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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FEBRUARY 7, 1997
Date of Report
(Date of earliest event reported)
SCHAWK, INC.
(Exact name of Registrant
as specified in its charter)
DELAWARE
(State or other jurisdiction of incorporation or organization)
1-9335
(Commission File Number(s))
36-2545354
(I.R.S. Employer Identification No.)
1695 RIVER ROAD
DES PLAINES, ILLINOIS
(Address of principal executive office)
60018
(Zip Code)
847/827-9494
(Registrant's telephone number, including area code)
Exhibit Index appears on page 5
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
The Registrant has announced that it has completed the disposition of its
Plastic Group on Friday, February 7, 1997 to the ESCO Electronics Corporation
(NYSE: ESE) of St. Louis, MO. ESCO purchased the stock of the Company's
Plastics Group subsidiaries in France, Netherlands and Ireland, and the
Plastics Group related net assets of the Company's Hebron and Huntley, IL,
Patillas, Puerto Rico, Stockton, CA and Germany operations. The purchase price
was $92 million plus working capital adjustments.
Further details of this disposition are contained in the Acquisition Agreement
by and between ESCO and Schawk, Inc. dated December 18, 1996 and attached
hereto as Exhibit A, the Amendment to the Acquisition Agreement by and between
ESCO and Schawk, Inc. dated December 18, 1996 and attached hereto as Exhibit B,
and the press release of the Registrant dated February 10, 1997 and attached
hereto as Exhibit D.
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
Pro forma financial statements of Schawk, Inc. giving effect to the disposition
of the Plastics Group are contained in Exhibit C which are attached hereto.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, hereunto duly authorized.
SCHAWK, INC.
- -------------
(Registrant)
/s/ David A. Schawk
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President, Chief Executive Officer and Director
/s/ Marie Meisenbach Graul
- --------------------------
Chief Financial Officer, Treasurer, Public Information Officer and Director
/s/ Dennis D. Wilson
- --------------------------
Director of Financial Reporting and Chief Accounting Officer
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EXHIBIT INDEX
EXHIBIT 10 Acquisition Agreement by and Between ESCO Electronics Corporation
and Schawk, Inc. dated December 18, 1996
EXHIBIT 10.1 First Amendment to the Acquisition Agreement by and Between ESCO
Electronics Corporation and Schawk, Inc. dated December 18, 1996
EXHIBIT 15 Proforma Financial Statements
EXHIBIT 99 Registrant's Press Release dated February 10, 1997
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ACQUISITION AGREEMENT
by and between
ESCO ELECTRONICS CORPORATION.
Buyer,
and
SCHAWK, INC.
Seller.
Dated December 18, 1996
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TABLE OF CONTENTS
ACQUISITION AGREEMENT
<TABLE>
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SECTION PAGE
ARTICLE I DEFINITIONS..............................................................1
ARTICLE II PURCHASE AND SALE OF PURCHASED ASSETS...................................9
2.1 Assets to be Purchased.......................................................9
2.2 Assumed Liabilities..........................................................9
2.3 Consideration................................................................9
2.4 Allocation of Consideration..................................................9
2.5 Closing......................................................................9
2.6 Deliveries of Seller at Closing.............................................10
2.7 Deliveries of Buyer at Closing..............................................10
2.8 Determination of Closing Working Capital....................................10
2.9Post-Closing Adjustment......................................................11
ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLER..............................11
3.1 Corporate Existence and Power of Seller.....................................12
3.2 Approval and Enforceability of Agreement....................................12
3.3 Financial Statements........................................................12
3.4 Events Subsequent to September 30, 1996.....................................13
3.5 Inventories.................................................................14
3.6 Accounts and Notes Receivable...............................................14
3.7 Undisclosed Liabilities.....................................................14
3.8 Taxes.......................................................................15
3.9 Real Property Owned.........................................................16
3.10 Personal Property and Capital Stock Owned..................................18
3.11 Real and Personal Property Leased from Seller Group Persons................18
3.12 Real and Personal Property Leased to a Seller Group Person.................18
3.13 Intellectual Property......................................................19
3.14 Necessary Property and Transfer of Purchased Assets........................19
3.15 Use and Condition of Property..............................................20
3.16 Licenses and Permits.......................................................20
3.17 Contracts--Disclosure......................................................20
3.18 Contracts--Validity, Etc...................................................21
3.19 No Breach of Law or Governing Documents....................................22
3.20 Litigation and Arbitration.................................................22
3.21 Officers, Directors, Employees and Consultants.............................22
3.22 Indebtedness to and from Officers, Directors and Others....................23
3.23 Outside Financial Interests................................................23
3.24 Payments, Compensation and Perquisites of Agents and Employees.............23
3.25 Labor Agreements and Employment Agreements................................23
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3.26 Employee Benefit Plans.....................................................24
3.27 Terminated Plans...........................................................25
3.28 Overtime, Back Wages, Vacation and Minimum Wages...........................25
3.29 Discrimination, Workers Compensation and Occupational Safety and Health....26
3.30 Alien Employment Eligibility...............................................26
3.31 Labor Disputes; Unfair Labor Practices.....................................26
3.32 Insurance Policies.........................................................26
3.33 Guarantees.................................................................27
3.34 Product Warranties.........................................................27
3.35 Product Liability Claims...................................................27
3.36 Product Safety Authorities.................................................27
3.37 Environmental Matters......................................................27
3.38 Broker's Fees..............................................................29
3.39 Foreign Assets.............................................................29
3.40 Absence of Sensitive Payments..............................................29
3.41 Trade Regulation Law.......................................................30
3.42 Truthfulness...............................................................30
3.43 Bank Accounts of Purchased ntities........................................30
3.44 Books and Records..........................................................30
3.45 Affiliates.................................................................30
3.46 Ownership of Assets........................................................30
3.47 No Marks on Equipment or Inventory.........................................30
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER................................31
4.1 Corporate Existence of Buyer................................................31
4.2 Approval of Agreement.......................................................31
4.3 No Breach of Articles or Indentures.........................................31
ARTICLE V CERTAIN COVENANTS........................................................31
5.1 Operation of the Business...................................................32
5.2 Preservation of Business....................................................33
5.3 Insurance and Maintenance of Property.......................................33
5.4 Full Access.................................................................33
5.5 Books, Records and Financial Statements.....................................33
5.6 WARN Act....................................................................33
5.7 Other Government Filings....................................................34
5.8 Tax Matters.................................................................34
5.9 Change of Name..............................................................35
5.10 Escrow.....................................................................35
5.11 Supplements to Schedules...................................................35
5.12 Adverse Changes............................................................36
ARTICLE VI COVENANT NOT TO COMPETE................................................36
6.1 Covenant Not to Compete.....................................................36
6.2 Restriction on Employment..................................................37
6.3 Confidentiality.............................................................37
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6.4 Remedies....................................................................37
6.5 Permitted Investments.......................................................37
6.6 Access to Properties and Records............................................38
ARTICLE VII CONDITIONS TO BUYER'S OBLIGATIONS.....................................38
7.1 Representations and Warranties of Seller....................................38
7.2 Performance of this Agreement...............................................38
7.3 No Material Adverse Change..................................................38
7.4 Certificate of Seller.......................................................38
7.5 Opinion of Counsel..........................................................39
7.6 No Lawsuits.................................................................39
7.7 No Restrictions.............................................................39
7.8 Consents....................................................................39
7.9 Releases....................................................................39
7.10 Documents..................................................................39
7.11 [RESERVED].................................................................39
7.12 Title Insurance............................................................40
7.13 Compliance with Applicable Law.............................................40
7.14 Due Diligence..............................................................41
7.15 Foreign Closings...........................................................41
7.16 Further Assurances.........................................................41
ARTICLE VIII CONDITIONS TO SELLER'S OBLIGATIONS...................................41
8.1 Representations and Warranties of Buyer.....................................41
8.2 Performance of this Agreement...............................................41
8.3 Certificate of Buyer........................................................41
8.4 Opinion of Counsel..........................................................41
8.5 Payment of Purchase Price...................................................41
8.6 Documents...................................................................42
8.7 Further Assurances..........................................................42
ARTICLE IX INDEMNIFICATION........................................................42
9.1 Indemnification of Buyer....................................................42
9.2 Indemnification of Seller...................................................42
9.3 Survival....................................................................43
9.4 Limitations.................................................................43
9.5 Notice of Claim.............................................................43
9.6 Rights to Contest Claims of Third Persons...................................43
9.7 Exclusive Remedy............................................................44
9.8 Tax Indemnification.........................................................44
9.9 Mitigation of Losses........................................................44
ARTICLE X DISPUTE RESOLUTION......................................................45
10.1 Scope; Initiation..........................................................45
10.2 Negotiations Between Executives............................................45
10.3 Binding Arbitration........................................................45
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10.4 Confidentiality Notice.....................................................46
ARTICLE XI MISCELLANEOUS..........................................................47
11.1 Changes to Structure.......................................................47
11.2 Termination of Agreement...................................................47
11.3 Manner and Effect of Termination...........................................47
11.4 Non-Disclosure of Information..............................................47
11.5 Bulk Sales.................................................................48
11.6 Contents of Agreement, Parties in Interest, Assignment.....................48
11.7 Severability...............................................................48
11.8 Counterparts...............................................................48
11.9 Interpretation.............................................................48
11.10 Governing Law.............................................................49
11.11 Payment of Fees and Expenses..............................................49
11.12 Notice....................................................................49
11.13 Additional Agreements.....................................................50
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ACQUISITION AGREEMENT
THIS ACQUISITION AGREEMENT (the "Agreement") is made this 18th day of
December, 1996, by and between ESCO Electronics Corporation, a Missouri
corporation ("Buyer"), and Schawk, Inc., a Delaware corporation ("Seller").
Defined terms are set forth in Article I.
RECITALS
A. The Buyer Companies desire to purchase from Seller and the other Seller
Group Persons the Purchased Assets and to assume the Assumed Liabilities, on
the following terms and conditions.
B. Seller and the other Seller Group Persons desire to sell to the Buyer
Companies the Purchased Assets and to assign to the Buyer Companies the Assumed
Liabilities, on the following terms and conditions.
NOW, THEREFORE, in consideration of the foregoing recitals and the mutual
covenants, representations, warranties, conditions, and agreement hereinafter
expressed, the Parties agree as follows:
ARTICLE I
DEFINITIONS
"Affiliate" means a Person that directly, or indirectly through one or
more intermediaries, controls, is controlled by, or is under common control
with, the Person referred to. In this definition, "control" means the
possession, direct or indirect, of the power to direct or cause the direction
of the management and policies of a Person, whether through ownership of
securities, by contract, or otherwise.
"Affiliated Group" has the meaning set forth in Section 1504 of the Code.
"Arbiter" means the individual appointed under Section 2.8(b).
"Assets" means all assets and property and associated rights and
interests, real, personal, and mixed, tangible and intangible, of whatever
kind, owned or used by a Seller Group Person in connection with the Business.
Without limiting the generality of the foregoing, the Assets include the
following items:
(a) All assets reflected and/or described on the Balance Sheet, except
any such assets which have been disposed of in the Ordinary Course of the
Business since the Balance Sheet Date;
(b) all assets owned or used by a Seller Group Person in connection
with the Business which have been fully depreciated or written off;
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(c) all assets acquired by a Seller Group Person in connection with the
Business since the Balance Sheet Date;
(d) all accounts receivable of a Seller Group Person in connection with
the Business;
(e) all inventories of a Seller Group Person in connection with the
Business, including but not limited to all raw materials, finished goods,
component parts and work in process;
(f) all Contracts of a Seller Group Person with suppliers or customers in
connection with the Business;
(g) all machinery, equipment, supplies and tools of a Seller Group Person
used in connection with the Business;
(h) all vehicles of a Seller Group Person used in connection with the
Business; (including without limitation any helicopters or other aircrafts);
(i) all parcels of real property of a Seller Group Person used in
connection with the Business, including without limitation all buildings,
plants, warehouses, facilities and other improvements and fixtures thereon and
appurtenances thereto;
(j) all permits, approvals, licenses and certifications issued to a Seller
Group Person by a Government or by a private testing or certifying authority in
connection with the Business, to the extent assignable under the terms thereof
and applicable Law;
(k) all transferable rights of Seller or its Affiliates to tax exemptions
in connection with the Business, including without limitation the Puerto Rico
Grant;
(l) all Intellectual Property and documentation thereof and the right and
power to assert, defend and recover title thereto in the same manner and to the
same extent as a Seller Group Person could or could cause to be done if the
transactions contemplated hereby did not occur, and the right to recover for
past damages on account of the infringement, misuse, or theft thereof;
(m) all records, including business, computer, engineering, and other
records, and all associated documents, discs, tapes, and other storage or
record keeping media of any Seller Group Person prepared or held in connection
with the Business, including but not limited to all sales data, customer lists,
accounts, bids, contracts, supplier records, and other data and information of
the Business, excluding corporate minute books of the Seller Companies;
(n) all rights and claims against others under Contracts;
(o) all interests in any capital stock of the Purchased Entities; and
(p) all other claims against others, rights, and choses in action,
liquidated or unliquidated, of a Seller Group Person arising from the Business,
including those arising under insurance policies.
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"Assignment and Assumption Agreement" means the form of instrument
attached as Exhibit A.
"Assumed Executory and Other Agreements" means (i) the Contracts described
in the Schedules hereto, subject to Buyer's right of review and approval under
Section 5.11 of such Schedules; (ii) executory contracts, agreements or other
commitments existing on the date hereof and not required to be disclosed in
said Schedules; (iii) executory contracts, agreements or other commitments
between the date hereof and the Closing, in accordance with the provisions
hereof; (iv) executory warranties, agreements and commitments in respect to
product liability and product support arising out of the sale of goods and
inventory or the rendition of services by the Business; provided, however,
Assumed Executory and Other Agreements shall not include that certain
Consulting Agreement between Seller and Plastic Molded Concepts, Inc. involving
consulting services from Bert Bodnar.
"Assumed Liabilities" means Liabilities of a Non-Purchased Entity, to the
extent the Liabilities are:
(a) incurred in the Ordinary Course of the Business and to the extent
they are:
(i) Liabilities that are (A) quantified on the Closing Balance
Sheet, and if incurred on or before the Balance Sheet Date, quantified on the
Balance Sheet, and (B) if incurred after the date of this Agreement, incurred in
compliance with this Agreement; provided, however, that Liabilities quantified
on the Closing Balance Sheet shall not include Liabilities owed by Seller to
Plastic Molded Concepts, Inc.; or
(ii) Liabilities which exist at or accrue following the Closing
Date under Assumed Executory and Other Agreements; or
(b) specifically identified on Exhibit I to the Assignment and
Assumption Agreement.
"Balance Sheet" means the unaudited, consolidated, and consolidating
balance sheet of the Business as of September 30, 1996, and all notes and
schedules thereto, attached on Schedule 3.3.
"Balance Sheet Date" means the date of the Balance Sheet.
"Bill of Sale" means the form of instrument attached as Exhibit B.
"Business" means the business and operations of any and all Seller Group
Persons reflected in the Confidential Memorandum and referred to therein as The
Plastics Group of Seller.
"Business Condition" of a Person or business means the business, assets,
results of operations, or condition (financial or otherwise) of such Person or
business.
"Buyer" has the meaning set forth in the Preamble.
"Buyer Company" means one of the corporations identified on Schedule 2.1
or a corporation to which Buyer has assigned certain of its rights pursuant to
Section 11.6.
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"Buyer Companies" means all of the corporations identified on Schedule
2.1.
"Cash and Cash Equivalents" means, at any time, any assets which are in
the form of, or are readily convertible into money, including, without
limitation, cash, checks and other negotiable instruments, deposits with any
bank or financial institution (whether as demand deposits or time deposits and
whether or not evidenced by certificates of deposit), and readily marketable
securities of any type.
"Closing" means the consummation of the transactions contemplated by this
Agreement.
"Closing Audit" has the meaning specified in Section 2.8(a) hereof.
"Closing Balance Sheet" means the balance sheet prepared pursuant to
Section 2.8(a).
"Closing Date" means January 31, 1997 or, if the conditions to Closing are
not by then satisfied, on such date following satisfaction of such conditions
(other than conditions to be satisfied at Closing according to the terms
hereof) as the Parties may agree in writing but not later than February 15,
1997 or, if any conditions are not satisfied as a result of factors beyond the
control of either Party, not later than March 31, 1997.
"COBRA" means the Consolidated Omnibus Budget Reconciliation Act of 1985,
as amended.
"Code" means the Internal Revenue Code of 1986, as from time to time
amended.
"Confidential Memorandum" means the confidential memorandum relating to
the Plastics Group of Seller dated September, 1996.
"Consideration" has the meaning set forth in Section 2.3 hereof.
"Contract" means any contract, agreement, arrangement, understanding,
lease, indenture, evidence of indebtedness, binding commitment or instrument,
purchase order, or offer, written or oral, entered into or made by or on behalf
of any Seller Group Person, or to which any Seller Group Person is a party, or
by which it or its property is bound, in connection with the Business.
"Court" means any court, grand jury, administrative or regulatory body,
Government agency, arbitration or mediation panel or similar body.
"Covenant Not to Compete" means the obligations of the Non-Purchased
Entities under Article VI.
"Dollars" or "$" means United States Dollars.
"Effective Time" means the effective time of the Closing, which shall be
as of the close of business on the Closing Date.
"Employee" means any employee of any Seller Group Person in connection
with the Business, including any retired, laid-off, on-leave, former or
terminated employee.
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"Employee Plan/Agreement" has the meaning set forth in Section 3.26
hereof.
"Environmental Law" means any current or past Law relating to the
protection of health or the environment, including without limitation: the
Clean Air Act, the Federal Water Pollution Control Act, the Resource
Conservation and Recovery Act, the Comprehensive Environmental Response,
Compensation and Liability Act, the Toxic Substance Control Act, any comparable
state or foreign Law, and the common law, including the law of nuisance and
strict liability.
"Environmental Permits" means all permits, registrations, approvals and
licenses, and all filings with and submissions to any Government or other
authority, required by any Environmental Law.
"Environmental Property" means all assets and property currently or
previously owned, leased, operated or used by any Seller Group Person or any
entity previously owned by a Seller Group Person for which Successor liability
may exist.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Escrow Agreement" means the form of agreement attached as Exhibit C.
"Excluded Assets" means (i) the PMC Note, (ii) Cash and Cash Equivalents,
(iii) any office equipment, computers or similar items which are located at
Seller's headquarters at 1695 River Road, Des Plaines, Illinois and neither
necessary for the operation of the Business nor included on the Balance Sheet
or in the Confidential Memorandum, (iv) any computer software relating to
Seller's option program or dividend program that is neither necessary for
payment of compensation to Employees in Puerto Rico or the operation of the
Business nor included on the Balance Sheet or in the Confidential Memorandum,
and (v) computer software and hardware relating to Seller's Tek Pak Division on
PIC-based computer software on General Automation hardware (the "Tek Pak
Software and Hardware"), provided, that Seller shall upon Closing license to
Buyer, at no cost to Buyer, the Tek Pak Software and Hardware for so long as
such Tek Pak Software and Hardware is required to operate the Business in an
efficient manner, and such license shall be included in the Intellectual
Property.
"Excluded Liabilities" means all Liabilities of any Seller Group Person
other than the Assumed Liabilities.
"Existing Names" has the meaning set forth in Section 5.9 hereof.
"Final Purchase Price" means the Purchase Price following adjustment
pursuant to Section 2.9.
"Financial Statements" means the Balance Sheet, the Other Statements, and
the Other Financial Statements.
"GAAP" means U.S. generally accepted accounting principles applied on a
consistent basis.
"Government" means the United States of America, any other nation or
sovereign state, the European Union, any federal, bilateral or multilateral
governmental authority, the Commonwealth of Puerto Rico, any state, possession,
territory, county, district, city or other governmental unit or subdivision,
and any branch, agency, or judicial body of any of the foregoing.
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"Government Contract" means any prime contract, subcontract, teaming
agreement or arrangement, joint venture, basic ordering agreement, letter
contract, purchase order, delivery order, change order, or other arrangement of
any kind in writing, (A) between a Seller Group Person, in connection with the
Business, and (i) a Government, (ii) any prime contractor of a Government,
(iii) any subcontractor with respect to any contract described in clauses (i)
or (ii) above, or (B) to which a Seller Group Person, in connection with the
Business, is a party, or by which it is bound and which is financed by a
Government and subject to the rules and regulations of such Government
concerning procurement.
