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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported) May 10, 2000
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PARAGON CORPORATE HOLDINGS INC.
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(Exact name of registrant as specified in its charter)
Delaware No. 333-51569 34-1845312
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(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
7400 Caldwell Avenue, Niles, Illinois 60714
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(Address of principal executive offices) (Zip Code)
(847) 779-2500
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Registrant's telephone number, including area code
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(Former name or former address, if changed since last report.)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
Paragon Corporate Holdings, Inc. ("Paragon" or "Company") sold substantially all
of the assets and certain liabilities of its wholly owned subsidiary, Curtis
Industries ("Curtis") to Barnes Group, Inc. ("Barnes"), pursuant to an asset
purchase agreement dated April 27, 2000 for $62.1 million in cash, subject to an
adjustment for net worth. Curtis comprised Paragon's automotive and industrial
supplies segment which Paragon reported as a discontinued operation in its
consolidated financial statements set forth in its Quarterly Report on Form 10-Q
for the three months ended March 31, 2000 filed on May 15, 2000. The transaction
closed on May 10, 2000.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(b) Pro forma financial information:
The unaudited pro forma consolidated statement of operations for the three
months ended March 31, 2000 and the unaudited pro forma combined statement of
operations for the year ended December 31, 1999 give effect to the disposition
of Curtis as if the sale and the resulting cash proceeds occurred at the
beginning of each of these periods. The unaudited pro forma combined statement
of operations for the year ended December 31, 1999 also includes the pro forma
effect of Paragon's 2000 acquisition of Multigraphics, Inc. as discussed in the
Company's 8-K filings dated April 11, 2000 and February 11, 2000. The unaudited
pro forma consolidated balance sheet as of March 31, 2000 gives effect to the
disposition of Curtis as if the sale and the cash proceeds occurred as of that
date. Also presented are the unaudited pro forma consolidated statements of
operations for the years ended December 31, 1998 and 1997 that reflect the
Curtis business as a discontinued operation in the historical financial
statements of Paragon.
The unaudited pro forma statements of operations do not reflect the anticipated
gain on the sale of Curtis. Curtis was treated as a discontinued operation by
Paragon, and therefore, the gain is not part of the pro forma requirements.
The unaudited pro forma financial information is provided for informational
purposes only and does not purport to be indicative of the financial position or
operating results that would have actually occurred if the transactions had
occurred at such dates, nor is it necessarily indicative of Paragon's future
operating results or financial position.
The pro forma financial information and related notes should be read in
conjunction with the audited historical financial statements and related notes
included in the Company's Annual Report on Form 10-K for the year ended December
31, 1999, the Quarterly Report on Form 10-Q for the three months ended March 31,
2000, and the pro forma financial information and related notes included in the
Company's Current Report on Form 8-K regarding the acquisition of Multigraphics,
Inc., all filed with the Securities and Exchange Commission.
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PARAGON CORPORATE HOLDINGS INC.
UNAUDITED PRO FORMA CONSOLIDATED
BALANCE SHEET
March 31, 2000
(Dollars in Thousands)
<TABLE>
<CAPTION>
Pro Forma Adjustments
---------------------------------------
Discontinuance Other
Paragon of Curtis(1) Adjustments Pro Forma
----------------- ------------------- ------------------ -----------------
<S> <C> <C> <C> <C>
Assets:
Current assets:
Cash and cash equivalents $ 15,394 $ 51,350 (3) $ 66,744
Short-term investments 1,001 1,001
Accounts receivable, less allowances 46,373 $ (10,519) 35,854
Inventories 56,574 (14,996) 41,578
Other current assets 5,545 (426) 5,119
Net assets of discontinued operation 51,230 (51,230) (2)
----------------- ------------------- ------------------ -----------------
Total current assets 124,887 25,289 120 150,296
Property, plant and equipment, net 21,532 (9,079) 12,453
Goodwill, net 62,591 (30,399) 32,192
Other assets 4,915 (22) 4,893
----------------- ------------------- ------------------ -----------------
$ 213,925 $ (14,211) $ 120 $ 199,834
================= =================== ================== =================
Liabilities & stockholder's equity (deficit):
Current liabilities:
Revolving credit facility $ 23,871 $ (4,550) (3) $ 19,321
Accounts payable 27,227 $ (4,609) 22,618
Accrued liabilities 34,494 (5,689) 28,805
Deferred service revenue 14,446 14,446
Due to GEC 818 818
Current portion of long-term debt and capital
lease obligations 2,699 (121) 2,578
----------------- ------------------- ------------------ -----------------
Total current liabilities 103,555 (10,419) (4,550) 88,586
Senior Notes 115,000 115,000
Other long-term debt and capital lease
obligations, less current portion 1,930 (256) 1,674
Retirement obligations 11,909 (3,536) 8,373
Other long-term liabilities 6,439 6,439
Stockholder's equity (deficit):
Common stock 1 1
Paid-in capital 47 47
Retained earnings (deficit) (24,280) 9,170 (4) (19,610)
(4,500) (3)
Accumulated other comprehensive loss (676) (676)
----------------- ------------------- ------------------ -----------------
Total stockholder's equity (deficit) (24,908) 0 4,670 (20,238)
----------------- ------------------- ------------------ -----------------
$ 213,925 $ (14,211) $ 120 $ 199,834
================= =================== ================== =================
</TABLE>
The accompanying notes are an integral part of these unaudited Pro Forma
Financial Statements.
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PARAGON CORPORATE HOLDINGS INC.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED
BALANCE SHEET
March 31, 2000
(Dollars in Thousands)
(1) Classification of the net assets of Curtis as net assets of discontinued
operation.
(2) Represents the disposition of the net assets of Curtis.
(3) Represents net cash proceeds from the sale of Curtis after giving effect to
the following: (i) distribution to the Company's sole stockholder of
$4.5 million for income taxes related to the sale pursuant to the tax
payment agreement dated April 1, 1998 with the stockholder, (ii) reduction
of $4.55 million of borrowings outstanding on the revolving credit facility
and (iii) payment of $1.7 million of transaction costs.
(4) Represents the recognition of the estimated gain from the sale.
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PARAGON CORPORATE HOLDINGS INC.
UNAUDITED PRO FORMA CONSOLIDATED
STATEMENT OF OPERATIONS
For the three months ended March 31, 2000
(Dollars in Thousands)
<TABLE>
<CAPTION>
Pro Forma
Paragon Adjustments Pro Forma
------------ ------------- -------------
<S> <C> <C> <C>
Net revenue $57,160 $ 57,160
Cost of revenue 43,115 43,115
------------ -------------
Gross profit 14,045 14,045
Costs and expenses:
Sales and marketing expenses 6,462 6,462
General and administrative expenses 6,875 6,875
Research and development 894 894
Depreciation and amortization 1,259 1,259
Management fee 92 $ (92) (2)
Acquisition, relocation and severance costs 481 481
------------ ------------- -------------
16,063 (92) 15,971
------------ ------------- -------------
Operating loss (2,018) 92 (1,926)
Interest income 48 48
Interest expense (3,563) 102 (3) (3,461)
Other expense (140) (140)
------------ ------------- -------------
Income (loss) from continuing operations before income
taxes (5,673) 194 (5,479)
Income taxes (6) (6)
------------ ------------- -------------
Income (loss) from continuing operations $(5,679) $ 194 $ (5,485)
============ ============= =============
</TABLE>
The accompanying notes are an integral part of these unaudited Pro Forma
Financial Statements.
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PARAGON CORPORATE HOLDINGS INC.
UNAUDITED PRO FORMA COMBINED
STATEMENT OF OPERATIONS
For the year ended December 31, 1999
(Dollars in Thousands)
<TABLE>
<CAPTION>
Historical
--------------------------
Paragon Multigraphics
for the for the
year ended year ended Discontinuance
December 31, December 25, Pro Forma of
1999 1999 Adjustments Subtotal Curtis(1) Pro Forma
---------- ----------- ----------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net revenue $248,668 $105,999 $ (71) (4) $ 354,596 $ (83,510) $ 271,086
Cost of revenue 158,803 79,142 (2,232) (5) 235,698 (35,578) 200,120
(15) (4)
-------- -------- -------- --------- --------- ---------
Gross profit 89,865 26,857 2,176 118,898 (47,932) 70,966
Costs and expenses:
Sales and marketing expenses 42,275 8,484 (612) (5) 50,147 (17,389) 32,758
General and administrative expenses 38,785 14,358 (3,193) (5) 49,950 (21,185) 28,765
Research and development 3,631 3,631 3,631
Depreciation and amortization 7,270 2,072 778 (6) 9,184 (4,565) 4,619
(936) (7)
Management fee 233 233 (233)(2)
Acquisition, relocation and severance
costs 1,633 735 2,368 2,368
-------- -------- -------- --------- --------- ---------
93,827 25,649 (3,963) 115,513 (43,372) 72,141
-------- -------- -------- --------- --------- ---------
Operating income (loss) (3,962) 1,208 6,139 3,385 (4,560) (1,175)
Interest income 1,044 (50) (8) 994 (56) 938
Interest expense (12,383) (1,872) (164) (8) (14,369) 411 (3) (13,958)
50 (8)
Other expense (90) (90) (114) (204)
-------- -------- -------- --------- --------- ---------
Income (loss) from continuing
operations before income taxes (15,391) (664) 5,975 (10,080) (4,319) (14,399)
Income taxes 164 164 29 193
-------- -------- -------- --------- --------- ---------
Income (loss) from continuing
operations $(15,227) $ (664) $ 5,975 $ (9,916) $ (4,290) $ (14,206)
======== ======== ======== ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these unaudited Pro Forma
Financial Statements.
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PARAGON CORPORATE HOLDINGS INC.
UNAUDITED PRO FORMA CONSOLIDATED
STATEMENT OF OPERATIONS REFLECTING DISCONTINUED OPERATIONS
For the year ended December 31, 1998
(Dollars in Thousands)
<TABLE>
<CAPTION>
Discontinuance Pro Forma
of Continuing
Paragon Curtis(1) Operations
--------- --------- ---------
<S> <C> <C> <C>
Net revenue $ 268,624 $ (81,136) $ 187,488
Cost of revenue 163,958 (34,054) 129,904
--------- --------- ---------
Gross profit 104,666 (47,082) 57,584
Costs and expenses:
Sales and marketing expenses 44,383 (17,498) 26,885
General and administrative expenses 37,630 (21,255) 16,375
Research and development 3,046 3,046
Depreciation and amortization 5,496 (3,886) 1,610
Management fee 1,423 1,423
Acquisition, relocation and severance costs 2,705 (784) 1,921
--------- --------- ---------
94,683 (43,423) 51,260
--------- --------- ---------
Operating income 9,983 (3,659) 6,324
Interest income 1,728 (140) 1,588
Interest expense (11,311) 975 (10,336)
Other expense (258) 82 (176)
--------- --------- ---------
Income (loss) from continuing operations before income
taxes 142 (2,742) (2,600)
Income taxes (745) 8 (737)
--------- --------- ---------
Loss from continuing operations $ (603) $ (2,734) $ (3,337)
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these unaudited Pro Forma
Financial Statements.
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PARAGON CORPORATE HOLDINGS INC.
UNAUDITED PRO FORMA CONSOLIDATED
STATEMENT OF OPERATIONS REFLECTING DISCONTINUED OPERATIONS
For the year ended December 31, 1997
(Dollars in Thousands)
<TABLE>
<CAPTION>
Discontinuance Pro Forma
of Continuing
Paragon Curtis(1) Operations
------- --------- ----------
<S> <C> <C> <C>
Net revenue $ 193,216 $ (6,901) $ 186,315
Cost of revenue 129,651 (2,834) 126,817
--------- --------- ---------
Gross profit 63,565 (4,067) 59,498
Costs and expenses:
Sales and marketing expenses 26,386 (1,657) 24,729
General and administrative expenses 17,603 (1,740) 15,863
Research and development 3,755 3,755
Depreciation and amortization 1,481 (271) 1,210
Management fee 1,941 1,941
Acquisition, relocation and severance costs 1,400 1,400
--------- --------- ---------
52,566 (3,668) 48,898
--------- --------- ---------
Operating income 10,999 (399) 10,600
Interest income 789 (30) 759
Interest expense (2,598) 322 (2,276)
Other income 139 7 146
--------- --------- ---------
Income (loss) from continuing operations before
income taxes 9,329 (100) 9,229
Income taxes (775) (11) (786)
--------- --------- ---------
Income (loss) from continuing operations $ 8,554 $ (111) $ 8,443
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these unaudited Pro Forma
Financial Statements.
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PARAGON CORPORATE HOLDINGS INC.
NOTES TO UNAUDITED PRO FORMA
STATEMENTS OF OPERATIONS
(Dollars in Thousands)
(1) Represents the elimination of Curtis operations from the historical results
of Paragon. On December 5, 1997, the Company acquired all of the common
stock of Curtis. The acquisition was accounted for as a purchase and
accordingly, the results of operations of Curtis were included in the
consolidated financial statements of the Company from the date of
acquisition.
(2) Represents the elimination of the management fee for Curtis for the
periods ended March 31, 2000 and December 31, 1999.
(3) Represents the reduction in interest expense for the periods ended
March 31, 2000 and December 31, 1999 resulting from the repayment of
borrowings on the revolving credit facility with a portion of the proceeds
from the sale.
(4) Represents the elimination of sales between the Company and Multigraphics.
(5) Represents the annual net cost savings resulting from Multigraphics
workforce reductions and realignments and the closure of the Multigraphics
Arlington Heights, IL distribution center and the Mount Prospect, IL
headquarters facility. Includes warehousing, personnel, office and service
technician travel costs that are redundant and will be provided at other
Paragon locations at an incremental cost of $231.
Workforce reductions and related travel costs $ 4,828
Warehouse rental costs 189
Office rental and other costs 1,020
-----------
Net cost savings $ 6,037
===========
The net cost savings included in the pro forma financial data above are
the projected annual savings relating to Multigraphics during the year of
acquisition only. Upon completion of the workforce reductions and
realignments and closure of redundant facilities for both Multigraphics and
Paragon, the annual net cost savings are estimated to be in the $10 million
to $13 million range. The additional savings above $6 million have not been
included in the pro forma financial data.
(6) Represents the incremental amortization expense related to goodwill,
amortized over a period of 30 years.
(7) Represents the depreciation expense related to the write-off of redundant
computer equipment and software and leasehold improvements that will no
longer be used by the combined Company.
(8) Represents increased interest expense related to the additional borrowings
under Paragon's revolving credit facility at an interest rate of 9.25% and
the elimination of related interest on the $2,000 pre-acquisition working
capital loan by Paragon to Multigraphics
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(c) Exhibits:
2. Asset Purchase Agreement dated April 27, 2000 by and among Barnes Group
Inc., Curtis Industries, Inc., and Paragon Corporate Holdings Inc.
99.1 Press Release dated April 27, 2000 announcing the execution of the Asset
Purchase Agreement.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
PARAGON CORPORATE HOLDINGS INC.
--------------------------------------
(Registrant)
May 24, 2000 /s/ Gregory T. Knipp
- ----------------------------- --------------------------------------
Acting Chief Financial Officer
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EXHIBIT 2
EXECUTION VERSION
ASSET PURCHASE AGREEMENT
BY AND AMONG
BARNES GROUP INC.,
a Delaware corporation, et al (the "Buyer")
AND
CURTIS INDUSTRIES, INC.,
a Delaware corporation (the "Seller")
AND
PARAGON CORPORATE
HOLDINGS, INC.,
a Delaware corporation (the "Parent")
Dated as of April 27, 2000
<PAGE> 2
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (the "Agreement") is entered into as of
the 27th day of April, 2000 (the "Effective Date"), by and among BARNES GROUP
INC., a Delaware corporation ("BGI"), on behalf of itself, Barnes Group Canada
Inc., a Canadian corporation ("Barnes Canada"), and Bowman Distribution Europe
Limited, a United Kingdom corporation ("Bowman Europe") (BGI, Barnes Canada and
Bowman Europe are collectively referred to herein as the "Buyer"), CURTIS
INDUSTRIES, INC., a Delaware corporation (the "Seller"), and PARAGON CORPORATE
HOLDINGS, INC., a Delaware corporation (the "Parent"). The Buyer, the Seller and
the Parent are sometimes referred to herein individually as a "Party" and
collectively as the "Parties".
RECITALS:
WHEREAS, the Seller and its wholly-owned subsidiaries, Curtis
Industries (UK) Limited, a U.K. limited company (the "U.K. Sub"), and Curtis
Industries of Canada Limited, a Canadian limited company (the "Canadian Sub")
(collectively the U.K. Sub and the Canadian Sub are referred to herein as the
"Curtis Subsidiaries" and, together with the Seller, are referred to herein as
the "Curtis Parties"), are engaged in the logistical management business,
distributing automotive security products, fasteners, and MRO industrial
supplies (the "Business").
WHEREAS, to induce the Buyer to enter into this Agreement, the Parent,
being the sole stockholder of the Seller, wishes to join in this Agreement and
to indemnify the Buyer in accordance with the provisions of Article 9 hereof.
WHEREAS, the Buyer wishes to purchase and acquire from the Seller, and
the Seller wishes to sell and transfer to the Buyer, certain assets relating to
the Business, upon the terms and subject to the conditions set forth in this
Agreement.
NOW, THEREFORE, in consideration of the premises and the
representations, warranties, covenants and agreements herein contained, the
Parties agree as follows.
ARTICLE 1
DEFINITIONS
1.1 "Acquired Assets" means all right, title and interest in and to
substantially all of the assets of the Seller, tangible or intangible, relating
primarily to the Business. The Acquired Assets are listed on Section 1.1 of the
Disclosure Schedule attached hereto and, except as set forth on Section 1.31 of
the Disclosure Schedule, shall include all of the Seller's (a) real property,
leaseholds and subleaseholds therein, improvements, fixtures and fittings
thereon, and easements, rights-of-way and other appurtenances thereto (such as
appurtenant rights in and to public streets), (b) tangible personal property
(e.g., telephone, office and other equipment, inventory, parts, work-in-process,
office and other supplies, furniture, computers and motor vehicles), (c)
Intellectual Property, goodwill associated therewith, licenses and sublicenses
granted and obtained with respect thereto and rights thereunder, remedies
against infringements thereof, and rights to protection of interests therein
under the laws of all jurisdictions, (d) leases, subleases and rights thereunder
for personal property, (e) agreements (including all Area
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Manager, Sales Executive, Employee, District Marketing Manager and District
Sales Manager, and Participation and Non-Competition Agreements and all other
agreements entered into by any of the Curtis Parties with any of their
respective employees or agents which contain covenants not to compete or similar
competitive restrictions), contracts, indentures, mortgages, instruments,
security interests, guaranties (other than the Seller's guaranty of the Parent's
Series A and Series B 9 5/8% Senior Notes and other Obligations (as such term is
defined in that certain Indenture dated April 1, 1998 among the Parent, the
subsidiary guarantors identified therein and Norwest Bank Minnesota, National
Association, as trustee)), other similar arrangements and rights thereunder
(including billed and unbilled accounts receivable, as well as other rights to
receive money that are reflected on the Closing Balance Sheet), (f) all of the
issued and outstanding capital stock of the Canadian Sub, to be purchased by
Barnes Canada, and all of the issued and outstanding capital shares of the U.K.
Sub, to be purchased by Bowman Europe, (g) to the extent reflected on the
Closing Balance Sheet and to the extent that such liabilities are assumed by
Buyer, any claims, deposits, prepayments received by any Curtis Party prior to
the Closing for services to be rendered by the Buyer, the U.K. Sub or the
Canadian Sub after the Closing, refunds, causes of action, rights of recovery,
rights of set off and rights of recoupment (including any such item relating to
the payment of Taxes), (h) Governmental Authorizations, (i) originals or copies,
as appropriate, of books (including minute books and stock ledgers of the Curtis
Subsidiaries), records (other than those set forth at Section 1.31 of the
Disclosure Schedule), files, ledgers, invoices, purchase orders, sales and
service acknowledgements, documents, correspondence, business plans, projections
and forecasts, other plans, drawings and specifications, creative materials,
advertising and promotional materials, studies, reports, manuals, training
materials and other printed or written materials, (j) to the extent provided in
Section 6.7, assets held in certain trusts and other vehicles associated with
certain Employee Benefit Plans assumed by the Buyer and certain assets of the
Seller associated with such Employee Benefit Plans, (k) internet addresses, (l)
all goodwill of the Business, and (m) all other property and rights of every
kind and nature owned or held by the Parent or any of the Curtis Parties that
relate primarily to the operation, maintenance, promotion or advertising of the
Business.
