ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement") is made as of the 18th day
of December, 2001, by and among Heritage Marketing Corporation, a Delaware
corporation (the "Stockholder"), Color Prelude, Inc., a Delaware corporation
(the "Company"), and IST, Corp., a Delaware corporation ("Purchaser").
WHEREAS, the Company is engaged in the business of creating and producing
consumer product sampling programs primarily for marketers of health and beauty
aids (the "Business"); and
WHEREAS, Stockholder is the sole record and beneficial owner of all of the
issued and outstanding shares (the "Shares") of capital stock of the Company
(the "Company Stock"); and
WHEREAS, Purchaser desires to purchase the Business, and substantially all
of the assets used in connection therewith, and to assume certain liabilities of
the Company, on the terms and conditions set forth herein; and
WHEREAS, the Company desires to sell the Business, and substantially all of
the assets used in connection therewith, and to assign certain liabilities of
the Company to the Purchaser, on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual agreements, representations
and warranties herein contained, the parties hereto hereby agree as follows:
1. PURCHASE AND SALE
1.1 PURCHASED ASSETS; EXCLUDED ASSETS; AND ASSUMED LIABILITIES.
(a) At the Closing (as hereinafter defined) and subject to the terms
and conditions of this Agreement, Purchaser shall purchase and acquire from
the Company, and Company shall sell, convey, transfer and assign to
Purchaser, on a going concern basis, free and clear of all Encumbrances,
all of the Purchased Assets (as defined below) but not the Excluded Assets
(as defined below). The "Purchased Assets" means the Business and all of
the assets and properties (except for the Excluded Assets) used in
connection therewith, including without limitation, all of the Company's
right, title and interest in, to and under the following:
(i) the Company's leasehold interests in the Currently Leased
Real Property defined in Section 2.10 and more particularly
identified on Schedule 2.10, in each case together with the
Company's interest in all buildings, fixtures, plant,
equipment and improvements thereon or attached thereto;
(ii) all machinery, equipment, equipment parts, furniture,
vehicles, fixtures and all other tangible personal property,
including but not limited to that set forth on Schedule 2.8
("Machinery and Equipment");
(iii)all inventory, including raw materials, work in process and
finished goods, packaging materials and supplies (whether on
hand at the Currently Leased Real Property, in transit
thereto, or elsewhere) used or held for use in the Business
("Inventory");
(iv) all cash and cash equivalents, including without limitation
bank accounts (in the name of the Company or escrow account
held for its benefit), certificates of deposit and
marketable securities;
(v) all accounts receivable, notes and refunds receivable,
including those set forth on Schedule 2.21;
(vi) all contracts, leases, purchase orders, sales orders,
contracts to purchase new materials, contracts to receive
services or supplies, contracts to sell products and all
other binding agreements of the Company which can be
assigned to the Purchaser without such assignment
constituting a breach thereunder or with respect to which
the other party or parties to such agreement has given its
written consent to the assignment to the Purchaser, and
which are set forth on Schedule 1.1 hereof (collectively,
the "Assumed Contracts" and individually, an "Assumed
Contract");
(vii)all patents, trademarks, service marks, trade names, trade
dress, copyrights, common law, statutory and similar rights
(and all goodwill associated therewith), and all
registrations thereof, applications therefor, and rights or
renewal, modifications or extensions anywhere in the world,
intellectual property assignments, work for hire agreements,
including such intellectual property set forth on Schedule
2.6 and the rights to sue for past or on-going infringement
or misappropriation of any of the foregoing, and to seek and
retain any recoveries resulting therefrom
(collectively, the "Intellectual Property");
(viii) all Company's books, records, accounting information and
files to the extent they relate to the Purchased Assets and
the Business, and all media in which all or any of the
information, knowledge, data or records may be related or
stored (the "Business Records");
(ix) all general, financial and personnel records, including
employee records for current employees, correspondence and
other files and records, customer lists, customer files,
credit information, advertising, promotional and sales
materials, letterhead, business cards, sales data, product
price lists, account histories, all software, including
programs relating to any of the information listed herein or
similar information;
(x) all claims, causes of action, rights, entitlements and
demands against third parties relating to any of the
Purchased Assets or Assumed Liabilities prior to the Closing
Date;
(xi) all goodwill and going concern value;
(xii)all rights and interest of the Company in and to any
internet domain names and websites of the Company relating
to the Business;
(xiii) all right, title and interest in and to the name "Color
Prelude, Inc." and any derivative thereof;
(xiv)all manufacturer's and seller's warranties made to the
Company;
(xv) all telephone numbers, yellow page listings and internet
addresses, if any;
(xvi)all licenses, permits, registrations (and applications
therefor) and other governmental authorizations or other
rights granted by governmental authorities used in or
required or necessary for the lawful ownership or operation
of the Business, including but not limited to those
described on Schedule 2.6 and Schedule 2.7 (collectively,
the "Transferred Permits");
(xvii) all marketing and technical know-how, trade and business
secrets, technology, processes, procedures, proprietary
information and other similar information with respect to
the Business;
(xviii) product design, formulae (whether or not published and
whether or not in the public domain), data, plans,
blueprints, production formulas, specifications, manuals,
package and other designs, logos, drawings, recorded
knowledge, engineering reports for equipment, equipment and
parts lists, test reports, materials standards, catalogues,
processing standards, performance and quality control
standards, marketing studies, research data, art work,
plates, dies, computer and other similar information
relating to the manufacture, distribution, marketing,
display or sales of products;
(xix) all office and other supplies, tools and spare parts;
(xx) all deposits of any nature whatsoever, including security
deposits, deposits on equipment and prepaid expenses; and
(xxi)all other rights and assets relating to, or used in
connection with the conduct of the Business, but excluding
the Excluded Assets.
(b) Notwithstanding the foregoing, the Purchased Assets shall not
include, and the Company shall retain ownership of, the following assets of
the Company (the "Excluded Assets"):
(i) The Company's rights under this Agreement and the other
agreements, certificates and instruments to be executed by
Company in connection with or pursuant to this Agreement;
(ii) the Company's minute book and stock record book;
(iii)all contracts, leases, purchase orders, sales orders,
contracts to purchase new materials, contracts to receive
services or supplies, contracts to sell products and all
other binding agreements of the Company, other than Assumed
Contracts (collectively, the "Retained Contracts");
(iv) All refunds of income taxes filed or to be filed by Company
or its affiliates;
(v) All records relating to the general corporate operations and
administration of the Company's business that are not used
in the operation of the Business; and
(vi) All counterclaims and offsets in respect to any liability of
the Company which is not an Assumed Liability.
(c) At the Closing, the Company shall assign to the Purchaser, and the
Purchaser shall assume, all obligations of the Company to be performed
after the Closing under the Assumed Contracts; provided, however, that in
no event shall Purchaser assume any liability under any Assumed Contract
incurred by the Company in violation of the provisions of this Agreement or
arising out of a breach or default under any Assumed Contract by the
Company prior to Closing (including any event prior to the Closing that,
with the passage of time or the giving of notice, or both, would become
such a breach or default) and Purchaser shall have the right not to assume
any Assumed Contract if the Company or any other party thereto is in breach
or default thereunder (including any event that, with the passage of time
or the giving of notice, or both, would become a breach or default) as of
the Closing.
(d) At the Closing, Purchaser shall assume from the Company all
accounts payable and accrued expenses of the Company (i) existing as of the
Closing Date, but only if and to the extent that same: (A) were incurred by
the Company in the ordinary course of its business prior to the Closing
Date, (B) are set forth on the Closing Balance Sheet, (C) remain unpaid on
the Closing Date, and (D) are required to be reflected in the Final Closing
Balance Sheet, and (E) are not otherwise excluded by this Asset Purchase
Agreement from the liabilities or obligations of the Company to be assumed
by Purchaser; provided, however, that in no event shall any of the
Indebtedness (as defined in Section 6.5 hereof) of Seller, even to the
extent classified as a current liability, be included as one of the Assumed
Liabilities and provided further, however, that with respect to any accrual
for sales, use and payroll taxes, payroll, and employee vacation benefits,
there shall be excluded from such assumption of liabilities any amounts due
as a result of the delinquent payment of such amounts, including penalties,
fines and interest ("Accrued Liabilities").
(e) At the Closing, the Purchaser shall assume from the Company, to
the extent relating to periods on and after the Closing, all liabilities
and obligations of the Company under the leases of the Currently Leased
Real Property ("Lease Obligations").
(f) At the Closing, the Purchaser shall pay on behalf of the Company,
management bonuses to such management personnel of the Company and in such
amounts as the Stockholder and the Company shall specify in a written
direction letter to be delivered to the Purchaser prior to Closing;
provided, however, the aggregate amount to be paid by the Purchaser under
this Section 1.1(f) shall in no event exceed $150,000.
(g) Except for those liabilities and obligations to be assumed and/or
discharged by Purchaser pursuant to Sections 1.1(c), (d), (e) and (f)
above, (collectively, the "Assumed Liabilities"), Purchaser shall not
assume, nor shall Purchaser be liable or obligated in any way for any
debts, contracts, liabilities, commitments and obligations of the Company
of any kind or nature whatsoever, whether absolute or contingent,
liquidated or unliquidated, disclosed or undisclosed, and whether or not
accrued, matured, known, or unknown (the "Retained Liabilities"). Without
limiting the foregoing, the following shall constitute Retained
Liabilities:
(i) any and all accrued liabilities of the Company, arising prior
to the Closing Date and not specifically assumed pursuant to Sections
1.1(c), 1.1(d), 1.1(e) or 1.1(f) hereof;
(ii) liabilities or obligations arising prior to the Closing Date
out of any breach by the Company of any provisions of any agreement,
contract, commitment or lease to which the Company is a party
including liabilities or obligations arising out of the Company's
failure to perform any agreement, contract, commitment or lease in
accordance with its terms prior to the Closing Date, and also
including any liability arising out of the assignment to Purchaser of
any Contract in violation of the terms thereof;
(iii)any liabilities or obligations of the Company or its
Affiliates under any employee benefit plans, arising from the
operation of the Company's business prior to the Closing Date;
(iv) any liability or obligation of the Company or its Affiliates
arising out of any action, suit, investigation or proceeding based
upon an event occurring or a claim arising (A) prior to the Closing
Date or (B) after the Closing Date in the case of claims (X) in
respect of products or services sold or provided by the Company prior
to the Closing Date and/or (Y) attributable to acts performed or
omitted by the Company or its Affiliates prior to the Closing Date
(including any product liability or similar claim for injury to person
or property, regardless of when made or asserted, which arises out of
or is based upon any express or implied representation, warranty,
agreement or guarantee made by the Company, or alleged to have been
made by the Company, or which is imposed or asserted by operation of
law, in connection with any service performed or product sold or
leased by or on behalf of the Company prior to the Closing Date,
including any claim relating to any product delivered in connection
with the performance of such service and any claim seeking recovery
for consequential damage, lost revenue or income);
(v) except for any sales, use and payroll taxes, to the extent
expressly assumed by the Purchaser pursuant to Section 1.1(d) hereof,
any
and all liabilities for any taxes, charges, fees, levies or other
assessments (and all related interest, additions to tax and penalties)
imposed by the United States, or any state, local or foreign
government or subdivision or agency thereof (the "Taxes") payable with
respect to the business, assets, properties or operations of the
Company or any member of any affiliated group of which the Company is
a member for any period prior to the Closing Date,;
(vi) except as expressly assumed herein, any liability or
obligation under or in connection with any Excluded Assets;
(vii)any liability or obligation of the Company or Stockholder
arising or incurred in connection with the negotiation, preparation
and execution of this Asset Purchase Agreement and the transactions
contemplated hereby and fees and expenses of any and all counsel,
accountants and other experts;
(viii) any intercompany liabilities between any the Company or
any of their Affiliates;
(ix) any and all liabilities resulting from litigation, whether
or not pending or threatened prior to the Closing Date, arising out of
the conduct of the Business prior to the Closing Date or facts or
circumstances relating to the Business existing or occurring prior to
the Closing Date.
1.2 PURCHASE PRICE. The aggregate purchase price for the Purchased Assets
is (i) $19,032,250.50 (the "Initial Cash Purchase Price"), as adjusted prior to
the Closing pursuant to Section 1.4(a) (the "Closing Purchase Price") and as
further adjusted following the Closing pursuant to Section 1.4(b)(the "Cash
Purchase Price"), and (ii) the Assumed Liabilities (collectively, the "Purchase
Price"). Subject to Section 1.5 hereof, the Cash Purchase Price shall be paid in
cash (payable by wire transfer), by the Purchaser, on behalf of the Company, to
the Administrative Agent for the ratable benefit of the Lenders, in accordance
with the wiring instructions provided by the Administrative Agent and approved
by the Company in writing.
1.3 ALLOCATION OF PURCHASE PRICE. Purchaser and the Company hereby agree
to allocate the Purchase Price among the Purchased Assets in accordance with
Section 1060 of the Code as of the Closing; provided, however, a portion of the
Purchase Price payable hereunder, in an amount not to exceed $375,000, shall be
allocated to the Non-Competition Agreements to be executed and delivered
pursuant to Section 8.1(l). The allocation shall be substantially in the form
attached hereto as Exhibit 1.3. The allocation attached hereto as Exhibit 1.3
shall be adjusted by the parties to reflect any changes in the net assets of the
Company as set forth on the Final Closing Balance Sheet . The parties agree to
file timely any information that may be required to be filed pursuant to the
regulations promulgated under Section 1060(b) of the Code. The parties further
agree that they shall report the federal, state, municipal and local and other
tax consequences of
the purchase and sale hereunder in a manner consistent with the allocation
determined pursuant to this Section 1.3 and they shall not take any position
inconsistent therewith in connection with any tax return, refund claim,
litigation or otherwise.
1.4 PURCHASE PRICE ADJUSTMENTS.
(a) Pre-Closing Purchase Price Adjustment.
(i) On the date that is no more than three business days prior to
the Closing, the Company shall deliver to the Purchaser an estimated
balance sheet of the Company as of 11:59 p.m. of the day immediately
preceding the Closing Date (the "Estimated Closing Balance Sheet"),
which shall be prepared using accounting principles consistent with
those used in prior periods, but which shall be adjusted to (i)
eliminate any assets which are Excluded Assets and any liabilities
which are not Assumed Liabilities, (ii) eliminate any prepaid expense
to the extent that the rights of the Company under the contract to
which the prepaid expense relates have not been assigned to the
Purchaser, and (iii) eliminate any accruals for amounts due as a
result of the delinquent payment of (or failure to pay) sales, use and
payroll taxes, including but not limited to, any penalties, fines and
interest. The allocation of the Purchase Price pursuant to Section 1.3
hereof shall not be used or in any way effect or cause an adjustment
of the amounts otherwise set forth on the Estimated Closing Balance
Sheet, the Closing Balance Sheet and the Final Closing Balance Sheet.
Prior to the Closing, representatives of the Purchaser and the Company
shall conduct a physical count and inspection of all inventory of the
Company and the amount thereof (which shall be appropriately adjusted
in the Closing Balance Sheet to reflect increases or decreases thereof
between the date of such physical count and inspection and the
Closing), determined in accordance with United States generally
accepted accounting principles applied on a basis consistent with
preceding years and throughout the periods involved ("GAAP"), shall be
used in the preparation of the Estimated Closing Balance Sheet. The
stockholders' equity reflected on the Estimated Closing Balance Sheet
is referred to herein as the "Estimated Closing Stockholder's Equity".
The difference between the Adjusted Current Assets and the Adjusted
Current Liabilities as reflected on the Estimated Closing Balance
Sheet is referred to herein as the "Estimated Closing Working
Capital".
(ii) If:
(A) the Estimated Closing Stockholder's Equity is less than
$5,250,000 (the "Target Closing Stockholder's Equity"); and/or
(B) the Estimated Closing Working Capital is less than
$2,500,000 (the "Target Closing Working Capital").
then the Initial Purchase Price shall be reduced by an amount equal to
the amount that would cause: (i) the Estimated Closing Stockholder's
Equity to be equal to or
greater than the Target Closing Stockholder's Equity, and (ii) the
Estimated Closing Working Capital to be equal to or greater than the
Target Closing Working Capital.
(b) Post-Closing Purchase Price Adjustment.
(i) As soon as practicable, but in no event later than 45 days
following the Closing Date, the Company shall prepare, or cause to be
prepared a balance sheet of the Company as of 11:59 p.m. of the day
immediately preceding the Closing Date reviewed by the Company's
Accountants, as hereinafter defined (the "Closing Balance Sheet")
which shall be prepared in accordance with GAAP, but which shall be
adjusted to (i) eliminate any assets which are Excluded Assets and any
liabilities which are not Assumed Liabilities (ii) eliminate any
prepaid expense to the extent that the rights of the Company under the
contract to which the prepaid expense relates have not been assigned
to the Purchaser, and (iii) eliminate any accruals for amounts due as
a result of the delinquent payment of (or failure to pay) sales, use
and payroll taxes, including but not limited to, any penalties, fines
and interest.
