<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): July 30, 1999
SPINNAKER INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 000-09559 06-0544125
(State of ---------------- (IRS Employer
incorporation) (Commission File Identification No.)
1700 PACIFIC AVENUE, SUITE 1600
DALLAS, TEXAS 75201
(Address of principal executive offices)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: 214-855-0322
Exhibit Index on page 10
----
<PAGE>
This Form 8-K/A amends the Form 8-K filed by the Registrant on August 16,
1999, with respect to an event occurring on July 30, 1999.
Item 2. ACQUISITION OR DISPOSITION OF ASSETS
On April 9, 1999, Spinnaker Industries, Inc., a Delaware corporation (the
"Registrant"), entered into a Stock Purchase Agreement with Intertape Polymer
Group, Inc. ("Intertape") for the sale of its main industrial tape
subsidiary, Central Products Company ("Central") and concurrently entered
into an Asset Purchase Agreement with Intertape providing for the sale of
substantially all of the assets of its other industrial tape unit, Spinnaker
Electrical Tape Company ("Electrical", and together with Central, the
"Industrial Tape Businesses"). Intertape, headquartered in Montreal, Quebec,
develops, manufactures and markets a wide variety of specialized plastic and
paper based packaging products and packaging systems for industrial uses.
The disposition by the Registrant of the Industrial Tape Businesses (the
"Disposition") was completed with the sale of Central effective as of August
9, 1999. The sale of the assets of Electrical closed on July 30, 1999. The
Industrial Tape Businesses generated $121.8 million, $119.7 million and
$124.1 million of net sales for fiscal years ended December 31, 1998, 1997
and 1996, respectively, and $53.5 million and $57.9 million for the six month
periods ended June 30, 1999 and 1998, respectively.
General corporate office expenses related to finance and administrative
functions including public company compliance reporting, bank and investor
relations, taxes other than income taxes and holding company payroll,
historically allocated and charged to the industrial tape segment were
reversed and allocated back to continuing operations. These expenses were not
considered to be directly attributed to the Industrial Tape Businesses and
remain an expense of the continuing operations of the Registrant.
The purchase price paid by Intertape to the Registrant for the Industrial
Tape Businesses was allocated as follows: approximately $81,450,000 in cash
and five-year warrants to purchase 300,000 shares of Intertape common stock
at a strike price of $29.50 per share for Central and $23,000,000 in cash for
Electrical. Intertape is a publicly traded company with its common shares
listed on the American Stock Exchange and the Toronto Stock Exchange under
the stock symbol "ITP". Intertape's common stock closed at approximately $28
per share on August 6, 1999.
Proceeds from the sale of Central were first used to satisfy related
transaction costs and to repay $18.1 million of working capital revolver
debt, which included all amounts owed by Central under the Registrant's $60
million revolving credit facility. The balance of the proceeds, estimated to
be approximately $60 million, are available to invest in any business,
capital expenditure, or other tangible asset in the "Permitted Businesses",
as defined in the Indenture. Any proceeds not so invested within 270 days
after the closing of the sale of Central or not used to permanently reduce
indebtedness (other than subordinated debt) shall be used to repurchase the
Registrant's 10 3/4% Senior Secured Notes (the "Senior Notes") on a pro rata
basis as required by the Indenture. The proceeds from the sale of the
Electrical assets, an unrestricted subsidiary, were used to repay certain
term debt and working capital revolver debt collateralized by the assets of
Electrical. The remaining proceeds, estimated to be approximately $16
million, will be available
2
<PAGE>
for general purposes or investments, which may include purchasing Senior
Notes in the open market. Senior Notes currently trade at a substantial
discount from the principal amount. This document contains certain forward
looking information. Pursuant to the requirements of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
It should be recognized that such information represents estimates or
forecasts based upon various assumptions, including the matters referred to
therein, as well as meeting the Registrant's internal performance assumptions
regarding expected operating performance and the expected performance of the
economy as it impacts Registrant's businesses. As a result, such information
is subject to various uncertainties, inaccuracies and risks.
Item 7. FINANCIAL STATEMENTS AND EXHIBITS
(b) PRO FORMA FINANCIAL INFORMATION. Unaudited pro forma financial
statements of the Registrant and the Industrial Tape Businesses
as of June 30, 1999 and the six month period then ended. Unaudited
pro forma statement of operations for the year ended December 31,
1998.
(c) EXHIBITS
2.1 Stock Purchase Agreement between Registrant and Intertape Polymer
Group Inc. dated April 9, 1999.(1)
2.2 Asset Purchase Agreement by and among Registrant, Spinnaker Electrical
Tape Company and Intertape Polymer Group Inc. dated April 9, 1999.(1)
- -------------
(1) Filed herewith.
Pursuant to the requirements of the Securities Exchange Act of 1934,
as amended, the Registrant has duly caused this report to be signed on its
behalf by the undersigned hereunto duly authorized
SPINNAKER INDUSTRIES, INC.
Date: August 17, 1999 By: /s/ Craig J. Jennings
---------------------------
Craig J. Jennings
Vice President, Finance
and Treasurer
3
<PAGE>
UNAUDITED PRO FORMA FINANCIAL DATA
The following unaudited pro forma financial information of the Registrant is
based on the historical consolidated financial statements of the Registrant
and has been prepared to illustrate the effects of the Disposition as though
it had occurred as of the beginning of the period presented for the pro forma
statement of operations. Defined terms herein have the meanings given to them
in the Form 8-K of which this is a part.
The pro forma adjustments include, in the opinion of management, all
adjustments necessary to give pro forma effect to the Disposition as though
such transaction had occurred as of the beginning of the period presented for
the pro forma statement of operations and as if it had occurred on June 30,
1999 for the pro forma balance sheet.
The unaudited pro forma financial information is not necessarily indicative
of how the Registrant's balance sheet and results of operations would have
been presented had the Disposition actually been consummated at the assumed
date, nor is it necessarily indicative of presentation of the Registrant's
balance sheet and results of operations for any future period. The unaudited
pro forma financial information should be read in conjunction with the
historical consolidated financial statements and related notes thereto
included in the Registrant's Annual Report on Form 10-K for the period ended
December 31, 1998 and the Registrant's Quarterly Report on Form 10-Q for the
period ended June 30, 1999.
The pro forma adjustments are based upon available information. These
adjustments are directly attributable to the Disposition and are expected to
have a continuing impact on the Registrant's business, results of operations,
and financial position.
4
<PAGE>
SPINNAKER INDUSTRIES, INC
UNAUDITED PRO FORMA BALANCE SHEET
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE)
<TABLE>
<CAPTION>
DISPOSITION
OF INDUSTRIAL PRO FORMA PRO FORMA
JUNE 30, 1999 TAPE BUSINESS ADJUSTMENTS JUNE 30, 1999
------------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash $ -- $ -- $ 75,512 (1) $ 75,512
Accounts receivable, net 19,428 -- -- 19,428
Inventories, net 26,197 -- -- 26,197
Prepaid expenses and other 2,016 -- -- 2,016
Net current assets of discontinued
operations 31,986 (31,986) -- --
--------- --------- -------- --------
Total current 79,627 (31,986) 75,512 123,153
Property, plant and equipment, net 39,531 -- -- 39,531
Other assets, net 28,279 -- 3,000 (2) 31,279
Net non-current assets of discontinued
operations 69,491 (69,491) -- --
--------- --------- -------- --------
TOTAL ASSETS $ 216,928 $(101,477) $ 78,512 $193,963
--------- --------- -------- --------
--------- --------- -------- --------
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities:
Accounts payable & accrued liabilities $ 22,188 $ -- $ -- $ 22,188
Current portion of long term debt 1,862 -- (1,143)(3) 719
Working capital revolver 38,332 -- (20,095)(4) 18,237
Net current liabilities of discontinued
operations 15,338 (15,338) -- --
--------- --------- -------- --------
Total current liabilities 77,720 (15,338) (21,238) 41,144
Long term debt, less current portion 125,762 -- (3,750)(3) 122,012
Deferred income taxes & pension liabilities 2,334 -- 7,728 (5) 10,062
Net non-current liabilities of discontinued
operations 6,280 (6,280) -- --
Stockholders' equity 4,832 (79,859) 95,772 20,745
--------- --------- -------- --------
TOTAL LIABILITIES & STOCKHOLDERS'
EQUITY $ 216,928 $(101,477) $ 78,512 $193,963
--------- --------- -------- --------
--------- --------- -------- --------
</TABLE>
5
<PAGE>
SPINNAKER INDUSTRIES, INC
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE)
<TABLE>
<CAPTION>
DISPOSITION PRO FORMA
YEAR ENDED OF INDUSTRIAL PRO FORMA YEAR ENDED
12/31/98 TAPE BUSINESS ADJUSTMENTS 12/31/98
---------- ------------- ----------- ----------
<S> <C> <C> <C> <C>
Net sales $280,941 $121,806 $ -- $159,135
Cost of sales 247,071 105,641 -- 141,430
-------- -------- ------- --------
Gross margin 33,870 16,165 -- 17,705
Selling, general and administrative expense 25,303 12,876 -- 12,427
-------- -------- ------- --------
Income (loss) from operations 8,567 3,289 -- 5,278
Interest expense 16,976 -- (1,755)(6) 15,221
Interest income -- -- 3,625 (7) 3,625
Other income (expense) - net (86) (21) -- (65)
-------- -------- ------- --------
Loss from continuing operations before
income taxes (8,495) 3,268 5,470 (6,383)
Income tax provision (benefit) (1,876) 722 256 (8) (1,410)
-------- -------- ------- --------
Net loss from continuing operations $ (6,619) $ 2,546 $ 5,214 $ (4,973)
-------- -------- ------- --------
-------- -------- ------- --------
Earnings per common share-
loss from continuing operations $ (0.92) $ (0.69)
-------- --------
-------- --------
</TABLE>
6
<PAGE>
SPINNAKER INDUSTRIES, INC
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE)
<TABLE>
<CAPTION>
PRO FORMA
SIX MONTHS SIX MONTHS
ENDED PRO FORMA ENDED
6/30/99 ADJUSTMENTS 6/30/99
---------- ----------- ----------
<S> <C> <C> <C>
Net sales $79,740 $ -- $79,740
Cost of sales 73,031 -- 73,031
---------- ----------- ----------
Gross margin 6,709 -- 6,709
Selling, general and administrative expense 5,976 -- 5,976
---------- ----------- ----------
Income (loss) from operations 733 -- 733
Interest expense 4,383 3,497 (9) 7,880
Interest income -- 1,812 (7) 1,812
Other income (expense) - net 850 -- 850
---------- ----------- ----------
Loss from continuing operations before
income taxes (2,800) (1,685) (4,465)
Income tax provision (benefit) (724) (431)(8) (1,155)
---------- ----------- ----------
Net loss from continuing operations $(2,076) $(1,254) $(3,310)
---------- ----------- ----------
---------- ----------- ----------
Earnings per common share-
Loss from continuing operations $ (0.28) $ (0.45)
---------- ----------
---------- ----------
</TABLE>
7
<PAGE>
SPINNAKER INDUSTRIES, INC.
NOTES TO UNAUDITED PRO FORMA FINANCIAL INFORMATION
(DOLLARS IN MILLIONS, EXCEPT PER SHARE)
GENERAL
The Registrant's unaudited pro forma statement of operations for the year
ended December 31, 1998 is based the statement of operations represented in
the Registrant's annual report on Form 10-K and has not been restated to
present the industrial tape segment as a discontinued operation. The
Registrant's unaudited pro forma statement of operations for the six months
ended June 30, 1999 is based on the statement of operations presented in the
Registrant's June 30, 1999 Form 10-Q and has been presented as a discontinued
operation since the April 9, 1999 measurement date.
The Registrant has not determined whether it will retire a pro rata portion
of indebtedness related to the Industrial Tape Business, other than the
repayment of certain borrowings under the Registrant's $60 million revolving
credit facility ("Spinnaker Credit Facility") and borrowings under the
Electrical revolving credit facility at closing.
Net proceeds from the Central sale are available to invest in any business,
capital expenditure or other tangible asset in the Permitted Businesses, as
defined in the Indenture. Any proceeds not so invested within 270 days after
the closing of the sale of Central or not used to permanently reduce
indebtedness shall be used to repurchase the Senior Notes on a pro rata basis
as required by the Indenture.
Interest expense attributed to the Senior Notes and related deferred
financing has historically been allocated based on the pro rata share of
subsidiary debt obligations retired with the proceeds from the issuance of
the Senior Notes to total debt obligations retired. The Senior Notes proceeds
were used to extinguish certain outstanding term and revolver obligations in
October 1996. As a result, interest expense, as presented on a historical
basis, may not necessarily be indicative of interest expense of continuing
operations. Interest expenses charged to the discontinued industrial tape
segment total $4.2 million in the six month period ended June 30, 1999 and
$9.2 million for the year ended December 31, 1999.
(1) Represents estimated net cash proceeds from the disposition of the
Industrial Tape Businesses, calculated as follows:
<TABLE>
<CAPTION>
($ in millions)
Central Electrical
------- ----------
<S> <C> <C>
Cash purchase price $ 81.5 $ 23.0
Less: Estimated expenses, fees and taxes 3.5 .5
Repayment of debt at closing 18.1 6.9
------ ------
Net cash proceeds $ 59.9 $ 15.6
------ ------
------ ------
</TABLE>
(2) Represents estimated value of five-year warrants to purchase 300,000 shares
of Intertape common stock at a strike price of $29.50 per share.
(3) Represents repayment of Electrical term debt with an original principal
amount of $4.5 million and the Registrant's subordinated note with an
original principal amount of $0.5 million.
8
<PAGE>
(4) Represents repayment of certain borrowings under Spinnaker Credit Facility
and approximately $2.0 million for repayment of borrowings under the
Electrical revolving credit facility.
(5) Represents deferred taxes on the sale of Industrial Tape Business.
(6) Represents the elimination of working capital revolver interest associated
with repayments of certain borrowings under the Spinnaker Credit Facility
and $2.0 million under the Electrical revolving credit facility at closing.
(7) Represents interest income earned on net proceeds invested in institutional
money market funds, yielding an average return of 4.80%.
(8) Represents income tax adjustment required to reflect the estimated
effective tax rate for continuing operations.
(9) Represents the adjustment required to reverse and allocate back to
continuing operations Senior Note interest historically allocated to
Central based on the pro rata share of Central's debt obligations retired
with the proceeds from the issuance of the Senior Notes, to total debt
obligations retired.
9
<PAGE>
EXHIBIT INDEX
2.1 Stock Purchase Agreement between Registrant and Intertape Polymer Group
Inc. dated April 9, 1999.(1)
2.2 Asset Purchase Agreement by and among Registrant, Spinnaker Electrical
Tape Company and Intertape Polymer Group Inc. dated April 9, 1999.(1)
- -------------
(1) Filed herewith.
<PAGE>
STOCK PURCHASE AGREEMENT
BY AND BETWEEN
SPINNAKER INDUSTRIES, INC.
AND
INTERTAPE POLYMER GROUP INC.
DATED AS OF
APRIL 9, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I - PURCHASE AND SALE OF COMPANY SHARES. . . . . . . . . . . . . . . . . . .1
1.1 Sale of Company Shares by Seller . . . . . . . . . . . . . . . . . . .1
1.2 Time and Place of Closing. . . . . . . . . . . . . . . . . . . . . . .1
ARTICLE II - PURCHASE PRICE. . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
2.1 Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
ARTICLE III -SELLER REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . .2
3.1 Organization; Title to Company Shares. . . . . . . . . . . . . . . . .3
3.2 Certificate of Incorporation and Bylaws. . . . . . . . . . . . . . . .3
3.3 Authority. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
3.4 No Conflict; Required Filings and Consents . . . . . . . . . . . . . .3
3.5 Absence of Litigation. . . . . . . . . . . . . . . . . . . . . . . . .4
3.6 Brokers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
3.7 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
ARTICLE IV - COMPANY REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . .5
4.1 Organization; Approvals. . . . . . . . . . . . . . . . . . . . . . . .5
4.2 Capital Stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
4.3 Certificate of Incorporation and Bylaws. . . . . . . . . . . . . . . .5
4.4 No Conflict; Required Filings and Consents . . . . . . . . . . . . . .6
4.5 Compliance; Permits. . . . . . . . . . . . . . . . . . . . . . . . . .6
4.6 Inventory. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
4.7 Accounts Receivable. . . . . . . . . . . . . . . . . . . . . . . . . .6
4.8 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . .7
4.9 Absence of Certain Changes or Events . . . . . . . . . . . . . . . . .7
4.10 Absence of Litigation. . . . . . . . . . . . . . . . . . . . . . . . .8
4.11 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . .8
4.12 Labor and Employment Matters . . . . . . . . . . . . . . . . . . . . .9
4.13 Tangible Personal Property . . . . . . . . . . . . . . . . . . . . . 10
4.14 Environmental Matters. . . . . . . . . . . . . . . . . . . . . . . . 10
4.15 Absence of Agreements. . . . . . . . . . . . . . . . . . . . . . . . 12
4.16 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.17 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.18 Material Contracts . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.19 Substantial Customers and Suppliers. . . . . . . . . . . . . . . . . 13
4.20 Intellectual Property. . . . . . . . . . . . . . . . . . . . . . . . 13
4.21 Year 2000 Representation . . . . . . . . . . . . . . . . . . . . . . 15
4.22 Real Property. . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
i
<PAGE>
<S> <C>
4.23 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.24 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.25 Material Adverse Effect. . . . . . . . . . . . . . . . . . . . . . . 16
ARTICLE V - BUYER REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . 16
5.1 Organization; Approvals. . . . . . . . . . . . . . . . . . . . . . . 16
5.2 Authority. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5.3 No Conflict; Required Filings and Consents . . . . . . . . . . . . . 17
5.4 Absence of Litigation. . . . . . . . . . . . . . . . . . . . . . . . 17
5.5 Brokers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.6 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.7 Holding of Company Shares. . . . . . . . . . . . . . . . . . . . . . 18
ARTICLE VI - CERTAIN COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . 18
6.1 Affirmative Covenants. . . . . . . . . . . . . . . . . . . . . . . . 18
6.2 Negative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . 19
6.3 Exclusivity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.4 Access and Information . . . . . . . . . . . . . . . . . . . . . . . 21
6.5 Update Disclosure; Breaches. . . . . . . . . . . . . . . . . . . . . 22
6.6 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.7 Retention of Records . . . . . . . . . . . . . . . . . . . . . . . . 22
ARTICLE VII - ADDITIONAL AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . . . 23
7.1 Appropriate Action; Consents; Filings. . . . . . . . . . . . . . . . 23
7.2 Employee Benefit Matters . . . . . . . . . . . . . . . . . . . . . . 23
7.3 Notification of Certain Matters. . . . . . . . . . . . . . . . . . . 25
7.4 Public Announcements . . . . . . . . . . . . . . . . . . . . . . . . 25
7.5 Customer Retention . . . . . . . . . . . . . . . . . . . . . . . . . 25
7.6 Non-Competition. . . . . . . . . . . . . . . . . . . . . . . . . . . 25
ARTICLE VIII - TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
8.1 Tax Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . 27
8.2 Preparation and Filing of Tax Returns. . . . . . . . . . . . . . . . 28
8.3 Tax Contests . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
8.4 Cooperation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
8.5 Termination of Tax Sharing Agreements. . . . . . . . . . . . . . . . 30
8.6 FIRPTA Certificates. . . . . . . . . . . . . . . . . . . . . . . . . 31
8.7 Conflict . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
8.8 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
ARTICLE IX - CONDITIONS OF CLOSING . . . . . . . . . . . . . . . . . . . . . . . . 31
9.1 Conditions to Obligations of Each Party. . . . . . . . . . . . . . . 31
9.2 Additional Conditions to Obligations of Buyer. . . . . . . . . . . . 31
9.3 Additional Conditions to Obligations of the Seller . . . . . . . . . 33
ii
<PAGE>
<S> <C>
ARTICLE X - TERMINATION, AMENDMENT AND WAIVER. . . . . . . . . . . . . . . . . . . 34
10.1 Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
10.2 Effect of Termination; Put Right . . . . . . . . . . . . . . . . . . 34
10.3 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
ARTICLE XI - NDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
11.1 Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . . . 35
11.2 Procedures for Indemnification . . . . . . . . . . . . . . . . . . . 36
ARTICLE XII - GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . 37
12.1 Survival of Representations, Warranties, Covenants and Agreements. . 37
12.2 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
12.3 Certain Definitions. . . . . . . . . . . . . . . . . . . . . . . . . 38
12.4 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
12.5 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
12.6 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . 39
12.7 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
12.8 Parties In Interest. . . . . . . . . . . . . . . . . . . . . . . . . 40
12.9 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
12.10 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
12.11 Time Is of the Essence . . . . . . . . . . . . . . . . . . . . . . . 40
12.12 Amendment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
12.13 Waiver of Jury Trial . . . . . . . . . . . . . . . . . . . . . . . . 40
12.14 Consent to Jurisdiction. . . . . . . . . . . . . . . . . . . . . . . 40
</TABLE>
iii
<PAGE>
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (this "AGREEMENT"), dated as of April 9,
1999, by and between Spinnaker Industries, Inc., a Delaware corporation
("SELLER"), and Intertape Polymer Group Inc., a corporation organized under
the Canada Business Corporations Act ("BUYER").
WITNESSETH:
WHEREAS, Seller is the record and beneficial owner of all of the
outstanding capital stock of Central Products Company, a Delaware corporation
(the "COMPANY") engaged in the business of the design, development,
manufacture and sale of industrial tapes; and
WHEREAS, Buyer desires to acquire from Seller all of the outstanding
capital stock of the Company from Seller, and Seller desires to sell, assign,
transfer, convey and deliver to Buyer such stock, on the terms and subject to
the conditions of this Agreement; and
WHEREAS, concurrently with the execution and delivery of this
Agreement, Buyer is entering into an asset purchase agreement of even date
herewith (the "ASSET PURCHASE AGREEMENT") with Seller and Spinnaker
Electrical Tape Company, a Delaware corporation and an affiliate of the
Company engaged in the business of the design, development, manufacture and
sale of industrial tapes.
NOW, THEREFORE, in consideration of the foregoing premises and the
representations, warranties and agreements contained in this Agreement, and
subject to the terms and conditions set forth in this Agreement, the parties
agree as follows:
ARTICLE I
PURCHASE AND SALE OF COMPANY SHARES
1.1 SALE OF COMPANY SHARES BY SELLER. Subject to the satisfaction
or waiver of the conditions set forth in this Agreement, at the Closing (as
defined in SECTION 1.2), Seller shall sell, assign, transfer, convey and
deliver to Buyer, and Buyer shall purchase and accept from Seller, all of the
outstanding capital stock of the Company (the "COMPANY SHARES"), free and
clear of all restrictions on transfer (subject, however, to restrictions on
the transferability thereof under all applicable securities laws and
regulations thereunder), Taxes, liens, options, warrants, purchase rights,
contracts, commitments, equities, claims and demands (other than the rights
of Buyer under this Agreement).
1.2 TIME AND PLACE OF CLOSING.
(a) The closing of the transactions contemplated hereby (the
"CLOSING") will take place on the Closing Date (defined below) or at such
other time as the parties agree. The Closing shall be held at the offices of
Morgan, Lewis & Bockius LLP located at 101 Park Avenue, New
1
<PAGE>
York, New York 10178 or such location as may be agreed upon by the parties.
The parties shall use reasonable efforts to cause the Closing to occur on the
first business day following the later to occur of (i) the effective date
(including expiration of any applicable waiting period) of the last required
consent of any regulatory authority having authority over and approving or
exempting the contemplated transaction or (ii) after all the remaining
conditions set forth in ARTICLE IX are satisfied or waived (the "CLOSING
DATE").
(b) At the Closing:
(i) Buyer shall deliver Seller (A) immediately
available funds by wire transfer to an account specified by Seller in an
amount equal to the Purchase Price (as defined in SECTION 2.1), offset as
provided in Section 2.1, (B) a Warrant Agreement, substantially in the form
attached hereto as EXHIBIT A, and (C) the opinion, certificates and other
agreements and documents set forth in ARTICLE IX;
(ii) Seller shall deliver to Buyer (A) the certificate
or certificates representing all of the Company's outstanding capital stock,
either duly endorsed for transfer to Buyer or accompanied by appropriate duly
executed stock powers and with all requisite stock transfer stamps and taxes
attached or provided for, (B) the opinion, certificates and other documents
set forth in ARTICLE IX, and (C) resignations from each member of the
Company's Board of Directors; and
(iii) (A) All intercompany receivables and all
intercompany debt, together with all interest thereon to the Closing Date,
shall be eliminated and (B) such amounts as are required to obtain a release
of the Company Shares and assets of its business at the Closing Date under
that certain Revolving Loan and Letter of Credit Facility, dated October 23,
1996, by and among Central Products Company, Spinnaker Coating, Inc.,
Spinnaker Coating-Maine, Inc. and Entoleter, as Borrowers, Spinnaker
Industries, Inc., as Guarantor, and the other parties thereto, as amended
from time to time (the "CREDIT AGREEMENT"), shall be repaid. Current Federal
income taxes receivable and payable shall be considered intercompany balances
for purposes of this Section.
ARTICLE II
PURCHASE PRICE
2.1 PURCHASE PRICE. The aggregate purchase price for the Company
Shares shall be Eighty Million United States Dollars (US $80,000,000) (the
"PURCHASE PRICE"). The payment being made pursuant to SECTION 1.2(b)(iii)(B)
above shall be offset against the Purchase Price, the balance of which shall
be delivered by Buyer to Seller at Closing by wire transfer in immediately
available federal funds to an account designated by Seller by written notice
to Buyer given at least two days prior to the Closing Date. The portion of
the Purchase Price allocable to the non-competition provisions of SECTION 7.9
shall be Seven Million United States Dollars (US $7,000,000).
ARTICLE III
SELLER REPRESENTATIONS AND WARRANTIES
2
<PAGE>
Except as set forth in the Disclosure Schedule delivered by Seller to
Buyer attached to and incorporated in this Agreement (the "DISCLOSURE
SCHEDULE"), which Disclosure Schedule shall reference disclosure items by
section, Seller represents and warrants to Buyer as follows:
3.1 ORGANIZATION; TITLE TO COMPANY SHARES. Seller is a corporation
validly existing and in good standing under the laws of the State of
Delaware. Seller is, and on the Closing Date will be, the record and
beneficial owner of the Company Shares, and Seller owns, and on the Closing
Date will own, the Company Shares free and clear of all restrictions on
transfer, Taxes, liens, options, warrants, purchase rights, contracts,
commitments, equities, claims and demands (other than restrictions on
transferability under applicable securities laws and regulations thereunder
and the rights of Buyer under this Agreement), except as set forth in SECTION
3.1 of the Disclosure Schedule. The delivery on the Closing Date of the
certificates representing the Company Shares purchased hereunder to Buyer
will transfer to Buyer good, valid and marketable title to the Company
Shares, free and clear of all restrictions on transfer (other than
restrictions on transferability under applicable securities laws and
regulations thereunder), Taxes, liens, options, warrants, purchase rights,
contracts, commitments, equities, claims and demands. From and after the
Closing, neither Seller nor any other person (other than Buyer) will have any
rights whatsoever to the Company Shares, any other securities of the Company
or any options or other rights convertible or exchangeable into such Company
Shares or other securities with respect to the Company.
3.2 CERTIFICATE OF INCORPORATION AND BYLAWS. Seller previously has
furnished to Buyer a true, complete and accurate copy of its Certificate of
Incorporation and Bylaws, as amended or restated (the "SELLER CERTIFICATE AND
BYLAWS"). Such Seller Certificate and Bylaws are in full force and effect.
Seller is not in violation of any of the provisions of the Seller Certificate
and Bylaws.
3.3 AUTHORITY. Seller has the requisite corporate power and
authority to execute and deliver this Agreement, to perform its obligations
under this Agreement and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement by Seller and the consummation
by Seller of the transactions contemplated hereby have been duly and validly
authorized by all necessary corporate action and no other corporate
proceedings on the part of Seller are necessary to authorize this Agreement
or to consummate the transactions contemplated hereby (other than applicable
stockholder approvals). This Agreement has been duly executed and delivered
by, and constitutes a valid and binding obligation of, Seller and, assuming
due authorization, execution and delivery by Buyer, is enforceable against
Seller in accordance with its terms, except as enforcement may be limited by
general principles of equity whether applied in a court of law or a court of
equity and by bankruptcy, insolvency and similar laws affecting creditors'
rights and remedies generally.
3.4 NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) The execution and delivery of this Agreement by Seller
does not, and the performance of this Agreement and the transactions
contemplated hereby by Seller shall not, (i) conflict with or violate the
Seller Certificate and Bylaws (ii) conflict with or violate any federal or
state law, statute, ordinance, rule, regulation, order, judgment or decree
(collectively, "LAWS") applicable to Seller or by which it or any of its
properties are bound or affected, or (iii) result in any
3
<PAGE>
breach of or constitute a default (or an event that with notice or lapse of
time or both would become a default) under, or give to others any rights of
termination, amendment, acceleration, cancellation of, or result in the
creation of a Lien (as defined in SECTION 11.3) on Seller, the Company or any
of their respective assets pursuant to any note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other instrument or
obligation to which Seller is a party or by which it or any of its properties
are bound or affected, except in the case of clauses (ii) and (iii) for any
such conflicts, violations, breaches, defaults or other occurrences that
individually or in the aggregate, would not, or be reasonably likely to have,
have a Material Adverse Effect with respect to Seller or the Company.
(b) The execution and delivery of this Agreement by Seller
does not, and the performance of this Agreement by Seller shall not, require
any consent, approval, authorization or permit of, or filing with or
notification to any governmental or regulatory authority or any third party
except for applicable requirements, if any, of the Securities Act of 1933, as
amended (the "SECURITIES ACT"), the Securities Exchange Act of 1934, as
amended (the "EXCHANGE ACT"), state securities or blue sky laws ("BLUE SKY
LAWS"), the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended
(the "HSR ACT"), the filing of other documents as required by applicable law,
applicable transfer tax filings and where the failure to obtain such
consents, approvals, authorizations or permits would not prevent or delay
consummation of the transaction contemplated hereby, or otherwise prevent
Seller from performing its obligations under this Agreement or would be such
as to result in, or be reasonably likely to result in, a Material Adverse
Effect with respect to Seller or the Company.
3.5 ABSENCE OF LITIGATION. Seller is not a party to any, and there
are no pending or, to the knowledge of Seller, threatened, legal,
administrative, arbitral or other proceedings, claims, actions or
governmental or regulatory investigations of any nature against Seller
challenging the validity or propriety of the transactions contemplated by
this Agreement which if unfavorably determined would prevent the consummation
of the transactions contemplated hereby, except where such events would not
have, or be reasonably likely to have, a Material Adverse Effect with respect
to Seller or the Company. There are no claims or judgments pending with
respect to which Seller has been duly served or otherwise received notice as
of the date of this Agreement or, to the knowledge of Seller, threatened
against Seller or the Company or outstanding against Seller or the Company or
affecting Seller or the Company, that in the aggregate would have a Material
Adverse Effect on the Company. No injunction, order, judgment, decree or
regulatory restriction has been imposed on Seller or the assets of Seller
which has had or reasonably could be expected to have a Material Adverse
Effect with respect to the Company.
