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) JANUARY 31, 1995
FURON COMPANY
(Exact Name of Registrant as Specified in Charter)
CALIFORNIA 0-8088 95-1947155
(State or Other (Commission (IRS Employer
Jurisdiction of File Number) Identification
Incorporation) Number)
29982 IVY GLENN DRIVE, LAGUNA NIGUEL, CALIFORNIA 92677
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code:
(714) 831-5350
NOT APPLICABLE
(Former Name or Former Address, if Changed Since Last Report)
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The purpose of this filing is to include a conformed
signature page, which was inadvertently not included, to that
certain Asset Purchase Agreement, by and between Furon Company, a
California corporation, and Custom Coating and Laminating
Corporation, a Massachusetts corporation, dated as of January 31,
1995, filed as Exhibit 2 to the Registrant's Form 8-K, filed with
the Securities and Exchange Commission on February 15, 1995.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange
Act of 1934, the Registrant has duly caused this Report to be
signed on its behalf by the undersigned hereunto duly authorized.
FURON COMPANY,
a California corporation
Date: February 17, 1995 By: /s/ Monty A. Houdeshell
-----------------------
Name: Monty A. Houdeshell
Title: Vice President, Chief
Financial Officer and
Treasurer
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EXHIBIT INDEX
Exhibit
No. Name of Item
Number
2 Asset Purchase Agreement, by and
between Furon Company, a California
corporation and Custom Coating &
Laminating Corporation, a
Massachusetts corporation, dated
as of January 31, 1995.
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ASSET PURCHASE AGREEMENT
dated as of
January 31, 1995
by and between
CUSTOM COATING & LAMINATING CORPORATION
and
FURON COMPANY
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TABLE OF CONTENTS
Page
ARTICLE 1
PURCHASE AND SALE OF ASSETS . . . . . . . . . . . . . . . 1
1.1 Transfer of Assets. . . . . . . . . . . . . . . 1
1.1.1 Personal Property. . . . . . . . . . . . 2
1.1.2 Inventory. . . . . . . . . . . . . . . . 2
1.1.3 Real Property. . . . . . . . . . . . . . 2
1.1.4 Accounts Receivable and Prepayments. . . 2
1.1.5 Cash and Cash Equivalents. . . . . . . . 2
1.1.6 Intellectual Property. . . . . . . . . . 2
1.1.7 Sales Materials. . . . . . . . . . . . . 3
1.1.8 Books and Records. . . . . . . . . . . . 3
1.1.9 Assigned Contracts . . . . . . . . . . . 3
1.1.10 Insurance from Destroyed or Damaged
Assets . . . . . . . . . . . . . . . . . 3
1.1.11 Permits. . . . . . . . . . . . . . . . . 4
1.1.12 Goodwill . . . . . . . . . . . . . . . . 4
1.2 Excluded Assets . . . . . . . . . . . . . . . . 4
ARTICLE 2
CLOSING/ESCROW/PURCHASE PRICE/
ASSUMPTION OF LIABILITIES . . . . . . . . . . . . . . . . 4
2.1 The Closing . . . . . . . . . . . . . . . . . . 4
2.2 Escrow. . . . . . . . . . . . . . . . . . . . . 4A
2.3 Purchase Price and Adjustment . . . . . . . . . 5
2.3.1 Cash Portion of the Purchase Price . . . 5
2.3.2 Post-Closing Adjustment to Cash
Portion. . . . . . . . . . . . . . . . . 5
2.3.3 Earn-out Portion of the Purchase
Price. . . . . . . . . . . . . . . . . . 8
2.3.4 Audit by Seller. . . . . . . . . . . . . 8
2.3.5 Disposition. . . . . . . . . . . . . . . 10
2.4 Instruments of Conveyance and Transfer. . . . . 10
2.5 Assumption of Certain Liabilities . . . . . . . 10
2.6 Non-Assumption of Liabilities . . . . . . . . . 11
2.7 Tax Allocation. . . . . . . . . . . . . . . . . 11
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SELLER. . . . . . . . . 12
3.1 Organization, Corporate Power and Authority . . 12
3.2 Authorization of Agreements . . . . . . . . . . 12
3.3 No Breach . . . . . . . . . . . . . . . . . . . 12
3.4 Governmental Approvals, Consents. . . . . . . . 13
3.5 Permits . . . . . . . . . . . . . . . . . . . . 13
3.6 Financial Statements; Changes . . . . . . . . . 13
3.7 Tax Matters . . . . . . . . . . . . . . . . . . 14
3.8 Contracts . . . . . . . . . . . . . . . . . . . 15
3.9 Condition of Property, Title to Assets. . . . . 15
3.10 Use of Real Property . . . . . . . . . . . . . 16
3.11 Legal Proceedings and Claims . . . . . . . . . 16
3.12 Dividends and Other Distributions. . . . . . . 16
3.13 Insurance. . . . . . . . . . . . . . . . . . . 17
3.14 Compliance with Law. . . . . . . . . . . . . . 17
3.15 Employee Benefits. . . . . . . . . . . . . . . 17
3.16 Employees. . . . . . . . . . . . . . . . . . . 19
3.17 Accounts Receivable. . . . . . . . . . . . . . 20
3.18 Inventory. . . . . . . . . . . . . . . . . . . 20
3.19 Environmental Matters. . . . . . . . . . . . . 20
3.20 No Brokers or Finders. . . . . . . . . . . . . 22
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF BUYER . . . . . . . . . 23
4.1 Organization, Corporate Power and Authority . . 23
4.2 Authorization of Agreement. . . . . . . . . . . 23
4.3 No Breach . . . . . . . . . . . . . . . . . . . 23
4.4 Governmental Approvals, Consents. . . . . . . . 23
4.5 No Brokers or Finders . . . . . . . . . . . . . 24
4.6 Inspection of Properties. . . . . . . . . . . . 24
ARTICLE 6
COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . 24
6.1 Title Commitment. . . . . . . . . . . . . . . . 24
6.2 Seller's Covenant Not to Compete. . . . . . . . 24
6.2.1 Restrictions . . . . . . . . . . . . . . 24
6.2.2 Special Remedies and Enforcement . . . . 25
6.2.3 Severability . . . . . . . . . . . . . . 25
6.3 Employment. . . . . . . . . . . . . . . . . . . 25
6.4 COBRA Coverage and Profit Sharing Plan. . . . . 26
6.4.1 COBRA. . . . . . . . . . . . . . . . . . 26
6.4.2 Profit Sharing Plan. . . . . . . . . . . 26
6.5 Sales and Use Tax . . . . . . . . . . . . . . . 27
6.6 Preservation of Confidentiality . . . . . . . . 27
6.7 Removal of Underground Storage Tanks. . . . . . 28
ARTICLE 7
CONDITIONS OF PURCHASE. . . . . . . . . . . . . . . . . .28B
7.1 General Conditions. . . . . . . . . . . . . . .28B
7.2 Conditions to Obligations of Buyer. . . . . . . 29
7.3 Conditions to Obligations of Seller . . . . . . 30
ARTICLE 8
[Reserved]. . . . . . . . . . . . . . . . . . . . . . . . 31
ARTICLE 9
INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . 31
9.1 Obligations of Seller . . . . . . . . . . . . . 31
9.2 Obligations of Buyer. . . . . . . . . . . . . . 33
9.3 Procedure . . . . . . . . . . . . . . . . . . . 33
9.4 Limitation on Certain Claims. . . . . . . . . . 35
9.5 Payment . . . . . . . . . . . . . . . . . . . . 35
9.6 Term. . . . . . . . . . . . . . . . . . . . . . 36
ARTICLE 10
GENERAL . . . . . . . . . . . . . . . . . . . . . . . . . 36
10.1 Amendments; Waivers. . . . . . . . . . . . . . 36
10.2 Schedules; Exhibits; Integration . . . . . . . 36
10.3 Best Efforts; Further Assurances . . . . . . . 36
10.4 Governing Law. . . . . . . . . . . . . . . . . 37
10.5 No Assignment. . . . . . . . . . . . . . . . . 37
10.6 Headings . . . . . . . . . . . . . . . . . . . 37
10.7 Counterparts . . . . . . . . . . . . . . . . . 37
10.8 Publicity and Reports. . . . . . . . . . . . . 37
10.9 Remedies Cumulative. . . . . . . . . . . . . . 37
10.10 Parties in Interest . . . . . . . . . . . . . 38
10.11 Notices . . . . . . . . . . . . . . . . . . . 38
10.12 Expenses and Attorneys Fees . . . . . . . . . 39
10.13 Survival. . . . . . . . . . . . . . . . . . . 39
10.14 Specific Performance. . . . . . . . . . . . . 39
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ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (this "AGREEMENT")
is entered into as of January 31, 1995, by and between
Custom Coating & Laminating Corporation, a Massachusetts
corporation ("SELLER"), and Furon Company, a California
corporation ("BUYER").
R E C I T A L S
WHEREAS, Seller owns or leases certain assets more
particularly described in this Agreement, including both
real and personal property, used by Seller in the
manufacturing and sale of customized and standard specialty
engineered products which rely on surface chemistry
technology (the "BUSINESS"); and
WHEREAS, Plantation Street Realty Nominee Trust
(the "TRUST"), a trust under a declaration of trust dated
December 28, 1984, and recorded with the Worcester District
Registry of Deeds, Book 8510, Page 333, owns certain
real property leased by Seller and used in the Business;
and
WHEREAS, Seller and the Trust desire to sell, and
Buyer desires to purchase from Seller and the Trust, all of
the assets related to the Business and Buyer is willing to
assume certain specified liabilities of the Business, for
the consideration and on the terms and conditions described
herein.
A G R E E M E N T
NOW, THEREFORE, in consideration of the mutual
covenants and promises contained herein and intending to be
legally bound, the parties agree as follows:
ARTICLE 1
PURCHASE AND SALE OF ASSETS
1.1 TRANSFER OF ASSETS. Subject to the terms and
conditions of this Agreement, on the Closing Date (as
defined below), Seller will sell, transfer, assign and
deliver or cause to be sold, transferred, assigned and
delivered, to Buyer, and Buyer will purchase from Seller and
the Trust, all of Seller's and the Trust's right, title and
interest in and to all of Seller's and the Trust's assets,
rights and properties, of every kind or nature, which are
used in or are related to the Business or are necessary for
the operation of the Business as presently conducted (the
"ASSETS"). The Assets include, but are not limited to, the
following:
1.1.1 PERSONAL PROPERTY. All tangible
personal property used in or related to the Business,
including, but not limited to, fixtures, vehicles,
machinery and equipment, furniture, tools and supplies
(collectively, the "PERSONAL PROPERTY"); provided,
however, that Personal Property does not include those
certain art works and other personal effects of Roger
P. Plourde or Michele Waddill listed or described in
Section 1.1.1 of the Disclosure Schedule; a list of all
Personal Property, as of October 31, 1994, is set forth
in Section 1.1.1 of the Disclosure Schedule;
1.1.2 INVENTORY. Except as set forth in
Section 1.2 below, all inventory of the Business,
including, but not limited to, finished goods,
work-in-process and raw materials (collectively, the
"INVENTORY"), a list of which as of November 30, 1994
is set forth in Section 1.1.2 of the Disclosure
Schedule;
1.1.3 REAL PROPERTY. All real property used
in or related to the Business, including all fixtures
and improvements attached thereto, and all rights
appurtenant thereto which real property is more fully
described (including, but not limited to, the legal
descriptions thereof) in Section 1.1.3 of the
Disclosure Schedule (the "REAL PROPERTY," the portion
of the Real Property which is currently owned by the
Trust shall be referred to herein as the "LEASED REAL
PROPERTY");
