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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
APRIL 24, 1997
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NATIONAL FIBERSTOK CORPORATION
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DELAWARE 333-08925 23-2574778
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(State or other (Commission File (IRS Employer
jurisdiction of Number) Identification No.)
incorporation)
5775 PEACHTREE DUNWOODY RD.
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SUITE C-150
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ATLANTA, GEORGIA
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(404) 256-1123
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Item 2. ACQUISITION OR DISPOSITION OF ASSETS
On April 24, 1997, National Fiberstok Corporation ("NFC") purchased all of
the outstanding capital stock of AmeriComm Direct Marketing, Inc. ("AmeriComm")
pursuant to the terms of a Stock Purchase Agreement, dated as of February 20,
1997, among NFC, AmeriComm and the former stockholders of AmeriComm, as amended
(the "Stock Purchase Agreement"). The aggregate purchase price was
approximately $23.6 million plus transaction costs. Pursuant to the Stock
Purchase Agreement, the purchase price was determined by reducing $24.0 million
by the sum of outstanding indebtedness of AmeriComm at the closing and certain
pre-closing distributions to AmeriComm's former principal stockholder. At the
closing of the acquisition, $1.0 million of the aggregate purchase price was
deposited into an escrow account to cover potential indemnification claims of
NFC against the former stockholders of AmeriComm. Additional consideration of
$1.0 million was paid to the former principal stockholder of AmeriComm for his
agreement not-to-compete with NFC. AmeriComm's former principal stockholder is
a member of the board of directors of NFC and DEC International, Inc. ("DEC"),
which owns all of the issued and outstanding capital stock of NFC.
AmeriComm operates facilities in four locations through which it provides
direct mail products and services, including direct mail distribution and
database management. NFC currently intends that the assets of AmeriComm will be
used by NFC in a manner generally consistent with the use of such assets by
AmeriComm immediately prior to the consummation of the acquisition.
To fund the acquisition of AmeriComm, DEC issued $25 million aggregate
principal amount of 12 1/2% notes, a portion of the proceeds of which was
contributed by DEC to NFC. Interest on the DEC notes is due quarterly commencing
June 30, 1997, and, under limited circumstances, may be paid for up to six
interest payment periods during the first two years in additional DEC notes. As
part of the financing, former holders of DEC's cumulative redeemable preferred
stock with a $10 million liquidation preference exchanged such shares of
preferred stock for a like amount of the newly issued DEC notes.
Item 5. OTHER EVENTS
First quarter report, dated May 6, 1997, relating to first quarter
1997 financial results, filed as Exibit 2.2 to this Report on Form 8-K, is
incorporated by reference herein.
Item 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial statements of business as acquired.
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1. To be filed by amendment as soon as is practicable, but no later
than 60 days after this report on Form 8-K must be filed.
(b) Pro forma financial information.
1. To be filed by amendment as soon as is practicable, but no later
than 60 days after this report on Form 8-K must be filed.
(c) Exhibits.
2.1 Stock Purchase Agreement, dated as of February 20, 1997, among
NFC, AmeriComm and the former stockholders of AmeriComm, as
amended.
2.2 First quarter report, dated May 6, 1997.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
NATIONAL FIBERSTOK CORPORATION
Date By:
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Name: Robert B. Webster
Title: Executive Vice
President and Chief
Financial Officer
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________________________________________________________________
________________________________________________________________
STOCK PURCHASE AGREEMENT
Dated as of February 20, 1997
By and Among
NATIONAL FIBERSTOK CORPORATION,
AMERICOMM DIRECT MARKETING, INC.
and
THE STOCKHOLDERS OF
AMERICOMM DIRECT MARKETING, INC.
________________________________________________________________
________________________________________________________________
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TABLE OF CONTENTS
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Page
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ARTICLE I
DEFINITIONS.................................................................. 2
ARTICLE II
PURCHASE OF STOCK............................................................ 10
Section 2.1 Purchase of Stock........................................... 10
Section 2.2 Price....................................................... 11
Section 2.3 Payment of Indebtedness..................................... 12
Section 2.4 Closing..................................................... 12
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY................................ 13
Section 3. Representations and Warranties of the Company............... 13
Section 3.1 Existence and Good Standing................................. 13
Section 3.2 Capital Stock............................................... 13
Section 3.3 Authorization and Validity of this Agreement................ 14
Section 3.4 Subsidiaries and Investments................................ 15
Section 3.5 Financial Statements; No Material Changes................... 15
Section 3.6 Books and Records........................................... 17
Section 3.7 Title to Properties; Encumbrances........................... 17
Section 3.8 Real Property............................................... 18
Section 3.9 Intellectual Property....................................... 18
Section 3.10 Leases..................................................... 19
Section 3.11 Material Contracts......................................... 19
Section 3.12 Consents and Approvals; No Violations...................... 21
Section 3.13 Litigation................................................. 22
Section 3.14 Taxes...................................................... 23
Section 3.15 Liabilities................................................ 27
Section 3.16 Insurance.................................................. 27
Section 3.17 Compliance with Laws....................................... 27
Section 3.18 Employment Relations....................................... 28
Section 3.19 Employee Benefit Plans..................................... 28
Section 3.20 Interests in Customers, Suppliers, etc..................... 36
Section 3.21 Environmental Laws and Regulations......................... 37
Section 3.22 Bank Accounts, Powers of Attorney.......................... 40
Section 3.23 Compensation of Employees.................................. 41
Section 3.24 Conduct of Business........................................ 41
Section 3.25 Customer Relations......................................... 41
(i)
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Section 3.26 Condition of Assets........................................ 41
Section 3.27 Broker's or Finder's Fees.................................. 42
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE SELLERS................................ 42
Section 4. Representations and Warranties of the Sellers............... 42
Section 4.1 Ownership of Stock.......................................... 42
Section 4.2 Authorization and Validity of Agreement..................... 43
Section 4.3 Restrictive Documents....................................... 43
Section 4.4 Broker's or Finder's Fees................................... 44
Section 4.5 Interests in Customers, Suppliers, etc...................... 44
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER.............................. 44
Section 5. Representations and Warranties of the Purchaser............. 44
Section 5.1 Existence and Good Standing; Power and Authority............ 45
Section 5.2 Restrictive Documents....................................... 45
Section 5.3 Purchase for Investment..................................... 45
Section 5.4 Broker's or Finder's Fees................................... 46
ARTICLE VI
TRANSACTIONS PRIOR TO THE CLOSING DATE....................................... 46
Section 6.1 Conduct of Business of the Company.......................... 46
Section 6.2 Exclusive Dealing........................................... 49
Section 6.3 Review of the Company....................................... 49
Section 6.4 Reasonable Efforts.......................................... 51
Section 6.5 Additional Consents......................................... 52
Section 6.6 Material Transactions....................................... 52
Section 6.7 Release of Guarantees....................................... 52
Section 6.8 Supplements to Schedules.................................... 53
Section 6.9 Satisfaction and Termination of Equity Arrangements......... 53
ARTICLE VII
CONDITIONS TO THE PURCHASER'S OBLIGATIONS.................................... 53
Section 7. Conditions to the Purchaser's Obligations................... 53
Section 7.1 Opinions of Counsel......................................... 54
Section 7.2 Good Standing and Other Certificates........................ 54
Section 7.3 No Material Adverse Change.................................. 55
(ii)
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Section 7.4 Truth of Representations and Warranties..................... 55
Section 7.5 Performance of Agreements................................... 55
Section 7.6 No Litigation Threatened.................................... 55
Section 7.7 Third Party Consents; Governmental Approvals................ 56
Section 7.8 Termination of Security Interests........................... 56
Section 7.9 Resignations................................................ 56
Section 7.10 Financing.................................................. 56
Section 7.11 FIRPTA..................................................... 57
Section 7.12 HSR Act.................................................... 57
Section 7.13 Escrow Agreement........................................... 57
Section 7.14 Non-Competition Agreement.................................. 57
ARTICLE VIII
CONDITIONS TO THE COMPANY'S
AND THE SELLERS' OBLIGATIONS................................................. 57
Section 8. Conditions to the Company's and the Sellers' Obligations.... 57
Section 8.1 Opinions of Counsel......................................... 58
Section 8.2 Truth of Representations and Warranties..................... 58
Section 8.3 Third Party Consents; Governmental Approvals................ 58
Section 8.4 Performance of Agreements................................... 58
Section 8.5 No Litigation Threatened.................................... 59
Section 8.6 HSR Act..................................................... 59
ARTICLE IX
TAX MATTERS.................................................................. 59
Section 9.1 Tax Returns................................................. 59
Section 9.2 Apportionment of Taxes...................................... 61
Section 9.3 Cooperation; Audits......................................... 62
Section 9.4 Controversies............................................... 63
Section 9.5 Amended Returns............................................. 64
Section 9.6 Non-foreign Person Affidavit................................ 65
Section 9.7 Indemnification............................................. 65
Section 9.8 Transfer Taxes.............................................. 67
ARTICLE X
SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION................................. 68
Section 10.1 Survival of Representations................................ 68
Section 10.2 Indemnification............................................ 68
Section 10.3 Indemnification Procedure.................................. 70
(iii)
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ARTICLE XI
TERMINATION.................................................................. 73
Section 11.1 Termination................................................ 73
Section 11.2 Effect of Termination...................................... 74
ARTICLE XII
MISCELLANEOUS................................................................ 75
Section 12.1 Best Knowledge of the Company.............................. 75
Section 12.2 Expenses................................................... 75
Section 12.3 Governing Law.............................................. 75
Section 12.4 Captions................................................... 76
Section 12.5 Publicity.................................................. 76
Section 12.6 Notices.................................................... 76
Section 12.7 Parties in Interest........................................ 77
Section 12.8 Counterparts............................................... 77
Section 12.9 Entire Agreement........................................... 77
Section 12.10 Amendments................................................ 78
Section 12.11 Severability.............................................. 78
Section 12.12 Third Party Beneficiaries................................. 78
Section 12.13 Jurisdiction.............................................. 78
EXHIBITS
Exhibit A - Form of Opinion of Counsel to the Company
Exhibit B - Form of Escrow Agreement
Exhibit C - Form of Non-Competition Agreement
Exhibit D - Form of Opinion of Counsel to Purchaser
ANNEXES
Annex I - Stockholders; Stock
Annex II - Phantom Stock and Non-Accrued Bonus Obligations
Annex III - 205 Eiler Street Purchase and Sale Agreement
Annex IV - Aggregate Closing Payment; Escrow Account
SCHEDULES
Schedule 1.1(a) Capital Lease and Equipment Loan Obligations
Schedule 1.1(d) Gibraltar Bank Investment
Schedule 3.2(a) Capital Stock
(iv)
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Schedule 3.4(a) Subsidiaries and Investments
Schedule 3.7 Title to Properties; Encumbrances
Schedule 3.8 Real Property
Schedule 3.9 Intellectual Property
Schedule 3.10 Leases
Schedule 3.11 Material Contacts
Schedule 3.12 Consents and Approvals
Schedule 3.13 Litigation
Schedule 3.14 Tax Matters
Schedule 3.16 Insurance
Schedule 3.18 Employment Relations
Schedule 3.19 Employment Benefit Plans
Schedule 3.20 Interests in Customers; Suppliers
Schedule 3.21 Environmental Laws and Regulations
Schedule 3.22 Bank Accounts; Powers of Attorney
Schedule 3.24 Conduct of Business
Schedule 6.7 Release of Guarantees
(v)
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STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT (this "AGREEMENT"), dated as of February 20, 1997,
by and among NATIONAL FIBERSTOK CORPORATION, a Delaware corporation (the
"PURCHASER"), AMERICOMM DIRECT MARKETING, INC. a Delaware corporation (the
"COMPANY") and the stockholders of the Company listed on ANNEX I attached hereto
(the "STOCKHOLDERS"). The Stockholders shall be referred to herein individually
as a "SELLER" and collectively as the "SELLERS."
W I T N E S S E T H :
WHEREAS, each of the Sellers is the holder of the number of common shares
of stock, no par value, of the Company (collectively, the "STOCK") set forth
opposite such Seller's name in ANNEX I hereto, which shares of the Seller
constitute all of the issued outstanding shares of the capital stock of the
Company;
WHEREAS, prior to the Closing (as hereafter defined) the Company intends to
issue .622318 shares of its Common Stock (as hereafter defined) to Ann Ingram
and 6.373391 shares of its Common Stock to each of Marc Ingram, Michael Ingram
and Nancy Ingram Blum, and such individuals shall, upon the issuance of such
shares of Common Stock, become Sellers under
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this Agreement and their names shall be listed in ANNEX I attached hereto (such
individuals being hereafter referred to as the "PROSPECTIVE STOCKHOLDERS");
WHEREAS, the Sellers desire to sell, and the Purchaser desires to purchase,
the Stock pursuant to this Agreement; and
WHEREAS, it is the intention of the parties hereto that, upon consummation
of the purchase and sale of the Stock pursuant to this Agreement, the Purchaser
shall own all of the outstanding shares of capital stock of the Company.
NOW, THEREFORE, IT IS AGREED:
ARTICLE I
DEFINITIONS
Section 1.1 DEFINITIONS. In addition to the terms defined elsewhere in
this Agreement, the following terms shall have the respective meanings specified
therefor below (such meanings to be equally applicable to both the singular and
plural forms of the terms defined).
