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______________________________________________________
STOCK PURCHASE AGREEMENT
________________________
by and among
LEP INTERNATIONAL WORLDWIDE LIMITED
as "LIW,"
LEP INTERNATIONAL HOLDINGS LIMITED
as "Holdings One,"
LEP HOLDINGS (NORTH AMERICA) LIMITED
as "Holdings Two,"
LEP HOLDINGS (USA) INC.
as "Stockholder,"
and
INTERNATIONAL LOGISTICS LIMITED
as "Buyer"
Dated: October 31, 1996
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STOCK PURCHASE AGREEMENT
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS . . . . . . . . . . . . . . 2
1.1 DEFINED TERMS . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE II
PURCHASE AND SALE OF STOCK. . . . . . . . . . . 14
2.1 TRANSFER OF STOCK . . . . . . . . . . . . . . . . . . . . . . 14
2.2 PURCHASE PRICE. . . . . . . . . . . . . . . . . . . . . . . . 14
2.3 POST-CLOSING ADJUSTMENT.. . . . . . . . . . . . . . . . . . . 15
2.4 INTERCOMPANY RECEIVABLES AND PAYABLES . . . . . . . . . . . . 16
ARTICLE III
CLOSING . . . . . . . . . . . . . . . 17
3.1 CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.2 DELIVERIES AT CLOSING . . . . . . . . . . . . . . . . . . . . 17
3.3 OTHER CLOSING TRANSACTIONS. . . . . . . . . . . . . . . . . . 18
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE SELLERS WITH RESPECT
TO THE TARGET AND ITS SUBSIDIARIES. . . . . . . . . 19
4.1 ORGANIZATION OF THE TARGET AND EACH OF ITS SUBSIDIARIES . . . 20
4.2 SUBSIDIARIES. . . . . . . . . . . . . . . . . . . . . . . . . 20
4.3 AUTHORIZATION . . . . . . . . . . . . . . . . . . . . . . . . 20
4.4 ABSENCE OF CERTAIN CHANGES OR EVENTS. . . . . . . . . . . . . 21
4.5 TITLE TO ASSETS . . . . . . . . . . . . . . . . . . . . . . . 23
4.6 FACILITIES. . . . . . . . . . . . . . . . . . . . . . . . . . 23
4.7 CONTRACTS AND COMMITMENTS . . . . . . . . . . . . . . . . . . 24
4.8 PERMITS, CONSENTS AND APPROVALS . . . . . . . . . . . . . . . 27
4.9 NO CONFLICT OR VIOLATION. . . . . . . . . . . . . . . . . . . 27
4.10 FINANCIAL STATEMENTS. . . . . . . . . . . . . . . . . . . . . 27
4.11 BOOKS AND RECORDS . . . . . . . . . . . . . . . . . . . . . . 28
4.12 LITIGATION. . . . . . . . . . . . . . . . . . . . . . . . . . 28
4.13 LABOR MATTERS . . . . . . . . . . . . . . . . . . . . . . . . 28
4.14 LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . 29
4.15 COMPLIANCE WITH LAW . . . . . . . . . . . . . . . . . . . . . 29
4.16 NO BROKERS. . . . . . . . . . . . . . . . . . . . . . . . . . 29
4.17 NO OTHER AGREEMENTS TO SELL THE ASSETS. . . . . . . . . . . . 30
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4.18 PROPRIETARY RIGHTS. . . . . . . . . . . . . . . . . . . . . . 30
4.19 EMPLOYEE BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . 31
4.20 THIS SECTION INTENTIONALLY OMITTED. . . . . . . . . . . . . . 35
4.21 TAX MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . 35
4.22 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . 38
4.23 ACCOUNTS RECEIVABLE . . . . . . . . . . . . . . . . . . . . . 39
4.24 PAYMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . 39
4.25 CURRENT INACTIVE SUBSIDIARIES OF THE TARGET . . . . . . . . . 40
4.26 CUSTOMERS, DISTRIBUTORS AND SUPPLIERS . . . . . . . . . . . . 40
4.27 COMPLIANCE WITH ENVIRONMENTAL LAWS. . . . . . . . . . . . . . 40
4.28 BANKING RELATIONSHIPS . . . . . . . . . . . . . . . . . . . . 41
4.29 INTERCOMPANY LOANS. . . . . . . . . . . . . . . . . . . . . . 41
4.30 MATERIAL MISSTATEMENTS OR OMISSIONS . . . . . . . . . . . . . 42
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE SELLERS WITH
RESPECT TO THE SELLERS AND THE SELLERS' SUBSIDIARIES . . . . 42
5.1 ORGANIZATION OF THE SELLERS . . . . . . . . . . . . . . . . . 42
5.2 SUBSIDIARIES. . . . . . . . . . . . . . . . . . . . . . . . . 42
5.3 AUTHORIZATION . . . . . . . . . . . . . . . . . . . . . . . . 43
5.4 ABSENCE OF CERTAIN CHANGES OR EVENTS. . . . . . . . . . . . . 43
5.5 CONSENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . 43
5.6 NO CONFLICT OR VIOLATION. . . . . . . . . . . . . . . . . . . 44
5.7 FINANCIAL STATEMENTS. . . . . . . . . . . . . . . . . . . . . 44
5.8 LITIGATION. . . . . . . . . . . . . . . . . . . . . . . . . . 44
5.9 LABOR MATTERS . . . . . . . . . . . . . . . . . . . . . . . . 44
5.10 LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . 44
5.11 COMPLIANCE WITH LAW . . . . . . . . . . . . . . . . . . . . . 45
5.12 NO OTHER AGREEMENTS TO SELL THE ASSETS. . . . . . . . . . . . 45
5.13 TRANSACTIONS WITH CERTAIN PERSONS . . . . . . . . . . . . . . 45
5.14 PAYMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . 45
5.15 PROJECTIONS . . . . . . . . . . . . . . . . . . . . . . . . . 45
5.16 SOLVENCY. . . . . . . . . . . . . . . . . . . . . . . . . . . 46
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF BUYER . . . . . . . 46
6.1 ORGANIZATION OF BUYER . . . . . . . . . . . . . . . . . . . . .46
6.2 AUTHORIZATION . . . . . . . . . . . . . . . . . . . . . . . . 46
6.3 NO BROKERS. . . . . . . . . . . . . . . . . . . . . . . . . . 46
6.4 NO CONFLICT OR VIOLATION. . . . . . . . . . . . . . . . . . . 47
6.5 CONSENTS AND APPROVALS. . . . . . . . . . . . . . . . . . . . 47
6.6 LITIGATION. . . . . . . . . . . . . . . . . . . . . . . . . . 47
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6.7 INVESTMENT INTENT . . . . . . . . . . . . . . . . . . . . . . 47
ARTICLE VII
COVENANTS OF SELLERS, THE TARGET AND BUYER. . . . . . . 48
7.1 FURTHER ASSURANCES. . . . . . . . . . . . . . . . . . . . . . 48
7.2 BUYER'S RIGHT OF FIRST REFUSAL IN ACQUISITION TRANSACTION
INVOLVING THE SELLERS OR THE SELLERS' SUBSIDIARIES. . . . . . 48
7.3 EMPLOYEE MATTERS. . . . . . . . . . . . . . . . . . . . . . . 50
7.4 USE OF PURCHASE PRICE AMOUNT. . . . . . . . . . . . . . . . . 50
7.5 1995 YEAR END FINANCIAL STATEMENTS. . . . . . . . . . . . . . 50
7.6 DISSOLUTION OF THE STOCKHOLDER. . . . . . . . . . . . . . . . 50
7.7 PAYMENT OF FLEET OBLIGATION . . . . . . . . . . . . . . . . . 51
7.8 FRANCHISE MATTERS . . . . . . . . . . . . . . . . . . . . . . 51
7.9 NAME CHANGES. . . . . . . . . . . . . . . . . . . . . . . . . 51
ARTICLE VIII
ACTIONS BY SELLERS AND BUYER AFTER CLOSING. . . . . . . .51
8.1 BOOKS AND RECORDS . . . . . . . . . . . . . . . . . . . . . . 51
8.2 SURVIVAL OF REPRESENTATIONS, ETC. . . . . . . . . . . . . . . 52
8.3 INDEMNIFICATIONS. . . . . . . . . . . . . . . . . . . . . . . 52
8.4 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . 55
ARTICLE IX
TAX MATTERS . . . . . . . . . . . . . . 55
9.1 RETURNS . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
9.2 CONTESTS. . . . . . . . . . . . . . . . . . . . . . . . . . . 56
9.3 PAYMENT OF TAXES. . . . . . . . . . . . . . . . . . . . . . . 56
9.4 NOTICE OF CONTESTS. . . . . . . . . . . . . . . . . . . . . . 57
9.5 COOPERATION . . . . . . . . . . . . . . . . . . . . . . . . . 58
9.6 ELECTION UNDER SECTION 338(h)(10) . . . . . . . . . . . . . . 58
9.7 PURCHASE PRICE ADJUSTMENT . . . . . . . . . . . . . . . . . . 58
ARTICLE X
MISCELLANEOUS. . . . . . . . . . . . . . 59
10.1 ASSIGNMENT. . . . . . . . . . . . . . . . . . . . . . . . . . 59
10.2 NOTICES.. . . . . . . . . . . . . . . . . . . . . . . . . . . .59
10.3 CHOICE OF LAW . . . . . . . . . . . . . . . . . . . . . . . . 60
10.4 SERVICE OF PROCESS, CONSENT TO JURISDICTION . . . . . . . . . 60
10.5 ENTIRE AGREEMENT; AMENDMENTS AND WAIVERS. . . . . . . . . . . 60
10.6 MULTIPLE COUNTERPARTS . . . . . . . . . . . . . . . . . . . . 61
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10.7 EXPENSES. . . . . . . . . . . . . . . . . . . . . . . . . . . 61
10.8 INVALIDITY. . . . . . . . . . . . . . . . . . . . . . . . . . 61
10.9 TITLES; GENDER. . . . . . . . . . . . . . . . . . . . . . . . 61
10.10 PUBLICITY . . . . . . . . . . . . . . . . . . . . . . . . . . 61
10.11 CUMULATIVE REMEDIES.. . . . . . . . . . . . . . . . . . . . . 61
10.12 CONFIDENTIAL INFORMATION. . . . . . . . . . . . . . . . . . . 61
10.13 ATTORNEYS' FEES . . . . . . . . . . . . . . . . . . . . . . . 62
10.14 LIMITATION OF LIABILITY . . . . . . . . . . . . . . . . . . . 63
10.15 KNOWLEDGE . . . . . . . . . . . . . . . . . . . . . . . . . . 63
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STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement, dated as of October 31, 1996 (this
"AGREEMENT"), is by and among International Logistics Limited, a Delaware
corporation ("BUYER"), LEP International Worldwide Limited, a company organized
under the laws of England ("LIW"), LEP International Holdings Limited, a company
organized under the laws of England ("HOLDINGS ONE"), LEP Holdings (North
America) Limited, a company organized under the laws of England ("HOLDINGS TWO"
and, together with LIW and Holdings One, the "PARENT COMPANIES") and LEP
Holdings (USA) Inc., a Georgia corporation (the "STOCKHOLDER" and together with
the Parent Companies, the "SELLERS").
RECITALS
A. LIW desires to sell its United States and Puerto Rico business
operations, which operations in the United States and Puerto Rico are comprised
entirely of LEP Profit International, Inc., a Delaware corporation (the
"TARGET") and its Subsidiaries.
B. The Stockholder, an indirect subsidiary of LIW, is the owner of all
of the issued and outstanding shares of capital stock of the Target and the
Target is the owner of all of the issued and outstanding shares of capital stock
of each of its Subsidiaries.
C. Buyer desires to purchase from the Stockholder, and the Stockholder
desires to sell to Buyer, all of the issued and outstanding capital stock of the
Target upon the terms and subject to the conditions of this Agreement (the
"ACQUISITION").
D. In connection with the Acquisition, the parties desire to set forth
certain representations, warranties and covenants made each to the other as an
inducement to the consummation of the Acquisition, upon the terms and subject to
the conditions contained herein.
E. In connection with the Acquisition, the Sellers are willing to
indemnify Buyer, and Buyer is willing to indemnify the Sellers, against certain
liabilities they may incur in connection with the Acquisition, upon the terms
and subject to the conditions contained herein.
AGREEMENT
NOW, THEREFORE, in consideration of the respective covenants and promises
contained herein and for other good and valuable consideration, the receipt and
adequacy of which is hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
1.1 DEFINED TERMS. As used herein, the terms set forth below shall have
the following meanings. Any of such terms, unless the context otherwise
requires, may be used in the singular or plural, depending upon the reference.
"1995 YEAR END BALANCE SHEET" shall mean the audited consolidated
balance sheet of the Target and its Subsidiaries for the period ended December
31, 1995, together with the notes thereon, prepared in accordance with GAAP and
previously delivered to Buyer.
"1995 YEAR END FINANCIAL STATEMENTS" shall mean the audited
consolidated balance sheets of the Target and its Subsidiaries and related
audited consolidated statements of operations and income, changes in
stockholders' equity and cash flow of the Target and its Subsidiaries for the
twelve month period ended December 31, 1995, together with notes thereon,
prepared in accordance with GAAP and previously delivered to Buyer.
"ACCOUNTING FIRM" shall have the meaning set forth in Section 2.3(a)
of this Agreement.
"ACQUISITION PROPOSAL" shall have the meaning set forth in Section
7.2(a) of this Agreement.
"ACQUISITION TRANSACTION" shall have the meaning set forth in Section
7.2(a) of this Agreement.
"ACTION" shall mean any action, claim, suit, litigation, proceeding,
labor dispute, arbitral action, governmental audit, inquiry, criminal
prosecution, investigation or unfair labor practice charge or complaint.
"AFFILIATE" shall have the meaning set forth in the Securities
Exchange Act of 1934, as amended, and the rules and regulations thereunder.
Without limiting the foregoing, all directors and officers of a Person that is a
corporation and all managing members of a Person that is a limited liability
company, shall be deemed affiliates of such Person for all purposes hereunder.
"ANCILLARY AGREEMENTS" shall mean the License Agreement, the Escrow
Agreement, the InterCompany Agreement, the Option Deed, the LIW Promissory Note
Release, the Warrant Instrument, the Trademark Assignment, the Software License
and Technical Support Agreement, the Source Code Deposit Agreement and the
Shareholders Agreement.
"ASSETS" shall mean, with respect to the Target and each of its
Subsidiaries, all of the right, title and interest in and to all of the
business, properties, assets and rights of any kind, whether tangible or
intangible, real or personal owned by the Target or any of its Subsidiaries or
in which the Target or any of its Subsidiaries has any interest, including
without limitation all of the right, title and interest of the Target and each
of its Subsidiaries in the following:
2
(i) all accounts and notes receivable (whether current or
noncurrent), refunds, deposits, prepayments or prepaid expenses (including
without limitation any prepaid insurance premiums);
(ii) all Contract Rights;
(iii) all shares of common stock and any other ownership
interests owned by the Target or such Subsidiary;
(iv) all tangible personal property;
(v) all Owned Real Property;
(vi) all Leases and Leasehold Estates;
(vii) all Leasehold Improvements;
(viii) all Fixtures and Equipment;
(ix) all Books and Records;
(x) all Proprietary Rights;
(xi) all Insurance Policies;
(xii) all Permits;
(xiii) all computers and software;
(xiv) all available supplies, sales literature, promotional
literature, customer, supplier and distributor lists, art work, employee
uniforms, wrapping, supply and packaging items, display units, telephone and fax
numbers, purchasing records and any other items related to the Business;
(xv) all rights under or pursuant to all warranties,
representations and guarantees made by suppliers in connection with the Assets
or services furnished to the Target or any of its Subsidiaries pertaining to the
Business or affecting the Assets;
(xvi) all claims, causes of action, choses in action, rights of
recovery and rights of set-off of any kind, against any person or entity,
including without limitation any liens, security interests, pledges or other
rights to payment or to enforce payment in connection with products delivered by
the Target or any of its Subsidiaries on or prior to the Closing Date; and
(xvii) all goodwill related to the Business.
"BENEFIT ARRANGEMENT" shall mean any employment, consulting,
severance or other similar contract, arrangement or policy and each plan,
arrangement (written or oral), program, agreement or commitment providing for
insurance coverage (including without limitation any self-insured
3
arrangements), workers' compensation, disability benefits, supplemental
unemployment benefits, vacation benefits, retirement benefits, life, health,
disability or accident benefits (including without limitation any "voluntary
employees' beneficiary association" as defined in Section 501(c)(9) of the
Code providing for the same or other benefits) or for deferred compensation,
profit-sharing bonuses, stock options, stock appreciation rights, stock
purchases or other forms of incentive compensation or post-retirement
insurance, compensation or benefits which (A) is not a Welfare Plan, Pension
Plan or Multiemployer Plan, (B) is entered into, maintained, contributed to
or required to be contributed to, as the case may be, by the Target or any of
its Subsidiaries or an ERISA Affiliate or under which the Target or any of
its Subsidiaries or any ERISA Affiliate may incur any Liability, and (C)
covers any employee or former employee of the Target or any of its
Subsidiaries or any ERISA Affiliate (with respect to their relationship with
such entities).
"BOOKS AND RECORDS" shall mean (a) all records and lists of the
Target and each of its Subsidiaries pertaining to the Assets, (b) all records
and lists of the Target and its Subsidiaries pertaining to the Business,
customers, suppliers or personnel of each of the Target and each of its
Subsidiaries, (c) all product, business and marketing plans of the Target and
each of its Subsidiaries, and (d) all books, ledgers, files, reports, plans,
drawings and operating records of every kind maintained by the Target and each
of its Subsidiaries.
"BUSINESS" shall mean the business conducted by the Target and its
Subsidiaries of providing origin and destination services, freight forwarding,
logistics, supply chain management, customs clearing services, transportation
and distribution services in the United States and Puerto Rico, together with
any ancillary services provided therewith.
"BUSINESS DAY" shall mean any day other than a Saturday, a Sunday, or
a day on which banking institutions in the cities of New York, New York or
Atlanta, Georgia are authorized or obligated by law, regulation or executive
order to remain closed.
"BUYER" shall mean International Logistics Limited, a Delaware
corporation.
"BUYER INDEMNIFIED PARTIES" shall have the meaning set forth in
Section 8.3(a) of this Agreement.
"CLAIM" shall have the meaning set forth in Section 8.3(d) of this
Agreement.
"CLAIM NOTICE" shall have the meaning set forth in Section 8.3(d) of
this Agreement.
"CLOSING" shall have the meaning set forth in Section 3.1 of this
Agreement.
"CLOSING BALANCE SHEET" shall have the meaning set forth in Section
2.3(a) of this Agreement.
"CLOSING DATE" shall mean (a) October 31, 1996; or (b) such other
date as Buyer and the Stockholder shall mutually agree upon.
"CLOSING FINANCIAL STATEMENTS" shall have the meaning set forth in
Section 2.3(a) of this Agreement.
4
"CLOSING FINANCIAL STATEMENTS DELIVERY DATE" shall have the meaning
set forth in Section 2.3(g) of this Agreement.
"CODE" shall mean the Internal Revenue Code of 1986, as amended, and
the rules and regulations thereunder.
"CONFIDENTIAL INFORMATION" shall have the meaning set forth in
Section 10.12(b) of this Agreement.
"CONTRACT" shall mean any agreement, contract, Lease, note, loan,
evidence of indebtedness, purchase order, letter of credit, indenture, security
or pledge agreement, franchise agreement, covenant not to compete, employment
agreement, license, instrument, obligation, commitment, purchase and sales
order, quotation or other executory commitment to which the Target or any of its
Subsidiaries is a party or is bound, or to which any Assets of the Target or any
of its Subsidiaries are subject, whether oral or written, express or implied.
"CONTRACT RIGHTS" shall mean all of the rights and obligations of the
Target and each of its Subsidiaries under the Contracts.
"CORPORATION" shall mean (i) the Target and each of its Subsidiaries,
(ii) all partnerships, joint ventures, limited liability companies,
associations, joint-stock companies or trusts in which the Target or any of its
Subsidiaries was at any time or is a partner, joint venturer, participant or
member and (iii) all predecessor or former corporations, partnerships, joint
ventures, limited liability companies, associations, joint-stock companies or
trusts, whether in existence as of the date hereof or at any time prior to the
date hereof, the assets or obligations of which have been acquired or assumed by
the Target or any of its Subsidiaries or to which the Target or any of its
Subsidiaries has succeeded.
"COPYRIGHTS" shall mean registered copyrights, copyright applications
and unregistered copyrights.
"COURT ORDER" shall mean any judgment, decision, consent decree,
injunction, ruling or order of any federal, state or local court or governmental
agency, department or authority that is binding on any person or its property
under applicable law.
"DAMAGES" shall have the meaning set forth in Section 8.3(a) of this
Agreement.
"DEFAULT" shall mean (a) a breach of or default under any Contract or
Permit, (b) the occurrence of an event that with the passage of time or the
giving of notice or both would constitute a breach of or default under any
Contract or Permit, or (c) the occurrence of an event that with or without the
passage of time or the giving of notice or both would give rise to a right of
termination, renegotiation or acceleration under any Contract or Permit.
"DISCLOSURE SCHEDULE" shall mean a schedule executed and delivered by
the Sellers to Buyer as of the date hereof which sets forth the exceptions to
(i) the representations and warranties of the Sellers with respect to the Target
and its Subsidiaries contained in Article IV hereof, (ii) the representations
and warranties of the Sellers with respect to the Sellers contained in Article V
hereof
5
and (iii) certain other information called for by this Agreement. Unless
otherwise specified, each reference in this Agreement to any numbered schedule
is a reference to that numbered schedule which is included in the Disclosure
Schedule.
"DISCONTINUED OPERATIONS" shall mean any businesses or operations,
previously sold or otherwise disposed of by any of the Sellers or by the Target
or any of its Subsidiaries, including but not limited to (i) the discontinued
subsidiaries set forth in Schedule 1.1 hereto and (ii) the "current inactive
subsidiaries of the Target" set forth in Schedule 4.2 hereto, and any ongoing
indemnification obligations in connection therewith.
"DOCUMENTARY LETTER OF CREDIT" shall mean that certain Documentary
Letter of Credit No. ASL-21033 issued by Shawmut Bank for the benefit of RFG Co.
Ltd. in the face amount of $33,334.34.
"DOWNWARD ADJUSTMENT" shall have the meaning set forth in Section
2.3(b) of this Agreement.
"EMPLOYEE PLANS" shall mean all Benefit Arrangements, Multiemployer
Plans, Pension Plans and Welfare Plans.
"ENCUMBRANCE" shall mean any claim, lien, pledge, option, charge,
easement, security interest, deed of trust, mortgage, right-of-way,
encroachment, conditional sales agreement, encumbrance or other similar right of
any third party, whether voluntarily incurred or arising by operation of law,
and includes, without limitation, any agreement to give any of the foregoing in
the future, and any contingent sale or other title retention agreement or lease
in the nature thereof.
"ENVIRONMENTAL LAWS" shall mean all Regulations which regulate or
relate to the protection or clean-up of the environment, the use, treatment,
storage, transportation, generation, manufacture, processing, distribution,
handling or disposal of, or emission, discharge or other release or threatened
release of, Hazardous Substances, the preservation or protection of waterways,
groundwater, drinking water, air, wildlife, plants or other natural resources,
or the health and safety of persons or property, including without limitation
protection of the health and safety of employees. Environmental Laws shall
include, without limitation, the Federal Insecticide, Fungicide, Rodenticide
Act, Resource Conservation & Recovery Act, Clean Water Act, Safe Drinking Water
Act, Occupational Safety and Health Act, Toxic Substances Control Act, Clean Air
Act, Comprehensive Environmental Response, Compensation and Liability Act,
Emergency Planning and Community Right-to-Know Act, Hazardous Materials
Transportation Act and all analogous or related federal, state or local laws,
each as amended.
