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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
__________
FORM 8-K
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date the earliest event reported) May 9, 1996
------------------------
RXI Holdings, Inc.
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(Exact Name of Registrant as Specified in Charter)
Delaware
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(State or other jurisdiction of Incorporation)
33-94420 95-4426626
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(Commission File Number) (I.R.S. Employer Identification No.)
11111 Santa Monica Boulevard, Suite 270 Los Angeles, California 90025
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(Address of Principal Executive Offices) (Zip code)
(310) 473-7005
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Registrant's Telephone Number, Including Area Code)
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(Former Name or Former Address, if Changed Since Last Report)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On May 9, 1996, RXI Plastics, Inc. ("Company"), a wholly-owned
subsidiary of Registrant, acquired all of the outstanding stock of Vanguard
Plastics of California, Inc. ("Vanguard") pursuant to a Stock Purchase
Agreement, dated as of May 1, 1996, among the Company, Registrant, Vanguard
Plastics Inc. and the 1989 Steil Family Trust (the "Agreement").
The purchase price for the acquisition was $1,176,740, consisting of
$600,270 in cash and an unsecured note in the principal amount of $576,470. The
purchase price was based on the fair market value of the assets and liabilities
acquired and was funded through the Company's existing revolving credit facility
with CIT Group/Business Credit, Inc. ("CIT"). The Company has also refinanced
Vanguard's existing indebtedness with the proceeds of a new term loan obtained
from CIT in the amount of $1,300,000.
Pursuant to the Agreement, the Company acquired all of the outstanding
stock of Vanguard. Vanguard is engaged in the business of manufacturing plastic
containers, a business in which the Company is also presently engaged. The
Company intends to continue to operate the acquired business in a manner
generally consistent with past practice.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) FINANCIAL STATEMENTS. The required financial statements are
anticipated to be filed within the 60 day period permitted by Item 7(a) of Form
8-K.
(b) PRO FORMA FINANCIAL INFORMATION. The required pro forma
financial information is anticipated to be filed within the 60 day period
permitted by Item 7(b) of Form 8-K.
(c) EXHIBITS. The following exhibits are filed as exhibits to this
current report on Form 8-K, and none have been incorporated by reference to any
other registration statement, report or other document.
EXHIBIT NUMBER DESCRIPTION
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2.1 Stock Purchase Agreement, dated as of May 1, 1996,
between the Company, Registrant, Vanguard Plastics
Inc. and the 1989 Steil Family Trust.
2.2 Amendment to Financing Agreement, dated as of February
10, 1995 among CIT, Texberry Container Corporation,
Patrick Plastics, Inc. and the Company.
2
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SIGNATURE
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.
RXI Holdings, Inc.
May , 1996 By: /s/ Leon Farahnik
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Leon Farahnik, President
and Chief Executive Officer
By: /s/ Marvin Liebman
-----------------------------------
Marvin Liebman,
Chief Financial Officer
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STOCK PURCHASE AGREEMENT
DATED AS OF MAY 1, 1996
AMONG
VANGUARD PLASTICS INC.
AND
JOHN A. STEIL AND URSULA E. STEIL, TRUSTEES
OF THE 1989 STEIL FAMILY TRUST
AND
RXI PLASTICS, INC.
AND
RXI HOLDINGS, INC.
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TABLE OF CONTENTS
Page
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ARTICLE I
PURCHASE AND SALE
1.1 PURCHASE AND SALE OF SHARES. . . . . . . . . . . . . . . . . . . . 1
1.2 PURCHASE PRICE . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLERS
2.1 OWNERSHIP OF SHARES. . . . . . . . . . . . . . . . . . . . . . . . 2
2.2 DUE ORGANIZATION . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.3 DUE AUTHORIZATION. . . . . . . . . . . . . . . . . . . . . . . . . 2
2.4 CAPITALIZATION . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.5 PERMITS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.6 FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . 4
2.7 NO UNDISCLOSED LIABILITIES . . . . . . . . . . . . . . . . . . . . 4
2.8 NO MATERIAL ADVERSE CHANGE . . . . . . . . . . . . . . . . . . . . 4
2.9 REAL PROPERTY. . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.10 INTELLECTUAL PROPERTY. . . . . . . . . . . . . . . . . . . . . . . 5
2.11 MATERIAL CONTRACTS; PRODUCT WARRANTIES . . . . . . . . . . . . . . 7
2.12 EMPLOYEES AND RELATED AGREEMENTS; ERISA. . . . . . . . . . . . . . 10
2.13 EMPLOYEE RELATIONS . . . . . . . . . . . . . . . . . . . . . . . . 11
2.14 NO DEFAULTS OR VIOLATIONS. . . . . . . . . . . . . . . . . . . . . 12
2.15 CERTAIN ENVIRONMENTAL MATTERS. . . . . . . . . . . . . . . . . . . 12
2.16 LITIGATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2.17 TAXES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2.18 COMPANY ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . 16
2.19 INSURANCE POLICIES . . . . . . . . . . . . . . . . . . . . . . . . 17
2.20 ACCOUNTS RECEIVABLE; INVENTORIES . . . . . . . . . . . . . . . . . 17
2.21 CAPITAL IMPROVEMENTS . . . . . . . . . . . . . . . . . . . . . . . 17
2.22 ASSETS SUFFICIENT FOR CONDUCT OF BUSINESS. . . . . . . . . . . . . 17
2.23 CONSENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
2.24 BANK ACCOUNTS; POWERS OF ATTORNEY. . . . . . . . . . . . . . . . . 18
2.25 CUSTOMERS AND SUPPLIERS. . . . . . . . . . . . . . . . . . . . . . 18
2.26 COMPANY PRODUCTS . . . . . . . . . . . . . . . . . . . . . . . . . 18
2.27 ANTITRUST CONSIDERATIONS . . . . . . . . . . . . . . . . . . . . . 18
2.28 DISCLOSURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER AND GUARANTOR
3.1 DUE ORGANIZATION . . . . . . . . . . . . . . . . . . . . . . . . . 19
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3.2 CORPORATE AUTHORITY. . . . . . . . . . . . . . . . . . . . . . . . 19
3.3 FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . 20
3.4 CONSENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
ARTICLE IV
COVENANTS OF SELLERS AND PURCHASER
4.1 IMPLEMENTING AGREEMENT . . . . . . . . . . . . . . . . . . . . . . 20
4.2 INVESTIGATION OF THE BUSINESS BY PURCHASER . . . . . . . . . . . . 20
4.3 PRESERVATION OF BUSINESS, ASSETS AND SHARES. . . . . . . . . . . . 21
4.4 ORDINARY COURSE. . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.5 BOOKS AND RECORDS. . . . . . . . . . . . . . . . . . . . . . . . . 21
4.6 COMPENSATION . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
4.7 CONSENTS AND APPROVALS . . . . . . . . . . . . . . . . . . . . . . 22
4.8 MAINTENANCE OF INSURANCE . . . . . . . . . . . . . . . . . . . . . 22
4.9 NO MODIFICATIONS . . . . . . . . . . . . . . . . . . . . . . . . . 22
4.10 NO ORGANIC CHANGE. . . . . . . . . . . . . . . . . . . . . . . . . 22
4.11 NO ISSUANCE OF SHARES, OPTIONS, ETC. . . . . . . . . . . . . . . . 22
4.12 NO DIVIDENDS, ETC. . . . . . . . . . . . . . . . . . . . . . . . . 22
4.13 EMPLOYEES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
ARTICLE V
COVENANTS OF PURCHASER
5.1 IMPLEMENTING AGREEMENT . . . . . . . . . . . . . . . . . . . . . . 23
5.2 CONFIDENTIALITY. . . . . . . . . . . . . . . . . . . . . . . . . . 23
5.3 CONSENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
5.4 RECORDS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE VI
CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER
6.1 CONSENTS AND APPROVALS . . . . . . . . . . . . . . . . . . . . . . 24
6.2 WARRANTIES TRUE AS OF BOTH DATE HEREOF AND CLOSING DATE. . . . . . 24
6.3 COMPLIANCE WITH AGREEMENTS AND COVENANTS . . . . . . . . . . . . . 24
6.4 NO CHANGES OR DESTRUCTION OF PROPERTY. . . . . . . . . . . . . . . 24
6.5 OPINION OF COUNSEL . . . . . . . . . . . . . . . . . . . . . . . . 24
6.6 NON-COMPETITION AND NON-DISCLOSURE AGREEMENT . . . . . . . . . . . 24
6.7 RELEASE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
6.8 OTHER AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . 25
6.9 ACTIONS OR PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . 25
6.10 RESIGNATION OF DIRECTORS AND OFFICERS. . . . . . . . . . . . . . . 25
6.11 COMPLIANCE WITH HSR ACT. . . . . . . . . . . . . . . . . . . . . . 25
ARTICLE VII
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CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLERS
7.1 WARRANTIES TRUE AS OF BOTH DATE HEREOF AND CLOSING DATE. . . . . . 25
7.2 COMPLIANCE WITH AGREEMENTS AND COVENANTS; CERTIFICATE. . . . . . . 25
7.3 OPINION OF COUNSEL . . . . . . . . . . . . . . . . . . . . . . . . 26
7.4 RELEASE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
7.5 OTHER AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . 26
7.6 ACTIONS OR PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . 26
7.7 EMPLOYMENT AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . 26
7.8 COMPLIANCE WITH HSR ACT. . . . . . . . . . . . . . . . . . . . . . 26
7.9 DELIVERY OF GUARANTY . . . . . . . . . . . . . . . . . . . . . . . 26
ARTICLE VIII
THE CLOSING
8.1 CLOSING. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
8.2 DELIVERIES BY SELLERS AND THE COMPANY. . . . . . . . . . . . . . . 27
8.3 DELIVERIES BY PURCHASER. . . . . . . . . . . . . . . . . . . . . . 28
ARTICLE IX
TERMINATION
9.1 TERMINATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
9.2 NOTICE OF TERMINATION. . . . . . . . . . . . . . . . . . . . . . . 29
ARTICLE X
SURVIVAL AND REMEDY: INDEMNIFICATION
10.1 SURVIVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
10.2 INDEMNIFICATION BY SELLERS . . . . . . . . . . . . . . . . . . . . 29
10.3 INDEMNIFICATION BY PURCHASER AND GUARANTOR . . . . . . . . . . . . 30
10.4 NOTICE OF CLAIMS . . . . . . . . . . . . . . . . . . . . . . . . . 30
10.5 THIRD PARTY CLAIMS . . . . . . . . . . . . . . . . . . . . . . . . 31
10.6 PROPORTIONATE LIABILITY; OFFSET. . . . . . . . . . . . . . . . . . 31
10.7 LIMITATION ON LOSSES . . . . . . . . . . . . . . . . . . . . . . . 31
10.8 SOLE REMEDY. . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
ARTICLE XI
MISCELLANEOUS
11.1 ARBITRATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
11.2 EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
11.3 AMENDMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
11.4 BROKERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
11.5 NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
11.6 EFFECT OF INVESTIGATIONS.. . . . . . . . . . . . . . . . . . . . . 34
11.7 WAIVERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
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11.8 COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
11.9 HEADINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
11.10 APPLICABLE LAW . . . . . . . . . . . . . . . . . . . . . . . . . . 34
11.11 ASSIGNMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
11.12 PUBLICITY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
11.13 OTHER INSTRUMENTS . . . . . . . . . . . . . . . . . . . . . . . . 35
11.14 ENTIRE UNDERSTANDING . . . . . . . . . . . . . . . . . . . . . . . 35
EXHIBITS
Exhibit A Form of Purchaser Note
Exhibit B Form of Opinion of Counsel to Sellers
Exhibit C Form of Non-Competition and Non-Disclosure Agreement
Exhibit D Form of Release
Exhibit E Form of Opinion of Counsel to Purchaser
Exhibit F Form of Employment Agreement
SCHEDULES
Schedule 1.1 Shares Owned by Each Seller
Schedule 1.2 Payment Instructions
Schedule 2.2 Jurisdictions
Schedule 2.3 Due Authorization
Schedule 2.4 Capitalization
Schedule 2.5 Permits
Schedule 2.8 Material Adverse Changes
Schedule 2.9 Real Property
Schedule 2.10(F) Intellectual Property
Schedule 2.10(G) Agreements regarding Intellectual Property
Schedule 2.10(H) Title to Intellectual Property
Schedule 2.10(I) Intellectual Property Breaches
Schedule 2.10(J) Challenged; Restricted Intellectual Property
Schedule 2.10(K) Intellectual Property Infringement
Schedule 2.10(L) Employee Intellectual Property
Schedule 2.11(A) Material Contracts
Schedule 2.11(B) Customer Orders and Proposals
Schedule 2.11(C) Product Warranties
Schedule 2.12(A) Employment Compensation and Similar Agreements
Schedule 2.12(B) Employee Benefit Plans
Schedule 2.12(D) Noncompliance with Respect to Plans
Schedule 2.12(I) Employees
Schedule 2.14 No Defaults or Violations
Schedule 2.15 Environmental Matters
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Schedule 2.16 Litigation
Schedule 2.17 Tax Matters
Schedule 2.18 Company Assets
Schedule 2.19 Insurance Policies
Schedule 2.20 Accounts Receivable
Schedule 2.21 Capital Improvements
Schedule 2.23 Consents
Schedule 2.24 Bank Accounts
Schedule 2.25 Customers and Suppliers
Schedule 2.26 Company Products
Schedule 4.5 Books and Records
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT, dated as of May 1, 1996 (this "AGREEMENT"),
is by and among Vanguard Plastics Inc., a Pennsylvania corporation, and John A.
Steil and Ursula E. Steil, as sole Trustees of The 1989 Steil Family Trust
("Trust") (each, a "SELLER" and collectively, "SELLERS"), RXI Plastics, Inc., a
Delaware corporation ("PURCHASER") and RXI Holdings, Inc., a Delaware
corporation ("Guarantor").
RECITALS
A. Sellers own one hundred percent (100%) of the outstanding shares of
capital stock of Vanguard Plastics of California, Inc., a California corporation
(the "COMPANY"), which shares Sellers desire to sell to Purchaser and Purchaser
is willing to purchase from Sellers, on the terms and conditions set forth
herein.
B. Guarantor owns one hundred percent (100%) of the outstanding shares of
capital stock of Purchaser.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements hereinafter set forth, it is hereby agreed among the parties as
follows:
ARTICLE I
PURCHASE AND SALE
1.1 PURCHASE AND SALE OF SHARES. Subject to the terms and conditions set
forth in this Agreement, at the Closing (as defined in SECTION 8.1) each Seller
shall sell, transfer, convey and deliver to Purchaser, and Purchaser shall
accept, acquire and take delivery of, all of the shares of capital stock of the
Company (the "SHARES") owned by such Seller. The number of Shares owned by each
Seller is listed opposite such Seller's name on SCHEDULE 1.1.
1.2 PURCHASE PRICE. As full consideration for the sale, transfer,
conveyance and delivery to Purchaser of all of the Shares on the Closing Date
(as defined in SECTION 8.1), Purchaser shall pay to Sellers in the aggregate as
the purchase price for all of the Shares ("Purchase Price") the amount equal to
the sum of One Million One Hundred Seventy-Six Thousand Four Hundred Seventy
Dollars ($1,176,740). A portion of the Purchase Price shall consist of a
promissory note in the form of Exhibit A hereto (the "PURCHASER NOTE"). The
Purchaser Note shall be in an aggregate principal amount equal to Five Hundred
Seventy-Six Thousand Four Hundred Seventy Dollars ($576,470), shall bear
interest at a rate of ten percent (10%) payable semi-annually in arrears with
twenty percent (20%) of the original principal payable on each anniversary of
the Closing Date, and shall be due and payable in full on the fifth anniversary
of the Closing Date. The Purchaser Note may be prepaid by Purchaser at any time
without penalty, and will be guaranteed by Guarantor pursuant to a guaranty in
the form of Exhibit G ("Guaranty"). The cash portion of the
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Purchase Price shall be wired pursuant to written instructions to be provided
by Vanguard Plastics no later than two (2) days prior to the Closing and the
Purchase Price will be paid to Sellers at the Closing as follows:
(a) The Purchaser Note shall be delivered to the Trust; and
(b) The balance of the Purchase Price shall be paid to Vanguard
Plastics, Inc.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLERS
Each Seller, jointly and severally, except for the representations and
warranties set forth in Section 2.1 and (to the extent of consents to be
obtained by the Seller and not the Company) Section 2.23 which are made by each
Seller for itself alone, represents and warrants to Purchaser as follows:
2.1 OWNERSHIP OF SHARES. The Shares set forth opposite such Seller's name
on SCHEDULE 1.1 are owned by such Seller free and clear of any option, pledge,
security interest, lien, charge, encumbrance, mortgage or claim, (each, an
"ENCUMBRANCE"), have been duly and validly issued, are fully paid and non-
assessable, and except for the Stockholder Agreement disclosed on Schedule 2.4
are not subject to any restriction on transfer. Upon transfer to Purchaser of
the Shares at the Closing, such Seller will convey to Purchaser good title to
such Shares free and clear of all Encumbrances. SCHEDULE 1.1 is a complete and
accurate list of all of the legal and beneficial owners of shares of stock of
the Company.
2.2 DUE ORGANIZATION. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of California
and is duly qualified to do business as a foreign corporation in each of the
jurisdictions listed on SCHEDULE 2.2 with all requisite corporate power and
authority to own, lease and operate its properties and to carry on its business
as now being conducted. The Company does not conduct business nor is it
required to qualify to do business as a foreign corporation in any
jurisdiction(s) other than the jurisdictions listed on SCHEDULE 2.2, except
where failure to be qualified would not have a material adverse effect on the
Company. The Company does not own or lease property in any jurisdiction other
than its jurisdiction of incorporation and the jurisdictions set forth on
SCHEDULE 2.2. The Company has no subsidiaries, either wholly or partially
owned, and the Company does not, directly or indirectly, own or hold any
outstanding voting securities or other equity interest in any security issued by
any corporation or other entity.
2.3 DUE AUTHORIZATION. Such Seller has full corporate, fiduciary or
personal power and authority to enter into this Agreement and to carry out the
transactions contemplated hereby, and this Agreement has been duly executed and
delivered by such Seller and constitutes the legal, valid and binding obligation
of such Seller, enforceable in accordance with its terms, except as such
enforceability may be limited by applicable
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bankruptcy, insolvency, moratorium, reorganization or similar laws from time
to time in effect which affect creditors' rights generally, and by legal and
equitable limitations on the availability of specific remedies. Except as
set forth on SCHEDULE 2.3, the execution, delivery and performance of this
Agreement by such Seller and all other instruments, agreements, certificates
and documents required hereby by such Seller do not (i) violate any decree or
judgment of any court or the government of the United States or any state or
political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or
pertaining to government (each, a "GOVERNMENTAL AUTHORITY") which may be
binding on or applicable to the Company, the assets of the Company (the
"COMPANY ASSETS"), or any of the Sellers; (ii) violate any law (or regulation
promulgated under any law); (iii) result in a breach of, or constitute a
default (or an event which, with or without notice or lapse of time or both,
would constitute a default) under, or permit cancellation of, or result in
the creation of any Encumbrance upon any of the Company Assets or the Shares
under, or require the consent of a party other than the Company under, any of
the terms, conditions or provisions of any contract, lease, commitment,
indenture, mortgage, note, bond, instrument, license or other agreement to
which such Seller or the Company is a party, or by which such Seller, the
Company or any of the Company Assets or the Shares are bound, where such
breach, default or cancellation would have a material adverse effect on the
Company; (iv) permit the acceleration of the maturity of any indebtedness of
the Company or any indebtedness secured by any of the Company Assets or the
Shares; or (v) violate or conflict with any provision of the articles of
incorporation or bylaws of the Company.
2.4 CAPITALIZATION. The authorized capital stock of the Company consists
of One Million (1,000,000) shares of common stock, no par value, of which Five
Hundred Thousand (500,000) shares have been duly issued and are currently issued
and outstanding. Neither Seller nor the Company has granted or issued any
option, warrant or similar right to, or entered into any agreements,
arrangements or commitments with, any person or entity to purchase or acquire
any rights with respect to any shares of capital stock of the Company. Except
as set forth in SCHEDULE 2.4, the Company is not a party to, and does not
otherwise have any knowledge of the current existence of, any stockholder
agreement, voting trust agreement or any other similar contract, agreement,
arrangement, commitment, plan or understanding restricting or otherwise related
to the voting, dividend, ownership or transfer rights of any shares of capital
stock of the Company, and the Company has no obligations to repurchase any
shares of common stock of the Company. The Stockholders Agreement listed on
Schedule 2.4 will be terminated immediately prior to the Closing.
2.5 PERMITS. SCHEDULE 2.5 is a true, correct and complete list of all the
Company's Federal, state, local or foreign licenses, certificates, permits,
franchises, consents, approvals and rights (the "PERMITS"). The Company owns,
holds or possesses all Permits necessary to entitle it to own or lease, operate
and use its assets and to carry on and conduct its business substantially as
currently conducted. Complete and correct copies of the Permits have been
delivered to Purchaser. The Company has fulfilled and performed its obligations
under each of the Permits and no event has occurred or condition exists which
constitutes or, after notice or lapse of time or both, would constitute a breach
or default under any such Permit or would adversely affect in any material
respect the rights of the
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Company under any such Permit or which permits revocation or termination of
any such Permits or which would adversely affect in any material respect the
rights of the Company under any such Permit.
2.6 FINANCIAL STATEMENTS. Sellers have delivered to Purchaser copies of
the audited financial statements of the Company as of and for the twelve-month
periods ended December 31, 1992, December 31, 1993, December 31, 1994 and
December 31, 1995, in each case consisting of the balance sheet at each such
date and the related statements of income, changes in stockholders equity and
cash flows for the applicable period (collectively, the "FINANCIAL STATEMENTS").
The Financial Statements have been prepared in conformity with generally
accepted accounting principles ("GAAP") consistently applied and present fairly
the consolidated financial position and the assets of the Company and the
consolidated results of the operation of the Company and changes in financial
position as of and with respect to the respective dates thereof and the periods
covered thereby and are in conformity with the past accounting practices of the
Company as consistently applied during such periods. The balance sheet included
in the Financial Statements as at December 31, 1995, referred to as the "Balance
Sheet", is prepared in conformity with GAAP consistently applied and fairly
presents the consolidated financial position of the Company as at the date
thereof in conformity with GAAP. None of the Financial Statements contains any
material items of special or nonrecurring income except as expressly specified
therein. Except for liabilities which accrue or arise in the ordinary course of
the Company's business as conducted in prior periods, since the date of the
Balance Sheet, the Company has not incurred any liabilities, debts, claims or
obligations, whether accrued, absolute, contingent or otherwise, whether due or
to become due.
2.7 NO UNDISCLOSED LIABILITIES. As of the date hereof, the Company is not
subject to any liability (including unasserted claims, whether known or
unknown), whether absolute, contingent, accrued or otherwise, which is not shown
or which is in excess of amounts shown or reserved for in the Balance Sheet,
other than liabilities of the same nature as those set forth in the Balance
Sheet which were reasonably incurred in the ordinary course of its business
consistent with past practice after the date of the Balance Sheet. As of the
Closing, the Company will have no liabilities which, in accordance with GAAP,
would be required to be reflected on a balance sheet as of such date other than
(i) current liabilities or indebtedness incurred in the ordinary course of
business after January 1, 1996, (ii) Company indebtedness incurred prior to
January 1, 1996 and reflected on the Balance Sheet and (iii) deferred tax
liabilities.
2.8 NO MATERIAL ADVERSE CHANGE. Except as set forth on SCHEDULE 2.8,
since December 31, 1995, the business of the Company has been conducted only in
the ordinary course and there has not been since December 31, 1995: (i) any
material adverse change in the financial condition, business, properties, assets
or results of operations of the Company; (ii) any material loss or damage
(whether or not covered by insurance) to any of the Company Assets which
materially affects or impairs the ability of the Company to conduct its
business, or any other event or condition of any character which has materially
and adversely affected the business or operation of the Company; (iii) the
attaching, placing or granting of, or the agreement to attach, place or grant,
any Encumbrance on any of the
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Company Assets or the Shares; (iv) any indebtedness incurred by such Seller
or the Company, other than in the ordinary course of business; (v) any
contract or other transaction entered into by such Seller relating to, or
otherwise affecting in any way, the Company or the operation thereof, other
than in the ordinary course of business; (vi) any sale or transfer of the
Company Assets or any cancellation of any debts or claims of the Company;
(vii) any change in the terms of any of the Material Contracts (as defined in
SECTION 2.11 hereof) of the Company, except in the ordinary course of
business; (viii) any change in the accounting systems, policies or practices
of the Company; (ix) any waiver by or on behalf of the Company of any rights
which have any material value; or (x) any transactions with any of the
Company's affiliates, except for transactions entered into in the ordinary
course of business, which in the aggregate have not been material to the
Company.
2.9 REAL PROPERTY. "REAL PROPERTY" shall mean all of the land, buildings,
plants, facilities, installations, fixtures and other structures and
improvements leased exclusively to, or owned by, the Company. All of Company's
Real Property is listed on SCHEDULE 2.9. The activities carried on by the
Company on the Real Property are not, to such Seller's knowledge, in violation
of any applicable zoning, environmental or health and safety regulation or
ordinance or any other similar law, statute, regulation or ordinance in any
material respect and all of such premises are in such condition as is adequate
for the operation of the Company's business. To such Seller's knowledge, all
covenants or other restrictions (if any) to which any of the Real Property is
subject are being properly performed and observed except to the extent contrary
to law and neither the Company nor any of the Sellers has received any notice of
violation (or claimed violation) thereof and there is no pending, threatened or
proposed proceeding or governmental action to modify the zoning classification
of, or to condemn or take by the power of eminent domain (or to purchase in lieu
thereof), or to classify as a landmark, or otherwise to take or restrict in any
way the right to use, develop or alter, all or any part of the Real Property.
