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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) October 30,1998
SHOREWOOD PACKAGING CORPORATION
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in charter)
Delaware 0-15007 11-2742734
- --------------- ----------- -------------------
(State or other (Commission (IRS Employer
jurisdiction of File No.) Identification No.)
incorporation)
277 Park Avenue, New York, New York 10172
- ----------------------------------------------------- --------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 371-1500
--------------
Not Applicable
- --------------------------------------------------------------------------------
(Former name or former address, if changed since last report)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On October 30, 1998, Shorewood Packaging Corporation, a
Delaware corporation, and certain of its wholly-owned subsidiaries
(collectively, the "Company"), purchased from Queens Group, Inc., a New York
corporation ("Queens") and certain entities affiliated with Queens (the "Related
Entities") the printing and packaging business and substantially all the assets
of Queens and the Related Entities (the "Acquired Assets"). The Related Entities
are Queens Group - Weaverville, Inc., a New York corporation, Allmond Realty
Co., a New York general partnership, Talmadge Realty Company, a New Jersey
general partnership, Belmont Realty Company, a New York general partnership,
Weaverville Realty Company, LLC, a Delaware limited liability company, and Mount
Holly Enterprises, Inc., a North Carolina corporation. Neither Queens nor the
Related Entities nor any other affiliates of Queens or the Related Entities had
any material relationship with the Company or any of its affiliates, directors
or officers, or any associate of any such director or officer.
In accordance with the terms and conditions of a certain
Purchase and Sale Agreement dated October 30, 1998 by and among the Company,
Queens and the Related Entities, the Acquired Assets were purchased, with
economic effect as of September 1, 1998. The total consideration for the
Acquired Assets consisted of a cash payment of approximately $105.9 million
(subject to various adjustments certain of which will be based upon an audit of
the interim balance sheet of Queens and the Related Entities as at August 30,
1998 and certain of which will be based on other factors), the assumption of
Indebtedness (as defined) aggregating approximately $19.6 and one million shares
of the Company's common stock, par value $.01 per share (the "Common Stock").
The closing price of the Common Stock on October 30, 1998 was $16 per share.
Approximately $94.6 million of the cash portion of the purchase price was paid
to the sellers at the closing and $11.25 million was escrowed subject to certain
adjustments and contingencies. The purchase price was the result of arms length
negotiations. The cash portion of the purchase price was funded from the
proceeds of the Company's existing credit facility as amended and restated as of
the date of the closing (the "New Credit Facility"). The lenders under the New
Credit Facility are NationsBank, N.A., The Bank of Nova Scotia and various other
participating lenders.
The Acquired Assets consist of substantially all the assets
used by Queens and the Related Entities for the production and marketing of high
quality, value-added printing and packaging products, primarily for the music,
multimedia and general consumer industries (the "Business"), which Business the
Company intends to continue. The Business was conducted by Queens and the
Related Entities primarily at five facilities located at Weaverville, North
Carolina, Stanley, North Carolina, Louisville, Kentucky, Edison, New Jersey and
Indianapolis, Indiana. Queens' executive offices were located in Long Island
City, New York. The Acquired Assets comprise the good will, all accounts
receivable, furniture, fixtures and equipment, inventory, intellectual property
(with certain exceptions) and contract rights owned or used by Queens and the
Related Entities in connection with the Business. The Company or wholly-owned
subsidiaries of the Company acquired fee simple title to the two North Carolina
facilities and the Louisville, Kentucky facility together with title to all
personal property associated with each such facility, a leasehold interest with
an option to buy the Edison, New Jersey facility together with title to all
personal property associated therewith and a leasehold interest in the
Indianapolis, Indiana facility together with title to all personal property
associated therewith.
2
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ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION
AND EXHIBITS.
(a) FINANCIAL STATEMENTS.
It is impractical to provide the financial statements
requested by this Item within the time this Current
Report is required to be filed. Such financial
statements will be filed as soon as practicable, but
not more than 60 days after this Current Report is
required to be filed.
(b) INTERIM AND PRO FORMA FINANCIAL INFORMATION.
It is impractical to provide the pro forma financial
statements required by this Item within the time this
Current Report is required to be filed. Such pro
forma financial statements will be filed as soon as
practicable, but not more than 60 days after this
Current Report is required to be filed.
(c) EXHIBITS.
10.116 Purchase and Sale Agreement, dated October
30, 1998, by and among Shorewood Packaging
Corporation and Queens Group, Inc., Queens
Group -Weaverville, Inc., Allmond Realty
Co., Talmadge Realty Company, Belmont
Realty Company, Weaverville Realty
Company, LLC and Mount Holly Enterprises,
Inc., omitting schedules and exhibits.(1)
- --------
(1) The Company shall furnish all omitted schedules and exhibits to the
Purchase and Sale Agreement, dated October 30, 1998, by and among
Shorewood Packaging Corporation and Queens Group, Inc., Queens Group
-Weaverville, Inc., Allmond Realty Co., Talmadge Realty Company,
Belmont Realty Company, Weaverville Realty Company, LLC and Mount Holly
Enterprises, Inc., upon the request of the Securities and Exchange
Commission.
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SIGNATURES
Pursuant to the requirements of the Securities and Exchange
Act of 1934, the Company has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
SHOREWOOD PACKAGING CORPORATION
By: /s/ William H. Hogan
William H. Hogan
Vice President - Finance and
Corporate Controller
Date: November 16, 1998
4
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INDEX TO EXHIBITS
ITEM PAGE
10.116 Purchase and Sale Agreement, dated October 30, 1998, by and
among Shorewood Packaging Corporation and Queens Group, Inc.,
Queens Group - Weaverville, Inc., Allmond Realty Co., Talmadge
Realty Company, Belmont Realty Company, Weaverville Realty
Company, LLC and Mount Holly Enterprises, Inc.
5
<PAGE> 1
PURCHASE AND SALE AGREEMENT
by and among
SHOREWOOD PACKAGING CORPORATION
Buyer,
and
QUEENS GROUP, INC., QUEENS GROUP - WEAVERVILLE, INC., ALLMOND REALTY
CO., TALMADGE REALTY COMPANY, BELMONT REALTY COMPANY, MOUNT
HOLLY ENTERPRISES, INC., WEAVERVILLE REALTY COMPANY, LLC.
Sellers,
and
Dated October 30, 1998
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TABLE OF CONTENTS
PURCHASE AND SALE AGREEMENT
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SECTION PAGE
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ARTICLE I................................................................... 1
1.1 Definitions...................................................... 1
ARTICLE II.................................................................. 18
2.1 Assets and Shares to be Purchased................................ 18
2.2 Assumed Liabilities.............................................. 18
2.3 Consideration.................................................... 19
2.4 Allocation of Consideration...................................... 20
2.5 Closing.......................................................... 20
2.6 Deliveries at Closing............................................ 20
2.7 Escrow Account................................................... 20
2.8 Working Capital Holdback......................................... 21
2.9 Audited Balance Sheet............................................ 21
2.10 Working Capital Adjustment...................................... 22
2.11 Net Indebtedness Adjustment..................................... 25
2.12 Approved Payment Adjustment..................................... 25
2.13 Accounts Receivable Adjustment.................................. 25
2.14 Tax Liability Adjustment........................................ 27
2.15 Intentionally Omitted........................................... 28
2.16 Financial Dispute Resolution Mechanism.......................... 28
2.17 Share Price Adjustment.......................................... 29
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<TABLE>
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ARTICLE III................................................................. 29
3.1 Existence and Power of Sellers................................... 29
3.2 Approval and Enforceability of Agreement......................... 30
3.3 Subsidiaries and Other Affiliates................................ 30
3.4 Charter Documents................................................ 30
3.5 Financial Statements............................................. 30
3.6 Events Subsequent to August 30, 1998............................. 31
3.7 Inventories...................................................... 32
3.8 Solvency......................................................... 32
3.9 Undisclosed Liabilities.......................................... 32
3.10 Taxes........................................................... 33
3.11 Personal Property--Owned........................................ 33
3.12 Real and Personal Property--Leased from Sellers................. 34
3.13 Real and Personal Property--Leased to Sellers................... 34
3.14 Intellectual Property........................................... 35
3.15 Necessary Property and Transfer of Purchased Assets............. 35
3.16 Use and Condition of Property................................... 36
3.17 Licenses and Permits............................................ 36
3.18 Contracts--Disclosure........................................... 36
3.19 Material Contracts--Validity, Etc............................... 38
3.20 No Breach of Law or Governing Documents......................... 38
3.21 Litigation and Arbitration...................................... 38
3.22 Officers, Directors, Employees and Consultant................... 39
3.23 Outside Financial Interests..................................... 39
3.24 Indebtedness to and from Officers, Directors and Others......... 39
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<TABLE>
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3.25 Payments, Compensation and Perquisites of Agents and Employees.. 40
3.26 Employee Benefit Plans.......................................... 40
3.27 Terminated Plans................................................ 42
3.28 Overtime, Back Wages, Vacation and Minimum Wages................ 43
3.29 Discrimination, Workers Compensation and Occupational Safety
and Health ..................................................... 43
3.30 Alien Employment Eligibility.................................... 43
3.31 Labor Disputes; Unfair Labor Practices.......................... 43
3.32 Insurance Policies.............................................. 44
3.33 Guarantees...................................................... 44
3.34 Product Warranties.............................................. 44
3.35 Product Liability Claims........................................ 44
3.36 Product Safety Authorities...................................... 44
3.37 Environmental Matters........................................... 45
3.38 Broker's Fees................................................... 46
3.39 Foreign Assets.................................................. 46
3.40 Foreign Operations and Export Control........................... 46
3.41 Absence of Sensitive Payments................................... 47
3.42 Truthfulness.................................................... 47
3.43 Bank Accounts of Sellers........................................ 47
3.44 Books and Records................................................ 47
3.45 Permitted Liens................................................. 48
3.46 Materiality..................................................... 48
ARTICLE IV.................................................................. 48
4.1 Corporate Existence of Buyer..................................... 48
4.2 Approval of Agreement............................................ 48
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<TABLE>
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4.3 No Breach of Articles............................................ 49
4.4 SEC Filings...................................................... 49
4.5 Solvency......................................................... 49
4.6 No Breach of Law................................................. 49
4.7 Litigation and Arbitration....................................... 50
4.8 SPC Shares........................................................ 50
4.9 Truthfulness..................................................... 50
4.10 SPC Shares Buy-back............................................. 50
ARTICLE V................................................................... 50
5.1 Operation of the Business........................................ 50
5.2 Preservation of Business......................................... 52
5.3 Insurance and Maintenance of Property............................ 52
5.4 Full Access...................................................... 52
5.5 Books, Records and Financial Statements.......................... 52
5.6 Other Government Filings......................................... 52
5.7 Tax Matters...................................................... 53
5.8 Financial Statements............................................. 54
ARTICLE VI.................................................................. 54
6.1 Change of Name................................................... 54
6.2 Covenant of Cooperation.......................................... 54
6.3 Covenant of Notification......................................... 54
6.4 Covenant of Good Faith........................................... 55
6.5 Employees........................................................ 55
6.6 Retention of Records............................................. 59
6.7 Environmental Remediation........................................ 59
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<TABLE>
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6.8 Environmental Reports............................................ 66
6.9 Retention Bonuses, etc........................................... 66
6.10 Olive Trucking.................................................. 66
6.11 Hecht........................................................... 66
6.12 New Jersey Title................................................ 66
ARTICLE VII................................................................. 67
7.1 Covenant Not to Compete.......................................... 67
7.2 Employees........................................................ 68
7.3 Confidentiality.................................................. 69
7.4 Remedies......................................................... 69
7.5 Permitted Investments............................................ 70
ARTICLE VIII................................................................ 70
8.1 Representations and Warranties of Sellers........................ 70
8.2 Performance of this Agreement.................................... 70
8.3 Certificate of Sellers........................................... 70
8.4 Opinion of Counsel............................................... 70
8.5 Escrow Agreements................................................ 70
8.6 Ancillary Agreements............................................. 71
8.7 No Lawsuits...................................................... 71
8.8 Consents......................................................... 71
8.9 Releases......................................................... 71
8.10 Documents....................................................... 71
ARTICLE IX.................................................................. 71
9.1 Representations and Warranties of Buyer.......................... 71
9.2 Performance of this Agreement.................................... 72
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<TABLE>
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9.3 Certificate of Buyer............................................. 72
9.4 Opinion of Counsel............................................... 72
9.5 Payment of Purchase Price and Assumption of Liabilities.......... 72
9.6 Ancillary Contracts.............................................. 72
9.7 Consents......................................................... 72
9.8 No Lawsuits...................................................... 72
9.9 Releases......................................................... 72
ARTICLE X................................................................... 73
10.1 Survival of Representations and Warranties...................... 73
10.2 Indemnification................................................. 73
10.3 Limitations on Indemnification.................................. 75
10.4 Set-off Rights.................................................. 76
10.5 Participation in Litigation..................................... 76
10.6 Claims Procedure................................................ 77
10.7 Limitation on Liability......................................... 77
ARTICLE XI.................................................................. 77
11.1 Appointment; Acceptance......................................... 77
11.2 Authority....................................................... 77
11.3 Actions......................................................... 78
11.4 Effectiveness................................................... 79
ARTICLE XII................................................................. 79
12.1 Assignment; Binding Agreement................................... 79
12.2 Termination of Agreement........................................ 79
12.3 Manner and Effect of Termination................................ 80
12.4 Amendments...................................................... 81
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<TABLE>
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12.5 Remedies........................................................ 81
12.6 Entire Agreement and Modification............................... 81
12.7 Counterparts.................................................... 81
12.8 Headings; Interpretation........................................ 81
12.9 Governing Law................................................... 81
12.10 Payment of Fees and Expenses................................... 81
12.11 Notices........................................................ 82
</TABLE>
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DEFINITIONS
Adjusted Purchase Price------------------------------------------------------ 1
Affiliate-------------------------------------------------------------------- 1
Agency Submittals------------------------------------------------- Schedule 6.7
Agreement-------------------------------------------------------------------- 1
Allocation------------------------------------------------------------------ 19
Amended and Restated Lease Agreement----------------------------------------- 1
Ancillary Agreements--------------------------------------------------------- 2
Appraisal------------------------------------------------------------------- 19
Approved Environmental Budget------------------------------------------------ 2
Approved Environmental Compliance Work--------------------------------------- 2
Approved Environmental Investigation Work------------------------------------ 3
Approved Environmental Remediation Work-------------------------------------- 3
Approved Payments----------------------------------------------------------- 51
Approved Remediation Standard------------------------------------------------ 3
AR Adjustment Date---------------------------------------------------------- 25
ARC-------------------------------------------------------------------------- 1
are aware of---------------------------------------------------------------- 80
Assets----------------------------------------------------------------------- 4
Assignment and Assumption Agreement------------------------------------------ 5
Assumed Liabilities---------------------------------------------------------- 5
Assumed Severance Obligations--------------------------------------------- 5, 6
Audited Balance Sheet------------------------------------------------------- 21
Audited Financial Statements------------------------------------------------- 6
becoming aware of----------------------------------------------------------- 80
Berg Survey----------------------------------------------------------------- 66
best knowledge-------------------------------------------------------------- 80
Bill of Sale----------------------------------------------------------------- 6
BRC-------------------------------------------------------------------------- 1
BRC Loan--------------------------------------------------------------------- 6
Business--------------------------------------------------------------------- 6
Business Condition----------------------------------------------------------- 6
Buyer--------------------------------------------------------------------- 1, 6
Buyer Exempt Claims---------------------------------------------------------- 6
Buyer Indemnified Parties--------------------------------------------------- 72
Buyer's 401(k) Plan--------------------------------------------------------- 54
Cafeteria Plans------------------------------------------------------------- 57
Closing---------------------------------------------------------------------- 6
Closing Date----------------------------------------------------------------- 6
Closing Price---------------------------------------------------------------- 7
Closing Price Differential--------------------------------------------------- 7
COBRA------------------------------------------------------------------------ 7
Code------------------------------------------------------------------------- 7
Collective Bargaining Agreements--------------------------------------------- 7
Competitive Products-------------------------------------------------------- 66
Consolidated Indebtedness of the Sellers as of the Interim Balance Sheet Date 7
Continuation Coverage------------------------------------------------------- 41
Continuing Employees-------------------------------------------------------- 57
Contract--------------------------------------------------------------------- 7
Contribution Period--------------------------------------------------------- 55
Controlling Shareholders----------------------------------------------------- 7
Court------------------------------------------------------------------------ 7
Current Assets--------------------------------------------------------------- 7
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Current Liabilities----------------------------------------------------------7
Delta------------------------------------------------------------------------8
DIVX-------------------------------------------------------------------------9
Effective Time---------------------------------------------------------------8
Election Date---------------------------------------------------------------28
Employee Plan/Agreement-----------------------------------------------------39
Employee Plans/Agreements---------------------------------------------------39
Employees-------------------------------------------------------------------39
Environmental Conditions-----------------------------------------------------8
Environmental Costs----------------------------------------------------------8
Environmental Dispute-------------------------------------------------------63
Environmental Law------------------------------------------------------------8
Environmental Permits--------------------------------------------------------8
Environmental Procedures-----------------------------------------------------8
Environmental Property-------------------------------------------------------8
Environmental Reports--------------------------------------------------------8
EPA-------------------------------------------------------------------------44
ERISA------------------------------------------------------------------------8
Estimated Tax Liability-----------------------------------------------------26
Estimating Payment Certificate-----------------------------------------------8
Excess----------------------------------------------------------------------22
Excluded Assets--------------------------------------------------------------9
Excluded Automobiles--------------------------------------------------------10
Excluded Liabilities--------------------------------------------------------10
Excluded Queens Entities----------------------------------------------------10
Final Determination---------------------------------------------------------10
Financial Dispute-----------------------------------------------------------27
Financial Statements--------------------------------------------------------10
GAAP------------------------------------------------------------------------11
Government------------------------------------------------------------------11
Hazardous Materials---------------------------------------------------------11
Holdback Escrow Deposit-----------------------------------------------------20
HSR Act---------------------------------------------------------------------11
Income Taxes----------------------------------------------------------------10
Indebtedness----------------------------------------------------------------11
Indemnified Losses----------------------------------------------------------72
Indemnified Party-----------------------------------------------------------75
Indemnifying Party----------------------------------------------------------75
Independent Accountant------------------------------------------------------27
Independent Consultant------------------------------------------------------63
Indianapolis Property-------------------------------------------------------11
Initial Cash Payment--------------------------------------------------------18
Initial Purchase Price------------------------------------------------------18
Initial Working Capital Payment---------------------------------------------20
Intellectual Property-------------------------------------------------------11
Interest Amount-------------------------------------------------------------12
Interest Rate---------------------------------------------------------------12
Interim Balance Sheet-------------------------------------------------------12
Interim Balance Sheet Date--------------------------------------------------12
Interim Balance Sheet Date Accounts-----------------------------------------12
Interim Balance Sheet Date Cash Amount--------------------------------------12
Interim Financial Statements------------------------------------------------12
IRCA------------------------------------------------------------------------42
ISRA---------------------------------------------------------------------4, 51
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Kaltman Employment Agreement------------------------------------------------12
knowledge-------------------------------------------------------------------80
known to--------------------------------------------------------------------80
Law-------------------------------------------------------------------------12
Letter of Intent------------------------------------------------------------12
Liabilities-----------------------------------------------------------------12
License Agreement-----------------------------------------------------------12
Lien------------------------------------------------------------------------12
Losses----------------------------------------------------------------------72
Louisville Property---------------------------------------------------------13
Material Adverse Effect-----------------------------------------------------28
Material Contracts----------------------------------------------------------37
MHE--------------------------------------------------------------------------1
multiemployer plan----------------------------------------------------------39
Net Indebtedness------------------------------------------------------------13
New Jersey Escrow and Lease Agreements--------------------------------------13
New Jersey Property---------------------------------------------------------13
NJDEP------------------------------------------------------------------------3
NJDEP Application-----------------------------------------------------------60
Non-Competition Agreements--------------------------------------------------13
Notice of Dispute-----------------------------------------------------------21
Order-----------------------------------------------------------------------13
Ordinary Course-------------------------------------------------------------13
Originally Issued Shares----------------------------------------------------18
Other Party-------------------------------------------------------Schedule 6.7
Parties---------------------------------------------------------------------13
Party-----------------------------------------------------------------------13
Performance Escrow Agent----------------------------------------------------13
Performance Escrow Agreement------------------------------------------------13
Performance Escrow Deposit--------------------------------------------------20
Permitted Liens-------------------------------------------------------------13
Permitted Transferee--------------------------------------------------------13
Person----------------------------------------------------------------------14
Phase II Report--------------------------------------------------------------8
Plan------------------------------------------------------------------------14
Pre-Balance Sheet Medical Claims--------------------------------------------14
Pre-Closing Period----------------------------------------------------------14
Product Liability Claims----------------------------------------------------43
Prohibited Expenses---------------------------------------------------------14
Proprietary Information-----------------------------------------------------68
Purchase Price--------------------------------------------------------------18
Purchased Assets--------------------------------------------------------14, 28
QGI--------------------------------------------------------------------------1
QGWI-------------------------------------------------------------------------1
Q-Pack Registered Marks-----------------------------------------------------14
Real Estate Appraisal-------------------------------------------------------19
Real Property---------------------------------------------------------------14
Registered Intellectual Property--------------------------------------------34
Related Agreements----------------------------------------------------------76
Remediation Agreement-------------------------------------------------------60
Remediation Funding Source--------------------------------------------------60
Remediator--------------------------------------------------------Schedule 6.7
Restricted Period-------------------------------------------------------14, 66
Retained Cash Amount--------------------------------------------------------14
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Retention Bonuses-----------------------------------------------------------15
Return----------------------------------------------------------------------15
Returns---------------------------------------------------------------------15
SEC Filings-----------------------------------------------------------------48
Seller-----------------------------------------------------------------------1
Seller Indemnified Parties--------------------------------------------------73
Sellers----------------------------------------------------------------------1
Sellers'Basket--------------------------------------------------------------74
Sellers'Representative------------------------------------------------------76
Separate Covenant-----------------------------------------------------------67
Severance Obligations-------------------------------------------------------15
Share Price Adjustment------------------------------------------------------15
Shortfall-------------------------------------------------------------------23
Sidrow Contract-------------------------------------------------------------15
SPC--------------------------------------------------------------------------1
SPC Shares------------------------------------------------------------------15
Stanley Property------------------------------------------------------------15
Stockholders and Registration Rights Agreement------------------------------15
Tax Liability---------------------------------------------------------------15
Taxes-----------------------------------------------------------------------15
Third Person----------------------------------------------------------------72
Title Defect----------------------------------------------------------------65
Transaction-----------------------------------------------------------------16
TRC--------------------------------------------------------------------------1
triggering event-----------------------------------------------Schedule 6.7(c)
Union 401(k) Plan-----------------------------------------------------------57
Value of the SPC Shares-----------------------------------------------------16
Verebay Employment Agreement------------------------------------------------16
WARN ACT--------------------------------------------------------------------57
WC Balance------------------------------------------------------------------22
WC Overpayment--------------------------------------------------------------23
Weaverville Property--------------------------------------------------------16
Working Capital-------------------------------------------------------------16
Working Capital Escrow Agent------------------------------------------------16
Working Capital Escrow Agreement--------------------------------------------16
Working Capital Holdback----------------------------------------------------16
WRC--------------------------------------------------------------------------1
Year 2000 Compliant---------------------------------------------------------16
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PURCHASE AND SALE AGREEMENT
THIS PURCHASE AND SALE AGREEMENT (the "Agreement") is made this 30th
day of October, 1998, by and among SHOREWOOD PACKAGING CORPORATION, a Delaware
corporation ("SPC" or "Buyer") and QUEENS GROUP, INC., a New York corporation
("QGI"), QUEENS GROUP - WEAVERVILLE, INC., a New York corporation ("QGWI"),
ALLMOND REALTY CO., a New York general partnership ("ARC"), TALMADGE REALTY
COMPANY, a New Jersey general partnership ("TRC"), BELMONT REALTY COMPANY, a New
York general partnership ("BRC"), WEAVERVILLE REALTY COMPANY, LLC, a Delaware
limited liability company ("WRC") and MOUNT HOLLY ENTERPRISES, INC., a North
Carolina corporation ("MHE") (QGI, QGWI, ARC, TRC, BRC, MHE and WRC, each a
"Seller" and collectively, the "Sellers.")
RECITALS
A. Buyer desires to purchase from Sellers the Business and to assume the Assumed
Liabilities, on the following terms and conditions; and
B. Sellers desire to sell to Buyer the Business and to assign to Buyer the
Assumed Liabilities, on the following terms and conditions.
NOW, THEREFORE, in consideration of the foregoing recitals and the mutual
covenants, representations, warranties, conditions, and agreement hereinafter
expressed, the Parties agree as follows:
ARTICLE I.
GENERAL PROVISIONS
1.1 DEFINITIONS. Certain capitalized terms used in this Agreement have
the following meanings:
"Adjusted Purchase Price" means the Initial Purchase Price following
adjustments pursuant to Sections 2.10, 2.11, 2.12, 2.13 and 2.14, if any.
"Affiliate" means a Person that directly, or indirectly through one
or more intermediaries, controls, is controlled by, or is under common control
with, the Person referred to. In this definition, "control" means the
possession, direct or indirect, of the power to direct or cause the direction of
the management and policies of a Person, whether through ownership of
securities, by contract, or otherwise.
"Amended and Restated Lease Agreement" means an agreement between
BRC and Buyer (or its designee) in the form attached hereto as Exhibit A.
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"Ancillary Agreements" means the Stockholder and Registration Rights
Agreement, the Amended and Restated Lease Agreement, New Jersey Escrow and Lease
Agreements, the Verebay Employment Contract, the Kaltman Employment Contract,
the Assignment and Assumption Agreements, the Performance Escrow Agreement, the
License Agreement, the Non-Compete Agreements and the Working Capital Escrow
Agreement, collectively.
"Approved Environmental Budget" means:
(a) with respect to the Stanley Property, as to (i) Approved
Environmental Compliance Work, $52,000; (ii) Approved
Environmental Investigation Work, $15,000; and (iii) Approved
Environmental Remediation Work, that amount as shall be agreed
to by the Parties after Closing, through good faith
negotiations, which estimates the Environmental Costs for
conducting the Approved Environmental Remediation Work in
order to achieve the Approved Remediation Standard;
(b) with respect to the New Jersey Property, as to (i) Approved
Environmental Compliance Work, $20,000, (ii) Approved
Environmental Investigation Work, $45,000; and (iii) as to
Approved Environmental Remediation Work, an amount, no greater
than the amount of the Remediation Funding Source, as shall be
agreed to by the Parties through good faith negotiations as to
the cost of effecting the Approved Environmental Remediation
Work required by the NJDEP and as may be amended, from time to
time by the NJDEP;
(c) with respect to the Louisville Property, as to (i) Approved
Environmental Compliance Work, $ 73,500, (ii) Approved
Environmental Investigation Work, $90,000 and (iii) Approved
Environmental Remediation Work, that amount as shall be agreed
to by the Parties after Closing, through good faith
negotiations, which estimates the Environmental Costs for
conducting the Approved Environmental Remediation Work in
order to achieve the Approved Remediation Standard;
(d) with respect to the Weaverville Property, as to the Approved
Environmental Compliance Work, $23,000;
(e) with respect to the Indianapolis Property, as to the Approved
Environmental Compliance Work, $60,000; and
(f) with respect to any Environmental Property, such other amount
or amounts as may be jointly agreed to by Buyer and Sellers'
Representative.
"Approved Environmental Compliance Work" means (i) all necessary
actions to bring the Business into compliance with the Environmental Laws with
respect to those matters identified as compliance issues in the Environmental
Reports; and (ii) all necessary actions to resolve those matters identified as
Finding Nos. 5 (regarding Indianapolis Superfund site) and 6
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(regarding asbestos O&M plan) of the Phase I Environmental Assessment Findings
set forth in the Phase II Environmental Site Assessment and Compliance Report
for the Indianapolis Property and Finding No. 3 (regarding asbestos plan) of the
Phase I Environmental Assessment Findings set forth in the Phase II
Environmental Site Assessment and Compliance Report for the Louisville Property.
"Approved Environmental Investigation Work" means any and all
investigation, sampling, monitoring and analysis with respect to those matters
identified as Phase II Findings in the Environmental Reports, or with respect to
the New Jersey Property, such further investigative work as the NJDEP shall
identify.
"Approved Environmental Remediation Work" means any and all cleanup,
remediation, abatement, removal, monitoring, or off-site disposal with respect
to those matters identified as Phase II Findings in the Environmental Reports,
or with respect to the New Jersey Property, those matters identified by the New
Jersey Department of Environmental Protection ("NJDEP").