3.6 BROKERS. No broker, finder or investment banker is entitled to
any brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by
or on behalf of Seller, except as provided in that certain letter agreement
between Seller and Schroder & Co. Inc. regarding such fees, which fees are
the sole responsibility of, and are to be paid by, Seller.
3.7 DISCLOSURE. No representation or warranty of Seller contained
in this Agreement, and no statement contained in the Disclosure Schedule or
in any certificate, list or other writing furnished
4
<PAGE>
to Buyer pursuant to any provision of this Agreement contains any untrue
statement of a material fact or omits to state a material fact necessary in
order to make the statements herein or therein, in light of the circumstances
under which they were made, not misleading.
ARTICLE IV
COMPANY REPRESENTATIONS AND WARRANTIES
Except as set forth in the Disclosure Schedule delivered by Seller to
Buyer attached to and incorporated in this Agreement (the "DISCLOSURE
SCHEDULE"), which Disclosure Schedule shall reference disclosure items by
section, Seller represents and warrants to Buyer, with respect to the Company
and, as to Taxes, Seller represents and warrants to Buyer with respect to
both Seller and the Company, as follows:
4.1 ORGANIZATION; APPROVALS. The Company is a corporation validly
existing and in good standing under the laws of the State of Delaware. The
Company has the requisite corporate power and authority and is in possession
of all franchises, grants, authorizations, licenses, permits, easements,
consents, certificates, approvals and orders ("COMPANY APPROVALS") necessary
to own, lease and operate its properties and to carry on its business as it
is now being conducted, and the Company has not received any notice of
proceedings relating to the revocation or modification of any Company
Approvals, except where the failure to be so organized, existing and in good
standing or to have such power, authority, Company Approvals and revocations
or modifications would not, individually or in the aggregate, have a Material
Adverse Effect (as defined in SECTION 10.3) with respect to the Company.
4.2 CAPITAL STOCK. As of the date hereof and as of the Closing
Date, the authorized capital stock of the Company consists of 200,000 shares
of common stock, no par value. As of the date hereof and as of the Closing
Date, the only issued and outstanding shares of common stock are the Company
Shares, all of which are, and on the Closing Date will be, duly authorized,
validly issued, fully paid and nonassessable, and the issuance thereof was in
compliance with all applicable Laws. Except for the Company Shares, no
shares of capital stock of the Company have been issued, are held in treasury
or are reserved for issuance. There are no outstanding or authorized
options, warrants, purchase rights, subscription rights, conversion rights,
exchange rights, or other contracts or commitments that could require the
Company to issue, sell, or otherwise cause to become outstanding any of its
capital stock (other than the rights of Buyer under this Agreement). There
are no outstanding or authorized stock appreciation, phantom stock, profit
participation or similar rights with respect to the Company. There are no
voting trusts, proxies, or other agreements or understandings with respect to
the voting of the Company Shares. There are no preemptive rights or
agreements, arrangements or understandings to issue preemptive rights with
respect to the issuance or sale of the Company's capital stock.
4.3 CERTIFICATE OF INCORPORATION AND BYLAWS. The Company
previously has furnished to Buyer a true, complete and accurate copy of its
Certificate of Incorporation and Bylaws, as amended or restated (the "COMPANY
CERTIFICATE AND BYLAWS"). Such Company Certificate and Bylaws are in full
force and effect. The Company is not in violation of any of the provisions of
the Company Certificate and Bylaws.
5
<PAGE>
4.4 NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) The transactions contemplated hereby by the Company
shall not, (i) conflict with or violate the Company Certificate and Bylaws
(ii) conflict with or violate any Laws applicable to the Company or by which
it or any of its properties are bound or affected, or (iii) result in any
breach of or constitute a default (or an event that with notice or lapse of
time or both would become a default) under, or give to others any rights of
termination, amendment, acceleration cancellation of, or result in the
creation of a Lien on the Company or any of its assets pursuant to any note,
bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which the Company is a party
or by which it or any of its properties are bound or affected, except in the
case of clauses (ii) and (iii) for any such conflicts, violations, breaches,
defaults or other occurrences that individually or in the aggregate, would
not have a Material Adverse Effect with respect to the Company.
(b) No consent, approval, authorization or permit of, or
filing with or notification to any governmental or regulatory authority or
any third party except for applicable requirements, if any, of the Securities
Act, the Exchange Act, the HSR Act, or Blue Sky Laws, the filing of other
documents as required by applicable law, applicable transfer tax filings is
required to be obtained by the Company in connection with the transactions
contemplated hereby, except where the failure to obtain such consents,
approvals, authorizations or permits would not prevent or delay consummation
of the transactions contemplated hereby, or otherwise prevent the Company
from performing its obligations under this Agreement or would be such as to
result in, or be reasonably likely to result in, a Material Adverse Effect
with respect to the Company.
4.5 COMPLIANCE; PERMITS. The Company is not in conflict with, or
in default or violation of, (i) any Law applicable to the Company or by which
the Company is bound or affected, or (ii) any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which the Company is a party or by which the
Company is bound or affected, except for any such conflicts, defaults or
violations which would not, individually or in the aggregate, have a Material
Adverse Effect with respect to the Company.
4.6 INVENTORY. The inventory of the Company consists of raw
materials and supplies, manufactured and processed parts, work-in-progress
and finished goods, all of which is merchantable and fit for the purpose for
which it was procured or manufactured, and none of which is slow-moving,
obsolete, damaged or defective, subject to the reserve for inventory
writedown set forth on the Company's balance sheet at December 31, 1998 (or
in any notes thereto), and as adjusted for operations and transactions
through the Closing Date in accordance with the past custom and practice of
the Company.
4.7 ACCOUNTS RECEIVABLE. The accounts receivable of the Company
are reflected properly on its books and records, are valid receivables
subject to no setoffs or counterclaims, are current and collectible, and will
be collected in accordance with their terms at their recorded amounts,
subject to the reserve for bad debts set forth on the Company's balance sheet
at December 31, 1998 (or in any notes thereto), and as adjusted for
operations and transactions through
6
<PAGE>
the Closing Date in accordance with the past custom and practice of the
Company. All accounts receivable of the Company are listed on SECTION 4.7 of
the Disclosure Schedule.
4.8 FINANCIAL STATEMENTS.
(a) Prior to the execution of this Agreement, Seller has
delivered to Buyer complete and correct copies of the Company's unaudited
balance sheet and related income statements and statements of cash flow for
the eleven month period ended November 30, 1998 and the years ended December
31, 1998, and December 31, 1997, respectively, and Seller's audited
consolidated balance sheet and related income statements and statements of
cash flow for the year ended December 31, 1998 (the "FINANCIAL STATEMENTS").
All such Financial Statements are complete and correct in all material
respects and were (i) prepared from the books of account or other financial
records of the Company and Seller, respectively (ii) prepared in accordance
with GAAP applied on a consistent basis throughout the periods involved, and
(iii) fairly present in all material respects the financial position of the
Company and the consolidated financial position of Seller at the respective
dates and the results of operations and cash flows and the consolidated
results of operations and cash flows (as applicable) for the periods
indicated, except that the interim consolidated financial statements were or
are subject to normal and recurring year-end adjustments which were not or
are not expected to be material in amount and do not have any footnote
disclosures.
(b) Except (i) for the liabilities that are fully reflected
in the Financial Statements (including any related notes thereto) or not
required to be reflected in accordance with GAAP and (ii) for the liabilities
incurred in the ordinary course of business consistent with past practice
since December 31, 1998, the Company has not incurred any liability that,
either alone or when combined with all similar liabilities, has had or would
have a Material Adverse Effect with respect to the Company.
4.9 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed in
the Financial Statements or reports filed by Seller pursuant to the
Securities Act or the Exchange Act (the "SELLER REPORTS") filed prior to the
date of this Agreement, since December 31, 1998 to the date of this
Agreement, the Company has conducted its business only in the ordinary course
and in a manner consistent with past practice and, since December 31, 1998,
there has not been (i) any change in the financial condition, results of
operations or business of the Company having a Material Adverse Effect with
respect to the Company, (ii) any damage, destruction or loss not covered by
insurance with respect to any assets of the Company having a Material Adverse
Effect with respect to the Company, (iii) any declaration, setting aside or
payment of any dividends or distributions in respect of shares of capital
stock of the Company or any redemption, purchase or other acquisition of any
of its securities, (iv) any entering into of any new, or modification,
amendment or termination (partial or complete) of, any existing collective
bargaining agreement, contract or other agreement or understanding with a
labor union or similar organization to which the Company has been, or is, a
party or Plan (as defined in SECTION 4.11 below), or other increase in the
salary, bonus, rate of commission or rate of consulting fees payable or to
become payable to any directors, officers, employees or consultants of Seller
or Company, or employment or severance agreement or other employee
compensation arrangement with any of its directors, officers or employees
(whether new hires or existing employees), in each case where such
compensation or arrangement exceeds
7
<PAGE>
$75,000, or (v) any union organizing activities relating to employees of
Seller or Company or any entering into of any other material transaction
involving or affecting each of Seller or Company outside the ordinary course
of business of such Seller or Company consistent with past practice.
4.10 ABSENCE OF LITIGATION. The Company is not a party to any, and
there are no pending or, to the knowledge of the Company, threatened, legal,
administrative, arbitral or other proceedings, claims, actions or
governmental or regulatory investigations of any nature against the Company
challenging the validity or propriety of the transactions contemplated by
this Agreement which if unfavorably determined would prevent the consummation
of the transactions contemplated hereby. There are no claims and judgments
pending with respect to which the Company has been duly served or otherwise
received notice as of the date of this Agreement, or, to the knowledge of the
Company, threatened against the Company or outstanding against the Company or
affecting the Company, that in the aggregate would have a Material Adverse
Effect on the Company. No injunction, order, judgment, decree or regulatory
restriction has been imposed on the Company or the assets of the Company
which has had or reasonably could be expected to have a Material Adverse
Effect with respect to the Company.
4.11 EMPLOYEE BENEFIT PLANS.
(a) PLANS OF THE COMPANY. SECTION 4.11(a) of the Disclosure
Schedule lists (i) all employee benefit plans (as defined in Section 3(3) of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA")),
and all bonus, stock option, stock purchase, restricted stock, incentive,
deferred compensation, retiree medical or life insurance, supplemental
retirement, severance or other benefit plans, programs or arrangements and
all employment termination, severance or other employment contracts or
employment agreements, with respect to which the Company has any obligation
and which benefit any of its employees (collectively, the "PLANS"). The
Company has furnished or made available to Buyer a copy of each Plan (or a
description of the Plans, if the Plans are not in writing) and a copy of each
material document prepared in connection with each such Plan, including,
without limitation, and where applicable a copy of (i) each trust or other
funding arrangement, (ii) each summary plan description and summary of
material modifications, (iii) any IRS Forms 5500 and related schedules filed
since August 1998, (iv) any IRS determination letter for each such Plan
issued since August 1998, (v) any actuarial and financial statements in
connection with each such Plan issued since August 1998, and (vi) any other
material information relating to each such Plan as requested by Buyer, to the
extent it is available to the Company.
(b) ABSENCE OF CERTAIN TYPES OF PLANS. No Plan is described
in Section 401(a)(1) of ERISA. SECTION 4.11(b) of the Disclosure Schedule
lists all Plans that obligate the Company to pay separation, severance,
termination or similar-type benefits as a result of any transaction
contemplated by this Agreement or as a result of a "change in control,"
within the meaning of such term under Section 280C of the Code.
(c) COMPLIANCE WITH APPLICABLE LAW. Except as set forth in
SECTION 4.11(c) of the Disclosure Schedule, each Plan has been operated in
all material respects in accordance with the requirements of all applicable
Law and all persons who participate in the operation of such Plans and
8
<PAGE>
all Plan "fiduciaries" (within the meaning of Section 3(21) of ERISA) have
acted in all material respects in accordance with the provisions of all
applicable Law. The Company has performed in all material respects all
obligations required to be performed by it under the Plans, is not in
material default under or in material violation of the Plans and the Company
and Seller have no knowledge of any such default or violation by any party to
the Plans.
(d) QUALIFICATION OF CERTAIN PLANS. Each Plan that is
intended to be qualified under Section 401(a) of the Code or Section 401(k)
of the Code (including each trust established in connection with such a Plan
that is intended to be exempt from Federal income taxation under Section
501(a) of the Code) has received a favorable determination letter from the
Internal Revenue Service ("IRS") that it is so qualified, and the Company is
not aware of any material fact or event that has occurred since the date of
such determination letter from the IRS to adversely affect the qualified
status of any such Plan. No trust is maintained or contributed by the Company
or the Seller to fund any Plan that is intended to be qualified as a
voluntary employees' beneficiary association or is intended to be exempt from
federal income taxation under Section 501(c)(9) of the Code.
(e) ABSENCE OF CERTAIN LIABILITIES AND EVENTS. The Company
has not incurred any liability under Title IV of ERISA or for any excise tax
arising under Section 4971 through 4980E of the Internal Revenue Code of
1986, as amended (the "CODE") and to the knowledge of the Company or the
Seller no fact or event exists that could give rise to any such material
liability.
(f) PLAN CONTRIBUTIONS. All contributions, premiums or
payments required to be made with respect to any Plan have been made.
(g) MULTIEMPLOYER PLANS. No Plan is a multiemployer plan
(within the meaning of Section 3(37) of ERISA).
(h) POST-RETIREMENT MEDICAL. Each Plan that provides
medical or life benefits beyond an employee's termination of employment
(other than as required by applicable Law) is disclosed on SECTION 4.11(h) of
the Disclosure Schedule.
4.12 LABOR AND EMPLOYMENT MATTERS.
(a) Except for confidentiality, noncompetition, consulting
or other similar contracts with any employees, consultants, officers or
directors of the Company set forth in SECTION 4.12(a) of the Disclosure
Schedule, the Company is not a party to any such contracts. Each such
contract is in full force and effect and neither the Company nor Seller or,
to the knowledge of the Company or Seller, any other party to such contract
has received notice that the Company is in violation or breach of or default
in any material respect under any such contract (or with notice or lapse of
time or both, would be in violation or breach of or default in any material
respect under any such contract).
(b) Except as set forth in SCHEDULE 4.12(b) of the
Disclosure Schedule: (i) the Company's current employees are not represented
by a labor union or organization, no labor union or organization has been
certified or recognized as a representative of any such current employees,
9
<PAGE>
and the Company is not a party to and/or has any obligation under any
collective bargaining agreement or other labor union contract, white paper or
side agreement with any labor union or organization or any obligation to
recognize or deal with any labor union or organization, and there are no such
contracts, white papers or side agreements pertaining to or which determine
the terms or conditions of employment of any current employee of either the
Company; (ii) there are no pending or threatened representation campaigns,
elections or proceedings or questions concerning union representation
involving any current employees; (iii) neither the Company nor Seller has
knowledge of any activities or efforts of any labor union or organization (or
representatives thereof) to organize any current employees of the Company,
nor of any demands for recognition or collective bargaining, nor of any
strikes, slowdowns, work stoppages or lock-outs of any kind, or threats
thereof, by or with respect to any current employees or any actual or claimed
representatives thereof, and no such activities, efforts, demands, strikes,
slowdowns, work stoppages or lock-outs have occurred for the past 24 months;
(iv) the Company has not engaged in, admitted committing or been held in any
administrative or judicial proceeding to have committed any unfair labor
practice under the National Labor Relations Act, as amended; (v) the Company
is not involved in any industrial or trade dispute or any dispute or
negotiations regarding a claim of material importance with any labor union or
organization; and (vi) there are no controversies, claims, demands or
grievances of material importance pending or, so far as the Company or Seller
are aware, threatened, between the Company on the one hand, and any of its
employees or any actual or claimed representative thereof on the other hand.
(c) The Company is in material compliance with all Laws
relating to the employment of labor, including but not limited to such Laws
relating to wages, hours, the Worker Adjustment Retraining and Notification
Act of 1988 ("WARN"), collective bargaining, discrimination, civil rights,
safety and health, worker's compensation and the collection and payment of
withholding and/or social security taxes and any similar tax.
4.13 TANGIBLE PERSONAL PROPERTY. The Company has, or will as of
Closing have, good and indefeasible title to all of its owned tangible
personal property and assets, free and clear of all Liens, except liens for
Taxes not yet due and payable, pledges to secure deposits and such minor
imperfections of title, if any, as do not materially detract from the value
of or interfere with the present use of such property or which, individually
or in the aggregate, would not have a Material Adverse Effect with respect to
the Company. All leases pursuant to which the Company leases from others
tangible or personal property are in good standing, valid and effective in
accordance with their respective terms. All items of tangible personal
property are listed in Disclosure Schedule SECTION 4.13, indicating which
such tangible personal property is owned or leased. All such tangible
personal property is adequate and suitable for the conduct of the business of
the Company and is in good working order and condition, ordinary wear and
tear excepted.
4.14 ENVIRONMENTAL MATTERS. Seller represents and warrants as
follows: (i) the Company, all real property owned by the Company (the "REAL
PROPERTY") and real property subject to leases entered into by the Company
(the "REAL PROPERTY LEASES") are in compliance with all applicable
Environmental Laws (as defined below); (ii) there is no amount of asbestos or
ureaformaldehyde material in or on any property owned, leased or operated by
the Company or the Seller in connection with the Company; (iii) there are no
underground storage tanks located on, in
10
<PAGE>
or under any properties currently owned, leased or operated by the Company or
Seller in connection with the Company that violate or result in liability
under any Environmental Law (as defined below); (iv) neither the Company nor
Seller have been notified by any governmental agency or third party of any
pending or threatened Environmental Claim (as defined below) against the
Company or Seller in connection with the Company; (v) neither the Company nor
Seller have been notified by any governmental agency or any third party that
either the Company or Seller in connection with the Company may be a
potentially responsible party for environmental contamination or any Release
(as defined below) of Hazardous Materials (as defined below); (vi) the
Company has obtained and holds all permits, licenses and authorizations
required under applicable Environmental Laws relating to the ownership or
operations of the Company ("ENVIRONMENTAL PERMITS"); (vii) the Company is in
compliance with all terms, conditions and provisions of all applicable
Environmental Permits; (viii) no Releases of Hazardous Materials have
occurred at, from, in, on, to or under any property currently or formerly
owned, operated or leased by the Company or Seller in connection with the
Company or any predecessors of the Company or Seller in connection with the
Company, and no Hazardous Materials are present in, on or about or migrating
to or from any such property that could give rise to an Environmental Claim
by a third party (including any governmental entity or private party) against
the Company; (ix) neither the Company nor Seller in connection with the
Company nor any predecessors thereof have transported or arranged for the
treatment, storage, handling, disposal or transportation of any Hazardous
Material to any location which could result in an Environmental Claim against
or liability to the Company; and (x) there have been no environmental
investigations, studies, audits or tests conducted by, on behalf of or which
are in the possession of any Seller or Company with respect to any property
currently or formerly owned, leased or operated by either Seller or Company
in connection with the Company thereof which have not been delivered to Buyer
prior to execution of this Agreement, except in each case where such event or
condition would not have a Material Adverse Effect on the Company.
For purposes of this Section, "ENVIRONMENTAL CLAIMS" shall mean any
and all administrative, regulatory, judicial or private actions, suits,
demands, notices, claims, liens, investigations, injunctions or similar
proceedings that may create liability for Seller relating in any way to: (i)
any Environmental Law; (ii) any Hazardous Material, including without
limitation, any investigation, monitoring, abatements, removal, remedial,
corrective or other response action in connection with any Hazardous
Material, Environmental Law or order or notice of liability or violation of a
governmental entity or Environmental Law; or (iii) any actual or alleged
damage, injury, threat or harm to the environment.
"HAZARDOUS MATERIALS" shall mean any and all chemicals, pollutants,
contaminants, wastes, toxic substances, compounds, products, solid, liquid,
gas, petroleum, asbestos, asbestos-containing materials, polychlorinated
biphenyls or other regulated substances or materials which are hazardous,
toxic or otherwise harmful to the environment.
"ENVIRONMENTAL LAW" shall mean any and all federal and state civil and
criminal laws, statutes, ordinances, orders, codes, rules or regulations of
any governmental or regulatory authority relating to the protection of
health, the environment, natural resources, worker health and safety and/or
governing the handling, use, generation, treatment, storage, transportation,
disposal, manufacture, distribution, formulation, packaging, labeling, or
Release of Hazardous Materials,
11
<PAGE>
including but not limited to: the Clean Air Act, 42 U.S.C. Section 7401 ET
SEQ.; the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, 42 U.S.C. Section 9601 ET SEQ.; the Federal Water Pollution
Control Act, 33 U.S.C. Section 1251 ET SEQ.; the Hazardous Material
Transportation Act 49 U.S.C. Section 1801 ET SEQ.; the Federal Insecticide,
Fungicide and Rodenticide Act 7 U.S.C. Section 136 ET SEQ.; the Resource
Conservation and Recovery Act of 1976 ("RCRA"), 42 U.S.C. Section 6901 ET
SEQ.; the Toxic Substances Control Act, 15 U.S.C. Section 2601 ET SEQ.; the
Occupational Safety & Health Act of 1970, 29 U.S.C. Section 651 ET SEQ.; the
Oil Pollution Act of 1990, 33 U.S.C. Section 2701 ET SEQ.; and the state
analogies thereto, all as amended or superseded from time to time, on or
before, but not after, the date of Closing.
"RELEASE" shall mean any spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching, dumping or
disposing of a Hazardous Material into the environment.
4.15 ABSENCE OF AGREEMENTS. The Company is not a party to any
agreement, order, directive, memorandum of understanding or similar
arrangement that restricts materially the conduct of the Company, except for
those the existence of which has been disclosed in writing to Buyer prior to
the date of this Agreement, nor has the Company been advised, that any person
or governmental authority is contemplating issuing or requesting any such
agreement, order, directive, memorandum of understanding or similar
arrangement.
4.16 TAXES.
(a) Seller and the Company have duly and timely filed all
tax returns, reports or statements (including information statements) ("TAX
RETURNS") with respect to the Company or any affiliated, combined,
consolidated, unitary or similar group of which the Company is or was a
member (a "RELEVANT GROUP"), which are required to have been filed with
respect to all federal, state, local or foreign net or gross income, gross
receipts, net proceeds, sales, use, AD VALOREM, transfer, value added,
franchise, withholding, payroll, employment, disability, excise, property,
alternative or add-on minimum, environmental or other taxes, assessments,
duties, fees, levies or other governmental charges of any nature whatever,
except to the extent in dispute and set forth in the Disclosure Schedule at
SECTION 4.16, together with any interest, penalties, additions to tax or
additional amounts with respect thereto ("TAXES"); and each such Tax Return
correctly and completely reflects the Tax liability and other information
required to be reported thereon. All Taxes due and payable by the Company or
Seller, and all Taxes shown on the Tax Returns, have been paid.
(b) The Company has properly and fully accrued unpaid Taxes
in its Financial Statements for the respective periods covered thereby. As
of the Closing Date, the unpaid Taxes of the Company shall not exceed such
provisions as adjusted for the passage of time through the Closing Date by
any material amount.
(c) Neither the Company nor Seller is a party to any
agreement extending the time within which to file any Tax Return. To
Seller's knowledge, no claim has been made by a jurisdiction in which the
Company does not file Tax Returns that the Company is or may be subject to
taxation by that jurisdiction.
12
<PAGE>
(d) The Company has not waived any statute of limitations in
respect of Taxes or agreed to any extension of time with respect to a Tax
assessment or deficiency.
(e) Neither Seller nor the Company have received any written
ruling related to Taxes of the Company or entered into any written and
legally binding agreement with any governmental agency, board, bureau, body,
department or authority of any United States federal, state or local
jurisdiction or any foreign jurisdiction, having or purporting to exercise
jurisdiction with respect to any Tax (a "TAXING AUTHORITY") relating to Taxes
of the Company.
(f) The Company has withheld and paid all Taxes required to
have been withheld and paid in connection with amounts paid or owing to any
employee, former employee, creditor, independent contractor, shareholder,
customer, affiliate, supplier or other third party.
(g) Seller has not been notified by any Taxing Authority of
an intent to assess additional Taxes against or in respect of the Company for
any past period. To the knowledge of Seller and the Company, there is no
dispute or claim concerning any Taxes of the Company or the Seller (as
relating to the Company) either (i) claimed or raised by any Taxing Authority
or (ii) otherwise known to Seller.
4.17 INSURANCE. SECTION 4.17 of the Disclosure Schedule lists all
policies of insurance of the Company currently in effect. Each policy listed
on such schedule is valid and in full force and effect. The Company has no
liability for unpaid premiums or premium adjustments not properly reflected
on the applicable financial statements.
4.18 MATERIAL CONTRACTS. Except as included as exhibits in Seller
Reports, the Company is not a party to or obligated under any material
contract, agreement or other instrument or understanding that is not
terminable by the Company without additional payment or penalty within 90
days.
4.19 SUBSTANTIAL CUSTOMERS AND SUPPLIERS. SECTION 4.19 of the
Disclosure Schedule lists the 5 largest customers or clients of the Company
on the basis of revenues for goods sold or services provided in the fiscal
year ended 1997 and the 10 largest customers or clients in the fiscal year
ended 1998. SECTION 4.19 of the Disclosure Schedule lists the 10 largest
suppliers of the Company on the basis of cost of goods or services purchased
in the fiscal years ended 1996, 1997 and 1998. For each such customer or
supplier set forth on such Schedule, a copy of such supplier or customer
contract, agreement or understanding with the Company or Seller has been
delivered to Buyer prior to execution of this Agreement. No such customer,
client or supplier has ceased or materially reduced its purchases from or
sales or provision of services to the Company since December 31, 1998, or to
the knowledge of the Company or Seller, has threatened to cease or materially
reduce such purchases or sales or provision of services after the date of
this Agreement. Except for deposits or other non-material amounts paid in
the ordinary course of business consistent with past practice, the Company
has not accepted any prepayment of any sales price or fee or license fee from
any client or customer that relates to products not yet delivered or services
not yet performed by Seller.
13
<PAGE>
4.20 INTELLECTUAL PROPERTY.
(a) The Company owns all right, title and interest in or
possesses adequate licenses or other rights to use (i) all discoveries and
inventions (whether patentable or unpatentable and whether or not reduced to
practice), all improvements thereto, and all patents, patent applications
(either filed or in preparation for filing), and patent disclosures, together
with all reissuances, continuations, continuations-in-part, revisions,
extensions and reexaminations thereof, (ii) all trademarks, service marks,
trade dress, brand names, logos, trade names, Internet domain names, and
corporate names, together with all translations, adaptations, derivations and
combinations thereof and including all goodwill associated therewith, and all
applications (either filed or in preparation for filing), registrations and
renewals in connection therewith, (iii) all copyrightable works, all
copyrights and all applications (either filed or in preparation for filing),
registrations and renewals in connection therewith, (iv) all trade secrets
and confidential business information (including ideas, research and
development, know-how, formulas, compositions, recipes, manufacturing and
production processes and techniques, technical data, designs, drawings,
specifications, customer and supplier lists, pricing and cost information and
business and marketing plans and proposals), (v) all computer software
(including source code, data and related documentation), (vi) all other
proprietary rights, (vii) all copies and tangible embodiments of all the
foregoing (in whatever form or medium) ("INTELLECTUAL PROPERTY") used in or
material to conduct the business of the Company without conflict with the
rights of others. Disclosure Schedule SECTION 4.20(a) sets forth a
description of (i) all Intellectual Property currently owned by or licensed
to the Company and (ii) all licenses, royalties, assignments and other
similar agreements relating to the foregoing to which the Company is a party
and all agreements relating to technology, know-how or processes that the
Company is licensed or authorized to use by others, or which it licenses or
authorizes others to use, and which the Company uses (the "INTELLECTUAL
PROPERTY AGREEMENTS"). No other Intellectual Property is used in or material
to the conduct of the business of the Company.
(b) The Intellectual Property does not infringe or violate
the intellectual property or contractual rights of any third parties in any
country where the Company does business; to Seller's knowledge, no claim has
been asserted or threatened by any person to the ownership of or right to use
any Intellectual Property or challenging or questioning the validity or
effectiveness of any such license or agreement, and neither the Company nor
Seller has knowledge of a valid basis for any such claim; the Company and
Seller have no knowledge of any claim that any product, activity or operation
of the Company infringes upon or involves, or has resulted in the
infringement of, any intellectual property rights of any other person, and no
proceedings have been instituted, are pending or, to the best of the
knowledge of the Company and Seller, are threatened which challenge the
rights of the Company with respect thereto, and neither the Company nor
Seller has knowledge of a valid basis for any such claim.
(c) To Seller's knowledge, no Intellectual Property is being
infringed by any third party; no action has been asserted or threatened that
any Intellectual Property is being infringed by any third party.
(d) All of the registrations and applications set forth in
Disclosure Schedule SECTION 4.20(d) are in full force and effect and all
necessary registration, maintenance and renewal
14
<PAGE>
fees in connection therewith have been made and all necessary documents and
certificates in connection therewith have been filed with the relevant
patent, copyright, trademark or other authority in the United States or
foreign jurisdictions, as the case may be, for the purpose of maintaining the
registrations or applications for registration of such Intellectual Property
or updating record title thereto, except where such events, either
individually or in the aggregate, would not, or be reasonably likely to, have
a Material Adverse Effect on the Company.
(e) All of the Intellectual Property is, or will be as of
Closing, free and clear of any and all Liens. There are no restrictions on
the direct or indirect transfer of the Intellectual Property, except as
disclosed in any agreements licensing such Intellectual Property to the
Company.
(f) The Intellectual Property Agreements are valid and
binding and in full force and effect, and true and correct copies have been
provided to the Buyer; Seller has not granted any license, agreement or other
permission to use such Intellectual Property except as disclosed on
Disclosure Schedule SECTION 4.20(f); the consummation of the transactions
contemplated by this Agreement will not violate nor result in the breach,
modification, cancellation, termination or suspension of the Intellectual
Property Agreements, and Seller is in compliance with, and has not breached
any term of, any Intellectual Property Agreement, and, to the knowledge of
Seller, all of the other parties to such Intellectual Property Agreements are
in compliance with, and have not breached, any of the terms thereof; there is
no dispute between Seller and any other party to any Intellectual Property
Agreement regarding the scope of the license or performance under any
applicable Intellectual Property Agreement, including with respect to any
payments to be made by the Seller thereunder, except where such events,
either individually or in the aggregate, would not have, or be reasonably
likely to have, a Material Adverse Effect on the Company.
(g) Seller has made available to Buyer prior to the
execution of this Agreement any available documentation with respect to any
invention, process, design, computer software and program or other know-how
or trade secret or proprietary information included in such Intellectual
Property, which documentation, if any, is accurate in all material respects
and reasonably sufficient in detail and content to identify and explain such
invention, process, design, computer software and programs or other know-how
or trade secret or proprietary information. Seller has taken reasonable
security measures to protect the secrecy, confidentiality and value of their
trade secrets and proprietary information (including the reasonable
enforcement by Seller of a policy requiring each employee or contractor to
execute proprietary information and confidentiality agreements in
substantially Seller's standard form, and to Seller's knowledge all current
and former employees and contractors of Seller have executed such an
agreement).