In addition, with respect to Real Property subject to a lease or similar
agreement pursuant to which the Company is the lessee of, or holds or operates,
any Real Property owned by a third person, no event or condition has occurred
which constitutes or, with the giving of notice or passage of time or both could
constitute, a material default thereunder, which default would have a material
adverse effect on the financial condition or results of operations of the
Company, or would entitle the lessor to terminate the lease.
2.10 INTELLECTUAL PROPERTY. "Intellectual Property" means all of the
intellectual property owned by, licensed to or used by the Company in the
conduct of its business (other than commercially available "Shrinkwrap" licensed
software), and includes:
(a) all United States and foreign patents, patent applications,
continuations, continuations-in-part, divisions, reissues, patent
disclosures, inventions (whether or not patentable) or improvements thereto
("Patent Rights");
(b) all United States, state and foreign trademarks, service marks,
logos, trade dress and trade names (including all assumed or fictitious
names under which the Company is conducting its business or has within the
previous five years
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conducted its business), whether registered or unregistered, and pending
applications to register the foregoing ("Trademarks");
(c) all United States and foreign copyrights, whether registered or
unregistered and pending applications to register the same ("Copyrights");
(d) all confidential ideas, trade secrets, know-how, concepts,
methods, processes, formulae, reports, data, customer lists, mailing lists,
business plans, or other proprietary information ("Trade Secrets"); and
(e) all computer software programs and software systems, the
copyright or other intellectual property rights to which are owned by or
licensed to, and used by the Company in the conduct of the Company's
business, including all databases, compilations, tool sets, compilers,
higher level or proprietary languages, related documentation and materials,
whether in source code, object code or human readable form ("Software").
(f) SCHEDULE 2.10(F) contains a list and description (showing in each
case the owner, licensor or licensee thereof; any product, device, process,
service, business or publication covered thereby; the expiration date and
number, if any) of all Intellectual Property, other than (i) copyrights
that are unregistered and as to which no registration application is
pending, (ii) Trade Secrets, and (iii) software licensed to the Company
that is generally available to end users and subject to license agreements
that become effective when the purchaser breaks the Software package.
(g) SCHEDULE 2.10(G) also contains a list and description of all
agreements, commitments, contracts, understandings, licenses, sublicenses,
assignments and indemnities which relate or pertain to any Intellectual
Property or to disclosure or use of ideas or information of the Company or
third persons to which the Company is a party, showing in each case the
parties thereto and the material terms thereof.
(h) Except as disclosed in SCHEDULE 2.10(H), the Company either:
(i) owns the entire right, title and interest in and to the Intellectual
Property free and clear of any Encumbrance; or (ii) has the perpetual,
royalty-free right to use the same.
(i) Except as disclosed in SCHEDULE 2.10(I), the Company is not in
breach of any material provision of any material agreement, commitment,
contract, understanding, license, sublicense, assignment or indemnity which
relates to any of the Intellectual Property, and the Company has not taken
any action which would impair or otherwise adversely effect its rights in
any of the Intellectual Property. The Company has all right, power and
authority with respect to the Intellectual Property and materials
identified above to execute and deliver this Agreement, to consummate the
transactions contemplated hereby and thereby and to comply with or fulfill
the terms, conditions or provisions hereof or thereof. The transactions
contemplated by this Agreement will have no adverse effect on the validity
and enforceability of any of the Intellectual Property.
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(j) Except as disclosed in SCHEDULE 2.10(J): (i) all registrations
for Intellectual Property identified as being owned by the Company are
valid and in force, and all applications to register any unregistered
Intellectual Property are pending and in good standing, all without
challenge of any kind; (ii) the Intellectual Property owned by the Company
is valid and enforceable; and (iii) the Company has the sole and exclusive
right to bring actions for infringement or unauthorized use of the
Intellectual Property owned by the Company, and to the best knowledge of
the Company, there is no basis for any such action. Correct and complete
copies of: (x) registrations for all registered copyrights, trademarks,
trade names, service marks and patents identified as being owned by the
Company; (y) all pending applications to register unregistered Intellectual
Property (together with any subsequent correspondence or filings relating
to the foregoing); and (z) all items identified above, have heretofore been
delivered by the Company or Sellers.
(k) Except as disclosed in SCHEDULE 2.10(K), no infringement of any
copyright, trademark, service mark, trade name, patent, patent right, trade
secret or other property right of any other Person (as defined below) has
occurred or results in any way from the operations of the Company's
business. "PERSON" means any individual, corporation, partnership, joint
venture, association, company, trust, estate, unincorporated organization
or Governmental Authority. No claim of any infringement of any copyright,
trademark, service mark, trade name, patent, patent right, trade secret or
other property right of any other Person has been made or asserted in
respect of the operations of the Company's business. The Company has not
had notice of, or knowledge of any basis for, a claim against the Company
that its operations, activities, products, software, equipment, machinery
or processes of the Company's business infringe any copyright, trademark,
service mark, trade name, patent, patent right, trade secret or other
property right of any other Person.
(l) Except as disclosed in SCHEDULE 2.10(L), all employees, agents,
consultants, or contractors who have contributed to or participated in the
creation or development of any copyrightable, patentable or trade secret
material on behalf of the Company or any predecessor in interest thereto
either: (i) was, at the time of such contribution or participation, an
employee of the Company; (ii) is a party to a "work-for-hire" agreement
under which the Company is deemed to be the original owner/author of all
property rights therein; or (iii) has executed an assignment or an
agreement to assign in favor of the Company (or such predecessor in
interest, as applicable) of all right, title and interest in such material.
2.11 MATERIAL CONTRACTS; PRODUCT WARRANTIES. SCHEDULE 2.11(A) lists the
agreements and contracts deemed material by the Company or the Sellers (the
"Material Contracts"). Except as set forth in SCHEDULE 2.11(A), the Company is
not a party to or bound by:
(a) any contract for the purchase, sale or lease of real property;
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(b) any contract for the purchase of raw materials which involved the
payment of more than $100,000 in fiscal year 1996 or which includes
obligations of the Company which extends beyond June 30, 1996;
(c) any contract for the purchase, licensing or development of
Software;
(d) any consignment, distributor, dealer, manufacturers
representative, sales agency, advertising representative or advertising or
public relations contract which involved the payment of more than $50,000
in either of calendar years 1994 or 1995, and which extends beyond June 30,
1996;
(e) any guarantee of the obligations or liabilities of customers,
suppliers, officers, directors, employees, affiliates of the Company or
others;
(f) any contract between the Company and any stockholder, director or
officer or any affiliate of any of them;
(g) any agreement which provides for, or relates to, the incurrence
by the Company of debt for borrowed money or the extension of credit (other
than to customers in the ordinary course of business consistent with past
practice) by the Company to any other Person;
(h) any agreement or understanding with a third Person that restricts
the Company from carrying on its business anywhere in the world; or that
provides for or relates to any non-competition or confidentiality
arrangement with any Person, including any current or former officer or
employee of the Company;
(i) any contract or group of related contracts for capital
expenditures or capital purchases in excess of $100,000 for any single
project or related series of projects;
(j) any partnership, joint venture or other similar arrangement or
agreement involving a sharing of profits or losses;
(k) any contract that provides for penalties or other specified
damages based on late or delayed delivery of product by the Company or
breach by the Company of such contract;
(l) any contract not otherwise referred to in this SECTION 2.11 and
not made in the ordinary course of the Company's business; or
(m) any contract for any purpose (whether or not made in the ordinary
course of the Company's business or otherwise not required to be listed or
described in SCHEDULE 2.11(A)) that is material to the Company or its
business.
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(n) SCHEDULE 2.11(B) sets forth, as of March 31, 1996, each open
customer contract or purchase order for which the contract price is $50,000
or greater and includes, for each such contract or purchase order (i) the
contract price, (ii) the aggregate amount of the advance payments, if any,
received by the Company as of that date, and (iii) the estimated percentage
of completion of such contract or purchase order as of that date.
SCHEDULE 2.11(B) also sets forth, as of March 31, 1996, each proposal made
to or received from a customer for which the contract price is expected to
be, if such proposal is accepted (or is, if such proposal has been
accepted), in excess of $50,000.
(o) SCHEDULE 2.11(C) contains, with respect to all products sold or
distributed by the Company, (i) the form of, or a description of the
material terms of, each standard product warranty given or offered by the
Company, and (ii) a list and description of each express warranty given or
offered by the Company that is not a standard warranty, in each case which
warranty is in effect on the date hereof or will be in effect on the
Closing Date. The reserve for liabilities with respect to warranty claims
or returns for defective goods included in the Financial Statements as of
December 31, 1995 fairly reflects in all material respects the amount
required in accordance with GAAP to be shown therein as a reserve for
returns or liability, and the reserve for such liabilities that will be set
forth in the books and records of the Company on the Closing Date will
fairly reflect in all material respects the amount required in accordance
with GAAP to be shown thereon as of the Closing Date.
Except as set forth in SCHEDULE 2.11(A), each of the Material Contracts
constitutes a valid and binding obligation of the Company, and to the Company's
best knowledge, the other parties thereto, and is in full force and effect and
will continue in full force and effect after the Closing Date, in each case
without breaching the terms thereof or resulting in the forfeiture or impairment
of any rights thereunder and without the consent, approval or act of, or the
making of any filing with, any other party. The Company has fulfilled and
performed in all material respects its obligations required to be heretofore
performed under each of the Material Contracts, and the Company is not in, or
alleged to be in, breach or default under, nor is there or is there alleged to
be any basis for termination of, any of the Material Contracts and, to the best
knowledge of the Company, no other party to any of the Material Contracts has
breached or defaulted thereunder, and no event has occurred and no condition or
state of facts exists which, with the passage of time or the giving of notice or
both, would constitute such a default or breach by the Company or, to the best
knowledge of the Company, by any such other party. The Company is not currently
renegotiating any of the Material Contracts or paying liquidated damages in lieu
of performance thereunder. Complete and correct copies of each of the Material
Contracts have heretofore been delivered to Purchaser.
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2.12 EMPLOYEES AND RELATED AGREEMENTS; ERISA.
(a) Attached as SCHEDULE 2.12(A) is a list of all of the Company's
employment, consulting, commission, advisory or other service agreements or
arrangements (whether in writing or oral), other than hourly workers which
provide for the payment by the Company of more than $30,000 per annum, and all
of the Company's bonus or incentive remuneration plans or arrangements, deferred
compensation agreements, confidentiality agreements and covenants not to compete
with any officer, director, stockholder, employee, agent or attorney-in-fact of
the Company.
(b) Attached as SCHEDULE 2.12(B) is a true and correct list of all of
the Company's employee benefit agreements, plans or arrangements (within the
meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), including any profit sharing, pension, or 401(k) plans
(each, a "BENEFIT PLAN").
(c) The Company or the Sellers have heretofore delivered to Purchaser
(i) a copy of each employee manual issued by the Company since January 1, 1991
and (ii) a full and complete statement of the present policies relating to
vacation pay, sick pay, and personal or family leave, holidays, overtime work,
severance, layoffs, insurance benefits and expense reimbursement of the
employees of the Company.
(d) Neither the Company nor the Sellers maintain any Employee Plan
that is an employee pension benefit plan within the meaning of Section 3(2) of
ERISA, or contributes to any employee benefit plan subject to Title IV of ERISA.
Except as set forth in SCHEDULE 2.12(D), each of the Benefit Plans complies in
form in all material respects and has been administered in all material respects
in accordance with the requirements of ERISA and, where applicable, the Code.
The Company has complied in all material respects with the health care
continuation requirements of Section 601 ET SEQ. of ERISA with respect to its
employees and their spouses, former spouses and dependents.
(e) The Company has made available to Purchaser, with respect to each
of the Company's Benefit Plans, correct and complete copies of (i) all currently
effective plan documents and amendments, trust agreements and insurance
contracts, (ii) the most recent Annual Report (Form 5500 Series) and
accompanying schedules, as filed, (iii) the current and, to the extent
available, the prior summary plan description, and (iv) the most recent
financial statements.
(f) Neither the Company nor, to the best knowledge of any Seller, any
other "disqualified person" (within the meaning of Section 4975 of the Code) or
"party in interest" (within the meaning of Section 3(14) of ERISA) has engaged
in any "prohibited transaction" (within the meaning of Section 4975 of the Code
or Section 406 of ERISA) with respect to any of the Benefit Plans which could
subject any such Plan (or its related trust) or Purchaser or any ERISA Affiliate
(as defined in ERISA) of Purchaser to the penalty or tax under Section 402(i) of
ERISA or Section 4975 of the Code.
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(g) There is no pending or, to the best knowledge of any Seller,
threatened claim which alleges any violation of ERISA or any other law (i) by or
on behalf of any of the Benefit Plans or (ii) by any employee of the Company or
any plan participant or beneficiary against any such plan.
(h) SCHEDULE 2.12(I) contains: (i) a list of all employees of the
Company as of February 29, 1996, (ii) the then current annual compensation of
and a description of the fringe benefits (other than those generally available
to all employees) provided by the Company to any such listed employees, (iii) a
list of all present or former employees of the Company paid $30,000 or more in
calendar year 1995 who have terminated or given notice of their intention to
terminate their relationship with the Company since December 31, 1995, (iv) a
list of any increase, effective after December 31, 1995, in the rate of
compensation of any employees if such increase exceeds 5% of the previous annual
salary (exclusive of any bonus and/or profit sharing compensation) of such
employee and (v) a list of all substantial changes in job assignments of, or
arrangements with, or promotions or appointments of, any employees whose
compensation as of December 31, 1995 was $30,000 per annum or more.
(i) To such Seller's knowledge, (i) neither such Seller nor any
officer or director of the Company has any direct or indirect interests in the
business of competitors, suppliers or customers of the Company and (ii) the
Company has not (A) used any corporate funds for unlawful contributions, gifts,
entertainment or other unlawful expenses related to political activity, (B) made
any direct or indirect unlawful payments to government officials or others from
corporate funds or the establishment or maintenance of any unlawful or
unrecorded funds, (C) violated any of the provisions of The Foreign Corrupt
Practices Act of 1977, or any rules or regulations promulgated thereunder, (D)
received any illegal discounts or rebates or any other violation of the
antitrust laws or (E) been the subject of any investigation by the Securities
and Exchange Commission ("SEC") or any other federal, foreign, state or local
government agency or authority.
2.13 EMPLOYEE RELATIONS. The Company has complied in all material respects
with all applicable laws, rules and regulations which relate to wages, hours,
discrimination in employment and collective bargaining (except where non-
compliance would not have a material adverse effect on the Company) and is not
liable for any arrears of wages or any taxes or penalties for failure to comply
with any of the foregoing. The Company is not a party to any collective
bargaining agreement, nor, to such Seller's knowledge, is any organizing drive
under way or any representation election scheduled. To such Seller's knowledge,
the Company is not a party to, and is not affected by or threatened with, any
dispute or controversy with a union or with respect to unionization or
collective bargaining involving employees of the Company. The Company is not
materially affected by any dispute or controversy with a union or with respect
to unionization or collective bargaining involving any of its suppliers or
customers. To the best of the Company's or any Seller's knowledge, no union
organizing or election activities involving any non-union employees of the
Company have occurred at any time during they three-year period immediately
preceding the Closing Date.
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2.14 NO DEFAULTS OR VIOLATIONS. The Company is not in breach of any
provision of, nor is it in default under the terms of, any Material Contract to
which it is a party or under which it has any rights or by which it is bound,
except where such breach or default would not have a material adverse effect on
the Company, and to the knowledge of such Seller, no other party to any such
Contract is in default or breach thereunder. Except as disclosed in
SCHEDULE 2.14, the Company is in compliance in all material respects with each
law, regulation, rule or order of any Governmental Authority that is applicable
to it, except where non-compliance would not have a material adverse effect on
the Company. No notice from any Governmental Authority has been served upon any
of the Sellers, the Company claiming any violation of any law, regulation, rule
or order which would have a material adverse effect on the business or
operations of the Company.
2.15 CERTAIN ENVIRONMENTAL MATTERS. Except as set forth in SCHEDULE 2.15:
(a) the Company's past and present operations of the Company's
business have complied and are in material compliance with all applicable
requirements of laws derived from or relating to all federal, state and
local laws or regulations relating to or addressing the environment, health
or safety, including the Comprehensive Environmental Response, Compensation
and Liability Act, as amended ("CERCLA"), the Occupational Safety and
Health Act ("OSHA") and the Resource Conservation and Recovery Act ("RCRA")
("Environmental Laws");
(b) the Company has obtained all environmental, health and safety
Permits necessary for the operation of its business, and all such Permits
are in good standing and the Company is in compliance with all terms and
conditions of such Permits;
(c) none of the Company, nor any of the Real Property or its past or
present operations, is subject to any on-going investigation by, order from
or agreement with any Person (including any prior owner or operator of any
Real Property) respecting (i) any Environmental Law, (ii) any actions
required to (A) clean up, remove, treat or in any other way address
Contaminants (as defined below) in the environment, (B) prevent the Release
(as defined below) or minimize the further Release of Contaminants or (C)
investigate and determine if a remedial response is needed and to design
such a response and post-remedial investigation, monitoring, operation and
maintenance and care, or (iii) any claim of losses and expenses arising
from a Release or threatened Release ("Remedial Action"). A "Release"
means any release, spill, emission, leaking, pumping, injection, deposit,
disposal, discharge, dispersal, leaching or migration of a Contaminant into
the indoor or outdoor environment or into or out of any Real Property,
including the movement of Contaminants through or in the air, soil, surface
water, groundwater or any Real Property; "Contaminant means any pollutant,
hazardous substance, hazardous air pollutant, toxic air contaminant,
radioactive substance or waste, toxic substance, asbestos, radon gas,
polychlorinated biphenyls, hazardous waste, extremely hazardous waste,
special waste, lead, petroleum or petroleum-derived substance or waste
(including, without limitation, hydraulic oil, gasoline or diesel fuel) and
includes, but is not limited to, all of the items listed above as defined
in any Environmental Law
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(including CERCLA and RCRA) or any hazardous or toxic constituent thereof,
as well as any other substance which is required by any governmental
authority or Environmental Law to be investigated, cleaned up, removed,
treated, controlled, monitored or otherwise abated or the presence of
which shall require warnings to be given;
(d) the Company is not subject to any judicial or administrative
proceeding, order, judgment, decree or settlement alleging or addressing a
violation of or liability under any Environmental Law;
(e) Except as set forth in SCHEDULE 2.15, the Company has not:
(i) suffered a Release of a Contaminant substance or filed any
report of a Release pursuant to Section 103(a) of CERCLA, or any state
equivalent;
(ii) filed a notice pursuant to Section 103(c) of CERCLA;
(iii) filed notice pursuant to Section 3010 of RCRA or any
state equivalent, indicating the generation of any hazardous waste, as
that term is defined under 40 CFR Part 261 or any state analog; or
(iv) filed any notice under any applicable Environmental Law
reporting a substantial violation of any applicable Environmental Law;
(f) there is not now, nor to the best knowledge of the Company has
there ever been, on or in any Real Property:
(i) any treatment, recycling, storage or disposal of any
hazardous waste, as that term is defined under 40 CFR Part 261 or any
state analog that requires or required a Permit pursuant to Section
3005 of RCRA or any state equivalent; or
(ii) any underground storage tank or surface impoundment or
landfill or waste pile.
(g) there is not now on or in any Real Property any polychlorinated
biphenyls (PCB) used in pigments, hydraulic oils, electrical transformers
or other equipment;
(h) the Company has not received any notice or claim to the effect
that it is or may be liable to any Person as a result of the Release or
threatened Release of a Contaminant into the environment on any Real
Property or generated by the Company;
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(i) no Real Property has been listed or, to the best knowledge of the
Company, proposed for listing on the National Priorities List pursuant to
CERCLA, on the Comprehensive Environmental Response, Compensation and
Liability Information System List or any state list of sites requiring
Remedial Action;
(j) the Company has not sent or arranged for the transport of any
Contaminant to any site listed on the National Priorities List pursuant to
CERCLA or that otherwise could give rise to liability on the part of the
Company for Remedial Action, losses or expenses;
(k) no environmental Encumbrance has attached to any Real Property;
(l) any asbestos-containing material which is on or part of any Real
Property (excluding any raw materials used in the manufacture of products
or products themselves) is in good repair according to the current
standards and practices governing such material, and its presence or
condition does not violate any currently applicable Environmental Law;
(m) none of the products that the Company manufactures, distributes
or sells in connection with its business, now or in the past, contains
asbestos or asbestos-containing material; and
(n) there has been no Release for which the Company has
responsibility under any Environmental Law to investigate, monitor, remove
or remediate.
2.16 LITIGATION. Except as set forth in SCHEDULE 2.16, there are no
actions, suits, or other litigation, proceedings or governmental investigations
pending or, to the knowledge of any of the Sellers, threatened against the
Company, or which seek to restrain the transactions contemplated by this
Agreement. Neither the Company nor such Seller is subject to any order,
judgment, decree, stipulation, or consent of or with any court, Governmental
Authority or agency which has, or is likely to have, a material adverse effect
on the financial condition or the results or operation of the Company.
2.17 TAXES.
(a) Except as set forth on SCHEDULE 2.17, (i) the Company has filed
or caused to be filed all returns, reports or similar statements (together with
the schedules thereto) required to be filed with respect to any Tax (as defined
in PARAGRAPH (D) below), including, without limitation, any information return,
claim for refund, amended return and declaration of estimated Tax (collectively,
"TAX RETURNS") required to be filed as of the time this representation is made;
(ii) all such Tax Returns disclose all Taxes required to be paid by the Company
for the periods covered thereby; (iii) the Company has no liability for Taxes
(whether or not shown on any Tax Return) owed by the Company for activities or
events occurring at any time prior to the Closing Date which have not been
timely paid or adequately reserved for on the Balance Sheet or the books and
records of the Company; (iv) the Company has not waived or been requested to
waive any statute of limitations in
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respect of Taxes; (v) to the best knowledge of the Sellers the Tax Returns
referred to in clause (i) have not been examined by the Internal Revenue
Service or the appropriate state, local or foreign taxing authority; (vi)
there is no action, suit, investigation, audit, claim or assessment pending
or to the best of the Sellers knowledge proposed or threatened with respect
to Taxes of the Company; (vii) all deficiencies asserted or assessments made
as a result of any examination of the Tax Returns referred to in clause (i)
have been reserved for on the Financial Statements or paid in full; (viii)
the Company is not a party to any written or unwritten agreement or
arrangement for the allocation or payment of Tax liabilities or payment for
Tax benefits with respect to a consolidated, combined or unitary Tax Return
which Tax Return includes the Company; (ix) there are no liens for Taxes upon
the assets of the Company, except liens relating to current Taxes not yet
due; (x) all Taxes which the Company is required by law to withhold or to
collect for payment have been duly withheld and collected, and have been paid
or accrued; (xi) the accruals for deferred Taxes (assuming 1994 tax rates)
reflected in the Financial Statements are adequate to cover any deferred tax
liability of the Company determined in accordance with GAAP through the date
thereof; (xii) the Company has not been a member of any Company Group (as
defined in PARAGRAPH (D) below) and is not a member of any Company Group as
of the date hereof; (xiii) there are no Tax rulings, requests for rulings, or
closing agreements relating to the Company which could affect the Company's
liability for Taxes for any period after the Closing Date; (xiv) as a result
of a change in accounting method for a Tax period beginning before the
Closing Date, the Company will not be required to include any adjustment
under Section 481(c) of the Code (or any corresponding provision of state or
local Tax law) in taxable income for any Tax period beginning on or after the
Closing Date; (xv) as a result of any "closing agreement" (as described in
Section 7121 of the Code or any corresponding provision of state or local Tax
law), the Company will not be required to include any item of income in or
exclude any item of deduction from any Taxable period beginning on or after
the Closing Date; (xvi) no unresolved claim has ever been made by a Taxing
authority in a jurisdiction where the Company has never paid Taxes or filed
Tax Returns asserting that the Company or is or may be subject to Taxes
assessed by such jurisdiction; (xvii) none of the property of the Company is
required to be treated as owned by another person pursuant to Section
168(f)(8) of the Code (as in effect prior to its amendment by the Tax Reform
Act of 1986) or is "tax exempt use property" within the meaning of Section
168(h) of the Code; (xviii) the Company has not filed a consent under Section
341(f) of the Code or any comparable provision of state statutes; (xix) all
assets reflected on the Financial Statements are properly treated as owned by
the Company for all income Tax purposes; (xx) since January 1, 1990, neither
the Company nor the Sellers have taken any action not in accordance with past
practice that would have the effect of deferring any Tax liability for the
Company from any taxable period ending on or before the Closing Date to any
taxable period ending after the Closing Date; (xxi) no income or gain of the
Company has been deferred pursuant to Treasury Regulation Sections 1.1502-13T
or -14T, or Proposed Treasury Regulation Sections 1.1502-13; (xxii) no excess
loss account (as described in Treasury Regulation Sections 1.1502-14,
1.1502-19, and 1.1502-32), exists with respect to the Company; (xxiii) no
power of attorney has been granted with respect to any matter relating to
Taxes of the Company which is currently in force; (xxiv) neither the Company
has participated in or cooperated in an international boycott, within the
meaning of Section 999 of the Code, nor has any such corporation had
operations which are or may hereafter become reportable under Section 999 of
the Code; (xxv) the
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Company has not disposed of property in a transaction being accounted for
under the installment method pursuant to Section 453 or 453A of the Code; and
(xxvi) the Company has no corporate acquisition indebtedness, as described in
Section 279(b) of the Code.