"Approved Remediation Standard" means, to the extent applicable to
industrial or commercial properties:
(a) With respect to the Indianapolis Property, such investigation,
monitoring, remediation and other actions reasonably necessary
to satisfy the requirements of the Voluntary Remediation
Program of the State of Indiana in order to obtain (to the
extent reasonably obtainable) a written certificate of
completion or other similar document identifying that, with
respect to acts or omissions occurring prior to the Interim
Balance Sheet Date, no further investigation, monitoring,
remediation or other action is needed, provided, however,
Sellers shall not place, or agree to place, any restriction
upon the Indianapolis Property which will unreasonably effect
Buyer's use and enjoyment of the property or the Business,
unless a notice of termination has been given under the
Amended and Restated Lease Agreement to the Buyer or Buyer has
ceased to occupy substantially all of the property leased to
it under the Amended and Restated Lease Agreement.
(b) With respect to the Louisville and Stanley Properties, such
investigation, monitoring, remediation or other action as may
be reasonably necessary to obtain (to the extent reasonably
obtainable) from the applicable state governmental
environmental agency a written certificate or letter
identifying that with respect to acts or omissions occuring
prior to the Interim Balance Sheet Date, no further
investigation, monitoring, remediation or other action is
needed, or if the state governmental environmental agency does
not have authority to issue such a letter or certificate, then
to the then current cleanup standards for commercial property
published by the applicable state governmental environmental
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agency, and if none, then to a cleanup standard agreed to by
the Parties through good faith negotiations.
(c) With respect to the New Jersey Property, such investigation,
monitoring, remediation or other action reasonably necessary
to fulfill all obligations for remediation under the New
Jersey Industrial Site Recovery Act, N.J.S.A. 13:1k-6 et seq.
("ISRA"), with respect to acts or omissions occuring prior to
the Interim Balance Sheet Date and to secure a no further
action letter without conditions (except for such standard
conditions as may generally be imposed by the NJDEP) from the
NJDEP.
"Assets" means all assets and property and associated rights and
interests, real, personal, and mixed, tangible and intangible, of whatever kind,
owned or used by Sellers in connection with the Business. Without limiting the
generality of the foregoing, the Assets include the following items:
(a) all assets reflected and/or described on the Interim Balance
Sheet, except any such assets which have been disposed of in
the Ordinary Course of the Business since the Interim Balance
Sheet Date or otherwise as permitted pursuant to Section
5.1(d);
(b) all assets owned or used by Sellers in connection with the
Business which have been fully depreciated or written off;
(c) all assets acquired by Sellers in connection with the Business
since the Interim Balance Sheet Date;
(d) all accounts receivable of Sellers in connection with the
Business;
(e) all inventories of Sellers in connection with the Business,
including but not limited to all raw materials, finished goods
and work in process;
(f) all Contracts of Sellers with suppliers or customers in
connection with the Business;
(g) all machinery, equipment, spare parts, supplies (including
blankets) and tools of Sellers used in connection with the
Business;
(h) all vehicles of Sellers used in connection with the Business;
(i) title to or leasehold interests in or an option to buy at
nominal value, as the case may be, all parcels of real
property of Sellers used in connection with the Business,
including without limitation all buildings, plants,
warehouses, facilities and other improvements and fixtures
thereon and appurtenances thereto;
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<PAGE> 17
(j) all permits, approvals, licenses and certifications issued to
Sellers by a Government or by a private testing or certifying
authority in connection with the Business, to the extent
assignable under the terms thereof and applicable Law;
(k) all Intellectual Property, and documentation thereof and the
right and power to assert, defend and recover title thereto in
the same manner and to the same extent as Sellers could or
could cause to be done if the transactions contemplated hereby
did not occur, and the right to recover for past damages on
account of the infringement, misuse, or theft thereof;
(l) on account of the infringement, misuse, or theft thereof;
(m) all records, including business, computer, engineering, and
other records, and all associated documents, discs, tapes, and
other storage or recordkeeping media of Sellers prepared or
held in connection with the Business, including but not
limited to all sales data, customer lists, accounts, bids,
contracts, supplier records, and other data and information of
the Business;
(n) all rights and claims against others under Contracts;
(o) all rights in all applicable jurisdictions and countries to
the use of the name "Queens Group" and all related names
whether used in combination with other words or not, and all
goodwill associated therewith and with the Business;
(p) all other claims against others, rights, and chooses in
action, liquidated or unliquidated, of Sellers arising from
the Business including those arising under insurance policies;
and
(q) the Cafeteria Plans.
"Assignment and Assumption Agreement" means the form of instrument
attached hereto as Exhibit B.
"Assumed Liabilities" means (i) the Assumed Severance Obligations,
(ii) the Liabilities of Sellers, to the extent the Liabilities relate to or were
incurred in connection with the Business or the Purchased Assets and to the
extent they are not Excluded Liabilities, (iii) all Liabilities of Sellers taken
into account in computing any adjustment to the Purchase Price pursuant to
Sections 2.10, 2.11, 2.12 and 2.13(b), (iv) all Liabilities relating to or
arising out of the operations of the Business from and after the Interim Balance
Sheet Date and not incurred in violation of the terms hereof, (v) the Cafeteria
Plans (vi) the Liabilities referred to in Section 6.5(c) relating to COBRA, and
(vii) any other Liabilities expressly assumed by Buyer hereunder.
"Assumed Severance Obligations" means the Severance Obligations, up
to a maximum amount, per Employee, equal to the lesser of one week's pay for
each year in the
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<PAGE> 18
employ of any Seller or any predecessor in interest of any Seller or twenty six
(26) weeks pay based upon the Employee's base salary in effect on the date of
termination of such Employee's employment with Sellers or Buyer, as the case may
be (or with respect to Employees covered by effective employment agreements
which have been assumed by Buyer, up to the amounts provided for in the case of
termination under the relevant provisions of such agreements). For purposes of
clarity, it is understood that the term "Assumed Severance Obligations" does not
include, and specifically excludes, (i) Retention Bonuses, to whomever payable
and (ii) Severance Obligations payable to any of the Controlling Shareholders.
"Audited Financial Statements" means the audited combined balance
sheets of Sellers and the Excluded Queens Entities for each of the years ending
December 28, 1997 and December 29, 1996, together with the related statements of
operations (earnings) and cash flows for each of the periods then ended, all
presented in accordance with GAAP, and accompanied by an unqualified report of
Sellers' independent auditors, Goldstein Golub Kessler & Company, L.L.P.
"Bill of Sale" means the form of instrument attached hereto as
Exhibit C.
"BRC Loan" means that certain loan in the original principal amount
of $1,200,000 made by Mellon Bank, N.A., to BRC on May 28, 1998.
"Business" means the collective business and operations of Sellers
generally conducted under the tradenames Queens Group, Inc., Queens Group -
Weaverville, Inc., Allmond Realty Co., Talmadge Realty Company, Belmont Realty
Co., Weaverville Realty Company, L.L.C and Mount Holly Enterprises, Inc. as
reflected in the Financial Statements.
"Business Condition" of a Person or business means the business,
assets, results of operations, condition (financial or otherwise) and prospects
of such Person or business.
"Buyer" has the meaning set forth in the Preamble (or any Affiliate
of Buyer to whom this Agreement is assigned pursuant to Section 12.1(a) hereof).
"Buyer Exempt Claims" means:
(i) Financial Disputes and claims for Purchase Price adjustments
under Article II;
(ii) claims of fraud;
(iii) claims under Section 10.2(a)(ii) and Section 10.2(a)(iii); and
(iv) claims for breach of any of the representations and warranties
contained in Sections 3.1 and 3.2 of Article III but only to
the extent that such breach affects the overall validity of
this Agreement or the Transaction.
"Closing" means the consummation of the Transaction.
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"Closing Date" means the later of (a) October 30, 1998 or such other
date as the Parties may agree, or (b) as soon as practicable after the
termination of the applicable waiting period under the HSR Act, or, if the other
conditions to Closing are not by then satisfied, on such date within ten (10)
business days following satisfaction of such conditions (other than conditions
to be satisfied at Closing according to the terms hereof) that Buyer or Sellers'
Representative shall designate in a written notice given to the other at least
three (3) business days prior to the scheduled Closing Date, but in no event
shall the Closing Date occur later then December 31, 1998, except as expressly
provided in Section 12.2(b) below.
"Closing Price" means, with respect to the Closing Date or any
relevant Election Date, as the case may be, a value per SPC Share equal to the
average closing price per SPC Share during the ten (10) trading days immediately
preceding the Closing Date or such Election Date.
"Closing Price Differential" means the amount, if any, by which the
Closing Price on the Closing Date is less than $15 (up to a maximum amount of
$3).
"COBRA" means the Consolidated Omnibus Budget Reconciliation Act of
1985, as amended.
"Code" means the Internal Revenue Code of 1986, as from time to time
amended.
"Collective Bargaining Agreements" means the Agreements listed on
Part IV of Schedule 3.18.
"Consolidated Indebtedness of the Sellers as of the Interim Balance
Sheet Date" means the consolidated Indebtedness of the Sellers as of the Interim
Balance Sheet Date (exclusive of Indebtedness under the BRC Loan), as initially
derived from the Interim Balance Sheet and reflected in the Estimated Payment
Certificate, subject to adjustment after the Closing pursuant to Sections 2.9
and 2.11.
"Contract" means any contract, agreement, lease, license, indenture,
evidence of indebtedness, binding commitment or instrument, purchase order,
written or oral, entered into or made by or on behalf of any Seller in
connection with the Business, or to which any Seller is a party or by which it
or its property is bound.
"Controlling Shareholders" means Leonard Hecht, Leonard Verebay,
Eric Kaltman, Gerald Sanders and Arlene Sanders.
"Court" means any court, grand jury, administrative or regulatory
body, Government agency, arbitration or mediation panel or similar body.
"Current Assets" means all items which, in accordance with GAAP,
would be classified as current assets.
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<PAGE> 20
"Current Liabilities" means all items which, in accordance with
GAAP, would be classified as current liabilities.
"Effective Time" means the effective time of the Closing, which,
notwithstanding anything to the contrary contained herein and irrespective of
when the Closing occurs, shall be deemed to be for all purposes, 12:00 p.m.,
Midnight, August 30, 1998.
"Environmental Conditions" means only the conditions, hazards,
pollution, or contamination from Hazardous Materials identified in the
Environmental Reports as requiring remediation in order to bring the property
into compliance with applicable Environmental Laws and attributable to acts or
omissions occurring prior to the Interim Balance Sheet Date.
"Environmental Costs" means all reasonable, customary and documented
costs and expenses (including reasonable attorneys', consultant and engineering
fees and Government fines and penalties), but excluding internal corporate
overhead, paid or incurred in connection with the Approved Environmental
Remediation Work, Approved Environmental Investigation Work and the Approved
Environmental Compliance Work.
"Environmental Law" means any current, past or future Law relating
to the protection of health or the environment, including without limitation:
the Clean Air Act, the Federal Water Pollution Control Act, the Resource
Conservation and Recovery Act, the Comprehensive Environmental Response,
Compensation and Liability Act, the Toxic Substance Control Act, any comparable
state or foreign Law, and the common law, including the law of nuisance and
strict liability.
"Environmental Permits" means all permits, registrations, approvals
and licenses, and all filings with and submissions to any Government or other
authority, required by any Environmental Law.
"Environmental Property" means all assets and property currently or
previously owned, leased, operated or used in connection with the Business.
"Environmental Procedures" means the procedures set forth on
Schedule 6.7.
"Environmental Reports" means the Phase II Environmental Site
Assessment and Compliance Reports (the "Phase II Report"), with respect to the
Real Property dated October 1998 prepared by Delta Environmental Consultants,
Inc. ("Delta"), and the Phase I Environmental Site Assessment and Compliance
Audit Reports prepared by Delta.
"ERISA" means the Employee Retirement Security Act of 1974, as
amended.
"Estimated Payment Certificate" means a certificate from the
President and the Chief Financial Officer of QGI dated the Closing Date and
deliverable to Buyer at Closing estimating the amount of the Approved Payments
made by Sellers during the Pre-Closing Period as well as the Consolidated
Indebtedness of Sellers as of the Interim Balance Sheet Date, the
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<PAGE> 21
Interim Balance Sheet Date Cash Amount, the Retained Cash Amount and the amount
of the Net Indebtedness, and which shall include a reasonably detailed
description of each calculation.
"Excluded Assets" means the following items:
(i) the Retained Cash Amount;
(ii) an amount of cash equal to the Tax Liability, as finally
determined pursuant to Section 2.14;
(iii) the Excluded Automobiles;
(iv) the assets and businesses of the Excluded Queens Entities and
Oliver Trucking Corp. and any other Affiliate of any Seller
(which is not itself a Seller hereunder);
(v) the agreement between QGI and Pictorial Offset Corporation
dated March 6, 1998 and the agreements listed on Schedule
3.12, including any payments made under any of them from and
after the Interim Balance Sheet Date;
(vi) the names of the Sellers other than QGI and QGWI;
(vii) the mortgage on the residence of Stanton Bryan described in
the second paragraph of Schedule 3.24 and all rights
resulting from or arising out of that statement of Judgment
entered September 18, 1998, in the Supreme Court of NY
County, Index No. 603298/98;
(viii) the Q Pack patent and associated Intellectual Property
rights, including the Q-Pack Registered Marks (including any
licenses of any such patent or other rights to Digital Video
Express L.P. ("DIVX"), a Delaware limited partnership, or any
Affiliate thereof), including all licensing and royalty fees
derived therefrom from and after the Interim Balance Sheet
Date (but exclusive of printing and packaging revenues);
(ix) any prepayments or accruals with respect of Liabilities which
are not Assumed Liabilities hereunder;
(x) any promissory notes or receivables relating to any loans or
advances set forth on Schedule 3.24;
(xi) any amounts paid or payable under health insurance policies
or other insurance or fidelity policies or bonds relating to
(y) acts or omissions occurring prior to the Interim Balance
Sheet Date or (z) Liabilities of Sellers which are not
Assumed Liabilities hereunder;
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<PAGE> 22
(xii) the bank accounts of Sellers other than QGI and QGWI and
Account Number 777565404 at Chase Manhattan Bank;
(xiii) the fee interest in the Indianapolis Property; and
(xiv) the Union 401(k).
"Excluded Automobiles" shall mean the automobiles listed on Schedule
1.2 hereto.
"Excluded Liabilities" means:
(i) all Liabilities of Sellers relating to federal, state or
local income taxes ("Income Taxes"), Retention Bonuses,
Severance Obligations (to the extent that they do not
constitute Assumed Severance Obligations);
(ii) all Liabilities arising under the Contracts listed on
Schedule 1.3 hereof;
(iii) all Liabilities to the extent relating to the Excluded
Assets;
(iv) all Liabilities of the Sellers arising after the Closing Date
(other than Assumed Severance Obligations and other Assumed
Liabilities);
(v) all audit, accounting, legal, environmental and other
professional fees and expenses incurred by any Seller or
Controlling Shareholder in connection with the execution of
this Agreement and the consummation of the Transaction
contemplated hereby and the preparation of the financial
statements described on Schedule 5.8;
(vi) all Liabilities owed by QGI to any of the Sellers other than
QGI and QGWI representing the transfer of cash balances in
excess of the Retained Cash Amount from such Sellers to QGI;
(vii) up to approximately $50,000 of amounts owed by Sellers to
MCI/Worldcom in respect of periods prior to the Interim
Balance Sheet and arising under certain disputed invoices to
Sellers therefrom; and
(viii) all Liabilities of BRC and the Excluded Queens Entities other
than Liabilities reflected in the Interim Balance Sheet.
"Excluded Queens Entities" means Barwood Associates, Barnett Leasing
Company and Talmadge Leasing Company.
"Final Determination" means either a mutual agreement of Buyer and
Sellers' Representative or a binding arbitration (if the disputants agree to
submit to arbitration whether pursuant to this Agreement or otherwise), or a
final order, decree, or judgment of a Court of
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<PAGE> 23
competent jurisdiction in the United States of America (the time for appeal
having expired and no appeal having been taken).
"Financial Statements" means the Audited Financial Statements and
the Interim Financial Statements.
"GAAP" means generally accepted accounting principles, as in effect
on the Interim Balance Sheet Date.
"Government" means the United States of America, any other nation or
sovereign state, the European Union, any federal, bilateral or multilateral
governmental authority, any state, possession, territory, county, district, city
or other governmental unit or subdivision, and any branch, agency, or judicial
body of any of the foregoing.
"Hazardous Materials" means any pollutants, contaminants, hazardous
substances, hazardous chemicals, toxic substances, hazardous wastes, infectious
wastes, radioactive materials, petroleum including crude oil or any fraction
thereof, asbestos fibers, or solid wastes or other hazardous materials,
including without limitation those defined in any Environmental Law.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976.
"Indebtedness" means, without duplication, the sum of (a) all
obligations of the Sellers for borrowed money or evidenced by promissory notes,
(b) the principal portion of all obligations of the Sellers under capital
leases, (c) all commercial letters of credit and the maximum or face amount of
all performance and standby letters of credit issued or bankers' acceptance
facilities created for the account of any of the Sellers, including, without
duplication, all unreimbursed draws thereunder, (d) all guaranty obligations of
the Sellers with respect to Indebtedness of another Person (except indebtedness
of Barwood Associates or other Affiliates of Sellers which guaranteed
Indebtedness shall not be among the Assumed Liabilities), (e) all Indebtedness
of another Person secured by a Lien on any property of the Sellers, whether or
not such Indebtedness has been assumed by any of the Sellers, (f) all
Indebtedness of any partnership or unincorporated joint venture to the extent
any Seller is legally obligated or has a reasonable exception of being liable
with respect thereto, net of any assets of such partnership or joint venture and
(g) the principal balance outstanding under any synthetic lease, tax retention
operating lease, off-balance sheet loan or similar off-balance sheet financing
product where such transaction is considered borrowed money indebtedness for Tax
purposes but is classified as an operating lease under GAAP. For purposes of
clarity, it is understood that the Indebtedness of Sellers shall be calculated
on a combined basis, after provision for inter-company eliminations.
"Indianapolis Property" means that real property, buildings,
fixtures, improvements and appurtenances thereto located at 620 South Belmont
Avenue, Indianapolis, Indiana.
"Intellectual Property" means all of the following (in whatever form
or medium) which are owned by or licensed to Sellers for use in the Business:
patents, trademarks, service
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<PAGE> 24
marks, trade names, corporate names, copyrights, and copyrighted works;
registrations thereof and applications therefor; trade secrets, software
(whether in source code or object code), firmware, mask works, programs,
inventions, discoveries, proprietary processes, and items of proprietary
know-how, information or data; proprietary prospect lists, customer lists,
projections, analyses, and market studies; and licenses, sublicenses,
assignments, and agreements in respect of any of the foregoing.
"Interest Amount" means interest at a rate equal to the Interest
Rate on the sum of the Initial Cash Payment plus the Performance Escrow Deposit
plus the Holdback Escrow Deposit (if any) computed from the Interim Balance
Sheet Date through and including the Closing Date.
"Interest Rate" means interest at an annual rate equal to 4.69%,
compounded monthly.
"Interim Balance Sheet" means the unaudited balance sheet included
in the Interim Financial Statements.
"Interim Balance Sheet Date" means August 30, 1998.
"Interim Balance Sheet Date Accounts" means the accounts and notes
receivable of Sellers outstanding at or relating to the periods prior to the
Interim Balance Sheet Date.
"Interim Balance Sheet Date Cash Amount" means the aggregate amount
of cash, cash equivalents and marketable securities of Sellers on hand as at the
Interim Balance Sheet Date, as initially derived from the Interim Balance Sheet
and reflected in the Estimated Payment Certificate, subject to adjustment after
the Closing pursuant to Sections 2.9 and 2.11.
"Interim Financial Statements" means the unaudited combined balance
sheet of Sellers as at the close of the eight month interim period ending on
August 30, 1998, together with the related statement of operations and cash
flows for such period as well as the corresponding eight month interim period
ending August 31, 1997, all presented in accordance with GAAP.
"Kaltman Employment Agreement" means an agreement in the form
attached hereto as Exhibit D.
"Law" means any statute, law, treaty, ordinance, rule, regulation,
instrument, directive, decree, order, or injunction of any Government,
quasi-governmental authority, or Court, and includes rules or regulations of any
regulatory or self-regulatory authority compliance with which is required by
law.
"Letter of Intent" means that certain Letter of Intent dated August
18, 1998 between SPC and Sellers and Controlling Shareholders in respect of the
Transaction.
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<PAGE> 25
"Liabilities" means liabilities and/or obligations, known or
unknown, asserted or unasserted, liquidated or unliquidated, accrued, absolute,
contingent or otherwise, whether or not required to be reflected on the
financial statements of a business.
"License Agreement" means an agreement in the form attached hereto
as Exhibit E.
"Lien" means any lien, security interest, mortgage, option, lease,
tenancy, occupancy, restrictive covenant, condition, easement, agreement,
pledge, hypothecation, charge, restriction, or other encumbrance of every kind
and nature.
"Louisville Property" means that Real Property located at 4501
Allmond Avenue, Louisville, Kentucky.
"New Jersey Escrow and Lease Agreements" means the agreements
between TRC and Buyer (or its designee) in the forms attached hereto as Exhibit
F.
"New Jersey Property" means that Real Property located at 180
Talmadge Road, Edison, New Jersey.
"Net Indebtedness" shall mean (i) the Consolidated Indebtedness of
Sellers as of the Interim Balance Sheet Date minus (ii) the Interim Balance
Sheet Date Cash Amount plus (iii) the Retained Cash Amount, as initially
reflected in the Estimated Payment Certificate, subject to adjustment after the
Closing pursuant to Sections 2.9 and 2.11.
"Non-Competition Agreements" means non-compete agreements, in the
form attached hereto as Exhibit G, to be executed by each of the Controlling
Shareholders.
"Order" means an order, judgment, writ, injunction, award or decree
of any Court or Government.
"Ordinary Course" means, with respect to the Business, only the
ordinary course of commercial operations engaged in by such Business consistent
with past practices, and specifically does not include activity (i) involving
the purchase or sale of such business or of any product line or business unit or
(ii) involving material modification or adoption of any Plan.
"Party" means Buyer or any Seller, and "Parties" means Buyer and all
Sellers.
"Performance Escrow Agent" means the escrow agent under the
Performance Escrow Agreement.
"Performance Escrow Agreement" means the form of agreement attached
hereto as Exhibit H.
"Permitted Liens" means: (i) liens, claims or encumbrances imposed
by law, such as carriers', warehousemen's, materialmen's liens, not material in
amount and that will not materially interfere with the operation of the
Business; (ii) liens for real property taxes not yet
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<PAGE> 26
due and payable and liens for real property taxes the payment of which is being
contested in good faith or the time for doing so has not yet expired, provided
that adequate reserves have been established therefor on the books and records
of Sellers; (iii) as to real property, survey exceptions, easements or
reservations of, or rights of others for, rights of way, highway and railroad
crossings, sewers, electric lines, telegraph and telephone lines; and (iv)
Liens, Liabilities or encumbrances that are security for (and that can be
discharged and satisfied by the payment of) Assumed Liabilities and other Liens
listed on Schedule 3.45.
"Permitted Transferee" means any transferee of Originally Issued
Shares pursuant to the provisions of Section 2.2 of the Stockholder and
Registration Rights Agreement.
"Person" means any natural person, any corporation, partnership,
limited liability company, limited liability partnership, joint venture,
association, company, or other legal entity, and any Government.
"Plan" means any agreement, arrangement, plan or policy, qualified
or non-qualified, whether or not considered legally binding, that involves (a)
any pension, retirement, profit sharing, deferred compensation, bonus, stock
option, stock purchase, phantom stock, health, welfare or incentive plan; or (b)
welfare or "fringe" benefits, including without limitation any voluntary
employees' beneficiary associations or related trusts, vacation, severance,
disability, medical, hospitalization, dental, life and other insurance, tuition,
company car, club dues, income tax preparation, sick leave, maternity, paternity
or family leave, child care or other benefits; or (c) any employment,
consulting, engagement or retainer agreement or arrangement.
"Pre-Balance Sheet Medical Claims" means medical claims submitted by
Employees under Sellers' self-insured medical plan in respect of expenses
incurred prior to the Interim Balance Sheet Date.
"Pre-Closing Period" means the period commencing at the close of
business on the Interim Balance Sheet Date and ending on the Closing Date.
"Prohibited Expenses" means the costs or expenses described on
Schedule 5.1 (l) to the extent paid by Sellers during the Pre-Closing Period.
"Purchased Assets" means all of the Assets other than the Excluded
Assets.
"Q-Pack Registered Marks" means the U.S. trademark registration no.
1,918,817 and 1,962,227 and U.S. Servicemark registration no. 1,299,956 and all
statutory and common law rights in respect of the trademarks and servicemarks
evidenced thereby.
"Real Property" means each parcel of real property included in the
Purchased Assets, including without limitation all buildings, plants,
warehouses, facilities and other improvements and fixtures thereon and
appurtenances thereto.
"Restricted Period" means the period commencing on the Closing Date
and ending on the second anniversary thereof or such earlier date as of which
the provisions of
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<PAGE> 27
Article II of the Stockholder and Registration Rights Agreement shall have been
terminated in accordance with the provisions of the Stockholder and Registration
Rights Agreement.
"Retained Cash Amount" means any cash, cash equivalents and
marketable securities held by Sellers other than QGI and QGWI as at the Closing
Date (which shall in no event exceed $150,000), as initially estimated in the
Estimated Payment Certificate, subject to adjustment after the Closing pursuant
to Sections 2.9 and 2.11.
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<PAGE> 28
"Retention Bonuses" means any retention or incentive bonus,
parachute payment or other special bonus or compensation payable solely as a
result of or in connection with a change of control of the Sellers or a sale of
all or a substantial part of the Business.
"Returns" means returns, reports, estimated tax and informational
statements and returns relating to Taxes which are, were or will be required by
Law to be filed by Sellers in connection with the Business, and all information
returns (e.g., Form W-2, Form 1099) and reports relating to Taxes or Plans. Any
one of the foregoing Returns may be referred to sometimes as a "Return."
"Severance Obligations" means such severance costs and obligations
which under Sellers' severance policies will become payable to (i) any Employee
who is not offered employment by Buyer and who is terminated by Sellers within
ten (10) business days after the Closing and (ii) any Employee who is offered
and accepts employment with Buyer, but who is terminated by Buyer within sixty
(60) days after the Closing.
"Share Price Adjustment" means the number of Originally Issued
Shares held by the Stockholders (as defined in the Stockholders and Registration
Rights Agreement) and their Permitted Transferees on the Election Date
multiplied by the Closing Price Differential or the amount by which the Closing
Price on the Election Date is less than $15, whichever is less. Appropriate
adjustments shall be made to said calculation to the extent necessary to reflect
any intervening changes in the SPC Shares by reason of a stock dividend, stock
split, reverse stock split, recapitalization, merger, consolidation,
combination, reorganization or similar event.
"Sidrow Contract" means that certain agreement between QGI and
Michael Sidrow dated August 1, 1998.
"SPC Shares" means shares of SPC's common stock, par value $.01 per
share.
"Stanley Property" means that Real Property located at 1101 South
Highway 27, Stanley, North Carolina.
"Stockholders and Registration Rights Agreement" means an agreement
in the form attached hereto as Exhibit I.
"Tax Liability" means 43.75% of Sellers' combined taxable income
(net of losses, if any) during the Pre-Closing Period.
"Taxes" means all taxes, charges, fees, levies or other like
assessments imposed or assessed by any Government, including without limitation
income, profits, windfall profit, employment (including Social Security, state
pension plans, and unemployment insurance), withholding, payroll, franchise,
gross receipts, sales, use, transfer, stamp, occupation, real or personal
property, ad valorem, value added, premium, and excise taxes; Pension Benefit
Guaranty Corporation premiums and any other like Government charges; and shall
include all penalties, fines, assessments, additions to tax, and interest
resulting from, attributable to, or
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<PAGE> 29
incurred in connection with such Taxes or any contest or dispute thereof. Any
one of the foregoing Taxes may be referred to sometimes as a "Tax."
"Transaction" means the transactions contemplated by this Agreement
and the Ancillary Agreements, collectively.
"Value of the SPC Shares" means the number of SPC Shares issued to
Sellers at Closing, determined in accordance with Section 2.3(c), multiplied by
the greater of the Closing Price and $15.
"Verebay Employment Agreement" means an agreement in the form
attached hereto as Exhibit J.
"Weaverville Property" means that Real Property located at 90
Monticello Road, Weaverville, North Carolina.
"Working Capital" means (i) the combined Current Assets of Sellers
exclusive of (x) cash, cash equivalents and marketable securities, and (y)
promissory notes from, and advances to, Employees listed on Schedule 3.24 and,
without duplication of amounts otherwise excluded from Working Capital, other
Current Assets of Sellers (other than cash, cash equivalents and marketable
securities) which are Excluded Assets hereunder and (z) 50% of the aggregate
value of finished goods and work in process not subject to valid purchase orders
(other than 12" blanks) and raw materials in excess of six months old minus (ii)
the combined Current Liabilities of the Business (modified to include employee
severance obligations assumed by Buyer arising on account of Employees
terminated prior to the Interim Balance Sheet Date, whether payable within one
year or over a longer period) exclusive of (x) current maturities of
Indebtedness and (y) any other reserves or accruals in respect of Liabilities of
Sellers which are Excluded Liabilities hereunder.
