Exhibit 2.1
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (the "Agreement") is
made and entered into this 13th day of November, 2000,
by and among SCHOOL SPECIALTY, INC., a Wisconsin
corporation ("Buyer"), J.L. HAMMETT COMPANY, a
Massachusetts corporation (the "Seller"), MONATIQUOT
REAL ESTATE TRUST, a Massachusetts business trust dtd.
12/3/64 (the "Trust"), and solely with respect to
Section 9 hereof, RICHMOND Y. HOLDEN, JR. and
JEFFREY S. HOLDEN (individually a "Management
Shareholder" and collectively the "Management
Shareholders").
The Seller desires to sell to the Buyer and the
Buyer desires to purchase from the Seller the Purchased
Assets, as defined below, used in the Business, as
defined below. The Seller further desires to purchase
from the Trust real property owned by the Trust in
Lyons, New York which is utilized in the Business by
the Seller (the "Owned Real Property").
NOW, THEREFORE, in consideration of the premises
and of the representations, warranties, covenants, and
agreements herein contained, the parties agree as
follows:
1. ASSET PURCHASE AND RELATED MATTERS
1.1. Transfer of Purchased Assets.
(a) For the purpose of this Agreement the term
"Business" shall mean the Seller's K-12 education sales
division for non-profit public schools, private
schools, parochial schools, school districts and
teachers as previously conducted through direct mail
programs, sales representatives calling on individual
schools, business managers, school districts, teachers
and superintendents, as well as through catalogs,
flyers, promotions and online transactions conducted
directly with the above referenced schools, school
districts and teachers, but excluding the following:
(i) selling to customers at retail prices through the
retail stores, through the business to consumer retail
web site and through flyer distributions (which for the
purposes of this Agreement shall be limited to
forty-eight (48) pages in length) and mailed to
teachers as well as to the schools where they work
within a thirty (30) mile radius of the Seller's retail
locations for the purpose of inducing such teachers to
make purchases from the retail locations according to
the current business practices of the Seller's retail
store locations, (ii) Seller's pre K early childhood
business conducted with private day care centers and
chains, including without limitation those set forth on
Schedule 1.1(a)(ii), (iii) Seller's Charter and
Educational Management Organizations business which
sells to privately managed multi-location charter
schools as well as to schools managed or operated by
non-public management organizations, including without
limitation those schools and organizations set forth on
Schedule 1.1(a)(iii), and (iv) certain of Seller's
on-line affiliate relationships as set forth on
Schedule 1.1(a)(iv). Notwithstanding anything to the
contrary herein, the Seller does acknowledge that it
will not engage in transactions which would cause the
Seller to be directly selling to organizations in the
Business being purchased by Buyer. Notwithstanding
anything to the contrary herein the term "Business"
shall consist of
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those operations and related assets
(except for Excluded Assets) which generated the net
sales used to calculate the Purchase Price as described
in Section 1.4(a). Subject to and upon the terms and
conditions of this Agreement, the Buyer agrees to
purchase and acquire from the Seller, and the Seller
agrees to sell, transfer, convey, and deliver to the
Buyer at the Closing (as defined in Section 2.1) good
and valid title to all of the tangible and intangible
assets, properties, and business used primarily in the
conduct of the Business as of October 31, 2000 as set
forth on Schedule 1.1(a) and as updated through the
Closing Date for acquisitions and dispositions made in
the ordinary course of the Business, excluding Excluded
Assets (the "Purchased Assets"), free and clear of any
Liens, other than Permitted Liens (both as defined
below). Further, as of the Closing Date, the Trust
agrees to sell, transfer, convey, and deliver to the
Buyer at the Closing good and valid title to the Owned
Real Property. For the purpose of this Agreement the
Owned Real Property shall be included in the definition
of Purchased Assets.
(b) For purposes of this Agreement: (x) "Lien"
means any mortgage, security interest, pledge, hypothecation,
assignment, deposit arrangement, encumbrance, lien
(statutory or otherwise), charge, preference, priority,
or other security agreement, option, warrant,
attachment, right of first refusal, preemptive,
conversion, put, call or other claim or right,
restriction on transfer (other than restrictions
imposed by federal and state securities laws), or
preferential arrangement of any kind or nature
whatsoever (including any restriction on the transfer
of any assets, any conditional sale or other title
retention agreement, any financing lease involving
substantially the same economic effect as any of the
foregoing and the filing of any financing statement
under the Uniform Commercial Code or comparable law of
any jurisdiction); and (y) "Taxes" means all federal,
state, county, local, foreign and other taxes or
assessments including, without limitation, income,
estimated income, business, occupation, franchise,
property (real and personal), sales, employment, gross
receipts, use, transfer, ad valorem, profits, license,
capital payroll, employee withholding, unemployment,
excise goods and services, severance, stamp and
including interest, penalties and additions in
connection therewith for which the Seller is or may be
liable. For purposes of this Agreement, "Permitted
Liens" means the following:
(i) easements, covenants, restrictions and similar
encumbrances that do not materially interfere with the
use of the Owned Real Property or any leased real
property as currently used and improved;
(ii) encroachments that do not materially adversely
affect the value or use of the Owned Real Property or
leased real property as currently used and improved and
that could be removed without material cost;
(iii) liens for Taxes, assessments and other
governmental charges not yet due and payable or due but
being contested in good faith by appropriate
proceedings or not delinquent; mechanics', workmen's,
repairmen's, warehousemen's, carriers', or other like
liens arising or incurred in the ordinary course of
business, original purchase price conditional sales
contracts and
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equipment leases with third parties
entered into in the ordinary course of business or
which are not material, either individually or in the
aggregate; and
(iv) Liens set forth in Schedule 1.1(b)(iv) hereto.
(c) Notwithstanding anything to the contrary provided
for in this Section 1.1, all the following property of
the Seller shall be specifically excluded from the
Purchased Assets to be sold by the Seller and purchased
by the Buyer under the terms of this Agreement:
(i) the corporate charter, qualifications to
conduct business as a foreign corporation, arrangements
with registered agents relating to foreign qualifications,
taxpayer and other identification numbers, seals,
minute books, stock transfer books, blank stock
certificates, and other documents relating to the
organization, maintenance, and existence of the Seller
as a corporation;
(ii) those assets and properties disposed of since
the date of the Interim Balance Sheet in the ordinary
course of business and such other assets as have been
disposed of in accordance with this Agreement;
(iii) the consideration to be received hereby and
the Seller's rights hereunder;
(iv) the Seller's rights under all policies of
insurance;
(v) all properties and assets of the Seller used
or held for use primarily in the conduct of any business
of the Seller other than the Business ("Seller's Other
Business");
(vi) all properties and assets of the Seller listed
on Schedule 1.1(c)(vi) hereto;
(vii) all right, title and interest in and to
Seller's Intellectual Property (as hereinafter defined)
including the registered Intellectual Property listed
on Schedule 1.1(c)(vii), including the names of the
Seller or its affiliates or any trade names,
trademarks, identifying logos or service marks
employing the words "J.L. Hammett" or any part or
variation thereof, or any trade name, trademark or logo
confusingly or misleadingly similar thereto, including
any federal and state trademark registrations and
common law trademark rights in same, and any goodwill
relating or appurtenant to any thereof (all of the
foregoing, collectively, the "Seller's Trademarks and
Logos");
(viii) (i) All cash and cash equivalents on deposit
in any bank account, money market account, certificate
of deposit or comparable accounts in the name of the
Seller, (ii) petty cash held by the Seller, (iii)
undeposited checks in the possession of the Seller and
(iv) amounts due to Seller relating to unprocessed
credit card transactions in connection with any sale
occurring (whether or not the
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purchased product or service has been shipped or produced)
prior to the Closing, provided that these amounts have
been removed from the accounts receivable or recorded as
a customer deposit or unearned revenue of the Business for
the purposes of calculating Net Assets;
(ix) all prepaid Taxes to the extent such Taxes would,
if not prepaid, be Excluded Liabilities;
(x) all files, documents, records, data and books of
account (whether in written, electronic or other form)
which (i) Seller is required by law to retain, (ii)
contain information relating to Seller's Other
Businesses or (iii) were prepared in connection with
the sale of the Business;
(xi) all Seller Employee Plans (as defined in Section
3.19);
(xii) all non-trade accounts receivable or other
inter-company accounts owing from any affiliate of Seller;
(xiii) all claims, rights (and benefits arising
therefrom), causes of action, rights of recovery,
set-offs or defenses of any kind pertaining primarily
to, or arising primarily out of, the other Excluded Assets;
(xiv) all tax returns filed by Seller or any of its
affiliates; and
(xv) any credit or refund relating to Taxes of the
Business with respect to any period prior to the Closing.
The assets, property and business of the Seller
specifically excluded from sale and purchase under this
Agreement are sometimes referred to as the "Excluded Assets."
1.2. Assumption of Certain Liabilities.
(a) Subject to the terms and conditions of this
Agreement, on the Closing Date, the Buyer hereby
assumes only (i) the liabilities, debts, and
obligations of the Business based upon events
occurring, arising, and incurred after the Closing,
(ii) all contracts, commitments, leases, instruments
and agreements set forth on Schedule 1.2(a) hereby (the
"Assigned Contracts") to the extent any liability is
based upon events occurring, arising, and incurred
after the Closing or as set forth on Schedule 1.4(b)
and (iii) those debts, liabilities and obligations of
the Business as set forth on Schedule 1.2 (the "Assumed
Liabilities").
(b) Unless otherwise listed on Schedule 1.2 or
relating to liabilities and obligations for which Buyer
is responsible under Section 5.4 hereof, the Seller
shall be solely responsible for, and shall promptly
discharge, any and all liabilities, claims and
obligations of Seller not included within the Assumed
Liabilities. Except as otherwise specifically provided
in this Section 1.2 (including as set forth on Schedule
1.2), Buyer shall not assume, be liable for or incur
any cost or expense respecting any obligation or
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liability of Seller listed below, or any other
obligation, liability or claim relating to or incurred
by the Seller and its operations prior to the Closing
Date or to the Purchased Assets, of any kind or nature,
known, unknown, matured, unmatured, contingent, or
otherwise including liabilities, claims or obligations
that have or may arise in the future from events,
facts, conditions or circumstances existing on or prior
to the Closing Date (the "Excluded Liabilities")
regardless of when claims respecting such Excluded
Liabilities were, or may be asserted, including but not
limited to:
(i) any liability or obligation of Seller arising
out of any contract or lease, including, without
limitation, any liability or obligation arising from a
breach or default by Seller under any contract or lease
or from a wrongful transfer thereof to Buyer;
(ii) any liability or obligation to Seller's
employees or former employees arising from job related
events occurring prior to the Closing Date, including,
without limitation, any liabilities or obligations relating
to its personnel policies, wages, salary, compensation,
(other than bonuses and commissions accrued through the
Closing Date and vacation pay, all as set forth on
Schedule 1.2), terms and conditions of employment,
employment agreements, severance pay, or pension,
profit-sharing or welfare benefit plans for such
employees or former employees or any Seller Employee
Program (as hereinafter defined) or any liability or
obligation of Seller relating to or arising out of
working conditions, unfair labor practice charges, job
hazards, or job related events occurring prior to the
Closing Date or any liability or obligation of Seller
for workers compensation or disability claims relating
to events occurring prior to the Closing Date,
regardless of the time of the provision of services,
materials or supplies or payment for the same;
(iii) any litigation, proceeding, action, or claim
by any person or entity or other obligation of Seller
prior to the Closing Date or otherwise relating to the
Purchased Assets whether or not such litigation,
proceeding, claim, or obligation is pending,
threatened, or asserted before, on, or after the
Closing Date;
(iv) any liability or obligation of Seller arising
out of or in any way relating to or resulting from any sale
of products by Seller prior to the Closing Date
(including any liability or obligation of Seller for
claims made for injury to person or damage to property,
whether made in product liability, tort, breach of
warranty, or otherwise);
(v) any Taxes of Seller (whether relating to
periods before or after the transactions contemplated in
this Agreement or incurred by Seller in connection with
this Agreement and the transactions provided for herein),
including but not limited to any liability for Taxes
arising out of the inclusion of Seller in any group
filing consolidated, combined, or unitary tax returns
or arising out of any transferred liability, provided
that Buyer assumes liability for all Taxes which Buyer
has agreed to pay under Section 4.1 hereof;
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(vi) any obligations of Seller arising (A) before
the Closing Date with respect to the Business and (B) at
any time with respect to the rest of Seller's business
other than the Business, under any Law, including,
without limitation, antitrust, civil rights, health,
safety, labor, discrimination, and environmental laws;
(vii) any and all liabilities or obligations of the
Seller (or any predecessor owner of and or part of its
business and assets) of any kind whatsoever arising
under any Environmental Law ("Environmental
Liabilities"). For purposes hereof, the term
"Environmental Law" means any federal, state, foreign
and local statutory laws, ordinances, codes, rules,
regulations, approvals or requirements of any
governmental authority, court orders, administrative
orders, executive orders, consent decrees, injunctions,
judgments, and common law pertaining to (i) health,
safety, natural resources, wildlife or the environment,
or (ii) the management, manufacture, possession,
presence, use, generation, transportation, treatment,
storage, disposal, release, threatened release,
abatement, removal, remediation or handing of, or
exposure to, any petroleum products or Hazardous
Materials (as hereinafter defined) and all amendments,
modifications and additions thereto, or any similar,
implementing or successor law.
(viii) any and all liabilities and obligations of
the Seller (or any predecessor owner of all or part of
its businesses and assets) of any kind, whether
presently in existence or arising hereafter. It is
hereby understood that the Buyer will not assume
sponsorship of any Seller Employee Plan(s) as defined
in Section 3.19 herein, as maintained by the Seller.
The Seller expressly retains the liabilities and
responsibilities of the sponsorship of the Seller
Employee Plans.
The assumption of the Assumed Liabilities by Buyer
hereunder shall be treated as independent of its
existing business and shall not enlarge any rights of
third parties under contracts or arrangements with
Buyer or Seller. Nothing herein shall prevent Buyer
from contesting in good faith any of the Assumed
Liabilities.
1.3. [This section is left intentionally blank] .
1.4. Purchase Price.
(a) For purposes of this Agreement, the "Purchase
Price" shall equal 75% of the net sales of the Business
for the 12-month period beginning November 1, 1999 and
ending October 31, 2000 (the "Interim Period") as
described on Schedule 1.4(a) as attached, determined in
accordance with generally accepted accounting
principals in effect as of the Closing in the United
States, consistently applied ("GAAP"). Schedule 1.4(a)
shall describe net sales in a manner consistent with
how the Seller has historically reported sales of the
Business with any variance from GAAP to be noted in
Schedule 1.4(a), including but not limited to
segregating sales by product class designation or
market segment designation. The Purchase Price shall
be adjusted pursuant to the terms of Sections 1.4 and
1.5 herein. At the Closing, Buyer shall pay to the
Seller and the
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Trust in cash or by wire transfer of
immediately available funds to an account designated by
Seller in writing, an amount equal to ninety five
percent (95%) of the Purchase Price. For the transfer
of the Owned Real Property to the Buyer under the
conditions as herein described, the Trust shall receive
its entire portion of the Purchase Price at Closing,
namely $3,500,000, which amount represents the agreed
upon fair market value of the Owned Real Property. As
security for the performance by Seller of its
obligations under this Agreement, Buyer shall deposit
into a segregated account at Bank One, N.A. five
percent (5%) of the Purchase Price (the "Escrow
Amount") for the benefit of the Seller. The Escrow
Amount shall be owned by the Seller but shall be
governed by the terms set forth in this Agreement and
in the Escrow Agreement attached as Exhibit 1.4(b)
("Escrow Agreement").