4.21 YEAR 2000 REPRESENTATION. No technology owned, developed or
licensed by the Company or used in connection with the business (including,
but not limited to, information systems and technology, commercial and
noncommercial hardware and software, firmware, mechanical or electrical
products, embedded systems, or any other electro-mechanical or
processor-based system, whether as part of a desktop system, office system,
building system or otherwise) (collectively, the "TECHNOLOGY") will
experience any malfunctions, premature cancellation or expiration of
contractual rights or deletion of data, or any other problems in connection
with (i) the year 2000 (and all subsequent years) as distinguished from 1900
years, (ii) the date February 29, 2000, and all
15
<PAGE>
subsequent leap years, and (iii) the date September 9, 1999, except where
such problems, either individually or in the aggregate, would not have a
Material Adverse Effect on the Company.
4.22 REAL PROPERTY. SECTION 4.22 of the Disclosure Schedule lists
those parcels of real property used, occupied or operated by the Company (the
"REAL PROPERTY") and all leases, including capitalized leases, for real
property used by the Company (the "REAL PROPERTY LEASES"). The Real Property
and Real Property Leases are the only property of similar type used by the
Company. The Company owns the Real Property in fee subject to no Liens,
except for those set forth in SECTION 4.22 of the Disclosure Schedule. The
Company's interest in the Real Property Leases is subject to no Liens, except
for those set forth in SECTION 4.22 of the Disclosure Schedule. True and
correct copies of the Real Property Leases have been delivered or made
available to Buyer by the Company. Subject to the terms of the respective
Real Property Leases, the Company has a valid and subsisting leasehold estate
in and the right to quiet enjoyment to the property subject thereto for the
full term of the respective Real Property Lease. The Real Property Leases
are in full force and effect adequate and suitable for the conduct of the
business of the Company and are enforceable in accordance with their
respective terms, except as such enforceability may be subject to or limited
by bankruptcy, insolvency, reorganization or other similar Laws, now or
hereafter in effect, affecting the enforcement of creditors' rights
generally. The Company has not assigned, pledged, mortgaged, hypothecated or
otherwise transferred any Real Property Lease. The Company has not sublet
all or any portion of any Leased Real Property. The Company has not received
any written notice of default under any Real Property Lease, and to the
Company's knowledge there is no material default by any tenant or landlord
under any Real Property Lease, and no event has occurred or failed to occur
which, with the giving of notice or the passage of time, or both, would
constitute a material default under any Real Property Lease. No portion of
any parcel of Real Property or real property subject to a Real Property Lease
is located in an area designated as a flood zone by any governmental entity,
except to the extent such property is adequately insured by a policy of flood
insurance. The buildings, structures, facilities, fixtures and other
improvements located on the Real Property and the Real Property are adequate
and suitable for the conduct of the business of the Company and are in good
working order and condition, ordinary wear and tear excepted.
4.23 DISCLOSURE. No representation or warranty of the Company
contained in this Agreement, and no statement contained in the Disclosure
Schedule or in any certificate, list or other writing furnished to Buyer
pursuant to any provision of this Agreement contains any untrue statement of
a material fact or omits to state a material fact necessary in order to make
the statements herein or therein, in light of the circumstances under which
they were made, not misleading.
4.24 SUBSIDIARIES. The Company does not have any subsidiaries and
the Company does not control, directly or indirectly, and does not hold any
direct or indirect equity investment or participation in, any corporation,
partnership, trust or other business association.
4.25 MATERIAL ADVERSE EFFECT. Since December 31, 1998 there has
been no Material Adverse Effect with respect to the Company.
16
<PAGE>
ARTICLE V
BUYER REPRESENTATIONS AND WARRANTIES
Except as set forth in the Disclosure Schedule delivered by Buyer to
the Company and Seller attached to this Agreement (the "BUYER DISCLOSURE
SCHEDULE"), which Buyer Disclosure Schedule shall reference disclosure items
by section, Buyer represents and warrants to the Company and Seller as
follows:
5.1 ORGANIZATION; APPROVALS. Buyer is a corporation validly
existing and in good standing under the Canada Company Corporations Act.
Buyer has the requisite corporate power and authority and is in possession of
all franchises, grants, authorizations, licenses, permits, easements,
consents, certificates, approvals and orders ("BUYER APPROVALS") necessary to
own, lease and operate its properties and to carry on its business as it is
now being conducted, and Buyer has not received any notice of proceedings
relating to the revocation or modification of any Buyer Approvals, except
where the failure to be so organized, existing and in good standing or to
have such power, authority, Buyer Approvals and revocations or modifications
would not, individually or in the aggregate, have a Material Adverse Effect
with respect to Buyer.
5.2 AUTHORITY. Buyer has the requisite corporate power and
authority to execute and deliver this Agreement, to perform its obligations
under this Agreement and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement by Buyer, the issuance of the
warrants and the consummation by Buyer of the transaction contemplated hereby
have been duly and validly authorized by all necessary corporate action and
no other corporate proceedings on the part of Buyer are necessary to
authorize this Agreement or to consummate the transaction contemplated
hereby. This Agreement has been duly executed and delivered by, and
constitutes a valid and binding obligation of, Buyer and, assuming due
authorization, execution and delivery by the Company and Seller, is
enforceable against Buyer in accordance with its terms, except as enforcement
may be limited by general principles of equity whether applied in a court of
law or a court of equity and by bankruptcy, insolvency and similar laws
affecting creditors' rights and remedies generally.
5.3 NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) The execution and delivery of this Agreement by Buyer
does not, and the performance of this Agreement and the transaction
contemplated hereby by Buyer shall not, (i) conflict with or violate the
charter documents of Buyer, (ii) conflict with or violate any Laws applicable
to Buyer or by which it or any of its properties are bound or affected, or
(iii) result in any breach of or constitute a default (or an event that with
notice or lapse of time or both would become a default) under, or give to
others any rights of termination, amendment, acceleration or cancellation of,
or result in the creation of a Lien on any of the properties or assets of
Buyer pursuant to any note, bond, mortgage, indenture, contract, agreement,
lease, license, permit, franchise or other instrument or obligation to which
Buyer is a party or by which it or any of its properties is bound or
affected, except in the case of clauses (ii) and (iii) for any such
conflicts, violations, breaches, defaults or other occurrences that
individually or in the aggregate, would not have a Material Adverse Effect
with respect to Buyer.
17
<PAGE>
(b) The execution and delivery of this Agreement by Buyer
does not, and the performance of this Agreement by Buyer shall not, require
any consent, approval, authorization or permit of, or filing with or
notification to any governmental or regulatory authority or any third party
except for applicable requirements, if any, of the Securities Act, the
Exchange Act, the Blue Sky Laws, the HSR Act, and filing of other documents
as required by applicable law, applicable transfer tax filings and where the
failure to obtain such consents, approvals, authorizations or permits would
not prevent or delay consummation of the transaction contemplated hereby or
otherwise prevent Buyer from performing its obligations under this Agreement
and would not have, or be reasonably likely to have, a Material Adverse
Effect with respect to Buyer.
5.4 ABSENCE OF LITIGATION. Buyer is not a party to any, and there
are no pending or, to the knowledge of Buyer, threatened, legal,
administrative, arbitral or other proceedings, claims, actions or
governmental or regulatory investigations of any nature against Buyer
challenging the validity or propriety of the transactions contemplated by
this Agreement which if unfavorably determined would prevent the consummation
of the transaction contemplated hereby.
5.5 BROKERS. No broker, finder or investment banker is entitled to
any brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by
or on behalf of Buyer, except as provided in that certain letter agreement
between Buyer and Downer & Company L.L.C. regarding such fees, which fees are
the sole responsibility of, and are to be paid by, Buyer.
5.6 DISCLOSURE. No representation or warranty of Buyer contained
in this Agreement, and no statement contained in Buyer Disclosure Schedule or
in any certificate, list or other writing furnished to the Company or Seller
pursuant to any provision of this Agreement contains any untrue statement of
a material fact or omits to state a material fact necessary in order to make
the statements herein or therein, in light of the circumstances under which
they were made, not misleading.
5.7 HOLDING OF COMPANY SHARES. Buyer is not acquiring the Company
Shares with an intention to distribute or transfer such Company Shares to
another person.
ARTICLE VI
CERTAIN COVENANTS
6.1 AFFIRMATIVE COVENANTS. Seller covenants and agrees with Buyer
that from and after the date of this Agreement and prior to the Closing Date,
unless the prior written consent of Buyer shall have been obtained and except
as otherwise contemplated herein, that Seller shall cause the Company to:
(a) operate its business only in the ordinary course
consistent with past practices;
(b) use reasonable efforts to preserve intact its business
organization and assets, maintain its rights and franchises, retain the
services of its officers and key employees and maintain its relationships
with customers;
18
<PAGE>
(c) use reasonable efforts to maintain and keep its
properties in good repair and condition, ordinary wear and tear excepted;
(d) use reasonable efforts to keep in full force and effect
insurance and bonds comparable in amount and scope of coverage to that now
maintained by it;
(e) perform in all material respects all obligations
required to be performed by it under all material contracts, leases and
documents relating to or affecting the Company;
(f) maintain its books and records in the usual, regular or
ordinary manner consistent with past practice and provide Buyer access to
such materials at a reasonable time and place as Buyer and the Company may
agree;
(g) use reasonable efforts to obtain all authorizations,
consents, orders and approvals from all governmental or regulatory
authorities that may be or become necessary for its execution and delivery of
and the performance of its obligations under this Agreement;
(h) take such reasonable action as shall be required to
fulfill any and all contractual or statutory obligations the Company may have
to any unions or labor organizations or otherwise as a result of or relating
to the execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby;
(i) take reasonable actions required pursuant to the terms
of any indentures, credit agreements, contracts or other agreements to
address the consequences of the transactions contemplated by this Agreement,
and to obtain the necessary consents and required releases pursuant to such
indentures, credit agreements, contracts or agreements;
(j) Seller shall deliver to Buyer all documents and
information resulting from or relating to (i) all third party claims relating
to, resulting from or arising out of that incident that occurred on or about
December 4, 1998, involving the explosion and actual or potential Release of
materials from, in, on, under or at the Company's Brighton, Colorado facility
(hereinafter the "INCIDENT") and (ii) all policies of insurance and relevant
correspondence regarding claims asserted under such policies or otherwise
that may cover or be applicable to such claims;
(k) use its best efforts to secure from Heller Financial,
Inc. releases of the security interests recorded against Company's trademark
registrations and patents at the U.S. Patent and Trademark Office ("PTO"),
record such releases at the PTO and provide to Buyer copies and proof of such
releases and recordals; and
(l) use its best efforts to secure from Unisource Brands,
Inc. an assignment from Paper Corporation of America to Unisource Worldwide,
Inc. of the trademark registrations for FLASH-TITE, GLASS-PAK, GREY CORE,
STRES-FLEX and STRES-PRUF, record such assignment at the PTO and provide to
Buyer copies and proof of such assignment and recordal.
19
<PAGE>
6.2 NEGATIVE COVENANTS. Except as specifically contemplated by
this Agreement, from the date of this Agreement until the Closing Date, the
Seller shall cause the Company not to, without the prior written consent of
Buyer, do any of the following:
(a) except as required by applicable Law or to maintain
qualification pursuant to the Code, adopt, amend, renew or terminate any Plan
or any agreement, arrangement, plan or policy between the Company and one or
more of the Company's current or former directors, officers or employees, or
except for normal increases in the ordinary course of business consistent
with past practice or except as required by applicable Law, increase in any
manner the base salary, bonus incentive compensation or fringe benefits of
any director, officer or employee or pay any benefit not required by any Plan
or agreement as in effect as of the date of this Agreement (including without
limitation the granting of stock options, stock appreciation rights,
restricted stock, restricted stock units or performance units or shares);
(b) declare or pay any dividend on, or make any other
distribution in respect of, the Company's outstanding shares of capital stock;
(c) (i) redeem, purchase or otherwise acquire any shares of
the Company's capital stock or any securities or obligations convertible
into or exchangeable for any shares of the Company's capital stock, or any
options, warrants, conversion or other rights to acquire any shares of the
Company's capital stock or any such securities or obligations; (ii) merge
with or into any other corporation, permit any other corporation to merge
into the Company or consolidate with any other corporation, or effect any
reorganization or recapitalization; (iii) purchase or otherwise acquire any
substantial portion of the assets, or of any class of stock, of any
corporation; (iv) liquidate, sell, dispose of, or encumber any assets or
acquire any assets, other than in the ordinary course of the Company's
business consistent with past practice; or (v) split, combine or reclassify
any of its capital stock or issue or authorize or propose the issuance of any
other securities in respect of, in lieu of or in substitution for shares of
the Company's capital stock;
(d) issue, deliver, award, grant or sell, or authorize or
propose the issuance, delivery, award, grant or sale of, any shares of any
class of capital stock of the Company (including shares held in treasury) or
any rights, warrants or options to acquire, any such shares, other than the
issuance of the Company's common stock issuable upon exercise of employee or
director stock options outstanding as of the date of this Agreement or
pursuant to the Company's Plans, in effect as of the date of this Agreement;
(e) propose or adopt any amendments to the Company
Certificate and Bylaws in any way adverse to Buyer;
(f) change any of its methods of accounting in effect at
December 31, 1998 or change any of its methods of reporting income or
deductions for federal income tax purposes from those employed in the
preparation of the federal income tax returns for the taxable year ended
December 31, 1998, except as may be required by Law or GAAP;
20
<PAGE>
(g) change in any material respect any material policies
concerning the Company, except as required by Law, including without
limitation: (i) sell, assign, transfer, pledge, mortgage or otherwise
encumber any of its assets, except for those sales, assignments, transfers,
pledges, mortgages and encumbrances (A) currently existing or provided for in
existing agreements, (B) incurred in individual amounts of less than $75,000
and in an aggregate amount of no more than $750,000 or (C) incurred in the
ordinary course of business consistent with past practice; (ii) enter into
any agreement with respect to any acquisition of a material amount of assets
or any discharge, waiver, satisfaction, release or relinquishment of any
material contract rights, liens, encumbrances, debt or claims, not in the
ordinary course of business and consistent with past practices; (iii) settle
any claim, action, suit, litigation, proceeding, arbitration, investigation
or controversy of any kind, for any amount in excess of $75,000, net of any
insurance proceeds, that would restrict in any material respect the Company;
(iv) make any capital expenditure in excess of $500,000, except in the
ordinary course and consistent with past practice; (v) make any investment of
more than $100,000; or (vi) take any action or fail to take any action which
individually or in the aggregate could reasonably be expected to have a
Material Adverse Effect with respect to the Company; PROVIDED, HOWEVER,
nothing in this Section shall prevent Seller or Company from eliminating
intercompany assets and liabilities prior to Closing; and
(h) agree in writing or otherwise to do any of the foregoing.
6.3 EXCLUSIVITY. For the period commencing on the date hereof and
ending on the earlier of the termination of this Agreement, the date
specified in SECTION 10.1(e) or the Closing (the "EXCLUSIVITY PERIOD"),
except for discussions with Buyer and its representatives, neither Seller nor
the Company will, directly or indirectly through any director, officer,
shareholder, employee, agent, adviser or otherwise, orally or in writing,
initiate, solicit, encourage, respond to, discuss, negotiate or accept any
inquiries, indications of interest, proposals or offers from, or make any
inquiries, indications of interest, proposals, offers, counter proposals or
counteroffers to, or furnish any information to, any other person with
respect to (i) an acquisition of shares of the Company, (ii) additional
equity or convertible debt financing for the Company, (iii) an acquisition of
all or a substantial part of the assets of the Company, or (iv) a merger,
consolidation or any other transaction which would result in a change in
control in the Company or a substantial change in the business of the
Company. Further, during such Exclusivity Period Seller will promptly
forward to Buyer any expressions of interest or other communications or
inquiries received by it in any such regard. During the Exclusivity Period,
Seller will make the books, records and management of the Company and
management of Seller available to Buyer and its representatives for
transition purposes.
In addition, during the Exclusivity Period, Buyer agrees that it will
not, except for discussions with Seller and its representatives, directly or
indirectly through any director, officer, shareholder, employee, agent,
adviser or otherwise, orally or in writing, initiate, solicit, encourage,
respond to, discuss, negotiate or make any inquiries, indications of
interest, proposals, offers, counter proposals or counteroffers to, or
furnish any information to, any other person with respect to a material
transaction with or in respect of such person.
21
<PAGE>
6.4 ACCESS AND INFORMATION.
(a) From the date of this Agreement until the Closing Date
and upon reasonable notice, and subject to applicable Law relating to the
exchange of information, Seller shall afford, and shall cause the Company to
afford, to Buyer's officers, employees, accountants, legal counsel and other
representatives, access during normal business hours to all the properties,
books, contracts, commitments and records relating to the Company, but
excluding any books, contracts, commitments and records in any way related to
the sale of the Company.
(b) From the date of this Agreement and until the Closing
Date, Seller shall cause the Company to, or shall itself, furnish promptly to
Buyer (i) a copy of each nonconfidential filing made by Seller with the
Securities and Exchange Commission (the "SEC"), under the HSR Act or under
any other applicable Laws promptly after such documents are available, (ii) a
copy of each Tax Return filed by Seller for the three most recent years
available with respect to or containing information pertaining to the
Company, a copy of any correspondence received from the IRS or any other
governmental entity or taxing authority or agency and any other
correspondence relating to Taxes payable with respect to the Company, and
(iii) all other information concerning the Company as Buyer may reasonably
request, other than in each case reports or documents which neither the
Company nor Seller is permitted to disclose under applicable Law or binding
agreement entered into prior to the date of this Agreement. The parties will
make appropriate substitute disclosure arrangements under circumstances in
which the restrictions of the preceding sentence apply.
(c) Unless otherwise required by Law, the parties will hold
any such information which is nonpublic in confidence until such time as such
information becomes publicly available through no wrongful act of either
party, and in the event of termination of this Agreement for any reason each
party shall promptly return all nonpublic documents obtained from any other
party, and any copies made of such documents, to such other party or destroy
such documents and copies. From the date hereof until the earlier of the
Closing Date or the termination of this Agreement, and subject to the other
provisions of this Agreement, the parties agree that they will take no
actions outside of the ordinary course of business to harm the value of the
business conducted by the Company; provided, however, that this limitation
shall not limit the ability of the parties to engage in normal competition
with each other (including, to the extent applicable, effecting price
adjustments to their respective products).
6.5 UPDATE DISCLOSURE; BREACHES.
(a) From and after the date of this Agreement until the
Closing Date, the parties shall update their respective Disclosure Schedules
by written notice to the other party to reflect any matters which have
occurred from and after the date of this Agreement which, if existing on the
date of this Agreement, would have been required to be described therein;
provided that (i) to the extent that any information that would be required
to be included in an update under this Section would have in the past been
contained in internal reports prepared in the ordinary course, such update
may occur by delivery of such internal reports prepared in accordance with
past practice, and (ii) to the extent that updating required under this
Section is unduly burdensome, Seller and Buyer will use
22
<PAGE>
their best efforts to develop alternate updating procedures utilizing,
wherever possible, existing reporting systems.
(b) Each party shall, in the event it becomes aware of the
impending or threatened occurrence of any event or condition which would
cause or constitute a material breach (or would have caused or constituted a
material breach had such event occurred or been known prior to the date of
this Agreement) of any of its representations, warranties or agreements
contained or referred to herein, given prompt written notice thereof to the
other party and use its best efforts to prevent or promptly remedy the same.
6.6 EXPENSES. All Expenses (as defined below) incurred by Buyer,
on the one hand, and Seller and/or the Company, on the other hand, shall be
borne solely and entirely by Buyer, on the one hand, and Seller, on the other
hand. "EXPENSES" as used in this Agreement shall include all reasonable fees
and out-of-pocket expenses (including without limitation all fees and
expenses of counsel, accountants, investment bankers, experts and consultants
to the party and its affiliates) incurred by a party or on its behalf in
connection with or related to the authorization, preparation and execution of
this Agreement, the solicitation of stockholder approvals and all other
matters related to the closing of the transactions contemplated hereby.
Seller shall be liable for and assume and pay the broker's fees to Schroder &
Co. Inc. and Buyer shall be liable for and shall assume and pay the broker's
fees of Downer & Company LLC.
6.7 RETENTION OF RECORDS. Buyer shall retain all books and records
of the Company that Buyer receives from the Company for a period of six years
following the Closing Date. After the Closing, Seller and its
representatives shall have reasonable access to all such books and records
during normal business hours. In addition, Buyer shall upon reasonable
request furnish to Seller, at Seller's expense, copies of any such books or
records.
ARTICLE VII
ADDITIONAL AGREEMENTS
7.1 APPROPRIATE ACTION; CONSENTS; FILINGS. The parties shall use
reasonable efforts to (i) do all things appropriate, necessary, proper or
advisable under applicable Law to consummate and make effective the
transactions contemplated by this Agreement, (ii) obtain all consents,
licenses, permits, waivers, approvals, authorizations or orders required
under Law in connection with the authorization, execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby
and (iii) make all necessary filings, and thereafter make any other required
submissions, with respect to this Agreement required under the Securities Act
and the Exchange Act and the rules and regulations thereunder, any other
applicable federal or state securities laws and any other applicable Law;
provided that, Buyer and the Company shall cooperate with each other in
connection with the making of all such filings that relate specifically to
the transaction contemplated by this Agreement, including providing copies of
all such documents to the non-filing party and its advisors prior to filing
and, if requested, to accept all reasonable additions, deletions or changes
suggested in connection therewith.
23
<PAGE>
7.2 EMPLOYEE BENEFIT MATTERS.
(a) RETENTION OF LIABILITY. Effective as of the Closing,
the Company shall cease to participate in all Plans maintained or sponsored
by Seller or any of its affiliates other than the Company and shall continue
to sponsor all Plans sponsored and maintained exclusively for employees and
former employees of the Company. Seller promptly after receiving written
notice from Buyer (or one of its affiliates) shall reimburse Buyer (or one of
its affiliates) for all costs (including payroll taxes) relating to the
provision of any severance benefits or payments made to Transferred Employees
(as hereinafter defined), up to a maximum reimbursement, when combined with
any reimbursement of severance pursuant to Section 6.2(b) of the Asset
Purchase Agreement, of $700,000.00. In addition, Seller shall be responsible
for all claims for workers compensation benefits for all current and former
employees of the Company with respect to all work-related injuries which
occurred prior to the Closing, provided Buyer notifies Seller (directed to
the attention of Craig Jennings) within three (3) business days of any report
of such injury to Buyer by the employees. Seller shall assume all
responsibility for any and all liabilities for all payments and benefits
under the Key Employee Retention Plan. Seller shall also be responsible for
any long-term or short-term disability benefits payable under the Spinnaker
Industries Short Term and Long Term Disability Plans, to the extent such
benefits are insured, the disability began or is found to have begun prior to
the Closing Date, the disability claim was filed prior to the second
anniversary of the Closing Date, and the disability claim was not filed by a
former employee after such employee was involuntarily terminated from
employment by the Buyer (or one of its affiliates). Seller shall cooperate
with Buyer in effecting an assignment to Buyer of any policies or insurance
for the provision of health or welfare benefits if requested by Buyer.
(b) FLEXIBLE BENEFIT PLAN. On the Closing Date, Buyer (or
one of its affiliates) shall cause to be maintained (for a period at least
equal to the balance of the 1999 calendar year) for the benefit of all
employees of the Company employed as of the Closing Date (the "TRANSFERRED
EMPLOYEES") and all former employees of the Company for whom benefits are
being provided under the Spinnaker Industries Flexible Benefits Plan (the
"FLEX PLAN") as of the Closing Date (together with the Transferred Employees,
the "Flex Employees"), a plan substantially identical to the Flex Plan. As
soon as practicable thereafter, the Seller shall cause to be transferred to
the Buyer the credit or debit balances in the various spending accounts under
the Flex Plan for the Flex Employees. Following such transfer, Buyer (or one
of its affiliates) shall be responsible for all liabilities for all Flex
Employees under Buyer's Plan.
(c) 401(K) PLAN. On or as soon as practicable after the
Closing Date, Buyer (or one of its affiliates) shall cause to be maintained
for the benefit of the Transferred Employees and all former employees of the
Company for whom benefits are owing under the terms of the Spinnaker
Industries Affiliates' 401(k) Plan (the "COMPANY 401(k) PLAN") (together
referred to as the "401(k) EMPLOYEES"), a defined contribution plan intended
to be qualified under Section 401(k) of the Code ("BUYER'S 401(k) PLAN"). As
soon as practicable after the Closing Date, but in any event prior to the
transfer referred to herein, Buyer shall deliver to Seller a copy of the most
recent favorable determination letter for the Buyer's 401(k) Plan, or
evidence that such determination letter is not necessary, or evidence of an
application timely filed with the IRS for such a letter with respect to a
newly adopted plan. In addition, if the Buyer's 401(k) Plan is a newly
adopted plan for which a
24
<PAGE>
determination letter is necessary, Buyer shall make or cause to be made
timely any and all amendments requested by the IRS in order to ensure that
the Buyer's 401(k) Plan meets the requirements to ensure it receives a
favorable determination letter. As soon as practicable thereafter, the
Seller shall direct the trustee of the trust funding the Company 401(k) Plan
to transfer to the trustee of the trust funding the Buyer's 401(k) Plan the
aggregate individual account balances of the 401(k) Employees (whether or not
vested). Individual account balance shall be valued as of the date of
transfer, and the transfer shall be in cash or in kind, as determined by
Buyer, except that outstanding loan balances shall be transferred in the form
of notes or other documentation evidencing such loans. Prior to the date of
the transfer, the Seller or its affiliates shall have contributed all
contributions (including salary deferral and matching contributions)
attributable to service performed by the 401(k) Employees through the Closing
Date. Following such transfer, Buyer (or one of its affiliates) shall be
responsible for liabilities attributable to the 401(k) Employees under the
Buyer's 401(k) Plan. In the event that the Buyer fails to obtain a favorable
determination letter from the IRS in respect of the Buyer's 401(k) Plan, the
Buyer shall indemnify Seller, from and after the Closing Date, against, and
agrees to hold Seller harmless from, any and all damages incurred or suffered
by Seller as a result of the Buyer's failure to satisfy the requirements of
this SECTION 7.2(c).
(d) DEFINED BENEFIT PLAN ASSET TRANSFERS. As soon as
practicable (but in no event later than sixty (60) days) following the
Closing Date, Seller shall cause the trustee of the master trust funding the
Central Products Company Affiliated Employees' Pension Plan and the Central
Products Company Retirement Plan (collectively, the "Pension Plans") to
transfer, in accordance with the terms of the Pension Plans and the agreement
creating the master trust, the assets of each of the Pension Plans to a trust
(or trusts), qualifying under Section 501(a) of the Code, that is designated
by Buyer to hold the assets of the Pension Plans. Such assets shall be
transferred in cash or other marketable assets reasonably acceptable to Buyer
and shall only be transferred after Buyer provides Seller with a copy of the
agreement creating the Buyer's trust (or trusts) which is intended to be
qualified under Section 501(a) of the Code.
(e) NO RIGHTS. Nothing in this Section shall be construed
to give any employee or former employee of the Company (or any beneficiary
thereof) any rights of any kind, including any right to employment or
continued employment with the Company or the right to any particular terms of
employment, nor shall anything contained in this Section be construed to
prevent the Company or any of its affiliates from terminating or modifying
any benefit plan that they may establish or maintain.
7.3 NOTIFICATION OF CERTAIN MATTERS. Seller and the Company shall
give prompt notice to Buyer, and Buyer shall give prompt notice to Seller and
the Company, of (i) the occurrence or non-occurrence of any event, the
occurrence or nonoccurrence of which would be likely to cause any
representation or warranty contained in this Agreement to be untrue or
inaccurate and (ii) any failure of Seller or the Company or Buyer, as the
case may be, to comply with or satisfy any covenant, condition or agreement
to be complied with or satisfied by it hereunder; PROVIDED, HOWEVER, that the
delivery of any notice pursuant to this Section shall not limit or otherwise
affect the remedies available hereunder to the party receiving such notice.
25
<PAGE>
7.4 PUBLIC ANNOUNCEMENTS. Buyer and Seller shall consult with each
other before issuing any press release or otherwise making any public statements
with respect to the transaction contemplated hereby and shall not issue any such
press release or make any such public statement prior to such consultation,
except as may be required by Law or any listing agreement with or rule of the
National Association of Securities Dealers, Inc.
7.5 CUSTOMER RETENTION. To the extent permitted by law or applicable
regulation, Seller and the Company shall use reasonable efforts to assist Buyer
in its efforts to retain the Company's customers. Such efforts may include
making introductions of Buyer's employees to such customers, assisting in the
mailing of information prepared by Buyer and reasonably acceptable to Seller and
the Company, to such customers and actively participating in any "transitional"
marketing programs as the Buyer may reasonably request.
7.6 NON-COMPETITION.
(a) For a period commencing on the Closing Date and terminating
on the third anniversary thereof (the "PERIOD"), as an inducement to Buyer to
execute this Agreement and complete the transactions contemplated hereby, and in
order to preserve the goodwill associated with the Company, Seller will not
(1) engage in, continue in, participate in or have any interest in any sole
proprietorship, partnership, corporation or business that is engaged primarily
or in any material respect in the business of the manufacture, sale or
distribution of pressure sensitive and water activated tape and industrial
electrical tape serving either the retail or industrial end markets (the
"PROHIBITED BUSINESS") in North America (the "TERRITORY"), (2) consult with,
advise or assist in any way, whether or not for consideration, any corporation,
partnership, firm or other business organization which is now or becomes a
competitor of Buyer in any aspect with respect to the Prohibited Business,
including, but not limited to, with respect to the Prohibited Business,
advertising or otherwise endorsing the products of any such competitor,
soliciting customers or otherwise serving as an intermediary for any such
competition or engaging in any form of business transaction on other than an
arms'-length basis with any such competitor; or (3) unless Buyer has terminated
such employee, solicit for employment any employee of the Company, without the
prior consent of Buyer; PROVIDED, HOWEVER, that nothing herein shall be deemed
to prevent (i) Seller from acquiring through market purchases and owning, solely
as an investment, less than five percent of the equity securities of any class
of any issuer whose shares are registered under Section 12(b) or 12(g) of the
Exchange Act, and are listed or admitted for trading on any United States
national securities exchange or are quoted on the Nasdaq National Market, or any
similar system of automated dissemination of quotations of securities prices in
common use, so long as Seller is not a member of any "control group" (within the
meaning of the rules and regulations of the United States Securities and
Exchange Commission) of any such issuer, (ii) any offer by Seller to employ a
person in the Prohibited Business (except as set forth in this Section); or
(iii) Seller from being acquired by a person engaged in any business in
competition with the Prohibited Business of the Company.
