SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report Pursuant
to Section 13, or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) March 15, 2000
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PARLEX CORPORATION
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(Exact Name of Registrant as Specified in Its Charter)
Massachusetts
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(State or Other Jurisdiction of Incorporation)
0-12942 04-2464749
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(Commission File Number) (IRS Employer Identification No.)
One Parlex Place, Methuen, Massachusetts 01844
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(Address of Principal Executive Offices) (Zip Code)
(978) 685-4341
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(Registrant's Telephone Number, Including Area Code)
Not applicable
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(Former Name or Former Address, if Changed Since Last Report)
Item 2. ACQUISITION or DISPOSITION of ASSETS
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Pursuant to a Stock Purchase Agreement dated as of January 21, 2000
(the "Purchase Agreement"), by and among Parlex Corporation (the "Company"),
and Cookson Group plc and Cookson Investments, Inc. (collectively
"Cookson"), the Company completed its acquisition of the stock of two
Cookson Group plc wholly owned subsidiaries, Poly-Flex Circuits Limited (a
United Kingdom company) and Poly-Flex Circuits, Inc. (a Rhode Island
corporation)(collectively "Poly-Flex")(the "Poly-Flex Acquisition"). The
Poly-Flex Acquisition was completed on March 1, 2000. Pursuant to the
Purchase Agreement, the Company paid Cookson $19,650,000.00 in cash. Poly-
Flex designs, manufactures, markets and sells low cost, polymer thick film
flexible circuit assemblies. Poly-Flex's products are custom, application
specific flexible circuit assemblies constructed on a polyester substrate.
The operations of Poly-Flex's two manufacturing facilities, one in the
United Kingdom, and one in Cranston, Rhode Island, are split into two parts
consisting of the "circuit fabrication" area and the "SMT assembly" area.
The circuit fabrication area is where the flexible circuits are printed
using high speed printing presses and die cut using optically registered
hydraulic presses. The SMT assembly area consists of multiple surface mount
lines for electronic component placement and functional test. The Company
currently plans to continue the production of Poly-Flex's products using the
same plant and equipment.
The purchase price for the Poly-Flex Acquisition was determined as a
result of arms-length negotiations between representatives of both the
Company and Cookson. The Poly-Flex Acquisition has been accounted for under
the purchase method of accounting.
To facilitate the acquisition of Poly-Flex, the Company entered into a
Loan Agreement dated as of March 1, 2000, (the "Loan Agreement") among the
Company, and Fleet National Bank. The Loan Agreement provides for two
credit facilities (the "Credit Facilities"), consisting of a $15.0 million
revolving credit facility (the "Revolving Credit Facility") and a $15.0
million term loan (the "Term Loan").
The Company paid the purchase price for the Poly-Flex Acquisition and
paid certain related fees and expenses with available cash and borrowings of
$4,639,589 under the Revolving Credit Facility and $15,000,000 under the
Term Loan.
All amounts outstanding under the Revolving Credit Facility are
payable on December 31, 2001. The $15.0 million Term Loan is payable in 20
consecutive quarterly installments, in an amount equal to: $750,000 for the
first 19 consecutive quarterly installments; and (2) the amount of the
unpaid principal balance for the final installment.
Interest accrues on loans made under the Credit Facilities at the
Company's option at either (1) LIBOR base rate plus an applicable margin
ranging from 1.5% to 2.00% based upon the consolidated leverage of the
Company or (2) Fleet National Bank's prime rate. The post-default rate on
outstanding loans is 4.00% above the otherwise applicable rate of interest.
The Credit Facilities are unsecured.
The information set forth above is qualified in its entirety by
reference to (i) the Purchase Agreement, a copy of which is filed herewith
as Exhibit 2.1, and (ii) the Loan Agreement, a copy of which is filed
herewith as Exhibit 10.S.
Item 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
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Financial Statements of the Acquired Business
(a) It is currently impracticable for the Registrant to provide the
required one year financial statements with respect to the
acquired business referred to in Item 2 of this Report. The
Registrant will file the required financial information by
amendment as soon as practicable and in any event no later than
60 days from the date hereof.
(b) It is currently impracticable for the Registrant to provide the
required pro forma financial information with respect to the
acquired business referred to in Item 2. The Registrant will
file the required pro forma financial information by amendment as
soon as such information is available and in any event no later
than 60 days from the date hereof.
(c) Exhibits.
See Exhibit Index attached hereto. The exhibits listed in the Exhibit
Index filed as part of this report are filed as part of or are included in
this report.
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.
PARLEX CORPORATION
(Registrant)
By:
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Peter J. Murphy
President and
Chief Executive Officer
Dated: March 15, 2000
EXHIBIT INDEX
Exhibit
Number Exhibit
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2.1 Stock Purchase Agreement dated as of January 21, 2000, by and
among Parlex Corporation, Cookson Group, plc and Cookson
Investments, Inc.
10.S Loan Agreement dated as of March 1, 2000, by and between
Parlex Corporation and Fleet National Bank.
EXHIBIT 2.1
STOCK PURCHASE AGREEMENT
among
COOKSON GROUP plc
COOKSON INVESTMENTS, INC.
and
PARLEX CORPORATION
For the Purchase of All of the Outstanding Capital
Stock of POLY-FLEX Circuits, Inc. and All of the Outstanding
Share Capital of POLY-FLEX Circuits Ltd.
dated as of January 21, 2000
STOCK PURCHASE AGREEMENT
Table of Contents
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Page
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ARTICLE I Certain Definitions 1
1.1 Affiliate 2
1.2 Agreement 2
1.3 Affiliated Group 2
1.4 Balance Sheet Date 2
1.5 Business Day 2
1.6 Buyer 2
1.7 CA1985 2
1.8 Change of Control 2
1.9 Closing 3
1.10 Closing Date 3
1.11 Code 3
1.12 Combined EBIT 3
1.13 Combined Net Asset Value 3
1.14 Company 4
1.15 Confidentiality Agreement 4
1.16 Contract 4
1.17 Cookson License Agreement 4
1.17 Cookson UK Trust 4
1.18 Employee Plan 4
1.19 Encumbrances 4
1.20 Environmental Laws 4
1.21 Environmental Release 5
1.22 Expenses 5
1.23 ERISA 6
1.24 GAAP 6
1.25 Governmental Authority 6
1.26 Governmental Authorization 6
1.27 Hazardous Substance 6
1.28 Historical Financial Statements 7
1.29 Income Taxes 7
1.30 Indebtedness 7
1.31 Inland Revenue 7
1.32 Intellectual Property Assets 7
1.33 Knowledge 8
1.34 Law or Laws 8
1.35 Liability 8
1.36 Losses 8
1.37 Material Adverse Effect 8
1.38 Non-Compete Agreement 8
1.39 Order 8
1.40 Ordinary Course of Business 8
1.41 Organizational Documents 9
1. 42 Other Taxes 9
1.43 Person 9
1.44 Permitted Encumbrances 9
1.45 Poly-Flex UK 9
1.46 Poly-Flex US 9
1.47 Prescribed Benefit 10
1.48 Real Property 10
1.49 Seller 10
1.50 Seller US Group 10
1.51 Stock 10
1.52 Subsidiary. 10
1.53 Taxes Act 10
1.54 Tax Authority 10
1.55 Tax Returns 10
1.56 UK Employees 11
1.57 US Employees 11
1.58 Additional Definitions 11
ARTICLE II Acquisition of Stock by Buyer 13
2.1 Sale and Purchase of Stock 13
2.2 Purchase Price 13
2.3 Earnest Money Deposit 13
2.4 Payment of Purchase Price 14
2.5 Dispute Resolution; Purchase Price Adjustment 14
2.6 Physical Inventory 16
2.7 Contingent Purchase Price Adjustment. 16
2.8 Determination of Combined EBIT 17
2.9 Protective Provisions 19
ARTICLE III Closing 20
3.1 Closing 20
3.2 Closing Deliveries 20
3.3 Non-Compete Agreement 20
3.4 Cookson License Agreement 20
ARTICLE IV Representations and Warranties of Seller 21
4.1 Corporate Existence and Qualification 21
4.2 Capitalization and Ownership of the Company 22
4.3 Subsidiaries 23
4.4 Authorization 23
4.5 No Breach or Violation 23
4.6 Governmental Consents and Approvals 24
4.7 Organizational Documents and Minute Books 24
4.8 Financial Statements 24
4.9 Absence of Certain Developments 25
4.10 Company Income Taxes and Tax Returns 26
4.11 Contracts 30
4.12 Litigation 32
4.13 Real Property Owned or Leased 32
4.14 Machinery and Equipment Owned or Leased 34
4.15 Proprietary Rights 34
4.16 Governmental Authorizations 36
4.17 Compliance with Law 36
4.18 Environmental Compliance 36
4.19 Employees; Labor Relations 38
4.20 Employee Benefit Plans and Arrangements Poly-Flex US 41
4.21 Employee Benefit Plans and Arrangements - Poly-Flex UK 42
4.22 Guarantees 46
4.23 Officers and Directors and Certain Authorized Persons 46
4.24 Insurance 47
4.25 Indebtedness to and from Officers, Directors and Others 47
4.26 Brokers' Fees 47
4.27 Millennium Compliance 47
4.28 Suppliers 48
4.29 Accounts Receivable 48
4.30 Undisclosed Liabilities 48
4.31 Product Warranty 48
4.32 Proprietary Information of Third Parties 48
4.33 Trading Name 49
4.34 Representations and Warranties 49
4.35 Exclusivity 49
ARTICLE V Representations and Warranties of the Buyer 49
5.1 Organization of Buyer 49
5.2 Authorization 50
5.3 No Breach or Violation 50
5.4 Litigation 50
5.5 Governmental Consents and Approvals 50
5.6 Investment Intent 51
5.7 Brokers' Fees 51
5.8 Financing 51
ARTICLE VI Conduct of Business Prior to Closing; Certain Agreements 51
6.1 Restrictions on Operations Prior to Closing 51
6.2 Reasonable Commercial Efforts to Consummate Transaction 52
6.3 Hart-Scott-Rodino Filings 52
6.4 Required Consents 52
6.5 Notification 52
6.6 Payment of Indebtedness by Seller's Affiliates 53
6.7 No Solicitation 53
6.8 Further Assurances 54
ARTICLE VII Investigation by Buyer 54
7.1 Access to Records 54
7.2 Financial Reports 54
ARTICLE VIII Conditions Precedent to Buyer's Obligations 55
8.1 Correctness of Representations and Warranties 55
8.2 Compliance with Agreement 55
8.3 Certificate of Seller 55
8.4 Absence of Proceedings 55
8.5 Consents 55
8.6 Resignations 56
8.7 Related Party Loans and Advances from or to Company 56
8.8 Corporate Records 56
8.9 Opinion of Seller's Counsel 56
8.10 Non-Compete Agreement 56
8.11 Cookson License Agreement 56
8.12 Proceedings and Documents 56
8.13 Deliveries by Seller 56
8.14 Absence of Material Adverse Effect 56
ARTICLE IX Conditions Precedent to Seller's Obligations 58
9.1 Correctness of Representations and Warranties 58
9.2 Compliance with Agreement 58
9.3 Certificate of Officers 58
9.4 Absence of Litigation 58
9.5 Consents 58
9.6 Proceedings and Documents 58
9.7 Opinion of Buyer's Counsel 59
9.8 Non-Compete Agreement 59
9.9 Cookson License Agreement 59
9.10 Credit Assurance 59
9.11 Deliveries by Buyer 59
ARTICLE X Termination 59
10.1 Termination of Agreement 59
10.2 Procedure and Effect 60
ARTICLE XI Indemnification 61
11.1 Indemnification 61
11.2 Buyer Indemnification 62
11.3 Claims for Indemnification 63
11.4 Third Party Claims 63
11.5 Exclusive Remedy 65
11.6 Survival 65
11.7 Limitations on Buyer's Right to Indemnification 65
11.8 Limitations on Seller's Right to Indemnification 66
11.9 Other Limitations on Indemnification 67
ARTICLE XII Additional Covenants of Buyer and Seller 68
12.1 Tax Returns; Section 338(h)(10) Election 68
12.2 Apportionment of Income Taxes 69
12.3 Cooperation; Audits 71
12.4 Controversies 72
12.5 Income Tax Position 72
12.6 Return of Documents 72
12.7 Books and Records 73
12.8 Employee Plans Poly-Flex US 73
12.9 Employee Plans Poly-Flex UK 75
12.10 Uncollected Receivables 75
12.11 Confidentiality 75
12.12 Litigation Support 76
12.13 Termination of Participation in Insurance Program 76
ARTICLE XIII Miscellaneous 76
13.1 Binding Effect; Assignment 76
13.2 Payment of Fees and Expenses 76
13.3 Further Acts by Seller 77
13.4 Publicity 77
13.5 Entire Agreement; Construction, Counterparts; Effectiveness 77
13.6 Notices 77
13.7 Amendment and Waiver 78
13.8 Severability 79
13.9 Interpretation 79
13.10 No Reliance 79
13.11 Seller's Disclosure Schedules 80
13.12 Jurisdiction; Service of Process 80
13.13 Time of Essence 80
13.14 Legal Proceedings 80
EXHIBITS
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A. Seller's Counsel Opinion
B. Buyer's Counsel Opinion
C. Non-Compete Agreement
D. Cookson License Agreement
SCHEDULES
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2.4 Indebtedness
2.5 Company's Past Practices
4.1 Foreign Corporation Status
4.2 Capitalization and Ownership of the Company
4.3 Subsidiaries
4.5 No Breach or Violation
4.6 Government Consents and Approvals
4.8 Historical Financial Statements
4.8(a) Accruals and Reserves
4.9 Certain Developments Since Balance Sheet Date
4.10 Income Taxes
4.11 Contracts
4.12 Litigation
4.13 Real Property Owned and Leased
4.15 Intellectual Property Assets
4.16 Governmental Authorizations
4.17 Compliance with Laws
4.18 Environmental Matters
4.19(a) Employees
4.19(b) Employees; Labor Relations
4.19(c) UK Employees; Labor Relations
4.19(d) Employment Agreements
4.19(g) Deferred Remuneration
4.19(h) Notice of Termination/Dismissal
4.19(m) Work Week
4.19(p) Unemployment Experience
4.20(a) Employee Plans
4.20(d) Transaction's Effect on Employee Plans
4.20(h) Retiree Benefits
4.21(b) Poly-Flex UK Employee Benefit Obligations
4.21(d) Index of Cookson UK Trust Documents
4.21(r) UK Share Incentive Programs
4.22 Guarantees
4.23 Officers, Directors and Other Authorized Persons
4.24 Insurance
4.25 Indebtedness to and from Officers, Directors and Others
4.27 Millennium Compliance
4.28 Suppliers
4.29 Accounts Receivable
4.30 Undisclosed Liabilities
4.31 Product Warranty
4.32 Proprietary Information of Third Parties
5.3 No Breach or Violation
5.4 Buyer Litigation
8.5 Consents
8.6 Resignations
8.13 Alpha License Amendment
12.8(c) Employee Plans Poly-Flex US
12.8(d) Employee Plans Poly-Flex US
12.9 Employee Plans Poly-Flex UK
STOCK PURCHASE AGREEMENT
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THIS AGREEMENT made and entered into as of January 21, 2000, by and
among:
Cookson Group plc, a public limited company incorporated in England
and Wales (hereinafter referred to as the "Parent") (registered
no. 00251977);
Cookson Investments, Inc., a Delaware corporation (hereinafter
referred to as "CII" and together with Parent, the "Seller"); and
Parlex Corporation, a Massachusetts corporation (hereinafter referred
to as "Buyer").
R E C I T A L S:
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WHEREAS, POLY-FLEX Circuits, Inc., a Rhode Island corporation ("Poly-
Flex US"), is engaged in the manufacture of flexible circuit products to be
used in electronic applications (hereinafter referred to as the
"Business");
WHEREAS, Parent owns, directly or through one or more subsidiaries,
all of the issued and outstanding shares of Poly-Flex US's common stock,
$.01 par value per share (the "US Stock"), which represent all of the
issued and outstanding capital stock of Poly-Flex US;
WHEREAS, POLY-FLEX Circuits Ltd., a United Kingdom limited company
("Poly-Flex UK" and together with Poly-Flex US, the "Company"), is engaged
in the Business in the United Kingdom and elsewhere outside of the United
States;
WHEREAS, Parent owns all of the issued share capital of Poly-Flex UK,
consisting of 355,555 Ordinary shares of [Pound]1.00 each (the "UK Stock" and
together with the US Stock, the "Stock");
WHEREAS, Parent desires to sell or cause to be sold to Buyer, and
Buyer desires to purchase, all of the Stock, on the terms and subject to
the conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements herein set forth, the parties hereto agree as
follows:
ARTICLE I
CERTAIN DEFINITIONS
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As used herein, the following terms shall have the following
meanings:
Section 1.1 Affiliate. The term "Affiliate" shall mean, with respect
to any Person, any other Person directly or indirectly controlling or
controlled by, or under direct or indirect common control with, such
Person.
Section 1.2 Agreement. The term "Agreement" shall mean this
Agreement and all Schedules and Exhibits attached hereto, and any and all
amendments, modifications and supplements hereto entered into in accordance
with the terms hereof.
Section 1.3 Affiliated Group. The term "Affiliated Group" shall mean
any affiliated group within the meaning of Code Section 1504(a) or any
consolidated, combined, unitary or similar group defined under a similar
provision of state, local or foreign law.
Section 1.4 Balance Sheet Date. The term "Balance Sheet Date" shall
mean November 30, 1999.
Section 1.5 Business Day. The term "Business Day" shall mean a day
other than a Saturday or Sunday or a day on which banks located in New York
City or Boston, Massachusetts are authorized or required to close.
Section 1.6 Buyer. The term "Buyer" shall have the meaning specified
in the preamble hereto.
Section 1.7 CA1985. The term "CA1985" shall mean the Companies Act
1985.
Section 1.8 Change of Control. "Change of Control" shall mean the
occurrence of one or more of the following events: (i) any sale, lease,
exchange or other transfer (in one transaction or a series of related
transactions) of all or substantially all of the assets of the Company to
any Person or group of related Persons for purposes of Section 13(d) of the
Exchange Act (a "Group"), together with any Affiliates thereof; (ii) the
sale, lease, exchange or other transfer of assets of the Company having an
aggregate book value as of the date of sale, lease, exchange or other
transfer equal to at least one-third of the aggregate book value of all of
the Company's assets as of such date, to any Person or Group or any
Affiliates thereof (in one transaction or a series of related
transactions); (iii) the approval by the holders of capital stock of the
Company of any plan or proposal for liquidation or dissolution; (iv) any
Person or Group (other than Buyer) shall become the beneficial owner,
directly or indirectly, of shares representing more than 50% of the
aggregate ordinary voting power represented by the issued and outstanding
capital stock of the Company; or (v) the power to elect or appoint or cause
the election or appointment of at least a majority of the members of the
full Board of Directors of the Company shall not be or shall cease to be
exercisable by the Buyer.
Section 1.9 Closing. The term "Closing" shall mean the closing of
the transactions contemplated herein.
Section 1.10 Closing Date. The term "Closing Date" shall mean the
date that is three Business Days following the expiration or earlier
termination of the applicable waiting period under the HSR Act, or such
other date as Buyer and Seller may agree to in writing.
Section 1.11 Code. The term "Code" shall mean the Internal Revenue
Code of 1986, as amended, and all rules and regulations promulgated
thereunder.
Section 1.12 Combined EBIT. "Combined EBIT" shall mean, with respect
to the Company, for the EBIT Period, an amount equal to the net income or
loss of the Company, after deduction of all expenses and proper charges but
before payment or provision for interest expense and Income Taxes, for the
EBIT Period, determined in accordance with U.S. GAAP, provided that there
shall be excluded therefrom (a) any amortization of goodwill and other
costs related to the transactions contemplated by this Agreement, (b) any
intercompany fees or charges, other than intercompany fees or charges for
goods or services received or provided at a cost no greater than that
generally available from unrelated third parties, (c) any extraordinary or
non-recurring gains, losses, charges or expenses (i.e., not arising in the
Ordinary Course of Business), (d) any charges or expenses relating to or
arising from the application of purchase accounting, and (e) any charges or
expenses on account of the license fee payable under the Cookson License
Agreement. Any calculation of Combined EBIT for purposes of Section 2.7(a)
shall be made on an annualized basis to reflect a full 12-month period for
such calculation.
Section 1.13 Combined Net Asset Value. The term " Combined Net Asset
Value" shall mean that amount as of the Closing Date, calculated in
accordance with U.S. GAAP consistent with the Company's past practices,
except as set forth on Schedule 2.5, equal to (i) the sum of all assets of
the Company, determined on a combined basis, excluding all nontrade
intercompany accounts receivable and all cash and cash equivalents, less
(ii) the sum of all liabilities of the Company, determined on a combined
basis, excluding all liabilities relating to Income Taxes to be borne by
Seller, or for which Seller is responsible, pursuant to this Agreement, all
liabilities relating to nontrade intercompany payables or intercompany loan
accounts, all other Indebtedness to be repaid or prepaid at the Closing,
and all accrued vacation pay attributable to the period from the Closing
Date through December 31, 2000.
Section 1.14 Company. The term "Company" shall have the meaning
specified in the recitals hereof.
Section 1.15 Confidentiality Agreement. The term "Confidentiality
Agreement" shall mean that certain Reciprocal Confidentiality and Non-
Disclosure Agreement dated August 12, 1999 between Poly-Flex US and Buyer.
Section 1.16 Contract. The term "Contract" shall mean any agreement,
contract, obligation or undertaking (whether written or oral) that is
legally binding.
Section 1.17 Cookson License Agreement. The term "Cookson License
Agreement" shall mean the license agreement regarding the "Cookson" name
between Buyer and Parent in the form attached hereto as Exhibit D.
Section 1.17 Cookson UK Trust. The term "Cookson UK Trust" shall
mean the Cookson Group Pension Plan the establishment of which, with effect
from 1 March 1946, was confirmed by a Trust Deed dated 2 April 1946.
Section 1.18 Employee Plan. The term "Employee Plan" shall mean any
employee benefit plan, arrangement or agreement, including bonus plans,
other incentive compensation, profit sharing, termination, severance, stock
option, stock appreciation right, restricted stock, pension, retirement,
deferred compensation, employment, retiree medical and retiree life
insurance, welfare and other employee benefits plans, arrangements or
agreements providing benefits to any present or former employee of Poly-
Flex US or any beneficiary or dependent thereof that is or has been
maintained, administered or contributed to by Poly-Flex US or the Seller at
any time during the thirty-four month period preceding the Closing Date.
Section 1.19 Encumbrances. The term "Encumbrances" shall mean, with
respect to any property, asset or security, any mortgage, pledge, option,
lien, security interest, charge, claim or substantial restriction,
including any restriction on use, transfer or, in the case of any security,
voting.
Section 1.20 Environmental Laws. The term "Environmental Laws" shall
mean, with respect to Poly-Flex US, the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended, the Resource
Conservation and Recovery Act of 1976, as amended ("CERCLA"), and with
respect to Poly-Flex UK, the Environmental Protection Act 1990, the Water
Resources Act 1991, the Water Industry Act 1991, the Environmental Act
1995, the Clean Air Act 1993, and with respect to both, all other federal,
state, local and foreign statutes, regulations, directives, rules,
ordinances, codes, licenses and permits of all governmental authorities and
all applicable judicial, administrative and regulatory decrees, judgments
and orders, whether existing or hereafter enacted, promulgated or issued
which relate to the protection of human health or the environment from the
effects of Hazardous Substances, including, but not limited to, those
pertaining to reporting, licensing, permitting, investigating and
remediating emissions, discharges, releases or threatened releases of
Hazardous Substances into the air, surface water, groundwater or land,
noise levels, ground vibrations, or relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of Hazardous Substances, but excluding those pertaining to
providing safe and healthful working conditions and reducing occupational
safety and health hazards, drinking water, groundwater, wetlands,
landfills, open dumps, storage tanks, solid waste, waste water, storm water
runoff, waste emissions or wells. Without limiting the generality of the
foregoing, the term shall encompass each of the following statutes, and
regulations, orders, decrees, permits, licenses and deed restrictions now
or hereafter promulgated thereunder, and amendments and successors to such
statutes and regulations as may be enacted and promulgated from time to
time: (i) The Comprehensive Environmental Response, Compensation and
Liability Act (codified in scattered sections of 26 U.S.C., 33 U.S.C., 42
U.S.C. and 42 U.S.C. Section 9601 et seq.) ("CERCLA"); (ii) the Resource
Conservation and Recovery Act (42 U.S.C. Section 6901 et seq.) ("RCRA");
(iii) the Hazardous Materials Transportation Act (49 U.S.C. Section 1801 et
seq.); (iv) the Toxic Substances Control Act (15 U.S.C. Section 2061 et
seq.); (v) the Clean Water Act (33 U.S.C. Section 1251 et seq.); (vi) the
Clean Air Act (42 U.S.C. Section 7401 et seq.); (vii) the Safe Drinking
Water Act (21 U.S.C. Section 349, 42 U.S.C. Section 201 and Section 300f et
seq.); (viii) the National Environmental Policy Act (42 U.S.C. Section 4321
et seq.); (ix) the Superfund Amendments and Reauthorization Act of 1986
(codified in scattered sections of 10 U.S.C., 29 U.S.C., 33 U.S.C., and 42
U.S.C.); (x) Title III of the Superfund Amendment and Reauthorization Act
(40 U.S.C. Section 1101 et seq.); (xi) the Uranium Mill Tailings Radiation
Control Act (42 U.S.C. Section 7901 et seq.); (xii) the Federal
Insecticide, Fungicide and Rodenticide Act (7 U.S.C. Section 136 et seq.);
(xiii) the Noise Control Act (42 U.S.C. Section 4901 et seq.); and (xiv)
the Emergency Planning and Community Right to Know Act (42 U.S.C. Section
1100 et seq.).
Section 1.21 Environmental Release. The term "Environmental Release"
shall mean any release, spill, pumping, pouring, emptying, storage, escape,
dumping, discarding, burying, abandoning, emission, leaking, injection,
deposit, disposal, discharge, dispersal, leaching or migration into the
atmosphere, soil, surface water, groundwater or property.
Section 1.22 Expenses. The term "Expenses" means any and all
reasonable out-of-pocket expenses incurred in connection with
investigating, defending or asserting any claim, action, suit or proceeding
indemnified against hereunder, including, without limitation, court filing
fees, court costs, arbitration fees or costs, witness fees, and reasonable
fees and disbursements of legal counsel.
Section 1.23 ERISA. The term "ERISA" shall mean the Employee
Retirement Income Security Act of 1974, as amended and as the same may be
in effect from time to time.
Section 1.24 GAAP. The term "GAAP" shall mean generally accepted
accounting principles consistently applied in the United States, or the
United Kingdom as it relates to Poly-Flex UK, except for the effects of not
recognizing Income Taxes for Poly-Flex US as applied in the United States.
Section 1.25 Governmental Authority. The term "Governmental
Authority" means any court or tribunal or administrative, governmental or
regulatory body, agency or authority, whether domestic or foreign.
Section 1.26 Governmental Authorization. The term "Governmental
Authorization" shall mean any approval, consent, license, permit, waiver or
other authorization issued, granted, given or otherwise made available by
or under the authority of any governmental authority or pursuant to any
Law.
Section 1.27 Hazardous Substance. The term "Hazardous Substance"
shall mean substances that are defined or listed in, or otherwise
classified pursuant to, any applicable Environmental Law as "hazardous
substances," "hazardous materials," "hazardous wastes" or "toxic
substances," or any other formulation intended to define, list or classify
substances by reason of deleterious properties such as ignitability,
corrosivity, reactivity, radioactivity, carcinogenicity, reproductive
toxicity or "EP toxicity," and petroleum and drilling fluids, produced
waters and other wastes associated with the exploration, development, or
production of crude oil, natural gas or geothermal energy including without
limiting the generality of the foregoing, (a) any waste, hazardous waste,
pollutant, contaminant, or hazardous or toxic substance as specified,
listed, identified, or defined in (i) the Resource Conservation and
Recovery Act, 42 U.S.C.A. Section 6901, et seq., and the rules, regulations
and orders promulgated thereunder; (ii) the Comprehensive Environmental
Response Compensation and Liability Act of 1980; (iii) the Clean Water Act,
33 U.S.C. 1251, et seq., and the rules, regulations and order promulgated
thereunder; (iv) the Clean Air Act 42 U.S.C. 7401 et seq., and the rules,
regulations and orders promulgated thereunder; (v) the Toxic Substances
Control Act, 15 U.S.C. 2601, et seq., and the rules, regulations, and
orders promulgated thereunder; (vi) the Hazardous Materials Transportation
Act, 49 U.S.C. 1801, et seq., and the rules, regulations and orders
promulgated thereunder; (vii) the Occupational Safety and Health Act, 29
U.S.C. 651, et seq., and the rules, regulations and orders promulgated
thereunder; and (viii) any other applicable Laws, and the rules,
regulations, and orders promulgated thereunder; (b) asbestos; (c)
formaldehyde; (d) polychlorinated biphenyl; (e) radioactive materials; (f)
waste oil and other petroleum products; and (g) any other substance which
constitutes a nuisance or hazard to the environment or the public health,
safety, or welfare.