(b) For the purpose of this Agreement the Seller
shall prepare Schedule 1.4(b) as of November 20, 2000
(also referred to herein as the "Net Asset Schedule")
which shall list the total assets of the Business
(including the value of the Owned Real Property as
described in Section 1.4(a)) less the Assumed Liabilities,
all as calculated in accordance with GAAP ("Net Assets"),
which Net Asset Schedule shall be updated as of the
Closing Date by the Seller in accordance with Section
1.5(b) for transactions in the ordinary course of
business of the Business and such update shall include
but not be limited to an updating of inventory based
upon a physical inventory as of the Closing. In
calculating Net Assets, any material increase in
intangible assets since December 31, 1999 shall be
excluded, except with the prior written agreement of
the Buyer. In the event Buyer does not permit such
inclusion of any such intangible asset in calculating
Net Assets, such intangible asset(s) shall constitute
Excluded Assets and shall be retained by the Seller.
In calculating Net Assets under this Agreement, (x)
Seller's inventory and inventory reserves shall be
calculated in accordance with GAAP with a reserve
against the Seller's inventory to be not less then
fifteen percent (15%) of the inventory on the Closing
Date, and (y) Seller's accounts receivable shall be
calculated in accordance with GAAP. The Purchase Price
shall be adjusted, on a dollar-for-dollar basis, to the
extent the Net Assets do not equal or exceed forty-four
percent (44%) of the sum of (i) Purchase Price as
initially calculated under the terms of Section 1.4(a)
and as adjusted under the terms of Section 1.5(a)
herein; and (ii) the Covenant Fee (as defined in
Section 9.1) (the "Net Asset Target") as of the Closing.
1.5. Post-closing Adjustment to Purchase Price.
(a) The Buyer's Accountants shall audit Schedule
1.4(a). The Buyer's Accountants shall complete the
audit of Schedule 1.4(a) within ninety (90) days of
their receipt of the Seller's Closing Net Asset
Schedule. Any proposed adjustments which the Buyer's
Accountants find necessary to be made to Schedule
1.4(a) so as to accurately reflect the net sales during
the Interim Period calculated in accordance with GAAP,
shall be delivered to the Seller by the Buyer ("Net
Sales Adjustments"), which delivery shall include a
full description of each item relating to such Net
Sales Adjustments and shall state the basis under GAAP
for each such adjustment.
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(b) Within thirty (30) days following the Closing,
the Seller shall provide to the Buyer and the Buyer's
Accountants a Net Asset Schedule as of the Closing (the
"Seller's Closing Net Asset Schedule"). The Seller's
Closing Net Asset Schedule shall be prepared by the
Seller in accordance with GAAP. The Buyer's
Accountants shall audit the Seller's Closing Net Asset
Schedule. The Buyer's Accountants shall complete the
audit of the Seller's Closing Net Asset Schedule within
ninety (90) days of their receipt of the Seller's
Closing Net Asset Schedule. Any proposed adjustments
which the Buyer's Accountants find necessary to be made
to the Seller's Closing Net Asset Schedule so as to
accurately reflect the Net Assets as of the Closing
Date, in accordance with GAAP, shall be delivered to
the Seller by the Buyer within such ninety (90) day
period ("Net Asset Adjustments"), which delivery shall
include a full description of each item relating to
such Net Asset Adjustments and shall state the basis
under GAAP for each such adjustment.
(c) The Seller shall, within thirty (30) days from
the receipt of the Net Asset Adjustments and the Net Sales
Adjustments, notify the Buyer whether or not the Seller
disputes the Net Asset Adjustments and/or the Net Sales
Adjustments. In said notice the Seller shall notify
the Buyer of those proposed adjustments in the Net
Asset Adjustments and/or the Net Sales Adjustments
which it believes are incorrect and shall state the
basis under GAAP for such disagreement. If the Buyer
has not received notice of such a dispute within such
thirty (30) day period, then the submitted Net Asset
Adjustments and Net Sales Adjustments shall be deemed
to constitute the final basis for any Purchase Price
adjustment as described in Section 1.5(b). If, on the
other hand, the Buyer has received notice of such a
dispute within such thirty (30) day period, then the
Buyer and the Seller shall for thirty (30) days
following receipt of such notice of dispute, attempt to
reach agreement on the Net Asset Adjustment and/or the
Net Sales Adjustment. If no resolution of this dispute
is finalized within said thirty (30) day period, the
Buyer and the Seller shall mutually agree in writing on
an independent accounting firm to review the Net Asset
Adjustments and/or the Net Sales Adjustments (and
related information) to determine the amount, if any,
of such Net Asset Adjustments and/or Net Sales
Adjustments determined as set forth above. In the
event that the Buyer and the Seller cannot agree in
writing on an independent accounting firm, the parties
hereto agree that the following accounting firms shall
be selected in the following order to fill the role of
the independent accounting firm under the terms of this
Agreement: The Boston office of (i) Deloitte & Touche,
(ii) Ernst & Young, and (iii) KPMG. The determination
of such independent accounting firm shall be final and
binding on the parties hereto. The costs of the
independent accounting firm shall be borne by the party
(either the Buyer or the Seller) whose determination of
the aggregate adjustment of the Purchase Price was
furthest from the actual aggregate adjustment resulting
from the determination(s) of the independent accounting
firm of the Net Asset Adjustments and/or the Net Sales
Adjustments, as the case may be, or equally by the
Buyer and the Seller in the event that the
determination by the independent accounting firm is
equidistant between the determinations of the parties.
The calculation of this adjustment to the Purchase
Price shall be final and binding.
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(d) In the event that there shall be a Net Sales
Adjustment, the Purchase Price shall be adjusted using
the adjusted net sales, applying the formula described
in Section 1.4(a) to calculate the revised Purchase
Price. In the event that the Net Assets as of Closing
and as described in Schedule 1.4(b), as adjusted under
the terms of Sections 1.5(b) and (c), above, are less
than the sum of (i) 44% of the Purchase Price, as it
may have been adjusted pursuant to the first sentence
of this Section 1.5(d), plus (ii) 44% of the Covenant
Fee (the "Adjusted Net Asset Target"), a dollar for
dollar reduction in the Purchase Price (as it may have
been adjusted pursuant to the first sentence of this
Section 1.5(d)) shall be made as determined by the
amount of deficiency from the Adjusted Net Asset
Target. In the event that the Net Assets as of Closing
and as described in Schedule 1.4(b), as adjusted under
the terms of Sections 1.5(b) and (c), above, are
greater than the Adjusted Net Asset Target, a dollar
for dollar increase in the Purchase Price (as it may
have been adjusted pursuant to the first sentence of
this Section 1.5(d)) shall be made as determined by the
amount of surplus above the Adjusted Net Asset Target
with an absolute maximum upward adjustment of Three
Million Dollars ($3,000,000.00). Within five (5) days
of the final determination of any adjustment in the
Purchase Price, the Seller in the event of a
deficiency, or the Buyer in the event of a surplus,
shall promptly pay to the appropriate party to this
Agreement said adjustment in immediately available
funds. In the event of a deficiency, the Buyer shall,
in its sole and unfettered discretion, have the option
to receive said payment either (x) directly from the
Seller or (y) by requesting a disbursement from the
Escrow Amount.
(e) Notwithstanding anything to the contrary in
Section 8.2, the Indemnification Deductible shall not
apply to this Section 1.5, and any adjustment required
under this Section 1.5 shall be from the first dollar.
(f) Each party shall provide the other party hereto
and its representatives (including, but not limited to,
such party's accountants) reasonable access to all
books and records of the Business (both pre- and
post-closing) reasonably necessary to achieve the
purposes of the provisions of this Section 1.5.
1.6. Pledged Assets.
(a) As collateral security for the payment of any
post-closing adjustments to the Purchase Price under
Section 1.5, and any indemnification obligations of the
Seller pursuant to Section 8, the Seller hereby grants
to the Buyer, for the benefit of the Buyer, a security
interest in the bank accounts in which the Escrow
Amount is deposited.
(b) The Buyer shall have the option to apply the
Escrow Amount to satisfy any adjustments to the
Purchase Price under Sections 1.4 or 1.5 and the
remainder of such Escrow Account shall remain available
to satisfy any indemnification obligations of the
Seller pursuant to Section 8 until the date which is
one (1) year after the Closing Date (the "Release
Date"). Promptly following the Release Date, the
Escrow Amount shall be distributed directly to the
account which will be provided to the Buyer by the
Seller, and any security interest of the Buyer therein
shall terminate, less (i) any Escrow Amount which has
been applied to satisfy any adjustments to the Purchase
Price under Sections
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1.4 and 1.5; (ii) any finally determined indemnification
obligations of the Seller under Section 8, and (iii) the
amount in controversy which is the subject of any pending
claims under Section 8 as of the Release Date.
1.7. Seller's Representative. The Management
Shareholders and the Seller, by signing this Agreement,
designate Richmond Y. Holden, Jr. or, in the event that
Richmond Y. Holden, Jr. is unable or unwilling to
serve, Jeffrey S. Holden, or to his written designee,
to be the Seller's Representative for purposes of this
Agreement and all matters related thereto. The
Management Shareholders and the Seller shall be bound
by any and all actions taken by the Seller's
Representative on their behalf.
1.8. Assignment of Contracts and Rights. Anything in
this Agreement to the contrary notwithstanding, nothing
in this Agreement will constitute a "Transfer", or an
attempted Transfer, of any Contract or Approval to be
Transferred pursuant to the terms of Section 1.1 for
which all consents, approvals, and waivers to Transfer
required from third parties have not been obtained by
Seller and delivered to Buyer if such Contract or
Approval is not capable of being Transferred without
such consents, approvals, or waivers, or if such
Transfer or attempted Transfer would constitute a
breach of such Contract or Approval or a violation of
any Law (as hereinafter defined) (such non-transferable
Contracts and Approvals being collectively referred to
herein as "Non-Transferable Contracts"). If Buyer has
agreed to purchase the Subject Assets notwithstanding
the failure to obtain any consent, approval, or waiver
with respect to a Non-Transferable Contract, after the
Closing Seller, at its expense, will use commercially
reasonable efforts to obtain all consents, approvals,
and waivers necessary to Transfer any Non-Transferable
Contract listed on Schedule 3.12(a) or Schedule
3.12(b). Upon obtaining all consents, approvals, and
waivers necessary to Transfer any Non-Transferable
Contract, such Non-Transferable Contract will, without
further action, be deemed to be Transferred to be
Transferred to Buyer. To the extent that any consent,
approval, or waiver necessary to Transfer a
Non-Transferable Contract is not obtained by Seller,
Seller will, as to each Non-Transferable Contract
during the original term thereof, use commercially
reasonable efforts to (i) provide to Buyer the benefits
of such Non-Transferable Contract, (ii) cooperate in
any reasonable and lawful arrangement designed to
provide such benefits to Buyer without incurring any
additional obligation to the Buyer or any third party,
and (iii) enforce, at the request of Buyer and for the
account of Buyer, any rights of Seller arising from any
Non-Transferable Contract (including, without
limitation, the right to elect to terminate in
accordance with the terms thereof upon the advice of
Buyer). Buyer will reimburse Seller for amounts paid
by Seller under the terms of any Non-Transferable
Contract to any third party for the benefits received
by Buyer under such Non-Transferable Contract from and
after the Closing Date. As Seller endeavors to fulfill
its obligations under this Section 1.8, Buyer agrees to
cooperate with Seller, including by providing business
and financial information requested by a party to any
such Non-Transferable Contract.
2. CLOSING
2.1. The Closing. The closing of the transactions
contemplated hereby (the "Closing") shall take place at
9:00 A.M. CDT (or if later, one hour after the
adjournment of the stockholders meeting at which the
transactions contemplated hereby are approved) on
November 22, 2000 at the offices of the Buyer unless
another place or time is agreed to in writing by the
<PAGE>
Buyer and the Seller. The date upon which the Closing
occurs is referred to as the "Closing Date."
2.2. Deliveries by the Seller. At the Closing, the
Seller and the Trust (as regards only Paragraph (o)
below) shall deliver, or cause to be delivered at their
cost the following:
(a) a copy of the Seller's Articles of Organization,
as amended through the Closing Date, certified by the
Secretary of State of the Commonwealth of
Massachusetts;
(b) a certificate of the Secretary of State of the
Commonwealth of Massachusetts to the effect that the
Seller is legally existing and in good standing under
the laws of such state as well as comparable
certificates from all jurisdictions in which the Seller
is required to be qualified as a foreign corporation,
the absence of which foreign qualification would
reasonably be expected to cause a material adverse
effect to the Business, if any;
(c) a certificate of the appropriate governmental
authorities of the Commonwealth of Massachusetts as
well as those foreign jurisdictions as described in
Section 2.2(b), if any, to the effect that the Seller
has filed and paid all business sales, withholding and
corporate income tax required to be paid and has no
outstanding franchise tax liability (so-called
"department of revenue tax good standing"), which shall
be delivered within one hundred eighty (180) days
following the Closing Date;
(d) such bills of sale, endorsements, consents,
releases, assignments, and other good and sufficient
instruments of conveyance and assignment, as shall be
effective to vest in the Buyer all right, title, and
interest in and to the Purchased Assets, free and clear
of all Liens, other than Permitted Liens;
(e) any patent and trademark assignments in recordable
form and sufficient to record the assignment of the
patents and trademarks to be transferred to the Buyer
pursuant to this Agreement;
(f) the compliance certificate executed by the
appropriate officer of the Seller required by Sections
6.1 and 6.5;
(g) a certificate of the Secretary of the Seller
attesting to the incumbency and signatures of the
appropriate officers of the Seller and certifying that
(i) the By-laws of the Seller attached thereto as a
true, correct and complete copy and that such By-laws
have not been rescinded, superseded or otherwise
modified since the date thereof and (ii) the minutes of
the corporate proceedings of the Seller with respect to
the transactions contemplated hereby as a true,
correct, and complete copy and that such minutes
attached thereto have not been rescinded, superseded,
or otherwise modified since the date thereof;
(h) the opinion of counsel for the Seller dated as
of the Closing Date in the form reasonably satisfactory
to the Buyer;
<PAGE>
(i) such Uniform Commercial Code termination
statements, releases, reconveyance, and other documents
and instruments which may be reasonably necessary to
effect the transactions contemplated hereby;
(j) an Assignment of Leases for property located in
Dallas, Texas (two locations) and Southaven,
Mississippi.
(k) such consents as are listed on Schedule 3.12(b)
(delivered at Closing unless otherwise noted on
Schedule 3.12(b));
(l) an Assignment and Assumption of Contracts;
(m) the License Agreement described in Section 3.11
and in the form attached hereto as Exhibit 3.11;
(n) a service agreement detailing the relationship
between the Buyer and the Seller relating to
transitional issues necessary for the successful
integration of the Purchase Assets into the operations
of the Buyer, a copy of which is attached hereto as
Exhibit 2.2(n) (the "Service Agreement"); and
(o) an owner's policy of title insurance in the
amount of $3,000,000 of the Owned Real Property naming
Buyer as the insured, as Buyer's interest may appear,
written by First American Title Insurance Company, which
policy shall guarantee the Seller's title to be in the
condition called for by this agreement, except for
mortgages, judgments or other liens which will be
satisfied out of the proceeds of the sale. A
commitment by such title company agreeing to issue such
a title policy upon the recording of the proper
documents as agreed herein, shall be deemed sufficient
performance.
2.3. Deliveries by the Buyer. At the Closing, the
Buyer shall deliver, or cause to be delivered, the
Purchase Price, pursuant to Section 1.4.