(b) No transaction contemplated by this Agreement is subject to
withholding under Section 1445 of the Code;
(c) As a result of the transactions contemplated by this Agreement,
the Company will not be obligated to make a payment to an individual that would
be a "parachute payment" to a "disqualified individual" as those terms are
defined in Section 280G of the Code, without regard to whether such payment is
reasonable compensation for personal services performed or to be performed in
the future;
(d) As used herein, "TAX" means: (i) any federal, state, local or
foreign income, windfall profits, severance, property, production, sales, use,
license, excise, franchise, employment, payroll, withholding, alternative or
add-on minimum, ad valorem, transfer, stamp, or environmental tax, or any other
tax or other like assessment or charge of any kind whatsoever, together with any
interest or penalty, addition to tax or additional amount imposed by any
Governmental Authority; and (ii) any liability of the Company arising in
connection with events occurring on or before the Closing Date for the payment
of amounts, or with respect to payments of a type, described in clause (i) as a
result of being a member of an affiliated, consolidated, combined or unitary
group, or as a result of any obligation of the Company under any Tax sharing
arrangement or Tax indemnity arrangement. "COMPANY GROUP" means any "affiliated
group" (as defined in Section 1504(a) of the Code without regard to the
limitations contained in Section 1504(b) of the Code) that, at any time on or
before the Closing Date, includes or has included the Company or any predecessor
of or successor to the Company (or another such predecessor or successor), or
any other group of corporations which, at any time on or before the Closing
Date, files or has filed Tax Returns on a combined, consolidated or unitary
basis with the Company or any predecessor of or successor to the Company (or
another such predecessor or successor).
2.18 COMPANY ASSETS. The Company has good title to all of the Company
Assets (including, without limitation, all assets reflected on the Balance
Sheet), free and clear of all Encumbrances, except for assets which are subject
to leases or otherwise as described in SCHEDULE 2.11. All of the Company
Assets, whether real or personal, owned or leased, have been well maintained and
are in a condition adequate for the operation of the Company's business except
for such failure as will not have a material adverse effect. SCHEDULE 2.18 sets
forth a true and complete list of all machinery, equipment, vehicles, furniture
and other personal property owned by the Company with a value in excess of
$10,000. SCHEDULE 2.18 contains a brief description of each lease or other
agreement or right, whether written or oral (including in each case the annual
rental, the expiration date thereof and a brief description of the property
covered), under which the Company is lessee of, or holds or operates, any
machinery, equipment, vehicle or other tangible personal property owned by a
third Person, except for any such lease, agreement or right that is terminable
by the Company without penalty or payment on notice of 30 days or less, or which
involves the payment by the Company of rentals of less than $10,000 per year.
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2.19 INSURANCE POLICIES. SCHEDULE 2.19 is a true, correct and complete
list of all policies of fire, liability, life and employee health,
environmental, worker's compensation and other forms of insurance currently held
and maintained by the Company, none of which is in default and all of which are
in full force and effect. A complete and correct copy of each such policy,
together with certificates evidencing such coverage, has been delivered to
Purchaser. The Company shall keep or cause such insurance or comparable
insurance in full force and effect through the Closing Date. The Company has
complied with each of such insurance policies and has not, to its best
knowledge, failed to give any notice or present any claim thereunder in a due
and timely manner except for such failure as would not have a material adverse
effect on the financial condition or results of operation of the Company. Such
Seller has delivered to Purchaser correct and complete copies of the most recent
inspection reports, if any, received from insurance underwriters as to the
condition of the Company Assets.
2.20 ACCOUNTS RECEIVABLE; INVENTORIES.
(a) SCHEDULE 2.20 is a true, correct and complete list and aging of
all accounts receivable, trade receivables, notes receivable and other
receivables as of March 31, 1996 arising out of the business and operation of
the Company on a consolidated basis. Subject to the reserves for bad or
uncollectible accounts included on the Balance Sheet, all of the aforesaid
receivables are, to the Company's best knowledge, collectible for the full
recorded amount of such receivables in the ordinary course of business and have
arisen out of bona fide transactions in the ordinary course of business.
(b) The inventories of the Company (including raw materials,
supplies, work-in-process, finished goods and other materials) as at March 31,
1996 were in good, merchantable and useable condition and are reflected in the
books and records of the Company in accordance with GAAP, at the lower of
average cost or market value. The inventory obsolescence policies of the
Company are appropriate for the nature of the products sold and the marketing
methods used by the Company and the Balance Sheet fairly gives effect to the
amount of obsolete inventory as of December 31, 1995. All of the Company's
inventory is located on the Real Property.
2.21 CAPITAL IMPROVEMENTS. SCHEDULE 2.21 describes all of the capital
improvements or purchases or other capital expenditures (as determined in
accordance with GAAP) which the Company has committed to or contracted for which
have not been completed prior to the date hereof and the cost and expense
reasonably estimated to complete such work and purchases.
2.22 ASSETS SUFFICIENT FOR CONDUCT OF BUSINESS. Except as set forth on
Schedule 2.22, the Company owns or leases all of the assets and properties
required for the operation of the Company's business as it is presently operated
in all material respects.
2.23 CONSENTS. Except as set forth on SCHEDULE 2.23, no notice to, filing
with, authorization of, exemption by, or consent of any person, entity or
Governmental Authority
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is required (including, without limitation, with respect to the Material
Contracts listed on SCHEDULE 2.11) in order for such Seller to consummate the
transactions contemplated hereby.
2.24 BANK ACCOUNTS; POWERS OF ATTORNEY. SCHEDULE 2.24 is a true, correct
and complete list of all the bank accounts of the Company and sets forth the
names and locations of each bank or other financial institution at which the
Company has any such account (giving the account numbers) or safe deposit box
and the names of all persons authorized to draw thereon or have access thereto,
and the names of all persons, if any, now holding powers of attorney or
comparable delegation or authority from the Company and a summary statement
thereof.
2.25 CUSTOMERS AND SUPPLIERS. SCHEDULE 2.25 sets forth (i) a list of names
and addresses of the ten largest customers and the ten largest suppliers
(measured in each case by dollar volume of purchases or sales during the year
ended December 31, 1995) of the Company and the dollar amount of purchase or
sales which each such customer or supplier represented during each of the years
ended December 31, 1994 and December 31, 1995; and (ii) copies of the forms of
purchase order for inventory and other supplies and sales contracts for finished
goods used by the Company. Except as set forth in SCHEDULE 2.25, there exists
no actual or, to the Company's knowledge, threatened termination, cancellation
or limitation of, or any modification or change in, the business relationship of
the Company with any customer or group of customers listed in SCHEDULE 2.25, or
whose purchases individually or in the aggregate are material to the Company or
the operation of its business, or with any supplier or group of suppliers listed
in SCHEDULE 2.25, or whose sales individually or in the aggregate are material
to the Company or the operation of the business, and there exists no present
condition or state of facts or circumstances involving customers, suppliers or
sales representatives which Seller or the Company can now reasonably foresee
would materially adversely affect the Company or prevent the conduct of its
business after the consummation of the transactions contemplated by this
Agreement in essentially the same manner in which such business has heretofore
been conducted.
2.26 COMPANY PRODUCTS. Except as set forth on SCHEDULE 2.26, to the
Company's best knowledge, there are no statements, citations or decisions by any
Governmental Authority or regulatory body that any product manufactured,
marketed or distributed at any time by the Company ("Company Products") is
materially defective or materially fails to meet any standards promulgated by
any such governmental or regulatory body. Except as set forth on SCHEDULE 2.26,
there have been no recalls ordered by any such Governmental Authority or
regulatory body with respect to any Company Product. Except as set forth on
SCHEDULE 2.26, to the knowledge of the Company or any Seller, there is no (i)
fact relating to any Company Product that may impose upon the Company a duty to
recall any Company Product or a duty to warn customers of a defect in any
Company Product, or (ii) latent or overt design, manufacturing or other defect
in any Company Product.
2.27 ANTITRUST CONSIDERATIONS. The Person owning fifty percent (50%) or
more of the voting securities or possessing the contractual power to designate
fifty percent (50%) or more of the directors of the corporation, which under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act")
and the regulations thereunder
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could be deemed the "ultimate parent entity", does not have annual net sales
or total assets, on a consolidated basis, in an amount equalling or exceeding
One Hundred Million Dollars ($100,000,000).
2.28 DISCLOSURE. None of the representations or warranties of the Company
contained herein, none of the information contained in the Schedules referred to
in herein, and none of the other documents furnished or to be furnished to
Purchaser or any of its representatives by the Company or its representatives
explicitly pursuant to the terms of this Agreement, is false or misleading in
any material respect or omits to state a fact herein or therein necessary to
make the statements herein or therein not misleading in any material respect.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER AND GUARANTOR
Purchaser and Guarantor each represent and warrant to Sellers as follows:
3.1 DUE ORGANIZATION. Purchaser and Guarantor are each a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware.
3.2 CORPORATE AUTHORITY. Purchaser and Guarantor respectively have all
requisite corporate power and authority to enter into this Agreement and the
Guaranty and to carry out its obligations hereunder and thereunder. The
execution, delivery and performance of this Agreement by Purchaser has been duly
authorized by all necessary corporate action on the part of Purchaser. This
Agreement has been duly executed and delivered by Purchaser and constitutes the
legal, valid and binding obligation of Purchaser, enforceable in accordance with
its terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, moratorium, reorganization or similar laws from time to
time in effect that affect creditors' rights generally, and by legal and
equitable limitations on the availability of specific remedies. The execution,
delivery and performance of the Guaranty by Guarantor has been duly authorized
by all necessary corporate action on the part of Guarantor. The Guaranty has
been duly authorized and when executed and delivered by Guarantor at the Closing
will constitute the legal, valid and binding obligation of Guarantor,
enforceable in accordance with its terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, moratorium, reorganization or
similar laws from time to time in effect that affect creditors' rights
generally, and by legal and equitable limitations on the availability of
specific remedies. The execution and delivery of this Agreement does not and
the execution and delivery of the Guaranty will not, and the consummation of the
transactions contemplated hereby will not, (i) violate any law (or regulation
promulgated under any material law), (ii) violate any provisions of the
certificate of incorporation or bylaws of Purchaser or Guarantor, (iii) result
in a breach of, or constitute a default under (or any event which with or
without notice or lapse of time or both would constitute a default), or result
in the acceleration of any obligation or the creation or any Encumbrance under
any contract, lease, commitment, indenture, mortgage, note, bond, instrument,
license or
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agreement to which Purchaser or Guarantor is a party or by which it or any of
its properties is bound, except where no material adverse effect on the
Purchaser or Guarantor will be incurred as a consequence of any such breach,
or (iv) violate any decree or judgment of any Governmental Authority
applicable to Purchaser or Guarantor or by which it or any of its properties
is bound.
3.3 FINANCIAL STATEMENTS. Guarantor has delivered to Sellers copies of
the audited consolidated financial statements of the Guarantor as of and for the
twelve-month periods ended June 30, 1994 and June 30, 1995, and its unaudited
consolidated financial statements as of and for the six (6) month periods ended
December 31, 1994 and December 31, 1995, in each case consisting of the balance
sheet at each such date and the related statements of income, changes in
stockholders equity and cash flows for the applicable period (collectively, the
"FINANCIAL STATEMENTS"). The Financial Statements have been prepared in
conformity with generally accepted accounting principles ("GAAP") consistently
applied and present fairly the consolidated financial position and the assets of
the Guarantor and the consolidated results of the operation of the Guarantor and
changes in financial position as of and with respect to the respective dates
thereof and the periods covered thereby and are in conformity with the past
accounting practices of the Guarantor as consistently applied during such
periods.
3.4 CONSENTS. Except as set forth on SCHEDULE 3.5, no notice to, filing
with, authorization of, exemption by, or consent of any person, entity or
Governmental Authority is required in order for Purchaser or Guarantor to
consummate the transactions contemplated hereby.
ARTICLE IV
COVENANTS OF SELLERS AND PURCHASER
Sellers and, where applicable, Purchaser, agree that from the date hereof
to the Closing Date:
4.1 IMPLEMENTING AGREEMENT. Each of the Sellers will take all action
required of it and will use reasonably best efforts to cause the Company to take
such actions as necessary to fulfill Sellers' obligations under the terms of
this Agreement and will use reasonably best efforts to satisfy all conditions
precedent which are to be satisfied by Sellers. On or prior to the Closing
Date, each Seller shall, and shall cause each affiliate of the Company, to pay
to the Company any amounts owed by such person to the Company.
4.2 INVESTIGATION OF THE BUSINESS BY PURCHASER. Sellers shall afford and
use reasonably best efforts to cause the Company to afford the officers,
employees and authorized representatives of Purchaser (including, without
limitation, independent public accountants and attorneys) complete access during
normal business hours to the offices, properties, employees and business and
financial records (including computer files, retrieval programs and similar
documentation) of the business of the Company to the extent Purchaser
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shall deem necessary or desirable and shall furnish to Purchaser or its
authorized representatives such additional information concerning the Company
Assets and the operations of the business as shall be reasonably requested,
including all such information as shall be necessary to enable Purchaser or
its representatives to verify the accuracy of the representations and
warranties contained in this Agreement, to verify that the covenants of
Sellers contained in this Agreement have been complied with and to determine
whether the conditions set forth in ARTICLE VI have been satisfied.
Purchaser agrees that such investigation shall be conducted in such a manner
as not to interfere unreasonably with the operations of the Company or the
business. Without limiting the generality of the foregoing, Sellers shall
permit Purchaser to cause an employee, consultant or representative to be
present at all times during normal business hours at the Company's principal
offices and facilities to observe the conduct of the business, to review
books and records, to meet with and discuss the business with the Company's
employees, customers and suppliers and to assist in effectuating an orderly
transition; provided, that such representative shall not meet with or discuss
the business of Company with customers or suppliers of Company without being
accompanied by a representative of the Company. Such representative shall
have no authority to act on behalf of Sellers or the Company in any respect,
to give direction or instruction to any employee of the Company, nor to
amend, modify or waive any provision of this Agreement. Purchaser will cause
such representative to refrain from taking any action which would result in
an unreasonable interference with the conduct of the business by the Company.
4.3 PRESERVATION OF BUSINESS, ASSETS AND SHARES. The Company shall
operate and carry on the business only in the ordinary course and substantially
as presently operated. Consistent with the foregoing, the Sellers shall use
reasonably best efforts to cause Company shall keep and maintain the Company
Assets in good operating condition and repair and shall use its best efforts
consistent with good business practice to maintain the business organization of
the business intact and to preserve the goodwill of the suppliers, contractors,
licensor, employees, customers, distributors and others having business
relations with the business. In connection therewith, Sellers shall use
reasonably best efforts to cause the Company to not (i) transfer or cause to be
transferred from the business any employee or agent thereof, (ii) offer
employment after the Closing Date to any such employee or agent or (iii)
otherwise attempt to persuade any such person to terminate his or her
relationship with the business.
4.4 ORDINARY COURSE. The Company shall operate its business only in the
usual, regular and ordinary course and manner and, without limiting the
foregoing, shall not enter into any agreement, arrangement or transaction which
would be required to be listed on SCHEDULE 2.11 hereto if in effect as of the
date hereof, except with the prior written consent of Purchaser. Without
limiting the generality of the foregoing, the Company shall not make any, or
commit to make any, capital expenditure of $10,000 or more without Purchaser's
written consent.
4.5 BOOKS AND RECORDS. The Company shall maintain its books, accounts and
records in the usual, regular and ordinary manner, and on a basis consistent
with the Financial Statements and past practices, except as disclosed on
SCHEDULE 4.5.
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4.6 COMPENSATION. No increase or other material change shall be made in
the compensation arrangements for any officer, director or stockholder, nor,
except for salary or wage increases in the ordinary course, for any other
employee, consultant or agent of the Company employed at or in connection with
the business or operation of the Company from that in effect as of December 31,
1995; and no pension or profit-sharing plan, or any other employee benefit
arrangement, shall be agreed to, adopted or entered into without the written
consent of Purchaser.
4.7 CONSENTS AND APPROVALS. Each Seller shall use its reasonable best
efforts to obtain all necessary consents and approvals to the performance of
this Agreement and the transactions contemplated hereby. The Company and/or
Sellers shall make all filings, applications, statements and reports to all
Governmental Authorities which are required to be made prior to the Closing Date
by or on behalf of either or both of them pursuant to any applicable statute,
rule or regulation in connection with this Agreement and the transactions
contemplated hereby.
4.8 MAINTENANCE OF INSURANCE. The Company shall not cancel any existing
insurance and shall promptly replace any cancelled insurance with comparable
coverage as is reasonably acceptable to Purchaser.
4.9 NO MODIFICATIONS. The Company shall not modify, amend or otherwise
alter or change any of the material terms or provisions of any of the Contracts
to which it is a party except (i) in the ordinary course of business and in a
manner which will not cause any of the representations or warranties to be
untrue, or (ii) consented to in writing in advance by Purchaser.
4.10 NO ORGANIC CHANGE. No amendment shall be made to the articles of
incorporation or the bylaws of the Company, and no change shall be made in the
capital stock of such corporations by reclassification, subdivision,
reorganization or otherwise, without the prior written consent of Purchaser.
4.11 NO ISSUANCE OF SHARES, OPTIONS, ETC. No change shall be made in the
number of shares of capital stock of the Company issued and outstanding, and no
option, warrant or other right to acquire shares of capital stock or any other
security of the Company shall be granted or created.
4.12 NO DIVIDENDS, ETC. No dividend or other distribution or payment shall
be declared, paid or made by the Company with respect to its capital stock and
no purchase, redemption or other acquisition shall be made by the Company of any
capital stock or any other security of the Company without the prior written
consent of Purchaser.
4.13 EMPLOYEES. The Seller shall use reasonably best efforts to cause
Company to use all reasonable efforts to ensure that the employees listed on
SCHEDULE 2.12(I) remain on the Company's consolidated payroll records until the
Closing Date (except for those employees terminated for cause by the Company),
and shall continue to pay such employees
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all amounts of wages, bonuses and other remuneration payable with respect to
periods on or prior to the Closing Date.
ARTICLE V
COVENANTS OF PURCHASER
Purchaser agrees that from the date hereof to the Closing Date:
5.1 IMPLEMENTING AGREEMENT. Purchaser will take all necessary action
required to fulfill its obligations under this Agreement and will use reasonably
best efforts to satisfy all conditions precedent which are to be satisfied by
Purchaser.
5.2 CONFIDENTIALITY. All information and documentation provided by the
Company to Purchaser or any of its representatives shall be held in strict
confidence and will not be used or disclosed by Purchaser for purposes other
than in connection with its consideration of the transactions contemplated
hereby, except to the extent such information (i) was already known to Purchaser
or its representatives or available to Purchaser on a non-confidential basis
when received, (ii) hereafter becomes lawfully obtainable from other sources, or
(iii) must be disclosed by Purchaser or its affiliates in any document filed
with any Governmental Authority and is available for public inspection.
5.3 CONSENTS. Prior to the Closing, Purchaser shall cooperate with the
Company to procure, upon reasonable terms and conditions, all necessary consents
and approvals; shall complete all filings, registrations and certificates
required to be made by Purchaser in connection with the transaction contemplated
herein; and shall satisfy all other requirements prescribed by law, including
obtaining any approval necessary under federal antitrust laws, which are
necessary to consummate the transactions contemplated by this Agreement.
5.4 RECORDS. For a seven-year period following the Closing, Purchaser
shall grant to each Seller and its representatives, at such Seller's request
(and subject to Seller's reimbursement of Purchaser's out-of-pocket expenses),
access to and the right to make or obtain copies of those records and documents
of the Company related to the pre-Closing business or the Company Assets as may
be reasonably necessary for such Seller's tax, employee benefit or financial
reporting obligations or other investigations required by law or for such
Seller's dealings with, handling or discharging of any debt, obligation or
liability. If Purchaser elects to dispose of such records during such period,
Purchaser shall first give Seller sixty (60) days' written notice, during which
period each Seller shall have the right at such Seller's expense to obtain the
records without further consideration to Purchaser. Purchaser and its employees
shall cooperate with Sellers as reasonably necessary in connection with Seller's
rights as set forth in this SECTION 5.4.
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ARTICLE VI
CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER
The obligations of Purchaser under this Agreement are, at the option of
Purchaser, subject to satisfaction of the following conditions precedent on or
before the Closing Date:
6.1 CONSENTS AND APPROVALS. The consents, approvals, certificates and
licenses listed on SCHEDULE 2.23 and as otherwise necessary shall have been
received by Purchaser, or Purchaser shall have received written assurances in
form and substance reasonably satisfactory to Purchaser, that such consents,
approvals, certificates and licenses will be granted and/or issued promptly
after the Closing Date.
6.2 WARRANTIES TRUE AS OF BOTH DATE HEREOF AND CLOSING DATE. The
representations and warranties of Sellers contained herein shall be true and
correct in all material respects on and as of the date of this Agreement, and
shall also be true and correct in all material respects (except for such changes
as are contemplated by the terms of this Agreement or changes in schedules
hereto which are not materially adverse in the aggregate) on and as of the
Closing Date with the same force and effect as though again made on and as of
the Closing Date.
6.3 COMPLIANCE WITH AGREEMENTS AND COVENANTS. Each of the Sellers shall,
in all material respects, have performed all of its respective obligations and
agreements and complied with all of the covenants contained in this Agreement to
be performed and complied with by it on or prior to the Closing Date.
6.4 NO CHANGES OR DESTRUCTION OF PROPERTY; CERTIFICATE. Between the date
hereof and the Closing Date, there shall have been (a) no material adverse
change in the Company Assets, the business operations, liabilities, profits,
prospects or condition (financial or otherwise) of the business; (b) no material
adverse federal or state legislative or regulatory change affecting the business
or its products or services; and (c) no material damage to the Company Assets by
fire, flood, casualty, act of God or the public enemy or other cause, regardless
of insurance coverage for such damage; and there shall have been delivered to
Purchaser a certificate or certificates to, dated the Closing Date and signed by
each of the Sellers, certifying as to compliance with SECTION 6.2, SECTION 6.3
and this SECTION 6.4.
6.5 OPINION OF COUNSEL. Purchaser shall have received an opinion, dated
as of the Closing Date, of Manatt, Phelps & Phillips, LLP, counsel for Sellers,
substantially in the form of EXHIBIT B hereto.
6.6 NON-COMPETITION AND NON-DISCLOSURE AGREEMENT. Each Seller shall have
executed and delivered in favor of the Company a Non-Competition and Non-
Disclosure Agreement substantially in the form of EXHIBIT C hereto (the "NON-
COMPETITION AGREEMENT").
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6.7 RELEASE. Seller shall have caused each of the officers and directors
of the Company who held such positions immediately prior to the Closing to have
executed and delivered in favor of the Company a release substantially in the
form of EXHIBIT D hereto (the "RELEASE").
6.8 OTHER AGREEMENTS. All of the other agreements, certificates and
instruments to be delivered to Purchaser at the Closing pursuant to ARTICLE VIII
shall have been delivered to Purchaser.
6.9 ACTIONS OR PROCEEDINGS. No action or proceeding by any Governmental
Authority shall have been instituted or threatened which would enjoin, restrain,
prohibit or result in substantial damages in respect of this Agreement or the
complete consummation of the transactions as contemplated by this Agreement, and
which would, in the reasonable judgment of Purchaser, make it inadvisable to
consummate such transaction and no court order shall have been entered in any
action or proceeding instituted by any party which enjoins, restrains or
prohibits this Agreement or the complete consummation of the transactions as
contemplated by this Agreement.
6.10 RESIGNATION OF DIRECTORS AND OFFICERS. All members of the Board of
Directors of the Company shall resign, effective on the Closing Date.
6.11 COMPLIANCE WITH HSR ACT. If HSR Act filings shall have been made
pursuant to SECTION 2.27, the waiting period applicable to the consummation of
the transactions contemplated by this Agreement under the HSR Act shall have
expired or been terminated.
ARTICLE VII
CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLERS
The obligations of Sellers under this Agreement are, at the option of
Sellers, subject to the satisfaction of the following conditions precedent on or
before the Closing Date:
7.1 WARRANTIES TRUE AS OF BOTH DATE HEREOF AND CLOSING DATE. The
representations and warranties of Purchaser and Guarantor contained herein shall
be true and correct in all material respects on and as of the date of this
Agreement, and shall also be true and correct in all material respects (except
for such changes as are contemplated by the terms of this Agreement) on and as
of the Closing Date with the same force and effect as though again made by
Purchaser and Guarantor on and as of the Closing Date.
7.2 COMPLIANCE WITH AGREEMENTS AND COVENANTS; CERTIFICATE. Purchaser
shall, in all material respects, have performed all obligations and agreements
and complied with all covenants contained in this Agreement, to be performed and
complied with by it on or prior to the Closing Date, and Purchaser shall have
delivered to Sellers a certificate, dated as of the Closing Date, of the
President or a Vice President of Purchaser, certifying as to its compliance with
SECTION 7.1 and this SECTION 7.2.
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7.3 OPINION OF COUNSEL. Sellers shall have received an opinion, dated as
of the Closing Date, of Sidley & Austin, counsel for Purchaser, substantially in
the form of EXHIBIT E hereto.
7.4 RELEASE. The Company shall have executed and delivered to each of the
officers and directors of the Company who held such positions immediately prior
to the Closing the Release.
7.5 OTHER AGREEMENTS. All of the other agreements, certificates and
instruments to be delivered to Sellers at the Closing pursuant to ARTICLE VIII
shall have been delivered to Sellers.
7.6 ACTIONS OR PROCEEDINGS. No action or proceeding by any governmental
agency shall have been instituted or threatened which would enjoin, restrain or
prohibit, or might result in substantial damages in respect of, this Agreement
or the complete consummation of the transactions as contemplated by this
Agreement, and which would, in the reasonable judgment of Sellers, make it
inadvisable to consummate such transactions, and no court order shall have been
entered in any action or proceeding instituted by any party which enjoins,
restrains, or prohibits this Agreement or the complete consummation of the
transactions as contemplated by this Agreement.
7.7 EMPLOYMENT AGREEMENT. The Company and John A. Steil shall have
executed and delivered an employment agreement relating to the employment of
John A. Steil by the Company, substantially in the form of Exhibit F hereto.
