<PAGE>
EXHIBIT 2.1
STOCK PURCHASE AGREEMENT
Among
ONEIDA LTD.,
DELCO INTERNATIONAL LTD. (INC.),
PERRY DELMAN,
ROBERT DELMAN,
PETER KRANES,
MICHAEL SEHLMEYER
and
DENNIS KANFER
Dated as of May 30, 2000
TABLE OF CONTENTS
Page ARTICLE I
DEFINITIONS
SECTION 1.01. Certain Defined Terms 1
ARTICLE II
PURCHASE AND SALE
SECTION 2.01. Purchase and Sale of the Shares 11
SECTION 2.02. Purchase Price; Allocation of Purchase Price 11
SECTION 2.03. Closing 11
SECTION 2.04. Closing Deliveries by the Stockholders 11
SECTION 2.05. Closing Deliveries by the Purchaser 11
SECTION 2.06. Post-Closing Adjustment of Purchase Price 12
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE
STOCKHOLDERS
SECTION 3.01. Authority of the Company and Each Stockholder 15
SECTION 3.02. Organization, Authority and Qualification of the
Company 15
SECTION 3.03. Capital Stock and Ownership of the Company 16
SECTION 3.04. Subsidiaries 16
SECTION 3.05. Corporate Books and Records 18
SECTION 3.06. No Conflict 18
SECTION 3.07. Governmental Consents and Approvals 18
SECTION 3.08. Financial Information; Books and Records 18
SECTION 3.09. Absence of Undisclosed Liabilities 19
SECTION 3.10. Receivables 19
SECTION 3.11. Inventories 20
SECTION 3.12. Acquired Assets 20
SECTION 3.13. Sales and Purchase Order Backlog 20
SECTION 3.14. Conduct in the Ordinary Course; Absence of
Certain Changes, Events and Conditions 21
SECTION 3.15. Litigation 23
SECTION 3.16. Compliance with Laws 23
SECTION 3.17. Environmental and Other Permits and Licenses;
Related Matters 24
SECTION 3.18. Material Contracts 24
SECTION 3.19. Intellectual Property 26
SECTION 3.20. Real Property 28
SECTION 3.21. Tangible Personal Property 29
SECTION 3.22. Assets 29
SECTION 3.23. Customers 30
SECTION 3.24. Suppliers 30
SECTION 3.25. Employee Benefit Matters 31
SECTION 3.26. Labor Matters 33
SECTION 3.27. Salaried Employees 34
SECTION 3.28. Certain Interests 34
SECTION 3.29. Taxes 35
SECTION 3.30. Insurance 36
SECTION 3.31. Accounts; Lockboxes; Safe Deposit Boxes; Powers
of Attorney 37
SECTION 3.32. Full Disclosure 38
SECTION 3.33. Brokers 38
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
SECTION 4.01. Organization and Authority of the Purchaser 38
SECTION 4.02. No Conflict 38
SECTION 4.03. Governmental Consents and Approvals 39
SECTION 4.04. Investment Purpose 39
SECTION 4.05. Litigation 39
SECTION 4.06. Brokers 39
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.01. Conduct of Business Prior to the Closing 39
SECTION 5.02. Access to Information 40
SECTION 5.03. Confidentiality 41
SECTION 5.04. Regulatory and Other Authorizations; Notices and
Consents 43
SECTION 5.05. Notice of Developments 43
SECTION 5.06. Use of Intellectual Property 44
SECTION 5.07. Non-Competition 44
SECTION 5.08. Release of Indemnity Obligations 46
SECTION 5.09. Transfer of SDC 46
SECTION 5.10. Guarantee 46
SECTION 5.11. Further Action 46
ARTICLE VI
EMPLOYEE MATTERS
SECTION 6.01. Phantom Shares 47
ARTICLE VII
TAX MATTERS
SECTION 7.01. Indemnity 47
SECTION 7.02. Returns and Payments 48
SECTION 7.03. Contests 48
SECTION 7.04. Time of Payment 49
SECTION 7.05. Cooperation and Exchange of Information 50
SECTION 7.06. Conveyance Taxes 50
SECTION 7.07. Miscellaneous 51
ARTICLE VIII
CONDITIONS TO CLOSING
SECTION 8.01. Conditions to Obligations of the Company and the
Stockholders 51
SECTION 8.02. Conditions to Obligations of the Purchaser 52
ARTICLE IX
INDEMNIFICATION
SECTION 9.01. Survival of Representations and Warranties 55
SECTION 9.02. Indemnification by the Stockholders 55
SECTION 9.03. Distributions from Indemnity Escrow Fund 57
SECTION 9.04. Tax Matters 57
SECTION 9.05. Appointment of Stockholder Representative 57
ARTICLE X
TERMINATION AND WAIVER
SECTION 10.01. Termination 60
SECTION 10.02. Effect of Termination 61
SECTION 10.03. Waiver 61
ARTICLE XI
GENERAL PROVISIONS
SECTION 11.01. Expenses 61
SECTION 11.02. Notices 61
SECTION 11.03. Public Announcements 62
SECTION 11.04. Headings 62
SECTION 11.05. Severability 62
SECTION 11.06. Entire Agreement 63
SECTION 11.07. Assignment 63
SECTION 11.08. No Third Party Beneficiaries 63
SECTION 11.09. Amendment 63
SECTION 11.10. Governing Law 63
SECTION 11.11. Counterparts 63
SECTION 11.12. Specific Performance 63
EXHIBITS
5.07 Non-Compete Purchase Price Schedule
11.03 Final Form of Press Release
STOCK PURCHASE AGREEMENT, dated as of May 30, 2000,
among Oneida Ltd., a New York corporation (the "Purchaser"),
Delco International Ltd. (Inc.), a New York corporation (the
"Company"), and Perry Delman, Robert Delman, Peter Kranes,
Michael Sehlmeyer and Dennis Kanfer (each a "Stockholder" and,
collectively, the "Stockholders").
W I T N E S S E T H:
WHEREAS, the Company, directly and through its
various subsidiaries, is engaged in the business of sourcing,
importing, manufacturing and distributing cutlery,
silverplated and stainless flatware and hollowware, china
dinnerware, glass tableware and other miscellaneous supplies
at various locations in the United States and Canada (the
"Business");
WHEREAS, the Stockholders own all the issued and
outstanding shares (the "Shares") of common stock, par value
$0.01 per share (the "Common Stock"), of the Company;
WHEREAS, the Stockholders wish to sell to the
Purchaser, and the Purchaser wishes to purchase from the
Stockholders, the Shares, upon the terms and subject to the
conditions set forth herein;
WHEREAS, contemporaneously with the execution of this
Agreement, the Company and the Stockholders are entering into
an escrow agreement (the "Escrow Agreement") with The Chase
Manhattan Bank (the "Escrow Agent"), which will become
effective upon the closing of the transactions contemplated by
this Agreement; and
WHEREAS, contemporaneously with the execution of this
Agreement, certain Stockholders are entering into employment
agreements with the Company (each an "Employment Agreement"
and, collectively, the "Employment Agreements"), which will
become effective upon the closing of the transactions
contemplated by this Agreement;
NOW, THEREFORE, in consideration of the premises and
the mutual agreements and covenants hereinafter set forth, the
Purchaser, the Company and the Stockholders hereby agree as
follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Certain Defined Terms
. As used herein, the following terms shall have the
following meanings:
"Action" means any claim, action, suit, arbitration,
inquiry, proceeding or investigation by or before any
Governmental Authority.
"Adjustment Escrow Amount" means $5,000,000.
"Adjustment Escrow Fund" means the Adjustment Escrow
Amount deposited with the Escrow Agent as such sum may be
increased or decreased as provided in the Escrow Agreement.
"Affiliate" means, with respect to any specified
Person, any other Person that directly, or indirectly through
one or more intermediaries, controls, is controlled by, or is
under common control with, such specified Person.
"Agreement" or "this Agreement" means this Stock
Purchase Agreement, dated as of May 30, 2000, among the
Purchaser, the Company and the Stockholders (including the
exhibits hereto and the Disclosure Schedule) and all amendments
hereto made in accordance with the provisions of Section 11.09.
"Ancillary Agreements" means the Escrow Agreement and
the Employment Agreements.
"Ancillary Lease Documents" has the meaning specified
in Section 3.20(d).
"Assets" means the total assets of the Company shown
on any specified balance sheet of the Company.
"Book Value" means the excess of the Assets over the
Liabilities of the Company.
"Business" has the meaning specified in the Recitals.
"Business Day" means any day that is not a Saturday,
a Sunday or other day on which banks are required or authorized
by Law to be closed in The City of New York.
"CERCLA" means the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended
through the Closing Date.
"CERCLIS" means the Comprehensive Environmental
Response, Compensation and Liability Information System, as
updated through the Closing Date.
"Closing" has the meaning specified in Section 2.03.
"Closing Balance Sheet" means the audited
consolidated balance sheet (including the related notes and
schedules thereto) of the Company and the Subsidiaries, to be
prepared pursuant to Section 2.06(a) and to be dated as of the
Closing Date.
"Closing Date" has the meaning specified in Section
2.03.
"Code" means the Internal Revenue Code of 1986, as
amended through the date hereof.
"Common Stock" has the meaning specified in the
Recitals.
"Company" has the meaning specified in the Preamble.
"Company Marks" has the meaning specified in
Section 5.06(a).
"Company Software" means all Software manufactured,
distributed, sold, licensed, owned, used or marketed by the
Company.
"Company Systems" means all computer hardware,
Software, systems, and equipment (including embedded
microcontrollers in non-computer equipment) embedded within or
used to operate the products of the Business, and/or used for
the operation of the Business as currently conducted.
"Confidential Information" has the meaning specified
in Section 5.03(a).
"control" (including the terms "controlled by" and
"under common control with"), with respect to the relationship
between or among two or more Persons, means the possession,
directly or indirectly or as trustee, personal representative
or executor, of the power to direct or cause the direction of
the affairs or management of a Person, whether through the
ownership of voting securities, as trustee, personal
representative or executor, by contract or credit arrangement
or otherwise.
"Copyrights" means rights of publicity and privacy,
and copyrights in works of authorship of any type, including
Software, registrations and applications for registration
thereof throughout the world, all rights therein provided by
international treaties and conventions, all moral and common
law rights thereto, and all other rights associated therewith.
"Designated Amount" means $50,000.
"Disclosure Schedule" means the Disclosure Schedule
attached hereto, dated as of the date hereof, and forming a
part of this Agreement.
"Employment Agreement(s)" has the meaning specified
in the Recitals.
"Encumbrance" means any security interest, pledge,
hypothecation, mortgage, lien (including, without limitation,
environmental and tax liens), violation, charge, lease,
license, encumbrance, servient easement, adverse claim,
reversion, reverter, preferential arrangement, restrictive
covenant, condition or restriction of any kind, including,
without limitation, any restriction on the use, voting,
transfer, receipt of income or other exercise of any attributes
of ownership.
"Environment" means surface waters, groundwaters,
soil, subsurface strata and ambient air.
"Environmental Claims" means any and all
administrative, regulatory or judicial actions, suits, demands,
demand letters, claims, liens, notices of noncompliance or
violation, investigations, proceedings, consent orders or
consent agreements relating in any way to any Environmental Law
or any Environmental Permit (hereinafter "Claims"), including,
without limitation, (a) any and all Claims by Governmental
Authorities for enforcement, cleanup, removal, response,
remedial or other actions or damages pursuant to any applicable
Environmental Law and (b) any and all Claims by any Person
seeking damages, contribution, indemnification, cost recovery,
compensation or injunctive relief resulting from Hazardous
Materials or arising from alleged injury or threat of injury to
health, safety or the environment.
"Environmental Laws" means any Law, now or hereafter
in effect and as amended, and any judicial or administrative
interpretation thereof, including any judicial or
administrative order, consent decree or judgment, relating to
the environment, health, safety, natural resources or Hazardous
Materials, including, without limitation, CERCLA; the Resource
Conservation and Recovery Act, 42 U.S.C. 6901 et seq.; the
Hazardous Materials Transportation Act, 49 U.S.C. 6901 et
seq.; the Clean Water Act, 33 U.S.C. 1251 et seq.; the Toxic
Substances Control Act, 15 U.S.C. 2601 et seq.; the Clean Air
Act, 42 U.S.C. 7401 et seq.; the Safe Drinking Water Act, 42
U.S.C. 300f et seq.; the Atomic Energy Act, 42 U.S.C. 2011 et
seq.; the Federal Insecticide, Fungicide and Rodenticide Act, 7
U.S.C.
136 et seq.; the Federal Food, Drug and Cosmetic Act, 21
U.S.C. 301 et seq.; and California Proposition 65.
"Environmental Permits" means all permits, approvals,
identification numbers, licenses and other authorizations
required under or issued pursuant to any applicable
Environmental Law.
"ERISA" has the meaning specified in Section 3.25(a).
"Escrow Agent" has the meaning specified in the
Recitals.
"Escrow Agreement" has the meaning specified in the
Recitals.
"Escrow Amount" means the sum of the Adjustment
Escrow Amount and the Indemnity Escrow Amount.
"Exempt Term" has the meaning specified in Section
5.09.
"Financial Statements" has the meaning specified in
Section 3.08(a)(i).
"Governmental Authority" means any United States
federal, state or local or any non-United States government,
governmental, regulatory or administrative authority, agency or
commission or any court, tribunal or judicial or arbitral body.
"Governmental Order" means any order, writ, judgment,
injunction, decree, stipulation, determination or award entered
by or with any Governmental Authority.
"Hazardous Materials" means (a) petroleum and
petroleum products, radioactive materials, asbestos-containing
materials, urea formaldehyde foam insulation, transformers or
other equipment that contains polychlorinated biphenyls and
radon gas, (b) any other chemicals, materials or substances
defined as or included in the definition of "hazardous
substances", "hazardous wastes", "hazardous materials",
"extremely hazardous wastes", "restricted hazardous wastes",
"toxic substances", "toxic pollutants", "contaminants" or
"pollutants", or words of similar import, under any applicable
Environmental Law and (c) any other chemical, material or
substance which is regulated by any Environmental Law.
"HSR Act" means the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, and the rules and
regulations promulgated thereunder.
"Indebtedness" means, with respect to any Person,
(a) all indebtedness of such Person, whether or not contingent,
for borrowed money, (b) all obligations of such Person for the
deferred purchase price of property or services (including
deferred compensation under any employee benefit, bonus, stock
option, stock purchase, restricted stock, incentive, deferred
compensation, retiree medical or life insurance, supplemental
retirement, severance or other benefit plan, program or
arrangement, or any employment, termination, severance, change
in control or other contract or agreement), (c) all obligations
of such Person evidenced by notes, bonds, debentures or other
similar instruments, (d) all indebtedness created or arising
under any conditional sale or other title retention agreement
with respect to property acquired by such Person (even though
the rights and remedies of the seller or lender under such
agreement in the event of default are limited to repossession
or sale of such property), (e) all obligations of such Person
as lessee under leases that have been or should be, in
accordance with U.S. GAAP, recorded as capital leases, (f) all
obligations, contingent or otherwise, of such Person under
acceptance, letter of credit or similar facilities, (g) all
obligations of such Person to purchase, redeem, retire, defease
or otherwise acquire for value any capital stock of such Person
or any warrants, rights or options to acquire such capital
stock, valued, in the case of redeemable preferred stock, at
the greater of its voluntary or involuntary liquidation
preference plus accrued and unpaid dividends, (h) all
Indebtedness of others referred to in clauses (a) through (g)
above guaranteed directly or indirectly in any manner by such
Person, or in effect guaranteed directly or indirectly by such
Person through an agreement (i) to pay or purchase such
Indebtedness or to advance or supply funds for the
payment or purchase of such Indebtedness, (ii) to purchase,
sell or lease (as lessee or lessor) property, or to purchase or
sell services, primarily for the purpose of enabling the debtor
to make payment of such Indebtedness or to assure the holder of
such Indebtedness against loss, (iii) to supply funds to or in
any other manner invest in the debtor (including any agreement
to pay for property or services irrespective of whether such
property is received or such services are rendered) or (iv)
otherwise to assure a creditor against loss, and (i) all
Indebtedness referred to in clauses (a) through (g) above
secured by (or for which the holder of such Indebtedness has an
existing right, contingent or otherwise, to be secured by) any
Encumbrance on property (including, without limitation,
accounts and contract rights) owned by such Person, even though
such Person has not assumed or become liable for the payment of
such Indebtedness.
"Indemnified Party" has the meaning specified in
Section 9.02(a).
"Indemnity Escrow Amount" means $5,000,000.
"Indemnity Escrow Fund" means the Indemnity Escrow
Amount deposited with the Escrow Agent as such sum may be
increased or decreased as provided in the Escrow Agreement and
in Section 2.06(c)(i).
"Independent Accounting Firm" has the meaning
specified in Section 2.06(b)(ii).
"Intellectual Property" means (i) Patents, (ii)
Trademarks, (iii) Copyrights, (iv) Trade Secrets and (v)
Software.
"Interim Financial Statements" has the meaning
specified in Section 3.08(a)(ii).
"Internal MIS Systems" means Software and computer
systems (including hardware, firmware, operating system
software, utilities and applications software) used in the
ordinary course of the Business that process financial
information, including, where applicable, payroll, accounting,
billing/receivables, purchasing payables, inventory, asset
tracking, customer service and human resources.
"Inventories" means all inventory, merchandise,
finished goods, raw materials, packaging, supplies and other
personal property related to the Business maintained, held or
stored by or for the Company or any Subsidiary on the Closing
Date and any prepaid deposits for any of the same.
"IRS" means the Internal Revenue Service of the
United States.
"knowledge of the Company" means the knowledge of the
executive officers of the Company, after due inquiry.
"Law" means any federal, state, local or foreign
statute, law, ordinance, regulation, rule, code, order,
requirement or rule of law (including, without limitation,
common law).
"Leased Real Property" means the real property leased
by the Company or any Subsidiary, in each case as tenant,
together with, to the extent leased by the Company or any
Subsidiary, all buildings and other structures, facilities or
improvements currently or hereafter located thereon, all
fixtures, systems, equipment and items of personal property of
the Company or any Subsidiary attached or appurtenant thereto,
and all easements, licenses, rights and appurtenances relating
to the foregoing.
"Liabilities" means any and all debts, liabilities
and obligations, whether accrued or fixed, absolute or
contingent, matured or unmatured or determined or determinable,
including, without limitation, those arising under any Law
(including, without limitation, any Environmental Law), Action
or Governmental Order and those arising under any contract,
agreement, arrangement, commitment or undertaking.
"Licensed Intellectual Property" means Intellectual
Property licensed to the Company or any Subsidiary pursuant to
the Licenses.
"Licenses" means (i) licenses of Intellectual
Property by the Company or any Subsidiary to third parties,
(ii) licenses of Intellectual Property by third parties to the
Company or any Subsidiary and (iii) agreements between the
Company or any Subsidiary and third parties relating to the
development or use of Intellectual Property, the development or
transmission of data, or the use, modification, framing,
linking advertisement, or other practices with respect to
Internet web sites.
"Loss" has the meaning specified in Section 9.02(a).
"Material Adverse Effect" means circumstances or
changes in or effects on the Business, the Company or any
Subsidiary that, individually or in the aggregate with all
other circumstances or changes in or effects on the Business,
the Company or any Subsidiary: (a) is or is reasonably likely
to have a materially adverse effect on the business,
operations, assets or liabilities (including, without
limitation, contingent liabilities), employee relationships,
customer or supplier relationships, results of operations or
the condition (financial or otherwise) of the Business, the
Company or any Subsidiary, taken as a whole; (b) is reasonably
likely to have a materially adverse effect on the ability of
the Purchaser to operate or conduct the Business in the manner
in which it is currently operated or conducted by the Company
and the Subsidiaries; or (c) materially impairs the ability of
the Company or any Stockholder to perform its respective
obligations under this Agreement.
"Material Contracts" has the meaning specified in
Section 3.18(a).
"Multiemployer Plan" has the meaning specified in
Section 3.25(b).
"Multiple Employer Plan" has the meaning specified in
Section 3.25(b).
"Non-Compete Purchase Price" has the meaning
specified in Section 5.07(d).
"Options" has the meaning specified in Section
3.20(d)(v).
"Owned Intellectual Property" means Intellectual
Property owned by the Company or any Subsidiary.
"Owned Real Property" means the real property owned
by the Company or any Subsidiary, together with all buildings
and other structures, facilities or improvements located
thereon, all
fixtures, systems, equipment and items of personal property of
the Company or any Subsidiary attached or appurtenant thereto
and all easements, licenses, rights and appurtenances relating
to the foregoing.
"Patents" means United States, foreign and
international patents, patent applications and statutory
invention registrations, including reissues, divisions,
continuations, continuations-in-part, extensions and
reexaminations thereof, and all rights therein provided by
international treaties and conventions.
"Payments" has the meaning specified in Section
9.05(a)(ii).
"Permits" means all permits, approvals,
identification numbers, licenses and other authorizations
required under or issued pursuant to any law.