1.2 "Affiliate" means with respect to any Person, any other Person
controlling, controlled by or under common control with such Person. For
purposes of this definition, "control" (including, with correlative meaning, the
term "controlled by"), as used with respect to any Person, shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities or by contract or otherwise.
1.3 "Assumed Contracts" shall mean those contracts and agreements
listed in Section 2.2(a) of the Disclosure Schedule attached hereto, in each
case as in effect at the Closing.
1.4 "Assumed Liabilities" means only those liabilities (other than
Excluded Liabilities): (a) expressly assumed under the Operative Documents, (b)
set forth on the December 31 Balance Sheet (except for intercompany
obligation(s) of any of the Curtis Parties to the Parent, which obligation(s)
shall not be Assumed Liabilities); (c) arising in the Ordinary Course of
Business out of the conduct of the Business during the period from January 1,
2000 through the Closing Date, (d) resulting from the termination of any
employee of a Curtis Party at or after the Closing Date, (e) arising under any
employee benefit plan of a Curtis Party, (f) set
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forth on the attached Section 2.2(b) of the Disclosure Schedule, (g) set forth
in Section 6.7 (relating to Employee Benefit Plans), (h) related to the U.K. Sub
and the Canadian Sub (provided, however, nothing in this clause (h) shall modify
or diminish Buyer's right to indemnification for any breach of a representation,
warranty or covenant relating thereto), (i) relating to real property taxes and
personal property taxes for all periods before and after the Closing Date, (j)
relating to workmen's compensation claims arising before and after the Closing
Date, and (k) relating to casualty insurance (or claims thereunder) with respect
to Bath Iron Works.
1.5 "Basis" means any past or present fact, situation, circumstance,
status, condition, activity, practice, plan, occurrence, event, incident,
action, failure to act or transaction that forms or could form the basis for any
specified consequence.
1.6 "Business" has the meaning set forth in the Recitals above.
1.7 "Buyer" has the meaning set forth in the preface above.
1.8 "Canadian Sub" has the meaning set forth in the Recitals above.
1.9 "Cash" means cash (including all disbursements in the form of a
check that were issued prior to the applicable balance sheet date but that were
not deducted by the bank from the bank balance prior to such balance sheet
date), cash equivalents, marketable securities and short-term investments.
1.10 "Closing" has the meaning set forth in Section 2.4 below.
1.11 "Closing Date" has the meaning set forth in Section 2.4 below.
1.12 "Closing Balance Sheet" has the meaning set forth at Section
2.3(a)(iii).
1.13 "Closing Payment" has the meaning set forth at Section 2.3.
1.14 "Code" means the Internal Revenue Code of 1986, as amended, or any
successor law, and regulations issued by the IRS pursuant to the Code or any
successor law or, with respect to the Curtis Subsidiaries, the comparable
statutes, laws and regulations of the U.K. and Canadian Tax Authorities,
respectively.
1.15 "Consent" means any approval, consent, ratification, waiver or
other authorization (including any Governmental Authorization).
1.16 "Curtis Parties" has the meaning set forth in the Recitals above.
1.17 "Curtis Subsidiaries" has the meaning set forth in the Recitals
above.
1.18 "December 31 Balance Sheet" has the meaning set forth in Section
3.4 below.
1.19 "Disclosure Schedule" has the meaning set forth in Section 2.2(a)
below.
1.20 "Draft Closing Balance Sheet" has the meaning set forth at Section
2.3(a)(ii).
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1.21 "DOR" has the meaning set forth in Section 2.5(k) below.
1.22 "Effective Date" has the meaning set forth in the preface above.
1.23 "Employee Benefit Plan" means: (a) with respect to the Seller, (i)
any "employee benefit plan" as defined in Section 3(3) of ERISA (including any
"multiemployer plan" as defined in Section 3(37) of ERISA), and (ii) all other
contracts, programs or arrangements to provide benefits, including: supplemental
retirement, deferred compensation, excess benefit, profit sharing, bonus,
incentive, stock purchase, stock ownership, stock option, stock appreciation
right, employment, severance, salary continuation, termination, change of
control, vacation, educational assistance, scholarships, moving expenses,
holiday and any other fringe benefit plan, contract, program or arrangement,
whether written or unwritten, qualified or nonqualified, funded or unfunded, and
including any that have been frozen or terminated) maintained, contributed to or
required to be contributed to, by any of the Curtis Parties or any of their
ERISA Affiliates for the benefit of any employee, former employee, director,
officer or independent contractor of any of the Curtis Parties or under which
any of the Curtis Parties or their ERISA Affiliates has any liability with
respect to any employee, former employee, director, officer or independent
contractor of any of the Curtis Parties; and (b) with respect to the U.K. Sub
and/or the Canadian Sub, any private scheme, arrangement or agreement for the
provision of any pension, retirement, death, incapacity, sickness, disability,
accident or other like benefits (including the payment of medical expenses) for
any Curtis Parties employee or for the widow, child or dependent of any Curtis
Parties employee which the U.K. Sub and/or the Canadian Sub is either a party
to, participates in, contributes to or which relates to the employees of the
U.K. Sub, the Canadian Sub or the Seller.
1.24 "Employee Pension Benefit Plan" has the meaning set forth in ERISA
Section 3(2).
1.25 "Employee Welfare Benefit Plan" has the meaning set forth in ERISA
Section 3(1).
1.26 "Encumbrance" means any lien, pledge, mortgage, security interest,
claim, charge or other encumbrance, right or claim of any kind whatsoever, other
than liens for Taxes not yet due and payable.
1.27 "Environment" means soil, land surface or subsurface strata,
surface waters (including navigable waters, ocean waters, streams, ponds,
drainage basins, and wetlands), groundwaters, drinking water supply, stream
sediments, ambient air (including indoor air), plant and animal life, and any
other environmental medium or natural resource.
1.28 "Environmental, Health and Safety Laws" means any Legal
Requirement that refers or relates to the Environment, public health and safety,
or employee health and safety that was in effect on or prior to the Closing
Date.
1.29 "ERISA" means the Employee Retirement Income Security Act of 1974,
as amended from time to time, any successor statute thereto and all final or
temporary regulations promulgated thereunder and generally applicable published
rulings entitled to precedential effect.
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1.30 "ERISA Affiliate" means (a) any corporation included with the
Seller in a controlled group of corporations within the meaning of Section
414(b) of the Code, (b) any trade or business (whether or not incorporated)
which is under common control with the Seller within the meaning of Section
414(c) of the Code, (c) any member of an affiliated service group of which the
Seller is a member within the meaning of Section 414(m) of the Code, or (d) any
other Person treated as an affiliate of the Seller under Section 414(o) of the
Code.
1.31 "Excluded Assets" means the assets of the Curtis Parties set forth
on the attached Section 1.31 of the Disclosure Schedule, including funded debt,
Cash, and any deposits, refunds or rights to receive money that are not
reflected on the Closing Balance Sheet; PROVIDED, that Excluded Assets shall not
include advance payments received by a Curtis Party prior to the Closing for
services to be rendered by the Buyer, the U.K. Sub or the Canadian Sub after the
Closing; notwithstanding anything else provided herein, Seller shall be entitled
to retain all Cash held by the U.K Subsidiary or the Canadian Subsidiary and it
shall not constitute a violation of the covenants set forth in Article V hereto
to transfer cash to Buyer from either such subsidiary (i) in satisfaction of any
intercompany account payable of either such subsidiary, (ii) as a distribution,
or (iii) otherwise.
1.32 "Excluded Liabilities" means (i) all liabilities of the Seller
which are not Assumed Liabilities, and (ii) all liabilities of the Curtis
Parties for periods ending at or prior to the Closing Date (and any partial
periods then ended) relating to (a) Taxes and (b) escheat or unclaimed funds.
1.33 "Facilities" means any real property, whether held through
leaseholds or owned, currently occupied by any of the Curtis Parties and any
buildings, plants, or structures thereon.
1.34 "Fiduciary" has the meaning set forth in ERISA Section 3(21).
1.35 "Final Purchase Price" has the meaning set forth at Section 2.3
below.
1.36 "Financial Statements" has the meaning set forth in Section 3.4
below.
1.37 "GAAP" means United States generally accepted accounting
principles as in effect from time to time; PROVIDED, with respect to those items
specified in Section 3.4 of the Disclosure Schedule, for any and all purposes
under this Agreement (including preparation of the Closing Balance Sheet and the
determination of the accuracy of any representation or warranty and the right to
any indemnity), the parties have agreed that the treatment of such items on the
December 31 Balance Sheet is consistent with GAAP and that the parties shall not
dispute whether an item has been properly accounted for in accordance with GAAP.
1.38 "Governmental Authorization" means any approval, consent, license,
permit, franchise, order, registration, qualification, accreditation, waiver,
variance, or other authorization issued, granted, given, or otherwise made
available by or under the authority of any Governmental Body or pursuant to any
Legal Requirement.
1.39 "Governmental Body" means any
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(a) nation, state, county, city, town, village, district, or other
jurisdiction of any nature;
(b) federal, state, provincial, local, municipal, foreign, or
other government;
(c) governmental or quasi-governmental authority of any nature
(including any governmental agency, branch, department, official, or entity and
any court or other tribunal);
(d) multi-national organization or body; or
(e) body exercising, or entitled to exercise, any administrative,
executive, judicial, legislative, police, regulatory, or taxing authority or
power of any nature.
1.40 "Hazardous Materials" means any waste or other substance that is
listed, defined, designated, or classified as, or otherwise determined to be,
hazardous, radioactive, or toxic or a pollutant or a contaminant under or
pursuant to any Environmental, Health and Safety Law, including any admixture or
solution thereof, and specifically including petroleum and all derivatives
thereof or synthetic substitutes therefor and asbestos or asbestos-containing
materials.
1.41 "HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended, or any successor law, and regulations and rules issued
pursuant to that Act or any successor law.
1.42 "Intellectual Property" means (a) all inventions (whether patented
or not patented, patentable or unpatentable and whether or not reduced to
practice), all improvements thereto, and all patents, patent applications and
patent disclosures, together with all reissuances, continuations,
continuations-in-part, revisions, extensions and reexaminations thereof, (b) all
trademarks, service marks, trade dress, logos, trade names and corporate names
including the Trade Names, together with all translations, adaptations,
derivations and combinations thereof and including all goodwill associated
therewith, and all applications, registrations and renewals in connection
therewith, (c) all copyrightable works, all copyrights, and all applications,
registrations and renewals in connection therewith, (d) all mask works and all
applications, registrations and renewals in connection therewith, (e) all trade
secrets and confidential business information (including ideas, research and
development, know-how, formulas, compositions, manufacturing and production
processes and techniques, technical data, designs, drawings, specifications,
customer and supplier lists, pricing and cost information, and business and
marketing plans and proposals), (f) all computer software (including data and
related documentation), (g) all other proprietary rights, and (h) all copies and
tangible embodiments thereof (in whatever form or medium).
1.43 "Inventories" means all stock and inventories of finished goods,
raw materials, works in process, parts and supplies of the Curtis Parties.
1.44 "IRS" means the United States Internal Revenue Service or any
successor agency, and, to the extent relevant, the United States Department of
the Treasury.
1.45 "ITA" means the Income Tax Act (Canada), as amended.
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1.46 "Knowledge" means actual knowledge of Keith Drewett, Idelle Wolf,
Pat Brady, Jeffrey Pernus, William Beaver, David Hughes, Lynn Lonn and Ian
Gudgeon, as appropriate, of a particular fact or other matter following good
faith investigation thereof.
1.47 "Legal Requirement" means any federal, state, provincial, local,
municipal, foreign, international, multinational, or other administrative order,
constitution, law, ordinance, principle of common law, rule, regulation, code,
license, permit, statute or treaty, including, without limitation, those
applicable to any of the Curtis Parties, the Acquired Assets, the Business or
any of the Facilities.
1.48 "Liability" means any liability (whether known or unknown, whether
asserted or unasserted, whether absolute or contingent, whether accrued or
unaccrued, whether liquidated or unliquidated, and whether due or to become
due), including any liability for Taxes.
1.49 "Multiemployer Plan" has the meaning set forth in ERISA Section
3(37) and Code Section 414(f).
1.50 "Multiple Employer Plan" has the meaning set forth in ERISA
Section 210.
1.51 "Net Worth" means the amount determined by subtracting (i) the
amount of total liabilities of the Seller as reported on the Seller's applicable
balance sheet from (ii) the amount of total assets of the Seller reported on the
Seller's applicable balance sheet, in each case exclusive of the Seller's
goodwill, cash and funded debt.
1.52 "Net Worth Adjustment Schedule" has the meaning set forth at
Section 2.3(a)(ii) below.
1.53 "Operative Documents" means this Agreement, its Exhibits and
Schedules, and all other instruments, certificates and agreements required
hereby and thereby.
1.54 "Order" means any award, decision, injunction, judgment, order,
decree, ruling, charge, subpoena, or verdict entered, issued, made, or rendered
by any court, administrative agency, or other Governmental Body or by any
arbitrator.
1.55 "Ordinary Course of Business" -- As used in this Agreement, an
action taken by a Person will be deemed to have been taken in the "Ordinary
Course of Business" only if:
(a) such action is consistent with the past practices of such
Person, is not of unusual size or duration and is taken in the ordinary course
of the normal day-to-day operations of such Person;
(b) such action is not required to be authorized by the board of
directors of such Person (or by any Person or group of Persons exercising
similar authority) and is not required to be specifically authorized by the
stockholders of such Person; and
(c) such action is similar in nature and magnitude to actions
customarily taken, without any authorization by the board of directors (or by
any Person or group of Persons
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exercising similar authority), in the ordinary course of the normal day-to-day
operations of other Persons that are in the same line of business as such
Person.
Notwithstanding the foregoing, in no event shall the
"Ordinary Course of Business" include any action that would cause any of the
Curtis Parties or the Parent to violate or breach any contract, agreement,
representation, or warranty made by it under this Agreement.
1.56 "Parent" has the meaning set forth in the preface above.
1.57 "Party" has the meaning set forth in the preface above.
1.58 "PBGC" means the Pension Benefit Guaranty Corporation.
1.59 "Person" means an individual, a partnership, a corporation, an
association, a joint stock company, a limited liability company or partnership,
a trust, a joint venture, an unincorporated organization or a Governmental Body
(or any department, agency, or political subdivision thereof).
1.60 "Preliminary Purchase Price" has the meaning set forth in Section
2.3 below.
1.61 "Proceeding" means any action, arbitration, audit, hearing,
investigation, litigation, or suit (whether civil, criminal, administrative,
investigative, or informal) commenced, brought, conducted, or heard by or
before, or otherwise involving, any Governmental Body or arbitrator.
1.62 "Prohibited Transaction" has the meaning set forth in ERISA
Section 406 and Code Section 4975.
1.63 "Relevant Employees" means any past or present employee of the
U.K. Sub.
1.64 "Reportable Event" has the meaning set forth in ERISA Section
4043.
1.65 "Schemes"" means the retirement benefits schemes known as The
Curtis Executive Pension Plan and The Curtis Industries (U.K.) Limited Pension
Plan each established by trust deeds dated July 1, 1988 (or the trustees from
time to time of those schemes as the context requires).
1.66 "Subsidiary" means any corporation with respect to which a
specified Person (or a Subsidiary thereof) owns a majority of the common stock
or has the power to vote or direct the voting of sufficient securities to elect
a majority of the directors.
1.67 "Seller" has the meaning set forth in the preface above.
1.68 "Tax" means all forms of taxation, duty, levy, impost or charge
imposed by a Tax Authority, including federal, state, provincial, local or
foreign income, gross receipts, license, payroll, employment, excise, severance,
stamp, occupation, premium, windfall profits, environmental (including taxes
under Code Section 59A), customs duties, capital, capital stock, corporate,
franchise, profits, withholding, social security (or similar), unemployment,
disability,
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sales, use, transfer, registration, alternative or add-on minimum, estimated or
other tax of any kind whatsoever, including any interest, penalty or addition
thereto, whether disputed or not, and any liability for the payment of any
amount of the type described herein as a result of being a "transferee" (within
the meaning of Section 6901 of the Code, Section 160 of the ITA or any other
applicable law) of another entity or a member of an affiliated or combined group
and, with respect to the U.K. Sub and the Canadian Sub, wage, employer health,
workers compensation, compensation, retirement contribution, turnover, utility,
or value added tax; provided, however, "Tax" shall not include any real property
or personal property taxes.
1.69 "Taxes Act 1988" means the Income and Corporation Taxes Act 1988.
1.70 "Tax Authority" means any Governmental Body, domestic or foreign,
having jurisdiction over the assessment, determination, collection, or other
imposition of any Tax.
1.71 "Tax Reassessment Period" in respect of any Taxes means the period
ending on the first date on which no assessment, reassessment, notice of
deficiency or other document assessing liability for such Taxes may be issued
pursuant to the relevant laws that impose such Taxes.
1.72 "Tax Return" means any return, declaration, report, claim for
refund or information return or statement relating to Taxes, including any
schedule or attachment thereto, and including any amendment thereof.
1.73 "Threatened" -- A claim, Proceeding, dispute, action, or other
matter will be deemed to have been "Threatened" if any demand or statement has
been made in writing or any notice has been given in writing, or if any other
event has occurred or any other circumstances exist, that would lead a prudent
Person to conclude that such a claim, Proceeding, dispute, action, or other
matter is likely to be asserted, commenced, taken, or otherwise pursued in the
future.
1.74 "Trade Names" has the meaning set forth in Section 3.10(c) below.
1.75 "Y2K-Compliant" shall mean that the Curtis Parties' software
systems are able to provide specific dates and calculate spans of dates, and to
record, store, process and provide true and accurate dates and calculations for
dates and spans of dates within the closed interval January 1, 1942 through
December 31, 1999 (the "Interval Dates") prior to, including and following
January 1, 2000, including by: (i) prior and up to December 31, 1999 correctly
processing day and date calculations within the Interval Dates; (ii) on and
after January 1, 2000 correctly processing day and date calculations within the
Interval Dates; (iii) recognizing September 9, 1999 and January 1, 2001 as valid
dates; (iv) recognizing the year 2000 as a leap year having 366 days, and
correctly processing February 29, 2000 as a valid leap year date; and (v)
incorporating interface programs sufficient to translate accurately to
four-digit format (without any burden of interpretation) any two-digit year
representations included in software, components or systems, including but not
limited to external databases, data warehouses, software systems and user
interfaces, not owned or operated in connection with the Business, which
electronically or manually send data to or receive data from software,
components or systems used in the Business.
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ARTICLE 2
BASIC TRANSACTION
2.1 Purchase and Sale of Assets. On and subject to the terms and
conditions of this Agreement, at the Closing the Buyer agrees to purchase and
acquire from the Seller and the Seller agrees to sell, transfer, convey and
deliver to the Buyer, the Acquired Assets, free and clear of any Encumbrance
other than the Assumed Liabilities, for the consideration specified in Section
2.3 below.
2.2 Assumption of Contracts and Liabilities.
(a) Assumed Contracts. At Closing, the Assumed Contracts, as set
forth in Section 2.2(a) of the disclosure schedule accompanying this Agreement
and initialed by the Buyer and the Seller (the "Disclosure Schedule"), will be
assigned by the Seller to the Buyer (and/or the Buyer's designee, at the Buyer's
discretion); as a result of such assignment, the Buyer and/or its designee shall
only assume and be responsible for obligations that do not arise out of (i) any
breach or default by any of the Curtis Parties or their Affiliates, or (ii)
facts that, with notice or a lapse of time or both, would constitute a default
on the part of any of the Curtis Parties or their Affiliates in the performance
of any of the Assumed Contracts. To the extent that any of the Assumed Contracts
are not assignable without the consent of a third party, this Agreement shall
not, in and of itself, constitute an assignment or an attempted assignment of
such Assumed Contract if such assignment or attempted assignment would
constitute a breach thereof. The Seller shall obtain prior to the Closing Date
all required consents to assignment from such third parties in accordance with
Section 7.1(c) of this Agreement.
(b) Assumed Liabilities. Except for (i) its obligations under the
Assumed Contracts from and after the Closing and (ii) the Assumed Liabilities,
the Buyer will not assume or have any responsibility with respect to any
obligation or Liability of any kind, whether known or unknown, contingent or
absolute and whether now existing or arising hereafter, of the Seller or with
respect to the Acquired Assets, the Facilities or the Business.