7.8 COMPLIANCE WITH HSR ACT. If HSR Act filings shall have been made
pursuant to Section 2.27, the waiting period applicable to the consummation of
the transactions contemplated by the Agreement under the HSR Act shall have
expired or been terminated.
7.9 DELIVERY OF GUARANTY. Guarantor shall have issued and delivered the
Guaranty to the Trust.
ARTICLE VIII
THE CLOSING
8.1 CLOSING. The closing (the "CLOSING") shall take place at the offices
of the Sidley & Austin in Los Angeles, California, at 10:00 a.m. on May 9, 1996,
or on such earlier or later date to which the parties hereto shall mutually
agree in writing (the "CLOSING DATE").
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8.2 DELIVERIES BY SELLERS AND THE COMPANY. At the Closing, Sellers and
the Company shall deliver to Purchaser the following:
(a) Certificates evidencing all of the Shares, which certificates
shall be duly endorsed in blank or accompanied by duly executed stock powers;
(b) Resignations of all directors and officers of the Company;
(c) The certificate referred to in SECTION 6.4;
(d) The Non-Competition Agreements;
(e) The Release;
(f) The opinion referred to in SECTION 6.5;
(g) The stock record book and minute book of the Company;
(h) Complete and correct copies of the Company's articles of
incorporation, certified by the Secretary of State of California, as in effect
on the date hereof and the Closing Date;
(i) Complete and correct copies of the Company's bylaws, certified by
the Company's corporate secretary or an assistant secretary, as in effect on the
date hereof and the Closing Date;
(j) A certificate of good standing or certificate of status with
respect to the Company dated as of a recent date from the Secretary of State of
California and from the Secretary of State of each state listed in SCHEDULE 2.2;
(k) A certificate of tax good standing with respect to the Company
dated as of a recent date from the California Franchise Tax Board;
(l) A certificate of the Company's corporate secretary or an
assistant Secretary, as in effect on the date hereof and the Closing Date, to
the effect that (a) the resolutions of the Board of Directors of the Company
authorizing the execution and performance of this Agreement and the transactions
contemplated herein as attached thereto, are in full force and effect and have
not been superseded, amended or modified as of the Closing Date and (b) the
incumbency and signatures of the officers of the Company executing this
Agreement are as set forth on the certificate; and
(m) all consents, waivers or approvals, if any, listed on SCHEDULE
2.3 or otherwise obtained with respect to the consummation of the transactions
contemplated by this Agreement.
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8.3 DELIVERIES BY PURCHASER. At the Closing, Purchaser will deliver to
Sellers the following:
(a) The cash portion of the Purchase Price;
(b) The opinion referred to in SECTION 7.3;
(c) The certificate referred to in SECTION 7.2;
(d) A certificate of good standing with respect to Purchaser dated as
of a recent date from the Secretary of State of Delaware;
(e) A certificate of good standing with respect to Guarantor dated as
of a recent date from the Secretary of State of Delaware;
(f) Copies of resolutions of the Board of Directors of Purchaser and
Guarantor authorizing and approving the execution of this Agreement and the
Guaranty and the transactions contemplated hereby, certified respectively by
Purchaser's and Guarantor's corporate secretary or an assistant secretary;
(g) A certificate as to the incumbency and specimen signatures of the
officers of Purchaser authorized to execute this Agreement or any other
agreement to be executed by Purchaser and contemplated hereby; and
(h) The Note and the Guaranty.
ARTICLE IX
TERMINATION
9.1 TERMINATION. This Agreement may be terminated at any time on or prior
to the Closing:
(a) With the mutual written consent of each of Sellers and Purchaser;
(b) By Purchaser or Sellers if the Closing has not occurred on or
before May 15, 1996 (or such later date as may be mutually agreed by Purchaser
and Sellers), other than by reason of a default by the party seeking to
terminate;
(c) By Purchaser in the event of any material breach by Sellers of
any of their respective agreements, representations or warranties contained
herein and the failure of the Company or Sellers, as the case may be, to cure
such breach within fifteen (15) days after receipt of notice from Purchaser of
such breach; or
(d) By Sellers in the event of any material breach by Purchaser of
any of Purchaser's agreements, representations or warranties contained herein
and the failure of
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Purchaser to cure such breach within fifteen (15) days after receipt of
notice from Sellers of such breach;
9.2 NOTICE OF TERMINATION. In the event of any termination pursuant to
SECTION 9.1 (other than pursuant to SECTION 9.1(a)), written notice setting
forth the reasons thereof must be given by the terminating party to each other
party.
ARTICLE X
SURVIVAL AND REMEDY: INDEMNIFICATION
10.1 SURVIVAL. The covenants, representations and warranties of the
parties hereto contained herein or in any other certificate or other writing
delivered pursuant hereto, together with the indemnification obligations of
Sellers under SECTION 10.2 and the indemnification obligations of Purchaser
under SECTION 10.3, shall survive until the expiration of twenty-four (24)
months from the Closing Date; PROVIDED, HOWEVER, that the representations and
warranties contained in SECTIONS 2.12, 2.13, 2.15 and 2.17 shall survive for so
long as any statute of limitation applicable thereto remains in effect, and the
covenant contained in Section 5.2 will terminate at Closing.
10.2 INDEMNIFICATION BY SELLERS. Each of the Sellers agrees, severally, in
proportion to its share of the Purchase Price as set forth in SCHEDULE 1.2 ("pro
rata"), to indemnify Purchaser and each of its subsidiaries and affiliates
(including the Company from and after the Closing) (collectively, the
"INDEMNIFIED PARTIES") against, and agrees to hold it and them harmless from,
any and all liabilities, losses, costs, claims, damages, penalties or expenses
(including, without limitation, reasonable attorneys' fees and expenses and
costs of investigation and litigation) (collectively, "LOSSES"), incurred or
suffered by any Indemnified Party or any combination thereof arising out of any
of the following:
(a) any breach of or any inaccuracy in any representation or warranty
made by any of the Sellers and/or the Company in this Agreement;
(b) any breach of or failure by Sellers to perform any covenant or
obligation of Sellers set forth in this Agreement;
(c) any acts or omissions on or prior to the Closing Date of any of
the officers or directors of the Company, to the extent claims based on any such
acts or omissions have not been released by the Company pursuant to the Release;
(d) any liability for broker's fees, finder's fees, investment
banking fees or commissions incurred by the Sellers and/or the Company and paid
by the Purchaser; and
(e) any Tax liability incurred by the Company and not reflected on
the Company's Financial Statements and that relate to or are in respect of a
period ending on or
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prior to the Closing Date, including any Tax liability relating to the
Company's Benefit Plan whether or not disclosed to Purchaser.
10.3 INDEMNIFICATION BY PURCHASER AND GUARANTOR. Purchaser and Guarantor
each hereby agree to indemnify Sellers against, and agrees to hold it and them
harmless from, any and all Losses incurred or suffered by any of the Sellers
arising forth of any of the following:
(a) any breach of or any inaccuracy in any representation or warranty
made by Purchaser or Guarantor pursuant to this Agreement;
(b) any breach of or failure by Purchaser or Guarantor to perform any
covenant or obligation of Purchaser or Guarantor set out in this Agreement;
(c) the business or operation of the Company, or any act or omission
by Purchaser or Guarantor or the Company related thereto, which arises from and
after the Closing Date; and
(d) any liability for broker's fees, finder's fees, investment
banking fees or commissions incurred by the Purchaser or Guarantor and paid by
the Sellers and/or the Company.
10.4 NOTICE OF CLAIMS.
(a) Any person seeking indemnification hereunder (an "INDEMNITEE")
shall give to the party obligated to provide indemnification to such Indemnitee
(the "INDEMNITOR") a notice (a "CLAIM NOTICE") describing in reasonable detail
the facts giving rise to any claim for indemnification hereunder and shall
include in such Claim Notice (if then known) the amount or the method of
computation of the amount of such claim, and a reference to the provision of
this Agreement or any other agreement, document or instrument executed hereunder
or in connection herewith upon which such claim is based, PROVIDED that a Claim
Notice in respect of any action at law or suit in equity by or against a third
person as to which indemnification will be sought shall be given promptly after
the action or suit is commenced; PROVIDED, FURTHER, that failure to give such
notice shall not relieve the Indemnitor of its obligations hereunder except to
the extent it shall have been prejudiced by such failure. If a Claim Notice is
not disputed in writing within 10 business days following receipt, the
Indemnitee shall be deemed to have agreed to the amount so claimed (which shall
then become a Determined Loss Amount). If a dispute notice is received, the
Indemnitee may commence an arbitration pursuant to Article XI to determine the
obligation of Indemnitor with respect thereto.
(b) After the giving of any Claim Notice pursuant hereto, the amount
of indemnification to which an Indemnitee shall be entitled under this ARTICLE X
shall be determined: (i) by the written agreement between the Indemnitee and the
Indemnitor, (ii) by operation of the provisions of Section 10.4(a), (iii) by a
final order of the Arbitrator or (iv) by any other means to which the Indemnitee
and the Indemnitor shall agree. The order
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of the Arbitrator shall be deemed final when the Arbitrator issues its
written report. Such amount, once so determined, plus interest thereon from
the date the Indemnitee paid any liability or claim which constitutes a Loss
until the date of satisfaction thereof by the Indemnitor, is herein called
the "DETERMINED LOSS AMOUNT". The Indemnitee shall have the burden of proof
in establishing the amount of Losses suffered by it. The parties agree to
use their reasonable best efforts to cause any arbitration proceeding
commenced in accordance with Section 10.4(a) to be concluded within 90 days
after selection of the Arbitrator.
10.5 THIRD PARTY CLAIMS.
(a) The Indemnitee and Indemnitor shall jointly and in good faith
conduct and control, through counsel of their mutual choosing, but at the
Indemnitor's expense, the defense, compromise or settlement of any third person
claim, action or suit ("Third Party Claim") commenced or asserted against
Indemnitee (or in the case of Purchaser, against Company) with respect to which
indemnification is sought by any Indemnitee from any Indemnitor hereunder, and
in any such case the Indemnitee and Indemnitor shall cooperate in connection
therewith and shall furnish to each other such records, information and
testimony and attend such conferences, discovery proceedings, hearings, trials
and appeals as may be reasonably requested by either party in connection
therewith. In the event the Indemnitor, after reasonable notice from the
Indemnitee, fails to defend or otherwise participate in any such Third Party
Claim (including a failure to reasonably agree upon counsel to defend the Third
Party Claim), action or suit, the Indemnitee may exclusively control, defend,
compromise or settle such claim, action or suit in its discretion, and any and
all costs incurred by Indemnitee in connection therewith shall be deemed
"Losses."
10.6 PROPORTIONATE LIABILITY; OFFSET. All liability for which Sellers have
Losses shall be borne proportionately by each Seller on the basis of such
Seller's pro rata share of the Purchase Price. Purchaser, if it is a
Indemnitee, may offset any Losses against the Purchaser Note but only to the
extent of the pro rata share of the Seller who holds the Purchaser Note, and in
such event, the holder of the Purchase Note shall be entitled to contribution
from the other Seller.
10.7 LIMITATION ON LOSSES. Neither Purchaser nor Sellers shall be liable
for any Losses incurred as a result of any matter for which indemnification is
required hereunder unless and only to the extent such Losses, in the aggregate,
and involving all claims by any Indemnitee against the Indemnitor, exceed
$75,000. In no event shall the aggregate liability of Purchaser or the Sellers
for all Losses exceed that portion of the Purchase Price which has actually been
received by Sellers in the form of cash.
10.8 SOLE REMEDY. The provisions of this Article X shall constitute the
sole remedy at law for any breach of the representations and warranties of this
Agreement by a party and no damages may be recovered except to the extent, and
under the circumstances, set forth above. Notwithstanding the foregoing,
Purchaser as one party, and the Sellers, as the other party, reserve the right
to seek to rescind the purchase and sale contemplated hereby, if otherwise
completed, based upon the actual material fraud of the other party.
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ARTICLE XI
MISCELLANEOUS
11.1 ARBITRATION. Any controversy or claim arising out of or relating to
this Agreement or the breach thereof shall be submitted to binding, non-
appealable arbitration administered by the American Arbitration Association
("A.A.A.") in accordance with its Commercial Arbitration Rules. Such
controversy or claim shall be heard by a single arbitrator (the "Arbitrator").
The award shall be made within six (6) months of selection of the Arbitrator,
except that an Arbitration initiated under Section 10.4(a) shall be concluded
within ninety (90) days following selection of the Arbitrator. The Arbitrator
shall be selected by the parties within (10) business days or shall be appointed
by the Executive Director of the Southern California Chapter of the A.A.A.
Judgment on the award may be entered in any court having jurisdiction. The
arbitration shall be held in Los Angeles, California or as otherwise mutually
agreed by the parties hereto. The arbitration shall be held on consecutive
business days as necessary to hear the matter, and the hearing shall commence
within 60 days after selection of the Arbitrator. The Arbitrator shall
determine issues of arbitrability but may not limit, expand or otherwise modify
the terms of the Agreement nor have any authority to award punitive or other
damages in excess of compensatory damages and each party irrevocably waives any
claim thereto. The Arbitrator shall permit, to the extent reasonably necessary,
one document production request, and one follow-up request, and one deposition
of the principals involved in a controversy or claim submitted to arbitration
hereunder. Each party shall bear its own expenses and shall share equally the
costs and expenses of the Arbitrator. The parties, their representatives, other
participants and the Arbitrator shall hold the existence, content and result of
the arbitration in confidence except as disclosure is required by law or as is
reasonably necessary to defend claims or procedural rights of the party making
the disclosure.
11.2 EXPENSES. Purchaser shall bear all of its costs and expenses relating
to this transaction. Sellers shall pay all taxes, assessments, charges and
fees, if any, imposed by the United States or any state or political subdivision
thereof, required to be paid in connection with the sale and transfer of the
Shares. The Company shall bear the fees and disbursements of Manatt, Phelps &
Phillips and Sherr Joffe & Zuckerman incurred by Sellers in connection with this
transaction, in an aggregate amount not to exceed $20,000.
11.3 AMENDMENT. This Agreement shall not be amended, modified or
supplemented except by a written instrument signed by all of the parties hereto.
11.4 BROKERS. Each of the parties hereto represents that, except as set
forth in Section 11.2 hereof, no broker or finder has acted for it in connection
with this Agreement or the transactions contemplated hereby and that no broker
or finder is entitled to any brokerage or finder's fee or other commission based
on agreements, arrangements or understandings made by it.
11.5 NOTICES. All notices, requests, demands and other communications
required or permitted hereunder shall be in writing and shall be deemed to have
been duly given when
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delivered by hand, or by confirmed facsimile transmission, or on two (2)
business days following consignment, freight prepaid, to a commercial
overnight air courier service, or five (5) days after being mailed, first
class postage prepaid, return receipt requested.
To Trust: c/o John A. Steil
Vanguard Plastics of California, Inc.
9420 Telfair Avenue
Sun Valley, California 91352
Facsimile: (818) 768-9267
with a copy to each of:
Manatt Phelps & Phillips LLP
11345 West Olympic Boulevard
Los Angeles, California 90064
Attention: Andrew Erskine, Esq.
Facsimile: (310) 312-4224
To:Vanguard: Vanguard Plastics Inc.
c/o Zuckerman & Honickman
191 South Gulph Road
King of Prussia, Pennsylvania 19406
Attention: Norma Reichlin
Facsimile: (610) 962-1081
and
Vanguard Plastics Inc.
18 Market Street
Patterson, New Jersey 07501
Attention: Richard Meyersburg
with a copy to
Sherr Joffe & Zuckerman
200 Four Falls Corporate Center
Suite 400
West Conshohocken, Pennsylvania 19428
Attention: Barbara Dubrow, Esq.
To: Purchaser RXI Holdings, Inc.
or 11111 Santa Monica Boulevard
Guarantor: Suite 270
Los Angeles, California 90025
Attention: Leon Farahnik
Facsimile: (310) 473-9592
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<PAGE>
with a copy to
Sidley & Austin
555 West Fifth Street
Suite 4000
Los Angeles, California 90013
Attention: Moshe J. Kupietzky, Esq.
Facsimile: (213) 896-6600
or to such other individual or address as a party hereto may designate for
itself by notice given as herein provided.
11.6 EFFECT OF INVESTIGATIONS. Any due diligence review, audit or other
investigation or inquiry undertaken or performed by or on behalf of Purchaser
shall not limit, qualify, modify or amend the representations, warranties and
covenants of, and indemnities by, Sellers and/or the Company made or undertaken
pursuant to this Agreement.
11.7 WAIVERS. The failure of a party hereto at any time or times to
require performance of any provision hereof shall in no manner affect its right
at a later time to enforce the same. No waiver by a party of any condition or
of any breach of any term, covenant, representation or warranty contained in
this Agreement shall be effective unless in writing, and no waiver in any one or
more instances shall be deemed to be a further or continuing waiver of any such
condition or breach in other instances or a waiver of any other condition or
breach of any other term, covenant, representation or warranty.
11.8 COUNTERPARTS. This Agreement may be executed simultaneously in
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
11.9 HEADINGS. The headings preceding the text of Articles and Sections of
this Agreement and the Schedules hereto are for convenience only and shall not
be deemed part of this Agreement.
11.10 APPLICABLE LAW. This Agreement shall be governed by and
construed and enforced in accordance with the internal laws of the State of
California.
11.11 ASSIGNMENT. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective heirs, personal
representatives, successors and assigns. Any party hereto may assign its rights
hereunder to another person or entity, provided that the assignor shall continue
to remain liable for all of its obligations under this Agreement.
11.12 PUBLICITY. Except as required by applicable law, necessary to
implement the provisions of this Agreement or as compelled by administrative or
judicial process (and in any such event, the parties shall consult prior to
making any disclosure) neither party shall, without the prior written approval
of the other, make any press release or other public announcement regarding the
transactions contemplated by this Agreement.
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11.13 OTHER INSTRUMENTS. Upon the reasonable request of Purchaser,
Sellers will on and after the Closing Date execute and deliver to Purchaser such
other documents, releases, assignments and other instruments as may be required
to effectuate completely the sale, transfer, conveyance and delivery to
Purchaser of, and to vest fully in Purchaser title to, each of the Shares.
11.14 ENTIRE UNDERSTANDING. This Agreement sets forth the entire
agreement and understanding of the parties hereto in respect to the transactions
contemplated hereby and supersedes all prior agreements, arrangements and
understandings relating to the subject matter hereof (including the letter of
intent dated as of February 19, 1996 among Purchaser, Sellers and the Company)
and is not intended to confer upon any other person any rights or remedies
hereunder. There have been no representations or statements, oral or written,
that have been relied on by any party hereto, except those expressly set forth
in this Agreement.
Next Page is Page 36
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered on the date first above written.
RXI HOLDINGS, INC.
By: /s/ Leon Farahnik
----------------------------------
Leon Farahnik, President
RXI PLASTICS, INC.
By: /s/ Leon Farahnik
----------------------------------
Leon Farahnik, Chairman
THE 1989 STEIL FAMILY TRUST
By: /s/ John A. Steil
----------------------------------
John A. Steil, Trustee
By: /s/ Ursula E. Steil
----------------------------------
Ursula E. Steil, Trustee
VANGUARD PLASTICS INC.
By: /s/ Marc Zuckerman
----------------------------------
Its: Chairman of the Board
---------------------------------
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EXHIBIT A TO STOCK PURCHASE AGREEMENT
PROMISSORY NOTE
$576,470 California
May , 1996
--
FOR VALUE RECEIVED, the undersigned, RXI Plastics, Inc., a Delaware
corporation ("Maker"), promises to pay to The 1989 Steil Family Trust ("Payee"),
at 24926 Vista Verenda, Woodland Hills, CA 91367, the principal sum of Five
Hundred Seventy Six Thousand Four Hundred Seventy Dollars ($576,470) in lawful
money of the United States, with interest accruing on the outstanding principal
balance at the annual rate ("Loan Rate") of ten percent. Interest shall be
based on a 365-day year or 366-day year, as applicable, and actual days elapsed.
All accrued and unpaid interest on this promissory note ("Note") shall
be payable semiannually in arrears on the 15th day of May and November of each
year commencing November 15, 1996; provided, however, that in the event any such
day is not a business day, such payment shall be payable on the next succeeding
business day.
The principal of this Note shall be payable in installments of 20% of
the original principal amount on each anniversary of the date hereof. All
outstanding principal and accrued and unpaid interest shall be due and payable
in full on the fifth anniversary of the date hereof. At any time, and from time
to time Maker may prepay all or any portion of the principal amount of the
outstanding indebtedness represented by this Note. All payments received
hereunder shall be applied first to reimburse Payee for any out of pocket
collection and related costs, fees, and expenses incurred by Payee pursuant to
the succeeding paragraph, second to the payment of accrued interest, and then to
the repayment of principal.
If any payment under this Note is not paid within ten days after the
date on which the payment is due (irrespective of whether Maker has received any
notice of such nonpayment), then Maker shall be in default hereunder and Payee
may elect, upon written notice to Maker, to declare all principal and accrued
but unpaid interest under this Note immediately due and payable. Any failure of
Payee to make such election following a default or defaults shall not constitute
a waiver of Payee's right to make the election in the event of any subsequent
default.
Maker promises to pay all reasonable out-of-pocket attorneys' fees and
other reasonable out-of-pocket costs and expenses of any nature incurred by
Payee in connection with the collection of this Note.
Maker and all endorsers jointly and severally waive diligence, grace,
demand, presentment for payment, exhibition of this Note, protest, notice of
protest, notice of dishonor, notice of demand, notice of nonpayment, and any and
all exemption rights against
<PAGE>
the indebtedness evidence by this Note, and agree to any and all extensions
or renewals from time to time without notice and to any partial payments of
this Note made before or after maturity and that no such extension, renewal
or partial payment shall release any one or all of them from the obligation
of payment of this Note or any installment of this Note, and consent to
offsets of any sums owed to any one or all of them by Payee at any time.
This Note, and the terms, conditions and provisions hereof, may not be
changed, modified, amended or terminated, except in a writing signed by both
Maker and Payee.
Payee hereby grants to Maker the irrevocable and absolute right to
offset against any amount payable hereunder in sums to which the Maker is
entitled under Section 10.6 of the Stock Purchase Agreement dated as of May 1,
1996 by and among Maker, Payee, and others and to deposit in escrow funds
otherwise due to be paid hereunder pursuant to Section 10.5 of the Stock
Purchase Agreement.
This Note is negotiated under and shall be governed by and construed
in accordance with the laws of the State of California.
RXI PLASTICS, INC.,
a Delaware corporation
By:________________________________
Name:______________________________
Title:_____________________________
AGREED TO AND ACCEPTED:
THE 1989 STEIL FAMILY TRUST
By: ______________________________
John A. Steil, Trustee
By: ______________________________
Ursula E. Steil, Trustee
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EXHIBIT B TO STOCK PURCHASE AGREEMENT
May 9, 1996
RXI Holdings, Inc.
11111 Santa Monica Boulevard
Suite 270
Los Angeles, California 90025
Ladies and Gentlemen:
We have acted as special counsel to The 1989 Steil Family Trust (the
"Trust") in connection with the preparation, execution and delivery of the
Stock Purchase Agreement, dated as of May 1, 1996 (the "Agreement") among the
Trust, Vanguard Plastics Inc., a Pennsylvania corporation ("Vanguard") (the
Trust and Vanguard are referred to herein each as a "Seller" and collectively
as "Sellers"), RXI Plastics, Inc., a Delaware corporation ("Guarantor"), and
RXI Holdings, Inc., a Delaware corporation ("Holdings") (Guarantor and
Holdings are referred to herein collectively as "Purchaser"), relating to the
purchase and sale of all of the outstanding shares of Vanguard Plastics of
California, Inc., a California corporation (the "Company"). In accordance
with Section 6.5 of the Agreement, we have been requested by the Trust to
provide this opinion to you with respect to certain matters relating to the
Trust, the Company and Vanguard. Capitalized terms used herein and not
otherwise defined herein shall have the same meanings herein as ascribed
thereto in the Agreement.
In our examination, we have assumed the genuineness of all signatures,
including endorsements, the legal capacity of natural persons, the
authenticity of all documents submitted to us as originals, the conformity to
original documents of all documents submitted to us as certified or photostatic
copies, and the authenticity of the originals of such copies. As to any facts
material to this opinion which we did not independently establish or verify,
we have relied upon certificates of trustees of the Trust and or certificates
of officers of the Company, copies of which are attached. With respect to the
matters set forth in paragraphs 3 and 4 of this opinion and the matters
relating to Vanguard in paragraphs 5, 6, 7, 8 and 9 of this opinion, we have
relied solely, without further investigation, upon the legal opinion of
Sherr, Joffe & Zuckerman, rendered to us on behalf of Vanguard, a copy of
which opinion is attached hereto.
In rendering opinions set forth herein, we have examined and relied
solely on originals or copies of the following:
(a) the Agreement;
<PAGE>
RXI Holdings, Inc.
April 10, 1996
Page 2
(b) the Non-Competition and Non-Disclosure Agreement, dated as of May 1,
1996 between the Company and each of the Sellers (the "Non-Competition
Agreement");
(c) [the Trust Agreement];
(d) certificates of the Secretary of the Company, dated the date
hereof, certifying, among other matters, (i) the Articles of Incorporation of
the Company, (ii) the incumbency of officers of the Company, and (iii) a
certificate from the Secretary of State of the State of California as to the
status of the Company in California;
[(e) an opinion of even date herewith rendered by Sherr, Joffe &
Zuckerman on behalf of Vanguard]; and
(f) such other documents as we have deemed necessary or appropriate as a
basis for the opinions set forth below.
In rendering the opinions set forth herein, we have, with your consent,
relied only upon examination of the documents described above and have made
no independent verification or investigation of the factual matters set forth
therein.
