retained Subsidiary during the last year or is pending, and no
arbitration proceeding has arisen out of or under a collective bargaining or
other labor agreement and is pending and no claim therefor has been asserted
during the last year. Except as set forth in Section 3.21 of the Disclosure
Schedule, no collective bargaining or other labor agreement is currently being
negotiated by A. B. Dick or any Purchaser Retained Subsidiary and no union or
collective bargaining unit represents any of the employees of A. B. Dick or any
Purchaser Retained Subsidiary. Except as set forth in Section 3.21 of the
Disclosure Schedule, neither A. B. Dick nor any Purchaser Retained Subsidiary
has experienced, nor (to the Knowledge of the Sellers) has been threatened with,
any work stoppage or slow down during the past five years.
SECTION 3.22. BUSINESS OF A. B. DICK. A. B. Dick and the
Purchaser Retained Subsidiaries are engaged in the business of developing,
manufacturing, distributing and marketing a broad range of equipment, supplies
and services for use in the reprographics and graphic arts industries including
but not limited to products and services for the pre-press, press and post-press
applications, copiers and digital duplicators.
SECTION 3.23. CUSTOMERS. Section 3.23 of the Disclosure
Schedule lists the 20 largest customers or groups of related customers of the
Business for the 12-month period ended March 31, 1996, together with the amount
of revenue of the Business generated by each such customer during that period.
Neither A. B. Dick nor any Purchaser Retained Subsidiary
23
29
has received, as of the date hereof, any written notice or, to the Knowledge of
Seller, oral notice, that any such customer intends to terminate or materially
reduce its business with A. B. Dick or any Purchaser Retained Subsidiary.
SECTION 3.24. SUPPLIERS. Section 3.24 of the Disclosure
Schedule lists each supplier from which A. B. Dick and the Purchaser Retained
Subsidiaries purchased at least 10% of the goods and services supplied to A. B.
Dick and the Purchaser Retained Subsidiaries in connection with the Business
during the 12-month period ended March 31, 1996, together with amount of goods
and services purchased by A. B. Dick and the Purchaser Retained Subsidiaries
from each such supplier during that period.
SECTION 3.25. PRODUCT LIABILITY. Except as disclosed on
Section 3.25 of the Disclosure Schedule, no party has made any written, or to
the Knowledge of Seller, oral product liability claim with respect to any actual
or alleged injury to person or property as a result of the ownership, possession
or use of any product sold by A. B. Dick or any Purchaser Retained Subsidiary.
SECTION 3.26. CREDIT TERMS; PRODUCT WARRANTIES. Section 3.26
of the Disclosure Schedule, to the Knowledge of Seller, sets forth all the terms
and conditions of credit greater than "net 30" given to any customer of A. B.
Dick or any Purchaser Retained Subsidiary and all extraordinary discounts given
by A. B. Dick or any Purchaser Retained Subsidiary to their respective
customers. Seller has made available to Purchaser a copy of the standard
warranties and guarantees of A. B. Dick and the Purchaser Retained Subsidiaries
and, to the Knowledge of Seller, any material departures therefrom.
SECTION 3.27. INSURANCE. Section 3.27 of the Disclosure
Schedule sets forth a true, correct and complete list of all insurance policies
and bonds currently maintained in which A. B. Dick or any Purchaser Retained
Subsidiary is named as an insured party, or for which A. B. Dick or any
Purchaser Retained Subsidiary has paid any premiums, and the Disclosure Schedule
correctly states the name of the insurer, type and amount of coverage,
deductible amounts, if any, expiration date and amount of premium paid annually
for each such policy. Except as disclosed on the Disclosure Schedule, all such
policies or bonds are currently in full force and effect and neither A. B. Dick
nor any Purchaser Retained Subsidiary has received during the past year any
notice from any such insurer cancelling or threatening to cancel any such
insurance. A. B. Dick and each Purchaser Retained Subsidiary will continue all
of such insurance in full force and effect up to the Closing (but on and after
the Closing Purchaser shall be responsible for its own insurance for A.B. Dick
and the Purchaser Retained Subsidiaries). All premiums due and payable on such
policies have been paid.
SECTION 3.28. PROJECTIONS. Although management of A. B. Dick
has provided to Purchaser projections for A. B. Dick, Purchaser acknowledges
that such projections and budget information, do not constitute a representation
or warranty by Seller and that such projections and budget information are not
being relied upon by Purchaser.
24
30
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to Seller as follows:
SECTION 4.01. INCORPORATION AND AUTHORITY OF PURCHASER.
Purchaser is a corporation duly organized, validly existing and in good standing
under the laws of its jurisdiction of incorporation and has all necessary
corporate power and authority to enter into this Agreement, the Lease and the
Note, to carry out its obligations hereunder and thereunder and to consummate
the transactions contemplated hereby and thereby. The execution and delivery of
this Agreement, the Lease and the Note by Purchaser, the performance by
Purchaser of its obligations hereunder and thereunder and the consummation by
Purchaser of the transactions contemplated hereby and thereby have been duly
authorized by all requisite corporate action on the part of Purchaser. This
Agreement has been, and the Note and the Lease will be, duly executed and
delivered by Purchaser, and (assuming due authorization, execution and delivery
of this Agreement and the Lease, as applicable, by Seller) constitutes and, with
respect to the Note and the Lease, will constitute legal, valid and binding
obligations of Purchaser enforceable against Purchaser in accordance with their
terms.
SECTION 4.02. NO CONFLICT. Except as may result from any facts
or circumstances relating solely to Seller, the execution, delivery and
performance of this Agreement, the Lease and the Note by Purchaser do not and
will not (a) violate or conflict with the certificate of incorporation or
by-laws (or similar organizational documents) of Purchaser, (b) conflict with or
violate any law, rule, regulation, order, writ, judgment, injunction, decree,
determination or award applicable to Purchaser, or (c) result in any breach of,
or constitute a default (or event which with the giving of notice or lapse of
time, or both, would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or result in the
creation of any lien or other encumbrance on any of the assets or properties of
Purchaser pursuant to, any material note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument relating to
such assets or properties to which Purchaser or any of its subsidiaries is a
party or by which any of such assets or properties is bound or affected, except
as would not, individually or in the aggregate, have a material adverse effect
on the ability of Purchaser to consummate the transactions contemplated by this
Agreement, the Lease and the Note.
SECTION 4.03. CONSENTS AND APPROVALS. The execution and
delivery of this Agreement, the Lease and the Note by Purchaser do not, and the
performance of this Agreement, the Lease and the Note by Purchaser will not,
require any consent, approval, authorization or other action by, or filing with
or notification to, any governmental or regulatory authority, except (a) as
described in a writing delivered to Seller by Purchaser on the date hereof, (b)
the notification requirements of the HSR Act and (c) as may be necessary as a
result of any facts or circumstances relating solely to Seller.
SECTION 4.04. ABSENCE OF LITIGATION. No claim, action,
proceeding or investigation involving Purchaser is pending (or, to the Knowledge
of Purchaser, is threatened) before any court, arbitrator or administrative,
governmental or regulatory authority or body
25
31
which seeks to delay or prevent the consummation of the transactions
contemplated hereby or which would be reasonably likely to materially and
adversely affect or restrict Purchaser's ability to consummate the transactions
contemplated hereby.
SECTION 4.05. BROKERS. No broker, finder or investment banker
is entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of Purchaser or Nesco.
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.01. CONDUCT OF BUSINESS PRIOR TO THE CLOSING. (a)
Unless Purchaser otherwise agrees in writing and except as otherwise set forth
herein or in the Disclosure Schedule (including Section 5.01 thereof), between
the date of this Agreement and the Closing Date, Seller will cause A. B. Dick
and the Purchaser Retained Subsidiaries to (i) conduct the Business only in the
ordinary course and not enter into any transaction that could reasonably be
expected to change materially the amount of accounts receivable, inventory or
accounts payable set forth on the Reference Statement, (ii) preserve
substantially intact the business organization of the Business, (iii) use
reasonable efforts to keep available to Purchaser the services of the present
officers and key employees of A. B. Dick and the Purchaser Retained Subsidiaries
(other than the chief executive officer and chief financial officer of A. B.
Dick and the employees in the legal department of A. B. Dick), which shall not
require the payment of any stay bonus or other amount not payable in the
ordinary course, (iv) use reasonable efforts to preserve the current
relationships of A. B. Dick and the Purchaser Retained Subsidiaries with their
respective customers, suppliers, distributors and other persons with which A. B.
Dick and the Purchaser Retained Subsidiaries have significant business
relationships and (v) use reasonable efforts to preserve, insure and protect the
assets of the Business against loss, theft, damage, destruction, infringement or
other injury.
(b) Except as expressly provided in this Agreement or the
Disclosure Schedule (including Section 5.01 thereof) between the date of this
Agreement and the Closing Date, Seller will cause A. B. Dick and the Purchaser
Retained Subsidiaries not to take any of the actions enumerated in clauses (i)
through (ix) of Section 3.13 without the prior written consent of Purchaser
(which consent, in the case of clauses (i) - (iii) thereof, shall not be
unreasonably withheld and shall be deemed granted if Purchaser fails to respond
to any written request by Seller for consent within three (3) business days of
Purchaser's receipt of any such written request).
SECTION 5.02. CONFIDENTIALITY. The terms regarding
confidentiality and public release of information in the letter agreement dated
as of May 13, 1996 (the "Confidentiality Agreement") are hereby incorporated
herein by reference, shall apply to Purchaser as well as to all the other
parties hereto and shall continue in full force and effect until the Closing, at
which time such Confidentiality Agreement and the obligations of Purchaser under
this Section 5.02 shall terminate; PROVIDED, HOWEVER, that the Confidentiality
Agreement shall terminate only
26
32
in respect of that portion of the Confidential Information (as defined in the
Confidentiality Agreement) exclusively relating to the transactions contemplated
by this Agreement. If this Agreement is, for any reason, terminated prior to the
Closing, the Confidentiality Agreement shall continue in full force and effect.
SECTION 5.03. REGULATORY AND OTHER AUTHORIZATIONS; CONSENTS.
(a) Each party hereto shall use all reasonable efforts as soon as practicable
following the date of this Agreement to obtain all authorizations, consents,
orders and approvals of all federal, state, local and foreign regulatory bodies
and officials that may be or become necessary for its execution and delivery of,
and the performance of its obligations pursuant to, this Agreement and will
cooperate fully with the other party in promptly seeking to obtain all such
authorizations, consents, orders and approvals. Each party hereto has filed a
Notification and Report Form pursuant to the HSR Act with respect to the
transactions contemplated hereby, in response to which the Federal Trade
Commission granted early termination of the waiting period with respect thereto.
The parties hereto will not take any action that will have the effect of
delaying, impairing or impeding the receipt of any required approvals.
Notwithstanding anything to the contrary herein, neither party hereto shall be
required to divest or otherwise impair its rights with respect to any business
or property in order to obtain any such authorization, consent, order or
approval.
(b) Except with respect to the contracts set forth in Section
5.03(b) of the Disclosure Schedule, each party hereto shall use all reasonable
efforts to obtain any other consents and approvals under any contract set forth
in Schedule 3.19 which may be required in connection with its consummation of
the transactions contemplated by this Agreement, and the other party shall
cooperate in those efforts (which cooperation shall not, however, include the
payment of any fee or other amount in order to obtain any such consent).
SECTION 5.04. PRE-CLOSING TRANSFER OF ASSETS. (a) PRE-CLOSING
U.S. ACCOUNTS RECEIVABLE. No later than immediately prior to the Closing, Seller
shall cause A. B. Dick to transfer to Seller or any of its Affiliates the
accounts receivable generated by operations in the United States of the type and
nature included in the account labeled "U.S. Accounts Receivable- net" in the
Reference Statement, outstanding at the close of business on the date
immediately prior to the Closing Date (the "U.S. Accounts Receivable"). From and
after such transfer, the U.S. Accounts Receivable shall belong to Seller or any
such Affiliate. By the Closing Date, A. B. Dick and Seller shall enter into a
transfer agreement with regard to the U.S. Accounts Receivable in the form of
Exhibit 5.04(a).
(b) PRE-CLOSING TRANSFER OF SUBSIDIARIES. Prior to the
Closing, Seller shall cause A. B. Dick to transfer or sell to Seller or any of
its Affiliates all the outstanding capital stock of the following Subsidiaries
that A. B. Dick owns directly or indirectly: A. B. Dick Holland BV, A. B. Dick
(Japan) Ltd., Itek Graphix Pty. Limited (Australia), Scriptomatic, Inc. (USA),
Refac Marketing Services Inc. (USA), Scriptomatic S.A. (Switzerland), Videojet
Systems International, Inc. (USA), Videojet Japan Inc., Videojet GmbH, A. B.
Dick Holdings Limited (UK), Cheshire Mailing Limited (UK), Videojet Limited
(UK), A. B. Dick Limited (UK), and A. B. Dick Co. Pension Trustees (S.A.)
Limited (the "Seller Retained Subsidiaries"). Prior to the Closing, Seller shall
provide Purchaser with a summary of each such transfer, together with copies of
the documents used to effect such transfers. The cost of each transfer shall be
wholly
27
33
borne by Seller or its Affiliate and not charged against the operations of A. B.
Dick or any Purchaser Retained Subsidiary.
(c) PRE-CLOSING TRANSFER OF NILES FACILITY. Prior to the
Closing Seller shall cause A. B. Dick to transfer to Seller or any of its
Affiliates A. B. Dick's entire ownership interest in the Niles Facility. All
items of personal property shall remain assets of A. B. Dick, except as set
forth in Section 5.04(c) of the Disclosure Schedule. As an express undertaking
related to the transfer of the real property, Seller or its Affiliate shall
assume direct liability for all liabilities relative to the real property, in
any way, including but not limited to any liability arising under Environmental
Law, real property taxes and assessments, insurance, maintenance, repairs,
capital expenditures, utilities and other direct or indirect, fixed or
contingent, known or unknown, liabilities associated therewith, subject to the
Lease and to this Agreement. Prior to the transfer of the real property Seller
shall keep Purchaser informed as to the steps to be taken and documents to be
used to effect this transfer. The cost and expenses of the transfer shall be
wholly borne by Seller or its Affiliate and not charged against the operations
of A. B. Dick or any Purchaser Retained Subsidiary.
