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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): March 29, 1996
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THE TRANZONIC COMPANIES
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(Exact name of registrant as specified in its charter)
Ohio 1-5774 34-0664235
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(State or other (Commission File Number) (I.R.S. Employer
jurisdiction of Identification
incorporation) Number)
30195 Chagrin Boulevard, Pepper Pike, Ohio 44124
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(Address of principal executive offices) (ZIP Code)
Registrant's telephone number, including area code: (216)831-5757
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N/A
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(Former name or former address if changed from last report)
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Item 2. ACQUISITION OR DISPOSITION OF ASSETS
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(a) On February 29, 1996, Whitney-Corr-Pak International,
Inc. ("Buyer") entered into an Asset Purchase Agreement (the "Agreement") with
the Registrant and its wholly-owned subsidiaries, Design Trend, Inc. and
Ever-Ready Appliance Mfg. Co. (collectively, the "Subsidiaries"), pursuant to
which Buyer agreed to purchase substantially all of the assets of the
Subsidiaries (the "Assets"). The Assets sold include the accounts receivable,
proprietary rights, contract and leasehold rights, machinery, equipment,
inventory, supplies, goodwill and other tangible and intangible assets of the
Subsidiaries which were used by the Subsidiaries in connection the design,
production, manufacture and sale of laundry products, closet storage and closet
organization products, cedar storage products, and personal travel organizers
(the "Business").
Pursuant to the Agreement and as a result of arm's length
negotiations between the parties, Buyer paid to the Registrant and the
Subsidiaries on March 29, 1996 (the "Closing Date"), $10,100,000 (the "Purchase
Price"), in cash subject to certain adjustments by reason of working capital in
existence on the Closing Date compared with average working capital during a
specified twelve-month period prior to the Closing Date. Buyer assumed as of
the Closing Date certain specified liabilities of the Subsidiaries related to
the Business, including certain current liabilities. Except as specifically
provided in the Agreement, the Registrant and the Subsidiaries generally
retained all liabilities of the business arising from the operations,
activities and transactions of the Business through the Closing Date.
Pursuant to the Agreement, the Registrant and the Subsidiaries made
various representations and warranties regarding such entities and the Business
and have agreed, subject to certain limitations, to indemnify Buyer for any
breaches thereof. The Registrant and the Subsidiaries also agreed not to
compete with the Business for a period of five years.
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Item 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION
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AND EXHIBITS
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(a) Financial Statements of Business Acquired.
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Not applicable
(b) Pro Forma Financial Information Unaudited
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It is impractical to provide the required financial statements
for the acquired business at the time this Report on Form 8-K is filed. None
of the required financial statements are available at this time. The following
required financial statements will be filed by the Registrant by means of an
amendment to this Report on or about May 31, 1996:
1. The Tranzonic Companies Unaudited Pro Forma Combined
Condensed Consolidated Statement of Earnings for the
year ended February 29, 1996.
2. The Tranzonic Companies Unaudited Pro Forma Combined
Condensed Consolidated Balance Sheet dated February 29,
1996.
(c) Exhibits.
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10.1. Asset Purchase Agreement by and among Whitney-Corr-Pak
International, Inc., The Tranzonic Companies, Design
Trend, Inc. and Ever-Ready Appliance Mfg. Co. dated
February 29, 1996.
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SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
Date: April 11, 1996 THE TRANZONIC COMPANIES
By: /s/ Robert S. Reitman
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Name: Robert S. Reitman
Title: President
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ASSET PURCHASE AGREEMENT
BY AND AMONG
WHITNEY-CORR-PAK INTERNATIONAL, INC.
THE TRANZONIC COMPANIES
DESIGN TREND, INC.
AND
EVER-READY APPLIANCE MFG. CO.
February 29, 1996
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TABLE OF CONTENTS
Page
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ARTICLE I PURCHASE AND SALE; ASSUMPTION OF CERTAIN
LIABILITIES; CLOSING.................................. 1
1.1 Purchase and Sale..................................... 1
1.2 Assumption of Certain Liabilities..................... 4
1.3 Purchase Price........................................ 5
1.4 Purchase Price Adjustments............................ 5
1.5 The Closing........................................... 7
ARTICLE 2 TRANSITIONAL ARRANGEMENTS............................. 7
2.1 Sellers' Name Changes................................. 7
ARTICLE 3 CONFIDENTIALITY....................................... 8
3.1 Confidentiality Obligations of the Parties............ 8
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE PURCHASER....... 8
4.1 Organization of the Purchaser......................... 8
4.2 Authorization; Binding Effect; No Breach.............. 9
4.3 Brokerage............................................. 9
4.4 Available Capital..................................... 9
4.5 Accuracy on Closing Date.............................. 9
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF THE SELLERS......... 9
5.1 Organization and Power................................ 9
5.2 Authorization; Binding Effect; No Breach..............10
5.3 Subsidiaries; Investments.............................10
5.4 Financial Statements and Related Matters..............10
5.5 Absence of Undisclosed Liabilities....................11
5.6 Purchased Assets......................................11
5.7 Absence of Certain Developments.......................11
5.8 Tax Matters...........................................13
5.9 Contracts and Commitments.............................14
5.10 Proprietary Rights....................................16
5.11 Certain Litigation....................................17
5.12 Brokerage.............................................17
5.13 Insurance.............................................17
5.14 Employees.............................................17
5.15 ERISA.................................................18
5.16 Real Estate...........................................19
5.17 Compliance with Laws..................................20
5.18 Product Warranty......................................22
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<TABLE>
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5.19 Disclosure............................................22
5.20 Accuracy on Closing Date..............................22
ARTICLE 6 EMPLOYEES.............................................22
ARTICLE 7 SURVIVAL AND INDEMNIFICATION..........................23
7.1 Survival of Representations and Warranties............23
7.2 Indemnification Obligations of the Seller Parties.....24
7.3 Indemnification Obligations of the Purchaser..........25
7.4 Indemnification Procedures............................25
7.5 Treatment of Indemnification Payments.................27
7.6 Payment...............................................27
7.7 Arbitration Procedure.................................27
ARTICLE 8 CONDITIONS TO THE CLOSING.............................29
8.1 Conditions of the Purchaser's Obligation..............29
8.2 Conditions to the Seller Parties' Obligation..........32
ARTICLE 9 OTHER COVENANTS.......................................33
9.1 Interim Agreements of the Seller Parties..............33
9.2 Exclusivity...........................................35
9.3 Notice by the Purchaser...............................35
9.4 Additional Interim Agreements.........................35
9.5 Transaction Expenses..................................35
9.6 Further Assurances....................................36
9.7 Announcements.........................................36
9.8 Property Taxes and FICA...............................36
9.9 Financial Statements..................................37
9.10 Non-Solicitation......................................37
9.11 Non-Competition.......................................38
9.12 Access to Records.....................................38
9.13 Use of Business Names by the Purchaser................39
9.14 Accounts Receivable...................................39
9.15 Inventory.............................................41
9.16 Cooperation on Tax Matters............................42
9.17 Maintaining Non-Competition Agreements................42
9.18 Landlord Deposits.....................................42
ARTICLE 10 DEFINITIONS................................................43
10.1 Definitions...........................................43
10.2 Other Definitional Provisions.........................46
10.3 Cross Reference of Other Definitions..................47
ARTICLE 11 OTHER AGREEMENTS...........................................49
11.1 Termination...........................................49
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11.2 Remedies..............................................50
11.3 Consent to Amendments.................................50
11.4 Successors and Assigns................................50
11.5 Governing Law.........................................50
11.6 Notices...............................................50
11.7 Severability of Provisions ...........................52
11.8 Schedules and Exhibits ...............................52
11.9 Counterparts .........................................52
11.10 No Third-Party Beneficiaries .........................52
11.11 Headings .............................................52
11.12 Merger and Integration ...............................52
11.13 Risk of Loss .........................................53
11.14 Allocation of Purchase Price .........................53
11.15 Bulk Sales Law .......................................53
11.16 Actions by any Seller Party ..........................53
</TABLE>
List of Exhibits
List of Schedules
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ASSET PURCHASE AGREEMENT
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THIS ASSET PURCHASE AGREEMENT is made as of February 29, 1996,
by and among Whitney-Corr-Pak International, Inc., a Delaware corporation (the
"Purchaser"), The Tranzonic Companies, an Ohio corporation ("Parent"), Design
Trend, Inc., an Ohio corporation ("Design"), and Ever-Ready Appliance Mfg. Co.,
a Missouri corporation ("Sub"). Design and Sub are each referred to herein as a
"Seller" and collectively referred to herein as the "Sellers." Parent and the
Sellers are collectively referred to herein as the "Seller Parties." The
Purchaser and the Seller Parties are each referred to herein as a "Party" and
collectively referred to herein as the "Parties." Unless otherwise indicated,
capitalized terms used but not defined prior to their first usage herein are
defined in Section 10.1. A cross reference list of other defined terms is set
forth in Section 10.3.
The Parties agree as follows:
ARTICLE 1
PURCHASE AND SALE; ASSUMPTION OF CERTAIN LIABILITIES; CLOSING
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1.1 PURCHASE AND SALE.
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(a) PURCHASED ASSETS. Upon the terms and subject to the
conditions set forth in this Agreement, at the Closing each Seller shall sell,
assign, transfer and deliver to the Purchaser, or cause to be sold, assigned,
transferred and delivered to the Purchaser, and the Purchaser shall purchase,
free and clear of all Liens (other than Permitted Liens), all right, title and
interest of Design or Sub in all properties, assets, rights and interests of
every kind and nature, whether tangible or intangible, and wherever located and
by whomever possessed, relating to or used in the Business, except as set forth
in Section 1.1(b) below (collectively, the "Purchased Assets"), including,
without limitation:
(i) all accounts and notes receivable (whether current or
noncurrent);
(ii) all owned, issued or licensed Proprietary Rights
(including, without limitation, the names "Design-Trend," "American Homeware,"
"Pressing Supply," "Ever-Ready Appliance" and all of the Proprietary Rights
listed on the attached Proprietary Rights Schedule), along with all income,
royalties, damages and payments due or payable as of the Closing or thereafter
relating to such Proprietary Rights, including, without limitation, damages and
payments for past, present or future infringements or misappropriations
thereof, the right to sue and recover for past infringements or
misappropriations thereof and any and all corresponding rights that, now or
hereafter, may be secured throughout the world;
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(iii) all rights existing under leases, contracts, licenses,
permits, distribution arrangements, sales and purchase agreements, other
agreements and business arrangements, including, without limitation, all
contracts and agreements described on the Contracts Schedule attached hereto;
(iv) all owned or leased real property, if any, and all
plants, buildings and other improvements located on such owned or leased
property, and all easements, licenses, rights of way, permits and all
appurtenances to such owned or leased property, including, without limitation,
all appurtenant rights in and to public streets, whether or not vacated
(collectively, the "Real Estate");
(v) all leasehold improvements and all machinery, equipment
(including all transportation and office equipment), fixtures, trade fixtures,
tools, dies, molds, patterns and furniture, including, without limitation, all
such items which are located in any building, warehouse, office or other space
leased, owned or occupied by a Seller or used in connection with the Real
Estate;
(vi) all inventories of raw materials, work in process,
semi-finished and finished goods (including, without limitation, consigned
goods), stores, replacement and spare parts, packaging materials, operating
supplies, and lubricants;
(vii) all office supplies, production supplies, spare parts,
other miscellaneous supplies, and other tangible property of any kind,
including, without limitation, all property of any kind located in any
building, office or other space leased, owned or occupied, or in any warehouse
where any properties and assets of the Business may be situated;
(viii) all prepayments and prepaid expenses;
(ix) all claims, causes of action, choses in action, rights
of recovery and rights of set-off of any kind;
(x) the right to receive and retain mail, accounts
receivable payments and other communications relating to the Business;
(xi) the right to bill and receive payment for products
shipped or delivered and services performed but unbilled or unpaid as of the
Closing;
(xii) the Books and Records;
(xiii) all advertising, marketing and promotional materials
and all other printed or written materials;
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(xiv) all permits, licenses, certifications and approvals from all
permitting, licensing, accrediting and certifying agencies, and the rights to
all data and records held by such permitting, licensing, accrediting and
certifying agencies;
(xv) all goodwill as a going concern and all other intangible
properties;
(xvi) all deposits made with third parties relating to the
Business (including, without limitation, (A) deposits for rent and (B) deposits
for insurance and Taxes with respect to any Leased Real Property or other
leased property);
(xvii) all telephone numbers (e.g. "800" numbers); and
(xviii) all fixed assets included on the Latest Balance Sheet
and any and all subsequent improvements or additions thereon through the
Closing Date.
(b) EXCLUDED ASSETS. Notwithstanding Section 1.1(a), the
following assets are expressly excluded from the purchase and sale contemplated
hereby and, as such, are not Purchased Assets (collectively, the "EXCLUDED
ASSETS"):
(i) all cash and marketable securities owned by any Seller;
(ii) all monies to be received by the Sellers from the
Purchaser;
(iii) the name "Tranzonic" and the "T" logo trademark;
(iv) all rights of each Seller under this Agreement;
(v) all claims or rights of refund for federal or state
income tax paid;
(vi) all taxpayer and other identification numbers;
(vii) all seals, minute books, stock transfer books, blank
stock certificates, and other documents relating to the organization,
maintenance, and existence of each Seller as a corporation;
(viii) all deposits relating to Sellers' (A) 401(k) plan, (B)
property and casualty insurance policies and (C) employee wage garnishments;
(ix) all prepaid workers' compensation premiums;
(x) all rights of the Sellers under the Employment
Agreements
(xi) the cash surrender value of the life insurance policy
insuring the life of Glenn; and
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(xii) the capital stock of Sub.
(c) DEFERRED TRANSFERS. The Seller Parties agree that if any
permit, license, certificate, approval, intangible property or other asset (a
"Deferred Asset") is not transferred or assigned to the Purchaser on the
Closing Date, and such Deferred Asset would constitute a Purchased Asset if
such Deferred Asset were assignable or transferable to the Purchaser, then
until such time as such Deferred Asset has been transferred to the Purchaser,
such Deferred Asset shall be held by a Seller as the agent of the Purchaser,
for the benefit of the Purchaser. Subject to applicable Legal Requirements,
such Seller shall use all reasonable efforts to follow and implement any
reasonable written instructions received from the Purchaser relating to the
holding and use of such Deferred Asset. The Purchaser shall reimburse such
Seller and hold such Seller harmless from and against all Losses incurred as a
result of such Seller's post-Closing Date use of such Deferred Asset pursuant
to the Purchaser's instructions (other than any Losses arising out of or
relating to such Seller's gross negligence or wilful misconduct) unless the
Purchaser is otherwise entitled to indemnification for such Losses pursuant to
Section 7.2. After the Closing Date, no Seller Party shall use any Deferred
Asset for any other purpose. Such Seller shall use best efforts to transfer any
Deferred Asset to the Purchaser as soon as practicable after the Closing Date.
1.2 ASSUMPTION OF CERTAIN LIABILITIES.
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(a) ASSUMED LIABILITIES. Subject to Section 1.2(b), as additional
consideration for the Purchased Assets, at the Closing the Purchaser will
assume the following liabilities and obligations of the Sellers relating
exclusively to the Business (the "Assumed Liabilities"):
(i) all current liabilities of the Sellers(x) incurred by the
Sellers in the ordinary course of business which are set forth on the face of
the Latest Balance Sheet, rather than in any notes thereto, or (y) which are of
the type set forth on the face of the Latest Balance Sheet and are incurred by
the Sellers in the ordinary course of business since the date of the Latest
Balance Sheet (in the case of clauses (x) and (y), other than Taxes, accrued
interest, dividends, Indebtedness and intercompany liabilities); and
(ii) all obligations of the Sellers to be performed after the
Closing pursuant to (1) contractual warranties offered by the Sellers in
connection with the sale of merchandise prior to the Closing Date and (2) the
contracts, orders and commitments which are not identified by an asterisk on
the attached Contracts Schedule, other than any obligation arising out of or
relating to (x) breaches or violations of such contracts, orders and
commitments and (y) product liabilities, tortious conduct, misappropriation or
infringement, in the case of clauses (x) and (y) to the extent arising out of
facts, events, conditions or circumstances which occurred or were in existence
or failed to occur on or prior to the Closing Date;
(b) EXCLUDED LIABILITIES. Except as set forth in Section
1.2(a), the Purchaser shall not assume or become liable for, and shall not be
deemed to have assumed or have become liable for, any liability or obligation
of a Seller Party or the Business not expressly assumed by the Purchaser
pursuant to Section 1.2(a), whether accrued, absolute or contingent, whether
known or
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unknown, whether disclosed or undisclosed, whether due or to become due and
whether related to the Purchased Assets or otherwise, and regardless of when or
by whom asserted, including, without limitation, any liability or obligation
arising out of or relating to (w) negative cash balances (e.g., checks issued
prior to the Closing which have not cleared as of the Closing), (x) the
Employment Agreements, (y) the ownership, use or operation of the Business or
the Purchased Assets prior to the Closing Date and (z) facts, events,
conditions or circumstances which occurred or were in existence or failed to
occur on or prior to the Closing Date (the "Excluded Liabilities"). The
foregoing shall not be deemed to affect the Purchaser's obligation under
Section 6.
1.3 PURCHASE PRICE. The purchase price for the Purchased Assets (the
"Purchase Price") will consist of (i) $10,100,000 (as adjusted pursuant to
Section 1.4, the "Cash Purchase Price") payable to Parent on behalf of the
Sellers and (ii) the assumption by the Purchaser of the Assumed Liabilities.