Section 1.28 Historical Financial Statements. The term "Historical
Financial Statements" shall mean (i) the unaudited balance sheets of Poly-
Flex US as at December 31, 1997 and 1998, and the related unaudited
statements of income and cash flows for each of the fiscal years then ended
and (ii) the unaudited balance sheet of Poly-Flex US as at the Balance
Sheet Date, and the related unaudited statements of income and cash flows
for the period then ended, prepared by Poly-Flex US; (iii) the audited
balance sheets of Poly-Flex UK as at December 31, 1997 and 1998, and the
audited profit and loss account of Poly-Flex UK for the financial periods
then ended together with all notes and the directors' and auditors' reports
annexed thereto, and (iv) the unaudited balance sheet of Poly-Flex UK as at
the Balance Sheet Date, and the related unaudited statements of income and
cash flows for the period then ended, prepared by Poly-Flex UK.
Section 1.29 Income Taxes. The term "Income Taxes" shall mean any
federal, state, local or foreign income or franchise (or an excise tax
based on income) tax, including a tax assessed on a corporation by
reference to its income, gains or profits, and shall include, for avoidance
of doubt, any withholding tax, United Kingdom Corporation tax and advance
corporation tax, and in each instance, any interest, penalties or additions
to tax attributable to such tax.
Section 1.30 Indebtedness. The term "Indebtedness" shall mean with
respect to any Person, at any date, without duplication, (i) all
obligations of such Person for borrowed money, including, all principal,
interest, premiums, fees, expenses, overdrafts and penalties with respect
thereto, (ii) all obligations of such Person evidenced by bonds,
debentures, notes or other similar instruments, (iii) all obligations of
such Person to reimburse any bank or other Person in respect of amounts
paid under a letter of credit or similar instrument, and (iv) all
Indebtedness of any other Person of the type referred to in clauses (i) to
(iii) above directly or indirectly guaranteed by such Person or secured by
any assets of such Person.
Section 1.31 Inland Revenue. The term "Inland Revenue" shall mean
the Commissioners of Inland Revenue.
Section 1.32 Intellectual Property Assets. The term "Intellectual
Property Assets" shall mean all foreign or domestic patents, trademarks,
logos, trade names, service marks, service names, internet domain names
(registered and unregistered), copyrights and applications for all of the
foregoing and all computer software programs, databases, inventions, trade
secrets and proprietary know-how.
Section 1.33 Knowledge. The term "Knowledge" shall mean actual
awareness of a particular fact or other matter by any of Dennis J.
Carvalho, Lawrence A. Girouard, Steve Corbett, Bruce P. Haslehurst, Al
Hollenbeck, Neil Kirby, David M. Price, Stephen Schroeder, Dan Ferriera,
Kristol Henry and Stephen Tobitt, each a management employee of the Company
or a Seller, or when referring to Buyer, Peter J. Murphy or Eric Zanin.
Section 1.34 Law or Laws. The term "Law or Laws" shall mean all
federal, state, local and foreign laws, statutes, rules and regulations,
ordinances, codes, permits or licenses including, without limitation, those
pertaining to building, zoning, employment, providing safe and healthful
working conditions and reducing occupational safety and health hazards.
Section 1.35 Liability The term "Liability" shall mean any
liability, if asserted, whether absolute or contingent, whether accrued or
unaccrued, whether liquidated or unliquidated, and whether due or to become
due.
Section 1.36 Losses. The term "Losses" shall mean any and all
losses, costs, liabilities, settlement payments, awards, judgments,
interest on judgments, fines, penalties, damages, deficiencies or other
out-of-pocket charges incurred or suffered (in each case tax adjusted in
accordance with Section 11.8(e) as a result of any matter indemnified
hereunder).
Section 1.37 Material Adverse Effect. The term "Material Adverse
Effect" shall mean with respect to any Person, any effect that is
materially adverse to the business, assets, liabilities, results of
operations or condition (financial or otherwise) of such Person and all
Persons included with such Person, including all subsidiaries, and where
used with reference to the Company, shall mean Poly-Flex US and Poly-Flex
UK taken as a whole.
Section 1.38 Non-Compete Agreement. The term "Non-Compete Agreement"
shall mean the non-compete agreement between Parent and Buyer in the form
attached hereto as Exhibit C.
Section 1.39 Order. The term "Order" means any award, decision,
injunction, judgment, order, ruling, subpoena or verdict entered, issued,
made or rendered by any court, administrative agency or other governmental
body or by any arbitrator.
Section 1.40 Ordinary Course of Business. The term "Ordinary Course
of Business" shall mean with respect to any Person, the Ordinary Course of
Business of such Person, consistent with such Person's past practice and
custom, including, with respect to any category, quantity or dollar or
sterling amount, the amount, terms and frequency of payment, delivery,
accrual, expense or other accounting entry.
Section 1.41 Organizational Documents. The term "Organizational
Documents" means the articles or certificate of incorporation, bylaws or
other similar organizational or charter documents, including all
amendments, of the referenced Person and, in relation to Poly-Flex UK,
includes the Memorandum and Articles of Association, the Certificate of
Incorporation and each Certificate of Incorporation on Change of Name.
Section 1.42 Other Taxes. The term "Other Taxes" shall mean any
federal, state, local or foreign tax, other than Income Taxes and the
duties covered by Section 4.10(d)(4) (Duties) and Section 4.10(d)(8) (Stamp
Duty), (i) assessed on the sale of products or services; (ii) assessed on
the use of products; or (iii) constituting a value-added tax.
Section 1.43 Person. The term "Person" shall mean any individual,
corporation, partnership, limited liability company, association, joint
venture, trust or unincorporated entity or organization, or a government or
any agency, instrumentality or political subdivision thereof.
Section 1.44 Permitted Encumbrances. The term "Permitted
Encumbrances" shall mean (a) any Encumbrance arising in connection with any
purchase money security interest or capitalized lease disclosed to Buyer
pursuant to this Agreement; (b) any Encumbrance relating to deposits or
pledges made in the Ordinary Course of Business of the Company in
connection with, or to secure payment of, utilities or similar services,
workers' compensation, unemployment insurance, pensions or other social
security obligations; (c) any easements, rights of way, restrictions and
other similar Encumbrances disclosed to Buyer and not materially
interfering with the ordinary conduct of the Business; (d) any Encumbrance
for taxes not delinquent or being contested in good faith and for which
adequate reserves have been taken in accordance with GAAP; (e) any inchoate
materialmen's, mechanics, workmen's, repairmen's or other similar
Encumbrance arising in the Ordinary Course of Business of the Company, and
other statutory Encumbrances arising in the Ordinary Course of Business of
the Company, including Encumbrances arising in connection with bills of
lading, warehouse receipts and other documents of title, and if perfected,
disclosed to Buyer, and (f) any replacement, extension, modification or
renewal of any Encumbrance described in clauses (a) through (e) above.
Section 1.45 Poly-Flex UK. The term "Poly-Flex UK" shall have the
meaning specified in the recitals.
Section 1.46 Poly-Flex US. The term "Poly-Flex US" shall have the
meaning specified in the recitals.
Section 1.47 Prescribed Benefit. The term "Prescribed Benefit" shall
mean any pension, lump sum, gratuity or other like benefit or any
retirement, death, redundancy, termination of employment, incapacity,
sickness, disability, accident, hospital, medical expenses or survivorship
benefit or other like benefit.
Section 1.48 Real Property. The term "Real Property" shall mean the
real estate owned or leased by the Company described in Schedule 4.13,
together with all buildings, structures, improvements and fixtures thereon
and all rights pertaining thereto.
Section 1.49 Seller. The term "Seller" shall have the meaning
specified in the preamble hereto; provided, however, that in the event
Seller transfers to a direct or indirect subsidiary of Parent any shares of
Stock prior to the Closing hereunder, the term "Seller" shall be deemed to
include, effective upon such transfer, any such transferee of Stock so long
as such transferee agrees in writing to be bound by the terms of this
Agreement with respect to the Stock so transferred.
Section 1.50 Seller US Group. The term "Seller US Group" shall mean
Cookson International Partnership, a Delaware general partnership, and any
direct or indirect subsidiary thereof.
Section 1.51 Stock. The term "Stock" shall have the meaning
specified in the recitals hereto.
Section 1.52 Subsidiary The term "Subsidiary" shall mean any Person
with respect to which the Company, directly or indirectly through another
Person, owns a majority of the common stock or other equity interests or
has the power to vote or direct the voting of sufficient securities to
elect the majority of the board of directors or similar controlling body.
Section 1.53 Taxes Act. The term "Taxes Act" shall mean the Income
and Corporation Taxes Act 1988.
Section 1.54 Tax Authority. The term "Tax Authority" shall mean the
Inland Revenue, H.M. Customs and Excise or other statutory, state,
provincial or local governmental authority, body or official (whether
within or outside the United Kingdom) and the Internal Revenue Service, and
any state or local governmental authority (whether within or outside the
United States) involved in the assessment, collection or administration of
Income Tax.
Section 1.55 Tax Returns. The term "Tax Returns" shall mean all
returns, declarations, reports and information returns and statements of
any Person required to be filed or sent by or with respect to it in respect
of any Income Taxes, including any schedule or attachment thereto, and
including any amendment thereof.
Section 1.56 TCGA. The term "TCGA" shall mean the Taxation of
Chargeable Gains Act 1992.
Section 1.57 UK Employees. The term "UK Employees" shall mean those
persons employed by Poly-Flex UK as at the date hereof as definitively
listed in Schedule 4.19(a).
Section 1.58 US Employees. The term "US Employees" shall mean those
persons employed by Poly-Flex US as at the date hereof as definitively
listed in Schedule 4.19(a).
Section 1.59 VAT. The term "VAT" means value added tax.
Section 1.60 VATA. The term "VATA" means the Value Added Tax Act
1994.
Section 1.61 Additional Definitions. The following additional terms
are defined herein in the Sections noted opposite each such term:
<TABLE>
<CAPTION>
Term Section Reference
---- -----------------
<S> <C>
"Accounting Firm" 2.5(b)
"Acquired Entity" 2.8(f)
"Admitted Liability" 11.3(c)
"A/R Reserves" 12.10
"Business" Recitals
"Business Premises" 4.18(a)
"Business Records" 12.7
"Buyer Welfare Plans" 12.8(b)
"CERCLA" 4.18(a)
"CII" Preamble
"Claim" 11.3(a)
"Claim Notice" 11.3(a)
"Claw Back Amount" 2.7(a)
"Claw Back Threshold" 2.7(a)
"Closing Balance Sheet" 2.5(a)
"Closing Statements" 2.5(a)
"Closing Receivables" 12.10
"Combined Net Asset Value Adjustment" 2.5(c)
"Competing Proposal" 6.7
"Contingent Adjustment Dispute Notice" 2.8(b)
"Contingent Purchase Price" 2.7(a)
"Dispute Statement" 11.3(b)
"Earnest Money Deposit" 2.3
"Earn-Out Threshold" 2.7(a)
"EBIT Period Financial Statements" 2.8(a)
"EBIT Period" 2.7(a)
"FTC" 6.3
"401(k) Plan" 12.8(a)
"HSR Act" 4.6
"ICTA" 12.2(b)
"Indemnified Party" 11.3(a)
"Indemnifying Party" 11.3(a)
"Interest Rate" 2.3
"Last Calculation" 2.5(a)
"Maximum Amount" 11.7(a)
"Mediation" 13.14(c)
"Multiemployer Plan" 4.20(a)
"Net Asset Value Statement" 2.5(a)
"neutral" 13.14(c)
"Notice of Objection" 2.5
"Outside Date" 10.1(b)
"Parent" Preamble
"Pre-Closing Short Period" 12.2(a)
"Post Closing Short Period" 12.2(a)
"Purchase Price" 2.2
"Receipt Date" 2.8(b)
"Relevant Periods" 12.2(b)
"Seller's Disclosure Schedules" Art. IV
"Stern Hourly Plan" 11.1(a)
"Stern Plan" 11.1(a)
"Stern Plans" 11.1(a)
"Stern Savings Plan" 11.1(a)
"Tax Matter" 12.4
"Third Party Claim" 11.4(a)
"Threshold" 11.7(b)
"Transfer" 2.1
"UK Purchase Price" 2.2
"UK Stock" Recitals
"Uncollected Receivables" 12.10
"US Purchase Price" 2.2
"US Stock" Recitals
</TABLE>
ARTICLE II
----------
ACQUISITION OF STOCK BY BUYER
-----------------------------
Section 2.1 Sale and Purchase of Stock. On the terms and subject to
the conditions of this Agreement, Parent agrees to sell, assign, transfer
and deliver or cause to be sold, assigned, transferred or delivered (the
"Transfer") to Buyer or Buyer's nominee, and Buyer agrees to purchase, all
of the Stock free and clear of all Encumbrances.
Section 2.2 Purchase Price. Subject to and upon the terms and
conditions set forth in this Agreement, and in reliance upon the
representations and warranties contained herein, and in consideration of
the Transfer to the Buyer or Buyer's nominee of: (a) the US Stock and other
undertakings set forth in this Agreement, Buyer shall pay to CII or its
nominee $15,050,000 (the "US Purchase Price") and (b) the UK Stock and
other undertakings set forth in this Agreement, Buyer shall pay to Parent
or its nominee $4,100,000 (the "UK Purchase Price", and together with the
US Purchase Price, the "Purchase Price") on the Closing Date, subject to
certain credits as provided for in Section 2.3 and subject to adjustment as
provided for in Sections 2.5 and 11.9(d).
Section 2.3 Earnest Money Deposit. On the date of this Agreement,
Buyer shall pay to Seller a deposit in the amount of Two Million Dollars
($2,000,000) (the "Earnest Money Deposit"). Buyer shall pay the Earnest
Money Deposit in immediately available funds by bank wire transfer to an
account designated by Seller. If Closing occurs, the Purchase Price shall
be credited by the amount of the Earnest Money Deposit, together with
interest thereon calculated at a simple interest rate of five percent (5%)
per annum (based on a 360-day year) (the "Interest Rate"), and the balance
of the Purchase Price shall be paid at the Closing in accordance with
Section 2.4. If the Closing does not occur on or before the Outside Date,
the Earnest Money Deposit, together with interest thereon calculated at the
Interest Rate, will be immediately refunded to Buyer, unless: (i) Closing
does not occur because of Buyer's failure or refusal to close in breach of
this Agreement, so long as Buyer's failure or refusal to close was not
caused by the acts or conduct of Seller or by Seller's breach of this
Agreement or Seller's failure or refusal to satisfy any conditions
precedent to Buyer's obligations set forth in Sections 8.1, 8.2, 8.3, 8.6,
8.7, 8.8, 8.9, 8.10, 8.11, 8.13 or 8.14, or (ii) any conditions precedent
to Seller's obligations to close provided in Sections 9.1, 9.2, 9.3, 9.7,
9.8, 9.9, 9.10 and 9.11 are unmet at the time set for the Closing, and in
the case of clause (ii) above, Buyer is unable or unwilling to cure any
breach within fifteen (15) days, in any which case Seller shall retain the
Earnest Money Deposit plus interest thereon as liquidated damages and not
as a penalty.
Section 2.4 Payment of Purchase Price. At the Closing, Buyer shall
pay the Purchase Price (less the Earnest Money Deposit and interest
thereon) to Seller, by wire transfer of immediately available funds in
United States dollars to an account or accounts designated by Seller. Any
adjustment to the Purchase Price pursuant to the Combined Net Asset Value
Adjustment shall be payable by Buyer or Seller, as the case may be, in
accordance with Section 2.5. At the Closing, Seller will, or will cause the
Company to, pay in full by wire transfer all Indebtedness of the Company
which is listed on Schedule 2.4 and outstanding immediately prior to the
Closing.
Section 2.5 Dispute Resolution; Purchase Price Adjustment: (a) As
soon as practical after the Closing Date, but in no event more than 60 days
thereafter, Buyer shall prepare, at its sole cost and expense, and deliver
to Seller a final combined audited closing balance sheet of the Company as
of the opening of business on the Closing Date ("Closing Balance Sheet").
The Closing Balance Sheet shall be accompanied by a schedule reflecting
Buyer's calculation of Combined Net Asset Value as of the opening of
business on the Closing Date (the "Net Asset Value Statement" and together
with the Closing Balance Sheet, the "Closing Statements"). The Closing
Statements will be prepared and determined in accordance with U.S. GAAP
except for the Company's past practices as set forth on Schedule 2.5. For a
period of 60 days thereafter, Seller shall be entitled to submit to Buyer a
notice of objection to the Closing Statements ("Notice of Objection"),
which notice shall set forth an alternative Combined Net Asset Value
calculation and explain in reasonable detail the basis for the objection to
Buyer's computation. If Seller does not submit to Buyer a Notice of
Objection within said 60-day period, the Closing Statements, including the
computation of Combined Net Asset Value as set forth by Buyer, shall be
deemed final and binding on the parties hereto, and not subject to
collateral attack for any reason.
(b) In the event that Seller submits a Notice of Objection within
the 60 day period contemplated in paragraph (a) above, the following
resolution procedures shall be followed:
(i) Buyer and Seller and their respective representatives
shall seek in good faith to resolve in writing any differences which
they may have with respect to any matter specified in such Notice of
Objection;
(ii) Buyer and Seller and their respective representatives
shall each have access to the working papers, trial balances and
similar materials of the other party and its representatives prepared
in connection with such other party's preparation of the Closing
Statements and the Notice of Objection, as the case may be; and
(iii) if Buyer and Seller are not able to resolve in writing
any differences they may have with respect to any matter specified in
the Notice of Objection within 30 days of its delivery to Seller,
Buyer and Seller shall submit to Arthur Andersen, LLP (the
"Accounting Firm"), for review and resolution, any and all matters
which remain in dispute and which were included in the Notice of
Objection, which submission shall include (x) a statement by each of
Buyer and Seller as to the matters in dispute and such party's
calculation of Combined Net Asset Value based on its interpretation
of such disputed matters (the "Last Calculation") and (y) such other
documents and information as the Accounting Firm may request. Each
party may also furnish to the Accounting Firm such other information
and documents as it deems relevant with appropriate copies or
notification being given to the other parties. The Accounting Firm
may conduct a conference concerning the disagreement between Seller
and the Buyer, at which conference each party shall have the right to
present additional documents, materials and other evidence and to
have present its or their advisors, counsel or accountants. The
Accounting Firm shall, within 30 days of such submission, reach a
final, binding resolution of all matters which remain in dispute,
which final resolution shall be (A) in writing setting forth the
Accounting Firm's calculation of Combined Net Asset Value (which
calculation may conclusively rely on the accuracy of matters not in
dispute and the Accounting Firm's determination regarding matters in
dispute), (B) furnished to Buyer and Seller, within 30 days after the
items in dispute have been referred to the Accounting Firm, (C) made
in accordance with this Agreement and (D) conclusive and binding upon
the parties to this Agreement and not subject to collateral attack
for any reason. Nothing herein will be construed to authorize or
permit the Accounting Firm to determine (i) any question or matter
whatsoever under or in connection with this Agreement, except the
determination of what adjustments, if any, must be made in one or
more disputed items reflected on the Closing Statements delivered by
Buyer in order for the Closing Statements to be determined in
accordance with the provisions of this Agreement or (ii) any
adjustment to Combined Net Asset Value which results in Combined Net
Asset Value falling outside of the range for Combined Net Asset Value
as determined by either Seller and Buyer pursuant to the Last
Calculation.
(c) Upon final determination of Combined Net Asset Value by written
agreement of Buyer and Seller or by the Accounting Firm pursuant to the
preceding paragraph (b), Buyer and Seller shall redetermine the amount that
is either added to or subtracted from the Purchase Price (such amount that
is either added to or subtracted from the Purchase Price herein referred to
as the "Combined Net Asset Value Adjustment") as follows: (i) the Purchase
Price shall be reduced and Seller shall pay to Buyer that amount, if any,
by which the Combined Net Asset Value as of the date of the Closing is less
than Nineteen Million Dollars ($19,000,000), plus interest from the date of
the Closing through the date of payment of such difference calculated at
the Interest Rate; or (ii) the Purchase Price shall be increased and Buyer
shall pay to Seller that amount, if any, by which the Combined Net Asset
Value as of the date of the Closing is more than Twenty Million Dollars
($20,000,000), plus interest from the date of the Closing through the date
of payment of such difference, calculated at the Interest Rate. Any such
payment from Buyer or Seller, as the case may be, shall be made to the
applicable party within 5 days of such final determination by wire transfer
of immediately available funds in United States dollars to the party
receiving the money.
(d) In connection with the dispute resolution provided for in this
Section 2.5, the parties hereto shall pay their own fees and expenses;
provided that the fees and expenses of the Accounting Firm shall be borne
solely by the party whose calculation of Combined Net Asset Value as set
forth in its Last Calculation differs in the aggregate by the greatest
number of dollars from the calculation of Combined Net Asset Value by the
Accounting Firm. No party will disclose to the Accounting Firm, and the
Accounting Firm will not consider for any purpose, any settlement
discussions or settlement offer (other than the Last Calculation) made by
any party.
Section 2.6 Physical Inventory. On the Closing Date, Buyer shall
conduct, and Buyer's independent accountants shall observe, a physical
inventory count at the Company's facilities for the purpose of calculating
the Combined Net Asset Value Amount, at which inventory count Seller and
Seller's independent accountants also shall be entitled to observe.
Section 2.7 Contingent Purchase Price Adjustment.
(a) Buyer agrees that as additional consideration for the purchase
of the Stock, in addition to the payment of the Purchase Price, if the
Combined EBIT of the Company for the period commencing on the Closing Date
and ending December 31, 2000 ("EBIT Period") equals or exceeds $2.5 million
Dollars (the "Earn-Out Threshold"), as conclusively determined in
accordance with Section 2.8 hereof, Buyer will pay to Seller, on or before
June 30, 2001 (or such later date as all disputes regarding Combined EBIT
shall have been resolved in accordance with Section 2.8 hereof), an amount
equal to the product of $.50 times the amount by which Combined EBIT
exceeds the Earn-Out Threshold (the "Contingent Purchase Price"). Seller
agrees that as additional inducement for the purchase of the Stock by
Buyer, in the event the Combined EBIT of the Company for the EBIT Period is
less than $2 million (the "Claw Back Threshold"), as conclusively
determined in accordance with Section 2.8 hereof, Seller will pay to Buyer,
on or before June 30, 2001 (or such later date as all disputes regarding
Combined EBIT shall have been resolved in accordance with Section 2.8
hereof), an amount equal to the difference between the Claw Back Threshold
and Combined EBIT up to a maximum amount of $1.25 million Dollars (the
"Claw Back Amount").
(b) Any Contingent Purchase Price payable by Buyer to Seller
pursuant to this Section 2.7 shall be paid by wire transfer, in United
States dollars, of immediately available funds to an account or accounts
designated in writing by Seller. Any Claw Back Amount payable by Seller to
Buyer pursuant to this Section 2.7 shall be paid by wire transfer, in
United States dollars, of immediately available funds to an account or
accounts designated in writing by Buyer.
(c) As used in Sections 2.7 through 2.9, inclusive, the term
"Company" shall be deemed to include the business of the Company, as well
as any business or businesses conducted by Buyer, or by any Subsidiary of
Buyer, which represent a succession to and a continuation of the business
currently conducted by the Company.
(d) Buyer and Seller agree that any Contingent Purchase Price or
Claw Back Amount, as the case may be, payable under this Section 2.7 shall
be allocated 78.329% to the US Purchase Price and 21.671% to the UK
Purchase Price (i.e., the same allocation used for allocating the Purchase
Price under Section 2.2 hereof).
Section 2.8 Determination of Combined EBIT.
(a) Buyer agrees that it will deliver to Seller on or before
January 31, 2001, combined financial statements of the Company, for the
EBIT Period, together with statements setting forth the calculation of
Combined EBIT for the EBIT Period, prepared and determined in accordance
with U.S. GAAP (the "EBIT Period Financial Statements"). In addition, Buyer
agrees that from the Closing Date to the end of the EBIT Period, Buyer will
deliver to Seller on or before the 30th day of each month, a copy of its
customary monthly financial reports for the preceding month (including any
income statement and balance sheet included therein).
(b) Within sixty (60) days of Seller's receipt of the EBIT Period
Financial Statements (the "Receipt Date"), Seller shall cause Seller's
independent accountants to conduct, if desired by Seller, an audit of the
EBIT Period Financial Statements, and shall provide written notice to Buyer
of any dispute which Seller may have over items included in the EBIT Period
Financial Statements or in the calculation of Combined EBIT as derived from
the EBIT Period Financial Statements ("Contingent Adjustment Dispute
Notice"). If Seller disputes any of the items included in the EBIT Period
Financial Statements or the calculation of Combined EBIT, Seller shall
provide Buyer with a copy of the Seller's audit report (to the extent
conducted) and shall set forth in reasonable detail the basis for such
dispute. In addition, Seller shall provide Buyer and Buyer's independent
accountants with reasonable access to and, at Buyer's expense, copies of,
the audit papers, work papers and other documents of the Seller and its
independent accountants, if any, to enable Buyer to review and evaluate the
basis for Seller's Contingent Adjustment Dispute Notice. Buyer and its
independent accountants will provide Seller and Seller's independent
accountants with reasonable access to the necessary books, records and work
papers of the Company to enable Seller to review and evaluate the basis for
Buyer's calculation of Combined EBIT, and Seller and its independent
accountants shall have the right, at Seller's expense, to make copies of
all the books, records and work papers of the Company and its independent
accountants. During the sixty (60) day period following the Buyer's receipt
of the Contingent Adjustment Dispute Notice, the Buyer may, if it desires,
have its independent accountants conduct an audit of the EBIT Period
Financial Statements. During such 60-day period, the parties shall attempt
in good faith to settle any dispute through negotiation, and shall instruct
their respective independent accountants to seek to resolve the points of
disagreement and agree upon Combined EBIT.
(c) If Seller does not dispute any of the items included in the EBIT
Period Financial Statements or Buyer's calculation of Combined EBIT within
sixty (60) days of the Receipt Date, or if the Buyer and Seller reach
agreement upon the items initially in dispute (with such further
adjustments as to which they may agree) within sixty (60) days following
Buyer's receipt of the Contingent Adjustment Dispute Notice, the Combined
EBIT so accepted or agreed upon shall be final, conclusive and binding on
the parties hereto and not subject to collateral attack.
(d) If Seller does not accept Buyer's calculation of Combined EBIT
and Buyer and Seller do not agree upon the items in dispute pursuant to the
procedures set forth above, then upon the completion of an audit of the
EBIT Period Financial Statements by the Buyer (to the extent conducted),
but in no event later than sixty (60) days following Buyer's receipt of the
Contingent Adjustment Dispute Notice, Buyer and Seller shall promptly refer
the items in dispute to the Accounting Firm (or another mutually agreed
upon firm of nationally recognized independent public accountants which has
not performed any material services since the Closing Date for either the
Buyer or Seller or their respective Affiliates) to act as an arbitrator to
resolve all matters in dispute and determine the calculation of Combined
EBIT. The Accounting Firm shall, within forty-five (45) days after such
submission, determine and report to Buyer and Seller upon any disputed
items. Each of the parties shall furnish, at its own expense, the
Accounting Firm and the other parties with (i) a statement as to the
matters in dispute and such party's calculation of Combined EBIT based on
its interpretation of such disputed matters and (ii) such other documents
and information as the Accounting Firm may request. Each party may also
furnish to the Accounting Firm such other information and documents as it
deems relevant with appropriate copies or notification being given to the
other parties. The Accounting Firm may conduct a conference concerning the
disagreement between the Seller and the Buyer, at which conference each
party shall have the right to present additional documents, materials and
other evidence and to have present its or their advisors, counsel or
accountants. The Accounting Firm shall promptly render their decision on
the matters in dispute in writing, which decision will include the
Accounting Firm's own statement as to Combined EBIT based on the matters
not in dispute and the Accounting Firm's determination regarding matters in
dispute. All determinations made by the Accounting Firm shall be final,
conclusive and binding with respect to the calculation of Combined EBIT and
shall not be subject to collateral attack. Fees and expenses of the
Accounting Firm shall be borne by the party whose calculation of Combined
EBIT as set forth in its initial submission to the Accounting Firm differs
by the greatest number of dollars from the calculation of Combined EBIT by
the Accounting Firm.