The parties agree that Buyer may sell, assign or otherwise
transfer this covenant not to compete, in whole or in part, to any person,
corporation, firm or entity that may hereafter own the Company Shares or
succeeds to the business. The parties further agree that the geographic scope
26
<PAGE>
of this covenant not to compete shall extend to any city, county or other
political subdivision of any country in the Territory, each of which is deemed
to be separately named herein. Recognizing the specialized nature of the
business transferred to Buyer and the scope of competition, the Company and
Seller each acknowledge the geographic scope of this covenant not to compete to
be reasonable. The parties intend that the covenant contained in this Section
shall be construed as a series of separate covenants, one for each city, county
or political subdivision of each country in the Territory, each of which is
deemed to be separately named herein, each for a series of one-year periods
within the Period. Except for geographic coverage and periods of effectiveness,
each such separate covenant shall be identical in terms. If in any judicial
proceeding a court shall refuse to enforce any of the separate covenants deemed
included in this Section, then such unenforceable covenant shall be deemed
eliminated for the purpose of that proceeding to the extent necessary to permit
the remaining separate covenants to be enforced.
In the event a court of competent jurisdiction determines that the
provisions of this covenant not to compete are excessively broad as to duration,
geographic scope or activity, it is expressly agreed that this covenant not to
compete shall be construed so that the remaining provisions shall not be
affected, but shall remain in full force and effect, and any such over broad
provisions shall be deemed, without further action on the part of any person, to
be modified, amended and/or limited, but only to the extent necessary to render
the same valid and enforceable in such jurisdiction.
(b) Seller and the Company each agree with Buyer that the
provisions and restrictions contained in this Section are necessary to protect
the legitimate continuing interests of Buyer in acquiring the Company, and that
any violation or breach of these provisions will result in irreparable injury to
Buyer for which a remedy at law would be inadequate. Seller and the Company
each agree with Buyer that in the event of a violation or breach and regardless
of any other provision contained in this Agreement, Buyer shall be entitled to
injunctive and other equitable relief, including without limitation specific
performance, as a court may grant after considering the intent of this Section,
and Buyer shall not be entitled to any other form of relief from such violation
or breach.
7.7 FURTHER TRANSFER MATTERS. Effective on the Closing Date, Seller
constitutes and appoints Buyer the true and lawful attorney-in-fact of the
Seller, with full power of substitution, in the name of the Seller, but on
behalf of and for the sole benefit of Buyer: (i) to demand and receive from
time to time any and all of the assets of the Company and to make endorsements
and give receipts and releases for and in respect of the same and any part
thereof, (ii) to institute, prosecute, compromise and settle any and all actions
or proceedings that Buyer may deem proper in order to collect, assert or enforce
any claim, right or title of any kind in or to the assets of the Company and
(iii) to do all such acts and things in relation to the matters set forth in the
preceding clauses (i) through (iii) as Buyer shall deem desirable. Seller
hereby acknowledges that the foregoing appointment made and the powers granted
are coupled with an interest and are not and shall not be revocable by it in any
manner or for any reason. At the Closing, Seller shall provide Buyer with a
written power of attorney in form and substance appropriate to carry out the
above.
27
<PAGE>
ARTICLE VIII
TAXES
8.1 TAX INDEMNIFICATION.
(a) From and after the Closing Date, to the extent a Tax (i) is
imposed on the Company for any Taxable period ending on or before the Closing
Date ("PRE-CLOSING PERIOD"), or (ii) is imposed on the Company and relating to
(A) the Seller or any affiliate (other than the Company), with respect to any
Tax period, (B) any Tax for the Pre-Closing Period for which the Company may be
liable under Section 1.1502-6 of the Treasury regulations (or any similar
provision of state, local or foreign law), as a transferee or successor or by
contract, Seller agrees to pay to the appropriate Taxing Authority the amount of
such Tax, plus any additional penalties and interest incurred in the payment of
such Tax, and to Buyer an amount sufficient to make such payments be on a
Grossed-Up Basis, each within the later of 30 days of receipt of notice of such
Tax or final resolution of any dispute relating to such Tax. If such Tax is
paid by Buyer or the Company, Seller agrees to reimburse the party paying such
Tax the amount of such Tax plus any additional penalties and interest incurred
in the payment of such Tax.
(b) From and after the Closing Date, to the extent a Tax
(other than a Tax described in the first sentence of SECTION 8.1(a)) (i) is
imposed on the Company for any Taxable period beginning after the Closing
Date ("POST-CLOSING PERIOD") or (ii) is imposed on the Seller or any of its
affiliates and relating to the Company for any Post-Closing Period, the Buyer
and the Company, jointly and severally, agree to pay the amount of such Tax,
plus any additional penalties and interest incurred in the payment of such
Tax, to the appropriate Taxing Authority within the later of 30 days of
receipt of notice of such Tax or final resolution of any dispute relating to
such Tax. If such Tax is paid by Seller, Buyer and the Company, jointly and
severally, agree to reimburse the Seller, on a Grossed-Up Basis, the amount
of such Tax plus any additional penalties and interest incurred in the
payment of such Tax.
(c) If Seller, Buyer or the Company receives notice of a Tax
properly payable under SECTIONS 8.1(a) and (b) by another party to this
Agreement (the "RESPONSIBLE PARTY"), then such recipient shall provide written
notice to the Responsible Party within 30 days of having received such notice.
(d) Seller shall pay all transfer, real property transfer,
stock transfer and other similar Taxes and fees ("TRANSFER TAXES") arising out
of or in connection with the transactions effected pursuant to this Agreement,
and shall indemnify, defend, and hold harmless Buyer, the Company and their
respective affiliates with respect to such Transfer Taxes. Seller shall file
all necessary documentation and Tax Returns with respect to such Transfer Taxes.
(e) No amounts of indemnity shall be payable as a result of a
claim under this Section unless and until the party seeking indemnity has
suffered, incurred, sustained or become subject to Taxes, interest or penalties
in excess of $25,000, in which case such party shall be entitled to seek
indemnity for all Taxes, interest or penalties in excess of such $25,000 amount.
28
<PAGE>
(f) All rights and obligations of the parties with respect to
indemnification under this Section shall survive for the applicable statute of
limitations (including any extensions) for the Tax for which such claim of
indemnification is based upon.
8.2 PREPARATION AND FILING OF TAX RETURNS.
(a) Seller shall file or cause to be filed all Tax Returns of,
or that include, the Company for all Pre-Closing Periods. Seller shall pay all
Tax liabilities shown by such Tax Returns to be due. In particular, Seller will
include the income of the Company for all Pre-Closing Periods on the
consolidated federal income Tax Returns of Seller and pay any federal income
Taxes attributable to such income. The Company will furnish Tax information to
Seller for inclusion in the consolidated federal income Tax Return of Seller for
the period that includes the Closing Date in accordance with the past customs
and practice of the Company. Seller will allow Buyer an opportunity to review
and comment upon such Tax Returns (including any amended Tax Returns) to the
extent that they relate to the Company and shall make such revisions to such Tax
Returns as are reasonably requested by Buyer.
(b) Buyer shall file or cause to be filed all Tax Returns of,
or that include, the Company for all Taxable periods ending on or after the
Closing Date. With respect to any Tax Return of the Company for a Taxable
period that begins on or before the Closing Date and ends after the Closing
Date, Buyer shall allow Seller an opportunity to review and comment upon such
Tax Returns and shall make such revisions to such Tax Returns as are reasonably
requested by Seller. Seller shall pay to Buyer within 15 days after the date on
which Taxes are paid with respect to such periods, an amount equal to the
portion of such Taxes which relates to the Pre-Closing Period. For purposes of
this SECTION 8.2, in the case of any Taxes that are imposed on a periodic basis
and are payable for a Taxable period that includes (but does not end on) the
Closing Date, the portion of such Tax which relates to the Pre-Closing Period
shall (x) in the case of any Taxes other than Taxes based upon or related to
income or receipts, be deemed to be the amount of such Tax for the entire
Taxable period multiplied by a fraction the numerator of which is the number of
days in the Taxable period ending on and including the Closing Date and the
denominator of which is the number of days in the entire Taxable period, and (y)
in the case of any Tax based upon or related to income or receipts be deemed
equal to the amount which would be payable if the relevant Taxable period ended
on the Closing Date. Any credits relating to a Taxable period that begins
before and ends after the Closing Date shall be taken into account as though the
relevant Taxable period ended on the Closing Date. All determinations necessary
to give effect to the foregoing allocations shall be made in a manner consistent
with prior practice of the Company.
Any refund of Taxes (including any interest thereon) that relates to the
Company and that is attributable to a Post-Closing Period, shall be the property
of the Company and shall be retained by the Company (or, if applicable, promptly
paid by Seller to the Company if any such refund is received by Seller or any of
its subsidiaries or affiliates). If after the Closing Date, the Company
receives a refund of any Tax (including any interest thereon) that relates to,
and that was previously paid by or on behalf of the Company and that is
attributable to a Pre-Closing Period and such Tax is not described in the
previous sentence, then the Company shall promptly pay or cause to be paid to
the Seller the amount of such refund together with any interest thereon. Any
refund of Taxes
29
<PAGE>
(including any interest thereon) that includes but does not end on the
Closing Date shall be allocated between the Pre-Closing Period and the
Post-Closing Period in accordance with SECTION 8.2(b).
8.3 TAX CONTESTS.
(a) If any Taxing Authority or other person asserts a claim
with respect to Taxes (a "TAX CLAIM"), then the party hereto first receiving
notice of such Tax Claim promptly shall provide written notice thereof to the
other party hereto; PROVIDED, HOWEVER, that the failure of a party to give such
prompt notice to other party shall not relieve such party failing to provide
such notice of any of its obligations under this Article, except to the extent
that the receiving party is irreparably prejudiced thereby. Such notice shall
specify n reasonable detail the basis for such Tax Claim and shall include a
copy of any relevant correspondence received from the Taxing Authority or other
person.
(b) If within 60 days after receiving a Tax Claim or written
notice of such a Tax Claim from the Buyer, Seller notifies the Buyer that Seller
desires to defend Buyer with respect to the Tax Claim, then Seller shall have
the right to defend or prosecute, at its sole cost, expense and risk, such Tax
Claim by all appropriate proceedings, which proceedings shall be defended or
prosecuted diligently by Seller; PROVIDED, HOWEVER, Seller shall not, without
the prior written consent of Buyer, enter into any compromise or settlement of
such Tax Claim that would result in any Tax detriment to any indemnitee; and
PROVIDED, FURTHER, that Buyer may, at the sole cost and expense of Buyer, at any
time prior to Seller's delivery of the notice referred to in the first sentence
of this SECTION 8.3(b) file any motion, answer or other pleadings or take any
other action that Buyer reasonably believes to be necessary or appropriate to
protect its interests. So long as Seller is defending or prosecuting a Tax
Claim, Buyer shall provide or cause to be provided to Seller any information
reasonably requested by Seller relating to such Tax Claim, and Buyer shall
otherwise cooperate with Seller and its representatives in good faith in order
to contest effectively such Tax Claim. Seller shall inform Buyer of all
developments and events relating to such Tax Claim (including, without
limitation, providing to Buyer copies of all written materials relating to such
Tax Claim), and Buyer or its authorized representatives shall be entitled, at
the expense of Buyer, to participate in but not control, all conferences,
meetings and proceedings relating to such Tax Claim.
(c) If Seller fails to notify Buyer within 60 days after
receiving a Tax Claim or a written notice of such Tax Claim from Buyer that
Seller desires to defend the Tax Claim pursuant to this SECTION 8.3 or, if after
delivery of such notice, Seller fails to reasonably defend or prosecute such Tax
Claim, then Buyer shall at any time thereafter have the right (but not the
obligation) to defend or prosecute, at the sole cost, expense and risk of Buyer,
such Tax Claim. Buyer shall have full control of such defense or prosecution
and such proceedings, including any settlement or compromise thereof. If
requested by Buyer, Seller shall cooperate in good faith with Buyer and its
authorized representatives in order to contest effectively such Tax Claim.
Seller may participate in, but not control, any defense, prosecution, settlement
or compromise of any Tax Claim controlled by Buyer pursuant to this SECTION
8.3(c), and shall bear its own costs and expenses with respect thereto.
(d) In the case of any Tax Claim that is defended or prosecuted
by Seller pursuant to this SECTION 8.3, Seller shall pay to the Buyer, on a
Grossed-Up Basis, the full amount of any Tax
30
<PAGE>
arising or resulting form such Tax Claim within 30 days after any final
determination of any Tax arising or resulting from such Tax Claim. In the
case of any Tax Claim that is defended or prosecuted by Buyer pursuant to
this SECTION 8.3, Seller shall pay to the Buyer, on a Grossed-Up Basis, the
full amount of any Tax arising or resulting from such Tax Claim, together
with any costs or expenses for investigating, defending or prosecuting a Tax
Claim including, without limitation, reasonable attorneys', accountants' and
experts' fees and disbursements, settlement costs, court costs and any
similar costs or expenses ("ASSOCIATED COSTS") that have not theretofore been
paid by Seller to Buyer, within 30 days after such final determination. In
the case of any Tax Claim not covered by the two preceding sentences, Seller
shall pay to the Buyer, on a Grossed-Up Basis, the full amount of any Tax
arising or resulting from such Tax Claim, together with any Associated Costs,
that have not theretofore been paid by Seller to Buyer, at least five
business days before the date payment of such Tax is due from the Seller or
the Buyer.
8.4 COOPERATION. Each party hereto shall, and shall cause its
subsidiaries and affiliates to, cooperate fully as and to the extent reasonably
requested by the other party in connection with filing any Tax Return, amended
Tax Return or claim for refund, or in conducting any audit, litigation or other
proceeding with respect to Taxes. Such cooperation and information shall
include providing copies of all relevant Tax Returns, together with relevant
accompanying schedules and relevant work papers, relevant documents relating to
rulings or other determinations by Taxing Authorities and relevant records
concerning the ownership and Tax basis of property, which any such party may
possess. Each party will retain all Tax Returns, schedules and work papers, and
all material records and other documents relating to Tax matters, of the Company
for the Tax period first ending after the Closing Date and for all prior Tax
periods until the later of (i) the expiration of the statute of limitations of
the Tax periods to which the Tax Returns and other documents relate or (ii)
eight years following the due date (without extension) for such Tax Returns.
Thereafter, the party holding such Tax Returns or other documents may dispose of
them; PROVIDED, that such party shall give to the other party the reasonable
written notice prior to doing so. Each party shall make its employees
reasonably available on a mutually convenient basis at its cost to provide
explanation of any documents or information so provided. Buyer and Seller
further agree, upon request, to use their best efforts to obtain any certificate
or other document from any governmental authority or any other person as may be
necessary to mitigate, reduce or eliminate any Tax that could be imposed
(including but not limited to, with respect to the transactions contemplated
hereby). Buyer and Seller further agree, upon request, to provide the other
party with all information that either party may be required to report pursuant
to Section 6043 of the Code.
8.5 TERMINATION OF TAX SHARING AGREEMENTS. Any and all Tax allocation
or sharing agreements or other agreements or arrangements relating to Tax
matters between the Company on the one hand and any affiliate of Seller on the
other hand shall be terminated with respect to the Company as of the day before
the Closing Date and, from and after the Closing Date, the Company shall not be
obligated to make any payment to any affiliate of Seller, Taxing Authority or
other person pursuant to any such agreement or arrangement for any past or
future period.
8.6 FIRPTA CERTIFICATES. Seller shall deliver to Buyer on the Closing
Date duly executed FIRPTA certificates in customary form.
31
<PAGE>
8.7 CONFLICT. In the event of a conflict between the provisions of
this Article and any other provision of this Agreement, the provisions of this
Article shall control.
8.8 SURVIVAL. All rights and obligations under this ARTICLE VIII
shall survive the Closing and continue until the expiration of the applicable
statute of limitations (including tollings and extensions thereto).
ARTICLE IX
CONDITIONS OF CLOSING
9.1 CONDITIONS TO OBLIGATIONS OF EACH PARTY. The respective
obligations of each party to effect the transactions contemplated hereby shall
be subject to the satisfaction at or prior to the Closing Date of the following
conditions:
(a) NO ORDER. No federal or state governmental or regulatory
authority or other agency or commission, or federal or state court of competent
jurisdiction, shall have enacted, issued, promulgated, enforced or entered any
statute, rule, regulation, executive order, decree, injunction or other order
(whether temporary, preliminary or permanent) which restricts, prevents or
prohibits consummation of the transactions contemplated by this Agreement.
(b) HART-SCOTT-RODINO ACT. Early termination shall have been
granted or applicable waiting periods shall have expired under the HSR Act.
(c) ASSET PURCHASE AGREEMENT. Subject to the provisions of
SECTION 10.2, the closing of the transactions contemplated by the Asset Purchase
Agreement shall occur simultaneously with the transactions contemplated hereby.
9.2 ADDITIONAL CONDITIONS TO OBLIGATIONS OF BUYER. The obligations of
Buyer to effect the transactions contemplated hereby are also subject to the
following conditions:
(a) REPRESENTATIONS AND WARRANTIES. Each of the
representations and warranties of the Company and Seller contained in this
Agreement, including giving effect to any update to the Disclosure Schedule,
shall be true and correct in all material respects (except that where any
statement in a representation or warranty expressly includes a standard of
materiality, such statement shall be true and correct in all respects) as of the
Closing Date (except to the extent such representations and warranties speak as
of an earlier date) as though made on and as of the Closing Date, and Buyer
shall have received a certificate from each of Seller and the Company signed on
behalf of Seller and the Company, respectively, by the Chief Executive Officer
or President and the Chief Financial Officer of Seller and the Company,
respectively, to the foregoing effect.
(b) AGREEMENTS AND COVENANTS. The Company shall have performed
or complied in all material respects with all agreements and covenants required
by this Agreement to be performed or complied with by it on or prior to the
Closing Date.
32
<PAGE>
(c) CONSENTS OBTAINED. All consents, waivers, approvals,
authorizations or orders required to be obtained and all filings required to be
made by Seller or the Company for the authorization, execution and delivery of
this Agreement and the consummation by it of the transactions contemplated
hereby shall have been obtained and made by Seller and the Company, except those
for which failure to obtain such approvals or make such filings would not
individually or in the aggregate, have a Material Adverse Effect with respect to
the Company.
(d) NO CHALLENGE. There shall not be pending any action,
proceeding or investigation before any court or administrative agency or by a
government agency (i) challenging or seeking material damages in connection
with, the transactions hereby contemplated or (ii) seeking to restrain, prohibit
or limit the exercise of full rights of ownership or operation by Buyer of all
or any portion of the Company, or (iii) seeking to recover against the proceeds
of the transactions contemplated hereby, which in any case is reasonably likely
to have a Material Adverse Effect with respect to the Company.
(e) NO MATERIAL ADVERSE CHANGES. Since the date of this
Agreement, there shall not have been any change in the financial condition,
results of operations or business of the Company or the Company, taken as a
whole, that either individually or in the aggregate would have a Material
Adverse Effect with respect to the Company. Buyer shall have received a
certificate of the Chief Executive Officer or President and the Chief Financial
Officer of the Company to that effect.
(f) OPINION OF COUNSEL. Buyer shall have received from Jenkens
& Gilchrist, a Professional Corporation, independent counsel to the Company
("COMPANY'S COUNSEL"), an opinion dated the Closing Date, substantially in the
form attached as EXHIBIT B.
(g) FINANCING AND EMPLOYMENT RELEASES. Buyer shall have
received releases or other documentation in form reasonably satisfactory to
Buyer evidencing the satisfaction of obligations of the Company under or
pursuant to the Credit Agreement.
(h) REAL PROPERTY MATTERS. With respect to each Real Property
Lease containing a provision that grants the lessor thereunder any rights of
termination or consent as a result of the transaction contemplated hereby, Buyer
shall have received an estoppel certificate and consent (dated not more than 30
days prior to the Closing Date) where such estoppel certificate and consent are
required from each landlord under each such Real Property Lease reasonably
acceptable in form to Buyer.
(i) BRIGHTON MATTERS. With reference to the Seller's
obligations under SECTION 6.1(j), (i) Seller shall have notified Buyer of all
third party claims in accordance with SECTIONS 6.1(j) and 12.2 and (ii) Seller
shall have provided its insurance carrier with a written notification notifying
such carrier of the Incident and shall have provided Buyer with a copy of such
notification.
9.3 ADDITIONAL CONDITIONS TO OBLIGATIONS OF THE SELLER. The
obligations of Seller to effect the transactions contemplated hereby are also
subject to the following conditions:
33
<PAGE>
(a) REPRESENTATIONS AND WARRANTIES. Each of the
representations and warranties of Buyer set forth in this Agreement, including
giving effect to any update to the Buyer Disclosure Schedule, shall be true and
correct in all material respects (except that where any statement in a
representation or warranty expressly includes a standard of materiality, such
statement shall have been true and correct in all respects) as of the Closing
Date (except to the extent such representations and warranties speak as of an
earlier date), as though made on and as of the Closing Date, and Seller shall
have received a certificate signed on behalf of Buyer by the Chief Executive
Officer or President and the Chief Financial Officer of Buyer to the foregoing
effect.
(b) AGREEMENTS AND COVENANTS. Buyer shall have performed or
complied in all material respects with all agreements and covenants required by
this Agreement to be performed or complied with by it on or prior to the Closing
Date.
(c) CONSENTS UNDER AGREEMENTS. All consents, waivers,
approvals, authorizations or orders required to be obtained, and all filings
required to be made by Buyer for the authorization, execution and delivery of
this Agreement and the consummation by it of the transactions contemplated
hereby shall have been obtained and made by Buyer, except where failure to
obtain any consents, waivers, approvals, authorizations or orders required to be
obtained or any filings required to be made would not have a Material Adverse
Effect with respect to Buyer.
(d) NO CHALLENGE. There shall not be pending any action,
proceeding or investigation before any court or administrative agency or by a
government agency (i) challenging or seeking material damages in connection
with, transactions hereby contemplated or (ii) seeking to restrain, prohibit or
limit the exercise of full rights of ownership or operation by Buyer of all or
any portion of the Company, which in either case would have a Material Adverse
Effect with respect to the Company.
(e) NO MATERIAL ADVERSE CHANGES. Since the date of this
Agreement, there has not been any change in the financial condition, results of
operations or business of Buyer, taken as a whole, that either individually or
in the aggregate would have a Material Adverse Effect with respect to Buyer.
Seller shall have received a certificate of the Chief Executive Officer or
President and the Chief Financial Officer of Buyer to that effect.
(f) OPINION OF COUNSEL. Seller shall have received from
Morgan, Lewis & Bockius LLP, independent counsel to Buyer ("BUYER COUNSEL"), an
opinion dated the Closing Date, substantially in the form attached hereto as
EXHIBIT C.
(g) REGISTRATION RIGHTS AGREEMENT. Seller shall have received
from Buyer a Registration Rights Agreement, substantially in the form attached
hereto as EXHIBIT D.
ARTICLE X
TERMINATION, AMENDMENT AND WAIVER
10.1 TERMINATION. This Agreement may be terminated at any time prior
to the Closing Date:
34
<PAGE>
(a) by mutual consent of Buyer and Seller;
(b) by either Seller or Buyer if any approval of stockholders
required for the consummation of the transactions contemplated hereby shall not
have been obtained by reason of the failure to obtain the required vote at a
duly held meeting of such stockholders or at any adjournment or postponement
thereof;
(c) by Seller or Buyer if there has been a breach in any
material respect (except that where any statement in a representation or
warranty expressly includes a standard of materiality, such statement shall have
been breached in any respect) of any representation or warranty, or the material
nonfulfillment of any covenant or agreement, set forth in this Agreement, on the
part of any party, which breach has not been cured within 10 business days
following receipt by the nonterminating party of notice of such breach or other
condition, or which breach or nonfulfillment by its nature, cannot be cured
prior to the Closing Date; PROVIDED, HOWEVER, this Agreement may not be
terminated pursuant to this clause (c) by the breaching party;
(d) by either Buyer or Seller if any permanent injunction
preventing the consummation of the transactions contemplated hereby shall have
become final and nonappealable or if any applicable Law or any rule or
regulation thereunder shall hereafter be enacted or becomes applicable that
makes the transactions contemplated hereby or the consummation of the Closing
illegal;
(e) subject to the provisions of SECTION 10.2 below, by either
Buyer or Seller if the transactions contemplated hereby shall not have been
consummated by July 31, 1999, for a reason other than the failure of the party
seeking termination to comply with its obligations under this Agreement;
PROVIDED, HOWEVER, that in the event early termination shall not have been
granted or applicable waiting periods shall not have expired under the HSR Act
as of such date, the parties may agree to extend such date for up to two
additional 30 day periods, with such agreement not to be unreasonably withheld;
(f) by either Buyer or Seller if any regulatory authority has
denied approval of the transactions contemplated hereby, and neither Buyer nor
Seller has, within 30 days after the entry of such order denying approval, filed
a petition seeking review of such order as provided by applicable law; or
(g) by Buyer in the event it shall have notified Seller of its
intention to terminate this Agreement pursuant to SECTION 7.7 within the time
period set forth therein.
10.2 EFFECT OF TERMINATION; PUT RIGHT. In the event of the termination
of this Agreement pursuant to SECTION 10.1, this Agreement shall forthwith
become void and all rights and obligations of any party shall cease except as
set forth in SECTION 6.4(c) of this Agreement; PROVIDED, HOWEVER, nothing herein
shall relieve any party from liability for any willful breach of this Agreement
or shall restrict either party's rights in the case thereof. At any time after
July 31, 1999, provided that approval under the HSR Act has not been obtained,
Seller may elect to pay to Buyer a termination fee of five million U.S. dollars
(US $5,000,000) (the "BREAK UP FEE"). The Break up fee shall be
35
<PAGE>
payable by Seller to Buyer by wire transfer of immediately available funds,
to such account as Buyer shall designate in writing to Seller, not later than
five business days following the date of such election. If Seller makes such
election and the Break up fee is paid as herein provided, the parties shall
thereupon proceed to close the transaction contemplated by, and on the terms
and conditions provided for in, the Asset Purchase Agreement; PROVIDED,
HOWEVER, and notwithstanding the earlier close of the Asset Purchase
Agreement, in the event regulatory approval has not been denied and Buyer
desires to close the transactions herein contemplated at a mutually agreeable
date as provided in SECTION 10.1(e), Seller shall cooperate with Buyer in
such effort and, upon receipt of any required regulatory approvals, shall
close the transactions herein contemplated on the terms and conditions herein
provided.
10.3 WAIVER. At any time prior to the Closing Date, the parties may
(a) extend the time for the performance of any of the obligations or other acts
of the other party, (b) waive any inaccuracies in the representations and
warranties contained herein or in any document delivered pursuant hereto and (c)
waive compliance with any of the agreements or conditions contained herein. Any
such extension or waiver shall be valid only if set forth in a written
instrument signed on behalf of such party, but such extension or waiver or
failure to insist on strict compliance with an obligation, covenant, agreement
or condition shall not operate as a waiver of, or estoppel with respect to, any
subsequent or other failure.
ARTICLE XI
INDEMNIFICATION
11.1 INDEMNIFICATION. Subject to the provisions of this Article,
Seller shall indemnify Buyer, its stockholders, employees, agents and affiliates
(collectively, the "BUYER INDEMNITEES") in respect of, and hold each of them
harmless from and against, and shall pay the full amount of, on a Grossed-Up
Basis (as defined in SECTION 12.3), any and all Losses suffered, incurred or
sustained by any of them or to which any of them becomes subject resulting from,
arising out of or relating to: (i) any causes of action asserted or other legal
proceedings initiated on the part of any of the stockholders of Seller relating
in any way to claims based on the sale of Seller's assets; (ii) any employee
pension benefit plan subject to Title IV of ERISA that is maintained by Seller
or any of its "controlled group," within the meaning of Section 4001(a)(15) of
ERISA, other than any Plans; (iii) severance obligations occurring within six
months of the Closing Date in connection with the agreements described on
EXHIBIT E; (iv) the nonfulfillment of or failure to perform any covenant or
agreement on the part of Seller contained in SECTION 6.6 and SECTION 8.1
(provided that the parties agree that no double recovery shall occur or be
permitted); and (v) any claims by a governmental entity including, but not
limited to, the United States Environmental Protection Agency, the State of
Colorado and the City of Brighton, relating to, resulting from or arising out of
the Incident including, but not limited to, any such claims associated with the
investigation, monitoring or remediation of Hazardous Materials, the replacement
of manholes and the replacement of sewer lines and any related claims for
subrogation and/or indemnification (hereinafter "BRIGHTON GOVERNMENTAL CLAIMS").
11.2 PROCEDURES FOR INDEMNIFICATION. Any claims for indemnification by
any party entitled to indemnification hereunder (an
36
<PAGE>
"INDEMNIFIED PARTY") from any party hereunder (an "INDEMNITOR") under this
ARTICLE XI shall be made by an Indemnified Party by delivery of a written
notice to the Indemnitor requesting indemnification (an "INDEMNIFICATION
CLAIM") and specifying the basis on which indemnification is sought and the
amount of asserted Losses. Indemnitor shall have 30 days after the date on
which the Indemnitor receives the notice of an Indemnification Claim to
object to such Indemnification Claim by delivery of a written notice of such
objection to the Indemnified Party specifying in reasonable detail the basis
for such objection. If within 30 days after the date on which the Indemnitor
receives the notice of the Indemnification Claim, the Indemnitor has not
delivered to the Indemnified Party a notice objecting to all or any portion
of the claimed Loss and setting forth the amount of such claimed
indemnification for such Loss objected to and the reasons for such objection,
the Indemnified Party shall be entitled to indemnification for such Loss, and
the Indemnitor shall promptly pay the full amount of such Loss. If, within
30 days after the date on which the Indemnitor receives the notice of an
Indemnification Claim, the Indemnitor delivers to the Indemnified Party an
objection to all or any portion of the claimed Loss, setting forth the amount
of such Loss objected to and the reasons for such objection, the Indemnified
Party shall be entitled to reimbursement for the portion of such Loss not
objected to by the Indemnitor and the Indemnitor shall promptly pay the full
amount of so much of the Loss as to which the Indemnitor did not object.
(a) Upon determination of the amount of an Indemnification
Claim, whether by agreement between the Indemnitor and the Indemnified Party or
by any final adjudication, the Indemnitor shall pay the amount of such
Indemnification Claim within 5 days of the date such amount is determined.
(b) The rights accorded to Indemnified Parties hereunder shall
be in addition to any rights that any Indemnified Party may have at law or in
equity.
(c) Any payment under this Article shall be treated for Tax
purposes as an adjustment of the Purchase Price to the extent such
characterization is proper and permissible under the applicable U.S. Tax law,
including the Code, Treasury regulations, court decisions and administrative
promulgations or, alternatively, by Buyer as an offset to a Tax benefit item, if
such characterization is permissible under such Tax law.
(d) In no event shall the aggregate liability of Seller for
claims asserted pursuant to Section 11.1(i) and (iii) of this Agreement and
Section 9.1 (i) and (iii) of the Asset Purchase Agreement (excluding
indemnification with respect to the payment of Taxes, penalties, Brighton
Governmental Claims, interest and collection costs thereof) exceed $700,000.
(e) Seller's obligation to indemnify Buyer under
SECTION 11.1(v) above shall terminate on the date which is the earlier of: (i)
Buyer's receipt of evidence that is satisfactory to the Buyer that all actual or
potential Brighton Governmental Claims have been resolved, or (ii) expiration of
the applicable statutes of limitation.