"Working Capital Escrow Agent" means the escrow agent under the
Working Capital Escrow Agreement.
"Working Capital Escrow Agreement" means the form of agreement
attached hereto as Exhibit K.
"Working Capital Holdback" means the amount by which Working Capital
as shown on the Interim Balance Sheet is less or more (as the case may be) than
six million dollars ($6,000,000).
"Year 2000 Compliant" shall mean with respect to any software,
hardware and other applicable equipment with imbedded software that such product
will (i) be able to accurately process date/time data (including, but not
limited to, calculating, computing, comparing and sequencing) from, into, within
and between the 20th and 21st centuries, including the years 1999 and 2000 and
leap year calculations, and will create, store and generate output data related
to these dates without errors or omissions; and/or (ii) will continue in all
material respects to be fully functional and will operate according to its
specifications, without
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error or interruption and without special material modification or repair,
notwithstanding the occurrence of dates within and between the 20th and 21st
centuries, including the years 1999 and 2000, and generally, with respect to the
Business shall mean that in the time before, during and after January 1, 2000.
ARTICLE II.
PURCHASE AND SALE OF PURCHASED ASSETS
2.1 ASSETS AND SHARES TO BE PURCHASED. Subject to the terms and conditions
hereof, on the Closing Date and as of the Effective Time, Sellers shall sell to
Buyer, free and clear of all Liens except Permitted Liens, all right, title and
interest of Company Sellers in and to all of the Purchased Assets.
2.2 ASSUMED LIABILITIES.
(a) Subject to the terms and conditions hereof, (i) on the Closing
Date, Buyer shall assume, pay and discharge all outstanding
Indebtedness of Sellers reflected on the Interim Balance Sheet
or incurred during the Pre-Closing Period in compliance with
the terms hereof (other than Indebtedness outstanding under
the BRC Mortgage Loan) or otherwise obtain from the relevant
lenders full and complete releases of Sellers from such
liabilities and or undertakings from the relevant lenders to
deliver such releases within a reasonable period of time
follow receipt of payment from Buyer (ii) on the Closing Date
and as of the Effective Time, Sellers shall assign and
transfer to Buyer and Buyer agrees to assume all of the other
Assumed Liabilities.
(b) Notwithstanding the foregoing, if any required consent to
assignment or transfer of any obligation or instrument set
forth in Part I of Schedule 3.19 has not been obtained at or
prior to the Closing, then, at Buyer's election and in its
sole discretion, and subject to Buyer's right to require
strict compliance with Section 8.8 hereof, such obligation or
instrument shall not be assigned or transferred, but Buyer
shall act as agent for each Seller in order to obtain for
Buyer (at Buyer's expense) the benefits under such obligation
or instrument.
(c) Except for Assumed Liabilities, neither Buyer nor any
Affiliate of Buyer assumes or agrees to become liable for or
successor to any liabilities or obligations of Seller
whatsoever, liquidated or unliquidated, known or unknown,
contingent or otherwise, whether of any Seller, any Affiliate
of any Seller, any predecessor thereof, or any other Person,
or of the Business. No other statement in or provision of this
Agreement and no other statement, written or oral, action, or
failure to act includes or constitutes any such assumption or
agreement, and any statement to the contrary by any Person is
unauthorized and hereby disclaimed. Except as expressly
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provided in this Section 2.2, without limiting the generality
of the foregoing, neither Buyer nor any Affiliate of Buyer
assumes or agrees to become liable for any of Sellers' or
Controlling Shareholders liabilities relating to Income Taxes.
2.3 CONSIDERATION. The purchase price to be paid by Buyer for the Business
(the "Purchase Price") shall be the aggregate of (a) the Adjusted Purchase Price
plus (b) the Contingent Payment, if any plus (c) the Share Price Adjustment, if
any. The portion of the Purchase Price payable at Closing (the "Initial Purchase
Price") consists of the items described in clauses (a), (b) and (c) below,
subject to adjustment after the Closing pursuant to Sections 2.10, 2.11, 2.12,
2.13, 2.14.and 2.17:
(a) cash in an amount equal to (x) One Hundred Twenty Nine Million
Five Hundred Thousand Dollars ($129,500,000) plus the Initial
Working Capital Payment, if applicable, minus the sum of (i)
the Performance Escrow Deposit, (ii) the amount of the Net
Indebtedness, as reflected in the Estimated Payment
Certificate, provided that if such amount is less than zero,
the Initial Cash Payment shall be increased by the amount by
which Net Indebtedness is less than zero, (iii) the Value of
the SPC Shares, (iv) an amount equal to the book value of the
Excluded Automobiles as of the Interim Balance Sheet Date, as
reflected on the books and records of Sellers as of such date,
(v) the Working Capital Holdback (if the amount of Working
Capital derived from the Interim Balance Sheet is less than
six million dollars ($6,000,000)), (vi) an amount equal to one
half (1/2) of the cost of the Real Estate Appraisal and (vii)
an amount equal to the amount by which the Approved Payments
made by Sellers during the Pre-Closing Period, as initially
reflected on the Estimated Payment Certificate, exceeds the
amount accrued therefor on the Interim Balance Sheet (the net
cash amount under this sub-clause (x), the "Initial Cash
Payment") plus (y) an amount equal to the Interest Amount;
(b) the assumption of the Assumed Liabilities, including all
Indebtedness outstanding as of the Closing Date; and
(c) one million SPC Shares (the "Originally Issued Shares");
provided, however, if the Closing Price is less than $12, the
amount of the Initial Cash Payment payable to the Sellers
shall be increased by the amount by which $12 exceeds the
Closing Price multiplied by one million; and provided further,
however, if the Closing Price is more than $18, the number of
SPC Shares issued to the Sellers shall be reduced to that
number of SPC Shares which is equal to eighteen million
divided by the Closing Price.
The Sellers hereby collectively and irrevocably direct that the
Purchase Price be paid to or as directed by the Sellers' Representative. Each of
the Sellers hereby acknowledges that Buyer may rely without qualification on the
directions of the Sellers' Representative, and
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that neither Buyer nor any of its Affiliates shall have any liability, or duty
to inquire of, any Seller or Controlling Shareholder or third party with respect
to such direction or with respect to any action taken by it pursuant thereto.
2.4 ALLOCATION OF CONSIDERATION. The Parties have heretofore undertaken to
cause an appraisal to be made of the Real Estate, which appraisal is expected to
be completed on or prior to the Closing (the "Real Estate Appraisal"). Buyer and
Sellers shall each bear one-half (1/2) of the costs of the Real Estate Appraisal
(Sellers' share thereof to be deducted from the cash payable at Closing in
determining the Initial Cash Payment, as set forth above). Buyer has heretofore
undertaken, at its sole cost and expense, to cause an appraisal to be made of
the Purchased Assets other than the Real Estate by an appraiser reasonably
acceptable to Sellers' Representative (such appraisal, together with the Real
Estate Appraisal, to be referred to as the "Appraisal"). The Sellers and Buyer
hereby agree to, and shall, allocate the Purchase Price among the Purchased
Assets and the Assumed Liabilities as set forth on Schedule 2.4 and in
accordance with the values set forth in the Real Estate Appraisal (as to the
Purchased Assets constituting Real Estate) and as set forth in the Appraisal (as
to the other Purchased Assets) (the "Allocation"). For Income Tax purposes, the
Parties shall report such Allocation in a consistent manner and shall take no
position contrary thereto (except to the extent required by a Final
Determination of a Court or the Internal Revenue Service).
2.5 CLOSING. The Closing shall take place at 10:00 a.m. on the Closing
Date at the offices of Bryan Cave LLP, 245 Park Avenue, New York, NY 10167. The
Closing is intended to occur with economic effect as of the Effective Time (but
with Income Tax effect as of the Closing Date).
2.6 DELIVERIES AT CLOSING.
(a) At Closing, subject to the conditions to Sellers' obligations
in Article IX, each Seller shall execute and deliver or cause
to be delivered the documents identified in Article VIII to be
executed and delivered by such Seller.
(b) At Closing, subject to the conditions to Buyer's obligations
in Article VIII, Buyer shall (a) execute and deliver or cause
to be delivered the documents identified in Article IX and
stock certificates representing the Originally Issued Shares
and (b) transfer by wire transfer the Initial Cash Payment
plus the Interest Amount (to an account designated by Sellers
not less than two business days before the Closing Date), (c)
transfer by wire to an account designated in the Performance
Escrow Agreement, the Performance Escrow Deposit, and (d) if
the amount by which the Working Capital as shown on the
Interim Balance Sheet is greater than six million dollars
($6,000,000), transfer by wire to an account designated in the
Working Capital Escrow Agreement, the Holdback Escrow Deposit.
2.7 ESCROW ACCOUNT. At and in connection with the Closing, Buyer, the
Sellers' Representative and the Performance Escrow Agent shall execute the
Performance Escrow Agreement, pursuant to which the Purchase Price payable to
Sellers may be adjusted as provided
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in Article X and Sections 2.10, 2.11, 2.12, 2.13, 2.14, 6.7 and 6.12 hereof.
Pursuant to the Performance Escrow Agreement, on the Closing Date, Buyer shall
deposit with the Performance Escrow Agent in an interest bearing account the sum
of Nine Million Seven Hundred Fifty Thousand Dollars ($9,750,000) (the
"Performance Escrow Deposit"), to secure the performance of, and except as
expressly provided herein, to constitute the sole source of, the Sellers'
obligations hereunder. The Performance Escrow Deposit shall also be available to
fund Environmental Costs incurred by Buyer or Sellers pursuant to Section 6.7
and the costs of curing the Title Defect pursuant to Section 6.12. One third
(1/3) of the Performance Escrow Deposit, to the extent no claim has been made
against it by Buyer pursuant to Article X or Section 2.10, 2.11, 2.12, 2.13,
2.14 or 6.7 or 6.12 (or by Sellers' Representative pursuant to Section 6.7(e)),
will be released to the Sellers nine (9) months after the Closing, one third
(1/3) of the balance, to the extent no claim has been made against it by Buyer
pursuant to Article X or Section 2.10, 2.11, 2.12, 2.13, 2.14, 6.7 or 6.12 (or
by Sellers' Representative pursuant to Section 6.7(e)), shall be released to the
Sellers one year after the Closing and the entire balance of the Performance
Escrow Deposit then remaining, to the extent no claim has been made against it
by Buyer pursuant to Article X or Section 2.10, 2.11, 2.12 , 2.13, 2.14 or 6.7
(or by Sellers' Representative pursuant to Section 6.7(e)) is then pending,
shall be released to the Sellers two (2) years after the Closing, all as more
particularly described and set forth in the Performance Escrow Agreement.
2.8 WORKING CAPITAL HOLDBACK. At the Closing, (i) if the amount of Working
Capital derived from the Interim Balance Sheet is greater than six million
dollars ($6,000,000), Buyer shall deposit with the Working Capital Escrow Agent
in an interest bearing account an additional sum equal to the lesser of
$1,500,000 and the Working Capital Holdback (the amount so deposited shall be
referred to as the "Holdback Escrow Deposit") and (ii) if the amount of Working
Capital as shown on the Interim Balance Sheet is less than six million dollars
($6,000,000), the amount of the Working Capital Holdback shall be withheld by
Buyer from the Initial Cash Payment, in each case, as security for any
adjustments to the Initial Purchase Price in determining the Adjusted Purchase
Price pursuant to Section 2.10 following completion of the Closing. If the
Amount of Working Capital as shown on the Interim Balance Sheet is greater than
six million dollars ($6,000,000), at the Closing, Buyer, the Sellers'
Representative and the Working Capital Escrow Agent shall execute the Working
Capital Escrow Agreement. In such event, (i) the Working Capital Escrow Agent
shall hold the Holdback Escrow Deposit in escrow pursuant to the terms of the
Working Capital Escrow Agreement and (ii) the amount of the Initial Cash Payment
payable to Sellers shall be increased by the amount, if any, by which the
Working Capital Holdback exceeds the Holdback Escrow Deposit (the "Initial
Working Capital Payment").
2.9 AUDITED BALANCE SHEET.
(a) The calculation of the Purchase Price is based upon the
assumption that, as calculated in accordance with GAAP (except
as modified herein), the Sellers have combined Working Capital
of at least six million dollars ($6,000,000) as at the Interim
Balance Sheet Date.
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(b) Buyer is causing, at its sole cost and expense, its
independent certified public accountants to conduct an audit
and examination of the Interim Balance Sheet (same, as so
audited, together with any adjustments or changes resulting
from the audit, the "Audited Balance Sheet"). Prior to the
date hereof, the Sellers have caused a physical inventory of
the Business to be taken for use in the preparation of such
Audited Balance Sheet, in which Buyer's independent certified
public accountants have participated. Sellers' Representative
shall have the full right to review the work papers in
connection with the audit. Buyer shall deliver the Audited
Balance Sheet, together with the auditors report thereon, to
the Sellers' Representative not later than 30 days after the
Closing, together with its calculations of the adjustments to
the Initial Purchase Price, if any, required pursuant to
Sections 2.10 and 2.11, which are derived from such Audited
Balance Sheet, and, with respect to the Retained Cash Amount,
which are derived from the final reconciliation of the cash
balances of the Sellers as at the Closing Date (other than QGI
and QGWI) together with explanations of such adjustments and
supporting documentation.
(c) The Audited Balance Sheet and the calculation of the
adjustments to the Initial Purchase Price, if any, required
pursuant to Sections 2.10 and 2.11, shall be deemed to be
acceptable to and shall become final and binding on the
Parties, except to the extent Sellers' Representative shall
have made a specific written objection (a "Notice of Dispute")
thereto not more than 30 days after the date Sellers'
Representative receives the Audited Balance Sheet. In such
case, the dispute shall be resolved in accordance with the
financial dispute resolution mechanism set forth in Section
2.16 (which the Parties agree shall be the exclusive means of
resolving any such dispute).
2.10 WORKING CAPITAL ADJUSTMENT.
(a) The Purchase Price shall be adjusted by reducing or increasing
(as the case may be) the Initial Purchase Price dollar for
dollar by the amount, if any, by which Working Capital as
derived from the Audited Balance Sheet is less or more (as the
case may be) than six million dollars ($6,000,000), which
shortfall shall be payable by Sellers or such excess (net of
any Initial Working Capital Payment made to Sellers) shall be
payable by Buyer (as the case may be) upon final determination
of the adjustment in accordance with the procedures set forth
in Sections 2.9 and 2.16. Notwithstanding the foregoing,
solely for purposes of calculating the adjustment to the
Purchase Price contemplated by this Section, as between the
Interim Balance Sheet and the Audited Balance Sheet, (i) no
decrease or increase of the values of the Interim Balance
Sheet Date Accounts or decrease or increase in the reserve
therefor shall be given effect, (ii) no decrease or increase
in the amount accrued for Approved Payments shall be given
effect and (iii) no decrease or increase in the amount accrued
for Pre-Balance Sheet Medical
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Claims shall be given effect. The Parties have agreed that for
purposes of both the Interim Balance Sheet and the Audited
Balance Sheet an amount shall be accrued as of the Interim
Balance Sheet Date equal to the aggregate amount of medical
claims incurred during the Pre-Closing Period in respect of
the persons set forth on Schedule 2.10.
(b) Specifically, if Working Capital as derived from the Audited
Balance Sheet is more than six million dollars ($6,000,000)
(the amount of the excess, the "Excess"), then the following
provisions shall apply:
(1) If the amount of the Working Capital Holdback was
withheld by Buyer from the Initial Cash Payment pursuant
to Section 2.8, Buyer shall be obligated to pay to
Sellers' Representative the amount of the Working
Capital Holdback plus the amount of the Excess (together
with interest thereon from the Interim Balance Sheet
Date at the Interest Rate); or
(2) If the Holdback Escrow Deposit was deposited with the
Working Capital Escrow Agent pursuant to Section 2.8 and
no Initial Working Capital Payment was made to Sellers,
(i) the Excess and all income accrued thereon shall be
paid by the Working Capital Escrow Agent to the Sellers
out of the Holdback Escrow Deposit and the remainder of
the Holdback Escrow Deposit, if any, and all income
earned thereon shall be paid to Buyer and (ii) if the
Holdback Escrow Deposit is not sufficient to fund the
entire amount of the Excess, then Buyer shall be
obligated to pay to the Sellers' Representative the
deficiency (together with interest thereon from the
Interim Balance Sheet Date at the Interest Rate).
(3) If (x) the Holdback Escrow Deposit was deposited with
the Working Capital Escrow Agent pursuant to Section
2.8, (y) an Initial Working Capital Payment was made to
Sellers pursuant to Section 2.8 and (z) the amount of
the Excess exceeds the amount of such Initial Working
Capital Payment (the amount by which the Excess exceeds
the Initial Working Capital Payment, the "WC Balance"),
(i) the WC Balance and all income accrued thereon shall
be paid to the Sellers out of the Holdback Escrow
Deposit and the remainder of the Holdback Escrow
Deposit, if any, and all income earned thereon shall be
paid to Buyer and (ii) if the Holdback Escrow Deposit is
not sufficient to fund the entire amount of the WC
Balance, then Buyer shall be obligated to pay to the
Sellers' Representative the deficiency (together with
interest thereon from the Interim Balance Sheet Date at
the Interest Rate).
(4) If (x) the Holdback Escrow Deposit was deposited with
the Working Capital Escrow Agent pursuant to Section
2.8, (y) an Initial Working Capital Payment was made to
Sellers pursuant to Section 2.8 and (z) the
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amount of the Excess is less than the amount of such
Initial Working Capital Payment (the amount by which the
Excess is less than the Initial Working Capital Payment,
the "WC Overpayment"), (i) the Holdback Escrow Deposit
and all income earned thereon shall be paid by the
Working Capital Escrow Agent to Buyer and (ii) Buyer
shall be entitled to withdraw from the Performance
Escrow Deposit (or, at its option, collect directly from
the Sellers) the amount of the WC Overpayment (together
with interest thereon from the Interim Balance Sheet
Date at the Interest Rate) and, to the extent that the
Performance Escrow Deposit is insufficient to fund such
amount, Sellers shall be jointly and severally obligated
to pay to Buyer the deficiency (together with interest
thereon from the Interim Balance Sheet Date at the
Interest Rate).
(c) Conversely, if Working Capital as derived from the Audited
Balance Sheet is less than six million dollars ($6,000,000)
(the amount of the shortfall, the "Shortfall"), then, the
following provisions shall apply:
(1) If the amount of the Working Capital Holdback was
withheld by Buyer from the Initial Cash Payment pursuant
to Section 2.8, then (i) if the amount of the Working
Capital Holdback is equal to or less than the Shortfall,
(x) Sellers shall have no further rights or claims in
respect of the Working Capital Holdback, (y) Buyer shall
be entitled, at its option, either to withdraw from the
Performance Escrow Deposit or to collect directly from
Sellers the amount, if any, by which the Shortfall
exceeds the Working Capital Holdback (together with
interest thereon from the Interim Balance Sheet Date at
the Interest Rate) and (z) to the extent that the
Performance Escrow Deposit is insufficient to fund such
amount, Sellers shall be obligated to return to Buyer
the deficiency (together with interest thereon from the
Interim Balance Sheet Date at the Interest Rate) or (ii)
if the amount of the Working Capital Holdback is greater
than the Shortfall, Buyer shall be obligated to pay to
Sellers' Representative the amount by which the Working
Capital Holdback exceeds the Shortfall (together with
interest thereon from the Interim Balance Sheet Date at
the Interest Rate)(however, Sellers shall then have no
further rights or claims in respect of the remainder of
the Working Capital Holdback); or
(2) If the Holdback Escrow Deposit was deposited with the
Working Capital Escrow Agent pursuant to Section 2.8,
(i) the full amount of the Holdback Escrow Deposit and
all income accrued thereon shall be paid by the Working
Capital Escrow Agent to Buyer and (ii) Buyer shall be
entitled to withdraw from the Performance Escrow Deposit
(or, at its option, collect directly from the Sellers)
the amount of the Shortfall (together with interest
thereon from the Interim Balance Sheet Date at the
Interest Rate) and, to the extent that the Performance
Escrow
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Deposit is insufficient to fund such amount, Sellers
shall be jointly and severally obligated to pay to Buyer
the deficiency (together with interest thereon from the
Interim Balance Sheet Date at the Interest Rate).
2.11 NET INDEBTEDNESS ADJUSTMENT. The Purchase Price shall be adjusted by
reducing or increasing the Initial Purchase Price dollar for dollar by the
amount, if any, by which the Net Indebtedness of Sellers derived from the
Audited Balance Sheet is less or more (as the case may be) than the Net
Indebtedness of Sellers as shown on the Estimated Payment Certificate, which
shortfall shall be payable by Buyer to Sellers or which excess shall be payable
by Sellers to Buyer (as the case may be) upon final determination of the
adjustment pursuant to Sections 2.9 and 2.16 (together with interest thereon
from the Interim Balance Sheet Date at the Interest Rate). If the amount of Net
Indebtedness derived from the Audited Balance Sheet exceeds the amount of Net
Indebtedness as shown on the Estimated Payment Certificate, Buyer may, at is
option, recover the excess (together with interest thereon from the Interim
Balance Sheet Date at the Interest Rate) from the Performance Escrow Deposit in
accordance with Performance Escrow Agreement or, alternatively, seek recourse
directly from Sellers.
2.12 APPROVED PAYMENT ADJUSTMENT. Buyer and Sellers' Representative hereby
endeavor and agree, as soon as practicable after the Closing, to jointly review
the calculation of the Approved Payments contained in the Estimated Payment
Certificate to determine whether a further adjustment to the Purchase Price is
necessary. If they so determine, the Purchase Price shall be adjusted by
reducing or increasing the Initial Purchase Price dollar for dollar by the
amount, if any, by which the amount of the actual Approved Payments is less or
more (as the case may be) than the amount of the Approved Payments as shown on
the Estimated Payment Certificate, which shortfall shall be payable by Buyer to
Sellers or which excess shall be payable by Sellers to Buyer (as the case may
be) (together with interest thereon from the Interim Balance Sheet Date at the
Interest Rate). If the amount of the actual Approved Payments, as determined by
the Parties, exceeds the amount of the Approved Payments as shown on the
Estimated Payment Certificate, Buyer may, at its option, recover the excess
(together with interest thereon from the Interim Balance Sheet Date at the
Interest Rate) from the Performance Escrow Deposit in accordance with
Performance Escrow Agreement or, alternatively, seek recourse directly from
Sellers. If despite their good faith efforts the Buyer and Sellers'
Representative are unable to agree on such adjustment (and in any event if no
such agreement is reached within thirty (30) days after the date Sellers'
Representative receives the Audited Balance Sheet), either one of them may by
giving a Notice of Dispute to the other refer the matter for resolution in
accordance with the procedures set forth in Section 2.16 (which the Parties
agree shall be the exclusive means and forum for resolving any such disputes).
Buyer and Sellers' Representative shall, to the extent practicable, seek to
resolve the adjustment to the Initial Purchase Price, if any, required pursuant
to this Section 2.12 in conjunction and simultaneously with the adjustments, if
any, required pursuant to Sections 2.10 and 2.11, and, if one or more disputes
arises under all or any of such Sections, to resolve all such disputes pursuant
to a single proceeding under Section 2.16.
2.13 OTHER ADJUSTMENTS.
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(a) The Purchase Price shall be adjusted by reducing or increasing the
Initial Purchase Price dollar for dollar by the amount, if any, by
which (i) the sum of the aggregate amount of Interim Balance Sheet
Date Accounts collected by Sellers or Buyer during the period
commencing on the Interim Balance Sheet Date and ending on the one
(1) year anniversary of the Closing Date (the "AR Adjustment Date")
plus the reserve for bad debts shown on the Interim Balance Sheet is
more or less (as the case may be) than (ii) the amount recorded for
accounts and notes receivable of Sellers on the Interim Balance
Sheet, which shortfall shall be payable by Sellers to Buyer or which
excess shall be payable by Buyer to Sellers' Representative (as the
case may be) upon final determination of the adjustment pursuant
hereto. The Parties hereby agree and endeavor to cooperate with each
other in good faith and to use their commercially reasonable efforts
to collect the Interim Balance Sheet Date Accounts which remain
outstanding at the Closing Date in the ordinary course as soon as
reasonably practicable after the Closing. Such cooperation may
include, without limitation, soliciting account debtors and their
billing representatives, suspending services and sales to delinquent
account debtors and/or taking other actions consistent with Buyer's
past collection practice. All monies collected by Buyer after the
Closing Date from account debtors of the Business shall be applied
on first in, first out basis, i.e., first to the discharge of such
account debtors' Interim Balance Sheet Date Accounts before any
monies are applied to accounts arising after the Interim Balance
Sheet Date, except to the extent that any such Interim Balance Sheet
Date Account is subject to a bona fide contest, claim, dispute or
right of set off, in which case, such account shall remain
outstanding until the underlying dispute is resolved. Buyer shall,
as soon as commercially practicable after the AR Adjustment Date,
deliver to Sellers' Representative a reasonably detailed account of
the status of the Interim Balance Sheet Date Accounts as of the AR
Adjustment Date (showing which accounts have been collected and
which have not) together with a calculation of the adjustment to the
Purchase Price, if any, required pursuant to this Section 2.13(a).
The calculation of the adjustment shall be deemed acceptable and
binding upon the Parties, except to the extent Sellers'
Representative shall have given Buyer a Notice of Dispute not more
than 30 days after Sellers' Representative receives the Purchase
Price adjustment calculation. In such case, the dispute shall be
resolved in accordance with the mechanism set forth in Section 2.16
(which the Parties agree shall be the exclusive means and forum of
resolving any such dispute). If it is finally determined in
accordance with the procedures above that an adjustment is owed to
Buyer, Buyer may, at its option, recover such adjustment from the
Performance Escrow Deposit in accordance with Performance Escrow
Agreement or, alternatively, seek recourse directly from Sellers.
Conversely, if it is finally determined in accordance with the
procedures above that an adjustment is owed to Sellers, Buyer shall
be obligated to pay to Sellers' Representative the amount of such
adjustment. In any case, whether the adjustment runs in favor of
Buyer or Sellers, Buyer shall on the AR Adjustment Date assign to
Sellers' Representative (as agent for Sellers) all of Buyer's right
title and interest in and to the Interim Balance Sheet Date Accounts
which are outstanding and unpaid as at that time.
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(b) The Purchase Price shall be adjusted by reducing or increasing the
Initial Purchase Price dollar for dollar by the amount, if any, by
which the aggregate amount paid by the Sellers or Buyer on account
of Pre-Balance Sheet Medical Claims from the Interim Balance Sheet
Date to the AR Adjustment Date is more or less (as the case may be)
than the amount accrued or reserved for Pre-Balance Sheet Medical
Claims on the Interim Balance Sheet, which shortfall shall be
payable by Buyer to Sellers' Representative and which excess shall
be payable by Sellers to Buyer (as the case may be) upon final
determination of the adjustment pursuant to procedures set forth
below. Buyer shall, as soon as commercially practicable after the AR
Adjustment Date, deliver to Sellers' Representative a reasonably
detailed account of the status of the Pre-Balance Sheet Medical
Claims as of the AR Adjustment Date (showing the amounts paid on
account thereof as at that date) together with a calculation of the
adjustment to the Purchase Price, if any, required pursuant to this
Section 2.13(b). The calculation of the adjustment shall be deemed
acceptable and binding upon the Parties, except to the extent
Sellers' Representative shall have given Buyer a Notice of Dispute
not more than 30 days after Sellers' Representative receives the
Purchase Price adjustment calculation. In such case, the dispute
shall be resolved in accordance with the mechanism set forth in
Section 2.16 (which the Parties agree shall be the exclusive means
and forum of resolving any such dispute). If it is finally
determined in accordance with the procedures above that an
adjustment is owed to Buyer, Buyer may, at its option, recover such
adjustment from the Performance Escrow Deposit or, alternatively,
seek recourse against and directly from Sellers. Conversely, if it
is finally determined in accordance with the procedures set forth
above that an adjustment is owed to Sellers, Buyer shall be
obligated to pay to Sellers' Representative (as agent for the
Sellers) the amount of such adjustment.
(c) It is the intent of the Parties that all adjustments to the
Purchase Price, if any, required pursuant to this Section 2.13
shall be resolved simultaneously and in conjunction with each
other, and that, if one or more disputes arises under all or
any of the paragraphs of this Section, all such disputes shall
be resolved pursuant to a single proceeding under Section
2.16.