"ENVIRONMENTAL CONDITIONS" shall mean the introduction into the
environment of any Hazardous Substance (whether or not upon any Facility or
Former Facility or other property and whether or not such pollution constituted
at the time thereof a violation of any Environmental Law as a result of any
Release of any kind whatsoever of any Hazardous Substance) during and in
connection with the ownership, operation or occupancy of any Corporation as a
result of which any Corporation has become or becomes liable to any person, or
has become or becomes responsible for any environmental remediation under
current Environmental Laws, or by reason of which any Facility, Former Facility
or any of the Assets suffers or becomes subject to any lien under current
Environmental Laws.
6
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"ERISA AFFILIATE" shall mean any entity which is (or at any relevant
time was) a member of a "controlled group of corporations" with, or under
"common control" with, or a member of an "affiliated service group" with, the
Target or any of its Subsidiaries, as defined in Section 414(b), (c), (m), (n)
or (o) of the Code.
"ESCROW AGREEMENT" shall have the meaning set forth in Section 2.2(b)
of this Agreement.
"ESCROW AMOUNT" shall have the meaning set forth in Section 2.2(b) of
this Agreement.
"FACILITIES" shall mean all plants, offices, manufacturing
facilities, stores, warehouses, improvements, administration buildings, and all
real property and related facilities which are used or held for use in
connection with the Business.
"FACILITY LEASES" shall mean all of the leases of Facilities, all of
which are listed in Schedule 4.6(a) hereto.
"FINANCIAL STATEMENTS" shall mean, with respect to the Target and its
Subsidiaries, (i) the monthly unaudited consolidated financial statements for
each of the months beginning after the Most Recent Fiscal Quarter End through
and including the month ended August 30, 1996 (the "MOST RECENT MONTH END
FINANCIAL STATEMENTS"), (ii) the unaudited consolidated financial statements for
the fiscal quarter ended June 30, 1996 (the "MOST RECENT FISCAL QUARTER END
FINANCIAL STATEMENTS"), and (iii) the Year End Financial Statements.
"FINANCING OBLIGATIONS" shall mean (a) any indebtedness of the Target
or any of its Subsidiaries for borrowed money, including without limitation the
Fleet Obligation, (b) any obligations of the Target or any of its Subsidiaries
evidenced by bonds, notes, debentures, letters of credit or similar instruments,
(c) obligations of the Target or any of its Subsidiaries under capitalized
leases, (d) obligations under conditional sale, title retention or similar
agreements or arrangements creating an obligation of the Target or any of its
Subsidiaries with respect to the deferred purchase price of property (other than
customary trade credit), (e) interest rate and currency obligation swaps, hedges
and similar arrangements of the Target and any of its Subsidiaries and (f) all
obligations of the Target or any of its Subsidiaries to guarantee any of the
foregoing types of obligations on behalf of others.
"FIXTURES AND EQUIPMENT" shall mean all of the furniture, fixtures,
furnishings, machinery, automobiles, trucks, spare parts, supplies, equipment,
tooling, molds, patterns, dies and other tangible personal property owned by the
Target or any of its Subsidiaries and used, held for use or useful in connection
with the Business, wherever located, and including any such Fixtures and
Equipment in the possession of any suppliers of the Target or any of its
Subsidiaries, together with all warranty rights with respect thereto.
"FLEET OBLIGATION" shall mean the credit facility (including any
accrued interest thereon and any and all prepayment penalties and liquidated
damages that would arise as a result of the prepayment or other early
termination of the credit facility) from Fleet Capital Corporation, as successor
to
7
Shawmut Capital Corporation, to LEP Profit International, Inc. secured in
part by a letter of credit in the amount of $1,000,000 provided by TBC, in favor
of Fleet Capital Corporation.
"FOREIGN SUBSIDIARY" shall mean any Subsidiary organized under the
laws of or with a principal place of business in any country other than the
United States. For purposes of this Agreement, LEP Profit International, Inc.
(Puerto Rico) shall not be deemed to be a "Foreign Subsidiary."
"FORMER FACILITY" shall mean, with respect to each Corporation, each
plant, office, manufacturing facility, store, warehouse, improvement,
administrative building and all real property and related facilities which was
owned, leased or operated by such Corporation at any time prior to the date
hereof, but excluding any Facilities.
"GAAP" shall mean generally accepted accounting principles in the
United States of America, as in effect from time to time, consistently applied.
"HAZARDOUS SUBSTANCE" shall mean any pollutant, contaminant,
chemical, waste and any toxic, infectious, carcinogenic, reactive, corrosive,
ignitible or flammable chemical or chemical compound or hazardous substance,
material or waste, whether solid, liquid or gas, that is subject to regulation,
control or remediation under any Environmental Laws including, without
limitation, any quantity of asbestos in any form, urea formaldehyde, PCB's,
radon gas, crude oil or any fraction thereof, all forms of natural gas,
petroleum products or by-products or derivatives.
"HOLDINGS ONE" shall mean LEP International Holdings Limited, a
company organized under the laws of England.
"HOLDINGS TWO" shall mean LEP Holdings (North America) Limited, a
company organized under the laws of England.
"HSR ACT" shall mean the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended.
"INCLUDED SUBSIDIARIES" shall have the meaning set forth in Section
9.6 of this Agreement.
"INSURANCE POLICIES" shall mean the insurance policies related to the
Assets or the Business.
"INTERCOMPANY AGREEMENT" shall mean the operations agreement by and
between LIW, LIM, Buyer and the Target and each of its Subsidiaries,
substantially in the form of Appendix A attached hereto.
"INTERCOMPANY DEFICIT" shall mean the amount, if any, as of the
Closing Date, by which all sums owed by the Target or any of its Subsidiaries,
to the Sellers or any of the Sellers' Subsidiaries, exceeds all sums owed by the
Sellers or any of the Sellers' Subsidiaries, to the Target or any of its
Subsidiaries, as of such date (i.e., net payable that is payable by the Target
and its Subsidiaries).
8
"INTERCOMPANY SURPLUS" shall mean the amount, if any, as of the
Closing Date, by which all sums owed by the Sellers or any of the Sellers'
Subsidiaries, to the Target or any of its Subsidiaries, exceeds all sums owed by
the Target or any of its Subsidiaries, to the Sellers or any of the Sellers'
Subsidiaries, as of such date (i.e., net receivable owed to the Target and its
Subsidiaries).
"LEASED REAL PROPERTY" shall mean all leased property described in
the Facility Leases.
"LEASEHOLD ESTATES" shall mean all rights and obligations of the
Target and each of its Subsidiaries as lessee under the Leases.
"LEASEHOLD IMPROVEMENTS" shall mean all leasehold improvements
situated in or on the Leased Real Property and owned by the Target or any of its
Subsidiaries.
"LEASES" shall mean all of the existing leases with respect to the
personal or real property of the Target or any of its Subsidiaries used or held
for use in connection with the Business.
"LIABILITIES" shall mean any direct or indirect liability,
indebtedness, obligation, commitment, expense, claim, deficiency, guaranty or
endorsement of or by any person of any type, whether accrued, absolute,
contingent, matured, unmatured, known, unknown or other. "LIABILITY" shall have
the correlative meaning.
"LICENSE AGREEMENT" shall mean the trademark license agreement by and
between Holdings One and the Target, substantially in the form of Appendix B
attached hereto.
"LIW" shall mean LEP International Worldwide Limited, a company
organized under the laws of England.
"LIW PROMISSORY NOTE" shall mean that certain Promissory Note, dated
August 16, 1996, by LIW in favor of TBC in the principal sum of one million
dollars ($1,000,000).
"LIW PROMISSORY NOTE RELEASE" shall mean that certain Deed of Release
by and between LIW and TBC pursuant to which TBC releases the obligations of LIW
under the LIW Promissory Note in exchange for LIW's grant to Buyer of the
Warrant Instrument, substantially in the form of Appendix C attached hereto.
"MATERIAL ADVERSE EFFECT" shall mean with respect to the Target or
any of its Subsidiaries, after giving effect to the transactions contemplated by
this Agreement (except with respect to (i)(C) below), (i) a significant or
substantial adverse effect or adverse change in (A) the condition (financial or
otherwise) of or in the Assets of the Target and its Subsidiaries, collectively,
or (B) the Business or properties, Liabilities, reserves, working capital,
earnings, technology or relations with customers, public image or employees of
the Target and its Subsidiaries, collectively, or (C) the right or ability of
the Sellers or the Target to consummate the transactions contemplated hereby, or
(ii) any event or condition, singly or in the aggregate, which would, with the
passage of time, constitute a "Material Adverse Effect."
9
"MORTGAGES" shall mean with respect to the Target and each of its
Subsidiaries, all deeds of trust, mortgages or other Encumbrances securing
indebtedness and relating to any of the Owned Real Property of the Target or
such Subsidiaries.
"MOST RECENT FISCAL QUARTER END" shall mean June 30, 1996.
"MOST RECENT FISCAL QUARTER END FINANCIAL STATEMENTS" shall have the
meaning ascribed to it in the definition of "Financial Statements."
"MOST RECENT MONTH END FINANCIAL STATEMENTS" shall have the meaning
ascribed to it in the definition of "Financial Statements."
"MULTIEMPLOYER PLAN" shall mean any Multiemployer Plan, as defined in
Section 3(37) or 4001(a)(3) of ERISA, (A) which the Target or any of its
Subsidiaries or any ERISA Affiliate maintains, administers, contributes to or is
required to contribute to, or, after September 25, 1980, maintained,
administered, contributed to or was required to contribute to, or under which
the Target or any of its Subsidiaries or any ERISA Affiliate may incur any
Liability and (B) which covers any employee or former employee of the Target or
any of its Subsidiaries or any ERISA Affiliate (with respect to their
relationship with such entities).
"NET WORTH DEFICIENCY" shall have the meaning set forth in Section
2.3(d) of this Agreement.
"NET WORTH SURPLUS" shall have the meaning set forth in Section
2.3(e) of this Agreement.
"NET WORTH VALUE" shall have the meaning set forth in Section 2.3(f)
of this Agreement.
"NOTICE OF EXERCISE" shall have the meaning set forth in Section
7.2(b) of this Agreement.
"NOTICE OF INTENT" shall have the meaning set forth in Section 7.2(a)
of this Agreement.
"OFFERED ITEMS" shall have the meaning set forth in Section 7.2(a) of
this Agreement.
"OFFER PRICE" shall have the meaning set forth in Section 7.2(a) of
this Agreement.
"OPTION DEED" shall mean, collectively, the Option Deed and the
Warrant Instrument, substantially in the form of Appendix D attached hereto,
entered into by and among Buyer, LIW and certain managers of LIW and others
pursuant to which: (a) Buyer is granted the Default Option, the Warrant Option,
the First Call Option, the Second Call Option and the Third Call Option (each as
defined in the Option Deed, and (b) certain managers of LIW receive the Put
Option (as defined in the Option Deed).
"ORDINARY COURSE OF BUSINESS" or "ORDINARY COURSE" or any similar
phrase when used with respect to the Target or any of its Subsidiaries shall
mean with respect to the Target and each such Subsidiary the ordinary course of
the Business and consistent with the past practices of the Target and each such
Subsidiary.
10
"OVERLAP PERIOD" shall have the meaning set forth in Section 9.1 of
this Agreement.
"OWNED REAL PROPERTY" shall mean all real property owned in fee by
the Target and any of its Subsidiaries, including without limitation all rights,
easements and privileges appertaining or relating thereto, all buildings,
fixtures, and improvements located thereon and all Facilities thereon, if any.
"PARENT COMPANIES" shall mean, collectively, LIW, Holdings One and
Holdings Two.
"PATENTS" shall mean all patents and patent applications and
registered designs and registered design applications.
"PBGC" shall mean the Pension Benefit Guaranty Corporation.
"PENSION PLAN" shall mean any "employee pension benefit plan" as
defined in Section 3(2) of ERISA (other than a Multiemployer Plan) (A) which the
Target or any of its Subsidiaries or any ERISA Affiliate maintains, administers,
contributes to or is required to contribute to, or, within the five years prior
to the Closing Date, maintained, administered, contributed to or was required to
contribute to, or under which the Target or any of its Subsidiaries or any ERISA
Affiliate may incur any Liability and (B) which covers any employee or former
employee of the Target or any of its Subsidiaries or any ERISA Affiliate (with
respect to their relationship with such entities).
"PERMITTED ENCUMBRANCES" shall mean the Encumbrances listed on
Schedule 1.3 hereto and other Encumbrances which, individually and in the
aggregate, do not materially detract from the value or transferability of the
property or Assets subject thereto, or interfere in any material respect with
the present use of the properties or Assets subject thereto.
"PERMITS" shall mean all licenses, permits, franchises,
authorizations, consents or orders of, or filings with, any governmental
authority, whether foreign, federal, state or local, or any other person,
necessary for the conduct or operations of the Business.
"PERSON" shall mean an individual, partnership, corporation, limited
liability company, joint venture, trust, association or unincorporated
organization or a government or agency or political subdivision thereof.
"PERSONNEL" shall have the meaning set forth in Section 4.4(b)(i) of
this Agreement.
"POST-CLOSING PERIOD" shall have the meaning set forth in Section 9.2
of this Agreement.
"PRE-CLOSING ENVIRONMENTAL MATTERS" shall mean (a) the production,
use, generation, storage, treatment, recycling, disposal, discharge, release, or
other handling or disposition at any time on or prior to the Closing Date
(collectively "HANDLING") of any Hazardous Substance, either in, on, under or
from any Facility or Former Facility during and in connection with the
ownership, operation or occupancy of any Corporation, including, without
limitation, the effects of such Handling of Hazardous Substances which result in
an Environmental Condition, and (b) the failure on or prior to the Closing Date
of any Facility or Former Facility during the ownership, operation or occupancy
of any Corporation to be in compliance with any applicable Environmental Law or
the failure on or prior to
11
the Closing Date of any operation of any Corporation to be in compliance with
any applicable Environmental Laws or to have discharged liability for any
past non-compliance.
"PRE-CLOSING PERIODS" shall have the meaning set forth in Section 9.1
of this Agreement.
"PROPRIETARY RIGHTS" shall mean all of the Copyrights, Patents,
Trademarks, technology rights and licenses, computer software (including without
limitation any source or object codes therefor or documentation relating
thereto), trade secrets, franchises, know-how, inventions, designs,
specifications, plans, drawings and intellectual property rights of the Target
and each of its Subsidiaries.
"PURCHASE PRICE" shall have the meaning set forth in Section 2.2(a)
of this Agreement.
"REGULATIONS" shall mean any laws, statutes, ordinances, regulations,
rules, court decisions and orders of any foreign, federal, state or local
government and any other governmental department or agency, including without
limitation Environmental Laws, energy, motor vehicle safety, public utility,
zoning, building and health codes, occupational safety and health and laws
respecting employment practices, employee documentation, terms and conditions of
employment and wages and hours.
"RELEASE" shall mean and include any spilling, leaking, pumping,
pouring, emitting, emptying, discharging, injecting, leaching, dumping or
disposing into the environment or the workplace of any Hazardous Substance.
"RELEVANT TERMS" shall have the meaning set forth in Section 7.2(a)
of this Agreement.
"REPRESENTATIVE" shall mean any officer, director, principal,
attorney, agent, employee or other representative.
"S AGENT" shall mean any sales agent of the Target or any of its
Subsidiaries.
"SELLER MATERIAL ADVERSE EFFECT" shall mean with respect to the
Sellers and each of the Sellers' Subsidiaries, after giving effect to the
transactions contemplated hereby (except with respect to (i)(C) below), (i) a
significant or substantial adverse effect or adverse change in (A) the condition
(financial or otherwise) of or in the assets of (a) the Sellers and the Sellers'
Subsidiaries, collectively, or (b) the Target and its Subsidiaries,
collectively, or (B) the business or properties, Liabilities, reserves, working
capital, earnings, technology or relations with customers, public image or
employees of (a) the Sellers and the Sellers' Subsidiaries, collectively, or (b)
the Target and its Subsidiaries, collectively, or (C) the right or ability of
the Sellers or the Target to consummate the transactions contemplated hereby, or
(ii) any event or condition, singly or in the aggregate, which would, with the
passage of time, constitute a "Seller Material Adverse Effect."
"SELLERS" shall mean, collectively, the Stockholder and the Parent
Companies.
"SELLERS INDEMNIFIED PARTIES" shall have the meaning set forth in
section 8.3(b) of this Agreement.
12
"SELLERS' SUBSIDIARY" shall mean (a) any corporation in an unbroken
chain of corporations beginning with LIW if each of the corporations other than
the last corporation in the unbroken chain then owns stock possessing more than
50% of the total combined voting power of all classes of stock in one of the
other corporations in such chain, (b) any partnership in which LIW or any of the
Sellers' Subsidiaries is a general partner and any limited liability company in
which LIW or any of the Sellers' Subsidiaries is a managing member, or (c) any
partnership or limited liability company in which LIW or any of the Sellers'
Subsidiaries possesses more than a 50% interest in the total capital or total
income of such partnership or limited liability company. For the purposes of
this Agreement, "Sellers' Subsidiaries" shall be deemed to exclude the Target
and its Subsidiaries.
"SELLERS' ACCOUNTANT" shall have the meaning set forth in Section
2.3(a) of this Agreement.
"SHAREHOLDERS AGREEMENT" shall mean that Shareholders' Agreement by
and among Buyer, certain managers of LIW and others, substantially in the form
of Appendix I, attached hereto.
"SOFTWARE LICENSE AND TECHNICAL SUPPORT AGREEMENT" shall mean that
agreement by and between LEP International Management Limited, an English
company ("LIM") and the Target, substantially in the form of Appendix G,
attached hereto.
"SOURCE CODE DEPOSIT AGREEMENT" shall mean that agreement by and
between LIM and the Target, substantially in the form of Appendix H, attached
hereto.
"STOCKHOLDER" shall mean LEP Holdings (USA) Inc., a Georgia
corporation.
"SUBSIDIARY" shall mean (a) any corporation in an unbroken chain of
corporations beginning with the Target if each of the corporations other than
the last corporation in the unbroken chain then owns stock possessing more than
50% of the total combined voting power of all classes of stock in one of the
other corporations in such chain, (b) any partnership in which the Target or any
of its Subsidiaries is a general partner and any limited liability company in
which the Target or any of its Subsidiaries is a managing member, or (c) any
partnership or limited liability company in which the Target or any of its
Subsidiaries possesses more than a 50% interest in the total capital or total
income of such partnership or limited liability company.
"TAX" shall mean any federal, state, local or foreign net or gross
income, gross receipts, license, payroll, employment, excise, severance, stamp,
business, occupation, premium (including taxes under Code Section 59A), customs
duties, capital stock, franchise, profits, withholding, payroll, social security
(or similar), unemployment, disability, real property, personal property, sales,
use, transfer, registration, value added, alternative or add-on minimum,
estimated, or other tax, levy, impost, governmental fee or like assessment or
charge of any kind whatsoever, including any interest, penalty or addition
thereto, whether disputed or not, imposed by any governmental authority or
arising under any tax law or agreement, including, without limitation, any joint
venture or partnership agreement.
"TBC" shall mean The Bekins Company, a Delaware corporation.
13
"TRADEMARKS" shall mean registered trademarks, registered service
marks, trademark and service mark applications and unregistered trademarks and
service marks.
"TRADEMARK ASSIGNMENT" shall mean the trademark assignment by the
Target to Holdings One with respect to the "LEP" trademark, substantially in the
form of Appendix E attached hereto.
"UPWARD ADJUSTMENT" shall have the meaning set forth in Section
2.3(c) of this Agreement.
"WARRANT INSTRUMENT" shall mean that certain warrant issued by LIW to
the Buyer granting the right to exercise such warrant and receive 419,900 shares
of ordinary stock of LIW at no additional cost, substantially in the form of
Appendix J attached hereto.
"WARRANTS" shall mean (a) agreements, rights to subscribe (including
any preemptive rights), options, warrants, calls, commitments or rights of any
character to purchase or otherwise acquire any common stock or other securities
of LIW, and (b) outstanding securities of LIW that are convertible into or
exchangeable for capital stock or other securities of LIW.
"WELFARE PLAN" shall mean any "employee welfare benefit plan" as
defined in Section 3(1) of ERISA, (A) which the Target or any of its
Subsidiaries or any ERISA Affiliate maintains, administers, contributes to or is
required to contribute to, or under which the Target or any of its Subsidiaries
or any ERISA Affiliate may incur any Liability and (B) which covers any employee
or former employee of the Target or any of its Subsidiaries or any ERISA
Affiliate (with respect to their relationship with such entities).
ARTICLE II
PURCHASE AND SALE OF STOCK
2.1 TRANSFER OF STOCK. Upon the terms and subject to the conditions
contained herein, at the Closing, the Stockholder shall sell, convey, transfer,
assign and deliver to Buyer, and Buyer shall purchase from the Stockholder, all
of the outstanding shares of capital stock of the Target as set forth in
Schedule 2.1 of this Agreement.
2.2 PURCHASE PRICE.
(a) PURCHASE PRICE. At the Closing, upon the terms and subject
to the conditions set forth herein, in consideration for the transfer of all the
shares of capital stock of the Target pursuant to Section 2.1 of this Agreement,
the Stockholder shall be entitled to receive and the Buyer shall be obligated to
pay four million five hundred thousand dollars ($4,500,000) in cash (the
"PURCHASE PRICE"). Buyer shall pay the Purchase Price, less the Escrow Amount
(as defined below), by wire transfer of immediately available funds to an
account designated by the Stockholder.
(b) ESCROW AGREEMENT. In order to establish a procedure for the
satisfaction of any claims by any Buyer Indemnified Party for indemnification
pursuant to Section 8.3 or Article IX hereof, the Sellers shall enter into an
escrow agreement with Buyer and the Escrow Agent, substantially in the
14
form of Appendix F attached hereto (the "ESCROW AGREEMENT"), pursuant to
which seven-hundred and fifty thousand dollars ($750,000) of the Purchase
Price shall be held in escrow until the first anniversary of the Closing
Date, subject to the terms of the Escrow Agreement. Pursuant to the Escrow
Agreement, the Sellers hereby direct Buyer to deliver to the Escrow Agent (as
such term is defined in the Escrow Agreement), and at the Closing Buyer shall
wire to the Escrow Agent in immediately available funds, an aggregate of
seven-hundred and fifty thousand dollars ($750,000) in cash out of the
aggregate amount of the Purchase Price (the "ESCROW AMOUNT"). The respective
indemnification obligations of the Sellers hereunder shall not be limited to
the Escrow Amount.
2.3 POST-CLOSING ADJUSTMENT.
(a) CLOSING BALANCE SHEET. Schedule 2.3 of the Disclosure Schedule
sets forth a calculation of the actual cash paid to the Sellers at Closing and
the estimated Net Worth Value. As promptly as practicable after the Closing
Date (but in no event more than ninety (90) days after the Closing Date), Buyer
will cause the Target to prepare and deliver to the Sellers consolidated
combined financial statements of the Target and its Subsidiaries as of the close
of business on the day immediately preceding the Closing Date (the "CLOSING
FINANCIAL STATEMENTS"). The Closing Financial Statements shall be accompanied
by a certificate of the Chief Financial Officer of the Target to the effect that
the Closing Financial Statements present fairly, in accordance with GAAP and the
accounting practices of the Target and its Subsidiaries applied on a basis
consistent with the Financial Statements except with respect to those changes
set forth on Schedule 4.10, the financial condition of the Target and its
Subsidiaries as of the close of business on the day immediately preceding the
Closing Date. The balance sheet contained in the Closing Financial Statements
shall be referred to herein as the "CLOSING BALANCE SHEET." The Closing
Financial Statements will be prepared in accordance with GAAP, applied on a
basis consistent with the 1995 Year End Financial Statements, except with
respect to certain agreed changes in accounting policies as set forth in
Schedule 4.10 attached hereto and incorporated herein by this reference. The
Closing Balance Sheet shall be accompanied by reasonably detailed schedules,
including a calculation of the Net Worth Value. The Sellers and a firm of
independent public accountants designated by the Sellers (the "SELLERS'
ACCOUNTANT") will be entitled to reasonable access during normal business hours
to the relevant records and working papers of the Target and its Subsidiaries to
aid in their review of the Closing Financial Statements. The Closing Financial
Statements shall be deemed to be accepted by the Sellers and shall be conclusive
for the purposes of the adjustment described in Sections 2.3(b) and 2.3(c)
hereof except to the extent, if any, that the Sellers or the Sellers' Accountant
shall have delivered, within thirty (30) days after the date on which the
Closing Financial Statements are delivered to the Sellers, a written notice to
Buyer stating each and every item to which the Sellers take exception,
specifying in reasonable detail the nature and extent of any such exception (it
being understood that any amounts not disputed as provided herein shall be paid
promptly). If a change proposed by the Sellers is disputed by Buyer, then Buyer
and the Sellers shall negotiate in good faith to resolve such dispute. If,
after a period of twenty (20) days following the date on which the Sellers give
Buyer notice of any such proposed change, any such proposed change still remains
disputed, then Buyer and the Sellers hereby agree that Ernst & Young, LLP (the
"ACCOUNTING FIRM") shall resolve any remaining disputes. The Accounting Firm
shall act as an arbitrator to determine, based solely on presentations by the
Sellers and Buyer, and not by independent review, only those issues still in
dispute. The decision of the Accounting Firm shall be final and binding and
shall be in accordance with the provisions of this Section 2.3(a). The fees and
expenses of the Accounting Firm, if any, shall be paid equally by Buyer and the
Stockholder; PROVIDED, HOWEVER, that, if the
15
Accounting Firm determines that either party's position is totally correct,
then the other party shall pay one hundred percent (100%) of the costs and
expenses incurred by the Accounting Firm in connection with any such
determination.