37
<PAGE>
ARTICLE XII
GENERAL PROVISIONS
12.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS.
Except as otherwise set forth herein, the representations and warranties of the
parties shall expire at Closing. The covenants and agreements of the parties
shall expire at Closing; PROVIDED, HOWEVER, that the covenants and agreements
contained in SECTIONS 6.4(c), 6.6, 6.7, 7.2, 7.6, ARTICLE VIII and 10.2 shall
survive the Closing and expire in accordance with their respective terms,
provided that to the extent obligations require repeated performance or
performance from time to time, expiration shall occur only upon the final
performance of the obligations; and provided further that Seller's obligation to
indemnify Buyer under SECTION 11.1(v) above shall survive the Closing and
terminate on the date provided in SECTION 11.2(e).
12.2 NOTICES. All notices and other communications given or made
pursuant to this Agreement shall be in writing and shall be deemed given if
delivered personally, telecopied (with confirmation), mailed by certified mail
(postage prepaid, return receipt requested) to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice) and shall be effective upon receipt:
(a) If to Seller or the Company:
Spinnaker Industries, Inc.
1700 Pacific Ave., Suite 1600
Dallas, Texas 75201
Telecopier: (214) 855-0093
Attention: President
With copies to:
Jenkens & Gilchrist, a Professional Corporation
1445 Ross Ave., Suite 3200
Dallas, Texas 75202
Telecopier: (214) 855-4300
Attention: Ronald J. Frappier
Crouch & Hallett, L.L.P.
717 North Harwood Street
Suite 1400
Dallas, Texas 75201
Telecopier: (214) 922-4193
Attention: Timothy R. Vaughan
38
<PAGE>
(b) If to Buyer:
Intertape Polymer Group Inc.
110E Montee de Liesse
St. Laurent,Quebec H4T IN4
Canada
Telecopier: (514) 731-5477
Attention: Andrew M. Archibald
With a copy to:
Morgan, Lewis & Bockius LLP
101 Park Avenue
New York, NY 10178
Telecopier: (212) 309-6273
Attention: Nancy H. Corbett
12.3 CERTAIN DEFINITIONS. For purposes of this Agreement, the term:
(a) "AFFILIATE" means a person that directly or indirectly,
through one or more intermediaries, controls, is controlled by, or is under
common control with, the first mentioned person; including, without limitation,
any partnership or joint venture in which any person (either alone, or though or
together with any other subsidiary) has, directly or indirectly, an interest of
5% or more.
(b) "BUSINESS DAY" means any day other than a day on which
federally-chartered banks are required or authorized to be closed.
(c) "CONTROL" (including the terms "controlled by" and "under
common control with") means the possession, directly or indirectly or as trustee
or executor, of the power to direct or cause the direction of the management or
policies of a person, whether through the ownership of stock or as trustee or
executor, by contract or credit arrangement or otherwise.
(d) "GROSSED-UP BASIS" means, when used to describe the basis
on which the payment of a specified sum is to be made, a basis such that the
amount of such payment, after being reduced by the amount of all Taxes imposed
on the recipient of such payment as a result of the receipt or accrual of such
payment and after taking into account the Tax benefit of any deductions
attributable to such Taxes and/or payments that are currently available to the
recipient of such payment, will equal the specified sum.
(e) "LAW" shall have the meaning set forth in SECTION 3.4.
(f) "LIEN" shall mean any conditional sale agreement, default
of title, easement, encroachment, encumbrance, hypothecation, infringement,
lien, mortgage, pledge, reservation, restriction, security interest, title
retention or other security arrangement, or any adverse right or
39
<PAGE>
interest, charge, or claim of any nature whatsoever of, on, or with respect
to any property or property interest, other than (i) liens for current
property Taxes not yet due and payable, and (ii) liens which do not
materially impair the use of, or title to, or value of the assets subject to
such lien.
(g) "LOSS" shall mean any and all demands, claims, actions or
causes of action, assessments, damages, liabilities, costs and expenses,
including interest, penalties, costs of environmental investigation, remediation
and monitoring and defense, and reasonable attorneys' fees, environmental
consultants fees and other professional fees, and expenses relating thereto (but
excluding lost profits or consequential or incidental damages).
(h) "MATERIAL ADVERSE EFFECT" means, with respect to Buyer,
Seller, the Company or Company, (i) any adverse effect on the business, assets,
properties, liabilities, prospects, results of operations or financial condition
of, and which is material with respect to, such party (or the Company), or (ii)
any effect that materially impairs the ability of such party to consummate the
transactions contemplated hereby; PROVIDED, HOWEVER, that Material Adverse
Effect shall not be deemed to include the impact of (A) actions contemplated by
this Agreement, (B) changes in laws and regulations or interpretations thereof
that are generally applicable to the manufacturing industry and (C) changes in
generally accepted accounting principles that are generally applicable to the
manufacturing industry.
(i) "PERSON" means an individual, corporation, partnership,
association, trust, unincorporated organization, other entity or group (as
defined in Section 13(d) of the Exchange Act); and
(j) "SUBSIDIARY" or "SUBSIDIARIES" of the Company, Seller,
Buyer or any other person, means any corporation, partnership, joint venture or
other legal entity of which either the Company, Seller, Buyer, or such other
person, as the case may be (either alone or through or together with any other
subsidiary), owns, directly or indirectly, 50% or more of the stock or other
equity interests the holders of which are generally entitled to vote for the
election of the board of directors or other governing body of such corporation
or other legal entity.
12.4 HEADINGS. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
12.5 SEVERABILITY. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner adverse to
any party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in an acceptable manner to the end that
transactions contemplated hereby are fulfilled to the extent possible.
12.6 ENTIRE AGREEMENT. This Agreement and the letter agreement dated
as of the date hereof regarding Tax loss carryforwards constitute the entire
agreement of the parties and supersedes
40
<PAGE>
all prior agreements and undertakings, both written and oral, between the
parties, or any of them, with respect to the subject matter hereof and,
except as otherwise expressly provided herein, are not intended to confer
upon any other person any rights or remedies hereunder.
12.7 ASSIGNMENT. This Agreement shall not be assigned by operation of
law or otherwise, except that Buyer may assign all or any of its rights
hereunder to any affiliate provided that no such assignment shall relieve Buyer
of its obligations hereunder.
12.8 PARTIES IN INTEREST. This Agreement shall be binding upon and
inure solely to the benefit of each party and nothing in this Agreement, express
or implied, is intended to or shall confer upon any other person any right,
benefit or remedy of any nature whatsoever under or by reason of this Agreement.
12.9 GOVERNING LAW. This Agreement shall be governed by, and construed
in accordance with, the laws of the State of Delaware, regardless of the laws
that might otherwise govern under applicable principles of conflicts of law.
12.10 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, and by the different parties in separate counterparts, each of
which when executed shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
12.11 TIME IS OF THE ESSENCE. Time is of the essence with respect to
this Agreement.
12.12 AMENDMENT. This Agreement may be amended by the agreement in
writing of the parties and in accordance with their applicable charter documents
and applicable Law.
12.13 WAIVER OF JURY TRIAL. Each of Seller and Buyer waive their
respective rights to a trail by jury of any claim or cause of action based upon
or arising out of or related to this agreement, any assignment or the
transactions contemplated hereby, in any action, proceeding or other litigation
of any type brought by any party against the other parties, whether with respect
to contract claims, tort claims, or otherwise. Each of Seller and Buyer agree
that any such claim or cause of action shall be tried by a court trial without a
jury. Without limiting the foregoing, the parties further agree that their
respective right to a trial by jury is waived by operation of this Section as to
any action, counterclaim or other proceeding which seeks, in whole or in part,
to challenge the validity or enforceability of this Agreement, any assignment or
any provision hereof or thereof. This waiver shall apply to any subsequent
amendments, renewals, supplements or modifications to this Agreement or any
assignment.
12.14 CONSENT TO JURISDICTION. The parties hereto each hereby
irrevocably submit to the exclusive jurisdiction of the state courts of the
State of Delaware and to the jurisdiction of the United States District Court of
Delaware for the purposes of any suit, action or other proceeding arising out of
or based upon this Agreement or the subject matter hereto brought by any other
party hereto. Each party hereto, to the extent permitted by applicable law,
hereby waives and agrees not to assert, by way of motion, as a defense, or
otherwise, in any such suit, action or proceeding brought in such courts, any
claim that it is not subject personally to the jurisdiction of the above-named
courts, that
41
<PAGE>
its property is exempt or immune from attachment or execution, that the venue
of the suit, action or proceeding is improper or that this Agreement or the
subject matter hereof may not be enforced in or by such Court.
42
<PAGE>
IN WITNESS WHEREOF, Seller and Buyer have caused this Agreement to be
executed as of the date first written above by their respective officers
thereunto duly authorized.
SPINNAKER INDUSTRIES, INC. ("Seller")
By: /s/ Ned N. Fleming III
--------------------------------------------------
Name: Ned N. Fleming III
------------------------------------------------
Title: President and Chief Operating Officer
-----------------------------------------------
INTERTAPE POLYMER GROUP INC. ("Buyer")
By: /s/ Andrew Archibald
--------------------------------------------------
Name: Andrew Archibald
------------------------------------------------
Title: Chief Financial Officer, Secretary, Treasurer
and Vice President Administration
-----------------------------------------------
<PAGE>
CROSS REFERENCES TO DISCLOSURE SCHEDULE
<PAGE>
ASSET PURCHASE AGREEMENT
BY AND AMONG
SPINNAKER ELECTRICAL TAPE COMPANY,
SPINNAKER INDUSTRIES, INC.
AND
INTERTAPE POLYMER GROUP INC.
DATED AS OF
APRIL 9, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I - SALE OF ASSETS AND ASSUMPTION OF LIABILITIES . . . . . . . . . . . . . .1
1.1 Sale of Assets by Seller . . . . . . . . . . . . . . . . . . . . . . .1
1.2 Excluded Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . .3
1.3 Assumed Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . .4
1.4 Excluded Liabilities . . . . . . . . . . . . . . . . . . . . . . . . .5
1.5 Time and Place of Closing. . . . . . . . . . . . . . . . . . . . . . .5
ARTICLE II - PURCHASE PRICE. . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
2.1 Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
2.2 Allocation of Purchase Price . . . . . . . . . . . . . . . . . . . . .6
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF THE SELLER . . . . . . . . . . . . .6
3.1 Organization; Approvals. . . . . . . . . . . . . . . . . . . . . . . .7
3.2 Certificate of Incorporation and Bylaws. . . . . . . . . . . . . . . .7
3.3 Authority. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
3.4 No Conflict; Required Filings and Consents . . . . . . . . . . . . . .7
3.5 Compliance; Permits. . . . . . . . . . . . . . . . . . . . . . . . . .8
3.6 Inventory. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
3.7 Accounts Receivable. . . . . . . . . . . . . . . . . . . . . . . . . .8
3.8 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . .8
3.9 Absence of Certain Changes or Events . . . . . . . . . . . . . . . . .9
3.10 Absence of Litigation. . . . . . . . . . . . . . . . . . . . . . . . .9
3.11 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . 10
3.12 Labor and Employment Matters . . . . . . . . . . . . . . . . . . . . 11
3.13 Tangible Personal Property . . . . . . . . . . . . . . . . . . . . . 12
3.14 Environmental Matters. . . . . . . . . . . . . . . . . . . . . . . . 12
3.15 Absence of Agreements. . . . . . . . . . . . . . . . . . . . . . . . 13
3.16 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.17 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.18 Brokers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.19 Material Contracts . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.20 Substantial Customers and Suppliers. . . . . . . . . . . . . . . . . 14
3.21 Intellectual Property. . . . . . . . . . . . . . . . . . . . . . . . 15
3.23 Year 2000 Representation . . . . . . . . . . . . . . . . . . . . . . 17
3.24 Real Property. . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.25 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.26 Material Adverse Effect. . . . . . . . . . . . . . . . . . . . . . . 18
ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF BUYER . . . . . . . . . . . . . . . 18
4.1 Organization; Approvals. . . . . . . . . . . . . . . . . . . . . . . 18
i
<PAGE>
4.2 Authority. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
4.3 No Conflict; Required Filings and Consents . . . . . . . . . . . . . 18
4.4 Absence of Litigation. . . . . . . . . . . . . . . . . . . . . . . . 19
4.5 Brokers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
4.6 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE V - CERTAIN COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.1 Affirmative Covenants. . . . . . . . . . . . . . . . . . . . . . . . 19
5.2 Negative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.3 Exclusivity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
5.4 Access and Information . . . . . . . . . . . . . . . . . . . . . . . 22
5.5 Update Disclosure; Breaches. . . . . . . . . . . . . . . . . . . . . 23
5.6 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
5.7 Retention of Records . . . . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE VI - ADDITIONAL AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . 23
6.1 Appropriate Action; Consents; Filings. . . . . . . . . . . . . . . . 23
6.2 Employee Benefit Matters . . . . . . . . . . . . . . . . . . . . . . 24
6.3 Notification of Certain Matters. . . . . . . . . . . . . . . . . . . 25
6.4 Public Announcements . . . . . . . . . . . . . . . . . . . . . . . . 26
6.5 Customer Retention . . . . . . . . . . . . . . . . . . . . . . . . . 26
6.6 Tax Cooperation and Indemnification. . . . . . . . . . . . . . . . . 26
6.7 Bulk Transfer Laws . . . . . . . . . . . . . . . . . . . . . . . . . 28
6.8 Non-Competition. . . . . . . . . . . . . . . . . . . . . . . . . . . 28
6.9 Further Transfer Matters . . . . . . . . . . . . . . . . . . . . . . 29
6.10 Prorations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
6.11 Release of Liens . . . . . . . . . . . . . . . . . . . . . . . . . . 30
ARTICLE VII - CONDITIONS OF CLOSING. . . . . . . . . . . . . . . . . . . . . . . . 30
7.1 Conditions to Obligation of Each Party . . . . . . . . . . . . . . . 30
7.2 Additional Conditions to Obligations of Buyer. . . . . . . . . . . . 30
7.3 Additional Conditions to Obligations of the Seller . . . . . . . . . 32
ARTICLE VIII - TERMINATION, AMENDMENT AND WAIVER . . . . . . . . . . . . . . . . . 33
8.1 Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
8.2 Effect of Termination. . . . . . . . . . . . . . . . . . . . . . . . 34
8.3 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
ARTICLE IX - INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
9.1 Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . . . 34
9.2 Procedures for Indemnification . . . . . . . . . . . . . . . . . . . 35
ARTICLE X - GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 36
10.1 Survival of Representations, Warranties, Covenants and Agreements. . 36
10.2 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
ii
<PAGE>
10.3 Certain Definitions. . . . . . . . . . . . . . . . . . . . . . . . . 37
10.4 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
10.5 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
10.6 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . 38
10.7 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
10.8 Parties In Interest. . . . . . . . . . . . . . . . . . . . . . . . . 39
10.9 Governing Law; Venue . . . . . . . . . . . . . . . . . . . . . . . . 39
10.10 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
10.11 Time Is of the Essence . . . . . . . . . . . . . . . . . . . . . . . 39
10.12 Amendment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
10.13 Waiver of Jury Trial . . . . . . . . . . . . . . . . . . . . . . . . 39
10.14 Consent to Jurisdiction. . . . . . . . . . . . . . . . . . . . . . . 39
</TABLE>
iii
<PAGE>
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (this "AGREEMENT"), dated as of April 9,
1999, by and among Spinnaker Electrical Tape Company, a Delaware corporation
("SELLER"), Spinnaker Industries, Inc., a Delaware corporation ("PARENT"), and
Intertape Polymer Group Inc., a corporation organized under the Canada Business
Corporations Act ("BUYER").
WITNESSETH:
WHEREAS, Seller is engaged in the business of the design, development,
manufacture and sale of industrial tapes (the "BUSINESS"); and
WHEREAS, Buyer desires to acquire from Seller the Business through a
purchase of certain of the assets of Seller, and Seller desires to sell, assign,
transfer, convey and deliver to Buyer, on the terms and subject to the
conditions of this Agreement, all of its rights, title and interest in, or to,
all of the assets, rights, properties, claims and contracts owned or used by
Seller in the conduct of the Business and, in connection therewith, Buyer has
agreed to assume certain liabilities of Seller relating to the Business, all on
the terms set forth in this Agreement; and
WHEREAS, concurrently with the execution and delivery of this Agreement,
Buyer is entering into an agreement of even date herewith (the "STOCK PURCHASE
AGREEMENT") with Parent, pursuant to which Parent shall sell to Buyer, and Buyer
shall purchase and acquire from Parent, all of the capital stock of Central
Products Company, a Delaware corporation ("CPC") and an affiliate of Seller
engaged in the business of the design, development, manufacture and sale of
industrial tapes.
NOW, THEREFORE, in consideration of the foregoing premises and the
representations, warranties and agreements contained in this Agreement, and
subject to the terms and conditions set forth in this Agreement, the parties
agree as follows:
ARTICLE I
SALE OF ASSETS AND ASSUMPTION OF LIABILITIES
1.1 SALE OF ASSETS BY SELLER. Subject to the satisfaction or waiver
of the conditions set forth in this Agreement, at the Closing (as defined in
SECTION 1.5), Seller shall sell, assign, transfer, convey and deliver to Buyer,
and Buyer shall purchase and accept from Seller, all of the following assets
associated with the Business (but excluding the Excluded Assets described in
SECTION 1.2) (collectively, the "PURCHASED ASSETS"):
(a) REAL PROPERTY. All of the parcels of real property used,
occupied or operated by Seller in connection with the Business described in
SCHEDULE 1.1(a) (the "REAL PROPERTY"), and all of the rights arising out of the
ownership of the Real Property or appurtenant thereto, together with all
buildings, structures, facilities, fixtures and other improvements to the Real
Property (together with such Real Property, the "FACILITIES");
1
<PAGE>
(b) LEASED PROPERTY. All leases, including capitalized leases,
for real property leased or used by Seller in connection with the Business
described in SCHEDULE 1.1(b) (the "REAL PROPERTY LEASES");
(c) PERSONAL PROPERTY LEASES. All leases, including
capitalized leases, for personal property leased or used by Seller in connection
with the Business, including without limitation those described in SCHEDULE
1.1(c) (the "PERSONAL PROPERTY LEASES");
(d) MACHINERY AND EQUIPMENT. The machinery, equipment,
computer hardware, tooling, office equipment, telephone, telecopy and
communications equipment, furniture and other items of tangible personal
property owned or licensed (to the extent transferable) by Seller that are used
in connection with the Business and all leasehold improvements (to the extent of
Seller's interest therein) the principal items of which as of December 31, 1998
are listed in SCHEDULE 1.1(d) (the "EQUIPMENT"), and all warranties and
guarantees, if any, express or implied, existing for the benefit of Seller in
connection with the Equipment (to the extent transferable);
(e) INVENTORY. The finished products and all work-in-progress,
raw materials, waste materials, scrap, samples, stores and spares, components,
goods in transit from suppliers or manufacturers, goods held on consignment by
any third party for Seller (excluding goods held on consignment for any third
party by Seller), supplies, and packaging and promotional materials used in
connection therewith, owned by Seller on the Closing Date, together with all
rights of Seller against suppliers that relate to the Purchased Assets (the
"INVENTORY");
(f) VEHICLES. All motor vehicles owned or leased by Seller in
connection with the operation of the Business, including without limitation
those described in SCHEDULE 1.1(f);
(g) INTELLECTUAL PROPERTY. All right, title and interest of
Seller in and to any and all Intellectual Property (as defined in SECTION 3.22)
used by Seller in connection with the Business or being developed by Seller in
connection with the Business as of the Closing Date, including without
limitation the Intellectual Property described in SCHEDULE 1.1(g);
(h) BUSINESS INFORMATION AND FILES. Any and all business
information, market research studies, customer lists, customer records and
information, supplier lists, technical manuals, specifications, data, designs,
blueprints and drawings, technical papers, sales and promotional materials,
catalogs, advertising and marketing materials and related books, records and
files currently used by Seller in connection with the Business, but excluding
such information that is related to the sale of the Business;
(i) CONTRACTS. To the extent transferable, all commitments,
orders, quotations, bids, supply agreements, procurement agreements, service
agreements, contracts and agreements, written or oral, to which Seller is a
party or by which Seller is bound (the "CONTRACTS");
(j) ACCOUNTS RECEIVABLE. All accounts receivable of the
Business owned by Seller and reflected on the books and records of Seller as of
the Closing Date;
2
<PAGE>
(k) SECURITY DEPOSITS. All security deposits deposited by or
on behalf of Seller as lessee or sublessee under any lease included in the
Business and other transferable deposits;
(l) LICENSES, CERTIFICATIONS AND PERMITS. To the extent
transferable, the licenses, permits, certificates of authority, authorizations,
approvals, registrations, franchises and similar consents granted or issued by
any governmental or regulatory authority to Seller, including without limitation
those set forth in SCHEDULE 1.1(l) (the "PERMITS");
(m) CORPORATE NAMES, TRADE NAMES, ETC. The use of the name
"Spinnaker Electrical Tape Company," including the goodwill attached to such
name, and the trade names and marks descriptive of and associated with such name
for a period not to exceed nine months;
(n) BANK ACCOUNTS, CASH, ETC. All cash, checks, negotiable
instruments, short-term investments, bank accounts, deposits, securities,
investments (and all interest thereon, to the extent applicable) and all other
cash equivalents of Seller;
(o) BOOKS AND RECORDS. All written or recorded information
used by Seller in connection with the Business, including without limitation
employee payroll and personnel records and customer lists, credit information,
supplier lists and all books and records containing purchasing, sales, marketing
and advertising information of the Business, or relating to the Purchased Assets
or Assumed Liabilities (as defined in SECTION 1.3);
(p) INSURANCE POLICIES. To the extent assignable, any
insurance policy, bonds, or other similar items, or any cash surrender value in
regard thereof, or any security or other deposits, and all insurance proceeds
received by Seller, or rights to receive insurance proceeds, to the extent any
of the foregoing relate to damage to any item of personalty or realty or
property of the Business which has suffered damage or becomes damaged between
the date of this Agreement and the Closing Date, except to the extent such
proceeds were utilized to repair any such damaged item; and
(q) CAUSES OF ACTION. All causes of action and other claims of
Seller of every kind or description which Seller may have against any person or
entity arising out of or relating to the Purchased Assets and the Assumed
Liabilities (both relating to periods on or after the Closing Date, except with
respect to claims relating to product warranties assumed hereunder, which relate
to all periods);
in each case as of the Closing Date, subject to changes made from the date of
this Agreement to the Closing Date and reflected on appropriate updated
Schedules, as applicable. To the extent assets are used by Parent in connection
with the Business and its other businesses, the parties shall use good faith
efforts to separate such assets in accordance with their respective uses.
1.2 EXCLUDED ASSETS. Notwithstanding any other provision of this
Agreement, the following assets of Seller are excluded from the sale and shall
not be sold, assigned, transferred, conveyed or delivered by Seller to Buyer,
and Buyer shall not acquire any of Seller's right, title or interest therein
(such assets collectively, the "EXCLUDED ASSETS"):
3
<PAGE>
(a) TAX REFUNDS. Any refunds, credits or other assets or
rights (including interest thereon or claims therefor) with respect to any Taxes
(as defined in SECTION 3.16) of Seller;
(b) CAUSES OF ACTION. All causes of action and other claims of
every kind or description that Seller may have against any person or entity
arising out of or relating to (i) the Excluded Assets or the Excluded
Liabilities (as defined below) and (ii) the Purchased Assets or Assumed
Liabilities (as defined below) (in the case of (ii) relating to periods prior to
the Closing Date);
(c) INTERCOMPANY RECEIVABLES. All intercompany receivables of
Seller; and
(d) OTHER EXCLUDED ASSETS. Such other specific assets used in
the Business as are listed in SECTION 1.2(c) of the Seller Disclosure Schedule.
1.3 ASSUMED LIABILITIES. Buyer shall assume the following
liabilities of the Seller (the "ASSUMED LIABILITIES"):
(a) all obligations under the terms of any outstanding warranty
(except those relating to any Excluded Asset);
(b) liabilities arising on and after the Closing Date (except
as otherwise herein expressly agreed) under the Contracts, the Real Property
Leases, the Personal Property Leases and other assets included in the Purchased
Assets;
(c) all liabilities for accounts payable and accrued and unpaid
expenses of the Business;
(d) all insurance claims, including without limitation
automobile liability, general liability and casualty claims, made on or after
the Closing Date relating to the Purchased Assets or Assumed Liabilities, except
as provided in SECTION 1.4(g);
(e) all liabilities of Seller pursuant to that collective
bargaining agreement between Seller and the Laborers' International Union of
North America, AFL-CIO, Local No. 994, effective from March 7, 1998 through
March 2, 2001;
(f) all liabilities arising from the ownership of the Purchased
Assets on and after the Closing Date;
(g) liabilities relating to the Plans (as defined in SECTION
3.11(a)), but only to the extent provided in SECTION 6.2; and
(h) liabilities relating to all causes of action and other
claims which a third party may assert in respect of any of the Purchased Assets
(but only to the extent such causes of action or claims relate to liabilities
assumed hereunder).
4
<PAGE>
1.4 EXCLUDED LIABILITIES. Seller shall retain and Buyer shall not
assume any liabilities or obligations (other than the Assumed Liabilities) of
Seller with respect to the Business, whether known or unknown, fixed or
contingent, including without limitation the following obligations or
liabilities, as well as the liabilities in SECTION 1.4 of the Seller Disclosure
Schedule (the "EXCLUDED LIABILITIES"):
(a) all obligations and liabilities arising out of or relating
to the Excluded Assets;
(b) all financial indebtedness of Seller and any liabilities of
Seller arising under any agreement for borrowed money, including without
limitation, pursuant to any of the following (but exclusive of any capitalized
leases, which shall be Assumed Liabilities):
(i) the Credit Agreement by and among Seller and the
other parties thereto dated as of July 30, 1998 (the "TESA CREDIT FACILITY");
(ii) the Nonnegotiable Subordinated Promissory Note dated
as of July 30, 1998 issued by Seller in the original principal amount of
$500,000 (the "TESA NOTE"); and
(c) all intercompany debt;
(d) all liabilities of Seller, Parent or any affiliate of
Parent for Taxes accruing prior to the Closing Date and Taxes relating to the
conduct of the Business prior to the Closing Date;
(e) all other liabilities of the Business not expressly
included in the Assumed Liabilities, including all liabilities of either Parent
or Seller in connection with the Business arising under or pursuant to
Environmental Laws (as defined in SECTION 3.14) arising from events occurring
prior to the Closing Date;
(f) all overdrafts;
(g) except as expressly provided herein, all liabilities
relating to the employment by Seller of any employee, agent, contractor or
consultant, or the termination of such employment prior to the Closing Date,
including liabilities for compensation and benefits (except, as to the Plans, to
the extent provided in SECTION 6.2); and
(h) all liabilities relating to, resulting from or arising out
of employee exposure to Hazardous Materials in excess of applicable
Occupational, Safety and Health Administration Act and analogous state law
standards and/or requirements at the Carbondale, Illinois facility
("CARBONDALE") as of or prior to the Closing Date.
1.5 TIME AND PLACE OF CLOSING. The closing of the transactions
contemplated hereby (the "CLOSING") will take place on the Closing Date (defined
below), or at such other time as the parties agree. The Closing shall be held
at the law offices of Morgan, Lewis & Bockius LLP located at 101 Park Avenue,
New York, New York 10178 or such location as may be agreed upon by the parties.
The parties shall use reasonable efforts to cause the Closing to occur on the
first business
5
<PAGE>
day following the later to occur of (i) the effective date (including
expiration of any applicable waiting period) of the last required consent of
any regulatory authority having authority over and approving or exempting the
contemplated transaction or (ii) after all the remaining conditions set forth
in ARTICLE VII are satisfied or waived (the "CLOSING DATE").
ARTICLE II
PURCHASE PRICE
2.1 PURCHASE PRICE. The aggregate purchase price for the Business
shall be (i) Twenty-Three Million United States Dollars (US $23,000,000) (the
"CASH PURCHASE PRICE") and (ii) the assumption by Buyer of the Assumed
Liabilities (collectively, the "PURCHASE PRICE"). The Cash Purchase Price shall
be made to Seller at Closing by wire transfer in immediately available federal
funds to an account designated by Seller by written notice to Buyer at least two
days prior to the Closing Date. The portion of the Purchase Price allocable to
the non-competition provision of SECTION 6.8 shall be US $3,000,000.
2.2 ALLOCATION OF PURCHASE PRICE.
(a) Within sixty (60) days following the Closing Date, Buyer
shall prepare and deliver to Seller and Parent an allocation of the Purchase
Price (set forth as provided in SCHEDULE 2.2) among asset classes as specified
by Section 1060 of the Code and the Treasury regulations thereunder (the "NOTICE
OF ALLOCATION"). This allocation shall be binding upon Seller unless Seller
shall provide a written notice of objection within fifteen (15) days after
receipt of the Notice of Allocation in which event Seller and Buyer shall
negotiate in good faith to resolve such dispute as expeditiously as possible.
Buyer and Seller agree that such allocation is in accordance with the rules in
Section 1060 of the Code and the Treasury regulations promulgated thereunder.
Buyer and Seller recognize that the Purchase Price does not include Buyer's
acquisition expenses and that Buyer will allocate such expenses appropriately.
(b) Seller and Buyer agree to prepare and file on a timely
basis any relevant Tax Returns required to be filed pursuant to Section 1060 of
the Code, the Treasury regulations thereunder or any provisions of local, state
and foreign law (including, without limitation, Asset Acquisition Statements on
IRS Form 8594), setting forth an allocation of the Purchase Price, pursuant to
Section 1060 of the Code and the Treasury regulations thereunder, in a manner
entirely consistent with the allocation set forth in SCHEDULE 2.2 and agree to
act in accordance with such allocation in the preparation of financial
statements and the filing of all Tax Returns and in the course of any Tax audit,
Tax review or Tax litigation relating thereto. None of Buyer, Parent and Seller
will assert that the allocation reflected in the Notice of Allocation was not
separately bargained for at arm's-length and in good faith.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SELLER
Except as set forth in the Disclosure Schedule delivered by Seller to
Buyer attached to and incorporated in this Agreement (the "SELLER DISCLOSURE
SCHEDULE"), which Seller Disclosure Schedule
6
<PAGE>
shall reference disclosure items by section, Seller and Parent jointly and
severally represent and warrant to Buyer as follows:
3.1 ORGANIZATION; APPROVALS. Parent is a corporation validly existing
and in good standing under the laws of the State of Delaware. Seller is a
corporation validly existing and in good standing under the laws of the State of
Delaware. Seller has the requisite corporate power and authority and is in
possession of all franchises, grants, authorizations, licenses, permits,
easements, consents, certificates, approvals and orders ("SELLER APPROVALS")
necessary to own, lease and operate its properties and to carry on its business
as it is now being conducted, and Seller has not received any notice of
proceedings relating to the revocation or modification of any Seller Approvals,
except where the failure to be so organized, existing and in good standing or to
have such power, authority, Seller Approvals and revocations or modifications
would not, individually or in the aggregate, have a Material Adverse Effect (as
defined in SECTION 10.3) with respect to the Business.