1.1.4 ACCOUNTS RECEIVABLE AND PREPAYMENTS.
All accounts receivable (including, without limitation,
all accounts receivable arising from sales prior to the
Closing Date, even if the invoices relating to such
sales have not been issued as of the Closing Date),
notes receivable, prepaid items, credits, reserves and
deposits paid by Seller, a list of which as of October
31, 1994 is set forth in Section 1.1.4 of the
Disclosure Schedule;
1.1.5 CASH AND CASH EQUIVALENTS. All cash on
hand and cash equivalents (including, but not limited
to, bank accounts and temporary cash investments);
1.1.6 INTELLECTUAL PROPERTY. All patents,
trademarks and trade names, trademark and trade name
registrations, service marks and service mark
registrations, copyrights and copyright registrations,
the applications therefor and the licenses with respect
thereto, all unregistered intellectual property, all
trade secrets, secret processes, confidential
information and know-how, inventions, designs and
improvements and any rights or claims relating to or
deriving from any of the foregoing (collectively, the
"INTELLECTUAL PROPERTY"), a list of which patents,
trademarks and trade names, trademark and trade name
registrations, service marks and service mark
registrations, copyrights registrations, applications
for any of the foregoing and licenses under which
Seller is entitled to use any of the foregoing as of
October 31, 1994 is set forth in Section 1.1.6 of the
Disclosure Schedule;
1.1.7 SALES MATERIALS. All of Seller's sales
data and information, customer lists, supplier lists,
engineering and production records, mailing lists,
catalogues, brochures, sales literature, promotional
material, advertising material and other selling
material;
1.1.8 BOOKS AND RECORDS. All books and
records and all files, documents, papers and agreements
(including, but not limited to, those contained in
computerized storage media) pertaining to the Assets,
the Assumed Liabilities (as defined below) or otherwise
relating to the Business (excluding the corporate
minute book, stock transfer ledger and other corporate
records of Seller, copies of which will be available to
Buyer at its request) (the "BUSINESS RECORDS");
provided, that Buyer shall for a period of five (5)
years following the Closing (as defined below) maintain
such Business Records and shall, at the written request
of Seller provide to Seller or its representatives or
successors at reasonable times access to and the right
to make copies of such Business Records;
1.1.9 ASSIGNED CONTRACTS. All rights of
Seller under all contracts, agreements, leases,
licenses, sales orders, purchase orders or other
legally binding commitments or instruments, whether or
not in writing (collectively, "CONTRACTS"), guarantees
and warranties from third parties, including but not
limited to all Contracts listed on any section of the
Disclosure Schedule and those Contracts entered into in
the ordinary course of the Business through the Closing
Date (the "ASSIGNED CONTRACTS");
1.1.10 INSURANCE FROM DESTROYED OR DAMAGED
ASSETS. All insurance proceeds from any insurance
provider for any Asset that is destroyed or damaged
after the date hereof and prior to the Closing, or any
replacement property or asset actually acquired for
such destroyed or damaged Asset;
1.1.11 PERMITS. All transferable licenses,
permits, franchises, certificates of authority, or
orders (and any applications therefor) and any
equivalent documents (collectively, "PERMITS"); and
1.1.12 GOODWILL. The goodwill incident to the
Business.
The Assets shall also include all assets, rights
and properties of the type described above that are acquired
by Seller between the date hereof and the Closing Date.
1.2 EXCLUDED ASSETS. The Assets shall not include (i)
any deferred loan costs relating to any of the Assets,
including but not limited to any such deferred loan costs
relating to the Leased Real Property and (ii) all raw
materials inventory consisting of polyester or polyamide
silicone pressure-sensitive tape (the "RETAINED INVENTORY")
set forth in Section 1.2 of the Disclosure Schedule. The
Retained Inventory will be segregated from other inventory
of Buyer, will be stored (at the expense of Buyer, except
that Seller shall be responsible for insuring the Retained
Inventory at its own expense and shall have the risk of loss
thereof) at the premises of Buyer (and, if utilized by Buyer
in the Business, will be purchased and paid for by Buyer at
such cost as may be agreed upon by Buyer and Seller), or may
be sold by Seller to a third party or otherwise disposed of
by Seller in its sole discretion.
ARTICLE 2
CLOSING/ESCROW/PURCHASE PRICE/
ASSUMPTION OF LIABILITIES
2.1 THE CLOSING. The Closing (the "CLOSING") of the
transactions contemplated by this Agreement will be held at
7:00 a.m. Pacific Standard Time on January 31, 1995 or at
such other time as the parties hereto may agree (the
"CLOSING DATE"). At the Closing the Assets and the Real
Property shall be transferred to Buyer from Seller and the
Trust upon delivery of the Cash Portion of the Purchase
Price to Commonwealth Land Title Insurance Company (the
"TITLE COMPANY") pursuant to escrow instructions in the form
attached as Exhibit A hereto. Upon receipt by the Title
Company of the Cash Portion of the Purchase Price and
satisfaction of each other condition set forth in Section 7
below, the Title Company shall record the Deed (as defined
in Section 2.4 hereof) and shall issue the Title Policy (as
defined in Section 6.1 hereof), and the remaining Assets
shall be transferred to Buyer by the delivery of documents
via overnight mail or telecopier through the offices of
O'Melveny & Myers, 610 Newport Center Drive, Suite 1700,
Newport Beach, California 92660.
2.2 ESCROW. At the Closing, the Title Company shall
deposit into an escrow account with Chemical Trust Company
of California (the "ESCROW AGENT"), a portion of the Cash
Portion and the Purchase Price equal to $1.4 million (the
"ESCROW FUNDS") to be held and released in accordance with
the terms of an escrow agreement in substantially the form
attached hereto as Exhibit B (the "ESCROW AGREEMENT"), to be
entered into at the Closing, by Buyer, Seller and the Escrow
Agent. The Escrow Funds shall be in the name and
specifically for the account of Seller, as set forth in the
Escrow Agreement, and shall be held to satisfy any and all
claims of Buyer for indemnification pursuant to Article 9
hereof.
2.3 PURCHASE PRICE AND ADJUSTMENT. Upon the terms and
subject to the conditions set forth herein, Buyer agrees to
pay to Seller the following Purchase Price (for the purposes
of this Agreement, the "PURCHASE PRICE" shall be defined as
the aggregate of (i) the Cash Portion of the Purchase Price
(as defined in Section 2.3.1 and as adjusted pursuant to
Section 2.3.2 below), (ii) the total Earn-Out Payments (as
defined in Section 2.3.3 and as adjusted in Section 2.3.4
below) and (iii) the aggregate amount of the Assumed
Liabilities (as defined in Section 2.5 below).
2.3.1 CASH PORTION OF THE PURCHASE PRICE. At
the Closing, Buyer agrees to acquire the Assets from Seller,
assume the Assumed Liabilities and pay the aggregate amount
of TWENTY THREE MILLION EIGHT HUNDRED AND SEVENTY THOUSAND
TWO HUNDRED AND EIGHTY EIGHT DOLLARS ($23,870,288), less the
Escrow Funds (the "CASH PORTION"), to Seller on the Closing
Date by wire transfer of immediately available funds to the
Title Company for receipt on behalf of Seller. The Cash
Portion shall be subject to adjustment under Section 2.3.2.
2.3.2 POST-CLOSING ADJUSTMENT TO CASH PORTION.
The Cash Portion shall be subject to adjustment in
accordance with the procedures set forth below. For the
purposes of this Agreement, the terms "BALANCE SHEET ASSETS"
and "BALANCE SHEET ASSUMED LIABILITIES" shall mean those
Assets and Assumed Liabilities, respectively, that are
reflected on the Closing Date Balance Sheet (as defined
below).
(a) Within sixty (60) days after the Closing
Date, Buyer will prepare at its expense and present to
Seller an audited balance sheet of the Business as of
the Closing Date (as finally determined pursuant to
Section (e) below, the "CLOSING DATE BALANCE SHEET").
The Closing Date Balance Sheet shall be prepared by the
Boston, Massachusetts office of Price Waterhouse, LLP
in accordance with generally accepted accounting
principles, applied on a consistent basis ("GAAP"),
using the same accounting principles, methods,
practices, procedures and policies, and using the same
methods of estimates and judgments, used in preparing
the Audited Financial Statements (as defined below)
(the "APPLICABLE ACCOUNTING METHODS"); provided,
however, that the Closing Date Balance Sheet shall be
prepared as though the parties had not consummated the
transactions contemplated by this Agreement. Without
limiting the generality of the foregoing, the Closing
Date Balance Sheet shall not include (i) any adjustment
to reflect changes proposed to be made by Buyer after
the Closing in the manner in which the Business will be
conducted or the manner in which any of the Balance
Sheet Assets will be utilized, (ii) any accrual for
fees and expenses of counsel and accountants or other
transaction costs attributable to the transactions
contemplated by this Agreement, (iii) any Assets not
previously recorded on the Balance Sheet that were
utilized in the Business as of the date of such Balance
Sheet (such as the Leased Real Property), (iv) any
Retained Inventory or (v) any Excluded Liabilities. In
connection with the preparation and audit of the
Closing Date Balance Sheet, Buyer will, at its own
expense, conduct a physical count of the Inventory of
the Business as of the Closing Date.
(b) If Seller does not agree with any amount
set forth on the Closing Date Balance Sheet as prepared
by Buyer, Seller shall have the right to submit the
Closing Date Balance Sheet to the Independent
Accountants (as defined below) for auditing and final
determination. The Closing Date Balance Sheet shall be
binding on Seller unless Seller presents to Buyer
within thirty (30) days after Seller's receipt of the
Closing Date Balance Sheet from Buyer written notice
that the Closing Date Balance Sheet, in Seller's
opinion, was not prepared in accordance with the
Applicable Accounting Methods, specifying the nature
and extent of any understatement of Balance Sheet
Assets or overstatement of Balance Sheet Assumed
Liabilities alleged to result from such failure.
(c) If the total of the Balance Sheet Assets
less the Balance Sheet Assumed Liabilities (the "NET
BOOK VALUE") reflected on the Closing Date Balance
Sheet, as finally determined pursuant to paragraph (e)
below, exceeds $5,522,288, the Cash Portion shall be
increased by such excess. The amount of any such
increase in the Cash Portion shall be paid by Buyer to
Seller in the manner set forth in Section 2.3.1 and in
accordance with paragraph (e) below; provided, however,
that such amount shall be paid in full within ten (10)
days after the final determination of the Closing Date
Balance Sheet.
(d) If the Net Book Value reflected in the
Closing Date Balance Sheet, as finally determined
pursuant to paragraph (e) below, is less than
$5,522,288, the Cash Portion shall be reduced by such
difference. The amount of any such reduction in the
Cash Portion shall be refunded by Seller to Buyer by
wire transfer in immediately available funds to an
account designated by Buyer and in accordance with
paragraph (e) below; provided, however, that such
amount shall be paid in full within ten (10) days after
the final determination of the Closing Date Balance
Sheet.
(e) Except for the amount of the Inventory
and inventory reserve determined to be appropriate by
Price Waterhouse, LLP, which both Buyer and Seller
agree to accept as the final amount for such accounts
on the Closing Date Balance Sheet, if Buyer and Seller
are unable to resolve any disagreement with respect to
the Closing Date Balance Sheet, within ten (10) days
after Buyer receives a timely notice of disagreement,
the party alleged to owe any amount shall pay to the
other party that portion of the total amount owed that
is not in dispute, and only that portion of any amount
owed that is in dispute shall be submitted for final
resolution to the New York, New York office of KPMG
Peat Marwick, or if such firm is unable or unwilling to
make such final determination, to such other
independent accounting firm as the parties shall
mutually designate. (The accounting firm making such
determination is referred to herein as the "INDEPENDENT
ACCOUNTANTS"). Subject to Section (f) below, the
Independent Accountants shall make such final
determination on the basis of such procedures as the
Independent Accountants, in their sole judgment, deem
applicable and appropriate, taking into account the
nature of the issues, the amount(s) in dispute and the
respective positions asserted by the parties. The
Independent Accountants shall review the disputed
matters and as promptly as practicable deliver to Buyer
and Seller a statement in writing setting forth their
determination as to the proper treatment of the items
or amounts in dispute, and such determination shall be
final and binding upon the parties without any further
right of appeal. Buyer and Seller agree that a
judgment of any state or federal court of competent
jurisdiction may be rendered upon any determination
made by the Independent Accountants pursuant to this
Section. The Closing Date Balance Sheet shall be
deemed to be binding on Buyer and Seller upon
(i) Seller's failure to deliver to Buyer a notice of
disagreement within thirty (30) days of its receipt of
the Closing Date Balance Sheet prepared by Buyer,
(ii) resolution of any disagreement by mutual agreement
of the parties after a timely notice of disagreement
has been delivered to Buyer, or (iii) notification by
the Independent Accountants of their final
determination of the items of disagreement submitted to
them (the "FINAL ADJUSTMENT").
(f) Notwithstanding anything to the contrary
in the foregoing Section (e), in determining the Final
Adjustment, the Independent Accountants (i) shall
utilize and be bound by the Applicable Accounting
Methods, and shall not substitute therefor other
accounting principles, methods, practices, procedures,
policies or methods of estimates and adjustments, (ii)
shall limit their review to the items of disagreement
submitted to them, (iii) shall in no event determine a
Final Adjustment which would result in a final Net Book
Value (A) higher than the proposed Net Book Value
submitted to the Independent Accountants by Seller
("SELLER'S VALUE") or (B) lower than that submitted to
the Independent Accountants by Buyer ("BUYER'S VALUE"),
and (iv) shall in no event change or modify the amounts
of the Inventory or inventory reserve accounts as
determined by Price Waterhouse, LLP.