(a) copy of the Unanimous Consent of Directors of the
Buyer authorizing the execution, delivery and thereby
the binding of the Buyer to the terms of this Agreement
as well as authorizing those acts necessary to
consummate the transactions as herein contemplated;
(b) the opinion of counsel for the Buyer dated as of
the Closing Date, in the form reasonably satisfactory
to the Seller;
(c) a certificate of the Secretary of the Buyer
attesting to the incumbency and signatures of the
appropriate officers of the Buyer and certifying as to
(i) the Articles of Incorporation and By-laws of the
Buyer attached thereto as true, correct and complete
copies and that such Articles of Incorporation and
By-laws have not been rescinded, superseded or
otherwise modified since the date thereof and (ii) the
Unanimous Consent of the Directors of the Buyer with
respect to the transactions contemplated hereby as a
<PAGE>
true, correct, and complete copy and that such consent
attached thereto has not been rescinded, superseded, or
otherwise modified since the date thereof;
(d) the License Agreement described in Section 3.11;
(e) the Service Agreement described in Section 2.2(n); and
(f) the compliance certificate executed by the
appropriate officer of the Buyer required by Section 7.1.
2.4. Joint Deliveries of the Parties. At the Closing,
the Seller, and the Buyer shall jointly deliver or
cause to be delivered: the Escrow Agreement, pursuant
to Section 1.4(a).
3. REPRESENTATIONS AND WARRANTIES OF THE SELLER AND
THE TRUST
To induce the Buyer to enter into this Agreement
and consummate the transactions contemplated hereby,
the Seller (to all representations and warranties of
this Section 3 and the Trust (only as such may apply to
the Owned Real Property), severally and not jointly,
represent and warrant to the Buyer as follows (for
purposes of this Agreement, the phrases "knowledge of
the Seller" or the "Seller's knowledge", or words of
similar import, mean the knowledge of the Management
Shareholders, members of the Board of Directors of the
Seller, officers of the Seller, including facts of
which such directors and executive officers, assuming
the reasonably prudent exercise of their duties, are
aware):
3.1. Due Organization. The Seller is a corporation
duly organized, validly existing, and in good standing
under the laws of the jurisdiction of its incorporation
and is duly authorized and qualified to do business
under all applicable laws, regulations, ordinances, and
orders of public authorities to own, operate, and lease
its properties and to carry on its business in the
places and in the manner as now conducted, except as
such lack of qualification to do business shall not
cause a material harm to the Business or to the value
of the Purchased Assets. Schedule 3.l hereto contains
a list of all jurisdictions in which the Seller is
authorized or qualified to do business. The Seller has
filed as a foreign corporation in all foreign
jurisdictions in which the nature of its operations or
assets required such qualification except where failure
to so file would not cause a material harm to the
Business or the Purchased Assets. The Articles of
Organization and Bylaws of the Seller are collectively
referred to as the "Charter Documents". The Seller is
not in violation of any Charter Documents.
3.2. Authorization; Validity. Except for the approval
by Seller's stockholders at the special meeting to be
held on November 22, 2000 (as the same may be
adjourned, the "Meeting"), the Seller has all requisite
corporate power and authority to enter into and perform
its obligations pursuant to the terms of this
Agreement. The Seller has the full legal right,
corporate power and authority to enter into this
Agreement and the transactions contemplated hereby.
Each Management Shareholder has the full legal right
and authority to enter into this Agreement and to
perform his obligations contemplated by Section 9 of
this Agreement. The execution and delivery of this
Agreement by the Seller and the performance by the
Seller of the
<PAGE>
transactions contemplated herein have
been duly and validly authorized by the Board of
Directors of the Seller and the Management
Shareholders, and this Agreement has been duly and
validly authorized by all necessary corporate action
except for the approval to be sought at the Meeting.
As of the date hereof, the Sellers have received
proxies from holders of at least seventy two percent
(72%) of the shares of capital stock of the Seller
authorizing one or both the Management Shareholders to
vote their shares in favor of the consummation of the
transactions as herein contemplated. Proxies received
by the Seller are composed, in part, of proxies
executed and delivered by individual shareholders which
represent at least forty three percent (43%) of the
outstanding shares of capital stock of the Seller. On
or prior to the date hereof, holders of the Seller's
common stock have contributed shares of such common
stock representing in excess of 28% of the total number
of shares of Seller's common stock outstanding on the
date hereof into a voting trust under the terms of a
Voting Trust Agreement dated as of January 20, 1993
under which the Management Shareholders act as
Trustees. This Agreement is a legal, valid, and
binding obligation of the Seller and each Management
Shareholder, enforceable in accordance with its terms
except as limited by (i) applicable bankruptcy,
insolvency, reorganization, moratorium or other laws of
general application affecting the enforcement of
creditors' rights and (ii) general principles of equity
that restrict the availability of equitable remedies
(regardless of whether enforceability is considered in
a proceeding in equity or at law).
3.3. No Conflicts. The execution, delivery, and
performance of this Agreement, the consummation of the
transactions contemplated hereby, and the fulfillment
of the terms hereof will not (upon receipt of the
approval to be sought at the Meeting):
(a) conflict with, or result in a breach or violation
of, any of the Charter Documents;
(b) conflict with, or result in a default (or would
constitute a default but for any requirement of notice
or lapse of time or both) under any material document,
agreement, or other instrument to which the Seller is a
party or by which the Seller is bound, or result in the
creation or imposition of any Lien (other than a
Permitted Lien) on any of the Purchased Assets pursuant
to (i) any law or regulation to which the Seller or any
of its property is subject, or (ii) any judgment,
order, or decree to which the Seller is bound or any of
its property is subject;
(c) result in termination or any impairment of any
permit, license, franchise, contractual right, or other
authorization of the Seller or by which the Seller is
bound, provided that the Seller obtains the consents
set forth in Schedule 3.12(b); or
(d) violate any law, order, judgment, rule,
regulation, decree, or ordinance to which the Seller is
subject or by which the Seller is bound including,
without limitation, the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 (the "HSR Act") (upon
expiration or early termination of the applicable
waiting period), together with all rules and
regulations promulgated thereunder.
<PAGE>
3.4. Complete Copies of Materials. The Seller has made
available to the Buyer true and complete copies of each
agreement, contract, commitment, or other document (or
summaries of same) related to the Business that is
referred to in the Schedules.
3.5. Seller Financial Conditions. The following
financial conditions are true and accurate:
(a) The Seller's net sales for the Business for the
year ended December 31, 1999 were no less than One
Hundred Eight Million Dollars ($108,000,000.00);
(b) The Seller's net sales for the Business for the
Interim Period were no less than One Hundred Four
Million Five Hundred Thousand Dollars ($104,500,000.00);
(c) The Seller's earnings before interest and taxes
for the Business for the Seller's most recently
completed fiscal year were no less than Seven Million
Five Hundred Seventy Four Thousand Dollars ($7,574,000.00); and
(d) The Seller's earnings before interest and taxes
for the Business for the Interim Period were no less
than Seven Million Four Hundred Sixty Two Thousand
Dollars ($7,462,000.00).
3.6. Financial Statements. Schedule 3.6 includes (a)
true, complete and correct copies of the balance sheet
of the Seller as of December 31, 1999 and the Seller's
income statement of the Business for the year ended
December 31, 1999 (collectively, the "Seller
Financials") and (b) true, complete and correct copies
of the Seller's unaudited balance sheet of the Business
for the Interim Period (the "Interim Balance Sheet") as
of October 31, 2000 (the "Balance Sheet Date") and the
income statement for the Business for the Interim
Period (collectively, the "Interim Financials", and
together with the Seller Financials, the "Financial
Statements"). The Financial Statements have been
prepared in accordance with GAAP consistently applied
except (i) with respect to the Interim Balance Sheet
which has been prepared in accordance with generally
accepted accounting principles not necessarily as
consistently applied, (ii) in the case of the Interim
Financial Statements, for the absence of footnotes and
normal year-end adjustments, and (iii) as described on
Schedule 3.6. Each balance sheet included in the
Financial Statements presents fairly the financial
condition of the Business as of the date indicated
thereon, and each of the income statements included in
the Financial Statements presents fairly the results of
operations for the Business for the periods indicated
thereon. Since the date of the Seller Financials,
there have been neither any material changes in the
Seller's accounting policies regarding the Business nor
any events which shall require disclosure or recording
in the Financial Statements.
3.7. Absence of Undisclosed Liabilities.
(a) There are no liabilities, nor any factual
basis therefor, relating to the Business, the Purchased
Assets, any acts or omissions of the Seller or any
person for whom the Seller is legally responsible, or
any portion thereof or interest therein, which will
become the obligation or liability of Buyer, or
otherwise be binding upon Buyer or
<PAGE>
the Purchased Assets on or after the Closing, other than
the Assumed Liabilities. There is no liability, which is
not disclosed in this Agreement or in any Schedule or
Exhibit hereto and that will become an Assumed
Liability, that would have a material adverse effect on
the Purchased Assets, or the value thereof.
(b) For purposes of this Agreement, the terms
"liability" and "liabilities" shall include, without
limitation, any direct or indirect liability,
indebtedness, guaranty, endorsement, claim, loss,
damage, deficiency, cost, expense, obligation, or
responsibility, either accrued, absolute, contingent,
mature, unmatured, or otherwise and whether known or
unknown, fixed or unfixed, liquidated or unliquidated,
secured or unsecured.
3.8. Permits. The Seller owns or holds all licenses,
franchises, permits, and other governmental
authorizations, including, without limitation, permits,
titles (including, without limitation, motor vehicle
titles and current registrations) necessary for the
continued operation of the Business as it is currently
being conducted (the "Permits"). The Permits are
listed in detail on Schedule 3.8. The Permits are
valid, and the Seller has not received any notice that
any governmental authority intends to modify, cancel,
terminate or fail to renew any Permit. The Seller has
conducted and is conducting its business in compliance
with the requirements, standards, criteria, and
conditions set forth in the Permits and other
applicable orders, approvals, variances, rules, and
regulations, and is not in material violation of any of
the foregoing. For purposes of this paragraph,
"Permits" does not include "Environmental Permits" as
defined in Section 3.17(c) hereof.
3.9. Personal Property. Schedule 3.9 sets forth a
complete and accurate list of all of the Tangible
Assets owned or leased by the Seller and used in the
Business, including a list of all leases of Tangible
Assets, as of October 31, 2000 and as updated through
the Closing Date for acquisitions and dispositions made
in the ordinary course of the Business. All of the
trucks, vehicles and other machinery and equipment,
included in the Purchased Assets, are in good working
order and condition, ordinary wear and tear excepted.
All leases set forth on Schedule 3.9 and the
attachments thereto are in full force and effect and
constitute valid and binding agreements of the Seller,
and the Seller is not in breach of any of their
respective terms.
3.10. Contacts. The Seller owns those phone
numbers, fax numbers and internet contact assets as
listed on Schedule 3.10 (the "Contacts"). The Contacts
are all of the phone, fax and electronic numbers,
addresses, or contact information which are utilized
by the Seller in the operation of the Business, certain
of which Contacts will constitute Excluded Assets as
listed on Schedule 1.1(c)(vi) which may be used by
Buyer pursuant to the Transaction Service Agreement as
noted therein.
3.11. Intellectual Property.
(a) The Seller owns or possesses adequate,
enforceable, and transferable long-term licenses or
other rights to use, without payment, all copyrights,
patents, trade names, trade secrets, trademarks,
franchises, and similar rights now used or employed in
the Business, including, but not limited to, the name
"J.L. Hammett Company", "eZone", "Living Colors", or
variations thereof, as well as any proprietary bidding
and bid
<PAGE>
software (the "Intellectual Property") and such
rights will not cease to be valid rights of the Seller
by reason of the execution, delivery, and performance
of this Agreement or the consummation of the
transactions contemplated hereby. It is noted that the
use of the trade name "J.L. Hammett Company," "Living
Colors" and "eZone" shall be retained by the Seller and
may be utilized by the Buyer pursuant to the terms of
the "License Agreement", a copy of which is attached
hereto as Exhibit 3.11. The Intellectual Property,
including such listed as Excluded Assets, will be
retained by Seller and may be used by Buyer pursuant to
the License Agreement.
(b) All the Intellectual Property necessary or
desirable to operate the Business in the manner
presently conducted by the Seller is being provided to
Buyer per the terms of the License Agreement and the
Service Agreement.
(c) Except as listed on Schedule 3.11(c), the Seller
has no obligations to compensate any person for the use
of any Intellectual Property (other than in the case of
commercially available software for maintenance and
other fees) nor has the Seller granted to any person
any license, option or other rights to use in any
manner any of its Intellectual Property, whether
requiring the payment of royalties or not.
(d) Except as listed on Schedule 3.11(d), the Seller
has not received any notice of invalidity or
infringement of any rights of others with respect to
the Intellectual Property. No person has notified the
Seller that it is claiming any ownership of or right to
use such Intellectual Property. No person, to the
knowledge of the Seller, is infringing upon any such
Intellectual Property in any way. The use of the
Intellectual Property by the Seller does not and will
not conflict with, infringe upon or otherwise violate
the valid rights of any third party in or to such
Intellectual Property, and no action has been
instituted against or notices received by the Seller
that are presently outstanding alleging that the use of
the Intellectual Property infringes upon or otherwise
violates any rights of a third party in or to such
Intellectual Property.
3.12. Contracts and Customers.
(a) Schedule 3.12(a) contains a complete and
accurate list of all material contracts, commitments,
leases, instruments, agreements, written or oral, which
are necessary for the operations of the Business as
currently operated by the Seller (the "Contracts").
The Buyer shall succeed to the Seller's rights, and
assume the Seller's obligations, under the Contracts
(as Assumed Contracts) as of Closing. The Seller has
made available to the Buyer true, complete and correct
copies of all the Contracts. Seller has made available
to the Buyer a list of all customers of the Business.
Seller has made available to the Buyer all pertinent
information relating to such customers.
(b) Each Contract, is valid and binding on the
Seller and is in full force and effect and is not subject
to any default of any material provision thereunder by any
party obligated to the Seller pursuant thereto. The
Seller has obtained all necessary consents, waivers and
approvals of parties to any Contracts that are required
in connection with any of the transactions contemplated
hereby, or are required by any governmental agency or
<PAGE>
other third party or are required by the terms of such
Contracts ("Third Party Consents"). All Third Party
Consents are listed on Schedule 3.12(b).
(c) Schedule 3.12(c) sets forth a complete and
accurate list of all Significant Customers and
Significant Suppliers. For purposes of this Agreement,
"Significant Customers" are the ten (10) customers that
have effected the largest aggregate amount of
purchases, in dollar terms, from the Business during
the nine-month ended September 30, 2000, and
"Significant Suppliers" are the ten (10) suppliers who
supplied the largest amount by dollar volume of school
supply, equipment and/or furniture products to the
Business during the nine-month ended September 30, 2000.
(d) Schedule 3.12(d) contains a complete and accurate
list of all Contracts (i) to which the Seller and any
affiliate of the Seller or any officer, director or
shareholder of the Seller are parties ("Related Party
Agreements").
(e) Except to the extent set forth on Schedule
3.12(e), (i) none of the Seller's Significant Customers
has canceled or substantially reduced or, to the
knowledge of the Seller, is currently attempting or
threatening to cancel or substantially reduce, its
purchasing relationship with the Seller, (ii) none of
the Seller's Significant Suppliers has canceled or
substantially reduced or, to the knowledge of the
Seller, is currently attempting to cancel or
substantially reduce, the supply of products or
services to the Seller, (iii) the Seller has complied
with all of its material commitments and obligations
and is not in default under any of the Contracts, and
no notice of default has been received with respect to
any thereof, and (iv) there are no Contracts that were
not negotiated at arm's length with third parties not
affiliated with the Seller or any officer, director or
shareholder of the Seller. The Seller has not received
any material customer complaints concerning its
products and/or services, nor has it had any of its
products returned by a purchaser thereof except for
normal returns and exchanges consistent with past
history and those returns that would not result in a
reversal of any material revenue.
3.13. Government Contracts.
(a) The Seller has no dispute pending before a
contracting office of, nor any current claim (other
than the Accounts Receivable) pending against, any
agency or instrumentality of the United States
Government or any state or local government, relating
to a contract.