"AGGREGATE CLOSING PAYMENT" shall have the meaning specified in Section
2.2.
"AGREEMENT" shall mean this Agreement (including the Exhibits, Annexes and
Schedules attached hereto), as amended, modified or supplemented from time to
time.
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"AUDITED STATEMENTS" shall have the meaning specified in Section 3.5(a).
"BALANCE SHEET" shall have the meaning specified in Section 3.5(b).
"BALANCE SHEET DATE" shall have the meaning specified in Section 3.5(b).
"BUSINESS DAY" shall mean any day other than a Saturday, a Sunday or a day
on which banks located in New York, New York shall be authorized or required by
law to close.
"CAPITAL LEASE GUARANTEES" shall have the meaning set forth in Section 6.7.
"CLAIM" shall have the meaning specified in Section 10.3(a).
"CLOSING" shall have the meaning specified in Section 2.4.
"CLOSING DATE" shall have the meaning specified in Section 2.4.
"CODE" shall have the meaning specified in Section 3.14(c)(iv).
"COMMON STOCK" shall have the meaning specified in Section 3.2.
"COMPANY" shall have the meaning described in the preamble to this
Agreement.
"COMPANY PROPERTY" shall have the meaning specified in Section 3.21.
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"DAMAGES" shall have the meaning specified in Section 10.2(a).
"DMS TRANSACTION" shall have the meaning specified in Section 6.6.
"DRMO TRANSACTION" shall have the meaning specified in Section 6.6.
"EMPLOYEE BENEFIT PLANS" shall have the meaning specified in Section
3.19(a).
"ENCUMBRANCES" shall have the meaning specified in Section 3.7.
"ENVIRONMENTAL CLAIMS" shall have the meaning specified in Section 3.21.
"ENVIRONMENTAL LAW" shall have the meaning specified in Section 3.21.
"ERISA" shall have the meaning specified in Section 3.19(a)(i).
"ESCROW ACCOUNT" shall have the meaning specified in Section 2.2(a).
"ESCROW AGENT" shall have the meaning specified in Section 2.2(a).
"ESCROW AGREEMENT" shall have the meaning specified in Section 7.13.
"GAAP" shall have the meaning specified in Section 3.5(a).
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"HAZARDOUS MATERIALS" shall have the meaning specified in Section 3.21.
"HSR ACT" shall have the meaning specified in Section 6.4.
"INDEMNIFIED PARTY" shall have the meaning specified in Section 10.3(a).
"INDEMNIFYING PARTY" shall have the meaning specified in Section 10.3(a).
"INTELLECTUAL PROPERTY" shall have the meaning specified in Section 3.9.
"MATERIAL ADVERSE EFFECT" shall have the meaning specified in Section 3.1.
"OVERLAP PERIOD" shall have the meaning specified in Section 9.4.
"PERMITTED PAYMENTS OR ASSIGNMENTS" means:
(a) payment of (i) indebtedness of the Company to Mr. Calvin Ingram and
Mr. Michael Ingram in the aggregate amount of $175,000 which amount was paid in
December 1996 and (ii) regular monthly amounts as provided under the capital
lease and equipment loan obligations of the Company described in SCHEDULE
1.1(a);
(b) payment of cash dividends and other cash distributions to the Sellers
in an amount equal to the sum of (i)(x) $2,900,938 less (y) the phantom stock
and non-accrued bonus obligations of the Company described on ANNEX II hereto
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plus (ii) an amount equal to 43.83% of the consolidated taxable income (but not
the loss) of the Company (which taxable income shall reflect the write off of
the $50,000 "other asset" relating to the property located at 205 Eiler Street,
Louisville, Kentucky) for the period from December 1, 1996 to the Closing Date
determined on a basis consistent with the preparation of the Company's prior tax
returns and shall be subject to the last paragraph of this definition;
(c) assignment or distribution immediately prior to the Closing to the
Sellers of the Company's investment(s) in McCown De Leeuw & Co. III, L.P.;
(d) assignment or distribution immediately prior to the Closing to the
Sellers of the Company's investment in Gibraltar Bank as described in SCHEDULE
1.1(a);
(e) assignment or distribution immediately prior to the Closing to the
Sellers of the Company's right to receive the deferred purchase price (but not
interim rent payments) due on April 30, 1998 in respect of the property located
at 205 Eiler Street, Louisville, Kentucky, pursuant to the purchase and sale
agreement, a copy of which is attached hereto as ANNEX III;
(f) assignment or distribution immediately prior to the Closing to the
Sellers of the account receivable from Mr. John Hanson in the amount of $16,456;
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(g) assignment or distribution immediately prior to the Closing to the
Sellers of the account receivable from Basil Trucking in the amount of $72,000;
and
(h) assignment immediately prior to the Closing to the Sellers of the
Company's right to receive Kentucky state income tax refunds for the tax years
1992 through 1994.
The parties acknowledge that the Company will pay its phantom stock and
non-accrued bonus obligations described on ANNEX II hereto immediately prior to
the Closing out of the available cash referred to in clause (b)(i)(x) of the
preceding sentence. The Company and Sellers reserve the right to adjust the
phantom stock and non-accrued bonus obligations described on Annex II up to and
including two (2) days before the Closing Date, with the understanding that any
additional sums will come out of the available cash referred to in clause
(b)(i)(x) above, namely the $2,900,938, less adjustments.
The Sellers, the Purchaser and the Company agree that, as of the Closing
Date, they shall estimate an amount equal to 43.83% of the taxable income (but
not the loss) of the Company for the period from December 1, 1996 to the Closing
Date, determined on the basis consistent with the preparation of the Company's
prior tax returns. This amount shall be distributed to the Sellers by the
Company immediately prior
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to the Closing. The Sellers, the Purchaser and the Company shall, upon the
filing of the final tax return for the period or periods beginning December 1,
1996 and ending on the Closing Date, mutually agree on the amount of taxable
income to be attributed to Sellers, and the Company shall distribute to the
Sellers a sum equal to 43.83% of such agreed upon taxable income attributed to
the Sellers, minus the amount, if any, that was distributed pursuant to this
paragraph to the Sellers immediately prior to the Closing. Said net amount
shall be distributed within ten (10) days after the filing of the applicable tax
return. If the amount distributed to the Sellers immediately prior to the
Closing pursuant to this paragraph exceeds 43.83% of the agreed amount of
taxable income to be attributed to the Sellers, the excess shall be refunded by
Calvin Ingram to the Company within ten (10) days after the filing of the
applicable return.
"PERSON" shall have the meaning specified in Section 3.11.
"POST-CLOSING PERIOD" shall have the meaning specified in Section 9.2.
"PRE-CLOSING PERIOD" shall have the meaning specified in Section 3.14(b).
"PROSPECTIVE STOCKHOLDERS" shall have the meaning specified in the preamble
to this Agreement.
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"PURCHASER" shall have the meaning specified in the preamble to this
Agreement.
"REAL PROPERTY" shall have the meaning set forth in Section 3.8.
"RETURNS" shall have the meaning specified in Section 3.14(a).
"SELLER" and "SELLERS" shall have the meanings specified in the preamble to
this Agreement; provided that the term, "SELLER" and "SELLERS" shall include,
individually or collectively, as applicable, Ann Ingram, Marc Ingram, Michael
Ingram and Nancy Ingram upon the issuance by the Company of the shares of Common
Stock to such individuals as contemplated in Section 6.1.
"STOCK" shall have the meaning specified in the preamble to this Agreement.
"STOCKHOLDER" shall have the meaning specified in the preamble to this
Agreement.
"SUBSIDIARIES" means, with respect to any entity, a corporation or other
entity of which a majority of the outstanding shares of voting stock or other
voting equity interests are owned by such entity, either directly or indirectly
through one or more intermediaries.
"TAXES" means all taxes, assessments, charges, duties, fees, levies or
other governmental charges, including, without limitation, all Federal, state,
local, foreign and
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other income, franchise, profits, capital gains, capital stock, transfer, sales,
use, occupation, property, excise, severance, windfall profits, stamp, license,
payroll, withholding and other taxes, assessments, charges, duties, fees, levies
or other governmental charges of any kind whatsoever (whether payable directly
or by withholding and whether or not requiring the filing of a Return), all
estimated taxes, deficiency assessments, additions to tax, penalties and
interest and shall include any liability for such amounts as a result either of
being a member of a combined, consolidated, unitary or affiliated group or of a
contractual obligation to indemnify any person or other entity.
"TAX MATTER" shall have the meaning specified in Section 9.4.
"UNAUDITED STATEMENTS" shall have the meaning specified in Section 3.5(b).
ARTICLE II
PURCHASE OF STOCK
Section 2.1 PURCHASE OF STOCK. Subject to the terms and conditions set
forth in this Agreement, the Purchaser agrees to purchase from each of the
Sellers on the Closing Date and each of the Sellers agree to sell, assign,
transfer and deliver to the Purchaser on the Closing Date, the shares of Stock
so owned by such Seller. The certificates representing
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the Stock shall be duly endorsed in blank, or accompanied by stock powers duly
executed in blank, by the Sellers transferring the same to the Purchaser with
all necessary transfer tax and other revenue stamps, acquired at the Purchaser's
expense, affixed and cancelled. The Sellers agree to cure any deficiencies with
respect to the endorsement of the certificates representing the Stock owned by
the Sellers or with respect to the stock power accompanying any such
certificates.
Section 2.2 PRICE. In full consideration for the sale by the Sellers of
the Stock to the Purchaser, the Purchaser shall deliver at the Closing to the
Sellers an amount equal to $24,000,000 less the amounts to be repaid in
accordance with Section 2.3 (such net amount, the "AGGREGATE CLOSING PAYMENT")
by wire transfer in immediately available funds as follows:
(a) to the escrow agent (the "ESCROW AGENT") to be held in an escrow
account (the "ESCROW ACCOUNT") pursuant to the provisions of the Escrow
Agreement as contemplated by Section 10.2(e) hereof, an amount equal to
$1,000,000, representing the sum of that portion of the Aggregate Closing
Payment to be held in the Escrow Account as set forth in ANNEX IV hereto;
and
(b) to Ann Ingram, the sum of Two Hundred Fifty Thousand
($250,000.00); to Marc Ingram the sum of One
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Hundred Fifty Thousand Dollars ($150,000.00); to Michael Ingram the sum of
One Hundred Fifty Thousand Dollars ($150,000.00); to Nancy Ingram Blum the
sum of One Hundred Fifty Thousand Dollars ($150,000.00); and to Calvin
Ingram the balance of the Aggregate Closing Payment, in each case as set
forth opposite such Seller's name in ANNEX IV hereto, said sums to be wire
transferred to the accounts specified by each of the Sellers to the
Purchaser at least two (2) Business Days prior to Closing.
Section 2.3 PAYMENT OF INDEBTEDNESS. In addition to the payment of the
Aggregate Closing Payment pursuant to Article II hereof, at the Closing,
Purchaser shall, by wire transfer, pay or cause the Company to repay the
outstanding balance of all indebtedness of the Company (other than $34,000 of
capitalized lease obligations of the Company), in each case as of the opening of
business on the Closing Date.
Section 2.4 CLOSING. The purchase and sale referred to in Section 2.1
(the "CLOSING") shall take place at 10:00 A.M. at the offices of White & Case,
New York, New York on April 15, 1997, or at such other time and date (not later
than April 15, 1997) as the parties hereto shall designate in writing. Such
date is herein referred to as the "CLOSING DATE".
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Section 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to the Purchaser as follows:
Section 3.1 EXISTENCE AND GOOD STANDING. The Company is a corporation
duly organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation. The Company has the requisite corporate power
and authority to own, lease and operate its properties and to carry on its
business as now being conducted. The Company is duly qualified or licensed to
do business and is in good standing in each jurisdiction in which the character
or location of the properties owned, leased or operated by the Company or the
nature of the business conducted by the Company makes such qualification or
license necessary, except where the failure to be so duly qualified or licensed
would not have a material adverse effect on the business, operations, financial
condition or results of operations of the Company (a "MATERIAL ADVERSE EFFECT").
Section 3.2 CAPITAL STOCK. The Company has an authorized capitalization
consisting of 3,000 shares of common stock, no par value (the "COMMON STOCK"),
of which 1,000 shares are issued and outstanding. It is understood and agreed
between the parties that prior to Closing, an additional 19.742491
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shares of Common Stock will be issued and outstanding. Such shares of Common
Stock will be issued in the amounts specified in the preamble to this Agreement,
and all said shares of Common Stock shall be transferred at Closing to the
Purchaser pursuant to this Agreement. All outstanding shares of capital stock
of the Company have been duly authorized and validly issued and are fully paid
and nonassessable. Except as set forth on SCHEDULE 3.2(a) there are no
outstanding subscriptions, options, warrants, rights, calls, commitments,
conversion rights, rights of exchange, plans or other agreements of any
character providing for the purchase, issuance or sale of any shares of the
capital stock of the Company.
