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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): July 22, 1998
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ESSEF CORPORATION
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(Exact name of registrant as specified in its charter)
OHIO 0-15902 34-0777631
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(State or other (Commission File (I.R.S. Employer
jurisdiction of Number) Identification
incorporation) Number)
220 Park Drive, Chardon, Ohio 44024
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(Address of principal executive offices) (Zip Code)
(216) 286-2200
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(Registrant's telephone number, including area code)
N/A
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(Former name or former address, if changed since last report)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On July 22, 1998, Rainbow Acquisition Corp. ("RAC"), a wholly-owned
subsidiary of Pac-Fab, Inc., which is a wholly owned subsidiary of Essef
Corporation (the "Registrant"), completed its previously announced acquisition
of substantially all of the operating assets (the "Acquired Assets") of Rainbow
Molding, Inc., Rainbow Lifegard Products, Inc. and Kencar, Inc. (collectively,
"Sellers"). This purchase was consummated on the terms specified in a certain
Asset Purchase Agreement dated as of June 1, 1998 by and among RAC, the Sellers,
Price-Presby Companies, Inc., which is the parent company of the Sellers
("Price-Presby"), and The Price Family Trust UAD 11-6-97, which is the sole
stockholder of Price-Presby.
The Acquired Assets consist of equipment, inventory, receivables, real
property and intellectual property used in connection with the manufacture and
sale of swimming pool, spa and aquarium accessory products. The purchase price
was approximately $24.6 million in cash and the assumption of approximately $2.4
million of operating liabilities, which amount was negotiated between the
parties as the fair market value for the Acquired Assets. The acquisition was
financed pursuant to a Credit Agreement dated April 28, 1997, as amended, among
the Registrant, National City Bank, as Administrative Agent, and ABN Amro Bank
N.V., as Syndication Agent.
RAC intends to use the Acquired Assets in connection with the
manufacture and sale of swimming pool, spa and aquarium accessory products.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
No pro forma financial information or financial statements are required
to be filed as part of this report.
<TABLE>
<CAPTION>
EXHIBIT LIST
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Location of
Document in
Sequential
Exhibit Numbering
Number Description System
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<S> <C> <C>
2 Asset Purchase Agreement dated June 1, 1998 by and among RAC, the
Sellers and the Price Family Trust VAD 11-6-97
(the schedules to the Asset Purchase Agreement have been omitted from
this report; however a copy of any such schedule will be furnished
supplementally to the Commission upon request)
</TABLE>
SIGNATURE
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Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ESSEF Corporation
Registrant
Dated: August 5, 1998 By: /s/ Stuart D. Neidus
---------------------------------
Stuart D. Neidus
Executive Vice President and
Chief Financial Officer
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EXHIBIT 2
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement") is made as of
June 1, 1998, by and among RAINBOW ACQUISITION CORP., an Ohio corporation
("Buyer"), THE PRICE FAMILY TRUST UAD 11697, a California trust ("Trust"),
PRICE-PRESBY COMPANIES, INC., a California corporation ("Price"), RAINBOW
MOLDING, INC., a California corporation and a wholly-owned subsidiary of Price
("Molding"), RAINBOW LIFEGARD PRODUCTS, INC., a California corporation and a
wholly-owned subsidiary of Price ("Lifegard"), and KENCAR, INC., a California
corporation and a wholly-owned subsidiary of Lifegard ("Kencar"). Price,
Molding, Lifegard and Kencar are collectively the "Corporate Sellers" and each
of them is a "Corporate Seller." The Corporate Sellers and Trust are
collectively the "Sellers" and each of them is a "Seller."
WHEREAS, upon the terms and subject to the conditions of this
Agreement, Buyer desires to purchase and assume from Sellers, and Sellers desire
to sell and assign to Buyer, substantially all of the assets (other than capital
stock and the assets which comprise Lifegard's Grantville, Georgia facilities)
used or held for use in the conduct of the Corporate Sellers' respective
businesses of manufacturing, assembling and distributing swimming pool and
aquarium accessory products (collectively, the "Business"), and certain
liabilities related to the Business; and
WHEREAS, pursuant to an Equipment Purchase Agreement dated as of
even date herewith ("Equipment Purchase Agreement"), Buyer has agreed to
purchase from Lifegard, and Lifegard has agreed to sell to Buyer, substantially
all of the machinery and equipment used or held for use in the conduct of the
Business at Lifegard's Grantville, Georgia facilities.
NOW THEREFORE, in consideration of the representations,
warranties, covenants and agreements herein contained, the parties agree as
follows:
1. TRANSFERRED AND EXCLUDED ASSETS.
1.1 TRANSFERRED ASSETS. On the Closing Date (as defined in Section
11.1 hereof), Sellers shall sell, transfer, convey, assign and deliver to Buyer,
and Buyer shall purchase and accept from Sellers, all of Sellers' right, title,
and interest in and to the Transferred Assets. Except as provided in Section 1.2
hereof, the "Transferred Assets" shall include all of the following assets and
rights, wherever located and whether or not recorded on Sellers' books:
(a) FIXED ASSETS, MACHINERY AND EQUIPMENT. All fixed
assets, machinery and equipment (including office furniture and
equipment and computer equipment and computer software), fixtures,
leasehold improvements, tools, vehicles, parts and supplies used
or held for use in the conduct of the Business (except those
relating to Lifegard's Grantville, Georgia facilities), including
without limitation, the items identified on SCHEDULE 1.1(a)
attached hereto;
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(b) INVENTORY. All inventory of merchandise and goods used
or held for use in the conduct of the Business ("Inventory");
(c) CONTRACTS. All rights and interests of the Corporate
Sellers in and to (i) the executory contracts, agreements and
arrangements identified on SCHEDULE 1.1(c) attached hereto
("Scheduled Contracts") and (ii) any other contract, agreement or
arrangement relating to noncompetition, nondisclosure or
proprietary rights, whether or not listed on such schedule ("Other
Contracts") (the Scheduled Contracts and the Other Contracts are
collectively, the "Contracts"), to the extent such Contracts are
assignable or transferable;
(d) PERMITS. To the extent assignable, all rights and
interests of the Sellers under all permits, licenses and approvals
necessary for the conduct of the Business, including without
limitation, those items identified on SCHEDULE 4.13 attached
hereto;
(e) DOCUMENTS AND RECORDS. Copies of all documents and
records of the Sellers relating to the operation of the Business
and originals of all documents and records relating to the
Sellers' ownership, use, maintenance, or repair of any of the
Transferred Assets including, without limitation, sales and cost
records, inspection records, inventory records, employee and
payroll records, customer records and files, lists of suppliers
and related files, all financial, tax, sales tax exemption
certificates and other books and records that are reasonably
necessary for the operation of the Business by Buyer after the
Closing Date;
(f) INTELLECTUAL PROPERTY. All patents, patent
applications, invention records, processes, customer lists and
records, trade secrets, technology, know-how, computer software,
to the extent Sellers can assign or transfer such software,
(including without limitation, all computer data relating to
contracts (whether oral or written), agreements or commitments
with customers or suppliers, and the software used to store and
retrieve any such data) and other intellectual property of any
kind or description used by any of the Corporate Sellers in the
conduct of the Business, including without limitation, the names
"Price Presby Companies, Inc.", "Rainbow Molding, Inc.", "Rainbow
Lifegard, Inc." and "Kencar, Inc.", and all related trade names,
trademarks, service marks and names and copyrights relating to the
foregoing;
(g) RECEIVABLES. All of the Corporate Sellers' accounts
and notes receivable, except those from any Seller, any subsidiary
or affiliate of any Seller, or any current or former director,
officer or shareholder of any of the foregoing ("Related
Parties");
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(h) PREPAID EXPENSES AND DEPOSITS. All of the Corporate
Sellers' prepaid expenses and deposits;
(i) CALIFORNIA REAL PROPERTY. All of the Sellers' right,
title and interest in and to the land and buildings, and
improvements thereon and appurtenances thereto, used in the
conduct of the Business and located within the State of
California, as more fully described on SCHEDULE 1.1(i) attached
hereto (the "California Real Property"); and
(j) CASH, CASH EQUIVALENTS AND MARKETABLE SECURITIES. All
of the Corporate Sellers' cash-on-hand, deposits in bank accounts
and marketable securities, other than the capital stock described
in Section 1.2(c) below; and
(k) OTHER INCLUDED ASSETS. All other assets of the
Corporate Sellers, except those excluded by Section 1.2 below.
1.2 EXCLUDED ASSETS. Notwithstanding the foregoing, the following
assets of the Sellers (the "Excluded Assets") will be retained by the Sellers
and will not be included in the Transferred Assets:
(a) OTHER REAL PROPERTY. Except for the California Real
Property and the Leased Real Property (as hereinafter defined),
all rights and interests of any Seller in and to any real
property, including, without limitation, the real property used by
the Corporate Sellers in connection with their Grantville, Georgia
operations (the "Grantville Real Property");
(b) GRANTVILLE EQUIPMENT. All machinery and equipment used
or held for use in connection with the operation of the facilities
located on the Grantville Real Property, including without
limitation, the machinery and equipment which is the subject of
the Equipment Purchase Agreement;
(c) CAPITAL STOCK. All right, title and interest of any
Seller in and to the capital stock of any Corporate Seller or any
affiliate of any Corporate Seller;
(d) PREPAID AND DEFERRED FEDERAL AND STATE INCOME TAXES.
All of the Corporate Sellers' prepaid and deferred federal and
state income taxes;
(e) OTHER AGREEMENTS. All rights and interests of the
Corporate Sellers in and to any executory contract, agreement or
arrangement which is not included within the Contracts described
in Section 1.1(c) above;
(f) RECEIVABLES FROM RELATED PARTIES. All accounts and
notes receivable of the Sellers from Related Parties; and
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(g) OTHER EXCLUDED ASSETS. All of the items identified on
SCHEDULE 1.2(g) attached hereto.