Whenever our opinion herein with respect to the existence or absence of
facts is stated to be to our knowledge, such statement is intended to signify
that, during the course of our representation of the Company or the Trust in
connection with the transactions contemplated by the Agreement, no
information came to the attention of lawyers within our firm with principal
responsibility for the aforementioned transactions or other representation of
the Company or the Trust which would give us actual knowledge of facts
contrary to the existence or absence of the facts indicated. However, we have
not undertaken any special or independent investigation to determine the
existence or absence of such facts, and no inference as to our knowledge of
such facts should be drawn from our representation of the Company in
connection with the transactions contemplated by the Agreement or our
representation of the Company.
We express no opinion as to the laws of any jurisdiction other than the
laws of the State of California, and as to the opinion expressed in
paragraphs 3 and 6 below as related to Vanguard, the corporate law of the
State of Pennsylvania in respect of which, and with your consent, we have
relied upon the attached opinion of Sherr, Joffe & Zuckerman.
Based upon the foregoing and subject to the limitations, qualifications,
exceptions and assumptions set forth herein, we are of the opinion that:
<PAGE>
RXI Holdings, Inc.
April 10, 1996
Page 3
1. The Company is a corporation validly existing and in good standing
under the laws of the State of California, and is qualified and in good
standing to transact business as a foreign corporation in each jurisdiction
in which the business operations by the Company of its business, or the
ownership of its assets requires such qualification, except where the failure
to so qualify or be in good standing would not have a material adverse effect
upon the Company.
2. The Company has the corporate power and authority to own, lease and
operate its assets as now being owned, leased and operated.
3. Vanguard is a corporation validly existing and in good standing
under the laws of the State of Pennsylvania.
4. Vanguard has the corporate power and authority to enter into the
Agreement and the Non-Competition Agreement and to carry out the transactions
contemplated thereby.
5. Each of the Agreement and the Non-Competition Agreement has been
duly authorized, executed and delivered by the Sellers. The Agreement
constitutes the legal, valid and binding agreement of each of the Sellers
thereto enforceable against them in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium, fraudulent transfer or other similar laws of general applicability
relating to or affecting the enforcement of creditors' rights and by the
effect of general principles of equity (regardless of whether enforceability
is considered in a proceeding in equity or at law).
6. Neither the execution and delivery of the Agreement, or the
Non-Competition Agreement by the Sellers nor the consummation or the
fulfillment of the terms, conditions and provisions thereof has or will
conflict with, or result in the breach of the terms, conditions or provisions
of, or constitute a default, an event of default or an event requiring the
consent or approval of a third party or creating rights of acceleration,
termination or cancellation under, or result in the creation or imposition of
any lien or encumbrance upon any property of the Vanguard or the Company,
under (a) the Articles of Incorporation or Bylaws of Vanguard, or (b) any
note, instrument, agreement, mortgage, lease, license, franchise, or permit
identified by the Trust or in the Officer's Certificate, except as disclosed
on Schedule 2.3, or (c) any judgment, decree, order, statute, rule or
regulation known to us, to which any of the Sellers is a party or any of its
property or assets is subject or by which any of the Sellers are bound.
7. Except for the consent to transfer of the California Department of
Corporations of the shares held by Sellers, no order, consent or approval of
any state or
<PAGE>
RXI Holdings, Inc.
April 10, 1996
Page 4
federal governmental authority is required on the part of the Company or the
Sellers for the execution and delivery of the Agreement or the Non-Competition
Agreement.
8. The stock certificates, stock powers and other instruments
delivered to Purchaser at the Closing are in proper form under the laws of
the State of California.
9. The authorized capital stock of the Company consists of One Million
(1,000,000) shares of common stock, no par value, of which Five Hundred
Thousand (500,000) shares have been duly issued and are currently issued and
outstanding. Neither the Sellers nor the Company have granted or issued any
option, warrant or similar right to, or entered into any agreements,
arrangements or commitments with, any person or entity to purchase or acquire
any rights with respect to any shares of capital stock of the Company. To our
knowledge, the Company is not a party to any stockholder agreement, voting
trust agreement or any other similar contract, agreement, arrangement,
commitment, plan or understanding restricting or otherwise relating to the
voting, dividend, ownership or transfer rights of any shares of capital stock
of the Company, and the Company has no obligation to repurchase any shares of
common stock of the Company.
10. Subject to the next succeeding sentence, to our knowledge, without
any independent investigation, the Company is not party to or threatened with
any action, suit or proceeding in any court or by or before any arbitrator or
governmental authority or agency, which action, suit or proceeding would
materially and adversely affect the financial condition or business
operations of the Company. [Sentence re: San Diego PVC litigation].
11. The Trust is a duly existing trust, the Trustees are the sole
trustees of the Trust, and the Trustees have the requisite power and authority
to enter into the Agreement and perform their obligations thereunder.
Our opinions are subject to the following assumptions and qualifications:
(a) We have assumed the authenticity of all documents submitted to us
as originals, the genuineness of all signatures, the legal capacity of all
natural persons and the conformity with the original documents of any copies
thereof submitted to us for our examination.
(b) We have assumed the due authorization, execution and delivery of
the Agreement and all of the other instruments and agreements contemplated
thereby by the parties thereto (other than Sellers) and that the Agreement
and all of the other instruments and agreements contemplated thereby
constitute the legally valid and binding obligations of
<PAGE>
RXI Holdings, Inc.
April 10, 1996
Page 5
the parties thereto (other than Sellers), enforceable against such parties in
accordance with their respective terms.
(c) We have assumed compliance by you with any and all applicable laws
with which you are required to comply relating to or affecting the matters
and actions contemplated by the Agreement and all of the other instruments
and agreements contemplated thereby.
(d) We have assumed that neither the Agreement nor any of the other
instruments and agreements contemplated thereby has been amended, modified,
terminated or revoked in any respect, and that each remains in full force and
effect as of the date hereof.
* * * * * *
This opinion is given as of the date hereof and we disclaim any
obligation to advise you of any changes or developments in law that may occur
after the date hereof which may affect the conclusions reached herein.
This opinion is being furnished only to you and is solely for your
benefit and is not to be used, circulated, quoted, relied upon or otherwise
referred to for any purpose without our prior written consent.
Very truly yours,
<PAGE>
EXHIBIT C TO STOCK PURCHASE AGREEMENT
NON-COMPETITION AND NON-DISCLOSURE AGREEMENT
THIS NON-COMPETITION AND NON-DISCLOSURE AGREEMENT (this "Agreement"), dated
as of May 1, 1996, is by and between Vanguard Plastics of California, Inc., a
California corporation (the "Company"), and Vanguard Plastics Inc. ("Seller")
and John A. Steil ("Steil").
RECITALS
A. The Company is engaged in the business of plastic container
manufacturing, excluding the manufacture of soft drink bottles, water bottles
and sport drink bottles (the "Business");
B. Pursuant to a Stock Purchase Agreement ("Stock Purchase Agreement")
dated as of May 1, 1996, among RXI Plastics, Inc., a Delaware corporation
("RXI"), RXI Holdings, Inc., a Delaware corporation ("Guarantor"), Vanguard
Plastics, Inc. and The 1989 Steil Family Trust (collectively, the "Selling
Stockholders"), RXI has agreed to acquire all of the outstanding capital stock
of the Company from the Selling Stockholders (the "Acquisition");
C. Seller and The 1989 Steil Family Trust (of which Steil is a trustee
and a beneficiary) are the sole stockholders of the Company and have knowledge
of trade secrets, customer information and other confidential and proprietary
information of the Company;
D. In order to protect the goodwill, trade secrets and other confidential
and proprietary information of the Business, RXI and the Selling Stockholders
have agreed that RXI's obligation to consummate the transactions contemplated by
the Stock Purchase Agreement is subject to the condition, among others, that
Selling Stockholders shall have entered into this Agreement; and
E. The Selling Stockholders have a material economic interest in the
consummation of the Acquisition and, in order to induce RXI to consummate the
transactions contemplated by the Stock Purchase Agreement, each of the Selling
Stockholders and the Company have agreed to enter into this Agreement;
NOW, THEREFORE, in consideration of the premises and mutual covenants and
agreements hereinafter set forth, the Company and each of the Selling
Stockholders, intending to be legally bound, hereby agree as follows:
<PAGE>
1. DEFINITIONS. As used in this Agreement, terms defined in the preamble
and recitals of this Agreement shall have the meanings set forth therein and the
following terms shall have the meanings set forth below:
(a) "COMPETITIVE BUSINESS" shall mean any business enterprise engaged
in the same or substantially similar line of business as the Business in the
Territory.
(b) "CONFIDENTIAL INFORMATION" shall mean any of the Company's
copyrighted and other proprietary software and any policies, procedures or
manuals related thereto, customer and supplier lists, marketing arrangements,
business plans, projections, financial information, training manuals, pricing
manuals, product development plans, designs, market strategies, internal
performance statistics and other competitively sensitive information concerning
the Company which is material to the Company and is not generally known by the
public, whether or not in written or tangible form.
(c) "PERMITTED ACTIVITIES" shall mean (i) owning directly or
indirectly as a passive investment not more than 2% of the outstanding equity
securities of a publicly-held entity engaged in a Competitive Business which has
securities listed for trading on a securities exchange registered with the
Securities and Exchange Commission or through the automatic quotation system of
a registered securities association, (ii) making loans to, or other investments
in, the Seller and (iii) to the extent not prohibited by Section 3 of this
Agreement, dealing with suppliers, contractors, distributors, agents or former
employees of the Company in connection with any business which is not a
Competitive Business and (iv) activities undertaken on behalf and at the request
of Company.
(d) "RESTRICTED PERIOD" shall mean for Vanguard the period commencing
on the date of this Agreement and ending on the date which is one (1) year from
the date hereof and for Steil the period commencing on the date of this
Agreement and ending on the date which is five (5) years from the date hereof.
(e) "TERRITORY" shall mean California, Arizona, Utah, Idaho, New
Mexico and Nevada.
(f) "TRADE SECRETS" shall mean the whole or any portion or phase of
any scientific or technical information, design, process, procedure, computer
program, formula or improvement of the Company that is valuable and not
generally known to the competitors of the Company, whether or not in written or
tangible form.
2. NO COMPETITIVE BUSINESS. Each Selling Stockholder hereby agrees that
during the Restricted Period, except for Permitted Activities, it will not
directly or indirectly own, manage, operate, control, invest in, lend to, or
acquire an interest in, or otherwise engage or participate in (whether as a
proprietor, partner, stockholder, joint venturer, investor or other participant
in), or use or permit its name to be used in, any Competitive Business in the
Territory, without regard to (a) whether the Competitive Business has its
office, manufacturing or other business facilities within or without the
Territory, (b) whether any of the activities of such Selling Stockholder
referred to above occurs or is performed within or
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<PAGE>
without the Territory or (c) whether such Selling Stockholder resides, is
incorporated in or reports to an office within or without the Territory.
Notwithstanding the foregoing, the parties acknowledge that Seller sells to
certain customers which have offices located in the Territory and who are
customers of the Company. Insofar as deliveries to such customers outside
the Territory are concerned, nothing contained herein shall prohibit Seller
from continuing its relationships with such customers. Further, Seller may
continue incidental sales to Dial Corporation within the Territory in a
manner consistent with past practice.
3. NO INTERFERENCE WITH THE BUSINESS.
(a) Each Selling Stockholder hereby agrees that during the Restricted
Period it will not directly or indirectly solicit, induce or influence any
customer, supplier, lender, lessor or any other person which has a business
relationship with the Company in the Territory, or which had on the date of the
Stock Purchase Agreement a business relationship with the Company, to
discontinue or reduce the extent of such relationship with the Company, provided
that the foregoing shall not in any event prohibit the Selling Stockholders from
continuing to sell goods to any customer, or to purchase goods or services from
any supplier so long as such action is not prohibited by Section 2 of this
Agreement.
(b) Each Selling Stockholder hereby agrees that during the Restricted
Period, except for Permitted Activities, it will not (i) directly or indirectly
recruit or solicit any employee of the Company to discontinue such employment,
agency or other relationship with the Company, or (ii) employ or seek to employ,
or cause any Competitive Business to employ or seek to employ, for any
Competitive Business in the Territory, any person who is then (or was at any
time within six months prior to the date the Selling Stockholder or the
Competitive Business employs or seeks to employ such person) employed by the
Company.
4. NO DISCLOSURE OF PROPRIETARY INFORMATION. Each Selling Stockholder
hereby agrees that during the Restricted Period it will not directly or
indirectly disclose to any person, or use or otherwise exploit for its own
benefit or for the benefit of any person, other than the Company, any
Confidential Information or Trade Secrets.
5. REMEDIES. The parties to this Agreement agree that (i) if a Selling
Stockholder breaches any provision of this Agreement, the damage to the Company
will be substantial, although difficult to ascertain, and money damage will not
afford the Company an adequate remedy, and (ii) if a Selling Stockholder is in
breach of any provision of this Agreement, or threatens a breach of any
provision of this Agreement, the Company shall be entitled, in addition to all
other rights and remedies as may be provided by law, to specific performance and
injunctive and other equitable relief to prevent or restrain a breach of any
provision of this Agreement. In addition, all claims for damages for a breach
of this Agreement shall be submitted to arbitration in accordance with Section 7
of this Agreement. The breach by one of the Selling Stockholders of this
Agreement shall not ipso facto constitute a breach by the other Selling
Stockholders of this Agreement.
6. GOVERNING LAW. This Agreement is made under and shall be governed by,
and construed and enforced in accordance with, the laws of the State of
California.
-3-
<PAGE>
7. ARBITRATION. Any disagreement, dispute, controversy or claim arising
out of or relating to this Agreement or the breach hereof (whether sounding in
contract or tort), shall be resolved exclusively and finally by arbitration in
accordance with the following procedures:
(a) The arbitration shall be conducted in Los Angeles, California, or
such other location as the parties mutually agree.
(b) The arbitration proceedings will be conducted in accordance with,
and pursuant to, the Commercial Arbitration Rules (the "Arbitration Rules") of
the American Arbitration Association. In the event of any conflict between the
Arbitration Rules and the provisions of this Section 7, the provisions of this
Section 7 shall control.
(c) There will be a single neutral arbitrator ("Arbitrator") who will
be selected pursuant to the Arbitration Rules.
(d) The Arbitrator will have the power to grant all appropriate legal
and equitable relief, both by way of interim relief and as a part of the final
award, as may be granted by any court of competent jurisdiction, in order to
carry out the terms of this Agreement (including, without limitation,
declaratory and injunctive relief and damages, but in no event shall the
Arbitrator have the authority to award punitive or exemplary damages). All
awards and orders of the Arbitrator, including interim relief, may be enforced
by any court of competent jurisdiction.
(e) The parties intend that the arbitration proceedings be conducted
as expeditiously as possible and that appropriate rights of discovery (including
the right to depose witnesses, submit interrogatories and request documents) be
granted to each party. In that regard, the parties agree to work together in
good faith and with the Arbitrator to arrive upon mutually acceptable procedures
regarding the time limits for, and type and degree of, such rights of discovery
and the periods of time within which the matters submitted to arbitration must
be heard and determined by the Arbitrator. If the parties are unable to so
agree, such issues will be submitted to the Arbitrator for his determination.
If proper notice of any hearing has been given, the Arbitrator will have full
power to proceed to take evidence or to perform any other acts necessary to
arbitrate the matter in the absence of any party who fails to appear. At the
request of any party, the Arbitrator, attorneys, parties to the arbitration,
witnesses, experts, court reporters or other persons present at the arbitration
shall agree in writing to maintain the strict confidentiality of the arbitration
proceedings.
(f) Notwithstanding the foregoing, a party may apply to a court of
competent jurisdiction within the State of California for relief in the form of
a temporary restraining order or preliminary injunction, or other provisional
remedy pending appointment of an Arbitrator or pending final determination of a
claim through arbitration in accordance with this Section 7. In the event a
dispute is submitted to arbitration hereunder during the term of this Agreement,
the parties shall continue to perform their respective obligations hereunder,
subject to any interim relief that may be ordered by the Arbitrator or by a
court of competent jurisdiction pursuant to the previous sentence.
-4-
<PAGE>
(g) The parties, by written stipulation, may expand or contract the
rights, duties or obligations provided above, or otherwise modify the
arbitration procedures as suits their convenience, consistent with that which is
otherwise permissible within the framework of the Arbitration Rules.
(h) The prevailing party (if a prevailing party is determined to
exist by the Arbitrator) in any proceeding or action under this Section 7 shall
be entitled, in addition to any other damages or relief awarded, to an award of
all legal and accounting fees, expenses and other out-of-pocket costs incurred
by such party (including any costs and fees incurred by and payable to the
Arbitrator and any costs incurred in enforcing any such award), regardless of
whether such proceeding or action proceeds to final judgment.
(i) Any decision or award of the Arbitrator shall be final and
binding upon the parties to the arbitration proceeding except for fraud or
failure to provide a hearing. The parties hereto hereby waive to the extent
permitted by law any rights to appeal or to review of such award by any court or
tribunal. The parties agree that the award of the Arbitrator may be enforced
against the parties to the proceeding or their assets wherever they may be found
and that a judgment upon the award may be entered in any court having
jurisdiction thereof.
8. ENTIRE AGREEMENT; AMENDMENTS AND WAIVERS. This Agreement contains the
entire agreement of the parties with respect to the subject matter hereof and
supersedes all prior agreements, written or oral, with respect thereto. This
Agreement may be amended or modified and the terms and conditions hereof may be
waived, only by a written instrument signed by the parties or, in the case of
waiver, by the party waiving compliance. No delay on the part of either party
in exercising any right, power or privilege hereunder shall operate as a waiver
thereof, nor shall any waiver on the part of either party of any right, power or
privilege hereunder, nor any single or partial exercise of any right, power or
privilege hereunder, preclude any other or further exercise thereof or the
exercise of any other right, power or privilege hereunder. The rights and
remedies provided herein are cumulative and are not exclusive of any rights or
remedies that either party may otherwise have at law or in equity.
9. REPRESENTATIONS AND WARRANTIES. Each Selling Stockholder represents
and warrants that this Agreement is its legal, valid and binding obligation,
enforceable against it in accordance with its terms. Each Selling Stockholder
represents and warrants that it has no right, title, interest or claim in or to
or under any Trade Secrets, Confidential Information or other property to be
acquired by RXI as contemplated in the Stock Purchase Agreement.
10. NOTICES. All notices or other communications required or permitted
hereunder shall be in writing and shall be deemed given or delivered when
delivered personally or four days after being mailed by registered or certified
mail, return receipt requested, or one day after being sent by private overnight
courier addressed as set forth below, or if sent by facsimile transmission, on
the first business day after transmission provided that an original copy has
been deposited in the U.S. mail:
-5-
<PAGE>
To Trust: c/o John A. Steil
Vanguard Plastics of California, Inc.
9420 Telfair Avenue
Sun Valley, California 91352
Facsimile: (818) 768-9267
with a copy to each of:
Manatt Phelps & Phillips LLP
11345 West Olympic Boulevard
Los Angeles, California 90064
Attention: Andrew Erskine, Esq.
Facsimile: (310) 312-4224
To Vanguard: Vanguard Plastics Inc.
c/o Zuckerman & Honickman
191 South Gulph Road
King of Prussia, Pennsylvania 19406
Attention: Norma Reichlin
Facsimile: (610) 962-1081
and
Vanguard Plastics Inc.
18 Market Street
Patterson, New Jersey 07501
Attention: Richard Meyersburg
with a copy to
Sherr Joffe & Zuckerman
200 Four Falls Corporate Center
Suite 400
West Conshohocken, Pennsylvania 19428
Attention: Barbara Dubrow, Esq.
To: Purchaser RXI Holdings, Inc.
or Guarantor: 11111 Santa Monica Boulevard
Suite 270
Los Angeles, California 90025
Attention: Leon Farahnik
Facsimile: (310) 473-9592
with a copy to
-6-
<PAGE>
Sidley & Austin
555 West Fifth Street
Suite 4000
Los Angeles, California 90013
Attention: Moshe J. Kupietzky, Esq.
Facsimile: (213) 896-6600
or to such other address as such party may indicate by a notice delivered to the
other party hereto.
11. SEVERABILITY. To the extent any provision of this Agreement shall be
invalid or unenforceable, it shall be considered deleted herefrom and the
remainder of such provision and of this Agreement shall be unaffected and shall
continue in full force and effect. In furtherance and not in limitation of the
foregoing, should the duration or geographical extent of, or business activities
covered by any provision of this Agreement be in excess of that which is valid
and enforceable under applicable law, then such provision shall be construed to
cover only that duration, extent or activities which may validly and enforceably
be covered. Each Selling Stockholder acknowledges the uncertainty of the law in
this respect and expressly stipulates that this Agreement shall be given the
construction which renders its provisions valid and enforceable to the maximum
extent (not exceeding its express terms) possible under applicable law.
12. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the parties hereto, the heirs and legal representatives
of Each Selling Stockholder severally and the successors and assigns of the
Company. Neither Selling Stockholder shall not be entitled to assign its
obligations hereunder. Company may assign its rights under this Agreement to
any corporation, firm or other business entity (i) with or into which the
Company may merge or consolidate, or (ii) to which the Company may sell or
transfer all or substantially all of its assets or of which 50% or more of the
equity investment and of the voting control is owned, directly or indirectly,
by, or is under common ownership with, the Company, and any such assignee shall
have the right to further assign this Agreement. Each Selling Stockholder
agrees that, upon request therefor, it will, in writing, acknowledge and consent
to any such assignment of this Agreement.
-7-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
VANGUARD PLASTICS OF CALIFORNIA, INC.
By: _______________________________________
Name: _____________________________________
Title: ____________________________________
VANGUARD PLASTICS INC.
By: _______________________________________
Name: _____________________________________
Title: ____________________________________
___________________________________________
JOHN A. STEIL
PSM96A75.SEL (5/21/96 11:57pm)
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<PAGE>
EXHIBIT D TO STOCK PURCHASE AGREEMENT
RELEASE
This Release ("Release") is entered into as of May 1, 1996 among
Vanguard Plastics of California, Inc., a California corporation (the "Company"),
on the one hand, and, on the other hand, the officers and directors (as named in
the signature pages hereto, the "Individual Releasors") of the Company, and
Vanguard Plastics Inc., a Pennsylvania corporation ("Vanguard"), with reference
to the following:
A. RXI Plastics, Inc., a Delaware corporation ("Purchaser"), RXI
Holdings, Inc. a Delaware corporation ("Guarantor") The 1989 Steil Family Trust
("Steil") and Vanguard (Steil and Vanguard collectively referred to herein as,
the "Sellers") are parties to that certain Stock Purchase Agreement dated as of
May 1, 1996 (the "Agreement");
B. Sections 6.7 and 7.4 of the Agreement require, as conditions precedent
to the Purchaser's and Sellers' respective obligations to consummate the
transactions contemplated by the Agreement, that this Release be (i) executed by
the Individual Releasors and delivered to the Company and (ii) executed by the
Company and delivered to the Individual Releasors; and
C. In order to effectuate the transactions contemplated by the Agreement,
and upon a determination by each of the undersigned that the execution and
delivery hereof and the consummation of the transactions contemplated by the
Agreement is in the best interests of each of the undersigned, the undersigned
have agreed to execute and deliver this Release;
NOW, THEREFORE, in consideration of the premises herein contained, and for
other good and valuable consideration, the sufficiency and receipt of which is
hereby acknowledged, the parties hereto hereby agree as follows:
1. RELEASE BY INDIVIDUAL RELEASORS OF COMPANY. Except with respect
to indemnification obligations of the Company to any Individual Releasor and
except for obligations of the Company to any Individual Releasor who is an
officer of the Company for payment of current salaries and other compensation
including pension and fringe benefits and reimbursement of incidental business
expenses, in each case in the ordinary course of the Company's business
consistent with past practice, the Individual Releasors and each of them, for
themselves and for their respective successors, heirs and assigns, hereby
release, remise, forever discharge and relinquish the Company from any and all
liabilities, actions, claims, obligations, damages, attorneys' fees, suits, and
demands of any kind or nature, known and unknown, liquidated or unliquidated, in
law or in equity, whether arising under any local, state or federal statute or
ordinance, or under the common law of any state of the United States, or under
any federal common law of the United States, or under any contract,
<PAGE>
occurring at any time up to and through the date of this Release and relating
to or arising from any Individual Releasor's interests as a stockholder,
director, officer or employee of the Company (collectively "Claims Against
Company"), including Claims Against Company which have not yet ripened or
about which Individual Releasers do not yet know, and agree not to bring any
action in any judicial, administrative or other proceeding against the
Company alleging any such Claim Against Company or otherwise arising in
connection with any such Claim Against Company, or support any shareholder of
the Company in any such action brought by such shareholder.
2. RELEASE BY COMPANY OF INDIVIDUAL RELEASORS. Except for
obligations arising pursuant to the Agreement, the Company, for itself and for
its respective successors, heirs and assigns, does hereby release, remise,
forever discharge and relinquish each Individual Releasor from any and all
liabilities, actions, claims, obligations, damages, attorneys' fees, suits, and
demands of any kind or nature, known and unknown, liquidated or unliquidated, in
law or in equity, whether arising under any local, state or federal statute or
ordinance, or under the common law of any state of the United States, or under
any federal common law of the United States, or under any contract, occurring at
any time up to and through the date of this Release (collectively "Claims
Against Individual Releasors") including Claims Against Individual Releasors
which have not yet ripened or about which the Company does not yet know, and
agrees not to bring any action in any judicial, administrative or other
proceeding against any Individual Releasors alleging any such Claim Against
Individual Releasors or otherwise arising in connection with any such Claim
Against Individual Releasors, or support any shareholder of the Company in any
such action brought by such shareholder.