(d) PRE-CLOSING TRANSFER OF OTHER ASSETS. Prior to the Closing
Seller shall cause A. B. Dick to transfer to Seller or its Affiliates the assets
described in Section 5.04(d) of the Disclosure Schedule.
(e) TAX LIQUIDATION PLAN. Purchaser acknowledges that A. B.
Dick will adopt a plan of liquidation for the purposes of Section 332 of the
Code (and the analogous provisions of state and local tax law) only, such plan
to be effective on or before the Closing Date, and A. B. Dick will distribute
the certain assets described in this Section 5.04 to Seller in pursuance of such
plan before the Closing.
(f) POST-CLOSING RETURN OF RECORDS. To the extent after the
Closing that A.B. Dick has physical possession of records relating to the
business of Seller or its Affiliates, Purchaser shall, upon Seller's request,
cause A.B. Dick to return to Seller, or provide Seller, after receipt of
reasonable notice, with reasonable access during normal business hours to, such
records. To the extent after the Closing that Seller has physical possession of
records relating to the business of A. B. Dick or any Purchaser Retained
Subsidiary, Seller shall, upon Purchaser's request, return to Purchaser, or
provide Purchaser, after receipt of reasonable notice, with reasonable access
during normal business hours to such records.
SECTION 5.05. U.S. ACCOUNTS RECEIVABLE. (a) ADJUSTMENT.
Promptly after the Closing, Purchaser shall cause A.B. Dick to deliver to Seller
a list of the U.S. Accounts Receivable transferred in accordance with Section
5.04(a), including the book value thereof at the close of business on the day
immediately prior to the Closing Date and any accounting provision for bad or
doubtful accounts in existence at such time relative thereto. Purchaser shall
also cause A.B. Dick to provide Seller access to the supporting documentation
for the U.S. Accounts Receivable and to preserve such documentation for Seller.
If the aggregate book value of all U.S. Accounts Receivable
transferred to Seller or its Affiliate, less any accounting provision for bad or
doubtful accounts in existence at such time, is less than $20,000,000 at
Closing, then at the end of 30 days following the delivery of
28
34
the list referred to above, Purchaser shall pay to Seller a lump sum in cash
equal to the difference of such amounts. If the aggregate book value of all U.S.
Accounts Receivable transferred to Seller or its Affiliate, less any accounting
provision for bad or doubtful accounts in existence at the open of business on
the Closing Date, is more than $20,000,000, then at the end of 30 days from the
Closing, Seller shall pay to A. B. Dick a lump sum in cash equal to the
difference of such amounts. The amount of any accounting provision for bad or
doubtful accounts shall reflect prior practices and experience and shall be
reasonable and if disputed shall be resolved as part of the Final Working
Capital arbitration provided for in Section 2.02(c).
(b) COLLECTION. Purchaser shall cause A. B. Dick to use the
reasonable efforts of A. B. Dick to collect in good faith the U.S. Accounts
Receivable on behalf and as agent of Seller as described in this paragraph,
through its usual, customary and commercially reasonable collection practices,
and Seller shall reimburse Purchaser for any out-of-pocket expenses incurred by
A.B. Dick in connection therewith upon its invoice. The U.S. Accounts Receivable
shall be collected on a FIFO basis relative to other accounts receivable of A.B.
Dick of the relevant obligor (unless otherwise specified in writing by such
obligor, which A.B. Dick shall not take any action to cause). Until the U. S.
Accounts Receivable have been collected in full or such earlier time agreed to
by the parties hereto, the mail of A. B. Dick shall be opened every business day
together by a representative of A. B. Dick and a representative of Seller. Any
mail received over a weekend or on a holiday will be opened by such
representatives on the following business day. The representatives will also
review a list of collections received under any lockbox arrangement and instruct
the lockbox agent to disburse such collections in accordance with the provisions
of this Agreement. Purchaser shall cause checks received each day by A. B. Dick
representing payment for U. S. Accounts Receivable to be endorsed by the A. B.
Dick representative to Seller and as so endorsed to be given to Seller at the
time the mail is so opened each day. Purchaser shall cause funds received each
day by A. B. Dick in any lockbox account of A. B. Dick representing payment for
U.S. Accounts Receivable to be transferred by the lockbox agent to Seller no
later than the third business day after such funds are received; provided,
however, that any such funds that ultimately do not constitute collected funds
shall either be returned by Seller to Purchaser or offset against obligations of
Purchaser under this Section 5.05(b). If a check or collection from a customer
contains amounts remitted to both Seller and A. B. Dick pursuant to the terms of
this Agreement, A. B. Dick shall remit to Seller the amount owed to Seller on
the business day on which such amount shall constitute collected funds. If a
customer specifically designates a payment to be applied to an invoice already
deemed paid under the FIFO method, the FIFO method shall be applied with respect
to such payment without regard to such designation by the customer. All payments
to Seller hereunder shall be without deduction, counterclaim or offset of any
kind. A. B. Dick shall only institute third-party collection activity (i.e., via
lawsuits or collection agency), upon written instruction and approval of Seller
and all out-of-pocket expense for such third-party collection activity shall be
borne by Seller. Seller shall not, either directly or indirectly, through its
agents, take extraordinary collection action which would injure the customer
relationship between A. B. Dick and any U.S. Accounts Receivable customer. For
the purpose hereof, extraordinary collection activity shall refer to the
collection practices more severe than those customarily undertaken by A. B. Dick
prior to the Closing, it being understood that those customarily undertaken by
A.B. Dick prior to the Closing include utilizing collection agencies and
bringing lawsuits. In the event Seller does bring any suit in accordance with
the foregoing, A.B. Dick shall not thereafter be required to continue any
collection action against the relevant obligor hereunder.
29
35
SECTION 5.06. RELOCATION COST REIMBURSEMENT. Seller or any of
its Affiliates will pay to Purchaser, against submission of invoices therefor,
up to $2,000,000 of expenses actually incurred by Purchaser or A.B. Dick in
connection with moving out of the Niles Facility and in connection with making
leasehold improvements in and moving into a replacement facility. All such
invoices submitted shall be paid by Seller or any of its Affiliates to A.B. Dick
within 10 days of receipt by Seller; provided, however, that in no event shall
Seller or any of its Affiliates be obligated to reimburse such costs in an
amount exceeding $2,000,000. Purchaser and Seller agree to treat any amounts
paid by Seller pursuant to this Section 5.06 as an adjustment to the
consideration for the Shares paid pursuant to Section 2.02 for all Tax purposes.
SECTION 5.07. INTRA-COMPANY ACCOUNTS. At the time of Closing,
Seller will cause A. B. Dick and the Purchaser Retained Subsidiaries to pay or
otherwise satisfy all debts or accounts payable from A. B. Dick and the
Purchaser Retained Subsidiaries to Seller or any Affiliate, including those
debts or accounts payable which arise in the ordinary course of business from
the purchase by A. B. Dick or the Purchaser Retained Subsidiaries of goods and
services from Seller or any of its Affiliates.
SECTION 5.08A. U.S. PENSION PLANS. (a) Prior to Closing,
Seller shall take any and all actions necessary to cause each of the following
to occur, as applicable, with respect to each A. B. Dick Pension Plan:
(i) Remove A. B. Dick as the contributing sponsor, as defined
in section 4001(a)(13) of ERISA, the plan sponsor, as defined in
section 3(16)(B) of ERISA, and the plan administrator, as defined in
section 3(16)(A) of ERISA and section 414(g) of the Internal Revenue
Code; and
(ii) In the case of all participants employed by A. B. Dick on
the Closing Date, vest said participants in their full accrued benefits
under each A. B. Dick Pension Plan and terminate all future benefit
accruals.
A.B. Dick shall continue to maintain, and shall be solely responsible and liable
for, the A.B. Dick Company Executive Share Unit Plan, the A.B. Dick Company
Executive Compensation Plan, and the A.B. Dick Company Contingent Compensation
Plan after the Closing Date, with such plans being continued only as frozen
plans, without new benefit accruals, to distribute previously earned benefits.
(b) With respect to all A. B. Dick Pension Plans that are
defined benefit pension plans and are or were maintained by A. B. Dick at any
time prior to the Closing, Seller shall indemnify Purchaser, A. B. Dick, the
Purchaser Retained Subsidiaries and their respective Affiliates against, and
hold them harmless from, any liability for any future benefits, and any costs or
expenses related to any claims for future benefits, of all such employees,
former employees and beneficiaries who establish their entitlement to such
benefits pursuant to such plans at any time, whether before or after the
Closing.
(c) As soon as practicable following the Closing Date,
Purchaser shall cause A. B. Dick to establish a defined contribution pension
plan, as described in section 3(34) of ERISA,
30
36
that satisfies the requirements of sections 401(a) and 401(k) of the Internal
Revenue Code. The terms of such plan shall be determined exclusively by
Purchaser, provided that such plan shall accept rollover contributions from the
GEC-USA Employees' Savings and Investment Plan (the "GEC Savings Plan"). Except
as provided in this Section 5.08A(c) or otherwise expressly determined by
Purchaser, on and after the Closing Date, A. B. Dick shall not maintain or
contribute to any pension plan, within the meaning of section 3(2) of ERISA, or
other retirement program or deferred compensation arrangement. A. B. Dick and
Purchaser shall be solely responsible and liable for any plan established by A.
B. Dick or Purchaser on or after the Closing, and Seller shall have no liability
whatsoever with respect to any such plan. Purchaser shall, and shall cause A. B.
Dick to, indemnify Seller and its Affiliates against, and hold them harmless
from, any liability related to any such plan established by A. B. Dick or
Purchaser.
SECTION 5.08B. NON-U.S. PENSION PLANS. (a) Seller shall take
any and all actions necessary to cease participation by the U. K. Subsidiary in
The GEC Plan and Selected Benefit Scheme and The GEC 1992 Savings-Related Share
Option Scheme (the "U.K. Pension Schemes"), effective as of the Closing Date or
as soon as practicable thereafter. The UK Subsidiary and Purchaser shall take
any necessary actions requested by Seller to effect the cessation of the UK
Subsidiary's participation in the U.K. Pension Schemes.
(b) As soon as practicable after the Closing Date, Seller
shall take any and all actions necessary to "wind up" (terminate) the A.B. Dick
Company of Canada, Ltd. Pension Plan (the "Canadian Pension Plan"). All
participants employed by A.B. Dick Company of Canada, Ltd. (the "Canadian
Subsidiary") on the Closing Date shall be fully vested in their full accrued
benefits under the Canadian Pension Plan. The Canadian Subsidiary and Purchaser
shall take any necessary actions requested by Seller to wind up the Canadian
Pension Plan. Prior to the wind up of the Canadian Pension Plan, the Canadian
Subsidiary and Purchaser shall not take any actions to modify the Canadian
Pension Plan, unless agreed to in writing by Seller. The Canadian Subsidiary,
Purchaser, and/or the Affiliates of Purchaser shall have no right to, or
interest in, the assets of the Canadian Pension Plan. Any assets of the Canadian
Pension Plan that revert to the Canadian Subsidiary, Purchaser, an Affiliate of
Purchaser, Seller, or an Affiliate of Seller shall belong solely to Seller and
its Affiliates. Purchaser shall, or shall cause the Canadian Subsidiary to,
promptly pay to Seller or an Affiliate of Seller an amount equal to any
reversion received by the Canadian Subsidiary, Purchaser, or an Affiliate of
Purchaser from the Canadian Pension Plan, less an amount equal to all taxes
payable by the Canadian Subsidiary, Purchaser, or any Affiliate of Purchaser
which are attributable to the reversion. Purchaser and the Canadian Subsidiary
shall cooperate with Seller and its Affiliates in any negotiations with
employees of the Canadian Subsidiary concerning the Canadian Pension Plan.
(c) A.B. Dick, S.A. shall retain the A.B. Dick, S.A. Pension
Plan (the "Belgian Pension Plan") after the Closing Date.
(d) With respect to any and all A. B. Dick Non-U.S. Pension
Plans, other than the Belgian Pension Plan, that are or were maintained by each
Purchaser Retained Subsidiary at any time prior to the Closing, Seller shall
indemnify each Purchaser Retained Subsidiary, A. B. Dick, Purchaser and their
respective Affiliates against, and hold them harmless from, the following:
31
37
(i) Any liability for any future benefits, and any costs or
expenses related to any claims for future benefits, of all such
employees, former employees and beneficiaries who establish their
entitlement to such benefits pursuant to such plans at any time,
whether before or after the Closing; and
(ii) Any liability, costs or expenses relating to completing
the actions described in Sections 5.08B(a) and 5.08B(b) above.
SECTION 5.09A. U.S. WELFARE PLANS AND OTHER BENEFIT PLANS. (a)
Prior to Closing, Seller shall take any and all actions necessary to relieve A.
B. Dick and Purchaser from any future or past liability or responsibility
whatsoever for providing any type of retiree medical benefit coverage for
employees or former employees of A. B. Dick (and their beneficiaries) in the
United States (any and all such benefits hereinafter are referred to as "retiree
medical benefits") under all A. B. Dick Benefit Plans providing retiree medical
benefits at any time prior to the Closing (including benefits described in
Section 5.09A(b)). With respect to all A. B. Dick Benefit Plans providing
retiree medical benefits for employees (and their beneficiaries) in the United
States at any time prior to the Closing (including benefits described in Section
5.09A(b)), Seller shall remain liable for future benefits, and any costs or
expenses related to any claims for future benefits, of all such employees,
former employees and beneficiaries who establish their entitlement to such
benefits pursuant to such plans at any time, whether before or after the
Closing. After the Closing, A. B. Dick and Purchaser shall not have any
liability or responsibility whatsoever with respect to any such retiree medical
benefits, unless such benefits arise under a plan established or maintained by
Purchaser after the Closing Date; and Purchaser shall, and shall cause A. B.