(b) In the event that there is a Net Worth Deficiency (as defined
below) with respect to the Target and its Subsidiaries, the Sellers shall pay to
Buyer, as an adjustment to the Purchase Price, an amount equal to (i) the Net
Worth Deficiency, (ii) plus the amount of the InterCompany Surplus, if any,
(iii) minus the amount of the InterCompany Deficit, if any (the "DOWNWARD
ADJUSTMENT"); PROVIDED, HOWEVER, if the Downward Adjustment is a negative
number, then Buyer shall pay to the Stockholder an amount equal to (i) the
InterCompany Deficit minus (ii) the Net Worth Deficiency. Any payments required
to be made by the Sellers pursuant to this Section 2.3(b) or pursuant to Section
2.3(c) shall be made within ten (10) days of the Closing Financial Statements
Delivery Date (as defined below) by wire transfer of immediately available funds
to an account designated by Buyer.
(c) In the event that there is a Net Worth Surplus (as defined
below) with respect to the Target and its Subsidiaries, Buyer shall pay to the
Stockholder, as an adjustment to the Purchase Price, an amount equal to (i) the
Net Worth Surplus, (ii) plus the amount of the InterCompany Deficit, if any,
(iii) minus the amount of the InterCompany Surplus, if any (the "UPWARD
ADJUSTMENT"); PROVIDED, HOWEVER, that If the Upward Adjustment is a negative
number, then the Sellers shall pay to Buyer an amount equal to (i) the
InterCompany Surplus minus (ii) the Net Worth Surplus. Any payments required to
be made by Buyer pursuant to this Section 2.3(c) or pursuant to Section 2.3(b)
shall be made within ten (10) days of the Closing Financial Statements Delivery
Date by wire transfer of immediately available funds to an account designated by
the Stockholder.
(d) The term "NET WORTH DEFICIENCY" shall mean, with respect to the
Target and its Subsidiaries, the amount, if any, by which the Net Worth Value is
a deficit greater than three million five hundred thousand dollars
(- $3,500,000).
(e) The term "NET WORTH SURPLUS" shall mean, with respect to the
Target and its Subsidiaries, the amount, if any, by which the Net Worth Value is
greater than a deficit of three million five hundred thousand dollars
(- $3,500,000).
(f) The term "NET WORTH VALUE" shall mean, with respect to the
Target and its Subsidiaries, the (i) net amount of the Assets, (ii) less the
value of the Liabilities (including but not limited to the Financing Obligations
exclusive of the face amount of the Documentary Letter of Credit) as set forth
on the Closing Balance Sheet; PROVIDED, HOWEVER, that if any change to the
Closing Financial Statements is agreed to by the Target and the Stockholder in
accordance with Section 2.3(a), or any dispute between the Target and the
Stockholder with respect to the Closing Financial Statements is resolved in
accordance with Section 2.3(a), then "NET WORTH VALUE" shall be calculated after
giving effect to any such change or resolution.
(g) The term "CLOSING FINANCIAL STATEMENTS DELIVERY DATE" shall mean
the date on which the Closing Financial Statements are delivered pursuant to
Section 2.3(a); PROVIDED, HOWEVER, that if the Sellers take exception to any
item in the Closing Financial Statements, the Closing Financial Statements
Delivery Date shall be the date on which the Target and the Stockholder agree in
writing to any change
16
as provided in Section 2.3(a) or the date on which the Accounting Firm
delivers its decision with respect to such dispute as provided in Section
2.3(a).
2.4 INTERCOMPANY RECEIVABLES AND PAYABLES. On the Closing Financial
Statements Delivery Date, all intercompany payables and receivables, between the
Target and its Subsidiaries on the one hand, and the Sellers and the Sellers'
Subsidiaries on the other hand, shall be settled and liquidated in the manner
set forth in Sections 2.3(b) and 2.3(c) of this Agreement.
ARTICLE III
CLOSING
3.1 CLOSING. Upon the terms and subject to the conditions set forth
herein, the closing of the transactions contemplated herein (the "CLOSING")
shall be held at 9:00 a.m. local time on the Closing Date at the offices
of Latham & Watkins, Sears Tower, Suite 5800, 233 South Wacker Drive, Chicago,
IL 60606, unless the parties hereto otherwise agree.
3.2 DELIVERIES AT CLOSING.
(a) STOCK CERTIFICATES. To effect the Acquisition, the Stockholder
shall, on the Closing Date, deliver to Buyer certificates(s) evidencing all of
the capital stock of the Target, free and clear of any Encumbrances of any
nature whatsoever, duly endorsed in blank for transfer or accompanied by stock
powers duly executed in blank.
(b) BUYER CERTIFICATES. To effect the Acquisition, Buyer will
furnish the Sellers with such certificates of its officers and others as may be
reasonably requested by the Sellers, which certificates shall include, but not
be limited to:
(i) a certificate executed by the Secretary or an Assistant
Secretary of Buyer certifying as of the Closing Date (A) a true and complete
copy of the Certificate of Incorporation of Buyer, (B) a true and complete copy
of the Bylaws of Buyer, (C) a true and complete copy of the resolutions of the
board of directors of Buyer authorizing the execution, delivery and performance
of this Agreement by Buyer and the consummation of the transactions contemplated
hereby and thereby, and (iv) incumbency matters;
(ii) a copy of the Certificate of Incorporation of Buyer and
all amendments thereto, certified as of a recent date by the Secretary of State
of Delaware; and
(iii) a certificate of the Secretary of State of Delaware
certifying the good standing of Buyer in its state of incorporation.
(c) OPINION OF BUYER'S COUNSEL. At the Closing, Buyer shall deliver
to the Stockholder an opinion of Latham & Watkins, counsel to Buyer, dated as of
the Closing Date, in form and substance reasonably satisfactory to the parties
and customary in transactions of the type contemplated by this Agreement.
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(d) SELLER CERTIFICATES. To effect the Acquisition, the Sellers
shall and shall cause the Target to furnish the Buyer with such certificates of
its officers and others as may be reasonably requested by the Buyer, which
certificates shall include, but not be limited to:
(i) a certificate executed by the Secretary or an Assistant
Secretary of each of the Sellers and of the Target and each of its Subsidiaries
certifying as of the Closing Date (A) a true and complete copy of the Articles
or Certificate of Incorporation (or such other comparable organizational
documents) of each of the Sellers and of the Target and each such Subsidiary,
(B) a true and complete copy of the Bylaws of each of the Sellers and of the
Target and each such Subsidiary, (C) incumbency matters and (D) with respect to
each of the Sellers, (1) a true and correct copy of the resolutions of the board
of directors of such Seller authorizing the execution, delivery and performance
of this Agreement by such Seller and the consummation of the transactions
contemplated hereby, and (2) approval and adoption of this Agreement by any
requisite vote or consent of the shareholders of such Seller;
(ii) a copy of the Articles or Certificate of Incorporation
(or such other comparable organizational documents) of each of the Sellers and
of the Target and each of its Subsidiaries and all amendments thereto, certified
as of a recent date by the appropriate Secretary of State or such other
appropriate authority; and
(iii) a certificate of the appropriate Secretary of State
certifying the good standing of the Target and each of its Subsidiaries in its
state of incorporation and all states in which it is qualified to do business.
(e) OPINION OF SELLERS' COUNSEL. The Sellers shall deliver to Buyer
an opinion of Troutman Sanders LLP, special counsel to the Sellers, and, to the
extent reasonably requested by Buyer, local counsel (including but not limited
to New York counsel with respect to enforceability), dated as of the Closing
Date, in form and substance reasonably satisfactory to the parties and customary
in transactions of the type contemplated by this Agreement.
3.3 OTHER CLOSING TRANSACTIONS.
(a) PAYMENT OF PURCHASE PRICE. At the Closing, Buyer shall deliver
to the Stockholder the Purchase Price as provided in Section 2.2.
(b) INTERCOMPANY AGREEMENT. At the Closing, the Buyer, LIW, LIM and
the Target and its Subsidiaries shall enter into the Intercompany Agreement
substantially in the form of Appendix A attached hereto.
(c) LICENSE AGREEMENT. At the Closing, the Target and Holdings One
shall enter into the License Agreement substantially in the form of Appendix B
attached hereto.
(d) LIW PROMISSORY NOTE RELEASE. At the Closing, TBC and LIW shall
enter into the LIW Promissory Note Release substantially in the form of Appendix
C attached hereto.
(e) OPTION DEED. At the Closing, the Buyer and certain managers of
LIW and others shall enter into the Option Deed substantially in the form of
Appendix D attached hereto.
18
(f) TRADEMARK ASSIGNMENT. At the Closing, the Target shall deliver
the Trademark Assignment, substantially in the form of Appendix E attached
hereto, to Holdings One.
(g) ESCROW AGREEMENT. At the Closing, the Sellers shall enter into
the Escrow Agreement with Buyer and the Escrow Agent substantially in the form
of Appendix F attached hereto and Buyer shall deposit the Escrow Amount into
escrow thereunder contemplated by Section 2.2(b).
(h) SOFTWARE LICENSE AND TECHNICAL SUPPORT AGREEMENT. At the
Closing, the Target and LIM shall enter into the Software License and Technical
Support Agreement, substantially in the form of Appendix G attached hereto.
(i) SOURCE CODE DEPOSIT AGREEMENT. At the Closing, the Target and
LIM shall enter into the Source Code Deposit Agreement, substantially in the
form of Appendix H hereto.
(j) SHAREHOLDERS AGREEMENT. At the Closing, Buyer and certain
managers of LIW and others shall enter into the Shareholders Agreement,
substantially in the form of Appendix I attached hereto.
(k) WARRANT INSTRUMENT. At the Closing, LIW shall execute the
Warrant Instrument, substantially in the form of Appendix J hereto.
(l) PAYMENT OF FLEET OBLIGATION. Concurrently with the Closing,
Buyer shall cause the Target to retire the aggregate amount of the Fleet
Obligation.
(m) NONFOREIGN AFFIDAVIT. At the Closing, the Stockholder shall
furnish Buyer an affidavit, stating, under penalty of perjury, such transferor's
United States taxpayer identification number and that such transferor is not a
foreign person, pursuant to Section 1445(b)(2) of the Code.
(n) HOULIHAN LOKEY OPINION. At the Closing, LIW and Buyer shall be
furnished with an opinion from Houlihan, Lokey, Howard & Zukin, Inc. stating
that the Purchase Price (plus the amount of the Financing Obligations being
assumed or retired by Buyer as set forth herein) is at least equal to the fair
value of the aggregate assets of the Target and its Subsidiaries, with fair
value being defined as the amount at which the aggregate assets of the Target
and its Subsidiaries would change hands between a willing Buyer and a willing
Seller, each having reasonable knowledge of the relevant facts, neither being
under any compulsion to act, with equity to both. The costs of such opinion
shall be paid by Buyer.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE SELLERS WITH RESPECT TO THE
TARGET AND ITS SUBSIDIARIES
The Sellers hereby, jointly and severally, represent and warrant to
Buyer as follows (except as otherwise set forth in the numbered section of the
Disclosure Schedule corresponding to the Sections of
19
this Article to which such exception pertains), which representations and
warranties are, as of the date hereof, true and correct:
4.1 ORGANIZATION OF THE TARGET AND EACH OF ITS SUBSIDIARIES. (a) The
Target and each of its active Subsidiaries is duly organized, validly existing
and in good standing under the laws of its jurisdiction of incorporation or
formation with full power and authority to conduct the Business as it is
presently being conducted and to own and lease its properties and Assets. The
Target and each of its Subsidiaries is duly qualified to do business as a
foreign corporation and is in good standing in each jurisdiction in which such
qualification is necessary under the applicable law as a result of the conduct
of the Business or ownership (or leasing) of its properties, except where the
failure to be so qualified or in good standing would not have a Material Adverse
Effect. Copies of the Certificates or Articles of Incorporation and Bylaws of
the Target and each of its Subsidiaries, and all amendments thereto, heretofore
delivered to Buyer are accurate and complete as of the date hereof.
Schedule 4.1(a) contains a true, correct and complete list of all jurisdictions
in which the Target and each of its Subsidiaries is qualified to do business as
a foreign corporation.
(b) The authorized, issued and outstanding shares of capital stock
of the Target and each of its Subsidiaries are set forth in Schedule 4.1(b)
hereto. All of the outstanding shares of capital stock of the Target and each
of its Subsidiaries are duly authorized, validly issued, fully paid and non-
assessable. Except as set forth in Schedule 4.1(b), the Stockholder has good
and valid title to all of the issued and outstanding shares of capital stock of
the Target free and clear of all Encumbrances with full right, power and
authority to transfer such shares to Buyer subject to securing the consents set
forth in Schedule 4.1(b) hereof. Except as set forth in Schedule 4.1(b), the
Target owns all of the issued and outstanding shares of capital stock of each of
its Subsidiaries. Except as set forth in Schedule 4.1(b), there are no
outstanding subscriptions, calls, commitments, warrants or options for the
purchase of shares of any capital stock or other securities of (or other
ownership interests in) the Target or any of its Subsidiaries or any securities
convertible into or exchangeable for shares of capital stock or other securities
issued by (or other ownership interests in) the Target or any of its
Subsidiaries or any other commitments of any kind for the issuance of additional
shares of capital stock or other securities issued by (or other ownership
interests in) the Target or any of its Subsidiaries. Upon delivery to Buyer and
the payment in full of the Fleet Obligation, the capital stock of the Target and
its Subsidiaries will be free and clear of all Encumbrances and shall be duly
authorized, validly issued, fully paid and non-assessable.
4.2 SUBSIDIARIES. Except as set forth in Schedule 4.2, the Target (a)
does not have any Subsidiaries nor (b) any direct or indirect stock or other
ownership interest (whether controlling or not) in any Person.
4.3 AUTHORIZATION. The Target and each of its Subsidiaries have all
requisite corporate power and authority, and have taken all corporate action
necessary, to own, lease and operate their respective Assets and to conduct the
Business as it is presently being conducted. The Target has all requisite power
and authority, and has taken all action necessary, to execute and deliver the
Ancillary Agreements to which it is a party, to consummate the transactions
contemplated thereby and to perform its obligations thereunder. The execution
and delivery by the Target of the Ancillary Agreements to which it is a party
and the consummation by the Target of the transactions contemplated thereby have
been duly approved by the board of directors and, to the extent required under
applicable corporate
20
laws, shareholders of the Target. No other proceedings or actions on the
part of the Target are necessary to authorize the Ancillary Agreements to
which it is a party and the transactions contemplated hereby and thereby.
Each of the Ancillary Agreements to which it is a party have been duly
executed and delivered by the Target, and each such agreement is a legal,
valid and binding obligation of the Target, enforceable against the Target in
accordance with its terms, except as such enforceability may be limited by
(i) bankruptcy, insolvency, moratorium, reorganization and other similar laws
affecting creditors' rights generally and (ii) general principles of equity,
regardless of whether asserted in a proceeding in equity or at law.
4.4 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth in
Schedule 4.4:
(a) since June 30, 1996, there has not been any actual or, to
the knowledge of the Sellers, threatened change in the Assets or the Business,
or the Liabilities, earnings, results of operations or financial condition of
the Target or any of its Subsidiaries that would have a Material Adverse Effect;
(b) since June 30, 1996, there has not been (i) except for
normal periodic increases in the ordinary course of business or pursuant to the
collective bargaining agreements to which the Target or any of its Subsidiaries
are a party as set forth in Schedule 4.13, any increase in the compensation
payable or to become payable by the Target or any of its Subsidiaries to any of
its current or former officers, employees, or agents (collectively,
"PERSONNEL"), (ii) any grant, payment or accrual, contingent or otherwise, for
or to the credit of any of the Personnel with respect to any bonus, incentive
compensation, service award or other like benefit other than in the ordinary
course of business, (iii) any adoption, creation or amendment of any Employee
Plan of the Target or any of its Subsidiaries, (iv) any written employment
agreement made by the Target or any of its Subsidiaries to which the Target or
any of its Subsidiaries is a party or (v) any other material change in
employment terms for any officers, employees or agents of the Target or any of
its Subsidiaries other than in the ordinary course of business;
(c) since December 31, 1995, there has not been any sale,
lease, assignment or transfer of any of the Assets, other than to persons that
are not affiliates for fair consideration and in the ordinary course of
business;
(d) since June 30, 1996, there has not been any cancellation of
any indebtedness or waiver or release of any right or claim of the Target or any
of its Subsidiaries relating to its activities or properties in connection with
the Assets or the Business, except where such cancellation, release or waiver
would not, individually or in the aggregate, have a Material Adverse Effect;
(e) since June 30, 1996, there has not been any amendment,
cancellation or termination of any Contract, commitment, agreement, transaction
or Permit relating to the Assets or the Business or entry into any Contract,
commitment, agreement, Lease, transaction or Permit which, in each case, is not
in the ordinary course of business;
(f) since June 30, 1996, there has not been any damage,
destruction or loss of Assets (whether or not covered by insurance) which would
have a Material Adverse Effect.
21
(g) since June 30, 1996, there has not been any change in
employee relations which has or would have a Material Adverse Effect;
(h) since December 31, 1995, there has not been any change in
accounting methods, principles or practices by the Target or any of its
Subsidiaries;
(i) since June 30, 1996, there has not been any revaluation of
any of the Assets of the Target or any of its Subsidiaries, including without
limitation writing down the value of inventory or writing off notes or accounts
receivable except in the ordinary course of business, except for such
revaluation of Assets which would not have, either individually or in the
aggregate, a Material Adverse Effect;
(j) since June 30, 1996, except for certain pledges to TBC,
there has not been any mortgage, pledge or other Encumbrance of any Assets,
except Permitted Encumbrances;
(k) since December 31, 1995, except for the Fleet Obligation
and certain indebtedness to TBC, there has not been any incurrence of
indebtedness by the Target or any of its Subsidiaries for borrowed money or
commitment to borrow money entered into by the Target or any of its
Subsidiaries, or any loans made or agreed to be made by the Target or any of its
Subsidiaries, or indebtedness guaranteed by the Target or any of its
Subsidiaries, in excess of $100,000 (exclusive of freight costs and customs
duties) for any single item (or series of similar items with the same party or
parties);
(l) since December 31, 1995, there has not been any incurrence,
payment, discharge or satisfaction by the Target or any of its Subsidiaries of
Liabilities, except Liabilities incurred, paid, discharged or satisfied in the
ordinary course of business and not in excess of $100,000 (exclusive of freight
costs and customs duties) for any single item (or series of similar items with
the same party or parties);
(m) since December 31, 1995, there has not been any capital
expenditure or the execution of any Lease or Contract (or series of related
Leases or Contracts) or any incurring of liability therefor, in each case by the
Target and its Subsidiaries (i) involving affiliates of the Target or any of its
Subsidiaries, (ii) involving payments, individually or, for a series of related
Contracts involving payments to or from the same party or parties, in the
aggregate, in excess of $100,000, or (iii) outside of the ordinary course of
business;
(n) since June 30, 1996, there has not been any failure to pay
or satisfy when due any Liability of the Target and its Subsidiaries, except
where the failure would not have a Material Adverse Effect;
(o) since June 30, 1996, there has not been any failure of the
Target or any of its Subsidiaries to carry on diligently (given the financial
condition of the Target and its Subsidiaries) the Business in the ordinary
course;
(p) since December 31, 1995, other than pursuant to this
Agreement, there has not been any issuance of any shares of capital stock of the
Target or any of its Subsidiaries or any rights or
22
options to purchase any such shares, payment of dividends in cash or
otherwise or any other distribution on account of the capital stock of the
Target and any of its Subsidiaries;
(q) since June 30, 1996, there has not been any acceleration of
the payment by the Target or any of its Subsidiaries of any accounts payable to
LIW and/or any affiliate of LIW outside of the normal MCS terms (as such terms
are defined in the Intercompany Agreement);
(r) to the knowledge of the Sellers, since June 30, 1996, there
has not occurred any other event or condition which in any one case or in the
aggregate would have a Material Adverse Effect;
(s) agreement by any Seller or the Target or any of its
Subsidiaries to do any of the things described in the preceding clauses (a)
through (r) other than as expressly provided for herein.
4.5 TITLE TO ASSETS. Schedule 4.5 contains accurate lists or summary
descriptions of categories of all tangible Assets owned or leased by the Target
and any of its Subsidiaries where the value of an individual item exceeds
$50,000 at current book value or where an aggregate of similar items exceeds
$100,000 at current book value. Except as set forth in Schedule 4.5, the Target
and each of its Subsidiaries owns or has the right to use its respective Assets
free and clear of any Encumbrances, except for Encumbrances specifically
identified in Schedule 4.5 and Permitted Encumbrances. The Assets include
without limitation all assets necessary for the conduct of the Business. All
tangible assets and properties which are part of the Assets conform in all
respects to all applicable Regulations (including Environmental Laws) relating
to their construction, use and operation except where the failure to conform
would not have a Material Adverse Effect.
4.6 FACILITIES.
(a) FACILITIES. Neither the Target nor any of its Subsidiaries owns
any Owned Real Property. Schedule 4.6(a) also contains a complete and accurate
description of the following terms of all Facility Leases of the Target and any
of its Subsidiaries: (i) a general description of the leased property or items,
(ii) the term, (iii) the applicable rent and (iv) any requirements for the
consent of third parties to assignments thereof or to the change of control or
ownership of The Target. To the knowledge of the Sellers, all Facility Leases
of the Target and any of its Subsidiaries are valid, binding and enforceable in
accordance with their terms and, to the knowledge of the Sellers, are in full
force and effect; except as set forth in Schedule 4.6, no event exists which
(whether with or without notice, lapse of time or both or the happening or
occurrence of any other event) would constitute a Default thereunder on the part
of the Target or any of its Subsidiaries which would terminate or cause a
material Liability under any Facility Leases; and, to the knowledge of the
Sellers, there exists no occurrence of any event which (whether with or without
notice, lapse of time or both or the happening or occurrence of any other event)
would constitute a Default thereunder by any other party.
(b) ACTIONS. There are no pending condemnation proceedings,
administrative proceeding or other Actions against the Target or any of its
Subsidiaries with respect to any of the Facility Leases, or to the knowledge of
the Sellers, pending or threatened condemnation proceedings, administrative
proceedings or other Actions otherwise with respect to any of the Facility
Leases.
23
(c) LEASES OR OTHER AGREEMENTS. Except for Facility Leases listed
in Schedule 4.6, there are no leases, subleases, licenses, occupancy agreements,
options, rights, concessions or other agreements or arrangements with respect to
real property, written or oral, involving, individually or in the aggregate, the
payment of $50,000 or more to or by the Target or any of its Subsidiaries during
any twelve-month period and granting to any Person the right to purchase, use or
occupy any Facility or any real property.
