<PAGE> 1
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): October 15, 1997
-------------------------------
THE TRANZONIC COMPANIES
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Ohio 1-5774 34-0664235
- ---------------- ------------------------- ------------------------
(State or other (Commission File Number) (I.R.S. Employer
jurisdiction of Identification
incorporation) Number)
30195 Chagrin Boulevard, Pepper Pike, Ohio 44124
- ------------------------------------------- -------------------------
(Address of principal executive offices) (ZIP Code)
Registrant's telephone number, including area code: (216)831-5757
-----------------------------
N/A
- --------------------------------------------------------------------------------
(Former name or former address if changed from last report)
<PAGE> 2
Item 2. ACQUISITION OR DISPOSITION OF ASSETS
- ------- ------------------------------------
(a) On October 15, 1997, the Registrant's wholly-owned subsidiary,
Baxter Tube Company (the "Subsidiary"), sold substantially all of its assets
(the "Assets") to Caraustar Industries, Inc., a North Carolina corporation
("Buyer") pursuant to an Asset Purchase Agreement (the "Agreement") by and among
Buyer, the Registrant and the Subsidiary. The Assets included the accounts
receivable, proprietary rights, contract and leasehold rights, machinery,
equipment, inventory, supplies, goodwill, the stock of the Subsidiary's
wholly-owned United Kingdom subsidiary, Unity Tubes Limited, and other tangible
and intangible assets of the Subsidiary which were used by the Subsidiary in
connection with the business of manufacturing spiral-wound paper tubes and
cores, including general purpose tubes, fiberglass forming tubes and lay-flat
sleeves, for use by a variety of industries (the "Business").
The purchase price for the Assets (the "Purchase Price") specified
in the Agreement, which was determined as a result of arm's length negotiations
between the parties, was $14,000,000 in cash subject to certain adjustments
based upon the amount by which the liabilities assumed by Buyer were greater or
less than, as the case may be, $833,000. The Purchase Price paid at closing on
October 15, 1997 was $13,528,376, but this amount is subject to adjustment based
upon a post-closing audit.
Pursuant to the Agreement, the Registrant and the Subsidiary made
various representations and warranties regarding the Subsidiary and the Business
and have agreed, subject to certain limitations, to indemnify Buyer for any
breaches thereof. The Registrant and the Subsidiary also agreed not to compete
with the Business for a period of five years.
Item 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL
- ------- -----------------------------------------
INFORMATION AND EXHIBITS
------------------------
(a) Financial Statements of Business Acquired.
------------------------------------------
Not applicable
(b) Pro Forma Financial Information Unaudited
-----------------------------------------
The following financial statements are filed herewith as a part of
this Report:
1. The Tranzonic Companies Unaudited Pro Forma Condensed
Consolidated Balance Sheet as of August 31, 1997.
2. The Tranzonic Companies Unaudited Pro Forma Condensed
Consolidated Statement of Earnings for the year ended February
28, 1997 and for the Six-Month Period Ended August 31, 1997.
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(c) Exhibits.
--------
10.1. Asset Purchase Agreement by and among Baxter Tube
Company, The Tranzonic Companies and Caraustar
Industries, Inc. dated September 19, 1997.
3
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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: October 23, 1997 THE TRANZONIC COMPANIES
By: /s/Robert S. Reitman
---------------------
Name: Robert S. Reitman
Title: President
4
<PAGE> 5
THE TRANZONIC COMPANIES
PRO FORMA FINANCIAL INFORMATION
UNAUDITED
On September 19, 1997, The Tranzonic Companies entered into a definitive
agreement to sell substantially all of the assets and business of it's
wholly-owned subsidiary Baxter Tube Company to Caraustar Industries, Inc.
The following unaudited financial statements set forth the pro forma condensed
consolidated balance sheet of The Tranzonic Companies as if the divestiture had
been consummated on August 31, 1997 and the pro forma condensed statement of
earnings for the year ended February 28,1997 and for the six-month period ended
August 31, 1997 as if the divestiture had been consummated at March 1, 1996 and
March 1, 1997 respectively.
The following pro forma data are not necessarily indicative of the results of
operations which would have been reported had the divestiture taken place during
those periods or which may be reported in the future. The statements should be
read in conjunction with the respective historical statements and notes thereto
of The Tranzonic Companies.
<PAGE> 6
<TABLE>
<CAPTION>
THE TRANZONIC COMPANIES
UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED BALANCE SHEET
AS OF AUGUST 31, 1997
THE DIVESTITURE PRO FORMA
TRANZONIC OF PRO FORMA TRANZONIC
COMPANIES BAXTER TUBE ADJUSTMENTS COMPANIES
------------------------------------------------- -------------
ASSETS
------
<S> <C> <C> <C> <C>
CURRENT ASSETS
CASH $7,980,238 0 10,648,086 (1) 18,628,324
RECEIVABLES 16,595,225 (1,792,397) 0 14,802,828
INVENTORY 20,657,821 (1,601,157) 0 19,056,664
OTHER CURRENT ASSETS 1,659,658 (79,624) 0 1,580,034
------------------------------------------------- -------------
TOTAL CURRENT ASSETS 46,892,942 (3,473,178) 10,648,086 54,067,850
PROPERTY PLANT AND EQUIPMENT 18,901,031 (2,741,479) 0 16,159,552
OTHER NON-CURRENT ASSETS 11,543,745 (2,256,055) 0 9,287,690
------------------------------------------------- -------------
TOTAL ASSETS $77,337,718 (8,470,712) 10,648,086 79,515,092
================================================= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES
ACCOUNTS PAYABLE $8,511,182 (1,446,443) 0 7,064,739
OTHER CURRENT LIABILITIES 4,624,496 (169,338) 0 4,455,158
------------------------------------------------- -------------
TOTAL CURRENT LIABILITIES 13,135,678 (1,615,781) 0 11,519,897
OTHER NON-CURRENT LIABILITIES 4,140,025 (30,665) (28,032)(2) 4,081,328
SHAREHOLDERS' EQUITY
COMMON SHARES 998,885 0 0 998,885
ADDITIONAL PAID IN CAPITAL 5,902,555 0 0 5,902,555
RETAINED EARNINGS 57,600,132 0 3,851,852 (3) 61,451,984
------------------------------------------------- -------------
64,501,572 0 3,851,852 68,353,424
LESS TREASURY SHARES 4,439,557 0 0 4,439,557
------------------------------------------------- -------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $77,337,718 (1,646,446) 3,823,820 79,515,092
================================================= =============
<FN>
(1) Represents the net after-tax cash proceeds on the sale
(2) Represents the deferred tax effects of the sale
(3) Represents the net after-tax gain on the sale
</TABLE>
<PAGE> 7
<TABLE>
<CAPTION>
THE TRANZONIC COMPANIES
UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED STATEMENT OF EARNINGS
FOR THE YEAR ENDED FEBRUARY 28, 1997
THE DIVESTITURE PRO FORMA
TRANZONIC OF TRANZONIC
COMPANIES BAXTER TUBE COMPANIES
----------------------------------------------------------
<S> <C> <C> <C>
SALES $139,664,413 (12,322,053) 127,342,360
COSTS AND EXPENSES
COST OF GOODS SOLD 91,240,529 (10,108,398) 81,132,131
SELLING, GENERAL & ADMINISTRATIVE EXPENSES 37,819,825 (943,889) 36,875,936
----------------------------------------------------------
129,060,354 (11,052,287) 118,008,067
----------------------------------------------------------
OPERATING EARNINGS 10,604,059 (1,269,766) 9,334,293
INTEREST INCOME 383,033 0 383,033
INTEREST EXPENSE (38,392) 76 (38,316)
----------------------------------------------------------
344,641 76 344,717
----------------------------------------------------------
EARNINGS BEFORE TAXES 10,948,700 (1,269,690) 9,679,010
INCOME TAXES 3,914,000 (463,000) 3,451,000
----------------------------------------------------------
NET EARNINGS $7,034,700 (806,690) 6,228,010
==========================================================
NET EARNINGS PER COMMON AND
COMMON EQUIVALENT SHARE $2.00 1.77
=================== ==============
</TABLE>
<PAGE> 8
<TABLE>
<CAPTION>
THE TRANZONIC COMPANIES
UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED STATEMENT OF EARNINGS
FOR THE SIX-MONTH PERIOD ENDED AUGUST 31, 1997
THE DIVESTITURE PRO FORMA
TRANZONIC OF TRANZONIC
COMPANIES BAXTER TUBE COMPANIES
-----------------------------------------------------------------
<S> <C> <C> <C>
SALES $76,324,575 (8,215,383) 68,109,192
COSTS AND EXPENSES
COST OF GOODS SOLD 50,386,388 (6,689,930) 43,696,458
SELLING, GENERAL & ADMINISTRATIVE EXPENSES 19,792,336 (768,823) 19,023,513
---------------------------------------------------------
70,178,724 (7,458,753) 62,719,971
---------------------------------------------------------
OPERATING EARNINGS 6,145,851 (756,630) 5,389,221
INTEREST INCOME 215,716 (50,382) 165,334
INTEREST EXPENSE (173,217) 1,828 (171,389)
---------------------------------------------------------
42,499 (48,554) (6,055)
---------------------------------------------------------
EARNINGS BEFORE TAXES 6,188,350 (805,184) 5,383,166
INCOME TAXES 678,000 (291,000) 387,000
---------------------------------------------------------
NET EARNINGS $5,510,350 (514,184) 4,996,166
=========================================================
NET EARNINGS PER COMMON AND
COMMON EQUIVALENT SHARE $1.55 1.41
================== ==============
</TABLE>
<PAGE> 1
Exhibit 10.1
ASSET PURCHASE AGREEMENT
by and between
BAXTER TUBE COMPANY ("Seller")
and
CARAUSTAR INDUSTRIES, INC. ("Purchaser")
Dated September 19, 1997
<PAGE> 2
<TABLE>
<CAPTION>
TABLE OF CONTENTS
TITLE PAGE NO.