(ii) The Stockholder shall deliver a copy of the Closing Balance
Sheet to the Purchaser promptly after it has been prepared. After
receipt of the Closing Balance Sheet, the Purchaser and Purchaser's
Accountants, as hereinafter defined, shall have 45 days to review the
Closing Balance Sheet. Unless the Purchaser delivers written notice to
the Stockholder on or prior to the 45th day after its receipt of the
Closing Balance Sheet specifying in detail all disputed items and the
basis therefore, the Purchaser shall be deemed to have accepted and
agreed to the Closing Balance Sheet. If the Purchaser notifies the
Stockholder in writing of its objection to the Closing Balance Sheet,
the Stockholder and the Purchaser shall, within 45 days following such
written notice (the "Resolution Period"), attempt to resolve their
differences and any resolution by them (evidenced in writing) as to
any disputed amounts shall be final, binding and conclusive on all
parties hereto.
(iii) If at the conclusion of the Resolution Period there remain
amounts in dispute, then all amounts remaining in dispute shall be
submitted to KPMG, LLP (the "Independent Accountant") within five
Business Days after the expiration of the Resolution Period. The
Stockholder and the Purchaser each agree to execute, if requested by
the Independent Accountant, an engagement letter in form and substance
reasonably satisfactory to the Stockholder and the Purchaser. All fees
and expenses relating to the work, if any, to be performed by the
Independent Accountant shall be borne equally by the Stockholder and
the Purchaser. The Independent Accountant shall determine and resolve
only those issues still in dispute. The Independent Accountant's
determination shall be made within 30 days after the submission of the
dispute to the Independent Accountant, shall be set forth in a written
statement delivered to the Stockholder and the Purchaser and shall be
final, binding and conclusive on all parties hereto. The Closing
Balance Sheet finally determined pursuant to this Section 1.4(b),
whether
determined by agreement of the Purchaser and the Company (with or
without dispute) and/or by decision of the Independent Accountant, is
referred to herein as the "Final Closing Balance Sheet". The
stockholders' equity reflected on the Final Closing Balance Sheet is
referred to herein as the "Final Closing Stockholder's Equity". The
difference between the Adjusted Current Assets and the Adjusted
Current Liabilities as reflected on the Final Closing Balance Sheet is
referred to herein as the "Final Closing Working Capital". The Final
Closing Balance Sheet shall be final, binding and conclusive on the
parties for the purpose of determining any payments required to be
made pursuant to this Section 1.4(b).
(iv) If:
(A) the Final Closing Stockholder's Equity is less than the
Target Closing Stockholder's Equity; and/or
(B) the Final Closing Working Capital is less than the
Target Closing Working Capital
then the Company shall, at the time and in the manner specified in
Section 1.4(b)(v) hereof, pay to the Purchaser an amount equal to the
amount that would cause: (i) the Final Closing Stockholder's Equity,
plus the amount of any reductions based on the Estimated Closing
Stockholder's Equity (pursuant to Section 1.4(a) hereof), to be equal
to or greater than the Target Closing Stockholder's Equity, and (ii)
the Final Closing Working Capital, plus the amount of any reductions
based on the Estimated Closing Working Capital (pursuant to Section
1.4(a) hereof), to be equal to or greater than the Target Closing
Working Capital (the "Post-Closing Purchase Price Reduction").
(v) The Purchaser and the Company jointly shall notify the
Purchase Price Escrow Agent and Indemnity Escrow Agent ("the Purchase
Price Adjustment Notice"), in accordance with the terms and provisions
of the Purchase Price Escrow Agreement and the Indemnity Escrow
Agreement, respectively, of the Post-Closing Purchase Price Reduction,
if any, or that there is not a Post-Closing Purchase Price Reduction,
on or prior to the date that is five days after the date on which the
Final Closing Balance Sheet has been accepted pursuant to Section
1.4(b)(ii) or determined pursuant to Section 1.4(b)(iii) (the
"Determination Date"), which Purchase Price Reduction Notice shall:
(1) instruct the Purchase Price Escrow Agent (A) in the
event there is a Post-Closing Purchase Price Reduction,
to release and pay to the Purchaser the Post-Closing
Purchase Price Reduction, if any, together with all
interest earned thereon from the Closing Date to the
date of distribution, from the Purchase Price Escrow
Amount, and, upon payment of the such amount, to
transfer to the Indemnity Escrow Agent from the
Purchase Price Escrow Amount, if any remains,
an amount equal to the lesser of the remaining amount
of the Purchase Price Escrow Amount and $250,000 (such
amount transferred is hereafter referred to as the
"Transferred Balance Amount"), and after payment of
such Transferred Balance Amount, to release and pay to
the Administrative Agent, on behalf of the Company, the
balance of the Purchase Price Escrow Amount, or (B) in
the event that there is not a Post-Closing Purchase
Price Reduction, to transfer to the Indemnity Escrow
Agent from the Purchase Price Escrow Amount, an amount
equal to $250,000 ("Transferred Amount") and, after
transferring such Transferred Amount, to release and
pay to the Administrative Agent, on behalf of the
Company, the balance of the Purchase Price Escrow
Amount, and
(2) instruct the Indemnity Escrow Agent, to (A) release and
pay to the Purchaser, from the Indemnity Escrow Amount,
the amount by which the Post-Closing Purchase Price
Reduction, if any, exceeds the amount of the Purchase
Price Escrow Amount available to be paid to the
Purchaser by the Purchase Price Escrow Agent pursuant
to clause (1) above (such excess amount hereafter
referred to as the "Reduction Shortfall"), and (B) in
the event there is not a Reduction Shortfall, to
receive and hold the Transferred Balance Amount or
Transferred Amount, as the case may be, in escrow as
part of the Indemnity Escrow Amount pursuant to the
terms of the Indemnity Escrow Agreement.
(vi) Within ten (10) days following the receipt of the Purchase
Price Reduction Notice, the Purchase Price Escrow Agent and the
Indemnity Escrow Agent shall make such payments and release such
portion of the Purchase Price Escrow Amount and Indemnity Escrow
Amount, as the case may be, in accordance with the instructions set
forth in the Purchase Price Reduction Notice.
1.5 CLOSING. The closing of the transactions contemplated hereby (the
"Closing") shall be held at 9:00 a.m., New York City time, on December 18, 2001
(the "Closing Date") at the offices of Herrick, Feinstein LLP in Newark, New
Jersey. The date on which the Closing shall occur shall be referred to herein as
the "Closing Date." At the Closing, the parties shall execute such lease
assignments, bills of sale and instruments of assignment and assumption as are
necessary to convey title to the Purchased Assets and to constitute assignment
and assumption of the Assumed Liabilities, as more fully set forth in Section 8;
and Purchaser shall pay and deliver the Closing Purchase Price in the following
manner: (i) $ 1,000,000 of the Closing Purchase Price shall be payable in cash
(the "Indemnity Escrow Amount") to First Union National Bank, a national banking
association (the "Indemnity Escrow Agent"), which amount shall be held in escrow
by the Indemnity Escrow Agent in accordance with the terms and
provisions of the escrow agreement in the form annexed hereto as Exhibit 1.5-A
(the "Indemnity Escrow Agreement"), (ii) $1,000,000 of the Closing Purchase
Price shall be payable in cash (the "Purchase Price Escrow Amount") to First
Union National Bank, a national banking association ("Purchase Price Escrow
Agent"), which amount shall be held in escrow by the Purchase Price Escrow Agent
in accordance with the terms and provisions of the escrow agreement in the form
annexed hereto as Exhibit 1.5-B (the "Purchase Price Escrow Agreement"), (iii)
the balance of all Indebtedness of the Company shall be paid to all creditors to
whom such Indebtedness is owed, in accordance with the payoff statements to be
delivered by the Company pursuant to Section 6.5 herein and (iv) the entire
remaining balance of the Closing Purchase Price shall be payable in cash to the
Administrative Agent for the ratable benefit of the Lenders, on behalf of the
Company. Each party will cause to be prepared, executed and delivered all
documents required to be delivered by such party pursuant to this Agreement and
all other appropriate and customary documents as another party or its counsel
may reasonably request for the purpose of consummating the transactions
contemplated by this Agreement. All actions taken at the Closing shall be deemed
to have been taken simultaneously as of the opening of business on the Closing
Date.
2. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDER AND THE COMPANY
As inducement for the Purchaser to enter into this Agreement, the Company
and the Stockholder, jointly and severally, represent and warrant to the
Purchaser as follows:
2.1 DUE ORGANIZATION. The Company is a corporation duly organized, validly
existing and in good standing under the laws of Delaware, and has all requisite
power and authority to carry on its business as it is now being conducted. The
Company is duly qualified to do business and is in good standing in each
jurisdiction listed on Schedule 2.1, which jurisdictions are the only ones in
which the conduct of the Company's business requires such qualification. True,
complete and correct copies of the Articles of Incorporation and Bylaws
(together, the "Charter Documents"), each as amended, of the Company are all
attached to Schedule 2.1. The stock records of the Company, a copy of which is
attached to Schedule 2.1, are correct and complete.
2.2 AUTHORIZATION; CONSENTS.
(a) This Agreement has been duly and validly executed and delivered by
the Company and the Stockholder and constitutes the legal, valid and
binding obligation of each of them enforceable in accordance with its
terms, except that (i) enforceability may be limited by bankruptcy,
insolvency, reorganization, receivership, conservatorship, moratorium or
other similar laws affecting the enforcement of creditors' rights and (ii)
the availability of equitable remedies may be limited by equitable
principles of general applicability.
(b) Except as set forth on Schedule 2.2, neither the execution and
delivery by the Company and Stockholder of this Agreement, any Company
Ancillary Documents or Stockholder Ancillary Documents nor the consummation
by either of them of the transactions contemplated hereby or thereby will
(A) violate, breach, be in conflict with, or constitute a default under, or
permit the termination or the acceleration of maturity of, or result in the
imposition of any Encumbrance upon any property or asset of the Company or
Stockholder pursuant to (i) the Charter Documents of either of them or (ii)
any note, bond, indenture, mortgage, deed of trust, evidence of
indebtedness, loan or lease agreement, other agreement or instrument,
judgment, order, injunction, or decree by which either the Company or
Stockholder is bound, to which either is a party, or to which any of their
respective material assets are subject; or (B) conflict with or violate any
Legal Requirement for which the Company or the Stockholder is subject or
bound.
(c) Except as contemplated elsewhere herein and except as set forth in
Schedule 2.2, neither the Company nor Stockholder is required to submit any
notice, declaration, report or other filing or registration with any
governmental or regulatory authority or instrumentality in connection with
the execution and delivery of this Agreement or the consummation of the
transactions contemplated hereby.
(d) Except as contemplated elsewhere herein and except as set forth in
Schedule 2.2, no waiver, consent, approval or authorization of any
governmental or regulatory authority or instrumentality or any third party
is required to be obtained or made by the Company or the Stockholder in
connection with the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby.
(e) The execution, delivery and performance by the Company of this
Agreement and each Company Ancillary Document and the consummation by the
Company of the transactions contemplated hereunder and thereunder have been
duly authorized by all necessary corporate action on the part of the
Company, including the unanimous written consent of all the directors and
shareholders of the Company. The Company has the full right, power and
authority to execute, deliver and perform this Agreement and the Company
Ancillary Documents to which it is a party and to consummate the
transactions contemplated hereby and thereby. The execution, delivery and
performance by the Stockholder of this Agreement and each Stockholder
Ancillary Document and the consummation by the Stockholder of the
transactions contemplated hereunder and thereunder have been duly
authorized by all necessary corporate action on the part of the
Stockholder, including the unanimous written consent of all the directors
and shareholders of the Stockholder. The Stockholder has the full right,
power and authority to execute, deliver and perform this Agreement and the
Stockholder Ancillary Documents and to consummate the transactions
contemplated hereby and thereby.
(f) Each Company Ancillary Document to be executed by the Company,
when executed and delivered, will be the valid and binding agreement of the
Company, enforceable against the Company in accordance with its terms. Each
Stockholder Ancillary Document to be executed and delivered by the
Stockholder, when executed and delivered, will be the valid and binding
agreement of the Stockholder enforceable against the Stockholder in
accordance with its terms. The business of the Company has been conducted
directly and exclusively through the corporate entity of the Company and
through no other entities whatsoever.
2.3 CAPITAL STOCK OF THE COMPANY. The authorized capital stock of the
Company is set forth on Schedule 2.3. The Shares are owned of record and
beneficially by the Stockholder in the amounts set forth on Schedule 2.3, and
constitute all of the outstanding Company Stock. All of the issued and
outstanding shares of the capital stock of the Company have been duly authorized
and validly issued, are fully paid and non-assessable, and were offered, issued,
sold and delivered by the Company in compliance with all applicable state and
federal laws concerning the issuance of securities. None of such shares of
Company Stock were issued in violation of any preemptive or subscription rights,
rights of first refusal or similar rights of any person or any agreement or
instrument to which the Company or the Stockholder is a party or is bound.
2.4 SUBSIDIARIES. The Company has no subsidiaries or d/b/a names and has
not conducted business under any other name except the legal name set forth on
its Charter Documents. The Company does not own, of record or beneficially, or
control, directly or indirectly, any capital stock, securities convertible into
capital stock or any other equity interest in any corporation, association or
other business entity, and the Company is not, directly or indirectly, a
participant in any joint venture, partnership or other non-corporate entity.
2.5 HISTORICAL FINANCIAL INFORMATION.
(a) Complete and correct copies of the following financial statements
are attached as Schedule 2.5:
(i) the unaudited balance sheet of the Company as of December 31,
1999 and related statements of operations, stockholder's equity and
cash flows for the year then ended, together with any related notes
and schedules (the "1999 Financial Statements");
(ii) the unaudited balance sheet of the Company as of December
31, 2000 and the related statement of operations, stockholder's equity
and cash flows for the year then ended, together with any related
notes and schedules (the "2000 Financial Statements");
(iii) the unaudited balance sheet of the Company as of September
30, 2001 and the related interim statements of operations and
cash flows for the nine months then ended (the "Interim 2001 Financial
Statements") (The 1999 Financial Statements, 2000 Financial
Statements, the Interim Financial Statements to be delivered by the
Stockholder pursuant to Section 4.7 and Interim 2001 Financial
Statements are herein collectively called the "Company Financial
Statements", and September 30, 2001 is herein called the "Most Recent
Balance Sheet Date").
(b) As promptly as practicable after the preparation thereof, the
Company shall attach the Interim Financial Statements, as defined in
Section 4.7, to Schedule 2.5.
(c) The Company Financial Statements and the Interim Financial
Statements (when attached to Schedule 2.5) have been prepared from the
books and records of the Company in conformity with GAAP and present fairly
the financial position, assets, liabilities and results of operations of
the Company as of the dates of such statements and for the periods covered
thereby. The books of account of the Company have been kept accurately in
the ordinary course of business, the transactions entered therein represent
bona fide transactions, and the revenues, expenses, assets and liabilities
of the Company have been properly recorded therein in all material
respects.
(d) Except as set forth on Schedule 2.5(d), the Company does not have
any Liabilities except: (i) those Liabilities set forth on the Interim 2001
Financial Statements and not heretofore paid or discharged (none of which
Liabilities is in excess of the amount set forth thereon); and (ii)
Liabilities of the same nature as those set forth on the Interim 2001
Financial Statements and reasonably incurred in the ordinary course of
business, consistent with past practice, after the Most Recent Balance
Sheet Date.
2.6 PERMITS AND INTANGIBLES. The Company holds all licenses, franchises,
permits, privileges, immunities, approvals, registrations and other governmental
authorizations required in connection with the conduct of the Company's business
and its ownership, leasing, operating and using of its assets. Schedule 2.6 sets
forth a list, complete in all material respects, of the summary description of
all such licenses, franchises, permits and other governmental authorizations
(including trademarks, trade names, patents, patent applications, copyrights and
similar intellectual property, but excluding the environmental permits and other
environmental approvals listed on Schedule 2.7). The licenses, franchises,
permits and other governmental authorizations listed on Schedules 2.6 and 2.7
are valid, subsisting and in full force and effect, and the Company has not
received any notice that any Person intends to cancel, terminate or not renew
any such license, franchise, permit or other governmental authorization. The
Company has conducted and is conducting its business in compliance with the
requirements, standards, criteria and conditions set forth in the licenses,
franchises, permits and other governmental authorizations listed on Schedules
2.6 and 2.7 and is not in violation of any of the foregoing. Except as
specifically set forth on Schedule 2.6 or 2.7, the transactions contemplated by
this Agreement will not result in a default under or
a breach or violation of, or adversely affect the rights and benefits afforded
to the Company by, any such licenses, franchises, permits or government
authorizations, and each of the foregoing will continue to be legal, valid,
binding and enforceable on identical terms following consummation of the
transactions contemplated by this Agreement.