1.4 PURCHASE PRICE ADJUSTMENTS.
(a) CLOSING DATE ADJUSTMENT. At the Closing, the Cash Purchase Price
will be adjusted dollar-for-dollar as set forth below:
(i) Not more than 10 business days, but in no event less than 3
business days, before the Closing Date, Parent and the Purchaser
shall, in good faith, jointly estimate Working Capital as of the open
of business on the Closing Date, on a reasonable basis using the
Sellers' then available financial information; provided, however, that
if Parent and the Purchaser cannot agree on an estimate of Working
Capital on the Closing Date, such estimate shall be deemed to be equal
to the average of Parent's and the Purchaser's good faith determination
thereof. The amount of Working Capital on the Closing Date as finally
estimated pursuant to this Section 1.4(a)(i) is referred to herein as
"Estimated Working Capital." At the Closing, if Estimated Working
Capital is less than $9,642,373, then the Cash Purchase Price will be
decreased by the amount of such deficiency. Alternatively, at the
Closing, if Estimated Working Capital is greater than $9,642,373, then
the Cash Purchase Price will be increased by the amount of such excess.
The adjustment to the Cash Purchase Price referred to in the preceding
two sentences is referred to herein as the "Closing Date Adjustment."
For all purposes hereof, "Working Capital" shall mean Purchased Assets
which are current assets (other than any current assets resulting from
any Planned Capital Expenditures) minus the sum of (x) Assumed
Liabilities which are current liabilities and (y) any liabilities
related to Planned Capital Expenditures, in each case, as determined on
a consolidated basis in accordance with the guidelines set forth on
Exhibit A attached hereto.
(ii) At the Closing, if the aggregate amount actually spent by
the Sellers up until the Closing for the capital expenditures relating
to the Purchased Assets described on the attached Capital Expenditures
Schedule (the "Planned Capital Expenditures") is less than $1,400,000,
then the Cash Purchase Price will be decreased by the amount of such
deficiency.
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(b) POST-CLOSING DETERMINATION. On or before the Closing Date, the
Purchaser and its auditors shall perform an inventory and such other procedures
(collectively, the "Closing Date Procedures") as are reasonably necessary to be
performed in order to enable the Parties to have an accurate and complete
Closing Review. Within 45 days after the Closing Date, the Purchaser and its
auditors will conduct a review (the "Closing Review") of Working Capital as of
the open of business on the Closing Date and will prepare and deliver to Parent
a computation of the amount of Working Capital as of the open of business on
the Closing Date (the "Draft Balance Sheet"). The Purchaser and its auditors
shall give Parent and its auditors an opportunity to observe the Closing Review
and shall make available to such Persons all records and work papers used in
preparing the Draft Balance Sheet. Parent shall be deemed for all purposes
hereof to have agreed with the computation of Working Capital as of the Closing
Date set forth on the Draft Balance Sheet (and such amount will be conclusive
and binding upon the Parties) unless Parent, within 20 days after receipt of
the Draft Balance Sheet, delivers a notice (an "Objection Notice") to the
Purchaser setting forth Parent's calculation of the disputed amount(s). The
Purchaser and Parent will use reasonable efforts to resolve any disagreements
as to such computations, but if they do not obtain a final resolution within 20
days after the Purchaser has received the Objection Notice, the Purchaser and
Parent will jointly retain the Chicago office of Price Waterhouse (the "Firm")
to resolve any remaining disagreements. The Purchaser and Parent shall direct
the Firm to render a determination within 60 days of its retention, and the
Parties and their respective employees shall cooperate with the Firm during its
engagement. The Firm shall consider only those items and amounts in the Draft
Balance Sheet set forth in the Objection Notice which the Purchaser and Parent
are unable to resolve. The Firm's determination shall be based on the
definition of Working Capital included herein. The determination of the Firm
will be conclusive and binding upon the Parties. The Parties shall bear the
costs and expenses of the Firm based on the percentage which the portion of the
contested amount not awarded to each Party bears to the amount actually
contested by such Party. The amount of Working Capital as of the Closing Date,
as finally determined pursuant to this Section 1.4(b), is referred to herein as
"ACTUAL WORKING CAPITAL," and the Draft Balance Sheet, as revised by the
conclusive determination pursuant to this Section 1.4(b), is referred to herein
as the "FINAL BALANCE SHEET."
(c) POST-CLOSING ADJUSTMENT. If Estimated Working Capital is less than
Actual Working Capital, the Purchaser shall, within five (5) business days
after the determination thereof, pay to Parent on behalf of the Sellers an
amount equal to such deficiency by wire transfer or delivery of other
immediately available funds. If Actual Working Capital is less than Estimated
Working Capital, the Sellers shall, within five (5) business days after the
determination thereof, pay to the Purchaser an amount equal to such deficiency
by wire transfer or delivery of other immediately available funds. In each
case, the amount of such payment shall include interest from the Closing Date
through the date of such payment on the amount of such deficiency at a rate
equal to the lesser of (i) a floating rate equal to the prime or base rate of
interest, as established and publicly announced from time to time by the First
National Bank of Chicago (which rate shall be adjusted on the effective date of
each change in such prime rate), and (ii) the maximum rate permitted by
applicable usury laws. Interest on any such unpaid amount shall be compounded
semi-annually, computed on the basis of a 360-day year consisting of twelve
30-day months and shall be payable on demand.
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1.5 THE CLOSING. The closing of the purchase and sale of the Purchased
Assets, the assumption of the Assumed Liabilities, and the transactions
relating thereto (the "Closing") will take place at the offices of Kirkland &
Ellis, 200 East Randolph Drive, Chicago, Illinois, or at such other place as is
mutually agreeable to the Parties, commencing at 10:00 a.m. local time on March
20, 1996 (or, if later and subject to Section 11.1 below, on the second
business day following 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 itself)) or such other date as the Parties may mutually
determine. The date of the Closing is herein referred to as the "Closing Date,"
and the Closing shall be deemed to occur at the opening of business on the
Closing Date. At the Closing, subject to the satisfaction or waiver of each of
the conditions specified in Sections 8.1 and 8.2:
(a) the Sellers will convey to the Purchaser good title to all
of the Purchased Assets, free and clear of all Liens (other than Permitted
Liens), and deliver to the Purchaser bills of sale, assignments of leases and
contracts and all other instruments of conveyance which are necessary or
desirable to effect transfer of the Purchased Assets (the "Sale"), which
instruments shall be in a form reasonably acceptable to the Parties;
(b) the Purchaser will deliver to the Sellers such instruments
of assumption as are required in order for the Purchaser to assume the Assumed
Liabilities (the "Assumption"), which instruments shall be in a form reasonably
acceptable to the Parties;
(c) the Purchaser will deliver to Parent on behalf of the
Sellers the Cash Purchase Price, by wire transfer of immediately available
funds;
(d) there shall be delivered to the Purchaser and the Sellers
the opinions, certificates and other documents and instruments provided to be
delivered under Article 8.
ARTICLE 2
TRANSITIONAL ARRANGEMENTS
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2.1 SELLERS' NAME CHANGES. As soon as practicable after the Closing,
each Seller Party will cause Design, Sub and each Affiliate of any Seller Party
with a corporate name which is (or which is confusingly similar to, as
determined by the Purchaser in its sole discretion) "Design Trend," "American
Homeware," "Pressing Supply" or "Ever-Ready Appliance" to change its corporate
name to a name which is not (and which is not confusingly similar to, as
determined by the Purchaser in its sole discretion) "Design Trend," "American
Homeware," "Pressing Supply" or "Ever-Ready Appliance" in order to effect the
intent of the Parties that from and after the Closing the Purchaser will have
the sole right as against the Seller Parties and all other Persons to conduct
business under such names and that the Purchaser will commence doing so at the
time of the Closing.
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ARTICLE 3
CONFIDENTIALITY
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3.1 CONFIDENTIALITY OBLIGATIONS OF THE PARTIES.
(a) DEFINITION. For purposes of this Section 3.1, "CONFIDENTIAL
INFORMATION" shall mean the trade secrets, customer lists, business plans,
financial information and other proprietary and confidential information
concerning the Business other than information that is already generally
available to the public or that becomes generally available to the public
without any breach of the confidentiality provisions of this Agreement or any
other agreement with respect to confidentiality among the Parties and/or their
Affiliates.
(b) CONFIDENTIAL TREATMENT. For a period of three years
following the Closing, each Seller Party will (and will cause each of its
Affiliates to) treat and hold as confidential all Confidential Information,
refrain from using any Confidential Information, and, at the Purchaser's
request, deliver to the Purchaser or destroy all tangible embodiments (and all
copies) of any Confidential Information which are in any such Person's or any
such Affiliate's possession; PROVIDED that Parent may disclose financial
information relating to the Business which Parent is required to disclose
pursuant to its financial reporting requirements in accordance with its past
practice.
(c) FORCED DISCLOSURE. If, during the three-year period
following the Closing, any Seller Party or any of its Affiliates is requested
or required (by oral question or request for information or documents in any
legal proceeding, interrogatory, subpoena, civil investigative demand, or
similar process) to disclose any Confidential Information, such Person will
notify the Purchaser promptly of such request or requirement so that the
Purchaser may seek an appropriate protective order or waive compliance with the
provisions of this Section 3.1. If, in the absence of such a protective order
or waiver, any Seller Party or any of its Affiliates, on the advice of counsel,
is compelled to disclose any Confidential Information, such Person will use
reasonable efforts to (i) ensure that such disclosure is limited to
Confidential Information which is so required to be disclosed and (ii) obtain
an order or other assurance that confidential treatment will be accorded to any
Confidential Information disclosed.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
-----------------------------------------------
As a material inducement to the Seller Parties to enter into this
Agreement, the Purchaser hereby represents and warrants that:
4.1 ORGANIZATION OF THE PURCHASER. The Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. The Purchaser has the requisite corporate power and authority and all
licenses, permits and authorizations necessary to enter into, deliver and carry
out its obligations pursuant to the Transaction Documents to which it is a
party.
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4.2 AUTHORIZATION; BINDING EFFECT; NO BREACH. The Purchaser's
execution, delivery and performance of each Transaction Document to which it is
a party has been duly authorized by it. Each Transaction Document to which the
Purchaser is a party constitutes a valid and binding obligation of the
Purchaser which is enforceable against the Purchaser in accordance with its
terms, except as such enforceability may be limited by (a) applicable
insolvency, bankruptcy, reorganization, moratorium or other similar laws
affecting creditors' rights generally and (b) applicable equitable principles
(whether considered in a proceeding at law or in equity). The execution,
delivery and performance by the Purchaser of the Transaction Documents to which
it is a party do not and will not (i) conflict with or result in a breach of
the terms, conditions or provisions of, (ii) constitute a default under, (iii)
result in a violation of, or (iv) require any authorization, consent, approval,
exemption or other action by or declaration or notice to any Government Entity
or other third party pursuant to, the charter or bylaws of the Purchaser or any
agreement, instrument, or other document, or any Legal Requirement, to which
the Purchaser or any of its assets is subject.
4.3 BROKERAGE. There is no claim for brokerage commissions, finders'
fees or similar compensation in connection with the transactions contemplated
by the Transaction Documents based on any arrangement or agreement which is
binding upon the Purchaser.
4.4 AVAILABLE CAPITAL. On or prior to the Closing Date, the
Purchaser will have $2 million available to it which may be used in furtherance
of the transactions contemplated herein.
4.5 ACCURACY ON CLOSING DATE. Each representation and warranty set
forth in this Article 4 and all information contained in any certificate
delivered by or on behalf of the Purchaser pursuant to this Agreement will be
true and correct as of the time of the Closing as though then made, except (a)
as affected by the transactions expressly contemplated by the Transaction
Documents and (b) to the extent that such representation or warranty by its
terms relates solely to an earlier date.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
---------------------------------------------
As a material inducement to the Purchaser to enter into this Agreement,
purchase the Purchased Assets and assume the Assumed Liabilities, the Sellers
hereby jointly and severally represent and warrant that:
5.1 ORGANIZATION AND POWER. Each Seller Party is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation. Design and Sub are each duly qualified to do
business in each jurisdiction in which its ownership of property or conduct of
business requires it to so qualify. The Organization Schedule attached hereto
lists every jurisdiction where Design or Sub is duly qualified to do business.
Each of Design and Sub has the requisite corporate power necessary to own and
operate its properties and carry on the Business, and
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each Seller Party has the requisite corporate power necessary to enter into,
deliver and carry out the transactions contemplated by the Transaction
Documents.
5.2 AUTHORIZATION; BINDING EFFECT; NO BREACH. Each Seller Party's
execution, delivery and performance of each Transaction Document to which it is
a party has been duly authorized by such Seller Party. Each Transaction
Document to which any Seller Party is a party constitutes a valid and binding
obligation of such Person which is enforceable against such Person in
accordance with its terms, except as such enforceability may be limited by (a)
applicable insolvency, bankruptcy, reorganization, moratorium or other similar
laws affecting creditors' rights generally and (b) applicable equitable
principles (whether considered in a proceeding at law or in equity). Except as
set forth on the attached Consents Schedule, the execution, delivery and
performance of the Transaction Documents to which any Seller Party is a party
do not and will not (i) conflict with or result in a breach of the terms,
conditions or provisions of, (ii) constitute a default under, (iii) result in
the creation of any Lien (other than a Permitted Lien) upon any of the
Purchased Assets under, (iv) give any third party the right to modify,
terminate or accelerate any Assumed Liability or other liability or obligation
of any Seller Party under, (v) result in a violation of, or (vi) require any
authorization, consent, approval, exemption or other action by or declaration
or notice to any Government Entity pursuant to, the charter or bylaws of any
Seller Party or any agreement, instrument or other document, or any Legal
Requirement, to which any Seller Party or any Purchased Assets are subject.
Without limiting the generality of the foregoing, none of the Sellers and any
of their Affiliates has entered into any agreement, or is bound by any
obligation of any kind whatsoever, directly or indirectly, to transfer or
dispose of (whether by sale of stock or assets, assignment, merger,
consolidation or otherwise) the Business or the Purchased Assets to any Person
other than the Purchaser other than with respect to sales of inventory in the
ordinary course of business and consistent with the Sellers' past practice.
5.3 SUBSIDIARIES; INVESTMENTS. Except as set forth on the attached
Investment Schedule, neither Sub nor Design owns or holds any Investment other
than, in the case of Design, stock of Sub and other than marketable securities
which are Excluded Assets.
5.4 FINANCIAL STATEMENTS AND RELATED MATTERS.
(a) FINANCIAL STATEMENTS. Attached to this Agreement as EXHIBIT
B are: (i) the unaudited special purpose balance sheets of the Business as of
February 28, 1995 and February 28, 1994 and the related unaudited special
purpose statements of income for the respective 12-month periods then ended and
(ii) the unaudited special purpose balance sheet of the Business as of December
31, 1995 (the "LATEST BALANCE SHEET") and the related unaudited special purpose
statement of income for the 10-month period then ended (all of such financial
statements in clauses (i) and (ii) are collectively referred to herein as the
"FINANCIAL STATEMENTS"). Each of the Financial Statements (including in all
cases the notes thereto, if any) presents fairly the financial condition of the
Business as of the dates of such statements and the results of operation for
such periods, is accurate and complete, is consistent with the books and
records of the Sellers (which, in turn, are accurate and complete) and has been
prepared in accordance with GAAP applied on a consistent basis throughout the
periods covered thereby, subject in the case of the Latest Balance Sheet to
normal year-end
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<PAGE> 15
adjustments (which will not be material individually or in the aggregate) and
the lack of footnotes and other presentation items.
(b) INVENTORY. Without limiting the generality of the foregoing,
the Financial Statements provide reserves for defective, slow-moving, obsolete
or damaged inventory calculated in accordance with GAAP.
5.5 ABSENCE OF UNDISCLOSED LIABILITIES. Except as set forth on the
attached Liabilities Schedule, the Sellers do not have any liability (whether
accrued, absolute or contingent, whether known or unknown, whether disclosed or
undisclosed, whether due or to become due and whether related to the Purchased
Assets or otherwise, and regardless of when or by whom asserted) other than:
(a) the liabilities set forth on the face of the Latest Balance Sheet, (b)
current liabilities which have arisen after the date of the Latest Balance
Sheet in the ordinary course of business and consistent with the Sellers' past
practice (none of which is a liability resulting from breach of contract,
breach of warranty, tort, infringement, violation of law or lawsuit) and (c)
other liabilities and obligations expressly disclosed and quantified in the
other Schedules to this Agreement.
5.6 PURCHASED ASSETS. Except as set forth on the attached ASSETS
SCHEDULE:
(a) the Purchased Assets constitute all of the assets and rights
(other than the Excluded Assets) which are used or useful in the Business as
currently conducted and presently proposed to be conducted by the Sellers and
are located at the locations set forth on the attached Assets Schedule;
(b) Design and/or Sub has good title to, or a valid leasehold
interest in, all of the Purchased Assets, in each case free and clear of all
Liens (other than Permitted Liens), other than (i) inventory sold in the
ordinary course of business and consistent with the Sellers' past practice,
(ii) other properties and assets disposed of in the ordinary course of business
and consistent with the Sellers' past practice since the date of the Latest
Balance Sheet (which properties and assets have a fair market value which does
not exceed $25,000 in the aggregate) and (iii) Liens disclosed on the Latest
Balance Sheet (including any notes thereto); and
(c) the equipment and other tangible assets which constitute
Purchased Assets are in good operating condition (subject to normal wear and
tear) and fit for use in the ordinary course of business and consistent with
its past practice.