Section 3.3 AUTHORIZATION AND VALIDITY OF THIS AGREEMENT. The Company has
the requisite corporate power and authority to execute and deliver this
Agreement and to perform its obligations hereunder. The execution, delivery and
performance of this Agreement by the Company and the performance of its
obligations hereunder have been duly authorized and approved by its Board of
Directors and by the holders of a requisite amount of the Stock and no other
corporate action on the part of the Company or action by the Sellers is
necessary to authorize the execution, delivery and performance of this Agreement
by the Company. This Agreement has been duly executed and delivered by the
Company and,
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assuming due execution of this Agreement by the Purchaser, is a valid and
binding obligation of the Company enforceable against the Company in accordance
with its terms, except to the extent that its enforceability may be subject to
applicable bankruptcy, insolvency, reorganization, moratorium and similar laws
affecting the enforcement of creditors' rights generally and by general
equitable principles.
Section 3.4 SUBSIDIARIES AND INVESTMENTS. Except as set forth on SCHEDULE
3.4(a), the Company does not own any capital stock or other equity or ownership
or proprietary interest in any corporation, partnership, association, trust,
joint venture or other entity.
Section 3.5 FINANCIAL STATEMENTS; NO MATERIAL CHANGES. (a) The Company
has heretofore furnished the Purchaser with audited balance sheets of the
Company and its previously owned subsidiaries for the years ended 1993, 1994 and
1995, together with related statements of income and retained earnings and cash
flows for the fiscal years then ended, together with the reports of Deloitte &
Touche LLP (collectively, the "AUDITED STATEMENTS"). The Audited Statements,
including the footnotes thereto, have been prepared in accordance with generally
accepted accounting principles consistently applied by the Company throughout
the periods indicated ("GAAP") and fairly present in all material respects the
financial position of the Company and its
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previously owned subsidiaries at the respective dates thereof, and the results
of the operations and cash flows of the Company for the respective periods
indicated.
(b) The Company has also heretofore furnished the Purchaser with
unaudited, balance sheets of the Company for the months ended September 30,
November 30, and December 31, 1996, together with related statements of income
and changes in financial position for the period then ended (collectively, the
"UNAUDITED STATEMENTS"). The Unaudited Statements have been prepared in
accordance with GAAP and fairly present in all material respects the financial
position of the Company at their respective dates thereof, and the results of
the operations and cash flows of the Company for the respective periods
indicated, in each case subject to normal year-end adjustments and except for
the absence of notes to such financial statements. The unaudited balance sheet
of the Company dated November 30, 1996, is hereinafter referred to as the
"BALANCE SHEET" and November 30, 1996, is hereinafter referred to as the
"BALANCE SHEET DATE."
(c) Since December 31, 1995, there has been no (i) material adverse change
in the business, operations, financial condition or results of operations of the
Company or (ii) material damage, destruction or loss to any asset or property,
tangible or intangible, of the Company which
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materially affects the ability of the Company to conduct its business.
Section 3.6 BOOKS AND RECORDS. The minute books of the Company and its
previously owned subsidiaries, as previously made available to the Purchaser and
its representatives, contain materially accurate records of all meetings of, and
corporate actions taken by (including action taken by written consent), the
respective shareholders and Board of Directors of the Company. At Closing all
of the books and records of the Company will be in the possession of the
Company.
Section 3.7 TITLE TO PROPERTIES; ENCUMBRANCES. Except as set forth on
SCHEDULE 3.7 attached hereto and except for such properties and assets which
have been sold or otherwise disposed of in the ordinary course of business since
the Balance Sheet Date, the Company has good title to its material properties
and assets (real and personal, tangible and intangible), including, without
limitation, the material properties and assets reflected in the Balance Sheet,
subject to no encumbrance, lien, charge or other restriction of any kind or
character ("ENCUMBRANCES"), except for (i) Encumbrances reflected in the Balance
Sheet, (ii) Encumbrances for current Taxes, assessments or governmental charges
or levies on property not yet due, (iii) Encumbrances arising by operation of
law, (iv) Encumbrances described on SCHEDULE 3.7 attached hereto and (v)
Encumbrances on leased
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equipment and leased property that arise out of any of the leases listed on
SCHEDULE 3.10.
Section 3.8 REAL PROPERTY. SCHEDULE 3.8 attached hereto contains an
accurate and complete list of all real property owned in whole or in part by the
Company (the "REAL PROPERTY") and identifies the nature of the activities
conducted on such property. With respect to all of the buildings, structures
and appurtenances situated on the Real Property, the Company has, in its
opinion, adequate rights of ingress and egress for operation of the business of
the Company in the ordinary course consistent with past practice. None of such
buildings, structures or appurtenances, nor the operation or maintenance
thereof, violates any restrictive covenant or encroaches, on any property owned
by others, except for such violations, encumbrances or encroachments which would
not have a Material Adverse Effect.
Section 3.9 INTELLECTUAL PROPERTY. The Company possesses all licenses,
patents, trade names, trademarks and service marks (collectively, the
"INTELLECTUAL PROPERTY") necessary for the ownership of its properties and the
conduct of its business as presently conducted. All Intellectual Property of
the Company is set forth on SCHEDULE 3.9 attached hereto. All such Intellectual
Property is in full force and effect and the Company has not received written
notice of any event,
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inquiry, investigation or proceeding threatening the validity of any such
Intellectual Property.
Section 3.10 LEASES. SCHEDULE 3.10 attached hereto contains a list of all
leases or sub-leases to which the Company is a party requiring an annual
aggregate payment of at least $25,000. Except as otherwise set forth in
SCHEDULE 3.10 attached hereto, each lease or sub-lease set forth in SCHEDULE
3.10 is in full force and effect, subject to applicable bankruptcy, insolvency,
reorganization, moratorium and similar laws effecting the enforcement of
creditors' rights generally and by general equitable principles; all rents and
additional rents due to date from the Company on each such lease or sub-lease
have been paid; the Company has not received any notice that it is in material
default under any such lease or sub-lease; and, to the best knowledge of the
Company, there exists no event, occurrence, condition or act (including the
consummation of the transactions contemplated by this Agreement) which, with the
giving of notice, the lapse of time or the happening of any further event or
condition, would become a material default under such lease or sub-lease.
Section 3.11 MATERIAL CONTRACTS. Except as set forth on SCHEDULE 3.10 and
SCHEDULE 3.11 attached hereto, the Company neither has nor is bound by (a) any
agreement, contract or commitment that involves the performance of services or
the
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delivery of goods and/or materials by the Company of an amount or value in
excess of $25,000, other than purchase orders entered into in the ordinary
course of business, (b) any agreement, contract or commitment not in the
ordinary course of business, (c) any agreement, indenture or other instrument
which contains restrictions with respect to payment of dividends or any other
distribution in respect of its capital stock, (d) any agreement, contract or
commitment relating to capital expenditures in excess of $25,000, (e) any
agreement, indenture or instrument relating to indebtedness, liability for
borrowed money or the deferred purchase price of property (excluding trade
payables in the ordinary course of business), (f) any loan or advance to, or
investment in, any individual, partnership, joint venture, corporation, trust,
unincorporated organization, government or other entity (each a "PERSON"), any
agreement, contract or commitment relating to the making of any such loan,
advance or investment or any agreement, contract or commitment involving a
sharing of profits, (g) any guarantee or other contingent liability in respect
of any indebtedness or obligation of any Person (other than in the ordinary
course of business), (h) any management service, consulting or any other similar
type of contract, (i) any agreement, contract or commitment limiting the ability
of the Company to engage in any line of business or to compete with any Person,
(j)
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any warranty, guaranty or other similar undertaking with respect to a
contractual performance extended by the Company other than in the ordinary
course of business, (k) any agreement, contract or commitment with any affiliate
of the Company, including any of the Sellers, or (l) any amendment, modification
or supplement in respect of any of the foregoing. Except as otherwise set forth
on SCHEDULE 3.11, each contract or agreement set forth on SCHEDULE 3.11 is in
full force and effect, subject to applicable bankruptcy, insolvency,
reorganization, moratorium and similar laws effecting the enforcement of
creditors' rights generally and by general equitable principles, and there
exists no material default or event of default or to the best knowledge of the
Company, event, occurrence, condition or act (including the consummation of the
transactions contemplated hereby) which, with the giving of notice, the lapse of
time or the happening of any other event or condition, would become a material
default or event of default thereunder.
Section 3.12 CONSENTS AND APPROVALS; NO VIOLATIONS. Except as set forth
in SCHEDULE 3.12 attached hereto, the execution and delivery of this Agreement
by the Company and the consummation of the transactions contemplated hereby (a)
will not violate or contravene any provision of the Certificate of Incorporation
or By-laws of the Company, (b) will not violate or contravene any statute, rule,
regulation, order or decree
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of any public body or authority by which the Company is bound or by which any of
its properties or assets are bound, (c) will not require any filing with, or
permit, consent or approval of, or the giving of any notice to, any governmental
or regulatory body, agency or authority, or any other Person and (d) will not
result in a violation or breach of, conflict with, constitute (with or without
due notice or lapse of time or both) a default (or give rise to any right of
termination, cancellation, payment or acceleration) under, or result in the
creation of any Encumbrance upon any of the properties or assets of the Company
under, any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, license, franchise, permit, agreement, lease, franchise agreement or
any other instrument or obligation to which the Company is a party, or by which
any of its properties or assets may be bound, except, in the case of clauses (c)
and (d), for such filings, permits, consents or approvals, the absence of which,
and violations, breaches, defaults, conflicts and encumbrances which, in the
aggregate, would not have a Material Adverse Effect.
Section 3.13 LITIGATION. Except as set forth on SCHEDULE 3.13 attached
hereto, there is no action, suit, proceeding at law or in equity, arbitration or
administrative or other proceeding by or before (or to the best knowledge of the
Company any investigation by) any governmental or other
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instrumentality or agency, pending, or, to the best knowledge of the Company,
threatened, against or affecting the Company or its properties or rights which
could materially and adversely affect the right or ability of the Company to
carry on its businesses as now conducted, or which could have a Material Adverse
Effect; and the Company knows of no valid basis for any such action, proceeding
or investigation. The Company is not subject to any judgment, order or decree
entered in any lawsuit or proceeding which could reasonably be likely to have a
Material Adverse Effect.
Section 3.14 TAXES. (a) TAX RETURNS. The Company has timely filed or
caused to be timely filed or will timely file or cause to be timely filed within
the time period permitted by law, including all available extensions, with the
appropriate taxing authorities all returns, statements, forms and reports for
Taxes ("RETURNS") that are required to be filed by, or with respect to, the
Company on or prior to the Closing Date. The Returns have accurately reflected
and will accurately reflect all liability for Taxes of the Company for the
periods covered thereby.
(b) PAYMENT OF TAXES. All Taxes and Tax liabilities of the Company for
all taxable years or periods that end on or before the Closing Date and, with
respect to any taxable year or period beginning before and ending after the
Closing Date, the portion of such taxable year or period ending on and
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including the Closing Date ("PRE-CLOSING PERIODS") have been timely paid or
accrued and adequately disclosed and fully provided for on the Balance Sheet or
otherwise on the books and records of the Company in accordance with GAAP.
(c) OTHER TAX MATTERS. (i) SCHEDULE 3.14 attached hereto sets forth (A)
each taxable year or other taxable period of the Company for which an audit or
other examination of Taxes by the appropriate tax authorities of any nation,
state or locality is currently in progress (or scheduled as of the Closing Date
to be conducted) together with the names of the respective tax authorities
conducting (or scheduled to conduct) such audits or examinations and a
description of the subject matter of such audits or examinations, (B) the most
recent taxable year or other taxable period for which an audit or other
examination relating to Federal income taxes of the Company has been finally
completed and the disposition of such audits or examinations, (C) the taxable
years or other taxable periods of the Company which will not be subject to the
normally applicable statute of limitations by reason of the existence of
circumstances that would cause any such statute of limitations for applicable
Taxes to be extended, except for extensions for the time for the filing of
Returns which extensions are permitted by law, (D) the amount of any proposed
adjustments (and the principal reason therefor) relating to any Returns for Tax
liability of the
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Company which have been proposed or assessed by any taxing authority and (E) a
list of all notices received by the Company from any taxing authority relating
to any issue which could affect the Tax liability of the Company, which issue
has not been finally determined and which, if determined adversely to the
Company, could result in a Tax liability.
(ii) Except as disclosed in SCHEDULE 3.14, the Company has not been
included in any "consolidated," "unitary" or "combined" Return provided for
under the law of the United States, any foreign jurisdiction or any state or
locality with respect to Taxes for any taxable period for which the statute of
limitations has not expired.
(iii) All Taxes which the Company is (or was) required by law to
withhold or collect have been duly withheld or collected, and have been timely
paid over to the proper authorities to the extent due and payable.
(iv) The Company is not a "United States real property holding
corporation" within the meaning of Section 897(c)(2) of the Internal Revenue
Code of 1986, as amended, and the rules and regulations promulgated thereunder
(the "CODE").
(v) There are no tax sharing, allocation, indemnification or similar
agreements or arrangements in effect as between the Company or any predecessor
or affiliate thereof and any other party (including the Seller and any
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predecessor or affiliate thereof) under which the Purchaser or the Company could
be liable for any Taxes or other claims of any party.
(vi) The Company has not applied for, been granted, or agreed to any
accounting method change for which it will be required to take into account any
adjustment under Section 481 of the Code or any similar provision of the Code or
the corresponding tax laws of any nation, state or locality.