2. ASSUMED AND EXCLUDED LIABILITIES.
2.1 ASSUMPTION OF LIABILITIES. Simultaneously with the transfer of
the Transferred Assets on the Closing Date in accordance with this Agreement,
Buyer shall assume (i) all liabilities and obligations of the Corporate Sellers
under the Scheduled Contracts, to the extent such liabilities and obligations
relate to the performance of the Scheduled Contracts after the Closing
("Contract Liabilities"); and (ii) all accounts and notes payable (except any
notes payable to any Related Party), operating expenses and warranty reserves,
to the extent such accounts and notes payable, operating expenses and warranty
reserves are accrued on the Closing Date Balance Sheet, ("Operating
Liabilities") (the Contract Liabilities and the Operating Liabilities are
together, the "Assumed Liabilities"). As of October 31, 1997, Assumed
Liabilities, as detailed on SCHEDULE 3.1(1), totaled $1,232,192. Such amount
will be updated in accordance with the provisions of Section 3.1 hereof.
2.2 EXCLUDED LIABILITIES. Except for the liabilities and
obligations expressly assumed by Buyer in Section 2.1, Buyer shall not assume or
be responsible for any liabilities or obligations of any Seller or any of their
respective predecessors, regardless of nature, whether accrued, absolute,
contingent, known or unknown ("Excluded Liabilities"). Without limiting the
generality of the foregoing, Buyer specifically does not assume the following
types of liabilities: (a) obligations or claims relating to the employment by
any Corporate Seller of any of the current or former employees of such Corporate
Seller; (b) liabilities relating to federal, state or local income or franchise
taxes; (c) obligations or notes payable to any Related Party; (d) liabilities or
obligations related to the cessation of operations at, and the closing of,
Lifegard's Grantville, Georgia facilities; (e) any environmental obligations or
liabilities and (f) any liabilities relating to any litigation pending against
any Seller as of the Closing.
3. CALCULATION AND PAYMENT OF PURCHASE PRICE.
3.1 PURCHASE PRICE; TERMS OF PAYMENT.
(a) The consideration ("Purchase Price") for the
Transferred Assets and the Covenants-Not-To-Compete set forth in
Section 12 hereof shall be an aggregate of the following:
(i) Eight Million Dollars ($8,000,000) for the
California Real Property; and
(ii) Seventeen Million Seven Hundred Fifty
Thousand Dollars ($17,750,000) for all of the other
Transferred Assets, assuming the value at the Closing Date
(less applicable reserves required under generally
accepted accounting principles ("GAAP")) of the items
described under Sections 1.1(a), (b), (g), (h), (j) and
(k) hereof (the "Operating Assets"), minus the value at
the Closing Date of the Operating Liabilities described in
Section 2.1 (Operating Assets minus Operating Liabilities
are hereinafter referred to as the "Net
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Operating Assets") is Ten Million Six Hundred Fifty
Thousand Four Hundred Seven Dollars ($10,650,407). Such
amount was calculated based on the Corporate Sellers'
October 31, 1997 consolidated balance sheet as detailed
on SCHEDULE 3.1(1) attached hereto. For purposes of
calculating the inventory amount in the Net Operating
Assets, inventory shall be valued using the same
valuation methodologies as were used in calculating the
October 31, 1997 inventory value. In addition, the
categories of inventory that were deemed obsolete by the
Corporate Sellers and not counted or valued in the
October 31, 1997 consolidated balance sheet will be
treated consistently in the calculation of Net Operating
Assets. For purposes of Closing, Net Operating Assets
shall be deemed to be those reflected on the Corporate
Sellers' most recently available consolidated balance
sheet, which shall be dated as of a date not more than
15 days prior to the Closing and shall be attached to
this Agreement as SCHEDULE 3.1(2) ("Estimated NOA"),
with a corresponding dollar for dollar increase or
decrease in the Purchase Price for the change in the
amount of Net Operating Assets from the $10,650,407 of
Net Operating Assets reflected on SCHEDULE 3.1(1). Any
post-closing adjustment in the Purchase Price shall be
calculated pursuant to Section 3.2 below.
(b) The Purchase Price shall be paid as follows:
(i) the assumption by Buyer on the Closing Date
of the Assumed Liabilities;
(ii) the payment by Buyer on the Closing Date, in
immediately available United States dollars by wire
transfer to a bank account designated by the Trust, of
Eight Million Dollars ($8,000,000);
(iii) the payment by Buyer on the Closing Date,
in immediately available United States dollars by wire
transfer to a bank account designated by the Corporate
Sellers, of Fifteen Million Seven Hundred Fifty Thousand
Dollars ($15,750,000), adjusted for any change in the
Estimated NOA;
(iv) the deposit by Buyer (as agent for the
Corporate Sellers) on the Closing Date into escrow with an
escrow agent mutually acceptable to Buyer and the Seller
Parties ("Escrow Agent") of Two Million Dollars
($2,000,000). The Escrow Deposit shall be held by the
Escrow Agent pursuant to the terms of an escrow agreement
to be entered into by and among the Escrow Agent, Buyer,
and the Seller Parties in substantially the form attached
hereto as EXHIBIT B ("Escrow Agreement").
3.2 PURCHASE PRICE ADJUSTMENT. Not later than 120 days following
the Closing, Buyer shall have its independent accountants, Deloitte & Touche
L.L.P. prepare a consolidated
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balance sheet setting forth the Net Operating Assets of the Corporate Sellers as
of the Closing Date ("Closing Date Balance Sheet"). The Sellers agree to
cooperate to the extent requested by Buyer in the preparation of the Closing
Date Balance Sheet. The Closing Date Balance Sheet shall be prepared in
accordance with GAAP as consistently applied by the Corporate Sellers in the
preparation of their consolidated annual reviewed financial statements, except
for inventories which shall be calculated using the methodologies described in
Section 3.1 hereof. In the event the parties, using their best efforts, are
unable to agree upon the Closing Date Balance Sheet, Buyer and the Corporate
Sellers shall submit a list of the disputed issues to a mutually acceptable
independent accounting firm (the "Accounting Firm") for resolution in accordance
with the principles set forth above. The decision of the Accounting Firm shall
be final and binding only as to the disputed issues submitted to the Accounting
Firm. The costs and expenses of the Accounting Firm shall be borne ratably by
the party or parties identified by the Accounting Firm as having been at fault.
The amounts shown on the Closing Date Balance Sheet shall be used for
calculating the Purchase Price adjustments, if any. The Closing Date Balance
Sheet shall set forth the Net Operating Assets of the Corporate Sellers and
shall be prepared and presented in the same format as SCHEDULE 3.1(2). To the
extent the Net Operating Assets on the Closing Date Balance Sheet exceed the
Estimated NOA as detailed on SCHEDULE 3.1(2) (the "Excess"), Buyer shall
promptly pay to the Corporate Sellers an amount equal to the full amount of such
Excess. To the extent the Net Operating Assets on the Closing Date Balance Sheet
are less than the Estimated NOA as detailed on SCHEDULE 3.1(2) (the
"Deficiency"), the Corporate Sellers shall promptly pay to Buyer an amount equal
to the full amount of such Deficiency. If the Deficiency exceeds Three Million
Dollars ($3,000,000), Buyer shall have the option of rescinding the purchase
transaction, which option must be exercised, if at all, within seven (7) days
after the final determination of the Closing Date Balance Sheet in accordance
with this Section 3.2.
3.3. ALLOCATION. The parties shall cooperate after the Closing to
reach agreement on a mutually acceptable purchase price allocation. Once such
allocation has been agreed upon, no party shall take a position on any income
tax return (including any report filed on Internal Revenue Service Form 8594),
before any governmental agency charged with the collection of any income tax or
in any judicial proceeding that is in any way inconsistent therewith.
4. REPRESENTATIONS AND WARRANTIES OF THE SELLERS. The Sellers
jointly and severally represent and warrant to Buyer that the following
statements are true, accurate and complete as of the date hereof and the Closing
Date:
4.1 ORGANIZATION; STANDING; POWER. Each of the Corporate Sellers
is a corporation duly organized, validly existing, and in good standing under
the laws of the State of California and has full corporate power to carry on the
Business as now conducted. The Trust is a valid trust under the laws of the
State of California, with full power to own its assets. The statements set forth
in the Recitals to this Agreement with respect to the ownership of the capital
stock of the Corporate Sellers are accurate and complete. Each Corporate Seller
is duly qualified to do business as a foreign corporation in all jurisdictions
where its failure to be so qualified would result in any liability to Buyer
after the Closing or have a material adverse effect upon the Business or the
Transferred Assets. California and Georgia are the only jurisdictions in which
any Corporate Seller has maintained an office or facility and/or had employees.
No Corporate Seller is restricted by any written agreement or understanding with
third parties or by any writs, judgments or orders of any
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judicial or administrative body from carrying on the Business anywhere in the
world. No Corporate Seller owns or has a right or obligation to acquire any
equity interest (or option therefor) of any corporation, partnership, limited
liability company, business trust or other business entity. No Corporate Seller
participates, or has any equity interest, in any joint venture or collective
production, sales or marketing arrangement or agreement.
4.2 AUTHORIZATION. The execution, delivery, and performance of
this Agreement has been duly authorized and approved by the board of directors
and stockholders of each Corporate Seller. Each Corporate Seller has full
corporate power and authority, and each Seller has full legal right, to execute
and deliver this Agreement and the other instruments and agreements for which
provision is made herein and to perform its obligations under this Agreement and
such other instruments and agreements. Jerry Lazarus is the sole trustee of the
Trust, with full power and authority to execute and deliver, on behalf of the
Trust, this Agreement and each other document which the Trust is required to
execute and deliver hereunder. This Agreement constitutes the valid and binding
obligation of each Seller, and, upon execution and delivery by a Seller, the
other instruments for which provision is made herein will constitute valid and
binding obligations of such Seller, in each case, enforceable against such
Seller in accordance with the terms thereof except as enforcement may be limited
by bankruptcy, insolvency, reorganization, fraudulent transfer or similar laws
affecting the rights of creditors generally or by the application of equitable
principles.
4.3 CONSENTS AND APPROVALS; NO VIOLATIONS. Neither the execution
and delivery by any Seller of this Agreement or any instrument for which
provision is made herein, nor the performance by any Seller of all of its
obligations under this Agreement or any instrument for which provision is made
herein, will (a) result in a violation of applicable statute, ordinance, rule,
or regulation, order, judgment, writ or decree of any court or governmental or
regulatory body applicable to it, or by which any of the Transferred Assets may
be bound; (b) conflict with any Corporate Seller's articles of incorporation or
by-laws (or similar charter documents); or (c) result in the breach of, or
constitute a default under, any agreement or instrument to which any Seller is a
party, or by which any Seller or any of the Transferred Assets is bound. Except
with respect to the matters described in Section 10.5 hereof regarding the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, no action, approval,
consent or authorization by any governmental agency, commission, board, bureau
or instrumentality is required of any Seller in order to consummate the
transactions contemplated by this Agreement.
