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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
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Date of Report (Date of earliest event reported) August 17, 1998 Commission File Number 000-24385
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SCHOOL SPECIALTY, INC.
(Exact name of registrant)
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Delaware 39-0971239
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(State of organization) (I.R.S. Employer Identification Number)
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1000 North Bluemound Drive, Appleton, WI 54914
(Address of principal executive offices and zip code)
(920) 734-2756
(Registrant's telephone Number)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On August 17, 1998, School Specialty, Inc. (the "Company") acquired
all of the common stock of Beckley-Cardy, Inc. ("Beckley-Cardy") through the
merger of a wholly-owned subsidiary of the Company into The National School
Supply Company, of which Beckley-Cardy is a wholly-owned subsidiary.
Beckley-Cardy is the educational supply industry's second largest
distributor, based in Mansfield, Ohio. The Company intends to continue to use
the acquired assets for substantially the same purposes. The purchase price
was $76.3 million, subject to adjustment. The Company also succeeded to
Beckley-Cardy's credit facilities of approximately $60 million on the closing
date, which the Company retired at closing from draws on its own credit
facility. The purchase price was based on the Company's evaluation of the
financial condition, business operations and prospects of Beckley-Cardy and
was negotiated in an arms-length transaction among unrelated and unaffiliated
parties. Funds for the acquisition were obtained from a draw on the Company's
existing line of credit with NationsBank, NA.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements. It is impracticable to provide the
required financial statements at this time. The required financial statements
will be filed as soon as practicable, but not later than 60 days after the
date by which this report on Form 8-K must be filed.
(b) Pro forma financial information. It is impracticable to provide
the required pro forma financial information at this time. The required pro
forma financial information will be filed as soon as practicable, but not
later than 60 days after the date by which this report on Form 8-K must be
filed.
(c) The following exhibits are filed with this report:
Exhibit No.
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2.1 Agreement and Plan of Merger dated as of August 14,
1998 among the National School Supply Company,
stockholders of The National School Supply Company, BCG
Acquisition Corp. and School Specialty, Inc.
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SIGNATURE
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.
SCHOOL SPECIALTY, INC.
BY: /s/ Donald J. Noskowiak
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Donald J. Noskowiak
Chief Financial Officer
Dated: August 31, 1998
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Exhibit 2.1
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AGREEMENT
AND PLAN OF MERGER
among
THE NATIONAL SCHOOL SUPPLY COMPANY
STOCKHOLDERS OF
THE NATIONAL SCHOOL SUPPLY COMPANY
BCG ACQUISITION CORP.
and
SCHOOL SPECIALTY, INC.
Dated as of August 14, 1998
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TABLE OF CONTENTS
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1. DEFINITIONS.....................................................................................1
1.1. Certain Matters of Construction...............................................1
1.2. Certain Definitions...........................................................2
2. THE MERGER.....................................................................................10
2.1. The Merger...................................................................10
2.2. Effective Time...............................................................10
2.3. Certificate of Incorporation; By-Laws........................................11
2.4. Directors and Officers.......................................................11
2.5. Effect on Capital Stock......................................................11
2.6. Exchange of Certificates.....................................................12
2.7. Stock Transfer Books.........................................................14
2.8. Lost, Stolen or Destroyed Certificates.......................................14
2.9. Acceptance of Liability by Stockholders and Optionholders....................14
3. MERGER CONSIDERATION...........................................................................14
3.1. Acquisition Price............................................................14
4. REPRESENTATIONS AND WARRANTIES OF THE SELLERS..................................................15
4.1. Organization and Authority...................................................15
4.2. Authorization and Enforceability.............................................15
4.3. Non-Contravention, Etc.......................................................15
4.4. Title to Stock; Prior Owner Debt.............................................15
5. REPRESENTATIONS AND WARRANTIES RELATING TO THE COMPANY.........................................16
5.1. Corporate Matters, etc.......................................................16
5.2. Financial Statements, etc....................................................18
5.3. Change in Condition Since Balance Sheet Date.................................19
5.4. Environmental Matters, etc...................................................21
5.5. Real and Personal Property...................................................22
5.6. Intellectual Property Rights.................................................23
5.7. Certain Contractual Obligations..............................................24
5.8. Insurance, etc...............................................................25
5.9. Litigation, etc..............................................................25
5.10. Compliance with Laws, etc....................................................26
5.11. Tax Matters..................................................................26
5.12. Employee Benefit Plans.......................................................27
5.13. Labor Matters................................................................30
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5.14. Brokers, etc.................................................................30
6. REPRESENTATIONS AND WARRANTIES OF THE BUYER....................................................31
6.1. Corporate Matters, etc.......................................................31
6.2. Financial Condition, etc.....................................................32
6.3. Investment Intent, Related Matters...........................................32
6.4. Litigation...................................................................32
6.5. Brokers, etc.................................................................32
7. CERTAIN AGREEMENTS OF THE PARTIES..............................................................33
7.1. Payment of Transfer Taxes and Other Charges..................................33
7.2. Confidentiality Covenant of the Buyer........................................33
7.3. Operation of Business, Related Matters.......................................33
7.4. Preparation for Closing......................................................34
7.5. No Section 338 Election......................................................35
7.6. Further Assurances...........................................................35
8. CONDITIONS TO THE OBLIGATION TO CLOSE OF THE BUYER.............................................37
8.1. Representations, Warranties and Covenants....................................37
8.2. Legality; Governmental Authorization; Litigation.............................38
8.3. Third Party Consents.........................................................38
8.4. Opinion of Counsel...........................................................38
8.5. General......................................................................38
9. CONDITIONS TO THE OBLIGATION TO CLOSE OF THE SELLERS...........................................39
9.1. Representations, Warranties and Covenants....................................39
9.2. Legality; Government Authorization; Litigation...............................39
9.3. Opinion of Counsel...........................................................40
9.4. General......................................................................40
10. WARN...........................................................................................40
11. INDEMNIFICATION................................................................................40
11.1. Indemnification..............................................................40
11.2. Time Limitation on Indemnification...........................................41
11.3. Monetary Limitations on Indemnification......................................41
11.4. Third Party Claims, etc......................................................42
11.5. Certain Other Indemnity Matters..............................................42
11.6. Tax Indemnity................................................................44
12. CONSENT TO JURISDICTION; JURY TRIAL WAIVER.....................................................45
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12.1. Consent to Jurisdiction......................................................45
12.2. WAIVER OF JURY TRIAL.........................................................46
13. TERMINATION....................................................................................46
13.1. Termination of Agreement.....................................................47
13.2. Effect of Termination........................................................47
13.3. Time of Essence..............................................................48
13.4. Confidentiality; Non-Compete.................................................48
14. MISCELLANEOUS..................................................................................49
14.1. Entire Agreement; Waivers....................................................49
14.2. Amendment or Modification....................................................49
14.3. Investigation; No Additional Representations.................................49
14.4. Severability.................................................................49
14.5. Successors and Assigns.......................................................49
14.6. Sellers' Representative......................................................50
14.7. Notices......................................................................50
14.8. Public Announcements.........................................................52
14.9. Headings, etc................................................................52
14.10. Disclosure...................................................................52
14.11. Knowledge....................................................................52
14.12. Third Party Beneficiaries....................................................53
14.13. Counterparts.................................................................53
14.14. Governing Law................................................................53
14.15. Strict Construction..........................................................53
14.16. Expenses.....................................................................53
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EXHIBITS
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Exhibit 8.4 Form of Sellers' Counsel Opinion
Exhibit 8.8 Title Insurance
Exhibit 9.3 Form of Buyer's Counsel Opinion
SCHEDULES
Schedule 1 Sellers
Schedule 2.5.3 Options and Option Price
Schedule 3.1 Selling Shareholders; Shares and Options
Schedule 4.3 Sellers' Exceptions to Non-Contravention
Schedule 4.4 Prior Owner Debt
Schedule 5.1.3 Company Exceptions to Non-Contravention
Schedule 5.1.5 Subsidiaries
Schedule 5.1.7 Minute Books
Schedule 5.1.8 Directors and Officers
Schedule 5.2.2 Character of Financial Information
Schedule 5.2.3 Liabilities and Obligations
Schedule 5.3 Changes in Condition Since Balance Sheet Date
Schedule 5.4 Environmental Matters
Schedule 5.5.1 Liens on Assets/Personal Property
Schedule 5.5.2 Leases, Owned Real Property
Schedule 5.6 Trademarks and other Intellectual Property Rights
Schedule 5.7 Contractual Obligations
Schedule 5.8 Insurance
Schedule 5.9 Litigation Matters
Schedule 5.10 Compliance with Law
Schedule 5.11 Tax Matters
Schedule 5.12 Company Plans and Benefit Arrangements
Schedule 5.13 Labor Matters
Schedule 5.16 Books and Records
Schedule 5.17 Accounts and Safe Deposit Boxes
Schedule 5.20 Names of Each of the Target Companies
Schedule 7.3 Operations of Business
Schedule 8.3 Necessary Consents
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AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (this "Agreement") is made as of the
14th day of August, 1998, among The National School Supply Company, a Delaware
corporation (the "Company"), each stockholder or holder of options of the
Company whose signatures appear on the signature pages hereto (each a "Seller"),
BCG Acquisition Corp., a Delaware corporation ("MergeCo"), School Specialty,
Inc., a Delaware corporation (the "Buyer") and solely for purposes of Section
13.4, Butler Capital Corporation and Fenway Partners, Inc.
Recitals
1. Each of the Sellers respectively owns the number of issued and
outstanding shares of common stock of the Company, par value $0.01 per share
("Common Stock"), and/or options or warrants to purchase Common Stock
("Options"), as set forth opposite such Seller's name on Schedule 1 hereto.
2. Buyer owns all of the outstanding capital stock of MergeCo.
3. The respective Boards of Directors of the Company and MergeCo have
each determined that it is advisable and in the best interests of their
respective stockholders to effect a merger of MergeCo with and into the Company
(the "Merger") upon the terms and subject to the conditions set forth herein and
in accordance with the applicable provisions of the Delaware General Corporation
Law (the "DGCL").
4. Pursuant to the Merger, each outstanding share of Common Stock shall
be converted into the right to receive the Merger Consideration, all upon the
terms and conditions set forth herein.
5. Prior to the Merger, all Options shall be converted into the right
to receive the Merger Consideration, all upon the terms and conditions set forth
herein.
Agreement
Therefore, in consideration of the foregoing and the mutual agreements
and covenants set forth below, the parties hereto hereby agree as follows:
1. DEFINITIONS. For purposes of this Agreement:
1.1. Certain Matters of Construction. In addition to the
definitions referred to or set forth below in this Section 1:
(i) The words "hereof", "herein", "hereunder" and words of
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similar import shall refer to this Agreement as a whole
and not to any particular Section or provision of this
Agreement, and reference to a particular Section of
this Agreement shall include all subsections thereof.
(ii) The words "party" and "parties" shall refer to the
Sellers, the Company, MergeCo and the Buyer.
(iii) Definitions shall be equally applicable to both the
singular and plural forms of the terms defined, and
references to the masculine, feminine or neuter gender
shall include each other gender.
(iv) Accounting terms used herein and not otherwise defined
herein are used herein as defined by Generally Accepted
Accounting Principles (as defined below), consistently
applied.
(v) All references in this Agreement to any Exhibit or
Schedule shall, unless the context otherwise requires,
be deemed to be a reference to an Exhibit or Schedule
as such may be amended in accordance with Section
7.4.3, as the case may be, to this Agreement, all of
which are made a part of this Agreement.
(vi) The word "including" shall mean including without
limitation.
1.2. Certain Definitions. The following terms shall have the
following meanings:
1.2.1. "Action" shall mean any claim, action, cause of action
or suit by or before any Governmental Authority, or any other material
dispute which could reasonably be expected to give rise to a claim,
action, cause of action or suit by or before any Governmental Authority
or could reasonably be expected to require payment by or result in a
liability to any Target Company of more than $50,000.
1.2.2. "Affiliate" shall mean, as to the Company (or other
specified Person), each Person directly or indirectly controlling,
controlled by or under common control with the Company (or such
specified Person). For purposes of this definition, the term "control"
(including the terms "controlling," "controlled by" and "under common
control with") means the possession, direct or indirect, of the power
to direct or cause the direction of the management and policies of a
Person, whether through ownership of voting securities or otherwise.
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1.2.3. "Agreement" is defined in the Preamble.
1.2.4. "Audited Financials" is defined in Section 5.2.1.
1.2.5. "Balance Sheet" shall mean the consolidated balance
sheet as of March 31, 1998 included in the Audited Financials.
1.2.6. "Balance Sheet Date" shall mean March 31, 1998.
1.2.7. "Bank Debt" shall mean all Debt (including, without
limitation, all outstanding principal, prepayment premiums, if any, and
accrued interest, fees and expenses related thereto) of the Target
Companies to U.S. Bank National Association, formerly known as First
Bank National Association (the "Bank") under the Revolving Credit, Term
Loan and Guaranty Agreement dated as of September 13, 1994, as amended
to date, between the Target Companies and the Bank.
1.2.8. "Business" shall mean the business of the Target
Companies as such business is currently conducted.
1.2.9. "Business Day" shall mean any day on which banking
institutions in New York, New York are customarily open for the purpose
of transacting business.
1.2.10. "Buyer" is defined in the Preamble.
1.2.11. "Buyer Group" is defined in Section 11.1.
1.2.12. "By-laws" shall mean the corporate by-laws of a
corporation, as from time to time in effect.
1.2.13. "Certificate" is defined in Section 2.6.1.
1.2.14. "Charter" shall mean the certificate or articles of
incorporation or organization or other charter or organizational
documents of any Person (other than an individual), each as from time
to time in effect.
1.2.15. "Closing" is defined in Section 2.2.
1.2.16. "Closing Date" is defined in Section 2.2.
1.2.17. "Closing Tax Reserve" shall mean Tax Reserves, less
reserves for deferred Taxes, less an amount equal to the difference
between the Target Companies' actual Income Tax for the taxable period
(or portion thereof) ending on the Closing
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Date and their Income Tax for such period (or portion thereof)
determined without the deferral of interest under section 163(j) of
the Code.
1.2.18. "Current Tax Accruals" is defined in Section
5.11(viii).
1.2.19. "Code" shall mean the federal Internal Revenue Code
of 1986, as amended.
1.2.20. "Common Stock" is defined in the Recitals.
1.2.21. "Company" is defined in the Preamble.
1.2.22. "Company Intangibles" is defined in Section 5.6.
1.2.23. "Company Plans" is defined in Section 5.12.
1.2.24. "Confidential Information" shall mean all information
pertaining to the business and operations of the Target Companies that
is not generally available to the public and that the Target Companies
keep confidential, including, but not limited to, plans and strategies
of the Target Companies, financial information, information as to
suppliers, pricing information, and people and organizations with whom
the Target Companies have business relationships.
1.2.25. "Confidentiality Agreement" is defined in Section
7.2.
1.2.26. "Consent" is defined in Section 4.3.
1.2.27. "Contracts" is defined in Section 5.7.
1.2.28. "Contractual Obligation" shall mean, with respect to
any Person, any written or enforceable oral contract, agreement, deed,
mortgage, lease, license, indenture, note, bond, or other document or
instrument (including, without limitation, any document or instrument
evidencing or otherwise relating to any indebtedness but excluding the
Charter and By-laws of such Person) to which or by which such Person is
legally bound.
1.2.29. "Debt" shall mean all obligations of such Person (i)
for borrowed money, (ii) evidenced by notes, bonds, debentures or
similar instruments, but in no event including operating leases, (iii)
in respect of capitalized leases and purchase money obligations for the
acquisition of equipment and fixed assets, and (iv) in the nature of
guarantees of obligations of the type described in clauses (i), (ii)
and (iii) above of any other Person.
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1.2.30. "Dissenting Shares" is defined in Section 2.6.4.
1.2.31. "Effective Time" is defined in Section 2.2.
1.2.32. "Enforceable" shall mean, with respect to any
Contractual Obligation, that such Contractual Obligation is the legal,
valid and binding obligation of the Person in question, enforceable
against such Person in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency, reorganization
or other laws affecting creditors' rights generally and general
principles of equity (whether considered in a proceeding at law or in
equity).