2.3 Payment of Purchase Price. In full consideration for the
performance of this Agreement by the Seller and the transfer and delivery to the
Buyer of the Acquired Assets, the Buyer agrees, subject to the terms, conditions
and limitations set forth in this Agreement, (i) to pay to the Seller at the
Closing the aggregate consideration of SIXTY TWO MILLION ONE HUNDRED THOUSAND
DOLLARS, ($62,100,000) (the "Preliminary Cash Payment"), and (ii) to assume the
Assumed Liabilities (such assumption, together with the Preliminary Cash
Payment, constituting the "Preliminary Purchase Price"), subject to the
adjustments expressly set forth in this Agreement (as so adjusted, the "Final
Purchase Price"). The Preliminary Cash Payment shall be made at the Closing by
wire transfer of immediately available funds to one or more accounts to be
designated by the Seller not less than two (2) business days prior to the
Closing (the "Closing Payment").
(a) Post-Closing Adjustment of the Preliminary Purchase Price. The
Preliminary Purchase Price shall be subject to upward or downward adjustment on
a dollar-for-dollar basis after the Closing Date as follows:
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(i) On May 1, 2000, Buyer shall take such cycle counts
of the Curtis Parties' inventory that it believes are reasonably necessary to
assure itself of the accuracy of Seller's perpetual inventory system. If Buyer
is not satisfied with the results of such cycle count, the Buyer will take a
physical count of the Inventories as soon as reasonably possible prior to the
Closing, which count the Seller and its representatives may observe. Such count
shall apply methods consistent with the Seller's past practice, as reflected in
the Financial Statements.
(ii) Within sixty (60) days following the Closing, the
Buyer shall prepare and deliver to the Seller an unaudited balance sheet of the
Business (including the Curtis Subsidiaries) as at April 29, 2000 (the "Draft
Closing Balance Sheet"). The Buyer shall prepare the Draft Closing Balance Sheet
in accordance with GAAP and the same accounting principles, assumptions and
bases utilized in the preparation of the December 31 Balance Sheet previously
delivered to the Buyer by the Seller, and incorporating the results of the
physical inventory, if any, with respect to variances from the perpetual
inventory pursuant to Section 2.3(a)(i) above. The Seller shall cooperate fully
with the Buyer in the preparation of the Draft Closing Balance Sheet, including,
the furnishing of all information regarding the accounting principles,
assumptions and bases used in preparing the December 31 Balance Sheet. The Buyer
shall also prepare a Post-Closing Adjustment Schedule of the Preliminary
Purchase Price in the same form as Exhibit A attached hereto (the "Net Worth
Adjustment Schedule") reflecting adjustments to the Closing Balance Sheet to
take into account assets and or liabilities of the Business not transferred to
or assumed by Buyer on the Closing Date.
(iii) The Seller shall deliver to the Buyer within
twenty-one (21) days following its receipt of the Draft Closing Balance Sheet
and the Net Worth Adjustment Schedule, a detailed statement describing its
objections (based upon the comparison of the December 31 Balance Sheet and the
Draft Closing Balance Sheet, and setting forth in reasonable detail each amount
objected to, including any good faith objection to the physical count of the
Inventories, the amount proposed as an adjustment thereto and the basis for such
objection), if any, thereto. Failure by the Seller to so object to the Draft
Closing Balance Sheet and the Net Worth Adjustment Schedule shall constitute
acceptance thereof, whereupon the Draft Closing Balance Sheet shall be deemed to
be the "Closing Balance Sheet." The Buyer and the Seller shall use their
reasonable and good faith efforts to resolve any such objections, but if they do
not reach a final resolution within thirty (30) days following the Seller's
delivery of its statement of objections, the Buyer and the Seller shall settle
the disagreement by retaining a nationally-recognized accounting firm other than
the Buyer's or the Seller's auditors to resolve any remaining objections. The
determination of such accounting firm will be set forth in writing and shall be
issued within forty-five (45) days of the date such accounting firm is retained.
The Draft Closing Balance Sheet then shall be adjusted in accordance with such
accounting firm's decision. The Draft Closing Balance Sheet, as so adjusted,
shall be the Closing Balance Sheet. Any decision by such accounting firm shall
be final and binding upon the Parties, absent fraud or manifest error, and
judgment may be entered thereon, upon the application of either Party, by any
court having competent jurisdiction. The Buyer and the Seller each shall bear
the cost of preparing and presenting its case, and the fees and expenses of such
accounting firm will be shared equally by the Buyer and the Seller.
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(iv) During the period of any dispute referred to
above, (A) the Buyer shall provide the Seller, the Seller's accountants, and the
nationally recognized accounting firm retained pursuant to subsection (iii),
above, full access during the Buyer's normal business hours to the books,
records, facilities and employees of the Buyer, the Buyer's accountants and all
work papers in connection with the Draft Closing Balance Sheet and the Net Worth
Adjustment Schedule; PROVIDED, HOWEVER, that any such access shall be allowed
only in such manner as not to interfere unreasonably with the operation of the
Buyer's business, and (B) the Seller shall, and shall cause the Seller's
independent accountants to, provide the Buyer, the Buyer's accountants and the
nationally recognized accounting firm retained pursuant to subsection (iii),
above, full access to the work papers in connection with the December 31 Balance
Sheet, the Seller's objections to the Draft Closing Balance Sheet, and the Net
Worth Adjustment Schedule.
(v) If the Net Worth of the Seller as shown on the
Closing Balance Sheet is greater or less than Nineteen Million Seventy Nine
Thousand Dollars ($19,079,000), the Preliminary Purchase Price shall be subject
to adjustment on a dollar-for-dollar basis. Within five (5) business days after
the date on which the Closing Balance Sheet is finally determined pursuant to
this Section 2.3(a), the Buyer (in the event the Net Worth is greater) or the
Seller (in the event the Net Worth is less) shall pay to an account specified by
the other Party, by wire transfer of immediately available funds, the difference
between the Net Worth reflected on the Closing Balance Sheet and Nineteen
Million Seventy Nine Thousand Dollars ($19,079,000).
(b) [Intentionally Left Blank]
2.4 The Closing. Subject to the satisfaction or waiver of all
conditions to the obligations of the Parties to consummate the transactions
contemplated hereby (other than conditions with respect to actions the
respective Parties will take at the Closing), the closing of the transactions
contemplated by this Agreement (the "Closing") shall take place at the offices
of Squire, Sanders and Dempsey, L.L.P., 4900 Key Tower, 127 Public Square,
Cleveland, OH, 44114, or such other place as mutually agreed to by the Parties,
commencing at 10:00 a.m. local time on the later of: (a) May 11, 2000 or (b)
such other date and time as the Parties may mutually determine (the "Closing
Date").
2.5 Closing Deliveries by the Seller. At the Closing, the Seller shall
execute and deliver or cause to be delivered to the Buyer:
(a) The right to immediate possession of the Acquired Assets.
(b) A Bill of Sale in the form attached as Exhibit B, and such
other instruments of transfer and conveyance as may reasonably be requested by
the Buyer, in each case executed by a duly authorized officer of the Seller.
(c) Certificates representing all of the issued and outstanding
capital stock of the Curtis Subsidiaries, together with duly endorsed stock
transfer powers therefor.
(d) Those consents specified in Section 2.5(d) to the Disclosure
Schedule;
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(e) The Assignment and Assumption Agreements, in the forms
attached as Exhibit C-1 (Contracts) and C-2 (Leases), executed by a duly
authorized officer of the Seller with respect to the Assumed Contracts.
(f) Copies of the discharges or pay-off letters, as applicable, of
all Encumbrances, UCC financing statements or other loan documents listed on
Section 2.5(f) to the Disclosure Schedule.
(g) An Estoppel and Consent Certificate for each lease or sublease
listed in Section 3.9(a) of the Disclosure Schedule executed by the landlord in
any such lease or sublease, in form reasonably satisfactory to the Buyer.
(h) An opinion of counsel to the Seller, addressed to the Buyer
and dated as of the Closing Date, as to the due organization, valid existence
and capitalization of the Curtis Subsidiaries, their due qualification/licensure
to conduct business, the Seller's ownership of and due authorization to sell and
transfer to the Buyer all of the equity securities of the Curtis Subsidiaries,
the due approval by the Canadian Sub of the transfer of all of the issued and
outstanding capital stock of the Canadian Sub from the Seller to the Buyer, the
sufficiency of the foreign Governmental Authorizations obtained to effect such
transfer and sale and to permit the Buyer to continue to conduct the Business
post-Closing where and in the manner conducted by the Curtis Subsidiaries
immediately prior to the Closing, the validity, binding nature and
enforceability of the Operative Documents with respect to such transfer and
sale, and the matters specified in Section 3.3 with respect to the Curtis
Subsidiaries. In rendering such opinion, such counsel may rely upon certificates
of public officers, as to matters governed by the laws of jurisdictions other
than Ohio, New York or the federal laws of the United States of America, upon
opinions of counsel reasonably satisfactory to the Buyer, and, as to matters of
fact, upon certificates of officers of the Seller, copies of which opinions and
certificates shall be contemporaneously delivered to the Buyer.
(i) Certificates issued as of a recent date (i) by the Secretary
of State of the State of Delaware certifying as to the legal existence and
active status of the Seller and of the Parent, and (ii) by the U.K. Registrar of
Companies certifying as to the legal existence and good standing of the U.K.
Sub.
(j) A Certificate of Compliance issued as of a recent date by
Industry Canada, Corporation Directorate certifying as to the incorporation and
continued existence and good standing of the Canadian Sub.
(k) A letter issued by the Division of Revenue of the State of
Delaware ("DOR"), dated within ten (10) days of the Closing Date, indicating
that the Seller is current with respect to the payment of Delaware state income
Taxes.
(l) A completed application, including Form T2062, to obtain a
clearance certificate pursuant to Section 116 of the ITA in respect of the
disposition of the shares of the Canadian Sub by the Seller. If the Seller has
not previously applied for such a clearance certificate, the Seller undertakes
to forthwith submit the application to the Canada Customs and Revenue Agency
upon completion of the Closing and to use best efforts to obtain the clearance
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certificate within 30 days after the end of the month in which the Buyer
acquires the shares of the Canadian Sub. The Seller agrees to provide a copy of
the clearance certificate to the Buyer upon receipt of same from the Canada
Customs and Revenue Agency.
(m) Certificates of the Secretaries of the Seller and the Parent,
in form reasonably satisfactory to the Buyer, dated the Closing Date and
certifying, respectively, as to (i) the incumbency and genuine signature of each
of the Seller's and the Parent's officers who executed the Operative Documents,
(ii) the written consents of the Seller's and the Parent's stockholders and
directors, respectively authorizing (a) the Seller to undertake the transactions
contemplated hereunder, (b) the Parent to enter into the Agreement and to
indemnify the Buyer in accordance with the provisions of Article 9 hereunder,
(c) their signatories to execute and deliver the Agreement and all other
documents and instruments required to effect such transactions, such resolutions
and consents having been duly adopted and being in full force and effect on the
Closing Date, and (iii) the written consent of the Canadian Sub approving the
transfer of all of the issued and outstanding capital stock of the Canadian Sub
from the Seller to the Buyer, such consent having been duly adopted and being in
full force and effect on the Closing Date.
(n) Officer's Certificates of the Seller and the Parent, each
dated the Closing Date and certifying that (i) the Seller's and the Parent's
representations and warranties contained in Article 3 are true and correct on
and as of the Closing Date with the same force and effect as though made on such
date, and that (ii) with respect to each Benefit Plan that is a "group health
plan" within the meaning of Section 607 of ERISA and that is subject to Section
4980B of the Code, the Seller and each ERISA Affiliate of the Seller have
complied in all respects with the continuation coverage requirements of the Code
and ERISA.
(o) A duly executed Certificate of Amendment to the Seller's
Certificate of Incorporation, in form ready for filing, to effect a change of
the Seller's name in accordance with the provisions of Section 6.9 below.
(p) Resolutions of the Curtis Parties effectuating the transfer of
sponsorship of those Employee Benefit Plans specified in Section 6.10, certified
respectively by the applicable Secretaries of the Curtis Parties, such
resolutions having been duly adopted and being in full force and effect on the
Closing Date.
(q) An Assignment of Patents and an Assignment of Trademarks, each
in a form reasonably acceptable to Buyer.
(r) Such other agreements, instruments and documents as the Buyer
reasonably deems necessary to effect the transactions contemplated hereby.
(s) Section 6.11 of the Disclosure Schedule.
2.6 Closing Deliveries by the Buyer. At the Closing, the Buyer will
execute and deliver, or cause to be delivered to the Seller:
(a) The Preliminary Purchase Price pursuant to Section 2.3(a)
hereof.
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(b) The Assignment and Assumption Agreement executed by a duly
authorized officer of the Buyer.
(c) A Certificate issued as of a recent date by the Secretary of
State of the State of Delaware certifying as to the legal existence and good
standing of the Buyer.
(d) A Certificate of the Secretary of the Buyer, in form
reasonably satisfactory to the Seller, dated the Closing Date and certifying as
to (i) the incumbency and genuine signature of each of the officers of the Buyer
who executed the Operative Documents, and (ii) the resolutions of the Buyer's
Board of Directors, authorizing the Buyer to undertake the transactions
contemplated hereunder and authorizing the Buyer's signatories to execute and
deliver this Agreement and all other documents and instruments required to
effect such transactions, such resolutions having been duly adopted and being in
full force and effect on the Closing Date.
(e) A Certificate of the President of the Buyer dated the Closing
Date and certifying that the representations and warranties of the Buyer
contained in Article 4 are true and correct on and as of the Closing Date with
the same force and effect as though made on such date.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE SELLER AND THE PARENT
As a material inducement to the Buyer to enter into the Operative
Documents and to consummate the transactions contemplated hereunder and
thereunder, each of the Seller and the Parent represents and warrants to the
Buyer that the statements contained in this Article 3 (and in the applicable
Sections of the Disclosure Schedule) are true and correct as of the date of this
Agreement and will be true and correct at and as of the Closing.
3.1 Organization and Capitalization of the Curtis Parties.
(a) Section 3.1 of the Disclosure Schedule contains a complete and
accurate list for each of the Curtis Parties of its name, its jurisdiction of
incorporation, and its capitalization (including the identity of each
stockholder and the number of shares held by each). Each of the Curtis Parties
and the Parent is a corporation duly organized, validly existing, and in good
standing under the laws of the jurisdiction of its incorporation. Each of the
Curtis Parties is duly qualified or licensed to do business as a foreign
corporation and is in good standing under the laws of each state or other
jurisdiction in which either the ownership or use of the properties owned or
used by it, or the nature of the activities conducted by it, require such
qualification, except where failure to be so qualified or licensed would not
have a material adverse effect on the Acquired Assets, the Business or any of
the Curtis Parties. Each of the Curtis Parties has all requisite power and
authority to own, lease and operate the properties and assets that it purports
to own or use, to carry on its business as now conducted (including the
performance of all its obligations under the Assigned Contracts) and to
consummate the transactions contemplated by the Operative Documents.
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(b) The Parent is the record and beneficial owner of all of the
Seller's issued and outstanding capital stock. A listing of the authorized
equity securities of each Curtis Subsidiary is set forth on Section 3.1 of the
Disclosure Schedule. The Seller is, and on the Closing Date will be, the record
and beneficial owner and holder of all of the equity securities of the Curtis
Subsidiaries, free and clear of all Encumbrances. The shares of the Curtis
Subsidiaries being sold pursuant to this Agreement consist of the whole of the
issued and allotted share capital, respectively, of the Curtis Subsidiaries. No
legend or other reference to any purported Encumbrance appears upon any
certificate representing equity securities of any of the Curtis Parties. None of
the outstanding equity securities or other securities of the Curtis Parties was
issued in violation of any Legal Requirement (including the Securities Act of
1933, as amended) or any preemptive right of any Person. All of the outstanding
equity securities of the Curtis Subsidiaries have been duly authorized and
validly issued and are fully paid and nonassessable. Except as set forth on
Section 3.1 of the Disclosure Schedule, there are no outstanding securities,
options, warrants, rights, agreements, calls, subscription commitments, demands
or understandings of any character whatsoever, fixed or contingent, that
directly or indirectly (a) call for or require the issuance, sale, transfer or
other disposition of any equity interests or securities of any of the Curtis
Parties, (b) obligate the Seller, its stockholder or either of the Curtis
Subsidiaries to grant, offer or enter into any such agreement, or (c) relate to
the voting or control of any equity interests of any of the Curtis Parties.
There are no securities convertible into or exchangeable for the stock of any of
the Curtis Parties and no Person has any right to require the Seller, its
stockholder or either of the Curtis Subsidiaries to register any securities of
any of the Curtis Parties under the Securities Act of 1933 or otherwise. Except
as set forth in Section 3.1 of the Disclosure Schedule, none of the Curtis
Parties owns, either directly or indirectly, any interest or investment (whether
debt or equity) in any corporation, partnership, joint venture, business trust
or other entity.
3.2 Authorization of Transaction.
(a) The Seller has all requisite power and authority (including
full corporate power and authority) to execute and deliver the Operative
Documents and to undertake its obligations thereunder and to consummate the
transactions contemplated thereby, including, without limitation, the sale and
transfer to the Buyer of all of the issued and outstanding capital stock of the
Curtis Subsidiaries. Without limiting the generality of the foregoing, the Board
of Directors of the Seller and the stockholders of the Seller have duly
authorized the execution, delivery and performance of this Agreement by the
Seller. Each of the Operative Documents to which the Seller is a party
constitutes a valid and binding agreement of the Seller, enforceable against the
Seller in accordance with its terms subject to applicable bankruptcy, insolvency
and other laws affecting creditors' rights generally, public policy and
equitable principles generally. The Operative Documents are sufficient to
transfer to and to vest in the Buyer good and marketable title to the Acquired
Assets, free and clear of all liabilities, obligations, Encumbrances and
contingencies of any kind, except as set forth on Section 3.2 of the Disclosure
Schedule.
(b) The Parent has all requisite power and authority (including
full corporate power and authority) to execute and deliver the Operative
Documents, to undertake its obligations thereunder and to consummate the
transactions contemplated thereby. Without limiting the generality of the
foregoing, the Board of Directors of the Parent has duly authorized
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the execution, delivery and performance of this Agreement by the Parent. Each of
the Operative Documents to which the Parent is a party constitutes a valid and
binding agreement of the Parent, enforceable against the Parent in accordance
with its terms subject to applicable bankruptcy, insolvency and other laws
affecting creditors' rights generally, public policy and equitable principles
generally.
3.3 Noncontravention. The execution and delivery of the Operative
Documents by the Seller and the Parent, and the consummation of the transactions
contemplated thereby (including the assignments and assumptions referred to in
Article 2 above), (a) will not violate any provision of the Certificate of
Incorporation, Articles of Incorporation or other similar charter document, or
the Bylaws, of the Seller, the Curtis Subsidiaries or the Parent, (b) will not
violate any statute, rule, regulation, order or decree of any Governmental Body
by which the Seller, the Curtis Subsidiaries, their respective properties or
assets, or the Parent is bound or give any Governmental Body the right to
revoke, withdraw, suspend, cancel, terminate or modify any Governmental
Authorization that is held by any of the Curtis Parties or that otherwise
relates to the Acquired Assets or the Business, and (c) will not result in a
violation or breach of, or constitute a default under, any license, franchise,
permit, indenture, agreement or other instrument to which the Seller, either of
the Curtis Subsidiaries or the Parent is a party, or by which the Seller, either
of the Curtis Subsidiaries, or any of their properties or assets is bound,
excluding from the foregoing clauses (b) and (c) violations, breaches or
defaults which, either individually or in the aggregate, (i) would not prevent
the Seller, the Curtis Subsidiaries or the Parent from performing their
respective obligations under the Operative Documents or the consummation of the
transactions contemplated thereby, and (ii) would not have a material adverse
effect on the Buyer's post-Closing ownership, operation and maintenance of the
Acquired Assets and conduct of the Business as conducted by the Curtis Parties
immediately prior to the Closing. Except as set forth in Section 3.3 of the
Disclosure Schedule, none of the Seller, the Curtis Subsidiaries or the Parent
is required to give any notice to, make any filing with, or obtain any Consent
from any Person in connection with the execution and delivery of this Agreement
or any of the other Operative Documents, or the consummation or performance of
the transactions contemplated hereby and thereby. Except as set forth in Section
3.3 of the Disclosure Schedule and except for filings required under the HSR
Act, none of the Seller, the Curtis Subsidiaries or the Parent is, and none of
them will be solely on account of the Closing hereunder, required to make any
filing or registration with, or obtain any Consent from, any Person in
connection with the execution, delivery and complete performance of the
transactions contemplated by the Operative Documents (including the assignments
and assumptions referred to in Article 2 above), or in order for the
transactions contemplated by the Operative Documents to be effective or to
preserve any material right or benefit of the Curtis Parties or the Business.