4.4 FINANCIAL STATEMENTS. The consolidated balance sheets of the
Corporate Sellers as of January 31, 1998, 1997 and 1996, and the related
statements of income and retained earnings for each of the years then ended (in
each case, along with related footnotes and independent accountant's review
report for the periods then ended) have been provided by the Corporate Sellers
to Buyer and are attached hereto as SCHEDULE 4.4. All of the financial
statements required to be attached hereto as SCHEDULE 4.4 have been prepared in
accordance with the Corporate Sellers' historical accounting practices and in
accordance with GAAP (other than with respect to (i) inventory values which are
based on the cost of materials without regard to overhead and labor and include
intercompany profit on sales from Molding and (ii) the valuation of obsolete and
slow moving inventory) applied on a consistent basis and present fairly the
financial position of the Corporate Sellers as at the respective dates of such
statements, and the results of the operations for the periods shown on such
statements, and fairly set forth the information purported to be shown
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therein. The consolidated balance sheet required to be attached hereto as
Schedule 3.1(2) will be prepared in accordance with the Corporate Sellers'
historical accounting practices and in accordance with GAAP applied on a
consistent basis and present fairly the financial position of the Corporate
Sellers as at the date of such balance sheet and fairly set forth in the
information purported to be shown therein.
4.5 CONDUCT OF BUSINESS; NO DIVIDENDS OR DISTRIBUTIONS. Since
October 31, 1997, the Corporate Sellers have operated the Business in the usual
and ordinary manner, have not sold or otherwise disposed of any of the assets
reflected in the October 31, 1997 statement of assets (other than the sale of
inventory or collection of receivables in the ordinary course of the Business)
and have not declared or paid any dividends (except as disclosed in the October
31, 1997 balance sheet) or made any other distributions on their respective
capital stock or repurchased or agreed to repurchase any of such capital stock.
4.6 UNDISCLOSED LIABILITIES. The Corporate Sellers do not have any
liabilities, fixed or contingent, other than (i) liabilities fully shown or
reserved against in their October 31, 1997 balance sheet , and (ii) current
liabilities, not unusual in nature or amount, incurred in the ordinary course of
business by the Sellers since October 31, 1997.
4.7 NO ADVERSE CHANGE. Since October 31, 1997, there has not
occurred:
(a) Any material adverse change in the assets,
liabilities, or financial position and results, or operating
performance of the Business;
(b) Any damage or destruction, whether or not covered by
insurance, affecting the assets, properties, or operations of any
Seller or the Business or the California Real property or the
property covered by any real property lease described in SCHEDULE
4.22 ("Leased Real Property") including without limitation, any
consummated, pending or planned taking by eminent domain (or
voluntary conveyance in lieu thereof) of all or part of the
California Real Property or the Leased Real Property;
(c) Any labor dispute or employee action, affecting the
financial position or operations of any Corporate Seller or the
Business;
(d) Any material adverse change in the sales, backlog of
customer orders, customer relations, employee relations, sourcing
of Inventory, or supplier or distributor relations with respect to
any Corporate Seller or the Business, including without
limitation, the loss of any key employee (other than Ken Price),
customer or supplier; or
(e) Any other transaction, event, or condition of any
character relating to, and materially and adversely affecting, the
results of operations of any Corporate Seller or the Business or
the financial position or the prospects of any Corporate Seller or
the Business.
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4.8 TAX MATTERS. Except as specifically set forth on SCHEDULE 4.8
attached hereto:
All returns and reports for Taxes, as defined below, (i) for all
taxable years or periods that end on or before the Closing Date and (ii) with
respect to any taxable year or period beginning before and ending after the
Closing Date, for the portion of such taxable year or period ending on and
including the Closing Date ("Pre-Closing Periods") that would be required to be
filed by any Corporate Seller on or before the Closing Date as a result of the
existence, ownership, or operation of the Transferred Assets or the Business
(collectively, the "Returns" and individually a "Return") have been filed when
due in a timely fashion and, to the extent that such Returns relate to the
Transferred Assets or the Business are, or will be, accurate in all material
respects; provided, however, that for purposes of this Agreement, any U.S.
federal income tax returns filed by any Corporate Seller that include the income
or losses of the Business shall be included within the definition of "Returns"
solely to the extent that such Returns relate to the Transferred Assets or the
Business. All Taxes owed by any Corporate Seller for all Pre-Closing Periods
with respect to the Transferred Assets and or the Business have been, or will be
prior to the Closing Date, fully paid or accrued in a timely fashion to the
extent due and payable. No Corporate Seller has any liability, contingent or
otherwise, for such Pre-Closing Period Taxes not due and payable. No claim has
ever been made by any taxing authority in a jurisdiction where any Corporate
Seller does not file Returns that such Corporate Seller is subject to taxation
in such jurisdiction as a result of the existence, ownership, or operation of
the Transferred Assets or the Business. There are no agreements for the
extension or waiver of the time for assessment of any Taxes relating to the
Transferred Assets or the Business for any Pre-Closing Period and no Corporate
Seller has been requested to enter into any such agreement or waiver. All Taxes
relating to the Transferred Assets and the Business for any Pre-Closing Period
that any Corporate Seller is required by law to withhold or collect (including
without limitation (i) sales and use taxes and (ii) employment and income taxes
relating to payments to employees or others) have been duly withheld or
collected, and have been timely paid over to the proper authorities to the
extent due and payable. No Corporate Seller is now, nor has any Corporate Seller
ever been, a party to any Tax allocation, sharing, indemnification, or similar
agreement. Each Corporate Seller has properly completed and filed all sales tax
exemption certificates for sales where tax was not charged. For purposes of this
Agreement, the term "Taxes" shall mean all taxes, however denominated, including
any interest, penalties, or other additions to tax that may become payable in
respect thereof, imposed by any federal, state, local, or foreign government or
any agency or political subdivision of any such government.
4.9 TRANSFERRED ASSETS. As of the date hereof, except as disclosed
on SCHEDULE 4.9 or the Title Commitment (as defined in Section 7.8(a) below),
the Sellers have good and marketable title to the Transferred Assets free and
clear of all mortgages, security interests, title defects, pledges, liens,
charges, options and encumbrances of any kind or description. At the Closing,
except as disclosed on SCHEDULE 4.9 and except for the Permitted Exceptions (as
defined in Section 7.8(e) below), the Sellers will deliver to Buyer good and
marketable title to the Transferred Assets free and clear of all mortgages,
security interests, title defects, pledges, liens, charges, options and
encumbrances of any kind or description. The Corporate Sellers will do all
things necessary to comply with all bulk sales or transfer laws applicable to
the transactions contemplated by this Agreement and have made adequate provision
for the payment in full of all amounts owing to their respective creditors
(other than in respect of the Assumed Liabilities) when the same shall become
due and payable. The Transferred Assets constitute all of the assets (other than
the Excluded
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Assets) used or held for use by the Sellers in the conduct of the Business and
are in sufficiently good condition and repair to permit the operation of the
Business after the Closing Date in the same manner as it was operated prior to
the Closing Date. Except as disclosed on SCHEDULE 4.9, all of the Corporate
Sellers' rights and interests in and to the Contracts and the computer software
used in the Business will be assigned or transferred to Buyer on the Closing
Date as part of the Transferred Assets.
4.10 PATENTS, TRADE NAMES, ETC. All patents, patent applications,
invention disclosures, technology, intellectual property, trade names, service
marks or trademarks used by the Corporate Sellers are set forth on SCHEDULE 4.10
attached hereto. To the best knowledge of the Sellers, neither the operation of
the Business nor the products or services sold by any Corporate Seller infringe
upon the proprietary rights of others. No Seller has received any notice
alleging that it has infringed on any other party's intellectual property
rights. No Seller has any liability for, nor has any Seller given any
indemnification for, infringement of any other party's intellectual property
rights.
4.11 CONTRACTS AND COMMITMENTS. SCHEDULE 4.11 identifies all
material contracts, agreements, and commitments to which any Corporate Seller is
a party or by which any Corporate Seller is bound. Except for contracts,
agreements, and commitments identified on SCHEDULE 4.11, no Corporate Seller is
a party to or bound by any oral or written:
(a) Contract, agreement, or commitment for employment or
personal services or any severance agreement that is not
terminable, without liability or expense, by such Corporate Seller
on 30 days' or less notice;
(b) Dealer, distributor, sales agency, or brokerage
agreement;
(c) Contract, agreement, or commitment relating to the
lease or sale to or by others of the California Real Property or
the Leased Real Property;
(d) Contract, agreement, or commitment for capital
expenditures in excess of $10,000 for any one project or $25,000
in the aggregate;
(e) Contract, agreement, or commitment for the purchase or
sale of materials or supplies or the performance of services that
involves more than $50,000 or will not be fulfilled within 30 days
from the date of this Agreement;
(f) Contract not made in the ordinary course of business;
(g) Rebate arrangement or other similar agreement given to
any customer or received from any supplier;
(h) Consignment, ledger balance inventory, or similar
contract with either a supplier or a customer;
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(i) Any contract, agreement or commitment containing
provisions relating to noncompetition, nondisclosure or the
protection of proprietary rights; or
(j) Any other material contract.
Except as disclosed on SCHEDULE 4.11, each Corporate Seller has in all material
respects performed and is performing all obligations required to be performed by
it, and no Corporate Seller nor to the best of the Sellers' knowledge any other
party thereto, is in default under any contract, agreement, or commitment to
which any Corporate Seller is a party. No Corporate Seller has received any
notice of default under any such contract, agreement, or commitment, nor has any
event occurred which with notice or lapse of time or both would constitute a
default by such Corporate Seller thereunder. None of such contracts, agreements,
or commitments is subject to any impending cancellation or breach. No Corporate
Seller is bound by any commitments for the performance of services or delivery
of products in excess of its ability to provide such services or deliver such
products during the time available to satisfy such commitments; all outstanding
commitments for the performance of services or delivery of products were made on
a basis calculated to produce a profit under the circumstances prevailing when
such commitments were made. The net accounts receivable of the Corporate Sellers
at Closing will be fully collectible. To the extent such net accounts receivable
are not fully collectible, Sellers will indemnify Buyer.