3. RELEASE BY VANGUARD OF COMPANY. Except for obligations arising
pursuant to the Agreement, Vanguard for itself and for its respective legal
successors and assigns, does hereby release, remise, forever discharge and
relinquish the Company from any and all liabilities, actions, claims,
obligations, damages, attorneys' fees, suits, and demands of any kind or nature,
known and unknown, liquidated or unliquidated, in law or in equity, whether
arising under any local, state or federal statute or ordinance, or under the
common law of any state of the United States, or under any federal common law of
the United States, or under any contract, occurring at any time up to and
through the date of this Release (collectively "Claims Against Company")
including Claims Against Company which have not yet ripened or about which
Vanguard does not yet know, and agrees not to bring any action in any judicial,
administrative or other proceeding against Company alleging any such Claim
Against Company or otherwise arising in connection with any such Claim Against
Company, or support any shareholder of the Company in any such action brought by
such shareholder.
4. RELEASE BY COMPANY OF VANGUARD. Except for obligations arising
pursuant to the Agreement, the Company for itself and for its respective legal
successors and assigns, does hereby release, remise, forever discharge and
relinquish Vanguard from any and all liabilities, actions, claims, obligations,
damages, attorneys' fees, suits, and demands of any kind or nature, known and
unknown, liquidated or unliquidated, in law or in equity, whether arising under
any local, state or federal statute or ordinance, or under the common law of any
state of the United States, or under any federal common law of the United
States,
-2-
<PAGE>
or under any contract, occurring at any time up to and through the date of
this Release (collectively "Claims Against Vanguard") including Claims
Against Vanguard which have not yet ripened or about which the Company does
not yet know, and agrees not to bring any action in any judicial,
administrative or other proceeding against Vanguard alleging any such Claim
Against Vanguard or otherwise arising in connection with any such Claim
Against Vanguard, or support any shareholder of the Company in any such
action brought by such shareholder.
5. WAIVER OF STATUTORY BENEFITS. The parties intend that the
foregoing releases shall be effective as full and final accords and
satisfactions of all claims released thereby and, as further consideration for
the transactions contemplated by the Agreement, each of the Company and the
Individual Releasors hereby further agrees, represents and warrants that the
matters released herein are not limited to matters which are known or disclosed.
In this connection, each of the Company and the Individual Releasors hereby
agrees, represents and warrants that he, she or it realizes and acknowledges
that (a) factual matters now existing and unknown to him, her or it may have
given or may hereafter give rise to Claims which are presently unknown,
unsuspected, unliquidated, unmatured and/or contingent, (b) such Claims may be
unknown, unsuspected, unliquidated, unmatured and/or contingent due to
ignorance, oversight, error, negligence or otherwise, and (c) if such Claims had
been known, suspected, liquidated, matured and/or unconditional, his, her or its
decision to enter into this Release may have been materially affected. Each of
the Company and the Individual Releasors further agrees, represents and warrants
that this Release has been negotiated and agreed upon in view of these
realizations. Nevertheless, each of the Individual Releasors hereby intends to
release, discharge and acquit the Company from any such unknown, unsuspected,
unliquidated, unmatured and/or contingent Claims which are in any way set forth
in or related to the matters identified hereinabove. EACH OF THE INDIVIDUAL
RELEASORS HEREBY EXPLICITLY WAIVES ALL RIGHTS UNDER AND ANY BENEFITS OF ANY
COMMON LAW OR STATUTORY RULE OR PRINCIPLE WITH RESPECT TO THE RELEASE OF SUCH
CLAIMS, INCLUDING, WITHOUT LIMITATION, SECTION 1542 OF THE CALIFORNIA CIVIL
CODE, WHICH PROVIDES AS FOLLOWS:
A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH A CREDITOR
DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME
OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM, MUST HAVE
MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR.
EACH OF THE INDIVIDUAL RELEASORS AGREES THAT NO SUCH COMMON LAW OR STATUTORY
RULE OR PRINCIPLE, INCLUDING SECTION 1542 OF THE
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<PAGE>
CALIFORNIA CIVIL CODE, SHALL AFFECT THE VALIDITY OR SCOPE OR ANY OTHER ASPECT OF
THIS RELEASE.
6. EFFECTIVE DATE OF RELEASE. This Release shall be effective as of
the Closing Date, as defined in the Agreement.
7. COUNTERPARTS. This Release may be executed in counterparts
which, when taken together, shall constitute one and the same agreement.
IN WITNESS WHEREOF, the undersigned have executed this Release as of
the date first above written.
The Company: VANGUARD PLASTICS OF CALIFORNIA, INC.
By: _______________________________________
Name:
Title:
Individual Releasors: ____________________________________________
JOHN A. STEIL
____________________________________________
____________________________________________
VANGUARD PLASTICS INC
By: _______________________________________
Name:
Title:
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<PAGE>
EXHIBIT E TO STOCK PURCHASE AGREEMENT
OPINION OF COUNSEL TO PURCHASER
________ , 1996
To the Shareholders of Vanguard Plastics of California, Inc.
party to the Stock Purchase Agreement
defined below
c/o Vanguard Plastics of California, Inc.
9420 Telfair Avenue
Sun Valley, California 91352
Ladies and Gentlemen:
We refer to the Stock Purchase Agreement dated as of ________, 1996 (the
"Agreement") among RXI Plastics, Inc., a Delaware corporation ("Purchaser"),
RXI Holdings, Inc., and the 1989 Steil Family Trust ("Trust") and Vanguard
Plastics Inc. ("Vanguard") (collectively, the "Shareholders"), providing for,
among other things, the acquisition by Purchaser from the Shareholders of all
of the outstanding capital stock of Vanguard Plastics of California, Inc., a
California corporation (the "Company"). We have served as counsel to
Purchaser in connection with the Agreement and the transactions contemplated
thereby. Terms used herein which are defined in the Agreement shall have the
respective meanings set forth therein, unless otherwise defined herein.
This opinion is limited solely to the federal laws of the United States of
America and the laws of the State of California as those laws were in effect
as of the date hereof, and we express no opinion as to the laws of any other
state or jurisdiction, or to any ordinances, regulations or practices of any
county, city or other governmental agency or body within the State of
California.
As used herein, unless otherwise expressly stated, the term "to the best of
our knowledge" or "to our knowledge" or other phrases to the same or similar
effect with reference to matters of fact, means that to the actual knowledge
of those attorneys in our firm who have devoted substantial attention to this
engagement, but not including any constructive or imputed notice of any
information, we find no reason to believe that the opinions expressed herein
are factually incorrect. Beyond that we have made no independent factual
investigation for the purpose of rendering an opinion with respect to such
matters.
<PAGE>
Shareholders of Vanguard Plastics of California, Inc.
_________________, 1996
Page 2
Pursuant to Section 7.3 of the Agreement, and subject to the assumptions,
limitations and qualifications herein set forth, we are of the opinion that:
1. Purchaser is a corporation duly incorporated, validly existing and in
good standing under the laws of the State of Delaware.
2. Purchaser has the corporate power and authority to execute, deliver
and perform the Agreement and the Purchaser Note and to consummate the
transactions contemplated thereby.
3. The Agreement and the Purchaser Note have each been duly authorized,
executed and delivered by Purchaser and constitute the legal, valid and
binding agreement of Purchaser enforceable against Purchaser in accordance
with their respective terms, except as enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer or
other similar laws of general applicability relating to or affecting the
enforcement of creditors' rights and by the effect of general principles of
equity (regardless of whether enforceability is considered in a proceeding in
equity or at law).
4. Neither the execution and delivery of the Agreement or the Purchaser
Note nor the consummation or the fulfillment of the terms, conditions and
provisions thereof, conflict with, result in the breach of the terms,
conditions or provisions of, or constitute a default, an event of default or
an event creating rights of acceleration, termination or cancellation or a
loss of rights under, or result in the creation or imposition of any lien or
encumbrance upon any property of Purchaser under (a) the Certificate of
Incorporation or Bylaws of Purchaser, or (b) any material note, instrument,
agreement, mortgage, lease, license, franchise or permit identified in the
Officer's Certificate, or (c) any judgment, decree, order, statute, rule or
regulation which is known to us, and to which Purchaser is a party or any of
its or their assets or properties is subject or by which Purchaser is bound.
For the purpose of rendering the foregoing opinions, we have relied, with
your consent, as to various questions of fact material to such opinions, upon
the representations made by the Parties in the Agreement and upon certificates
of officers of Purchaser attached hereto. We also have examined originals, or
copies of originals certified to our satisfaction, of such agreements,
documents, certificates, and other statements of government officials and other
instruments, have examined such questions of law and have satisfied ourselves
as to such matters of fact as we have considered relevant and necessary as a
basis for the foregoing opinions.
For purposes of rendering the foregoing opinions, we have made, with your
consent, and without further inquiry as to their accuracy or completeness, the
following assumptions:
(a) We have assumed the authenticity of all documents submitted to us as
originals, the genuineness of all signatures, the legal capacity of all natural
persons and the conformity with the original documents of any copies thereof
submitted to us for our examination.
<PAGE>
Shareholders of Vanguard Plastics of California, Inc.
_________________, 1996
Page 3
(b) We have assumed the due authorization, execution and delivery of the
Agreement and all of the other instruments and agreements contemplated thereby
by the parties thereto (other than Purchaser) and that the Agreement and all of
the other instruments and agreements contemplated thereby constitute the legally
valid and binding obligations of the parties thereto (other than Purchaser),
enforceable against such parties in accordance with their respective terms.
(c) We have assumed compliance by you with any and all applicable laws
with which you are required to comply relating to or affecting the matters and
actions contemplated by the Agreement and all of the other instruments and
agreements contemplated thereby.
(d) We have assumed that neither the Agreement nor any of the other
instruments and agreements contemplated thereby has been amended, modified,
terminated or revoked in any respect, and that each remains in full force and
effect as of the date hereof.
This opinion is given as of the date hereof and we disclaim any obligation
to advise you of any changes or developments in law that may occur after the
date hereof which may affect the conclusions reached herein.
This opinion is being delivered solely for the benefit of the persons to
whom it is addressed and may not be quoted, filed with any governmental
authority or other regulatory agency or otherwise circulated or utilized for any
other purpose without our prior written consent.
Very truly yours,
<PAGE>
OFFICERS' CERTIFICATE
Reference is made to that certain Stock Purchase Agreement (the
"Agreement"), dated as of May 1, 1996, by and among RXI Plastics, Inc.
("Purchaser"), RXI Holdings, Inc. ("Guarantor"), Vanguard Plastics Inc.
("Vanguard") and the 1989 Steil Family Trust ("Trust") (the Trust and
Vanguard collectively referred to as the "Shareholders"). Capitalized terms
used in this certificate which are not defined herein shall have the meanings
given such terms in the Agreement.
The undersigned, Leon Farahnik and Marvin Liebman, are delivering this
Officers' Certificate to Sidley & Austin in connection with their issuance of
an opinion to the Shareholders pursuant to Section 7.3 of the Agreement. We
acknowledge that a copy of this Officers' Certificate will be delivered to
Shareholders, and hereby authorize Sidley & Austin to rely upon the
statements set forth below, all of which are true and correct, in connection
with the preparation and issuance of the above-referenced opinion.
We hereby certify that to the best of our knowledge after diligent
inquiry:
1. Leon Farahnik is the duly appointed and acting Chairman of the Board
and Chief Executive Officer of Purchaser.
2. Marvin Liebman is the duly elected and acting Chief Financial
Officer and Secretary of Purchaser.
3. Purchaser has been duly incorporated under the laws of the
jurisdiction in which it is incorporated and is currently in good standing in
its state of incorporation.
4. Purchaser has not taken any action to dissolve or liquidate its
corporate powers.
5. Except for the documents set forth in the Registration Statement of
Form S-4, filed with the Securities Exchange Commission on July 6, 1995,
Purchaser is not a party to any material contract or instrument.
6. There is no litigation, arbitration or other proceeding pending or
threatened against the Purchaser, or any of its properties or assets, and
there are no outstanding judgments, injunctions, orders or decrees of any
court or other governmental authority against the Purchaser.
<PAGE>
IN WITNESS WHEREOF, the undersigned have caused this Officers'
Certificate to be duly executed as of the ____ day of May, 1996.
_______________________________________
Leon Farahnik
_______________________________________
Marvin Liebman
<PAGE>
EXHIBIT F TO STOCK PURCHASE AGREEMENT
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into
as of the 1st day of May, 1996, by and between Vanguard Plastics a division
of RXI Plastics, Inc., a Delaware corporation (the "Company"), and John A. Steil
(the "Executive").
WITNESSETH:
WHEREAS, the Executive has the experience to provide services to the
Company of an extraordinary character which gives such services a peculiar
value, the loss of which cannot be reasonably or adequately compensated in
damages in an action at law; and
WHEREAS, the Company desires to retain the services of the Executive, and
the Executive desires to be employed by the Company for the term of this
Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements set forth herein, the Company and the Executive, intending to be
legally bound, hereby agree as follows:
1. EMPLOYMENT. The Company hereby employs the Executive as the President
of the Vanguard Plastics division of the Company, and the Executive accepts such
employment and agrees to perform the duties and services specified herein,
subject always to such resolutions as are established from time to time by the
Board of Directors of the Company (the "Board"), for the period and upon the
other terms and conditions set forth in this Agreement.
2. TERM. The term of the Executive's employment hereunder shall be for a
period commencing on the date of this Agreement and ending on December 31, 2001
(the "Term"), unless the parties agree to extend such employment. The Term is
subject to earlier termination as hereinafter specified. Unless an amendment to
this Agreement is executed which extends the Term, any employment following
expiration of the Term shall be deemed strictly "at will."
3. POSITION AND DUTIES.
3.01 SERVICE WITH THE COMPANY. During the Term, the Executive agrees
to provide his substantially full business time and attention to the business of
the Company, consistent with the provisions of this Agreement and to perform
such executive employment duties as the Board of Directors of the Company or the
Chairman of the Board of RXI Holdings, Inc., Company's parent (the "Parent
Corporation"), shall assign to him from time to time.
<PAGE>
3.02 NO CONFLICTING DUTIES. Except as set forth in the last sentence
of this Section 3.02, during the Term, the services of Executive shall be
provided exclusively to Company and Executive shall not serve as an officer,
director, employee, consultant or advisor to any other business without the
prior written consent of the Company's Board. The Executive hereby confirms
that he is under no contractual commitments inconsistent with his obligations
set forth in this Agreement, and that during the Term, he will not render or
perform services, or enter into any contract to do so, for any other
corporation, firm, entity or person which are inconsistent with the provisions
of this Agreement, provided that Executive may serve as an officer of, and
provide services to Municipal Paper, Inc. in the manner heretofore provided, so
long as such does not materially impair his ability to perform his services to
Company.
3.03 RELOCATION. Executive shall provide his services to Company in
the metropolitan Los Angeles, California area and shall not be required to
relocate outside of such metropolitan area without his consent. Nonetheless,
Executive recognizes that his position as President of the Company will obligate
him to travel from time to time, including attendance at Board of Director
meetings in other locations.
3.04 RIGHT TO INSURE. The Company shall have the right to secure, in
its own name or otherwise and at its own expense, life, health, accident or
other insurance covering or otherwise insuring Executive, and Executive shall
have no right, title or interest in or to any such insurance or any of the
proceeds or benefits thereof. Executive shall fully assist and cooperate with
the Company in procuring any such insurance, including without limitation by
submitting to such examinations, and by signing such applications and other
instruments, as may reasonably be required by any insurance carrier to which
application is made by the Company for any such insurance.
4. COMPENSATION.
4.01 BASE SALARY. As compensation for all services to be rendered by
the Executive under this Agreement, the Company shall pay to the Executive a
base annual salary of not less than One Hundred Twenty Thousand Dollars
($120,000) (the "Base Salary"), which shall be paid on a regular basis in
accordance with the Company's normal payroll procedures and policies. The
amount of the Base Salary shall be reviewed annually by the Board, and the Board
in its sole and exclusive discretion shall determine whether such Base Salary
amount shall be increased, provided that Base Salary shall not be decreased
without consent of Executive.
4.02 INCENTIVE COMPENSATION. In addition to the Base Salary described
in Section 4.01 and the Stock Option Agreement described in Section 4.03, the
Executive shall be entitled to participate in all non-stock based incentive
compensation plans applicable to executives of the Parent Corporation.
Notwithstanding the foregoing sentence, the determination to include Executive
in any such plan, and the level of participation, shall be determined in the
sole discretion of the Parent Corporation's Board of Directors.
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<PAGE>
4.03 OPTION AGREEMENT. In addition to the Base Salary described in
Section 4.01 and the incentive compensation described in Section 4.02, the
Executive shall be entitled to exercise certain stock options as more fully
described in a certain Stock Option Agreement dated as of the date hereof, among
the Company, the Parent Corporation and Executive, a copy of which is attached
hereto as EXHIBIT A.
4.04 PARTICIPATION IN BENEFIT PLANS; PERQUISITES. The Executive shall
be included, to the extent eligible thereunder, in any and all plans of the
Vanguard Plastics division of the Company ("Division") providing general
benefits for the Division's employees, as adopted from time to time, including
but not limited to Group Life Insurance, Hospitalization, Disability, Medical,
Dental, Pension, Profit Sharing and Savings Plans (but excluding stock option or
stock bonus plans). The Executive's participation in any such plan or program
shall be subject to the provisions, rules and regulations applicable thereto.
Executive shall be entitled to vacation and sick leave as specified in the
Division's policy manual applicable to all executives of Division. In addition,
Company shall provide Executive with such perquisites as Parent Corporation
provides to its senior executives or to the senior executives of its
subsidiaries.
4.05 EXPENSES. In accordance with the Parent Corporation's policies
established from time to time, the Company will pay or reimburse the Executive
for all reasonable and necessary out-of-pocket expenses and provide allowances
on a basis consistent with the reimbursement and allowance that the Parent
Corporation, or its subsidiaries, provide to individuals serving in similar
positions as the Executive, subject to the presentment of appropriate itemized
statements of such expenses and reasonably requested backup. Executive shall be
entitled to a monthly automobile allowance in the amount of $1,000.
5. COMPENSATION UPON THE TERMINATION OF THE EXECUTIVE'S EMPLOYMENT WITH
THE COMPANY.
5.01 In the event that the Executive is deemed "totally or permanently
disabled" pursuant to Section 10.01, then the Executive shall cease to be
entitled to receive the Executive's then current Base Salary (or to receive
benefits pursuant to Section 4.04). The foregoing shall not affect any rights
of Executive under disability insurance policies or programs adopted by the
Company or the Parent Corporation and in which Executive is a participant.
5.02 In the event the Executive's employment is terminated by virtue
of his death, Executive's beneficiary or a beneficiary designated by the
Executive in writing to the Company, or in the absence of such beneficiary, the
Executive's estate, shall be entitled to receive the Executive's then current
Base Salary through the end of the calendar month in which his death occurred.
The foregoing shall be in addition to any insurance proceeds which Executive's
beneficiary shall be entitled to receive under Company sponsored insurance
programs.
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<PAGE>
5.03 In the event that the Executive's employment is terminated
pursuant to Sections 10.03, then he shall not be entitled to any compensation
other than his then current Base Salary which has accrued through the date of
termination.
5.04 In the event that Executive's employment is terminated pursuant
to Section 10.04, he shall be entitled to his then current Base Salary which has
accrued through the date of termination and shall otherwise not be entitled to
any additional compensation.
5.05 In the event Executive is terminated by the Company pursuant to
Section 10.05 at any time prior to May ____, 1999, the Company shall (subject to
Section 9.01(a) hereof) continue to pay to the Executive, in regular
installments, his monthly Base Salary and all fringe benefits for a period of
twelve (12) months following the effective date of such termination. Should
Executive's employment be terminated by Company at any time after May 9, 1999,
Company shall have no obligation to continue to pay Base Salary or fringe
benefits.
5.06 All payments required to be made by the Company to the Executive
pursuant to this Section 5 shall be paid in the manner and at the times
specified in Section 4.01 hereof.
6. CONFIDENTIAL INFORMATION. Except as permitted or directed by the
Company's Board, the Executive shall not during the Term or at any time
thereafter divulge, furnish, disclose or make accessible (other than in the
ordinary course of the business of the Company) to anyone for use in any way any
confidential or secret knowledge or information about the Company or used by the
Company in its business which the Executive has acquired or become acquainted
with or will acquire or become acquainted with prior to the termination of the
period of his employment by the Company (including employment by the Company
prior to the date of this Agreement), whether developed by himself or by others,
concerning any trade secrets, confidential or secret designs, processes,
formulae, software or computer programs, plans, devices or material (whether or
not patented or patentable, copyrighted or copyrightable) directly or indirectly
useful in any aspect of the business of the Company, any confidential customer
or supplier lists of the Company, any confidential or secret development or
research work of the Company, or any other confidential, secret or nonpublic
aspects of the business of the Company. The Executive acknowledges that the
above-described knowledge or information constitutes a unique and valuable asset
of the Company acquired at great time and expense by the Company, and that any
disclosure or other use of such knowledge or information other than for the sole
benefit of the Company would be wrongful and would cause irreparable harm to the
Company. Both during and after the Term, the Executive will refrain from any
acts or omissions that would reduce the value of the use of such knowledge or
information to the Company. The foregoing obligations of confidentiality,
however, shall not apply to any knowledge or information which is now generally
publicly known or which subsequently becomes generally publicly known, other
than as a direct or indirect result of the breach of this Agreement by the
Executive.
7. COVENANTS DURING EMPLOYMENT PERIOD.
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<PAGE>
7.01 DISCLOSURE AND ASSIGNMENT. The Executive will promptly disclose
in writing to the Company complete information concerning each and every
invention, discovery, improvement, device, design, apparatus, practice, process,
software or computer program, method or product, whether or not patentable or
copyrightable, made, developed, perfected, devised, conceived or first reduced
to practice by the Executive, either solely or in collaboration with others,
during Executive's employment under this Agreement, or for the period in which a
covenant not to compete is in effect hereunder as to Executive, whether or not
during regular working hours, relating either directly or indirectly to the
business, products or practices of the Company (hereinafter referred to as the
"Inventions"). The Executive, to the extent that he has the legal right to do
so, hereby acknowledges that any and all of the Inventions are the property of
the Company and hereby assigns and agrees to assign to the property of the
Company any and all of the Executive's right, title and interest in and to any
and all of the Inventions without further payment.
7.02 INTENTIONALLY OMITTED.
7.03 RECORDS. The Executive will keep complete, accurate and
authentic accounts, notes, data and records of all Inventions in the manner and
form requested by the Company. Such accounts, notes, data and records shall be
the property of the Company, and, upon its request, the Executive will promptly
surrender the same to it or, if not previously surrendered upon its request or
otherwise, the Executive will surrender the same, and all copies thereof, to the
Company upon the conclusion of his employment.
7.04 OBLIGATIONS, RESTRICTIONS AND LIMITATIONS. The Executive
understands that the Company may enter into agreements or arrangements with
agencies of the United States Government, and that the Company may be subject to
laws and regulations which impose obligations, restrictions and limitations on
it with respect to inventions and patents which may be acquired by it or which
may be conceived or developed by employees, consultants or other agents
rendering services to it. The Executive agrees that he shall be bound by all
such obligations, restrictions and limitations disclosed to him applicable to
any said invention conceived or developed by him during the Term and shall take
any and all further action which may be required to discharge such obligations
and to comply with such restrictions and limitations.
7.05 ASSISTANCE OF THE EXECUTIVE. Upon the request of the Company and
without further compensation therefor, but at no expense to the Executive, and
whether during the Term or thereafter, the Executive will provide reasonable
assistance, including, but not limited to, the execution of papers and lawful
oaths and the giving of testimony, that in the opinion of the Company, its
successors and assigns, may be necessary or desirable (i) in obtaining,
sustaining, reissuing, extending and enforcing United States and foreign Letters
Patents, including, but not limited to, design patents, on any and all of the
Inventions or trademarks; (ii) for perfecting, affirming and recording the
Company's complete ownership and title of its assets; and (iii) in prosecuting
or defending litigation relating to matters as to which Employee has knowledge,
and Executive agrees otherwise to cooperate fully in all proceedings and matters
relating to the Company.
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<PAGE>
7.06 CODE OF BUSINESS CONDUCT. The Executive agrees to be bound by
the Code of Business Conduct attached to this Agreement, except to the extent
that the Code of Business Conduct is inconsistent with an express provision of
this Agreement.
8. VENTURES. If, during the Term, the Executive is engaged in or
associated with the planning or implementing of any project, program or venture
involving the Company and a third party or parties, all rights in the project,
program or venture shall belong to the Company and shall constitute a corporate
opportunity belonging exclusively to the Company. Except as approved by the
Company's Board, the Executive shall not be entitled to any interest in such
project, program or venture or to any commission, finder's fee or other
compensation in connection therewith other than the salary to be paid to
Executive as provided in this Agreement.
9. NON-COMPETITION; SOLICITATION OF CUSTOMERS AND SOLICITATION OF
EMPLOYEES.
9.01 NON-COMPETITION.
(a) The Executive agrees that, during the Term of this
Agreement, he shall not directly or indirectly engage in competition with the
Company in any manner or capacity (e.g., as a management consultant, principal,
partner, officer, director, stockholder or management employee) in any phase of
the Company's business as then being conducted and in case of termination by the
Company of the Executive's employment pursuant to Section 10.05, for a period of
one (1) year following the termination of his employment with the Company he
shall not, directly or indirectly, engage in competition with the Company in
California, Utah, Arizona, Nevada, New Mexico or Idaho in any manner or
capacity. If Executive's employment under this Agreement is terminated pursuant
to Section 10.05, as a condition to Executive's right to continue to receive
compensation pursuant to Section 5.05, Executive shall refrain from competing
with the Company in the Territory during the balance of the Term. The Company
shall also have the right upon forty-five (45) days' written notice to Executive
after termination of employment, to require the Executive to refrain from
competing for an additional period of six (6) months from the date the covenant
would otherwise expire, in which event, the Executive shall be entitled to
receive additional payments equal to six (6) months of his Base Salary (to be
paid monthly during such additional six (6) month period). Executive
acknowledges that if Executive's employment is terminated by Executive pursuant
to Section 10.04 or by the Company pursuant to Section 10.03, the foregoing
covenant shall remain in effect for the balance of the original Term.
