<PAGE>
<PAGE>
FORM 8-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of Earliest
Event Reported): November 15, 1995
GIBSON GREETINGS, INC.
(Exact name of registrant as specified in its charter)
Delaware 0-11902 52-1242761
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
2100 Section Road, Cincinnati, Ohio 45237
(Address of principal executive offices)
Registrant's telephone number, including area code:(513) 841-6600
<PAGE>
<PAGE>
INFORMATION TO BE INCLUDED IN THE REPORT
Items 1, 3, 4, 5, 6 and 8 are not applicable and are omitted from
this report.
Item 2. Acquisition or Disposition of Assets
Gibson Greetings, Inc. (the Company) consummated its previously
reported agreement to sell one hundred percent (100%) of all of the
outstanding shares of capital stock of Cleo, Inc. (Cleo), the
Company's wholly-owned subsidiary, to CSS Industries, Inc. (CSS),
effective November 15, 1995, pursuant to the terms of the Stock
Purchase Agreement dated as of October 3, 1995 between the Company
and CSS. The description of such transaction set forth herein does
not purport to be complete and is qualified in its entirety by
reference to the Stock Purchase Agreement attached hereto as Exhibit
2.
Aggregate consideration received by the Company from CSS amounted to
approximately $133.1 million, consisting of $96.5 million in cash, a
CSS note payable in 75 days for a principal amount of approximately
$24.6 million (which amount was calculated based on a principal
amount of $20.0 million plus increases from $161.8 million in the
amount of intercompany indebtedness of Cleo owed to the Company as
of November 15, 1995) bearing interest at 8.00% and $12.0 million
which will be held in escrow for certain post-closing adjustments
and indemnification obligations. Additionally, the Company has been
released from approximately $14.0 million of third-party debt which
has been retained by Cleo.
The amount of the consideration was determined by arms-length
negotiations between the Company and CSS. There is no material
relationship between CSS and the Company or any of the Company's
affiliates, directors or officers, or any associate of any such
directors or officers.
<PAGE>
<PAGE>
Item 7. Financial Statements, Pro Forma Financial Information
and Exhibits
(a) Financial Statements of Business Acquired.
Not Applicable.
(b) Pro Forma Financial Information.
Number Description
------ -----------
P-1 Pro Forma Condensed Consolidated Financial
Statements - Summary
P-2 Pro Forma Condensed Consolidated Balance
Sheet as of September 30, 1995
P-3 Pro Forma Condensed Consolidated Statement
of Operations for the Nine Months Ended
September 30, 1995
P-4 Pro Forma Condensed Consolidated Statement
of Operations for the Year Ended
December 31, 1994
P-5 Notes to Pro Forma Financial Information
(c) Exhibits
Number Description
2 Stock Purchase Agreement
99 Press Release dated November 16, 1995
<PAGE>
<PAGE>
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.
Date: November 30, 1995 GIBSON GREETINGS, INC.
/s/William L. Flaherty
William L. Flaherty
Vice President - Finance
<PAGE>
<PAGE>
Gibson Greetings, Inc.
Pro Forma Condensed Consolidated Financial Statements - Summary
Gibson Greetings, Inc. (the Company) consummated its agreement to
sell Cleo, Inc. (Cleo), the Company's wholly-owned gift wrap
subsidiary, to CSS Industries, Inc. (CSS) effective November 15,
1995 (the Sale).
Total consideration to the Company amounted to approximately $133.1
million, consisting of $96.5 million in cash, a note payable in 75
days for approximately $24.6 million and $12.0 million which will be
held in escrow.
The following unaudited pro forma condensed consolidated balance
sheet of the Company as of September 30, 1995 was prepared assuming
the Sale was consummated as of the balance sheet date. The related
unaudited pro forma condensed consolidated statements of operations
were prepared assuming the transaction was consummated at the
beginning of those periods.
The pro forma financial statements referred to above do not purport
to represent what the Company's financial position or results of
operations actually would have been if the Sale, in fact, occurred
on the date referred to above or to project the Company's results of
operations for any period. These pro forma financial statements and
accompanying notes should be read in conjunction with the
consolidated financial statements and notes thereto included in the
Company's Annual Report on Form 10-K/A (Amendment No. 1) for the
year ended December 31, 1994.
P-1
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<PAGE>
<TABLE>
GIBSON GREETINGS, INC.
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF SEPTEMBER 30, 1995
(Dollars in thousands)
(Unaudited)
<CAPTION>
Pro Forma
Reported Cleo, Inc. Adjustment Pro Forma
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and equivalents $ 1,100 $ - $ 42,500 a,d $ 43,600
Notes receivable - - 4,304 b,d 4,304
Trade receivables, net 96,402 64,403 - 31,999
Inventories 184,490 103,829 - 80,661
Prepaid expenses 5,946 2,011 - 3,935
Income taxes receivable 69,917 28,418 28,418 c,d 69,917
--------- --------- --------- ---------
Total current assets 357,855 198,661 75,222 234,416
--------- --------- --------- ---------
Plant and equipment, net 112,916 33,237 - 79,679
Deferred income taxes 8,942 (1,349) (1,349)c,d 8,942
Other assets, net 96,457 1,116 - 95,341
--------- --------- --------- ---------
$ 576,170 $ 231,665 $ 73,873 $ 418,378
========= ========= ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Intercompany borrowings $ - $ 151,367 $ 151,367 d $ -
Debt due within one year 79,253 1,361 (54,000)a 23,892
Accounts payable 22,619 13,936 - 8,683
Other current liabilities 158,247 8,100 (67,708)d 82,439
--------- --------- --------- ---------
Total current liabilities 260,119 174,764 29,659 115,014
--------- --------- --------- ---------
Long-term debt 52,093 12,687 - 39,406
Other liabilities 41,240 - - 41,240
--------- --------- --------- ---------
Total liabilities 353,452 187,451 29,659 195,660
--------- --------- --------- ---------
Stockholders' Equity 222,718 44,214 44,214 d 222,718
--------- --------- --------- ---------
$ 576,170 $ 231,665 $ 73,873 $ 419,551
========= ========= ========= =========
P-2
</TABLE>
PAGE
<PAGE>
<TABLE>
GIBSON GREETINGS, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995
(Dollars in thousands except per share amounts)
(Unaudited)
<CAPTION>
Pro Forma
Reported Cleo, Inc. Adjustment Pro Forma
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Revenues $ 342,080 $ 72,347 $ - $ 269,733
Costs and expenses
Operating expenses:
Cost of products sold 159,208 58,823 - 100,385
Selling, distribution
and administrative
expenses 169,717 28,447 966 e 142,236
Loss on sale of
Cleo, Inc. 82,758 - (82,758)d -
--------- --------- --------- ---------
Total operating
expenses 411,683 (87,270) (81,792) 242,621
--------- --------- --------- ---------
Operating income (loss) (69,603) (14,923) 81,792 27,112
Financing expenses, net:
Interest expense 9,529 7,162 4,644 g 7,011
Interest income (357) - - (357)
--------- --------- --------- ---------
Total financing
expenses, net 9,172 7,162 4,644 6,654
--------- --------- --------- ---------
Income (Loss)
before income taxes (78,775) (22,085) 77,148 20,458
Income taxes (24,479) (7,889) 25,589 g 8,999
--------- --------- --------- ---------
Net income (loss) $ (54,296) $ (14,196) $ 51,599 $ 11,459
========= ========= ========= =========
Net income (loss) per share $ (3.35) $ (.88) $ 3.18 $ .71
========= ========= ========= =========
Average shares outstanding 16,197 16,197 16,197 16,197
========= ========= ========= =========
P-3
</TABLE>
PAGE
<PAGE>
<TABLE>
GIBSON GREETINGS, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1994
(Dollars in thousands except per share amounts)
(Unaudited)
<CAPTION>
Pro Forma
Reported Cleo, Inc. Adjustment Pro Forma
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Revenues $ 548,795 $ 189,387 $ - $ 359,408
Costs and expenses
Operating expenses:
Cost of products sold 310,039 160,420 - 149,619
Selling, distribution
and administrative
expenses 276,147 56,741 2,200 e 221,606
--------- --------- --------- ---------
Total operating
expenses 586,186 217,161 2,200 371,225
--------- --------- --------- ---------
Operating loss (37,391) (27,774) (2,200) (11,817)
Financing and derivative
transaction expenses:
Interest expense 10,599 9,148 5,755 f 7,206
Interest income (765) - - (765)
Gain on derivative
transactions (1,641) - - (1,641)
--------- --------- --------- ---------
Total financing and
derivative transaction
expenses, net 8,193 9,148 5,755 4,800
--------- --------- --------- ---------
Loss before income taxes (45,584) (36,922) (7,955) (16,617)
Income taxes (16,981) (14,276) (4,232)g (6,937)
--------- --------- --------- ---------
Net loss $ (28,603) $ (22,646) $ (3,723) $ (9,680)
========= ========= ========= =========
Net loss per share $ (1.77) $ (1.40) $ (.23) $ (.60)
========= ========= ========= =========
Average shares outstanding 16,130 16,130 16,130 16,130
========= ========= ========= =========
P-4
</TABLE>
<PAGE>
<PAGE>
NOTES TO PRO FORMA FINANCIAL INFORMATION
Explanations of specific pro forma adjustments are as follows:
(a) The $42,500 net increase in pro forma cash and equivalents is
calculated as follows:
Cash proceeds from sale of Cleo, Inc. $ 96,500
Bank repayments assumed to be made
with cash proceeds (54,000)
----------
Cash and equivalent adjustment $ 42,500
==========
The remaining $42,500 of cash proceeds was not used to repay debt as
the remaining borrowings require lender approval and prepayment of
the debt outstanding at September 30, 1995 would be cost
prohibitive.
(b) The pro forma note receivable of $4,304 represents the amount
that the Company would have received as determined by the Stock
Purchase Agreement dated October 3, 1995 between the Company and CSS
had the Sale been consummated on September 30, 1995. The difference
between the pro forma amount and the actual amount of the note
receivable of $24,574 at November 15, 1995 represents the increase
in advances by the Company to Cleo during the period October 1
through November 15, 1995 for which CSS reimbursed the Company by
increasing the note.
(c) The $28,418 increase in pro forma income taxes receivable and
the $1,349 decrease in pro forma deferred income taxes result from
the re-establishment of tax assets and liabilities previously
allocated by the Company to Cleo through intercompany borrowings.
Such tax assets and liabilities will remain with the Company as the
Company files consolidated tax returns.
P-5
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<PAGE>
(d) The pro forma adjustments represent the proceeds from the Sale,
the resulting elimination of the Company's net investment in and
advances to Cleo, and the elimination of the previously established
reserve for disposition against the Company's net investment in
Cleo. Such reserve represents the estimated shortfall of the net
proceeds from the Sale compared to the Company's net investment in
and advances to Cleo.
Intercompany borrowings $ 151,367
Income taxes receivable (28,418)
Deferred income taxes 1,349
----------
Net advances to Cleo 124,298
Net equity of Cleo 44,214
----------
Net investment in and advances to Cleo 168,512
Net proceeds from Sale (see note b above) 100,804
----------
Reserve for disposition 67,708
Divestiture costs 15,050
----------
Loss on sale of Cleo $ 82,758
==========
(e) Management fees were allocated by the Company to Cleo based upon
a percentage of revenues. Such fees represent reimbursement by Cleo
to the Company for fixed overhead costs of the Company, including
legal, tax and administrative expenses. These costs are not
expected to be eliminated as a result of the Sale and, accordingly,
all allocated costs have been added back as a pro forma adjustment.
(f) The Company has assumed the following for purposes of computing
pro forma adjustment to interest expense:
(1) Interest expense associated with existing short-term debt
prepaid by proceeds from the Sale has been eliminated.
(2) Senior notes have not been prepaid.
(3) Due to the lower short-term debt levels discussed
above, additional commitment fees have been computed on
the unused revolving credit facility.
(g) The pro forma income tax benefit consists of the following:
1995 1994
--------- ---------
Income tax on reversal of
loss on sale of Cleo $ 27,856 $ -
Income tax benefit on
pro forma expenses (2,792) (4,232)
--------- ---------
Income tax adjustment $ 25,064 $ (4,232)
========= =========
P-6
<PAGE>
<PAGE>
STOCK PURCHASE AGREEMENT
Agreement dated as of October 3, 1995, between GIBSON
GREETINGS, INC., a Delaware corporation ("Seller"), and CSS
INDUSTRIES, INC., a Delaware corporation ("Buyer").
Seller owns all of the outstanding equity securities of
Cleo Inc., a Tennessee corporation ("Cleo"), consisting of 100
shares of common stock, no par value (the "Shares"). The parties
wish to provide for Seller's sale of the Shares to Buyer and
Buyer's purchase of the Shares from Seller on the terms and
conditions of this Agreement.
The parties agree as follows:
1. The Acquisition.
1.1 Purchase and Sale. Subject to the terms and
conditions of this Agreement, at the Closing to be held as
provided in Section 2, Seller shall sell the Shares to Buyer, and
Buyer shall purchase the Shares from Seller, free and clear of
any security interest, mortgage, lien, charge, adverse claim or
restriction of any kind, including, but not limited to, any
restriction on the use, voting, transfer, receipt of income or
other exercise of any attributes of ownership, other than a
restriction on transfer attributable solely to Federal or state
securities laws (collectively, "Encumbrances").
1.2 Purchase Price. The aggregate purchase price
for the Shares (the "Price") shall be $128,500,000 subject to
adjustment as provided in Sections 1.2(b) and 1.4, payable as
follows:
(a) $96,500,000 to Seller at the Closing in
immediately available funds; and
(b) a promissory note (the "Note") payable
to Seller in the original principal amount of $20,000,000 plus or
minus any increases or decreases, respectively, from $161,834,000
in the outstanding amount of "Advances from Parent" from Seller
to Cleo as of the Closing Date (prior to the contribution
pursuant to Section 1.3) as shown on the certificate delivered
pursuant to Section 2.2(d), in substantially the form of Exhibit
1.2(b); and
(c) $12,000,000 (the "Escrow Amount") to
Bank of New York as escrow agent (the "Escrow Agent") pursuant to
the Escrow Agreement in substantially the form of Exhibit 1.2(c)
hereto (the "Escrow Agreement").
1.3 Cancellation of Intercompany Obligations at
Closing. Simultaneously with the Closing, Seller shall
extinguish any remaining indebtedness of Cleo to Seller or its
affiliates by contributing such remaining indebtedness to the
capital of Cleo, but such contribution shall not affect the
Price. As used herein, "indebtedness of Cleo to Seller or its
Affiliates" means all obligations of Cleo to Seller or its
affiliates including, without limitation, the "Advances from
Parent" or other terms used to describe intercompany indebtedness
as shown on the Balance Sheet (as defined below), but excluding
indebtedness for goods purchased by, or services rendered to,
Cleo from or by Seller or its affiliates priced in accordance
with past practice.
1.4 Adjustment to the Price.
(a) Buyer shall cause Cleo to use
commercially reasonable efforts to conduct a physical count of
the inventory, equipment and other fixed assets as of the Closing
Date in the presence of Deloitte & Touche, LLP ("D&T") and
representatives of Seller and Buyer, if desired by such party,
within five business days following the Closing Date, excluding
fully depreciated fixed assets, supplies and other items of
minimal value.
(b) Within thirty days following the
Closing, Buyer shall cause Cleo to prepare and deliver to Buyer
and Seller a balance sheet of Cleo as of the Closing (the
"Closing Date Statement of Net Equity"), which shall be prepared
in accordance with generally accepted United States accounting
principles ("GAAP") consistently applied, except there will be no
"pushdown" to the Closing Date Statement of Net Equity of
estimated losses with respect to Seller's investment in Cleo, if
any, that Seller may record on its books or records relating to
its contemplated sale of Cleo. Buyer and Seller may observe, or
appoint representatives to observe, the preparation of the
Closing Date Statement of Net Equity. For purposes of this
Agreement, Closing Date Net Equity means the total of
stockholder's equity plus intercompany borrowings by Cleo
(contributed to capital pursuant to Section 1.3), and plus any
income tax liability and minus any income tax asset (before
making adjustments associated with the ss 338(h)(10) election
contemplated by Section 7.6(h) and without any adjustment for
real property assigned to Cleo pursuant to Section 3.11). For
purposes of calculating the Closing Date Statement of Net Equity,
deferred tax liabilities and deferred tax assets shall be
reflected, in the aggregate, as a net deferred tax asset of
$4,300,000.