1.2.33. "Environmental Laws" shall mean any federal, state or
local law as in effect as of the date hereof relating to (i) releases
or threatened releases of Hazardous Substances, and (ii) the
manufacture, handling, transport, use, treatment, storage or disposal
of Hazardous Substances.
1.2.34. "ERISA" shall mean the federal Employee Retirement
Income Security Act of 1974 or any successor statute, as amended and as
in effect as of the date hereof.
1.2.35. "Expense Adjustment" shall mean the sum of (i) all
legal, accounting and other third party professional fees and expenses
incurred by the Company in connection with the transactions
contemplated hereby up through the Closing Date, except for the fees
and expenses of Ernst & Young LLP, (ii) the amount of all
reimbursements of out-of-pocket and overhead expenses of Butler Capital
Corporation and Fenway Partners Capital Fund, L.P. paid by the Company
in connection with the transactions contemplated hereby, (iii) 50% of
the first $50,000 in aggregate payments and 100% of all payments
thereafter made by the Company to third parties in connection with
obtaining consents in connection with this Agreement and the
transactions contemplated hereby, including without limitation consents
listed on Schedule 8.3, and (iv) the amount of prepayment premiums paid
by the Company in excess of $700,000 in connection with the payment of
Prior Owner Debt pursuant to Section 2.2.
1.2.36. "Filing" is defined in Section 4.3.
1.2.37. "Financial Statements" is defined in Section 5.2.1.
1.2.38. "Generally Accepted Accounting Principles" or "GAAP "
shall mean generally accepted accounting principles in the United
States as in effect and applied in the preparation of the Audited
Financials as of and for the year ended March 31, 1998, consistently
applied.
1.2.39. "Governmental Authority" shall mean any federal, state
or local
<PAGE>
government, regulatory or administrative agency, or court (or any
department, bureau or division thereof).
1.2.40. "Governmental Order" shall mean any decree,
stipulation, determination or award entered by any Governmental
Authority.
1.2.41. "Hazardous Substances" shall mean (i) substances
defined in or regulated as toxic or hazardous under the following
federal statutes and their state and local counterparts, as well as
these statutes' implementing regulations, in each case, as amended and
as in effect as of the Closing Date: the Hazardous Materials
Transportation Act, the Resource Conservation and Recovery Act, the
Comprehensive Environmental Response, Compensation and Liability Act,
the Clean Water Act, the Safe Drinking Water Act, the Asbestos Hazard
Emergency Response Act, the Atomic Energy Act, the Toxic
Substances Control Act, the Federal Insecticide, Fungicide, and
Rodenticide Act, and the Clean Air Act; (ii) petroleum and petroleum
products, including crude oil and any fractions thereof; (iii) natural
gas, synthetic gas and any mixtures thereof; (iv) PCBs; and (v)
asbestos.
1.2.42. "HSR Act" is defined in Section 6.1.3.
1.2.43. "Income Taxes" means U.S. federal, state, local or
foreign income taxes (including alternative minimum taxes), and "Income
Tax Returns" means Tax Returns reporting Income Taxes.
1.2.44. "Indemnifying Party" is defined in Section 11.1.
1.2.45. "Indemnitee" is defined in Section 11.1.
1.2.46. "Individual Sellers" shall mean each of James Miller,
Jack Ferner, James Loudon, Edward Gyenes, and David McKeon.
1.2.47. "Individual Sellers' Representative" is defined in
Section 14.6.
1.2.48. "Intangibles" is defined in Section 5.6.
1.2.49. "Interim Financials" is defined in Section 5.2.1.
1.2.50. "IRS" is defined in Section 5.11.
1.2.51. "Leases" is defined in Section 5.5.2.
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1.2.52. "Legal Requirement" shall mean any federal, state or
local statute, ordinance, code, rule or regulation.
1.2.53. "Licenses" is defined in Section 5.6.
1.2.54. "Lien" shall mean any mortgage, pledge, lien, security
interest, attachment or encumbrance of any kind or nature whatsoever,
provided, however, that the term "Lien" shall not include (i)
statutory liens for Taxes not yet due or payable, (ii) encumbrances in
the nature of zoning restrictions, easements, rights or restrictions
of record on the use of real property if the same do not materially
detract from the value of the property encumbered thereby or
materially impair the use of such property in the Business as
currently conducted or proposed to be conducted, (iii) liens to secure
landlords, lessors or renters under leases or rental agreements
confined to the premises rented, (iv) deposits or pledges made in
connection with, or to secure payment of, worker's compensation,
unemployment insurance, old age pension programs mandated under
applicable Legal Requirements or other social security, (v) liens in
favor of carriers, warehousemen, mechanics and materialmen, liens to
secure claims for labor, materials or supplies and other like liens,
and (vi) restrictions on transfer of securities imposed by applicable
state and federal securities laws.
1.2.55. "Losses" shall mean any and all damages, deficiencies,
awards, assessments, amounts paid in good faith settlement, judgments,
fines, penalties, costs and expenses (including, without limitation,
reasonable legal costs and expenses); provided, however, that the
amount of any such Losses for the purposes of indemnification hereunder
shall be determined net of the sum of any amounts reasonably
recoverable by the Indemnitee under insurance policies with respect to
such Loss and the present value (based on a discount factor equal to
the then current Citibank prime rate) of any Tax Benefit reasonably
expected to be realized by the Indemnitee (or any consolidated,
combined or unitary group of which the Indemnitee is also a member)
arising from the incurrence or payment of such loss. Such Tax Benefit
shall be net of any Taxes attributable to the insurance recovery or
indemnification payment. Buyer and Sellers agree that any
indemnification payments under the Agreement shall be considered an
adjustment to the Merger Consideration.
1.2.56. "Majority Sellers" shall mean Sellers holding shares
of Common Stock and/or Options representing seventy-five percent (75%)
of the aggregate number of shares of Common Stock and Options held by
all Sellers as of the date hereof as shown on Schedule 3.1, calculated
by assuming the exercise of all such Options.
1.2.57. "Material Adverse Effect" shall mean any change in or
effect on the business of any of the Target Companies which has a
material adverse effect on the business, operations, assets, properties
and condition (financial or otherwise) of the Target Companies taken as
a whole or on the ability of the Company to perform its
<PAGE>
obligations under this Agreement.
1.2.58. "Merger Consideration" is defined in Section 3.1.
1.2.59. "Option Price" is defined in Section 2.5.3.
1.2.60. "Optionholder" is defined in Section 2.6.1.
1.2.61. "Options" is defined in the Recitals.
1.2.62. "Ordinary Course of Business" shall mean the ordinary
course of the Target Companies' business consistent with past practice.
1.2.63. "Owned Personalty" is defined in Section 5.5.1.
1.2.64. "Permits" is defined in Section 5.10.
1.2.65. "Person" shall mean any individual, partnership,
corporation, association, trust, joint venture, unincorporated
organization or other entity other than any
Governmental Authority.
1.2.66. "Personalty Leases" is defined in Section 5.5.1.
1.2.67. "Prior Owner Debt" shall mean all Debt (including,
without limitation, all outstanding principal, prepayment premiums, if
any, and accrued interest, fees and expenses related thereto) of the
Target Companies to (i) Mezzanine Lending Associates I, L.P. under the
Company's $1,162,077.34 Subordinated Note due 1999, dated October 29,
1996; (ii) Mezzanine Lending Associates II, L.P. under Beckley-Cardy,
Inc.'s $2,371,007.07 Subordinated Note due 2002, dated October 29, 1996
and the Company's $2,762,211.86 Subordinated Note due 1999, dated
October 29, 1996; (iii) Mezzanine Lending Associates III, L.P. under
Beckley-Cardy, Inc.'s $2,371,007.07 Subordinated Note due 2002, dated
October 29, 1996 and the Company's $3,902,698.62 Subordinated Note due
1999, dated October 29, 1996; (iv) Fenway Partners Capital Fund, L.P.
under the Company's $750,492.35 Subordinated Note due 1999, dated
October 29, 1996; Beckley-Cardy, Inc.'s $1,531,242.88 Subordinated Note
due 2002, dated October 29, 1996; the Company's $1,783,890.61
Subordinated Note due 1999, dated October 29, 1996; Beckley-Cardy,
Inc.'s $1,531,242.88 Subordinated Note due 2002, dated October 29,
1996; and the Company's $2,520,439.33 Subordinated Note due 1999, dated
October 29, 1996.
1.2.68. "Pro Rata Share" shall mean as to each Seller (and
each Stockholder and Optionholder deemed pursuant to Section 2.9 to
constitute a Seller for all purposes of Section 11) the percentage set
opposite the name of such Seller on Schedule 1
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hereto.
1.2.69. "Real Property" is defined in Section 5.5.2.
1.2.70. "Securities Act" is defined in Section 6.3.
1.2.71. "Seller" is defined in the Preamble.
1.2.72. "Share" is defined in Section 2.5.1.
1.2.73. "Stockholder" is defined in Section 2.6.1.
1.2.74. "Structures" is defined in Section 5.5.2.
1.2.75. "Subsidiary" shall mean any Person of which the
Company (or other specified Person) shall own directly or indirectly
through a Subsidiary, a nominee arrangement or otherwise at least a
majority of the outstanding capital stock (or other shares of
beneficial interest) entitled to vote generally.
1.2.76. "Surviving Corporation" is defined in Section 2.1.
1.2.77. "Target Companies" shall mean, collectively, the
Company and its Subsidiaries.
1.2.78. "Tax" shall mean any (and in the plural "Taxes" shall
mean all) (a) federal, state, local or foreign and other taxes,
assessments, duties and similar charges of any kind (including, without
limitation, income, gross receipts, franchise, estimated, gains,
withholding, alternative minimum, add-on minimum, sales, use, transfer,
registration, value added, excise, severance, stamp, occupation,
premium, profit, windfall profit, customs duty, real property, personal
property, capital stock, social security, employment, unemployment,
disability, payroll, license, employee, and other taxes of every kind
and nature) arising under or imposed by any Legal Requirement,
including, without limitation, all interest, penalties and additions
with respect to any of the foregoing; (b) liability for payment of
amounts described in clause (a) as a result of transferee liability, of
being a member of an affiliated, consolidated, combined or unitary
group for any period, or otherwise through operation of law; and (c)
liability for payment of (or with respect to) amounts described in
clauses (a) or (b) as a result of any tax sharing, tax indemnity or tax
allocation agreement or any other agreement to indemnify any other
person for Taxes.
1.2.79. "Tax Benefit" shall mean any reduction in Tax realized
by any Person attributable to the consummation of the transactions
contemplated by this Agreement, which Tax Benefit shall be determined
after first taking all other items of income, gain,
<PAGE>
loss, deduction or credit of such Person into account.
1.2.80. "Tax Liabilities" is defined in Section 11.6.
1.2.81. "Tax Reserves" shall mean the amounts of accrued
Income Tax reflected on the Balance Sheet in the aggregate amount of
$476,752, plus reserves for deferred Taxes.
1.2.82. "Tax Return" shall mean any federal, state, local, and
foreign returns, reports, information returns, claims for refund, and
declarations of estimated Tax, or other documents with respect to Taxes
required to be filed with a Taxing authority and any schedule,
supporting information, or attachments to any of the foregoing or
amendments thereto, including (where permitted or required)
consolidated, combined or unitary returns for any group of entities.
1.2.83. "WARN" shall mean the Worker Adjustment
and Retraining Notification Act of 1988.
2. THE MERGER.
2.1. The Merger. At the Effective Time (as defined in Section 2.2
below), subject to and upon the terms and conditions of this Agreement and the
DGCL: MergeCo shall merge with and into the Company; the corporate existence of
the Company shall continue; and the separate corporate existence of MergeCo
shall cease. The corporate identity, existence, name, purposes, franchises,
powers, rights and immunities of the Company shall continue unaffected and
unimpaired by the merger, and the corporate identity, existence, purposes,
franchises, powers, rights and immunities of MergeCo shall be merged into the
Company which shall be fully vested therewith. The Company shall be subject to
and shall assume all of the debts and liabilities of MergeCo as if the Company
had itself incurred them, and all rights of creditors and all liens upon the
property of each of the Company and MergeCo shall be preserved unimpaired. The
Company as the surviving corporation after the Merger is hereinafter sometimes
referred to as the "Surviving Corporation."
2.2. Effective Time. The closing of the Merger and the other
transactions contemplated by this Agreement (the "Closing") shall take place at
the offices of Ropes & Gray, Boston, Massachusetts or such other location as the
parties may agree, at 10:00 a.m. (eastern standard time) on August 17, 1998, or
as promptly as practicable thereafter, subject to the satisfaction or waiver of
the conditions set forth in Sections 8 and 9, at which time (i) the parties
hereto shall cause the Merger to be consummated by filing a certificate of
merger as contemplated by the DGCL, together with any required related
certificates, with the Secretary of State of the State of Delaware (the time of
such filing being the "Effective Time" and the date of the Closing being
referred to as the "Closing Date") and (ii) the Buyer shall pay in full the Bank
Debt and the Prior Owner Debt by wire transfer of immediately available federal
<PAGE>
funds. The consummation of the transactions contemplated by this Agreement shall
be deemed effective as of August 1, 1998 and, except as may be provided to the
contrary in Section 11 (Indemnification), all economic profits and losses of the
Company as of August 1, 1998 shall accrue to the benefit of and be deemed to be
the responsibility of Buyer; provided, however, that the representations and
warranties of the parties set forth in this Agreement shall be effective as of
the date hereof unless they specifically refer to an earlier date.
2.3. Certificate of Incorporation; By-Laws.
2.3.1. Certificate of Incorporation. Upon such Merger, the
Certificate of Incorporation of MergeCo, as in effect immediately prior
to the Effective Time, shall be the Certificate of Incorporation of the
Surviving Corporation until thereafter amended in accordance with the
DGCL and such Certificate of Incorporation.
2.3.2. By-Laws. Upon such Merger, the By-Laws of MergeCo, as
in effect immediately prior to the Effective Time, shall be the By-Laws
of the Surviving Corporation until thereafter amended in accordance
with the DGCL, the Certificate of Incorporation of the Surviving
Corporation and such By-Laws; provided, however, that the Board of
Directors of the Surviving Corporation shall consist of the same number
of directors as the number of directors of MergeCo at the Effective
Time.
2.4. Directors and Officers. Upon such Merger, the directors of MergeCo
immediately prior to the Effective Time shall be the directors of the Surviving
Corporation, each to hold office in accordance with the Certificate of
Incorporation and By-Laws of the Surviving Corporation, and the officers of
MergeCo immediately prior to the Effective Time shall be the officers of the
Surviving Corporation, in each case until their respective successors are duly
elected or appointed and qualified.
2.5. Effect on Capital Stock. At the Effective Time, by virtue of the
Merger and without any action on the part of the Company, MergeCo or the holders
of any of the following securities:
2.5.1. Conversion of Securities. Each share of Class A Common
Stock and Class B Common Stock issued and outstanding immediately prior
to the Effective Time (excluding any shares to be canceled pursuant to
Section 2.5.2) shall be converted into the right to receive the Merger
Consideration and each share of Class C Common Stock issued and
outstanding immediately prior to the Effective Time (excluding any
shares to be canceled pursuant to Section 2.5.2) shall be converted
into the right to receive Merger Consideration equal to the Merger
Consideration that would have been received had such share of Class C
Common Stock been converted into Class A Common Stock pursuant to the
terms of the Company's Certificate of Incorporation in effect
immediately prior to the Merger. Each share of Class A Common Stock,
Class B Common Stock and Class C Common Stock is defined herein as a
"Share".
<PAGE>
2.5.2. Cancellation. Each Share held in the treasury of the
Company and each Share owned by any direct or indirect wholly owned
subsidiary of the Company immediately prior to the Effective Time
shall, by virtue of the Merger and without any action on the part of
the holder thereof, cease to be outstanding, be canceled and retired
without payment of any consideration therefor and cease to exist.
2.5.3. Stock Rights. Prior to the Effective Time, the Board of
Directors of the Company (or, if appropriate, any Committee thereof)
shall adopt appropriate resolutions and take all other actions
necessary to provide that each Option issued and outstanding
immediately prior to the Effective Time shall, by virtue of the Merger
and without any action on the part of the holder thereof, be converted
into the right to receive, upon the surrender of the instrument
evidencing such Option, a cash payment equal to the product (the
"Option Price") of (A) the number of Shares subject to such Option and
(B) the excess of the Merger Consideration over the per share exercise
price of the Option, and each Option so converted will, upon such
payment, be canceled. Schedule 2.5.3 sets forth a list of all
outstanding Options, the applicable exercise price and the Option
Price.