3.4 Financial Statements. The Seller has delivered to the Buyer: (a)
audited consolidated balance sheets of the Seller and its subsidiaries as at
December 31, 1998 and as at December 31, 1997, in each case, including the notes
thereto and the related consolidated statements of income, changes in
stockholders' equity and cash flow for the fiscal periods then ended, certified
by Ernst & Young LLP, independent certified public accountants (Ernst & Young
LLP audited the balance sheet as of December 31,1997 and the related
consolidated statements of operations and cash flows for the one-month period
then ended. Ernst & Young LLP also audited the statements of operations and cash
flows for Curtis Industries, Inc. for the eleven-month period ended December 5,
1997), and (b) the audited consolidated balance sheet of
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the Seller and its subsidiaries as at December 31, 1999 (the "December 31
Balance Sheet") and the related consolidated statements of income, changes in
stockholders' equity and cash flow for the fiscal year then ended, including in
each case the notes thereto, (the financial statements described in clauses (a)
and (b) above, including the notes thereto, the "Financial Statements"). Except
as set forth in Section 3.4 of the Disclosure Schedule, all the Financial
Statements fairly present the financial condition and the results of operations,
changes in stockholders' equity and cash flow of the Seller and its subsidiaries
as at the respective dates of, and for the periods referred to in, the Financial
Statements, all in accordance with GAAP. Except as set forth in Section 3.4 of
the Disclosure Schedule, the Financial Statements reflect the consistent
application of such accounting principles throughout the periods involved, are
correct and complete in all material respects, and are consistent with the books
and records of the Seller and its subsidiaries. Except as set forth in Section
3.4 of the Disclosure Schedule, the Seller has maintained adequate reserves for
all liabilities set forth in the Financial Statements. The books and records of
the Seller and its subsidiaries are, and during the periods covered by the
Financial Statements were, in all material respects, true, correct and complete
and fairly and accurately reflect or reflected the income, expenses, assets and
liabilities of the Curtis Parties, including the nature thereof and the
transactions giving rise thereto, and provide a fair and accurate basis for the
presentation of the Financial Statements.
3.5 Conduct of the Business Subsequent to December 31, 1999. Except as
disclosed at Section 3.5 of the Disclosure Schedule and except as contemplated
hereby, since December 31, 1999, the Business has been carried on only in the
Ordinary Course of Business, and there has not been any material adverse change
in the condition (financial or otherwise), assets, liabilities, obligations,
operations, or results of operations of the Curtis Parties or the Business.
Without limiting the generality of the foregoing, since that date, except as
disclosed at Section 3.5 of the Disclosure Schedule:
(a) None of the Curtis Parties has sold, leased, transferred,
assigned or otherwise disposed of any of their assets, tangible or intangible,
other than inventory for a fair consideration or other assets in the Ordinary
Course of Business.
(b) None of the Curtis Parties has entered into any agreement,
contract, lease or license (or series of related agreements, contracts, leases
and licenses) either involving more than $25,000 or outside the Ordinary Course
of Business.
(c) None of the Curtis Parties has accelerated, terminated,
modified or cancelled any agreement, contract, lease or license (or series of
related agreements, contracts, leases and licenses) involving more than $25,000
to which it is a party or by which it is bound.
(d) None of the Curtis Parties has suffered the imposition of any
Encumbrance upon any of its assets.
(e) None of the Curtis Parties has made any capital expenditure
(or series of related capital expenditures) either involving more than $25,000
in the aggregate or outside the Ordinary Course of Business.
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<PAGE> 20
(f) None of the Curtis Parties has made any capital investment in,
any loan to, or any acquisition of the securities or assets of any other Person
(or series of related capital investments, loans and acquisitions).
(g) None of the Curtis Parties has issued any note, bond or other
debt security or created, incurred, assumed or guaranteed any indebtedness for
borrowed money or for a capitalized lease obligation either involving more than
$25,000 singly or $40,000 in the aggregate or for any obligation of the Parent
or any of its Affiliates.
(h) None of the Curtis Parties has delayed or postponed the
payment of accounts payable or other Liabilities outside the Ordinary Course of
Business.
(i) None of the Curtis Parties has granted any extension of credit
in the sale of products, collection of receivables or otherwise, other than in
the Ordinary Course of Business.
(j) None of the Curtis Parties has cancelled, compromised, waived
or released any right or claim (or series of related rights and claims)
involving more than $25,000.
(k) None of the Curtis Parties has granted any license or
sublicense of any rights under or with respect to any Intellectual Property.
(l) None of the Curtis Parties has authorized any change in its
Certificate of Incorporation, Articles of Incorporation or other similar charter
document.
(m) None of the Curtis Parties has experienced any damage,
destruction or loss (whether or not covered by insurance) to its property,
reasonable wear and tear excepted.
(n) None of the Curtis Parties has made any loan to, or entered
into any other transaction with, any of its directors or officers or any
relative by blood or marriage thereof, or any of the Curtis Parties' Affiliates
or any employee of the Curtis Parties.
(o) None of the Curtis Parties has entered into any employment or
compensation agreements other than in the Ordinary Course of Business,
collective bargaining agreements or any consulting agreements or any other
similar arrangements, written or oral, or modified the terms of any existing
such contract or agreement.
(p) None of the Curtis Parties has granted any increase in the
base compensation of, or made any other change in employment terms for, any of
its directors, officers and employees, except as required pursuant to written
employment agreements or in the Ordinary Course of Business.
(q) None of the Curtis Parties has adopted, amended, modified or
terminated any bonus, profit-sharing, incentive, severance or other plan,
contract or commitment for the benefit of any of its directors, officers and
employees, or taken any such action with respect to any other Employee Benefit
Plan.
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(r) None of the Curtis Parties has experienced any labor problems
which, individually or in the aggregate, materially adversely affected or are
reasonably expected to materially adversely affect the condition (financial or
otherwise), assets, earnings, operations, business or prospects of the Curtis
Parties or the Business.
(s) None of the Curtis Parties has made or pledged to make any
charitable or other capital contribution.
(t) None of the Curtis Parties has engaged in any methods of
billing and collection, purchase, sale, lease, management, equipment servicing
or repair, accounting or operation that vary from its usual and customary past
practice.
(u) None of the Curtis Parties has suffered any other material
occurrence, event, incident, action, failure to act or transaction outside the
Ordinary Course of Business or which has a material adverse effect or is
reasonably expected to have a material adverse effect on the Business, the
Acquired Assets or any of the Curtis Parties.
(v) None of the Curtis Parties has agreed to any of the foregoing.
3.6 Undisclosed Liabilities.
(a) None of the Curtis Parties has any Liability required by GAAP
to be reflected on the December 31 Balance Sheet or the Closing Balance Sheet
and, to the Knowledge of the Seller, there is no Basis for (nor should the
Seller have had Knowledge of) any present or future action, suit, proceeding,
hearing, investigation, charge, complaint, claim or demand against the Curtis
Parties or any of them giving rise to any Liability, except for: (i) Liabilities
set forth on the Financial Statements; (ii) Liabilities which have arisen after
December 31, 1999 in the Ordinary Course of Business, none of which results
from, arises out of, relates to, is in the nature of or was caused by any breach
of contract, breach of warranty, tort, infringement or violation of law; and
(iii) Liabilities expressly set forth at Section 3.6(a) of the Disclosure
Schedule hereto.
(b) Without in any way limiting the representation and warranty
set forth in Section 3.6(a) above, none of the Curtis Parties has any unfunded
Liabilities required by GAAP to be reflected on the Closing Balance Sheet of
Seller in connection with any workers' compensation, employers' liability, group
health plan, retirement plan, pension plan or other employee benefit except as
described in Section 3.6(b) of the Disclosure Schedule.
3.7 Legal Compliance.
(a) Except as set forth in Section 3.7(a) of the Disclosure
Schedule, the Curtis Parties have complied in all material respects with each
Legal Requirement that is or was applicable to it or to the conduct or operation
of the Business or the ownership or use of any of the Acquired Assets;
(b) To the Knowledge of the Seller, no event has occurred or
circumstance exists that (with or without notice or lapse of time or both) (i)
may constitute or result in a violation by any of the Curtis
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Parties of, or a failure on the part of any of the Curtis Parties to comply
with, any Legal Requirement, or (ii) may give rise to any obligation on the part
of any of the Curtis Parties to undertake, or to bear all or any portion of the
cost of, any remedial action of any nature, and no Proceeding, charge,
complaint, claim, demand or notice has been filed or commenced against any of
the Curtis Parties alleging any failure so to comply;
(c) The Governmental Authorizations listed in Section 3.7(c) of
the Disclosure Schedule collectively constitute all of the material Governmental
Authorizations necessary to permit the Curtis Parties to lawfully conduct and
operate the Business in the manner in which they currently conduct and operate
the Business and to permit the Curtis Parties to own and use their respective
assets in the manner in which they currently own and use such assets. All
documentation and record keeping which the Curtis Parties or any of them are
required to perform under applicable Legal Requirements has been fully performed
in all material respects in a timely manner, and at and after the Closing, the
Seller shall put the Buyer in possession of or, as applicable with respect to
the corporate and tax records of the Seller, give access to such documentation
and record keeping.
(d) None of the Curtis Parties, and none of their officers,
employees or independent contractors, is suspended or debarred from doing
business with the U.S. Government or is the subject of a finding of
nonresponsibility or ineligibility for U.S. Government contracting.
3.8 Tax Matters.
(a) Each of the Curtis Parties and the Parent has filed, caused to
be filed or will file on a timely basis all Tax Returns that are, were or will
be required to be filed by or with respect to any of them, either separately or
as a member of a group of corporations, as of the Closing Date, pursuant to
applicable Legal Requirements, to the extent such Tax Returns relate to the
Business, except where failure to file such Tax Returns would not have a
material adverse effect on the financial condition of the Curtis Parties. The
Curtis Parties have paid, or made provision for the payment of, all Taxes that
are applicable to them that have or may have become due pursuant to those Tax
Returns or otherwise, or pursuant to any assessment received by the Parent or
any of the Curtis Parties, except such Taxes, if any, as are listed on Section
3.8(a) of the Disclosure Schedule and are being contested in good faith and as
to which adequate reserves (determined in accordance with GAAP) have been
provided in the December 31 Balance Sheet and except where failure to pay such
Taxes would not have a material adverse effect on the financial condition of the
Curtis Parties. The unpaid Taxes of the Curtis Parties: (i) did not, as of
December 31, 1999, exceed the reserve for Tax Liability set forth on the face of
the December 31 Balance Sheet; and (ii) do not exceed that reserve as adjusted
for the passage of time through the Closing Date in accordance with the past
custom and practice of the Parent and the Curtis Parties in filing their Tax
Returns, except where such unpaid Taxes would not have a material adverse effect
on the financial conditions of the Curtis Parties. All Taxes due and payable by
the Curtis Parties (whether or not shown on any Tax Return) with respect to all
periods (or partial periods) through the Closing Date have been paid or will be
paid by the Seller or the Parent, except where failure to pay such Taxes would
not have a material adverse effect on the financial condition of the Curtis
Parties. Except as set forth at Section 3.8(a) of the Disclosure Schedule, none
of the Curtis Parties or the Parent is currently the beneficiary of any
extension of time within which to file any Tax Return related to the Business.
None of the
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Parent or the Curtis Parties has waived any statute of limitations in respect of
Taxes or agreed to any extension of time with respect to a Tax assessment or
deficiency related to the Business.
(b) Section 3.8(b) of the Disclosure Schedule lists all Tax
Returns filed with respect to the Curtis Parties and the Business for taxable
periods that have not been barred by any federal or applicable state,
provincial, local or foreign statute of limitations, indicates those Tax Returns
that have been audited, and indicates those Tax Returns that currently are the
subject of audit. Each such Tax Return filed with respect to the Curtis Parties
and the Business was true, correct and complete in all material respects,
together with all examination reports and statements of deficiencies assessed
against or agreed to by the Parent with respect to the Business or any of the
Curtis Parties. All deficiencies proposed as a result of such audits have been
paid, reserved against, settled or, as described in Section 3.8(a) of the
Disclosure Schedule, are being contested in good faith by appropriate
proceedings with adequate reserves provided therefor. The Seller has delivered
or made available to the Buyer copies of the Tax Returns indicated on the
attached Section 3.8(b) of the Disclosure Statement.
(c) The Curtis Parties have withheld and/or remitted to the
applicable Tax Authority all Taxes required to be so withheld or remitted in
connection with amounts paid or owing to any employee, independent contractor,
creditor, stockholder, non-resident person or other third party, except where
failure to pay such Taxes would not have a material adverse effect on the
financial condition of the Curtis Parties.
(d) There are no Tax liens on any assets of the Curtis Parties,
including but not limited to the Acquired Assets, and no basis exists for the
imposition of any such liens. Except as set forth in Section 3.8(d) of the
Disclosure Schedule, no adjustment of or deficiency for any Tax or claim for
additional Taxes has been proposed, Threatened, asserted or assessed against the
Seller, the Curtis Parties or any member of any affiliated or combined group of
which the Seller or the Curtis Parties is or was a member for which the Seller
or any of the Curtis Parties could be liable. Except as set forth in Section
3.8(d) of the Disclosure Schedule, there are no audit examinations being
conducted or Threatened, and there is no deficiency or refund litigation or
controversy in progress or Threatened, with respect to any Taxes of the Parent
(with respect to the Curtis Parties, the Acquired Assets and the Business) or
the Curtis Parties or with respect to any Tax Returns previously filed by or on
behalf of the Parent (to the extent related to the Business) or the Curtis
Parties.
(e) No claim has been made by a Tax Authority in a jurisdiction
where the Curtis Parties do not file Tax Returns that any of the Parent (with
respect to the Curtis Parties, the Acquired Assets and the Business) or the
Curtis Parties is or may be subject to Taxes by that jurisdiction. Section
3.8(e) of the Disclosure Schedule lists all of the jurisdictions in which the
Curtis Parties have been authorized to do business, owned or leased property,
had employees or customers, employed capital, or solicited or made sales.
(f) The Seller is a qualified subchapter S subsidiary. Except as
set forth in Section 3.8(a) of the Disclosure Schedule, none of the Curtis
Parties is a "U.S. real property holding corporation" as defined in Section
897(c)(2) of the Code. Neither the Seller nor the Parent is a foreign person
within the meaning of, and no Tax is required to be withheld as a result of the
transfer contemplated by this Agreement pursuant to, Section 1445 of the Code.
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Except as set forth in Section 3.8(f) of the Disclosure Schedule, there is no
Tax allocation or Tax sharing agreement that will require any payment by the
Buyer or by the Curtis Parties after the date of this Agreement. None of the
Curtis Parties has entered into any advance pricing agreements with any Tax
Authority.
(g) None of the Assumed Liabilities, if any, is an obligation to
make a payment that will not be deductible under Code Section 280G.
(h) The U.K. Sub is and always has been resident in the United
Kingdom for tax purposes.
(i) The U.K. Sub has duly and punctually paid all Tax that it has
become liable to pay and is under no liability to pay any penalty or interest in
connection with any claim for Tax and has not paid any Tax which it was and is
not properly due to pay.
(j) No distribution within the meaning of Sections 209, 210 and
212, Taxes Act 1988 has been made by the U.K. Sub except dividends shown in its
audited accounts nor is the U.K. Sub bound to make any such distribution. No
securities (within the meaning of Section 254(1), Taxes Act 1988,) issued by the
U.K. Sub and remaining in issue at the date hereof were issued in such
circumstances that the interest payable thereon fails to be treated as a
distribution under Section 209(2)(e)(iii), Taxes Act 1988. The U.K. Sub has not
made or received any distribution which is an exempt distribution within Section
213, Taxes Act 1988. The U.K. Sub has not received any capital distribution to
which the provisions of Section 346, Taxes Act 1988 or Section 189, TCGA 1992
could apply. The U.K. Sub has not issued any share capital, nor granted options
or rights to any person which entitles that person to require the issue of any
share capital to which the provision of Section 249, Taxes Act 1988 could apply.
(k) There has not within the three years preceding the date hereof
been a major change in the nature or conduct of the trade of the U.K. Sub within
the meaning of Section 768, Taxes Act 1988 nor has any transaction occurred to
which Section 768A, Taxes Act 1988 could apply.
(l) The U.K. Sub is not a dual resident investing company within
the meaning of Section 404, Taxes Act 1988.
(m) The U.K. Sub has never been a close company within the meaning
of Section 414, Taxes Act 1988. No distribution within Section 418, Taxes Act
1988 has been made by the U.K. Sub and no such distribution will be made before
Completion. The U.K. Sub has not made (and will not be deemed to have made) any
loan or advance to a participator or an associate of a participator so as to
become liable to make any payment under Section 419, Taxes Act 1988. The U.K.
Sub has supplied to the inspector such information and particulars as are
necessary to make full and accurate disclosure of all facts and considerations
material to be known by him to enable him to make intimations pursuant to
Schedule 19, paragraph 16, Taxes Act 1988 that he does not intend to make
apportionment in respect of the U.K. Sub for any accounting period ending on or
before the Accounts Date and the U.K. Sub has received such intimations. No
apportionment pursuant to Section 423, Taxes Act 1988 and Schedule 19 has ever
been made or could be made against the U.K. Sub. The U.K. Sub has at all times
been a
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"trading company" or a "member of a trading group" as defined in Schedule 19,
paragraph 7, Taxes Act 1988. The U.K. Sub has not expended or applied any sums
liable to be regarded as income available for distribution pursuant to Schedule
19, paragraph 8, Taxes Act 1988 (first business loans) and is not bound
(contingently or otherwise) to expend or apply any such sum.
(n) If each of the capital assets of the U.K. Sub were disposed of
for a consideration equal to the book value of that asset or adopted for the
purpose of the audited accounts, no liability to corporation tax on chargeable
gains or balancing charge under the Capital Allowances Act 1990 would arise (and
for this purpose there shall be disregarded any relief and allowances available
to the U.K. Sub other than amounts falling to be deducted from the consideration
receivable under Section 38, TCGA 1992). No election under Section 35, TCGA 1992
is in effect in relation to the U.K. Sub and, on or prior to the Closing Date,
full particulars are given in the Disclosure Letter of the first relevant
disposal for the purposes of that section. On or prior to the Closing Date, the
Disclosure Letter contains full particulars of all assets held by the U.K. Sub
or disposed of by the U.K. Sub on or after 6 April 1988 in respect of which
relief is or would be available under Schedule 4, TCGA 1992 upon disposal.
(o) The U.K. Sub has not disposed of or acquired any asset to or
from any Person connected with it within the meaning of Section 839, Taxes Act
1988 or in circumstances such that the provisions of Section 17, TCGA 1992 could
apply to such disposal or acquisition.
(p) The U.K. Sub has properly operated the Pay As You Earn system
deducting tax as required by law from all payments to or treated as made to
employees and ex-employees of the U.K. Sub and punctually accounting to the
Inland Revenue for all tax so deducted.
(q) The U.K. Sub has not issued any shares or conferred any
interest in shares in the circumstances described in the Section 138(1), Taxes
Act 1988 and has complied with Section 139(5), Taxes Act 1988. The U.K. Sub has
not issued any shares or conferred any interest in shares in the circumstances
described in Section 77(1) and has complied with Section 85, Finance Act 1988.
The U.K. Sub has not made any payment to which Section 313, Taxes Act 1988
applies. The U.K. Sub does not operate any share scheme approved under the
provisions of Schedule 9, Taxes Act 1988 nor a profit related pay scheme to
which the provisions of Chapter III of Part V, Taxes Act 1988 apply.
(r) The U.K. Sub has paid all national insurance and graduated
pension contributions for which it is liable and has kept proper books and
records relating to the same.
(s) The U.K. Sub has duly paid or has procured to be paid all
stamp duty on documents to which it is a party or in which it is interested and
which are liable to stamp duty.
(t) All supplies made by the U.K. Sub are taxable supplies and the
U.K. Sub is not and will not be denied credit for any input tax by reason of the
operation of Section 26, Value Added Tax Act 1994 and regulations made
thereunder. All input tax for
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which the U.K. Sub has claimed credit has been paid by the U.K. Sub in respect
of supplies made to it relating to goods or services used or to be used for the
purpose of its business. No supplies have been made to the U.K. Sub to which the
provisions of Section 8, Value Added Tax Act 1994 might apply. The U.K. Sub has
not committed any offence contrary to Section 60 or 72, Value Added Tax Act
1994, nor has it received any penalty liability notice pursuant to Section
64(3), Value Added Tax Act 1994, surcharge liability notice pursuant to Section
59, or written warranty issued pursuant to Section 76(2) of that Act. On or
prior to the Closing Date, the Disclosure Letter contains details and copies of
all elections, together with the relevant notification, made by the U.K. Sub
pursuant to paragraph 2, Schedule 10, Value Added Tax Act 1994.
