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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 of 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) December 16, 1997
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Central Garden & Pet Company
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(Exact name of registrant as specified in its charter)
Delaware 0-20242 68-0275553
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(State or other jurisdiction (Commission File (IRS Employer
of incorporation) Number) Identification No.)
3697 Mt. Diablo Boulevard, Lafayette, California 94549
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (510) 283-4573
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Inapplicable
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(Former name or former address if changed since last report)
Exhibit Index located on page 3
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Item 2. Acquisition or Disposition of Assets
------------------------------------
On December 17, 1997, Central Garden & Pet Company issued a press
release announcing the consummation of the acquisition of the
outstanding stock of Kaytee Products Incorporated ("Kaytee"). Kaytee
is a manufacturer of bird and small animal food products based in
Chilton, Wisconsin.
Item 7. Financial Statement and Exhibits
--------------------------------
(a) Financial Statements - Not Applicable
(b) Pro Forma Financial Information - Not Applicable.
(c) See attached Exhibit Index.
2
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EXHIBIT INDEX
Number Exhibit
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1.1 Press Release dated December 17, 1997.
1.2 Stock Purchase Agreement dated as of
December 10, 1997.*
* The schedules and exhibits to this agreement, as set forth in the Table of
Contents located on page (i), have not been filed herewith, pursuant to Item
601(b)(2) of Regulation S-K. The Registrant agrees to furnish supplementally a
copy of any omitted schedule or exhibit to the Commission upon request.
3
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
CENTRAL GARDEN & PET COMPANY
By /s/ Robert B. Jones
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Robert B. Jones, Vice President
and Chief Financial Officer
Dated: December 19, 1997
4
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EXHIBIT 1.1
[LETTERHEAD OF CENTRAL GARDEN & PET]
FOR IMMEDIATE RELEASE
- ---------------------
Contact: Gregory Reams
Central Garden & Pet
510/283-4573
Paul Verbinnen/Debbie Miller
Sard Verbinnen & Co
212/687-8080
CENTRAL GARDEN & PET COMPLETES ACQUISITION OF KAYTEE PRODUCTS
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LAFAYETTE, CALIFORNIA, DECEMBER 17, 1997 - Central Garden & Pet Company
(NASDAQ:CENT) today announced that it has completed the previously announced
acquisition of Kaytee Products Incorporated, one of the nation's largest
manufacturers of bird and small animal food.
Based in Chilton, Wisconsin, Kaytee Products is the national leader in
specialty pet foods for birds and small animals as well as a major producer of
branded wild bird food. Brand names include Kaytee(R) and Amazon Smythe(R).
The business acquired by Central reported annual sales of approximately $103
million for the fiscal year ended June 30, 1997. Kaytee Products has
approximately 425 employees and manufacturing sites located in Chilton,
Wisconsin, Rialto, California, Cressona, Pennsylvania and Abilene, Kansas.
Kaytee Products' distribution business in Southern California, United Pacific
Pet, principally an Iams dog food distribution business, has been spun-off and
retained by the former stockholders of Kaytee Products.
Central Garden & Pet Company is the leading national distributor of lawn
and garden and pet supply products. Central offers customers a wide array of
value-added services designed to increase the sales and profitability of both
manufacturers and retailers, including inventory management, advertising and
promotional programs, in-store design and display assistance and sales program
development. Central also offers lines of proprietary branded products which
include Zodiac(R) and Four Paws(R) pet products, Island(R) aquariums,
Matthews (R) redwood products and Grant's(R) ant control products.
###
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EXHIBIT 1.2
STOCK PURCHASE AGREEMENT
dated as of December 10, 1997
among
THE SHAREHOLDERS OF KAYTEE PRODUCTS INCORPORATED
and
CENTRAL GARDEN & PET COMPANY
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TABLE OF CONTENTS
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Page
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ARTICLE I - Purchase and Sale of Stock................................................ 1
1.1. Purchase of Stock........................................................... 1
1.2. Purchase Price.............................................................. 1
1.3. Payment of Estimated Purchase Price......................................... 2
1.4. Determination of the Purchase Price......................................... 3
1.5. Payment of the Purchase Price............................................... 4
1.6. Definitions................................................................. 4
1.7. Payment of SARs............................................................. 5
ARTICLE II - Conditions Precedent to Closing.......................................... 5
2.1. Conditions Precedent to the Buyer's Obligation.............................. 5
2.2. Conditions Precedent to the Sellers' Obligation............................. 7
ARTICLE III - Closing................................................................. 9
3.1. Time and Place of Closing................................................... 9
3.2. Deliveries of the Buyer..................................................... 9
3.3. Deliveries of the Sellers................................................... 10
ARTICLE IV - Warranties and Representations of the Sellers............................ 11
4.1. Several Warranties and Representations...................................... 11
4.1.1. Title to Shares....................................................... 11
4.1.2. Authority of the Sellers.............................................. 11
4.2. Joint and Several Warranties and Representations............................ 12
4.2.1. Organization and Standing of the Company.............................. 12
4.2.2. Capitalization........................................................ 12
4.2.3. No Violation of Law by the Company.................................... 13
4.2.4. Absence of Litigation and Defaults.................................... 13
4.2.5. Subsidiaries, Investments............................................. 13
4.2.6. Patents, Trademarks, and Other Intellectual Property.................. 13
4.2.7. Financial Statements and Undisclosed Liabilities...................... 14
4.2.8. Conduct Out of Ordinary Course........................................ 14
4.2.9. Taxes................................................................. 15
4.2.10. Contracts and Other Agreements....................................... 16
4.2.11. Compliance with Laws................................................. 16
4.2.12. Employee Terminations................................................ 16
4.2.13. Employee Benefit Plans............................................... 16
4.2.14. Customers............................................................ 18
4.2.15. Real Estate.......................................................... 18
4.2.16. Title to Other Assets................................................ 19
4.2.17. Environmental Matters................................................ 19
</TABLE>
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4.2.18. Other Activities of the Sellers...................................... 21
4.2.19. Related Party Transactions........................................... 21
4.2.20. Brokers; Agents...................................................... 21
4.2.21. Inventories.......................................................... 21
4.2.22. Accounts Receivable.................................................. 21
4.2.23. Disclosure........................................................... 21
4.3. Definition of "Material Adverse Effect"..................................... 21
4.4. Definition of "Knowledge"................................................... 22
4.5. No Warranties Regarding Distribution Business............................... 22
ARTICLE V - Warranties and Representations of the Buyer............................... 22
5.1. Authority................................................................... 22
5.2. Securities Matters.......................................................... 23
5.3. Brokers; Agents............................................................. 23
ARTICLE VI - Covenants................................................................ 23
6.1. Covenants of the Sellers.................................................... 23
6.1.1. Access................................................................ 23
6.1.2. Insurance............................................................. 24
6.1.3. Ordinary Course....................................................... 24
6.2. Mutual Covenants............................................................ 25
6.2.1. Cooperation........................................................... 25
6.2.2. Records............................................................... 25
6.2.3. Publicity............................................................. 25
6.2.4. Execution of Additional Documents..................................... 26
6.2.5. Reasonable Efforts.................................................... 26
6.2.6. Section 338(h)(10) Election........................................... 26
6.3. Covenants of the Buyer...................................................... 27
6.3.1. Benefits.............................................................. 27
6.3.2. Purchase of Related Real Estate and Funding of SAR Payment Amount..... 27
6.3.3. Kaytee Avian Foundation and Ed Center................................. 27
6.3.4. Life Insurance........................................................ 28
6.3.5. William Engler, Sr. Agreement......................................... 28
6.3.6. Tax Account........................................................... 28
6.3.7. Liens on Assets of Distribution Business.............................. 28
ARTICLE VII - Disclosure Schedule..................................................... 29
ARTICLE VIII - Indemnification........................................................ 29
8.1. Indemnification of the Buyer................................................ 29
8.2. Indemnification of the Sellers.............................................. 30
8.3. Procedure Relative to Indemnification....................................... 30
8.4. Effect of Taxes and Insurance............................................... 31
</TABLE>
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8.5. Limits on Indemnification Claims............................................ 32
8.5.1. Basket and De Minimus Claims.......................................... 32
8.5.2. Maximum Amount of Indemnification..................................... 32
8.5.3. Survival of Warranties and Representations of the Sellers............. 32
8.6. Sole Remedy; Termination.................................................... 32
8.7. No Indemnification for Known Breaches of Representations and Warranties..... 33
8.8. Adjustment to Purchase Price................................................ 33
ARTICLE IX - Sellers' Agent........................................................... 33
9.1. Appointment................................................................. 33
9.2. Authority................................................................... 33
9.3. Disputes.................................................................... 34
ARTICLE X - Termination............................................................... 34
ARTICLE XI - Non-Disclosure Covenant.................................................. 35
11.1. Non-Disclosure of Confidential Information................................. 35
11.2. Enforcement................................................................ 36
ARTICLE XII - Miscellaneous........................................................... 36
12.1. Expenses................................................................... 36
12.2. Notices.................................................................... 36
12.3. Right to Specific Performance.............................................. 37
12.4. Entire Agreement........................................................... 37
12.5. Assignment................................................................. 37
12.6. Binding Effect............................................................. 37
12.7. Paragraph Headings......................................................... 38
12.8. Severability............................................................... 38
12.9. Applicable Law............................................................. 38
12.10. Counterparts.............................................................. 38
12.11. Termination of Stockholders Agreement..................................... 38
</TABLE>
List of Schedules and Exhibits
------------------------------
Schedule 1.1 Stock Ownership; Payment of Purchase Price; Wire Transfer
Instructions*
Schedule 1.2 Earn-Out Calculation and Payment*
Schedule 2.1(f) Related Real Estate; Encumbrances Thereon*
Schedule 6.2.6 Asset Values*
Exhibit A Form of Noncompetition Agreements*
Exhibit B Form of Escrow Agreement*
Exhibit C Form of Business Transfer and Assumption Agreement*
Disclosure Schedule*
* The schedules and exhibits to this agreement have not been filed herewith,
pursuant to Item 601(b)(2) of Regulation S-K. The Registrant agrees to furnish
supplementally a copy of any omitted schedule or exhibit to the Commission upon
request.
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STOCK PURCHASE AGREEMENT
------------------------
THIS AGREEMENT is effective for accounting and change of control purposes
as of the 1st day of December, 1997, by and among the shareholders of KAYTEE
PRODUCTS INCORPORATED, a Wisconsin corporation (the "Company"), which
shareholders are listed on the signature pages attached hereto (each such
shareholder referred to herein individually as a "Seller" and all of such
shareholders referred to herein collectively as the "Sellers") and CENTRAL
GARDEN & PET COMPANY, a Delaware corporation (the "Buyer").
B A C K G R O U N D:
The Sellers collectively own all of the issued and outstanding shares of
Class A Common Stock no par value ("Class A Common Stock") and Class B Common
Stock no par value ("Class B Common Stock") (collectively, the "Common Stock")
of the Company. The Sellers desire to sell to the Buyer and the Buyer desires
to purchase from the Sellers all of the issued and outstanding shares of Common
Stock, upon the terms and conditions set forth herein.
NOW, THEREFORE, the Buyer and the Sellers, in consideration of the mutual
promises hereinafter set forth, do hereby promise and agree as follows:
ARTICLE I
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Purchase and Sale of Stock
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1.1. Purchase of Stock. Subject to the terms and conditions set forth in
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this Agreement, the Sellers shall sell to the Buyer and the Buyer shall purchase
from the Sellers at the Closing (as defined in Paragraph 3.1, below) all of the
issued and outstanding shares of Common Stock, consisting of 2,000 shares of
Class A Common Stock and 18,000 shares of Class B Common Stock (collectively,
the "Subject Shares"). The number and percentage of the Subject Shares to be
transferred by each Seller shall be as set forth opposite such Seller's name on
Schedule 1.1 attached hereto.
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1.2. Purchase Price. The aggregate purchase price for the Subject Shares
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(the "Purchase Price") shall be Sixty-Seven Million Dollars ($67,000,000) (the
"Base Amount"), subject to adjustment as hereinafter provided, plus a contingent
earnout payment determined and payable as provided in Schedule 1.2 attached
hereto (the "Earnout Payment"). The Base Amount shall be adjusted as follows:
(a) The Base Amount shall be reduced by the amount of the Real Estate
Price (as defined in Paragraph 1.6, below);
(b) The Base Amount shall be reduced by the SAR Payment Amount (as
defined in Paragraph 1.6, below);
<PAGE>
(c) The Base Amount shall be increased by the amount, if any, by
which the Closing Date Shareholders' Equity (as defined in Paragraph 1.6,
below) exceeds Twenty-Two Million One Hundred Thirty-Eight Thousand Dollars
($22,138,000) (the "Target Equity Amount"); and
(d) The Base Amount shall be decreased by the amount, if any, by
which the Target Equity Amount exceeds the Closing Date Shareholders'
Equity.