Dick to, indemnify Seller and its Affiliates against, and hold them harmless
from, any liability related to any such plan established or maintained by A. B.
Dick or Purchaser. Nothing in this Agreement shall limit any right Seller and
its Affiliates otherwise may have to amend or terminate, in whole or in part,
the retiree medical benefits provided under the GEC-USA Employees' Welfare
Benefit Plan (or any other plan or arrangement maintained by Seller or its
Affiliates at any time).
(b) Seller shall continue to offer retiree medical benefits to
employees of A. B. Dick (and their beneficiaries) in the United States on the
Closing Date whose employment by A. B. Dick terminates permanently and who meet
the eligibility requirements for such benefits during the six month period
following the Closing. Such retiree medical benefits shall be offered under the
same terms and conditions applicable on the date of this Agreement except that
(i) an additional two years shall be added to the age and years of service of
each such employee at the time of his termination of employment (provided that
such termination occurs within the six month period following the Closing) to
determine his eligibility for retiree medical benefits and his share of the cost
of such benefits, and (ii) such employee shall be entitled to receive retiree
medical benefits notwithstanding his receipt of severance pay from A. B. Dick.
The retiree medical benefits described in this Section 5.09A(b) shall be
provided exclusively by Seller or an Affiliate of Seller under a benefit plan
sponsored and administered by Seller or an Affiliate of Seller and shall not be,
nor be deemed to be, provided by A. B. Dick or Purchaser or a benefit plan of A.
B. Dick or Purchaser. The provisions of Sections 5.09A(a) and 8.05 shall be
fully applicable to the retiree medical benefits described in this Section
5.09A(b).
32
38
(c) A. B. Dick shall retain the A. B. Dick Welfare Plans
listed in Schedule 5.09A(c), but Seller shall cause any and all other A. B. Dick
Welfare Plans, or A. B. Dick's participation thereunder, to be terminated
immediately prior to, or as of, the Closing Date without any liability, cost or
expense to A. B. Dick or Purchaser. After the Closing, A. B. Dick and Purchaser
shall be solely responsible and liable for the A. B. Dick Welfare Plans listed
in Section 5.09A(c) of the Disclosure Schedule, and Seller shall have no
liability whatsoever with respect to such plans after the Closing; and Purchaser
shall, and shall cause A. B. Dick to, indemnify Seller and its Affiliates
against, and hold them harmless from, any liability related to such plans or any
benefits arising under such plans, whether the claim for liability or benefits
arose before or after the Closing. Except as provided in Section 5.09A(c) of the
Disclosure Schedule, each A. B. Dick Welfare Plan listed in Section 5.09A(c) of
the Disclosure Schedule reserves to A. B. Dick the right to amend or terminate
such plan.
(d) Employees of A. B. Dick shall continue to participate in
the GEC-USA Employees' Welfare Benefit Plan (the "GEC Welfare Plan") through
midnight of the Closing Date, at which time coverage under the GEC Welfare Plan
shall cease for employees of A. B. Dick and their eligible dependents.
(e) Effective as of 12:01 a.m. immediately following the
Closing Date, A. B. Dick (or Purchaser for employees of A. B. Dick) shall
establish such new employee welfare benefit plans (as defined in section 3(1) of
ERISA) as it may desire; provided, however, that A. B. Dick (or Purchaser for
employees of A. B. Dick) shall, effective as of 12:01 a.m. immediately following
the Closing Date, establish a group health plan (as defined in section 607(1) of
ERISA) for active employees of A. B. Dick, which plan shall waive any
pre-existing conditions and evidence of insurability requirements with respect
to employees of A. B. Dick (and, if applicable, count total service with A. B.
Dick both before and after the Closing for eligibility purposes), except for
such pre-existing conditions and evidence of insurability requirements as are
contained in the GEC Welfare Plan on the Closing Date which could have been
imposed had coverage under the GEC Welfare Plan continued. A. B. Dick and
Purchaser shall be solely responsible and liable for such employee welfare
benefit plans, and Seller shall have no liability whatsoever with respect to
such plans; and Purchaser shall, and shall cause A. B. Dick to, indemnify Seller
and its Affiliates against, and hold them harmless from, any liability related
to any such plans established or maintained by A. B. Dick or Purchaser.
SECTION 5.09B. NON-U.S. WELFARE PLANS AND OTHER BENEFIT PLANS.
(a) Prior to Closing, Seller shall take any and all actions necessary to relieve
each Purchaser Retained Subsidiary, A. B. Dick and Purchaser from any future or
past liability or responsibility whatsoever for providing any type of retiree
medical benefit coverage for employees or former employees of each Purchaser
Retained Subsidiary (and their beneficiaries) (any and all such benefits
hereinafter are referred to as "retiree medical benefits") under all A. B. Dick
Non-U.S. Benefit Plans providing retiree medical benefits at any time prior to
the Closing. With respect to all A. B. Dick Non-U.S. Benefit Plans providing
retiree medical benefits for employees (and their beneficiaries) at any time
prior to the Closing, Seller shall remain liable for future benefits, and any
costs or expenses related to any claims for future benefits, of all such
employees, former employees and beneficiaries who establish their entitlement to
such benefits pursuant to such plans at any time, whether before or after the
Closing. After the Closing, the Purchaser Retained Subsidiaries, A. B. Dick and
Purchaser shall not have any liability or responsibility
33
39
whatsoever with respect to any such retiree medical benefits, unless such
benefits arise under a plan established or maintained by the Purchaser Retained
Subsidiaries after the Closing Date; and Purchaser shall, and shall cause the
Purchaser Retained Subsidiaries to, indemnify Seller and its Affiliates against,
and hold them harmless from, any liability related to any such plan established
or maintained by the Purchaser Retained Subsidiaries or Purchaser. Nothing in
this Agreement shall limit any right Seller and its Affiliates otherwise may
have to amend or terminate, in whole or in part, the retiree medical benefits
described in this Section 5.09B(a)
(b) Intentionally omitted.
(c) The Purchaser Retained Subsidiaries shall retain the A. B.
Dick Non-U.S. Welfare Plans listed in Section 5.09B(c) of the Disclosure
Schedule, but Seller shall cause any and all other A.B. Dick Non-U.S. Welfare
Plans, or the Purchaser Retained Subsidiaries' participation thereunder, to be
terminated immediately prior to, or as of, the Closing Date without any
liability, cost or expense to the Purchaser Retained Subsidiaries or Purchaser.
After the Closing, the Purchaser Retained Subsidiaries and Purchaser shall be
solely responsible and liable for the A.B. Dick Non-U.S. Welfare Plans listed in
Section 5.09B(c) of the Disclosure Schedule, except that, in the case of any
benefits which are self-insured, Seller shall be liable for the run-out of all
claims and expenses incurred prior to the Closing, and Seller shall have no
other liability whatsoever with respect to such plans after the Closing; and the
Purchaser shall, and shall cause the Purchaser Retained Subsidiaries to,
indemnify Seller and its Affiliates against, and hold them harmless from, any
liability related to such plans or any benefits arising under such plans,
whether the claim for liability or benefits arose before or after the Closing
(but, in the case of any benefits which are self-insured, excluding liability
for the run-out of all claims and expenses incurred prior to the Closing).
Except as provided in Section 5.09B(c) of the Disclosure Schedule, each A.B.
Dick Non-U.S. Welfare Plan listed in Section 5.09B(c) of the Disclosure Schedule
reserves to each Purchaser Retained Subsidiary the right to amend or terminate
such plan.
SECTION 5.10. SEVERANCE ALLOWANCE. At the time of Closing,
Seller shall cause a cash account of A. B. Dick to have cash of $1,500,000.00 to
reimburse Purchaser and A. B. Dick for post-Closing Date severance liabilities
related to A. B. Dick's and the Purchaser Retained Subsidiaries' employees.
SECTION 5.11. ADDITIONAL AGREEMENTS.
(a) At the time of Closing, Seller will cause A.B. Dick
Holland BV, subject to written confirmation by Purchaser, to execute (i) a
distributor agreement in the form as provided on Exhibit 5.11(a)(i), and to
serve as a distributor in the Netherlands of A. B. Dick in the territories
designated therein and (ii) a manufacturing, warehousing and shipping services
agreement (the "Manufacturing Agreement"). Seller and Purchaser agree to
negotiate in good faith prior to the Closing with respect to the terms of the
Manufacturing Agreement.
(b) At the time of Closing, Seller will cause Itek Graphix
Pty. Limited, subject to written confirmation by Purchaser, to execute a
distributor agreement in the form as provided on Exhibit 5.11(b), and to serve
as a distributor in Australia of A. B. Dick in the territories designated
therein.
34
40
(c) At the time of Closing, Seller will cause Videojet Systems
International Inc. ("Videojet") to execute a distributor agreement in the form
as provided on Exhibit 5.11(c) pursuant to which A.B. Dick Company of Canada
Ltd. will become a distributor of Videojet products and services.
(d) At the time of Closing, Seller will cause Videojet to
execute a capsule ink supply agreement with A. B. Dick in the form as provided
on Exhibit 5.11(d).
(e) Walter Seiler is an employee on the payroll of G. E. C.
France S. A. who has been regularly assigned to work for the UK Subsidiary. Mr.
Seiler is scheduled to retire in April, 1997 and to continue to receive salary
until June, 1997. Purchaser agrees to reimburse Seller or Seller's appropriate
Affiliate on demand for the compensation and benefit expenses incurred directly
for Mr. Seiler through June, 1997.
(f) Willem van Sanbliet is an employee on the payroll of A. B.
Dick Holland BV who has been regularly assigned to work for A. B. Dick in its
DeMeern operations. Such assignment described in the foregoing sentence shall
terminate no later than six (6) months following the Closing. Until other
suitable arrangements are agreed upon between the parties, Purchaser will, or
will cause A. B. Dick to, reimburse Seller or Seller's appropriate Affiliate on
demand for the compensation and benefit expenses incurred directly for Mr.
Sanbliet. Such suitable arrangements shall include payments of compensation,
duties and benefits comparable to Mr. Sanbliet's current arrangements.
SECTION 5.12. ENVIRONMENTAL PERMIT TRANSFERS. Seller agrees to
cooperate reasonably with Purchaser in transferring any transferable, existing
Environmental Permits to A. B. Dick or Purchaser.
SECTION 5.13. FURTHER ACTION. Each of the parties hereto shall
execute and deliver such documents and other papers and take such further
actions as may be reasonably required to carry out the provisions hereof and
give effect to the transactions contemplated hereby.
SECTION 5.14. ACCOUNTS RECEIVABLE. Except as otherwise
provided in this Agreement, from the date of this Agreement through the Closing
Date, no accounts receivable of A. B. Dick will be converted to notes
receivable, written off (except against already established reserves) or, except
in the ordinary course, otherwise extended, without the prior written consent of
Purchaser.
SECTION 5.15. TAX SHARING AGREEMENT. The tax sharing
arrangement between A.B. Dick and Seller shall be terminated as of the Closing
and all amounts payable thereunder shall be cancelled in full.
SECTION 5.16. PRE-CLOSING CLAIMS BY A.B. DICK. All recoveries
or reimbursements received by A.B. Dick or any of the Purchaser Retained
Subsidiaries after the Closing in respect of claims made prior to Closing by any
of them from any governmental authorities in respect of any environmental
matters or under insurance policies in respect of any matters shall belong to
Seller, except to the extent included in Final Working Capital or set-off
35
41
from any indemnity owed by Seller hereunder. Accordingly and subject to the
preceding sentence, upon receipt by Purchaser, A.B. Dick or any Purchaser
Retained Subsidiary of any such recoveries or reimbursements, they shall
immediately be paid over in full to Seller. Purchaser shall cause A.B. Dick to
cooperate with reasonable requests by Seller to assist it in obtaining such
recoveries and reimbursements.
SECTION 5.17. GEC PLC GUARANTEE. The General Electric Company
plc ("GEC plc") shall at the Closing execute and deliver to Purchaser a
guarantee in the form of Exhibit 5.17.
SECTION 5.18. 3500 INVENTORY. (a) With respect to the 3500
Inventory, Purchaser shall cause A. B. Dick to pay to Seller after the Closing
50% of all gross proceeds actually received by A. B. Dick or its Affiliates as
collected funds (net of any sales or transfer taxes) after the Closing in
connection with the sales, rental or lease of any 3500 Inventory; provided,
however, that such obligation to make payments shall cease and Purchaser and A.
B. Dick shall not be obligated to make any further payments under this Section
5.18 at such time that Seller has received in the aggregate an amount in respect
of such payments equal to the Final 3500 Inventory.
(b) If any negative adjustment (the"Negative Adjustment") is
made from the amount originally proposed by Seller as the Final 3500 Inventory
pursuant to Section 2.02(c) and Purchaser has made payments pursuant to Section
5.18(a) which in the aggregate are equal to Final 3500 Inventory as adjusted,
Purchaser shall pay to Seller 25% of any additional gross proceeds actually
received by A.B. Dick or its Affiliates as collected funds (net of any sales or
transfer taxes) in connection with the sales of 3500 Inventory; provided,
however, that such obligation to make payments shall cease and Purchaser and
A.B. Dick shall not be obligated to make any further payments under this Section
5.18(b) at such time that Seller has received in the aggregate an amount in
respect of such payments equal to the Negative Adjustment.