"Permitted Encumbrances" means such of the following
as to which no enforcement, collection, execution, levy or
foreclosure proceeding shall have been commenced and as to
which the Company is not otherwise subject to civil or criminal
liability due to its existence: (a) liens for Taxes,
assessments and governmental charges or levies not yet due and
payable;
(b) Encumbrances imposed by Law, such as materialmen's,
mechanics', carriers', workmen's and repairmen's liens and
other similar liens arising in the ordinary course of business
securing obligations that (i) are not overdue for a period of
more than 30 days and (ii) are not in excess of $5,000 in the
case of a single property or $50,000 in the aggregate at any
time; (c) pledges or deposits to secure obligations under
workers' compensation laws or similar legislation or to secure
public or statutory obligations; and (d) minor survey
exceptions, reciprocal easement agreements and other customary
encumbrances on title to real property that (i) were not
incurred in connection with any Indebtedness, (ii) do not
render title to the property encumbered thereby unmarketable
and (iii) do not, individually or in the aggregate, materially
adversely affect the value of or the use of such property for
its current and anticipated purposes.
"Person" means any individual, partnership, firm,
corporation, association, trust, unincorporated organization or
other entity, as well as any syndicate or group that would be
deemed to be a person under Section 13(d)(3) of the Securities
Exchange Act of 1934, as amended.
"Phantom Stock Award" has the meaning specified in
Section 6.01.
"Phantom Stock Plan" means the Company's phantom
stock plan.
"Plans" has the meaning specified in Section 3.25(a).
"Purchase Price" has the meaning specified in Section
2.02.
"Purchase Price Bank Account" means a bank account in
the United States to be designated by the Stockholder
Representative in a written notice to the Purchaser at least
five Business Days before the Closing which, prior to the
Closing, shall have a balance of $0.0.
"Purchaser" has the meaning specified in the
Preamble.
"Purchaser's Accountants" means
PricewaterhouseCoopers LLP, independent accountants of the
Purchaser.
"Real Property" means the Leased Real Property and
the Owned Real Property.
"Receivables" means any and all accounts receivable,
notes and other amounts receivable from third parties,
including, without limitation, customers and employees, arising
from the conduct of the Business before the Closing Date,
whether or not in the ordinary course, together with any unpaid
financing charges accrued thereon.
"Reference Balance Sheet" means the audited
consolidated balance sheet (including the related notes and
schedules thereto) of the Business including the Company and
the Subsidiaries, dated as at January 31, 2000, a copy of which
is set forth in Section 3.08(a) of the Disclosure Schedule.
"Reference Balance Sheet Date" means January 31,
2000.
"Regulations" means the Treasury Regulations
(including Temporary Regulations) promulgated by the United
States Department of Treasury with respect to the Code or other
federal tax statutes.
"Release" means disposing, discharging, injecting,
spilling, leaking, leaching, dumping, emitting, escaping,
emptying, seeping, placing and the like into or upon any land
or water or air or otherwise entering into the Environment.
"Remedial Action" means all action: (a) to clean up,
remove, treat or handle in any other way Hazardous Materials in
the Environment; (b) to prevent the Release of Hazardous
Materials so that they do not migrate, endanger or threaten to
endanger public health or the Environment; or (c) to perform
remedial investigations, feasibility studies, corrective
actions, closures and postremediation or postclosure studies,
investigations, operations, maintenance and monitoring.
"Resignation Notice" has the meaning specified in
Section 9.05(c).
"Restricted Period" has the meaning specified in
Section 5.07(a).
"Returns" has the meaning specified in Section
7.02(a).
"SDC" means Seneca Distributors Corp., a New York
corporation and wholly owned subsidiary of the Company.
"SDC Lease" means the lease between the Company and
180182 Bowery Realty Corporation relating to the property
located at 180-182 Bowery, New York, New York.
"Shares" has the meaning specified in the Recitals.
"Software" means computer software, programs and
databases in any form, including Internet web sites, web content
and links, source code, object code, operating systems and
specifications, data, databases, database management code,
utilities, graphical user interfaces, menus, images, icons,
forms, methods of processing, software engines, platforms and
data formats, all versions, updates, corrections, enhancements
and modifications thereof, and all related documentation,
developer notes, comments and annotations.
"Stockholder Representative" has the meaning
specified in Section 9.05(a).
"Stockholder(s)" has the meaning specified in the
Recitals.
"Stockholders' Accountants" means KPMG LLP,
independent accountants of the Stockholders.
"Stockholders' Agreement" means the Stockholders'
Agreement among the Stockholders dated as of August 15, 1996,
as amended.
"Subsidiaries" mean Delco Tableware International,
Inc., Seneca Distributors Corp., Table Source, Inc. and Realco
Development Corp. and any and all other corporations,
partnerships, joint ventures, associations and other entities
controlled by the Company directly or indirectly through one or
more intermediaries.
"Tangible Personal Property" has the meaning
specified in Section 3.21.
"Tax" or "Taxes" means any and all taxes, fees,
levies, duties, tariffs, imposts, and other charges of any kind
(together with any and all interest, penalties, additions to
tax and additional amounts imposed with respect thereto)
imposed by any government or taxing authority, including,
without limitation: taxes or other charges on or with respect
to income, franchises, windfall or other profits, gross
receipts, property, sales, use, capital stock, payroll,
employment, social security, workers' compensation,
unemployment compensation, or net worth; taxes or other charges
in the nature of excise, withholding, ad valorem, stamp,
transfer, value added, or gains taxes; license, registration
and documentation fees; and customs' duties, tariffs, and
similar charges.
"Third Party Claims" has the meaning specified in
Section 9.02(b).
"Trade Secrets" means trade secrets, know-how and
other confidential or proprietary technical, business and other
information, including manufacturing and production processes
and techniques, research and development information,
technology, drawings, specifications, designs, plans,
proposals, technical data, financial, marketing and business
data, pricing and cost information, business and marketing
plans, customer and supplier lists and information, and all
rights in any jurisdiction to limit the use or disclosure
thereof.
"Trademarks" means trademarks, service marks, trade
dress, logos, trade names, corporate names, URL addresses,
domain names and symbols, slogans and other indicia of source
or origin, including the goodwill of the business symbolized
thereby or associated therewith, common law rights thereto,
registrations and applications for registration thereof
throughout the world, all rights therein provided by
international treaties and conventions, and all other rights
associated therewith.
"U.S. GAAP" means United States generally accepted
accounting principles and practices in effect from time to time
applied consistently throughout the periods involved.
"Year 2000 Compliant" means that the Company Systems
provide uninterrupted millennium functionality in that the
Company Systems will record, store, process and present
calendar dates falling on or after January 1, 2000 in the same
manner and with the same functionality as the Company Systems
record, store, process and present calendar dates falling on or
before December 31, 1999.
ARTICLE II
PURCHASE AND SALE
SECTION 2.01. Purchase and Sale of the Shares
. Upon the terms and subject to the conditions of
this
Agreement, at the Closing, the Stockholders shall sell, assign,
transfer, convey and deliver, or cause to be sold, assigned,
transferred, conveyed and delivered, to the Purchaser, the
Shares, and the Purchaser shall purchase the Shares.
SECTION 2.02. Purchase Price; Allocation of Purchase
Price
. Subject to the adjustments set forth in Section
2.06, the purchase price for the Shares shall be $67,000,000
(the "Purchase Price").
SECTION 2.03. Closing
. Subject to the terms and conditions of this
Agreement, the sale and purchase of the Shares contemplated by
this Agreement shall take place at a closing (the "Closing") to
be held at the offices of Shearman & Sterling, 599 Lexington
Avenue, New York, New York at 10:00 A.M. New York time on the
fifth Business Day following the later to occur of (i) the
expiration or termination of all applicable waiting periods
under the HSR Act and (ii) the satisfaction or waiver of all
other conditions to the obligations of the parties set forth in
Article VIII, or at such other place or at such other time or
on such other date as the Company and the Purchaser may
mutually agree upon in writing (the day on which the Closing
takes place being the "Closing Date").
SECTION 2.04. Closing Deliveries by the Stockholders
. At the Closing, each Stockholder shall deliver or
cause to be delivered to the Purchaser:
(a) stock certificates evidencing such Stockholder's
Shares duly endorsed in blank, or accompanied by stock
powers duly executed in blank, in form satisfactory to the
Purchaser and with all required stock transfer tax stamps
affixed;
(b) a receipt for the Purchase Price less the Escrow
Amount executed by the Stockholder Representative;
(c) a receipt executed by such Stockholder for such
Stockholder's first installment of the Non-Compete
Purchase Price set forth in Exhibit 5.07; and
(d) the opinions, certificates and other documents
required to be delivered pursuant to Section 8.02.
SECTION 2.05. Closing Deliveries by the Purchaser
. (a) At the Closing, the Purchaser shall deliver
to
the Stockholders:
(i) the Purchase Price less the Escrow Amount by
wire transfer in immediately available funds to the
Purchase Price Bank Account;
(ii) the aggregate first installment of the Non-
Compete Purchase Price set forth in Exhibit 5.07 by wire
transfer in immediately available funds to the Purchase
Price Bank Account; and
(iii) the opinions, certificates and other
documents required to be delivered pursuant to Section
8.01.
(b) At the Closing, the Purchaser shall deliver to
the Escrow Agent, in accordance with the Escrow Agreement, the
Adjustment Escrow Amount and the Indemnity Escrow Amount by
wire transfer in immediately available funds to the accounts
designated therefor in the Escrow Agreement.
SECTION 2.06. Post-Closing Adjustment of Purchase
Price
. The Purchase Price shall be subject to adjustment
after the Closing as specified in this Section 2.06:
(a) Closing Balance Sheet. As promptly as
practicable, but in any event within 60 calendar days
following the Closing Date, the Purchaser shall deliver to
the Stockholder Representative the Closing Balance Sheet,
together with the report thereon of the Purchaser's
Accountants, stating that the Closing Balance Sheet fairly
presents the consolidated financial position of the
Company and the Subsidiaries at the Closing Date in
conformity with U.S. GAAP applied on a basis consistent
with the preparation of the Reference Balance Sheet. The
Stockholders shall cooperate and use reasonable efforts to
assist the Purchaser to the extent reasonably required to
prepare the Closing Balance Sheet.
(b) Disputes. (i) Subject to clause (ii) of this
Section 2.06(b), the Closing Balance Sheet delivered by
the Purchaser to the Stockholder Representative shall be
deemed to be and shall be final, binding and conclusive on
the parties hereto.
(ii) The Stockholders, through the Stockholder
Representative, may dispute any amounts reflected on the
Closing Balance Sheet to the extent the net effect of such
disputed amounts in the aggregate would affect the Book
Value reflected on the Closing Balance Sheet by more than
the Designated Amount, but only on the basis that the
amounts reflected on the Closing Balance Sheet were not
arrived at in accordance with U.S. GAAP applied on a basis
consistent with the preparation of the Reference Balance
Sheet; provided, however, that the Stockholder
Representative, on behalf of the Stockholders, shall have
notified the Purchaser and the Purchaser's Accountants in
writing of each disputed item, specifying the estimated
amount thereof in dispute and setting forth, in reasonable
detail, the basis for such dispute, within 30 Business
Days of the Purchaser's delivery of the Closing Balance
Sheet to the Stockholder Representative. In the event of
such a dispute, the Stockholders' Accountants and the
Purchaser's Accountants shall attempt to reconcile their
differences, and any resolution by them as to any disputed
amounts shall be final, binding and conclusive on the
parties hereto. If
any such resolution by the Stockholders' Accountants and the
Purchaser's Accountants leaves in dispute amounts the net
effect of which in the aggregate would not affect the Book
Value reflected on the Closing Balance Sheet by more than the
Designated Amount, all such amounts remaining in dispute
shall then be deemed to have been resolved in favor of the
Closing Balance Sheet delivered by the Purchaser to the
Stockholder Representative. If the Stockholders' Accountants
and the Purchaser's Accountants are unable to reach a
resolution with such effect within 20 Business Days after the
receipt by the Purchaser and the Purchaser's Accountants of
the Stockholder Representative's written notice of dispute,
the Stockholders' Accountants and the Purchaser's Accountants
shall submit the items remaining in dispute for resolution to
Ernst & Young (or, if such firm shall decline or is unable to
act or is not, at the time of such submission, independent of
the Stockholders and the Purchaser, to another independent
accounting firm of international reputation mutually
acceptable to the Stockholders and the Purchaser) (either
Ernst & Young or such accounting firm being referred to
herein as the "Independent Accounting Firm"), which shall,
within 30 Business Days after such submission, determine and
report to the Stockholders and the Purchaser upon such
remaining disputed items, and such report shall be final,
binding and conclusive on the Stockholders and the Purchaser.
The fees and disbursement of the Independent Accounting Firm
shall be allocated among the Stockholders, on the one hand,
and the Purchaser, on the other hand, in the same proportion
that the aggregate amount of such remaining disputed items so
submitted to the Independent Accounting Firm that is
unsuccessfully disputed by each such party (as finally
determined by the Independent Accounting Firm) bears to the
total amount of such remaining disputed items so submitted.
(iii) In acting under this Agreement, the
Stockholders' Accountants, the Purchaser's Accountants and
the Independent Accounting Firm shall be entitled to the
privileges and immunities of arbitrators.
(iv) The Stockholder Representative, the Stockholders'
Accountants and their respective representatives shall be
given reasonable access during normal working hours upon
reasonable notice to all the accounting books and records of
the Company and the work papers of the Purchaser's
Accountants relating to the preparation of the Closing
Balance Sheet.
(v) No adjustment to the Purchase Price pursuant to
Section 2.06(c) shall be made with respect to amounts
disputed by the Stockholders pursuant to this Section
2.06(b), unless the net effect of the amounts successfully
disputed by the Stockholders in the aggregate is to increase
or decrease the Book Value reflected on the Closing Balance
Sheet by at least the Designated Amount.
(c) Purchase Price Adjustment. The Closing Balance
Sheet shall be deemed final for the purposes of this Section
2.06 upon the earliest of (A) the failure of the Stockholder
Representative to notify the Purchaser, on behalf of the
Stockholders, of a dispute within 30 Business Days of the
Purchaser's delivery of the Closing Balance Sheet to the
Stockholder Representative, (B) the resolution of all
disputes, pursuant to Section 2.06(b)(ii), by the
Stockholders' Accountants and the Purchaser's Accountants and
(C) the resolution of all disputes, pursuant to Section
2.06(b)(ii), by the Independent Accounting Firm. Subject to
the limitation set forth in Section 2.06(b)(v), an adjustment
to the Purchase Price shall be made as follows:
(i) in the event that the Book Value reflected on
the Reference Balance Sheet exceeds the Book Value
reflected on the Closing Balance Sheet by at least the
Designated Amount, then the Purchase Price shall be
adjusted downward in an amount equal to such excess over
the Designated Amount. Promptly following such
determination, but in any event within three (3)
Business Days, the Purchaser shall deliver written
notice to the Escrow Agent and the Stockholder
Representative specifying the amount of such downward
adjustment of the Purchase Price, and the Escrow Agent
shall, within three (3) Business Days of its receipt of
such notice and in accordance with the terms of the
Escrow Agreement, pay such amount to the Purchaser out
of the Adjustment Escrow Fund by wire transfer in
immediately available funds. In the event that the
Adjustment Escrow Fund is insufficient to cover the
amount of such downward adjustment, then the Escrow
Agent shall distribute the entire Adjustment Escrow Fund
to the Purchaser as provided above and the Stockholders
shall pay, on or prior to the date on which the Escrow
Agent distributes the Adjustment Escrow Fund to the
Purchaser, an amount to the Purchaser, by wire transfer
in immediately available funds to an account designated
by the Purchaser in a written notice to the Stockholder
Representative, equal to the amount of such deficiency.
In the event that any Stockholder shall fail to pay the
amount of such deficiency within the period specified in
the immediately preceding sentence, the Purchaser may
deliver written notice to the Escrow Agent and the
Stockholder Representative specifying such amount, and
the Escrow Agent shall, within three Business Days of
its receipt of such notice and in accordance with the
terms of the Escrow Agreement, pay such amount to the
Purchaser out of the Indemnity Escrow Fund by wire
transfer in immediately available funds. No failure of
the Purchaser to deliver a notice of the type specified
in the immediately preceding sentence shall relieve the
Stockholders of the obligation to pay the amount of such
deficiency to the Purchaser. In the event that the
amount of funds in the Adjustment Escrow Fund exceeds
the amount of the downward adjustment of the Purchase
Price provided for in the first sentence of this Section
2.06(c)(i), then the Escrow Agent shall, after paying
the amount due to the Purchaser as provided in such
sentence, pay the remaining amount of funds in the
Adjustment Escrow Fund to the Stockholder
Representative; and
(ii) in the event that the Book Value reflected on
the Closing Balance Sheet exceeds the Book Value
reflected on the Reference Balance Sheet by at least the
Designated Amount, then the Purchase Price shall be
adjusted upward in an amount equal to such excess over
the Designated Amount and the Purchaser shall, within
three Business Days of such determination, pay the
amount of such excess to the Stockholders by wire
transfer in immediately available funds. In such event,
the Purchaser shall, within three (3) Business Days,
deliver written notice to the Escrow Agent of such an
event and the Escrow Agent shall, within three
(3) Business Days of its receipt of such notice and in
accordance with the terms of the Escrow Agreement, pay
all funds in the Adjustment Escrow Fund to the
Stockholder Representative.
(e) Any payments required to be made by the
Stockholders, the Purchaser or the Escrow Agent pursuant to
Section 2.06(c) shall bear interest from the Closing Date
through the date of payment at 8.0%.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY AND THE STOCKHOLDERS
As an inducement to the Purchaser to enter into this
Agreement, the Company and the Stockholders hereby jointly and
severally represent and warrant to the Purchaser as follows:
SECTION 3.01. Authority of the Company and Each
Stockholder
. The Company and each Stockholder have all necessary
power and authority to enter into this Agreement and the Escrow
Agreement and each Stockholder has all necessary power and
authority to enter into each Employment Agreement to which he is
a party, and the Company and each Stockholder have all necessary
power and authority to carry out their respective obligations
hereunder and thereunder and to consummate the transactions
contemplated hereby and thereby. The execution and delivery of
this Agreement and the Escrow Agreement by the Company and each
Stockholder and of each Employment Agreement by each Stockholder
that is a party thereto, the performance by the Company and each
Stockholder of their respective obligations hereunder and
thereunder and the consummation by the Company and each
Stockholder of the transactions contemplated hereby and thereby
have been duly authorized by all requisite action on the part of
the Company and each Stockholder. This Agreement and the Escrow
Agreement have been duly executed and delivered by the Company and
each Stockholder, and (assuming due authorization, execution and
delivery by the Purchaser and, in the case of the Escrow
Agreement, the Escrow Agent) this Agreement and the Escrow
Agreement constitute legal, valid and binding obligations of the
Company and each Stockholder enforceable against the Company and
each Stockholder in accordance with its terms. The Employment
Agreements have been duly executed and delivered by each
Stockholder who is a party thereto and (assuming due
authorization, execution and delivery by the Purchaser) shall
constitute legal, valid and binding obligations of such
Stockholder enforceable against such Stockholder in accordance
with their respective terms.
SECTION 3.02. Organization, Authority and
Qualification of the Company
. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of New
York and has all necessary power and authority to own, operate or
lease the properties and assets now owned, operated or leased by
it and to carry on the Business as it has been and is currently
conducted. The Company is duly licensed or qualified to do
business and is in good standing in each jurisdiction in which the
properties owned or leased by it or the operation of its business
makes such licensing or qualification necessary, except for those
failures which, when taken together with all other such failures,
would not have a Material Adverse Effect. True and
correct copies of the Certificate of Incorporation and By-laws of
the Company, each as in effect on the date hereof, have been
delivered by the Company to the Purchaser.
SECTION 3.03. Capital Stock and Ownership of the
Company
. (a) The authorized capital stock of the Company
consists of 10,000,000 shares of Common Stock. As of the date
hereof, (i) 5,500,000 shares of Common Stock are issued and
outstanding, all of which are validly issued, fully paid and
nonassessable, and (ii) 2,500,000 additional shares of Common
Stock are held in the treasury of the Company. None of the issued
and outstanding shares of Common Stock was issued in violation of
any preemptive rights. Except for the Plans, there are no
options, warrants, convertible securities or other rights,
agreements, arrangements or commitments of any character relating
to the Shares or obligating any of the Stockholders or the Company
to issue or sell any Shares, or any other interest in, the
Company. There are no outstanding contractual obligations of the
Company to repurchase, redeem or otherwise acquire any shares of
Common Stock or to provide funds to, or make any investment (in
the form of a loan, capital contribution or otherwise) in, any
other Person. The Shares constitute all the issued and
outstanding capital stock of the Company and, except for the
Stockholders' Agreement, are owned of record and beneficially by
the Stockholders free and clear of all Encumbrances. Upon
consummation of the transactions contemplated by this Agreement
and registration of the Shares in the name of the Purchaser in the
stock records of the Company, the Purchaser, assuming it shall
have purchased the Shares for value in good faith and without
notice of any adverse claim, will own all the issued and
outstanding capital stock of the Company free and clear of all
Encumbrances. There are no voting trusts, stockholder agreements,
proxies or other agreements or understandings in effect with
respect to the voting or transfer of any of the Shares.
(b) The stock register of the Company accurately
records: (i) the name and address of each Person owning Shares
and (ii) the certificate number of each certificate evidencing
shares of capital stock issued by the Company, the number of
shares evidenced by each such certificate, the date of issuance
thereof and, in the case of cancellation, the date of
cancellation.
SECTION 3.04. Subsidiaries
. (a) Section 3.04(a) of the Disclosure Schedule sets
forth a true and complete list of all Subsidiaries. The Company
shall deliver to the Purchaser within three (3) Business Days
after the date hereof a list setting forth each Subsidiary's name,
type of entity, jurisdiction and date of incorporation or
organization, authorized capital stock, partnership capital or
equivalent, the number and type of issued and outstanding shares
of capital stock, partnership interests or similar ownership
interests and the current ownership of such shares, partnership
interests or similar ownership interests.
