United States Securities and Exchange Commission
Washington, D.C. 20549
FORM 8-K
Current Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): August 14, 1998
(August 11, 1998)
Commission file number 1-5558
Katy Industries, Inc.
(Exact name of registrant as specified in its charter)
Delaware 75-1277589
(State of Incorporation) (IRS Employer Identification Number)
6300 S. Syracuse #300, Englewood, Colorado 80111
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (303) 290-9300
Item 2. Acquisition of Assets
On August 11, 1998, Katy Industries, Inc. ("Katy" or the "Company")
acquired substantially all of the assets of the Wilen Companies, Incorporated
("Wilen"). The purchase price for Wilen, which is subject to possible
adjustment based on a closing date balance sheet prepared on a post-closing
basis, was approximately $50,000,000, including certain indebtedness paid by
Katy. On the closing date, Katy paid an amount equal to 95% of the estimated
purchase price, which was funded through a $33,000,000 borrowing against the
Company's unsecured line of credit at Bank of America, with the balance being
funded from cash on hand. The remaining portion of the purchase price will
be paid upon the final determination of the net asset value as of July 31,
1998 and is expected to be funded from cash on hand.
Wilen, based in Atlanta, Georgia, is a premier manufacturer and
distributor of a wide variety of professional cleaning products including
mops, brooms and plastic cleaning products with annual sales of approximately
$42,000,000. The assets of Wilen include cash and cash equivalents, accounts
receivable, inventory, and machinery and equipment. The Company intends to
continue the business of Wilen and to utilize the assets of Wilen in the same
manner in which they were used prior to the acquisition.
There is no material relationship between Wilen and Katy, or any of
their respective affiliates, directors, or officers or, to the knowledge of
Katy, any associate of any such director or officer.
Item 7. Financial Statements and Exhibits
It is impracticable at this time for the Company to provide the
financial statements required to be filed with this Form 8-K. The Company
intends to file such required financial statements not later than
October 10, 1998.
The Asset Purchase Agreement is filed as Exhibit 2.
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.
Katy Industries, Inc.
---------------------------------
(Registrant)
By /s/ John R. Prann, Jr.
---------------------------------
John R. Prann, Jr.
Chief Executive Officer
Date August 14, 1998
-----------------------
EXHIBIT 2
ASSET PURCHASE AGREEMENT
Dated as of August 11, 1998
by and among
WILEN ACQUISITION CORPORATION, Purchaser,
KATY INDUSTRIES, INC., Guarantor
THE WILEN COMPANIES, INCORPORATED, Seller
and
JOSEPH M. WILEN, Shareholder
TABLE OF CONTENTS
ARTICLE I Purchase and Sale of the Purchased Assets -1-
1.1 Purchased Assets -1-
1.2 Transfer of Purchased Assets -2-
1.3 Further Assurances -3-
1.4 Power of Attorney -3-
ARTICLE II Assumption of Liabilities -3-
2.1 Assumed Liabilities -3-
2.2 Exclusion of Liabilities -5-
ARTICLE III Purchase Price and Payment -5-
3.1 Calculation of Base Purchase Price -5-
3.2 Determination of July 31 Net Worth Statement -6-
3.3 Determination of Final Purchase Price -7-
3.4 Allocation of Final Purchase Price -8-
ARTICLE IV Closing -8-
4.1 Closing Date -8-
4.2 Deliveries by the Purchaser -8-
4.3 Deliveries by the Seller and the Shareholder -10-
4.4 Simultaneous Delivery -11-
4.5 Risk of Loss -11-
ARTICLE V Conditions to Closing -11-
5.1 Conditions Precedent to Obligations of the Purchaser -12-
5.2 Conditions Precedent to Obligations of the Seller and
the Shareholder -13-
ARTICLE VI Representations and Warranties -14-
6.1 Representations and Warranties of the Seller and
the Shareholder -14-
6.2 Representations and Warranties of the Purchaser and
the Guarantor -28-
ARTICLE VII Covenants and Agreements -30-
7.1 Satisfaction of Retained Liabilities -30-
7.2 Environmental Liability -30-
7.3 [ Intentionally Omitted ] -32-
7.4 [ Intentionally Omitted ] -32-
7.5 Access -32-
7.6 Employment and Related Matters -32-
7.7 Non-Competition Agreement -34-
7.8 Confidentiality -34-
7.9 Consents and Approvals -35-
7.10 Transfer of Business Relationships and Other
Transitional Assistance -35-
7.11 Product Liability Matters -35-
7.12 Tax Matters. -36-
7.13 Post Closing Real Estate Matters -36-
ARTICLE VIII Termination and Abandonment -36-
8.1 Termination and Abandonment -36-
8.2 Effect of Termination -37-
ARTICLE IX Indemnification -37-
9.1 Seller's and Shareholder's Indemnification -37-
9.2 Purchaser's Indemnification -39-
9.3 Losses -39-
9.4 Procedure for Indemnification -40-
9.5 Sole Remedy -41-
9.6 Insurance -41-
ARTICLE X Expenses -41-
10.1 Professional Expenses -41-
10.2 Transfer Expenses -41-
ARTICLE XI Miscellaneous -42-
11.1 Entire Agreement; Amendment -42-
11.2 Binding Effect; Assignment -42-
11.3 Notices -42-
11.4 Severability -43-
11.5 Mutual Contribution; No Third Party Beneficiaries -43-
11.6 Waivers -44-
11.7 Bulk Sales Law -44-
11.8 Headings; Gender; Number -44-
11.9 Applicable Law -44-
11.10 [Intentionally omitted.] -44-
11.11 Non-Binding Mediation -44-
11.12 Representations and Warranties Complete -44-
11.13 Counterparts -45-
LIST OF SCHEDULES AND EXHIBITS
Schedules
Schedule 1.1(b) Excluded Assets
Schedule 2.1 Contractual Commitments
Schedule 3.1(b)(i) Adjustment Modifications
Schedule 3.1(b)(ii) Modified March 31 Balance Sheet
Schedule 3.4 Allocation
Schedule 6.1(a) Licenses
Schedule 6.1(c) Defaults
Schedule 6.1(d) Required Seller Consents
Schedule 6.1(e) March 31 Financial Statement; Intercompany and
Related Party Assets and Liabilities
Schedule 6.1(f) Buy-Back Arrangements
Schedule 6.1(g) Absence of Undisclosed Liabilities
Schedule 6.1(h) Liens
Schedule 6.1(j) Intellectual Property
Schedule 6.1(k) Litigation
Schedule 6.1(m) Environmental Approvals and Permits
Schedule 6.1(n) Taxes
Schedule 6.1(o) Insurance; Product Liability Claims
Schedule 6.1(p) Labor Relations
Schedule 6.1(q) Employee Benefit Plans
Schedule 6.1(r) Commitments, Leases and Contracts
Schedule 6.1(s) Real Estate
Schedule 6.1(v) Major Suppliers
Schedule 6.1(w) Major Customers
Schedule 6.1(y) Product Warranties
Schedule 6.1 (aa) Transactions with Interested Persons
Schedule 7.3(b) Compensation Increases; Benefit Grants
Schedule 7.6(a) Employees; Employment Agreements
Exhibits
Exhibit A Opinion of the Purchaser's Counsel
Exhibit B Assumption Agreement
Exhibit C-1 Facility Lease Amendment
Exhibit C-2 Warehouse Lease Amendment
Exhibit D Employment Agreement
Exhibit E Subordination and Attornment Agreement
Exhibit F Bill of Sale
Exhibit G Assignments (Intangible Assets)
Exhibit H Opinion of Seller's Counsel
Exhibit I Release
Exhibit J Non-Competition Agreement
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement") is dated as of
August 11, 1998, by and between WILEN ACQUISITION CORPORATION, a Delaware
corporation (the "Purchaser"), KATY INDUSTRIES, INC., a Delaware corporation
("Guarantor") (solely for purposes of its representations and warranties
contained in Section 6.2 hereof), THE WILEN COMPANIES, INCORPORATED, a Georgia
corporation (the "Seller"), and JOSEPH M. WILEN, an individual resident of the
State of Georgia (the "Shareholder").
R E C I T A L S:
A. The Seller is engaged in the business of designing, manufacturing,
marketing and selling professional and consumer cleaning products, including,
without limitation, mops, brooms and plastic cleaning products
(the "Business").
B. The Shareholder is the sole shareholder of the Seller and
further owns the real property and improvements thereon on which the Company's
main facilities are located at 3760 Southside Parkway, Atlanta, Georgia (the
"Facility").
C. The Seller desires to sell, the Shareholder desires that the
Seller sell, and the Purchaser desires to purchase, the Business and
substantially all of the assets and property owned or used by the Seller in
connection with the operation and conduct of the Business, on the terms and
subject to the conditions herein set forth.
D. Purchaser is an indirect subsidiary of Guarantor, and, as such,
Guarantor will derive substantial benefit from this Agreement and is willing
to enter into this Agreement.
NOW, THEREFORE, in consideration of the premises, the mutual
covenants and agreements contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto hereby agree as follows:
ARTICLE I
Purchase and Sale of the Purchased Assets
1.1 Purchased Assets.
(a) Purchased Assets. Subject to the terms and conditions set
forth in this Agreement, other than the Excluded Assets (as hereinafter
defined), the Seller shall sell, transfer, assign, convey and deliver to the
Purchaser, and the Purchaser shall purchase, accept and acquire from the
Seller, the Business and all properties and assets of the Seller (whether real
or personal, tangible or intangible) used or held for use in or related to the
Business, of every kind and description and wherever located, existing as of
the Closing Date (as hereinafter defined) (collectively, the "Purchased
Assets"), free and clear of all Liens other than Permitted Liens (each, as
hereinafter defined), including, without limitation, all accounts receivable,
prepaid expenses and other current assets, inventories (including raw
materials, work in process and finished goods), fixed assets (including all
machinery, equipment, computer hardware, tooling, furniture and fixtures),
owned leasehold improvements, owned motor vehicles, and all other owned
tangible personal property, all interests in real property and any
improvements thereon, all real property leases (subject in the case of the
Facility and Warehouse to amendment as hereinafter provided), all contract
rights, including unfilled customer orders, personal property leases
(including motor vehicle and other fixed assets and tangible personal property
leases), all computer programs, software, codes and databases or licenses with
respect thereto, all sales literature and promotional materials, all trade
names and trademarks, all goodwill of and associated with the Business,
knowhow, manufacturing and marketing programs and procedures, patents and
patent applications, inventions, discoveries, improvements, processes, trade
dress, plans, designs, methods, technical drawings, surveys, trade secrets,
copyright registrations, copyright applications, and any other non-registered
copyrights, and all other intellectual property, all customer lists, all
books, records and files, and all other tangible and intangible assets and
rights of the Seller used or held for use in the Business. As used herein,
the term "Liens" means, collectively, any security interest, mortgage, lien,
charge, restriction, encumbrance, hypothecation, pledge, conditional sale
agreement, claim, or other encumbrance. "Permitted Liens" has the meaning
given such term in Section 6.1(h) hereof.
(b) Excluded Assets. The provisions of Section 1.1(a)
notwithstanding, the Seller shall not sell, transfer, assign, convey or
deliver to the Purchaser, and the Purchaser shall not purchase, accept or
acquire the following assets of the Seller (collectively, the "Excluded
Assets"): (i) any and all parts, maintenance supplies, records, agreements and
other assets related to the ownership or operation of that certain Lear 25D,
registration number 825D (the "Aircraft"); (ii) any and all policies of life
insurance naming the Shareholder or any member of the Shareholder's family as
the insured life or beneficiary and any and all split dollar or other
arrangements relating to any such policy; (iii) the Seller's membership at the
Golf Club of Georgia; (iv) the Company's limited partnership interest in
Piedmont and 11th Street Associates, Ltd.; (v) any and all capital stock and
assets of Carolina Industries, Inc., a North Carolina corporation
("Carolina"); and (vi) those assets identified on Schedule 1.1(b) attached
hereto.
1.2 Transfer of Purchased Assets. On the Closing Date, the Seller
shall sell, assign, transfer, convey and deliver to the Purchaser all of the
Purchased Assets by bills of sale, assignments, endorsements and other good
and sufficient instruments of transfer necessary or desirable, in the
reasonable opinion of the Purchaser, to vest in the Purchaser good, complete
and indefeasible title to the Purchased Assets, free and clear of all Liens
other than Permitted Liens. All such documents shall be in form and substance
satisfactory to the Purchaser and its counsel and shall include, where the
assignment requires the consent of any third party and such consent has not
been waived by Purchaser, written consent of such third party.
1.3 Further Assurances. From time to time after the Closing Date,
at the Purchaser's request and without further consideration therefor, the
Seller shall perform, execute and deliver or cause to be performed, executed
and delivered, all such further acts, deeds, assignments, transfers,
conveyances and assurances as the Purchaser may reasonably require for the
more effective assigning, transferring, granting, conveying, selling, assuring
and confirming to the Purchaser and its successors and assigns, and for aiding
and assisting in reducing to possession, the Purchased Assets transferred or
to be transferred pursuant to this Agreement and as may be appropriate to
carry out the transactions contemplated hereby.
1.4 Power of Attorney. Without limiting any provision hereof, the
Seller agrees that, upon consummation of the transactions contemplated hereby,
the Purchaser and its successors and assigns shall be, and they hereby are,
constituted and appointed the true and lawful attorney of the Seller with
respect to the Purchased Assets, with full power of substitution, in the name
of the Purchaser or in the name of the Seller or otherwise, and for the
benefit and at the sole expense of the Purchaser, to institute and prosecute
all proceedings that the Purchaser may deem proper in order to collect, assert
or enforce any claim, right or title of any kind in and to the Purchased
Assets, and subject to the provisions of Article IX including Section 9.4, to
defend or compromise any and all suits and proceedings in respect of any of
said assets, and to do all such acts and things in relation thereto as the
Purchaser shall deem advisable. Specifically, but not in limitation of the
foregoing, from and after the Closing Date, the Purchaser shall have the right
and authority to enforce and collect, for its own account, all items that are
included in the Purchased Assets, and to endorse with the name of the
Purchaser or the Seller, as the case may be, any checks or drafts received on
account of any such items. The Seller shall promptly pay to the Purchaser any
amounts that may be received by the Seller after the Closing Date with respect
to any of the Purchased Assets. The Seller acknowledges that the foregoing
powers are coupled with an interest and shall not be revocable by the Seller
in any manner or for any reason. The Purchaser shall be entitled to retain
for its own account any amounts collected pursuant to the foregoing powers.