5.7 ABSENCE OF CERTAIN DEVELOPMENTS. Except as set forth on the
attached DEVELOPMENTS SCHEDULE, since June 30, 1995, there has been no material
adverse change in the financial condition, operating results, assets, customer
or supplier relations, employee relations or business prospects of the
Business. Without limiting the generality of the preceding sentence, except as
expressly contemplated by this Agreement or as set forth on the attached
DEVELOPMENTS SCHEDULE, since June 30, 1995 no Seller has:
(a) engaged in any activity which has resulted in (i) any
acceleration or delay of the collection of accounts or notes receivable, (ii)
any delay in the payment in accounts payable or (iii)
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any increase in purchases of raw materials, in each case as compared with its
custom and practice in the conduct of the Business immediately prior to the
date of the Latest Balance Sheet;
(b) discharged or satisfied any Lien or paid any obligation or
liability which would not constitute an Assumed Liability if it were unpaid on
the Closing Date, other than current liabilities paid in the ordinary course of
business and consistent with such Seller's past practice;
(c) mortgaged or pledged any Purchased Asset or subjected
any Purchased Asset to any Lien;
(d) sold, assigned, conveyed, transferred, canceled or waived
any property, tangible asset, Proprietary Right or other intangible asset or
right which, if it were held by such Seller on the Closing Date, would
constitute a Purchased Asset, other in the ordinary course of business and
consistent with such Seller's past practice;
(e) disclosed any Confidential Information to any Person
other than the Purchaser and the Purchaser's representatives, agents,
attorneys, accountants and present and proposed financing sources;
(f) waived any right relating to the Business other than in
the ordinary course of business or consistent with such Seller's past practice;
(g) made commitments for capital expenditures which will
not be paid prior to the Closing and which, in the aggregate, would exceed
$25,000;
(h) made any loan or advance to, or guarantee for the
benefit of, or any Investment in, any other Person;
(i) granted any bonus or any increase in wages, salary or other
compensation to any employee (other than any increase in wages or salaries
granted in the ordinary course of business and consistent with such Seller's
past practice granted to any employee who is not affiliated with such Seller
except by reason of such Person's employment by such Seller);
(j) made any charitable contribution which will not be paid
prior to the Closing;
(k) suffered damages, destruction or casualty losses which, in
the aggregate, exceed $50,000 (whether or not covered by insurance) to any
Purchased Asset or any other property or asset which, if it existed and was
held by such Seller on the Closing Date, would constitute a Purchased Asset;
(l) received any indication from any material supplier to the
Business to the effect that such supplier will stop, or materially decrease the
rate of, supplying materials, products or services to such Seller (or to the
Purchaser, if the Sale is consummated), or received any indication from any
material customer of the Business to the effect that such customer will stop,
or materially
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<PAGE> 17
decrease the rate of, buying materials, products or services from such Seller
(or from the Purchaser, if the Sale is consummated);
(m) entered into any transaction other than in the ordinary course
of business and consistent with such Seller's past practice; or
(n) agreed to do any act described in any of clauses 5.7(a) through (m).
5.8 TAX MATTERS. The attached TAXES SCHEDULE sets forth a list of all
states, territories and jurisdictions (whether foreign or domestic) in which
any Seller Party, listed separately for each Seller Party, is required to file
a Tax Return with respect to the Business. Except as set forth in the attached
TAXES SCHEDULE:
(a) each Seller Party has filed all Tax Returns and other reports which
it was required to file with respect to the Business, and each such return or
other report was correct and complete in all respects, and each Seller Party
has paid all Taxes due and owing by it with respect to the Business (whether or
not shown on any Tax Return or other report) and has withheld and paid over all
Taxes which it is obligated to withhold from amounts paid or owing in connection
with the Business to any employee, independent contractor', stockholder,
partner, creditor or other third party;
(b) no Tax audits are pending or being conducted with respect to
any Seller Party relating to the Business;
(c) there are no Liens on any of the assets of any Seller Party
that arose in connection with any failure (or alleged failure) to pay any Tax
relating to the Business;
(d) no information related to Tax matters has been requested by any
Taxing authority, and no Seller Party has received notice indicating an intent
to open an audit or other review from any Taxing authority, in each case with
respect to the Business;
(e) no material deficiency or proposed adjustment which has not been
settled or otherwise resolved for any amount of Tax relating to the Business
has been proposed, asserted or assessed by any taxing authority against any
Seller Party, and there is no material action, suit, taxing authority
proceeding or audit relating to the Business now in progress, pending or, to
any Seller's Knowledge, threatened against or with respect to any Seller Party;
(f) to any Seller's Knowledge, no taxing authority will claim or
assess, with respect to the period preceding the Closing Date, any amount of
additional Taxes relating to the Business against any Seller Party;
(g) since August 31, 1993, no claim has been made, and, to any Seller's
Knowledge, prior to August 31, 1993, no claim was made, by any jurisdiction in
which a Seller Party does not file Tax Returns to the effect that any Seller
Party is or may be subject to any Tax imposed by that jurisdiction concerning
any Seller Party's tax liability relating to the Business;
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<PAGE> 18
(h) none of the Assumed Liabilities could obligate the
Purchaser to make any payments that would not be deductible pursuant to Code
Section 28G;
(i) no Seller Party has waived any statute of limitations in
respect of Taxes or agreed to an extension of time with respect to any Tax
assessment or deficiency, in each case with respect to the Business; and
(j) no Seller Party is a party to any Tax sharing or allocation
Agreement relating to the Business, and no Seller Party has any liability for
the Taxes of any person under Section 1.1502-6 of the Treasury Regulations (or
any similar provision of state, local or foreign law), as a transferee or
successor, by contract, or otherwise.
5.9 CONTRACTS AND COMMITMENTS.
-------------------------
(a) CONTRACTS SCHEDULE. The attached EMPLOYEES SCHEDULE
contains a current list of the employees of the Sellers and the regular wages
or salaries of, and bonus arrangements (including a brief description thereof)
applicable to, such employees. Other than this Agreement or as described on the
attached CONTRACTS SCHEDULE, no Seller is a party to any written or oral:
(i) pension, profit sharing, stock option, employee stock
purchase or other plan or arrangement providing for deferred or other
compensation to employees or any other employee benefit, welfare or
stock plan or arrangement which is not described on the attached
EMPLOYEE BENEFITS SCHEDULE, or any contract with any labor union, or
any severance Agreement;
(ii) contract relating to the Business for the employment or
engagement as an independent contractor of any Person on a full-time,
part-time, consulting or other basis;
(iii) contract pursuant to which such Seller has advanced or
loaned funds, or agreed to advance or loan funds, to any other Person;
(iv) contract or indenture relating to any Indebtedness or
the mortgaging, pledging or otherwise placing a Lien on any of the
Purchased Assets;
(v) contract pursuant to which such Seller is the lessee
of, or holds or operates, any real or personal property owned by any
other Person;
(vi) contract pursuant to which such Seller is the lessor of,
or permits any third party to hold or operate, any real or personal
property owned by such Seller or of which such Seller is a lessee;
(vii) assignment, license, indemnification or other contract
with respect to any intangible property (including any Proprietary
Right) which is not described on the attached PROPRIETARY RIGHTS
SCHEDULE;
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<PAGE> 19
(viii) contract or agreement with respect to services rendered
or goods sold or leased to or from others, other than any customer
purchase order accepted in the ordinary course of business and in
accordance with such Seller's past practice which both (A) does not
require delivery after the date which is six months after the Closing
Date and (B) does not involve a sale price of more than $50,000;
(ix) contract prohibiting such Seller from freely engaging in
the Business anywhere in the world;
(x) nondisclosure or confidentiality agreement;
(xi) contract related to capital expenditures;
(xii) independent sales representative or distributorship
agreement; or
(xiii) any other contract which is material to the Business or
involves a consideration in excess of $25,000.
(b) ENFORCEABILITY. Each item described on the attached
CONTRACTS SCHEDULE (the "CONTRACTS") is valid, binding and enforceable in
accordance with its terms, including, without limitation, with respect to any
non-competition provisions contained in any Contract, except as such
enforceability may be limited by (i) applicable insolvency, bankruptcy,
reorganization, moratorium or other similar laws affecting creditors' rights
generally and (ii) applicable equitable principles (whether considered in a
proceeding at law or in equity).
(c) COMPLIANCE. Each Seller has performed all obligations
required to be performed by it under each Contract, and no Seller is in default
under or in breach of (nor is it in receipt of any claim of default or breach
under) any such obligation. No event has occurred which with the passage of
time or the giving of notice (or both) would result in a default, breach or
event of noncompliance under any obligation of a Seller pursuant to any
Contract. No Seller has a present expectation or intention of not fully
performing any obligation of such Seller pursuant to any Contract, and none of
the Sellers has Knowledge of any breach or anticipated breach by any other
party to any Contract.
(d) LEASES. With respect to each Contract which is a lease of
personal property with a Seller as lessee, such Seller holds a valid and
existing leasehold interest under such lease for the term set forth with
respect to such lease on the attached CONTRACTS SCHEDULE.
(e) AFFILIATED TRANSACTIONS. Except as set forth on the
attached AFFILIATED TRANSACTIONS SCHEDULE, no officer, director, stockholder or
Affiliate of any Seller Party (and no individual related by blood or marriage
to any such Person, and no entity in which any such Person or individual owns
any beneficial interest) is a party to any agreement, contract, commitment or
transaction with a Seller (other than this Agreement) with respect to the
Business or has any material interest in any material property used by a Seller
with respect to the Business. The AFFILIATED TRANSACTIONS SCHEDULE also sets
forth a description of all services provided by Parent or any of its
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Affiliates other than Design or Sub to, or on behalf of, the Business utilizing
assets not included in the Purchased Assets and the manner in which the costs
of providing such services have been allocated to the Business. Except as set
forth on the attached Affiliated Transactions Schedule, neither Parent nor any
of its Affiliates other than Design or Sub owns any asset that is used or was
used in the Business or was acquired for use in the Business.
(f) COPIES. The Purchaser or its representatives have been
supplied with a true and correct copy of each written Contract, each as
currently in effect. The attached CONTRACTS SCHEDULE includes a description of
the material terms of each oral Contract.
5.10 PROPRIETARY RIGHTS.
(a) SCHEDULE. The attached PROPRIETARY RIGHTS SCHEDULE contains
a complete and accurate list of (i) all patented or registered Proprietary
Rights owned or used by Design or Sub, (ii) all pending patent applications and
applications for registrations of other Proprietary Rights filed by or on
behalf of any Seller Party in connection with the Business, (iii) all trade
names, corporate names and unregistered trade marks and service marks owned or
used by Design or Sub, and (iv) all unregistered copyrights and computer
software owned or used by Design or Sub which are material to the Purchased
Assets, the Assumed Liabilities or the financial condition, operating results,
assets, customer or supplier relations, employee relations or business
prospects of the Business. The attached PROPRIETARY RIGHTS SCHEDULE also
contains a complete and accurate list of all licenses and other rights granted
by Design or Sub to any third patty, and all licenses and other rights granted
by any third party to Design or Sub, in each case with respect to any
Proprietary Rights. The Proprietary Rights listed on the attached PROPRIETARY
RIGHTS SCHEDULE comprise all intellectual property rights which are used or
useful in the operation of the Business as presently conducted or proposed to
be conducted.
(b) OWNERSHIP; CLAIMS. Except as set forth on the attached
PROPRIETARY RIGHTS SCHEDULE, Design or Sub owns and possesses all right, title
and interest in and to (or has the right to use pursuant to a valid and
enforceable license) all Proprietary Rights described on such Schedule or
otherwise necessary or used in or material to the operation of the Business as
presently conducted and as presently proposed to be conducted, in each case
free and clear of all Liens (other than Permitted Liens), and such Seller has
taken all necessary actions to maintain and protect such Proprietary Rights. To
the Sellers' Knowledge, the owners of such Proprietary Rights which are
licensed to Design or Sub have taken all necessary actions to maintain and
protect the Proprietary Rights which are subject to such licenses. Except as
indicated on the attached PROPRIETARY RIGHTS SCHEDULE:
(i) there have been no claims made against any Seller Party
asserting the invalidity, misuse or unenforceability of any of such
Proprietary Rights, and there are no grounds for any such claim,
(ii) no Seller Party has received any notice of (nor is it
aware of any facts which indicate a likelihood of) any infringement or
misappropriation by, or conflict with,
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any Person with respect to such Proprietary Rights (including any
demand or request that such Seller Party license rights from any
Person),
(iii) the conduct of the Business has not infringed or
misappropriated, and does not infringe or misappropriate, any
Proprietary Right of any other Person, nor would the Purchaser's
conduct of the Business as presently conducted infringe or
misappropriate any Proprietary Right of any other Person,
(iv) to the Sellers' Knowledge, the Proprietary Rights used in
connection with the Business have not been infringed or
misappropriated by any other Person, and
(v) immediately after the Closing, the Purchaser shall own and
possess all right, title and interest in and to (or the right to use,
on terms and conditions identical to those applicable to the licensed
Seller immediately prior to the Closing, pursuant to a valid and
enforceable license) all Proprietary Rights described on such Schedule
or otherwise necessary for the operation of the Business as presently
conducted and as presently proposed to be conducted, in each case free
and clear of all Liens (other than Permitted Liens).
5.11 CERTAIN LITIGATION. Except as set forth on the attached LITIGATION
SCHEDULE, there is no action, suit, proceeding, order, investigation or claim
pending (or, to the Sellers' Knowledge, threatened) against or affecting the
Business (or, to the Sellers' Knowledge, pending or threatened against or
affecting any officer, director or employee of any Seller Party with respect to
the Business), at law or in equity, or before or by any Government Entity,
including, without limitation, (a) with respect to the transactions
contemplated by the Transaction Documents, or (b) concerning the design,
manufacture, rendering or sale by any Seller of any product or service or
otherwise concerning the conduct of the Business, and, in the case of clauses
(a) and (b), to the Sellers' Knowledge, there is no basis for any of the
foregoing.
5.12 BROKERAGE. Except for any amounts payable to KeyCorp Investment
Banking, there is no claim for brokerage commissions, finders' fees or similar
compensation in connection with the transactions contemplated by the
Transaction Documents based on any arrangement or agreement which may be
binding upon any Seller Party or to which any Seller Party or any of the
Purchased Assets may be subject.
5.13 INSURANCE. The attached INSURANCE SCHEDULE contains a description
of each insurance policy maintained by each Seller Party with respect to any of
the Purchased Assets, and each such policy is in full force and effect (it
being understood that such insurance may be cancelled at the Closing). No
Seller Party is in default of any obligation pursuant to any insurance policy
maintained by it with respect to the Business.
5.14 EMPLOYEES.
(a) CONTINUED EMPLOYMENT. To the Sellers' Knowledge, as of
the date hereof, no executive or key employee of any Seller or any group of
employees of any Seller has any plans to terminate employment with such Seller,
and no employee of either Seller has any plans to refuse
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<PAGE> 22
an offer of employment from the Purchaser if such offer is made (assuming
substantially similar employment terms).
(b) COMPLIANCE AND RESTRICTIONS. Each Seller has complied with
all laws relating to the employment of labor in connection with the Business,
including provisions of such laws relating to wages, hours, equal opportunity,
collective bargaining and the payment of social security and other taxes, and
no Seller has any material labor relations problem (including any union
organization activities, threatened or actual strikes or work stoppages or
material grievances). Except as set forth on the attached EMPLOYEE MATTERS
SCHEDULE, no employees of any Seller are subject to any noncompete,
nondisclosure, confidentiality, employment, consulting or similar agreement
relating to, affecting, or in conflict with, the Business activities as
presently conducted or as proposed to be conducted. The attached EMPLOYEE
MATTERS SCHEDULE sets forth each material labor relations problem (including,
without limitation, any known union organization activities, known threatened
or actual strikes or work stoppages or known material grievances) experienced
by any Seller at any time during the five-year period preceding the date of
this Agreement.
5.15 ERISA. Except as set forth on the attached EMPLOYEE BENEFITS
SCHEDULE:
(a) with respect to all current employees (including those on
lay-off, disability or leave of absence), former employees, and retired
employees of the Seller Parties with respect to the Business (the "EMPLOYEES"),
no Seller Party maintains or contributes to any (i) employee welfare benefit
plans (as defined in Section 3(1) of ERISA) ("EMPLOYEE WELFARE PLANS"), or (ii)
any plan, policy or arrangement which provides nonqualified deferred
compensation, bonus or retirement benefits, severance or "change of control"
(as set forth in Code Section 280G) benefits, or life, disability accident,
vacation, tuition reimbursement or other material fringe benefits ("OTHER
PLANS");
(b) no Seller Party maintains, contributes to, or participates
in any defined benefit plan or defined contribution plan which are employee
pension benefit plans (as defined in Section 3(2) of ERISA) ("EMPLOYEE PENSION
PLANS");
(c) no Seller Party contributes to or participates in any
multiemployer plan (as defined in Section 3(37) of ERISA) (a "MULTIEMPLOYER
PLAN");
(d) no Seller Party maintains or has any obligation to
contribute to or provide any post-retirement health, accident or life insurance
benefits to any Employee, other than limited medical benefits required to be
provided under Code Section 4980B;
(e) all Plans (and all related trusts and insurance
contracts) comply in form and in operation in all respects with the applicable
requirements of ERISA and the Code;
(f) all required reports and descriptions (including all Form
5500 Annual Reports, Summary Annual Reports, PBGC-1s and Summary Plan
Descriptions) with respect to all Plans have been properly filed with the
appropriate government agency or distributed to participants, and each Seller
Party has complied with the requirements of Code Section 4980B;
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(g) with respect to each Plan, all contributions, premiums or
payments which are due on or before the Closing Date have been paid, or, with
respect to the most recent payroll or any payroll paid after the date hereof,
will within 15 business days after such payroll is made be paid, to such Plan;
and
(h) no Seller Party has incurred any liability to the Pension
Benefit Guaranty Corporation (the "PBGC"), the United States Internal Revenue
Service, any multiemployer plan or otherwise with respect to any employee
pension benefit plan or with respect to any employee pension benefit plan
currently or previously maintained by members of the controlled group of
companies (as defined in Sections 414(b) and (c) of the Code) that includes
such Seller Party (the "CONTROLLED GROUP") that has not been satisfied in full,
and no condition exists that presents a material risk to any Seller Party or
any member of the Controlled Group of incurring such a liability (other than
liability for premiums due the PBGC) which could reasonably be expected to have
any adverse effect on the Purchaser or any of the Purchased Assets after the
Closing.