2.5.4. Capital Stock of MergeCo. Each share of common stock,
$0.01 par value per share, of MergeCo issued and outstanding
immediately prior to the Effective Time shall be converted into and
exchanged for one validly issued, fully paid and nonassessable share of
common stock, $0.01 par value per share, of the Surviving Corporation.
2.6. Exchange of Certificates.
2.6.1. Exchange Procedures. At the Effective Time or as soon
as reasonably practicable after the Effective Time, each holder of
Shares (a "Stockholder") and each holder of Options (an "Optionholder")
shall deliver (i) certificates which immediately prior to the Effective
Time represented outstanding Shares or Options of the Company (each, a
"Certificate") (ii) a letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon proper delivery of the Certificates
to the Surviving Corporation and shall be in such form and have such
other provisions as may be reasonably acceptable to the Buyer and the
Majority Sellers), and (iii) instructions to effect the surrender of
the Certificates in exchange for the Merger Consideration (as defined
below) in accordance with the terms and conditions set forth in this
Agreement. Upon surrender of a Certificate for cancellation to the
Surviving Corporation together with such letter of transmittal, duly
executed, and such other customary documents as may be required
pursuant to such instructions, the holder of such Certificate shall be
entitled to receive in exchange therefor the Merger Consideration
calculated in accordance with (and as defined in) Section 3 and the
Certificate so surrendered shall forthwith be canceled. The Merger
<PAGE>
Consideration shall be payable at the option of each holder (i) by wire
transfer of immediately available federal funds to a single account
designated in such letter of transmittal or (ii) by check from the
Surviving Corporation. In the event of a transfer of ownership of
Shares or Options that is not registered in the transfer records of the
Company as of the Effective Time, the Merger Consideration may be paid
in accordance with this Section 2 to a transferee if the Certificate
evidencing such Shares or Options is presented to the Surviving
Corporation, accompanied by all documents required to evidence and
effect such transfer pursuant to this Section 2.6.1. At and after the
Effective Time, each holder of a Certificate to be canceled pursuant to
this Section 2.6.1 or Dissenting Shares (as defined below) shall cease
to have any rights as a Stockholder or Optionholder of the Company or
the Surviving Corporation, except for the right to surrender
Certificates in the manner prescribed by this Section 2.6.1 in exchange
for payment of the Merger Consideration or, in the case of a holder of
Dissenting Shares, the right to perfect the right to receive payment
for Dissenting Shares pursuant to the provisions of the DGCL. No
transfer of Shares shall be made on the stock transfer books of the
Surviving Corporation at or after the Effective Time.
2.6.2. No Liability. Any Stockholders or Optionholders who
have not tendered their duly executed Certificates as provided in
Section 2.6.1 at or prior to the Effective Time shall thereafter be
entitled to look to the Surviving Corporation only as general
creditors. Notwithstanding the foregoing, the Surviving Corporation
shall not be liable to any holder of Shares or Options for any Merger
Consideration delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law.
2.6.3. Withholding Rights. The Surviving Corporation shall
be entitled to deduct and withhold from the Merger Consideration
otherwise payable pursuant to this Agreement to any holder of Shares
or Options such amounts as the Surviving Corporation is required to
deduct and withhold with respect to the making of such payment under
the Code, or any provision of state, local or foreign tax law. To the
extent that amounts are so withheld by Surviving Corporation, such
withheld amounts shall be treated for all purposes of this Agreement
as having been paid to the holders of the Shares or Options in respect
of which such deduction and withholding was made by the Surviving
Corporation.
2.6.4. Dissenting Shares. Notwithstanding anything in this
Agreement to the contrary but only in the circumstances and to the
extent provided by the DGCL, Shares that are outstanding immediately
prior to the Effective Time and that are held by Stockholders who were
entitled to and did not vote such Shares in favor of the Merger or
consent thereto in writing and who shall have properly and timely
delivered to the Company a written demand for payment (a copy of which
shall be promptly provided to the Buyer) of the fair value of Shares in
the manner provided in and complied with all of the relevant provisions
of Section 262 of the DGCL ("Dissenting Shares") shall not be converted
into or represent the right to receive the Merger Consideration.
<PAGE>
Instead, the holders thereof shall be entitled to payment of the fair
cash value of such Shares in accordance with the provisions of Section
262 of the DGCL; provided, however, that (i) if any holder of
Dissenting Shares shall subsequently deliver a written withdrawal of
his demand for payment of the fair value of such Shares and the Board
of Directors of the Company or the Surviving Corporation, as the case
may be, shall consent thereto, or (ii) if any holder fails to establish
and perfect his entitlement to the relief provided in such Section 262
or if the right of such holder to receive the fair value of such Shares
as to which he seeks relief otherwise terminates pursuant to Section
262 of the DGCL, such Shares shall thereupon cease to be deemed to be
Dissenting Shares and shall be deemed to have been converted into and
represent the right to receive, upon the surrender of the Certificates
representing such Shares, as of the Effective Time, the Merger
Consideration. The Company shall not, except with the prior written
consent of the Buyer, voluntarily make or commit to make any payment
with respect to demands for appraisal of Shares or offer to settle any
such demands.
2.7. Stock Transfer Books. At the Effective Time, the stock transfer
books of the Company shall be closed, and there shall be no further registration
of transfers of Shares thereafter on the records of the Company.
2.8. Lost, Stolen or Destroyed Certificates. In the event any
Certificates shall have been lost, stolen or destroyed, the Surviving
Corporation shall issue in exchange for such lost, stolen or destroyed
Certificates, upon the making of an affidavit of that fact by the holder thereof
and, if requested by the Surviving Corporation, delivery of bond in such sum as
the Surviving Corporation may reasonably direct as indemnity against any claim
that may be made against the Surviving Corporation with respect to the
Certificates alleged to have been lost, stolen or destroyed, such Merger
Consideration as may be required pursuant to Section 2.6.1.
2.9. Acceptance of Liability by Stockholders and Optionholders.
Each Stockholder and Optionholder other than the Sellers, by such Stockholder's
or Optionholder's acceptance of the Merger Consideration, shall be, and shall be
deemed to have agreed to be, entitled to all benefits of a Seller under Section
11 of this Agreement and to be liable for all obligations of a Seller under
Section 11 of this Agreement, as fully as if such Stockholder or Optionholder
were a Seller hereunder.
3. MERGER CONSIDERATION
3.1. Acquisition Price. The aggregate amount of the Merger
Consideration for all Shares and of the Option Price for all Options shall be
$76,305,471.50 (Seventy-Six Million Three Hundred Five Thousand Four Hundred
Seventy-One Dollars and Fifty Cents), minus the amount of the Expense
Adjustment. The amount of the Merger Consideration per Share and per Option (the
"Merger Consideration") shall be calculated as set forth in Schedule 3.1.
<PAGE>
4. REPRESENTATIONS AND WARRANTIES OF THE SELLERS. Each of the Sellers, severally
and not jointly, represents and warrants to the Buyer and MergeCo, but only with
respect to such Seller and the Shares owned by such Seller, that, except as set
forth in the Schedules to this Agreement:
4.1. Organization and Authority. Such Seller (other than an individual)
is an entity duly formed, validly existing and in good standing under the laws
of the jurisdiction of its organization and such Seller has full power and
authority to enter into this Agreement, to carry out and perform its obligations
hereunder and to consummate the transactions contemplated hereby.
4.2. Authorization and Enforceability. This Agreement has been
duly authorized, executed and delivered by, and is Enforceable against, such
Seller.
4.3. Non-Contravention, Etc. Except as set forth in Schedule 4.3 and
other than failure to obtain or make any consent, approval, waiver,
authorization, order, declaration, filing, registration, qualification or
recording (each a "Consent or Filing") where the failure of such Seller to
obtain or make such Consent or Filing would not reasonably be expected to have a
Material Adverse Effect or except as otherwise would not reasonably be expected
to have a Material Adverse Effect, the execution and delivery of this Agreement
by such Seller and the consummation by such Seller of the Closing hereunder in
accordance with the terms and conditions of this Agreement do not and will not
conflict with or result in the breach of any of the terms or provisions of, or
constitute a default under, the Charter or By-laws of such Seller, any
Contractual Obligation or Governmental Order to which such Seller is a party or
by which such Seller is, or the Shares and/or Options to be sold by such Seller
hereunder are, bound or any Legal Requirement applicable to such Seller or to
the Shares and/or Options to be sold by such Seller. No Consent or Filing is
required to be obtained or made by such Seller in connection with the execution,
delivery and performance of this Agreement by such Seller or the sale of the
Shares and/or Options to be sold by such Seller as contemplated hereby, except
as set forth in Schedule 4.3, and other than any Consent or Filing where the
failure of such Seller to obtain or make such Consent or Filing would not
reasonably be expected to have a Material Adverse Effect.
4.4. Title to Stock; Prior Owner Debt. Such Seller is the record and
beneficial owner of and has good and valid title to the Shares and/or Options
set forth opposite such Seller's name on Schedule 3.1, free and clear of any
Liens. Except for the rights of Buyer and MergeCo under this Agreement, there is
no Contractual Obligation pursuant to which any such Seller has granted any
unexercised option, warrant or other right to any Person to acquire Shares or
any other securities of, or equity interests in, the Company. Except for the
Prior Owner Debt, none of the Target Companies owes any Debt to such Seller or
to its Affiliates. Schedule 4.4 sets forth the total amount of Prior Owner Debt
owed to such Seller, the payoff amount of such Prior Owner Debt as of the
Closing Date and the amount of any prepayment premiums associated with the
payoff of such Prior Owner Debt.
<PAGE>
4.5. Brokers, etc. No broker, finder, investment bank or similar agent
is entitled to any brokerage or finder's fee in connection with the transactions
contemplated by this Agreement based upon agreements or arrangements made by or
on behalf of such Seller.
5. REPRESENTATIONS AND WARRANTIES RELATING TO THE COMPANY. The
Company represents and warrants to Buyer and MergeCo that, except as set forth
in the Schedules:
5.1. Corporate Matters, etc.
5.1.1. Organization, Power and Standing of the Company. The
Company is a corporation duly incorporated, validly existing and in
good standing under the laws of the State of Delaware and the Company
has the corporate power and authority to own, operate or lease its
properties and to carry on its business in all material respects as
currently conducted and is duly qualified and in good standing to do
business in each jurisdiction in which the nature of the business
conducted by it or the ownership or leasing of its properties makes
such qualification necessary, other than where the failure to be so
duly organized, validly existing and in good standing, or to have such
power and authority, or to be duly qualified and in good standing,
would not reasonably be expected to have a Material Adverse Effect.
5.1.2. Authorization; Validity. The Company has all requisite
corporate power and authority to enter into and perform its obligations
pursuant to the terms of this Agreement. The Company has the full legal
right, corporate power and authority to enter into this Agreement and
the transactions contemplated hereby. The execution and delivery of
this Agreement by the Company and the performance by the Company of the
transactions contemplated herein have been duly and validly authorized
by the Board of Directors of the Company and its stockholders and this
Agreement has been duly and validly authorized by all necessary
corporate action. This Agreement is Enforceable against the Company.
5.1.3. Non-Contravention, etc. Except for items listed on
Schedule 5.1.3 and other than any failure to make or obtain any
Consent or Filing where the failure of such Target Company to make or
obtain such Consent or Filing would not reasonably be expected to have
a Material Adverse Effect or except as otherwise would not reasonably
be expected to have a Material Adverse Effect, neither the execution,
delivery or performance of this Agreement nor the consummation of the
Closing hereunder in accordance with the terms and conditions of this
Agreement does or will constitute, result in or give rise to (i) a
breach, violation or default under any Legal Requirement applicable to
any Target Company, (ii) a breach of or default under any Charter or
By-Laws provision of any Target Company, (iii) the imposition of any
Lien upon any asset of any Target Company, (iv) a breach of or default
under (or the
<PAGE>
acceleration of the time for performance of any obligation under) any
Contractual Obligation of any Target Company or any Governmental Order
binding upon any Target Company or (v) the termination or impairment
of any Permit of any Target Company. No Consent or Filing is required
to be obtained or made by or on behalf of any Target Company in
connection with the execution, delivery or performance of this
Agreement and the consummation of the Closing hereunder in accordance
with the terms and conditions of this Agreement, except as set forth
on Schedule 5.1.3 and other than any Consent or Filing where the
failure to make or obtain such Consent or Filing would not reasonably
be expected to have a Material Adverse Effect.
5.1.4. Title to Stock. The entire authorized capital stock of
the Company consists of 6,273,000 Shares of which 5,157,829 Shares are
issued and outstanding, 457,403 Shares are reserved for issuance upon
exercise of Options and 35,956 Shares are reserved for issuance upon
conversion of the Company's Class C Common Stock to Class A Common
Stock pursuant to the Company's Charter. The Shares and/or Options
listed on Schedule 3.1 constitute all of the issued and outstanding
Shares and/or Options of the Company, the Shares are duly authorized,
validly issued and are fully paid and nonassessable and the Options are
exercisable at the per share exercise price set forth on Schedule 3.1.
The Shares and/or Options are held of record by the Sellers and other
Stockholders and Optionholders as set forth on Schedule 3.1. Except for
the rights of the Buyer and MergeCo under this Agreement and as set
forth on Schedule 3.1, there is no Contractual Obligation pursuant to
which the Company has granted any unexercised option, warrant or other
right to any Person to acquire Shares or any other securities of, or
equity interests in, the Company. None of the Target Companies directly
or indirectly owns, or has agreed to purchase or otherwise acquire, the
capital stock or other securities of, or any interests convertible into
or exchangeable or exercisable for, the capital stock or other
securities of any Person other than a Target Company. All of the issued
and outstanding shares of the capital stock of the Company were
offered, issued, sold and delivered by the Company, in compliance with
all applicable state and federal laws concerning the issuance of
securities, except as would not reasonably be expected to have a
Material Adverse Effect. Further, none of such Shares was issued in
violation of any preemptive rights.
5.1.5. Subsidiaries. Schedule 5.1.5 sets forth a true and
complete list of all Subsidiaries of the Company, including the name
and jurisdiction of organization of each such Subsidiary. Each
Subsidiary listed on Schedule 5.1.5 is a corporation or other entity
duly formed and validly existing under the laws of its jurisdiction of
organization, has the power and authority to own, operate or lease the
properties and assets now owned, operated or leased by such Subsidiary
and to carry on its business in all material respects as currently
conducted. There is no Contractual Obligation pursuant to which any
Subsidiary has granted any unexercised option, warrant or any other
right to any Person to acquire any securities of or interests in any
Subsidiary. Except as set forth in Schedule 5.1.5, each Subsidiary
listed on Schedule 5.1.5 is
<PAGE>
wholly-owned by the Company (either directly or indirectly by way of
ownership through another Subsidiary listed on Schedule 5.1.5) and is
duly qualified and in good standing to do business in each
jurisdiction in which the nature of the business conducted by it or
the ownership or leasing of its properties makes such qualification
necessary, other than where the failure to be so duly organized,
validly existing and in good standing, or to have such power and
authority, or to be duly qualified and in good standing, would not
reasonably be expected to have a Material Adverse Effect.
5.1.6. Charter and By-laws. The Company has heretofore
delivered or made available to the Buyer true and complete copies of
the Charter and By-laws of each Target Company, in each case as in
effect on the date hereof.
5.1.7. Minute Books. The minute books of the Target Companies
have been made available to Buyer and are correct and, except as set
forth in Schedule 5.1.7, complete in all material respects.
5.1.8. Directors and Officers. Schedule 5.1.8 contains a
complete and accurate list of the directors and officers of the Target
Companies.
5.2. Financial Statements, etc.
5.2.1. Financial Information. The Buyer has been furnished
with each of the following:
(a) The consolidated audited balance sheet of the Company
and its consolidated Subsidiaries as of March 31, 1996,
1997 and 1998 and the related statements of earnings
and shareholders equity and cash flows for the fiscal
years then ended, accompanied by the notes thereto and
the report thereon of Ernst & Young (collectively, the
"Audited Financials" and, together with the
Interim Financials (as defined in paragraph (b) below),
the "Financial Statements").