----- --------
<S> <C>
1. CERTAIN DEFINITIONS.............................................................................................1
2. PURCHASE AND SALE; PRICE........................................................................................8
3. ASSUMPTION OF LIABILITIES......................................................................................11
4. REPRESENTATIONS AND WARRANTIES BY SELLER.......................................................................12
5. REPRESENTATIONS AND WARRANTIES BY PURCHASER....................................................................29
6. CLOSING........................................................................................................31
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER...............................................................31
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER..................................................................35
9. SURVIVAL AND INDEMNIFICATION...................................................................................37
10. ACCESS TO INFORMATION..........................................................................................40
11. DOCUMENTS TO BE DELIVERED AT CLOSING...........................................................................41
12. OPERATION OF THE BUSINESS PENDING AND POST CLOSING.............................................................43
13. BULK SALES COMPLIANCE..........................................................................................44
14. BROKERAGE......................................................................................................44
15. RESTRICTIVE COVENANT...........................................................................................45
16. SELLER'S NAME..................................................................................................46
17. TERMINATION ...................................................................................................47
18. BINDING AGREEMENT..............................................................................................47
19. NOTICES........................................................................................................48
20. SECTION HEADINGS...............................................................................................50
21. EXHIBITS.......................................................................................................50
22. COUNTERPARTS...................................................................................................50
23. COOPERATION....................................................................................................50
24. PUBLICITY......................................................................................................51
25. GENDER.........................................................................................................51
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
26. ENTIRE AGREEMENT...............................................................................................51
27. WAIVER OF PROVISIONS...........................................................................................52
28. GOVERNING LAW..................................................................................................52
29. WORKER ADJUSTMENT AND RETRAINING ACT...........................................................................52
</TABLE>
<PAGE> 4
ASSET PURCHASE AGREEMENT
------------------------
THIS ASSET PURCHASE AGREEMENT is made this 19th day of September, 1997,
by and between Baxter Tube Company, an Ohio corporation ("Seller"), The
Tranzonic Companies, an Ohio corporation ("Shareholder"), and Caraustar
Industries, Inc., a North Carolina corporation ("Purchaser").
RECITALS
--------
A. Seller and the Subsidiary (hereinafter defined) are engaged in the
business of manufacturing spiral wound paper tubes and cores, including general
purpose tubes, fiberglass forming tubes and lay-flat sleeves, for use by a
variety of industries (the "Business").
B. Shareholder is the sole shareholder of Seller and has joined in the
execution of this Agreement for the purposes hereinafter set forth.
C. Seller desires to sell to Purchaser and Purchaser desires to acquire
from Seller all of the assets, properties and business of Seller related to or
connected with the operation of the Business as a going concern other than the
Excluded Assets (hereinafter defined), in accordance with the terms and
conditions hereinafter set forth.
AGREEMENTS
----------
NOW, THEREFORE, in consideration of the foregoing Recitals and of the
covenants and agreements hereinafter set forth, the parties hereto do hereby
covenant and agree as follows:
<PAGE> 5
1. CERTAIN DEFINITIONS
-------------------
For the purposes of this Agreement, the terms defined in this Section 1
shall have the meanings set out below. All capitalized terms not defined in this
Section 1 shall have the meanings ascribed to them in other parts of this
Agreement. All accounting terms not otherwise defined, whether or not
capitalized, shall have the meanings ascribed to them by generally accepted
accounting principles.
(a) "Accounts Receivable" shall mean all accounts, instruments (whether
or not negotiable), accounts receivable, chattel paper, documents and other
rights and obligations now or hereafter received by or belonging or owing to
Seller and the Subsidiary for goods sold and/or services performed by it on or
before the Closing Date.
(b) "Annual Statement" shall mean Seller's unaudited Balance Sheet at
February 28, 1997 and the accompanying Statements of Income for Seller's three
(3) fiscal years then ended, together with the schedules and notes, if any,
related thereto.
(c) "Assumed Liabilities" shall have the meaning set forth in Section
3(A). The values ascribed to the respective Assumed Liabilities shall be those
which are on Seller's and the Subsidiary's books and records, in accordance with
generally accepted accounting principles, PROVIDED, however, that no value shall
be ascribed to any obligations under any contracts comprising the Assumed
Liabilities which, as of the Closing Date,
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were not liabilities in accordance with generally accepted accounting
principles.
(d) "Closing" shall mean the closing on the Closing Date of the
purchase and sale transaction contemplated by this Agreement.
(e) "Closing Date" shall mean October 15, 1997, as of the close of
business, or such other date as to which the parties may agree in writing.
(f) "Closing Date Balance Sheet" shall mean the consolidated balance
sheet of Seller and the Subsidiary, adjusted by excluding (i) the Excluded
Assets and (ii) the liabilities which are not Assumed Liabilities, prepared by
KPMG in connection with the Review, as such balance sheet may be revised by the
parties during the Resolution Period or by the Arbitrating Accountant.
(g) "Financial Statements" shall mean the Annual Statement and Interim
Statement.
(h) "Indebtedness" of any Person means, without duplication: (i)
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 in respect of letters of credit; (ii) obligations
under capitalized leases in respect of which such Person is liable, contingently
or otherwise, as obligor, guarantor or otherwise, or in respect of
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which obligations such Person assures a creditor against loss; and (iii) any
unsatisfied obligation of such Person for "withdrawal liability" to a
"multiemployer plan," as such terms are defined under the Employee Retirement
Income Security Act of 1974, as amended.
(i) "Interim Statement" shall mean Seller's consolidated unaudited
Balance Sheet at July 31, 1997 and the accompanying Statement of Income for the
five (5) month period then ended, together with the schedules and notes, if any,
relating thereto.
(j) "Inventory" shall mean all inventories of Seller, including raw
materials, work in progress and finished inventory and all supplies.
(k) "Knowledge" shall mean in respect of Seller the actual knowledge of
Robert S. Reitman, Alayne L. Reitman or Dennis H. Kelly, officers of Seller.
(l) "Leased Operating Assets" shall have the meaning set forth under
Operating Assets.
(m) "Leasehold Interests" shall mean the leases of real property
relating to the Business in respect of which Seller is the tenant, which leases
are listed on Exhibit A.
(n) "Lien" means any mortgage, pledge, security interest, encumbrance,
charge or other lien.
(o) "Operating Assets" shall mean all layouts, tools, dies and die
makers, motor vehicles, fork lifts, manufacturing, fabricating, processing,
transporting, packaging and materials handling equipment, computer hardware and
software, office equipment, desks, chairs, file cabinets and other furniture and
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furnishings, and all other machinery and equipment of whatever kind and
description included as fixed assets on the books of Seller or which, in the
normal course of business of Seller, would be included on its books and records
except for the fact that the same have been depreciated fully or expensed.
Operating Assets also shall include Seller's interest as lessee in all assets of
the type described in the preceding sentence which are leased by Seller and used
in the operation of the Business, subject, in all events, to the terms of the
respective leases (the "Leased Operating Assets").
(p) "Person" means an individual, a partnership, a corporation, a
limited liability company, a joint stock company, a business trust, a joint
venture and an unincorporated organization.
(q) "Plan" means any employee benefit plan, employee pension plan,
employee welfare plan, 401(k) plan or multiemployer plan to which Seller
contributes or is a party.
(r) "Proprietary Assets" shall mean all of Seller's trade secrets,
"know-how" and proprietary information, trademarks, trademark registrations,
service marks, service mark registrations and all trade names (including,
without limitation, all rights in and to the names "Baxter Tube Company" and
"Unity Paper Tubes" and any derivations thereof), copyrights, patents, patent
applications, transferable licenses, goodwill, agreements not to compete, sales
records, customer lists, supplier lists, mailing lists, telephone numbers,
computer and other data bases in whatever medium and however stored (except such
computer data
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bases as relate to the Excluded Assets), engineering drawings and reports,
catalogs, artwork, photographs, catalog supplies, all contracts with customers
and suppliers, business records, manufacturing records, business manuals, claims
and rights of every kind or nature whether or not arising under leases,
contracts or other instruments.
(s) "Real Estate" shall mean the parcel of land upon which Seller
conducts a portion of the Business, such parcel being commonly known as 460 Knox
Court, Minerva, Ohio 44657 and more particularly described on Exhibit B,
together with all improvements situated thereon, together with all hereditaments
and appurtenant rights, privileges and easements thereunto belonging, and
together with all fixtures and chattel property used in connection with the
parcel of land, buildings and improvements.
(t) "Seller's Assets" shall mean all of Seller's business, properties
and assets (other than the Excluded Assets) which comprise the Business as a
going concern, tangible and intangible, wherever located, whether or not
reflected in its business, corporate or other records. Without limiting the
generality of the foregoing, Seller's Assets shall include all Accounts
Receivable; all Inventory; all Leasehold Interests; all Operating Assets; all
Proprietary Assets; all Real Estate; the outstanding capital stock of the
Subsidiary and any other subsidiary corporation(s); and all assets reflected on
the July 31, 1997 Balance Sheet forming part of the Interim Statement and all
assets of the type reflected thereon which were or are
6
<PAGE> 10
acquired by Seller after July 31, 1997 to and including the Closing Date, EXCEPT
such assets as Seller may have disposed of in the regular and ordinary course of
its business prior to the Closing Date and EXCEPT FURTHER Seller's Assets shall
not include the following assets of Seller or the Subsidiary (collectively, the
"Excluded Assets"): (i) cash, cash equivalents and marketable securities, (ii)
income tax refunds and claims, unliquidated insurance claims and litigation
claims against third parties arising out of facts or circumstances in existence
prior to the Closing Date whether or not recovery action by Seller or the
Subsidiary has been instituted prior to the Closing Date, (iii) all monies to be
received by Seller from Purchaser, (iv) any rights to use the name "Tranzonic"
and the "T" logo trademark, (v) all rights of Seller under this Agreement, (vi)
prepaid expenses and deposits of Seller, (vii) Seller's corporate books and
records and stock transfer books; provided, however, that for a two (2) year
period following the Closing Date, during normal business hours on reasonable
advance notice, Seller shall permit Purchaser to inspect and copy those books
and records of Seller which relate to Seller's Assets, (viii) all taxpayer and
other identification numbers, (ix) all deposits relating to Seller's (A) 401(k)
plan if non-transfer is permitted by the Internal Revenue Code and ERISA, (B)
property and casualty insurance policies and (C) employee wage garnishments, (x)
all prepaid workers' compensation premiums and any reserves in respect thereof,
(xi) the cash surrender value of any life insurance policies and (xii) the
assets of Seller or the
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Subsidiary listed on Exhibit C. Seller, however, shall be entitled to make and
retain copies of any documents or records included in Seller's Assets which are
necessary for its tax, accounting or legal purposes.
(u) "Subsidiary" shall mean Unity Tubes Limited (formerly known as
Baxter Tube Company (UK) Limited), a private company with limited liability
registered in England and Wales under Company No. 3237520
2. PURCHASE AND SALE; PRICE
------------------------
(A) Seller agrees to sell to Purchaser, and Purchaser agrees to
purchase from Seller, Seller's Assets for the purchase price and upon and
subject to the terms, provisions and conditions hereinafter set forth.