3.9 Properties; Acquired Assets.
(a) Section 3.9(a) of the Disclosure Schedule contains a complete
and accurate list of (i) all real property and interests therein owned by any of
the Curtis Parties (the "Owned Real Property"), and (ii) each item of real
property leased, used or occupied by any of the Curtis Parties or in which any
of the Curtis Parties has an interest (other than real property owned by any of
the Curtis Parties) (the "Leased Property"; and together with the Owned Real
Property, the "Real Property"). The Seller has good and marketable,
indefeasible, fee simple title to the Owned Real Property, and valid leasehold
interests in the Leased Property. Except as set forth in Section 3.9(a) of the
Disclosure Schedule, and except for properties and assets disposed of in the
Ordinary Course of Business since the date of the December 31 Balance Sheet, the
Owned Real Property is free and clear of all Encumbrances or restrictions on
transfer except: (i) as reflected in the December 31 Balance Sheet or the
Closing Balance Sheet, (ii) liens for Taxes not yet due and payable or being
contested in good faith (and for which adequate accruals have been reserved on
the December 31 Balance Sheet or the Closing Balance Sheet), and (iii) such
imperfections of title and Encumbrances with respect to other properties as are
not material in character, amount or extent, and which do not detract from the
value, or interfere with the present use, of the property subject thereto or
affected thereby.
(b) Except as set forth in Section 3.9(b) of the Disclosure
Schedule, there are no developments affecting any of the Real Property pending
or, to the Knowledge of the Seller, Threatened, which might materially interfere
with any present use, or, with respect to the Owned Property, materially detract
from the value or marketability of, any such property or assets.
(c) The Seller has delivered to the Buyer correct and complete
copies of the leases and subleases listed in Section 3.9(a) of the Disclosure
Schedule (as amended to date). Except as set forth in Section 3.9(c) of the
Disclosure Schedule, all leases of the Leased Property are in good standing and
are valid, binding and enforceable in accordance with their respective terms
and, to the Seller's Knowledge, there does not exist under any such lease any
default or any event which with notice or lapse of time or both would constitute
a default. There are no disputes, oral agreements or forbearance programs in
effect as to any such lease or sublease. Except as set forth in Section 3.9(c)
of the Disclosure Schedule, each such lease or sublease will continue to be
legal, valid, binding, enforceable and in full force and effect on identical
terms following the consummation of the transactions contemplated by the
Operative Documents (including the assignments and assumptions referred to in
Section 2 above), subject
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to applicable bankruptcy, insolvency and other laws affecting creditors' rights
generally, public policy and equitable principles generally. To the Seller's
Knowledge, no condemnation, environmental, zoning, land-use or other regulatory
proceedings or rule making procedures have been instituted or planned to be
instituted, with respect to the current Leased Property, which would result in
the Curtis Parties or the Buyer being required to vacate such premises or
materially alter or limit such use, nor has the Seller received notice of any
proceedings to impose any new Taxes or operating restrictions upon any of such
properties or the Seller's conduct of the Business therein.
(d) The Facilities are in adequate condition to operate the
Business as heretofore conducted and are, to the Seller's Knowledge,
structurally sound.
(e) To the Seller's Knowledge, the Facilities have access to (i)
public roads or valid easements over private streets or private property for
such ingress to and egress from all such Facilities, and (ii) water supply,
storm and sanitary sewer facilities, telephone, gas and electrical connections,
fire protection, drainage and other public utilities, in each case as is
necessary for the conduct of the Business as heretofore conducted. To the
Seller's Knowledge, none of the Facilities encroaches upon real property of
another Person, and no structure of any other Person substantially encroaches
upon any of the Real Property.
(f) To the Seller's Knowledge, all Facilities have received all
Governmental Approvals required in connection with the operation thereof and
have been operated and maintained in accordance with applicable laws, rules and
regulations in all material respects. To the Seller's Knowledge, the Real
Property and its continued use, occupancy and operation as is currently used,
occupied and operated, does not constitute a nonconforming use under any
applicable building, zoning, subdivision or other land use or similar Legal
Requirement.
(g) Except as set forth in Section 3.9(g) of the Disclosure
Schedule, the Acquired Assets constitute substantially all of the properties and
assets used in connection with the operation of the Business in the manner in
which and to the extent to which the Business is currently being conducted. The
Acquired Assets do not omit any asset required to operate the Business as
operated by Seller immediately preceding the Effective Date or the Closing.
Except as set forth in Section 3.9(g) of the Disclosure Schedule, none of the
tangible personal property included in the Acquired Assets is subject to any
personal property or equipment leases. To the Seller's Knowledge, each such
tangible asset is in good operating condition and repair (subject to normal wear
and tear) and is suitable for the purposes for which it presently is used. As of
the Closing Date, and except as set forth in Section 3.9(a) of the Disclosure
Schedule, good and valid title to, and valid leasehold interests in, the
Acquired Assets shall vest in the Buyer, free and clear of all Encumbrances or
restrictions on transfer, except: (i) as reflected in the December 31 Balance
Sheet or the Closing Balance Sheet, (ii) liens for Taxes not yet due and payable
or being contested in good faith (and for which adequate accruals have been
reserved on the December 31 Balance Sheet or the Closing Balance Sheet), and
(iii) such imperfections of title and Encumbrances with respect to other
properties as are not material in character, amount or extent, and which do not
detract from the value, or interfere with the present use, of the property
subject thereto or affected thereby.
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(h) All of the Inventories are owned by the Curtis Parties free
and clear of all Encumbrances and are properly valued in accordance with GAAP
consistently applied by the Curtis Parties. All of the Inventories reflected in
the Financial Statements or produced or acquired thereafter have been produced
or acquired in the Ordinary Course of Business. Except to the extent of reserves
set forth in the Financial Statements for slow-moving and/or obsolete inventory,
all Inventories (a) are in good condition, (b) are saleable or usable in the
Ordinary Course of Business, and (c) are in quantities sufficient for the normal
operation of the Business in accordance with past practice. Except as set forth
in Section 3.9(h) of the Disclosure Schedule, none of the Inventories are held
on consignment by the Seller or any other Person or are subject to any
repurchase or return agreement in favor of any Person and all of the Inventories
are located at the Facilities of the Curtis Parties or are in transit in the
Ordinary Course of Business. Since December 31, 1999, the Inventories have not
materially increased or decreased other than in the Ordinary Course of Business.
3.10 Intellectual Property.
(a) The Curtis Parties own or have the right to use pursuant to
license, sublicense, agreement or permission all Intellectual Property necessary
for or used in the operation of the Business as presently conducted. Each item
of Intellectual Property owned or used by the Curtis Parties immediately prior
to the Closing hereunder will be owned or available for use by the Buyer on
substantially identical terms and conditions immediately subsequent to the
Closing hereunder. The Seller has taken all necessary action to maintain and
protect each item of Intellectual Property that the Curtis Parties or any of
them own or use in connection with the Business.
(b) None of the Curtis Parties has interfered with, infringed
upon, misappropriated or otherwise come into conflict with any Intellectual
Property rights of third parties, and none of the directors and officers (and
employees with responsibility for Intellectual Property matters) of the Curtis
Parties, to the Knowledge of the Seller, has ever received any charge,
complaint, claim, demand or notice alleging any such interference, infringement,
misappropriation or violation (including any claim that the Curtis Parties must
license or refrain from using any Intellectual Property rights of any third
party). To the Knowledge of Seller, no third party has interfered with,
infringed upon, misappropriated or otherwise come into conflict with any
Intellectual Property rights of the Curtis Parties.
(c) The Seller does not own any patents or patent registrations,
issued or pending. The Seller does not hold any rights under patent licenses or
patent agreements. The Seller has not granted any license, agreement, right or
other permission to any third party with respect to its Intellectual Property,
except as set forth in Section 3.10(c) of the Disclosure Schedule. Section
3.10(c) of the Disclosure Schedule also identifies each trade name, and
registered and unregistered trademark presently used by the Seller in connection
with the operation of the Seller's Business (collectively, the "Trade Names").
With respect to each item of Intellectual Property required to be identified in
Section 3.10(c) of the Disclosure Schedule:
(i) the Seller possesses all right, title and interest in
and to the item, free and clear of any Encumbrance, license or other
restriction;
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(ii) the item is not subject to any outstanding injunction,
judgment, order, decree, ruling or charge;
(iii) no Proceeding, complaint, claim or demand is pending
or Threatened which challenges the legality, validity, enforceability, use or
ownership of the item; and
(iv) The Seller has not agreed to indemnify any Person for
or against any interference, infringement, misappropriation or other conflict
with respect to the item.
(b) There exists no Intellectual Property that any third party
owns and that the Seller uses pursuant to license, sublicense, agreement or
permission.
(c) The Seller will not interfere with, infringe upon,
misappropriate or otherwise come into conflict with, any Intellectual Property
rights of third parties as a result of the continued operation of the Business
as presently conducted.
3.11 Material Contracts. Section 3.11 of the Disclosure Schedule sets
forth a list of each contract to which any of the Curtis Parties is a party
which is material to the Business or which results or could reasonably be
expected to result in an annual payment to or by the Parent (in respect of the
Business) or by the Curtis Parties of at least $100,000. The Seller has
delivered to the Buyer true, complete and correct copies of each written Assumed
Contract and a description of each oral Assumed Contract. With respect to each
such Assumed Contract and except as disclosed in Section 3.11 of the Disclosure
Schedule: (a) the Assumed Contract is legal, valid, binding, enforceable and in
full force and effect, subject to applicable bankruptcy, insolvency and other
laws affecting creditors' rights generally, public policy and equitable
principles generally; (b) the Assumed Contract will continue to be legal, valid,
binding, enforceable and in full force and effect on identical terms following
the consummation of the transactions contemplated by the Operative Documents
(including the assignments and assumptions referred to in Article 2 above),
subject to applicable bankruptcy, insolvency and other laws affecting creditors'
rights generally, public policy and equitable principles generally; (c) to the
Seller's Knowledge, no party is in material breach or default, and no event has
occurred which with notice or lapse of time would constitute a breach or
default, or permit termination, modification or acceleration, under the Assumed
Contract; and (d) to the Seller's Knowledge, no party has repudiated any
provision of the Assumed Contract. The Seller has complied with all of the
material provisions of each such Assumed Contract. Except as set forth on
Section 3.11 of the Disclosure Schedule, all such Assumed Contracts can be
freely assigned to the Buyer without penalty or liquidated damages and the
assignment of each such Assumed Contract shall be valid and binding on the
Seller and the third party thereto. The writings evidencing all such Assumed
Contracts constitute the substantive agreement between the parties as to the
subject matter thereof, including, but not limited to, terms of price and
quantity.
3.12 Notes and Accounts Receivable. All accounts receivable of the
Business are reflected properly on the Curtis Parties' books and records, are
valid receivables subject to no setoffs or counterclaims, are properly reflected
on the accounts receivable aging schedules previously provided to the Buyer, are
collectible in accordance with their terms at their recorded
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amounts, subject only to the reserve for bad debts set forth on the face of the
December 31 Balance Sheet, as adjusted for the passage of time through the
Closing Date in accordance with the past custom and practice of the Curtis
Parties.
3.13 Insurance. Section 3.13 of the Disclosure Schedule contains a
complete and correct list of all insurance policies maintained by the Curtis
Parties or the Parent in respect of the Business since January 1, 1992 and as of
the date hereof and describes any self-insurance arrangements applicable to the
Business and sets forth the following information with respect to each insurance
policy (including policies providing property, casualty, liability and workers'
compensation coverage and bond and surety arrangements) to which the Parent or
any of the Curtis Parties has been a party, a named insured or otherwise the
beneficiary of coverage at any time since the Curtis Parties' respective
incorporation:
(a) the name, address and telephone number of the agent;
(b) the name of the insurer, the name of the policyholder and the
name of each covered insured;
(c) the policy number and the period of coverage;
(d) the scope (including an indication of whether the coverage was
on a claims made, occurrence or other basis) and amount (including a description
of how deductibles and ceilings are calculated and operate) of coverage;
(e) a description of any retroactive premium adjustments or other
loss-sharing arrangements; and
(f) a loss run, as of a date that is within 30 days of the Closing
Date, with respect to each such insurance policy.
With respect to each such insurance policy: (i) the policy is legal,
valid, binding, enforceable (subject to applicable bankruptcy, insolvency and
other laws affecting creditors' rights generally, public policy and equitable
principles generally) and in full force and effect; (ii) neither the Seller nor,
to the Knowledge of the Seller, any other party to the policy is in breach or
default (including with respect to the payment of premiums or the giving of
notices), and no event has occurred which, with notice or the lapse of time,
would constitute such a breach or default, or permit termination, modification
or acceleration, under the policy; and (iii) to the Knowledge of Seller, no
party to the policy has repudiated any provision thereof. The Seller has made
available to the Buyer complete and correct copies of all such policies together
with all riders and amendments thereto.
3.14 Litigation. Section 3.14 of the Disclosure Schedule sets forth
each instance in which any of the Curtis Parties: (a) is subject to any
outstanding injunction, judgment, order, decree, ruling or charge; or (b) is a
party or, to the Knowledge of the Seller, is Threatened to be made a party to
any Proceeding of, in, or before any court or quasi-judicial or administrative
agency of any federal, state, provincial, local or foreign jurisdiction or
before any arbitrator. None of the Proceedings set forth in Section 3.14 of the
Disclosure Schedule, if decided adversely to the Parent, the Curtis Parties or
the Business, could result in any material adverse
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effect. The Seller has no Basis to believe that any such Proceeding may be
brought or threatened against the Parent, the Curtis Parties or the Business.
3.15 Employees.
(a) To the Knowledge of the Seller, no executive, key employee or
group of employees has any plans to terminate employment with any of the Curtis
Parties, and neither the Seller nor the Parent has knowledge of any reason why
any of the Curtis Parties' employees would not agree to continue his or her
employment following the Closing, PROVIDED, that he or she is offered employment
by the Buyer on terms no less favorable to such employee than those terms
currently applicable to him or her. Except as set forth on Section 3.15(a) of
the Disclosure Schedule, none of the Parent or the Curtis Parties is a party to
or bound by, nor are any of their employees otherwise subject to, any collective
bargaining agreement, nor has the Parent or any of the Curtis Parties
experienced any strikes, grievances, claims of unfair labor practices or other
collective bargaining disputes since January 1, 1992. To the Knowledge of the
Seller or Parent, none of the Parent or the Curtis Parties has committed any
unfair labor practice with respect to employees of the Curtis Parties. Neither
the Seller nor the Parent has Knowledge of any organizational effort presently
being made or threatened or at any time during the past three years made or
threatened by or on behalf of any labor union or any representatives thereof
with respect to employees of the Curtis Parties.
(b) Attached at Section 3.15(b) of the Disclosure Schedule is a
list of all of the Seller's employees as of April 14, 2000. The Seller has
previously delivered to the Buyer a written summary of the material terms of
each such employee's employment. Except as set forth on Section 3.15(b) to the
Disclosure Schedule, the Curtis Parties have paid all salaries, wages, bonuses,
commissions, vacation pay, overtime and benefits, including termination and
severance benefits, to which their respective employees are currently entitled,
which they have earned and which are due and payable. From and after the Closing
Date, Buyer shall be exclusively liable for the payment to persons who were
employees of any of the Curtis Parties on the Closing Date due on termination of
employment, including severance benefits and all benefits under claims incurred
but not paid as of and through the Closing Date. Except as set forth on Section
3.15(b) to the Disclosure Schedule, to the Knowledge of the Seller, no employee
or former employee of any of the Curtis Parties is in breach of any employment,
confidentiality or non-competition agreement with any of the Curtis Parties or
with any other Person, and no employee or former employee has misappropriated
any Intellectual Property of any Person.
(c) To the Knowledge of the Seller, no employee or former employee
of any of the Curtis Parties, while employed by any of the Curtis Parties, has
procured or arranged for the procurement for any Person of any products and/or
services that were not then available to customers through the Business in
exchange for a fee or other form of compensation from such Person to such
employee.
(d) Section 3.15(d) of the Disclosure Schedule lists employees who
had been employed by a Curtis Party for more than one year and whose employment
with any of the Curtis Parties has been terminated for any reason during the six
month period immediately prior to the Closing. For each such employee who was in
the sales function and who was among the top 20 salespersons in annual sales
volume, Section 3.15(d) of the Disclosure Schedule also
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lists his or her sales volume for each of the two (2) years immediately
preceding the termination of his or her employment.
3.16 Employee Benefits.
(a) Set forth on Section 3.16(a) of the Disclosure Schedule is a
complete list of each Employee Benefit Plan that the Seller maintains or to
which the Seller contributes. Except as set forth on Section 3.16(a) of the
Disclosure Schedule:
(i) each Employee Benefit Plan (and each related trust,
insurance contract or fund) has at all times through the date hereof complied in
all material respects in form and in operation in all respects with the
applicable requirements of ERISA, the Code and other applicable laws;
(ii) all required reports and descriptions due on or before
the Closing Date (including Form 5500 Annual Reports, Summary Annual Reports,
PBGC-1s and Summary Plan Descriptions) will have been filed or distributed
appropriately with respect to each such Employee Benefit Plan on or before the
Closing Date. With respect to Employee Benefit Plans maintained by Seller, the
requirements of Part 6 of Subtitle B of Title I of ERISA and of Code Section
4980B have been met in all material respects with respect to each such Employee
Benefit Plan which is an Employee Welfare Benefit Plan;
(iii) with respect to Employee Benefit Plans maintained by
Seller, all contributions (including all employer contributions and employee
salary reduction contributions) which are due have been paid to each such
Employee Benefit Plan which is an Employee Pension Benefit Plan, and there is no
"accumulated funding deficiency" (as defined in Section 412 of the Code and
Section 302 of ERISA) with respect to any Employee Pension Benefit Plan. All
premiums or other payments due on or before the Closing Date for all periods
ending on or before the Closing Date have been paid with respect to each such
Employee Benefit Plan which is an Employee Welfare Benefit Plan;
(iv) with respect to Employee Benefit Plans maintained by
Seller, except as disclosed in Section 3.16(d) of the Disclosure Schedule, no
Employee Benefit Plan provides benefits, including death or medical benefits,
beyond termination of service or retirement other than (a) coverage mandated by
law or (b) death or retirement benefits under an Employee Benefit Plan qualified
under Section 401(a) of the Code. Except as disclosed in Section 3.16(d) of the
Disclosure Schedule, none of the Curtis Parties or their ERISA Affiliates has
made a written or oral representation to any current or former employee
promising or guaranteeing any employer-paid continuation of medical, dental,
life or disability coverage for any period of time beyond retirement or
termination of employment;
(v) with respect to Employee Benefit Plans maintained by
Seller, each Employee Benefit Plan which is an Employee Pension Benefit Plan
(other than a plan described in Section 401(a)(1) of ERISA) meets the
requirements of a "qualified plan" under Code Section 401(a) and each such
Employee Benefit Plan and each Employee Benefit Plan which is a voluntary
employee beneficiary association has received a favorable
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determination letter from the Internal Revenue Service, or such letter is
pending or such Employee Benefit Plan is an adopted standardized prototype plan
that has received such a letter;
(vi) with respect to Employee Benefit Plans maintained by
Seller, each such Employee Benefit Plan which is an Employee Pension Benefit
Plan (other than any Multiemployer Plan) has been funded in compliance with the
requirements of ERISA and Code Section 412; and
(vii) the Seller has delivered to the Buyer correct and
complete copies of the plan documents and summary plan descriptions, the most
recent determination letter received from the Internal Revenue Service, the most
recent Form 5500 Annual Report and the most recent actuarial report of an
Employee Pension Benefit Plan and all related trust agreements, insurance
contracts and other funding agreements which implement each such Employee
Benefit Plan.
(b) Except as disclosed in Section 3.16(b) of the Disclosure
Schedule, with respect to each Employee Benefit Plan maintained or contributed
to by Seller or its ERISA Affiliates (while such entities were ERISA Affiliates
of Seller):
(i) no such Employee Benefit Plan which is an Employee
Pension Benefit Plan (other than any Multiemployer Plan) has been completely or
partially terminated or been the subject of a Reportable Event as to which
notices would be required to be filed with the PBGC. No Proceeding by the PBGC
to terminate any such Employee Pension Benefit Plan (other than any
Multiemployer Plan) has been instituted or threatened;
(ii) there have been no Prohibited Transactions with respect
to any such Employee Benefit Plan. No Fiduciary has any Liability for breach of
fiduciary duty or any other failure to act or comply in connection with the
administration or investment of the assets of any such Employee Benefit Plan. No
Proceeding with respect to the administration or the investment of the assets of
any such Employee Benefit Plan (other than routine claims for benefits) is
pending or, to the knowledge of the directors and officers of the Seller,
threatened. None of the directors and officers of the Seller has any knowledge
of any Basis for any such Proceeding; and
(iii) the Seller has not incurred, and none of the directors
and officers of the Seller has any reason to expect that the Seller will incur,
any Liability to the PBGC (other than PBGC premium payments which are not yet
due) or otherwise under Title IV of ERISA (including any withdrawal Liability)
or under the Code with respect to any such Employee Benefit Plan which is an
Employee Pension Benefit Plan.