"Hazardous Materials" means any pollutants, contaminants, hazardous
substances, hazardous chemicals, toxic substances, hazardous wastes, infectious
wastes, radioactive materials, petroleum including crude oil or any fraction
thereof, asbestos fibers, or solid wastes or other hazardous materials.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976
(incorporated as Section 7A of the Clayton Act), as amended.
"Intellectual Property" means all of the following (in whatever form or
medium) which are owned by or licensed to any Seller Group Person in connection
with the Business: patents, trademarks, service marks, trade names, corporate
names, copyrights, and copyrighted works; registrations thereof and
applications therefor; trade secrets, software (whether in source code or
object code), firmware, mask works, programs, inventions, discoveries,
proprietary processes, and items of proprietary know-how, information, data or
intellectual property; proprietary prospect lists, customer lists, projections,
analyses, and market studies; and licenses, sublicenses, assignments, and
agreements in respect of any of the foregoing; provided, however, that
Intellectual Property shall not include trademarks, service marks, trade names
or corporate names for "Schawk, Inc." or "Schawk Graphics."
"Law" means any statute, law, treaty, ordinance, rule, regulation,
instrument, directive, decree, order, or injunction of any Government,
quasi-governmental authority, or Court, and includes any rule or regulation of
any regulatory or self-regulatory authority compliance with which is required
by law.
"Liability" means any liability and/or obligation, whether or not required
to be reflected on the financial statements of a business.
"Lien" means any lien, security interest, mortgage, option, lease,
tenancy, occupancy, covenant, condition, easement, agreement, pledge,
hypothecation, charge, claim, restriction, or other encumbrance of every kind
and nature.
"Non-Purchased Entities" means all Seller Group Persons which are not a
Purchased Entity.
"Notice of Dispute" means a notice to Buyer delivered pursuant to Section
2.8(b), specifying in reasonable detail all points of disagreement with the
computation of Working Capital set forth on the Closing Balance Sheet.
"Order" means an order, judgment, writ, injunction, award or decree of any
Court or Government.
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"Ordinary Course" means, with respect to the Business, only the ordinary
course of commercial operations customarily engaged in by such Business
consistent with past practices, and specifically does not include (a) activity
(i) involving the purchase or sale of such business or of any product line or
business unit, (ii) involving modification or adoption of any Employee
Plan/Agreement or (iii) which requires approval by the board of directors or
shareholders of a corporation engaged in such business, or (b) the incurrence
of any liability for any tort or any breach or violation of or default under
any Contract or Law.
"Other Financial Statements" means the unaudited consolidated, and
consolidating balance sheets of the Seller as of September 30, 1996, and the
audited consolidated, and consolidating balance sheets of the Seller as of
December 31, 1995, 1994, and 1993 and the related statements of earnings,
stockholders' equity and cash flows for the periods then ended, together with
all notes or schedules thereto, attached on Schedule 3.3.
"Other Statements" means the balance sheets, statements of earnings and
cash flows of the Business, other than the Balance Sheet, as of September 30,
1996, and December 31, 1995, 1994, and 1993, and all notes and schedules
thereto, attached on Schedule 3.3.
"Party" means either Buyer or Seller, and "Parties" means both of them but
does not include a Buyer Company other than Buyer or a Seller Group Person
other than Seller.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Permitted Liens" has the meaning specified in Section 3.9(a) hereof.
"Person" means any natural person, any domestic or foreign corporation,
partnership, limited liability company, limited liability partnership, joint
venture, association, company, or other legal entity, and any Government.
"PMC Note" means the note in the amount of $2,437,000 identified on the
Balance Sheet and any account receivable from Plastic Molded Concepts, Inc.,
not arising from the sale of goods and inventory.
"Puerto Rico Grant" means the Grant of Industrial Tax Exemption applicable
to the Business issued by the Commonwealth of Puerto Rico.
"Purchased Assets" means all of the Assets other than the Excluded Assets.
"Purchased Entity" means any corporation that any Buyer Company is
purchasing an equity interest in pursuant to this Agreement which is set forth
on Schedule 1.1(b).
"Purchased Entity Purchase Agreement" means the form of agreement attached
as Exhibit D.
"Purchase Price" shall mean the amount set forth in Section 2.7(b).
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"Real Property" means each parcel of real property included in the
Purchased Assets, including without limitation all buildings, plants,
warehouses, facilities and other improvements and fixtures thereon and
appurtenances thereto.
"Returns" means returns, reports, estimated tax and informational
statements and returns relating to Taxes which are, were or will be required by
Law to be filed by any Seller Group Person or other Tax Affiliate of Seller in
connection with the Business, and all information returns (e.g., Form W-2, Form
1099) and reports relating to Taxes or Employee Plan/Agreement. Any one of the
foregoing Returns may be referred to sometimes as a "Return".
"Seller" has the meaning set forth in the Preamble.
"Seller Company" means any Seller Group Person which is a corporation.
"Seller Group" means Seller and all Affiliates of Seller.
"Seller Group Person" means a Person included in the Seller Group.
"Seller Group Persons" means all of the persons included in the Seller
Group.
"Shares" has the meaning specified in Section 3.10(b) hereof.
"Tax Affiliate" means any member of an Affiliated Group of which Seller is
or was a member, or any member of a combined or unitary group of which Seller
is or was a member.
"Taxes" means all taxes, charges, fees, levies or other like assessments
imposed or assessed by any Government, including without limitation income,
profits, windfall profit, employment (including Social Security, state pension
plans, and unemployment, workmen's, and occupational and non-occupational
disability insurance required by Law), withholding, payroll, franchise, gross
receipts, sales, use, transfer, stamp, occupation, real or personal property,
ad valorem, value added, premium, and excise taxes; Pension Benefit Guaranty
Corporation premiums and any other like Government charges; and shall include
all penalties, fines, assessments, additions to tax, and interest resulting
from, attributable to, or incurred in connection with such Taxes or any contest
or despite thereof. Any one of the foregoing Taxes may be referred to
sometimes as a "Tax."
"Title Commitment" has the meaning specified in Section 7.13(a) hereof.
"Title Company" has the meaning specified in Section 7.13(a) hereof.
"WARN Act" means the Worker Adjustment and Retraining Notification Act, as
amended.
"Working Capital" means (x) current assets (as identified on the Balance
Sheet) excluding Cash and Cash Equivalents, and the PMC Note, minus (y) current
liabilities (as identified on the Balance Sheet, all determined in accordance
with GAAP; for purposes of the Closing Balance Sheet, current assets shall be
included to the extent included in the Purchased Assets, and current
liabilities shall be included to the extent arising from Assumed Liabilities or
Liabilities of a Purchased Entity, or a reserve or accrual relating thereto.
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ARTICLE II
PURCHASE AND SALE OF PURCHASED ASSETS
2.1 ASSETS TO BE PURCHASED. Subject to the terms and conditions hereof,
on the Closing Date and as of the Effective Time, a Seller Group Person shall
sell to a Buyer Company, as identified on Schedule 2.1, free and clear of all
Liens, all right, title and interest in and to, collectively, all of the
Purchased Assets, except for Purchased Assets to the extent owned by Purchased
Entities.
2.2 ASSUMED LIABILITIES.
(a) Subject to the terms and conditions hereof, on the Closing Date and
as of the Effective Time, a Seller Group Person shall assign and transfer to a
Buyer Company, as identified on Schedule 2.1, and a Buyer Company shall assume,
only the Assumed Liabilities.
(b) Notwithstanding the foregoing, if the assignment or transfer of any
obligation or instrument would cause a breach thereof and if no required
consent to such assignment or transfer has been obtained, then, at the Buyer's
election and in its sole discretion, and subject to the Buyer's right to
require strict compliance with Section 7.10 hereof, such obligation or
instrument shall not be assigned or transferred, but a Buyer Company shall act
as agent for the applicable Seller Group Person in order to obtain for the
applicable Buyer Company the benefits under such obligation or instrument.
(c) EXCEPT AS EXPRESSLY AND UNAMBIGUOUSLY PROVIDED IN THIS SECTION 2.2,
NEITHER BUYER, NOR ANY BUYER COMPANY, NOR ANY AFFILIATE OF ANY BUYER COMPANY
ASSUMES OR AGREES TO BECOME LIABLE FOR OR SUCCESSOR TO ANY LIABILITIES OR
OBLIGATIONS WHATSOEVER, LIQUIDATED OR UNLIQUIDATED, KNOWN OR UNKNOWN,
CONTINGENT OR OTHERWISE, WHETHER OF SELLER, ANY SELLER GROUP PERSON, ANY
PREDECESSOR THEREOF, OR ANY OTHER PERSON, OR OF THE BUSINESS. NO OTHER
STATEMENT IN OR PROVISION OF THIS AGREEMENT AND NO OTHER STATEMENT, WRITTEN OR
ORAL, ACTION, OR FAILURE TO ACT INCLUDES OR CONSTITUTES ANY SUCH ASSUMPTION OR
AGREEMENT, AND ANY STATEMENT TO THE CONTRARY BY ANY PERSON IS UNAUTHORIZED AND
HEREBY DISCLAIMED.
2.3 CONSIDERATION. The Consideration shall be the aggregate of (a) the
Final Purchase Price, plus (b) the amount of the Assumed Liabilities.
2.4 ALLOCATION OF CONSIDERATION. The Consideration provided for in
Section 2.3 shall be allocated among the Purchased Assets, Assumed Liabilities
and Covenant Not to Compete, and among foreign jurisdictions, as provided in
Schedule 2.4 hereto.
2.5 CLOSING. The Closing shall take place at 9:00 a.m. local time at the
offices of Vedder, Price, Kaufman & Kammholz located at 222 North LaSalle
Street, Chicago, Illinois, 60601-1003.
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2.6 DELIVERIES OF SELLER AT CLOSING. At Closing, subject to the
conditions to Seller's obligations in Article VIII, Seller shall execute and
deliver or cause to be delivered the documents identified in Article VII.
2.7 DELIVERIES OF BUYER AT CLOSING. At Closing, subject to the conditions
to Buyer's obligations in Article VII, Buyer shall (a) execute and deliver or
cause to be delivered the documents identified in Article VIII and (b) transfer
by wire transfer, to an account designated by Seller not less than two business
days before the Closing Date, the sum (the "Purchase Price") of (i) Ninety Two
Million Dollars ($92,000,000) plus (ii) the amount of Cash and Cash Equivalents
of the Purchased Entities as of the Closing Date (based on an estimate as of
December 31, 1996 (the "December Cash Estimate")).
2.8 DETERMINATION OF CLOSING WORKING CAPITAL.
(a) As of the Closing Date, Buyer shall conduct an audit and
examination of the Purchased Assets and the Assumed Liabilities (the "Closing
Audit") at Buyer's sole cost and expense. The Seller, at its sole cost and
expense, may have a representative participate in the taking of the physical
inventory in connection with the Closing Audit. On the basis of such Closing
Audit, Buyer shall prepare with the assistance of Seller personnel as requested
by Buyer a balance sheet as of the Closing Date (the "Closing Balance Sheet")
including a computation of Working Capital, as of the Closing Date, of the
Business, in accordance with GAAP except as set forth in Schedule 2.8 applied
consistently with the accounting policies and procedures followed, and utilizing
similar classifications used, in preparing the Balance Sheet, provided such
policies and procedures are in accordance with GAAP except as set forth in
Schedule 2.8. Buyer shall deliver the Closing Balance Sheet to the Seller not
later than 45 days after the Closing Date. Each Party (the "Reviewed Party")
shall, upon the request of the other party (the "Requesting Party"), provide the
Requesting Party's representatives with reasonable access to the Reviewed
Party's accountants and, to the extent permitted by internal rules and
procedures of the Reviewed Party's accountants, use its reasonable best efforts
to provide equal access to such accountant's work papers at such accountant's
place of business and in such accountant's presence, in order to facilitate the
Requesting Party's review of such Closing Balance Sheet. In preparing such
Closing Balance Sheet, inventory shall be valued on a basis consistent with the
inventory valuation in the Balance Sheet.
(b) If the Seller disputes the computation of Working Capital set forth on
the Closing Balance Sheet as delivered by Buyer, then not more than 20 days
after the date the Seller receives the Closing Balance Sheet the Seller shall
provide to Buyer a Notice of Dispute. Upon receipt of the Notice of Dispute,
Buyer shall promptly consult with the Seller with respect to its specified
points of disagreement in an effort to resolve the dispute. If any such
dispute cannot be resolved by Buyer and the Seller within 20 days after Buyer
receives the Notice of Dispute, or any mutually agreed upon extension to such
period, they shall refer the dispute to a partner in and designated by Arthur
Andersen LLP, certified public accountants (the "Arbiter"), as an arbitrator to
finally determine, as soon as practicable, and in any event within 30 days
after such referral, all points of disagreement with respect to the computation
of Working Capital set forth on the Closing Balance Sheet. The Parties
represent and warrant that neither of them has a material pre-existing
relationship with the Arbiter. For purposes of such arbitration each Party
shall submit a proposed computation of Working Capital; Buyer's proposals need
not be identical to the computation of Working Capital set forth on the Closing
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Balance Sheet and delivered pursuant to Section 2.8(a). Any items included in
Buyer's computation of Working Capital not specifically disputed by Seller
shall be deemed accepted and not subject to arbitration. The Arbiter shall
apply the terms of this Section 2.8 and the other relevant provisions of this
Agreement, and shall otherwise conduct the arbitration under such procedures as
the Parties may agree or, failing such agreement, under the Commercial
Arbitration Rules of the American Arbitration Association. Upon the conclusion
of the arbitration proceeding, the Arbiter shall choose either Buyer's
computation of Working Capital or Seller's computation. The Arbiter shall not
independently calculate Working Capital. The fees and expenses of the
arbitration and the Arbiter incurred in connection with the arbitration of the
computation of Working Capital shall be paid by the non-prevailing party;
provided, that such fees and expenses shall not include, so long as a Party
complies with the procedures of this Section 2.8, the other Party's outside
counsel or accounting fees. All determinations by the Arbiter shall be final,
conclusive, binding and not subject to judicial review or appeal with respect
to the computation of Working Capital and the allocation of arbitration fees
and expenses.
2.9 POST-CLOSING ADJUSTMENT. The Purchase Price shall be adjusted as
follows, based on the computation of Working Capital set forth in the Closing
Balance Sheet determined under Section 2.8(a) or if necessary, 2.8(b):
(a) If such Working Capital is less than $13,895,000 Seller shall pay
to Buyer such difference;
(b) If such Working Capital is greater than $13,895,000 Buyer shall pay
to Seller such difference;
(c) If the December Cash Estimate is greater than the Cash and Cash
Equivalents of the Purchased Entities as of the Closing Date as listed on the
Closing Balance Sheet, Seller shall pay to Buyer such difference;
(d) If the December Cash Estimate is less than the Cash and Cash
Equivalents of the Purchased Entities as of the Closing Date as listed on the
Closing Balance Sheet, Buyer shall pay to Seller such difference; and
(e) Any payment required to be made by Buyer or Seller pursuant to
paragraphs (a), (b), (c), or (d) above shall be by wire transfer of funds not
more than three days after final determination thereof.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
The Seller hereby makes the following representations and warranties, each
of which is true and correct on the date hereof and each of which shall survive
the Closing Date and the transactions contemplated hereby. With respect to any
representation or warranty of the Seller in this Article III which is qualified
by or to the Seller's or any Seller Group Person's knowledge, such knowledge
shall
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be deemed to exist only if the persons listed on Schedule 3.0 have knowledge of
the matter to which such qualification applies.
3.1 CORPORATE EXISTENCE AND POWER OF SELLER.
(a) True and complete copies of the articles or certificate of
incorporation and bylaws and all amendments thereto of each Seller Company,
certified by its secretary, are attached as Schedule 3.1. Each Seller Company
is a corporation duly organized, validly existing and in good standing under
the Laws of the jurisdictions indicated therein.
(b) Each Seller Company has the corporate power and authority, and each
other Seller Group Person has the legal power and authority, to own and use its
Assets and to transact the business in which it is engaged, holds all
franchises, licenses and permits necessary and required therefor. Further,
each Seller Company is duly licensed or qualified to do business as a foreign
corporation and is in good standing in each jurisdiction where such license or
qualification is required, except where the failure to be so qualified could
not be reasonably expected to have a material adverse effect on such Seller
Company. Each Seller Company has the corporate power, and each other Seller
Group Person has the legal power, to enter into this Agreement, to perform its
obligations hereunder, and to consummate the transactions contemplated hereby.
3.2 APPROVAL AND ENFORCEABILITY OF AGREEMENT.
(a) The execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby have been duly authorized, approved and
ratified by all necessary action on the part of each Seller Group Person.
Pursuant to such resolutions, authorizations, consents, approvals and/or
ratifications, the Seller has full authority to enter into and deliver this
Agreement, to perform its obligations hereunder and to cause each other Seller
Group Person to perform their respective obligations hereunder, and to
consummate, and to cause each other Seller Group Person to consummate, the
transactions contemplated hereby.
(b) Assuming the due execution and delivery hereof by Buyer, this
Agreement is a legal, valid and binding obligation of Seller, enforceable
against Seller according to its terms.
3.3 FINANCIAL STATEMENTS.
(a) Attached as Schedule 3.3 hereto are the Financial Statements.
(b) The Financial Statements were derived from the books and records of
the Seller and (i) are true, complete, and correct, (ii) present fairly the
financial position, results of operations, and cash flows of the Business and
the Seller, as indicated, at the dates and for the periods indicated, (iii)
have been prepared in accordance with GAAP applied on a basis consistent with
previous periods, and (iv) do not include any untrue statement of a material
fact required to be stated or reflected therein or omit to state or reflect any
material fact necessary to make any statements therein not misleading.
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(c) The Balance Sheet and the Other Statements have been prepared on a
basis consistent with the Reports on Form 10-Q of Seller filed with the
Securities and Exchange Commission.
3.4 EVENTS SUBSEQUENT TO SEPTEMBER 30, 1996. Since September 30, 1996,
except as set forth on Schedule 3.4, there has been no:
(a) change in the Business Condition of the Business other than changes
in the Ordinary Course, none of which have been materially adverse and, to the
knowledge of each Seller Group Person, no such change will arise from the
consummation of the transactions contemplated hereby;
(b) loss or, to the knowledge of each Seller Group Person, threatened
loss of a customer account;
(c) damage, destruction or loss, other than reasonable wear and tear,
involving Assets with a fair market value or book value of $10,000 or more,
whether covered by insurance or not, affecting the Purchased Assets;
(d) declaration, setting aside, or payment of any dividend or any
distribution (in cash or in kind) with respect to any securities of any
Purchased Entities;
(e) payment of fees or expenses of counsel, accountants and other
experts incurred by any Purchased Entities incident to the negotiation,
preparation or execution of this Agreement or the Closing;
(f) increase in or commitment to increase compensation, benefits, or
other remuneration to or for the benefit of any shareholder, member, partner,
director, officer, Employee or agent in respect of the Business, any other
Person, or any benefits granted under any Employee Plan/Agreement with or for
the benefit of any such shareholder, member, partner, director, officer,
Employee, agent or Person;
(g) transaction entered into or carried out by any Seller Group Person
in respect of the Business other than in the Ordinary Course of the Business;
(h) borrowing or incurrence of any indebtedness (including letters of
credit and foreign exchange contracts), contingent or other, by or on behalf of
any Seller Group Person or any endorsement, assumption, or guarantee of payment
or performance of any Indebtedness or Liability of any other Person or entity
by any Seller Group Person in respect of the Business, except as provided under
the credit facilities listed as Exhibit 10.18, 10.19 and 10.20 of the Seller's
Form 10-K for the period ended December 31, 1995 as filed with the Securities
and Exchange Commission;
(i) change made by any Seller Group Person in its Tax or financial
accounting or any Tax election;
(j) grant of any Lien with respect to the Purchased Assets;
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(k) transfer or reclassification for accounting purposes of any Assets
other than arm's-length sales, leases, or dispositions in the Ordinary Course
of the Business;
(l) material modification or termination of any Contract with an
aggregate contract value of $50,000 or any material term thereof;
(m) lease or acquisition of any capital assets included in the
Purchased Assets with a value greater than $10,000 per item, unless Buyer has
consented to such lease or acquisition;
(n) in connection with the Business, loan or advance to any Person
except for advances not material in amount made in the Ordinary Course of the
Business to Employees;
(o) management of current assets and current liabilities constituting
Working Capital (and the level thereof) in a manner inconsistent with current
practices or the preparation of the Balance Sheet; or
(p) commitment or agreement by any Seller Group Person to do any of the
foregoing items (d) through (o).