(B) The purchase price ("Purchase Price") for Seller's Assets shall be
(i) Fourteen Million Dollars ($14,000,000) (the "Unadjusted Purchase Price")
MINUS (ii) (in the case of a positive amount) or PLUS (iii) (in the case of a
negative amount) the amount by which the Assumed Liabilities of Seller and the
Subsidiary at the Closing Date shall exceed or be less than, as the case may be,
Eight Hundred Thirty-Three Thousand Dollars ($833,000). The Purchase Price is
subject to adjustment and shall be paid as set forth below.
(C) Not less than seven (7) days prior to the Closing Date, Seller
shall provide Purchaser with an estimate of the Purchase Price, taking into
account the estimated amount of the expected adjustment pursuant to Section 2(B)
(the "Estimated Price"). At Closing, Purchaser shall pay Seller by wire transfer
of
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immediately available federal funds to Seller's account an amount equal to the
Estimated Price.
(D) Promptly after the Closing, KPMG Peat Marwick LLP ("KPMG") shall
perform a balance sheet review (the "Review") of Seller's and the Subsidiary's
liabilities to determine the value of the Assumed Liabilities at the Closing
Date. The Review shall be completed within thirty (30) days after the Closing
Date and KPMG shall furnish the results thereof to Purchaser and Seller. Seller
shall make its books and records available to KPMG and Purchaser shall make the
employees and the books and records of the Business available to KPMG, each for
purposes of the Review. If neither party objects to the value for the Assumed
Liabilities established by the Review, within twenty (20) days after receipt of
the results of the same, the value for the Assumed Liabilities shown in KPMG's
report shall be used to establish the Purchase Price. If either party objects
within such twenty (20) day period (the "Resolution Period"), Seller and
Purchaser in good faith shall attempt to resolve any disagreement. If the
parties are not able to agree within thirty (30) days after the expiration of
the Resolution Period, the objecting party(ies) shall specify the items in
dispute and the dispute shall be arbitrated by Price Waterhouse LLP (the
"Arbitrating Accountant"), whose decision shall be binding upon Seller and
Purchaser. The Arbitrating Accountant shall furnish its report to Purchaser and
Seller. The fees of the Arbitrating Accountant shall be borne by the
non-prevailing party, provided that if a portion of the disputed amount is
awarded to Seller and a portion
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to Purchaser, the fees of the Arbitrating Accountant shall be borne by the
parties in the same ratio.
Final determination of the Assumed Liabilities of Seller and
the Subsidiary at the Closing Date shall be deemed to have taken place on the
first to occur of (i) twenty (20) days after the delivery by KPMG to Purchaser
and Seller of the results of the Review, if no objection thereto is filed by
either party during the Resolution Period specified, (ii) the date that the
parties resolve all remaining disagreements or (iii) the date of the delivery by
the Arbitrating Accountant to Purchaser and Seller of its determination of items
in dispute. Within five (5) days after final determination of the Assumed
Liabilities of Seller and the Subsidiary at the Closing Date, Purchaser shall
pay to Seller, or Seller shall refund to Purchaser, as the case may be, by wire
transfer, the amount by which the Estimated Price is less than (or exceeds) the
Purchase Price.
(F) The Purchase Price shall be allocated among Seller's Assets
(including Accounts Receivable, Inventory, Leasehold Interests, Operating
Assets, Proprietary Assets (including, without limitation, goodwill), the stock
of the Subsidiary and Real Estate) in accordance with the values established
pursuant to the Allocation Schedule attached hereto as Exhibit D and made a part
hereof. Purchaser and Seller agree to be bound by such allocation and to file
all returns and reports (including, without limitation, Internal Revenue Service
Form 8594, Asset Acquisition Statement Under Section 1060) in respect of the
transaction herein contemplated, including, but not limited to,
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all United States, state and local tax returns, on the basis of
such allocation.
3. ASSUMPTION OF LIABILITIES
-------------------------
(A) Subject to Section 3(B), as additional consideration for the
purchase of Seller's Assets, at the Closing Purchaser will assume the following
liabilities and obligations of Seller and the Subsidiary relating to the
Business (the "Assumed Liabilities") and Purchaser will pay, perform and/or
discharge when due the Assumed Liabilities:
(i) all liabilities of Seller and the Subsidiary
incurred by Seller and the Subsidiary in the
ordinary course of business which are of the type
set forth on the Balance Sheet included in the
Financial Statements (other than accrued
interest, dividends, bank indebtedness and
intercompany liabilities) in the amounts set forth
on the Closing Balance Sheet; and
(ii) all obligations of Seller and the Subsidiary to be
performed after the Closing pursuant to (x)
contractual, implied or statutory warranties
offered by Seller and the Subsidiary in connection
with the sale of merchandise prior to the Closing
Date and (y) the contracts, orders and commitments
listed on Exhibit F or entered into by Seller and
the Subsidiary in the ordinary course of business.
(B) LIABILITIES NOT ASSUMED. Except as set forth in this Agreement,
Purchaser shall neither assume nor become liable for the payment or performance
of any obligations, claims, liabilities, contracts, commitments or undertakings
of Seller or the Subsidiary. Without limiting the foregoing, Purchaser shall not
assume or become liable to pay, perform or discharge the liabilities or
obligations of Seller or the Subsidiary listed below:
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(i) any costs, liabilities, expenses or obligations of
Seller and the Subsidiary attributable to the sale
herein contemplated (including, but not limited to,
any of Seller's counsel fees and accountant fees);
(ii) any United States federal, United States state or
United States local taxes (or the United Kingdom
equivalents) (a) imposed by reason of the
operation of the Business through the Closing Date
(other than United Kingdom taxes accrued on the
Financial Statements or the Closing Date Balance
Sheet), or (b) imposed upon Seller by reason of
the sale of Seller's Assets pursuant to this
Agreement;
(iii) any costs, expenses, obligations or liabilities
incurred by Seller after the Closing Date;
(iv) any liabilities or obligations of Seller in
respect of any Plans now or formerly maintained by
Seller;
(v) any loans payable to or other liabilities to or in
respect of Shareholder;
(vi) any employee bonuses or similar forms of special
or increased compensation payable by reason of or
triggered by the sale and purchase contemplated by
this Agreement or a change in ownership of the
Business unless the same are accounted for in
determining the Assumed Liabilities at the Closing
Date; or
(vii) accrued wages, payroll taxes and withholdings of
Seller.
(C) SELLER'S OBLIGATIONS. Seller shall pay, discharge and/or perform
when due all liabilities of Seller other than the Assumed Liabilities.
4. REPRESENTATIONS AND WARRANTIES BY SELLER
----------------------------------------
As a material inducement to Purchaser to enter into this Agreement,
Seller represents and warrants to Purchaser, as follows:
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<PAGE> 16
(a) ORGANIZATION AND STANDING. Seller is a corporation duly
incorporated, existing and in good standing under the laws of the State of Ohio
and has full corporate power and authority to own or lease Seller's Assets and
to carry on the Business as now being conducted. Seller is duly licensed or
qualified to transact business and is in good standing in each other
jurisdiction where its failure to be licensed or qualified to do business would
have a material adverse effect on the Business.
(b) CAPITAL STOCK. All of the issued and outstanding capital stock of
Seller is owned by Shareholder and has been duly and validly authorized and
issued.
Seller owns all of the issued and outstanding capital stock of the
Subsidiary. All of such capital stock has been duly and validly authorized and
issued, and is free and clear of any liens, encumbrances, pledges, claims,
charges, assessments and restrictions whatsoever. There are no outstanding
subscriptions, options, warrants, agreements or commitments giving anyone any
current or future right to acquire any capital stock of the Subsidiary or to
require Seller to cause any capital stock of the Subsidiary to be sold or issued
nor is there any agreement restricting the right of Seller to transfer the
capital stock of the Subsidiary.
(c) OTHER INTERESTS. No Person has any right or option to purchase any
of Seller's Assets except for contracts with customers to purchase Inventory in
the ordinary course of business.
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<PAGE> 17
(d) BINDING. Each of Seller and Shareholder has the full corporate
power, authority and legal right to execute and deliver this Agreement and to
carry out the transactions and perform its obligations contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by all
necessary corporate action. This Agreement constitutes a legal, valid and
binding obligation of Seller and Shareholder enforceable in accordance with its
terms, 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).
(e) NO CONFLICTING INSTRUMENTS. No provision of the Articles of
Incorporation or Code of Regulations of Seller or Shareholder has been or will
be violated or affected adversely in any manner by the execution and delivery of
this Agreement or by the performance or satisfaction of any agreement or
condition herein contained or provided for upon Seller's or Shareholder's part
to be performed or satisfied. Neither the execution, delivery nor performance of
this Agreement by Seller or Shareholder, with or without the giving of notice or
the passage of time, or both, will result in any default under, termination of,
or the creation of any Lien on, Seller's Assets pursuant to any provision of
Seller's or Shareholder's respective Articles of Incorporation or Code of
Regulations or any franchise, mortgage,
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<PAGE> 18
deed of trust, note, lease, license, agreement or understanding, or violate any
law, rule or regulation or any order, judgment, decree or award of any
arbitrator, court or governmental agency to which Seller or Shareholder is a
party or by which either of them or their properties may be bound or affected.
(f) FINANCIAL STATEMENTS. Seller heretofore has furnished to Purchaser
the Financial Statements. The Financial Statements fairly present the financial
condition and the results of operations of Seller and the Subsidiary and the
Business as at the respective dates and for the respective periods to which they
apply in conformity with generally accepted accounting principles applied on a
consistent basis throughout the periods involved, subject, in the case of the
Interim Statement, to normal recurring adjustments, not material in amount,
which are made at year end or upon audit and to the absence of notes that, if
presented, would not differ materially from those contained in the Annual
Statement; provided that the Annual Statement does not reflect the financial
condition and the results of operation of the Subsidiary since its assets were
not acquired until March 1, 1997. Except as set forth in Exhibit E hereto,
Seller and the Subsidiary have no material obligation or liability (whether
absolute, contingent or otherwise, including, without limitation, product
liability and warranty obligations) except liabilities, obligations or
contingencies (i) which are fully accrued or reserved against in the Financial
Statements, (ii) the obligations specified in Section 3(A)(ii) above, (iii)
which were incurred in the ordinary course of business since the date of the
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<PAGE> 19
Financial Statements or (iv) which are liabilities not assumed by Purchaser
pursuant to Section 3(B) hereof.