(e) Buyer and the Seller agree that Combined EBIT will be calculated
in accordance with U.S. GAAP.
(f) In the event that any time prior to December 31, 2000, the
Company desires to consummate the direct or indirect acquisition, in one
transaction or a series of related transactions, of any equity interests of
a Person (through purchase, exchange, merger, consolidation or otherwise)
or of all, substantially, all or any material portion of the assets of a
Person other than in the ordinary course of business (an "Acquired
Entity"), Buyer agrees that it will, and will cause the Company to,
maintain at all times the Acquired Entity as a separate Subsidiary, and
will cause the financial statements of the Company for each period ending
on or before December 31, 2000 to be prepared on a consolidating basis
separately accounting for the Company on the one hand, and the Acquired
Entity on the other.
(g) Notwithstanding anything to the contrary in this Agreement, in
the event of a Change of Control of the Company at any time during the EBIT
Period, Combined EBIT of the Company shall be conclusively deemed to be
$2,400,000 as of the effective date of such Change of Control, and the
Seller shall not be entitled to receive any Contingent Purchase Price from
Buyer, nor shall Buyer be entitled to receive any Claw Back Amount from
Seller.
Section 2.9 Protective Provisions. From and after the Closing Date
and until January 1, 2001, Buyer shall:
(a) not, and cause each Affiliate of Buyer not to, compete anywhere
in the world with any business conducted by the Company on the date hereof,
or with any other businesses to which the business of the Company may
reasonably extend, except through the Company;
(b) cause all transactions between Buyer and each Affiliate of
Buyer, on the one hand, and the Company, on the other hand, to be conducted
on an arm's length basis on terms and conditions at least as favorable to
the Company as the Company could obtain from Persons who were not Buyer or
Affiliates of Buyer;
(c) cause the Company to operate the business of the Company
substantially in the manner as the business of the Company is operated on
the date hereof, and to maintain in good repair and condition its assets in
substantially the same manner as conducted by the Company on the date
hereof;
(d) cause the Company to not enter into the ownership, active
management or operation of any business other than the business of the
Company on the date of this Agreement;
(e) cause the Company to maintain separate accounting books and
records which are the basis for the calculation of Combined EBIT for the
EBIT Period;
(f) for purposes of the calculation of Combined EBIT herein, not
cause, suffer or permit the Company to make any substantial change in its
accounting principles and practices; and
(g) cause the Company to conduct its operations in the Ordinary
Course of Business.
ARTICLE III
CLOSING
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Section 3.1 Closing. The Closing shall take place at the offices of
Edwards & Angell, LLP, 2800 BankBoston Plaza, Providence, Rhode Island on
the Closing Date or at such other place as the parties hereto, acting
through their respective counsel, shall agree upon. The Closing of the
transactions contemplated hereby shall be effective as of 12:01 a.m.
Providence, Rhode Island time on the Closing Date.
Section 3.2 Closing Deliveries.
To effect the transfer of the Stock referred to in Article II hereof,
Seller will, on the Closing Date, deliver to Buyer (i) all original
certificates evidencing the Stock, duly endorsed in blank or accompanied by
appropriate stock powers duly executed in blank in respect of the US Stock,
together with duly executed transfers in respect of the UK Stock; (ii) the
various certificates, instruments and other documents referred to in
Article VIII below; and (iii) the deeds and documents of title to the Real
Property owned by Poly-Flex UK, if any, and (b) Buyer will deliver to
Seller (i) the Purchase Price, in the manner described in Section 2.4
above, and (ii) the various certificates, instruments and other documents
referred to in Article IX below. All matters at the Closing shall be
considered to have taken place simultaneously, and no delivery of any
document shall be deemed to have been completed until all transactions and
delivery of documents have been completed.
Section 3.3 Non-Compete Agreement. At the Closing, Parent will enter
into a Non-Compete Agreement with Buyer in the form of Exhibit C hereto.
Section 3.4 Cookson License Agreement. At the Closing, Parent will
enter into the Cookson License Agreement with Buyer in the form of Exhibit
D hereto that will allow Buyer to use the "Cookson" trademark for the
period and uses specified in the Cookson License Agreement, in
consideration of the payment to Parent by Buyer of $500,000 in cash payable
at Closing by wire transfer of immediately available funds to an account or
accounts designated by Parent.
ARTICLE IV
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REPRESENTATIONS AND WARRANTIES OF SELLER
----------------------------------------
On or prior to the date hereof, the Seller has delivered to Buyer
schedules (the "Seller's Disclosure Schedules") setting forth, among other
things, items the disclosure of which is necessary or appropriate either in
response to an express disclosure requirement contained in a provision
hereof or as an exception to one or more representations or warranties
contained in this Article IV or to one or more of its covenants contained
in Article VI. The mere inclusion of an item in the Seller's Disclosure
Schedules as an exception to a representation or warranty shall not be
deemed an admission by the Seller that such item represents a material
exception or fact, event or circumstance or that such item is reasonably
expected or likely to result in a Material Adverse Effect on the Company.
Subject to Section 13.11, Seller may include in Seller's Disclosure
Schedules items of disclosure which expressly refer to a particular
representation or warranty, whether or not the corresponding representation
or warranty in this Agreement makes reference to the existence of that
particular Schedule.
Subject to the foregoing, in order to induce the Buyer to enter into
this Agreement and to purchase the Stock, the Seller hereby represents and
warrants to Buyer that the statements contained in Article IV are correct
as of the date hereof, except as set forth in the Seller's Disclosure
Schedules. Nothing in the Seller's Disclosure Schedules shall be deemed
adequate to disclose an exception to a representation or warranty made
herein, unless the Disclosure Schedule identifies the exception with
reasonable particularity and in reasonable detail:
Section 4.l Corporate Existence and Qualification. (a) Poly-Flex US
is a corporation duly incorporated, validly existing and in good standing
under the laws of the State of Rhode Island, and has full corporate power
and authority to own, lease and operate the properties and assets owned,
leased or operated by it and to carry out its business as presently
conducted. Poly-Flex US is qualified to do business as a foreign
corporation and is in good standing under the laws of each jurisdiction
identified on Schedule 4.1, and is qualified to do business as a foreign
corporation and is in good standing under the laws of each other
jurisdiction in which either the ownership or use of the properties owned,
leased or used by it or the nature of the activities conducted by it
requires such qualification, other than any jurisdiction in which the
failure to be so qualified would not reasonably be expected to have a
Material Adverse Effect on the Company.
(b) Poly-Flex UK is a company incorporated, registered and validly
existing under the laws of England and Wales, and has full corporate power
and authority to own, lease and operate the properties and assets owned,
leased or operated by it and to carry out its business as presently
conducted. Poly-Flex UK is qualified to do business as a foreign
corporation under the laws of each jurisdiction identified on Schedule 4.1,
and is qualified to do business as a foreign corporation under the laws of
each other jurisdiction in which either the ownership or use of the
properties owned, leased or used by it or the nature of the activities
conducted by it requires such qualification, other than any jurisdiction in
which the failure to be so qualified would not reasonably be expected to
have a Material Adverse Effect on the Company.
(c) The Company is not in default under or in violation of any
provisions of its articles of incorporation or by-laws.
Section 4.2 Capitalization and Ownership of the Company. (a) All of
the Stock is owned beneficially and of record by the Seller as described on
Schedule 4.2, free and clear of all Encumbrances. Upon payment of the
entire Purchase Price to Seller and the delivery of the certificates for
the Stock to Buyer pursuant to this Agreement, Buyer will have acquired all
of the right, title and interest of Seller in and to the Stock, free and
clear of all Encumbrances. All of the shares of Stock were validly issued,
are fully paid and nonassessable, and were not issued in violation of any
preemptive or similar rights of any shareholder.
(b) The authorized capital stock of the Poly-Flex US consists of (i)
8,000 shares of common stock, $.01 par value per share, of which 1,000
shares are, as of the date hereof, and will be, as of the Closing Date,
issued and outstanding. There are no outstanding options, warrants or other
rights to subscribe for or purchase from Poly-Flex US, or any securities
convertible into or exchangeable for, or any plans, contracts or
commitments providing for the issuance of, or the granting of rights to
acquire, (i) any capital stock of Poly-Flex US or (ii) any securities
convertible into or exchangeable for any capital stock of Poly-Flex US.
(c) The authorized share capital of the Poly-Flex UK consists of (i)
500,000 Ordinary shares of [Pound]1 each, of which 355,555 shares are, as of
the date hereof, and will be, as of the Closing Date, issued and fully paid.
There are no outstanding options, warrants or other rights to subscribe for
or purchase from Poly-Flex UK, or any securities convertible into or
exchangeable for, or any plans, contracts or commitments providing for the
issuance of, or the granting of rights to acquire, (i) any capital stock of
Poly-Flex UK or (ii) any securities convertible into or exchangeable for
any capital stock of the Poly-Flex UK.
(d) There are no outstanding contractual obligations or
understandings of the Company to repurchase, redeem or otherwise acquire
any of the Stock.
(e) There are no rights, agreements, restrictions or encumbrances
(such as preemptive rights, rights of first refusal, rights of first offer,
proxy, voting agreements, voting trusts, registration rights agreements or
shareholders agreements) with respect to the purchase, sale or voting of
any shares of Stock.
Section 4.3 Subsidiaries. The Company does not have any
subsidiaries. Except as set forth on Schedule 4.3 hereto, the Company does
not own securities or have any ownership of or other property interest in
any Person (whether as legal or beneficial owner) or have rights,
contingent or otherwise, to acquire any securities or any ownership of or
property interest in any other Person.
Section 4.4 Authorization. The Seller has full corporate power and
authority and all approvals required by applicable Laws to enter into this
Agreement, to consummate the transactions contemplated hereby and to
perform its obligations hereunder. The execution, delivery and performance
by Seller of this Agreement and the consummation of the transactions
contemplated hereby by Seller have been duly authorized by all requisite
corporate and shareholder actions on the part of the Seller. This Agreement
has been duly executed and delivered by the Seller and is a valid and
binding obligation of the Seller enforceable against the Seller in
accordance with its terms, except as the enforcement thereof may be limited
by laws affecting the rights of creditors generally or general principles
of equity.
Section 4.5 No Breach or Violation. (a) The execution and delivery
of this Agreement by the Seller, compliance with and fulfillment of the
terms hereof by the Seller, the sale and delivery of the Stock to Buyer by
the Seller, and the consummation by the Seller of the other transactions
contemplated hereby, do not and will not, with notice or passage of time or
both, (i) conflict with or result in a breach of the terms, conditions or
provisions of, (ii) constitute a default under, (iii) result in the
creation of any Encumbrance upon the assets, properties or rights of the
Seller pursuant to, (iv) give any Person the right to accelerate any
obligation under, or (v) result in a violation of, the Organizational
Documents of Seller or any Law, Order, or, except as set forth on Schedule
4.5, any material Contract to which the Seller is subject or by which the
Seller is or any of its properties or assets are bound.
(b) The execution and delivery of this Agreement by the Seller, its
compliance with and fulfillment of the terms hereof, the sale and delivery
of the Stock to Buyer by the Seller, and the consummation of the other
transactions contemplated hereby by the Seller, do not and will not, with
notice or passage of time or both, (i) conflict with or result in a breach
of the terms, conditions or provisions of, (ii) constitute a default under,
(iii) result in the creation or imposition of any Encumbrance upon the
capital stock or assets, properties or rights of the Company pursuant to,
(iv) give any Person the right to accelerate any obligation under, or (v)
result in a violation of, the Organizational Documents of the Company or
any Law, Order, or, except as set forth on Schedule 4.5, any material
Contract to which the Company is subject or by which the Company is or any
of its properties or assets are bound.
Section 4.6 Governmental Consents and Approvals. Except as set forth
on Schedule 4.6, no consent, approval, exemption, audit, waiver, order or
authorization of, or registration, qualification, designation, declaration,
notice or filing with, any governmental authority (foreign or domestic), is
required on the part of the Seller or the Company in connection with the
execution, delivery and performance of this Agreement by the Seller or the
sale or delivery to Buyer of the Stock, or the other transactions
contemplated by this Agreement, other than pursuant to the applicable
requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended (the "HSR Act").
Section 4.7 Organizational Documents and Minute Books. Complete and
correct copies of the Organizational Documents of the Company have been
previously delivered to Buyer and no changes in such documents will be made
on or before the Closing Date. The minute books of the Company which shall
be delivered to the Buyer at the Closing contain records of all meetings
and consents in lieu of meetings of the Board (and its committees) and of
the stockholders of the Company since incorporation. Except as reflected in
such minute books, there are no minutes of meetings or consents in lieu of
meetings of the Board (or its committees) or of the stockholders of the
Company.
Section 4.8 Financial Statements. (a) True and complete copies of
the Historical Financial Statements have previously been delivered to Buyer
and are attached hereto as Schedule 4.8. Except as disclosed on Schedule
4.8(a), the Historical Financial Statements have been prepared in
accordance with U.S. GAAP or UK GAAP, as the case may be, consistently
applied throughout the periods covered, present fairly in all material
respects the financial condition of Poly-Flex US and Poly-Flex UK, as
applicable, and the results of their respective operations and cash flows
for the periods indicated, and are consistent with the books and records of
the Company, subject in the case of interim financial statements, to normal
recurring year-end adjustments (the effect of which will not, individually
or in the aggregate, reasonably be expected to have a Material Adverse
Effect) and the absence of notes (which, if presented, would not differ
materially from those included in the annual financial statements). With
respect to the Company's 1997 and 1998 annual financial statements, the
Company booked certain reserves and accruals which are disclosed and
identified on Schedule 4.8(a), certain of which reserves and accruals have
been or will be revised, released or otherwise redetermined so as to affect
the Historical Financial Statements (including the 1999 interim financial
statements) and Closing Balance Sheet.
(b) The Company's Other Taxes for periods ending on or before the
Closing Date are accrued or reserved for in all material respects on the
Historical Financial Statements or Closing Balance Sheet, as the case may
be. For purposes of this Section 4.8(b), the phrase "in all material
respects" shall mean an amount not to exceed $25,000 individually or in the
aggregate.
(c) Poly-Flex UK has not received notification of the levy of any
fine or penalty for non-compliance by Poly-Flex UK or any director of Poly-
Flex UK in connection with the filing of returns, particulars, resolutions
and other documents required under any legislation to be delivered on
behalf of Poly-Flex UK to the Registrar of Companies.
Section 4.9 Absence of Certain Developments. Other than entering
into this Agreement, except as set forth on Schedule 4.9 or in the Ordinary
Course of Business of the Company, since the Balance Sheet Date, the
Company has not:
(a) issued or sold any capital stock or other equity securities or
any rights, options or warrants with respect thereto, or purchased or
redeemed or otherwise acquired any shares of its capital stock, or
declared, set aside or paid any dividend or other distribution in respect
of its shares of capital stock (other than distributions which reduce the
amount of an intercompany loan balance due from the Company to Seller);
(b) made any commitments for capital expenditures, additions or
improvements, except those which do not exceed $25,000 individually or
$50,000 in the aggregate;
(c) made any material change in accounting procedures or practices;
(d) sold, leased, subleased, assigned or transferred any of its
tangible or intangible properties or assets, or canceled, waived or
compromised any material debts or claims, other than in the Ordinary Course
of Business for consideration which the Company believes in good faith to
be fair;
(e) mortgaged or pledged any of its properties or assets, tangible or
intangible, or subjected them to any Encumbrance, except Permitted
Encumbrances;
(f) made any capital investment in, any loan to, or any acquisition
of the securities or assets of, any other Person (or series of related
capital investments, loans, or acquisitions);
(g) issued any note, bond or other debt security or created,
incurred, assumed, or guaranteed any Indebtedness or capitalized lease
obligation;
(h) granted any license or sublicense of any rights under or with
respect to any Intellectual Property Assets;
(i) authorized, made or permitted to be made any change in its
corporate charter or by-laws;
(j) experienced any material damage, destruction or loss (whether or
not covered by insurance) to its property;
(k) incurred any material written legal obligation to do any of the
foregoing;
(l) entered into any agreement, contract, lease or license (or series
of related agreements, contracts, leases, and licenses) either involving
more than $100,000 or outside the Ordinary Course of Business;
(m) neither the Company nor, to the Knowledge of the Company, any
other party thereto has accelerated, terminated, modified, or canceled any
agreement, contract, lease, or license (or series of related agreements,
contracts, leases, and licenses) to which the Company is a party or by
which it is bound, the acceleration, termination, modification or
cancellation of which would reasonably be expected to have a Material
Adverse Effect upon the Company; or
(n) made or pledged to make any material charitable contribution
outside the Ordinary Course of Business.
Section 4.10 Company Income Taxes and Tax Returns.
(a) Poly-Flex US Income Taxes and Tax Returns. The Seller US Group
(and any other Affiliated Group of which Poly-Flex US has been a member)
has filed on a timely basis on or before the date hereof, all Tax Returns
that it was required to file for each taxable period during which Poly-Flex
US was a member of the Seller US Group (or such other Affiliated Group, as
the case may be), and has paid all Income Taxes shown thereon as owing.
(b) Poly-Flex UK Income Taxes and Tax Returns. Except as disclosed on
Schedule 4.10, all Tax Returns required to be made, submitted or given to
any Tax Authority by Poly-Flex UK on or before the date hereof have been
properly and duly prepared and punctually made, submitted or given and are
up-to-date and correct, and all Income Tax shown as due on such Tax Returns
has been paid.
(c) Additional Company Tax Matters.
(1) Except as set forth in Schedule 4.10, (i) Company does not
expect any Governmental Authority to assess any additional Income Taxes for
any period for which Tax Returns have been filed, nor has Company or Seller
received notice (written or oral) of any assessment or intent to make any
assessment by any Governmental Authority regarding Income Taxes for any
such period for which such Tax Returns have been filed; (ii) there are no
pending requests for rulings from any Governmental Authority with respect
to Income Taxes of the Company; (iii) neither Company or Seller has
received written notice of a claim made by a Governmental Authority in a
jurisdiction where the Company does not file Tax Returns that Company is or
may be subject to taxation by that jurisdiction or is obliged to act as
withholding agent under the laws of that jurisdiction; (iv) there is no
dispute or claim concerning any Income Tax liability of Company claimed or
raised by any Governmental Authority during any presently pending audit or
proceeding; and (v) no waiver or extension of any statute of limitations
has been given or requested with respect to Company in connection with any
Tax Returns of Company.
(2) Except as set forth in Schedule 4.10, Company is not a party to
or bound by any agreement providing for the allocation, sharing or
indemnification of Income Taxes, and there are no powers of attorney
currently in force with respect to any matter related to Income Taxes of
Company.
(3) Except as set forth in Schedule 4.10, Poly-Flex US does not have
any liability under Treasury Regulation Section 1.1502-6 (or any similar
provision of state, local or foreign law) for the Taxes of any Person,
other than the Income Tax liability of a Person who is currently a member
of the Affiliated Group of which Company is currently a member.
(4) Except as set forth in Schedule 4.10, the performance of the
transactions contemplated by this Agreement will not (either alone or upon
the occurrence of any additional or subsequent event) result in any payment
that would constitute an "excess parachute payment" within the meaning of
Section 280G of the Code.
(5) Poly-Flex US is not currently, and has not been within the last
5 years, a "United States real property holding corporation" within the
meaning of Section 897(c) of the Code.
(6) Except as set forth in Schedule 4.10, neither Poly-Flex US nor
any other Person on behalf of Poly-Flex US: (i) has filed a consent
pursuant to Section 341(f) of the Code or agreed to have Section 341(f)(2)
of the Code apply to any disposition of a subsection (f) asset (as such
term is defined in Section 341(g)(4) of the Code) owned by Poly-Flex US;
(ii) has executed or entered into a closing agreement pursuant to Section
7121 of the Code or any predecessor provision thereof or any similar
provision of state, local or foreign law or any other agreement relating to
Income Taxes with any Governmental Authority; or (iii) has agreed to or is
required to make any adjustments pursuant to Section 481(a) of the Code or
any similar provision of state, local or foreign law by reason of a change
in accounting method initiated by Poly-Flex US. The IRS has not made any
written proposal to Poly-Flex US regarding any such adjustment or change in
accounting method, and Poly-Flex US does not have any application pending
with any Governmental Authority requesting permission for any changes in
accounting methods that relate to the business or operations of Poly-Flex
US.
(7) Except as set forth in Schedule 4.10, none of the assets of
Poly-Flex US is (i) property required to be treated as being owned by
another Person pursuant to the provisions of Section 168(f)(8) of the
Internal Revenue Code of 1954, as amended and in effect immediately prior
to the enactment of the Tax Reform Act of 1986, or (ii) "tax exempt use
property" within the meaning of Section 168(h)(i) of the Code.
(d) Additional Tax matters relating to Poly-Flex UK
(1) General
Poly-Flex UK is not and does not expect to be involved in a dispute
in relation to Income Tax or duty (including in each case penalties
or interest) or regarding the availability of any relief from Income
Tax or duty to Poly-Flex UK. No Tax Authority has investigated or
indicated that it intends to investigate Poly-Flex UK's Tax affairs.
(2) Chargeable Gains
Neither the execution nor the performance of, nor any action taken in
pursuance of, this Agreement, nor the satisfaction of any condition
to which this Agreement is subject, nor any other event, transaction,
act or omission since the Balance Sheet Date will result in any asset
of Poly-Flex UK being deemed to have been disposed of and reacquired
under Section 179 of the TCGA.
(3) Value added tax
(i) Poly-Flex UK:
(A) has made, given, obtained and kept up-to-date, full and
accurate records, invoices and documents appropriate or
required for the purposes of the VATA;
(B) has compiled in all respects with all other applicable
VAT legislation and in particular has filed all returns
and made all payments of VAT on a timely basis; and
(ii) Poly-Flex UK is not under a duty to make payments on account
of VAT pursuant to any order made under Section 28 of the
VATA.
(iii) Poly-Flex UK is not and has not during the period of
ownership by Cookson been a member of a group of companies
for the purpose of Section 43 of the VATA (groups of
companies).
(iv) Poly-Flex UK makes no supplies which are exempt from VAT
under Section 31 VATA.
(v) The Disclosure Letter contains details of each material claim
for bad debt relief made under Section 36 of the VATA (bad
debts) made by Poly-Flex UK during the period of its
ownership by the Seller.
(vi) Poly-Flex UK is not and has not in the three years prior to
the Closing Date been a party to any transaction or
arrangements in respect of which a direction has been or so
far as the vendor is aware could be made under paragraphs 1
or 2 of Schedule 6 or paragraph 1 of Schedule 7 to the VATA.
(vii) Poly-Flex UK is not and has not during its period of
ownership by the Seller agreed to become an agent, manager or
factor for the purposes of Section 47 of the VATA ) (agents,
etc.) of a person not resident in the United Kingdom.
(viii) Poly-Flex UK has not during its period of ownership by the
Seller been a party to any transactions in respect of which a
direction under the provisions of Schedule 9A to the VATA has
been or may so far as the vendor is aware be made.
(4) Duties
All value added tax payable by the Closing Date on the import of
goods and all customs duties and duties of excise payable by the
Closing Date to a Tax Authority in respect of any asset (including,
without limitation trading stock) imported or owned by Poly-Flex UK
have been paid.
(5) Close company
Poly-Flex UK has not during the period of its ownership by the Seller
been a close company for the purposes of the Taxes Act.
(6) Surplus ACT
Poly-Flex UK does not have and has not had at any time since
immediately before 6 April 1999 any unrelieved surplus advance
corporation tax within the meaning given to that term by section 32
of the Finance Act 1998.
(7) Demergers
Poly-Flex UK is not a company concerned in any exempt distribution
made during its period of ownership by the Seller for the purposes of
Section 214 of the Taxes Act (chargeable payments connected with
exempt distributions).
(8) Stamp duty
All documents executed during the period Poly-Flex UK has been owned
by the Seller by virtue of which Poly-Flex UK has any right or in the
enforcement of which Poly-Flex UK is interested have been duly
stamped.
(9) Miscellaneous
(i) Poly-Flex UK has not sold or assigned or granted an interest
by license in or any patent rights, copyrights, design rights
or works of art in circumstances such that it will be
chargeable to Income Tax in respect of that sale, assignment
or grant for any accounting period ending after Completion.
(ii) Poly-Flex UK has not entered into any transaction to which
the provisions of Sections 34 to 37 or 779 to 782 of the
Taxes Act apply or could apply.
(iii) Poly-Flex UK is not and has not been a party to any
transaction as a result or in consequence of which Poly-Flex
UK has been or could be treated as deriving income which is
taxable under Section 776 of the Taxes Act.
(iv) Poly-Flex UK has not entered into any transactions to which
Section 786 of the Taxes Act may apply.
(v) Poly-Flex UK has not made a claim under Section 584 or 585 of
the Taxes Act.
(vi) Poly-Flex UK has not received and is not entitled to receive
any interest or dividends on which double taxation relief has
fallen or may fall to be restricted in accordance with the
provisions of section 798 of the Taxes Act.
NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THIS AGREEMENT, THE
REPRESENTATIONS AND WARRANTIES CONTAINED IN THIS SECTION 4.10 ARE THE SOLE
AND EXCLUSIVE REPRESENTATIONS AND WARRANTIES MADE BY SELLER WITH REGARD TO
INCOME TAXES AND TAX RETURNS.
Section 4.11 Contracts. Attached hereto as Schedule 4.11 is a list
of all of the following Contracts:
(a) all outstanding purchase orders or agreements for the
purchase of materials, products, supplies, goods, services, equipment
or other assets which involve aggregate annual payments by the
Company of more than $100,000;
(b) all sales, distribution or other similar Contracts
providing for the sale by the Company of materials, products,
supplies, goods, services, equipment or other assets that provide for
annual payments to the Company of more than $100,000;
(c) all licenses or franchises granted to or by the Company,
other than licenses included in "off the shelf" software packages;
(d) all Contracts of employment with any officer, director, or
employee of the Company which are not terminable at will by the
Company;
(e) all Contracts with the Company providing for stock options
or stock purchases, bonuses, deferred or incentive compensation,
profit sharing, retirement or severance payments, stay or change of
control bonuses or similar incentives for any officer, director or
employee of the Company;
(f) all Contracts with the Company relating to the rental or
use of real property, equipment, vehicles, other personal property or
fixtures which are not capital leases, except for Contracts
individually involving payment of annual rentals or sums less than
$50,000;
(g) all Contracts with the Company constituting capital leases
of machinery, equipment, fixtures or other personal property, except
for Contracts individually involving annual payments by the Company
of sums less than $25,000;
(h) all Contracts with the Company for capital expenditures or
the acquisition of fixed assets involving expenditures in excess of
$25,000;
(i) all Contracts relating to, or evidence of, Indebtedness
(whether secured or unsecured) of the Company, and all mortgages,
pledges, conditional sales contracts, chattel and purchase-money
mortgages and other security arrangements securing such Indebtedness
or with respect to any real estate, improvements, equipment, other
personal property or fixtures, used or owned by the Company;
(j) all Contracts with the Company granting to others the right
to manufacture, distribute or sell products for the Company,
including manufacturer's representatives and sales representatives
agreements, dealer agreements, distributorship agreements, agency
agreements, marketing agreements, and agreements with brokers;
(k) all Contracts with the Company relating to joint ventures;
(l) all Contracts concerning the purchase or sale of capital
stock of the Company or any other securities of the Company;
(m) all Contracts with the Company containing covenants that
limit in any material respect the Company's freedom to compete in any
line of business or with any Person in any geographical area, or that
limit the Company's right to sell or purchase from any Person, in
each case with respect to the Business (other than sales or
distribution agreements providing for exclusive arrangements in the
Ordinary Course of Business);
(n) all Contracts with the Company involving secrecy or
confidentiality obligations to which the Company or its employees or
agents are subject with respect to the Business (other than supplier
and customer confidentiality covenants entered into in the Ordinary
Course of Business); and
(o) all Contracts with the Company for the purchase or sale of
materials, supplies, equipment, merchandise or services that contain
a price escalation clause or other provision resetting price based
upon an index or event beyond the control of the Company (other than
cost of living escalation clauses included in the Ordinary Course of
Business) or that obligate the Company to purchase all or
substantially all of its requirements or all of the production of a
particular product from a supplier.