(d) FACILITY LEASES AND LEASED REAL PROPERTY. With respect to each
Facility Lease, the Target and each of its Subsidiaries that is a party to such
Facility Lease has an interest in the Leasehold Estate, subject only to
Permitted Encumbrances and those Encumbrances set forth in Schedule 4.6(d).
Except as set forth in Schedule 4.6, the Target and each of its Subsidiaries
enjoys peaceful and undisturbed possession of all the Leased Real Property it
leases, subject to the rights of the fee owners and the terms of the Facility
Leases, and the Target and each of its Subsidiaries has performed all the
obligations required to be performed by it through the date hereof, except where
the failure to perform would not, either individually or in the aggregate, have
a Material Adverse Effect.
(e) CERTIFICATE OF OCCUPANCY. To the knowledge of the Sellers, all
Facilities have received all required approvals of governmental authorities
(including without limitation Permits and a certificate of occupancy or other
similar certificate permitting lawful occupancy of the Facilities) required in
connection with the operation thereof and have been operated and maintained in
all respects in accordance with applicable Regulations, except where the failure
to receive such approvals or comply with any such Regulation would not have a
Material Adverse Effect.
(f) UTILITIES. All Facilities are supplied with utilities
(including without limitation water, sewage, disposal, electricity, gas and
telephone) and other services necessary for the operation of such Facilities as
currently operated, and, to the knowledge of the Sellers, there is no condition
which would result in the termination of the present access from any Facility to
such utility services.
(g) IMPROVEMENTS, FIXTURES AND EQUIPMENT. The improvements
constructed on the Facilities, including without limitation all Leasehold
Improvements are (i) insured to the extent and in a manner customary in the
industry, (ii) to the knowledge of the Sellers, structurally sound with no
material defects, (iii) in good operating condition and repair, subject to
ordinary wear and tear, (iv) to the knowledge of the Sellers, sufficient for the
operation of the Business as presently conducted and (v) in conformity with all
applicable Regulations, except where the failure to be insured, structurally
sound, in good operating condition and repair or to conform with any such
Regulation would not have a Material Adverse Effect. None of the improvements
is subject to any commitment or other arrangement for their sale or use by any
affiliate of the Target or any of its Subsidiaries or, to the knowledge of the
Sellers, any third party that would materially interfere with the use thereof.
(h) NO SPECIAL ASSESSMENT. Neither the Target nor any of its
Subsidiaries has received notice of any special assessment relating to any
Facility or any portion thereof and, to the knowledge of the Sellers, there is
no pending or threatened special assessment.
24
4.7 CONTRACTS AND COMMITMENTS.
(a) CONTRACTS. Schedule 4.7(a) lists the following Contracts,
agreements and other written arrangements to which the Target and any of its
Subsidiaries is a party, or by which the Assets of the Target or any such
Subsidiary are bound, including without limitation:
(i) Contracts not made in the ordinary course of business;
(ii) written employment and severance agreements, including
without limitation Contracts (A) to employ or terminate officers or other
Personnel and other Contracts with present or former officers, directors or
shareholders or other Personnel of the Target or any of its Subsidiaries or (B)
that will result in the payment by, or the creation of any Liability to pay on
behalf of Buyer or the Target or any of its Subsidiaries any severance,
termination, "golden parachute," or other similar payments to any present or
former Personnel following termination of employment or otherwise as a result of
the consummation of the transactions contemplated by this Agreement;
(iii) labor or union contracts;
(iv) excluding Contracts with S-Agents and employees,
written sales, commission, consulting or agency Contracts related to the Assets
or the Business requiring payments by the Target or its Subsidiaries in excess
of $50,000 during any twelve-month period;
(v) options with respect to any property, real or personal,
whether the Target or any of its Subsidiaries shall be the grantor or grantee
thereunder, providing for payments in excess of $50,000;
(vi) excluding Contracts that are cancelable by the Target
(in the case of Contracts entered into by the Target) and its Subsidiaries (in
the case of contracts that are entered into by the Target's Subsidiaries)
without penalty or increased cost, written Contracts for the performance of
services or delivery of goods by the Target or any of its Subsidiaries involving
receipts in excess of $500,000 (exclusive of freight charges and customs duties)
or expenditures in excess of $50,000 (exclusive of freight charges and customs
duties) in any twelve-month period;
(vii) excluding Contracts that are cancelable by the Target
(in the case of Contracts entered into by the Target) and its Subsidiaries (in
the case of contracts that are entered into by the Target's Subsidiaries)
without penalty or increased cost, Contracts involving expenditures or
Liabilities, actual or potential, which individually involve in excess of
$50,000 (exclusive of freight charges and customs duties) in any twelve-month
period;
(viii) promissory notes, loans, indentures, evidences of
indebtedness, letters of credit, guarantees, or other similar instruments
relating to an obligation to repay borrowed money, individually or in the
aggregate in excess of $25,000, whether the Target or any of its Subsidiaries
shall be the borrower, lender or guarantor thereunder or whereby any Assets are
pledged (excluding credit provided by the Target or any such Subsidiary in the
ordinary course of business to purchasers of its products or services);
25
(ix) Contracts containing covenants materially limiting the
freedom of the Target or any of its Subsidiaries or any officer, director,
shareholder or affiliate of the Target or any of its Subsidiaries, (i) to engage
in any line of business which is competitive with the Business, or (ii) except
for covenants running in favor of the Target or any of its Subsidiaries, to
compete with any Person with respect to the Business;
(x) except for agreements with S Agents, written
arrangements (or group of related written arrangements) constituting a
partnership or joint venture between the Target or any of its Subsidiaries and
any other Person;
(xi) written arrangements between the Target or any of its
Subsidiaries and any of their respective directors, officers, shareholders or
employees, any affiliate thereof or any member of any such person's immediate
family (x) providing for the furnishing of material services by, (y) providing
for the rental of material real or personal property from, or (z) otherwise
requiring material payments to (other than for services as officers, directors
or employees of the Target or any such Subsidiary), any such Person or any
corporation, partnership, trust or other entity in which any such Person has a
substantial interest as a shareholder, officer, director, trustee or partner;
(xii) Contracts that materially limit or contain material
restrictions on the ability of the Target or any of its Subsidiaries to purchase
or sell any Assets;
(xiii) Contracts with the United States, any state or local
government or any agency or department thereof;
(xiv) Leases of real property; and
(xv) Leases of personal property providing for lease
payments in excess of $50,000 and not cancelable (without Liability) within 30
calendar days.
The Target and its Subsidiaries have made available to Buyer true, correct and
complete copies of all of the Contracts listed in Schedule 4.7(a), including all
amendments and supplements thereto.
(b) ABSENCE OF BREACHES AND DEFAULTS. All of the Contracts to which
the Target or any of its Subsidiaries is party or by which it or any of the
Assets is bound or affected are valid, binding and enforceable in accordance
with their terms, except where any such failure to be enforceable would not,
either individually or in the aggregate, have a Material Adverse Effect. Except
as set forth in Schedule 4.7(b), the Target and each of its Subsidiaries has
fulfilled, or taken all action necessary to enable it to fulfill when due, all
of its material obligations under each such Contract, except where the failure
to fulfill its obligations thereunder, or the failure to take any such action to
enable it to fulfill its obligations thereunder, either individually or in the
aggregate, would not have a Material Adverse Effect. Except as set forth in
Schedule 4.7(b), the Target and each of its Subsidiaries which is a party to
such Contracts and, to the knowledge of the Sellers, each other party to such
Contracts has complied in all material respects with the provisions thereof and
is not in Default thereunder, except where such Default would not, either
individually or in the aggregate, have a Material Adverse Effect, and no notice
of any claim of Default has been given to the Target or any of its Subsidiaries.
Neither the Target nor any of its Subsidiaries has reason to believe that any
outstanding bid, proposal or any
26
unfinished Contract will upon performance by the Target or any of its
Subsidiaries result in a loss to the Target or such Subsidiary, except where
such loss would not have a Material Adverse Effect.
(c) SERVICE WARRANTY. Except as set forth in Schedule 4.7(c),
neither the Target nor any of its Subsidiaries has committed any act, and there
has been no omission, which will result in, and there has been no occurrence
which will give rise to, Liability for breach of warranty (whether covered by
insurance or not) on the part of the Target or any of its Subsidiaries, with
respect to products maintained, delivered or installed or services rendered
prior to or on the Closing Date, except for such Liabilities which would not,
either individually or in the aggregate, have a Material Adverse Effect.
4.8 PERMITS, CONSENTS AND APPROVALS.
(a) Schedule 4.8(a) sets forth a complete list of all material
Permits used in the operation of the Business or otherwise held by the Target or
any of its Subsidiaries with respect to the Business. The Target and each of
its Subsidiaries has all Permits required to be maintained by the Target or any
of its Subsidiaries under any Regulation (including applicable Environmental
Laws) in the operation of its Business or in the ownership of the Assets, and
possesses such Permits free and clear of all Encumbrances, other than Permitted
Encumbrances and Encumbrances identified in Schedule 4.8(a), except Permits the
failure of which to obtain would not have a Material Adverse Effect. To the
knowledge of the Sellers neither the Target nor any of its Subsidiaries is in
Default, nor has the Target or any of its Subsidiaries received any notice of
any claim of Default, with respect to any such Permit. Except as set forth in
Schedule 4.8(a), none of the rights of the Target or any of its Subsidiaries in
any Permit will be adversely affected by the completion of the transactions
contemplated by this Agreement. Except for Permits set forth in Schedule
4.8(a), no present or former shareholder, director, officer or employee of the
Target or any of its Subsidiaries or any affiliate thereof, or any other Person
owns or has any proprietary, financial or other interest (direct or indirect) in
any Permit which any Seller owns, possesses or uses.
(b) Other than in connection with or in compliance with the
provisions of the HSR Act, and except as disclosed in Schedule 4.8(b) hereto, no
notice to, declaration, filing or registration with, or Permit from, any
domestic or foreign governmental or regulatory body or authority, or any other
Person, is required to be made or obtained by the Target or any of its
Subsidiaries in connection with the execution, delivery or performance of this
Agreement and the consummation of the transactions contemplated hereby.
Schedule 4.8(b) sets forth all Contracts which require the consent of the other
parties thereto to any "change of control" or similar event with respect to the
Target or any of its Subsidiaries.
4.9 NO CONFLICT OR VIOLATION. Except as set forth in Schedule 4.9,
neither the execution, delivery or performance of this Agreement or the
Ancillary Agreements nor the consummation of the transactions contemplated
hereby or thereby, nor compliance by the Target or any of its Subsidiaries with
any of the provisions hereof, will (a) violate any provision of the Articles of
Incorporation or Bylaws of the Target or any of its Subsidiaries, (b) violate or
result in or constitute a Default under, or result in the termination of, or
accelerate the performance required by, or result in a right of termination or
acceleration under, or result in the creation of any Encumbrance upon any of the
Assets under, any of the terms, conditions or provisions of any Contract or
Permit (i) to which the Target or any of its Subsidiaries is a party or (ii) by
which the Assets are bound, (c) violate any Regulation or
27
Court Order or (d) impose any Encumbrance on any of the Assets or the
Business, other than Permitted Encumbrances, except in the cases of each of
clauses (b), (c) and (d) above, for such violations, Defaults, terminations,
accelerations or creations of Encumbrances which, individually and in the
aggregate, would have a Material Adverse Effect.
4.10 FINANCIAL STATEMENTS. The Target and each of its Subsidiaries have
heretofore delivered to Buyer true and complete copies of the Financial
Statements. The Financial Statements (a) are in accordance with the Books and
Records of the Target and its Subsidiaries in all material respects, (b) except
as set forth in Schedule 4.10 have been prepared in accordance with GAAP
consistently applied (except such changes as may have been required by GAAP)
throughout the period covered thereby (subject, in the case of the Interim
Financial Statements, which have been prepared in accordance with the historical
accounting procedures of the Target and its Subsidiaries for the preparation of
interim financial statements, to normal year-end adjustments and the absence of
footnotes) and (c) after giving effect to the adjustments specified therein,
fairly and accurately present in all material respects (i) the combined assets,
liabilities (including all reserves) and financial position of the Target and
its Subsidiaries on the date or for the period covered thereby, (ii) the
combined results and operations of the Target and its Subsidiaries for the
period presented and (iii) the combined cash flows of the Target and its
Subsidiaries for the period presented.
4.11 BOOKS AND RECORDS. The Target and each of its Subsidiaries has made
and kept (and given Buyer access to) Books and Records and accounts, which, in
reasonable detail, accurately reflect in all material respects the activities of
the Target and each such Subsidiary. The minute books of the Target and each of
its Subsidiaries previously delivered to Buyer accurately reflect all material
action previously taken by the shareholders, board of directors and committees
of the board of directors of the Target and each such Subsidiary. The copies of
the stock ledgers of the Target and each of its Subsidiaries previously
delivered to Buyer are true, correct and complete in all material respects, and
accurately reflect all transactions effected in the stock of the Target and each
of its Subsidiaries through and including the date hereof.
4.12 LITIGATION. Except as set forth in Schedule 4.12, there are no
Actions, individually or, if related to a single set of circumstances, in the
aggregate, involving more than $50,000 pending, or to the knowledge of the
Sellers, threatened (a) against, or to the knowledge of the Sellers, relating to
or affecting (i) the Target or any of its Subsidiaries, the Business or the
Assets (including with respect to Environmental Laws), (ii) any Employee Plan of
the Target or any of its Subsidiaries or any trust or other funding instrument
or any fiduciary or administrator thereof in their capacity as such, (iii) any
officers or directors of the Target or any of its Subsidiaries in such capacity,
(iv) any shareholder of the Target or any of its Subsidiaries in
such shareholder's capacity as a shareholder of the Target or such Subsidiary or
(v) the transactions contemplated by this Agreement or before or by any federal,
state, municipal or other governmental department, commission, board, bureau,
agency or instrumentality, domestic or foreign, any of which would have a
Material Adverse Effect, (b) which, if determined adversely to the Target or any
of its Subsidiaries, could reasonably be expected to delay, limit or enjoin the
transactions contemplated by this Agreement, (c) that involve the probability of
criminal liability on the part of the Target or any of its Subsidiaries, or (d)
in which the Target or any of its Subsidiaries is a plaintiff, including any
derivative suits brought by or on behalf of the Target or any of its
Subsidiaries. Except as set forth in Schedule 4.12, neither the Target nor any
of its Subsidiaries is in Default with respect to or subject to any judgment,
order, writ, injunction or decree of any court or governmental
28
agency and there are no unsatisfied judgments against the Target or any of
its Subsidiaries, the Business or the Assets, any of which would,
individually or in the aggregate, have a Material Adverse Effect. To the
knowledge of the Sellers, there is not a reasonable likelihood of an adverse
determination of any pending Actions that could, individually or in the
aggregate, have a Material Adverse Effect. There are no Court Orders or
agreements with, or liens of, any governmental authority pursuant to or under
any Environmental Law which regulate, obligate or bind the Target or any of
its Subsidiaries or, to the knowledge of the Sellers, any Facility or Former
Facility.
4.13 LABOR MATTERS. Except as set forth in Schedule 4.13, neither the
Target nor any of its Subsidiaries is a party to any labor agreement with
respect to its employees with any labor organization, union or similar group or
association and there are no employee unions (nor any other similar labor or
employee organizations) which represent employees of the Target and its
Subsidiaries. Other than pursuant to the labor agreements set forth in Schedule
4.13 and the activities of the unions which are parties thereto with respect to
the employees covered thereby, neither the Target nor any of its Subsidiaries is
experiencing any attempt by organized labor or its representatives to make the
Target or any of its Subsidiaries conform to demands of organized labor relating
to its employees or to enter into a binding agreement with organized labor that
would cover the employees of the Target or any of its Subsidiaries. There is no
labor strike or labor disturbance pending or, to the knowledge of the Sellers,
threatened against the Target or any of its Subsidiaries nor is any grievance
currently being asserted. The Business is in compliance with all applicable
laws respecting employment practices, employment documentation, terms and
conditions of employment and wages and hours, except where any failure to comply
with any such applicable law would not have a Material Adverse Effect, and is
not and has not engaged in any unfair labor practice which would, individually
or in the aggregate, have a Material Adverse Effect. Without limiting the
foregoing, the Target and each of its Subsidiaries is in compliance with the
Immigration Reform and Control Act of 1986 and maintains a current Form I-9, to
the extent required by such Act, in the personnel file of each employee hired
after November 9, 1986, except where any failure to comply would not have a
Material Adverse Effect. Schedule 4.13 sets forth the names and current annual
salary rates or current hourly wages of all present employees of the Target or
any of its Subsidiaries whose annual cash compensation for the 1996 fiscal year
exceeds $75,000, and also sets forth the earnings for each of such employees as
reflected on Form W-2 for the 1995 calendar year. Except as set forth in
Schedule 4.13, there is no unfair labor practice charge or complaint against the
Target or any of its Subsidiaries pending before the National Labor Relations
Board or any other domestic or foreign governmental agency arising out of
conduct of the Business, and to the knowledge of the Sellers there are no facts
or information which would give rise thereto.
4.14 LIABILITIES. Except as set forth in Schedule 4.14 hereto, neither
the Target nor any of its Subsidiaries has any Liabilities due or to become due,
except (a) Liabilities which are reflected and reserved against on the 1995 Year
End Financial Statements, which have not been paid or discharged since the date
thereof, (b), Liabilities hereunder and under the Ancillary Agreements or
(c) Liabilities arising in the ordinary course of business (including the
payment of amounts due in the ordinary course under Contracts) and none of
which, individually or in the aggregate, has or would have a Material Adverse
Effect.
4.15 COMPLIANCE WITH LAW. Except as set forth in Schedule 4.15, the
Target and each of its Subsidiaries and the conduct of the Business have not
violated and are in compliance with all applicable Regulations and Court Orders
relating to the Assets or the Business or operations of the Target and
29
each such Subsidiary, except where the violation or failure to comply,
individually or in the aggregate, would not have a Material Adverse Effect.
Neither the Target nor any of its Subsidiaries has received any notice to the
effect that, or otherwise been advised that, the Target or any of its
Subsidiaries is not in compliance with any such Regulations or Court Orders,
and no Seller has reason to believe that any existing circumstances are
likely to result in violations of any of the foregoing, which failure to
comply or violation would, in any one case or in the aggregate, have a
Material Adverse Effect.
4.16 NO BROKERS. Neither the Target nor any of its Subsidiaries nor any
of their respective officers, directors, employees, shareholders or affiliates
has employed or made any agreement with any broker, finder or similar agent or
any person or firm which will result in the obligation of Buyer or any of its
affiliates to pay any finder's fee, brokerage fees or commission or similar
payment in connection with the transactions contemplated hereby.
4.17 NO OTHER AGREEMENTS TO SELL THE ASSETS. Neither the Target nor any
of its Subsidiaries nor any of their respective officers, directors,
shareholders or affiliates has any outstanding commitment or legal obligation,
absolute or contingent, to any other Person other than Buyer to sell, assign,
transfer or effect a sale of all or a material portion of the Assets (other than
inventory in the ordinary course of business), to sell or effect a sale of the
capital stock of the Target or any of its Subsidiaries, to effect any merger,
consolidation, liquidation, dissolution or other reorganization of the Target or
any of its Subsidiaries, or to enter into any agreement or cause the entering
into of an agreement with respect to any of the foregoing.
4.18 PROPRIETARY RIGHTS.
(a) PROPRIETARY RIGHTS. Schedule 4.18(a) sets forth with respect to
the Target and each of its Subsidiaries: (i) for each Patent owned by the
Target or any of its Subsidiaries, the number, expiration date and subject
matter for each country in which such Patent has been issued, or, if applicable,
the application number, date of filing and subject matter for each country, (ii)
for each Trademark owned by the Target or any of its Subsidiaries, the
application serial number or registration number, the class of goods covered and
the issuance date for each country in which a Trademark has been registered and
(iii) for each Copyright owned by the Target or any of its Subsidiaries, the
number and date of filing for each country in which a Copyright application has
been filed. The Proprietary Rights listed in the Disclosure Schedule are all of
the material Proprietary Rights used by the Target or any of its Subsidiaries in
connection with the Business. True and correct copies of all Patents (including
any and all pending applications) owned, controlled or created by or on behalf
of the Target or any of its Subsidiaries or in which the Target or any of its
Subsidiaries have any ownership interest whatsoever have been provided to Buyer.
(b) OWNERSHIP AND PROTECTION OF PROPRIETARY RIGHTS. The Target and
its Subsidiaries own or have a valid right to use each of the Proprietary
Rights, and assuming the consents described in Schedule 4.18(b) have been
obtained, no such Proprietary Rights will cease to be valid rights of the Target
or any of its Subsidiaries solely by reason of the execution, delivery and
performance of this Agreement or the consummation of the transactions
contemplated hereby. Except for applications pending, all of the material
Patents, registered designs and registered Trademarks listed in the Disclosure
Schedule have been duly issued to the Target or its Subsidiaries and all of the
other Proprietary Rights exist and if possible, are registered and are
subsisting. All of the pending Patent
30
applications have been duly filed. None of the Proprietary Rights owned by
the Target or any of its Subsidiaries is involved in any pending or, to the
knowledge of the Sellers, threatened litigation. Neither the Target nor any
of its Subsidiaries has received any notice of invalidity of its right or
infringement of any rights of others with respect to such Proprietary Rights.
Except as set forth in Schedule 4.18(b), no Person (i) has notified the
Target or any of its Subsidiaries that it is claiming any ownership of or
right to use such Proprietary Rights, or (ii) to the knowledge of the
Sellers, is infringing upon any such Proprietary Rights in any way. To the
knowledge of the Sellers, the use of by the Target or any of its Subsidiaries
of the Proprietary Rights owned by the Target and its Subsidiaries does not
and will not infringe upon the rights of any third party and no Action has
been instituted against or notices received by the Target or any of its
Subsidiaries that are presently outstanding alleging that any use by the
Target and its Subsidiaries of the Proprietary Rights infringes upon or
otherwise violates any rights of a third party.
4.19 EMPLOYEE BENEFIT PLANS.
(a) DISCLOSURE; DELIVERY OF COPIES OF RELEVANT DOCUMENTS AND OTHER
INFORMATION. Schedule 4.19 contains a complete list of Employee Plans. Except
as set forth in Schedule 4.19, true and complete copies of each of the following
documents have been made available by the Target and its Subsidiaries to Buyer:
(i) each Welfare Plan, Pension Plan, Multiemployer Plan and Benefit Arrangement
(and, if applicable, related trust agreements) which covers or has covered
employees of the Target or any of its Subsidiaries (with respect to their
relationship with such entities) and all amendments thereto, all Summary Plan
Descriptions (as such term is defined in ERISA) thereof which have been
distributed to any employees of the Target or any of its Subsidiaries, (ii) each
Employee Plan which covers or has covered employees of the Target or any of its
Subsidiaries (with respect to their relationship with such entities) including
Summary Plan Descriptions thereof which have been distributed to any employees
of the Target or any of its Subsidiaries (including descriptions of the number
and level of employees covered thereby) and a complete description of any
Employee Plan which is not in writing, (iii) the most recent determination or
opinion letter issued by the Internal Revenue Service with respect to each
Pension Plan and each Welfare Plan (other than a Multiemployer Plan, as defined
in Section 3(37) of ERISA) which covers or has covered employees of the Target
or any of its Subsidiaries (with respect to its relationship with such
entities), (iv) for the three most recent plan years, Annual Reports on Form
5500 Series required to be filed with any governmental agency for each Pension
Plan which covers or has covered employees of the Target or any of its
Subsidiaries (with respect to its relationship with such entities), (v) all
actuarial reports prepared for the last three plan years for each Pension Plan
which covers or has covered employees of the Target or any of its Subsidiaries
(with respect to its relationship with such entities) and (vi) a description
setting forth the amount of any Liability of the company as of the Closing Date
for payments more than thirty (30) calendar days past due with respect to each
Welfare Plan which covers or has covered employees or former employees of the
Target or any of its Subsidiaries.