(g) CONTRACTS. Exhibit F contains a complete and accurate list of each
of the following contracts and agreements existing as of the date of this
Agreement relating to the Business or Seller's Assets:
(i) all Plans and all contracts with any labor union;
(ii) contracts for the employment, or engagement as an
independent contractor, of any Person on a full-
time, part-time, consulting or other basis,
excluding contracts for Persons other than
individuals wherein the aggregate annual payment
contemplated does not exceed Ten Thousand Dollars
($10,000);
(iii) contracts pursuant to which such Seller has advanced
or loaned funds, or agreed to advance or loan funds,
to any other Person other than minimal advances to
employees in the ordinary course of business;
(iv) contracts or indentures relating to any
Indebtedness or the mortgaging, pledging or
otherwise placing a Lien on any of Seller's
Assets;
(v) contracts pursuant to which Seller is the lessee of,
or holds or operates, any Leasehold Interest or any
Leased Operating Asset, other than leases of office
equipment such as computers, copiers, facsimile
machines and the like;
(vi) contracts pursuant to which Seller is the lessor
of, or permits any Person to hold or operate, any
real or personal property owned by Seller;
(vii) assignments, licenses, or other contracts in
respect of any intangible property (including any
Proprietary Asset) which is not described in any
other Exhibit;
(viii) contracts or agreements in respect of services
rendered or goods sold to or purchased from others,
other than (A) any customer purchase order or (B) any
purchase order for Inventory accepted in the ordinary
course of business and in
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<PAGE> 20
accordance with Seller's and the Subsidiary's past
practice which both (x) does not require delivery
after the date which is six months after the Closing
Date and (y) does not involve an aggregate sale price
of more than $20,000; or
(ix) any other contract which involves an aggregate
consideration in excess of $20,000.
Seller and the Subsidiary have complied in all material respects with the
provisions of the contracts listed on Exhibit F and are not in default under any
material provision of them. To the best of Seller's Knowledge there is not any
breach or anticipated breach by any other party to such contracts and neither
Seller nor the Subsidiary has received any notice of any alleged breach or
claimed right of termination by reason of breach. Each of such contracts will be
in full force and effect at the Closing Date with no material modification of
its respective terms, unless by its terms it expires prior thereto or is
terminated by Seller in the ordinary course of business.
(h) LITIGATION. Except as set forth on Exhibit G, there are no actions,
suits or proceedings pending or, to the Knowledge of Seller, threatened, in
respect of Seller, the Subsidiary, Seller's Assets or the Business, at law or in
equity, before any Federal, state, county or municipal court or other
governmental department, commission, board, agency or instrumentality, domestic
or foreign, which would materially adversely affect the Subsidiary, the Business
or Seller's Assets or that challenge, or may have the effect of preventing,
delaying or otherwise interfering with, the transactions contemplated by this
Agreement. Seller and the Subsidiary are not operating under,
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<PAGE> 21
subject to or in default in respect of any order, writ, injunction or decree of
any Federal, state, county or municipal court or other governmental department,
commission, board, agency, bureau or instrumentality, domestic or foreign.
Seller and the Subsidiary are not involved in or, to Seller's Knowledge,
threatened by, any labor dispute or grievance and it has not been charged with
or, to Seller's Knowledge, threatened with, any claims for unfair labor
practices.
(i) TAXES. Exhibit H lists the jurisdictions in which Seller and the
Subsidiary file tax returns and reports in respect of the Business and its
employees and the types of taxes represented by such returns and reports. Seller
has filed on a timely basis all tax returns and reports that it is required by
law to file and has paid on a timely basis all taxes, fees and charges of any
kind (including, without limiting the generality of the foregoing, all
deficiencies proposed as a result of any examination) required in connection
therewith. There has been withheld or collected from each payment made to each
employee of Seller and the Subsidiary the amount of all taxes (including without
limitation federal income taxes, Federal Insurance Contributions Act taxes and
state and local income, payroll and wage taxes and the United Kingdom
equivalents) required to be withheld or collected therefrom (based upon the
information respecting each employee furnished by the employee to Seller), and,
to the extent due at the date of this Agreement, the same have been paid to the
proper tax depositories or collecting authorities and future sums will be timely
paid to the proper tax
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<PAGE> 22
authorities by the Closing Date or any later legally required payment date.
(j) CONDUCT OF BUSINESS. Except as provided in this Agreement, as
reflected in the Interim Statement or as reflected in Exhibit I, since the close
of business on February 28, 1997, there has not been
(i) any material adverse change in the Business or the
results of its operation;
(ii) any damage, destruction or casualty loss, whether
covered by insurance or not, materially and
adversely affecting the Seller's Assets or the
Business;
(iii) (x) any material increase in the rate or terms of
compensation payable to or to become payable to
Seller's or the Subsidiary's employees (the
"Employees"), except increases occurring in
accordance with employment agreements or (y) any
material modifications in employee benefits to the
Employees;
(iv) entry into, termination of (except by reason of the
occurrence of a contractually specified termination
date) or material amendment to any contract or
commitment or license or permit material to the
Business, except in the ordinary course of business
or as contemplated herein;
(v) any creation of or assumption of any mortgage,
pledge, or other lien or encumbrance upon any of
the Seller's Assets;
(vi) any sale, assignment, lease, transfer or other
disposition of any of Seller's Assets, except in
the ordinary course of business;
(vii) any imposition or incurring of any obligation or
liability, fixed or contingent, except in the
ordinary course of business;
(viii) except as otherwise provided in this subsection or
except in the ordinary course of business, entry into
any agreement with respect to the operation of the
Business pursuant to which the aggregate annual
financial obligation of Purchaser may exceed $10,000,
or which is not terminable by
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Purchaser without penalty upon ninety (90) days'
notice or less;
(ix) any commitment to make any purchase for, or sale
of, any inventories relating to the operation of
the Business, except in the ordinary course of
business;
(x) any commitment in excess of $10,000 for any
capital expenditure for which Purchaser shall have
any financial obligation to discharge after
Closing;
(xi) any termination or material adverse alteration of
Seller's or the Subsidiary's relationship with any
customer that, during any six-month period in the
last two years, accounted for more than 10% of
Seller's sales; or
(xii) any transaction otherwise relating to the Business
not in the ordinary course of business.
Notwithstanding anything to the contrary in the foregoing, Seller is permitted
to transfer out of the Subsidiary any Excluded Asset.
(k) GUARANTEES. Except as disclosed in Exhibit J, Seller and the
Subsidiary are not liable, directly or indirectly, upon or in respect of (by way
of discount, repurchase agreement, guarantee or otherwise), any Indebtedness or
obligated in any other way to provide funds or to guarantee or assume, any debt,
obligation or dividend of any other Person, except for endorsements made in the
ordinary course of business in connection with the deposit of items for
collection. No Person other than Shareholder has guaranteed any of the
obligations or liabilities of Seller.
(l) EQUIPMENT. Exhibit K contains a list and description as of July 31,
1997 of all Seller's Assets and the assets of the Subsidiary which are currently
being depreciated for financial
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reporting or Federal income tax purposes and are carried on Seller's
depreciation records, including, without limitation, all trucks, automobiles,
rolling stock, machinery, factory and office equipment, furniture, fixtures and
other tangible personal property and assets. All assets currently used by Seller
and the Subsidiary in the conduct of the Business other than the Excluded Assets
are included as Seller's Assets.
(m) RECEIVABLES. Exhibit L contains a list and description of the
Accounts Receivable as of July 31, 1997. Such Exhibit also sets forth the
following information as to such accounts: name of each debtor, total amount
owing by such debtor, aging of each debtor's balance by month and total amount
owing by all such debtors in the aggregate. All of the Accounts Receivable
reflected on the Closing Date Balance Sheet will be fully collectible in amount
and when due, subject to the reserve for doubtful accounts set forth on the
Closing Date Balance Sheet.
(n) INVENTORY. All Inventory reflected on the Closing Date Balance
Sheet including related supplies will be marked down to the lower of cost (on a
first-in, first-out basis) or market value.
(o) REAL PROPERTY. Seller does not own any real property other than the
Real Estate. Seller does not lease any real property except pursuant to the
lease(s) respecting the Leasehold Interests. There is no pending or, to Seller's
Knowledge, threatened condemnation, taking or similar proceeding affecting the
Real Estate or the Leasehold Interests or any portion thereof or any pending
public improvements in or about the Real Estate or
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<PAGE> 25
the Leasehold Interests which could in any manner materially affect the Real
Estate or the Leasehold Interests other than on a temporary basis.
(p) TITLE TO PROPERTIES. Seller and the Subsidiary, respectively, have
good title to all of Seller's Assets and none of Seller's Assets is subject to a
contract of sale (except Inventory held for sale in the ordinary course of
business) or option or subject to any Lien (except, as to the Real Estate and
the real property owned by the Subsidiary, the conditions, easements and
restrictions of record which do not interfere materially with the present uses
of the Real Estate and the real property owned by the Subsidiary and the conduct
of a portion of the Business thereon, zoning ordinances, if any, and liens for
real property taxes and assessments, both general and special, which are not yet
due and payable), except as set forth in the Financial Statements.
(q) PROPRIETARY ASSETS. Exhibit M contains a summary description of all
Proprietary Assets. No rights under any patents, inventions, copyrights,
trademarks or trade names other than the Proprietary Assets or other contracts
included in Seller's Assets are required in connection with the conduct of the
Business as heretofore conducted. Seller has no Knowledge of any conflict with,
or infringement or claimed infringement in respect of, the rights of others to
the use of its corporate name or any other Proprietary Assets used by Seller in
the Business.
(r) COMPLIANCE WITH LAWS. Seller and the Subsidiary, in the operation
of the Business: (i) possess all of the business licenses, permits (including
environmental permits) and authorizations (collectively, "Authorizations") that
are
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necessary for legally conducting the Business as presently conducted, except
where the absence of any such Authorization would not have a materially adverse
effect on the conduct of the Business, and Seller and the Subsidiary have made
such filings as may be required by local, state or federal governments; (ii) are
in material compliance with all applicable laws, rules and regulations,
including those relating to the employment of labor, wages, hours, collective
bargaining, discrimination and the payment of social security and similar taxes,
and (iii) are not liable for any arrears of wages or any penalties for failure
to comply with any of the foregoing. Exhibit N lists all material licenses,
permits and authorizations that are held by Seller and the Subsidiary as of the
date hereof and are required for the conduct of the Business, as presently
conducted. All such licenses, permits and authorizations are in full force and
effect, with no material violations of any of them having occurred or, to
Seller's Knowledge, been alleged to have occurred, and with no proceedings
pending or, to Seller's Knowledge, threatened, that would have the effect of
revoking or materially limiting or affecting the transfer or renewal of any such
licenses or permits. Except as set forth in Exhibit N or otherwise disclosed in
this Agreement or in a document delivered pursuant to this Agreement there are
no applications by Seller or the Subsidiary in connection with the Business or
material complaints by others pending or threatened in writing as of the date
hereof before any governmental agency relating to the Business, other than (i)
proceedings that affect the industry
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generally and (ii) renewal applications in respect of Authorizations being
processed in the ordinary course of business.