(c) With respect to Employee Benefit Plans maintained by or
contributed to by Seller and its ERISA Affiliates, Seller and its ERISA
Affiliates (while such entities were ERISA Affiliates of Seller) do not
contribute to, have never contributed to, or have never been required to
contribute to any Multiemployer Plan or has no Liability (including withdrawal
Liability) under any Multiemployer Plan.
(d) With respect to Employee Benefit Plans maintained by Seller,
except as disclosed in Section 3.16(d) of the Disclosure Schedule, the Seller
does not maintain,
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has never maintained or contributed to, and has never been required to
contribute to, any Employee Welfare Benefit Plan providing medical, health or
life insurance or other welfare-type benefits for current or future retired or
terminated employees, their spouses or their dependents (other than in
accordance with Code Section 4980B).
(e) Except as disclosed in Section 3.16(e) of the Disclosure
Schedule, the Seller's and the Parent's execution of this Agreement and
performance of the transactions contemplated by the Operative Documents do not
and will not constitute an event under any Employee Benefit Plan that will
result in any payment (whether as severance pay or otherwise), acceleration,
vesting or increase in benefits with respect to any employee. With respect to
Employee Benefit Plans maintained by Seller, no Employee Benefit Plan provides
for "parachute payments" within the meaning of Section 280G of the Code.
(f) UK Sub Pensions.
(i) Save for the Schemes, the UK Sub is neither a party to
nor participates in nor contributes to any private scheme, arrangement or
agreement (whether legally enforceable or not) for the provision of any pension,
retirement, death, incapacity, sickness, disability, accident or other like
benefits (including the payment of medical expenses) for any Relevant Employee
or for the widow, child or dependant of any Relevant Employee.
(ii) To the Knowledge of Seller, the UK Sub (a) has not
given any undertaking or assurance (whether legally enforceable or not) to any
Relevant Employee or to any widow, child or dependant of any Relevant Employee
as to the introduction, improvement or increase of any benefit of a kind
described in Section 3.16(f)(i) above; or (b) is not paying nor has in the last
three years paid any benefit of a kind described in (i) above to any Relevant
Employee or the widow, child or dependant of any Relevant Employee.
(iii) All material details relating to the Schemes that have
been requested by Buyer have been made available to Buyer
(iv) Contributions to the Schemes are not paid in arrears
and all contributions and other amounts which have fallen due for payment have
been paid and no fees, charges or expenses referable to the Schemes for which
the UK Sub is or may become liable (whether wholly or in part) have been
incurred but not paid and the UK Sub has reimbursed any person who has paid any
such fees, costs and expenses if and to the extent that the UK Sub is or may
become liable so to do.
(v) The UK Sub has been admitted to participation in the
Schemes; to the Knowledge of Seller, has observed and performed those provisions
of the Schemes which apply to it; and may terminate its liability to contribute
to the Schemes without notice, without the consent of any person and without
further payment.
(vi) Except as otherwise provided in this clause (vi), the
Schemes provide only money purchase benefits (within the meaning of the Pension
Scheme Act of 1993. All benefits (which are not money purchase benefits as
aforesaid) payable in the event of death while in employment to which the
Schemes relate are insured fully under a policy with an insurance company of
good repute and, to the Knowledge of Seller, there are no grounds on
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which that company might avoid liability under that policy. The Schemes are
exempt approved schemes (within the meaning of the Income and Corporation Taxes
Act 1988, Section 592), to the Knowledge of Seller, comply with and have at all
times been administered in accordance with all applicable laws, regulations and
requirements (including those of the Inland Revenue and of trust law).
(vii) The trustees of the Schemes are not engaged in any
litigation or arbitration proceedings and, to the Knowledge of Seller, no
litigation or arbitration proceedings are pending or Threatened by or against
the trustees of the Schemes and there are no facts likely to give rise to any
litigation or arbitration.
(viii) The UK Sub is the only employer for the time being
participating in the Schemes. No employer which has previously participated in
the Schemes has any claim under the Schemes and, in respect of any such
employer, the Schemes has been partially wound up in accordance with its
provisions.
(ix) In relation to the Schemes or the assets or previous
assets thereof, neither the UK Sub nor the trustees or administrator of the
Schemes has given an indemnity or guarantee to any person (other than in the
case of the UK Sub any general indemnity in favor of the trustees or
administrator under the documents governing the Schemes).
3.17 Environment, Health and Safety. Except as set forth on Section
3.17 to the Disclosure Schedule and except for matters that would not have a
material adverse effect on the Business:
(a) The Curtis Parties' officers and directors and the Curtis
Parties have complied at all times through the date hereof in all material
respects with all Environmental, Health and Safety Laws, and no Proceeding,
complaint, claim, demand or notice has been filed or commenced against any of
them alleging any failure so to comply. In addition, no notice, request for
information, or other inquiry has been received by any of them with respect to
any environmental or health and safety matters, and there has been no Threatened
Proceeding with respect to any of them under any Environmental, Health and
Safety Laws. Without limiting the generality of the preceding sentence, the
Curtis Parties have obtained and been in material compliance with all of the
terms and conditions of all Government Authorizations which are required under,
and have complied in all material respects with all other Legal Requirements
which are contained in, all Environmental, Health and Safety Laws.
(b) None of the Curtis Parties has handled or disposed of any
Hazardous Material, arranged for the disposal of any Hazardous Material, exposed
any employee or other individual to any substance or condition or owned or
operated any property or facility in any manner that could reasonably be
expected to form the Basis for any present or future Proceeding against the
Seller giving rise to any Liability for any cost of investigation, remediation
or other response actions, for damage to any property or natural resources, for
any illness of or personal injury to any employee or other individual, or for
any reason under any Environmental, Health and Safety Law or under common law.
Without limiting the generality of the foregoing, no release, emission or
discharge of any Hazardous Material into the environment has occurred or is
currently occurring in connection with the Business, or has occurred at, on,
into, under, or having originated at any Facility or property of the Curtis
Parties, except for
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minimal amounts in compliance with Environmental, Health and Safety Laws
incident to the ordinary operation of the Business.
3.18 No Bribes, Illegal Payments. To the Knowledge of the Seller, no
officer, partner, employee or agent of the any of the Curtis Parties has
directly or indirectly given or agreed to give any illegal gift, contribution,
payment or similar benefit to any supplier, customer, governmental employee or
other Person who was, is or may be in a position to help or hinder the Curtis
Parties, the Business or: (a) which could subject any of the Curtis Parties or
the Buyer to any damage or penalty in any Proceeding; or (b) the
non-continuation of which in the future could result in a material adverse
effect on the business, operations, assets, prospects or condition, financial or
otherwise, of the Business or the Buyer. To the Knowledge of the Seller, no
officer, partner, employee or agent of any of the Curtis Parties has: (i)
established or maintained any unrecorded fund or asset for any purpose; or (ii)
made any false entries on any books or records furnished in connection herewith
to the Buyer.
3.19 Compliance with Fictitious Name Statutes. The Seller has complied
with all requirements of fictitious name statutes in all jurisdictions in which
it conducts business, except where the failure to so comply would not have a
material adverse effect. All of the fictitious name filings of the Seller are
listed in Section 3.19 of the Disclosure Schedule attached hereto.
3.20 Trade Payables. At the Closing, the Seller shall provide the Buyer
with a true and complete listing of all of the known outstanding trade payables
and accrued expenses of the Curtis Parties relating to the Business and incurred
in the Ordinary Course of Business (the "Pre-Closing Payables"), identifying the
amount of Pre-Closing Payables as of a date not more than ten (10) days prior to
the Closing Date.
3.21 Brokers' Fees. Except for fees payable to Brown, Gibbons, Lang &
Company, which fees shall be the responsibility of the Seller, the Seller has no
Liability or obligation to pay any fees or commissions to any broker, finder or
agent with respect to the transactions contemplated by the Operative Documents,
and there are no such fees or commissions incurred by or on behalf of the Seller
for which the Buyer could become liable or obligated.
3.22 Year 2000 Compliance. To the Knowledge of the Seller, all material
items, products, software, components and systems used in the operation of the
Business, which incorporate the processing of dates or date-related data
(including, but not limited to, representing, calculating, comparing and
sequencing), including, but not limited to, computer systems, infrastructure
items, software applications, hardware and related equipment and utilities are
currently Y2K-Compliant.
3.23 Transactions with Affiliates; Conflicts of Interest. Except as set
forth in Section 3.23 of the Disclosure Schedule, to the Knowledge of Seller, no
(a) director, officer, employee or stockholder of any of the Curtis Parties or
the Parent or their respective Affiliates, nor (b) to the Seller's and the
Parent's Knowledge, any corporation, partnership, trust or other entity in which
any such person, or any member of the family of any such person, is an officer,
director, trustee, partner or holder of more than five percent (5%) of the
outstanding capital stock, is a party to any transaction with any of the Curtis
Parties, including any contract agreement or other arrangement providing for the
employment of, furnishing of services by, rental of real or personal property
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from or otherwise requiring payments to, any such person or firm. To the
Seller's and the Parent's Knowledge, none of such persons has any direct or
indirect ownership interest in any firm or corporation which competes with the
Curtis Parties, except that employees, officers, directors and stockholders of
the Seller, and their families, may own stock in a publicly traded company that
competes with the Curtis Parties, provided such stock ownership does not exceed
five percent (5%) of the issued and outstanding capital stock of such competing
company. For purposes of this Agreement, a company shall be considered to be
"competing" if it engages in any business that is similar to the Business as of
the date of this Agreement.
3.24 Promotional Programs. A complete description of the Curtis
Parties' promotional programs including a summary of the constituent components
and eligible participants is set forth on Section 3.24 of the Disclosure
Schedule.
3.25 Investment Canada Act. The Canadian Sub does not provide
"transportation services" or "financial services" and is not a "cultural
business" within the meaning of the Investment Canada Act.
3.26 Competition Act (Canada). The Curtis Parties do not have assets in
Canada that exceed in the aggregate, Cdn.$35 million in aggregate value and do
not have gross revenues from sales in, from, or into Canada, that exceed, in the
aggregate, Cdn.$35 million in value, determined for purposes of and in the
manner prescribed by the Competition Act (Canada).
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE BUYER
As a material inducement to the Seller and the Parent to enter into
this Agreement and to consummate the transactions contemplated hereunder and
thereunder, the Buyer represents and warrants to the Seller and the Parent that
each of the statements contained in this Article 4 (and in the applicable
Sections of the Disclosure Schedule) is true and correct as of the date of this
Agreement and will be true and correct at and as of the Closing.
4.1 Organization of the Buyer. The Buyer is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
Delaware and has full power and authority to carry on its business as it is now
being conducted.
4.2 Authorization of Transaction. The execution, delivery and
performance of the Operative Documents by the Buyer and the performance by the
Buyer of the transactions contemplated thereby shall have been duly authorized
and approved by all necessary corporate proceedings of the Buyer as of the
Closing Date. This Agreement has been duly executed and delivered by the Buyer
and constitutes a valid and binding agreement of the Buyer, enforceable against
the Buyer in accordance with its terms subject to applicable bankruptcy,
insolvency and other laws affecting creditors' rights generally, public policy
and equitable principles generally. The Buyer has full power and authority
(including full corporate power and authority) to execute and deliver the
Operative Documents and to perform its obligations thereunder.
4.3 Noncontravention. The execution and delivery of the Operative
Documents by the Buyer, and the consummation of the transactions contemplated
thereby (including the
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assignments and assumptions referred to in Article 2 above), (a) will not
violate any provision of the Certificate of Incorporation or Bylaws of the
Buyer, (b) will not violate any statute, rule, regulation, order or decree of
any Governmental Body by which the Buyer or any of its properties or assets is
bound, and (c) will not result in a violation or breach of, or constitute a
default under, any license, franchise, permit, indenture, agreement or other
instrument to which the Buyer is a party, or by which the Buyer or any of its
properties or assets is bound, excluding from the foregoing clauses (b) and (c)
violations, breaches or defaults which, either individually or in the aggregate,
would not prevent the Buyer from performing its obligations under the Operative
Documents or consummation of the transactions contemplated thereby. Except as
set forth in Section 4.3 of the Disclosure Schedule, the Buyer does not need to
give any notice to, make any filing with, or obtain any Consent from any Person
in connection with the execution and delivery of this Agreement or the
consummation or performance of the transactions contemplated hereby and by the
Operative Documents. Except for filings required under the HSR Act, the Buyer is
not and will not be required to make any filing or registration with, or obtain
any Consent from, any Person in connection with the execution and delivery of
this Agreement and the consummation or performance of the transactions
contemplated hereby and by the Operative Documents.
4.4 Proceedings. There is no Proceeding pending or, to the Knowledge of
the Buyer, Threatened against the Buyer, that would have a material adverse
effect on the Buyer's ability to perform its obligations under the Operative
Documents.
4.5 Brokers or Finders. No agent, broker or Person acting on behalf of
the Buyer is, or will be, entitled to any commission or broker's or finder's fee
from any of the Parties or their Affiliates in connection with any of the
transactions contemplated by the Operative Documents.
ARTICLE 5
PRE-CLOSING COVENANTS
The Parties agree as follows with respect to the period between the
execution of this Agreement and the Closing (except with respect to the final
clause of Section 5.2, which shall survive the Closing):
5.1 General. Each of the Parties will use its reasonable best efforts
to take all action and to do all things necessary, proper or advisable in order
to consummate and make effective the transactions contemplated by the Operative
Documents (including satisfaction, but not waiver, of the Closing conditions set
forth in Article 7 below).
5.2 Notices and Consents; Governmental Authorizations. The Seller will
give any notices to third parties, and will use its best efforts to obtain any
Consents and non-disturbance agreements that the Buyer reasonably may request in
connection with the matters referred to in Section 3.3 above and/or to effect
transfers of the Assumed Contracts or the leases or subleases referred to in
Section 3.9(a) of the Disclosure Schedule. Subject to the Buyer's right to
require that all Consents be delivered as a condition to Closing, if a Consent
is not obtained with respect to any such contract or
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agreement, the Seller will use, and will cause the Curtis Subsidiaries to use,
their commercially reasonable efforts to continue to maintain in effect such
contract or agreement and will otherwise assist the Buyer with respect to the
transfer of any claims or rights thereunder. Each of the Parties will give any
required notices, make any filings with, and use its reasonable best efforts to
obtain any Governmental Authorizations in connection with the matters referred
to in Sections 3.3, 3.11 and 4.3 above; PROVIDED, that at any time and from time
to time after the Closing, to the extent that any contract or agreement may not
effectively be assigned to the Buyer, the Seller hereby covenants and agrees to
perform and enforce such contract or agreement or portion thereof for the
benefit of the Buyer, at the Buyer's request and sole expense.
5.3 Operation of Business The Seller will not, and it will not allow
the Curtis Subsidiaries to, engage in any practice, take any action, or enter
into any transaction outside the Ordinary Course of Business without obtaining
the prior written consent of the Buyer. Without limiting the generality of the
foregoing, the Seller will not: (a) declare, set aside or pay any dividend or
make any distribution with respect to its capital stock or redeem, purchase or
otherwise acquire any of its capital stock; or (b) otherwise engage in any
practice, take any action, or enter into any transaction of the sort described
in Section 3.5 above; notwithstanding anything else provided herein, Seller
shall be entitled to retain all Cash held by the U.K Subsidiary or the Canadian
Subsidiary and it shall not constitute a violation of the covenants set forth in
Article V hereto to transfer cash to Buyer from either such subsidiary (i) in
satisfaction of any intercompany account payable of either such subsidiary, (ii)
as a distribution, or (iii) otherwise.
5.4 Preservation of Business. The Seller will use its best efforts to
keep the Business and properties substantially intact, including the Curtis
Parties' present operations, physical facilities, goodwill, working conditions
and relationships with lessors, licensors, suppliers, customers and employees.
5.5 Full Access. Until termination of this Agreement or Closing
pursuant to the terms hereof, the Seller will permit representatives of the
Buyer to have reasonable access during normal business hours and upon reasonable
notice, and in a manner so as not to interfere with the normal business
operations of the Seller, to all premises, properties, personnel, books, records
(including Tax records), contracts and documents of or pertaining to the
Business or the Curtis Parties.
5.6 Notice of Developments. Each Party will give prompt written notice
to the other Party of any material adverse development causing a breach of any
of its own representations and warranties in Article 3 and Article 4, as the
case may be. No disclosure by any Party pursuant to this Section 5.6, however,
shall be deemed to amend or supplement the Disclosure Schedule or to prevent or
cure any misrepresentation, breach of warranty or breach of covenant.
5.7 Exclusivity. Until termination of this Agreement or Closing
pursuant to the terms hereof, the Seller will not: (a) solicit, initiate or
encourage the submission of any proposal or offer from any Person relating to
the acquisition of any capital stock or other voting securities, or any
substantial portion of the assets, of any of the Business or the Curtis Parties
(including any acquisition structured as a merger, consolidation or share
exchange); or (b) participate in any discussions or negotiations regarding,
furnish any information with respect to, assist or
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participate in, or facilitate in any other manner any effort or attempt by any
Person to do or seek to do any of the foregoing.
5.8 Resignations. Seller will obtain resignations effective as of the
Closing of the officers and directors of the Curtis Parties specified by Buyer.
ARTICLE 6
COVENANTS WHICH SURVIVE THE CLOSING
6.1 Confidentiality Covenant. Except as set forth below, neither the
Seller, the Curtis Subsidiaries or the Parent, on the one hand, nor the Buyer,
on the other hand, nor any of their respective Affiliates, shall at any time
from and after the execution of this Agreement, directly or indirectly, without
the prior written consent of the other Party, disclose or use, in any way
harmful to the business, operations, assets, prospects or condition of the
Business, the other Party or any of its Affiliates, or otherwise contrary to the
interests of such other Party or its Affiliates, any information involving or
relating to the other Party or any of its Affiliates or any business, venture or
other activity of such other Party, past, present or future, actual or
prospective; PROVIDED, HOWEVER, that such information shall not include any
information known generally to the public (other than as a result of disclosure
in violation hereof by a Party or any of its Affiliates), or disclosed to such
Party on a nonconfidential basis from a third party, PROVIDED, that such third
party is not bound by a confidentiality agreement with or other obligation of
confidentiality or secrecy with respect to such information under an agreement
or applicable law, and FURTHER PROVIDED, that the Parties and their Affiliates
may disclose such confidential information to their respective advisors who
shall be bound by the provisions of this Section 6.1. Notwithstanding the
foregoing, the provisions of this Section 6.1 shall not prohibit any disclosure
required by law in connection with any judicial or administrative proceeding or
inquiry. This Section 6.1 shall survive the Closing or termination of this
Agreement for any reason whatsoever; PROVIDED, HOWEVER, that this Section 6.1
shall not prevent the Buyer and its Affiliates from using confidential
information relating to the Acquired Assets, the Business and/or the Curtis
Parties from and after the Closing in connection with the operation of the
Business and the Acquired Assets.
6.2 Non-Competition and Non-Solicitation Covenants. The Seller, for
itself and the Curtis Subsidiaries, hereby acknowledges that the success of the
business of the Buyer (including, without limitation, after giving effect at the
Closing to the sale and transfer to the Buyer of the Acquired Assets) depends,
among other things, upon the absence of competition from the Curtis Parties, the
Parent and their respective Affiliates, and the continued preservation of the
confidentiality of certain information acquired from the Curtis Parties, the
Parent and their respective Affiliates pursuant to Section 6.1. Each of the
Seller and the Parent hereby further acknowledges that an absence of such
competition and the preservation of the confidentiality of such information is
an essential premise of the bargain by and among the Parties, and that the Buyer
would be unwilling to enter into the Operative Documents in the absence of this
Section 6.2. Accordingly, commencing on the Closing Date and continuing for a
period of two (2) years, the Parties agree to the following:
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(a) Except as set forth on Section 6.2(a)(i) of the Disclosure
Schedule, none of the Seller, the Parent or their stockholders shall, directly
or indirectly, own, manage, operate, control or participate in any manner in the
ownership, management, operation or control of, or be connected as an officer,
employee, partner, director, consultant, agent or otherwise with, or have any
financial interest in, or aid or assist anyone else in any business that is a
direct competitor of the Business (taking into consideration products, markets
and distribution methods and channels to customers), as conducted by Seller
prior to the Closing.