5.16 REAL ESTATE.
------------
(a) OWNED PROPERTIES. Neither Design nor Sub owns any real
property.
(b) LEASED PROPERTY. The attached REAL ESTATE SCHEDULE lists
and describes briefly all real property leased or subleased to each Seller
Party and used in the Business (the "LEASED REAL PROPERTY"). The Sellers have
delivered to the Purchaser or its representatives correct and complete copies
of the leases and subleases listed on the attached REAL ESTATE SCHEDULE
(collectively, the "LEASES"). With respect to the Leased Real Property and each
of the Leases, and except as provided on the attached REAL ESTATE SCHEDULE:
(i) such Lease is legal, valid, binding, enforceable, and
in full force and effect;
(ii) such Lease is fully assignable to the Purchaser and will
continue to be legal, valid, binding, enforceable, and in full force
and effect on identical terms following the consummation of the Sale
and the Assumption and the commencement of the operation of the
Business by the Purchaser;
(iii) no party to such Lease is in 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 of such Lease;
(iv) no party to such Lease has repudiated any provision
thereof;
(v) there are no disputes, oral agreements, or forbearance
programs in effect as to such Lease;
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(vi) in the case of each Lease which is a sublease, the
representations and warranties set forth in clauses 5.16(b)(i)
through (v) are true and correct with respect to the underlying lease;
(vii) no Person (other than a Seller) is in possession of any
of the Leased Real Property;
(viii) no Seller Party has assigned, transferred, conveyed,
mortgaged, deeded in trust, or encumbered any interest in the
leasehold or subleasehold created pursuant to such Lease;
(ix) none of the Leases has been modified in any respect,
except to the extent that such modifications are in writing and have
been delivered or made available to the Purchaser;
(x) all permits, licenses, approvals and other authorizations
required in connection with the operation of the Business on the
Leased Real Property required to have been issued to enable the Leased
Real Property to be lawfully occupied and used for all of the purposes
for which it is currently occupied and used in connection with the
operation of the Business have been lawfully issued and are, as of the
date hereof, in full force and effect;
(xi) all buildings, structures and other improvements located
upon the Leased Real Property, including, without limitation, all
components thereof, are in good operating condition and repair subject
only to the provision of usual and customary maintenance provided in
the ordinary course of business with respect to buildings, structures
and improvements of like age and construction, and all water, gas,
electrical, steam, compressed air, telecommunication, sanitary and
storm sewage and other utilities and systems serving the Leased Real
Property are sufficient to enable the continued operation of the
Leased Real Property as it is now operated in connection with the
operation of the Business; and
(xii) to the Sellers' Knowledge, there are no proceedings in
eminent domain, condemnation or other similar proceedings, lawsuits or
actions relating to the Leased Real Property.
5.17 COMPLIANCE WITH LAWS.
--------------------
(a) Generally. Except as set forth on the attached COMPLIANCE
SCHEDULE, the Business has been and is being conducted in compliance with all
Legal Requirements, and no Seller Party has received notice alleging that the
Business is not in compliance with all Legal Requirements.
(b) REQUIRED PERMITS. Each Seller Party has complied with
(and is in compliance with) all permits, licenses and other authorizations
required for the operation of the Business (including, without limitation,
pursuant to Environmental and Safety Requirements). The items
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described on the attached PERMITS SCHEDULE constitute all of the permits,
filings, notices, licenses, consents, authorizations, accreditation, waivers,
approvals and the like of, to or with any Government Entity which are required
for the consummation of the Sale, the Assumption or any other transaction
contemplated by the Transaction Documents or the ownership of the Purchased
Assets or the Purchaser's conduct of the Business (as it is presently conducted
by the Sellers) thereafter.
(c) ENVIRONMENTAL AND SAFETY MATTERS. Without limiting the
generality of Sections 5.17(a) and (b):
(i) Each Seller has complied and is in compliance
with all Environmental and Safety Requirements.
(ii) None of the Sellers have received any written or
oral notice, report or other information regarding any liabilities
(whether accrued, absolute, contingent, unliquidated or otherwise) or
investigatory, remedial or corrective obligations, relating to any
Seller or their facilities and arising under Environmental and Safety
Requirements.
(iii) Except as set forth on the attached ENVIRONMENTAL
AND SAFETY MATTERS SCHEDULE, none of the following exists at any
property or facility owned or operated by any Seller:
1) underground storage tanks or surface
impoundments
2) asbestos-containing material in any form
or condition; or
3) materials or equipment containing
polychlorinated biphenyls.
(iv) None of the Sellers have treated, stored, disposed
of, arranged for or permitted the disposal of, transported,
handled, or Released any substance, including, without limitation, any
hazardous substance, or owned or operated any facility or property, so
as to give rise to liabilities of the Sellers for response costs,
natural resource damages or attorneys' fees pursuant to the
Comprehensive Environmental Response, Compensation and Liability Act
of 1980 ("CERCLA"), as amended, or similar state Environmental and
Safety Requirements.
(v) Neither this Agreement nor the consummation of the
transactions that are the subject of this Agreement will result in any
obligations for site investigation or cleanup, or notification to or
consent of any Government Entity or third parties, pursuant to any
so-called "transaction-triggered" or "responsible property transfer"
Environmental and Safety Requirements.
(vi) None of the Sellers have, either expressly or by
operation of law, assumed or undertaken any liability in connection
with the Business, including, without limitation, any obligation for
corrective or remedial action, of any other Person relating to any
Environmental and Safety Requirements.
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(vii) Without limiting the foregoing, no facts, events
or conditions relating to the past or present facilities,
properties or operations of the Sellers will prevent, hinder or limit
continued compliance with Environmental and Safety Requirements, give
rise to any Investigatory, remedial or corrective obligations pursuant
to Environmental and Safety Requirements, or give rise to any other
liabilities (whether accrued, absolute, contingent, unliquidated or
otherwise) pursuant to Environmental and Safety Requirements,
including, without limitation, any relating to onsite or offsite
Releases or threatened Releases of hazardous materials, substances or
wastes, personal injury, property damage or natural resource damage.
5.18 PRODUCT WARRANTY. Except as set forth on the attached Warranties
Schedule, all products manufactured, serviced, distributed, sold or delivered
by any Seller have been manufactured, serviced, distributed, sold and/or
delivered in conformity with all applicable contractual commitments and all
express and implied warranties. No liability of any Seller exists for
replacement or other damages in connection with any such product.
5.19 DISCLOSURE. Neither this Article 5 nor any schedule, attachment,
written statement, document, certificate or other item supplied to the
Purchaser by or on behalf of any Seller Party with respect to the transactions
contemplated by the Transaction Documents contains any untrue statement of a
material fact or omits a material fact necessary to make each staternent
contained herein or therein not misleading.
5.20 ACCURACY ON CLOSING DATE. Each representation and warranty set
forth in this Article 5 and all information contained in any exhibit,
schedule or attachinent to this Agreement or in any certificate or other
writing delivered by, or on behalf of, any Seller Party to the Purchaser will
be true and correct as of the time of the Closing as though then made, except
(a) as affected by the transactions expressly contemplated by the Transaction
Documents and (b) to the extent that such representation or warranty by its
terms relates solely to an earlier date.
ARTICLE 6
EMPLOYEES
---------
Prior to the Closing, the Purchaser shall provide Parent with a list of
employees to whom the Purchaser intends to offer employment (the "REQUESTED
EMPLOYEES"). The Purchaser will reimburse the Sellers promptly after payment
but no more often than monthly for all Severance Costs which are paid to any of
the employees of the Sellers (or paid by Parent to James L. Glenn ("Glenn"))
listed on the EMPLOYEES SCHEDULE who are not Requested Employees and are not at
any time within a two-year period after the Closing Date employed (or engaged
as a consultant or independent contractor) by Parent or any of its Affiliates.
The Sellers (and, in the case of Glenn, Parent) will retain all liabilities
with respect to each employee of any Seller who is not a Requested Employee,
each Requested Employee who does not accept employment with the Purchaser and
each former employer of either Seller, including, without limitation, any
liabilities or obligations with respect to any such employee pursuant to the
Consolidated Omnibus Budget Reconciliation Act of 1987
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("COBRA"). No Seller Party will discourage, or permit any of its Affiliates to
discourage, any Requested Employee from accepting employment with the
Purchaser. For purposes hereof, "SEVERANCE COSTS" shall mean the actual
severance payments made to an employee by the Seller Party who employs such
employee pursuant to such Seller Party's current severance program or the
employee's employment contract, provided that the Purchaser's obligation
hereunder shall in no event exceed the following amounts: (a) with respect to
each employee of either Seller other than Anthony M. Ribaudo ("RIBAUDO") and
Glenn, one week of base salary at existing rates for each year or partial year
of service of such employee with such Seller, (b) with respect to Ribaudo,
continuation of his current base salary as set forth in the Ribaudo Employment
Agreement and Medical Costs incurred with respect to Ribaudo, in each case
until February 28, 1997 and (c) with respect to Glenn, continuation of his
current base salary as set forth in the Glenn Employment Agreement and Medical
Costs incurred with respect to Glenn, in each case until June 30, 1997. For
purposes hereof, "MEDICAL COSTS" shall mean, with respect to either Glenn or
Ribaudo, as applicable, the costs incurred by Parent for such person's
participation in the medical plan generally available to employees of Parent,
which costs shall be deemed to equal the actual costs, or, if applicable, the
deemed premium rate usually charged with respect to employees of Parent who are
receiving COBRA coverage.
ARTICLE 7
SURVIVAL AND INDEMNIFICATION
----------------------------
7.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
-------------------------------------------
(a) SURVIVAL TERM. All representations, warranties, covenants
and agreements contained herein or made in writing by any Party in connection
herewith shall survive the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby (regardless of any
investigation, examination or inquiry made by any Party or on its behalf) and
will continue in full force and effect for:
(i) perpetuity, in the case of the representations and
warranties in Sections 4.2, 5.2 and 5.6(b) (and Sections 4.5 and 5.20
to the extent such Sections relate to Sections 4.2, 5.2 and 5.6(b));
(ii) the period prescribed by the applicable statute of
limitations, in the case of the representations and warranties in
Sections 5.8, 5.15 and 5.17 (and Section 5.20 to the extent such
Section relates to Sections 5.8, 5.15 and 5.17); and
(iii) a period of two years following the Closing Date
for all other representations and warranties set forth in Articles 4
and 5.
(b) NO WAIVER. Except as expressly provided in Sections
7.2(a)(i)(D) and 7.3(a)(i), neither Party's participation in the consummation
of any transaction pursuant to any Transaction Document nor any waiver of any
condition to such participation (including any
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condition that a representation or warranty of any other Party be true and
correct) will constitute a waiver by such participating Party of any
representation or warranty of any Party or otherwise affect the survival of any
such representation or warranty.
7.2 INDEMNIFICATION OBLIGATIONS OF THE SELLER PARTIES.
-------------------------------------------------
(a) SPECIFIC INDEMNIFLABLE LOSSES. In addition to any other
right or remedy available to the Purchaser at law or in equity, the Seller
Parties, jointly and severally, will indemnify the Purchaser and its
Aftiliates, stockholders, officers, directors, employees, agents,
representatives and permitted successors and assigns (collectively, the
"PURCHASER INDEMNITEES") in respect of, and save and hold each Purchaser
Indemnitee harmless against and pay on behalf of or reimburse each Purchaser
Indemnitee as and when incurred, any Loss which any Purchaser Indemnitee
suffers, sustains or becomes subject to as a result of, in connection with,
relating to or by virtue of, without duplication:
(i) any misrepresentation or breach of any
representation or warranty by any Seller set forth in Article 5 of
this Agreement; provided that
(A) no Seller Party will have any liability
under this Section 7.2(a)(i) (other than any liability
relating to any breach of any representation or warranty
contained in Sections 5.2, 5.6(a), and 5.6(b)) unless and until
the aggregate of all Losses resulting under this Section
7.2(a)(i) exceeds $300,000, in which event the Seller Parties
will be jointly and severally liable for all Losses thereafter
until the aggregate of all such Losses exceeds $3,000,000, after
which point no Seller Party will be liable for any further Losses
resulting under this Section 7.2(a)(i);
(B) no Seller Party will have any liability
under this Section 7.2(a)(i) (other than any liability
relating to any breach of any representation or warranty
contained in Sections 5.2, 5.6(a), 5.6(b) and 5.18) for any
breach or series of related breaches in respect of which the
Losses are less than $2,000, and such Losses shall not be
aggregated for purposes of Section 7.2(a)(i)(A);
(C) if there is an applicable survival period
for such representation or warranty pursuant to Section 7.1, the
Purchaser makes a written claim for indemnification pursuant to
Section 7.4(a) within such survival period; and
(D) no Purchaser Indemnitee shall be entitled to
indemnification for any Loss relating to a misrepresentation or
breach of a representation or warranty contained herein that
Thomas J. Formolo or Robert A. Zriny actually (as opposed to
constructively or otherwise) knew existed on the Closing Date (it
being understood that the Parties acknowledge and agree that no
Purchaser Indemnitee is precluded under this subsection (D) from
seeking indemnification for Losses relating to misrepresentations
or breaches of representations or warranties merely because
Thomas J. Formolo or Robert A. Zriny may have been aware on the
Closing Date of facts or circumstances that relate to such
breach);
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(ii) any nonfulfillment or breach of any covenant or
agreement of any Seller Party set forth in this Agreement other than
any covenant or agreement contained in Article 5 of this Agreement;
(iii) any Excluded Liability; or
(iv) any liability in connection with the consummation
of the transactions contemplated herein to any prospective buyer with
whom the Seller Parties or any of their respective agents have had
discussions regarding the disposition of the Business.
(b) SOURCE OF INDEMNIFICATION. The Purchaser Indemnitees'
remedy for any indemnification hereunder may be satisfied by proceeding against
any Seller Party, at the Purchaser Indemnitees' option.
7.3 INDEMNIFICATION OBLIGATIONS OF THE PURCHASER. In addition to any
other right or remedy available to the Seller Parties at law or in equity, the
Purchaser will indemnify the Seller Parties and their Affiliates, partners,
stockholders, officers, directors, employees, agents, representatives and
permitted successors and assigns (collectively, the "SELLER INDEMNITEES") in
respect of, and save and hold each Seller Indemnitee harmless against and pay
on behalf of or reimburse each Seller Indemnitee as and when incurred, any Loss
which such Seller Indemnitee suffers, sustains or becomes subject to as a
result of; in connection with, relating to or by virtue of, without
duplication:
(a) any misrepresentation or breach of any representation or
warranty by the Purchaser set forth in Article 4 of this Agreement; provided
that (i) no Seller Indemnitee shall be entitled to indemnification for any Loss
relating to a misrepresentation or breach of a representation or warranty
contained herein that Robert S. Reitman or Alayne L. Reitman actually (as
opposed to constructively or otherwise) knew existed on the Closing Date (it
being understood that the Parties acknowledge and agree that no Seller
Indemnitee is precluded under this subsection (i) from seeking indemnification
for Losses relating to misrepresentations or breaches of representations or
warranties merely because Robert S. Reitman or Alayne L. Reitman may have been
aware on the Closing Date of facts or circumstances that relate to such breach)
and (ii) if there is an applicable survival period for such representation or
warranty pursuant to Section 7.1, the Seller Parties make a written claim for
indemnification pursuant to Section 7.4(a) within such survival period;
(b) any nonfulfillment or breach of any covenant or agreement
of the Purchaser set forth in any Transaction Document other than any covenant
or agreement contained in Article 4 of this Agreement; or
(c) any Assumed Liability.
7.4 INDEMNIFICATION PROCEDURES.
--------------------------
(a) NOTICE OF CLAIM. Any Person making a claim for
indemnification pursuant to Section 7.2 or 7.3 above (an "INDEMNIFIED PARTY")
must give any Party from whom
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indemnification is sought (an "INDEMNIFYING PARTY") written notice of such
claim (an "INDEMNIFICATION CLAIM NOTICE") promptly after the Indemnified Party
receives any written notice of any action, lawsuit, proceeding, investigation
or other claim (a "PROCEEDING") against or involving the Indemnified Party by a
Government Entity or other third party or otherwise discovers the liability,
obligation or facts giving rise to such claim for indemnification; provided
that the failure to notify or delay in notifying an Indemnifying Party will not
relieve the Indemnifying Party of its obligations pursuant to Section 7.2 or
7.3, as applicable, except to the extent that such failure actually harms the
Indemnifying Party. Such notice must contain a description of the claim and the
nature and amount of such Loss (to the extent that the nature and amount of
such Loss is known at such time).