(s) EMPLOYEES. Exhibit O contains the name of each employee of Seller
and the Subsidiary employed as of the dates of the respective payrolls most
recently paid prior to the date of this Agreement, his position, his rate of
compensation and the date upon which he was hired.
(t) INSURANCE. Exhibit P contains a complete list and summary
description of all insurance policies, including the nature, period of coverage
and applicable "deductible" provisions, in which, as of the date of this
Agreement, Seller or the Subsidiary is named as an insured or beneficiary or as
a loss payable payee and for which Seller or the Subsidiary has paid all or part
of the premium in force on the date hereof. Substantially similar policies will
be maintained in force and effect by Seller and the Subsidiary in their present
amounts up through and including the Closing Date. Seller and the Subsidiary
have not received notice which threatens cancellation of any of said policies.
(u) TRANSACTIONS WITH INTERESTED PERSONS. Except as set forth on
Exhibit F, to Seller's Knowledge none of the leases, contracts, documents and
instruments required to be set forth in the Exhibits delivered pursuant to this
Agreement involves any "Interested Person" (hereinafter defined) as a party
thereto or as a party beneficially interested therein. Since March 1, 1997
Seller has not, directly or indirectly, purchased, leased from or
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<PAGE> 28
otherwise acquired any property or obtained any services from or sold, leased to
or otherwise disposed of any property or furnished any services to or otherwise
dealt with (except in respect of remuneration for services rendered (including
stock options and other fringe benefits) as a Director, officer or employee of
Seller), in the ordinary course of business or otherwise, any Interested Person,
except for the provision of legal and banking services with entities affiliated
with Directors of Shareholder, the costs of which legal and banking services are
at market rates. As used in this subsection (u), "Interested Person" means any
executive officer or Director of Seller or any person with whom such person has
any direct or indirect relation by blood or marriage or adoption, or Person in
which any such person has any material direct or indirect interest.
(v) EMPLOYEE BENEFIT PLANS. Exhibit Q contains a brief description of
each Plan. Except as set forth in Exhibit Q, with respect to all "employee
benefit plans" (as defined in Section 3(3) of ERISA) to which Seller contributes
on behalf of employees:
(i) all such plans comply in all material respects
with ERISA;
(ii) all contributions which are due and payable by
Seller on or before the date hereof to such plans
have been made; and
(ii) none of the plans subject to Title IV of ERISA has
been terminated, no proceeding to terminate any of
such plans has been instituted, and there has been no
complete or partial withdrawal, cessation of facility
operations or occurrence of any other
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event that would result in the imposition of
liability on Seller under Title IV of ERISA.
(w) OFFICERS AND DIRECTORS. Exhibit R contains the names and titles of
all officers and Directors of Seller and the Subsidiary.
(x) ENVIRONMENTAL MATTERS.
(i) Except as set forth in Exhibit S, each of Seller
and the Subsidiary (w) is in compliance in all
material respects with all applicable federal,
state and local laws, regulations, orders,
decrees, permits and other legal requirements
relating to hazardous substances (as defined
below) or protection of the environment, human
health or safety (the "Environmental Laws"), (x)
has not received any communication (written or, to
Seller's Knowledge, oral) that alleges that it is
not in such compliance, or has caused exposure of
any person or the environment to any hazardous
substance, (y) has all material permits and other
approvals required by the Environmental Laws for
the conduct of its business, and (z) has no
Knowledge of any facts or circumstances that may
prevent or substantially increase the cost of
compliance with Environmental Laws in the future.
(ii) Exhibit S identifies all environmental reports,
audits or assessments, or occupational health
studies, that, to Seller's Knowledge, relate to
property or facilities owned or operated by Seller
or the Subsidiary (collectively the "Seller
Facilities") undertaken by governmental agencies
or other parties, or by Seller, or by any of its
lenders, agents, independent contractors or
representatives. Exhibit S identifies all of the
Seller Facilities.
(iii) Except as set forth in Exhibit S, to Seller's
Knowledge, there is not occurring any generation,
storage, treatment, release or disposal of any
"hazardous substance" on, in or from any Seller
Facility, nor is any such facility contaminated by
any hazardous substance. For purposes of this
Agreement the term "hazardous substance" shall
include each substance identified as such under
the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980 as amended
by the Superfund Amendments and Reauthorization
Act of 1986 ("CERCLA"), 42 U.S.C. 9601, et seq.,
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as well as any other substance or material meeting
any one or more of the following criteria: (x) it is
or contains a substance designated as a hazardous
waste, hazardous substance, hazardous material,
pollutant, contaminant or toxic substance under any
Environmental Law; (y) it is toxic, reactive,
corrosive, ignitable, infectious, radioactive or
otherwise hazardous; or (z) it is or contains,
without limiting the foregoing, petroleum
hydrocarbons.
(iv) Seller has heretofore delivered to Purchaser true
and complete copies of each of the following
documents:
a. each environmental report, audit
and assessment, and each
occupational health study,
identified in Exhibit S; and
b. each permit identified in Exhibit S.
(v) Except as disclosed in the environmental reports
or as otherwise set forth in Exhibit S, Seller and
the Subsidiary do not own or operate any site
which, pursuant to CERCLA or any other
Environmental Law, (x) has been placed on the
"National Priorities List" or any other list of
sites suspected to be contaminated by any
hazardous substance, (y) is or has been subject to
a claim, administrative order or other request to
take investigative, removal or remedial action
under CERCLA or any other Environmental Law, or
(z) is otherwise the subject of any federal, state
or private investigation, remediation or cost
recovery or contribution effort or claim relating
to Environmental Laws; and
(vi) Exhibit S identifies (w) all on-site locations
where Seller or the Subsidiary has stored,
disposed or arranged for the disposal of hazardous
substances or wastes, (x) to Seller's Knowledge
all underground storage tanks, and the capacity
and contents of such tanks, located or formerly
located on any Seller Facility, (y) to Seller's
Knowledge all asbestos contained in or forming
part of any building, building component,
structure or office space owned, leased or
otherwise occupied by Seller, none of which, to
Seller's Knowledge, is friable and (z) to Seller's
Knowledge all polychlorinated biphenyls (PCB's)
used or present at any property owned, leased or
otherwise occupied by Seller. To the extent
required by law, Seller has maintained records in
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the ordinary course of business respecting off-site
locations where Seller has stored, disposed or
arranged for the disposal of hazardous substances or
wastes, and Seller shall make such records available
to Purchaser for inspection and copying.
Notwithstanding anything to the contrary in this
Agreement, Seller's Knowledge pursuant to this
subparagraph (vi) is limited to environmental and
similar reports in Seller's possession.
(y) NO OTHER REPRESENTATIONS. Purchaser acknowledges that (i) it has
had the opportunity to visit with Shareholder and Seller and meet with their
respective officers and other representatives to discuss the Business and
Seller's Assets and Seller's liabilities, financial condition, cash flow and
operations and (ii) all materials and information requested by Purchaser have
been provided to Purchaser to Purchaser's reasonable satisfaction. Except for
the express representations and warranties contained in this Agreement (and the
other documents executed and delivered in connection herewith), Purchaser
acknowledges that Seller has made no representations, warranties or agreements
of any kind as to the Business and Seller's Assets. Furthermore, Purchaser
acknowledges that any information which is contained in any Exhibit to this
Agreement or which has been furnished to Purchaser's attorneys prior to the date
hereof shall be deemed to be within the knowledge of Purchaser, and Seller shall
have no liability to Purchaser in respect of any misrepresentation of facts
within the knowledge of Purchaser. SELLER AND PURCHASER SPECIFICALLY AGREE THAT
SELLER'S ASSETS ARE BEING SOLD "AS-IS" AND THAT THERE ARE NO WARRANTIES RELATING
THERETO (INCLUDING IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE), OTHER THAN THOSE
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<PAGE> 32
SPECIFICALLY REFERRED TO HEREIN AND IN THE DOCUMENTS TO BE DELIVERED IN
CONNECTION WITH THE CLOSING. PURCHASER HAS MADE ITS OWN INDEPENDENT ANALYSIS AND
EVALUATION OF SELLER, SELLER'S BUSINESS AND ITS PRESENT AND EXPECTED FUTURE
VALUE AND PURCHASER HAS NOT RELIED UPON ANY PROJECTIONS, ESTIMATES OR BUDGETS
HERETOFORE MADE AVAILABLE BY SELLER OR SELLER'S REPRESENTATIVES. SELLER HAS MADE
NO REPRESENTATION OR WARRANTY THAT THE RESULTS OF OPERATION REFLECTED IN THE
FINANCIAL STATEMENTS IN ANY MANNER SUGGEST OR IMPLY THE POSSIBILITIES OR
RELATIVE AMOUNTS OF FUTURE SALES, GROSS MARGINS, EXPENSES, TAXES OR NET PROFITS
OR OTHER MEASURES OF FINANCIAL PERFORMANCE.
5. REPRESENTATIONS AND WARRANTIES BY PURCHASER
As a material inducement to Seller to enter into this Agreement,
Purchaser represents and warrants to and, where applicable, covenants with
Seller, as follows:
(a) ORGANIZATION AND STANDING. Purchaser is a corporation duly
incorporated, existing and in good standing under the laws of the State of North
Carolina and has full corporate power and authority to own or lease its
property, to carry on the business in which it is now engaged as now being
conducted, and to purchase, own and operate Seller's Assets.
(b) NO CONFLICTING INSTRUMENTS. No provision of the Articles
[Certificate] of Incorporation or Code of Regulations [Bylaws] of Purchaser, or
of any agreement to which Purchaser is a party or by which it is bound, has been
or will be violated or adversely affected in any manner by the execution and
delivery of this Agreement or by the performance or satisfaction of any
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<PAGE> 33
agreement or condition herein contained or provided for upon Purchaser's part to
be performed or satisfied.
(c) BINDING. This Agreement constitutes a legal, valid and binding
obligation of Purchaser enforceable in accordance with its terms 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).