3.2 CERTIFICATE OF INCORPORATION AND BYLAWS. Seller previously has
furnished to Buyer a true, complete and accurate copy of its current Certificate
of Incorporation and Bylaws, as amended or restated (the "SELLER CERTIFICATE" or
"SELLER BYLAWS"). Such Seller Certificate and Seller Bylaws are in full force
and effect. Seller is not in violation of any of the provisions of the Seller
Certificate or Seller Bylaws.
3.3 AUTHORITY. Each of Parent and Seller has the requisite corporate
power and authority to execute and deliver this Agreement, to perform its
obligations under this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement by Seller and Parent and
the consummation by each of Seller and Parent of the transaction contemplated
hereby have been duly and validly authorized by all necessary corporate action
and no other corporate proceedings on the part of Seller or Parent are necessary
to authorize this Agreement or to consummate the transactions contemplated
hereby (other than applicable stockholder approvals). This Agreement has been
duly executed and delivered by, and constitutes a valid and binding obligation
of, Seller and Parent and, assuming due authorization, execution and delivery by
Buyer, is enforceable against Seller and Parent in accordance with its terms,
except as enforcement may be limited by general principles of equity whether
applied in a court of law or a court of equity and by bankruptcy, insolvency and
similar laws affecting creditors' rights and remedies generally.
3.4 NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) The execution and delivery of this Agreement by Seller and
Parent does not, and the performance of this Agreement and the transactions
contemplated hereby by Seller and Parent shall not, (i) conflict with or violate
the Seller Certificate or Seller Bylaws or the Certificate of Incorporation or
Bylaws of Parent, (ii) conflict with or violate any federal or state law,
statute, ordinance, rule, regulation, order, judgment or decree (collectively,
"LAWS") applicable to Seller or Parent or by which it or any of their properties
are bound or affected, or (iii) result in any breach of or constitute a default
(or an event that with notice or lapse of time or both would become a default)
under, or give to others any rights of termination, amendment, acceleration or
cancellation of, or result in the creation of a Lien (as defined in
SECTION 10.3) on any of the Purchased Assets pursuant
7
<PAGE>
to any note, bond, mortgage, indenture, contract, agreement, lease, license,
permit, franchise or other instrument or obligation to which Seller or Parent
are parties or by which they or any of their properties are bound or
affected, except in the case of clauses (ii) and (iii) for any such
conflicts, violations, breaches, defaults or other occurrences that,
individually or in the aggregate, would not have a Material Adverse Effect
with respect to the Business. Seller is not a "restricted subsidiary" under
the terms of that certain Indenture dated as of October 23, 1996, by and
among Parent, CPC and the other parties thereto.
(b) The execution and delivery of this Agreement by Seller and
Parent does not, and the performance of this Agreement by Seller or Parent shall
not, require any consent, approval, authorization or permit of, or filing with
or notification to any governmental or regulatory authority or any third party
except for applicable requirements, if any, of the Securities Act of 1933, as
amended (the "SECURITIES ACT"), the Securities Exchange Act of 1934, as amended
(the "EXCHANGE ACT"), state securities or blue sky laws ("BLUE SKY LAWS"), the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
ACT"), the filing of other documents as required by applicable Law, applicable
transfer tax filings and where the failure to obtain such consents, approvals,
authorizations or permits would not prevent or delay consummation of the
transactions contemplated hereby, or otherwise prevent Seller or Parent from
performing its obligations under this Agreement and would not have a Material
Adverse Effect with respect to the Business.
3.5 COMPLIANCE; PERMITS. Seller is not in conflict with, or in
default or violation of, (i) any Law applicable to Seller or by which the
Business is bound or affected, or (ii) any note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other instrument or
obligation to which Seller is a party or by which the Business is bound or
affected, except for any such conflicts, defaults or violations which would not,
individually or in the aggregate, have a Material Adverse Effect with respect to
the Business.
3.6 INVENTORY. The inventory of Seller consists of raw materials and
supplies, manufactured and processed parts, work-in-progress and finished goods,
all of which is merchantable and fit for the purpose for which it was procured
or manufactured, and none of which is slow moving, obsolete, damaged or
defective, subject to the reserve for inventory writedown set forth on Seller's
balance sheet at December 31, 1998 (or in any notes thereto), and as adjusted
for operations and transactions through the Closing Date in accordance with the
past custom and practice of Seller.
3.7 ACCOUNTS RECEIVABLE. The accounts receivable of Seller are
reflected properly on its books and records, are valid receivables subject to no
setoffs or counterclaims, are current and collectible, and will be collected in
accordance with their terms at their recorded amounts, subject to the reserve
for bad debts set forth on Seller's balance sheet at December 31, 1998 (or in
any notes thereto), and as adjusted for operations and transactions through the
Closing Date in accordance with the past custom and practice of Seller. All
accounts receivable of Seller are listed in SECTION 3.7 of the Seller Disclosure
Schedule.
8
<PAGE>
3.8 FINANCIAL STATEMENTS.
(a) Prior to the execution of this Agreement, Seller has
delivered to Buyer complete and correct copies of Seller's unaudited balance
sheet and income statement for the period ended December 31, 1998, and Parent's
audited consolidated balance sheet and income statement for the year ended
December 31, 1998 (the "FINANCIAL STATEMENTS"). All such Financial Statements
are complete and correct in all material respects and were (i) prepared from the
books of account or other financial records of Seller and Parent, (ii) prepared
in accordance with GAAP applied on a consistent basis throughout the periods
involved (except as may be indicated in the notes to such financial statements),
and (iii) fairly present in all material respects the consolidated financial
position of Seller and Parent at the respective dates and the consolidated
results of operations and cash flows for the periods indicated, except that the
interim consolidated financial statements were or are subject to normal and
recurring year-end adjustments which were not or are not expected to be material
in amount or effect and do not have any footnote disclosures.
(b) Except (i) for the liabilities that are fully reflected or
reserved against in the Financial Statements (including any related notes
thereto) or not required to be reflected or reserved against in accordance with
GAAP and (ii) for the liabilities incurred in the ordinary course of business
consistent with past practice since December 31, 1998, neither Parent nor Seller
has incurred any liability that, either alone or when combined with all similar
liabilities, has had or would have a Material Adverse Effect with respect to the
Business.
3.9 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed in the
Financial Statements or reports filed by Parent pursuant to the Securities Act
or Exchange Act (the "PARENT REPORTS") filed prior to the date of this
Agreement, since December 31, 1998 to the date of this Agreement, Seller has
conducted the Business only in the ordinary course and in a manner consistent
with past practice and, since December 31, 1998, there has not been (i) any
change in the financial condition, results of operations or business of Seller
having a Material Adverse Effect with respect to the Business, (ii) any damage,
destruction or loss not covered by insurance with respect to any assets of
Seller having a Material Adverse Effect with respect to the Business, (iii) any
declaration, setting aside or payment of any dividends or distributions in
respect of shares of capital stock of Seller or any redemption, purchase or
other acquisition of any of its securities, (iv) any entering into of any new,
or modification, amendment or termination (partial or complete) of any existing
collective bargaining agreement, contract or other agreement or understanding
with a labor union or similar organization to which Seller has been, or is, a
party or Plan (as defined below), or other increase in the salary, bonus, rate
of commission or rate of consulting fees payable or to become payable to any
directors, officers, employees or consultants of Seller, or employment or
severance agreement or other employee compensation arrangement with any of its
directors, officers or employees (whether new hires or existing employees), in
each case where such compensation or arrangement exceeds $75,000, or (v) any
union organizing activities relating to employees of Seller or any entering
into of any other material transaction involving or affecting each Seller
outside the ordinary course of business of Seller consistent with past practice.
3.10 ABSENCE OF LITIGATION. Neither Seller nor Parent is a party to
any, and there are no pending or, to the knowledge of Seller and Parent,
threatened, legal, administrative, arbitral or other
9
<PAGE>
proceedings, claims, actions or governmental or regulatory investigations of
any nature against Seller or Parent challenging the validity or propriety of
the transactions contemplated by this Agreement which if unfavorably
determined would prevent the consummation of the transactions contemplated
hereby. There are no claims and judgments pending with respect to which
Seller has been duly served or otherwise received notice as of the date of
this Agreement, or, to the knowledge of either Seller or Parent, threatened
against Seller or outstanding against Seller or affecting the Business, that
in the aggregate would have a Material Adverse Effect on the Business. No
injunction, order, judgment, decree or regulatory restriction has been
imposed on Parent, Seller or the assets of Seller which has had or reasonably
could be expected to have a Material Adverse Effect with respect to the
Business.
3.11 EMPLOYEE BENEFIT PLANS.
(a) PLANS OF SELLER. SECTION 3.11(a) of the Seller Disclosure
Schedule lists (i) all employee benefit plans (as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA")), and all
bonus, stock option, stock purchase, restricted stock, incentive, deferred
compensation, retiree medical or life insurance, supplemental retirement,
severance or other benefit plans, programs or arrangements and all employment
termination, severance or other employment contracts or employment agreements,
with respect to which Seller has any obligation and which benefit any of its
employees (collectively, the "PLANS"). Seller has furnished or made available
to Buyer a copy of each Plan (or a description of the Plans, if the Plans are
not in writing) and a copy of (i) each trust or other funding arrangement, (ii)
each summary plan description and summary of material modifications, (iii) any
IRS Forms 5500 and related schedules filed since August 1998, (iv) any IRS
determination letter for each such Plan issued since August 1998, (v) any
actuarial and financial statements in connection with each such Plan issued
since August 1998, and (vi) any other material information relating to each such
Plan as requested by Buyer, to the extent it is available to the Company.
(b) ABSENCE OF CERTAIN TYPES OF PLANS. No plan is described in
Section 401(a)(1) of ERISA. SECTION 3.11(b) of the Seller Disclosure Schedule
lists all Plans that obligate Seller to pay separation, severance, termination
or similar-type benefits solely as a result of any transactions contemplated by
this Agreement or as a result of a "change in control," within the meaning of
such term under Section 280G of the Code (as defined below).
(c) COMPLIANCE WITH APPLICABLE LAW. Except as set forth in
SECTION 3.11(c) of the Seller Disclosure Schedule, each Plan has been operated
in all material respects in accordance with the requirements of all applicable
Law and all persons who participate in the operation of such Plans and all Plan
"fiduciaries" (within the meaning of Section 3(21) of ERISA) have acted in all
material respects in accordance with the provisions of all applicable Law.
Seller has performed in all material respects all obligations required to be
performed by it under the Plans, is not in material default under or in material
violation of the Plans and Seller has no knowledge of any such default or
violation by any party to the Plans.
(d) QUALIFICATION OF CERTAIN PLANS. Each Plan that is intended
to be qualified under Section 401(a) of the Code or Section 401(k) of the Code
(including each trust established in
10
<PAGE>
connection with such a Plan that is intended to be exempt from Federal income
taxation under Section 501(a) of the Code) has received a favorable
determination letter from the Internal Revenue Service ("IRS") that it is so
qualified, and to Seller's knowledge no material fact or event has occurred
since the date of such determination letter from the IRS to adversely affect
the qualified status of any such Plan. No trust, if any, maintained or
contributed by Seller to fund any Plan is intended to be qualified as a
voluntary employees' beneficiary association or is intended to be exempt from
federal income taxation under Section 501(c)(9) of the Code.
(e) ABSENCE OF CERTAIN LIABILITIES AND EVENTS. Seller has not
incurred any material liability under Title IV of ERISA or for any excise tax
arising under Section 4971 through 4980E of the Internal Revenue Code of 1986,
as amended (the "CODE") with respect to any Plan, and to the knowledge of Seller
no fact or event exists that could give rise to any such liability.
(f) PLAN CONTRIBUTIONS. All contributions, premiums or
payments required to be made with respect to any Plan have been made.
(g) MULTIEMPLOYER PLANS. Each Plan that is a multiemployer
plan (within the meaning of Section 3(37) of ERISA) is disclosed in SECTION
3.11(g) of the Seller Disclosure Schedule. With respect to each such plan, (i)
no withdrawal liability has been incurred by Seller and Seller has no reason to
believe that any such liability will be incurred prior to the Closing Date, (ii)
to Seller's knowledge no such plan is in "reorganization" (within the meaning of
Section 4241 of ERISA), no proceedings have been instituted by the Pension
Benefit Guaranty Corporation against the plan, there is no contingent liability
for withdrawal liability by reason of a sale of assets pursuant to Section 4204
of ERISA, and any withdrawal under Section 4203 of ERISA that will occur by
reason of the Closing will not result in the imposition of withdrawal liability
on Seller, and (iii) no notice has been received that increased contributions
may be required to avoid a reduction in plan benefits or the imposition of an
excise tax, or that the plan is or may become "insolvent" (within the meaning of
Section 4245 of ERISA).
(h) POST-RETIREMENT MEDICAL. No Plan provides medical or life
benefits beyond an employee's termination of employment (other than as required
by applicable Law).
3.12 LABOR AND EMPLOYMENT MATTERS.
(a) Except for confidentiality, noncompetition, consulting or
other similar contracts with any employees, consultants, officers or directors
of Seller set forth in SECTION 3.12(a) of the Seller Disclosure Schedule, Seller
is not a party to any such contracts. Each such contract is in full force and
effect and neither Seller nor Parent or, to the knowledge of Seller or Parent,
any other party to such contract has received notice that Seller is in violation
or breach of or default in any material respect under any such contract (or with
notice or lapse of time or both, would be in violation or breach of or default
in any material respect under any such contract).
(b) Except as set forth in SCHEDULE 3.12(b) of the Seller
Disclosure Schedule: (i) Seller's current employees are not represented by a
labor union or organization, no labor union or organization has been certified
or recognized as a representative of any such current employees,
11
<PAGE>
and Seller is not a party to and/or has any obligation under any collective
bargaining agreement or other labor union contract, white paper or side
agreement with any labor union or organization or any obligation to recognize
or deal with any labor union or organization, and there are no such
contracts, white papers or side agreements pertaining to or which determine
the terms or conditions of employment of any current employees of Seller;
(ii) there are no pending or threatened representation campaigns, elections
or proceedings or questions concerning union representation involving any
current employees; (iii) neither Seller nor Parent has knowledge of any
activities or efforts of any labor union or organization (or representatives
thereof) to organize any current employees of Seller, nor of any demands for
recognition or collective bargaining, nor of any strikes, slowdowns, work
stoppages or lock-outs of any kind, or threats thereof, by or with respect to
any current employees or any actual or claimed representatives thereof, and
no such activities, efforts, demands, strikes, slowdowns, work stoppages or
lock-outs occurred since July 15, 1998 (and, to the knowledge of Seller and
Parent, for the past 24 months); (iv) Seller has not engaged in, admitted
committing or been held in any administrative or judicial proceeding to have
committed any unfair labor practice under the National Labor Relations Act,
as amended; (v) Seller is not involved in any industrial or trade dispute or
any dispute or negotiations regarding a claim of material importance with any
labor union or organization; and (vi) there are no controversies, claims,
demands or grievances of material importance pending or, so far as Seller or
Parent is aware, threatened, between Seller, on the one hand, and any of its
employees or any actual or claimed representative thereof, on the other hand.
(c) Seller is in material compliance with all Laws relating to
the employment of labor, including but not limited to such Laws relating to
wages, hours, the Worker Adjustment Retraining and Notification Act of 1988
("WARN"), collective bargaining, discrimination, civil rights, safety and
health, worker's compensation and the collection and payment of withholding
and/or social security taxes and any similar tax.
3.13 TANGIBLE PERSONAL PROPERTY. Seller has good and indefeasible
title to all of its owned tangible personal property and assets, free and clear
of all Liens, except liens for Taxes not yet due and payable, pledges to secure
deposits and such minor imperfections of title, if any, as do not materially
detract from the value of or interfere with the present use of such property or
which, individually or in the aggregate, would not have a Material Adverse
Effect with respect to the Business. All leases pursuant to which Seller leases
from others tangible or personal property are in good standing, valid and
effective in accordance with their respective terms. All items of tangible
personal property are listed in SECTION 3.13 of the Seller Disclosure Schedule,
indicating which such tangible personal property is owned or leased. All such
tangible personal property is adequate and suitable for the conduct of the
Business and is in good working order and condition, ordinary wear and tear
excepted.
3.14 ENVIRONMENTAL MATTERS. Seller and Parent represent and warrant as
follows: (i) Seller and all Real Property and real property subject to Real
Property Leases are in compliance with all applicable Environmental Laws (as
defined below); (ii) there is no amount of asbestos or ureaformaldehyde material
in or on any property owned, leased or operated by Seller or Parent in
connection with the Business; (iii) there are no underground storage tanks
located on, in or under any properties currently owned, leased or operated by
Seller or Parent in connection with the
12
<PAGE>
Business that violate or result in liability under any Environmental Law (as
defined below); (iv) neither Seller nor Parent have been notified by any
governmental agency or third party of any pending or threatened Environmental
Claim (as defined below) against Seller or Parent in connection with the
Business; (v) neither Seller nor Parent have been notified by any
governmental agency or any third party that either Seller or Parent in
connection with the Business may be a potentially responsible party for
environmental contamination or any Release (as defined below) of Hazardous
Materials (as defined below) in connection with the Business; (vi) Seller has
obtained and holds all permits, licenses and authorizations required under
applicable Environmental Laws relating to the Business ("ENVIRONMENTAL
PERMITS"); (vii) Seller is in compliance with all terms, conditions and
provisions of all applicable Environmental Permits; (viii) no Releases of
Hazardous Materials have occurred at, from, in, on, or under any property
currently or formerly owned, operated or leased by Seller or Parent in
connection with the Business or any predecessors of the Seller or Parent in
connection with the Business and no Hazardous Materials are present in, on or
about any such property that could give rise to an Environmental Claim by a
third party (including any governmental entity or private party) against
Seller; and (ix) neither Seller nor Parent in connection with the Business
have transported or arranged for the treatment, storage, handling, disposal
or transportation of any Hazardous Material to any location which could
result in an Environmental Claim against or liability to Seller; and (x)
there have been no environmental investigations, studies, audits or tests
conducted by, on behalf of or which are in the possession of any Seller or
the Parent with respect to any property currently or formerly owned, leased
or operated by either Seller or Parent in connection with the Businesses
thereof which have not been delivered to Buyer prior to execution of this
Agreement, except in each case where such event or condition would not have a
Material Adverse Effect on the Business.
For purposes of this Section, "ENVIRONMENTAL CLAIMS" shall mean any and
all administrative, regulatory, judicial or private actions, suits, demands,
notices, claims, investigations, injunctions or similar proceedings that may
create liability for Seller in any way relating to: (i) any Environmental Law;
(ii) any Hazardous Material, including without limitation any investigation,
monitoring, abatements, removal, remedial, corrective or other response action
in connection with any Hazardous Material, Environmental Law or order or notice
of liability or violation of a governmental entity or Environmental Law; or
(iii) any actual or alleged damage, injury, threat or harm to the environment.
"HAZARDOUS MATERIALS" shall mean any and all chemicals, pollutants,
contaminants, wastes, toxic substances, compounds, products, solid, liquid, gas,
petroleum, asbestos, asbestos-containing materials, polychlorinated biphenyls or
other regulated substances or materials which are hazardous, toxic or otherwise
harmful to the environment.
"ENVIRONMENTAL LAW" shall mean any and all federal and state civil and
criminal laws, statutes, ordinances, orders, codes, rules or regulations of any
governmental or regulatory authority relating to the protection of health, the
environment, natural resources, worker health and safety and/or governing the
handling, use, generation, treatment, storage, transportation, disposal,
manufacture, distribution, formulation, packaging, labeling, or Release of
Hazardous Materials, including but not limited to: the Clean Air Act, 42 U.S.C.
Section 7401 ET SEQ.; the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, 42 U.S.C. Section 9601 ET SEQ.; the Federal Water
Pollution Control Act, 33 U.S.C. Section 1251 ET SEQ.; the Hazardous Material
13
<PAGE>
Transportation Act, 49 U.S.C. Section 1801 ET SEQ.; the Federal Insecticide,
Fungicide and Rodenticide Act, 7 U.S.C. Section 136 ET SEQ.; the Resource
Conservation and Recovery Act of 1976 ("RCRA"), 42 U.S.C. Section 6901 ET SEQ.;
the Toxic Substances Control Act, 15 U.S.C. Section 2601 ET SEQ.; the
Occupational Safety & Health Act of 1970, 29 U.S.C. Section 651 ET SEQ.; the Oil
Pollution Act of 1990, 33 U.S.C. Section 2701 ET SEQ.; and the state analogies
thereto, all as amended or superseded from time to time, on or before, but not
after, the Closing Date.
"RELEASE" shall mean any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, dumping or disposing of a
Hazardous Material into the environment.
3.15 ABSENCE OF AGREEMENTS. Seller is not a party to any agreement,
order, directive, memorandum of understanding or similar arrangement that
restricts materially the conduct of the Business, except for those the existence
of which has been disclosed in writing to Buyer prior to the date of this
Agreement, nor has Seller been advised, that any person or governmental
authority is contemplating issuing or requesting any such agreement, order,
directive, memorandum of understanding or similar arrangement.
3.16 TAXES.
(a) The Seller and Parent jointly and severally represent and
warrant as follows, limited, however, in each case, to Taxes, Tax Returns or
other Tax matters (i) that include, relate to or otherwise affect the Business
or the Purchased Assets, (ii) that could result in the imposition of a lien on,
or the assertion of a claim against, the Buyer with respect to any Purchased
Asset or (iii) that could affect the computation of the taxable income or the
Tax liability of Buyer or any affiliate thereof for any Post-Closing Period.
Parent and Seller have duly and timely filed all federal, state, local and other
returns and reports (the "TAX RETURNS") with respect to Seller or any
affiliated, combined, consolidated, unitary or similar group of which Seller or
any subsidiary is or was a member (a "RELEVANT GROUP") which are required to be
filed with respect to all federal, state, local or foreign net or gross income,
gross receipts, net proceeds, sales, use, ad valorem, transfer, value added,
franchise, withholding, payroll, employment, disability, excise, property,
alternative or add-on minimum, environmental or other taxes, assessments,
duties, fees, levies or other governmental charges of any nature whatever,
except to the extent in dispute and set forth in SECTION 3.16(a) of the Seller
Disclosure Schedule, together with any interest, penalties, additions to tax or
additional amounts with respect thereto (the "TAXES"); all Taxes shown on the
Tax Returns have been fully and timely paid and all such Tax Returns are
complete and correct. There are no pending or, to the knowledge of Parent and
Seller, threatened examinations, claims, liens, assessments or deficiencies to
which Seller or the Purchased Assets may be subject; all Taxes due and payable
by Parent or Seller with respect to the Purchased Assets have been fully and
timely paid.
(b) Seller is not a party to any agreement extending the time
within which to file any Tax Return. To Seller's knowledge, no claim has been
made by a jurisdiction in which Seller does not file Tax Returns that Seller is
or may be subject to taxation by that jurisdiction.
14
<PAGE>
(c) Seller has not waived any statute of limitations in respect
of Taxes or agreed to any extension of time with respect to any Tax assessment
or deficiency.
3.17 INSURANCE. SECTION 3.17 of the Seller Disclosure Schedule lists
all policies of insurance of Seller currently in effect. Each policy listed on
such Schedule is valid and in full force and effect. To Parent's and Seller's
knowledge, Seller has no liability for unpaid premiums or premium adjustments
not properly reflected on the applicable financial statements.
3.18 BROKERS. No broker, finder or investment banker is entitled to
any brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of Parent or Seller, except as provided in that certain letter
agreement between Parent and Schroder & Co. Inc. regarding such fees and such
fees are the sole responsibility of, and are to be paid by, Parent.
3.19 MATERIAL CONTRACTS. Except as included as exhibits in Parent
Reports, Seller is not a party to or obligated under any material contract,
agreement or other instrument or understanding that is not terminable by Seller
without additional payment or penalty within 90 days.
3.20 SUBSTANTIAL CUSTOMERS AND SUPPLIERS. SECTION 3.20 of the Seller
Disclosure Schedule lists the 5 largest customers or clients of Seller on the
basis of revenues for goods sold or services provided in the fiscal year ended
1997 and the 10 largest customers or clients in the fiscal year ended 1998.
SECTION 3.20 of the Seller Disclosure Schedule lists the 10 largest suppliers of
Seller on the basis of cost of goods or services purchased in the fiscal years
ended 1997 and 1998. For each such customer or supplier set forth in such
Schedule, a copy of such supplier or customer contract, agreement or
understanding with Seller or Parent has been delivered to Buyer prior to
execution of this Agreement. No such customer, client or supplier has ceased or
materially reduced its purchases from or sales or provision of services to
Seller since December 31, 1998, or to the knowledge of Seller or Parent, has
threatened to cease or materially reduce such purchases or sales or provision of
services after the date of this Agreement. Except for deposits or other
nonmaterial amounts paid in the ordinary course of business consistent with past
practice, Seller has not accepted any prepayment of any sales price or fee from
any client or customer that relates to products not yet delivered or services
not yet performed by Seller.
3.21 INTELLECTUAL PROPERTY.
(a) Seller owns all right, title and interest in or possesses
adequate licenses or other rights to use (i) all discoveries and inventions
(whether patentable or unpatentable and whether or not reduced to practice), all
improvements thereto, and all patents, patent applications (either filed or in
preparation for filing), and patent disclosures, together with all reissuance,
continuations, continuations-in-part, revisions, extensions and reexaminations
thereof, (ii) all trademarks, service marks, trade dress, brand names, logos,
trade names, Internet domain names, and corporate names, together with all
translations, adaptations, derivations and combinations thereof and including
all goodwill associated therewith, and all applications (either filed or in
preparation for filing), registrations and renewals in connection therewith,
(iii) all copyrightable works, all copyrights and all applications (either filed
or in preparation for filing), registrations
14
<PAGE>
and renewals in connection therewith, (iv) all trade secrets and confidential
business information (including ideas, research and development, know-how,
formulas, compositions, recipes, manufacturing and production processes and
techniques, technical data, designs, drawings, specifications, customer and
supplier lists, pricing and cost information and business and marketing plans
and proposals), (v) all computer software (including source code, data and
related documentation), (vi) all other proprietary rights, (vii) all copies
and tangible embodiments of all the foregoing (in whatever form or medium)
("INTELLECTUAL PROPERTY") used in or material to conduct the Business without
conflict with the rights of others. Seller Disclosure Schedule SECTION
3.21(a) sets forth a description of (i) all Intellectual Property currently
owned by or licensed to Seller and (ii) all licenses, royalties, assignments
and other similar agreements relating to the foregoing to which Seller is a
party and all agreements relating to technology, know-how or processes that
Seller is licensed or authorized to use by others, or which it licenses or
authorizes others to use, and which Seller uses (the "INTELLECTUAL PROPERTY
AGREEMENTS"). No other Intellectual Property is used in or material to the
conduct of the Business.
(b) The Intellectual Property does not infringe or violate the
intellectual property or contractual rights of any third parties in any country
where Seller does Business; to Seller's knowledge, no claim has been asserted or
threatened by any person to the ownership of or right to use any Intellectual
Property or challenging or questioning the validity or effectiveness of any such
license or agreement, and neither Parent nor Seller has knowledge of a valid
basis for any such claim; Parent and Seller have no knowledge of any claim that
any product, activity or operation of Seller infringes upon or involves, or has
resulted in the infringement of, any intellectual property rights of any other
person, and no proceedings have been instituted, are pending or, to the best of
the knowledge of Parent and Seller, are threatened which challenge the rights of
Seller with respect thereto, and neither Parent nor Seller has knowledge of a
valid basis for any such claim.
(c) To Seller's knowledge, no Intellectual Property is being
infringed by any third party; no action has been asserted or threatened that any
Intellectual Property is being infringed by any third party.
(d) All of the registrations and applications set forth in
SECTION 3.21(d) of the Seller Disclosure Schedule are in full force and effect
and all necessary registration, maintenance and renewal fees in connection
therewith have been made and all necessary documents and certificates in
connection therewith have been filed with the relevant patent, copyright,
trademark or other authority in the United States or foreign jurisdictions, as
the case may be, for the purpose of maintaining the registrations or
applications for registration of such Intellectual Property or updating record
title thereto, except where such events, either individually or in the
aggregate, would not, or be reasonably likely to, have a Material Adverse Effect
on the Business.
(e) All of the Intellectual Property is free and clear of any
and all Liens. There are no restrictions on the direct or indirect transfer of
the Intellectual Property, except as disclosed in any agreements licensing such
Intellectual Property to Seller.
16
<PAGE>
(f) The Intellectual Property Agreements are valid and binding
and in full force and effect, and true and correct copies have been provided to
the Buyer; Seller has not granted any license, agreement or other permission to
use such Intellectual Property except as disclosed on SECTION 3.21(f) of the
Seller Disclosure Schedule; the consummation of the transactions contemplated by
this Agreement will not violate nor result in the breach, modification,
cancellation, termination or suspension of the Intellectual Property Agreements,
and Seller is in compliance with, and has not breached any term of, any
Intellectual Property Agreement, and, to the knowledge of Seller, all of the
other parties to such Intellectual Property Agreements are in compliance with,
and have not breached, any of the terms thereof; there is no dispute between
Seller and any other party to any Intellectual Property Agreement regarding the
scope of the license or performance under any applicable Intellectual Property
Agreement, including with respect to any payments to be made by the Seller
thereunder, except where such events, either individually or in the aggregate,
would not have, or be reasonably likely to have, a Material Adverse Effect on
the Business.
(g) Seller has made available to Buyer prior to the execution
of this Agreement any available documentation with respect to any invention,
process, design, computer software and program or other know-how or trade secret
or proprietary information included in such Intellectual Property, which
documentation, if any, is accurate in all material respects and reasonably
sufficient in detail and content to identify and explain such invention,
process, design, computer software and programs or other know-how or trade
secret or proprietary information. Seller has taken reasonable security
measures to protect the secrecy, confidentiality and value of their trade
secrets and proprietary information (including the reasonable enforcement by
Seller of a policy requiring each employee or contractor to execute proprietary
information and confidentiality agreements in substantially Seller's standard
form, and to Seller's knowledge all current and former employees and contractors
of Seller have executed such an agreement).
3.23 YEAR 2000 REPRESENTATION. No technology owned, developed or
licensed by the Company or used in connection with the business (including, but
not limited to, information systems and technology, commercial and noncommercial
hardware and software, firmware, mechanical or electrical products, embedded
systems, or any other electro-mechanical or processor-based system, whether as
part of a desktop system, office system, building system or otherwise)
(collectively, the "TECHNOLOGY") will experience any malfunctions, premature
cancellation or expiration of contractual rights or deletion of data, or any
other problems in connection with (i) the year 2000 (and all subsequent years)
as distinguished from 1900 years, (ii) the date February 29, 2000, and all
subsequent leap years, and (iii) the date September 9, 1999, except where such
problems, either individually or in the aggregate, would not have a Material
Adverse Effect on the Business.