(g) The fees and expenses of the Independent
Accountants shall be borne by Buyer and Seller
proportionately as follows: Buyer shall pay an amount
equal to the aggregate amount of such fees and
expenses, multiplied by the fraction which results from
dividing (A) the difference between Buyer's Value and
the final Net Book Value giving effect to the Final
Adjustment, by (B) the difference between Seller's
Value and Buyer's Value as submitted to the Independent
Accountants, and the balance of such fees and expenses
shall be paid by Seller.
2.3.3 EARN-OUT PORTION OF THE PURCHASE PRICE.
In addition to the Cash Portion of the Purchase Price
set forth above, Buyer shall pay to Seller up to FOUR
MILLION DOLLARS ($4,000,000) in contingent payments as
set forth in Schedule A attached hereto over Buyer's
next three (3) fiscal years (each an "EARN-OUT
PAYMENT"). Each Earn-Out Payment shall be based on the
Net Sales of all CC&L Products (as defined in Schedule
A attached hereto). The amount of Net Sales of all
CC&L Products shall be determined by Buyer and
submitted to Seller in a statement delivered within 90
days following the close of the fiscal year of Buyer in
question (each an "EARN-OUT STATEMENT"), commencing
with the fiscal year ending February 3, 1996. Each
Earn-Out Payment amount so determined, or any
undisputed portion thereof, shall be paid to Seller at
the end of such 90-day period.
2.3.4 AUDIT BY SELLER. Each Earn-Out
Statement shall accurately account for the Net Sales of
all CC&L Products during the applicable fiscal year.
Such calculation of Net Sales shall be determined in
accordance with the definition of Net Sales as set
forth in Schedule A attached hereto and shall be
accompanied by a certificate of Buyer's Chief
Accounting Officer that, in his or her opinion, the
Earn-Out Statement presents fairly the Net Sales of all
CC&L Products in all material respects. Seller shall
be entitled, at Seller's election and at Seller's
expense, to audit the books and records of Buyer in
which the relevant information is recorded, together
with any of Buyer's records supporting its entries in
those books to confirm the Net Sales for a fiscal year,
provided that Seller may audit any particular fiscal
year's Net Sales only once and such audit shall be
completed within sixty (60) days from the date of
commencement. Seller shall be entitled to audit the
books and records of Buyer in respect of a fiscal year
as set forth in this Section 2.3.4 only upon thirty
(30) days written notice to Buyer given at any time
during the one year period following the date the
related Earn-Out Statement has been delivered to
Seller; provided, however, that such audit shall take
place during the normal business hours of Buyer and at
the place where those books and records are normally
kept. In the event that Buyer and Seller are unable to
agree on the amount due under any Earn-Out Payment to
be paid hereunder, Buyer shall pay to Seller that
portion of the respective Earn-Out Payment that is not
in dispute, and only that portion of any amount alleged
to be owed by Buyer to Seller shall be submitted for
final resolution to the Independent Accountants. The
Independent Accountants shall make such final
determination on the basis of such procedures as the
Independent Accountants, in their sole judgment, deem
applicable and appropriate, taking into account the
nature of the issues, the amount(s) in dispute and the
respective positions asserted by the parties. The
Independent Accountants shall review the disputed
matters and as promptly as practicable deliver to
Seller and Buyer a statement in writing setting forth
their determination as to the disputed amount. Such
determination shall be final and binding upon the
parties without any further right of appeal. Buyer and
Seller agree that a judgment of any state or federal
court of competent jurisdiction may be rendered upon
any determination made by the Independent Accountants
pursuant to this Section. The fees and expenses of the
Independent Accountants in determining the amount owed
under any disputed Earn-Out Payment shall be borne by
Seller and Buyer proportionately as follows: Seller
shall pay an amount equal to the aggregate amount of
such fees and expenses, multiplied by the fraction
which results from dividing (A) the difference between
the amount set forth by Seller as the appropriate Earn-
Out Payment and the final Earn-Out Payment amount as
determined by the Independent Accountants, by (B) the
difference between amount set forth by Buyer as the
appropriate Earn-Out Payment and the amount set forth
by Seller as the appropriate Earn-Out Payment amount,
each as submitted to the Independent Accountants, and
the balance of such fees and expenses shall be paid by
Buyer.
2.3.5 DISPOSITION. If at any time during
which the Earn-Out Payments are to be calculated, Buyer
shall determine that it is in the best interests of
Buyer to dispose of all or substantially all of the
Assets purchased from Seller (the "DISPOSITION"), then
in such event, Buyer shall pay to Seller the present
value (based on an annual discount rate of 25%) of the
potential Earn-Out Payments remaining to be paid,
calculated as if the Target Sales Amount (as defined in
Schedule A attached hereto) for each remaining year,
respectively, was exceeded.
2.4 INSTRUMENTS OF CONVEYANCE AND TRANSFER. On the
Closing Date, Seller shall execute and deliver or cause to
be delivered to Buyer or the Title Company, as the case may
be, (a) the Bill of Sale, attached hereto as Exhibit C (the
"BILL OF SALE"), (b) the Assignment and Assumption
Agreement, attached hereto as Exhibit D (the "ASSIGNMENT AND
ASSUMPTION AGREEMENT"), (c) a deed in recordable form for
the Real Property in the form attached hereto Exhibit J (the
"DEED") and (d) such other documents as may be reasonably
requested by Buyer in order to carry out the transactions
contemplated herein.
2.5 ASSUMPTION OF CERTAIN LIABILITIES. On the Closing
Date, Buyer shall execute and deliver to Seller the
Assignment and Assumption Agreement, pursuant to which,
subject to Section 2.6, Buyer shall assume and agree to pay,
perform and discharge when due, the following liabilities of
Seller as of the Closing Date to the extent they are
reflected on the Balance Sheet or arise or have arisen
between August 31, 1994 and the Closing Date and are or were
incurred by Seller in the ordinary course of and are
directly related to the Business (the "ASSUMED
LIABILITIES"): (i) all operating liabilities reflected on
the Closing Date Balance Sheet (but only to the extent of
the amount thereof so reflected) and taken into account in
the calculation of the Net Book Value, including, but not
limited to, accounts payable (including, without limitation,
water, sewage and utility charges), accrued payroll and
employee benefits (including, without limitation, vacation
days, sick days and health, life and disability insurance
premiums), accrued profit sharing amounts, commissions
earned but not yet paid, accrued expenses and accrued and
deferred taxes (other than federal and state taxes payable
by Seller's stockholders with respect to the taxable income
of Seller) and (ii) all liabilities under the Assigned
Contracts, including, but not limited to, liabilities to
customers and vendors under outstanding purchase orders,
purchase agreements, customer agreements, equipment leases,
sales representative agreements and other operating
agreements, in each case to the extent such liability is
disclosed in Section 3.8 of the Disclosure Schedule or is
not required to be listed therein pursuant to Section 3.8
hereof and for which Buyer is not otherwise entitled to
indemnification under Article 9 hereof and is not the result
of any breach of any such agreement by Seller prior to the
Closing; provided, however, that, apart from the obligation
to sell products to customers under outstanding purchase
orders entered into in the ordinary course of business and
consistent with past practice, any liabilities to be assumed
by Buyer resulting from the Assigned Contracts which are not
required to be listed in Section 3.8 of the Disclosure
Schedule shall be limited to (x) contracts entered into in
the ordinary course of business and consistent with past
practice and (y) $50,000 in the aggregate.
It is expressly understood by the parties that the
Assumed Liabilities do not include: (i) any liability or
obligation of Seller incurred on behalf of or owed to any
stockholder or affiliate of Seller; (ii) Seller's $1.5
million revolving line of credit with Shawmut Bank, N.A.;
(iii) all real property mortgages, including but not limited
to those reflected on the Balance Sheet and those relating
to the Leased Real Property; (iv) all liabilities and
obligations related to any outstanding environmental claims;
(v) any Product Liability Claims or any Product Warranty and
Return Claims (as such terms are defined in Sections
9.1(b)(i) and 9.1(b)(ii) hereof) or (vi) all other
liabilities or obligations of Seller or the Business not
specifically assumed under this Section 2.5 (collectively,
the "EXCLUDED LIABILITIES").
2.6 NON-ASSUMPTION OF LIABILITIES. Except as
expressly set forth in Section 2.5 and notwithstanding
anything to the contrary in this Agreement, Buyer is not
assuming, and shall not be deemed to have assumed any
liabilities or obligations of Seller or the Business, of any
kind or nature whether arising before or after the Closing
Date and whether or not disclosed on the Balance Sheet or
the Closing Date Balance Sheet.
2.7 TAX ALLOCATION. Buyer and Seller shall allocate
the Purchase Price to broad categories constituting
components of the Assets in accordance with the basis of
allocation set forth in Section 2.7 of the Disclosure
Schedule. Each party will report the transactions
contemplated in this Agreement in accordance with the agreed
upon allocation, except to the extent that modifications are
necessary to reflect changes in the Assets and Assumed
Liabilities between the date hereof and the Closing Date for
all federal, state, local and other tax purposes. Each
party further agrees to cooperate in the preparation of Form
8594 under Section 1060 of the Internal Revenue Code of
1986, as amended, or as may hereafter be amended (the
"CODE"), and the timely filing of such Form with the
Internal Revenue Service.
<PAGE>
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SELLER
Except as otherwise indicated on the Disclosure
Schedule previously delivered to Buyer and attached hereto,
Seller represents, warrants and agrees:
3.1 ORGANIZATION, CORPORATE POWER AND AUTHORITY.
Seller is a corporation duly organized, validly existing and
in good standing under the laws of the Commonwealth of
Massachusetts. Seller does not own or lease any real
property or maintain any place of business outside of
Massachusetts and is not qualified to do business as a
foreign corporation in any jurisdiction. Seller has all
requisite corporate power and authority to own, operate and
lease the Assets, to conduct the Business, to execute and
deliver this Agreement and the related documents
contemplated hereby and to perform its obligations hereunder
and thereunder.
3.2 AUTHORIZATION OF AGREEMENTS. The execution,
delivery and performance by Seller of this Agreement and the
related documents contemplated herein, and the consummation
by it of the transactions contemplated herein and therein,
have been duly authorized by all necessary corporate action
by Seller. This Agreement has been, and each of the related
documents will be at the Closing, duly executed and
delivered by Seller and constitute, or will, when delivered,
constitute, the legal, valid and binding obligations of
Seller, enforceable against Seller in accordance with their
respective terms, except as may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws
relating to or limiting creditors' rights generally, and by
equitable principles.
3.3 NO BREACH. The execution and delivery of this
Agreement and the related documents by Seller do not, and
the consummation of the transactions contemplated hereby and
thereby will not: (a) violate any provision of the charter
documents or bylaws of Seller, (b) result in the breach (or
an event which, with the giving of notice or lapse of time
or both, would constitute a breach) of any term or provision
of, or constitute a default under, or give rise to a right
to terminate, any material indenture, mortgage, deed of
trust or other agreement or arrangement to which Seller is a
party or by which any of the Assets are bound or affected,
(c) result in the creation of any lien, charge or
encumbrance on the Assets, or (d) violate any statute or law
or any judgment, decree, order, regulation or rule of any
court or governmental authority to which Seller is subject
or by which any of the Assets are bound or affected.
3.4 GOVERNMENTAL APPROVALS, CONSENTS. Except as set
forth in Section 3.4 of the Disclosure Schedule, no
approval, authorization, consent, qualification, order or
registration, or any waiver of any of the foregoing, or any
action of, or any notice, statement or other communication
is required to be filed with or delivered to, any
governmental entity or any other person for the execution
and delivery by Seller of this Agreement or the related
documents or the consummation by it or the Trust of the
transactions contemplated herein or therein.
3.5 PERMITS. Section 3.5 of the Disclosure Schedule
sets forth each Permit, or any waiver thereof, obtained by
Seller, that is required to be issued by any governmental
entity or obtained by Seller in connection with the conduct
of the Business (other than Permits the failure to obtain
which could not reasonably be expected to have a material
adverse effect on the Business) together with the name of
the governmental entity issuing such Permit. Except as set
forth in Section 3.5 of the Disclosure Schedule, such
Permits are valid and in full force and effect, all such
Permits are freely transferable by Seller, and upon the
Closing, Buyer will have all right, title and interest as
the holder thereof. To the best of Seller's knowledge, no
suspension, cancellation or termination of any Permit
required by any governmental entity to permit the Business
to be conducted is threatened that could reasonably be
expected to have a material adverse effect on the Business.
3.6 FINANCIAL STATEMENTS; CHANGES.
(a) Audited Financial Statements. Seller has
delivered to Buyer balance sheets for Seller at December 31,
1993 and July 28, 1993 and the related statements of income,
retained earnings and cash flows for the period from July
29, 1993 to December 31, 1993 (collectively, the "AUDITED
FINANCIAL STATEMENTS"). The Audited Financial Statements
have been examined by Price Waterhouse, LLP, independent
public accountants to Seller, whose report thereon is
included with the Audited Financial Statements. The Audited
Financial Statements have been prepared in conformity with
GAAP, applied on a consistent basis. Such statements of
income and cash flows present fairly the results of
operations and cash flows of Seller for the periods covered,
and the balance sheets present fairly the financial
condition of Seller as of July 28, 1993 and December 31,
1993, respectively.