(b) REPRESENTATIONS. Except as set forth in Schedule 4.19:
(i) PENSION PLANS
(A) The funding method used in connection with each Pension
Plan which is subject to the minimum funding requirements of ERISA is acceptable
under ERISA and the actuarial
31
assumptions used in connection with funding each such plan are reasonable
under ERISA. As of the last day of the last plan year of each Pension Plan
and as of the Closing Date, the "amount of unfunded benefit liabilities" as
defined in Section 4001(a)(18) of ERISA (but excluding from the definition of
"current value" of "assets" of such Pension Plan, accrued but unpaid
contributions) did not exceed zero. No "accumulated funding deficiency" as
defined in Section 412 of the Code or as defined in Section 302(a)(2) of
ERISA, whichever may apply, for which an excise tax is due or would be due in
the absence of a waiver, has been incurred with respect to any Pension Plan
with respect to any plan year, whether or not waived. Neither the Target nor
any of its Subsidiaries nor any ERISA Affiliate has failed to pay when due
any "required installment", within the meaning of Section 412(m) of the Code
and Section 302(e) of ERISA, whichever may apply, with respect to any Pension
Plan. Neither the Target nor any of its Subsidiaries nor any ERISA Affiliate
is subject to any lien imposed under Section 412(n) of the Code or Section
302(f) of ERISA, whichever may apply, with respect to any Pension Plan.
Neither the Target nor any of its Subsidiaries nor any ERISA Affiliate has
any Liability for unpaid contributions with respect to any Pension Plan or
employee benefit plan of any foreign government.
(B) Neither the Target nor any of its Subsidiaries nor any
ERISA Affiliate is required to provide security to a Pension Plan which covers
or has covered employees or former employees of the Target or any of its
Subsidiaries under Section 401(a)(29) of the Code.
(C) Each Pension Plan and each related trust agreement,
annuity contract or other funding instrument which covers or has covered
employees or former employees of the Target or any of its Subsidiaries (with
respect to their relationship with such entities) is intended to be and has been
operated as qualified and tax-exempt under the provisions of Code Sections
401(a) (or 403(a), as appropriate) and 501(a) and has been so qualified during
the period from its adoption to date.
(D) Each Pension Plan, each related trust agreement,
annuity contract or other funding instrument which covers or has covered
employees or former employees of the Target or any of its Subsidiaries (with
respect to their relationship with such entities) presently complies and has
been maintained in all material respects in compliance with its terms and, both
as to form and in operation, with the requirements prescribed by any and all
Regulations and Court Orders which are applicable to such plans, including
without limitation ERISA and the Code.
(E) The Target and each of its Subsidiaries paid all
premiums (and interest charges and penalties for late payment, if applicable)
due the PBGC with respect to each Pension Plan for each plan year thereof for
which such premiums are required. Neither the Target or any of its Subsidiaries
nor any ERISA Affiliate has engaged in, or is a successor or parent corporation
to an entity that has engaged in, a transaction described in Section 4069 of
ERISA. There has been no "reportable event" (as defined in Section 4043(b) of
ERISA and the PBGC regulations under such Section) with respect to any Pension
Plan. No filing has been made by the Target or any of its Subsidiaries or any
ERISA Affiliate with the PBGC, and no proceeding has been commenced by the PBGC,
to terminate any Pension Plan. No condition exists and no event has occurred
that would constitute grounds for the termination of any Pension Plan by the
PBGC. Neither the Target or any of its Subsidiaries nor any ERISA Affiliate
has, at any time, (1) ceased operations at a facility so as to become subject to
the provisions of Section 4062(e) of ERISA, (2) withdrawn as a substantial
employer so as to become subject to the provisions of Section 4063 of ERISA, or
(3) ceased making contributions on or before
32
the Closing Date to any Pension Plan subject to Section 4064(a) of ERISA to
which the Target or any ERISA Affiliate made contributions during the six
years prior to the Closing Date.
(ii) MULTIEMPLOYER PLANS
(A) Neither the Target or any of its Subsidiaries nor any
ERISA Affiliate has, at any time, withdrawn from a Multiemployer Plan in a
"complete withdrawal" or a "partial withdrawal" as defined in Sections 4203 and
4205 of ERISA, respectively, so as to result in a Liability, contingent or
otherwise (including without limitation the obligations pursuant to an agreement
entered into in accordance with Section 4204 of ERISA), of the Target or any of
its Subsidiaries or any ERISA Affiliate. Neither the Target nor any of its
Subsidiaries nor any ERISA Affiliate has engaged in, or is a successor or parent
corporation to an entity that has engaged in, a transaction described in Section
4212(c) of ERISA.
(B) All contributions required to be made by the Target or
any of its Subsidiaries or any ERISA Affiliate to each Multiemployer Plan have
been made when due.
(C) If, as of the Closing Date, the Target or any of its
Subsidiaries (and all ERISA Affiliates) were to withdraw from all Multiemployer
Plans to which it (or any of them) has contributed or been obligated to
contribute, it (and they) would incur no Liabilities to such plans under Title
IV of ERISA.
(D) To the knowledge of the Sellers, with respect to each
Multiemployer Plan: (1) no such Multiemployer Plan has been terminated or has
been in reorganization under ERISA so as to result, directly or indirectly, in
any Liability, contingent or otherwise, of any Sellers or any ERISA Affiliate
under Title IV of ERISA; (2) no proceeding has been initiated by any person
(including the PBGC) to terminate any Multiemployer Plan; (3) Neither the Target
nor any of its Subsidiaries nor any ERISA Affiliate has reason to believe that
any Multiemployer Plan will be terminated or will be reorganized under ERISA;
and (4) neither the Target nor any of its Subsidiaries nor any ERISA Affiliate
expects to withdraw from any Multiemployer Plan.
(iii) WELFARE PLANS
(A) Each Welfare Plan which covers or has covered employees
or former employees of the Target or any of its Subsidiaries (with respect to
their relationship with such entities) has been maintained in all material
respects in compliance with its terms and, both as to form and operation, with
the requirements prescribed by any and all Regulations and Courts Orders which
are applicable to such Welfare Plan, including without limitation ERISA and the
Code.
(B) None of the Targets, any of its Subsidiaries, any ERISA
Affiliate or any Welfare Plan has any present or future obligation to make any
payment to, or with respect to any present or former employee of the Target or
any of its Subsidiaries or any ERISA Affiliate pursuant to, any retiree medical
benefit plan, or other retiree Welfare Plan. No condition (other than those
evident on the face of the documents that constitute such plans) exists which
would prevent any Sellers from amending or terminating any such benefit plan or
Welfare Plan.
33
(C) Each Welfare Plan which covers or has covered employees
or former employees of the Target or any of its Subsidiaries and which is a
"group health plan," as defined in Section 607(1) of ERISA, has been operated in
all material respects in compliance with provisions of Part 6 of Title I,
Subtitle B of ERISA and Sections 162(k) and 4980B of the Code at all times.
(D) Neither the Target nor any of its Subsidiaries nor any
ERISA Affiliate has incurred any Liability with respect to any Welfare Plan that
is a "multiemployer plan", as defined in Section 3(37) of ERISA, under the terms
of such Welfare Plan, any collective bargaining agreement or otherwise resulting
from any cessation of contributions, cessation of obligation to make
contributions or other form of withdrawal from such Welfare Plan.
(E) If, as of the Closing Date, the Target or any of its
Subsidiaries (and all ERISA Affiliates) were to have a cessation of
contributions, cessation of obligations to make contribution or other form of
withdrawal from all Welfare Plans that are "multiemployer plans", as defined in
Section 3(37) of ERISA, it (and they) would incur no Liabilities with respect to
any such Welfare Plans under the terms of such Welfare Plans, any collective
bargaining agreement or otherwise.
(iv) BENEFIT ARRANGEMENTS. Each Benefit Arrangement which
covers or has covered employees or former employees of the Target or any of its
Subsidiaries (with respect to their relationship with such entities) has been
maintained in substantial compliance with its terms and with the requirements
prescribed by any and all Regulations and Court Orders which are applicable to
such Benefit Arrangement, including without limitation the Code. Except as set
forth in the Disclosure Schedule, and except as provided by law, the employment
of all persons presently employed or retained by the Target or any of its
Subsidiaries (other than those employees with whom the Target or any of its
Subsidiaries has an employment agreement) is terminable at will.
(v) UNRELATED BUSINESS TAXABLE INCOME. To the knowledge of the
Sellers, no Employee Plan (or trust or other funding vehicle pursuant thereto)
is subject to any tax under Code Section 511.
(vi) DEDUCTIBILITY OF PAYMENTS. There is no contract,
agreement, plan or arrangement covering any employee or former employee of the
Target or any of its Subsidiaries (with respect to its relationship with such
entities) that, individually or collectively, provides for the payment by such
Sellers of any amount (i) that is not deductible under Section 162(a)(1) or 404
of the Code or (ii) that is an "excess parachute payment" pursuant to Section
280G of the Code.
(vii) FOREIGN PLANS. None of the Foreign Subsidiaries has any
employees and there are no plans that cover any employee or former employee of
any Foreign Subsidiary that would constitute Employee Plans or that would be
subject to ERISA if they were to cover employees subject to the laws of the
United States.
(viii) FIDUCIARY DUTIES AND PROHIBITED TRANSACTIONS. To the
knowledge of the Sellers, none of the Target nor any of its Subsidiaries nor any
other plan fiduciary of any Welfare Plan or Pension Plan which covers or has
covered employees or former employees of the Target or any of its Subsidiaries
or any ERISA Affiliate, has engaged in any transaction in violation of Sections
404 or 406 of ERISA or any "prohibited transaction," as defined in Section
4975(c)(1) of the Code, for which no exemption exists under Section 408 of ERISA
or Section 4975(c)(2) or (d) of the Code, or has
34
otherwise violated the provisions of Part 4 of Title I, Subtitle B of ERISA.
Neither the Target nor any of its Subsidiaries has knowingly participated in
a violation of Part 4 of Title I, Subtitle B of ERISA by any plan fiduciary
of any Welfare Plan or Pension Plan and has not been assessed any civil
penalty under Section 502(l) of ERISA.
(ix) VALIDITY AND ENFORCEABILITY. Each Welfare Plan, Pension
Plan, related trust agreement, annuity contract or other funding instrument and
Benefit Arrangement which covers or has covered employees or former employees of
the Target or any of its Subsidiaries (with respect to their relationship with
such entities) is legally binding in all material respects and in full force and
effect.
(x) LITIGATION. There is no Action or Court Order outstanding,
relating to or seeking benefits under any Employee Plan that is pending or, to
the knowledge of the Sellers, threatened against the Target or any of its
Subsidiaries, any ERISA Affiliate or any Employee Plan.
(xi) NO AMENDMENTS. Neither the Target nor any of its
Subsidiaries nor any ERISA Affiliate has any announced plan or legally binding
commitment to create any additional Employee Plans which are intended to cover
employees or former employees of the Target or such Subsidiary (with respect to
their relationship with such entities) or to amend or modify any existing
Employee Plan which covers or has covered employees or former employees of the
Target or such Subsidiary (with respect to their relationship with such
entities).
(xii) NO OTHER MATERIAL LIABILITY. No event has occurred in
connection with which any Sellers or any ERISA Affiliate or any Employee Plan,
directly or indirectly, would be subject to any material Liability (A) under any
Regulation or Court Order relating to any Employee Plans or (B) pursuant to any
obligation of the Target or such Subsidiary to indemnify any person against
Liability incurred under any such Regulation or Court Order as they relate to
the Employee Plans.
(xiii) UNPAID CONTRIBUTIONS. Neither the Target nor any of
its Subsidiaries of the Sellers nor any ERISA Affiliate has any Liability for
unpaid contributions under Section 515 of ERISA with respect to any Pension
Plan, Multiemployer Plan or Welfare Plan.
(xiv) INSURANCE CONTRACTS. Neither the Target nor any of its
Subsidiaries nor any Employee Plan (other than a "multiemployer plan", as
defined in Section 3(37) of ERISA) holds as an asset of any Employee Plan any
interest in any annuity contract, guaranteed investment contract or any other
investment or insurance contract issued by an insurance company that is the
subject of bankruptcy, conservatorship or rehabilitation proceedings.
(xv) NO ACCELERATION OR CREATION OF RIGHTS. Neither the
execution and delivery of this Agreement or other related agreements by the
Target or any of its Subsidiaries nor the consummation of the transactions
contemplated hereby or the related transactions will result in the acceleration
or creation of any rights of any person to benefits under any Employee Plan
(including, without limitation, the acceleration of the vesting or
exercisability of any stock options, the acceleration of the vesting of any
restricted stock, the acceleration of the accrual or vesting of any benefits
under any Pension Plan or the acceleration or creation of any rights under any
severance, parachute or change in control agreement).
35
4.20 THIS SECTION INTENTIONALLY OMITTED.
4.21 TAX MATTERS.
(a) FILING OF TAX RETURNS. Each of the Target and each of its
Subsidiaries (and any affiliated group of which the Target or such Subsidiary is
now or has been a member) has timely filed with the appropriate taxing
authorities all returns (including without limitation information returns and
other material information) in respect of Taxes required to be filed through the
date hereof and will timely file any such returns required to be filed on or
prior to the Closing Date, other than those returns, the failure of which to
file would not, individually or in the aggregate, have a Material Adverse
Effect. The returns and other information filed are complete and accurate in
all material respects. Except as specified in Schedule 4.21(a), neither the
Target nor any of its Subsidiaries, nor any group of which the Target or such
Subsidiary is now or was a member, has requested any extension of time within
which to file returns (including without limitation information returns) in
respect of any Taxes. Each of the Target and each of its Subsidiaries has made
available to Buyer complete and accurate copies of the Target's or such
Subsidiary's foreign, federal, state and local tax returns for the years 1993,
1994 and 1995.
(b) PAYMENT OF TAXES. All material amounts of Taxes payable by the
Target or any of its Subsidiaries or any affiliated group with which the Target
or any of its Subsidiaries files a consolidated or combined Tax return (whether
or not shown on any Tax return) in respect of periods beginning before the
Closing Date have been timely paid, or will be timely paid, or an adequate
reserve has been established therefor, as set forth in Schedule 4.21(b) and the
Financial Statements, and neither the Target nor any of its Subsidiaries has any
material Liability for Taxes in excess of the amounts so paid or reserves so
established.
(c) AUDITS, INVESTIGATIONS OR CLAIMS. Except as set forth in
Schedule 4.21(c), no material deficiencies for Taxes have been claimed, proposed
or assessed by any taxing or other governmental authority against the Target or
any of its Subsidiaries. Except as set forth in Schedule 4.21(c), there are no
pending or, to the knowledge of the Target or the Sellers, threatened audits,
investigations or claims for or relating to any material additional Liability in
respect of Taxes, and there are no matters under discussion with any
governmental authorities with respect to Taxes that in the reasonable judgment
of any Seller, is likely to result in a material additional Liability for Taxes.
Audits, if any, of foreign, federal, state, and local returns for Taxes by the
relevant taxing authorities have been completed for each period set forth in
Schedule 4.21(c) and, except as set forth in Schedule 4.21(c), neither the
Target nor any of its Subsidiaries has been notified that any taxing authority
intends to audit a return for any period. Except as set forth in Schedule
4.21(c), no extension of a statute of limitations relating to Taxes is in effect
with respect to the Target or any of its Subsidiaries.
(d) LIEN. There are no liens for Taxes (other than for current
Taxes not yet due and payable) on the Assets.
(e) SAFE HARBOR LEASE PROPERTY. None of the Assets is property that
is required to be treated as being owned by any other Person pursuant to the so-
called safe harbor lease provisions of former Section 168(f)(8) of the Code.
36
(f) SECURITY FOR TAX-EXEMPT OBLIGATIONS. None of the Assets
directly or indirectly secures any debt the interest on which is tax-exempt
under Section 103(a) of the Code.
(g) TAX-EXEMPT USE PROPERTY. None of the Assets is "tax-exempt use
property" within the meaning of Section 168(h) of the Code.
(h) FOREIGN PERSON. The Stockholder is not a Person other than a
United States Person within the meaning of the Code.
(i) NO WITHHOLDING. The transaction contemplated herein is not
subject to the tax withholding provisions of Section 3406 of the Code, or of
Subchapter A of Chapter 3 of the Code or of any other provision of law.
(j) PARTNERSHIP. Except as set forth in Schedule 4.21(j), neither
the Target nor any of its Subsidiaries is a party to any joint venture,
partnership, or other arrangement or contract that could be treated as a
partnership for federal income tax purposes.
(k) WITHHOLDING. Each of the Target and its Subsidiaries has
withheld all material amounts of Taxes required to have been withheld by it in
connection with amounts paid or owing to any employee, independent contractor,
creditor, stockholder, or other third party, and such withheld Taxes have either
been duly paid to the proper governmental authority or set aside in accounts for
such purpose.
(l) COLLAPSIBLE CORPORATIONS. Neither the Target nor any of its
Subsidiaries has filed a consent under Code Section 341(f) concerning
collapsible corporations.
(m) GOLDEN PARACHUTE PAYMENTS. Neither the Target nor any of its
Subsidiaries has made any payments, nor is the Target or any of its Subsidiaries
obligated to make any payments, and neither the Target nor any of its
Subsidiaries is a party to any agreement that could obligate it to make any
payments that would not be deductible under Code Section 280G.
(n) DISCLOSURE STATEMENT. Neither the Target nor any of its
Subsidiaries has filed with respect to any item a disclosure statement pursuant
to Code Section 6662 or any comparable disclosure with respect to foreign, state
or local statutes.
(o) TAX ALLOCATION AGREEMENTS. Except as set forth in Schedule
4.21(o), neither the Target nor any of its Subsidiaries is a party to any Tax
allocation or sharing agreement.
(p) JOINT AND SEVERAL LIABILITY. Neither the Target nor any of its
Subsidiaries (A) within the last five (5) years has been a member of any
affiliated group filing a consolidated federal income Tax Return (other than a
group the common parent of which is the Stockholder or its predecessor) and (B)
has any liability for the Taxes of any person as defined in Section 7701(a)(1)
of the Code (other than the Target and its Subsidiaries) under Treasury
Regulation Section 1.1502-6 (or any similar provision of state, local, or
foreign law), as a transferee or successor, by contract, or otherwise.
(q) ADEQUATE RESERVES. The charges, accruals and reserves for Taxes
(including deferred Taxes) currently reflected on the Financial Statements in
accordance with GAAP are adequate in all
37
material respects to cover all unpaid Taxes accruing or payable by the Target
or any of its Subsidiaries in respect of taxable periods that end on or
before the Closing Date and for any taxable periods that begin before the
Closing Date and end thereafter to the extent such Taxes are attributable to
the portion of such period ending on the Closing Date (determined under the
closing of the books method of allocation).
(r) NO SECTION 338 AND 336 ELECTIONS. Other than as contemplated by
this Agreement, there are no elections in effect made by the Stockholder, Target
or any of its Subsidiaries pursuant to Code Sections 338 or 336(e) or the
regulations thereunder and neither the Target nor any of its Subsidiaries is
subject to any constructive elections under Code Section 338 or the regulations
thereunder.
(s) CHANGE IN ACCOUNTING METHOD. Neither the Target nor any of its
Subsidiaries has agreed to or is required to make any adjustment pursuant to
Code Section 481(a) by reason of a change in accounting method initiated by any
such company and neither the Seller nor the Target has knowledge that the
Internal Revenue Service has proposed any such adjustment or change in
accounting method.
(t) CERTAIN ACTIONS. Neither the Target nor any of its Subsidiaries
has taken, and none will take prior to Closing, any action not in accordance
with past practice that would have the effect of deferring any Tax liability of
the Target or any of its Subsidiaries from any taxable period ending on or
before the Closing Date to any subsequent taxable period.
(u) NO EXCESS LOSS ACCOUNTS. There currently are no excess loss
accounts, deferred intercompany gains or losses, or other like items pertaining
to the Target or any of its Subsidiaries.
(v) NO TRANSFER PRICING AGREEMENTS. Neither the Target nor any of
its Subsidiaries has entered into transfer pricing agreements or other like
arrangements with respect to any foreign jurisdiction.
(w) INFORMATION REGARDING FOREIGN SUBSIDIARIES. None of the Foreign
Subsidiaries is (i) engaged in a United States trade or business for federal
income tax purposes; (ii) a passive foreign investment company within the
meaning of the Code; or (iii) a foreign investment company within the meaning of
the Code; Schedule 5.14(w) sets forth for each of the Foreign Subsidiaries: (i)
(the amount of current and accumulated earnings and profits as of the date
hereof and the amount expected as of the Closing Date; and (ii) the amount of
previously taxed income within the meaning of section 959 of the Code as of the
date hereof and the amount expected as of the Closing Date (taking into account
the amount of any dividend income to stockholders under section 1248 of the Code
from the transactions contemplated by this Agreement).
(x) INTERNATIONAL BOYCOTT. Neither the Target nor any of its
Subsidiaries has participated in or cooperated with an international boycott or
has been requested to do so in connection with any transaction or proposed
transaction.
(y) SUBPART F INCOME. Buyer would not be required to include any
amount in gross income with respect to any of the Foreign Subsidiaries pursuant
to section 951 of the Code if the taxable year of any such Foreign Subsidiaries
were deemed to end on the Closing Date after the Closing.
38
(z) SECTION 338(h)(10) ELECTION. The Stockholder is the common
parent of the affiliated group (within the meaning of Section 1504(a) of the
Code) that includes the Target, and the Stockholder will not be a target
corporation within the meaning of Section 338 of the Code for the taxable year
that includes the Closing Date.
4.22 INSURANCE. Schedule 4.22 contains a complete and accurate (in all
material respects) list of all policies or binders of fire, liability, title,
worker's compensation, product liability (which list shall be for three (3)
years) and other forms of insurance (showing as to each policy or binder the
carrier, policy number, coverage limits, expiration dates, annual premiums, a
general description of the type of coverage provided and loss experience history
by line of coverage) maintained by the Target or any of its Subsidiaries in
connection with the Business, the Assets or their respective employees. To the
knowledge of the Sellers, all insurance coverage currently maintained by the
Target and its Subsidiaries applicable to the Target or any of its Subsidiaries,
its employees, the Business or the Assets is in full force and effect, and
provides coverage as may be required by applicable Regulation and by any and all
Contracts to which the Target or any of its Subsidiaries is a party, except
where the failure to provide such coverage would not, individually or in the
aggregate, have a Material Adverse Effect. To the knowledge of the Sellers,
there is no Default under any such coverage nor, to the knowledge of the
Sellers, has there been any failure to give notice or present any material claim
under any such coverage in a due and timely fashion. There are no outstanding
unpaid material amounts of premiums (other than those not yet due and payable)
except in the ordinary course of business and no notice of cancellation or
nonrenewal of the Target or any such coverage has been received. Except as set
forth in Schedule 4.22, there are no provisions in such insurance policies for
retroactive or retrospective premium adjustments that have not been fully
provided in the Closing Financial Statements. Except as set forth in Schedule
4.22, all products liability, general liability and workers' compensation
insurance policies maintained by the Target or any of its Subsidiaries during
the three (3) year period prior to the Closing have been occurrence policies and
not claims made policies. Except for performance bonds obtained in the ordinary
course of the Business, there are no outstanding performance bonds in any
material amounts covering or issued for the benefit of the Target or any of its
Subsidiaries. To the knowledge of the Sellers, there are no facts particular to
the Target and its Subsidiaries upon which an insurer would be justified in
reducing coverage or increasing premiums in any material amounts on existing
policies or binders. Except as set forth in Schedule 4.22, no insurer has
advised the Target or any of its Subsidiaries that it intends to reduce
coverage, increase premiums in any material amounts or fail to renew any
existing policy or binder, with respect to which such insurer has not acted.
4.23 ACCOUNTS RECEIVABLE. The accounts receivable reflected on the
balance sheet contained in the Most Recent Month End Financial Statements, and
all accounts receivable arising since June 30, 1996, represent bona fide claims
of the Target and its Subsidiaries against debtors for sales, services performed
or other charges arising on or before the date hereof, and, to the knowledge of
the Sellers, all the goods delivered and services performed which gave rise to
said accounts were delivered or performed in all material respects in accordance
with the applicable orders, Contracts or customer requirements. To the
knowledge of the Sellers, all accounts receivable in excess of $100,000 shall be
subject to no defenses, counterclaims or rights of setoff, except to the extent
of the appropriate reserves for bad debts on accounts receivable as set forth on
the Closing Balance Sheet.