(c) The payments described in this Section 5.18 shall be made
by A. B. Dick to Seller within two (2) business days after any such proceeds are
received by A. B. Dick as collected funds. Until such time as Seller has
received an amount equal to the amount originally proposed by Seller as the
amount of the Final 3500 Inventory, it shall have the right to audit from time
to time, at its sole cost and expense during normal business hours upon
reasonable notice, the books and records of A. B. Dick and the Purchaser
Retained Subsidiaries relating to the sales, rentals or leases of 3500
Inventory. Purchaser and Seller agree to treat any amounts paid by Seller
pursuant to this Section 5.18 as an adjustment to the consideration for the
Shares paid pursuant to Section 2.02 for all Tax purposes. The gross proceeds
derived from any rental agreement or lease shall be reduced by the amount of any
financing charges and service charges provided for in such rental agreement or
lease. If a rental agreement or lease does not specify the amount of the
applicable financing charges, the gross proceeds shall be reduced by an amount
equal to the financing charge for a comparable agreement.
36
42
ARTICLE VI
TAX MATTERS
SECTION 6.01. TAX INDEMNITIES. (a) From and after the Closing
Date, Seller shall indemnify Purchaser and its Affiliates, without gross-up for
Taxes, against and hold them harmless from all Taxes (i) imposed on Seller, the
Seller Retained Subsidiaries or any Affiliate with which Seller files a
consolidated or combined income tax return (other than A. B. Dick or any
Purchaser Retained Subsidiary) with respect to any taxable period that ends on,
before or after the Closing Date, (ii) imposed on A. B. Dick or any of the
Purchaser Retained Subsidiaries with respect to any taxable period that ends on
or before the Closing Date, and, in the case of any taxable period beginning
before (but not ending on or before) the Closing Date, any Taxes of A. B. Dick
or any Purchaser Retained Subsidiary that are allocable, pursuant to Section
6.01(d), to the portion of such period ending on the Closing Date, (iii) imposed
as a result of the Section 338 Elections (as defined in Section 6.05(a)), (iv)
imposed as a result of the liquidating distributions made by A. B. Dick pursuant
to Section 5.04 of this Agreement, and (v) imposed on the UK Subsidiary under
Section 179 Taxation of Chargeable Gains Act 1992 of the United Kingdom;
provided, however, that Seller shall have no obligation to make any payment
pursuant to this Section 6.01 until the aggregate amount of claims arising
pursuant hereto exceeds the Tax Basket (defined below), in which case Purchaser
and its Affiliates shall be entitled to indemnity for the amount of such claim
in excess of the Tax Basket and all claims made thereafter. From and after the
Closing Date, Seller shall indemnify Purchaser and its Affiliates against and
hold them harmless from all reasonable costs and expenses (including reasonable
attorneys' and consultants' fees) incurred by Purchaser or any of its Affiliates
in connection with enforcing their rights under this Article VI. Estimated Taxes
paid by or on behalf of A. B. Dick or any Purchaser Retained Subsidiary on or
prior to the Closing Date shall be credited to Taxes with respect to the
Pre-Closing Tax Period. "Tax Basket" means the reserve for Taxes included in the
calculation of Final Working Capital.
(b) From and after the Closing Date, Purchaser and A. B. Dick
shall indemnify Seller and its Affiliates, without gross-up for Taxes, against
and hold them harmless from all Taxes imposed on or with respect to A. B. Dick
or any of its Purchaser Retained Subsidiaries that are not subject to
indemnification pursuant to paragraph (a) of this Section 6.01, including, but
not limited to, Taxes resulting from any transaction of A. B. Dick or any of its
Purchaser Retained Subsidiaries occurring on the Closing Date but after the
Closing. From and after the Closing Date, Purchaser and A. B. Dick agree to
indemnify Seller and its Affiliates against and hold them harmless from all
costs and expenses (including reasonable attorneys' and consultants' fees)
incurred by Seller or any of its Affiliates in connection with enforcing their
rights under this Article VI.
(c) Payment by the indemnitor of any amount due under this
Section 6.01 shall be made within ten Business Days following written notice by
the indemnitee that payment of such amounts to the appropriate tax authority is
due, provided that the indemnitor shall not be required to make any payment
earlier than two Business Days (or, in the case of non-US Taxes, five (5)
Business Days) before it is due to the appropriate tax authority. If Seller
receives an assessment or other notice of Tax due with respect to A. B. Dick or
any of its Subsidiaries for any period ending on or before the Closing Date for
which Seller is not responsible, in whole
37
43
or in part, pursuant to paragraph (a) of this Section 6.01, because all or a
part of such Tax does not exceed the amount reserved for Taxes in the books and
records of A. B. Dick and its Subsidiaries as of the Closing Date or otherwise,
and Seller pays such Tax, then Purchaser or A. B. Dick shall pay to Seller, in
accordance with the first sentence of this Section 6.01(c), the amount of such
Tax for which Seller is not responsible. In the case of a Tax that is contested
in accordance with the provisions of Section 6.03, payment of the Tax to the
appropriate tax authority will not be considered to be due earlier than the date
a final determination to such effect is made by the appropriate taxing authority
or a court unless such payment is necessary to contest such Tax.
(d) For purposes of this Agreement, in the case of any Tax
that is imposed on a periodic basis and is payable for a period that begins
before the Closing Date and ends after the Closing Date, the portion of such
Taxes payable for the period ending on the Closing Date shall be (i) in the case
of any Tax other than a Tax based upon or measured by income, the amount of such
Tax for the entire period multiplied by a fraction, the numerator of which is
the number of days in the period ending on the Closing Date and the denominator
of which is the number of days in the entire period and (ii) in the case of any
Tax based upon or measured by income, the amount which would be payable if the
taxable year ended on the Closing Date. Any credit shall be prorated based upon
the fraction employed in clause (i) of the preceding sentence. In the case of
any Tax based upon or measured by capital (including net worth or long-term
debt) or intangibles, any amount thereof required to be allocated under this
Section 6.01(d) shall be computed by reference to the level of such items on the
Closing Date.
(e) Purchaser covenants that without the prior consent of
Seller, it will not and will not cause or permit A. B. Dick, the Purchaser
Retained Subsidiaries, or any Affiliate of Purchaser, to (i) take any action on
the Closing Date, other than in the ordinary course of business or pursuant to
the Section 338 Elections that results in any increased Tax liability or
reduction of any Tax Asset of Seller or its Affiliates or indemnification
obligation of Seller under Section 6.01 of this Agreement, or (ii) make or
change any Tax election, amend any Tax return or take any position on any Tax
return, or take any other action (other than in the ordinary course of business
or pursuant to the Section 338 Elections) that results in any increased Tax
liability or reduction of any Tax Asset of Seller or any of its Affiliates.
Purchaser agrees that Seller and Seller's Affiliates are to have no liability
for Taxes resulting from any action referred to in the preceding sentence, and
agrees to indemnify and hold harmless the Seller and its Affiliates against such
Tax or reduction of Tax Asset.
(f) Seller covenants that without the prior written consent of
Purchaser, Seller will not take and will not cause or permit any Affiliate of
Seller to take any action on the Closing Date, other than any action in the
ordinary course of business or pursuant to the Section 338 Elections, that
results in any increased Tax liability or reduction of any Tax Asset of
Purchaser, A. B. Dick or their respective Affiliates. Seller agrees that
Purchaser, A. B. Dick and their respective Affiliates are to have no liability
for Taxes resulting from any action referred to in the preceding sentence and
agrees to indemnify and hold harmless Purchaser, A. B. Dick and their respective
Affiliates against any such Tax or reduction of Tax Asset.
(g) Seller will indemnify Purchaser against and hold it
harmless from (i) any liability of the UK Subsidiary to repay the whole or any
part of any payment received for group
38
44
relief under Sections 402-413 Income and Corporation Taxes Act 1988 and (ii) any
non-receipt of any payment for group relief included in the calculation of Final
Working Capital.
(h) Seller will indemnify Purchaser against and hold it
harmless from any United Kingdom Tax or Value Added Tax liability of the UK
Subsidiary which is properly attributable to Seller or any Seller Retained
Subsidiary.
(i) Purchaser hereby covenants with Seller to pay to Seller,
by way of adjustment to the consideration for the sale of the Shares, an amount
equal to any Tax for which Seller or any other person falling within section
767A(2) of the Income and Corporation Taxes Act 1988 (Taxes Act) becomes liable
by virtue of the operation of section 767A and 767B of the Taxes Act in
circumstances where the taxpayer company (as referred to in section 767A (1)) is
the U.K. Subsidiary.
(j) The covenant contained in Section 6.02(i) shall:
(i) extend to any reasonable out-of-pocket costs
incurred by the Seller or such other person
in connection with such Tax or a claim under
Section 6.02(i);
(ii) not apply to Tax which has been recovered
under section 767B(2) of the Taxes Act or
any other relevant statutory provision (and
the Seller shall procure that no such
recovery is sought to the extent that
payment is made hereunder)
(iii) apply only to a Tax described in Section
6.02(i) with respect to which Purchaser is
not entitled to make a claim for indemnity
under Article VI.
SECTION 6.02. REFUNDS AND TAX BENEFITS. Purchaser shall
promptly pay to Seller any refund or credit (including any interest paid or
credited with respect thereto) received by A. B. Dick or any of its Subsidiaries
of Taxes (i) relating to Pre-Closing Tax Periods or (ii) attributable to an
amount paid by Seller under Section 6.01 hereof. Purchaser shall, if Seller so
requests and at Seller's expense, cause the relevant entity to file for and
obtain any refund to which Seller is entitled under this Section 6.02. Purchaser
shall permit Seller to control (at Seller's expense) the prosecution of any such
refund claimed, and shall cause the relevant entity to authorize by appropriate
power of attorney such persons as Seller shall designate to represent such
entity with respect to such refund claimed. In the event that any refund or
credit of Taxes for which a payment has been made pursuant to this Section 6.02
is subsequently reduced or disallowed, Seller shall indemnify and hold harmless
the payor for any Tax liability, including interest and penalties, assessed
against such payor by reason of the reduction or disallowance.
SECTION 6.03. CONTESTS. (a) After the Closing, Purchaser shall
promptly notify Seller in writing of the commencement of any Tax audit or
administrative or judicial proceeding or of any demand or claim on A. B. Dick
which, if determined adversely to the taxpayer or after the lapse of time, would
be grounds for indemnification under Section 6.01. Such notice shall contain
factual information (to the extent known to A. B. Dick) describing the
39
45
asserted Tax liability in reasonable detail and shall include copies of any
notice or other document received from any taxing authority in respect of any
such asserted Tax liability. If Purchaser fails to give Seller prompt notice of
an asserted Tax liability as required by this Section 6.03, then (i) if Seller
is precluded by the failure to give prompt notice from contesting the asserted
Tax liability in both the administrative and judicial forums, Seller shall not
have any obligation to indemnify for any Loss arising out of such asserted Tax
liability, and (ii) if Seller is not so precluded from contesting but such
failure to give prompt notice results in a detriment to Seller, any amount which
Seller is otherwise required to pay Purchaser pursuant to Section 6.01 with
respect to such liability shall be reduced by the amount of such detriment.
(b) Seller may elect to control, through counsel of its own
choosing and at its own expense, any audit, claim for refund and administrative
or judicial proceeding involving any asserted liability with respect to which
indemnity may be sought under Section 6.01 (any such audit, claim for refund or
proceeding relating to an asserted Tax liability is referred to herein as a
"Contest"). If Seller elects to control a Contest, it shall, within 30 calendar
days of receipt of the notice of asserted Tax liability, notify Purchaser of its
intent to do so, and Purchaser shall cooperate and shall cause its Affiliates to
cooperate, at the expense of Seller, in each phase of such Contest. If Seller
elects not to control the Contest, fails to notify Purchaser of its election as
herein provided or contests its obligation to indemnify under Section 6.01,
Purchaser or A. B. Dick may pay, compromise or contest, at its own expense, such
asserted liability. However, in such case, neither Purchaser nor A. B. Dick may
settle or compromise any asserted liability over the objection of Seller;
PROVIDED, HOWEVER, that consent to settlement or compromise shall not be
unreasonably withheld or delayed. In any event, Seller may participate, at its
own expense, in the Contest. If Seller chooses to control the Contest, Purchaser
shall promptly empower and shall cause its Affiliates promptly to empower (by
power of attorney and such other documentation as may be appropriate) such
representatives of Seller as it may designate to represent Purchaser, A. B. Dick
any Purchaser Retained Subsidiary or any of their Affiliates in the Contest
insofar as the Contest involves an asserted Tax liability for which Seller would
be liable under Section 6.01.
SECTION 6.04. PREPARATION OF TAX RETURNS. Seller shall prepare
and file (a) United States federal, state and local income and franchise tax
returns and schedules relating to A. B. Dick and its Subsidiaries for any Tax
period ending on or prior to the Closing Date and which are required to be filed
after the Closing Date, and (b) any United Kingdom or Belgian tax returns for
taxable periods ending on or prior to March 31, 1996. With respect to any
returns for which Seller has filing responsibility pursuant to the preceding
sentence, A. B. Dick and its Subsidiaries will be included in the consolidated,
combined or unitary tax returns of Seller or an Affiliate of Seller on a basis
consistent with prior tax years unless a different treatment is required by an
intervening change in law. The parties agree that if A. B. Dick or any of its
Subsidiaries is permitted, but not required, under applicable state or local
income or franchise tax laws to treat the Closing Date as the last day of a Tax
period, they will treat the Tax period as ending on the Closing Date. Seller
shall prepare and file all other returns of Taxes for any period ending on or
prior to the Closing Date to the extent Seller or an Affiliate of Seller (other
than A. B. Dick or any of the Purchaser Retained Subsidiaries) previously was
responsible for the preparation and filing of such returns for the immediately
preceding Tax period. Purchaser shall prepare or cause to be prepared all
returns of Taxes for A. B. Dick and the Purchaser Retained Subsidiaries for
which Seller is not responsible pursuant to this Section
40
46
6.04 (the "Purchaser Returns"). Such Purchaser Returns shall, to the extent they
include any Pre-Closing Tax Period, (i) be prepared on a basis consistent with
those prepared for prior tax years, including depreciation methods and other
accounting methods which may be elected or adopted annually, unless a different
treatment of any item is required by an intervening change in law and (ii) shall
be submitted by Purchaser to Seller (together with schedules, statements and, to
the extent requested by Seller, supporting documentation) at least 40 days prior
to the due date (including extensions) for filing. If Seller objects to any item
on such Purchaser Return, it shall, within 10 days after delivery of such
Return, notify Purchaser in writing that it so objects, specifying with
particularity any such item and stating the specific factual or legal basis for
any such objection. If a notice of objection shall be duly delivered, Purchaser
and Seller shall negotiate in good faith and use their best efforts to resolve
such items. If Purchaser and Seller are unable to reach such agreement within 5
days after receipt by Purchaser of such notice, the disputed items shall be
resolved by a nationally recognized accounting firm with no material
relationship with Purchaser, Seller or their Affiliates (the "Accounting
Referee"), chosen and mutually acceptable to both Purchaser and Seller within
five days of the date on which the need to choose the Accounting Referee arises.