3.24 REAL PROPERTY. The Real Property listed on SECTION 1.1(a) of the
Seller Disclosure Schedule and Real Property Leases listed on SECTION 1.1(b) of
the Seller Disclosure Schedule are the only property of similar type used by
Seller in the Business. Seller owns the Real Property in fee subject to no
Liens, except for those set forth in SECTION 3.24 of the Seller Disclosure
Schedule. Seller's interest in the Real Property Leases is subject to no Liens,
except for those set forth in SECTION 3.24 of the Seller Disclosure Schedule.
True and correct copies of the Real Property Leases
17
<PAGE>
have been delivered or made available to Buyer by Seller. Subject to the
terms of the respective Real Property Leases, Seller has a valid and
subsisting leasehold estate in and the right to quiet enjoyment to the
property subject thereto for the full term of the respective Real Property
Lease. The Real Property Leases are in full force and effect and are
enforceable in accordance with their respective terms, except as such
enforceability may be subject to or limited by bankruptcy, insolvency,
reorganization or other similar Laws, now or hereafter in effect, affecting
the enforcement of creditors' rights generally. Seller has not assigned,
pledged, mortgaged, hypothecated or otherwise transferred any Real Property
Lease. Seller has not sublet all or any portion of any Leased Real Property.
Seller has not received any written notice of default under any Real Property
Lease, and to Seller's knowledge there is no material default by any tenant
or landlord under any Real Property Lease, and no event has occurred or
failed to occur which, with the giving of notice or the passage of time, or
both, would constitute a material default under any Real Property Lease. No
portion of any parcel of Real Property or real property subject to a Real
Property Lease is located in an area designated as a flood zone by any
governmental entity, except to the extent such property is adequately insured
by a policy of flood insurance. The Facilities are adequate and suitable for
the conduct of the Business and are in good working order and condition,
ordinary wear and tear excepted.
3.25 DISCLOSURE. No representation or warranty of Seller or Parent
contained in this Agreement, and no statement contained in the Seller Disclosure
Schedule or in any certificate, list or other writing furnished to Buyer
pursuant to any provision of this Agreement contains any untrue statement of a
material fact or omits to state a material fact necessary in order to make the
statements herein or therein, in light of the circumstances under which they
were made, not misleading.
3.26 MATERIAL ADVERSE EFFECT. Since December 31, 1998, there has been
no Material Adverse Effect with respect to the Business.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Except as set forth in the Disclosure Schedule delivered by Buyer to
Seller and Parent attached to this Agreement (the "BUYER DISCLOSURE SCHEDULE"),
which Buyer Disclosure Schedule shall reference disclosure items by section,
Buyer represents and warrants to Seller and Parent as follows:
4.1 ORGANIZATION; APPROVALS. Buyer is a corporation validly existing
and in good standing under the Canada Business Corporations Act. Buyer has the
requisite corporate power and authority and is in possession of all franchises,
grants, authorizations, licenses, permits, easements, consents, certificates,
approvals and orders ("BUYER APPROVALS") necessary to own, lease and operate its
properties and to carry on its business as it is now being conducted, and Buyer
has not received any notice of proceedings relating to the revocation or
modification of any Buyer Approvals, except where the failure to be so
organized, existing and in good standing or to have such power, authority, Buyer
Approvals and revocations or modifications would not, individually or in the
aggregate, have a Material Adverse Effect with respect to Buyer.
18
<PAGE>
4.2 AUTHORITY. Buyer has the requisite corporate power and authority
to execute and deliver this Agreement, to perform its obligations under this
Agreement and to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement by Buyer and the consummation by Buyer of the
transactions contemplated hereby have been duly and validly authorized by all
necessary corporate action and no other corporate proceedings on the part of
Buyer are necessary to authorize this Agreement or to consummate the
transactions contemplated hereby. This Agreement has been duly executed and
delivered by, and constitutes a valid and binding obligation of, Buyer and,
assuming due authorization, execution and delivery by Seller and Parent, is
enforceable against Buyer in accordance with its terms, except as enforcement
may be limited by general principles of equity whether applied in a court of law
or a court of equity and by bankruptcy, insolvency and similar laws affecting
creditors' rights and remedies generally.
4.3 NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) The execution and delivery of this Agreement by Buyer does
not, and the performance of this Agreement and the transactions contemplated
hereby by Buyer shall not, (i) conflict with or violate the charter documents of
Buyer, (ii) conflict with or violate any Laws applicable to Buyer or by which it
or any of its properties are bound or affected, or (iii) result in any breach of
or constitute a default (or an event that with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, or result in the creation of a Lien
on any of the properties or assets of Buyer pursuant to any note, bond,
mortgage, indenture, contract, agreement, lease, license, permit, franchise or
other instrument or obligation to which Buyer is a party or by which it or any
of its properties is bound or affected, except in the case of clauses (ii) and
(iii) for any such conflicts, violations, breaches, defaults or other
occurrences that, individually or in the aggregate, would not have or be
reasonably likely to have a Material Adverse Effect with respect to Buyer.
(b) The execution and delivery of this Agreement by Buyer does
not, and the performance of this Agreement by Buyer shall not, require any
consent, approval, authorization or permit of, or filing with or notification to
any governmental or regulatory authority or any third party except for
applicable requirements, if any, of the Securities Act, the Exchange Act, the
Blue Sky Laws, the HSR Act, and filing of other documents as required by
applicable law, applicable transfer tax filings and where the failure to obtain
such consents, approvals, authorizations or permits would not prevent or delay
consummation of the transactions contemplated hereby or otherwise prevent Buyer
from performing its obligations under this Agreement and would not have a
Material Adverse Effect with respect to Buyer.
4.4 ABSENCE OF LITIGATION. Buyer is not a party to any, and there are
no pending or, to the knowledge of Buyer, threatened, legal, administrative,
arbitral or other proceedings, claims, actions or governmental or regulatory
investigations of any nature against Buyer challenging the validity or propriety
of the transactions contemplated by this Agreement which if unfavorably
determined would prevent the consummation of the transactions contemplated
hereby.
4.5 BROKERS. No broker, finder or investment banker is entitled to
any brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this
19
<PAGE>
Agreement based upon arrangements made by or on behalf of Buyer, except as
provided in that certain letter agreement between Buyer and Downer & Company
L.L.C. regarding such fees, which fees are the sole responsibility of, and
are to be paid by, Buyer.
4.6 DISCLOSURE. No representation or warranty of Buyer contained in
this Agreement, and no statement contained in the Buyer Disclosure Schedule or
in any certificate, list or other writing furnished to Seller or Parent pursuant
to any provision of this Agreement contains any untrue statement of a material
fact or omits to state a material fact necessary in order to make the statements
herein or therein, in light of the circumstances under which they were made, not
misleading.
ARTICLE V
CERTAIN COVENANTS
5.1 AFFIRMATIVE COVENANTS. Seller and Parent covenant and agree with
Buyer that from and after the date of this Agreement and prior to the Closing
Date, unless the prior written consent of Buyer shall have been obtained and
except as otherwise contemplated herein, Seller will, and Parent shall cause
Seller to:
(a) operate its business only in the ordinary course consistent
with past practices;
(b) use reasonable efforts to preserve intact its business
organization and assets, maintain its rights and franchises, retain the services
of its officers and key employees and maintain its relationships with customers;
(c) use reasonable efforts to maintain and keep its properties
in good repair and condition, ordinary wear and tear excepted;
(d) use reasonable efforts to keep in full force and effect
insurance and bonds comparable in amount and scope of coverage to that now
maintained by it;
(e) perform in all material respects all obligations required
to be performed by it under all material contracts, leases and documents
relating to or affecting the Business;
(f) maintain its Books and Records in the usual, regular or
ordinary manner consistent with past practice and provide Buyer access to such
materials at a reasonable time and place as Buyer and Seller may agree;
(g) use reasonable efforts to obtain all authorizations,
consents, orders and approvals from all governmental or regulatory authorities
that may be or become necessary for its execution and delivery of and the
performance of its obligations under this Agreement;
(h) take such reasonable action as shall be required to fulfill
any and all contractual or statutory obligations Seller may have to any unions
or labor organizations or otherwise as a result of or relating to the execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby;
20
<PAGE>
(i) take such reasonable actions required pursuant to the terms
of any contracts and agreements to address the consequences of the transactions
contemplated by this Agreement, and to obtain necessary consents and required
releases; and
(j) use best efforts to obtain from the City of Carbondale (the
"City") an amendment to the Lease Agreement listed on SCHEDULE 1.1(b), whereby
the City waives its termination rights pursuant to the provisions of Article XIV
of such Lease Agreement.
In addition, Parent will vote all of its shares of stock of Seller to authorize
the transactions contemplated by this Agreement pursuant to the terms and
conditions set forth in this Agreement.
5.2 NEGATIVE COVENANTS. Except as specifically contemplated by this
Agreement, from the date of this Agreement until the Closing Date, Seller shall
not, and Parent shall cause Seller not to, without the prior written consent of
Buyer, do any of the following:
(a) except as required by applicable Law or to maintain
qualification pursuant to the Code, adopt, amend, renew or terminate any Plan or
any agreement, arrangement, plan or policy between Seller and one or more of
Seller's current or former directors, officers or employees, or except for
normal increases in the ordinary course of business consistent with past
practice or except as required by applicable Law, increase in any manner the
base salary, bonus incentive compensation or fringe benefits of any director,
officer or employee or pay any benefit not required by any Plan or agreement as
in effect as of the date of this Agreement (including without limitation the
granting of stock options, stock appreciation rights, restricted stock,
restricted stock units or performance units or shares);
(b) (i) merge with or into any other corporation, permit any
other corporation to merge into it or consolidate with any other corporation, or
effect any reorganization or recapitalization; (ii) purchase or otherwise
acquire any substantial portion of the assets or stock of any corporation; or
(iii) liquidate, sell, dispose of, or encumber any assets or acquire any assets,
other than in the ordinary course of its business consistent with past practice;
(c) propose or adopt any amendments to the Seller Certificate
or Seller Bylaws in any way adverse to Buyer;
(d) change any of its methods of accounting in effect at
December 31, 1998 or change any of its methods of reporting income or deductions
for federal income tax purposes from those employed in the preparation of the
federal income tax returns for the taxable year ended December 31, 1998, except
as may be required by Law or GAAP;
(e) change in any material respect any material policies
concerning the Business, except as required by Law, including without
limitation: (i) sell, assign, transfer, pledge, mortgage or otherwise encumber
any of its assets, except for those sales, assignments, transfers, pledges,
mortgages and encumbrances (A) currently existing or provided for in existing
agreements, (B) incurred in individual amounts of less than $75,000 and in an
aggregate amount of no more than $750,000 or (C) incurred in the ordinary course
of business consistent with past practice; (ii) enter
21
<PAGE>
into any agreement with respect to any acquisition of a material amount of
assets or any discharge, waiver, satisfaction, release or relinquishment of
any material contract rights, liens, encumbrances, debt or claims, not in the
ordinary course of business and consistent with past practices; (iii) settle
any claim, action, suit, litigation, proceeding, arbitration, investigation
or controversy of any kind, for any amount in excess of $75,000, net of any
insurance proceeds, that would restrict in any material respect the Business;
(iv) make any capital expenditure in excess of $500,000, except in the
ordinary course and consistent with past practice; (v) make any investment of
more than $100,000; or (vi) take any action or fail to take any action which
individually or in the aggregate would have a Material Adverse Effect with
respect to Seller or the Business; PROVIDED, HOWEVER, nothing in this Section
shall prevent Seller from eliminating intercompany assets and liabilities
prior to the Closing; and
(f) agree in writing or otherwise to do any of the foregoing.
5.3 EXCLUSIVITY
For the period commencing on the date hereof and ending on the earlier of
the termination of this Agreement, the date specified in SECTION 8.1(e) or the
Closing (the "EXCLUSIVITY PERIOD"), except for discussions with Buyer and its
representatives, Parent will not, directly or indirectly through any director,
officer, shareholder, employee, agent, adviser or otherwise, orally or in
writing, initiate, solicit, encourage, respond to, discuss, negotiate or accept
any inquiries, indications of interest, proposals or offers from, or make any
inquiries, indications of interest, proposals, offers, counter proposals or
counteroffers to, or furnish any information to, any other person with respect
to (i) an acquisition of shares of Seller, (ii) additional equity or convertible
debt financing for Seller, (iii) an acquisition of all or a substantial part of
the assets of Seller, or (iv) a merger, consolidation or any other transaction
which would result in a change in control in Seller or a substantial change in
the business of Seller. Further, during such Exclusivity Period Parent will
promptly forward to Buyer any expressions of interest or other communications or
inquiries received by it in any such regard. During the Exclusivity Period,
Parent will make the books, records of Parent and Seller and management of
Parent available during normal business hours to Buyer and its representatives
for due diligence and valuation purposes.
In addition, during the Exclusivity Period, Buyer agrees that it will
not, except for discussions with Parent and its representatives, directly or
indirectly through any director, officer, shareholder, employee, agent, adviser
or otherwise, orally or in writing, initiate, solicit, encourage, respond to,
discuss, negotiate or make any inquiries, indications of interest, proposals,
offers, counterproposals or counteroffers to, or furnish any information to, any
other person with respect to a material transaction with or in respect of such
person.
5.4 ACCESS AND INFORMATION.
(a) From the date of this Agreement until the Closing Date and
upon reasonable notice, and subject to applicable Law relating to the exchange
of information, Parent and Seller shall afford to Buyer's officers, employees,
accountants, legal counsel and other representatives, access during normal
business hours to all its properties, books, contracts, commitments and records
22
<PAGE>
relating to the Business, but excluding any books, contracts, commitments and
records in any way related to the sale of the Business.
(b) From the date of this Agreement and until the Closing Date,
Seller shall furnish promptly to Buyer (i) a copy of each nonconfidential filing
made by Parent with the Securities and Exchange Commission (the "SEC"), under
the HSR Act or under any other applicable Laws promptly after such documents are
available, (ii) a copy of each Tax Return filed by Parent for the three most
recent years available with respect to or containing information pertaining to
the Business, a copy of any correspondence received from the IRS or any other
governmental entity or taxing authority or agency and any other correspondence
relating to Taxes payable with respect to the Business, and (iii) all other
information concerning the Business as Buyer may reasonably request, other than
in each case reports or documents which neither Seller nor Parent is permitted
to disclose under applicable Law or binding agreement entered into prior to the
date of this Agreement. The parties will make appropriate substitute disclosure
arrangements under circumstances in which the restrictions of the preceding
sentence apply.
(c) Unless otherwise required by Law, the parties will hold any
such information which is nonpublic in confidence until such time as such
information becomes publicly available through no wrongful act of either party,
and in the event of termination of this Agreement for any reason each party
shall promptly return all nonpublic documents obtained from any other party, and
any copies made of such documents, to such other party or destroy such documents
and copies. From the date hereof until the earlier of the Closing Date or the
termination of this Agreement, and subject to the other provisions of this
Agreement, the parties agree that they will take no actions outside of the
ordinary course of business to harm the value of the Business conducted by
Seller; provided, however, that this limitation shall not limit the ability of
the parties to engage in normal competition with each other (including, to the
extent applicable, effecting price adjustments to their respective products).
5.5 UPDATE DISCLOSURE; BREACHES.
(a) From and after the date of this Agreement until the Closing
Date, the parties shall update their respective Disclosure Schedules by written
notice to the other party to reflect any matters which have occurred from and
after the date of this Agreement which, if existing on the date of this
Agreement, would have been required to be described therein; provided that, (i)
to the extent that any information that would be required to be included in an
update under this Section would have in the past been contained in internal
reports prepared in the ordinary course, such update may occur by delivery of
such internal reports prepared in accordance with past practice, and (ii) to the
extent that updating required under this Section is unduly burdensome, Seller
and Buyer will use their best efforts to develop alternate updating procedures
utilizing, wherever possible, existing reporting systems.
(b) Each party shall, in the event it becomes aware of the
impending or threatened occurrence of any event or condition which would cause
or constitute a material breach (or would have caused or constituted a material
breach had such event occurred or been known prior to the date of this
Agreement) of any of its representations or agreements contained or referred to
herein, given
23
<PAGE>
prompt written notice thereof to the other party and use its best efforts to
prevent or promptly remedy the same.
5.6 EXPENSES. All Expenses (as defined below) incurred by Buyer,
on the one hand, and Parent and/or Seller, on the other hand, shall be borne
solely and entirely by Buyer, on the one hand, and Parent, on the other hand.
"EXPENSES" as used in this Agreement shall include all reasonable fees and
out-of-pocket expenses (including without limitation all fees and expenses of
counsel, accountants, investment bankers, experts and consultants to the
party and its affiliates) incurred by a party or on its behalf in connection
with or related to the authorization, preparation and execution of this
Agreement, the solicitation of stockholder approvals and all other matters
related to the closing of the transactions contemplated hereby. Parent shall
be liable for and shall assume and pay the broker's fees of Schroder & Co.
Inc. and Buyer shall be liable for and shall assume and pay the broker's fees
of Downer & Company.
5.7 RETENTION OF RECORDS. Buyer shall retain all books and records of
Seller that Buyer receives from Seller for a period of six years following the
Closing Date. After the Closing, Seller and Parent and their respective
representatives shall have reasonable access to all such books and records
during normal business hours. In addition, Buyer shall upon reasonable request
furnish to Seller or Parent, without charge, copies of any such books or
records.
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 APPROPRIATE ACTION; CONSENTS; FILINGS. The parties shall use
reasonable efforts to (i) do all things appropriate under applicable Law to
consummate and make effective the transactions contemplated by this Agreement,
(ii) obtain all consents, licenses, permits, waivers, approvals, authorizations
or orders required under Law required in connection with the authorization,
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby, and (iii) make all necessary filings, and
thereafter make any other required submissions, with respect to this Agreement
required under the Securities Act and the Exchange Act and the rules and
regulations thereunder, any other applicable federal or state securities laws
and any other applicable Law; provided that, Buyer and Seller shall cooperate
with each other in connection with the making of all such filings that relate
specifically to the transactions contemplated by this Agreement, including
providing copies of all such documents to the nonfiling party and its advisors
prior to filing and, if requested, to accept all reasonable additions, deletions
or changes suggested in connection therewith.
6.2 EMPLOYEE BENEFIT MATTERS.
(a) RETENTION OF LIABILITY. Except as provided in this
Section, or as required pursuant to any collective bargaining agreement, neither
Buyer nor any of its affiliates shall adopt, become a sponsoring employer of,
nor have any obligations under or with respect to any Plan and Seller shall
retain all liabilities thereunder.
(b) WELFARE BENEFITS. Buyer shall be responsible for all (i)
claims for medical, dental and prescription drug benefits incurred by or with
respect to the Transferred Employees and
24
<PAGE>
former employees of the Seller (and their dependents), and (ii) claims
relating to COBRA coverage attributable to "qualifying events" incurred by or
with respect to any Transferred Employee or former employee of Seller (and
any dependent thereof), Seller shall be responsible for any and all claims
for workers compensation benefits for all Transferred Employees and former
employees of the Seller with respect to all work-related injuries which
occurred prior to the Closing, provided Buyer notifies Seller (directed to
the attention of Craig Jennings) within three (3) business days of any report
of such injury to Buyer (or one of its affiliates) by the employee. In
addition, on the Closing Date and for the balance of the 1999 calendar year,
Buyer (or one of its affiliates) shall cause to be maintained for the benefit
of all Transferred Employees and all former employees of the Seller for whom
benefits are being provided under the Spinnaker Industries Flexible Benefits
Plan (the "FLEX PLAN") as of the Closing Date (together with the Transferred
Employees, the "FLEX EMPLOYEES"), a plan substantially identical to the Flex
Plan. As soon as practicable thereafter, the Seller shall cause to be
transferred to the Buyer the credit or debit balances in the various spending
accounts under the Flex Plan along with any net cash amount attributable to
those balances for the Flex Employees. Following such transfer, Buyer (or
one of its affiliates) shall be responsible for all liabilities for all Flex
Employees under the Buyer's Plan. Further, Buyer shall be responsible for all
severance payments owing to any Transferred Employee except that Seller,
promptly after receiving written notice from Buyer (or one of its affiliates)
shall reimburse Buyer (or one of its affiliates) for all costs (including
payroll taxes) relating to the provision of any severance benefits and
payments made to any Transferred Employee, up to a maximum reimbursement,
when combined with any reimbursement of severance pursuant to Section 7.2(a)
of the Stock Purchase Agreement, of $700,000.00. Buyer also shall be
responsible for all disability claims filed after Closing with respect to the
Transferred Employees, except that Seller shall remain responsible for any
long term or short term disability benefits payable under the Spinnaker
Industries Short Term and Long Term Disability Plans, to the extent such
benefits are insured, the disability began or is found to have begun prior to
the Closing Date, and the disability claim was not filed by a former employee
of the Buyer (or one of its affiliates) after such Employee was involuntarily
terminated from employment by the Buyer (or one of its affiliates). Seller
shall cooperate with Buyer in effecting an assignment to Buyer of any
policies of insurance for the provision of health or welfare benefits to the
Transferred Employees and former employees of Seller and any other individual
who is not a Transferred Employee or former employee of Seller and
administrative contracts relating thereto, if requested by Buyer.
(c) 401(k) PLAN. On or as soon as practicable after the
Closing Date, Buyer (or one of its affiliates) shall cause to be maintained for
the benefit of Transferred Employees and all former employees of the Seller for
whom benefits are owing under the Spinnaker Industries Affiliates' 401(k) Plan
(the "PARENT'S 401(k) PLAN") (together referred to as the "401(k) EMPLOYEES") a
defined contribution plan intended to be qualified under Section 401(k) of the
Code ("BUYER'S 401(k) PLAN"). As soon as practicable after the Closing Date,
but in any event prior to the transfer referred to herein, Buyer shall deliver
to Seller a copy of the most recent favorable determination letter for the
Buyer's 401(k) Plan, or evidence that such determination letter is not
necessary, or evidence of an application timely filed with the IRS for such a
letter with respect to a newly adopted plan. In addition, if the Buyer's 401(k)
Plan is a newly adopted plan for which a determination letter is necessary,
Buyer shall make or cause to be made timely any and all amendments requested by
the IRS in order to ensure that the Buyer's 401(k) Plan meets the requirements
to ensure it receives a
25
<PAGE>
favorable determination letter. As soon as practicable thereafter, Seller
shall direct the trustee of the trust funding Parent's 401(k) Plan to
transfer to the trustee of the trust funding Buyer's 401(k) Plan the
aggregate individual account balances of the 401(k) Employees (whether or not
vested). Individual account balances shall be valued as of the date of
transfer, and the transfer shall be in cash or in kind, as determined by
Buyer, except that outstanding loan balances shall be transferred in the form
of notes or other appropriate documents evidencing such loans. Prior to the
date of the transfer, Seller or its affiliates shall have contributed all
contributions (including salary deferral and matching contributions)
attributable to service performed by the 401(k) Employees through the Closing
Date. Following such transfer, Buyer or one of its affiliates shall be
responsible for liabilities attributable to 401(k) Employees under the
Buyer's 401(k) Plan. In the event that the Buyer fails to obtain a favorable
determination letter from the IRS in respect of the Buyer's 401(k) Plan, the
Buyer shall indemnify Seller and Parent, from and after the Closing Date,
against, and agrees to hold Seller and Parent harmless from, any and all
damages incurred or suffered by Seller and Parent as a result of the Buyer's
failure to satisfy the requirements of this SECTION 6.2(c).
(d) NO RIGHTS. Nothing in this Section shall be construed to
give any employee or former employee of Seller (or any beneficiary thereof) any
rights of any kind, including any right to continued employment with Buyer or
the right to any particular terms of employment, nor shall anything contained in
this Section be construed to prevent Buyer or any of its affiliates from
terminating or modifying any benefit plan that they may establish or assume.
(e) EMPLOYEES. Buyer shall offer employment to all of Seller's
employees effective as of the Closing Date on terms and, for the balance of the
1999 calendar year, with compensation and benefits substantially similar to
those in force immediately prior to the Closing Date (the "TRANSFERRED
EMPLOYEES").
6.3 NOTIFICATION OF CERTAIN MATTERS. Parent and Seller shall give
prompt notice to Buyer, and Buyer shall give prompt notice to Parent and Seller,
of (i) the occurrence or non-occurrence of any event, the occurrence or
nonoccurrence of which would be likely to cause any representation or warranty
contained in this Agreement to be untrue or inaccurate and (ii) any failure of
Parent or Seller or Buyer, as the case may be, to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it
hereunder; PROVIDED, HOWEVER, that the delivery of any notice pursuant to this
Section shall not limit or otherwise affect the remedies available hereunder to
the party receiving such notice.
6.4 PUBLIC ANNOUNCEMENTS. Buyer and Seller shall consult with each
other before issuing any press release or otherwise making any public statements
with respect to the transactions contemplated hereby and shall not issue any
such press release or make any such public statement prior to such consultation,
except as may be required by Law or any listing agreement with or rule of the
National Association of Securities Dealers, Inc.
6.5 CUSTOMER RETENTION. To the extent permitted by law or applicable
regulation, Parent and Seller shall use reasonable efforts to assist Buyer in
its efforts to retain Seller's customers. Such efforts may include making
introductions of Buyer's employees to such customers, assisting in the mailing
of information prepared by Buyer and reasonably acceptable to Parent and Seller,
to such
26
<PAGE>
customers and actively participating in any "transitional marketing programs
as the parties may agree upon.
6.6 TAX COOPERATION AND INDEMNIFICATION.
(a) Seller, Parent and Buyer shall each, and shall cause their
respective affiliates to, provide the other party with such cooperation,
assistance and information as any of them may reasonably request in respect of
Taxes of the Business or the Purchased Assets, the preparation of any Tax
Return, including Tax Returns relating to transfer Taxes, amended Tax Return or
claim for refund in respect of the Purchased Assets, or the participation in or
conduct of any audit or other examination by any taxing authority or judicial or
administrative proceeding relating to liability for Taxes of the Purchased
Assets. Such cooperation and information shall include (i) providing copies of
all relevant portions of relevant Tax Returns, together with relevant
accompanying schedules and relevant workpapers, relevant documents relating to
rulings or other determinations by taxing authorities and relevant records
concerning the ownership and Tax basis of property, which any such party may
possess, and (ii) making employees available on a mutually convenient basis to
provide explanations of any documents or information provided.
(b) From and after the Closing Date, to the extent a Tax is
imposed on Buyer with respect to the Purchased Assets or Business for any period
ending on or before the Closing Date ("PRE-CLOSING PERIOD"), Parent and Seller
jointly and severally agree to pay the amount of such Tax, on a Grossed-Up
Basis, plus any additional penalties and interest incurred in the payment of
such Tax, to the appropriate Taxing Authority or to Buyer, as appropriate,
within the later of 30 days of receipt of notice of such Tax or final resolution
of any dispute relating to such Tax. If such Tax is paid by Buyer, Parent and
Seller jointly and severally agree to reimburse Buyer the amount of such Tax, on
a Grossed-Up Basis, plus any additional penalties and interest incurred in the
payment of such Tax.
(c) From and after the Closing Date, to the extent a Tax (other
than a Tax described in the first sentence of SECTION 6.6(b)) is imposed on
Parent or Seller with respect to the Purchased Assets or Business for any period
after the Closing Date ("POST-CLOSING PERIOD"), Buyer agrees to pay the amount
of such Tax, on a Grossed-Up Basis, plus any additional penalties and interest
incurred in the payment of such Tax, to the appropriate Taxing Authority within
the later of 30 days of receipt of notice of such Tax or final resolution of any
dispute relating to such Tax. If such Tax is paid by Parent or Seller, Buyer
agrees to reimburse Seller the amount of such Tax, on a Grossed-Up Basis, plus
any additional penalties and interest incurred in the payment of such Tax.
(d) (i) If any Taxing Authority or other person asserts a
claim with respect to Taxes of the Purchased Assets or Business (a "TAX CLAIM"),
then the party hereto first receiving notice of such Tax Claim properly payable
by another party to this Agreement (the "RESPONSIBLE PARTY") shall provide
written notice thereof to the Responsible Party within 30 days of having
received such notice; PROVIDED, HOWEVER, that the failure of a party to give
such prompt notice to the Responsible Party shall not relieve such Responsible
Party of any of its obligations under this SECTION 6.6. Such notice shall
specify in reasonable detail the basis for such Tax Claim and shall
27
<PAGE>
include a copy of any relevant correspondence received from the Taxing
Authority or other person.
(ii) If within 60 days after receiving a Tax Claim or
written notice of such a Tax Claim with respect to Pre-Closing Period Taxes from
the Buyer, Parent or Seller notifies the Buyer that Parent or Seller desires to
defend Buyer with respect to the Tax Claim, then Parent or Seller shall have the
right to defend or prosecute, at its sole cost, expense and risk, such Tax Claim
by all appropriate proceedings, which proceedings shall be defended or
prosecuted diligently by Parent or Seller; PROVIDED, HOWEVER, Parent or Seller
shall not, without the prior written consent of Buyer, enter into any compromise
or settlement of such Tax Claim that would result in any Tax detriment to Buyer;
and PROVIDED FURTHER, that Buyer may, at the sole cost and expense of Buyer, at
any time prior to its delivery of the notice referred to in the first sentence
of SECTION 6.6(d)(i) file any motion, answer or other pleadings or take any
other action that Buyer reasonably believes to be necessary or appropriate to
protect its interests. So long as Parent or Seller is defending or prosecuting
a Tax Claim, Buyer shall provide or cause to be provided to Parent or Seller any
information reasonably requested by Parent or Seller relating to such Tax Claim,
and Buyer shall otherwise cooperate with Parent or Seller and its
representatives in good faith in order to contest effectively such Tax Claim.
Parent or Seller shall inform Buyer of all developments and events relating to
such Tax Claim (including without limitation, providing to Buyer copies of all
written materials relating to such Tax Claim), and Buyer or its authorized
representatives shall be entitled, at the expense of Buyer, to participate in,
all conferences, meetings and proceedings relating to such Tax Claim.
(iii) If Parent or Seller fails to notify Buyer within 60
days after receiving a Tax Claim or a written notice of such a Tax Claim with
respect to Pre-Closing Period Taxes from Buyer that Parent or Seller desires to
defend the Tax Claim pursuant to this SECTION 6.6(d) or, if after delivery of
such notice, Parent or Seller fails to reasonably defend or prosecute such Tax
Claim, then Buyer shall at any time thereafter have the right (but not the
obligation) to defend or prosecute, at the sole cost, expense and risk of Buyer,
such Tax Claim. Buyer shall have full control of such defense or prosecution
and such proceedings, including any settlement or compromise thereof. If
requested by Buyer, Parent or Seller shall cooperate in good faith with Buyer
and its authorized representatives in order to contest effectively such Tax
Claim. Parent or Seller may participate in, but not control any defense,
prosecution, settlement or compromise of any Tax Claim controlled by Buyer
pursuant to this SECTION 6.6(d)(iii), and shall bear its own costs and expenses
with respect thereto.
(e) Parent and Seller shall pay all transfer, real property
transfer, stock transfer and other similar taxes and fees ("TRANSFER TAXES")
arising out of or in connection with the transactions effected pursuant to this
Agreement, and shall indemnify, defend, and hold harmless Buyer and its
respective affiliates with respect to such Transfer Taxes. Parent or Seller
shall file all necessary documentation and Tax Returns with respect to such
Transfer Taxes.