ARTICLE II
Assumption of Liabilities
2.1 Assumed Liabilities. Subject to the terms and conditions of
this Agreement, at the Closing, the Purchaser agrees to timely assume, pay,
perform and discharge in full when due, and the Seller hereby agrees to
transfer and assign to the Purchaser, the following obligations of the Seller
(collectively, the "Assumed Liabilities") which the Purchaser agrees to fully
and timely discharge from and after the Closing Date:
(i) all accounts payable and accrued liabilities of the
Seller reflected on the March 31 Financial Statement (as
hereinafter defined), to the extent that such accounts
payable and accrued liabilities remain unpaid in the
ordinary course of business as of the Closing Date and are
reflected on the July 31 Net Worth Statement (as hereinafter
defined);
(ii) all accounts payable and accrued liabilities incurred by
the Seller in the ordinary course of business consistent with
prior practice after March 31, 1998 and through the Closing Date,
solely to the extent such amounts (A) are accrued in accordance
with GAAP (as hereinafter defined) and reflected on the July 31
Net Worth Statement or (B) are of the same type as reflected on
the July 31 Net Worth Statement and incurred between July 31, 1998
and the Closing Date;
(iii) all contractual commitments of the Seller incurred in
the ordinary course of the Business and to be performed after the
Closing Date pursuant to (a) the contracts, agreements and leases
identified on Schedule 6.1(r) hereto that are assigned to the
Purchaser hereunder and (b) contracts, agreements and leases of
the Seller that are not required either to be identified on
Schedule 6.1(r) hereto or reflected on the March 31 Financial
Statement or the Closing Date Net Worth Statement, as the case may
be, in accordance with GAAP (as hereinafter defined)(including,
without limitation, open customer orders and purchase orders);
(iv) legal fees and expenses of the Seller incurred during
the three (3) year period following the Closing Date in connection
with defending (a) those pending actions, suits, claims and
proceedings (other than unfair labor practice claims) listed on
Schedule 6.1(k) hereto and (b) any and all actions, suits, claims
and proceedings instituted on or after the Closing Date relating
to the conduct of the Business by the Seller prior to the Closing
Date (but in no event any losses, costs or expenses relating to
the compromise or settlement of, or judgements with respect to,
any of the foregoing), up to an aggregate maximum of One Hundred
Seven Thousand Dollars ($107,000) in each of the three consecutive
twelve (12) month periods beginning on the Closing Date, but not
including any actions, suits claims or proceedings relating to
Seller Environmental Liabilities, as hereinafter defined;
(v) any and all liabilities associated with those unfair
labor practice claims (i.e., wage and hour disputes, compensation
claims, and work rule and similar claims, and not workers
compensation, discrimination, sexual harassment and similar
claims) listed on Schedule 6.1(p) hereto and those unfair labor
practice claims relating to the Business and filed after the date
of this Agreement; and
(vi) those liabilities specifically identified on Schedule
2.1 attached hereto.
With respect to the actions, suits, claims and proceedings described in
subparagraph (iv) above, the Purchaser's obligations shall be limited to
the monetary obligations described therein and the Seller and the
Shareholder shall retain all other obligations with respect thereto,
including without limitation, control of the defense of the same.
2.2 Exclusion of Liabilities. The parties expressly agree and
understand that the Purchaser shall assume no indebtedness, liabilities
or obligations of the Seller, except the Assumed Liabilities as
specifically provided for in Section 2.1 above, and the Seller shall
remain liable for each and every other debt, obligation and liability of
the Seller and of the Business (collectively, the "Excluded
Liabilities").
ARTICLE III
Purchase Price and Payment
3.1 Calculation of Base Purchase Price.
(a) Purchase Price. The purchase price for all of the Purchased
Assets shall be Forty Seven Million Five Hundred Thousand Dollars
($47,500,000) (the "Primary Amount"), plus (ii) Two Million Six Hundred
Ninety Three Thousand One Hundred Twenty Dollars ($2,693,120) (the
"Payoff Amount") (the sum of Primary Amount and the Payoff Amount being
hereinafter referred to as the "Base Purchase Price"), subject to
adjustment as provided herein.
(b) Net Worth Adjustment. The Base Purchase Price shall be
increased or decreased as provided in this Section. The "Net Worth
Adjustment" shall be equal to the difference between (A) the Net Worth
of the Seller as of March 31, 1998 (the "Base Net Worth"), which the
parties agree is Seven Million One Hundred Sixty Two Thousand Seven
Hundred Thirteen Dollars ($7,162,713), as set forth in the Seller's
Modified March 31 Balance Sheet (as hereinafter defined), and (B) the
Net Worth of the Seller as of July 31, 1998 (the "July 31 Net Worth").
If the July 31 Net Worth is greater than the Base Net Worth, then the
Base Purchase Price shall be increased by the difference. If the Base
Net Worth is greater than the July 31 Net Worth, then the Base Purchase
Price will be decreased by the difference; provided, however, that in
the event that the July 31 Net Worth is more than Five Hundred Thousand
Dollars ($500,000) less than the Base Net Worth, such decrease of the
Base Purchase Price shall be limited to Five Hundred Thousand Dollars
($500,000), unless the difference between the July 31 Net Worth and the
Base Net Worth is more than Seven Hundred Fifty Thousand Dollars
($750,000), in which case the Base Net Worth should be reduced by Five
Hundred Thousand Dollars ($500,000) plus the amount by which the
difference between the July 31 Net Worth and the Base Net Worth exceeds
Seven Hundred Fifty Dollars ($750,000). The Two Hundred Fifty Thousand
Dollar ($250,000) differential described in the foregoing proviso is
hereafter referred to as the "Adjustment Basket." Notwithstanding the
foregoing, the calculation of the Net Worth Adjustment shall be further
modified as set forth on Schedule 3.1(b)(i) attached hereto, including,
without limitation, the identification on such Schedule 3.1(b)(i) of
certain items that will directly reduce the Base Purchase Price, and
will be disregarded for purposes of determining whether or not the
Adjustment Basket is applicable (the "Adjustment Modifications"). For
the purpose of this computation, the "Net Worth of the Seller as of July
31, 1998" equals the sum of the Purchased Assets less the sum of those
Assumed Liabilities set forth in Article II hereof which are properly
accrued, or properly should be accrued, on July 31, 1998, determined as
of July 31, 1998, in accordance with generally accepted accounting
principles, consistently applied ("GAAP") subject to the Adjustment
Modifications. The term "Modified March 31 Balance Sheet" shall mean a
balance sheet of the Seller as of March 31, 1998, prepared in accordance
with GAAP, showing only the Purchased Assets and the Assumed Liabilities
set forth in Article II hereof, attached hereto as Schedule 3.1(b)(ii).
(c) Seller's Estimate. On or before the third (3rd) business day
preceding the Closing Date, the Seller shall furnish to the Purchaser a
pro forma calculation of the July 31 Net Worth, a preliminary
calculation of the Net Worth Adjustment and a preliminary calculation of
the increase or decrease to the Base Purchase Price, each calculated as
specified in Section 3.1(b) hereof and prepared in good faith by the
Seller (the "Seller's Estimate"). The Seller's Estimate, when accepted
by Purchaser, or as adjusted upon agreement of the parties (the
"Estimated Purchase Price"), will be utilized by the parties to
determine the amounts to be paid at the Closing.
(d) Payment from Purchaser to Seller. On the Closing Date, the
Purchaser shall deliver to the Seller an amount equal to (i) one hundred
percent (100%) of the Payoff Amount, plus (ii) ninety-five percent (95%)
of an amount equal to the Estimated Purchase Price minus the Payoff
Amount (the "Initial Payment"), by wire transfer of immediately
available funds to an account or accounts designated by the Seller.
3.2 Determination of July 31 Net Worth Statement.
(a) Within forty-five (45) calendar days after the Closing Date (as
hereinafter defined), the Purchaser shall deliver to the Seller a
statement of the July 31 Net Worth (as modified pursuant to Section
3.2(b) below) (the "July 31 Net Worth Statement") prepared by the
Purchaser in accordance with GAAP subject to the Adjustment
Modifications. The inventory included on the July 31 Net Worth
Statement shall be determined pursuant to a physical inventory conducted
by the Purchaser or its representatives on July 18, 1998, rolled forward
to July 31, 1998, consistent with such July 18, 1998 valuation.
Inventory will be valued at the Seller's standard cost in accordance
with GAAP, with appropriate reserves for obsolete, defective, damaged or
discontinued inventory, subject to the Adjustment Modifications. The
Seller and the Purchaser shall each pay their respective expenses, if
any, incurred in connection with the physical inventory and preparation
of the July 31 Net Worth Statement.
(b) No later than fifteen (15) calendar days after the Seller's
receipt of the proposed July 31 Net Worth Statement, if, in the Seller's
commercially reasonable judgment, adjustments are necessary for such
July 31 Net Worth Statement to be prepared in conformity with the
accounting methods discussed above, the Seller shall deliver to the
Purchaser a written statement describing such objections and the
applicable bases for such adjustments. If the Purchaser does not
receive such written statement from the Seller within such fifteen (15)
day period, the July 31 Net Worth Statement as prepared by Purchaser
shall be deemed accepted by Seller. In the event that the Seller does
deliver such a written statement to the Purchaser, the Purchaser shall
have the right, in its commercially reasonable judgment, to also propose
adjustments to the proposed July 31 Net Worth Statement consistent with
GAAP subject to the Adjustment Modifications, by delivery of a written
statement describing such proposed adjustments to Seller not later than
five (5) calendar days following receipt of Seller's written statement.
The Purchaser shall provide the Seller with access to the books and
records of the Business during normal business hours to review the July
31 Net Worth Statement. The parties shall use reasonable efforts to
resolve any such objections or proposed adjustments by the Seller and
the Purchaser.
(c) If the parties are unable to finally resolve all such
objections within thirty (30) calendar days after the Purchaser's or
Seller's, if applicable, receipt of such objections, the parties shall,
within ten (10) calendar days after such thirty (30) day period, submit
the accounting issues in dispute to the Atlanta, Georgia office of Ernst
& Young (the "Accountant") to resolve any such remaining objections.
The Accountant shall be furnished with a copy of this Agreement, the
proposed July 31 Net Worth Statement, and any objections of the Seller
or the Purchaser to the proposed July 31 Net Worth Statement and the
applicable bases therefor. Each party shall have the right to submit
supporting or explanatory material to the Accountant, complete copies of
which supporting and explanatory material shall be provided to the other
party. The determination of the Accountant shall be made within fifteen
(15) days of the submission to such Accountant, shall be set forth in
writing and shall be conclusive and binding upon the parties hereto.
The fees and expenses of the Accountant shall be shared equally by the
Purchaser and the Seller. The Purchaser will revise the July 31 Net
Worth Statement to reflect the resolution of any objections thereto
pursuant to this Section.
3.3 Determination of Final Purchase Price.
(a) The "Final Purchase Price" shall be finally determined and paid
as set forth below.
(b) If the Base Purchase Price as adjusted by the Net Worth
Adjustment determined utilizing the amounts set forth on the July 31 Net
Worth Statement including the Adjustment Modifications (the "Final
Purchase Price") shall be greater than the Initial Payment, the
Purchaser shall pay the amount of such discrepancy to the Seller within
five (5) days following the earlier of (i) the date the parties agree
upon the Net Worth Adjustment, or (ii) the date of resolution of any
dispute among the parties with respect to the Net Worth Adjustment.
(c) If the Final Purchase Price shall be less than the Initial
Payment, the amount of such discrepancy shall be refunded by the Seller
to the Purchaser within five (5) days following the earlier of (i) the
date the parties agree upon the Net Worth Adjustment, or (ii) the date
of resolution of any dispute among the parties with respect to the Net
Worth Adjustment.
(d) Any payments made pursuant to this Section 3.3 shall include
interest on the principal amount of such payment from the Closing Date
until the date of such payment at the rate announced in The Wall Street
Journal as the "Prime Rate" in effect from time to time.
3.4 Allocation of Final Purchase Price. The Purchaser and the
Seller hereby agree that the Final Purchase Price shall be allocated
among the Purchased Assets in the manner set out in Schedule 3.4
attached hereto. The Seller and the Purchaser agree that the values so
attributed to the Purchased Assets are the respective fair market values
thereof. Such allocation shall be binding upon the parties hereto and
the parties shall file their respective tax returns and make any
required or desirable elections in accordance with such allocation and
shall not take any position or action inconsistent with such allocation.
Each party will promptly notify the other if the Internal Revenue
Service or any other taxing authority proposes to reallocate the Final
Purchase Price.
ARTICLE IV
Closing
4.1 Closing Date. The transactions contemplated by this Agreement
shall be consummated at a closing (the "Closing") to be held at 10:00
a.m. local time at the offices of Smith, Gambrell & Russell, LLP, on
August 11, 1998, or on such other date or at such other time or place as
the parties may mutually determine (the "Closing Date").
4.2 Deliveries by the Purchaser. At the Closing, the Purchaser and
Guarantor, as the case may be, shall deliver to the Seller or the
Shareholder, as applicable, the following:
(a) The Initial Payment;
(b) Copies of resolutions duly adopted by the Board of Directors of
the Purchaser and Guarantor, respectively, authorizing the execution,
delivery and performance of this Agreement and all related agreements,
documents and certificates, duly certified as of the Closing Date by the
Secretary or an Assistant Secretary of the Purchaser or Guarantor, as
the case may be;
(c) A legal opinion of Holleb & Coff, as counsel to the Purchaser
and Guarantor, dated as of the Closing Date, in substantially the form
attached hereto as Exhibit A;
(d) Certificate(s) of Good Standing of the Purchaser and Guarantor,
certified as of a date not more than fourteen (14) days prior to the
Closing Date, from the Secretary of State of Delaware and, with respect
to the Purchaser, Georgia;
(e) Certificates of the Secretary or an Assistant Secretary of the
Purchaser and Guarantor, respectively, certifying as to the incumbency
and signatures of the Purchaser's and the Guarantor's officers;
(f) An Assumption Agreement relating to the Assumed Liabilities,
dated as of the Closing Date, substantially in the form of Exhibit B
attached hereto (the "Assumption Agreement") executed by the Purchaser;
(g) A certificate, dated as of the Closing Date, of authorized
officers of the Purchaser and Guarantor, certifying that the conditions
specified in Section 5.2 hereof have been fully satisfied;
(h) (i) An Assignment of and Amendment to Lease between the
Purchaser and the Shareholder, relating to the lease of the Facility,
substantially in the form of Exhibit C-1 attached hereto (the "Facility
Lease Amendment"), executed by the Purchaser, (ii) an Assignment of and
Amendment to Lease, between the Purchaser and the Shareholder, relating
to the Lease of that portion of the warehouse located at 440 Englewood
Avenue, Atlanta, Georgia, currently used by the Seller, substantially in
the form of Exhibit C-2 attached hereto (the "Warehouse Lease
Amendment"), executed by the Purchaser, (iii) an Assignment and
Assumption of Lease and Landlord's Consent relating to the lease of the
Seller's Phoenix, Arizona facility (the "Phoenix Assignment"), executed
by Purchaser, together with such other documents and instruments as may
reasonably be deemed necessary by the Seller and the Purchaser in
connection with the foregoing;
(i) An employment agreement between the Purchaser and the
Shareholder, substantially in the form of Exhibit D attached hereto (the
"Employment Agreement"), executed by the Purchaser;
(j) A Subordination and Attornment Agreement among Wachovia Bank,
National Association, Seller, Guarantor and the Shareholder in the form
of Exhibit E attached hereto;
(k) The Plan Assumption Agreements (as hereinafter defined),
executed by the Purchaser;
(l) Such other documents and certificates required to be executed
or delivered by the Purchaser at the Closing in accordance with the
terms of this Agreement.
4.3 Deliveries by the Seller and the Shareholder. At the Closing,
the Seller and the Shareholder shall deliver, or cause to be delivered,
to the Purchaser the following:
(a) A Bill of Sale substantially in the form of Exhibit F attached
hereto, dated as of the Closing Date and executed by the Seller,
conveying the non-real estate tangible Purchased Assets to the
Purchaser;
(b) Assignments substantially in the form of Exhibit G attached
hereto, dated as of the Closing Date and executed by the Seller,
conveying the intangible Purchased Assets to the Purchaser, together
with the written consent to the transfer by each party under any
contract being assigned hereunder (if such consent is required under the
terms of the governing instrument and not waived by Purchaser at
closing).