1.3. Payment of Estimated Purchase Price. At the Closing, the Buyer shall
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deliver to: (a) the Sellers by certified check or by wire transfer as provided
in Paragraph 1.5,(b), below, an aggregate amount equal to ninety percent (90%)
of the Estimated Purchase Price (as defined below), which amount shall be
allocated among and paid to the Sellers in proportion to the number of Subject
Shares held by each as set forth on Schedule 1.1 attached hereto and (b) Godfrey
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& Kahn, S.C., as escrow agent to be held in escrow pursuant to the terms of the
Escrow Agreement (or defined in Paragraph 3.2(g), below) pending a determination
of the final Purchase Price in accordance with the Paragraphs 1.4 through 1.6,
below, an aggregate amount (the "Escrow Amount") equal to ten percent (10%) of
the Estimated Purchase Price. For purposes hereof, the "Estimated Purchase
Price" shall be an amount equal to (i) the Base Amount, minus (ii) the Real
Estate Purchase Price and minus (iii) the Estimated SAR Payment Amount (as
defined below), and adjusted by (iv) the difference between the Target Equity
Amount and an estimate of the Closing Date Shareholders' Equity (the "Estimated
Closing Date Equity"). The Estimated Closing Date Equity shall be based on an
estimate of the Final Closing Date Balance Sheet (as defined in Paragraph
1.4(d), below) jointly prepared by the parties using the results of the Physical
Inventory (as defined below) and calculated using the same principles used to
calculate the Closing Date Shareholders' Equity under Paragraphs 1.4 and 1.6,
below, and using an estimate of the SAR Payment Amount (the "Estimated SAR
Payment Amount") determined on the basis of Base Amount using the Estimated
Closing Date Equity. The Sellers shall initially calculate the Estimated
Closing Date Equity and deliver such calculation (with appropriate supporting
detail) to the Buyer at least five business days prior to the Closing. If for
any reason the parties are unable to agree upon the Estimated Closing Date
Equity the Sellers' calculation shall be used for the Closing. Upon calculation
of the Estimated Closing Date Equity, the parties shall calculate the
difference, if any, between the Estimated Closing Date Equity and the Target
Equity Amount and if the Estimated Closing Date Equity exceeds the Target Equity
Amount, the Estimated Purchase Price shall be increased by the amount of such
difference and if the Target Equity Amount exceeds the Estimated Closing Date
Equity the Estimated Purchase Price shall be decreased by the amount of such
difference. On a mutually agreeable date preceding the Closing Date, the Seller
shall cause the Company to conduct in the presence of representatives of the
Buyer and the Buyer's independent accountants, a physical inventory of the
Company's inventory (such physical inventory shall be referred to herein as the
"Physical Inventory"). The results of the Physical Inventory shall be used by
the parties for the purposes of calculating the Estimated Closing Date Equity,
the Closing Date Shareholders' Equity and the Final Closing Date Balance Sheet.
The Closing Date Shareholders' Equity shall include a charge for any transfer
taxes, recording fees or other title charges which the Company pays with respect
to the transfer of the Related Real Estate. The Earnout Payment, if any, shall
be paid in accordance with the provisions of Schedule 1.2 attached hereto.
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1.4. Determination of the Purchase Price.
-----------------------------------
(a) The Buyer and the Sellers acknowledge and agree that the exact
amount of the Purchase Price will not be known as of the Closing Date (as
defined in Paragraph 3.1, below) and the Estimated Purchase Price must be
adjusted subsequent to the Closing Date to reflect the parties' final
calculation of the Purchase Price. Accordingly, as soon as practicable
following the Closing Date, but in no event later than 60 days following
the Closing Date, the Sellers shall prepare and deliver to the Buyer a
balance sheet of the Company prepared as of the Closing Date, adjusted to
exclude any assets or liabilities of the Distribution Business (as defined
in Paragraph 2.2(g), below) (the "Sellers' Closing Date Balance Sheet")
together with the Sellers' calculation of the Closing Date Shareholders'
Equity. Such calculation shall be made in accordance with generally
accepted accounting principles consistently applied ("GAAP"), and the
provisions of Paragraph 1.6, below, adjusted to exclude any assets or
liabilities of the Distribution Business and using the results of the
Physical Inventory.
(b) Within 30 days after its receipt of the Sellers' Closing Date
Balance Sheet, the Buyer shall notify the Sellers of any disputes and the
amount of and basis for such disagreements. If the Sellers and the Buyer
are unable to resolve any disputes within 15 days after Sellers' receipt of
such notice, the parties may request their independent public accountants
to resolve the disputes. In the event such accounting firms are unable to
resolve the disputes within 30 days after the parties refer the disputes to
them or if either party requests, the disputes shall be referred to the
Milwaukee, Wisconsin office of Ernst & Young LLP (the "Independent Firm")
or such other independent accounting firm as the Independent Firm appoints
to resolve such disputes. In connection therewith, the parties shall
execute engagement letters and other documents reasonably required by the
Independent Firm or such other accounting firm.
(c) Each of the Buyer and the Sellers shall be permitted to submit
such data and information to the Independent Firm as such party deems
appropriate, including without limitation, a presentation of the facts,
authorities and principles supporting such party's position with respect to
the dispute. All expenses and fees of the Independent Firm or such other
independent accounting firm as the Independent Firm shall appoint shall be
shared equally by the Buyer on the one hand and the Sellers on the other.
(d) For purposes hereof, the balance sheet of the Company dated as of
the Closing Date, adjusted to exclude any assets or liabilities related to
the Distribution Business, as finally determined by the parties or
determined by the Independent Firm or such other independent firm as the
Independent Firm may appoint shall be referred to as the "Final Closing
Date Balance Sheet" and the date such amount is finally determined shall be
referred to as the "Final Determination Date."
1.5. Payment of the Purchase Price.
-----------------------------
(a) After the Final Closing Date Balance Sheet is determined, the
parties shall calculate the difference, if any, (the "Variance Amount")
between the Target Equity
3
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Amount and the Closing Date Shareholders' Equity and shall calculate the
final Purchase Price under Paragraph 1.2, above, based on the amount of
such difference. If the final Purchase Price as so calculated exceeds the
Estimated Purchase Price, the Buyer shall be obligated to pay to the
Sellers the Variance Amount and all of the Escrow Amount shall be disbursed
to the Sellers. If the Estimated Purchase Price exceeds the final Purchase
Price as so calculated, the Variance Amount shall be paid to the Buyer from
the Escrow Amount and the balance of the Escrow Amount, if any, shall be
paid to the Sellers. If the Variance Amount exceeds the Escrow Amount, all
of the Escrow Amount shall be paid to the Buyer and the Sellers shall be
obligated to pay to the Buyer the amount of such difference. Any payments
made under this Paragraph 1.5(a), including any payments of the Escrow
Amount, shall be made within ten days after the Final Determination Date
and shall include interest from the Closing Date to the date of payment at
a rate equal to the rate earned on 90-day United States Treasury Bills as
of the Closing Date.
(b) Any payments made to the Sellers pursuant to this Article I shall
be made to the Sellers in proportion to their ownership interests set forth
on Schedule 1.1 attached hereto by certified check or wire transfer of
------------
immediately available funds to the bank account designated thereon or to
such other bank account as any Seller may notify the Buyer of on or before
the Closing, and any payments made to the Buyer shall be made pro rata by
such Sellers in proportion to their ownership interests set forth on
Schedule 1.1 attached hereto by wire transfer of immediately available
------------
funds to a bank account designated by the Buyer. Any payments to be made
to the Escrow Agent shall be made by wire transfer of immediately available
funds to such bank account as the Escrow Agent may designate by notice
given to the Buyer at the Closing.
1.6. Definitions. For purposes hereof, the following terms shall have the
-----------
meanings set forth below:
(a) The "Closing Date Shareholders' Equity" shall mean an amount
equal to (i) the book value of all assets reflected on the Final Closing
Date Balance Sheet less (ii) the book value of all liabilities reflected on
the Final Closing Date Balance Sheet; provided, however, that such amount
-------- -------
shall exclude (i) the SAR Payment Amount or any debt incurred by the
Company to fund the SAR Payment Amount, (ii) any assets or liabilities of
the Distribution Business and (iii) the Related Real Estate and any
liabilities incurred or assets used to purchase the Related Real Estate.
(b) The "SAR Payment Amount" shall mean the aggregate amount owed by
the Company to the holders of stock appreciation rights ("SARs"), which
amount shall be paid in accordance with Paragraph 1.7, below, and shall be
based upon the final Purchase Price.
(c) The "Real Estate Price" shall mean Three Million One Hundred
Seventy-Five Thousand Dollars ($3,175,000).
1.7. Payment of SARs. Immediately prior to the Closing on the Closing
---------------
Date, the Company shall pay to the holders of the SARs ninety percent (90%) of
the Estimated SAR
4
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Payment Amount and shall deposit in escrow with Godfrey & Kahn, S.C., the
remaining ten percent (10%) of the Estimated SAR Payment Amount and the Buyer
shall lend to or otherwise provide the Company with cash in the amount required
to make such payments and deposit. Upon final disbursement of the Escrow Amount
as provided in Paragraph 1.5, above, and final determination of the SAR Payment
Amount the balance of the SAR Payment Amount shall be paid to the holders of the
SARs by the Escrow Agent from the Escrow Amount. Upon payment of the Earnout
Payment, if any, to the Sellers in accordance with Schedule 1.2 attached hereto,
------------
the balance of the SAR Payment shall be paid by the Sellers to the holders of
the SARs. For purposes hereof and for tax purposes, the SAR Payment Amount shall
be deemed to have been paid by the Company prior to the Closing and the Sellers
shall be entitled to the benefit of all deductions which the Company may receive
for tax purposes as a result of making such payments. To the extent that the
Buyer shall receive any deduction for such payments or shall otherwise receive a
refund or credit for tax purposes as a result of such payments, the Buyer shall
reimburse the Sellers in proportion to their ownership of the Subject Shares as
set forth on Schedule 1.1 attached hereto, in the amount of such deduction,
------------
refund or credit.
ARTICLE II
----------
Conditions Precedent to Closing
-------------------------------
2.1. Conditions Precedent to the Buyer's Obligation. The obligation of
----------------------------------------------
the Buyer to consummate the transactions contemplated herein is subject to the
satisfaction as of the Closing of the following conditions:
(a) The representations and warranties of the Sellers made in this
Agreement shall be true and correct in all material respects as of the date
hereof and on and as of the Closing, as though made on and as of the
Closing Date; the Sellers shall have performed the covenants of the Sellers
contained in this Agreement required to be performed on or prior to the
Closing; and the Sellers shall have delivered to the Buyer a certificate
dated the Closing Date and signed by each of the Sellers confirming the
foregoing. The foregoing certificate shall confirm that all severance and
related benefits of any kind due employees of the Company who have
terminated employment prior to the Closing and which are by their terms due
to such terminated employees prior to the Closing have been paid or
provided.
(b) The Sellers shall have filed, if required by law, proper
premerger notification forms with the United States Federal Trade
Commission (the "FTC") and the Antitrust Division of the United States
Department of Justice (the "DOJ") under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, and the rules and regulations
promulgated thereunder (the "HSR Act"), and the waiting period following
the filing of proper premerger notification forms by the Buyer and the
Sellers shall have expired, whether pursuant to early termination or by
passage of time.
(c) All government consents and licenses, permits, authorizations,
approvals or filings with and notifications to any federal, state, local or
other governmental or
5
<PAGE>
regulatory body required to be made or obtained by the Sellers in
connection with the consummation of the transactions contemplated by this
Agreement shall have been made or obtained including, without limitation,
filings under the HSR Act. All consents of third parties required to be
obtained by Sellers in connection with the consummation of such
transactions shall have been obtained.
(d) No statute, law, regulation or order shall have been enacted by
any governmental or regulatory authority which would make any of the
transactions contemplated by this Agreement illegal or otherwise prevent
the consummation thereof.
(e) No injunction or order of any court or administrative agency of
competent jurisdiction shall be in effect as of the Closing which restrains
or prohibits the consummation of the transactions contemplated by this
Agreement, nor shall have any party, other than the Buyer, commenced any
action, suit or proceeding requesting such an injunction or order.
(f) Immediately prior to or simultaneously with the Closing, the
owners of the real estate which is used as part of the Company's service
center in Chilton, Wisconsin and the owners of the real estate used as the
Company's manufacturing facility in Rialto, California, which real estate
is legally described on Schedule 2.1(f) attached hereto (such real estate
---------------
being referred to herein as the "Related Real Estate"), shall have sold to
the Company the Related Real Estate in exchange for the cash payments set
forth on Schedule 2.1(f) attached hereto, free and clear of all liens,
---------------
claims and encumbrances except those described on Schedule 2.1(f) attached
---------------
hereto and at the Buyer's option (i) the owners of the Related Real Estate
shall have made arrangements to repay all mortgages encumbering the Related
Real Estate on or prior to the Closing Date or (ii) the Buyer shall have
caused the Company to assume such mortgages and to effect a release of the
owners of the Related Real Estate from any obligations under such
mortgages. For purposes hereof, the exchange of the Related Real Estate
referred to herein shall be referred to as the "Real Estate Transfer."
(g) There shall have been no material damage to or loss or
destruction of the Related Real Estate or any material asset of the
Company.
(h) The Seller shall have delivered to the Buyer extended coverage
ALTA title insurance policies or final title insurance commitments
initialed by the title insurance company in the amounts of Five Million Six
Hundred Thousand Dollars ($5,600,000) with respect to the Company's
facility in Chilton, Wisconsin and the Related Real Estate in Chilton,
Wisconsin, Two Million Dollars ($2,000,000) with respect to the Related
Real Estate in Rialto, California, Ninety-Two Thousand Dollars ($92,000)
with respect to the Company's facility in Abilene, Kansas, and Four Hundred
Seventy-Eight Thousand Dollars ($478,000) with respect to the Company's
facility in Cressona, Pennsylvania listing the Buyer and such financial
institution or institutions as the Buyer may designate as insureds
thereunder, and insuring that title to such real estate is, as of the
Closing Date, in the condition specified in the title insurance commitments
attached hereto as part of
6
<PAGE>
Section 4.2.15 of the Disclosure Schedule (as defined in Paragraph 4.1,
below) and shall have delivered surveys for each parcel of real property
prepared by a licensed surveyor in the state where the property is located
sufficient to cause the title insurance company to remove the standard
survey exception in the title insurance policies. In addition, the Sellers
shall have provided estoppel certificates in customary form, executed by
each of the landlords for the Leased Real Property (other than the Related
Real Estate) for each lease which cannot be terminated by the Company
within 90 days of the Closing and which requires annual rental payments in
excess of Fifteen Thousand Dollars ($15,000).