4.12 INVENTORY. All of the Inventory was acquired, and has been
maintained, by the Sellers in the ordinary course of the Business. Except as
otherwise described on SCHEDULE 4.12, none of the Inventory in the possession of
any Corporate Seller is held on consignment, and none of the Inventory is
consigned to third parties. No Corporate Seller is under any liability or
obligation with respect to the return of Inventory in the possession of any
third parties.
4.13 PERMITS AND LICENSES; COMPLIANCE WITH LAWS. SCHEDULE 4.13
attached hereto identifies all of the permits, licenses, or other governmental
authorizations required for the operation of the Business as presently conducted
or for the ownership of the Transferred Assets. Neither the ownership of the
Transferred Assets by the Sellers nor the operation of the Business as presently
conducted violates in a material way any applicable order, law, ordinance, code,
or regulation. To the best knowledge of the Sellers, no investigation is pending
or threatened regarding the existence of any such violation.
4.14 NO PENDING OR THREATENED LITIGATION AND CLAIMS. Except as
disclosed on SCHEDULE 4.14 attached hereto: (a) no suit or proceeding is pending
against or by any Seller or against any of the Transferred Assets; (b) no claim
has been asserted or threatened against or by any Seller or against any of the
Transferred Assets; (c) to the best knowledge of the Sellers, there is no basis
for any claim to be asserted against any of the Sellers or affecting any of the
Transferred Assets; (d) no claim, action, cause of action, suit, proceeding,
inquiry, investigation or order by or before any governmental authority,
administrative body or arbitration panel has been instituted or prosecuted
against any Seller in the past ten years.
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4.15 ENVIRONMENTAL AND SAFETY MATTERS. The Sellers and the
Business are in compliance with all laws, whether federal, state or local,
generally relating to the protection of health, safety or the environment
("Environmental and Safety Laws"), and there are no conditions on the California
Real Property or the Leased Real Property that could give rise to any cleanup
obligations under any Environmental and Safety Laws. No Seller has received
notice of any violation or potential violation of Environmental and Safety Laws.
To the best knowledge of the Sellers, there is no liability or obligation under
Environmental and Safety Laws which relates to the ownership or operation of the
Transferred Assets or the Business. The Sellers have supplied Buyer with copies
of any assessments, reviews or studies in its possession or control describing
any environmental conditions on or about the California Real Property or the
Leased Real Property. Without in any way limiting the generality of the
foregoing, (i) all underground storage tanks, and the capacity and contents of
such tanks, located on the California Real Property or the Leased Real Property
are identified in SCHEDULE 4.15, (ii) there is no asbestos contained in or
forming in any part of any building, building component, structure or office
space on the California Real Property or the Leased Real Property, and (iii) no
polychlorinated biphenyls ("PCBs") or PCB-containing items are used or stored at
the California Real Property or the Leased Real Property.
4.16 CUSTOMERS, SUPPLIERS AND SALES REPRESENTATIVES. SCHEDULE 4.16
attached hereto contains a listing of all customers, suppliers and sales
representatives of the Business as of May 19, 1998. Except as described in
SCHEDULE 4.16, the Sellers are not aware of any existing or anticipated changes
in the policies or conditions, financial or otherwise, of such customers,
suppliers or sales representatives which will materially and adversely affect
the Business either as now conducted or subsequent to the Closing Date. None of
the customers or suppliers of the Business has canceled or otherwise terminated,
or made any written or oral threat to any Corporate Seller to cancel or
otherwise terminate for any reason, including the consummation of the
transactions contemplated hereby, its relationship with the Business. To the
best of the Sellers' knowledge, no customer or supplier listed in SCHEDULE 4.16
intends to cancel or otherwise terminate its relationship with the Business or
to decrease its provision of services or supplies to the Business or its usage
of the services or products of the Business.
4.17 INSURANCE. SCHEDULE 4.17 contains a list of all liability
insurance policies maintained by the Corporate Sellers in the last ten years
(including without limitation, comprehensive general liability, contractually
assumed liability, chlorinator liability and general bodily injury liability)
and indicates in each case, the insurer, the types and amounts of coverage, the
applicable deductible, the expiration date, and any additional loss payees or
additional insureds. The Corporate Sellers have previously delivered true and
correct copies of all such insurance policies to Buyer. SCHEDULE 4.17 also lists
all claims filed with respect to such insurance policies during the past two
years, including any open or unresolved claims.
4.18 EMPLOYEE BENEFITS. SCHEDULE 4.18 lists and identifies: (i)
each employee pension benefit plan, as defined in Section 3(2) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA") (a "Pension Plan");
(ii) each employee welfare benefit plan, as defined in Section 3(1) of ERISA (a
"Welfare Plan"); and (iii) each compensation and employment arrangement,
including, but not limited to, any fringe benefit, incentive compensation,
bonus, severance, deferred compensation, and supplemental executive compensation
plan, and employment agreement (a "Benefit Arrangement"), that is maintained by
any Corporate Seller. Each Welfare
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Plan that provides medical benefits has been administered in compliance in all
respects with the requirements of Section 601 through 608 of ERISA. No Corporate
Seller and no ERISA Affiliate (as defined below) of any Corporate Seller has, or
will have, any liability to or in connection with any multi-employer plan, as
defined in Section 3(37) of ERISA and no Pension Plan, Welfare Plan, or Benefit
Arrangement will result in any liability to Buyer or will have an adverse impact
upon the Transferred Assets or subject the Transferred Assets to any lien under
ERISA, the Internal Revenue Code ("Code"), or the laws of any state or country.
As used herein, the term "ERISA Affiliate" shall mean any subsidiary of any
Corporate Seller and any trade or business (whether or not incorporated) that is
part of the same controlled group, or under common control with, or part of an
affiliated service group that includes any Corporate Seller within the meaning
of Sections 414(b), (c), (m) or (o) of the Code.
4.19 LABOR MATTERS.
(a) Each Corporate Seller is in full compliance with all
laws, whether federal, state or local, respecting employment and
employment practices, terms and conditions of employment, wages
and hours, and nondiscrimination in employment, and is not engaged
in any unfair labor practice.
(b) No Corporate Seller is a party to, or subject to any
obligation, liability or commitment with respect to any written or
oral employment, compensation, consulting, severance pay or
similar agreement, express or implied, other than the agreements
listed on SCHEDULE 4.11 or SCHEDULE 4.18. SCHEDULE 4.19 attached
hereto sets forth a payroll list as of the date hereof, showing as
of such date, each employee of each Corporate Seller and his or
her social security number, annual salary and date of hire. Except
as set forth on SCHEDULE 4.19, no Corporate Seller has any
workers' compensation claims or liabilities and each Seller has
paid all workers' compensation and unemployment compensation
premiums due to date. To the best knowledge of the Sellers, all
employees of the Business intend to offer their services to Buyer
as employees following the Closing.
4.20 PRODUCTS; PRODUCT LIABILITY. Except as set forth on SCHEDULE
4.20, no Corporate Seller has sold, manufactured or possessed any products which
(a) contain asbestos, (b) are for on-board aircraft applications, (c) are for
nuclear applications, or (d) have been relabeled or repackaged with a label or
package specifying a different country of origin than originally specified.
Except as set forth on SCHEDULE 4.20, during the past fifteen years, no
Corporate Seller has experienced material product warranty issues or received
notice or information of any claim or allegation of death or personal injury,
property or economic damage, 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, assembled, sold or distributed by it,
or any service provided by it, except for routine warranty claims.
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<PAGE> 14
4.21 PROSPECTS. There are no facts or circumstances known to any
Seller that would have an adverse effect on the conduct of the Business as
heretofore conducted, or would adversely affect the future prospects for
profitable operation of the Business.
4.22 REAL PROPERTY. No Seller owns any real property or any
easement rights used in the operation of the Business, other than the California
Real Property and the Grantville Real Property. Except as disclosed on SCHEDULE
4.22, no Seller leases any real property in connection with the Business. The
Trust has a good and marketable title in fee simple to the California Real
Property, free and clear of all mortgages, security interests, title defects,
pledges, liens, charges, tenancies, restrictions and encumbrances, other than
taxes and assessments, both general and special, which are a lien but are not
yet due and payable and do not, individually or in the aggregate, materially
detract from the value of the California Real Property or materially impair the
use and operation thereof in carrying on the Business. All of the buildings,
structures, other improvements and fixtures on the California Real Property and
the Leased Real Property conform in all material respects to the applicable
national, state and local health, fire, safety, zoning and building laws and
ordinances and administrative regulations. To the best knowledge of the Sellers,
there are no pending or threatened proceedings in eminent domain involving the
California Real Property or the Leased Real Property or any portion of either of
them, or for a sale in lieu thereof, or any plans for a possible widening of the
streets abutting the California Real Property or Leased Real Property or the
imposition of any special taxes or assessments against the California Real
Property or Leased Real Property or any portion thereof.
4.23 FINDERS. No finder or broker has acted or is acting on behalf
of any Seller in connection with the transactions contemplated by this
Agreement.
4.24 MATERIAL INFORMATION. To the knowledge of the Sellers, no
representation or warranty given by the Sellers in this Agreement or in any list
or description referred to herein contains any untrue statement of material fact
or omits to state a material fact necessary to make the statements contained
herein or therein not misleading, and there is no fact known to any Seller that
materially and adversely affects the Business or the Transferred Assets which
has not been set forth in this Agreement or a list or description referred to
herein.
5. HSR MATTERS. Buyer and the Sellers agree to cooperate in
providing any and all information to the Department of Justice and Federal Trade
Commission with respect to the consummation of the transactions contemplated
hereby under the Hart-Scott-Rodino Antitrust Improvements Act of 1976.
6. REPRESENTATIONS AND WARRANTIES OF BUYER . Buyer represents and
warrants to each Seller that the following statements are true, accurate and
complete as of the date hereof and the Closing Date:
6.1 ORGANIZATION, EXISTENCE, AND STANDING OF BUYER. Buyer is a
corporation duly organized, validly existing, and in good standing under the
laws of the State of Ohio.