(b) The unaudited consolidated balance sheet of the Company
and its consolidated Subsidiaries as of June 30, 1998
and related unaudited consolidated statements of
earnings and cash flows for the three-month period then
ended (collectively the "Interim Financials").
5.2.2. Character of Financial Information. Except as set forth
in Schedule 5.2.2 or in the Financial Statements, the Financial
Statements were prepared in accordance with Generally Accepted
Accounting Principles consistently applied throughout the periods
specified therein and present fairly, in all material respects, the
<PAGE>
consolidated financial position and results of operations and cash
flows of the Company and its Subsidiaries as of the dates and for the
periods specified therein in accordance with Generally Accepted
Accounting Principles, subject in the case of the Interim Financials to
the absence of footnotes and to normal year-end audit adjustments which
adjustments would not be in the aggregate material.
5.2.3. Liabilities and Obligations. Except as set forth in
Schedule 5.2.3, none of the Target Companies is liable for or subject
to any liabilities required to be reflected on a balance sheet prepared
in accordance with GAAP except for:
(i) those liabilities reflected on the Balance Sheet and
not previously paid or discharged;
(ii) those liabilities incurred since the Balance Sheet Date
in the Ordinary Course of Business; and
(iii) other liabilities which do not in the aggregate exceed
$10,000.
5.3. Change in Condition Since Balance Sheet Date. Except for matters
set forth in Schedule 5.3, since the Balance Sheet Date the Business has been
conducted only in the Ordinary Course of Business (except as otherwise required
or permitted by the terms of this Agreement) and:
(a) None of the Target Companies has:
(i) entered into any Contractual Obligation other than this
Agreement relating to (A) the sale of any capital stock
or equity interest in any Target Company, (B) the
purchase of assets constituting a business or (C) any
merger, consolidation or other business combination;
(ii) settled or agreed to settle any material Action;
(iii) mortgaged, pledged or subjected to any Lien any of
their assets other than (A) conditional sales or
similar security interests granted in connection with
the lease or purchase of equipment or supplies in the
Ordinary Course of Business, (B) Liens disclosed on
Schedule 5.5.1 and (C) Liens that have not had a
Material Adverse Effect;
(iv) sold, leased, transferred or exchanged any material
property for less than the fair value thereof;
<PAGE>
(v) declared or paid any dividends or distributions on any
shares of its capital stock (other than dividends or
distributions to a Target Company);
(vi) incurred any damage, destruction or loss (whether or
not covered by insurance) with respect to any of its
assets that has resulted or is reasonably expected to
result in a Material Adverse Effect;
(vii) undertaken any material change in its accounting
methods, principles, procedures, practices or its
financial structure except as required by GAAP;
(viii) made any material increase in the benefits under, or
established or terminated or materially amended any
material bonus, insurance, severance, deferred
compensation, pension, retirement, profit sharing,
stock option (including the granting of stock options,
stock appreciation rights, phantom stock, performance
awards, or restricted stock awards), stock purchase or
other employee benefit plan, or effected any material
increase in the compensation payable or to become
payable to its directors, officers or employees except
in the Ordinary Course of Business;
(ix) sold, leased, transferred or assigned any material
amount of its assets, tangible or intangible, other
than in the Ordinary Course of Business;
(x) canceled or forgiven any material Debt or waived any
material claims or rights other than in the Ordinary
Course of Business;
(xi) disclosed any material confidential or proprietary
information to any person or entity other than Buyer
and its representatives, agents, attorneys and
accountants or its own employees, representatives,
agents, attorneys and accountants in connection with
the transactions contemplated hereby, except in the
Ordinary Course of Business;
(xii) made or committed to make any expenditure for capital
assets (or series of such related expenditures) in
excess of
<PAGE>
$50,000 individually or $260,000 in the aggregate;
(xiii) made any material loan or advance to, or guarantee
for the benefit of, any other Person, other than in the
Ordinary Course of Business;
(xiv) made any material write-down in its accounts
receivable other than in the Ordinary Course of
Business; or
(xv) incurred or assumed any material liabilities,
obligations or indebtedness for borrowed money or
guaranteed any such liabilities or indebtedness other
than in the Ordinary Course of Business.
(b) None of the Target Companies has entered into any Contractual
Obligation to do any of the actions referred to in clause (a)
above other than in the Ordinary Course of Business; and
(c) There has not been any material adverse change in the
Business and financial condition of the Target Companies,
taken as a whole, other than changes resulting from general
economic, financial or market conditions or circumstances
generally affecting the Business.
5.4. Environmental Matters, etc. Except as set forth on Schedule 5.4
and except for items that could not reasonably be expected to involve
liabilities in excess of $10,000 individually or $75,000 in the aggregate, (a)
each of the Target Companies is as of the date hereof in compliance with all
Environmental Laws; (b) there is as of the date hereof no Action pending or, to
the knowledge of the Company, threatened against any Target Company in respect
of (i) noncompliance by any Target Company with any Environmental Laws or (ii)
the release or threatened release into the environment of any Hazardous
Substance by any Target Company or (iii) the handling, storage, use,
transportation or disposal of any Hazardous Substance by any Target Company; (c)
there are no underground storage tanks on any Real Property owned by any Target
Company and no underground storage tanks currently or formerly used by any
Target Company on any leased Real Property; (d) there is no friable asbestos
contained in any Real Property owned by any Target Company; and (e) no event has
occurred or condition exists that could reasonably be expected to give rise to
an actual or contingent liability against any Target Company under the
Environmental Laws.
5.5. Real and Personal Property.
5.5.1. Except as set forth on Schedule 5.5.1 or as would not
reasonably be expected to have a Material Adverse Effect, each
applicable Target Company has valid
<PAGE>
title to all of its owned personal property other than intellectual
property (the "Owned Personalty") and such personal property is not
subject to any Lien. Except as would not reasonably be expected to
have a Material Adverse Effect, (i) all leases and licensing
agreements for personal property involving liabilities in excess of
$10,000 per year ("Personalty Leases") leased or licensed by any of
the Target Companies are listed on Schedule 5.5.1 and, to the
knowledge of the Company, are valid and in full force and effect; (ii)
the Target Companies have performed all obligations required to be
performed by them under such leases; and (iii) no event or condition
exists which constitutes or, with the giving of notice or the passage
of time or both, would constitute a default by any of the Target
Companies as lessee or licensee under such leases. On or before the
Closing Date, each Target Company will deliver to the Buyer a copy of
its fixed asset register, together with its depreciation schedules.
The Owned Personalty and the property used pursuant to the Personalty
Leases constitutes all personal property other than intellectual
property currently used by the Target Companies to conduct the
Business except as would not reasonably be expected to have a Material
Adverse Effect.
5.5.2. Schedule 5.5.2 sets forth a list of all interests in
real property owned by any of the Target Companies, and all interests
in real property leased to the Target Companies (the "Real Property").
Except as would not reasonably be expected to have a Material Adverse
Effect, (i) all leases (the "Leases") of Real Property leased to the
Target Companies are, to the knowledge of the Company, valid and in
full force and effect; (ii) the Target Companies have performed all
obligations required to be performed by them under such Leases; (iii)
to the knowledge of the Company, no event or condition exists which
constitutes or, with the giving of notice or passage of time or both,
would constitute a default by any of the Target Companies as lessee
under such Lease; and (iv) to the knowledge of the Company no breach or
default by any other Person under any of the Leases has occurred and is
continuing. Except as set forth in Schedule 5.5.2 or as revealed in the
surveys attached thereto:
(a) As of the Closing, the applicable Target
Company will have the title to the fee owned
Real Property shown on the commitments for
Title Insurance attached as Schedule 5.5.2
hereto.
(b) All structures, facilities and improvements
to the Real Property ("Structures") are
located within the boundary lines of the
Real Property and no structures, facilities
or other improvements on any parcel adjacent
to the Real Property encroach onto any
portion of the Real Property, except as has
not had a Material Adverse Effect.
(c) There are no pending or, to the Company's
knowledge, threatened condemnation
proceedings, lawsuits or administrative
<PAGE>
actions relating to any portion of the fee
owned Real Property which affects any
material portion of the fee owned Real
Property.
(d) No Target Company is party to any lease of
Real Property as landlord or sublessor
thereunder and there are no persons in
possession of any Real Property other than
the Target Companies.
5.6. Intellectual Property Rights. Schedule 5.6 lists all material
trade and product names, patents, trademarks, service marks, trade dress
(including logos, designs, company names, business names, fictitious names and
other business identifiers) and copyrights (including registrations and
applications therefor), registered or unregistered, U. S. or foreign
("Intangibles"), that are owned or licensed by any of the Target Companies,
other than commercially available software programs and other than Intangibles
associated with inventory (such Intangibles, other than commercially available
software programs and other than Intangibles associated with inventory, are
referred to herein as the "Company Intangibles"). Schedule 5.6 also lists each
license or other Contractual Obligation under which any Company Intangible is
licensed by the Target Companies (the "Licenses"). Except as set forth on
Schedule 5.6 or would not reasonably be expected to have a Material Adverse
Effect, the rights of Target Companies with respect to the Company Intangibles
listed on Schedule 5.6 will not be adversely affected by reason of the
execution, delivery and performance of this Agreement or the consummation of the
transactions contemplated hereby. Except as disclosed on Schedule 5.6, there is
no license or other Contractual Obligation under which the Company is a licensor
with respect to any Company Intangibles. Except as disclosed on Schedule 5.6,
use by the Target Companies of the Company Intangibles does not infringe any
rights of any third party and to the Company's knowledge, no activity of any
third party infringes upon the rights of the Target Companies with respect to
any of the Company Intangibles, in each case except where such infringement
would not reasonably be expected to have a Material Adverse Effect. Except as
set forth on Schedule 5.6 or as would not reasonably be expected to have a
Material Adverse Effect, no Actions against any Target Company with respect to
the Company Intangibles are currently pending or, to the knowledge of the
Company, are threatened by any Person to the effect that the Target Companies'
use of the Company Intangibles infringes the rights of third parties. The
Company Intangibles constitute all of the Intangibles (other than commercially
available software programs and other than Intangibles associated with
Inventory) currently used by the Target Companies in the operation of the
Business, except as would not have a Material Adverse Effect.
5.7. Certain Contractual Obligations. Set forth on Schedule 5.7 is a
true and complete list of all of the following Contractual Obligations of the
Target Companies whether written or oral:
(a) All individual employment or consulting
agreements pursuant to
<PAGE>
which services are rendered to the Target
Companies (other than the Company Plans), in
each case which are likely to involve
payments by or on behalf of a Target Company
in excess of $50,000 per year, and all
collective bargaining agreements;
(b) All Contractual Obligations under which any
Target Company is or will after the Closing
be restricted in any material respect from
carrying on any business or other activities
anywhere in the world (other than use
restrictions contained in any of the Leases,
Personalty Leases and Licenses);
(c) All Contractual Obligations (but excluding
options for shares) to sell or otherwise
dispose of any assets having a fair market
value in excess of $100,000 except in the
Ordinary Course of Business;
(d) All Contractual Obligations between any
Target Company on the one hand and any
Affiliate of any Target Company on the other
hand;
(e) All Contractual Obligations (including,
without limitation, partnership and joint
venture agreements) under which (i) any
Target Company has any liability or
obligation for Debt or constituting or
giving rise to a guarantee of any liability
or obligation of any Person (other than any
Target Company) or (ii) any Person has any
liability or obligation constituting or
giving rise to a guarantee of any liability
or obligation of any Target Company, in
either case involving any Debt or Liability
in excess of $100,000 individually and
excluding any trade payables incurred in the
Ordinary Course of Business;
(f) All Contractual Obligations entered into
since July 15, 1993 pursuant to which any
Target Company incurred an obligation to pay
any amounts in excess of $100,000 in respect
of indemnification obligations, purchase
price adjustment or otherwise in connection
with any (i) acquisition or disposition of
assets constituting a business or securities
representing a controlling interest in any
Person, (ii) merger, consolidation or other
business combination, or (iii) series or
group of related transactions or events of a
type specified in subclauses (i) and (ii);
(g) All Contractual Obligations pursuant to
which any Target Company may be expected to
perform services or provide
<PAGE>
products with a value in excess of $100,000
per year and which cannot be canceled
without material cost by any Target Company
within 30 days, except for customer purchase
orders received in the Ordinary Course of
Business; and
(h) All Contractual Obligations pursuant to
which any Target Company may be obligated to
pay for goods and services to be delivered
or performed in excess of $100,000 per year
and which cannot be canceled without
material cost by any Target Company within
30 days, except for purchase orders issued
in the Ordinary Course of Business.
Each of the Contractual Obligations listed on Schedule 5.7, as in effect on the
date hereof, shall be referred to herein collectively as the "Contracts"). No
breach or default in performance by any Target Company under any of the
Contracts has occurred and is continuing, and no event has occurred which with
notice or lapse of time or both would constitute such a breach or default, other
than any breach or default which would not reasonably be expected to have a
Material Adverse Effect. To the knowledge of the Company, no material breach or
default by any other Person under any of the Contracts has occurred and is
continuing, and no event has occurred which with notice or lapse of time or both
would constitute such a material breach or default, except a breach or default
which would not reasonably be expected to have a Material Adverse Effect.
5.8. Insurance, etc. Schedule 5.8 is the Target Companies' insurance
broker's schedule as of the date hereof which sets forth all policies or binders
of insurance covering the operations of the Target Companies. The Company has
delivered or made available to the Buyer true and accurate copies of all such
policies or binders as in effect on the date hereof. None of the Target
Companies is in any material default with respect to its obligations under any
of such policies.
5.9. Litigation, etc. Except as set forth on Schedule 5.9 or would not
reasonably be expected to have a Material Adverse Effect, as of the date hereof,
(i) there is no Action against any Target Company pending or, to the knowledge
of the Company, threatened and (ii) there is no Action pending or, to the
knowledge of the Company, threatened which seeks rescission of or seeks to
enjoin the consummation of this Agreement or any of the transactions
contemplated hereby. Except as set forth on Schedule 5.9, there are no
outstanding judgments, decrees, stipulations or awards (whether rendered by a
court or administrative agency) against any Target Company or against any of its
properties or business which require future performance on the part of any
Target Company.
5.10. Compliance with Laws, etc. The operations of the Business are in
compliance as of the date hereof with applicable Legal Requirements and each of
the Target Companies has complied with applicable Legal Requirements, except as
set forth in Schedule 5.10 or as
<PAGE>
would not reasonably be expected to have a Material Adverse Effect. The Target
Companies have been granted all licenses, permits, consents, approvals,
franchises and other authorizations under any Legal Requirement necessary for
the conduct of the Business, except where the failure to obtain such licenses,
permits, consents, approvals, franchises or other authorization would not
reasonably be expected to have a Material Adverse Effect (the "Permits"). The
Company has not received any notice that any Governmental Authority or other
licensing authority will revoke, cancel, rescind, materially modify or refuse to
renew in the ordinary course any of the Permits.
5.11. Tax Matters.
Except as set forth on Schedule 5.11:
(i) Each of the Target Companies has on a timely
basis filed or has had filed on its behalf
all material Tax Returns that it was
required to file on or before the date
hereof (or the Closing Date);
(ii) each of the Tax Returns referred to in
clause (i) is true, correct and complete in
all material respects;
(iii) the Target Companies have paid in full on a
timely basis all Taxes shown on Tax Returns
referred to in clause (i), and no other
Taxes are payable by the Target Companies
(whether or not shown on such Tax Returns),
except as would not, individually or in the
aggregate, reasonably be expected to be
material;
(iv) all deficiencies asserted in writing and any
assessments made as a result of any
examinations of the Tax Returns referred to
in clause (i) by the Internal Revenue
Service ("IRS") or the appropriate state,
local or foreign taxing authority have been
paid in full;
(v) none of the Target Companies has received
any written notice of any audit, claim,
deficiency or assessment pending or proposed
with respect to Taxes of any of the Target
Companies;
(vi) none of the Target Companies is party to (A)
any written agreements or waivers extending
the statutory period of limitation
applicable to any Taxes of the Target
Companies or (B) any action or proceeding
for assessment or collection of Taxes;
(vii) each of the Target Companies (A) has filed
any combined,
<PAGE>
consolidated or unitary federal, state,
local or foreign Income Tax Returns it was
required to file and (B) is not a party to
any Contractual Obligation relating to the
allocation or sharing of Taxes among members
of a combined, consolidated or unitary
group;
(viii) the amount of the Target Companies'
liability for unpaid Taxes for all taxable
periods or portions thereof ending on or
before the Closing Date does not in the
aggregate exceed the amount of (A) the
current liability accruals, as of the
Closing Date, for Taxes (excluding Tax
Reserves), as adjusted for ordinary
operations since the date of the Balance
Sheet in accordance with past custom and
practice, except for the treatment of
interest subject to section 163(j) of the
Code ("Current Tax Accruals") plus (B) the
Closing Tax Reserve;
(ix) the Target Companies have withheld and paid
over to the proper authorities all Taxes
required to have been withheld and paid
over, and complied with all information and
backup withholding requirements, including
maintenance of required records with
respect thereto, in connection with amounts
paid or owing to any employee, creditor,
independent contractor or other third party;
and
(x) none of the Target Companies is obligated to
make any payments, or is a party to any
agreements that would under any
circumstances obligate it to make any
payments that would not be deductible under
section 280G of the Code.