3.5 INVENTORIES. All finished goods held by any Seller Group Person at
any location are merchantable in the Ordinary Course of the Business, except to
the extent of any reserve therefor on the Balance Sheet, and all inventories
held by any Seller Group Person at any location are (i) valued at the lower of
cost or market (cost being determined by the FIFO accounting method) in the
same manner as recorded on the Balance Sheet and (ii) written off to the extent
physically damaged, previously used, obsolete, discontinued, "excess" or "old."
"Excess" inventory shall mean (i) with respect to products in existence more
than 12 months, the amount of inventory in excess of a 12 month supply based on
actual sales of such products over the last 12 months, and (ii) with respect to
products introduced within the last 12 months, the amount of such inventory in
excess of a 24 month supply based upon forecasted sales, which forecast has been
prepared by the Seller in a commercially reasonable manner. "Old" inventory
shall mean any item of inventory which has been held by Seller for more than 24
months. Except as set forth on Schedule 3.5, no Seller Group Person holds in
connection with the Business any Purchased Assets on consignment or has title to
or ownership of any Purchased Assets in the possession of others.
3.6 ACCOUNTS AND NOTES RECEIVABLE. Set forth on Schedule 3.6(a) hereto
are all accounts and notes receivable of all Seller Group Persons and an aging
schedule related thereto, each as of September 30, 1996, June 30, 1996 and
December 31, 1995. Such accounts and notes receivable are, and any accounts
and notes receivable arising between such date and the Closing Date shall be,
valid, genuine and subsisting, and except as set forth on Schedule 3.6(b), all
such accounts and notes receivable arose or will have arisen in the Ordinary
Course of the Business. Such accounts and notes receivable are not, and will
not be on the Closing Date, subject to any defense, set-off, counterclaims or
Lien, except for customer disputes in the Ordinary Course of the Business in
respect to which adequate reserves are maintained on the Business' books and
records. Except to the extent of any reserve therefor on the Financial
Statements or paid in full prior to Closing, all accounts and notes receivable
are and will be current and accounted for in accordance with GAAP.
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3.7 UNDISCLOSED LIABILITIES. To the knowledge of each Seller Group
Person, no Seller Group Person has, in connection with the Business, any
Liabilities whatsoever, asserted or unasserted, liquidated or unliquidated,
accrued, absolute, contingent, or otherwise, and there is no basis for any
claim against any Seller Group Person in connection with the Business for any
such Liability except (a) to the extent set forth and used in determining the
consolidated net worth of the Business on the Balance Sheet, (b) to the extent
set forth on Schedule 3.7, or (c) Liabilities incurred in the Ordinary Course
of the Business since the Balance Sheet Date, none of which will, or could,
have an adverse effect upon the Business Condition of the Business.
3.8 TAXES.
(a) All Returns required to be filed by any Seller Group Person in
connection with the Business or by any Purchased Entity on or prior to the
Closing Date with respect to Taxes have been or will be timely filed.
(b) All amounts shown on each of such Returns have been paid or will be
paid when due.
(c) Any Taxes which are to be assumed by Buyer in respect of the
Purchased Assets which are attributable to the Seller Group for either its
operations on or before the Closing Date, or attributable to the Agreement,
which are not yet due and owing, but which will be due within 12 months of the
Closing Date, will be adequately reflected on the Closing Balance Sheet as a
Current Liability for Taxes, other than increases after the Closing Date in ad
valorem real estate taxes assessed against the Real Property in accordance with
past practice. All other liabilities for Taxes (non-current in nature) will be
adequately reflected on the Closing Balance Sheet as a reserve for Taxes.
(d) There are no grounds for the assertion or assessment of any Taxes
against the Purchased Assets or the Business other than those reflected or
reserved against on the Closing Balance Sheet.
(e) Neither the Purchased Assets nor the Business or will be encumbered
by any Liens arising out of any unpaid Taxes and there are no grounds for the
assertion or assessment of any Liens against the Purchased Assets or the
Business in respect of any Taxes (other than Liens for Taxes if payment thereof
is not yet required, and which are set forth on Schedule 3.8(e) hereto).
(f) The transactions contemplated by this Agreement will not give rise
to (i) the creation of any Liens against the Purchased Assets or the Business in
respect of any Taxes or (ii) the assertion of any additional Taxes against the
Purchased Assets or the Business.
(g) Except as set forth on Schedule 3.8(g), there is no action or
proceeding or unresolved claim for assessment or collection, pending or
threatened, by, or present or expected dispute with, any Government authority
for assessment or collection from any Seller Group Person of any Taxes of any
nature affecting the Purchased Assets or the Business.
(h) There is no extension or waiver of the period for assertion of any
Taxes against any Seller Group Person affecting the Purchased Assets or the
Business.
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(i) Except as set forth on Schedule 3.8(i), no Seller Group Person is a
"foreign person" within the meaning of Section 1445(f)(3) of the Code.
(j) None of the Purchased Assets or Assumed Liabilities is subject to,
or constitute, a safe harbor lease within the meaning of Section 168(f)(8) of
the Code.
(k) None of the Purchased Assets have been financed with, or directly
or indirectly secures, any industrial revenue bonds or debt, the interest on
which is tax exempt under Section 103(a) of the Code.
(l) Except as set forth on Schedule 3.8(l), none of the Purchased
Assets, Contracts, or Assumed Liabilities will constitute a partnership, joint
venture, or other arrangement or contract that could be treated as a partnership
for federal income tax purposes.
(m) Except as set forth on Schedule 3.8(m), none of the Purchased
Assets consist of stock in a subsidiary of any Seller Group Person.
(n) None of the Purchased Assets is tax-exempt use property within the
meaning of Section 168(h) of the Code.
(o) None of the Purchased Assets is subject to a tax indemnification
agreement.
(p) None of the exemptions, grants or tax holidays with respect to
Taxes or tax credits, as disclosed in the Confidential Memorandum, have expired
or have been made null and void or otherwise invalid by any action or lack of
action on the part of the Seller Group. The Seller Group will take no action
nor make any election which by so doing would alter the status of such
exemption, grant, or tax holiday, other than the transfer of the Puerto Rico
Grant. To the knowledge of any Seller Group Person, the consummation of the
transactions will not result in the alteration of the status of such exemption,
grant, or tax holiday, other than the transfer of the Puerto Rico Grant.
Seller further agrees to perform any reasonable act or acts necessary to
preserve such exemptions, grants and tax holidays so that said benefits will
survive the Closing.
(q) None of the Purchased Assets includes any deferred tax asset.
3.9 REAL PROPERTY OWNED.
(a) Set forth on Schedule 3.9(a) hereto is a legal description of each
parcel of Real Property, a description of the title insurance policy or other
evidence of title issued with respect thereto and a description of the type of
use of each such parcel. Except for (i) current Taxes or assessments due but
not yet payable and (ii) Liens of record set forth on Schedule 3.9(a), none of
which is substantial in character or amount and none of which interferes with
the present use of the Real Property in any material way ("Permitted Liens"), a
Seller Group Person has good and marketable title to the Real Property free and
clear of all Liens and there exists no restriction on the use or transfer of
the Real Property. No Seller Group Person has in connection with the Business
any interest in or any right or obligation to acquire any interest in any
parcel of real property other than those described on Schedule 3.9(a).
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(b) All improvements located on, and the use presently being made of, the
Real Property comply, in all material respects, with all applicable zoning and
building codes, ordinances and regulations and all applicable fire,
environmental, occupational safety and health standards and similar standards
established by Law and, to the knowledge of each Seller Group Person, the same
use thereof by Buyer will not result in any violation of any such code,
ordinance, regulation or standard. The present use and operation of the Real
Property does not constitute a non-conforming use and is not subject to a
variance. Except as set forth on Schedule 3.9(b), to the knowledge of each
Seller Group Person, there is no proposed, pending or threatened change in any
such code, ordinance, regulation or standard which would adversely affect the
Business of the use of the Purchased Assets.
(c) At and after the Closing, a Buyer Company or a Purchased Entity shall
have the right to maintain or use such space, facilities or appurtenances
outside the building lines, whether on, over or under the ground, and to
conduct such activities thereon as maintained, used or conducted by any Seller
Group Person in connection with the Business on the date hereof and the Closing
Date and such right is not subject to revocation. At and after the Closing, a
Buyer Company or a Purchased Entity shall have all rights, easements and
agreements necessary for the use and maintenance of water, gas, electric,
telephone, sewer or other utility pipelines, poles, wires, conduits or other
like facilities, and appurtenances thereto, over, across and under the Real
Property. No proceeding is pending or, to the knowledge of each Seller Group
Persons, threatened which could adversely affect the zoning classification of
the Real Property.
(d) There is no unpaid property Tax, levy or assessment against the
Real Property not reflected on the Balance Sheet, nor is there pending or, to
the knowledge of each Seller Group Person, threatened any condemnation
proceeding against the Real Property or any portion thereof, other than
increases on or after the Closing in ad valorem taxes in accordance with past
practice. The Real Property consists of one or more legally subdivided
parcels, and the sale thereof as contemplated herein conforms to and complies
with all subdivision, land use and Environmental Laws. No part of any
improvements on the Real Property encroaches upon any property adjacent thereto
or upon any easement, nor is there any encroachment or overlap on to the Real
Property. Except as set forth as Schedule 3.9(d), to the knowledge of each
Seller Group Person, the Real Property is not located within an area of special
risk or hazard with respect to earthquake, flood or other natural disaster, and
the Real Property is not located within any flood plain or subject to any
similar type of restrictions for which permits or licenses are necessary to the
use thereof. Other than as described in Schedule 3.38, no Seller Group Person
has dealt with any broker, finder or other person in connection with the sale
of the Real Property in any manner that might give rise to any claim for
commissions against any Buyer Company or Purchased Entity or any Lien against
the Real Property.
(e) Except as set forth on Schedule 3.9(e), to the knowledge of each
Seller Group Person, there is no condition affecting the Real Property or the
improvements located thereon which requires repair or correction to restore the
same to reasonable operating condition. Set forth on Schedule 3.9(e) are
copies of documents, reports and agreements relating to any such conditions.
No assessments for public improvements have been made in respect of the Real
Property which are unpaid. Except as otherwise described on Schedule 3.9(e):
(i) there is no pending or, to the knowledge of each Seller Group Person,
threatened condemnation proceeding, administrative action or judicial
proceeding of any type relating to the Real Property or other matters affecting
adversely the current use, occupancy or value of the Real Property; (ii) the
Real Property does not serve any adjoining property
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for any purpose inconsistent with the use of the Real Property; (iii) there are
no leases, subleases, licenses, concessions or other agreements, written or
oral, granting to any person or entity the right to use or occupy any portion
of the Real Property; (iv) all water, gas, electrical, steam, compressed air,
telecommunication, sanitary and storm sewage lines and other utilities and
systems serving the Real Property are sufficient to enable the continued
operation of the Real Property as currently operated and as proposed to be
operated; (v) all certificates of occupancy, permits, licenses, approvals and
other authorizations required in connection with the past, present and proposed
operation of its business on the Real Property have been lawfully issued to a
Seller Group Person and are, as of the date hereof, and will be following the
consummation of the transactions contemplated hereby, in full force and effect;
and (vi) all Real Property has access to public roads and utilities necessary
to conduct the Business at such Real Property.
3.10 PERSONAL PROPERTY AND CAPITAL STOCK OWNED
(a) Except as set forth on Schedule 3.10(a) hereto, the Seller Group
Persons collectively have good and marketable title to all personal property
included in the Purchased Assets, including in each case all personal property
reflected on the Balance Sheet or acquired after the date thereof (except any
personal property subsequently sold in the Ordinary Course of the Business),
free and clear of all Liens, and there exists no restriction on the use or
transfer of such property.
(b) The Seller Group Persons collectively are the sole owners of record
and beneficial owners of shares of capital stock of the Purchased Entities (the
"Shares"). The number, type and record and beneficial owners of the Shares are
more fully described on Schedule 3.10(b) and such Shares are owned by the
Seller Group Persons free and clear of all security interests, claims and
restrictions. The Shares constitute 100 percent of the issued and outstanding
capital stock of the Purchased Entities, and are all validly issued, fully paid
and non-assessable.
3.11 REAL AND PERSONAL PROPERTY LEASED FROM SELLER GROUP PERSONS. Set
forth on Schedule 3.11 hereto is a description of each lease under which a
Seller Group Person is the lessor of any real or personal property in
connection with the Business. Seller has delivered to Buyer a true, correct
and complete copy of each lease identified on Schedule 3.11. The premises or
property described in such leases are presently occupied or used by the
respective lessees under the terms of such leases. All rentals or other
payments due under such leases have been paid and there exists no default under
the terms of any of such leases and no event has occurred which, upon passage
of time or the giving of notice, or both, would result in any event of default
or prevent such Seller Group Person from exercising and obtaining the benefits
of any rights contained therein. Except as set forth on Schedule 3.11, no
consent is necessary for the assignment or conveyance of such leases to the
Buyer Companies, and upon the Closing a Buyer Company or a Purchased Entity
will have all right, title and interest of the lessor under the terms of such
leases, free of all Liens.
3.12 REAL AND PERSONAL PROPERTY LEASED TO A SELLER GROUP PERSON. Set
forth on Schedule 3.12(a) hereto is a description of each lease involving
annual rental payments of $10,000 or more under which a Seller Group Person is
the lessee of any real property in connection with the Business, and on
Schedule 3.12(b) hereto is a description of each lease under which a Seller
Group Person is the lessee of any personal property in connection with the
Business. Seller has delivered to Buyer a true, correct and complete copy of
each lease identified on Schedules 3.12(a) and 3.12(b).
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The premises or property described in said leases are presently occupied or
used by a Seller Group Person as lessee under the terms of such leases.
Except as set forth on Schedules 3.12(a) and 3.12(b), all rentals due under
such leases have been paid and there exists no default under the terms of any
such leases and no event has occurred which, upon passage of time or the giving
of notice, or both, would result in any event of default or prevent such
Seller Group Person from exercising and obtaining the benefits of any rights or
options contained therein. The Seller Group Persons collectively have all
right, title and interest of the lessee under the terms of said leases, free of
all Liens and all such leases are valid and in full force and effect. Except
as set forth on Schedules 3.12(a) and 3.12(b), no consent is necessary for the
assignment to the Buyer Companies of such leases under which a Seller Group
Person is lessee. Upon the Closing, a Buyer Company or a Purchased Entity will
have all right, title and interest of the lessee under the terms of such
leases, free of all Liens. There is no default or basis for acceleration or
termination under, nor has any event occurred nor does any condition exist
which, with the passage of time or the giving of notice, or both, would
constitute a default or basis for acceleration under any underlying lease,
agreement, mortgage or deed of trust which default or basis for acceleration
would adversely affect any lease described on Schedules 3.12(a) or 3.12(b) or
the property or use of the property covered by such lease. Subject to any
consent required of a lessor as set forth on Schedules 3.12(a) and 3.12(b),
there will be no default or basis for acceleration under any such underlying
lease, agreement, mortgage or deed of trust as a result of the transactions
provided for in this Agreement.
3.13 INTELLECTUAL PROPERTY.
(a) Schedule 3.13(a) contains a true, complete and accurate list of all
the Intellectual Property. Schedule 3.13(a) accurately identifies, where
appropriate, one or more of the following, by country, for each item of the
Intellectual Property: filing date, issue date, classification of invention or
goods covered, licensor, license date and licensed subject matter. Schedule
3.13(a) contains a complete and accurate list of all licenses and other rights
granted by any Seller Group Person to any third party with respect to any item
of the Intellectual Property. True, complete and correct copies of the forms
of such customer licenses are included as part of Schedule 3.13(a).
(b) Seller represents and warrants as follows: (i) the Intellectual
Property was validly issued and, except as set forth on Schedule 3.13(b), no
Seller Group Person has received notice of the invalidity or unenforceability
of any Intellectual Property; (ii) there was no inequitable conduct in
obtaining any patent owned by a Seller Group Company and included in the
Intellectual Property; (iii) the Intellectual Property encompasses all
proprietary rights necessary for the conduct of the Business as presently
conducted or proposed to be conducted (in each case free and clear of all
Liens); (iv) each Seller Group Person has taken all commercially reasonable
actions necessary to maintain and protect the Intellectual Property; (v) to the
knowledge of each Seller Group Person, the owners of the Intellectual Property
licensed to any Seller Group Person have taken all actions necessary to
maintain and protect the Intellectual Property subject to such licenses; (vi)
there has been no claim made against any Seller Group Person asserting the
invalidity, misuse or unenforceability of any of the Intellectual Property or
challenging such Seller Group Person's right to use or ownership of any of the
Intellectual Property, and, to the knowledge of each Seller Group Person, there
are no grounds for any such claim or challenge; (vii) to the knowledge of each
Seller Group Person, there is and has been no infringement or misappropriation
of any of the Intellectual Property; (viii) the conduct of the Business has not
infringed or misappropriated, and does not infringe or misappropriate, any
intellectual property or
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proprietary right of any other entity; (ix) no loss of any of the Intellectual
Property is presently threatened or pending; and (x) the consummation of the
transactions contemplated by this Agreement will not alter, impair or
extinguish any of the Intellectual Property.
3.14 NECESSARY PROPERTY AND TRANSFER OF PURCHASED ASSETS. The Purchased
Assets and the Assumed Liabilities constitute all of the Seller Group Persons'
property and property rights now necessary for the conduct of the Business in
the manner and to the extent presently conducted by the Seller Group Persons.
The Assets constitute all of the Seller Group Persons' property and property
rights now used for the conduct of the Business in the manner and to the extent
presently conducted by the Seller Group Persons. No such assets or property
are in the possession of others and, in connection with the Business, the
Seller Group Persons hold no property on consignment. Except as set forth on
Schedule 3.14 hereto, no consent is necessary to, and there exists no
restriction on, the transfer of any of the Purchased Assets or the assignment
of the Assumed Liabilities to the Buyer Companies. There exists no condition,
restriction or reservation affecting the title to or utility of the Purchased
Assets or Assumed Liabilities which would prevent the Buyer Companies from
occupying or utilizing the Purchased Assets or enforcing the rights under the
Assumed Liabilities, or any part thereof, to the same full extent that a Seller
Group Person might continue to do so if the sale and transfer contemplated
hereby did not take place. Upon the Closing, good and marketable title to the
Purchased Assets attributable to the Non-Purchased Entities and the rights
under the Assumed Liabilities shall be vested in the Buyer Companies, and
good and marketable title to the Purchased Assets attributable to the Purchased
Entities shall remain vested in the Purchased Entities, in all cases free and
clear of all Liens.
3.15 USE AND CONDITION OF PROPERTY. The Purchased Assets include
sufficient Assets in good operating condition and repair as are required for
the operation of the Business as presently conducted, and conform, in all
material respects, to all applicable Laws, and no notice of any violation of
any Law relating to any of the Purchased Assets has been received by Seller or
any other Seller Group Person except such as have been fully complied with.
There is no pending or, to the knowledge of each Seller Group Person,
threatened condemnation proceeding or similar action affecting the Purchased
Assets or with respect to any streets or public amenities appurtenant thereto
or in the vicinity thereof which would adversely affect the Business or the use
of the Purchased Assets.
3.16 LICENSES AND PERMITS. Set forth on Schedule 3.16 hereto is a
description of each license or permit required for the conduct of the Business
together with the name of the Government agency or entity issuing such license
or permit. Such licenses and permits are valid and in full force and effect.
Except as noted on Schedule 3.16, such licenses and permits are freely
transferable by the applicable Seller Group Person, and upon Closing the Buyer
Companies will have all right, title and interest of the holder thereof.