(b) Other than the Subsidiaries, there are no other
corporations, partnerships, joint ventures, associations or other
entities in which the Company owns, of record or beneficially, any
direct or indirect equity or other interest or any right
(contingent or otherwise) to acquire the same.
(c) Each Subsidiary that is a corporation: (i) is a
corporation duly organized and validly existing under the laws of
its jurisdiction of incorporation, (ii) has all necessary power
and authority to own, operate or lease the properties and assets
owned, operated or leased by such Subsidiary and to carry on its
business as it has been and is currently conducted by such
Subsidiary and (iii) is duly licensed or qualified to do business
and is in good standing in each jurisdiction in which the
properties owned or leased by it or the operation of its business
makes such licensing or qualification necessary, except for those
failures which, when taken together with all other such failures,
would not have a Material Adverse Effect. Each Subsidiary that is
not a corporation: (i) is duly organized and validly existing
under the laws of its jurisdiction of organization, (ii) has all
necessary power and authority to own, operate or lease the
properties and assets owned, operated or leased by such Subsidiary
and to carry on its business as it has been and is currently
conducted by such Subsidiary and (iii) is duly licensed or
qualified to do business and is in good standing in each
jurisdiction in which the properties owned or leased by it or the
operation of its business makes such licensing or qualification
necessary or desirable, except for those failures which, when
taken together with all other such failures, would not have a
Material Adverse Effect.
(d) Except as set forth in Section 3.04(a) of the
Disclosure Schedule, all the outstanding shares of capital stock
of each Subsidiary that is a corporation are validly issued, fully
paid, nonassessable and free of preemptive rights and are owned by
the Company, whether directly or indirectly, free and clear of all Encumbrances.
(e) There are no options, warrants, convertible
securities or other rights, agreements, arrangements or
commitments of any character relating to the capital stock of any
Subsidiary or obligating the Company or any Subsidiary to issue or
sell any shares of capital stock of, or any other interest in, any
Subsidiary.
(f) True and complete copies of the certificate of
incorporation and by-laws (or similar organizational documents),
in each case as in effect on the date hereof, of each Subsidiary
have been delivered by the Company to the Purchaser.
(g) No Subsidiary is a member of (nor is any part of
its business conducted through) any partnership nor is any
Subsidiary a participant in any joint venture or similar
arrangement.
(h) There are no voting trusts, stockholder
agreements, proxies or other agreements or understandings in
effect with respect to the voting or transfer of any shares of
capital stock of or any other interests in any Subsidiary.
(i) The stock register of each Subsidiary accurately
records: (i) the name and address of each Person owning shares of
capital stock of such Subsidiary and (ii) the certificate number
of each certificate evidencing shares of capital stock issued by
such Subsidiary, the number of shares evidenced by each such
certificate, the date of issuance thereof and, in the case of
cancellation, the date of cancellation.
SECTION 3.05. Corporate Books and Records
. The minute books of the Company and the Subsidiaries
contain accurate records of all meetings and accurately reflect
all material actions taken by the stockholders, the Boards of
Directors and all committees of the Boards of Directors of the
Company and the Subsidiaries. Within ten (10) Business Days
following the date hereof, the Company will make available to the
Purchaser complete and accurate copies of all such minute books
and of the stock register of the Company and each Subsidiary.
SECTION 3.06. No Conflict
. Assuming compliance with the notification
requirements of the HSR Act and the making and obtaining of all
filings, notifications, consents, approvals, authorizations and
other actions referred to in Section 3.07, except as may result
from any facts or circumstances relating solely to the Purchaser,
the execution, delivery and performance of this Agreement and the
Escrow Agreement by the Company and the Stockholders and of each
Employment Agreement by the Stockholder who is party to such
Employment Agreement do not and will not (a) violate, conflict
with or result in the breach of any provision of the certificate
of incorporation or by-laws (or similar organizational documents)
of the Company or any Subsidiary, (b) conflict with or violate (or
cause an event that could have a Material Adverse Effect as a
result of) any Law or Governmental Order applicable to the Company
or any Subsidiary or (c) except as set forth in Section 3.06 of
the Disclosure Schedule, conflict with, result in any breach of,
constitute a default (or event that with the giving of notice or
lapse of time, or both, would become a default) under, require any
consent under, or give to others any rights of termination,
amendment, acceleration, suspension, revocation or cancellation
of, or result in the creation of any Encumbrance on any of the
Shares or on any of the assets or properties of the Company or any
Subsidiary pursuant to, any note, bond, mortgage or indenture,
contract, agreement, lease, sublease, license, permit, franchise
or other instrument or arrangement to which the Company or any
Subsidiary is a party or by which any of the Shares or any of the
assets or properties of the Company or any Subsidiary is bound.
SECTION 3.07. Governmental Consents and Approvals
. The execution, delivery and performance of this
Agreement and the Escrow Agreement by the Company and each
Stockholder and of each Employment Agreement by the Stockholder
who is party to such Employment Agreement do not and will not
require any consent, approval, authorization or other order of,
action by, filing with or notification to any Governmental
Authority, except the notification requirements of the HSR Act.
SECTION 3.08. Financial Information; Books and Records
. (a) True and complete copies of (i) the audited
consolidated balance sheet of the Company for each of the three
fiscal years ended as of January 31, 1998, January 31, 1999 and
January 31, 2000 and the related audited consolidated statements
of income, retained earnings, stockholders' equity and changes in
financial position of the Company, together with all related notes
and schedules thereto, accompanied by the reports thereon of the
Stockholders' Accountants (collectively referred to herein as the
"Financial Statements") and (ii) the unaudited consolidated
balance sheet of the Company as of April 30, 2000 and the related
consolidated statements of income (collectively referred to herein
as the "Interim Financial Statements") have been delivered by the
Company to the Purchaser. The Financial Statements, the Interim
Financial Statements and the Reference Balance Sheet (1) were
prepared in accordance with the books of account and other
financial records of the Company and the Subsidiaries, (2) present
fairly the consolidated financial
condition and results of operations of the Company and the
Subsidiaries as of the dates thereof or for the periods covered
thereby, (3) have been prepared in accordance with U.S. GAAP
applied on a basis consistent with the past practices of the
Company and the Subsidiaries (except that no notes or schedules
have been prepared with respect to the Interim Financial
Statements) and (4) include all adjustments (consisting only of
normal recurring accruals) that are necessary for a fair
presentation of the consolidated financial condition of the
Company and the Subsidiaries and the results of the operations of
the Company and the Subsidiaries as of the dates thereof or for
the periods covered thereby.
(b) The books of account and other financial records of
the Company and the Subsidiaries: (i) reflect all items of income
and expense and all assets and Liabilities required to be
reflected therein in accordance with U.S. GAAP applied on a basis
consistent with the past practices of the Company and the
Subsidiaries, respectively, and (ii) are in all material respects
complete and correct, and do not contain or reflect any material
inaccuracies or discrepancies.
SECTION 3.09. Absence of Undisclosed Liabilities
. There are no Liabilities of the Company or any
Subsidiary, other than Liabilities (i) reflected or reserved
against on the Reference Balance Sheet or (ii) incurred since the
date of the Reference Balance Sheet in the ordinary course of
business, consistent with past practice, of the Company and the
Subsidiaries and which would not have a Material Adverse Effect.
Reserves are reflected on the Reference Balance Sheet against all
Liabilities of the Company and the Subsidiaries, in amounts that
have been established on a basis consistent with the past
practices of the Company and the Subsidiaries and in accordance
with U.S. GAAP.
SECTION 3.10. Receivables
. Section 3.10 of the Disclosure Schedule sets forth
an aged list of the Receivables as of the Reference Balance Sheet
Date showing separately those Receivables that as of such date had
been outstanding for (i) 29 days or less, (ii) 30 to 59 days,
(iii) 60 to 89 days, (iv) 90 to 119 days and (v) more than 119
days. Except to the extent, if any, reserved for on the Reference
Balance Sheet, all Receivables reflected on the Reference Balance
Sheet arose from, and the Receivables existing on the Closing Date
will have arisen from, the sale of Inventory or services to
Persons not affiliated with the Stockholders, the Company or any
Subsidiary and in the ordinary course of business consistent with
past practice and, except as reserved against on the Reference
Balance Sheet, constitute or will constitute, as the case may be,
only valid, undisputed and collectible claims of the Company or a
Subsidiary not subject to valid claims of setoff or other defenses
or counterclaims other than normal cash discounts accrued in the
ordinary course of business consistent with past practice. All
Receivables reflected on the Reference Balance Sheet or arising
from the date thereof until the Closing (subject to the reserve
for bad debts, if any, reflected on the Reference Balance Sheet)
are or will be good and have been collected or are or will be
collectible, without resort to litigation or extraordinary
collection activity, within 120 days of the Closing Date.
SECTION 3.11. Inventories
. (a) Subject to amounts reserved therefor on the
Reference Balance Sheet, the values at which all Inventories are
carried on the Reference Balance Sheet reflect the historical
inventory valuation policy of the Company and the Subsidiaries of
stating such Inventories at the lower of cost (determined on the
first-in, first-out method) or market value. The Company or a
Subsidiary, as the case may be, has good and marketable title to
the Inventories free and clear of all Encumbrances. The
Inventories do not consist of any items held on consignment to the
Company. Neither the Company nor any Subsidiary is under any
obligation or liability with respect to accepting returns of items
of Inventory or merchandise in the possession of their customers
other than in the ordinary course of business consistent with past
practice. No clearance or extraordinary sale of the Inventories
has been conducted since the Reference Balance Sheet Date.
Neither the Company nor any Subsidiary has acquired or committed
to acquire or manufacture Inventory for sale which is not of a
quality and quantity usable in the ordinary course of business
within a reasonable period of time and consistent with past
practice, nor has the Company or any Subsidiary changed the price
of any Inventory except for
(i) price reductions to reflect any reduction in the cost thereof
to the Company or such Subsidiary, (ii) reductions and increases
responsive to normal competitive conditions and consistent with
the Company's or such Subsidiary's past sales practices,
(iii) increases to reflect any increase in the cost thereof to the
Company or such Subsidiary and (iv) increases and reductions made
with the written consent of the Purchaser. Section 3.11 of the
Disclosure Schedule sets forth a complete list of the addresses of
all warehouses and other facilities in which the Inventories are
located.
(b) The Inventories are in good and merchantable
condition in all material respects, are suitable and usable for
the purposes for which they are intended and are in a condition
such that they can be sold in the ordinary course of the Business
consistent with past practice. The Inventories reflected on the
Reference Balance Sheet were as of the date of the Reference
Balance Sheet salable at values not less than the respective book
value amounts shown on the Reference Balance Sheet. The value of
all items of obsolete, damaged and slow-moving materials and of
materials of below standard quality has been written down to
realizable market value or has been adequately reserved for on the
Reference Balance Sheet.
SECTION 3.12. Acquired Assets
. Since the Reference Balance Sheet Date, all the
assets of the Company and the Subsidiaries, including, without
limitation, the benefit of any licenses, leases or other
agreements or arrangements, have been acquired for consideration
not less than the fair market value of such assets at the date of
such acquisition.
SECTION 3.13. Sales and Purchase Order Backlog
. (a) As of May 22, 2000, open sales orders accepted
by the Company or any Subsidiary totaled approximately $5,000,000.
Within three (3) Business Days after the date hereof, the Company
shall deliver to the Purchaser a list of all sales orders which
have been accepted by the Company or any Subsidiary and that were
open as of May 22, 2000.
(b) As of May 22, 2000, open purchase orders issued by
the Company or any Subsidiary totaled $18,154,000. Within three
(3) Business Days after the date hereof, the Company shall deliver
to the Purchaser a list of all purchase orders which have
been issued by the Company or any Subsidiary and that were open as
of May 22, 2000.
SECTION 3.14. Conduct in the Ordinary Course; Absence
of Certain Changes, Events and Conditions
. Since the Reference Balance Sheet Date, the Business
has been conducted in the ordinary course and consistent with past
practice. As amplification and not limitation of the foregoing,
since the Reference Balance Sheet Date, neither the Company nor
any Subsidiary has:
(a) permitted or allowed any of the assets or
properties of the Company or any Subsidiary to be subjected
to any Encumbrance, other than Permitted Encumbrances and
Encumbrances that will be released at or prior to the
Closing;
(b) except in the ordinary course of business
consistent with past practice, discharged or otherwise
obtained the release of any Encumbrance related to the
Business, the Company or the Subsidiaries or paid or
otherwise discharged any Liability related to the Business,
the Company or the Subsidiaries, other than current
liabilities reflected on the Reference Balance Sheet and
current liabilities incurred in the ordinary course of
business consistent with past practice since the Reference
Balance Sheet Date;
(c) written down or written up (or failed to write down
or write up in accordance with U.S. GAAP consistent with past
practice) the value of any Inventories or Receivables or
revalued any of the assets of the Company or any Subsidiary
other than in the ordinary course of business consistent with
past practice and in accordance with U.S. GAAP and except as
would not have a Material Adverse Effect;
(d) made any change in any method of accounting or
accounting practice or policy used by the Company or any
Subsidiary;
(e) amended, terminated, cancelled or compromised any
material claims of the Company or any Subsidiary or waived
any other rights of substantial value to the Company or any
Subsidiary;
(f) sold, transferred, leased, subleased, licensed or
otherwise disposed of any properties or assets, real,
personal or mixed (including, without limitation, leasehold
interests and intangible property), except as would not have
a Material Adverse Effect, other than the sale of Inventories
in the ordinary course of business consistent with past
practice;
(g) issued or sold any capital stock, notes, bonds or
other securities, or any option, warrant or other right to
acquire the same, of the Company or any Subsidiary;
(h) redeemed any of the capital stock or declared, made
or paid any dividends or distributions (whether in cash,
securities or other property) to the holders of capital stock
of the Company or any Subsidiary or otherwise, other than
dividends, distributions and redemptions declared, made or
paid by any Subsidiary solely to the Company;
(i) merged with, entered into a consolidation with or
acquired an interest of 5% or more in any Person or acquired
a substantial portion of the assets or business of any Person
or any division or line of business thereof, or otherwise
acquired any material assets other than in the ordinary
course of business consistent with past practice;
(j) except as disclosed in Section 3.14(j) of the
Disclosure Schedule, made any capital expenditure or
commitment for any capital expenditure in excess of $25,000
individually or $100,000 in the aggregate;
(k) except as disclosed to the Purchaser in writing
within three (3) Business Days after the date hereof, issued
any purchase orders or otherwise agreed to make any purchases
involving exchanges in value in excess of $100,000
individually;
(l) made any material changes in the customary methods
of operations of the Company, any Subsidiary or the Business,
including, without limitation, practices and policies
relating to manufacturing, purchasing, Inventories,
marketing, selling and pricing;
(m) made, revoked or changed any express or deemed Tax
election or method of Tax accounting or settled or
compromised any liability with respect to Taxes of the
Company or any Subsidiary;
(n) incurred any Indebtedness in excess of $100,000
individually or $1,000,000 in the aggregate;
(o) made any loan to, guaranteed any Indebtedness of
or otherwise incurred any Indebtedness on behalf of any
Person;
(p) failed to pay any creditor any amount owed to such
creditor when due, except as would not have a Material
Adverse Effect;
(q) (i) granted any increase, or announced any
increase, in the wages, salaries, compensation, bonuses,
incentives, pension or other benefits payable by the Company
or any Subsidiary to any of its employees, including, without
limitation, any increase or change pursuant to any Plan, or
(ii) established or increased or promised to increase any
benefits under any Plan, in either case except as required by
Law or any collective bargaining agreement and involving
ordinary increases consistent with the past practices of the
Company or such Subsidiary;
(r) entered into any agreement, arrangement or
transaction with any of its directors, officers, employees or
stockholders (or with any relative, beneficiary, spouse or
Affiliate of such Persons);
(s) disclosed any secret or confidential Intellectual
Property (except by way of issuance of a patent) or permitted
to lapse or become abandoned any Intellectual Property (or
any registration or grant thereof or any application relating
thereto) to which, or under which, the Company or any
Subsidiary has any right, title, interest or license;
(t) allowed any Permit or Environmental Permit that
was issued or relates to the Company or any Subsidiary or
otherwise relates to the Business to lapse or terminate or
failed to renew any insurance policy, Permit or Environmental
Permit that is scheduled to terminate or expire within 45
calendar days of the Closing Date;
(u) failed to maintain the Company's and each
Subsidiary's property and equipment in good repair and
operating condition, ordinary wear and tear excepted;
(v) suffered any casualty loss or damage with respect
to any of the Assets that in the aggregate have a replacement
cost of more than $50,000, whether or not such casualty loss
or damage shall have been covered by insurance;
(w) amended, modified or consented to the termination
of any Material Contract or the Company's or any Subsidiary's
rights thereunder;
(x) amended or restated the certificate of
incorporation or by-laws (or other organizational documents)
of the Company or any Subsidiary;
(y) made any charitable contribution;
(z) suffered any Material Adverse Effect; or
(aa) agreed, whether in writing or otherwise, to take
any of the actions specified in this Section 3.14 or granted
any options to purchase, rights of first refusal, rights of
first offer or any other similar rights or commitments with
respect to any of the actions specified in this
Section 3.14, except as expressly contemplated by this
Agreement and the Ancillary Agreements.
SECTION 3.15. Litigation
. Except as set forth in Section 3.15 of the
Disclosure Schedule (which, with respect to each Action disclosed
therein, sets forth the parties, nature of the proceeding, date
and method commenced, amount of damages or other relief sought
and, if applicable, paid or granted), there are no Actions by or
against the Company or any Subsidiary (or by or against any
Stockholder or any Affiliate thereof and relating to the Business,
the Company or any Subsidiary) or involving any of the Assets or
the Business pending before any Governmental Authority (or, to the
knowledge of the Company, threatened to be brought by or before
any Governmental Authority). None of the matters disclosed in
Section 3.15 of the Disclosure Schedule has or has had a Material
Adverse Effect. None of the Company, the Subsidiaries or any of
their respective assets or properties is subject to any
Governmental Order (nor, to the knowledge of the Company, are
there any such Governmental Orders threatened to be imposed by any Governmental
Authority).
SECTION 3.16. Compliance with Laws
. The Company and the Subsidiaries have each conducted
and continue to conduct the Business in material compliance with
all Laws and Governmental Orders applicable to the Company or any
Subsidiary or any of their properties or assets, or the Business,
and neither the Company nor any Subsidiary is in material
violation of any such Law or Governmental Order.
SECTION 3.17. Environmental and Other Permits and
Licenses; Related Matters
. (a) Except as would not reasonably be expected to have a
Material Adverse Effect: (i) the Company and each Subsidiary are
in compliance with, and for the past three years have been in
compliance with, all applicable Environmental Laws and all
Environmental Permits; (ii) Hazardous Materials have not been
generated, used, treated, handled or stored on, transported to or
from, or Released on any of the Real Property or, to the knowledge
of the Company, any property adjoining any of the Real Property,
by the Company or, to the knowledge of the Company, any other
Person; (iii) there is no asbestos or asbestos-containing material
on any of the Real Property; (iv) none of the Real Property is
listed or proposed for listing, or adjoins any other property that
is listed or proposed for listing, on the National Priorities List
or CERCLIS or on any analogous federal, state or local list; and
(v) there are no Environmental Claims pending or, to the knowledge
of the Company, threatened against the Company, any Subsidiary,
the Business or the Real Property and, to the knowledge of the
Company, there are no circumstances that can reasonably be
expected to form the basis of any such Environmental Claim.
(b) The Company has provided the Purchaser with copies
of (i) any environmental assessment or audit reports or other
similar studies or analyses relating to the Company, the
Subsidiaries, the Business or the Real Property and (ii) all
insurance policies issued at any time that may provide coverage to
the Company, the Subsidiaries, the Business or the Real Property
for environmental matters.
(c) Neither the execution of this Agreement nor the
consummation of the transactions contemplated herein will require
any Remedial Action or notice to or consent of Governmental
Authorities or third parties pursuant to any applicable
Environmental Law or Environmental Permit.
SECTION 3.18. Material Contracts
. (a) Within three (3) Business Days after the date
hereof, the Company shall deliver to the Purchaser a list of each
of the following contracts and agreements of the Company and the
Subsidiaries (such contracts and agreements, together with all
contracts, agreements, leases and subleases concerning the
management or operation of any Real Property (including, without
limitation, brokerage contracts) listed or otherwise disclosed in
Section 3.20(a) or 3.20(b) of the Disclosure Schedule to which the
Company or any Subsidiary is a party and all agreements relating
to Intellectual Property set forth in Section 3.19(a) of the
Disclosure Schedule, being "Material Contracts"):
(i) each contract, agreement, invoice, purchase order
and other arrangement, for the purchase of Inventory, spare
parts, other materials or personal property with any supplier
or for the furnishing of services to the Company, any
Subsidiary or otherwise related to the Business, under the
terms of which the Company or any Subsidiary: (A) is likely
to pay or otherwise give consideration of more than $100,000
in the aggregate during the calendar year ended December 31,
2000, (B) is likely to pay or otherwise give consideration of
more than $250,000 in the aggregate over the remaining term
of such contract or (C) cannot cancel without penalty or
further payment and without more than 30 days' notice;
(ii) each contract, agreement, invoice, sales order and
other arrangement for the sale of Inventory or other
personal property or for the furnishing of services by the
Company or any Subsidiary that: (A) is likely to involve
consideration of more than $100,000 in the aggregate during
the calendar year ended December 31, 2000, (B) is likely to
involve consideration of more than $250,000 in the aggregate
over the remaining term of the contract, or (C) cannot be
cancelled by the Company or such Subsidiary without penalty
or further payment and without more than 30 days' notice;
(iii) all broker, distributor, dealer,
manufacturer's representative, franchise, agency, sales
promotion, market research, marketing, consulting,
advertising, freight and rebate contracts and agreements to
which the Company or any Subsidiary is a party;
(iv) all management contracts and contracts with
independent contractors or consultants (or similar
arrangements) to which the Company or any Subsidiary is a
party and which are not cancellable without penalty or
further payment and without more than 30 days' notice;
(v) all contracts and agreements relating to
Indebtedness of the Company or any Subsidiary;
(vi) all contracts and agreements with any Governmental
Authority to which the Company or any Subsidiary is a party;
(vii) all contracts and agreements that limit or
purport to limit the ability of the Company or any Subsidiary
to compete in any line of business or with any Person or in
any geographic area or during any period of time;
(viii) all contracts and agreements between or among
the Company or any Subsidiary, on one hand, and any
Stockholder or any Affiliate of any Stockholder, on the other
hand;
(ix) all contracts and agreements providing for
benefits under any Plan; and
(x) all other contracts and agreements, whether or not
made in the ordinary course of business, that are material to
the Company or any Subsidiary or to the conduct of the
Business, or the absence of which would have a Material
Adverse Effect.