5.12. Employee Benefit Plans.
(a) Schedule 5.12 lists each material employee
benefit plan, program or policy (including,
without limitation, each "employee benefit
plan" within the meaning of section 3(3) of
ERISA, stock plans and fringe benefit
plans), written or oral, that is maintained
or otherwise contributed to by the Company
or any of its Subsidiaries as of the date
hereof (collectively, "Company Plans") under
which benefits are provided to employees or
beneficiaries of employees or former
employees or beneficiaries of former
employees.
(b) With respect to each of the Company Plans,
the Company has made available to the Buyer
a current, accurate and complete
<PAGE>
copy (or, to the extent no such copy exists,
an accurate description) thereof and, to the
extent applicable, (i) any related trust
agreement, annuity contract or other funding
instrument; (ii) any summary plan
description; (iii) the two most recent
annual Forms 5500 (if applicable) with
respect to such Company Plans; and (iv) if
such Company Plan is intended to be a
qualified single employer plan under section
401(a) of the Code, a copy of the most
recent favorable determination letter
received from the IRS.
(c) Except as set forth in Schedule 5.12, (i)
each Company Plan has been operated in
accordance with its terms except where a
failure to so operate would not reasonably
be expected to have a Material Adverse
Effect and each Company Plan is in
compliance as of the date hereof with the
applicable provisions of law and
governmental regulations, if any, including
without limitation ERISA and the Code,
except where such noncompliance would not
reasonably be expected to have a Material
Adverse Effect; (ii) each Company Plan (and
its related trust) that is intended to be
qualified and tax-exempt within the meaning
of sections 401(a) and 501(a) of the Code
has received a favorable determination
letter as to its qualification and
exemption, and nothing has occurred (or
failed to occur) that would adversely affect
such Plan's qualification and exemption
except as would not reasonably be expected
to have a Material Adverse Effect; (iii) no
"reportable event" (as such term is
used in section 4043 of ERISA), any
non-exempt "prohibited transaction" (as such
term is used in section 4975 of the Code or
section 406 of ERISA) or "accumulated
funding deficiency" (as such term is used in
section 412 or 4971 of the Code) has
heretofore occurred with respect to any
Company Plan that would reasonably be
expected to have a Material Adverse Effect;
(iv) no litigation or administrative or
other proceedings (other than routine claims
for benefits) involving the Company Plans
have occurred or to the knowledge of the
Company are threatened which would
reasonably be expected to have a Material
Adverse Effect; (v) each Target Company has
complied with the health care continuation
requirements of section 601, et. seq. of
ERISA with respect to employees and their
spouses, former spouses and dependents,
except where failure to comply would not
reasonably be expected to have a Material
Adverse Effect; and (vi) no Target Company
has obligations to provide post-retirement
medical benefits to any employee or any
former employee of a Target Company, other
than statutory liability for providing group
health plan
<PAGE>
continuation coverage under Part 6 of Title
I of ERISA and Section 4980B of the Code and
other than would not reasonably be expected
to have a Material Adverse Effect.
(d) No Target Company maintains or contributes
to any single employer plan (as such term is
defined in Section 4001(b) of ERISA) subject
to Title IV of ERISA or any "multiemployer
plan" (as such term is defined in section
3(37) of ERISA) or has incurred any material
liability, including without limitation
withdrawal liability, with respect to any
such plan that remains unsatisfied, nor has
any Target Company maintained or contributed
to any plan subject to Title IV of ERISA
within the six years ending as of the
Closing Date.
(e) No Company Plans are, to the Company's
knowledge, presently under audit or
examination (nor has notice been received of
a potential audit or examination) by the
IRS, the Department of Labor, or any other
governmental agency or entity, and no
matters are currently pending with respect
to any Company Plan under the IRS's Employee
Plans Compliance Resolutions System.
(f) Except as set forth on Schedule 5.12 and
other than would not reasonably be expected
to have a Material Adverse Effect, no
Company Plan or other agreement contains any
provision that would give rise to any
vesting of benefits, severance, termination
or other payments or liabilities in excess
of $5000 in the case of any single employee
as a result of the transactions contemplated
by this Agreement, and no Target Company has
declared or paid any special bonus in
connection with the transactions
contemplated by this Agreement in excess of
$10,000.
(g) None of the Target Companies has any
liability with respect to any present or
former employee benefit plan other than the
Company Plans except as would not reasonably
be expected to have a Material Adverse
Effect.
(h) The treatment of Stock Rights provided in
Section 2.5.3 does not violate the terms of
any Options or the plans under which they
were issued.
5.13. Labor Matters. No labor union represents or has ever represented
the Target Companies' employees, no collective bargaining agreement is binding
and in force against any Target Company nor is any Target Company negotiating
such an agreement, and, to the
<PAGE>
knowledge of the Company, no labor representation organization effort exists nor
has there been any such activity within the past five years. The Target
Companies have complied with applicable Legal Requirements respecting employment
and employment practices, terms and conditions of employment and wages and
hours, including without limitation any such laws respecting employment
discrimination, workers' compensation, family and medical leave, the Immigration
Reform and Control Act, and occupational safety and health requirements, except
as set forth on Schedule 5.13 or as would not reasonably be expected to have a
Material Adverse Effect.
5.14. Brokers, etc. No broker, finder, investment bank or similar agent
is entitled to any brokerage or finder's fee in connection with the transactions
contemplated by this Agreement based upon agreements or arrangements made by or
on behalf of the Company.
5.15. Complete Copies of Materials. The Company has made available to
Buyer true and complete copies of each agreement, contract, or other document
(or summaries thereof) that is listed in the Schedules.
5.16. Books and Records. The Target Companies have made and kept books
and records and accounts, which have been made available to the Buyer. Except as
set forth on Schedule 5.16, the Target Companies have not engaged in any
material transaction, maintained any material bank account, or used any material
corporate funds except for transactions, bank accounts, and funds which have
been and are reflected in its normally maintained books and records in the
Ordinary Course of Business.
5.17. Bank Accounts; Powers of Attorney. Schedule 5.17 sets forth a
complete and accurate list as of the date of this Agreement, of:
(a) the name of each financial institution in
which any Target Company has any account or
safe deposit box;
(b) the names in which the accounts or boxes are
held;
(c) the type of account;
(d) the name of each person authorized to draw
thereon or have access thereto; and
(e) the name of each person, corporation, firm
or other entity holding a general or special
power of attorney from any Target Company
and a description of the terms of such
power.
5.18. Accounts Receivable and Inventory. All accounts receivable
reflected on the Balance Sheet arose from sales actually made or services
actually performed in the Ordinary
<PAGE>
Course of Business transactions. Except as set forth in Schedule 5.2.2 or in the
Audited Financial Statements, the amount of accounts receivable and inventory
(net of applicable reserves) reflected on the Balance Sheet are properly
reflected in all material respects in accordance with GAAP consistently applied.
5.19. Disclosure. The representations and warranties by the Sellers or
the Company contained in this Agreement (including the Schedules attached
hereto) and in the certificate to be furnished pursuant to Section 8.1.4,
considered as a whole, do not contain and will not contain any untrue statement
of a material fact and, to the knowledge of the Company, do not omit and will
not omit to state any material fact required in order for such representations
and warranties not to be misleading.
5.20. Predecessor Status; Etc. Schedule 5.20 sets forth a listing of
all legal names, trade names, fictitious names or other names (including,
without limitation, any names of divisions or operations) of each Target Company
and all of its predecessor companies during the five-year period immediately
preceding the Closing, including without limitation the names of any entities
from whom any Target Company has acquired material assets other than inventory
constituting a business during such period. During the five-year period
immediately preceding the Closing, each Target Company has operated only under
the names set forth on Schedule 5.20 in the jurisdiction or jurisdictions set
forth on Schedule 5.20 and has not been a subsidiary or division of another
corporation or a part of an acquisition which was later rescinded.
6. REPRESENTATIONS AND WARRANTIES OF THE BUYER. The Buyer represents and
warrants as follows:
6.1. Corporate Matters, etc.
6.1.1. Organization, Power and Standing of the Buyer and
MergeCo. Each of the Buyer and MergeCo is a corporation duly
incorporated, validly existing and in good standing under the laws of
the jurisdiction of its incorporation and has full power and authority,
corporate and otherwise, to enter into this Agreement, to carry out and
perform its obligations hereunder and to consummate the transactions
contemplated hereby.
6.1.2. Authorization and Enforceability. This Agreement has
been duly authorized, executed and delivered by, and is Enforceable
against, each of the Buyer and MergeCo.
6.1.3. Non-Contravention, etc. Subject to compliance with the
Buyer's credit facility, the execution, delivery and performance of
this Agreement by the Buyer and MergeCo and the consummation by the
Buyer and MergeCo of the Closing hereunder in accordance with the terms
and conditions of this Agreement does not and will not
<PAGE>
conflict with or result in the breach of any terms or provisions of, or
constitute a default, under any Contractual Obligation of or the
Charter or By-Laws of the Buyer or MergeCo or a breach of any Legal
Requirement applicable to the Buyer or MergeCo. Except for satisfaction
of the notification requirements of the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), no consent is
required to be obtained or made by or on behalf of the Buyer or MergeCo
in connection with the execution, delivery or performance of this
Agreement and the consummation of the transactions contemplated hereby,
except (i) for items which shall have been obtained or made on or prior
to, and shall be in full force and effect at, the Closing Date and (ii)
where failure to obtain such consent would not materially and adversely
affect the Buyer's ability to consummate the Closing hereunder in
accordance with the terms and conditions of this Agreement and would
not prevent the Buyer from performing in all material respects any of
its obligations under this Agreement.
6.2. Financial Condition, etc. The Buyer has as of the date hereof and
MergeCo will have as of the Closing sufficient funds in an aggregate amount
sufficient to (i) pay the Merger Consideration and all contemplated fees,
expenses and other amounts related to the transactions contemplated by this
Agreement and (ii) provide adequate working capital for the Business.
6.3. Investment Intent, Related Matters. The Buyer and MergeCo are
purchasing the Shares for its own account and have the present intention of
holding the Shares for investment purposes and not with a view to, or for sale
in connection with, any distribution thereof in violation of any federal or
state securities laws. The Buyer and MergeCo are "accredited investors" within
the definition set forth in Rule 501(a) of the Securities Act of 1933, as
amended (the "Securities Act").
6.4. Litigation. As of the date hereof, there is no Action pending or,
to the knowledge of the Buyer, threatened (i) against the Buyer, MergeCo or any
of their Affiliates which would reasonably be expected to have a Material
Adverse Effect on the ability of the Buyer or MergeCo to perform its obligations
under this Agreement or (ii) which seeks rescission of or seeks to enjoin the
consummation of this Agreement or any of the transactions contemplated hereby.
6.5. Brokers, etc. No broker, finder, investment bank or similar agent
is entitled to any brokerage or finder's fee in connection with the transactions
contemplated by this Agreement based upon agreements or arrangements made by or
on behalf of the Buyer, MergeCo or any of
their Affiliates.
7. CERTAIN AGREEMENTS OF THE PARTIES.
7.1. Payment of Transfer Taxes and Other Charges. The Buyer shall be
responsible for and shall pay all stock transfer Taxes, real property transfer
Taxes, sales Taxes,
<PAGE>
documentary stamp Taxes, recording charges and other similar Taxes arising in
connection with the transactions contemplated by this Agreement. Each of the
parties hereto shall prepare and file, and shall fully cooperate with each other
party with respect to the preparation and filing of, any Tax Returns and other
filings relating to any such Taxes or charges as may be required.
7.2. Confidentiality Covenant of the Buyer. The Confidentiality
Agreement dated March 3, 1998 (the "Confidentiality Agreement") by and between
the Buyer and Butler Capital Corporation on behalf of the Company is hereby
confirmed and acknowledged as a continuing obligation of such parties.
7.3. Operation of Business, Related Matters. From the date hereof and
on and prior to the Closing Date, except as otherwise permitted or required by
this Agreement, the Company will cause the Target Companies to conduct the
Business in the Ordinary Course of Business. From the date hereof and on and
prior to the Closing Date no Seller will sell, pledge or otherwise encumber his,
her or its Shares, without the prior written consent of the Buyer. Except as set
forth in Schedule 7.3, from the date hereof and prior to the Closing Date, the
Company shall not, and shall cause the Target Companies not to, without the
prior written consent of Buyer, which will not be unreasonably withheld:
(a) enter into any transactions otherwise than
on an arms' length basis (other than as
contemplated by this Agreement and
transactions in the Ordinary Course of
Business among the Target Companies);
(b) pay any compensation other than in the
Ordinary Course of Business or increase any
compensation of any officer or employee
other than such increases in compensation as
may be made in the Ordinary Course of
Business;
(c) incur any Debt (including, without
limitation, any capital lease) except in the
Ordinary Course of Business;
(d) amend the Charter or By-laws of any Target
Company or sell, lease or otherwise dispose
of any material assets (except (i) for sales
or other dispositions of inventory or excess
equipment in the Ordinary Course of Business
and (ii) as may otherwise be permitted by
the terms of this Agreement);
(e) make any material change in the Business or
operations of any of the Target Companies;
(f) make any capital expenditure in excess of
the amount budgeted
<PAGE>
therefor or enter into any contract or
commitment therefor in excess of budgeted
amounts;
(g) make any dividend or other distribution or
payment in respect of the capital stock of
any Target Company (other than to a Target
Company);
(h) make any material change in any accounting
methods, principals, procedures or
practices, except as required to conform to
changes in GAAP, in which case the Company
shall give Buyer prior notice thereof; or
(i) enter into any Contractual Obligation to do
any of the actions referred to in this
Section 7.3.
The Buyer shall respond with reasonable promptness to any and all
requests by the Sellers for consent(s) for any Target Company to take any of the
actions specified in this Section 7.3, and no requested consent shall be
unreasonably withheld.
7.4. Preparation for Closing. The Buyer on the one hand and the Company
and the Sellers on the other hand will each use all reasonable best efforts to
bring about the fulfillment of each of the conditions precedent to the
obligations of the other set forth in this Agreement, subject to the following:
7.4.1. HSR Filing. Each of Buyer and the Company will supply
all information requested by Governmental Authorities in connection
with the HSR notification that has been filed by each of Buyer and the
Company and will cooperate with each other in responding to any such
request. Buyer shall be solely responsible for all filing fees required
to be paid in connection therewith.
7.4.2. Consents, etc. Prior to the Closing Date, the Company
shall use reasonable efforts to obtain or make the Consents or Filings
indicated on Schedule 8.3, provided, however, that the Company shall
not be obligated to incur more than an aggregate of $50,000 in expenses
in connection therewith.
7.4.3. Supplemental Schedules. The Sellers may (but will not
be required to), from time to time prior to or on the Closing Date, by
notice in accordance with this Agreement, supplement or amend Schedules
(other than Schedule 7.3), including without limitation one or more
supplements or amendments to correct any matter which would otherwise
give rise to a breach of any representation, warranty or covenant
herein contained. If a supplement or amendment of any Schedule corrects
a matter which absent correction would give rise to a material breach
of any representation or warranty, then Buyer shall have the right
prior to Closing to terminate this Agreement,
<PAGE>
with such termination being Buyer's sole remedy relating to matters set
forth in amendments or supplements to any Schedule. Notwithstanding any
other provision hereof but subject to the immediately preceding
sentence, each supplement or amendment of any Schedule will be
effective to cure and correct for all purposes any breach of any
representation, warranty or covenant relating to such Schedule not
having read at all times as so supplemented and amended.