(f) No amounts of indemnity for Tax payments shall be payable
as a result of a claim under this Section unless and until the party seeking
indemnity has suffered, incurred, sustained or become subject to Taxes,
penalties or interest in excess of $25,000, in which case such
28
<PAGE>
party shall be entitled to seek indemnity for all Taxes, penalties or
interest in excess of such $25,000 amount. All such indemnification payments
shall be made on a Grossed-Up Basis.
(g) All rights and obligations of the parties with respect to
indemnification under this Section shall survive for the applicable statute of
limitations (including any extensions) for the Tax for which such claim of
indemnification is based upon.
6.7 BULK TRANSFER LAWS. Buyer hereby waives compliance by Seller and
Parent with the laws of any jurisdiction relating to bulk transfers which may be
applicable in connection with the transfer of the Purchased Assets to Buyer;
PROVIDED, HOWEVER, that Seller and Parent shall indemnify, defend and hold Buyer
and its affiliates and representatives harmless from and against any and all
Losses (as defined in SECTION 10.3) directly or indirectly arising out of, or
resulting from, or relating to any failure to comply with such laws.
6.8 NON-COMPETITION.
(a) For a period commencing on the Closing Date and terminating
on the third anniversary thereof (the "PERIOD"), as an inducement to Buyer to
execute this Agreement and complete the transactions contemplated hereby, and in
order to preserve the goodwill associated with the Business, Parent and Seller
will not (1) engage in, continue in, participate in or have any material
interest in any sole proprietorship, partnership, corporation or business that
is engaged primarily or in any material respect in the business of the
manufacture, sale or distribution of pressure sensitive and water activated tape
and industrial electrical tape serving either the retail or industrial end
markets (the "PROHIBITED BUSINESS") in North America (the "TERRITORY"), (2)
consult with, advise or assist in any way, whether or not for consideration, any
corporation, partnership, firm or other business organization which is now or
becomes a competitor of Buyer in any aspect with respect to the Prohibited
Business, including, but not limited to, with respect to the Prohibited
Business, advertising or otherwise endorsing the products of any such
competitor, soliciting customers or otherwise serving as an intermediary for any
such competition or engaging in any form of business transaction on other than
an arms'-length basis with any such competitor; or (3) unless Buyer has
terminated such Transferred Employee, solicit for employment any Transferred
Employee that has been employed by Buyer, without the prior consent of Buyer;
PROVIDED, HOWEVER, that nothing herein shall be deemed to prevent (i) Parent or
Seller from acquiring through market purchases and owning, solely as an
investment, less than five percent of the equity securities of any class of any
issuer whose shares are registered under Section 12(b) or 12(g) of the Exchange
Act, and are listed or admitted for trading on any United States national
securities exchange or are quoted on the Nasdaq National Market, or any similar
system of automated dissemination of quotations of securities prices in common
use, so long as neither Parent nor Seller is a member of any "control group"
(within the meaning of the rules and regulations of the United States Securities
and Exchange Commission) of any such issuer, (ii) any offer by Parent or Seller
to employ a person in the Prohibited Business (except as set forth in this
Section), or (iii) Parent or Seller from being acquired by a person engaged in
any business in competition with the Prohibited Business of Seller.
The parties agree that Buyer may sell, assign or otherwise
transfer this covenant not to compete, in whole or in part, to any person,
corporation, firm or entity that succeeds to the
29
<PAGE>
Business. The parties further agree that the geographic scope of this
covenant not to compete shall extend to any city, county or other political
subdivision of any country in the Territory, each of which is deemed to be
separately named herein. Recognizing the specialized nature of the Purchased
Assets transferred to Buyer and the scope of competition, Seller and Parent
each acknowledge the geographic scope of this covenant not to compete to be
reasonable. The parties intend that the covenant contained in this Section
shall be construed as a series of separate covenants, one for each city,
county or political subdivision of each country in the Territory, each of
which is deemed to be separately named herein, each for a series of one-year
periods within the Period. Except for geographic coverage and periods of
effectiveness, each such separate covenant shall be identical in terms. If
in any judicial proceeding a court shall refuse to enforce any of the
separate covenants deemed included in this Section, then such unenforceable
covenant shall be deemed eliminated for the purpose of that proceeding to the
extent necessary to permit the remaining separate covenants to be enforced.
In the event a court of competent jurisdiction determines that the
provisions of this covenant not to compete are excessively broad as to duration,
geographic scope or activity, it is expressly agreed that this covenant not to
compete shall be construed so that the remaining provisions shall not be
affected, but shall remain in full force and effect, and any such over broad
provisions shall be deemed, without further action on the part of any person, to
be modified, amended and/or limited, but only to the extent necessary to render
the same valid and enforceable in such jurisdiction.
(b) Parent and Seller each agree with Buyer that the provisions
and restrictions contained in this Section are necessary to protect the
legitimate continuing interests of Buyer in acquiring the Purchased Assets, and
that any violation or breach of these provisions will result in irreparable
injury to Buyer for which a remedy at law would be inadequate. Parent and
Seller each agrees with Buyer that in the event of a violation or breach and
regardless of any other provision contained in this Agreement, Buyer shall be
entitled to injunctive and other equitable relief, including specific
performance, as a court may grant after considering the intent of this Section,
and Buyer shall not be entitled to any other form of relief from such violation
or breach.
6.9 FURTHER TRANSFER MATTERS. Effective on the Closing Date,
Seller and Parent hereby constitute and appoint Buyer the true and lawful
attorney-in-fact of Seller or Parent, with full power of substitution, in the
name of Seller or Parent, but on behalf of and for the sole benefit of Buyer:
(i) to demand and receive from time to time any and all of the Purchased
Assets and to make endorsements and give receipts and releases for and in
respect of the same and any part thereof and for the Business, (ii) to
institute, prosecute, compromise and settle any and all actions or
proceedings that Buyer may deem proper in order to collect, assert or enforce
any claim, right or title of any kind in or to the Purchased Assets or
Business, (iii) to defend or compromise any or all actions or proceedings in
respect of any of the Purchased Assets or Business, and (iv) to do all such
acts and things in relation to the matters set forth in the preceding clauses
(i) through (iii) as Buyer shall deem desirable. Seller and Parent hereby
acknowledges that the appointment hereby made and the powers hereby granted
are coupled with an interest and are not and shall not be revocable by it in
any manner or for any reason. At Closing, Seller shall provide Buyer with a
written power of attorney in form and substance appropriate to authorize and
carry out the above.
30
<PAGE>
6.10 PRORATIONS. The following prorations relating to the Purchased
Assets and the ownership and operation of the Business will be made as of the
Closing Date, with Seller liable to the extent such items relate to any time
period prior to the Closing Date and Buyer liable to the extent such items
relate to periods beginning with and subsequent to the Closing Date: (a) real
estate taxes on or with respect to the Real Property; (b) rents, additional
rents, taxes and other items payable by or to Seller under the Real Property
Leases; (c) the amount of charges for sewer, water, telephone, electricity and
other utilities relating to the Real Property and the real property subject to
the Real Property Leases; and (d) all other items (excluding personal property
taxes and other Taxes) normally adjusted in connection with similar
transactions. Except as otherwise agreed by the parties, the net amount of all
such prorations will be settled and paid on the Closing Date. If the Closing
shall occur before a real estate tax rate is fixed, the apportionment of taxes
shall be based upon the tax rate for the preceding year applied to the latest
assessed valuation.
6.11 RELEASE OF LIENS. Seller, at or before Closing, shall release of
record, the liens listed on SCHEDULE 3.24 of the Seller Disclosure Schedule.
ARTICLE VII
CONDITIONS OF CLOSING
7.1 CONDITIONS TO OBLIGATION OF EACH PARTY. The respective
obligations of each party to effect the transactions contemplated hereby shall
be subject to the satisfaction at or prior to the Closing Date of the following
conditions:
(a) NO ORDER. No federal or state governmental or regulatory
authority or other agency or commission, or federal or state court of competent
jurisdiction, shall have enacted, issued, promulgated, enforced or entered any
statute, rule, regulation, executive order, decree, injunction or other order
(whether temporary, preliminary or permanent) which restricts, prevents or
prohibits consummation of the transactions contemplated by this Agreement.
(b) HART-SCOTT-RODINO ACT. Early termination shall have been
granted or applicable waiting periods shall have expired under the HSR Act.
(c) CONSENT OF MUNICIPALITY. Seller shall have received
consent from any municipality required to provide consent to the transfer of
Real Property pursuant to this Agreement.
7.2 ADDITIONAL CONDITIONS TO OBLIGATIONS OF BUYER. The obligations
of Buyer to effect the transactions contemplated hereby are also subject to the
following conditions:
(a) REPRESENTATIONS AND WARRANTIES. Each of the
representations and warranties of Seller and Parent contained in this
Agreement, including giving effect to any update to the Seller Disclosure
Schedule, shall be true and correct in all material respects (except that
where any such statement in a representation or warranty expressly includes a
standard of materiality, such statement shall be true and correct in all
respects) as of the Closing Date (except to the extent such representations
and warranties speak as of an earlier date) as though made on and as of the
Closing
31
<PAGE>
Date, and Buyer shall have received a certificate signed on behalf of Seller
by the Chief Executive Officer or President and the Chief Financial Officer
of Seller to the foregoing effect.
(b) AGREEMENTS AND COVENANTS. Seller shall have performed or
complied in all material respects with all agreements and covenants required by
this Agreement to be performed or complied with by it on or prior to the Closing
Date.
(c) CONSENTS OBTAINED. All consents, waivers, approvals,
authorizations or orders required to be obtained and all filings required to be
made by Seller for the authorization, execution and delivery of this Agreement
and the consummation by it of the transactions contemplated hereby shall have
been obtained and made by Seller, except those for which failure to obtain such
approvals or make such filings would not individually or in the aggregate have a
Material Adverse Effect with respect to the Business.
(d) NO CHALLENGE. There shall not be pending any action,
proceeding or investigation before any court or administrative agency or by a
government agency (i) challenging or seeking material damages in connection with
the transactions hereby contemplated, (ii) seeking to restrain, prohibit or
limit the exercise of full rights of ownership or operation by Buyer of all or
any portion of the Purchased Assets, or (iii) seeking to recover against the
proceeds of the transactions contemplated hereby, which in any case is
reasonably likely to have a Material Adverse Effect with respect to the
Purchased Assets.
(e) NO MATERIAL ADVERSE CHANGES. Since the date of the
Agreement, there has not been any change in the financial condition, results of
operations or business of Seller or the Business, taken as a whole, that either
individually or in the aggregate would have a Material Adverse Effect with
respect to the Purchased Assets, and Buyer shall have received a certificate of
the Chief Executive Officer or President and the Chief Financial Officer of
Seller to such effect.
(f) OPINION OF COUNSEL. Buyer shall have received from Jenkens
& Gilchrist, a Professional Corporation, independent counsel to Seller
("SELLER'S COUNSEL"), an opinion dated the Closing Date, substantially in the
form attached as EXHIBIT A.
(g) REAL PROPERTY MATTERS.
(i) Buyer shall have received an estoppel and consent
certificate (dated not more than 30 days prior to the Closing Date) from each
landlord under a Real Property Lease reasonably acceptable in form to Buyer;
(ii) Buyer shall have received, at Seller's sole cost and
expense, a policy of title insurance, dated as of the Closing Date and issued by
Buyer's title insurance company, insuring the owner or tenant of the applicable
parcel of Real Property or real property subject to a Real Property Lease, free
of all Liens including, without limitation, all liens listed on SECTION 3.24 of
the Seller Disclosure Schedule, together with, at Seller's sole cost and
expense, an ALTA/ACSM survey for each such parcel reasonably acceptable to
Buyer. Seller shall deliver to Buyer's title
32
<PAGE>
insurance company a title affidavit sufficient to allow Buyer's title
insurance company to omit the customary standard exceptions from the policy
of title insurance;
(iii) Buyer shall have received a nondisturbance
agreement, in form reasonably acceptable to Buyer, from each holder of a
mortgage or deed of trust affecting any Real Property Lease;
(iv) Buyer shall have received special warranty deeds in
proper statutory form for recording and otherwise in form and substance
reasonably satisfactory to Buyer conveying title to the Real Property, if any,
in accordance with this Agreement and an assignment of each Real Property Lease
conveying title to each Real Property Lease in accordance with this Agreement in
a form reasonably acceptable to Buyer;
(h) FINANCING AND EMPLOYMENT RELEASES. Buyer shall have
received releases or other documentation in form reasonably satisfactory to
Buyer evidencing the satisfaction of obligations of Seller under or pursuant to
the tesa Credit Agreement, any relevant employment agreements and the tesa Note;
and
(i) WARRANTY CLAIM. On or before April 30, 1999, Seller shall
have asserted in writing a warranty claim in respect of the repair of the floor
and foundation at the Carbondale, Illinois facility and shall have assigned all
its rights under such warranty claim to Buyer.
7.3 ADDITIONAL CONDITIONS TO OBLIGATIONS OF THE SELLER. The
obligations of Parent and Seller to effect the transactions contemplated hereby
are also subject to the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. Each of the
representations and warranties of Buyer set forth in this Agreement, including
giving effect to any update to the Buyer Disclosure Schedule, shall be true and
correct in all material respects (except that where any such statement in a
representation or warranty expressly includes a standard of materiality, such
statement shall be true and correct in all respects) as of the Closing Date
(except to the extent such representation and warranties speak as of an earlier
date), as though made on and as of the Closing Date, and Seller shall have
received a certificate signed on behalf of Buyer by the Chief Executive Officer
or President and the Chief Financial Officer of Buyer to the foregoing effect.
(b) AGREEMENTS AND COVENANTS. Buyer shall have performed or
complied in all material respects with all agreements and covenants required by
this Agreement to be performed or complied with by it on or prior to the Closing
Date.
(c) CONSENTS UNDER AGREEMENTS. All consents, waivers,
approvals, authorizations or orders required to be obtained, and all filings
required to be made by Buyer for the authorization, execution and delivery of
this Agreement and the consummation by it of the transactions contemplated
hereby shall have been obtained and made by Buyer, except where failure to
obtain any consents, waivers, approvals, authorizations or orders required to be
obtained or any filings required to be made would not have a Material Adverse
Effect with respect to Buyer.
33
<PAGE>
(d) NO CHALLENGE. There shall not be pending any action,
proceeding or investigation before any court or administrative agency or by a
government agency (i) challenging or seeking material damages in connection with
transactions hereby contemplated or (ii) seeking to restrain, prohibit or limit
the exercise of full rights of ownership or operation by Buyer of all or any
portion of the Purchased Assets, which in either case would have a Material
Adverse Effect with respect to the Purchased Assets.
(e) NO MATERIAL ADVERSE CHANGES. Since the date of the
Agreement, there has not been any change in the financial condition, results of
operations or business of Buyer that either individually or in the aggregate
would have a Material Adverse Effect with respect to Buyer. Seller shall have
received a certificate of the Chief Executive Officer or President and the Chief
Financial Officer of Buyer to such effect.
(f) OPINION OF COUNSEL. Seller and Parent shall have received
from Morgan, Lewis & Bockius LLP, independent counsel to Buyer ("BUYER'S
COUNSEL"), an opinion dated the Closing Date, substantially in the form attached
as EXHIBIT B.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
8.1 TERMINATION. This Agreement may be terminated at any time prior
to the Closing Date:
(a) by mutual consent of Buyer, Seller and Parent;
(b) by either Parent, Buyer or Seller if any approval of
stockholders required for the consummation of the transactions contemplated
hereby shall not have been obtained by reason of the failure to obtain the
required vote at a duly held meeting of such stockholders or at any adjournment
or postponement thereof;
(c) by Seller, Parent or Buyer if there has been a breach in
any material respect (except that where any statement in a representation or
warranty expressly includes a standard of materiality, such statement shall have
been breached in any respect) of any representation, warranty, covenant or
agreement, set forth in this Agreement, on the part of any party, which breach
has not been cured within 10 business days following receipt by the
nonterminating party of notice of such breach or other condition, or which
breach by its nature, cannot be cured prior to the Closing Date; PROVIDED,
HOWEVER, this Agreement may not be terminated pursuant to this clause (c) by the
breaching party;
(d) by either Buyer, Parent or Seller if any permanent
injunction preventing the consummation of the transactions contemplated hereby
shall have become final and nonappealable or if any applicable Law or any rule
or regulation thereunder shall hereafter be enacted or becomes applicable that
makes the transactions contemplated hereby or the consummation of the Closing
illegal;
34
<PAGE>
(e) by either Buyer, Parent or Seller if the transactions
contemplated hereby shall not have been consummated by July 31, 1999, for a
reason other than the failure of the party seeking termination to comply with
its obligations under this Agreement; PROVIDED, HOWEVER, that in the event early
termination shall not have been granted or applicable waiting periods shall not
have expired under the HSR Act as of such date, the parties may agree to extend
such date for up to two additional 30 day periods, with such agreement not to be
unreasonably withheld, and, further, provided, if the Put Right in SECTION 10.2
of the Stock Purchase Agreement has been exercised, the parties shall in good
faith close the transaction contemplated hereby as soon as possible after such
exercise.
(f) by either Buyer, Parent or Seller if any regulatory
authority has denied approval of the transactions contemplated hereby, and
neither Buyer nor Seller has, within 30 days after the entry of such order
denying approval, filed a petition seeking review of such order as provided by
applicable law; or
(g) by Buyer in the event it shall have notified Parent and
Seller of its intention to terminate this Agreement pursuant to SECTION 6.11
within the time period set forth therein.
8.2 EFFECT OF TERMINATION. In the event of the termination of this
Agreement pursuant to SECTION 8.1, this Agreement shall forthwith become void
and all rights and obligations of any party shall cease except as set forth in
SECTION 5.4(c) of this Agreement; PROVIDED, HOWEVER, nothing herein shall
relieve any party from liability for any willful breach of this Agreement or
shall restrict either party's rights in the case thereof.
8.3 WAIVER. At any time prior to the Closing Date, the parties may
(a) extend the time for the performance of any of the obligations or other acts
of the other party, (b) waive any inaccuracies in the representations and
warranties contained herein or in any document delivered pursuant hereto and (c)
waive compliance with any of the agreements or conditions contained herein. Any
such extension or waiver shall be valid only if set forth in a written
instrument signed on behalf of such party, but such extension or waiver or
failure to insist on strict compliance with an obligation, covenant, agreement
or condition shall not operate as a waiver of, or estoppel with respect to, any
subsequent or other failure.
ARTICLE IX
INDEMNIFICATION
9.1 INDEMNIFICATION. Subject to the provisions of this Article,
Seller shall indemnify Buyer, its stockholders, officers, directors, employees,
agents and affiliates (collectively, the "BUYER INDEMNITEES") in respect of, and
hold each of them harmless from and against, and shall pay the full amount of,
on a Grossed-Up Basis (as defined in SECTION 10.3), any and all Losses suffered,
incurred or sustained by any of them or to which any of them becomes subject
resulting from, arising out of or relating to: (i) any causes of action
asserted or other legal proceedings initiated on the part of any of the
stockholders of Seller relating in any way to claims based on the failure to
obtain shareholder approval of the sale of Parent's assets; (ii) any employee
pension benefit plan subject to Title IV of ERISA that is maintained by Seller
or any of its "controlled group," within the meaning of
35
<PAGE>
Section 4001(a)(15) of ERISA, other than any Plans; (iii) severance
obligations occurring within six months of the Closing Date in connection
with the agreements described on EXHIBIT C; and (iv) the nonfulfillment of or
failure to perform any covenant or agreement on the part of Seller contained
in SECTIONS 5.6 and 6.7.
9.2 PROCEDURES FOR INDEMNIFICATION. Any claims for indemnification by
any party entitled to indemnification hereunder (an "INDEMNIFIED PARTY") from
any party hereunder (an "INDEMNITOR") under this ARTICLE IX shall be made by an
Indemnified Party by delivery of a written notice to the Indemnitor requesting
indemnification (an "INDEMNIFICATION CLAIM") and specifying the basis on which
indemnification is sought and the amount of asserted Losses. Indemnitor shall
have 30 days after the date on which the Indemnitor receives the notice of an
Indemnification Claim to object to such Indemnification Claim by delivery of a
written notice of such objection to the Indemnified Party specifying in
reasonable detail the basis for such objection. If within 30 days after the
date on which the Indemnitor receives the notice of the Indemnification Claim,
the Indemnitor has not delivered to the Indemnified Party a notice objecting to
all or any portion of the claimed Loss and setting forth the amount of such
claimed indemnification for such Loss objected to and the reasons for such
objection, the Indemnified Party shall be entitled to indemnification for such
Loss, and the Indemnitor shall promptly pay the full amount of such Loss. If,
within 30 days after the date on which the Indemnitor receives the notice of an
Indemnification Claim, the Indemnitor delivers to the Indemnified Party an
objection to all or any portion of the claimed Loss, setting forth the amount of
such Loss objected to and the reasons for such objection, the Indemnified Party
shall be entitled to reimbursement for the portion of such Loss not objected to
by the Indemnitor and the Indemnitor shall promptly pay the full amount of so
much of the Loss as to which the Indemnitor did not object.
(a) Upon determination of the amount of an Indemnification
Claim, whether by agreement between the Indemnitor and the Indemnified Party or
by any final adjudication, the Indemnitor shall pay the amount of such
Indemnification Claim within 5 days of the date such amount is determined.
(b) The rights accorded to Indemnified Parties hereunder shall
be in addition to any rights that any Indemnified Party may have at law or in
equity.
(c) Any payment under this Article shall be treated for Tax
purposes as an adjustment of the Purchase Price to the extent such
characterization is proper and permissible under the applicable U.S. Tax law,
including the Code, Treasury regulations, court decisions and administrative
promulgations or, alternatively, by Buyer as an offset to a Tax benefit item, if
such characterization is permissible under such Tax law.
(d) In no event shall the aggregate liability of Seller and
Parent for claims asserted pursuant to Section 9.1(i) and 9.1(iii) of this
Agreement and Section 11.1(i) and 11.1(iii) of the Stock Purchase Agreement
(excluding indemnification with respect to the payment of Taxes, penalties,
Brighton Governmental Claims, interest and collection costs thereof) exceed
$700,000.
36
<PAGE>
ARTICLE X
GENERAL PROVISIONS
10.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS.
Except as otherwise set forth herein, the representations and warranties of the
parties shall expire at Closing. The covenants and agreements of the parties
shall expire at Closing; PROVIDED, HOWEVER, that the covenants and agreements
contained in SECTIONS 5.4(c), 5.6, 5.7, 6.2, 6.6, 6.8 and 6.9 shall survive
Closing and expire in accordance with their respective terms, provided that to
the extent obligations require repeated performance or performance from time to
time, expiration shall occur only upon the final performance of the obligation.
10.2 NOTICES. All notices and other communications given or made
pursuant to this Agreement shall be in writing and shall be deemed given if
delivered personally, telecopied (with confirmation), mailed by certified mail
(postage prepaid, return receipt requested) to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice) and shall be effective upon receipt:
(a) If to Parent or Seller:
Spinnaker Industries, Inc.
1700 Pacific Ave., Suite 1600
Dallas, Texas 75201
Telecopier: (214) 855-0093
Attention: President
With copies to:
Jenkens & Gilchrist, a Professional Corporation
1445 Ross Ave., Suite 3200
Dallas, Texas 75202
Telecopier: (214) 855-4300
Attention: Ronald J. Frappier
Crouch & Hallett, L.L.P.
717 North Harwood Street
Suite 1400
Dallas, Texas 75201
Telecopier: (214) 922-4193
Attention: Timothy R. Vaughan
37
<PAGE>
(b) If to Buyer:
Intertape Polymer Group Inc.
110E Montee de Liesse
St. Laurent, Quebec H4T IN4
Canada
Telecopier: (514) 731-5477
Attention: Andrew M. Archibald
With a copy to:
Morgan, Lewis & Bockius LLP
101 Park Avenue
New York, New York 10178
Telecopier: (212) 309-6273
Attention: Nancy H. Corbett
10.3 CERTAIN DEFINITIONS. For purposes of this Agreement, the term:
(a) "AFFILIATE" means a person that directly or indirectly,
through one or more intermediaries, controls, is controlled by, or is under
common control with, the first mentioned person; including, without limitation,
any partnership or joint venture in which any person (either alone, or though or
together with any other subsidiary) has, directly or indirectly, an interest of
5% or more;
(b) "BUSINESS DAY" means any day other than a day on which
federally-chartered banks are required or authorized to be closed;
(c) "CONTROL" (including the terms "controlled by" and "under
common control with") means the possession, directly or indirectly or as trustee
or executor, of the power to direct or cause the direction of the management or
policies of a person, whether through the ownership of stock or as trustee or
executor, by contract or credit arrangement or otherwise;
(d) "GROSSED-UP BASIS" means, when used to describe the basis
on which the payment of a specified sum is to be made, a basis such that the
amount of such payment, after being reduced by the amount of all Taxes imposed
on the recipient of such payment as a result of the receipt or accrual of such
payment and after taking into account the Tax benefit of any deductions
attributable to such Taxes and/or payments that are currently available to the
recipient of such payment, will equal the specified sum;
(e) "LIEN" shall mean any conditional sale agreement, default
of title, easement, encroachment, encumbrance, hypothecation, infringement,
lien, mortgage, pledge, reservation, restriction, security interest, title
retention or other security arrangement, or any adverse right or interest,
charge, or claim of any nature whatsoever of, on, or with respect to any
property or property
38
<PAGE>
interest, other than (i) liens for current property Taxes not yet due and
payable, and (ii) liens which do not materially impair the use of, or title
to, or value of the assets subject to such lien;
(f) "LOSS" shall mean any and all demands, claims, actions or
causes of action, assessments, damages, liabilities, costs and expenses,
including interest and penalties, and reasonable attorneys' fees and expenses
relating thereto (but excluding lost profits or consequential or incidental
damages);
(g) "MATERIAL ADVERSE EFFECT" means, with respect to Buyer,
Parent, Seller or Business, (i) any adverse effect on the business, assets,
properties, liabilities, prospects, results of operations or financial condition
of, and which is material with respect to, such party (or the Business), or (ii)
any effect that materially impairs the ability of such party to consummate the
transactions contemplated hereby; PROVIDED, HOWEVER, that Material Adverse
Effect shall not be deemed to include the impact of (A) actions contemplated by
this Agreement, (B) changes in laws and regulations or interpretations thereof
that are generally applicable to the manufacturing industry and (C) changes in
generally accepted accounting principles that are generally applicable to the
manufacturing industry;
(h) "PERSON" means an individual, corporation, partnership,
association, trust, unincorporated organization, other entity or group (as
defined in Section 13(d) of the Exchange Act); and
(i) "SUBSIDIARY" or "SUBSIDIARIES" of Seller, Parent, Buyer or
any other person, means any corporation, partnership, joint venture or other
legal entity of which either Seller, Parent, Buyer, or such other person, as the
case may be (either alone or through or together with any other subsidiary),
owns, directly or indirectly, 50% or more of the stock or other equity interests
the holders of which are generally entitled to vote for the election of the
board of directors or other governing body of such corporation or other legal
entity.
10.4 HEADINGS. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
10.5 SEVERABILITY. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner adverse to
any party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in an acceptable manner to the end that
transactions contemplated hereby are fulfilled to the extent possible.
10.6 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
of the parties and supersedes all prior agreements and undertakings, both
written and oral, between the parties, or any of them, with respect to the
subject matter hereof and, except as otherwise expressly provided herein, are
not intended to confer upon any other person any rights or remedies hereunder.
39
<PAGE>
10.7 ASSIGNMENT. This Agreement shall not be assigned by operation of
law or otherwise, except that Buyer may assign all or any of its rights
hereunder to any affiliate provided that no such assignment shall relieve Buyer
of its obligations hereunder.
10.8 PARTIES IN INTEREST. This Agreement shall be binding upon and
inure solely to the benefit of each party and nothing in this Agreement, express
or implied, is intended to or shall confer upon any other person any right,
benefit or remedy of any nature whatsoever under or by reason of this Agreement.
10.9 GOVERNING LAW; VENUE. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware, regardless of
the laws that might otherwise govern under applicable principles of conflicts of
law.
10.10 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, and by the different parties in separate counterparts, each of
which when executed shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
10.11 TIME IS OF THE ESSENCE. Time is of the essence with respect to
this Agreement.
10.12 AMENDMENT. This Agreement may be amended by the agreement of the
parties and in accordance with their applicable charter documents and applicable
Law.
10.13 WAIVER OF JURY TRIAL. Each of Seller and Buyer waive their
respective rights to a trail by jury of any claim or cause of action based upon
or arising out of or related to this agreement, any assignment or the
transactions contemplated hereby, in any action, proceeding or other litigation
of any type brought by any party against the other parties, whether with respect
to contract claims, tort claims, or otherwise. Each of Seller and Buyer agree
that any such claim or cause of action shall be tried by a court trial without a
jury. Without limiting the foregoing, the parties further agree that their
respective right to a trial by jury is waived by operation of this Section as to
any action, counterclaim or other proceeding which seeks, in whole or in part,
to challenge the validity or enforceability of this Agreement, any assignment or
any provision hereof or thereof. This waiver shall apply to any subsequent
amendments, renewals, supplements or modifications to this Agreement or any
assignment.
10.14 CONSENT TO JURISDICTION. The parties hereto each hereby
irrevocably submit to the exclusive jurisdiction of the state courts of the
State of Delaware and to the jurisdiction of the United States District Court of
Delaware for the purposes of any suit, action or other proceeding arising out of
or based upon this Agreement or the subject matter hereto brought by any other
party hereto. Each party hereto, to the extent permitted by applicable law,
hereby waives and agrees not to assert, by way of motion, as a defense, or
otherwise, in any such suit, action or proceeding brought in such courts, any
claim that it is not subject personally to the jurisdiction of the above-named
courts, that its property is exempt or immune from attachment or execution, that
the venue of the suit, action or proceeding is improper or that this Agreement
or the subject matter hereof may not be enforced in or by such Court.
40
<PAGE>
IN WITNESS WHEREOF, Seller, Parent and Buyer have caused this Agreement
to be executed as of the date first written above by their respective officers
thereunto duly authorized.
SPINNAKER INDUSTRIES, INC. ("Parent")
By: /s/ Ned N. Fleming III
---------------------------------
Name: Ned N. Fleming III
-------------------------------
Title: President and Chief
Operating Officer
------------------------------
SPINNAKER ELECTRICAL TAPE
COMPANY ("Seller")
By: /s/ Mark R. Matteson
---------------------------------
Name: Mark R. Matteson
-------------------------------
Title: Vice President, Corporate
Development
------------------------------
INTERTAPE POLYMER GROUP INC.
("Buyer")
By: /s/ Andrew Archibald
---------------------------------
Name: Andrew Archibald
-------------------------------
Title: Chief Financial Officer,
Secretary, Treasurer and
Vice President Administration
------------------------------
<PAGE>
CROSS REFERENCES TO SELLER DISCLOSURE SCHEDULE
<PAGE>
CROSS REFERENCES TO BUYER DISCLOSURE SCHEDULE