(b) Unaudited Interim Financial Statements.
Seller has delivered to Buyer a balance sheet for Seller at
August 31, 1994 (the "BALANCE SHEET"), and the related
statements of operations, retained earnings and cash flows
for the period then ended (collectively, the "INTERIM
FINANCIAL STATEMENTS"). All such Interim Financial
Statements have been prepared in conformity with GAAP,
applied on a consistent basis (except for the absence of
footnotes and subject to ordinary year-end adjustments made
in conformity with GAAP, applied on a consistent basis).
The statements of operations and cash flows present fairly
the results of operations and cash flows of Seller for the
period covered, and the Balance Sheet presents fairly the
financial condition of Seller as of August 31, 1994 (the
Audited Financial Statements and the Interim Financial
Statements together shall be referred to herein as the
"FINANCIAL STATEMENTS").
(c) No Material Adverse Changes. Except as set
forth in Section 3.6(c) of the Disclosure Schedule, since
the date of the Balance Sheet, whether or not in the
ordinary course of the Business, there has not been,
occurred or arisen:
(i) any change in or event affecting Seller
or the Business that has had or may reasonably be
expected to have a material adverse effect on Seller,
the Assets or the Business (including its results of
operations, financial condition and prospects);
(ii) any transaction entered into or carried
out other than in the usual and ordinary course of the
Business based on the Business' past practice;
(iii) any material change made in the
methods of doing business or in the accounting
principles or practices or the method of application of
such principles or practices; or
(iv) any sale, lease or other disposition
of, or any agreement to sell, lease or otherwise
dispose of, any of the Assets, other than sales, leases
or other dispositions in the usual and ordinary course
of the Business consistent with the Business' past
practice.
3.7 TAX MATTERS.
(a) Seller has timely filed or will timely file
all tax returns required of it and has paid or will pay all
taxes of Seller due for all periods or portions of periods
ending on or before the Closing Date (except as provided in
the following sentence). Adequate provision has been made
in the books and records of Seller, and to the extent
required by GAAP in the Financial Statements, for all taxes
of Seller whether or not due and payable and whether or not
disputed to the extent not paid.
(b) Section 3.7 of the Disclosure Schedule lists
the date or dates through which any federal, state or other
governmental entity have examined all federal, state or
other income, sales or any other tax returns of Seller.
Except as set forth in Section 3.7 of the Disclosure
Schedule, no governmental entity has, during the past three
(3) years, examined or is in the process of examining any
tax returns of Seller. Except as set forth in Section 3.7
of the Disclosure Schedule, no governmental entity has
proposed in writing any deficiency, assessment or claim for
taxes and, there is no basis for any such deficiency,
assessment or claim. No waiver of the statute of
limitations with respect to tax returns of Seller has been
given by or requested from Seller.
3.8 CONTRACTS. Section 3.8 of the Disclosure Schedule
lists each Contract to which Seller is a party or to which
Seller or the Assets is subject or by which Seller or the
Assets is bound that individually, or together as a series
of related Contracts involving the same party or parties, or
the successors to such party or parties: (a) obligates
Seller to pay an amount of $25,000 or more, (b) has an
unexpired term as of the date of the Balance Sheet in excess
of six (6) months, (c) is material to the Business,
(d) provides for an extension of credit by Seller to any
customer or client of Seller for any amount over $25,000,
(e) provides for the borrowing of money by Seller other than
credit agreements with banks having normal credit terms, (f)
was not made in the ordinary course of the Business, or
(g) is in any way otherwise material to the Business. Each
Contract is valid and existing, Seller has duly performed
all its obligations thereunder to the extent that such
obligations to perform have accrued and no breach or
default, alleged breach or default, or event which would
(with the passage of time, notice or both) constitute a
breach or default thereunder by Seller, or, to the best
knowledge of Seller, any other party or obligor with respect
thereto, has occurred or as a result of the transactions
contemplated herein will occur. True copies of the
Contracts listed in Section 3.8 of the Disclosure Schedule,
including all amendments and supplements thereto, have been
delivered to Buyer.
3.9 CONDITION OF PROPERTY, TITLE TO ASSETS. Either
Seller or the Trust has good and marketable title to all of
the Assets, free of encumbrances, except for: (a) liens for
taxes and installments of special assessments not yet due,
(b) imperfections in title, if any, not material in amount,
and which individually and in the aggregate do not
materially interfere with the conduct of the Business or the
use of the Assets, (c) the matters set forth in Section 3.9
of the Disclosure Schedule, and (d) with respect to the Real
Property, building restrictions, zoning restrictions and
other restrictions of a similar character which do not
materially impair the operation of the Business as currently
conducted. Seller makes no representation herein as to the
effect of any building restriction, zoning restriction or
other similar restriction currently in force, in the event
that Buyer shall, after the Closing, modify the manner in
which the Business is operated or make any alteration or
improvement to the Real Property. All of the Assets are in
good operating condition and repair as required for their
use in the Business.
3.10 USE OF REAL PROPERTY. The Real Property includes
all real property and leasehold interests currently used by
Seller for the conduct of the Business. Except as disclosed
in Section 3.10 of the Disclosure Schedule, neither Seller
nor the Trust has received notice of any violation of any
applicable zoning or building regulation or ordinance
relating to the Real Property and, to the knowledge of
Seller and the Trust, there is no such violation. To the
knowledge of Seller and the Trust, no fact or condition
exists which is reasonably likely to result in
discontinuation of presently available or otherwise
necessary water, sewer, gas, electricity, telephone,
drainage facilities and other utilities or services for the
Real Property. Neither Seller nor the Trust has received
notice of any proposed material special assessments, or any
proposed material changes in property tax or land use laws
affecting any portion of the Real Property.
3.11 LEGAL PROCEEDINGS AND CLAIMS. Except as set
forth in Section 3.11 of the Disclosure Schedule, there is
no order, action, investigation, inquiry or audit pending,
or, to the best knowledge of Seller or the Trust,
threatened, against or affecting Seller, the Assets or the
Business. Section 3.11 of the Disclosure Schedule lists
each pending order, action, investigation, inquiry or audit
of which Seller has knowledge that involves a claim or
potential claim of aggregate liability in excess of $25,000
against, or that enjoins or seeks to enjoin any activity of
or by Seller. Except as set forth in Section 3.11 of the
Disclosure Schedule (which separately categorizes the claims
of product liability and warranty), no product warranty,
product liability or other tort claims are pending as of the
date hereof or, to the best knowledge of Seller, threatened
against Seller.
3.12 DIVIDENDS AND OTHER DISTRIBUTIONS. Except as set
forth in Section 3.12 of the Disclosure Schedule, there has
been no dividend or other distribution of assets or
securities whether consisting of money, property or any
other thing of value, declared, issued or paid by Seller
subsequent to the date of the Balance Sheet.
3.13 INSURANCE. Seller is, and at all times during
the past three (3) years has been, insured with reputable
insurers against all risks normally insured against by
companies engaged in similar businesses. All insurance
policies and bonds are in full force and effect.
Section 3.13 of the Disclosure Schedule lists all insurance
policies and bonds for the Business. Seller is not in
default under any such policy or bond and has received no
notice of cancellation of any such policy or bond.
3.14 COMPLIANCE WITH LAW. Except as set forth in
Section 3.10 of the Disclosure Schedule, Seller has
conducted the Business and operated and used the Assets in
accordance with all federal, state and local laws and
regulations applicable to the conduct of the Business, and
is not in violation of any such laws other than violations
which would not have a material adverse effect on the Assets
taken as a whole, or on the Business.
3.15 EMPLOYEE BENEFITS.
(a) Employee Benefit Plans, Collective Bargaining
and Employee Agreements, and Similar Arrangements.
(1) Section 3.15 of the Disclosure Schedule
lists all employee benefit, compensation and fringe benefit
plans and arrangements, including without limitation, any
"employee benefit plan" (within the meaning of Section 3(3)
of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA") which provide benefits or compensation to
current employees of Seller employed in the Business or
which currently provide benefits or compensation to former
employees of Seller who were employed in the Business.
(2) Seller has delivered to Buyer true and
complete copies of all documents and summary plan
descriptions with respect to such plans, agreements and
arrangements, or summary descriptions of any such plans,
agreements or arrangements not otherwise in writing.
(3) There are no negotiations, demands or
proposals that are pending or have been made which concern
matters now covered, or that would be covered, by plans,
agreements or arrangements of the type described in this
Section.
(4) Seller and each trade or business that
is a member of a group of which Seller is a member and which
is under common control ("ERISA AFFILIATE") within the
meaning of Section 414(b) and (c) of the Code are in
compliance in all material respects with the applicable
provisions of ERISA and all other laws applicable with
respect to all such plans, agreements and arrangements and
to all group health plans of any ERISA Affiliate. Seller
and its ERISA Affiliates have performed all of their
obligations under all such plans, agreements and
arrangements. There are no actions (other than routine
claims for benefits) pending or threatened against such
plans or their assets, or arising out of such plans,
agreements or arrangements, and, no facts exist which could
give rise to any such actions.
(b) Qualified Stock Bonus, Pension and Profit-
sharing Plans.
(1) Section 3.15A of the Disclosure Schedule
lists all "employee pension benefit plans" (within the
meaning of Section 3(2) of ERISA) in Section 3.15 of the
Disclosure Schedule which are also stock bonus, pension or
profit-sharing plans within the meaning of Section 401(a) of
the Code.
(2) Each such plan is qualified in form and
operation under Section 401(a) of the Code and each trust
under each such plan is exempt from tax under Section 501(a)
of the Code. No event has occurred that will or could
subject any such plans to tax under Section 511 of the Code.
No prohibited transaction (within the meaning of Section
4975 of the Code) or party-in-interest transaction (within
the meaning of Section 406 of ERISA) has occurred with
respect to any of such plans.
(3) Seller has delivered to Buyer for each
such plan copies of the following documents: (i) the form
5500 with all attachments filed in each of the most recent
three plan years, (ii) the most recent determination letter
from the Internal Revenue Service, and (iii) the
consolidated statement of assets and liabilities of such
plan as of its most recent valuation date.
(c) Pension Plans.
(1) Section 3.15B of the Disclosure Schedule
lists all plans in Section 3.15 of the Disclosure Schedule
which are also subject to Title IV of ERISA.
(2) With respect to each such plan in which
Seller or any ERISA Affiliate participates or has
participated: (i) neither Seller nor any ERISA Affiliate has
withdrawn from such plan during a plan year in which it was
a "substantial employer" (as defined in Section 4001(a)(2)
of ERISA), (ii) neither Seller nor any ERISA Affiliate has
filed a notice of intent to terminate any such plan or
adopted any amendment to treat any such plan as terminated,
(iii) the Pension Benefit Guaranty Corporation (the "PBGC")
has not instituted proceedings to terminate any such plan,
(iv) no other event or condition has occurred which might
constitute grounds under Section 4042 of ERISA for the
termination of, or the appointment of a trustee to
administer, any such plan, (v) no accumulated funding
deficiency, whether or not waived, exists with respect to
any such plan, no condition has occurred or exists which by
the passage of time would be expected to result in an
accumulated funding deficiency as of the last day of the
current plan year of any such plan, (vi) no reportable
event, as described in Section 4043 of ERISA, has occurred
with respect to any such plan, (vii) no excise taxes are
payable under the Code and (viii) no amendment with respect
to which security is required under Section 307 of ERISA has
been made or is reasonably expected to be made.
(3) All costs of and benefits payable under
any plans subject to Title IV of ERISA have been provided
for on the basis of consistent methods in accordance with
sound actuarial assumptions and practices. Since the last
valuation date for each such plan, there has been no
amendment or change to such plan that would increase the
amount of benefits thereunder.
(4) In addition to the documents listed in
Section (b)(3) above, Seller has delivered to Buyer for each
Title IV plan copies of the following documents: (i) the
Form PBGC-1 filed in each of the most recent three (3) plan
years and (ii) the actuarial report as of the last valuation
date.
(d) Multiemployer Plans.
No plan listed in Section 3.15 of the
Disclosure Schedule is a "multiemployer plan" (within the
meaning of Section 3(37) of ERISA). Seller has never
contributed to or had an obligation to contribute to any
multiemployer plan.