2.14 TAX LIABILITY ADJUSTMENT. The Sellers shall, and are hereby expressly
authorized to, declare a dividend/distribution in an aggregate amount equal to
the Tax Liability, which dividend shall be payable at Closing, to the extent of
available cash on hand, based on the Sellers' good faith estimate of the
Sellers' combined taxable income during the Pre-Closing Period (the "Estimated
Tax Liability"). The Purchase Price shall be adjusted by reducing or increasing
(as the case may be) the Initial Purchase Price by the amount by which the Tax
Liability, as finally determined by Sellers' Representative, subject to
adjustment pursuant to Section 2.16 below, is less or more (as the case may be)
than the Estimated Tax Liability, which shortfall shall be payable by Buyer and
which excess shall be payable by Sellers (as the case may be) upon final
determination by Sellers' Representative of the Sellers' combined taxable income
for the relevant period for federal and state Income Tax purposes, subject to
Section 5.7(b). If said adjustment runs in Buyer's favor, Buyer may, at its
option, either recover the excess from the Performance Escrow Deposit or,
alternatively, seek recourse against and directly
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from the Sellers. For purposes of this Section 2.14, Sellers' combined taxable
income for the Pre-Closing Period shall be determined by first determining the
Sellers' combined taxable income for the period from January 1, 1998 through the
Closing Date and then subtracting therefrom Sellers' combined taxable income for
the period from January 1, 1998 through August 30, 1998 (computed on a
hypothetical basis as if the Closing had occurred, for federal income tax
purposes, on August 30, 1998).
2.15 INTENTIONALLY OMITTED
2.16 FINANCIAL DISPUTE RESOLUTION MECHANISM.
(a) Whenever Sellers' Representative or Buyer shall provide to the other
a Notice of Dispute pursuant to Section 2.8, 2.9, 2.10, 2.11, 2.12,
2.13 or 2.14 of this Article II (or pursuant to Section 5.7(b)(2))
(a "Financial Dispute"), Buyer and Sellers' Representative shall,
upon the addressee's receipt of the Notice of Dispute, promptly
consult with each other with respect to their specified points of
disagreement in an effort to resolve the dispute. If any such
dispute cannot be resolved by Buyer and the Sellers' Representative
within 30 days after the Notice of Dispute is given, they shall
refer the dispute to an independent and reputable firm of certified
public accountants, which (a) has not worked for any of the Sellers
or Controlling Shareholders or Buyer, or any of their respective
Affiliates, within three years from the date of the dispute and (b)
shall be reasonably acceptable to the parties to the dispute (the
"Independent Accountant"), to finally determine, as soon as
practicable, and in any event within 30 days after such referral,
all points of disagreement with respect to the matter at hand. The
Independent Accountant shall establish the procedures for resolving
such dispute (including procedures for the presentation of evidence)
giving due regard to the intention of the Parties to resolve
Financial Disputes as quickly, efficiently and inexpensively as
possible. All hearings shall be held on an expedited basis and shall
be confidential. The means and forum for resolving Financial
Disputes set forth in this Section 2.16 shall be the exclusive means
and forum for resolving Financial Disputes. The fees and expenses of
the proceedings and the Independent Accountant incurred by the
Parties in connection with the proceedings shall be allocated
between the Parties by the Independent Accountant in proportion to
the extent any Party did not prevail on the merits of the items in
dispute in question. All determinations by the Independent
Accountant shall be final, conclusive and binding with respect to
the dispute in question and the allocation of costs.
(b) During the pendency of any Financial Dispute, Buyer and Sellers'
Representative shall each afford the other and its authorized
representatives with reasonable access, during normal business hours
and upon reasonable prior written notice, to all relevant books,
records (including work papers, schedules and memorandum),
calculations and supporting materials in its possession and relevant
to or derived from the dispute in question, provided that neither
Party shall be required to disclose to the other any material which
is the subject of an attorney client privilege and in any case the
disclosing party may, as a condition to furnishing any information,
require that the
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other party agree to be bound in writing by standard and customary
confidentiality covenants and other reasonable restrictions
governing the use of non-public information.
2.17 SHARE PRICE ADJUSTMENT. If the Closing Price (i) on the Closing Date
and (ii) on any trading day selected by the Sellers' Representative during the
period of one (1) year following the expiration of the Restricted Period (such
trading day, the "Election Date") is less than $15, then, Sellers'
Representative (as agent for Sellers) may, by written notice given to Buyer
specifying the Election Date, demand that Buyer pay to Sellers' Representative
(as agent for the Sellers) the Share Price Adjustment. Such notice may not be
given more than 30 days after the Election Date specified therein. In such
event, Buyer shall pay to Sellers' Representative (as agent for the Sellers),
within ten (10) business days after the applicable notice is given, as
additional Purchase Price, an amount equal to the Share Price Adjustment.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF SELLERS
The Sellers hereby jointly and severally make the following
representations and warranties, each of which is true and correct on the date
hereof and, except for changes expressly permitted by this Agreement or
consented to by SPC in writing, shall be true and correct on the Closing Date
and each of which shall survive the Closing Date and the Transaction
contemplated hereby. For purposes of this Article III only, the term "Purchased
Assets" shall be deemed to include the fee interests in the Indianapolis
Property and the New Jersey Property.
3.1 EXISTENCE AND POWER OF SELLERS.
(a) Each of QGI, QGWI and MHE is a corporation duly incorporated,
validly existing and in good standing under the Laws of its
jurisdiction of incorporation. Each of ARC, TRC and BRC is a
general partnership duly organized and validly existing under
the Laws of its jurisdiction of organization. WRC a limited
liability company, duly organized, validly existing and in
good standing under the Laws of its jurisdiction of
organization.
(b) Each Seller has the legal power and authority to own and use
its assets and to transact the business in which it is
engaged, holds all franchises, licenses and permits necessary
and required therefor, is duly licensed or qualified to do
business and is in good standing in each jurisdiction where
such license or qualification is required, except where
failure to obtain such license or so qualify will not have a
material adverse effect upon the Business or the Business
Condition of the Sellers taken as a whole (a "Material Adverse
Effect"). Each Seller and each Controlling Shareholder has the
legal power to enter into this Agreement and the Ancillary
Agreements to which it, he or she is a party, to perform its
obligations hereunder and thereunder, and to consummate the
Transaction contemplated hereby and thereby.
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3.2 APPROVAL AND ENFORCEABILITY OF AGREEMENT.
(a) The execution and delivery of this Agreement and each of the
Ancillary Agreements to which it is a party and the
consummation of the Transaction contemplated hereby and
thereby have been duly authorized, approved and ratified by
all necessary corporate or partnership action on the part of
each Seller. Certified copies of all required corporate or
partnership resolutions, authorizations, consents, approvals
and/or ratification's will be delivered at Closing. Pursuant
to such resolutions, authorizations, consents, approvals
and/or ratification's, each Seller has full corporate or
partnership authority to enter into and deliver this Agreement
and the other Ancillary Agreements to which it is party, to
perform its obligations hereunder and thereunder, and to
consummate the Transaction contemplated hereby and thereby.
(b) Assuming the due execution and delivery hereof by Buyer, this
Agreement and the Ancillary Agreements constitute the legal,
valid and binding obligation of each Seller and Controlling
Shareholder which is a party hereto or thereto, enforceable
against Sellers and the Controlling Shareholders, according to
their terms, subject as to enforceability to the effect of
general principles of equity and to applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation and other
similar laws relating to, or affecting generally, the
enforcement of applicable creditors' rights and remedies.
3.3 SUBSIDIARIES AND OTHER AFFILIATES. Except as set forth on Schedule
3.3, no Seller owns or has the power to vote the securities of any class of any
other corporation or any partnership, limited liability company, joint venture
or other entity.
3.4 CHARTER DOCUMENTS. Sellers have heretofore made available or delivered
to Buyer true and complete copies of each Seller's articles of incorporation and
by-laws, certificate of partnerships and partnership agreement, certificate of
formation and operating agreement or equivalent organizational instruments of
such Seller as in effect on the date hereof.
3.5 FINANCIAL STATEMENTS.
(a) Attached as Schedule 3.5 hereto are the Audited Financial
Statements.
(b) The Audited Financial Statements were derived from the books
and records of the Sellers and the Excluded Queens Entities
and (i) are true, complete, and correct in all material
respects, (ii) present fairly in all material respects, the
financial position, results of operations, and cash flows of
such entities at the dates and for the periods indicated,
(iii) have been prepared in accordance with GAAP and
Regulation S-X, and (iv) do not include any untrue statement
of a material fact required to be stated or reflected therein
or omit to state or reflect any material fact necessary to
make any statements therein not misleading.
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(c) The Interim Financial Statements will be when and as delivered
to Buyer pursuant to this Agreement derived from the books and
records of the Sellers and the Excluded Queens Entities and
will (i) be true, complete, and correct in all material
respects, (ii) present fairly, in all material respects, the
financial position, results of operations, and cash flows of
the Business at the dates and for the periods indicated, (iii)
prepared in accordance with GAAP and Regulation S-X, and (iv)
not include any untrue statement of a material fact required
to be stated or reflected therein or omit to state or reflect
any material fact necessary to make any statements therein not
misleading.
3.6 EVENTS SUBSEQUENT TO AUGUST 30, 1998. Since August 30, 1998, except as
set forth on Schedule 3.6 and except for matters arising out of actions in
respect of the Business not prohibited pursuant to Section 5.1, there has been
no:
(a) change in the Business Condition other than changes in the
Ordinary Course, none of which have had a Material Adverse
Effect, and, to the knowledge of Sellers, no such change will
arise from the consummation of the Transaction contemplated
hereby;
(b) loss or, to the knowledge of the Sellers, threatened loss of a
material customer account;
(c) damage, destruction or loss, whether covered by insurance or
not, affecting the Purchased Assets, which has had a Material
Adverse Effect;
(d) except for (i) dividends paid after the Interim Balance Sheet
Date which are accrued as Current Liabilities on the Interim
Balance Sheet and (ii) dividends paid to fund the estimated
Tax Liability in accordance with Section 2.14, declaration,
setting aside, or payment of any dividend or any distribution
(in cash or in kind) by any Seller;
(e) increase in or commitment to increase compensation, benefits,
or other remuneration to or for the benefit of any
shareholder, member, partner, director, officer, employee,
sales representative or agent of Sellers, or, in connection
with the Business, any other Person (except in the Ordinary
Course of Business), or any benefits granted under any Plan
with or for the benefit of any such shareholder, member,
partner, director, officer, employee, agent or Person (except
in the Ordinary Course of Business);
(f) transaction entered into or carried out by Sellers other than
in the Ordinary Course of the Business and not otherwise
disclosed on the Schedules hereto;
(g) borrowing or incurrence of any indebtedness (including letters
of credit and foreign exchange contracts), contingent or
other, by or on behalf of Sellers other than through Sellers'
loan agreements described on Schedule 3.18, or
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any endorsement, assumption, or guarantee of payment or
performance of any Indebtedness or Liability of any other
Person or entity by Sellers;
(h) change made by the Sellers in its Tax or financial accounting
or any Tax election;
(i) grant of any Lien with respect to the Purchased Assets, other
than Permitted Liens or Liens that will be discharged at or
prior to the Closing;
(j) transfer of any Assets other than arm's-length sales, leases,
or dispositions in the Ordinary Course of the Business or
pursuant to any agreement listed on the Schedules hereto;
(k) modification or termination of any material Contract or any
material term thereof;
(l) lease or acquisition of any capital assets included in the
Purchased Assets;
(m) in connection with the Business, loan or advance to any Person
other than loans on Schedule 3.24, advances for travel,
commissions and other advances to Employees made in the
Ordinary Course; or
(n) commitment or agreement by Sellers to do any of the foregoing
items (d) through (m).
3.7 INVENTORIES. Except as set forth in Schedule 3.7, all inventory of
Sellers consists of a quality and quantity usable and salable in the Ordinary
Course of the Business, except for obsolete items and items of below-standard
quality, which have been either reserved for or written off or written down to
net realizable value in the Interim Balance Sheet. The quantity of the
inventories of Sellers, taken as a whole, is reasonable in the present
circumstances of Sellers. Except as set forth on Schedule 3.7, Sellers do not
hold in connection with the Business any Purchased Assets on consignment and do
not have title to or ownership of any Purchased Assets in the possession of
others.
3.8 SOLVENCY. As of the execution and delivery of this Agreement, each
Seller is, and, as of the Closing Date, will be solvent, and none of such
entities will be rendered insolvent on account of the Transactions contemplated
hereby.
3.9 UNDISCLOSED LIABILITIES. To the knowledge of Sellers, Sellers do not
have, in connection with the Business, any Liabilities whatsoever and there is
no basis for any material claim against Sellers in connection with the Business
for any such Liability except (a) to the extent set forth on or reflected in the
Interim Balance Sheet or in the footnotes thereto or otherwise taken into
account in effecting an adjustment to the Purchase Price pursuant to Sections
2.10, 2.11, 2.12 and 2.13(b), (b) to the extent set forth on the Schedules
hereto or in the Environmental Reports or (c) Liabilities under the Material
Contracts or Liabilities incurred in the Ordinary Course of the Business.
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3.10 TAXES.
(a) All Tax and information Returns required to be filed by
Sellers on or prior to the Closing Date with respect to Taxes
have been or will be true and correct in all material respects
and timely filed except where failure to be true and correct
or to have been so filed will not have a Material Adverse
Effect.
(b) All amounts shown as due on each of such Returns have been
paid or, to the extent payable prior to the Closing Date, will
be paid when due, except for Taxes the payment of which is
being contested in good faith or the time for doing so has not
yet expired, provided that adequate reserves have been
established and on the books and records of Sellers;
(c) Any Taxes (i) which are to be assumed by Buyer in respect of
the Purchased Assets, (ii) which relate to periods preceding
the Interim Balance Sheet Date and (iii) which at the Closing
Date are not yet due and owing will be adequately reflected or
accrued for on the Interim Balance Sheet as a Current
Liability for Taxes.
(d) To Sellers' knowledge, there are no grounds for the assessment
of any material amount of Taxes against Sellers, the Purchased
Assets or the Business which would make such assessment
reasonably likely to occur other than those reflected or
accrued for on the Interim Balance Sheet.
(e) There is no action or proceeding or unresolved written claim
for assessment or collection pending or, to the knowledge of
Sellers, threatened by, or present or expected dispute with,
any Government authority for assessment or collection from
Sellers of any Taxes of any nature adversely affecting the
Purchased Assets or the Business.
(f) There is no extension or waiver of the period for assertion of
any Taxes against Sellers affecting the Purchased Assets or
the Business.
(g) None of the Purchased Assets consist of stock in a subsidiary
of Sellers.
(h) None of the Purchased Assets is subject to a tax
indemnification agreement.
(i) No payroll or FICA withholding Taxes were payable by Sellers
on account of payments made to Novell Lithographers, Inc.
prior to the Interim Balance Sheet Date.
3.11 PERSONAL PROPERTY--OWNED. Except as set forth on Schedule 3.11
hereto, Sellers have good and marketable title to all material personal property
included in the Purchased Assets, including, in each case, all material personal
property reflected on the Interim
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Balance Sheet or acquired after the date thereof (except any personal property
subsequently sold in the Ordinary Course of the Business), free and clear of all
Liens, except Permitted Liens.
3.12 REAL AND PERSONAL PROPERTY--LEASED FROM SELLERS. Set forth on
Schedule 3.12 hereto is a description of each lease under which any Seller is a
lessor of any real or personal property in connection with the Business (except
inter-company leases between Sellers). Each Seller has delivered to Buyer a
true, correct and complete copy of each lease identified on Schedule 3.12 The
premises or property described in such leases are presently occupied or used by
the respective lessees under the terms of such leases. All rentals or other
payments due under such leases have been paid and there exists no default under
the terms of any of such leases and no event has occurred which, upon passage of
time or the giving of notice, or both, would result in any event of default or
prevent Sellers from exercising and obtaining the benefits of any rights
contained therein, except to the extent such would not have a Material Adverse
Effect. Except as set forth on Schedule 3.19, no consent is necessary for the
assignment or conveyance of such leases to Buyer, and, upon the Closing, Buyer
will have all right, title and interest of the lessor under the terms of such
leases, free of all Liens except Permitted Liens.
3.13 REAL AND PERSONAL PROPERTY--LEASED TO SELLERS. Set forth on Schedule
3.13(a) hereto is a description of each lease under which any Seller is the
lessee of any real property in connection with the Business (except leases of
property from another Seller), and on Schedule 3.13(b) hereto is a description
of each lease under which any Seller is the lessee of any personal property
material to the Business (except leases of property from another Seller).
Sellers have delivered to Buyer a true, correct and complete copy of each lease
identified on Schedules 3.13(a) and 3.13(b). The premises or property described
in said leases are presently occupied or used by Sellers as lessee under the
terms of such leases. Except as set forth on Schedules 3.13(a) and 3.13(b), all
rentals due under all leases which are material to the Business have been paid
and there exists no material default by Sellers, or to the knowledge of Sellers
by any other party to such leases under the terms of any such leases and, to the
knowledge of Sellers, no event has occurred which, upon passage of time or the
giving of notice, or both, would result in any event of material default or
prevent Sellers from exercising and obtaining the benefits of any material
rights or options contained therein. Sellers have all right, title and interest
of the lessee under the terms of all leases which are material to the Business,
free of all Liens (other than the Liens set forth on Schedule 3.13(c) and
Permitted Liens), and all such leases are valid and in full force and effect.
Except as set forth on Schedule 3.19, no consent is necessary for the assignment
to Buyer of such leases under which Sellers are lessee. Upon the Closing, Buyer
will have all right, title and interest of the lessee under the terms of all
leases which are material to the Business, free of all Liens (other than
Permitted Liens). There is no default or basis for acceleration or termination
under, nor, to the knowledge of Sellers, has any event occurred nor does any
condition exist which, with the passage of time or the giving of notice, or
both, would constitute a default or basis for acceleration under any underlying
lease, agreement, mortgage or deed of trust which default or basis for
acceleration would have a Material Adverse Effect. Subject to any consent
required of a lessor as set forth on Schedule 3.19, there will be no default or
basis for acceleration under any such underlying lease agreement, mortgage, or
deed of transfers as a result of the Transaction.
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3.14 INTELLECTUAL PROPERTY.
(a) Schedule 3.14 contains a true, complete and accurate list of
all patented and registered Intellectual Property owned by
Sellers and all pending patent applications and applications
for the registration of Intellectual Property owned or filed
by Sellers' (the "Registered Intellectual Property"). Schedule
3.14 accurately identifies, where appropriate, one or more of
the following, by country, for each item of the Registered
Intellectual Property: filing date, issue date, classification
of invention or goods covered, licensor, license date and
licensed subject matter. Schedule 3.14 contains a complete and
accurate list of all licenses and other rights granted by
Sellers to any third party with respect to any item of the
Registered Intellectual Property. True, complete and correct
copies of such licenses in effect on the date hereof have been
provided to Buyer.
(b) Sellers represent and warrant as follows: (i) the Intellectual
Property is valid and enforceable and encompasses all
proprietary rights necessary for the conduct of the Business
as presently conducted (in each case free and clear of all
Liens) except Permitted Liens; (ii) Sellers have taken all
commercially reasonable actions necessary to maintain and
protect the Intellectual Property; (iii) to the knowledge of
Sellers, the owners of the Intellectual Property licensed to
Sellers have taken all commercially reasonable actions
necessary to maintain and protect the Intellectual Property
subject to such licenses; (iv) there has been no written
claims or, to the knowledge of Sellers, oral claim made
against Sellers asserting the invalidity, misuse or
unenforceability of any material item of Intellectual Property
or challenging Sellers' right to use or ownership of any
material item of Intellectual Property, and, to the knowledge
of Sellers there are no grounds for any such claim or
challenge; (v) Sellers are not aware of any infringement or
misappropriation of any material item of Intellectual Property
or of any facts raising a reasonable likelihood of
infringement or misappropriation; (vi) to the knowledge of
Sellers, the conduct of the Business has not infringed or
misappropriated, and does not infringe or misappropriate, any
intellectual property or proprietary right of any other
entity; (vii) no loss of any material item of Intellectual
Property is pending or, to the knowledge of Sellers
threatened; and (viii) the consummation of the Transaction
contemplated by this Agreement will not alter, impair or
extinguish any of the Intellectual Property in a manner which
would have a, Material Adverse Effect. Except as set forth on
Schedule 3.14, all of Sellers internal computer systems are
Year 2000 Compliant.
3.15 NECESSARY PROPERTY AND TRANSFER OF PURCHASED ASSETS. (x) The
Purchased Assets, the Excluded Assets and the Assumed Liabilities constitute all
of Sellers' property and property rights now used for the conduct of the
Business in the manner and to the extent presently conducted by Sellers, and (y)
the Purchased Assets, the Assumed Liabilities and the
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rights granted to Buyer under the Ancillary Agreements, taken as a whole,
constitute all of Sellers rights necessary for the conduct of the Business in
the manner and to the extent presently conducted. Except as set forth on
Schedule 3.15, no such assets or property are in the possession of others and
the Sellers hold no property on consignment (except ink). Except as set forth on
Schedule 3.15 hereto, no consent is necessary to, and there exists no
restriction on, the transfer of any of the Purchased Assets or the assignment of
the Assumed Liabilities to Buyer. To the knowledge of Sellers, and subject to
all consents listed on Schedule 3.15 being obtained, except for Permitted Liens,
there exists no condition, restriction or reservation affecting the title to or
utility of the Purchased Assets or Assumed Liabilities which would prevent Buyer
from occupying or utilizing the Purchased Assets or enforcing the rights under
the Assumed Liabilities, or any part thereof, to the same extent, in all
material respects, that Sellers would have the right to continue to do so if the
sale and transfer contemplated hereby did not take place. Upon the Closing, good
and marketable title to the Purchased Assets and the rights under the Assumed
Liabilities shall be vested in Buyer free and clear of all Liens (other than
Permitted Liens).
3.16 USE AND CONDITION OF PROPERTY. The Purchased Assets are, taken as a
whole, in good operating condition and repair (ordinary wear and tear excepted)
as required for their use in the Business as presently conducted or planned, and
conform in all material respects to all applicable Laws, and no written notice
of any violation of any Law relating to any of the Purchased Assets has been
received by Sellers except such as have been fully complied with in all material
respects. There is no pending or, to Sellers' knowledge, proposed or threatened
condemnation proceeding or similar action affecting the Purchased Assets which
would have a Material Adverse Effect.
3.17 LICENSES AND PERMITS. Set forth on Schedule 3.17 hereto is a
description of each governmental license or permit required for the conduct of
the Business together with the name of the Government agency or entity issuing
such license or permit. Such licenses and permits are valid and in full force
and effect in all material respects. Except as noted on Schedule 3.17, such
licenses and permits are freely transferable by Sellers. Set forth in the
Environmental Reports is a description of additional licenses and permits that
may needed for the conduct of the Business.
3.18 CONTRACTS--DISCLOSURE. Except as set forth in Schedule 3.18 there is
not outstanding:
(a) any single Contract providing for an expenditure by Sellers in
excess of $50,000 from and after the Interim Balance Sheet
Date, Contracts with the same or affiliated vendor(s)
providing for an expenditure by any Seller in excess of
$50,000 from and after the Interim Balance Sheet Date, or any
Contracts in the aggregate providing for expenditures by
Sellers in excess of $50,000 from and after the Interim
Balance Sheet Date, for the purchase of any real property,
machinery, equipment or other items which are in the nature of
capital investment;
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(b) any single Contract providing for an expenditure by Sellers in
excess of $50,000 from and after the Interim Balance Sheet
Date, Contracts with the same or affiliated vendor(s)
providing for an expenditure by Sellers in excess of $50,000
from and after the Interim Balance Sheet Date, or Contracts in
the aggregate providing for expenditures by Sellers in excess
of $50,000 from and after the Interim Balance Sheet Date for
the purchase of raw materials, supplies, component parts or
any other items or services;
(c) any Contract to sell products or to provide services to third
Persons in excess of $50,000 from and after the Interim
Balance Sheet Date which (i) is at a price which, when the
terms thereof are viewed as a whole together with all
contracts with such party, would result in a net loss on the
sale of such products or providing of such services of greater
than $50,000, (ii) is pursuant to terms or conditions which
the Sellers, at the time of execution thereof and as of the
date hereof, could not reasonably expect to satisfy or fulfill
in all material respects, or (iii) involves more than $50,000
from after the Interim Balance Sheet Date or which, together
with all other Contracts to or with the same party or
affiliated parties involves more than $50,000 from after the
Interim Balance Sheet Date;
(d) any Contract for materials, supplies, component parts or other
items or services which, when taken together with all other
Contracts to or with the same party or affiliated parties, is
in excess of the normal, ordinary, usual and current
requirements of the Business or at a price in excess of the
current reasonable market price;
(e) in connection with the Business, any revocable or irrevocable
guaranty, indemnity, or power of attorney;
(f) in connection with the Business, any evidence of indebtedness,
loan agreement, indenture, promissory note, letter of credit,
foreign exchange contract, conditional sales agreement or
other similar type of agreement under which the Sellers have
more than $50,000 of Indebtedness as of the Interim Balance
Sheet Date;
(g) any Contract which involves (i) a sharing of profits, (ii)
future payments of $50,000 or more per annum to other Persons,
or (iii) any joint venture, partnership or similar
arrangement;
(h) any Contract involving any sales agency, sales representation,
distributorship or franchise;
(i) any Contract containing covenants limiting the freedom of
Sellers, in connection with the Business, to compete in any
line of business or with any Person or in any area; and
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(j) any Contract providing for an expenditure by Sellers in excess
of $50,000 from and after the Interim Balance Sheet Date
either not made in the Ordinary Course of the Business or not
cancelable without penalty on 30 days notice.
The contracts required to be listed on Schedule 3.18 are herein referred
to as the "Material Contracts".
3.19 MATERIAL CONTRACTS--VALIDITY, ETC.
(a) Each Material Contract is a valid and binding obligation of
the Seller or the Sellers party thereto, and, to the knowledge
of Sellers, the other parties thereto, is enforceable in
accordance with its terms, and is in full force and effect,
subject as to enforceability to general principles of equity
and to applicable bankruptcy, insolvency, reorganization,
liquidation and other similar laws relating to, or affecting
generally, the enforcement of applicable creditors rights and
remedies.
(b) None of the Sellers nor, to the knowledge of Sellers, any
other party to any Material Contract is in breach or violation
thereof or default thereunder and no event has occurred which,
through the passage of time or the giving of notice, or both,
would constitute or result in a breach or violation of or
default under any Material Contract, or would cause the
acceleration of any obligation of any party thereto or the
creation of a Lien upon any Purchased Asset (other than a
Permitted Lien), except to the extent that such will not
result in a material liability to the Business.
(c) Except as set forth on Schedule 3.19, each Material Contract
will be duly assigned to Buyer on the Closing Date and upon
such assignment, Buyer will acquire all right, title and
interest of the Seller or the Sellers party thereto in and to
such Contract. Except as set forth on Schedule 3.19, no
consent is required for such assignment.
3.20 NO BREACH OF LAW OR GOVERNING DOCUMENTS. Sellers have in all material
respects complied with and are not in any material respect in default under or
in breach or violation of any applicable Law of any Government body, or the
provisions of any franchise or license, no Seller is in default under or in
breach or violation of any provision of its articles or certificate of
partnership or association or its partnership agreement. Neither the execution
of this Agreement nor (subject to the expiration of the HSR Act waiting period)
the Closing do or will constitute or result in any such default, breach or
violation.
3.21 LITIGATION AND ARBITRATION. Except as set forth on Schedule 3.21
hereto, there is no suit, claim, action or proceeding now pending or, to the
knowledge of Sellers, threatened before any Court, administrative or regulatory
body, Government agency, arbitration or mediation panel or similar body, nor, to
the knowledge of Sellers, are there any grounds therefor, to which any of the
Sellers is a party or which may result in any judgment, Order,
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decree, liability, award or other determination which could reasonably be
expected to have Material Adverse Effect. No such judgment, Order, decree or
award has been entered against any Seller nor has any such liability been
incurred which could reasonably be expected to have such effect. There is no
claim, action or proceeding now pending or, to the knowledge of Sellers,
threatened before any Court, administrative or regulatory body, Government
agency, arbitration or mediation panel or similar body which will, or would
reasonably be expected to, prevent or hamper the consummation of the
Transaction, and no Seller has been or, to the knowledge of Sellers, been
threatened to be subject to, and, to the knowledge of Sellers, there are no
grounds for, any suit, claim, litigation, proceeding (administrative, judicial,
or in arbitration, mediation or alternative dispute resolution), or Government
investigation, or other action or Order, writ, injunction, or decree of any
court or other Government relating to personal injury, death, or property or
economic damage not covered by insurance arising from products of any of the
Sellers which, if adversely determined, could reasonably be expected to result
in a material Liability to the Business.
3.22 OFFICERS, DIRECTORS, EMPLOYEES AND CONSULTANTS. Set forth on Schedule
3.22 hereto is a complete list of:
(a) all partners of Sellers;
(b) all officers (with office held) of Sellers;
(c) all consultants to Sellers (excluding legal accounting,
investment banking and financial); and
(d) all sale representatives.
together, in each case, with a description of each employment agreement,
commission arrangement or other compensation commitment applicable to such
Person.