The Accounting Referee shall resolve any disputed items within 20 days of having
the item referred to it pursuant to such procedures as it may require. The
costs, fees and expenses of the Accounting Referee shall be borne equally by
Purchaser and Seller. Purchaser will deliver to Seller a complete and accurate
copy of each return required to be filed by Purchaser, A. B. Dick or any
Purchaser Retained Subsidiary under this Section 6.04 for Tax periods that
include the Closing Date, and any amendment to such return, within 10 Business
Days of the date such return is filed with the appropriate tax agency.
SECTION 6.05. SECTION 338(h)(10) ELECTION. (a) The parties
agree that in connection with the sale contemplated hereby, the parties shall
cause an express election pursuant to Section 338(h)(10) of the Internal Revenue
Code and any similar elections under any applicable state or local income tax
laws to be made for A. B. Dick and Itek Graphix Corporation (the "Section 338
Elections"), and shall comply with the rules and regulations applicable to the
Section 338 Elections.
(b) For purposes of executing the Section 338 Elections, on or
prior to the Closing Date, Purchaser and Seller (and other entities as
necessary) jointly shall execute four copies (three for Purchaser and one for
Seller) of IRS Form 8023 and all attachments required to be filed therewith
pursuant to applicable Treasury regulations and any other forms required to be
filed under state or local law with respect to Section 338 Elections. The forms
relating to the Section 338 Elections for federal, state and local Tax purposes
hereinafter shall be referred to as the "Forms". The Forms shall be filed with
the appropriate tax authorities not earlier than 90 days before the latest date
for the filing thereof. As soon as practicable, but not later than 30 days
following Seller's calculation of Final Working Capital, Seller shall submit to
Purchaser any necessary corrections, amendments or supplements (the
"Adjustments") to such Form and the attachments thereto, as executed by
Purchaser and Seller (and other entities as necessary) on or before the Closing
Date. Seller's Adjustments shall be binding on the parties hereto unless
Purchaser shall deliver to Seller notice in writing of an objection to any item
within 30 days following Purchaser's receipt of such calculations. In the event
of such a dispute, Purchaser and Seller shall negotiate in good faith among
themselves for a period of 15 Business Days in an attempt to resolve such
dispute. If no resolution is reached within such
41
47
period, Purchaser and Seller shall submit such disputed items to KPMG Peat
Marwick within two Business Days after the end of that period and the decision
of such accounting firm shall be given within 30 days thereafter and will be
conclusive and binding on the parties. Purchaser and Seller will each pay one
half of the fees and expenses charged by KPMG Peat Marwick in connection
therewith. The fees and expenses of the accounting firm shall be shared equally
between Purchaser and Seller. In any event, however, the Forms must be filed on
or before their due date.
(c) For purposes of making the Section 338 Elections, Section
6.05 of the Disclosure Schedule shall set forth an allocation of Purchaser's
"adjusted grossed-up basis" in the shares of A. B. Dick and the Purchaser
Retained Subsidiaries (within the meaning of the Treasury regulations under
Section 338 of the Internal Revenue Code) to the classes of tangible and
intangible assets of A. B. Dick and the Purchaser Retained Subsidiaries as of
the Closing Date as required by Form 8023-A (the "Allocation"). The Allocation
shall be modified to reflect an Adjustment made pursuant to Section 6.05(b)
above. The Allocation shall be binding upon Purchaser and Seller for purposes of
allocating the "deemed selling price" (within the meaning of the Treasury
regulations) among the assets of A. B. Dick and its Subsidiaries. Neither party
shall file any Tax return, or take a position with a Tax authority, that is
inconsistent with the Allocation. The parties also agree to use reasonable
efforts prior to Closing to agree to an allocation of purchase price with
respect to each asset deemed purchased, and if such an agreement is reached,
such allocation shall be treated as an Allocation for purposes of this
Agreement.
SECTION 6.06. COOPERATION AND EXCHANGE OF INFORMATION. Seller
and Purchaser will provide each other with such cooperation and information as
either of them reasonably may request of another in filing any Tax return,
amended return or claim for refund, determining a liability for Taxes or a right
to a refund of Taxes or participating in or conducting any audit or other
proceeding in respect of Taxes. Such cooperation and information shall include
providing copies of relevant Tax returns or portions thereof, together with
accompanying schedules and related work papers and documents relating to rulings
or other determinations by taxing authorities. Each party shall make its
employees available on a mutually convenient basis to provide explanations of
any documents or information provided hereunder. Each party will retain all
returns, schedules and work papers and all material records or other documents
relating to Tax matters of A. B. Dick and the Purchaser Retained Subsidiaries
for its taxable period first ending after the Closing Date and for all prior
taxable periods until the later of (a) the expiration of the statute of
limitations of the taxable periods to which such returns and other documents
relate, without regard to extensions except to the extent notified by another
party in writing of such extensions for the respective Tax periods, or (b) six
years following the due date (without extension) for such returns. Any
information obtained under this Section 6.06 shall be kept confidential, except
as may be otherwise necessary in connection with the filing of returns or claims
for refund or in conducting an audit or other proceeding.
SECTION 6.07. CONVEYANCE TAXES. Purchaser agrees to assume
liability for and to pay all sales, transfer, stamp, real property transfer and
similar Taxes incurred as a result of the sale of the Shares contemplated
hereby. In addition, Purchaser agrees to indemnify Seller and its Affiliates for
any and all Losses incurred by Seller and its Affiliates arising out of
Purchaser's failure to make timely or full payments of such Taxes.
42
48
SECTION 6.08. MISCELLANEOUS. (a) The parties agree to treat
all payments made under this Article VI or Article VIII as adjustments to the
purchase price for Tax purposes.
(b) Except as expressly provided otherwise, this Article VI
shall be the sole provision governing Tax matters and indemnities therefor under
this Agreement.
ARTICLE VII
CONDITIONS TO CLOSING
SECTION 7.01. CONDITIONS TO OBLIGATIONS OF SELLER. The
obligations of Seller to consummate the transactions contemplated by this
Agreement shall be subject to the fulfillment or waiver, at or prior to the
Closing, of each of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES; COVENANTS. The
representations and warranties of Purchaser contained in this Agreement
shall be true and correct in all material respects as of the Closing,
with the same force and effect as if made as of the Closing, other than
such representations and warranties as are made as of another date, and
the covenants contained in this Agreement to be complied with by
Purchaser on or before the Closing shall have been complied with in all
material respects, and Seller shall have received a certificate of
Purchaser to such effect signed by a duly authorized officer thereof;
(b) NO ORDER. No United States, state or foreign governmental
authority or other agency or commission or United States, state or
foreign court of competent jurisdiction shall have enacted, issued,
promulgated, enforced or entered any statute, rule, regulation,
injunction or other order which is in effect and has the effect of
making the transactions contemplated by this Agreement illegal or
otherwise restraining or prohibiting consummation of such transactions,
and the parties hereto shall use all reasonable efforts to have any
such order or injunction entered prior to the Closing vacated;
(c) RESOLUTIONS. Seller shall have received a true and
complete copy, certified by the Secretary or an Assistant Secretary of
Purchaser, of the resolutions duly and validly adopted by the board of
directors of Purchaser evidencing its authorization of the execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby;
(d) INCUMBENCY CERTIFICATE. Seller shall have received a
certificate of the Secretary or an Assistant Secretary of Purchaser
certifying the names and signatures of the officers of Purchaser
authorized to sign this Agreement and the other documents to be
delivered hereunder; and
43
49
(e) LEGAL OPINION. Seller shall have received a legal opinion,
addressed to Seller and dated the Closing Date, substantially in the
form of Exhibit 7.01(e).
SECTION 7.02. CONDITIONS TO OBLIGATIONS OF PURCHASER. The
obligation of Purchaser to consummate the transactions contemplated by this
Agreement shall be subject to the fulfillment or waiver, at or prior to the
Closing, of each of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES; COVENANTS. The
representations and warranties of Seller contained in this Agreement
shall be true and correct in all material respects as of the Closing,
with the same force and effect as if made as of the Closing, other than
such representations and warranties as are made as of another date and
except for any such failures to be true and correct that would not be
reasonably expected to have a material adverse effect individually or
in the aggregate on the Business, each material covenant contained in
this Agreement to be complied with by Seller on or before the Closing
shall have been complied with in all material respects (with respect to
this Section 7.02(a) the covenants listed in Section 9.01(b) of the
Disclosure Schedule shall be deemed to be immaterial covenants and all
other covenants to be complied with hereunder shall be deemed to be
material), and Purchaser shall have received a certificate of Seller to
such effect signed by a duly authorized officer thereof; provided,
however, that Purchaser shall be entitled to indemnification after the
Closing pursuant to Section 8.03(a)(i) with respect to any
representation or warranty of Seller that is not true and accurate in
all respects at the Closing and with respect to any representation or
warranty of Seller that is not true and accurate in all respects as if
any such representation or warranty were made by Seller as of the
Closing Date;
(b) MATERIAL ADVERSE CHANGE. Subsequent to the date hereof,
there shall not have occurred and be continuing any act, event or
condition which is reasonably likely to prevent or impair the ability
of the Business to be conducted in substantially the same manner as
conducted immediately before the Closing.
(c) NO ORDER. No United States, state or foreign governmental
authority or other agency or commission or United States, state or
foreign court of competent jurisdiction shall have enacted, issued,
promulgated, enforced or entered any statute, rule, regulation,
injunction or other order which is in effect and has the effect of
making the transactions contemplated by this Agreement illegal or
otherwise restraining or prohibiting consummation of such transactions,
and the parties hereto shall use all reasonable efforts to have any
such order or injunction entered prior to the Closing vacated;
(d) NILES LEASE. Seller or its Affiliate and A. B. Dick shall
have executed and delivered a real property lease for the Niles
Facility in the form attached hereto as Exhibit 7.02(d) (the "Lease").
(e) RESIGNATIONS. Each director (other than those remaining
with A. B. Dick or such subsidiary after Closing) of A. B. Dick and
the Purchaser Retained Subsidiary shall have resigned effective as
of the Closing Date;
44
50
(f) RESOLUTIONS. Purchaser shall have received a true and
complete copy, certified by the Secretary or an Assistant Secretary of
Seller, of the resolutions duly and validly adopted by the board of
directors of Seller evidencing its authorization of the execution and
delivery of this Agreement and the consummation of the transactions
contemplated hereby;
(g) INCUMBENCY CERTIFICATE. Purchaser shall have received a
certificate of the Secretary or an Assistant Secretary of Seller
certifying the names and signatures of the officers of Seller
authorized to sign this Agreement and the other documents to be
delivered hereunder;
(h) LEGAL OPINION. Purchaser shall have received legal
opinions, addressed to Purchaser and dated the Closing Date,
substantially in the forms of Exhibit 7.02(h)(i) and Exhibit
7.02(h)(ii);
(i) ASSUMPTION AGREEMENT. Seller shall have executed and
delivered to Purchaser an assumption agreement in the form of
Exhibit 7.02(i) hereto (the "Assumption Agreement");
(j) NOMINEE SHARES. Any nominee shares in any Purchaser
Retained Subsidiary shall have been transferred, without any additional
consideration, to Purchaser or its nominee; and
(k) RELEASE OF LIENS. All liens, encumbrances and charges
against A. B. Dick, any Purchaser Retained Subsidiary or the Real
Property relating only to the Excluded Liabilities shall have been
released.
(l) GEC PLC GUARANTEE. GEC plc shall have delivered to
Purchaser the guarantee described in Section 5.17.
(m) MANUFACTURING AGREEMENT. A.B. Dick Holland BV shall have
executed and delivered to Purchaser the Manufacturing Agreement in a
form reasonably satisfactory to Purchaser.
Purchaser's obligations hereunder are not subject to any third party financing.
ARTICLE VIII
INDEMNIFICATION
SECTION 8.01. SURVIVAL. Subject to the limitations and other
provisions of this Agreement and subject to Sections 8.04 and 8.05, (a) the
representations and warranties of the parties hereto contained herein shall
survive the Closing and shall remain in full force and effect, regardless of any
investigation made by or on behalf of Seller or Purchaser until March 31, 1998
(other than the representations and warranties contained in Section 3.14,
Section 3.17 and Section 3.18 which shall survive the closing in full force and
effect and shall be governed by
45
51
Article VI, Section 8.04 and Section 8.05, respectively) and (b) each covenant
and agreement of each party hereto (including its indemnification obligations
other than those based upon its representations and warranties) shall survive
the Closing and shall remain in full force and effect, in each case regardless
of any investigation made by or on behalf of any party hereto for a period equal
to the specific statute of limitations period applicable to that covenant or
agreement, if any, and if there is no limitation and in any case with respect to
clause (iii) of Section 8.02(a) and clause (iii) of Section 8.03(a), then such
indemnification shall survive indefinitely.