(b) The Seller has not submitted any inaccurate,
untruthful, or misleading cost or pricing data,
certification, bid, proposal, report, claim, or any
other information relating to a contract to any agency
or instrumentality of the United States Government or
any state or local government.
(c) The Seller has not been suspended or debarred from
bidding on contracts or subcontracts for any agency or
instrumentality of the United States Government, nor,
to the knowledge of the Seller, has any suspension or
debarment action been threatened
<PAGE>
or commenced. There is no valid basis for the Seller's
suspension or debarment from bidding on contracts or
subcontracts for any agency of the United States Government.
(d) The Seller has not, with respect to any material
government contract, received a cure notice advising
the Seller that it is or was in default or would, if it
failed to take remedial action, be in default under
such contract.
3.14. Inventory and Accounts Receivable.
(a) The Seller has made and will make available to the
Buyer, a complete, detailed and accurate list of all of
the Inventory for every location of the Business as of
November 10, 2000. Except to the extent reserved for
in the Net Asset Schedule or Seller's Closing Net Asset
Schedule, as applicable, the inventories of the Seller
existing on the date hereof and reflected on the Net
Asset Schedule or the Seller's Closing Net Asset
Schedule, as applicable, are marketable and saleable in
the ordinary course of business of the Business as
conducted by the Seller prior to the Closing Date, and
none of such inventories are obsolete, damaged or
defective. The inventories relating thereto of the
Seller shown on the Net Asset Schedule and Seller's
Closing Net Asset Schedule, as applicable, are so
reflected in accordance with GAAP and reflect reserves
against such inventories due to obsolete, damaged or
defective inventory.
(b) The accounts receivable of the Seller are being
collected through the Closing Date in the ordinary
course of the Business. The Seller's accounts
receivable reflected on the Net Asset Schedule and the
Seller's Closing Net Asset Schedule, as applicable,
have arisen in bona-fide arms length transactions in
the ordinary course of the Business and, except to the
extent reserved for in the Net Asset Schedule or the
Seller's Closing Net Asset Schedule, as applicable, are
valid and binding obligations of the account debtors
without counterclaims, set-offs or other defenses
thereto (other than returns and claims in the ordinary
course of business, all of which have been reserved for
in accordance with GAAP). The accounts receivable and
reserves relating thereto of the Seller shown on the
Net Asset Schedule and the Seller's Closing Net Asset
Schedule, as applicable, are so reflected in accordance
with GAAP.
3.15. Purchased Assets. The Purchased Assets
constitute all of the assets (whether tangible assets,
intellectual property or otherwise) (i) that are
material to, or (ii) that are necessary for, the
conduct and operation of the Business, except for
Excluded Assets and any assets the use of which is
provided for in the License Agreement or the Services
Agreement, including those set forth on Schedule
1.1(c)(vi) and all are either owned by the Seller or
leased under an Assumed Contract.
3.16. Insurance. Schedule 3.16 sets forth a
complete and accurate list, as of the Balance Sheet
Date, of all insurance policies carried by the Seller
and all insurance loss runs or workmen's compensation
claims received for the past two (2) policy years.
Except as set forth on Schedule 3.16, there are no
pending, or to the best of the Seller's knowledge
threatened or reasonably anticipated claims or actions
against the Seller under any worker's compensation
policy or long-term disability policy. The Seller has
delivered to the Buyer true, complete and
<PAGE>
correct copies of all current insurance policies, all of
which are in full force and effect. All premiums payable
under all such policies have been paid and the Seller
is otherwise in full compliance with the terms of such
policies. All of such policies are represented to
insure the Seller on an occurrence basis. To the
knowledge of the Seller, there have been no threatened
claims against, terminations of, or material premium
increases with respect to, any of such policies.
3.17. Environmental Matters.
(a) Hazardous Material. As used herein the term
"Hazardous Material" shall mean any substance that has
been designated by or regulated under any Governmental
Entity or applicable federal, state, local or other
applicable law to be radioactive, toxic, hazardous or
otherwise a danger to health or the environment,
including, without limitation, PCBs, pollutant,
contamination, asbestos, petroleum, urea-formaldehyde
and all substances listed as hazardous substances
pursuant to the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended, or
defined as a hazardous waste pursuant to the United
States Resource Conservation and Recovery Act of 1976,
as amended, and the regulations promulgated pursuant to
said laws, but excluding office and janitorial supplies
properly and safely maintained. Except as listed on
Schedule 3.17(a), to the Seller's knowledge there are
no underground storage tanks and there has been no
release of Hazardous Materials from, on, or under the
Owned Real Property or any property operated, leased or
occupied by the Seller in its operation of the
Business, including the land and the improvements,
ground water and surface water thereof.
(b) Hazardous Materials Activities. The Seller has
not transported, stored, used, manufactured, disposed
of or released, or exposed its employees or others to,
Hazardous Materials or disposed of, transported, sold,
or manufactured any product containing a Hazardous
Material (collectively, "Seller Hazardous Materials
Activities") in violation of or in a manner which would
give rise to liability under any Environmental Law.
All environmental audits, inspections or related
correspondence relating to the Purchased Assets which
were known to the Seller shall be listed on Schedule
3.17(b). Copies of all documents listed on Schedule
3.17(b) shall be delivered to the Buyer prior to the
Closing.
(c) Environmental Permits. The Seller currently holds
all environmental approvals, permits, licenses,
clearances and consents (the "Environmental Permits")
necessary for the conduct of the Seller's Hazardous
Material Activities and the Business in accordance with
applicable Environmental Laws as such activities and
business are currently being conducted except to the
extent that the absence of any such Environmental
Permit would not have a material adverse effect on the
Purchased Assets or the value thereof. All
Environmental Permits are in full force and effect. To
Seller's knowledge the Seller (i) is in compliance in
all material respects with all terms and conditions of
the Environmental Permits and (ii) is in compliance in
all material respects with all other limitations,
restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules and timetables
contained in the laws of all Governmental Entities
<PAGE>
relating to pollution or protection of the environment
or contained in any regulation, code, plan, order,
decree, judgment, notice or demand letter issued,
entered, promulgated or approved thereunder. To the
Seller's knowledge, there are no circumstances that may
prevent or interfere with such compliance in the
future. Schedule 3.17(c) includes a listing and
description of all Environmental Permits currently held
by the Seller.
(d) Environmental Liabilities. No action, proceeding,
revocation proceeding, amendment procedure, writ,
injunction or claim is pending against the Seller, or
to the knowledge of the Seller, threatened concerning
any Environmental Permit, Hazardous Material or any
Seller Hazardous Materials Activity. There are no past
or present actions, activities, circumstances,
conditions, events, or incidents that could involve the
Seller (or any person or entity whose liability the
Seller has retained or assumed, either by contract or
operation of law) in any environmental litigation, or
impose upon the Seller (or any person or entity whose
liability the Seller has retained or assumed, either by
contract or operation of law) any material
environmental liability including, without limitation,
common law tort liability.
3.18. Labor and Employment Matters.
(a) Employment Matters. The Seller: (i) is in
compliance in all material respects with all applicable
federal, state and local laws, rules and regulations
respecting employment, employment practices, terms and
conditions of employment and wages and hours, in each
case, with respect to applicants for employment with
the Business or Employees; (ii) has withheld all
amounts required by law or by agreement to be withheld
from the wages, salaries and other payments to
Employees; (iii) is not liable for any arrears of wages
(other than in accordance with standard payroll
practices) or any taxes or any penalty for failure to
comply with any of the foregoing; and (iv) is not
liable for any payment to any trust or other fund or to
any governmental or administrative authority, with
respect to unemployment compensation benefits, social
security or other benefits or obligations for Employees
(other than routine payments to be made in the normal
course of business and consistent with past practice).
Schedule 3.18(a) includes a true and complete list of
all employees of the Business including employees
supporting the international business of the Business
located at Seller's headquarters in Braintree,
Massachusetts ("Headquarters") but excluding any other
employee located at Headquarters. Schedule 3.18(a)
also includes and identifies those employees that are
not expected to be actively working at the time of
Closing. In each case such Schedule includes the
current job title and compensation (including hourly
rate or annual salary ) of each such individual and
shall be sorted and listed by location and department.
(b) Labor Matters. The employees of the Seller are
not represented by any labor union. Except as set
forth in Schedule 3.18(b) the Seller does not know of
any activities or proceedings of any labor union to
organize any Employees. Except as set forth in
Schedule 3.18(b), to the knowledge of Seller, the
Seller is not presently, nor has it been in the past, a
party to, or bound by, any collective bargaining
agreement or union contract with respect to Employees
and no collective bargaining agreement is being
negotiated by the Seller. No work stoppage, slow down,
or labor strike against the Seller
<PAGE>
is currently (nor has there been at any time during the
past three (3) years) pending, threatened or reasonably
anticipated. Except as set forth in Schedule 3.18(b), there
are no actions, suits, claims, labor disputes or grievances
pending, or, to the knowledge of the Seller, threatened
or reasonably anticipated relating to any labor, safety
or discrimination matters involving any Employee,
including, without limitation, charges of unfair labor
practices or discrimination complaints. Neither the
Seller nor any of its subsidiaries has knowingly
engaged in any unfair labor practices within the
meaning of the National Labor Relations Act. The
Seller has no knowledge of any pending or threatened
termination of employment of any employees of the
Seller whose termination would cause an adverse effect
on the Business.
3.19. Employee Benefit Plans.
(a) Definitions. With the exception of the definition
of "Affiliate" set forth in Section 3.19(a)(i) below
(which definition shall apply only to this Section
3.19), for purposes of this Agreement, the following
terms shall have the meanings set forth below:
(i) "Affiliate" shall mean any other person or entity
under common control with the Seller within the meaning
of Section 414(b), (c), (m) or (o) of the Code and the
regulations issued thereunder;
(ii) "Code" shall mean the Internal Revenue Code of
1986, as amended;
(iii) "COBRA" shall mean the Consolidated Omnibus
Budget Reconciliation Act of 1985, as amended;
(iv) "DOL" shall mean the Department of Labor;
(v) "Employee" shall mean any current, former, or
retired employee, officer, or director of the Seller or
any Affiliate;
(vi) "ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended;
(vii) "FMLA" shall mean the Family Medical Leave
Act of 1993, as amended;
(viii) "IRS" shall mean the Internal Revenue Service;
(ix) "Seller Employee Plan" shall mean any plan,
program, policy, practice, contract, agreement or other
arrangement providing for compensation, severance,
termination pay, performance awards, stock or
stock-related awards, fringe benefits or other employee
benefits or remuneration of any kind, whether written
or unwritten or otherwise, funded or unfunded,
including without limitation, each "employee benefit
plan", within the meaning of Section 3(3) of ERISA
which is or has been maintained, contributed to, or
required to be
<PAGE>
contributed to, by the Seller or any
Affiliate for the benefit of any Business Employee.
(b) All Seller Employee Plans are listed on Schedule
3.19. Each Seller Employee Plan has been maintained
and administered in all material respects in compliance
with its terms and with the requirements prescribed by
any and all statutes, orders, rules and regulations,
including but not limited to ERISA and the Code, which
are applicable to such Seller Employee Plans.
Seller and its Affiliates have, prior to the Effective
Time materially complied with the health care
continuation requirements of COBRA, the requirements of
FMLA and any similar provisions of state law applicable
to its Business Employees. No suit, action or other
litigation (excluding claims for benefits incurred in
the ordinary course of Seller Employee Plan activities)
has been brought, or to the best knowledge of the
Seller and the Management Shareholders is threatened,
against or with respect to any Seller Employee Plan.
3.20. Taxes. The Seller warrants and represents
the following: (a) Seller has timely and accurately
filed within the time period for filing or any
extension granted with respect thereto, all federal
state, local and foreign tax returns, reports, and
estimates ("Returns") which it is required to file
relating or pertaining to any and all taxes
attributable to or levied upon the Purchased Assets and
(b) paid any and all taxes shown on any of the Returns
that are due and payable prior to Closing. There are
(and immediately following the Closing there will be)
no liens or similar encumbrances on the Purchased
Assets relating or pertaining to taxes. Seller has no
knowledge of any basis for the assertion of any claims
which, would result in a lien or other encumbrance on
the Purchase Assets or otherwise adversely effect Buyer
or the Purchased Assets.
3.21. Conformity with Law; Litigation. Except as
set forth on Schedule 3.21, there are no material
claims, actions, suits or proceedings, pending or, to
the knowledge of the Seller, threatened against or
affecting the Seller at law or in equity, or before or
by any federal, state, municipal or other governmental
department, commission, board, bureau, agency or
instrumentality (a "Governmental Entity") and no notice
of any such material claim, action, suit, proceeding or
investigation, whether pending or threatened, has been
received nor, to the knowledge of the Sellers, is there
any reasonable basis for any such material claim,
action, suit, proceeding or investigation. There are
no material judgments, orders, injunctions, decrees,
stipulations or awards (whether rendered by a court or
administrative agency or by arbitration) against the
Seller or against any of its properties or business.
The Seller has not violated any material law or
regulation or any order of any Governmental Entity.
This Section 3.21 shall not apply to environmental
matters described in Section 3.17 hereof.
3.22. Absence of Changes. Except as listed on
Schedule 3.22, and except as a result of or relating to
the negotiation, execution, delivery, performance
and/or announcement of this Agreement and the
transactions contemplated hereby, since December 31,
1999, except as contemplated herein, there has not been:
<PAGE>
(a) any change that by itself or together with other
changes, has had or could reasonably be expected to
have a material adverse effect on the Business or the
Purchased Assets;
(b) any events or transactions which are out of the
ordinary course of business of the Business, which
could reasonably be expected to have a material adverse
effect on the Business or the Purchased Assets,
including but not limited to accelerating the shipment
of orders or canceling or otherwise reducing the order
backlog of the Business as of the Closing Date;
(c) any damage, destruction or loss (whether or not
covered by insurance) materially and adversely
affecting the Business or the Purchased Assets;
(d) any breach or termination outside of the ordinary
course of business of the Business of any material
contract, agreement, lease, sublease, license, permit
or other right to which the Seller is a party (other
than those that would not have any material adverse
effect on the Purchased Assets);
(e) any material transaction by the Seller outside the
ordinary course of business affecting the Business or
the Purchased Assets;
(f) the commencement or notice or, to the best
knowledge of the Seller, threat of commencement of any
lawsuit or proceeding against or investigation of the
Seller of any of its affairs concerning the Business or
the Purchased Assets;
(g) any waiver of any material rights or claims of the
Seller;
(h) all sales commitments made for products of the
Business are at prices not less than Inventory values
plus selling expenses and profit margins consistent
with Seller's prior experience in the Business; or
(i) negotiation or agreement by the Seller or any
officer or employee thereof to do any of the things
described in the preceding clauses (other than
negotiations with the Buyer and its representatives
regarding the transactions contemplated by this
Agreement).
3.23. Relations with Government. The Seller has
not made, offered or agreed to offer anything of value
to any governmental official, political party or
candidate for government office nor has it otherwise
taken any action that would cause the Seller to be in
violation of the Foreign Corrupt Practices Act of 1977,
as amended, or any law of similar effect.
3.24. Disclosure. No representation or warranty
by the Seller contained in this Agreement, in the
Schedules attached hereto, or in any certificate
furnished by the Seller to the Buyer in connection
herewith contains any untrue statement of a material
fact or omits to state any material fact necessary in
order to make any statement contained herein or therein
not misleading. There is no fact known to the Seller
that would cause a material adverse effect to the
Business; provided, however, that (i) changes in
general (national, regional or local) economic,
<PAGE>
or regulatory conditions or changes in the Business'
industry ("Industry Conditions"), or (ii) this
Agreement, the transactions contemplated hereby, or an
announcement or indication thereof, or any actions
taken by the Buyer hereunder or in contemplation
hereof, or any actions which the Seller was required to
take hereunder, or any direct contact of the Buyer or
any of its representatives with any of the customers or
suppliers or potential customers or suppliers, or any
of the employees of the Seller (including any departure
of any such employee) ("Agreement Conditions"), shall
not constitute a material adverse effect.