2.7 ENVIRONMENTAL MATTERS. Except as described on Schedule 2.7, the Company
has complied with and is in compliance in all respects with all federal, state,
local and foreign statutes (civil and criminal), laws, ordinances, regulations,
rules, notices, permits, judgments, orders and decrees applicable to the Company
or its properties, assets, operations and businesses relating to environmental
protection (collectively "Environmental Laws") including, without limitation,
Environmental Laws relating to air, water, land and the generation, storage,
use, handling, transportation, treatment or disposal of Hazardous Wastes,
Hazardous Materials and Hazardous Substances including petroleum and petroleum
products (as such terms are defined in any applicable Environmental Law) and any
other substances or conditions that may support a claim or cause of action
against the Company under any Environmental Laws. Except as described on
Schedule 2.7, the Company has obtained and adhered to all necessary permits and
other approvals necessary to treat, transport, store, dispose of and otherwise
handle Hazardous Wastes, Hazardous Materials and Hazardous Substances, a list of
all of which permits and approvals is set forth on Schedule 2.7, and has
reported to the appropriate authorities, to the extent required by all
Environmental Laws, all past and present sites owned and operated by the Company
where Hazardous Wastes, Hazardous Materials or Hazardous Substances have been
treated, stored, disposed of or otherwise handled. Except as described on
Schedule 2.7, the Company is in compliance with all terms and conditions of such
permits. There have been no releases (as defined in Environmental Laws) at,
from, in or on any property owned or operated by the Company except as permitted
by Environmental Laws. There is no on-site or off-site location to which the
Company has transported or disposed of Hazardous Wastes, Hazardous Materials or
Hazardous Substances or arranged for the transportation of Hazardous Wastes,
Hazardous Materials or Hazardous Substances or which is the subject of any
federal, state, local or foreign enforcement action or any other investigation
which may lead to any claim against the Company or Purchaser for any clean-up
cost, remedial work, damage to natural resources, property damage or personal
injury, including, but not limited to, any claim under (i) the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended, (ii)
the Resource Conservation and Recovery Act, (iii) the Hazardous Materials
Transportation Act or (iv) comparable state or local statutes and regulations.
The Company has no Liability in connection with any release of any Hazardous
Waste, Hazardous Material or Hazardous Substance into the environment. To the
knowledge of the Company and the Stockholder, there has been no release (as
defined in Environmental Laws) and no threat of release at, on, under or from
any nearby properties that has migrated or threatened to migrate onto or under
the sites owned and operated by the Company or that would or could otherwise
affect the Company's properties or assets. The sites owned and operated by the
Company and the operations at such sites are not subject to any judicial or
administrative proceeding, order, judgment,
decree or settlement, any investigation, alleging or addressing violation of any
Environmental Laws. The Company is not presently, and has not been at any
previous time hereto, the owner or operator of any site which: (i) has any past
or present on-site generation, treatment, recycling, storage or disposal of any
hazardous waste, as that term is defined under 40 C.F.R. Part 261 or any state
equivalent; (ii) has any past or present landfill, storage tanks, underground or
otherwise, or surface impoundment; (iii) has any PCBs, asbestos-containing
material or ACMs, or urea-formaldehyde; and (iv) has any other polychlorinated
byphenyls ("PCBs") used in hydraulic oils, electrical transformers or other
equipment. The Company is not presently, and has not been at any time the owner
or operator of any site which is or was listed or proposed for listing on the
National Priorities List ("NPL") pursuant to CERCLA or on the Comprehensive
Environmental Response, Compensation, and Liability Information System List
(CERCLIS) or any similar state list of sites, and there is not any condition at
such sites which, if known to a Governmental Body, would qualify such site for
inclusion on any such federal or state list. The Company has not sent or
directly arranged for the transport of any waste to any site listed on the NPL
or proposed for listing on the NPL or to a site included on the CERCLIS list, or
any similar list. No environmental approvals, clearances or consents are
required under any Legal Requirement from any Governmental Body in order for the
parties to this Agreement to consummate the transactions contemplated herein.
2.8 PERSONAL PROPERTY. Schedule 2.8 sets forth a list of (i) all personal
property included in "plant, property and equipment" or any similar category on
the balance sheet of the Company, (ii) all other personal property owned by the
Company with a fair market value in excess of $10,000 as of the Most Recent
Balance Sheet Date or acquired since the Most Recent Balance Sheet Date and
(iii) all leases and agreements in respect of personal property. True, correct
and complete copies of all of the documents listed on Schedule 2.8 have been
delivered to Purchaser. Except as set forth and specifically described on
Schedule 2.8, (i) all personal property used by the Company in its business is
either owned by the Company or leased by the Company pursuant to a lease
included on Schedule 2.8, (ii) all of the personal property listed on Schedule
2.8 is in good structural and operating condition, ordinary wear and tear
excepted, and (iii) all leases and agreements included on Schedule 2.8 are in
full force and effect and constitute valid and binding agreements of the other
parties (and their successors) thereto in accordance with their respective
terms. Except as set forth on Schedule 2.8, the Company has, and will at the
Closing convey to Purchaser, good and marketable title to the tangible and
intangible personal property it purports to own, free and clear of all
Encumbrances. All items of personal property owned or leased by the Company and
their uses conform with all applicable Legal Requirements and no notice of any
existing violation of any such matters relating to such items of personal
property or their use has been received by the Company or the Stockholder. No
Person other than the Company owns any items of personal property situated on
any premises which the Company owns or leases, or which are utilized in, or
necessary to, the operation of the Company's business, except for leased items
disclosed on the Schedules hereto. The Company currently owns or leases all
items of personal property necessary to conduct the operations of the Company's
business as currently conducted.
2.9 SIGNIFICANT CUSTOMERS; MATERIAL CONTRACTS AND COMMITMENTS.Schedule 2.9
sets forth a list of (i) all customers representing $250,000 or more of the
Company's revenues for the year ended December 31, 2000 or for the year ending
December 31, 2001 (together with the revenue amount for each such customer for
such period or periods); any joint venture, partnership, or other arrangement
involving a sharing of profits; (ii) any consignment, distributor, dealer,
manufacturer's representative, sales agency, advertising representative, or
public relations contract; (iii) any agreement limiting the Company's ability to
engage in any business; (iv) any confidentiality agreement to which the Company
is a party pursuant to which the Company is prohibited from disclosing any
confidential information or pursuant to which another party is prohibited from
disclosing confidential information; (v) any contract not made in the ordinary
course of the Company's business; (vi) any commitments, leases, options,
instruments and similar agreements to which the Company is a party or by which
it or any of its properties are bound (including, but not limited to, contracts
with customers, joint venture or partnership agreements, understandings with
employees with respect to compensation, contracts with any labor organizations,
strategic alliances and options to purchase land), whether oral or written, and
(vii) all other contracts or agreements to which the Company is a party or by
which it or any of its properties are bound, whether oral or written, which
provide for more than $5,000 in aggregate obligations of the Company. True,
complete and correct copies of such written agreements have been provided to
Purchaser. Except as described on Schedule 2.9, (i) none of the Company's
customers identified on Schedule 2.9 have canceled or substantially reduced or,
to the knowledge of the Company, are currently attempting or threatening to
cancel a contract or substantially reduce utilization of the services provided
by the Company, and (ii) the Company has complied with all commitments and
obligations pertaining to it, and is not in default under any contracts or
agreements listed on Schedule 2.9 and no notice of default under any such
contract or agreement has been received. Except as set forth on Schedule 2.9,
each customer order currently under production and being processed by the
Company relates to a written purchase order from such customer and a complete
and correct list of all such purchase orders currently under production is set
forth on Schedule 2.9-A hereof. No such customer has alleged to the Company that
its purchase order is not a duly authorized purchase order. Each of the
contracts, commitments, leases, options, instruments and agreements set forth in
Schedule 2.9 and each other Schedule attached to this Agreement (collectively,
the "Scheduled Agreements"), except as otherwise specifically set forth in the
Schedule in which such Scheduled Agreement is listed, constitutes a legal, valid
and binding obligation of the Company, and is in full force and effect and is
enforceable against the Company, in accordance with its terms. No other party to
any Scheduled Agreement has alleged to the Company that such Scheduled Agreement
to which it is a party is not a legal, valid or binding obligation of such party
or that such Scheduled Agreement to which it is a party is not enforceable
against such party. Except as set forth in Schedule 2.9, consummation of the
transactions contemplated hereby will not cause a breach of or constitute a
default (with or without the giving of notice or the lapse of time or both)
under any of the Scheduled Agreements, result in the forfeiture or impairment of
any rights thereunder, require the consent, approval or act of, or the making of
any filing with, any other Person pursuant to the
terms thereof (to the extent the absence of such consent or approval would
constitute a breach or default, or require or result in the payment of any
assignment or related fees or costs). No other party to any of such Scheduled
Agreements has breached or defaulted thereunder and no event has occurred and no
condition or state of facts exists which, with the passage of time or the giving
of notice, or both, would constitute such a default or breach by any such other
party thereto. The Company is not currently renegotiating any of the Scheduled
Agreements except in the ordinary course of business or paying liquidated
damages in lieu of performance thereunder. Complete and correct copies of each
of the written Scheduled Agreements (including without limitation all
amendments, supplements or other modifications thereto or waivers of right
thereunder) have heretofore been delivered by the Company and the Stockholder to
the Purchaser. Schedule 2.9 also includes a summary description of all plans or
projects involving the opening of new operations, expansion of existing
operations, the acquisition of any property, business assets (other than
inventory) requiring, in any event, the payment individually of more than
$5,000, or in the aggregate of more than $50,000, by the Company.
2.10 REAL PROPERTY.
(a) Schedule 2.10 sets forth a complete and accurate list and brief
description of each lease or occupancy, possessory or similar agreement, as
the same may have been amended or modified (showing the parties, annual
rental, commencement date, expiration date, renewal and purchase options,
if any, the improvements thereon, the uses being made thereof and the
location of the real property covered by such lease or other agreements),
under which the Company is lessee of, or holds or operates, any real
property owned by any third party (the "Currently Leased Real Property").
There are no other leases, subleases, tenancies or other rights of
occupancy or possession affecting such leases. The Company has, and will
convey to Purchaser at Closing, the right to quiet enjoyment of all such
Currently Leased Real Property for the full term of each such lease or
similar agreement (and any renewal option related thereto), and the
leasehold or other interest of the Company in such Currently Leased Real
Property is not subject to or subordinate to any security interest, lien or
mortgage except as expressly set forth in such lease and except for liens
for taxes not yet due and payable as set forth on Schedule 2.10. Except as
set forth on Schedule 2.10, the Company has no obligation to restore,
modify, construct or otherwise alter the Currently Leased Real Property
upon expiration of the lease term or at any other time.
(b) Schedule 2.10 sets forth a list and brief description of each
lease or similar agreement (showing the parties, date and term, uses made
thereof by the Company or its predecessors and location) under which the
Company or its predecessors previously was lessee of, or held or operated,
any real property owned by any third party (the "Previously Leased Real
Property") and set forth a list and brief description of any real property
previously owned by the Company ("Previously Owned Real Property").
(c) None of the Currently Leased Real Property is subject to, and
neither the Company nor the Stockholder has received notice of, any pending
or proposed reassessment, contest, protest, or other proceedings with
respect to real property taxes. Neither the Company nor the Stockholder has
taken any action to have real estate taxes that will be assessed against
the Currently Leased Real Property adjusted or modified in any respect.
There is no, and neither the Company nor the Stockholder has received
notice of any, pending or proposed special assessment that affects, or may
affect, the Currently Leased Real Property or any portion thereof. The
Stockholder and the Company have delivered to the Purchaser true, correct
and complete copies of (i) the leases, and all amendments, renewals and
modifications thereof, relating to the Currently Leased Real Property, (ii)
the real estate tax bills which any of them has in its possession issued
for the three most recent years for which bills have been issued for all
real estate Taxes, (iii) any and all notices which any of them has in its
possession pertaining to real estate Taxes or assessments relating to the
Currently Leased Real Property and (iv) all petitions for appeal which any
of them has in its possession of any Taxes or assessments for said years.
(d) The Company does not own any parcels of real property or hold any
option or right to acquire any real property.
(e) The current uses by the Company of, and existing structures
located on, the Currently Leased Real Property are in compliance with all
applicable zoning and other land use requirements. No Legal Requirements
prohibit or interfere with the current use by the Company of any of the
Currently Leased Real Property. The Company, to the extent required by any
Legal Requirements, is in possession of all certificates of occupancy with
respect to all of the Currently Leased Real Property issued by the
appropriate municipal authorities. Valid certificates of occupancy for all
Currently Leased Real Property which permit the current uses of the
Currently Leased Real Property exist and continue in full force and effect.
No government body having the power of eminent domain over the Currently
Leased Real Property has commenced or, to the knowledge of the Company and
Stockholder, intends to exercise the power of eminent domain or a similar
power with respect to all or any part of the Currently Leased Real
Property.
(f) The improvements located on the Currently Leased Real Property are
in good condition and are structurally sound, and all mechanical and other
systems located therein are in an operating condition good for the use to
which same are put by the Company in the current operation of the Company's
business, subject to normal wear and tear. No condition exists requiring
material repairs, alterations or corrections, and no maintenance or repair
to the improvements or the mechanical or other systems located therein have
been unreasonably deferred.
2.11 INSURANCE. Schedule 2.11 sets forth a list of all insurance policies
and binders maintained, owned or carried by the Company or under which the
Company is insured. True, complete and correct copies of all insurance policies
currently in effect, together with certificates of insurance showing such
policies to be in effect, have been delivered to Purchaser. Such policies and
binders are: (i) valid and enforceable and in full force and effect, (ii) are
underwritten by financially sound and reputable insurers, (iii) are sufficient
for all applicable requirements of law and provide insurance, including, without
limitation, general liability insurance, property insurance and product
liability insurance, in such amounts and against such risks as indicated as are
customary with respect to businesses similarly situated to protect in all
material respects to the properties, assets, business and operations of the
Company prior to the Closing Date. Schedule 2.11 indicates the extent to which
the product liability and personal injury insurance maintained by the Company
provides coverage on an occurrence basis since the Company's commencement of
operations. The Company has complied with each of the insurance policies and
binders maintained, owned or carried by it and has not failed to give any notice
or present any claim thereunder in a due and timely manner. Except as set forth
on Schedule 2.11, there are no outstanding unpaid claims under any of such
insurance policies or binders, and the Company has not received any notice of
cancellation or non-renewal currently in effect of any such policy or binder.
There is no inaccuracy in any application for such policies or binder. At no
time in the five year period prior to the date hereof, has the Company been
denied any insurance or indemnity bond coverage which it has requested or made
any reduction in the scope or amount of its insurance coverage, or received
notice from any of its insurance carriers that any insurance premiums will be
materially increased or increased in an amount disproportionate to the amount of
past increases with respect to such insurance or indemnity bond coverage (or
with respect to similar insurance) in the future or that any insurance coverage
so listed in such Schedule will not be available in the future on substantially
the same terms as now in effect. In the five year period prior to the date
hereof, no insurance carrier has canceled or reduced any insurance coverage for
the Company or given any notice of its intention to cancel or reduce any such
coverage. All premiums due and payable under any such insurance policies or
binders have been duly paid. The Stockholder and the Company have delivered to
the Purchaser correct and complete copies of the most recent inspection report,
if any, received by the Stockholder or the Company from insurance underwriters
as to the condition of any of its assets or properties. Schedule 2.11 sets forth
(i) the nature of any worker's compensation claims experienced by the Company in
each of the years ended December 31, 1998, December 31, 1999, and December 31,
2000, all worker's compensation claims made during the year 2001 to the date
hereof, and all worker's compensation claims that are open on the date hereof,
(ii) the amounts paid thereon to the date hereof, (iii) the current status of
each, and (iv) for each such claim that is open, the amounts reserved therefore.
No retrospective adjustment or incremental expense is pending or threatened by
the Company's worker's compensation insurer.
2.12 COMPENSATION; EMPLOYMENT AGREEMENTS; ORGANIZED LABOR MATTERS.
(a) Schedule 2.12 sets forth a list, as of the date hereof, showing
all officers, directors and key employees of the Company, listing all
employment agreements with such officers, directors and key employees and
the rate of compensation (and the portions thereof attributable to salary,
bonus, fringe benefits and other compensation, respectively) of each of
such persons as of the dates set forth therein. True, complete and correct
copies of any employment agreements for the persons listed on Schedule 2.12
and all other employment and other agreements of any nature containing any
provision that could require the Company to make any payment to any person
as a result of the transactions contemplated by this Agreement have been
delivered to Purchaser. Schedule 2.12 sets forth a list of each employee of
the Company who is currently on a leave of absence for any reason
whatsoever (including, but not limited to, a leave pursuant to any short or
long term disability plan, any workers' compensation award or order,
military leave, the federal Family Medical Leave Act or any similar state
statute or the federal Americans with Disabilities Act or any similar state
statute), the date such employee's leave of absence began, the date when
such employee is expected to return to work and the reason for the leave of
absence. Since the Most Recent Balance Sheet Date, there have been no
increases in the compensation payable or any special bonuses to any
officer, director, key employee or other employee, except ordinary salary
increases implemented on a basis consistent with past practices. Schedule
2.12 also sets forth all stay bonuses, agreements regarding continued
compensation amounts, severance arrangements, change of control payments
and similar arrangements in respect of employees of the Company, all of
which payments and arrangements will remain the responsibility of the
Stockholder rather than of the Company or Purchaser and shall not be
included in the Assumed Liabilities hereunder. Except as set forth on
Schedule 2.12, the Company has no policy, written or otherwise, regarding
the payment of severance. Except as set forth on Schedule 2.12, (i) there
are no loans or advances to employees of the Company or consultants which
are due the Company, and (ii) the Company has no liability to any employee
for reimbursement of travel or other expenses incurred by such employee,
except to the extent such liability is included in the Most Recent Balance
Sheet or reasonably incurred in the ordinary course of business thereafter.