SECTION 8.02. INDEMNIFICATION BY PURCHASER. (a) Purchaser
agrees, subject to the other terms and conditions of this Agreement and without
gross-up for Taxes, to indemnify Seller and its Affiliates against and hold it
harmless from all Losses arising out of (i) the breach of any representation or
warranty of Purchaser herein (other than any covered by Article VI), (ii) the
breach of any covenant or agreement of Purchaser herein (other than any covered
by Article VI), and (iii) the Designated Liabilities. Anything in Section 8.01
to the contrary notwithstanding, no claim may be asserted nor may any action be
commenced against Purchaser pursuant to Section 8.02(a)(i) or 8.02(a)(ii) for
breach of any representation, warranty, covenant or agreement contained herein,
unless written notice of such claim or action is received by Purchaser
describing in detail the facts and circumstances with respect to the subject
matter of such claim or action on or prior to the date on which the
representation, warranty, covenant or agreement on which such claim or action is
based ceases to survive as set forth in Section 8.01. Anything in this Agreement
to the contrary notwithstanding, any failure by Seller or any of its Affiliates
to notify Purchaser or any of its Affiliates of any claim, action or Loss in
connection with or relating to Purchaser's obligations pursuant to Section
8.02(a)(iii) shall in no way relieve or otherwise affect Purchaser's obligations
under such Sections.
(b) The indemnification obligations of Purchaser pursuant to
Section 8.02(a)(i) shall not be effective until the aggregate dollar amount of
all Losses which would otherwise be indemnifiable pursuant to Section 8.02(a)(i)
exceeds $250,000 (the "Purchaser's Threshold Amount"), and then only to the
extent such aggregate amount exceeds Purchaser's Threshold Amount and,
notwithstanding anything to the contrary, such indemnification obligations
pursuant to clause (i) of Section 8.02(a) of Purchaser shall be limited to
$15,000,000. All other indemnities of Purchaser in this Agreement shall be
effective without regard to the threshold or cap described in this Section
8.02(b). For the purposes of this Section 8.02 and any other indemnity by
Purchaser under this Agreement, and for the purposes of computing such
individual or aggregate amounts of claims, the amount of each claim shall be
deemed to be an amount net of any insurance proceeds and any indemnity,
contribution or other similar payments actually received by Seller, and Seller
shall reimburse Purchaser for the amount of any additional insurance proceeds
and any additional indemnity, contribution or other similar payment recovered by
Seller or any of its Affiliates from any third party, after deducting
out-of-pocket expenses incurred by Seller or its Affiliates to obtain such
recovery, with respect to any such claim for which Purchaser has been
indemnified by Seller. For any Loss indemnifiable by Purchaser under this
Agreement that is subject to insurance or other indemnity, contribution or other
similar payment from a third party, Purchaser will lend to the indemnified party
hereunder the amount covered by such insurance or other indemnity, contribution
or similar payment, and Seller will use reasonable efforts to collect such
amounts from the relevant third party, it being understood that such insurance,
indemnity, contribution or similar payment is primary and that
46
52
Purchaser's indemnities under this Agreement are secondary. Any such
reimbursement in connection with any claim shall not exceed the amount received
by Purchaser from Seller in connection with Seller's indemnity for that claim.
(c) Seller, at its sole cost and expense, agrees to give
Purchaser written notice of any claim, assertion, event or proceeding by or in
respect of a third party as to which it may request indemnification under this
Agreement or as to which Purchaser's Threshold Amount may be applied as soon as
is practicable and in any event within 30 days of the time that Seller learns of
such claim, assertion, event or proceeding; PROVIDED, HOWEVER, that the failure
to so notify Purchaser shall not affect rights to indemnification hereunder
except to the extent that Purchaser demonstrates that it is actually prejudiced
by such failure. If Purchaser acknowledges in writing its obligations to
indemnify an indemnified person under Section 8.02(a) against any Loss that may
result from any such claim or proceeding, Purchaser shall be entitled to assume
and control, through counsel of its own choosing, the defense or settlement of
any such claim or proceeding at its own expense. If Purchaser elects to assume
the defense of any such claim or proceeding, Seller may participate in such
defense, but in such case the expenses of Seller and its counsel shall be paid
by Seller. Seller shall provide Purchaser with access to its records and
personnel relating to any such claim, assertion, event or proceeding during
normal business hours and shall otherwise cooperate with Purchaser in the
defense or settlement thereof, and Purchaser shall reimburse Seller for all its
reasonable out-of-pocket expenses in connection therewith. If Purchaser elects
to direct the defense of any claim or proceeding pursuant to this Section,
Seller shall not pay, or permit to be paid, or settle or admit any liability
with respect to any part of any claim or demand arising from such asserted
liability, unless Purchaser consents in writing to such payment or unless
Purchaser, subject to the last sentence of this Section 8.02(c), withdraws from
the defense of such asserted liability, or unless a final judgment from which no
appeal may be taken by or on behalf of Purchaser is entered against Seller for
such liability. If Purchaser shall fail to defend, or if, after commencing or
undertaking any such defense, Purchaser fails to prosecute or withdraws from
such defense, Seller shall have the right to undertake the defense or settlement
thereof, at Purchaser's expense. If Seller assumes the defense of any such claim
or proceeding pursuant to this Section 8.02(c) and proposes to settle such claim
or proceeding prior to a final judgment thereon or to forego appeal with respect
thereto, then Seller shall give Purchaser prompt written notice thereof and
Purchaser shall have the right to participate in and approve the settlement or
assume or reassume the defense of such claim or proceeding.
(d) Except as set forth in this Agreement, Purchaser is not
making any representation, warranty, covenant or agreement with respect to the
matters contained herein. Notwithstanding anything to the contrary contained in
this Agreement, no breach of any representation, warranty, covenant or agreement
contained herein shall give rise to any right on the part of Seller, after the
consummation of the purchase and sale of the Shares contemplated by this
Agreement, to rescind this Agreement or any of the transactions contemplated
hereby.
(e) Notwithstanding anything to the contrary contained in this
Agreement, Purchaser shall have no liability under any provision of this
Agreement for and in no event shall Purchaser's Threshold Amount be applied to
any Losses to the extent that such Losses result from or arise out of actions
taken by Seller, the Seller Retained Subsidiaries or their respective Affiliates
after the Closing Date.
47
53
(f) With respect to any claim for indemnity that may be
asserted under Section 8.02(a)(iii) or Sections 8.02(a)(i) or (ii), any such
claim may be asserted first under Section 8.02(a)(iii), and to the extent that
Section 8.02(a)(iii) does not apply to the whole of such claim, the remainder of
such claim may be asserted under Sections 8.02(a)(i) or (ii).
(g) In no event shall Purchaser be obligated to indemnify
Seller or any other Person with respect to any Excluded Liability. Nothing in
this Section 8.02(g) shall be construed to limit Purchaser's obligations to
indemnify Seller and its Affiliates for any Designated Liabilities in accordance
with the terms of this Agreement.
SECTION 8.03. INDEMNIFICATION BY SELLER. (a) Seller agrees,
subject to the other terms and conditions of this Agreement and the Assumption
Agreement, and without grossup for Taxes, to indemnify Purchaser, A. B. Dick,
the Purchaser Retained Subsidiaries and their respective Affiliates against and
hold them harmless from all Losses arising out of (i) the breach of any
representation or warranty of Seller herein (other than representations and
warranties contained in Section 3.14, Section 3.17 and Section 3.18 which shall
be governed by Article VI, Section 8.04 and Section 8.05, respectively, it being
understood that Article VI, Section 8.04 and Section 8.05 constitutes the sole
treatment of the matters addressed therein), (ii) the breach of any covenant or
agreement of Seller herein (other than Article VI, it being understood as
aforesaid), (iii) any action taken by any landlord under any of the leases
identified in Section 3.16 of the Disclosure Schedule as a result of or in
connection with the failure by Seller for any reason to obtain the consent of
any party to any of such leases required in connection with or as a result of
the execution of this Agreement by Seller or the consummation of the
transactions contemplated by this Agreement, but only to the extent that any
such action by any such landlord is not instigated by Purchaser or its
Affiliates, and (iv) the Excluded Liabilities. Anything in Section 8.01 to the
contrary notwithstanding, no claim may be asserted nor any action commenced
against Seller pursuant to Section 8.03(a)(i) or 8.03(a)(ii) for any
representation, warranty, covenant or agreement contained herein, unless written
notice of such claim or action is received by Seller describing in detail the
facts and circumstances with respect to the subject matter of such claim or
action on or prior to the date on which the representation, warranty, covenant
or agreement on which such claim or action is based ceases to survive as set
forth in Section 8.01, irrespective of whether the subject matter of such claim
or action shall have occurred before or after such date. Anything in this
Agreement to the contrary notwithstanding, any failure by Purchaser or any of
its Affiliates to notify Seller or any of its Affiliates of any claim, action or
Loss in connection with or relating to Seller's obligations pursuant to Section
8.03(a)(iii) or Section 8.03(a)(iv) shall in no way relieve or otherwise affect
Seller's obligations under such Sections.
(b) The indemnification obligations of Seller pursuant to
clause (i) of Section 8.03(a) shall not be effective until the aggregate dollar
amount of all Losses which would otherwise be indemnifiable pursuant to this
Section 8.03 exceeds $250,000 (the "Seller's Threshold Amount"), and then only
to the extent such aggregate amount exceeds Seller's Threshold Amount and,
notwithstanding anything to the contrary, such indemnification obligations
pursuant to clause (i) of Section 8.03(a) of Seller shall be limited to
$15,000,000 in the aggregate. All other indemnities of Seller in this Agreement
shall be effective without regard to the threshold or cap described in this
Section 8.03(b). For the purposes of this Section 8.03 and any other indemnity
by Seller under this Agreement, and for the purposes of computing such
48
54
individual or aggregate amounts of claims, the amount of each claim shall be
deemed to be an amount net of any insurance proceeds and any indemnity,
contribution or other similar payments actually received by Purchaser, and
Purchaser shall reimburse Seller for the amount of any additional insurance
proceeds and any additional indemnity, contribution or other similar payments
recovered by Purchaser or any of its Affiliates from any third party, after
deducting out-of-pocket expenses incurred by Purchaser or its Affiliates to
obtain such recovery, with respect to any such claim for which Purchaser has
been indemnified by Seller. Any such reimbursement in connection with any claim
shall be limited to the amount received by Purchaser from Seller in connection
with Seller's indemnity for that claim. For any Loss indemnifiable by Seller
under this Agreement that is subject to insurance or other indemnity,
contribution or other similar payment from a third party, Seller will lend to
the indemnified party hereunder the amount covered by such insurance or other
indemnity, contribution or similar payment, and Purchaser will cause A. B. Dick
to use reasonable efforts to collect such amounts from the relevant third party,
it being understood that such insurance, indemnity, contribution or similar
payment is primary and that Seller's indemnities under this Agreement are
secondary.
(c) In no event shall Seller be obligated to indemnify
Purchaser or any other Person with respect to any Designated Liability. Nothing
in this Section 8.03(c) shall be construed to limit Seller's obligations to
indemnify Purchaser and its Affiliates for any Excluded Liabilities in
accordance with the terms of this Agreement.
(d) Seller shall promptly assume and control the defense of
any claim or proceeding by or in respect of a third party as to which Purchaser
is entitled indemnification under Section 8.03(a)(iv). Purchaser agrees to give
Seller written notice of any claim, assertion, event or proceeding by or in
respect of a third party as to which it may request indemnification under
Sections 8.03(a)(i), (ii) or (iii) or as to which Seller's Threshold Amount may
be applied as soon as is practicable and in any event within 30 days of the time
that Purchaser learns of such claim, assertion, event or proceeding; PROVIDED,
HOWEVER, that the failure to so notify Seller shall not affect rights to
indemnification hereunder except to the extent that Seller demonstrates that it
is actually prejudiced by such failure. Purchaser agrees to give Seller written
notice of any claim, assertion, event or proceeding by or in respect to a third
party as to which it may request indemnification under Section 8.03(a)(iv) as
soon as is practicable and in any event within 30 days of the time Purchaser
learns of such claim, assertion, event or proceeding; provided, however, that
the failure to so notify Seller shall not affect rights to indemnification
hereunder. If Seller acknowledges in writing its obligations to indemnify an
indemnified person under Sections 8.03(a)(i), (ii) or (iii) against any Loss
that may result from any such claim or proceeding, Seller shall be entitled to
assume and control, through counsel of its own choosing, the defense or
settlement of any such claim or proceeding at its own expense. Purchaser may
participate in any defense assumed by Seller, but in such case the expenses of
Purchaser shall be paid by Purchaser. Purchaser shall provide Seller with access
to its records and personnel relating to any such claim, assertion, event or
proceeding during normal business hours and shall otherwise cooperate with
Seller in the defense or settlement thereof, and Seller shall reimburse
Purchaser for all its reasonable out-of-pocket expenses in connection therewith.
If Seller elects to direct the defense of any such claim or proceeding,
Purchaser shall not pay, or permit to be paid, or settle or admit any liability
with respect to any part of any claim or demand arising from such asserted
liability unless Seller consents in writing to such payment or unless Seller,
49
55
subject to the last sentence of this Section 8.03(d), withdraws from the defense
of such asserted liability or unless a final judgment from which no appeal may
be taken by or on behalf of Seller is entered against Purchaser for such
liability. If Seller shall fail to defend, or, if after commencing or
undertaking any such defense, fail to prosecute or withdraws from such defense,
Purchaser shall have the right to undertake the defense or settlement thereof,
at Seller's expense. If Purchaser assumes the defense of any such claim or
proceeding pursuant to this Section 8.03(d) and proposes to settle such claim or
proceeding prior to a final judgment thereon or to forego any appeal with
respect thereto, then Purchaser shall give Seller prompt written notice thereof
and Seller shall have the right to participate in and approve the settlement or
assume or reassume the defense of such claim or proceeding.
(e) Except as set forth in this Agreement, Seller is not
making any representation, warranty, covenant or agreement with respect to the
matters contained herein. Anything herein to the contrary notwithstanding, no
breach of any representation, warranty, covenant or agreement contained herein
shall give rise to any right on the part of Purchaser, after the consummation of
the purchase and sale of the Shares contemplated hereby, to rescind this
Agreement or any of the transactions contemplated hereby.