(c) Such other instruments of sale, transfer and assignment as
shall be necessary or appropriate, as determined by the Purchaser, to
effectuate the transfer, assignment and conveyance of the Purchased
Assets to the Purchaser, and to vest in the Purchaser good and
marketable title to the Purchased Assets, free and clear of all Liens
other than Permitted Liens, including all instruments necessary to
assign Seller's right, title and interest in and to any inventions,
patents, trademarks, trade names, copyrights or other intellectual
property relating to the Business sufficient for recording with the
United States Patent and Trademark Office and Register of Copyrights and
all equivalent governmental agencies;
(d) A copy of resolutions duly adopted by the Board of Directors
and the shareholders of the Seller, authorizing the execution, delivery
and performance of this Agreement and all related agreements, documents
and certificates, duly certified as of the Closing Date by the Secretary
or an Assistant Secretary of the Seller;
(e) A legal opinion of Smith, Gambrell & Russell, LLP, as counsel
to the Seller, dated as of the Closing Date, in substantially the form
attached hereto as Exhibit H;
(f) (i) A release of the Shareholder, substantially in the form of
Exhibit I attached hereto, permitting the Purchaser to use the name
"Wilen" and all variations thereof in the conduct of its business at no
additional cost to the Purchaser and (ii) such documentation as may be
necessary under applicable law to change the name of the Seller to a
name other than and dissimilar to "The Wilen Companies, Incorporated" or
any colorable imitation thereof;
(g) the Phoenix Assignment, executed by Seller;
(h) A Certificate of Good Standing of the Seller, certified as of a
date not more than sixteen (16) days prior to the Closing Date, from the
Secretary of State of Georgia.
(i) A certificate of the Secretary or an Assistant Secretary of the
Seller, certifying: (i) a copy of the Seller's By-laws; (ii) a copy of
the Certificate of Incorporation of the Seller; and (iii) as to the
incumbency and signatures of the Seller's officers;
(j) A certificate, dated as of the Closing Date, an authorized
officer of the Seller certifying that the conditions specified in
Section 5.1 hereof have been fully satisfied;
(k) The Non-Competition Agreement (as hereinafter defined) executed
by the Shareholder and the Seller;
(l) All copies of environmental reports with respect to the Real
Estate in the possession of the Seller on the Closing Date, if any;
(m) The Facility Lease Amendment and the Warehouse Lease Amendment,
each executed by the Shareholder;
(n) The Employment Agreement, executed by the Shareholder;
(o) The Plan Assumption Agreements, executed by the Seller; and
(p) Such other documents and certificates required to be executed
or delivered at the Closing by the Seller in accordance with the terms
of this Agreement.
4.4 Simultaneous Delivery. All documents, instruments and funds to
be delivered on the Closing Date pursuant to this Article IV shall be
regarded as having been delivered simultaneously, and no document,
instrument or funds shall be regarded as having been delivered until all
such documents, instruments and funds have been delivered.
4.5 Risk of Loss. Risk of loss for each of the Purchased Assets
shall be borne by the Seller until the Closing, after which time the
Purchaser shall bear the risk of loss for each such Purchased Asset.
ARTICLE V
Conditions to Closing
5.1 Conditions Precedent to Obligations of the Purchaser. The
obligations of the Purchaser to consummate the transactions contemplated
by this Agreement are subject to and conditioned on the satisfaction of
each of the following conditions, any one or more of which may be waived
in writing by the Purchaser:
(a) Representations, Warranties and Covenants. All of the
representations and warranties of the Seller and the Shareholder
contained herein shall be true and correct in all material respects on
and as of the date hereof and on and as of the Closing Date, and the
Seller and the Shareholder shall have complied with and performed in all
material respects, all of the covenants and agreements to be complied
with and performed by the Seller or the Shareholder, or both, as
applicable, on or prior to the Closing Date.
(b) Asset Due Diligence. The Purchaser shall have completed (i) a
physical inspection of the Purchased Assets (including, without
limitation, an environmental review and assessment of the Facility and
any and all of the Seller's other facilities), and (ii) a due diligence
review of the corporate, business, operational, financial, tax, pension
and other legal affairs of the Seller, and the Purchaser shall be
satisfied, in its sole discretion, with the results of such inspection
and review.
(c) Compliance with Applicable Laws. The Seller and the
Shareholder shall have complied with all applicable federal, state, and
local laws necessary to consummate the transactions contemplated hereby.
In particular, the waiting period applicable to the transactions
contemplated hereby under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976 (the "HSR Act") shall have expired or been terminated.
(d) No Adverse Proceedings. As of the Closing Date, no action,
investigation, suit or proceeding by any foreign, federal, state, or
local governmental or regulatory commission, agency or authority, and no
action, suit or proceeding by any other Person (as defined hereinafter),
shall be pending or threatened which challenges or seeks to enjoin,
prohibit or prevent this Agreement or any transaction contemplated
hereby, or which claims damages as a result of the consummation of the
transactions contemplated hereby. As used in this Agreement, the term
"Person" shall mean and include any individual, sole proprietorship,
partnership, joint venture, limited liability company, trust,
association, corporation, or any other entity and any governmental
agency, department or authority.
(e) No Adverse Change. There shall have been no material adverse
change in the Purchased Assets or the operations, financial condition or
prospects of the Business, nor any material loss of or damage to the
properties of the Business, whether or not covered by insurance, from
March 31, 1998 through the Closing Date.
(f) Required Consents. All third party consents, waivers and
releases under any agreements, leases, mortgages, licenses, permits and
other instruments to which the Seller or the Shareholder is a party and
which relate to the Business or by which any of the Purchased Assets may
be bound, including, without limitation, all consents, waivers and
releases of Liens other than Permitted Liens on the Purchased Assets
(including, without limitation, the release of all Liens in favor of
Wachovia Bank of Georgia, N.A. ("Wachovia")), all consents required
under leases and contracts, and all consents, approvals, orders and
authorizations of, and all registrations, qualifications, designations,
declarations or filings with, any foreign, federal, state, or local
governmental authority having jurisdiction over the Seller, the
Purchaser, the Shareholder or any of their respective properties,
required in connection with the execution and delivery of this Agreement
or the consummation of the transactions contemplated hereby, shall have
been obtained and attained on or prior to, and shall be in full force
and effect as of, the Closing Date. In particular, the Development
Authority of Fulton County (the "Authority"), Wachovia, and
First-Citizens Bank & Trust Company, as applicable, shall have given all
consents and waivers required under (i) that certain Series A Loan
Agreement, dated as of November 1, 1994, between the Authority and the
Seller and the documents and instruments executed in connection
therewith and (ii) that certain Series B Loan Agreement, dated as of
November 1, 1994, by and between the Authority and the Shareholder and
the documents and instruments executed in connection therewith
(collectively, the "IRB Documents") in order for the transactions
contemplated hereby to be consummated without violating the term of any
of the IRB Documents.
(g) Deliveries. The Seller and the Shareholder shall have
delivered to the Purchaser all documents required to be delivered to the
Purchaser on the Closing Date pursuant to Section 4.3 hereof.
5.2 Conditions Precedent to Obligations of the Seller and the
Shareholder. The obligations of the Seller and the Shareholder to
consummate the transactions contemplated by this Agreement are subject
to and conditioned on the satisfaction of each of the following
conditions, any one or more of which may be waived in writing by the
Seller and the Shareholder:
(a) Representations, Warranties and Covenants. All of the
representations and warranties of the Purchaser and Guarantor contained
herein shall be true and correct in all material respects on and as of
the date hereof and on and as of the Closing Date, and the Purchaser
shall have complied with and performed in all material respects all of
the covenants and agreements to be complied with and performed by the
Purchaser on or prior to the Closing Date.
(b) No Adverse Proceedings. As of the Closing Date, no action,
investigation, suit or proceeding by any foreign, federal, state or
local governmental or regulatory commission, agency or authority, and no
action, suit or proceeding by any other Person, shall be pending or
threatened which challenges or seeks to enjoin, prohibit or prevent this
Agreement or any transaction contemplated hereby, or which claims
damages as a result of the consummation of the transactions contemplated
hereby.
(c) Required Consents. All of the consents, waivers and releases
described in Section 5.1(f) hereof shall have been obtained or the
obtainment of the same waived by Purchaser.
(d) Deliveries. The Purchaser and Guarantor shall have delivered
to the Seller or the Shareholder, or both, as applicable, the Initial
Payment and all documents required to be delivered to the Seller and the
Shareholder, or both, as applicable, on the Closing Date pursuant to
Section 4.2 hereof.
ARTICLE VI
Representations and Warranties
6.1 Representations and Warranties of the Seller and the
Shareholder. The Seller and the Shareholder, jointly and severally,
hereby represent and warrant to the Purchaser on and as of the date
hereof and on and as of the Closing Date as follows:
(a) Organization and Standing. The Seller is a corporation duly
organized, validly existing and in good standing under the laws of
Georgia. The Seller is duly qualified to do business and is in good
standing in each jurisdiction in which the character of the properties
owned or held under lease by it or the nature of the business transacted
by it makes such qualification necessary or where its failure to qualify
to do business would adversely affect the Seller or its ability to
perform the transactions contemplated by this Agreement. The Seller has
all requisite corporate power and authority and all requisite and
sufficient licenses, franchises, permits and authorizations required of
any federal, state or local governmental authority, agency or entity
(collectively, the "Licenses") to own and lease the Purchased Assets,
and to carry on the Business as and where presently conducted except for
such Licenses that the failure to obtain would not, in the aggregate,
result in a material adverse effect on the Purchased Assets or the
Business. All Licenses held by the Seller in connection with the
Business are more particularly described on Schedule 6.1(a) attached
hereto. No governmental proceeding is pending or threatened to cancel,
modify or fail to renew any such License.
(b) Corporate Action. The Seller has full corporate power and
authority to execute and deliver this Agreement, to sell, assign,
transfer and deliver the Purchased Assets to the Purchaser, and
otherwise to perform all of its obligations hereunder and to consummate
the transactions contemplated hereby. All shareholder, and other
corporate proceedings required to be taken by or on the part of the
Seller to execute, deliver and carry out this Agreement and to authorize
the Seller to sell, assign, transfer, convey and deliver the Purchased
Assets to the Purchaser have been duly and properly taken. Assuming the
due authorization, execution and delivery hereof by the Purchaser, this
Agreement constitutes the legal, valid and binding obligation of the
Seller and the Shareholder, enforceable in accordance with its terms,
and, subject to the same assumption with respect thereto, all
instruments of transfer and other documents to be delivered in
connection herewith, when executed and delivered by the Seller and the
Shareholder, as applicable, will constitute legal, valid and binding
obligations of the Seller and the Shareholder, as applicable,
enforceable in accordance with their respective terms.
(c) Negation of Default. Except as set forth on Schedule 6.1(c)
attached hereto, the execution and delivery of this Agreement by the
Seller and the Shareholder, their compliance with the terms hereof and
their consummation of the transactions contemplated hereby will not
violate, conflict with or result in a breach of any provision of the
Certificate of Incorporation or By-laws of the Seller, or (whether with
due notice or lapse of time or otherwise) constitute a default, give
rise to any right of acceleration or result in the creation of any Lien
under, or otherwise result in a breach or violation of, any contract,
agreement, lease, commitment, indenture, mortgage, trust deed, note,
bond, debenture, License or other instrument or obligation relating to
the Business or the Purchased Assets (except such contracts, agreements,
leases, commitments, indentures, mortgages, trust deeds, notes, bonds,
debentures or other instruments or obligations that are not required to
be listed on Schedule 6.1(r) below, the breach or violation of which
would not result in the acceleration of any payments thereunder in an
amount in excess of Ten Thousand Dollars ($10,000) individually or One
Hundred Thousand ($100,000) in the aggregate, nor otherwise result,
alone or in the aggregate, in a material adverse effect on the Business
or the Purchased Assets) or any judgment, order or decree of any court,
administrative agency or other governmental authority, to which the
Seller or the Shareholder is a party or otherwise subject or by which
the Seller or the Shareholder may be bound. Neither the execution and
delivery of this Agreement by the Seller and the Shareholder, nor their
compliance with the terms hereof and the Seller's and the Shareholder's
consummation of the transactions contemplated hereby, will violate,
conflict with or contravene in any material respect any statute or any
judicial or governmental regulation, order, injunction, judgment or
decree binding on the Seller or the Shareholder, and neither the Seller
nor the Shareholder has received any notice which is inconsistent with
the foregoing.
(d) Consents. Except for (i) the approval required from the
Federal Trade Commission and the United States Department of Justice
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR
Act"), (ii) the approvals, consents and authorizations set forth on
Schedule 6.1(d) attached hereto and (iii) consents under such contracts,
agreements, leases, commitments, indentures, mortgages trust deeds,
notes, bonds, debentures or obligations that are not required to be
listed on Schedule 6.1(r) below where the failure to obtain consent
would not result in the acceleration of payments thereunder in an amount
in excess of Ten Thousand Dollars ($10,000) individually or One Hundred
Thousand ($100,000) in the aggregate, nor otherwise result, alone or in
the aggregate, in a material adverse effect on the Business or the
Purchased Assets, the execution and delivery of this Agreement by the
Seller and the Shareholder, and their consummation of the transactions
contemplated hereby, will not require the approval, consent or
authorization of any third party, any foreign, federal, state or local
court, government authority or regulatory body, or give any party with
rights under any instrument, agreement, contract, mortgage, judgment,
award, order or other restriction the right to terminate, modify or
otherwise change any of the current rights or obligations of the Seller
or the Shareholder thereunder. To the Seller's and Shareholder's
knowledge, except as set forth on Schedule 6.1(d) hereto, (i) the
failure of any Person not a party hereto to authorize or approve this
Agreement and the transactions contemplated hereby will not give any
Person the right to enjoin, rescind or otherwise prevent or impede the
sale of the Purchased Assets to the Purchaser in accordance with the
terms of this Agreement, and (ii) except for consents, authorizations
and approvals under such contracts, agreements, leases, commitments,
indentures, mortgages trust deeds, notes, bonds, debentures or
obligations that are not required to be listed on Schedule 6.1(r) below
where the failure to obtain such consent, authorization and approval
would not result in the acceleration of payments thereunder in an amount
in excess of Ten Thousand Dollars ($10,000) individually or One Hundred
Thousand ($100,000) in the aggregate, nor otherwise result, alone or in
the aggregate, in a material adverse effect on the Business or the
Purchased Assets), create an interest in any of the Purchased Assets in
favor of any Person, or give any Person the right to obtain damages from
or any other judicial relief against the Purchaser, as a result of any
of the transactions carried out in accordance with the provision of this
Agreement.
(e) Financial Statements. Attached hereto as Schedule 6.1(e) are
the unaudited financial statements of the Seller for the fiscal quarter
ended March 31, 1998 (the "March 31 Financial Statement") and the
audited financial statements of the Seller for the fiscal years ended
December 31, 1997, 1996 and 1995, including a balance sheet and
statement of operations (income), which were prepared in conformity with
GAAP, applied on a consistent basis for such periods (except that the
March 31 Financial Statement does not include footnotes, normal year-end
adjustments, accruals for ad valorem taxes, inventory reserves,
allocations of labor and overhead to inventory, management letters,
supplemental information and schedules,) and the opinion of Smith &
Radigan, Seller's auditors. Each of such financial statements are true
and correct in all material respects and except for matters identified
in the immediately preceding sentence with respect to the March 31
Financial Statement fairly present the financial condition and results
of operations of the Seller for the periods and as of the date thereof.
Except as set forth on Schedule 6.1(e) hereto, the Seller has not
changed any of its accounting methods or practices since December 31,
1994. Except as set forth on Schedule 6.1(e) attached hereto, the March
31 Financial Statement does not reflect any related party assets,
liabilities, or transactions, including, without limitation, any related
party sales, purchases, expenses, licenses, commissions or transactions
allocable to the Seller.