(b) Ownership by the Executive, as a passive investment, of less
than 2% of the outstanding equity interests of any entity listed on a national
securities exchange or publicly traded in the over-the-counter market shall not
constitute a breach of this Section 9.
(c) The Executive further agrees that, during the Term, he will
not, directly or indirectly, assist or encourage any other person in carrying
out, directly or indirectly, any activity that would be prohibited by the above
provisions of this Section 9 if
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<PAGE>
such activity were carried out by the Executive, either directly or
indirectly, and in particular the Executive agrees that he will not, directly
or indirectly, induce any employee of the Company to carry out, directly or
indirectly, any such activity.
9.02 AGREEMENT NOT TO SOLICIT CUSTOMERS. The Executive agrees that
during the Term and for all periods in which a covenant not to compete is in
effect hereunder as to Executive, he will not, either directly or indirectly, on
his own behalf or in the service or on behalf of others, solicit, divert or
appropriate, or attempt to solicit, divert or appropriate, to any competing
business any person or entity whose account with the Company was sold or
serviced by or under the supervision of the Executive during the year preceding
the termination of such employment.
9.03 AGREEMENT NOT TO SOLICIT EMPLOYEES. The Executive agrees that
during the Term and for the three (3) year period following the termination or
expiration of the Term, he will not, either directly or indirectly, on his own
behalf or in the service or on behalf of others solicit, divert or hire away, or
attempt to solicit, divert or hire away any person then employed by the Company
or then serving as a sales representative of the Company.
10. TERMINATION PRIOR TO EXPIRATION OF THE TERM.
10.01 DISABILITY. The Executive shall be deemed to be "totally or
permanently disabled" or to have a "total or permanent disability" if Executive
is unable on account of sickness or accident, whether or not job-related, to
engage in regularly or to perform adequately his assigned duties under this
Agreement for a continuous period of 120 days or for 180 days during any twelve
(12) month period. Executive shall be entitled to receive Base Salary and
benefits prior to the time that Executive is deemed hereby in the reasonable
judgment of the Board to be "totally or permanently disabled." Subject to
Company's obligation to pay compensation and benefits pursuant to Section 5.01,
upon Executive's total or permanent disability, Company may terminate this
Agreement.
10.02 DEATH OF EXECUTIVE. The Executive's employment shall
terminate immediately upon the death of Executive.
10.03 TERMINATION FOR CAUSE. The Company may terminate the
Executive's employment at any time for "Cause" (as hereinafter defined)
immediately upon written notice to Executive. Such written notice shall set
forth with reasonable specificity the Company's basis for such termination. As
used herein, the term "Cause" shall mean that the Executive shall have (i) in
the reasonable judgment of the Board committed a criminal act or an act of
fraud, embezzlement, breach of trust or other act of dishonesty; (ii) in the
reasonable judgment of Company breached his fiduciary duties in a material
manner, or was guilty of material gross neglect or gross misconduct; (iii) in
the reasonable judgment of the Board willfully violated written corporate policy
or rules of the Company; or (iv) in the reasonable judgment of the Board, has
willfully refused to follow the written directions given by the Board from time
to time or breached any covenant or obligation under this Agreement or
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<PAGE>
other agreement with the Company, which, if curable, has not been cured
within thirty (30) days after written notice to Executive.
10.04 RESIGNATION. Subject to Section 9.01 hereof, the Executive
may terminate his employment prior to the end of the Term, following the written
submission of the Executive's resignation to the Board to be effective no less
than three (3) months following the date of submission, or such earlier date as
is agreed to by the Board.
10.05 TERMINATION WITHOUT CAUSE. The Company may terminate the
Executive's employment at any time during the Term, without cause, upon written
notice to the Executive. Termination "without cause" shall mean termination of
employment by the Company on any basis other than termination of Executive's
employment hereunder pursuant to Sections 10.01, 10.02, 10.03 or 10.04. No
exercise by Company of its rights under this Section 10.05 shall under any
circumstances be deemed to constitute (i) a breach by the Company of any term,
express or implied (including without limitation any breach of any covenant of
good faith and fair dealing); (ii) a wrongful discharge or termination of
Executive's employment; (iii) a wrongful deprivation of Executive's corporate
office, or damage or injury to his reputation; or (iv) a violation of any other
duty owed by Company to Executive (whether in contract or tort), unless any of
the foregoing shall result from the determination by Company to terminate
Executive's employment which constitutes a violation by Company of any federal,
state of municipal statute, ordinance, rule or regulation, respecting which the
parties may not contract otherwise.
10.06 SURRENDER OF RECORDS AND PROPERTY. Upon termination of his
employment with the Company, the Executive shall deliver promptly to the Company
all records, manuals, books, blank forms, documents, letters, memoranda, notes,
notebooks, reports, data, tables, calculations or copies thereof, which are the
property of the Company and which relate in any way to the business, products,
practices or techniques of the Company, and all other property, trade secrets
and confidential information of the Company, including, but not limited to, all
documents which in whole or in part contain any trade secrets or confidential
information of the Company, which in any of these cases are in his possession or
under his control.
11. ASSIGNMENT. This Agreement shall not be assignable, in whole or in
part, by either party without the written consent of the other party, except
that the Company may, without the consent of the Executive, assign its rights
and obligations under this Agreement to any corporation, firm or other business
entity (i) with or into which the Company may merge or consolidate, or (ii) to
which the Company may sell or transfer all or substantially all of its assets or
of which 50% or more of the equity investment and of the voting control is
owned, directly or indirectly, by, or is under common ownership with, the
Company. Upon such assignment by the Company, the Company shall obtain the
assignees' written agreement enforceable by Executive to assume and perform,
from and after the date of such assignment, the terms conditions, and provisions
imposed by this Agreement upon the Company. After any such assignment by the
Company and such written agreement by the Assignee, the Company shall be
discharged from all further liability hereunder and such
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assignee shall thereafter be deemed to be the Company for the purposes of all
provisions of this Agreement including this Section 11.
12. INJUNCTIVE RELIEF. The Executive agrees that it would be difficult to
compensate the Company fully for damages for any violation of the provisions of
this Agreement, including without limitation the provisions of Sections 6, 7, 8,
9 and 10.03. Accordingly, the Executive specifically agrees that the Company
shall be entitled to temporary and permanent injunctive relief to enforce the
provisions of this Agreement. This provision with respect to injunctive relief
shall not, however, diminish the right of the Company to claim and recover
damages in addition to injunctive relief. Executive acknowledges that the
services to be rendered by Executive under this Agreement, and the rights and
privileges granted by Executive to the Company hereunder, are of a special,
unique, extraordinary and intellectual character which gives them a peculiar and
special value, the loss of which cannot be reasonably or adequately compensated
in damages in an action at law, and a breach by Executive of any of the
provisions hereof will cause the Company great and irreparable injury.
Executive acknowledges that the Company shall, therefore, be entitled, in
addition to any other remedies which it may have under this Agreement or at law,
to receive injunctive and other equitable relief (including without limitation
specific performance) to enforce any of the rights and privileges of the Company
or any of the covenants or obligations of Executive hereunder. Nothing
contained herein, and no exercise by the Company of any right or remedy, shall
be construed as a waiver by the Company of any other rights or remedies which
the Company may have.
13. INDEMNIFICATION. The Company shall indemnify Executive as provided in
the Company's Bylaws in effect at the commencement of this Agreement, a copy of
which is attached hereto as EXHIBIT B, and made a part hereof. The scope of
indemnification to which Executive is entitled shall not be diminished, but may
be further expanded by the Company, by amendment of the Company's Bylaws,
Certificate of Incorporation or otherwise. In the event Executive serves as a
member of Parent Company's Board of Directors, he shall moreover, insofar as
pertains to his services as a director of Parent Company, be entitled to
indemnification as set forth in Parent Company's Bylaws.
14. MISCELLANEOUS.
14.01 GOVERNING LAW. This Agreement is made under and shall be
governed by and construed in accordance with the laws of the State of California
without regard to conflicts of law principles of the State of California.
14.02 ARBITRATION. Any disagreement, dispute, controversy or
claim arising out of or relating to this Agreement or the interpretation hereof
(whether sounding in contract or tort), shall be resolved exclusively and
finally by arbitration as set forth on EXHIBIT C hereto, including but not
limited to disputes relating to the existence of an alleged breach of this
Agreement or improper termination of Executive's employment.
14.03 PRIOR AGREEMENTS. This Agreement contains the entire
agreement of the parties relating to the subject matter hereof and supersedes
all prior agreements and
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understanding with respect to such subject matter, and the parties hereto
have made no agreements, representations or warranties relating to the
subject matter of this Agreement which are not set forth herein.
14.04 WITHHOLDING TAXES. The Company may withhold from all
compensation payable pursuant hereto all sums required to be withheld under all
federal, state and city laws, or governmental regulation or ruling, with respect
to payment of compensation, benefits or perquisites.
14.05 AMENDMENTS. No amendment or modification of this Agreement
shall be deemed effective unless made in writing signed by the parties hereto.
14.06 NO WAIVER. No term or condition of this Agreement shall be
deemed to have been waived nor shall there be any estoppel to enforce any
provisions of this Agreement, except by a statement in writing signed by the
party against whom enforcement of the waiver or estoppel is sought. Any written
waiver shall not be deemed a continuing waiver unless specifically stated, shall
operate only as to the specific term or condition waived and shall not
constitute a waiver of such term or condition for the future or as to any act
other than that specifically waived.
14.07 SEVERABILITY. To the extent any provision of this Agreement
shall be invalid or unenforceable, it shall be considered deleted herefrom and
the remainder of such provision and of this Agreement shall be unaffected and
shall continue in full force and effect. In furtherance and not in limitation
of the foregoing, should the duration or geographical extent of, or business
activities covered by any provision of this Agreement be in excess of that which
is valid and enforceable under applicable law, then such provision shall be
construed to cover only that duration, extent or activities which may validly
and enforceably be covered. The Executive acknowledges the uncertainty of the
law in this respect and expressly stipulates that this Agreement shall be given
the construction which renders its provisions valid and enforceable to the
maximum extent (not exceeding its express terms) possible under applicable law.
14.08 SURVIVAL. Sections 6, 7, 8, 9 and 14 shall survive
termination of this Agreement.
14.09 NOTICES. All notices or other communications required or
permitted hereunder shall be in writing and shall be deemed given or delivered
when delivered personally or four days after being mailed by registered or
certified mail, return receipt requested, or one day after being sent by private
overnight courier addressed as set forth below, or if sent by facsimile
transmission, on the first business day after transmission provided that an
original copy has been deposited in the U.S. mail:
If to Executive, to:
John A. Steil c/o Vanguard Plastics of California, Inc.
9420 Telfair Avenue
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Sun Valley, California 91352
Telecopy: (818)768-9627
If to the Company, to:
Vanguard Plastics division of RXI Plastics, Inc.
c/o RXI Holdings Inc.
11111 Santa Monica Boulevard
Suite 270
Los Angeles, California 90025
Attention: Leon Farahnik
Telecopy: (310) 473-9592
with a copy to:
Sidley & Austin
555 West Fifth Street
40th Floor
Los Angeles, California 90013
Attention: Moshe J. Kupietzky, Esq.
Telecopy: (213) 896-6600
or to such other address as such party may indicate by a notice delivered to the
other party hereto.
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first written above.
THE COMPANY:
VANGUARD PLASTICS A DIVISION OF
RXI PLASTICS, INC., A DELAWARE CORPORATION
By:________________________________________
Title:_____________________________________
THE EXECUTIVE:
___________________________________________
JOHN A. STEIL
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EXHIBIT C TO EMPLOYMENT AGREEMENT
ARBITRATION PROCEEDINGS
(a) The arbitration shall be conducted in Los Angeles, California.
(b) The arbitration proceedings will be conducted in accordance with,
and pursuant to, the then current commercial Arbitration Rules (the "Arbitration
Rules") of the American Arbitration Association in Los Angeles, California,
except if the Arbitration Rules conflict with the provisions of this EXHIBIT C
in which event the provisions of this EXHIBIT C shall control.
(c) There will be a single neutral arbitrator ("Arbitrator") who will
be selected in accordance with the usual rules and procedures under the
Arbitration Rules.
(d) The Arbitrator will have the power to grant all appropriate legal
and equitable relief, both by way of interim relief and as a part of his final
award, as may be granted by any court of competent jurisdiction, in order to
carry out the terms of this Agreement (including, without limitation,
declaratory and injunctive relief and damages, but in no event shall the
Arbitrator have the authority to award punitive or exemplary damages). All
awards and orders of the Arbitrator, including interim relief, may be enforced
by any court of competent jurisdiction.
(e) The parties intend that the arbitration proceedings be conducted
as expeditiously as possible and that appropriate rights of discovery (including
the right to depose witnesses, submit interrogatories and request documents) be
granted to each party. In that regard, the parties agree to work together in
good faith to arrive upon mutually acceptable procedures regarding the time
limits for, and type and degree of, such rights of discovery and the periods of
time within which the matters submitted to arbitration must be heard and
determined by the Arbitrator. If the parties are unable to so agree, such
issues will be submitted to the Arbitrator for his determination. If proper
notice of any hearing has been given, the Arbitrator will have full power to
proceed to take evidence or to perform any other acts necessary to arbitrate the
matter in the absence of any party who fails to appear. At the request of any
party, the Arbitrator, attorneys, parties to the arbitration, witnesses,
experts, court reporters, or other persons present at the arbitration shall
agree in writing to maintain the strict confidentiality of the arbitration
proceedings.
(f) Notwithstanding the foregoing, a party may apply to a court of
competent jurisdiction within the State of California for relief in the form of
a temporary restraining order or preliminary injunction, or other provisional
remedy pending appointment of an Arbitrator or pending final determination of a
claim through arbitration in accordance with this EXHIBIT C. In the event a
dispute is submitted to arbitration hereunder during the Term, the parties shall
continue to perform their respective obligations hereunder, subject to any
interim relief that may be ordered by the Arbitrator or by a court of competent
jurisdiction pursuant to the previous sentence.
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(g) The parties, by written stipulation, may expand or contract the
rights, duties or obligations provided above, or otherwise modify the
arbitration procedures as suits their convenience, consistent with what is
otherwise permitted and feasible within the framework of the Arbitration Rules.
(h) The prevailing party (if a prevailing party is determined to
exist by the Arbitrator) in any proceeding or action under this EXHIBIT C shall
be entitled to an award of all legal and accounting fees, expenses and other
out-of-pocket costs incurred by such party, including any costs and fees
incurred by and payable to the Arbitrator, in such proceeding or action, in
addition to any other damages or relief awarded, regardless of whether such
proceeding or action proceeds to final judgment.
(i) Any decision or award of the Arbitrator shall be final and
binding upon the parties to the arbitration proceeding except for fraud or
failure to provide a hearing. The parties hereto hereby waive to the extent
permitted by law any rights to appeal or to review of such award by any court or
tribunal. The parties agree that the award of the Arbitrator may be enforced
against the parties to the proceeding or their assets wherever they may be found
and that a judgment upon the award may be entered in any court having
jurisdiction thereof.
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RXI HOLDINGS, INC.
CODE OF BUSINESS CONDUCT
(EFFECTIVE OCTOBER 1, 1994)
In order to ensure the integrity of the operations of RXI Holdings, Inc.
and its subsidiaries (collectively, "Company") and its reputation in the
business community, it is imperative that employees of Company not engage in any
activity, at any time, which does or may appear to conflict with the business
interests of Company. Company has developed certain guidelines, discussed
below, to assist employees in implementing its policy of maintaining appropriate
accounting practices and its policies against conflicts of interests,
transactions with government officials or employees, use of inside information
and certain political activities.
Certain of the guidelines discussed below apply to activities of an
employee's immediate family, as well as to the employee. For such purposes, an
employee's "immediate family" is deemed to be his or her spouse, any blood
relation of such employee who is a member of the employee's household (such as a
child, parent, sibling, aunt, uncle, cousin, etc.) and any such relation's
spouse.
The guidelines discussed below are intended for illustrative purposes only
and are not all-inclusive. The guidelines do not relieve any employee of his or
her responsibility to report any other situation which may reasonably be
anticipated to pose a potential conflict of interest. Any employee who has a
question about such guidelines, or about any particular activity which deviates
from the guidelines or any other aspect of Company's conflict of interest policy
should contact the Company's Chief Executive Officer or the Chief Financial
Officer. All such inquiries will be treated confidentially. You will be asked
to sign a copy of these guidelines to acknowledge that you have read and
understand them.
1. GIFTS. No employee or any member of any employee's immediate family
should accept any gift, whether cash, property, travel or services, in any one
year having an aggregate value greater than what is usual and customary, giving
consideration to all of the surrounding facts and circumstances (i.e., greater
than the amount an employee would normally spend on himself or herself and his
or her personal friends), from, or on behalf of, any person or company (or
parent company) or any officer, director, employee, representative or agent, or
other person with managerial responsibilities, which competes with Company or
with which Company does, or may reasonably be anticipated to do, business,
including, but not limited to, companies or individuals engaged to, or who will,
provide services to companies engaged anywhere in the world in any part of the
entertainment business (including agents, attorneys, printing firms,
advertisers, etc.) (a "Conflict Business Entity"). Although meals, drinks or
other entertainment are not subject to the foregoing restrictions, any employee
and members of the employee's immediate family should exercise reasonable
judgment and not accept such entertainment on a scale which might appear to
obligate the employee. In addition, employees should note the provisions of
paragraph 4, "Transactions with Conflict Business Entities," below.
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<PAGE>
2. OUTSIDE EMPLOYMENT; OTHER ACTIVITIES. No employee earning in excess
of $50,000 annually should engage in any outside business activity or accept any
compensatory employment or position, whether as an officer, director, employee,
consultant or other independent contractor, with any other company or business
entity. Also, no employee should engage in any outside business activity or
accept any compensatory employment, which would be considered a conflict of
interest (e.g., working in the same industry). In addition, no employee should
engage in any outside activity to an extent that such activity does, or could
reasonably be anticipated to, impair such employee's ability to perform his or
her job at Company.
3. ECONOMIC INTEREST IN CONFLICT BUSINESS ENTITIES. No employee should
be a partner of any Conflict Business Entity, nor should any employee, together
with all members of such employee's immediate family, own (in his or her own
name or the name of a broker, bank or other nominee or agent) 2% or more of any
class of securities (including common stock, preferred stock, debt instruments,
limited partnership interests, etc.) of any Conflict Business Entity.
4. TRANSACTIONS WITH CONFLICT BUSINESS ENTITIES. No employee or any
member of such employee's immediate family should accept any gift or other
gratuity (regardless of amount) from or on behalf of any Conflict Business
Entity in connection with any transaction or potential transaction between
Company and such Conflict Business Entity. In addition, in the event a member
of any employee's immediate family in the ordinary course of such person's
employment would be involved, directly or indirectly, in any transactions
between a Conflict Business Entity and Company or any other company which may
provide goods or services to Company or a Company subsidiary, such employee
should discuss the matter with the Chief Executive Officer or the Chief
Financial Officer before becoming involved, directly or indirectly.
5. USE OF INSIDE INFORMATION FOR PERSONAL GAIN; CONFIDENTIALITY.
Non-public information concerning Company or its officers, directors, employees
or affiliates or their respective businesses of which any employee becomes aware
should not be discussed with anyone outside of Company, including members of an
employee's immediate family. ("Nonpublic Information" is generally information
which has not been the subject of any press release or otherwise disseminated to
the public at large.) Any inquiries from reporters or other members of the
press should be referred to the Company's Secretary, without further response,
and any unauthorized disclosure of Nonpublic Information of which an employee
becomes aware should be similarly reported immediately.
The foregoing principles also apply to inside information which employees
of Company may obtain concerning another public corporation with respect to
securities of such other corporation. Thus, if any employee of Company obtains
material information about another corporation (such as a customer or supplier
of the Company) which is not yet public, he or she should refrain from trading
in the stock of the other corporation until a public announcement has been
made. Employees should be advised that engaging in any such transaction, as
well as contravening Company's Code of Business Conduct, may also constitute
criminal violations of federal and state securities laws.
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<PAGE>
6. TRANSACTIONS WITH GOVERNMENT OFFICIALS OR EMPLOYEES. No funds or
assets of Company shall be paid, loaned, given or otherwise transferred,
directly or indirectly, to any government official or employee, except in
accordance with the following policies and procedures. No payment for an
illegal purpose shall be made directly or indirectly to or for the benefit of
any government official or employee. The provisions contained in this Code with
respect to government officials and employees shall also apply to any entity in
which a government official or employee is known to have a material interest.
No government official or employee shall be retained to perform services
related to a matter within the scope of his or her official duties or the duties
and responsibilities of the governmental body by which he or she is employed.
No government official or employee shall be retained to perform any other
services and Company shall not enter into any other transaction with such
persons except for a legitimate business purpose and in accordance with
applicable law. Any such services rendered or transactions must be pursuant to
a written contract which has been approved in writing by the Chief Executive
Officer or the Chief Financial Officer of Company, which specifies, in the case
of services to be performed, the nature and scope of the services to be
rendered, and which provides that no payment for such services or reimbursement
of expenses shall be made by the Company except against a statement describing
in reasonable detail the nature of services rendered or expenses incurred.
Any government official or employee who is a party to a contract with
Company shall, as a condition of such contract, certify annually in writing to
the Company that he or she has complied with all governmentally imposed
substantive or reporting requirements applicable to his or her entering into a
contract with a private party with respect to the performance of services or the
consummation of a transaction which is outside the scope of his or her
governmental responsibilities. Company shall retain all such certifications for
five years after completion of performance or other termination of the contract.
The Company's Chief Executive Officer will verify the activities under approved
agreement, on an annual basis, and will verify the continued legality of such
agreement and the services rendered thereunder.
Social amenities, entertainment and other courtesies may be extended to
government officials or employees only to the extent appropriate and reasonable
under applicable laws and customs. No gifts or entertainment shall be offered
or furnished to any government official or employee having an aggregate value
greater than what is usual and customary, giving consideration to all of the
surrounding facts and circumstances (I.E., greater than the amount which the
Company employee would normally spend on himself or herself and his or her
personal friends). No gifts in the form of cash, stock or other similar
consideration shall be given, regardless of amount. Any gift about which an
employee is uncertain should not be made without the written approval of the
Chief Executive Officer or the Chief Financial Officer. Any expenses incurred
by a Company employee in connection with the matters discussed herein shall be
specifically designated as such in the disbursement records and on his or her
expense reimbursement records, and accurately recorded on Company's books and
records.
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<PAGE>
7. POLITICAL ACTIVITIES. There is no objection to political activity on
a federal, state or local level, provided that the activity does not occur
during business hours or, as discussed above, impair the performance of the
employee's duties at Company. In addition, the employee must make clear to any
political group with which such employee is affiliated that such employee's
activities are being conducted exclusively in his or her personal capacity.
Such employee shall never use Company's name in connection with such activity or
take any other action which could imply that Company is associated with such
activity. Staff members may encounter a conflict of interest if they are
identified with a major political candidate. Employees who desire actively to
engage in such a political campaign must request a leave of absence.
8. SALES AND PURCHASES OF GOODS AND SERVICES. Sales of goods and
services by Company shall be billed to the purchaser by written invoice, setting
forth in reasonable detail the goods or services involved and the amounts owed
to Company therefor. No customer shall be billed for any amount in excess of
the actual selling price of the goods or services, and no part of the purchase
price shall be rebated to a customer except in accordance with approved plans
and programs of Company and applicable law. All payments by Company for goods
or services (including advertising and marketing participation) shall be
supported by documentation reflecting the actual purpose of the payment. All
payments of fees and or commissions to attorneys, consultants, advisors, agents,
dealers or representatives shall be made by check or draft or other documentary
transfer drawn to the order of the party entitled thereto. No payment shall be
made to accounts or designated payees in a country other than those in which the
obligee resides, maintains a principal place of business or rendered the
services for which payment is due without written approval of the Company's
Chief Executive Officer or Chief Financial Officer.
9. ACCURACY AND COMPLETENESS OF BOOKS AND RECORDS. The books, records
and accounts of Company must accurately and fairly reflect in reasonable detail
Company's assets, liabilities, revenues and expenses, and no false or
intentionally misleading entries shall be made therein. All payments and all
other dispositions of the assets made by or on behalf of Company must be
described accurately and fairly and with reasonable detail in the books, records
and accounts of Company and are to be made only for the purpose described.in the
documents and records recording the payment or other disposition. No payment or
other disposition by or on behalf of Company shall be made without adequate
supporting documentation. No undisclosed or unrecorded fund or asset of Company
shall be established or maintained for any purpose. Compliance with generally
accepted accounting principles and Company's systems of internal accounting
controls is required at all times. Complete and accurate information is to be
given in response to inquiries from Company's
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internal and outside independent auditors as well as Company/'s legal
counsel. No employee shall enter into any arrangement that results in a
violation of this section.
I have read, understand and agree to abide by the Code of Business conduct
guidelines set forth above.
___________________________________ Date:_____________________________
Signature
Please print the following:
Name: _______________________________________________________________________
Title/Position: _____________________________________________________________
Company/Division: ___________________________________________________________
Department: _________________________________________________________________
Location: ___________________________________________________________________
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GUARANTY AGREEMENT
GUARANTY AGREEMENT ("Guaranty") dated as of May 1, 1996 by RXI
Holdings, Inc., a Delaware corporation (the "Guarantor"), to and for the benefit
of John A. Steil, and Ursula E. Steil as Sole Trustees of The 1989 Steil Family
Trust ("Trust") and Vanguard Plastics, Inc., ("Vanguard") (the Trust and
Vanguard being referred to as the "Beneficiaries"). Reference is hereby made to
that certain Stock Purchase Agreement, by and between the Beneficiaries, RXI
Plastics, Inc., ("Purchaser") and Guarantor dated as of May 1, 1996 (the
"Agreement"). Capitalized terms used and not defined herein shall have the
meanings given them in the Agreement.