3.17 CONTRACTS--DISCLOSURE. Except as set forth in Schedule 3.17 there is
not outstanding:
(a) any single Contract providing for an expenditure by any Seller
Group Person in excess of $25,000, Contracts with the same or affiliated
vendor(s) providing for an expenditure by any Seller Group Person in excess of
$25,000 or any Contracts in the aggregate providing for expenditures by any
Seller Group Persons in excess of $50,000, for the purchase of any real
property, machinery, equipment or other items which are in the nature of
capital investment;
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(b) any single Contract providing for an expenditure by any Seller
Group Person in excess of $50,000, Contracts with the same or affiliated
vendor(s) providing for an expenditure by any Seller Group Person in excess of
$50,000, or Contracts in the aggregate providing for expenditures by any
Seller Group Persons in excess of $100,000, for the purchase of raw materials,
supplies, component parts or any other items or services;
(c) any Contract to sell products or to provide services to third
Persons which (i) is at a price which would result in a loss at the gross
profit line on the sale of such products or providing of such services, (ii) is
pursuant to terms or conditions which a Seller Group Person cannot reasonably
expect to satisfy or fulfill in their entirety, or (iii) involves more than
$50,000 or which, together with all other Contracts to or with the same
party or affiliated parties involves more than $50,000;
(d) any Contract for materials, supplies, component parts or other
items or services in excess of the normal, ordinary, usual and current
requirements of the Business or at a price in excess of the current reasonable
market price;
(e) in connection with the Business, any revocable or irrevocable
guaranty, indemnity, or power of attorney;
(f) in connection with the Business, any evidence of indebtedness, loan
agreement, indenture, promissory note, letter of credit, foreign exchange
contract, conditional sales agreement or other similar type of agreement except
as provided under the credit facilities listed as Exhibit 10.18, 10.19 and
10.20 of the Seller's Form 10-K for the period ended December 31, 1995 as filed
with the Securities and Exchange Commission;
(g) any Contract which involves (i) a sharing of profits, (ii) future
payments of $25,000 or more per annum to other Persons, or (iii) any joint
venture, partnership or similar arrangement;
(h) any Contract involving any sales agency, sales representation,
distributorship or franchise;
(i) any Contract containing covenants limiting the freedom of any
Seller Group Person, in connection with the Business, to compete in any line of
business or with any Person or in any area;
(j) any Contract not made in the Ordinary Course of the Business; or
(k) any Government Contract;
(l) any Contract between any Seller Group Persons;
(m) any other Contract which is material to the Business which is not
cancelable without penalty on thirty (30) days notice or less and which is not
set forth on another Schedule.
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3.18 CONTRACTS--VALIDITY, ETC.
(a) Except as otherwise disclosed on Schedule 3.17, each Contract on
Schedule 3.17 and any other Contract which is material to the Business is a
valid and binding obligation of the parties thereto, enforceable in accordance
with its terms, and in full force and effect.
(b) No Seller Group Person and, to the knowledge of each Seller Group
Person, no other Person which is party to any Contract is in breach or
violation thereof or default thereunder. To the knowledge of each Seller Group
Person, no event has occurred which, through the passage of time or the giving
of notice, or both, would constitute, and neither the execution of this
Agreement nor the Closing do or will constitute or result in, a breach or
violation of or default under any Contract, or would cause the acceleration of
any obligation of any party thereto or the creation of a Lien upon any
Purchased Asset.
(c) Each Contract of a Non-Purchased Entity relating to the Business
will be duly assigned to Buyer on the Closing Date and upon such assignment,
Buyer will acquire all right, title and interest of the Seller Group Person in
and to such Contract and will be substituted for such Seller Group Person under
the terms of such Contract. Except as set forth on Schedule 3.14, no
consent is required for such assignment.
(d) Except as set forth on Schedule 3.18(d), no Contract with any
Purchased Entity contains any change of control provisions.
3.19 NO BREACH OF LAW OR GOVERNING DOCUMENTS. To the knowledge of each
Seller Group Person, each such Person, in connection with the Business, and
each Purchased Entity has complied with and is not in default under or in
breach or violation of any applicable Law, or the provisions of any franchise
or license. No Seller Group Person is in default under or in breach or
violation of any provision of its articles or certificate of incorporation or
association or its bylaws. No Seller Group Person has received notice
alleging, and neither the execution of this Agreement nor the Closing do or
will constitute or result in, any default, breach or violation identified in
this Section 3.19. Except as required under the HSR Act and except with
respect to the Puerto Rico Grant, no Government permits or consents are
necessary to effect the transactions contemplated hereby.
3.20 LITIGATION AND ARBITRATION. Except as set forth on Schedule 3.20(a)
hereto, there is no suit, claim, action or proceeding now pending or, to the
knowledge of each Seller Group Person, threatened before any court, grand jury,
administrative or regulatory body, Government agency, arbitration or mediation
panel or similar body, nor, to the knowledge or each Seller Group Person, are
there any grounds therefor, to which a Seller Group Person, in connection with
the Business, or a Purchased Entity is a party or which may result in any
judgment, order, decree, liability, award or other determination which will, or
could, have any material adverse effect upon any Purchased Asset or the assets
of any Purchased Entity or upon the Business Condition of the Business. Except
as set forth on Schedule 3.20(b) hereto, no such judgment, order, decree or
award has been entered against any Seller Group Person nor has any such
liability been incurred which has, or could have, such effect. There is no
claim, action or proceeding now pending or, to the knowledge of each Seller
Group Person, threatened before any court, grand jury, administrative or
regulatory body, Government agency, arbitration or mediation panel or similar
body which will, or could, prevent or hamper the
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consummation of the transactions contemplated by this Agreement, and none of
the Seller Group Persons has been, nor, to the knowledge or each Seller Group
Person, been threatened to be subject to, and, to the knowledge of each Seller
Group Person, there are no grounds for, any suit, claim, litigation, proceeding
(administrative, judicial, or in arbitration, mediation or alternative dispute
resolution), Government or grand jury investigation, or other action or order,
writ, injunction, or decree of any court or other Government entity relating to
personal injury, death, or property or economic damage arising from products of
the Business entity.
3.21 OFFICERS, DIRECTORS, EMPLOYEES AND CONSULTANTS. Set forth on
Schedule 3.21 hereto is a complete list of
(a) all directors of each Purchased Entity;
(b) all officers (with office held) of each Purchased Entity;
(c) all Employees of each Seller Group Person in connection with the
Business and of each Purchased Entity who earn total compensation $50,000 or
more per year; and
(d) all consultants to each Seller Group Person in connection with the
Business and of each Purchased Entity;
together, in each case, with the current rate of compensation payable to each.
3.22 INDEBTEDNESS TO AND FROM OFFICERS, DIRECTORS AND OTHERS. Except as
set forth on Schedule 3.22, (a) no Seller Group Person is indebted to any
shareholder, director or officer of any Seller Company, or any Employee or
agent of any Seller Group Person, except for amounts due as normal salaries,
wages and bonuses and in reimbursement of ordinary expenses on a current basis
and (b) no shareholder, director or officer of any Seller Company, or Employee
or agent of any Seller Group Person, is indebted to any Seller Group Person in
connection with the Business, except for advancements for ordinary business
expenses in a normal amount.
3.23 OUTSIDE FINANCIAL INTERESTS. Except as identified on Schedule 3.23
hereto, no officer or director of any Seller Company nor the owner of more than
5% of the capital stock of any Seller Company has any direct or indirect
financial interest in any competitor with or supplier or customer of the
Business; provided, however, that for this purpose ownership of corporate
securities having no more than 2% of the outstanding voting power of any
competitor, supplier or customer which securities are listed on any national
securities exchange or authorized for quotation on the Automated Quotations
System of the National Association of Securities Dealers, Inc. shall not be
deemed to be such a financial interest provided such Person has no other
connection or relationship with such competitor, supplier or customer.
3.24 PAYMENTS, COMPENSATION AND PERQUISITES OF AGENTS AND EMPLOYEES. All
payments to agents, consultants and others made by any Seller Group Person in
connection with the Business have been in payment of bona fide fees and
commissions and not as bribes, illegal or improper payments. Each of the
Seller Group Persons have properly and accurately reflected on its books and
records all compensation paid to and perquisites provided to or on behalf of
its consultants, agents and Employees. Such compensation and perquisites have
been properly and accurately disclosed in the
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financial statements, proxy statements and other public or private reports,
records or filings of any Seller Group Person to the extent required by Law.
3.25 LABOR AGREEMENTS AND EMPLOYMENT AGREEMENTS. Except as set forth on
Schedule 3.25, no Seller Group Person is, in connection with the Business, a
party to (a) any union collective bargaining, works council, or similar
agreement or arrangement, (b) any retainer, consulting, or employment agreement
or (c) any other agreement with an Employee not otherwise required to be set
forth on Schedule 3.25 or 3.26. True, correct and complete copies of all
documents creating or evidencing any agreement or arrangement listed on
Schedule 3.25 have been furnished to Buyer. There are no negotiations, written
demands or proposals which are pending which concern matters now covered, or
that would be covered, by the type of agreements or arrangements listed in this
Section or which relate to Employee Plan/Agreements. The Seller Group
Persons have at all times, in all material respects, operated the
Business and conducted their respective employment practices in accordance with
the terms of the agreements and arrangements listed on Schedule 3.25.
3.26 EMPLOYEE BENEFIT PLANS.
(a) Disclosure. Schedule 3.26 describes all pension, thrift, savings,
profit sharing, retirement, incentive bonus or other bonus, medical, dental,
life, accident insurance, benefit, employee welfare, disability, group or other
insurance, stock appreciation, stock option, executive or deferred
compensation, health, hospitalization and other similar fringe or employee
benefit plans, programs and arrangements, whether or not written, and any,
whether written or unwritten, "golden parachute" agreements, severance
agreements or plans, vacation and sick leave plans, programs, arrangements and
policies, including, without limitation, all "employee benefit plans" (as
defined in Section 3(3) of ERISA), all employee manuals, and all written
statements of policies relating to employment, which are provided to, for the
benefit of, or relate to, any Employees. The items described in the foregoing
sentence are hereinafter sometimes referred to collectively as "Employee
Plan/Agreements," and each individually as an "Employee Plan/Agreement." True,
correct and complete copies of all documents creating or evidencing each of the
Employee Plan/Agreements have been furnished to Buyer. No Employee
Plan/Agreement is a "multiemployer plan"(as defined in Section 4001 of ERISA),
and none of the Seller Group Persons have contributed nor been obligated to
contribute to any such multiemployer plan. Seller has furnished Buyer with
respect to each Employee Plan/Agreement the three most recent annual reports
prepared in connection therewith (Form 5500 including all schedules thereto)
or, if an Employee Plan/Agreement has been in existence for less than three
years, the annual report prepared for each year such Employee Plan/Agreement
has been in existence.
(b) Prohibited Transactions and Reportable Events. There have been no
"prohibited transactions" within the meaning of Section 406 or 407 of ERISA or
Section 4975 of the Code for which a statutory or administrative exemption does
not exist with respect to any Employee Plan/Agreement. No "reportable event"
within the meaning of Section 4043 of ERISA (other than those for which
reporting is waived) has occurred with respect to any Employee Plan/Agreement.
(c) Payments and Compliance. With respect to each Employee
Plan/Agreement (A) all payments due from any Seller Group Person to date have
been made and all amounts properly accrued to date as liabilities of Seller
which have not been paid have been properly recorded on the books of Seller
and are reflected in Seller's most recent balance sheet; (B) all reports and
information
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relating to each such Employee Plan/Agreement required to be disclosed or
provided to participants or their beneficiaries have been timely disclosed or
provided; and (C) each such Employee Plan/Agreement which is intended to
qualify under Section 401 of the Code has received a favorable determination
letter from the Internal Revenue Service with respect to such qualification,
its related trust has been determined to be exempt from taxation under Section
501(a) of the Code, and, to the knowledge of each Seller Group Person, nothing
has occurred since the date of such letter that would adversely affect such
qualification or exemption. Each trust created under any such Employee
Plan/Arrangement is exempt from tax under Section 501(a) of the Code
and has been so exempt during the period from creation to date. Seller has
furnished Buyer with the most recent determination letters of the Internal
Revenue Service relating to each such Employee Plan/Arrangement. Each Employee
Plan/Arrangement has been maintained in compliance with its terms and with the
requirements prescribed by any and all applicable Laws, including but not
limited to ERISA and the Code.
(d) Post-Retirement Benefits. Except as specified on Schedule 3.26,
no Employee Plan/Agreement provides benefits, including, without limitation,
death or medical benefits (whether or not insured) with respect to current or
former employees of any Seller Group Person beyond their retirement or other
termination of service other than (A) continuation coverage mandated by Section
4980B(f) of the Code ("Continuation Coverage"), (B) death or pension benefits
under any Employee Plan/Agreement that is an employee pension benefit plan, (C)
deferred compensation benefits accrued as liabilities on the books of Seller
(including Seller's most recent balance sheet), (D) disability benefits under
any Employee Plan/Agreement that is an employee welfare benefit plan and which
have been fully provided for by insurance or otherwise, or (E) benefits in the
nature of severance pay. No tax under Section 4980B of the Code has been
incurred in respect of an Employee Plan/Agreement that is a group health plan,
as defined in Section 5000(b)(1) of the Code.
(e) No Triggering of Obligations. Except as specified on Schedule
3.26 other than by reason of actions taken by Buyer following the Closing, the
consummation of the transaction contemplated by this Agreement will not (A)
entitle any current or former employee of any Seller Group Person to severance
pay, unemployment compensation or any other payment, except as expressly
provided in this Agreement, (B) accelerate the time of payment or vesting, or
increase the amount of compensation due to any such employee or former
employee, (C) result in any prohibited transaction described in Section 406 of
ERISA or Section 4975 of the Code for which an exemption is not available, (D)
give rise to the payment of any amount that would not be deductible pursuant to
the terms of Section 280G of the Code or (E) give rise to a reportable event
described in Section 4043 of ERISA.
(f) International Plans. Except as specified on Schedule 3.26 no
Seller Group Person maintains any Employee Plan/Agreement covering any Employee
outside of the United States and no Seller Group Person has ever contributed to
or been obligated to contribute to any such Employee Plan/Agreement. Each such
Employee Plan/Agreement is fully funded to the extent required by all
applicable Law and has obtained all appropriate tax qualifications.
3.27 TERMINATED PLANS. Set forth on Schedule 3.27 hereto are all employee
benefit plans related to the Business which any Seller Group Person has
terminated or taken action to terminate since January 1, 1992. Such
terminations have been carried out in all material respects in accordance with
all provisions of Law, including without limitation all applicable provisions
of the Code and
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ERISA and all required disclosure to the PBGC. Except as described on Schedule
3.27 hereto, no Seller Group Person has any liability to any Person or entity,
including without limitation the PBGC, any other Government agency or any
participant in or beneficiary of any such plan, nor is any Seller Group Person
liable for any excise, income or other tax or penalty as a result of such
termination. Seller has obtained a favorable determination letter from the IRS
with respect to the termination of each of such plans in the United States
(complete and correct copies of which have been delivered to Buyer). The
notices of sufficiency and favorable determination letters were received
after full and accurate disclosure of all material facts to the IRS.
3.28 OVERTIME, BACK WAGES, VACATION AND MINIMUM WAGES. No Employee of any
Seller Group Person in connection with the Business has any claim against such
Seller Group Person (whether under any Law, Contract, or otherwise) on account
of or for (a) overtime pay, other than overtime pay for the current payroll
period, (b) wages or salary (excluding current bonus, accruals and amounts
accruing under pension and profit-sharing Plans) for any period other than the
current payroll period, (c) vacation, time off or pay in lieu of vacation or
time off, other than that earned in respect of the current fiscal year, (d) any
violation of any Law relating to minimum wages, child labor or maximum hours of
work.
3.29 DISCRIMINATION, WORKERS COMPENSATION AND OCCUPATIONAL SAFETY AND
HEALTH. Except as set forth on Schedule 3.29(a), no Person or party
(including, but not limited to, Government agencies of any kind) has any claim,
notice of claim, charge, lawsuit or basis for any thereof, against any Seller
Group Person in connection with the Business arising out of any Law relating to
discrimination in employment, employment practices (including wrongful
termination), or occupational safety and health standards, and no such claim,
notice of claim, charge or lawsuit is pending or, to the knowledge of each
Seller Group Person, threatened against any Seller Group Person. Since January
1, 1993, no Seller Group Person has received any notice in connection with the
Business from any Person alleging a violation of any such Law or occupational
safety or health standards. No Seller Group Person has any outstanding
Contracts or obligations to indemnify any person for violation of the Laws and
standards set forth in this Section. No Seller Group Person has failed to file
any required EEO-1 Reports and the Seller Group Persons are in compliance with
Executive Order 11246. Except as set forth on Schedule 3.29(b), there are no
pending workers compensation claims involving any Seller Group Person and there
have never been any workers compensation claims against any Seller Group Person
relating to the use or existence of asbestos in any of such Seller Group
Person's products. Seller has deliver to Buyer a true, correct and complete
list of all workers compensation claims made over the three years preceding the
date hereof.
3.30 ALIEN EMPLOYMENT ELIGIBILITY. To the knowledge of each Seller Group
Person, with respect to each Person employed by any Seller Group Person in the
Business on or after May 1, 1987, and who actually commenced such employment on
or after November 6, 1986, (a) such Seller Group Person hired such Person in
compliance with the Immigration Reform and Control Act of 1986 and the rules
and regulations thereunder ("IRCA") and (b) such Seller Group Person and each
Affiliate to such Seller Group Person has complied with all recordkeeping and
other regulatory requirements under IRCA.
3.31 LABOR DISPUTES; UNFAIR LABOR PRACTICES. Except as set forth on
Schedule 3.31, there is neither pending nor, to the knowledge of each Seller
Group Person, threatened any labor
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dispute, strike or work stoppage which affects or which reasonably may be
expected to affect the Business Condition of the Business. Except as set forth
on Schedule 3.31, to the knowledge of each Seller Group Person, since January
1, 1993, no Seller Group Person nor any of their respective agents,
representatives or employees has committed any unfair labor practice, as
defined in the National Labor Relations Act of 1947, as amended. There is not
now pending or threatened any charge or complaint against any Seller Group
Person by the National Labor Relations Board, any state or local labor or
employment agency or any representative thereof, and the execution of this
Agreement and the consummation of the transaction contemplated by this
Agreement will not result in any such charge or complaint. Since January 1,
1993, there have been no union organizing attempts with respect to the
Business.
3.32 INSURANCE POLICIES. Set forth on Schedule 3.32 hereto is a list of
all insurance policies and bonds in force covering or relating to the Purchased
Assets or the Business, including without limitation all properties, operations
or personnel of the Seller Group Persons related to the Business and brokers
used in the placement of such policies and bonds. The Seller maintains
occurrence-based product liability insurance with respect to the Business with
not less than $5,000,000.00 of coverage (the "Product Liability Insurance") and
the premiums on the Product Liability Insurance have been paid to date and will
be paid by the Seller, and such insurance is and will be effective for all
periods up to and including the Closing Date.
3.33 GUARANTEES. Except as set forth on Schedule 3.33 hereto, no Seller
Group Person in connection with the Business is a guarantor, indemnitor, surety
or accommodation party or otherwise liable for any indebtedness of any other
Person, firm or corporation except as endorser of checks received and deposited
in the Ordinary Course of the Business.
3.34 PRODUCT WARRANTIES. Set forth on Schedule 3.34 hereto are the
standard forms of product warranties and guarantees used in the Business, and
copies of all other material product warranties and guarantees, and a summary
of all oral product warranties used by any of the Seller Group Persons if
different from the foregoing. Except as described on Schedules 3.34 and/or
3.35 since January 1, 1992 no product warranty or similar claims have been made
against any Seller Group Person in connection with the Business except routine
claims as to which, in the aggregate, losses and expenses in respect of repair
or replacement of merchandise do not and will not exceed the warranty expenses
and warranty reserves reflected in the Other Financial Statements or the
Closing Balance Sheet. No Person or party (including, but not limited to,
Government agencies of any kind) has any claim, or basis for any action or
proceeding, against any Seller Group Person under any Laws relating to unfair
competition, false advertising or other similar claims arising out of product
warranties, guarantees, specifications, manuals or brochures used in the
Business.
3.35 PRODUCT LIABILITY CLAIMS. Except as described on Schedule 3.35,
since January 1, 1992, Seller has not received notice or information as to any
claim or allegation of injury, death, or property or economic damages, any
claim for punitive or exemplary damages, any claim for contribution or
indemnification, or any claim for injunctive relief in connection with any
product manufactured, sold, distributed or otherwise put in commerce by or in
connection with any service provided by any Seller Group Person in connection
with the Business.
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3.36 PRODUCT SAFETY AUTHORITIES. Except as set forth on Schedule 3.36
hereto, no Person has been required to file any notification or other report
with or provide information to any Government agency or product safety
standards group concerning actual or potential defects or hazards with respect
to any product manufactured, sold, distributed or otherwise put in commerce in
connection with the Business, and there exist no grounds for the recall of any
such product.