(vii) No indebtedness of the Company consists of "corporate
acquisition indebtedness" within the meaning of Section 279 of the Code.
(viii) The Company is not a party to any agreement that would require
it to make any payment that would constitute an "excess parachute payment" for
purposes of Sections 280G and 4999 of the Code.
(d) The Company has made a valid S election under Section 1361 of the
Code. With respect to the Company, such election was made on March 15, 1996 and
was effective as of the year commencing January 1, 1996. The Company has also
made all such elections required under any analogous provisions of state or
local law. The Company will continue to be a valid S corporation through the
day immediately preceding the Closing Date.
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Section 3.15 LIABILITIES. The Company has no outstanding material claims,
liabilities or indebtedness, contingent or otherwise, except as set forth in the
Balance Sheet or referred to in the footnotes thereto, other than liabilities
incurred subsequent to the Balance Sheet Date in the ordinary course of
business.
Section 3.16 INSURANCE. SCHEDULE 3.16 lists all policies of property,
fire and casualty, product liability, workers compensation and other forms of
insurance owned or held by the Company. The Company has not received (i) any
notice of cancellation of any policy listed in such Schedule or refusal of
coverage thereunder, (ii) any notice that any issuer of such policy has filed
for protection under applicable bankruptcy laws or is otherwise in the process
of liquidating or has been liquidated, or (iii) any other indication that such
policies are no longer in full force or effect or that the issuer of any such
policy is no longer willing or able to perform its obligations thereunder.
Since the last renewal date of any insurance policy, there has not been any
material adverse change in the relationship of the Company with its insurers or
in the premiums payable pursuant to such policies.
Section 3.17 COMPLIANCE WITH LAWS. The Company is in compliance with all
applicable laws, regulations, orders,
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judgments and decrees, except where the failure to so comply would not have a
Material Adverse Effect.
Section 3.18 EMPLOYMENT RELATIONS. (a) The Company is in material
compliance with all Federal, state or other applicable laws, domestic or
foreign, respecting employment and employment practices, terms and conditions of
employment and wages and hours, and has not, and is not, engaged in any unfair
labor practice;
(b) no unfair labor practice complaint against the Company is pending
before the National Labor Relations Board;
(c) there is no labor strike, dispute, slowdown or stoppage actually
pending or threatened against or involving the Company;
(d) the Company is not a party to any collective bargaining agreement and
no collective bargaining agreement is currently being negotiated by the Company;
(e) to the best knowledge of the Company, no representation question
exists respecting employees of the Company; and
(f) except as provided on SCHEDULE 3.18, no claim in respect of the
employment of any employee has been asserted and is currently pending or, to the
best knowledge of the Company, threatened, against the Company.
Section 3.19 EMPLOYEE BENEFIT PLANS. EMPLOYEE BENEFIT PLANS. (a) LIST OF
PLANS. Set forth in SCHEDULE 3.19 attached
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hereto is an accurate and complete list of all domestic and foreign (i)
"employee benefit plans," within the meaning of Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended, and the rules and
regulations thereunder ("ERISA"); (ii) bonus, stock option, stock purchase,
restricted stock, incentive, profit-sharing, pension, retirement, deferred
compensation, medical, life, disability, accident, accrued leave, vacation, sick
pay, sick leave, supplemental retirement and unemployment benefit plans,
programs, arrangements, commitments and/or practices (whether or not insured);
and (iii) employment, consulting, termination, and severance contracts or
agreements; in each case for active, retired or former employees or directors,
whether or not any such plans, programs, arrangements, commitments, contracts,
agreements and/or practices (referred to in (i), (ii) or (iii)) are in writing
or are otherwise exempt from the provisions of ERISA; that have been
established, maintained or contributed to (or with respect to which an
obligation to contribute has been undertaken) or with respect to which any
potential liability is borne by the Company (including, for this purpose and for
the purpose of all of the representations in this Section 3.19, any predecessors
to the Company and all employers (whether or not incorporated) that are by
reason of common control treated together with the Company as a single employer
(i) within the meaning of
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Section 414 of the Code or (ii) as a result of the Company being or having been
a general partner of any such employer), since September 2, 1974 ("EMPLOYEE
BENEFIT PLANS").
(b) STATUS OF PLANS. Each Employee Benefit Plan complies in form
with the requirements of all applicable laws, including without limitation ERISA
and the Code, and has at all times been maintained and operated in substantial
compliance with its terms and the requirements of all applicable laws,
including, without limitation, ERISA and the Code. No complete or partial
termination of any Employee Benefit Plan has occurred or is expected to occur.
The Company has no commitment, present intention or current understanding to
create, modify or terminate any Employee Benefit Plan. Except as required to
maintain the tax-qualified status of any Employee Benefit Plan under Section
401(a) of the Code, no condition or circumstance exists that would prevent the
amendment or termination of any Employee Benefit Plan. Except with regard to
any increase in the expense of providing current benefits, including but not
limited to, current medical benefits under existing Employee Benefit Plans which
are due solely to increases in the cost of such benefits imposed by a third
party, insurer or carrier, no event has occurred and no condition or
circumstance has existed that could result in a material increase in the
benefits under or the expense of maintaining
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any Employee Benefit Plan from the level of benefits or expense incurred for the
most recent fiscal year ended thereof.
(c) NO SINGLE-EMPLOYER / MULTIEMPLOYER PENSION PLANS. No Employee
Benefit Plan is an "employee pension benefit plan" (within the meaning of
Section 3(2) of ERISA) subject to Section 412 of the Code or Section 302 or
Title IV of ERISA. The Company has never maintained or contributed to or had
any obligation to contribute to (or borne any liability with respect to) any
"multiple employer plan" within the meaning of the Code or ERISA or
"multiemployer plan" (as defined in Section 4001(a)(3) of ERISA).
(d) LIABILITIES. The Company does not maintain any Employee Benefit
Plan which is a "group health plan" (as such term is defined in Section 607(1)
of ERISA or Section 5000(b)(1) of the Code) that has not been administered and
operated in all respects in compliance with the applicable requirements of
Section 601 of ERISA and Section 4980B(f) of the Code and the Company is not
subject to any liability, including, without limitation, additional
contributions, fines, taxes, penalties or loss of tax deduction as a result of
such administration and operation. Except as disclosed in SCHEDULE 3.19, the
Company does not maintain any Employee Benefit Plan (whether qualified or
nonqualified within the meaning of Section 401(a) of the Code) providing for
post-
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employment and/or health, life insurance or other welfare benefits and having
unfunded liabilities, and, except as disclosed in SCHEDULE 3.19, the Company
does not have any obligation to provide any such benefits to any retired or
former employees or active employees following any such employee's retirement or
termination of service. The Company does not maintain any Employee Benefit Plan
which is an "employee welfare benefit plan" (as such term is defined in Section
3(1) of ERISA) that has provided any "disqualified benefit" (as such term is
defined in Section 4976(b) of the Code) with respect to which an excise tax
could be imposed.
The Company has no unfunded liabilities pursuant to any Employee
Benefit Plan that is not intended to be qualified under Section 401(a) of the
Code.
The Company has not incurred any liability for any tax or excise tax
arising under Section 4977, 4978, 4978B, 4979 or 4980B of the Code, and no event
has occurred and no condition or circumstance has existed that could give rise
to any such liability.
There are no actions, suits or claims pending, or, to the best
knowledge of the Company, threatened, anticipated or expected to be asserted
against any Employee Benefit Plan or the assets of any such plan (other than
routine claims for benefits and appeals of denied routine claims). No civil or
criminal action brought pursuant to the provisions of Title
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I, Subtitle B, Part 5 of ERISA is pending, threatened, anticipated, or expected
to be asserted against the Company or any fiduciary of any Employee Benefit
Plan, in any case with respect to any Employee Benefit Plan. No Employee
Benefit Plan or any fiduciary thereof has been the direct or indirect subject of
an audit, investigation or examination by any governmental or quasi-governmental
agency in regard to such Employee Benefit Plan.
(e) CONTRIBUTIONS. Full payment has been made of all amounts which
the Company is required, under applicable law or under any Employee Benefit Plan
or any agreement relating to any Employee Benefit Plan to which the Company is a
party, to have paid as contributions thereto as of the last day of the most
recent fiscal year of such Employee Benefit Plan ended prior to the date hereof.
All such contributions have been fully deducted for income tax purposes and no
such deduction has been challenged or disallowed by any governmental entity, and
to the best knowledge of the Company no event has occurred and no condition or
circumstance has existed that could give rise to any such challenge or
disallowance. The Company has made proper accruals on the Company's books and
records as of the last day of the most recent fiscal year to meet contributions
and any other liabilities that have not been paid or satisfied because they are
not yet due under the terms of any Employee Benefit Plan,
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applicable law or related agreements. Benefits under all Employee Benefit Plans
are as disclosed and have not been increased subsequent to the date as of which
documents have been provided.
(f) TAX QUALIFICATION. Each Employee Benefit Plan intended to be
qualified under Section 401(a) of the Code has been determined to be so
qualified by the Internal Revenue Service. Each trust established in connection
with any Employee Benefit Plan which is intended to be exempt from Federal
income taxation under Section 501(a) of the Code has been determined to be so
exempt by the Internal Revenue Service. To the Company's best knowledge, since
the date of each most recent determination referred to in this paragraph (f), no
event has occurred and no condition or circumstance has existed that resulted or
is likely to result in the revocation of any such determination or that could
adversely affect the qualified status of any such Employee Benefit Plan or the
exempt status of any such trust.
(g) TRANSACTIONS. Neither the Company nor any of their respective
directors, officers, employees or, to the best knowledge of the Sellers and the
Company, other persons who participate in the operation of any Employee Benefit
Plan or related trust or funding vehicle, has engaged in any transaction with
respect to any Employee Benefit Plan or breached any applicable fiduciary
responsibilities or
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obligations under Title I of ERISA that would subject any of them to a tax,
penalty or liability for prohibited transactions or breach of any obligations
under ERISA or the Code or would result in any claim being made under, by or on
behalf of any such Employee Benefit Plan by any party with standing to make such
claim.
(h) TRIGGERING EVENTS. Except as disclosed in SCHEDULE 3.19, the
execution of this Agreement and the consummation of the transactions
contemplated hereby, do not constitute a triggering event under any Employee
Benefit Plan, policy, arrangement, statement, commitment or agreement, whether
or not legally enforceable, which (either alone or upon the occurrence of any
additional or subsequent event) will or may result in any payment (whether of
severance pay or otherwise), "parachute payment" (as such term is defined in
Section 280G of the code), acceleration, vesting or increase in benefits to any
employee or former employee or director of the Company. No Employee Benefit
Plan provides for the payment of severance, termination, change in control or
similar types of payments or benefits.
(i) DOCUMENTS. The Company has delivered or caused to be delivered
to Purchaser and its counsel true and complete copies of all material documents
in connection with each Employee Benefit Plan, including, without limitation
(where applicable): (i) all Employee Benefit Plans as in
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effect on the date hereof, together with all amendments thereto, including, in
the case of any Employee Benefit Plan not set forth in writing, a written
description thereof; (ii) all current summary plan descriptions, summaries of
material modifications, and material communications; (iii) all current trust
agreements, declarations of trust and other documents establishing other funding
arrangements (and all amendments thereto and the latest financial statements
thereof); (iv) the most recent Internal Revenue Service determination letter
obtained with respect to each Employee Benefit Plan intended to be qualified
under Section 401(a) of the Code or exempt under Section 501(a) of the Code; (v)
the annual report on Internal Revenue Service Form 5500-series for each of the
last three years for each Employee Benefit Plan required to file such form; (vi)
the most recently prepared financial statements; and (vii) all contracts and
agreements relating to each Employee Benefit Plan, including, without
limitation, collective bargaining agreements, service provider agreements,
insurance contracts, annuity contracts, investment management agreements,
subscription agreements, participation agreements, and recordkeeping agreements.
Section 3.20 INTERESTS IN CUSTOMERS, SUPPLIERS, ETC. Except as set forth
on SCHEDULE 3.20 attached hereto, to the best knowledge of the Company, none of
the Sellers nor any other officer or director of the Company possesses, directly
or
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indirectly, any ownership interest in, or is a director, officer or employee of,
any Person which is a supplier, customer, lessor, lessee, licensor, developer,
competitor or potential competitor of the Company. Ownership of securities of a
company whose securities are registered under the Securities Exchange Act of
1934 of 2% or less of any class of such securities shall not be deemed to be a
financial interest for purposes of this Section 3.20.
Section 3.21 ENVIRONMENTAL LAWS AND REGULATIONS. Except as set forth on
SCHEDULE 3.21 and except for that which would not have a Material Adverse
Effect:
(a) Hazardous Materials (as hereinafter defined) have not been generated,
used, treated or stored on, transported to or from, or released or disposed on,
the Company Property (as hereinafter defined), or, to the best knowledge of the
Company, any property adjoining or adjacent except in compliance with
Environmental Laws.
(b) The Company is in compliance in all material respects with
Environmental Laws (as hereinafter defined) and the requirements of permits
issued under such Environmental Laws with respect to the Company Property.
(c) There are no pending or, to the best knowledge of the Company,
threatened Environmental Claims (as hereinafter defined) against the Company or
any Company Property.