(c) Buyer shall cause Cleo to have D&T
perform an audit of the Closing Date Statement of Net Equity in
accordance with generally accepted auditing standards. As soon
as practicable, but in any event within 60 days following the
Closing, D&T shall deliver to Buyer, Seller and Cleo an opinion
thereon to the effect that the Closing Date Statement of Net
Equity has been prepared in accordance with Section 1.4(b). In
the event that D&T shall deliver an opinion on the Closing Date
Statement of Net Equity qualified as to conformance with GAAP,
except as provided in Section 1.4(b), Buyer shall cause Cleo to
resolve the issue or issues which form the basis for such
qualification. If Cleo is unable to resolve such qualification
in the D&T opinion within 10 days after the delivery of such
opinion, Buyer shall cause Cleo to make such adjustments and
changes in accordance with GAAP, except as provided in Section
1.4(b), as D&T shall deem necessary for the removal of such
qualification for purposes of the audit, but such adjustments and
changes shall be resolved in accordance with Section 1.4(e) for
purposes of determining Closing Date Net Equity.
(d) Except as provided in Subsection 1.4(e),
within 15 days after the delivery to Buyer and Seller of the
Closing Date Statement of Net Equity with the D&T opinion
relating thereto, if the Closing Date Net Equity exceeds an
amount (the "Calculated Amount") equal to $168,500,000 plus the
amount of the Note, then Buyer shall pay to the Seller an amount
equal to such excess and if the Closing Date Net Equity is less
than the Calculated Amount, then Seller and Buyer shall direct
the Escrow Agent to pay to Buyer an amount equal to such
difference (subject to the limitation set forth in Section
9.5(b)), in either event with interest thereon at the rate of
8.0% per annum simple interest from the Closing Date through the
date of payment.
(e) If (i) Cleo and D&T are unable to
resolve any issues in connection with the qualification of the
Closing Date Statement of Net Equity arising pursuant to Section
1.4(c) or (ii) either Buyer or Seller disagrees with the Closing
Date Net Equity and notifies the other in writing setting forth
in detail the basis for such dispute within 15 business days
after the Closing Date Statement of Net Equity is delivered to
Buyer and Seller pursuant to Section 1.4(b), Buyer and Seller
shall attempt in good faith to reconcile their differences and
any resolution by them as to any disputed amount shall be final,
binding and conclusive. If Buyer and Seller fail to reach a
resolution within 10 business days after receipt of a written
notice of dispute, Buyer and Seller shall submit the items
remaining for resolution with respect to the determination of
Closing Date Net Equity to Price Waterhouse & Co. or another "Big
Six" accounting firm to be mutually appointed by Buyer and Seller
(the "Independent Accounting Firm"), which shall within 20
business days of such submission resolve and report to Seller and
Buyer upon such remaining disputed items, and such report shall
be final, binding and conclusive with no right of appeal and will
have the legal effect of an arbitration award. The dispute
resolution process shall be conducted in accordance with the
Commercial Arbitration Rules of the American Arbitration
Association before a single arbitrator and any hearing shall take
place in Philadelphia, Pennsylvania. Buyer and Seller shall each
be responsible for one half of the fees and disbursements of the
Independent Accounting Firm. Any amount subject to dispute under
this Section 1.4(e) which is then determined to be owing shall be
paid as provided in Section 1.4(d), with interest at the rate
provided in Section 1.4(d), in immediately available funds within
five business days following resolution of such dispute.
2. The Closing.
2.1 Place and Time. The closing of the sale and
purchase of the Shares (the "Closing") shall take place at the
offices of Morgan, Lewis & Bockius LLP, 2000 One Logan Square,
Philadelphia, Pennsylvania 19103-6993 at 10:00 a.m. (Eastern
time) on October 31, 1995 (or as soon as practicable thereafter),
but not later than the close of business on November 15, 1995, or
at such other place, date and time as the parties may agree in
writing (the date of the Closing is referred to herein as the
"Closing Date"), subject to the following:
(a) If any of the conditions set forth in
Section 3 have not been satisfied on the date on which the
Closing would otherwise occur, Buyer may from time to time, by
notice to Seller, defer the Closing to 1:00 p.m. on a business
day specified in that notice, but not later than November 15,
1995.
(b) If any of the conditions set forth in
Section 4 have not been satisfied on the date on which the
Closing would otherwise occur, Seller may from time to time, by
notice to Buyer, defer the closing to 1:00 p.m. on a business day
specified in that notice, but not later than November 15, 1995.
(c) If both of the preceding paragraphs (a)
and (b) are applicable, the Closing shall take place on the later
of the dates determined in accordance with those paragraphs.
2.2 Deliveries by Seller. At the Closing, Seller
shall deliver the following to Buyer:
(a) Certificates representing the Shares,
duly endorsed for transfer to Buyer; Seller shall cause Cleo to
immediately exchange those certificates for, and to deliver to
Buyer at the Closing, a certificate representing the Shares
registered in the name of Buyer (without any legend or other
reference to any Encumbrance).
(b) The documents contemplated by Section 3.
(c) All other documents, instruments and
writings required by this Agreement to be delivered by Seller at
the Closing and any other documents or records relating to Cleo's
business reasonably requested by Buyer in connection with this
Agreement.
(d)Certificate of the Chief Financial
Officer of Seller certifying as to the amount of "Advances from
Parent" from Seller to Cleo as of the Closing Date.
2.3Deliveries by Buyer. At the Closing, Buyer
shall deliver the following to Seller:
(a)A wire transfer of the amounts
contemplated by Section 1.2 in immediately available funds to
accounts designated by Seller and the Escrow Agent.
(b)The Note.
(c)The documents contemplated by Section 4.
(d)All other documents, instruments and
writings required by this Agreement to be delivered by Buyer at
the Closing.
3. Conditions to Buyer's Obligations.
The obligations of Buyer to effect the Closing
shall be subject to the satisfaction at or prior to the Closing
of the following conditions, any one or more of which may be
waived by Buyer:
3.1No Injunction. There shall not be in effect
any injunction, order or decree of a court of competent
jurisdiction that prevents the consummation of the transactions
contemplated by this Agreement, that restricts Buyer's
acquisition of the Shares or that will require any divestiture as
a result of Buyer's acquisition of the Shares or that will
require all or any part of the business of Cleo to be held
separate and no litigation or proceedings seeking the issuance of
such an injunction, order or decree or seeking to impose
substantial penalties on Buyer or Seller if this Agreement is
consummated shall be pending.
3.2Representations, Warranties and Agreements.
The representations and warranties of Seller set forth in this
Agreement shall be true and complete in all material respects as
of the Closing Date as though made at such time (except for
changes specifically contemplated or permitted by this Agreement,
other than updating the Disclosure Letter pursuant to Section
7.5). Seller shall have performed and complied in all material
respects with the agreements contained in this Agreement required
to be performed and complied with by it at or prior to the
Closing. Buyer shall have received a certificate confirming
compliance with this Section signed by an authorized
representative of Seller.
3.3Legal Opinion. Buyer shall have received an
opinion from counsel to Seller dated the Closing Date and in
substantially the form of Exhibit 3.3 hereto.
3.4 Regulatory Approvals. All licenses,
authorizations, consents, orders and regulatory approvals of any
domestic or foreign national, state or municipal or other local
government or multi-national body (including, but not limited to,
the European Economic Community), any subdivision, agency,
commission or authority thereof (collectively, "Governmental
Bodies") necessary for the consummation of Buyer's acquisition of
the Shares shall have been obtained and shall be in full force
and effect and any applicable waiting period under the Hart-
Scott-Rodino Antitrust Improvements Act of 1976, as amended (the
"HSR Act") shall have expired.
3.5Consents of Third Parties. The consents and
approvals of third parties identified on Exhibit 3.5 shall have
been obtained on terms and conditions reasonably satisfactory to
Seller and Buyer.
3.6Resignations of Certain Directors and
Officers. All directors and officers of Cleo and its
Subsidiaries who are officers of Gibson and all employees of
Seller who are trustees for employee benefit plans which relate
only to Cleo employees whose resignations shall have been
requested by Buyer not less than ten business days before the
Closing Date shall have submitted their resignations or been
removed effective as of the Closing Date. As used herein
"Subsidiary" shall mean with respect to any Person, any
corporation or other Person, other than a natural Person, of
which 50% or more of the voting interests are held by such Person
or one or more of its Subsidiaries.
3.7Payment of Certain Bonuses. Seller shall
have paid any bonus owed to any executive officer of Cleo as a
result of the transactions contemplated by this Agreement, it
being understood that any severance payment obligations resulting
from a termination of any Cleo employee after the Closing shall
be paid by Cleo.
3.8Employee Benefits Matters. Seller shall have
performed its obligations to be performed prior to the Closing
pursuant to Section 7.11(a).
3.9Union Matters. The collective bargaining
agreement with United Paperworkers International Union AFL-CIO
and its Local Union 1766 shall have been extended for not less
than one year upon substantially the same terms as set forth in
the current collective bargaining agreement or terms otherwise
reasonably satisfactory to Buyer, and Buyer shall be otherwise
reasonably satisfied that following the Closing there will be no
strike, work stoppage, slowdown, or similar labor disturbance.
3.10Lease. Cleo shall have entered into a
separate lease pertaining to the premises known as 4025 Viscount,
Memphis, Tennessee containing terms substantially similar to
those under the existing lease between Seller and Corporate
Property Associates #2 & #3 dated January 25, 1982 which includes
such premises, including without limitation the option to
purchase contained in Paragraph 27 therein, except that during
the period from the Closing Date to January 31, 2002, the base
rent payable by Cleo thereunder shall be $1,500,000 per annum,
and Cleo shall have entered into a subordination, nondisturbance
and attornment agreement with the mortgage holder on the
premises, in form and substance reasonably satisfactory to Buyer.
3.11Assignment of Certain Properties. Seller
shall have assigned to Cleo all of its right, title and interest
in all of the owned and leased real property owned or leased by
Seller and used by Cleo, including the properties set forth on
Exhibit 3.11 hereto, paid all applicable transfer taxes with
respect thereto and, with respect to owned properties, delivered
a duly executed deed in form and substance reasonably
satisfactory to Buyer.
3.12 Economic Development Revenue Bonds. The
trust indentures between the Industrial Development Board of the
City of Memphis, County of Shelby, Tennessee (the "IDB") and
First Tennessee Bank National Association (the "Trustee") and
related leases between the IDB and Cleo shall have been amended
to apply to the "Project Site" rather than to the "Project," and
the IDB, the Trustee and the Letter of Credit Bank (as defined in
that certain Reimbursement Agreement) shall have consented to the
transactions contemplated by this Agreement, and Seller shall
have obtained proof of satisfaction of the mortgage in the
original principal amount of $3,200,000 relating to the
Bloomington, Indiana facility.
3.13 Mexican Subsidiary. Seller shall have taken
all actions necessary on its part to transfer to Buyer or its
designee the one share of Cleo De Mexico, S.A. De C.V. owned by
Seller.
3.14 License Agreements. All licensors of
trademarks and copyrights of other persons on products sold by
Cleo and its Subsidiaries pursuant to license agreements with
Seller, or with Seller and Cleo jointly, which are listed on
Exhibit 3.14 hereto shall have entered into license agreements
with Cleo or its Subsidiaries upon substantially the same terms.
3.15 Audited Financials. D&T shall have agreed,
subject to completion of the audit of the December 31, 1993
consolidated balance sheet of Cleo by another independent
certified public accounting firm, to prepare at Buyer's expense
and deliver to Buyer within 70 days of Closing audited financial
statements for Cleo and its Subsidiaries for the fiscal year
ended December 31, 1994 and for the 1995 stub period ended on the
Closing Date (as well as to audit the Closing Date Statement of
Net Equity).
3.16 No Material Adverse Change. There shall not
have been any material adverse change in the business or
financial condition of Cleo and its Subsidiaries taken as a
whole.
3.17Escrow Agreement. Seller and the Escrow
Agent shall have entered into the Escrow Agreement.
4. Conditions to Seller's Obligations.
The obligations of Seller to effect the Closing
shall be subject to the satisfaction at or prior to the Closing
of the following conditions, any one or more of which may be
waived by Seller:
4.1No Injunction. There shall not be in effect
any injunction, order or decree of a court of competent
jurisdiction that prevents the consummation of the transactions
contemplated by this Agreement or that prohibits the sale of the
Shares to Buyer and no litigation or proceedings seeking the
issuance of such an injunction, order or decree or seeking to
impose substantial penalties on Buyer or Seller if this Agreement
is consummated shall be pending.
4.2Representations, Warranties and Agreements.
The representations and warranties of Buyer set forth in this
Agreement shall be true and complete in all material respects as
of the Closing Date as though made at such time. Buyer shall
have performed and complied in all material respects with the
agreements contained in this Agreement required to be performed
and complied with by it prior to or at the Closing. Seller shall
have received a certificate confirming compliance with this
Section signed by an officer of Buyer.
4.3Legal Opinion. Seller shall have received an
opinion from Morgan, Lewis & Bockius LLP counsel to Buyer, dated
the Closing Date and in substantially the form of Exhibit 4.3
hereto.
4.4Regulatory Approvals. All licenses,
authorizations, consents, orders and regulatory approvals of
Governmental Bodies necessary for the consummation of Seller's
sale of the Shares to Buyer shall have been obtained and shall be
in full force and effect and any applicable waiting period under
the HSR Act shall have expired.
4.5Disney License. Each of the existing
licenses with Walt Disney Company that have both the Seller and
Cleo as licensees shall have been amended to apply separately to
Seller and Cleo after the Closing.
4.6Section 338(h)(10) Election. Seller and
Buyer shall have taken all necessary pre-Closing action to timely
file with the Internal Revenue Service a Form 8023-A making a
Section 338(h)(10) election for Cleo under the Internal Revenue
Code of 1986 (the "Code") pursuant to Section 7.6(h).
4.7Economic Development Revenue Bonds and
Guarantees. Seller shall have been released from all liability
under its guaranty of Cleo's obligation under the Reimbursement
Agreements relating to Cleo's Economic Development Revenue Bonds,
Series 1989A and 1989B.
4.8Intentionally Omitted.
4.9Escrow Agreement. Buyer and the Escrow Agent
shall have entered into the Escrow Agreement.
4.10 Releases. Seller shall have been released
from all liability for payments due after the Closing Date under
the real property leases described in Sections 3.10 and 3.11 and
the other obligations listed on Exhibit 4.10.
4.11Lender Consents. Seller shall have received
appropriate consents from its senior note and bank lenders to
acceptance of the Note, or in lieu thereof Buyer shall have
agreed to amend this Agreement to provide for an additional cash
payment at Closing in an amount equal to the principal amount of
the Note.
<PAGE>
5. Representations and Warranties of Seller.
Seller represents and warrants to Buyer that,
except as set forth in a letter dated the date of this Agreement,
executed by Seller, addressed and delivered to Buyer and
containing information required by this Agreement and exceptions
to the representations and warranties of Seller under this
Agreement (the "Disclosure Letter"):
5.1Organization of Seller; Authorization.
Seller is a corporation duly organized, validly existing and in
good standing under the laws of Delaware with full corporate
power and authority to execute and deliver this Agreement and to
perform its obligations hereunder. Seller has all requisite
corporate power and authority to execute, deliver and perform its
obligations under this Agreement and to consummate the
transactions contemplated hereby. The execution, delivery and
performance of this Agreement have been duly and validly
authorized by all necessary corporate action of Seller and this
Agreement constitutes a valid and binding obligation of Seller,
enforceable against it in accordance with its terms.
5.2No Conflict as to Seller. Neither the
execution and delivery of this Agreement nor the consummation of
the sale of the Shares to Buyer will (a) violate any provision of
the certificate of incorporation or by-laws of Seller or (b)
subject to receipt of the consents listed in Section 5.7 of the
Disclosure Letter, violate, be in conflict with, or constitute a
default (or an event which, with notice or lapse of time or both,
would constitute a default) under any agreement to which Seller
is a party or (c) violate any statute or law or any judgment,
decree, order, regulation or rule of any court or other
Governmental Body applicable to Seller.