(i) The Sellers shall have delivered to the Buyer the documents,
certificates, agreements and instruments required under Paragraph 3.3,
below and such other resolutions, certificates and documents as the Buyer
shall reasonably request and as are customary for transactions similar to
the transactions contemplated herein.
(j) Prior to the Closing, all loans or advances made by the Company
to any of the Sellers or any related person or entity shall have been
repaid in full.
(k) The transactions contemplated hereby shall have been approved by
Congress Financial, which approval shall be sought by the Buyer as soon as
practicable after the date hereof.
In the event that any of the foregoing conditions to the Closing shall not have
been satisfied prior to January 31, 1998, the Buyer may elect to (i) terminate
this Agreement without liability to the Buyer, or (ii) waive, in writing, all
such unsatisfied conditions and consummate the transactions contemplated herein
despite such failure. If the Buyer elects to consummate the transactions
contemplated herein, the Buyer shall not have any right to be indemnified under
Article VIII hereof for any Damages (as defined in Paragraph 8.1, below) arising
out of the failure to satisfy the condition(s) which have been waived.
2.2. Conditions Precedent to the Sellers' Obligation. The obligation of
-----------------------------------------------
the Sellers to consummate the transactions contemplated herein is subject to the
satisfaction as of the Closing of the following conditions:
(a) The representations and warranties of the Buyer made in this
Agreement shall be true and correct in all material respects as of the date
hereof and on and as of the Closing, as though made on and as of the
Closing Date; the Buyer shall have performed the covenants of the Buyer
contained in this Agreement required to be performed on or prior to the
Closing; and the Buyer shall have delivered to the Sellers a certificate
dated the Closing Date and signed by an authorized officer of the Buyer
confirming the foregoing.
(b) The Buyer shall file or cause its ultimate parent entity to file,
if required by law, proper premerger notification forms with the FTC and
the DOJ under the HSR Act, and the waiting period following the filing of
proper premerger notification forms by the Buyer and the Sellers shall have
expired, whether pursuant to early termination or by passage of time.
7
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(c) All material government consents and licenses, permits,
authorizations, approvals or filings with and notification to any federal,
state, local or other governmental or regulatory body required to be made
or obtained by the Buyer in connection with the consummation of the
transactions contemplated by this Agreement shall have been made or
obtained including, without limitation, filings under the HSR Act. All
material consents of third parties required to be obtained by the Buyer in
connection with the consummation of such transactions shall have been
obtained.
(d) No statute, law, regulation or order shall have been enacted by
any governmental authority which would make any of the transactions
contemplated by this Agreement illegal or otherwise prevent the
consummation thereof.
(e) No injunction or order of any court or administrative agency of
competent jurisdiction shall be in effect as of the Closing which restrains
or prohibits the consummation of the transactions contemplated under this
Agreement, nor shall have any party, other than the Sellers, commenced any
action, suit or proceeding requesting such an injunction or order.
(f) The Real Estate Transfer shall have been consummated immediately
prior to or simultaneously with the Closing, as contemplated by Paragraph
2.1(f), above.
(g) Prior to the Closing, the Company shall have distributed to the
Sellers or an entity they will organize, on terms and conditions acceptable
to the Sellers and the Buyer, all assets and liabilities associated with
the Company's distribution business other than the right to distribute the
Company's products in Southern California (all of such transferred assets
and liabilities are referred to herein as the "Distribution Business" and
the transfer of the Distribution Business is referred to herein as the
"Spinoff").
(h) Prior to the Closing, all loans or advances made by the Sellers
or any related person or entity to the Company shall have been repaid in
full.
(i) The Buyer shall have lent or otherwise provided to the Company
cash in the amount required to (A) pay the Real Estate Price or, if the
Buyer elects to cause the Company to assume the mortgages on the Related
Real Estate, the Real Estate Price less the amount of the mortgages assumed
by the Company, and the SAR Payment Amount to be paid at the Closing in
accordance with Paragraph 2.1(f), above, and Paragraph 1.7, above and (B)
allow the Company to pay bonuses aggregating approximately $1,173,575 to
employees of the Company in connection with the Closing (the "Employee
Bonuses").
(j) The Buyer shall have delivered to the Sellers the documents,
certificates, agreements and instruments required under Paragraph 3.2,
below.
In the event that any of the foregoing conditions to Closing shall not have been
satisfied prior to January 31, 1998, Sellers may elect to (i) terminate this
Agreement without liability to the Sellers, or (ii) waive, in writing, any such
unsatisfied conditions and consummate the transactions contemplated herein
despite such failure. If the Sellers elect to consummate the transac-
8
<PAGE>
tion contemplated herein, the Sellers shall not have any right to be
indemnified under Article VIII hereof for any Damages arising out of the failure
to satisfy the condition(s) which have been waived.
ARTICLE III
-----------
Closing
-------
3.1. Time and Place of Closing. The closing of the purchase and sale
-------------------------
contemplated herein (the "Closing") shall be held at the offices of Godfrey &
Kahn, S.C., in Milwaukee, Wisconsin at 10:00 a.m., local time, on December ___,
1997 or at such other time or place as the Sellers and the Buyer shall mutually
agree. The date on which the Closing shall occur is hereinafter referred to as
the "Closing Date."
3.2. Deliveries of the Buyer. At the Closing, the Buyer shall deliver to
-----------------------
the Sellers the following:
(a) The payment of the Estimated Purchase Price in the manner
specified in Paragraph 1.3, above.
(b) A certificate from the Secretary of the Buyer, in a form
reasonably satisfactory to the Sellers and their counsel, setting forth the
resolutions of the Board of Directors of the Buyer, authorizing the
execution of this Agreement, all agreements, documents and instruments to
be executed by the Buyer in connection herewith (the "Buyer Ancillary
Documents") and the taking of any and all actions deemed necessary or
advisable to consummate the transactions contemplated herein or therein.
(c) The certificate of the Buyer required to be delivered pursuant to
Paragraph 2.2(a), above.
(d) Separate noncompetition agreements, in substantially the form of
Exhibit A attached hereto, with each of William D. Engler, Jr., Michael C.
---------
Engler and Virginia L. Duncan (collectively, the "Noncompetition
Agreements"), duly executed by the Buyer and the Company.
(e) Evidence that the Buyer has provided sufficient funds to the
Company to pay the Real Estate Price to the owners of the Related Real
Estate in accordance with Paragraph 2.1(f), above, and Paragraph 6.3.2,
below the SAR Payment Amount in accordance with Paragraph 1.7, above and
Paragraph 6.3.2, below.
(f) An escrow agreement in substantially the form of Exhibit B
---------
attached hereto (the "Escrow Agreement"), duly executed by the Buyer.
(g) The releases contemplated by Paragraph 6.3.7, below, in form
satisfactory to the Sellers.
9
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(h) Resale certificates, in form acceptable to the Sellers, in which
the Buyer certifies that the inventory it will own of the Company following
completion of the transactions set forth herein is being purchased for
resale.
3.3. Deliveries of the Sellers. At the Closing, the Sellers shall deliver
-------------------------
to the Buyer the following:
(a) Certificates representing the Subject Shares, duly endorsed in
blank or accompanied by stock powers duly executed in blank by the
applicable Seller.
(b) The certificate of the Sellers required to be delivered pursuant
to Paragraph 2.1(a), above.
(c) Resignations of the directors of the Company and each person who
is a trustee, custodian, or authorized signatory under any employee benefit
plan, bank account, depository account or safe deposit box of the Company,
effective as of the Closing, as designated by the Buyer.
(d) Constructive possession of the complete books and records
relating to the business of the Company, including all keys or articles
required for access thereto and the combinations for all safes, vaults and
other places of safekeeping or storage of the Company.
(e) The Noncompetition Agreements, duly executed by each of William
D. Engler, Jr., Michael C. Engler and Virginia L. Duncan.
(f) An opinion of the Sellers' counsel, Godfrey & Kahn, S.C., as to
the valid existence of the Company as a Wisconsin corporation, and, subject
to appropriate and customary exceptions and exclusions, as to the
enforceability of this Agreement under Wisconsin law.
(g) The Escrow Agreement, duly executed by the Sellers, the Company
and by Godfrey & Kahn, S.C.
(h) A business transfer and assumption agreement in substantially the
form of Exhibit C attached hereto executed by the Company and the entity
---------
organized by the Sellers for the operation of the Distribution Business.
(i) Copies of deeds or other evidence that the Related Real Estate
has been conveyed to the Company.
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ARTICLE IV
----------
Warranties and Representations of the Sellers
---------------------------------------------
4.1. Several Warranties and Representations. Each of the Sellers hereby
--------------------------------------
severally (but not jointly) warrants and represents to the Buyer, which
warranties and representations shall survive the Closing for the periods set
forth in Paragraph 8.5.3, below, that except as set forth in the disclosure
schedule attached hereto (the "Disclosure Schedule"), the following statements
are true on the date hereof:
4.1.1. Title to Shares. Such Seller is the beneficial and record owner of
---------------
the respective number of shares of Common Stock set forth opposite such Seller's
name on Schedule 1.1 attached hereto and at the Closing will deliver to the
------------
Buyer good title to such shares free and clear of all liens, security interests,
claims, charges, equities, pledges and encumbrances of any kind whatsoever,
except as provided in Section 180.0622(2)(b) of the Wisconsin Statutes and the
cases decided thereunder and applicable federal and state securities laws.
4.1.2. Authority of the Sellers. Such Seller has full right, power and
------------------------
authority to sell, transfer and deliver to the Buyer the full legal and
beneficial ownership in the portion of Subject Shares to be sold by such Seller
pursuant to this Agreement and to consummate the transactions contemplated
herein and in the agreements, documents and instruments associated herewith
which are to be executed by any of the Sellers (collectively, the "Seller
Ancillary Documents") to which such Seller is a party. If such Seller is an
entity other than a natural person, or if such Seller is a natural person acting
in a capacity as an agent, trustee or executor, such Seller is duly constituted
in such capacity, has the appropriate power and authority to enter into this
Agreement and the Seller Ancillary Agreements to which such Seller is a party
and to consummate the transactions contemplated hereby and thereby, and the
execution and delivery of this Agreement and the Seller Ancillary Documents to
which such Seller is a party and the consummation of the transactions
contemplated hereby and thereby by such Seller have been approved by any neces
sary action on behalf of such Seller. This Agreement has been duly and validly
executed and delivered by such Seller and is the legal, valid and binding
obligation of such Seller enforceable in accordance with its terms except as
enforceability may be limited by bankruptcy, insolvency, fraudulent conveyance,
moratorium and other laws generally affecting the rights of creditors and
general principles of equity and applicable federal or state laws which may
affect the availability of equitable remedies. No action, consent or approval
by or registration or filing with any court, governmental authority or
instrumentality, or other third party is required in connection with the
execution and delivery by such Seller of this Agreement or the Seller Ancillary
Documents to the extent such Seller is a party thereto or the consummation by
such Seller of the transactions contemplated hereby and thereby other than the
premerger notification with the FTC and DOJ under the HSR Act. No claim,
action, suit, proceeding, arbitration, investigation or inquiry before any
federal, state, municipal, foreign or other court or governmental or
administrative body or agency, any securities or commodities exchange, other
regulatory body or any private arbitration tribunal is now pending against or
relating to such Seller or to the knowledge of such Seller, threatened, which
would adversely affect the ability of such Seller to consummate the sale
11
<PAGE>
of the Subject Shares that such Seller owns or the other transactions
contemplated by this Agreement or the Seller Ancillary Documents to which such
Seller is a party.
4.2. Joint and Several Warranties and Representations. Each of the
------------------------------------------------
Sellers hereby jointly and severally warrants and represents to the Buyer, which
warranties and representations shall survive the Closing for the periods set
forth in Paragraph 8.5.3, below, that, except as set forth in the Disclosure
Schedule, the following statements are true as of the date hereof:
4.2.1. Organization and Standing of the Company. The Company is a
----------------------------------------
corporation duly organized and validly existing under the laws of the State of
Wisconsin. The Company is qualified to transact business as a foreign
corporation in each jurisdiction where the nature of its business requires such
qualification, except where the failure to qualify would not have a Material
Adverse Effect. The Company has the corporate power and authority to own or
lease its properties and to carry on all business activities which it now
conducts. The Disclosure Schedule contains a true, complete and correct list of
all states in which the Company is qualified to do business as a foreign
corporation. The Company's Articles of Incorporation and By-Laws (a copy of each
of which have been delivered to the Buyer) are true, complete and correct and
are in full force and effect without amendment or modification.
4.2.2. Capitalization. The entire duly authorized capital stock of the
--------------
Company consists of: (i) 3,000 shares of Class A Common Stock of which 2,000
such shares are validly issued and outstanding; (ii) and 27,000 shares of Class
B Common Stock of which 18,000 such shares are validly issued and outstanding
and owned by the Sellers as set forth on Schedule 1.1 attached hereto. All of
------------
the Subject Shares are fully paid and nonassessable, except as provided in
Section 180.0622(2)(b) of the Wisconsin Statutes and the cases decided
thereunder. The Subject Shares have not been issued in violation of, and are
not subject to, any preemptive or subscription rights. Other than the
Stockholders Agreement (as defined below), there are no outstanding warrants,
options, agreements, subscriptions, convertible or exchangeable securities or
other commitments pursuant to which the Company is or may become obligated to
issue, sell, purchase, return or redeem any shares of capital stock or other
securities of the Company. The Subject Shares constitute all of the issued and
outstanding shares of capital stock of the Company of whatever class, series or
designation. Except for this Agreement, the Seller Ancillary Documents, the
Voting Trust Agreement dated January 2, 1982 (the "Voting Trust") and the
Amended and Restated Stockholders Agreement dated December 1, 1995 (the
"Stockholders Agreement"), as amended, there are no voting trust agreements,
powers of attorney, proxies or any other contracts, agreements, arrangements,
commitments, plans or understandings, written or oral, restricting or otherwise
relating to the voting, dividend rights or disposition of the Subject Shares or
otherwise granting any person any right in respect of the Subject Shares.