Neither the Company nor the Purchaser shall have any liability for
severance payments with respect to those persons listed on Schedule 5.5.
(b) Except as set forth on Schedule 2.12, (i) the Company is not bound
by or subject to (and none of its assets or properties is bound by or
subject to) any arrangement with any labor union, (ii) no employees of the
Company are represented by any labor union or covered by any collective
bargaining agreement, (iii) to the knowledge of the Company, no campaign to
establish such representation is in progress and (iv) there is no pending
or, to the Company's knowledge after due inquiry, threatened, labor dispute
involving the Company and any group of its employees.
2.13 EMPLOYEE BENEFIT PLANS.
(a) Schedule 2.13 sets forth a schedule, complete in all material
respects, showing all employee benefit plans of Company, including all
agreements or arrangements (other than agreements or arrangements set forth
on Schedule 2.12) containing "golden parachute" or other similar
provisions, and deferred compensation agreements, together with true,
complete and correct copies of such plans, agreements and any trusts
related thereto, and classifications of employees covered thereby as of the
Most Recent Balance Sheet Date. Except for the employee benefit plans, if
any, described on Schedule 2.13, the Company does not sponsor, maintain or
contribute to any plan program, fund or arrangement that constitutes an
"employee pension benefit plan," nor does the Company have any obligation
to contribute to or accrue or pay any benefits under any deferred
compensation or retirement funding arrangement on behalf of any employee or
employees (such as, for example, and without limitation, any individual
retirement account or annuity, any "excess benefit plan" (within the
meaning of Section 3(36) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA")) or any non-qualified deferred compensation
arrangement). For the purposes of this Agreement, the term "employee
pension benefit plan" shall have the same meaning as is given that term in
Section 3(2) of ERISA. The Company has not sponsored, maintained or
contributed to any employee pension benefit plan and not required to
contribute to any retirement plan pursuant to the provisions of any
collective bargaining agreement establishing the terms and conditions of
employment of any of the Company's employees.
(b) Except as set forth in Schedule 2.13 above, the Company is not
now, and cannot as a result of its past activities become, liable to the
Pension Benefit Guaranty Corporation or to any multiemployer employee
pension benefit plan under the provisions of Title IV of ERISA. All
employee benefit plans listed on Schedule 2.13 and the administration
thereof are in compliance with their terms and all applicable provisions of
ERISA and the regulations issued thereunder, as well as with all other
applicable federal, state and local statutes, ordinances and regulations.
All contribution obligations of Company with respect to any plan listed on
Schedule 2.13 have either been fulfilled in their entirety or are fully
reflected on the balance sheet of the Company as of the Most Recent Balance
Sheet Date. All plans listed on Schedule 2.13 that are intended to qualify
(the "Qualified Plans") under Section 401(a) of the Internal Revenue Code
of 1986, as amended (the "Code") are, and have been so qualified and have
been determined by the Internal Revenue Service to be so qualified. Except
as disclosed on Schedule 2.13, all reports and other documents required to
be filed with any governmental agency or distributed to plan participants
or beneficiaries (including, but not limited to, actuarial reports, audits
or tax returns) have been timely filed or distributed, and the most recent
copies thereof are included as part of Schedule 2.13. Neither the
Stockholder nor the Company has engaged in any transaction prohibited under
the provisions of Section 4975 of the Code or Section 406 of ERISA. No plan
listed in Schedule 2.13 has incurred an accumulated
funding deficiency, as defined in Section 412(a) of the Code and Section
302(1) of ERISA; and the Company has not incurred any liability for excise
tax or penalty due to the Internal Revenue Service or any liability to the
Pension Benefit Guaranty Corporation. There have been no terminations,
partial terminations or discontinuance of contributions to any such
Qualified Plan intended to qualify under Section 401(a) of the Code without
notice to and approval by the Internal Revenue Service; no plan listed in
Schedule 2.13 subject to the provisions of Title IV of ERISA has been
terminated; there have been no "reportable events" (as that phrase is
defined in Section 4043 of ERISA) with respect to any such plan listed in
Schedule 2.13; the Company has not incurred liability under Section 4062 of
ERISA; and no circumstances exist pursuant to which the Company could have
any direct or indirect liability whatsoever as at the Closing (including,
but not limited to, any liability to any multiemployer plan or the PBGC
under Title IV of ERISA or to the Internal Revenue Service for any excise
tax or penalty, or being subject to any statutory lien to secure payment of
any such liability) with respect to any plan now or heretofore maintained
or contributed to by any entity other than the Company that is, or at any
time was, a member of a "controlled group" (as defined in Section
412(n)(6)(B) of the Code) that includes the Company.
2.14 CONFORMITY WITH LAW; LITIGATION. Except as set forth on Schedule 2.14,
there are no claims, actions, suits or proceedings, pending or, to the knowledge
of the Stockholder, threatened against or affecting the Company, its assets or
the prospects of the Business, at law or in equity, or before or by any
Governmental Body. No notice of any claim, action, suit or proceeding, whether
pending or threatened, has been received by the Company during the last five
years and there is no basis therefor. The Company has conducted for the past
five years and now conducts its business in compliance with all Legal
Requirements applicable to the Company or its assets. No notice has been served
on or communicated to the Company by any Person of any violation of any Legal
Requirements.
2.15 TAXES.
(a) For purposes of this Agreement, the term "Taxes" shall mean all
taxes, charges, fees, levies or other assessments including, without
limitation, income, gross receipts, excise, property, sales, withholding,
social security, unemployment, occupation, use, service, license, payroll,
franchise, transfer and recording taxes, fees and charges, imposed by the
United States or any state, local or foreign government or subdivision or
agency thereof (a "Taxing Authority"), whether computed on a separate,
consolidated, unitary, combined or any other basis; and such term shall
include any interest, fines, penalties or additional amounts attributable
to or imposed with respect to any such taxes, charges, fees, levies or
other assessments.
(b) Each of the following statements is true and correct in all
material respects. All Tax returns ("Returns") required to be filed with
respect to any Tax for which the Company is liable have been duly and
timely filed with the
appropriate Taxing Authority, such Returns are complete and accurate and
disclose all Taxes required to be paid for the periods covered thereby,
each Tax shown to be payable on each such Return has been paid, each Tax
payable by the Company by assessment has been timely paid in the amount
assessed, and adequate reserves have been established on the books of the
Company for all Taxes for which the Company is liable, but the payment of
which is not yet due. The accruals for all Taxes due by the Company on the
Interim 2001 Financial Statements are sufficient and the accruals for all
Taxes due by the Company as of the Closing Date will be sufficient for all
unpaid Taxes, whether or not disputed, in respect of its business and
operations for the period then ended and all prior periods. The Company is
not, and never has been, liable for any Tax payable by reason of the income
or property of a Person other than the Company. The Company has timely
filed true, correct and complete declarations of estimated Tax in each
jurisdiction in which any such declaration is required to be filed by it.
No Encumbrances for Taxes exist upon the assets of the Company except
Encumbrances for Taxes which are not yet due. The Company is not and never
has been, subject to Tax in any jurisdiction outside the United States. No
litigation with respect to any Tax for which the Company is asserted to be
liable is pending or, to the knowledge of the Company, threatened, and no
basis which the Company or the Stockholder believes to be valid exists on
which any claim for any such Tax can be asserted against the Company. There
are no requests for rulings or determinations in respect of any Taxes
pending between the Company and any Taxing Authority. No issues have been
raised and remain pending by any Taxing Authority in connection with the
examination of any Return of the Company. All deficiencies asserted and
assessments made, if any, as a result of or in connection with any
examination have been paid in full or are fully reflected as a liability in
the Company Financial Statements. No extension of any period during which
any Tax may be assessed or collected and for which the Company is or may be
liable has been granted to any Taxing Authority. The Company is not and
never has been party to any tax allocation or sharing agreement. All
amounts required to be withheld by the Company and paid to governmental
agencies for income, social security, unemployment insurance, sales,
excise, use and other Taxes have been collected or withheld and paid to the
proper Taxing Authority. The Company has made all deposits required by law
to be made with respect to employees' withholding and other employment
Taxes. Neither the Company nor the Stockholder is a "foreign person," as
that term is referred to in Section 1445(f)(3) of the Code. The Company has
not filed a consent pursuant to Section 341(f) of the Code or any
comparable provision of any other tax statute and has not agreed to have
Section 341(f)(2) of the Code or any comparable provision of any other Tax
statute apply to any disposition of an asset. The Company has not made, is
not obligated to make and is not a party to any agreement that could
require it to make any payment that is not deductible under Section 280G of
the Code. No asset of the Company is subject to any provision of applicable
law which eliminates or reduces the allowance for depreciation or
amortization in respect of that asset below the allowance generally
available to an asset of its
type. No accounting method changes of the Company exist or are proposed or
threatened which could give rise to an adjustment under Section 481 of the
Code.
2.16 NO VIOLATIONS; ALL REQUIRED CONSENTS OBTAINED. The Company is not in
violation of any of its Charter Documents. Neither the Company nor, to the
knowledge of the Stockholder after due inquiry, any other party thereto is in
default under any material lease, instrument, license, permit or agreement to
which the Company is a party or by which its material properties are bound (the
"Material Documents"). The execution of this Agreement by the Company and the
Stockholder and the performance by the Company and the Stockholder of their
obligations hereunder and the consummation of the transactions contemplated
hereby will not result in any violation or breach or constitute a default under
any of the terms or provisions of the Material Documents or the Charter
Documents, and at and after the Closing Date, the Company will be entitled to
the rights and benefits under the Material Documents to which the Company is
entitled immediately prior to the Closing. None of the Material Documents
requires notice to, or any consent or approval that has not been obtained of,
any governmental agency or other third party with respect to any of the
transactions contemplated hereby in order to remain in full force and effect.
Consummation of the transactions contemplated hereby will not give rise to any
right to termination, cancellation or acceleration or loss of any material right
or benefit. None of the Material Documents prohibits or restricts the Company
from freely selling products or providing services to any other person in any
material respect.
2.17 ABSENCE OF CHANGES.
(a) Except as set forth on Schedule 2.17, since December 31, 2000,
there has been:
(i) no material adverse change in the assets, properties,
relationship with customers (including, but not limited to, the
Company's relationship with Mary Kay Inc., with respect to the
Company's production of the Thermo Form Lipstick Sampler), business,
results of operations, liabilities, prospects or condition (financial
or otherwise) of the Company or the Business (collectively, referred
to herein as the "Business Condition"); and
(ii) no damage, destruction, loss or claim (whether or not
covered by insurance) or condemnation or other taking which adversely
affects the Business Condition.
(b) Except as set forth on Schedule 2.17, the Company has not
experienced any shortage, cessation or interruption of materials, supplies,
or other services required to conduct its business or operations.
(c) Except as set forth in Schedule 2.17, since December 31, 2000, the
Company has conducted its business only in the ordinary course and in
conformity with past practice. Without limiting the generality of the
foregoing, since December 31, 2000, the Company has not:
(i) incurred any Liability or made any expenditure, other than
such as may have been incurred or made in the ordinary course of
business consistent with past practice, and other than capital
expenditures set forth in clause (ii) of this subsection, or created,
incurred, assumed or guaranteed any indebtedness for borrowed money or
entered into any capitalized leases;
(ii) had or made any capital expenditures or commitments for its
business or equipment in excess of $5,000 individually or $25,000 in
the aggregate;
(iii) made or suffered any amendment or termination of any
agreement to which it is or was a party, beneficiary or designee or by
which it is or was bound, canceled, modified or waived any debts owed
to or claims held by it (including the settlement of any claims or
litigation), or waived any substantial right;
(iv) sold, transferred, leased or otherwise disposed of or
mortgaged, pledged or imposed or suffered to be imposed any
Encumbrance on, any of its assets or properties, except for sales of
inventory or other transactions in the ordinary course of business
consistent with past practice;
(v) (A) increased the compensation or bonuses, special
compensation or fringe benefits of any kind of any of its officers,
employees or agents over the rate being paid to them as of December
31, 2000, or (B) adopted, increased or amended any benefit under any
insurance, pension, profit-sharing, bonus, incentive, deferred
compensation, retirement, medical, hospital, disability, welfare or
other employee benefit plan, payment or arrangement made to, for or
with any such officer, employee or agent, or (C) amended, terminated
or entered into any employment or consulting contract with any
officer, employee or agent, or made any severance or termination or
change of control payment to any of its officers or salaried employees
or entered into any agreement to make any such payment;
(vi) accelerated collection of its notes or accounts receivable
generated prior to the date when such collection would have occurred
in the ordinary course of its business in accordance with the terms of
the respective invoices, or delayed payment of any account payable or
other liability beyond its due date or the date when such liability
would have been paid in the ordinary course of its business consistent
with past practices;
(vii) sold, assigned or transferred any patents, trademarks,
trade names, copyrights, trade secrets or other intangible assets, or
disclosed any proprietary or confidential information to any Person
other than the Purchaser;
(viii) extended credit other than in the ordinary course of
business consistent with past practice or permitted any change in its
credit practices, its method of accounting or accounting practice, or
its method of maintaining its books, accounts or business records;
(ix) allowed the levels of materials, supplies, work in process,
finished goods or other materials included in its inventory to vary in
any material respect from levels customarily maintained by the
Company;
(x) declared, set aside or paid any dividend or made any other
distributions to any shareholders (whether in cash, stock or other
property);
(xi) purchased, redeemed, called for purchase or redemption, or
otherwise acquired any shares or any other securities or issued any
securities;
(xii) made any write-downs that, in the aggregate, exceed $10,000
or made any write-offs as uncollectible of any notes or accounts
receivable that, in the aggregate, exceed $10,000;
(xiii) entered into any other transaction other than in the
ordinary course of business or any transaction (other than that
involving purchases of inventory and supplies) which involve
commitments for expenditures in excess of $10,000 in the aggregate; or
(xiv) other than specifically contemplated by this Agreement,
agreed or committed to do, or authorized or approved any action
looking to do, any of the foregoing.
(d) Since December 31, 2000, the Company has not:
(i) merged, consolidated, liquidated or reorganized;
(ii) amended any of its Charter Documents; or
(iii) other than specifically contemplated by this Agreement,
agreed or committed to do, or authorized or approved any action
looking to do, any of the foregoing.
2.18 DEPOSIT ACCOUNTS; POWERS OF ATTORNEY. Schedule 2.18 sets forth a
schedule as of the date of this Agreement of: (i) the name of each financial
institution in which the Company has accounts or safe deposit boxes, (ii) the
names in which the accounts or boxes are held, (iii) the type of account and
account number and (iv) the name of each person authorized to draw thereon or
have access thereto. Schedule 2.18 sets forth the name of each person,
corporation, firm or other entity holding any general or special power of
attorney from the Company and a description of the terms of each such power.
Schedule 2.18 lists all credit cards under which any employee or officer of the
Company may incur liability, and the persons holding such cards.
2.19 COMPETING LINES OF BUSINESS; RELATED-PARTY TRANSACTIONS. Except as set
forth on Schedule 2.19, neither the Stockholder nor any other affiliate of the
Company owns, directly or indirectly, any interest in, or is an officer,
director, employee or consultant of or otherwise receives remuneration from, any
business which is a competitor, lessor, lessee, customer or supplier of the
Company, except for ownership of less than 1% of the outstanding stock of any
publicly traded company in which such person has no management or other similar
position. Except as set forth on Schedule 2.19, neither the Stockholder nor any
of its affiliates has any interest in any property, real or personal, tangible
or intangible, used in or pertaining to the Company's business. There have been
no situations with respect to the Company which involved or involve (i) the use
of any corporate funds for unlawful contributions, gifts, entertainment or other
unlawful expenses related to political activity or to any of its customers or
suppliers, (ii) the making of any direct or indirect unlawful payments to
government officials or others from corporate funds or the establishment or
maintenance of any unlawful or unrecorded funds, (iii) the violation of any of
the provisions of The Foreign Corrupt Practices Act of 1977, or any rules or
regulations promulgated thereunder, (iv) the receipt of any illegal discounts or
rebates or any other violation of the antitrust laws or (v) any investigation
with respect to any of the foregoing by any Governmental Body.
2.20 INTELLECTUAL PROPERTY.
(a) Schedule 2.20 contains a list and brief description of:
(i) all United States and foreign patents and patent
applications, all United States, state and foreign trademarks, service
marks, trade names and copyrights for which registrations have been
issued or applied for, and all other United States, state and foreign
trademarks, service marks, trade names and copyrights owned or used by
the Company or in which the Company holds any right, license or
interest, showing in each case the product, device, process, service
business or publication covered thereby, the registered or other
owner, the registration or application date, as applicable, the
expiration date and the number, if any;
(ii) all agreements, contracts, licenses, commitments,
assignments and indemnities relating or pertaining to any asset,
property or right of the character described in the preceding clause
(i) to which the Company is a party; and
(iii) all licenses or agreements pertaining to mailing lists,
know-how, trade secrets, inventions, disclosures or uses of ideas to
which the Company is a party.