(f) Inventory. Except as set forth on Schedule 6.1(f), and in the
next succeeding sentence, all of the current inventory and all items
comprising inventory of the Business that were valued in the inventory
account on the balance sheet included in the March 31 Financial
Statement, were items of a quality and quantity usable or saleable in
the ordinary course of business of the Seller consistent with past
practices. No such items of inventory are obsolete, discontinued,
defective or damaged other than items valued at an aggregate amount not
in excess of One Hundred Forty Thousand Dollars ($140,000) ( Obsolete
Inventory ). The inventory of the Seller is sufficient to satisfy the
ordinary course purchase requirements of the Seller's customers. No
such items of inventory are subject to any buy-back arrangement or
similar sales promotion offered by the Seller, other than as set forth
on Schedule 6.1(f) attached hereto. No material adverse change has
occurred in the quality or condition of such inventory since March 31,
1998. In addition to and not in limitation of the foregoing, all
inventory comprising Purchased Assets will, on the Closing Date, consist
of items of a quality and quantity useable and saleable in the normal
course of the Business, subject only to Obsolete Inventory having an
aggregate value of less than $140,000 and the volume of production or
purchase of inventory and supplies, or of orders therefor, has not been
reduced or increased in anticipation of the transactions contemplated by
this Agreement. Except as set forth on Schedule 6.1(f), the Seller has
not received any request, nor is the Seller or the Shareholder aware of
any third party's intention to request, that the Seller accept a
significant return of goods or products sold in connection with the
Business.
(g) Absence of Undisclosed Liabilities. Except as set forth on
Schedule 6.1(g) attached hereto, at March 31, 1998, the Seller had no
debts, obligations or liabilities (whether contingent, accrued or
absolute), of a nature required to be reflected on a balance sheet,
other than those debts, obligations or liabilities clearly and fully
reflected or reserved against in the March 31 Financial Statement.
Except as set forth on Schedule 6.1(g) attached hereto, since March 31,
1998, the Seller has not incurred any debt, obligation or liability
(whether fixed, absolute, accrued, contingent or otherwise and whether
direct or indirect, primary or secondary, known or unknown), except
those arising in the ordinary course of the Business.
(h) Title to and Sufficiency of Purchased Assets. The Seller has
and will convey to the Purchaser good, marketable and legal title to all
of the Purchased Assets, excluding Intellectual Property described on
Schedule 6.1(j) hereto (with respect to which, title matters are
addressed in Section 6.1(j) hereof), free and clear of any Liens, except
as set forth on Schedule 6.1(h) attached hereto ("Permitted Liens").
The Purchased Assets comprise all of the assets, property and rights of
every type or description, real, personal and mixed, tangible and
intangible, necessary to the operation of the Business substantially as
currently conducted and, together with the Excluded Assets and the
Facility, constitute all of the assets, payments and rights of every
type or description, real, personal and mixed, tangible or intangible,
used in the operation of the Business as currently conducted. Except as
set forth on Schedule 6.1(h) hereto and except for the Aircraft and
assets of the type described in clause (i) of Section 1.1(b) hereof,
none of the assets of Carolina are used or held for use in the conduct
of the Business.
(i) Condition of Assets. All of the Purchased Assets are in good,
useable condition and repair, ordinary wear and tear excepted.
(j) Intellectual Property. Schedule 6.1(j) attached hereto sets
forth a complete and correct list of all trademarks, trade names,
patents, copyrights and other intellectual property owned or used by or
registered in the name of the Seller (including, without limitation, all
licensing or similar agreements relating to the foregoing, whether the
Seller is the licensor or licensee thereunder), whether registered with
any United States governmental entity or agency or whether any
applications for such registration are pending. The Seller owns or
possesses adequate and enforceable licenses or other rights to use all
intellectual property in the conduct of the Business being acquired by
the Purchaser hereunder, is not in default under any such licensing or
similar agreement, is not aware of any other party to any such license
or agreement being in default thereunder, has not received any notice or
other knowledge of conflict with or infringement (or alleged
infringement) of any rights of any Person, and, except as set forth on
Schedule 6.1(j), no officer, director, employee, shareholder or former
shareholder of the Seller has any rights in or to any of such
intellectual property. Except as set forth on Schedule 6.1(j) hereto,
the Seller has no notice or knowledge that any of the intellectual
property identified herein is being infringed upon or appropriated by
any third party. The Seller owns and possesses adequate and enforceable
rights to use all of the intellectual property and all design drawings,
trade secrets, processes, and other technical data used or useful in the
Business, all of which are included in the Purchased Assets. To the
Seller's knowledge, none of such intellectual property or any of the
technology covered thereby has been misappropriated from any Person.
The use in the Business of any intellectual property and other technical
or proprietary data has not required and does not require the payment of
any royalty or similar payment to any Person (except pursuant to the
agreements so identified on Schedule 6.1(j) hereto), and, on the Closing
Date, the Seller will transfer to the Purchaser (i) good title thereto,
free and clear of any Liens other than Permitted Liens or (ii) a valid
right to use the same in a manner necessary to operate the Business as
presently conducted.
(k) Litigation. Except as set forth on Schedule 6.1(k) attached
hereto, there are no claims, actions, suits, legal or administrative
proceedings, governmental investigations or any labor matters pending
or, to the Seller's knowledge, threatened against or adversely affecting
the Seller, the Business or any of the Purchased Assets, nor, to the
Seller's knowledge, any basis for any such claim, action, suit, legal or
administrative proceeding, governmental investigation or labor matter.
There are no judgments, decrees, settlements, orders, rulings, writs or
injunctions involving the Seller, the Business or any of the Purchased
Assets which (either by reason of compliance or default) may adversely
affect the Seller, the Business or any of the Purchased Assets, or which
relate in any way to the transactions contemplated by this Agreement.
(l) Compliance with Laws. The Seller's operation and ownership of
the Business and the Purchased Assets and, to Seller's knowledge, the
condition of the Real Estate (as hereinafter defined) and the buildings
and improvements located therein, are in compliance with all laws,
statutes, rules, regulations and other requirements imposed by foreign,
federal, state, local and other governmental authorities applicable to
the Seller and/or the operation and ownership of the Business and the
Purchased Assets (including all applicable occupational safety and other
similar laws, ordinances, rules, regulations and requirements), except
for instances of non-compliance which would not result in a capital
expenditure or the payment of funds, penalties or damages of more than
$10,000 with respect to any one instance of non-compliance or $50,000 in
the aggregate or have a material adverse effect on the Purchased Assets
or the Business.
(m) No Violation of Environmental Laws. Except as set forth on
Schedule 6.1(m) (i) the Seller, the Purchased Assets and the Seller's
operation and ownership of the Business are in compliance with all
applicable foreign, federal, state, municipal and local laws, statutes,
regulations, ordinances, orders, standards, guidelines, and directives,
relating to pollution, contamination, the transportation, handling,
storage, labeling, or disposition of Hazardous Material (as hereinafter
defined), the protection of the environment, health, safety, or the
protection or conservation of natural habitat or resources, including,
without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, the Resource
Conservation and Recovery Act, the Hazardous Materials Transportation
Act, the Toxic Substances Control Act, the Emergency Planning and
Community Right-to-Know Act and the Clean Water Act (collectively, the
"Environmental Laws"), (ii) the Seller and the Shareholder, as
applicable, have timely filed all reports, have obtained all approvals
and permits and has generated and maintained all data, documentation,
and records required under any Environmental Laws, all of which are
listed on Schedule 6.1(m) attached hereto, (iii) except as set forth on
Schedule 6.1(m), neither the Seller nor the Shareholder has (and, to the
Seller's knowledge, no other Person has) placed, held, located, stored,
buried, dumped, disposed, spilled or released any Hazardous Material on,
beneath or about the Facility or any other property used, owned or
leased by the Seller or the Shareholder in connection with the Business,
and, to the Seller's knowledge, there is no Hazardous Material present
in, on, or under, the Facility or any such other property, or affecting
any of the Purchased Assets, nor, to Seller's knowledge, is there or has
there been any activity with respect to any Hazardous Material including
any emission, spill, or release of a Hazardous Material, in, on, or
under, the Facility, any such other property, including any off-site
disposal facility, or any contiguous real or immoveable property to or
from which a Hazardous Material could reasonably be anticipated to be
released or spilled, which could lead to the imposition under any
Environmental Law of any damage, loss or liability (including the costs
of investigation, clean up, governmental response or remediation) on the
owner, occupant or person having charge, management or control of the
Business, the Facility, any other such property, or any of the Purchased
Assets, and (iv) neither the Seller nor the Shareholder has received any
notice from the U.S. Environmental Protection Agency or any state, local
or other domestic or foreign governmental agency or authority
(collectively, the "E.P.A."), or any other public or private entity,
advising that the Seller or the Shareholder is responsible or
potentially responsible for corrective action or investigation or
response costs with respect to a release, a threatened release or
cleanup of Hazardous Material on or about the Facility or any other
property used, owned or leased by the Seller or the Shareholder in
connection with the Business, including any off-site disposal facility,
and neither the Seller nor the Shareholder has any reason to believe
that such notice may be forthcoming. As used herein, the term
"Hazardous Material" shall include, but is not limited to, chemicals,
wastes, and hazardous, dangerous or toxic substances or materials (1)
including any "Hazardous Substances", "Pollutants" or "Contaminants" (as
such terms are defined in any Environmental Laws), or regulated by any
Environmental Laws as now or hereinafter in effect including, without
limitation, petroleum, petroleum products, resins, asbestos and PCBs.
There are no underground storage tanks located on the Facility or any
other property used, owned or leased by the Seller or the Shareholder in
connection with the Business, nor to the knowledge of Seller, has any
underground storage tank been located at the Facility or any such
property. The Seller has delivered to the Purchaser copies of all
environmental reports prepared by or on behalf of the Seller or any
other Person with respect to the Real Estate (as hereinafter defined),
all of which are listed on Schedule 6.1(m) attached hereto.
(n) Taxes. Except as set forth on Schedule 6.1(n) hereto, all
Taxes (as hereinafter defined) payable by Seller which are due or to
become due by reason of the Purchased Assets or the operation of the
Business by the Seller prior to the Closing Date have been or will be
paid when due unless the liability for or amount of such Taxes is in
dispute as described on Schedule 6.1(n) hereto, and, if so, such Taxes
shall be paid when the liability for or the amount of such Taxes has
been finally determined, except and to the extent any such Taxes
constitute an Assumed Liability in which event they will be paid by
Purchaser. Except as set forth on Schedule 6.1(n) attached hereto, and
except for any Taxes included within the Assumed Liabilities, with
respect to any Taxes payable by Seller which are not due and, therefore,
have not been paid prior to the Closing Date, adequate provisions
therefor have been or will be made by the Seller, and all such Taxes
will be duly and timely paid by the Seller unless the liability for or
amount of such Taxes is in dispute, and, if so, such Taxes shall be paid
when the liability for or the amount of such Taxes has been finally
determined. There are no tax Liens upon any property or assets of the
Seller pertaining to the Business or the Purchased Assets, except Liens
for Taxes not yet due and payable. All foreign, federal, state, and
local tax reports and returns, including, without limitation, income tax
returns, withholding tax returns, goods and services and retail sales
tax returns, required to be filed by or on behalf of the Seller on or
prior to the Closing Date with any government or any foreign or domestic
governmental agency or authority have been or will be duly prepared and
filed when due, and were and will be true, correct and complete. There
is no examination or proceeding pending by any authority or agency
relating to the assessment or collection of any Taxes, or any interest
or penalties thereon, due from or remittable by the Seller, nor does the
Seller know of any basis for any such assessment. For purposes of this
Agreement, "Tax" or "Taxes" shall mean all present and future taxes, as
the context requires, including, without limitation, income, capital
stock, gross receipts, net proceeds, ad valorem, value added, goods and
services, turnover, sales, use, real estate transfer, real property,
personal property (tangible and intangible), stamp, leasing, lease,
user, excise, franchise, transfer, fuel, vehicle sales, excess profits,
occupational and interest equalization, unitary, severance, withholding,
employment and other taxes, duties, assessments, imposts and charges
(including, without limitation, the recapture of any tax items such as
investment tax credits), together with all fines, interest, penalties
and additions imposed on or in respect of, or in lieu of, or for
non-collection of such amounts with respect to such amounts, which are
due or claimed to be due by any federal, state or local taxing
authorities or which are payable with respect to the Purchased Assets or
the Business.
(o) Insurance. The Seller presently maintains and has at all times
prior to the date hereof maintained, liability (including product
liability), casualty, property loss and other insurance coverage upon
the properties included in the Purchased Assets and with respect to the
conduct of the Business, in such amounts, of such kinds and with such
insurance carriers as are generally deemed appropriate and sufficient
for companies of a similar size engaged in similar types of business and
operations as the Seller. Attached hereto as Schedule 6.1(o) is a true
and complete list of all policies of fire, liability, indemnity and
other forms of insurance currently in force maintained by the Seller,
setting forth the type and amount of coverage, policy number, policy
periods and the status of premiums paid thereon. Except as set forth on
Schedule 6.1(o) attached hereto, there have been no product liability
claims against the Seller during the immediately preceding five (5)
years.
(p) Labor Relations. Except as set forth on Schedule 6.1(p)
attached hereto, the Seller is not a party to or bound by any collective
bargaining agreement or other contract with any labor or employee union
or association representing any of the employees of the Seller, is not
currently conducting negotiations with any labor union and is not aware
of any current attempt to organize any employees of the Seller for the
purpose of collective bargaining. Except as set forth on Schedule
6.1(p) hereto, there are no strikes, lockouts or work stoppages pending
of threatening, nor any labor disputes or grievances pending or
threatened against or affecting the Business. The Seller has generally
good relations with its employees, and has had no strikes, lockouts or
job actions pending or threatened with any such employees.
(q) Employee Benefit Plans.
(i) Schedule 6.1(q) attached hereto lists all "Employee Welfare
Benefit Plans" and "Employee Pension Benefit Plans" (as defined in
Sections 3(1) and 3(2) respectively of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")) existing on the
date hereof or at any time within the three (3) year period
immediately preceding the Closing Date that are or have been
maintained or contributed to by the Seller for the benefit of any
employees (including, for this purpose and for the purpose of all
of the representations contained in this Section 6.1(p), any other
entities which by reason of Section 414 of the Internal Revenue
Code of 1986, as amended (the "Code"), are treated together with
the Seller as a single employer under Code Section 414).
(ii) The Seller does not maintain or contribute to, nor has
it maintained or contributed to at any time during the three (3)
year period immediately preceding the Closing Date, any "Employee
Pension Benefit Plan" subject to Title IV of ERISA for the benefit
of any employees. The Seller does not maintain or contribute to,
nor has it maintained or contributed at any time to any
"Multiemployer Plans," as defined in Section 3(37) of ERISA for
the benefit of any employees.
(iii) Except as listed in Schedule 6.1(q), the Seller does not
maintain any retirement or deferred compensation plan or
arrangement, savings, incentive or non-qualified stock option,
restricted stock, stock appreciation rights or stock purchase
plan, unemployment compensation plan, personnel policy (including,
but not limited to, holiday pay, moving expense reimbursement,
sick leave, vacation pay, bonus or benefit arrangement), insurance
or hospitalization program or any other fringe benefit
arrangement, whether written or oral (all such plans and
arrangements hereinafter referred to collectively as "Fringe
Benefit Arrangements") for any employee, consultant or agent of
the Seller, whether pursuant to contract, arrangement, custom or
informal understanding, which does not constitute an "Employee
Benefit Plan" (as defined in Section 3(3) of ERISA), or for which
the Purchaser may have any liability after the Closing Date.
(iv) A true and complete copy of each of the plans and
arrangements listed in Schedule 6.1(q) attached hereto, and in
effect on the date hereof, together with related trusts, any
amendments to the plans or the trusts, summary plan descriptions,
favorable determination letters and the annual report most
recently filed for such plan, has been supplied to the Purchaser.
(v) All Employee Pension Benefit Plans, Employee Welfare Benefit
Plans and Fringe Benefit Arrangements listed in Schedule 6.1(q)
comply, and in the past have complied, in all material respects in
form and operation with all requirements of applicable federal,
state, local and other laws and regulations, whether domestic or
foreign.