(f) Notwithstanding anything to the contrary contained in this
Agreement, Seller shall have no liability under Section 8.03(a)(i) and (ii) for
and in no event shall Seller's Threshold Amount be applied to any Losses to the
extent that such Losses result from or arise out of actions taken by A. B. Dick,
any Purchaser Retained Subsidiary, or their respective Affiliates after the
Closing Date or by Purchaser or its Affiliates.
(g) With respect to any claim for indemnity that may be
asserted under either Section 8.03(a)(iv) or Sections 8.03(a)(i), (ii) or (iii),
any such claim may be asserted first under Section 8.03(a)(iv), and to the
extent that Section 8.03(a)(iv) does not apply to the whole of such claim, the
remainder of such claim may be asserted under Sections 8.03(a)(i), (ii) or
(iii).
(h) In the event that Seller is required to indemnify
Purchaser or its Affiliates pursuant to clause (i) of Section 8.03(a) as it
relates to Section 3.07 on the basis that the Company's Financial Data
overstates the 3500 Inventory included therein, the Working Capital adjustments
made pursuant to clause (i) of Section 2.02(b) shall be retroactively
recalculated by deducting the amount of such overstatement from the Reference
Working Capital; provided, however, that the amount of such retroactive
adjustment shall not exceed the amount which Seller is required to pay to
Purchaser and its Affiliates for such indemnification. A payment in the amount
of such retroactive adjustment shall be made by Purchaser to Seller and such
payment shall be offset against the amount for which Seller is required to
indemnify Purchaser as described in the first sentence of this paragraph. For
purposes of this paragraph only, any such indemnity not payable by Seller due to
the Seller's Threshold Amount shall, to such extent, nonetheless be deemed to
have been paid to Purchaser.
SECTION 8.04. ENVIRONMENTAL INDEMNIFICATION. (a) Subject to
the limitations set forth below in Section 8.04(b), from and after the Closing
Date, Seller shall indemnify and hold harmless Purchaser, A. B. Dick, the
Purchaser Retained Subsidiaries and their respective Affiliates from all Losses
and Consequential Damages arising out of: (i) any Hazardous Substance present
in, on, under or above any real property owned, leased, occupied or used by
50
56
A. B. Dick or any Purchaser Retained Subsidiary at any time prior to the Closing
or any personal property located or used thereat, arising out of actions or
conditions occurring or existing prior to, at or after the Closing; (ii) any
claims by any governmental or regulatory authority or third party in connection
with any violation of or noncompliance with or other liability arising under any
Environmental Laws or Environmental Permits relating to A. B. Dick or any
Purchaser Retained Subsidiary prior to the Closing; (iii) the breach of any
representation or warranty of Seller in Section 3.17; (iv) the matters disclosed
in Section 3.17 of the Disclosure Schedule; and (v) all liabilities and
obligations in connection with any sites to which any Hazardous Substance was
transported or at which any Hazardous Substance migrated, was disposed or
arrangements were made for transportation to or disposal at such sites of any
Hazardous Substances from any location operated by A. B. Dick or any Purchaser
Retained Subsidiaries prior to the Closing, including any such sites previously
owned, leased, occupied or used by Seller in the conduct of the Business (any of
the matters addressed in clauses (i), (ii), (iii), (iv) or (v) of this Section
8.04(a) and clauses (i), (ii) or (iii) of Section 8.04(e) are collectively
"Environmental Losses"). Seller's obligations under this Section 8.04 shall be
without limitation as to time or amount.
(b) Notwithstanding anything to the contrary in this
Agreement, Seller's obligations under this Section 8.04 shall be subject to the
following provisions:
(i) With respect to the Real Property (other than the
Unoccupied Leased Properties), Seller's obligations under this Section
8.04 shall only apply to Environmental Losses arising out of actions or
conditions occurring or existing prior to Closing, but only to the
extent that Seller receives notice from an indemnified party within
three (3) years after the Closing Date of any such Environment Loss or
any such action, omission or condition that may result in an
Environmental Loss. It shall be presumed that (A) any Environmental
Loss of which Seller receives notice pursuant to the preceding sentence
arises out of actions or conditions occurring or existing prior to the
Closing Date absent a showing by Seller by a preponderance of the
evidence that such Environmental Loss relates solely to actions of
Purchaser, its Affiliates or any other third party after the Closing
Date and (B) any condition of which Seller receives notice pursuant to
the preceding sentence was in existence prior to the Closing Date
absent a showing by Seller by a preponderance of the evidence that such
condition relates solely to actions of Purchaser, its Affiliates or any
other third party after this Closing Date.
(ii) Subject to the requirement of notice and the presumption
described in clause (b)(i) above, with respect to any Hazardous
Substance present in, on, under or above the Real Property (other than
the Unoccupied Lease Properties), Seller's obligations under Section
8.04(a)(i) shall only apply to Environmental Losses arising out of the
investigation, sampling, monitoring, treatment, remediation, removal,
closure, corrective action, control (including by virtue of the
installation of pollution control equipment) or cleanup ("Remedial
Activities") of any Hazardous Substance present in, on, under or above
any Real Property (other than any Unoccupied Leased Property) or any
personal property located or used thereat, arising out of actions,
omissions or conditions occurring or existing prior to the Closing
Date, to the extent that those Remedial Activities are (A) required by
any governmental or regulatory authorities under any Environmental Law
or Environmental Permit, or (B) necessary and appropriate in
51
57
connection with necessary excavation, maintenance, repair, replacement,
building expansion or reconstruction when done in the ordinary course
of business by A. B. Dick and the Purchaser Retained Subsidiaries after
the Closing. With respect to the Real Property (other than the
Unoccupied Leased Properties), Seller's obligations under Section
8.04(a)(i) shall not include the cost of Remedial Activities which are
required under any applicable Environmental Law because of a material
change by A. B. Dick or any Purchaser Retained Subsidiary on or after
the Closing in the nature of the use of the Real Property (other than
the Unoccupied Leased Properties) from the use thereof at the time of
the Closing.
(iii) With respect to the Niles Facility, Seller's obligations
under this Section 8.04 shall apply to all Environmental Losses arising
out of actions or conditions occurring or existing prior to, at or
after the Closing Date, except to the extent that (A) Seller proves by
a preponderance of the evidence that any such Environmental Loss
associated with the Niles Facility arose in connection with the use,
generation, storage, release, discharge or disposal of any Hazardous
Substance by A. B. Dick during the term of the Lease and (B) Purchaser
does not then prove by a preponderance of the evidence that any such
Environmental Loss associated with the Niles Facility was caused by a
Designated Use (defined below). "Designated Use" means any activity
which Purchaser, A. B. Dick and/or the Purchaser Retained Subsidiaries
conducts after the Closing in a manner, at a product rate and using
materials, processes and work practices that is substantially and
materially similar to those conducted by Seller, A. B. Dick and/or
their Affiliates prior to the Closing Date.
(iv) With respect to a breach of any representation or
warranty of Seller in Section 3.17, Seller's obligations under this
Section 8.04 shall only apply to any breach of which Seller receives
notice from an indemnified party within three (3) years after the
Closing Date.
(c) With respect to the Real Property after the Closing and
the Niles Facility during the term of the Lease, subject to Seller's option to
conduct Remedial Activities described in Section 8.04(d), Purchaser will not
unreasonably neglect Remedial Activities that are necessary and appropriate to
address conditions that could reasonably be expected to give rise to
Environmental Losses; PROVIDED, HOWEVER, that the failure by Purchaser to comply
with this Section 8.04(c) shall not affect rights to indemnification under this
Section 8.04 except to the extent that Seller is actually prejudiced by such
failure.
(d) Without limiting the effect of Section 8.04(a), Seller
shall have the option to conduct any indemnified Remedial Activities. The
indemnified party agrees to provide all necessary and reasonable cooperation to
the indemnifying party in performing such Remedial Activities and shall provide
the indemnifying party with all reasonable and necessary access to the Real
Property upon reasonable notice during normal business hours and without
unreasonable interference to the operation of the site. Subject to the
foregoing, Seller shall have the right to make such excavations, test pits,
boreholes, undertake investigations, install monitoring or treatment facilities,
in, on and under such Real Property to such extent and for so long as shall be
necessary to conduct such Remedial Activities. A party performing any such
Remedial Activities shall keep the other party informed regarding such Remedial
Activity and shall provide
52
58
the other party with copies of all monitoring, sampling and other data regarding
conditions of the Real Property relating to the Remedial Activities. The party
performing any such Remedial Activities shall give the other party the
opportunity to review and comment in advance upon any material submissions to
governmental or regulatory authorities with respect to the Remedial Activities.
A party performing Remedial Activities hereunder shall conduct such Remedial
Activities providing such review and comment period does not interfere with any
obligations imposed under Environmental Law or, in the reasonable judgment of
the remediating party, jeopardize any privilege arising under a self audit law
or otherwise. A party performing Remedial Activities hereunder shall conduct
such remedial Activities as would a reasonable owner of the Real Property
conducting such Remedial Activities for its own account in similar circumstances
and for a similar industrial use, including making all reasonable efforts to
prevent the Remedial Activities from interfering with the conduct of business at
the Real Property.
(e) From and after the Closing Date, Seller shall indemnify
and hold harmless Purchaser, A.B. Dick, the Purchaser Retained Subsidiaries and
their respective Affiliates from all Losses arising out of or related to: (i)
any Hazardous Substance present in, on, under or above any real property owned,
leased, occupied or used by any Seller Retained Subsidiary at any time prior to,
at or after the Closing or any personal property located or used thereat,
arising out of actions or conditions occurring or existing prior to, at or after
the Closing; (ii) any claims by governmental or regulatory authority or third
party in connection with any violation of or noncompliance with or other
liability arising under any Environmental Laws or Environmental Permits relating
to any Seller Retained Subsidiary prior to, at or after the Closing; and (iii)
all liabilities and obligations in connection with any sites to which any
Hazardous Substance was transported or at which any Hazardous Substance
migrated, was disposed or arrangements were made for transportation to or
disposal at such sites of any Hazardous Substances from any location operated by
any Seller Retained Subsidiary prior to, at or after the Closing, including any
such sites owned, leased, occupied or used by any Seller Retained Subsidiary in
the conduct of its businesses.
(f) The obligations and liabilities of Seller with respect to
Environmental Losses arising from claims of any third party which are subject to
the indemnification provided for in Section 8.04(a) or Section 8.04(e) ("Third
Party Claims") shall be governed by and contingent upon the following additional
terms and conditions:
(i) If an indemnified person shall receive notice of any
Third-Party Claim with respect to the Real Property, such indemnified
person shall give Seller notice of such Third-Party Claim within 30
days of the receipt by such indemnified person of such notice;
PROVIDED, HOWEVER, that the failure to so notify Seller shall not
affect rights to indemnification hereunder except to the extent that
Seller demonstrates that it is actually prejudiced by such failure. If
an indemnified person shall give Seller notice of any Third Party Claim
with respect to any property other than the Real Property, such
indemnified person shall give Seller notice of such Third Party Claim
within thirty (30) days of the receipt by such indemnified person of
such notice; PROVIDED, HOWEVER, that the failure to so notify Seller
shall not affect rights to indemnification hereunder.
(ii) Seller shall promptly assume and control the defense of
any Third Party Claim relating to any property other than the Niles
Facility or any Real Property that is
53
59
not an Unoccupied Leased Property. With respect to the Niles Facility
or any Real Property that is not an Unoccupied Leased Property, if
Seller acknowledges in writing its obligations to indemnify an
indemnified person hereunder against any Environmental Losses that may
result from a Third Party Claim, then Seller shall be entitled to
assume and control the defense of such Third Party Claim at its expense
and through counsel of its choice if it gives notice of its intention
to do so to such indemnified person. If there exists or is reasonably
likely to exist a conflict of interest that would make it inappropriate
in the reasonable judgment of such indemnified person for the same
counsel to represent both such indemnified person and Seller, then such
indemnified person shall be entitled to retain its own counsel, in each
jurisdiction for which counsel is required, at the expense of Seller.
(iii) In the event Seller undertakes or exercises the right to
undertake any such defense against any Third Party Claim as provided
above, an indemnified person shall cooperate with Seller in such
defense and make available to Seller, at Seller's expense, all
witnesses, pertinent records, material and information in such
indemnified person's possession or under such indemnified person's
control relating thereto as is reasonably required by Seller.
Similarly, in the event an indemnified person is, directly or
indirectly, conducting the defense against any such Third-Party Claim,
the indemnifying person shall cooperate with such indemnified person in
such defense and make available to such indemnified person, at Seller's
expense, all such witnesses, records, materials and information in
Seller's possession or under Seller's control relating thereto as is
reasonably required by such indemnified person.
(iv) No such Third-Party Claim may be settled by Seller
without the written consent of the indemnified person, which consent
shall not be unreasonably withheld.
SECTION 8.05. INDEMNIFICATION BY SELLER FOR LIABILITIES
RELATING TO PENSION PLANS, OTHER BENEFIT PLANS, RETIREE MEDICAL BENEFITS AND
BREACH OF EMPLOYEE BENEFIT PLAN REPRESENTATIONS. (a) Seller shall indemnify
Purchaser, A. B. Dick, the Purchaser Retained Subsidiaries, and their respective
Affiliates, against, and to hold each of them harmless from, all Losses and
Consequential Damages arising out of or in any way related to (i) any A. B. Dick
Pension Plan or other A. B. Dick Benefit Plan not retained by A. B. Dick,
Purchaser, or an Affiliate of Purchaser after the Closing pursuant to Section
5.09A(c), (ii) any claim for retiree medical benefits under any A. B. Dick
Benefit Plan, as described in Section 5.09A(a) above, (iii) any A. B. Dick
Non-U.S. Pension Plan or other A. B. Dick Non-U.S. Benefit Plan not retained by
a Purchaser Retained Subsidiary, Purchaser, or an Affiliate of Purchaser after
the Closing pursuant to Sections 5.08B(c) and 5.09B(c) above, (iv) any claim for
retiree medical benefits under any A. B. Dick Non-U.S. Benefit Plan, as
described in Section 5.09B(a) above, (v) intentionally omitted, or (vi) any
breach of any of the representations and warranties of Seller under Section 3.18
above. Any representation or warranty of Seller under Section 3.18 relating to
any A. B. Dick Benefit Plan or A. B. Dick Non-U.S. Benefit Plan providing for
retiree medical benefits or any A. B. Dick Pension Plan or A. B. Dick Non-U.S.