(b) All patents owned, controlled or used by the Company are valid and
in force, all fees with respect thereto have been fully paid, and all
patent applications of the Company listed therein are in good standing and
without challenge of any kind and at the Closing, the Company will own, and
will convey to Purchaser, the entire rights, title and interest in and to
such patents and patent applications free and clear of all Encumbrances.
All of the registrations for trade names, trademarks, service marks and
copyrights listed in Schedule 2.20, as being owned, controlled, or used by
the Company are valid and in force, all fees with respect thereto have been
fully paid and all applications for such registrations are in good standing
without challenge of any kind, and the entire right, title and interest in
and to each such trade name, trademark, service mark and copyright so
listed as well as the registrations and application for registration
therefore are owned and as of the Closing will be owned and transferred by
the Company free and clear of all Encumbrances. Each of the listed
trademarks is presently in use for the related goods and is not and has not
in the past been abandoned. Correct and complete copies of all the patents
and patent applications and of all of the trademarks, trade names, service
marks and copyrights and registrations, applications or deposits therefore
and all the licenses listed in Schedule 2.20 have heretofore been delivered
by the Company to the Purchaser.
(c) Except as provided on Schedule 2.20, the Company owns or has the
perpetual royalty-free right to use all patents, trademarks, service marks,
copyrights, trade names inventions, improvements, processes, formulae,
trade secrets, mailing list, know-how and proprietary or confidential
information used by it in conducting activities related to the Company's
business. No infringement of any patent, patent right, trademark, or
service mark, trade name or copyright or registration thereof has occurred
from the operations of the Company's business and no claim or threat of any
such infringement has been filed or otherwise made in respect of any of the
foregoing. No proceedings are pending or threatened against the Company
which challenges the validity or ownership of any trademark, trade name,
service mark or copyright or the ownership of any other right or property
described in Schedule 2.20, and there is no basis therefore.
(d) The Company has good and marketable title to that computer
software described as "Owned Software" on Schedule 2.20 hereto and shown to
be owned by it on such Schedule (the "Owned Software"), free of all claims,
including claims or rights of employees, agents, consultants or other
parties involved in the development or creation of such computer software.
The Company has the right and license to use that software described as
"Licensed Software" on Schedule 2.20 hereto and shown to be licensed by it
on such Schedule (the "Licensed Software") free and clear of any
Encumbrances.
Schedule 2.20 sets forth a list of all license fees, rents, royalties or
other charges that the Company is required or obligated to pay with respect
to Licensed Software. The Company is in full compliance with all provisions
of any license, lease or other similar agreement pursuant to which it has
rights to use the Licensed Software. None of the Licensed Software has been
incorporated into or made a part of any Owned Software or any other
Licensed Software and none of the Owned Software is dependent on any
Licensed Software in order to freely operate in the manner in which it is
intended. The Owned Software and Licensed Software constitute all software
used in the Company's business (the "Software"). The Company has not
received notice that it is infringing any intellectual property rights of
any other person or entity with respect to the Software, and no other
person or entity is infringing any intellectual property rights of the
Company with respect to the Software which the Company leases or licenses
to it. All of the Company's computer systems and programs, equipment and
other computer/ software infrastructure or communications products,
including, without limitation, embedded code, software, web site(s), local
area networks, wide area networks or other types of networking operations,
whether proprietary to or licensed from third parties, are sufficient to
enable the Company to: (i) meet all of the Company's obligations and duties
to third parties existing as of the Closing Date, and (ii) support all of
its internal operations as they exist as of the Closing Date. Schedule 2.20
includes a brief description of the purpose and use of each item of
Software.
(e) The Company has taken all reasonably necessary and desirable
action to maintain and protect each item of intellectual property that it
owns or uses.
2.21 ACCOUNTS RECEIVABLE.
(a) Schedule 2.21 sets forth a true, correct and complete list as of a
date not more than five days prior to the date hereof, of the accounts and
notes receivable of the Company. Schedule 2.21 includes an aging of all
such accounts and notes receivable showing amounts due in 30-day aging
categories, based upon the date of shipment. On the Closing Date, the
Company shall deliver to the Purchaser a true, complete and correct list of
all accounts and notes receivable, including an aging in 30-day categories,
based upon the date of shipment, as of a date not more than five days prior
to the Closing Date, which shall be attached to Schedule 2.21.
(b) Except as set forth on Schedule 2.21, such accounts and notes
receivable of the Company are valid and genuine; have arisen solely out of
bona fide sales, performance of services and other business transactions in
the ordinary course of business consistent with past practice; are not
subject to set-offs or counterclaims or any valid defenses; and are
collectible in the ordinary course of business at the full recorded amount
thereof less the allowance for collection losses recorded on the Company's
books. Such recorded allowances for
collection losses on the Company's books have been determined in accordance
with GAAP consistent with past practice. Since December 31, 2000, (i) no
event has occurred that would require an increase in the aggregate reserve
of the Company for uncollectible accounts receivable and (ii) there has
been no adverse change in the composition of such accounts receivable in
terms of aging.
2.22 INVENTORY.
(a) Except as set forth in Schedule 2.22, all of the inventory owned
by the Company is in good and merchantable condition and, except as sold or
purchased in the ordinary course of business since the Most Recent Balance
Sheet Date, is reflected in the Interim 2001 Financial Statements in
accordance with GAAP and is reflected in the books and records of the
Company at the lower of cost or market value. The reserve for inventory
obsolescence on the Company's books is adequate and has been determined in
accordance with GAAP consistent with past practice. The Company's
inventories are, and as of the Closing Date will be, commercially usable,
merchantable and fit for the purposes intended and will be of the kind,
quality and quantity regularly and currently used in the Company's
business.
(b) There are no material claims for return of merchandise of the
Company by reason of alleged overshipments, defective merchandise, or
otherwise.
(c) All of the inventory owned by the Company and other goods stored
by it pending shipment or delivery are held at the locations set forth on
Schedule 2.22. No inventory is held on consignment by or for the Company,
and the Company is not otherwise under any liability or obligation with
respect to the return of inventory in the possession of wholesalers,
retailers or other customers.
2.23 PRODUCT LIABILITY CLAIMS; PRODUCT WARRANTIES. Schedule 2.23 sets forth
all product liability claims pending or, to the knowledge of the Company,
threatened against the Company and all product liability claims paid by or on
behalf of the Company for the three year period prior to the Closing Date.
Except as set forth on Schedule 2.23, the Company has not given or offered any
warranty covering any products sold or distributed by it, and the Company has
not extended to its customers any indemnification or guarantees.
2.24 BOOKS AND RECORDS. The books and records of the Company have been
maintained in accordance with good business practices and applicable legal,
regulatory and accounting requirements, reasonably enabling the Company to
prepare its financial statements in accordance with GAAP, reflect only valid
transactions and are complete and correct in all material respects.
2.25 CONDITIONS AFFECTING THE COMPANY; FULL DISCLOSURE. There are no other
conditions with respect to the Company's products, services, customers,
properties,
personnel or suppliers which are known to the Company or the Stockholder which
would materially adversely affect the Company's Business, operations, assets,
properties, prospects or conditions (financial or otherwise), except such
conditions as the Company and Stockholder have fully disclosed in the Schedules
to this Agreement. Neither the Company nor the Stockholder is aware of any facts
pertaining to the Company or the Company's Business which materially adversely
affect or which would be expected to materially adversely affect the Company or
the Company's business and which have not been disclosed in this Agreement or
the Schedules attached to this Agreement. No representation or warranty of the
Company or the Stockholder in this Agreement, any Company Ancillary Documents or
Stockholder Ancillary Documents, nor any written statement or certificate
furnished or to be furnished to the Purchaser pursuant to this Agreement, or in
connection with the transactions contemplated by this Agreement, contains or
will contain when made, given or furnished any untrue statement of a material
fact, or omits or will omit to state a material fact necessary to make the
statements contained herein or therein not misleading.
2.26 ACCOUNTS PAYABLE AND ACCRUED EXPENSES. Schedule 2.26 sets forth (i) a
true, correct and complete list as of a date not more than five days prior to
the date hereof, of the accounts and notes payable of the Company and (ii) a
true, correct and complete list, as of the date hereof, of all accrued expenses
and accrued liabilities of the Company. Schedule 2.26 includes an aging of all
such accounts and notes payable showing amounts due in 30-day aging categories,
based upon the invoice date. On the Closing Date, the Company shall deliver to
the Purchaser a true, complete and correct list of all accounts and notes
payable, including an aging in 30-day categories, based upon the invoice date,
as of a date not more than five days prior to the Closing Date, which shall be
attached to Schedule 2.26.
2.27 FINDERS AND BROKERS. Other than through Veronis, Suhler & Associates
LLC (the fees and expenses of which shall be paid by the Stockholder), all
negotiations relative to this Agreement and the transactions contemplated hereby
have been carried on by the Stockholder and the Company directly with the
Purchaser. No Person other than Veronis, Suhler & Associates LLC has, as a
result of any agreement or action of the Company or the Stockholder, any valid
claim against any of the parties hereto for a brokerage commission, finder's fee
or other like payment.
3. REPRESENTATIONS OF THE PURCHASER
As inducement for the Stockholder to enter into this Agreement, the
Purchaser represents and warrants to the Stockholder as follows:
3.1 DUE ORGANIZATION.Purchaser is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Delaware. Purchaser
has the requisite power and authority to carry on its business as it is now
being conducted.
3.2 AUTHORIZATION.
(a) This Agreement has been duly and validly executed and delivered by
the Purchaser and constitutes the legal, valid and binding obligation of
the Purchaser enforceable in accordance with its terms, except that (i)
enforceability may be limited by bankruptcy, insolvency, reorganization,
receivership, conservatorship, moratorium or other similar laws affecting
the enforcement of creditors' rights and (ii) the availability of equitable
remedies may be limited by equitable principles of general applicability.
(b) Except as set forth on Schedule 3.2, neither the execution and
delivery by the Purchaser of this Agreement nor the consummation by it of
the transactions contemplated hereby will materially violate, breach, be in
conflict with, or constitute a material default under, or permit the
termination or the acceleration of maturity of, or result in the imposition
of any Encumbrance upon any property or asset of Purchaser pursuant to (i)
its certificate of incorporation or bylaws or (ii) any note, bond,
indenture, mortgage, deed of trust, evidence of indebtedness, loan or lease
agreement, other material agreement or instrument, judgment, order,
injunction, or decree by which the Purchaser is bound, to which it is a
party, or to which its material assets are subject.
(c) Except as contemplated elsewhere herein and except as set forth in
Schedule 3.2, Purchaser is not required to submit any notice, declaration,
report or other filing or registration with any governmental or regulatory
authority or instrumentality in connection with the execution and delivery
of this Agreement or the consummation of the transactions contemplated
hereby.
(d) Except as contemplated elsewhere herein and except as set forth in
Schedule 3.2, no waiver, consent, approval or authorization of any
governmental or regulatory authority or instrumentality or any third party
is required to be obtained or made by the Purchaser in connection with the
execution and delivery of this Agreement or the consummation of the
transactions contemplated hereby.
3.3 PURCHASER FINANCIAL RESOURCES. Set forth as Exhibit 3.3 hereto is a
true, correct and complete copy of the commitment letter from the Purchaser's
lender, reflecting the Purchaser's proposed financing necessary to pay the
entire purchase price specified herein.
3.4 FINDERS AND BROKERS.Except for Credit Suisse First Boston ("CSFB") and
William J. Fox, no Person has acted, directly or indirectly, as a broker, finder
or financial advisor for the Purchaser in connection with the transactions
contemplated by this Agreement, and no Person is entitled to any fee or
commission or like payment in respect thereof. All fees payable to CSFB and
William J. Fox as a result of the transactions contemplated by this Agreement
shall be paid by the Purchaser.
4. CERTAIN COVENANTS AND AGREEMENTS
The Company and the Stockholder, jointly and severally, covenant and agree
that, from and after the execution and delivery of this Agreement to and
including the Closing Date (and thereafter as reflected below), they shall cause
the Company to comply with the covenants set forth below, and the Purchaser
covenants and agrees that it shall similarly comply with said covenants to the
extent applicable to it.
4.1 ACCESS. Upon reasonable notice, the Company and the Stockholder will
give to Purchaser and its counsel, accountants and other authorized
representatives, full access during reasonable business hours to all of the
properties, books, contracts, documents and records of the Company and shall
furnish Purchaser with all such information concerning its affairs, including
financial statements and personnel files, reviews and evaluations, as the
Purchaser may reasonably request in order that Purchaser may have full
opportunity to make such reasonable investigations as it shall desire for the
purpose of verifying the performance of and compliance with the representations,
warranties, covenants and the conditions contained herein or for other purposes
reasonably related to the transactions contemplated hereby. The Company and the
Stockholder will take all action necessary to enable Purchaser, its counsel,
accountants and other representatives to discuss the affairs, properties,
business, operations and records of the Company at such times and as often as
Purchaser may reasonably request with executives, independent accountants and
counsel of the Company and the Stockholder. No such investigation or inquiry
shall in any way limit the representations and warranties of the Company and the
Stockholder hereunder or the obligations of the Company and the Stockholder
pursuant to Article 10 hereof.
4.2 REASONABLE EFFORTS. The Company, the Stockholder and Purchaser shall
take all reasonable actions necessary to consummate the transactions
contemplated by this Agreement and will use all necessary and reasonable means
at their disposal to obtain all necessary consents and approvals of other
Persons and Governmental Bodies required to enable it to consummate the
transactions contemplated by this Agreement. The Purchaser shall further take
all commercially reasonable actions to cause the financing described in Section
3.3 to be consummated in accordance with the terms contemplated thereby.
4.3 PUBLIC ANNOUNCEMENTS;CONFIDENTIALITY. All notices to third parties and
other publicity relating to the transactions contemplated by this Agreement
shall be jointly planned and agreed to by the Stockholder and Purchaser, and no
party shall issue any press release or make any public statement with respect to
the transactions contemplated by this Agreement without the consent of the other
parties hereto. In addition, each of the parties covenants that it will hold in
strict confidence the terms and conditions of this Agreement and not disclose
any of such information to third parties, except, (i) Purchaser may disclose
such information to lenders providing financing to Purchaser for purposes of
consummating the transactions contemplated hereby, (ii) Stockholder and the
Company may disclose such information to the Administrative Agent and the
Lenders for purposes of evaluating the transactions contemplated hereby, (iii)
Purchaser may disclose such information to the Securities and Exchange
Commission ("SEC") in connection with required filings to be made to the SEC by
the
Purchaser, its parent or any affiliates of Purchaser, and (iv) any party,
after notice and consultation with the other parties hereto, may disclose such
information to Governmental Bodies to the extent required by applicable law.
4.4 ORDINARY COURSE OF BUSINESS. Except as contemplated by this Agreement,
during the period from the execution and delivery of this Agreement through the
Closing Date, the Company shall (i) conduct its operations in the ordinary
course of business consistent with past and current practices, (ii) use
commercially reasonable efforts to maintain and preserve intact its goodwill and
business relationships, (iii) keep and maintain its assets and properties in
substantially the same operating condition and repair (normal wear and tear
excepted) as currently maintained, (iv) continue all existing policies of
insurance in full force and effect and at least at such levels as are in effect
on the date hereof, and (v) not take any action referred to in Section 2.17(c)
or 2.17(d).
4.5 NO SHOPPING. From the date hereof through and until the earlier of
termination of this Agreement in accordance with Article 12 or Closing, neither
the Stockholder nor the Company nor any of their affiliates, employees,
officers, directors, agents or advisors shall, directly or indirectly, (a)
solicit, initiate or encourage any inquiries, proposals or offers from any third
party relating to any acquisition of the Company, its assets or the Shares, or
(b) with respect to any effort or attempt by any third party to do or seek any
of the foregoing, (i) participate in any discussions or negotiations, (ii)
furnish to any third party any information with respect to, or afford access to
the properties, books or records of or relating to, the Company, or (iii)
otherwise cooperate in any way with, or assist or participate in, or facilitate
or encourage any such effort. The Company and the Stockholder will take such
action as may be necessary to, immediately cease and cause to be terminated all
existing discussions, conversations, negotiations and other communications with
any Persons conducted heretofore with respect to any of the foregoing, and the
Company and the Stockholder shall notify the Purchaser promptly if any such
proposal or offer, or any inquiry or other contract with any Person with respect
thereto, is made and shall, in any such notice to the Purchaser, indicate in
detail the identity of the Person making such proposal, offer, inquiry or
contact and the terms and conditions of such proposal, offer, inquiry or other
contract. The Stockholder and the Company agree not to, without the prior
written consent of the Purchaser, release any Person from or waive any provision
of, any confidentiality or standstill agreement to which the Company is a party.
4.6 PRESERVE ACCURACY OF REPRESENTATIONS AND WARRANTIES. Each of the
parties hereto shall refrain from taking any action that would render any
representation or warranty contained in Article 2 or Article 3 of this Agreement
inaccurate as of the Closing Date. Each party hereto will promptly notify each
other of any action, suit or proceeding that shall be instituted or threatened
against it, including without limitation any such action, suit or proceeding
seeking to restrain, prohibit or otherwise challenge the legality of any
transaction contemplated by this Agreement. Each party hereto shall promptly
notify each other upon becoming aware of any facts or circumstances that cause
or are reasonably likely to cause any of such parties' representations and
warranties contained herein or relating to any matters required to be set forth
in any Schedule hereto
to be untrue.