3.37 ENVIRONMENTAL MATTERS.
(a) Except as set forth on Schedule 3.37(a), all assets and property
currently or previously owned, leased, operated, or used by any Seller Group
Person, all current or previous conditions on and uses of the Environmental
Property, and all current or previous ownership or operation of the Seller or
the Environmental Property (including without limitation transportation and
disposal of Hazardous Materials by or for any Seller Group Person) comply and
have at all times complied with, in all material respects, and do not cause,
have not caused, and will not cause liability to be incurred by any Seller
Group Person under any Environmental Law. Except as set forth on Schedule
3.37(a), no Seller Group Person is in violation of and nor has violated any
Environmental Law.
(b) Except as set forth on Schedule 3.37(b), the Seller Group Persons
have properly obtained and are in compliance with all Environmental Permits. No
deficiencies have been asserted by any such Government or authority with
respect to such items.
(c) Except as set forth on Schedule 3.37(c), there has been no spill,
discharge, leak, leaching, emission, migration, injection, disposal, escape,
dumping, or release of any kind on, beneath, above, or into the Environmental
Property or into the environment surrounding the Environmental Property of any
Hazardous Materials.
(d) Except as set forth on Schedule 3.37(d), there are and have been
no (i) Hazardous Materials stored, disposed of, generated, manufactured,
refined, transported, produced, or treated at, upon, or from the Environmental
Property; (ii) asbestos fibers or materials or polychlorinated biphenyls on or
beneath the Environmental Property, or (iii) underground storage tanks or
underground injection control facilities on or beneath the Environmental
Property.
(e) The Seller has delivered to Buyer, prior to the execution and
delivery of this Agreement, complete copies of any and all (i) documents
received by any Seller Group Person from, or submitted by any Seller Group
Person to, the U.S. Environmental Protection Agency (the "EPA") and/or any
state, county or municipal environmental or health agency or Government agency
or department concerning the environmental condition of the Environmental
Property or the effect of any Seller Group Person's operations on the
environmental condition of the Environmental Property; and (ii) reviews,
audits, reports, or other analyses concerning the Environmental Property.
(f) To the knowledge of each Seller Group Person, no expenditure will
be required (other than maintenance and similar expenses in the Ordinary Course
of the Business) in order for any Seller Group Person to comply with any
Environmental Laws in effect at the time of the Closing in connection with the
operation or continued operation of the Business or the Environmental Property
in a manner consistent with the current operation thereof of the Seller Group
Persons.
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(g) Except as set forth in Schedule 3.37(g), there never has been
pending or, to the knowledge of the Seller Group Persons, threatened against
the Seller or any other person or entity to the extent that such other person
or entity from time to time has owned, leased, occupied or conducted operations
on the Environmental Property, any civil, criminal or administrative action,
suit, summons, citation, complaint, claim, notice, demand, request, judgment,
order, Lien, proceeding, hearing, study, inquiry or investigation based on or
related to an Environmental Permit or an Environmental Law.
(h) Except as set forth in Schedule 3.37(h), none of the Seller Group
Persons, nor any other Person or entity to the extent that such other Person or
entity from time to time has owned, leased, occupied or conducted operations on
the Environmental Property, has ever received from any Person any notice of, or
has any knowledge of, any past, present or anticipated future events,
conditions, circumstances, activities, practices, incidents, actions,
agreements or plans that could: (i) interfere with, prevent, or increase the
costs of compliance or continued compliance with any Environmental Permits or
any renewal or transfer thereof or any Environmental Law; (ii) make more
stringent any restriction, limitation, requirement or condition under any
Environmental Law or any Environmental Permit in connection with the operations
on the Environmental Property; or (iii) give rise to any liability, loss or
expense, or form the basis of any civil, criminal or administrative action,
suit, summons, citation, complaint, claim, notice, demand, request, judgment,
order, Lien, proceeding, hearing, study, inquiry or investigation involving the
Environmental Property or any Seller Group Person, based on or related to an
Environmental Permit or an Environmental Law or to the presence, manufacture,
generation, refining, processing, distribution, use, sale, treatment,
recycling, receipt, storage, disposal, transport, handling, emission,
discharge, release or threatened release of any Hazardous Materials.
(i) None of the Seller Group Persons in respect to the Business has
transported or arranged for the transportation of any Hazardous Materials to
any location which is: (i) listed on, or proposed for listing on, the EPA's
National Priorities List published at 40 CFR Part 300 or on any similar state
list; or (ii) the subject of any regulatory action which may lead to claims
against any of the Seller Group Persons for damages to natural resources,
personal injury, clean-up costs or clean-up work.
(j) Schedule 3.37(j) contains a list of all sites where the Seller
Group Persons' Hazardous Materials relating to the Business may have been sent
in the past, or are currently being sent for disposal, treatment, recycling or
storage, including the address of each such site, and a description and
estimate of the amount of the Hazardous Materials disposed of, treated,
recycled or stored at each such site.
(k) Schedule 3.37(k) contains a list containing the name and address
of each person, firm, corporation or other entity engaged in the handling,
transportation or disposal of the Seller Group Persons' Hazardous Materials in
respect to the Business, a description of such Hazardous Materials, and an
estimate of the amount of such Hazardous Materials.
3.38 BROKER'S FEES. Except as described on Schedule 3.38, no Seller Group
Person has retained any broker, finder or agent or agreed to pay any brokerage
fees, finder's fees or commissions with respect to the transactions
contemplated by this Agreement.
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3.39 FOREIGN ASSETS. Except with respect to operations of the Purchased
Entities in France, Germany, the Netherlands and Ireland, or as set forth on
Schedule 3.39, no Seller Group Person has in connection with the Business any
interest in any real property or tangible or intangible property located
outside of the United States, including any stock, securities or investments
in, claims against, or receivables from any entities or Persons with
substantially all their property or business so located.
3.40 ABSENCE OF SENSITIVE PAYMENTS; ANTI-BOYCOTT. No Seller Group Person
and no officer, director, manager of any Seller Company nor agent or employee
of any Seller Group Person, in connection with the Business:
(a) has made or authorized any contributions, payments or gifts of
funds or property to any Government official, employee or agent where either the
payment or the purpose of such contribution, payment or gift was or is illegal
under (i) the Foreign Corrupt Practices Act of 1977 and the regulations adopted
thereto, or (ii) applicable local Laws;
(b) has directly or indirectly made any contribution to candidates for
public office which would be a violation of (i) the Foreign Corrupt Practices
Act and the regulations adopted thereto, or (ii) applicable local Laws;
(c) maintains any unrecorded fund or asset for any purpose; or
(d) received any notice of violation and/or is or has been not in
compliance with relevant anti-boycott legislation, including without limitation
the Tax Reform Act of 1976, the Export Administration Act of 1979, and the
regulations thereunder.
3.41 TRADE REGULATION LAW. No material anti-dumping duty or other
sanction under any trade regulation is in force or has been in force since
January 1, 1993 in relation to any Seller Group Person in relation to the
Business in respect of the products produced by any Seller Group Person.
3.42 TRUTHFULNESS. To the knowledge of each Seller Group Person, no
representation or warranty of the Seller herein and no statement, information
or certificate furnished or to be furnished by or on behalf of the Seller or
its counsel, accountants or other agents pursuant hereto or in connection with
the transactions contemplated hereby contains or will contain any untrue
statement of a material fact or omits or will omit to state a material fact
necessary in order to make the statements contained herein or therein not
misleading. To the knowledge of each Seller Group Person, there is no fact or
development, actual or prospective, other than general economic conditions,
which adversely affects or in the future might reasonably be expected adversely
to affect the Business, the Purchased Assets or the rights under the Assumed
Liabilities in any material respect which has not been set forth or described
in this Agreement or in the Schedules hereto.
3.43 BANK ACCOUNTS OF PURCHASED ENTITIES. Set forth on Schedule 3.43
hereto is a list of all bank accounts and safe deposit boxes maintained by each
Purchased Entity, together with the names of all Persons who are authorized
signatories or have access thereto.
3.44 BOOKS AND RECORDS. The books of account, stock record books and
minute books and other corporate records of Seller which relate to the Business
and of each Purchased Entity are in all material respects complete and correct,
have been maintained in accordance with good business
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practices and the matters contained therein are accurately reflected on the
Financial Statements. The minute books and stock books of Seller which relate
to the Business and of each Purchased Entity have been made available to Buyer
and are correct and complete to the date hereof.
3.45 AFFILIATES. Except as set forth on Schedule 3.45, the Seller has no
Affiliates.
3.46 OWNERSHIP OF ASSETS. No Purchased Entity owns any Assets, has any
Liabilities, or otherwise engages in any activity which is not included in and
in connection with the Business.
3.47 NO MARKS ON EQUIPMENT OR INVENTORY. The name and mark "Schawk" and
any variants thereof do not appear on any existing molds, dies, or other
equipment of the Business nor on any stock of inventory, packaging, shipping
materials, or the like of the Business.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby makes the following representations and warranties, each of
which is true and correct on the date hereof and each of which shall survive
the Closing Date and the sale contemplated hereby.
4.1 CORPORATE EXISTENCE OF BUYER. Each of the Buyer Companies is or will
prior to Closing be a corporation duly organized, validly existing and in good
standing under Law. Each of the Buyer Companies or will prior to Closing have
the corporate power and authority to own and use its properties and to
transact the business in which it is engaged. In the event any Buyer Company
assigns its rights and obligations hereunder to a subsidiary or affiliate, as
provided in Section 11.6 hereof, such subsidiary or affiliate will be a
corporation duly organized, validly existing and in good standing under the
Laws of its state of incorporation; and such subsidiary or affiliate will have
the corporate power and authority to own and use its property and to transact
the business in which it is engaged.
4.2 APPROVAL OF AGREEMENT. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly
authorized, approved and ratified by all necessary action on the part of Buyer.
Pursuant to such resolutions, authorizations, consents, approvals and/or
ratifications, Buyer has full authority to enter into and deliver this
Agreement, to perform its obligations hereunder and to cause each other Buyer
Company to perform their respective obligations hereunder, and to consummate,
and to cause each other Buyer Company to consummate, the transactions
contemplated hereby. In the event any Buyer Company assigns its rights and
obligations hereunder to a wholly-owned subsidiary or affiliate, as provided in
Section 11.6 hereof, such assignment will have been approved by all necessary
corporate action of such subsidiary or affiliate, and such subsidiary or
affiliate will have full power and authority to perform its obligations
hereunder.
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4.3 NO BREACH OF ARTICLES OR INDENTURES. The execution of this Agreement
and the consummation of the transactions contemplated hereby has not and will
not constitute or result in the breach of any of the provisions of, or
constitute a default under, the articles or certificate of incorporation or
association or bylaws of any Buyer Company, or any material indenture, evidence
of indebtedness or other commitment to which any Buyer Company (or any
subsidiary or affiliate to which any Buyer Company assigns its rights and
obligations hereunder, as provided in Section 11.6 hereof) is a party or by
which it is bound, which breach or default would have a material adverse effect
on the Buyer Companies, taken as a whole.
ARTICLE V
CERTAIN COVENANTS
5.1 OPERATION OF THE BUSINESS. Seller covenants that until the Closing,
without the prior written consent of Buyer, no Seller Group Person will, in
connection with the Business, and the Seller will not permit any Purchased
Entity to:
(a) grant any increase in the rate of pay of any of its Employees,
grant any increase in the salaries of any officer, employee or agent, enter
into or increase the benefits provided under any bonus, profit-sharing,
incentive compensation, pension, retirement, medical, hospitalization, life
insurance or other insurance plan or plans, or other contracts or
commitments, or in any other way increase in any amount the benefits or
compensation of any such officer, Employee or agent except, however, ordinary
merit increases not unusual in character or amount made in the Ordinary Course
of the Business to Employees who are not officers, directors or stockholders;
(b) enter into any employment contract or collective bargaining
agreement;
(c) enter into any Contract or commitment or engage in any transaction
which is not in the Ordinary Course of the Business or which is inconsistent
with past practices;
(d) sell or dispose of or encumber any material amount of Assets;
(e) make, or enter into any Contract for, any material capital
expenditure or enter into any material lease of capital equipment or real
estate;
(f) enter into any Contract, whether for the purchase or sale of
inventory, supplies, other products or services or otherwise, and whether in
the Ordinary Course of the Business or otherwise, involving more than $50,000
or enter into any series of such Contracts with one party or affiliated group
of parties involving more than $100,000 in the aggregate, except for purchases
of materials and sales of inventory in the Ordinary Course of the Business;
(g) create, assume, incur or guarantee any indebtedness other than that
incurred pursuant to existing Contracts disclosed in the Schedules delivered
pursuant hereto;
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(h) declare or pay any dividend or make any sale of, or distribution in
respect of, its capital stock or directly or indirectly redeem, purchase or
otherwise acquire any of its capital stock or issue any of its capital stock or
other securities other than the payment of management fees to Affiliates
identified on Schedule 3.17;
(i) make or institute any unusual or novel method of transacting business
or change any accounting procedures or practices or its financial structure;
(j) make any amendments to or changes in its articles or certificate of
incorporation or association or bylaws;
(k) perform any act, or attempt to do any act, or permit any act or
omission to act, which will cause a breach of any material Contract, commitment
or obligation to which any Seller Group Person is a party relating to the
Business or to the ability of any Seller Group Person to perform its
obligations under this Agreement; or
(l) manage current assets and current liabilities constituting Working
Capital (and the level thereof) in a manner inconsistent with current practices
or the preparation of the Balance Sheet.
5.2 PRESERVATION OF BUSINESS. Seller covenants that, until the Closing,
the Seller Group Persons shall carry on the Business diligently and
substantially in the same manner as heretofore conducted and shall make
commercially reasonable efforts to keep their respective business organizations
intact, including their respective present Employees and present relationships
with suppliers and customers and others having business relations with such
Seller Group Persons. The Seller Group Persons will at all times maintain in
inventory quantities of raw materials, component parts, work in process,
finished goods and other supplies and materials sufficient to allow the Buyer
Companies to continue to operate the Business, after the Closing Date, free
from any shortage of such items and, as necessary, to timely complete,
consistent with past practice, all Contracts.
5.3 INSURANCE AND MAINTENANCE OF PROPERTY. Until the Closing, Seller
shall cause all the Purchased Assets and all property owned or leased pursuant
to the Assumed Liabilities to be insured against all ordinary and insurable
risks (except in respect of any leased property where the terms of the lease do
not impose on lessee the obligation to maintain insurance and where the loss of
such property would not materially adversely affect the conduct of the
Business) and will operate, maintain and repair all of such property in a
careful, prudent and efficient manner all in conformity with the insurance
policies set forth in Schedule 3.32.
5.4 FULL ACCESS. Seller covenants that, until the Closing,
representatives of Buyer shall have full access at all reasonable times to all
premises, properties, books, records, contracts, tax records and documents of
each Seller Group Person relating to the Business, and Seller will furnish to
Buyer any information in respect of the Business as Buyer may from time to time
request. Such examination and investigation by Buyer, and any discovery of
facts resulting therefrom, shall not affect the warranties and representations
of Seller contained in this Agreement. Buyer shall use reasonable efforts to
promptly inform Seller of any matters of which Buyer becomes aware that
constitute a breach of the representations and warranties pursuant to Article
III hereof; provided that Buyer's failure
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to so inform Seller of such matters shall in no way adversely impact Buyer's
right to indemnification as provided for in Article IX hereof.
5.5 BOOKS, RECORDS AND FINANCIAL STATEMENTS. Seller covenants that, until
the Closing, each Seller Group Person shall maintain its books and financial
records in connection with the Business in accordance with GAAP consistently
applied, and on a basis consistent with the past practices of such Seller Group
Person. Such books and financial records shall fairly and accurately reflect
the operations of the Business. Seller shall furnish to Buyer promptly, as
available, monthly financial statements and operating reports applicable to the
Business, all of which shall be prepared in accordance with GAAP consistently
applied and shall present fairly the financial position and results of
operations of the Business at the dates and for the periods indicated.
5.6 WARN ACT. The Seller Group Persons shall give all necessary or
appropriate notice under the WARN Act, and shall be responsible for any and all
liabilities and penalties under the WARN Act.
5.7 OTHER GOVERNMENT FILINGS. The Parties shall cooperate in making, as
soon as practicable following the execution hereof, all filings required by any
Government agency (including without limitation pre-merger notifications
required to be filed with the Federal Trade Commission and the United States
Department of Justice) in connection with the transactions contemplated by this
Agreement or necessary for their consummation (including without limitation a
request for approval of transfer of the Puerto Rico Grant). Buyer and Seller
covenant with each other that all information each provides in connection with
such filings will be true, accurate and complete and will comply with all
applicable Laws.
5.8 TAX MATTERS.
(a) Seller shall pay all applicable sales, use or other similar
transfer Taxes that are, or become, due or payable as a result of the sale,
conveyance, assignment, transfer or delivery of the Purchased Assets hereunder,
whether levied on any Buyer Company, the Purchased Assets or any Seller Group
Person. Seller, in the case of the Purchased Assets, shall prepare, subject to
Buyer's reasonable approval, and file any Returns required in respect of such
Taxes.
(b) All real estate, personal property, ad valorem and any other local
or state Taxes relating to the Purchased Assets or the Business which shall be
accrued but unpaid as of the Closing Date, or which shall be paid as of the
Closing Date but relate in whole or in part to periods after the Closing Date,
shall be prorated to the Closing Date and shall be reflected on the Closing
Balance Sheet. Any such prorated Taxes which may be ultimately assessed after
the Closing Date shall be paid by Seller to Buyer or Buyer to Seller, as the
case may be, within thirty (30) days of such determination.
(c) The Parties shall report Buyer's purchase of the Purchased Assets
pursuant to Section 1060 of the Code and other applicable Laws in a consistent
manner and shall take no position contrary thereto. Such allocation shall be
agreed upon in writing by Buyer and Seller within thirty (30) days of the final
purchase price determination, as adjusted (if necessary) pursuant to Section
2.8 of the Agreement. Buyer and Seller each shall be responsible for the
preparation of any statements and forms to be filed pursuant to Section 1060 of
the Code or in accordance with other applicable Law.
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(d) The Parties agree to furnish or cause to be furnished, upon
request, as promptly as practicable, such information and assistance (including
access to books and records) relating to the Purchased Assets as is reasonably
necessary for the preparation of any Return for Taxes, claims for refund or
audit or prosecution or defense of any claim, suit or proceeding relating to
any proposed adjustment of Taxes paid.
(e) The Parties shall use reasonable efforts to provide or obtain from
any taxing authority any certificate or other document necessary to mitigate,
reduce or eliminate any Taxes (including additions thereto or interest and
penalties thereon) that otherwise would be imposed with respect to the
transactions contemplated in this Agreement.
(f) Seller shall furnish to Buyer, as provided in Section 1445(b)(2) of
the Code, an affidavit pursuant to Section 1445(a), stating under penalties of
perjury, transferor's United States taxpayer identification number and that the
transferor is not a foreign person.
(g) All gains on the sale of stock in any Controlled Foreign
Corporation (CFC) will be reported, as necessary, under the provisions of IRC
Section 1248, Subpart F or any other governing statutory authority, on the
Returns of the appropriate Seller Group Person. The Seller Group will
indicate the amount of gain to be reported, for each respective CFC within 40
days of the final determination of the purchase price as adjusted, if
necessary, under the provisions of Section 2.8 of the Agreement.
5.9 CHANGE OF NAME. Immediately after the Closing Date, FilterTek U.S.A.,
Inc, and any other Seller Group Person not included in the Purchased Entities
which has "FilterTek" or some variant thereof in its name, in such manner as is
reasonably requested by Buyer, shall each change its name to some name other
than its name immediately prior to the Closing Date (the "Existing Name") or
any variation or abbreviation thereof and file appropriate notification of
change of name in all jurisdictions where such notification is required, and
Seller will take all steps as may be appropriate to ensure to the Buyer
Companies the continued right to use the Existing Names and all variants
thereof in connection with Buyer's operation of the Business.
5.10 ESCROW. In the event Seller shall, after the Closing, sell all or
substantially all of its assets or initiate procedures leading to its complete
or partial liquidation, dissolution, or enter into any other transaction which
could reasonably be expected to result in a distribution or other payment to
Seller's stockholders that would leave the Seller with insufficient assets to
meet its obligations to Buyer hereunder, Seller shall prior to such event
deposit an amount reasonably adequate to support the obligations of Seller to
Buyer hereunder, but not less than $15,000,000, pursuant to the Escrow
Agreement.
5.11 SUPPLEMENTS TO SCHEDULES. Seller covenants and agrees that it has
submitted the text of this Agreement, as of the date hereof, for review to all
of the persons listed on Schedule 3.0. The Parties have agreed on the texts of
Schedules 1.1(b) and 2.1 (subject to Section 11.1), Schedule 3.0, and the
Exhibits A, E, and F. As to the balance of the Schedules, Seller shall use
reasonable best efforts to complete them and submit them promptly, and in no
event later than January 15, 1997, to Buyer for Buyer's review and approval.