(d) FINANCIAL ABILITY. Purchaser has available to it sufficient funds
to pay and perform all of its obligations hereunder, including payment of the
Purchase Price and payment of the Assumed Liabilities when due.
(e) LITIGATION. Except as set forth on Exhibit T, there are no actions,
suits or proceedings pending or, to the knowledge of Purchaser, threatened, in
respect of Purchaser or the business conducted by Purchaser, at law or in
equity, before any Federal, state, county or municipal court or other
governmental department, commission, board, agency or instrumentality, domestic
or foreign, which would materially adversely affect Purchaser or the business
conducted by Purchaser or that challenge, or may have the effect of preventing,
delaying or otherwise interfering with the transactions contemplated by this
Agreement. Purchaser is not operating under, subject to or in default in respect
of any order, writ, injunction or decree of any Federal, state, county or
municipal court or other
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governmental department, commission, board, agency, bureau or
instrumentality, domestic or foreign.
6. CLOSING
-------
The Closing hereunder shall take place at 10:00 a.m. on the
Closing Date at the offices of Berick, Pearlman & Mills Co.,
L.P.A., 1350 Eaton Center, 1111 Superior Avenue, Cleveland, Ohio
44114.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER
------------------------------------------------
The obligations of Purchaser hereunder are subject to the following
conditions, any of which may be waived in writing by Purchaser:
(a) REPRESENTATIONS AND WARRANTIES TRUE AT CLOSING. The representations
and warranties of Seller contained in this Agreement considered collectively
shall be true and correct in all material respects on the Closing Date with the
same effect as if made on and as of such date, except as contemplated or
permitted by this Agreement. All Exhibits and all other information furnished to
Purchaser pursuant to this Agreement shall be updated by Seller as of a date not
more than fourteen (14) days prior to the Closing Date, and Seller shall furnish
copies of all such updated Exhibits to Purchaser and shall make available all
such updated information not less than four (4) days prior to the Closing Date.
The updating of said Exhibits and information shall be solely for informational
purposes, provided, however, that if such updating shall cause the
representations and warranties of Seller collectively to be materially
inaccurate, Purchaser's sole remedy shall be to
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<PAGE> 35
terminate this Agreement and receive back any portion of the Purchase Price
theretofore paid to Seller.
(b) PERFORMANCE OF AGREEMENTS AND CONDITIONS. Seller shall have
performed and complied with all agreements and conditions required by this
Agreement to be performed and complied with by Seller prior to or at the Closing
Date.
(c) INJUNCTION. On the Closing Date there shall not be in effect any
injunction, writ, temporary restraining order or any other order of any nature
issued by a court or other governmental body or agency of competent jurisdiction
directing that the transaction provided for herein not be consummated as herein
provided, nor shall there be any litigation or proceeding pending or threatened
in respect of the transaction contemplated hereby.
(d) INSTRUMENTS OF TRANSFER AND OTHER DOCUMENTS. Seller shall have
delivered to Purchaser instruments of transfer which vest in Purchaser good
title to all of Seller's Assets, and shall have delivered all other instruments,
certificates and documents required to be delivered hereunder, including,
without limitation, those required under Section 11(a).
(e) CONSENTS. All required consents from third parties and governmental
authorities to permit the transfer of the Assets and the operation of the
Business by the Purchaser, other than consents the absence of which would not
have a material adverse effect on the conduct of the Business, shall have been
obtained.
(f) OPINION OF COUNSEL. Purchaser shall have received a legal opinion
from Berick, Pearlman & Mills Co., L.P.A., counsel for Seller, dated as of the
Closing Date, in form and substance
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<PAGE> 36
reasonably satisfactory to counsel for Purchaser, to the effect that:
(i) Seller is a corporation duly incorporated, validly
existing and in good standing under the laws of
Ohio, with full corporate power and authority to
own Seller's Assets, conduct the Business and to
carry out the transaction contemplated by this
Agreement, and Seller is duly qualified to do
business as a foreign corporation in good standing
in the State of South Carolina.
(ii) All of the issued and outstanding capital stock of
Seller were duly authorized and issued by Seller, are
fully paid and non-assessable and are owned by
Shareholder;
(iii) To the best of such counsel's knowledge, after due
inquiry, there is no litigation, proceeding or
investigation pending, threatened or reasonably
anticipated against Seller which questions the
validity of this Agreement or the validity of any
action taken or to be taken by Seller pursuant to
or in connection with the provisions of this
Agreement;
(iv) All corporate and other proceedings required to be
taken by or on behalf of Seller and Shareholder in
order to authorize them to execute and carry out this
Agreement and to consummate the transaction
contemplated hereby have been duly and properly
taken;
(v) This Agreement has been duly and validly executed
and delivered by, and is a valid and legally
binding obligation of, Seller in accordance with
its terms, subject, as to the enforcement of
remedies, to applicable bankruptcy,
reorganization, insolvency, moratorium and other
laws affecting the rights of creditors generally
and to general principles of equity and the
discretion of the court (regardless of whether
enforceability is considered in a proceeding in
equity or at law); and
(vi) As of the Closing Date, the execution and delivery
by Seller of this Agreement and the consummation
by Seller of the transaction contemplated herein
do not conflict with or result in a breach of, or
constitute a default under, the Articles of
Incorporation or Code of Regulations of Seller or
the provisions of any law, governmental rule,
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<PAGE> 37
regulation, judgment, decree or order binding on
Seller or Seller's Assets or, to the best of such
counsel's knowledge, after due inquiry, any of the
provisions of any indenture, mortgage, lease,
contract or other instrument specified in Exhibit C
to this Agreement to which Seller is a party or by
which it is bound.
(g) ENVIRONMENTAL REPORT. Purchaser shall have received reports of
Phase I environmental examinations addressed to Purchaser indicating that the
Real Estate and the facilities which are the subject of the Leasehold Interests
do not contain any hazardous substance (as defined in Subsection 4(x)(iii)) not
disclosed in Exhibit S, the continued presence or the cost of remediation of
which would materially adversely affect the Business; provided that if Purchaser
shall not notify Seller prior to October 10, 1997 of the failure of the
satisfaction of the condition precedent set forth in this Subsection (g), the
same shall be deemed waived for all purposes; and provided, further, that if the
cost of remediation as determined by the environmental engineer performing the
examination is estimated at less than Two Hundred Fifty Thousand Dollars
($250,000), Seller shall have the right to treat such estimated cost of
remediation as an Assumed Liability, in which event the condition precedent set
forth in this Subsection (g) shall be deemed waived.
Seller represents and warrants that it has not caused, and it covenants
and agrees that it shall not cause, any event that would prevent the
satisfaction of all of the conditions set forth in this Section 7. Seller
covenants and agrees to take all action reasonably required to satisfy such
conditions.
34
<PAGE> 38
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER
---------------------------------------------
The obligations of Seller to sell Seller's Assets at the
Closing hereunder are subject to the following conditions, any of which may be
waived in writing by Seller:
(a) REPRESENTATIONS AND WARRANTIES TRUE AT CLOSING. The representations
and warranties of Purchaser contained in this Agreement considered collectively
shall be true and correct in all material respects on the Closing Date with the
same effect as if made on and as of such date, except as contemplated or
permitted by this Agreement.
(b) PERFORMANCE OF AGREEMENTS AND CONDITIONS. Purchaser shall have
performed and complied with all agreements and conditions required by this
Agreement to be performed or complied with by Purchaser prior to or at the
Closing Date.
(c) INJUNCTION. On the Closing Date there shall not be in effect any
injunction, writ, temporary restraining order or any order of any nature issued
by a court or other governmental body or agency of competent jurisdiction
directing that the transaction provided for herein not be consummated as herein
provided, nor shall there be any litigation or proceeding pending or threatened
in respect of the transaction contemplated hereby.
(d) OPINION OF COUNSEL. Purchaser shall have delivered to Seller an
opinion of Robinson, Bradshaw & Hinson, P.A., counsel for Purchaser, dated the
Closing Date, in form and substance reasonably satisfactory to counsel for
Seller, to the effect that:
35
<PAGE> 39
(i) Purchaser is a corporation duly incorporated,
existing and in good standing under the laws of the
State of North Carolina with full power and authority
to carry on its business and to carry out the
transaction contemplated by this Agreement;
(ii) To the best of such counsel's knowledge, after due
inquiry, there is no litigation, proceeding or
investigation pending, threatened or reasonably
anticipated against Purchaser which questions the
validity of this Agreement or the validity of any
action taken or to be taken by Purchaser pursuant
to or in connection with the provisions of this
Agreement;
(iii) All corporate and other proceedings required to be
taken by or on the part of Purchaser in order to
authorize it to execute and carry out this Agreement
and to consummate the transaction contemplated hereby
have been duly and properly taken; and
(iv) This Agreement has been duly and validly executed
and delivered by, and is a valid and legally
binding obligation of, Purchaser in accordance
with its terms, subject, as to the enforcement of
remedies, to applicable bankruptcy,
reorganization, insolvency, moratorium and other
laws affecting the rights of creditors generally
and to general principles of equity and the
discretion of the court (regardless of whether
enforceability is considered in a proceeding in
equity or at law).
(e) DELIVERY OF DOCUMENTS. Purchaser shall have delivered to Seller the
documents contemplated by Section 11(b).
Purchaser represents and warrants that it has not caused, and it
covenants and agrees that it shall not cause, any event that would prevent the
satisfaction of all of the conditions set forth in this Section 8. Purchaser
covenants and agrees to take all action reasonably required to satisfy such
conditions.
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<PAGE> 40
9. SURVIVAL AND INDEMNIFICATION
----------------------------
(A) SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
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 transaction contemplated hereby, but all claims made after
Closing for breach of such representations, warranties, covenants and agreements
shall be made under, and subject to the limitations set forth in, this Section
9. No such claim shall be made after the expiration of the Claim Period
(hereinafter defined), time being of the essence. As used in this Agreement, the
"Claim Period" shall mean the period ending ninety (90) days after the Closing
Date; PROVIDED, HOWEVER, that in the event of a change in control of Shareholder
prior to the expiration of such ninety (90) day period, the Claim Period shall
expire on the last to occur of (i) December 25, 1997 or (ii) the date that such
change in control of Shareholder shall have occurred.