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(d) There are no facts, circumstances, conditions or occurrences
regarding the Company's past or present business or operations or any Company
Property, or to the best knowledge of the Company any property adjoining any
Company Property, that could reasonably be anticipated (i) to form the basis
of an Environmental Claim against the Company or any of the Company Property
or assets that individually or in the aggregate could have a Material Adverse
Effect, or (ii) to cause any such current Company Property or assets to be
subject to any restrictions on its ownership, occupancy, use or
transferability under any Environmental Law.
(e) There are not now and to the best knowledge of the Company there never
have been any underground storage tanks located on any Company Property or, to
the best knowledge of the Company, located on any property that adjoins or is
adjacent to any Company Property.
(f) For purposes of this Section 3.21 the following definitions shall
apply:
"COMPANY PROPERTY" means any real property and improvements at any time
owned, leased, used, operated or occupied by the Company.
"HAZARDOUS MATERIALS" means (a) any petroleum or petroleum products,
radioactive materials, asbestos in any form that is friable, urea formaldehyde
foam insulation, transformers or other equipment that contain dielectric fluid
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containing levels of polychlorinated biphenyls, and radon gas; and (b) any
chemicals, materials or substances defined as or included in the definition of
"hazardous substances," "hazardous wastes," "hazardous materials," "extremely
hazardous wastes," "restricted hazardous wastes," "toxic substances," "toxic
pollutants," or words of similar import, under any applicable Environmental Law.
"ENVIRONMENTAL LAW" means any federal, state or local statute, law,
rule, regulation, ordinance, code, policy or rule of common law in effect and in
each case as amended as of the Closing Date, and any judicial or administrative
interpretation thereof as of the Closing Date, including any judicial or
administrative order, consent decree or judgment, relating to the environment,
health, safety or Hazardous Materials, including, without limitation, the
Comprehensive Environmental Response, Compensation, and Liability Act of 1980,
42 U.S.C. Section 9601 et seq.; the Resource Conservation and Recovery Act of
1976, 42 U.S.C. Section 6901 ET SEQ.; the Federal Water Pollution Control Act,
as amended, 33 U.S.C. Section 1251 ET SEQ.; the Toxic Substances Control Act, 15
U.S.C. Section 2601 ET SEQ.; the Clean Air Act, 42 U.S.C. Section 7401 ET SEQ.;
the Safe Drinking Water Act, 42 U.S.C. Section 300f ET SEQ.; the Oil Pollution
Act of 1990, 33 U.S.C. Section 2701 ET SEQ.; the Emergency Planning and
Community Right-To-Know Act, 42 U.S.C. Section 1101 ET SEQ.; the Occupational
Safety and Health Act of
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1970, as amended, 29 U.S.C. Section 651 ET SEQ.; and any state and local
counterparts or equivalents; in each case, as amended.
"ENVIRONMENTAL CLAIMS" means administrative, regulatory or judicial
actions, suits, demands, demand letters, claims, liens, notices of
non-compliance or violation, investigations or proceedings relating in any way
to any Environmental Law or any permit issued under any such Law, including (a)
Environmental Claims by governmental or regulatory authorities for enforcement,
cleanup, removal, response, remedial or other actions or damages pursuant to any
applicable Environmental Law, and (b) Environmental Claims by any third party
seeking damages, contribution, indemnification, cost recovery, compensation or
injunctive relief resulting from Hazardous Materials or arising from alleged
injury or threat of injury to health, safety or the environment.
Section 3.22 BANK ACCOUNTS, POWERS OF ATTORNEY. Set forth on SCHEDULE
3.22 attached hereto is an accurate and complete list showing (a) the name and
address of each bank in which the Company has a material account or safe deposit
box, the number of any such account or any such box and the names of all persons
authorized to draw thereon or to have access thereto and (b) the names of all
persons, if any, holding powers of attorney from the Company.
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Section 3.23 COMPENSATION OF EMPLOYEES. The Company has previously
provided the Purchaser with an accurate and complete list for fiscal year 1996
showing the names of all persons employed by the Company who received more than
$50,000 in 1996 cash compensation (including, without limitation, salary,
commission and bonus) and who are expected to be employed by the Company on the
Closing Date. Such list sets forth the present salary or hourly wage, total in
1996 and expected 1997 cash compensation (including, without limitation, salary,
commission and bonus) and fringe benefits, of each such person.
Section 3.24 CONDUCT OF BUSINESS. Except as disclosed on SCHEDULE 3.24
attached hereto and except as expressly contemplated by this Agreement, since
November 30, 1996, the Company has not taken any action which, if taken
subsequent to the execution of this Agreement and on or prior to the Closing
Date, would constitute a material breach of any of the agreements of the Company
set forth in Section 6.1.
Section 3.25 CUSTOMER RELATIONS. There has not been, and the Company has
no reason to believe that there will be, any change in relations with customers
of the Company as a result of the transactions contemplated by this Agreement
which could have a Material Adverse Effect.
Section 3.26 CONDITION OF ASSETS. The assets and properties utilized in
and material to the conduct of the Company's
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businesses, whether owned or leased, are in the aggregate in good operating
condition and repair (normal wear and tear excepted) and are suitable for the
purposes for which they are presently being used.
Section 3.27 BROKER'S OR FINDER'S FEES. No agent, broker, person or firm
acting on behalf of the Company or the Sellers, is, or will be, entitled to any
commission or broker's or finder's fees from the Company, or from any Person
controlling, controlled by or under common control with any of the Company, in
connection with the transactions contemplated by this Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
Section 4. REPRESENTATIONS AND WARRANTIES OF THE SELLERS. Each of the
Sellers represents and warrants jointly and severally as of the date hereof to
the Purchaser as follows:
Section 4.1 OWNERSHIP OF STOCK. Each of the Sellers is the lawful owner
of the Stock listed on ANNEX I hereto, free and clear of all liens,
encumbrances, restrictions and claims of every kind. Each of the Sellers has
the full legal right, power and authority to enter into this Agreement and to
sell, assign, transfer and convey the shares of Stock so owned by such Seller
pursuant to this Agreement, and the delivery to the Purchaser of the Stock
pursuant to the provisions of this
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Agreement will transfer to the Purchaser good title thereto, free and clear of
all Encumbrances.
Section 4.2 AUTHORIZATION AND VALIDITY OF AGREEMENT. Each of the Sellers
has the requisite power and authority to execute and deliver this Agreement and
the Escrow Agreement, to perform its obligations hereunder and thereunder and to
consummate the transactions contemplated to be performed by such Seller hereby
and thereby. This Agreement has been, and at the Closing the Escrow Agreement
will be, duly executed and delivered by each of the Sellers and, assuming the
due execution of this Agreement and the Escrow Agreement by the Purchaser, this
Agreement is, and at the Closing the Escrow Agreement will be, a valid and
binding obligation of each of the Sellers, enforceable against each of the
Sellers in accordance with its respective terms, except to the extent that its
enforceability may be subject to applicable bankruptcy, insolvency,
reorganization and similar laws affecting the enforcement of creditors' rights
generally and to general equitable principles.
Section 4.3 RESTRICTIVE DOCUMENTS. None of the Sellers is subject to any
mortgage, lien, lease, agreement, instrument, order, law, rule, regulation,
judgment or decree, or any other restriction of any kind or character which
would prevent consummation by such Seller of the transactions contemplated by
this Agreement or the Escrow Agreement.
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Section 4.4 BROKER'S OR FINDER'S FEES. No agent, broker, person or firm
acting on behalf of any of the Sellers is, or will be, entitled to any
commission or broker's or finder's fees from the Company, or from any Person
controlling, controlled by or under common control with the Company, in
connection with any of the transactions contemplated by this Agreement or the
Escrow Agreement.
Section 4.5 INTERESTS IN CUSTOMERS, SUPPLIERS, ETC. Except as set forth
on SCHEDULE 4.5, none of the Sellers nor to the best knowledge of such Seller
any other officer or director of the Company, possesses, directly or indirectly,
any ownership interest in, or is a director, officer or employee of, any Person
which is a supplier, customer, lessor, lessee, licensor, developer, competitor
or potential competitor of the Company. Ownership of securities of a company
whose securities are registered under the Securities Exchange Act of 1934 of 2%
or less of any class of such securities shall not be deemed to be an ownership
interest for purposes of this Section 4.5.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
Section 5. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. The
Purchaser represents and warrants to the Company and the Sellers as follows:
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Section 5.1 EXISTENCE AND GOOD STANDING; POWER AND AUTHORITY. The
Purchaser is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware. The Purchaser has the requisite
corporate power and authority to enter into, execute and deliver this Agreement
and perform its obligations hereunder. This Agreement has been duly authorized
and approved by the Purchaser and, assuming the due execution of this Agreement
by the Company and the Sellers, is a valid and binding obligation of the
Purchaser enforceable against it in accordance with its terms, except to the
extent that its enforceability may be subject to applicable bankruptcy,
insolvency, reorganization, moratorium and other similar laws affecting the
enforcement of creditors' rights generally and by general equitable principles.
Section 5.2 RESTRICTIVE DOCUMENTS. The Purchaser is not subject to any
mortgage, lien, lease, agreement, instrument, order, law, rule, regulation,
judgment or decree, or any other restriction of any kind or character which
would prevent consummation by it of the transactions contemplated by this
Agreement.
Section 5.3 PURCHASE FOR INVESTMENT. The Purchaser will acquire the Stock
for its own account for investment and not with a view toward any resale or
distribution thereof; PROVIDED, HOWEVER, that the disposition of the Purchaser's
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property shall at all times remain within the sole control of the Purchaser.
The Purchaser will comply with all applicable U.S. Federal and state securities
laws in connection with any public offering by the Purchasers of the Stock.
Section 5.4 BROKER'S OR FINDER'S FEES. No agent, broker, person or firm
acting on behalf of the Purchaser is, or will be, entitled to any commission or
broker's or finder's fees from the Sellers in connection with any of the
transactions contemplated by this Agreement.
ARTICLE VI
TRANSACTIONS PRIOR TO THE CLOSING DATE
Section 6.1 CONDUCT OF BUSINESS OF THE COMPANY. During the period from
the date of this Agreement to the Closing Date, the Company shall conduct its
respective operations only according to its ordinary and usual course of
business; use its reasonable efforts to: (a) preserve intact its business
organizations, (b) keep available the services of its officers and employees and
(c) maintain its relationships and goodwill with licensors, suppliers,
distributors, customers, landlords, employees, agents and others having business
relationships with it. The Company shall confer with the Purchaser concerning
operational matters of a material nature and report periodically to the
Purchaser concerning the business, operations and finances of the Company.
Notwith-
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standing the two immediately preceding sentences, prior to the Closing Date,
except as may be first approved in writing by the Purchaser, except for
Permitted Payments or Assignments, and except as is otherwise permitted or
required by this Agreement, the Company shall, (a) refrain from amending or
modifying its Certificate of Incorporation or By-Laws from its form on the date
of this Agreement; (b) refrain from paying or increasing any bonuses, salaries,
or other compensation to any director, officer, employee or stockholder or
entering into any employment, severance, or similar agreement with any director,
officer, or employee; (c) refrain from the adopting or increasing of any profit
sharing, bonus, deferred compensation, savings, insurance, pension, retirement,
or other employee benefit plan for or with any of its employees; (d) refrain
from entering into any material contract or commitment except material contracts
and commitments in the ordinary course of business consistent with past
practice; (e) refrain from increasing its indebtedness for borrowed money,
except current borrowings in the ordinary course of business; (f) refrain from
paying its indebtedness; (g) refrain from cancelling or waiving any claim or
right of substantial value which individually or in the aggregate is material;
(h) refrain from declaring or paying any dividends or other cash distributions
to any Seller including, without limitation, dividends or other
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cash distributions to the Sellers to meet any income tax obligations of such
Sellers resulting from the Company's status as an "S" corporation; (i) refrain
from redeeming, purchasing or otherwise acquiring any of its capital stock; (j)
refrain from making any material change in accounting methods or practices,
except as required by law or generally accepted accounting principles; (k)
except for the issuance of an aggregate of 19.742491 shares of Common Stock to
the Prospective Stockholders in the amounts described in the preamble to this
Agreement (provided that each such Prospective Stockholder shall have, at the
time of such issuance, executed and delivered to the Purchaser a counterpart
signature page of this Agreement and ANNEX I appropriately revised), refrain
from issuing or selling any shares of capital stock or any other securities, or
issuing any securities convertible into, or options, warrants or rights to
purchase or subscribe to, or entering into any arrangement or contract with
respect to the issue and sale of, any shares of its capital stock or any other
securities, or making any other changes in its capital structure; (l) refrain
from selling, leasing or otherwise disposing of any material asset or property;
(m) refrain from entering into any commitment for the making of a capital
expenditure, except in the ordinary course of business consistent with past
practice; (n) refrain from writing off as uncollectible
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any notes or accounts receivable, except write-offs in the ordinary course of
business charged to applicable reserves, none of which individually or in the
aggregate is material; and (o) refrain from agreeing in writing to do any of the
foregoing.