(b) Except with the Buyer's prior written consent, none of the
Seller, the Parent or their stockholders or corporate Affiliates shall, directly
or indirectly, recruit, employ as a result of any such recruitment, or otherwise
seek to induce by any means any person who was employed by any of the Curtis
Parties within six months preceding the Closing Date to terminate his or her
employment, to violate any agreement with or duty to the Buyer or any Affiliate
of the Buyer, or to hire any such employee.
(c) None of the Curtis Parties, the Parent or their Affiliates
shall, directly or indirectly, solicit or encourage any Person who is a client
of the Business to terminate its relationship with the Business.
(d) Enforcement. The Parties acknowledge and agree that, because
legal remedies may be inadequate in the event of a breach of, or other failure
to perform, any of the covenants and obligations set forth in this Section 6.2,
the non-breaching Party may, in addition to obtaining any damages available to
it, enforce this Section 6.2 by injunction and other equitable remedies. The
Seller and the Parent also acknowledge and agree that no breach by a Party of,
or other failure by such Party to perform, any of its covenants and obligations
under any of the Operative Documents or otherwise shall relieve the other Party
of any of its obligations under this Section 6.2.
(e) Severability; Etc. The Parties agree that the provisions set
forth in this Section 6.2, including without limitation as to duration and
geographic scope, are reasonable to protect the legitimate interests of the
Buyer and the goodwill associated with the Business prior to the Closing. The
provisions of this Section 6.2 are severable, and in the event that any
provision hereof should, for any reason, be held invalid or unenforceable in any
respect, it shall not invalidate, render unenforceable or otherwise affect any
other provision hereof, and such invalid or unenforceable provision shall be
construed by limiting it so as to be valid and enforceable to the maximum extent
compatible with, and possible under, applicable law.
6.3 Prorations and Adjustments.
(a) Real Estate Taxes. Real estate taxes and assessments
shall be the responsibility of Buyer and shall not be prorated as of the Closing
Date.
(b) The Seller's Accrual of Certain Employee Benefit
Obligations on or Before the Closing Date. On the Closing Balance Sheet, Seller
shall fully accrue for all vested and accrued employee vacation, holiday pay,
sick leave and like expense for the Seller's employees through the Closing Date.
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(c) Survival at Closing. The provisions of this Section 6.3
shall survive the Closing for twelve (12) months.
6.4 Further Assurances. Each of the Parties hereto, upon the request
from time to time of the other Party hereto and without further consideration,
will do each and every act and thing as may be necessary or reasonably requested
to consummate the transactions contemplated hereby (including, without
limitation, the orderly transfer to the Buyer of the Acquired Assets and
assumption by the Buyer of the Assumed Liabilities), including without
limitation: (i) executing, acknowledging and delivering assurances, assignments
and other documents and instruments, furnishing information and copies of
documents, books and records (including without limitation tax records); (ii)
filing reports, returns, applications, filings and other documents and
instruments with governmental authorities; (iii) taking such steps as shall be
necessary to enter the Buyer upon the books of the Canadian Sub as the holder of
all of the issued and outstanding capital stock of the Canadian Sub and to issue
stock certificates to the Buyer representing such shares; and (iv) cooperating
with each other party hereto in exercising any right or pursuing any claim,
whether by litigation or otherwise, other than rights and claims running against
the party from whom or which such cooperation is requested. This Section 6.4
shall survive the Closing for an unlimited period of time.
6.5 Disclosure of Breach or Futility. If, prior to Closing, any Party
acquires knowledge of: (a) a material misrepresentation or material breach by
any other Party; or (b) an event, occurrence or circumstance making satisfaction
of a condition in Section 7.1 or 7.2 hereof unlikely, the Party acquiring such
knowledge shall give prompt written notice thereof to each other Party in
sufficient detail to permit a reasonable analysis thereof. Any due diligence
undertaken by the Buyer hereunder shall not diminish the Buyer's right to rely
upon the representations, warranties and agreements of the Seller and the Parent
in this Agreement.
6.6 Transition Services. During the sixty (60) day period following the
Closing, the Seller and the Parent shall work with the Buyer to develop mutually
agreeable arrangements with respect to transition services for the benefit of
the Buyer, such transition services, if any, to be made available to the Buyer
throughout the twelve (12) month period immediately following the Closing.
6.7 Offers of Employment; Employee Plan Matters.
(a) The Buyer shall offer employment, commencing on the Closing
Date, to all employees of the Curtis Parties, such employment offers to include
no less base compensation and other compensation and benefits in the aggregate
not less favorable than the compensation and benefits provided by the Curtis
Parties immediately prior to the Closing. In addition, Buyer shall offer
employment to A. Keith Drewett and Idelle K. Wolf under employment agreements
that are no less favorable in the aggregate than their employment agreements
respectively dated July 2, 1998 and July 20, 1998. With respect to each employee
who accepts employment with Buyer as of the Closing, Buyer shall adopt a
severance pay plan or arrangement that is identical to the severance pay plan or
arrangement which was provided by the Curtis Parties to such employee on the
Closing Date. Such severance pay plan or arrangements shall include, without
limitation, the Curtis Industries, Inc. Severance Pay Plan for Certain
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Executive Employees, the Curtis Industries, Inc. Severance Benefit Plan for
Certain Executive Employees, the Curtis Industries, Inc. Severance Pay Benefit
Plan for Landerhaven Headquarters Employees (exempt and non-exempt), and the
severance pay provisions of paragraph 4 of the employment agreements with A.
Keith Drewett (dated July 2, 1998) and Idelle K. Wolf (dated July 20, 1998).
After the Closing Date, Buyer may amend or terminate any of the aforementioned
compensation arrangements, plans and benefits in accordance with their
respective terms and applicable law. Buyer shall assume, and Seller shall have
no liability for, any termination liability under the Worker Adjustment and
Retraining Notification ACT of 1988 ("WARN") in connection with the transactions
contemplated hereunder, any severance pay or any other liability with respect to
the employees of the Curtis Parties. The Curtis Parties shall not attempt to
retain any of the employees to whom the Buyer has offered employment or in any
way interfere with the Buyer's attempts to employ such individuals. Buyer agrees
that the health plan coverage to be afforded to those employees of the Seller
who accept employment with the Buyer shall be coverage that, pursuant to Section
602(2)(D)(i) of ERISA, terminates any continuation coverage rights such
employees might otherwise have under the COBRA health continuation of coverage
provisions (hereinafter referred to as the "COBRA Provisions") contained in
Section 4980(f) of the Code and in Section 601 through 608 of ERISA as a result
of the termination of their employment with the Seller.
(b) Buyer shall assume Seller's existing obligation to provide
deferred compensation payments pursuant to the terms of the Deferred
Compensation Agreements with Certain Former Executives and the Supplemental
Executive Retirement Plan, each as disclosed in Section 3.16 of the Disclosure
Schedule. Buyer shall assume Seller's existing obligation to provide retiree
medical and retiree life insurance benefits pursuant to the terms of the
Postretirement Benefit Plan for Certain Former UAW Manufacturing and Executive
Employees.
(c) Buyer shall assume sponsorship of, and all of the Seller's
existing obligations to provide deferred compensation payment pursuant to, the
Area Manager Deferred Compensation Plan (the "Area Manager Plan"). At the
Closing (to the extent cash had been funded in the applicable bank account),
Seller shall transfer to Buyer in cash an amount equal to the amount funded in
any applicable bank accounts relating to deferred compensation payments under
the Area Manager Plan, determined as of the Closing Date. After the Closing
Date, with respect to the Area Manager Plan, Buyer shall be solely responsible
for (i) satisfying all obligations with respect to such plan, (ii) maintaining
such plan, including, without limitation, amending such plan to the extent
required to comply with applicable law, and (iii) all reporting and disclosure
requirements with due dates after the Closing Date. After the Closing Date,
Buyer may amend or terminate the Area Manager Plan in accordance with its terms
and applicable law.
(d) Buyer shall become the sponsoring employer of the Curtis
Industries, Inc. UAW Retirement Income Plan (the "UAW Plan"). Accordingly, the
UAW Plan shall be amended to substitute Buyer as the sponsoring employer of the
plan and, to the extent applicable, any trust or other funding arrangement for
such plan shall be likewise amended, effective as of the Closing Date. After the
Closing Date, with respect to the UAW Plan, the Buyer shall be solely
responsible for (i) making all required contributions to, and otherwise
providing funding for, all benefits accrued under the plan, (ii) the maintenance
of such plan, including, without limitation, amendment of such plan to comply
with the requirements of
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Section 401(a) of the Code, (iii) and all reporting and disclosure requirements
with due dates after the Closing Date, and (iv) any liability due with respect
to any termination of such plan. After the Closing Date, Buyer may amend or
terminate the UAW Plan in accordance with its terms and applicable law.
(e) Buyer shall become the sponsoring employer of the Curtis
Industries, Inc. 401(k) Retirement Savings Plan (the "401(k) Plan").
Accordingly, the 401(k) Plan shall be amended to substitute Buyer as the
sponsoring employer of the plan and, to the extent applicable, any trust or
other funding arrangement for such plan shall be likewise amended, effective as
of the Closing Date. Seller shall accrue on the Closing Balance Sheet, all
amounts attributable to salary deferrals of its employees made under the 401(k)
Plan prior to the Closing Date, and any employer matching contributions required
to be contributed to the plan as a result of such salary deferrals. After the
Closing Date, with respect to the 401(k) Plan, Buyer shall be solely responsible
for (i) making all required contributions to, and otherwise providing funding
for, all benefits accrued under the plan, (ii) maintenance of the plan,
including, without limitation, amendment of such plan to comply with the
requirements of Section 401(a) of the Code, and (iii) all reporting and
disclosure requirements with due dates after the Closing Date. After the Closing
Date, Buyer may amend or terminate the 401(k) Plan in accordance with its terms
and applicable law.
(f) Buyer shall become the sponsoring employer of the following
welfare benefit plans and/or programs of Curtis Industries, Inc.:
a. The Group Insurance Plan, including:
(i) The Kaiser Foundation Health Plan of Ohio,
(ii) The Kaiser Foundation Health Plan of Hawaii
(iii) The Kaiser Foundation Health Plan of Atlanta
(iv) The self-insured group health plan of Curtis
Industries, Inc. maintained with The TPA, Inc.
as third party administrator and aggregate and
specific stop-loss insurance coverage through
John Alden Life Insurance Company.
b. The Dental Insurance Plan maintained with Union Fidelity
Insurance Co.
c. The Life Insurance Plans maintained with
(i) Life Insurance Company of North America,
(ii) CNA Life Insurance Co., and
(iii) UNUM Life Insurance Co. of America.
d. The Long-Term Disability Plan maintained with UNUM Life
Insurance Company of America, the Contributory Long Term
Disability Plan maintained with Paul Revere Insurance
Company, and the Short Term Disability Plan.
e. The Group Travel Accident Insurance Program.
f. The Personal Accident Insurance Plan.
g. The Educational Assistance Plan.
h. The Section 125 Plan.
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Each of the foregoing plans is referred to herein as the
"Assumed Welfare Plans". Each of the Assumed Welfare Plans shall be amended to
substitute Buyer as the sponsoring employer of the plan and, to the extent
applicable, a likewise amendment shall be made to any insurance contract, trust,
third party administrator contract, or other funding arrangement for such plans,
effective as of the Closing Date. Seller shall pay all premiums due under
insurance contracts maintained with respect to the Assumed Welfare Plans, for
premium due dates prior to the Closing Date. All employee contributions for
coverage under an Assumed Welfare Plan which are deducted from employee
paychecks prior to the Closing Date, shall, in accordance with the applicable
plan, be applied toward the purchase of insurance prior to the Closing Date or
held under the self-insured health care plan and/or Section 125 Plan, and
transferred to Buyer as part of Buyer's assumption of such plans. After the
Closing Date, with respect to the Assumed Welfare Plans, Buyer shall be solely
responsible for (i) making all required premium payments to, and for otherwise
providing funding for, all benefits due under such plans, (ii) the maintenance
of such plans, including, without limitation, amendment of such plans to comply
with the requirements of applicable law, (iii) all reporting and disclosure
requirements with due dates after the Closing Date, and (iv) any obligations of
such plans relating to Part 6 of Subtitle B of Title I of ERISA (including
obligations arising prior to the Closing Date). After the Closing Date, Buyer
may amend or terminate the Assumed Welfare Plans in accordance with their terms
and applicable law.
6.8 Post-Closing Retention of Records. For a period of not less than
four (4) years after the Closing Date, the Buyer shall preserve and retain all
corporate, accounting, legal, auditing and other books and records pertaining to
the Acquired Assets; provided, however, such four (4) year period shall be
extended in the event that any Proceeding has been commenced or is pending or
Threatened at the expiration of such four (4) year period and such extension
shall continue until any such Proceeding has been settled or resolved with
finality or is no longer pending or Threatened. Notwithstanding the foregoing,
the Buyer may discard or destroy any of such books and records prior to the end
of such four (4) year period or period of extension if the Buyer has given the
Seller at least sixty (60) days prior written notice of the Buyer's intent to
discard or destroy such books and records and has given the Seller the
opportunity to take possession of any or all of such books and records within
said sixty (60) day period. The Buyer shall afford the Seller and its
representatives reasonable access during normal business hours to, and the right
to make copies of, all such books and records, for any legitimate purpose
(including, without limitation, in connection with the preparation,
documentation and/or handling of any financial statements, tax returns, tax
audits, reports to governmental or regulatory agencies, litigation, disputes,
claims or controversies).
6.9 Use of Trade Names. Except as set forth on Section 6.9 of the
Disclosure Schedule, the Seller agrees that, from and after the Closing, it will
not use the corporate identities and Trade Names or any variation or variations
thereof on any item disseminated to the public. From and after the Closing, the
Buyer and its Affiliates shall have the exclusive right to use the Trade Names
in connection with the Business. Effective as soon as practicable following the
Closing, the Parent, in its capacity as the sole shareholder of the Seller,
shall cause the Seller to take all necessary action to change the corporate,
assumed and trade names of the Seller in its state of incorporation and in all
states in which it is authorized to transact business on the Closing Date to a
name that does not contain any words similar or reasonably likely to be confused
with any words in the "Curtis Industries, Inc." name or any use by the Buyer
thereof
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and shall thereupon cease all use of such name. This Section 6.9 shall survive
the Closing for an unlimited period of time.
6.10 Transfer of Sponsorship of Certain Employee Benefits Plans. Prior
to the Closing, the Curtis Parties shall have adopted resolutions in form and
substance reasonably satisfactory to the Buyer to effect the transfer to the
Buyer of the sponsorship of those Employee Benefits Plans set forth on Section
6.10 of the Disclosure Schedule.
6.11 Enforcement of Confidentiality Agreements. Section 6.11 of the
Disclosure Schedule, which shall be delivered at Closing, sets forth each
confidentiality agreement or portion thereof running in favor of the Seller in
respect of the Business and/or the Acquired Assets (unless such agreement may
not be disclosed pursuant to its term). The Seller shall assign to the Buyer
each confidentiality agreement or portion thereof running in favor of the Seller
in respect of the Business and/or the Acquired Assets; PROVIDED, that at any
time and from time to time after the Closing, to the extent that any such
confidentiality agreement may not effectively be assigned to the Buyer, the
Seller hereby covenants and agrees to enforce such non-assignable
confidentiality agreement or portion thereof for the benefit of the Buyer, at
the Buyer's request and sole expense.
6.12 Canadian Sub Clearance Certificate. In the event that the Buyer is
obligated to remit tax on behalf of the Seller pursuant to Section 116(5) of the
ITA, (i) the Buyer undertakes to remit the amount payable under Section 116(5)
of the ITA to the Receiver General of Canada, on, but not before, the 30th day
of the month following in the month in which the Buyer acquires the shares of
the Canadian Sub and to obtain a receipt for such payment. If the Buyer fails to
remit as and when required by Section 116(5) of the ITA, any liability arising
as a result of such failure to comply, is and remains the sole responsibility of
the Buyer and (ii) the Seller agrees to forthwith reimburse to the Buyer any
amounts paid by the Buyer on account of the Seller's tax pursuant to Section
116(5) of the ITA and this Section 2.5(l)(i), upon receiving the payment receipt
from the Buyer.
6.13 Post Closing Tax Payments. If, during the five years following the
Closing Date, any portion of the management fee payments made in any taxable
year that began before the Closing by the U.K. Sub are disallowed for United
Kingdom corporation tax purposes or are treated as dividends for United Kingdom
income tax purposes, or any portion of the management fee payments made in any
taxable year that began before the Closing by the Canadian Sub are disallowed
for Canadian income tax purposes or are treated as dividends for Canadian income
tax purposes, the U.K. Sub (or any successor thereto) or the Canadian Sub (or
any successor thereto) is required to pay Tax on such disallowed amounts, and
Parent or its stockholder may amend any of their United States federal income
tax returns to take a credit for any foreign taxes paid or to treat under
Revenue Procedure 99-32, 1999-34 I.R.B. 296, the disallowed portion of such
management fee payments as a loan or advance, then Parent will promptly remit to
BGI the actual tax benefit that would be available to Parent or its stockholder
from such amendment. Parent agrees that it will cooperate reasonably with Buyer,
at Buyer's expense, in seeking relief under the competent authority provisions
of the income tax convention between the United States and the United Kingdom or
the income tax convention between the United States and Canada. Parent shall not
be required to pay any amount to the U.K. Sub (or any successor thereto) or the
Canadian Sub (or any successor thereto) pursuant to Revenue Procedure 99-32,
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unless Buyer pays an equal amount to Parent (as additional consideration for
the stock of the U.K. Sub or the Canadian Sub). If Parent or its stockholder
files any amendments to its Tax Returns and any tax credit claimed is
disallowed, BGI will remit to Seller the amount relating to the tax credit
previously paid to BGI.
ARTICLE 7
CONDITIONS TO OBLIGATION TO CLOSE
7.1 Conditions to Obligation of the Buyer. The obligation of the Buyer
to consummate the transactions to be performed by it in connection with the
Closing is subject to satisfaction of the following conditions:
(a) The representations and warranties set forth in Article 3
above shall be true and correct in all material respects at and as of the
Closing Date as if made on the Closing Date.
(b) The Seller shall have performed and complied with all of its
respective covenants hereunder in all material respects to be performed on or
prior to the Closing.
(c) The Seller shall have procured all third party consents
specified in Section 5.2 above.
(d) The Parties shall have procured with finality all Governmental
Authorizations necessary or appropriate (i) for the continued operation of the
Business by the Buyer, on the same basis as the Curtis Parties are currently
operating the same, without the imposition of materially adverse conditions on
the Business or the Acquired Assets; and (ii) for the consummation of the
transactions contemplated by the Operative Documents. All notification filings
required to be made under the HSR Act shall have been made, all applicable
waiting periods thereunder shall have expired or been terminated without any
request from any appropriate Governmental Body for additional information or, if
additional information has been requested, all applicable extended waiting
periods shall have expired; provided, however, that the Buyer may not rely on
the condition set forth in this Section 7.1(d) if the failure to obtain the
requisite approvals or clearances under the HSR Act is a result of the Buyer's
failure to take all necessary action in accordance with Section 6.4 above.
(e) No material adverse change in the operation of the Business
shall have occurred after the Effective Date and no fact shall have arisen which
has or reasonably could be expected to have a material adverse effect on the
Acquired Assets or on the Business. Without limiting the generality of the
foregoing, for purposes of this Section 7.1(e), the termination by any employee,
customer or vendor (other than those vendors identified on Section 7.1(e) of the
Disclosure Schedule) of his, her or its relationship with any of the Curtis
Parties shall not be deemed to constitute a material adverse change in the
operation of the Business.
(f) No Proceeding shall be pending or Threatened wherein an
unfavorable injunction, judgment, order, decree, ruling or charge would: (i)
prevent
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consummation of any of the transactions contemplated by this Agreement;
(ii) cause any of the transactions contemplated by this Agreement to be
rescinded following consummation; or (iii) affect adversely the right of the
Buyer to own the Acquired Assets and to operate the Business (and no such
injunction, judgment, order, decree, ruling or charge shall be in effect).
(g) The Seller shall have paid and discharged in full all
indebtedness and removed all liens in any way affecting the Acquired Assets,
except for such liens as are expressly assumed by the Buyer as more particularly
set forth on Section 2.2(b) of the Disclosure Schedule hereto.