4.2.3. No Violation of Law by the Company. The consummation of the
----------------------------------
transactions contemplated hereby will not (i) cause the Company to contravene
any order, writ, judgment, injunction, decree, determination or award which
currently affects or binds the Company or under any existing applicable law,
rule or regulation; (ii) except for filings under the HSR Act, require any
consent, approval, authorization, license, permit, registration, filing,
recording or waiver under any order, writ, judgment, injunction, decree,
determination or award which
12
<PAGE>
currently affects or binds the Company or under any governmental or judicial
license, franchise, permit or approval held by the Company or which binds or
may affect the Company or any of the Company's assets (other than the assets
related to the Distribution Business) or under any applicable law, rule or
regulation; or (iii) result in the creation or imposition of any lien, claim
or encumbrance upon any of the Company's assets.
4.2.4. Absence of Litigation and Defaults. There is no litigation,
----------------------------------
proceeding or investigation or other legal or administrative proceeding pending
or, to the knowledge of the Sellers, threatened against the Company or its
properties, assets, operations or business which could affect the transactions
contemplated herein in a material manner or otherwise have a Material Adverse
Effect.
4.2.5. Subsidiaries, Investments. The Disclosure Schedule contains a list
-------------------------
of all of the Company's ownership or investment interests in any corporation,
partnership, joint venture or other business entity.
4.2.6. Patents, Trademarks, and Other Intellectual Property. The
----------------------------------------------------
Disclosure Schedule contains a list of (i) all issued patents and all registered
trademarks and registered copyrights which are owned by the Company, (ii) all
applications therefor which the Company owns (which applications are listed
separately on the Disclosure Schedule), and (iii) all other issued patents,
registered trademarks and registered copyrights which are licensed by the
Company or which are used by the Company in the operation of its business,
except for any issued patents, registered trademarks or registered copyrights or
applications therefor which are used exclusively in the Distribution Business
(all such listed intellectual property being referred to herein collectively as
the "Intellectual Properties"). To the extent the Intellectual Properties are
valid, the Company has the sole right to use such Intellectual Properties, free
of any liens, encumbrances and restrictions. The Company has not licensed any of
the Intellectual Properties to any other entity, except as identified on the
Disclosure Schedule. Since July 1, 1995, no claims have been asserted or, to the
knowledge of the Sellers, threatened in writing by any person challenging the
Company's ownership or use of any of the Intellectual Properties, or asserting
that the Company's conduct of its businesses as currently conducted infringes or
violates the intellectual property rights of another, which, if successful,
would have a Material Adverse Effect. To the knowledge of the Sellers, none of
the Intellectual Properties infringes or otherwise violates the rights of others
or is being infringed by others in any manner which would have a Material
Adverse Effect. To the knowledge of the Sellers, the Company is not and has not
since July 1, 1995, infringed or violated any intellectual property right of a
third party or unlawfully used any trade secrets of any third party. To the
knowledge of the Sellers, each of the Intellectual Properties is currently valid
and subsisting.
4.2.7. Financial Statements and Undisclosed Liabilities.
------------------------------------------------
(a) The consolidated financial statements of the Company and its
subsidiaries for the fiscal years ended June 30, 1996 and June 28, 1997 and
the unaudited financial statements of the Company and its subsidiaries for
the quarter ended September 27, 1997 (collectively, the "Financial
Statements") are in accordance with the books and records of
13
<PAGE>
the Company, have been prepared in conformity with generally accepted
accounting principles applied on a consistent basis throughout the periods
covered thereby (except as noted therein) and present fairly the financial
position and the results of operations and changes in stockholders' equity
of the Company as of the dates and for the periods indicated, subject in
the case of the Financial Statements for the quarter ended September 27,
1997, to normal, recurring, year-end adjustments and any information which
would be included in footnotes thereto.
(b) There are no commitments, liabilities or obligations relating to
the Company for which specific and adequate provisions have not been made
on the Financial Statements, except for commitments, liabilities and
obligations (i) described in the Disclosure Schedule, (ii) incurred in or
as a result of the ordinary course since June 28, 1997, or (iii) which are
not required to be disclosed on the Financial Statements under GAAP,
including without limitation, commitments, liabilities or obligations under
the Contracts (as defined in Paragraph 4.2.10, below).
4.2.8. Conduct Out of Ordinary Course. The Company has, since June 28,
------------------------------
1997, conducted its business in the normal and ordinary course and has not
suffered any change which would have a Material Adverse Effect. Without
limiting the generality of the foregoing, since June 28, 1997 the Company has
not, except for the Real Estate Transfer, the contemplated transfer of the
Distribution Business in the Spinoff and the contemplated payment of the SAR
Payment Amount:
(a) acquired or agreed to acquire any assets which are material,
individually or in the aggregate, to the Company, except in its ordinary
course of business consistent with prior practice;
(b) sold, leased or otherwise disposed of any of its assets, which
are material, individually or in the aggregate, to the Company, except in
the ordinary course of business consistent with prior practice;
(c) merged or consolidated with another corporation;
(d) altered or amended its articles of incorporation or bylaws;
(e) effected any material increase in compensation or benefits
provided to any Key Employee (as defined in Paragraph 4.2.12, below) or any
general increase in pay to any of its other employees; or
(f) except for distributions to cover tax obligations or other
distributions consistent with past practices, issued capital stock or
declared or paid a dividend or made any other payment from capital or
surplus or other distribution to its shareholders of any nature, or
directly or indirectly, redeemed, purchased or otherwise acquired or
recapitalized or reclassified any of its capital stock or liquidated in
whole or in part.
14
<PAGE>
4.2.9. Taxes. The Company has correctly prepared and properly filed an
-----
election (an "S election") under Section 1362 of the Internal Revenue Code of
1986, as amended (the "Code"), to be treated as an S corporation and has filed
its Federal and state Tax Returns (as hereinafter defined) in a manner
consistent with such status and has made any applicable state filings in states
where the Company has elected to be treated as an S corporation. The Company is
an S corporation within the meaning of Section 1361 of the Code. The Company
has, or prior to the Closing will have, accurately prepared and duly and timely
filed all Tax Returns which it was required to file on or before the Closing
Date and has paid all Taxes required to be paid with respect to the periods
covered by such Tax Returns, or will create a reserve therefor on the Final
Closing Date Balance Sheet. No deficiencies for any Taxes which would have a
Material Adverse Effect have been asserted or assessed, or to the knowledge of
the Sellers, proposed, with respect to the Company that remain unpaid. The
Company has properly withheld and paid over to the appropriate taxing
authorities all Taxes required by it to be withheld. Except for the Selection,
the Company is not a party to any election or consent with respect to Taxes.
There are no agreements, waivers or arrangements providing for the extension of
time with respect to the assessment of any Tax owed by the Company. There are
no liens upon any properties or assets of the Company relating to or
attributable to Taxes, except liens for Taxes, assessments and other
governmental charges which are not yet due and payable or which may hereafter be
paid without penalty. The Company has not made any payments, is not obligated
to make any payments, and is not a party to any agreements that under any
circumstances could obligate it to make any payments, that will not be
deductible under Section 280G of the Code. The Company and each Seller will
provide the appropriate affidavit under penalty of perjury required by Section
1445(b)(2) of the Code to enable the Buyer to not withhold a Tax under Section
1445(a) of the Code. For purposes hereof, (i) "Tax" or "Taxes" means federal,
state, local, or foreign income, gross receipts, license, payroll, parking,
employment, excise, severance, stamp, occupation, premium, windfall profits,
environmental (including taxes under Code Sec. 59A), customs duties, capital
stock, franchise, profits, withholding, social security (or similar),
unemployment, disability, real property, personal property, sales, use,
transfer, registration, value added, alternative or add-on minimum, estimated
tax, or other tax of any kind whatsoever, including any interest, penalty, or
addition thereto, whether disputed or not, including such item for which
liability arises as a transferee or successor-in-interest, including liability
therefor as a transferee or successor-in-interest, and (ii) "Tax Return" means
any return, declaration, report, claim for refund, information return or
statement relating to Taxes, including any schedule or attachment thereto, and
including any amendment thereof.
4.2.10. Contracts and Other Agreements. The Disclosure Schedule sets
------------------------------
forth a true and complete list of all of the following to which the Company is a
party or by which it is bound (collectively, the "Contracts"): (i) all
contracts not made in the ordinary course of business, (ii) all leases with
respect to any item of material property used by the Company, except those
related to the Distribution Business, (iii) all loan agreements, security
agreements, notes, guarantees and mortgages, (iv) all agreements affecting the
Intellectual Properties, (v) all continuing contracts for the purchase of
materials, supplies or equipment in excess of the requirements of the Company's
business, (vi) all collective bargaining agreements or other contracts with any
labor union, (vii) all written agreements between the Company and any of the
Sellers or any officer, director or employee of the Company, (viii) all oral
agreements with any customer,
15
<PAGE>
supplier or sales representative of the Company which are not terminable upon
notice of 30 days or less without liability to the Company after such
termination. Each Contract which is written is valid, binding and in full force
and effect enforceable in accordance with its terms except as enforceability may
be limited by bankruptcy, insolvency, fraudulent conveyance, moratorium and
other laws generally affecting the rights of creditors and general principles of
equity and applicable federal or state laws which may affect the availability of
equitable remedies. The Company has performed in all material respects the
obligations required to be performed by it to date under the Contracts, is not
(with or without the lapse of time or the giving of notice, or both) in breach
or default in any material respect thereunder and to the knowledge of the
Sellers, is not alleged to be in breach or default in any material respect
thereunder. All Contracts are in the name of the Company.
4.2.11. Compliance with Laws. Except for Environmental Laws (which are
--------------------
defined and covered in Paragraph 4.2.17, below), to the knowledge of the
Sellers, the Company is not in violation of any law, order, ordinance, rule or
regulation of any governmental authority. There is no order, decree or judgment
affecting the Company with respect to any violation by the Company of any such
law, order, ordinance, rule or regulation.
4.2.12. Employee Terminations. The Disclosure Schedule lists any officer
---------------------
or other Key Employee (as defined below) of the Company whose employment with
the Company has terminated since January 1, 1995. None of the Sellers has
knowledge that any officer or other Key Employee of the Company is considering
the termination of employment with the Company. For purposes of this Agreement,
"Key Employee" means an employee whose base compensation or annual salary
exceeded $60,000 for the most recently completed fiscal year.
4.2.13. Employee Benefit Plans. Except as set forth on the Disclosure
----------------------
Schedule, neither the Company nor any entity under common control with the
Company, within the meaning of section 414(b), (c), (m) or (o) of the Code or
section 4001(a)(14) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA") (a "Plan Affiliate"), maintains, is required to contribute to,
or is required to provide benefits under, any plan, fund or program providing
any pension, profit sharing, deferred compensation, severance pay, bonuses,
incentive compensation, stock options, stock purchases, or any other form of
retirement or deferred benefit, or any health, accident, dependent care, or
other welfare benefit (a "Plan").
(a) The Company and all Plan Affiliates are in compliance in all
material respects with all laws and regulations relating to the Plans,
including, but not limited to, compliance in all material respects with all
provisions of the Code and ERISA, if applicable. To the knowledge of the
Sellers, neither the Company nor any Plan Affiliate is in default in
performing its obligations under any Plan or related agreement and all
contributions and other payments required to be made under any Plan with
respect to the period prior to the Closing have been made (or reserves
adequate for such payments have been set aside). There are no suits,
claims or proceedings (collectively, "Actions"), other than claims for
benefits, pending, or to the knowledge of the Sellers, threatened against
or arising out of any of the Plans and to the knowledge of the Sellers,
there are no facts which could give rise to any of such Actions that would
have a material adverse effect on
16
<PAGE>
any Plan or on the Company. Neither the Company nor any Plan Affiliate has
engaged in any non-exempt "prohibited transaction" (as defined in section
4975 of the Code or section 406 of ERISA) with respect to any Plan.
(b) No officer of the Company has agreed to any future increases in
benefit levels or the creation of new benefits with respect to any Plan.
(c) No Plan is a multiemployer plan (as defined in section 4001(a)(3)
of ERISA) (a "Multiemployer Plan"). Neither the Company nor any Plan
Affiliate has ever been obligated to contribute to a Multiemployer Plan.
No Plan is subject to Title IV of ERISA, and neither the Company nor any
Plan Affiliate has ever been obligated to contribute to a Plan which is or
was subject to Title IV of ERISA.
(d) With respect to each Plan which is intended to be a qualified
plan under section 401(a) of the Code (a "Qualified Plan"), the Company has
received a determination letter from the Internal Revenue Service stating
that the Plan does qualify in form with section 401(a) of the Code, as
amended by the Tax Reform Act of 1986 and subsequent legislation, and to
the knowledge of the Sellers no events have occurred since the issuance of
such letter which would cause the Plan not to be so qualified. All
contributions required to be made to any Qualified Plan have been so made
within the time period provided under sections 404(a)(6) and 412 of the
Code, and no accumulated funding deficiency (as defined in section 412 of
the Code) exists, whether or not waived, with respect to any Qualified
Plan. Each of the Plans can be terminated by the Company within a period
of 30 days following the Closing Date in accordance with the terms of such
Plan and, if applicable, the provisions of ERISA and the Code, without any
additional contribution to such Plan or the payment of any additional
compensation or amount or the additional vesting or acceleration of any
benefits provided under the Plans, except for contributions accrued under
any such Plan for periods prior to the Closing.