3.16 EMPLOYEES. Section 3.16 of the Disclosure
Schedule sets forth a list of the names and current salary
or wage rates of the employees of the Business employed as
of the date hereof, and the names and compensation
arrangements with any consultants or agents. None of such
employees belongs to any union or collective bargaining
unit. Seller is not under any obligation to recognize or
bargain with any labor union with respect to such employees.
Upon termination of the employment of any such employees by
Seller, Buyer will not, by reason of anything done by Seller
prior to or at the Closing, be liable to any of said
employees for so-called "severance pay" or other similar
payments. Except as set forth in Section 3.16 of the
Disclosure Schedule, there are no pending or threatened
employment claims or suits under applicable federal or state
fair employment laws (including claims arising under
workers' compensation laws) relating to or arising out of
the conduct of the Business.
3.17 ACCOUNTS RECEIVABLE. Except as set forth in
Section 3.17 of the Disclosure Schedule, the accounts
receivable reflected on the Balance Sheet, and all accounts
receivable arising between the date of the Balance Sheet and
the Closing Date, arose or will arise from transactions in
the ordinary course of the Business, are collectible in the
aggregate amount recorded net of the aggregate amount of any
applicable reserves (which reserves are, and in the case of
reserves established by Seller with respect to accounts
receivable arising between the date of the Balance Sheet and
the Closing Date and reflected in the Closing Date Balance
Sheet, will be, adequate and calculated in accordance with
GAAP), and the goods involved have been sold and delivered
to the obligor, or are in transit, and no further goods or
services are required to be provided in order to complete
the sales and to entitle Seller or its assignee to collect
the accounts receivable in full. Except as set forth in
Section 3.17 of the Disclosure Schedule, no receivable has
been pledged or assigned to any other person and no defense
or set off to any receivable has been asserted in writing by
the receivable obligor, or, to the knowledge of Seller,
exists.
3.18 INVENTORY. Except as set forth in Section 3.18
of the Disclosure Schedule, the Inventory set forth on the
Balance Sheet is (i) valued at the lower of cost or market
in accordance with GAAP and (ii) consists of items of a
quality and quantity currently useable and salable in the
ordinary course of the Business without markdown or
discount. Except as set forth in Section 3.18 of the
Disclosure Schedule, Seller does not hold any materials on
consignment and does not have title to any materials in the
possession of others.
3.19 ENVIRONMENTAL MATTERS.
3.19.1 DEFINITIONS. For purposes of this
Agreement, the following terms shall have the meanings
set forth below:
(a) "HAZARDOUS SUBSTANCE" shall mean
substances that are defined or listed in, or
otherwise classified pursuant to, any applicable
laws as "hazardous substances," "hazardous
materials," "hazardous wastes" or "toxic
substances," or any other formulation intended to
define, list or classify substances by reason of
deleterious properties such as ignitibility,
corrosivity, reactivity, radioactivity,
carcinogenicity, reproductive toxicity or "EP
toxicity," and petroleum and drilling fluids,
produced waters and other wastes associated with
the exploration, development, or production of
crude oil, natural gas or geothermal energy.
(b) "ENVIRONMENTAL LAWS" shall mean all
laws relating to the protection of human health,
safety or the environment including: (i) all
requirements pertaining to reporting, licensing,
permitting, controlling, investigating or
remediating emissions, discharges, releases or
threatened releases of Hazardous Substances,
chemical substances, pollutants, contaminants or
toxic substances, materials or wastes, whether
solid, liquid or gaseous in nature, into the air,
surface water, groundwater or land, or relating to
the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or
handling of Hazardous Substances, chemical
substances, pollutants, contaminants or toxic
substances, materials or wastes, whether solid,
liquid or gaseous in nature; and (ii) all
requirements pertaining to the protection of the
health and safety of employees or the public.
(c) "ENVIRONMENTAL CONDITION" shall
mean the presence in, on, under or about the Real
Property or the Assets of any Hazardous Substance
which, if the presence of such Hazardous Substance
was known, would be reportable under any
Environmental Law, or which could reasonably be
anticipated to require investigation or
remediation pursuant to any Environmental Law.
3.19.2 ENVIRONMENTAL INFORMATION. To the
best of Seller's knowledge, Seller has, prior to the
date of this Agreement, provided Buyer all information
which relates, in all material respects, to the use of
Hazardous Substances upon the Real Property or in the
operation of the Business, any Environmental Condition
existing upon the Real Property, or to the compliance
of the Business or the Real Property with any
Environmental Laws, except for information that
discloses a use of Hazardous Substances, the existence
of an Environmental Condition or a noncompliance with
Environmental Laws which would not have a material
adverse effect on the Assets or on the Business. A
list of each document previously provided to Buyer
pursuant to this Section 3.19.2 is set forth in Section
3.19.2 of the Disclosure Schedule.
3.19.3 COMPLIANCE WITH ENVIRONMENTAL LAWS;
PERMITS. Except as disclosed in Section 3.19.3 of the
Disclosure Schedule, the Business is, and at all times
in the past has been, operated in all material respects
in compliance with all Environmental Laws. Except as
disclosed in Section 3.19.3 of the Disclosure Schedule,
to Seller's knowledge, Seller has obtained and
presently maintains all Permits or other governmental
authorizations required to operate the Business in all
material respects in compliance with all applicable
Environmental Laws.
3.19.4 ENVIRONMENTAL CONDITIONS; ACTION BY
GOVERNMENTAL AGENCY. Except as disclosed in Section
3.19.4 of the Disclosure Schedule, to Seller's
knowledge, no Environmental Condition exists upon the
Real Property and no investigation, inquiry or other
proceeding is pending or, to the knowledge of Seller,
threatened by any governmental entity with respect to
the Real Property or the Business and relating to any
actual or alleged Environmental Condition or failure to
comply with any applicable Environmental Law that could
reasonably be expected to have a material adverse
effect on the Business.
3.19.5 TREATMENT, STORAGE OR DISPOSAL
SITES. Section 3.19.5 of the Disclosure Schedule, to
Seller's knowledge, contains a list of all Hazardous
Substance or waste treatment, storage or disposal sites
used in the operation of the Business and not located
on the Real Property ("OFF-SITE FACILITIES") during the
ten-year period prior to the date of this Agreement.
Section 3.19.5 of the Disclosure Schedule also
contains, to Seller's knowledge, a list of all parties
engaged to transport Hazardous Substances or wastes to
such Off-Site Facilities during such ten-year period.
Except as set forth in Section 3.19.5 of the Disclosure
Schedule, to Seller's actual knowledge, it has not
during the foregoing ten-year period sent Hazardous
Substances to an Off-Site Facility that has been
designated as a site for investigation or remediation
under any Environmental Law or by any Federal or State
governmental agency.
3.20 NO BROKERS OR FINDERS. No agent, broker, finder,
or investment or commercial banker, or other person or firm
engaged by or acting on behalf of Seller or any of its
affiliates in connection with the negotiation, execution or
performance of this Agreement or the related documents, is
or will be entitled to any brokerage or finder's or similar
fee or other commission as a result of this Agreement or the
transactions contemplated herein other than Shields &
Company, Inc. or as otherwise disclosed to Buyer in writing.
Any fees or expenses resulting from such engagement shall be
the sole responsibility of Seller.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents, warrants and agrees as follows:
4.1 ORGANIZATION, CORPORATE POWER AND AUTHORITY.
Buyer is a corporation duly organized, validly existing and
in good standing under the laws of the state of California
and has all requisite corporate power and authority to
execute and deliver this Agreement and the related documents
to which it is a party and to perform its obligations
hereunder and thereunder.
4.2 AUTHORIZATION OF AGREEMENT. The execution,
delivery and performance by Buyer of this Agreement and the
related documents contemplated herein, and the consummation
by it of the transactions contemplated herein and therein,
have been duly authorized by all necessary corporate action
by Buyer. This Agreement has been, and each of the related
documents will be at the Closing, duly executed and
delivered by Buyer and constitute, or will, when delivered,
constitute, the legal, valid and binding obligations of
Buyer, enforceable against Buyer in accordance with their
respective terms, except as may be limited by bankruptcy,
insolvency, reorganization, moratorium and other similar
laws relating to or limiting creditors' rights generally and
by equitable principles.
4.3 NO BREACH. The execution, delivery and
performance by Buyer of this Agreement and the related
documents to which it is a party, and the consummation of
the transactions contemplated thereby will not: (a) violate
any provision of the charter documents or bylaws of Buyer,
(b) result in the breach (or an event which, with the giving
of notice or lapse of time or both, would constitute a
breach) of any term or provision of, or constitute a default
under, or give rise to a right to terminate, any material
indenture, mortgage, deed of trust or other agreement or
arrangement to which Buyer is a party or by which any of its
assets are bound or affected, or (c) violate any statute or
law or any judgment, decree, order, regulation or rule of
any court or governmental authority to which Buyer is
subject or by which any of Buyer's assets are bound or
affected.
4.4 GOVERNMENTAL APPROVALS, CONSENTS. No approval,
authorization, consent, qualification, order or
registration, or any waiver of any of the foregoing, or any
action of, or any notice, statement or other communication
is required to be filed with or delivered to, any
governmental entity or any other person for the execution
and delivery by Buyer of this Agreement and the related
documents contemplated herein or the consummation by it of
the transactions contemplated herein and therein.
4.5 NO BROKERS OR FINDERS. No agent, broker, finder
or investment or commercial banker, or other person or firm
engaged by or acting on behalf of Buyer in connection with
the negotiation, execution or performance of this Agreement
and the related documents, is or will be entitled to any
broker's or finder's or similar fees or other commissions as
a result of this Agreement or the transactions contemplated
herein.
4.6 INSPECTION OF PROPERTIES. Buyer acknowledges that
it has been provided with full access to the Real Property
and has had an opportunity to perform such inspection and
investigation, including, without limitation, with respect
to environmental matters and compliance with zoning and
building regulations and ordinances applicable to the Real
Property, as it has deemed appropriate. Seller
acknowledges, however, that by providing Buyer an
opportunity to inspect the Real Property, it has not limited
any of its representations, warranties or covenants made
herein. Furthermore, Seller acknowledges that Buyer is
under no obligation to inspect the Real Property and shall
not be deemed to have constructive knowledge of facts not
actually known to Buyer on the date hereof that might have
been obtained through such an inspection or investigation.
ARTICLE 5
[RESERVED]
ARTICLE 6
COVENANTS
6.1 TITLE COMMITMENT. At least twenty (20) days prior
to the Closing, at Seller's expense, Seller shall furnish
Buyer an extended coverage commitment for an ALTA policy of
title insurance insuring the fee title to all parcels of the
Real Property, containing standard exceptions but free and
clear of all encumbrances except as set forth in Section 3.9
of the Disclosure Schedule and containing such endorsements
as Buyer may reasonably require (the "TITLE POLICY") issued
by the Title Company in the amount of $3,430,000.
6.2 SELLER'S COVENANT NOT TO COMPETE.
6.2.1 RESTRICTIONS. Seller agrees that for a
period of five (5) years after the Closing Date, Seller
shall not, in any way, directly or indirectly, compete
with, assist any person in competing with or acquire an
interest in any person competing with, the Business,
whether as an owner, stockholder, joint venturer,
partner, officer, employee, consultant, agent or
otherwise.
6.2.2 SPECIAL REMEDIES AND ENFORCEMENT.
Seller and Buyer agree that a breach by Seller of any
of the covenants set forth in this Section 6.2 could
cause irreparable harm to Buyer, that Buyer's remedies
at law in the event of such breach would be inadequate,
and that, accordingly, in the event of such breach, a
restraining order or injunction or both may be issued
against Seller, in addition to any other rights and
remedies that are available to Buyer. In connection
with any such action or proceeding for injunctive
relief, Seller hereby waives the claim or defense that
a remedy at law alone is adequate and agrees, to the
maximum extent permitted by law, to have each provision
of this Section 6.2 specifically enforced against
Seller and consents to the entry of injunctive relief
against Seller enforcing or restraining any breach or
threatened breach of this Section 6.2.
6.2.3 SEVERABILITY. If this Section 6.2 is
more restrictive than permitted by the laws of any
jurisdiction in which Buyer seeks enforcement hereof,
this Section 6.2 shall be limited to the extent
required to permit enforcement under such laws. In
particular, the parties intend that the covenants
contained in Section 6.2.1 shall be construed as a
series of separate covenants, one for each county and
city in which the Business has been carried on or in
which Buyer may conduct a similar business after the
Closing Date. Except for geographic coverage, each
such separate covenant shall be deemed identical in
terms. If, in any proceeding, a court or arbitrator
shall refuse to enforce any of the separate covenants,
then such unenforceable covenant shall be deemed
eliminated from this Section 6.2 for the purpose of
those proceedings to the extent necessary to permit the
remaining separate covenants to be enforced. If the
provisions of this Section 6.2 shall ever be deemed to
exceed the duration or geographic limitations or scope
permitted by applicable law, then such provisions shall
be reformed to the maximum time or geographic
limitations in scope, as the case may be, permitted by
applicable law.