4.7 INTERIM FINANCIAL STATEMENTS.The Company shall promptly deliver to the
Purchaser copies of monthly, quarterly and annual financial statements that will
be prepared by or on behalf of the Company during the period from the date
hereof through the Closing Date (collectively, "Interim Financial Statements",
and each individually, an "Interim Financial Statement"). Each such Interim
Financial Statement shall fairly present the financial position and results of
operations of the Company as at the dates and for the periods indicated, shall
be prepared on a basis consistent and in accordance with the basis upon which
the Company Financial Statements were prepared.
4.8 STATE TAX CLEARANCE LAWS. The Company agrees to comply with the
provisions of any applicable Delaware tax clearance law and any similar laws of
the State of Maryland prior to the Closing Date. The Company hereby agrees to
place in escrow, from the Purchase Price, if required by the taxing authorities
of any such states, the amount the taxing authorities so require, which escrow
shall be released to the Administrative Agent on behalf of the Company upon
authorization from and as directed by such taxing authorities.
4.9 CLOSING DATE PURCHASE ORDER SCHEDULE.Immediately prior to Closing, the
Company shall deliver to Purchaser an updated Schedule 2.9-A hereof which shall
reflect those items contained on Schedule 2.9-A as of the date hereof, except
for those purchase orders which have been paid since the date hereof and
additional open purchase orders entered into in the ordinary course of business.
Such updated schedule is referred to herein as the "Closing Date Purchase Order
Schedule" and on the Closing Date shall be attached hereto as Schedule 4.9.
5. OTHER COVENANTS AND AGREEMENTS
The Stockholder, the Company and the Purchaser hereto covenant and agree as
follows:
5.1 TAX MATTERS.
(a) The Company shall timely pay all transfer, documentary, sales,
stamp and other Taxes and fees arising from or relating to the sale of the
Purchased Assets contemplated by this Agreement, and the Company shall, at
its own expense, file all necessary Returns and other documentation with
respect to all such transfer, documentary, sales, stamp and other Taxes and
fees relating to such sale of the Purchased Assets or otherwise relating to
periods ending prior to or on the Closing Date. If required by applicable
law, the Purchaser will join in the execution of any such Returns and other
documentation.
5.2 CONFIDENTIAL NATURE OF OBLIGATIONS. The Purchaser, on the one hand, and
the Company and Stockholder, on the other hand, agree that they will treat in
confidence all documents, materials and other information which it or they shall
have
obtained regarding the other during the course of the negotiations leading to
the consummation of the transactions contemplated hereby (whether obtained
before or after the date of this Agreement), the investigation provided for
herein and the preparation of this Agreement and other related documents, and,
in the event the transactions contemplated hereby shall not be consummated, each
party will return to the other all copies of nonpublic documents and materials
which have been furnished in connection therewith. The obligation of the
Purchaser, on the one hand, and the Company and Stockholder, on the other hand,
to treat such documents, materials and other information in confidence shall not
apply to any information which (i) such party can demonstrate was lawfully in
its possession prior to the disclosure thereof by the other party, (ii) is known
to the public and did not become so known through any violation of a legal
obligation, (iii) became known to the public through no fault of such party or
(iv) is later lawfully acquired by such party from other sources. In the event
of the actual or threatened breach by any party of any of the provisions of this
Section 5.2, the other party may, in addition and supplementary to any other
rights and remedies existing in its favor, apply to any court of law or equity
of competent jurisdiction for specific performance, injunctive or other relief
in order to enforce or prevent any violation of the provisions hereof. A party
agrees not to raise the defense of an adequate remedy at law in any such
proceeding.
5.3 ENVIRONMENTAL MATTERS. The Stockholder and the Company shall provide
the Purchaser and their authorized representatives with access upon reasonable
advance notice to all real property owned, leased or used by the Company for the
purpose of performing a Phase I (or less extensive) environmental assessment
thereon. In the event such Phase I (or less extensive) assessment provides a
reasonable basis for concluding further testing is warranted to determine the
nature and scope of any Liability, the Stockholder and the Company shall permit
the Purchaser and its authorized representatives to conduct follow-up
inspections as they may reasonably require (including, without limitation, any
air, water, soil, or other environmental testing and monitoring deemed necessary
by them). The Purchaser agrees that it will not disclose, and will cause its
authorized representatives not to disclose, to any Person for any purpose
whatsoever except to authorized representatives of the Purchaser, lenders
providing financing to the Purchaser for the transactions contemplated herein,
and Persons for whom the Purchaser has received written consent from the
Stockholder to disclose such information, and as required by any Legal
Requirement. In the event this Agreement is terminated in accordance with
Article 12, the Purchaser agrees to repair and/or restore any damage or other
alteration to such real estate caused by the Purchaser's environmental
assessment thereof.
5.4 MAINTENANCE OF BOOKS AND RECORDS. Each of the parties hereto shall
preserve until the sixth anniversary of the Closing Date all records possessed
or to be possessed by such party relating to the business of the Company prior
to the date hereof. After the Closing Date, any party having legitimate need for
such access shall, upon prior reasonable request specifying such need, be
provided with access during regular business hours to (i) the officers and
employees of such party, and (ii) the books of account and records of such
party, but, in each such case, only to the extent relating to the business of
the Company prior to the Closing Date; provided, however, that the foregoing
right of access shall not be exercised in a manner interfering unreasonably with
the normal operations and business of the party required to afford such access.
5.5 TRANSFERRED EMPLOYEES. The Company will terminate all of its employees
(except for those Persons listed on Schedule 5.5 hereto) including, upon their
return from leave, those employees on short-or long-term disability, family
leave or any other authorized leave of absence, immediately prior to the Closing
("Terminated Employees"). The Purchaser will offer employment, immediately after
the Closing, to all Terminated Employees, upon terms and conditions acceptable
to Purchaser, including but not limited to a requirement that any new employee
of the Purchaser agree to be subject to the terms of employment set forth in the
Purchaser's employee handbook and agrees to execute a confidentiality and
non-disclosure agreement in favor of Purchaser. Those Terminated Employees that
accept Purchaser's offer of employment shall be collectively referred to herein
as the "Transferred Employees." In connection with the employment of the
Transferred Employees, the Purchaser will (i) assume all employee liabilities
accrued on the Closing Balance Sheet in respect of such Transferred Employees
for payroll, payroll taxes and employee vacation benefits, and (ii) be
responsible for any liability for severance benefits under the Purchaser's
severance policy, if any, which may become due to Transferred Employees whose
employment by Purchaser is terminated after the Closing Date by the Purchaser.
For purposes only of calculating severance payments which may become due with
respect to a Transferred Employee, a Transferred Employee's length of employment
by Purchaser shall be deemed to include such Transferred Employee's length of
employment by the Company. Notwithstanding the foregoing, nothing in this
Section 5.5 is intended to obligate the Purchaser to continue the employment of
any Transferred Employee for any period following the Closing, to restrict in
any way the Purchaser's rights to modify the terms and conditions of any
Transferred Employee's employment or to bestow upon any Transferred Employee any
rights as a third party beneficiary hereof.
5.6 COMPANY'S LEGAL NAME. Effective as of the Closing, the Company will
change its legal name to a name which does not include "Color Prelude" or
similar phrases utilized in the operation of the Business.
5.7 NON-COMPETITION. Each of the Company and Stockholder hereby agrees
that, for a period commencing on the date hereof and ending on the fifth
anniversary date of this Agreement, it will not, directly or indirectly, own,
operate, manage or make an investment or accept an ownership interest in, any
entity that is engaged in the Business anywhere in the continental United
States. Each of the Company and Stockholder agrees and acknowledges that a
violation by it of the covenant contained herein may cause irreparable damage to
Purchaser and that Purchaser may have no adequate remedy at law for such
violation. Accordingly, each of the Company and Stockholder agrees that
Purchaser's right to injunctive relief shall be cumulative and in addition to
whatever remedies it may have at law. Each of the Company and Stockholder
further recognizes and agrees that (i) this covenant is necessary and essential
to protect the business of Purchaser and to realize and derive all of the
benefits, rights and expectations of acquiring the Business, (ii) that the area
and duration of the covenants herein are in all things reasonable, and (iii)
that good and valuable consideration exists for the Company and Stockholder
being bound by such covenants.
5.8 COMPANY'S EMPLOYEES TERMINATED. The Company agrees that it shall be
solely responsible and liable for compliance with all federal, state and local
laws that may govern the termination of the Company's employees, including but
not limited to compliance with the Worker Adjustment and Retraining Notification
Act ("WARN Act") and notice and continuation coverage rights as may be required
under Section 4980B of the Internal Revenue Code of 1986, as amended ("COBRA").
5.9 AUDIT OF COMPANY'S FINANCIAL STATEMENTS. The Company and the
Stockholder agree that they shall use their reasonable best efforts to provide
assistance and information, when requested, in connection with the audit by the
Purchaser of the Company's financial statements for the years ended December 31,
2000 and December 31, 2001, so as to enable the Purchaser, its parent, and any
affiliates of the Purchaser to timely file such financial statements with the
SEC in accordance with SEC requirements.
6. CONDITIONS TO PURCHASER'S CLOSING
The obligations of Purchaser to consummate the transactions contemplated
under this Agreement shall be subject to the fulfillment at or prior to the
Closing of the following conditions, it being understood that Purchaser may, in
its sole discretion, waive any or all of such conditions in whole or in part
(provided, however, that no such waiver shall constitute a waiver by the
Purchaser of any of its rights or remedies at law or in equity if the
Stockholder or the Company shall be in violation of any of their respective
representations, warranties, covenants, agreements or obligations under this
Agreement):
6.1 REPRESENTATIONS, ETC. The Company and the Stockholder shall have
performed the covenants and agreements contained in this Agreement and the
Stockholder Ancillary Documents and the Company Ancillary Documents that are to
be performed by each of them at or prior to the Closing, and the representations
and warranties of the Company and the Stockholder contained in this Agreement
shall be true
and correct in all respects on and as of the Closing Date with the same effect
as though made at such time (except as contemplated or permitted by this
Agreement).
6.2 CONSENTS. All consents and approvals of Governmental Bodies and from
any other Persons required to (i) consummate the transactions contemplated by
this Agreement, including those Persons referenced on Schedule 2.2, and (ii)
transfer and assign to the Purchaser all Permits, including those referenced on
Schedule 2.6, shall have been obtained without cost (other than normal legal and
out of pocket expenses incident to processing such consents and approvals) or
other adverse consequence to Purchaser and shall be in full force and effect.
6.3 NO ADVERSE LITIGATION. No order or preliminary or permanent injunction
shall have been entered, no Legal Requirement or Order shall have been enacted,
issued, promulgated or enforced, and no action, suit, investigation or other
legal or administrative proceeding by any court or Governmental Body, agency or
other Person shall be pending or threatened on the Closing Date which may have
the effect of (i) making any of the transactions contemplated hereby illegal,
(ii) materially adversely affecting the value of the assets or business of the
Company or (iii) making Purchaser or the Company liable for the payment of
damages to any Person.
6.4 INTERCOMPANY ACCOUNT. As of the Closing, (i) neither the Company nor
the Stockholder (or any of its affiliates) shall be liable to the other in
respect of money borrowed, funds advanced or similar obligations, except for any
reimbursement obligation of the Stockholder to the Company in respect of amounts
paid by the Company under the Guaranty, and (ii) any management agreement or
similar relationship between the Stockholder or its affiliates and the Company
shall have been terminated.
6.5 INDEBTEDNESS.As of the Closing, the Company shall use a portion of the
Purchase Price to retire in full all of the Company's Indebtedness, except for
the Company's Indebtedness under the Guaranty which shall be partially repaid.
As used herein, "Indebtedness" shall mean (i) all indebtedness of the Company
for borrowed money, whether current or funded, or secured or unsecured, (ii) all
indebtedness of the Company for the deferred purchase price of property or
services represented by a note or other security, (iii) all indebtedness of the
Company created or arising under any conditional sale or other title retention
agreement with respect to property acquired by the Company (even though the
rights and remedies of the seller or lender under such agreement in the event of
default are limited to repossession or sale of such property), (iv) all
indebtedness of the Company secured by a purchase money mortgage or other lien
to secure all or part of the purchase price of property subject to such mortgage
or lien, (v) all obligations under leases which shall have been or must be, in
accordance with generally accepted accounting principles, recorded as capital
leases in respect of which such person is liable as lessee, (vi) any liability
of the Company in respect of banker's acceptances or letters of credit, (vii)
any liability of the Company in respect of dividends payable and (viii) all
indebtedness referred to in the preceding clauses which is directly or
indirectly guaranteed by the Company or which the Company has agreed
(contingently or otherwise) to purchase or otherwise acquire or in respect of
which it has otherwise
assured a creditor against loss. On or prior to the Closing Date, the Company
shall have delivered to Purchaser evidence in form satisfactory to Purchaser, of
(i) the payment of a portion of the obligations of the Company under the
Guaranty and the full payment of all other Indebtedness of the Company, which,
in each case, shall include, but not be limited to, a payoff statement from each
creditor to whom such Indebtedness has been repaid indicating the amount to be
paid in satisfaction of the Indebtedness due such creditor, and (ii) the release
and discharge of record of any Encumbrance on the Purchased Assets, including,
without limitation, any liens on the Purchased Assets which secure the Guaranty.
Any such release shall be evidenced by a release agreement and such other
documents as shall be reasonably necessary to discharge the Encumbrances, all in
form and substance reasonably satisfactory to the Purchaser, including one or
more termination statements on Form UCC-3, each of which shall be executed by
the secured party releasing such Encumbrance on or prior to the Closing Date.
6.6 CORPORATE ACTION.
(a) The Company shall have delivered to the Purchaser a Certificate of
the Secretary of the Company: (i) attaching a true and complete copy of the
Company's Charter Documents, as amended to the date hereof; (ii) attaching
a Certificate of Good Standing of the Company issued by the Secretary of
State of Delaware, dated within a reasonable date prior to Closing, (iii)
attaching a unanimous consent of all of the stockholders and members of the
Board of Directors of the Company in connection with the authorization and
approval of the execution, delivery and performance by the Company of this
Agreement and the Company Ancillary Documents; and (iv) setting forth the
incumbency of the officers of the Company who have executed and delivered
this Agreement and each other document executed on the date hereof,
including therein a signature specimen of each such officer or officers, in
the form of Exhibit 6.6-A attached hereto.
(b) The Stockholder shall have delivered to the Purchaser a
Certificate of the Secretary of the Stockholder: (i) attaching a true and
complete copy of the Stockholder's Charter Documents, as amended to the
date hereof; (ii) attaching a Certificate of Good Standing of the
Stockholder issued by the Secretary of State of Delaware, dated within a
reasonable date prior to Closing, (iii) attaching a unanimous consent of
all of the stockholders and members of the Board of Directors of the
Stockholder in connection with the authorization and approval of the
execution, delivery and performance by the Stockholder of this Agreement
and the Stockholder Ancillary Documents; and (iv) setting forth the
incumbency of the officers of the Stockholder who have executed and
delivered this Agreement and each other document executed on the date
hereof, including therein a signature specimen of each such officer or
officers, in the form of Exhibit 6.6-B attached hereto.
6.7 INTENTIONALLY OMITTED.
6.8 OPINION OF COUNSEL. The Purchaser shall have received a legal opinion
of Hallett & Perrin, P.C., counsel to the Stockholder and the Company, dated the
Closing Date in the form of Exhibit 6.8 attached hereto.
6.9 LANDLORD CONSENT AND ESTOPPEL. The Company shall deliver a written
consent and estoppel, in form and substance reasonably satisfactory to the
Purchaser, from the landlord of each parcel of Currently Leased Real Property,
consenting to the assignment by the Company to the Purchaser of the Company's
rights and obligations under the leases relating to the Currently Leased
Property ("Landlord Consents").
6.10 NO CHANGES OR DESTRUCTION OF ASSETS. Between the date hereof and the
Closing, there shall have been no material adverse change (regardless of
insurance coverage therefor) in the Company's business or the assets or
properties of the Company, and no material adverse federal or state legislative
or regulatory change affecting the Company, the Company's business or the assets
or properties of the Company.
6.11 CLOSING DELIVERIES. Purchaser shall have received each of the
documents or items required to be delivered to it pursuant to Section 8.1
hereof, and each other instrument, certificate or other document it may
reasonably request.
7. CONDITIONS TO THE COMPANY'S CLOSING
The obligations of the Company to consummate the transactions contemplated
under this Agreement shall be subject to the fulfillment at or prior to the
Closing of the following conditions, it being understood that the Company may,
in its sole discretion, waive any or all of such conditions in whole or in part
(provided, however, that no such waiver shall constitute a waiver by the Company
of any of its rights or remedies at law or in equity if the Purchaser shall be
in violation of any of its representations, warranties, covenants, agreements or
obligations under this Agreement):
7.1 REPRESENTATIONS, ETC. Purchaser shall have performed in all material
respects the covenants and agreements contained in this Agreement and the
Purchaser Ancillary Documents that are to be performed by it at or prior to the
Closing, and the representations and warranties of Purchaser contained in this
Agreement shall be true and correct in all respects on and as of the Closing
Date with the same effect as though made at such time (except as contemplated or
permitted by this Agreement).