(b) CONTROL OF DEFENSE: CONDITIONS. With respect to the defense
of any Proceeding against or involving an Indemnified Party in which a
Government Entity or other third party in question seeks only the recovery of a
sum of money for which indemnification is provided in Section 7.2 or 7.3, at
its option an Indemnifying Party may appoint as lead counsel of such defense
any legal counsel selected by the Indemnifying Party; provided that before the
Indemnifying Party assumes control of such defense it must first:
(i) enter into an agreement with the Indemnified Party
(in form and substance reasonably satisfactory to the Indemnified
Party) pursuant to which the Indemnifying Party agrees to be fully
responsible (with no reservation of any rights other than the right to
be subrogated to the rights of the Indemnified Party) for all Losses
relating to such Proceeding and unconditionally guarantees the payment
and performance of any liability or obligation which may arise with
respect to such Proceeding or the facts giving rise to such claim for
indemnification, and
(ii) furnish the Indemnified Party with evidence that
the Indemnifying Party, in the Indemnified Party's sole judgment,
is and will be able to satisfy any such liability.
(c) CONTROL OF DEFENSE: EXCEPTIONS AND RELATED MATTERS.
Notwithstanding Section 7.4(b):
(i) the Indemnified Party will be entitled to
participate in the defense of such Proceeding and to employ counsel of
its choice for such purpose at its own expense (provided that the
Indemnifying Party will bear the reasonable fees and expenses of such
separate counsel incurred prior to the date upon which the
Indemnifying Party effectively assumes control of such defense);
(ii) the Indemnifying Party will not be entitled to
assume control of the defense of such Proceeding, and will pay the
reasonable fees and expenses of legal counsel retained by the
Indemnified Party, if
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(A) the Indemnified Party reasonably believes that an
adverse determination of such Proceeding could be
detrimental to or injure the Indemnified Party's reputation
or future business prospects,
(B) the Indemnified Party reasonably believes that
there exists or could arise a conflict of interest which,
under applicable principles of legal ethics, could prohibit
a single legal counsel from representing both the
Indemnified Party and the Indemnifying Party in such
Proceeding, or
(C) the Indemnifying Party has failed or is failing to
prosecute or defend vigorously such Proceeding; and
(iii) the Indemnifying Party must obtain the prior written
consent of the Indemnified Party (which the Indemnified Party will
not unreasonably withhold) prior to entering into any settlement of
such Proceeding or ceasing to defend such Proceeding.
7.5 TREATMENT OF INDEMNIFICATION PAYMENTS. Amounts paid to or on behalf
of the Purchaser or the Seller Parties as indemnification hereunder shall be
treated as adjustments to the Purchase Price. If any Tax authority asserts that
an indemnification payment is not an adjustment to the Purchase Price, the
Indemnifying Party will indemnify the Indemnified Party against any Tax imposed
on the receipt of such indemnification payment pursuant to Section 7.2 or 7.3,
including any Tax imposed on any payment pursuant to this Section 7.5.
7.6 PAYMENT. The Indemnifying Party shall pay the Indemnified Party to
the extent the Indemnified Party is entitled to payment hereunder in
immediately available funds promptly after (but no later than 5 days after) the
Indemnified Party provides the Indemnifying Party with notice of a claim
hereunder and the parties reasonably agree that there is a reasonable basis for
such claim, or a Final Determination is made pursuant to the terms of Section
7.7 below. The amount of any indemnification payment shall bear interest from
the date any Loss is incurred with respect to such indemnification payment
through the date such payment is made at the lesser of (i) a floating rate
equal to the prime or base rate of interest, as established and publicly
announced from time to time by the First National Bank of Chicago (which rate
shall be adjusted on the effective date of each change in such prime rate), and
(ii) the maximum rate permitted by applicable usury laws. Interest on any such
unpaid amount shall be compounded semi-annually, computed on the basis of a
360-day year consisting of twelve 30-day months and shall be payable on demand.
In addition, such Party shall promptly reimburse the other Party for any and
all costs and expenses of any nature or kind whatsoever (including, but not
limited to, all attorneys' fees) incurred in seeking to collect any amounts
owed by one Party to another Party or to enforce any Final Determination.
7.7 ARBITRATION PROCEDURE.
----------------------
(a) EXCLUSIVE METHOD. The Parties agree that the arbitration
procedure set forth below (including the enforcement provisions in Section
7.7(f)) shall be the sole and exclusive method for resolving and remedying
claims for money damages arising out of the provisions of Article 7 (the
"DISPUTES"). The Parties hereby agree and acknowledge that, except as otherwise
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provided in this Section 7.7 or in the Commercial Arbitration Rules of the
American Arbitration Association as in effect from time to time, the
arbitration procedures and any Final Determination hereunder shall be governed
by, and shall be enforced pursuant to the Uniform Arbitration Act, 710 ILCS 5.
(b) NOTICE. In the event that any Party asserts that there exists a
Dispute, such Party shall deliver a written notice to the other Party
specifying the nature of the asserted Dispute and requesting a meeting to
attempt to resolve the same. If no such resolution is reached within 10
business days after the delivery of such notice, the Party delivering such
notice of Dispute (the "Disputing Party") may, within 45 business days after
delivery of such notice, commence arbitration hereunder by delivering to the
other Party a notice of arbitration (a "NOTICE OF ARBITRATION"). Such Notice of
Arbitration shall specify (i) the matters as to which arbitration is sought,
(ii) the nature of any Dispute, (iii) the claims of the Disputing Party, (iv)
the amount and nature of any damages, if any, sought to be recovered as a
result of any alleged claim and (v) any other matters required by the
Commercial Arbitration Rules of the American Arbitration Association as in
effect from time to time to be included therein, if any.
(c) SELECTION OF ARBITRATORS. The Purchaser and the Sellers each shall
select one non-neutral arbitrator expert in the subject matter of the Dispute
(the arbitrators so selected shall be referred to herein as the "PURCHASER'S
ARBITRATOR" and the "SELLERS' ARBITRATOR," respectively). In the event that
either the Purchaser or the Sellers fail to select an arbitrator as set forth
herein within 20 days from the delivery of a Notice of Arbitration, then the
matter shall be resolved by the arbitrator selected by the other. The Sellers'
Arbitrator and the Purchaser's Arbitrator shall select a third independent,
neutral arbitrator expert in the subject matter of the dispute, and the three
arbitrators so selected shall resolve the matter according to the procedures
set forth in this Section 7.7. If the Sellers' Arbitrator and the Purchaser's
Arbitrator are unable to agree on a third arbitrator within 20 days after their
selection, the Sellers' Arbitrator and the Purchaser's Arbitrator shall each
prepare a list of three independent arbitrators within 5 days of the expiration
of such 20-day period. The Sellers' Arbitrator and the Purchaser's Arbitrator
shall each have the opportunity to eliminate one arbitrator from the other
arbitrator's list within seven days after submission thereof, and the third
arbitrator shall then be selected by lot from the arbitrators remaining on the
lists submitted by the Sellers' Arbitrator and the Purchaser's Arbitrator. In
the event that either the Sellers' Arbitrator or the Purchaser's Arbitrator
fails to submit a list of three independent arbitrators within such 5-day
period or otherwise fails to participate in any aspect of the arbitrator
selection process set forth herein, the other will select the third arbitrator.
(d) COSTS. The arbitrator(s) selected pursuant to Section 7.7(c) above
will allocate the costs and expenses of arbitration to each Party in proportion
to the contested amount not awarded to each Party relative to the total
contested amount. For example, if (i) the Purchaser submits a claim for $1,000,
(ii) the Sellers contest $500 of the $1,000 claimed by the Purchaser and (iii)
the arbitrator(s) ultimately resolve(s) the dispute by awarding the Purchaser
$300 of the $500 contested, then the costs and expenses of arbitration will be
allocated 60% (i.e., 300 +div 500) to the Sellers and 40% (i.e., 200 +div 500)
to the Purchaser.
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(e) FINAL DETERMINATION. The arbitration shall be conducted in
Chicago, Illinois under the Commercial Arbitration Rules of the American
Arbitration Association as in effect from time to time, except as modified by
the agreement of the Parties. The arbitrator(s) shall so conduct the
arbitration that a final result, determination, finding, judgment and/or award
(the "FINAL DETERMINATION") is made or rendered as soon as practicable, but in
no event later than 90 business days after the delivery of the Notice of
Arbitration nor later than 20 days following completion of the arbitration. The
Final Determination must be agreed upon and signed by the sole arbitrator or by
at least two of the three arbitrators (as the case may be). The Final
Determination shall be final and binding on the Parties, and there shall be no
appeal from or reexamination of the Final Determination, except for fraud,
perjury, evident partiality or misconduct by an arbitrator prejudicing the
rights of any Party and to correct manifest clerical errors.
(f) ENFORCEMENT. The Parties may enforce any Final
Determination in any state or federal court located in Cook County, Illinois,
Newark, New Jersey or Cleveland, Ohio. For the purpose of any action or
proceeding instituted with respect to any Final Determination, each Party
hereto hereby irrevocably submits to the jurisdiction of such courts,
irrevocably consents to the service of process by registered mail or personal
service and hereby irrevocably waives, to the fullest extent permitted by law,
any objection which it may have or hereafter have as to personal jurisdiction,
the laying of the venue of any such action or proceeding brought in any such
court and any claim that any such action or proceeding brought in any court has
been brought in an inconvenient forum.
ARTICLE 8
CONDITIONS TO THE CLOSING
-------------------------
8.1 CONDITIONS OF THE PURCHASER'S OBLIGATION. The Purchaser's
obligation to effect the Sale and the Assumption at the Closing is subject to
the satisfaction as of the Closing of the following conditions precedent:
(a) REPRESENTATIONS AND WARRANTIES. Each representation and
warranty set forth in Article 5 will be true and correct in all material
respects at and as of the Closing as though then made, except to the extent of
any change solely caused by the transactions expressly contemplated by the
Transaction Documents.
(b) COVENANTS. Each Seller Party will have performed and
observed in all material respects each covenant or other obligation required to
be performed or observed by such Person pursuant to the Transaction Documents
prior to the Closing.
(c) COMPLIANCE WITH APPLICABLE LAWS. The consummation of the
transactions contemplated by the Transaction Documents will not be prohibited
by any Legal Requirement or subject the Purchaser, the Business or the
Purchased Assets to any penalty, liability or (in the Purchaser's sole
judgment) other onerous condition arising under any applicable Legal
Requirement or imposed by any Government Entity.
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(d) PROCEEDINGS. No action, suit or proceeding will be pending
or threatened before any Government Entity the result of which could prevent or
prohibit the consummation of any transaction pursuant to the Transaction
Documents, cause any such transaction to be rescinded following consummation,
or adversely affect the Purchaser's right to acquire or hold the Purchased
Assets or conduct the Business or any Seller Party's performance of its
obligations pursuant to the Transaction Documents, and no judgment, order,
decree, stipulation, injunction or charge having any such effect will exist.
(e) CONSENTS. All filings, notices, licenses, consents,
authorizations, accreditation, waivers, approvals and the like of, to or with
any Government Entity or any other Person that are required for the
consummation of the Sale, the Assumption or any other transaction contemplated
by the Transaction Documents or the ownership of the Purchased Assets or the
conduct of the Business by the Purchaser thereafter (the "CONSENTS") will have
been duly made or obtained.
(f) OPINION OF COUNSEL. The Purchaser will have received from
Berick Pearlman & Mills, legal counsel for the Seller Parties, an opinion with
respect to the matters set forth in Exhibit C attached hereto addressed to the
Purchaser. Such opinion will be dated the Closing Date and will be in form
satisfactory to the Purchaser's special legal counsel.
(g) NO MATERIAL ADVERSE CHANGE. Since February 28, 1995, there
will have been no material adverse change in the financial condition, operating
results, assets, customer or supplier relations, employee relations or business
prospects of the Business.
(h) FINANCING. The Purchaser will have obtained debt financing
for the transactions contemplated herein and post-Closing working capital
requirements in amounts and on terms satisfactory to the Purchaser.
(i) TITLE INSURANCE. The Purchaser shall have obtained, with
respect to each parcel of Leased Real Property reasonably requested by the
Purchaser or required by any lender to the Purchaser in connection with the
Sale, an ALTA leasehold policy of title insurance Form B-1990 with deletion of
creditor's rights exception issued by a title insurer satisfactory to the
Purchaser (the "TITLE COMPANY") in such amount as the Purchaser reasonably
determines insuring title to the leasehold estate in such parcel of Leased Real
Property in the Purchaser subject only to Permitted Real Estate Liens
(collectively, the "TITLE POLICIES"). The cost of the Title Policies shall be
shared equally by the Purchaser and Parent. The Title Policies shall contain:
(i) an "Extended Coverage Endorsement" insuring over the general exceptions
contained in such policies; (ii) an ALTA Zoning Endorsement 3.1 (or
equivalent), including parking; (iii) an endorsement insuring that the Leased
Real Property described in such Title Policy is the parcel shown on the survey
with respect to such Leased Real Property; (iv) an endorsement insuring that
each street adjacent to such Leased Real Property is a public street and that
there is direct and unencumbered access, ingress and egress to such street from
such Leased Real Property; (v) if any parcel of Leased Real Property contains
more than one record parcel, a contiguity endorsement insuring that all such
record parcels are contiguous
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to one another; and (vi) a tax parcel endorsement and such other endorsements
as shall be reasonably requested by the Purchaser or required by any lender to
the Purchaser in connection with the Sale.
(j) SURVEYS. The Purchaser will have received a current ALTA/ACSM
survey of each parcel of Leased Real Property with respect to which a Title
Policy is required to be made in accordance with the 1992 ALTA/ACSM standards
including items 1 through 14 of Table A thereof made by a surveyor licensed in
the jurisdiction in which such parcel of Leased Real Property is located and
certified to the Purchaser, the Purchaser's lender and the Title Company as
having been so made, disclosing the location of all improvements, easements,
party-walls, sidewalks, roadways, utility lines and other matters required to
be shown on the surveys and showing each such parcel of Leased Real Property to
be free from survey defects and encroachments of improvements located thereon
onto adjacent property and to be free from encroachments of improvements
located on property adjacent onto such parcel of Leased Real Property. The cost
of any such survey will be shared equally by the Purchaser and Parent.
(k) ESTOPPEL LETTERS. With respect to each parcel of Leased Real
Property, such Seller Party will have delivered to the Purchaser an estoppel
letter from the lessor under the related lease or sublease to the effect that:
(i) the copy of the lease or sublease attached to such estoppel letter is a
true, correct and complete copy of such lease or sublease and represents the
entire agreement between such lessor and such Seller Party as to such parcel;
(ii) such Seller Party is not in breach or default under such lease or
sublease, and no event has occurred which, with the giving of notice or the
passage of time, would constitute such a breach or default, or permit
termination, modification or acceleration under such lease or sublease; (iii)
such lessor has not repudiated any provision of such lease or sublease; (iv)
there are no disputes, oral agreements or forbearance programs in effect as to
such lease or sublease; and (v) such other matters as the Purchaser reasonably
may request.
(l) LIEN RELEASES. The Sellers shall have caused any Person holding
a Lien (other than a Permitted Lien) on any Purchased Asset to have executed
and delivered to the Purchaser a lien release with respect to such Purchased
Asset in form and substance satisfactory to the Purchaser.
(m) SELLER PARTIES CLOSING DOCUMENTS. The Seller Parties will
have delivered to the Purchaser the following documents:
(i) a certificate signed by the president, vice president,
chief financial officer or treasurer of each Seller Party, dated the
Closing Date, stating that the conditions specified in Sections 8.1(a)
through 8.1(e), inclusive, have been fully satisfied;
(ii) a copy of the resolutions duly adopted by the board of
directors of each Seller Party authorizing such Seller Party's
execution, delivery and performance of the Transaction Documents to
which such Seller Party is a party and the consummation of the Sale
and all other transactions contemplated by the Transaction Documents,
as in effect as of the Closing, certified by an officer of such Seller
Party;
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(iii) a certificate (dated not more than 15 business days
prior to the Closing) of the Secretary of State of each state listed
on the attached ORGANIZATION SCHEDULE as to the good standing of each
Seller Party in such states;
(iv) the Books and Records;
(v) such a bill of sale, warranty deeds, warranty assignments
of leases and all other instruments of conveyance which are necessary
or desirable to effect the Sale, including, to the extent appropriate,
documents acceptable for recordation in the United States Patent and
Trademark Office, the United States Copyright Office and any other
similar Government Entity;
(vi) copies of the Consents; and
(vii) such other documents relating to the transactions
contemplated by the Transaction Documents as the Purchaser reasonably
requests.
All corporate and other proceedings or actions taken or required to be taken by
any Seller Party in connection with the transactions contemplated by the
Transaction Documents, and all documents incident thereto, must be reasonably
satisfactory in form and substance to the Purchaser and its special legal
counsel. Any condition set forth in this Section 8.1 may be waived only in a
writing executed by the Purchaser.
8.2 CONDITIONS TO THE SELLER PARTIES' OBLIGATION. The
Seller Parties' obligation to effect the Sale at the Closing is subject to the
satisfaction as of the Closing of the following conditions precedent:
(a) REPRESENTATIONS AND WARRANTIES. Each representation and
warranty set forth in Article 4 will be true and correct in all material
respects at and as of the Closing as though then made, except to the extent of
any change solely caused by the transactions expressly contemplated by the
Transaction Documents.
(b) COVENANTS. The Purchaser will have performed and observed
in all material respects each covenant or other obligation required to be
performed or observed by it pursuant to the Transaction Documents prior to the
Closing.