7.5. No Section 338 Election. Buyer will not make an election pursuant
to section 338 of the Code or any similar provision under any state, local or
foreign law with respect to the Target Companies.
7.6. Further Assurances. Each party, upon the request from time to time
of any other party hereto after the Closing, and at the expense of the
requesting party but without further consideration, will do each and every act
and thing as may be necessary or reasonably requested to consummate the
transactions contemplated hereby in an orderly fashion.
7.7. No Competing Offers; Prohibited Transactions. For the period from
the date hereof up to and including the Closing Date or the termination of this
Agreement, none of the Sellers or any Target Company or their respective
Affiliates will solicit offers or enter into discussions of any sort with any
other party or parties, or provide any information concerning the sale of all or
part of the shares, the merger or consolidation of any Target Company or the
sale or leasing of all or substantially all of the Target Company's assets, and
none of the Sellers or any Target Company or any of their respective Affiliates
will seek the affiliation of any Target Company with any entity other than Buyer
and neither will negotiate nor entertain any offer with respect to such
affiliation.
7.8. Pre-Transaction Stub-Period Tax Returns. Buyer shall, at Buyer's
expense (except as otherwise provided in Section 11.6), prepare and timely file
all Tax Returns for taxable periods of the Target Companies ending on or prior
to the Closing Date that have not been filed as of the Closing Date. Buyer may,
at Buyer's discretion, use Sellers' accounting firm, Ernst & Young, or such
other accounting firm as Buyer may determine to prepare such Tax Returns. Buyer
shall allow Sellers and their representatives an opportunity to review and
comment upon the Income Tax Returns of the Target Companies for the periods
ending March 31, 1998 and the Closing Date within a reasonable time prior to
their due date and filing and all Tax Returns to be filed for periods ending on
or before March 31, 1997, and shall not file such Tax Returns without the
Sellers' prior written consent, which consent shall not be unreasonably
withheld. Except for the treatment of interest subject to Section 163(j) of the
Code and unless otherwise required by law, such Tax Returns shall be prepared
and filed on a basis consistent with the Target Companies' past custom and
practice.
7.9. Amended Tax Returns. Buyer and the Target Companies shall not
amend any Tax Returns of the Target Companies for any period ending on or prior
to the Closing Date without the Sellers' prior written consent, which consent
shall not be unreasonably withheld.
<PAGE>
7.10. Tax Audits Relating to the Target Companies. Buyer and the
Target Companies shall promptly notify the Sellers in writing of the
commencement of any audit or examination of any Tax Return of the Target
Companies for any period ending on or prior to the Closing Date, and any other
proposed change or adjustment, claim, dispute, arbitration or litigation which
would reasonably be expected to affect the liability of Sellers for Taxes under
this Agreement (a "Tax Claim"). Such notice shall describe the asserted Tax
Claim in reasonable detail and shall include copies of any notices and other
documents received from any Taxing authority in respect of any such asserted Tax
Claim. Buyer shall have the right to control any Tax Claims in the Tax audit or
examination stage, provided, however, that Buyer shall inform Sellers regularly
of the status and progress of such Tax audit or examination and shall allow
Sellers and their representatives to review and comment on any legal submissions
or other written legal responses in connection with such audit or examination.
Buyer and the Target Companies may not settle any Tax Claim without Sellers'
prior written consent, provided, however, that if the Buyer proposes a
settlement that would be accepted by a Taxing authority and the Sellers do not
consent, Sellers shall, at their cost and expense, control any further contest
of such Tax Claim and shall indemnify the Target Companies for any additional
Taxes that the Target Companies may incur in excess of the proposed settlement
and for reasonable third-party out-of-pocket costs and expenses relating to the
continuation of the contest of the Tax Claim following the proposed settlement
(Taxes payable up to the amount of the proposed settlement would be indemnified
pursuant to Section 11.6). If a Tax Claim is not settled at the Tax audit or
examination stage, the Sellers and their representatives shall have the right to
control any further contest of such Tax Claim and, if they exercise such right,
shall bear the expenses relating thereto; provided, however, that Sellers may
not settle any such Tax Claim without Buyer's consent (which consent shall not
be unreasonably withheld) if such settlement would reasonably be expected to
materially adversely affect the Taxes of the Target Companies or Buyer for
taxable periods beginning on, after or including the Closing Date.
Notwithstanding the foregoing, the liability of each Seller in respect of
amounts to be paid by the Sellers under this Section 7.10 shall not exceed such
Seller's Pro Rata Share of such amounts.
7.11. Cooperation Regarding Tax Matters. The parties hereto shall
provide such necessary information as any other party hereto may reasonably
request in connection with the preparation of such party's Tax Returns, or to
respond to or contest any audit, or claim or otherwise satisfy any Legal
Requirement relating to Taxes of each party hereto or their respective
affiliates, including provision of powers of attorney to defend a Tax Claim.
7.12. Tax Sharing Agreements. Any and all tax sharing agreements or
similar arrangements (other than this Agreement) with respect to Taxes involving
the Target Companies shall be terminated as of the Closing Date to the extent
such agreements or arrangements bind the Target Companies, and as of the Closing
Date, the Target Companies shall not have any obligation under any such
agreement or arrangement for any past, present, or future period.
<PAGE>
8. CONDITIONS TO THE OBLIGATION TO CLOSE OF THE BUYER. The obligations of the
Buyer to consummate the Closing under this Agreement are subject to the
satisfaction, at or prior to the Closing, of all of the following conditions,
compliance with which, or the occurrence of which, may be waived prior to the
Closing in writing by the Buyer in its sole discretion:
8.1. Representations, Warranties and Covenants.
8.1.1. Continued Accuracy of Representations and Warranties.
All representations and warranties of the Sellers and the Company
contained in this Agreement shall be true and accurate in all material
respects as of the Closing Date as if made on the Closing Date, except
for changes expressly permitted or contemplated by this Agreement.
8.1.2. Performance of Agreements. The Sellers and the Company
shall have performed and satisfied, in all material respects, all
covenants and agreements required by this Agreement to be performed or
satisfied by them at or prior to the Closing.
8.1.3. Sellers' Closing Certificate. At the Closing, each of
the Sellers shall furnish a certificate, signed by such Seller, dated
the Closing Date, to the effect that the conditions specified in
Sections 8.1.1 and 8.1.2, to the extent relating to representations,
warranties, covenants and agreements of such Seller, have been
satisfied.
8.1.4. Company's Closing Certificate. At the Closing, the
Company shall furnish a certificate, signed by the President or a Vice
President of the Company, dated the Closing Date, to the effect that
the conditions specified in Sections 8.1.1 and 8.1.2, to the extent
relating to representations, warranties, covenants and agreements of
the Company, have been satisfied.
8.1.5. Outstanding Capital. The shares of Common Stock and the
Options listed on Schedule 3.1 shall constitute all the outstanding
stock of the Company and all the unexercised Contractual Obligations
pursuant to which the Company has granted any option, warrant or other
right to any Person to acquire any shares of common stock or any other
securities of, or equity interest in, the Company. Upon the
consummation of the Merger, all Options shall be converted into the
right to receive the Merger Consideration, upon the terms and
conditions set forth herein.
8.2. Legality; Governmental Authorization; Litigation. The acquisition
of the shares of Common Stock and the consummation of the other transactions
contemplated hereby, shall not be prohibited by any Legal Requirement, and all
necessary filings, if any, pursuant to the HSR Act shall have been made and all
applicable waiting periods thereunder shall have
<PAGE>
expired or been terminated. No Action shall have been instituted at or prior to
the Closing by any Person other than a party hereto or any Affiliate thereof, or
instituted by any Governmental Authority, relating to this Agreement or any of
the transactions contemplated hereby, which has a reasonable likelihood of
success and the result of which would prevent or make illegal the consummation
of any such transaction or could otherwise have a material adverse effect on the
ability of the Sellers to consummate the transactions contemplated hereby. No
temporary restraining order, preliminary or permanent injunction or other order
issued after the date hereof by any court of competent jurisdiction or other
legal or regulatory restraint or provision challenging Buyer's proposed
acquisition of the Target Companies or limiting or restricting Buyer's conduct
or operation of the Business of the Company following the Closing shall be in
effect, nor shall any proceeding brought by an administrative agency or
commission or other Governmental Authority or instrumentality, domestic or
foreign, seeking any of the foregoing be pending.
8.3. Third Party Consents. There shall have been obtained or made
by the Company the Consents and Filings listed on Schedule 8.3.
8.4. Opinion of Counsel. The Sellers and the Company shall have
furnished the Buyer with a favorable opinion of Ropes & Gray and Smith,
Katzenstein & Furlow, dated as of the Closing Date in the form of Exhibit 8.4.
8.5. General. All corporate proceedings required to be taken on the
part of the Company in connection with the transactions contemplated by this
Agreement shall have been taken. The Buyer shall have received copies of such
officers' certificates, good standing certificates, incumbency certificates and
other customary closing documents as the Buyer may reasonably request in
connection with the transactions contemplated hereby.
8.6. Charter Documents. Buyer shall have received (a) a copy of the
Articles of Incorporation of each Target Company certified by an appropriate
authority in the state of its incorporation and (b) a copy of the By-laws of
each Target Company certified by the Secretary of the Company, and the text of
such documents shall not have changed from the text thereof furnished to the
Buyer prior to the date hereof.
8.7. FIRPTA Compliance. Each of the Sellers shall have delivered to
Buyer at the Closing a certificate or certificates in form and substance
reasonably satisfactory to Buyer, duly executed and acknowledged, certifying all
facts necessary to exempt the transactions contemplated hereunder from
withholding under section 1445 of the Code.
8.8. Title Insurance. On or before the Closing, the Company shall have
furnished the Buyer, at the Buyer's expense, with ALTA policy of title insurance
in the form attached as Exhibit 8.8 hereto.
9. CONDITIONS TO THE OBLIGATION TO CLOSE OF THE SELLERS. The
<PAGE>
obligations of the Sellers to consummate the Closing under this Agreement are
subject to the satisfaction, at or prior to the Closing, of all of the following
conditions, compliance with which, or the occurrence of which, may be waived
prior to the Closing in writing by the Majority Sellers in their sole
discretion:
9.1. Representations, Warranties and Covenants.
9.1.1. Continued Accuracy of Representations and Warranties.
All representations and warranties of the Buyer contained in this
Agreement shall be true and accurate in all material respects as of the
Closing Date as if made on the Closing Date.
9.1.2. Performance of Agreements. The Buyer shall have
performed and satisfied, in all material respects, all covenants and
agreements required by this Agreement to be performed or satisfied by
the Buyer at or prior to the Closing.
9.1.3. Payment of Merger Consideration and Debt.
Contemporaneously with the Closing, the Buyer shall pay in full (i) the
Merger Consideration to all Stockholders and Optionholders tendering
Certificates in accordance with Section 2.6.1 and (ii) the Bank Debt
and the Prior Owner Debt.
9.1.4. Officer's Certificate. At the Closing, the Buyer shall
furnish to the Sellers a certificate signed by the President or any
Vice President of the Buyer, dated the Closing Date, to the effect that
the conditions specified in Sections 9.1.1, 9.1.2 and 9.1.3 have been
satisfied.
9.2. Legality; Government Authorization; Litigation. The Sellers'
consummation of the transactions contemplated hereby shall not be prohibited by
any Legal Requirement, and all necessary filings, if any, pursuant to the HSR
Act shall have been made and all applicable waiting periods thereunder shall
have expired or been terminated. No Action shall have been instituted at or
prior to the Closing by any Person other than a party hereto or any Affiliate
thereof, or instituted by any Governmental Authority, relating to this Agreement
or any of the transactions contemplated hereby, which has a reasonable
likelihood of success and the result of which would prevent or make illegal the
consummation any such transaction or could otherwise have a material adverse
effect on the ability of the Sellers to consummate the transactions contemplated
hereby. No temporary restraining order, preliminary or permanent injunction or
other order issued after the date hereof by any court of competent jurisdiction
or other legal or regulatory restraint or provision challenging Buyer's proposed
acquisition of the Target Companies shall be in effect, nor shall any proceeding
brought by an administrative agency or commission or other Governmental
Authority or instrumentality, domestic or foreign, seeking any of the foregoing
be pending.
9.3. Opinion of Counsel. The Buyer shall have furnished the Sellers
with a
<PAGE>
favorable opinion of Wilmer, Cutler & Pickering dated the Closing Date in the
form of Exhibit 9.3.
9.4. General. All corporate proceedings required to be taken by the
Buyer in connection with the transactions contemplated by this Agreement shall
have been taken. The Sellers shall have received copies of such officers'
certificates, good standing certificates, incumbency certificates and other
customary closing documents as the Sellers may reasonably request in connection
with the transactions contemplated hereby.
10. WARN. The Buyer shall indemnify the Sellers and their Affiliates and defend
and hold each of them harmless from and against any Losses which may be incurred
by any of them under WARN, or any state plant closing or notification law or
otherwise, arising out of, or relating to, any actions taken by the Buyer or the
Company on or after the Closing Date.
11. INDEMNIFICATION.
11.1. Indemnification. Subject to the terms of this Section 11, each of
the Sellers (each in its capacity as an indemnifying party, an "Indemnifying
Party"), for itself only and not jointly in the case of the indemnification
provided in Sections 11.1.1(i) and 11.1.1(iii) below, agrees to indemnify Buyer
(and following the Closing, the Company and the other Target Companies)
(collectively, the "Buyer Group") (each in its capacity as indemnified party, an
"Indemnitee") and hold the Buyer Group harmless, and the Buyer (in its capacity
as indemnifying party, an "Indemnifying Party") agrees to indemnify each of the
Sellers (each in its capacity as indemnified party, an "Indemnitee") and hold
each of the Sellers harmless, from, against and in respect of any and all Losses
arising from or related to any of the following:
11.1.1. The Sellers. In the case of each Seller as an
Indemnifying Party (i) any breach of any representation or warranty
made by such Seller in Section 4 of this Agreement; (ii) any breach of
any representation or warranty made by the Company in Section 5 of this
Agreement (other than Section 5.11) or any breach or violation of any
covenant or agreement made by the Company in this Agreement (other than
with respect to Taxes which are covered by Section 11.6 hereof) to be
performed at or prior to Closing; or (iii) any breach or violation of
any covenant or agreement made by such Seller in this Agreement.
11.1.2. The Buyer. In the case of the Buyer as Indemnifying
Party (i) any breach of any representation or warranty made by the
Buyer in this Agreement; or (ii) any breach or violation of any
covenant or agreement made by the Buyer in this Agreement.
11.2. Time Limitation on Indemnification. Except as provided in Section
11.6, no claim may be made or suit instituted by the Buyer Group under any
provision of this Section
<PAGE>
11 after the five hundred and forty-fifth (545th) day following the Closing Date
except for: (i) claims by the Buyer Group in respect of the representations and
warranties set forth in Sections 4.1, 4.2, 4.4, 5.1.4, 5.4 or 5.12 and (ii)
claims as to which any Indemnitee has given any Indemnifying Party written
notice (describing with reasonable specificity the amount and basis of such
claims) on or prior to the five hundred and forty-fifth (545th) day following
the Closing Date, provided, however, that any such claims made prior to such
date shall survive until the final resolution of such claims. Claims with
respect to the representations and warranties set forth in Sections 4.1
("Organization and Authority"), 4.2 ("Authorization and Enforceability") 4.4
("Title to Stock") and 5.1.4 ("Title to Stock") shall survive without
limitation; claims with respect to the representations and warranties set forth
in Section 5.12 ("Employee Benefit Plans") shall survive for six months past the
applicable statute of limitations with respect to the Target Companies (giving
effect to any extension thereof) and claims with respect to the representations
and warranties set forth in Section 5.4 ("Environmental Matters") shall survive
until the third anniversary of the Closing Date, provided, however, that any
such claim made by written notice (describing with reasonable specificity the
amount and basis of such claims) prior to such date shall survive until the
final resolution of such claims.
11.3. Monetary Limitations on Indemnification. Notwithstanding any
other provisions of this Agreement but subject to the second, third and fourth
sentences of this Section 11.3, the Sellers as Indemnifying Parties shall not
have any obligation to indemnify the Buyer Group as Indemnitee under Section
11.1.1 unless the aggregate cumulative total of all Losses incurred by the Buyer
Group as Indemnitee (other than for claims with respect to the representations
and warranties set forth in Sections 4.4 and 5.1.4) exceeds $750,000 (Seven
Hundred and Fifty Thousand Dollars), whereupon the Buyer Group as Indemnitee
shall be entitled to indemnification for the entire amount of such Losses.