For purposes of this Section 3.18 and Sections 3.20, 3.21 and
3.22, the term "lease" shall include any and all leases,
subleases, sale/leaseback agreements or similar arrangements.
(b) Each Material Contract: (i) is valid and binding
on the parties thereto and is in full force and effect, (ii) is
freely and fully assignable to the Purchaser without penalty or
other adverse consequences and (iii) upon consummation of the
transactions contemplated by this Agreement and the Ancillary
Agreements, except to the extent that any consents set forth in
Section 3.07 of the Disclosure Schedule are not obtained, shall
continue in full force and effect without penalty or other adverse consequence.
Neither the Company nor any Subsidiary is in breach
of, or default under, any Material Contract.
(c) To the knowledge of the Company, no other party to
any Material Contract is in breach thereof or default thereunder.
(d) There is no contract, agreement or other
arrangement granting any Person any preferential right to
purchase, other than in the ordinary course of business consistent
with past practice, any of the properties or assets of the Company
or any Subsidiary.
SECTION 3.19. Intellectual Property
. (a) Within three (3) Business Days after the date
hereof, the Company shall deliver to the Purchaser a true and
complete list of (i) all patents and patent applications,
registered trademarks and trademark applications, registered
copyrights and copyright applications, and domain names included
in the Owned Intellectual Property (excluding Trade Secrets), (ii)
Licenses and (iii) other Owned Intellectual Property material to
the Business (excluding Trade Secrets).
(b) The operation of the Business as currently
conducted or as contemplated to be conducted, the use of the Owned Intellectual
Property and Licensed Intellectual Property in
connection therewith and the Company's or any Subsidiary's
transmission, use, linking and other practices related to the
operation of its web site in connection with the Business, the
content thereof and the advertisements contained therein, do not
conflict with, infringe, misappropriate or otherwise violate the
Intellectual Property or other proprietary rights, including
rights of privacy, publicity and endorsement, of any third party,
and no Actions are pending or threatened against the Company or
any Subsidiary alleging any of the foregoing.
(c) The Company is the exclusive owner of the entire
and unencumbered right, title and interest in and to the Owned
Intellectual Property and Licenses, and the Company is entitled to
use the Owned Intellectual Property and Licensed Intellectual
Property in the ordinary course of the Business as presently
conducted or as contemplated to be conducted.
(d) The Owned Intellectual Property and Licensed
Intellectual Property include all of the Intellectual Property
used in the ordinary day-to-day conduct of the Business, and there
are no other items of Intellectual Property that are material to
such ordinary day-to-day conduct thereof. The Owned Intellectual
Property and, to the knowledge of the Company, the Licensed
Intellectual Property are subsisting, valid and enforceable and
have not been adjudged invalid or unenforceable in whole or part.
(e) No Actions have been asserted, are pending or, to
the knowledge of the Company, are threatened against the Company
or any Subsidiary (i) based upon or challenging or seeking to deny
or restrict the use by the Company or any Subsidiary of any of the
Owned Intellectual Property or Licensed Intellectual Property,
(ii) alleging that any services provided by, processes used by or
products manufactured or sold by the Company or any Subsidiary in
connection with the Business infringe or misappropriate any
Intellectual Property right of any third party or (iii) alleging
that the Licensed Intellectual Property is being licensed or
sublicensed in conflict with the terms of any license or other
agreement.
(f) To the knowledge of the Company, no person is
engaging in any activity that infringes the Owned Intellectual
Property or Licensed Intellectual Property. Neither the Company
nor any Subsidiary has granted any license or other right to any
third party with respect to the Owned Intellectual Property or
Licensed Intellectual Property.
(g) The Company shall make available to the Purchaser
within three (3) Business Days after the date hereof correct and
complete copies of all the agreements included in the Licenses.
With respect to each such agreement:
(i) such agreement is valid and binding and in full
force and effect and represents the entire agreement between
the respective licensor and licensee with respect to the
subject matter of such agreement;
(ii) such agreement will not cease to be valid and
binding and in full force and effect on terms identical to
those currently in effect as a result of the consummation of
the transactions contemplated by this Agreement, nor will the consummation
of the transactions contemplated by this
Agreement constitute a breach or default under such agreement
or otherwise give the licensor a right to terminate such
agreement;
(iii) neither the Company nor any Subsidiary has (A)
received any notice of termination or cancellation under such
agreement, (B) received any notice of breach or default under
such agreement, which breach has not been cured, or (C)
granted to any other third party any rights, adverse or
otherwise, under such agreement that would constitute a
breach of such agreement; and
(iv) to the knowledge of the Company, neither the
Company, any Subsidiary nor any other party to such agreement
is in breach or default thereof in any material respect, and
no event has occurred that, with notice or lapse of time,
would constitute such a breach or default or permit
termination, modification or acceleration under such
agreement.
(h) To the knowledge of the Company (i) there has been
no misappropriation of any material trade secrets or other
material confidential Intellectual Property used in connection
with the Business by any person, (ii) no employee, independent
contractor or agent of the Company or any Subsidiary has
misappropriated any trade secrets of any other person in the
course of performance as an employee, independent contractor or
agent of the Business, and (iii) no employee, independent
contractor or agent of the Company or any Subsidiary is in default
or breach of any term of any employment agreement, nondisclosure
agreement, assignment of invention agreement or similar agreement
or contract relating in any way to the protection, ownership,
development, use or transfer of Intellectual Property.
(i) Except as would not have a Material Adverse Effect,
all Company Systems are Year 2000 Compliant.
SECTION 3.20. Real Property
. (a) Section 3.20(a) of the Disclosure Schedule
lists: (i) the street address of each parcel of Owned Real
Property, (ii) the current owner of each such parcel of Owned Real
Property and (iii) the current use of each such parcel of Owned
Real Property.
(b) Section 3.20(b) of the Disclosure Schedule lists:
(i) the street address of each parcel of Leased Real Property,
(ii) the identity of the lessor, lessee and current occupant (if
different from lessee) of each such parcel of Leased Real Property
and (iii) the current use of each such parcel of Leased
Real Property.
(c) The Company has made available to the Purchaser, or
shall make available to the Purchaser within three (3) Business
Days after the date hereof, true, legible and complete copies, to
the extent available, of all the title insurance policies, title
reports, surveys, certificates of occupancy, environmental reports
and audits, appraisals, Permits, other Encumbrances, title
documents and other documents relating to or otherwise affecting
the Real Property, the operations of the Company or any Subsidiary
thereon or any other uses thereof. Either the Company or a
Subsidiary, as the case may be, is in peaceful and undisturbed
possession of each parcel of Real Property. Neither the Company
nor any Subsidiary has leased or subleased any parcel or any
portion of any parcel of Real Property to any other Person and no
other Person has any rights to the use, occupancy or enjoyment
thereof pursuant to any lease, sublease, license, occupancy or
other agreement, nor has the Company or any Subsidiary assigned
its interest under any lease or sublease listed in Section 3.20(b)
of the Disclosure Schedule to any third party.
(d) The Company has, or has caused to be, delivered to
the Purchaser true and complete copies of all leases and subleases
listed in Section 3.20(b) of the Disclosure Schedule and any and
all ancillary documents (the "Ancillary Lease Documents")
pertaining thereto (including, but not limited to, all amendments,
modifications, supplements, exhibits, schedules, addenda and
restatements thereto and thereof and all consents, including,
without limitation, consents for alterations, assignments and
sublets, documents recording variations, memoranda of lease,
options, rights of expansion, extension, first refusal and first
offer and evidence of commencement dates and expiration dates).
With respect to each such lease and sublease:
(i) such lease or sublease, together with all Ancillary
Lease Documents delivered pursuant to the first sentence of
this Section 3.20(d), is in full force and effect and
represents the entire agreement between the respective
landlord and tenant with respect to such Leased Real
Property;
(ii) such lease or sublease will not cease to be in full
force and effect on terms identical to those currently in
effect as a result of the consummation of the transactions
contemplated by this Agreement, nor will the consummation of
the transactions contemplated by this Agreement constitute a
breach or default under such lease or sublease or otherwise
give the landlord a right to terminate such lease or
sublease;
(iii) (A) neither the Company nor any Subsidiary has
received any notice of cancellation or termination under such
lease or sublease and (B) neither the Company nor any
Subsidiary has received any notice of a breach or default
under such lease or sublease, which breach or default has not
been cured;
(iv) none of the Company, any Subsidiary or, to the
knowledge of the Company, any other party to such lease or
sublease is in breach or default in any material respect and,
to the knowledge of the Company, no event has occurred that,
with notice or lapse of time, would constitute such a breach
or default or permit termination, modification or
acceleration under such lease or sublease; and
(v) neither the Company nor any Subsidiary has
exercised or given any notice of exercise of, nor has any
lessor or landlord exercised or received any notice of
exercise by a lessor or landlord of, any option, right of
first offer or right of first refusal contained in any such
lease or sublease, including, without limitation, any
pertaining to purchase, expansion, renewal, extension or
relocation (collectively, "Options").
(e) There are no condemnation proceedings or eminent
domain proceedings of any kind pending or, to the knowledge of the
Company, threatened against the Real Property.
(f) All the Real Property is occupied under a valid and
current certificate of occupancy or similar permit, the
transactions contemplated by this Agreement will not require the
issuance of any new or amended certificate of occupancy and, to
the knowledge of the Company, there are no facts that would
prevent the Real Property from being occupied by the Company or
any Subsidiary, as the case may be, after the Closing in the same
manner as occupied by the Company or such Subsidiary immediately
prior to the Closing.
(g) No improvements on the Real Property and none of
the current uses and conditions thereof violate any Encumbrance,
applicable deed restrictions or other applicable covenants,
restrictions, agreements, existing site plan approvals, zoning or
subdivision regulations or urban redevelopment plans as modified
by any duly issued variances, and no permits, licenses or
certificates pertaining to the ownership or operation of all
improvements on the Real Property, other than those which are
transferable with the Real Property, are required by any
Governmental Authority having jurisdiction over the Real Property.
(h) All improvements on any Real Property are wholly
within the lot limits of such Real Property.
SECTION 3.21. Tangible Personal Property
. The Company has good and valid title to, or valid
and subsisting leasehold interests in, all tangible personal
property used by the Company or reflected on the Reference Balance
Sheet (the "Tangible Personal Property").
SECTION 3.22. Assets
. (a) Either the Company or a Subsidiary, as the case
may be, owns, leases or has the legal right to use all the
properties and assets, including, without limitation, the Owned
Intellectual Property, the Licensed Intellectual Property, the
Licenses, the Real Property and the Tangible Personal Property,
used or intended to be used in the conduct of the Business or
otherwise owned, leased or used by the Company or any Subsidiary
and, with respect to contract rights, is a party to and enjoys the
right to the benefits of all contracts, agreements and other
arrangements used or intended to be used by the Company or any
Subsidiary in or relating to the conduct of the Business, all of
which properties, assets and rights constitute Assets. Either the
Company or a Subsidiary, as the case may be, has good and
marketable title to or, in the case of leased or subleased Assets,
valid and subsisting leasehold interests in, all the Assets, free
and clear of all Encumbrances, except (i) as disclosed in Section
3.19(a), 3.20(a) or 3.20(b) of the Disclosure Schedule and (ii)
Permitted Encumbrances.
(b) The Assets constitute all the properties, assets
and rights forming a part of or used, held or intended to be used
in, and all such properties, assets and rights as are necessary in
the conduct of, the Business. At all times since the Reference
Balance Sheet Date, the Company has caused the Assets to be
maintained in accordance with good business practice, and all the
Assets are in good operating condition and repair and are suitable
for the purposes for which they are used and intended.
SECTION 3.23. Customers
. Section 3.23 of the Disclosure Schedule sets forth
the names and addresses of the ten most significant customers of
the Business (based on sales for the year ended January 31, 2000)
that ordered goods or merchandise from the Company or any
Subsidiary during the 12-month period ended January 31, 2000 and
the amount for which each such customer was invoiced during such
period and during the three-month period ended April 30, 2000.
Within three (3) Business Days after the date hereof, the Company
will make available to the Purchaser, and permit the Purchaser to
copy, the names and addresses of all the customers of the Business
that ordered goods or merchandise from the Company or any
Subsidiary for both the 12-month period ended January 31, 2000 and
the three-month period ended April 30, 2000 and the amount for
which each such customer was invoiced during such period. Neither
the Company nor any Subsidiary has received any notice or has any
reason to believe that any significant customer of the Business
has ceased, or will cease, to use the products, equipment, goods
or services of the Company or any Subsidiary, or has substantially
reduced, or will substantially reduce, the use of such products,
equipment, goods or services at any time.
SECTION 3.24. Suppliers
. Section 3.24 of the Disclosure Schedule sets forth
the names and addresses of the ten most significant suppliers
(based on aggregate purchases for the year ended January 31, 2000)
from which the Company or Subsidiary ordered raw materials,
supplies, merchandise and other goods for the Business during the
12-month period ended January 31, 2000 and the amount for which
each such supplier invoiced the Company or any Subsidiary during
such period and during the three-month period ended April 30,
2000. Within three (3) Business Days following the date hereof,
the Company will make available to the Purchaser, and permit the
Purchaser to copy, the names and addresses of all the suppliers
from which the Company or any Subsidiary ordered raw materials,
supplies, merchandise and other goods for the Business for both
the 12-month period ended January 31, 2000 and the three-month
period ended April 30, 2000 and the amount for which each such
supplier invoiced the Company or any Subsidiary during such
period. Neither the Company nor any Subsidiary has received any
notice or has any reason to believe that any significant supplier
will not sell raw materials, supplies, merchandise and other goods
to the Company or any Subsidiary at any time after the Closing
Date on terms and conditions substantially similar to those used
in its current sales to the Business, subject only to general and
customary price increases.
SECTION 3.25. Employee Benefit Matters
.
(a) Plans and Material Documents. Section 3.25(a) of the
Disclosure Schedule lists (i) all employee benefit plans (as
defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")) and all bonus, stock
option, stock purchase, restricted stock, incentive, deferred
compensation, retiree medical or life insurance, supplemental
retirement, severance or other benefit plans, programs or
arrangements, and all employment, termination, severance, change
in control or other contracts or agreements to which the Company
or any Subsidiary is a party, with respect to which the Company or
any Subsidiary has any obligation or that are maintained,
contributed to or sponsored by the Company or any Subsidiary for
the benefit of any current or former employee, officer or director
of the Company or any Subsidiary, (ii) each employee benefit plan
for which the Company or any Subsidiary could incur liability
under Section 4069 of ERISA in the event such plan has been or
were to be terminated, (iii) any plan in respect of which the
Company or any Subsidiary could incur liability under Section
4212(c) of ERISA and (iv) any contracts, arrangements or
understandings between any Stockholder or any Affiliate of any
Stockholder and any employee of the Company or of any Subsidiary,
including, without limitation, any contracts, arrangements or
understandings relating to the sale of the Company (collectively,
the "Plans"). Each Plan is in writing and the Company has made
available to the Purchaser a complete and accurate copy of each
Plan. The Company shall make available to the Purchaser within
three (3) Business Days after the date hereof a complete and
accurate copy of each material document prepared in connection
with each such Plan including, without limitation, (i) a copy of
each trust or other funding arrangement, (ii) each summary plan
description and summary of material modifications, (iii) the most
recently filed IRS Form 5500, (iv) the most recently received IRS determination
letter for each such Plan and (v) the most recently
prepared actuarial report and financial statement in connection
with each such Plan. Except as set forth in Section 3.25(a) of
the Disclosure Schedule, there are no other employee benefit
plans, programs, arrangements or agreements, whether formal or
informal, whether in writing or not, to which the Company or any
Subsidiary is a party, with respect to which the Company or any
Subsidiary has any obligation or that are maintained, contributed
to or sponsored by the Company or any Subsidiary for the benefit
of any current or former employee, officer or director of the
Company or any Subsidiary. Neither the Company nor any Subsidiary
has any express or implied commitment (i) to create, incur
liability with respect to or cause to exist any other employee
benefit plan, program or arrangement, (ii) to enter into any
contract or agreement to provide compensation or benefits to any
individual or (iii) to modify, change or terminate any Plan, other
than with respect to a modification, change or termination
required by ERISA or the Code.
(b) Absence of Certain Types of Plans. None of the
Plans is a multiemployer plan (within the meaning of
Section 3(37) or 4001(a)(3) of ERISA) (a "Multiemployer Plan") or
a single employer pension plan (within the meaning of
Section 4001(a)(15) of ERISA) for which the Company or any
Subsidiary could incur liability under Section 4063 or 4064 of
ERISA (a "Multiple Employer Plan"). None of the Plans provides
for the payment of separation, severance, termination or similar
type benefits to any Person or obligates the Company or any
Subsidiary to pay separation, severance, termination, retirement,
enhanced benefits or any acceleration, vesting, distribution or
increase in benefit or obligation or similar type benefits solely
as a result of any transaction contemplated by this Agreement or
as a result of a "change in control", within the meaning of such
term under Section 280G of the Code. None of the Plans provides
for or promises retiree medical, disability or life insurance
benefits to any current or former employee, officer or director of
the Company or any Subsidiary. Each of the Plans is subject
only to the laws of the United States or a political subdivision
thereof.
(c) Compliance with Applicable Law. Each Plan is now
and always has been operated in all respects in accordance with
the requirements of all applicable Law, including, without
limitation, ERISA and the Code, and all persons who participate in
the operation of such Plans and all Plan "fiduciaries" (within the
meaning of Section 3(21) of ERISA) have acted in accordance with
the provisions of all applicable Law, including, without
limitation, ERISA and the Code. The Company and each Subsidiary
have performed all obligations required to be performed by them
under, are not in any respect in default under or in violation of,
and have no knowledge of any default or violation by any party to,
any Plan. No legal action, suit or claim is pending or threatened
with respect to any Plan (other than claims for benefits in the
ordinary course) and no fact or event exists that could give rise
to any such action, suit or claim.
(d) Qualification of Certain Plans. Each Plan that is
intended to be qualified under Section 401(a) of the Code or
Section 401(k) of the Code has received a favorable determination
letter from the IRS that it is so qualified and each trust
established in connection with any Plan which is intended to be
exempt from federal income taxation under Section 501(a) of the
Code has received a determination letter from the IRS that it is
so exempt and no fact or event has occurred since the date of such determination
letter from the IRS to adversely affect the
qualified status of any such Plan or the exempt status of any such
trust. Each trust maintained or contributed to by the Company or
any Subsidiary which is intended to be qualified as a voluntary
employees' beneficiary association and which is intended to be
exempt from federal income taxation under Section 501(c)(9) of the
Code has received a favorable determination letter from the IRS
that it is so qualified and so exempt and no fact or event has
occurred since the date of such determination by the IRS to
adversely affect such qualified or exempt status.
(e) Absence of Certain Liabilities and Events. With
respect to the Plans, no event has occurred and there exists no
condition or set of circumstances in connection with which the
Company or the Subsidiaries could be expected to be subject to any
liability under the terms of such plans, ERISA, the Code or any
other applicable Law.
(f) Plan Contributions and Funding. All contributions,
premiums or payments required to be made with respect to any Plan
have been made on or before their due dates. All such
contributions have been fully deducted for income tax purposes, no
such deduction has been challenged or disallowed by any government
entity and no fact or event exists that could give rise to any
such challenge or disallowance. As of the Closing Date, no Plan
that is subject to Title IV of ERISA will have an "unfunded
benefit liability" (within the meaning of
Section 4001(a)(18) of ERISA).
(g) Certain Employee Benefits Assets. Each of the
guaranteed investment contracts and other funding contracts with
any insurance company that are held by any of the Plans and any
annuity contracts purchased by (i) any of the Plans or (ii) any
pension benefit plans (as defined in Section 3(2) of ERISA) that
provided benefits to any current or former employees of the
Company or any Subsidiary was issued by an insurance company that
carried the highest rating from each of Duff & Phelps Credit
Rating Co., Standard & Poor's Insurance Rating Services,
A.M. Best Company and Moody's Investors Service, as of the date
such contract was issued, the date hereof and the Closing Date.