(c) COMPLIANCE WITH APPLICABLE LAWS. The consummation of the
transactions contemplated by the Transaction Documents will not be prohibited
by any Legal Requirement or subject any Seller Party to any penalty or
liability arising under any Legal Requirement or imposed by any Government
Entity.
(d) PROCEEDINGS. No action, suit or proceeding will be pending
or threatened before any Government Entity the result of which could prevent or
prohibit the consummation of any transaction pursuant to the Transaction
Documents, cause any such transaction to be rescinded following such
consummation or adversely affect the Purchaser's performance of its obligations
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pursuant to the Transaction Documents, and no judgment, order, decree,
stipulation, injunction or charge having any such effect will exist.
(e) OPINION OF COUNSEL. Parent will have received from Kirkland
& Ellis, special legal counsel for the Purchaser, an opinion with respect to
the matters set forth in EXHIBIT D attached hereto addressed to Parent. Such
opinion will be dated the Closing Date and will be in form satisfactory to the
Seller Parties' legal counsel.
(f) PURCHASER CLOSING DOCUMENTS. The Purchaser will have
delivered to Parent the following documents:
(i) a certificate signed by the president or chief
financial officer of the Purchaser, dated the Closing Date, stating
that the conditions specified in Sections 8.2(a) through 8.2(d),
inclusive, have been fully satisfied;
(ii) all instruments which are necessary or desirable to
effect the Assumption; and
(iii) such other documents relating to the transactions
contemplated by the Transaction Documents to be consummated at the
Closing as the Sellers reasonably request.
All corporate and other proceedings or actions taken or required to be taken by
the Purchaser in connection with the transactions contemplated by the
Transaction Documents, and all documents incident thereto, must be reasonably
satisfactory in form and substance to the Seller Parties and their legal
counsel. Any condition set forth in this Section 8.2 may be waived only in a
writing executed by a Seller.
ARTICLE 9
OTHER COVENANTS
---------------
9.1 INTERIM AGREEMENTS OF THE SELLER PARTIES. The Seller Parties
covenant and agree that prior to the Closing, unless the Purchaser agrees
otherwise in writing, or as otherwise expressly contemplated or permitted by
the Transaction Documents, the Sellers will conduct the Business in, and the
Sellers will not take any action other than in, the ordinary course of
business, on an arm's-length basis and in accordance with all Legal
Requirements and the Sellers' past custom and practice. Without limiting the
generality of the preceding sentence, each Seller Party covenants that:
(a) no Seller will, directly or indirectly,
(i) sell, pledge, dispose of or encumber any Purchased
Asset, other than sales of inventory in the ordinary course of
business and consistent with past practice,
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(ii) engage in any activity which would accelerate the
collection of its accounts or notes receivable, delay the payment of
its accounts payable, or reduce or otherwise restrict the amount of
inventory (including raw material, packaging, work-in-process, or
finished goods) on hand, in each case, other than in the ordinary
course of the conduct of the Business,
(iii) acquire assets other than in the ordinary course
of business or as otherwise contemplated by this Agreement,
(iv) take any action with respect to the grant of any
bonuses, salary increases, severance or termination pay (other than
the payment of any such amounts to which such Seller conimitted
prior to December 31, 1995) or the adoption or amendment of any
employee benefit or welfare plan,
(v) take any action which would render, or which could
reasonably be expected to render, any representation or warranty made
by any Seller Party in this Agreement untrue at (or at any time prior
to) the Closing,
(vi) enter into or modify, or propose to enter into or
modify, any agreement, arrangement or understanding with respect to
any of the matters referred to in clauses (i) through (v) above;
(b) each Seller will use its best efforts to cause its current
insurance policies not to be canceled or terminated, and not to permit any of
the coverage pursuant to any such policy to lapse, unless at the time of such
termination, cancellation or lapse there is in full force and effect a
replacement policy which provides coverage in an amount which is not less than
the amount of the coverage pursuant to the canceled, terminated or lapsed
policy;
(c) each Seller will
(i) insofar as such matters relate to the Purchased
Assets, the Assumed Liabilities or the Business, use reasonable
commercial efforts to (A) preserve intact the organization and
goodwill of the Business, (B) keep available the services of its
officers and employees as a group, and (C) maintain satisfactory
relationships with its material financing sources, suppliers and
customers and other Persons having business relationships with it,
(ii) maintain its facilities and assets in good and
operable condition, and
(iii) notify the Purchaser of any change in the normal
course of the Business or in the condition of the Purchased Assets or
the operation of the Business and any governmental or third
party complaint, investigation or hearing (or communication indicating
that such a complaint, investigation or hearing is or may be
contemplated) if such change, complaint, investigation or hearing
could reasonably be expected to be material, individually or in the
aggregate, to the Purchased Assets, the Assumed Liabilities or the
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financial condition, operating results, assets, customer or supplier
relations, employee relations or business prospects of the
Business;
(d) each Seller Party will permit representatives of the
Purchaser and the Purchaser's present and proposed financing sources to have
full access (at reasonable times and in a manner so as not to unreasonably
interfere with such Seller Party's normal business operations) to all such
Seller Party's personnel, customers and suppliers and all premises, properties,
books, records, contracts, Tax records and other documents of such Seller Party
pertaining to the Business.
9.2 EXCLUSIVITY. None of the Seller Parties will (i) solicit, initiate,
or encourage the submission of any proposal or offer from any Person relating
to the acquisition of all or any portion of the Business (including any
acquisition of any capital stock or other voting securities (whether by merger
or otherwise)) or (ii) participate in any discussions or negotiations
regarding, furnish any information with respect to, assist or participate in,
or facilitate in any other manner any effort or attempt by any Person to do or
seek any of the foregoing. Each of the Seller Parties agrees to notify the
Purchaser immediately if any Person makes any proposal, offer, inquiry, or
contact with respect to any of the foregoing.
9.3 NOTICE BY THE PURCHASER. From the date of this Agreement until the
Closing, the Purchaser promptly will notify Parent if any representation or
warranty of the Purchaser set forth in this Agreement was untrue when made or
subsequently has become untrue.
9.4 ADDITIONAL INTERIM AGREEMENTS. Each Party will use reasonable
efforts to:
(a) take or cause to be taken all actions, and do or cause to be done
all things, which are necessary, proper or advisable to cause any other Party's
conditions set forth in Sections 8.1 and 8.2 to be fully satisfied, and
(b) consummate and make effective as promptly as practicable the
transactions contemplated by the Transaction Documents, including using
reasonable efforts to obtain the Consents.
9.5 TRANSACTION EXPENSES. The Purchaser will be responsible for and pay
all costs and expenses incurred by the Purchaser in connection with the
negotiation, preparation and entry into the Transaction Documents and the
consummation of the transactions to be consummated pursuant to the Transaction
Documents. The Seller Parties will be responsible for and pay (a) all stamp and
recording taxes, fees and expenses and other miscellaneous closing fees or
costs associated therewith, (b) all costs and expenses incurred by the Seller
Parties in connection with the negotiation, preparation and entry into the
Transaction Documents and the consummation of the transactions to be
consummated pursuant to the Transaction Documents and (c) except as provided in
the following sentence, all costs arising out of the actual transfer or
assignment of any Purchased Assets from any Seller Party to the Purchaser
pursuant to this Agreement (including, without limitation, costs incurred in
connection with seeking consents to transfer license agreements). The Purchaser
and Parent will each pay one-half of all transfer, sales, use and other similar
taxes, all title
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insurance and survey costs referred to in Sections 8. 1(i) and 8. 1(j) and all
settlement fees and escrow fees imposed by reason of the transactions
contemplated by this Agreement.
9.6 FURTHER ASSURANCES. From and after the Closing, each Party will
execute all documents and take any other action which it is reasonably
requested to execute or take to effectuate further the transactions
contemplated by the Transaction Documents.
9.7 ANNOUNCEMENTS. Prior to the Closing, the Purchaser will not make
any public announcement of or regarding the transactions contemplated by this
Agreement (other than to its investors) without the prior approval of Parent as
to the timing and content of such announcement (which approval Parent may not
unreasonably withhold or delay). The Seller Parties will not make any public
announcement of or regarding the transactions contemplated by this Agreement
without the prior approval of the Purchaser as to the timing and content of
such announcement (which approval the Purchaser may not unreasonably withhold
or delay); provided that the Seller Parties may make a public announcement of
or regarding the transactions contemplated herein on or shortly after the date
hereof, subject to the Purchaser's approval of the content thereof (which
approval the Purchaser may not unreasonably withhold or delay). The provisions
of this Section 9.7 will not apply to any announcements which are required by
law (including pursuant to the regulations of any securities exchange);
provided that the Party making any such announcement will use reasonable
efforts to confer with the other Parties prior to making such announcement.
9.8 PROPERTY TAXES AND FICA.
-----------------------
(a) FICA. The alternative procedure established in Section 5 of
Revenue Procedure 84-77, 1984-2 C.B. 753, relating to employment tax returns
and statements shall be adopted by the Purchaser and the Seller Parties for
transferred employees. The Seller Parties shall, in a timely fashion, furnish
the Purchaser with the information it needs to comply with this procedure.
(b) PRORATIONS. All real property taxes, personal property
taxes ad valorem obligations and similar taxes imposed on a periodic basis, in
each case levied with respect to the Purchased Assets, other than transaction
expenses provided for in Section 9.5, for a taxable period which includes (but
does not end on) the Closing Date (collectively, the "APPORTIONED OBLIGATIONS")
shall be apportioned between Sellers and the Purchaser as of the Closing Date
based on the number of days of such taxable period included in the period prior
to and including the Closing Date (the "PRE-CLOSING TAX PERIOD") and the number
of days of such taxable period included in the period after the Closing Date
(the "POST-CLOSING TAX PERIOD"). Sellers shall be liable for the proportionate
amount of such taxes that is attributable to the Pre-Closing Tax Period. At the
Closing, Sellers and the Purchaser shall present a reimbursement to which each
is entitled under this Section 9.8(b) together with such supporting evidence as
is reasonably necessary to calculate the proration amount. The proration amount
shall be paid by the Party owing it to the other Party or Parties within 10
days after delivery of such statement. Thereafter, Sellers shall notify the
Purchaser upon receipt of any bill for real or personal property taxes relating
to the Purchased Assets, part or all of which are attributable to the
Post-Closing Tax Period, and shall promptly deliver such bill to the Purchaser
who shall pay the same to the appropriate taxing authority; PROVIDED, that if
such bill covers the Pre-
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Closing Tax Period, Sellers shall also remit prior to the due date of
assessment to the Purchaser payment for the proportionate amount of such bill
that is attributable to the Pre-Closing Tax Period. In the event that either
Sellers or the Purchaser shall thereafter make a payment for which such Party
or Parties are entitled to reimbursement under this Section 9.8(b), the other
Party or Parties shall make such reimbursement promptly but in no event later
than 30 days after the presentation of a statement setting forth the amount of
reimbursement to which the presenting Party or Parties are entitled, along with
such supporting evidence as is reasonably necessary to calculate the amount of
reimbursement. Any payment required under this Section 9.8(b) and not made
within 10 days of delivery of the statement shall bear interest at the rate per
annum determined, from time to time, under the provisions of Section 6621(a)(2)
of the Code for each day until paid.
9.9 FINANCIAL STATEMENTS. The Sellers shall deliver to the Purchaser as
soon as available but in any event within 15 business days after the end of
each monthly accounting period of the Sellers ending after the date hereof but
before the Closing, unaudited special purpose statements of income of the
Business for such respective monthly period and for the period from the
beginning of the respective current fiscal year to the end of such month, and
an unaudited special purpose balance sheet of the Business as of the end of
such monthly period, setting forth in each case comparisons to the
corresponding period in the respective preceding fiscal year (collectively, the
"PRE-CLOSING MONTHLY FINANCIAL STATEMENTS"). Each Pre-Closing Monthly Financial
Statement (including the notes thereto) shall be prepared in accordance with
GAAP applied on a consistent basis throughout the periods covered thereby,
present fairly the financial condition of the Business as of such dates and the
results of operations of the Business for such periods, and shall be consistent
with the books and records of the Business (which books and records shall be
correct and complete), subject to normal year-end adjustments (which will not
be material individually or in the aggregate) and the lack of footnotes and
other presentation items.
9.10 NON-SOLICITATION.
----------------
(a) SELLERS' EMPLOYEES. For a period commencing on the date hereof
and ending on February 28, 1998, the Purchaser agrees not to (and agrees to
cause its Affiliates not to) solicit for employment any employee of any Seller
Party (other than any employee of the Business); provided, that the foregoing
shall not prohibit the Purchaser or any Affiliate of the Purchaser from
soliciting any employee of any Seller Party who first solicits employment from
the Purchaser or any Affiliate of the Purchaser, so long as none of the
Purchaser or any Affiliate of the Purchaser directed or encouraged the
solicitation of such employment by such employee.
(b) PURCHASER EMPLOYEES. For a period commencing on the date
hereof and ending on February 28, 1998, each Seller Party agrees not to (and
agrees to cause its Affiliates not to) solicit for employment any employee of
the Purchaser or any Requested Employee; provided, that the foregoing shall not
prohibit any Seller Party or any Affiliate of any Seller Party from soliciting
any employee of the Purchaser or Requested Employee who first solicits
employment from any Seller Party or any Affiliate of any Seller Party, so long
as none of the Seller Parties or any Affiliate of any Seller Party directed or
encouraged the solicitation of such employment by such employee.
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9.11 NON-COMPETITION. In consideration for, and as an inducement to
and a condition to, the Purchaser's agreement to enter into this Agreement,
each Seller Party agrees as follows:
(a) SCOPE OF AGREEMENT. Each Seller Party agrees that during
the period beginning on the Closing Date and ending on the fifth anniversary of
the Closing Date (the "NON-COMPETITION PERIOD"), no Seller Party will, directly
or indirectly, either for themselves or for any other Person, permit its name
to be used by or participate in any business or enterprise identical to or
similar to any part of the Business as of the date of this Agreement and which
is located in North America. For purposes of this Agreement, the term
"participate" includes any direct or indirect interest in any enterprise,
whether as an officer, director, employee, partner, sole proprietor, agent,
representative, independent contractor, consultant, franchisor, franchisee,
creditor, owner or otherwise; provided, that the term "participate" shall not
include ownership of less than two percent of the stock of a publicly-held
corporation whose stock is traded on a national securities exchange or in the
over-the-counter market. Each Seller Party agrees that this covenant is
reasonable with respect to its duration, geographical area and scope.
(b) SPECIFIC PERFORMANCE. The Parties agree that the Purchaser
would suffer irreparable harm from a breach by any Seller Party of any of the
covenants or agreements contained in this Section 9.11. In the event of an
alleged or threatened breach by any such Person of any of the provisions of
this Section 9.11, the Purchaser or its successors or assigns may, in addition
to all other rights and remedies existing in its favor, apply to any court of
competent jurisdiction for specific performance and/or injunctive or other
relief in order to enforce or prevent any violations of the provisions hereof
(including the extension of the Non-Competition Period by a period equal to the
length of the violation of this Section 9.11). In the event of an alleged
breach or violation by any such Person of any of the provisions of this Section
9.11, the Non-Competition Period described above will be tolled until such
alleged breach or violation is resolved. Each Seller Party agrees that these
restrictions are reasonable.
(c) REASONABLENESS. If, at the time of enforcement of any of
the provisions of this Section 9.11, a court holds that the restrictions stated
therein are unreasonable under the circumstances then existing, the Parties
hereto agree that the maximum period, scope or geographical area reasonable
under such circumstances will be substituted for the stated period, scope or
area.
(d) SURVIVAL. Each Seller Party agrees that the covenants made
in Section 9.11(a) shall be construed as an agreement independent of any other
provision of this Agreement and shall survive any order of a court of competent
jurisdiction terminating any other provision of this Agreement.
9.12 ACCESS TO RECORDS. After the Closing Date, to the extent
reasonably required for any bona fide business purpose, each Party will allow,
and will use its reasonable efforts to cause its agents, representatives and
Affiliates to allow, the other Party or Parties (and the agents,
representatives and Affiliates of the other Party or Parties) reasonable access
to all business records and files concerning the Business, the Purchased Assets
or the Assumed Liabilities which relate to the period prior to the Closing Date
and will permit such Persons to make copies at their own
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expense of the same. Charges for copies will be limited to actual out-of-pocket
costs. Such access will be granted upon reasonable advance notice, during
normal business hours, and in such a manner so as not to interfere unreasonably
with the operations of the Person affording such access. Prior to Closing, the
Purchaser shall deliver to the Seller Parties a written description of the
Purchaser's existing document retention program, including storage locations.
9.13 USE OF BUSINESS NAMES BY THE PURCHASER.
---------------------------------------
(a) To the extent the trademarks, service marks, brand, trade,
corporate or business names of Parent which are not Purchased Assets are used
by the Business (including, without limitation, the name "Tranzonic") on
stationery, signage, invoices, receipts, forms, packaging, advertising and
promotional materials, products, training and service literature and materials
or computer programs of the Business ("MARKED MATERIALS") or appear on
inventory of the Business at the Closing, the Purchaser may use such Marked
Materials or sell such inventory after the Closing without altering or
modifying such Marked Materials or inventory, or removing or rendering
illegible all such trademarks, service marks, or brand, trade, corporate or
business names. The Purchaser may continue to use or sell any Marked Materials
or inventory which use such trademarks, service marks, brand, trade, corporate
or business names, to the extent such use or sale is consistent with the past
practice of the Sellers, until the first anniversary of the Closing Date, and
the Purchaser may continue to create any Marked Materials or inventory which
use such trademarks, service marks, brand, trade, corporate or business names,
to the extent consistent with the past practice of the Sellers, until 90 days
after the Closing Date (and thereafter use such Marked Materials and sell such
inventory until the first anniversary of the Closing Date), after which
respective time periods the Purchaser will not take such actions without the
prior written consent of Parent.