(vi) All group health plans, as defined under Code Section
5000(b)(1), maintained by or for the employees of the Seller
comply in all respects with all COBRA health continuation coverage
requirements under Section 4980B of the Code.
(vii) There have been no "prohibited transactions" (as
described in Section 406 of ERISA or Section 4975 of the Code)
with respect to any Employee Benefit Plan maintained by the Seller
or to which the Seller has been a party for the benefit of any
employee.
(viii) Except as set forth on Schedule 6.1 (q), all accrued
obligations of the Seller, whether arising by operation of law, by
contract or by past custom, for compensation, including bonuses,
to its employees, consultants or agents, for taxes and other
obligations to any governmental entity payable in connection with
such compensation, and for payments with respect to any plan or
arrangement listed in Schedule 6.1(q) have been paid, or adequate
accruals for such obligations have been and are being made by the
Seller, and are reflected in the March 31 Financial Statement or
will be reflected on the Closing Net Worth Statement. There is no
suit, arbitration or other proceeding concerning any benefit claim
(other than routine claims for benefits) or other matter, whether
brought by or against a participant or beneficiary, a trustee, a
plan administrator, the Seller or any director, officer or
employee thereof.
(ix) With respect to any severance pay agreement, the
consummation of the transactions contemplated by this Agreement
will not result in any liability to the Purchaser by reason of an
acceleration in the time of payment or vesting or an increase in
the amount of compensation due to any individual covered by a
severance pay agreement. All severance pay policies of the Seller
may be terminated at will.
(x) No Employee Benefit Plan provides medical or death benefits
(whether or not insured) with respect to any current or former
employee of the Seller which continue beyond their retirement or
other termination of service other than coverage mandated by
applicable law.
(r) Leases, Contracts and Other Commitments.
(i) Except as set forth on Schedule 6.1(r) attached hereto, the
Seller has no outstanding contracts or other commitments, written
or oral, for the performance or receipt of services, or for the
payment of moneys, or for the purchase, sale, lease, license, use
or acquisition of real or personal property of any kind or
character, other than (v) non-material contracts and commitments
terminable without penalty by the Seller upon not more than one
hundred twenty (120) days prior notice and (w) contracts and
commitments which require the payment by Seller of less than Ten
Thousand Dollars ($10,000) in any calendar year individually or
$100,000 in the aggregate. Specifically, and not in limitation of
the foregoing, except as set forth on Schedule 6.1(r), the Seller
has no (x) written or oral contract, agreement or understanding
with any supplier, sales representative, commission agent,
distributor, dealer, customer, consultant or similar person, (y)
any written or oral employment contract, agreement or
understanding with any person, other than those certain employment
agreements identified on Schedule 7.6(a) attached hereto, true and
complete copies of which have been provided to the Purchaser or
(z) is there any oral agreement or understanding with any employee
of Seller which cannot be terminated without cause on reasonable
notice and without penalty, excepting in each case those contracts
and commitments which are not required to be listed pursuant to
the first sentence of this Section 6.1(r)(i).
(ii) The Seller has delivered to the Purchaser a copy of all
personal property leases, real property leases and operating
contracts to which it is a party and which are required to be
identified on Schedule 6.1(r), as well as all other contracts and
commitments set forth on Schedule 6.1(r) hereto, all of which are
true and complete.
(iii) No outstanding purchase commitment of the Seller is in
excess of the normal, ordinary and usual requirements of the
Business, and no contract price in any outstanding purchase
commitment of the Seller is excessive when compared to current
market prices for the relevant materials, products, commodities or
services. No outstanding sales or lease commitment by the Seller
obligates the Seller to sell or lease any products or services at
a price which, in view of currently prevailing and projected costs
of raw materials, manufacturing, overhead and administrative and
general expense applicable thereto, would result in a loss.
(iv) Except as set forth on Schedule 6.1(r) hereto, the
Seller is in substantial compliance with the provisions of each,
and is not in default under any, of the personal property leases,
real property leases and operating contracts, as well as each or
any of the other contracts and commitments, set forth on Schedule
6.1(r) hereto, and, to the Seller's knowledge, no default exists
by any other party to any such contract, lease or commitment. All
such leases, contracts and commitments are valid, subsisting and,
to the knowledge of Seller and the Shareholder, in full force and
effect and enforceable in accordance with their respective terms.
No event has occurred which, with the passage of time or giving
of notice or both, would constitute a default on the part of the
Seller under any such lease, contract or commitment, nor is the
Seller aware of any event or circumstance which would reasonably
indicate that such a default or event on the part of any party
thereto may occur in the future.
(s) Real Property. Neither the Shareholder (in connection with the
operation of the Business) nor the Seller has any real property
interests (owned or leased), except as set forth on Schedule 6.1(s)
attached hereto (collectively, the "Real Estate"). The Seller owns no
real property. Except as set forth on Schedule 6.1(s) hereto, all of
the buildings, structures and appurtenances situated on the Real Estate
are in good operating condition and in a state of maintenance and repair
adequate and suitable for the purposes for which such buildings,
structures and appurtenances are presently being used. With respect to
each such building, structure and appurtenance, the Seller has adequate
rights of ingress and egress for operating the Business in the ordinary
course. To the Seller's knowledge, no such building, structure or
appurtenance (x) violates any building, zoning, subdivision or other
land use or similar law, regulation or ordinance affecting or relating
to the Real Estate, (y) violates any restrictive covenant, easement or
other instrument of record or any provision of any foreign, federal,
state, or local law, or (z) encroaches on any property owned by any
other Person. No condemnation or rezoning proceeding is pending or, to
Seller's knowledge, threatened, and neither Seller nor Shareholder has
requested, applied for or given consent to any zoning variance, in each
case, which would preclude or impair the use of the Real Estate by the
Seller for the purposes for which it is currently used or anticipated to
be used. To the knowledge of Seller; the consummation of the
transactions contemplated hereby will not result in a violation of any
applicable zoning ordinance or the termination of any applicable zoning
ordinance or the termination of any applicable variance now existing,
and (ii) if the improvements on the Real Estate are damaged or destroyed
prior to or after the Closing, the repair or replacement of same by
Buyer will not violate any applicable zoning ordinance. There is no
pending, or to Seller's knowledge, proposed or threatened action to
impose any special assessment on, or otherwise to take or restrict in
any way the right to use, alter or occupy any part of the Real Estate.
Neither Seller nor Shareholder has received any notice of any disputes
with contiguous property owners as to the boundary lines of the Real
Estate or as to any improvements, structures or buildings thereon.
Neither Seller nor Shareholder has received any notice of any claims or
rights of other Persons as to any rights over, across, under or through
any of the Real Estate, other than those which are a matter of public
record. To Seller's knowledge, the Real Estate has such access to all
gas, water, electricity, storm and sanitary sewer, telephone and other
utility services necessary for the operation of the Business as
currently conducted by Seller. Seller or Shareholder has delivered to
Buyer copies of the most recent real estate tax assessments and tax
bills for the Real Estate.
(t) Accounts Receivable. All accounts receivable of the Business
which are reflected on the March 31 Statement (a) arose in the ordinary
course of business; and (b) net of the reserve for doubtful accounts
receivable set forth on the March 31 Financial Statement and to be
consistently reflected on the Closing Date Net Worth Statement, (i)
represent valid, bona fide and subsisting claims, (ii) are correct as to
amount and are legally enforceable according to their terms, (iii) to
the knowledge of Seller and the Shareholder, have no current right of
defense, counter-claim or set-off against them; and (c) are owned by the
Seller free of any Liens, choate or inchoate, liquidated or
unliquidated, other than Permitted Liens.
(u) No Adverse Change. Since March 31, 1998, the Seller has
conducted the Business in the ordinary and regular course and there has
not been: (i) any material adverse change in the financial condition,
results of operations or prospects of the Business; (ii) any material
adverse change in any of the Seller's relationships with any supplier,
distributor or customer; (iii) any change in the accounting methods or
practices followed by the Seller or in the manner in which the books,
records and accounts of the Seller are maintained; (iv) any Lien, other
than Permitted Liens and liens identified on Schedule 6.1(u) hereto; (v)
any waiver or release of any material right or claim of the Seller,
except in the ordinary course of business consistent with past
practices; (vi) any payment, discharge, satisfaction or forgiveness by
the Seller of any claim, liability, obligation or debt due it or waiver
or release by the Seller of any right or claim, other than in the
ordinary course of business, consistent with past practice or described
on Schedule 6.1(u) hereto; (vii) any damage, destruction or other
casualty loss with respect to the Purchased Assets, other than losses
not exceeding Five Thousand Dollars ($5,000) individually or Fifty
Thousand Dollars ($50,000) in the aggregate, whether or not covered by
insurance, or the failure by the Seller to adequately maintain all of
the Purchased Assets consistent with the pattern and practice of
maintenance of such assets in the industry or in as favorable a
condition as the same are in as of the date hereof, reasonable wear and
tear excepted; (viii) any strike, work stoppage, slowdown, or any threat
of any of the foregoing, affecting the Business; (ix) any purchase,
sale, assignment, lease, transfer or other disposal of any amount of the
Purchased Assets by the Seller, except in the ordinary course of
business consistent with past practices; (x) any capital expenditures
made or incurred by the Seller in excess of Five Thousand Dollars
($5,000) individually or Fifty Thousand Dollars ($50,000) in the
aggregate, except as reflected on the March 31 Financial Statement or
set forth on Schedule 6.1(u) hereto; (xi) any amendment or termination
of any contract, agreement, lease, sublease, license, sublicense,
instrument or License to which the Seller is a party, except in the
ordinary course of business consistent with past practices or
contemplated by or pursuant to the terms of this Agreement; (xii) any
agreement by the Seller to incur any liability or obligation (absolute,
accrued, contingent or otherwise) other than in the ordinary and usual
course of business and consistent with past practices (none of which has
had or will have an adverse effect on the Business or the Purchased
Assets); (xiii) any change of any assumption underlying, or methods of
calculating, any bad debt, contingency or other reserve except as set
forth on Schedule 6.1(u); (xiv) any failure by the Seller to maintain
any insurance that was in effect on March 31, 1998; (xv) any failure to
apply or reapply for necessary permits and Licenses; (xvi) any transfer
or grant by Seller of any rights under, or entry by Seller into any
settlement regarding the breach or infringement of, any license, patent,
copyright, trademark, trade name, invention or similar right relating to
the Business, or modified any existing right with respect thereto except
as set forth on Schedule 6.1(u); (xvii) any change in the rate of
compensation, commission, or other direct or indirect remuneration
payable, or paid or agreed or orally promised to pay, conditionally or
otherwise, any bonus, extra compensation, pension, severance or vacation
pay, to any officer, employee, salesman, distributor or agent of the
Seller, other than in the ordinary course of business except as set
forth on Schedule 6.1(u) or (xviii) any agreement by the Seller (whether
oral or written, contingent or otherwise), or any amendment to or
modification of any existing agreement, to do any of the things
described in clauses (i) through (xvii) above.
(v) Suppliers. Except as set forth on Schedule 6.1(v) attached
hereto, the Seller had (i) no suppliers of products and services during
the twelve (12) month period ended June 30, 1998 whose products or
services had a value in excess of One Hundred Thousand Dollars
($100,000) and (ii) no sole-source suppliers of significant materials or
services.
(w) Customers. Attached hereto as Schedule 6.1(w) is a complete
and accurate list of the twenty-five (25) largest customers (by dollar
volume) of the Seller during the twelve (12) month period ended June 30,
1998 (each a "Major Customer"), indicating the existing contractual
arrangements, if any, with each Major Customer. Except as set forth on
Schedule 6.1(w) hereto, there are no outstanding disputes with any Major
Customer of which Seller or the Shareholder have knowledge and no Major
Customer has refused to, or stated its intention not to, continue its
relationship with the Seller, nor has any Major Customer materially
changed its arrangements with the Seller.
(x) Fees and Commissions. No agent, broker, investment banker or
other Person acting on behalf or under the authority of the Seller is or
will be entitled to any broker's, finder's, originator's or investment
banker's fees or any other commission or similar fee directly or
indirectly from any of the parties hereto in connection with the
transactions contemplated hereby, and no such fees are or will be
chargeable to or for the account of the Purchaser, nor have any such
fees been paid, nor will any such fees be paid or payable out of, or in
any manner constitute a Lien against, the Purchased Assets.
(y) Product Warranty Costs and Returns; Product Defects. Attached
hereto as Schedule 6.1(y) is a true and complete description of all
product warranties, return policies and procedures and other credit and
sales practices offered by the Seller to its customers which have been
in force or effect at any time during the twenty-four (24) month period
immediately preceding the date hereof, regardless of the date of the
sale to which such warranty, return policy or other practice may relate.
The Seller has no contractual or, except for obligations with respect
to implied warranties and similar rights granted by statute or other
applicable law, other legal obligation to accept returns of any of the
products made, manufactured, distributed, sold, leased, or distributed
by Seller prior to the Closing Date (the "Products"). To the knowledge
of Seller and the Shareholder, there are no material defects in the
design or manufacturing of any of the Products that would adversely
affect the performance or quality of all of the Products or designs sold
by Seller to customers of the Business. There have been no product
recalls or material defects in the design or manufacture of any Products
that would materially and adversely affect the performance or equality
of such Products.
(z) Certain Payments; Absence of Certain Business Practices.
Neither the Seller, nor to the Seller's or the Shareholder's knowledge
any of its representatives or agents, has made or will cause to be made
by or on behalf of the Seller prior to the Closing Date, any payments,
loans or gifts or promises or offers of payments, loans or gifts of any
money or anything of value, directly or indirectly, to or for the use or
benefit of any official or employee of any United States governmental
entity, department or agency.
(aa) Transactions With Interested Persons. Except as set forth on
Schedule 6.1(aa) hereto, no officer, director, shareholder, employee, or
affiliate of the Seller, or their respective spouses or children is or
owns, directly or indirectly, on an individual or joint basis, any
material interest in, serves as an officer or director of, or has any
contractual relationship with any customer, competitor or supplier of
the Business or any organization which has a contract, agreement,
arrangement or commitment with Seller.
(bb) Work Orders. There are no outstanding work orders,
non-compliance orders, deficiency notices or other such notices relative
to the Real Estate which have been issued by any fire department,
sanitation, environment, labor, health or other governmental authority.
There are no matters under discussion with any such department or
authority relating to work orders, non-compliance orders, deficiency
notices or other such notices.
(cc) IRB Bonds. The later of (i) the latest date on which any of
the bonds issued pursuant to the IRB Documents (the "IRB Bonds") were
issued and (ii) the latest date on which either of the projects financed
with the IRB Bonds (each, a "Project") was Placed in Service (as
hereinafter defined) is a date more than three (3) years prior to the
Closing Date. The term "Placed in Service" shall mean the placement of
a Project in a condition or state of readiness and availability for a
specifically assigned function.
(dd) Misstatement or Omission. No representation or warranty by the
Seller or the Shareholder in this Agreement or in any other agreement,
document or instrument executed in connection herewith, including any
exhibit, schedule, written statement, certificate or other document
furnished or to be furnished by the Seller or the Shareholder pursuant
hereto or thereto or in connection with the transactions contemplated
hereby or thereby, contains or will contain any untrue statement of a
material fact, or omits or will omit to state a material fact required
to be stated herein or therein necessary to make the statements
contained herein or therein not misleading. Copies of all documents
heretofore furnished by the Seller or the Shareholder to the Purchaser
are true, correct and complete copies of such documents, including all
amendments or modifications thereto.
Wherever and whenever a representation or warranty contained in this
Agreement is made to the "knowledge" of the Seller, such representation
or warranty shall include only the knowledge of the Shareholder and any
individual serving as a chief executive officer, president or any vice
president of the Seller. An individual shall be deemed to have
knowledge of a particular fact or other matter only if such individual
is actually aware of such fact or other matter.