5.3Ownership of Shares. The authorized equity
securities of Cleo consist of 100 shares of common stock, no par
value, of which 100 shares are outstanding and constitute the
Shares. Seller owns the Shares, of record and beneficially, free
and clear of all Encumbrances. No legend or other reference to
any purported Encumbrance appears upon any certificate
representing the Shares. The delivery of certificates to Buyer
provided in Section 2.2 and the payment to Seller provided in
Section 2.3 will result in Buyer's immediate acquisition of
record and beneficial ownership of the Shares, free and clear of
all Encumbrances. There are no outstanding options, rights,
conversion rights, agreements or commitments of any kind relating
to the issuance, sale or transfer of any equity securities or
other securities of Cleo.
5.4Organization of Cleo and Subsidiaries.
Section 5.4 of the Disclosure Letter sets forth as to Cleo and
each of its Subsidiaries its name, jurisdiction of incorporation
and directors and officers. Cleo and each of such Subsidiaries
is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation,
with full corporate power and authority to own its properties and
to engage in its business as presently conducted, is duly
qualified and in good standing as a foreign corporation under the
laws of each other jurisdiction in which it is authorized to do
business and is not required to qualify as a foreign corporation
in any other jurisdiction except where the failure to be so
qualified would not have a material adverse effect on the
business, financial condition, operating results or assets and
liabilities of Cleo and its Subsidiaries, taken as a whole (a
"Material Adverse Effect"). Section 5.4 of the Disclosure
Schedule sets forth each United States and foreign jurisdiction
where Cleo and each of its Subsidiaries are qualified as a
foreign corporation. All of the outstanding equity securities of
each of such Subsidiaries are owned of record and beneficially by
Cleo, free and clear of all Encumbrances, except that one share
of Cleo de Mexico, S.A. de C.V. is owned by Seller. Such equity
securities have been duly authorized and validly issued and are
fully paid and non-assessable. There are no outstanding options,
rights, conversion rights, agreements or commitments of any kind
relating to the issuance, sale or transfer of any equity
securities or other securities of Cleo or any of Cleo's
Subsidiaries. Neither Cleo nor any of its Subsidiaries owns, or
has any option, right, agreement or commitment of any kind to
acquire, any securities or other securities of any other Person
or any direct or indirect equity or ownership interest in any
other business.
5.5No Conflict as to Cleo and Subsidiaries.
Neither the execution and delivery of this Agreement nor the
consummation of the sale of the Shares to Buyer will (a) violate
any provision of the certificate of incorporation or by-laws (or
other governing instrument) of Cleo or any of its Subsidiaries or
(b) subject to receipt of the consents listed in Section 5.7 of
the Disclosure Letter, violate, or be in conflict with, or
constitute a default (or an event which, with notice or lapse of
time or both, would constitute a default) under, or result in the
termination of, or accelerate the performance required by, or
excuse performance by any Person of any of its obligations under,
or cause the acceleration of the maturity of any debt or
obligation pursuant to, or resulting in the creation or
imposition of any Encumbrance upon any property or assets of Cleo
or any of its Subsidiaries under, any agreement or Commitment
required to be listed in Section 5.17 of the Disclosure Letter to
which Cleo or any of its Subsidiaries is a party or by which any
of their respective property or assets is bound, or to which any
of the property or assets of Cleo or any of its Subsidiaries is
subject, or (c) violate any statute or law or any judgment,
decree, order, regulation or rule of any court or other
Governmental Body applicable to Cleo or any of its Subsidiaries.
5.6Consents and Approvals of Governmental
Authorities. Except for requirements of the HSR Act and as
listed in Section 5.6 of the Disclosure Letter, no consent,
approval or authorization of, or declaration, filing or
registration with, any Governmental Body is required to be made
or obtained by Seller or Cleo or any of its Subsidiaries in
connection with the execution, delivery and performance of this
Agreement by Seller or the consummation of the sale of the Shares
to Buyer.
5.7Other Consents. Except as listed in Section
5.7 of the Disclosure Letter, no consent of any Person is
required to be obtained by Seller or Cleo or any of its
Subsidiaries to the execution, delivery and performance of this
Agreement or the consummation of the sale of the Shares to Buyer,
including, but not limited to, consents from parties to leases or
Commitments disclosed or required to be disclosed on Section 5.17
of the Disclosure Letter.
5.8Financial Statements. Seller has delivered
to Buyer unaudited balance sheets of Cleo and its Subsidiaries as
of August 31, 1995 (the "Balance Sheet") and as of December 31,
1994, 1993 and 1992 and statements of income and cash flows for
each of the periods then ended. Such financial statements and
notes are in accordance with the books and records of Cleo and
its Subsidiaries and fairly present the consolidated financial
condition and results of operations of Cleo and its Subsidiaries
as of the respective dates thereof and for the periods therein
referred to, all in accordance with GAAP consistently applied
throughout the periods involved, except as set forth in the notes
thereto.
5.9Undisclosed Liabilities. There is no direct
or indirect liability, indebtedness, obligation, expense, claim,
deficiency, guaranty or endorsement of or by any person (other
than endorsements of notes, bills and checks presented to banks
for collection or deposit in the ordinary course of business) of
any type, whether accrued, absolute, contingent, matured,
unmatured or other, of Cleo or its Subsidiaries ("Liabilities")
which could reasonably be expected to have a Material Adverse
Effect, except:
(a)those Liabilities adequately and
specifically set forth or reserved for on the Balance Sheet and
not heretofore paid or discharged or not required under GAAP to
be so set forth or reserved on the Balance Sheet;
(b)those Liabilities arising in the
ordinary course of business consistent with past practice under
any Commitment specifically disclosed in Section 5.17 of the
Disclosure Letter or not required to be disclosed therein because
of the nature of such Commitment or the term or amount involved;
and
(c)those Liabilities incurred, consistent
with past business practice, in the ordinary course of business
since the date of the Balance Sheet and not heretofore paid or
discharged.
5.10Title to Properties. Section 5.10 of the
Disclosure Letter describes all interests in real property owned
or leased by Cleo or any of its Subsidiaries. Either Cleo or one
of its Subsidiaries owns good and (in the case of real property
and motor vehicles) marketable title to all the properties and
assets that they purport to own (real, personal and mixed,
tangible and intangible), including, without limitation, all the
properties and assets reflected in the Balance Sheet (except for
property sold since the date of the Balance Sheet in the ordinary
course of business or leased under capitalized leases) and all
the properties and assets purchased or otherwise acquired by Cleo
or any of its Subsidiaries since the date of the Balance Sheet.
All properties and assets reflected in the Balance Sheet are free
and clear of all Encumbrances except, with respect to all such
properties and assets, (a) mortgages or security interests shown
on the Balance Sheet as securing specified liabilities or
obligations, all of which are listed in the Balance Sheet or the
Disclosure Letter, (b) mortgages or security interests incurred
in connection with the purchase of property or assets after the
date of the Balance Sheet (such mortgages and security interests
being limited to the property or assets so acquired), (c) as to
real property, (i) imperfections of title, if any, none of which
materially detracts from the value or impairs the use of the
property subject thereto, or impairs the operations of Cleo or
any of its Subsidiaries, (ii) zoning laws that do not impair the
present or anticipated use of the property subject thereto, and
(iii) the encumbrances disclosed in Section 5.10 of the
Disclosure Letter and (d) liens for current taxes not yet due.
There are no existing agreements, options, commitments or rights
with, of or to any Person to acquire any of the assets of Cleo or
its Subsidiaries or any interest therein, except for contracts
for the sale of inventory entered into in the ordinary course of
business consistent with past practice. No person other than
Cleo or its Subsidiaries owns any tangible assets situated on the
properties used by Cleo and its Subsidiaries or necessary for the
operation of their businesses, except for leased items listed in
the Disclosure Letter or having annual rentals of less than
$25,000 in the aggregate and for items of immaterial value.
5.11 Condition of Buildings, Plants and
Equipment. Except as disclosed in Section 5.11 of the Disclosure
Letter, the buildings, plants, structures, equipment and other
personal property owned or leased by Cleo or its Subsidiaries are
in good operating condition and repair (ordinary wear and tear
and immaterial breakdowns excepted) and are usable in the
ordinary course of business of Cleo and its Subsidiaries. Cleo
and its Subsidiaries are not to Seller's knowledge, and have not
received notification that they are, in violation of any
applicable building, zoning, or other law, ordinance or
regulation in respect of their buildings, plants or structures or
their operations. Each real property lease is, and at Closing
shall be, in full force and effect and has not been assigned,
modified, supplemented or amended except as set forth in Section
5.10 of the Disclosure Letter and Sections 3.10 and 3.11 hereof
and neither tenant nor, to Seller's knowledge, landlord under any
such lease is in default under any such lease, and no
circumstances or state of facts presently exists which, with the
giving of notice or passage of time, or both, would permit the
landlord or, to Seller's knowledge, tenant to terminate any such
lease.
5.12 No Condemnation or Expropriation. Neither
the whole nor any portion of the property or leaseholds owned or
held by Cleo or any of its Subsidiaries is subject to any
governmental decree or order to be sold or is being condemned,
expropriated or otherwise taken by any Governmental Body or other
Person with or without payment of compensation therefor which
condemnation, expropriation or taking individually or in the
aggregate would have a Material Adverse Effect. There are no
assessments with respect to any of the properties owned or leased
by Cleo or any of its Subsidiaries which remain unpaid in amounts
greater than $100,000 in the aggregate.
5.13 Litigation. Except as listed in Section
5.13 of the Disclosure Letter, there is no action or suit, by or
before any court or Governmental Body pending or, to Seller's
knowledge, threatened, nor is Seller aware of any pending or
threatened inquiry, proceeding or investigation against Cleo, any
of its Subsidiaries or their respective assets or which seeks to
enjoin or obtain damages in respect of the consummation of this
Agreement. Neither Cleo, any of its Subsidiaries or Seller with
respect to Cleo is a named party to nor, to Seller's knowledge,
is Cleo otherwise subject to, any judgment, order, decree, writ,
injunction or award of any court, Governmental Body or any
arbitrator.
5.14 Absence of Certain Changes. Except as
disclosed in Section 5.14 of the Disclosure Letter, since the
date of the Balance Sheet, neither Cleo nor any of its
Subsidiaries has:
(a)suffered the damage or destruction of
any of its material properties or assets (whether or not covered
by insurance), or made any material disposition of any of its
properties or assets other than in the ordinary course of
business;
(b)made any change or amendment in its
certificate of incorporation or by-laws, or other governing
instruments;
(c)issued or sold any equity securities or
other securities, acquired, directly or indirectly, by redemption
or otherwise, any such equity securities, reclassified, split-up
or otherwise changed any such equity security, or granted or
entered into any options, warrants, calls or commitments of any
kind with respect thereto;
(d)organized any Subsidiary or acquired any
equity securities of any Person or any equity or ownership
interest in any business;
(e)borrowed any funds (other than from
Seller or Cleo or one of its Subsidiaries) or incurred, or
assumed or become subject to, whether directly or by way of
guarantee or otherwise, any obligation or liability with respect
to any such indebtedness for borrowed money;
(f)granted any increase in the compensation
of officers or employees, except in connection with promotions in
the ordinary course of business (including any such increase
pursuant to any employee benefit plan);
(g)subjected any asset to an Encumbrance
other than as described in Section 5.10(b), (c) and (d);
(h)changed any of the accounting principles
followed by Cleo and its Subsidiaries or the method of applying
such principles; or
(i)operated other than in the ordinary
course of business consistent with past practice.
5.15 No Material Adverse Change. Since the date
of the Balance Sheet, there has not been any material adverse
change in the business, financial condition or operating results
of Cleo and its Subsidiaries taken as a whole, other than changes
resulting from economic conditions generally prevailing in the
United States or in the social expression industry.
<PAGE>
5.16 Intellectual Property Rights.
(a)Section 5.16 of the Disclosure Letter
sets forth a complete and accurate list and description of (i)
all registered and material unregistered United States and
foreign patents, trademarks, trade names, service marks,
copyrights and applications therefor and all material trade
secrets owned by Cleo and its Subsidiaries or otherwise used in
the business of Cleo and its Subsidiaries (the "Patent and
Trademark Rights") and (ii) all United States and foreign
patents, trademarks, trade names, service marks, copyright
registrations and applications therefor and trade secrets
licensed to Seller, Cleo and its Subsidiaries or otherwise used
in the business of Cleo and its Subsidiaries but not owned (the
"Licensed Rights"). The Patent and Trademark Rights and the
Licensed Rights are together referred to as the "Intellectual
Property Rights". Section 5.16 of the Disclosure Letter also
sets forth any United States and foreign patents, trademarks,
trade names, service marks, copyrights and applications therefor,
without regard to materiality, and any material trade secrets
owned by Seller or any of its Subsidiaries (other than Cleo or
its Subsidiaries) and used by Cleo or its Subsidiaries.
(b)Except as set forth in the Disclosure
Letter, Cleo or its Subsidiaries own all right, title and
interest in and to the Patent and Trademark Rights, and the
Patent and Trademark Rights are not subject to any arrangement
requiring any payment to any person or the obligation to grant
rights to any person in exchange for the use of such Patent and
Trademark Right. The owned Intellectual Property Rights are
owned free and clear of any Encumbrances except as contemplated
by Section 5.10(d). The Intellectual Property Rights are all
those rights necessary to the conduct of the business of Cleo and
its Subsidiaries as currently being conducted by Cleo and its
Subsidiaries.
(c)The validity of the Patent and Trademark
Rights and title thereto, and the validity of the Licensed
Rights, (i) have not been questioned in any prior litigation
during the past three years to which Cleo is a party or which is
otherwise known to Seller, (ii) are not being questioned in any
pending litigation to which Cleo is a party or which is otherwise
known to Seller and (iii) are not, to Seller's knowledge, the
subject of any threatened or proposed litigation.
(d)The business of Cleo and its
Subsidiaries, as currently being conducted by Cleo and its
Subsidiaries, does not conflict with or infringe, and has not, to
Seller's knowledge, been alleged to conflict with or infringe,
any patents, trademarks, trade names, service marks, copyrights,
copyright registrations, trade secrets or other proprietary
rights of others.
(e)To Seller's knowledge, no third party
has interfered with, infringed upon, misappropriated, or
otherwise come into conflict with any of the Intellectual
Property Rights. Except as set forth in the Disclosure Letter,
neither Cleo or any of its Subsidiaries is obligated to indemnify
any person for or against any interference, infringement,
misappropriation, or other conflict with respect to any of the
Intellectual Property Rights.
(f)Assuming that all of the consents listed
in Exhibit 3.14 and Section 5.7 of the Disclosure Letter are
obtained prior to the Closing Date, the consummation of the
transactions contemplated by this Agreement will not result in
the loss or impairment of any of the Intellectual Property
Rights.
5.17 Commitments. Section 5.17 of the Disclosure
Letter contains a list, as of the date hereof, of each contract,
agreement, understanding or other commitment, whether written or
oral (including any and all amendments thereto), to which Seller,
Cleo or its Subsidiaries is a party or by which it is bound
relating to the business of Cleo and its Subsidiaries
(collectively, the "Commitments"), of the nature described below:
(a)contract with any employee or
consultant;
(b)contract for the future purchase of, or
payment for, supplies or products or services in any single
instance exceeding $200,000, or in the aggregate $500,000, or of
a duration of more than twelve months;
(c)contract to sell or supply products or
to perform services in excess of $200,000, or of a duration of
more than twelve months;
(d)contract to sell or supply products to
any Government Body;
(e)representative or sales agency contract;
(f)contract limiting or restraining it from
engaging or competing in any lines or business with any Person;
(g)contract with any customer providing for
a volume refund, retrospective price adjustment, price guarantee
or guaranteed sale;
(h)commitment to guarantee the obligations
of others or commitment by others to guarantee the obligations of
Cleo or its Subsidiaries;
(i)equipment lease;
(j)mortgage, indenture, note, debenture,
bond, letter of credit agreement, surety agreement, loan
agreement or other commitment for the borrowing or lending of
money relating to Cleo or its Subsidiaries or agreement for a
line of credit;
(k)license, franchise, distributorship or
other agreement (other than with respect to packaged computer
software), including those which relate in whole or in part to
any software, technical assistance or other know-how or other
Intellectual Property Right used in the prior 24 months;
(l)commitment or agreement for any capital
expenditure or leasehold improvement in excess of $100,000; or
(m)material contract, agreement or
commitment not otherwise disclosed herein.