3.23 OUTSIDE FINANCIAL INTERESTS. Except as identified on Schedule 3.23
hereto, no Controlling Shareholder nor, to Sellers knowledge, any other officer
or director of any Seller or owner of more than 5% of the equity of any Seller,
has any direct or indirect financial interest in any competitor with or supplier
or customer of any Seller; provided, however, that for this purpose ownership of
corporate securities having no more than 1% of the outstanding voting power of
any competitor, supplier or customer which securities are listed on any national
securities exchange or authorized for quotation on the Automated Quotations
System of the National Association of Securities Dealers, Inc., shall not be
deemed to be such a financial interest provided such Person has no other
connection or relationship with such competitor, supplier or customer.
3.24 INDEBTEDNESS TO AND FROM OFFICERS, DIRECTORS AND OTHERS. Except as
set forth on Schedule 3.24 or taken into account in the preparation of or
reflected on the Interim Balance Sheet, (a) no Seller is indebted to any
partner, officer, employee or agent of any of the Sellers except for amounts due
for services rendered as normal salaries, wages and bonuses and other
compensation and in reimbursement of ordinary expenses on a current basis and
(b) no partner,
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officer, employee or agent of any of the Sellers is indebted to any Seller in
connection with the Business, except for advancements for ordinary business
expenses in a normal amount.
3.25 PAYMENTS, COMPENSATION AND PERQUISITES OF AGENTS AND EMPLOYEES. All
payments to agents, consultants and others made by each Seller in connection
with the Business have been in payment of bona fide fees and commissions and not
as bribes, kickbacks, illegal or improper payments. Sellers have properly and
accurately reflected on their books and records all compensation paid to and
perquisites provided to or on behalf of their consultants, agents and employees.
3.26 EMPLOYEE BENEFIT PLANS.
(a) Disclosure. Schedule 3.26 lists, as in effect on September 1,
1998, all pension, thrift, savings, profit sharing,
retirement, incentive bonus or other bonus, medical, dental,
life, accident insurance, benefit, employee welfare,
disability, group insurance, stock appreciation, stock option,
executive or deferred compensation, hospitalization and other
similar fringe or employee benefit plans, programs and
arrangements, whether or not written, and any, whether written
or unwritten, employment or consulting contracts, "golden
parachutes," collective bargaining agreements, severance
agreements or plans, vacation and sick leave plans, programs,
arrangements and policies, including, without limitation, all
"employee benefit plans" (as defined in Section 3(3) of ERISA,
all employee manuals, and all written statements of policies
relating to employment, which are provided to, for the benefit
of, or relate to, any persons ("Employees") employed by any of
the Sellers, other than any multiemployer plan as defined in
Section 4001 of ERISA ("multiemployer plan"). The items
described in the foregoing sentence are hereinafter sometimes
referred to collectively as "Employee Plans/Agreements," and
each individually as an "Employee Plan/Agreement." Each of the
Employee Plans/Agreements has been furnished to Buyer. Except
as set forth on Schedule 3.26, no Seller has ever contributed
or been obligated to contribute to any multiemployer plan for
which there may be any material liability. Sellers have
furnished Buyer with respect to each Employee Plan/Agreement,
if applicable, the three most recent annual reports prepared
in connection therewith (Form 5500 including all schedules
thereto) or, if an Employee Plan/Agreement has been in
existence for less than three years, the annual report
prepared for each year such Employee Plan/Agreement has been
in existence. No material promises or commitments have been
made with respect to any Employee Plan/Agreement other than in
accordance with a reasonable interpretation of the terms of
such Employee Plan/Agreement. There is no plan or commitment,
whether legally binding or not, to establish any new Employee
Plan/Agreement, to modify (other than by way of termination)
any Employee Plan/Agreement (except to the extent required by
law or as previously disclosed) or to enter into any new
Employee Plan/Agreement;
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nor has any intention or commitment to do any of the foregoing
been communicated. Sellers have at all times operated the
Business and conducted their employment practices in all
respects in accordance with the terms of the Employee
Plans/Agreements, except to the extent failure to do so would
not have a Material Adverse Effect. Except as set forth in
Schedule 3.26, each multiemployer Plan to which any Seller
contributes has received a favorable determination letter from
the Internal Revenue Service with respect to its qualification
under Section 401 of the Code, and to the knowledge of
Sellers, nothing has occurred since the date of such letter
that would adversely affect such qualification.
(b) Prohibited Transactions, etc. There have been no "prohibited
transactions" within the meaning of Section 406 or 407 of
ERISA or Section 4975 of the Code for which a statutory or
administrative exemption does not exist with respect to any
Employee Plan/Agreement, and in respect of which a Seller
would have a material liability.
(c) Payments and Compliance. With respect to each Employee
Plan/Agreement (A) all material payments due from each Seller
to date have been made and all amounts which have not been
paid but which, under GAAP, are required to be accrued as
Liabilities of Sellers as of the Interim Balance Sheet Date,
have been properly recorded on the books of Sellers and are
reflected in the Interim Balance Sheet; (B) all reports and
information relating to each such Employee Plan/Agreement
required to be disclosed or provided to participants or their
beneficiaries have been timely disclosed or provided except to
the extent any failure to do so would not result in a material
liability of any Seller; and (C) except as set forth in
Schedule 3.26, each such Employee Plan/Agreement which is
intended to qualify under Section 401 of the Code has received
a favorable determination letter from the Internal Revenue
Service with respect to such qualification, its related trust
has been determined to be exempt from taxation under Section
501(a) of the Code, and to the knowledge of Sellers, nothing
has occurred since the date of such letter that would
adversely affect such qualification or exemption. Each trust
created under any such Employee Plan/Agreement is exempt from
tax under Section 501(a) of the Code and has been so exempt
during the period from creation to date. Sellers have
furnished Buyer with the most recent determination letters of
the Internal Revenue Service relating to each such Employee
Plan/Agreement. Each Employee Plan/Agreement has been
maintained in compliance with its terms and with the
requirements prescribed by any and all applicable Laws,
including but not limited to ERISA and the Code, except to the
extent failure to do so would not have a Material Adverse
Effect.
(d) Post-Retirement Benefits. Except as set forth on Schedule
3.26, no Employee Plan/Agreement provides benefits, including,
without limitation,
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death or medical benefits (whether or not insured) with
respect to current or former employees of any of the Sellers
beyond their retirement or other termination of service other
than (A) continuation coverage mandated by Section 4980B(f) of
the Code ("Continuation Coverage"), (B) death or pension
benefits under any Employee Plan/Agreement that is an employee
pension benefit plan, (C) deferred compensation, medical or
other benefits accrued as liabilities on the books of Sellers
(including Sellers' Interim Balance Sheet), (D) disability
benefits under any Employee Plan/Agreement that is an employee
welfare benefit plan and which have been fully provided for by
insurance or otherwise, or (E) benefits in the nature of
severance or vacation pay. No material tax under Section 4980B
of the Code has been incurred in respect of an Employee
Plan/Agreement that is a group health plan, as defined in
Section 5000(b)(1) of the Code.
(e) No Triggering of Obligations. Except as set forth on Schedule
3.26 or pursuant to a material contract previously disclosed,
other than by reason of actions taken by Buyer following the
Closing, the consummation of the Transaction contemplated by
this Agreement will not (A) entitle any current or former
employee of any of the Sellers to severance pay, unemployment
compensation or any other payment, except as expressly
provided in this Agreement, and except for items constituting
Excluded Liabilities (B) accelerate the time of payment or
vesting, or increase the amount of compensation included among
the Assumed Liabilities and due to any such employee or former
employee, (C) result in any prohibited transaction described
in Section 406 of ERISA or Section 4975 of the Code for which
an exemption is not available, or (D) give rise to the payment
by Buyer of any amount that would not be deductible pursuant
to the terms of Section 280G of the Code.
(f) International Plans. Except as set forth on Schedule 3.26, no
Seller maintains any Employee Plan/Agreement covering any
Employee or former Employee outside of the United States and
Sellers have never contributed to nor been obligated to
contribute to any such Employee Plan/Agreement for which there
may be any liability.
3.27 TERMINATED PLANS. Set forth on Schedule 3.27 hereto are all
"employee benefit plans" (as defined in Section 3(2) of ERISA,) that are covered
by Title IV of ERISA that any Seller has terminated or taken action to terminate
since January 1, 1995. Such terminations have been carried out in all material
respects in accordance with all provisions of applicable law, including without
limitation all applicable provisions of the Code and ERISA. Except as described
on Schedule 3.27 hereto, no Seller has any material liability to any Person or
entity, including without limitation the PBGC, any other Government agency or
any participant in or beneficiary of any such plan, nor is any Seller liable for
any material excise, income or other tax or penalty as a result of such
termination. If applicable, each Seller has obtained a notice of sufficiency
from the PBGC and a favorable determination letter from the IRS with respect to
the
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termination of each of such plans (complete and correct copies of which have
been delivered to Buyer); the notices of sufficiency and favorable determination
letters were received after full and accurate disclosure of all material facts
to the appropriate Government agencies.
3.28 OVERTIME, BACK WAGES, VACATION AND MINIMUM WAGES. Except as set forth
on Schedule 3.28, no present or former employee of any of the Sellers in
connection with the Business has any claim against any of the Sellers (whether
under any Law, Contract, or otherwise) on account of or for (a) overtime pay,
other than overtime pay for the current payroll period, (b) wages or salary
(excluding current bonus, accruals and amounts accruing under pension and
profit-sharing Plans) for any period other than the current payroll period, (c)
vacation, time off or pay in lieu of vacation or time off, other than that
earned in respect of the current fiscal year, (d) any violation of any Law
relating to minimum wages, child labor or maximum hours of work, except as (i)
accrued on the Interim Balance Sheet or (ii) for amounts which in the aggregate
are not material to the Business and could not be reasonably expected to result
in the impositions of any criminal penalties.
3.29 DISCRIMINATION, WORKERS COMPENSATION AND OCCUPATIONAL SAFETY AND
HEALTH. Except as set forth on Schedule 3.29, no Person or party (including, but
not limited to, Government agencies of any kind) has made or delivered any
claim, notice of claim, charge, lawsuit or, to Sellers knowledge, is there any
basis therefor, against any of the Sellers in connection with the Business
arising out of any Law relating to discrimination in employment or employment
practices or occupational safety and health standards, and no such claim, notice
of claim, charge or lawsuit is pending or, to the best knowledge of Sellers,
threatened against any of the Sellers. Since January 1, 1998, no Seller has
received any notice in connection with the Business from any Person alleging a
violation of any such Law or occupational safety or health standards. No Seller
has any outstanding Contracts or obligations to indemnify any person for
violation of the Laws and standards set forth in this Section (other than
general indemnification obligations in respect of directors, officers and
partners). Each Seller has filed since January 1, 1998 all EEO-1 reports and
affirmative action plans with appropriate Government agencies. Other than those
listed in Schedule 3.29, there are no pending workers compensation claims
involving any of the Sellers as of the Interim Balance Sheet Date and there have
never been any workers compensation claims against any of the Sellers relating
to the use or existence of asbestos in any of Sellers' products. Sellers have
delivered to Buyer a true, correct and complete list of all workers compensation
claims made since January 1, 1997.
3.30 ALIEN EMPLOYMENT ELIGIBILITY. With respect to each Person employed by
Sellers in the Business on or after May 1, 1987, and who actually commenced such
employment on or after November 6, 1986, to the knowledge of Sellers, (a)
Sellers hired such Person in compliance with the Immigration Reform and Control
Act of 1986 and the rules and regulations thereunder ("IRCA") and (b) Sellers
has complied in all material respects with all recordkeeping and other
regulatory requirements under IRCA.
3.31 LABOR DISPUTES; UNFAIR LABOR PRACTICES. Except as set forth on
Schedule 3.31, there is neither pending nor, to the knowledge of Sellers
threatened in writing any labor dispute, strike or work stoppage which affects
or which reasonably may be expected to affect the
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Business Condition of the Business. Except as set forth on Schedule 3.31, within
the past three years, none of the Sellers nor, to Sellers' knowledge, any of
their agents, representatives or employees has committed any unfair labor
practice, as defined in the National Labor Relations Act of 1947, as amended.
There is not now pending or, to Sellers' knowledge, threatened any charge or
complaint against Sellers by the National Labor Relations Board, any state or
local labor or employment agency or any representative thereof, and the
execution of this Agreement and the consummation of the Transaction contemplated
by this Agreement could not reasonably be expected to result in any such charge
or complaint.
3.32 INSURANCE POLICIES. Set forth on Schedule 3.32 hereto is a list of
all insurance policies and bonds in force as of September 1, 1998 covering or
relating to the Purchased Assets or the Business, including without limitation
all properties, operations or personnel of Sellers. Policies thereon described
evidence insurance in such amounts and against such risks and losses as are
generally maintained with respect to comparable businesses and properties.
3.33 GUARANTEES. Except as set forth on Schedule 3.33 hereto, none of the
Sellers is a guarantor, indemnitor, surety or accommodation party or otherwise
liable for any indebtedness of any other Person, firm or corporation except as
endorser of checks received and deposited in the Ordinary Course of Business.
3.34 PRODUCT WARRANTIES. Except as set forth on Schedule 3.34 hereto, the
Sellers do not employ any forms of product warranties and guarantees in
connection with the Business. Except as specifically described on Schedule 3.34,
since January 1, 1998 no material product warranty or similar claims have been
made against Sellers except routine claims in the Ordinary Course of the
Business. No Person or party (including, but not limited to, Government agencies
of any kind) has made any claim or, to the knowledge of Sellers, threatened any
action or proceeding, against any of the Sellers under any Law relating to
unfair competition, false advertising or other similar claims arising out of
product warranties, guarantees, specifications, manuals or brochures used in the
Business which, if adversely determined, would result in a material liability to
the Business.
3.35 PRODUCT LIABILITY CLAIMS. Except as described on Schedule 3.35, since
January 1, 1998, no Seller has received notice of or written information as to
any claim or allegation of injury, death, or property or economic damages, any
claim for punitive or exemplary damages, any claim for contribution or
indemnification, or any claim for injunctive relief in connection with any
product manufactured, sold, distributed or otherwise put in commerce by or in
connection with any service provided by any of the Sellers (collectively,
"Product Liability Claims"), except for claims covered by insurance and claims
which would not have a Material Adverse Effect.
3.36 PRODUCT SAFETY AUTHORITIES. Except as set forth on Schedule 3.36
hereto, since January 1, 1997 no Seller has been required to file any
notification or other report with or provide information to any Government
agency or product safety standards group concerning actual or potential defects
or hazards with respect to any product manufactured, sold, distributed
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or otherwise put in commerce in connection with the Business, and to the
knowledge of Sellers there exist no grounds for the recall of any such product.
3.37 ENVIRONMENTAL MATTERS.
(a) Except as set forth on Schedule 3.37 or in the Environmental
Reports, all assets and property owned, leased, operated, or
used by any of the Sellers, all current conditions on and uses
of the Environmental Property, and all current ownership or
operation of any of the Sellers or the Environmental Property
(including without limitation transportation and disposal of
Hazardous Materials by or for any of the Sellers) comply in
all material respects with the Environmental Laws. Except as
set forth on Schedule 3.37 or in the Environmental Reports, no
Seller is in material violation of any Environmental Law.
(b) Except as set forth on Schedule 3.37 or in the Environmental
Reports, all Sellers have properly obtained and are in
compliance, in all material respects, with all Environmental
Permits, and, to Sellers' knowledge, no deficiencies have been
asserted by any such Government or authority with respect to
such items.
(c) No Seller has received any written notice or order advising a
Seller that it is responsible for cleanup of any Hazardous
Materials on any property. Except as set forth in the
Environmental Reports, no Seller has any reasonable basis for
believing that there is a reasonable likelihood that any such
notice or order will be issued.
(d) Except as set forth in the Environmental Reports, there are no
underground storage tanks located on the Real Property, and no
Hazardous Materials are present or have been or are being
emitted, discharged or released on, under or from the Real
Property which may create Material Adverse Effect.
(e) The Sellers have made available to Buyer, prior to the
execution and delivery of this Agreement, complete copies of
any and all of the following in their possession: (i)
documents received by any of the Sellers from, or submitted by
any of the Sellers to, the U.S. Environmental Protection
Agency (the "EPA") and/or any state, county or municipal
environmental or health agency concerning the environmental
condition of the Environmental Property or the effect of the
Sellers' operations on the environmental condition of the
Environmental Property; and (ii) reviews, audits, reports, or
other analyses concerning the Environmental Property.
(f) Except as set forth in the Environmental Reports, no release
of Hazardous Materials, violation of Environmental Law or
environmental cleanup has occurred at or, to the knowledge of
the Sellers, affected the Environmental Property during the
period of ownership or use by a Seller or, to Sellers'
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knowledge, prior thereto, which is likely to result in the
assertion of material liability or creation of a material lien
on the Real Property by any governmental body, agency or other
Person with respect thereto.
(g) Except as set forth in the Environmental Reports, to the
knowledge of Sellers, no Seller has transported or arranged
for the transportation of any Hazardous Materials to any
location which is: (i) listed on, or proposed for listing on,
the EPA's National Priorities List published at 40 CFR Part
300 or on any similar state list, or (ii) the subject of any
regulatory action which may lead to claims against any of the
Sellers for material damages to natural resources, personal
injury, clean-up costs or clean-up work.
(h) Schedule 3.37 contains a list of the sites where Sellers'
Hazardous Materials have, to their knowledge, been sent during
the past twelve (12) months, or are currently being sent for
disposal, treatment, recycling or storage, including the
address of each such site, and a description and estimate of
the amount of the Sellers' Hazardous Materials disposed of,
treated, recycled or stored at each such site during such
period.
(i) Schedule 3.37 contains a list containing the name and address
of each person, firm, corporation or other entity engaged by
Sellers in the handling, transportation or disposal of any of
the Sellers' Hazardous Materials, a description of such
Hazardous Materials, and an estimate of the amount of such
Hazardous Materials disposed of during the past twelve (12)
months.
3.38 BROKER'S FEES. Except as described on Schedule 3.38, Sellers have not
retained any broker, finder or agent or agreed to pay any brokerage fees,
finder's fees or commissions with respect to the transactions contemplated by
this Agreement.
3.39 FOREIGN ASSETS. Except as set forth on Schedule 3.39, no Seller has
in connection with the Business any interest in any real property or tangible or
intangible property located outside of the United States, including any stock,
securities or investments in, claims against, or receivables from any entities
or Persons with substantially all their property or business so located.
3.40 FOREIGN OPERATIONS AND EXPORT CONTROL. All Sellers have at all times
conducted the Business and operated in all material respects:
(a) pursuant to valid permits, licenses, certificates,
accreditations and qualifications to do business in all
jurisdictions outside the United States where such permits,
licenses, certificates, accreditations and qualifications are
required by local Law except where the failure to so qualify
would not have a Material Adverse Effect;
(b) in compliance with all applicable foreign Laws, including,
without limitation, Laws relating to foreign investment,
foreign exchange control,
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immigration, employment and taxation, and, to Sellers'
knowledge, no claims have been filed against any of the
Sellers and no investigations are pending or threatened
against Sellers alleging a violation of any such Laws;
(c) without notice of violation of and in compliance with all
relevant anti-boycott legislation, including without
limitation the Tax Reform Act of 1976, as amended, the Export
Administration Act of 1979, as amended, the Export
Administration Amendments Act of 1985, and regulations
thereunder, including all reporting requirements, the
International Traffic in Arms regulations, and the regulations
of the Office of Foreign Assets Control of the U.S. Treasury
Department;
(d) without violation of and pursuant to any required export
licenses granted under the Export Administration Act of 1979,
as amended, and the Export Administration Amendments Acts of
1981 and 1985, and regulations thereunder, which licenses are
described on Schedule 3.41; and
(e) without violation of the Foreign Corrupt Practices Act of
1977, and regulations thereunder.
3.41 ABSENCE OF SENSITIVE PAYMENTS. To the knowledge of the Sellers, none
of the Sellers nor any partner, officer or director of any of the Sellers, in
connection with the Business:
(a) have made or authorized any contributions, payments or gifts
of funds or property to any Government official, employee or
agent which was or is illegal under (i) the Foreign Corrupt
Practices Act and the regulations adopted thereto, or (ii)
applicable local Laws;
(b) have directly or indirectly made any contribution to
candidates for public office which would be a violation of (i)
the Foreign Corrupt Practices Act and the regulations adopted
thereto, or (ii) applicable local Laws; or
(c) intentionally maintained any unrecorded fund or asset for any
purpose.
3.42 TRUTHFULNESS. No representation or warranty of Sellers or any of them
herein and no written statement or certificate furnished or to be furnished by
or on behalf of Sellers pursuant hereto or in connection with the Transaction
contains or will contain any untrue statement of a material fact or omits or
will omit to state a material fact necessary in order to make the statements
contained herein or therein not misleading.
3.43 BANK ACCOUNTS OF SELLERS. Set forth on Schedule 3.43 hereto is a list
of all bank accounts and safe deposit boxes maintained by each of QGI and QGWI,
together with the names of all Persons who are authorized signatories or have
access thereto.
3.44 BOOKS AND RECORDS. The books of account, stock record books and
minute books and other corporate records of Sellers are in all material respects
complete and correct,
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have been maintained in all material respects in accordance with good business
practices and the matters contained therein are accurately reflected on the
Financial Statements in all material respects.
3.45 PERMITTED LIENS. Schedule 3.45 and Part II of Schedule 3.18 contain a
true and complete list of all Permitted Liens encumbering the Purchased Assets
of the type described in clause (iv) of the definition of Permitted Liens.
3.46 MATERIALITY. The matters and items excluded from the representations
and warranties set forth in this Article by operations of the materiality
exceptions and materiality qualifications contained in such representations and
warranties, in the aggregate for all such excluded matters and items, are not
and could not reasonably be expected to have a Material Adverse Effect.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby makes the following representations and warranties,
each of which is true and correct on the date hereof and, except for changes
expressly permitted by this Agreement, or consented to in writing by Sellers'
Representative, shall be true and correct on the Closing Date and each of which
shall survive the Closing Date and the sale contemplated hereby.
4.1 CORPORATE EXISTENCE OF BUYER. SPC is a corporation duly organized,
validly existing and in good standing under the Laws of the State of Delaware
and is duly qualified as a foreign corporation and is in good standing in each
jurisdiction where such qualification is required except where failure to so
qualify will not have a material adverse effect on Buyer. SPC has the corporate
power and authority to own and use its properties and to transact the business
in which it is engaged. In the event Buyer assigns its rights and obligations
hereunder to a subsidiary or affiliate, as provided in Section 12.1 hereof, such
subsidiary or affiliate will be a corporation duly organized, validly existing
and in good standing under the Laws of its state of incorporation; and such
subsidiary or affiliate will have the corporate power and authority to own and
use its property and to transact the business in which it is engaged.
4.2 APPROVAL OF AGREEMENT.
(a) The execution and delivery of this Agreement and each of the
Ancillary Agreements and the consummation of the Transaction
contemplated hereby and thereby have been duly authorized,
approved and ratified by all necessary corporate action on the
part of SPC and any Affiliate thereof party thereto. Certified
copies of all required resolutions, authorizations, consents,
approvals and/or ratifications will be delivered to Closing
and no such resolution, authorization, consent or approval has
been altered, amended, rescinded, repealed or revoked.
Pursuant to such resolutions, authorizations, consents,
approvals and/or ratifications, SPC has full authority to
enter into and deliver this Agreement, to perform its
obligations hereunder, and to consummate the Transaction
contemplated hereby. In the event
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Buyer assigns its rights and obligations hereunder to a
wholly-owned subsidiary or Affiliate, as provided in Section
12.1 hereof, such assignment will have been approved by all
necessary corporate action of such subsidiary or Affiliate,
and such subsidiary or affiliate will have full power and
authority to perform its obligations hereunder.
(b) Assuming the due execution and delivery hereof and thereof by
Sellers and each Controlling Shareholder which is a party
hereto or thereto, this Agreement and the Ancillary Agreements
constitute the legal, valid and binding obligation of SPC and
any Affiliate thereof party thereto enforceable against it
according to their terms, subject as to enforceability to the
effect of general principles of equity and to applicable
bankruptcy, insolvency, reorganization, moratorium,
liquidation and other similar laws relating to, or affecting
generally, the enforcement of applicable creditors' rights and
remedies.
4.3 NO BREACH OF ARTICLES. Except as set forth on Schedule 4.3, the
execution of this Agreement and each of the Ancillary Agreements and the
consummation of the transactions contemplated hereby and thereby has not and
will not constitute or result in the breach of any of the provisions of, or
constitute a default under, the articles or certificate of incorporation or
association or bylaws of SPC, or any material agreement, indenture, evidence of
indebtedness or other commitment to which SPC (or any subsidiary or affiliate to
which Buyer assigns its rights and obligations hereunder, as provided in Section
12.1 hereof) is a party or by which it is bound, which breach of default would
have a material adverse effect on Buyer and its subsidiaries, taken as a whole.
4.4 SEC FILINGS. As of their respective dates, SPC's (i) Annual Reports on
Form 10-K for the years ended May 2, 1998, May 3, 1997 and April 27, 1996, as
filed with the SEC, (ii) proxy statements relating to all of SPC's meetings of
stockholders (whether annual or special) since April 30, 1995, and (iii) all
other reports, statements and registration statements (including Quarterly
Reports on Form 10-Q and Current Reports on Form 8-K) filed by Buyer with the
SEC since April 30, 1995 (including all exhibits and schedules thereto and
documents incorporated by reference therein) (together, the "SEC Filings") did
not contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading.
4.5 SOLVENCY. As of the execution and delivery of this Agreement, SPC is,
and, as of the Closing Date, will be solvent, and SPC will not be rendered
insolvent on account of the Transactions contemplated hereby.
4.6 NO BREACH OF LAW. SPC has in all material respects complied with and
is not in any material respect in default under or in breach or violation of any
applicable Law of any Government body, or the provisions of any franchise or
license, or in breach or violation of any provision of its respective articles
of incorporation and by-laws. Neither the execution of this Agreement nor the
Closing do or will constitute or result in any such default, breach or
violation.
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4.7 LITIGATION AND ARBITRATION. Except as set forth in the SEC Filings,
there is no suit, claim, action or proceeding now pending or, to the knowledge
of Buyer, threatened before any Court, administrative or regulatory body,
Government agency, arbitration or mediation panel or similar body, nor, to the
knowledge of Buyer, are there any grounds therefor, to which SPC is a party,
which may result in any judgment, Order, decree, liability, award or other
determination which could reasonably be expected to have material adverse effect
on the business of SPC, taken as a whole, or which will, or could reasonably be
expected to, prevent or hamper the consummation of the Transaction.
4.8 SPC SHARES. The Originally Issued Shares to be issued in connection
with the Transaction, when issued in accordance with the terms and provisions of
this Agreement, will be duly authorized, fully paid and non-assessable and will
not be subject to any preemptive or other statutory rights of stockholders and
will be issued in compliance with applicable United States federal and state
securities laws.
4.9 TRUTHFULNESS. No representation or warranty of Buyer and no written
statement or certificate furnished or to be furnished by or on behalf of Buyer
pursuant hereto or in connection with the Transaction contains or will contain
any untrue statement of a material fact or omits or will omit to state a
material fact necessary in order to make the statements contained herein or
therein not misleading.
4.10 SPC SHARES BUY-BACK. Neither SPC nor any Affiliate of SPC has, during
the ten day period prior to the Closing Date, purchased any SPC Shares in any
open market transaction at a purchase price in excess of $15 per share.
ARTICLE V.