39
4.24 PAYMENTS. To the knowledge of the Sellers, neither the Target nor
any of its Subsidiaries has, (i) directly or indirectly, paid or delivered any
fee, commission or other sum of money or item or property, however
characterized, to any finder, agent, client, customer, supplier, government
official or other party, in the United States or any other country, which is in
any manner related to the Business, Assets or operations of the Target or any of
its Subsidiaries, which is, or may be with the passage of time or discovery,
illegal under any federal, state or local laws of the United States (including
without limitation the U.S. Foreign Corrupt Practices Act) or any other country
having jurisdiction; (ii) illegally participated in any boycotts or other
similar practices affecting any of its actual or potential customers, or
(iii) established or maintained any unrecorded fund or asset for any purpose or
made any false entries on the Books and Records of the Target or such Subsidiary
for any reason. In addition, the Target or any of its Subsidiaries (a) has
complied with all applicable laws relating to employee and civil rights and
relating to employment opportunities, (b) filed in a timely manner all reports
or documents it was required to file (and the information contained therein was
correct and complete in all respects) under all applicable laws, (c) has
possession of all records and documents it was required to retain under all
applicable laws and (d) has not violated in any respect or received a notice or
charge asserting any violation of the Sherman Act, the Clayton Act, the
Robinson-Patman Act, the Federal Trade Commission Act, the Securities Act or the
Securities Exchange Act of 1934, each as amended, except in the case of each of
clauses (a), (b), (c) and (d) above, when such failure would not have a Material
Adverse Effect.
4.25 CURRENT INACTIVE SUBSIDIARIES OF THE TARGET. None of the "current
inactive subsidiaries of the Target" set forth in Schedule 4.2(a) hereto have
any assets, any Liabilities or any creditors.
4.26 CUSTOMERS, DISTRIBUTORS AND SUPPLIERS. Schedule 4.26 sets forth a
complete and accurate list of the names and addresses of (i) the ten largest
customers of the Target and each of its Subsidiaries, showing the approximate
total sales in dollars by the Target and each such Subsidiary to each such
customer during the fiscal year most recently ended; (ii) ten largest suppliers
of the Target or any of its Subsidiaries, showing the approximate total
purchases in dollars by the Target and each such Subsidiary from each such
supplier during such fiscal year; and (iii) all S Agents of the Target and each
of its Subsidiaries. Except as set forth in Schedule 4.26, since June 30, 1996,
there has been no adverse change in the business relationship of the Target or
any of its Subsidiaries with any customer, supplier or S Agent named in
Schedule 4.26 which, individually or in the aggregate, would have a Material
Adverse Effect and neither the Target nor any of its Subsidiaries has received
any communication from any customer, supplier or S Agent named in Schedule 4.26
of any intention to terminate or materially reduce purchases from or supplies or
services to the Target or any of its Subsidiaries.
4.27 COMPLIANCE WITH ENVIRONMENTAL LAWS. Except as set forth in Schedule
4.27:
(a) FACILITIES. The Facilities are, and at all times during the
ownership, operation or occupancy of any Corporation have been, and all Former
Facilities were at all times when owned, leased or operated by any Corporation,
owned, leased and operated in compliance with all applicable Environmental Laws
and in a manner which would not cause an Environmental Condition, where such
non-compliance or Environmental Condition would have a Material Adverse Effect.
Without limiting the foregoing, (i) there is not and has not been any Hazardous
Substance used, generated, treated, stored, transported, disposed of, handled or
otherwise existing on, under, about or emanating from any
40
Facility or any Former Facility as a result of any act or omission of any
Corporation, except for quantities of any such Hazardous Substances used,
generated, treated, stored, transported, disposed of, handled, or otherwise
held on, under or about any such Facility by any Corporation in full
compliance with all applicable Environmental Laws, where such non-compliance
would have a Material Adverse Effect, (ii) each Corporation has at all times
used, generated, treated, stored, transported, disposed of or otherwise
handled its Hazardous Substances in compliance with all applicable
Environmental Laws and in a manner which would not cause an Environmental
Condition, where such non-compliance or Environmental Condition would have a
Material Adverse Effect; and (iii) there is not now and has not been at any
time during the ownership, operation or occupancy of any Corporation any
underground or above-ground storage tank or pipeline at any Facility or
Former Facility where the installation, use, maintenance, repair, testing,
closure or removal of such tank or pipeline by any Corporation was not in
compliance with all applicable Environmental Laws, where such non-compliance
would have a Material Adverse Effect, and there has been no Release from any
such tank or pipeline during the ownership, operation, or occupancy of any
Corporation, where such Release would have a Material Adverse Effect.
(b) NOTICE OF VIOLATION. To the knowledge of the Sellers, no
Corporation has received any notice of alleged, actual or potential
responsibility for, or any inquiry or investigation regarding, (i) any
Release or threatened Release of any Hazardous Substance at any location, or
(ii) any Environmental Conditions, or (iii) an alleged violation of, or
non-compliance with, any Environmental Law.
(c) PRE-CLOSING ENVIRONMENTAL MATTERS. There are no Pre-Closing
Environmental Matters which would have a Material Adverse Effect.
(d) ENVIRONMENTAL AUDITS OR ASSESSMENTS. True, complete and
correct copies of the written reports, and all parts thereof, of all
environmental audits or assessments which have been conducted at any Facility
or Former Facility within the past five years by or on behalf of the Target
or any of its Subsidiaries or of which any Seller otherwise has known, have
been made available to Buyer and a list of all such reports, audits and
assessments and any other similar report, audit or assessment of which any
Seller has knowledge is included in Schedule 4.27(d).
(e) INDEMNIFICATION AGREEMENTS. Other than agreements (including
without limitation, leases) entered into in the ordinary course of business,
to the knowledge of the Sellers, no Corporation is a party, whether as a
direct signatory or as successor, assign or third party beneficiary, or
otherwise bound, to any Contract (excluding insurance policies disclosed on
the Disclosure Schedule) under which such Corporation is obligated by or
entitled to the benefits of, directly or indirectly, any representation,
warranty, indemnification, covenant, restriction or other undertaking
concerning Environmental Conditions known to any Corporation.
(f) RELEASES OR WAIVERS. To the knowledge of the Sellers, other
than agreements entered into in the ordinary course of business (including,
without limitation, leases), no Corporation is a party to an agreement under
which such Corporation has released any other Person from any Liability to
the Corporation under any Environmental Laws for any Environmental Condition.
41
(g) NOTICES, WARNINGS AND RECORDS. Each Corporation has given all
notices and warnings, made all reports, and has kept and maintained all records
required by and in compliance with all applicable Environmental Laws where such
non-compliance would have a Material Adverse Effect.
4.28 BANKING RELATIONSHIPS. Schedule 4.28 sets forth a complete and
accurate description of all arrangements that the Target or any of its
Subsidiaries has with any banks, savings and loan associations or other
financial institutions providing for checking accounts, safe deposit boxes,
and certificates of deposit, indicating in each case account numbers, if
applicable, and the person or persons authorized to act or sign on behalf of
the Target and each such Subsidiary in respect of any of the foregoing.
4.29 INTERCOMPANY LOANS. Other than MCS (as defined in the InterCompany
Agreement) related intracompany trading and except as set forth in Schedule
4.29, since June 30, 1996, neither the Target nor any of its Subsidiaries has
entered into any Contract relating to intercompany indebtedness between or
among the Target and its Subsidiaries and/or LIW and/or any affiliate of LIW
(other than the Target or its Subsidiaries).
4.30 MATERIAL MISSTATEMENTS OR OMISSIONS. No representations or
warranties by any of the Sellers in this Agreement, nor any exhibit,
appendix, certificate or schedule heretofore or hereinafter furnished to
Buyer pursuant hereto, or in connection with the transactions contemplated
hereby, including without limitation the Disclosure Schedule, contains any
untrue statement of a material fact, or omits to state any material fact
necessary to make the statements or facts contained therein not misleading.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE SELLERS WITH RESPECT TO THE
SELLERS AND THE SELLERS' SUBSIDIARIES
The Sellers hereby, jointly and severally, represent and warrant to
Buyer as follows (except as otherwise set forth in the numbered section of
the Disclosure Schedule corresponding to the Sections of this Article to
which such exception pertains), which representations and warranties are, as
of the date hereof, true and correct:
5.1 ORGANIZATION OF THE SELLERS. (a) Each Seller is duly organized,
validly existing and in good standing under the laws of its jurisdiction of
incorporation or formation with full power and authority to conduct its
business as it is presently being conducted and to own and lease its
properties and assets. Copies of the Certificates or Articles of
Incorporation and Bylaws or other organizational documents of each of the
Sellers, and all amendments thereto, heretofore delivered to Buyer are
accurate and complete as of the date hereof.
(b) Schedule 5.1(b) hereof sets forth a complete and accurate list
of the all of the holders of capital stock of each Seller and the number of
share of such capital stock held by such holder. All of
42
the outstanding shares of capital stock of each Seller are duly authorized,
validly issued, fully paid and non-assessable. Except as set forth in
Schedule 5.1(b), there are no outstanding subscriptions, calls, commitments,
warrants or options for the purchase of shares of any capital stock or other
securities of (or other ownership interests in) any Seller or any securities
convertible into or exchangeable for shares of capital stock or other
securities issued by (or other ownership interests in) any Seller or any
other commitments of any kind for the issuance of additional shares of
capital stock or other securities issued by (or other ownership interests in)
any Seller. None of the Sellers have granted any rights or options to
purchase any such shares, made any payment of dividends in cash or otherwise
or any other distribution on account of the capital stock of any Seller.
Except as set forth in Schedule 5.1(b) there are no pledges for any purpose
of the capital stock of any of the Sellers or any of the Sellers'
Subsidiaries.
5.2 SUBSIDIARIES. Except as set forth in Schedule 5.2, there are no
Sellers' Subsidiaries which are operating companies or which have assets in
excess of $500,000.
5.3 AUTHORIZATION. Each of the Sellers has all requisite corporate
power and authority to own, lease and operate its assets and to conduct its
business as it is presently being conducted. Each Seller has all requisite
power and authority, and has taken all action necessary, to execute and
deliver this Agreement and the Ancillary Agreements to which it is a party,
to consummate the transactions contemplated hereby and thereby and to perform
its obligations hereunder and thereunder. The execution and delivery by each
Seller of this Agreement and the Ancillary Agreements to which it is a party
and the consummation by each Seller of the transactions contemplated hereby
and thereby have been duly approved by the board of directors and, to the
extent required under applicable corporate laws, shareholders of such Seller.
No other proceedings or actions on the part of any Seller is necessary to
authorize this Agreement and the Ancillary Agreements to which it is a party
and the transactions contemplated hereby and thereby. This Agreement and
each of the Ancillary Agreements to which any Seller is a party have been
duly executed and delivered by such Seller and each such agreement is a
legal, valid and binding obligation of such Seller, enforceable against such
Seller in accordance with its terms, except as such enforceability may be
limited by (i) bankruptcy, insolvency, moratorium, reorganization and other
similar laws affecting creditors' rights generally and (ii) general
principles of equity, regardless of whether asserted in a proceeding in
equity or at law.
5.4 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth in
Schedule 5.4:
(a) since June 30, 1996, there has not been any increase in
any credit facility or other bank or similar debt instrument of any of the
Sellers or any of the Sellers' Subsidiaries;
(b) since December 31, 1995, except for the LIW Promissory
Note, there has not been any incurrence of indebtedness by any Seller for
borrowed money or commitment to borrow money entered into by any Seller, or
any loans made or agreed to be made by any of the Sellers, or indebtedness
guaranteed by any of the Sellers, in excess of $100,000 for any single item
(or series of similar items with the same party);
(c) since December 31, 1995, except Liabilities incurred in
connection with the consummation of the transactions contemplated hereby,
there has not been any incurrence by any Seller of Liabilities, except
Liabilities incurred in the ordinary course of business of such Seller and
not in
43
excess of $250,000 for any single item (or series of similar items), or
increase or change in any assumptions underlying or methods of calculating,
any doubtful account contingency or other reserves of any Seller;
(d) since December 31, 1995, there has not been any failure
to pay or satisfy when due any Liability of any Seller, except where the
failure would not have a Seller Material Adverse Effect;
(e) agreement by any Seller to do any of the things described
in the preceding clauses (a) through (d) other than as expressly provided for
herein.
5.5 CONSENTS. Except as disclosed in Schedule 5.5 hereto, no notice
to, declaration, filing or registration with, or Permit from, any domestic or
foreign governmental or regulatory body or authority, or any other Person, is
required to be made or obtained by any Seller in connection with the
execution, delivery or performance of this Agreement and the consummation of
the transactions contemplated hereby, the failure of which would,
individually or in the aggregate, have a Seller Material Adverse Effect.
Except as set forth on Schedule 5.5, none of the rights of any Seller in its
contracts or permits will be impaired by reason of the consummation of the
transactions contemplated by this Agreement.
5.6 NO CONFLICT OR VIOLATION. Except as set forth in Schedule 5.6,
neither the execution, delivery or performance of this Agreement or the
Ancillary Agreements nor the consummation of the transactions contemplated
hereby or thereby, nor compliance by any Seller or any of the Sellers'
Subsidiaries with any of the provisions hereof, will (a) violate any
provision of the Articles of Incorporation or Bylaws or other organizational
documents of any Seller or any of the Sellers' Subsidiaries, (b) violate or
result in or constitute a Default under, or result in the termination of, or
accelerate the performance required by, or result in a right of termination
or acceleration under, or result in the creation of any encumbrance upon any
of the assets under, any of the terms, conditions or provisions of any
contract or permit (i) to which any Seller or any of the Sellers'
Subsidiaries is a party or (ii) by which its assets are bound, (c) violate
any Regulation or Court Order, except in the cases of each of clauses (b) and
(c) above, for such violations, Defaults, terminations, accelerations or
creations of encumbrances which, individually and in the aggregate, would not
have a Seller Material Adverse Effect.
5.7 FINANCIAL STATEMENTS. The Sellers have heretofore delivered to
Buyer true and complete copies of the pro-forma financial statements for
Holdings One and its subsidiaries for the year ended December 31, 1995. Such
financial statements (a) are in accordance in all material respects with the
books and records of Holdings One and its subsidiaries, (b) have been
prepared in accordance with generally accepted accounting principles in the
United Kingdom consistently applied throughout the period covered thereby and
(c) after giving effect to the adjustments specified therein, fairly and
accurately present in all material respects (i) the combined assets,
liabilities (including all reserves) and financial position of Holdings One
and its subsidiaries, (ii) the combined results and operations of Holdings
One and its subsidiaries for the period presented and (iii) the combined cash
flows of Holdings One and its subsidiaries for the period presented.
5.8 LITIGATION. Except as set forth in Schedule 5.8, there are no
Actions, individually or in the aggregate, involving more than $250,000
pending, or to the knowledge of the Sellers, threatened
44
which, if determined adversely to any Seller, could reasonably be expected to
delay, limit or enjoin the transactions contemplated by this Agreement or
which would otherwise, individually or in the aggregate, have a Seller
Material Adverse Effect. To the knowledge of the Sellers, no Seller is in
Default with respect to or subject to any judgment, order, writ, injunction
or decree of any court or governmental agency and there are no unsatisfied
judgments against any Seller, its business or its assets. To the knowledge
of the Sellers, no Person has served any Seller with a written demand (that
has not been satisfied) for an indebtedness exceeding seven hundred and fifty
pounds (U.K.). To the knowledge of Sellers, there is not a reasonable
likelihood of an adverse determination of any pending Actions that could,
individually or in the aggregate, have a Seller Material Adverse Effect.
5.9 LABOR MATTERS. Schedule 5.9 sets forth the names and current
annual salary rates or current hourly wages of all present employees of any
Seller or any of the Seller Subsidiaries whose annual salary (exclusive of
bonus and benefits) for the 1995 calendar year exceeded $200,000.
5.10 LIABILITIES. Except as set forth in Schedule 5.10, the Sellers,
taken on a consolidated basis, including all of the Sellers' Subsidiaries
have no Liabilities due or to become due, except (a) Liabilities which are
reflected and reserved against on the pro-forma financial statements of LIW
and the Sellers' Subsidiaries dated December 31, 1995 , which have not been
paid or discharged since the date thereof, (b) Liabilities hereunder and
under the Ancillary Agreements and (c) Liabilities arising in the ordinary
course of business, none of which, individually or in the aggregate, would
have a Seller Material Adverse Effect.
5.11 COMPLIANCE WITH LAW. Each Seller and the conduct of such Seller's
business have not violated and are in compliance with all Regulations and
Court Orders relating to the assets or the business or operations of each
such Seller, except where the violation or failure to comply, individually or
in the aggregate, would not have a Seller Material Adverse Effect.
5.12 NO OTHER AGREEMENTS TO SELL THE ASSETS. Except as set forth in
Schedule 5.12, none of the Sellers has any outstanding commitment or legal
obligation, absolute or contingent, or is bound in any way, to any other
Person other than Buyer to sell, assign, transfer or effect a sale of a
material portion of its assets (other than inventory in the ordinary course
of business), to sell or effect a sale of the capital stock of any Seller or
any of the Sellers' Subsidiaries, to effect any merger, consolidation,
liquidation, dissolution or other reorganization of any Seller or any of the
Sellers' Subsidiaries, or to enter into any agreement or cause the entering
into of an agreement with respect to any of the foregoing, except in each
case with respect to non-operating Sellers' Subsidiaries.
5.13 TRANSACTIONS WITH CERTAIN PERSONS. No officer, director or
employee of any Seller nor any member of any such person's immediate family
is presently, or has been at any time since January 1, 1996, a party to any
transaction with any Seller relating to any Seller's business, including
without limitation, any contract, agreement or other arrangement (a)
providing for the furnishing of services by, (b) providing for the rental of
real or personal property from, or (c) otherwise requiring payments to (other
than for services as officers, directors or employees of such Seller) any
such person or corporation, partnership, trust or other entity in which any
such person has an interest as a shareholder, officer, director, trustee or
partner, other than contracts, agreements and arrangements for fair
consideration upon arms-length terms.
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5.14 PAYMENTS. To the knowledge of the Sellers, no Seller has, (i)
directly or indirectly, paid or delivered any fee, commission or other sum of
money or item or property, however characterized, to any finder, agent,
client, customer, supplier, government official or other party, in the United
States or any other country, which is in any manner related to the business,
assets or operations of any Seller, which is, or may be with the passage of
time (under currently existing Regulations) or discovery, illegal under any
federal, state or local laws of the United States (including without
limitation the U.S. Foreign Corrupt Practices Act) or any other country
having jurisdiction; (ii) illegally participated in any boycotts or other
similar practices affecting any of its actual or potential customers, or
(iii) established or maintained any unrecorded fund or asset for any purpose
or made any false entries on the books and records of such Seller for any
reason.
5.15 PROJECTIONS. To the knowledge of the Sellers, the financial
projections, business plans and budgets prepared and previously delivered to
Buyer, and attached hereto as Exhibit A, with respect to the restructuring of
LIW and certain of the Sellers' Subsidiaries were prepared in good faith
based upon assumptions which Sellers reasonably believed at the time of
preparation thereof to be reasonable and which Sellers have no reason to
believe have become, with the passage of time, no longer reasonable.
5.16 SOLVENCY. No Seller is after giving effect to the transactions
contemplated by this Agreement (x) insolvent or (y) left with unreasonably
small capital with which to engage in its business as contemplated pursuant
to the transactions hereby, and no Seller has, or will after giving effect to
the transactions contemplated by this Agreement, incurred debts beyond its
ability to pay such debts as they mature. The total value of the Sellers'
assets (both individually and taken as a whole, including for such purpose,
their subsidiaries) is and will be after giving effect to the transactions
contemplated hereby, greater than the total Liabilities of such Sellers.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to the Sellers as follows,
which representations and warranties are, as of the date hereof, and will be,
as of the Closing Date, true and correct:
6.1 ORGANIZATION OF BUYER. Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Delaware. Buyer is duly qualified to do business as a foreign corporation and
is in good standing in each jurisdiction in which such qualification is
necessary under the applicable law as a result of the conduct of its business
or the ownership (or leasing) of its properties, except where the failure to
be so qualified or in good standing would not have a material adverse effect
on Buyer or its ability to perform its obligations hereunder or under any of
the Ancillary Agreements to which it is a party.
6.2 AUTHORIZATION. Buyer has all requisite corporate power and
authority, and has taken all corporate action necessary, to execute and
deliver this Agreement and the Ancillary Agreements to which it is a party,
to consummate the transactions contemplated hereby and thereby and to perform
its
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obligations hereunder and thereunder. The execution and delivery by Buyer of
this Agreement and the Ancillary Agreements to which it is a party and the
consummation by Buyer of the transactions contemplated hereby and thereby
have been duly approved by the board of directors and stockholder of Buyer.
No other corporate proceedings or actions on the part of Buyer are necessary
to authorize this Agreement and the Ancillary Agreements to which it is a
party and the transactions contemplated hereby and thereby. This Agreement
and the Ancillary Agreements to which Buyer is a party have been duly
executed and delivered by Buyer, and are legal, valid and binding obligations
of Buyer, enforceable against Buyer in accordance with their terms, except as
such enforceability may be limited by (i) bankruptcy, insolvency, moratorium,
reorganization and other similar laws affecting creditors' rights generally
and (ii) the general principles of equity, regardless of whether asserted in
a proceeding in equity or at law.
6.3 NO BROKERS. Neither Buyer nor any of its subsidiaries nor any of
their respective officers, directors, employees, shareholders or affiliates
has employed any broker, finder, advisor or intermediary in connection with
the transactions contemplated by this Agreement which would be entitled to a
broker's, finder's, or similar fee or commission in connection therewith or
upon the consummation thereof, other than William E. Myers & Company, the
fees of which will be paid by Buyer.
6.4 NO CONFLICT OR VIOLATION. Neither the execution, delivery or
performance of this Agreement or the Ancillary Agreements, nor the
consummation of the transactions contemplated hereby or thereby, nor
compliance by the Buyer with any of the provisions hereof, will (a) violate
any provision of the Certificate of Incorporation or Bylaws of the Buyer, (b)
violate or result in or constitute a default under, or result in the
termination of, or accelerate the performance required by, or result in a
right of termination or acceleration under, or result in the creation or any
Encumbrance upon any of the assets under, any of the terms, conditions or
provisions of any contracts or permit (i) to which the Buyer is a party or
(ii) by which its assets are bound, (c) violate any Regulation or Court Order
or (d) impose any Encumbrance on any of the assets or the business of Buyer,
except for permitted encumbrances, except in the cases of each of clauses
(b), (c) and (d) above, for such violations, defaults, terminations,
accelerations, or creations of Encumbrances which, individually or in the
aggregate, would not have a material adverse effect on Buyer or its ability
to perform its obligations hereunder or under any of the Ancillary Agreements
to which it is a party.
6.5 CONSENTS AND APPROVALS. Other than in connection with or in
compliance with the provisions of the HSR Act, no notice to, declaration,
filing or registration with, or permit from, any domestic or foreign
governmental or regulatory body or authority, or any other Person, is
required to be made or obtained by Buyer in connection with the execution,
delivery or performance of this Agreement and the consummation of the
transactions contemplated hereby.
6.6 LITIGATION. There are no Actions, individually or, if relating to
a single set of circumstances, in the aggregate, involving in excess of
$50,000, pending or, to Buyer's knowledge, threatened or anticipated, which,
if determined adversely to Buyer could reasonably be expected to delay, limit
or enjoin the transactions contemplated by this Agreement or the Ancillary
Agreements to which it is a party or which would otherwise, individually or
in the aggregate, have a material adverse effect on the Buyer or its ability
to perform its obligations hereunder or under any of the Ancillary Agreements
to which it is a party.