SECTION 3.26. Labor Matters
. (a) Except as set forth in Section 3.26 of the
Disclosure Schedule, neither the Company nor any Subsidiary is a
party to any collective bargaining agreement or other labor union
contract applicable to persons employed by the Company or any
Subsidiary and currently there are no organizational campaigns,
petitions or other unionization activities seeking recognition of
a collective bargaining unit within the Company or any Subsidiary;
(b) there are no controversies, strikes, slowdowns or work
stoppages pending or threatened between the Company or any
Subsidiary and any of their respective employees and neither the
Company nor any Subsidiary has experienced any such controversy,
strike, slowdown or work stoppage within the past three years; (c)
neither the Company nor any Subsidiary has breached or otherwise
failed to comply with the provisions of any collective bargaining
or union contract and there are no grievances outstanding against
the Company or any Subsidiary under any such agreement or
contract; (d) there are no unfair labor practice complaints
pending against the Company or any Subsidiary before the National
Labor Relations Board or any other Governmental Authority or any
current union representation questions involving employees of the
Company or any Subsidiary; (e) the Company and each Subsidiary are
currently in material compliance with all applicable Laws relating
to the employment of labor, including those related to wages,
hours, collective bargaining and the payment and withholding of
taxes and other sums as required by the appropriate Governmental
Authority, and have withheld and paid to the appropriate
Governmental Authority or are holding for payment not yet due to
such Governmental Authority all amounts required to be withheld
from employees of the Company or any Subsidiary and are not liable
for any arrears of wages, taxes, penalties or other sums for
failure to comply with any of the foregoing; (f) the Company and
each Subsidiary have paid in full to all their respective
employees or adequately accrued for in accordance with U.S. GAAP
all wages, salaries, commissions, bonuses, benefits and other
compensation due to or on behalf of such employees; (g) there is
no claim with respect to payment of wages, salary or overtime pay
that has been asserted or is now pending or threatened before any
Governmental Authority with respect to any Persons currently or
formerly employed by the Company or any Subsidiary; (h) neither
the Company nor any Subsidiary is a party to, or otherwise bound
by, any consent decree with, or citation by, any Governmental
Authority relating to employees or employment practices; (i) there
is no charge or proceeding with respect to a violation of any
occupational safety or health standards that has been asserted or
is now pending or threatened with respect to the Company or any
Subsidiary; and (j) there is no charge of discrimination in
employment or employment practices for any reason, including,
without limitation, age, gender, race, religion or other legally
protected category, that has been asserted or is now pending or
threatened before the United States Equal Employment Opportunity
Commission or any other Governmental Authority in any jurisdiction
in which the Company or any Subsidiary has employed or currently
employs any Person.
SECTION 3.27. Salaried Employees
. (a) Within three (3) Business Days after the date
hereof, the Company will make available to the Purchaser, and
permit the Purchaser to copy, a list setting forth the name, place
of employment, the current annual salary rates, bonuses,
deferred or contingent compensation, pension, accrued vacation,
"golden parachute" and other like benefits paid or payable (in
cash or otherwise) in 1998, 1999 and 2000, the date of employment
and a description of position and job function of each current
salaried employee, officer, director, consultant or agent of the
Company or any Subsidiary.
(b) Section 3.27(b) of the Disclosure Schedule sets
forth the directors, officers, employees and other persons that
are under written obligation to the Company or any Subsidiary to
maintain in confidence all confidential or proprietary information
acquired in the course of employment or engagement with the
Company or any Subsidiary or to assign to the Company or any
Subsidiary all inventions made within the scope of employment or
engagement with the Company or any Subsidiary during such
employment or engagement. The Company and the Stockholders shall
use reasonable efforts to afford to the Purchaser as of the
Closing Date the benefits of the confidentiality provisions
relating to any director, officer, employee or other person set
forth in Section 3.27(b) of the Disclosure Schedule to the extent
that the benefits of such confidentiality provisions are not
provided to the Purchaser in this Agreement or an Employment
Agreement.
SECTION 3.28. Certain Interests
. (a) No stockholder, officer or director of the
Company or any Subsidiary and no relative or spouse (or relative
of such spouse) who resides with, or is a dependent of, any such
stockholder, officer or director:
(i) has any direct or indirect financial interest in
any competitor, supplier or customer of the Company or any
Subsidiary, provided, however, that the ownership of
securities representing no more than 1% of the outstanding
voting power of any competitor, supplier or customer, that
are also listed on any national securities exchange or traded
actively in the national over-the-counter market, shall not
be deemed to be a "financial interest" so long as the Person
owning such securities has no other connection or
relationship with such competitor, supplier or customer;
(ii) owns, directly or indirectly, in whole or in part,
or has any other interest in any tangible or intangible
property that the Company or any Subsidiary uses or has used
in the conduct of the Business or otherwise; or
(iii) has outstanding any Indebtedness to the
Company or any Subsidiary.
(b) Except as set forth in Section 3.28(b) of the
Disclosure Schedule, neither the Company nor any Subsidiary has
any Liability or any other obligation of any nature whatsoever to
any officer, director or stockholder of the Company or any
Subsidiary or to any relative or spouse (or relative of such
spouse) who resides with, or is a dependent of, any such officer,
director or stockholder.
SECTION 3.29. Taxes
. (a) (i) All returns and reports in respect of Taxes
required to be filed with respect to the Company and each
Subsidiary have been timely filed; (ii) all Taxes required to be
shown on such returns and reports or otherwise due have been
timely paid; (iii) all such returns and reports (insofar as they
relate to the activities or income of the Company or any
Subsidiary) are true, correct and complete in all material
respects; (iv) no adjustment relating to such returns has been
proposed formally or informally by any Tax authority (insofar as
either relates to the activities or income of the Company or any
Subsidiary or could result in liability of the Company or any
Subsidiary on the basis of joint and/or several liability) and, to
the knowledge of the Company, no basis exists for any such
adjustment; (v) there are no pending or, to the knowledge of the
Company, threatened actions or proceedings for the assessment or
collection of Taxes against the Company or any Subsidiary;
(vi) no consent under section 341(f) of the Code has been filed
with respect to the Company or any Subsidiary or of the Business;
(vii) all sales and license transactions between the Company and
any Subsidiary, and between any of the Subsidiaries, have been
conducted on an arm's-length basis; (viii) the Company has not
been at any time a member of any partnership or joint venture or
the holder of a beneficial interest in any trust for any period
for which the statute of limitations for any Tax has not expired;
(ix) neither the Company nor any Subsidiary is subject to any
accumulated earnings tax, personal holding company tax or similar
tax; and (x) neither the Company nor any Subsidiary is or has been
a U.S. real property holding corporation within the meaning of
section 897 of the Code.
(b) (i) There are no outstanding waivers or agreements
extending the statute of limitations for any period with respect
to any Tax to which the Company, any Subsidiary or the Business
may be subject; (ii) there are no requests for information
currently outstanding that could affect the Taxes of the Company,
any Subsidiary or the Business; (iii) there are no proposed
reassessments of any property owned by the Company or any
Subsidiary or other proposals that could increase the amount of
any Tax to which the Company, any Subsidiary or the Business would
be subject; and (iv) no power of attorney that is currently in
force has been granted with respect to any matter relating to
Taxes that could affect the Company.
(c) (i) Section 3.29(c) of the Disclosure Schedule
lists all income, franchise and similar tax Returns (federal,
state, local and foreign) filed with respect to each of the
Company and the Subsidiaries for taxable periods ended on or after
December 31, 1996, indicates the most recent income, franchise or
similar tax Return for each relevant jurisdiction for which an
audit has been completed or the statute of limitations has lapsed
and indicates all tax Returns that currently are the subject of
audit; and (ii) the Stockholders have made available to the
Purchaser, or shall make available to the Purchaser within three
(3) Business Days after the date hereof, correct and complete
copies of all federal, state and foreign income, franchise and
similar tax Returns, examination reports, and statements of
deficiencies assessed against or agreed to by the Company or any
Subsidiary since December 31, 1996.
(d) For purposes of determining whether the conditions
to Closing have been satisfied (but not for purposes of the
Stockholders' indemnification of the Purchaser pursuant to Section
7.01(a)), the representations in Section 3.29(a) shall apply only
with respect to items that could have a Material Adverse Effect
on the Company, any Subsidiary, or the Business. For purposes of
the Stockholders' indemnification of the Purchaser pursuant to
Section 7.01(a), the representations in Section 3.29(a) shall be
deemed to have been made with no exception.
(e) On the Reference Balance Sheet, reserves and
allowances have been provided, and on the Closing Balance Sheet
reserves and allowances will be provided, in each case adequate to
satisfy all Liabilities for Taxes relating to the Company, the
Subsidiaries and the Business for periods through the Closing Date
(without regard to the materiality thereof).
SECTION 3.30. Insurance
. (a) Section 3.30(a) of the Disclosure Schedule sets
forth the following information with respect to each insurance
policy (including policies providing property, casualty,
liability, workers' compensation, and bond and surety
arrangements) under which the Company or any Subsidiary has been
an insured, a named insured or otherwise the principal beneficiary
of coverage at any time within the past three years:
(i) the name, address and telephone number of the agent
or broker;
(ii) the name of the insurer and the names of the
principal insured and each named insured;
(iii) the policy number and the period of coverage;
(iv) the type, scope (including an indication of whether
the coverage was on a claims made, occurrence or other basis)
and amount (including a description of how deductibles,
retentions and aggregates are calculated and operate) of
coverage; and
(v) the premium charged for the policy, including,
without limitation, a description of any retroactive premium
adjustments or other loss-sharing arrangements.
(b) With respect to each such insurance policy:
(i) the policy is legal, valid, binding and enforceable in
accordance with its terms and, except for policies that have
expired under their terms in the ordinary course, is in full force
and effect; (ii) neither the Company nor any Subsidiary is in
breach or default (including any breach or default with respect to
the payment of premiums or the giving of notice), and no event has
occurred that, with notice or the lapse of time, would constitute
such a breach or default or permit termination or modification,
under the policy; (iii) no party to the policy has repudiated, or
given notice of an intent to repudiate, any provision thereof; and
(iv) to the knowledge of the Company, no insurer on the policy has
been declared insolvent or placed in receivership, conservatorship
or liquidation or currently has a rating of "B+" or below from
A.M. Best & Co. or a claims-paying ability rating of "BBB" or
below from Standard & Poor's, Inc.
(c) There are no risks against which the Company or any
Subsidiary is self-insured or which are covered under any risk
retention program in which the Company or any Subsidiary
participates.
(d) All material assets, properties and risks of the
Company and each Subsidiary are, and for the past five years have
been, covered by valid and, except for policies that have expired
under their terms in the ordinary course, currently effective
insurance policies or binders of insurance (including, without
limitation, general liability insurance, property insurance and
workers' compensation insurance) issued in favor of the Company or
a Subsidiary, as the case may be, in each case with responsible
insurance companies, in such types and amounts and covering such
risks as are consistent with customary practices
and standards of companies engaged in businesses and operations
similar to those of the Company or such Subsidiary, as the case
may be.
(e) At no time subsequent to December 31, 1997 has the
Company or any Subsidiary (i) been denied any insurance or
indemnity bond coverage that it has requested, (ii) made any
material reduction in the scope or amount of its insurance
coverage or received notice from any of its insurance carriers
that any insurance premiums will be subject to increase in an
amount materially disproportionate to the amount of the increases
with respect thereto (or with respect to similar insurance) in
prior years or that any insurance coverage listed in
Section 3.30(a) of the Disclosure Schedule will not be available
in the future on substantially the same terms as those that are
now in effect or (iii) suffered any extraordinary increase in
premium for renewed coverage. Since January 1, 1998, no insurance
carrier has cancelled, failed to renew or materially reduced any
insurance coverage for the Company or any Subsidiary or given any
notice or other indication of its intention to cancel, not renew
or reduce any such coverage.
(f) At the time of the Closing, all insurance policies
currently in effect will be outstanding and duly in force.
(g) All of the Assets are insurable on customary terms
at commercially reasonable rates and no Asset will cease to be
insurable on terms substantially similar to those in effect as of
the date hereof as a result of the consummation of the
transactions contemplated by this Agreement.
(h) No insurance policy listed in Section 3.30(a) of
the Disclosure Schedule will cease to be legal, valid, binding,
enforceable in accordance with its terms and in full force and
effect on terms identical to those in effect as of the date hereof
as a result of the consummation of the transactions contemplated
by this Agreement.
SECTION 3.31. Accounts; Lockboxes; Safe Deposit Boxes;
Powers of Attorney
. Section 3.31 of the Disclosure Schedule is a true
and complete list of (a) the names of each bank, savings and loan
association, securities or commodities broker or other financial
institution in which the Company or any Subsidiary has an account,
including cash contribution accounts, and the names of all persons
authorized to draw thereon or have access thereto, (b) the
location of all lockboxes and safe deposit boxes of the Company
and each Subsidiary and the names of all Persons authorized to
draw thereon or have access thereto and (c) the names of all
Persons, if any, holding powers of attorney from the Company or
any Subsidiary. At the time of the Closing, without the prior
written consent of the Purchaser, neither the Company nor any
Subsidiary shall have any such account, lockbox or safe deposit
box other than those listed in Section 3.31 of the Disclosure
Schedule, nor shall any additional Person have been authorized,
from the date of this Agreement, to draw thereon or have access
thereto or to hold any such power of attorney relating to the
Company, any Subsidiary or the Business or from the Company or any
Subsidiary. Except as disclosed in
Section 3.31 of the Disclosure Schedule, the Stockholders have not
commingled monies or accounts of the Company or any Subsidiary
with other monies or accounts of the Stockholders nor have the
Stockholders transferred monies or accounts of the Company or any
Subsidiary other than to an account of the Company or such
Subsidiary. At the time of the Closing, all monies and
accounts of the Company and each Subsidiary shall be held by, and
be accessible only to, the Company or such Subsidiary.
SECTION 3.32. Full Disclosure
. No representation or warranty of the Company or any
Stockholder in this Agreement, nor any statement or certificate
furnished or to be furnished to the Purchaser pursuant to this
Agreement, or in connection with the transactions contemplated by
this Agreement, contains or will contain any untrue statement of a
material fact, or omits or will omit to state a material fact
necessary to make the statements contained herein or therein not
misleading.
SECTION 3.33. Brokers
. No broker, finder or investment banker is entitled
to any brokerage, finder's or other fee or commission in
connection with the transactions contemplated by this Agreement or
the Ancillary Agreements based upon arrangements made by or on
behalf of the Company or any Stockholder.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF THE PURCHASER
As an inducement to the Company and each Stockholder to
enter into this Agreement, the Purchaser hereby represents and
warrants to the Company and each Stockholder as follows:
SECTION 4.01. Organization and Authority of the
Purchaser
. The Purchaser is a corporation duly incorporated,
validly existing and in good standing under the laws of the State
of New York and has all necessary corporate power and authority to
enter into this Agreement and the Ancillary Agreements, to carry
out its obligations hereunder and thereunder and to consummate the transactions
contemplated hereby and thereby. The execution and
delivery of this Agreement and the Ancillary Agreements by the
Purchaser, the performance by the Purchaser of its obligations
hereunder and thereunder and the consummation by the Purchaser of
the transactions contemplated hereby and thereby have been duly
authorized by all requisite action on the part of the Purchaser.
This Agreement and the Ancillary Agreements have been duly
executed and delivered by the Purchaser, and (assuming due
authorization, execution and delivery by the Company, each
Stockholder that is a party thereto and, in the case of the Escrow
Agreement, the Escrow Agent) this Agreement and the Ancillary
Agreements constitute legal, valid and binding obligations of the
Purchaser, enforceable against the Purchaser in accordance with
their respective terms.
SECTION 4.02. No Conflict
. Assuming compliance with the notification
requirements of the HSR Act and the making and obtaining of all
filings, notifications, consents, approvals, authorizations and
other actions referred to in Section 4.03, except as may result
from any facts or circumstances relating solely to the Company or
any Stockholder, the execution, delivery and performance of this
Agreement and the Ancillary Agreements by the Purchaser, do not
and will not (a) violate, conflict with or result in the breach of
any provision of the Certificate of Incorporation or By-laws of
the Purchaser, (b) conflict with or violate any Law or
Governmental Order applicable to the Purchaser or (c) conflict
with, or result in any breach of, constitute a default (or event
that with the giving of notice or lapse of time, or both, would
become a default) under, require any consent under, or give to
others any rights of termination, amendment, acceleration,
suspension, revocation or cancellation of, or result in the
creation of any Encumbrance on any of the assets or properties of
the Purchaser pursuant to, any note, bond, mortgage or indenture,
contract, agreement, lease, sublease, license, permit, franchise
or other instrument or arrangement to which the Purchaser is a
party or by which any of such assets or properties is bound, that
would have a material adverse effect on the ability of the
Purchaser to consummate the transactions contemplated by this
Agreement or by the Ancillary Agreements.
SECTION 4.03. Governmental Consents and Approvals
. The execution, delivery and performance of this
Agreement and each Ancillary Agreement by the Purchaser do not and
will not require any consent, approval, authorization or other
order of, action by, filing with, or notification to, any
Governmental Authority, except the requirements of the HSR Act.
SECTION 4.04. Investment Purpose
. The Purchaser is acquiring the Shares solely for the
purpose of investment and not with a view to, or for offer or sale
in connection with, any distribution thereof.
SECTION 4.05. Litigation
. No claim, action, proceeding or investigation is
pending or, to the knowledge of the Purchaser, threatened, which
seeks to delay or prevent the consummation of, or that would be
reasonably likely to materially adversely affect the Purchaser's
ability to consummate, the transactions contemplated by this
Agreement and the Ancillary Agreements.
SECTION 4.06. Brokers
. No broker, finder or investment banker is entitled
to any brokerage, finder's or other fee or commission in
connection with the transactions contemplated by this Agreement
based upon arrangements made by or on
behalf of the Purchaser. ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.01. Conduct of Business Prior to the Closing
. (a) The Company and the Stockholders covenant and
agree that, except as described in Section 5.01(a) of the
Disclosure Schedule, between the date hereof and the time of the
Closing, neither the Company nor any Subsidiary shall conduct its
business other than in the ordinary course and consistent with the
past practice of the Company or such Subsidiary. Without limiting
the generality of the foregoing, except as described in Section
5.01(a) of the Disclosure Schedule, the Company shall and shall
cause each Subsidiary to (i) continue its advertising and
promotional activities, and pricing and purchasing policies, in
accordance with past practice; (ii) not shorten or lengthen the
customary payment cycles for any of its payables or receivables;
(iii) use its reasonable best efforts to (A) preserve intact its
business organizations and the business organization of the
Business, (B) keep available to the Purchaser the services of the
employees of the Company and each Subsidiary, (C) continue in full
force and effect without material modification all existing
policies or binders of insurance currently maintained in respect
of the Company, each Subsidiary and the Business and (D) preserve
its current relationships with its customers, suppliers and other
persons with which it has significant business relationships; (iv)
exercise, but only after notice to the Purchaser and receipt of
the Purchaser's prior written approval, any rights of renewal
pursuant to the terms of any of the leases or subleases set forth
in Section 3.20(b) of the Disclosure Schedule that by its terms
would otherwise expire; and (v) not engage in any practice, take
any action, fail to take any action or enter into any transaction
that could cause any representation or warranty of the Company or
any Stockholder to be untrue in any material respect (or in the
case of any representation or and warranty that is qualified as to materiality,
that could cause such representation or warranty to
be untrue in any respect) or result in a breach of any covenant
made by the Company or any Stockholder in this Agreement.
(b) Except as described in Section 5.01(b) of the
Disclosure Schedule, the Company and the Stockholders covenant and
agree that, prior to the Closing, without the prior written
consent of the Purchaser, neither the Company nor any Subsidiary
will do any of the things enumerated in the second sentence of
Section 3.14 (including, without limitation, clauses (a) through
(aa) thereof); provided that, the Company and the Subsidiaries may
issue purchase orders or otherwise agree to make any purchases in
the ordinary course of business to customers and in amounts
consistent with past practice to satisfy customer orders or future
business.
(c) Between the date hereof and the Closing, the
Company shall promptly make available to the Purchaser copies of,
and permit the Purchaser to copy, (i) each material purchase order
issued by the Company or any Subsidiary and (ii) each sales order.
SECTION 5.02. Access to Information
. (a) From the date hereof until the Closing, upon
reasonable notice, the Company shall and shall cause its officers,
directors, employees, agents representatives, accountants and
counsel and shall cause the Subsidiaries and each of the
Subsidiaries' officers, directors, employees, agents,
representatives, accountants and counsel to: (i) afford the
officers, employees and authorized agents, accountants, counsel,
financing sources and representatives of the Purchaser reasonable
access, during normal business hours, to the offices, properties,
plants, other facilities, books and records of the Company and
each Subsidiary and to those officers, directors, employees,
agents, accountants and counsel of the Company and of each
Subsidiary who have any knowledge relating to the Company, any
Subsidiary or the Business and (ii) furnish to the officers,
employees and authorized agents, accountants, counsel, financing
sources and representatives of the Purchaser such additional
financial and operating data and other information regarding the
assets, properties and goodwill of the Company, the Subsidiaries
and the Business (or legible copies thereof) as the Purchaser may
from time to time reasonably request.
(b) In order to facilitate the resolution of any claims
made against or incurred by the Company or any Stockholder prior
to the Closing, for a period of seven years after the Closing, the
Purchaser shall (i) retain the books and records of the Company
and the Subsidiaries relating to periods prior to the
Closing in a manner reasonably consistent with the prior practice
of the Company and the Subsidiaries and (ii) upon reasonable
notice, afford any Stockholder reasonable access (including the
right to make, at the expense of such Stockholder, photocopies),
during normal business hours, to such books and records.