3.25. Catalog and Catalog Information. Schedule
3.25 lists all variations of catalogs of the Business
for the current year and next year, all information and
in process work for future catalogs of the Business
which are owned by the Seller including but not limited
to the beginning and ending date for each catalog and a
detailed listing of the prepaid catalog account for the
Business, showing the remaining unamortized cost on a
catalog by catalog basis. Also Schedule 3.25
identifies all mailing lists utilized by Seller in the
Business.
3.26. Absence of Shareholder Claims. Except as set
forth in Schedule 3.26, no Shareholder has any claims
against the Business or the Purchased Assets.
3.27. Sufficiency and Title to the Purchased
Assets. Upon consummation of the transactions
contemplated hereby, Buyer will have acquired good and
marketable title in and to, or a valid leasehold
interest in, each of the Purchased Assets, free and
clear of all Liens, except for Permitted Liens.
3.28. Real Property.
(a) For purposes of this Agreement, "Real Property"
means all interests in real property which shall
include the Owned Real Property including, without
limitation, leaseholds and subleaseholds, purchase
options, rights of first referral, easements, licenses,
rights to access, and rights of way, and all buildings
and other improvements thereon, together with any
additions thereto or replacements thereof, used by or
useful to the Business.
(b) Schedule 3.28 contains a complete and accurate
description of all Real Property (including street
address, legal description (where known), owner, and
Seller's use thereof) and, to the Seller's knowledge,
Liens thereon.
(c) Except as set forth in Schedule 3.28:
(i) The Seller has an exclusive right to use,
possess, and quietly enjoy the Real Property set forth
in the Leases.
(ii) There are no parties other than the Seller in
possession of any of the Real Property or any portion
thereof, and there are no leases, subleases, licenses,
concessions or other agreements, written or oral,
granting to any party or parties the right of use or
occupancy of any portion of the Real Property or any
portion thereof.
<PAGE>
(iii) All oral or written leases, subleases,
licenses, concession agreements or other use or
occupancy agreements pursuant to which the Seller
leases from any other party any Real Property,
including all amendments, renewals, extensions,
modifications or supplements to any of the foregoing or
substitutions for any of the foregoing (collectively,
the "Leases") are valid and in full force and effect,
except where any such failure would not reasonably be
expected to harm the Business or the Purchased Assets
in an amount to exceed Twenty Five Thousand Dollars
($25,000.00). True, complete and correct copies of all
of the Leases, all amendments, renewals, extensions,
modifications or supplements thereto, and all material
correspondence related thereto, including all
correspondence pursuant to which any party to any of
the Leases declared a default thereunder or provided
notice of the exercise of any operation granted to such
party under such Lease are attached hereto as Schedule
3.28. The Leases and the Seller's interests thereunder
are free of all Liens. The Seller has not received any
notice of default under any of the Leases, and the
Seller is in full compliance with the terms and
provisions of the Leases and there are no material
maintenance or capital improvement obligations related
thereto.
(iv) The Real Property and its continued use,
occupancy and operation in the conduct of the Business
comply with all applicable statutes, rules, regulations,
ordinances, orders, writs, injunctions, judgments,
decrees, awards or restrictions of any government
entity having jurisdiction over any portion of the Real
Property (including, without limitation, applicable
statutes, rules, regulations, orders and restrictions
relating to zoning, land use, safety, health,
employment and employment practices and access by the
handicapped) (collectively, the "Laws"), covenants,
conditions, restrictions, easements, disposition
agreements and similar matters affecting the Real
Property. The Seller has obtained all approvals of
governmental authorities (including certificates of use
and occupancy, licenses and permits) required in
connection with the use, occupation and operation of
the Real Property.
(v) The Real Property and its continued use,
occupancy and operation as used, occupied and operated in
the conduct of the Business does not constitute a
nonconforming use and is not the subject of a special
use permit under any applicable Law.
(vi) No notice from any governmental authority has been
served upon the Seller claiming any violation of any
law (including any code, rule, regulation, zoning or
building ordinance or health or safety ordinance), or
requiring or calling attention to the need for any
work, repairs, construction, alterations, or
installations on or in connection with such Real
Property which has not been complied with.
(vii) No portion of the Real Property or the
structures used in the conduct of the Business has
suffered any damage by fire or other casualty which
<PAGE>
has not heretofore been completely repaired and restored
to its original condition in accordance with the terms of
the relevant lease.
(viii) All real property taxes and assessments that
are due and payable with respect to the Real Property
have been paid or will be paid at or prior to Closing.
(ix) The Trust has fee title to the Owned Real
Property free of all liens and encumbrances, except (A)
Permitted Liens and (B) as set forth on Schedule 3.28
which will be released at or prior to Closing, and is
properly authorized to transfer title of the Owned Real
Property to the Buyer as of the Closing. Further the
condition of the Owned Real Property satisfies all of
the conditions, terms, representations, and warranties
of this Section 3.28, as well as other applicable
provisions of this Agreement.
3.29. Seller's Solvency. The Seller is solvent, is
able to pay its debts as they become due, has capital
sufficient to carry on its business as presently
conducted and proposed to be conducted, and owns
property which has both a fair value and a fair
saleable value in excess of the amount required to pay
its debts as they become due. The Seller will not be
rendered insolvent by the transactions contemplated by
this Agreement, and following the consummation of such
transactions, the Seller will be able to pay its debts
as they become due, will have capital sufficient to
carry on its business as then conducted and proposed to
be conducted, and will own property which has a fair
value and a fair saleable value in excess of the amount
required to pay its debts as they become due.
3.30. Required Governmental Filings and Consents.
The execution, delivery and performance of this
Agreement and the consummation of the transactions
contemplated hereby will not require any consent,
approval, authorization or permit of, or filing with or
notification to, any governmental or regulatory
authority, domestic or foreign, except for under the
HSR Act filing.
3.31. No Violations. Neither the Seller nor the
Trust has received notice that it is or would be with
the passage of time, (a) in violation of any provision
of its Charter Documents (for the Trust would include
all relevant governing documents including but not
limited to its trust agreement as currently amended) or
(b) in default or violation of any term, condition or
provision of (i) any material judgment, decree, order,
injunction or stipulation applicable to the Seller or
(ii) any material agreement, note, mortgage, indenture,
contract, lease or instrument, permit, concession,
franchise or license to which the Seller or the Trust
is a party or by which the Seller, the Trust or its
properties or assets may be bound, in each case to the
extent any such violation or default will impact the
Business, or the Purchased Assets after the Closing.
4. REPRESENTATIONS OF THE BUYER
To induce the Trust, the Seller and the Management
Shareholders to enter into this Agreement and
consummate the transactions contemplated hereby, the
Buyer represents and warrants to the Seller and the
Management Shareholders as follows:
<PAGE>
4.1. Due Organization. The Buyer is a corporation duly
organized, validly existing, and in good standing under
the laws of the State of Wisconsin. The Buyer is duly
authorized and qualified to do business under all
applicable laws, regulations, ordinances and orders of
public authorities to carry on its respective business
in the places and in the manner as now conducted.
Copies of the Articles of Incorporation and the Bylaws,
each as amended, the Buyer (collectively, the "Charter
Documents") have been made available to the Seller.
The Buyer is not in violation of any Charter Document.
4.2. Authorization; Validity of Obligations. The
representatives of the Buyer executing this Agreement
have all requisite corporate power and authority to
enter into and bind the Buyer to the terms of this
Agreement. The Buyer has the full legal right, power
and corporate authority to enter into this Agreement
and the transactions contemplated hereby. The
execution and delivery of this Agreement by the Buyer
and the performance by the Buyer of the transactions
contemplated herein have been duly and validly
authorized by the Board of Directors of the Buyer, and
this Agreement has been duly and validly authorized by
all necessary corporate action. This Agreement is a
legal, valid and binding obligation of the Buyer
enforceable in accordance with its terms except as
limited by (i) applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general
application affecting the enforcement of creditors'
rights and (ii) general principles of equity that
restrict the availability of equitable remedies
(regardless of whether enforceability is considered in
a proceeding in equity or at law).
4.3. No Conflicts. The execution, delivery and
performance of this Agreement, and the consummation of
the transactions contemplated hereby, will not:
(a) conflict with, or result in a breach or violation
of the Charter Documents;
(b) subject to compliance with any agreements between
the Buyer and its lenders, conflict with, or result in
a default (or would constitute a default but for a
requirement of notice or lapse of time or both) under
any document, agreement or other instrument to which
the Buyer is a party, or result in the creation or
imposition of any lien, charge or encumbrance on any of
the Buyer's properties pursuant to (i) any law or
regulation to which the Buyer or any of their
respective property is subject, or (ii) any judgment,
order or decree to which the Buyer is bound or any of
their respective property is subject;
(c) result in termination or any impairment of any
material permit, license, franchise, contractual right
or other authorization of the Buyer; or
(d) violate any law, order, judgment, rule,
regulation, decree or ordinance to which the Buyer is
subject, or by which the Buyer is bound, (including,
without limitation, the HSR Act, (upon expiration or
early termination of the applicable waiting period),
together with all rules and regulations promulgated
thereunder).
(e) the Buyer understands and agrees that there are no
other warranties, representations, or covenants,
express or implied which apply to the Seller or the
<PAGE>
Management Shareholders, except for those set forth
herein or referred to by reference to another document
as described herein, if executed by the Seller or any
of its Management Shareholders.
4.4. Financial Capacity. The Buyer (i) has adequate
bank facilities in place which, either alone or with
cash presently on hand, will provide sufficient funds
to pay the amounts payable hereunder, including the
Purchase Price, in accordance with the terms of this
Agreement, and to consummate the transactions
contemplated hereby and (ii) will have on the Closing
Date sufficient funds to pay the amounts payable
hereunder pursuant to the terms of this Agreement.
Buyer's bank and other credit facilities permit Buyer
to borrow money under such facilities or, if necessary,
other facilities, and use such funds to pay the amounts
payable hereunder, in accordance with the terms of this
Agreement and to consummate the other transactions
contemplated hereby. Buyer is not aware of any matter
relating to Buyer which would prevent it from
fulfilling its obligations hereunder and consummating
the transaction contemplated by this Agreement.
5. COVENANTS AND AGREEMENTS
5.1. Reserve for Certain Liabilities. The Seller
shall, so far as is practicable, apply as much of the
Purchase Price, as may be adjusted, paid under this
Agreement as may be necessary to satisfy the Seller's
liabilities under its existing Credit Facilities and
for Taxes and other expenses related to the
transactions contemplated hereby.
5.2. WARN.
(a) Seller shall be solely responsible for providing
any notices required under the Worker Adjustment and
Retraining Notification Act ("WARN") and any comparable
state or local law occasioned by any employment losses
occurring before and including the time of Closing and
agrees to indemnify Buyer from and against its failure
to provide any required notice in accordance with this
Paragraph.
(b) Buyer shall be solely responsible for providing
any notices required under WARN and any comparable
state or local law occasioned by any employment losses
occurring after the time of the Closing, including any
decision by it not to hire the Seller's terminated
workers following the Closing, and agrees to indemnify
Seller from and against its failure to provide any
required notice in accordance with this Paragraph.
Seller agrees to provide Buyer with such information
and assistance as may be necessary to permit Buyer to
discharge its duties under this Paragraph.
5.3. Tax Matters.
(a) Tax Returns. The Seller shall be responsible for
timely filing all federal and state income tax returns
of the Seller and for paying all income taxes
attributable to the income of the Seller for all
periods prior to and including the Closing Date.
Further the Seller shall be responsible for that
portion of sales, use, real, personal, other property
<PAGE>
or other income (if any) taxes attributable to periods
prior to the Closing Date, except for those liabilities
that are included as Assumed Liabilities.
(b) Allocation of Adjusted Purchase Price. Seller and
Buyer agree to allocate the Purchase Price, as
adjusted, (and all other relevant amounts) in
accordance with the provisions of Section 1060 of the
Internal Revenue Code of 1986, as amended (the "Code")
as specifically set forth by Seller and Buyer on
Schedule 5.3(b) hereto. Seller shall provide an
updated schedule to reflect the Purchase Price
adjustment pursuant to Section 1.5(c) within thirty
(30) days of such adjustment. Seller and Buyer shall
consistently use such allocation in satisfying any and
all reporting requirements of the Internal Revenue
Service ("IRS") and any state, local or other taxing
authority. Seller and Buyer also agree to file IRS
Form 8594 consistently with the foregoing and in
accordance with Section 1060 of the Code.
(c) Responsibility for Taxes. Any transfer,
documentary, sales, use or other taxes assessed upon or
with respect to the transfer of the Purchased Assets
and/or the Business to the Buyer and any recording or
filing fees with respect thereto incurred on any date
prior to and including the Closing Date shall be the
responsibility of the Seller. The Seller hereby
indemnifies and agrees to hold the Buyer harmless from,
against and in respect of any U.S. federal, state or
municipal Tax liability (including interest and
penalties), if any, incurred by or imposed upon the
Buyer resulting from or as a consequence of the sale of
Purchased Assets or assumption of Assumed Liabilities
by the Buyer contemplated hereby (including without
limitation, any such Tax liability arising pursuant to
Section 1374 of the Code or state counterpart, if
applicable) on or prior to the Closing Date. In the
event Buyer is audited by the IRS or a state taxing
authority pertaining to the purchase of Purchased
Assets or assumption of Assumed Liabilities, Buyer
shall immediately notify Seller in writing of such
audit.
5.4. Employment by the Buyer of Seller Employees.
(a) Effective as of the Closing Date, Buyer shall
make an offer of employment to all Business Employees.
Those Business Employees who accept such offers of
employment shall be referred to herein as the
"Transferred Employees". Each offer of employment to
Business Employees shall include the following terms
which shall be effective through December 31, 2000:
(i) employment terminable at will at the same rate of
base pay in effect for the Transferred Employee
immediately prior to the Closing Date and for incentive
bonus and sales compensation programs which, if the
specified goals are achieved, will result in total
compensation that is no less than in effect for the
Transferred Employee immediately prior to the Closing
Date; (ii) employment to be performed at the same
geographic location of the Transferred Employee with
Seller immediately prior to the Closing Date, with the
exception of the warehouse manager located in the
Dallas Texas area; and (iii) a benefits package for the
Transferred Employee (including, without limitation,
pension, welfare and fringe benefits) which
collectively and, subject to the provisions of Section
5.4(f) and the deductible requirements of Seller's
medical insurance policies, are substantially
equivalent to the benefits package provided to
similarly situated employees of Buyer, the current
<PAGE>
substantive terms of which are summarized in Schedule
5.4(a). In accordance with its obligations under
applicable family and medical leave act laws, Buyer
shall make an offer of employment to all Business
Employees who are identified by the Seller in
accordance with Section 3.18(a) who are expected to be
absent from work with the Business on the Closing Date.
(b) For purposes of this Agreement, the term
"Business Employees" is hereby defined as follows:
(i) all persons actively employed by Seller in the
Business immediately before Closing; and (ii) all employees
of Seller who are absent from work with the Business on
account of vacation, sickness, disability or leave of
absence at Closing or for whom an obligation to recall,
rehire or otherwise return to employment exists under a
contractual obligation or law. The "Business
Employees" shall be listed on Schedule 3.18(a) less and
excluding those individuals listed on Schedule 5.4(b)
by the Seller who shall remain employees of the Seller
on and after the Closing Date.
(c) After the Closing Date, Seller shall not be
responsible for wages, salaries and other employee
benefits for Transferred Employees for service of such
Transferred Employees with Buyer with the exception of
providing COBRA benefits in accordance with applicable
law. As of the Closing Date, the Business Employees
shall cease active participation in each Employee Plan
and no additional benefits shall be accrued thereunder
for such employees. Seller shall be liable for, accrue
for and pay all claims for benefits under the Employee
Plans, which are incurred prior to the Closing Date.