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6.7 INVESTMENT INTENT. Buyer is an "accredited investor" within the
meaning of Regulation D under the Securities Act of 1933, as amended (the
"SECURITIES ACT") and is acquiring all of the issued and outstanding capital
stock of the Target solely for its own account for purposes of investment and
not with a view to any resale or distribution thereof in violation of
applicable securities laws. Buyer acknowledges that the issued and
outstanding capital stock of the Target has not been registered under the
Securities Act or any applicable state securities law. Buyer is experienced
and capable of analyzing and evaluating the merits and results of investments
in the Target, or has been and will be advised as to such investment by
persons who have such knowledge and experience and are independent of the
Sellers. Buyer acknowledges that it has been furnished with or provided
access to such information regarding the Business, the Target and the
Target's Subsidiaries as Buyer has requested; PROVIDED, HOWEVER, that
notwithstanding anything to the contrary contained herein, Buyer shall not be
deemed in any way to have waived its ability to rely on the representations
and warranties of the Sellers contained herein through its acknowledgement of
the foregoing.
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ARTICLE VII
COVENANTS OF SELLERS, THE TARGET AND BUYER
The Sellers and Buyer each covenant with each other as follows:
7.1 FURTHER ASSURANCES. Upon the terms and subject to the conditions
contained herein, the parties agree (i) to use all reasonable efforts to
take, or cause to be taken, all actions and to do, or cause to be done, all
things necessary, proper or advisable to consummate and make effective the
transactions contemplated by this Agreement, (ii) to execute any documents,
instruments or conveyances of any kind which may be reasonably necessary or
advisable to carry out any of the transactions contemplated hereunder, and
(iii) to cooperate with each other in connection with the foregoing. Without
limiting the foregoing, the parties agree to use their respective reasonable
efforts (A) to obtain all necessary waivers, consents and approvals from
other parties to the Contracts and Permits; PROVIDED, HOWEVER, that none of
the Sellers, the Target or Buyer shall be required to make any payments,
commence litigation or agree to modifications of the terms thereof in order
to obtain any such waivers, consents or approvals, (B) to obtain all
necessary Permits as are required to be obtained under any Regulations, (C)
to give all notices to, and make all registrations and filings with, third
parties, including without limitation submissions of information requested by
governmental authorities, (D) to defend all Actions challenging this
Agreement or the consummation of the transactions contemplated hereby, (E) to
lift or rescind any injunction or restraining order or other Court Order
adversely affecting the ability of the parties to consummate the transactions
contemplated hereby and (F) to fulfill all conditions to this Agreement.
7.2 BUYER'S RIGHT OF FIRST REFUSAL IN ACQUISITION TRANSACTION INVOLVING
THE SELLERS OR THE SELLERS' SUBSIDIARIES.
(a) NOTICE OF INTENT. If at any time from the Closing Date until
the seventh anniversary of the Closing Date, the Sellers or any of the
Sellers' Subsidiaries or any of their respective officers, directors,
employees or Representatives (including, without limitation investment
bankers, attorneys and accountants) proposes to enter into an agreement to
(i) sell, assign or otherwise transfer all or substantially all of (A) the
assets of any of the Sellers or any of the Sellers' Subsidiaries or (B) the
shares of capital stock of any of the Sellers (other than LIW) or any of the
Sellers' Subsidiaries, or (ii) merge, consolidate, liquidate, dissolve or
consummate any other similar transaction with respect to any of the Sellers
or any of the Sellers' Subsidiaries except, in each case with respect to the
liquidation or dissolution of any non-operating Seller Subsidiary (each of
the transactions set forth in clauses (i) and (ii) above being referred to
herein as an "ACQUISITION TRANSACTION"), then the Sellers shall deliver
written notice of the Acquisition Transaction (a "NOTICE OF INTENT"),
accompanied by a copy of the proposal relating to such Acquisition
Transaction (the "ACQUISITION PROPOSAL"), to Buyer, setting forth which of
the Sellers or the Sellers' Subsidiaries will be subject to such Acquisition
Transaction, the number of shares of capital stock or the particular assets
to be sold or otherwise transferred in such Acquisition Transaction (the
"OFFERED ITEMS"), the price at which the Offered Items will be sold or
otherwise transferred pursuant to the Acquisition Transaction (the "OFFER
PRICE") and any other terms and conditions material to the Acquisition
Transaction (the "RELEVANT TERMS").
49
(b) NOTICE OF EXERCISE. Upon receipt of the Notice of Intent,
Buyer shall have the right to purchase at the Offer Price all, but not less
than all, of the Offered Items upon terms substantially similar to the
Relevant Terms (it being understood that if any terms would be impossible or
commercially impracticable for Buyer to match, Buyer shall be given the
opportunity to exercise its option as set forth herein on other terms so long
as the benefit to the applicable selling party is substantially the same,
when taken as a whole, as the Relevant Terms), exercisable by the delivery of
notice to LIW (the "NOTICE OF EXERCISE"), within forty-five (45) calendar
days from the date of receipt of the Notice of Intent. The right of Buyer
pursuant to this Section 7.2 shall terminate if not exercised within
forty-five (45) calendar days after receipt by Buyer of the Notice of Intent.
If the Offer Price, or a portion of the Offer Price, involves consideration
other than cash, Buyer shall (subject to agreement by Buyer and the Sellers
with respect to reasonable registration rights for the Sellers if securities
are issued to the Sellers as provided below) have the right to purchase the
Offered Items for (A) a cash amount equal to the sum of the portion of such
consideration which is cash plus (B) at Buyer's election, either (i) the
amount of ILL stock the fair market value of which (as determined by
Houlihan, Lokey, Howard & Zukin, Inc. or another independent appraiser
mutually agreed upon by Buyer and LIW) at such time is equal to the "Cash
Value" of the non-cash consideration, (ii) an amount in cash equal to the
"Cash Value" of the non-cash consideration or (iii) any combination of the
compensation set forth in clauses (i) or (ii) above. For purposes of this
Section 7.2, "Cash Value" shall mean, in the case of securities which are
quoted on NASDAQ or any securities exchange, an amount equal to the last
reported sales price on such exchange for such securities on the date of the
Notice of Intent and, in the case of securities or other property for which
there is no such readily available market price, an amount equal to the fair
market value of such securities or other property as determined in good faith
by an investment bank or other entity mutually agreeable to Buyer and LIW in
their reasonable discretion.
(c) OBLIGATION TO SELL. In the event that Buyer exercises its
rights to purchase the Offered Items in accordance with Section 7.2(b), then
Buyer shall have an irrevocable obligation to purchase, and Sellers shall
sell the Offered Items after not less than sixty (60) and not more than
ninety (90) calendar days from the date of the delivery of the Notice of
Exercise, or by such other date as shall be mutually agreeable to Buyer and
the Sellers.
(d) COMPLETION OF ACQUISITION TRANSACTION. If (a) all notices
required to be given pursuant to Section 7.2(a) have been duly given and (b)
Buyer has not delivered the Notice of Exercise within the applicable time
period, then the selling party shall have the right, for a period of ninety
(90) calendar days from the earlier of (i) the expiration of the period
pursuant to Section 7.2(b) in which Buyer can deliver the Notice of Exercise
with respect to such Acquisition Transaction, or (ii) the date on which Buyer
notifies LIW that it will not exercise the right of first refusal granted
pursuant to Section 7.2(b), to sell to a third party the Offered Items upon
the Relevant Terms and otherwise in full compliance with any other applicable
provisions of this Agreement; provided that any material deviation from the
Relevant Terms must be disclosed to Buyer no less than fifteen (15) days
prior to the closing of the Acquisition Transaction and Buyer shall,
thereafter, be granted ten (10) days to deliver a Notice of Exercise and
purchase at the Offer Price all, but not less than all, of the Offered Items
upon terms substantially similar to the revised Relevant Terms.
(e) PERMITTED NEGOTIATIONS AND TRANSACTIONS. Notwithstanding
anything to the contrary contained in this section 7.2, the Sellers shall be
allowed (i) to negotiate and enter into agreements with
50
third parties with respect to strategic alliances, without any actions
required hereunder, in any of the following countries: Australia, Germany,
Italy, Denmark, Sweden, Holland and New Zealand and (ii) to sell its assets
and businesses to any third party without first offering to sell such assets
and business to Buyer, to the extent such assets and businesses are located
in Australia or New Zealand.
7.3 EMPLOYEE MATTERS.
(a) Nothing contained in this Agreement shall confer upon any
employee of the Target or any of its Subsidiaries any right with respect to
continuance of employment after the consummation of the transaction
contemplated hereby, nor shall anything herein interfere with the right of
Buyer to terminate the employment of any of the employees of the Target or
any of its Subsidiaries at any time, with or without cause, or restrict Buyer
in the exercise of its independent business judgment in modifying any of the
terms and conditions of the employment of any such employees.
Notwithstanding the foregoing, Buyer acknowledges that Sellers have advised
Buyer of the collective bargaining agreements set forth in Schedule 4.13 and
that Target and its Subsidiaries shall continue to be bound by such
collective bargaining agreements.
(b) No provision of this Agreement shall create any third party
beneficiary rights in any employee of the Target or any of its Subsidiaries,
any beneficiary or dependents thereof, or any collective bargaining
representative thereof, with respect to the compensation, terms and
conditions of employment and benefits that may be provided to any employee of
the Target or any of its Subsidiaries by Buyer or under any benefit plan
which Buyer may maintain.
(c) Prior to the second anniversary of the Closing Date, no Seller
nor any affiliate of any Seller nor any Sellers Subsidiary shall, directly or
indirectly, solicit for employment any key employee of the Target or any of
its Subsidiaries whose employment is continued by Buyer after the Closing
Date, unless Buyer first terminates the employment of such employee or gives
its written consent to such employment or offer of employment.
7.4 USE OF PURCHASE PRICE AMOUNT. Each of the Sellers hereby agrees
that it will use commercially reasonable efforts to use the amount of the
Purchase Price (plus any further amounts received by the Stockholder pursuant
to Section 2.3(b) or 2.3(c) of this Agreement) in the manner set forth in the
plan of restructuring, attached hereto as Exhibit B. Any use of the amount
of the Purchase Price (and any further amounts received by the Sellers
pursuant to Section 2.3(b) or 2.3(c) of this Agreement) in a manner
inconsistent with Exhibit B shall require the prior approval of all of the
Buyer's nominees to the board of directors of LIW.
7.5 1995 YEAR END FINANCIAL STATEMENTS. Prior to the date hereof, the
Sellers shall have delivered to Buyer the 1995 Year End Financial Statements.
The 1995 Year End Financial Statements shall have been audited, with an
explanatory paragraph, by Price Waterhouse at Sellers' expense and shall have
been accompanied by an unqualified report to the effect that the 1995 Year
End Financial Statements present fairly, in accordance with GAAP, the
financial condition of the Target and its Subsidiaries for such period.
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7.6 DISSOLUTION OF THE STOCKHOLDER. Within ninety (90) days after the
Closing Date, the Sellers shall cause the Stockholder to be wound up and
liquidated and any and all of its remaining assets to be distributed to its
stockholders. Upon consummation of the transactions contemplated hereby, the
Stockholder will have no assets (other than the proceeds of this transaction,
which will be distributed to its shareholders). The Stockholder shall
conduct no further business until its dissolution, winding up and liquidation
and shall have sufficient assets to pay its creditors as such payments become
due.
7.7 PAYMENT OF FLEET OBLIGATION. Concurrently with the Closing, Buyer
shall cause the Target to retire the aggregate amount of the Fleet Obligation.
7.8 FRANCHISE MATTERS. Buyer acknowledges that it does not become a
"franchisee" as such term is defined by the Federal Trade Commission and by
applicable state franchise laws by virtue of the provisions of this Agreement
or any of the Ancillary Agreements. Buyer hereby waives, to the extent
permitted by applicable law, any protections to "franchisees" and rights to
sue for damages as a "franchisee" that may be provided by any of the
regulations promulgated by the Federal Trade Commission or under any
applicable state franchise laws.
7.9 NAME CHANGES. Within sixty (60) days after the Closing Date, Buyer
shall cause each of LEP Air, Inc., LEP Transport, Inc. and LEP Bloodstock,
Inc. to change its name so as to no longer contain the word "LEP" in such
name.
ARTICLE VIII
ACTIONS BY SELLERS AND BUYER AFTER THE CLOSING
8.1 BOOKS AND RECORDS.
(a) The Sellers and Buyer agree that each will cooperate with
and make available to the other party, during normal business hours, all
Books and Records, information and Personnel (without substantial disruption
of employment) retained and remaining in existence after the Closing Date
that are necessary or useful in connection with any tax inquiry, audit,
investigation or dispute, any litigation or investigation or any other matter
requiring any such Books and Records, information or employees for any
reasonable business purpose. The party requesting any such Books and
Records, information or employees shall bear all of the out-of-pocket costs
and expenses (including without limitation, attorneys' fees, but excluding
reimbursement for salaries and employee benefits) reasonably incurred in
connection with providing such Books and Records, information or employees.
(b) COOPERATION AND RECORDS RETENTION. The Sellers and Buyer
shall (and Buyer shall cause Target and its Subsidiaries to) (i) each provide
the other with such assistance as may reasonably be requested by any of them
in connection with the preparation of any return, audit, or other examination
by any taxing authority or judicial or administrative proceedings relating to
Liability for Taxes, (ii) each retain and provide the other with any records
or other information that may be relevant to such return, audit or
examination, proceeding or determination, and (iii) each provide the other
with any final determination of any such audit or examination, proceeding, or
determination that affects any amount required to be shown on any tax return
of the other for any period. Without limiting the generality of the
foregoing, Buyer and the Sellers shall each retain, until the applicable
statutes of
52
limitations (including any extensions) have expired, copies of all tax
returns, supporting work schedules, and other records or information that may
be relevant to such returns for all tax periods or portions thereof ending on
or before the Closing Date and shall not destroy or otherwise dispose of any
such records without first providing the other party with a reasonable
opportunity to review and copy the same.
8.2 SURVIVAL OF REPRESENTATIONS, ETC. All statements contained in the
Disclosure Schedule or in any certificate, schedule, exhibit or instrument or
conveyance delivered by or on behalf of the parties pursuant to this
Agreement or in connection with the transactions contemplated hereby shall be
deemed to be representations and warranties by the parties hereunder. The
representations and warranties of the Sellers on the one hand and Buyer on
the other hand contained herein and as provided in the preceding sentence
shall survive the Closing Date until sixty days after the completion of the
fiscal-year audit of the Target and its Subsidiaries for the second full year
after the Closing Date (but shall in no event survive to a date later than
April 15, 1998), PROVIDED, HOWEVER, that the representations and warranties
contained in Section 4.19 and 4.21 shall continue to survive until sixty days
after the expiration of the applicable statute of limitations period (giving
effect to any waiver, tolling or extension thereof) and that the
representations and warranties contained in Section 4.27 shall continue to
survive until four (4) years after the Closing Date. The termination of the
representations and warranties provided herein shall not affect the rights of
a party in respect of any Claim made by such party in a writing received by
the other party prior to the expiration of the applicable survival period
provided herein.
8.3 INDEMNIFICATIONS.
(a) BY THE SELLERS. The Sellers shall jointly and severally
indemnify, save and hold harmless Buyer, its affiliates and subsidiaries, and
each of their respective Representatives (collectively, the "BUYER
INDEMNIFIED PARTIES"), from and against any and all costs, losses,
Liabilities, obligations, damages, lawsuits, deficiencies, claims, demands,
and expenses (whether or not arising out of third-party claims), including
without limitation interest, penalties, costs of mitigation, any clean-up,
remedial correction or responsive action, damages to the environment,
attorneys' fees and all amounts paid in investigation, defense or settlement
of any of the foregoing (herein, "DAMAGES"), incurred in connection with,
arising out of or resulting from (i) any breach of any representation or
warranty or the inaccuracy of any representation made by the Sellers in or
pursuant to this Agreement; (ii) any breach of any covenant or agreement made
by the Sellers in or pursuant to this Agreement; (iii) any Liabilities or
contingent Liabilities, whether arising prior to or after the Closing Date,
related to, in connection with or arising out of the activities of the
Sellers or any of the Sellers' Subsidiaries; (iv) any Liability with respect
to the Discontinued Operations (except for Liabilities arising out of the
operation of the Discontinued Operations after the Closing Date by the
Buyer); (v) any Liabilities arising under any Environmental Law or concerning
any Environmental Condition, occurring after the Closing Date and resulting
from (A) any release or waiver by any Corporation of any other Person with
respect thereto which is not disclosed in the Disclosure Schedule or (B) any
representation, warranty, indemnification, covenant, restriction or other
undertaking of any Corporation with respect thereto which is not disclosed in
the Disclosure Schedule (except with respect to representations and
warranties set forth in Section 4.27 of this Agreement, the Liabilities with
respect to which will be indemnified against pursuant to the terms of Section
8.3(a)(i) above); (vi) any Liabilities arising out of any treatment of The
National Guardian Corporation or any of its affiliates (other than the Target
and its Subsidiaries) as an
53
ERISA Affiliate or the Target or any of its Subsidiaries; or (vii) any breach
of any of the Ancillary Agreements by any of the Sellers or any of the
Sellers' Subsidiaries.
The term "DAMAGES" as used in this Section 8.3 is not limited to
matters asserted by third parties against any indemnified party, but includes
Damages incurred or sustained by an indemnified party in the absence of third
party claims. Payments by any indemnified party of amounts for which such
indemnified party is indemnified hereunder shall not be a condition precedent
to recovery. The rights and remedies provided in this Article VIII shall be
exclusive as to any Damages incurred by a party under this Agreement;
PROVIDED, HOWEVER, that nothing herein shall preclude a party from exercising
its rights under this Agreement and applicable law to seek equitable
remedies, including without limitation, specific performance and injunctions.
(b) BY BUYER. Buyer shall indemnify and save and hold harmless
the Sellers and their respective affiliates and Representatives
(collectively, the "SELLERS INDEMNIFIED PARTIES") from and against any and
all Damages incurred in connection with, arising out of or resulting from (i)
any breach of any representation or warranty or the inaccuracy of any
representation made by Buyer in or pursuant to this Agreement; (ii) any
breach of any covenant or agreement made by Buyer in or pursuant to this
Agreement; (iii) any payments required to be made by any of the Sellers to
Jeffrey A. Maddow pursuant to the guarantee by LIW of his severance agreement
or (iv) any payments required to be made by any of the Sellers pursuant to
the guarantee to Cargo Net Services Corporation of obligations of the Target
and/or its Subsidiaries.
(c) COOPERATION. The indemnified party shall cooperate in all
reasonable respects with the indemnifying party and its representatives
(including without limitation its attorneys) in the investigation, trial and
defense of such lawsuit or action and any appeal arising therefrom; PROVIDED,
HOWEVER, that the indemnified party may, at its own cost, participate in
negotiations, arbitrations and the investigation, trial and defense of such
lawsuit or action and any appeal arising therefrom. The parties shall
cooperate with each other in any notifications to insurers.
(d) DEFENSE OF CLAIMS. If a claim for Damages (a "CLAIM") is to
be made by a party entitled to indemnification hereunder against the
indemnifying party, the party claiming such indemnification shall, subject to
Section 8.2 hereof, give written notice (a "CLAIM NOTICE") to the
indemnifying party as soon as practicable after the party entitled to
indemnification becomes aware of any fact, condition or event which may give
rise to Damages for which indemnification may be sought under this Section
8.3. If any lawsuit or enforcement action is filed against any party
entitled to the benefit of indemnity hereunder, written notice thereof shall
be given to the indemnifying party as promptly as practicable (and in any
event within five (5) calendar days after the service of the citation or
summons). The failure of any indemnified party to give timely notice
hereunder shall not affect rights to indemnification hereunder, except to the
extent that the indemnifying party demonstrates actual damage caused by such
failure. After such notice, if the indemnifying party shall acknowledge in
writing to the indemnified party that the indemnifying party shall be
obligated under the terms of its indemnity hereunder in connection with such
lawsuit or action, then the indemnifying party shall be entitled, if it so
elects at its own cost, risk and expense, (i) to take control of the defense
and investigation of such lawsuit or action, (ii) to employ and engage
attorneys of its own choice to handle and defend the same unless the named
parties to such action or proceeding (including any impleaded parties)
include both the indemnifying party and the indemnified party and the
indemnified party has been advised in writing
54
by counsel that there may be one or more legal defenses available to such
indemnified party that are different from or additional to those available to
the indemnifying party, in which event the indemnified party shall be
entitled, at the indemnifying party's cost, risk and expense, to separate
counsel of its own choosing, and (iii) to compromise or settle such lawsuit
or action, which compromise or settlement shall be made only with the written
consent of the indemnified party, such consent not to be unreasonably
withheld. If the indemnifying party fails to assume the defense of such
lawsuit or action within fifteen (15) calendar days after receipt of the
Claim Notice, the indemnified party against which such lawsuit or action has
been asserted will (upon delivering notice to such effect to the indemnifying
party) have the right to undertake, at the indemnifying party's cost and
expense, the defense, compromise or settlement of such lawsuit or action on
behalf of and for the account and risk of the indemnifying party; PROVIDED,
HOWEVER, that such lawsuit or action shall not be compromised or settled
without the written consent of the indemnifying party, which consent shall
not be unreasonably withheld. If the indemnified party settles or
compromises such lawsuit or action without the written consent of the
indemnifying party, the indemnifying party shall not have any liability
hereunder for or with respect to such lawsuit or action. In the event the
indemnified party assumes the defense of the lawsuit or action, the
indemnified party will keep the indemnifying party reasonably informed of the
progress of any such defense, compromise or settlement. The indemnifying
party shall be liable for any settlement of any action effected pursuant to
and in accordance with this Section 8.3 and for any final judgment (subject
to any right of appeal), and the indemnifying party agrees to indemnify and
hold harmless an indemnified party from and against any Damages by reason of
such settlement or judgment.
(e) BROKERS AND FINDERS. No agent, broker, investment banker,
financial advisor or other Person is or will be entitled to any broker's or
finder's fee or any other commission or similar fee in connection with any of
the transactions contemplated hereby other than William E. Myers & Company
(the fees of which will be paid by Buyer). Each party hereto agrees to hold
the other parties hereto harmless from and against any and all claims,
liabilities or obligations with respect to any such fee or commission or
expenses related thereto asserted by any Person (i) with respect to any such
fee or commission or expenses related thereto or (ii) on the basis of any act
or statement alleged to have been made by any party hereto or any of their
respective representatives or affiliates.
(f) REPRESENTATIVES. No individual Representative of any party
shall be personally liable for any Damages under the provisions contained in
this Section 8.3. Nothing herein shall relieve either party of any Liability
to make any payment expressly required to be made by such party pursuant to
this Agreement.
(g) LIMITATION ON INDEMNITY/COMMITMENTS.
(i) The indemnification obligation of the parties hereto
with respect to any breach of any representation or warranty pursuant to
Sections 8.3(a) or (b) shall be limited to Claims for Damages made prior to
last date of survival thereof referred to in Section 8.2. The
indemnification obligation of the parties hereto with respect to any breach
of any covenant or agreement pursuant to Sections 8.3(a) or (b) shall
survive indefinitely subject to the terms of this Agreement.
55
(ii) Buyer may not recover Damages from the Sellers pursuant
to Section 8.3(a)(i) until the aggregate amount of Damages relating to such
Claims for which Buyer is seeking indemnification exceeds two hundred and
fifty thousand dollars ($250,000); PROVIDED, HOWEVER, in the event that the
aggregate amount of Damages for which Buyer is seeking indemnification
exceeds such amount, Buyer may recover the full amount of such Damages less
$250,000. Notwithstanding the foregoing, the maximum amount of damages for
which the Sellers shall be liable pursuant to this Section 8.3 shall be
twenty-eight million dollars ($28,000,000), plus or minus the amount of any
post-Closing adjustment as set forth in Section 2.3 hereof.
(iii) No Seller may recover Damages from Buyer pursuant to
Section 8.3(b)(i) until the aggregate amount of Damages for which such
Seller is seeking indemnification exceeds two hundred and fifty thousand
dollars ($250,000); PROVIDED, HOWEVER, in the event that the aggregate
amount of Damages for which such Seller is seeking indemnification exceeds
such amount, such Seller may recover the full amount of such Damages less
$250,000. Notwithstanding the foregoing, the maximum amount of damages for
which Buyer shall be liable pursuant to this Section 8.3 shall be twenty-
eight million dollars ($28,000,000), plus or minus the amount of any post-
Closing adjustment as set forth in Section 2.3 hereof.