Notwithstanding any other provision of this Agreement but subject to the third
and fourth sentences of this Section 11.3, the total maximum aggregate
indemnification liability of all Sellers as a group for all claims pursuant to
Section 11.1.1 (other than for claims with respect to the representations and
warranties set forth in Sections 4.4 and 5.1.4) shall not exceed $13,500,000
(Thirteen Million Five Hundred Thousand Dollars). Claims with respect to the
representations and warranties set forth in Sections 4.4 ("Title to Stock") and
5.1.4 ("Title to Stock") shall not be subject to (i) the $750,000 "basket" set
forth in the first sentence of this Section 11.3 or (ii) the $13.5 million
"ceiling" set forth in the second sentence of this Section 11.3. In addition to
the foregoing limits, the liability of each Seller under Section 11.1.1(ii) in
respect of each Loss shall not exceed such Seller's Pro Rata Share of such Loss.
The limitations set forth in this Section 11.3 do not apply to limit liability
under Section 11.6.
11.4. Third Party Claims, etc. Promptly after (a) becoming aware of any
fact, occurrence or event which may give rise to a claim for indemnification
under this Section 11 or (b) the receipt by any Indemnitee of notice of the
commencement of any action or other claim against such Indemnitee by a third
party, such Indemnitee shall, if a claim with respect thereto is or may be made
against any Indemnifying Party pursuant to this Section 11, give
<PAGE>
such Indemnifying Party written notice of the nature and basis of such claim.
Prior to the thirtieth day after receipt by the Indemnifying Party of a notice
from the Indemnitee with respect to the commencement of an action or other claim
by a third party, the Indemnitee will defend against such claim (provided that
the Indemnitee shall not settle such claim). The Indemnifying Parties shall have
the right to defend such claim, at the Indemnifying Parties' expense and with
counsel of their choice reasonably satisfactory to the Indemnitee, provided that
the Indemnifying Parties so notify the Indemnitee within 30 days after receipt
of such notice. So long as the Indemnifying Parties are conducting the defense
of such claim as provided in the immediately preceding sentence, the Indemnitee
may retain separate co-counsel at its sole cost and expense and may participate
in defense of such claim, and the Indemnifying Parties will not consent to the
entry of any judgment or enter into any settlement with respect to such claim
unless such judgment or settlement contains an unconditional term providing for
a release to be given by the claimant in question or plaintiff to the Indemnitee
of and from all liability in respect of such claim. In the event the
Indemnifying Parties do not assume defense of such claim as so provided, (x) the
Indemnitee shall defend against such claim (provided that the Indemnitee shall
not settle such claim unless such judgment or settlement contains an
unconditional term providing for a release to be given by the claimant in
question or plaintiff to the Indemnitee of and from all liability in respect of
such claim) and (y) the Indemnifying Parties will remain responsible for any
Losses the Indemnitee may suffer as a result of such claim to the full extent
provided in this Section 11. Regardless of which party shall assume the defense
of such claim, each party shall provide to the other parties on request all
information and documentation reasonably necessary to support and verify any
Losses which give rise to such claim for indemnification and shall provide
reasonable access to all books, records and personnel in their possession or
under their control which would have a bearing on such claim. In cases where the
potential Indemnifying Parties in question with respect to a third party claim
are the Sellers generally, all determinations by the Majority Sellers with
respect to actions to be taken or not taken by the Indemnifying Parties in
connection with the rights or obligations of the Indemnifying Parties under this
Section 11.4 shall be conclusive and binding on all Sellers. This Section 11.4
does not apply to Tax Claims.
11.5. Certain Other Indemnity Matters.
(a) From and after the Closing the Buyer Group's
sole and exclusive remedy (other than
specific enforcement to the extent otherwise
available) with respect to any and all
claims relating to the subject matter of
this Agreement shall be pursuant to the
indemnification provisions set forth in this
Section 11. In furtherance of the foregoing,
the Buyer hereby, on its own behalf and on
behalf of its Affiliates, waives, to the
fullest extent permitted under applicable
law, and agrees not to assert in any action
or proceeding of any kind, any and all
rights, claims and causes of action it or
such Affiliate may now or hereafter have
against the Sellers other than claims for
indemnification asserted
<PAGE>
as permitted by and in accordance with the
provisions set forth in this Section 11
(including, without limitation, any such
rights, claims or causes of action arising
under or based upon common law or other
Legal Requirements).
(b) Notwithstanding anything to the contrary
contained in this Agreement, if the Closing
occurs, (i) no claim for indemnification may
be asserted by the Buyer Group against any
Seller under this Section 11 with respect to
any matter discovered by or known to the
Buyer on or before the Closing Date and (ii)
no claim for indemnification may be asserted
by any Seller against the Buyer under this
Section 11 with respect to any matter
discovered or known to such Seller on or
before the Closing Date. This Section
11.5(b) shall not apply to claims made by
the Buyer Group with respect to Tax
Liabilities or the representations and
warranties set forth in Sections 4.4 and
5.1.4.
(c) Upon making any payment to an Indemnitee for
any indemnification claim pursuant to this
Section 11, the Indemnifying Party shall be
subrogated, to the extent of such payment,
to any rights which the Indemnitee may have
against other Persons with respect to the
subject matter underlying such
indemnification claim.
(d) The Sellers shall have no liability under
any provision of this Agreement for any
Losses to the extent that such Losses relate
to actions taken by Buyer or its Affiliates
after the Closing. After the Closing, the
Buyer shall, and shall cause the Target
Companies to, take all reasonable steps to
mitigate all such Losses upon and after
becoming aware of any event which could
reasonably be expected to give rise to any
Losses with respect to which indemnification
may be requested hereunder.
(e) All costs and expenses of defense incurred
by any Indemnifying Party as contemplated by
Section 11.4 shall be deemed to constitute
Losses for purposes of Section 11.3, and
such expenses shall be reimbursed by the
Indemnified Party to the extent that such
costs and expenses, if incurred by the
Indemnified Party, would not have been
recoverable by the Indemnified Party from
the Indemnifying Party pursuant to this
Section 11.
(f) After the Closing, the Target Companies
shall not indemnify any Seller or any of
their investors or Affiliates for any claim
for
<PAGE>
indemnification pursuant to any statute,
charter, by-law, or contractual
indemnification right, including the right
to receive payments for interest or Taxes,
and any such indemnification rights are
hereby terminated.
11.6. Tax Indemnity.
(a) Subject to the provisions of this Section
11.6, each of the Sellers agrees to
indemnify the Buyer Group and hold the Buyer
Group harmless from, against and in respect
of any and all of the following: (i) Losses
arising from or attributable to any breach
of any representation or warranty made by
the Company in Sections 5.11 or 7.12 of this
Agreement or any breach or violation of any
covenant or agreement of the Company in this
Agreement to be performed at or prior to
Closing with respect to Taxes, determined
without regard to (A) any disclosures,
scheduled or otherwise, or (B) any
qualifications as to materiality; (ii)
liability for Taxes paid by or on behalf of
the Target Companies after the Closing Date
for taxable periods, or portions thereof,
ending on or prior to the Closing Date which
are not reflected in Current Tax Accruals;
(iii) any reasonable out-of-pocket
third-party expenses relating to defense of
Tax Claims as defined in Section 7.10 hereof
with respect to Losses and Taxes described
in clauses (i) and (ii) (except with respect
to expenses during any portion of the Tax
audit or examination stage which is under
Buyer's control); and (iv) reasonable
out-of-pocket third-party expenses relating
to preparation of Tax Returns required to be
filed on or before the Closing Date (after
taking into account any extensions thereof)
but which were not so filed. (The amounts
described in the preceding sentence are
collectively referred to as "Tax
Liabilities".) Notwithstanding the foregoing
and except as provided in Section 7.10,
Sellers shall be required to indemnify the
Buyer Group for Tax Liabilities only to the
extent such Tax Liabilities, in the
aggregate, exceed the amount of the Closing
Tax Reserve, and the liability of each
Seller for indemnified Tax Liabilities shall
not exceed such Seller's Pro Rata Share of
such Tax Liabilities. For purposes of this
Section 11.6, no item shall be double
counted in determining Tax Liabilities.
(b) It is understood and agreed by Buyer that
Tax Liabilities do not include any
diminution in value in the Target Companies,
or adjustments to income or deductions which
do not increase liability for Taxes but
simply decrease the size of net operating
<PAGE>
loss carryforwards from taxable periods (or
portions thereof) ending on or before the
Closing Date, tax basis or other similar Tax
attributes of the Target Companies which
would otherwise be usable in taxable periods
(or portions thereof) of the Target
Companies beginning after the Closing Date,
and that Sellers have not made any
representation or warranty as to the size of
the net operating loss carryforwards of the
Target Companies or the amount of basis in
the Target Companies' assets or other
similar Tax attributes. Notwithstanding
anything to the contrary in this Section
11.6 and except as provided in Section
5.11(x), Sellers shall not be liable for any
Taxes of the Target Companies (i)
attributable to taxable periods beginning
after the Closing Date or (ii) which are
attributable to transactions outside the
Ordinary Course of Business which Buyer
causes to occur on the Closing Date after
control of the Target Companies has been
transferred to the Buyer. The Buyer Group's
claims with respect to a Tax Liability shall
survive for six months past the applicable
statute of limitations with respect to the
Target Companies (giving effect to any
extension thereof) provided, however, that
any such claims made prior to such date by
written notice (describing with reasonable
specificity the amount and basis of such
claims) shall survive until the final
resolution of such claims.
12. CONSENT TO JURISDICTION; JURY TRIAL WAIVER.
12.1. Consent to Jurisdiction. Each party to this Agreement, by its
execution hereof, (i) hereby irrevocably submits, and agrees to cause each of
its Subsidiaries to submit, to the exclusive jurisdiction of the state courts of
the State of Delaware or the United States District Court located in the State
of Delaware for the purpose of any Action arising out of or based upon this
Agreement or relating to the subject matter hereof, (ii) hereby waives, and
agrees to cause each of its Subsidiaries to waive, to the extent not prohibited
by applicable law, and agrees not to assert, and agrees not to allow any of its
Subsidiaries to assert, by way of motion, as a defense or otherwise, in any such
Action, any claim that it is not subject personally to the jurisdiction of the
above-named courts, that its property is exempt or immune from attachment or
execution, that any such Action brought in one of the above-named courts may be
removed to any federal court, should be dismissed on grounds of forum non
conveniens, should be transferred to any court other than one of the above-named
courts, or should be stayed by reason of the pendency of some other proceeding
in any other court other than one of the above-named courts, or that this
Agreement or the subject matter hereof may not be enforced in or by such court,
or that this Agreement or the subject matter hereof may not be enforced in or by
such court, and (iii) hereby agrees not to commence or to permit any of its
Subsidiaries to commence any Action arising out of or based upon this Agreement
or relating to the subject matter hereof other than before one of the
above-named courts nor to
<PAGE>
make any motion or take any other action seeking or intending to cause the
transfer or removal of any such Action to any court other than one of the
above-named court whether on the grounds of inconvenient forum or otherwise.
Each party hereby (x) consents to service of process in any such Action in any
manner permitted by Delaware law or by registered or certified mail, return
receipt requested, at its address specified pursuant to Section 15; (y) agrees
that service of process made in accordance with clause (x) is reasonably
calculated to give actual notice of any such Action; and (z) waives and agrees
not to assert (by way of motion, as a defense, or otherwise) in any such Action
any claim that service of process made in accordance with clause (x) does not
constitute good and sufficient service of process.
12.2. WAIVER OF JURY TRIAL. TO THE EXTENT NOT PROHIBITED BY APPLICABLE
LAW WHICH CANNOT BE WAIVED, EACH OF THE PARTIES HERETO HEREBY WAIVES, AND AGREES
TO CAUSE EACH OF ITS SUBSIDIARIES TO WAIVE, AND COVENANTS THAT NEITHER IT NOR
ANY OF ITS SUBSIDIARIES WILL ASSERT (WHETHER AS PLAINTIFF, DEFENDANT OR
OTHERWISE) ANY RIGHT TO TRIAL BY JURY IN ANY FORUM IN RESPECT OF ANY ISSUE OR
ACTION, CLAIM , CAUSE OF ACTION OR SUIT (IN CONTRACT, TORT OR OTHERWISE),
INQUIRY, PROCEEDING OR INVESTIGATION ARISING OUT OF OR BASED UPON THIS AGREEMENT
OR THE SUBJECT MATTER HEREOF OR IN ANY WAY CONNECTED WITH OR RELATED OR
INCIDENTAL TO THE TRANSACTIONS CONTEMPLATED HEREBY, IN EACH CASE WHETHER NOW
EXISTING OR HEREAFTER ARISING. THE BUYER ACKNOWLEDGES THAT IT HAS BEEN INFORMED
BY THE SELLERS THAT THIS SECTION 12.2 CONSTITUTES A MATERIAL INDUCEMENT UPON
WHICH THE SELLERS ARE RELYING AND WILL RELY IN ENTERING INTO THIS AGREEMENT AND
ANY OTHER AGREEMENTS RELATING HERETO OR CONTEMPLATED HEREBY. ANY PARTY HERETO
MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION 12.2 WITH ANY COURT
AS WRITTEN EVIDENCE OF THE CONSENT OF EACH SUCH PARTY TO THE WAIVER OF ITS RIGHT
TO TRIAL BY JURY.
13. TERMINATION.
13.1. Termination of Agreement. This Agreement may be terminated by the
parties only as provided below:
(a) The Buyer and the Majority Sellers may
terminate this Agreement by mutual written
consent at any time prior to the Closing;
(b) The Buyer may terminate this Agreement by
giving written notice to the Sellers at any
time prior to the Closing in the event the
Sellers are in material breach of any
representation, warranty, covenant or
agreement contained in this Agreement, the
Buyer
<PAGE>
has notified the Sellers of the breach and
such breach has continued without cure for a
period of 30 days after the notice of breach
and there is a reasonable likelihood that
such breach will result in an inability of
the Sellers to satisfy the conditions set
forth in Section 8.1;
(c) The Majority Sellers may terminate this
Agreement by giving written notice to the
Buyer at any time prior to the Closing in
the event the Buyer or MergeCo is in
material breach of any representation,
warranty, covenant or agreement contained in
this Agreement, the Majority Sellers have
notified the Buyer of the breach and such
breach has continued without cure for a
period of 30 days after the notice of breach
and there is a reasonable likelihood that
such breach will result in an inability of
the Buyer to satisfy the conditions set
forth in Section 9.1;
(d) The Buyer may terminate this Agreement prior
to the Closing pursuant to Section 7.4.3.;
or
(e) The Majority Sellers may terminate this
Agreement on or after 4:00 p.m. on August
17, 1998 if the Closing of the transactions
contemplated by this Agreement shall not
have occurred by such date and the Buyer may
terminate this Agreement on or after 4:00
p.m. on August 17, 1998 if the Closing of
the transactions contemplated by this
Agreement shall not have occurred by such
date.
13.2. Effect of Termination. In the event of the termination of this
Agreement pursuant to Section 13.1, all obligations of the parties hereunder
(other than obligations under Sections 7.2, 12, 14 and this Section 13, which
shall survive termination) shall terminate without any liability of any party to
any other party; provided, however, that no termination by a party pursuant to
clause (b), (c), (d) or (e) of Section 13.1 shall relieve such party from any
liability arising from or relating to any breach by such party prior to
termination.
13.3. Time of Essence. Time is and shall be of the essence in this
Agreement.