COVENANTS CONCERNING SELLERS
Sellers covenant and agree with Buyer that, as of the Effective Time
until the earlier of the Closing Date or the date of termination or expiration
of this Agreement, Sellers will conduct the Business in the Ordinary Course and
subject to the following provisions and limitations:
5.1 OPERATION OF THE BUSINESS. Sellers represent to Buyer that, except as
set forth on Schedule 5.1, no Seller has taken any action nor incurred any
liability or obligation of the type prohibited by Section 5.1 (a) through (l)
below between the Interim Balance Sheet Date and the date hereof. Without the
prior written consent of Buyer, none of the Sellers will:
(a) grant any increase in the rate of pay of any of its employees,
grant any increase in the salaries of any officer, employee or
agent (other than in the Ordinary Course, or pursuant to
preexisting, commitments or policies in effect on the Interim
Balance Sheet Date and which are disclosed in the Schedules
hereto), enter into or increase the benefits provided under
any bonus, profit-sharing, incentive compensation, pension,
retirement, medical, hospitalization, life insurance or other
insurance plan or plans, or other
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contracts or commitments, or in any other way increase in any
amount the benefits or compensation of any such officer,
employee or agent except, however, ordinary increases made in
the Ordinary Course of the Business to employees or agents who
are not directors or stockholders (or family members thereof);
(b) hire any new employees other than in the Ordinary Course,
enter into any employment contract or collective bargaining
agreement;
(c) enter into any Material Contract or engage in any transaction
which is not in the Ordinary Course of the Business;
(d) sell or dispose of or encumber any material amount of Assets
which is not in the Ordinary Course of the Business except
that Sellers may, with the prior written consent of Buyer,
which consent shall not be unreasonably withheld, sell or
otherwise dispose of assets which are not material to the
Business provided that proceeds thereof are retained in the
Business;
(e) make, or enter into any Contract for, any capital expenditure
or enter into any lease of capital equipment or real estate
requiring an expenditure of more than $50,000;
(f) create, assume, incur or guarantee any Indebtedness other than
(i) in the Ordinary Course of the Business and with a maturity
date of less than one year or (ii) that incurred pursuant to
existing Material Contracts disclosed in the Schedules
delivered pursuant hereto;
(g) except as authorized by Section 2.14 and except for
dividends/distributions accrued on the Interim Balance Sheet,
declare or pay any dividend or make any sale of, or
distribution in respect of, their partnership or member
interests or directly or indirectly redeem, purchase or
otherwise acquire any of their capital stock or issue any of
their partnership interests or other securities;
(h) make or institute any unusual or novel method of transacting
business or change any accounting procedures or practices or
their financial structure;
(i) make any amendments to or changes in their articles or
certificate of partnership or partnership agreement or
certificate of formation or operating agreement which would
interfere with the consummation of the Transaction;
(j) intentionally perform any act, or intentionally attempt to do
any act, or permit any act or omission to act, which will
cause a breach of any Material Contract; or
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(k) pay or incur any Prohibited Expenses, except for (i) payments
at the rate of up to $250,000 per month for the period from
the Interim Balance Sheet Date to the Closing Date (such
payments are herein referred to as the "Approved Payments")
and (ii) compensation to Verebay and Kaltman at rates equal to
the rates of compensation specified in the Verebay Employment
Contract and the Kaltman Employment Contract, respectively.
5.2 PRESERVATION OF BUSINESS. Sellers shall, carry on the Business
diligently and substantially in the same manner as heretofore conducted and
shall use their commercially reasonable efforts to keep their business
organizations intact, including their present employees and present
relationships with suppliers and customers and others having business relations
with Sellers. Sellers will at all times maintain in inventory quantities of raw
materials, component parts, work in process, finished goods and other supplies
and materials which, taken as a whole, are on a basis consistent with the
present and reasonably expected future requirements of the Business.
5.3 INSURANCE AND MAINTENANCE OF PROPERTY. Sellers will cause all the
Purchased Assets and all property owned or leased pursuant to the Assumed
Liabilities to be insured in substantially the same manner and to substantially
the same extent as heretofore insured and will operate, maintain and repair all
of such property in a manner materially consistent with Sellers' past practices.
5.4 FULL ACCESS. Representatives of Buyer shall have full access at all
reasonable times to all personnel, premises, properties, books, records,
contracts, tax records and documents of Sellers, and Sellers will furnish to
Buyer any information in respect of the Business as Buyer may from time to time
reasonably request. Such examination and investigation by Buyer, and any
discovery of facts resulting therefrom, shall not affect the warranties and
representations of Sellers contained in this Agreement. All information provided
to Buyer in accordance with this Section 5.4 shall be subject in all respects to
that certain confidentiality letter dated June 5, 1998 between Buyer and
Sellers.
5.5 BOOKS, RECORDS AND FINANCIAL STATEMENTS. Sellers shall maintain
their books and financial records so that financial statements based thereon may
be prepared in accordance with GAAP. Said books and financial records shall
fairly and accurately reflect the operations of the Business in all material
respects. Sellers shall furnish to Buyer promptly, as available, monthly
financial statements and operating reports applicable to the Business since
Interim Balance Sheet Date, all of which shall be prepared in accordance with
GAAP and shall present fairly in all material respects the financial position
and results of operations of Sellers at the dates and for the periods indicated
subject to normal year-end audit adjustments.
5.6 OTHER GOVERNMENT FILINGS. Sellers will make, as soon as practicable
following the execution hereof, all filings required by any Government agency in
connection with the Transaction contemplated by this Agreement, including the
filings required to be made by the Sellers under the HSR Act and under the New
Jersey Industrial Site Recovery Act ("ISRA") with respect to the Real Property
located in New Jersey. All information provided by Sellers in
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connection with such filings will be true, accurate and complete in all material
respects and will comply in all material respects with all applicable Laws.
5.7 TAX MATTERS.
(a) Sellers shall pay the first $45,000 of all applicable sales,
use or other similar transfer Taxes that are, or become, due
or payable as a result of the sale, conveyance, assignment,
transfer or delivery of the Purchased Assets hereunder,
whether levied on Buyer, the Purchased Assets or Sellers.
Buyer and Sellers shall each bear one-half (1/2) of all such
Taxes in excess of $45,000, if any. Sellers and Buyer shall
jointly prepare, and file any Returns required in respect of
such Taxes.
(b) (1) Sellers and Buyer shall report Buyer's purchase of the
Purchased Assets and pursuant to Section 1060 of the Code and
other applicable Laws in a consistent manner in accordance
with the Allocation and shall take no position contrary
thereto. Such Allocation shall be determined in conjunction
with the determination of Tax Liability under Section 2.14 in
accordance with the Appraisal, subject to the adjustments set
forth on Schedule 2.14. Buyer and Sellers each shall be
responsible for the preparation of any statements and forms to
be filed pursuant to Section 1060 of the Code or in accordance
with other applicable Law. (2) Sellers shall, within a
reasonable period of time before same are due, afford SPC an
opportunity to review the relevant portions of all Tax Returns
of Sellers in which Sellers (or any of them) report Buyer's
purchase of the Purchased Assets and/or the taxable income of
any Seller during the Pre-Closing Period, and SPC shall have a
right of reasonable consent over those portions thereof
relating to (i) the allocation of the Purchase Price among the
Purchased Assets and (ii) the computation of the Sellers'
taxable income during the Pre-Closing Period. In connection
with such review, Sellers' Representative shall make available
to Buyer all work papers, schedules, memorandum, calculations
and supporting documentation applicable to the relevant
portions of such Tax Returns, including, without limitation, a
reconciliation between Sellers' taxable income and accounting
income for the Pre-Closing Period. In the case of any dispute
between the Parties under this sub-paragraph relating to the
computation of the amount of the Tax Liability which cannot be
resolved by good faith negotiations, either Buyer or Sellers'
Representative may, by giving a Notice of Dispute to the
other, refer the matter for resolution in accordance with the
procedures set forth in Section 2.16 (which the Parties agree
shall be the exclusive means and forum for resolving any such
disputes).
(c) Each Party agrees to furnish or cause to be furnished to the
other Party, upon request, as promptly as practicable, such
information and assistance (including reasonable access to
books and records) relating to the Purchased
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Assets as is reasonably necessary for the preparation of any
Tax return, claims for refund or audit or prosecution or
defense of any claim, suit or proceeding relating to any
proposed adjustment of Taxes paid by such requesting Party.
(d) Sellers shall furnish to Buyer, as provided in Section
1445(b)(2) of the Code, an affidavit pursuant to Section
1445(a), stating under penalties of perjury, Transferor's
United States taxpayer identification number and that the
Transferor is not a foreign person.
5.8 FINANCIAL STATEMENTS. Sellers hereby undertake and agree to prepare,
at their sole cost and expense, and deliver to Buyer (i) as soon as reasonably
practicable after the date hereof, and in any event not later than five (5)
business days prior to the Closing, the Interim Financial Statements and (ii) at
the Closing, the other financial statements specified on Schedule 5.8; provided,
however, that if despite the use of commercially reasonable efforts, it is not
commercially practicable for Sellers to produce in time for the Closing the
unaudited statements of income necessary for the preparation of the pro forma
financial statements required to be included in SPC's Form 8K for the
Transaction, Sellers shall, in lieu of delivering such financial statements at
Closing, cooperate in all reasonable respects as may be requested by SPC in the
production of such statements after the Closing.
ARTICLE VI.
OTHER COVENANTS
6.1 CHANGE OF NAME. At the Closing, each of QGI and QGWI shall deliver
duly executed certificates of amendment and/or other appropriate documents as
may be required to change its name to some name other than Queens Group or any
variation or abbreviation thereof and file appropriate notification of its
change of name in all jurisdictions where such notification is required and take
all other steps as may be reasonably appropriate and requested by Buyer to
enable Buyer to use the name Queens Group and all variants thereof in connection
with Buyer's operation of the Business.
6.2 COVENANT OF COOPERATION. Buyer and Sellers' Representative shall
cooperate with each other in obtaining, and use commercially reasonable efforts
to help each other obtain, all of the consents and approvals listed on Schedule
3.19 hereto, which cooperation may include, if reasonable and appropriate under
the circumstances, meeting with and promptly furnishing information to
appropriate third parties.
6.3 COVENANT OF NOTIFICATION. Buyer and Sellers' Representative shall
each promptly notify the other upon (1) becoming aware of any Order or decree or
any complaint praying for an Order or decree restraining or enjoining the
consummation of this Agreement or the Transaction, or (2) receiving any notice
from any Government department, Court, bureau, agency or commission of its
intention (A) to institute an investigation into, or institute a suit or
proceeding to restrain or enjoin consummation of this Agreement or such
Transaction, or (B) to nullify or render ineffective this Agreement or such
Transaction if consummated.
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6.4 COVENANT OF GOOD FAITH. No Party hereto shall intentionally take any
action which could be reasonably be expected to in any manner interfere with the
carrying out of the Transaction on a timely basis, and shall use commercially
reasonable efforts and proceed in good faith to cause to be met as promptly as
reasonably practicable each condition to Closing over which it shall have any
control.
6.5 EMPLOYEES.
(a) Buyer agrees to recognize, as of the Closing Date, the labor
unions identified in the Collective Bargaining Agreements as
the collective bargaining representatives of the Employees for
whom such unions are the collective bargaining representatives
as of the Closing Date, and further agrees to assume, the
Collective Bargaining Agreements.
(b) As of the Closing Date, Buyer shall include all nonunion
Continuing Employees who presently participate in the Queens
Group, Inc. 401(k) Plan in the Shorewood Packaging Corporation
Retirement and Savings Plan ("Buyer's 401(k) Plan") and shall
grant credit in Buyer's 401(k) Plan for all past service with
Seller for eligibility and vesting purposes.
(c) Effective as of the Closing Date, Buyer shall provide, or
shall cause an Affiliate to provide, health coverage under a
health care Plan of Buyer to all Employees to whom it offers
employment and who accept such employment and who were
entitled to health coverage under one or more of the health
care Plans of the Sellers immediately prior to the Closing
Date, and their eligible dependents. Buyer shall permit such
participation without the application of any additional
minimum eligibility period of employment for coverage and
without any additional restriction for pre-existing conditions
and shall provide credit toward the payment of any deductible
with respect to such plan. Buyer shall in its sole discretion
determine the level of health coverage benefits and reserves
to right to amend, modify or terminate such coverage at any
time. In addition, as of the Closing Date Buyer or an
Affiliate thereof also will offer coverage for the duration of
the coverage period required under Section 4980(B)(f)(2)(B) of
the Code under the health care Plans of Buyer covering the
employees after the closing to any former Employees (together
with their eligible dependents) who have been previously
employed in any capacity by any Seller and who as of the
Closing Date, either (i) already had elected health care
continuation coverage under the provisions of Section 4980B of
the Code or (ii) are in an election period to elect such
coverage, in accordance with Section 4980B(f)(5) of the Code,
as of the Closing Date, and Buyer shall provide all notices in
accordance with Section 4980B(f)(6) of the Code in connection
therewith.
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(d) Multiemployer Plans
(1) Immediately after the Closing Date, Buyer shall make
contributions with respect to the operations of the
Business on behalf of Employees working in the Business
to such of the Plans that are the Multiemployer Plans as
set forth on Schedule 3.26 for substantially the same
number of contribution base units for which the Sellers
had an obligation to contribute to such Multiemployer
Plans with respect to the operations of the Business on
behalf of Employees working in the Business. Nothing in
this section shall be construed as impairing or limiting
Buyer's right to discharge, lay off or hire employees or
otherwise to manage the operations of the Business,
including but not limited to, the right to amend, revise
or terminate any Collective Bargaining Agreement
currently in effect.
(2) During the period of five Plan years commencing with the
first Plan year commencing after the Closing Date (the
"Contribution Period"), Buyer shall provide the
following in each such Multiemployer Plan: either a bond
or an escrow in the manner required by the provisions of
Section 4204(a)(1)(B) of ERISA in an amount which is the
greater of (i) the average annual contribution required
to be made by the Sellers under each such Multiemployer
Plan with respect to the operations of the Business for
the three (3) Plan years inclusive preceding the Plan
year in which the Closing Date occurs or (ii) the annual
contribution that the Sellers were required to make with
respect to the operations of the Business under each
such Multiemployer Plan for the last Plan year before
the Plan year in which the Closing Date occurs. The
costs of maintaining such bond or escrow shall be borne
by the Buyer. If Buyer fails to make a contribution to
each such Multiemployer Plan when due or if Buyer
withdraws (in either a complete or partial withdrawal
with respect to the operations of the Business) from
each such Multiemployer Plan at any time during the
Contribution Period, the respective bond or escrow shall
be paid to the Multiemployer Plan. Upon expiration of
the Contribution Period (or such earlier date that an
escrow is not required under law), the escrow, including
the interest earned thereon, shall be returned to Buyer.
Notwithstanding anything contained in this paragraph (2)
to the contrary, Buyer shall not be obligated to provide
the bond or escrow required herein in the event Buyer
obtains a proper variance or exemption under Section
4204(c) of ERISA and the applicable regulations
thereunder, provided all requirements of said variance
or exemption are met. The Sellers shall cooperate with
Buyer, at Buyer's expense, in obtaining any such
variance or exemption and shall consent to any
application for variance or exemption made to the PBGC.
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(3) From the Closing Date until final determination of any
withdrawal liability, the Sellers authorize Buyer to
commence discussion and from and after the Closing Date
until final determination, to initiate arbitration,
litigation or to do any other act which Buyer deems, in
its discretion, appropriate in order to reduce or
eliminate any withdrawal liability or any escrow or
bonding requirement imposed by each such Multiemployer
Plan which Buyer is required to satisfy under the terms
of this Agreement. The Sellers agree to reasonably
assist Buyer, at Buyer's expense, in any proceedings
commenced in accordance with this paragraph (3).
(4) If Buyer at any time withdraws from any such
Multiemployer Plan (in either a complete or partial
withdrawal with respect to the operations of the
Business) during the Contribution Period, the Sellers
shall be secondarily liable for any withdrawal liability
the Sellers would have to the Multiemployer Plan with
respect to the operations of the Business (but for the
provisions of Section 4204 of ERISA) if the liability of
Buyer with respect to such Multiemployer Plan is not
paid, and the Buyer shall indemnify and hold the Sellers
harmless from any such withdrawal liability and
liability the Sellers would have had with respect to the
operations of the Business.
(5) During the Contribution Period and pursuant to Section
4204(a)(3)(A) of ERISA, in the event a bond or escrow of
the Sellers is required pursuant to Section
4204(a)(3)(A) of ERISA, the Buyer shall, on behalf of
the Sellers, provide such bond or escrow and any
necessary or additional collateral. The amount of such
bond or escrow shall be the present value of the
withdrawal liability the Sellers would have but for
Section 4204 of ERISA. The costs of maintaining such
bond or escrow shall be borne by the Buyer. Upon
expiration of the Contribution Period or such earlier
date that an escrow is not required under law, the
escrow, including interest earned thereon, shall be
returned to the Buyer.
(6) Notwithstanding the foregoing, Buyer shall not be
required to provide a bond or escrow pursuant to Section
4204 of ERISA or to make the contributions described in
paragraph (1) of this Section 6.6(6) if the trustees of
each such Multiemployer Plan would have assessed no
withdrawal penalty against the Sellers had the Sellers
completely withdrawn from such Multiemployer Plan (but
for the operation of Section 4204 of ERISA) or in the
event liability had been assessed, the liability would
have been reduced to zero pursuant to the de minimis
provisions of Section 4209 of ERISA.
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(e) All expenses covered under medical, dental, vision,
prescription drug, travel accident, accidental death and
dismemberment, and life insurance Plans (if any) of Buyer and
which are incurred by Employees who are employed by Buyer
("Continuing Employees") and their dependents on or after the
Closing Date, including any expenses attributable to facts or
conditions existing on or before the Closing Date, are the
responsibility of Buyer and shall be paid directly by Buyer or
its insurance carrier to such Continuing Employees and
dependents. Buyer shall be responsible for any medical, dental
or life insurance coverage under the terms of Buyer's Plans
(if any) due to any Continuing Employees and their dependents
who retire after the Closing Date. All short-term, long-term
and extended disability benefits under the terms of Buyer's
plans (if any) payable to Continuing Employees and their
dependents who become disabled on or after the Closing Date
shall be the responsibility of Buyer and shall be paid
directly by Buyer or its insurance carrier to such Continuing
Employees and their dependents.
(f) Buyer shall permit a rollover of account balances from the
Queens Group, Inc. 401(k) Plan and the Queens Group Profit
Sharing Plan, attributable to Continuing Employees, to the
Shorewood Packaging Corporation Retirement and Savings Plan.
Buyer shall adopt a tax qualified Plan for Continuing
Employees who were covered under the Queens Group, Inc. Union
401(k) Plan (the "Union 401(k) Plan") immediately prior to the
Closing Date which provides the same level of benefits as were
provided by the Union 401(k) Plan as of the Closing Date and
shall grant credit for all past service with Sellers for
eligibility and vesting purposes.
(g) If any Continuing Employees are terminated by Buyer after the
Closing Date, any obligations arising out of such termination
of employment, including but not limited to severance, accrued
vacation pay, COBRA obligations, notices or compensation
required under the Worker Adjustment and Restraining
Notification ("WARN Act"), employment discrimination
complaints, unfair labor practice charges, grievance under any
collective bargaining agreement, breach of contract claims,
and wrongful termination and related tort claims, shall be the
sole responsibility of Buyer, provided that Buyer shall not be
responsible for any Severance Obligations of Sellers other
than Assumed Severance Obligations. Notwithstanding the
foregoing, Buyer retains all remedies set forth in this
Agreement for breach of any representations and warranties of
Sellers.
(h) As of the Closing Date, Sellers shall assign to Buyer the
assets and liabilities of the Queens Group, Inc. Cafeteria
Plan, the Queens Group Indiana, Inc. Cafeteria Plan, the
Queens Group New Jersey Cafeteria Plan and the Queens Group,
Inc. North Carolina Cafeteria Plan (collectively, the
"Cafeteria Plans"). Buyer shall assume all such liabilities
and adopt the Cafeteria Plans and shall continue the Cafeteria
Plans through December 31,
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1998. Effective January 1, 1999, Continuing Employees shall be
eligible to participate in the cafeteria plans maintained by
Buyer for Buyer's employees.
(i) All expenses covered under medical, dental, vision,
prescription drug, disability, travel accident, accidental
death and dismemberment, and life insurance Plans of Sellers
(if any) and which are incurred by Employees and their
dependents on or after the Interim Balance Sheet Date and
prior to the day after the Closing Date, including any
expenses attributable to facts or conditions existing on or
before the Interim Balance Sheet, are the responsibility of
Buyer and shall (to the extent not otherwise paid by Seller or
their insurance carriers during the Pre-Closing Period) be
paid directly by Buyer or its insurance carrier to such
Employees and dependents.
(j) This Section 6.5 shall govern employee benefits and employment
matters and shall supersede any provision in this Agreement to
the contrary.
6.6 RETENTION OF RECORDS. All of the files, lists and records included
in the Purchased Assets which are reasonably required by the Sellers'
Representative for the review of proposed Purchase Price adjustments or
indemnification claims, preparation of Tax Returns and the like, or the
resolution of any dispute between the Parties hereto, shall, on reasonable
notice, be made available by Buyer to the Sellers' Representative, during normal
business hours, for examination and duplication (at the expense of the Sellers)
after the Closing at Buyer's offices in New York City or Long Island for a
period of five (5) years from and after the Closing Date. From and after the
expiration of the period provided in the preceding sentence, Buyer shall have
the right to destroy any of such files, lists or records; provided, however, it
shall first comply with the following provisions of this subsection. At least
thirty (30) days prior to destroying any of said files, lists and records, Buyer
shall give notice of its intention to do so to the Sellers' Representative. If
the Sellers' Representative shall notify Buyer that the Sellers wish to retain
any of the files, lists or records which Buyer intends to destroy, Buyer shall
(at the expense of the Sellers) deliver such files, list or records to a
location designated by the Sellers' Representative in said notification.
6.7 ENVIRONMENTAL REMEDIATION.
(a) Subject to the provisions of this Section and Schedule 6.7 and
provided it acts in good faith and in a commercially
reasonably manner, Buyer shall have the right, after the
Closing, to conduct and perform the Approved Environmental
Compliance Work. Sellers' Representative shall have the right
to participate fully in all aspects of the Approved
Environmental Compliance Work and shall be given the right to
attend all meetings and discuss in advance all material
actions to be taken with respect thereto, as provided for in
Schedule 6.7. Subject to the limitations on recovery set forth
in Section 10.3(a), Buyer may fund the Environmental Costs of
performing the Approved Environmental Compliance Work from the
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Performance Escrow Deposit on the following basis, 100% of
such costs up to the applicable Approved Environmental Budget
and 90% of such costs in excess of such budget, all as more
specifically described in the Performance Escrow Agreement
(with the balance of such 10% to be paid by Buyer out of its
own funds), provided however, in the event Buyer's costs with
respect to any Approved Environmental Compliance Work exceed
by 125% the Approved Environmental Budget with respect
thereto, Buyer shall be able to continue with such compliance
work but may not fund the costs above 125% the Approved
Environmental Budget from the Performance Escrow Deposit until
the Parties, through good faith negotiations, agree on a new
budget for the costs with respect to any Approved
Environmental Compliance Work, or if an agreement can not be
reached, until the dispute is resolved in accordance with
Section 6.7(f) below. In the event it is finally determined
that the Sellers' Representative would not have been obligated
to incur such additional costs, then such costs shall be borne
solely by the Buyer and Buyer shall have no right to
reimbursement from the Performance Escrow Deposit.
(b) Subject to the provisions of this Section and Schedule 6.7 and
provided it acts in good faith and in a commercially
reasonable manner, Buyer shall have the sole right, after the
Closing, to conduct and perform the Approved Environmental
Investigation Work. Sellers' Representative shall have the
right to participate fully in all aspects of the Approved
Environmental Investigation Work and shall be given the right
to attend all meetings and discuss in advance all material
actions to be taken with respect thereto as provided for in
Schedule 6.7. Subject to the limitations on recovery set forth
in Section 10.3(a), Buyer may fund the Environmental Costs of
performing the Approved Environmental Investigation Work from
the Performance Escrow Deposit on the following basis, 100% of
such costs up to the applicable Approved Environmental Budget
and 90% of such costs in excess of such budget, all as more
specifically described in the Performance Escrow Agreement
(with the balance of such 10% to be paid by Buyer out of its
own funds), provided however, in the event Buyer's costs with
respect to any Approved Environmental Investigation Work
exceed by 125% the Approved Environmental Budget with respect
thereto, Buyer shall be able to continue with such
investigation work but may not fund the costs above 125% of
the Approved Environmental Budget from the Performance Escrow
Deposit until the Parties, through good faith negotiations,
agree on a new budget for the costs with respect to any
Approved Environmental Investigation Work, or if an agreement
can not be reached, until the dispute is resolved in
accordance with Section 6.7(f) below. In the event it is
finally determined that the Sellers' Representative would not
have been obligated to incur such additional costs, then such
costs shall be borne solely by the Buyer and Buyer shall have
no right to reimbursement from the Performance Escrow Deposit.
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(c) New Jersey Property
(1) With regard to the New Jersey Property, Seller shall,
prepare, execute and file an application, acceptable to Buyer
in its reasonable discretion, with the NJDEP (the "NJDEP
Application") and take such action as may be necessary to
secure from the NJDEP approval for the "triggering event" (as
such term is defined under ISRA) (including obtaining any of
the items specified on Schedule 6.7(c) with respect thereof),
and shall cooperate with Buyer in order to secure, post or
obtain any and all requisite remediation funding sources (from
the Performance Escrow Deposit) as may be required by the
NJDEP in connection therewith, in order to assist Buyer in
achieving the Approved Remediation Standard. Buyer shall have
the right to consult with Sellers' Representative with respect
to the content and scope and processing of the NJDEP
Application and it and its representatives shall have the
right to participate in the consultations with the NJDEP, all
in accordance with the Environmental Procedures.
(2) TRC shall, and Seller Representative shall cause TRC to,
provide any certification required in connection with the
NJDEP Application promptly upon Buyer's request therefor (and
in any event no later than five (5) business days after such
request is made). If the NJDEP requires that the Parties enter
into a remediation agreement (the "Remediation Agreement") (i)
TRC shall, and Sellers' Representative shall cause TRC to,
execute a Remediation Agreement in the form required by the
NJDEP, (ii) Buyer shall have the sole right to withdraw from
(or cause to be segregated) the Performance Escrow Deposit in
accordance with the Performance Escrow Agreement such monies
as may required by the NJDEP to secure the performance of the
applicable Approved Environmental Remediation Work (the
"Remediation Funding Source"), (iii) subject to the provisions
of this Section and Schedule 6.7, and provided that it acts in
good faith and in a commercially reasonable manner, Buyer
shall have the right to conduct and perform the Approved
Environmental Investigation Work and the Approved
Environmental Remediation Work in accordance with the
Environmental Remediation Procedures with a view to achieving
the Approved Remediation Standard and (iv) at such time as
Buyer shall have received from the NJDEP a no further action
letter without conditions and the NJDEP grants approval that
the Remediation Funding Source may be withdrawn, with respect
to the Environmental Conditions identified at the New Jersey
Property, Buyer shall, as applicable, either promptly return
to the Performance Escrow Agent all amounts of the Remediation
Funding Source not previously drawn upon to be administered
and disbursed by the Performance Escrow Agreement in
accordance with the terms of the Performance Escrow Agreement,
or cause such Remediation Funding Source to be withdrawn.
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(3) Buyer shall execute and file all necessary documents with
the NJDEP in order to achieve the Approved Remediation
Standard. Sellers' Representative shall have the right to
participate fully in all aspects of the Approved Environmental
Remediation Work and shall be given the right to attend all
meetings and discuss in advance all material actions to be
taken with respect thereto, as provided for in Schedule 6.7.
(4) Subject to the limitations on recovery set forth in
Section 10.3(a), Buyer may fund the Environmental Costs of
performing such Approved Environmental Remediation Work from
the Performance Escrow Deposit on the following basis, one
hundred percent (100%) of such costs up to the applicable
Approved Environmental Budget and ninety percent (90%) of such
costs in excess of such budget, and as more specifically
described in the Performance Escrow Agreement (with the
balance of such 10% to be paid by Buyer out of its own funds),
provided however, in the event Buyer's costs with respect to
any Approved Environmental Remediation Work exceed by 125% the
Approved Environmental Budget with respect thereto, Buyer
shall be able to continue with such remediation work but may
not fund the costs above 125% of the Approved Environmental
Budget from the Performance Escrow Deposit until the Parties,
through good faith negotiations, agree on a new budget for the
costs with respect to any Approved Environmental Remediation
Work, or if an agreement can not be reached, until the dispute
is resolved in accordance with Section 6.7(f) below. In the
event it is finally determined that the Seller's
Representative would not have been obligated to incur such
additional costs, then such costs shall be borne solely by the
Buyer and Buyer shall have no right to reimbursement from the
Performance Escrow Deposit.
(5) If TRC fails for any reason to execute and deliver either
the certification or the Remediation Agreement promptly within
five (5) business days after request therefor is made by
Buyer, the indemnification provided for in Section 10.2(b)(iv)
shall be suspended and of no force or effect for the period of
time until TRC executes and delivers the requested document.
Sellers or TRC shall execute and deliver to Buyer all
documents reasonably required by Buyer in order to achieve the
Environmental Remediation Standard, provided such documents do
not address matters for which Sellers or TRC are not
responsible for under this Agreement. Buyer hereby waives (and
agrees not to assert) any and all rights Buyer may have in
accordance with ISRA and the rules and regulations promulgated
thereunder to rescind the Transaction contemplated by this
Agreement arising out of Sellers' failure to secure prior to
Closing a no further action letter or other approval from the
NJDEP. However, nothing contained herein shall limit, suspend,
void or eliminate Sellers' obligations to comply with the
provisions of this Section 6.7, it being understood and agreed
that Sellers' obligations as set forth in Section 6.7 of this
Agreement survive
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Closing and shall remain in full force and effect
notwithstanding this waiver provision or the indemnity
provision contained in Section 10.2(b).