(B) INDEMNIFICATION OBLIGATIONS OF THE SELLER
Seller and Shareholder, jointly and severally, will
indemnify the Purchaser in respect of, and save and hold Purchaser harmless
against and pay on behalf of or reimburse Purchaser as and when incurred, any
loss, cost (including, without limitation, reasonable attorneys' fees), damage
or expense (collectively, "Losses") which Purchaser suffers, sustains or becomes
subject to as a result of, in connection with, relating to or by virtue of,
without duplication:
37
<PAGE> 41
(i) any misrepresentation or breach of any representation or
warranty by Seller set forth in this Agreement or any
documents executed and delivered by Seller in conjunction
herewith; PROVIDED that:
(x) Seller will not have any liability under this
Section 9(B) unless and until the aggregate of all
Losses resulting under this Section exceeds an
amount equal to two percent (2%) of the Purchase
Price, in which event Seller will be liable for
all Losses thereafter until the aggregate of all
such Losses equals an amount equal to fifteen
percent (15%) of the Purchase Price, after which
point Seller will not be liable for any further
Losses resulting under this Section 9(B);
(y) Seller will not have any liability under this
Section 9(B) (other than any liability relating to
any breach of any representation or warranty
contained in Sections 4(a) and 4(p)) for any
breach or series of related breaches in respect of
which the Losses are less than $5,000, and such
Losses shall not be aggregated for purposes of
Section 9(B); and
(z) Purchaser makes a written claim for
indemnification pursuant to Section 9(A) within
the Claim Period.
(ii) any nonfulfillment or breach of any covenant or
agreement of Seller set forth in this Agreement (other
than the representations and warranties specified in
Section 9(B)(i)); or
(iii) any liabilities or obligations of Seller or arising out of the
operation of the Business by Seller on or before the Closing
Date, whether accrued, unaccrued, known, unknown, fixed,
contingent, absolute or otherwise, that are not Assumed
Liabilities.
(C) INDEMNIFICATION OBLIGATIONS OF PURCHASER. Purchaser will indemnify
Seller in respect of, and save and hold Seller harmless against and pay on
behalf of or reimburse Seller as and when incurred, any Losses which Seller
suffers, sustains or becomes subject to as a result of, in connection with,
relating to or by virtue of, without duplication:
38
<PAGE> 42
(i) any misrepresentation or breach of any representation or
warranty by Purchaser set forth in Section 5 of this Agreement
or any documents executed and delivered to Seller in
conjunction herewith; PROVIDED that:
(x) Seller makes a written claim for indemnification
pursuant to Section 9(A) within the Claim Period;
and
(y) Seller shall not be entitled to indemnification for
any Losses relating to a misrepresentation or breach
of a representation or warranty contained herein that
Robert S. Reitman or Alayne L. Reitman actually knew
existed on the Closing Date.
(ii) any nonfulfillment or breach of any covenant or
agreement of Purchaser set forth in this Agreement
(other than the representations and warranties
specified in Section 9(C)(i)); or
(iii) any Assumed Liability.
(D) INDEMNIFICATION PROCEDURES. If any event shall occur or any
circumstance arise which might give rise to a claim in respect of any matter
against which either party has indemnified the other hereunder, the indemnified
party ("First Party") promptly shall give notice thereof to the other party
("Second Party"). If the matter as to which indemnification may be sought is a
claim by a third party, such notice shall be given within thirty (30) days after
said claim shall have been presented to the President of First Party; otherwise
such notice shall be given promptly after the President of First Party shall
determine that the matter is one as to which indemnification is sought. Unless
the parties otherwise agree in writing, Second Party shall defend against all
such third-party claims or otherwise satisfy said claims, at its sole cost and
expense, through counsel and accountants designated by it and approved by First
Party, which approval shall not be withheld unreasonably. First Party shall
39
<PAGE> 43
have the right to participate with Second Party in the defense of any such
matter and shall make available to Second Party the business records in
possession of First Party for said purpose. If Second Party, after receipt of
notification from First Party of a third-party claim, fails to protest, defend
or settle any such third-party claim, demand, suit or proceeding promptly,
diligently and in good faith, First Party shall have the right at its discretion
to settle, defend or pay the same.
10. ACCESS TO INFORMATION
---------------------
From the date hereof until the Closing Date, Purchaser, through its
employees, accountants, attorneys and other representatives, may make such
examination, inspection and investigation of the financial and legal condition,
business, operations and properties of Seller in respect of the Business and
Seller's Assets as Purchaser may deem necessary or advisable, and Seller agrees
to make available to such persons all records and other information and data
related to or in any way connected with the Business or Seller's Assets,
including corporate records and copies of documents, as Purchaser reasonably may
request, and to have its personnel cooperate with Purchaser's representatives.
Such examination, inspection and investigation shall be made at reasonable hours
so as not to interfere with the operations of Seller and shall be solely for
purposes of (i) confirming the accuracy of the representations and warranties of
Seller and (ii) preparing for the transition of the ownership of the Business to
Purchaser. The parties agree that the terms and provisions of the letter
agreement between Purchaser and Carleton, McCreary,
40
<PAGE> 44
Holmes & Co., a division of Key Capital Markets, Inc., as agent for Shareholder,
executed by Purchaser June 30, 1997 (the "Confidentiality Letter"), shall
continue in full force and effect for the benefit of Seller and Shareholder
until the Closing but thereupon shall terminate.
11. DOCUMENTS TO BE DELIVERED AT CLOSING
------------------------------------
At the Closing on the Closing Date:
(a) DELIVERIES BY SELLER. Seller shall deliver to
Purchaser the following:
(i) Duly executed bill or bills of sale transferring
to Purchaser all of the Seller's Assets and all
other personal property of every kind and
description to be transferred to Purchaser
hereunder. Such bill or bills of sale shall
warrant that all such property is free and clear
of all Liens and otherwise in accordance with this
Agreement;
(ii) Certificates of title or like documents to all of
Seller's motor vehicles or other equipment
included in Seller's Assets for which a
certificate of title or origin is required in
order to transfer title, duly assigned to
Purchaser;
(iii) A limited warranty deed conveying good and
marketable title to the Real Estate and warranting
title to the Real Estate to be free and clear of
all Liens created by, through or under Seller,
except zoning ordinances, if any, taxes and
assessments, both general and special, which are a
lien but are not then due and payable, conditions,
easements and restrictions of record which do not
materially interfere with the present use to which
the Real Estate is being put and any other matters
approved in writing by Purchaser;
(iv) An assignment to Purchaser of Seller's interest in
the leases which are the subject of the Leasehold
Interests;
(v) Instruments of transfer respecting the capital
stock of the Subsidiary;
41
<PAGE> 45
(vi) Separate assignments, endorsements or other good and
sufficient instruments of transfer of any leases,
franchises, contracts, insurance policies, permits,
licenses, trademarks, trade names and other
authorizations and rights to be conveyed hereunder in
accordance with the terms hereof;
(vii) The opinion of counsel referred to in Section
7(e);
(viii) A list of the Accounts Receivable including amounts
owed and aging, debtor name and address and such
other information as Purchaser reasonably may
require;
(ix) A current list of Seller's employees by name,
position, rate of compensation, date of hire and date
of any increase since March 1, 1997 in rate of
compensation or rate of commission;
(x) An affidavit of Seller indemnifying and saving
harmless Purchaser from the claims of any creditors
of Seller and for any alleged non-compliance with
applicable Bulk Sales laws;
(xi) Certificates of good standing respecting Seller
from the Secretaries of State of Ohio and South
Carolina;
(xii) Certified resolutions of the respective Boards of
Directors and Shareholder authorizing and
approving this transaction;
(xiii) The certificate of amendment required by Section
16;
(xiv) Uniform Commercial Code financing statement search
request results from the Secretaries of State of
Ohio, and South Carolina and from the Recorder of
Cuyahoga County, Ohio and the Clerk of Court of
Greenwood County, evidencing the absence of any liens
against Seller's Assets;
(xv) An affidavit to show that Seller is not subject to
Section 1445 of the Internal Revenue Code and that
Purchaser is not required to withhold any portion of
the purchase price for payment to the Internal
Revenue Service under such Section;
42
<PAGE> 46
(xvi) An incumbency certificate respecting Seller's
officers and certified resolutions of Seller's
Board of Directors authorizing and approving this
transaction;
(xvii) Physical possession of Seller's Assets; and
(xviii) All other instruments not herein specifically
provided for but which are reasonably necessary or
desirable to effectuate the purpose of this
Agreement.
(b) DELIVERIES BY PURCHASER. Purchaser shall deliver to
Seller the following:
(i) Certified resolutions of the Board of Directors of
Purchaser authorizing this transaction;
(ii) The opinion of counsel referred to in Section
8(d);
(iii) The Estimated Price due at Closing pursuant to
Section 2(C);
(iv) One or more instruments of assumption by Purchaser
of the Assumed Liabilities and of the leases and
contracts assigned to Purchaser; and
(v) All other instruments not herein specifically
provided for but which are reasonably necessary or
desirable to effectuate the purpose of this
Agreement.
12. OPERATION OF THE BUSINESS PENDING AND POST CLOSING
--------------------------------------------------
Between the date of this Agreement and the Closing Date,
Seller shall operate the Business in such a manner as to comply with the
provisions of Section 4(j) hereof and shall use reasonable commercial efforts to
sustain the business organization of Seller, keep available the services of
Seller's employees and sales force and preserve Seller's present relations with
suppliers and customers; provided, however, that nothing shall require Seller to
make or agree to make any increase in compensation, or take any other action in
respect of employees,
43
<PAGE> 47
suppliers or customers, which is inconsistent with present policies and
practices of Seller or with any other provisions of this Agreement.
13. BULK SALES COMPLIANCE
---------------------
Purchaser hereby waives compliance by Seller with the provisions of the
Bulk Sales Law of any state, and Seller warrants and agrees to pay and discharge
when due all claims of creditors of Seller which could be asserted against
Purchaser by reason of such non-compliance to the extent that such liabilities
are not Assumed Liabilities. Seller represents and warrants to Purchaser that
following the consummation of the purchase and sale transaction contemplated by
this Agreement, Seller will have sufficient assets to pay such creditor claims
and Seller will not be rendered insolvent by reason of the sale of Seller's
Assets.
14. BROKERAGE
---------
Each party represents and warrants to the other that except for
Carleton, McCreary, Holmes & Co., a division of Key Capital Markets, Inc.
("CMH"), whose compensation shall be the sole responsibility of Seller, and
[NONE] ("________"), whose compensation shall be the sole responsibility of
Purchaser, no person or persons assisted in or brought about the negotiation of
this Agreement in the capacity of broker, agent, finder or originator on behalf
of it. Each party ("First Party") agrees to indemnify and hold harmless the
other from any claim asserted against such other party for a brokerage or
agent's or finder's or originator's commission or compensation in respect of the
transaction contemplated by this Agreement by any person (other
44
<PAGE> 48
than CMH and [NONE] as hereinabove provided) purporting to act
on behalf of First Party.