Except as set forth on Schedule 4.11, all Contracts required to be
disclosed to Buyer pursuant to this Section 4.11 are valid, binding and in
full force and effect as to the Company, and neither the Company nor, to
the Knowledge of Seller, any other party thereto, is in material breach of,
or in material default under, and no notice of default has been received by
the Company in respect of, the terms of any such Contract. Company and to
the Company's Knowledge, each other party to any of the Contracts listed
above, have in all material respects performed all the obligations required
to be performed by them as of the present date. To the Knowledge of the
Company, no cancellation or early termination of any Contract listed above
outside of the Ordinary Course of Business of the Company is proposed,
pending or likely.
Section 4.12 Litigation. Except as set forth in Schedule 4.12
hereto, there is no suit, action or other litigation pending or, to the
Knowledge of Seller, threatened against the Company or any of its assets or
properties, or that may interfere with the transactions contemplated
hereby, whether at law or in equity or before any governmental authority or
arbitrator. Except as set forth on Schedule 4.12, the Company is not a
party to or subject to any Order affecting it or any of its assets or
properties or which could interfere with the consummation of the
transactions contemplated hereby. Except as set forth on Schedule 4.12,
there is no action or suit by the Company pending or overtly threatened
against others.
Section 4.13 Real Property Owned or Leased. (i) Schedule 4.13 lists
and describes briefly all real property that Company owns. Except as set
forth on Schedule 4.13, with respect to each such parcel of owned real
property:
(A) the legal description for the parcel contained in the
deed thereof describes such parcel fully and adequately, the
buildings and improvements are located within the boundary lines
of the described parcels of land and do not encroach on any
easement which may burden the land, the land does not serve any
adjoining property for any purpose inconsistent with the use of
the land, and the property is not located within any flood plain
or subject to any similar type of restricted area for which any
permits or licenses necessary to the use thereof have not been
obtained;
(B) there are no leases, subleases, licenses, concessions,
or other agreements, written or oral, granting to any party or
parties the right of use or occupancy of any portion of the
parcel of real property;
(C) there are no outstanding options or rights of first
refusal to purchase the parcel of real property, or any portion
thereof or interest therein;
(D) there are no parties (other than the Company) in
possession of the parcel of real property, other than tenants
under any leases disclosed in Schedule 4.13 who are in possession
of space to which they are entitled;
(E) all facilities located on the parcel of real property
are supplied with utilities and other services necessary for the
operation of such facilities, including gas, electricity, water,
telephone, sanitary sewer, and storm sewer, all of which services
are adequate to run the business of the Company as conducted and
are provided via public roads or via permanent, irrevocable
appurtenant easements benefiting the parcel of real property; and
(F) each parcel of real property abuts on and has direct
vehicular access to a public road, or has access to a public road
via a permanent, irrevocable, appurtenant easement benefiting the
parcel of real property, and access to the property is provided
by paved public right-of-way with adequate curb cuts available.
(ii) Schedule 4.13 lists and describes briefly all real property
leased or subleased to the Company. The Seller has delivered to the
Buyer correct and complete copies of the leases and subleases listed in
Schedule 4.13 (as amended to date). Except as set forth on Schedule
4.13, with respect to each lease and sublease listed in Schedule 4.13:
(A) the lease or sublease is legal, valid, binding,
enforceable, and in full force and effect;
(B) the lease or sublease will continue to be legal, valid,
binding, enforceable, and in full force and effect on identical
terms immediately following the consummation of the transactions
contemplated hereby;
(C) the Company is not in breach of the lease or sublease
and, to the Knowledge of the Company, the lessor or sublessor is
not in breach or default thereof, nor have any events occurred
which, with notice or lapse of time, would constitute a breach or
default or be likely to result in termination, modification, or
acceleration thereunder;
(D) the Company has not repudiated the lease, sublease or
any provision thereof and the Company has no Knowledge that a
party to the lease or sublease has repudiated any provision
thereof;
(E) there are no forbearance programs in effect as to the
lease or sublease;
(F) the Company has not assigned, transferred, conveyed,
mortgaged, deeded in trust, or encumbered any interest in the
leasehold or subleasehold;
(G) all facilities leased or subleased thereunder are
supplied with utilities and other services necessary for the
operation of said facilities;
(H) the current rent payable under the Lease vested in
Poly-Flex UK and listed in Schedule 4.13 is [Pound]88,000 per
annum payable from 8th November 1994 until the next review of rent
under that Lease on 8th November 1999, which review is ongoing as
of the date of this Agreement.
Section 4.14 Machinery and Equipment Owned or Leased. The Company
owns, free and clear of all Encumbrances other than Permitted Encumbrances,
all of the personal property reflected as owned by it in the Historical
Financial Statements and all personal property acquired by it after the
Balance Sheet Date (except for personal property disposed of by the Company
in the Ordinary Course of Business of the Company), and all such items of
personal property are in operating condition and repair, ordinary wear and
tear excepted.
Section 4.15 Proprietary Rights.
(a) Schedule 4.15 sets forth a complete and correct list of all
registered foreign and domestic patents, trademarks, logos, trade names,
service names, service marks, internet domain names and copyrights, and
applications for the foregoing, which constitute Intellectual Property
Assets owned or presently used by the Company in the conduct of the
Business.
(b) Except as set forth on Schedule 4.15, to the Knowledge of the
Company, the Company owns or possesses adequate licenses or other rights to
use the Intellectual Property Assets owned or presently used by the Company
necessary or material to the conduct of its business as conducted and no
notice of a claim has been received by the Company to the effect that the
operations of the Company infringe upon or conflict with the asserted
rights of any other Person under any Intellectual Property Assets of such
Person nor does Company have Knowledge of any such claim.
(c) To the Company's Knowledge, all issued patents and registered
trademarks and copyrights held by a Company are valid and subsisting and
the Company has taken all reasonably appropriate action to maintain and
protect each such item.
(d) No claim is pending or, to the Company's Knowledge, threatened
that challenges the validity, enforceability, ownership or right to use,
sell, license or dispose of any Intellectual Property Asset owned or
presently used by the Company and no such Intellectual Property Asset is
subject to any Order or settlement agreement restricting in any manner the
use or the licensing thereof by Company.
(e) To the Company's Knowledge, the Company has taken all reasonably
appropriate action to keep confidential all material technical information
developed by and belonging to the Company which has not been patented and
which is presently used by the Company. Except as set forth on Schedule
4.15, the Company has not assigned or licensed to any other Person any
rights to use any of the Intellectual Property Assets of the Company or any
right to manufacture, have manufactured, assemble or sell the products or
proposed products or to provide the services of Company.
(f) To the Company's Knowledge, no party is in material breach or
default under any license of the use of any Intellectual Property Asset
owned or presently used by the Company in any material respect, nor does
any condition exist which with notice or lapse of time or both would
constitute a material breach or default or permit termination, modification
or acceleration thereunder, and no party has repudiated any provisions
thereof.
(g) Except as disclosed on Schedule 4.15, there are no material
royalties, fees or other payments payable by the Company to any other
Person by reason of the ownership, use, license, sale or disposition of any
Intellectual Property Asset owned or presently used by the Company.
(h) To the Company's Knowledge, no third party is materially
infringing on or otherwise materially violating rights of the Company in
any Intellectual Property Asset owned or presently used by the Company.
(i) To the Company's Knowledge, Poly-Flex UK has, if required to do
so under the Data Protection Act 1984, duly registered as a data user in
respect of the business carried on by Poly-Flex UK, and has received no
complaint that it has failed to comply in any material respect with the
data protection principles as set out in that Act.
Section 4.16 Governmental Authorizations. Except as set forth on
Schedule 4.16, the Company holds all material Governmental Authorizations
required to own, lease and operate its properties and assets and to conduct
its business as now conducted. All fees and charges incident to those
Governmental Authorizations have been fully paid and are current and to the
Knowledge of Seller, no suspension or cancellation of any Governmental
Authorization has been threatened or would reasonably be expected to result
by reason of the transactions contemplated by this Agreement.
Section 4.17 Compliance with Law. Except as set forth in Schedule
4.17 hereto, to the Knowledge of Seller, the Company is not in material
violation of and has complied in all material respects with any Law or
Order and has not received any notification alleging any violations of Law
within the last two years with respect to which adequate corrective action
has not been taken.
Section 4.18 Environmental Compliance. Except as set forth on
Schedule 4.18 hereto: (a) The Company's use and operation of properties and
facilities used or operated in the business of the Company ("Business
Premises") have complied in all material respects with all Environmental
Laws, and the Company has not received any notice of asserted or pending
violations of any such Environmental Laws. Poly-Flex US has not, to its
Knowledge, sent or arranged for the transportation of hazardous substances
or wastes to a site that, nor has the Company owned, leased or operated a
site that, pursuant to the Comprehensive Environmental Response
Compensation and Liability Act of 1980 ("CERCLA"), as amended, or any
similar state law: (i) has been placed, or is proposed (by the
Environmental Protection Agency or relevant state authority) to be placed,
on the "National Priorities List" in effect as of the date hereof, of
hazardous waste sites or its state equivalent; or (ii) is subject to any
pending or, to the Company's Knowledge, threatened claims, administrative
orders or other requests to take "removal" or "remedial" action by any
Person, as those terms are defined under CERCLA. Poly-Flex US has not
received any written notice from, under or relating to CERCLA or any
comparable state law.
(b) The Company is in conformance in all material respects with all
applicable Environmental Laws, and to the Company's Knowledge, there are no
past or present events, conditions, activities, incidents, actions, or
plans (i) which, in connection with the Company's business, would
reasonably be expected to interfere with or prevent compliance or continued
compliance in all material respects with applicable Environmental Laws or
with any order issued, entered, promulgated or approved thereunder, or (ii)
which would reasonably be expected to subject the Company or Buyer to
damages (including liability under CERCLA), penalties, injunctive relief,
or clean-up costs under any Environmental Laws or pursuant to any third-
party environmental claim, or which require or are likely to require
reporting, clean-up, removal, remedial action, or other response pursuant
to Environmental Laws or any third party environmental claim.
(c) To the Company's Knowledge, there are not now, nor at any time
during the period of the Company's use, operation or ownership of its
Business Premises, have there ever been, underground storage tanks in, on,
or under any such Business Premises, or any underground storage tanks that
are or were at any time in the Company's care, custody, or control, that
contain Hazardous Materials, a release of which to soils or groundwater
would require reporting, clean-up, removal, or some other action under
Environmental Laws.
(d) Neither the Company nor, to the Company's Knowledge, any other
Person has caused or permitted during the period of ownership or occupation
of the Business Premises by the Company any Environmental Releases of
Hazardous Materials on, under, or at any of its Business Premises, which
would require reporting, clean-up, removal, or some other action under any
Environmental Laws.
(e) The Company is not subject to any material judgment, decree,
order, or citation related to or arising out of any applicable
Environmental Laws in connection with the conduct of its business.
(f) The Company possesses all material permits, licenses, and
approvals, if any, required under any applicable Environmental Laws in
connection with the conduct of its business.
(g) The Company has not received (nor, to the Company's knowledge,
has there been issued) any written notice, whether from a Governmental
Authority, citizens' group, employee or other Person, that alleges that
Company is or may be in material non-compliance with any applicable
Environmental Law.
(h) To the Company's Knowledge, no friable asbestos or asbestos
requiring remediation under applicable Environmental Law is present in any
material quantity on or at the Business Premises.
(i) In the United Kingdom, the opportunity given by the Seller to
the Buyer to obtain a Phase I Environmental Report and to make inquiries of
the statutory authorities shall be deemed between the parties to be
sufficient to satisfy the "Sold with Information" test under Part II A of
the Environmental Protection Act 1990 and the Contaminated Land (England)
Regulations 1999 (at such time as the current draft regulations are
enacted) or any amendments thereto and any Statutory Guidance issued under
the Act or Regulations, PROVIDED ALWAYS that this paragraph (i) shall only
relate to the liability of the respective parties to any local authority or
the Environment Agency as regulators under the said Part IIA and shall not
constitute or imply any other agreement as to liabilities for the purposes
of such regime nor shall it qualify nor affect in any way the terms of any
other warranties or provisions of this Agreement.
NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THIS AGREEMENT, THE
REPRESENTATIONS AND WARRANTIES CONTAINED IN THIS SECTION 4.18 ARE THE SOLE
AND EXCLUSIVE REPRESENTATIONS AND WARRANTIES MADE BY SELLER WITH REGARD TO
ENVIRONMENTAL MATTERS.
Section 4.19 Employees; Labor Relations. (a) Set forth on Schedule
4.19(a) is a list of all full-time US Employees along with their respective
job titles, annual compensation and years of service, and all UK Employees
along with details of their respective job titles, salaries, ages, length
of service, notice periods and benefits. There are no other individuals
employed by the Company at such date.
(b) Except as disclosed on Schedule 4.19(b), Poly-Flex US is not now
and has never been a party to any collective bargaining or other labor
Contract. During the last two years, there has not been, and there is not
presently pending or existing and to the Knowledge of Seller, there is not
threatened, any strike, picketing, labor arbitration, application,
grievance or complaint (whether for unfair labor practice, employment
discrimination, sexual harassment, or other workplace claim) filed by an
employee or union with the National Labor Relations Board or any comparable
governmental authority, or any organizational activity or other material
labor dispute against or affecting Poly-Flex US, and no application for
certification of a collective bargaining agent is pending or, to the
Knowledge of Seller, threatened. Except as set forth on Schedule 4.19(b),
there are no persons who previously worked as an employee of Poly-Flex US
who are on maternity leave or other leave of absence and have a statutory
or contractual right to return to work for Poly-Flex US.
(c) Except as set forth on Schedule 4.19(c), there are no persons
who previously worked as an employee of Poly-Flex UK who are on maternity
leave, secondment, absence on the grounds of disability or other leave of
absence and have or to the Company's Knowledge may have a statutory or
contractual right to return to work for Poly-Flex UK. Except as set forth
on Schedule 4.19(c), Poly-Flex UK has no recognition agreements in respect
of all or any of the UK Employees with any trade union, employees'
organization, staff association or other similar body. During the last 2
years Poly-Flex UK has not been involved in any industrial or trade dispute
with the UK Employees or with any trade union or the Works Committee as
identified in Schedule 4.19(c) in relation to their employment by Poly-Flex
UK.
(d) Except as set forth in Schedule 4.19(d), the Company does not
have (i) any written employment agreements with the UK Employees or the US
Employees or (ii) any policy, practice, plan, program or custom of paying
severance pay in connection with the termination of employment.
(e) Since the Balance Sheet Date no change has been made in the
terms of employment of the UK Employees by the Company (other than those
required by law and routine salary reviews).
(f) All contracts of employment (written or unwritten) with any UK
Employee can be terminated by 6 months notice or less without giving rise
to a claim for damages, severance pay or compensation (other than a
statutory or contractual redundancy payment as set forth in Schedule
4.19(d) or statutory compensation for unfair dismissal).
(g) Except as set forth on Schedule 4.19(g) and to the Company's
Knowledge, there are no amounts of deferred remuneration outstanding
(including but not limited to bonuses, holiday pay and section 13 of the
Employment Rights Act 1996, liabilities accrued prior to the date of this
Agreement) and which are for the account of the Poly-Flex UK to any UK
Employee (other than amounts representing remuneration approved due for the
current pay period, or for reimbursement of reasonable business expenses).
The Seller has in relation to each of the UK Employees and, so far as
relevant, to each of the former employees of Poly-Flex UK complied in all
material respects with all legislation, regulations, collective agreements,
workforce agreements, terms and conditions of employment and orders and has
complied in all material respects with all its obligations concerning the
health and safety at work of each of the UK Employees.
(h) Except as set forth on Schedule 4.19(h), no UK Employee has
given notice of termination of his contract of employment or is under
notice of dismissal.
(i) No payment has been made or promised to be made or benefit given
or promised to be given by the Company in connection with the actual or
proposed termination or suspension of employment or variation of any
contract of employment of any former employee of Poly-Flex UK or any UK
Employee.
(j) Save under Cookson UK Trust, the Company has not made or agreed
to make any payment to, or provided any agreement to provide any benefit
for, any UK Employee or any spouse or dependent of any UK Employee on
termination of their employment.
(k) The employers of UK Employees have not within the period of
Seller's ownership of Poly-Flex UK been a party to any "relevant" (as
defined in the Transfer of Undertakings (Protection of Employment)
Regulation 1981 as amended) or agreement for a relevant transfer nor been a
party to or been obliged to a party to any consultation in relation to
collective redundancies made pursuant to section 188 of the Trade Union and
Labour Relations (Consolidation) Act 1992.
(l) Poly-Flex UK has maintained records for regarding the service of
each of the UK Employees including for the purpose of the Working Time
Regulations 1998 and the National Minimum Wage Act 1999.
(m) Except as set forth on Schedule 4.19(m), none of the UK
Employees are required to work over 48 hours per week, calculated by
reference to an average 48 hour period over 17 weeks.
(n) All National Insurance and pension contributions and sums
payable by Poly-Flex UK to the Inland Revenue under the PAYE system have
been paid and proper records have been maintained in respect of all such
matters. Poly-Flex UK has deducted all tax required by law to be deducted
from all other payments to or treated as made to the UK Employees. Poly-
Flex UK has accounted to the Inland Revenue for all tax so deducted,
together with all tax chargeable on the benefits provided to the UK
Employees.
(o) As at the date of this Agreement and to the Company's Knowledge
there is no liability or claim against Poly-Flex UK by the UK Employees or
any ex-officer or ex-employee of Poly-Flex UK under:
* The Employment Rights Act 1996
* The Sex Discrimination Act 1975
* The Race Relations Act 1976
* The Disability Discrimination Act 1995
* The Trade Union and Labour Relations (consolidation) Act 1992
* The Trade Union Reform and Employment Rights Act 1993
* The Working Time Regulation 1998
* The National Minimum Wage Act 1999
* Article 141 (ex Article 119) of the Treaty of Rome
and, save as disclosed in Schedule 4.19(o), for personal injury.
(p) Schedule 4.19(p) sets forth the Company's unemployment
compensation experience with Poly-Flex US. Poly-Flex US has made all
required payments to its unemployment compensation reserve accounts with
the appropriate Governmental Authority under Rhode Island law, such
accounts have positive balances and, except as set forth on Schedule
4.19(p), to the Knowledge of the Company, there are no current or former
employees (i) receiving unemployment compensation benefits which are being
charged against such account, (ii) that are eligible for such benefits, or
(iii) that are claiming such benefits.
(q) Other than as disclosed on Schedules 4.19(a) - (p) or accrued on
the Historical Financial Statements or the Closing Balance Sheet, as the
case may be, to the Company's Knowledge, no present or former employee of
Company has any claim against the Company (whether under federal, foreign
or state law, under any employment agreement or otherwise), that would in
any way affect Buyer after the Closing Date, on account of or for: (i)
overtime pay for services performed prior to the Closing Date, other than
overtime pay for the current payroll period; (ii) wages, salaries,
commissions, bonuses or other direct compensation for any services
performed prior to the Closing Date, other than wages or salaries for the
current payroll period; or (iii) vacations, time off or pay in lieu of
vacation or time off, other than vacation or time off (or pay in lieu
thereof) earned in the twelve month period prior to the Closing Date.
Section 4.20 Employee Benefit Plans and Arrangements Poly-Flex US.
(a) Schedule 4.20(a) sets forth a correct and complete list as of the date
hereof of all Employee Plans currently maintained or contributed to by
Seller. Copies of such Employee Plans (and, if applicable, related trust
agreements, actuarial reports, insurance contracts and group annuity
contracts) and all amendments and summary plan descriptions relating
thereto have been previously made available to Buyer together with the most
recent annual reports (Form 5500) prepared in connection with any such
Employee Plan and the most recent determination letter from the Tax
Authority, if applicable. Each Employee Plan has been maintained and
administered in all material respects in accordance with the requirements
prescribed by any and all Laws, including but not limited to ERISA and the
Code, which are applicable to such Plans. To the Knowledge of Seller, no
transaction which would subject the Company to a tax or penalty imposed by
Section 4975 of the Code or a civil penalty under Section 502(i) of ERISA,
has occurred with respect to any Employee Plan. The Company has not
incurred any liabilities in connection with the termination of, or complete
or partial withdrawal from, a pension plan subject to or previously subject
to Title IV of ERISA or the complete or partial withdrawal from any
"multiemployer pension plan" (as defined in Section 3(37) of ERISA herein,
a "Multiemployer Plan") subject to Title IV of ERISA, either directly or as
a member of a controlled group of corporations or trades or businesses,
which liabilities have not been satisfied in full as of the Closing Date.
(b) Each Employee Plan intended to be "qualified" within the meaning
of Section 401(a) of the Code has received a favorable determination letter
from the Tax Authority. No partial termination (within the meaning of
Section 411(d)(3) of the Code) has occurred with respect to any Employee
Plan.
(c) Poly-Flex US is not, and has never been, a party to any pension
plan or welfare benefit plan that is a Multiemployer Plan. No Employee Plan
other than the Stern Plan and the Stern Hourly Plan (as defined in Section
11.1(a)(iv) hereof) is a defined benefit pension plan subject to Title IV
of ERISA or is subject to Code Section 412.
(d) Except as disclosed on Schedule 4.20(d), the consummation of the
transactions contemplated by the Agreement will not (i) give rise to any
liability or obligation of the Company pursuant to any Employee Plan,
including but not limited to, the payment of severance pay or benefits,
(ii) accelerate the time of payment or vesting or increase the amount of
compensation due under any Employee Plan, or (iii) cause any individual to
accrue or receive additional benefits, service or accelerated rights to
payment of benefits under any Employee Plan.
(e) There are no excess parachute payments of any type which will
become due as a result of the transactions contemplated by this Agreement
under the terms of any plan or agreement by which the Company is bound.
(f) There are no claims (other than claims in the normal course),
actions or lawsuits pending or threatened, or to the knowledge of the
Seller, are there any circumstances that would reasonably be expected to
give rise to any action, lawsuit or claim on behalf of or against any of
the Employee Plans or any trusts related thereto. To the Knowledge of the
Company or Seller, no litigation or governmental administrative proceeding
(or investigation) or other proceeding (other than those relating to
routine claims for benefits) is pending or threatened with respect to any
Employee Plan.
(g) All material contributions required to be made under the terms
of any Employee Plan have been timely made.
(h) Except as set forth on Schedule 4.20(h), Poly-Flex US is not
obligated to provide life insurance, medical or health benefit coverage on
or after retirement or other termination of employment to any employee or
former employee of Poly-Flex US, other than such continuation coverage as
is required to be made available under Section 4980B of the Code or Part
601 Title 1 of ERISA or any corresponding state statutory requirement.
(i) Each Employee Plan may be amended, terminated, or otherwise
modified by the Company to the greatest extent permitted by applicable law.
NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THIS AGREEMENT, THE
REPRESENTATIONS AND WARRANTIES CONTAINED IN THIS SECTION 4.20 ARE THE SOLE
AND EXCLUSIVE REPRESENTATIONS AND WARRANTIES MADE BY SELLER WITH REGARD TO
EMPLOYEE BENEFIT PLANS AND ARRANGEMENTS FOR POLY-FLEX US.
Section 4.21 Employee Benefit Plans and Arrangements - Poly-Flex UK.
(a) The UK Employees who are active members of the Cookson UK Trust
are contracted-out of the State Earnings Related Pension Scheme by
reference to the Cookson UK Trust. So far as the Seller is aware there is
no reason why the contracted-out status of the Cookson UK Trust should be
withdrawn or cease to apply. All state scheme premiums, within the meaning
of the Pension Schemes Act 1993, due in respect of any UK Employee who is a
member or former member of the Cookson UK Trust have been paid in
accordance with the statutory requirements.
(b) Except pursuant to the Cookson UK Trust and as set forth in
Schedule 4.21(b), Poly-Flex UK is not under any obligation or commitment
(whether legally enforceable or not) to pay, provide or contribute towards
(whether now or in the future and whether under a scheme or arrangement or
not) and Poly-Flex UK has not paid, provided or contributed towards, any
Prescribed Benefit for or in respect of any UK Employee. Poly-Flex UK has
not given any undertaking or assurance (whether legally enforceable or not)
as to the continuance, introduction, improvement or increase of any
Prescribed Benefit or any scheme or arrangement for the provision thereof
or as to the continuance of the Cookson UK Trust or its contributions
thereto.
(c) Parent is the principal employer for purposes of the Cookson UK
Trust.
(d) References to the trustees of a scheme include the administrator
of that scheme for the purposes of the Taxes Act and the former trustees of
that scheme. Schedule 4.21(d) sets forth an index of all documents
containing all material details relating to each UK Employee's benefits
under the Cookson UK Trust and such documents have been disclosed to the
Buyer, including, without limitation:
(i) a complete copy of the current deed and rules or other
relevant documents governing the Cookson UK Trust and all relevant
deeds, or other documents relating to Poly-Flex UK's participation in
and obligations under the Cookson UK Trust;
(ii) a complete copy of all relevant announcements,
explanatory literature, booklets and the like of current effect which
have been issued to UK Employees in connection with the Cookson UK
Trust;
(iii) details of any relevant amendments to the Cookson UK
Trust that are proposed but which have not been formally made;
(iv) a list of the UK Employees who are active members of the
Cookson UK Trust with all such information relating to them as is
necessary to establish their entitlement to benefits;
(v) the names and addresses of the current trustees and
administrators of the Cookson UK Trust and the name and address of
the actuary to the Cookson UK Trust;
(vi) a statement giving the rate at which Poly-Flex UK
contributes to the Cookson UK Trust;
(vii) full particulars of the terms of participation in the
Cookson UK Trust of Poly-Flex UK;
(viii) full particulars of any discretionary increases to
pensions in payment or in deferment under the Cookson UK Trust which
would have affected the UK's Employees if their pensions had been in
payment or deferment;
(ix) full particulars of any discretionary practice of the
Cookson UK Trust not being pension increases referred to in (viii)
above which affect the UK's Employees;
(x) a complete copy of each contract of insurance relating to
the Cookson UK Trust and of any associated agreement with the insurer
and full particulars of the premiums payable under each such contract
or agreement;
(xi) a complete copy of the contracting-out certificate in
force in relation to the Cookson UK Trust;
(xii) a complete copy of the Inland Revenue's letter of
approval of the Cookson UK Trust as an exempt approved scheme within
the meaning of Section 592 of the Taxes Act in force; and
(xiii) the Cookson UK Trust's schedule of contributions.
(e) The list of documents relating to the Cookson UK Trust attached
as Schedule 4.21(d) by reason of Sections 4.21(d)(i) and (ii) contain full
relevant particulars of all the benefits provided by and the terms of the
Cookson UK Trust for the UK Employees.
(f) The Cookson UK Trust is an exempt approved scheme (within the
meaning of Section 592 of the Taxes Act) as of its commencement and so far
as the Seller is aware there is no ground on which approval by the Inland
Revenue as such a scheme may be withdrawn or cease to apply.
(g) The Cookson UK Trust in all material aspects complies with and
has been administered in accordance with the documents that for the time
being have governed the Cookson UK Trust (including all announcements,
explanatory literature, booklets and the like) and all applicable laws,
regulations and requirements, including (but without limitation) those of
the Inland Revenue relevant to approval as an exempt approved scheme, those
relevant to contracting-out and trust law.
(h) Poly-Flex UK has observed and performed those material
provisions of the Cookson UK Trust that apply to it. Poly-Flex UK may
(without the consent of any person or further payment) terminate its
liability to contribute to the Cookson UK Trust at any time subject only to
giving such notice if any as is provided for in the documents relating to
the Cookson UK Trust, a list of which is attached as Schedule 4.21(d) by
reason of Sections 4.21(d)(i) and (ii).