6.2 Representations and Warranties of the Purchaser and the
Guarantor. The Purchaser and Guarantor hereby, jointly and severally,
represent and warrant to the Seller and the Shareholder on and as of the
date hereof and on and as of the Closing Date as follows:
(a) Organization and Standing. Each of Purchaser and Guarantor is
a corporation duly organized, validly existing and in good standing
under the laws of its governing jurisdiction. Each of Purchaser and
Guarantor has all requisite corporate power and authority and all
requisite and sufficient licenses, franchises, permits and
authorizations to own and lease its properties and assets and to carry
on its business as and where currently conducted.
(b) Corporate Action. Each of the Purchaser and Guarantor has full
corporate power and authority to execute and deliver this Agreement,
with respect to Purchaser to purchase the Purchased Assets from the
Seller, and otherwise to perform all of its obligations hereunder and to
consummate the transactions contemplated hereby. All shareholder,
corporate and other proceedings required to be taken by or on the part
of the Purchaser and Guarantor to authorize, execute, deliver and carry
out this Agreement and to purchase the Purchased Assets have been duly
and properly taken. Assuming the due authorization, execution and
delivery hereof by the Seller and the Shareholder, this Agreement
constitutes the legal, valid and binding obligation of the Purchaser and
Guarantor, enforceable in accordance with its terms, and, subject to the
same assumption with respect thereto, all other documents to be
delivered in connection herewith, when executed and delivered by the
Purchaser and Guarantor, as applicable, will constitute legal, valid and
binding obligations of the Purchaser and the Guarantor, enforceable in
accordance with their respective terms.
(c) Negation of Default. The execution and delivery of this
Agreement by the Purchaser and Guarantor, its compliance with the terms
hereof and its consummation of the transactions contemplated hereby will
not violate, conflict with or result in a breach of any provision of the
Certificate of Incorporation or By-laws of the Purchaser or Guarantor,
or (whether with due notice or lapse of time or otherwise) constitute a
default, give rise to any right of acceleration, or otherwise result in
a breach or violation of, any contract, agreement, lease, commitment,
indenture, mortgage, trust deed, note, bond, debenture, license or other
instrument or obligation, or any judgment, order or decree of any court,
administrative agency or other governmental authority, to which the
Purchaser or Guarantor is a party or otherwise subject. Neither the
execution and delivery of this Agreement by the Purchaser or Guarantor,
nor their respective compliance with the terms hereof and the
Purchaser's and Guarantor's consummation of the transactions
contemplated hereby, will violate, conflict with or contravene in any
material respect any statute or any judicial or governmental regulation,
order, injunction, judgment or decree binding on the Purchaser or the
Guarantor, and neither the Purchaser nor the Guarantor has received any
notice which is inconsistent with the foregoing.
(d) Consents. The execution and delivery of this Agreement by the
Purchaser and the Guarantor, and the consummation of the transactions
contemplated hereby, will not require the approval, consent or
authorization of any third party, any federal, state or local court,
government authority or regulatory body or creditor, or give any party
with rights under any instrument, agreement, contract, mortgage,
judgment, award, order or other restriction the right to terminate,
modify or otherwise change any of the current rights or obligations of
Purchaser thereunder. To the Purchaser's knowledge, the failure of any
Person not a party hereto to authorize or approve this Agreement and the
transactions contemplated hereby will not give any Person the right to
enjoin, rescind or otherwise prevent or impede the sale of the Purchased
Assets to the Purchaser in accordance with the terms of this Agreement,
to reach in any fashion the Purchased Assets in the hands of the
Purchaser following the closing, or to obtain damages from, or any other
judicial relief against, the Seller, as a result of any transactions
carried out in accordance with the provisions of this Agreement.
(e) Fees and Commissions. No agent, broker, investment banker, or
other Person acting on behalf or under the authority of the Purchaser is
or will be entitled to any broker's, finder's, originator's or
investment banker's fees or any other commission or similar fee directly
or indirectly from any of the parties hereto in connection with the
transactions contemplated hereby.
(f) Misstatement or Omission. No representation or warranty by the
Purchaser or Guarantor in this Agreement or in any other agreement,
document or instrument executed in connection herewith, including any
exhibit, schedule, written statement, certificate or document furnished
or to be furnished by the Purchaser or Guarantor pursuant hereto or
thereto or in connection with the transactions contemplated hereby or
thereby, contains or will contain any untrue statement of a material
fact, or omits or will omit to state a material fact required to be
stated herein necessary to make the statements contained herein not
misleading.
Wherever and whenever a representation or warranty contained in this
Agreement is made to the "knowledge" of the Purchaser, such
representation or warranty shall include the knowledge of any individual
serving as a chief executive officer, president or any vice president of
the Purchaser. An individual shall be deemed to have knowledge of a
particular fact or other matter only if such individual is actually
aware of such fact or other matter.
ARTICLE VII
Covenants and Agreements
7.1 Satisfaction of Retained Liabilities. From and after the
Closing Date, the Seller agrees to and shall, and the Shareholder shall
cause the Seller to, pay, perform and otherwise satisfy in full when due
all Seller's indebtedness, liabilities and obligations which relate to
or which may affect the Business or the Purchased Assets, except solely
for the Assumed Liabilities.
7.2 Environmental Liability.
(a) If, at any time, the Purchaser shall (i) receive notice from
the E.P.A. or any other similar public or private entity, (ii) receive a
claim from any third party, or (iii) otherwise discover or receive
notice or knowledge, of any Hazardous Material (including, without
limitation, petroleum, petroleum products, resins, asbestos and PCBs) or
other environmental pollution or contamination, or any other event or
condition on or off of the Real Estate relating to matters of
environmental protection, pollution, health, safety, sanitation or
conservation which could give rise to any damages, costs, loss or
liability under Environmental Laws (collectively, "Environmental
Liability"), which arose out of the operations of the Business prior to
the Closing Date or otherwise relates to any event, condition or
circumstance occurring prior to the Closing Date, regardless of whether
such event or condition was discovered by the Purchaser prior to the
Closing, then the Purchaser shall promptly notify the Seller thereof in
writing. To the extent that any such Environmental Liability (i) arose
out of the operations of the Business prior to the Closing or otherwise
arose out of the action or inaction of the Seller or the Shareholder and
(ii) constitutes a violation of one or more Environmental Laws
(including, without limitation, any exceedence of any applicable
clean-up standard thereunder) in effect on or before the time of Closing
(a "Seller Environmental Liability"), the Seller shall begin, and
thereafter shall proceed to complete, as soon as practicable and in a
good and workmanlike manner and at its sole cost and expense, all
investigation, negotiation with applicable parties, and remediation of
any such Seller Environmental Liability and, if applicable, restoration
of the affected property. Any such investigation, negotiation and
remediation shall be performed and completed in a manner consistent with
all applicable regulatory requirements and shall not in any event
unreasonably interfere with the Purchaser's conduct of its business and
its use and operation of the Real Estate. All Environmental Liabilities
that relate to any event, condition or circumstance occurring prior to
the Closing Date shall be Excluded Liabilities.
(b) If the Seller fails to begin or complete any such
investigation, negotiation or remediation as herein provided, then the
Purchaser may (but shall not be obligated to) undertake the same, all at
the expense of the Seller and the Shareholder. Further, if any such
Seller Environmental Liability on the Real Estate presents a hazard to
the operations or employees of the Purchaser, then the Purchaser may
(but shall not be obligated to) undertake such investigation,
negotiation and remediation at the Seller's and Shareholder's expense
without prior notice to the Seller or the Shareholder.
(c) The Purchaser agrees to provide all necessary access to its
premises to, and to fully cooperate with, the Seller and its employees,
representatives, agents and contractors in connection with any
environmental remediation, whether required pursuant to this Section 7.2
or otherwise, provided that the Seller shall, before entering on the
Purchaser's premises, provide a reasonable indemnity to the Purchaser
and any other occupants of the premises whereby Seller agrees to deal
with any claims, whether from Purchaser or from third persons, arising
from property damage or personal injury caused by the exercise of the
access right, including intrusive testing, excavation, and any other
related work, and to restore such areas of the premises affected by the
exercise of the access right so as to permit the carrying on of business
thereon in substantially the same manner as was carried on immediately
before the exercise of the access right. The Seller agrees to provide
the Purchaser with copies of all data and reports generated by the
Seller or any of its contractors during the course of any investigation
or remediation of any Seller Environmental Liability. No party hereto
shall settle any claim with respect to a Seller Environmental Liability
with the E.P.A. or any third party without the prior written consent of
the other parties hereto, which consent shall not be unreasonably
withheld. No such settlement shall relieve the Seller of liability
under this Section 7.2 in the event of any additional or future claims
from another governmental agency or any other Person. Each of the
parties shall make available to the other all records and other
materials required in order to contest any such claim, except to the
extent such records may be subject attorney/client privilege, and shall
cooperate fully with the other in the defense of all such claims.
Nothing in this Section 7.2 shall be deemed to relieve the Seller of any
liability for any Environmental Liability.
7.3 [ Intentionally Omitted ]
7.4 [ Intentionally Omitted ]
7.5 Access. After the Closing Date, the Purchaser shall permit the
Seller and the Shareholder reasonable access during normal business
hours, upon not less than five (5) calendar days' prior written notice,
to any records and files of the Seller transferred pursuant to this
Agreement, relating to a period prior to the Closing Date, and to any
employees of the Purchaser formerly employed by the Seller, as are
necessary in connection with the preparation of the Seller's or the
Shareholder's tax returns and the prosecution or defense of any tax
audits or third party claims, suits or actions by or against the Seller
or the Shareholder relating to the Business. The Purchaser shall use
reasonable commercial efforts to retain such books and records for a
period of not less than three (3) years after the Closing Date in order
to afford the Seller such access, and the Seller shall have the right at
any reasonable time to make copies thereof, at the Seller's and the
Shareholder's sole cost. If Purchaser wishes to destroy any such books
or records at any time within the ten (10) year period following the
Closing Date, Purchaser shall give the Seller and the Shareholders not
less than fifteen (15) calendar days' prior written notice thereof,
whereupon the Seller or the Shareholder may elect to take possession of
such books and records. Provided that the Purchaser uses such
commercially reasonable efforts to retain such books and records, the
Seller and the Shareholder acknowledge and agree that Purchaser shall
have no liability or Loss with respect to the loss or destruction of any
such books and records, and the Seller and the Shareholder hereby
expressly waive all claims with respect thereto.
7.6 Employment and Related Matters.
(a) Employees. Schedule 7.6(a) attached hereto lists all of the
individuals who are employed by the Seller on the date hereof, their
respective salaries, job titles, rates of remuneration and whether such
employee is currently inactive and has made a claim for or is receiving
disability benefits under the Seller's benefit plans and other terms of
employment. The Seller shall use all commercially reasonable and lawful
efforts to assist the Purchaser in arriving at continuing employment
arrangements with each of the individuals listed on Schedule 7.6(a)
hereto on substantially the same terms and conditions as he or she is
employed by the Seller immediately prior to the Closing Date, or
otherwise on such other terms and conditions as are acceptable to the
Purchaser. Purchaser shall offer such employment arrangements to at
least such number of Seller's employees as is sufficient to avoid any
notification requirement under the federal Workers Adjustment and
Retraining Notification Act.
(b) No Solicitation. Between the date of this Agreement and the
Closing Date, and for a period of two (2) years after the Closing Date,
neither the Seller nor the Shareholder shall, directly or indirectly,
approach, counsel or attempt to induce any person who is currently
employed by the Seller, or then employed by the Purchaser (or any
successor), to leave the employ of the Seller, or the Purchaser (or any
successor), as the case may be.
(c) Certain Employee Rights. Except as specifically set forth in
this subsection (c), Purchaser shall be under no obligation to maintain
any Employee Pension Benefit Plans, Employee Welfare Benefit Plans or
Fringe Benefit Arrangements of the Seller. At the Closing, Purchaser
shall assume sponsorship of The Wilen Companies, Incorporated
Administration 401(k) Savings Plan and Trust and The Wilen Companies,
Incorporated Plant 401(k) Savings Plan and Trust by entering into
Employee Pension Plan and Trust Assumption Agreements, in form and
substance reasonably acceptable to the Purchaser and the Seller (the
"Plan Assumption Agreements"). The Seller covenants that it shall be
solely responsible for all contributions to and liabilities arising from
any and all such Employee Pension Benefit Plans, Employee Welfare
Benefit Plans and Fringe Benefit Arrangements for all periods on or
before the Closing Date, except to the extent that such liabilities are
included within the Assumed Liabilities. The Seller covenants that all
contributions and other payment obligations required to be made on or
before the Closing Date under or in connection with such plans have been
or will be paid in full on or as of the Closing Date, except to the
extent that such obligations are included within the Assumed
Liabilities, and the Seller agrees to indemnify and hold the Purchaser
harmless from and against any and all such liabilities, debts and claims
asserted against the Purchaser in connection therewith. If the Seller
terminates its group health plan at or after the Closing, the Seller and
Purchaser agree that the Purchaser shall be responsible for providing
COBRA health continuation coverage under Code Section 498OB to any past
or present qualified beneficiaries under the Seller's group health plan.
(d) Public Statements. Prior to the Closing Date, the Seller and
the Purchaser shall consult with one another before issuing any written
communications or otherwise making any public statements, disclosures or
announcements to employees or any Person relating to this Agreement or
the transactions contemplated by this Agreement, except as may be
required by applicable law or by obligations pursuant to the rules and
regulations of applicable securities laws or upon advice of legal
counsel. The parties agree that the Purchaser shall have full and
complete discretion with respect to the content of such communications,
but shall at all times act in good faith.
7.7 Non-Competition Agreement. On or before the Closing Date, the
Shareholder and the Seller shall enter into a non-competition agreement
in favor of the Purchaser, substantially in the form of Exhibit J
attached hereto (the "Non-Competition Agreement").
7.8 Confidentiality.
(a) The Seller and the Shareholder hereby covenant and agree that
at all times from and after the Closing Date, they shall keep secret and
maintain in strictest confidence, and shall not use for its benefit or
for the benefit of any other Person, and shall not cause, and shall use
all commercially reasonable efforts not to allow any affiliates or any
of their respective agents, officers, directors or employees to so
disclose or use, any Confidential Information (as hereinafter defined)
relating to the Business, the Purchased Assets or otherwise pertaining
to this Agreement or the transactions contemplated hereby. As used in
this Agreement, "Confidential Information" shall mean any and all
information, in whatever form, relating to the Business or the Purchased
Assets, including, without limitation, any trade secrets, confidential
technical know-how, formulas, bills of material, operational methods,
names of customers, suppliers or other third parties, pricing policies,
supply information or data, product development techniques or plans, as
well as marketing and promotional plans, strategies and information,
which information is sufficiently secret to derive economic value,
actual or potential, from not being generally known to other persons who
can obtain economic value from its disclosure or use and is the subject
of efforts that are reasonable under the circumstances to maintain its
secrecy or confidentiality; provided, however, that the term
"Confidential Information" shall not include any information that, at
the time of disclosure, is generally available to the public or
thereafter becomes available to the public through no fault of the
Seller or its affiliates, or any of its employees, agents or
representatives.