Pension Plan shall survive the Closing and remain in full force and effect
indefinitely and all other representations and warranties of Seller under
Section 3.18 shall survive the Closing and remain in full force and effect until
March 31, 1998. Seller's obligations to indemnify Purchaser, A. B. Dick, the
Purchaser Retained Subsidiaries and their respective Affiliates described in
Sections 5.08A,
54
60
5.08B, 5.09A and 5.09B are hereby incorporated in this Section 8.05. The
indemnities described above and those indemnities incorporated in this Section
8.05 by reference shall survive the Closing and shall remain in full force and
effect for perpetuity, without any limit as to amount, except that any right to
indemnity for items (vi) above shall be for the period described in the second
sentence of this Section 8.05(a).
(b) Seller shall promptly assume and control the defense of
any claim or proceeding by or in respect to a third party as to which Purchaser
is entitled to indemnification under this Section 8.05. Purchaser may
participate in any defense assumed by Seller, but in such case the expenses of
Purchaser shall be paid by Purchaser. Purchaser shall provide Seller with access
to its records and personnel relating to any such claim, assertion, event or
proceeding during normal business hours and shall otherwise cooperate with
Seller in the defense or settlement thereof, and Seller shall reimburse
Purchaser for all its reasonable out-of-pocket expenses in connection therewith.
Upon the assumption by Seller of the defense of any such claim or proceeding,
Purchaser shall not pay, or permit to be paid, or settle or admit any liability
with respect to any part of any claim or demand arising from such asserted
liability unless Seller consents in writing to such payment or unless Seller,
subject to the last sentence of this Section 8.05, withdraws from the defense of
such asserted liability or unless a final judgment from which no appeal may be
taken by or on behalf of Seller is entered against Purchaser from such
liability. If Seller shall fail to defend, or, if after commencing or
undertaking any such defense, fails to prosecute or withdraws from such defense,
Purchaser shall have the right to undertake the defense or settlement thereof,
at Seller's expense. If Purchaser assumes the defense of any such claim or
proceeding pursuant to this Section 8.05(b) and proposes to settle such claim or
proceeding prior to a final judgment thereon or to forego any appeal with
respect thereto, then Purchaser shall give Seller prompt written notice thereof
and Seller shall have the right to participate in and approve the settlement or
assume or reassume the defense of such claim or proceeding.
SECTION 8.06. EXCLUSIVE REMEDIES; WAIVER. The rights and
remedies provided in this Agreement, the Guaranty executed by Nesco, Inc. as of
the date hereof and the Guaranty executed by GEC plc as of the Closing Date
shall be the exclusive remedies with respect to this Agreement and the subject
matter hereof, and each party hereto hereby irrevocably waives and releases
discharges and acquits the other party from any causes of action known or
unknown whether based on statute, regulation or common law, and any claims,
demands, debt, controversies, damages, costs, losses and expenses except as
provided in this Agreement. Neither the acceptance nor the delivery of this
waiver and release shall be construed as an admission of liability.
ARTICLE IX
TERMINATION AND WAIVER
SECTION 9.01. TERMINATION. This Agreement may be terminated at
any time prior to the Closing:
(a) by the mutual written consent of Seller and Purchaser;
55
61
(b) by Purchaser upon written notice to Seller if (i) any of
the representations or warranties of Seller contained herein is or
becomes inaccurate or untrue in any material respect (except for any
such breach that would not be reasonably expected to have a material
adverse effect individually or in the aggregate on the Business) and is
not cured in all material respects (including, but not limited to, by
the payment of money) within twenty (20) days of receipt of written
notice from Purchaser of such nonperformance; or (ii) any material
obligation, term or condition to be performed, kept or observed by
Seller hereunder has not been performed, kept or observed in any
material respect at or prior to the time specified in this Agreement
and is not cured in all material respects (including, but not limited
to, by the payment of money) within twenty (20) days of receipt of
written notice from Purchaser of any such nonperformance (for purposes
of this Section 9.01(b), the covenants listed in Section 9.01(b) of the
Disclosure Schedule shall be deemed to be immaterial obligations and
all other obligations terms or conditions to be performed, kept or
observed by Seller hereunder shall be deemed to be material);
(c) by Seller upon written notice to Purchaser if (i) any of
the representations or warranties of Purchaser contained herein is or
becomes inaccurate or untrue in any material respect and is not cured
in all material respects (including, but not limited to, by the payment
of money) within twenty (20) days of receipt of written notice from
Seller of such nonperformance; or (ii) any obligation, term or
condition to be performed, kept or observed by Purchaser hereunder has
not been performed, kept or observed in any material respect at or
prior to the time specified in this Agreement and is not cured in all
material respects (including, but not limited to, by the payment of
money) within twenty (20) days of receipt of written notice from Seller
of any such nonperformance;
(d) by either Seller or Purchaser, if the Closing shall not
have occurred within 90 days of the date hereof; PROVIDED, HOWEVER,
that the right to terminate this Agreement under this Section 9.01(d)
shall not be available to any party whose failure to fulfill any
obligation under this Agreement shall have been the cause of, or shall
have resulted in, the failure of the Closing to occur prior to such
date.
Time shall be of the essence in this Agreement.
SECTION 9.02. EFFECT OF TERMINATION. In the event of
termination of this Agreement as provided in Section 9.01, this Agreement shall
forthwith become void and there shall be no liability on the part of any party
hereto (a) except as set forth in Section 5.02 and Section 10.01 and (b) nothing
herein shall relieve either party from liability for any willful breach hereof.
Notwithstanding anything contained in this Agreement to the contrary, any party
terminating this Agreement for any reason shall not be liable to the other party
for Consequential Damages arising in connection with any such termination.
SECTION 9.03. WAIVER. At any time prior to the Closing, any
party may (a) extend the time for the performance of any of the obligations or
other acts of any other party hereto, (b) waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant hereto, or (c) waive compliance with any of the agreements
56
62
or conditions contained herein. Any such extension or waiver shall be valid only
if set forth in an instrument in writing signed by the party to be bound
thereby.
ARTICLE X
GENERAL PROVISIONS
SECTION 10.01. EXPENSES. All costs and expenses, including,
without limitation, fees and disbursements of counsel, financial advisors and
accountants, incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such costs and
expenses, whether or not the Closing shall have occurred.
SECTION 10.02. NOTICES. All notices, requests, claims, demands
and other communications hereunder shall be in writing and shall be given or
made (and shall be deemed to have been duly given or made upon receipt) by
delivery in person, by courier service, by cable, by telecopy, by telegram, by
telex or by registered or certified mail (postage prepaid, return receipt
requested) to the respective parties at the following addresses (or at such
other address for a party as shall be specified in a notice given in accordance
with this Section 10.02):
(a) if to Seller:
GEC INCORPORATED
5700 West Touhy Avenue
Niles, Illinois 60714-4690
Attention: Vice President and Secretary
Telecopier: (847) 647-1276
Telephone for confirmation: (847) 647-9440
with a copy to:
The General Electric Company, plc
1 Stanhope Gate
London W1A 1EH
Attention: The Secretary
Telecopier: 011-44-171-493-1974
and with a copy to:
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, NY 10019
Attention: Melvin L. Bedrick
Telecopier: (212) 474-3700
57
63
(b) if to Purchaser:
Paragon Corporate Holdings, Inc
6140 Parkland Blvd.
Mayfield Heights, Ohio 44124
Attention: Chairman
Telecopier: (216) 449-3112
with a copy to:
Baker & Hostetler
3200 National City Center
1900 East Ninth Street
Cleveland, Ohio 44114-3485
Attention: Edward G. Ptaszek, Jr.
Telecopier: (216) 696-0740
SECTION 10.03. PUBLIC ANNOUNCEMENTS. No party to this
Agreement shall make any public announcements in respect of this Agreement or
the transactions contemplated hereby or otherwise communicate with any news
media without prior notification to the other party, and the parties shall
cooperate as to the timing and contents of any such announcement.
SECTION 10.04. HEADINGS. The headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
SECTION 10.05. SEVERABILITY. If any term or other provision of
this Agreement is invalid, illegal or incapable of being enforced by any rule of
law or public policy, all other conditions and provisions of this Agreement
shall nevertheless remain in full force and effect so long as the economic or
legal substance of the transactions contemplated hereby is not affected in any
manner adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in a mutually acceptable
manner in order that the transactions contemplated hereby be consummated as
originally contemplated to the greatest extent possible.
SECTION 10.06. ENTIRE AGREEMENT. This Agreement and the other
agreements and instruments contemplated hereby constitutes the entire agreement
of the parties hereto with respect to the subject matter hereof and supersedes
all prior agreements and undertakings, both written and oral, other than the
Confidentiality Agreement, between Seller and Nesco with respect to the subject
matter hereof and except as otherwise expressly provided herein.
SECTION 10.07. ASSIGNMENT; BINDING EFFECT. This Agreement and
the other agreements and instruments contemplated hereby shall not be assigned
by either party hereto and any such purported assignment shall be void and of no
effect; PROVIDED, HOWEVER, that (i) Purchaser may assign this Agreement to its
Affiliate and (ii) Purchaser may assign the Assumption Agreement to a purchaser
of the Business or to a financial institution in connection
58
64
with a financing, in each case subject to any defense, estoppel, waiver, setoff
or claim which Seller may have with respect to Purchaser (arising before or
after such assignment). This Agreement and the various rights and obligations
arising hereunder shall inure to the benefit of and be binding upon Seller, its
successors and permitted assigns, and Purchaser, its successors and permitted
assigns. For purposes of this Agreement, all references to Purchaser, Seller, A.
B. Dick, the Seller Retained Subsidiaries and the Purchaser Retained
Subsidiaries include successors thereto.
SECTION 10.08. NO THIRD-PARTY BENEFICIARIES. Except as
provided in Article VI and VIII or in the Assumption Agreement, this Agreement
is for the sole benefit of the parties hereto and their permitted assigns and
nothing herein, express or implied, is intended to or shall confer upon any
other person or entity any legal or equitable right, benefit or remedy of any
nature whatsoever under or by reason of this Agreement.
SECTION 10.09. AMENDMENT. This Agreement may not be amended or
modified except by an instrument in writing signed by Seller and Purchaser.
SECTION 10.10. GOVERNING LAW. This Agreement shall be governed
by, and construed in accordance with, the laws of the State of Delaware
applicable to contracts executed in and to be performed in that State.
SECTION 10.11. ARBITRATION. If the parties hereto in good
faith cannot resolve any controversy or claim arising between the parties (but
not involving any third party) out of or related to this Agreement or in
connection with a breach of this Agreement within thirty (30) days after the
claiming party gives notice of such controversy or claim to the other party
hereto, any party hereto may demand and commence arbitration of the controversy
or claim. In the event of a demand for arbitration, Purchaser shall select one
arbitrator and Seller shall select one arbitrator within fifteen (15) days after
such demand shall have been given (the "Demand Date") and the two arbitrators,
within thirty (30) days after the Demand Date shall select a third arbitrator.
If the third arbitrator shall not be selected within thirty (30) days of the
Demand Date, either Purchaser or Seller may apply to the American Arbitration
Association (or any successor thereto) for the appointment of an arbitrator in
Chicago, Illinois or such other city as the parties may agree upon, and the
parties shall be bound by the appointments made by such Association. The
arbitration shall be held as promptly as practicable thereafter under the rules
of the American Arbitration Association in effect at the time such controversy,
claim or breach is submitted to arbitration. The determination made in
accordance with such rules shall be delivered in writing to the parties hereto
and shall be final, binding and conclusive upon them and, in the case of
arbitration pursuant to Article VIII hereof, the amount of the claim, if any, of
Purchaser or Seller determined to exist shall be a valid indemnifiable claim
under that Section. The parties hereto agree that a judgment may be entered by
any court of competent jurisdiction in accordance with any determination
properly made under this Section 10.11. Notwithstanding the foregoing, the
parties hereto agree that this Section 10.11 shall not apply to and shall have
no force or effect with respect to any claim by or controversy involving a third
party (a "Third Party Claim"). Each party hereto reserves the right to have any
Third Party Claim heard and determined in a court of competent jurisdiction.
59
65
SECTION 10.12. COUNTERPARTS. This Agreement may be executed in
one or more counterparts, and by the different parties hereto in separate
counterparts, each of which when executed shall be deemed to be an original but
all of which taken together shall constitute one and the same agreement.
SECTION 10.13. WAIVER OF JURY TRIAL. Each party hereto hereby
waives, to the fullest extent permitted by applicable law, any right it may have
to a trial by jury in respect of any litigation directly or indirectly arising
out of, under or in connection with this Agreement, the Note, the Lease or the
Guaranty or any other agreement contemplated hereby. Each party hereto (a)
certifies that no representative, agent or attorney or any other party has
represented, expressly or otherwise, that such other party would not, in the
event of litigation, seek to enforce the foregoing waiver and (b) acknowledges
that it and the other party hereto have been induced to enter into this
Agreement and such other documents, as applicable, by, among other things, the
mutual waiver and certifications in this Section 10.13.
IN WITNESS WHEREOF, Seller and Purchaser have caused this
Agreement to be executed as of the date first written above by their respective
officers thereunto duly authorized.
GEC INCORPORATED (Seller)
By /s/ A. Harris Walker
-----------------------------
Name: A. Harris Walker
Title: Vice President, Secretary
PARAGON CORPORATE HOLDINGS, INC.
(Purchaser)
By /s/ John H. Fountain
-----------------------------
Name: John H. Fountain
Title: Vice President
60