(iv) Neither (a) the termination of the representations or
warranties contained herein, nor (b) the expiration of the indemnification
obligations described above, will affect the rights of a Person in respect
of any Claim made by such Person received by the indemnifying party prior
to the expiration of the applicable survival period provided herein.
(e) ESCROW AGREEMENT. Notwithstanding the foregoing, subject to the
terms and conditions of the Escrow Agreement, Claims for indemnification against
any Seller pursuant to this Section 8.3 shall first be satisfied from the Escrow
Amount and, after the Escrow Amount has been exhausted, shall be recovered
directly from the Sellers.
8.4 INSURANCE. Buyer shall cause the Target to purchase for three (3)
years after the Closing Date insurance covering all of North America, issued by
one or more insurance carriers, evidencing fully paid and non-cancelable
Directors & Officers liability insurance coverage with respect to claims arising
out of events or occurrences on or prior to the Closing Date (whether or not
reported), in the amount of five million dollars ($5,000,000) and at a cost of
$67,500 (which amount will be reflected as a Liability on the Closing Balance
Sheet).
ARTICLE IX
TAX MATTERS
9.1 RETURNS. The Sellers and the Target shall have the exclusive
obligation and authority to file or cause to be filed all Tax returns that are
required to be filed by or with respect to the income, assets (including,
without limitation, real, personal and intangible property) or operations of the
Target or its Subsidiaries for all taxable years or other taxable periods ending
on or prior to the Closing Date (the "PRE-CLOSING PERIODS"). Except as provided
in the preceding sentence, Buyer shall have the exclusive obligation and
authority to file or cause to be filed all Tax returns that are required to be
filed by or with respect to the income, assets (including, without limitation,
real, personal and intangible
56
property) or operations of the Target or any of its Subsidiaries or any
successor thereto. No later than 30 days prior to the due date (or any later
date to which such due date has been legally extended) for the filing of any
Tax return with respect to any taxable year or other taxable period of the
Target and its Subsidiaries beginning on or before the Closing Date and
ending after the Closing Date (an "OVERLAP PERIOD"), Buyer shall (a) provide
the Sellers with written notice, which notice shall set forth Buyer's
calculations regarding the amount of Taxes for which Buyer determines the
Sellers are obligated to reimburse Buyer pursuant to Section 9.3(a) in
sufficient detail and particularity to enable the Sellers to verify the
amount of such Taxes for which the Sellers are obligated to reimburse Buyer,
(b) provide the Sellers with a draft of such Tax return, and (c) provide the
Sellers access to all records of the Target and its Subsidiaries reasonably
necessary to enable the Sellers and their representatives to evaluate the
draft Tax returns provided with such notice. No later than 10 days prior to
the due date (or any later date to which such due date has been legally
extended) for the filing of such Tax return, the Sellers shall notify Buyer
of any objections the Sellers may have to Buyer's calculations regarding the
amount of such Taxes and to any items set forth in such draft Tax return.
Buyer and the Sellers agree to consult and resolve in good faith any such
objection. In the event that Buyer and the Sellers are not able to resolve
such dispute within seven days of the filing date of such Tax return, the
parties shall appoint Ernst & Young, LLP to resolve such dispute as soon as
shall be practicable after such appointment. The fees and expenses of Ernst &
Young, LLP, if any, shall be payed equally by Buyer and LIW.
9.2 CONTESTS. The Sellers and their duly appointed representatives shall
have the exclusive authority to control any audit or examination by any taxing
authority, to initiate any claim for refund, to amend any Tax return and to
contest, resolve and defend against any assessment for additional Taxes, notice
of Tax deficiency or other adjustment of Taxes of or relating to any liability
of the Target or its Subsidiaries for Taxes reflected on any Tax returns
covering any Pre-Closing Periods; PROVIDED, HOWEVER, that (a) neither the
Sellers nor any of their duly appointed representatives shall, without the prior
written consent of the Buyer, which consent shall not be unreasonably withheld,
file any claim for refund, amend any Tax return or enter into any settlement of
any contest or otherwise compromise any issue that affects or may affect the Tax
liability of the Buyer or any of its Affiliates for any Tax period beginning
after the Closing Date (a "POST-CLOSING PERIOD") or any portion of an Overlap
Period beginning after the Closing Date, and (b) neither the Sellers nor any of
their duly appointed representatives shall, without the prior consent of the
Buyer, which consent shall not unreasonably be withheld, enter into any
settlement of any contest or otherwise compromise any issue that would increase
any liability accruals for Taxes as of the Closing Date or would otherwise
require payment by the Buyer of any amount under Section 9.3 unless the Sellers
shall have agreed to indemnify the Buyer for payment of such Taxes. Buyer and
its duly appointed representatives shall have the exclusive authority to control
any audit or other proceeding relating to Taxes for any taxable year or other
taxable period ending after the Closing Date; PROVIDED, HOWEVER, that (a)
neither Buyer, the Target nor any of their duly appointed representatives shall,
without the prior written consent of the Sellers, which consent shall not be
unreasonably withheld, enter into any settlement of any contest or otherwise
compromise any issue that affects or may affect the Tax liability of the Sellers
or any of their affiliates for any Pre-Closing Period or any portion of the
Overlap Period ending on the Closing Date, and (b) neither Buyer, the Target nor
any of their duly appointed representatives shall, without the prior consent of
the Sellers, which consent shall not unreasonably be withheld, enter into any
settlement of any contest or otherwise compromise any issue that would reduce
any liability accruals for Taxes as of the Closing Date or would otherwise
require payment by the Sellers of any amount under Section 9.3
57
unless Buyer shall have waived or caused to be waived for itself and the
Target any right to indemnification for Taxes from the Sellers. The Sellers
shall be entitled to any Tax refund relating to the Target and its
Subsidiaries to the extent such Tax refund relates to any Pre-Closing Period
or any portion of the Overlap Period ending on the Closing Date, unless such
refund has been recorded as an Asset on the Closing Balance Sheet in which
case Buyer shall be entitled thereto.
9.3 PAYMENT OF TAXES. (a) Taxes of the Target and its Subsidiaries that
relate to an Overlap Period shall be apportioned between the portion of such
period ending on the Closing Date and the portion of such period beginning after
the Closing Date on the basis of an interim closing of the books, and based on
accounting methods, elections and conventions that do not have the effect of
distorting income or expenses. Notwithstanding the foregoing, real and personal
property Taxes of the Target and its Subsidiaries for any Overlap Period shall
be apportioned on a per diem basis. The Sellers shall pay to Buyer or the
appropriate taxing authority the Taxes calculated with respect to the portion of
the Overlap Period ending on the Closing Date (as determined by the Sellers and
Buyer using the procedure set forth under Section 9.1), but any such payment
required by the Sellers shall be reduced by the amount of such Taxes already
paid by the Target or the Sellers or any affiliate of the Sellers on or prior to
the Closing Date or accrued or otherwise reflected as a Tax liability for such
period on the Closing Balance Sheet.
(b) except as otherwise provided in this Section 9.3(b) the Sellers shall
indemnify the Buyer Indemnified Parties and hold them harmless from (i) all
Liability for Taxes of the Target and its Subsidiaries (except Taxes accrued and
accounted for) for all Pre-Closing Tax Periods and the portion ending on the
Closing Date, including, without limitation, Liability for the election under
Section 338(h)(10) for any actual or deemed election under Section 338 of the
Code or any corresponding provision of state, local or foreign law (except with
respect to Liabilities for Puerto Rican Taxes, if any, resulting from an actual
or deemed liquidation of LEP Profit International, Inc. (Puerto Rico), for which
Buyer shall be responsible and indemnify the Sellers), (ii) all Liability (as a
result of Treasury Regulation Section 1.1502-6(a) or otherwise) for Taxes of any
Person (other than the Target or its Subsidiaries) with which any of the Sellers
or the Target or any of their respective Subsidiaries is or has been affiliated
or has filed or has been required to file a consolidated, combined or unitary
Tax Return and (iii) all Taxes arising out of a breach of the Sellers'
representations and warranties contained in Section 4.21 hereof.
Notwithstanding the foregoing provisions of this Section 9.3(b), the Sellers
shall not indemnify and hold harmless Buyer for the amount of recorded liability
accruals for Taxes reflected on the Closing Balance Sheet.
(c) Buyer agrees to pay or cause the Target to pay the Sellers an amount
equal to all payments made by the Sellers or their affiliates after the Closing
Date to any governmental authority for or with respect to Taxes imposed on or
with respect to the income, assets and operation of or with respect to the
Target or any of its Subsidiaries for periods ending on or prior to the Closing
Date, to the extent that the aggregate amount of such payments does not exceed
the amount of liability accruals for such Taxes reflected on the Closing Balance
Sheet.
(d) except as otherwise provided in this Section 9.3, Buyer hereby
indemnifies and agrees to hold harmless the Sellers and their affiliates from
and against all Taxes of or with respect to the Target and each of its
Subsidiaries for all taxable years or other taxable periods beginning after the
Closing Date
58
and, with respect to the Overlap Period, the portion of such period
commencing after the Closing Date.
9.4 NOTICE OF CONTESTS. The Buyer shall promptly notify the Seller, in
connection with any inquiry, examination, or proceeding, any government
authority proposes in writing to make or any assessment or adjustment with
respect to Tax items of the Target and its Subsidiaries, which assessments or
adjustments could affect the Sellers following the Closing Date, and shall
consult with the Sellers with respect to any such proposed assessment or
adjustment. Buyer shall notify the Sellers in writing promptly upon learning of
any such inquiry, examination, or proceeding and shall consult with the Sellers
with respect to any such proposed assessment or adjustment relating to periods
ending on or prior to the Closing Date.
9.5 COOPERATION. The Buyer shall cause the Target and its Subsidiaries
to provide the Sellers or their designee with such assistance as may reasonably
be requested by the Sellers or their designee in connection with the preparation
of any Tax return, audit or judicial or administrative proceeding or
determination relating to liability for Taxes of or with respect to the Target
or any of its Subsidiaries, including but not limited to, access to the books
and records, and the assistance of the officers and employees, of the Target and
its Subsidiaries. Buyer and the Sellers acknowledge that any and all
information obtained in connection with the preparation of any Tax return, audit
or judicial or administrative proceeding or determination pursuant to this
Section 9.5 is of a confidential nature and that all such information shall be
used only for the purposes set forth in the immediately preceding sentence.
9.6 ELECTION UNDER SECTION 338(h)(10). At the election of Buyer, the
Parent Companies shall cause the Stockholder to join Buyer in making an election
under Section 338(h)(10) of the Code and any corresponding elections permitted
under state, local, or foreign law with respect to the acquisition of the Target
and each of its corporate Subsidiaries (other than its Subsidiaries that are
organized under the laws of a country other than the United States) (such
Subsidiaries, the "INCLUDED SUBSIDIARIES") and if no election may be made
pursuant to such state, local or foreign law, to the extent available, under an
election corresponding to Section 338(a) and Section 338(g) of the Code for
purposes of such state, local or foreign law or to treat the Code Section
338(h)(10) election as making an election corresponding to Section 338(a) and
Section 338(g) of the Code. Buyer and the Stockholder shall exchange completed
and executed copies of Internal Revenue Service Form 8023-A, required schedules
thereto, and any similar state, local, and foreign forms as soon as practicable
after the Closing. The Stockholder and Buyer agree that Buyer, in its sole
reasonable discretion, shall allocate the Purchase Price and all other
capitalized costs among the Target's assets for income tax purposes. Buyer
agrees to give the Stockholder sufficient notice of such allocation to allow the
Stockholder, to the extent necessary, to take account of such allocation in its
tax filings. The Stockholder and Buyer acknowledge that for United States
federal income tax purposes (and for purposes of state, local or foreign taxes
in jurisdictions which permit elections analogous to the election permitted
under Section 338(h)(10) of the Code) the acquisition of the stock of Target
will be treated by the parties as a sale of the Assets of the Target (other than
stock of the Included Subsidiaries) and a sale of the assets of each of the
Included Subsidiaries to new corporations owned by Buyer, followed by a complete
liquidation of Target and the Included Subsidiaries into the Stockholder. The
parties agree to report the transactions in a manner consistent with this
treatment.
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9.7 PURCHASE PRICE ADJUSTMENT. To the extent permitted by law, any payment
made pursuant to Article VIII or Article IX hereunder by Buyer to the
Stockholder or by the Stockholder to Buyer shall be treated by all parties for
all purposes as an adjustment to the purchase price of the stock of the Target
and shall be allocated pursuant to the provisions of Section 9.6 hereof.
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ARTICLE X
MISCELLANEOUS
10.1 ASSIGNMENT. Neither this Agreement nor any of the rights or
obligations hereunder may be assigned by any party without the prior written
consent of the other parties; PROVIDED, HOWEVER, without the consent of any
other party, the Buyer may, (i) assign all such rights to any lender as
collateral security in connection with the financing of the Purchase Price so
long as Buyer is not in any way released from its obligations hereunder and (ii)
assign all such rights and obligations to any subsidiary or affiliate of Buyer
or to a successor in interest to Buyer which shall assume all obligations and
Liabilities of Buyer under this Agreement; PROVIDED, FURTHER, that LIW will not
unreasonably withhold its consent to the assignment by Buyer of this Agreement
or any of its rights and obligations hereunder in any sale by Buyer of all or a
significant portion of the assets of the Target and its Subsidiaries, taken as a
whole; and PROVIDED, FURTHER, that the Stockholder may, without the consent of
Buyer, assign its rights hereunder in connection with the dissolution of the
Stockholder. Subject to the foregoing, this Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors-in-
interest, personal representatives, heirs, legatees and permitted assigns, and
no other person shall have any right, benefit or obligation under this Agreement
as a third party beneficiary or otherwise.
10.2 NOTICES. All notices, requests, demands and other communications
which are required or may be given under this Agreement shall be in writing and
shall be deemed to have been duly given when received if personally delivered;
when transmitted if transmitted by telecopy, electronic or digital transmission
method; the day after it is sent, if sent for next day delivery to a domestic
address by recognized overnight delivery service (E.G., Federal Express); and
upon receipt, if sent by certified or registered mail, return receipt requested.
In each case notice shall be sent to:
If to the Sellers, addressed to:
LEP International Worldwide Limited
28 Church Street, Epsom
Surrey KT174QP, London
England
Attention: Ron Jackson
Fax Number: 011-44-137-281-3181
With a copy to:
Troutman Sanders LLP
600 Peachtree Street, N.E., Suite 5200
Atlanta, GA 30308-2216
Attention: John C. Beane
Fax Number: (404) 885-3900
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If to Buyer, addressed to:
International Logistics Limited
310 South Street, P.O. Box 1913
Morristown, NJ 07962-1913
Attention: Roger Payton
Fax Number: (708) 547-2124
With a copy to:
Latham & Watkins
633 W. 5th Street, Suite 4000
Los Angeles, CA 90071-2007
Attention: Paul D. Tosetti
Fax Number: (213) 891-8763
or to such other place and with such other copies as either party may designate
as to itself by written notice to the others.
10.3 CHOICE OF LAW. This Agreement shall be construed, interpreted and
the rights of the parties determined in accordance with the laws of the State of
New York (without reference to the choice of law provisions of New York law),
except with respect to matters of law concerning the internal corporate affairs
of any corporate entity which is a party to or the subject of this Agreement,
and as to those matters the law of the jurisdiction under which the respective
entity derives its powers shall govern.
10.4 SERVICE OF PROCESS, CONSENT TO JURISDICTION.
(a) SERVICE OF PROCESS. Each of the parties hereto irrevocably
consents to the service of any process, pleading, notices or other papers by the
mailing of copies thereof by registered, certified or first class mail, postage
prepaid, to such party at such party's address set forth herein, or by any other
method provided or permitted under New York law.
(b) CONSENT TO JURISDICTION. Each party hereto irrevocably and
unconditionally (1) agrees that any suit, action or other legal proceeding
arising out of this Agreement may be brought in the United States District Court
for the Southern District of New York or, if such court does not have
jurisdiction or will not accept jurisdiction, in any court of general
jurisdiction in the County of New York, New York; (2) consents to the
jurisdiction of any such court in any such suit, action or proceeding; and (3)
waives any objection which such party may have to the laying of venue of any
such suit, action or proceeding in any such court.
10.5 ENTIRE AGREEMENT; AMENDMENTS AND WAIVERS. This Agreement, the
Ancillary Agreements, together with all exhibits and schedules hereto and
thereto (including the Disclosure Schedule), constitutes the entire agreement
among the parties pertaining to the subject matter hereof and supersedes all
prior agreements, understandings, negotiations and discussions, whether oral or
62
written, of the parties. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties hereto. No
amendment, supplement, modification or waiver of this Agreement shall be binding
unless executed in writing by the party to be bound thereby. No waiver of any
of the provisions of this Agreement shall be deemed or shall constitute a waiver
of any other provision hereof (whether or not similar), nor shall such waiver
constitute a continuing waiver unless otherwise expressly provided.
10.6 MULTIPLE COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
10.7 EXPENSES. Except as otherwise specified in this Agreement, each
party hereto shall pay its own legal, accounting, out-of-pocket and other
expenses incident to this Agreement and to any action taken by such party in
preparation for carrying this Agreement into effect.
10.8 INVALIDITY. In the event that any one or more of the provisions
contained in this Agreement or in any other instrument referred to herein,
shall, for any reason, be held to be invalid, illegal or unenforceable in any
respect, then to the maximum extent permitted by law, such invalidity,
illegality or unenforceability shall not affect any other provision of this
Agreement or any other such instrument.
10.9 TITLES; GENDER. The titles, captions or headings of the Articles and
Sections herein, and the use of a particular gender, are for convenience of
reference only and are not intended to be a part of or to affect or restrict the
meaning or interpretation of this Agreement.
10.10 PUBLICITY. Neither Buyer, on the one hand, nor the Sellers, the
Target or any of their respective subsidiaries, on the other hand, shall
issue any press release or make any public statement regarding the
transactions contemplated hereby, without prior written approval of the other
parties.
10.11 CUMULATIVE REMEDIES. All rights and remedies of either party
hereto are cumulative of each other and of every other right or remedy such
party may otherwise have at law or in equity, and the exercise of one or more
rights or remedies shall not prejudice or impair the concurrent or subsequent
exercise of other rights or remedies.
10.12 CONFIDENTIAL INFORMATION.
(a) NO DISCLOSURE. The parties acknowledge that the transaction
described herein is of a confidential nature and shall not be disclosed except
to consultants, advisors and affiliates, or as required by law, until such time
as the parties make a public announcement regarding the transaction as provided
in Section 10.10.
(b) PRESERVATION OF CONFIDENTIALITY. In connection with the
negotiation of this Agreement, the preparation for the consummation of the
transactions contemplated hereby, and the performance of obligations hereunder,
Buyer acknowledges that it will have access to confidential information relating
to the Sellers and the Target and its Subsidiaries and the Sellers acknowledge
that they will have access to confidential information relating to the Buyer and
its affiliates, in each case, including technical,
63
manufacturing or marketing information, ideas, methods, developments,
inventions, improvements, business plans, trade secrets, scientific or
statistical data, diagrams, drawings, specifications or other proprietary
information relating thereto, together with all analyses, compilations,
studies or other documents, records or data prepared by the Sellers and the
Target and its Subsidiaries or Buyer, as the case may be, or their respective
Representatives or affiliates, which contain or otherwise reflect or are
generated from such information ("CONFIDENTIAL INFORMATION"). The term
"CONFIDENTIAL INFORMATION" does not include information received by one party
in connection with the transactions contemplated hereby which (i) is or
becomes generally available to the public other than as a result of a
disclosure by such party or its Representatives, (ii) was within such party's
possession prior to its being furnished to such party by or on behalf of the
other party in connection with the transactions contemplated hereby, provided
that the source of such information was not known by such party to be bound
by a confidentiality agreement with or other contractual, legal or fiduciary
obligation of confidentiality to the other party or any other Person with
respect to such information or (iii) becomes available to such party on a
non-confidential basis from a source other than the other party or any of
their respective Representatives, provided that such source is not bound by a
confidentiality agreement with or other contractual, legal or fiduciary
obligation of confidentiality to the other party or any other Person with
respect to such information.
(c) Each party shall treat all Confidential Information of the other
party as confidential, preserve the confidentiality thereof and not disclose any
such Confidential Information, except to its representatives and affiliates who
need to know such Confidential Information in connection with the transactions
contemplated hereby. Each party shall use all reasonable efforts to cause its
Representatives to treat all such Confidential Information of the other party as
confidential, preserve the confidentiality thereof and not disclose any such
Confidential Information. Each party shall be responsible for any breach of
this Agreement by any of its Representatives. If, however, Confidential
Information is disclosed, the party responsible for such disclosure shall
immediately notify the other party in writing and take all reasonable steps
required to prevent further disclosure.
(d) All Confidential Information shall remain the property of the
party who originally possessed such information. In the event of the
termination of this Agreement for any reason whatsoever, each party shall, and
shall cause its representatives to, return to the other party all Confidential
Information (including all copies, summaries and extracts thereof) furnished to
such party by the other party in connection with the transactions contemplated
hereby.
(e) If one party or any of its representatives or affiliates is
requested or required (by oral questions, interrogatories, requests for
information or documents in legal proceedings, subpoena, civil investigative
demand or other similar process) or is required by operation of law to disclose
any Confidential Information, such party shall provide the other party with
prompt written notice of such request or requirement, which notice shall, if
practicable, be at least 48 hours prior to making such disclosure, so that the
other party may seek a protective order or other appropriate remedy and/or waive
compliance with the provisions of this Agreement. If, in the absence of a
protective order or other remedy or the receipt of such a waiver, such party or
any of its representatives are nonetheless, in the opinion of counsel, legally
compelled to disclose Confidential Information, then such party may disclose
that portion of the Confidential Information which such counsel advises is
legally required to be disclosed, provided that such party uses its reasonable
efforts to preserve the confidentiality of the Confidential Information,
whereupon such disclosure shall not constitute a breach of this Agreement.
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10.13 ATTORNEYS' FEES. If any party to this Agreement brings an action
to enforce its rights under this Agreement, the prevailing party shall be
entitled to recover its costs and expenses, including without limitation
reasonable attorneys' fees, incurred in connection with such action,
including any appeal of such action.
10.14 LIMITATION OF LIABILITY. Notwithstanding anything to the contrary
in this Agreement, in no event shall any party hereto be liable for any
incidental or consequential damages occasioned by any failure to perform or
the breach of any obligation (including, without limitation, the breach of
any representation or warranty) under this Agreement.
10.15 KNOWLEDGE. Whenever a phrase herein is qualified by "to the
knowledge of the Seller" or a similar phrase, it is intended to refer to the
knowledge, after the exercise of reasonable diligence, of Jack Wasp, Ron
Series, Digby Davies, Ron Jackson, Andrew Bernard, Peter Brown, Wolfgang
Hollermann, Louis Mitchell and Martin McDonell.
65
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed on their respective behalf, by their respective officers
thereunto duly authorized, all as of the day and year first above written.
LEP INTERNATIONAL INTERNATIONAL LOGISTICS
WORLDWIDE LIMITED LIMITED
By: /s/ Digby J. Davies By: /s/ Roger E. Payton
------------------------------- --------------------------------------
Name: Digby J. Davies Name: Roger E. Payton
------------------------------ -------------------------------------
Its: Director Its: President & Chief Executive Officer
------------------------------- --------------------------------------
LEP INTERNATIONAL HOLDINGS LIMITED
By: /s/ Digby J. Davies
-------------------------------
Name: Digby J. Davies
------------------------------
Its: Director
-------------------------------
LEP HOLDINGS (USA) INC.
By: /s/ Digby J. Davies
-------------------------------
Name: Digby J. Davies
------------------------------
Its: President
-------------------------------
LEP HOLDINGS (NORTH AMERICA) LIMITED
By: /s/ Digby J. Davies
-------------------------------
Name: Digby J. Davies
------------------------------
Its: Director
-------------------------------
66