7.2 CONSENTS. All consents and approvals of Governmental Bodies and from
any other third parties required to be obtained by the Purchaser to consummate
the transactions contemplated by this Agreement shall have been obtained without
cost (other than normal legal and out of pocket expenses incident to processing
such consents and approvals) or other adverse consequence to the Stockholder or
the Company and shall be in full force and effect.
7.3 NO ADVERSE LITIGATION. No order or preliminary or permanent injunction
shall have been entered, no Legal Requirement or Order shall have been enacted,
issued,
promulgated or enforced, and no action, suit, investigation or other legal or
administrative proceeding by any court or Governmental Body, agency or other
Person shall be pending or threatened on the Closing Date which may have the
effect of (i) making any of the transactions contemplated hereby illegal or (ii)
making the Stockholder liable for the payment of damages to any Person.
7.4 CORPORATE ACTION.The Purchaser shall have delivered to the Stockholder
a Certificate of the Secretary of the Purchaser: (i) attaching a true and
complete copy of the Purchaser's Charter Documents, as amended to the date
hereof; (ii) attaching a Certificate of Good Standing of the Purchaser issued by
the Secretary of State of Delaware, dated within a reasonable date prior to
Closing, (iii) attaching a unanimous consent of all of the stockholders and
members of the Board of Directors of the Purchaser in connection with the
authorization and approval of the execution, delivery and performance by the
Purchaser of this Agreement and the Purchaser Ancillary Documents; and (iv)
setting forth the incumbency of the officers of the Purchaser who have executed
and delivered this Agreement and each other document executed on the date
hereof, including therein a signature specimen of each such officer or officers,
in the form of Exhibit 7.4 attached hereto.
7.5 CLOSING DELIVERIES.The Company and the Stockholder shall have received
each of the documents or items required to be delivered to them pursuant to
Section 8.2 hereof, and each other instrument, certificate or other document it
may reasonably request.
8. DOCUMENTS TO BE DELIVERED AT CLOSING
8.1 TO PURCHASER. At the Closing, there shall be delivered to Purchaser:
(a) a bill of sale, in form and substance reasonably satisfactory to
the Purchaser, duly executed by the Company, and such other
instruments of transfer and assignment necessary or appropriate
to transfer and vest in Purchaser all of the Company's right,
title and interest in, to and under the Purchased Assets;
(b) an assignment and assumption agreement, in form and substance
reasonably satisfactory to the Purchaser, duly executed by the
Company assigning to the Purchaser all of the Company's right,
title and interest in and to, and obligations under, the Assumed
Contracts ("Assignment and Assumption Agreement");
(c) an assignment and assumption agreement, in form and substance
reasonably satisfactory to the Purchaser, duly executed by the
Company assigning to the Purchaser all of the Company's right,
title and interest in and to, and obligations under, the leases
for the Currently Leased Real Property ("Lease Assignment")
(d) assignments of the Intellectual Property, in form and substance
reasonably satisfactory to the Purchaser, duly executed by the
Company, assigning to the Purchaser all of the Company's right,
title and interest in and to the Intellectual Property
("Intellectual Property Assignments");
(e) the consents and approvals required pursuant to Section 6.2;
(f) the releases and discharges required pursuant to Section 6.5;
(g) the certificates required pursuant to Section 6.6;
(h) the opinion of Hallett & Perrin, P.C., required pursuant to
Section 6.8;
(i) the Landlord Consents required pursuant to Section 6.9;
(j) a certificate, signed by an officer of the Company and of the
Stockholder, as to the fulfillment of the conditions set forth in
Sections 6.1 through 6.3 and 6.10 hereof;
(k) the Indemnity Escrow Agreement, duly executed by the Company and
the Purchase Price Escrow Agreement, duly executed by the
Company;
(l) the Non-Competition Agreements, duly executed by each of Messrs.
Wayne W. LoCurto and Peter J. Olaynack, in the form of Exhibit J
hereto (the "Non-Competition Agreements");
(m) a copy of the amendment to the Company's Certificate of
Incorporation to be filed in the office of the Secretary of State
of Delaware, changing the Company's name, as required pursuant to
Section 5.6;
(n) the Business Records (as defined in Section 1.1(a));
(o) a schedule of all outstanding and unpaid drafts issued by the
Company against those accounts set forth on Schedule 2.18 as of
Closing; and
(p) all documents and agreements required by the provisions hereof to
be delivered by the Stockholder or the Company at or prior to the
Closing, including but not limited to UCC-3 releases, and all
other items reasonably requested by Purchaser.
8.2 TO THE COMPANY.At the Closing, there shall be delivered to the Company
or, as the case may be, to the Administrative Agent:
(a) the Closing Purchase Price, as contemplated by Section 1.5
hereof;
(b) the Assignment and Assumption Agreement, duly executed by the
Purchaser;
(c) the Lease Assignment, duly executed by the Purchaser;
(d) the consents and approvals required pursuant to Section 7.2;
(e) the certificate required pursuant to Section 7.4;
(f) a certificate, signed by an officer of Purchaser, as to the
fulfillment of the conditions set forth in Sections 7.1 through
7.3 hereof;
(g) the Indemnity Escrow Agreement and the Purchase Price Escrow
Agreement, each duly executed by the Purchaser;
(h) the Non-Competition Agreements, duly executed by the Purchaser,
and
(i) all documents and agreements required by the provisions hereof to
be delivered by the Purchaser at the Closing, and all other items
reasonably requested by the Stockholder.
9. SURVIVAL
(a) All representations and warranties made by any party in this Agreement
shall be deemed to be material and to have been relied upon by the parties
hereto and shall survive the Closing for a period of twelve (12) months after
the Closing Date; provided, however, that (i) the representations, warranties
and agreements contained in Sections 2.7 and 2.15 shall survive the Closing
until the tenth day after the expiration of the statute of limitations
applicable to the matters covered thereby and (ii) the representations,
warranties and agreements contained in Sections 2.1, 2.2, 2.3 and 2.27 shall
survive indefinitely. Notwithstanding the foregoing, any representation or
warranty in respect of which indemnity may be sought under this Agreement shall
survive the time at which it would otherwise terminate pursuant to the preceding
sentence if notice of the inaccuracy or breach thereof giving rise to such right
of indemnity (including the basis for the claim for which indemnity is sought)
shall have been given in accordance with this Agreement to the party against
whom such indemnity may be sought prior to such time. The representations and
warranties hereunder shall not be affected or diminished by any investigation at
any time by or on behalf of the party for whose benefit such representations and
warranties were made.
(b) All the covenants, agreements and obligations contained in this
Agreement shall survive in accordance with their respective terms.
10. INDEMNIFICATION
10.1 INDEMNIFICATION OF THE COMPANY. Purchaser shall indemnify and hold the
Company and its affiliates (collectively "Company Indemnified Parties") harmless
from, against, for and in respect of:
(i) any and all damages, losses, settlement payments, obligations,
Liabilities, claims, actions or causes of action and encumbrances
("Damages") suffered, sustained, incurred or required to be paid by a
Company Indemnified Party because of the breach of any written
representation, warranty, agreement or covenant of Purchaser contained in
this Agreement or any Purchaser Ancillary Document;
(ii) any and all Liabilities, obligations, claims and demands arising
out of the ownership and operation of the Business on and after the Closing
Date, except to the extent the same arises from a breach of any written
representation, warranty, agreement or covenant of the Stockholder
contained in this Agreement, any Company Ancillary Document or any
Stockholder Ancillary Document;
(iii) any Assumed Liabilities; and
(v) all reasonable costs and expenses (including, without limitation,
attorneys' fees, interest and penalties) ("Expenses") incurred by a Company
Indemnified Party in connection with any action, suit, proceeding, demand,
assessment or judgment incident to any of the matters indemnified against
in this Section 10.1.
10.2 INDEMNIFICATION OF THE PURCHASER. The Stockholder and the Company,
jointly and severally, shall indemnify and hold Purchaser and its affiliates
(collectively "Purchaser Indemnified Parties") harmless from, against, for and
in respect of:
(i) any and all Damages suffered, sustained, incurred or required to
be paid by a Purchaser Indemnified Party because of the breach of any
written representation, warranty, agreement or covenant of the Stockholder
or the Company contained in this Agreement, any Company Ancillary Document
or any Stockholder Ancillary Document;
(ii) any and all Liabilities, obligations, claims and demands arising
out of the ownership of the Company and operation of the Business prior to
the Closing Date, other than Assumed Liabilities;
(iv) any and all Damages, costs and expenses suffered, sustained,
incurred or required to be paid by the Purchaser Indemnified Parties (i) as
a result of the failure of the Company prior to Closing to obtain a waiver
of the VOC limit, or to otherwise comply with such VOC limit, referred to
in the air permit issued by the Maryland Department of the Environment, as
described in Schedule 2.7 attached hereto, and (ii) as a result of the
failure of the Company to construct berms to provide secondary containment
in the materials storage areas, as described in Schedule 2.7; and
(v) all Expenses incurred by a Purchaser Indemnified Party in
connection with any action, suit, proceeding, demand, assessment or
judgment incident to any of the matters indemnified against in this Section
10.2.
10.3 GENERAL RULES REGARDING INDEMNIFICATION. The obligations and
liabilities of each indemnifying party hereunder with respect to claims
resulting from the assertion of liability by a Company Indemnified Party or
Purchaser Indemnified Party (herein an "indemnified party"), as the case may be,
shall be subject to the following terms and conditions:
(a) Until all funds held pursuant to the Indemnity Escrow Agreement
have been disbursed, any Purchaser Indemnified Party who shall have a claim
for indemnification shall give all notices of claims for indemnification,
and all such claims shall be satisfied, in accordance with the terms of the
Indemnity Escrow Agreement. In all other cases, the indemnified party shall
give prompt written notice to the indemnifying party of any claim which
might give rise to a claim by the indemnified party against the
indemnifying party based on the indemnity agreements contained in Section
10.1 or 10.2 hereof, stating the nature and basis of said claims and the
amounts thereof, to the extent known; provided, that failure of the
indemnified party to give such notice shall not relieve the indemnifying
party of its obligations under Sections 10.1 and 10.2 hereof except to the
extent, if at all, that such indemnifying party shall have been materially
prejudiced thereby.
(b) (i) If any action at law or suit in equity is instituted by a
third party against an indemnified party with respect to which an
indemnified party intends to claim indemnification under this Article 10 (a
"Third Party Claim"), such indemnified party shall immediately notify the
indemnifying party of such Third Party Claim. The failure to immediately
give the notice shall not relieve the indemnifying party of its
indemnification obligations hereunder except to the extent that the
indemnifying party is actually prejudiced as a result of the failure to
immediately give such notice.
(ii) Subject to Section 10.3(b)(iii) the indemnified party shall have
the right to conduct and control, through counsel of its choosing, the
defense of such Third Party Claim, and the indemnified party may compromise
or settle the same; provided, however, that the indemnified party shall
give the indemnifying party advance notice of any proposed compromise or
settlement. Subject to Section
10.3(b)(iii), if the indemnifying party shall, within 15 days of receipt of
such notice, object in writing to a proposed compromise or settlement with
respect to a Third Party Claim for money or damages, the indemnified party
shall not enter into such compromise or settlement; provided, however, that
approval of such compromise or settlement shall not be unreasonably
withheld. Notwithstanding the foregoing, the indemnified party shall retain
the power to enter into any compromise or settlement properly objected to
by the indemnifying party, but in so doing shall waive any right to
indemnity for the amount of such payment or settlement, and the amount of
such payment or settlement shall not be claimed for indemnity under this
Agreement.
(iii) If the remedy sought in any Third Party Claim referred to in
Section 10.3(b)(ii) is solely money damages, the indemnifying party shall
have 30 Business Days after receipt of the notice referred to in Section
10.3(b)(i) to notify the indemnified party that it elects to conduct and
control the defense of such Third Party Claim. If the indemnifying party
does not give the foregoing notice, the indemnified party shall have the
right to defend, contest, settle or compromise such Third Party Claim in
the exercise of its exclusive discretion, and the indemnifying party shall,
upon request from the indemnified party, promptly pay to the indemnified
party in accordance with the other terms of this Article 10, the amount for
which indemnification is provided pursuant to this Article 10 incurred in
connection with, arising out of or resulting from any such defense,
contest, settlement or compromise. If the indemnifying party so gives the
foregoing notice, the indemnifying party shall have the right to undertake,
conduct and control, through counsel of its own choosing and at its sole
expense, the conduct and settlement of such Third Party Claim, and the
indemnified party shall cooperate with the indemnifying party in connection
therewith; provided, however, that (A) the indemnifying party shall not
thereby permit to exist any Encumbrances upon any asset of the indemnified
party, (B) the indemnifying party must conduct the defense of the Third
Party Claim actively and diligently thereafter in order to preserve the
right in this regard, (C) the indemnifying party shall not consent to any
settlement or the entry of any judgment that does not include as an
unconditional term thereof the giving of a complete release from liability
with respect to any claims made, or that could have been made, in
connection with such Third Party Claim to the indemnified party, (D) the
indemnifying party shall permit the indemnified party to participate in
such defense through counsel of its own choosing, but the fees and expenses
of such counsel shall be borne by the indemnified party, except as provided
in clause (E) below, and (E) the indemnifying party shall agree promptly to
reimburse to the extent required under this Article 10 the indemnified
party for the full amount incurred in connection with, arising out of or
resulting from such Third Party Claim, including without limitation fees
and expenses of counsel for the indemnified party incurred after giving the
foregoing notice to the indemnifying party and prior to the assumption of
the conduct and control of such Third Party Claim by the indemnifying
party.
(c) The indemnified party shall make available to the indemnifying
party and its attorneys and accountants all books and records of the
indemnified party relating to such proceedings or litigation and the
parties hereto agree to render to each other such assistance as they may
reasonably require of each other in order to ensure the proper and adequate
defense of any such action, suit or proceeding.
(d) If any claims are made by third parties against an indemnified
party for which an indemnifying party would be liable, and it appears
likely that such claims might also be covered by the indemnified party's
insurance policies, the indemnified party shall make a timely claim under
such policies and to the extent that such party obtains any recovery from
such insurance, such recovery shall be offset against any sums due from an
indemnifying party (or shall be repaid by the indemnified party to the
extent that an indemnifying party has already paid any such amounts). The
parties acknowledge, however, that if an indemnified party is self-insured
as to any matters, either directly or through an insurer which assesses
retroactive premiums based on loss experience, then to the extent that the
indemnified party bears the economic burden of any claims through
self-insurance or retroactive premiums or insurance ratings, the
indemnifying party's obligation shall only be reduced by any insurance
recovery in excess of the amount paid or to be paid by the indemnified
party in insurance premiums.
(e) An indemnified party shall not make any claim under this Section
10 until it has incurred a cumulative aggregate of Damages and Expenses for
which indemnification is otherwise provided hereunder in the amount (the
"Basket Amount") equal to $50,000; provided further, that the foregoing
provisions of this clause (e) shall not apply to the adjustments to the
Purchase Price described in Section 1.4 or any amounts for which
indemnification under Section 10.1(iii) and Section 10.2(ii) is available,
all of which shall be made on a dollar-for-dollar basis.
(f) Except in the case of actual fraud or intentional
misrepresentation by the Company or Stockholder (as determined by a court
of competent jurisdiction), Purchaser's sole recourse in respect of amounts
for which it is entitled to indemnity under this Section 10 shall be
limited to the Escrowed Funds, and neither the Stockholder nor the Company
shall have any liability other than in respect of Purchaser's claim against
the Escrowed Funds in accordance with the terms of the Escrow Agreement.
11. RELEASE OF INDEMNITY ESCROW IN CERTAIN CIRCUMSTANCES.
Notwithstanding the provisions of Section 10.2 hereof, in the event the
Company receives a written claim or demand from a federal, state or local
governmental entity ("Taxing Authority") asserting a claim against the Company
for any payroll, sales or use tax liability of the Company relating to a period
prior to the Closing, which amount was
not accrued for on the Closing Balance Sheet and assumed by the Purchaser
("Unaccrued Tax Liability"), the Purchaser hereby agrees that up to $250,000, in
the aggregate, of the Indemnity Escrow Amount shall be permitted to be released
by the Indemnity Escrow Agent and paid directly by the Indemnity Escrow Agent to
the Taxing Authority in satisfaction of the Unaccrued Tax Liability. The Company
shall provide to the Purchaser and the Indemnity Escrow Agent a copy of any such
claim or demand for Unaccrued Tax Liability received by the Company from a
Taxing Authority. The Purchaser and the Company together shall provide written
notice to the Indemnity Escrow Agent, together with a copy of the claim or
demand received from the Taxing Authority, instructing the Indemnity Escrow
Agent to release and pay from the Indemnity Escrow Amount the amount of such
Unaccrued Tax Liability, up to a maximum aggregate amount released hereunder not
to exceed $250,000, directly to the Taxing Authority.