Section 6.2 EXCLUSIVE DEALING. During the period from the date of this
Agreement to the earlier of (i) the Closing Date or (ii) the termination of this
Agreement in accordance with its terms, none of the Sellers, their respective
affiliates and representatives, or the Company or any officer or director of any
of the Company shall take any action to, directly or indirectly, encourage,
initiate, solicit or engage in discussions or negotiations with, or provide any
information to, any Person, other than the Purchaser (and its affiliates and
representatives), concerning any purchase of any capital stock of the Company or
any merger, asset sale or similar transaction involving the Company.
Section 6.3 REVIEW OF THE COMPANY. The Purchaser may, prior to the
Closing Date, directly or through its representatives, review the properties,
books and records of the Company and its financial and legal condition to the
extent they deem necessary or advisable to familiarize itself with such
properties and other matters. Should the Purchaser, during the course of such
review become aware of facts or circumstances concerning the Company or any of
the Sellers
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which would constitute a breach of any of the representations and warranties of
the Company or any Seller, the Purchaser shall promptly notify the Sellers
thereof in writing, provided that the failure to so notify the Sellers shall not
affect the representations and warranties made by the Company in this Agreement
or the remedies of the Purchaser for breaches of those representations and
warranties. The Purchaser has not knowingly withheld from the Company or the
Sellers information concerning the Company or any of the Sellers which would
constitute a breach of any of the representations and warranties of the Company
or any Seller. The Company shall permit the Purchaser and its representatives
to have, after the date of execution of this Agreement, reasonable access to the
premises and to all the books and records of the Company and to cause the
officers of the Company to furnish the Purchaser with such financial and
operating data and other information with respect to the business and properties
of the Company as the Purchaser shall from time to time reasonably request. The
Company shall deliver or cause to be delivered to the Purchaser such additional
instruments, documents, certificates and opinions as the Purchaser may
reasonably request for the purpose of (a) verifying the information set forth in
this Agreement or on any Schedule attached hereto and (b) consummating or
evidencing the transactions contemplated by this Agreement,
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it being understood that any such additional instruments, documents,
certificates and opinions shall not create liability for the Company or the
Sellers not otherwise contemplated by this Agreement.
Section 6.4 REASONABLE EFFORTS. Each of the Company, the Sellers and the
Purchaser shall cooperate and use their respective reasonable best efforts to
take, or cause to be taken, all appropriate actions, and to make, or cause to be
made, all filings necessary, proper or advisable under applicable laws and
regulations (including, without limitation, the filing of Notification and
Report Forms under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "HSR ACT") with the Federal Trade Commission and the Antitrust
Division of the Department of Justice, it being understood that the filing fee
to be paid for such HSR Act filing shall be borne by the Purchaser) to
consummate and make effective the transactions contemplated by this Agreement,
including, without limitation, their respective reasonable best efforts to
obtain, prior to the Closing Date, all licenses, permits, consents, approvals,
authorizations, qualifications and orders of governmental authorities and
parties to contracts with the Company as are necessary for consummation of the
transactions contemplated by the Agreement and to fulfill the conditions to the
sale contemplated hereby.
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Section 6.5 ADDITIONAL CONSENTS. The Company shall use their best efforts
to obtain the consent of the National Association of Advertising Distributors
immediately upon the Closing to the purchase of the Stock by the Purchaser
pursuant to the terms hereof.
Section 6.6 MATERIAL TRANSACTIONS. The Company shall keep the Purchaser
reasonably informed as to the status of the negotiations concerning the
potential acquisition by the Company and/or the Purchaser of Direct Mail
Systems, Inc. (the "DMS TRANSACTION") and the negotiations concerning the
potential acquisition by Purchaser of Direct Response Mail of Orlando, Inc. (the
"DRMO TRANSACTION"), and the Company shall not execute definitive purchase
agreements with respect to the DMS Transaction and the DRMO Transaction without
allowing the Purchaser to review the material terms of such transactions.
Section 6.7 RELEASE OF GUARANTEES. (a) The Purchaser shall obtain the
release of the guarantor from each guarantee listed in SCHEDULE 6.7 and shall
use reasonable efforts to obtain the release of the guarantor from guarantees
relating to the capital leases referred to in Section 2.3 (the "CAPITAL LEASE
GUARANTEES").
(b) If the Purchaser is unable to obtain the release of any of the
guarantors of any of the Capital Lease Guarantees, the Purchaser shall indemnify
and hold harmless such
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guarantor from and against liabilities under such Capital Lease Guarantees to
the extent arising out of the operation of the Company by the Purchaser after
the Closing Date.
Section 6.8 SUPPLEMENTS TO SCHEDULES. From time to time prior to the
Closing Date, the Sellers may, with the prior written consent of the Purchaser
which may be withheld in the Purchaser's sole discretion, supplement Schedules
to this Agreement with respect to any matter hereafter arising which, if
existing or occurring at or prior to the date of this Agreement, would have been
required to be set forth or described in any such Schedule.
Section 6.9 SATISFACTION AND TERMINATION OF EQUITY ARRANGEMENTS. On or
prior to the Closing Date, the Company shall (consistent with the definition of
clause (b)(i) of the definition of Permitted Payments or Assignments) satisfy
and provide releases at the Closing with respect to all liabilities under its
phantom stock and other equity-based plans listed in the Schedules attached
hereto.
ARTICLE VII
CONDITIONS TO THE PURCHASER'S OBLIGATIONS
Section 7. CONDITIONS TO THE PURCHASER'S OBLIGATIONS. The obligation of
the Purchaser to purchase the Stock contemplated by this Agreement are
conditioned upon
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satisfaction, at or prior to the Closing, of the following conditions:
Section 7.1 OPINIONS OF COUNSEL. The Company shall have furnished the
Purchaser with an opinion, dated the Closing Date, of Klaine, Wiley, Hoffmann &
Minutolo, to the effect set forth in EXHIBIT A hereto.
Section 7.2 GOOD STANDING AND OTHER CERTIFICATES. The Purchaser shall
have received (a) copies of the charter, including all amendments thereto, in
each case certified by the Secretary of State or other appropriate official of
the jurisdiction of incorporation of the Company, (b) a certificate from the
Secretary of State or other appropriate official of the jurisdiction of
incorporation of the Company to the effect that the Company is in good standing
and listing all charter documents of the Company on file, (c) a certificate from
the Secretary of State or other appropriate official in each State in which the
Company is qualified to do business to the effect that the Company is in good
standing in such State, (d) a certificate as to the tax status of the Company
from the appropriate official in its jurisdiction of incorporation and each
state in which the Company is qualified to do business and (e) a copy of the
By-Laws of the Company certified by the Secretary of the Company as being true
and correct and in effect on the Closing Date.
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Section 7.3 NO MATERIAL ADVERSE CHANGE. Prior to the Closing there shall
have been no material adverse change in the aggregate in the business,
operations, financial condition, results of operations or prospects of the
Company and the Company shall have delivered to the Purchaser an officer's
certificate, dated the Closing Date, to such effect.
Section 7.4 TRUTH OF REPRESENTATIONS AND WARRANTIES. The representations
and warranties of the Company contained in this Agreement and the
representations and warranties of the Sellers contained in this Agreement shall
be true and correct on and as of the Closing Date with the same effect as though
such representations and warranties had been made on and as of such date, and
the Company and the Sellers shall have each delivered to the Purchaser a
certificate, dated the Closing Date, to such effect.
Section 7.5 PERFORMANCE OF AGREEMENTS. All of the agreements of the
Company and the Sellers to be performed prior to the Closing pursuant to the
terms of this Agreement shall have been duly performed in all material respects,
and the Company and the Sellers shall have each delivered to the Purchaser a
certificate, dated the Closing Date, to such effect.
Section 7.6 NO LITIGATION THREATENED. No action or proceedings shall have
been instituted or, to the best knowledge of any of the Company or any of the
Sellers, threatened before a court or other government body or by any public
authority
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to restrain or prohibit any of the transactions contemplated hereby.
Section 7.7 THIRD PARTY CONSENTS; GOVERNMENTAL APPROVALS. All consents,
approvals or waivers, if any, disclosed on any Schedule attached hereto or
required in connection with the consummation of the transactions contemplated by
this Agreement shall have been received. All of the consents, approvals,
authorizations, exemptions and waivers from governmental agencies that shall be
required in order to enable the Purchaser to consummate the transactions
contemplated hereby shall have been obtained.
Section 7.8 TERMINATION OF SECURITY INTERESTS. All security interests,
liens, mortgages, claims or other encumbrances of any kind securing indebtedness
of any of the Company shall be released, except for releases that will be
effected after the Closing by the payment of indebtedness of the Company as
provided in Section 2.3 (provided that, at the Closing, the Purchaser shall have
been provided with all executed documentation and other evidence necessary to
effect such releases).
Section 7.9 RESIGNATIONS. All members of the Board of Directors of the
Company shall have tendered their resignations from such positions effective at
the Closing.
Section 7.10 FINANCING. The Purchaser shall have received debt financing
reasonably acceptable to it providing
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financing necessary to consummate the transactions contemplated by this
Agreement.
Section 7.11 FIRPTA. The Sellers shall have furnished to the Purchaser,
on or prior to the Closing Date, a non-foreign person affidavit required by
Section 1445 of the Code.
Section 7.12 HSR ACT. Any waiting period (and any extension thereof)
under the HSR Act applicable to the transactions contemplated by this Agreement
shall have expired or terminated.
Section 7.13 ESCROW AGREEMENT. The Sellers, the Purchaser and the Escrow
Agent shall have entered into an escrow agreement substantially in the form of
EXHIBIT B hereto (the "ESCROW AGREEMENT").
Section 7.14 NON-COMPETITION AGREEMENT. Mr. Calvin Ingram shall have
executed a five year non-competition agreement substantially in the form of
EXHIBIT C hereto for cash consideration of $1 million payable upon the Closing.
ARTICLE VIII
CONDITIONS TO THE COMPANY'S
AND THE SELLERS' OBLIGATIONS
Section 8. CONDITIONS TO THE COMPANY'S AND THE SELLERS' OBLIGATIONS. The
obligations of the Company and the Sellers to effect the transactions
contemplated by this Agreement on the Closing Date are conditioned upon
satisfaction or waiver, at or prior to the Closing, of the following conditions:
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Section 8.1 OPINIONS OF COUNSEL. The Purchaser shall have furnished the
Sellers with an opinion, dated the Closing Date, of White & Case, to the effect
set forth in EXHIBIT D hereto.
Section 8.2 TRUTH OF REPRESENTATIONS AND WARRANTIES. The representations
and warranties of the Purchaser contained in this Agreement shall be true and
correct on and as of the Closing Date with the same effect as though such
representations and warranties had been made on and as of such date, and the
Purchaser shall have delivered to the Sellers an officer's certificate, dated
the Closing Date, to such effect.
Section 8.3 THIRD PARTY CONSENTS; GOVERNMENTAL APPROVALS. All consents,
approvals or waivers, if any, required in connection with the consummation of
the transactions contemplated by this Agreement shall have been received. All
of the consents, approvals, authorizations, exemptions and waivers from
government agencies that shall be required in order to permit the consummation
of the transactions contemplated hereby shall have been obtained.
Section 8.4 PERFORMANCE OF AGREEMENTS. All of the agreements of the
Purchaser to be performed prior to the Closing pursuant to the terms of this
Agreement shall have been duly performed in all material respects, and the
Purchaser shall
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have delivered to the Sellers an officer's certificate, dated the Closing Date,
to such effect.
Section 8.5 NO LITIGATION THREATENED. No action or proceeding shall be
instituted or, to the best knowledge of the Purchaser, threatened before a court
or other government body or any public authority to restrain or prohibit any of
the transactions contemplated hereby, and the Purchaser shall have delivered to
the Sellers an officer's certificate, dated the Closing Date, to such effect.
Section 8.6 HSR ACT. Any waiting period (and any extension thereof) under
the HSR Act applicable to the transactions contemplated by this Agreement shall
have expired or terminated.
ARTICLE IX
TAX MATTERS
Section 9.1 TAX RETURNS. (a) The Sellers shall have the exclusive
authority and obligation to prepare and timely file, or cause to be prepared and
timely filed, all Returns of the Company that are due with respect to any
taxable year or other taxable period ending on or prior to the Closing Date.
Such authority shall include, but not be limited to, the determination of the
manner in which any items of income, gain, deduction, loss or credit arising out
of the income, properties and operations of the Company shall be reported or
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disclosed in such Returns; PROVIDED, HOWEVER, that such Returns shall be
prepared by treating items on such Returns in a manner consistent with the past
practices with respect to such items, unless otherwise required by law. The
Sellers shall provide to the Purchaser drafts of all Returns of the Company
required to be prepared and filed by the Sellers under this Section 9.1(a) at
least thirty (30) days prior to the due date for the filing of such Returns. At
least fifteen (15) days prior to the due date for the filing of such Returns,
the Purchaser shall notify the Sellers of the existence of any objection
(specifying in reasonable detail the nature and basis of such objection) the
Purchaser may have to any items set forth on such draft Returns. The Purchaser
and the Sellers agree to consult and resolve in good faith any such objection.