(e) The Company has provided to the Buyer complete and correct copies
of all Plans, related trust agreements, insurance contracts or other
related agreements, the current summary plan description for each Plan
subject to ERISA, and any similar description of any other Plan which the
Company has prepared, and, if applicable, the most recently filed Internal
Revenue Service Form 5500 for each Plan, including but not limited to all
schedules thereto and all financial statements and attached opinions of
independent accountants.
4.2.14. Customers. The Disclosure Schedule contains a true and correct
---------
list of the Company's largest 20 customers as determined by sales for the
Company's fiscal years ended June 30, 1996 and June 28, 1997. None of the
Sellers has been advised or otherwise received specific information to the
effect that any such customer intends to cancel or substantially adversely
modify its relations with the Company or materially decrease its current
purchase of the Company's products beyond purchase fluctuations in such
customer's ordinary course of business.
17
<PAGE>
4.2.15. Real Estate. The Disclosure Schedule includes a complete list of
-----------
all real property owned by the Company (collectively, the "Owned Real
Property"), and all real property leased by the Company (the "Leased Real
Property"), which Leased Real Property currently includes the Related Real
Estate described in Paragraph 2.1(f), above. Except as set forth on the
Disclosure Schedule, to the knowledge of the Sellers, the Company will at the
Closing have (upon completion of the Real Estate Transfer or otherwise) good and
marketable title to the Owned Real Property and the Related Real Estate
(collectively, the "Real Property") free and clear of all mortgages, liens,
claims, charges, easements, covenants, rights-of-way and other encumbrances or
restrictions of any nature whatsoever, except the following encumbrances or
restrictions whether or not disclosed on the Disclosure Schedule:
(i) zoning, municipal and other similar restrictions;
(ii) easements, covenants, rights-of-way or other restrictions which
do not materially and adversely affect the use of the property to which
they relate;
(iii) mechanics', carriers', workmen, repairmen or other like liens
arising or incurred in the ordinary course of business;
(iv) liens for taxes, assessments and other governmental charges
which are not due yet and payable or which may thereafter be paid without
penalty;
(v) other imperfections of title or encumbrances, if any, which do
not materially detract from the usefulness or value of the property subject
thereto or individually or in the aggregate adversely affect, in any
material way, the present operation of the Company's business; and
(vi) the exceptions shown in the title commitments attached to the
Disclosure Schedule (all such exceptions set forth in clauses (i) - (vi)
being referred to collectively as "Permitted Liens").
To the knowledge of the Sellers, except for the Company's leases of the Related
Real Estate which will be terminated upon completion of the Real Estate
Transfer, the leases for the Leased Real Property are valid and enforceable in
accordance with their terms. The Sellers have not received notice of any
default from the landlord under any of the leases for the Leased Real Property.
4.2.16. Title to Other Assets. Except for the Real Property and Leased
---------------------
Real Property (as to which a separate warranty is set forth in Paragraph 4.2.15,
above), and except for the Intellectual Properties (as to which a separate
warranty is set forth in Paragraph 4.2.6, above), and except for the assets of
the Distribution Business (as to which the Company makes no warranties in this
Paragraph 4.2.16), the Company has title to all of its owned assets, in each
case, free and clear of all mortgages, liens, security interests, pledges,
charges or encumbrances of any nature whatsoever, except for Permitted Liens.
To the extent the leases governing the Company's leased property are in effect,
the Company has the right to use such leased property in accordance with the
terms of the applicable lease.
18
<PAGE>
4.2.17. Environmental Matters.
---------------------
(a) For purposes of this Paragraph 4.2.17, "Environmental Laws" shall
mean all Federal, state or local statutes, regulations, ordinances, orders
or decrees regulating or otherwise relating to the environment, including,
but not limited to, those relating to the disposal of Hazardous Waste or
other Hazardous Materials (as hereinafter defined).
(b) Neither the Company nor any prior owner or operator of any of the
Real Property has used any such Real Property for the disposal of Hazardous
Waste or Hazardous Materials. As used in this Paragraph 4.2.17, the term
"Hazardous Materials" or "Hazardous Waste" means any hazardous or toxic
substances, materials and wastes listed in the United States Department of
Transportation Hazardous Materials Table (49 CFR 172.101) or by the United
States Environmental Protection Agency (the "EPA") as a hazardous substance
(40 CFR Part 302) and amendments thereto, or such substances, materials and
wastes which are regulated under any applicable local, state or Federal
law, including without limitation, any material waste or substance which
is: (i) petroleum; (ii) asbestos; (iii) polychlorinated biphenyls; (iv)
defined as a "hazardous waste," "extremely hazardous waste," "restricted
hazardous waste" or "hazardous material" under applicable state laws and
regulations; (v) designated as a "hazardous substance" pursuant to Section
311 of the Clean Water Act, 33 U.S.C. (S) 1251, et seq. (33 U.S.C. (S)
-- ---
1321) or U.S.C. (S) 1317; (vi) defined as a "hazardous waste" pursuant to
Section 1004 of the Resource Conservation and Recovery Act, 42 U.S.C. (S)
6901, et seq. (42 U.S.C. (S) 6903); or (vii) defined as a "hazardous
-- ---
substance" pursuant to Section 101 of the Comprehensive Environmental
Response, Compensation and Liability Act ("CERCLA"), 42 U.S.C. Section
9601, et seq. (42 U.S.C. Section 9601).
(c) To the Sellers' knowledge, the Company has in all material
respects complied with and is in all material respects in compliance with
all applicable Environmental Laws.
(d) During the course of any activities conducted on any of the Real
Property by the Company, and by any prior owner or operator of any of the
Real Property, no Hazardous Waste or Hazardous Materials have been
generated or are being used on any such properties, except in accordance
with applicable Environmental Laws.
(e) There are no Hazardous Materials or Hazardous Wastes on, in,
under or about the Real Property, including, but not limited to, the soil
and groundwater at and below the Real Property and any surface water on and
running through the Real Property which, if present, would require cleanup,
removal or other remedial or responsive action under applicable
Environmental Laws.
(f) The Company has not received notice from any third party
including, without limitation, any Federal, state or local governmental
authority: (i) that the Company has been identified by the EPA as a
potentially responsible party under CERCLA with respect to a site listed on
the National Priorities List, 40 C.F.R. Part 300 Appendix B (1986); (ii)
that any Hazardous Waste or Hazardous Materials which the Company has
19
<PAGE>
generated, transported or disposed of has been found at any site at which a
Federal, state or local agency or other third party has conducted or has
ordered that the Company conduct a remedial investigation, removal or other
response action pursuant to any Environmental Law; or (iii) that the
Company is or shall be named a party to any claim, action, cause of action,
complaint (contingent or otherwise), legal or administrative proceeding
arising out of any third party's incurrence of costs, expenses, losses or
damages of any kind whatsoever in connection with the release of Hazardous
Waste or Hazardous Materials. Since January 1, 1995 and, to the Sellers'
knowledge, at any time prior to such date, the Company has not received
notice from any third party that the Company is in violation of any
Environmental Law or otherwise claiming any impairment, damage, injury or
other adverse effects to the environment resulting from operations
conducted on the Real Property.
(g) The Company has been issued, and will maintain until the Closing
Date, all required Federal, state and local permits, licenses, certificates
and approvals with respect to the Real Property relating to (i) air
emissions; (ii) discharges to surface water or groundwater; (iii) noise
emissions; (iv) solid or liquid waste disposal; and (v) the use,
generation, storage, transportation or disposal of Hazardous Materials or
Hazardous Waste, except where the failure to obtain or maintain any such
permits, licenses, certificates and approvals would not, either
individually or in the aggregate, have a Material Adverse Effect.
(h) The Sellers have provided the Buyer with true, accurate and
complete copies of any written information in the possession of the Sellers
which pertains to the environmental history or condition of the Real
Property. The Sellers shall also promptly furnish to the Buyer true,
accurate and complete copies of any sampling, test results or other
information relating to the environmental condition of the Real Property
which may be obtained by the Sellers prior to the Closing.
4.2.18. Other Activities of the Sellers. Except for the ownership of less
-------------------------------
than one percent (1%) of the outstanding shares of any publicly-held company,
none of the Sellers, nor to the knowledge of the Sellers, any officer, director
or Key Employee, owns directly or indirectly, any interest or has any investment
or profit participation in any person which has transacted business with the
Company since January 1, 1997 (a "Related Party") or in any competitor of the
Company.
4.2.19. Related Party Transactions. All of the transactions of the
--------------------------
Company with any Related Party have been conducted on terms comparable to those
which would have prevailed in arms-length transactions. The Company does not
have outstanding loans or other advances to the Sellers or to any officer,
director or other employee of the Company or to any Related Party, other than
travel, expense or similar advances in the usual and ordinary course of
business.
4.2.20. Brokers; Agents. The Sellers have not dealt with any agent,
---------------
finder, broker or other representative in any manner which could result in the
Company or the Buyer being liable for any fee or commission in the nature of a
finder's fee or originator's fee in connection with the
20
<PAGE>
subject matter of this Agreement, other than any fees which may be payable to
Cleary Gull Reiland & McDevitt Inc., which fees will be borne by the Sellers.
4.2.21. Inventories. The finished goods inventories on the balance sheet
-----------
of the Company as of June 28, 1997 included as part of the Financial Statements
were stated at the lower of cost or market determined on the moving average cost
method and the first-in, first-out method in accordance with generally accepted
accounting principles consistently applied.
4.2.22. Accounts Receivable. All trade accounts receivable of the Company
-------------------
represent, and all trade accounts receivable of the Company incurred between the
date hereof and the Closing will represent, valid obligations arising from sales
actually made in the ordinary course of business of the Company.
4.2.23. Disclosure. No representation or warranty made by the Sellers in
----------
this Agreement and no statement contained in a certificate, schedule, list or
other instrument or document specified in or delivered pursuant to this
Agreement, whether heretofore furnished to the Buyer or hereafter required to be
furnished to the Buyer (all such documents being taken as a whole), contains or
will contain any untrue statement of a material fact or omits or will omit to
state any material fact necessary to make the statements contained herein or
therein not misleading.
4.3. Definition of "Material Adverse Effect". For purposes of this
---------------------------------------
Agreement, the phrase "Material Adverse Effect" shall mean an effect or effects
which would have a material adverse effect on the Company or the financial
condition, results of operations, business or assets of the Company.
4.4. Definition of "Knowledge." For purposes of this Agreement, the
------------------------
phrase "to the best of the Sellers' knowledge," "to the Sellers' knowledge," "to
the knowledge of the Sellers," "know," or similar words and phrases in Article
IV or elsewhere in this Agreement referring to facts or other information known
by the Sellers shall be deemed to mean and refer only to facts and information
within the actual knowledge of any of the Sellers.
4.5. No Warranties Regarding Distribution Business. Notwithstanding any
---------------------------------------------
reference herein to the Company or its assets or business, except to the extent
necessary to prevent the Buyer or the Company from sustaining Damages (as
defined in Paragraph 8.1, below) as a result of the Company's ownership or
operation of the Distribution Business, the Sellers are making no warranties or
representations concerning the Distribution Business or any of the assets,
liabilities or operations of the Distribution Business and except to the extent
set forth above, any reference herein to the Company or any assets or
liabilities of the Company shall be deemed to exclude the Distribution Business
and any matter related thereto.
21
<PAGE>
ARTICLE V
---------
Warranties and Representations of the Buyer
-------------------------------------------
The Buyer hereby warrants and represents to the Sellers, which warranties
and representations shall survive the Closing for the period set forth in
Paragraph 5.2, below, that the following statements are true and correct on the
date hereof:
5.1. Authority. The Buyer is a corporation duly incorporated, validly
---------
existing and in good standing under the laws of Delaware and has the power and
authority to carry on all business activities which it currently conducts. The
Buyer has the corporate power and authority to enter into this Agreement and the
Buyer Ancillary Documents and to consummate the transactions contemplated hereby
and thereby. The execution and delivery of this Agreement and the Buyer
Ancillary Documents by the Buyer and the consummation of the transactions
contemplated hereby and thereby by the Buyer have been approved by all necessary
corporate action on behalf of the Buyer and are and shall constitute valid and
legally binding obligations of the Buyer, enforceable against the Buyer in
accordance with their respective terms except as enforceability may be limited
by bankruptcy, insolvency, fraudulent conveyance, moratorium and other laws
generally affecting the rights of creditors and general principles of equity and
applicable federal and state laws which may affect the availability of equitable
remedies. The execution and delivery of this Agreement and the Buyer Ancillary
Documents by the Buyer does not, and the consummation of the transactions
contemplated hereby and thereby and compliance with the terms hereof and thereof
by the Buyer will not (a) conflict with, or result in any breach or violation of
(i) any provision of the Articles/Certificate of Incorporation or By-Laws of the
Buyer or (ii) any judgment, order or decree, or statute, law, ordinance or rule
applicable to the Buyer, or (b) subject to the approval of Congress Financial,
as contemplated by Paragraph 2.1(k), above, violate or conflict with, or result
in a breach under, any agreement, instrument or document to which the Buyer is
a party or is subject. No action, consent or approval by or registration or
filing with, any court, governmental authority or instrumentality or other third
party is required in connection with the execution and delivery by the Buyer of
this Agreement and the Buyer Ancillary Documents by the Buyer or the
consummation by the Buyer of the transactions contemplated hereby and thereby
other than the premerger notification with the FTC and DOJ under the HSR Act.