(h) The Seller shall have delivered to the Buyer a certificate
signed by an authorized officer of the Seller dated the Closing Date to the
effect that each of the conditions specified in Subsections 7.1(a)-(h) have been
satisfied in all respects.
(i) The Buyer shall have received from counsel to the Seller the
opinion required pursuant to Section 2.5(h) above.
The Buyer may waive any condition specified in this Section
7.1 if it executes a writing so stating at or prior to the Closing.
7.2 Conditions to Obligation of the Seller. The obligation of the
Seller to consummate the transactions to be performed by it in connection with
the Closing is subject to satisfaction of the following conditions:
(a) The representations and warranties set forth in Article 4
above shall be true and correct in all material respects at and as of the
Closing Date as if made on the Closing Date.
(b) The Buyer shall have performed and complied with all of its
covenants hereunder in all material respects required to be performed on or
prior to the Closing.
(c) No Proceeding shall be pending or Threatened wherein an
unfavorable injunction, judgment, order, decree, ruling or charge would: (i)
prevent consummation of any of the transactions contemplated by this Agreement;
or (ii) cause any of the transactions contemplated by this Agreement to be
rescinded following consummation (and no such injunction, judgment, order,
decree, ruling or charge shall be in effect).
(d) The Buyer shall have delivered to the Seller a certificate
signed by an authorized officer of the Buyer to the effect that each of the
conditions specified in subsections 7.2(a)-(c) has been satisfied in all
respects.
The Seller may waive any condition specified in this Section
7.2 if it executes a writing so stating at or prior to the Closing.
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ARTICLE 8
TERMINATION
8.1 Termination of Agreement. The Parties may terminate this Agreement
as expressly provided below:
(a) The Buyer and the Seller may terminate this Agreement by
mutual written consent at any time prior to the Closing.
(b) The Buyer may terminate this Agreement by giving written
notice to the Seller at any time prior to the Closing: (i) in the event the
Seller has breached any representation, warranty or covenant contained in this
Agreement in any material respect; or (ii) if the Closing shall not have
occurred on or before the Closing Date, by reason of the failure of any
condition precedent under Section 7.1 hereof (unless the failure results
primarily from the Buyer itself breaching any representation, warranty or
covenant contained in this Agreement), and in the case of either (i) or (ii),
the Buyer has given written notice to the Seller of such breach or failure and
the Seller shall not have cured such breach or failure within fifteen (15) days.
(c) The Seller may terminate this Agreement by giving written
notice to the Buyer at any time prior to the Closing: (i) in the event the Buyer
has breached any representation, warranty or covenant contained in this
Agreement in any material respect; or (ii) if the Closing shall not have
occurred on or before the Closing Date, by reason of the failure of any
condition precedent under Section 7.2 hereof including, without limitation,
payment of the Purchase Price (unless the failure results primarily from the
Seller breaching any representation, warranty or covenant contained in this
Agreement) and in the case of either (i) or (ii), the Seller has given written
notice to the Buyer of such breach or failure and, except with respect to
payment of the Purchase Price, the Buyer shall not have cured such breach or
failure within fifteen (15) days.
8.2 Effect of Termination. Each Party's right of termination under
Section 8.1 is in addition to any other rights it may have under this Agreement
or otherwise, and the exercise of a right of termination will not constitute an
election of remedies. If this Agreement is terminated pursuant to Section 8.1,
all further obligations of the Parties under this Agreement will terminate
except that the obligations in Section 6.1 (Confidentiality), Section 10.1
(Press Releases) and Section 10.11 (Expenses) will survive; provided, however,
that if this Agreement is terminated by a Party because one or more conditions
to the terminating Party's obligations under this Agreement is not satisfied as
a result of the other Party's failure to comply with its obligations under this
Agreement, the terminating Party's right to pursue all legal remedies will
survive such termination unimpaired.
ARTICLE 9
INDEMNIFICATION
9.1 Survival of Representations. Unless specifically otherwise
provided, the Parties agree that all representations, warranties and covenants
made in the Operative Documents shall
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survive for a period of twelve (12) months after the Closing Date and shall not
be extinguished by the Closing or any investigation made by or on behalf of any
party hereto. Notwithstanding the foregoing, the representations and warranties
set forth in Sections 3.1, 3.2, 3.3, 3.7(b), 3.7(c), 3.7(d), 3.9(a), 3.9(c),
3.9(g), 3.10(a), 3.21, 4.1, 4.2, 4.3, 4.5, and 9.2(b) shall survive
indefinitely. Also notwithstanding the foregoing, any representation, warranty
or covenant for which a timely action, proceeding or claim is made pursuant to
the provisions of this Article IX shall survive beyond such twelve (12) month
period until any such action, proceeding or claim is finally determined and paid
in full.
9.2 Indemnification of the Buyer.
(a) General Indemnification. The Seller and the Parent agree,
jointly and severally, to indemnify and hold harmless the Buyer and its
Affiliates and their respective directors, officers and employees (the "Buyer
Indemnitees") from and against (A) any and all payments, damages, claims,
demands, losses, expenses, costs, obligations and liabilities, including
reasonable attorneys' fees, but excluding lost profits and consequential damages
(collectively, "Damages"), which may be asserted against or sustained or
incurred by the Buyer Indemnitees in connection with, arising out of or related
to (i) any inaccuracy in, misrepresentation, breach or alleged breach of any of
the representations, warranties, agreements, commitments, obligations, covenants
or conditions made by the Seller or the Parent hereunder; (ii) the Excluded
Liabilities; (iii) the failure of the transfer and assignment of the Acquired
Assets from the Seller to the Buyer to cause the Buyer to acquire such title to
the Acquired Assets as is represented and warranted by the Seller in this
Agreement and the Disclosure Schedule, unless such failure is caused by the
action of the Buyer; and (iv) any breach of any obligation arising under the
Assumed Contracts on or prior to the Closing Date; and (B) any and all costs and
expenses (including, but not limited to, reasonable legal expenses) incurred by
the Buyer Indemnitees in connection with the enforcement of their respective
rights hereunder. To the full extent permitted by law, the Seller and the Parent
covenant on behalf of themselves and their Affiliates not to sue any of the
Buyer Indemnitees regarding any matters referenced in this Section 9.2.
Notwithstanding the foregoing, the Seller and its Affiliates shall have the
right to enforce the performance of the Buyer's covenants and obligations set
forth in this Agreement or the other agreements contemplated hereby, to the
extent that the Seller or its Affiliate is a party thereto or otherwise entitled
to the benefits thereunder.
(b) Environmental Indemnification. Notwithstanding anything to the
contrary in this Agreement, the Seller and the Parent agree, jointly and
severally, to indemnify and hold harmless the Buyer Indemnitees, without
duplication, from and against all Damages (including, without limitation, all
reasonable costs and expenses of investigation by engineers, environmental
consultants and similar technical personnel), whether accrued, contingent,
absolute, determined, determinable or otherwise, incurred or suffered by the
Buyer Indemnitees or any of them arising out of or in connection with any fact,
condition or circumstance listed in Section 9.2(b) of the Disclosure Schedule
that constitutes a Liability under any Environmental, Health and Safety Laws as
of the Closing Date.
9.3 Indemnification of the Seller. The Buyer agrees to indemnify and
hold harmless the Curtis Parties and their Affiliates and their respective
directors, officers and employees (the "Seller Indemnitees") from and against
(A) any and all Damages which may be asserted against
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or sustained or incurred by the Seller Indemnitees in connection with, arising
out of or related to: (i) the Assumed Liabilities; (ii) any inaccuracy in,
misrepresentation, breach or alleged breach of any of the representations,
warranties, agreements, commitments, obligations, covenants or conditions made
by the Buyer hereunder; or (iii) the operation of the Business following the
Closing, except with respect to any Excluded Liabilities, and (B) any and all
costs and expenses (including, but not limited to, reasonable legal expenses)
incurred by the Seller Indemnitees in connection with the enforcement of their
respective rights hereunder. To the full extent permitted by law, the Buyer
covenants on behalf of itself and its Affiliates not to sue any of the Seller
Indemnitees regarding any matters referenced in this Section 9.3.
Notwithstanding the foregoing, the Buyer and its Affiliates shall have the right
to enforce the performance of the Parent's and Seller's covenants and
obligations set forth in this Agreement or the other agreements contemplated
hereby, to the extent that the Buyer or its Affiliate is a party thereto or
otherwise entitled to the benefits thereunder.
9.4 Procedure for Indemnification. Any party making a claim for
indemnification hereunder (the "Indemnitee") shall promptly notify the
indemnifying party (the "Indemnifying Party") of the claim in writing,
describing the claim, the amount thereof, and the basis therefor. The
Indemnifying Party shall respond to each such claim within thirty (30) days of
receipt of such notice. No action shall be taken pursuant to the provisions of
this Agreement or otherwise by the Indemnitee until the later of (a) the
expiration of the thirty (30) day response period (unless reasonably necessary
to protect the rights of the Indemnitee), or (b) thirty (30) days following the
receipt of a response within such thirty (30) day period by the Indemnitee
requesting an opportunity to cure the matter giving rise to indemnification
(and, in such event, the amount of such claim for indemnification shall be
reduced to the extent so cured within such thirty (30) day cure period). If such
demand is based on a claim by a third party, the Indemnifying Party shall have
the right to assume the entire control of the defense, compromise or settlement
thereof, including at its own expense, employment of counsel reasonably
satisfactory to the Indemnitee, and, in connection therewith, the Indemnitee
shall cooperate fully to make available to the Indemnifying Party all pertinent
information under its control. The Indemnifying Party shall not concede, settle
or compromise any such third-party claim without the consent of the Indemnitee,
which consent shall not be unreasonably withheld or delayed. No claim for
indemnification resulting from the breach or falsity of any of the
representations or warranties set forth herein or in any certificate or other
instrument delivered pursuant hereto shall be made after a date on which such
representation, warranty or agreement shall have expired under the provisions of
Section 9.1 hereof.
9.5 Limitations on Indemnity Obligations. Except as set forth in the
last sentence of this Section, the Indemnifying Party shall have no obligation
to pay any claim for indemnification hereunder unless and until the aggregate
amount of all such claims exceeds Five Hundred Thousand Dollars ($500,000) (the
"Threshold Indemnity Amount"). In the event the aggregate amount of all claims
for which an Indemnified Party seeks indemnification hereunder exceeds the
Threshold Indemnity Amount, the Indemnifying Party or Parties shall be liable
for the entire indemnity amount with respect to such aggregated claims,
including the Threshold Indemnity Amount, up to a maximum amount of Twelve
Million Five Hundred Thousand Dollars ($12,500,000) and, with respect to each if
the UK Sub and Canadian Sub, respectively, up to a maximum amount of twenty
percent (20%) of the Final Purchase Price allocated to the share of each such
subsidiary. Notwithstanding the foregoing, the limitations set forth in this
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Section 9.5 shall not apply to any claims for indemnification made pursuant to
this Article 9 (a) by any of the Buyer Indemnitees with respect to the payment
by the Seller of any post-Closing adjustment to the Final Purchase Price
pursuant to Section 2.3 hereof, or (b) by any of the Seller Indemnitees with
respect to the Assumed Liabilities or the payment by the Buyer of any
post-Closing adjustment to the Final Purchase Price pursuant to Section 2.3
hereof.
9.6 Treatment of Indemnification Payments. Any payment by an
Indemnifying Party under this Article IX will be an adjustment to the Final
Purchase Price unless a determination (as defined in Section 1313 of the Code)
with respect to the Indemnitee causes any such payment not to constitute an
adjustment to the Final Purchase Price for United States Federal income tax
purposes.
ARTICLE 10
MISCELLANEOUS
10.1 Press Releases and Public Announcements. No Party shall issue any
press release or make any public announcement relating to the subject matter of
this Agreement without the prior written approval of the other Party; provided,
however, that any Party may make any public disclosure it believes in good faith
is required by applicable law (in which case the disclosing Party will use its
reasonable best efforts to advise the other Party prior to making the
disclosure).
10.2 No Third Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any Person other than the Parties and their respective
successors and permitted assigns. Without limiting the foregoing, this Agreement
shall not confer any rights or remedies upon any present or former employee,
consultant or agent of any of the Curtis Parties or the Buyer.
10.3 Entire Agreement. This Agreement together with all other Operative
Documents constitutes the entire agreement between the Parties and supersedes
any prior understandings, agreements or representations by or between the
Parties, written or oral, to the extent they relate in any way to the subject
matter hereof.
10.4 Succession and Assignment. This Agreement shall be binding upon
and inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No Party may assign either this Agreement or
any of its rights, interests, or obligations hereunder without the prior written
approval of the other Party; provided, however, that the Buyer may: (a) assign
any or all of its rights and interests hereunder to one or more of its
Affiliates; and (b) designate one or more of its Affiliates to perform its
obligations hereunder (in any or all of which cases the Buyer nonetheless shall
remain responsible for the performance of all of its obligations hereunder).
10.5 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
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10.6 Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
10.7 Notices. All notices, requests, demands, claims and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given if (and then two
business days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient as set forth
below:
If to the Seller:
John H. Fountain, Chairman
Paragon Corporate Holdings, Inc.
7400 Caldwell Avenue
Niles, IL 60714-4690
Telecopier: 847-779-0634
If to the Buyer:
Barnes Group Inc.
123 Main Street
P.O. Box 489
Bristol, CT 06011-0489
Attention: Vice President, Business Development
Telecopier: 860-582-3226
with a copy to:
Barnes Group Inc.
123 Main Street
P.O. Box 489
Bristol, CT 06011-0489
Attention: Senior Vice President, General Counsel
And Secretary
Telecopier: 860-585-5396
Any Party may send any notice, request, demand, claim or other
communication hereunder to the intended recipient at the address set forth above
using any other means (including personal delivery, expedited courier, messenger
service, telecopy, telex, U.S. mail or electronic mail), but no such notice,
request, demand, claim or other communication shall be deemed to have been duly
given unless and until it actually is received by the intended recipient. Any
Party may change the address to which notices, requests, demands, claims and
other communications hereunder are to be delivered by giving the other Party
notice in the manner herein set forth.
10.8 Governing Law. This Agreement shall be governed by and construed
in accordance with the domestic laws of the State of New York without giving
effect to any choice or conflict of law provision or rule that would cause the
application of the laws of any jurisdiction other than the State of New York.
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10.9 Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by the
Parties. No waiver by any Party of any default, misrepresentation or breach of
warranty or covenant hereunder, whether intentional or not, shall be deemed to
extend to any prior or subsequent default, misrepresentation or breach of
warranty or covenant hereunder or affect in any way any rights arising by virtue
of any prior or subsequent such occurrence.
10.10 Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
10.11 Expenses. Each of the Buyer and the Seller will bear its own
costs and expenses (including legal fees and expenses) incurred in connection
with this Agreement and the transactions contemplated hereby, except that the
Buyer shall also pay the filing fee for the Parent's notification filing(s)
under the HSR Act with respect to the transactions contemplated by the Operative
Documents.
10.12 Construction. Any reference to any federal, state, local or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
word "including" shall mean including without limitation. Nothing in the
Disclosure Schedule shall be deemed adequate to disclose an exception to a
representation or warranty made herein unless the Disclosure Schedule identifies
the exception with reasonable particularity and describes the relevant facts in
reasonable detail. Without limiting the generality of the foregoing, the mere
listing (or inclusion of a copy) of a document or other item shall not be deemed
adequate to disclose an exception to a representation or warranty made herein
(unless the representation or warranty has to do with the existence of the
document or other item itself). The Parties intend that each representation,
warranty and covenant contained herein shall have independent significance. If
any Party has breached any representation, warranty or covenant contained herein
in any respect, the fact that there exists another representation, warranty or
covenant relating to the same subject matter (regardless of the relative levels
of specificity) which the Party has not breached shall not detract from or
mitigate the fact that the Party is in breach of the first representation,
warranty or covenant.
10.13 Joint Effort. The provisions of this Agreement have been
examined, negotiated and revised by counsel for each party, and no implication
shall be drawn against any Party by virtue of the drafting of this Agreement.
10.14 Incorporation of Exhibits and Schedules. The Exhibits and
Schedules identified in this Agreement are incorporated herein by reference and
made a part hereof.
10.15 Specific Performance. Each of the Parties acknowledges and agrees
that the other Party would be damaged irreparably in the event any of the
provisions of this Agreement are not performed in accordance with their specific
terms or otherwise are breached. Accordingly, each of the Parties agrees that,
unless otherwise expressly set forth herein, the other Party shall be entitled
to an injunction or injunctions to prevent breaches of the provisions of this
Agreement and to enforce specifically this Agreement and the terms and
provisions hereof in any action
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instituted in any court of the United States or any state thereof having
jurisdiction over the Parties and the matter (subject to the provisions set
forth in Section 10.16 below), in addition to any other remedy to which it may
be entitled, at law or in equity.
SIGNATURES APPEAR ON NEXT PAGE
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IN WITNESS WHEREOF, the Parties have caused this Agreement to be
executed by their respective duly authorized officers as of the date first
written above.
THE BUYER: THE SELLER:
BARNES GROUP INC. CURTIS INDUSTRIES, INC.
By: /s/ Philip A. Goodrich By: /s/ John H. Fountain
- --------------------------- ---------------------------------
Title: VP, Business Development Title: Chairman
------------------------- -----------------------------
THE PARENT:
----------
PARAGON CORPORATE HOLDINGS,
INC.
By: /s/ John H. Fountain
---------------------------------
Title: Chairman
------------------------------
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EXHIBIT 99.1
FOR IMMEDIATE RELEASE Contact: John H. Fountain
Chairman
(847) 779-2500
PARAGON CORPORATE HOLDINGS SIGNS DEFINITIVE AGREEMENT
TO SELL CURTIS INDUSTRIES TO BARNES GROUP
Proceeds from the sale of Curtis will be used to spur growth in
Paragon's A.B.Dick/Multigraphics business serving the graphic arts industry
NILES, Illinois-- April 27, 2000-- Paragon Corporate Holdings today announced
that it has signed a definitive agreement to sell substantially all of the
assets and related liabilities of its Curtis Industries Inc. subsidiary to
Barnes Group Inc. (NYSE: B). The transaction is expected to close in early May.
Terms of the agreement were not disclosed.
Paragon is a privately held holding company consisting of two main business
units:
- A.B.Dick/Multigraphics, an international manufacturer and distributor of
equipment, supplies and services for the graphic arts industry.
- Curtis Industries, a distributor of maintenance, repair and operating
(MRO) supplies and security products for the industrial and automotive
markets.
In January 2000, Paragon completed the acquisition of Multigraphics, Inc. and
merged it with its A.B.Dick operation to create a leading producer and marketer
of printing equipment, services and supplies sold on a global basis. The merger
is already producing substantial cost savings and new market opportunities for
Paragon.
"Curtis Industries has been profitable for Paragon since we acquired it in
December 1997," Paragon Chairman John Fountain said. "Nonetheless, we decided to
sell Curtis because, with the graphic arts industry strength we have with
A.B.Dick and Multigraphics, Curtis would not be part of our core business. The
sale of Curtis is the next step in our strategy to focus our efforts on pursuing
growth opportunities in the graphic arts industry worldwide."
Paragon will recognize a significant gain on the sale of Curtis and will use the
proceeds to continue to expand its A.B.Dick/Multigraphics business through
acquisitions and internal growth, including expanding its digital product
offerings and introducing a leading-edge e-commerce solution before the end of
the year.
For the year ended December 1999, Paragon had net sales of $248 million. Taking
into account the acquisition of Multigraphics and the sale of Curtis in 2000,
Paragon expects revenues in 2000 to be around $300 million.
<PAGE> 2
Barnes Group Inc. (http://www.barnesgroupinc.com) is a diversified international
manufacturer and distributor, serving a wide range of industrial markets with
precision metal parts and industrial supplies. Founded in 1857, Barnes Group
Inc. consists of three separate businesses with 1999 sales of $622 million.
Barnes Group employs approximately 4,000 people worldwide.
Paragon Corporate Holdings Inc. is a privately held holding company based in
Niles, Illinois. A.B.Dick/Multigraphics manufacturing operations are located in
Niles, Illinois, and Rochester, New York; and its foreign operations are located
in Canada, the United Kingdom, Belgium and the Netherlands.
This press release includes forward-looking statements that involve risks and
uncertainties. These risks and uncertainties include, but are not limited to:
(i) the Company's plans, strategies, objectives, expectations and intentions are
subject to change at any time at the discretion of the Company; (ii) the
Company's plans and results of operations will be affected by the Company's
ability to manage its growth and inventory; and (iii) other risks and
uncertainties indicated from time to time in the Company's filings with the
Securities and Exchange Commission.
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