True and complete copies of such Commitments have been delivered
to Buyer prior to the date hereof to the extent in the control of
Seller or Cleo (and, where otherwise noted in the Disclosure
Letter, shall use commercially reasonable efforts to deliver to
Buyer prior to the Closing) and each Commitment is a valid and
binding obligation in full force and effect subject to exceptions
which individually or in the aggregate will not have a Material
Adverse Effect. Except as disclosed on the Disclosure Letter,
Seller is not in default under any of the Commitments, and, to
Seller's knowledge, no third party is in default under any of the
Commitments, which default would individually or in the aggregate
have a Material Adverse Effect. Section 5.7 of the Disclosure
Letter identifies each Commitment which requires action on behalf
of a third party to give Cleo and its Subsidiaries all rights
under such Commitment following the consummation of the
transactions contemplated by this Agreement.
5.18 Labor Relations. (a) Except as set forth
in Section 5.18 of the Disclosure Letter:
(i) neither Cleo nor any of its
Subsidiaries is a party to any collective bargaining
agreement;
(ii) there is no unfair labor practice
complaint against Cleo or any of its Subsidiaries
pending before the National Labor Relations Board or
any other Government Body;
(iii) there is no labor strike,
dispute, slowdown or stoppage actually pending or, to
Seller's knowledge, threatened, against Cleo or any of
its Subsidiaries;
(iv) to Seller's knowledge, no
representation question exists respecting the employees
of Cleo or any of its Subsidiaries;
(v) neither Cleo nor any of its
Subsidiaries has experienced any strike, work stoppage
or other significant labor difficulty in the past five
years; and
(vi) no collective bargaining
agreement relating to employees of Cleo or any of its
Subsidiaries is currently being negotiated.
(b)Cleo and each of its Subsidiaries is in
compliance with all applicable laws respecting employment and
employment practices, terms and conditions of employment and
wages and hours except for any such violations which individually
or in the aggregate would not have a Material Adverse Effect, and
is not engaged in any unfair labor practice. There are no
outstanding claims against Cleo or its Subsidiaries (whether
under federal, state, local or foreign law, under any employment
agreement or policy, or otherwise) asserted by or on behalf of
any present or former employee or job applicant of Cleo or its
Subsidiaries on account of or for (i) overtime pay, other than
overtime pay for work done in the current payroll period, (ii)
wages or salary for any period other than the current payroll
period, (iii) any amount of vacation pay or pay in lieu of
vacation time off, other than vacation time off or pay in lieu
thereof earned in or in respect of the current fiscal year, (iv)
any amount of severance pay or similar benefits, (v) unemployment
insurance benefits, (vi) workers' compensation or disability
benefits, (vii) any violation of any statute, ordinance, order,
rule or regulation relating to plant closings, employment
terminations or layoffs, including but not limited to The Workers
Adjustment and Retraining Act ("WARN"), (viii) any violation of
any statute, ordinance, order, rule or regulations relating to
employee "whistleblower" or "right-to-know" rights and
protection, (ix) any violation of any statute, ordinance, order,
rule or regulations relating to the employment obligations of
federal contractors or subcontractors or (x) any violation of any
statute, ordinance, order, rule or regulation relating to minimum
wages or maximum hours of work. Seller is not aware of any such
claims which have not been asserted which, if asserted and
decided adversely, individually or in the aggregate, would have a
Material Adverse Effect. Except as set forth in Section 5.18 of
the Disclosure Letter, no Person (including any Governmental
Body) has asserted or, to Seller's or Cleo's knowledge,
threatened any claims against Cleo or its Subsidiaries under or
arising out of any statute, ordinance, order, rule or regulation
relating to discrimination or occupational safety in employment
or employment practices.
5.19 Employee Benefit Plans.
(a) Except as set forth in Schedule 5.19 of
the Disclosure Letter (the "Designated Plans"), neither Cleo nor
its Subsidiaries, nor Seller on behalf of Cleo or its
Subsidiaries, sponsors or maintains and has not sponsored nor
maintained any plan, fund, program, policy, arrangement, contract
or commitment, whether or not qualified for federal income tax
purposes, whether or not funded, whether formal or informal, and
whether for the benefit of a single individual or more than one
individual, which is in the nature of (a) an employee pension
benefit plan (as defined in section 3(2) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")),
(b) an employee welfare benefit plan (as defined in section 3(1)
of ERISA), (c) an incentive current or deferred compensation, or
other benefit or compensation arrangement for employees, former
employees, their dependents and/or their beneficiaries, or (d) an
arrangement that could be characterized as providing for
additional compensation, compensation associated with a change of
control, severance benefits, perquisites, or fringe benefits.
(b)Except as specifically set forth on
Schedule 5.19 of the Disclosure Letter, neither Cleo nor its
Subsidiaries, nor Seller on behalf of Cleo or its Subsidiaries,
sponsors or maintains, and is not a contributing employer or
otherwise a party to, or has any obligation or liability under or
with respect to, and has never maintained or participated in, or
been obligated to contribute to any defined benefit plan (as
defined in section 3(35) of ERISA) or multiemployer plan (as
defined in section 3(37) of ERISA). Neither the Seller, Cleo or
its Subsidiaries nor any entity other than Cleo or its
Subsidiaries has taken or failed to take any action, or permitted
any action which could cause any liability of Cleo or its
Subsidiaries to the Pension Benefit Guaranty Corporation
("PBGC"), to any such multiemployer plan (or to any participant,
beneficiary, trustee or fiduciary thereof), presently or
heretofore sponsored or maintained by Cleo or its Subsidiaries or
any entity other than Cleo or its Subsidiaries, including within
the concept of "entity other than Cleo or its Subsidiaries,"
Seller, any affiliate of Seller, any predecessor of Cleo or its
Subsidiaries, any former employer of any present or former
employees of Cleo or its Subsidiaries, or any "Controlled
Company." A "Controlled Company" is any enterprise which, with
Seller, forms or formed at any time since September 2, 1974 a
controlled group of corporations within the meaning of Section
414(b) of the Code, a group of trades or businesses under common
control within the meaning of Section 414(c) of the Code, or any
affiliated service group within the meaning of Section 414(m) of
the Code. Neither the Seller, Cleo and its Subsidiaries nor any
entity other than Cleo or its Subsidiaries has incurred or
expects to incur any withdrawal liability with respect to a
multiemployer plan under Subtitle E of Title IV of ERISA.
(c) Each Designated Plan and related trust
intended to meet the qualification requirements under Section
401(a), 401(k) and 501(a) of the Code has received a favorable
determination from the Internal Revenue Service ("IRS") which has
not been revoked, and each such Plan and related trust has been
amended to conform to the Code and pension law changes, and has
been resubmitted to the IRS, since the date of its most recent
IRS determination letter. Nothing has occurred since the date of
the last IRS determination letter which could result in the
imposition of excise taxes or income taxes on unrelated business
income under the Code or ERISA with respect to any such
Designated Plan or trust. Each terminated Designated Plan that
was intended to be qualified received a favorable letter of
determination from the IRS to the effect that the termination of
the Plan did not adversely affect the qualified status of such
Plan and the tax-exempt status of the corresponding funding
vehicles. As of the Closing Date, all amendments and actions
required to bring each Designated Plan into conformity in all
respects with all applicable laws have been made or taken to the
extent that such amendments or actions are required by law to be
made or taken in order to obtain a favorable determination letter
upon termination of the Designated Plan, if applicable. Neither
Seller nor Cleo or its Subsidiaries is presently or potentially
liable for failure to make contributions to any such Designated
Plan or its fiduciary conduct in connection with such Designated
Plan.
(d) With respect to any Designated Plans,
Seller has delivered to Buyer true and complete copies of (a) all
documents governing such Designated Plan, and all amendments
thereto, (b) all reports relating to such Designated Plan filed
by Seller or any of its subsidiaries or officials of any
Designated Plan with the United States Department of Labor, the
Internal Revenue Service, or any other federal or state
regulatory agency within the past five years, (c) all summary
plan descriptions, notices and other reporting and disclosure
material furnished to participants in any such Designated Plans,
(d) all actuarial, accounting and financial reports prepared with
respect to any of such Designated Plans within the past five
years, (e) all currently effective Internal Revenue Service
ruling or determination letters on any of such Designated Plans
and (f) to the extent such Designated Plans are unwritten, brief
summaries of the terms of such Designated Plans. Each financial
or other report delivered to Buyer pursuant hereto is accurate in
all material respects, and there have been no adverse changes in
the financial status of any Designated Plan since the date of the
most recent report provided with respect thereto.
(e) Seller, Cleo and its Subsidiaries have
operated, and have caused its appointees and nominees to operate,
each Designated Plan in a manner which is in compliance with the
terms thereof and with all applicable law, regulations and
administrative agency rulings and requirements applicable
thereto, except for any such violations which individually or in
the aggregate would not have a Material Adverse Effect. Each
employee, former employee and every dependent of the foregoing
entitled to continuation of benefit coverage under any employee
welfare benefit plan (within the meaning of 3(1) of ERISA)
sponsored by Seller, Cleo or any of its Subsidiaries has been
accorded all the rights to which such person is entitled as a
matter of law or regulation.
(f) Full payment has been made of all
amounts which Seller, Cleo or its Subsidiaries are required,
under applicable law or under any Designated Plan or any
agreement related to any Designated Plan to which Cleo or any of
its Subsidiaries are a party, to have paid as contributions
thereto as of the last day of the most recent fiscal year of each
Designated Plan ended prior to the date hereof. Except as
specifically set forth in Section 5.19 of the Disclosure Letter,
under each pension plan (within the meaning of Section 3(2) of
ERISA), as of the last day of the most recent plan year ended
prior to the date hereof, the actuarially determined present
value of all "benefit liabilities," within the meaning of Section
4001(a)(16) of ERISA (as determined on the basis of actuarial
assumptions contained in the plan's most recent actuarial
valuation), did not exceed the then current value of assets of
such plan, and there has been no change in the financial
condition of such plan since the last day of the most recent plan
year. Cleo has made adequate provision in the Balance Sheet for
employee benefits liability in accordance with GAAP and will make
adequate provision in the Closing Date Statement of Net Assets
for employee benefits liability arising prior to the Closing
(except to the extent such benefits will be paid by Seller).
Benefits under all Designated Plans are as represented and have
not been increased subsequent to the date of such documents.
(g)There does not exist any accumulated
funding deficiency within the meaning of Section 412 of the Code
or Section 302 of ERISA nor has there been issued a waiver of the
minimum funding standards imposed by the Code with respect to any
Designated Plan, nor are there any excise taxes due or hereafter
to become due under Section 4971 of the Code with respect to the
funding of any such Plan for any plan year or other fiscal period
prior to the date hereof. Neither Seller, Cleo nor any
Controlled Company has provided, or is required to provide,
security to any pension plan (within the meaning of 3(2) of
ERISA) of Seller, Cleo or any Controlled Company pursuant to
Section 401(a)(29) of the Code.
(h) With respect to each pension plan
(within the meaning of Section 3(2) of ERISA) that is subject to
the provisions of Title IV of ERISA, all of the following are
true:
(i) Except as specifically set forth
in Section 5.19 of the Disclosure Letter, there has not
occurred any "reportable event" within the meaning of
Section 4043 of ERISA or the regulations thereunder for
which the 30-day reporting requirement has not been
waived.
(ii) There exists no ground upon which
the PBGC would require termination of such plan or
appointment of itself or its nominee as trustee.
(iii) All PBGC premiums for all plan
years ended prior to Closing, to the extent due and
payable, have been paid in full, and all premiums
required to be paid as of Closing for the current plan
year, have been paid in full, including late fees,
interest and penalties, if and to the extent
applicable.
(iv) No condition or event currently
exists or currently is expected to occur that could
result, directly or indirectly, in any liability of
Cleo or any of its Subsidiaries under Title IV of
ERISA, whether to the PBGC or otherwise (except for
required premium payments under Title IV of ERISA,
which payments have been or will be made when due) on
account of the termination of any such plan.
(v) Except as specifically set forth in
Section 5.19 of the Disclosure Letter, if any such plan
were to be terminated as of the date hereof or as of
the Closing, neither Cleo nor any of its Subsidiaries
would incur, directly or indirectly, any liability
under Title IV of ERISA.
(i) Neither Seller, Cleo nor any Controlled
Company has participated, or will participate prior to or after
the Closing, in any conduct that could result in the imposition
upon Seller or any of its subsidiaries or of any excise tax under
Section 4971 through 4980B of the Code or civil liability under
Section 502(i) of ERISA.
(j) There is no action, claim or demand of
any kind (other than routine claims for benefits) that has been
brought or threatened against any Designated Plan, or the assets
thereof, against any fiduciary of any such Designated Plan, or
against Seller, Cleo or any of its Subsidiaries with respect to
any Designated Plan, and neither Seller, Cleo nor any of its
Subsidiaries has knowledge of any investigation or administrative
review that could result in the imposition on Cleo or any of its
Subsidiaries of any penalty or assessment in connection with any
Designated Plan.
(k) No circumstances have occurred by reason
of which Cleo or any of its Subsidiaries may be liable for:
(i) the appointment of any person or
entity as a fiduciary with respect to any Designated
Plan where such person was legally disqualified from
serving in such capacity;
(ii) the failure to monitor the
performance of the fiduciaries with respect to any
Designated Plan or to timely replace any such fiduciary
whose performance failed to meet the standards imposed
by ERISA with respect to fiduciary duties; or
(iii) any action taken by a fiduciary
with respect to any Designated Plan upon the direction
of, or with the acquiescence of, Seller, Cleo or its
Subsidiaries.
(l) Except as specifically indicated on
Section 5.19 of the Disclosure Letter, no Designated Plan
provides any health, life or other welfare coverage to employees
of Cleo or any of its Subsidiaries beyond termination of their
employment with Cleo or any of its Subsidiaries by reason of
retirement or otherwise, other than coverage as may be required
under Section 4980B of the Code or Part 6 of ERISA, or under the
continuation of coverage provisions of the laws of any state or
locality.
(m)No Designated Plan is funded by,
associated with, or related to a "voluntary employee's
beneficiary association" within the meaning of Section 501(c)(9)
of the Code. No Designated Plan is a nonconforming group health
plan as defined in Section 5000 of the Code. The Seller, Cleo
and its Subsidiaries have complied with the current and former
medicare secondary payer provisions with respect to any of the
Designated Plans subject thereto.
(n) Cleo and its Subsidiaries have filed or
caused to be filed on a timely basis all returns, reports
(including Form 5500), statements, notices, declarations, and
other documents required by any federal, state, local or foreign
governmental agency, (including without limitation, the Internal
Revenue Service, the Department of Labor, the PBGC and the
Securities and Exchange Commission) with respect to each
Designated Plan sponsored by or maintained by Cleo or its
Subsidiaries or with which Cleo or its Subsidiaries has or had
any filing obligation. Seller has delivered or caused to be
delivered to every participant, beneficiary and every other party
entitled to such material all plan descriptions, returns,
reports, schedules, notices, statements and similar materials,
including without limitation, summary Plan descriptions and
reports as are required under Title I of ERISA and/or the Code.
(o)The consummation of the transactions
contemplated by this Agreement will not, other than any payment
made pursuant to Code Section 401(k)(10) under any 401(k) Plan
and other than as specifically set forth in Section 5.19 of the
Disclosure Letter, accelerate the time of payment or vesting, or
increase any compensation due to any current employee or former
employee of Cleo or its Subsidiaries.
(p)Neither Seller nor Cleo or its
Subsidiaries have taken any action which would commit Buyer, Cleo
or its Subsidiaries to establish or continue any plan, fund or
program providing any employee benefits of any kind whatsoever
for any present or former employee of Cleo or its Subsidiaries,
including without limitation any plan or program which provides
post-retirement benefits, nor has Seller, Cleo or its
Subsidiaries taken any action prior to the Closing which would
prevent Buyer, Cleo or its Subsidiaries from changing the
benefits provided by any Designated Plan. Except as expressly
provided in this Agreement, nothing in this Agreement or in the
consummation of this transaction will require Buyer, Cleo or its
Subsidiaries to assume any obligation of Seller under any
Designated Plan. Except as set forth in Schedule 5.19 of the
Disclosure Letter and except with regard to benefits covered by a
collective bargaining agreement, Buyer has no obligation to
continue any Designated Plan as of the Closing and may, in its
sole and absolute discretion, terminate, modify or discontinue
any such Designated Plan, including without limitation any plan
or program which provides post-retirement benefits, in whole or
in part, without penalty and without prior notice to Seller, any
participant, beneficiary or present or former employee of Cleo
and its Subsidiaries.