(b) It is mutually recognized and agreed by the parties that
irreparable injury will result to the Purchaser and its business and
properties in the event of a breach or threatened breach of this Section
7.8 by the Seller, the Shareholder or any of their respective affiliates
employees, agents or representatives, that the amount or extent of
damages would be difficult if not impossible to ascertain and,
therefore, that any remedy at law for any breach by any of them of this
covenant will be inadequate. Accordingly, without prejudice to the
rights of the Purchaser also to seek damages or other remedies available
to it, the Purchaser shall be entitled to, and the Seller and the
Shareholder covenant that they will not contest the availability of,
temporary and permanent injunctive relief without the necessity of
proving actual damages to the Purchaser by reason of any such breach or
threatened breach. In addition, in the event of a breach or threatened
breach of this covenant by the Seller or the Shareholder or any such,
affiliate, employee, agent or representative, the Purchaser and its
successors and assigns shall also be entitled to recover from the Seller
and the Shareholder costs and attorneys' fees incurred in connection
with the enforcement of its rights hereunder. Whenever used herein, the
Purchaser shall be deemed to include any successor or any other Person
which may hereafter acquire all or any portion of the Business or the
Purchased Assets being acquired by the Purchaser hereunder.
(c) The covenants contained in this Section 7.8 shall be construed
and enforced independently of any other provision of this Agreement or
any other understanding or agreement between the parties, and the
existence of any claim or cause of action of the Seller or the
Shareholder against the Purchaser, of whatever nature, shall not
constitute a defense to the enforcement of the covenants contained
herein against the Seller, the Shareholder or any of their respective
affiliates, employees, agents or representatives.
7.9 Consents and Approvals. The Seller, the Shareholder and the
Purchaser shall each take or cause to be taken all commercially
reasonable acts necessary, and shall promptly make all filings or
submissions as are required (i) to obtain all third party consents
required pursuant to Article V hereof, including, without limitation,
any and all consents required under the leases, contracts and
commitments included within the Purchased Assets, in order to consummate
the transactions contemplated hereby, and (ii) to obtain any approval,
consent, license, clearance, exemption, waiver or registration of or
with any applicable foreign, federal, state or local governmental
authority necessary in order to consummate lawfully the transactions
contemplated hereby; provided, however, that each party shall be
primarily responsible for obtaining the consents, approvals, waivers,
clearances, exemptions, registrations and licenses required pursuant to
the contracts, leases and commitments to which it is a party and the
laws and regulations to which it is subject. Each party hereto shall
furnish to the other such necessary information and reasonable
assistance as the other may request in connection with its preparation
of any filing or submission which is necessary to obtain any
governmental approval, including, without limitation, approvals under
the HSR Act, as applicable. The Seller, the Shareholder and the
Purchaser shall each keep the others apprised of the status of any
communications with, and any inquiries or requests for additional
information made by, any governmental authority and shall comply
promptly with any such inquiry or request.
7.10 Transfer of Business Relationships and Other Transitional
Assistance. The Seller and the Shareholder shall use good faith efforts
to take such actions, at such times before the Closing Date as the
Purchaser may request, to introduce the Purchaser and its employees,
agents and representatives to the suppliers and customers of the
Business, including, without limitation, suppliers and the Major
Customers, and, for a period of four (4) months after the Closing, to
take such other actions as the Purchaser reasonably deems necessary or
desirable to effect the transfer of the Business, as a going concern, to
the Purchaser.
7.11 Product Liability Matters. At or prior to the Closing, Seller
at its expense shall cause Purchaser to be named as an additional
insured under each of its occurrence-type policy or policies of
insurance insuring against claims for personal injury and property
damage arising out of or resulting from any products of the Seller
shipped prior to the Closing Date. At the Closing, Seller shall deliver
to Purchaser one or more certificates of insurance evidencing that the
insurance to be obtained by it pursuant to this Section is in effect and
providing for notification to Purchaser at least thirty (30) calendar
days prior to the effective date of any termination or cancellation of
such insurance. The insurance coverage set forth in this Section shall
be maintained by Seller in amounts not less than were maintained by the
Seller during the twelve (12) months preceding the Closing until March
1, 1999, with a deductible not exceeding $5,000 per occurrence.
7.12 Tax Matters. The parties to this Agreement have estimated in
good faith Seller's taxable income for the first ten (10) days of
August, 1998 as Ninety Seven Thousand Eight Hundred Fifty Dollars
($97,850). The parties agree to file their respective federal and state
income tax returns consistent with such estimate and each party agrees
to notify the other parties if the Internal Revenue Service or any other
taxing authority challenges such estimate or the reporting of an
estimate.
7.13 Post Closing Real Estate Matters. Seller and Shareholder
shall use commercially reasonable efforts to obtain within a reasonable
period of time after Closing:
a) a Subordination, Non-Disturbance and Attornment Agreement
from the holder of any mortgage or security deed encumbering the
property which is leased pursuant to that certain Lease between Reywest
Development Corporation and Seller;
b) a Memorandum of Option, in a form reasonably satisfactory to
Purchaser and the Shareholder, evidencing Purchaser's right to purchase
and lease the land adjacent to the Facility and owned by Shareholder as
set forth in the Amendment of and Assignment To Lease with respect to
the Facility of even date herewith between Shareholder and Purchaser;
and
c) a consent from the landlord of the Phoenix property
acknowledging Purchaser's rights with respect to the renewal option
included in the lease.
ARTICLE VIII
Termination and Abandonment
8.1 Termination and Abandonment. This Agreement may be
terminated and abandoned at any time prior to the Closing Date:
(a) By mutual written consent of the Purchaser, the Seller and
the Shareholder;
(b) By the Purchaser, if the conditions set forth in Section 5.1
hereof shall not have been complied with or performed in any material
respect and such noncompliance or nonperformance shall not have been
cured or eliminated (or by its nature cannot be cured or eliminated) by
the Seller and the Shareholder on or before the Closing Date;
(c) By the Purchaser or the Seller, as applicable, within ten
(10) days following receipt of notice of an event described in clause
(i) of the second section of Section 7.4 hereof.
(d) By the Seller and the Shareholder, if the conditions set
forth in Section 5.2 hereof shall not have been complied with or
performed in any material respect and such noncompliance or
nonperformance shall not have been cured or eliminated (or by its nature
cannot be cured or eliminated) by the Purchaser on or before the Closing
Date;
(e) By the Seller and the Shareholder or the Purchaser, if any
court action or proceeding shall have been instituted by any party, or,
to the knowledge of the Purchaser, the Seller or the Shareholder, shall
have been threatened by any public or private authority or third party,
to restrain or prohibit the transactions contemplated by this Agreement;
or
(f) By the Seller and the Shareholder or the Purchaser, if the
Closing shall not have occurred on or prior to August 14, 1998, or such
later date as may be mutually approved in writing by the Seller, the
Shareholder and the Purchaser.
8.2 Effect of Termination. In the event of the termination or
abandonment of this Agreement pursuant to the provisions of this Article
VIII, this Agreement shall thereafter become void and have no effect;
provided, however, that the foregoing shall not be deemed to affect in
any way any right of action either party may have against the other for
breach of its representations, warranties or covenants hereunder. In
such event, the breaching party shall be liable to the non-breaching
party for all Losses (as hereinafter defined) arising as a result of
such breach.
ARTICLE IX
Indemnification
9.1 Seller's and Shareholder's Indemnification.
(a) Notwithstanding the investigation by the Purchaser, its
attorneys or any of its agents or representatives, the representations,
warrants and covenants of the Seller and the Shareholder set forth in
this Agreement and the liabilities of the Seller and the Shareholder
with respect thereto, shall survive for a period of two (2) years, at
which time they shall expire, except as follows: (i) the
representations, warranties and covenants set forth in Section 1.2,
Section 1.3, Section 2.2, Sections 6.1(a), (b), (the first sentence of
(h)), (the last sentence of (j)), (m), and (cc), Section 7.1, Section
7.2, and Section 7.12 and Article IX (including Section 9.1(b)(iv))
hereof shall survive the Closing without limitation of time and shall
not expire; (ii) the representations and warranties contained in Section
6.1(n) shall survive the Closing until any underlying tax obligation is
barred by all applicable limitations periods under applicable law (as
such periods may be extended by waiver), at which time they shall expire
and (iii) any covenant contained in this Agreement that provides for a
specific duration shall survive the Closing for the period so specified,
at which time it shall expire. Notwithstanding the preceding sentence,
any representation, warranty or covenant in respect of which indemnity
may be sought under Section 9.1(b) below shall survive the time at which
it would otherwise terminate pursuant to such sentence, if notice of the
inaccuracy, breach or nonperformance giving rise to such indemnity shall
have been given to the Seller or the Shareholder prior to the time that
it otherwise would have terminated.
(b) The Seller and the Shareholder (collectively, the "Seller
Group"), jointly and severally agree to indemnify, defend and hold the
Purchaser, its subsidiaries, its affiliates and its and their respective
shareholders, directors, officers, employees, agents, representatives,
successors and assigns (collectively, the "Purchaser Group"), harmless
from and against any and all Losses imposed on, accrued against,
sustained or incurred by the Purchaser Group or any one of them
resulting from or arising out of or by virtue of: (i) any
misrepresentation or breach of warranty made herein by the Seller or the
Shareholder; (ii) any non-compliance with, non-performance of or breach
by the Seller or the Shareholder of any of the covenants of this
Agreement to be performed by the Seller or the Shareholder or otherwise
set forth in any instrument or document executed or delivered by the
Seller or the Shareholder in connection with this Agreement; (iii) any
and all liabilities arising out of or in connection with the actions of
the Seller and the Shareholder and the conduct of the Business on or
prior to the Closing Date, including, without limitation, any and all
Seller Environmental Liabilities, but in all events excluding the
Assumed Liabilities; and (iv) any failure of the Seller and/or the
Shareholder to fully and timely discharge any Excluded Liability;
provided, however, that in no event shall the foregoing indemnification
obligations apply to any Environmental Liability other than the Seller
Environmental Liabilities.
(c) Notwithstanding any other provision hereof to the contrary,
the Seller, the Shareholder and the other members of the Seller Group
shall have no obligation to indemnify the Purchaser or the Purchaser
Group for any Losses otherwise indemnifiable hereunder, unless and until
the aggregate amount of all such Losses exceeds Two Hundred Fifty
Thousand Dollars ($250,000) (the "Section 9.1 Basket"), whereupon all
Losses in excess of such amount shall be indemnified as aforesaid;
provided, however, the Section 9.1 Basket shall not apply to the failure
of the Seller or the Shareholder to pay the Excluded Liabilities.
Furthermore, the Seller Group shall have no obligation to indemnify the
Purchaser or the Purchaser Group for any Losses that, when aggregated
with all other Losses paid by or on behalf of the Seller Group to the
Purchaser or the Purchaser Group, exceed Ten Million Dollars
($10,000,000) (the "Section 9.1 Cap"); provided, however that with
respect to any failure of the Seller or the Shareholder to pay the
Excluded Liabilities, the Section 9.1 Cap shall be an amount equal to
the Purchase Price.
9.2 Purchaser's Indemnification.
(a) The representations, warranties and covenants of the
Purchaser and Guarantor set forth in this Agreement, and the liabilities
of the Purchaser with respect thereto, shall survive the Closing Date
for a period of two (2) years, at which time they shall expire, except
as follows: (i) the representations, warranties and covenants set forth
in Section 2.1, Sections 6.2 (a) and (b), Section 7.5, Section 7.6 and
Section 7.12 and Article IX (including Section 9.2(b)(ii) and (iii))
hereof shall survive the Closing without limitation of time and shall
not expire; and (ii) any covenant contained in this Agreement that
provides for a specific duration shall survive the Closing for the
period so specified, at which time it shall expire. Notwithstanding the
preceding sentence, any representation, warranty or covenant in respect
of which indemnity may be sought under Section 9.2(b) below shall
survive the time at which it would otherwise terminate pursuant to such
sentence, if notice of the inaccuracy, breach or nonperformance giving
rise to such indemnity shall have been given to the Purchaser prior to
the time that it otherwise would have terminated.
(b) The Purchaser agrees to indemnify, defend and hold the Seller
Group harmless from and against any and all Losses imposed on, accrued
against, sustained or incurred by the Seller Group or any one of them
resulting from or arising out of or by virtue of: (i) any
misrepresentation or breach of warranty made herein by the Purchaser or
non-compliance with or breach by the Purchaser of any of the covenants
of this Agreement to be performed by the Purchaser or otherwise set
forth in any instrument or document executed or delivered by the
Purchaser or the Guarantor in connection with this Agreement; (ii) any
and all liabilities and obligations arising out of or in connection with
the conduct of the Business by the Purchaser after the Closing Date; and
(iii) any failure of Purchaser to fully and timely discharge any Assumed
Liability.
(c) Notwithstanding any other provision hereof to the contrary,
the Purchaser shall have no obligation to indemnify the Seller or the
Seller Group for any Losses otherwise indemnifiable hereunder, unless
and until the aggregate amount of all such Losses exceeds Two Hundred
Fifty Thousand Dollars ($250,000) (the "Section 9.2 Basket"), whereupon
all Losses in excess of such amount shall be indemnified as aforesaid;
provided, however, the Section 9.2 Basket shall not apply to the failure
of the Purchaser to pay the Assumed Liabilities or any indemnification
obligation of the Purchaser arising from clause (ii) of subsection
9.2(b) above. Furthermore, the Purchaser shall have no obligation to
indemnify the Seller or the Seller Group for any Losses that, when
aggregated with all other Losses paid by or on behalf of the Purchaser
to the Seller or the Seller Group, exceed Ten Million Dollars
($10,000,000) (the "Section 9.2 Cap"); provided, however, that with
respect to any failure of the Purchaser to pay the Assumed Liabilities
or any indemnification obligation arising from clause (ii) of subsection
9.2(b) above, the Section 9.2 Cap shall be an amount equal to the
Purchase Price.
9.3 Losses. For purposes of this Agreement, "Losses" shall mean
all claims (whether meritorious or not), actions, suits, proceedings,
judgments, causes of action, liabilities (whether fixed, absolute,
accrued, contingent or otherwise and whether direct or indirect, primary
or secondary, known or unknown), losses, demands, costs, assessments,
fines, damages, interest, penalties or expenses (including, without
limitation, reasonable attorneys' fees and expenses and costs of
litigation).
9.4 Procedure for Indemnification.
(a) Upon becoming aware of a claim for any Losses, the entity
seeking indemnification under this Article IX (the "Indemnified Party")
shall give notice of such claim to the party from whom indemnification
is sought (the "Indemnifying Party"); provided, however, that no delay
in giving notice hereunder shall relieve the Indemnifying Party from its
obligations hereunder, except and to the extent that the Indemnifying
Party is thereby prevented from fulfilling such obligations.
(b) Within thirty (30) calendar days after such notice, the
Indemnifying Party may deliver to the Indemnified Party its written
acknowledgment that the Indemnified Party is entitled to indemnification
pursuant to this Article IX for Losses arising out of such claim, suit
or action, together with evidence reasonably satisfactory to the
Indemnified Party that the Indemnifying Party has and will have the
financial capability to discharge any liability arising from such claim,
suit or action. Upon receipt by the Indemnified Party of such
acknowledgment and evidence, the Indemnifying Party may, with counsel
reasonably satisfactory to the Indemnified Party, assume the defense of
any such suit or action initiated by a third party ("Third Party Claim")
including its compromise and settlement, and the Indemnifying Party
shall pay all costs and expenses thereof and shall be fully responsible
for the outcome thereof. If the Indemnifying Party so assumes the
defense of such claim, suit or action, (i) no compromise or settlement
thereof may be effected by the Indemnifying Party without the
Indemnified Party's consent (which shall not be unreasonably withheld)
unless the sole relief is monetary damages that are paid in full by the
Indemnifying Party and (ii) the Indemnified Party shall have no
liability with respect to any compromise or settlement thereof effected
without its consent (which shall not be unreasonably withheld). In the
event that the Indemnifying Party does not provide such acknowledgment
and evidence, the Indemnified Party shall be entitled to assume the
defense of such Third Party Claim at the sole cost and expense of the
Indemnifying Party, with counsel reasonably satisfactory to the
Indemnifying Party; and in such event, all Losses, disbursements and
other costs and expenses (including, without limitation, reasonable
attorneys' fees) of such contest shall be subject to the indemnification
provisions of this Article IX. In such case, the Indemnified Party will
give the Indemnifying Party twenty (20) calendar days' notice of any
proposed settlement or compromise of any Third Party Claim, the defense
of which such party has assumed. Any settlement or compromise made or
caused to be made by the Indemnified Party of any such Third Party Claim
of the kind referred to above, shall be binding upon the Indemnifying
Party in the same manner as if a final judgment or decree had been
entered by a court of competent jurisdiction in the amount of such
settlement or compromise.