6.3 EMPLOYMENT. Buyer agrees to offer employment,
effective immediately following the Closing, to all of the
employees of the Business who are then employed by Seller,
except for the employees, if any, listed in Section 6.3 of
the Disclosure Schedule. Seller agrees in this regard to
cooperate with Buyer by permitting Buyer throughout the
period prior to the Closing to meet with the employees of
the Business at reasonable times and to distribute to them
such forms and other documents relating to employment by
Buyer after the Closing as Buyer deems appropriate. Buyer
agrees to make available to each employee of the Business
who accepts employment with Buyer as of the Closing Date and
who is not listed on Section 6.3 of the Disclosure Schedule,
health benefits substantially equivalent to the benefits
provided by Seller to its employees, such benefits to become
effective without a waiting period and without pre-existing
condition limitations. Nothing herein shall be deemed to
require Buyer to retain any of the employees it hires for
any specific period of time or to maintain compensation
rates or fringe benefit programs for any specific period of
time, however, Buyer shall be responsible for all actions
taken or omitted to be taken with respect to such employees
following their hiring by Buyer. Notwithstanding anything
to the contrary in this Agreement, except as set forth in
Section 6.4.2, Buyer does not assume, and shall not be
deemed to have assumed, any liability or obligation of
Seller relating to or arising from any employee benefit plan
of Seller.
6.4 COBRA COVERAGE AND PROFIT SHARING PLAN.
6.4.1 COBRA. Seller shall timely provide all
notices required to be provided to any of Seller's
employees, former employees, or the beneficiaries or
dependents of such employees or former employees, under
Part 6 of Subtitle B of Title I of ERISA or
Section 4980B(f) of the Code (herein collectively
referred to as "COBRA"), to the extent such notices are
required to be provided by Seller by reason of events
occurring prior to or on the Closing Date or by reason
of the transactions contemplated by this Agreement.
For the purposes of the foregoing, Seller shall treat
any employee who accepts employment with Buyer after
the Closing ("TRANSFERRED EMPLOYEES") and such
employee's beneficiaries and dependents, as of the
Closing Date as having incurred a "qualifying event"
(within the meaning of ERISA Section 603 and Code
Section 4980B(f)(3)) as of the Closing Date.
6.4.2 PROFIT SHARING PLAN. Seller shall
maintain sponsorship of the Custom Coating & Laminating
Corporation Profit Sharing Plan (the "Profit Sharing
Plan") for the purpose of terminating the Profit
Sharing Plan and distributing its assets to its
participants. Buyer shall cause its tax-qualified
defined contribution plan to accept direct transfers
(of the type referred to in Code Section 401(a)(31))
from the Profit Sharing Plan if such direct transfers
satisfy the following requirements: (i) the participant
in the Profit Sharing Plan receives an "eligible
rollover distribution" (as defined in Code Section
402(f)(2)(A)) from the Profit Sharing Plan within
twelve months of the Closing Date; (ii) the participant
is an active employee of Buyer at the time the direct
transfer would take place; and (iii) the participant
elects that the eligible rollover distribution be
directly transferred to Buyer's plan.
6.5 SALES AND USE TAX. Buyer and Seller shall
cooperate in preparing and filing tax returns relating to
all sales, excise, real estate, use, transfer or license tax
due with regard to the transactions contemplated by this
Agreement. Buyer and Seller shall each be responsible for
and pay for one-half (1/2) of all of such taxes resulting
from the purchase, sale or transfer of the Assets and the
Assumed Liabilities hereunder.
6.6 PRESERVATION OF CONFIDENTIALITY. For a period of
five (5) years from the date of this Agreement, Seller
agrees to treat all Confidential Information (as defined
below) of Seller or the Business, as confidential, to
preserve the confidentiality thereof and to not disclose any
Confidential Information, except disclosures made to
customers and vendors in the ordinary course of the Business
through the Closing Date and disclosure to its
representatives who need to know such confidential
information in connection with the transactions contemplated
herein at any time before or after the Closing. Seller
shall use all reasonable efforts to cause its customers,
vendors and representatives to treat all Confidential
Information as confidential in accordance with this Section
6.6, to preserve the confidentiality thereof and to not
disclose any Confidential Information at any time before or
after the Closing. As used in this Agreement, "CONFIDENTIAL
INFORMATION" means any and all technical, manufacturing or
marketing information, ideas, methods, developments,
inventions, improvements, business plans, trade secrets,
scientific or statistical data, diagrams, drawings,
specifications or other proprietary information relating
thereto normally treated as confidential and proprietary by
Seller in the ordinary course of the Business consistent
with past practice, together with all analyses,
compilations, studies or other documents, records or data
prepared by Seller or Buyer or their respective
representatives, as the case may be, which contain or
otherwise reflect or are generated from such information, or
which are generated in connection with the transactions
contemplated herein at any time before or after the Closing.
6.7 REMOVAL OF UNDERGROUND STORAGE TANKS.
(a) Immediately following the Closing (unless
otherwise requested in writing by Buyer), Seller shall
close, remove and dispose of all existing underground
storage tanks located upon the Real Property (the "TANKS")
and appropriately characterize and remediate, in accordance
with applicable law and until Buyer obtains written
assurances from local regulatory authorities or from a
Massachusetts Licensed Site Professional that no further
action is required, any contamination caused by the use or
operation of such Tanks prior to the Closing Date. Seller
shall be responsible to execute all hazardous waste
manifests required in connection with such disposal,
including any such manifests relating to such Tanks and any
soil required to be disposed of in accordance with
applicable law. Seller shall also be obligated to fill and
compact to 90% compaction, with clean fill, the excavation
caused by the removal of the Tanks and the excavation of
soil and to restore the existing ground cover (all of the
obligations listed in this Section 6.7(a) shall be
collectively referred to as "SELLER'S OBLIGATIONS"). Seller
shall procure all Permits necessary to enable Seller's
Obligations to be performed (provided, that the Permits
which Seller shall be responsible to procure shall include
only those necessary for the excavation, removal and
disposal of the Tanks and the excavated soil, and Seller
shall not be obligated to procure any other Permit,
including any Permit required for the installation or
operation of any replacement tanks or other storage
equipment or system) and contract with one or more
responsible contractors which are reasonably acceptable to
Buyer to fulfill Seller's Obligations, and Seller (or Buyer
on behalf of Seller) shall execute all contracts and
agreements with such contractors and pay all fees and
expenses relating to the fulfillment of Seller's
Obligations. Buyer shall at its own expense (i) provide
Seller and its subcontractors and representatives with
access to the Real Property and (ii) provide all such other
cooperation as may be reasonably necessary to enable Seller
to perform Seller's Obligations hereunder.
In the event Seller fails to commence the removal
of the Tanks by March 31, 1995, or fails thereafter to
diligently carry out its performance of Seller's
Obligations, and such failure shall not be cured within ten
(10) days of receipt by Seller of written notice from Buyer
thereof, then Buyer shall have the right to take such
actions as are reasonably necessary in order to effect
Seller's Obligations and Seller shall reimburse Buyer for
any and all costs or expenses reasonably incurred by Buyer
in connection with the fulfillment of Seller's Obligations.
<PAGE>
(b) In the event that (i) there shall occur,
after the Closing Date, a release of Hazardous Substances,
of a quantity which would require reporting under applicable
Environmental Laws, from or in the immediate vicinity of any
of the Tanks (other than a release caused by Seller or its
subcontractors or representatives), or (ii) Seller shall be
ready, willing and able to carry out Seller's Obligations,
but the commencement of the removal of the Tanks shall be
delayed beyond March 31, 1995, and such delay is caused by
the inability of Seller to obtain any necessary Permit, or
is caused by or is at the written request of Buyer, then in
such event, except for Seller's obligation to indemnify
Buyer with respect to any Losses as set forth in Article 9
hereof, Seller shall be released from any further obligation
pursuant to Section 6.7(a) above, and thereafter Seller's
Obligations shall consist solely of the following: (A)
Seller shall promptly reimburse Buyer for Buyer's actual
costs incurred for (1) the excavation, removal and
disposition by a contractor or contractors approved by
Seller (which approval shall not unreasonably be withheld),
in accordance with the requirements of applicable law of the
Tanks and any contaminated soil, (2) procuring all Permits
necessary to enable such excavation, removal and disposition
of the Tanks and any contaminated soil, (3) the filling and
compaction to 90% compaction of the resulting excavation and
(4) the restoration of the existing ground cover to the
extent disturbance thereof was necessary in connection with
such removal; provided, that, exclusive of any obligations
of Seller to indemnify Buyer with respect to any Losses as
set forth in Article 9 hereof, the liability of Seller
pursuant to this Subsection 6.7(b) shall in no event exceed
$30,000, less the aggregate amount of any costs actually
incurred by Seller prior to March 31, 1995 pursuant to
Section 6.7(a) above; and (B) Seller shall execute all
hazardous waste manifests required in connection with the
disposal of the Tanks; provided, however, that Buyer shall
execute all hazardous waste manifests required in connection
with the disposal of any contaminated soil required to be
disposed of in accordance with applicable law.
As a condition precedent to the obligations of
Seller pursuant to subsection 6.7(b) above, Buyer shall
cause to be performed by Groundwater Technology, Inc.
("GTI") or another qualified environmental consultant
approved by Seller (which approval shall not unreasonably be
withheld), sampling of the groundwater from the four
existing monitoring wells in the vicinity of the Tanks,
which were sampled by GTI on or about January 16, 1995 and
tank tightness tests of the Tanks (collectively, the "TANK
TESTS"). The Tank Tests shall be performed on or within
fifteen (15) business days of March 31, 1995, and repeated
immediately prior to the commencement by Buyer of the
removal of the Tanks (unless such removal shall commence
within thirty (30) days of the date of the first such Tank
Test). Buyer shall provide promptly to Seller a copy of any
report rendered by the consultant of any such Tank Test.
One half of the costs and expenses incurred by Buyer in
connection with such Tank Tests shall be reimbursed by
Seller to Buyer as set forth immediately below.
Amounts required to be reimbursed by Seller
hereunder shall be paid within ten (10) business days of
receipt by Seller of written notice from Buyer thereof,
accompanied by copies of invoices or other evidence
reasonably satisfactory to Seller of the actual amount of
the costs to be reimbursed.
(c) Notwithstanding any provision contained in
this Agreement to the contrary, this Section 6.7 shall
survive the Closing and shall not be subject to the $100,000
threshold set forth in Section 9.4 hereof.
ARTICLE 7
CONDITIONS OF PURCHASE
7.1 GENERAL CONDITIONS. The obligations of the
parties to effect the Closing shall be subject to the
following conditions:
(a) No Orders; Legal Proceedings. No law or
order shall have been enacted, entered, issued, promulgated
or enforced by any governmental entity, nor shall any action
have been instituted and remain pending or have been
threatened and remain so at what would otherwise be the
Closing Date, which prohibits or restricts or would (if
successful) prohibit or restrict the transactions
contemplated herein.
<PAGE>
(b) Approvals. Any applicable waiting period
under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, and the related regulations and published
interpretations thereunder (the "HSR ACT") shall have
expired or been terminated and all Permits and approvals,
authorizations, consents or waivers required to be obtained
from any governmental entity or any third party in order to
consummate the transactions contemplated herein shall have
been received or obtained on or prior to the Closing Date.
7.2 CONDITIONS TO OBLIGATIONS OF BUYER. The
obligations of Buyer to effect the Closing are subject, at
the option of Buyer, to the satisfaction or written waiver
of each of the following conditions:
(a) Representations and Warranties and Covenants
of Seller. The representations and warranties of Seller
herein contained shall be true at the Closing Date in all
material respects with the same effect as though made at
such time. Seller shall have performed all obligations and
complied with all covenants and conditions required by this
Agreement to be performed or complied with by it at or prior
to the Closing Date.
(b) No Material Adverse Change. There shall not
have been any material adverse change in or affecting
Seller, the Business or the Assets subsequent to the date of
the Balance Sheet.
(c) Opinion of Counsel. Buyer shall receive at
the Closing from Foley, Hoag & Eliot, counsel to Seller, an
opinion dated the Closing Date, substantially in the form of
Exhibit E attached hereto.
(d) Instruments of Conveyance and Transfer.
Seller shall have delivered to Buyer a duly executed copy of
the Bill of Sale and the Assignment and Assumption Agreement
relating to the sale of the Assets (other than the Real
Property) and assignment and assumption of the Assumed
Liabilities. With respect to the Real Property, Seller and
the Trust shall deliver or cause to be delivered to the
Buyer or the Title Company, as the case may be, an executed
Deed, in recordable form, for the Real Property, a Title
Policy as set forth in Section 6.1 hereof, and such other
documents as may be reasonably requested by Buyer in order
to carry out the transactions contemplated herein.