(i) Every UK Employee who has become entitled (whether under the
terms of the Cookson UK Trust or any applicable law) to become a member of
the Cookson UK Trust has been given the opportunity to become such a member
as of the date on which he became entitled. The Cookson UK Trust has not at
any time excluded employees from eligibility for membership on the grounds
of specified hours of work.
(j) Poly-Flex UK has been properly admitted to participation in the
Cookson UK Trust and such participation has been approved by the Inland
Revenue.
(k) No power has been exercised under the Cookson UK Trust:
(i) to admit any UK Employee to membership who is not
automatically eligible for membership under the documents
relating to the Cookson UK Trust a list of which is attached as
Schedule 4.21(d) by reason of Sections 4.21(d)(i) and (ii);
(ii) to provide terms of membership of the Cookson UK
Trust (whether as to benefits or contributions) for any UK
Employee which are different from those generally applicable to
the members of the Cookson UK Trust;
(iii) to provide any benefits for any UK Employee which
would not but for the exercise of that power have been payable
under the Cookson UK Trust; or
(iv) to augment any benefits for any UK Employee under
the Cookson UK Trust.
(l) All contributions and expenses in respect of the Cookson UK
Trust that have fallen due for payment (no matter who is liable to pay
them) or in respect of which an account has been rendered have been paid.
(m) All premiums that have fallen due for payment under the
contracts and agreements referred to in Section 4.21(d)(x) have been paid,
each such contract or agreement is enforceable and so far as the Seller is
aware there is no ground on which the insurers might avoid liability under
it.
(n) Without limiting the foregoing, all benefits (other than money
purchase benefits as defined in the Pension Schemes Act 1993) payable under
the Cookson UK Trust on the death of any person while in employment to
which the Cookson UK Trust relates are fully insured with an insurance
company authorized to carry on ordinary long-term insurance business under
the Insurance Companies Act 1982.
(o) No debt has become due in respect of the Cookson UK Trust under
Section 144 of the Pension Schemes Act 1993 or Section 75 of the Pensions
Act 1995.
(p) No payment to which Section 601 of the Taxes Act applies has
been made out of the funds which are or have been held for the purposes of
the Cookson UK Trust.
(q) To Seller's Knowledge, neither the Cookson UK Trust nor its
trustees nor Poly-Flex UK is engaged or involved in any proceedings which
relate to or are in connection with the UK Employee membership of Cookson
UK Trust or the benefits thereunder and no such proceedings are pending or
threatened (other than routine claims for benefits). In this sub-paragraph
"proceedings" (without limitation) includes any litigation or arbitration,
any investigation by the Pensions Ombudsman, any correspondence with the
Occupational Pensions Advisory Service, any investigation or inquiry by the
Occupational Pensions Regulatory Authority and any process under the
Cookson UK Trust's internal dispute resolution procedure.
(r) Except as set forth on Schedule 4.21(r), the UK Employees are
not entitled to any share incentive scheme or arrangement or share option
scheme or arrangement or any other scheme or arrangement relating to the
acquisition of any interest in shares in the Business in the United Kingdom
or in the Seller.
(s) The assets of the Cookson UK Trust were on 31 December 1997
sufficient to fund the liabilities of the Cookson UK Trust for benefits
accrued in respect of service completed or credited to date on the basis of
the actuarial assumptions used in making the actuarial valuation dated 31
December 1997.
(t) Poly-Flex UK has no ongoing liability in relation to the Merger
in April 1996 between the Cookson senior executive scheme and the Cookson
UK Trust.
NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THIS AGREEMENT, THE
REPRESENTATIONS AND WARRANTIES CONTAINED IN THIS SECTION 4.21 AND IN
SECTION 12.9 ARE THE SOLE AND EXCLUSIVE REPRESENTATIONS AND WARRANTIES MADE
BY SELLER WITH REGARD TO EMPLOYEE BENEFIT PLANS AND ARRANGEMENTS FOR POLY-
FLEX UK.
Section 4.22 Guarantees. Except as disclosed on Schedule 4.22 or in
the Historical Financial Statements, the Company has no Contracts
guaranteeing the payment or performance by any other Person, or whereby,
except for the endorsement of checks in the Ordinary Course of Business,
the Company in any way is or will be liable with respect to obligations of
any other Person.
Section 4.23 Officers and Directors and Certain Authorized Persons.
Schedule 4.23 hereto sets forth a complete and accurate list of: (i) the
names of all directors of the Company and periodic fees paid to such
directors; (ii) the names and offices of all officers of the Company; (iii)
the names of all persons authorized to borrow money or incur or guarantee
Indebtedness on behalf of the Company; (iv) all safes, vaults and safe
deposit boxes maintained by or on behalf of the Company or in which its
property is held, and the names of all persons authorized to have access
thereto; and (v) all bank accounts of the Company and the names of all
persons who are authorized signatories with respect to such accounts, the
capacities in which they are authorized signatories and the terms of their
authorizations.
Section 4.24 Insurance. Schedule 4.24 hereto contains a complete and
correct description of all policies of title, liability, fire, crime,
fidelity, product liability, worker's compensation and other forms of
insurance (including bonds) insuring the products, properties, assets,
business, operations, employees, officers and Employee Plans of the
Company, including for each policy the name of the insurer, the amount of
coverage, the type of insurance, the policy number, the renewal or
expiration date and all pending claims under the policy. All of the
insurance policies listed on Schedule 4.24 are outstanding and in full
force and all premiums with respect to the policies are currently paid.
Except as set forth in Schedule 4.24, the Company is not subject to any
retrospective additional premiums, additional charges resulting from an
audit, exposure charges or any other deferred charges that may become due
after the Closing Date with respect to such insurance.
Section 4.25 Indebtedness to and from Officers, Directors and
Others. Except as set forth on Schedule 4.25, the Company is not indebted
to any director, officer or employee of the Company, except for amounts due
as normal salaries, wages, benefits or reimbursement of ordinary business
expenses, or to the Seller or any Affiliate of Parent, except for
intercompany advances which will be eliminated in full prior to the Closing
Date. Except as set forth on Schedule 4.25, no director, officer or
employee of the Company is now, or on the Closing Date will be, indebted to
the Company except for ordinary business expense advances. All Indebtedness
of the Seller or any Affiliate of Parent due to the Company will be repaid
in full prior to the Closing Date.
Section 4.26 Brokers' Fees. Neither the Seller nor the Company, nor
anyone acting on their behalf, has retained or has any liability to, any
broker, investment banker, finder, agent or other intermediary or agreed to
pay any brokerage fee, finder's fee or commission with respect to the
transactions contemplated by this Agreement.
Section 4.27 Millennium Compliance. Schedule 4.27 describes the
measures that have been implemented by the Company to determine the extent
to which the computer systems owned or leased by the Company in the
Business are capable of handling date information involving all and any
dates, including accepting input, providing output and performing date
calculations in whole or in part during and/or after January 1, 2000. The
Company's computers which are necessary for the operation of the Business
will be capable of functioning on the Closing Date without adverse affects
from the date change contemplated by January 1, 2000.
Section 4.28. Suppliers. A complete and correct list of the Company's
major suppliers is set forth on Schedule 4.28. Except as set forth on
Schedule 4.28, there are no sole-source suppliers of significant materials
or services to the Company with respect to which practical alternative
sources of supply are unavailable on comparable terms and conditions.
Section 4.29. Accounts Receivable. The accounts and notes receivable
shown on the Historical Financial Statements and all accounts and notes
receivable arising subsequent to the Balance Sheet Date, have arisen in the
Ordinary Course of Business of the Company, represent valid and enforceable
obligations due to the Company, have been and are subject to no asserted
set-off or counter-claim other than immaterial disputes in the Ordinary
Course of Business, and have been collected or are fully collectible within
six months of the Closing Date in the Ordinary Course of Business in the
aggregate recorded amounts thereof net of reserves therefor (which, for
this purpose, shall mean the reserves reflected on the Company's books on
the Closing Date of $50,000). Except as disclosed on Schedule 4.29, the
Company has no accounts or notes receivable from any Person which is an
Affiliate of the Company, or from any director, officer or employee of the
Company.
Section 4.30 Undisclosed Liabilities. To the Company's Knowledge,
the Company has no Liability that would reasonably be expected to have a
Material Adverse Effect on the Company, except for (i) Liabilities set
forth on the most recent balance sheet as at the Balance Sheet Date; (ii)
Liabilities described in the Seller's Disclosure Schedules; or (iii)
Liabilities which have arisen after the Balance Sheet Date in the Ordinary
Course of Business.
Section 4.31 Product Warranty. To the Company's Knowledge there are
no product warranty claims for products manufactured or sold by the Company
other than claims arising in the Ordinary Course of Business or as set
forth of Schedule 4.31.
Section 4.32 Proprietary Information of Third Parties. Except as set
forth in Schedule 4.32, the Company has no Knowledge that any person
employed by Company has (a) violated or may be violating to any material
extent any of the terms or conditions of his or her employment, non-
competition or non-disclosure agreement with such third party, (b)
disclosed or may be disclosing or utilized or may be utilizing any trade
secret or proprietary information or documentation of such third party or
(c) interfered or may be interfering in the employment relationship between
such third party and any of its present or former employees.
Section 4.33 Trading Name. Poly-Flex UK does not trade under any
name other than its corporate name.
Section 4.34 Representations and Warranties. To the Company's
Knowledge, none of the representations and warranties made by Seller
contained herein, in the Seller's Disclosure Schedules or in certificates
delivered or to be delivered by the Seller pursuant to this Agreement at
the Closing and taken as a whole contain any untrue statement of a material
fact or omit to state a material fact necessary in order to make the
statements herein and therein, in light of the circumstances in which made,
not misleading.
Section 4.35 Exclusivity. THE REPRESENTATIONS AND WARRANTIES MADE BY
SELLER IN THIS AGREEMENT ARE IN LIEU OF AND ARE EXCLUSIVE OF ALL OTHER
REPRESENTATIONS AND WARRANTIES, INCLUDING WITHOUT LIMITATION ANY IMPLIED
WARRANTIES OF MERCHANTABILITY OR FITNESS OR ADEQUACY FOR ANY PARTICULAR
PURPOSE OR USE. SELLER HEREBY EXCLUDES AND DISCLAIMS ANY SUCH OTHER OR
IMPLIED REPRESENTATIONS OR WARRANTIES, NOTWITHSTANDING THE DELIVERY OR
DISCLOSURE TO BUYER OR ITS OFFICERS, DIRECTORS, EMPLOYEES, STOCKHOLDERS,
AGENTS, ADVISORS OR REPRESENTATIVES OF ANY DOCUMENTATION OR OTHER
INFORMATION BY THE SELLER OR ANY OTHER PERSON IN CONNECTION WITH THIS
AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. Without limiting the
generality of the foregoing, Seller makes no representation or warranty to
Buyer with respect to (a) any projections, estimates or budgets delivered
or made available to Buyer or its representatives before or after the date
of this Agreement, or (b) except as expressly covered by a representation
and warranty contained in this Article IV, any other information or
documents (financial or otherwise) made available to Buyer or its
representatives.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE BUYER
-------------------------------------------
In order to induce the Seller to enter into this Agreement and sell
the Stock, the Buyer hereby represents and warrants to Seller that:
Section 5.1 Organization of Buyer. The Buyer is a corporation duly
incorporated, validly existing and in good standing under the laws of the
Commonwealth of Massachusetts, has full corporate power and authority to
own, lease and operate the properties and assets owned, leased or operated
by it and to carry out its business as presently conducted or proposed to
be conducted by it, and is qualified to do business as a foreign
corporation and is in good standing under the laws of each jurisdiction in
which either the ownership or use of the properties or assets owned, leased
or used by it or the nature of the activities conducted by it requires such
qualification, other than any jurisdiction in which the failure to be so
qualified would not have a Material Adverse Effect on Buyer.
Section 5.2 Authorization. The Buyer has full corporate power and
authority and all approvals required by applicable Laws to enter into this
Agreement, to consummate the transactions contemplated hereby and to
perform its obligations hereunder. The execution, delivery and performance
of this Agreement and the consummation of the transactions contemplated
hereby by Buyer have been duly authorized by all requisite corporate and
shareholder action on the part of Buyer. This Agreement has been duly
executed and delivered by Buyer and is a valid and binding obligation of
Buyer, enforceable against Buyer in accordance with its terms, except as
the enforcement thereof may be limited by laws affecting the rights of
creditors generally or general principles of equity.
Section 5.3 No Breach or Violation. The execution and delivery of
this Agreement by Buyer, compliance with and fulfillment of the terms of
this Agreement by Buyer, and the consummation by Buyer of the transactions
contemplated hereby, do not and will not, with notice or passage of time or
both, (i) conflict with or result in a breach of the terms, conditions or
provisions of, (ii) constitute a default under, (iii) result in the
creation of any Encumbrance upon the capital stock or assets, properties or
rights of Buyer pursuant to, (iv) give any Person the right to accelerate
any obligation under, or (v) result in a violation of, the Organizational
Documents of Buyer, any Law, Order or material Contract to which Buyer is
subject or by which Buyer is or any of its assets or property are bound.
All consents or approvals of any Person under any Contract to which Buyer
is a party or by which it is bound which are required in connection with
the execution, delivery or performance of this Agreement or the
consummation of the transactions contemplated by this Agreement are set
forth on Schedule 5.3 attached hereto.
Section 5.4 Litigation. Except as set forth in Schedule 5.4 hereto,
there is no suit, action or other litigation pending or, to the Knowledge
of Buyer, threatened against Buyer or any of its assets or properties, or
that may interfere with the transactions contemplated hereby, whether at
law or in equity or before any governmental authority or arbitrator. Except
as set forth on Schedule 5.4, Buyer is not a party to or subject to any
Order affecting it or any of its assets or properties or which could
interfere with the consummation of the transactions contemplated hereby.
Section 5.5 Governmental Consents and Approvals. No consent,
approval, exemption, audit, waiver, order or authorization of, or
registration, qualification, designation, declaration, notice or filing
with, any governmental authority (foreign or domestic), is required on the
part of the Buyer in connection with the execution, delivery and
performance of this Agreement, or the consummation of the transactions
contemplated hereby, other than pursuant to the applicable requirements of
the HSR Act.
Section 5.6 Investment Intent. The Buyer is acquiring the Stock for
investment for its own account and not with a view to resale or
distribution within the meaning of the Securities and Exchange Act of 1933,
as amended. The Buyer does not presently intend to resell or otherwise
dispose of all or any part of the Stock unless and until the Buyer
determines at some future date that changed circumstances, not now
anticipated, make such disposition advisable. The Buyer acknowledges that
the Stock is not being registered under the securities Laws of the United
States, any state thereof or the United Kingdom.
Section 5.7 Brokers' Fees. Neither the Buyer nor anyone acting on
Buyer's behalf has retained any broker, investment banker, finder, agent or
other such intermediary or agreed to pay any brokerage fee, finder's fee or
commissions with respect to the transactions contemplated by this
Agreement.
Section 5.8 Financing. On the Closing Date, Buyer will have
available, through its own resources and in conjunction with committed
amounts will be available to be drawn by the Buyer under existing credit
facilities, sufficient funds to consummate the transaction contemplated by
this Agreement and to make all payments contemplated by Article II hereof.
ARTICLE VI
CONDUCT OF BUSINESS PRIOR TO CLOSING; CERTAIN AGREEMENTS
--------------------------------------------------------
Section 6.1 Restrictions on Operations Prior to Closing. From the
date of this Agreement until the earlier of the Closing Date or the date of
termination of this Agreement, the Seller agrees to cause the Company to
conduct its operations in the Ordinary Course of Business of the Company in
a manner substantially similar to the manner the business was conducted
prior to the execution of this Agreement (including managing its working
capital and making capital expenditures in accordance with past practices),
and to use commercially reasonable efforts to preserve for Buyer the
goodwill of all persons having business dealings with the Company and the
present business organization and employees of the Company. Without
limiting the generality of the foregoing, Seller will not permit the
Company at any time from and after the date hereof to and including the
Closing Date, without the prior written consent of the Buyer which consent
shall not be unreasonably withheld or delayed, to:
(a) Make any change in its Organizational Documents;
(b) Consolidate or merge with any other Person or acquire all
or substantially all of the business or assets of any other Person;
(c) Allow to lapse any policy of insurance insuring its
products, properties, assets or operations;
(d) Dispose of any Real Property; or
(e) Do or suffer any other act which would knowingly result in
a material breach of Section 4.9 of this Agreement.
Section 6.2 Reasonable Commercial Efforts to Consummate Transaction.
Each of Seller and Buyer will use its reasonable commercial efforts to
fulfill the conditions required to be fulfilled by it to bring about the
timely consummation of the transactions contemplated by this Agreement.
Each party will give prompt notice to the other party of the occurrence of
any event or the failure of any event to occur that might preclude or
interfere with the satisfaction of any condition precedent to the
obligations of any party under this Agreement or the timely consummation of
the transactions contemplated by this Agreement.
Section 6.3 Hart-Scott-Rodino Filings. Seller and Buyer shall each
prepare and file with the Federal Trade Commission ("FTC") and other
regulatory authorities as promptly as possible after the execution and
delivery of this Agreement, and in any event within 10 days of the date
hereof, all requisite applications (and subsequent to such filing, any
required amendments thereto together with related information, data and
exhibits) necessary to satisfy the requirements of the HSR Act. Each of
Buyer and Seller shall be responsible for payment of one-half of the HSR
Act filing fee. Buyer and Seller covenant and agree to request early
termination pursuant to the HSR Act for any notification filing required
under the HSR Act.
Section 6.4 Required Consents. Seller and Buyer will, and Seller
will cause the Company to, take all commercially reasonable actions
necessary to obtain any material consents or approvals of any Person, and
to give all material notices and make all material filings with any Person,
necessary for the performance of this Agreement and the consummation of the
transactions contemplated hereby, including without limitation, the consent
of applicable authority in respect of the Regional Selective Assistance
Grant.
Section 6.5 Notification. (a) Between the date of this Agreement and
the Closing Date, Seller will promptly notify Buyer in writing if Seller or
the Company becomes aware of any fact or condition that causes or
constitutes a breach of any of Seller's representations and warranties as
of the date of this Agreement, or if Seller or the Company becomes aware of
the occurrence after the date of this Agreement of any fact or condition
that would (except as expressly contemplated by this Agreement) cause or
constitute a breach of any such representation or warranty had such
representation or warranty been made as of the time of occurrence or
discovery of such fact or condition. Should any such fact or condition
require any change in the Seller's Disclosure Schedules if such Schedules
were dated the date of the occurrence or discovery of any such fact or
condition, Seller will promptly deliver to Buyer a supplement to the
Seller's Disclosure Schedules specifying such change. Buyer shall be
entitled to reject Seller's supplemental disclosures made pursuant to this
Section 6.5 for purposes of determining whether or not the conditions to
Closing set forth in Article VIII have been satisfied and to terminate this
Agreement, but only if and to the extent the fact(s) or condition(s)
underlying such supplemental disclosures, individually or in the aggregate,
have had or would reasonably be expected to have a Material Adverse Effect
upon the Company or is material to the transactions contemplated by this
Agreement. In such event, Seller's supplemental disclosures, or the
existence of facts or conditions underlying such supplemental disclosures
which give rise to Buyer's election to terminate this Agreement, shall not
be deemed a breach of this Agreement and any such termination by Buyer
shall be considered a termination pursuant to Section 10.1(a) hereof. If
Buyer does not reject any such supplemental disclosure in writing within
ten (10) Business Days following Buyer's receipt thereof, or if Buyer
elects to close despite such supplemental disclosures, the supplemental
disclosures shall be deemed accepted by Buyer, the condition to Closing set
forth in Section 8.1 shall be deemed satisfied and the representations and
warranties of Seller shall be deemed modified and supplemented as indicated
in such notice for all purposes hereof, including the application of
Article XI.
(b) Between the date of this Agreement and the Closing Date, each
party will promptly notify the other party of the occurrence of any breach
of any covenant of such party in this Article VI or of the occurrence of
any event that may make the satisfaction of the conditions in Articles VIII
and IX impossible or unlikely.
Section 6.6 Payment of Indebtedness by Seller's Affiliates. Seller
will cause all Indebtedness owed by the Company to Seller or any Affiliate
of Parent, or by the Seller or any Affiliate of Parent to the Company, to
be paid or eliminated in full prior to Closing.
Section 6.7 No Solicitation. From the date of this Agreement and
until the earlier of the Closing Date or the date of termination of this
Agreement, the Seller will not, nor will it permit the Company to (unless
the fiduciary duties of Seller's directors and officers otherwise require),
directly or indirectly, through any officer, director, employee,
consultant, agent, attorney, financial advisor or otherwise, solicit,
initiate or encourage the submission of proposals, inquiries or offers
from, or initiate any discussions or negotiations with, or provide any
information to, or enter into any agreement or transaction with, any Person
relating to any acquisition or purchase of all or substantially all of the
assets of the Company, or any equity interest in the Company, or any
business combination with the Company (a "Competing Proposal"), or
participate in any negotiations regarding, or furnish to any other Person
any information with respect to, or otherwise cooperate with, or assist or
participate in, facilitate or encourage, any effort or attempt by any other
Person to do or seek any of the foregoing (unless the fiduciary duties of
Seller's directors and officers otherwise require), and Seller will
promptly advise the Buyer of any inquiry or proposal relating thereto.
Section 6.8 Further Assurances. From time to time prior to the
Closing Date, as and when requested by any party hereto and subject to
Section 6.2, the other parties to this Agreement will execute and deliver,
or cause to be executed and delivered, all such documents and instruments
and will take, or cause to be taken, all such further or other actions, as
the requesting party may reasonably deem necessary to consummate the
transactions contemplated by this Agreement.
ARTICLE VII
INVESTIGATION BY BUYER
----------------------
Section 7.1 Access to Records. From the date of this Agreement and
until the earlier of the Closing Date or the date of termination of this
Agreement, Seller will cause the Company to (i) give the Buyer and its
representatives reasonable access during ordinary business hours to the
premises and management personnel of the Company, and full access during
ordinary business hours to the records, contracts, commitments, financial
statements, stock books, minute books, personnel records (subject to
limitations imposed by Law), books of account and tax records of the
Company, so as to enable Buyer and its representatives to investigate the
business and assets of the Company (without unreasonably interfering with
the operation thereof) and to examine (including an examination of the
audit work papers, if any, of any independent accountants) the condition
(financial or otherwise) of the Company, and (ii) furnish the Buyer and its
representatives all other information with respect to the business and
affairs of the Company, as the Buyer may, from time to time, reasonably
request including, without limitation, Tax Returns and other reports of or
information relating to the Company. Notwithstanding the foregoing,
however, Buyer shall not be permitted to (i) conduct a Phase II
environmental study (including drilling wells or soil borings), in respect
of the Real Property or (ii) present to or discuss with the Company's
employees, Buyer's proposed employee benefits package, in either case
without the prior written consent of Seller which shall not be unreasonably
withheld; provided, however, the parties agree that no such on site
environmental study shall be commenced until after February 15, 2000. The
Buyer agrees that all information derived from such investigation shall be
and remain at all times subject to the Confidentiality Agreement.
Section 7.2 Financial Reports. From the date of this Agreement and
until the earlier of the Closing Date or the date of termination of this
Agreement, Seller will cause the Company to deliver to Buyer on or before
the 20th day of each month, a copy of its customary monthly financial
reports for the preceding month (including any income statement and balance
sheet included therein).
ARTICLE VIII
CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS
-------------------------------------------
All obligations of Buyer under this Agreement, except those
obligations which are to be performed prior to the Closing Date, are
subject to the satisfaction (or waiver in whole or in part by the Buyer in
writing) on or before the Closing Date, of each of the following express
conditions precedent:
Section 8.1 Correctness of Representations and Warranties. All
representations and warranties of the Seller contained in this Agreement
shall have been true, accurate and correct on the date hereof and shall be
true and correct, in all material respects, on the Closing Date as though
such representations and warranties were made on and as of the Closing Date
(giving full effect to any supplemental disclosures to the Seller's
Disclosure Schedules that were delivered by Seller to Buyer on or prior to
the Closing Date and deemed accepted by Buyer in accordance with Section
6.5).
Section 8.2 Compliance with Agreement. Seller shall have performed
and complied with, and shall have caused the Company to perform and comply
with, all of their respective obligations and covenants under this
Agreement in all material respects.
Section 8.3 Certificate of Seller. The Seller shall have delivered
to the Buyer a certificate of an executive officer of Seller, dated the
Closing Date, certifying, in such form as the Buyer may reasonably request,
as to the fulfillment of the conditions set forth in Sections 8.1 and 8.2
above.
Section 8.4 Absence of Proceedings. No suit, action, proceeding or
investigation shall be pending before any court or governmental authority
to restrain, prohibit or to materially delay, or to obtain damages or other
relief in connection with, or to question the validity or legality of, this
Agreement or the consummation of the transactions contemplated hereby.
Section 8.5 Consents. All material filings with, and all material
consents and approvals of governmental authorities and of other Persons
which are required in connection with the transfer of the Stock to the
Buyer and the continued operation by Buyer of the business of the Company
as presently conducted, all as described in Schedule 8.5 hereto, shall have
been made or obtained and all waiting periods required pursuant to any such
filings shall have expired or been terminated.
Section 8.6 Resignations. The resignations of all the directors of
the Company and all of the officers of the Company who are not engaged in
the day to day operation of the Company and who are listed on Schedule 8.6
hereto, shall have been delivered by the Seller to the Buyer on the Closing
Date, or all such individuals shall have been removed from office by Seller
by such date, other than those of individuals, if any, designated in
writing by the Buyer to the Seller as individuals who shall continue in
office after the Closing Date.
Section 8.7 Related Party Loans and Advances from or to Company. All
Indebtedness of the Company to the Seller or any Affiliate of Parent, or to
the Company by the Seller or any Affiliate of Parent, shall have been paid
or eliminated in full prior to the Closing Date.
Section 8.8 Corporate Records. Seller shall have delivered all
original minute books and stock record books of the Company, and in
relation to Poly-Flex UK, its statutory books.
Section 8.9 Opinion of Seller's Counsel. Buyer shall have received
an opinion of Edwards & Angell, LLP, counsel to the Seller, dated the
Closing Date substantially in the form of Exhibit A attached hereto.
Section 8.10 Non-Compete Agreement. Parent shall have executed and
delivered a Non-Compete Agreement in the form of Exhibit C.
Section 8.11 Cookson License Agreement. Parent shall have executed
and delivered a Cookson License Agreement in the form of Exhibit D.
Section 8.12 Proceedings and Documents. All corporate and other
proceedings taken in connection with the transactions contemplated hereby
and all documents incident thereto shall be reasonably satisfactory in form
and substance to the Buyer and its counsel.
Section 8.13 Deliveries by Seller. The Seller shall have delivered
or caused to be delivered to the Buyer the following:
(a) A certificate of the Secretary of CII as to (i) the
resolutions adopted by the Board of Directors of CII authorizing and
approving the transactions contemplated by this Agreement, (ii) the
Bylaws of CII and (iii) the incumbency of each officer signing any
document contemplated hereby on behalf of CII;
(b) A copy of the Certificate of Incorporation of CII, with
all amendments thereto, certified as of a recent date by the
Secretary of State of the State of Delaware;
(c) A certificate of legal existence and corporate good
standing of CII issued as of a recent date by the Secretary of State
of the State of Delaware;
(d) Copies of the following documents (in each case certified
to be true by a director or the secretary of Poly-Flex UK) (i) the
Memorandum and Articles of Association of Poly-Flex UK; and (ii) the
Certificate of Incorporation and each subsequent Certificate of
Incorporation on Change of Name relating to Poly-Flex UK.
(e) A copy of the Articles of Incorporation of Poly-Flex US,
with all amendments thereto, certified as of a recent date by the
Secretary of State of the State of Rhode Island;
(f) Certificate of legal existence and corporate and tax good
standing of Poly-Flex US issued as of a recent date by the Secretary
of State of the State of Rhode Island and the Division of Taxation of
the State of Rhode Island;
(g) A copy of the executed Patent and Trademark Assignment
dated January 13, 2000 ( in the form attached hereto as part of
Schedule 8.13) between Alpha Metals and Poly-Flex US regarding
polysolder;
(h) A duly executed Deed of Release in respect of the Cookson
Group Set-Off Arrangements in the form attached as part of Schedule
8.13; and
(i) Discharges of all mortgages and terminations of all UCC
financing statements of record in respect of the Real Property owned
by Poly-Flex US.