(c) In order to facilitate the resolution of any claims
made by or against or incurred by the Purchaser, the Company or
any Subsidiary after the Closing or for any other reasonable
purpose, for a period of seven years following the Closing, each
Stockholder shall (i) retain the books and records of such
Stockholder that relate to the Business, the Company and the
Subsidiaries and their operations for periods prior to the Closing
and that shall not otherwise have been delivered to the Purchaser,
the Company or any Subsidiary and (ii) upon reasonable notice,
afford the officers, employees and authorized agents and
representatives of the Purchaser, the Company or any Subsidiary
reasonable access (including the right to make photocopies, at the
expense of the Purchaser, the Company or such Subsidiary), during
normal business hours, to such books and records.
SECTION 5.03. Confidentiality
. (a) Each Stockholder agrees to advise any of its
agents, representatives and Affiliates with access to Confidential
Information of such Stockholder's obligations hereunder with
respect to Confidential Information, and shall, and shall cause
its agents, representatives or Affiliates to: (i) except as
required by Law, treat and hold as confidential (and not disclose
or provide access to any Person to) all information relating to
trade secrets, processes, patent and trademark applications,
product development, price, employees, customers and suppliers,
pricing and marketing plans, policies and strategies, details of
client, employee and consultant contracts, operations methods,
product development techniques, business acquisition plans, new
personnel acquisition plans and all other confidential information
with respect to the Business, the Company and each Subsidiary
("Confidential Information"), (ii) in the event that such
Stockholder or any such agent, representative or Affiliate becomes
legally compelled to disclose any Confidential Information,
provide the Purchaser with prompt written notice of such
requirement so that the Purchaser, the Company or any Subsidiary
may seek a protective order or other remedy or waive compliance
with this Section 5.03(a), (iii) in the event that such protective
order or other remedy is not obtained, or the Purchaser waives
compliance with this
Section 5.03(a), furnish only that portion of such Confidential
Information that is legally required to be provided and exercise
his or her reasonable best efforts to obtain assurances that
confidential treatment will be accorded such information, and (iv)
promptly furnish (prior to, at, or as soon as practicable
following, the Closing) to the Company or the Purchaser any and
all copies (in whatever form or medium) of all Confidential
Information then in the possession of such Stockholder or any of
its agents, representatives or Affiliates and, except as otherwise
required by Section 5.02(c), destroy any and all additional copies
then in the possession of such Stockholder or any of its agents, representatives
or Affiliates and of any analyses, compilations,
studies or other documents prepared, in whole or in part, on the
basis thereof; provided, however, that this sentence shall not
apply to any information that, at the time of disclosure, is
available publicly and was not disclosed in breach of this
Agreement by such Stockholder, its agents, representatives or
Affiliates; provided further that, with respect to Intellectual
Property, specific information shall not be deemed to be within
the foregoing exception merely because it
is embraced in general disclosures in the public domain. In
addition, with respect to Intellectual Property, any combination
of features shall not be deemed to be within the foregoing
exception merely because the individual features are in the public
domain unless the combination itself and its principle of
operation are in the public domain. Each Stockholder agrees and
acknowledges that remedies at law for any breach of its
obligations under this Section 5.03(a) are inadequate and that in
addition thereto the Purchaser shall be entitled to seek equitable
relief, including injunction and specific performance, in the
event of any such breach.
(b) The Purchaser agrees to advise any of its agents,
representatives, Affiliates, employees, officers and directors
with access to Confidential Information of the Purchaser's
obligations hereunder with respect to Confidential Information and
shall, and shall cause its agents, representatives, Affiliates,
employees, officers and directors to: (i) except as required by
Law, treat and hold as confidential (and not disclose or provide
access to any Person to) all Confidential Information, (ii) in the
event that the Purchaser or any such agent, representative,
Affiliate, employee, officer or director becomes legally compelled
to disclose any such Confidential Information, provide the Company
with prompt written notice of such requirement so that the Company
may seek a protective order or other remedy or waive compliance
with this Section 5.03(b), (iii) in the event that such protective
order or other remedy is not obtained, or the Company waives
compliance with this Section 5.03(b), furnish only that portion of
such Confidential Information that is legally required to be
provided and exercise its reasonable best efforts to obtain
assurances that confidential treatment will be accorded such
information and (iv) except as required by Law, use Confidential
Information solely in connection with the consideration and
evaluation of the transactions contemplated by this Agreement;
provided, however, that none of the foregoing obligations shall
apply to the Purchaser following the Closing. In the event this
Agreement is terminated, the Purchaser agrees not to, and shall
cause its agents, representatives, Affiliates, employees, officers
and directors not to, discuss or otherwise disclose, except as
required by Law, the circumstances leading to termination to the
extent such information is non-public, and shall, and shall cause
its agents, representatives, Affiliates, employees, officers and
directors to, destroy any and all copies (in whatever form or
medium) of all Confidential Information then in the possession of
the Purchaser or any of its agents, representatives, Affiliates,
employees, officers or directors and of any analyses,
compilations, studies or other documents prepared, in whole or in
part, on the basis thereof. This Section 5.03(b) shall not apply
to any information that, at the time of disclosure, is available
publicly and was not disclosed in breach of this Agreement by the
Purchaser, its agents, representatives, Affiliates, employees,
officers and directors; provided that, with respect to
Intellectual Property, specific information shall not be deemed to
be within the foregoing exception merely because it is embraced in
general disclosures in the public domain. In addition, with
respect to Intellectual Property, any combination of features
shall not be deemed to be within the foregoing exception merely
because the individual features are in the public domain unless
the combination itself and its principle of operation are in the
public domain. The Purchaser agrees and acknowledges that
remedies at law for any breach of its obligations under this
Section 5.03(b) are inadequate and that in addition thereto the
Stockholders shall be entitled to seek equitable relief, including
injunction and specific performance, in the event of any such
breach.
SECTION 5.04. Regulatory and Other Authorizations;
Notices and Consents
. (a) The Company and the Stockholders shall use
their reasonable best efforts to obtain (or cause the Subsidiaries
to obtain) all authorizations, consents, orders and approvals of
all Governmental Authorities and officials that may be or become
necessary for its execution and delivery of, and the performance
of their obligations pursuant to, this Agreement and the Ancillary
Agreements and will cooperate fully with the Purchaser in promptly
seeking to obtain all such authorizations, consents, orders and
approvals. Each party hereto agrees to make an appropriate filing
pursuant to the HSR Act with respect to the transactions
contemplated by this Agreement within five Business Days of the
date hereof and to supply as promptly as practicable to the
appropriate Governmental Authorities any additional information
and documentary material that may be requested pursuant to the HSR
Act.
(b) The Company and the Stockholders shall or shall
cause the Subsidiaries to give promptly such notices to third
parties and use their reasonable best efforts to obtain such third
party consents and estoppel certificates as the Purchaser may in
its sole and absolute discretion deem necessary or desirable in
connection with the transactions contemplated by this Agreement.
(c) The Purchaser shall cooperate and use all
reasonable efforts to assist the Company and the Stockholders in
giving such notices and obtaining such consents and estoppel
certificates; provided, however, that the Purchaser shall have no
obligation to give any guarantee or other consideration of any
nature in connection with any such notice, consent or estoppel
certificate or to consent to any change in the terms of any
agreement or arrangement which the Purchaser in its sole and
absolute discretion may deem adverse to the interests of the
Purchaser, the Company, any Subsidiary or the Business.
(d) The parties hereto agree that, in the event that
any consent, approval or authorization necessary or desirable to
preserve for the Business, the Company or any Subsidiary any right
or benefit under any lease, license, contract, commitment or other
agreement or arrangement to which the Company or any Subsidiary is
a party is not obtained prior to the Closing, the Stockholders
will, subsequent to the Closing, cooperate with the Purchaser, the
Company or any such Subsidiary in attempting to obtain such
consent, approval or authorization as promptly thereafter as
practicable.
SECTION 5.05. Notice of Developments
. Prior to the Closing, the Company and the
Stockholders shall promptly notify the Purchaser in writing of (a)
all events, circumstances, facts and occurrences arising
subsequent to the date of this Agreement which could result in any
breach of a representation or warranty or covenant of the Company
or any Stockholder in this Agreement or which could have the
effect of making any representation or warranty of the Company or
any Stockholder in this Agreement untrue or incorrect in any
respect and (b) all other material developments affecting the
assets, Liabilities, business, financial condition, operations,
results of operations, customer or supplier relations, employee
relations, projections or prospects of the Company, any Subsidiary
or the Business.
SECTION 5.06. Use of Intellectual Property
. (a) The Company and the Stockholders acknowledge
that from and after the Closing, the name "Delco" and all similar
or related names, marks and logos (all of such names, marks and
logos being the "Company Marks") shall be owned by the Company or
a Subsidiary, that none of the Stockholders or any of their
Affiliates shall have any rights in the Company Marks and that
none of the Stockholders or any of their Affiliates will contest
the ownership or validity of any rights of the Purchaser, the
Company or any Subsidiary in or to the Company Marks.
(b) From and after the Closing, none of the
Stockholders or any of their Affiliates shall use any of the Owned Intellectual
Property or any of the Licensed Intellectual
Property.
(c) From the date hereof to the Closing, none of the
Stockholders, the Company or any Subsidiary shall, without the
permission of Purchaser (i) sell, assign, or grant any security
interest in or to any item of the Owned Intellectual Property,
Licensed Intellectual Property or Licenses, (ii) grant to any
third party any license with respect to any Owned Intellectual
Property or Licensed Intellectual Property, other than licenses of
Company Software to the customers of the Business in the ordinary
course of business, (iii) develop, create or invent any
Intellectual Property jointly with any third party, or (iv)
disclose, or allow to be disclosed, any confidential Owned
Intellectual Property, unless such Owned Intellectual Property is
subject to a confidentiality or nondisclosure covenant protecting
against disclosure thereof.
(d) From the date hereof to the Closing, the Company
shall perform all applicable filings, recordings and other acts,
and pay all required fees and taxes, to maintain and protect its
interest in each and every item of Owned Intellectual Property and
Licensed Intellectual Property.
SECTION 5.07. Non-Competition
. (a) In partial consideration of the payments made
to the Stockholders under this Agreement, the Stockholders agree
that, for a period of five years after the Closing (the
"Restricted Period"), the Stockholders shall not engage, directly
or indirectly, in any business anywhere in the world that
manufactures, produces or supplies products or services of the
kind manufactured, produced or supplied by the Purchaser, the
Business, the Company or any Subsidiary as of the Closing Date or,
without the prior written consent of the Purchaser, directly or
indirectly, own an interest in, manage, operate, join, control,
lend money or render financial or other assistance to or
participate in or be connected with, as an officer, employee,
partner, stockholder, consultant or otherwise, any Person that
competes with the Purchaser, the Business, the Company or any
Subsidiary in manufacturing, producing or supplying products or
services of the kind manufactured, produced or supplied by the
Purchaser, the Business, the Company or any Subsidiary as of the
Closing Date; provided, however, that, for the purposes of this
Section 5.07, ownership of securities having no more than one
percent of the outstanding voting power of any entity that
competes either directly or indirectly, with the Purchaser, the
Business, the Company or any Subsidiary which are listed on any
national securities exchange or traded actively in the national over-the-counter
market shall not be deemed to be in violation of
this Section 5.07 as long as the Person owning such securities has
no other connection or relationship with such entity.
(b) As a separate and independent covenant, each
Stockholder agrees with the Purchaser that, for the Restricted
Period, such Stockholder will not in any way, directly or
indirectly, for the purpose of conducting or engaging in any
business that manufactures, produces or supplies products or
services of the kind manufactured, produced or supplied by the
Business, the Company or any Subsidiary as of the Closing, call
upon, solicit, advise or otherwise do, or attempt to do, business
competitive with the Business with any customers of the Business,
the Company or any Subsidiary with whom the Business, the Company
or any Subsidiary had any dealings during the period of time in
which the Company was an Affiliate of such Stockholder or take away
or interfere or attempt to interfere with any custom, trade,
business or patronage of the Business, the Company or any
Subsidiary, or interfere with or attempt to interfere with any
officers, employees, representatives or agents of the Business, the
Company or any Subsidiary, or induce or attempt to induce any of
them to leave the employ of the Company or any Subsidiary or
violate the terms of their contracts, or any employment
arrangements, with the Company or any Subsidiary.
(c) The Restricted Period shall be extended by the
length of any period during which any Stockholder is in breach of
the terms of this Section 5.07.
(d) The purchase price for the covenants of this
Section 5.07 shall be $8,650,000 (the "Non-Compete Purchase
Price"), allocated among the Stockholders as set forth in Exhibit
5.07. On the date of each installment payment set forth in Exhibit
2.04 (or, if such date does not fall on a Business Day, the first
Business Day following such date), the Purchaser shall pay to each
Stockholder such Stockholder's installment of the NonCompete
Purchase Price as set forth in Exhibit 5.07. With respect to each Stockholder,
the payments shall be made by wire transfer in
immediately available funds to the Purchase Price Bank Account or
such other account designated by such Stockholder in writing to the
Purchaser at least five Business Days prior to the date on which
such payment is due. The parties hereto acknowledge that the
Purchaser's obligations to make payments pursuant to this Section
5.07(d) terminate following the final installment payment required
pursuant to Exhibit 5.07.
(e) The parties hereto acknowledge that the obligations
of Section 5.07(a) and 5.07(b) shall not apply with respect to the Stockholders
ownership and operation of SDC, in a manner consistent
with past practice, during the Exempt Term.
(f) Each Stockholder acknowledges that the covenants of
such Stockholder set forth in this Section 5.07 are an essential
element of this Agreement and that, but for the agreement of such
Stockholder to comply with these covenants, the Purchaser would not
have entered into this Agreement. Each Stockholder acknowledges
that this Section 5.07 constitutes an independent covenant and
shall not be affected by performance or nonperformance of any other
provision of this Agreement by the Purchaser. Each Stockholder has
independently consulted with his or her counsel and after such
consultation agrees that the covenants set forth in this Section
5.07 are reasonable and proper.
(g) The parties hereto recognize that the laws and
public policies of various jurisdictions may differ as to the
validity and enforceability of covenants similar to those set forth
in this Section 5.07. It is the intention of the parties that the
provisions in this Section 5.07 be enforced to the
fullest extent permissible under the laws and policies of each
jurisdiction in which enforcement may be sought, and that the
unenforceability (or the modification to conform to such laws or
policies) of any provisions in this Section 5.07 shall not render unenforceable,
or impair, the remainder of the provisions hereof. Accordingly, if at the time
of enforcement of any provision
hereof, a court of competent jurisdiction holds that the
restrictions stated in this Section 5.07 are unreasonable under
circumstances then existing, the parties hereto agree that the
maximum period, scope, or geographic area reasonable under such
circumstances will be substituted for the stated period, scope or
geographical area and that such court shall be allowed to revise
the restrictions contained in this Section 5.07 to cover the
maximum period, scope and geographical area permitted by law.
SECTION 5.08. Release of Indemnity Obligations
. The Stockholders covenant and agree, on or prior to
the Closing, to execute and deliver to the Company, for the
benefit of the Company and each Subsidiary, a general release and
discharge, in form and substance satisfactory to the Purchaser,
releasing and discharging the Company and each Subsidiary from any
and all obligations to indemnify the Stockholders or otherwise
hold them harmless pursuant to any agreement or other arrangement
entered into prior to the Closing.
SECTION 5.09. Transfer of SDC
. Prior to the Closing, the Company and the
Stockholders covenant and agree to transfer all of the outstanding
capital stock of SDC to the Stockholders on terms reasonably
acceptable to the Purchaser (which terms shall include an
assignment of the SDC Lease to SDC and an agreement to discontinue
the use of the name "Delco" and all similar or related names,
marks and logos). Within six months after the Closing Date (the
"Exempt Term"), the Stockholders covenant and agree to sell,
transfer or otherwise dispose of SDC to a third party unaffiliated
with the Stockholders. If, at the expiration of the Exempt Term,
the Stockholders have not sold, transferred or otherwise disposed
of SDC, the Stockholders covenant and agree to liquidate SDC. The
Purchaser covenants and agrees that, during the Exempt Term, the
Purchaser shall cause the Company to continue to provide financial
and accounting services to SDC on terms consistent with past
practice.
SECTION 5.10. Guarantee
. The Purchaser shall use reasonable efforts to obtain
a release for Perry Delman from his guarantee of the Company's
obligations under the Company's credit agreement with The Chase
Manhattan Bank and European American Bank dated as of August 12,
1999; provided that the Purchaser shall not be required to pay any
money in connection with such release or to substitute itself as
guarantor.
SECTION 5.11. Further Action
. Each of the parties hereto shall use all reasonable
efforts to take, or cause to be taken, all appropriate action, do
or cause to be done all things necessary, proper or advisable
under applicable Law, and execute and deliver such documents and
other papers, as may be required to carry out the provisions of
this Agreement and consummate and make effective the transactions
contemplated by this Agreement.
ARTICLE VI
EMPLOYEE MATTERS
SECTION 6.01. Phantom Shares
. Prior to the Closing, the Company shall take all
action appropriate and necessary to cash out each outstanding
phantom stock unit award issued under the Phantom Stock Plan (the
"Phantom Stock Award") in accordance with the terms of the Phantom
Stock Plan. The Company agrees that it shall not grant or award
or cause to be granted or awarded any Phantom Stock Award from the
date hereof and the Company further agrees that it shall take all
action that is appropriate and necessary prior to the Closing Date
(i) to terminate the Phantom Stock Plan, effective as of the day
before the Closing Date, and (ii) to obtain a release of all
claims on behalf of all holders of Phantom Share Awards on terms
reasonably satisfactory to the Purchaser.
ARTICLE VII
TAX MATTERS
SECTION 7.01. Indemnity
. (a) The Stockholders agree to indemnify and hold
harmless the Purchaser, the Company and each Subsidiary against
the following Taxes and, except as otherwise provided in Section
7.04, against any loss, damage, liability or expense, including
reasonable fees for attorneys and other outside consultants,
incurred in contesting or otherwise in connection with any such
Taxes: (i) Taxes imposed on the Company or any Subsidiary with
respect to taxable periods ending on or before the Closing Date;
(ii) with respect to taxable periods beginning before the Closing
Date and ending after the Closing Date, Taxes imposed on the
Company or any Subsidiary which are allocable, pursuant to Section
7.01(b), to the portion of such period ending on the Closing Date;
(iii) Taxes imposed on the Stockholders or imposed on any member
of any affiliated group with which any of the Company and the
Subsidiaries file or have filed a Return on a consolidated or
combined basis for a taxable period ending on or before the
Closing Date; and (iv) Taxes imposed on the Purchaser, the Company
or any Subsidiary as a result of any breach of warranty or
misrepresentation under Section 3.29.
(b) In the case of Taxes that are payable with respect
to a taxable period that begins before the Closing Date and ends
after the Closing Date, the portion of any such Tax that is
allocable to the portion of the period ending on the Closing Date
shall be:
(i) in the case of Taxes that are either (x) based upon
or related to income or receipts, or (y) imposed in
connection with any sale or other transfer or assignment of
property (real or personal, tangible or intangible) (other
than conveyances pursuant to this Agreement, as provided
under Section 7.07), deemed equal to the amount which would
be payable if the taxable year ended with the Closing Date;
and
(ii) in the case of Taxes imposed on a periodic basis
with respect to the assets of the Company or any Subsidiary,
or otherwise measured by the level of any item, deemed to be
the amount of such Taxes for the entire period (or, in the
case of such Taxes determined on an arrears basis, the amount
of such Taxes for the immediately preceding period),
multiplied by a fraction the numerator of which is the
number of calendar days in the period ending on the Closing
Date and the denominator of which is the number of calendar
days in the entire period.
SECTION 7.02. Returns and Payments
. (a) From the date of this Agreement through and
after the Closing Date, the Stockholders shall prepare and file or
otherwise furnish in proper form to the appropriate Governmental
Authority (or cause to be prepared and filed or so furnished) in a
timely manner all Tax returns, reports and forms ("Returns")
relating to the Company and the Subsidiaries that are due on or
before or relate to any taxable period ending on or before the
Closing Date (and the Purchaser shall do the same with respect to
any taxable period ending after the Closing Date). Returns of the
Company and the Subsidiaries not yet filed for any taxable period
that begins before the Closing Date shall be prepared in a manner
consistent with past practices employed with respect to the
Company and the Subsidiaries (except to the extent counsel for the
Stockholders or the Company render a legal opinion that there is
no reasonable basis in law therefor or determines that a Return
cannot be so prepared and filed without being subject to
penalties). With respect to any Return required to be filed by
the Purchaser or the Stockholders with respect to the Company and
the Subsidiaries and as to which an amount of Tax is allocable to
the other party under Section 7.01(b), the filing party shall
provide the other party and its authorized representatives with a
copy of such completed Return and a statement certifying the
amount of Tax shown on such Return that is allocable to such other
party pursuant to Section 7.01(b), together with appropriate
supporting information and schedules at least 20 Business Days
prior to the due date (including any extension thereof) for the
filing of such Return, and such other party and its authorized
representatives shall have the right to review and comment on such
Return and statement prior the filing of such Return.
(b) The Stockholders shall pay or cause to be paid when due
and payable all Taxes with respect to the Company and the
Subsidiaries for any taxable period ending on or before the
Closing Date and the Purchaser shall so pay or cause to be paid
Taxes for any taxable period after the Closing Date (subject to
its right of indemnification from the Stockholders by the date set
forth in Section 7.04 for Taxes attributable to the portion of any
Tax period that includes the Closing Date pursuant to Sections
7.01(a) and 7.01(b)).