For purposes of this Agreement, the following claims
shall be deemed to be incurred as follows: (i) life,
accidental death and dismemberment and business travel
accident insurance benefits, upon the death or accident
giving rise to such benefits; (ii) health, dental
and/or prescription drug benefits, upon provision of
such services, materials or supplies; and (iii)
long-term disability benefits, upon the approval by the
carrier of the individual for long-term disability
eligibility.
(d) Buyer shall recognize each Transferred Employee's
original date of hire with Seller for determining
eligibility and vesting and shall give each Transferred
Employee credit for such purposes, under each employee
benefit plan, program or arrangement of Buyer,
including for purposes of accrued vacation days;
provided, however, Buyer shall not recognize any
Transferred Employee's original date of hire with
Seller for purposes of benefit accrual under any
qualified or non-qualified defined benefit pension
plan. Buyer shall waive any pre-existing condition
limitation under each of Buyer's welfare benefit plans
for any condition of a Transferred Employee that would
have been covered under such plan had service of such
Transferred Employee with Seller been service with
Buyer. Seller shall be responsible for the
administration of and shall assume any and all
obligations arising under COBRA with respect to the
Transferred Employees and their beneficiaries who are
eligible to exercise their rights to such coverage as a
result of qualifying events occurring before, up to,
and including the time of Closing. Buyer shall be
responsible for the administration and shall retain
liability for all obligations arising under COBRA with
respect to the Transferred Employees and their
beneficiaries who are eligible to exercise their rights
to such coverage as a result of qualifying events
occurring after Closing. Seller agrees to utilize its
best efforts to permit
<PAGE>
Buyer to succeed it under the
Seller's Blue Cross HMO arrangement with respect to
Transferred Employees covered under such arrangement as
of the Closing Date and Buyer agrees to use its best
efforts to facilitate its succession to Seller under
the Seller's Blue Cross HMO arrangement as of Closing
Date. Transferred Employees not participating under
the Seller's Blue Cross HMO arrangement will be
provided with coverage under Buyer's health insurance
policy effective January 1, 2001. Buyer agrees to
reimburse Seller for the full COBRA premium cost for
Transferred Employees not participating in Buyer's
health insurance policies or arrangements until
January 1, 2001 within ten (10) days of presentation of
invoice.
(e) Buyer shall provide to any Transferred
Employees whose employment with Buyer is terminated other
than for cause (which shall mean gross negligence or
dereliction in the performance of such employee's
duties, dishonesty or commission of a crime) benefits
equal to or greater than Buyer's written severance
guidelines applicable to Transferred Employees that are
terminated due to a reorganization as set in
Schedule 5.4(e). Any Transferred Employees who are
terminated within twelve (12) weeks of Closing shall be
treated as being terminated in connection with a
reorganization.
(f) Buyer agrees to credit Transferred Employees
with all earned and/or accrued vacation days and personal
days accrued through the Closing date to which they are
entitled under Seller's vacation and personal day
policies upon their employment with Buyer, and with
length of service affecting the rate of accrual of
vacation days, and to advise those employees of same.
Buyer agrees to pay the Transferred Employees their
accrued but unused vacation pay as of the Closing Date
upon the request of any such Transferred Employee, but
under no circumstances shall Buyer be obligated to
provide vacation benefits (in the form of paid leave
and/or pay in lieu of paid leave) which exceeds the
amount due under the Buyer's vacation policy with due
credit for vested accruals under Seller's vacation
plan. The accrued liability for vacation days and
personal days will be properly recorded by the Seller
on Schedules 1.2 and 1.4(a) in accordance with GAAP.
Seller shall prepare and furnish Forms W-2 to all
employees of the Business, including current employees
of the Business, including current employees of the
Business who accept offers of employment from Buyer,
for all periods prior to the Closing Date and with
respect to all remuneration paid to such employees by
the Seller prior to the Closing Date.
5.5. Distributions. From the date of this Agreement
through the later of (a) the expiration of the period
as provided for in Section 8.2(c)(ii) herein; or (b)
final resolution of any indemnity claim under Section 8
of this Agreement, which indemnification is the
responsibility of the Seller, the Seller shall not make
any extraordinary distributions, considering its past
practices, to its shareholders; provided, however, that
distributions not exceeding $8,000,000.00 in the
aggregate shall be deemed to not constitute
extraordinary distributions.
<PAGE>
5.6. Cooperation.
(a) The Seller, Management Shareholders, and the
Buyer shall each deliver or cause to be delivered to the
other on the Closing Date, and at such other times and
places as shall be reasonably agreed to, such
instruments as the other may reasonably request for the
purpose of carrying out this Agreement and, after the
Closing, the Seller and the Management Shareholders
shall cooperate, at the Buyer' expense, with all
reasonable requests of the Buyer in connection with the
Buyer's preparation and filing of a current Report on
Form 8-K with respect to the transactions contemplated
by this Agreement including, but not limited to,
obtaining audited financial statements for the
Business. In connection therewith, if required, the
president or chief financial officer of the Seller
shall execute any documentation reasonably required by
the Buyer or the Buyer's independent public accountants
(in connection with such accountant's audit of the
Business), which shall be limited to standard
representation letters that do not impose personal
liability and that shall be consistent with the
representations and warranties contained in Section 3
hereof.
(b) The Management Shareholders and the Seller shall
cooperate and use their reasonable efforts to have the
present officers, directors and employees of the Seller
cooperate with the Buyer on and after the Closing Date
in furnishing information, evidence, testimony and
other assistance in connection with any filing
obligations, actions, proceedings, arrangements or
disputes of any nature with respect to matters
pertaining to all periods prior to the Closing Date
subject to preservation of any applicable
attorney-client privilege.
(c) Each party hereto shall cooperate in obtaining
all consents and approvals required under this Agreement
to effect the transactions contemplated hereby.
(d) The Seller shall for the benefit of the Buyer,
segregate the Purchased Assets and Assumed Liabilities
from the Seller's Other Business in electronic format
using the Seller's existing management information
systems, so as to properly and accurately establish the
opening asset and liability balances of the Business
purchased by the Buyer and to facilitate processing the
transactions of the Business purchased by the Buyer
post-Closing using the Seller's management information
systems which post-Closing transactions are covered in
the Services Agreement described in Exhibit 2.2(n).
5.7. Accounts Receivable and Accounts Payable. The
Seller shall notify the Buyer promptly in the event
that any legal action is intended to be taken to
collect any accounts receivable following the Closing
Date. Further the Seller's accounts payable are and
shall be paid through the Closing Date and thereafter
by the Seller within the terms of said accounts payable
and in the ordinary course of the Business, consistent
with past practices of the Seller in the operation of
the Business.
<PAGE>
5.8. Post-Closing Site Characterization.
(a) After Closing, Buyer agrees to grant to Seller
and Seller's agents permission to enter upon the Owned Real
Property, rent-free, to conduct all investigations (the
"Site Characterization") reasonably necessary to obtain
an insurance policy to insure against potential
environmental liabilities retained by Seller under the
terms of this Agreement. Such right of entry shall
include without limitation: (i) reasonable access to
all documents and records concerning the Owned Real
Property and the business operations conducted thereon
as such reasonably pertain to or are necessary to
obtain the insurance policy; (ii) access, ingress and
egress to and across all improvements, structures,
utilities, facilities, and all other portions of the
Owned Real Property, whether improved or unimproved;
(iii) the right to install wells and soil boring holes
on, and to remove soil and water samples from, the
Owned Real Property as are reasonably necessary to
obtain the insurance policy; (iv) the right to bring
onto the Owned Real Property such equipment as may be
necessary to conduct the Site Characterization; and (v)
the right to connect to and use existing utilities at
the Owned Real Property.
(b) Seller shall provide Buyer five (5) days written
notice (which may be verbal) prior to entering onto the
Owned Real Property, and shall make reasonable efforts
to avoid materially interfering with Buyer's use of the
Owned Real Property. Seller shall (i) insure that all
contractors have adequate insurance coverage, including
appropriate pollution liability and error and
omissions, (ii) restore the property to the same
condition as existed prior to the performance of the
work, and (iii) shall defend, hold harmless, and
indemnify Buyer from and against any and all claims,
damages, losses, cash, expenses, liabilities, or
obligations arising out of or relations or relating in
any way to the performance of the Site Characterization
including, without limitation the environmental
condition of the Owned Real Property.
(c) Seller agrees that all reports, together with
all data, analyses and other material prepared or compiled
by or on behalf of Seller during its site
investigations (collectively, the "Site Information")
shall be used solely by the Seller for the purposes of
obtaining environmental insurance, and shall not be
disclosed to third parties except as necessary or
convenient to achieve that purpose, or to the extent
compelled by law.
(d) Seller agrees to use its best efforts to minimize
any business disruption which may result from the
exercise of its rights hereunder.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE BUYER
The obligation of the Buyer to purchase the
Purchased Assets is subject to the satisfaction or
waiver, at or before the Closing, of the following
conditions and deliveries:
6.1. Representations and Warranties; Performance
Obligations. All of the representations and warranties
of the Seller and the Trust (only as such may apply to
the Owned Real Property) contained in this Agreement
shall be true and correct and complete in all material
respects on and as of the Closing Date as though such
representations and warranties had been
<PAGE>
made on and as of such date; all of the terms, covenants,
agreements and conditions of this Agreement to be complied
with, performed or satisfied by the Seller and the Trust
(only as such may apply to the Owned Real Property) on
or before the Closing Date shall have been duly
complied with, performed or satisfied in all material
respects; and a certificate to the foregoing effects
dated the Closing Date and signed on behalf of the
Seller and the Trust shall have been delivered to the
Buyer.
6.2. No Litigation. No temporary restraining order,
preliminary or permanent injunction or other order
issued by any court of competent jurisdiction or other
legal or regulatory restraint or provision challenging
the Buyer's proposed purchase of the Purchased Assets
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.
There shall be no action, suit, claim or proceeding of
any nature pending or threatened, relating to or
affecting the Purchased Assets or the Business that
could materially or adversely affect the Purchased
Assets or the Business.
6.3. Consents and Approvals. All necessary material
consents of, and filings with, any governmental
authority or agency or third party, relating to the
consummation by the Seller of the transactions
contemplated hereby, shall have been obtained and made
except where the failure to so obtain or make does not
have a material adverse effect. Any waiting period
applicable to the consummation of the transaction as
contemplated under this Agreement under the HSR Act
shall have expired or been terminated, and no action by
the Department of Justice or Federal Trade Commission
challenging or seeking to enjoin the consummation of
the transactions contemplated hereby shall be pending.
6.4. Deliveries. The Seller and the Shareholders
shall have made such deliveries as are called for by this
Agreement.
6.5. No Material Adverse Effect. No event, fact or
condition shall have occurred or be existing that would
reasonably be expected to have a material adverse
effect on the Purchased Assets or the Business other
than Industry Conditions and Agreement Conditions (as
such terms are defined in Section 3.24, above); and
Buyer shall have received a certificate signed on
behalf of the Seller and the Shareholders dated the
Closing Date to such effect.
6.6. Charter Documents; Authority. The Buyer shall
have received (a) a copy of the Bylaws of the Seller
certified by the Secretary of the Seller and (b) other
documents Buyer may reasonably request relating to the
existence of the Seller and the authority of the Seller
for this Agreement.
6.7. Dismissal of Litigation. Upon the Closing,
the Seller will dismiss with prejudice, on the merits
and without costs, the lawsuit presently pending in
Angelina County, Texas, entitled J.L. Hammett Co. v.
School Specialty, Inc., Bill Stevens and Bill Arnold,
Cause No. 32,877-00-3 (the "Texas Suit"). The parties
hereto will exchange full and complete mutual general
releases of any and all claims they may have against
such other, including also any claims against any
employees of each other. The releases to be provided
will not be a release of
<PAGE>
any claims for breach of this or any other document
executed in connection with the transactions as
described in the Agreement.
6.8. Repayment of Indebtedness/Release of Liens.
The Seller and the Trust shall have delivered to the Buyer
satisfactory evidence that the indebtedness secured by
Liens on the Purchased Assets described in Section 3.12
will be repaid in full at Closing, and any commitments
to lend thereunder will have been terminated,
concurrently with the Closing.
6.9. Shareholder Approval. The Buyer shall have
received evidence, in a form reasonably acceptable to
Buyer's counsel, from the Seller, indicating that the
requisite shareholder approval of the Seller and is
currently effective as of Closing, to approve the
consummation of the transactions herein contemplated
has been obtained.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER AND
MANAGEMENT SHAREHOLDERS The obligations of the
Trust, the Seller and the Management Shareholders to
sell the Purchased Assets is subject to the
satisfaction or waiver, at or before the Closing, of
the following conditions:
7.1. Representations and Warranties; Performance
Obligations. All of the representations and warranties
of the Buyer contained in this Agreement shall be true
and correct and complete in all material respects on
and as of the Closing Date as though such
representations and warranties had been made on and as
of such date; all of the terms, covenants, agreements
and conditions of this Agreement to be complied with,
performed or satisfied by the Buyer on or before the
Closing Date shall have been duly complied with,
performed or satisfied in all material respects; and a
certificate to the foregoing effects dated the Closing
Date and signed on behalf of the Buyer shall have been
delivered to the Seller.
7.2. Litigation. No temporary restraining order,
preliminary or permanent injunction, or other order
issued by any court of competent jurisdiction or other
legal or regulatory restraint or provision challenging
the Buyer's proposed purchase of the Purchased Assets
or issued against the Buyer regarding the purchase of
the Purchased Assets and the assumption of Assumed
Liabilities 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.
7.3. Consents and Approvals. All necessary consents
of, and filings with, any governmental authority or
agency or third party relating to the consummation of
the Buyer of the transactions contemplated herein,
shall have been obtained and made. Any waiting period
applicable to the consummation of the transaction
contemplated herein under the HSR Act shall have
expired or been terminated, and no action by the
Department of Justice or Federal Trade Commission
challenging or seeking to enjoin the consummation of
the transactions contemplated hereby shall be pending.
7.4. Dismissal of Litigation. Upon the Closing the
Buyer will dismiss with prejudice, on the merits and
without costs, any counterclaims it has or may assert
in the Texas Suit. The parties hereto will exchange
full and complete mutual general releases of any and
all claims they
<PAGE>
may have against such other, including
also any claims against any employees of each other.
The releases to be provided will not be a release of
any claims for breach of this or any other document
executed in connection with the transactions as
described in the Agreement.
7.5. Deliveries. The Buyer shall have made such
deliveries as are called for by this Agreement.
7.6. Shareholder Approval. The Seller shall have
received the requisite approval of the Shareholders of
Seller at the Meeting.
8. INDEMNIFICATION
8.1. General Indemnification by the Seller and the
Trust. Each the Seller and the Trust (only as it
regards the Owned Real Property) do jointly and
severally covenant and agree to indemnify, defend,
protect and hold harmless the Buyer and its officers,
directors, employees, stockholders, assigns, successors
and affiliates (individually, an "Indemnified Party"
and collectively, "Indemnified Parties") from, against
and in respect of all liabilities, losses, claims,
damages, punitive damages, causes of action, lawsuits,
administrative proceedings (including informal
proceedings), investigations, audits, demands,
assessments, adjustments, judgments, settlement
payments, deficiencies, penalties, fines, interest
(including interest from the date of such damages) and
costs and expenses (including without limitation
reasonable attorneys' fees and disbursements)
(collectively, "Damages") suffered, sustained, incurred
or paid by any Indemnified Party in connection with,
resulting from, or arising out of, directly or
indirectly, but excluding exemplary, special, or
punitive damages pursued by the Buyer other than for
reimbursement of same based upon the payment by Buyer
to a third party:
(a) any liability of the Seller which is not an
Assumed Liability and which relates to the Business or
the operations or assets of the Seller prior to the
date hereof, or the actions or omissions of the
Seller's directors, officers, shareholders, employees
or agents prior to the date hereof (including any
liability, which is not an Assumed Liability, that
becomes a liability of the Buyer under any bulk
transfer law of any jurisdiction, under any common law
doctrine of de facto merger or successor liability, or
otherwise by operation of law); or the operations or
assets of the Seller prior to the Closing Date; or
(b) any breach of any representation or warranty of
the Seller set forth in this Agreement or any Schedule
or certificate, delivered by or on behalf of the Seller
in connection herewith; or
(c) any breach of any covenant or agreement on the
part of the Seller set forth in this Agreement; or
(d) any claim for fees or commissions of any broker or
agent employed or alleged to have been employed by the
Seller; or
(e) any and all Damages incident to any of the
foregoing or to the enforcement of this Section 8.