Section 8.14 Absence of Material Adverse Effect. No Material Adverse
Effect shall have occurred from the date of this Agreement to the Closing
Date, other than the effects of general economic and business conditions
not particular to the Company.
ARTICLE IX
CONDITIONS PRECEDENT TO SELLER'S OBLIGATIONS
--------------------------------------------
All obligations of the Seller under this Agreement, except those
obligations which are to be performed prior to the Closing Date, are
subject to satisfaction (or waiver in whole or in part by the Seller in
writing) on or before the Closing Date (or such sooner date as may be
specified) of each of the following express conditions precedent:
Section 9.1 Correctness of Representations and Warranties. All
representations and warranties of the Buyer contained in this Agreement
shall have been true, accurate and correct, on the date hereof and shall be
true and correct, in all material respects, on the Closing Date as though
such representations and warranties were made on and as of the Closing
Date.
Section 9.2 Compliance with Agreement. The Buyer shall have
performed and complied with all its obligations under this Agreement in all
material respects.
Section 9.3 Certificate of Officers. The Buyer shall have delivered
to the Seller a certificate of an executive officer of Buyer, dated the
Closing Date, certifying, in such form as the Seller may reasonably
request, as to the fulfillment of the conditions set forth in Sections 9.1
and 9.2 above.
Section 9.4 Absence of Proceedings. No suit, action, proceeding or
investigation shall be pending before any court or governmental or
regulatory authority to restrain, prohibit or materially delay or to obtain
damages or other relief in connection with, or question the validity or
legality of, this Agreement or the consummation of the transactions
contemplated hereby.
Section 9.5 Consents. All material filings with, and all material
consents and approvals of governmental authorities and of other Persons
which are required in connection with the transfer of the Stock to the
Buyer and the continued operation by Buyer of the business of the Company
as presently conducted, all as described on Schedule 8.5 hereto, shall have
been made or obtained and all waiting periods required pursuant to any such
filings shall have expired or been terminated.
Section 9.6 Proceedings and Documents. All corporate and other
proceedings taken in connection with the transactions contemplated hereby
and all documents incident thereto shall be reasonably satisfactory in form
and substance to the Seller and their counsel.
Section 9.7 Opinion of Buyer's Counsel. Seller shall have received
an opinion of counsel to the Buyer dated the Closing Date substantially in
the form of Exhibit B attached hereto.
Section 9.8 Non-Compete Agreement. Buyer shall have executed and
delivered a Non-Compete Agreement in the form of Exhibit C.
Section 9.9 Cookson License Agreement. Buyer shall have executed and
delivered a Cookson License Agreement in the form of Exhibit D.
Section 9.10 Credit Assurance. The Buyer shall have procured and
delivered to Lloyds Bank plc such instruments of credit assurance as may be
requested by said Bank in support of the Company's obligations with respect
to customs/excise duties so as to allow for the termination of credit
assurance provided by Parent.
Section 9.11 Deliveries by Buyer. The Buyer shall have delivered or
caused to be delivered to the Seller the following:
(a) A certificate of the Secretary of Buyer as to (i) the
resolutions adopted by the Board of Directors of Buyer authorizing
and approving the transactions contemplated by this Agreement, (ii)
the incumbency of each officer signing any document contemplated
hereby on behalf of Buyer; and
(b) A certificate of legal existence and corporate good
standing of Buyer issued as of a recent date by the Secretary of
State of the State of Delaware.
ARTICLE X
TERMINATION
-----------
Section 10.1 Termination of Agreement. This Agreement may be
terminated at any time prior to the Closing by:
(a) The mutual written consent of Buyer and Seller;
(b) Buyer or Seller, if the Closing shall not have taken place on or
before March 10, 2000 (the "Outside Date");
(c) Buyer, if there has been a material breach of representation or
warranty or covenant on the part of Seller herein which has not been waived
at or prior to the Closing Date or, in the case of a covenant breach, is
not cured by the Outside Date;
(d) Seller, if there has been a material breach of representation or
warranty or covenant on the part of Buyer herein which has not been waived
at or prior to the Closing Date or, in the case of a covenant breach, is
not capable of being cured by the Outside Date;
(e) Buyer or Seller, if consummation of the transactions
contemplated hereby would violate any non-appealable Order; or
(f) Seller, in connection with its acceptance of a Competing
Proposal, whereupon Seller shall promptly pay Buyer the sum of $2,000,000
as liquidated damages (and not as a penalty) by wire transfer of
immediately available funds.
Section 10.2 Procedure and Effect. (a) In the event of the
termination of this Agreement by either party pursuant to the provisions of
Section 10.1 hereof, written notice thereof shall be given to the other
party hereto and all further obligations of the parties under this
Agreement shall terminate and be of no effect, without any liability or
obligation on the part of either party or any of their respective
directors, officers, stockholders, employees or representatives, except as
provided below or in Section 10.1(f) or 13.2 hereof and in the
Confidentiality Agreement. If this Agreement is terminated by a party
because of a breach of this Agreement by the other party or because one or
more of the conditions to the terminating party's obligations under this
Agreement is not satisfied as a result of the other party's failure to
comply with its obligations under this Agreement, the terminating party's
right to pursue all legal remedies will survive the termination unimpaired.
In the event that a condition precedent to any party's obligation is not
satisfied, nothing contained herein shall be deemed to require any party to
terminate this Agreement, rather than to waive such condition precedent and
proceed with the Closing.
(b) In the event that (i) Seller fails or refuses to close in breach
of this Agreement, so long as Seller's failure or refusal to close was not
caused by the acts or conduct of Buyer or by Buyer's breach of this
Agreement or Buyer's failure or refusal to satisfy any conditions precedent
to Seller's obligations set forth in Sections 9.1, 9.2, 9.3, 9.7, 9.8, 9.9,
9.10 or 9.11, or (ii) any conditions precedent to Buyer's obligations to
close provided in Sections 8.1, 8.2, 8.3, 8.6, 8.7, 8.8, 8.9, 8.10, 8.11
and 8.13 are unmet at the time set for the Closing, and Seller is unable or
unwilling to cure any breach or unwilling to fulfill any such condition
within fifteen (15) days, notwithstanding any other provision in this
Agreement, Seller shall pay to Buyer, and Buyer shall be entitled to
receive from Seller, as Buyer's sole and exclusive remedy with respect to
such breach, failure or refusal, a payment of Two Million Dollars
($2,000,000) as liquidated damages and not as a penalty.
(c) In the event of any termination of this Agreement which is
pursuant or deemed to be pursuant to Section 10.1(a) hereof, Seller shall
immediately refund to Buyer the Earnout Money Deposit.
ARTICLE XI
INDEMNIFICATION
---------------
Section 11.1 Indemnification. From and after the Closing, subject to
limitations of Sections 11.6, 11.7 and 11.9 hereof, Seller agrees to
indemnify and hold harmless Buyer against and in respect of:
(a) any and all Losses incurred or suffered by Buyer or the
Company that result from or arise out of:
(i) any breach of representation or warranty by Seller
under this Agreement or under any Schedule or under any
certificate delivered pursuant hereto; or
(ii) any breach or nonfulfillment of any agreement,
undertaking or covenant on the part of the Seller under this
Agreement;
(iii) any and all costs, claims and penalties on account
of any debt due or becoming due in respect of the Cookson UK
Trust under Section 75 of the Pensions Act 1995 in relation to
Poly-Flex UK's participation in the Cookson UK Trust at any
time in the past, present or future;
(iv) participation of the Company and any of its current
or former employees in the Pension Plan for Employees of Stern
Metals, Inc.(the "Stern Plan"), the Stern Metals, Inc. Hourly
Pension Plan (the "Stern Hourly Plan") and the Stern Metals,
Inc. Savings Plan (the "Stern Savings Plan" and together with
the Stern Plan and the Stern Hourly Plan, the "Stern Plans");
(v) any liability of the Company to repay amounts
advanced under the UK Regional Selective Assistance Grant if
repayment thereof is accelerated solely as a result of Buyer's
inability to obtain the applicable authority's consent to the
transactions contemplated hereby or the Company's breach of the
terms of said Grant prior to the Closing Date; and
(vi) all actions, proceedings, costs, claims (including,
but not limited to, claims under the Disability Discrimination
Act 1995, for unfair dismissal and claims for personal injury),
demands, awards or fines, orders and liabilities (including
legal costs) arising out of the accident dated November 4, 1996
involving Mary Kennovin or arising out of her employment by
Poly-Flex UK but only as a result of acts or conduct by the
Company or the Company's failure to act occurring prior to the
Closing Date.
(b) any liability of the Company for Income Taxes for any
period ending (or deemed to end pursuant to Section 12.2) on or
before the Closing Date or of any other member of the Seller Group
(or of any other Affiliated Group, as the case may be) in which the
Company has been a member (i) under Reg. [SECTION]1.1502-6 (or similar
provision of state, local or foreign law), (ii) as a transferee or
successor, (iii) by contract, or (iv) otherwise, provided however,
Buyer be entitled to indemnification under this Section 11.1(b) for
Income Taxes resulting from the voluntary actions or transactions of
the Company or Buyer after the Closing Date, and
(c) any and all Expenses incident to any of the foregoing or to
the enforcement of this Section 11.1.
Section 11.2 Buyer Indemnification. From and after the Closing,
subject to the limitations of Sections 11.6, 11.8 and 11.9 hereof, Buyer
will indemnify and hold harmless Seller against and in respect of:
(a) any and all Losses incurred or suffered by Seller that
result from or arise out of:
(i) any breach of representation or warranty by Buyer
under this Agreement or under any Schedule or under any
certificate delivered pursuant hereto; or
(ii) any breach or nonfulfillment of any agreement,
undertaking or covenant on the part of the Buyer under this
Agreement;
(b) any and all Losses arising out of or relating to the
operations of the Company's business or the use of its properties or
assets from and after the Closing; and
(c) any and all Expenses incident to any of the foregoing or to
the enforcement of this Section 11.2.
Section 11.3 Claims for Indemnification. (a) A party claiming
indemnification under this Article XI (the "Indemnified Party") must
promptly notify in writing (a "Claim Notice") the party from whom
indemnification is sought (the "Indemnifying Party") of the nature and
basis of such claim for indemnification (a "Claim"), describing in
reasonable detail the facts giving rise to such Claim and including in such
Claim Notice the reasonably estimated amount of such Claim, if known, and a
reference to the provisions of this Agreement or of any other agreement,
document or instrument executed hereunder or in connection herewith upon
which such Claim is based.
(b) In the event the Indemnifying Party shall in good faith dispute
the validity of all or any amount of a Claim as set forth in the Claim
Notice, the Indemnifying Party shall, within thirty (30) days of its
receipt of the Claim Notice, execute and deliver to the Indemnified Party a
notice setting forth with reasonable particularity the grounds and the
basis upon which the Claim or portion thereof is disputed (the "Dispute
Statement").
(c) In the event the Indemnifying Party does not dispute the Claim
as set forth in the Claim Notice or only disputes a portion thereof, then
the amount of the Claim described in the Claim Notice or the portion
thereof not disputed shall be deemed to be admitted (the "Admitted
Liability") and shall, upon the incurring of Losses and Expenses resulting
therefrom, immediately be due and payable to the Indemnified Party by the
Indemnifying Party.
(d) In the event the Indemnifying Party shall, within thirty (30)
days of its receipt of the Claim Notice, deliver to the Indemnified Party a
Dispute Statement, then the portion of the Claim described in the Claim
Notice that is disputed by the Indemnifying Party shall not be due and
payable, except in accordance with a final and unappealable decision of a
court of competent jurisdiction or a written agreement by the parties
stipulating the amount of the Admitted Liability. Notwithstanding the
foregoing, the Indemnifying Party shall still be obligated to defend any
Third Party Claim as and to the extent provided in Section 11.4.
Section 11.4 Third Party Claims. (a) If a Claim described in a Claim
Notice relates to a claim, suit, litigation or other action by a third
party against the Indemnified Party or any fixed or contingent liability to
a third party (a "Third Party Claim"), the Indemnifying Party may elect to
assume and control the defense of the Third Party Claim at its own expense
with counsel selected by the Indemnifying Party with the consent of the
Indemnified Party which consent will not be unreasonably withheld or
delayed. The Indemnifying Party may not control the defense (i) if the
named parties to the Third Party Claim (including any impleaded parties)
include both the Indemnifying Party and the Indemnified Party and
representation of both parties by the same counsel would be inappropriate
due to actual or potential differing interests between them, in which case
the Indemnified Party shall have the right to join in the defense of the
Third Party Claim and to employ counsel reasonably approved by the
Indemnifying Party (which approval will not be unreasonably withheld or
delayed) at the expense of the Indemnifying Party or (ii) to the extent
such Third Party Claim seeks an injunction, restraining order, declaratory
relief or other non-monetary relief and such Third Party Claim, if decided
adversely, would have a Material Adverse Effect on the Indemnified Party,
in which event, the Indemnified Party may employ counsel at the expense of
the Indemnifying Party. If the Indemnifying Party assumes the defense of
the Third Party Claim and is entitled to control the defense thereof
pursuant to the foregoing, the Indemnifying Party shall not be liable for
any fees and expenses of counsel for the Indemnified Party incurred
thereafter in connection with the Third Party Claim (except in the case of
actual or potential differing interests, as provided in the preceding
sentence). In the event the Indemnifying Party exercises its right to
assume the defense of a Third Party Claim, the Indemnified Party may
participate, through counsel of its own choice and at its own expense, in
the defense of any Third Party Claim as to which the Indemnifying Party has
elected to assume and control the defense thereof.
(b) Any party granted the right to direct the defense of a Third
Party Claim hereunder will: (i) keep the other fully informed of material
developments in the Third Party Claim at all stages thereof; (ii) promptly
submit to the other copies of all pleadings, responsive pleadings, motions
and other similar legal documents and papers reviewed in connection
therewith; (iii) permit the other party and its counsel, to the extent
practicable, to confer on the conduct of the defense thereof; and (iv) to
the extent practicable, permit the other party and its counsel an
opportunity to review all legal papers to be submitted prior to their
submission. The parties will make available to each other and each other's
counsel and accountants, without charge, all of its or their books and
records relating to the Third Party Claim, and each party will render to
the other party such assistance as may be reasonably required in order to
insure the proper and adequate defense thereof and shall furnish such
records, information and testimony and attend such conferences, discovery
proceedings, hearings, trials and appeals as may be reasonably requested by
the Indemnifying Party in connection therewith.
(c) The parties will use their respective good faith efforts to avoid
the waiver of any privilege of another party. The assumption of the defense
of any Third Party Claim by an Indemnifying Party will not constitute an
admission of responsibility to indemnify or in any manner impair or
restrict such party's rights to later seek to be reimbursed its costs and
expenses if indemnification under this Agreement with respect thereto was
not required. An Indemnifying Party may elect to assume the defense of a
Third Party Claim at any time during the pendency thereof, even if
initially the Indemnifying Party did not elect to assume the defense. No
settlement of a matter by the Indemnified Party will be binding on an
Indemnifying Party for any purpose, including the Indemnifying Party's
indemnification obligations hereunder, without the Indemnifying Party's
express written consent. The Indemnifying Party shall not make any
settlement of any such Third Party Claim without the written consent of the
Indemnified Party, unless the settlement involves only the payment of money
by the Indemnifying Party without prejudice to the Indemnified Party.
Section 11.5 Exclusive Remedy. In the absence of fraud, the
indemnification rights of the parties under this Article XI are the
exclusive rights and remedies of Buyer and Seller following the Closing for
any misrepresentation, breach of warranty or covenant or failure to fulfill
any agreement or covenant hereunder on the part of any party hereto. Absent
fraud, Buyer and Seller hereby irrevocably waive and release the other from
any and all claims and other causes of action, including, but not limited
to claims for contribution, relating to any matters pertaining to Section
4.18.
Section 11.6 Survival. (a) All representations and warranties in
this Agreement (and the indemnities contained in this Article XI which
specifically relate thereto) shall survive the Closing until the expiration
of the periods described below, and may survive thereafter, to the extent a
claim is made prior to such expiration with respect to any breach of such
representation, warranty or indemnity, until such claim is finally
determined or settled:
(i) with respect to the matters indemnified under Sections
11.1(a)(iii), 11.1(a)(vi), 11.1(b) and (c) hereof, until the
expiration of the applicable statute of limitations;
(ii) with respect to the matters indemnified under Section
11.1(a) (iv) hereof, there shall be no expiration period; and
(iii) with respect to all other matters indemnified under
Section 11.1 hereof, for a period ending on the second anniversary of
the Closing Date.
(b) No claim for a breach of a representation, warranty or covenant
may be made after termination of the applicable survival period.
(c) The covenants and agreements of the parties will survive the
Closing for the applicable statute of limitations, except for those
covenants and agreements that by their terms contemplate a shorter survival
period.
(d) Neither Buyer, Company nor any entity filing a consolidated tax
return which includes Buyer or Company shall consent to the extension of,
or take any other action to extend, any applicable statute of limitations
with respect to any tax year on account of which a claim for indemnity
hereunder may be brought without the prior written consent of the Seller.
Section 11.7 Limitations on Buyer's Right to Indemnification. (a)
The maximum aggregate liability of the Seller to indemnify the Buyer for
any Losses and Expenses of Buyer shall be limited to $9,750,000 (the
"Maximum Amount").
(b) The Buyer shall be entitled to seek indemnification for Claims
only when the sum of the aggregate of all such Losses and Expenses of Buyer
on account thereof exceeds $175,000 (the "Threshold"), at which point the
Seller shall be liable to the Buyer for all of such Losses and Expense to
the extent in excess of $87,500 up to the Maximum Amount.
(c) Except for Indemnity Claims in respect of Seller's obligations
under Sections 2.5 and 2.7 hereof, or on account of matters contemplated by
Section 4.2 hereof, the Buyer shall be entitled to seek indemnification for
Indemnity Claims only when (i) the Losses and Expenses arising from an
individual Indemnity Claim or group of related Indemnity Claims based on a
common nucleus of operative facts exceeds $10,000 and (ii) the sum of the
aggregate of all such Losses and Expenses of Buyer on account of all
Indemnity Claims which exceed the threshold for individual Indemnity Claims
contemplated by clause (i) above (it being understood that to the extent
the Losses or Expenses arising from an individual Indemnity Claim or group
of related Indemnity Claims exceed the $10,000 threshold described above,
then the entire amount of such Losses and Expenses, not just the amount in
excess of $10,000, shall be included in determining when the Threshold is
exceeded) exceeds the Threshold, at which point the Seller shall be liable
hereunder, for all of such Losses and Expenses on account of such Indemnity
Claims to the extent in excess of $87,500 up to the Maximum Amount.
(d) In the event that any item for which indemnification from Seller
is claimed by Buyer hereunder is booked, accrued or reserved for on either
the Historical Financial Statements or the Closing Balance Sheet, the Buyer
shall be entitled to indemnification for that item only to the extent the
associated Loss and Expense exceeds such charge, accrual or reserve.
(e) The limitations of this Section 11.7 shall not apply to the
Buyer's right to indemnification under Section 11.1(a) (iv).
Section 11.8 Limitations on Seller's Right to Indemnification. (a)
The maximum aggregate liability of the Buyer to indemnify the Seller for
any Losses and Expenses of Seller shall be limited to the Maximum Amount.
(b) The Seller shall be entitled to seek indemnification for Claims
only when the sum of the aggregate of all such Losses and Expenses of
Seller on account thereof exceeds the Threshold, at which point the Buyer
shall be liable to the Seller for all of such Losses and Expense to the
extent in excess of $87,500 up to the Maximum Amount.
(c) Except for Indemnity Claims in respect of Buyer's obligations
under Sections 2.5 and 2.7 hereof, the Seller shall be entitled to seek
indemnification for Indemnity Claims only when (i) the Losses and Expenses
arising from an individual Indemnity Claim or group of related Indemnity
Claims based on a common nucleus of operative facts exceeds $10,000 and
(ii) the sum of the aggregate of all such Losses and Expenses of Seller on
account of all Indemnity Claims which exceed the threshold for individual
Indemnity Claims contemplated by clause (i) above (it being understood that
to the extent the Losses or Expenses arising from an individual Indemnity
Claim or group of related Indemnity Claims exceed the $10,000 threshold
described above, then the entire amount of such Losses and Expenses, not
just the amount in excess of $10,000, shall be included in determining when
the Threshold is exceeded) exceeds the Threshold, at which point the Buyer
shall be liable hereunder, for all of such Losses and Expenses on account
of such Indemnity Claims to the extent in excess of $87,500 up to the
Maximum Amount.
Section 11.9 Other Limitations on Indemnification. (a) In the event
that either party makes a Claim which is determined by a court of competent
jurisdiction after entry of final and unappealable decision to be without
reasonable basis in law or fact, such party will bear and promptly
reimburse the other party for all Expenses in investigating and defending
against that Claim.
(b) The indemnification obligations of the parties hereunder shall be
limited to the obligation to make the other party whole on a dollar for
dollar basis for assets lost or diminished, liabilities increased or
expenses and costs actually incurred, and under no circumstances shall the
Indemnifying Party be liable for claims by the Indemnified Party that as a
consequence of the breach in question the Indemnified Party has incurred
consequential, enhanced, punitive, special or exemplary damages.
(c) To the extent that indemnity, insurance or "pass-through"
warranty coverage from a seller or manufacturer or other form of recovery
or reimbursement from a third party is available to Buyer or the Company to
cover any item for which indemnification may be sought hereunder, Buyer
will, and will cause the Company to, on a timely and expeditious basis,
seek recovery under applicable contracts, insurance policies and warranties
and otherwise exhaust all available remedies or causes of action to recover
the maximum amount of its Claim as may be available from such other party.
Seller shall be subrogated to the rights of Buyer and the Company under any
such contract, policy or warranty, and to the extent Seller indemnifies
Buyer on any Claim referred to in the previous sentence, Buyer will assign
to Seller, to the fullest extent allowable, its claim against such
indemnity, insurance, warranty coverage or third-party, or in the event
assignment is not permissible, Seller will be allowed to pursue such Claim
in the name of Buyer or the Company, as appropriate, at Seller's expense.
Seller will be entitled to retain all recoveries made as a result of any
such action to the extent of all sums paid to Buyer by Seller. Buyer will
make its and the Company's books and records relating to such Claim
available to Seller and make its and the Company's employees available for
interviews and similar matters to assist Seller in prosecuting such claim.
(d) Any amount recoverable by Buyer from Seller under this Article XI
will be net of any actual tax benefit realized by Buyer or the Company in
connection with federal, state and foreign tax deductions pertaining to the
item for which indemnification may be sought hereunder. To the extent the
actual tax benefit realized by the Buyer or the Company is incurred after
any recovery pursuant to this Article XI, there will be a corresponding
adjustment between the parties without regard to the time limitations
imposed under this Article XI. All indemnification payments under this
Article XI shall be deemed adjustments to Purchase Price.
ARTICLE XII
ADDITIONAL COVENANTS OF BUYER AND SELLERS
-----------------------------------------
Section 12.1 Tax Returns; Section 338(h)(10) Election. (a) Tax
Returns. Seller will timely file all Tax Returns which are required to be
filed on or prior to the Closing Date in accordance with all applicable
Laws, and any accruals established for Income Taxes with respect to the
Company, for any period ending on or before the Closing Date reflected on
the books and records of the Company (excluding any provision for deferred
Income Taxes) will be adequate. Seller will have the exclusive authority
and obligation to prepare and timely file, or cause to be prepared and
timely filed, all Tax Returns of the Company, that are due with respect to
any taxable year or other taxable period ending on or prior to the Closing
Date. Such authority will include, but not be limited to, the determination
of the manner in which any items of income, gain, deduction, loss or credit
arising out of the income, properties and operations of the Company will be
reported or disclosed in such Tax Returns; provided, however, that such Tax
Returns will be prepared by treating items on such Tax Returns in a manner
consistent with the past practice with respect to such items, unless
otherwise required by Law. Seller shall be entitled to any Income Tax
refund relating to the pre-Closing Income Tax period to the extent such
refunds are not reflected as such on the Closing Balance Sheet.
(b) Section 338(h)(10) Election.
(i) With respect to the purchase by Buyer of the Stock pursuant to
this Agreement, (A) Seller and Buyer, in Buyer's sole discretion and at its
election, shall jointly make an election under Section 338(h)(10) of the
Code (the "Election"), (B) Seller and Buyer shall, as promptly as
practicable following the Closing Date, cooperate with each other to take
all actions necessary and appropriate (including filing such forms,
returns, elections, schedules and other documents as may be required) to
effect and preserve a timely Election in accordance with the provisions of
Treasury Regulation Section 1.338(h)(10)-1 (and any comparable provisions
of state or local Tax law) or any successor provisions and (C) Seller and
Buyer shall report the purchase by Buyer of the Stock pursuant to this
Agreement consistent with the Election and shall take no position
inconsistent therewith in any Tax Return, any proceeding before any Taxing
Authority or otherwise.
(ii) In connection with the Election, Buyer and Seller shall agree
to the determination of the "Aggregate Deemed Sales Price" (as defined
under applicable Treasury Regulations) of the Stock and the allocation of
such "Aggregate Deemed Sales Price" among the assets of the Company. The
determination of the amount of the "Aggregate Deemed Sales Price" and the
allocation thereof shall be proposed by Buyer in consultation with Seller
in accordance with Section 338(b) of the Code and applicable Treasury
Regulations. Each of Seller and Buyer shall (A) be bound by such
determination and such allocation for purposes of determining any Taxes,
(B) prepare and file, and cause its Affiliates to prepare and file, its
Returns on a basis consistent with such determination of the "Aggregate
Deemed Sales Price" and such allocation and (C) take no position, and cause
its Affiliates to take no position, inconsistent with such determination
and such allocation on any applicable Return in any proceeding before any
Taxing Authority or otherwise. In the event that any such determination or
allocation is disputed by any Taxing Authority, the party receiving notice
of the dispute shall promptly notify the other party hereto concerning
resolution of the dispute.
(iii) For purposes of the foregoing Sections 12.1(b)(i) and (ii),
the term "Buyer" shall mean Buyer or Buyer's nominee.
Section 12.2 Apportionment of Income Taxes.
(a) Income Taxes Relating to Straddle Periods. With respect to
taxable years or periods beginning before and ending after the Closing
Date, such taxable year or period shall be treated as two separate taxable
periods, the first ending on the Closing Date ("Pre-Closing Short Period")
and the second beginning on the day following the Closing Date ("Post-
Closing Short Period"). The Seller will compute the Income Taxes due for
the Pre-Closing Short Period, as though such Pre-Closing Short Period was
the entire taxable year or period, based upon the accounting methods,
elections and conventions employed by the Company in its most recent prior
taxable year or period. To the extent that the Income Taxes relating to
such Pre-Closing Short Period are not adequately accrued on the Closing
Balance Sheet, the Seller will indemnify the Buyer under Section 11.1(b) of
this Agreement. Buyer will be responsible for paying the Income Taxes
relating to the entire straddle period to the appropriate Tax Authorities.
To the extent that the Company or Seller has made Income Tax estimates for
the Pre-Closing Short Period, and the Pre-Closing Short Period results in
Income Taxes being due in an amount less than such estimates, the Seller
will be entitled to a refund equal to the difference between the two
amounts.
(b) Trading Losses
(i) All trading losses of Poly-Flex UK in respect of any and all periods
ended on or before Closing ("Relevant Periods") which were not taken
into account as an asset in arriving at the Combined Net Asset Value
shall, if required by Parent, to the extent that surrender of such
losses is permitted under Chapter IV Part X Income and Corporation
Taxes Act 1988 ("ICTA"), be surrendered to Parent and/or to such
other eligible claimant companies as Parent may require, in
consideration for the payment by Parent and/or such other eligible
claimant companies of a sum equal to the amount of corporation tax
from which the company that is the claimant company in respect of
such surrender has been relieved by virtue of that surrender being
made PROVIDED THAT the provisions of this Section 12.2(b)(i) shall
not have effect if and to the extent that payment in respect of such
surrender has been made on the basis specified in the foregoing
provisions of this Section 12.2(b)(i) on or before the date of this
Agreement. Where the Seller and/or such other claimant has made a
payment pursuant to this Section 12.2(i) to Poly-Flex UK in respect
of a surrender of losses, the Buyer shall pay to the Seller an
additional amount (by way of an adjustment to the Purchase Price for
the UK Shares) equal to the sum paid by the Seller (or other
claimant) to Poly-Flex UK in respect of such surrender PROVIDED THAT
the Buyer shall not be required to pay any such additional amount to
the Seller if the payment for the surrender has been taken into
account in computing the Combined Net Asset Value.