No claim, action, suit, proceeding, arbitration, investigation or inquiry for
any federal, state, municipal, foreign or other court or governmental or
administrative body or agency, any securities or commodities exchange, other
regulatory body or any private arbitration tribunal is now pending against or
relating to the Buyer which would adversely affect the ability of the Buyer to
consummate the purchase of the Subject Shares or the other transactions
contemplated by this Agreement or the Buyer Ancillary Documents.
5.2. Securities Matters. The Subject Shares purchased by the Buyer
------------------
pursuant to this Agreement are acquired for investment only and not with a view
to any public distribution thereof, and the Buyer will not offer to sell or
otherwise dispose of the Subject Shares so acquired by it in violation of any of
the registration requirements of the Securities Act of 1933, as amended, or
applicable state securities laws.
22
<PAGE>
5.3. Brokers; Agents. The Buyer has not dealt with any agent, finder,
---------------
broker or other representative in any manner which could result in the Sellers
or the Company being liable for any fee or commission in the nature of a
finder's or originator's fee in connection with the subject matter of this
Agreement or the Buyer Ancillary Documents.
ARTICLE VI
----------
Covenants
---------
6.1. Covenants of the Sellers. Each of the Sellers covenants and agrees
------------------------
as follows:
6.1.1. Access. Prior to the Closing, such Seller will (i) cause the
------
Company to give the Buyer and its representatives, employees, counsel and
accountants reasonable access to the properties, books and records of the
Company, and (ii) cause the Company to furnish the Buyer and its designated
representatives with financial and operating data and other information with
respect to the Company for the purpose of permitting the Buyer, among other
things, to (a) conduct its due diligence review (including, without limitation,
its review of the Company's properties for conducting environmental due
diligence), (b) review the financial statements of the Company, (c) verify the
accuracy of the warranties and representations of the Sellers contained in this
Agreement, (d) confirm compliance by the Sellers with the terms of this
Agreement, and (e) prepare for the consummation of the transactions contemplated
by this Agreement. Without limiting the foregoing, the Sellers and the Company
will permit the Buyer and its accountants to have access during normal business
hours to examine and make copies of all work papers and schedules of the Company
and its accountants. In connection therewith, the Buyer shall be permitted to
discuss the business affairs and financial statements of the Company with the
Company's accountants, to review the work papers of such accountants regarding
the Company, to interview the employees of the Company regarding continued
employment and to discuss with the appropriate employees of the Company such
matters regarding the Company's business and assets as the Buyer may deem
necessary or appropriate. Between the date hereof and Closing, the employees
and agents of the Buyer shall be permitted to observe the operations and
management of the Company's business, and the Sellers will cause the Company's
employees, auditors and attorneys to reasonably assist and cooperate with the
Buyer to permit a smooth transition of the Company's business; provided that the
Buyer shall use reasonable efforts to avoid disrupting the operations of the
Company's business. The Buyer agrees that it will not contact the Company's
employees, suppliers or customers without the prior consent of the Sellers and
the Sellers may participate in any such discussions if they so choose.
6.1.2. Insurance. Such Seller shall cause the Company to keep all its
---------
present insurance policies in full force and effect through 11:59 p.m. of the
Closing Date.
6.1.3. Ordinary Course. Prior to the Closing, the Sellers shall cause the
---------------
Company to carry on its business in the usual, regular and ordinary course and
in substantially the same manner as heretofore conducted and, to the extent
consistent with such business, use all reasonable efforts consistent with past
practice and policies to preserve intact its business organization, keep
available the services of its officers and Key Employees, and preserve its
23
<PAGE>
relationship with customers, suppliers and others having business dealings with
it to the end that its goodwill and ongoing business shall be unimpaired in any
material respect as a result of the transactions contemplated hereby. Without
limiting the generality of the foregoing, during the period from the date hereof
to the Closing, the Sellers agree that except for the transfer of the Related
Real Estate and the Spinoff (and except as otherwise contemplated by this
Agreement or to the extent the Buyer shall otherwise consent in writing), the
Company shall not:
(a) acquire or agree to acquire any assets which are material,
individually or in the aggregate, to the Company, except in the ordinary
course of business consistent with prior practice;
(b) sell, lease or otherwise dispose of any of its assets which are
material, individually or in the aggregate, to the Company, except in the
ordinary course of business consistent with prior practice;
(c) merge or consolidate with another corporation;
(d) alter or amend its articles of incorporation or bylaws;
(e) effect any material increase in compensation or benefits provided
to any Key Employee or any general increase in pay to any of its other
employees; or
(f) except for distributions to cover tax obligations or other
distributions consistent with past practices, issue capital stock or
declare or pay a dividend or make any other payment from capital or surplus
or other distribution to its shareholders of any nature, or directly or
indirectly redeem, purchase or otherwise acquire or recapitalize or
reclassify any of its capital stock or liquidate in whole or in part.
In addition, between the date hereof and the Closing, none of the Sellers, the
Company or any of their respective affiliates shall, nor shall any of them
authorize any officer, director or employee of or any investment banker,
attorney, accountant or other representative retained by any of them to, solicit
or encourage (including by way of furnishing information or entering into
discussions or negotiations of any kind) any inquiries or the making of any
proposal which may reasonably be expected to lead to any takeover proposal. The
Company shall promptly advise the Buyer orally and in writing of any such
inquiries or proposals, but need not disclose the identity of any party making
any such inquiry or proposal. As used in this paragraph, "takeover proposal"
shall mean any proposal for a merger or other business combination involving the
Company or for the acquisition of a substantial equity interest in the Company
or all or a portion of the assets of the Company other than the transactions
contemplated by this Agreement.
6.2. Mutual Covenants. Each of the Sellers and the Buyer covenants and
----------------
agrees as follows:
6.2.1. Cooperation. The Buyer and the Sellers shall cooperate with each
-----------
other and shall cause their respective officers, employees, agents, accountants
and representatives to cooperate with each other after the Closing to ensure the
orderly transition of the ownership of the
24
<PAGE>
Company and its business from the Sellers to the Buyer and to minimize any
disruption to the business of the Company that might result from the
transactions contemplated hereby.
6.2.2. Records. After the Closing, upon reasonable written notice, the
-------
Buyer and the Sellers agree to furnish or cause to be furnished to each other
and their respective representatives, counsel and accountants access, during
normal business hours, such information (including records pertinent to the
Company) and assistance relating to the Company as is reasonably necessary for
financial reporting and accounting matters, assistance in the preparation and
filing of any returns, reports or forms or the defense of any tax claim or
assessment; provided, however, that such access does not unreasonably disrupt
-------- -------
the normal operations of the Company.
6.2.3. Publicity. The Buyer and the Sellers agree that no public releases
---------
or announcements concerning the transactions contemplated hereby shall be
issued by any party without the prior consent (which consent shall not be
unreasonably withheld) of the other parties, except as such release or
announcement may be required by law, in which case the party required to make
the release or announcement shall allow the other parties reasonable time to
comment on such release or announcement in advance of its issuance.
6.2.4. Execution of Additional Documents. From time to time, as and when
---------------------------------
requested by a party hereto, each party hereto shall execute and deliver, or
cause to be executed and delivered, all such documents and instruments and shall
take, or cause to be taken, all such further or other actions as such other
parties may reasonably deem necessary or desirable to consummate the
transactions contemplated by this Agreement or the agreements, documents or
instruments associated herewith.
6.2.5. Reasonable Efforts. Prior to the Closing, the Buyer and the
------------------
Sellers shall use all reasonable efforts to take or cause to be taken all action
and to do or cause to be done all things necessary, proper or advisable under
applicable laws and regulations to consummate and make effective the
transactions contemplated hereby.
6.2.6. Section 338(h)(10) Election. The Sellers and the Buyer will make a
---------------------------
timely and effective election under Section 338(h)(10) of the Code and any
comparable provision of state or local law with respect to the purchase by the
Buyer of the Subject Shares hereunder (collectively, together with the elections
under Section 338(g) of the Code and any comparable provision of state or local
law, the "Section 338(h)(10) Elections"). To facilitate such election, within
120 days after the Closing Date, the Buyer will deliver to the Sellers a
completed Internal Revenue Service Form 8023 and the required schedules thereto
and any similar forms under applicable state or local law (the "Forms") with
respect to the Buyer's purchase of the Subject Shares, which Forms shall have
been duly executed by an authorized person for the Buyer and shall allocate the
"modified aggregate deemed sales price" (as defined below) substantially in
accordance with the asset values set forth in Schedule 6.2.6 attached hereto.
--------------
Provided that the information on such Forms is, in the reasonable determination
of the Sellers, correct and complete in all material respects, the Sellers will
execute and deliver such Forms to the Buyer within 30 days after the Sellers'
receipt of such Forms. The Sellers and the Buyer shall cooperate fully with each
other and make available to each other such Tax data and other
25
<PAGE>
information as may be reasonably required by the Sellers or the Buyer in order
to prepare and timely file the Forms and any other required statements or
schedules. In the event that the Buyer and the Sellers are unable to resolve any
disagreements regarding the allocation of the "modified aggregate deemed sales
price" (as defined under applicable Treasury Regulations) among the assets or
other aspects of the Forms within 30 days after notice of such disagreement, the
matter in dispute shall be resolved as soon as practicable by the Milwaukee
office of the Independent Firm (but in no event longer than 30 days), which
resolution shall be binding and conclusive upon the Buyer and the Sellers
without further appeal therefrom. The Buyer on the one hand and the Sellers on
the other hand shall bear equally the fees and expenses of such firm. The Buyer
will timely file the Forms, and any required supplements thereto, in the manner
prescribed by Treasury Regulation Section 1.338(h)(10)-1(d) or the corresponding
provisions of applicable state or local law, and will provide written evidence
to the Sellers that it has done so. The Buyer and the Sellers agree that none of
them will take, or permit any of their affiliates to take, any action to modify
or revoke the elections contained in or the content of any Forms without the
express written consent of the other.
6.3. Covenants of the Buyer. The Buyer covenants and agrees as follows:
----------------------
6.3.1. Benefits. For a period of one year subsequent to the Closing, the
--------
Buyer shall offer or cause the Company to continue to offer to employees of the
Company benefits and compensation which are generally comparable to the
benefits and compensation maintained by the Company prior to the Closing for its
employees in general. Without limiting the foregoing, the Buyer specifically
covenants and agrees that it will honor all of the Company's obligations under
the employment agreements described in the Disclosure Schedule, unless the third
party thereto shall agree to amend or modify such agreement. In addition, the
Buyer shall provide or cause the Company to provide to each of William D.
Engler, Sr., William D. Engler, Jr., Michael C. Engler and Virginia L. Duncan
and their respective spouses, throughout their lifetimes, medical and other
health insurance benefits consistent with the medical, dental and other health
insurance provided to such individual on the Closing Date as described
specifically in the Disclosure Schedule. At the request of any such individual,
the Buyer shall deliver or cause the Company to deliver a document confirming
such commitment.
6.3.2. Purchase of Related Real Estate and Funding of SAR Payment Amount.
-----------------------------------------------------------------
The Buyer shall make arrangements to cause the Company to have cash in the
amount required to (a) pay the Real Estate Price and to cause the purchase of
the Related Real Estate in accordance with Paragraph 2.1(f), above, (b) pay the
SAR Payment Amount in accordance with Paragraph 1.7, above and (c) pay the
Employee Bonuses. The Buyer will cooperate with the Sellers and the Company in
connection with the purchase of the Related Real Estate and the paying of the
SAR Payment Amount.
6.3.3. Kaytee Avian Foundation and Ed Center. For a period of five years
-------------------------------------
subsequent to the Closing, the Buyer shall, or at the Buyer's option shall cause
the Company and/or third parties, to
26
<PAGE>
(a) maintain, operate and support fund raising activities for the
Kaytee Avian Foundation (the "Foundation") in a manner consistent with the
Company's practices prior to the date hereof and provide administrative
services and financial support to the Foundation reasonably similar to that
provided to the Foundation prior to the date hereof; and
(b) maintain and operate the Kaytee Education Center (the "Center")
in a manner reasonably similar to the manner in which the Center has been
maintained and operated prior to the date hereof.
The Buyer agrees to spend, or to cause the Company and/or arrange for third
parties to spend, at least Three Hundred Thirty Thousand Dollars ($330,000) per
year for direct costs relating to the maintenance, operation and support of the
Foundation and the Center as described above (being the level of the Company's
annual direct expenditures for such activities on the date hereof), but shall
have no legal obligation to make or arrange for expenditures in excess of such
amount.
6.3.4. Life Insurance. At any time on or prior to 30 days following the
--------------
Closing, each of William D. Engler, Jr., Michael C. Engler and Virginia L.
Duncan shall have the right and option to purchase from the Company the life
insurance policy on his or her life in exchange for cash in the amount of the
cash surrender value thereof. In the event that any of such individuals desire
to exercise such right, he or she will deliver to the Company written notice to
such effect and within ten days of the Company's receipt of such notice and upon
payment of the cash surrender value of the applicable life insurance policy, the
Buyer shall cause the Company to execute and deliver all documents required to
transfer the applicable policy as requested in such notice.
6.3.5. William Engler, Sr. Agreement. The Buyer acknowledges that the
-----------------------------
Company is a party to an Amended and Restated Compensation Agreement dated
December 31, 1993 with William D. Engler, Sr., which provides for certain
payments to be made for the joint lives of Mr. Engler and his spouse (the "WDE
Sr. Agreement"). Following the Closing, the Buyer shall cause the Company to
make all payments under the WDE Sr. Agreement when due and to perform all other
obligations under the WDE Sr. Agreement. The Sellers acknowledge that the Final
Closing Date Balance Sheet will reflect a liability for payments due under the
WDE Sr. Agreement determined in accordance with the principles set forth in
Article I.