6.2 POWER OF BUYER. Buyer has full corporate power, authority, and
legal right to execute and deliver this Agreement and the other instruments and
agreements for which provision is
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made herein and to perform its obligations under this Agreement and such other
instruments and agreements. Upon execution and delivery by Buyer, this Agreement
will constitute a valid and binding obligation of Buyer enforceable against
Buyer in accordance with its terms, except as enforcement may be limited by
bankruptcy, insolvency, reorganization, fraudulent transfer or similar laws
affecting the rights of creditors generally or by the application of equitable
principles.
6.3 NO LEGAL VIOLATIONS. Neither the execution and delivery by
Buyer of this Agreement or any instrument for which provision is made herein nor
the performance by Buyer of its obligations under this Agreement or any
instrument for which provision is made herein will (a) result in a violation of
applicable statute, ordinance, rule, or regulation, order, judgment, writ or
decree of any court or governmental or regulatory body applicable to Buyer; (b)
conflict with Buyer's articles of incorporation or bylaws (or similar charter
documents); or (c) result in the breach of, or constitute a default under, any
agreement or instrument to which Buyer is a party, or by which it is bound.
Except with respect to the matters described in Section 9.12 hereof regarding
the Hart-Scott-Rodino Antitrust Improvements Act of 1976, no action, approval,
consent or authorization by any governmental agency, commission, board, bureau
or instrumentality is required of Buyer in order to consummate the transactions
contemplated by this Agreement.
6.4 FINDERS. No finder or broker is acting or has acted on behalf
of Buyer in connection with the transactions contemplated by this Agreement.
7. COVENANTS BY THE SELLERS.
7.1 CONDUCT PRIOR TO THE CLOSING. From the date hereof until the
Closing Date:
(a) Each Corporate Seller shall: (i) maintain the
Transferred Assets in as good repair, working order and condition
as at present, ordinary wear and tear excepted; (ii) maintain
Inventory at levels consistent with the requirements of the
Business; (iii) use its best efforts to keep available to Buyer,
the services of its employees and agents and preserve for Buyer
its relationships with suppliers, customers and others having
business relationships with it; (iv) inform Buyer, on a regular
basis, about all matters materially affecting the Business; (v)
maintain its books of account and records in the usual and
ordinary manner and in accordance with such Corporate Seller's
accounting practices consistently applied; (vi) comply with all
laws; (vii) maintain its present insurance in full force and
effect, with policy limits and scope of coverage not less than is
now provided by its present insurance; (viii) pay all accounts
payable and other obligations (including taxes) on a basis
consistent with the practices of the Business as of the date
hereof; (ix) take all necessary actions to vest fully any employee
of such Corporate Seller who becomes an employee of Buyer in his
or her benefits under any Pension Plan maintained by such
Corporate Seller as of the Closing; and (x) otherwise continue to
operate in the ordinary course of its business.
(b) No Corporate Seller shall, without the prior written
consent of Buyer: (i) change its corporate structure, (ii) amend
its charter or bylaws, (iii) amend, supplement or terminate any
contract, (iv) incur any liability in excess of $25,000, (v)
transfer or otherwise dispose of any of the Transferred Assets,
other than (A) the sale of Inventory in the ordinary course of
business and (B) the sale of other property that is not material
to the Business and does not have an aggregate value in excess of
$25,000, (vi) grant to its employees any increases in compensation
or benefits, other than in the ordinary course of business, or
(vii) transfer its employees to any affiliated operation.
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<PAGE> 16
(c) No Seller shall directly or indirectly engage in any
negotiations, discussions, or communications with, solicit or
entertain offers from, or provide any information to, any persons
or entities other than Buyer relating to the sale of all or any
portion of any Corporate Seller or all or any portion of the
Transferred Assets (other than as permitted by Section 7.1(b)(v)
hereof. In addition to specific performance, in the event of any
violation of this Section 7.1(c), Buyer shall be entitled to
recover from the Sellers (and the Sellers shall be jointly and
severally liable for): (i) all actual and consequential damages
suffered by Buyer as a result of such violation and (ii) a bust-up
fee ("Bust-Up Fee") equal to the greater of $3,000,000 or the full
amount of all excess consideration agreed to be paid to the
Sellers for all or any portion of the Transferred Assets sold in
violation of Section 7.1(c).
(d) Each Seller shall (i) on a confidential basis
consistent with the prior agreement of the parties, provide
Buyer's employees, agents, and authorized representatives with
access to the locations operated by such Seller and to such
information and materials regarding such Seller and/or the
Business as Buyer may request in connection with its due diligence
investigation or to verify the satisfaction of all of the
conditions set forth in Article 9 hereof, (ii) cooperate and
assist Buyer with its due diligence review to the extent
reasonably requested by Buyer and (iii) after the completion of
the first phase of Buyer's due diligence review (covering all
matters other than customer and other proprietary information),
arrange and accompany Buyer on confidential visits with such
vendors and customers of the Corporate Sellers as Buyer may
request, and provide Buyer with access to such of the employees of
the Corporate Sellers as Buyer may request.
(e) Each Seller shall use its best efforts to cause the
conditions set forth in Section 9 to be satisfied on or prior to
the Closing Date.
7.2 TRANSFER OF WARRANTIES. In the event that any of the
Transferred Assets is under any warranty from the manufacturer or the original
seller thereof and such warranty is transferable, the Corporate Sellers will
execute such instruments as may be required to transfer the warranty to Buyer.
In the event payment is required to transfer such warranties, such amount will
be paid by Buyer.
7.3 TAXES. The Sellers will pay all sales, use, business,
franchise taxes and transfer taxes, if any, applicable to the transactions
provided for by this Agreement, and fully comply with applicable regulations and
statutes related thereto that require the filing of any reports, notices or
other information. The Sellers agree to cooperate with Buyer in preparing and
filing any reports, notices or other information which may allow Buyer to
insulate itself from any sales, business, franchise or other tax liabilities to
be incurred by Buyer after Closing.
7.4 CHANGE OF NAME. Immediately after the final determination of
the Closing Date Balance Sheet, each Corporate Seller shall take and cause to be
taken all necessary action in order to change its current corporate name. Each
Corporate Seller shall be permitted to use its current corporate name solely for
corporate purposes following the Closing Date until the final determination of
the Closing Date Balance Sheet or until such Corporate Seller has changed its
corporate name, whichever is earlier. Except as otherwise permitted by this
Section 7.4, from and after the Closing Date, no Seller shall use or employ in
any manner, directly or indirectly, any name
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listed in Section 1.1(f) hereof or any derivation or variation of any such name,
unless this Agreement is rescinded pursuant to Section 3.2 hereof.
7.5 COOPERATION AND FURTHER ASSURANCES. After the Closing Date,
the Sellers will give, or cause to be given, to Buyer and its representatives,
such reasonable access to the personnel, properties, titles, contracts, books,
records, files, documents and affairs of the Sellers and copies thereof (at the
expense of Buyer) as is reasonably necessary to allow Buyer to obtain
information in connection with the preparation, and any audit, of Buyer's tax
returns and any tax related claims, demands, other audits, suits, actions or
proceedings by or against Buyer as the owner and/or operator of the Business.
Each Corporate Seller agrees to cooperate with Buyer after the Closing Date in
connection with the maintenance of favorable relations with all of such
Corporate Seller's customers and suppliers and the assertion of warranty claims,
if any, against the suppliers with respect to any items in the Inventory, and to
otherwise provide Buyer with such reasonable cooperation as is necessary to
allow Buyer to obtain the full benefit of the transactions contemplated by this
Agreement. In addition, the Sellers will, from time to time after the Closing,
upon the reasonable request of Buyer, execute, acknowledge, and deliver all such
further acts, deeds, assignments, transfers, conveyances, and assurances as may
be reasonably required to transfer to and to vest in Buyer all right, title, and
interest of the Sellers in and to the Transferred Assets and to protect the
right, title, and interest of Buyer in and to all of the Transferred Assets.
7.6 REMOVAL OF EXCLUDED ASSETS. Within thirty (30) days after the
Closing Date, the Seller Parties will, at their sole cost and expense, remove
all Excluded Assets from the California Real Property and the Leased Real
Property.
7.7 EMPLOYEES. Effective as of the end of the work day on the date
immediately preceding the Closing Date, each Corporate Seller shall terminate
all of its employees (other than employees who are employed at the Corporate
Seller's Grantville, Georgia facilities and will be utilized by Lifegard in the
performance of its obligations under the Manufacturing Agreement referred to in
Section 11.2 hereof) and shall pay to each such employee all amounts owing
through such date, including any severance or termination pay obligations
arising from the transactions contemplated hereby. No Seller shall take any
action which will cause Buyer to be or become a successor corporation for
purposes of Title IV of ERISA with respect to any Pension Plan, Welfare Plan or
Benefit Arrangement maintained by any Corporate Seller for its employees. The
Corporate Sellers shall at all times remain solely liable for all amounts owing
to their current and former employees in respect of periods of employment prior
to the Closing Date.
7.8 TITLE COMMITMENT AND SURVEY.
(a) As promptly as practicable but in all events within
thirty (30) days after the date of this Agreement, the Trust shall
cause a licensed title insurance company approved by Buyer ("Title
Company") to furnish to Buyer: (i) a current title commitment
covering the California Real Property, binding the Title Company
to issue its 1990 Form ALTA Owner's Policy of Title Insurance
(without a creditors' rights exception) in favor of Buyer in the
aggregate amount of Eight Million Dollars ($8,000,000), in form
approved for use in the State of California, showing title to be
held currently by the Trust, in a good, marketable and insurable
condition, together with legible copies of all documents
identified in such title insurance commitment as exceptions to
title certified as true and complete by the Title Company
(collectively,
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the Title Commitment"); and (ii) reports of searches of the
Uniform Commercial Code records of both Los Angeles County and
the State of California (collectively, the "UCC Reports") with
respect to the state of title to the California Real Property.
The Trust shall bear the full cost of the UCC Reports and the
portion of the cost of the Title Commitment which would be owing
for a CLTA Standard Coverage Policy. Buyer shall bear the
additional premium associated with extended coverage.