(ii) Any sum payable under Section 12.2(b)(i) shall be paid on the date on
which any corporation tax chargeable on the taxable profits of the
company that is the claimant company in respect of the surrender in
question for the accounting period of its to which that surrender
relates becomes due and payable (or would have become due and payable
had the claimant company incurred any liability to corporation tax in
respect of that accounting period).
(iii) In the event that any payment is made in accordance with the
foregoing provisions of this Section 12.2(b) in respect of any
surrender of losses made under Section 12.2(b)(i) and corporation tax
falls nevertheless to be charged in respect of the taxable profits
that the relevant surrender was intended to relieve from such tax
(whether as a result of the Inland Revenue refusing to allow relief
for the losses or subsequently withdrawing relief for the losses in
respect of the relevant surrender or for any other reason
whatsoever), the Buyer shall procure that Poly-Flex UK shall
forthwith repay to the Parent or to the relevant subsidiary or
subsidiaries of the Parent either the sum previously paid in respect
of the relevant surrender in accordance with the foregoing provisions
of this Section 12.2(b) or, as the case may be, such part of that sum
as is attributable to the element of the surrender that did not have
the effect of relieving from corporation tax the taxable profits
intended to be relieved by virtue of such surrender and the Seller
shall forthwith repay to the Buyer (by way of an adjustment to the
Purchase Price for the UK Shares) any amount previously paid by the
Buyer to the Seller pursuant to Section 12.2(b)(i) up to the amount
of the repayment made by Poly-Flex UK to Parent pursuant to this
Section 12.2(b)(iii).
(iv) In the event of any payment becoming due from the Seller under
Section 1.1(b) (Indemnification) the Buyer shall, if required by
Parent, procure that Poly-Flex UK shall allow the surrender to it of
trading losses or other amounts referred to in Section 402 ICTA, or
advance corporation tax (pursuant to Section 240 ICTA), in each case
to the extent permitted by law without any payment being made in
consideration for such surrender. The Buyer shall, if required by
Parent, procure that Poly-Flex UK shall also allow the surrender to
it of trading losses or other amounts referred to in Section 402
ICTA, or advance corporation tax (pursuant to Section 240 ICTA), in
each case to the extent permitted by law if such surrenders have been
assumed to be made for the purposes of a balance sheet of Poly-Flex
UK and without any payment being made in consideration for any such
surrender.
(v) To give effect to the rights of Parent under this Section 12.2(b),
the Buyer shall, and shall procure that Poly-Flex UK shall, after
Closing,:
(A) sign all claims and surrenders prepared by Parent and promptly
submit such claims and surrenders duly signed to the Inland Revenue,
including any further documents required to amend or withdraw the
original claims or surrenders;
(B) execute all letters or other documents or take such further
action as may be required to effect such claims and surrenders; and
(C) provide copies of any material correspondence relating to the
matters mentioned at (A) or (B) above to Parent as soon as reasonably
practicable after receipt.
(vi) Save with the prior written agreement of Parent, the Buyer shall not
and shall procure that Poly-Flex UK shall not:
(A) withdraw or amend any claim or surrender in respect of any
period up to Closing; or
(B) make any other claims, elections, disclaimers or surrenders the
effect of which is to reduce the trading losses which may be
surrendered by Poly-Flex UK pursuant to this Section 12.2(b).
Section 12.3 Cooperation; Audits. In connection with the preparation
of Tax Returns, audit examinations and any administrative or judicial
proceedings relating to the Income Tax liabilities imposed on the Company
for all pre-Closing Income Tax periods, Buyer and the Company, as
applicable, on the one hand, and Seller, on the other hand, each at their
own expense, will cooperate fully with each other, including, but not
limited to the furnishing or making available without charge during normal
business hours of records, personnel (as reasonably required), books of
account and other materials necessary and helpful for the preparation of
such Tax Returns, the conduct of audit examinations or the defense of
claims by Income Tax authorities as to the imposition of Income Taxes.
Section 12.4 Controversies. Buyer will promptly notify Seller in
writing upon receipt by Buyer or any Affiliate of Buyer (including the
Company after the Closing Date) of written notice of any inquiries, claims,
assessments, audits or similar events with respect to Income Taxes relating
to a Pre-Closing Income Tax period for which Seller may be liable under
this Agreement (any such inquiry, claim, assessment, audit or similar
event, a "Tax Matter"). The Seller at its sole expense, will have the
exclusive authority to represent the interests of the Company with respect
to any Tax Matter before any Tax Authority and will have the sole right to
extend or waive the statute of limitations, with respect to a Tax Matter
and to control the defense, compromise or other resolution of any Tax
Matter, including responding to inquiries, filing tax returns and settling
audits; provided, however, that Seller will not enter into any settlement
of or otherwise compromise any Tax Matter that adversely affects or may
affect the liability of Buyer or the Company, or any Affiliate of the
foregoing, without the prior written consent of Buyer, which consent will
not be unreasonably withheld or delayed. The Seller will, in good faith,
consult with Buyer and, if Buyer requests , with counsel selected by Buyer
at Buyer's expense, regarding the conduct of or positions taken in any such
proceeding. The Seller will not file or cause or permit to be filed any
amended Tax Return without the prior written consent of Buyer, which
consent will not be unreasonably withheld or delayed.
Section 12.5 Income Tax Position. No party shall take a position for
Income Tax purposes which is inconsistent with this Agreement and prior tax
returns. Each party shall notify the other of any Tax Authority challenge
to the tax treatment of the transactions contemplated by this Agreement and
the results thereof.
Section 12.6 Return of Documents. In the event that the transactions
contemplated by this Agreement are not consummated for any reason, the
Buyer and the Seller (i) shall return to the other documents, contracts and
papers supplied by such other party, (ii) agree that all information
derived from the documents, contracts and papers concerning the Seller and
the Company which are furnished to Buyer shall be and remain at all times
subject to the Confidentiality Agreement and (iii) agree that the
Confidentiality Agreement shall survive any termination of this Agreement
and shall continue in full force and effect.
Section 12.7 Books and Records. After Closing, Seller will have,
upon reasonable advance notice, the right at any time during business hours
to inspect and to make copies, at its own expense, of any and all of the
Company's books, records, financial information and other data, to the
extent the books, records, financial information and other data pertain to
the Company's business, operations and properties prior to Closing (the
"Business Records"), for any proper purpose, including preparing Tax
Returns. In addition, Seller will have, upon reasonable advance notice, the
right to have temporary possession of original copies of the Business
Records to defend against or otherwise participate in a tax audit, other
governmental examination or any litigation (other than litigation involving
Buyer). For six years after Closing, Buyer will use, and will cause the
Company to use, reasonable measure to preserve the Business Records, which
measures will not be less comprehensive than the measures used by Buyer to
preserve its own records.
Section 12.8 Employee Plans Poly-Flex US.
(a) The Seller will, by proper resolution, participant notification
and plan amendments, cease all contributions to and discontinue the right
of any participant to accrue additional benefits under the Poly-Flex
Circuits, Inc. 401(k) Profit Sharing Plan (the "401(k) Plan") and establish
an effective date of plan termination which effective date is prior to the
Closing Date. The Seller shall be responsible for all costs incurred by
either it or Buyer that are associated with the termination of the 401(k)
Plan pursuant to this Section and any costs associated with bringing the
401(k) Plan into compliance with all applicable legal requirements prior to
termination (whether arising prior to or after the Closing Date), including
without limitation all costs (i) related to the operation, administration
and qualification of the 401(k) Plan; (ii) associated with the termination
of the 401(k) Plan, or (iii) arising from or related to the full vesting
resulting from such termination. Buyer shall cause the Parlex Corporation
401(k) Plan ("Parlex Plan") to be amended to provide that all US Employees
who are eligible to participate in the 401(k) Plan on the Closing Date
shall be eligible to participate in the Parlex Plan as of such date and
will receive eligibility and vesting service credit for their employment
with Poly-Flex US or Seller in the Parlex Plan.
(b) Effective as of the Closing, Seller shall take all action
necessary or appropriate to terminate the participation, benefits, and
coverage of all Poly-Flex US Employees under the Employee Plans
administered by Cookson America, Inc. In the event a US Employee
voluntarily terminates employment with Buyer or is terminated from
employment by Buyer during the period beginning on the Closing Date and
ending on December 31, 2000, Seller shall pay to Buyer, upon confirmation
that Buyer has paid such amount to such Employee, the difference, if any,
between the amount of accrued vacation pay to which such Employee would
have been entitled under the Poly-Flex US vacation pay practice in effect
as of the Closing Date and the amount of accrued vacation pay to which such
Employee is entitled under Buyer's vacation policy applicable to Poly-Flex
US's employees. Effective as of the Closing, Buyer will cause Poly-Flex US
to take all action necessary or appropriate to extend coverage and benefits
to Poly-Flex US Employees, under new or such existing medical plans, dental
plans, disability plans, life insurance plans, and other benefit
arrangements as are made available to similarly situated employees of
Buyer, which are similar to benefits offered to such employees of Buyer;
provided, however, that Poly-Flex US's employees will not receive fewer
vacation days on an annual basis under Buyer's vacation policy than
received on an annual basis under Poly-Flex US's vacation policy
(hereinafter collectively referred to as "Buyer Welfare Plans"). Seller
shall be responsible for providing continuation coverage under Section
4980B of the Code to all employees of Poly-Flex US and qualified
beneficiaries relating to employees of Poly-Flex US who, in either case,
are not US Employees on the Closing.
In the event it is not practical for Buyer to establish the Buyer
Welfare Plans effective on the Closing Date, Seller shall keep the
employees of Poly-Flex US in the Employee Plans for the period from the
Closing Date to the date on which the Buyer Welfare Plans are established
provided that such period shall not extend beyond 180 days. During such
period, Buyer shall cause Poly-Flex US to continue to make premium payments
to Cookson America, Inc. under the Employee Plans in accordance with past
practice. Buyer shall also cause Poly-Flex US to reimburse Seller or its
Affiliates for their out-of-pocket expenses plus an administration charge
equal to ten (10%) percent of total premium payments by Poly-Flex US to
Cookson America, Inc. during such period for premium payments made after
the Closing Date under the Employee Plans for such period. In the event
that Buyer shall cause employees of Poly-Flex US to continue to participate
in the Employee Plans after the Closing, Buyer shall cause Poly-Flex US
(and not Seller) to assume and be responsible for all liabilities for
claims and expenses (including claims and expenses under Section 4980B(f)
of the Code and the administration thereof) incurred by Poly-Flex US
Employees after the Closing, including any additional payments to be made
under the Employee Plans if premium payments are not sufficient to cover
claims and expenses. In no event will Buyer or Poly-Flex US be responsible
for any such claims and expenses (including claims and expenses under
Section 4980B(f) of the Code and the administration thereunder) of US
Employees who do not continue employment with Poly-Flex US at any time on
or after the Closing.
(c) Parent covenants and agrees to be responsible for all payment
obligations related to retention bonuses payable after the Closing Date for
the individuals named on Schedule 12.8(c).
(d) Buyer is aware of the opportunity and has declined to make an
offer of employment to the individual named on Schedule 12.8(d), even
though such individual performs services primarily for the benefit of the
Company. Seller shall be responsible for any claims from any individuals
listed on Schedule 12.8(c) for any such individual's employment by Seller
prior to the Closing or from any such individual's termination of
employment by Seller.
(e) Buyer and Seller covenant and agree that any claims or losses
relating to workers' compensation claims of any US Employees shall be the
responsibility and liability of Seller if the occurrence transpired prior
to the Closing Date and shall be the responsibility and liability of the
Buyer if the occurrence transpired on or after the Closing Date.
Section 12.9 Employee Plans Poly-Flex UK. Schedule 12.9 sets forth
covenants regarding the Employee Plans for Poly-Flex UK and the provisions
related to their transfer.
Section 12.10 Uncollected Receivables. At the Closing, Seller shall
deliver, or cause the Company to deliver, to Buyer a schedule of all of the
Company's accounts receivables and notes receivable as of the Closing Date
(the "Closing Receivables"). Buyer and Seller agree the reserve for bad
debt in respect thereof shall be $50,000 (the "A/R Reserves"). On or before
August 31, 2000, Buyer, at its option, may deliver to Seller a written
statement setting forth the dollar amount of any Closing Receivables, net
of A/R Reserves, which have not been collected by Buyer in cash or by
credit within 180 days following the Closing Date (the "Uncollected
Receivables"). Within five (5) business days following delivery of such
statement to Seller, Seller shall pay to Buyer an amount equal to the
aggregate dollar amount of the Uncollected Receivables, net of the A/R
Reserves, set forth in such statement, and Buyer shall assign to Seller,
upon its receipt of such amount, such Uncollected Receivables. Buyer agrees
to exercise reasonable collection procedures with regard to the Closing
Receivables during such 180 day period. Buyer shall apply customer payments
to customer balances in chronological order during such 180 day period,
paying the oldest balance first, unless Buyer certifies in good faith that
(i) Buyer has been notified by such customer that a dispute regarding such
prior balance exists, (ii) such customer payment is directed by the
customer (without inducement or suggestion by Buyer) to be applied to a
specific account or transaction and/or (iii) such customer payment can be
matched to a specific amount or transaction (without inducement or
suggestion by Buyer).
Section 12.11 Confidentiality. The Seller will treat and hold as such
all of the Confidential Information, and refrain from using any of the
Confidential Information except in connection with this Agreement. In the
event that the Seller is requested or required (by oral question or request
for information or documents in any legal proceeding, interrogatory,
subpoena, civil investigative demand, or similar process) to disclose any
Confidential Information, Seller will notify the Buyer promptly of the
request or requirement so that the Buyer may seek an appropriate protective
order or waive compliance with the provisions of this Section 12.11. If, in
the absence of a protective order or the receipt of a waiver hereunder, the
Seller is, on the advice of counsel, compelled to disclose any Confidential
Information to any tribunal or else stand liable for contempt, Seller may
disclose the Confidential Information to the tribunal; provided, however,
that Seller shall use its reasonable efforts to obtain, at the reasonable
request of the Buyer, an order or other assurance that confidential treatment
will be accorded to such portion of the Confidential Information required to
be disclosed as the Buyer shall designate. The foregoing provisions shall not
apply to any Confidential Information which is generally available to the
public immediately prior to the time of disclosure.
Section 12.12 Litigation Support. In the event and for so long as any
party actively is contesting or defending against any action, suit,
proceeding, hearing, investigation, charge, complaint, claim, or demand in
connection with (i) any transaction contemplated under this Agreement or (ii)
any fact, situation, circumstance, status, condition, activity, practice,
plan, occurrence, event, incident, action, failure to act, or transaction on
or prior to the Closing Date involving the Company, the other party will
cooperate with it and its counsel in the contest or defense, make their
personnel reasonably available, and provide such testimony and access to
their books and records as shall be reasonably necessary in connection with
the contest or defense, all at the sole cost and expense of the contesting or
defending party (unless the contesting or defending party is entitled to
indemnification therefor under Article XI for such claim).
Section 12.13 Termination of Participation in Insurance Program.
Buyer acknowledges that the Company is a participant in the Cookson Insurance
Program which includes various global and local coverages (the "Program") and
that upon the consummation of the transaction contemplated by this Agreement,
the Company will no longer be eligible to be a participant in the Program.
Therefore, Buyer agrees that from and after the Closing Buyer will be
responsible for obtaining all necessary or desirable insurance policies
applicable to the Company.
ARTICLE XIII
MISCELLANEOUS
-------------
Section 13.1 Binding Effect; Assignment. All of the terms of this
Agreement will be binding upon, inure to the benefit of and be enforceable
by Seller and its successors and permitted assigns and by Buyer and its
successors and permitted assigns. No party will assign, by operation of Law
or otherwise, any of its rights or obligations under this Agreement to any
other Person without the prior written consent of the other party. Any
unauthorized assignment will be void.
Section 13.2 Payment of Fees and Expenses. Each party will pay its
own expenses, costs and fees (including attorneys' and accountants' fees)
incurred in connection with the negotiation, preparation, execution and
delivery of this Agreement and the consummation of the transactions
contemplated by this Agreement. All transfer, documentary, sales, use,
stamp, registration, value added and other such taxes (including any
penalties and interest) of the Company imposed on Buyer which are incurred
as a result of or in connection with the transaction contemplated by this
Agreement will be borne and paid by the Buyer when due, and Buyer will, at
its own expense, cause to be filed all necessary returns and other
documentation with respect to all such taxes and fees.
Section 13.3 Further Acts by Seller. From and after the Closing
Date, upon the reasonable request of the Buyer, the Seller shall execute,
acknowledge and deliver all such further acts, deeds, assignments,
transfers, conveyances, powers of attorney, and assurances as may be
required to convey and transfer to and vest in the Buyer and protect its
right, title and interest in the Stock to be acquired hereunder, and as may
be reasonably appropriate otherwise to carry out the transactions
contemplated by this Agreement.
Section 13.4 Publicity. From the date of this Agreement through the
Closing Date, no party shall issue any press release or make any public
statement regarding the transactions contemplated hereby, without the prior
approval of the other party, and each party hereto shall issue a mutually
acceptable press release as soon as practicable after the Closing;
provided, however, that the foregoing shall not prevent either party hereto
from making any disclosures required by Law. Upon the execution of this
Agreement, the parties shall coordinate a press release mutually acceptable
to each regarding the transaction contemplated by this Agreement.
Section. 13.5 Entire Agreement; Construction, Counterparts;
Effectiveness. This Agreement and the Confidentiality Agreement constitutes
the entire agreement of the parties and supersedes all prior agreements,
understandings, negotiations and discussions of the parties, whether
written or oral. No representation, promise, inducement or statement of
intention has been made by any party that is not embodied in this Agreement
or in the other documents referred to in the immediately preceding
sentence, and no party will be bound by or liable for any alleged
representation, promise, inducement or statement of intention not so set
forth. The Table of Contents and Headings appearing in this Agreement have
been inserted solely for the convenience of the parties and shall be of no
force and effect in the construction of the provisions of this Agreement.
This Agreement shall be construed under the laws of the Commonwealth of
Massachusetts applicable to contracts made and to be performed in the
Commonwealth of Massachusetts without resort to its conflict of laws rules,
and shall be binding upon and inure to the benefit of the parties hereto,
and their respective successors and permitted assigns. This Agreement may
be executed in several counterparts, and each executed counterpart shall be
considered an original of this Agreement and all of which, when taken
together, will be deemed to constitute one and the same agreement. This
Agreement shall not become effective until it has been executed by all of
the parties hereto.
Section 13.6 Notices. Notices hereunder shall be effective if in
writing and shall be deemed to have been given at the earliest of the date
when actually delivered to an individual party or to an officer of a
corporate party by personal delivery, on the succeeding Business Day when
deposited with a nationally recognized overnight courier service, or five
days after deposited in the United States mail, postage prepaid, registered
or certified, return receipt requested, and addressed, in the case of the
Seller, to:
Cookson Investments, Inc.
One Cookson Place
Providence, Rhode Island 02903
Attention: General Counsel
and
Cookson Group plc
The Adelphi
1-11 John Adam Street
London WC2N 6HJ
Attention: The Group Secretary
with a copy to:
Christopher D. Graham, Esquire
Edwards & Angell, LLP
2800 BankBoston Plaza
Providence, Rhode Island 02903
and in the case of the Buyer, to:
Parlex Corporation
One Parlex Place
Methuen, MA 01844
Attn.: Peter Murphy, President and CEO
with a copy to:
Kutchin & Rufo, P.C.
175 Federal Street
Boston, MA 02110-2210
Attn.: Edward D. Kutchin, Esquire.
Any party may change the address to which notices are to be addressed by
giving the other parties notice in the manner herein set forth.
Section 13.7 Amendment and Waiver. This Agreement may be amended,
modified, superseded or canceled and any of the terms, covenants,
representations, warranties or conditions hereof may be waived, only by a
written instrument executed by the parties or, in the case of a waiver, by
or on behalf of the party waiving compliance. The failure of any party at
any time to require performance of any provision of this Agreement will in
no manner affect the right of that party at a later time to enforce that
provision. No waiver by any party of any condition or of any breach of any
term, covenant, representation or warranty contained in this Agreement, in
any one or more instances, will be deemed to be or construed as a further
or continuing waiver of that or any other condition or of that or any other
breach of any term, covenant, representation or warranty set forth in this
Agreement.
Section 13.8 Severability. Any provision, or clause of any
provision, of this Agreement that may be found to be contrary to applicable
Law or otherwise unenforceable will not affect the remaining terms of this
Agreement, which will be construed as if the unenforceable provision or
clause were absent from this Agreement. Upon the determination that such
provision or clause is contrary to applicable law or otherwise
unenforceable, the parties will negotiate in good faith to modify this
Agreement so as to effect the original intent of the parties as closely as
possible.
Section 13.9 Interpretation. (a) Unless the context requires
otherwise, all words used in this Agreement in the singular number shall
extend to and include the plural, all words in the plural number shall
extend to and include the singular, and all words in any gender shall
extend to and include all genders, all references to Sections, Articles,
Exhibits or Schedules are to Sections, Articles, Exhibits or Schedules of
or to this Agreement, each term defined in this Agreement has the meaning
assigned to it, each accounting term not otherwise defined in this
Agreement has the meaning assigned to it in accordance with GAAP, the term
"including" means "including without limitation", all references to dollar
amounts shall be to lawful currency of the United States and when used in
reference to Poly-Flex UK, shall mean the Pounds Sterling equivalent
calculated at the foreign exchange rate in effect on the date of this
Agreement, and to the extent the term "day or "days" is used, it shall mean
calendar days.
(b) No provision of this Agreement will be interpreted in favor of
or against any of the parties hereto by reason of the extent to which any
such party or its counsel participated in the drafting thereof or by reason
of the extent to which any such provision is inconsistent with any prior
draft hereof or thereof.
Section 13.10 No Reliance. Except for the parties to this Agreement
and any assignees permitted by Section 13.1 of this Agreement: (a) no
Person is entitled to rely on any of the representations, warranties,
covenants and agreements of the parties contained in this Agreement; and
(b) the parties assume no liability to any Person (other than to the
parties to this Agreement) because of any reliance on the representations,
warranties, covenants and agreements of the parties contained in this
Agreement.
Section 13.11 Seller's Disclosure Schedules. All capitalized terms
used in any of Seller's Disclosure Schedules shall have the definitions
specified in this Agreement. All descriptions or listings of documents
contained in the Seller's Disclosure Schedules are qualified in their
entirety by reference to the documents so described, as long as true copies
thereof have heretofore been delivered by the Seller to the Buyer. To the
extent any of the representations and warranties of the Seller pursuant to
this Agreement call for disclosure of matters which are substantially
duplicative of matters required to be disclosed by the Seller pursuant to
other representations and warranties under this Agreement, disclosure on
one schedule hereto of such a matter with reasonable particularity shall be
deemed to constitute disclosure of that particular matter on the schedule
which corresponds to the other representation or warranty, if the relevance
of such information to such other representation or warranty is reasonably
apparent on its face. Notwithstanding the foregoing, the degree of
disclosure required and the interpretation of matters disclosed in Seller's
Disclosure Schedules pertaining solely to United Kingdom employment law and
United Kingdom employee benefits for UK Employees shall be consistent with
United Kingdom standards of full and fair disclosure for such aspects of
the transaction contemplated by this Agreement.
Section 13.12 Jurisdiction; Service of Process. Any action or
proceeding seeking to enforce any provision of, or based on any right
arising out of, this Agreement shall be brought by or against either of the
parties in the courts of the State of Rhode Island, County of Providence or
the Commonwealth of Massachusetts, Suffolk County, or, if it has or can
acquire jurisdiction, in the United States District Court for the District
of Rhode Island or the Eastern District of Massachusetts, and each of the
parties consents to the jurisdiction of such courts (and of the appropriate
appellate courts) in any such action or proceeding and waives any objection
to venue laid therein. Process in any action or proceeding referred to in
the preceding sentence may be served on any party anywhere in the world.
Section 13.13 Time of Essence. With regard to all dates and time
periods set forth or referred to in this Agreement, time is of the essence.
Section 13.14 Legal Proceedings. If a dispute arises between the
parties relating to this Agreement or any of the other agreements to be
delivered hereunder, the parties agree, subject to Section 2.5 and Article
XI, to use the following procedure prior to either party pursuing other
available remedies:
(a) A meeting shall be held promptly (in no event more than 14 days
after the dispute arises) between the parties, attended by individuals with
decision-making authority regarding the dispute, to attempt in good faith
to negotiate a resolution of the dispute.
(b) If, within 30 days after such meeting, the parties have not
succeeded in negotiating a resolution of the dispute, they will jointly
appoint a mutually acceptable neutral person not affiliated with either of
the parties (the "neutral"), seeking assistance in such regard from the
American Arbitration Association if they have been unable to agree upon
such appointment within 40 days from the initial meeting. The fees of the
neutral shall be shared equally by the parties.
(c) In consultation with the neutral, the parties will select or
devise a mediation procedure ("Mediation") by which they will attempt to
resolve the dispute, and a time and place for the Mediation to be held,
with the neutral making the decision as to the procedure, and/or place and
time (but unless circumstances require otherwise, not later than 60 days
after selection of the neutral), if the parties have been unable to agree
on any such matters within 20 days after initial consultation with the
neutral.
(d) The parties agree to participate in good faith in the Mediation
to its conclusion as designated by the neutral. If the parties are not
successful in resolving the dispute through the Mediation, then the parties
may (but not must) agree to submit the matter to binding arbitration or a
private adjudicated resolution through the appropriate court or they may
commence legal proceedings.
(e) In the event legal proceedings through the courts are commenced
to enforce the parties' respective rights and obligations herein, the
prevailing party shall be entitled to reimbursement for all costs and
expenses, including reasonable legal fees, incurred with respect to said
legal proceedings.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
or caused this Agreement to be executed by their duly authorized
representatives, as of the day and year first above written.
SELLER:
COOKSON INVESTMENTS, INC.
By:_________________________________
Name: Mark Dingley
Title: Vice President
COOKSON GROUP plc
By: _______________________________
Name: Mark Dingley
Title: Vice President
BUYER:
PARLEX CORPORATION
By:_________________________________
Name:
Title:
67
EXHIBIT 10.S
FLEET NATIONAL BANK LOAN AGREEMENT
THIS AGREEMENT made this 1st day of March, 2000, by and between
Parlex Corporation, a Massachusetts corporation with an address and
principal place of business at 145 Milk Street, Methuen, Massachusetts
01844 (hereinafter called the "Borrower") and Fleet National Bank, a
national banking association organized and existing under the laws of the
United States of America, with a principal place of business at One Federal
Street, Boston, Massachusetts 02110-2010 (the "Bank").
W I T N E S S E T H :
The following constitutes the agreement of the parties:
SECTION 1
---------
AMOUNT AND TERMS OF CREDIT AND INTEREST
---------------------------------------
THE REVOLVING LOAN
------------------
1.1 Subject to the terms and conditions of this Agreement, the Bank
hereby establishes a revolving line of credit (the "Revolving Loan") of up
to Fifteen Million ($15,000,000.00) Dollars (the "Credit Limit") to be
advanced as hereinafter provided. The Bank shall, as long as no Event of
Default has occurred hereunder, from time to time, make advances comprising
the Revolving Loan to the Borrower upon the Borrower's request; provided,
however, that no advance will be made if, after giving effect to the
Borrower's request for such advance, the outstanding principal balance of
the Revolving Loan would exceed the Credit Limit.
1.2 The Revolving Loan shall be evidenced by a Revolving Line of
Credit Note executed by the Borrower made payable to the Bank of even date
herewith, in the maximum principal amount of $15,000,000.00 (the "Revolving
Note").
1.3 Interest on advances under the Revolving Loan shall accrue and
be payable as provided in a Revolving Note.
1.4 The principal balance of the Revolving Loan shall be payable as
provided in the Revolving Note.