<PAGE>
8.2. Limitation and Expiration. Notwithstanding the above:
(a) there shall be no liability for indemnification
under Section 8.1 unless, the aggregate amount of
Damages exceeds $800,000.00 (the "Indemnification
Deductible") whereupon only the amount of such claims
in excess of the Indemnification Deductible shall be
recovered by any Indemnified Party; provided, however,
that the Indemnification Deductible shall not apply to
(i) adjustments to the Purchase Price pursuant to
Section 1.4 or Section 1.5; (ii) breaches of the
covenant relating to tax matters contained in
Section 5.3; (iii) Section 3.17 (environmental
matters), Section 3.20 (taxes), or Section 3.21
(conformity with law; litigation), (iv) Damages arising
from or related to liabilities of the Seller that are
not Assumed Liabilities, including without limitation
Damages under Section 8.1(a), above, or (v) any
liability of the Buyer under any bulk transfer law of
any jurisdiction, under any common law doctrine of de
facto merger or successor liability, or otherwise by
operation of law);
(b) the aggregate amount of the Seller's liability
under this Section 8 shall not exceed $25,000,000.00,
provided, however, that the Seller's liability for
Damages arising out of any (i) breaches of the covenant
relating to tax matters contained in Section 5.3, or
(ii) breaches of the representations and warranties
made in Section 3.17 (environmental matters),
Section 3.20 (taxes), or Section 3.21 (conformity with
law; litigation), shall not be subject to such
limitation;
(c) the indemnification obligations under this
Section 8, or in any certificate or writing furnished
in connection herewith, shall terminate at the date
that is the later of clause (i) or (ii) of this
Section 8.2(c):
(i) (A) with respect to claims relating to or
arising out of breaches of the covenant relating to tax
matters contained in Section 5.3, or breaches of the
Section 3.20 (taxes) the date that is six (6) months
after the expiration of the longest applicable federal
or state statute of limitation (including mutually
agreed-upon extensions thereof), or (B) with respect to
representations and warranties made in Section 3.17
(environmental matters) seven (7) years after the
Closing Date, or (C) with respect to representations
and warranties made in Section 3.21 (conformity with
law; litigation) five (5) years after the Closing Date; or
(1) with respect to all claims
other than those referred to in clause
(i)(1) of this Section 8.2(c), eighteen
(18) months after the Closing Date (the
"Eighteen Month Anniversary"); or
(ii) the final resolution of claims or demands
pending as of the relevant dates described in clause (i)
of this Section 8.2(c) (such claims referred to as
"Pending Claims").
8.3. Indemnification Procedures. All claims or demands
for indemnification under this Section 8 ("Claims")
shall be asserted and resolved as follows:
<PAGE>
(a) In the event that any Indemnified Party has a
Claim against any party obligated to provide
indemnification pursuant to Section 8.1 or Section 8.7
hereof (the "Indemnifying Party") which does not
involve a Claim being asserted against or sought to be
collected by a third party against an Indemnifying
Party, the Indemnified Party shall within thirty (30)
days of receipt of a written demand for a Claim,
notify the Indemnifying Party of such Claim, specifying
the nature of such Claim and the amount or the
estimated amount thereof to the extent then feasible
(the "Claim Notice"). If the Indemnifying Party does
not notify the Indemnified Party within thirty (30)
days after the date of delivery of the Claim Notice
that the Indemnifying Party disputes such Claim, with a
detailed statement of the basis of such position, the
amount of such Claim shall be conclusively deemed a
liability of the Indemnifying Party hereunder. In case
an objection is made in writing in accordance with this
Section 8.3(a), the Indemnified Party shall respond in
a written statement to the objection within thirty (30)
days and, for sixty (60) days thereafter, attempt in
good faith to agree upon the rights of the respective
parties with respect to each of such Claims (and, if
the parties should so agree, a memorandum setting forth
such agreement shall be prepared and signed by both
parties).
(b) (i) In the event that any Claim for which
the Indemnifying Party would be liable to an Indemnified
Party hereunder is asserted against an Indemnified
Party by a third party (a "Third Party Claim"), the
Indemnified Party shall deliver a Claim Notice to the
Indemnifying Party. The Indemnifying Party shall have
thirty (30) days from date of delivery of the Claim
Notice to notify the Indemnified Party (A) whether the
Indemnifying Party disputes liability to the
Indemnified Party hereunder with respect to the Third
Party Claim, and, if so, the basis for such a dispute,
and (B) if such party does not dispute liability,
whether or not the Indemnifying Party desires, at the
sole cost and expense of the Indemnifying Party, to
defend against the Third Party Claim, provided that the
Indemnified Party is hereby authorized (but not
obligated), prior to and during the Notice Period, to
file any motion, answer or other pleading and to take
any other action which the Indemnified Party shall deem
necessary or appropriate to protect the Indemnified
Party's interests.
(ii) In the event that the Indemnifying Party
notifies the Indemnified Party within the Notice Period
that the Indemnifying Party does not dispute the Indemnifying
Party's obligation to indemnify with respect to the
Third Party Claim, the Indemnifying Party shall defend
the Indemnified Party against such Third Party Claim by
appropriate proceedings, provided that, unless the
Indemnified Party otherwise agrees in writing, the
Indemnifying Party may not settle any Third Party Claim
(in whole or in part) if such settlement does not
include a complete and unconditional release of the
Indemnified Party. If the Indemnified Party desires to
participate in, but not control, any such defense or
settlement the Indemnified Party may do so at its sole
cost and expense. If the Indemnifying Party elects not
to defend the Indemnified Party against a Third Party
Claim, whether by failure of such party to give the
Indemnified Party timely notice as provided herein or
otherwise, then the Indemnified Party, without waiving
any rights against such party, may settle or defend
against such Third Party Claim in the Indemnified
Party's sole discretion and the Indemnified Party
<PAGE>
shall be entitled to recover from the Indemnifying Party
the amount of any settlement or judgment and, on an ongoing
basis, all indemnifiable costs and expenses of the
Indemnified Party with respect thereto, including
interest from the date such costs and expenses were
incurred.
(iii) If at any time, in the reasonable opinion
of the Indemnified Party, notice of which shall be given
in writing to the Indemnifying Party, any Third Party
Claim seeks material prospective relief which could
have an adverse effect on any Indemnified Party or any
subsidiary, the Indemnified Party shall have the right
to control or assume (as the case may be) the defense
of any such Third Party Claim and the amount of any
judgment or settlement and the reasonable costs and
expenses of defense shall be included as part of the
indemnification obligations of the Indemnifying Party
hereunder. If the Indemnified Party elects to exercise
such right, the Indemnifying Party shall have the right
to participate in and control, the defense of such
Third Party Claim at the sole cost and expense of the
Indemnified Party.
(c) Nothing herein shall be deemed to prevent the
Indemnified Party from making a Claim under a Claim
Notice, and an Indemnified Party may make a Claim
hereunder, for Damages, excluding exemplary, special,
or punitive damages pursued by the Indemnified Party
other than for reimbursement of same based upon the
payment by an Indemnified Party to a third party,
provided the Claim Notice sets forth the specific basis
for any such Claim or demand to the extent then
feasible and the Indemnified Party has reasonable
grounds to believe that such Claim may be made.
(d) The Indemnified Party agrees to give the
Indemnifying Party written notice of any actual,
threatened or possible claim or demand which may give
rise to a right of indemnification within fifteen (15)
days of becoming aware of the foregoing.
(e) The parties will make appropriate adjustments
for any Tax benefits and/or Tax detriments (excluding the
tax effect of deductions for amounts not paid by the
Seller due to the Indemnification Deductible)
(calculated at a tax rate of 40%) or insurance proceeds
in determining the amount of any indemnification
obligation under this Section 8, provided that no
Indemnified Party shall be obligated to continue
pursuing any payment pursuant to the terms of any
insurance policy.
8.4. Survival of Representations, Warranties and
Covenants. All representations, warranties and
covenants made by the Seller, the Trust, and the Buyer
in or pursuant to this Agreement or in any document
delivered pursuant hereto shall be deemed to have been
made on the date of this Agreement (except as otherwise
provided herein) and, if a Closing occurs, as of the
Closing Date. The representations and warranties of
the Seller will survive the Closing and will remain in
effect until, and will expire upon, the termination of
the indemnification obligations with respect to any
such representation and warranty as provided in Section
8.2. The representations of the Buyer will survive the
Closing and will remain in effect until, and will
expire on a date that is eighteen (18) months after the
Closing Date.
<PAGE>
8.5. Remedies. Notwithstanding anything contained
in this Agreement to the contrary, from and after the
Closing, except: (i) as set forth in Section 9.2 with
respect to matters set forth in Section 9 hereof, (ii)
with respect to matters resulting from or involving a
fraudulent misrepresentation, (iii) for injunctive or
equitable relief to compel performance of the covenants
set forth in Section 5.6, above, and (iv) matters
relating to the Service Agreement and License Agreement
delivered in connection herewith (the "Excluded
Matters") the provisions of this Section 8 shall be the
sole recourse of the parties hereto, or any affiliate
thereof, for any breach, misrepresentation or other
matters relating to or arising in connection with this
Agreement and any of the agreements, documents or
instruments executed and delivered in connection
herewith and therewith and any of the transactions
contemplated hereby or thereby, and such recourse is
explicitly limited to the amounts and time limits set
forth in Section 8.2 hereof and to the claims as set
forth in Section 8.1 hereof. With respect to the
Excluded Matters, the remedies set forth in this
Section 8 are cumulative and shall not be construed to
restrict or otherwise affect any other remedies that
may be available to the Indemnified Parties under any
other agreement or pursuant to statutory or common law,
including the right to enforce specifically the
covenants set forth in this Agreement by injunctions or
restraining orders.
8.6. Arbitration.
(a) Except as set forth in Section 1.5 with respect
to adjustments to the Purchase Price and in Section 9.2
with respect to matters set forth in Section 9 hereof,
any dispute ("Arbitrated Disputes") arising out of or
relating to this Agreement or the breach, termination
or validity hereof shall be finally settled by binding
arbitration administered by the American Arbitration
Association ("AAA") in Chicago, Illinois, and, except
as expressly provided in this Agreement, shall be
conducted in accordance with the Expedited Procedures
under the Commercial Arbitration Rules of the AAA, as
such rules may be amended from time to time (the
"Rules"). The hearing locale shall be Chicago,
Illinois. A single, neutral arbitrator (the
"Arbitrator") shall be appointed by the AAA, within
five (5) days after an Arbitrated Dispute is submitted
for arbitration under this Section 8.6, to preside over
the arbitration and resolve the Arbitrated Dispute. The
Arbitrator shall be selected from the AAA's Commercial
Panel, and shall be qualified to practice law in at
least one jurisdiction in the United States and have
expertise in the interpretation of commercial
contracts. The parties shall have three (3) days to
object in writing to the appointment of the Arbitrator,
the sole basis for such objection being an actual
conflict of interest. The AAA, in its sole discretion,
shall determine within three (3) days the validity of
any objection to the appointment of the Arbitrator
based on an actual conflict of interest.
(b) The Arbitrator's decision (the "Decision")
shall be binding, and the prevailing party may enforce
the Decision in any court of competent jurisdiction.
(c) The parties shall use their best efforts to
cooperate with each other in causing the arbitration to
be held in as efficient and expeditious a manner as
practicable, including but not limited to, providing
such documents and making available such of their
personnel as the Arbitrator may request, so that the
Decision may be reached timely. The Arbitrator shall
take into account the parties' stated goal of expedited
proceedings in
<PAGE>
determining whether to authorize discovery and, if so,
the scope of permissible discovery and other hearing
and pre-hearing procedures.
(d) The authority of the Arbitrator shall be limited
to deciding liability for, and the proper amount of, a
Claim, and the Arbitrator shall have no authority to
award punitive damages. The Arbitrator shall have such
powers and establish such procedures as are provided
for in the Rules, so long as such powers and procedures
are consistent with this Section 8.6 and are necessary
to resolve the Arbitrated Dispute within the time
periods specified in this Agreement.
8.7. General Indemnification by the Buyer. Buyer
covenants and agrees to indemnify, defend, protect and
hold harmless the Seller and its officers, directors,
employees, assigns, successors and affiliates
(individually, an "Indemnified Party" and collectively,
"Indemnified Parties") from, against and in respect of
all liabilities, losses, claims, damages, punitive
damages, causes of action, lawsuits, administrative
proceedings (including informal proceedings),
investigations, audits, demands, assessments,
adjustments, judgments, settlement payments,
deficiencies, penalties, fines, interest (including
interest from the date of such damages) and costs and
expenses (including without limitation reasonable
attorneys' fees and disbursements of every kind, nature
and description) (collectively, "Damages") suffered,
sustained, incurred or paid by any Indemnified Party in
connection with, resulting from, or arising out of,
directly or indirectly, but excluding exemplary,
special, or punitive damages pursued by the Seller
other than for reimbursement of same based upon the
payment by the Seller to a third party:
(a) any Assumed Liability and/or any liability which
relates to the Business or the operations or assets of
the Buyer after the Closing Date; the actions or
omissions of the Buyer's directors, officers, member,
employees or agents after the Closing Date; or the
operations or assets of the Buyer after the Closing
Date; or
(b) any breach of any representation or warranty
of the Buyer set forth in this Agreement or any Schedule
or certificate, delivered by or on behalf of the Buyer
in connection herewith; or
(c) any nonfulfillment of any covenant or agreement on
the part of the Buyer set forth in this Agreement; or
(d) any claim for fees or commissions of any broker or
agent employed or alleged to have been employed by the
Buyer; or
(e) any and all Damages incident to any of the
foregoing or to the enforcement of this Section 8.