The condition in Section 7.1 shall
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not be deemed unsatisfied solely as a result of items proposed to be
disclosed in such Schedules unless:
(a) the proposed items are not true and correct on the Closing Date;
(b) Assumed Liabilities and Liabilities of the Purchased Entities
reflected in such proposed items will have the effect, in the aggregate, under
GAAP of reflecting an adverse change in the Business by $250,000 or more from
the Business as reflected in the Confidential Memorandum; as modified by item 1
on proposed Schedule 3.4; or
(c) any such proposed item involves (i) a material violation of Law
by the Business or in connection with the Business, any Seller Group Person or
Employee, (ii) a pattern of unethical or unlawful conduct by the Business; or
(iii) fraud by any Seller Group Person in connection with the Business.
5.12 ADVERSE CHANGES. Buyer shall promptly inform Seller of the
occurrence of any event or change in circumstances which materially and
adversely affects Buyer's ability to perform its obligations hereunder or to
operate the Business after Closing, including, without limitation, any
materially adverse amendments or modifications to Borrower's financing
commitments.
ARTICLE VI
COVENANT NOT TO COMPETE
6.1 COVENANT NOT TO COMPETE.
(a) Seller acknowledges and agrees that the value to Buyer of the
transactions provided for herein would be substantially diminished if any
Non-Purchased Entity (or its successors or assigns) were to enter into business
activities competitive with those sold to the Buyer Companies hereunder for a
reasonable period following the Closing Date. Consequently, as an inducement
for the Buyer Companies to enter into this Agreement, and in consideration of
the promises and representations of the Buyer Companies under this Agreement,
Seller covenants and agrees on its behalf and on behalf of the other
Non-Purchased Entities that for a period of three (3) years following the
Closing Date (the "Restricted Period"), none of the Non-Purchased Entities nor
their respective successors or assigns will engage in, or have any interest in,
directly or indirectly, any other Person, firm, corporation or other entity
engaged in any business activities competitive with the Business (as conducted
up to the Closing Date). This restriction shall be applicable only with
respect to the geographic areas in which any Seller Group Person has heretofore
or is now conducting or plans to conduct business operations. Seller covenants
and agrees, on its behalf and on behalf of the other Non-Purchased Entities,
not to solicit or accept business from, or provide competitive products or
services to, any customers (whether or not such Persons have done business with
any Seller Group Persons once or more than once) or accounts of any Seller
Group Persons (prior to the Closing Date) or any Buyer Companies (after the
Closing Date).
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(b) Seller specifically acknowledges and agrees that the foregoing
covenants are commercially reasonable and reasonably necessary to protect the
interests Buyer will acquire in the Business hereunder.
(c) The covenants contained in this Article VI shall be deemed to be a
series of separate covenants, one for each product line in each county and each
city of every state in which any Seller Group Person has heretofore conducted
or now conducts the Business. Each separate covenant shall hereinafter be
referred to as a "Separate Covenant."
(d) If any court or tribunal of competent jurisdiction shall refuse to
enforce one or more of the Separate Covenants because the time limit applicable
thereto is deemed unreasonable, it is expressly understood and agreed that such
Separate Covenant or Separate Covenants shall not be void but that for the
purpose of such proceedings such time limitation shall be deemed to be reduced
to the extent necessary to permit the enforcement of such Separate Covenant or
Separate Covenants.
(e) If any court or tribunal of competent jurisdiction shall refuse to
enforce any or all of the Separate Covenants because, taken together, they are
more extensive (whether as to geographic area, scope of business or otherwise)
than is deemed to be reasonable, it is expressly understood and agreed between
the Parties hereto that such Separate Covenant or Separate Covenants shall not
be void but that for the purpose of such proceedings the restrictions contained
therein (whether as to geographic area, scope of business or otherwise) shall
be deemed to be reduced to the extent necessary to permit the enforcement of
such Separate Covenant or Separate Covenants.
(f) The foregoing, however, shall not prohibit Seller or any
Non-Purchased Entity from conducting or engaging in activities in the printing
industry.
6.2 RESTRICTION ON EMPLOYMENT. The Seller agrees on its behalf and on
behalf of each of the other Non-Purchased Entities that during the Restricted
Period none of the Non-Purchased Entities nor their respective successors or
assigns will solicit for employment, or seek to entice, induce or in any manner
influence any person to leave, or not accept, his or her employment in the
Business. The foregoing shall not prevent any Seller Group Person from hiring
any person who was previously employed by the Business but who has been
discharged by the Buyer.
6.3 CONFIDENTIALITY. Seller agrees on its behalf and on behalf of the
other Non-Purchased Entities that, from and after the Closing, none of the
Non-Purchased Entities will at any time disclose to any person other than a
Buyer Company or use any "Proprietary Information" (as hereinafter defined)
owned, possessed, licensed or used by or relating to the Business, whether or
not such information is embodied in writing or other physical form. For
purposes of this Agreement, the phrase "Proprietary Information" means all
trade names, trademarks, service marks, patents and trade secrets and any and
all other information not publicly available which relates to specific matters
concerning the Business, such as, without limiting the generality of the
foregoing, engineering, design, manufacturing, maintenance and repair
information; computer software and programs; component sourcing and supply
information; identities of suppliers, customers and contractors; product
distribution information; pricing and compensation policies; sales or financing
procedures or methods; operational methods; strategic plans; internal financial
information; research and development plans and activities; and acquisition and
expansion plans. Seller recognizes and agrees that all documents and objects
containing any
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Proprietary Information, whether developed by Seller or by someone else for
Seller or any Seller Group Person, will after the Closing Date become the
exclusive property of the Buyer Companies.
6.4 REMEDIES. Because the breach or anticipated breach of the restrictive
covenants provided for in Section 6.1 could result in immediate and irreparable
harm and injury to Buyer, for which it would not have an adequate remedy at
law, Seller agrees that Buyer shall be entitled to relief in equity to
temporarily, preliminarily and/or permanently enjoin such breach or anticipated
breach and to seek any and all other legal and equitable remedies to which
Buyer may be entitled. Should such action be taken and an injunction issued,
Buyer shall be entitled to reimbursement of attorneys' fees and costs incurred.
6.5 PERMITTED INVESTMENTS. Nothing contained herein shall restrict Seller
or any other Non-Purchased Entity from owning five percent (5%) or less of the
corporate securities of any Person in competition with the Business which
securities are listed on any national securities exchange or authorized for
quotation on the Automated Quotations System of the National Association of
Securities Dealers, Inc., if such Person has no other connection or
relationship, direct or indirect, with the issuer of such securities.
6.6 ACCESS TO PROPERTIES AND RECORDS. (a) Following the Closing, upon
reasonable prior notice and during normal business hours as requested by
Seller, Buyer will afford to Seller such cooperation of the employees of Buyer
as is reasonably necessary or desirable to enable Seller to prepare timely
financial statements and federal, state and local tax returns or similar
matters. Such cooperation, however, shall not have the effect of unduly
disrupting the performance of such employees' regular duties.
(b) Subject to consummation of the Closing and subject to the terms of
Buyer's documentation retention policy (which policy the Buyer agrees to
deliver to the Seller on or before June 1, 1997), for a period of eight (8)
years after the Closing Date, Buyer will afford and cause to be afforded to
Seller (i) such access during normal business hours, upon reasonable prior
notice, to such books and records of Buyer as Seller may reasonably request in
connection with matters relating to Seller for periods ending on or prior to
the Closing Date; and (ii) such assistance in locating and copying such books
and records as Seller may reasonably request, which assistance shall not have
the effect of unduly disrupting the performance of such employees' regular
duties.
ARTICLE VII
CONDITIONS TO BUYER'S OBLIGATIONS
The obligations of Buyer to consummate the transactions provided for in
this Agreement shall be subject to the satisfaction of each of the following
conditions on or before the Closing Date, subject to the right of Buyer to
waive any one or more of such conditions:
7.1 REPRESENTATIONS AND WARRANTIES OF SELLER. The representations and
warranties of Seller contained in this Agreement, including the Schedules
hereto, and in the certificates and papers to
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be delivered to Buyer pursuant hereto and in connection herewith shall be true
and correct in all respects on the date hereof and, subject to Section 5.11, on
the Closing Date as though such representations and warranties were made on the
Closing Date, and, to the extent such representations and warranties are
qualified by knowledge, on the basis of knowledge on the Closing Date.
7.2 PERFORMANCE OF THIS AGREEMENT. Seller shall have duly performed or
complied with all of the obligations to be performed or complied with by it
under the terms of this Agreement on or prior to the Closing Date.
7.3 NO MATERIAL ADVERSE CHANGE. There shall have been no material adverse
change, actual or threatened, in the Business (including relationships with
customers or vendors for any reason), whether or not covered by insurance, as a
result of any cause whatsoever.
7.4 CERTIFICATE OF SELLER. Buyer shall have received a certificate signed
by the President of Seller dated as of the Closing Date and subject to no
qualification certifying that the conditions set forth in Sections 7.1, 7.2,
7.3, 7.6, 7.7, 7.8, and 7.13 hereof have been fully satisfied. Such
certificate shall be deemed a representation and warranty of Seller under this
Agreement.
7.5 OPINION OF COUNSEL. Buyer shall have received from Vedder, Price,
Kaufman & Kammholz, counsel to Seller, an opinion of such counsel, dated the
Closing Date, substantially in the form attached hereto as Exhibit E.
7.6 NO LAWSUITS. No suit, action or other proceeding or investigation
shall be threatened or pending before or by any Court or Government concerning
this Agreement or the consummation of the transactions contemplated hereby, or
in connection with any claim against any Seller Group Persons not disclosed
herein or on the Schedules hereto. No Government shall have threatened or
directed any request for information concerning this Agreement, the transaction
contemplated hereby or the consequences or implications of such transaction to
any Buyer Company or any Seller Group Person, or any officer or director of
any Buyer Company or any Seller Company, or any employee or agent of any Buyer
Company or any Seller Group Person.
7.7 NO RESTRICTIONS. There shall exist no conditions, restrictions or
reservations affecting the title to or utility of the Purchased Assets and the
rights under the Assumed Liabilities which would prevent the Buyer Companies
from occupying and utilizing the Purchased Assets and Assumed Liabilities, or
any part thereof, to the same full extent that any Seller Group Person might
continue to do so if the sale and transfer contemplated hereby did not take
place.
7.8 CONSENTS. All consents and approvals, including without limitation
final approval of transfer of the Puerto Rico Grant, necessary to insure that
the Buyer Companies will continue to have the same full rights in respect to
the Purchased Assets and Assumed Liabilities as the Seller Group Persons had
immediately prior to the consummation of the transaction contemplated hereunder
shall have been obtained; provided that the foregoing shall not apply to the
Puerto Rico Grant to the extent any delay in approval results from Buyer's
request for modification of the current terms of the Puerto Rico Grant in
addition to the request for transfer to a Buyer Company.
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7.9 RELEASES. Prior to the Closing Date, Seller shall have delivered to
Buyer the written release of all Liens, other than Liens permitted hereunder,
relating to the Purchased Assets, executed by the holder of or parties to each
such Lien. The releases shall be satisfactory in substance and form to Buyer
and its counsel.
7.10 DOCUMENTS. Buyer shall receive from Seller, duly executed, on the
Closing Date:
(a) the Bill of Sale, certificates for the Shares duly endorsed for
transfer or accompanied by duly endorsed stock powers, and other appropriate
documents conveying to Buyer good and marketable title to the Purchased Assets,
other than the general warranty deeds delivered to the Title Company as
provided in Section 7.12;
(b) the Assignment and Assumption Agreement, with related consents,
if any are so required, and
(c) Purchased Entity Purchase Agreements, duly stamped, authenticated,
and/or notarized as required by Law and as necessary for the transfer of the
Purchased Entities to a Buyer Company.
7.11 [RESERVED].
7.12 TITLE INSURANCE.
(a) As soon as practicable after the date hereof, but in any event at
least fifteen (15) days prior to the Closing Date, Buyer shall have received a
commitment (the "Title Commitment") from a nationally recognized title company
selected by Buyer (the "Title Company") to issue an ALTA standard form owner's
title insurance policy to the Buyer Companies with respect to the Real
Property, in an amount reasonably acceptable to Buyer and showing title thereto
vested in Seller, subject only to (i) applicable zoning and building Laws, (ii)
the Lien of real estate Taxes not yet due and payable, (iii) the Permitted
Liens as are set forth on Schedule 3.9(a), and (iv) such other exceptions and
Liens which can be satisfied by the payment of money and which exceptions and
Liens Seller shall, at Seller's sole cost, cause to be removed, discharged or
released at the Closing. Buyer shall also have obtained assurances from the
Title Company that all standard exceptions (including without limitation those
relating to mechanics' and materialmen's Liens, parties in possession and
survey matters) shall be deleted, and that the title policy to be issued at
Closing shall include an ALTA Form 3.1 zoning endorsement insuring the ability
of the Buyer Companies to continue to operate the Real Property in the same
manner as operated by the Seller Group Persons prior to the Closing Date, a
comprehensive endorsement and any other special endorsement required by Buyer.
The costs thereof divided equally between Buyer and Seller and settled at
Closing.
(b) In connection with the Title Commitment, Buyer and the Title
Company shall have received as soon as practicable after the date hereof, but
in any event at least fifteen (15) days prior to the Closing Date, from
reputable surveyors, an "as built" survey for all improvements located on the
Real Property and an ALTA form survey for the Real Property which shall located
by book and page all easements and rights of way on the Real Property. The
survey shall have been certified by the surveyor to Buyer and the Title
Company in form reasonably acceptable to Buyer and shall have been
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sufficient to enable the Title Company to issue the policy of title insurance
contemplated in paragraph (a) above. Each survey shall contain a legal
description of the applicable Real Property and a certification of the area of
the applicable Real Property in square feet. The costs thereof divided equally
between Buyer and Seller and settled at Closing.
(c) At Closing, Seller shall have executed and delivered to the Title
Company, pursuant to a joint written letter of instructions, general warranty
deeds in statutory form conveying the Real Property to the Buyer Companies,
subject only to (i) applicable zoning and building Laws, (ii) the Lien of real
estate taxes not yet due and payable, and (iii) the Permitted Liens set forth
on Schedule 3.9(a) which are acceptable to Buyer, together with such
affidavits, certificates and other instruments as are ordinarily delivered to a
purchaser (or assignee) of real estate and/or filed in the public records of
each community where the Real Property is located. At the Closing, the Title
Company shall have (i) issued to Buyer the owner's policy of title insurance
conforming with all requirements under paragraph (a) above and (ii) filed each
deed for the Real Property for record in the appropriate public records.
7.13 COMPLIANCE WITH APPLICABLE LAW. All filing and waiting periods
requirements of the HSR Act, any other antitrust or cartel Law, and any other
applicable Law relating to consummation of the transactions provided for herein
shall have been duly complied with. No second request shall have been issued
pursuant to the HSR Act nor has any inquiry or investigation been instituted by
any state or federal antitrust Government agency with respect to this
Agreement.
7.14 DUE DILIGENCE. Buyer shall not have obtained information pursuant to
its due diligence review of the Business and its Business Condition, including
without limitation investigation of customer, vendor, and other third person
relationships and environmental, tort, securities, corporate, product
liability, employee benefits, taxation and insurance matters, which would
reasonably cause Buyer to conclude that that the Business is not consistent, in
all material respects, with the Confidential Memorandum.
7.15 FOREIGN CLOSINGS. All actions necessary to consummate the
transactions to be contemplated by the Purchased Entity Purchase Agreements
shall have been taken.
7.16 FURTHER ASSURANCES. Buyer shall have received such further
instruments and documents as may reasonably be required to carry out the
transactions contemplated hereby and to evidence the fulfillment of the
agreements herein contained and the performance of all conditions to the
consummation of such transactions.
ARTICLE VIII
CONDITIONS TO SELLER'S OBLIGATIONS
The obligations of Seller to consummate the transactions provided for in
this Agreement shall be subject to the satisfaction of each of the following
conditions on or before the Closing Date, subject to the right of Seller to
waive any one or more of such conditions:
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8.1 REPRESENTATIONS AND WARRANTIES OF BUYER. The representations and
warranties of Buyer contained in this Agreement, including the Schedules
hereto, and in the certificates and papers to be delivered to Seller pursuant
hereto and in connection herewith shall be true and correct in all respects on
the date hereof and on the Closing Date (except for changes specifically
permitted hereunder) as though such representations and warranties were made on
the Closing Date.
8.2 PERFORMANCE OF THIS AGREEMENT. Buyer shall have duly performed or
complied with all of the obligations to be performed or complied with by it
under the terms of this Agreement on or prior to the Closing Date.
8.3 CERTIFICATE OF BUYER. Seller shall have received a certificate signed
by an officer of Buyer dated as of the Closing Date and subject to no
qualification certifying that the conditions set forth in Sections 8.1 and 8.2
hereof have been fully satisfied. Such certificate shall be deemed a
representation and warranty of Buyer hereunder.
8.4 OPINION OF COUNSEL. Seller shall have received from Bryan Cave LLP,
counsel to Buyer, an opinion of such counsel, dated the Closing Date,
substantially in the form attached hereto as Exhibit F.
8.5 PAYMENT OF PURCHASE PRICE . Seller shall receive from Buyer on the
Closing Date the Purchase Price to be delivered under Section 2.7 hereof.
8.6 DOCUMENTS. Buyer shall have duly executed the Assignment and
Assumption Agreement and the Purchased Entity Purchase Agreements.
8.7 FURTHER ASSURANCES. Seller shall have received such further
instruments and documents as may reasonably be required to carry out the
transactions contemplated hereby and to evidence the fulfillment of the
agreements herein contained and the performance of all conditions to the
consummation of such transactions.
ARTICLE IX
INDEMNIFICATION
9.1 INDEMNIFICATION OF BUYER. Seller shall hold Buyer, the Affiliates of
Buyer, and, from and after the Closing, the Purchased Entities, and the
shareholders, directors, officers, employees, successors, assigns and agents of
each of them (collectively, the "Buyer Indemnified Parties") harmless and
indemnify each of them from, against and in respect of, and waives any claim
for contribution or indemnity with respect to, any and all claims, losses,
damages, Liabilities, expenses or costs ("Losses"), plus reasonable attorneys'
fees and expenses incurred in connection with Losses and/or enforcement of this
Agreement, plus interest from the date incurred through the date of payment at
the prime lending rate of Morgan Guaranty from time to time prevailing (in all,
"Indemnified Losses") incurred or to be incurred by any of them and resulting
from or arising out of (a) any breach or violation of the representations,
warranties, covenants or agreements of any Seller Group Person contained in
this Agreement, or in any exhibit, statement, Schedule, certificate, instrument
or document delivered
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pursuant hereto, including provisions of this Article IX; (b) any Liability of
any Non-Purchased Entity not expressly assumed by Buyer hereunder or any
Liability of any Purchased Entity not connected to the Business; (c) any
Liability arising from the ownership, operation, or termination of the
manufacturing operations of FilterTek GmbH; (d) any Liability arising from the
acquisition of FilterTek, Inc., Robinson Industries, and/or Fuzere
Manufacturing by a Seller Group Person, except to the extent used in the
computation of Working Capital set forth on the Closing Balance Sheet; (e) any
Liability arising from the divestiture of Plastic Molded Concepts; (f) any
Liability arising from (i) any transportation or disposal of any Hazardous
Materials, or (ii) violation of, or contribution obligation under, any
Environmental Law in connection with (A) any location not included in the Real
Property, (B) any operations not included in the Business, or (C) any
discontinued operations of the Business; and/or (g) any Liability arising from
the termination of employment of Employees in Puerto Rico as a result of the
consummation of the transactions contemplated hereby.
9.2 INDEMNIFICATION OF SELLER. Buyer shall hold the Seller Group Persons,
except for, from and after the Closing, the Purchased Entities, and the
shareholders, directors, officers, employees, successors, assigns, and agents
of each of them, harmless and indemnify each of them from and against any and
all Indemnified Losses incurred or to be incurred by any of them, and resulting
from or arising out of any breach or violation of the representations,
warranties, covenants or agreements of Buyer contained in this Agreement,
including the provisions of this Article IX, and including the Assignment and
Assumption Agreement.