6.3.6. Tax Account. The parties acknowledge that the Company's balance
-----------
sheet as of June 28, 1997 reflects, and that the Final Closing Date Balance
Sheet will reflect (as an inclusion in "other assets"), an income tax deposit in
the amount of $490,868 made by the Company to the Internal Revenue Service
pursuant to applicable regulations relating to the reporting of income of fiscal
year Subchapter S corporations by shareholders who report on a calendar year
basis. The parties anticipate that such tax deposit will be refunded to the
Company upon the filing by the Sellers of their 1997 Federal income tax returns
reflecting the operations of the Company through the Closing Date. If for any
reason after the Closing Date the Company should receive income tax refunds in
excess of the amount of the tax deposit reflected on the Final Closing Date
Balance Sheet, the Buyer shall cause the Company to pay the amount of such
excess to the
27
<PAGE>
Sellers promptly upon receipt thereof. If for any reason the Company should not
receive a refund equal to the amount of the tax deposit reflected on the Final
Closing Date Balance Sheet by the Company to pay the same to the Sellers
promptly upon receipt thereof.
6.3.7. Liens on Assets of Distribution Business. The Buyer acknowledges
----------------------------------------
that the accounts receivable, inventory and other assets of the Distribution
Business are subject to security interests in favor of Bank One Milwaukee, N.A.
("Bank One") securing the Company's obligations under its loan and credit
agreements with Bank One. On the Closing Date, the Buyer shall cause the
Company to cause Bank One to release all security interests which encumber any
assets of the Distribution Business.
ARTICLE VII
-----------
Disclosure Schedule
-------------------
For convenience, the Disclosure Schedule is divided into sections or
contains references to subparagraphs of Article IV, to which particular
disclosures may be relevant. To the extent that any fact or information
disclosed in any subsection of the Disclosure Schedule to this Agreement is
manifestly relevant to any subsection of the Disclosure Schedule relating to any
other representation or warranty in Article IV, such fact or information shall
be deemed to be disclosed in such other subsection. To the extent that the
Disclosure Schedule discloses facts not required to be disclosed hereby, such
facts are disclosed for information purposes only. Terms used in the Disclosure
Schedule and not otherwise defined therein shall have the same meanings as are
ascribed to such terms in this Agreement. The Sellers shall have the right to
supplement the Disclosure Schedule prior to the Closing by delivery to the Buyer
prior to the Closing Date of any such supplement (a "Disclosure Supplement").
Each Disclosure Supplement shall be in writing and shall be delivered in
accordance with Paragraph 12.2 of this Agreement. The existence of any material
matter set forth in any such Disclosure Supplement which was not disclosed at
the time of the signing of this Agreement or as to which substantial adverse
changes have taken place since the signing of this Agreement (a "New Matter"),
shall give the Buyer the right under Article X, below, (a) to terminate this
Agreement by written notice to the Sellers at any time prior to the Closing or
(b) to consummate the transactions contemplated hereby. To the extent that the
Buyer elects to so consummate the transactions contemplated hereby, the
Disclosure Schedule shall be deemed amended and supplemented by all information
set forth in each Disclosure Supplement, and the warranties and representations
of the Sellers made in Article IV hereof shall be deemed amended and
supplemented by all such information set forth in each Disclosure Supplement as
if amended on the date of execution hereof.
28
<PAGE>
ARTICLE VIII
------------
Indemnification
---------------
8.1. Indemnification of the Buyer. The Sellers shall jointly and
----------------------------
severally indemnify the Buyer and the Company and hold them harmless from and
against any and all damages, losses, deficiencies, actions, judgments, costs and
expenses in excess of the amount, if any, reserved for a particular matter on
the Final Closing Date Balance Sheet (including reasonable attorneys' and
accountants' fees) (collectively referred to herein as "Damages") of or against
the Buyer or the Company resulting from or arising out of: (i) any
misrepresentation or breach of any warranty of such Seller contained in this
Agreement or any of the Seller Ancillary Documents; or (ii) the nonfulfillment
of any covenant or agreement on the part of such Seller contained in this Agree
ment or any of the Seller Ancillary Documents; (iii) any United States federal,
state or other taxes, penalties, interest and related charges and fees to which
the Company might become subject as a result of liability for income taxes of
the Company for periods ending on or prior to the Closing, except to the extent
that such taxes, penalties, interest and related charges and fees are fully
reserved on the Final Closing Date Balance Sheet; and (iv) any tax liability of
the Company which may arise as a result of the Spinoff.
8.2. Indemnification of the Sellers. The Buyer shall indemnify the
------------------------------
Sellers and hold them harmless from and against any and all Damages of or
against the Sellers resulting from or arising out of (i) any misrepresentation
or breach of warranty of the Buyer contained in this Agreement or any of the
Buyer Ancillary Documents or (ii) the nonfulfillment of any covenant or
agreement on the part of the Buyer contained in this Agreement or any of the
Buyer Ancillary Documents.
8.3. Procedure Relative to Indemnification.
-------------------------------------
(a) In the event that any party hereto shall claim that it is
entitled to be indemnified pursuant to the terms of this Article VIII, it
(the "Claiming Party") shall so notify the party against which the claim is
made (the "Indemnifying Party") in writing of such claim within ten days
after discovery of the facts supporting the claim or receipt of a written
notice of any claim of a third party (a "Third Party Claim") that may
reasonably be expected to result in a claim by such party against the party
to which such notice is given, as the case may be; provided, however, the
-------- -------
failure to give such notice within such ten day period shall not affect the
Claiming Party's right to indemnification hereunder except to the extent
that (i) the Indemnifying Party is unable to defend any such claim or is
required to pay a greater amount or accrue additional expenses with respect
to any such claim as a result of such failure to provide prompt notice or
(ii) such notice is not given within the applicable period specified in
Paragraph 8.5.3, below. Such notice shall with reasonable specificity
identify the breach of representation, warranty, covenant or agreement
claimed by the Claiming Party and the liability, loss, cost or expense
incurred by or imposed upon or expected to be incurred by or imposed upon
the Claiming Party on account thereof. If such liability, loss, cost or
expense is liquidated in amount, the notice shall so state. If the amount
is not liquidated, the notice shall so state and in such event a claim
shall be deemed asserted against the Indemnifying Party on behalf of the
Claiming
29
<PAGE>
Party, but no payment shall be made on account thereof until the
amount of such claim is liquidated and the claim is finally determined.
Such notice shall be provided for informational purposes, and by giving
such notice, the Claiming Party shall not be deemed to have waived the
right to assert that any representation, warranty, covenant or agreement
not specified in such notice has been breached and that the Claiming Party
is entitled to indemnification as a result thereof.
(b) The Indemnifying Party may, upon receipt of written notice of a
Third Party Claim and at its expense, defend such claim in its own name or,
if necessary, in the name of the Claiming Party, unless the aggregate
potential liability of the Claiming Party exceeds the aggregate potential
liability of the Indemnifying Party (calculated assuming indemnification by
the Indemnifying Party with reference to the limitations set forth in
Paragraph 8.5, below), in which event the Indemnifying Party shall only
have the right to defend the Third Party Claim with the consent of the
Claiming Party. The Claiming Party will cooperate with and make available
to the Indemnifying Party such assistance and materials as may be
reasonably requested of the Claiming Party, and the Claiming Party shall
have the right, at its expense, to participate in the defense. The
Indemnifying Party shall have the right to settle and compromise such claim
only with the consent of the Claiming Party which consent shall not be
unreasonably withheld. However, if the Claiming Party fails to consent to
such settlement or compromise offer, the Indemnifying Party may continue to
contest or defend such Third Party Claim and, in such event, the maximum
liability of the Indemnifying Party as to such Third Party Claim will not
exceed the amount of such settlement or compromise offer. If the
proceeding involves a matter solely of concern to the Claiming Party in
addition to the claim for which indemnification under this Article VIII is
being sought, such matter shall be within the sole responsibility of the
Claiming Party and its counsel.
(c) In the event the Indemnifying Party shall fail or not have the
right to assume the defense under Paragraph 8.3(b), above, or shall notify
the Claiming Party that it shall refuse to conduct a defense against a
Third Party Claim, then the Claiming Party shall have the right to conduct
a defense against such claim and shall have the right to settle and
compromise such claim without the consent of the Indemnifying Party.
(d) Except for any Third Party Claim as to which the Indemnifying
Party has refused to assume the defense, the Indemnifying Party shall be
subrogated to all rights of the Claiming Party against third parties who
may be liable for any matter for which indemnification is sought hereunder
and the Claiming Party shall reasonably cooperate with the Indemnifying
Party, which cooperation may include joining in litigation, to enforce such
rights.
8.4. Effect of Taxes and Insurance.
-----------------------------
(a) Taxes. Any indemnification payment due under this Article VIII
-----
to a Claiming Party shall be adjusted (upward or downward) to take into
account the actual Tax consequences to such Claiming Party resulting from
the payment of indemnification
30
<PAGE>
and the payment which gives rise to the indemnity obligation. The Claiming
Party shall make available to the Indemnifying Party, as reasonably
requested, records or information relating to the tax effect of an
indemnification payment due under this Article VIII.
(b) Insurance. In determining the amount of any claim for which a
---------
Claiming Party is entitled to indemnification pursuant to this Article
VIII, there shall be subtracted an amount equal to all insurance proceeds
actually received by such Claiming Party with respect to such claim, net of
any increase in insurance premiums incurred by the Claiming Party which can
be demonstrated by such party to be directly related to such claim.
8.5. Limits on Indemnification Claims.
--------------------------------
8.5.1. Basket and De Minimus Claims. Other than claims for
----------------------------
indemnification under clause (i) of Paragraph 8.1, above, for breach of any of
the warranties or representations in Paragraphs 4.1.1 and 4.1.2 or claims for
indemnification under clause (iii) or clause (iv) of Paragraph 8.1, above
(collectively, the "Excluded Claims"), the Sellers shall not be required to
provide indemnification under Paragraph 8.1, above, (i) for any Damages arising
from any breach by the Sellers of any warranty, representation or covenant
contained herein, or any Third Party Claim if the aggregate amount of the
Damages arising from such particular breach or the Third Party Claim do not
exceed Fifty Thousand Dollars ($50,000) (each, a "De Minimus Claim") and (ii)
unless the Buyer's Damages for all such claim(s) of indemnification which are
not De Minimus Claims, shall exceed in the aggregate One Million Dollars
($1,000,000) (the "Basket Amount"), and then only for amounts in excess of the
Basket Amount (it being understood and agreed that the "Basket Amount" is
intended as a deductible, and the Sellers shall not be liable for the first One
Million Dollars ($1,000,000) of Damages for which the Buyer would otherwise
entitled to indemnification).
8.5.2. Maximum Amount of Indemnification. Other than for the Excluded
---------------------------------
Claims, in no event shall the Sellers' aggregate liability with respect to all
claims of indemnification under Paragraph 8.1 exceed the aggregate amount of
Seven Million Three Hundred Thousand Dollars ($7,300,000).
8.5.3. Survival of Warranties and Representations of the Sellers.
---------------------------------------------------------
Notwithstanding any investigation by or information supplied to the parties, the
warranties and representations of the Sellers contained in Article IV hereof and
of the Buyer in Article V hereof shall survive the Closing for a period of
eighteen months, except as follows: (i) the warranties and representations of
the Sellers in Paragraphs 4.1.1 and 4.1.2 shall survive the Closing for the
applicable period under the statute of limitations therefor (including any
waivers thereof) and (ii) the warranties and representations in Paragraphs
4.2.4, 4.2.8, 4.2.12 and 4.2.14 shall survive the Closing for a period of six
months. Any claim for indemnification for breach of any warranty hereunder made
in writing prior to the expiration of the applicable survival period set forth
in the preceding sentence, and the rights of indemnity with respect thereto,
shall survive such expiration until resolved or judicially determined, and any
such claim not so made in writing prior to the expiration of such applicable
survival period shall be deemed to have been waived.
31
<PAGE>
8.6. Sole Remedy; Termination. Except as otherwise provided herein, the
------------------------
sole remedy of the Buyer for any claims matter arising out of the transaction
contemplated by this Agreement, including of the nature described in Paragraph
8.1 shall be the indemnity set forth in Paragraph 8.1, as the case may be, as
limited by the provisions set forth elsewhere in this Article VIII. Except for
claims for indemnification under clause (iii) or clause (iv) of Paragraph 8.1,
above, any claims for indemnification not submitted in writing by the Claiming
Party prior to the expiration of the applicable survival period of the warranty,
representation or covenant on which such claim is based shall be deemed to have
been waived. Any claims for indemnification made in good faith by the Claiming
Party in writing prior to such expiration date, and the right of indemnity with
respect thereto, shall survive until resolved or judicially determined.
8.7. No Indemnification for Known Breaches of Representations and
------------------------------------------------------------
Warranties. Notwithstanding any of the provisions set forth in this Article
- ----------
VIII, above, in the event that the Indemnifying Party can establish that the
Claiming Party had knowledge, on or before the Closing Date, of a breach of any
warranty or representation, then the Indemnifying Party shall not be liable
under this Article VIII for any Damages resulting from or arising out of any
such breach.
8.8. Adjustment to Purchase Price. The Sellers and the Buyer agree that
----------------------------
any indemnification payment made pursuant to this Article VIII, shall
constitute and be treated as an adjustment to the Purchase Price for tax
purposes.
ARTICLE IX
----------
Sellers' Agent
--------------
9.1. Appointment. Each Seller hereby irrevocably constitutes and appoints
-----------
William D. Engler, Jr. as such Seller's agent (the "Sellers' Agent") for the
purpose of performing and consummating such Seller's obligations under this
Agreement and the Seller Ancillary Documents. The appointment of William D.