(d) With regard to the Louisville and Stanley Properties, subject
to the provisions of this Section and Schedule 6.7 and
provided it acts in good faith and in a commercial reasonable
manner, Buyer shall have the right, after the Closing, to make
application to the applicable state governmental environmental
agency to enter such state's voluntary remediation program or
other similar program and to conduct and perform the Approved
Environmental Investigation Work and Approved Environmental
Remediation Work, in accordance with the Environmental
Remediation Procedures, with a view to achieving the Approved
Remediation Standard. Sellers' Representative shall have the
right to participate in the Approved Environmental Remediation
Work and shall be given the right to attend all meetings and
discuss in advance all material actions to be taken with
respect thereto, as provided for in Schedule 6.7. Subject to
the limitations on recovery set forth in Section 10.3(a),
Buyer may fund the Environmental Costs of performing such
Approved Environmental Remediation Work from the Performance
Escrow Deposit on the following basis, 100% of such costs up
to the applicable Approved Environmental Budget and 90% of
such costs in excess of such budget, and as more specifically
described in the Performance Escrow Agreement (with the
balance of such 10% to be paid by Buyer out of its own funds),
provided however, in the event Buyer's costs with respect to
any Approved Environmental Remediation Work exceed by 125% the
Approved Environmental Budget with respect thereto, Buyer
shall be able to continue with such remediation work but may
not fund the costs above 125% of the Approved Environmental
Budget from the Performance Escrow Deposit until the Parties,
through good faith negotiations, agree on a new budget for the
costs with respect to any Approved Environmental Remediation
Work, or if an agreement can not be reached, until the dispute
is resolved in accordance with Section 6.7(f) below. In the
event it is finally determined that the Seller's
Representative would not have been obligated to incur such
additional costs, then such costs shall be borne solely by the
Buyer and Buyer shall have no right to reimbursement from the
Performance Escrow Deposit.
(e) Sellers' Representative shall, within 90 days after the
Closing Date, cause BRC to make application to enter the
Indianapolis Property into the Indiana Voluntary Remediation
Program, and in a timely manner, to undertake all
investigation, monitoring remediation or other action
necessary to achieve the Approved Remediation Standard.
Sellers may fund 100% of the Environmental Costs of performing
such actions from the Performance Escrow Deposit, as more
specifically described in the Performance Escrow Agreement.
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(f) Buyer shall not request any disbursements from the Performance
Escrow Deposit under Section 4 of the Performance Escrow
Agreement which it is not entitled to request under the
provisions of this Section 6.7 or until the applicable
Sellers' Basket is exhausted. Further, Buyer shall, if
requested by the Sellers' Representative, itself pay or
reimburse Sellers' Representative for any expenses incurred
under this Section 6.7 until the applicable Sellers' Basket is
exhausted.
(g) Environmental Dispute Resolution Mechanism
(1) Whenever Sellers' Representative or Buyer shall provide
to the other an Environmental Notice of Dispute relating
to matters in this Section 6.7 (an "Environmental
Dispute"), Buyer and Sellers' Representative shall, upon
the addressee's receipt of the Environmental Notice of
Dispute, promptly consult with each other with respect
to their specified points of disagreement in an effort
to resolve the dispute. If any such dispute cannot be
resolved by Buyer and the Sellers' Representative within
30 days after the Environmental Notice of Dispute is
given, they shall refer the dispute to an independent
and reputable environmental consulting firm, which (a)
has not worked for any of the Sellers or Buyer, or any
of their respective Affiliates or legal counsel, within
three years from the date of the dispute and (b) shall
be reasonably acceptable to the parties to the dispute
(the "Independent Consultant"), to finally determine, as
soon as practicable, and in any event within 30 days
after such referral, all points of disagreement with
respect to the matter at hand. The Independent
Consultant shall establish the procedures for resolving
such dispute (including procedures for the presentation
of evidence) giving due regard to the intention of the
Parties to resolve Environmental Disputes as quickly,
efficiently and inexpensively as possible. All hearings
shall be held on an expedited basis and shall be
confidential. The means and forum for resolving
Environmental Disputes set forth in this Section 6.7
shall be the exclusive means and forum for resolving
Environmental Disputes, and the parties shall comply
with any determination made by the Independent
Consultant. The fees and expenses of the proceedings and
the Independent Consultant incurred by the Parties in
connection with the proceedings shall be allocated
between the Parties by the Independent Consultant in
proportion to the extent any Party did not prevail on
the merits of the items in dispute in question. All
determinations by the Independent Consultant shall be
final, conclusive and binding with respect to the
dispute in question and the allocation of costs.
(2) During the pendency of any Environmental Dispute, Buyer
and Sellers' Representative shall each afford the other
and its authorized
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representatives with reasonable access, during normal
business hours and upon reasonable prior written notice,
to all relevant documents, reports records (including
work papers, schedules and memoranda), laboratory
reports and supporting materials in its possession and
relevant to or derived from the dispute in question,
provided that neither Party shall be required to
disclose to the other any material which is the subject
of an attorney-client privilege and in any case the
disclosing party may, as a condition to furnishing any
information, require that the other party agree to be
bound in writing by standard and customary
confidentiality covenants and other reasonable
restrictions governing the use of non-public
information.
(3) With respect to each Budget which in the first instance,
must be agreed to or established by Sellers'
Representative and Buyer after the Closing, each of
Sellers' Representative and Buyer shall, at the
appropriate time, submit to the other the proposed
budget for the work in question. The parties shall
thereupon proceed in good faith to resolve any
disagreements between them with a view to adopting the
applicable Approved Environmental Budget as promptly as
practicable. If the parties are unable, despite good
faith negotiations, to agree on any such budget, all
disputes between them shall be resolved in accordance
with the dispute resolution mechanism above. During the
pendency of any dispute relating to any environmental
compliance, investigation, monitoring or remediation
work with respect to which, Buyer may fund the
Environmental Costs of performing the Approved
Environmental Remediation Work in question out of the
Performance Escrow Deposit, as more specifically
described in the Performance Escrow Agreement and
subject to the limitations on recovery contained in
Section 10.3(a) up to an amount equal to the budget for
such work proposed by the Sellers' Representative or, if
greater, an amount of $400,000 for all items in dispute,
provided, however, that if the amount actually withdrawn
by Buyer from the Performance Escrow Deposit to fund
such work exceeds the amount which it would have been
entitled to withdraw if the applicable Approved
Environmental Budget, as finally determined pursuant to
the procedures above, had been in place at the outset of
such work, Buyer shall, upon the final determination of
the amount of such Approved Environmental Budget,
promptly return to the Performance Escrow Deposit the
amount of such excess.
(g) Buyer shall obtain at least three competitive bids from
recognized environmental contractors (one of which can be
selected by Sellers' Representative) for any Approved
Environmental Investigation Work or Approved Environmental
Remediation Work where the cost for such work is anticipated
to exceed $20,000 for any one item or for work to be given to
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one contractor in the aggregate, and Buyer shall accept the
lowest bid that meets Buyer's specifications for the work.
Buyer shall not be required to bid consulting work related to
the Approved Environmental Investigation Work and the Approved
Environmental Remediation Work. Buyer agrees that Buyer's
consultant shall charge rates which are competitive for
environmental consulting services.
(h) Buyer and Sellers agree that any and all proceeds received
from any insurance carrier which has provided insurance
coverage to Sellers or provided coverage with respect to the
Environmental Property, where such proceeds are paid in
connection with an Environmental Condition, shall be applied
towards payment of the Environmental Costs to the extent that
the amount thereof exceeds any costs or fees, including
attorneys' fees, incurred in connection with the recovery of
any such insurance proceeds.
6.8 ENVIRONMENTAL REPORTS. Buyer has delivered to Sellers true, correct
and complete copies of the Environmental Reports and all material memorandum
from and to and material correspondence with Delta that in any way relate to any
Environmental Conditions.
6.9 RETENTION BONUSES, ETC. SPC hereby acknowledges that it has offered
to enter into a three year employment agreement with Michael Sidrow providing
employment as a director in its Management Information Systems Department at the
same base salary as currently enjoyed by him and providing standard benefits as
offered to other similarly situated executives of Buyer and providing
substantially the same severance benefits as the Sidrow Contract (other than
relating to change of control of Buyer). SPC acknowledges that it has been
provided by Sellers with copies of the employment agreements listed on Schedule
3.22 and that, assuming the authenticity and completeness of such copies
provided to it by Sellers, based on its review of the Contracts, of those
Contracts, only the Sidrow Contract and the Agreement between Erwin Moskowitz
and QGI dated July 28, 1998 provide for the payment of Retention Bonuses which
would or could be triggered by the consummation of the Transaction.
6.10 OLIVER TRUCKING. Buyer agrees to assume the Material Contract set
forth in Part V, Item 2 of Schedule 3.18; provided, however, Buyer expressly
reserves the right to renegotiate the pricing terms thereof.
6.11 HECHT. Buyer agrees to provide health coverage under one or more of
its health care Plans to Leonard Hecht and his eligible dependents for the
period through January 10, 1999, provided that Mr. Hecht shall pay a premium to
Buyer in the amount which he would otherwise be required to pay to Buyer if he
were receiving health care continuation coverage under COBRA during such period.
Thereafter, Mr. Hecht shall be entitled to elect to receive COBRA coverage as
provided in Section 6.5(c).
6.12 NEW JERSEY TITLE. Sellers' Representative, on behalf of Sellers,
shall undertake to and use its best efforts to correct a title defect relating
to a potential overlap, gap or gore with respect to the New Jersey Property (the
"Title Defect"). Buyer acknowledges and agrees that if its title insurance
company will issue an owners policy of title insurance at regular rates without
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exception as to the Title Defect, for that property as shown on a certain survey
prepared by Paul Berg, Jr. dated October 3, 1997 and last revised September 21,
1992 and by this reference made a part hereof as fully as if set forth herein
(the "Berg Survey"), Sellers' Representative shall have no further obligations
under this Section 6.12.
ARTICLE VII.
COVENANT NOT TO COMPETE
7.1 COVENANT NOT TO COMPETE.
(a) As a further inducement to Buyer to purchase the Purchased
Assets and to assume the Assumed Liabilities, each Seller
agrees that, in addition to any restrictions on competition to
which the Sellers or any of them, may be subject by contract
or as a matter of law or equity, for a period of five (5)
years from the Closing Date (the "Restricted Period"), each of
them will not, directly or indirectly: (i) engage in or in any
way own, manage, operate, control or otherwise advise or
assist or be actively connected with any enterprise which
engages in, or otherwise carries on, any business activity
which produces or otherwise manufactures and/or sells
packaging products (the "Competitive Products") or in any
other manner is in competition with the current Business of
Sellers or any related business in which it is aware Buyer is
planning to engage or (ii) with respect to the Competitive
Products, solicit or accept business from, or provide
competitive products or services to, any customers (whether or
not such Persons have done business with Sellers once or more
than once) or accounts of Sellers (during the period beginning
eighteen (18) months prior to the Closing Date and ending on
the Closing Date) or Buyer (after the Closing Date).
Notwithstanding the foregoing, nothing contained in this
Article VII shall be deemed to prohibit any Seller from (i)
maintaining an ownership interest in, or participating in the
operations of, Oliver Trucking Corporation, provided that the
business activities of Oliver Trucking Corporation are limited
solely to trucking, trucking brokerage and warehousing and
other activities not involving Competitive Products, (ii)
maintaining an ownership interest in, or participating in the
development and licensing of, the "Q-Pack" patent and related
Intellectual Property Rights, provided that such activities
are in strict compliance with the terms of the License
Agreement, or (iii) maintaining ownership of and conveying or
leasing the Indianapolis Property.
(b) It is expressly understood and agreed that although Sellers
and Buyer consider the restrictions contained in this Section
to be reasonable in the context in which made, if a final
judicial determination is made that the time, territory, scope
or any other restriction contained in this Section is
unreasonable or otherwise unenforceable, neither this
Agreement nor the
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provisions of this Section shall be rendered void, but shall
be deemed amended to apply as to such maximum scope, time and
territory and to such other extent as such court may
judicially determine or indicate to be reasonable, and as so
modified, the restrictions contained in this Section shall be
binding and enforceable.
(c) Each Seller specifically acknowledges and agrees that the
foregoing covenants are commercially reasonable and reasonably
necessary to protect the interests Buyer will acquire in the
Business hereunder.
(d) The covenants contained in this Article VII shall be deemed to
be a series of separate covenants, one for each product line
in each county and each city of every state in which any
Seller has heretofore conducted or now conducts the Business.
Each separate covenant shall hereinafter be referred to as a
"Separate Covenant."
(e) If any court or tribunal of competent jurisdiction shall
refuse to enforce one or more of the Separate Covenants
because the time limit applicable thereto is deemed
unreasonable, it is expressly understood and agreed that such
Separate Covenant or Separate Covenants shall not be void but
that for the purpose of such proceedings such time limitation
shall be deemed to be reduced to the extent necessary to
permit the enforcement of such Separate Covenant or Separate
Covenants.
(f) If any court or tribunal of competent jurisdiction shall
refuse to enforce any or all of the Separate Covenants
because, taken together, they are more extensive (whether as
to geographic area, scope of business or otherwise) than is
deemed to be reasonable, it is expressly understood and agreed
between the parties hereto that such Separate Covenant or
Separate Covenants shall not be void but that for the purpose
of such proceedings the restrictions contained therein
(whether as to geographic area, scope of business or
otherwise) shall be deemed to be reduced to the extent
necessary to permit the enforcement of such Separate Covenant
or Separate Covenants.
7.2 EMPLOYEES. Each Seller agrees that during the Restricted Period
neither it nor its successors or assigns will hire any Person who is at that
time, or was at any time within six (6) months prior thereto, in the employ or
service as a consultant or representative or otherwise of Sellers in connection
with the Business, and whom Buyer intends to employ or otherwise retain, or seek
to entice, induce or in any manner influence any such employee to leave his or
her employment or not accept or continue in such employment; provided, however,
that such Seller shall not be in breach of this provision unless the person so
solicited or induced is hired by such Seller or any of its Affiliates or any
other entity on whose behalf Seller solicited or induced such person within six
(6) months after the last act constituting such solicitation or inducement,
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provided that such solicitation or inducement did not include any commitment to
employ the person so solicited or induced after the expiration of the aforesaid
six (6) month period.
7.3 CONFIDENTIALITY. No Seller will at any time disclose to any person
other than Buyer or use any "Proprietary Information" (as hereinafter defined)
owned, possessed, licensed or used by or relating to the Business, whether or
not such information is embodied in writing or other physical form. For purposes
of this Agreement, the phrase "Proprietary Information" means all trade names,
trademarks, service marks, patents, copyright and trade secrets and any and all
other information not publicly available which relates to specific matters
concerning the Business, such as, without limiting the generality of the
foregoing, engineering, design, manufacturing, maintenance and repair
information; computer software and programs; component sourcing and supply
information; identities of suppliers, customers and contractors; product
distribution information; pricing and compensation policies; sales or financing
procedures or methods; operational methods; strategic plans; internal financial
information; research and development plans and activities; and acquisition and
expansion plans. Notwithstanding the foregoing, the following shall not
constitute Proprietary Information for purposes of this Agreement: (i)
information which is or becomes generally available to the public other than as
a result of a disclosure in breach of the terms of this Agreement, and (ii) as
to any particular Seller, information which rightfully comes into the possession
of such Seller without restriction hereunder and without direct or indirect
breach hereof. If a Seller is requested or required (by oral questions,
interrogatories, requests for information or documents, subpoena, civil
investigative demand or similar process) to disclose Proprietary Information,
such Seller shall promptly notify Buyer of such request or requirement so Buyer
may seek an appropriate protective order or other appropriate remedy or provide
a waiver of compliance with the confidentiality and non-disclosure provisions of
this Agreement. In the event that such protective order or other remedy is not
obtained, or that Buyer grants a waiver hereunder, such Seller may furnish that
portion (and only that portion) of the Proprietary Information which, in the
written opinion of counsel to such Seller, such Seller is legally compelled to
disclose and such Seller will exercise commercially reasonable efforts (at
Buyer's expense) to obtain reliable assurance that confidential treatment will
be accorded any Proprietary Information so furnished. Sellers recognize and
agree that all documents and objects containing any Proprietary Information,
whether developed by Sellers or by someone else for Sellers, will after the
Closing Date become the exclusive property of Buyer.
7.4 REMEDIES. Because the breach or anticipated breach of the
restrictive covenants provided for in this Article VII will result in immediate
and irreparable harm and injury to Buyer, for which it will not have an adequate
remedy at law, Sellers agree that Buyer shall be entitled to relief in equity to
temporarily, preliminarily and/or permanently enjoin such breach or anticipated
breach and to seek any and all other legal and equitable remedies to which Buyer
may be entitled. Should Buyer be determined the prevailing party in a final
judgment on any such action, Buyer shall be entitled to reimbursement of
attorneys' fees and costs incurred. If any Seller violates any of the
restrictive covenants provided for in this Article VII, the Restricted Period
shall be extended until five years after the date of entry of final judgment
enforcing such provision and the time for appeal has lapsed.
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7.5 PERMITTED INVESTMENTS. Nothing contained herein shall restrict any
Seller from owning capital stock of Buyer or one percent (1%) or less of the
corporate securities of any Person in competition with the Business which
securities are listed on any national securities exchange or authorized for
quotation on the Automated Quotations System of the National Association of
Securities Dealers, Inc., if such Person has no other connection or
relationship, direct or indirect, with the issuer of such securities.
ARTICLE VIII.
CONDITIONS TO BUYER'S OBLIGATIONS
The obligations of Buyer to consummate the transactions provided for
in this Agreement shall be subject to the satisfaction of each of the following
conditions on or before the Closing Date, subject to the right of Buyer to waive
any one or more of such conditions:
8.1 REPRESENTATIONS AND WARRANTIES OF SELLERS. The representations and
warranties of Sellers contained in this Agreement, including the Schedules
hereto, and in the certificates to be delivered to Buyer pursuant hereto and in
connection herewith shall be true and correct in all material respects (except
to the extent any such representations and warranties is already qualified as to
materiality in Article III, in which case, such representations and warranties
shall be true and correct without further qualifications as to materiality under
this Section 8.1) on the date hereof and on the Closing Date (except for changes
specifically permitted hereunder or occurring in the Ordinary Course without
breach of this Agreement) as though such representations and warranties were
made on the Closing Date.
8.2 PERFORMANCE OF THIS AGREEMENT. Sellers shall have duly performed or
complied in all material respects with all of the obligations to be performed or
complied with by them under the terms of this Agreement on or prior to the
Closing Date and, in any event, shall have complied with the obligations to be
performed by them under Sections 5.8 and 6.1.
8.3 CERTIFICATE OF SELLERS. Buyer shall have received (i) a certificate
signed by either of the President, Managing Partner or Managing Member of
Sellers dated as of the Closing Date and subject to no qualification certifying
that the conditions set forth in Sections 8.1 and 8.2 hereof have been fully
satisfied, and (ii) the Estimated Payment Certificate. Such certificates shall
be deemed representations and warranties of Sellers under this Agreement and
there shall be no personal liability of the party executing the same (except for
fraud or bad faith).
8.4 OPINION OF COUNSEL. Buyer shall have received from Rubin Baum Levin
Constant & Friedman, Counsel to Sellers, an opinion of such counsel, dated the
Closing Date, substantially in the form attached hereto as Exhibit L.
8.5 ESCROW AGREEMENTS. The Sellers and the Performance Escrow Agent
shall have executed and delivered the Performance Escrow Agreement and, if the
Working Capital shown on the Interim Balance Sheet is greater than six million
dollars ($6,000,000), Sellers, Buyer and the Working Capital Escrow Agent shall
have executed and delivered the Working Capital Escrow Agreement.
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8.6 ANCILLARY AGREEMENTS. Each Seller and each Controlling Shareholder and
Oliver Trucking Corp. shall have executed and delivered each Ancillary Agreement
to which he, she or it is a party.
8.7 NO LAWSUITS. No Party hereto shall be under an injunction or other
legal restriction which makes unlawful the closing of the Transaction and there
shall not be instituted against a Party any litigation or proceeding (i) by any
Government that relates to the Transaction or (ii) by any Person that either
separately or in the aggregate could reasonably be expected to have a Material
Adverse Effect or to prevent the consummation of the Transaction.
8.8 CONSENTS. All consents and approvals listed on Part I of Schedule
3.19 shall have been obtained. All required consents and approvals from
Governments shall have been obtained and all waiting periods required by Law
shall have expired, except that the prior approval of, or any other action by,
the NJDEP in respect of the transfer of fee title to the New Jersey Property
from TRC to Buyer (or its designee) shall not be required as a condition
precedent to the Transaction. Specifically, but without limitation, the waiting
period specified in the HSR Act, including any acceleration or extensions
thereof, shall have expired or been terminated.
8.9 RELEASES. Buyer shall have obtained from each applicable lender or
creditor whose Indebtedness is being discharged at Closing a pay-off letter and
a commitment to promptly (i) release or terminate (x) all security interests and
(y) all guaranties or support obligations of Sellers or the Controlling
Shareholders securing such Indebtedness and (ii) deliver and/or release all
related UCC-3s and other security arrangements related thereto.
8.10 DOCUMENTS. Buyer shall receive from Sellers on the Closing Date:
(a) the Bill of Sale and other appropriate documents conveying to
Buyer title to the Purchased Assets free and clear of all
Liens except Permitted Liens; and
(b) the Assignment and Assumption Agreement.
ARTICLE IX.
CONDITIONS TO SELLERS' OBLIGATIONS
The obligations of Sellers to consummate the transactions provided
for in this Agreement shall be subject to the satisfaction of each of the
following conditions on or before the Closing Date, subject to the right of
Sellers to waive any one or more of such conditions:
9.1 REPRESENTATIONS AND WARRANTIES OF BUYER. The representations and
warranties of Buyer contained in this Agreement, including the Schedules hereto,
and in the certificates to be delivered to Sellers pursuant hereto and in
connection herewith shall be true and correct in all material respects (except
to the extent that any of such representations and warranties is already
qualified as to materiality in Article IV, in which case, such representations
and warranties shall be true and correct without further qualification as to
materiality under this Section 9.1) on the date hereof and on the Closing Date
(except for changes specifically permitted hereunder or
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occurring in the ordinary course without breach of this Agreement) as though
such representations and warranties were made on the Closing Date.
9.2 PERFORMANCE OF THIS AGREEMENT. Buyer shall have duly performed or
complied in all material respects with all of the obligations to be performed or
complied in all material respects with by it under the terms of this Agreement
on or prior to the Closing Date.
9.3 CERTIFICATE OF BUYER. Sellers shall have received a certificate
signed by either the chief executive officer or the chief financial officer of
Buyer dated as of the Closing Date and subject to no qualification certifying
that the conditions set forth in Sections 9.1 and 9.2 hereof have been fully
satisfied. Such certificate shall be deemed a representation and warranty of
Buyer hereunder and there shall be no personal liability of the party executing
the same (except for fraud or bad faith).
9.4 OPINION OF COUNSEL. Sellers shall have received from Bryan Cave LLP,
counsel to Buyer, an opinion of such counsel, dated the Closing Date,
substantially in the form attached hereto as Exhibit M.
9.5 PAYMENT OF PURCHASE PRICE AND ASSUMPTION OF LIABILITIES. Sellers
shall receive from Buyer on the Closing Date the Initial Purchase Price to be
delivered under Section 2.3 hereof and the Assignment and Assumption Agreement,
duly executed by Buyer providing for the assumption of Assumed Liabilities. The
Performance Escrow Agent shall receive from Buyer the amount to be delivered to
the Performance Escrow Agent under Section 2.7 hereof and, if applicable, the
Working Capital Escrow Agent shall receive from Buyer the amount to be delivered
to the Working Capital Escrow Agent under Section 2.8.
9.6 ANCILLARY CONTRACTS. Buyer shall have executed and delivered each of
the Ancillary Agreements to which it is a party.
9.7 CONSENTS. All required consents and approvals from Governments shall
have been obtained and all waiting periods required by Law shall have expired,
except that the prior approval of, or any other action by, the NJDEP in respect
of the transfer of fee title to the New Jersey Property from TRC to Buyer (or
its designee) shall not be required as a condition precedent to the Transaction.
Specifically, but without limitation, the waiting period specified in the HSR
Act, including any acceleration or extensions thereof, shall have expired or
been terminated.
9.8 NO LAWSUITS. No Party hereto shall be under an injunction or other
legal restriction which makes unlawful the closing of the Transaction and there
shall not be instituted against a Party any litigation or proceeding (i) by any
Government that relates to the Transaction or (ii) by any Person that either
separately or in the aggregate could reasonably be expected to have a Material
Adverse Effect or to prevent the consummation of the Transaction.
9.9 RELEASES. Buyer shall have obtained from each applicable lender or
creditor whose Indebtedness is being discharged at Closing a pay-off letter and
a commitment to promptly (i) release or terminate (x) all security interests and
(y) all guaranties or support
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obligations of Sellers or the Controlling Shareholders securing such
Indebtedness and (ii) deliver and/or release all related UCC-3s and other
security arrangements related thereto.
ARTICLE X.
INDEMNIFICATION
10.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and
warranties of the Parties made in this Agreement or in any exhibit, Schedule,
certificate, instrument or document delivered pursuant hereto shall survive the
Closing and shall remain in effect for a period of two years after the Closing
Date and shall thereupon terminate and be of no further force and effect;
provided, however, that the foregoing shall not apply to representations and
warranties under Sections 3.1, 3.2, 4.1, 4.2 and 4.3 and, with respect to Income
Taxes only, Section 3.10, which representations and warranties shall survive
indefinitely; and provided, further, that this shall not prohibit any claim for
Indemnified Losses pursuant to Section 10.2 after such applicable survival
period with respect to Indemnified Losses as to which the indemnifying party has
received notice in accordance with this Article X prior to the expiration of
such survival period. All representations and warranties hereunder shall be
deemed to be material and, except as otherwise specifically provided herein,
relied upon by the Parties with or to whom the same were made, notwithstanding
any investigation or inspection made by or on behalf of such Party or Parties.
Solely for purposes of determining whether and to what extent any Party
hereunder shall be entitled to indemnification from any other Party pursuant to
this Article X, the representations and warranties of the Parties shall be
construed without regard to any qualifications as to materiality or Material
Adverse Effect or, with respect to the representations and warranties contained
in Sections 3.9, 3.14(b)(vi) and 3.15 only, any qualifications as to knowledge,
contained therein or applicable thereto, and no Party hereto shall in any action
or proceeding for indemnification under this Article X or the Performance Escrow
Agreement before any Court assert or interpose any defense or counterclaim that
any representation or warranty made by it under this Agreement was so qualified.
10.2 INDEMNIFICATION.
(a) Each Seller hereby agrees, jointly and severally, to indemnify
and hold Buyer, its shareholders, directors, officers,
employees, Affiliates, successors, assigns and agents of each
of them (collectively, the "Buyer Indemnified Parties")
harmless from, against and in respect of, and waives any claim
for contribution or indemnity with respect to, any and all
claims, losses, damages, liabilities, expenses, fines and
penalties or costs other than special, indirect or
consequential damages ("Losses"), plus reasonable attorneys',
environmental consultants, contractors and subcontractors and
environmental engineering fees and expenses incurred in
connection with Losses and/or enforcement of this Agreement
(in all, "Indemnified Losses") incurred or to be incurred by
any of them:
(i) to the extent resulting from or arising out of, or
alleged by a claimant other than the party seeking
indemnification (a "Third
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Person") to result from or arise out of, any breach or
violation of the representations, warranties, covenants
or agreements of the Sellers contained in this
Agreement, or in any exhibit, Schedule, certificate,
instrument or document delivered pursuant hereto,
including provisions of this Article X;
(ii) to the extent resulting from or arising out of, or
alleged by a Third Person to result from or arise out
of, any Excluded Liability;
(iii) to the extent resulting from or arising out of, or
alleged by any Controlling Shareholder or any other
present or former stockholder or option holder or
partner or member or other equity stakeholder of any
Seller (or Person purporting to be such) to result from
or arise out of, any action taken by Buyer, including
the payment of the Purchase Price and any other amounts
payable hereunder, in reliance on the directions of the
Sellers' Representative;
(iv) to the extent resulting from or arising out of (i) any
violation or any Liability under any Environmental Law
arising out of any actions or failure to act of Sellers
prior to the Interim Balance Sheet Date; (ii) the
release of any Hazardous Materials on, under or from any
property prior to the Interim Balance Sheet Date arising
out of Seller's actions or failure to act; or (iii) the
release of any Hazardous Materials on, under or from the
Environmental Property prior to the Interim Balance
Sheet Date;
(v) to the extent resulting from or arising out of the legal
proceedings listed on Schedule 10.2(a)(v); and
(vi) to the extent resulting from or arising out of any
claim, allegation, cause of action, demand, proceeding
or notice from any Third Party or from any Government in
connection with any Environmental Condition or any
alleged violation of, or alleged liability under any
Environmental Law referred to in the Environmental
Reports and existing prior to the Interim Balance Sheet
Date.