9.3 SURVIVAL. The respective representations and warranties made by the
Parties in Articles III and IV and in the certificates with respect thereto
issued pursuant to Sections 7.4 and 8.3 shall survive the Closing Date but
thereafter shall expire unless a claim with respect thereto shall have been
made in writing against the Party responsible for indemnification hereunder
(the "Indemnifying Party") pursuant to Section 11.12 hereof not later than
March 31, 1998; provided, that the foregoing limitations shall not apply to
representations and warranties under Sections 3.1, 3.2, 3.9, 3.10, 3.26 and
3.27, and on the certificate under Section 7.4 with respect to Sections 3.1,
3.2, 3.9, 3.10, 3.26 and 3.27, which shall survive without limitation
hereunder, or to representations and warranties under Section 3.8 and on the
certificate under Section 7.4 with respect to Section 3.8, and the rights of
the Buyer Indemnified Parties under Section 9.8, which shall survive to the
extent of the applicable statutes of limitations, if any.
9.4 LIMITATIONS.
(a) Seller shall not be liable for any breach of any representation or
warranty under Article III or certificate with respect thereto under Section
7.4, or indemnification with respect thereto under Section 9.1(a) or
indemnification under Section 9.8, (i) unless Indemnified Losses with respect
thereto exceed $200,000 but if so Seller shall be liable to the full extent
thereof, (ii) to the extent all payments by Seller to a Buyer Indemnified Party
pursuant to Seller's indemnification obligations hereunder exceed $15,000,000
and (iii) with respect to any matter involving Indemnified Loss or Losses, or
group or series of Indemnified Losses relating to the same matter, less than
$25,000 in the aggregate; provided, that none of the foregoing limitations
shall apply to representations and warranties under Sections 3.1, 3.2, 3.9,
3.10, 3.26 and 3.27 and on the certificate under Section 7.4 with respect to
Sections 3.1, 3.2, 3.9, 3.10, 3.26 and 3.27.
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9.5 NOTICE OF CLAIM. In the event that any Party hereto seeks
indemnification hereunder on behalf of itself or himself or another indemnified
person, such Party (the "Indemnified Party") shall give written notice to the
Indemnifying Party specifying the facts constituting the basis for such claim
and the amount, if known, of the claim asserted. The failure of the
Indemnifying Party, within a period of thirty (30) days after the giving of
such notice by the Indemnified Party, to give written notice to the Indemnified
Party of the intention to contest such claim shall be deemed an agreement that
the claim is a valid claim and at such time as it is known, the amount thereof
shall be paid promptly by the Indemnifying Party.
9.6 RIGHTS TO CONTEST CLAIMS OF THIRD PERSONS. If an Indemnified Party
asserts a claim for indemnification hereunder because of a claim made by any
claimant not a Party, the Indemnified Party shall give the Indemnifying Party
reasonably prompt notice thereof, but in no event more than ten (10) business
days after said assertion is actually known to the Indemnified Party; provided,
however, that the right of a person to be indemnified hereunder in respect of
claims made by a third party shall not be adversely affected by a failure to
give such notice unless, and then only to the extent that, an Indemnifying
Party is prejudiced thereby. The Indemnifying Party shall have the right, upon
written notice to the Indemnified Party, and using counsel reasonably
satisfactory to the Indemnified Party, to investigate, secure, contest or
settle the claim alleged by such third person (hereinafter called a
"Third-Person Claim"), provided that the Indemnified Party may participate
voluntarily, at its own expense, in any such Third-Person Claim through
representatives and counsel of its own choice, and, provided further, that the
Indemnifying Party unconditionally acknowledges to the Indemnified Party in
writing its obligation to indemnify the persons to be indemnified hereunder
with respect to all elements of, and to the full extent of, such Third-Person
Claim. Unless and until the Indemnifying Party elects to defend the
Third-Person Claim, the Indemnified Party shall have the full right, at its
option, to do so and to look to the Indemnifying Party under the provisions of
this Agreement for the full amount of the costs, if any, of defense. The
failure of the Indemnifying Party to respond in writing to the aforesaid notice
of the Indemnified Party with respect to such Third-Person Claim within thirty
(30) days after receipt thereof shall be deemed an election not to defend the
same. If the Indemnifying Party does not assume the defense of any such
Third-Person Claim, including any litigation resulting therefrom, (a) the
Indemnified Party may defend against such claim or litigation, in such manner
as it may deem appropriate, including, but not limited to, settling such claim
or litigation, after giving notice of the same to the Indemnifying Party, on
such terms as the Indemnified Party may deem appropriate, and (b) the
Indemnifying Party shall be entitled to participate in (but not to control) the
defense of such action, with its own counsel at its own expense. If the
Indemnifying Party thereafter seeks to question the manner in which the
Indemnified Party defended such Third-Person Claim or the amount or nature of
any such settlement, the Indemnifying Party shall have the burden to prove that
the Indemnified Party did not defend or settle such Third-Person Claim in a
reasonably prudent manner. The Parties shall make available to each other all
relevant information in their possession relating to any such Third-Person
Claim and shall cooperate in the defense thereof.
9.7 EXCLUSIVE REMEDY. The provisions of this Article IX and Article X
shall constitute the exclusive remedy of the Parties with respect to any claims
or Losses resulting from or arising out of the provisions of this Agreement
which may be asserted after the Closing; provided, that the foregoing shall not
preclude any claim for injunctive or other non-monetary equitable relief.
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9.8 TAX INDEMNIFICATION. In addition to any other indemnification granted
herein, but subject to Section 9.4 hereof, Seller agrees to indemnify, defend
and hold harmless the Buyer Indemnified Parties from and against all loss,
liability, including Seller's liability for Seller's Taxes or Seller's
liability, if any (for example, by reason of transferee liability or
application of Treas. Reg. Section 1.1502-6) for Taxes of others, loss of tax
attributes, damage or reasonable expense (including but not limited to
reasonable attorneys' fees and expenses) (collectively, "Tax Losses") payable
with respect to Taxes claimed or assessed against Buyer, any Buyer Company, any
Purchased Entity, or the Purchased Assets (i) for any taxable period ending on
or before the Closing Date except Taxes of the Purchased Entities to the extent
reflected in the computation of Working Capital set forth on the Closing
Balance Sheet, or (ii) for any taxable period resulting from a breach of any of
the representations or warranties contained in Section 3.8 hereof. Seller also
agrees to indemnify, defend and hold harmless the Buyer from and against any
and all Tax Losses sustained in a tax period of Buyer ending after the Closing
Date arising out of the settlement or other resolution of a proposed tax
adjustment which relates to a tax period ending on or before the Closing Date.
Notwithstanding anything else stated in this Section 9.8, Seller is not
obligated to indemnify Buyer for Tax Losses to the extent they arise from
changes after the Closing Date to any Laws related to Taxes.
9.9 MITIGATION OF LOSSES. Each Party shall take, and shall cause its
respective Affiliates to take, all reasonable steps within their respective
control to mitigate Indemnified Losses hereunder, provided that all such cost
incurred shall be included in Indemnified Losses.
In addition, the amount of the indemnification due to a party hereunder in
connection with any Indemnified Losses shall be calculated after giving effect
to the amount of any insurance proceeds or other cash receipts to the extent
received by the Indemnified Person as an indemnity against such Indemnified
Loss.
ARTICLE X
DISPUTE RESOLUTION
10.1 SCOPE; INITIATION. Resolution (except for resolution of the Closing
Balance Sheet under Section 2.8) of any and all disputes arising from or in
connection with this Agreement, whether based on contract, tort, statute or
otherwise, including disputes over arbitrability and disputes in connection
with claims by third persons ("Disputes") shall be exclusively governed by and
settled in accordance with the provisions of this Article X; provided, that the
foregoing shall not preclude equitable or other judicial relief to enforce the
provisions hereof or to preserve the status quo pending resolution of Disputes
hereunder; and provided further that resolution of Disputes with respect to
claims by third persons shall be deferred until any judicial proceedings with
respect thereto are concluded. Either Party to this Agreement may commence
proceedings hereunder by delivery of written notice providing a reasonable
description of the Dispute to the other, including a reference to this Article
(the "Dispute Notice").
10.2 NEGOTIATIONS BETWEEN EXECUTIVES. The Parties shall first attempt in
good faith to resolve promptly any Dispute by negotiations between executives
who are not directly involved in the
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Dispute, and who have authority to settle it (as to each Party, an
"Executive"). Not later than 20 days after delivery of the Dispute Notice,
each Party shall designate an Executive to meet with the other Party's
Executive at a reasonably acceptable time and place, and thereafter as such
Executives deem reasonably necessary. The Executives shall exchange relevant
information and endeavor to resolve the Dispute. Prior to any such meeting,
each Party's Executive shall advise the other as to any other individuals who
will attend such meeting. All negotiations pursuant to this Section 10.2 shall
be confidential and shall be treated as compromise negotiations for purposes of
Rule 408 of the Federal Rules of Evidence and similarly under other federal and
state rules of evidence.
10.3 BINDING ARBITRATION.
(a) If a Dispute has not been resolved pursuant to Sections 10.2
hereof within 120 days (or such longer period as the Parties may agree), the
Parties hereby agree to submit the Dispute to arbitration under the following
provisions, which arbitration shall be final and binding upon the Parties,
their successors and assigns, and that the following provisions constitute a
binding arbitration clause under applicable Law.
(b) Either Party may initiate arbitration of a Dispute by delivery of
a demand therefor (the "Arbitration Demand") to the other Party not sooner than
120 days after the date of delivery of the Dispute Notice but at any time
thereafter; provided, that if a Party does not cooperate in the procedures
provided under Section 10.2, the other Party may initiate arbitration at such
earlier time as such non-cooperation shall become reasonably apparent.
(c) The arbitration shall be conducted in St. Louis, Missouri or
Chicago, Illinois, by a sole arbitrator selected by agreement of the Parties
not later than 10 days after delivery of the Arbitration Demand or, failing such
agreement, appointed pursuant to the Commercial Arbitration Rules of the
American Arbitration Association, as amended from time to time (the "AAA
Rules"). In order to qualify as an arbitrator hereunder, a person must be an
equity partner (or comparable) in a law firm located in St. Louis, Missouri or
Chicago, Illinois with 175 or more attorneys and must be experienced in
commercial disputes. If an arbitrator becomes unable to serve, his or her
successor(s) shall be similarly selected or appointed.
(d) The arbitration shall be conducted pursuant to the Federal
Arbitration Act and the Missouri Uniform Arbitration Act or Illinois Uniform
Arbitration Act, as applicable, and such procedures as the Parties may agree
or, in the absence of or failing such agreement, pursuant to the AAA Rules.
Notwithstanding the foregoing:
(i) each Party shall be allowed to conduct discovery through written
requests for information, document requests, requests for stipulations of fact,
and depositions; (ii) the nature and extent of such discovery shall be
determined by the arbitrator, taking into account the needs of the Parties and
the desirability of making discovery expeditious and cost-effective; (iii) the
arbitrator may issue orders to protect the confidentiality of information, to
be disclosed in discovery; and (iv) the arbitrator's discovery rulings may be
enforced in any court of competent jurisdiction.
(e) All hearings shall be conducted on an expedited schedule, and all
proceedings shall be confidential. Either Party may at its expense make a
stenographic record thereof.
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(f) The arbitrator shall complete all hearings not later than 90 days
after selection or appointment, and shall make a final award not later than 30
days thereafter. The award shall be in writing and shall specify the factual
and legal bases for the award. The arbitrator shall apportion all costs and
expenses of the arbitration, including the arbitrator's fees and expenses and
fees and expenses of experts ("Arbitration Costs") between the prevailing and
non-prevailing Party as the arbitrator deems fair and reasonable. In
circumstances where a Dispute has been asserted or defended against on grounds
that the arbitrator deems manifestly unreasonable, the arbitrator may assess
all Arbitration Costs against the non-prevailing Party and may include in the
award the prevailing Party's attorney's fees and expenses in connection with
any and all proceedings under this Article X. Notwithstanding the foregoing,
in no event may the arbitrator award multiple, punitive or exemplary damages.
(g) Either Party may assert appropriate statutes of limitation as a
defense in arbitration; provided, that upon delivery of a Dispute Notice any
such statute shall be tolled pending resolution hereunder.
10.4 CONFIDENTIALITY NOTICE. Each Party shall notify the other promptly,
and in any event prior to disclosure to any third person, if it receives any
request for access to confidential information or proceedings hereunder.
ARTICLE XI
MISCELLANEOUS
11.1 CHANGES TO STRUCTURE. In the event Buyer deems it necessary or
advisable to change the structure of the acquisition set forth on Schedule 2.1,
so that it would purchase Purchased Assets of a Seller Group Person and assume
its Assumed Liabilities, rather than include such Person as a Purchased Entity;
or require a transfer of Purchased Assets and Assumed Liabilities to a
Purchased Entity prior to Closing; or other structural change consistent with
the overall objective of Buyer to acquire the Business; then in such event,
provided Buyer gives Seller notice of such change not later than January 15,
1997, the Parties shall amend this Agreement accordingly; provided further,
that to the extent such change requires the incurrence of additional cost by
Seller in excess of $25,000, Buyer shall reimburse the amount so in excess; and
provided further, that Schedule 2.1 may be modified by mutual consent of the
Parties to include the acquisition of Filtertek do Brazil Industria E Comercio
Ltda.
11.2 TERMINATION OF AGREEMENT. This Agreement and the transactions
contemplated hereby may be terminated prior to the Closing Date only as
follows:
(a) by mutual consent of Buyer and Seller; or
(b) by either Buyer or Seller if the Closing shall not have occurred
on or before, (i) if any of the conditions to Closing are not satisfied as a
result of factors beyond the control of either Party, March 31, 1997,
otherwise (ii) February 15, 1997.
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11.3 MANNER AND EFFECT OF TERMINATION.
(a) Any action by Buyer or Seller to terminate this Agreement and the
transactions contemplated hereby, as provided in Section 11.2 hereof, shall be
taken by its respective Board of Directors.
(b) If this Agreement is terminated pursuant to Section 11.2 hereof
without fault of either Party or breach of this Agreement, all obligations of
Seller and Buyer hereunder shall terminate, without liability of Seller to
Buyer or of Buyer to Seller. In such event, each Party hereto shall pay all
legal and other costs and expenses incurred by such Party in connection with
this Agreement and the transactions contemplated hereby.
(c) Nothing in this Section or elsewhere in this Agreement shall
impair or restrict the rights of any Party to any and all remedies at law or in
equity in the event of a breach of or default under this Agreement.
11.4 NON-DISCLOSURE OF INFORMATION. No Seller Group Person nor Buyer or
any of its Affiliates shall make any announcement or other disclosure of the
terms hereof or the transactions contemplated hereby (except disclosure to
their respective professional advisors) without the mutual written consent of
both of the Parties, except as required by law.
11.5 BULK SALES. Buyer hereby waives compliance with any applicable State
Uniform Commercial Code or other statutory provisions governing bulk sales.
Seller agrees to indemnify, defend and hold harmless the Buyer Companies from
any and all loss, cost or expenses, resulting from the assertion of claims made
against the Purchased Assets sold hereunder or against any Buyer Company by
creditors of any Seller Group Person under any bulk sales Law with respect to
liabilities and obligations of Seller Group Persons not assumed by any Buyer
Company hereunder, such indemnity to be in accordance with the provisions of
Article IX hereof without regard to the limitations contained in Section 9.4.
11.6 CONTENTS OF AGREEMENT, PARTIES IN INTEREST, ASSIGNMENT. This
Agreement, including the Schedules and Exhibits hereto, and the other
agreements and documents referred to herein set forth the entire understanding
of the Parties with respect to the subject matter hereof. Any previous
agreements of understandings between the parties regarding the subject matter
hereof, including, without limitation, the Confidentiality Agreement, by and
between Buyer and Coopers & Lybrand, LLP, dated as of September 9, 1996, and
the letters from Buyer to Coopers & Lybrand, LLP, relating to the Business,
dated September 26, 1996, November 19, 1996, November 20, 1996, November 23,
1996, and November 25, 1996, are merged into and superseded by this Agreement.
All representations, warranties, covenants, terms and conditions of this
Agreement shall be binding upon and inure to the benefit of and be enforceable
by the respective heirs, legal representatives, successors and permitted
assigns of the parties hereto; provided, however, that none of the rights or
obligations of any of the parties hereto may be assigned without the prior
written consent of, in the case of assignment by Seller, Buyer, or, in the case
of assignment by Buyer, Seller; provided however, that Buyer may assign all or
part of its rights under this Agreement and may delegate all or part of its
obligations under this Agreement to one or more corporations all or
substantially all of the capital stock of which is owned, directly or
indirectly, by Buyer, in which event all the rights and powers of Buyer
48
<PAGE> 54
and the remedies available to it under this Agreement shall extend to and be
enforceable by such assignee. Any such assignment and delegation shall not
release Buyer from its obligations under this Agreement, and further Buyer
guarantees to Seller the performance by each such assignee of its obligations
under this Agreement. In the event of any such assignment and delegation, the
term "Buyer" as used in this Agreement shall be deemed to refer to each such
assignee of Buyer and shall be deemed to include both Buyer and each such
assignee where appropriate.
11.7 SEVERABILITY. If any provision of this Agreement shall be determined
to be contrary to Law and unenforceable by any court of law, the remaining
provisions shall be severable and enforceable in accordance with their terms.
11.8 COUNTERPARTS. This Agreement may be executed in one or more
identical counterparts, each of which shall be deemed an original but all of
which together will constitute one and the same instrument.
11.9 INTERPRETATION. The table of contents and article and section
headings contained in this Agreement are inserted for convenience only and
shall not affect in any way the meaning or interpretation of the Agreement.
Both Parties have participated substantially in the negotiation and drafting
of this Agreement and each Party hereby disclaims any defense or assertion in
any litigation or arbitration that any ambiguity herein should be construed
against the draftsman. Each reference in this Agreement to an Article or a
Section, Schedule or Exhibit, unless otherwise indicated, shall mean an Article
or a Section of this Agreement or a Schedule or Exhibit attached to this
Agreement, respectively.
11.10 GOVERNING LAW. This Agreement shall be construed and interpreted
according to the Laws of the State of Illinois.
11.11 PAYMENT OF FEES AND EXPENSES. Each Party hereto shall pay all fees
and expenses of such Party's respective counsel, accountants and other experts
and all other expenses incurred by such Party incident to the negotiation,
preparation and execution of this Agreement and the consummation of the
transaction contemplated hereby, including any finder's or brokerage fees.
11.12 NOTICE. All notices, requests, demands and other communications
required or permitted under this Agreement shall be deemed to have been duly
given and made if in writing upon being delivered either by courier delivery or
by fax to the Party for whom it is intended, provided that a copy thereof is
deposited, postage prepaid, certified or registered mail, return receipt
requested (or such form of mail as may be substituted therefor by postal
authorities), in the United States mail, bearing the address shown in this
Section 11.12 for, or such other address as may be designated in writing
hereafter by such Party:
If to Buyer:
ESCO Electronics Corporation
8888 Ladue Road, Suite 200
49
<PAGE> 55
St. Louis, Missouri 63124-2090
Attention: General Counsel
Telecopier: (314) 213-7215
With a copy to:
Bryan Cave LLP
One Metropolitan Square
211 North Broadway, Suite 3600
St. Louis, Missouri 63108-2750
Attn: Michael Morgan.
Telecopier: (314) 259-2020
If to Seller:
Schawk, Inc.
1695 River Road
Des Plaines, Illinois 60018
Attention: Clarence W. Schawk
Telecopier: (847) 827-1264
With copies to:
Schawk, Inc.
1695 River Road
Des Plaines, Illinois 60018
Attention: A. Alex Sarkisian
Telecopier: (847) 827-2353
and
Vedder, Price, Kaufman & Kammholz
222 N. LaSalle
Suite 2600
Chicago, Illinois 60601
Attention: John T. McEnroe
Telecopier: (312) 609-5005
Any such notice shall be effective upon receipt. Either Party may change the
address to which notices are to be addressed by giving the other Party notice
in the manner herein set forth.
11.13 ADDITIONAL AGREEMENTS. At the Closing, Buyer shall reimburse Seller
to the extent of:
(a) the cost to Seller of automated fuel-injector filter assembly cells
purchased for use in the Business, provided that (i) such reimbursement shall
not exceed $600,000.00, (ii) such
50
<PAGE> 56
expenditures for cells shall have been made by Seller prior to Closing, and
(iii) the acquisition of such cells shall have been consistent with standard
policies and procedures of the Business and pursuant to the documentation
attached as Schedule 11.13(a); and
(b) one-half of the cost of the items listed on Schedule 11.13(b)
provided that (i) such reimbursement shall not exceed $300,000.00, (ii) such
expenditures have been made by Seller prior to Closing, and (iii) such
expenditures have been consistent with standard policies and procedures of the
Business and pursuant to the documentation attached as Schedule 11.13(b).