(q)All Designated Plans covering foreign
employees comply in all respects with applicable local law.
Neither Seller nor Cleo and its Subsidiaries has any unfunded
liabilities with respect to any pension plan (within the meaning
of 3(2) of ERISA) which covers foreign employees.
(r)The consummation of the transaction
contemplated by this Agreement will not result (either alone or
in conjunction with any other event) in (i) the payment or series
of payments by Cleo or its Subsidiaries to any person of an
"excess parachute payment" within the meaning of Section 280G of
the Code, or (ii) payments to an employee or former employee of
Cleo or its Subsidiaries which will be triggered as a result of
the change of control of Cleo contemplated by this Agreement
(other than payments due in the ordinary course without regard to
such change of control).
5.20 Compliance with Law. The operations of Cleo
and its Subsidiaries are being conducted in accordance with all
applicable laws and regulations of all Governmental Bodies having
jurisdiction over them except for any such violations which
individually or in the aggregate would not have a Material
Adverse Effect. Without limiting the generality of the
foregoing, neither Cleo nor any of its Subsidiaries, nor to
Seller's knowledge, any person with apparent or actual authority
to act on behalf of Cleo or any of its Subsidiaries, has
unlawfully offered, paid or agreed to pay, directly or
indirectly, any money or anything of value to or for the benefit
of any individual who is or was an official or employee or
candidate for office of the government of any country or
political subdivision, agency or instrumentality thereof or any
employee or agent of any customer or supplier of Cleo or its
Subsidiaries in violation of law. Since January 1, 1992, neither
Cleo nor any of its Subsidiaries has received any notification of
any asserted present or past failure by it to comply with any
applicable laws or regulations. Cleo and its Subsidiaries have
all licenses, permits, orders or approvals from the Governmental
Bodies required for the conduct of their businesses, and are not
in material violation of any such licenses, permits, orders and
approvals. All such licenses, permits, orders and approvals are
in full force and effect, and no suspension or cancellation of
any thereof has been threatened.
5.21 Environmental Matters.
(a)Except as set forth in Section 5.21 of
the Disclosure Letter, the operations of Cleo and its
Subsidiaries are being conducted in compliance with all
Environmental Laws (as hereinafter defined) except for any such
violations which individually or in the aggregate would not have
a Material Adverse Effect. For purposes of this Agreement, the
term "Environmental Laws" means any and all federal, state,
provincial, local laws and foreign laws and legal requirements
relating to health and safety and pollution or protection of the
environment, including laws, regulations and other legal
requirements relating to emissions, discharges, releases or
threatened releases of pollutants, contaminants, toxic or
Hazardous Substances (as hereinafter defined) into the
environment (including without limitation ambient air, surface
water, groundwater or land), or otherwise relating to the
processing, use, treatment, storage, disposal or transport of
pollutants, contaminants, or toxic or hazardous substances or
wastes. For purposes of this Agreement, the term "Hazardous
Substance" means (A) any gasoline, petroleum products, or
polychlorinated biphenyls ("PCBs"), (B) any substance, waste or
material defined as hazardous, radioactive, extremely hazardous,
toxic or dangerous, or as a pollutant or contaminant, under any
Environmental Law, and (C) any asbestos, asbestos-containing
substances or urea formaldehyde insulation.
(b)Cleo and its Subsidiaries hold all
permits, licenses, registrations and other authorizations (the
"Environmental Permits") necessary to conduct the Business under
the Environmental Laws, and all such Environmental Permits are
currently in effect. The Environmental Permits are listed in
Section 5.21 of the Disclosure Letter, and any that will cease to
permit Cleo to continue to conduct legally its current operations
as a result of the transactions contemplated by this Agreement
are so designated. Cleo and its Subsidiaries are in material
compliance with all terms and conditions of such Environmental
Permits and have not materially violated any of same. Neither
Seller, Cleo or its Subsidiaries have received any notice of any
proposal to amend, revoke, reissue or replace any Environmental
Permit, nor have any events occurred (other than a change in
applicable law) that could form a reasonable basis for any such
action. Cleo and its Subsidiaries have filed timely and complete
applications for renewal of any such Environmental Permits that
are required prior to the closing.
(c)No action, suit, proceeding, hearing,
investigation known to Seller or Cleo, charge, complaint, claim,
demand, penalty, or notice alleging any violation or failure to
comply with any Environmental Law or Environmental Permit by Cleo
and its Subsidiaries has been filed or commenced or, to Seller's
knowledge, is threatened or pending. Except as may be disclosed
in Section 5.21 of the Disclosure Letter, Cleo and its
Subsidiaries are not party to any agreement, consent order,
consent decree or adjudication of any type with any person,
including any government agency, that is authorized under or
makes reference to any Environmental Law.
(d)There has not been any spill, release or
unauthorized discharge of any Hazardous Substance in connection
with the business of Cleo or any of its Subsidiaries or at any of
the properties or facilities used by Cleo or its Subsidiaries,
where such spill, release or discharge was required to be
reported under the Environmental Law as in effect at the time of
such release or currently requires abatement or correction under
any Environmental Law as in effect on the date hereof. Neither
Cleo nor its Subsidiaries have permitted any Hazardous Substances
to be disposed of, treated or stored on any other property used
by Cleo or its Subsidiaries except in accordance with applicable
Environmental Law.
(e)There has not been and is not any
Environmental Condition (as hereinafter defined) at or relating
to any property at which wastes have been deposited or disposed
by or at the behest or direction of Cleo or its Subsidiaries or
any such predecessor, nor has Seller, Cleo or its Subsidiaries
received written notice of any such Environmental Condition. For
purposes of this Agreement the term "Environmental Condition"
means any condition or circumstance, that (i) requires abatement
or remediation under any Environmental Law currently in effect,
(ii) gives rise to any civil or criminal liability under any
Environmental Law currently in effect, or (iii) constitutes a
public or private nuisance based on the presence of Hazardous
Substances, under laws applicable on the Closing Date.
(f) Seller has provided to Buyer a copy of
each environmental audit or most recent health and safety
facility investigation conducted by Seller, Cleo or its
Subsidiaries or their representatives relating to the properties
and facilities used by Cleo and its Subsidiaries.
(g)There are no environmental liens on any
properties owned or leased by Cleo and its Subsidiaries and no
government actions which could subject the properties to such
liens have been taken, or, to Seller's knowledge, are pending or
threatened.
(h)Neither Cleo nor any of its Subsidiaries
is required to place any notice or restriction relating to the
presence of Hazardous Substances in the deed to any property
subject to this agreement and no property now owned by Cleo or
its Subsidiaries subject to this agreement has such a notice or
restriction in its deed.
(i)No consent, approval, or authorization
of, or registration or filing with any person, including any
governmental agency is required in connection with the execution
of this Agreement, or the consummation of the transactions
contemplated hereby.
5.22 Brokers or Finders. Seller has not employed
any broker or finder or incurred any liability for any brokerage
or finder's fees or commissions or similar payments in connection
with the sale of the Shares to Buyer, except for the fees of
Seller to CS First Boston as its financial adviser, which will be
paid by Seller.
5.23 Borrowing and Guarantees. Except for
advances from Seller or as set forth in the Disclosure Letter,
Cleo and its Subsidiaries (a) do not have any indebtedness for
borrowed money, (b) are not lending or committed to lend any
money (except for advances to employees in the ordinary course of
business), and (c) are not guarantors or sureties with respect to
the obligations of any Person.
5.24 Intentionally Omitted.
5.25 Intentionally Omitted.
5.26 Intentionally Omitted.
5.27 Product Warranties. Section 5.27 of the
Disclosure Letter sets forth all express product warranties made
by Cleo and its Subsidiaries which are currently in effect.
5.28 Relations with Customers and Suppliers.
Except as disclosed on the Disclosure Letter, since January 1,
1995, no customer or supplier of Cleo or its Subsidiaries has
indicated that it intends to cease its relationship with Cleo or
its Subsidiaries either before, after or because of the
consummation of the transactions contemplated hereby.
5.29 Transactions with Affiliates. Except as
disclosed in Section 5.29 of the Disclosure Letter, neither
Seller, nor any affiliate of Seller, nor any director or officer
of Seller or any member of his or her immediate family, owns or
has a controlling ownership interest in any corporation or other
entity that is a party to any Commitment or material business
arrangement or relationship with respect to the business of Cleo
and its Subsidiaries. All disclosed transactions between Seller
or an affiliate of Seller and Cleo or its Subsidiaries have been
on terms and conditions not materially less favorable to Cleo
than similar transactions between Cleo and non-affiliated parties
and are properly recorded on the books and records of Cleo and
its Subsidiaries.
5.30 Books of Account. The books, records and
accounts of Cleo and its Subsidiaries accurately and fairly
reflect in reasonable detail in accordance with GAAP the
transactions and the assets and liabilities of Cleo and its
Subsidiaries. Neither Cleo nor any of its Subsidiaries has
engaged in any transaction, maintained any bank account or used
any funds except for transactions, bank accounts and funds which
have been and are reflected in the normally maintained books and
records of the business.
5.31 Full Disclosure. There are no materially
misleading misstatements in any of the representations and
warranties made by Seller in this Agreement, the Disclosure
Letter, the Exhibits to this Agreement or in any of the
certificates delivered by Seller or its affiliates pursuant to
this Agreement and Seller has not omitted to state any fact
necessary to make statements made herein or therein not
materially misleading.
6. Representations and Warranties of Buyer.
Buyer represents and warrants to Seller as
follows:
6.1Organization of Buyer; Authorization. Buyer
is a corporation duly organized, validly existing and in good
standing under the laws of Delaware, with full corporate power
and authority to execute and deliver this Agreement and the Note
and to perform its obligations hereunder and under the Note. The
execution, delivery and performance of this Agreement and the
Note have been duly authorized by all necessary corporate action
of Buyer and this Agreement constitutes, and the Note when issued
will constitute, a valid and binding obligation of Buyer,
enforceable against it in accordance with its terms.
6.2Conflict as to Buyer. Neither the execution
and delivery of this Agreement or the Note nor the performance of
Buyer's obligations hereunder or thereunder will (a) violate any
provision of the certificate of incorporation or by-laws of
Buyer, (b) violate, be in conflict with, or constitute a default
(or an event which, with notice of lapse of time or both, would
constitute a default) under any agreement or commitment to which
Buyer is party or (c) violate any statute or law or any judgment,
decree, order, regulation or rule of any court or other
Governmental Body applicable to Buyer.
6.3Brokers or Finders. Buyer has not employed
any broker or finder or incurred any liability for any brokerage
or finder's fees or commissions or similar payments in connection
with any of the transactions contemplated hereby, except for the
fees of Buyer to Merrill Lynch & Co. as its financial adviser,
which will be paid by Buyer.
6.4Consents and Approvals of Governmental
Authorities. Except for requirements of the HSR Act, no consent,
approval or authorization of, or declaration, filing or
registration with, any Governmental Body is required to be made
or obtained by Buyer in connection with the execution, delivery
and performance of this Agreement and the Note by Buyer or the
consummation of the purchase of the Shares by Buyer.
6.5Other Consents. No consent of any Person is
required to be obtained by Buyer to the execution, delivery and
performance of this Agreement and the Note by Buyer or the
consummation of the purchase of the Shares by Buyer.
6.6Purchase for Investment. Buyer is purchasing
the Shares solely for its own account for the purpose of
investment and not with a view to, or for sale in connection
with, any distribution of any portion thereof in violation of any
applicable securities law.
7. Certain Agreements.
7.1Access. Between the date of this Agreement
and the Closing Date, Seller shall, and shall cause Cleo and its
Subsidiaries to, (a) give Buyer and its authorized
representatives reasonable access to all plants, offices,
warehouse and other facilities and properties of Cleo and its
Subsidiaries and to the books and records of Cleo and its
Subsidiaries, (b) permit Buyer to make inspections thereof, and
(c) cause its officers and its advisors to furnish Buyer with
such financial and operating data and other information with
respect to the business and properties of Cleo and its
Subsidiaries and to discuss with Buyer and its authorized
representatives the affairs of Cleo and its Subsidiaries, all as
Buyer may from time to time reasonably request, subject in each
case to the Confidentiality Agreement dated May 9, 1995 between
Buyer and Seller.
7.2HSR Act. Seller and Buyer shall as promptly
as possible after the date hereof file a Notification and Report
Form for Certain Mergers and Acquisitions with respect to the
acquisition of the Shares by Buyer with the Antitrust Division of
the Department of Justice and the Bureau of Competition of the
Federal Trade Commission pursuant to the HSR Act. Seller and
Buyer shall each give notice to the other upon receiving any
request for information pursuant to the HSR Act (providing a copy
of the request received) and use its best efforts to file
promptly the information requested.
7.3Other Regulatory Matters. Seller and Buyer
shall, and Seller shall cause Cleo and its Subsidiaries to, (a)
file with applicable regulatory authorities any applications and
related documents required to be filed by them in order to
consummate the contemplated transaction and (b) cooperate with
each other as they may reasonably request in connection with the
foregoing.
7.4Exclusivity. From the date hereof until the
earlier of the Closing or the termination of this Agreement,
Seller shall not, and shall not permit its agents to, directly or
indirectly, solicit or negotiate or enter into any agreement with
any other Person, or provide any nonpublic information to any
other Person, with respect to or in furtherance of any proposal
for a merger or business combination involving, or acquisition of
any interest in, or (except in the ordinary course of business)
sale of assets by, Cleo or its Subsidiaries, except for the
acquisition of the Shares by Buyer; provided, however, that
nothing herein shall prevent Seller from soliciting or
negotiating any agreement or providing nonpublic information in
connection with a possible sale of Seller, so long as any such
purchaser agrees to honor Seller's obligations under this
Agreement.
7.5Update Disclosure Letter. Between the date
hereof and the Closing Date, Seller will promptly disclose to
Buyer in writing any information set forth in the Disclosure
Letter which is no longer applicable and any information of the
nature of that set forth in the Disclosure Letter which arises
after the date hereof and which would have been required to be
included in the Disclosure Letter if such information had been
obtained on the date of delivery thereof, if such information
could reasonably be expected to have a Material Adverse Effect.
7.6Tax Matters.
(a)Tax Matters. Seller represents,
warrants, covenants, agrees and promises as follows:
(i) With respect to Cleo and each
current or former subsidiary of Cleo (Cleo and each
such other company referred to in this Section 7.6 as a
"Company"): (i) all reports, returns, statements
(including estimated reports, returns, or statements),
and other similar filings required to be filed on or
before the Closing Date by the Company (the "Tax
Returns") with respect to any Taxes (as defined below)
have been or will be timely filed with the appropriate
governmental agencies in all jurisdictions in which
such Tax Returns are required to be filed, and all such
Tax Returns correctly reflect the liability of the
Company for Taxes for the periods, properties, or
events covered thereby; (ii) all Taxes payable with
respect to the Tax Returns referred to in the preceding
clause, and all Taxes accruable or otherwise
attributable to events occurring prior to the Closing
Date, whether disputed or not, whether or not shown on
any Tax Return, and whether or not currently due or
payable, will have been or will be paid in full prior
to the Closing Date, or if and to the extent that Cleo
will be obligated to pay such Taxes, an adequate
accrual in accordance with generally accepted
accounting principles will be provided with respect
thereto on the Statement of Net Equity; (iii) except
as set forth in Section 7.6 of the Disclosure Letter,
the Company has no knowledge of any unassessed Tax
deficiencies or of any audits or investigations pending
or threatened against the Company with respect to any
Taxes; (iv) all Tax Returns of the Company for fiscal
years ending on or before December 31, 1991 have been
examined by the Internal Revenue Service, and any
assessments with respect to such returns have been
fully paid; (v) no claim has ever been made by any Tax
authority in a jurisdiction in which the Company does
not file Tax returns that it is or may be subject to
taxation by that jurisdiction; (vi) there are no liens
for Taxes upon any asset of the Company except for
liens for current Taxes not yet due; (vii) no issues
have been raised in any examination by any Tax
authority with respect to the Company which, by
application of similar principles, reasonably could be
expected to result in a proposed deficiency for any
other period not so examined; (viii) except as set
forth in the Disclosure Letter, the Company is not a
party to any Tax allocation or sharing agreement or
otherwise under any obligation to indemnify any person
with respect to any Taxes; and (ix) the Company has
timely made all deposits required by law to be made
with respect to employees' withholding and other
payroll, employment, or other withholding taxes,
including the portions of such taxes imposed upon the
Company.