(b) As promptly as practicable but in all events within
thirty (30) days after the date of this Agreement, the Trust shall
provide Buyer with a current survey of the California Real
Property (certified to Buyer and the Title Company), prepared by a
licensed surveyor and conforming to current ALTA Minimum Detail
Requirements for Land Title Surveys ("Survey"). The Survey shall
show all known easements and rights granted by license thereon
which can be depicted on the Survey (and reflected on the Title
Policy), all improvements, access to and from a dedicated and
accepted public right-of-way, and all building or setback lines
established by ordinance or of record. In addition, the Survey
shall show any applicable special flood hazard areas as shown on
the Flood Hazard Boundary Map or in any Flood Insurance Rate Map
Zones. The cost of such Survey shall be shared equally by Buyer
and the Trust.
(c) Within ten (10) days after Buyer's receipt of the
Title Commitment, the UCC Reports and the Survey, Buyer shall
notify the Trust of any matters shown on the Survey or identified
in the Title Commitment or the UCC Reports that Buyer is unwilling
to accept (collectively, "Buyer's Objections"). If any of Buyer's
Objections consist of delinquent taxes, mortgages, deeds of trust,
security agreements, construction or mechanics' liens, tax liens
or other liens capable of being discharged by the payment of
money, then, to that extent, notwithstanding anything herein to
the contrary, the Trust shall be obligated to pay and discharge
(or bond against in a manner sufficient to cause the Title Company
to insure over such Buyer's Objections) any such Buyer's
Objections. The Trust shall not be obligated to cure any
non-monetary Buyer's Objections unless the Trust agrees to cure
such non-monetary Buyer's Objections as hereinafter provided.
(d) Within five (5) days after the Trust's receipt of
notice of Buyer's Objections, the Trust shall notify Buyer whether
the Trust agrees to cure the non-monetary Buyer's Objections. If
the Trust notifies Buyer in writing within such ten (10) day
period that the Trust agrees to cure such non-monetary Buyer's
Objections, the Trust shall correct such non-monetary Buyer's
Objections on or before the Closing Date to the reasonable
satisfaction of Buyer. If the Trust does not notify Buyer within
such ten (10) day period of the Trust's agreement to cure such
non-monetary Buyer's Objections, the Trust shall be deemed to have
elected not to cure such non-monetary Buyer's Objections, and
Buyer shall elect either (i) to waive such non-monetary Buyer's
Objections without any abatement in the Purchase Price or (ii) to
terminate this Agreement, in which case the parties shall be
released from all obligations hereunder except those which
expressly survive a termination of this Agreement.
(e) Sellers shall not, after the date of this Agreement,
permit or suffer to exist any liens, encumbrances, covenants,
conditions, restrictions, easements or other title matters or seek
any zoning changes or take any other action which may affect or
modify the status of title without Buyer's prior written consent.
All title matters revealed by the Title Commitment, the UCC
Reports and the Survey (other than those rendering title
defeasible and delinquent taxes, mortgages, deeds of trust,
security agreements and other liens and other charges that are to
be paid at Closing as provided
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above) which (i) are not included within the Buyer's Objections or
(ii) are waived by Buyer as provided in Section 7.8(d)(i) above
shall be deemed "Permitted Exceptions." Notwithstanding the
foregoing, the Permitted Exceptions shall not include any matters
which may arise subsequent to the effective date of any of the
Title Commitment, UCC Reports and Survey.
7.9 GRANT DEED. Not less than two (2) days prior to the Closing,
the Trust shall deliver to the Title Company one or more duly executed Grant
Deeds to the California Real Property, in form and substance reasonably
acceptable to Buyer and subject only to the Permitted Exceptions ("Grant
Deeds"). The Title Company shall act as filing agent for purposes of recording
the Grant Deeds on the Closing Date pursuant to Section 11.2(c) hereof and the
cost of recording the Grant Deeds shall be shared equally by Buyer and the
Trust. Real property taxes and utilities shall be prorated as of the Closing
Date based on the prior year's tax bill and the most recent utility bills,
respectively.
8. COVENANTS OF BUYER.
8.1 ACCESS FOR SELLERS. For seven years after the Closing Date,
Buyer shall make available to each Seller and the representatives of such Seller
for inspection and copying such records pertaining to the Business as may
reasonably be requested by such Seller in connection with its rights or
obligations as the former owner of any of the Transferred Assets. Buyer's
obligations under this Section 8.1 are subject to its right to conduct its
operations with minimal disturbance and to reimbursement by Sellers for the
reasonable costs incurred in carrying out its obligations under this Section
8.1.
8.2 CONDUCT PRIOR TO THE CLOSING. From the date hereof until the
Closing Date, Buyer will use its best efforts to cause the conditions set forth
in Section 10 to be satisfied on or prior to the Closing Date.
9. CONDITIONS TO OBLIGATIONS OF BUYER. The obligations of Buyer
under this Agreement are subject to the satisfaction on or prior to the Closing
Date of the following conditions, unless such conditions are waived by Buyer:
9.1 REPRESENTATIONS AND WARRANTIES TRUE ON CLOSING DATE. The
Sellers' representations and warranties made in this Agreement shall be true in
all material respects as of the Closing Date as though such representations and
warranties were made as of the Closing Date.
9.2 COMPLIANCE WITH AGREEMENT. The Sellers shall have performed
and complied in all material respects with all of its obligations under this
Agreement that are to be performed or complied with by them prior to or on the
Closing Date, and the Sellers shall not otherwise be in default in any material
respect under any of the provisions of this Agreement.
9.3 NO LITIGATION. No litigation, proceeding or investigation
shall be pending or threatened which, if sustained, would enjoin or prevent the
consummation of the transactions contemplated by this Agreement or materially
and adversely affect Buyer's right to carry on the Business as currently
conducted.
9.4 THIRD-PARTY CONSENTS AND APPROVALS. The Sellers shall have
obtained all third-party consents and approvals, if any, required to permit the
transactions contemplated by this
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<PAGE> 20
Agreement, including without limitation, a customary form of Landlord Consent
and Estoppel Certificate from each lessor of the Leased Real Property.
9.5 NO MATERIAL ADVERSE EFFECT. There shall not have occurred any
event or casualty that materially adversely affects the value of the Transferred
Assets to Buyer or Buyer's ability to operate the Business in substantially the
same manner as presently operated by the Corporate Sellers.
9.6 TITLE. The Sellers shall have delivered to Buyer the pro forma
policy of title insurance required by Section 7.8 hereof showing Buyer as the
owner of the California Real Property and the Title Company shall have provided
Buyer with confirmation that it is prepared to issue the Title Policy in the
form of such pro forma policy.
9.7 LIEN RELEASES. The Sellers shall have provided Buyer with
evidence in form and substance reasonably satisfactory to Buyer of the release
of the Transferred Assets from all financing statements, liens and statements of
assignments (including any leasehold interests of Related Parties and any liens
related to bank loan agreements), other than those which are solely related to
the Assumed Liabilities.
9.8 CERTIFICATE OF FULFILLMENT OF CONDITIONS. Each Corporate
Seller shall have delivered to Buyer (a) a certificate, dated as of the Closing
Date and signed by its President, stating that the conditions set forth in
Sections 9.1, 9.2, 9.4 and 9.5 have been fulfilled and (b) copies of resolutions
adopted by its board of directors and stockholder(s), certified by its Secretary
or one of its Assistant Secretaries, approving its execution and delivery of
this Agreement and the performance by it of its obligations under this
Agreement..
9.9 LEGAL OPINION. Buyer shall have received from counsel to the
Sellers an opinion in the form of EXHIBIT D attached hereto, addressed to Buyer
and dated as of the Closing Date.
9.10 COMPLETION OF DUE DILIGENCE. Buyer shall be satisfied, in its
sole reasonable discretion, with the results of its due diligence investigation.
9.11 EMPLOYMENT AGREEMENTS. Buyer shall have entered into
employment agreements with Raul Umali and Tanya Price on terms satisfactory to
Buyer.
9.12 HSR WAITING PERIOD. The applicable waiting periods under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 and the rules thereunder
shall have expired and there shall not be in effect any preliminary or permanent
injunction or other order of a court or governmental or regulatory agency of
competent jurisdiction directing that the transactions contemplated hereby not
be consummated.
9.13 ESCROW AGREEMENT. Buyer shall have received from the Escrow
Agent a counterpart of the Escrow Agreement, duly executed by the Escrow Agent,
in the form of EXHIBIT B attached hereto.
10. CONDITIONS TO OBLIGATIONS OF SELLERS. The obligations of the
Sellers under this Agreement are subject to the satisfaction on or prior to the
Closing Date of the following conditions, unless such conditions are waived by
Sellers:
10.1 REPRESENTATIONS AND WARRANTIES TRUE ON CLOSING DATE. Buyer's
representations and warranties made in this Agreement shall be true in all
material respects as of the Closing Date as though such representations and
warranties were made as of the Closing Date.
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<PAGE> 21
10.2 COMPLIANCE WITH AGREEMENT. Buyer shall have performed and
complied in all material respects with all of its obligations under this
Agreement that are to be performed or complied with by it prior to or on the
Closing Date, and Buyer shall not otherwise be in default in any material
respect under any of the provisions of this Agreement.
10.3 NO LITIGATION. No litigation, proceeding or investigation
shall be pending or threatened which, if sustained, would enjoin or prevent the
consummation of the transactions contemplated by this Agreement.
10.4 CERTIFICATE OF FULFILLMENT OF CONDITIONS. Buyer shall have
delivered to the Sellers a certificate, dated as of the Closing Date and signed
by its President, stating that the conditions set forth in Sections 10.1 and
10.2 have been fulfilled.
10.5 HSR WAITING PERIOD. The applicable waiting periods under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 and the rules thereunder
shall have expired and there shall not be in effect any preliminary or permanent
injunction or other order of a court or governmental or regulatory agency of
competent jurisdiction directing that the transactions contemplated hereby not
be consummated.
10.6 ESCROW AGREEMENT. The Sellers shall have received from the
Escrow Agent a counterpart of the Escrow Agreement, duly executed by the Escrow
Agent, in the form of EXHIBIT B attached hereto.