In addition, Buyer shall consider, in Buyer's sole discretion, the
reimbursement of additional capital expenditures presented to it by Seller
prior to Closing.
51
<PAGE> 57
IN WITNESS WHEREOF, the parties hereto have executed this Agreement, as of
the day and year first above written.
ESCO ELECTRONICS CORPORATION
By:____________________________________
Name:__________________________________
Title:_________________________________
ATTEST:
_____________________________
Name:________________________
Title:_______________________
SCHAWK, INC.
By:____________________________________
Name:__________________________________
Title:_________________________________
ATTEST:
_____________________________
Name:________________________
Title:_______________________
52
<PAGE> 58
TABLE OF EXHIBITS
Exhibit A............................Form of Assignment and Assumption Agreement
Exhibit B...................................................Form of Bill of Sale
Exhibit C...............................................Form of Escrow Agreement
Exhibit D............................Form of Purchased Entity Purchase Agreement
Exhibit E...................................Form of Opinion of Counsel to Seller
Exhibit F....................................Form of Opinion of Counsel to Buyer
53
<PAGE> 59
TABLE OF SCHEDULES
<TABLE>
<S><C>
Schedule 1.1(b).......................................................................................Purchased Entities
Schedule 2.1.............................................................................................Buyer Companies
Schedule 2.4.................................................................................Allocation of Consideration
Schedule 3.0........................................................................................."Knowledge" Persons
Schedule 3.1................................................Seller's Articles or Certificate of Incorporation and Bylaws
Schedule 3.3........................................................................................Financial Statements
Schedule 3.4.....................................................................Events Subsequent to September 30, 1996
Schedule 3.5..................................................Purchased Assets on Consignment or in Possession of Others
Schedule 3.6(a)....................................................................List of Accounts and Notes Receivable
Schedule 3.6(b)........................................................Non-Ordinary Course Accounts and Notes Receivable
Schedule 3.7.....................................................................................Undisclosed Liabilities
Schedule 3.8(e)..........................................................................................Liens for Taxes
Schedule 3.8(g)...............................................................................................Tax Claims
Schedule 3.8(i)..........................................................................Foreign Person for Tax Purposes
Schedule 3.8(l).......................................................Partnerships, Joint Ventures or Other Arrangements
Schedule 3.8(m)..........................................................................Stock in Subsidiaries of Seller
Schedule 3.9(a)......................................................Description of Owned Real Property; Permitted Liens
Schedule 3.9(b)..............................................................................Proposed Regulatory Changes
Schedule 3.9(d)...........................................................Owned Real Property Located in Hazardous Areas
Schedule 3.9(e)..................................Conditions Requiring Repairs; Disclosures Regarding Owned Real Property
Schedule 3.10(a).................................................................................Owned Personal Property
Schedule 3.10(b)...........................................................................................Capital Stock
Schedule 3.11................................................Real and Personal Property Leased from Seller Group Persons
Schedule 3.12(a)...........................................................Real Property Leased to a Seller Group Person
Schedule 3.12(b).......................................................Personal Property Leased to a Seller Group Person
Schedule 3.13(a)...................................................................................Intellectual Property
Schedule 3.13(b)................................Notice of Invalidity or Unenforceability Regarding Intellectual Property
Schedule 3.14..........................................................................................Required Consents
Schedule 3.16.......................................................................................Licenses and Permits
Schedule 3.17.........................................................................................Material Contracts
Schedule 3.18(e)............................................................................Change of Control Provisions
Schedule 3.20(a)..............................................................................................Litigation
Schedule 3.20(b).................................................................................Judgments, Orders, Etc.
Schedule 3.21.............................................................Officers, Directors, Employees and Consultants
Schedule 3.22....................................................Indebtedness to and from Officers, Directors and Others
Schedule 3.23................................................................................Outside Financial Interests
Schedule 3.25............................................................................Labor and Employment Agreements
Schedule 3.26..........................................................................................Employee Benefits
Schedule 3.27...........................................................................................Terminated Plans
Schedule 3.29(a)...............................................................................Employment-Related Claims
Schedule 3.29(b).............................................................................Workers Compensation Claims
Schedule 3.31.............................................................................................Labor Disputes
Schedule 3.32..................................................................................................Insurance
</TABLE>
54
<PAGE> 60
<TABLE>
<S><C>
Schedule 3.33.................................................................................................Guarantees
Schedule 3.34.........................................................................................Product Warranties
Schedule 3.35.................................................................................. Product Liability Claims
Schedule 3.36...............................................................................Product Safety Notifications
Schedule 3.37(a)..................................................................Non-Compliance with Environmental Laws
Schedule 3.37(b)...............................................................Non-Compliance with Environmental Permits
Schedule 3.37(c)..........................................................................Release of Hazardous Materials
Schedule 3.37(d).............................Existence of Hazardous Materials, Asbestos, Underground Storage Tanks, Etc.
Schedule 3.37(g)....................................................................................Environmental Claims
Schedule 3.37(h)................................................Notice or Knowledge of Certain Environmental Instigators
Schedule 3.37(j)...............................................................................Hazardous Materials Sites
Schedule 3.37(k).................................................................Persons Dealing with Hazardous Material
Schedule 3.38..............................................................................................Broker's Fees
Schedule 3.39.............................................................................................Foreign Assets
Schedule 3.43..............................................................................................Bank Accounts
Schedule 3.45.................................................................................................Affiliates
Schedule 11.13(a).............................................Automated Fuel-Injector Filter Assembly Cell Documentation
Schedule 11.13(b)................................................Approved Capital Expenditures and Related Documentation
</TABLE>
55
<PAGE> 1
FIRST AMENDMENT TO THE
ACQUISITION AGREEMENT
BY AND BETWEEN
ESCO ELECTRONICS CORPORATION AND SCHAWK, INC.
DATED DECEMBER 18, 1996
This First Amendment to the Acquisition Agreement by and between ESCO
Electronics Corporation and Schawk, Inc. dated December 18, 1996 (this
"Amendment") is dated as of February 6, 1997.
Whereas, ESCO Electronics Corporation, a Missouri corporation ("Buyer") and
Schawk, Inc., a Delaware corporation ("Seller") are parties to an acquisition
agreement (the Acquisition Agreement") dated December 18, 1996, to which they
desire to make certain amendments, as further described herein.
Now therefore, in consideration of the foregoing recitals and the premises and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree for themselves, their
successors and assigns, as follows:
1. The following clause shall be added at the end of subparagraph 2.9 (e):
"and shall include interest at the prime rate of interest as announced from
time to time by Morgan Guaranty Trust Co. of New York from the Closing Date
through the date of payment."
2. Clause (b)(i) in Section 3.13 of the Acquisition Agreement is deleted and
replaced by the following:
"(i)(A) registered patents and trademarks included in the Intellectual
Property were validly issued, (B) unregistered trademarks included in the
Intellectual Property are valid, to the full extent, in civil law
counties, of protection for unregistered trademarks under applicable Law,
and in common law counties, to the full extent under common law and (C)
except as set forth on Schedule 3.13(b), no Seller Group Person has
received notice of the invalidity or unenforccability of any Intellectual
Property;"
3. Section 5.4 of the Acquisition Agreement is hereby deleted and replaced
by the following:
5.4 Full Access. Seller covenants that, until the Closing,
representatives of Buyer shall have full access at all reasonable
times to all premises, properties, books, records, contracts, tax
records and documents of each Seller Group Person relating to the
Business, and Seller will furnish to Buyer any information in
respect to the Business as Buyer may from time to time request. Such
examination and investigation by Buyer, and any discovery of facts
resulting therefrom, shall not affect the warranties and
representations of Seller contained in this Agreement. Buyer shall
inform Seller of any matter involving Indemnified Loss involving
$50,000 or more as to which Buyer believes, as of the Closing Date,
that it is entitled to and intends to assert a claim pursuant to
Article IX hereof that arises from a breach of the representations
and warranties pursuant to Article III hereof.
5. The following clause (h) shall be added to Section 9.1 of the
Acquisition Agreement. "and/or (h) any fines, orders, sanctions,
penalties, or other claims by any Government, and any Liability to any to
any Employee, arising from any actual or alleged violation of any Law
respecting employee or occupational safety or health ("OSHA Law") arising
from or in connection with conditions at any facility of the Business or
other Purchased Asset if such conditions existed at the Effective Time,
provided that (A) Buyer provides notice to Seller of any such claim or
Liability not later than March 31, 1998, and (B) notwithstanding the
foregoing. Buyer shall be responsible for any capital expenditure to
remedies such facilities and Purchased Assets in order to comply with such
OSHA Law,
<PAGE> 2
and shall use reasonable best efforts to mitigate any such claims or
Liabilities by endeavoring to cure after governmental notice of violation
has been received, and shall proceed to implement procedures in accordance
with good business practice.
5. Buyer and Seller agree that proper accruals shall be made in accordance
with GAAP on the closing Date Balance for inter ail 1996 ad valorem real
estate taxes.
6. The following shall be added to Section 9.8: The Purchased Assets shall
include certain items as provided in the letter dated February 7, 1997
attached as Schedule 9.8. Seller further agrees to indemnify, defend and
hold harmless the Buyer Indemnified Parties from and against all Taxes and
Tax Losses (as to any event, net of any actual tax gain realized in
connection with the same event) payable as a result of the transactions
contemplated in Section 9.8 including without limitation any Taxes or Tax
Losses arising from the invalidity, transfer or repayment of any
intercompany loans or administration thereof, so as to put the Buyer
Indemnified Parties in all respects in the same position with respect to
Taxes and tax attributes that they would have had if the transactions
contemplated in Schedule 9.8 had not occurred and the Closing had occurred
as contemplated in this Agreement without reference to Schedule 9.8;
provided, that the foregoing shall not be subject to the limitations in
Section 9/4(a)(i) or (iii) hereof. Seller and Buyer agree to review the
transactions described in said February 7, 1997 letter during the sixty
days after Closing to ascertain whether such transactions may be
restructured in a manner more favorable or neutral the Parties provided
that neither Party shall be required to incur any additional expense in
such respect. The Closing Balance Sheet shall be prepared in all respects
as if the Closing had occurred without reference to the transactions
contemplated in Schedule 9.8."
7. This Amendment is limited as specified and shall not constitute a
modification of any other provision of the Acquisition Agreement. Except
as expressly amended hereby, the Acquisition Agreement shall continue in
full force and effect in accordance with the provisions thereof on the
date hereof. As used in the Acquisition Agreement, "herein."
"hereinafter," "hereto," hereof," and words of similar import shall,
unless the context otherwise requires, mean the Acquisition Agreement
after the amendments by this Amendment.
8. This Amendment may be executed in one or more identical counterparts,
each of which shall be deemed an original but all of which together will
constitute one and the same instrument.
In witness whereof, ESCO Electronics Corporation and Schawk, Inc., hereby
approve this Amendment as of the day and year first written above.
ESCO Electronics Corporation
<PAGE> 1
EXHIBIT 15
Page 1 of 5
The following unaudited pro forma financial statements are presented for
informational purposes only and do not purport to be indicative of the
financial position which would actually have existed or the results of
operations which would actually have been obtained if the transaction had
occurred in the periods indicated below or which may exist or be obtained in
the future. The ultimate use of the proceeds may differ from the assumptions
used herein.
The following unaudited pro forma statements of income for the year ended
December 31, 1995 and the nine months ended September 30, 1996 give effect to
i. the elimination of the results of operations of the Plastics Group
which was sold as described in Item 2, and
ii. the related pro forma adjustments described in the accompanying
notes.
The pro forma results of operations are presented as though the disposal
occurred on January 1, 1995.
The following unaudited pro forma balance sheet as of September 30, 1996 gives
effect to the disposal of the Plastics Group and the related pro forma
adjustments described in the accompanying notes. The balance sheet is
presented as though the disposal occurred on September 30, 1996.
These statements should be read in conjunction with the historical financial
statements and accompanying notes of the Registrant.
1
<PAGE> 2
EXHIBIT 15
Page 2 of 5
Schawk, Inc.
Pro Forma Condensed Balance Sheet (Unaudited)
September 30, 1996
(Thousands of dollars)
<TABLE>
<CAPTION>
Schawk, Inc. Pro Forma
Consolidated Adjustments Pro Forma
============ =========== =========
<S> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 3,439 $ 90,644 (a) $ 4,083
(90,000)(b)
Short-term investments 18,957 (b) 18,957
Trade accounts receivable, net 29,292 (11,819)(a) 17,473
Inventories 17,575 (14,126)(a) 3,449
Prepaid expenses and other 3,932 (800)(a) 3,132
Deferred income taxes 1,504 1,504
--------- -------- --------
Total current assets 55,742 (7,144) 48,598
Cash and cash equivalents - restricted 40,000 (b) 40,000
Property and equipment - net 75,951 (47,758)(a) 28,193
Excess of cost over net assets acquired, less accumulated
amortization 49,235 (40,993)(a) 8,242
Unallocated acquisition costs 6,680 6,680
Other intangible assets, less accumulated amortization 938 (525)(a) 413
Other 6,042 (2,601)(a) 3,441
-------- -------- --------
Total assets $194,588 $(59,021) $135,567
======== ======== ========
Liabilities and Stockholders' Equity
Current liabilities:
Trade accounts payable $ 8,532 $ (6,674)(a) $ 1,858
Accrued expenses 15,087 (4,948)(a) 10,139
20,097 (a) 20,097
Notes payable to stockholders 5,765 (5,765)(b)
Current portion of long-term debt and capital lease
obligations 6,297 (335)(a) 5,962
======== ======== ========
Total current liabilities 35,681 2,375 38,056
Long-term debt 65,278 (25,278)(b) 40,000
Capital lease obligations 5,385 5,385
Deferred income taxes 5,269 (3,118)(a) 2,151
Other 1,206 1,206
Stockholders' equity 81,769 (33,000)(a) 48,769
======== ======== ========
Total liabilities and stockholders' equity $194,588 $(59,021) $135,567
======== ======== ========
</TABLE>
2
<PAGE> 3
EXHIBIT 15
Page 3 of 5
Schawk, Inc.
Pro Forma Condensed Statement of Income (Unaudited)
Year Ended December 31, 1995
(Thousands of dollars)
<TABLE>
<CAPTION>
Schawk, Inc. Pro Forma
Consolidated Adjustments Pro Forma
------------ ----------- ---------
<S> <C> <C> <C>
Net sales $172,290 $(85,086)(a) $87,204
Cost of sales 122,390 (71,324)(a) 51,066
Selling, general and administrative expenses 36,263 (11,147)(a) 25,116
-------- -------- -------
Operating income 13,637 (2,615) 11,022
Interest income (737) 49 (a) (688)
Interest expense 6,279 (1,972)(a) 2,250
(2,057)(c)
Other (income) expense 5 156 (a) 161
-------- -------- -------
5,547 (3,824) 1,723
-------- --------- -------
Income before income taxes 8,090 1,209 9,299
Income tax provision 1,154 (208)(a) 1,769
823 (c)
-------- -------- -------
Net income 6,936 594 7,530
Preferred dividends 1,360 1,360
-------- -------- -------
Income available for common sharehold $ 5,576 $ 594 $ 6,170
======== ======== =======
</TABLE>
3
<PAGE> 4
EXHIBIT 15
Page 4 of 5
Schawk, Inc.
Pro Forma Condensed Statement of Income (Unaudited)
Nine Months Ended September 30, 1996
(Thousands of dollars)
<TABLE>
<CAPTION>
Schawk, Inc Pro Forma
Consolidated Adjustments Pro Forma
------------ ----------- ---------
<S> <C> <C> <C>
Net sales $123,919 $(60,039)(a) $63,880
Cost of sales 84,979 (48,582)(a) 36,397
Selling, general and administrative expenses 26,043 (8,091)(a) 17,952
-------- -------- -------
Operating income 12,897 (3,366) 9,531
Interest income (359) 34 (a) (325)
Interest expense 4,055 (756)(a) 1,851
(1,448)(c)
Other (income) expense (85)(a) (85)
-------- -------- -------
3,696 (2,255) 1,441
-------- -------- -------
Income before income taxes 9,201 (1,111) 8,090
Income tax provision 3,180 (693)(a) 3,066
579 (c)
-------- -------- -------
Net income 6,021 (997) 5,024
Preferred dividends 939 939
-------- -------- -------
Income available for common shareholde $ 5,082 $ (997) $ 4,085
======== ======== =======
</TABLE>
4
<PAGE> 5
EXHIBIT 15
Page 5 of 5
Notes to Unaudited Pro Forma Financial Statements
The Schawk, Inc. Consolidated column in the pro forma balance sheet as of
September 30, 1996 and the pro forma statements of income for the year ended
December 31, 1995 and the nine months ended September 30, 1996 include the
Plastics Group's results for the full periods.
(a) Reflects the elimination of Plastics Group historical balances as of the
respective date as well as the cash proceeds from the transaction and the
estimated liabilities incurred in connection with the transaction.
Retained earnings reflects an estimated loss of approximately $33.0
million on the sale.
(b) The cash proceeds are used as follows: approximately $25 million reduces
long-term debt, $6 million reduces notes payable to stockholders, $19
million is invested in short-term investments and $40 million is reflected
as restricted cash and cash equivalents in connection with the provisions
of the Company's note agreement.
(c) Reflects reduction in interest expense at assumed average interest rates
of 7.0% for the year ended December 31, 1995 and 6.5% for the nine months
ended September 30, 1996 related to the long-term debt and 5.0 % for both
the year ended December 31, 1995 and the nine months ended September 30,
1996 related to the notes payable to stockholders. Also reflects the
related increase in income taxes at an assumed rate of 40% for both the
year ended December 31, 1995 and the nine months ended September 30, 1996.
Interest income from investment of cash proceeds in excess of those used to
reduce long-term debt is not reflected in the pro forma statements of income
pro forma adjustments column for the year ended December 31, 1995 and the nine
months ended September 30, 1996. If the excess cash proceeds earned interest
at 6%, proforma net income would have increased by $2,122 for the year end
December 31, 1995 and $1,592 for the nine months ended September 30, 1996 and
proforma stockholders' equity would have increased by $1,592 at September 30,
1996.
5
<PAGE> 1
EXHIBIT 99
[SCHAWK LOGO]
NEWS FOR IMMEDIATE RELEASE
FOR FURTHER INFORMATION, PLEASE CONTACT:
SCHAWK: MARIE MEISENBACH GRAUL, CHIEF FINANCIAL OFFICER 847/827-9494,
OR JACK MODZELEWSKI, FLEISHMAN-HILLARD 312/751-8878
SCHAWK, INC. COMPLETES THE SALE OF ITS PLASTICS GROUP
TO ESCO ELECTRONICS CORPORATION
DES PLAINES, IL. (February 10, 1997) -- Schawk, Inc. (NYSE: SGK) today
announced the completion of the sale of its Plastics Group to ESCO Electronics
Corporation (NYSE: ESE) for approximately $92 million in cash plus working
capital adjustments.
David A. Schawk, Chief Executive Officer of Schawk, Inc. said, "The
closing of this transaction is a milestone in Schawk's strategy of focusing on
its core imaging products and service businesses." Mr. Schawk continued, "We
can now concentrate our time, capital, technology and human resources
exclusively on our core business, imaging and information technologies. Our
strengthened balance sheet will enable us to enhance shareholder value through
reinvestment in expanding related services and continuing to make selective
acquisitions."
The transaction is expected to be accretive based on projected 1997 net
income. During 1996, Schawk completed the acquisition of three privately held
companies in the imaging products and services market to enhance its leadership
position as a supplier of sophisticated global imaging products and services
for multinational clients.
In connection with the close of this transaction, Ronald J. Kay,
President, Plastics Group and Larry Larkin, Executive Vice President, Plastics
Group have resigned from the Schawk, Inc. Board of Directors.
Schawk, Inc., headquartered in suburban Chicago, is a leading global
supplier of electronic digitized high resolution color imaging, database
management and on-site facility management, and other related outsourcing
services.
Schawk provides advanced technology services for the food, beverage and
consumer products packaging, point of sale and advertising markets. Schawk
also provides digital art production, design services and outsourcing. Upon
closing of transaction, Schawk will have approximately 850 employees at its 11
North American facilities. In 1995, Schawk reported net sales of $172.3
million.
-end-