SECTION 7.03. Contests
. (a) After the Closing, the Purchaser shall promptly
notify the Stockholder Representative in writing of any written
notice of a proposed assessment or claim in an audit or
administrative or judicial proceeding of the Purchaser or of any
of the Company and the Subsidiaries which, if determined adversely
to the taxpayer, would be grounds for indemnification under this
Article VII; provided, however, that a failure to give such notice
will not affect the Purchaser's right to indemnification under
this Article VII except to the extent, if any, that, but for such
failure, the Stockholders could have avoided all or a portion of
the Tax liability in question.
(b) In the case of an audit or administrative or
judicial proceeding that relates to periods ending on or before
the Closing Date, provided that the Stockholders acknowledge in
writing their liability under this Agreement to hold the
Purchaser, the Company and the Subsidiaries harmless against the
full amount of any adjustment which may be made as a result of
such audit or proceeding that relates to periods ending on or
before the Closing Date (or, in the case of any taxable year that
includes the Closing Date, against an adjustment allocable under
Section 7.01(b) to the portion of such year ending on or before
the Closing Date), the Stockholder Representative shall have the
right at the Stockholders' expense to participate in and control
the conduct of such audit or proceeding but only to the extent
that such audit or proceeding relates solely to a potential
adjustment for which the Stockholders have acknowledged their
liability; the Purchaser also may participate in any such audit or
proceeding and, if the Stockholder Representative does not assume
the defense of any such audit or proceeding, the Purchaser may
defend the same in such manner as it may deem appropriate,
including, but not limited to, settling such audit or proceeding
after giving five days' prior written notice to the Stockholder
Representative setting forth the terms and conditions of
settlement. In the event that issues relating to a potential
adjustment for which the Stockholders have acknowledged their
liability are required to be dealt with in the same proceeding as
separate issues relating to a potential adjustment for which the
Purchaser would be liable, the Purchaser shall have the right, at
its expense, to control the audit or proceeding with respect to
the latter issues.
(c) With respect to issues relating to a potential
adjustment for which both the Stockholders (as evidenced by its
acknowledgment under this Section 7.03) and the Purchaser, the
Company or any Subsidiary could be liable, (i) both the Purchaser
and the Stockholder Representative may participate in the audit or
proceeding, and (ii) the audit or proceeding shall be controlled
by that party which would bear the burden of the greater portion
of the sum of the adjustment and any corresponding adjustments
that may reasonably be anticipated for future Tax periods. The
principle set forth in the immediately preceding sentence shall
govern also for purposes of deciding any issue that must be
decided jointly (including, without limitation, choice of judicial
forum) in situations in which separate issues are otherwise
controlled under this Article VII by the Purchaser and the
Stockholder Representative.
(d) Neither the Stockholders nor the Stockholder
Representative shall enter into any compromise or agree to settle
any claim pursuant to any Tax audit or proceeding that would
adversely affect the Purchaser for such year or a subsequent year
without the written consent of the Purchaser, which consent may
not be unreasonably withheld. The Purchaser shall not enter into
any compromise or agree to settle any claim pursuant to any Tax
audit or proceeding that would adversely affect any Stockholder
for such year or a subsequent year without the written consent of
the Stockholder Representative, which consent may not be
unreasonably withheld. The Purchaser and the Stockholders
(including the Stockholder Representative) agree to cooperate, and
the Purchaser agrees to cause the Company and the Subsidiaries to
cooperate, in the defense against or compromise of any claim in
any audit or proceeding.
SECTION 7.04. Time of Payment
. Payment by the Stockholders of any amounts due under
this Article VII in respect of Taxes shall be made (i) at least
three Business Days before the due date of the applicable
estimated or final Return required to be filed by the Purchaser on
which is required to be reported income for a period ending after
the Closing Date for which the Stockholders are responsible under
Sections 7.01(a) and 7.01(b) without regard to whether the
Return shows overall net income or loss for such period, and (ii)
within three Business Days following an agreement between the
Stockholder Representative and the Purchaser that an indemnity
amount is payable, an assessment of a Tax by a taxing authority,
or a "determination" as defined in Section 1313(a) of the Code.
If liability under this Article VII is in respect of costs or
expenses other than Taxes, payment by the Stockholders of any
amounts due under this Article VII shall be made within five
Business Days after the date when the Stockholder Representative
has been notified by the Purchaser that the Stockholders have a
liability for a determinable amount under this Article VII and is
provided with calculations or other materials supporting such
liability.
SECTION 7.05. Cooperation and Exchange of Information
. The Stockholders and the Purchaser will provide each
other with such cooperation and information as either of them
reasonably may request of the other in filing any Return, amended
Return or claim for refund, determining a liability for Taxes or a
right to a refund of Taxes, participating in or conducting any
audit or other proceeding in respect of Taxes or making
representations to or furnishing information to parties
subsequently desiring to purchase any of the Company or the
Subsidiaries or any part of the Business from the Purchaser. Such
cooperation and information shall include providing copies of
relevant Returns or portions thereof, together with accompanying
schedules, related work papers and documents relating to rulings
or other determinations by Tax authorities. The Stockholders shall
make their employees available on a basis mutually convenient to
both parties to provide explanations of any documents or
information provided hereunder. Each of the Stockholders and the
Purchaser shall retain all Returns, schedules and work papers,
records and other documents in their possession relating to Tax
matters of the Company and the Subsidiaries for each taxable
period first ending after the Closing Date and for all prior
taxable periods until the later of (i) the expiration of the
statute of limitations of the taxable periods to which such
Returns and other documents relate, without regard to extensions
except to the extent notified by the other party in writing of
such extensions for the respective Tax periods, or (ii) six years
following the due date (without extension) for such Returns. Any
information obtained under this Section 7.05 shall be kept
confidential except as may be otherwise necessary in connection
with the filing of Returns or claims for refund or in conducting
an audit or other proceeding.
SECTION 7.06. Conveyance Taxes
. The Stockholders shall be liable for and shall hold
the Purchaser harmless against any real property transfer or
gains, sales, use, transfer, value added, stock transfer, and
stamp taxes, any transfer, recording, registration, and other
fees, and any similar Taxes which become payable in connection
with the transactions contemplated by this Agreement. The
Stockholders, after the review and consent by the Purchaser, shall
file such applications and documents as shall permit any such Tax
to be assessed and paid on or prior to the Closing Date in
accordance with any available pre-sale filing procedure. The
Purchaser shall execute and deliver all instruments and
certificates necessary to enable the Stockholders to comply with
the foregoing.
SECTION 7.07. Miscellaneous
. (a) Any tax sharing, tax allocation or similar
agreement or arrangement between the Stockholders and the Company
or any Subsidiary shall be terminated immediately prior to the
Closing.
(b) Notwithstanding any provision in this Agreement to
the contrary, the obligations of the Stockholders to indemnify and
hold harmless the Purchaser, the Company and the Subsidiaries
pursuant to this Article VII, and the representations and
warranties contained in Section 3.29, shall terminate at the close
of business on the 120th day following the expiration of the
applicable statute of limitations with respect to the Tax
Liabilities in question (giving effect to any waiver, mitigation
or extension thereof).
(c) From and after the date of this Agreement, the
Stockholders shall not without the prior written consent of the
Purchaser (which may, in its sole and absolute discretion,
withhold such consent) make, revoke or change, or cause or permit
to be made, revoked or changed, any express or deemed Tax election
or method of Tax accounting that would affect the Company or any
Subsidiary or settle or compromise any liability with respect to
Taxes of the Company or any Subsidiary.
(d) The Purchaser shall be entitled to recover
professional fees and related costs that it may reasonably incur
to enforce the provisions of this Article VII.
(e) All payments made by any party hereto to or for the
benefit of any other party hereto under this Article VII or under
Article IX (i) shall be made net of Tax benefits actually realized
by the indemnified party in respect of the claim giving rise to
the indemnity payment and (ii) shall be treated as adjustments to
the Purchase Price or as capital contributions for Tax purposes
and such treatment shall govern for purposes hereof except to the
extent that the Laws of a particular jurisdiction provide
otherwise, in which case such payments shall be made in an amount
sufficient to indemnify the relevant party on an afterTax basis.
ARTICLE VIII
CONDITIONS TO CLOSING
SECTION 8.01. Conditions to Obligations of the Company
and the Stockholders
. The obligations of the Company and each Stockholder
to consummate the transactions contemplated by this Agreement
shall be subject to the fulfillment, at or prior to the Closing,
of each of the following conditions:
(a) Representations, Warranties and Covenants. The
representations and warranties of the Purchaser contained in
this Agreement that are qualified as to materiality shall be
true and correct, and those not so qualified shall be true
and correct in all material respects as of the date hereof
and as of the Closing, with the same force and effect as if
made as of the Closing Date (other than such representations
and warranties that are made as of another date, which shall
be true and correct as of such date), the covenants and
agreements contained in this Agreement to be complied with by
the Purchaser on or before the Closing Date shall have been
complied with in all material respects, and the Stockholders
shall have received a certificate from the Purchaser to such
effect signed by a duly authorized officer thereof;
(b) HSR Act. Any waiting period (and any extension
thereof) under the HSR Act applicable to the purchase of the
Shares contemplated hereby shall have expired or shall have
been terminated;
(c) No Proceeding or Litigation. No Action shall have
been commenced by or before any Governmental Authority
against the Company, the Purchaser or any Stockholder,
seeking to restrain or materially and adversely alter the
transactions contemplated by this Agreement which, in the
reasonable, good faith determination of the Stockholders, is
likely to render impossible or unlawful the consummation of
such transactions; provided, however, that the provisions of
this Section 8.01(c) shall not apply if the Company or any
Stockholder has directly or indirectly solicited or
encouraged any such Action;
(d) Resolutions. The Stockholders shall have received
a true and complete copy, certified by the Secretary or an
Assistant Secretary of the Purchaser, of the resolutions duly
and validly adopted by the Board of Directors of the
Purchaser evidencing its authorization of the execution and
delivery of this Agreement and the Ancillary Agreements to
which it is a party and the consummation of the transactions
contemplated hereby and thereby;
(e) Incumbency Certificate. The Stockholders shall
have received a certificate of the Secretary or an Assistant
Secretary of the Purchaser certifying the names and
signatures of the officers of the Purchaser authorized to
sign this Agreement and the Ancillary Agreements and the
other documents to be delivered hereunder and thereunder;
(f) Legal Opinion. The Stockholders shall have
received from Catherine Suttmeier, General Counsel to the
Purchaser, a legal opinion, addressed to the Stockholders and
dated the Closing Date, covering matters reasonably requested
by the Stockholders;
(g) Ancillary Agreements. Each Ancillary Agreement
shall be in full force and effect; provided, however, that
the provisions of this Section 8.01(g) shall not apply if the
failure of any Ancillary Agreement to be in full force and
effect is attributable to any act or failure to act by the
Company or any Stockholder.
SECTION 8.02. Conditions to Obligations of the
Purchaser
. The obligations of the Purchaser to consummate the
transactions contemplated by this Agreement shall be subject to
the fulfillment, at or prior to the Closing, of each of the
following conditions:
(a) Representations, Warranties and Covenants. The
representations and warranties of the Company and the
Stockholders contained in this Agreement that are qualified
as to materiality shall be true and correct, and those not so
qualified shall be true and correct in all material respects
as of the date hereof and as of the Closing, with the same
force and effect as if made as of the Closing Date (other
than such representations and warranties that are made as of
another date, which shall be true and correct as of such
date), the covenants and agreements contained in this
Agreement to be complied with by the Company and the
Stockholders on or before the Closing Date shall have been
complied with in all material respects, and the Purchaser
shall have received a certificate of the Company and the
Stockholders to such effect signed, in the case of the
Company, by a duly authorized officer thereof and by each
Stockholder;
(b) HSR Act. Any waiting period (and any extension
thereof) under the HSR Act applicable to the purchase of the
Shares contemplated hereby shall have expired or shall have
been terminated;
(c) No Proceeding or Litigation. No Action shall have
been commenced or threatened by or before any Governmental
Authority against the Company, the Purchaser or any
Stockholder, seeking to restrain or materially and adversely
alter the transactions contemplated hereby which the
Purchaser believes, in its sole and absolute discretion, is
likely to render impossible or unlawful the consummation of
the transactions contemplated by this Agreement or which
could have a Material Adverse Effect or otherwise render
inadvisable, in the sole and absolute discretion of the
Purchaser, the consummation of the transactions contemplated
by this Agreement; provided, however, that the provisions of
this Section 8.02(c) shall not apply if the Purchaser has
solicited or encouraged any such Action;
(d) Resolutions of the Company. The Purchaser shall
have received a true and complete copy, certified by the
Secretary or an Assistant Secretary of the Company, of the
resolutions duly and validly adopted by the Board of
Directors of the Company and the Stockholders evidencing
their authorization of the execution and delivery of this
Agreement and the Ancillary Agreements and the consummation
of the transactions contemplated hereby and thereby;
(e) Incumbency Certificate of the Company. The
Purchaser shall have received a certificate of the Secretary
or an Assistant Secretary of the Company certifying the names
and signatures of the officers of the Company authorized to
sign this Agreement and the Ancillary Agreements and the
other documents to be delivered hereunder and thereunder;
(f) Legal Opinion. The Purchaser shall have
received from Salon, Marrow, Dyckman & Newman, LLP a legal
opinion, addressed to the Purchaser and dated the Closing
Date, covering matters reasonably requested by the Purchaser;
(g) Consents and Approvals. The Purchaser, the
Company, and the Stockholders shall have received, each in
form and substance satisfactory to the Purchaser in its sole
and absolute discretion, all authorizations, consents, orders
and approvals of all Governmental Authorities and officials
and all third party consents and estoppel certificates which
the Purchaser in its sole and absolute discretion deems
necessary or desirable for the consummation of the
transactions contemplated by this Agreement and the Ancillary
Agreements, including, without limitation, all consents set
forth in Section 3.06 of the Disclosure Schedule and all
third party consents required under any Material Contracts;
(h) Organizational Documents. The Purchaser shall
have received a copy of (i) the Certificate of
Incorporation, as amended (or similar organizational
documents), of the Company and of each Subsidiary, certified
by the secretary of state of the jurisdiction in which each
such entity is incorporated or organized, as of a date not
earlier than five Business Days prior to the Closing Date and
accompanied by a certificate of the Secretary or Assistant
Secretary of each such entity, dated as of the Closing Date,
stating that no amendments have been made to such Certificate
of Incorporation (or similar organizational documents) since
such date, and (ii) the By-laws (or similar organizational
documents) of the Company and of each Subsidiary, certified
by the Secretary or Assistant Secretary of each such entity;
(i) Minute Books. The Purchaser shall have received a
copy of the minute books and stock register of the Company
and each Subsidiary, certified by their respective
Secretaries or Assistant Secretaries as of the Closing Date;
(j) FIRPTA. The Stockholders shall have delivered to
the Purchaser a statement from the Company (in a form
reasonably satisfactory to the Purchaser) pursuant to
Treasury regulation section 1.897-2(h), certifying that the
Shares are not a United States real property interest within
the meaning of section 897 of the Code;
(k) Good Standing; Qualification to Do Business. The
Purchaser shall have received good standing certificates for
the Company and for each Subsidiary from the secretary of
state of the jurisdiction in which each such entity is
incorporated or organized dated as of a date not earlier than
five Business Days prior to the Closing Date and accompanied
by bring-down telegrams dated the Closing Date;
(l) Release of Indemnity Obligations. The Purchaser
shall have received the general release and discharge from
the Stockholders referred to in Section 5.08 in form and
substance satisfactory to the Purchaser in its sole and
absolute discretion;
(m) Due Diligence. The Purchaser shall have completed
all its business, legal, accounting and environmental due
diligence with respect to the Business, the Company and the
Subsidiaries and shall, in its sole and absolute judgment, be
satisfied with the results thereof;
(n) No Material Adverse Effect. No event or events
shall have occurred, or be reasonably likely to occur, which,
individually or in the aggregate, have, or could have, a
Material Adverse Effect;
(o) Stockholders' Agreement. The Purchaser shall have
received, in form reasonably satisfactory to the Purchaser, a
termination and release of the Stockholders' Agreement
executed by the Stockholders; and
(p) Ancillary Agreements. Each Ancillary Agreement
shall be in full force and effect; provided, however, that
the provisions of this Section 8.02(p) shall not apply if the
failure of any Ancillary Agreement to be in full force and
effect is attributable to any act or failure to act by the
Purchaser.
ARTICLE IX
INDEMNIFICATION
SECTION 9.01. Survival of Representations and
Warranties
. The representations and warranties of the parties
hereto contained in this Agreement and the Ancillary Agreements,
and all statements contained in the Acquisition Documents, shall
survive the Closing until two years following the Closing Date;
provided, however, that (a) the representations and warranties
made pursuant to Sections 3.01, 3.02, 3.03, 3.04, 3.33, 4.01 and
4.06 shall survive indefinitely, (b) the representations and
warranties dealing with Tax matters shall survive as provided in
Section 7.07(b) and (c) insofar as any claim is made by the
Purchaser for the breach of any representation or warranty of the
Company or any Stockholder contained herein, which claim arises
out of allegations of personal injury or property damage suffered
by any third party on or prior to the Closing Date or attributable
to products or Inventory sold or shipped, or activities or
omissions that occur, on or prior to the Closing Date, such
representations and warranties shall, for purposes of such claim
by the Purchaser, survive until thirty calendar days after the
expiration of the applicable statute of limitations governing such
claims. Neither the period of survival nor the liability of any
Stockholder with respect to the representations and warranties of
the Company or any Stockholder shall be reduced by any
investigation made at any time by or on behalf of the Purchaser.
If written notice of a claim has been given prior to the
expiration of the applicable representations and warranties by the
Purchaser to the Stockholder Representative, then the relevant
representations and warranties shall survive as to such claim,
until such claim has been finally resolved.
SECTION 9.02. Indemnification by the Stockholders
. (a) The Purchaser and its Affiliates, officers,
directors, employees, agents, successors and assigns (each an
"Indemnified Party") shall be indemnified and held harmless by the Stockholders,
jointly and severally, for and against any and all
Liabilities, losses, diminution in value, damages, claims, costs
and expenses, interest, awards, judgments and penalties
(including, without limitation, attorneys' and consultants' fees
and expenses) actually suffered or incurred by them (including,
without limitation, any Action brought or otherwise initiated by
any of them) (hereinafter a "Loss"), arising out of or resulting
from:
(i) the breach of any representation or warranty made
by the Company or any Stockholder contained in this Agreement
or the Ancillary Agreements; or
(ii) the breach of any covenant or agreement by the
Company or any Stockholder contained in this Agreement or the
Ancillary Agreements; or
(iii) Liabilities of the Company or any Subsidiary
not reflected on the Reference Balance Sheet, whether arising
before or after the Closing Date, arising from or relating to
the ownership or actions or inactions of the Company or such
Subsidiary or the conduct of the Business prior to the
Closing; or
(iv) any and all Losses suffered or incurred by the
Purchaser, the Company or any Subsidiary by reason of or in
connection with any claim or cause of action of any third
party to the extent arising out of any action, inaction,
event, condition, liability or obligation of the Company or
any Stockholder occurring or existing prior to the Closing;
or
(v) the excess of the amounts payable by the Purchaser
following the Closing Date that relate to service by any
employee of the Company through to the Closing Date.
To the extent that the Stockholders' undertakings set forth in
this Section 9.02 may be unenforceable, each Stockholder shall
contribute the maximum amount that he or she is permitted to
contribute under applicable Law to the payment and satisfaction of
all Losses incurred by the Purchaser, the Company and the
Subsidiaries.
(b) An Indemnified Party shall give the Stockholder
Representative notice of any matter which an Indemnified Party has
determined has given or could give rise to a right of
indemnification under this Agreement, within 60 days of such
determination, stating the amount of the Loss, if known, and
method of computation thereof, and containing a reference to the
provisions of this Agreement in respect of which such right of
indemnification is claimed or arises. The obligations and
Liabilities of the Stockholders under this Article IX with respect
to Losses arising from claims of any third party which are subject
to the indemnification provided for in this Article IX ("Third
Party Claims") shall be governed by and contingent upon the
following additional terms and conditions: if an Indemnified
Party shall receive notice of any Third Party Claim, the
Indemnified Party shall give the Stockholder Representative notice
of such Third Party Claim within 30 days of the receipt by the
Indemnified Party of such notice; provided, however, that the
failure to provide such notice shall not release the Stockholders
from any of its obligations under this Article IX except to the
extent that the Stockholders are materially prejudiced by such
failure and shall not relieve the Stockholders from any other
obligation or Liability that they may have to any Indemnified
Party otherwise than under this Article IX. If the Stockholder
Representative acknowledges in writing the Stockholders'
obligation to indemnify the Indemnified Party hereunder against
any Losses that may result from such Third Party Claim, then the
Stockholder Representative shall be entitled to assume and control
the defense of such Third Party Claim at the Stockholders' expense
and through counsel of its choice if it gives notice of its
intention to do so to the Indemnified Party within five days of
the receipt of such notice from the Indemnified Party; provided,
however, that if there exists or is reasonably likely to exist a
conflict of interest that would make it inappropriate in the
judgment of the Indemnified Party in its sole and absolute
discretion, for the same counsel to represent both the Indemnified
Party and the Stockholders, then the Indemnified Party shall be
entitled to retain its own counsel, in each jurisdiction for which
the Indemnified Party determines counsel is required, at the
expense of the Stockholders. In the event that the Stockholder
Representative exercises the right to undertake any such defense
against any such Third Party Claim as provided above, the
Indemnified Party shall cooperate with the Stockholder
Representative in such defense and make available to the
Stockholder Representative, at the Stockholders' expense, all
witnesses, pertinent records, materials and information in the
Indemnified Party's possession or under the Indemnified Party's
control relating thereto as is reasonably required by the
Stockholder Representative. Similarly, in the event the
Indemnified Party is, directly or indirectly, conducting the
defense against any such Third Party Claim, the Stockholder
Representative shall cooperate with the Indemnified Party in such
defense and make available to the Indemnified Party, at the
Stockholders' expense, all such witnesses, records, materials and
information in the Stockholders' possession or under the
Stockholders' control relating thereto as is reasonably required
by the Indemnified Party. No such Third Party Claim may be
settled by the Stockholder Representative or the Stockholders
without the prior written consent of the Indemnified Party.