For purposes of this Agreement, "Taxes" means any
taxes, duties, assessments, fees, levies, or similar governmental
charges, together with any interest, penalties, and additions to
tax, imposed by any taxing authority, wherever located (i.e.
whether federal, state, local, municipal, or foreign), including,
without limitation, all net income, gross income, gross receipts,
net receipts, sales, use, transfer, franchise, privilege,
profits, social security, disability, withholding, payroll,
unemployment, employment, excise, severance, property, windfall
profits, value added, ad valorem, occupation, or any other
similar governmental charge or imposition.
(ii) All material consolidated or
combined Tax Returns (except those described in
subparagraph (i) above) required to be filed by any
person through the date hereof that are required or
permitted to include the income, or reflect the
activities, operations and transactions, of Cleo or any
of its Subsidiaries for any taxable period have been
timely filed, and the income, activities, operations
and transactions of Cleo and Subsidiaries have been
properly included and reflected thereon. Seller shall
prepare and file, or cause to be prepared and filed,
all such consolidated or combined Tax Returns that are
required or permitted to include the income, or reflect
the activities, operations and transactions, of Cleo or
any Subsidiary, with respect to any taxable year ending
on or prior to the Closing Date, including, without
limitation, Seller's consolidated federal income tax
return for such taxable years. Seller will timely file
a consolidated federal income tax return for the
taxable year ended December 31, 1995, and such return
shall include and reflect the income, activities,
operations and transactions of Cleo for the taxable
period then ended, and Seller hereby expressly
covenants and agrees to file a consolidated federal
income tax return, and to include and reflect thereon
the income, activities, operations and transactions of
Cleo for the taxable period through the Closing Date.
All Tax Returns filed pursuant to this subparagraph
(ii) after the date hereof shall, in each case, to the
extent that such Tax Returns specifically relate to
Cleo or any of its Subsidiaries and do not generally
relate to matters affecting other members of Sellers'
consolidated group, be prepared and filed in a manner
consistent in all material respects (including
elections and accounting methods and conventions) with
the Tax Return most recently filed in the relevant
jurisdictions prior to the date hereto, except as
otherwise required by law or regulation or agreed to in
writing by Buyer. If any such Tax Return, to the
extent that it relates to Cleo or any Subsidiary and
not to Seller's consolidated group as a whole, shall
reflect any elections or the adoption of any new
accounting methods or conventions or other similar
items (except as required by law or regulation), the
reflection or adoption of any such items shall be
subject to the prior written approval of Buyer. Seller
has paid or will pay all Taxes that may now or
hereafter be due with respect to the taxable periods
covered by such consolidated or combined Tax Returns.
(iii) Except as shall be set forth in
the Disclosure Letter, neither Cleo nor any of its
Subsidiaries has agreed, or is required, to make any
adjustment under Section 481(a) of the Code by reason
of a change in accounting method or otherwise.
(iv) None of the Seller, Cleo or any
of its Subsidiaries or any predecessor or Affiliate of
the foregoing, at any time filed a consent under
Section 341(f)(1) of the Code, or agreed under Section
341(f)(3) of the Code, to have the provisions of
Section 341(f)(2) of the Code apply to any sale of its
stock.
(v) Except as set forth in the
Disclosure Letter, there is no (nor has there been any
request for an) agreement, waiver or consent providing
for an extension of time with respect to the assessment
of any Taxes attributable to Cleo, its Subsidiaries, or
their assets or operations and no power of attorney
granted by Cleo or any of its Subsidiaries with respect
to any Tax matter is currently in force.
(vi) Except as set forth in the
Disclosure Letter, there is no action, suit,
proceeding, investigation, audit, claim, demand,
deficiency or additional assessment in progress,
pending or threatened against or with respect to any
Tax attributable to Cleo, its Subsidiaries or their
assets or operations.
(vii) Except as set forth in the
Disclosure Letter, all amounts required to be withheld
as of the Closing Date by Cleo or any Subsidiary for
Taxes or otherwise have been withheld and paid when due
to the appropriate agency or authority.
(viii) Except as set forth in the
Disclosure Letter, no property of Cleo is "tax-exempt
use property within the meaning of Section 168(h) of
the Code nor property that Buyer, Cleo and/or its
Subsidiaries will be required to treat as being owned
by another person pursuant to Section 168(f)(8) of the
Internal Revenue Code of 1954, as amended and in effect
immediately prior to the enactment of the Tax Reform
Act of 1986.
(ix) Except as set forth in the
Disclosure Letter, no foreign Subsidiary of Cleo is
engaged in a United States trade or business or subject
to the Branch Profits Tax of Section 884 of the Code.
Neither Cleo nor any of its Subsidiaries is a party to,
is bound by, or has any obligation under any Tax
Agreement or (i) any agreement relating to a foreign
sales corporation within the meaning of Section 922(a)
of the Code, or (ii) any cost sharing agreement with
respect to the sharing of the costs and risks of
developing intangible property. Cleo and/or its
Subsidiaries are not and have never been subject to
section 999 of the Code. None of the Cleo Subsidiaries
(a) has made an election under Section 897(i) of the
Code, (b) is or has ever been a passive foreign
investment company as defined in Section 1296(a) of the
Code, or (c) is a foreign sales corporation as defined
in Section 922 of the Code.
(x) Except as set forth in the
Disclosure Letter, there is no contract, agreement,
plan or arrangement, including but not limited to the
provisions of this Agreement, covering any employee or
former employee of Cleo or its Subsidiaries that,
individually or collectively, could give rise to the
payment of any amount that would not be deductible
pursuant to Section 280G or 162 of the Code (assuming
no employees are terminated at or immediately following
the Closing).
(b) (i) Except as otherwise provided in
this Section 7.6(b)(i), Section 7.6(c) and Section
9.5(b) (except with respect to income taxes), Seller
shall be liable and responsible for, and shall
indemnify and hold Buyer, Cleo, and its Subsidiaries,
harmless from and against, (A) any and all Taxes of,
due and payable by, or imposed with respect to, Cleo,
its Subsidiaries, any predecessor thereof, and/or their
assets or operations, for any and all Taxable periods
ending on or prior to the Closing Date (whether or not
such Taxes have become due and payable); (B) any and
all Taxes (irrespective of the period to which such
Taxes relate or are attributable) resulting from Cleo
and/or its Subsidiaries (or any predecessor thereof)
having been (or ceasing to be) (x) affiliated with one
or more of the Seller, its Affiliates, or any
predecessor thereof or (y) included or required to be
included in any consolidated, combined or unitary
return for any period (or portion thereof) on or prior
to the Closing Date; (C) any and all Taxes
(irrespective of the period to which such Taxes relate
or are attributable) of, due and payable by, or imposed
with respect to Seller, or any past or present parent,
Subsidiary or other Affiliate of Seller (or any
predecessor thereof) other than Cleo and its
Subsidiaries; (D) any and all Taxes attributable to a
breach of this Section 7.6; (E) any and all Taxes of,
due and payable by, or imposed with respect to Cleo,
its Subsidiaries, or any predecessor thereof, and/or
their assets or operations arising out of any of the
Contemplated Transactions (as defined below); and (F)
any liability or obligation under any Tax Agreement or
the termination thereof.
(ii) Buyer shall be liable and
responsible for, and shall indemnify and hold Seller
and its Affiliates harmless from and against any and
all Taxes of, due and payable by, or imposed with
regard to Cleo, its Subsidiaries, and/or their assets
or operations for any and all taxable periods (or the
portion thereof) beginning the day after the Closing
Date.
(iii) For purposes of Section 7.6(b),
Contemplated Transactions means any transaction or
event contemplated by this Agreement that occurs at or
prior to the Closing.
(iv) Any Taxes with respect to the
business, activities and assets of Cleo or any of its
Subsidiaries that relate to a Tax period beginning on
or before the Closing Date and ending after the Closing
Date shall be apportioned between Seller and Buyer, in
the case of real and personal property Taxes, on a per
diem basis and, in the case of other Taxes, as
determined from the books and records of Cleo and its
Subsidiaries consistent with the Code and regulations
thereunder and other applicable law, based on the
actual operations of Cleo or any such Subsidiary during
the portion of such period ending on the Closing Date
and the portion of such period beginning at the
Closing. To the extent permitted by applicable law,
Seller shall elect or take such other procedural action
that is necessary or appropriate to treat a period that
would otherwise end after the Closing Date as ending on
Closing Date. Buyer shall cause Cleo and its
Subsidiaries to file any required separate
(nonconsolidated or noncombined) state, local and
foreign Tax Returns for any such Tax Period, and Buyer
shall pay, or cause its Subsidiaries or Affiliates to
pay, all state, local or foreign Taxes (including
interest and penalties relating thereto) shown as due
on any such returns with respect to Cleo and its
Subsidiaries; provided, however, that the obligation of
Buyer to pay, or to cause its Subsidiaries or
Affiliates to pay, such Taxes is subject to the
obligation of Seller to pay Buyer for its share of any
such Taxes pursuant to the provisions of Section
7.6(b)(i) and this Section 7.6(b)(iv).
(v) Except as provided in Section
7.6(c) hereof, any refunds or credits of Taxes that
arise in, or are otherwise attributable to, a taxable
year or Tax period (including a period deemed to be a
tax period under Section 7.6(b)(iv) ending on or before
the Closing Date, shall be for the account of Seller.
Any refunds or credits of Taxes that arise in, or are
otherwise attributable to, a taxable year or Tax period
(including a period deemed,to be a Tax period under
Section 7.6(b)(iv) of Buyer, Cleo or any of its
Subsidiaries ending after the Closing, including,
without limitation, any refunds or credits that arise
from the carryback of any deduction, loss or credit
from a Tax period (including a period deemed to be a
Tax period under Section 7.6(b)(iv)) ending subsequent
to the Closing to a taxable year or Tax period
(including a period deemed to be a Tax period under
Section 7.6(b)(iv)) ending on or before the Closing,
shall be for the account of Buyer. Seller shall
cooperate in the filing of any carryback refund
request. Buyer shall cause Cleo and its Subsidiaries,
within five business days, to forward to, or to
reimburse, Seller for any refunds or credits due Seller
after receipt thereof, and Seller shall within five
business days forward to, or reimburse, Buyer for any
refunds or credits due Buyer after receipt thereof.
(c)The only Tax sharing or indemnity
arrangement among Cleo, its Subsidiaries, Seller or its
Affiliates, or any predecessor thereof ("Tax Agreements") is the
one described in Section 7.6(c) of the Disclosure Letter. Such
arrangement will be terminated at the Closing with respect to
Cleo and its Subsidiaries, and Cleo and its Subsidiaries shall
have no continuing liability or rights thereunder.
(d)The provisions of this Section 7.6 shall
survive the Closing until the expiration of the applicable
statute of limitations, including extensions thereof.
(e)The provisions of this Section 7.6 set
forth the exclusive and entire agreement of the parties relating
to (i) sharing liabilities for Taxes, (ii) division of refunds of
Taxes and (iii) filing Tax Returns. The limitations contained in
Section 9 of this Agreement shall not apply to the provisions of
this Section 7.6 as they relate to income Taxes. In addition,
this Section 7.6 shall not limit Seller's indemnification
obligations under Section 9 hereof.
(f)Subsequent to the date hereof, the
parties hereto shall provide each other, and Buyer shall cause
Cleo and its Subsidiaries to provide Seller, with such
cooperation and information relating to Cleo and its Subsidiaries
as a party reasonably may request in (i) filing any Tax Return,
amended Return, claim for refund, election or consent, (ii)
determining any liability for Taxes or a right to refund of
Taxes, (iii) conducting or defending any audit or other
proceedings in respect of Taxes or (iv) conducting due diligence.
Such cooperation and information shall include providing copies
of all relevant Tax Returns, together with accompanying schedules
and related work papers, documents relating to rulings or other
determinations by taxing authorities and records concerning the
ownership and tax basis of property which any party, Cleo, its
Subsidiaries or any of their affiliates or predecessors may
possess. Buyer shall make, and shall cause Cleo and its
Subsidiaries to make, and Seller shall make, its employees,
Accountants and other advisors available on a mutually convenient
basis to provide explanations of any documents or information
required to be provided hereunder. The parties shall retain, and
Buyer shall cause Cleo or its Subsidiaries to retain, all Tax
Returns, schedules and work papers, and all material records and
other documents relating thereto, until the expiration of the
statute of limitations (and to the extent notified by any party,
any extensions thereof) of the taxable years to which such
Returns and other documents relate and, unless such returns and
other documents are offered and delivered to Seller or Buyer, as
applicable, until the final determination of any Tax in respect
of such years. In addition, the parties shall comply, and Buyer
shall cause Cleo and its Subsidiaries to comply, with all
applicable governmental record retention agreements entered into
with any taxing authority with respect to Cleo or any of the
Subsidiaries. Seller and Buyer shall reimburse each other for
reasonable out-of-pocket expenses incurred in connection with
assisting each other under this Section 7.6(f) but not for any
portion of wages and salaries incurred by either party.
(g)Seller shall deliver to Buyer, on or
before the Closing Date, an affidavit of an officer of Seller,
sworn to under penalty of perjury, setting forth Seller's name,
address and federal tax identification number and stating that
Seller is not a "foreign person" within the meaning of Section
1445 of the Code. If, on or before the Closing Date, Buyer shall
not have received such affidavit in a form satisfactory to Buyer,
Buyer may withhold from the purchase price payable at Closing to
Seller pursuant hereto such sums as are required to be withheld
therefrom under Section 1445 of the Code.
(h)Seller and Buyer agree to make timely,
effective and irrevocable Section 338(h)(10) elections, as well
as any Section 338(h)(10) elections (or corresponding or similar
elections) for state or local purposes, and to file such
elections in accordance with applicable regulations. The
provision of this Agreement shall apply to any such elections
that Seller, Buyer or Cleo makes for state or local Tax purposes.
Unless otherwise required by relevant law, Seller shall be
responsible for preparing and filing all Section 338 forms in
accordance with the terms of this Agreement in accordance with
the valuation of assets to be agreed upon by Buyer and Seller as
soon as practicable following the Closing. Seller shall furnish
copies of the Section 338 forms to Buyer for review and execution
at least twenty-five (25) business days before the date such
Section 338 forms are required to be filed. Buyer shall execute
and deliver to Seller such documents or forms as Seller may
reasonably request to complete properly the Section 338 forms,
provided that such documents or forms have been provided
previously to Buyer for its review as described above. Buyer
will return such forms to Seller at least five (5) business days
before the date such Section 338 forms are required to be filed.
Seller shall file the Section 338 forms required to be filed by
it in order to effect the Section 338(h)(10) election. Buyer and
Seller agree that the deemed sale price of the assets will be
determined in accordance with Treasury Regulation Section
1.338(h)(10) - 1T(f), and that the parties will file the forms
required under Section 1060 of the Tax Code and the regulations
thereunder in a manner substantially consistent therewith.
Notwithstanding any other provision of this Agreement, any Tax
liabilities or benefits, including losses, deductions and
refunds, relating to the Section 338(h)(10) election shall be for
Seller's account and any liabilities, refunds or credits relating
to the Section 338(h)(10) election for any taxable period of
Seller ending on or before the Closing Date shall be paid by or
to Seller.
7.7Restrictive Covenants.
(a) Seller covenants that for the three year
period beginning the Closing Date, it will not, directly or
indirectly, own, manage, operate, join, control, finance or
participate in the ownership, management, operation, control or
financing of, or be connected as a partner, principal, agent,
representative, consultant or otherwise with or use or permit its
name to be used in connection with, any business or enterprise
engaged directly or indirectly within any portion of North
America in the business of manufacturing or distributing (i)
promotional or "off shelf" Christmas (A) gift wrap, (B) boxed
greeting cards, (C) ribbons, (D) bows, (E) gift tags, (F) gift
bags, and (G) gift boxes, (ii) boxed children's valentines, (iii)
Easter egg decorating kits or (iv) any products intended to be
sold as part of fund raising plans or programs not involving
sales at retail stores (any of the foregoing being referred to
herein as the "Business"). It is understood by the parties that
Sections 7.7(a) and 7.7(b) are not intended to limit Seller's
ability to (i) manufacture or distribute boxed children's
valentines marketed under the "Gibson" trademark to customers
that purchased such product from the Seller during the 1995
product cycle, (ii) manufacture or distribute boxed Christmas
greeting cards marketed under the "Gibson" trademark, or (iii)
engage in the retail business currently conducted by Paper
Factory. It is recognized by Buyer and Seller that the Business
is and is expected to continue to be conducted throughout North
America and that more narrow geographical limitations of any
nature on this non-competition covenant (and the non-solicitation
covenant set forth in Section 7.7(b)) are therefore not
appropriate. The foregoing restriction shall not be construed to
prohibit the ownership by Seller of not more than five percent
(5%) of any class of securities of any corporation which is
engaged in any of the foregoing businesses having a class of
securities registered pursuant to the Securities Exchange Act of
1934.