13.4. Confidentiality; Non-Compete. Each of Senior Lending Associates
I, L.P., Senior Lending Associates II, L.P., Mezzanine Lending Associates I,
L.P., Mezzanine Lending Associates II, L.P., Mezzanine Lending Associates III,
L.P., BCC Industrial Services, Inc., Butler Capital Corporation, Fenway Partners
Capital Fund, L.P., Fenway Partners, Inc., James Miller, Jack Ferner and Edwin
Gyenes agree that, for a period of twelve months from the Closing Date, each
will, and will cause those Affiliates over which it exercises control to, and
will use reasonable efforts to cause its other Affiliates to, (a) not use
<PAGE>
or disclose any Confidential Information without the prior written consent of
the Surviving Corporation's chief executive officer or other specifically
designated officer, unless such Confidential Information has become public
knowledge (other than as a result of disclosure in violation of this provision)
or has come into the possession of other or others by legal means, or except as
required by applicable law or in connection with the exercise of any right or
remedy hereunder; (b) not directly or indirectly, whether as owner, partner,
investor, consultant, agent, employee, co-venturer or otherwise, compete with
the Surviving Corporation or any of its subsidiaries within the continental
United States in a Competitive Business (as defined below); and (c) not hire or
attempt to hire any employee as of the date hereof of the Surviving Corporation
or any of its subsidiaries (other than any employee terminated by the Surviving
Corporation or any of its subsidiaries and other than any employee that
approaches the prospective employer without any solicitation targeted at such
employee or group of employees of the Surviving Corporation), encourage any such
employee to terminate his or her relationship with the Surviving Corporation or
any of its subsidiaries, or solicit or encourage any customer or vendor of the
Surviving Corporation or any of its subsidiaries to terminate its relationship
with them, or, in the case of a customer, to conduct with any Person any
business or activity which such customer conducts or could conduct with the
Surviving Corporation or any of its subsidiaries; provided that nothing in this
provision shall prohibit (i) the holding of investments (including options) of
up to 5% of any class of the equity or debt securities of any public company and
(ii) Fenway Partners Capital Fund, L.P., Fenway Partners, Inc. and their
respective Affiliates from, directly or indirectly, whether as owner, partner,
investor, consultant, agent, employee, co-venturer or otherwise, engaging in any
Competitive Business (A) that supplies janitorial and safety equipment and
supplies and related products to schools and school systems or (B) to the extent
that the pre-tax earnings generated from Competitive Business do not in the
aggregate exceed $2,000,000 (Two Million Dollars). As used herein, the term
"Competitive Business" shall mean any business engaged in the sale directly to
schools and school systems of school supplies, teaching aids, educational
materials and furniture, fixtures and/or equipment for use in schools.
14. MISCELLANEOUS.
14.1. Entire Agreement; Waivers. This Agreement constitutes the entire
agreement among the parties hereto pertaining to the subject matter hereof and
supersedes all prior and contemporaneous agreements, understandings,
negotiations and discussions, whether oral or written, of the parties with
respect to such subject matter, other than the Confidentiality Agreement (which
shall survive execution and delivery of this Agreement and shall survive any
termination of this Agreement but shall terminate upon consummation of the
Closing). No waiver of any provision of this Agreement shall be deemed or shall
constitute a waiver of any other provision hereof (whether or not similar),
shall constitute a continuing waiver unless otherwise expressly provided nor
shall be effective unless in writing and executed (i) in the case of a waiver by
the Buyer, and (ii) in the case of a waiver by the Sellers, by the Majority
Sellers.
<PAGE>
14.2. Amendment or Modification. Except as set forth in Section 7.4.3,
the parties hereto may not amend or modify this Agreement except in such manner
as may be agreed upon by a written instrument executed by the Buyer, the Company
and the Majority Sellers.
14.3. Investigation; No Additional Representations. The Sellers and the
Company and their Affiliates have not made and are not making any
representation, warranty, covenant or agreement, express or implied, with
respect to the matters contained in this Agreement other than the explicit
representations, warranties, covenants and agreements of the Sellers and the
Company set forth herein. The Buyer acknowledges and agrees that it (i) has made
its own inquiry and investigation into, and based thereon has formed an
independent judgment concerning, the Business and the Target Companies, and (ii)
will not assert, except pursuant to Section 11, any claim against the Sellers or
any of their respective partners, directors, officers, employees, agents,
stockholders, consultants, investment bankers, brokers, representatives or
controlling persons, or any Affiliate of any of the foregoing, or hold the
Sellers or any such persons liable, for any inaccuracies, misstatements or
omissions with respect to information furnished by the Company, the Sellers or
such persons concerning the Business, the Target Companies, this Agreement or
the transactions contemplated hereby.
14.4. Severability. In the event that any provision hereof would, under
applicable law, be invalid or unenforceable in any respect, such provision shall
(to the extent permitted under applicable law) be construed by modifying or
limiting it so as to be valid and enforceable to the maximum extent compatible
with, and possible under, applicable law. The provisions hereof are severable,
and in the event any provision hereof should be held invalid or unenforceable in
any respect, it shall not invalidate, render unenforceable or otherwise affect
any other provision hereof.
14.5. Successors and Assigns. All of the terms and provisions of this
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective permitted transferees and assigns (each of which
transferees and assigns shall be deemed to be a party hereto for all purposes
hereof); provided, however, that (i) no transfer or assignment by any party
hereto shall be permitted without the prior written consent of the other parties
hereto and any such attempted transfer or assignment without consent shall be
null and void and (ii) no transfer or assignment by any party shall relieve such
party of any of its obligations hereunder.
14.6. Sellers' Representative. (a) Each of the Sellers (other than
Senior Lending Associates I, L.P., Senior Lending Associates II, L.P., Mezzanine
Lending Associates I, L.P., Mezzanine Lending Associates II, L.P., Mezzanine
Lending Associates III, L.P., BCC Industrial Services, Inc., Fenway Partners
Capital Fund, L.P., FPIP, LLC and FPIP Trust, LLC (collectively, the
"Institutional Sellers")) hereby appoints Squire, Sanders and Dempsey as the
agent, proxy and attorney-in-fact (the "Individual Sellers' Representative") for
such Sellers to receive all notices which may be sent to any such Seller
pursuant to the Agreement. All notices to be sent to such Sellers pursuant to
this Agreement may be addressed to the
<PAGE>
Individual Sellers' Representative and any notice so sent shall be deemed notice
to all such Sellers hereunder. Such Sellers hereby consent and agree that the
Individual Sellers' Representative is authorized to accept notice on behalf of
such Sellers pursuant hereto. This power of attorney and all authority hereby
conferred is granted subject to the interest of such Sellers hereunder and in
consideration of the mutual covenants and agreements made herein, and shall be
irrevocable and shall not be terminated by any act of any such Seller, by
operation of law, whether by such Seller's death or any other event. Buyer shall
be entitled to rely upon any communication or writings given or executed by the
Individual Sellers' Representative.
(b) Each of the Sellers other than the Institutional Sellers hereby
agrees not to assert any claim against, and to indemnify and hold harmless
Individual Sellers' Representative from and against any and all Losses incurred
by, the Individual Sellers' Representative or any of its partners, directors,
officers, employees, agents, stockholders, consultants, investment bankers,
brokers, representatives or controlling persons, or any Affiliate of any of the
foregoing, relating to Individual Sellers' Representative's capacity as
Individual Sellers' Representative other than such claims or Losses resulting
from the Individual Sellers' Representative's gross negligence or willful
misconduct.
(c) Each Seller other than the Instituaional Sellers hereby
unconditionally and irrevocably agrees to pay to the Individual Sellers'
Representative, promptly upon request and in any event within 10 days of such
request, a pro rata portion of any and all costs and expenses (including counsel
and legal fees and expenses) incurred by the Individual Sellers' Representative
in connection with this Agreement. Any and all payments made by any such Sellers
under this Section 14.6 shall be made free and clear of any present or future
taxes, deductions, charges or withholdings and all liabilities with respect
thereto.
14.7. Notices. Any notices or other communications required or
permitted hereunder shall be sufficiently given if in writing and delivered
personally or sent by telecopier, Federal Express, or registered or certified
mail, postage prepaid, addressed as follows:
If to Senior Lending Associates I, L.P.,
Senior Lending Associates II, L.P.,
Mezzanine Lending Associates I, L.P.,
Mezzanine Lending Associates II, L.P.,
Mezzanine Lending Associates III, L.P. or
BCC Industrial Services, Inc.
to it at:
<TABLE>
<S> <C>
767 Fifth Avenue, 6th Floor
New York, NY 10153
Telecopier: 212-759-0876
Attention: Costa Littas
If to Fenway Partners Capital Fund, L.P.,
<PAGE>
FPIP, LLC or FPIP Trust, LLC
to it at: 152 West 57th Street, 59th Floor
New York, NY 10019
Telecopier: 212-581-1205
Attention: Peter Lamm
with a copy to: Ropes & Gray
One International Place
Boston, MA 02110
Telecopier: 617-951-7050
Attention: R. Newcomb Stillwell
If to any Seller other than an Institutional Seller, Squire Sanders & Dempsey
to it at: 4900 Key Tower
127 Public Square
Cleveland, OH 44114
Telecopier: 216-479-8780
Attention: Mara Babin
If to Buyer or MergeCo, 1000 North Bluemond Drive
to it at: Appleton, Wisconsin 54914
Telecopier: 920-734-6276
Attention: Daniel P. Spalding
with a copy to: Wilmer, Cutler & Pickering
2445 M Street, N.W.
Washington, D.C. 20037
Telecopier: 202-663-6363
Attention: Mark A. Dewire
</TABLE>
If to any other Stockholder, to such Stockholder at the address of such
Stockholder on the records of the Company as of the Closing Date. Unless
otherwise specified herein, such notices or other communications shall be deemed
received (a) on the date delivered, if delivered personally, (b) two Business
Days after being sent by Federal Express, if sent by Federal Express, (c) one
Business Day after being delivered, if delivered by telecopier, and (d) three
Business Days after being sent, if sent by registered or certified mail. Each of
the parties hereto shall be entitled to specify a different address by giving
notice as aforesaid to each of the other parties hereto.
14.8. Public Announcements. At all times no party hereto will issue or
make any reports, statements or releases to the public with respect to this
Agreement or the transactions contemplated hereby without the consent of the
other parties hereto, which consent shall not be
<PAGE>
unreasonably withheld. If any party hereto is unable to obtain, after reasonable
effort, the approval of its public report, statement or release from the other
parties hereto and such report, statement or release is, in the opinion of legal
counsel to such party, required by law in order to discharge such party's
disclosure obligations, then such party may make or issue the legally required
report, statement or release and promptly furnish the other parties with a copy
thereof. Each party hereto will also obtain the prior approval by the other
parties hereto of any press release to be issued announcing the consummation of
the transactions contemplated by this Agreement.
14.9. Headings, etc. Section and subsection headings are not to be
considered part of this Agreement, are included solely for convenience, are not
intended to be full or accurate descriptions of the content thereof and shall
not affect the construction hereof.
14.10. Disclosure. Any item listed or referred to in any Schedule
pursuant to any Section of this Agreement shall be incorporated by reference
into each other Schedule only where such listing or description is expressly
cross-referenced in a Schedule.
14.11. Knowledge. As used herein, knowledge of the Company shall mean
the knowledge of Costa Littas, Donald Cihak, Peter Lamm, James Miller, Jack
Ferner, John McNamara, James Loudon, Edward Gyenes, David McKeon or Terry
Satterfield, including facts of which such directors and officers, in the
reasonably prudent exercise of their duties, should be aware.
14.12. Third Party Beneficiaries. Nothing in this Agreement is intended
or shall be construed to entitle any Person other than the parties or their
respective transferees and assigns permitted hereby to any claim, cause of
action, remedy or right of any kind.
14.13. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute but one and the same instrument.
14.14. Governing Law. This Agreement shall be governed by and construed
in accordance with the domestic substantive laws of the State of Delaware,
without giving effect to any choice or conflict of law provision or rule that
would cause the application of the laws of any other jurisdiction.
14.15. Strict Construction. No rule of strict construction shall apply
to or be used against any party hereto.
14.16. Expenses. If the Closing occurs, all costs and expenses
(including without limitation legal fees and expenses) incurred by the Sellers
in connection with this Agreement and the transactions contemplated hereby shall
be paid by the Company. All such costs and expenses incurred by the Company
shall be paid by the Company, whether or not the
<PAGE>
transactions contemplated hereby are consummated, and all such costs and
expenses incurred by the Buyer shall be paid by the Buyer whether or not the
transactions contemplated hereby are consummated.
[The rest of this page has been intentionally left blank.]
<PAGE>
[MERGER AGREEMENT]
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound
hereby, have caused this Agreement to be executed, as of the date first above
written by their respective officers thereunto duly authorized.
THE COMPANY: THE NATIONAL SCHOOL SUPPLY
COMPANY
By: /s/ James A. Loudon
------------------------------
Title: Chief Financial Officer
THE SELLERS: SENIOR LENDING ASSOCIATES I, L.P.
By: Senior Lending Management I, L.P.
By: *
--------------------------
Authorized Signatory
SENIOR LENDING ASSOCIATES II, L.P.
By: Senior Lending Management II, L.P.
By: *
-------------------------
Authorized Signatory
MEZZANINE LENDING ASSOCIATES I, L.P.
By: Mezzanine Lending Management I, L.P.
By: *
--------------------------
Authorized Signatory
MEZZANINE LENDING ASSOCIATES II, L.P.
By: Mezzanine Lending Management II, L.P.
By: *
--------------------------
Authorized Signatory
<PAGE>
[MERGER AGREEMENT]
MEZZANINE LENDING ASSOCIATES III, L.P.
By: Mezzanine Lending Management III, L.P.
By: *
--------------------------
Authorized Signatory
*By: /s/ Costa Littas
--------------------------
Costa Littas, authorized signatory of each of
the aforementioned limited partnerships
BCC INDUSTRIAL SERVICES, INC.
By: /s/ Thomas A. Berger, Jr.
--------------------------
Title: Principal
FENWAY PARTNERS CAPITAL FUND, L.P.
By: Fenway Partners, L.P., its general
partner
By: Fenway Partners Management, Inc., its
general partner
By: /s/ Andrea Levinson
----------------------------
Title: Managing Director
FPIP, LLC
By: Fenway Partners, Inc., its Manager
By: /s/ Andrea Levinson
-----------------------------
Title: Managing Director
FPIP TRUST, LLC
By: Fenway Partners, Inc., its Manager
By: /s/ Andrea Levinson
------------------------------
Title: Managing Director
RICHLAND COUNTY FOUNDATION
By: /s/ Pamela H. Siegenthaler
------------------------------
Title: President
/s/ John McNamara
---------------------------------
John McNamara
<PAGE>
[MERGER AGREEMENT]
/s/ Doug Dever
---------------------------------
Doug Dever
/s/ Jim Hurst
---------------------------------
Jim Hurst
/s/ Dave Gribben
---------------------------------
Dave Gribben
/s/ Jay Thomas
---------------------------------
Jay Thomas
/s/ Jack IIiff
---------------------------------
Jack IIiff
/s/ Mike Woltering
---------------------------------
Mike Woltering
/s/ Will Norman
---------------------------------
Will Norman
/s/ Andrew Love
---------------------------------
Andrew Love
/s/ Diane Metcalf
---------------------------------
Diane Metcalf
/s/ George Herzog
---------------------------------
George Herzog
/s/ Doris Gyenes
---------------------------------
Doris Gyenes
/s/ Don Moos
---------------------------------
Don Moos
/s/ Craig Mottayaw
---------------------------------
Craig Mottayaw
/s/ Brad Snoke
---------------------------------
Brad Snoke
<PAGE>
[MERGER AGREEMENT]
/s/ Garett Reid
-------------------------------
Garett Reid
/s/ Charlotte Ballou
-------------------------------
Charlotte Ballou
/s/ James Miller
-------------------------------
James Miller
/s/ Jack Ferner
-------------------------------
Jack Ferner
/s/ James Loudon
-------------------------------
James Loudon
/s/ Edwin Gyenes
-------------------------------
Edwin Gyenes
/s/ David McKeon
-------------------------------
David McKeon
/s/ Jeffrey K. Hewson
-------------------------------
Jeffrey K. Hewson
/s/ Joan Miller
--------------------------------
Joan Miller
THE BUYER: SCHOOL SPECIALTY, INC.
By: /s/ David J. Vander Zanden
-----------------------------
Title: President & COO
MERGECO: BCG ACQUISITION CORP.
By: /s/ David J. Vander Zanden
----------------------------
Title: VP & Secy
<PAGE>
[MERGER AGREEMENT]
Solely for purposes of
Section 13.4:
BUTLER CAPITAL CORPORATION
By: /s/ Costa Littas
-----------------------------
Title: Managing Director
FENWAY PARTNERS, INC.
By: /s/ Andrea Levinson
-----------------------------
Title: Managing Director