11. CLOSING; CLOSING DATE.
11.1 DATE AND TIME. The closing of purchase and sale contemplated
by this Agreement (the "Closing") will take place at Cleveland, Ohio as soon as
practicable after the satisfaction of the conditions set forth in Sections 9.12
and 10.5 hereof (relating to expiration of HSR waiting period) or such other
place and time as may be agreed to by Sellers and Buyer. The date of the Closing
is herein referred to as the "Closing Date." The Closing will be effective as of
2:00 p.m. E.S.T. on the Closing Date.
11.2 PROCEDURES. If all of the conditions specified in Article 9
have been fulfilled or are waived in writing by Buyer and all of the conditions
specified in Article 10 have been fulfilled or are waived in writing by Sellers,
on or by the Closing Date, then, on the Closing Date, the Closing shall be
effected by the following actions:
(a) SELLERS' DELIVERIES. The Sellers shall deliver to
Buyer:
(i) a duly executed general assignment and bill
of sale of the Transferred Assets in the form attached
hereto as EXHIBIT A;
(ii) duly executed separate assignments or other
appropriate instruments of transfer (including titles and
original registrations for all titled property) of any of
the Transferred Assets not appropriately transferred by
the general assignment and bill of sale referred to in
this Section 11.2;
(iii) a counterpart of the Escrow Agreement, duly
executed by each Seller, in the form attached hereto as
EXHIBIT B;
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<PAGE> 22
(iv) a counterpart of the manufacturing agreement
to be entered into between Buyer and Lifegard, duly
executed by Lifegard, in the form attached hereto as
EXHIBIT C ("Manufacturing Agreement"); and
(v) and any other documents and instruments
reasonably requested by Buyer to effectuate the intents
and purposes of this Agreement;
(b) BUYER DELIVERIES. Buyer shall deliver to the Sellers:
(i) a counterpart of the Escrow Agreement, duly
executed by Buyer, in the form attached hereto as EXHIBIT
B; and
(ii) a counterpart of the Manufacturing
Agreement, duly executed by Buyer, in the form attached
hereto as EXHIBIT C;
(c) WIRE TRANSFER AND ESCROW DEPOSIT. Buyer shall make the
wire transfer required by Section 3.1(b) hereof and the Escrow
Deposit required by 3.1(c) hereof; and
(d) RECORDING. The parties shall cause the Title Company
to file the Grant Deeds for recordation with the office of the
recorder of Los Angeles County, California.
11.3 POSSESSION. Possession of all of the Transferred Assets will
be delivered to Buyer on the Closing Date and the assignment to Buyer of the
Transferred Contracts, will be effective as between Sellers and Buyer on and as
of the Closing Date.
12. COVENANTS NOT-TO-COMPETE; CONFIDENTIAL INFORMATION.
(a) During the five (5) year period following the Closing
Date, no Seller will, directly or indirectly with or through
another individual or organization, whether as a stockholder
(other than as the holder of less than 1% of the outstanding
shares of a publicly held company), partner, member, director,
officer, employee, agent, or consultant, or in any other capacity:
(i) compete with Buyer or its affiliates either (A) in the design,
installation, provision, sale, or distribution of products or
services that are the same or similar to products or services now
or heretofore provided, sold, designed, manufactured, assembled or
distributed by any Seller, or (B) in serving previous or existing
customers of the Business; or (ii) solicit for employment,
consulting or other relationship involving the provision of
services, any employee of Buyer or any affiliate of Buyer.
Notwithstanding the foregoing, the Corporate Sellers shall be free
to dispose of any Excluded Assets in any manner and on any terms
deemed acceptable to Sellers. At all times following the Closing
Date, each Seller agrees to keep confidential and not to disclose
to others confidential, proprietary or secret information relating
to the Business, including, but not limited to, information
regarding customers or potential customers of the Business;
vendors and suppliers of the Business; pricing structure and
profit margins; employees and payroll policies of the Business;
computer systems of the Business; and other
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<PAGE> 23
proprietary, confidential or secret information relating to the
Business, products, activities or operating aspects (hereafter
"Confidential Information"). Each Seller shall use all reasonable
care to protect, and prevent unauthorized disclosure of, any
Confidential Information unless such information is now or becomes
generally known or available to the public without any violation
of this Agreement or is required to be disclosed by applicable law
or by court or governmental order;
(b) Each Seller acknowledges that a breach of its
obligations under this Section 12 would result in irreparable
injury to Buyer for which damages would not be an adequate remedy
and consents to the issuance of injunctive relief in the event of
a breach of its or his obligations under this Section 12, in
addition to any other remedies to which Buyer may be entitled by
law;
(c) Any provision of the foregoing covenant that is
prohibited or unenforceable, including without limitation, as to
time, geographic area, or scope of activity, shall be void to the
extent of that prohibition or unenforceability only; and the
remaining provisions, including the remainder of any provision
found only partially invalid or unenforceable, shall continue to
be in full force and effect and shall not be affected by such
invalidity or unenforceability; and
(d) Each Seller acknowledges that (i) its Covenant
Not-To-Compete is a material inducement to Buyer to enter into
this Agreement and consummate the transactions contemplated hereby
and (ii) it has benefited from the Agreement and will benefit from
the transactions contemplated hereby and (iii) such benefits are
adequate consideration to support its or his Covenant
Not-To-Compete.
13. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Notwithstanding
any investigation or inquiry made by or on behalf of Buyer or any Seller, each
party shall be entitled to rely on the representations, warranties and covenants
set forth herein or given in any other agreement executed and delivered on the
Closing Date. The representations, warranties, and covenants that are contained
in this Agreement or given on the Closing Date will survive any investigation
and inquiry made by or on behalf of Buyer or any Seller, as the case may be.
14. INDEMNIFICATION.
14.1 BY THE SELLERS. The Sellers agree, jointly and severally, to
hold harmless, indemnify and defend Buyer and each of Buyer's legal
representatives, successors and assigns (the "Indemnified Buyers") from and
against any loss, cost, liability, or expense (including without limitation,
costs and expenses of litigation and, to the extent permitted by law, reasonable
attorneys' fees)("Losses," each a "Loss") incurred by any of them by reason of
(a) the breach of any of the representations or warranties, or the breach of any
of the covenants or agreements of any Seller contained in this Agreement, the
Equipment Purchase Agreement, the Manufacturing Agreement or
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<PAGE> 24
any other instrument, agreement or document executed or delivered by any Seller
pursuant to this Agreement; (b) the breach by any Seller, on or before the
Closing Date, of any agreements with third parties; (c) the assertion against
any of the Indemnified Buyers of any Excluded Liability or any liability based
on or arising from any Excluded Liability, including but not limited to any
liability in excess of the amounts accrued on the Closing Date Balance Sheet
(including but not limited to claims relating to asbestos-containing products),
any liabilities or obligations arising under Federal, state or local
environmental laws and tax laws (including without limitation, any tax liability
arising in connection with the operation of the Business in the State of
Georgia), and any liabilities or obligations resulting from or relating to
employees or former employees or representatives of any Corporate Seller; (d)
any claim made or asserted against any of the Indemnified Buyers under any bulk
transfer or bulk sales law, or other principle of successor liability, by any
person having a claim against any Seller, whether such claim is liquidated or
unliquidated, contingent or disputed; or (e) any actual or threatened claim,
suit, action or proceeding arising out of or resulting from the conduct of the
Business prior to the Closing Date.
14.2 BY BUYER. Buyer agrees to hold harmless, indemnify and defend
each Seller and its heirs, legal representatives, successors and assigns against
any Loss incurred by such Seller by reason of (a) the breach of any of the
representations or warranties, or the breach of any of the respective covenants
or agreements of Buyer contained in this Agreement, the Equipment Purchase
Agreement, the Manufacturing Agreement or any other instrument, agreement or
document executed or delivered by Buyer pursuant to this Agreement, (b) the
failure of Buyer to pay, perform and discharge when due the Assumed Liabilities
or (c) any actual or threatened claim, suit, action or proceeding arising out of
or resulting from the conduct of the Business by Buyer after the Closing Date,
except, in any of the foregoing cases under (a), (b) or (c) above, to the extent
such Loss is attributable to facts giving rise to an obligation by the Sellers
to indemnify the Indemnified Buyers pursuant to Section 14.1 hereof.
14.3 DEFENSE OF THIRD-PARTY CLAIMS.
(a) Within fifteen (15) business days after receipt of
notice of commencement of any action or claim by any third-party
(including any governmental authority) before any court or other
governmental authority of competent jurisdiction (but in any event
at least 10 business days preceding the date on which an answer or
other pleading must be served in order to prevent a judgment by
default in favor of the third-party claimant), each party entitled
to indemnification hereunder (the "Indemnified Party") in respect
of such third-party claim shall give each party obligated to
provide such indemnification hereunder (the "Indemnifying Party")
written notice thereof, together with a copy of such claim,
process or other legal pleading. Upon receipt of such notice, the
Indemnifying Party shall promptly notify the Indemnified Party as
to whether it intends to exercise its right to undertake the
defense of such claim by representatives of its own choosing who
are reasonably acceptable to the Indemnified Party.
Notwithstanding the Indemnifying Party's undertaking of such
defense, the Indemnified Party shall have the right, at its own
expense, to engage its own counsel and participate in the defense
of such claim, and no settlement or compromise of
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<PAGE> 25
such claim shall be made without the prior written consent of the
Indemnified Party, which consent shall not be unreasonably
withheld. In connection with any defense undertaken by the
Indemnifying Party in accordance with this Section 14.3(a), the
Indemnified Party will cooperate with all reasonable requests of
the Indemnifying Party and will be reimbursed all its
out-of-pocket expenses, other than its attorneys' fees.