(b) Seller further covenants that for a
three year period beginning the Closing Date, it will not, either
directly or indirectly, (i) with respect to the activities
prohibited by Section 7.7(a), call on or solicit any Person who
or which within the past two years has been a customer with
respect to the Business or (ii) solicit the employment of any
person who is currently employed by Cleo or its Subsidiaries on a
full or part-time basis, unless such person prior to being
solicited by Seller was involuntarily discharged by Cleo or its
Subsidiaries.
(c) Seller recognizes and acknowledges that
by reason of its ownership of Cleo and its Subsidiaries it has
had access to confidential information relating to the Business
including, without limitation, information and knowledge
pertaining to products and services offered, innovations,
designs, ideas, plans, trade secrets, proprietary information,
advertising, distribution and sales methods and systems, sales
and profit figures, customer and client lists, and relationships
with dealers, distributors, wholesalers, customers, clients,
suppliers and others who have business dealings with the Business
("Confidential Information"). Seller acknowledges that such
Confidential Information is a valuable and unique asset and
covenants that it will not disclose any such Confidential
Information after the Closing Date to any person for any reason
whatsoever, unless such information (a) is in the public domain
through no wrongful act of Seller, (b) has been rightfully
received from a third party without restriction and without
breach of this Agreement, (c) is required by law to be disclosed
or is disclosed for purposes of defending claims related to Cleo
in a manner designed to protect the confidentiality of the
Confidential Information, (d) represents historical information
reasonably required by a prospective purchaser of Seller or (e)
represents information used by Seller in its business as
described in the second sentence of Section 7.7(a) prior to the
Closing Date.
(d) Seller acknowledges that the
restrictions contained in this Section 7.7 are reasonable and
necessary to protect the legitimate interests of Buyer, and that
any violation will result in irreparable injury to Buyer, Cleo
and its Subsidiaries.
Seller agrees that Buyer and Cleo shall be
entitled to preliminary and permanent injunctive relief, without
the necessity of proving actual damages, as well as an equitable
accounting of all earnings, profits and other benefits arising
from any violation of this Section 7.7, which rights shall be
cumulative and in addition to any other rights or remedies to
which Buyer may be entitled. In the event that any of the
provisions of this Section 7.7 should ever be adjudicated to
exceed the time, geographic, product or service, or other
limitations permitted by applicable law in any jurisdiction, then
such provisions shall be deemed reformed in such jurisdiction to
the maximum time, geographic, product or service, or other
limitations permitted by applicable law.
(e) The covenants set forth in this Section
7.7 shall be binding upon the successors and assigns of Seller,
including any acquiror of all or substantially all of the assets
or business of Seller. The foregoing restrictions shall not be
construed to prohibit any successor or assign of Seller or any
entity which acquires Seller subsequent to the Closing Date and
which has engaged in the Business prior to such acquisition from
continuing to engage in the Business or to prohibit any entity
which acquires Seller subsequent to the Closing Date and which
has not engaged in the Business prior to the Closing Date from
acquiring another entity which engages in the Business prior to
such acquisition if it does so without utilizing any facilities,
personnel or Confidential Information of Seller or Cleo and its
Subsidiaries.
7.8Third Party Consents and Estoppel Letters.
Seller shall use commercially reasonable efforts to obtain, prior
to the Closing Date, all consents or approvals required or
necessary to be obtained by Seller or Cleo or its Subsidiaries
for the execution, delivery or performance of this Agreement and
consummation of the transactions contemplated hereby or the
continuation by Cleo and its Subsidiaries after the Closing of
the business conducted by them immediately prior to the Closing
to the same extent as would have been applicable if the Closing
had not occurred, and the Seller shall use commercially
reasonable efforts following the Closing Date to obtain any
consents and approvals not obtained prior to the Closing Date.
Buyer shall assist Seller in obtaining such consents and
approvals by providing information reasonably requested and by
agreeing to guarantee any obligations of Cleo or Seller listed on
Exhibit 4.10 on substantially the same terms. A list of any such
unobtained consents and approvals shall be delivered to Buyer
prior to the Closing. If any such consent shall not be obtained
or if any attempted assignment of any Commitment from Seller to
Cleo would be ineffective or would impair Buyer's rights under
the Commitment in question so Buyer would not in effect acquire
all of the benefits of such Commitment, Seller shall cooperate
with Buyer in any other reasonable commercial arrangement
designed to provide such benefits to Buyer, and Buyer shall
perform under the applicable terms thereof. In addition, Seller
shall use commercially reasonable efforts (which shall not
require any payment by Seller or Cleo unless Buyer makes any such
payment) to obtain, prior to the Closing Date, estoppel letters
in a form reasonably satisfactory to Buyer from each landlord of
each leased property set forth in Section 5.10 of the Disclosure
Letter, except for sales offices.
7.9Intentionally Omitted.
7.10Use of Name. Seller agrees to allow Cleo to
use and sell any inventory or other items (excluding real
property and equipment which shall be relabeled as soon as
practicable following the Closing) included as assets on the
Balance Sheet which are imprinted with the "Gibson" name until
the earlier of (i) the third anniversary of the Closing Date or
(ii) all such assets have been disposed of in the ordinary course
of business.
7.11 Employee Benefit Matters. (a) Seller shall,
prior to Closing, amend the Gibson Greetings, Inc. Retirement
Income Plan ("Gibson Plan") to (i) provide that all participants
in the Retirement Income Plan who are employees of Cleo or its
subsidiaries on the Closing Date shall become 100% vested in
their accrued benefit under the Gibson Plan and (ii) provide that
as of the Closing Date, Cleo, Inc. is no longer an "Employer" as
that term is defined under section 1.12 of the Gibson Plan.
Prior to Closing, Seller shall make all contributions necessary
to fund such accelerated benefits. Seller shall provide such
participant notices and make such filings with all governmental
agencies as may be required by law, including without limitation
notices as required by section 204(h) of ERISA, that arise as a
result of the transaction contemplated in this Agreement (the
"Transaction") or any amendment made pursuant to this Section
7.11. On or after Closing, Seller shall provide Buyer with all
information necessary to complete all governmental filings that
Buyer is required to make as a result of the Transaction.
(b)Within 180 days after the Closing,
Seller shall amend (i) the Gibson Greetings, Inc. ERISA Make-Up
Plan, (ii) the Gibson Greetings, Inc. Supplemental Executive
Retirement Plan, (iii) the Gibson Greetings, Inc. Voluntary
Deferred Compensation Plan and (iv) the Gibson Greetings, Inc.
Deferred Compensation Plan each, to the extent applicable, to
provide that all participants in the plan who are employed by
Cleo or its subsidiaries on the Closing Date shall become 100%
vested in their accrued benefit or account balance, as
applicable, under the plan and that each such participant shall
be entitled to immediate payment of such benefit.
(c)Within 90 days after the Closing, Seller
shall file a request for a compliance statement with the Internal
Revenue Service ("IRS") pursuant to the Voluntary Compliance
Resolution Program on behalf of the Gibson Greetings, Inc.
Matched Paysaver Plan (the "Gibson 401(k) Plan") identifying the
operational defects listed in section 5.19(e) of the Disclosure
Letter. Employees of Cleo or its subsidiaries who continue to be
employed by Buyer as of the date of distribution will be given
the opportunity to elect a direct rollover of their cash
distributions from the Gibson 401(k) Plan to a qualified employee
benefit plan established by Buyer, if any. Seller will represent
and warrant to Buyer on the date of distribution from the Gibson
401(k) Plan that it has received a compliance statement from the
IRS with respect to the Gibson 401(k) Plan and that there exist
no known circumstances as of the date of distribution that would
result in the Gibson 401(k) Plan failing to satisfy the
requirements of Code section 401(a).
7.12 Further Assurances and Cooperation.
Following the Closing, at the reasonable request of Cleo, Seller
will execute, acknowledge and deliver to Buyer such documents and
take such further action as may be required to vest more
effectively in Cleo the assets used by Cleo and its Subsidiaries
and shall cooperate with Cleo in preparation of the audited
financial statements required to be delivered pursuant to Section
3.15.
7.13 Paper Factory. Buyer and Seller will
negotiate in good faith an agreement between Cleo and Paper
Factory of Wisconsin, Inc. ("Paper Factory") in respect of the
continued sale of certain products of Cleo to Paper Factory. If
the parties cannot reach agreement, the existing agreement
between Cleo and Paper Factory shall be terminated at the Closing
without liability or obligation of any party thereunder (except
in respect of outstanding orders), and Cleo shall continue to
supply Paper Factory with gift wrap under the terms of the
existing agreement until December 31, 1996.
<PAGE>
8. Conduct of Cleo's Business Prior to the Closing.
8.1Operation in Ordinary Course. Between the
date of this Agreement and the Closing Date, Seller shall cause
Cleo and its Subsidiaries to conduct their businesses in all
material respects in the ordinary course and to use commercially
reasonable efforts to maintain all current business
relationships. Without limitation of the foregoing, Cleo shall
collect its receivables and pay its payables as they become due
in the ordinary course of business and pay and receive advances
from Seller and purchase inventory in the ordinary course of
business, in each case substantially as and in the general manner
reflected in the financial forecast for fiscal year 1995 prepared
by Seller in September 1995.
8.2Business Organization. Between the date of
this Agreement and the Closing Date, Seller shall use
commercially reasonable efforts, and shall cause Cleo and each of
its Subsidiaries to use commercially reasonable efforts, to (a)
preserve substantially intact the business organization of Cleo
and each of its Subsidiaries and keep available the services of
the present officers and employees of Cleo and each of its
Subsidiaries, and (b) preserve in all material respects the
present business relationships and good will of Cleo and each of
its Subsidiaries.
8.3Corporate Organization. Between the date of
this Agreement and the Closing Date, Seller shall not cause or
permit any amendment of the certificate of incorporation or by-
laws (or other governing instrument) of Cleo or any of its
Subsidiaries, and shall cause Cleo and each of its Subsidiaries
not to:
(a)issue, sell or otherwise dispose of any
of its equity securities, or create, sell or otherwise dispose of
any options, rights, conversion rights or other agreements or
commitments of any kind relating to the issuance, sale or
disposition of any of its equity securities;
(b)sell or otherwise dispose of any equity
securities of Cleo or any of its Subsidiaries, or create or
suffer to be created any Encumbrance thereon, or create, sell or
otherwise dispose of any options, rights, conversion rights or
other agreements or commitments of any kind relating to the sale
or disposition of any equity securities of Cleo or any of its
Subsidiaries;
(c)reclassify, split up or otherwise change
any of its equity securities;
(d)be party to any merger, consolidation or
other business combination;
(e)sell, lease, license or otherwise
dispose of any of its properties or assets (including, but not
limited to rights with respect to patents and trademarks and
copyrights or other proprietary rights), except in the ordinary
course of business; or
(f)organize any new Subsidiary or acquire
any equity securities of any Person or any equity or ownership
interest in any business.
8.4Other Restrictions. Except as set forth on
Section 8.4 of the Disclosure Letter, between the date of this
Agreement and the Closing Date, Seller shall cause Cleo and each
of its Subsidiaries not to:
(a)borrow any funds or otherwise become
subject to, whether directly or by way of guarantee or otherwise,
any indebtedness for borrowed money, other than borrowings from
Seller, Cleo or another of its Subsidiaries;
(b)create any material Encumbrance on any
of its material properties or assets or grant any easement or
other Encumbrance with respect to the owned or leased real
property, including without limitation any drainage easement
agreement that would materially affect the use or value of the
Tuggle Road site;
(c)except in the ordinary course of
business, increase in any manner the compensation of any director
or officer or increase in any manner the compensation of any
class of employees;
(d)create or materially modify, except as
noted in the Disclosure Letter, any bonus, deferred compensation,
pension, profit sharing, retirement, insurance, stock purchase,
stock option, or other fringe benefit plan, arrangement or
practice or any other employee benefit plan (as defined in
section 3(3) of ERISA);
(e)make any capital expenditure or acquire
any property or assets (other than raw materials and supplies)
for a cost in excess of $200,000 in any one case or $400,000 in
the aggregate or as required by any Commitment listed in Section
5.17 of the Disclosure Letter;
(f)enter into any agreement that
materially restricts Cleo or any of its subsidiaries from
carrying on its business;
(g)pay, discharge or satisfy any material
claim, liability or obligation, absolute, accrued, contingent or
otherwise, other than the payment, discharge or satisfaction in
the ordinary course of business of liabilities or obligations
reflected in the Balance Sheet or incurred in the ordinary course
of business and consistent with past practice since the date of
the Balance Sheet or as required by law;
(h)cancel any material debts or waive any
material claims or rights; or
(i)act or intentionally omit from taking
any action which would cause any of the representations and
warranties in Section 5 to be inaccurate.
9. Survival of Representations and Warranties;
Indemnification.
9.1Survival. The representations and warranties
contained in this Agreement and in any certificate or document
delivered pursuant hereto shall survive the Closing for a period
of eighteen months, except for those contained in Sections 5.3
and 7.6 which shall survive until the termination of the
applicable statute of limitations. Except as provided in Section
9.6, no claim for indemnification hereunder for any breach of
representation or warranty shall be made after such time period.
9.2Indemnification by Seller. Seller shall
indemnify and hold harmless Buyer and Cleo, and shall reimburse
Buyer and Cleo for, any loss, liability, damage or expense
(including reasonable attorneys fees) (collectively, "Damages"),
to the extent not accrued in the Closing Date Statement of Net
Equity, arising from or in connection with (a) any inaccuracy in
any of the representations and warranties of Seller in this
Agreement (without consideration of any materiality or Material
Adverse Effect standard set forth in Sections 5.4, 5.9, 5.17,
5.18, 5.19, 5.20 and 5.21 therein), (b) any failure by Seller to
perform or comply with any agreement in this Agreement, (c) any
employee benefit plan sponsored by Seller, (d) any determination
that Cleo's Economic Development Revenue Bonds, Series 1989A, or
Economic Development Revenue Bonds relating to the Bloomington,
Indiana Facility are taxable bonds, (e) the presence, suspected
presence, release or threatened release by Seller, Cleo and its
Subsidiaries prior to the Closing Date of any Hazardous
Substances in or into the air, soil, surface water, groundwater
or soil vapor (at, on, about, under, within or beyond the lands
owned or leased by Cleo and its Subsidiaries, or at any other
location not owned or leased by Cleo and its Subsidiaries) and
any actions necessary to achieve compliance with Environmental
Laws, if and only to the extent that (i) such state of facts
would in the reasonable judgment of Buyer or Cleo impose
liability on or require remedial action by Buyer, Seller, Cleo or
its Subsidiaries under any Environmental Law or Environmental
Permit as currently in effect or as in effect at the time of such
release or threatened release, and (ii) notice of a claim
hereunder is delivered to Seller prior to the tenth anniversary
of the Closing (except in respect to the Diaz Refinery Site and
the Kirk/Heathcott Landfill Site as to which notice is hereby
deemed to have been given), (f) the Utility Control Corp. dispute
being handled by Seller and (g) the failure to obtain any
consents or approvals of the nature described in Section 7.8.
9.3Indemnification by Buyer. Buyer shall
indemnify and hold harmless Seller, and shall reimburse Seller
for, any Damages arising from or in connection with (a) any
inaccuracy in any of the representations and warranties of Buyer
in this Agreement (without consideration of any materiality or
Material Adverse Effect standard set forth therein), (b) any
failure by Buyer to perform or comply with any agreement in this
Agreement and (c) any claims if, and to the extent, arising from
the conduct of the business of Buyer, Cleo or its Subsidiaries
after the Closing.