(e) Title Policy Premium. Seller shall have paid
in full the applicable premium and related costs for the
Title Policy.
(f) Consents. All consents or approvals of third
parties and governmental authorities necessary for the
execution and delivery of this Agreement and the consumma-
tion of the transactions contemplated herein, including
without limitation the assignment of the Assigned Contracts,
shall have been obtained.
(g) Non-Foreign Corporation Affidavit. A duly
executed copy of the non-foreign corporation affidavit
attached hereto as Exhibit G shall have been delivered to
Buyer.
(h) Plourde Non-Competition and Consulting
Agreement. A duly executed Non-Competition and Consulting
Agreement by and between Roger P. Plourde and Buyer,
substantially in the form of Exhibit H attached hereto shall
have been delivered to Buyer.
(i) Waddill Employment Agreement. A duly
executed Employment Agreement by and between Michele Waddill
and Buyer, substantially in the form of Exhibit I attached
hereto shall have been delivered to Buyer.
obligations of Seller to effect the Closing are subject, at
the option of Seller, to the satisfaction or written waiver
of each of the following conditions:
(a) Representations and Warranties and Covenants
of Buyer. The representations and warranties of Buyer
herein contained shall be true at the Closing Date in all
material respects with the same effect as though made at
such time. Buyer shall have performed all obligations and
complied with all covenants and conditions required by this
Agreement to be performed or complied with by it at or prior
to the Closing Date.
(b) Plourde Non-Competition and Consulting
Agreement. A duly executed Non-Competition and Consulting
Agreement by and between Roger P. Plourde and Buyer,
substantially in the form of Exhibit H attached hereto shall
have been delivered to Seller.
(c) Waddill Employment Agreement. A duly
executed Employment Agreement by and between Michele Waddill
and Buyer, substantially in the form of Exhibit I attached
hereto shall have been delivered to Seller.
(d) Resale Certificate. A Sales and Use Tax
Resale Certificate from The Commonwealth of Massachusetts
satisfactory to Seller to exempt the transactions
contemplated herein from the Massachusetts Sales and Use Tax
shall have been delivered to Seller.
(e) Opinion of Counsel. Seller shall receive at
the Closing from Donald D. Bradley, Esq., General Counsel of
Buyer, an opinion dated the Closing Date, substantially in
the form of Exhibit F attached hereto.
ARTICLE 8
[RESERVED]
ARTICLE 9
INDEMNIFICATION
9.1 OBLIGATIONS OF SELLER. Seller agrees to indemnify
and hold harmless Buyer and its directors, officers,
employees, affiliates, agents and assigns from and against
any and all loss, claim, action, cost, damage, assessment,
disbursement, expense (including, without limitation,
interest, penalties and reasonable attorneys' fees),
liability, deficiency, diminution in value, obligation,
penalty, judgment or settlement of any kind or nature
(collectively, "LOSSES"), directly or indirectly, as a
result of, or based upon or arising from:
(a) any breach of any representation, warranty or
covenant of Seller made in this Agreement except for any
covenant set forth in Section 6.7 hereof; or
(b) any and all Excluded Liabilities including,
but not limited to, the following:
(I) any and all Product Liability Claims (as
defined below) asserted against Buyer with respect to
products manufactured by Seller on or prior to the Closing
Date. "PRODUCT LIABILITY CLAIMS" as used herein shall mean
any claim, action, lawsuit or proceeding in which damages
are sought for bodily injury or death to any person, or for
injury to or destruction of property (other than injury to
or destruction of the product itself or any parts or
components thereof), allegedly arising out of or resulting
from any defect in design or manufacture of, or any breach
of express or implied warranties or representations made
with respect to, any product (or any parts or components
thereof) manufactured by Seller on or before the Closing
Date, or in the case of products actually shipped by Seller
on or prior to the Closing Date, to any alleged failure to
provide adequate warning or instruction on the use of the
products;
(II) any and all Product Warranty and Return
Claims (as defined below) asserted against Buyer with
respect to products manufactured by Seller on or prior to
the Closing Date. "PRODUCT WARRANTY AND RETURN CLAIMS" as
used herein shall mean any claim, action, lawsuit or
proceeding in which repaired or replacement products,
refunds, or Losses resulting from such products (which are
not otherwise included in the Product Liability Claims as
set forth above), are sought for any products which are
returned pursuant to any previous return policy or related
agreement of Seller or which are alleged to be defective,
substandard, faulty, inferior or inoperative, or for any
injury to or destruction of the product itself or any parts
or components thereof, or for any breach of express or
implied warranties or representations made with respect to,
any product (or any parts or components thereof)
manufactured, shipped, sold, installed, delivered, serviced
or repaired in connection with the Business; provided,
however, that Seller shall indemnify Buyer for any such
Product Warranty and Return Claims only to the extent the
amount of such Claims or potential Claims was not reflected
in the Closing Date Balance Sheet, and taken into account in
the calculation of the Net Book Value;
(III) the alleged or actual violation of any
law, rule or regulation, prior to the Closing, by Seller or
the Trust including, without limitation, any Environmental
Law;
(IV) the generation, use, transportation,
treatment, storage, release or disposal, before the Closing,
of Hazardous Substances at the Real Property or any property
or facility of Seller;
(V) the presence of Hazardous Substances at
the Real Property or at any property or facility of Seller
which was present at the Real Property or such property or
facility at any time on or prior to the Closing;
(VI) actions taken by Buyer to bring into
compliance with Environmental Laws as in effect at the
Closing Date any violation or noncompliance existing as of
the Closing, including, without limitation, bringing the
operation of the Business into compliance with RCRA and
similar state laws as in effect at the Closing Date and all
permits issued thereunder, and from Losses arising from the
operation of the Business subsequent to the Closing and
prior to the correction of such items of noncompliance as a
result of such violation or noncompliance; provided,
however, that this Subsection 9.1(b)(vi) shall apply only to
such actions taken by Buyer as are necessitated by the
failure of Seller, within fourteen (14) days after receipt
from Buyer of written notice pursuant to Section 9.3 below
of such violation or noncompliance, to acknowledge in
writing its obligation to provide indemnification in respect
thereof and promptly thereafter to commence and diligently
prosecute action reasonably calculated to correct or remedy
such violation or non-compliance. Notwithstanding anything
to the contrary in the foregoing subsections 9.1(b)(iii),
(iv) (v) or (vi), Buyer shall not be indemnified in respect
of any Losses referred to in such subsections only to the
extent that such Losses are caused by, or are aggravated or
exacerbated by, acts or omissions of Buyer or its directors,
officers, employees, affiliates, consultants,
subcontractors, agents or assigns relating to the
generation, use, transportation, treatment, storage, release
or disposal of any Hazardous Substances after the Closing;
(VII) the failure of Seller to comply with
its payment obligations set forth in Section 6.7 hereof; or
(VIII) all claims, liabilities, or
obligations, known or unknown (other than accrued payroll,
benefits and related taxes to the extent of the amount
thereof reflected on the Closing Date Balance Sheet),
arising out of the employment relationship existing prior to
the Closing between Seller and any and all current or former
employees of Seller, including but not limited to (i) work-
related accidents or injuries, age and sex discrimination,
sexual harassment, violation of employment or safety laws
and wrongful discharge, where the act, omission, event, or
occurrence giving rise to the claim, obligation, or
liability shall have taken place prior to the Closing Date,
and (ii) medical or health care claims, obligations and
liabilities, under any plan, policy or program of Seller or
applicable law; or
(c) all Losses resulting from the assertion of
claims made against the Assets sold hereunder or against
Buyer by creditors of Seller under any applicable bulk
transfer law, including, but not limited to, the bulk
transfer provisions of the Uniform Commercial Code of any
state, or any similar statute, with respect to the
transactions contemplated hereby; provided, that this
Subsection shall in no event apply to Losses resulting from
the assertion of claims included in the Assumed Liabilities.
9.2 OBLIGATIONS OF BUYER. Buyer agrees to indemnify
and hold harmless Seller and its directors, officers,
employees, affiliates, agents and assigns from and against
any and all Losses, directly or indirectly, as a result of,
or based upon or arising from (i) the Assumed Liabilities,
(ii) any breach of any representation, warranty or covenant
of Buyer made in this Agreement or (iii) the ownership or
operation of the Business or the Assets after the Closing.
9.3 PROCEDURE.
(A) In the event that Buyer or Seller (the
"Indemnified Party") shall seek indemnification hereunder,
it shall give to the party obligated to provide
indemnification to such Indemnified Party (the "Indemnitor")
written notice (a "Claim Notice") describing in reasonable
detail the facts giving rise to any claim for
indemnification hereunder including the basis of such claim
in general terms (including a specific reference to the
provision of the Purchase Agreement under which such claim
arises), the date such Claim Notice is being sent, and (if
then known) the amount or the method of computation of the
amount of such claim and (if not then known) the Indemnified
Party's reasonable estimate of the anticipated maximum
amount of such claim together with the basis of such
estimate; provided, that a Claim Notice in respect of any
action at law or suit in equity by or against a third person
as to which indemnification will be sought shall be given
promptly after the action or suit is commenced. Neither the
failure of the Indemnified Party to give notice hereunder,
or defects or errors in any notice given, shall relieve the
Indemnitor of any indemnity obligation pursuant to this
Agreement. However, to the extent that such failure, defect
or error actually prejudices the rights of the Indemnitor,
the Indemnified Party's rights hereunder may be limited to
the extent of such actual prejudice.
(B) After the giving of a Claim Notice pursuant
hereto, the amount of indemnification to which an
Indemnified Party shall be entitled shall be determined:
(i) by the written agreement between the Indemnified Party
and the Indemnitor; (ii) by a judgment or decree of any
court of competent jurisdiction; or (iii) by any other means
to which the Indemnified Party and the Indemnitor shall
agree.
(C) The Indemnitor shall have the right to
conduct and control, through counsel of its choosing
reasonably acceptable to the Indemnified Party, the defense,
compromise or settlement of any third person claim, action
or suit against such Indemnified Party as to which
indemnification is sought by any Indemnified Party from any
Indemnitor hereunder, provided that the Indemnitor (i) has
acknowledged and agreed in writing, within 14 days after the
giving of a Claim Notice or such shorter period as may be
required to avoid any prejudice to the right of the
Indemnified Party, that, if the same is adversely
determined, the Indemnitor has an obligation to provide
indemnification to the Indemnified Party in respect thereof
and (ii) diligently and timely defends against such claim,
action or suit. In any such case the Indemnified Party
shall cooperate in connection therewith and shall furnish
such records, information and testimony and attend such
conferences, discovery proceedings, hearings, trials and
appeals as may be reasonably requested by the Indemnitor in
connection therewith; provided, that the Indemnitor shall
not, without the written consent of the Indemnified Party
(which consent shall not be withheld unreasonably)
compromise or settle any such claim, action or suit. The
Indemnified Party shall have the right to employ separate
counsel in any claim, action or suit and to participate in
the defense thereof, but the fees and expenses of such
counsel shall be at the expense of the Indemnified Party
unless (i) the Indemnitor has agreed in writing to pay such
fees and expenses, (ii) the Indemnitor has failed to assume
the defense and employ counsel, or (iii) the named parties
to any such claim, action or suit (including any impleaded
parties) include both the Indemnitor and the Indemnified
Party and the Indemnified Party shall have been advised by
its counsel that representation of the Indemnitor and the
Indemnified Party by the same counsel would be inappropriate
under applicable standards of professional conduct (whether
or not such representation by the same counsel has been
proposed) due to actual or potential differing interests
between them (in which case the Indemnitor shall not have
the right to assume the defense of such claim, action or
suit on behalf of the Indemnified Party).
(D) All payments made pursuant to this Section 9
shall constitute an adjustment to the Purchase Price.
9.4 LIMITATION ON CERTAIN CLAIMS. Buyer and its
directors, officers, employees, affiliates, agents and
assigns shall not be entitled to recover from Seller for any
breach or alleged breach by Seller of any representation or
warranty set forth in Section 3 above, or pursuant to
Section 9.1(a) hereof for any Losses (a) unless and until
the aggregate of all such Losses or claims recoverable by
the claiming party exceeds One Hundred Thousand Dollars
($100,000), and only to the extent such Losses or claims
exceed such $100,000 and additionally, (b) in the case of
Losses or claims arising out of a breach or alleged breach
of Section 3.9 above, only to the extent that the Buyer,
notwithstanding its diligent efforts, has been unable to
secure reimbursement therefor pursuant to the Title Policy.
Any Losses which arise pursuant to Sections 9.1(b) or (c)
shall not be subject to the $100,000 minimum set forth in
this Section 9.4.