(c) In case of any such Third Party Claim, the Indemnified Party
will, upon written request of the Indemnifying Party, cooperate
reasonably in the defense thereof, including affording to the
Indemnifying Party the right of access, during normal business hours, to
pertinent books and records for purposes of inspection and making
copies, but all reasonable out-of-pocket expenses incurred by the
Indemnified Party in connection with the foregoing shall be reimbursed
by the Indemnifying Party. If the Indemnifying Party assumes the
defense thereof in accordance with paragraph (b) above, the Indemnified
Party shall maintain the right to participate in the defense thereof and
to employ counsel, at its own expense, separate from the counsel
employed by the Indemnifying Party.
9.5 Sole Remedy. The indemnification provisions, procedures and
limitations of this Article IX shall be the exclusive remedies and
procedures relating thereto available to any party as a result of one or
more breaches of the representations, warranties, covenants, agreements
and obligations contained in this Agreement or any Schedule attached
hereto or the Bill of Sale or the Assumption Agreement; provided,
however, that this Section 9.5 shall not apply to (a) any act of fraud
perpetrated upon a party hereto by another party hereto, (b) any
equitable remedy available to a party hereto as a result of any such
breach or (c) any remedy available to the Purchaser at law or in equity
with regard to any Environmental Liability other than a Seller
Environmental Liability.
9.6 Insurance. Any amount otherwise payable pursuant to this
Article IX by an Indemnifying Party with respect to any Loss shall be
reduced by the amount of any insurance proceeds paid to the Indemnified
Party with respect to such Loss.
ARTICLE X
Expenses
10.1 Professional Expenses. Each of the parties hereto shall pay
all of its own respective costs and expenses with respect to legal,
accounting, consulting, appraisal and professional fees, as well as
printing and other related expenses, incurred or to be incurred by such
party in connection with the negotiation and preparation of this
Agreement and the consummation of the transactions contemplated hereby;
provided, however, that no such fees or expenses shall in any manner
constitute a Lien against the Purchased Assets.
10.2 Transfer Expenses. All applicable sales, use, transfer,
documentary or similar taxes, intangible taxes, if any, and transfer
fees which are payable by reason of the transactions contemplated by
this Agreement, shall be paid by the party upon whom they are imposed by
law or, in the event there is no applicable law, pursuant to local
custom.
ARTICLE XI
Miscellaneous
11.1 Entire Agreement; Amendment. This Agreement is the entire
agreement and understanding of the parties hereto with respect to the
subject matter hereof, and supersedes all prior and contemporaneous
negotiations, undertakings and agreements, written or oral, between the
parties. No representation, inducement, agreement, promise,
understanding or waiver altering, modifying, taking from or adding to
the terms and conditions hereof shall have any force or effect unless
the same is in writing and validly executed by each of the parties
hereto.
11.2 Binding Effect; Assignment. This Agreement shall be binding
upon and inure to the benefit of, and be enforceable by, the parties
hereto and their respective successors and permitted assigns. This
Agreement shall not be assignable by any party without the prior written
consent of the other parties and any attempted assignment in violation
of the foregoing shall be null and void; provided, however, that this
Agreement may be assigned by the Purchaser in connection with the sale
of all or substantially all of the assets of the Purchaser; provided
further, that no such assignment shall relieve the Purchaser of its
obligations hereunder.
11.3 Notices. Any notice, request, instruction or other
communication to be given hereunder by any party hereto shall be in
writing and shall be deemed to have been duly given on the date of
delivery, provided delivery is actually tendered at the appropriate
address, addressed to the persons identified below (i) in person, or
(ii) by overnight courier service nationally recognized in the United
States, or (iii) by facsimile copy (with original copy mailed the same
day), or (iv) five (5) calendar days after deposit in the U.S. mail by
first class certified mail, postage prepaid, return receipt requested,
all addressed as set forth below:
(i) If to the Seller or the
Shareholder, to: The Wilen Companies, Incorporated
3760 Southside Parkway
Atlanta, Georgia 30354
Attn: Mr. Joseph M. Wilen
Telephone No.: (404) 366-2111
Facsimile No.: (404) 361-8832
With a copy to: Smith, Gambrell & Russell, LLP
Promenade II, Suite 3100
1230 Peachtree Street, N.E.
Atlanta, Georgia 30309-3592
Attn: Paul S. Lee, Esq.
Telephone No.: (404) 815-3500
Facsimile No.: (404) 815-3509
(ii) If to the Purchaser
or Guarantor to: Katy Industries, Inc.
6300 S. Syracuse Way, Suite 300
Englewood, Colorado 80111-6723
Attn: Mr. John R. Prann, Jr.
Telephone No.: (303) 290-9300
Facsimile No.: (303) 290-9344
With a copy to: Katy Industries, Inc.
55 East Monroe Street
Suite 4100
Chicago, Illinois 60603
Attn: Arthur R. Miller
Telephone: (312) 807-4600
Facsimile: (312) 807-3900
and Holleb & Coff
55 East Monroe Street
Suite 4100
Chicago, Illinois 60603
Attn: Robert E. Kolek, Esq.
Telephone No.: (312)807-4600
Facsimile No.: (312)807-3900
or to such other person or persons at such address or addresses as may
be designated by written notice to the other party pursuant to this
Section 11.3.
11.4 Severability. If any provision of this Agreement is found
invalid, unenforceable or in violation of any law by a court of
competent jurisdiction, such provision shall be modified only to the
extent necessary to enable such provision to be valid and enforceable,
without affecting the remaining portions of this Agreement, which shall
remain in full force and effect; provided, however, that the severing of
any such provision will not materially change the substance of this
Agreement. As so amended, this Agreement shall be enforced to the
fullest extent possible to give effect to the intention of the parties
expressed herein.
11.5 Mutual Contribution; No Third Party Beneficiaries. The
parties to this Agreement and their counsel have mutually contributed to
its drafting. Consequently, no provision of this Agreement shall be
construed against any party on the ground that such party drafted the
provision or caused it to be drafted, or the provision contains a
covenant of such party. This Agreement shall not confer any rights or
remedies upon any person other than the parties and their respective
successors and permitted assigns.
11.6 Waivers. No delay on the part of any party in exercising any
right, power or privilege shall operate as a waiver thereof, nor shall
any waiver of any right, power or privilege operate as a waiver of any
other right, power or privilege, nor shall any single or partial
exercise of any right, power or privilege preclude any other or further
exercise thereof or of any other right, power or privilege. The rights
and remedies herein provided are cumulative and are not exclusive of any
rights or remedies which the parties otherwise may have at law or in
equity.
11.7 Bulk Sales Law. The Seller shall indemnify and hold the
Purchaser harmless from and against any and all Losses incurred or
sustained by the Purchaser arising from the transactions contemplated by
the Agreement which result from noncompliance with any applicable bulk
sales legislation.
11.8 Headings; Gender; Number. The headings of articles and
sections of this Agreement and of the schedules and exhibits hereto are
for convenience only and are not intended to limit, restrict, expand or
otherwise affect the meaning or interpretation of the provisions of this
Agreement. The use of any gender hereunder shall include all genders
and the use of the singular shall include the plural, and vice versa, in
each case as the context may require.
11.9 Applicable Law. This Agreement is governed by and shall be
construed and enforced in accordance with the laws of the State of
Illinois.
11.10 [Intentionally omitted.]
11.11 Non-Binding Mediation. Any controversy or claim arising out
of or relating to this Agreement, its interpretation, the breach or the
consummation thereof, or the closing contemplated thereunder, or the
respective rights or obligations of the parties, shall be first subject
to non-binding mediation administered by the American Arbitration
Association (the "Mediator"). In the event that such controversy or
claim cannot be resolved pursuant to mediation within thirty (30) days
after such matter is submitted to the Mediator as provided above, such
controversy or claim may be settled by arbitration upon the written
arbitration agreement made at that time of all parties, and failing such
arbitration agreement, by litigation.
11.12 Representations and Warranties Complete. EXCEPT FOR THE
REPRESENTATIONS AND WARRANTIES EXPRESSLY SET FORTH HEREIN, THE SELLER
AND SHAREHOLDER, ON THE ONE HAND, AND THE PURCHASER, ON THE OTHER HAND,
MAKE NO OTHER REPRESENTATIONS AND WARRANTIES, AND ALL OTHER
REPRESENTATIONS AND WARRANTIES, WHETHER EXPRESS OR IMPLIED, ARE HEREBY
EXPRESSLY DISCLAIMED AS TO ANY OTHER INFORMATION OR MATTERS, INCLUDING,
WITHOUT LIMITATION, ANY IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS
FOR A PARTICULAR PURPOSE WITH RESPECT TO THE PURCHASED ASSETS.
11.13 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, each of the parties hereto has caused this Asset
Purchase Agreement to be duly executed as of the date first written
above.
PURCHASER: SELLER:
- --------- -------
WILEN ACQUISITION CORPORATION WILEN COMPANIES,INCORPORATED
By:___________________________ By:______________________________
Its: Its: President
GUARANTOR: SHAREHOLDER:
KATY INDUSTRIES, INC.
By:___________________________ _______________________________
Its: _________________________ Joseph M. Wilen
GUARANTY
In consideration of, and as an inducement to the execution of this
Agreement, Katy Industries, Inc., a Delaware corporation (the
"Guarantor") and the sole shareholder of Purchaser, hereby
unconditionally, absolutely and irrevocably guarantees unto the Seller
and the Shareholder and their successors, assigns, heirs and personal
representatives, as the case may be (collectively, the
"Representatives"), that Purchaser will perform during the term of this
Agreement, each and every covenant, payment obligation, agreement and
undertaking (collectively, the "Obligations") on the part of Purchaser
contained and set forth in this Agreement and all other agreements and
documents ancillary to this Agreement (collectively, the "Transaction
Documents"), including, but not limited to, the Employment Agreement,
the Non-Competition Agreement, the Assumption Agreement, the Facility
Lease Amendment and the Warehouse Lease Amendment, together with any
renewals, modifications, consolidations and extensions of the
Transaction Documents.
Seller and/or Shareholder and their Representatives may from time to
time: (a) after notice and demand to Purchaser, resort to the Guarantor
for payment of the Obligations, whether Seller, Shareholder or their
Representatives have resorted to any property securing any of the
Obligations or proceeded against Purchaser, any other guarantor of the
Obligations, or any other party primarily or secondarily liable on any
of the Obligations, (b) release or compromise any liability of the
Guarantor hereunder or any liability of any other party or parties
primarily or secondarily liable on any of the Obligations, including
Purchaser, subject in all respects to the provisions of and restrictions
contained in Article IX of this Agreement, (c) extend, renew or credit
any of the Obligations for any period (whether longer than the original
period), (d) give any other form of indulgence, whether under the
Obligations or not. It is expressly agreed that this Guaranty is a
guarantee of payment and performance and not of collection.
Guarantor hereby waives and agrees not to assert or take advantage
of: (a) any defense that may arise by reason of the incapacity or lack
of authority of Guarantor or Purchaser, or the failure of Seller and/or
Shareholder to file or enforce a claim against the estate (either in
administration, bankruptcy, or any other proceedings) of Purchaser or
any other person or entity; (b) any defense based upon an election of
remedies by Seller and/or Shareholder which destroys or otherwise
impairs any subrogation rights of Guarantor or the right of Guarantor to
proceed against Purchaser for reimbursement, or both; (c) any defense
based upon failure of Seller and/or Shareholder to commence an action
against Purchaser; (d) any requirement of acceptance or notice of
acceptance of this Guaranty by Seller and/or Shareholder; (e) any
requirement of notice of presentment of any of the indebtedness or
performance of any of the Obligations hereby guaranteed; (f) any
requirement of protest and notice of dishonor or of default to Guarantor
or to any other party with respect to the indebtedness or performance of
Obligations hereby guaranteed; (g) any defense based on lack of due
diligence by Seller and/or Shareholder in collection, protection or
realization upon any collateral securing the indebtedness or performance
of the Obligations; and (h) any defense that the Obligations were
discharged in a bankruptcy proceeding of Purchaser, to which Guarantor
might otherwise be entitled.
Guarantor further waives any right to require that an action be
brought against Purchaser or any other person. Guarantor hereby
specifically waives any rights which may be conferred under O.C.G.A.
10-7-24. In the event of a default under the Transaction Documents,
Seller and Shareholders shall have the right to enforce their rights,
powers and remedies thereunder or hereunder or under any other
instrument now or hereafter evidencing, securing or otherwise relating
to the transactions contemplated by the Transaction Documents, in any
order, and all rights, powers and remedies available to Seller and/or
Shareholder in such event shall be nonexclusive and cumulative of all
other rights, powers and remedies provided thereunder or hereunder or by
law or in equity.
Any waiver, extension of time or other indulgence granted from time
to time by Seller or Shareholder or their Representatives with respect
to the Transaction Documents, shall in no way modify or amend the
liabilities or obligations of Guarantor thereunder or hereunder, which
shall be continuing, absolute, unconditional and irrevocable.
The provisions of this Guaranty shall be binding upon Guarantor and
its successors, and assigns and shall inure to the benefit of Seller and
Shareholder and their respective Representatives. The provisions of
this Guaranty shall in no event be impaired by any change which may
arise by reason of the dissolution of Purchaser.
The provisions of this Guaranty shall continue in full force and
effect until the Obligations of Purchaser are fully paid, performed and
discharged. The Obligations of Purchaser shall not be considered fully
paid, performed and discharged unless and until all Obligations by
Purchaser to Seller and Shareholder are no longer subject to any right
on the part of any person whomsoever, including, but not limited to,
Purchaser, Purchaser as debtor-in-possession, and/or any trustee in
bankruptcy to set aside such payments or to seek to recoup the amount of
such payments or any part thereof. The foregoing shall include, but not
be limited to, all rights to recover preferences voidable under Title 11
of the United States Code.
GUARANTOR HEREBY WAIVES AND RENOUNCES ALL RIGHTS OF REIMBURSEMENT,
SUBROGATION, INDEMNITY AND EXONERATION AGAINST PURCHASER, ALL RIGHTS OF
RECOURSE TO OR WITH RESPECT TO PURCHASER OR ANY ASSETS OR PROPERTY OF
PURCHASER AND FROM ANY OTHER PERSON OR ENTITY IN ANY WAY DIRECTLY OR
CONTINGENTLY LIABLE FOR ANY OF THE INDEBTEDNESS OF PURCHASER TO SELLER
AND SHAREHOLDER. THE WAIVER AND RENUNCIATION CONTAINED IN THE PRECEDING
SENTENCE IS FOR THE BENEFIT OF SELLER AND SHAREHOLDER AND PURCHASER, WHO
MAY ASSERT THE BENEFITS THEREOF AS A THIRD PARTY BENEFICIARY, AND THE
GUARANTOR MAY BE RELEASED FROM SUCH WAIVER AND RENUNCIATION ONLY BY THE
EXECUTION AND DELIVERY BY SELLER AND SHAREHOLDER AND PURCHASER OF AN
INSTRUMENT EXPRESSLY RELEASING GUARANTOR THEREFROM.
Dated: August 11, 1998 KATY INDUSTRIES, INC.
By:__________________________
Its:_________________________