Engler, Jr. as the Sellers' Agent is coupled with an interest and all authority
hereby conferred shall be irrevocable and shall not be terminated by any or all
of the Sellers without the consent of the Buyer, which consent may be withheld
for any reason, and the Sellers' Agent is hereby authorized and directed to
perform and consummate all of the transactions contemplated by this Agreement on
behalf of such Seller.
9.2. Authority. Not by way of limiting the authority of the Sellers'
---------
Agent, each of the Sellers, for such Seller and such Seller's respective heirs,
executors, administrators, successors and assigns, hereby authorizes the
Sellers' Agent on behalf of such Seller and without notice to such Seller to:
(a) Waive any provision of this Agreement;
(b) Execute and deliver all documents and instruments which may be
executed and delivered by such Seller pursuant to this Agreement, including
without limitation the Subject Shares and the stock powers with respect
thereto;
32
<PAGE>
(c) Make and receive notices and other communications pursuant to
this Agreement and service of process in any legal action or other
proceeding arising out of or related to this Agreement or any of the
transactions hereunder;
(d) Settle any dispute, claim, action, suit or proceeding arising out
of or related to this Agreement or any of the transactions hereunder as
limited by the provisions of Paragraph 9.3, below;
(e) Receive and distribute the Purchase Price;
(f) Appoint or provide for successor agents; and
(g) Pay expenses incurred or which may be incurred by or on behalf of
the Sellers in connection with this Agreement.
In the event of the failure or refusal of William D. Engler, Jr. to act as the
Sellers' Agent (or upon the death of William D. Engler, Jr. or any successor),
the Sellers shall promptly appoint one of the Sellers as their agent for
purposes of this Article IX, and failing such appointment, the Buyer may, by
written notice to the Sellers at the last address of the Sellers applicable for
purposes of Article IX hereof, designate one of the Sellers as such agent, which
designation shall remain in effect until the Sellers shall make such
appointment.
9.3. Disputes. Any claim, action, suit or other proceeding, whether in
--------
law or equity, to enforce any right, benefit or remedy granted to the Sellers
under this Agreement may be asserted, brought, prosecuted or maintained only by
the Sellers' Agent. Any claim, action, suit or other proceeding, whether in law
or equity, to enforce any right, benefit or remedy granted to the Buyer or the
Company under this Agreement, including without limitation any right of
indemnification provided in Paragraph 8.1 (to the extent the Sellers are liable
thereunder), may be asserted, brought, prosecuted or maintained by the Buyer
against the Sellers or the Sellers' Agent by service of process on the Sellers'
Agent and without the necessity of serving process on, or otherwise joining or
naming as a defendant in such claim, action, suit or other proceeding, any
Seller. With respect to any matter contemplated by this Article IX, the Sellers
shall be bound by any determination in favor of or against the Sellers' Agent or
the terms of any settlement or release to which the Sellers' Agent shall become
a party.
ARTICLE X
---------
Termination
-----------
This Agreement may be terminated at any time prior to the Closing Date:
(a) by the mutual written consent of the Buyer and the Sellers'
Agent;
(b) by the Buyer, or the Sellers:
(i) if any court or governmental body or agency thereof shall
have enacted promulgated or issued any statute, rule, regulation,
ruling, writ or injunction, or
33
<PAGE>
taken any other action, restraining, enjoining or otherwise
prohibiting the transactions contemplated hereby; or
(ii) if the Closing shall not have occurred on or before January
31, 1998; provided, however, that the right to terminate this
Agreement pursuant to this Paragraph (b)(ii) shall not be available to
any party whose breach of any representation or warranty or failure
to perform or comply with any covenant or obligation under this
Agreement has been the cause of, or resulted in, the failure of the
Closing to occur on or before such date; or
(c) by the Buyer if the DOJ or FTC shall issue a "second request" to
the Buyer, or the Sellers shall breach this Agreement; or
(d) by the Sellers if the DOJ or FTC shall issue a "second request"
to the Company or the Buyer shall breach this Agreement;
(e) by the Buyer pursuant to Article VII; or
(f) by the Sellers at any time after five business days after the
date hereof if the condition to the Closing specified in Paragraph 2.1(k),
above, has not been satisfied or waived by the Sellers.
In the event of any such termination, this Agreement shall become void, provided
that no such termination shall relieve any party from liability for any breach
of this Agreement by such party prior to such termination.
ARTICLE XI
Non-Disclosure Covenant
-----------------------
11.1. Non-Disclosure of Confidential Information. Each of the Sellers
------------------------------------------
acknowledges and agrees, severally but not jointly, that such Seller shall not,
at any time during the five year period following the Closing Date, disclose any
Confidential Information (as hereinafter defined) to anyone other than to
employees and representatives of the Buyer; a court of law, if so ordered; or a
third party if required by applicable law. For purposes of this Paragraph 11.1,
the term "Confidential Information" shall mean all proprietary information which
is not in the public domain or does not come into the public domain through no
fault of any Seller or information which such Seller is required by law or court
order to disclose relating to the Company, its customers, products and services,
including without limitation, the following: (i) all technical information
relating to the provision of goods or services by the Company; (ii) information
concerning pricing policies of the Company, prices charged by the Company to its
customers, the volume of orders of such customers and all other information
concerning the transactions of the Company with its customers or proposed
customers; (iii) the customer lists of the Company; (iv) information concerning
the marketing programs or strategies of the Company; (v) financial information
concerning the Company; (vi) information concerning salaries or wages paid to,
the
34
<PAGE>
work records of and other personal information relating to employees of the
Company; and (vi) all other confidential and proprietary information of the
Company.
11.2. Enforcement. In addition to all other legal remedies available to
-----------
the Buyer for the enforcement of the covenants contained in this Article XI,
each of the Sellers hereby agrees severally but not jointly, that the Buyer
shall be entitled to an injunction by any court of competent jurisdiction to
prevent or restrain any breach or threatened breach hereof. Each of the Sellers
further agrees severally but not jointly, that if any of the covenants set forth
herein shall at any time be adjudged invalid to any extent by any court of
competent jurisdiction, such covenant shall be deemed modified to the extent
necessary to render it enforceable.
ARTICLE XII
-----------
Miscellaneous
-------------
12.1. Expenses. Except as otherwise specifically provided herein, the
--------
parties hereto shall pay their own expenses, including without limitation,
accountants' and attorneys' fees incurred in connection with the negotiation and
consummation of the transactions contemplated by this Agreement. The Sellers
shall be responsible for any fees payable to Cleary Gull Reiland & McDevitt Inc.
in connection with the transactions contemplated herein. The Sellers shall be
liable for and shall pay and discharge when due any sales, use or transfer taxes
incurred and/or payable in connection with the purchase and sale of the Subject
Shares pursuant to this Agreement. The Sellers shall also pay the cost of the
issuance of the title policies under Paragraph 2.1(h), above, which shall
include the cost of customary endorsements related thereto.
12.2. Notices. All notices or other communications required or permitted
-------
to be given hereunder shall be in writing and shall be considered to be given
and received in all respects when hand delivered, when sent by prepaid express
or courier delivery service, when sent by facsimile transmission actually
received by the receiving equipment or three days after deposited in the United
States mail, certified mail, postage prepaid, return receipt requested (or
equivalents thereof), in each case addressed as follows, or to such other
address as shall be designated by notice duly given:
IF TO THE BUYER: Central Garden & Pet Company
3697 Mt. Diablo Boulevard
Lafayette, CA 94549
Attention: William E. Brown
Facsimile: (510)283-4984
With a Copy To: Orrick, Herrington & Sutcliffe LLP
The Old Federal Reserve Bank Building
400 Sansome Street
San Francisco, CA 94111
Attention: John F. Seegal
Facsimile: (415) 773-5759
35
<PAGE>
IF TO THE SELLERS: To the Sellers' Agent
William D. Engler, Jr.
121 West Breed Street
Chilton, WI 53014
Facsimile: None
With a Copy To: Godfrey & Kahn, S.C.
780 North Water Street
Milwaukee, WI 53202
Attention: Andrew R. Lauritzen
Facsimile: (414) 273-5198
12.3. Right to Specific Performance. The parties agree that the Subject
-----------------------------
Shares constitute unique property, that there is no adequate remedy at law for
the damage which any of them might sustain for the failure of the others to
consummate this Agreement, and, accordingly, that each of them is entitled to
the remedy of specific performance to enforce such consummation.
12.4. Entire Agreement. This Agreement, the Disclosure Schedule, the
----------------
exhibits and schedules attached hereto and the agreements executed and delivered
simultaneously herewith constitute the entire agreement among the parties hereto
relating to the subject matter hereof, and all prior agreements, correspondence,
discussions and understandings of the parties (whether oral or written) are
merged herein and made a part hereof, it being the intention of the parties
hereto that this Agreement and the instruments and agreements contemplated
hereby shall serve as the complete and exclusive statement of the terms of their
agreement together. No amendment, waiver or modification hereto or hereunder
shall be valid unless in writing signed by an authorized signatory of the party
or parties to be affected thereby. Notwithstanding the foregoing, the parties
acknowledge and agree that until such time as the Closing shall occur, the terms
and conditions of the Confidentiality Agreement dated June 12, 1997 between the
Company and the Buyer will remain binding on the Buyer in accordance with its
terms. Effective at the Closing, such Confidentiality Agreement shall terminate
and be of no further force and effect.
12.5. Assignment. This Agreement and the rights hereunder shall not be
----------
assignable or transferable by the Buyer without the prior written consent of the
Sellers' Agent or by any of the Sellers without the prior written consent of the
Buyer; provided, however, that the Buyer may, without the prior written consent
-------- -------
of the Sellers, assign any of its rights hereunder to the Company or any of its
subsidiaries, provided that no such assignment shall limit or affect the Buyer's
obligations hereunder.
12.6. Binding Effect. This Agreement shall be binding upon the parties
--------------
hereto and their respective successors and permitted assigns.
12.7. Paragraph Headings. The headings in this Agreement are for purposes
------------------
of convenience and ease of reference only and shall not be construed to limit
or otherwise affect the meaning of any part of this Agreement.
36
<PAGE>
12.8. Severability. The parties agree that if any provision of this
------------
Agreement shall under any circumstances be deemed invalid or inoperative, this
Agreement shall be construed with the invalid or inoperative provision deleted,
and the rights and obligations of the parties shall be construed and enforced
accordingly.
12.9. Applicable Law. This Agreement and all questions arising in
--------------
connection herewith shall be governed by and construed in accordance with the
laws of the State of Wisconsin without regard to the principles of conflicts of
laws thereunder.
12.10. Counterparts. This Agreement may be executed in one or more
------------
original or facsimile counterparts, all of which shall be considered but one and
the same agreement, and shall become effective when one or more such
counterparts have been executed by each of the parties and delivered to the
other parties.
12.11. Termination of Stockholders Agreement. Each of the Sellers hereby
-------------------------------------
agrees that effective immediately prior to the Closing, the Stockholders
Agreement and all rights thereunder, shall terminate.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day,
month and year first above written.
BUYER:
CENTRAL GARDEN & PET COMPANY
By: /s/ Robert B. Jones
-------------------
[Name], [Title]
Robert B. Jones V.P. Finance
37
<PAGE>
SELLERS:
KAYTEE PRODUCTS VOTING TRUST U/A/D
JANUARY 2, 1982
By: /s/ William D. Engler Jr.
--------------------------------------
William D. Engler, Jr., Voting Trustee
/s/ William D. Engler Jr.
-------------------------
William D. Engler, Jr.
/s/ Michael C. Engler
---------------------
Michael C. Engler
/s/ Virginia L. Duncan
----------------------
Virginia L. Duncan
PATRICIA GAIL PARISH 1995 TRUST
By: /s/ Henry E. Fuldner
-------------------------
Henry E. Fuldner, Trustee
PAULA LYNNE ENGLER 1995 TRUST
By: /s/ Henry E. Fuldner
-------------------------
Henry E. Fuldner, Trustee
SUSAN BETH CRITER 1995 TRUST
By: /s/ Henry E. Fuldner
-------------------------
Henry E. Fuldner, Trustee
38
<PAGE>
SARAH ANNE WEITZ 1995 TRUST
By: /s/ Henry E. Fuldner
-------------------------
Henry E. Fuldner, Trustee
NANCY ELLEN ENGLER 1995 TRUST
By: /s/ Henry E. Fuldner
-------------------------
Henry E. Fuldner, Trustee
WILLIAM M. ENGLER 1995 TRUST
By: /s/ Henry E. Fuldner
-------------------------
Henry E. Fuldner, Trustee
MICHELE E. HALBACH 1995 TRUST
By: /s/ Henry E. Fuldner
-------------------------
Henry E. Fuldner, Trustee
KARLA J. BARTEL 1995 TRUST
By: /s/ Henry E. Fuldner
-------------------------
Henry E. Fuldner, Trustee
39
<PAGE>
BRIAN M. ENGLER 1995 TRUST
By: /s/ Henry E. Fuldner
-------------------------
Henry E. Fuldner, Trustee
JOHN W. ENGLER 1995 TRUST
By: /s/ Henry E. Fuldner
-------------------------
Henry E. Fuldner, Trustee
MARY A. ENGLER 1995 TRUST
By: /s/ Henry E. Fuldner
-------------------------
Henry E. Fuldner, Trustee
ROBERT CASPER TRUST U/A/D 12/21/95
By: /s/ Jerome H. Kringel
--------------------------
Jerome H. Kringel, Trustee
VIRGINIA CASPER TRUST U/A/D 12/21/95
By: /s/ Jerome H. Kringel
--------------------------
Jerome H. Kringel, Trustee
VIRGINIA L. DUNCAN 1995 RETAINED ANNUITY TRUST
By: /s/ Jerome H. Kringel
--------------------------
Jerome H. Kringel, Trustee
40