(b) The Purchaser agrees that any remedy at law for any breach
by it of this Section 9.13 would be inadequate, and Parent would be entitled to
injunctive relief in such a case. If it is ever held that the restrictions
placed on the Purchaser by this Section 9.13 are too onerous and are not
necessary for the protection of Parent, the Parties agree that any court of
competent jurisdiction may reduce the duration or scope hereof; or delete
specific words or phrases, and in its reduced form such provision will then be
enforceable and will be enforced.
9.14 ACCOUNTS RECEIVABLE.
--------------------
(a) In the event that, after the Closing, any Seller Party or
any Affiliate of any Seller Party receives payment in respect of any accounts
or notes receivable related to the Business, such Seller Party or Affiliate
shall promptly remit such amounts to the Purchaser.
(b) After the Closing, the Purchaser shall use commercially
reasonable efforts (which shall not include the obligation to institute
litigation) to collect all accounts and notes receivable (whether current or
noncurrent) set forth on the Final Balance Sheet (the "ACCOUNTS RECEIVABLE").
If after 180 days after the Closing Date, the Purchaser has not received
payment in full on any of the Accounts Receivable (net of an amount of
allowances for doubtful accounts set forth for such Accounts Receivable on the
Final Balance Sheet), the Purchaser shall notify Parent
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of the amount of such underpayment (the "ACCOUNTS RECEIVABLE SHORTFALL") and
shall provide Parent with the names of the delinquent account debtors and the
amounts of their unpaid accounts. Within 10 business days after receipt of such
notice, Parent shall deliver to the Purchaser in immediately available funds
the Accounts Receivable Shortfall. Promptly after receipt of such funds, the
Purchaser shall assign such Accounts Receivable to Parent. In the event that
subsequent to the receipt of such payment the Purchaser receives any payment in
respect of such Accounts Receivable from the account debtors thereon, the
Purchaser shall promptly deliver such payment to Parent. The obligations of the
Purchaser pursuant to this Section 9.14(b) shall terminate as of the first
anniversary of the date hereof.
(c) If, from February 14, 1996 through the Closing Date, either Seller
enters into any arrangement with any existing customer of such Seller (which
arrangement is inconsistent with the past practice of such Seller with respect
to such existing customer concerning terms of sale or credit terms) or with a
Prohibited Customer, in either case without the prior written consent of the
Purchaser, any accounts receivable arising out of such arrangement (whether
arising before or after the Closing Date) shall be "GUARANTEED ACCOUNTS
RECEIVABLE." If 30 days after any Guaranteed Account Receivable becomes past
due, the Purchaser has not received payment in full on such Guaranteed Account
Receivable, the Purchaser shall notify Parent of the amount of such
underpayment (the "SHORTFALL") and shall provide Parent with the name of such
delinquent account debtor. Within 10 business days after receipt of such
notice, Parent shall deliver to the Purchaser in immediately available funds
the Shortfall. In the event that subsequent to the receipt of such payment the
Purchaser receives any payment in respect of such Guaranteed Account Receivable
from the account debtor thereon, the Purchaser shall promptly deliver such
payment to Parent. For purposes hereof; a "PROHIBITED CUSTOMER" shall mean any
of the following retail stores or any entities doing business under the
following names (or any substantially similar names) or any of their
Affiliates: K mart Corp, Caldor, Ames, Hills, Ben Franklin, House of Fabric,
Pergament Home Centers, Rickel Home Centers, Phar-Mor or Pamida.
Notwithstanding the foregoing, this Section 9.14(c) shall not apply to the
invoices of (1) Caldor in the approximate amount of $30,000 for the purchase of
approximately 6000 sweater dryers and (2) Ames and Pamida with respect to the
Pending Arrangements (as defined in Section 9.14(d) below). Set forth on the
attached K MART CORP PROPOSAL SCHEDULE is a description of the proposal made by
the Sellers to K mart Corp for the purchase of products of the Business (the "K
MART PENDING ARRANGEMENT"). If K mart Corp accepts the K mart Pending
Arrangement without modification thereof; then the provisions of this Section
9.14(c) shall apply to any receivables arising out of the K mart Pending
Arrangement but only to the extent that such receivables are uninsured and the
provisions of this Section 9.14(c) shall not apply to any invoices issued with
respect to receivables arising out of the K mart Pending Arrangement that are
issued after the date K mart Corp enters into bankruptcy.
(d) Contemporaneously with the signing of this agreement, the Sellers
plan to enter into arrangements with Ames and Pamida regarding the purchase of
products of the Business (the "PENDING ARRANGEMENTS"). The Seller Parties agree
not to terminate the Pending Arrangements without prior written consent of the
Purchaser. As part of the Pending Arrangements, the Sellers have agreed to
provide Ames and Pamida with free goods (i.e., purchase credits). The dates on
which delivery of the first shipment of free goods to Ames and Pamida is made
by the Sellers or the Purchaser (as the case may be) pursuant to the Pending
Arrangements are referred to herein
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individually as an "EFFECTIVE DATE". If, within six months of Ames' or Pamida's
respective Effective Date, such Person either (1) ceases purchasing (or
materially decreases the amount of purchases of) products of the Business from
the Purchaser (in each case, other than because of quality or service issues or
any other breach by the Purchaser) or (2) enters into bankruptcy (the
respective dates of such occurrences with respect to Ames and Pamida are
referred to individually herein as a "TERMINATION DATE"), then Parent shall
promptly, but in any event within 15 days of receiving notice of a Termination
Date from the Purchaser, pay to the Purchaser in immediately available funds
the Reimbursement Amount. For purposes of this paragraph the "REIMBURSEMENT
AMOUNT" shall mean (x) the Purchasers Inventory value for the free goods
provided to either Ames or Pamida, as the case may be, pursuant to the Pending
Arrangements (which value shall be stated at cost and not selling price) times
(y) a fraction, the numerator of which shall be the number of days lapsed
between such Person's respective Effective Date and Termination Date and the
denominator of which shall be 730 days in the case of Ames and 365 days in the
case of Pamida.
(e) For purposes of this Section 9.14, collections from any Person from
whom any Account Receivable or Guaranteed Account Receivable is due (a
"DEBTOR") will be applied in the chronological order of the Purchaser's and
Sellers' billings to such Debtor (i.e., to the oldest unpaid billing first)
unless (i) such Debtor disputes its obligation to pay such billing, (ii) such
Debtor indicates that such payment is to be applied in another manner, or (iii)
other facts or circumstances exist in light of which it would not be reasonable
to conclude that such Debtor does not intend such payment to be applied in
another manner. The Purchaser shall not encourage any such Debtor to take any
action described in subsections (i), (ii) or (iii) above (it being understood
that the Purchaser may request that a Debtor indicate how a payment is to be
applied).
9.15 INVENTORY. After the Closing, the Purchaser shall use commercially
reasonable efforts to sell the inventory which is part of the Purchased Assets.
If after 15 months after the Closing Date, the Purchaser has not sold a
quantity equal to the quantity on hand as of the Closing Date (as set forth on
the Final Balance Sheet) of each separate identifiable item of inventory which
is part of the Purchased Assets (whether or not presently finished goods), net
of the rcserves applicable to such inventory as set forth on the Final Balance
Sheet (the "INVENTORY RESERVES"), the Purchaser shall notify Parent of the
quantity of such unsold inventory net of the Inventory Reserves (and, if any
such unsold inventory constitutes Rolled Printed Fabric, such notice shall
include the Purchaser's good faith estimate of the cost of converting such
unsold inventory to finished goods) within 30 days after the end of such
15-month period. Within 10 business days after receipt of such notice, Parent
shall deliver payment to the Purchaser in immediately available funds for such
inventory (other than any Rolled Printed Fabric inventory) equal to the book
value of such unsold inventory (less any reserves applicable to such unsold
inventory) Promptly after receipt of such payment, the Purchaser shall, at the
request of Parent and at Parent's expense, deliver such unsold Inventory to
Parent, and Parent may dispose of such unsold inventory (and any converted
Rolled Printed Fabric delivered to Parent as provided below) in its sole
discretion, which disposal shall not constitute a violation of Section 9.11 or,
in the event Parent elects to utilize the services of any non-transferred
employee solely for purposes of disposing of such inventory, affect the
Purchaser's obligations under Section 6 hereof. Notwithstanding the foregoing,
if any such unsold inventory constitutes Rolled Printed Fabric, Parent may,
within 30 days of receipt of notice from the Purchaser described above, deliver
written notice to the Purchaser requesting conversion of the Rolled Printed
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Fabric. If Parent does not deliver such notice within 30 days after receiving
the Purchaser's notice (as described above), then within 15 days of such date,
the Parent shall deliver payment in immediately available funds for such
inventory in the manner described above. If Parent does deliver such notice,
then, within 30 days of receipt of such notice from Parent and prior to
delivering the Rolled Printed Fabric to Parent, the Purchaser will convert such
unsold inventory to finished goods, and deliver such finished goods to Parent.
Such conversion shall, in all material respects, be undertaken in accordance
with the Purchaser's then current business practices. Within 10 business days
after delivery of the converted inventory, Parent shall deliver payment to the
Purchaser in immediately available funds for the actual material costs (the
book value of the Rolled Printed Fabric, net of any applicable reserves, plus
the book value of any additional materials) plus the Purchaser's standard
overhead and labor costs of such conversion. The Purchaser shall use
commercially reasonable efforts to sell any inventory which constitutes Rolled
Printed Fabric on a first-in, first-out basis. For purposes hereof, "ROLLED
PRINTED FABRIC" shall mean inventory consisting of printed and unfinished
textile.
9.16 COOPERATION ON TAX MATTERS. The Purchaser and Parent shall
cooperate fully, as and to the extent reasonably requested by the other Party,
in connection with any audit, litigation or other proceeding with respect to
Taxes. Such cooperation shall include retaining and (upon the other Party's
request) providing records and information which are reasonably relevant to any
such audit, litigation or other proceeding and making employees available on a
mutually convenient basis to provide additional information and explaining any
material provided hereunder. The Purchaser and Parent agree (A) to retain all
books and records with respect to Tax matters pertinent to the Sellers relating
to any taxable period beginning before the Closing Date until the expiration of
the statute of limitations (and, to the extent notified by the Purchaser or
Parent, any extensions thereof) of the respective taxable periods, and to abide
by all record retention agreements entered into with any taxing authority, and
(B) to give the other Party reasonable written notice prior to transferring,
destroying or discarding any such books and records and, if so requested, to
allow the other Party to take possession of such books and records which are to
be transferred, destroyed or discarded.
9.17 MAINTAINING NON-COMPETITION AGREEMENTS. To the extent that any
Contract which contains any non-competition and/or non-solicitation provisions
which bind any present or former employee, officer, director or stockholder of
either Seller (or any of their predecessors-in-interest) or the Business
(including, without limitation, such provisions in the Ribaudo Employment
Agreement and the Glenn Employment Agreement) is not assigned to the Purchaser,
each Seller Party which is a party to such Contract shall use best efforts to
maintain such Contract in full force and effect and shall, at the request and
at the expense of the Purchaser, enforce all rights of such Seller Party under
such Contract. Each such Seller Party hereby grants to the Purchaser the
authority to sue any other party to each such Contract under such Contract in
such Seller Party's name. The Seller Parties agree not to modify or terminate
or waive any noncompetition, nonsolicitation or confidentiality provisions set
forth in the Ribaudo Employment Agreement or the Glenn Employment Agreement to
the extent such provisions pertain to the Business.
9.18 LANDLORD DEPOSITS. If, as of the Closing, any deposits (the
"DEPOSITS") are held by any lessor of leased property of the Business, the
Sellers may request that such lessor release the Deposits to the Sellers
promptly after the Closing, so long as the Purchaser is not obligated to
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redeposit funds with such lessor. At the termination of the applicable lease,
the Purchaser agrees to refund the Deposits to the Sellers. In the event any
lessor is entitled under an applicable lease to apply any charges against the
Deposits, the Purchaser will promptly pay to the Sellers an amount equal to the
reduction in the Deposits.
ARTICLE 10
DEFINITIONS
-----------
10.1 DEFINITIONS. For purposes hereof; the following terms, when used
herein with initial capital letters, shall have the respective meanings set
forth herein:
"AFFILIATE" of any Person means any other Person controlling,
controlled by or under common control with such first Person, including,
without limitation, such Person's officers, directors, stockholders and
partners.
"AGREEMENT" means this Asset Purchase Agreement, including all
Exhibits and Schedules hereto and any certificate delivered pursuant hereto, as
it may be amended from time to time in accordance with its terms.
"BOOKS AND RECORDS" means all lists, records and other
information pertaining to accounts, personnel and referral sources of the
Business, all lists and records pertaining to suppliers and customers of the
Business, and all other books, ledgers, files and business records of every
kind relating or pertaining to the Business, in each case whether evidenced in
writing, electronically (including by computer) or otherwise.
"BUSINESS" means, collectively, the businesses of Design and
Sub as currently conducted.
"CODE" means the United States Internal Revenue Code of 1986,
as amended.
"EMPLOYMENT AGREEMENTS" means the Glenn Employment Agreement,
the Himmelsbach Employment Agreement and the Ribaudo Employment Agreement.
"ENVIRONMENTAL AND SAFETY REQUIREMENTS" means all federal,
state, local and foreign statutes, regulations, ordinances and other provisions
having the force or effect of law, all judicial and administrative orders and
determinations and all common law, in each case concerning public health and
safety, worker health and safety and pollution or protection of the environment
(including, without limitation, all those relating to the presence, use,
production, generation, handling, transport, treatment, storage, disposal,
distribution, labeling, testing, processing, discharge, Release, threatened
Release, control, or cleanup of any hazardous materials, substances or wastes,
chemical substances or mixtures, pesticides, pollutants, contaminants, toxic
chemicals, petroleum products or by-products, asbestos, polychlorinated
biphenyls (or PCBs), noise or radiation).
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
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"GAAP" means, at a given time, United States generally accepted
accounting principles, consistently applied.
"GLENN EMPLOYMENT AGREEMENT" means the Employment Agreement dated as of
October 22, 1990 by and between Parent and Glenn, as may have been amended from
time to time.
"GOVERNMENT ENTITY" means any government agency, governmental
department, commission, board, bureau, court, arbitration panel or
instrumentality of the United States of America or any other nation, or any
state or other political subdivision thereof, or any entity exercising
executive, legislative, judicial, regulatory or administrative functions of
government.
"HIMMELSBACH EMPLOYMENT AGREEMENT" means the Compensation Agreement
dated as of September 1, 1983, by and between Sub and Jerry C. Himmelsbach, as
amended on November 2, 1994, and as may have been further amended from time to
time.
"INDEBTEDNESS" of any Person means, without duplication: (a)
indebtedness for borrowed money or for the deferred purchase price of property
or services in respect of which such Person is liable, contingently or
otherwise, as obligor or otherwise (other than trade payables and other current
liabilities incurred in the ordinary course of business) and any commitment by
which such Person assures a creditor against loss, including contingent
reimbursement obligations with respect to letters of credit; (b) indebtedness
guaranteed in any manner by such Person, including a guarantee in the form of
an agreement to repurchase or reimburse; (c) obligations under capitalized
leases in respect of which such Person is liable, contingently or otherwise, as
obligor, guarantor or otherwise, or in respect of which obligations such Person
assures a creditor against loss; and (d) any unsatisfied obligation of such
Person for "withdrawal liability" to a "multiemployer plan," as such terms are
defined under ERISA.
"INVESTMENT" means, with respect to any Person, any direct or indirect
purchase or other acquisition by such Person of any notes, obligations,
instruments, stock, securities or other ownership or beneficial interest
(including partnership interests and joint venture interests) of any other
Person, and any capital contribution by such Person to any other Person.
"KNOWLEDGE" means, with respect to the Sellers or the Seller Parties,
the actual knowledge of Robert S. Reitman or Alayne L. Reitman.
"LEGAL REQUIREMENT" means any requirement arising under any action,
statute, law, ordinance, order, judgment, decree, treaty, rule, regulation,
determination or direction of any Government Entity, including any
Environmental and Safety Requirement.
"LIEN" means any mortgage, pledge, security interest, encumbrance,
easement, restriction, charge, or other lien.
"LOSS" means, with respect to any Person, any diminution in value,
consequential or other damage, liability, demand, claim, action, cause of
action, cost, damage, deficiency, Tax, penalty, fine or other loss or expense,
whether or not arising out of a third party claim, including all
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interest, penalties, reasonable attorneys' fees and expenses and all amounts
paid or incurred in connection with any action, demand, proceeding,
investigation or claim by any third party (including any Government Entity)
against or affecting such Person and the investigation, defense or settlement
of any of the foregoing.
"PERMITTED LIENS" means (a) liens with respect to Taxes not yet due and
payable or which are being contested in good faith by appropriate proceedings
and for which appropriate reserves have been established in accordance with
GAAP; (b) deposits or pledges made in connection with, or to secure payment of,
utilities or similar services, workers' compensation, unemployment insurance,
old age pensions or other social security obligations; (c) purchase money
security interests and liens securing rental payments under capital lease
arrangements; (d) interests or title of a lessor under any lease permitted by
this Agreement; (e) mechanics', materialmen's or contractors' liens or
encumbrances or any similar lien or restriction for amounts not yet due and
payable or which are being contested in good faith by appropriate proceedings
and for which appropriate reserves have been established in accordance with
GAAP; and (f) easements, rights-of-way, restrictions and other similar charges
and encumbrances not interfering with the ordinary conduct of the Business or
detracting from the value of the assets of any Seller.