9.4Procedure for Indemnification. Promptly
after receipt by an indemnified party under Section 9.2 or 9.3 of
notice of the commencement of any action which gives rise to
Damages, such indemnified party shall, if a claim in respect
thereof is to be made against an indemnifying party under such
Section, give notice to the indemnifying party of the
commencement thereof. Failure so to notify the indemnifying
party shall relieve it of any liability that it may have to any
indemnified party, but only to the extent that the defense of
such action is materially prejudiced thereby, providing the
indemnifying party did not receive or otherwise have actual
notice thereof. If any such action shall be brought against an
indemnified party and it shall give notice to the indemnifying
party of the commencement thereof, the indemnifying party shall
be entitled to participate therein and, to the extent that it
shall wish, to assume the defense and cost thereof with counsel
satisfactory to such indemnified party and, after notice from the
indemnifying party to such indemnified party of its election to
assume the defense thereof, the indemnifying party shall not be
liable to such indemnified party under such Section for any fees
of other counsel or any other expenses of conducting the defense
(unless such fees or expenses are incurred at the request of the
indemnifying party), in each case subsequently incurred by such
indemnified party in connection with the defense thereof, other
than reasonable costs of investigation, provided, however, that
Buyer and Cleo shall be entitled, at their sole election to
retain control of any action or demand related to any
intellectual property right matters or as to which the remedy
would have a materially adverse on-going effect on Cleo or its
Subsidiaries. If the indemnifying party receives notice of any
action or demand, it shall notify the indemnified party within 30
days after the indemnified party's notice is given as to (a)
whether or not the indemnifying party disputes its liability with
respect to such action or demand and (b) if the indemnifying
party does not dispute such liability, whether or not it desires,
at its sole cost and expense, to defend the indemnified party
against such action or demand; provided, however, that the
indemnified party is hereby authorized prior to and during such
30-day period to file any motion, answer or other pleading which
it shall deem necessary or reasonably appropriate to protect its
interests. If an indemnifying party defends an action, the
indemnified party may participate in, but not control, any such
defense (except as provided above), at its sole cost and expense.
The indemnified party shall cooperate in good faith with the
indemnifying party for purposes of responding to discovery
requests and preparing defenses to claims, subject to
reimbursement of out-of-pocket expenses by the indemnifying
party. If an indemnifying party defends an action (a) 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 (i) there is no
finding or admission of any violation of law and no effect on any
other claims that may be made against the indemnified party and
(ii) the sole relief provided is monetary damages that are paid
in full by the indemnifying party and (b) the indemnifying party
shall have no liability with respect to any compromise or
settlement thereof effected without its consent. If notice is
given to an indemnifying party of the commencement of any action
and it does not, within 30 days after the indemnified party's
notice is given, give notice to the indemnified party of its
election to assume the defense thereof, the indemnifying party
shall be bound by any compromise or settlement thereof effected
by the indemnified party. In the event the indemnified party
should have a claim against the indemnifying party that does not
involve a claim or demand by a third party, the indemnified party
shall notify the indemnifying party with respect to such claim.
If the indemnifying party does not notify the indemnified party
within 20 days after the indemnified party's notice is given that
it disputes such claim, the amount of such claim shall be
conclusively deemed as liability of the indemnifying party
hereunder. Nothing hereunder shall be deemed to prevent a party
from making a claim hereunder for potential or contingent
damages, provided the notice to the indemnifying party sets forth
the specific basis for any such potential or contingent claim or
demand to the extent then feasible and such party has reasonable
grounds to believe that such a claim or demand may be made. All
claims to be paid by Seller to the Buyer shall first be paid
through application of funds, if any, then being held pursuant to
the Escrow Agreement.
9.5Limitations on Indemnification.
(a)Notwithstanding anything in this
Agreement to the contrary, an indemnifying party shall not have
any liability to an indemnified party in respect of any claim for
indemnification for the breach of any representation or warranty
contained herein, except for and excluding any liability for
income Taxes pursuant to Section 7.6, (i) unless a claim with
respect thereto is delivered to the indemnifying party specifying
the factual basis of the claim in reasonable detail to the extent
then known by the indemnified party prior to the termination of
the survival period for such representation and warranty set
forth in Section 9.1 hereof, and (ii) until and only to the
extent that the Damages to the indemnified party exceed a
cumulative aggregate total of $875,000.
(b)Except for and otherwise excluding any
liability for income Taxes pursuant to Section 7.6 or as referred
to in Section 9.6 below, Seller shall not have any liability to
Buyer under Sections 1.4, 7.6 and 9.2 of the Agreement in an
aggregate amount in excess of (i) $12,000,000, less (ii) the sum
of all payments to Buyer pursuant to the Escrow Agreement (other
than interest) and the reasonable fees and expenses incurred by
Seller after the Closing Date in connection with the
investigation or defense (other than in connection with
contesting a claim between Buyer and Seller) of any matter for
which it is required to indemnify Buyer under this Agreement.
(c)Except as set forth in this Agreement,
Seller shall not, directly or indirectly, be liable to Cleo or
Buyer for contribution pursuant to any Environmental Law, tort or
other law, and, except as set forth in this Agreement, Buyer and
Cleo and its Subsidiaries hereby release Seller from all such
claims, known and unknown.
(d)Except as set forth in this Agreement,
Buyer, Cleo and its Subsidiaries shall not, directly or
indirectly, be liable to Seller or any of its affiliates for
contribution pursuant to any Environmental Law, tort or other law
in any matter, including the Diaz Refinery Site and
Kirk/Heathcott Landfill Site, and Seller and its affiliates
hereby release Buyer, Cleo and its Subsidiaries from all such
claims, known and unknown.
9.6Exceptions to Limitations.
(a) Nothing herein shall be deemed to limit
or restrict in any manner any rights or remedies which either
party has, or might have, at law, in equity or otherwise, against
the other based on the willful misrepresentation or willful
breach of warranty by such party hereunder.
(b) Notwithstanding anything to the contrary
set forth, Seller shall be liable without limitation of any
nature at all times from and after the Closing for (i) workers'
compensation or similar expenses of Cleo and its subsidiaries
(including retrospective premium adjustments or surcharges, if
any, and liabilities, if any, to the State of Tennessee for
workers' compensation matters) in respect of all losses relating
to events at or prior to the Closing Date, (ii) post-retirement
benefit obligations of any nature in respect of employees of Cleo
or its Subsidiaries retiring on or prior to the Closing Date,
including any liabilities of such nature under the Gibson
Greetings, Inc. Retiree Health Insurance Plan, the Gibson
Greetings, Inc. Medicare Supplement Plan, the Gibson Greetings,
Inc. Retiree Life Insurance Plan, and the Cleo, Inc. Blue
Cross/Blue Shield Health Care Protection Plan for management
employees and (iii) any similar post-retirement benefit
obligations arising in respect of employees of Cleo or its
Subsidiaries retiring after the Closing Date, other than such
obligations created by Buyer, Cleo or its Subsidiaries after the
Closing, if the representation set forth in Section 5.19(p) of
this Agreement is not accurate and correct in all material
respects and (iv) any other obligations in respect of current or
former employees of Cleo and its Subsidiaries under the plans or
programs referenced or required to be referenced in Section 5.19
of the Disclosure Letter, except the employment agreements and
the Cleo, Inc. Bargaining Unit Employees Retirement Plan, Blue
Cross/Blue Shield Health Care Protection Plans (except the
portions thereof relating to retirees), Severance Pay Plan, Long-
term Disability Plan and Sick Pay Plan.
9.7 Effect of Investigation. Any claim for
indemnification shall not be invalid as a result of any
investigation by or opportunity to investigate afforded to Buyer.
10. Termination.
10.1Termination. This Agreement may be
terminated before the Closing occurs only as follows:
(a)By written agreement of Seller and Buyer
at any time.
(b)By Seller, by notice to Buyer at any
time, if one or more of the conditions specified in Section 4 is
not satisfied at the time at which the Closing (as it may be
deferred pursuant to Section 2.1) would otherwise occur or if
satisfaction of such a condition is or becomes impossible.
(c)By Buyer, by notice to Seller at any
time, if one or more of the conditions specified in Section 3 is
not satisfied at the time at which the Closing (as it may be
deferred pursuant to Section 2.1), would otherwise occur of if
satisfaction of such a condition is or becomes impossible.
(d)By Buyer or Seller, by notice to the
other at any time after November 15, 1995.
11. Notices.
All notices, consents, assignments and other
communications under this Agreement shall be in writing and shall
be deemed to have been duly given when (a) delivered by hand, (b)
sent by telex or telecopier (with receipt confirmed), provided
that a copy is mailed registered mail, return receipt requested,
or (c) received by overnight delivery service, in each case to
the appropriate addresses, telex numbers and telecopier numbers
set forth below (or to such other addresses, telex numbers and
telecopier numbers as a party may designate as to itself by
notice to the other parties).
(a)If to Buyer:
CSS Industries, Inc.
1845 Walnut Street
Philadelphia, PA 19103
Attention: Stephen V. Dubin, Esq.
Telecopy: (215) 569-9979
With a copy to:
Morgan, Lewis & Bockius LLP
2000 One Logan Square
Philadelphia, PA 19103
Attention: David R. King, Esq.
Steven M. Cohen, Esq.
Telecopy: (215) 963-5299
(b)If to Seller:
Gibson Greetings, Inc.
2100 Section Road
Cincinnati, OH 45237
Attention: William L. Flaherty
Telecopy: (513) 841-6028
With a copy to:
Taft, Stettinius & Hollister
Star Bank Center
425 Walnut St.
Suite 1800
Cincinnati, OH 45202
Attention: Charles D. Lindberg, Esq.
Telecopy: (513) 381-0205
12. Miscellaneous.
12.1 Expenses. Each party shall bear its own
expenses incident to the preparation, negotiation, execution and
delivery of this Agreement and the performance of its obligations
hereunder.
12.2 Intentionally Omitted.
12.3 Access by Seller. From and after the
Closing, Buyer shall provide Seller access, at Seller's expense
and on reasonable notice during normal business hours, to Cleo's
records, facilities and personnel, and shall cause such personnel
to cooperate with Seller, with respect to any litigation,
investigation or government proceeding or the preparation of any
tax return, financial statement or governmental report relating
to Cleo prior to the Closing Date.
12.4 Captions; Section References. The captions
in this Agreement are for convenience of reference only and shall
not be given any effect in the interpretation of this Agreement.
Unless otherwise specified, Section references in this Agreement
refer to the applicable Section or Subsection of this Agreement.
12.5 Modification and Waiver. No amendment,
modification or alteration of the terms or provisions of this
Agreement shall be binding unless the same shall be in writing
and duly executed by the parties hereto, except that any of the
terms or provisions of this Agreement may be waived in writing at
any time by the party which is entitled to the benefits of such
waived terms or provisions of this Agreement and the same shall
not be deemed to or constitute a waiver of any other provision
hereof (whether or not similar). No delay on the part of any
party in exercising any right, power or privilege hereunder shall
operate as a waiver thereof.
12.6 Exclusive Agreement; Amendment. This
Agreement supersedes all prior agreements among the parties with
respect to its subject matter, and is intended (with the
documents referred to herein) as a complete and exclusive
statement of the terms of the agreement among the parties with
respect thereto and cannot be changed or terminated orally,
except for the Confidentiality Agreement dated May 9, 1995, which
shall terminate as of the Closing Date.
12.7 Governing Law. This Agreement and (unless
otherwise provided) all amendments hereof and waivers and
consents hereunder shall be governed by the internal law of the
State of Delaware, without regard to the conflicts of law
principles thereof.
[Remainder of page intentionally left blank]
12.8 Binding Effect. This Agreement shall inure
to the benefit of and be binding upon the parties hereto and
their respective successors and assigns, provided that neither
party may assign its rights hereunder without the consent of the
other except that Buyer may assign its rights (but not its
obligations) under this Agreement to its wholly-owned Subsidiary
without the consent of Seller, provided that, after the Closing,
no consent of Seller shall be needed in connection with any
merger or consolidation of Buyer with or into another entity.
12.9 Public Announcements. Neither Seller nor
Buyer shall make any public statements, including, without
limitation, any press releases, with respect to this Agreement
and the transactions contemplated hereby without the prior
written consent of the other party (which consent shall not be
unreasonably withheld) except as may be required by law or by any
stock exchange. If a public statement is required to be made by
law or by any stock exchange, the parties shall use reasonable
efforts to consult with each other in advance as to the contents
and timing thereof.
12.10 Seller's Knowledge. For purposes of this
Agreement, Seller's knowledge shall mean the knowledge of the
persons listed on the left column of Exhibit 12.10 for purposes
of Section 5 of this Agreement and the knowledge of all of the
persons listed on Exhibit 12.10 for purposes of Section 3.2 of
this Agreement.
12.11 Counterparts. This Agreement may be
executed in two or more counterparts, each of which shall be
considered an original, but all of which together shall
constitute the same instrument. It shall not be necessary in
making proof of this Agreement or any counterpart hereof to
produce or account for any of the other counterparts.
GIBSON GREETINGS, INC.
By /s/ William L. Flaherty
Name: William L. Flaherty
Title: Vice President of Finance
and Chief Financial
Officer
CSS INDUSTRIES, INC.
By /s/ James G. Baxter
Name: James G. Baxter
Title: Vice President of Finance
and Chief Financial
Officer
<PAGE>
Exhibits to Stock Purchase Agreement
Exhibit 1.2(b) Promissory Note
Exhibit 1.2(c) Escrow Agreement
Exhibit 3.3 Seller's Legal Opinion
Exhibit 3.5 Certain Consents and Approvals
Exhibit 3.11 Assigned Properties
Exhibit 3.14 License Agreements
Exhibit 4.3 Buyer's Legal Opinion
Exhibit 4.10 Guarantee Obligations
Exhibit 12.10 Key Employees of Seller and Cleo
<PAGE>
Exhibit 3.11
CLEO OWNED AND LEASED PREMISES
IN THE NAME OF GIBSON
Property Address Owned or Leased
4025 Viscount Avenue
Memphis, Tennessee Leased
4400 B.F. Goodrich
Memphis, Tennessee Leased
4006 Air Park Street
Memphis, Tennessee Leased
3736 Getwell Road
Memphis, Tennessee Leased
1226 Manufacturers Row
Trenton, Tennessee Leased
800 Enterprise Drive
Oakbrook, Illinois Leased
<PAGE>
Exhibit 3.5
CERTAIN CONSENTS AND APPROVALS
Those consents and approvals described in Paragraphs A.
2, 5 and 6 (as it relates to the AT&T contract) and B. 2, 3 and 5
of Section 5.7 of Disclosure Letter pursuant to the Stock
Purchase Agreement, the provisions of which are incorporated by
reference herein. This enumeration is not intended to waive any
other obligation of Seller to obtain consents or approvals
otherwise required by the Agreement.
<PAGE>
Exhibit 3.14
LICENSE AGREEMENTS
Those licenses described in items I. 1.6, I. 1.7, I.
1.15, I. 1.16 and I. 1.17 of Section 5.17 to the Disclosure
Letter of Gibson Greetings, Inc. pursuant to the Stock Purchase
Agreement, the provisions of which are incorporated by reference
herein.
<PAGE>
<PAGE>
CONTACT: William L. Flaherty RELEASE DATE: November 16, 1995
Vice President - Finance
(513) 841-6675
Karen Durand
Director, Investor Relations
(513) 841-6986
FOR IMMEDIATE RELEASE
GIBSON GREETINGS, INC. SELLS CLEO, INC. TO CSS INDUSTRIES, INC.
CINCINNATI, OHIO, November 16, 1995 -- Gibson Greetings, Inc.
(NASDAQ: GIBG) announced the consummation of its previously
reported agreement to sell Cleo, Inc., the Company's wholly-owned
gift wrap subsidiary, to CSS Industries, Inc. (NYSE: CSS).
As previously disclosed, total consideration to Gibson amounted to
approximately $133.1 million, consisting of $96.5 million in cash,
a note payable in 75 days for approximately $24.6 million and $12.0
million which will be held in escrow for certain post-closing
adjustments and indemnification obligations. Additionally, Gibson
has been released from approximately $14.0 million of third-party
debt which will be retained by Cleo under CSS.
Benjamin J. Sottile, Chairman, President and Chief Executive
Officer of Gibson said: "We are pleased Cleo has been acquired by
CSS, a company who is a recognized leader in the seasonal social
expression business and who understands and can utilize Cleo's full
potential. The smooth transition in ownership is proceeding and it
is fully anticipated that Cleo's customers will continue to have
their needs addressed in a timely fashion."
Gibson Greetings, Inc. is the world's second largest publicly owned
manufacturer and distributor of everyday and seasonal greeting
cards, gift wrap and related social expression products.
###