12. FAILURE TO CLOSE BECAUSE OF DEFAULT
In the event that the Closing is not consummated by virtue of a material
default made by a party in the observance or in the due and timely performance
of any of its covenants or agreements herein contained ("Default"), the parties
shall have and retain all of the rights afforded them at law or in equity by
reason of that Default. In addition, the Company and the Stockholder, on the one
hand, and Purchaser, on the other, acknowledge that the Purchased Assets and the
transactions contemplated hereby are unique, that a failure by any of them to
complete such transactions will cause irreparable injury to the other, and that
actual damages for any such failure may be difficult to ascertain and may be
inadequate. Consequently, Purchaser, on one hand, and the Company and the
Stockholder, on the other hand, agree that each shall be entitled, in the event
of a Default by the other, to specific performance of any of the provisions of
this Agreement in addition to any other legal or equitable remedies to which the
non-defaulting party may otherwise be entitled. In the event any action is
brought, the prevailing party shall be entitled to recover court costs,
arbitration expenses and reasonable attorneys' fees.
13. TERMINATION RIGHTS
13.1 TERMINATION BY MUTUAL CONSENT. This Agreement may be terminated any
time prior to the Closing by consent of the parties hereto.
13.2 TERMINATION BY THE PURCHASER.
The Purchaser may terminate this Agreement by notice to the
Stockholder:
(i) at any time prior to the Closing, if the Company or the
Stockholder shall have materially breached or failed in any respect to
comply with any of its covenants, agreements or obligations under this
Agreement, or if any of its or his representations and warranties
contained in Article 2 hereof shall have been inaccurate in any
respect when made or become inaccurate in any respect at any time
prior to the Closing;
(ii) at any time prior to the Closing, if the Closing shall not
have occurred by December 18, 2001, and the failure the Closing to
occur on or before such date did not result from the failure of the
Purchaser to fulfill any of its covenants, obligations and agreements
contained herein that are required to be fulfilled prior to Closing;
or
(iii) at any time prior to Closing, if since the Most Recent
Balance Sheet Date, there shall have occurred any material adverse
change (whether or not covered by insurance) in the assets,
properties, business, prospects, results of operations, liabilities or
financial condition of the Company;
13.3 TERMINATION BY THE COMPANY.
The Company may terminate this Agreement by notice to the Purchaser at
any time prior to the Closing:
(i) if the Purchaser shall have materially breached or failed in
any respect to comply with any of its covenants, agreements or
obligations under this Agreement, or if any of the representations and
warranties contained in Article 3 hereof shall have been inaccurate in
any respect when made or become inaccurate in any respect at any time
prior to the Closing; or
(ii) if the Closing shall not have occurred by December 18, 2001,
and the failure of the Closing to occur on or before such date did not
result from failure of the Company or any Stockholder to fulfill any
of its covenants, obligations and agreements contained herein that are
required to be fulfilled prior to Closing.
13.4 EFFECT OF TERMINATION. If this Agreement is terminated pursuant to
this Article 13, except as otherwise provided in Article 12, all further
obligations of the parties under this Agreement (other than those contained in
Section 4.3, Section 5.2 and Section 14.12, which shall survive in accordance
with their terms) shall be terminated without further force and effect and
without further liability of any party to any other; provided that nothing
herein shall relieve any party from liability for such party's willful breach of
this Agreement.
14. GENERAL
14.1 SUCCESSORS AND ASSIGNS. This Agreement and the rights of the parties
hereunder may not be assigned, (i) except by operation of law, (ii) except that
Purchaser may assign its rights and obligations hereunder to an affiliate of the
Purchaser without the consent of the Stockholder or the Company, so long as
Purchaser guarantees the obligations of such assignee, and (iii) except that the
Purchaser, or Purchaser's affiliate,
as the case may be, may assign and transfer to any entity providing financing
for the transactions contemplated by this Agreement (or any refinancing of such
financing), as security for such financing, all of the interest, rights and
remedies of Purchaser or Purchaser's affiliate, as the case may be, in and to
this Agreement, and (iv) except for the collateral assignment by the Stockholder
and the Company of all of their respective interests, rights and remedies in and
to this Agreement to the Administrative Agent (for the ratable benefit of the
Lenders) to secure their respective obligations under the Credit Agreement and
the Guaranty, in accordance with a certain Collateral Assignment of Purchase
Agreement and Escrow Agreements (the "Collateral Assignment") dated the date
hereof. The Stockholder and the Company hereby expressly consent to the
aforementioned assignment by the Purchaser or Purchasers affiliate to its
lenders. The Purchaser and Purchaser's affiliate as the case may be, hereby
expressly consent to the Collateral Assignment by the Stockholder and the
Company. The Stockholder, the Company and the Purchaser (and the Purchaser's
affiliate as the case may be), each acknowledge and agree that (i) under all
circumstances, the Purchaser shall disburse such portion of the Purchase Price,
together with any other amounts to which the Stockholder and/or the Company may
be entitled hereunder and which would otherwise be paid directly to the
Stockholder or the Company in accordance with the terms hereof, directly to the
Administrative Agent by wire transfer of funds, to such account as the
Administrative Agent may direct from time to time, and (ii) neither the
Administrative Agent nor the Lenders shall be deemed to have assumed any of the
obligations of the Stockholder or the Company under this Agreement, (or any
related agreements) nor shall the Administrative Agent or the Lenders be under
any liability of any kind to the Stockholder, the Company or the Purchaser under
this Agreement. The Stockholder, the Company and the Purchaser (and the
Purchaser's affiliate as the case may be), each acknowledge and agree that the
lenders to which the Purchaser may assign all of its interest, rights and
remedies in and to this Agreement, as provided in this Section 14.1, shall not
be deemed to have assumed any of the obligations of the Purchaser (or the
Purchaser's affiliate, as the case may be) under this Agreement (or any related
agreements) and such lenders shall not be under any liability of any kind to the
Stockholder, the Company or the Purchaser under this Agreement. This Agreement
shall be binding upon and shall inure to the benefit of the parties hereto, the
assigns and successors of the Purchaser, the Company, the Stockholder, the
Company Indemnified Parties and the Purchaser Indemnified Parties, and the
heirs, administrators and executors of each of the foregoing.
14.2 ENTIRE AGREEMENT. This Agreement (including the schedules, exhibits
and annexes attached hereto) and the documents delivered pursuant hereto
constitute the entire agreement and understanding among the Stockholder, the
Company and Purchaser and supersede any prior agreement and understanding
relating to the subject matter of this Agreement. This Agreement, upon
execution, constitutes a valid and binding agreement of the parties hereto
enforceable in accordance with its terms and may be modified or amended only by
a written instrument executed by the parties hereto, and only with the prior
written consent of the Administrative Agent.
14.3 COUNTERPARTS. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original and all of which
together shall constitute but one and the same instrument.
14.4 NOTICES. All notices or other communications required or permitted
hereunder shall be in writing and shall be deemed given or delivered and
received (a) when delivered, if delivered personally, (b) four days after
mailing, if mailed by registered or certified mail, return receipt requested and
postage prepaid, or (c) on the second business day after delivery to a private
courier service with overnight delivery requested, if delivered to a private
courier service providing documented overnight service, or (d) on the date
received if transmitted by facsimile, in each case addressed as follows:
If to Purchaser, addressed to it at:
Arcade Marketing, Inc.
120 East 56th Street
Suite 1200
New York, New York 10022
Attn: Bruce Prashker, Sr. VP Corporate Development
with copy (which shall not constitute notice) to:
Herrick, Feinstein LLP
2 Penn Plaza
Newark, New Jersey 07105
Attn: Daniel A. Swick, Esq.
If to the Company, prior to Closing, addressed to it at:
7600 Energy Parkway
Baltimore, Maryland 21226
If to the Company, after the Closing, addressed to it at:
2 Owenoke Park
Westport, Connecticut 06880
Attn: Chief Executive Officer
Fax: (203)341-8732
With a copy to:
Fleet National Bank, as Administrative Agent
100 Federal Street, 6th Floor
Boston, Massachusetts 02110
Attn: Anthony D. Healey
Fax: (617)434-4775
If to the Stockholder, addressed to it at:
7600 Energy Parkway
Baltimore, Maryland 21226
If to the Stockholder, after the Closing, addressed to it at:
2 Owenoke Park
Westport, Connecticut 06880
Attn: Chief Executive Officer
Fax: (203)341-8732
or to such other address or counsel as any party hereto shall specify pursuant
to this Section from time to time.
14.5 GOVERNING LAW; JURISDICTION.
(a) This Agreement shall be construed in accordance with the laws of
the State of Delaware with regard to its principles governing conflicts of
laws.
(b) With respect to any claim or cause of action in connection with
the execution or performance of, or arising under, this Agreement or any
document executed and delivered pursuant to this Agreement, each party
hereto (a) irrevocably submits to the nonexclusive jurisdiction of the
state or federal courts located in the State of New York, (b) irrevocably
waives any objection which such party may have to the laying on of venue of
any such claim or cause of action brought in any such court, (c)
irrevocably waives any claim that any such claim or cause of action brought
in any such court has been brought in an inconvenient forum, (d)
irrevocably waives the right to object, with respect to such claim or cause
of action brought in ay such court, that such court does not have
jurisdiction over such party, and (e) irrevocably agrees that service of
process sufficient to confer personal jurisdiction in any such action can
be made by any party on another via Federal Express (or comparable
courier), with a copy by regular mail, with service to be made to the
addresses set forth in Section 13.4 hereof, and irrevocably waives any
objection which such party may have to such service of process in any such
action.
14.6 EFFECT OF INVESTIGATION . No investigation by the parties hereto in
connection with this Agreement or otherwise shall affect the representations and
warranties of the parties contained herein or in any certificate or other
document delivered in connection herewith and each such representation and
warranty shall survive such investigation.
14.7 EXERCISE OF RIGHTS AND REMEDIES. Except as otherwise provided herein,
no delay of or omission in the exercise of any right, power or remedy accruing
to any party as a result of any breach or default by any other party under this
Agreement shall impair any such right, power or remedy, nor shall it be
construed as a waiver of or acquiescence in any such breach or default, or of
any similar breach or default occurring later; nor shall any waiver of any
single breach or default be deemed a waiver of any other breach or default
occurring before or after that waiver.
14.8 REFORMATION AND SEVERABILITY. In case any provision of this Agreement
shall be invalid, illegal or unenforceable, it shall, to the extent possible, be
modified in such manner as to be valid, legal and enforceable but so as to most
nearly retain the intent of the parties, and if such modification is not
possible, such provision shall be severed from this Agreement, and in either
case the validity, legality and enforceability of the remaining provisions of
this Agreement shall not in any way be affected or impaired thereby.
14.9 REMEDIES CUMULATIVE. No right, remedy or election given by any term of
this Agreement shall be deemed exclusive but each shall be cumulative with all
other rights, remedies and elections available at law or in equity.
14.10 CAPTIONS. The headings of this Agreement are inserted for convenience
only, and shall not constitute a part of this Agreement or used to construe or
interpret any provision hereof.
14.11 PUBLICITY. Neither the Company, the Stockholder nor Purchaser shall
make any public release of information regarding the transactions contemplated
herein, without the prior written consent and approval of the other parties
hereto.
14.12 EXPENSES. The Stockholder, on behalf of the Company and with respect
to the costs and expenses of the Company, on one hand, and the Purchaser, on the
other hand, shall each pay all of their own costs and expenses incident to their
negotiation and preparation of this Agreement and to their performance and
compliance with all agreements and conditions contained herein on its part to be
performed or complied with, including, without limitation, the fees, expenses
and disbursements of its counsel and accountants. The Stockholder and the
Company represent, warrant and covenant that the Company has not as of the date
hereof paid, and prior to Closing shall not pay, any costs or expenses
(including, without limitation, the fees, expenses and disbursements of counsel
and accountants) incident to the negotiation and preparation of this Agreement
and the Stockholder's and Company's performance and compliance with all
agreements and conditions contained herein.
14.13 THIRD PARTY BENEFICIARIES. Except for (i) the Administrative Agent,
and (ii) any entity providing financing to the Purchaser for the transactions
contemplated by this Agreement (or any refinancing of such financing) and to
which the Purchaser, as security for such financing, has assigned all of the
interest, rights and remedies of Purchaser or Purchaser's affiliate, as the case
may be, in and to this Agreement, no
other individual or entity shall be a third-party beneficiary of the
representations, warranties, covenants, and agreements made by any party hereto.
14.14 DEFINITIONS. As used in this Agreement, the following terms shall
have the meanings specified or referred to in this Sections 14.14.
"Adjusted Current Assets" means the total current accounts receivable,
inventory and prepaid expenses of the Company, as of the date of
determination, and specifically includes any positive cash balances;
provided, however, that (i) any asset which is an Excluded Asset shall be
eliminated from the calculation of Adjusted Current Assets, and (ii) any
prepaid expense shall be eliminated from the calculation of Adjusted
Current Assets to the extent that the rights of the Company under the
contract to which the prepaid expense relates have not been assigned to the
Purchaser.
"Administrative Agent" means Fleet National Bank, in its capacity as
Administrative Agent pursuant to the terms of the Credit Agreement.
"Adjusted Current Liabilities" means the total current accounts
payable, accruals and deferred taxes of the Company as of the date of
determination, and specifically includes any negative cash balances due to
overdrafts (which shall be reclassified as a current liability for purposes
of this definition); provided, however, that any liability which is not
assumed by the Purchaser pursuant to the provisions of this Agreement shall
be excluded from the calculation of Adjusted Current Liabilities.
"Affiliate" means any Person controlling or controlled by the Person
in question. The term "control" (as used in the terms "controlling" and
"controlled by" means: (a) holding fifty percent (50%) or more of the
outstanding equity securities of an issuer, and (b) either: (i) holding
fifty percent (50%) or more of the outstanding voting securities of an
issuer, or (ii) holding the power to direct or cause the direction of the
management and policies of an entity, whether by contract, or otherwise;
provided, however, no financial institution shall be included within this
definition of "Affiliate."
"Business Day" means any day other than a Saturday, a Sunday, or
another day on which banks in the State of Maryland, the State of Delaware
or the State of New York are authorized or required not to be open for
conduct of their normal banking operations.
"Company's Accountants" means Deloitte and Touche.
"Company Ancillary Document" means any agreement or instrument
contemplated hereby to be executed and delivered by the Company.
"Credit Agreement" means that certain Credit Agreement, dated as of
September 21, 1999, by and among the Stockholder, the Administrative Agent
and the Lenders, as amended and in effect from time to time.
"Encumbrance" means any lien, claim, charge, security interest,
mortgage,
pledge, easement, right of use, encroachment, boundary disputes,
conditional sale or other title retention agreement, proxy, voting
agreement or trust, lease, tenancy, right of occupancy or license or use by
another person, defect in title, covenant or other restriction or
limitation of any kind.
"Governmental Body" means any court, government (federal, state, local
or foreign), department, commission, board, agency, bureau, official or
other regulatory, administrative or governmental authority.
"Guaranty" means that certain Guarantee and Collateral Agreement,
dated September 21, 1999, entered into by the Company, among others,
pursuant to which the Company unconditionally guaranteed the obligations of
the Stockholder under the Credit Agreement.
"Legal Requirement" means any law, statute, rule, regulation,
franchise, governmental permits, judgment, decree, Order, ordinance,
variance, directive, code or requirement of any Governmental Body.
"Lenders" means those lenders party to the Credit Agreement from time
to time.
"Liability and Liabilities" means any direct or indirect indebtedness,
guaranty, endorsement, claim, loss, damage, deficiency, cost, expense,
obligation or responsibility of any nature whatsoever, whether known or
unknown, asserted or unasserted, matured or unmatured, liquidated or
unliquidated, absolute or contingent, secured or unsecured.
"Order" means any order, writ, injunction, ruling, judgment,
stipulation or decree by or with any Governmental Body.
"Person" means and includes an individual, a partnership, a
corporation, a trust, a joint venture, an unincorporated organization and
any Governmental Body or other agency or authority.
"Purchaser's Accountants" means PriceWaterhouseCoopers LLP.
"Purchaser Ancillary Documents" means any agreement or instrument
contemplated hereby to be executed and delivered by the Purchaser.
"Stockholder Ancillary Documents" means any agreement or instrument
contemplated hereby to be executed and delivered by the Stockholder.
[signatures on following page]
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
IST Corp.
By:__/s/ Bruce Prashker_____________
Name: Bruce Prashker
Title: Vice President and
Assistant Secretary
Color Prelude, Inc.
By:__/s/ Peter J. Olaynack__________
Name: Peter J. Olaynack
Title: Vice President and
Secretary
Heritage Marketing Corporation
By:__/s/ Peter J. Olaynack__________
Name: Peter J. Olaynack
Title: Executive Vice President
And Chief Financial
Officer
Index of Exhibits
- -----------------
Exhibit 1.3 Allocation of Purchase Price
Exhibit 1.5-A Indemnity Escrow Agreement
Exhibit 1.5-B Purchase Price Escrow Agreement
Exhibit 3.3 Commitment Letter
Exhibit 6.6-A Company Secretary Certificate
Exhibit 6.6-B Stockholder Secretary Certificate
Exhibit 6.8 Opinion of Hallett & Perrin, P.C., Counsel to Company
and Stockholder
Exhibit 6.11 Remaining Due Diligence
Exhibit 7.4 Purchaser Secretary Certificate
Exhibit 8.1 Form of Non-Competition Agreement