(b) For all taxable years and other periods ending after the Closing Date
the Purchaser shall have the exclusive authority and obligation to prepare and
timely file, or cause to be prepared and timely filed, all Returns of the
Company. Such authority shall include, but not be limited to, the determination
of the manner in which any items of income, gain, deduction, loss or credit
arising out of the income, properties and operations of the Company shall be
reported or disclosed on such Returns; PROVIDED, HOWEVER, with respect to
Returns to be filed by the Purchaser pursuant to this Section
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9.1(b) for taxable periods beginning before the Closing Date and ending after
the Closing Date, items set forth on such Returns shall be treated in a manner
consistent with the past practices with respect to such items, unless otherwise
required by law. The Purchaser shall provide to the Sellers drafts of all
Returns of the Company which include the period from November 30, 1996 to the
Closing Date at least thirty (30) days prior to the due date for the filing of
such Returns.
Section 9.2 APPORTIONMENT OF TAXES. All Taxes and Tax liabilities with
respect to the income, property or operations of the Company that relate to a
taxable year or other taxable period beginning before and ending after the
Closing Date shall be apportioned between the Pre-Closing Period and the portion
of such taxable year or other taxable period after the Closing Date (the
"POST-CLOSING PERIOD") as follows: (A) in the case of Taxes other than income
Taxes and sales and use Taxes, on a per diem basis, and (B) in the case of
income Taxes and sales and use Taxes, as determined from the books and records
of the Company, between Pre-Closing and Post-Closing Periods as though the
taxable year of the Company terminated at the close of business on the Closing
Date, and based on accounting methods, elections and conventions that do not
have the effect of distorting income and expenses. The Sellers shall be liable
for the payment of
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all Taxes of the Company which are attributable to any Pre-Closing Period,
whether shown on any original return or amended return for the period referred
to therein; provided, that it is a condition to the obligation of the Sellers to
pay the income taxes from the period beginning December 1, 1996 and ending on
and including the Closing Date that the Company shall have distributed to the
Sellers an amount equal to the amount referred to in clause (ii) of paragraph
(b) of the definition of Permitted Payments or Assignments. The Purchaser shall
be liable for the payment of all Taxes which are attributable to any
Post-Closing Period.
Section 9.3 COOPERATION; AUDITS. In connection with the preparation of
Returns, audit examinations and any administrative or judicial proceedings
relating to the Tax liabilities imposed on the Company for all Pre-Closing
Periods, the Purchaser and the Company on the one hand, and the Sellers on the
other hand, will cooperate fully with each other, including, but not limited to,
the furnishing or making available during normal business hours of records,
personnel (as reasonably required), books of account, powers of attorney or
other materials necessary or helpful for the preparation of such Returns, the
conduct of audit examinations or the defense of claims by Tax authorities as to
the imposition of Taxes.
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Section 9.4 CONTROVERSIES. The Purchaser shall promptly notify the
Sellers in writing upon receipt by the Purchaser or any affiliate of the
Purchaser (including the Company after the Closing Date) of written notice of
any inquiries, claims, assessments, audits or similar events with respect to
Taxes relating to a taxable period ending on or prior to the Closing Date for
which the Sellers may be liable under this Agreement (any such inquiry, claim,
assessment, audit or similar event, a "TAX MATTER"). The Sellers, at their sole
expense, shall have the exclusive authority to represent the interests of the
Company with respect to any Tax Matter before the Internal Revenue Service, any
other taxing authority, any other governmental agency or authority or any court
and shall have the sole right to extend or waive the statute of limitations with
respect to a Tax Matter and to control the defense, compromise or other
resolution of any Tax Matter, including responding to inquiries, filing Tax
returns and settling audits; PROVIDED, HOWEVER, that the Sellers shall not enter
into any settlement of or otherwise compromise any Tax Matter that affects or
may affect the Tax liability of the Purchaser or the Company or any affiliate of
the foregoing for any Post-Closing Period, including the portion of a period
beginning before the Closing Date and ending after the Closing Date (the
"OVERLAP PERIOD") that is after the Closing Date, without the prior written
consent of
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the Purchaser, which consent shall not be unreasonably withheld. The Sellers
shall keep the Purchaser fully and timely informed with respect to the
commencement, status and nature of any Tax Matter. The Sellers shall, in good
faith, allow the Purchaser to make comments to the Sellers regarding the conduct
of or positions taken in any such proceeding.
Except as otherwise provided in this Article IX, the Purchaser shall at its
sole expense have the sole right to control any audit or examination by any
taxing authority, initiate any claim for refund or amend any Return, and
contest, resolve and defend against any assessment for additional Taxes, notice
of Tax deficiency or other adjustment of Taxes of, or relating to, the income,
assets or operations of the Company for all taxable periods; PROVIDED, HOWEVER,
that the Purchaser shall not, and shall cause its affiliates (including the
Company) not to, enter into any settlement of any contest or otherwise
compromise any issue that affects or may affect the Tax liability of the Sellers
or the Company for any Pre-Closing Period without the prior written consent of
the Sellers, which consent shall not be unreasonably withheld.
Section 9.5 AMENDED RETURNS. None of the Sellers shall file or cause to
be filed any amended Return without the prior written consent of the Purchaser,
which consent shall not be unreasonably withheld. The Purchaser shall not file
or cause
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to be filed any amended return covering any period or adjusting any Taxes for
a period which includes any period prior to the Closing Date without the
prior written consent of the Sellers, which consent shall not be unreasonably
withheld. If the Purchaser amends any Return that includes the period from
December 1, 1996 until and including the Closing Date, and such amendment
causes additional tax liabilities to the Sellers, the amount of such
additional tax liabilities, including interest and penalties, shall be
distributed by the Company to the Sellers within ten (10) days of the date
such taxes and costs are required to be paid.
Section 9.6 NON-FOREIGN PERSON AFFIDAVIT. Each Seller shall furnish to
the Purchaser on or before the Closing Date a non-foreign person affidavit as
required by Section 1445 of the Code.
Section 9.7 INDEMNIFICATION. (a) Calvin Ingram agrees to indemnify,
defend and hold harmless the Purchaser, its affiliates (including, after the
Closing Date, the Company) and the successors to the foregoing (and their
respective shareholders, officers, directors, employees and agents) on an
after-tax basis against (i) all Taxes (and losses, claims and expenses related
thereto) resulting from, arising out of, or incurred with respect to, any claims
that may be asserted by any party based upon, attributable to, or resulting from
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the failure of any representation or warranty made pursuant to Section 3.14 to
be true and correct as of the Closing Date, (ii) all Taxes imposed on or
asserted against the properties, income or operations of the Company for all
Pre-Closing Periods, and (iii) all Taxes imposed on the Company, or for which
the Company may be liable, as a result of any transaction contemplated by this
Agreement; PROVIDED, HOWEVER, that the Calvin Ingram's aggregate liability under
this Section 9.7(a) shall not exceed the Aggregate Closing Payment. In
addition, the indemnification provided under the preceding clause (ii) shall not
apply to the Taxes paid in accordance with clause (ii) of paragraph (b) of the
definition of Permitted Payments or Assignments. The Purchaser shall promptly
give the Sellers written notice of all Taxes, losses, claims and expenses which
the Purchaser has reasonably determined may give rise to a right of
indemnification under this Section 9.7(a), including a computation of the amount
of the required indemnification with sufficient detail and particularity to
enable Calvin Ingram to reasonably determine the amount of such required
indemnification.
(b) The Purchaser agrees to indemnify, defend and hold harmless the
Sellers, their affiliates, successors to the foregoing (and their respective
shareholders, officers, directors, employees and agents) on an after-tax basis
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against (i) all Taxes (and losses, claims and expenses related thereto)
resulting from, arising out of, or incurred with respect to, any claims that may
be asserted by any party based upon, attributable to, or resulting from the
failure of any representation or warranty or agreement of the Purchaser in this
Article IX and (ii) all Taxes imposed on the Company for any period or portion
thereof beginning after the Closing Date; PROVIDED, HOWEVER, that the
Purchaser's aggregate liability under this Section 9.7(b) shall not exceed the
Aggregate Closing Payment. Calvin Ingram shall promptly give the Purchaser
written notice of all Taxes, losses, claims and expenses which Calvin Ingram has
reasonably determined may give rise to a right of indemnification under this
Section 9.7(b), including a computation of the amount of the required
indemnification with sufficient detail and particularity to enable the Purchaser
to reasonably determine the amount of such required indemnification.
Section 9.8 TRANSFER TAXES. All transfer, sales and use, registration,
stamp and similar Taxes imposed in connection with the sale of the Stock or any
other transaction that occurs pursuant to this Agreement resulting from the
Closing of the transactions contemplated hereby occurring in New York rather
than Ohio shall be borne by the Purchaser.
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ARTICLE X
SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION
Section 10.1 SURVIVAL OF REPRESENTATIONS. The respective representations
and warranties of the Company, the Sellers and the Purchaser contained in this
Agreement shall survive the Closing for a period of two years except for the
representations and warranties of the Company contained in Sections 3.14, which
shall survive for the applicable statute of limitations period, and the
representations and warranties of the Seller in Article IV which shall survive
indefinitely.
Section 10.2 INDEMNIFICATION. (a) Prior to the Closing, the Company, and
thereafter, Calvin Ingram hereby agree to indemnify and hold the Purchaser and
its officers, directors, affiliates (including, without limitation, the Company)
and agents, and any successors thereto, harmless from damages, losses, costs or
expenses (including, without limitation, reasonable attorneys' and consultants'
fees and expenses) ("DAMAGES") incurred or suffered as a result of or arising
out of (i) the failure of any representation or warranty made by the Company in
this Agreement (without regard to any "materiality" or any "material adverse
effect" exception contained therein) to be true and correct as of the Closing
Date, (other than a breach of Section 3.14 with respect to Taxes which shall be
governed by Section 9.7(a)), or (ii) the breach of any covenant or agreement
made or to be performed
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by the Company pursuant to this Agreement; PROVIDED, HOWEVER, that neither the
Company nor Calvin Ingram shall be liable under clause (i) of this Section
unless the aggregate amount of Damages exceeds $200,000 and then only to the
extent of such excess; PROVIDED, FURTHER, HOWEVER, that the Company's and Calvin
Ingram's liability under clause (i) of this Section 10.2(a) shall not exceed, in
the aggregate, $500,000 for the period prior to the Closing and $3,500,000 for
the period after the Closing.
(b) Calvin Ingram hereby agrees to indemnify and hold the Purchaser and
its officers, directors, affiliates (including without limitation, the Company)
and agents, and any successors thereto, harmless from Damages incurred or
suffered as a result of or arising out of (i) the failure of any representation
or warranty made by the Sellers in Article IV of this Agreement to be true and
correct as of the Closing Date or (ii) the breach of any covenant or agreement
made or to be performed by any of the Sellers pursuant to this Agreement.
(c) The Purchaser hereby agrees to indemnify and hold the Sellers harmless
from Damages incurred or suffered as a result of or arising out of (i) the
failure of any representation or warranty made by the Purchaser in this
Agreement to be true and correct as of the Closing Date or (ii) the breach of
any covenant or agreement made or to be performed by the
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Purchaser pursuant to this Agreement; PROVIDED, HOWEVER, that the Purchaser
shall not be liable under clause (i) of this Section unless the aggregate amount
of Damages exceeds $200,000 and then only to the extent of such excess;
PROVIDED, FURTHER, HOWEVER, that the Purchaser's liability under this Section
10.2(c) shall not exceed, in the aggregate, the Aggregate Closing Payment.
(d) Absent fraud, the foregoing indemnification provisions and the
indemnification for Taxes provided in Section 9.7 shall be the exclusive remedy
for any breach of the covenants, obligations, representations or warranties set
forth in this Agreement; PROVIDED, HOWEVER, that the provisions of this Section
10.2(d) shall not prevent the Sellers or the Purchaser from seeking the remedies
of specific performance or injunctive relief in connection with a breach of a
covenant or agreement of any party contained herein.
(e) As security for Calvin Ingram's indemnity obligations pursuant to this
Section 10.2, but without in any way limiting the amount of such indemnity,
Calvin Ingram agrees to enter into the Escrow Agreement.
Section 10.3 INDEMNIFICATION PROCEDURE. (a) Any party seeking
indemnification (the "INDEMNIFIED PARTY") from any other party (the
"INDEMNIFYING PARTY") with respect to any claim, demand, action, proceeding or
other matter pursuant to this
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Agreement (the "CLAIM") shall promptly notify in writing the Indemnifying Party
of the existence of the Claim, setting forth in reasonable detail the facts and
circumstances pertaining thereto and the basis for the Indemnified Party's right
to indemnification.