9.5 PAYMENT. Subject to Section 9.4 hereof, if any
matter as to which Buyer may be able to assert a claim
hereunder has been finally determined in accordance with
this Agreement and the procedures set forth in the Escrow
Agreement, Buyer shall have the right, in addition to any
other rights and remedies (whether under this Agreement or
otherwise), to be paid first from the Escrow Funds for the
amount of such claim up to the amount of the Escrow Funds
available, with any remaining liability in excess of such
available Escrow Funds to be paid by Seller to Buyer within
ten (10) days of such final determination by wire transfer
of immediately available funds to an account designated by
Seller.
9.6 TERM. This Article 9 shall survive the Closing
and shall remain in effect as follows: (i) as to any
indemnification obligation arising pursuant to Section
9.1(a), this Article 9 shall survive the Closing and shall
remain in effect for a period of three (3) years after the
Closing or such lesser period as may be provided in Section
10.13 in respect of the particular representation or
warranty alleged to have been breached and (ii) as to any
indemnification obligation arising pursuant to Sections
9.1(b) or (c), this Article 9 shall remain in effect
indefinitely; provided, however, that as to any matter for
which a claim has been asserted in accordance with the
provisions of the Escrow Agreement that is pending or
unresolved at the end of any limitation period set forth in
this Section 9.6, this Article 9 shall remain in effect
until such matter is finally terminated or otherwise
resolved by the parties and settled under this Agreement or
by a court of competent jurisdiction and any amounts payable
hereunder are finally determined and paid.
ARTICLE 10
GENERAL
10.1 AMENDMENTS; WAIVERS. This Agreement and any
schedule or exhibit attached hereto may be amended only by
an agreement in writing of all parties. No waiver of any
provision nor consent to any exception to the terms of this
Agreement shall be effective unless in writing and signed by
the party to be bound and then only to the specific purpose,
extent and instance so provided.
10.2 SCHEDULES; EXHIBITS; INTEGRATION. Each schedule
and exhibit delivered pursuant to the terms of this
Agreement shall be in writing and shall constitute a part of
this Agreement, although schedules need not be attached to
each copy of this Agreement. This Agreement, together with
such schedules and exhibits, constitute the entire agreement
among the parties pertaining to the subject matter hereof
and thereof and supersede all prior agreements and
understandings of the parties in connection therewith.
10.3 BEST EFFORTS; FURTHER ASSURANCES. Each party
will use its best efforts to cause all conditions to its and
the other parties' obligations hereunder to be timely
satisfied and to perform and fulfill all obligations on its
part to be performed and fulfilled under this Agreement, to
the end that the transactions contemplated by this Agreement
shall be effected substantially in accordance with its
terms. Each party shall execute and deliver such further
certificates, agreements and other documents and take such
other actions as may be necessary or appropriate to
consummate or implement the transactions contemplated hereby
or to evidence such events or matters.
10.4 GOVERNING LAW. This Agreement and the legal
relations between the parties shall be governed by and
construed in accordance with the laws of the State of
California, excluding any laws which require the application
of another jurisdiction's laws.
10.5 NO ASSIGNMENT. Neither this Agreement nor any
rights or obligations under it are assignable without the
prior written consent of the other party.
10.6 HEADINGS. The descriptive headings of the
Articles, Sections and subsections of this Agreement are for
convenience only and do not constitute a part of this
Agreement.
10.7 COUNTERPARTS. This Agreement and any amendment
hereto or any other agreement (or document) delivered
pursuant hereto may be executed in one or more counterparts
and by different parties in separate counterparts. All of
such counterparts shall constitute one and the same
agreement (or other document) and shall become effective
(unless otherwise provided therein) when one or more
counterparts have been signed by each party and delivered to
the other party.
10.8 PUBLICITY AND REPORTS. Seller and Buyer shall
coordinate all publicity relating to the transactions
contemplated by this Agreement and no party shall issue any
press release, publicity statement or other public notice
relating to this Agreement, or the transactions contemplated
by this Agreement, without obtaining the prior consent of
the other party except to the extent that a particular
action is required by applicable law. Seller shall obtain
the prior written consent of Buyer in the case of any form
and the contents of any application or report made to any
governmental entity or which relates to this Agreement,
which consent shall not be unreasonably withheld.
10.9 REMEDIES CUMULATIVE. All rights and remedies
existing under this Agreement are cumulative to, and not
exclusive of, any rights or remedies otherwise available.
In addition, Article 9 shall not be deemed to preclude or
otherwise limit in any way the exercise of any other rights
or pursuit of other remedies for the breach of this
Agreement or with respect to any misrepresentation.
10.10 PARTIES IN INTEREST. This Agreement shall be
binding upon and inure to the benefit of each party, and
nothing in this Agreement, express or implied, is intended
to confer upon any other person any rights or remedies of
any nature whatsoever under or by reason of this Agreement.
Nothing in this Agreement is intended to relieve or
discharge the obligation of any third person to any party to
this Agreement.
10.11 NOTICES. Any notice or other communication
hereunder must be given in writing and (a) delivered in
person, (b) transmitted by telex, telefax or
telecommunications mechanism, (c) sent by reputable
overnight courier or (d) mailed by certified or registered
mail, postage prepaid, receipt requested as follows:
IF TO BUYER, ADDRESSED TO:
Furon Company
29982 Ivy Glenn Drive
Laguna Niguel, California 92677
Attention: Chairman of the Board and General
Counsel
IF TO SELLER, ADDRESSED TO:
Custom Coating & Laminating Corporation
c/o Roger P. Plourde
10 Mount View Drive
Paxton, MA 01612
WITH COPIES TO:
Michele Waddill
208 Iowa Street
Worcester, MA 02655
AND TO:
Foley, Hoag & Eliot
One Post Office Square
Boston, Massachusetts 02109
Attention: Robert W. Sweet, Jr., Esq.
or to such other address or to such other person as either
party shall have last designated by such notice to the other
party. Each such notice or other communication shall be ef-
fective: (i) if given by telecommunication, when transmitted
to the applicable number so specified in (or pursuant to)
this Section 10.11 and an appropriate answer back is
received, (ii) if given by mail, three days after such
communication is deposited in the mails with first class
postage prepaid, addressed as aforesaid or (iii) if given by
any other means, when actually received at such address.
10.12 EXPENSES AND ATTORNEYS FEES. Seller and Buyer
shall each pay their own expenses incident to the
negotiation, preparation and performance of this Agreement
and the transactions contemplated herein, including but not
limited to the fees, expenses and disbursements of their
respective accountants and counsel. In the event of any
action for the breach of this Agreement or misrepresentation
by any party, the prevailing party shall be entitled to
reasonable attorney's fees, costs and expenses incurred in
such action.
10.13 SURVIVAL. All representations and warranties of
the parties contained in this Agreement shall survive the
execution and delivery of this Agreement and the Closing
Date for 18 months after the Closing Date; provided,
however, the representations and warranties set forth in
Sections 3.1, 3.2, 3.3 and 3.4 shall survive for five (5)
years after the Closing Date, and the representations and
warranties set forth in Section 3.7 shall survive until
ninety (90) days after the expiration of the applicable
statutes of limitations.
10.14 SPECIFIC PERFORMANCE. Seller and Buyer each
acknowledge that, in view of the uniqueness of the Business
and the transactions contemplated by this Agreement, each
party would not have an adequate remedy at law for money
damages in the event that this Agreement has not been
performed in accordance with its terms, and therefore agrees
that the other party shall be entitled to specific
enforcement of the terms hereof in addition to any other
remedy to which it may be entitled, at law or in equity.
<PAGE>
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has
caused this Agreement to be executed by its duly authorized
officers as of the day and year first above written.
BUYER:
FURON COMPANY,
A CALIFORNIA CORPORATION
By: /s/ J. Michael Hagen
Name: J. Michael Hagen
Title: Chairman or the Board
and Chief Executive Officer
SELLER
CUSTOM COATING & LAMINATING
CORPORATION, A MASSACHUSETTS
CORPORATION
By: /s/ Roger P. Plourde
Name: Roger P. Plourde
Title: President
<PAGE>
<PAGE>
SCHEDULE A
EARN-OUT PAYMENTS
Definitions:
"CC&L PRODUCTS" as used herein shall be defined as the
following:
(i) all products currently being sold by Seller,
as they may be modified, enhanced or improved after the
Closing Date, and whether manufactured at the Real Property
or elsewhere;
(ii) all products coated by Buyer at the Real
Property;
(iii) all products listed in Section 1.1.6 of the
Disclosure Schedule as products currently being developed by
Seller;
(iv) all products sold by Buyer that are made
with any of the Intellectual Property that is disclosed in
Section 1.1.6 of the Disclosure Schedule or that as of the
date of the Agreement (a) is not generally available to the
public, (b) is not within Buyer's possession other than as a
result of its disclosure by Seller or its representatives
and (c) has not been independently developed by Buyer; or
(v) any other products sold by or on behalf of
Buyer that are not coated at the Real Property but are slit,
repackaged, die cut or otherwise converted or fabricated at
the Real Property; provided, however, that the amount to be
recognized as the Net Sales for such converted or fabricated
products for purposes of an Earn-Out Payment shall be
limited to the following percentage of the total actual Net
Sales therefor: (a) 5% for polyester or fiberglass-based
products; (b) 10% for polyamide-based products and products
made with any of the PTFE family of resins and (c) for all
other products, a percentage to be mutually agreed upon in
good faith by Buyer and Roger Plourde on a case-by-case
basis.
"NET SALES" as used herein shall be defined as the gross
sales of all CC&L Products, less any sales returns and
allowances, cash discounts and freight-out expenses, as each
of such terms is determined in accordance with generally
accepted accounting principles.
Full Earn-Out Payment: At the end of the 1996,
1997 and 1998 fiscal years of Buyer in which the Net Sales
of all CC&L Products meets or exceeds the respective Target
Sales Amount (as set forth in the table below), Buyer shall
pay to Seller an Earn-Out Payment equal to (i) $1,000,000
for the first of any of the three years in which such Target
Sales Amount is met or exceeded, and (ii) $1,500,000 for
each subsequent year after the $1,000,000 payment (or any
partial amount thereof as set forth below) is paid to
Seller, up to an aggregate possible payout of $4,000,000.
Partial Earn-Out Payment: If the Target Sales
Amount is not met in any of the three (3) fiscal years, a
partial amount shall be paid as follows: In any year in
which the Net Sales of CC&L Products exceeds the prior
year's Target Sales Amount, but does not meet the current
year's Target Sales Amount, a partial Earn-Out Payment shall
be paid to Seller. Such partial Earn-Out Payment shall be
equal to the amount of the Earn-Out Payment which would have
been paid to Seller had the Target Sales Amount for that
current year been met multiplied by a fraction, the
numerator of which is the difference between the actual Net
Sales for that current fiscal year and the Target Sales
Amount for the prior fiscal year, and the denominator of
which is the difference between the Target Sales Amount of
the current fiscal year and the Target Sales Amount of the
prior fiscal year.
Target Sales Amounts
Target Increase over
Fiscal Year Sales Amount Prior Year
1995 $23,000,000 _________
1996 $24,000,000 $1,000,000
1997 $27,000,000 $3,000,000
1998 $30,000,000 $3,000,000
<PAGE>
<PAGE> Examples
The following examples of possible Earn-Out
Payment amounts are provided for illustrative purposes only.
The numbers were chosen solely to facilitate explanation of
the calculations and do not reflect projections or
expectations of the Net Sales of CC&L Products.
Fiscal Target Sales Actual Net Earn-Out
Year Amount Sales Payment
Example 1 1995 23,000,000 ---- ----
1996 24,000,000 25,500,000 1,000,000
1997 27,000,000 23,000,000 0
1998 30,000,000 32,000,000 1,500,000
Example 2 1995 23,000,000 ---- ----
1996 24,000,000 25,000,000 1,000,000
1997 27,000,000 30,000,000 1,500,000
1998 30,000,000 35,000,000 1,500,000
Example 3 1995 23,000,000 ---- ----
1996 24,000,000 22,000,000 0
1997 27,000,000 25,000,000 333,333(1)
1998 30,000,000 29,000,000 1,000,000(2)
1995 23,000,000 ---- ____
1996 24,000,000 23,500,000 500,000(3)
1997 27,000,000 27,500,000 1,500,000
1998 30,000,000 32,000,000 1,500,000
___________________________
(1) 1,000,000 X 25,000,000 - 24,000,000 = 333,333
-----------------------
27,000,000 - 24,000,000
(2) 1,500,000 X 29,000,000 - 27,000,000 = 1,000,000
-----------------------
30,000,000 - 27,000,000
(3) 1,000,000 X 23,500,000 - 23,000,000 = 500,000
-----------------------
24,000,000 - 23,000,000