(b) If the Indemnifying Party by the fifteenth (15th)
business day after receipt of notice of commencement of any such
claim (or such earlier date which is five (5) days before the date
on which the answer or other responsive pleading must be filed in
order to prevent judgment by default in favor of the third-party
claimant), does not elect to undertake the defense of such claim,
the Indemnified Party (upon further written notice to the
Indemnifying Party) shall have the right to undertake the defense,
compromise or settlement of such claim on behalf of and for the
account and risk of the Indemnifying Party and will be reimbursed
by the Indemnifying Party for all of its out-of-pocket expenses,
including its reasonable attorneys' fees, as incurred; provided,
however, that if the Indemnifying Party has delivered written
notice to the Indemnified Party acknowledging its obligation to
indemnify the Indemnified Party for any and all Losses suffered by
the Indemnified Party by reason of such claim, then,
notwithstanding its failure to undertake the defense of such
claim, the Indemnifying Party shall be entitled to be kept
reasonably informed by the Indemnified Party of the progress of
such claim (including at least ten (10) days prior written notice
of any compromise or settlement) and shall have the right, upon
delivery of written notice to the Indemnified Party prior to the
expiration of such ten-day period, to reasonably reject any
compromise and settlement and assume the defense of such claim in
accordance with the provisions of subsection (a) of this Section
14.3, subject to its obligation to indemnify the Indemnified Party
for all out-of-pocket expenses, including reasonable attorneys'
fees, incurred by the Indemnified Party to such date in defense of
such claim.
14.4 PAYMENT OF INDEMNIFIED BUYERS' LOSSES FROM ESCROW.
(a) Buyer shall have the right at any time to deliver to
the Escrow Agent a written claim specifying an amount payable to
Buyer by the Sellers pursuant to Article 14 of this Agreement (an
"Indemnification Notice"). The Indemnification Notice must set
forth in reasonable detail the nature of the claim for Loss (as
defined in Section 14.1 of this Agreement) incurred, or which
Buyer reasonably and in good faith believe may be incurred, and
provide reasonable backup, if any, for such claim. Upon receipt of
any Indemnification Notice from Buyer, the Escrow Agent shall
promptly deliver a copy of such Indemnification Notice to the
Sellers in accordance with the Escrow Agreement. The Sellers may
deliver a notice in writing (a "Dispute Notice") to the Escrow
Agent within ten (10) business days after their receipt (as
provided in Section 3.1(a) of the Escrow Agreement) of the
Indemnification Notice, which Dispute Notice shall set forth
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<PAGE> 26
the Sellers' specific objections to each disputed claim, the
reasons therefor and the amount, if any, of the claimed Loss that
the Sellers acknowledge to be appropriate. Upon receipt of any
Dispute Notice from the Sellers, the Escrow Agent shall promptly
deliver a copy of such Dispute Notice to Buyer.
(b) If no Dispute Notice is timely delivered to the Escrow
Agent in accordance with this Section, the Escrow Agent shall
promptly distribute to Buyer funds from the Escrow Deposit equal
to the amount of the Loss stated in the Indemnification Notice.
(c) If a Dispute Notice is timely delivered to the Escrow
Agent in accordance with this Section, the parties shall cooperate
in good faith to resolve the dispute and the Escrow Agent shall
take no action on the claim until it has been resolved by mutual
agreement of the parties or a court of competent jurisdiction or
other authority mutually acceptable to Buyer and the Sellers. Any
portion of the Escrow Deposit determined to be owing to Buyer in
respect of such claim shall be promptly distributed by the Escrow
Agent to Buyer.
(d) Distributions to the Corporate Sellers by The Escrow
Agent shall be as provided in the Escrow Agreement.
15. TERMINATION. Anything herein or elsewhere to the contrary
notwithstanding, this Agreement may be terminated at any time prior to the
Closing:
(a) By Buyer, upon delivery of written notice to the
Sellers, if any of the conditions set forth in Section 9 hereof have
not been fulfilled by August 31, 1998 or have become incapable of
fulfillment on or before such date; or
(b) By Sellers, upon delivery of written notice to Buyer,
if any of the conditions set forth in Section 10 hereof have not been
fulfilled by August 31, 1998 or have become incapable of fulfillment on
or before such date.
In the event of any such termination, this Agreement will become void and of no
further force and effect and no party hereto will have any liability to any
other party hereunder, except with respect to liabilities and obligations that
expressly survive the termination of this Agreement and the Bust-Up Fee and
other remedies provided for in Section 7.1(c) hereof.
16. EXPENSES. Whether or not the transactions contemplated hereby
are consummated, each of the parties hereto will pay, except as otherwise
provided herein, its respective expenses, income and other taxes, and costs
(including without limitation, the fees, disbursements, and expenses of its
attorneys, accountants, and consultants) incurred by it in negotiating,
preparing, closing, and carrying out this Agreement and the transactions
contemplated by this Agreement.
17. NOTICES. Notices hereunder will be effective when they are
sent by facsimile, with confirmation of receipt; one day after they are
deposited with an overnight courier; and three
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<PAGE> 27
business days after they are deposited in the official mails, postage prepaid,
and, in each case, addressed:
(a) In the case of Buyer, to:
Stuart D. Neidus
Executive Vice President
Essef Corporation
220 Park Drive
Chardon, Ohio 44024
Fax No.: (216) 286-2206
and
Douglas Brittelle
President
Rainbow Acquisition Corp.
1620 Hawkins Avenue
Sanford, North Carolina 27330-9538
Fax No.: (919) 774-4841
With a copy to:
Mary Ann Jorgenson, Esq.
Squire, Sanders & Dempsey L.L.P.
4900 Key Tower, 127 Public Square
Cleveland, Ohio 44114-1304
Fax No.: (216) 479-8776
(b) In the case of the Sellers to:
Jerry Lazarus
27064 Esward Drive
Calabasas Hills, California 91301
Fax No.: (818) 707-9454
With a copy to:
Lynard C. Hinojosa, Esq.
Hinojosa and Khougaz
11111 Santa Monica Blvd., Ste. 1000
Los Angeles, California 90025
Fax No.: (310) 473-0906
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<PAGE> 28
All notices delivered hereunder shall be marked "PERSONAL AND CONFIDENTIAL." Any
party may change the address to which notices are to be addressed by giving the
other parties notice in the manner herein set forth.
18. PUBLIC ANNOUNCEMENTS AND RELEASES. No party to this Agreement
will make or cause to be made any public announcement or release concerning this
Agreement or the transactions contemplated hereby without consultation with the
other parties to this Agreement, except that Essef Corporation may make such
filings under the rules and regulations of the Securities and Exchange
Commission and NASDAQ or other applicable stock exchange rules as may, on advice
of counsel, be required and the parties may make such filings and disclosures as
may be necessary to comply with their obligations under Section 5 hereof.
19. GOVERNING LAW; VENUE. The validity, interpretation, and
performance of this Agreement will be determined in accordance with the laws of
the State of Ohio. Any action arising under this Agreement shall be venued in
Cleveland, Ohio.
20. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which will be deemed an original, but all of which
together shall constitute but one and the same instrument.
21. HEADINGS. The headings, subheadings, and captions in this
Agreement are for reference purposes only and are not intended to affect the
meaning or interpretation of this Agreement.
22. SCHEDULES AND ATTACHMENTS. The schedules to be attached and
other attachments hereto and the other documents delivered in connection
herewith are a part of this Agreement.
23. ENTIRE AGREEMENT. This Agreement contains the entire agreement
between the parties hereto with respect to its subject matter and supersedes all
negotiations, prior discussions, agreements, arrangements, and understandings,
written or oral, relating to the subject matter of this Agreement.
24. SUCCESSORS AND ASSIGNS. This Agreement will be binding upon
the Sellers and Buyer and their respective successors and assigns.
Notwithstanding the immediately preceding sentence, no Seller may assign its
rights and delegate its duties under this Agreement without the prior written
consent of Buyer. Buyer may assign its rights and delegate its duties, to any of
its subsidiaries or affiliated companies.
25. SEVERABILITY. If any provision of this Agreement is held to be
unenforceable, invalid, or void to any extent for any reason, that provision
shall remain in force and effect to the maximum extent allowable, if any, and
the enforceability and validity of the remaining provisions of this Agreement
shall not be affected thereby.
26. FEES OF PREVAILING PARTY. If there is a dispute under this
Agreement, the prevailing party shall be entitled to recover from the losing
party all reasonable attorneys' fees and costs incurred by it in the resolution
of such dispute.
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<PAGE> 29
IN WITNESS WHEREOF, each of the parties has caused this Agreement
to be duly executed and delivered as of the day and year first above written.
RAINBOW ACQUISITION CORP.
By: /s/ Douglas J. Brittelle
--------------------------------
Name: Douglas J. Brittelle
Title: Executive Vice President-Essef
PRICE PRESBY COMPANIES, INC.
By: /s/ Judith Price
--------------------------------
Name: Judith Price
Title: Sec.
RAINBOW MOLDING, INC.
By: /s/ Judith Price
--------------------------------
Name: Judith Price
Title: Sec.
RAINBOW LIFEGARD PRODUCTS, INC.
By: /s/ Judith Price
--------------------------------
Name: Judith Price
Title: Sec.
KENCAR, INC.
By: /s/ Judith Price
--------------------------------
Name: Judith Price
Title: Sec.
PRICE FAMILY TRUST UAD 11697
By: /s/ Jerry Lazarus
--------------------------------
Name: Jerry Lazarus
Title: Trustee
The undersigned hereby certify that they are the sole
beneficiaries of the Trust. In consideration of the payments provided for and
the covenants herein contained, the undersigned agree to be bound by the
provisions of this Agreement and to support the obligations of the Trust
hereunder.
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<PAGE> 30
JUDITH PRICE
/s/ Judith Price
--------------------------------
TANYA PRICE
/s/ Tanya Price
--------------------------------
SHAUNA PRICE FORSUM
/s/ Shauna Price Forsum
--------------------------------
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<PAGE> 31
LIST OF SCHEDULES TO
ASSET PURCHASE AGREEMENT
1.1(a) -- Fixed Assets, Machinery & Equipment
1.1(c) -- Contracts
1.1(i) -- California Real Property
1.2(g) -- Other Excluded Assets
3.1(1) -- Preliminary NOA
3.1(2) -- Estimated NOA
4.4 -- Financial Statements
4.8 -- Tax Matters
4.9 -- Liens
4.10 -- Intellectual Property
4.11 -- Contracts
4.12 -- Consignments
4.13 -- Permits and Licenses
4.14 -- Litigation
4.15 -- Environmental
4.16 -- Customers, Suppliers and Sales Reps.
4.17 -- Insurance
4.18 -- Employee Benefit Plans
4.19 -- Employees and Employee Claims
4.20 -- Products
4.22 -- Real Property