9. NON-COMPETITION
9.1. Prohibited Activities. The Seller shall not, for
a period of five (5) years following the Closing Date,
and any of the Management Shareholders (including
through any trusts which are affiliates or shareholders
of the Seller which they control) shall not, for a period
<PAGE>
of five (5) years following the Closing Date,
for any reason whatsoever, directly or indirectly, for
itself, himself, herself or on behalf of or in
conjunction with any other person, persons, seller,
partnership, corporation or business of whatever nature:
(a) engage, as an officer, director, shareholder,
owner, partner, member, joint venturer, or in a
managerial capacity (including any type of funding of
an enterprise), whether as an employee, independent
contractor, consultant or adviser, or as a sales
representative, in operation of marketing, selling and
distributing goods and/or services to public and
private pre-school and K-12 schools, school districts,
educators, related administrators or teachers working
for those previously listed institutions by what ever
means including but not limited to telemarketing,
catalog sales, direct mail, direct employed sales
personnel or independent sales agents, but excluding
the following: (i) selling to customers at retail
prices through the retail stores, through the business
to consumer retail web site and through flyer
distributions (which for the purposes of this Agreement
shall be limited to forty-eight (48) pages in length)
and mailed to teachers as well as to the schools where
they work within a thirty (30) mile radius of the
Seller's retail locations for the purpose of inducing
such teachers to make purchases from the retail
locations according to the current business practices
of the Seller's retail store locations, (ii) Seller's
pre K early childhood business conducted with private
day care centers and chains, including without
limitation those set forth on Schedule 1.1(a)(ii),
(iii) Seller's Charter and Educational Management
Organizations business which sells to privately managed
multi-location charter schools as well as to schools
managed or operated by non-public management
organizations, including without limitation those
schools and organizations set forth on Schedule
1.1(a)(iii), and (iv) certain of Seller's on-line
affiliate relationships as set forth on Schedule
1.1(a)(iv), (the "Competitive Activity"), within the
continental United States of America, and all currently
existing international accounts of the Business (the
"Territory"). Notwithstanding anything to the contrary
herein the term "Competitive Activity" shall include
but not be limited to all operations which generated
the net sales used to calculate the Purchase Price as
described in Section 1.4(a) of this Agreement;
(b) call upon any person who is, at that time,
within the Territory, an employee of the Buyer for the
purpose or with the intent of enticing such employee away
from or out of the employ of the Buyer;
(c) call upon any person who is or entity that is,
at that time, or that has been, within one year prior to
that time, a customer of the Buyer within the Territory
for the purpose of soliciting or selling products or
services related to the Competitive Activity within the
Territory;
(d) call upon any prospective acquisition candidate
that was, to the knowledge of the Seller or such
Management Shareholder, called upon by the Buyer as a
prospective acquisition candidate or was the subject of
an acquisition analysis by the Buyer. Each of the
Seller and each Management Shareholder, to the extent
lacking the knowledge described in the preceding
sentence, shall immediately cease all contact with such
<PAGE>
prospective acquisition candidate upon being informed
that the Buyer had called upon such candidate or made
an acquisition analysis thereof; or
(e) hire any salesman or sales manager, of any type,
other than sales people to engage in those activities
restricted by Section 9.1(a) hereof (except for those
excluded activities).
Notwithstanding the above, the foregoing covenant
shall not be deemed to prohibit the Seller or any
Management Shareholder from acquiring as an investment
not more than two percent (2%) of the capital stock of
a competing business whose stock is traded on a
national securities exchange or over- the-counter. For
purposes of this Section 9, the term "Buyer" includes
all subsidiaries and affiliates of the Buyer and any
companies the Buyer or any of its affiliates has
acquired as of the Closing Date. The Management
Shareholders shall receive 3.5% of 75% of the net sales
of the Business for the 12-month period beginning
November 1, 1999 and ending October 31, 2000,
determined in accordance with GAAP as adjusted under
the terms of Section 1.5(a) herein (the "Covenant
Fee"). The Covenant Fee shall be payable in full in
cash at closing.
9.2. Damages. Because of the difficulty of measuring
economic losses to the Buyer as a result of a breach of
the foregoing covenant, and because of the immediate
and irreparable damage that could be caused to the
Buyer for which it would have no other adequate remedy,
the Seller and each Management Shareholder agrees that
the foregoing covenant may be enforced by the Buyer in
the event of breach by such the Seller or any
Management Shareholder, by injunctions restraining
orders, and damages.
9.3. Reasonable Restraint. The covenants in this
Section 9 impose a reasonable restraint on the Seller
and each Management Shareholder in light of the
Business and of the activities and operations of the
Buyer on the date of the execution of this Agreement,
assuming the completion of the transactions
contemplated hereby, and the current plans of the
Buyer; but it is also the intent of the Buyer, the
Seller and each Management Shareholder that such
covenants be construed and enforced in accordance with
the activities and businesses defined in Section 9.1(a)
as a Competitive Activity.
9.4. Severability; Reformation. The covenants in
this Section 9 are severable and separate, and the
unenforceability of any specific covenant shall not
affect the provisions of any other covenant. Moreover,
in the event any court of competent jurisdiction shall
determine that the scope, time or territorial
restrictions set forth are unreasonable, then it is the
intention of the parties that such restrictions be
enforced to the fullest extent which the court deems
reasonable, and the Agreement shall thereby be reformed.
9.5. Independent Covenant. All of the covenants in
this Section 9 shall be construed as an agreement
independent of any other provision in this Agreement,
and the existence of any claim or cause of action of
the Seller or any Management Shareholder against the
Buyer, whether predicated on this Agreement or
otherwise, shall not constitute a defense to the
enforcement by the Buyer of such covenants. The parties
expressly acknowledge that the terms and conditions of
this Section 9 are independent of the terms and
conditions of any other agreements including, but
<PAGE>
not limited to, any employment agreements entered into in
connection with this Agreement. It is specifically
agreed that the period of five (5) years, stated at the
beginning of this Section 9 during which the agreements
and covenants of the Seller or a Management Shareholder
made in this Section 9 shall be effective, shall be
computed by excluding from such computation any time
during which the Seller or a Management Shareholder is
found by a court of competent jurisdiction to have been
in violation of any provision of this Section 9. The
covenants contained in Section 9 shall not be affected
by any breach of any other provision hereof by any
party hereto.
9.6. Materiality. The Seller and each Management
Shareholder hereby agree that the covenants set forth
in this Section 9 are a material and substantial part
of the transactions contemplated hereby.
9.7. Confidentiality.
(a) The Trust, the Seller and each Management
Shareholder covenants and agrees with the Buyer that it
or he will not at any time, except with the prior
written consent of the Buyer, directly or indirectly,
disclose any secret or confidential information of the
Business that it or he has learned by reason of its
ownership of the Business or his employment in
connection with the Business, or use any such
information in a manner detrimental to the interests of
the Buyer, unless (i) such information becomes known to
the public generally through no fault of the Trust, the
Seller or any Management Shareholder, (ii) disclosure
is required by law or the order of any governmental
authority under color of law, (iii) the disclosing
party reasonably believes that such disclosure is
required in connection with the defense of a lawsuit
against the disclosing party, or (iv) is disclosed to
agents or representatives of the Seller or other
parties on a need-to-know basis, provided, that prior
to disclosing any information pursuant to clause (i),
(ii) or (iii) above, the Seller or any of the
Management Shareholders (as applicable) shall give
prior written notice thereof to the Buyer and provide
the Buyer with the opportunity to contest such
disclosure and shall cooperate with efforts to prevent
such disclosure.
(b) The term "confidential information" means,
information not previously disclosed to the public or
to the trade by the Seller's or the Buyer's management
with respect to the Business or the Buyer's, or any of
its affiliates' or subsidiaries' products, facilities,
and methods, trade secrets and other intellectual
property, source code, systems, procedures, manuals,
confidential reports, product price lists, customer
lists, financial information (including the revenues,
costs, or profits associated with any products
distributed in the conduct of the Business), business
plans, prospects, or opportunities but shall exclude
any information already in the public domain.
10. GENERAL
10.1. Successors, Assigns and Guaranty. This
Agreement and the rights of the parties hereunder may
not be assigned (except by operation of law or by the
Buyer to any of affiliates)
<PAGE>
and shall be binding upon and shall inure to the benefit
of the parties hereto and the successors of the Buyer.
10.2. Entire Agreement. This Agreement (which
includes the Schedules hereto) sets forth the entire
understanding of the parties hereto with respect to the
transactions contemplated hereby. It shall not be
amended or modified except by a written instrument duly
executed by each of the parties hereto. Any and all
previous agreements and understandings between or among
the parties regarding the subject matter hereof,
whether written or oral, are superseded by this
Agreement. Notwithstanding the foregoing, in the event
of any conflict or inconsistency between the provisions
of this Agreement and those contained in those certain
Assignment and Assumption of Lease Agreements delivered
under Section 2.2(j) above, the provisions of this
Agreement shall control.
10.3. Counterparts. This Agreement may be executed
in any number of counterparts and any party hereto may
execute any such counterpart, each of which when
executed and delivered shall be deemed to be an
original and all of which counterparts taken together
shall constitute but one and the same instrument. For
the purpose of this agreement signatures delivered by
facsimile shall be considered effective as original
signatures.
10.4. Brokers and Agents. The Seller, represents
and warrants to the Buyer that they have not employed a
broker or agent in connection with the transactions
contemplated hereby, and they shall hold the Buyer
harmless from the payment of brokerage or agency fees
related to the transactions as herein contemplated.
10.5. Expenses. SSI shall be responsible for its
fees, costs, and expenses incurred in connection with
the transactions as described in this Agreement, and
SSI will agree to pay for the fees, costs, and expenses
incurred by the Seller, the Trust and the Management
Shareholders in connection with the transactions as
contemplated under the terms of this Agreement, in each
case including, but not limited to, HSR filings,
commissions or fees of any broker or finder referred by
them and any attorney's or accountant's fee incurred by
them in connection with the Agreement and the
transactions as contemplated herein to a maximum of
amount of One Hundred Thousand Dollars ($100,000.00),
and any expenses beyond will be the sole responsibility
of the Seller and/or the Trust. Buyer agrees to make
the reimbursements as required under this Section 10.5,
at Closing if requested by Seller. Said request shall
be accompanied by itemized accounts of expenses to be
so reimbursed.
10.6. Notices. Any notice or other communication
which is required or permitted hereunder shall be in
writing and shall be deemed given if delivered
personally or sent by telefax (with confirmation of
receipt), by registered or certified mail, postage
prepaid, or by recognized courier service, as follows:
<PAGE>
If to the Buyer to: School Specialty Inc.
3395 West College Avenue
P.O. Box 1579
Appleton WI 54913-1579
Attention: Mr. Daniel P. Spalding, CEO
Facsimile: 1-920-882-5863
With a copy to: Joseph F. Franzoi IV. Esq.
Franzoi & Franzoi, S.C.
514 Racine Street
Menasha, WI 54952
Facsimile: 1-920-725-0998
If to, the Seller,
Trust and/or a Management
Shareholder to: J.L. Hammett Company
P.O. Box 9057
Hammett Place
Braintree, MA 02184
Attention: Mr. Richard Holden
Mr. Jeffrey Holden
Facsimile: 1-781-848-0273
With a copy to: David F. Dietz, P.C.
Goodwin, Procter & Hoar LLP
Exchange Place
Boston, MA 02109-2881
Facsimile: 1-617-523-1231
or to such other address as the person to whom notice
is to be given may have specified in a notice duly
given to the sender as provided herein. Such notice,
request, claim, demand, waiver, consent, approval or
other communication shall be deemed to have been given
as of the date so delivered, telefaxed, mailed or
dispatched and, if given by any other means, shall be
deemed given only when actually received by the
addressees.
10.7. Governing Law. This Agreement shall be
governed by and construed, interpreted and enforced in
accordance with the laws of the Commonwealth of
Massachusetts.
10.8. Severability. If any provision of this
Agreement or the application thereof to any person or
circumstances is held invalid or unenforceable in any
jurisdiction, the remainder hereof, and the application
of such provision to such person or circumstances in
any other jurisdiction, shall not be affected thereby,
and to this end the provisions of this Agreement shall
be severable. The preceding sentence is in addition to
and not in place of the severability provisions in
Section 9.4.
<PAGE>
10.9. Absence of Third Party Beneficiary Rights.
No provision of this Agreement is intended, nor will be
interpreted, to provide or to create any third party
beneficiary rights or any other rights of any kind in
any client, customer, affiliate, shareholder, employee,
partner of any party hereto or any other person or
entity.
10.10. Mutual Drafting. This Agreement is the
mutual product of the parties hereto, and each
provision hereof has been subject to the mutual
consultation, negotiation and agreement of each of the
parties, and shall not be construed for or against any
party hereto.
10.11. Further Representations. Each party to this
Agreement acknowledges and represents that it has been
represented by its own legal counsel in connection with
the Agreement and the transactions contemplated hereby,
with the opportunity to seek advice as to its legal
rights from such counsel. Each party further represents
that it is being independently advised as to the tax
consequences of the Agreement and the transactions
contemplated hereby and is not relying on any
representation or statements made by the other party as
to such tax consequences.
10.12. Termination. This Agreement may be
terminated and the transactions contemplated by this
Agreement may be abandoned at any time prior to the
Closing Date as follows:
(a) by the mutual written agreement of the Buyer,
the Seller, the Trust and the Management Shareholders; or
(b) by the Buyer, the Seller, the Trust or the
Management Shareholders if the Closing shall not have
occurred on or before December 31, 2000.
If this Agreement is terminated pursuant to this
Section 10.12, this Agreement shall be deemed null and
void as of such termination and of no further force and
effect; provided, however, that such termination shall
not relieve any party hereto from liability for any
breach by such party of this Agreement.
IN WITNESS WHEREOF, the parties have executed this
Agreement as of the day and year first above written.
[SIGNATURES ON FOLLOWING PAGE]
<PAGE>
BUYER:
SCHOOL SPECIALTY, INC.
/s/ Daniel P. Spalding
---------------------------------------------
Daniel P. Spalding, Chief Executive Officer
SELLER:
J. L. HAMMETT COMPANY
/s/ Richmond Y. Holden, Jr.
---------------------------------------------
Richmond Y. Holden, Jr., President
TRUST:
MONATIQUOT REAL ESTATE TRUST
/s/ Richmond Y. Holden, Jr.
---------------------------------------------
Richmond Y. Holden, Jr., Trustee
MANAGEMENT SHAREHOLDERS:
/s/ Richmond Y. Holden, Jr.
---------------------------------------------
Richmond Y. Holden, Jr.
/s/ Jeffrey S. Holden
---------------------------------------------
Jeffery S. Holden
<PAGE>
Schedules and Exhibits to the Asset Purchase Agreement:
Schedule 1.1(a) Purchased Assets
Schedule 1.1(a)(ii) Pre-K Early Childhood Exclusions
Schedule 1.1(a)(iii) Charter and Educational Management Organization Exclusions
Schedule 1.1(a)(iv) On-Line Affiliate Relationships
Schedule 1.1(b)(iv) Permitted Liens
Schedule 1.1(c)(vi) Excluded Assets
Schedule 1.1(c)(vii) Intellectual Property
Schedule 1.2(a) Assigned Contracts
Schedule 1.2 Assumed Liabilities
Schedule 1.4(a) Net Sales
Schedule 1.4(b) Net Asset Schedule
Schedule 3.1 Foreign Qualifications
Schedule 3.6 Financial Statements
Schedule 3.8 Permits
Schedule 3.9 Tangible Assets Owned or Leased
Schedule 3.10 Contacts
Schedule 3.11(c) Use of Intellectual Property
Schedule 3.11(d) Notice of Invalidity or Infringement
Schedule 3.12(a) Contracts, Commitments and Leases
Schedule 3.12(b) Third Party Consents
Schedule 3.12(c) Significant Customers and Suppliers
Schedule 3.12(d) Related Party Agreements
Schedule 3.12(e) Significant Customer Exceptions
Schedule 3.16 Insurance and Workers' Compensation
Schedule 3.17(a) Hazardous Material
Schedule 3.17(b) Environmental Audits
Schedule 3.17(c) Environmental Permits
Schedule 3.18(a) Managers, Employees, Consultants
Schedule 3.18(b) Collective Bargaining Agreements and Activities
Schedule 3.19 Seller Employee Plans
Schedule 3.21 Lawsuits
Schedule 3.22 Material Adverse Effects
Schedule 3.25 Promotional Materials
Schedule 3.26 Shareholder Claims
Schedule 3.28 Real Property
Schedule 5.3(b) Allocation of Adjusted Purchase Price
Schedule 5.4(a) Employee Benefits
Schedule 5.4(b) Individual who will remain Employees of Seller
Schedule 5.4(e) Severance Program
Exhibit 1.4(b) - Escrow Agreement
Exhibit 2.2(n) - Service Agreement
<PAGE>
Exhibit 3.11 - License Agreement
Shareholder Proxy with opinion from Goodwin, Procter & Hoar LLP
The above schedules and exhibits to this document have been omitted.
The exhibits will be furnished supplementally to the Securities and Exchange
Commission upon request.