(b) Buyer hereby agrees to indemnify and hold each Seller, its
shareholders, directors, officers, employees, Affiliates,
successors, assigns and agents of each of them (collectively,
the "Seller Indemnified Parties") harmless from, against and
in respect of, and waives any claim for contribution or
indemnity with respect to, any and all Indemnified Losses
incurred or to be incurred by any of them:
(i) to the extent resulting from or arising out of, or
alleged by a Third Person to result from or arise out
of, any breach or violation of the representations,
warranties, covenants or agreements of the Buyer
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contained in this Agreement, or in any exhibit,
Schedule, certificate, instrument or document delivered
pursuant hereto, including provisions of this Article X;
(ii) to the extent resulting from or arising out of, or
alleged by a Third Person to result from or arise out
of, the ownership or operation of the Assets or the
Business which is based on or arises out of any act or
omission of Buyer occurring from and after the Closing;
(iii) to the extent resulting from or arising out of the
failure of Buyer to discharge or pay when due any
Assumed Liability; and
(iv) which result from or arise out of any act, action or
omission to act which occurs from and after the Closing
Date and relates to the consummation of the Transaction
in violation of or without full compliance with the
requirements of ISRA or the rules and regulations
promulgated thereunder or any claim or determination by
the NJDEP or otherwise, that the consummation of the
Transaction constitutes a "Triggering Event" under ISRA
or the rules and regulations promulgated thereunder,
including any and all penalties and fines, which Buyer
hereby agrees to pay and/or satisfy.
10.3 LIMITATIONS ON INDEMNIFICATION.
(a) Buyer shall not be entitled to recovery for any Indemnified
Losses or Environmental Costs under this Agreement until the
aggregate amount of such Indemnified Losses and Environmental
Costs shall exceed $300,000 (the "Sellers' Basket"), in which
event, Buyer may claim indemnification for the amount of such
claims in excess of $300,000, and Sellers' obligation
hereunder shall not exceed, individually or in the aggregate,
the remaining amount of the Performance Escrow Deposit. The
foregoing notwithstanding, (i) the limitations on recovery
contained in this Section 10.3(a) shall not apply to Buyer
Exempt Claims, (ii) only $150,000 of the Sellers' Basket shall
apply to (x) claims for indemnification under Section
10.2(a)(i) for breach of the representations contained in
Section 3.10(i), (y) claims for indemnification under Sections
10.2(a) (v), (vi), and (vii), (z) requests by Buyer to fund
Environmental Costs pursuant to Section 6.7 and (zz) requests
by Buyer for payment pursuant to Section 6.12 and (iii) the
Sellers' Basket shall not apply to requests by Sellers'
Representative to fund Environmental Costs pursuant to Section
6.7(e).
(b) The amount of any Indemnified Losses suffered by an
Indemnified Party under this Agreement (and the amount for
which such Party may seek indemnification pursuant to this
Article 10 on account of such Indemnified Losses) shall be
reduced by the amount, if any, of any insurance recovery
received by such Party from any insurance policy maintained by
such Party
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or its Affiliates, (x) net of (i) reasonable expenses incurred
by such party in obtaining such recovery and (ii) the present
value of any insurance premium increase attributable to the
claim underlying such recover, including retrospective premium
adjustments and (y) without prejudice to any rights of
subrogation the insurer may enjoy under such insurance policy.
10.4 SET-OFF RIGHTS. Buyer shall be entitled to set off any amounts owing
by the Sellers to the Buyer Indemnified Parties, or any of them, in respect to
Buyer Exempt Claims pursuant to this Article X or otherwise, against any amounts
owed to the Sellers by the Buyer.
10.5 PARTICIPATION IN LITIGATION. Within 20 days after receipt of notice
of any claim or demand or the commencement of any action which could give rise
to a right of indemnification hereunder, the Party seeking indemnification (the
"Indemnified Party") shall give the Party from which its is seeking
indemnification (the "Indemnifying Party") notice thereof, and the Indemnifying
Party shall have the right to undertake the defense thereof by representatives
of its own choosing and at its own expense; provided that the Indemnified Party
may participate in the defense with counsel of its own choice, the fees and
expenses of which counsel shall be paid by such Indemnified Party unless (i) the
Indemnifying Party has failed to assume the defense of such action or (ii) the
named parties to such action (including any impleaded parties) include both the
Indemnifying Party and the Indemnified Party and the Indemnified Party has been
advised by counsel that there may be one or more legal defenses available to it
that are different from or additional to those available to the Indemnifying
Party (in which case, if the Indemnified Party informs the Indemnifying Party in
writing that it elects to employ separate counsel at the expense of the
Indemnifying Party, the Indemnifying Party shall not have the right to assume
the defense of such action on behalf of the Indemnified Party, it being
understood, however, that the Indemnifying Party shall nevertheless have the
right to consent to any settlement or compromise of such claim which will result
in any payment being made by it or shall reduce the remaining amount of the
Sellers' Basket, and the Indemnifying Party shall not, in connection with any
one such action or separate but substantially similar or related actions in the
same jurisdiction arising out of the same general allegations or circumstances,
be liable for the reasonable fees and expenses of more than one separate firm of
attorneys at any time for the Indemnified Party).
In the event that the Indemnifying Party, by the 30th day after
receipt of notice of any such claim (or, if earlier, by the 10th day preceding
the day on which an answer or other pleading must be served in order to prevent
judgment by default in favor of the the Indemnifying Party asserting such
claim), does not elect to defend against such claim, the Indemnified Party will
(upon further notice to the Indemnifying Party) undertake the defense,
compromise or settlement of such claim on behalf of and for the account and risk
of the Indemnifying Party and at the Indemnifying Parties' expense, subject to
the right of the Indemnifying Party to consent to any settlement or compromise
of such claim which will result in any payment being made by it or which will
reduce the remaining amount of the Sellers' Basket, and assume the defense of
such claims at any time prior to settlement, compromise or final determination
thereof.
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10.6 CLAIMS PROCEDURE. In the event from time to time any Indemnified
Party believes that it will suffer any Losses for which an Indemnifying Party is
obligated to indemnify it hereunder, it shall promptly notify the Indemnifying
Party in writing of the matter, specifying therein the reason why the
Indemnified Party believes that the Indemnifying Party is or will be obligated
to indemnify, the amount, if liquidated, to be indemnified, and the basis on
which the Indemnified Party has calculated such amount; if not yet liquidated,
the notice shall so state; provided, however, that the right of a person to be
indemnified hereunder shall not be adversely affected by a failure to give such
notice unless, and then only to the extent that, an Indemnifying Party is
prejudiced thereby. The Indemnifying Party shall pay any amount to be
indemnified hereunder not more than five days after receipt of notice from the
Indemnified Party of the liquidated amount to be indemnified, unless such
indemnification is made pursuant to the Performance Escrow Agreement.
10.7 LIMITATION ON LIABILITY. Notwithstanding any other provision of this
Agreement to the contrary, except for Buyer Exempt Claims and claims relating to
fraud (with respect to which the Performance Escrow Deposit shall be a
non-exclusive remedy), the liability of the Sellers with respect to any matter
in respect of the Transaction or the Purchased Assets or the Business, including
any claim for a breach of any representation, warranty, covenant or agreement
pursuant to this Agreement or any other instrument shall be limited to the
assets of the Performance Escrow Deposit, and no Seller shall have any liability
to Buyer after the termination of the Performance Escrow Period (as defined in
the Performance Escrow Agreement) (whether such claim is framed in contract or
tort or arises hereunder or under any other instrument or document or otherwise
at law or in equity) other than in respect to claims made prior to such
termination (and liability therefor shall be limited to the remaining amount
held in escrow in respect thereof) and other than in respect of Buyer Exempt
Claims.
ARTICLE XI.
SELLERS' REPRESENTATIVE
11.1 APPOINTMENT; ACCEPTANCE. By executing this Agreement, each of the
Sellers hereby irrevocably constitutes and appoints QGI, or any assignee or
successor thereof, acting as hereinafter provided, as its, his or her
attorney-in-fact and agent to act in its, his or her name, place and stead in
connection with all matters arising from and under this Agreement, the
Performance Escrow Agreement and the Working Capital Escrow Agreement
(collectively, the "Related Agreements") after the Closing Date (the "Sellers'
Representative"), and acknowledges that such appointment is coupled with an
interest. By executing this Agreement, QGI hereby (i) accepts his or its
appointment and authorization to act as the Sellers' Representative and as
attorney-in-fact and agent in accordance with the terms hereof and (ii) agrees
to perform his obligations hereunder, and otherwise to comply with this Article
XI.
11.2 AUTHORITY. Each Seller fully and completely, without restriction:
(a) agrees to be bound by all notices received or given by, and
all agreements and determinations made by, and all documents
executed and delivered by
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the Sellers' Representative under the Related Agreements after
the Closing Date;
(b) authorizes the Sellers' Representative, after the Closing Date
(i) to assert claims, make demands and commence actions on
behalf of the Sellers and under the Related Agreements, (ii)
to dispute or to refrain from disputing any claim made by
Buyer under the Related Agreements, (iii) to negotiate and
compromise any dispute which may arise under, and exercise or
refrain from exercising remedies available to the Sellers
under, the Related Agreements, and to sign any releases or
other documents with respect to such dispute or remedy (and to
bind the Sellers s in so doing), (iv) to waive any condition
contained in the Related Agreements, (v) to give any and all
consents and notices under the Related Agreements, (vi) to
give such instructions and do such other things and refrain
from doing such things as the Sellers' Representative shall
deem appropriate to carry out the provisions of the Related
Agreements; and (vii) to perform all actions, exercise all
powers, and fulfill all duties otherwise assigned to the
Sellers' Representative in this Agreement;
(c) authorizes and directs the Sellers' Representative to receive
all payments under the Related Agreements payable to Sellers
after the Closing Date on its behalf, to invest such funds
pending their disbursement in such manner as the Sellers'
Representative in his sole discretion deems appropriate; and
to disburse pro rata any payments due to the Sellers under the
Related Agreements in accordance with the Sellers
instructions.
11.3 ACTIONS. Each of the Sellers hereby expressly acknowledges and agrees
that the Sellers' Representative has the sole and exclusive authority to act on
its behalf in respect of all matters arising under or in connection with the
Related Agreements after the Closing Date, notwithstanding any dispute or
disagreement among them, and that no Seller or Controlling Shareholder thereof
shall have any authority to act unilaterally or independently of Sellers'
Representative in respect to any such matter. Accordingly, Buyer, Working
Capital Escrow Agent and Performance Escrow Agent shall be entitled to rely on
any and all actions taken by the Sellers' Representative under the Related
Agreements without any liability to, or obligation to inquire of, any of the
Sellers or Controlling Shareholders. All notices, counternotices or other
instruments or designations delivered by any Seller or Controlling Shareholder
to Buyer, Working Capital Escrow Agent or Performance Escrow Agent or any other
Person in regard to the Related Agreements shall not be effective unless, but
shall be effective if, signed by the Sellers' Representative, and if not, such
document shall have no force or effect whatsoever and Buyer, Working Capital
Escrow Agent and Performance Escrow Agent and any other Person or entity may
proceed without regard to any such document. Buyer, Working Capital Escrow
Agent, Performance Escrow Agent and any other Person or entity are hereby
expressly authorized to rely on the genuineness of the signature of the Sellers'
Representative, and upon receipt of any writing which reasonably appears to have
been signed by the Sellers' Representative. Buyer, Working Capital Escrow Agent,
Performance Escrow Agent and any
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other Person may act upon the same without any further duty of inquiry as to the
genuineness of the writing.
11.4 EFFECTIVENESS. The authorizations of the Sellers' Representative
shall be irrevocable and effective until his rights and obligations under the
Related Agreements. terminate by virtue of the termination of all obligations of
the Sellers to Buyer and Buyer to Sellers under the Related Agreements.
ARTICLE XII.
MISCELLANEOUS
12.1 ASSIGNMENT; BINDING AGREEMENT.
(a) This Agreement and all or any part of Buyer's rights and
obligations hereunder may be assigned by Buyer at any time to
any Affiliate(s) of Buyer, so long as such action does not
unreasonably delay the Closing or require additional consents
to be obtained or filings to be made with Government bodies
(other than ministerial consents and filings). Buyer shall
cause such Affiliate(s) to perform any of Buyer's obligations
hereunder which are Assigned to such Affiliate(s) and shall
remain liable to Sellers hereunder notwithstanding any such
assignment. Sellers shall assign the Purchased Assets and
Assumed Liabilities among SPC and such Affiliate(s) as SPC
shall direct at the Closing.
(b) Neither this Agreement nor any of Sellers' rights or
obligations hereunder may be assigned by Sellers without
Buyer's prior written consent, except that QGI may, upon prior
written notice to SPC, assign its rights and obligations as
the Sellers' Representative hereunder to any one of the other
Sellers or any subsidiary or Affiliate of QGI in connection
with the liquidation or dissolution of QGI.
(c) This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and to their respective
successors and permitted assigns.
12.2 TERMINATION OF AGREEMENT. This Agreement and the transactions
contemplated hereby may be terminated prior to the Closing Date only as follows:
(a) by mutual consent of Buyer and Sellers' Representative;
(b) by either Buyer or Sellers' Representative; if the Closing
shall not have occurred on or before December 31, 1998 or such
other date, if any, as Buyer and Sellers shall agree upon;
provided, however, that if the Closing shall not have occurred
on or prior to December 1, 1998, Sellers' Representative may,
at its sole option, by written notice to Buyer, request that
Closing be delayed until January 10, 1999, in which case, the
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aforementioned date shall be automatically extended to January
10, 1999 and the Closing shall occur, if at all, on such date
between January 2, 1999 and January 10, 1999 as shall be
selected by Sellers' Representative;
(c) by Buyer or Sellers' Representative, by notice to the other,
if it determines in good faith that the Transaction
contemplated hereby has become impossible or unlikely to be
consummated by reason of the institution or threat by any
Person, Government authority or otherwise, of any litigation,
investigation or proceeding;
(d) by Buyer if (i) any of the conditions in Article IX have not
been satisfied as of the Closing Date or if satisfaction of
any such condition is or becomes impossible (other than
through the failure of Buyer to comply with its obligations
under this Agreement) and Buyer has not waived such condition
on or before the Closing Date or (ii) Sellers have failed or
refused (without justification) to close on a Closing Date
designated by Buyer in accordance with the terms hereof; or
(e) by Sellers' Representative, if (i) any of the conditions in
Article VIII have not been satisfied as of the Closing Date or
if satisfaction of any such condition is or becomes impossible
(other than through the failure of the Sellers to comply with
their obligations under this Agreement) and Sellers'
Representative has not waived such condition on or before the
Closing Date or (ii) Buyer has failed or refused (without
justification) to close on a Closing Date designated by
Sellers' Representative in accordance with terms hereof.
12.3 MANNER AND EFFECT OF TERMINATION.
(a) Any action by Buyer to terminate this Agreement and the
Transaction contemplated hereby, as provided in Section 12.2
hereof, shall be taken by its Chief Executive Officer. Any
such action by Sellers shall be taken by the Sellers'
Representative.
(b) If this Agreement is terminated pursuant to Section 12.2
hereof without fault of either party or breach of this
Agreement, all obligations of Sellers and Buyer hereunder
shall terminate, without liability of Sellers to Buyer or of
Buyer to Sellers. In such event, each party hereto shall pay
all legal and other costs and expenses incurred by such party
in connection with this Agreement and the transactions
contemplated hereby.
(c) Nothing in this Section or elsewhere in this Agreement shall
impair or restrict the rights of any party to any and all
remedies at law or in equity in the event of a breach of or
default under this Agreement.
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12.4 AMENDMENTS. This Agreement may be amended with the approval of the
Board of Directors of Buyer and the partners or appropriately authorized
officers (as the case may be) of Sellers at any time before the Closing Date.
12.5 REMEDIES. Nothing contained herein is intended to or shall be
construed to limit the remedies which either party may have against the other in
the event of a breach of or default under this Agreement, it being intended that
any remedies shall be cumulative and not exclusive.
12.6 ENTIRE AGREEMENT AND MODIFICATION. This Agreement, including the
Schedules attached hereto and the documents delivered pursuant hereto,
constitutes the entire agreement between the parties, provided that the
Confidentiality Agreement dated June 5, 1998 between Buyer and Sellers shall
remain in effect for its intended term and the provisions of Section 2.2 of the
Letter of Intent shall be, and hereby are, incorporated herein and made a part
hereof and shall be, and hereby are, expressly extended until the earlier to
occur of the Closing and the termination of this Agreement in accordance with
its terms. No changes of, modifications of, or additions to this Agreement shall
be valid unless the same shall be in writing and signed by all parties hereto.
If any provision of this Agreement shall be determined to be contrary to Law and
unenforceable by any court of law, the remaining provisions shall be severable
and enforceable in accordance with their terms.
12.7 COUNTERPARTS. This Agreement may be executed in one or more
identical counterparts, each of which shall be deemed an original but all of
which together will constitute one and the same instrument.
12.8 HEADINGS; INTERPRETATION. (a) The table of contents and article and
section headings contained in this Agreement are inserted for convenience only
and shall not affect in any way the meaning or interpretation of the Agreement.
Both parties have participated substantially in the negotiation and drafting of
this Agreement and each party hereby disclaims any defense or assertion in any
litigation or arbitration that any ambiguity herein should be construed against
the draftsman.
(b) Whenever used in this Agreement, the words "knowledge", "best
knowledge", "known to", "becoming aware of", "are aware of", or other words of
similar meaning or effect, as they pertain to the Sellers, means the actual
knowledge of the directors and executive officers of Sellers and of the
individuals listed on Schedule 12.8 (as to the areas noted thereon).
12.9 GOVERNING LAW. This Agreement shall be construed and interpreted
according to the Laws of the State of New York.
12.10 PAYMENT OF FEES AND EXPENSES. Each party hereto shall pay all fees
and expenses of such party's respective counsel, accountants and other experts
and all other expenses incurred by such party incident to the negotiation,
preparation and execution of this Agreement and the consummation of the
transaction contemplated hereby, including any finder's or brokerage fees.
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12.11 NOTICES. All notices, requests, demands and other communications
hereunder shall be deemed to have been duly given if the same shall be in
writing and shall be delivered or sent by registered or certified mail, postage
prepaid, or by recognized overnight courier and addressed as set forth below:
(a) If to Buyer: Shorewood Packaging Corporation
277 Park Avenue
New York New York 10172
Attention: M. Shore, CEO
with a copy to: Bryan Cave LLP
245 Park Avenue
New York, New York 10167
Attention: Peter A. Eisenberg
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(b) If to Sellers: Queens Group, Inc.
At the addresses set forth on Schedule 12.11
with a copy to: RUBIN BAUM/LEVIN CONSTANTE & FRIEDMAN
30 Rockefeller Plaza
New York, New York 10112
Attention: Matthew L. Lifflander
Any such notice by certified or registered mail shall be effective upon receipt
and any such notice by recognized overnight courier shall be effective one (1)
business day after delivery. Either Party may change the address to which
notices are to be addressed by giving the other Party notice in the manner
herein set forth.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement, on the day
and year first above written.
SHOREWOOD PACKAGING CORPORATION
By: /s/ MARC SHORE
----------------------------------
Name: Marc Shore
--------------------------------
Title: CEO/Pres.
--------------------------------
Attest:
/s/ ANDREW SHORE
- ----------------------------------
Name: Andrew Shore
-----------------------------
Title: Vice President - Secretary
----------------------------
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QUEENS GROUP, INC.
By: /s/ LEONARD VEREBAY
----------------------------------
Name: Leonard Verebay
--------------------------------
Title: 10/30/98 Pres.
--------------------------------
Attest:
/s/ GERALD SANDERS
- ----------------------------------
Name: Gerald Sanders
-----------------------------
Title: V.P.
----------------------------
QUEENS GROUP-WEAVERVILLE, INC.
By: /s/ LEONARD VEREBAY
----------------------------------
Name: Leonard Verebay
--------------------------------
Title: 10/30/98 Pres.
--------------------------------
Attest:
/s/ GERALD SANDERS
- ----------------------------------
Name: Gerald Sanders
-----------------------------
Title: V.P.
----------------------------
ALLMOND REALTY CO.
By: /s/ ERIC KALTMAN
----------------------------------
Name: Eric Kaltman
--------------------------------
Title: Partner
--------------------------------
Attest:
/s/ GERALD SANDERS
- ----------------------------------
Name: Gerald Sanders
-----------------------------
Title: Partner
----------------------------
<PAGE> 97
MOUNT HOLLY ENTERPRISES, INC.
By: /s/ LEONARD VEREBAY
----------------------------------
Name: Leonard Verebay
--------------------------------
Title: President
--------------------------------
Attest:
/s/ ERIC KALTMAN
- ----------------------------------
Name: Eric Kaltman
-----------------------------
Title: C.E.O.
----------------------------
TALMADGE REALTY CO.
By: /s/ MARTIN KALTMAN
----------------------------------
Name: Martin Kaltman
--------------------------------
Title: Managing Partner
--------------------------------
Attest:
- ----------------------------------
Name:
-----------------------------
Title:
----------------------------
BELMONT REALTY CO.
By: /s/ MARTIN KALTMAN
----------------------------------
Name: Martin Kaltman
--------------------------------
Title: Managing Partner
--------------------------------
Attest:
- ----------------------------------
Name:
-----------------------------
Title:
----------------------------
<PAGE> 98
WEAVERVILLE REALTY COMPANY LLC
By: /s/ LEONARD VEREBAY
----------------------------------
Name: Leonard Verebay
--------------------------------
Title: Managing Member
--------------------------------
Attest:
/s/ LEONARD HECHT
- ----------------------------------
Name: Leonard Hecht
-----------------------------
Title: Member
----------------------------
SELLERS' REPRESENTATIVE
By: /s/ LEONARD VEREBAY
----------------------------------
Name: Leonard Verebay
--------------------------------
Title: President
--------------------------------
<PAGE> 99
TABLE OF EXHIBITS
Exhibit A.................................Amended and Restated Lease Agreement
Exhibit B..........................Form of Assignment and Assumption Agreement
Exhibit C.................................................Form of Bill of Sale
Exhibit D..................................Form of Kaltman Employment Contract
Exhibit E............................................Form of License Agreement
Exhibit F...............................New Jersey Escrow and Lease Agreements
Exhibit G...................................Form of Non-Competition Agreements
Exhibit H.................................Form of Performance Escrow Agreement
Exhibit I...............Form of Stockholders and Registration Rights Agreement
Exhibit J.................................Form of Verebay Employment Agreement
Exhibit K.............................Form of Working Capital Escrow Agreement
Exhibit L................................Form of Opinion of Counsel to Sellers
Exhibit M..................................Form of Opinion of Counsel to Buyer
<PAGE> 100
TABLE OF SCHEDULES
<TABLE>
<S> <C>
Schedule 1.2 ..................................................Excluded Automobiles
Schedule 1.3 ..................................................Excluded Liabilities
Schedule 2.4.............................................................Allocation
Schedule 3.3....................................................Seller's Affiliates
Schedule 3.5...................................................Financial Statements
Schedule 3.6.................................Events Subsequent to November 30, 1997
Schedule 3.7................Inventory Not Usable in the Ordinary Course of Business
Schedule 3.11...........................................Personal Property Not Owned
Schedule 3.12........................Real and Personal Property Leased from Sellers
Schedule 3.13(a)................................... Real Property Leased to Sellers
Schedule 3.13(b)................................Personal Property Leased to Sellers
Schedule 3.13(c)....................................................Liens on Leases
Schedule 3.14.................................................Intellectual Property
Schedule 3.15............Purchased Assets on Consignment or in Possession of Others
Schedule 3.17..................................................Licenses and Permits
Schedule 3.18....................................................Material Contracts
Schedule 3.19.....................................................Required Consents
Schedule 3.21............................................................Litigation
Schedule 3.22........................Officers, Directors, Employees and Consultants
Schedule 3.23...........................................Outside Financial Interests
Schedule 3.24...............Indebtedness to and from Officers, Directors and Others
Schedule 3.26....Labor Agreements, Employee Benefit Plans and Employment Agreements
Schedule 3.27......................................................Terminated Plans
Schedule 3.28......................Overtime, Back Wages, Vacation and Minimum Wages
</TABLE>
<PAGE> 101
Schedule 3.29........................................Employment-Related Claims
Schedule 3.31...................................................Labor Disputes
Schedule 3.32........................................................Insurance
Schedule 3.33.......................................................Guarantees
Schedule 3.34...............................................Product Warranties
Schedule 3.35.........................................Product Liability Claims
Schedule 3.36.......................................Product Safety Authorities
Schedule 3.37............................................Environmental Matters
Schedule 3.38....................................................Broker's Fees
Schedule 3.39...................................................Foreign Assets
Schedule 3.43....................................................Bank Accounts
Schedule 3.45..................................................Permitted Liens
Schedule 4.3...........................Resolutions and Authorizations of Buyer
Schedule 5.1...........................Action Since Interim Balance Sheet Date
Schedule 5.1(l)............................................Prohibited Expenses
Schedule 5.8..............................................Financial Statements
Schedule 6.7..........................................Environmental Procedures
Schedule 6.7(c)..............................................Triggering Events
Schedule 10.2(a)(v)..........................................Legal Proceedings
Section 12.8............................................Persons with Knowledge
Section 12.11.............................................Addresses of Sellers
<PAGE> 102
SCHEDULE 1.3
Contracts
1. Agreement between Erwin Moskowitz and Queens dated July 20, 1998
2. Surety Agreement between Queens and Mellon Bank, N.A. dated February 16, 1996
3. Sidrow Contract
4. The BRC Loan
<PAGE> 103
SCHEDULE 6.7
Environmental Procedures
1. The party to this Agreement who will conduct any environmental
compliance, investigation, monitoring, or remediation (hereinafter
the "Remediator") shall transmit to the other party (the "Other
Party") a copy of any submission to any Government, including,
without limitation, work plans, sampling and analysis plans, health
and safety plans, quality assurance plans, reports of work completed
or in progress, and requests for modification of any previous
submittal (together hereafter known as the "Agency Submittals"), to
the extent reasonably possible, within a reasonable time in advance
of the submission date to allow for the Other Party to have a
meaningful opportunity to review and consult with Remediator.
2. Remediator shall transmit to the Other Party copies of all
information discovered or prepared related to any Environmental
Condition including, but not limited to, results of soil or
groundwater analysis, pumping test results, monitoring results, and
consultant reports or correspondence.
3. The Other Party shall have the right to attend all meetings or
significant discussions with any Government agency, consultant or
contractor related to any Environmental Condition. To the extent
reasonably possible, Remediator shall notify the Other Party of the
time and place of the meeting or significant discussion within a
reasonable time prior to any such meeting or significant discussion.
4. The Other Party agrees that it will not make any oral or written
communication to any Government agency concerning any Environmental
Condition without first obtaining the prior written approval of
Remediator or of the Independent Consultant pursuant to the
procedures set forth Section 6.7(f). The Other Party further agrees
that in any oral or written communication which the Other Party may
make to any Government agency or other third party, the Other Party
shall not take a position or make a statement which is adverse,
contradictory or critical of any position, statement or Agency
Submittal of Remediator, without the prior written approval of the
Remediator or the Independent Consultant pursuant to the procedures
set forth Section 6.7(f).
5. The Other Party shall have the right to enter the Environmental
Properties at all reasonable times, upon reasonable prior notice to
Remediator, during regular business hours, for the purpose of
observing activities related to the Environmental Condition.
6. Notwithstanding the rights granted above to the Other Party to
participate in, observe, review and comment upon the investigation
and remediation of the Environmental Condition, all final decisions
with respect to the scope and conduct of such investigation and
remediation shall be made by Remediator
<PAGE> 104
acting in good faith and in a commercially reasonable manner, and,
subject to Remediator's compliance with the Approved Remediation
Standard.
7. In the event that it is ultimately determined that any action taken
by the Remediator which was disputed by the other party was not
taken in a good faith and commercially reasonable manner, then the
Remediator shall bear, or reimburse or indemnify the other party
from and against, any and all costs, expenses, losses and damages
that result from , arise out of or are attributable to any such
action taken, excluding any costs and expenses, including legal fees
for filing and prosecuting the Environmental Dispute except as the
Independent Consultant may otherwise determine.
<PAGE> 105
SCHEDULE 6.7(c)
Triggering Events
(A) A letter indicating that the Industrial Site Recovery Act does
not apply to this transaction;
(B) A No Further Action letter approving Seller's negative
declaration;
(C) A letter approving Seller's Remedial Action Workplan as filed
with the New Jersey Department of Environmental Protection;
(D) Remediation Agreement to permit closing to occur prior to
compliance with the Industrial Site Recovery Act;
(E) A letter confirming that Seller qualifies for a de minimis
quantity exemption pursuant to N.J.S.A. 13:1K-9.7; or
(F) Any other approval from the New Jersey Department of
Environmental Protection allowed pursuant to the Industrial
Site Recovery Act.
<PAGE> 106
SCHEDULE 10.2(a)(v)
Legal Proceedings
1. Edward T. McGruder v. Queens Group-Kentucky, Inc.
2. Pamela J. Shepherd v. Queens Group-Indiana, Inc., Queens Group, Inc., Oliver
Trucking Corp. and Larry McQueary.
3. Rita Sue Haase, EEOC Charge No. 240981467
4. Gregory Mason, EEOC Charge No. 240981621