"PERMITTED REAL ESTATE LIENS" means (A) statutory liens for current
taxes or other governmental charges with respect to the Leased Real Property
not yet due and payable or the amount or validity of which is being contested
in good faith by appropriate proceedings by a Seller, and with respect to which
all reserves required by GAAP have been established; (B) mechanics', carriers',
workers', repairers' and similar statutory liens arising or incurred in the
ordinary course of business for amounts which are not delinquent and which are
not, individually or in the aggregate, material to the Business; (C) zoning,
entitlement, building and other land use regulations imposed by govennmental
agencies having jurisdiction over the Leased Real Property which are not
violated by the current use and operation of the Leased Real Property; and (D)
covenants, conditions, restrictions, easements and other matters of record
affecting title to the Leased Real Property which do not materially impair the
use or value of the Leased Real Property for the purposes for which it is used
in connection with the Business.
"PERSON" means an individual, a partnership, a corporation, an
association, a limited liability company, a joint stock company, a trust, a
joint venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof.
"PLANS" means all Employee Pension Plans, Employee Welfare Plans, Other
Plans and Multiemployer Plans to which any Seller Party contributes or is a
party.
"PROPRIETARY RIGHTS" means all of the following: (a) all inventions
(whether 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, divisions, extensions, and reexaminations thereof, (b)
all trademarks, service marks, trade dress, logos, trade names, and corporate
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
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(including, without limitation, all sottware), 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 and technical
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).
"RELEASE" has the meaning set forth in CERCLA.
"RIBAUDO EMPLOYMENT AGREEMENT" means the Employment Agreement
dated as of August 13, 1993, by and between American Homeware, Inc., a Texas
corporation (predecessor-in-interest to Design), and Ribaudo, as may have been
amended from time to time.
"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.
"TAXES" means any federal, state, local, or foreign income,
gross receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium, windfall profits, environmental (including taxes imposed
pursuant to Section 59A of the Code), customs duties, capital stock, franchise,
profits, withholding, social security, unemployment, disability, real property,
personal property, sales, use, transfer, registration, value added, alternative
or add-on minimum, or other tax, fee, assessment or charge of any kind
whatsoever, including any interest, penalty, or addition thereto, whether
disputed or not.
"TRANSACTION DOCUMENTS" means this Agreement, the Assumption
Agreement, dated as of the Closing Date, and the Bill of Sale and Assignment
Agreement dated as of the Closing Date.
"TREASURY REGULATIONS" means the United States Treasury
Regulations promulgated pursuant to the Code.
10.2 OTHER DEFINITIONAL PROVISIONS.
(a) ACCOUNTING TERMS. Accounting terms which are not otherwise
defined in this Agreement have the meanings given to them under GAAP. To the
extent that the definition of accounting term that is defined in this Agreement
is inconsistent with the meaning of such term under GAAP, the definition set
forth in this Agreement will control. With respect to the calculation of
Working Capital, all known errors and adjustments shall be taken into account,
regardless of their materiality. For purposes of this Agreement, consistent
application of accounting principles shall mean the accounting principles
utilized in preparing the Financial Statements (without regard to materiality),
to the extent that the Financial Statements were prepared in accordance with
GAAP, including, without limitation, with respect to the determination of the
nature of accounts, level of
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reserves or level of accruals. For purposes of the preceding sentence,
"consistent application of accounting principles" means consistent application
of accounting principles, policies, practices, procedures or methodologies with
respect to financial statements, their classification or their display, as well
as all consistent application of practices, methods, conventions or assumptions
(unless required by objective changes in underlying events) utilized in making
accounting estimates.
(b) "SECTIONS," ETC. Section, clause, Schedule and Exhibit references
contained in this Agreement are references to Sections, clauses, Schedules and
Exhibits in or to this Agreement, unless otherwise specified.
(c) SUCCESSOR LAWS. Any reference to any particular Code section or
any other law or regulation will be interpreted to include any revision of or
successor to that section regardless of how it is numbered or classified.
10.3 CROSS REFERENCE OF OTHER DEFINITIONS. Capitalized terms not
defined in Section 10.1 are defined in the corresponding Sections of this
Agreement:
Term Section
---- -------
Accounts Receivable 9.14
Accounts Receivable Shortfall 9.14
Actual Working Capital 1.4(b)
Apportioned Obligations 9.8(b)
Assumed Liabilities 1.2
Assumption 1.5(b)
Cash Purchase Price 1.3
CERCLA 5.17(c)(iv)
Closing 1.5
Closing Date 1.5
Closing Date Adjustment 1.4(a)(i)
Closing Date Procedures 1.4(b)
Closing Review 1.4(b)
COBRA 6
Confidential Information 3.1(a)
Consents 8.1(e)
Contracts 5.9(b)
Controlled Group 5.15(h)
Debtor 9.14(d)
Deferred Asset 1.1(c)
Deposits 9.18
Design Preface
Disputes 7.7(a)
Disputing Party 7.7(b)
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Draft Balance Sheet 1.4(b)
Effective Date 9.14(d)
Employee Welfare Plans 5.15(a)
Employee Pension Plans 5.15(b)
Employees 5.15(a)
Estimated Working Capital 1.4(a)(i)
Excluded Liabilities 1.2(b)
Excluded Assets 1.1(b)
Final Balance Sheet 1.4(b)
Final Determination 7.7(e)
Financial Statements 5.4(a)
Firm 1.4(b)
Glenn 6
Guaranteed Accounts Receivable 9.14(c)
Indemnification Claim Notice 7.4(a)
Indemnified Party 7.4(a)
Indemnifying Party 7.4(a)
Inventory Reserves 9.15
K mart Pending Arrangement 9.14(c)
Latest Balance Sheet 5.4(a)
Leased Real Property 5.16(b)
Leases 5.16(b)
Marked Materials 9.13(a)
Medical Costs 6
Multiemployer Plan 5.15(c)
Non-Competition Period 9.11(a)
Notice of Arbitration 7.7(b)
Objection Notice 1.4(b)
Other Plans 5.15(a)
Parent Preface
Parties Preface
PBGC 5.15(h)
Pending Arrangements 9.14(d)
Planned Capital Expenditures 1.4(a)(ii)
Pre-Closing Monthly Financial Statements 9.9
Pre-Closing Tax Period 9.8(b)
Post-Closing Tax Period 9.8(b)
Proceeding 7.4(a)
Prohibited Customer 9.14(c)
Purchase Price 1.3
Purchased Assets 1.1(a)
Purchaser Preface
Purchaser Indemnitees 7.2(a)
Purchaser's Arbitrator 7.7(c)
Real Estate 1.1(a)(iv)
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Ribaudo 6
Requested Employees 6
Reimbursement Amount 9.14(d)
Rolled Printed Fabric 9.15
Sale 1.5(a)
Seller Indemnitees 7.3
Seller Parties Preface
Seller's Arbitrator 7.7(c)
Sellers Preface
Severance Costs 6
Shortfall 9.14(c)
Sub Preface
Termination Date 9.14(d)
Title Company 8.1(i)
Title Policies 8.1(i)
Working Capital 1.4(a)(i)
ARTICLE 11
OTHER AGREEMENTS
----------------
11.1 TERMINATION. This Agreement may be terminated:
(a) at any time prior to the Closing by mutual agreement of
the Purchaser and the Seller Parties,
(b) by the Purchaser, at any time prior to the Closing, when
any Seller Party is in breach of any of its material obligations pursuant to
this Agreement or if any representation or warranty of any Seller Party is
false or misleading in any material respect (provided that such condition is
not the result of any breach of any covenant, representation or warranty of the
Purchaser set forth in any Transaction Document),
(c) by the Sellers, at any time prior to the Closing, when the
Purchaser is in breach of any of its material obligations pursuant to this
Agreement or if any representation or warranty of the Purchaser is false or
misleading in any material respect (provided that such condition is not the
result of any breach of any covenant, representation or warranty of any Seller
Party set forth in any Transaction Document), or
(d) by the Purchaser or the Sellers, at any time after
March 29, 1996, if the Closing has not then occurred.
Any termination of this Agreement pursuant to any of clauses 11.1(b) through
(d) will be effected by written notice from the terminating Party to the
Purchaser (if the Sellers are the terminating Party) or the Sellers (if the
Purchaser is the terminating Party). Termination of this Agreement
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pursuant to clause 11.1(b) or (c) will not eliminate any other remedy available
to any Party (including for breaches existing at the time of such termination).
11.2 REMEDIES. No failure to exercise, and no delay in exercising, any
right, remedy, power or privilege under this Agreement by any Party or course
of dealing between or among any of the Parties will operate as a waiver of such
right, remedy, power or privilege, nor will any single or partial exercise of
any right, remedy, power or privilege under this Agreement preclude any other
or further exercise of such right, remedy, power or privilege or the exercise
of any other right, remedy, power or privilege. Except as expressly set forth
herein, the rights, remedies, powers and privileges provided pursuant to this
Agreement are cumulative and not exhaustive of any other rights, remedies,
powers and privileges which may be provided by law.
11.3 CONSENT TO AMENDMENTS. No waiver, amendment, modification or
supplement of this Agreement will be binding upon any Party unless such waiver,
amendment, modification or supplement is set forth in writing and is executed
by such Party.
11.4 SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided in
this Agreement, all covenants and agreements set forth in this Agreement by or
on behalf of the Parties will bind and inure to the benefit of the respective
successors and assigns of the Parties, whether so expressed or not, except that
neither this Agreement or any of the rights, interests or obligations hereunder
may be assigned by any Seller Party without the Purchaser's prior written
consent. The Purchaser may (at any time prior to the Closing) at its sole
discretion, in whole or in part assign its rights and delegate its obligations
pursuant to this Agreement, including the right to purchase the Purchased
Assets and the obligation to assume the Assumed Liabilities to one or more of
its Affiliates, and the Purchaser may, at its sole discretion, direct the
Sellers to convey the Purchased Assets, in whole or in part, to one or more of
the Purchaser's Affiliates; provided that no such assignment shall relieve the
Purchaser of its obligation to pay the Purchase Price subject to the terms and
conditions contained herein. Furthermore, the Purchaser may assign its rights
under this Agreement (i) for collateral security purposes to any lenders
providing financing to the Purchaser or any of its Affiliates or (ii) in
connection with a sale of all or substantially all of the assets of any
business unit of the Purchaser.
11.5 GOVERNING LAW. This Agreement will be governed by and construed in
accordance with the domestic laws of the State of Illinois, without giving
effect to any choice of law or conflict provision or rule (whether of the State
of Illinois or any other jurisdiction) that would cause the laws of any
jurisdiction other than the State of Illinois to be applied. In furtherance of
the foregoing, the internal law of the State of Illinois will control the
interpretation and construction of this Agreement, even if under such
jurisdiction's choice of law or conflict of law analysis, the substantive law
of some other jurisdiction would ordinarily apply.
11.6 NOTICES.
(a) All demands, notices, communications and reports provided
for in this Agreement will be in writing and will be either personally
delivered, mailed by first class mail (postage prepaid) or sent by reputable
overnight courier service (delivery charges prepaid) to any
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Party at the address specified below, or at such address, to the attention of
such other Person, and with such other copy, as the recipient party has
specified by prior written notice to the sending Party pursuant to the
provisions of this Section 11.6.
If to any Seller Party:
-----------------------
The Tranzonic Companies
Suite 224E
30195 Chagrin Boulevard
Pepper Pike, Ohio 44124
Attn: Robert S. Reitman
Alayne L. Reitman
WITH A COPY, WHICH WILL
NOT CONSTITUTE NOTICE TO
ANY SELLER PARTY, TO:
Berick Pearlman & Mills
1350 Eaton Center
1111 Superior Avenue
Cleveland, Ohio 44114-2569
Attn: Samuel S. Pearlman
If to the Purchaser:
--------------------
Whitney.Corr-Pak International, Inc.
19 East Kimberly Road
East Brunswick, New Jersey 08816
Attn: Robert A. Zriny
Richard Weisman
WITH A COPY. WHICH WILL
NOT CONSTITUTE NOTICE
TO THE PURCHASER, TO:
Code, Hennessy & Simmons II, L.P.
c/o Code, Hennessy & Simmons, Inc.
10 South Wacker Drive
Suite 3175
Chicago, Illinois 60606
Attn: Brian P. Simmons
Thomas J. Formolo
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and
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Attn: Kevin R. Evanich, P.C.
(b) Any such demand, notice, communication or report will be
deemed to have been given pursuant to this Agreement when delivered personally,
on the fifth business day after deposit in the U.S. mail or on the business day
after deposit with a reputable overnight courier service, as the case may be.
11.7 SEVERABILITY OF PROVISIONS. If any covenant, agreement, provision
or term of this Agreement is held to be invalid for any reason whatsoever, then
such covenant, agreement, provision or term will be deemed severable from the
remaining covenants, agreements, provisions and terms of this Agreement and
will in no way affect the validity or enforceability of any other provision of
this Agreement.
11.8 SCHEDULES AND EXHIBITS. The Schedules and Exhibits constitute a
part of this Agreement and are incorporated into this Agreement for all
purposes. Nothing in any Schedule attached hereto shall be adequate to disclose
an exception to a representation or warranty made in this Agreement unless such
Schedule identifies the exception with 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 adequate to disclose an exception to a representation or warranty made in
this Agreement, unless the representation or warranty has to do with the
existence of the document or other item itself. No exceptions to any
representations or warranties disclosed on one Schedule shall constitute an
exception to any other representations or warranties made in this Agreement
unless such exception is disclosed as provided herein on each such other
applicable Schedule.
11.9 COUNTERPARTS. The Parties may execute this Agreement in separate
counterparts (no one of which need contain the signatures of all Parties), each
of which will be an original and all of which together will constitute one and
the same instrument.
11.10 NO THIRD-PARTY BENEFICIARIES. No Person which is not a Party,
including any employees of any Seller, will have any right or obligation
pursuant to this Agreement except for Code, Hennessy & Simmons II, L.P., in the
case of Section 11.12.
11.11 HEADINGS. The headings used in this Agreement are for the purpose
of reference only and will not affect the meaning or interpretation of any
provision of this Agreement.
11.12 MERGER AND INTEGRATION. Except as otherwise provided in this
Agreement, this Agreement sets forth the entire understanding of the Parties
relating to the subject matter hereof, and all prior understandings, whether
written or oral are superseded by this Agreement. The Parties agree that
certain letter from Code, Hennessy & Simmons II, L.P. to Parent dated December
29,
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<PAGE> 57
1995 is of no further force or effect and that no Party (and no Affiliate of
any Party) shall have any obligation or liability in respect thereof.
11.13 RISK OF LOSS. Until the Closing, all risk of loss with respect to
the Purchased Assets will remain with the Sellers. If prior to the Closing any
Purchased Asset is damaged, destroyed or lost, then at its option the Purchaser
may waive the failure of any condition set forth in Section 8.1 with respect to
such damage, destruction or loss and either
(a) reduce the Purchase Price by an amount equal to the
diminution in the fair market value (determined at the time of the Closing) of
such Purchased Asset by reason of such damage, destruction or loss or
(b) elect not to purchase such damaged, destroyed or lost
Purchased Asset and reduce the Purchase Price by the greater of the fair market
value or the net book value of such Purchased Asset (in each case determined
immediately prior to such damage, destruction or loss).
11.14 ALLOCATION OF PURCHASE PRICE. The allocation of the Purchase
Price among the Purchased Assets shall be made in accordance with Section 1060
of the Code and applicable Treasury Regulations thereunder and shall be
attached hereto as EXHIBIT E. The fair market value of the Purchased Assets
shall be mutually determined by the Purchaser and the Sellers, and such
determination shall be used by the parties in allocating the Purchase Price and
in preparing (a) Form 8594, Asset Acquisition Statement, for each of the
Purchaser and the Seller Parties, and (b) all Tax Returns. Each of the
Purchaser and the Seller Parties shall file Form 8594, prepared in accordance
with this Section, with its federal income Tax Return for its Tax period
including the Closing Date.
11.15 BULK SALES LAW. The Seller Parties will bear any Loss suffered by
any Seller Party or the Purchaser as a result of any Seller Party's
noncompliance with any provision of any bulk sales law which is applicable to
the transfer of the Purchased Assets pursuant to this Agreement.
11.16 ACTIONS BY ANY SELLER PARTY. Any action taken by any Seller Party
pursuant to, or as permitted by, this Agreement shall be deemed to be binding
on all Seller Parties for all purposes hereof For example, to the extent Parent
takes or fails to take any action pursuant to Section 1.4(b), such action or
failure to act shall be binding upon all Seller Parties.
* * * * *
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IN WITNESS WHEREOF, the Parties have executed this Asset
Purchase Agreement as of the date first written above.
THE PURCHASER:
WHITNEY-CORR-PAK INTERNATIONAL, INC.
By:
--------------------------------
Its:
------------------------------
THE SELLER PARTIES:
THE TRANZONIC COMPANIES
By: /s/ Alayne L. Reitman
--------------------------------
Its: Vice President
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DESIGN TREND, INC.
By: /s/ Alayne L. Reitman
--------------------------------
Its: Vice President
------------------------------
EVER-READY APPLIANCE MFG. CO.
By: /s/ Alayne L. Reitman
--------------------------------
Its: Vice President
------------------------------