(b) If any third party shall notify any Indemnified Party with respect to
any matter which may give rise to a Claim for indemnification against the
Indemnifying Party under this Agreement, then the Indemnified Party shall
promptly notify in writing each Indemnifying Party thereof; PROVIDED, HOWEVER,
that no delay on the part of the Indemnified Party in notifying any Indemnifying
Party shall relieve the Indemnifying Party from any liability or obligation
hereunder unless (and then solely to the extent) the Indemnifying Party thereby
is materially prejudiced by such failure to give written notice. In the event
that any Indemnifying Party notifies the Indemnified Party within 30 days after
the Indemnified Party has given notice of the matter that the Indemnifying Party
would be required to indemnify the Indemnified Party in full against any such
Claim and is assuming the defense thereof:
(i) the Indemnifying Party will defend the Indemnified Party against
the matter with counsel of its choice reasonably satisfactory to the Indemnified
Party;
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(ii) the Indemnified Party may retain separate co-counsel at its sole
cost and expense (except that the Indemnifying Party will be responsible for the
fees and expenses of the separate co-counsel (a) to the extent the Indemnified
Party concludes reasonably based upon advice of counsel that a conflict of
interest exists between the Indemnified Party and Indemnifying Party or (b) the
named parties to any such action (including any impleaded parties) include both
such Indemnified Party and the Indemnifying Party and such Indemnified Party
shall have been advised by counsel that there may be one or more legal defenses
available to the Indemnified Party which are not available to the Indemnifying
Party, or available to the Indemnifying Party, but the assertion of which would
be adverse to the interest of the Indemnified Party);
(iii) the Indemnified Party will not consent to the entry of any
judgment or enter into any settlement with respect to the matter without the
written consent of the Indemnifying Party (not to be withheld unreasonably); and
(iv) the Indemnifying Party will not consent to the entry of any
judgment or enter into any settlement, without the written consent of the
Indemnified Party (not to be withheld unreasonably).
(c) If no Indemnifying Party notifies the Indemnified Party within 30 days
after the Indemnified Party has given
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written notice of the matter that the Indemnifying Party is assuming the defense
thereof, then the Indemnified Party may defend against, or enter into any
settlement with respect to, the matter in any manner it reasonably may deem
appropriate, without prejudice to any of its rights hereunder.
(d) The Indemnified Party shall be entitled to reimbursement of reasonable
expenses included in Damages with respect to any Claim (including, without
limitation, the cost of defense, preparation and investigation relating to such
Claim) as such expenses are incurred by the Indemnified Party.
ARTICLE XI
TERMINATION
Section 11.1 TERMINATION. This Agreement may be terminated at any time
prior to the Closing:
(a) by the mutual written consent of the Purchaser and the Sellers;
(b) by the Purchaser, if there has been a material violation or breach by
the Company or the Sellers of any covenant, representation or warranty contained
in this Agreement which has prevented the satisfaction of any condition to the
obligations of the Purchaser at the Closing and such violation or breach has not
been waived by the Purchaser or, in the case of a covenant breach, cured by the
Company or a
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Seller within the earlier of ten days after written notice thereof from the
Purchaser or the Closing Date;
(c) by the Sellers, if there has been a material violation or breach by
the Purchaser of any covenant, representation or warranty contained in this
Agreement which has prevented the satisfaction of any condition to the
obligation of the Company at the Closing and such violation or breach has not
been waived by the Sellers or, with respect to a covenant breach, cured by the
Purchaser within the earlier of ten days after written notice thereof by the
Company or the Closing Date; or
(d) by either the Purchaser or the Sellers if the transactions
contemplated hereby have not been consummated by April 15, 1997; PROVIDED,
HOWEVER, that (i) neither the Purchaser nor the Sellers shall be entitled to
terminate this Agreement pursuant to this Section 11.1(d) if such Person's
breach of this Agreement has prevented the consummation of the transactions
contemplated hereby.
Section 11.2 EFFECT OF TERMINATION. In the event that this Agreement
shall be terminated pursuant to Section 11.1, all further obligations of the
parties hereto under this Agreement (other than pursuant to Sections 12.2 and
12.5, which shall continue in full force and effect) shall terminate without
further liability or obligation of either party to the other party hereunder;
provided, however, that
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no party shall be released from liability hereunder if this Agreement is
terminated and the transactions abandoned by reason of (i) willful failure of
such party to have performed its obligations hereunder or (ii) any knowing
misrepresentation made by such party of any matter set forth herein.
ARTICLE XII
MISCELLANEOUS
Section 12.1 BEST KNOWLEDGE OF THE COMPANY. Where any representation or
warranty made by the Company contained in this Agreement is expressly qualified
by reference to its best knowledge, such knowledge shall be deemed to exist if
the matter is within the actual knowledge of the Sellers and/or the executive
officers of the Company.
Section 12.2 EXPENSES. The parties hereto shall pay their own expenses
relating to the transactions contemplated by this Agreement, including, without
limitation, the fees and expenses of their respective counsel and financial
advisers, it being understood that all expenses of the Company incurred in
connection with the transactions contemplated by this Agreement shall be paid by
the Sellers prior to the Closing Date.
Section 12.3 GOVERNING LAW. THE INTERPRETATION AND CONSTRUCTION OF THIS
AGREEMENT, AND ALL MATTERS RELATING HERETO, SHALL BE GOVERNED BY THE LAWS OF THE
STATE OF OHIO APPLICABLE
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TO AGREEMENTS EXECUTED AND TO BE PERFORMED SOLELY WITHIN SUCH STATE.
Section 12.4 CAPTIONS. The Article and Section captions used herein are
for reference purposes only, and shall not in any way affect the meaning or
interpretation of this Agreement.
Section 12.5 PUBLICITY. Except as otherwise required by law, none of the
parties (nor any affiliates thereof) hereto shall issue, prior to the Closing,
any press release or make any other public statement, in each case relating to,
connected with or arising out of this Agreement or the matters contained herein,
without obtaining the prior approval of the Sellers, on the one hand, and the
Purchaser, on the other hand, to the contents and the manner of presentation and
publication thereof. Except as otherwise required by law, after the Closing the
Sellers shall not issue any press release or make any other public statement, in
each case relating to, connected with or arising out of this Agreement or the
matters contained herein, without obtaining the prior approval of the Purchaser.
Section 12.6 NOTICES. Any notice or other communication required or
permitted under this Agreement shall be sufficiently given if delivered in
person or sent by telecopy or by registered or certified mail, postage prepaid,
addressed as follows: if to the Purchaser, to National Fiberstok Corporation,
Suite C150, 5775 Peachtree Dunwoody Road,
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Atlanta, Georgia 33342, (Facsimile Number (404) 705-9929, Attention: Executive
Vice President and Chief Financial Officer, with a copy to its counsel, White &
Case, 1155 Avenue of the Americas, New York, New York 10036 (Facsimile Number
(212) 354-8113), Attention: Frank L. Schiff, Esq.; and if to the Sellers, to
Mr. Calvin Ingram at 10605 Deerfield Road, Cincinnati, Ohio 45242, Facsimile
Number (513) 792-0842, with a copy to: Klaine, Wiley, Hoffmann & Minutolo,
Attention: Gary R. Hoffmann, Esq., (Facsimile Number (513) 241-6754 or such
other address or number as shall be furnished in writing by any such party, and
such notice or communication shall be deemed to have been given as of the date
so delivered, sent by facsimile or mailed.
Section 12.7 PARTIES IN INTEREST. This Agreement may not be transferred,
assigned, pledged or hypothecated by any party hereto, other than by operation
of law. This Agreement shall be binding upon and shall inure to the benefit of
the parties hereto and their respective heirs, executors, administrators,
successors and permitted assigns.
Section 12.8 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, all of which taken together shall constitute one instrument.
Section 12.9 ENTIRE AGREEMENT. This Agreement, including the other
documents referred to herein and therein which form a part hereof and thereof,
contain the entire understanding of
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the parties hereto with respect to the subject matter contained herein and
therein. This Agreement supersedes all prior agreements and understandings
between the parties with respect to such subject matter.
Section 12.10 AMENDMENTS. This Agreement may not be changed orally, but
only by an agreement in writing signed by the parties hereto; provided, that the
parties agree and acknowledge that upon the execution and delivery to the
Purchaser by the Prospective Stockholders of counterpart signature pages in
accordance with Section 6.1 and the appropriate revision and delivery of ANNEX I
by the Prospective Stockholders to the Purchaser, this Agreement shall be deemed
to be amended to add such Prospective Stockholders as Sellers hereunder.
Section 12.11 SEVERABILITY. In case any provision in this Agreement shall
be held invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions hereof will not in any way be
affected or impaired thereby.
Section 12.12 THIRD PARTY BENEFICIARIES. Each party hereto intends that
this Agreement shall not benefit or create any right or cause of action in or on
behalf of any Person other than the parties hereto.
Section 12.13 JURISDICTION. Any judicial proceeding brought against any
of the parties to this Agreement or any dispute
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arising out of this Agreement or any matter related hereto may be brought in the
state courts of the State of Ohio, or in any United States District Court in the
State of Ohio, and, by execution and delivery of this Agreement, each of the
parties to this Agreement accepts the jurisdiction of such courts, and
irrevocably agrees to be bound by any judgment rendered thereby in connection
with this Agreement. The foregoing consent to jurisdiction shall not be deemed
to confer rights on any Person other than the respective parties to this
Agreement.
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IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed on its behalf by its respective officer thereunto duly authorized,
all as of the day and year first above written.
NATIONAL FIBERSTOK CORPORATION
By: /s/ ROBERT M. MILAS
______________________________
Name: ROBERT M. MILAS
Title: PRESIDENT & CEO
AMERICOMM DIRECT MARKETING, INC.
By: /s/ Calvin Ingram
______________________________
Name: Calvin Ingram
Title: Chief Executive Officer
/s/ Calvin Ingram
_______________________________
Calvin Ingram
/s/ Ann Ingram
_______________________________
Ann Ingram
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Exhibit 2.2
NATIONAL FIBERSTOK CORPORATION
FIRST QUARTER REPORT
MAY 6, 1997
National Fiberstok Corporation, the Atlanta based sole operating company of DEC
International, Inc. (the holding company), had first quarter Net Sales of $38.9
million, an increase of 127% over $17.1 million in the same quarter of 1996.
Operating Income was $1.4 million, an increase of 367% over $0.3 million in the
same quarter of 1996. EBITDA was $4.1 million, an increase of 215% over $1.3
million in the same quarter of 1996. The increases in Net Sales, Operating
Income and EBITDA experienced in the quarter were due primarily to the
acquisition of Transkrit Corporation of Roanoke, Virginia, in June, 1996, and to
a lesser extent, the acquisition of Label America, Inc. of Stone Mountain,
Georgia, in February, 1997. The increase in the first quarter 1997 net loss of
$1.3 million from the net loss of $.3 million for the same period in 1996 is due
to higher interest expense related to acquisition financing.
After giving pro forma effect to the acquisitions of Transkrit Corporation and
Label America, Inc. Net Sales for the LTM (last twelve months) ended March 31,
1997, were $171.6 million, a decrease of 7% over the $183.8 million on the same
basis in 1996. EBITDA for the LTM ended March 31, 1997, was $20.2 million, up
2% from the LTM ended December 31, 1996, but down 16% from the $23.9 million for
the LTM ended March 31, 1996. These results reflect continuing softness in the
demand for and a modest decline in the prices of envelopes and impact mailers as
well as a delay in the traditional order pattern of certain label customers.
Pro forma 1997 EBITDA as a percent of net sales, was 11.8% versus 13.0% for the
same period in 1996. The pro forma Net Loss of $1.6 million for the twelve
months ended March 31, 1997, compares to pro forma Net Income of $2.9 million in
1996. 1996 pro forma Net Income includes the $1.9 million favorable tax benefit
discussed in the 1996 fourth quarter report.
Interest Coverage for the pro forma LTM ended March 31, 1997 was 1.6 times,
unchanged from the LTM ended December 31, 1996. At March 31, 1997, there was
$9.3 million outstanding on the $20.0 million line-of-credit and available cash
on the balance sheet was $2.3 million. The borrowing on the line-of-credit was
required to finance the acquisition of Label America, Inc.
Pro forma Debt/EBITDA leverage was 5.1 times for the LTM ended March 31, 1997,
slightly improved from 5.2 for the LTM ended December 31, 1996.
On February 24, 1997, National Fiberstok Corporation acquired Label America,
Inc. Label America was founded in 1980 and has received numerous awards for
quality and innovation and is well known for custom and stock laser and thermal
products. The strategic acquisition expands the pressure sensitive label
business unit to a network of six manufacturing locations with over 400
employees and more than $60 million in total revenues.
<PAGE>
Subsequent to the quarter and on April 24, 1997, National Fiberstok Corporation
acquired AmeriComm Direct Marketing, Inc. (AmeriComm). AmeriComm provides
direct mail products and services, including direct mail distribution and
database management.
<PAGE>
NATIONAL FIBERSTOK CORPORATION
CONDENSED STATEMENT OF OPERATIONS AND BALANCE SHEETS
(in thousands)
For the three months ended
March 31,
1997 1996
---- ----
Net sales $38,858 $17,097
Operating income $ 1,434 $ 320
Net income (loss) ($ 1,347) ($ 262)
EBITDA $ 4,118 $ 1,256
March 31, December 31,
1997 1996
---- ----
ASSETS
Current assets
Cash and cash equivalents $ 2,341 $ 1,979
Trade receivables 19,121 17,384
Inventories 11,939 11,261
Other 3,606 2,689
--------- ---------
Total Current Assets 37,007 33,313
Property, plant and equipment, net 47,561 47,367
Other assets 59,286 52,694
--------- ---------
$143,854 $133,374
--------- ---------
--------- ---------
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities $ 26,243 $ 14,473
Noncurrent liabilities 4,553 4,427
Long-term debt 102,283 102,352
--------- ---------
Total liabilities 133,079 121,252
Stockholder's equity 10,775 12,122
--------- ---------
$143,854 $133,374
--------- ---------
--------- ---------