(c) No claim may be made against the Stockholders for indemnification
pursuant to Section 9.02(a)(i) unless the
aggregate of all Losses of the Indemnified Parties with respect to
Section 9.02(a)(i) shall exceed an amount equal to $100,000, in
which case the Stockholders shall be liable for all of such Loss
(subject to Section 9.02(d)).
(d) The maximum amount of indemnifiable Losses that may
be recovered from the Stockholders arising out of this Agreement
shall be equal to $15,000,000.
SECTION 9.03. Distributions from Indemnity Escrow Fund
. In the event that (a) the Stockholder Representative
shall not have objected to the amount claimed by the Purchaser for
indemnification with respect to any Loss or (b) the Stockholder
Representative shall have delivered notice of its disagreement as
to the amount of any indemnification requested by the Purchaser
and either (i) the Stockholder Representative and the Purchaser
shall have, subsequent to the giving of such notice, mutually
agreed that the Stockholders are obligated to indemnify the
Purchaser for a specified amount and shall have so jointly
notified the Escrow Agent or (ii) a final nonappealable judgment
shall have been rendered by the court having jurisdiction over the
matters relating to such claim by the Purchaser for
indemnification from Stockholders and the Escrow Agent shall have
received, in the case of clause (i) above, written instructions
from the Stockholder Representative and the Purchaser or, in the
case of clause (ii) above, a copy of the final nonappealable
judgment of the court, the Escrow Agent shall deliver to the
Purchaser from the Indemnity Escrow Fund any amount determined to
be owed to the Purchaser under this Article IX in accordance with
the Escrow Agreement.
SECTION 9.04. Tax Matters
. Anything in this Article IX (except for the specific
reference to Tax matters in Section 9.01) to the contrary
notwithstanding, the rights and obligations of the parties with
respect to indemnification for any and all Tax matters shall be
governed by Article VII.
SECTION 9.05. Appointment of Stockholder
Representative
. (a) The Stockholders do hereby constitute and
appoint Robert Delman (and each successor appointed in accordance
with Section 9.05(c) of this Agreement) (the "Stockholder
Representative") the agent and true and lawful attorney-in-fact of
them and each of them, in the name, place and stead of them and
each of them, in connection with and to facilitate the
consummation of the transactions contemplated by this Agreement,
and in connection with the performance of the various actions
required or permitted to be performed on behalf of the
Stockholders under this Agreement, which shall include the
following purposes and with the following powers, all of which
shall be exercised by the Stockholder Representative to the same
extent as if the Stockholders themselves were acting, and Robert
Delman (and any successor) hereby accepts such appointment and
agrees to use his or her best efforts to exercise such powers in
accordance with the terms hereof:
(i) to agree to, and to execute and deliver, such
agreements, documents and instruments as the Stockholder
Representative, in his or her sole discretion, may deem
necessary and advisable, and act for and on behalf of each of
the Stockholders, in each case solely in connection with the
matters set forth in this Agreement;
(ii) to receive and hold in trust, in a segregated
account or accounts established for the benefit of the
Stockholders, any sums of money paid or to be paid by the
Purchaser pursuant to this Agreement, including, without
limitation, the Purchase Price, distributions from the escrow
pursuant to the Escrow Agreement and any other amounts
payable to the Stockholder Representative under this
Agreement on behalf of the Stockholders (the "Payments"), and
to promptly apply such Payments for the payment of any sums
due or to become due to the Stockholders from the Purchaser
by virtue of the terms of this Agreement in accordance with
the respective interests of the Stockholders;
(iii) to exercise any and all rights granted to the
Stockholder Representative on behalf of the Stockholders
under the terms of this Agreement, the Ancillary Agreements
and any and all collateral documents delivered by the
Purchaser or any other Person, firm or corporation during the
term of this Agreement;
(iv) either in his or her own name as Stockholder
Representative or as attorney-in-fact for the Stockholders,
or in any one or more capacities, to enforce and protect the
rights and interests of the Stockholders and/or the
Stockholder Representative arising out of or under or in any
manner relating to this Agreement, including, in connection
therewith, to (A) assert any claim or institute any action or
proceeding, including without limitation, suits against the
Purchaser arising out of this Agreement; (B) investigate,
defend, contest or litigate any claim, action, proceeding or investigation
initiated by the Purchaser or any other Person,
firm or corporation or by any federal, state or local
governmental or regulatory authority, against the Stockholder
Representative and/or any of the Stockholders in any such
claim, action, proceeding or investigation; (C) file any
proofs of debt, claims and petitions as he or she, in his or
her sole discretion, may deem advisable or necessary; (D)
file and prosecute appeals from any decision, judgment or
award rendered in any such claims, action, proceeding or
investigation; and (E) with the prior written consent of the
Stockholders (which consent shall not be unreasonably
withheld), compromise or settle on such terms as he or she
shall determine to be appropriate, and give receipts,
releases and discharges with respect to, and direct the
Purchaser to make payments with respect to, any such claim,
action, proceeding or investigation; it being understood that
the Stockholder Representative shall not have any obligation
to take any such actions described in the foregoing clauses
(A) through (E) and no such failure to act on the part of the
Stockholder Representative shall be deemed a waiver of any
such right or interest by the Stockholder Representative or
the Stockholders to take any such actions unless such waiver
is in writing signed by the waiving party;
(v) to modify, extend, change or waive any of the
terms, provisions and conditions of this Agreement, the
Escrow Agreement or any other Ancillary Agreement, and any
other agreements hereafter executed or instruments hereafter
delivered in connection therewith; and, in connection
therewith, to execute, deliver and file any and all documents
or instruments on behalf of the Stockholders to give effect
to any such modification, extension, change or waiver; and
(vi) to make, execute, acknowledge and deliver all such
other agreements, guarantees, orders, receipts, endorsements,
notices, requests, instructions, certificates, stock powers,
letters and other writings, and, in general, to do any and
all things and to take any and all action that he or she in
his or her sole and absolute discretion, may consider
necessary or proper, in each case solely in connection with
or to carry out the transactions contemplated by this
Agreement; provided, however, that with respect to this
Section 9.05(a), he or she shall not have the right to, and
agrees that he or she will not, act as or hold himself or
herself out as the representative of the Stockholders for any
purpose other than the purposes specified in the Agreement.
(b) The grant of authority provided for in Section
9.05(a): (i) is coupled with an interest and shall be irrevocable
and survive the death, incompetency, bankruptcy or liquidation of
any Stockholder; (ii) may be exercised by the Stockholder
Representative either by signing separately as attorney-in-fact
for each Stockholder or, after listing all of the Stockholders
executing an instrument, by the signature of the Stockholder
Representative acting as attorney-in-fact for all of them; and
(iii) shall survive the delivery of an assignment by a Stockholder
of the whole or any fraction of his interest hereunder.
(c) The Stockholder Representative shall have the right
to resign by notice in writing (the "Resignation Notice"), mailed
by certified mail, return receipt requested, to each of the
Purchaser and the Stockholders as follows:
(i) If a Stockholder Representative shall not have
arranged for a successor or substitute representative or, if
any such successor or substitute representative shall not
have been consented to by the Stockholders, and such
Stockholder Representative shall resign or if such
Stockholder Representative for any reason shall fail or cease
to act as such hereunder or in the event of the commencement
of any proceeding by or against such Stockholder
Representative under any applicable bankruptcy,
reorganization, liquidation, insolvency or other similar law
now or hereafter in effect or of any proceeding in which a
receiver, liquidator, custodian, trustee or other similar
official is sought to be appointed for such Stockholder
Representative, the Stockholders shall, by majority vote of
the Stockholders, designate and appoint a new representative
or representatives to act hereunder pursuant to the
provisions of Section 9.05(a) hereof.
(ii) A resignation of a Stockholder Representative and
appointment of a successor representative shall become
effective only upon the successor representative's acceptance
of appointment as provided in this Section 9.05(c).
(iii) If a new representative shall act as successor
or substitute representative hereunder, the new
representative shall agree in writing to accept the terms of
this Agreement, subject, if applicable, to any additional
terms to, or different terms from, this Agreement consented
to under Section 9.05(c)(i) and promptly thereafter shall
receive all monies, instruments, collateral security and
other property and records held by his or her predecessors
hereunder. No substitute or successor representative shall
be liable for or obligated to examine the accounts, records
or actions of any predecessor representative.
(iv) Each substitute or successor representative acting
hereunder shall be vested with all of the rights, powers,
indemnities and immunities of the Stockholder Representative
initially acting hereunder, and the Stockholders agree to do
each and every act and thing necessary and appropriate to
vest the same in each such substitute or successor
representative.
ARTICLE X
TERMINATION AND WAIVER
SECTION 10.01. Termination
. This Agreement may be terminated at any time prior
to the Closing:
(f) by the Purchaser if, between the date hereof and
the time scheduled for the Closing: (i) an event or
condition occurs that has resulted in or that may be expected
to result in a Material Adverse Effect or (ii) the Company or
any Subsidiary makes a general assignment for the benefit of
creditors, or any proceeding shall be instituted by or
against the Company or any Subsidiary seeking to adjudicate
any of them a bankrupt or insolvent, or seeking liquidation,
winding-up or reorganization, arrangement, adjustment,
protection, relief or composition of its debts under any Law
relating to bankruptcy, insolvency or reorganization;
(g) by either the Stockholders or the Purchaser if the
Closing shall not have occurred by October 31, 2000;
provided, however, that the right to terminate this
Agreement under this Section 10.01(b) shall not be available
to any party whose failure to fulfill any obligation under
this Agreement shall have been the cause of, or shall have
resulted in, the failure of the Closing to occur on or prior
to such date;
(h) by either the Purchaser or the Stockholders in the
event that any Governmental Authority shall have issued an
order, decree or ruling or taken any other action
restraining, enjoining or otherwise prohibiting the
transactions contemplated by this Agreement and such order,
decree, ruling or other action shall have become final and
nonappealable; or
(i) by the mutual written consent of the Stockholders
and the Purchaser.
SECTION 10.02. Effect of Termination
. In the event of termination of this Agreement as
provided in Section 10.01, this Agreement shall forthwith become
void and there shall be no liability on the part of either party
hereto except (i) as set forth in Sections 5.03 and 11.01 and (ii)
that nothing herein shall relieve either party from liability for
any breach of this Agreement.
SECTION 10.03. Waiver
. The parties hereto may (a) extend the time for the
performance of any of the obligations or other acts of the other
parties hereto, (b) waive any inaccuracies in the representations
and warranties of the other parties hereto contained herein or in
any document delivered by the other parties hereto pursuant hereto
or (c) waive compliance with any of the agreements or conditions
contained herein of the other parties hereto. Any such extension
or waiver shall be valid only if set forth in an instrument in
writing signed by the party or parties to be bound thereby. Any
waiver of any term or condition shall not be construed as a waiver
of any subsequent breach or a subsequent waiver of the same term
or condition, or a waiver of any other term or condition, of this
Agreement. The failure of any party to assert any of its rights
hereunder shall not constitute a waiver of any of such rights.
ARTICLE XI
GENERAL PROVISIONS
SECTION 11.01. Expenses
. Except as otherwise specified in this Agreement, all
costs and expenses, including, without limitation, fees and
disbursements of counsel, financial advisors and accountants,
incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such
costs and expenses, whether or not the Closing shall have
occurred.
SECTION 11.02. Notices
. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given or
made (and shall be deemed to have been duly given or made upon
receipt) by delivery in person, by courier service or by
registered or certified mail (postage prepaid, return receipt
requested) to the respective parties at the following addresses
(or at such other address for a party as shall be specified in a
notice given in accordance with this Section 11.02):
(a) if to the Company or the Stockholders:
Delco International Ltd. (Inc.)
19 Harbor Park Drive
Port Washington, New York 11050
Attention: General Counsel
with copies to:
Mr. Robert Delman
112 Wooleys Lane
Great Neck, NY 11023
and
Salon, Marrow, Dyckman & Newman,
LLP 685 Third Avenue
New York, NY 10017
Attention: Stephen Feinberg, Esq.
(b) if to the Purchaser:
Oneida Ltd.
163-181 Kenwood Avenue Oneida, New York
13421
Attention: Catherine H. Suttmeier, Esq.
with a copy to:
Shearman & Sterling
599 Lexington Avenue
New York, NY 10022
Attention: Bonnie Greaves, Esq.
SECTION 11.03. Public Announcements
. The parties hereto agree that they will issue a
press release announcing the execution of this Agreement promptly
following such execution in substantially the form of Exhibit
11.03 hereto. Thereafter, neither the Company and the
Stockholders, on the one hand, nor the Purchaser, on the other
hand, shall make, or cause to be made, any press release or public announcement
in respect of this Agreement or the transactions
contemplated hereby or otherwise communicate with any news media
without prior consultation with the other party or parties, except
as may be required by Law or any stock exchange. The parties shall
cooperate, to the extent practicable, as to the timing and
contents of any such press release or public announcement.
SECTION 11.04. Headings
. The descriptive headings contained in this Agreement
are for convenience of reference only and shall not affect in any
way the meaning or interpretation of this Agreement.
SECTION 11.05. Severability
. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any Law or
public policy, all other terms and provisions of this Agreement
shall nevertheless remain in full force and effect for so long as
the economic or legal substance of the transactions contemplated
hereby is not affected in any manner materially adverse to any
party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties
hereto shall negotiate in good faith to modify this Agreement so
as to effect the original intent of the parties as closely as
possible in an acceptable manner in order that the transactions
contemplated hereby are consummated as originally contemplated to
the greatest extent possible.
SECTION 11.06. Entire Agreement
. This Agreement and the Ancillary Agreements
constitute the entire agreement of the parties hereto with respect
to the subject matter hereof and thereof and supersede all prior
agreements and undertakings, both written and oral, between the
Seller and the Purchaser with respect to the subject matter hereof
and thereof.
SECTION 11.07. Assignment
. This Agreement may not be assigned by operation of
law or otherwise without the express written consent of the
parties hereto (which consent may be granted or withheld in the
sole discretion of the parties hereto); provided, however, that
the Purchaser may assign this Agreement to an Affiliate of the
Purchaser without the consent of the other parties hereto;
provided further, however, that no assignment shall limit or
affect the Purchaser's obligations to make any payments hereunder.
Any attempted assignment in violation of this Section 11.07 shall
be void.
SECTION 11.08. No Third Party Beneficiaries
. Except for the provisions of Article IX relating to
Indemnified Parties, this Agreement shall be binding upon and
inure solely to the benefit of the parties hereto and their
permitted assigns and nothing herein, express or implied, is
intended to or shall confer upon any other Person, including,
without limitation, any union or any employee or former employee
of the Company, any legal or equitable right, benefit or remedy of
any nature whatsoever, including, without limitation, any rights
of employment for any specified period, under or by reason of this
Agreement.
SECTION 11.09. Amendment
. This Agreement may not be amended or modified except
(a) by an instrument in writing signed by, or on behalf of, the
parties hereto or (b) by a waiver in accordance with Section
10.03.
SECTION 11.10. Governing Law
. This Agreement shall be governed by, and construed
in accordance with, the laws of the State of New York, applicable
to contracts executed in and to be performed entirely within that
state. All actions and proceedings arising out of or relating to
this Agreement shall be heard and determined in any New York state
or federal court sitting in The City of New York. The parties
hereto expressly consent to the jurisdiction of any such court and
the venue therein.
SECTION 11.11. Counterparts
. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate
counterparts, each of which when executed shall be deemed to be an
original but all of which taken together shall constitute one and
the same agreement.
SECTION 11.12. Specific Performance
. The parties hereto agree that irreparable damage
would occur in the event any provision of this Agreement was not
performed in accordance with the terms hereof and that the parties
shall be entitled to specific performance of the terms hereof, in
addition to any other remedy at law or in equity without the
necessity of demonstration the inadequacy of monetary damages.
IN WITNESS WHEREOF, the Company, the Stockholders and
the Purchaser have caused this Agreement to be executed as of the
date first written above by their respective officers thereunto
duly authorized.
DELCO INTERNATIONAL LTD.
(INC.)
By: /s/ ROBERT
DELMAN_____________
Name: Robert Delman
Title: President
PERRY DELMAN
/s/ PERRY DELMAN
ROBERT DELMAN
/s/ ROBERT DELMAN
PETER KRANES
/s/ PETER KRANES
MICHAEL SEHLMEYER /s/
MICHAEL SEHLMEYER
DENNIS KANFER
/s/ DENNIS KANFER
ONEIDA LTD.
By: /s/ PETER J. KALLET Name:
Peter J. Kallet Title:
President & CEO
EXHIBIT 5.07
NON-COMPETE PURCHASE PRICE SCHEDULE
Perry Delman -- $4,000,000 payable over three years in quarterly
installments of $333,333.33 commencing on the Closing Date.
Rob Delman -- $1,800,000 payable over three years in quarterly
installments of $150,000 commencing on the Closing Date.
Peter Kranes -- $1,800,000 payable over three years in quarterly
installments of $150,000 commencing on the Closing Date.
Michael Sehlmeyer -- $750,000 payable over three years in
quarterly installments of $62,500 commencing on the Closing Date.
Dennis Kanfer -- $300,000 payable on the Closing Date.
EXHIBIT 11.03
FINAL FORM OF PRESS RELEASE
ONEIDA LTD. TO ACQUIRE DELCO INTERNATIONAL; STRATEGIC
ACQUISITION EXPANDS FOODSERVICE DIVISION
Oneida, NY - May xx, 2000 - Oneida Ltd. (NYSE:OCQ) today announced
that it has signed a definitive agreement to acquire the stock of
Delco International Ltd. (Inc.), including its
wholly owned subsidiary, Delco Tableware International Inc., and
its ABCO International division. Delco International is an
established marketer of tableware products for the foodservice
industry. A privately held company that has been in business for
over 60 years, Delco International is headquartered in Long
Island, N. Y., where its offices will remain. Delco International
complements Oneida's current tableware businesses, and underscores
Oneida's strategy of achieving global leadership as a complete
tabletop company.
Under terms of the agreement, Oneida will acquire Delco
International for approximately $76 million in cash. The
transaction is expected to close during Oneida's second quarter,
which concludes July 29, 2000, and is subject to the satisfactory
completion of a due diligence review and other customary closing
conditions.
Delco International's annual sales are approximately $77 million.
The company, its subsidiary, Delco Tableware International, and
its ABCO Division market tableware products to a broad range of
customers in the foodservice industry, including distributors,
restaurant chains, hotel chains and institutional customers. In
total, the company offers a full range of tabletop products.
Oneida President and Chief Executive Officer Peter J. Kallet
stated, "We are delighted to be associated with one of the most
respected and successful companies in the foodservice industry. We
especially look forward to working with their talented management
team. Delco International also increases our ability to satisfy
the complete needs of our customers, while bringing additional
global product sources."
Delco International President Robert Delman and ABCO Managing
Director Peter Kranes added, "We are excited to join forces with
Oneida Ltd., and to expand and strengthen our own tableware lines
through their vast product resources. Oneida is also well
recognized as one of the most innovative companies in the
foodservice industry with a great brand name and outstanding
reputation."
Oneida's agreement to acquire Delco marks the latest in a series
of steps to position the Company as the world's most diversified
tabletop resource. On May 23 Oneida announced an agreement to
acquire Sakura, Inc., a leading consumer dinnerware company. In
addition, on May 30 Oneida announced an agreement to acquire
Viners of Sheffield Limited, an established United Kingdom
marketer of flatware and cookware, and also announced it had
acquired exclusive distribution rights for Schott Zwiesel crystal
in the U.K.
Oneida Ltd. is a leading manufacturer of stainless steel and
silverplated flatware for both the consumer and foodservice
industries, and a leading supplier of dinnerware to the
foodservice industry. Oneida also is a leading supplier of a
variety of crystal, glassware and metal serveware for the tabletop
market.
Statements contained in this press release that state
that certain results are "expected" or "anticipated" to occur, or
otherwise state the company's predictions for the future, are
forward looking statements. These particular forward-looking
statements and all other statements that are not historical facts,
are subject to a number of risks and uncertainties, and actual
results may differ materially. Such factors include, but are not
limited to: general economic conditions in the Company's markets;
difficulties or delays in the development, production and
marketing of new products; the impact of competitive products and
pricing; unforeseen increases in the cost of raw materials or
shortages of raw materials; significant increases in interest
rates or the level of the Company's indebtedness; major slow downs
in the retail, travel or entertainment industries; the loss of
several of the Company's major customers; underutilization of the
Company's plants and factories; and the amount and rate of growth
of the Company's selling, general and administrative expenses.
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