1.5 Prior to the Expiration Date (as defined below), the Borrower
shall pay to the Bank quarterly in arrears, commencing on June 1, 2000 and
continuing on the first day of each September, December, March and June
thereafter, an unused line fee in an amount equal to one-quarter of one
(3%) percent per annum (calculated on the basis of the actual number of
days elapsed and a 360-day year) of the average daily unused principal
amount of the Revolving Loan for the preceding calendar quarter.
1.6 On any date on which a payment of interest or principal is due
under the Revolving Note, the Bank may charge the Borrower's demand deposit
account(s) with the amount thereof. The failure of the Bank to so charge
such account shall not relieve the Borrower of its obligations to make
payments hereunder.
1.7 The Bank need not enter payments of interest and principal upon
the Revolving Note but may maintain a record thereof on a separate ledger
maintained by the Bank.
1.8 No advance under the Revolving Loan will be made after December
31, 2001 (the "Expiration Date").
1.9 At any time prior to the close of the Bank's business on the
Expiration Date, the Borrower may repay, in whole or in part, the principal
amount of the Revolving Loan and may, in the Bank's discretion, reborrow
any such amounts repaid, all in accordance with this Section 1.
1.10 The Bank may, at any time and from time to time, upon the
request of the Borrower, but in the Bank's sole and absolute discretion,
extend the Expiration Date.
THE TERM LOAN
-------------
1.11 Subject to the terms and conditions of this Agreement, the Bank
will make a term loan to the Borrower on the date of execution of this
agreement (the ATerm Loan@ and together with the Revolving Loan, the
ALoans@), in the amount of $15,000,000.00 as evidenced by a Term Note of
even date in the original principal amount of $15,000,000.00 (the Term
Note@).
1.12 Interest on the principal balance of the Term Loan shall be
payable as provided in the Term Note.
1.13 The principal balance of the Term Loan shall be payable in
quarterly installments as provided in the Term Note.
1.14 On any date on which a payment of principal or interest is due
hereunder, the Bank may charge the Borrower=s demand deposit account(s)
with the amount thereof. The failure of the Bank to so charge such account
shall not relieve the Borrower of its obligations to make payments
hereunder.
1.15 The Bank need not enter payments of interest and principal upon
the Term Note, but may maintain a record thereof on a separate ledger
maintained by the Bank.
1.16 All of the Borrower=s obligations to the Bank, of every kind
and description, including those arising under this Agreement, direct or
indirect, absolute or contingent, due to become due, now existing or
hereafter arising, regardless of how they arise or by what agreement or
instrument they m ay be evidenced, including those arising under any other
agreements, instruments or documents executed in conjunction herewith, or
whether evidenced by an agreement or instrument, including obligations to
perform acts and refrain from taking action, as well as obligations to
repay the Loans, shall constitute the Borrower=s ALiabilities@ to the Bank,
as the same may be modified, amended, replaced or extended from time to
time.
1.17 The Revolving Note and Term Note are incorporated herein to the
same extent as if they were each set forth in full in this Agreement
SECTION 2
---------
WARRANTIES AND REPRESENTATIONS
------------------------------
2.1 To induce the Bank to enter into this Loan Agreement and to make
the Loans, the Borrower warrants and represents that, as of this date:
(a) The Borrower is a duly organized and existing corporation under
the laws of the Commonwealth of Massachusetts and is in good
standing under the laws of said Commonwealth.
(b) The Borrower is duly qualified to do business and in good
standing as a foreign corporation in each state or other
jurisdiction where the nature of the business conducted by it or
the property owned by it requires such qualification, except
where the failure to qualify would not have a material adverse
effect on the business, assets or financial condition of the
Borrower.
(c) The Borrower has good and clear record and marketable title to
all properties and assets which it purports to own, free and
clear of all mortgages, liens, pledges, charges, security
interests and encumbrances, other than those listed on Exhibit A
attached hereto.
(d) The Borrower owns and holds or leases all real and personal
property necessary or incidental to the present and planned
future (to the extent reasonably possible) conduct of its
business, including, without limitation, patents, trademarks,
service marks, trade names, copyrights and licenses and other
rights with respect to the foregoing.
(e) All books and records of the Borrower, including, but not
limited to, minute books, by-laws and books of account are
accurate and reflect all matters and transactions which should
currently be reflected therein.
(f) The general nature of the Borrower's business is as set forth on
Exhibit A attached hereto.
(g) The Borrower has no subsidiaries and no investments in the stock
or securities of any other corporation, firm, trust or other
entity, except as set forth on Exhibit A.
(h) Except as set forth on Exhibit A, there are no actions, suits,
investigations or proceedings pending, or to the actual
knowledge of the Borrower threatened, against the Borrower or
any of its properties in any court, before any governmental
authority, arbitration board, or any other tribunal which,
singly or in the aggregate, if decided adversely to the
Borrower, would materially and adversely affect the business,
properties or condition (whether financial or otherwise) of the
Borrower. The Borrower is not, nor by execution and delivery of
this Agreement and the performance of its obligations hereunder
(with or without the passage of time) will the Borrower be in
default with respect to any order of any court, governmental
authority, arbitration board or other tribunal.
(i) The Borrower has furnished to the Bank the financial statements
for the time period indicated on Exhibit A attached hereto. Said
statements fairly present the condition of the Borrower at the
dates thereof, and the statements of operation contained therein
fairly present the results of the operations of the Borrower for
the periods indicated, all in conformity with generally accepted
accounting principles consistently applied.
(j) Except to the extent reflected or reserved against in the
financial statements referred to above, the Borrower, as of the
date of said financial statements, had no liabilities of any
nature, whether accrued, absolute or contingent, including,
without limitation, tax liabilities, due or to become due, or
arising out of transactions entered into.
(k) Since the date of the financial statements referred to in
Section 2.1(i), and except as shown on Exhibit A, there has not
been:
(i) any change in the condition of the Borrower's assets or
liabilities, other than changes in its ordinary course of
business, none of which has been materially adverse, nor has
there been any depletion of cash or decrease of working capital
which has been materially adverse;
(ii) any damage, destruction or loss, whether or not covered
by insurance, materially and adversely affecting the
Borrower's properties or business;
(iii) any declaration of, setting aside of, or making of a
payment of any dividend or other distribution with
respect to the Borrower's capital stock or any direct or
indirect redemption, purchase or other acquisition of any
such stock, except for distributions to its stockholders
to satisfy federal and state tax liabilities on
undistributed income (if Borrower is a Subchapter "S"
corporation); or
(iv) any materially adverse:
(1) controversy with any labor organization or
employees;
(2) claim or controversy involving any federal, state or
local governmental agencies; or
(3) other event or condition materially affecting the
business or properties of the Borrower.
(l) The Borrower has filed all federal and state income tax returns,
excise tax returns, and all other tax returns of every kind and
nature which are required to be filed by the Borrower as of the
date hereof and has paid all taxes shown to be due on said
returns.
(m) The Borrower has no other addresses at which the Borrower has an
office, conducts business or at which any of the Borrower's
property is located except as set forth on Exhibit A.
(n) The execution and delivery of this Agreement, the borrowing by
the Borrower as herein provided, the execution and delivery by
the Borrower of all instruments, agreements and documents of
every kind and nature pursuant hereto and the performance by the
Borrower of all of its obligations to the Bank hereunder have
been duly authorized by the Board of Directors of the Borrower
and this Agreement and all instruments, agreements and documents
executed pursuant hereto are valid and binding obligations of
the Borrower enforceable in accordance with their terms except
to the extent such enforceability may be limited by laws of
general application affecting the rights of creditors.
(o) There is no provision in the articles of organization, agreement
of association or the by-laws of the Borrower, or any indenture,
contract or agreement to which it is a party or by which it is
bound, which prohibits the execution and delivery of this
Agreement or the performance by the Borrower of its obligations
hereunder.
(p) No event has occurred and no condition exists, which, upon the
execution and delivery of this Agreement would constitute a
default or an Event of Default hereunder. Neither the nature of
the Borrower or any of its business or properties, nor any
relationships between the Borrower and any other person, nor any
circumstances in connection with the execution or delivery of
this Agreement, is such as to require a consent, approval, or
authorization of or filing, registration, or qualification with,
any governmental authority on the part of the Borrower as a
condition of the execution and delivery of this Agreement or any
other instrument, agreement or document contemplated hereby, or
the performance by the Borrower of its obligations hereunder or
thereunder.
(q) The Borrower has no pension, profit sharing, stock option,
Employee Stock Ownership Trust ("ESOT"), insurance or other
similar plan providing for a program of deferred compensation or
benefits for any employee or officer, except as indicated on
Exhibit A hereto.
SECTION 3
---------
AFFIRMATIVE COVENANTS
---------------------
3.1 The Borrower will duly and punctually pay all interest and
principal becoming due to the Bank and will duly and punctually perform all
things on its part to be done or performed under this Agreement, or
pursuant to any instrument, document or agreement executed pursuant hereto.
3.2 The Borrower will, at all times, keep proper books of account in
which full, true and correct entries will be made of its transactions in
accordance with generally accepted accounting principles consistently
applied.
3.3 The Borrower will, at all reasonable times, and upon reasonable
notice from the Bank, make its books and records available, in its offices,
for inspection, examination and copying by the Bank and the Bank's
representatives and will, at all reasonable times, and upon reasonable
notice from the Bank, permit inspection of its properties by the Bank and
the Bank's representatives.
3.4 The Borrower will, at reasonable times, furnish the Bank with
such information and statements as the Bank may reasonably request and with
copies of all financial statements and reports that it shall send or make
available to stockholders.
3.5 The Borrower will furnish the Bank quarterly, within forty-five
(45) days after the close of each fiscal quarter, commencing with the
quarterly period in which this Agreement is executed, a balance sheet and
income statement reflecting the financial condition of the Borrower at the
end of each such period and the results of its operations during each such
period. Each statement shall also contain comparative statements for the
same period during the prior fiscal year. Each balance sheet and income
statement shall be prepared by the Borrower and certified by the President,
Treasurer or Chief Financial Officer of the Borrower, such certification to
state that such balance sheet and income statement fairly present the
financial condition and the results of operations of the Borrower at the
end of such period and during such period in accordance with generally
accepted accounting principles consistently applied, subject, however, to
year?end adjustments, none of which will be materially adverse.
3.6 The Borrower will furnish the Bank annually, within ninety (90)
days after the close of each fiscal year, a balance sheet and income and
surplus statement reflecting the financial condition of the Borrower at the
end of each such fiscal year and the results of its operation during such
fiscal year. Each such statement shall also contain comparative statements
for the prior fiscal year. Each such balance sheet and income statement is
to be audited by an independent certified public accountant selected by the
Borrower and satisfactory to the Bank with an audit quality statement to be
issued by the accountant and signed by the President and/or Treasurer
and/or Chief Financial Officer representing that neither the accounting
firm nor the President and/or Treasurer of the Borrower is aware of any
material modifications necessary to the financial statements for them to be
in conformity with generally accepted accounting principles consistently
applied. The Bank hereby acknowledges that Deloitte & Touche are
satisfactory independent certified public accountants. In addition, the
Borrower shall furnish to the Bank, in a timely manner, all reports filed
with the Securities and Exchange Commission ("SEC").
3.7 The Borrower will, on a quarterly basis, within forty-five (45)
days of the end of each fiscal quarter, deliver to the Bank a Compliance
Certificate in the form of Exhibit B attached hereto, signed by its
President or Treasurer certifying that each such officer has reviewed the
provisions of this Agreement (including, without limitation, the financial
covenants contained in this Agreement, to the extent they are being tested
at that time) and stating in his opinion, if such be the fact, that the
Borrower has not been and is not in default as to any of the covenants and
agreements of the Borrower contained in this Agreement, or in the event of
any such default, setting forth the details thereof.
3.8 The Borrower shall make its books and records available to the
Bank, upon reasonable request, for audit at such reasonable times as the
Bank deems necessary, in its reasonable business judgment.
3.9 The Borrower will maintain its corporate existence in good
standing, comply with all laws and regulations of the United States, of any
state or states thereof, of any political subdivision thereof and of any
governmental authority which may be applicable to the Borrower or to the
Borrower's business.
3.10 The Borrower will pay all real and personal property taxes,
assessments and charges and all franchise, income, unemployment, old age
benefit, withholding, sales and other taxes assessed against it or payable
by it at such times and in such manner to prevent any lien or charge from
attaching to its properties which in each instance would exceed
$175,000.00. The provisions of this section, however, shall not preclude
the Borrower from contesting in good faith and diligently prosecuting any
such tax, provided, however, that the Borrower shall, upon reasonable
request of the Bank, maintain reserves sufficient to discharge such tax in
the event such contest is resolved against the Borrower. The Borrower shall
not be in default under this Section by reason of the existence of a lien
for taxes not then due.
3.11 The Borrower will put and maintain its properties in good
repair, working condition and order and, from time to time, make all
needful and proper repairs, renewals and replacements.
3.12 The Borrower will maintain insurance at all times covering such
risks and in such amounts as the Bank may reasonably require in accordance
with industry standards, all such insurance to be in such form and for such
periods and written by such companies as shall be reasonably acceptable to
the Bank.
3.13 The Borrower will pay or reimburse the Bank, on demand, for all
reasonable expenses (including, without limitation, counsel fees and
expenses) incurred or paid by the Bank in connection with the preparation,
amendment, interpretation, extension or negotiation of this Agreement, and
any instrument, agreement or document to be delivered pursuant hereto; the
enforcement by the Bank of its rights as against the Borrower; and in the
defense of any action against the Bank with respect to its rights or
liabilities hereunder or thereunder if the Bank prevails in such action.
3.14 The Borrower will punctually and promptly make all payments and
perform all other obligations which may be required of it with respect to
any indebtedness (whether for money borrowed, goods purchased, services
rendered or however such indebtedness may otherwise arise) owing to
persons, firms or corporations other than the Bank, including, without
limitation, indebtedness which may be secured by a security interest in
assets of the Borrower or property of the Borrower, and all obligations
under the terms of any lease in which the Borrower is the lessee. The
provisions of this section shall not preclude the Borrower from contesting
in good faith and diligently prosecuting any such indebtedness or
obligation.
3.15 The Borrower shall pay or cause to be paid when due all amounts
necessary to fund in accordance with their terms all the Borrower's
deferred compensation plans whether now in existence or hereafter created,
and the Borrower will not withdraw from participation in, permit the
termination or partial termination of, or permit the occurrence of any
other event with respect to any deferred compensation plan maintained for
the benefit of its employees under circumstances that could result in
liability to the Pension Benefit Guaranty Corporation, or any of its
successors or assigns, or to the entity which provides funds for such
deferred compensation plan.
3.16. The Borrower shall maintain its primary operating accounts at
the Bank.
SECTION 4
---------
NEGATIVE COVENANTS
------------------
4.1 The Borrower (not including Parlex Shanghai) will not issue
evidences of indebtedness or create, assume, become contingently liable
for, or suffer to exist indebtedness in addition to indebtedness to the
Bank, including letters of credit issued for the account of the Borrower by
Bank, except for debt to its officers, directors and stockholders that is
subordinated to the Loans on terms reasonably satisfactory to the Bank (the
"Subordinated Debt"); provided, however, that the Borrower may incur
liabilities which are incurred or arise in the ordinary course of the
Borrower's business (other than liabilities incurred or arising with
respect to money borrowed.)
4.2 The Borrower will not declare or pay dividends (unless payable
in capital stock of the Borrower, which shall be allowed) or authorize or
make any other distribution with respect to its shares of capital stock of
the Borrower, whether now or hereafter outstanding (unless all financial
covenants contained herein have been satisfied and such action would not
cause the Borrower to violate any such covenants).
4.3 The Borrower will not make any loans or advances (except as
contemplated in Section 4.4 below) to any individual, firm or corporation,
including, without limitation, its officers and employees; provided,
however, that (a) the Borrower may make advances to its employees,
including its officers, with respect to expenses incurred by such
employees, which expenses are reimbursable by the Borrower and directly
related to the conduct of the Borrower's business; and (b) the Borrower may
make loans to Parlex Shanghai.
4.4 The Borrower will not invest in or purchase any stock or
securities of any individual, firm or corporation, provided, however, that
the Borrower may invest in (a) direct obligations of the United States of
America having a maturity of one year or less from the date of investment;
(b) investment grade bonds; (c) any other security for the purpose of
obtaining 10-K's and other financial reports, provided that such investment
does not exceed One Thousand ($1,000.00) Dollars; (d) the Parlex Shanghai
joint venture; (e) investments in Parlex Dynaflex Corporation, Parlex
Business Trust and in Parlex Asia Pacific Limited; and (f) the acquisition
of the stock of Poly-Flex Circuits, Inc. and Poly-Flex Circuits, Ltd. by
Borrower=s subsidiary, Parlex Acquisition Corporation. In addition, the
Borrower may buy back shares of its own stock.
4.5 The Borrower will not, without the Bank's prior written consent
(which shall not be unreasonably withheld), merge or consolidate or be
merged or consolidated with or into any other corporation.
4.6 The Borrower will not sell or dispose of any of its assets,
except that the Borrower may: (a) sell inventory in the ordinary and usual
course of its business;(b) dispose of (or trade in) equipment which is no
longer required for the conduct of the Borrower's business so long as the
Borrower receives therefor a sum (or credit) substantially equal to such
equipment's fair value; and (c) sell any of its other assets, provided that
the net book value thereof does not exceed $300,000.00 in any fiscal year.
4.7 Except as set forth on Exhibit A, the Borrower will not grant or
suffer to exist any mortgage, pledge, title retention agreement, security
interest, lien, charge or encumbrance with respect to any of its assets,
tangible or intangible, whether now owned or hereafter acquired, or subject
any of such assets to the prior payment of any indebtedness, or transfer in
any manner any of such assets with the intent or purpose, directly or
indirectly, of subjecting such assets to the payment of indebtedness,
except for purchase money security interests in the Borrower's equipment.
4.8 The Borrower will not engage in any business other than the
business in which it is currently engaged or a business reasonably allied
thereto.
4.9 (Minimum Current Ratio). The Borrower will not permit the ratio
of its current assets to its current liabilities, determined on a
consolidated basis, to be less than 1.4 to 1 as at the last day of each
fiscal quarter of the Borrower.
4.10 (Minimum Tangible Net Worth). The Borrower will not permit its
tangible net worth, determined on a consolidated basis, to be less than
$38,000,000.00 as at the last day of its fiscal year ending June 30, 2000
or less than $38,000,000.00 plus fifty (50%) percent of the prior year end
net income for each subsequent fiscal year, to be tested quarterly. The
term "tangible net worth" shall mean stockholders' equity determined in
accordance with generally accepted accounting principles, consistently
applied, subtracting therefrom: (i) intangibles (as determined in
accordance with such principles so applied), including, without limitation,
goodwill, purchased technology and capitalized software development costs;
and (ii) accounts and indebtedness owing from any employee or parent,
subsidiary or other affiliate.
4.11 (Maximum Total Liabilities to Tangible Net Worth Ratio). The
Borrower will not permit the ratio of its total liabilities (including,
without limitation, all deferred taxes and contingent liabilities such as
guarantees) to its tangible net worth, determined on a consolidated basis,
to be more than 1.5 to 1 as at the last day of each fiscal quarter of the
Borrower.
4.12 (Minimum Debt Service Coverage Ratio). The Borrower will not
permit the ratio of its: (a) EBITDA, minus unfinanced capital expenditures,
minus dividends and distributions; to (b) interest, plus current maturities
of long term indebtedness; determined on a consolidated basis, to be less
than 1.5 to 1.0 for the twelve-month period ending on the last day of each
fiscal quarter of the Borrower. For the purposes of this Section, the term
AEBITDA@ shall mean, for the applicable period, income from operations
before the payment of interest and taxes, plus depreciation and
amortization. Prior to the Expiration Date, outstanding balances under the
Revolving Loan shall not be considered current maturities of long term
indebtedness.
4.13 (Maximum Senior Funded Indebtedness to EBITDA). The Borrower
will not permit the ratio of its senior indebtedness to its EBITDA,
determined on a consolidated basis, to be more than 2.5 to 1 for the
twelve-month period ending on the last day of each fiscal quarter of the
Borrower. For the purposes of this Section, the term Asenior indebtedness@
shall mean all funded indebtedness owing by the Borrower to the Bank and
any other institutional lender.
4.14 All accounting terms not otherwise specifically defined herein
shall be construed and interpreted in accordance with generally accepted
accounting principles consistently applied.
SECTION 5
---------
DEFAULT
-------
5.1 The occurrence of any of the following events (after the
expiration of any applicable grace period) shall be an Event of Default
hereunder:
(a) The Borrower shall fail to pay any installment of principal or
interest on account of the Loans or any other liabilities of
Borrower to Bank when such payment is due, which failure
remains uncured for five (5) business days.
(b) The Borrower shall fail to observe or perform any covenant or
agreement contained in this Agreement or in any instrument,
document or agreement executed pursuant hereto, and in the
event that such failure can be cured, such failure remains
uncured for ten (10) business days.
(c) Any warranty, representation or statement made or furnished to
the Bank by or on behalf of the Borrower proves to have been
false in any material respect when made or furnished.
(d) Any event which results in the acceleration of the maturity of
the indebtedness of the Borrower to others under any indenture,
agreement, undertaking or otherwise.
(e) Dissolution, termination of existence or insolvency of the
Borrower.
(f) The Borrower shall: (i) cease, be unable, or admit in writing
its inability to pay its debts as they mature, or make a
general assignment for the benefit of, or enter into any
composition, trust mortgage or other arrangement with
creditors; (ii) apply for, or consent (by admission of material
allegations of a petition or otherwise) to the appointment of a
receiver, trustee or liquidator of the Borrower or of a
substantial part of its assets, or authorize such application
or consent, or proceedings seeking such appointment shall be
commenced against the Borrower; or (iii)the filing of any
complaint, application or petition by the Borrower or with the
Borrower's consent (by admission of material allegations of a
petition or otherwise) initiating any matter in which the
Borrower is or may be granted any relief from its debts
pursuant to Title 11 of the United States Code entitled
"Bankruptcy" (the "Bankruptcy Code") or any other bankruptcy,
reorganization, readjustment of debt, insolvency, dissolution,
liquidation or other similar law of any jurisdiction.
(g) The filing against the Borrower of a petition under the
Bankruptcy Code naming the Borrower as debtor, which is not
dismissed within sixty (60) days thereafter.
(h) The calling or sufferance by the Borrower of a meeting of the
creditors of the Borrower or the occurrence of a meeting by the
Borrower or a representative thereof with a formal or informal
committee of creditors of the Borrower.
5.2 Upon the occurrence of any Event of Default, all Loans of the
Borrower to the Bank shall, at the Bank's option and without notice or
demand, and notwithstanding any terms of payment in any note or other
instrument evidencing such Loans, become immediately due and payable, and
any obligation of the Bank to consider making Revolving Loans pursuant to
Section 1 shall terminate.
SECTION 6
---------
NOTICE
------
6.1 All notices and other communications hereunder shall be made by
facsimile, overnight air courier, or certified or registered mail, return
receipt requested, and shall be deemed to be received by the party to whom
it was sent one (1) business day after sending, if sent by facsimile, or
overnight air courier, and three (3) business days after mailing if sent by
certified or registered mail. All such notices and other communications to
a party hereto shall be addressed to such party at the address set forth at
the beginning of this Agreement or to such other address as such party may
designate for itself in a notice to the other party given in accordance
with this section.
6.2 The addresses to which such communications shall be sent are as
follows:
(a) If intended for the Borrower, to:
Parlex Corporation
145 Milk Street
Methuen, MA 01844
ATTN: Peter J. Murphy, President
Phone: (978) 685-4341
Fax: (978) 685-7867
with copies to:
Edward D. Kutchin, Esq.
Kutchin & Rufo, P.C.
175 Federal Street
Boston, MA 02110-2210
Phone: (617) 542-3000
Fax: (617) 542-3001
(b) If intended for the Bank, to:
Fleet National Bank
One Hundred Federal Street
Boston, MA 02110
ATTN: Thomas F. Brennan, Vice President
Phone: (617) 434-4512
Fax: (617) 434-1279
with copies to:
Brian T. Garrity, Esq.
Shapiro, Israel & Weiner, P.C.
100 North Washington Street
Boston, MA 02114
Phone: (617) 742-4200
Fax: (617) 742-2355
6.3 The addresses set forth herein may be changed by notice
hereunder.
SECTION 7
---------
MISCELLANEOUS
-------------
7.1 The Borrower will from time to time execute and deliver to the
Bank all such other and further instruments and documents and take or cause
to be taken all such other and further action as the Bank may reasonably
request in order to effect and confirm or vest more securely in the Bank
all rights contemplated in this Agreement.
7.2 The Borrower may take any action herein prohibited or omit to
perform any act required to be performed by the Borrower if the Borrower
shall obtain the Bank's prior written consent to each such action, or
omission to act, which consent shall not be unreasonably withheld. No
waiver on the Bank's part on any one occasion shall be deemed a waiver on
any other occasion. The Bank shall not be deemed to have waived any of its
rights hereunder unless such waiver shall be in writing and duly signed by
an authorized officer of the Bank.
7.3 This Agreement may be amended only by an instrument in writing
and duly signed by an authorized officer of the Borrower and an authorized
officer of the Bank.
7.4 All covenants, agreements, representations and warranties
contained in this Agreement shall bind the Borrower, its respective
successors and assigns, and shall inure to the Bank's benefit and the
benefit of the Bank's successors and assigns, whether expressed or not.
7.5 All rights of the Bank hereunder shall be cumulative. The
Borrower and any guarantor hereby waives presentment and protest of any
instrument and any notice thereof.
7.6 If any provisions of this Agreement shall be held to be illegal
or unenforceable, such illegality or unenforceability shall relate solely
to such provision and shall not affect the remainder of this Agreement.
7.7 This Agreement shall be construed and enforced in accordance
with the laws of the Commonwealth of Massachusetts.
7.8 This Agreement shall take effect as an instrument under seal.
7.9 BORROWER AND BANK EACH HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVES ANY RIGHT IT MAY HAVE OR HEREAFTER HAVE TO A TRIAL BY
JURY IN RESPECT OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR
RELATING TO THIS AGREEMENT. Borrower hereby certifies that neither Bank nor
any of its representatives, agents or counsel has represented, expressly or
otherwise, that Bank would not, in the event of any such suit, action or
proceeding, seek to enforce this waiver of right to trial by jury. Borrower
acknowledges that Bank has been induced to enter into this Agreement by,
among other things, this waiver. Borrower acknowledges that it has read the
provisions of this Agreement and in particular, this Section; has consulted
legal counsel; understands the right it is granting in this Agreement and
is waiving in this Section in particular, and makes the above waiver
knowingly, voluntarily and intentionally.
7.10 Borrower and Bank agree that any action or proceeding to
enforce or arising out of this Agreement may be commenced in any court of
the Commonwealth of Massachusetts sitting in the counties of Suffolk or
Middlesex, or in the District Court of the United States for the District
of Massachusetts.
7.11 The exhibits annexed hereto as Exhibit A and Exhibit B are the
only exhibits to be annexed to this Agreement, and the material contained
therein shall be incorporated herein.
7.12 The captions herein contained are inserted as a matter of
convenience only and such captions do not form a part of this Agreement and
shall not be utilized in the construction hereof.
7.13 Borrower and Guarantor hereby grant to Bank, a lien, security
interest and right of setoff as security for all Liabilities and
obligations to Bank, whether now existing or hereafter arising, upon and
against all deposits, credits, collateral and property, now or hereafter in
the possession, custody, safekeeping or control of Bank or any entity under
the control of Fleet Financial Group, Inc., or in transit to any of them.
At any time, without demand or notice, Bank may set off the same or any
part thereof and apply the same to any Liability or obligation of Borrower
and any Guarantor even though unmatured and regardless of the adequacy of
any other collateral securing the Loans. ANY AND ALL RIGHTS TO REQUIRE BANK
TO EXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT TO ANY OTHER COLLATERAL
WHICH SECURES THE LOANS PRIOR TO EXERCISING ITS RIGHT OF SETOFF WITH
RESPECT TO ANY SUCH DEPOSITS. CREDITS OR OTHER PROPERTY OF THE BORROWER OR
ANY GUARANTOR, ARE HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVED.
WITNESS: PARLEX CORPORATION
______________________________ By:_________________________________
Brian T. Garrity, Esq. Herbert W. Pollack, Chairman
FLEET NATIONAL BANK
By:_________________________________
Thomas F. Brennan, Vice President
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