15. RESTRICTIVE COVENANT
--------------------
(A) BUSINESS, TERRITORY AND DURATION. In order to induce Purchaser to
execute this Agreement, Seller and Shareholder covenant and agree that for a
period of (i) five (5) years following the Closing Date Seller and Shareholder
shall not, (x) within the geographical marketing area of the Business at the
Closing Date, directly or indirectly, either as an individual or as a partner or
joint venturer, or as an employee, agent or representative for any person or
business enterprise, or as an officer, director, shareholder (having more than a
nominal investment) or otherwise engage or be interested in any business engaged
in the designing, producing, manufacturing, buying, selling, distributing or
dealing in or with items presently comprising the product line of the Business
or items competitive therewith or (y) directly or indirectly sell or attempt to
sell any items competitive with or functionally similar to the products
presently comprising the product line of the Business, to any person or entity
which was a customer of Seller during the one (1) year period immediately
preceding the Closing Date.
(B) NO ADEQUATE REMEDY. Since it is recognized by Seller that
irreparable damage without an adequate judicial remedy at law could result from
any violation of the provisions of this Section, Seller agrees that, in addition
to any other remedies available to Purchaser, Purchaser shall have the remedy of
a restraining order, injunction, or such other equitable relief as
45
<PAGE> 49
may be decreed or issued by a court of competent jurisdiction to enforce the
provisions hereof. Seller acknowledges and agrees that the restrictive covenants
contained in this Section are necessary for the protection of Purchaser's
legitimate business interests and are reasonable in scope, time and content.
(C) INVALIDITY. If for any reason any portion of this Section 15 shall
be held invalid or unenforceable, it is agreed that the same shall not affect
any other portion hereof, but that the remaining covenants and restrictions or
portions hereof shall remain in full force and effect; and that if such
invalidity or unenforceability is due to the unreasonableness of the time or
geographical area covered by the said covenants and restrictions, said covenants
and restrictions of this Agreement shall nevertheless be effective for such
period of time and for such area as may be determined to be reasonable by a
court of competent jurisdiction.
16. SELLER'S NAME
-------------
As of the Closing Date, Seller shall cease using the name "Baxter
Tube", and any name similar thereto, and in connection therewith Seller agrees
to change its corporate name effective as of the Closing Date and to make the
appropriate filings with the State of Ohio and all other jurisdictions where the
name "Baxter Tube" is filed or registered to effectuate said change to a name
bearing no resemblance to its present name. At the Closing, Seller and
Shareholder shall deliver to Purchaser a duly executed and acknowledged
certificate of amendment to Seller's Articles of Incorporation or other
appropriate document which is required to
46
<PAGE> 50
change Seller's corporate name to a new name as aforesaid. Purchaser is
authorized to file such certificate or other document (at Seller's expense) at
or after the Closing.
17. TERMINATION
-----------
(A) By notice given at or prior to the Closing, this Agreement may be
terminated as set forth below:
(i) By either Purchaser or Seller if a material breach of
any provision of this Agreement has been committed by
the other party and such material breach has not been
cured or waived;
(ii) By Purchaser if the conditions of Section 11(a)
have not been satisfied in all material respects
as of the Closing Date or if satisfaction of such
conditions is or becomes impossible (other than
through the failure of Purchaser to comply with
its obligations under this Agreement) and
Purchaser has not waived such conditions on or
before the Closing Date;
(iii) By Seller if the conditions of Section 11(b) have
not been satisfied in all material respects as of
the Closing Date or if satisfaction of such
conditions is or becomes impossible (other than
through failure of Seller to comply with its
obligations under this Agreement) and Seller has
not waived such conditions on or before the
Closing Date; or
(iv) By mutual consent of Purchaser and Seller.
(B) If this Agreement is terminated by Seller or Purchaser pursuant to
Sections 17(A)(i), 17(A)(ii) or 17(A)(iii), the terminating party's right to
pursue all legal remedies by reason of (x) the breach by the other party or (y)
the failure of the other party to satisfy the conditions shall survive
unimpaired.
18. BINDING AGREEMENT
-----------------
All of the terms and provisions of this Agreement shall inure to the
benefit of, be enforceable by and be binding upon
47
<PAGE> 51
and enforceable against the parties hereto and their respective heirs and
personal representatives, successors and assigns. None of the parties hereto may
assign its rights or duties hereunder but Purchaser may elect to have the
Business and Seller's Assets transferred to one of Purchaser's subsidiaries at
Closing. No such transfer shall relieve Purchaser of any of its liabilities or
obligations under this Agreement.
Nothing contained in this Agreement shall confer any rights or remedies
upon any other person, firm or corporation.
19. NOTICES
-------
Any notice or other communication required or permitted hereunder shall
be expressed in writing and sent by certified or registered mail, return receipt
requested; or sent by nationally recognized overnight courier service such as
Federal Express; or sent by facsimile transmission between the hours of 9:00
a.m. and 4:30 p.m. local time at the place of intended receipt, which facsimile
transmission advises the sender thereof that the transmission was received by
the correct telephone number and that the status of such transmission was
"okay", and which facsimile transmission is confirmed by recognized overnight
courier service or certified or registered mail, return receipt requested; to
the respective parties at the following addresses, or at such other addresses as
the parties shall designate by written notice to the other:
SELLER: Baxter Tube Company
c/o The Tranzonic Companies
30195 Chagrin Boulevard
Pepper Pike, Ohio 44124
ATTN: Robert S. Reitman and
48
<PAGE> 52
Alayne L. Reitman
Fax: (216) 831-5647
Copy To: James H. Berick, Esq. and
Samuel S. Pearlman, Esq.
Berick, Pearlman & Mills Co., L.P.A.
1350 Eaton Center
1111 Superior Avenue
Cleveland, Ohio 44114-2569
Fax: (216) 861-4929
PURCHASER: Caraustar Industries, Inc.
3100 Washington Street
Austell, Georgia 30001
ATTN: H. Lee Thrash, III
Fax: (704) 378-4000
[THE BALANCE OF THIS PAGE IS INTENTIONALLY LEFT BLANK.]
49
<PAGE> 53
Copy to: Allain C. Andry, IV, Esq.
Robinson, Bradshaw & Hinson, P.A.
1900 Independence Center
101 North Tryon Street
Charlotte, North Carolina 28246-1900
Fax: (704) 378-4000
All notices shall be deemed received on the third business day after mailing or
the first business day after delivery to the overnight courier service or on
the business day when sent by facsimile transmission.
20. SECTION HEADINGS
----------------
The section and subsection headings and any table of contents listing
the same contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement.
21. EXHIBITS
--------
All Exhibits referred to in this Agreement are attached hereto and are
hereby incorporated herein and made a part hereof. Information disclosed on any
one Exhibit shall be deemed to have been disclosed on all other relevant
Exhibits.
22. COUNTERPARTS
------------
This Agreement may be executed in any one or more counterparts, all of
which taken together shall constitute one instrument.
23. COOPERATION
-----------
Each party shall cooperate and use its best efforts to consummate the
transaction contemplated herein. In addition, each party shall cooperate and
take such action and execute such other and further documents as reasonably may
be requested from
50
<PAGE> 54
time to time after the Closing Date by any other party to carry out the terms
and provisions and intent of this Agreement. Each party will bear its own
expenses in connection with the transactions contemplated by this Agreement.
24. PUBLICITY
---------
Shareholder may disclose the terms of this transaction in connection
with Shareholder's ongoing disclosure obligations as a publicly-held entity.
Seller will endeavor to consult with Purchaser as to the content of any such
disclosure prior to its release, but Shareholder reserves the right to make such
disclosures as it deems necessary. Prior to disclosure by Shareholder, Purchaser
will not make any disclosure of the terms of this transaction or of the fact
that this transaction is pending or consummated, as the case may be, prior to
consultation with, and approval of such disclosure by, Seller.
25. GENDER
------
Wherever the context of this Agreement so requires or permits, the
masculine herein shall include the feminine or the neuter and the singular shall
include the plural.
26. ENTIRE AGREEMENT
----------------
This Agreement and the Confidentiality Letter contains the entire
agreement between the parties hereto, and it is understood and agreed that there
are no other covenants, representations or warranties other than those contained
herein, in the Confidentiality Letter and in the Exhibits hereto. This Agreement
may not be changed or modified except by a writing duly executed by the parties
hereto.
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27. WAIVER OF PROVISIONS
--------------------
The terms, covenants, representations, warranties and conditions of
this Agreement may be waived only by a written instrument executed by the party
waiving compliance. The failure of any party at any time or times to require
performance of any provision of this Agreement shall in no manner affect the
right at a later date to enforce the same. No waiver by any party of any
condition or the breach of any provision, term, covenant, representation or
warranty contained in this Agreement, whether by conduct or otherwise, in any
one or more instances shall be deemed to be or construed as a further or
continuing waiver of any such condition or of the breach of any other provision,
term, covenant, representation or warranty of this Agreement.
28. GOVERNING LAW
-------------
This Agreement shall be governed by and construed under the laws of the
State of Ohio without giving effect to principles of conflicts of laws.
29. WORKER ADJUSTMENT AND RETRAINING ACT
------------------------------------
Purchaser agrees to rehire at least ninety percent (90%) of Seller's
existing workforce. The terms and conditions of employment under which Seller's
employees are rehired by Purchaser shall be substantially similar to their
existing terms and conditions of employment. Those employees selected to be
rehired shall be rehired within five (5) days of the Closing Date.
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IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first above set forth.
SELLER:
BAXTER TUBE COMPANY
By: /s/ Alayne L. Reitman
----------------------------------------
Title: Vice President
-------------------------------------
Print Name: Alayne L. Reitman
--------------------------------
PURCHASER:
CARAUSTAR INDUSTRIES, INC.
By: /s/ H. Lee Thrash, III
----------------------------------------
Title: Vice President, Planning/Development
-------------------------------------
and Chief Financial Officer
-------------------------------------
Print Name: H. Lee Thrash, III
--------------------------------
The Tranzonic Companies hereby joins in the execution of the foregoing
Agreement solely for the purpose of acknowledging and agreeing to its
obligations under Sections 9 and 15 thereof.
THE TRANZONIC COMPANIES
By: /s/ Alayne L. Reitman
----------------------------------------
Title: Senior Vice President
-------------------------------------
Print Name: Alayne L. Reitman
--------------------------------
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