WITNESSETH:
WHEREAS, the Beneficiaries and Purchaser are parties to the Agreement,
concerning the sale of all of the issued and outstanding shares of capital stock
(the "Shares") of Vanguard Plastics Inc. of California, a California corporation
(the "Company");
WHEREAS, the Beneficiaries require that the Guarantor execute and
deliver this Guaranty to the Beneficiaries as a condition precedent to the
Closing under the Agreement;
NOW, THEREFORE, in order to induce the Beneficiaries to sell the
Shares to Purchaser, and to accept the Purchaser Note from Purchaser, and for
other good and valuable consideration the receipt and sufficiency of which are
hereby acknowledged, the Guarantor hereby agrees with and for the benefit of the
Beneficiaries as follows:
1. GUARANTY.
(a) The Guarantor hereby fully and unconditionally guarantees
all of the obligations of Purchaser under the Agreement, including without
limitation the full and punctual payment of any and all monetary obligations of
Purchaser to Trust under the Purchaser Note.
(b) This Guaranty is a guaranty of payment and performance and
not merely of collection. The Guarantor agrees that, if Purchaser shall fail to
perform and discharge promptly any of its obligations or to pay any monetary
obligations under the Agreement or the Purchaser Note, the Guarantor shall
forthwith, upon demand, perform, discharge or pay the same in the same manner
and to the same extent as Purchaser is obligated to perform and pay. The
Guarantor further agrees that the Beneficiaries may proceed against the
Guarantor to enforce the provisions of this Guaranty without having first
proceeded against Purchaser under the Agreement or the Purchaser Note.
(c) The Guarantor further agrees to pay any and all costs and
expenses, including, without limitation, accountant's and attorney's fees,
disbursements and expenses, incurred by Beneficiaries in enforcing any rights
under this Guaranty.
<PAGE>
2. NO DISCHARGE. This Guaranty is a continuing guaranty and the
obligations of the Guarantor hereunder will not be discharged, affected,
impaired or released by: (a) any modification of, or amendment or supplement to,
the Agreement; (b) any waiver, consent, extension or other action or inaction or
any exercise or non-exercise of any right, remedy, or power; (c) any insolvency,
bankruptcy, reorganization, liquidation, dissolution, or similar proceedings
with respect to Purchaser; or (d) any other occurrence, circumstances or grounds
whatsoever that would release a guarantor, except performance in full of all
obligations of Purchaser in accordance with the terms and conditions of the
Agreement, as the same may be amended, modified, supplemented or terminated from
time to time. Guarantor hereby waives any provisions of applicable law which
may to the contrary, including, without limitation, Sections 2819, 2845 and
2846 of the California Civil Code.
3. REINSTATEMENT. The Guarantor agrees that this Guaranty shall be
automatically reinstated if and to the extent that any payment made by or on
behalf of Purchaser pursuant to the Agreement is rescinded or must be otherwise
restored, whether as a result of any proceedings in bankruptcy or reorganization
or otherwise.
4. NOTICES. All notices and other communications which may be given
under this Guaranty shall be in writing and shall be deemed to have been duly
given when (a) delivered by hand (with written confirmation of receipt), (b)
sent by telecopier, provided that a copy is mailed by certified mail, return
receipt requested, (c) three (3) Business Days after deposit in the U.S. Mails,
if mailed first class, by certified mail, return receipt requested or (d) when
received by the addressee, if sent by a nationally recognized overnight delivery
service (receipt requested), in each case to the appropriate addresses and
telecopier numbers set forth as follows:
To Trust: c/o John A. Steil
Vanguard Plastics of California, Inc.
9420 Telfair Avenue
Sun Valley, California 91352
Facsimile: (818) 768-9267
with a copy to:
Manatt Phelps & Phillips LLP
11345 West Olympic Boulevard
Los Angeles, California 90064
Attention: Andrew Erskine, Esq.
Facsimile: (310) 312-4224
To Vanguard: Vanguard Plastics Inc.
c/o Zuckerman & Honickman
191 South Gulph Road
King of Prussia, Pennsylvania 19406
Attention: Norma Reichlin
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Facsimile: (610) 962-1081
and
Vanguard Plastics Inc.
18 Market Street
Patterson, New Jersey 07501
Attention: Richard Meyersburg
with a copy to
Sherr Joffe & Zuckerman
200 Four Falls Corporate Center
Suite 400
West Conshohocken, Pennsylvania 19428
Attention: Barbara Dubrow, Esq.
To: Purchaser
or
Guarantor: RXI Holdings, Inc.
11111 Santa Monica Boulevard
Suite 270
Los Angeles, California 90025
Attention: Leon Farahnik
Facsimile: (310) 473-9592
with a copy to
Sidley & Austin
555 West Fifth Street
Suite 4000
Los Angeles, California 90013
Attention: Moshe J. Kupietzky, Esq.
Facsimile: (213) 896-6600
or at such other place as any such party may designate by notice duly given in
accordance with this Section to the parties.
5. SEVERABILITY. Any provision of this Guaranty that is prohibited
or unenforceable in any jurisdiction or with respect to any provision herein
shall, as to such jurisdiction or provision, be ineffective only to the extent
of such prohibition or unenforceability but shall not invalidate or render
unenforceable such provision in any other jurisdiction, and shall not invalidate
the remaining provisions hereof.
6. MISCELLANEOUS.
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(a) This Guaranty is a continuing guaranty and shall: (i) be
binding upon the Guarantor and its successors and assigns; (ii) inure to the
benefit of, and be enforceable by the Beneficiaries, its successors, assigns and
transferees, including its successors, assigns and transferees under this
Guaranty and the Agreement, but shall not, and is not intended to, create rights
in any third party; (iii) not be waived, amended or modified without the prior
written consent of the Beneficiaries; and (iv) be governed by, construed,
applied or enforced in accordance with, the laws of the State of California
(without regard to the choice of law rules thereof), including all matters of
construction, validity and performance.
(b) Guarantor hereby waives promptness, diligence, notice of
acceptance and any other notice with respect to any of its obligations under the
Agreement and this Guaranty and any requirement that Beneficiaries protect,
secure, perfect or insure any security interest or lien or any property subject
thereto or exhaust any right or take any action against Purchaser or any other
Person or any collateral.
(c) No failure on the part of Beneficiaries to exercise, and no
delay in exercising, any right hereunder shall operate as a waiver thereof; nor
shall any single or partial exercise of any right hereunder preclude any other
or further exercise thereof or the exercise of any other right. The remedies
herein provided are cumulative and not exclusive of any remedies provided by
law.
(d) Guarantor hereby agrees that all payments hereunder shall be
made and all obligations hereunder shall be performed in California.
(e) Guarantor hereby submits itself in any legal action or
proceeding relating to this Guaranty or for enforcement of any judgment in
respect thereof, to the non-exclusive general jurisdiction of the Superior Court
of the State of California, County of Los Angeles, the courts of the United
States of America for the Central District of California, and appellate courts
from any thereof.
(f) Guarantor hereby waives any objection that it may now or
hereafter have to the venue of any such action or proceeding in any such court
in California, or that such proceeding was brought in an inconvenient court and
agrees not to plead or claim the same.
(g) Guarantor hereby agrees that service of process in any such
legal action or proceeding may be effected by mailing a copy thereof (by
registered or certified mail, postage prepaid) to its address set forth herein.
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<PAGE>
IN WITNESS WHEREOF, the Guarantor has executed this Guaranty as of the
day and year first above written.
RXI Holdings, Inc.
By:
-----------------------------------------
Name:
Title:
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<PAGE>
RXI HOLDINGS, INC. 1994 STOCK OPTION PLAN
NON-QUALIFIED STOCK OPTION AGREEMENT
This Stock Option Agreement (this "Agreement") dated as of April __,
1996 (the "Option Date") is entered into between RXI HOLDINGS, INC., a Delaware
corporation (the "Company") and John A. Steil (the "Optionee").
1. GRANT OF OPTION.
The Company hereby grants to the Optionee, pursuant to the provisions
of the 1994 Stock Option Plan (the "Plan"), an option to purchase from the
Company (the "Option") 100,000 shares of its Class A Common Stock, $0.001 par
value ("Common Stock"), at the price of $1.25 per share (the "Exercise Price")
upon and subject to the terms and conditions set forth below.
2. OPTION SUBJECT TO ACCEPTANCE OF AGREEMENT.
The Option shall become null and void unless the Optionee shall accept
this Agreement by executing it in the space provided below and returning it to
the Company.
3. TIME AND MANNER OF EXERCISE OF OPTION.
3.1 MAXIMUM TERM OF OPTION. In no event may the Option be exercised,
in whole or in part, after the date which is five and one-half (5-1/2) years
after the Option Date (the "Expiration Date").
3.2 EXERCISE OF OPTION. (a) The Option shall become exercisable
according to the following schedule:
CUMULATIVE PERCENTAGE
VESTING DATE OF OPTIONS SHARES VESTED
First Anniversary 20%
Second Anniversary 40%
Third Anniversary 60%
Fourth Anniversary 80%
Fifth Anniversary 100%
(b) If the Optionee's employment by the Company terminates by
reason of disability, retirement on or after age 65 after a minimum of three
years of employment with the Company or any of its subsidiaries or death, the
Option shall be exercisable only to the extent that the Option is exercisable on
the effective date of Optionee's termination of employment and may thereafter be
exercised by the Optionee (or the Optionee's executor, administrator or legal
representative) for a period of six months from the date of the Optionee's
termination of employment or until the expiration of the term
<PAGE>
of the Option, whichever period is shorter. For purposes of this Agreement,
"disability" shall mean the inability of the Optionee substantially to
perform his duties and responsibilities.
(c) If the Optionee's employment by the Company terminates for
any reason other than as set forth in paragraph (b) above, the Option shall
terminate automatically on the effective date of the Optionee's termination of
employment; PROVIDED, HOWEVER, that if Optionee's employment is terminated by
the Company without "Cause," the Optionee may exercise the Option to the extent
exercisable on the date of termination of employment for a period of ninety (90)
days following the effective date of such termination. For purposes of this
Agreement, termination of employment for "Cause" shall mean a termination of
employment resulting from, or caused by, the Optionee's theft or embezzlement
from the Company, other act of dishonesty, the violation of a material term or
condition of the Optionee's employment, the conviction of the Optionee for a
crime involving moral turpitude, violation of any statutory or common law duty
of loyalty to the Company or the Optionee's engagement in acts or conduct which,
in the opinion of the Committee (as defined in the Plan), are harmful to the
interests of the Company.
3.3 METHOD OF EXERCISE. Subject to the limitations set forth in this
Agreement, the Option may be exercised (i) by giving written notice to the
Company specifying the number of whole shares to be purchased and accompanied by
payment therefor in full either (A) in cash, (B) in previously owned whole
shares of Common Stock (for which the Optionee has good title free and clear of
all liens and encumbrances) having a fair market value determined as of the date
of exercise equal to the aggregate purchase price payable by reason of such
exercise, (C) by authorizing the Company to retain whole shares of Common Stock
which would otherwise be issuable upon exercise of the Option having a fair
market value determined as of the date of exercise equal to the aggregate
purchase price payable by reason of such exercise, (D) in cash by a broker-
dealer to whom the Optionee has submitted an irrevocable notice of exercise, or
(E) a combination of (A), (B) and (C), and (ii) by executing such documents as
the Company may reasonably request. The Committee shall have sole discretion to
disapprove of an election pursuant to any of clauses (B) - (E). No shares of
Common Stock shall be issued until the full purchase price has been paid. Any
fraction of a share of Common Stock which would be required to pay such purchase
price shall be disregarded and the remaining amount due shall be paid in cash by
the Optionee.
3.4 TERMINATION OF OPTION. (a) In no event may the Option be
exercised after it terminates as set forth in this Section 3.4. The Option
shall terminate, to the extent not exercised pursuant to Section 3.3 or earlier
terminated pursuant to Section 3.2, on its Expiration Date.
(b) In the event that the Optionee shall forfeit rights to
purchase all or a portion of the shares to which this Option relates, the
Optionee shall, within 10 days of the date of the Company's written request,
return this Agreement to the Company for cancellation. If the Optionee
continues to have vested rights hereunder, the Company shall, within 10 days of
the Optionee's delivery of this Agreement to the Company for cancellation, issue
to the Optionee a substitute option agreement applicable to the Optionee's
vested rights
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<PAGE>
hereunder, which agreement shall be substantially similar to this Agreement
in form and substance.
4. ADDITIONAL TERMS AND CONDITIONS OF OPTION.
4.1 NONTRANSFERABILITY OF OPTION. Neither the Option nor any rights
under this Agreement may be transferred by the Optionee other than by will or
the laws of descent and distribution. During the Optionee's lifetime, the
Option is exercisable only by the Optionee or by his guardian or legal
representative. Any other transfer or any attempted assignment, pledge,
hypothecation or disposition, whether or not by operation of law, shall be void.
The Option shall not be subject to execution, attachment or other process, and
no person shall be entitled to exercise any rights of the Optionee hereunder or
possess any rights hereunder by virtue of any attempted execution, attachment or
other process.
4.2 INVESTMENT REPRESENTATION. The Optionee hereby represents and
covenants that (a) any share of Common Stock purchased upon exercise of the
Option will be purchased for investment and not with a view to the distribution
thereof within the meaning of the Securities Act of 1933, as amended (the
"Securities Act"), unless such purchase has been registered under the Securities
Act and applicable state securities law; (b) any subsequent sale of any such
shares shall be made either pursuant to an effective registration statement
under the Securities Act and any applicable state securities laws, or pursuant
to an exemption from registration under the Securities Act and such state
securities laws; and (c) if requested by the Company, the Optionee shall submit
a written statement, in form satisfactory to counsel for the Company, to the
effect that such representation (x) is true and correct as of the date of
purchase of any shares hereunder, or (y) is true and correct as of the date of
any sale of any such shares, as applicable. As a further condition precedent to
any exercise of the Option, the Optionee shall comply with all regulations and
requirements of any regulatory authority having control of or supervision over
the issuance of the shares and, in connection therewith, shall execute any
documents which the Board or any committee authorized by the Board shall in its
sole discretion deem necessary or advisable.
4.3 RESTRICTIVE LEGEND. Each certificate evidencing Common Stock
issued upon exercise of the Option shall bear a legend substantially in the form
set forth below:
THE SHARES OF STOCK EVIDENCED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND MAY NOT BE TRANSFERRED, SOLD OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF (I) A REGISTRATION STATEMENT
IN RESPECT OF SUCH SHARES WHICH IS FILED AND MADE EFFECTIVE
PURSUANT TO THE SECURITIES ACT OF 1933, AS AMENDED, OR
(II) AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY TO
THE EFFECT THAT REGISTRATION UNDER SUCH ACT IS NOT REQUIRED.
SUCH SHARES ARE ALSO SUBJECT TO THE RESTRICTIONS ON
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<PAGE>
TRANSFER CONTAINED IN A STOCK OPTION AGREEMENT DATED AS OF MAY 1,
1996 BETWEEN JOHN A. STEIL AND RXI HOLDINGS, INC.
4.4 THE COMPANY'S OPTION TO PURCHASE. Upon the termination of the
Optionee's employment with the Company, the Company shall have the option to
purchase, for a period of ninety (90) days, the Option (to the extent then
exercisable) and all shares of Common Stock then owned by Optionee, at a cash
purchase price equal to the Fair Market Value (as defined in the Plan) of such
Common Stock on the date of Optionee's termination of employment, which purchase
price shall be reduced, to the extent the Option has not been exercised, by the
Exercise Price in respect thereof. The provisions of this SECTION 4.4 shall
cease to be operative on the day following the effectiveness of a registration
statement filed under the Securities Act covering shares of the Common Stock
being sold by the Company for its own account.
4.5 TAXES. (a) As a condition precedent to any exercise of the
Option, the Optionee shall, upon request by the Company, pay to the Company in
addition to the purchase price of the shares, such amount of cash as the Company
may be required, under all applicable federal, state or local laws or
regulations, to withhold and pay over as income or other withholding taxes (the
"Required Tax Payments") with respect to such exercise of the Option. If the
Optionee shall fail to advance the Required Tax Payments after request by the
Company, the Company may, in its discretion, deduct any Required Tax Payments
from any amount then or thereafter payable by the Company to the Optionee.
(b) The Optionee may, at his election, satisfy his obligation to
advance the Required Tax Payments by any of the following means: (i) a cash
payment to the Company pursuant to Section 4.5(a), (ii) delivery to the Company
of previously owned whole shares of Common Stock (for which the Optionee has
good title, free and clear of all liens and encumbrances) having a fair market
value determined as of the date the obligation to withhold or pay taxes first
arises in connection with the Option (the "Tax Date"), (iii) authorizing the
Company to withhold from the shares of Common Stock otherwise issuable to the
Optionee pursuant to an Option, a number of whole shares of Common Stock having
a fair market value determined as of the Tax Date or (iv) any combination of the
foregoing methods; provided, however, that if the Optionee is subject to Section
16 of the Securities Exchange Act of 1934, as amended, the method of satisfying
such an obligation shall be in compliance with such Section 16 and the rules and
regulations thereunder. Shares of Common Stock to be delivered or withheld may
have an aggregate fair market value in excess of the minimum amount of the
Required Tax Payments, but not in excess of the amount of the Required Tax
Payments determined by applying the Optionee's maximum marginal tax rate. Any
fraction of a share of Common Stock which would be required to satisfy such an
obligation shall be disregarded and the remaining amount due shall be paid in
cash by the Optionee.
4.6 ADJUSTMENT. In the event of any change in the outstanding Common
Stock by reason of any stock split, stock dividend, recapitalization,
reorganization, merger, consolidation, combination, exchange of shares,
liquidation, spin-off or other similar change
-4-
<PAGE>
in capitalization, or any distribution to holders of Common Stock other than
a cash dividend, the number and class of shares under the Option and the
purchase price per share, shall be appropriately adjusted by the Committee
(as defined in the Plan) without a change in the aggregate purchase price.
The decision of the Committee regarding the amount and timing of any
adjustment pursuant to this Section 4.6 shall be conclusive.
4.7 COMPLIANCE WITH APPLICABLE LAW. The Option is subject to the
condition that if the listing of the shares covered by the Option on any
securities exchange, the registration or qualification of such shares under any
federal or state law or the consent or approval of any regulatory body shall be
required as a condition of, or in connection with, the granting of the Option or
the purchase or delivery of shares hereunder, the Option may not be exercised,
in whole or in part, unless and until such listing, registration, qualification,
consent or approval shall have been effected or obtained. The Company agrees to
make every reasonable effort to effect or obtain any such listing, registration,
qualification, consent or approval.
4.8 DELIVERY OF CERTIFICATES. Upon the exercise of the Option, in
whole or in part, the Company shall deliver one or more certificates
representing the number of shares purchased against full payment therefor. The
Company shall pay all original issue or transfer taxes and all fees and expenses
incident to such delivery, except as otherwise provided in Section 4.5.
4.9 OPTION CONFERS NO RIGHTS AS SHAREHOLDER. The Optionee shall not
be entitled to any privileges of ownership with respect to shares of Common
Stock subject to the Option unless and until purchased and delivered upon the
exercise of the Option, in whole or in part, and the Optionee shall not be
considered a shareholder of the Company with respect to any such shares not so
purchased and delivered.
4.10 OPTION CONFERS NO RIGHTS TO CONTINUED EMPLOYMENT. In no event
shall the granting of the Option or its acceptance by the Optionee give or be
deemed to give the Optionee any right to continue in the employment of the
Company.
4.11 DECISIONS OF BOARD. The Board or the Committee shall have the
right to resolve all questions which may arise in connection with the Option or
its exercise. Any interpretation, determination or other action made or taken
by the Board or the Committee regarding the Plan or this Agreement shall be
final, binding and conclusive.
4.12 COMPANY TO RESERVE SHARES. The Company shall at all times prior
to the expiration or termination of the Option reserve and keep available,
either in its treasury or out of its authorized but unissued shares of Common
Stock, the full number of shares subject to the Option from time to time.
4.13 AGREEMENT SUBJECT TO PLAN. This Agreement is subject to the
provisions of the Plan, and shall be interpreted in accordance therewith. The
Optionee hereby acknowledges receipt of a copy of the Plan.
-5-
<PAGE>
5. MISCELLANEOUS PROVISIONS.
5.1 MEANING OF CERTAIN TERMS. As used herein, the term "vest" shall
mean no longer subject to forfeiture and all exercisable rights hereunder shall
be deemed to be vested. As used herein, employment by the Company shall include
employment by a corporation which is a "subsidiary corporation" of the Company,
as such term is defined in section 424 of the Internal Revenue Code of 1986, as
amended (the "Code") or any affiliated corporation. References in this
Agreement to sections of the Code shall be deemed to refer to any successor
section of the Code or any successor internal revenue law.
5.2 SUCCESSORS. This Agreement shall be binding upon and inure to
the benefit of any successor or successors of the Company and any person or
persons who shall, upon the death of the Optionee, acquire any rights hereunder.
5.3 NOTICES. All notices, requests or other communications provided
for in this Agreement shall be made in writing either (a) by actual delivery to
the party entitled thereto, or (b) by mailing in the United States mails to the
last known address of the party entitled thereto, via certified or registered
mail, return receipt requested. The notice shall be deemed to be received in
case of delivery, on the date of its actual receipt by the party entitled
thereto, and in case of mailing, five days following the date of such mailing.
5.4 GOVERNING LAW. This Agreement shall be governed by, and
interpreted in accordance with, the internal laws of the State of California.
5.5 COUNTERPARTS. This Agreement may be executed in two counterparts
each of which shall be deemed an original and both of which together shall
constitute one and the same instrument.
Next Page is Page 7
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<PAGE>
5.6 DESIGNATION AS NONQUALIFIED STOCK OPTION. The Option is hereby
designated as not constituting an "incentive stock option" within meaning of
section 422 of the Code. This Agreement shall be interpreted and treated
consistently with such designation.
RXI HOLDINGS, INC.
By: __________________________________________
Name: ________________________________________
Title: _______________________________________
AGREED AND ACCEPTED:
____________________________________
John A. Steil
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<PAGE>
May , 1996
-----
RXI Plastics, Inc.
Patrick Plastics, Inc.
Texberry Container Corporation
11111 Santa Monica Boulevard - Suite 270
Los Angeles, CA 90025
Gentlemen:
Reference is made to the Financing Agreement dated February 10, 1995, as the
same may be amended from time to time (the "Financing Agreement") between the
undersigned as lender (herein "CITBC"), Patrick Plastics, Inc. ("Patrick"),
Texberry Container Corporation ("Texberry") and RXI Plastics, Inc. (f/k/a
Continental Plastics Incorporated) (herein "RXI") as borrowers. Capitalized
terms used herein and defined in the Financing Agreement shall have the same
meanings as set forth therein unless otherwise specifically defined herein.
RXI has requested that we extend to it an additional term loan in the principal
amount of $1,300,000, and we have agreed to make such additional term loan
subject to, and in accordance with, the terms, provisions and conditions set
forth herein.
Effective immediately upon fulfillment to CITBC's satisfaction of the Conditions
Precedent (as defined below) the Financing Agreement shall be, and hereby is,
amended as follows:
1. The Table of Contents is hereby amended by deleting the words
"Intentionally Omitted" in Section 4 and designating Section 4 as "TERM
LOANS".
2. Section 1 of the Financing Agreement shall be, and hereby is, amended by
the addition thereto of the following new definitions:
"PROMISSORY NOTE(S) shall mean the notes, in the forms of Exhibits A and B
attached hereto, delivered by the company to CITBC to evidence the Term
Loans pursuant to, and repayable in accordance with, the terms and
provisions of Section 4 of this Financing Agreement."
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<PAGE>
"TERM LOAN I shall mean the term loan in the original principal amount of
$700,000.00 made by CITBC pursuant to, and repayable in accordance with,
the provisions of Section 4(a) of this Financing Agreement."
"TERM LOAN II shall mean the term loan in the original principal amount of
$1,300,000 made by CITBC pursuant to, and repayable in accordance with, the
provisions of Section 4(b) of this Financing Agreement."
"TERM LOANS shall mean the term loans in the aggregate principal amount of
$2,000,000, consisting of Term Loan I in the original principal amount of
the $700,000 and Term Loan II in the amount original principal of
$1,300,000 each made by CITBC pursuant to, and repayable in accordance
with, the provisions of Section 4 of this Financing Agreement."
3. Section 4 of the Financing Agreement shall be, and hereby is deleted in its
entirety and the following is substituted in lieu thereof:
"SECTION 4. TERM LOANS
TERM LOAN I
1. Patrick agreed to and executed and delivered to CITBC the Promissory
Note, in the form of Exhibit A attached hereto (herein "Promissory Note
A"), to evidence Term Loan I, as extended by CITBC.
2. Upon receipt of Promissory Note A, CITBC extended to Patrick Term Loan
I in the original principal amount of $700,000.00.
3. The principal amount of Term Loan I has and shall be repaid to CITBC
by Patrick in sixteen (16) equal quarterly principal installments of
$43,750.00 each, whereof the first installment was payed on January 1, 1996
and the subsequent installments where and shall be due and payable on the
first business day of each quarter thereafter until paid in full.
TERM LOAN II
4. RXI hereby agrees to execute and deliver to CITBC the Promissory Note,
in the form of Exhibit B attached hereto, to evidence Term Loan II in the
original principal amount of $1,300,000 (herein "Promissory Note B") to be
extended to RXI by CITBC.
5. Upon receipt of such Promissory Note B, CITBC hereby agrees to extend
to RXI Term Loan II and deliver the amount of $1,300,000 to RXI in
accordance with RXI's written instructions.
6. The principal amount of Term Loan II shall be repaid to CITBC by RXI
in twenty (20) equal quarterly principal installments of $65,000 each,
whereof the first such installment
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<PAGE>
shall be due and payable on October 1, 1996 and subsequent installments
shall be due and payable on the first business day of each quarter
thereafter until all unpaid amounts with respect to Promissory Note B are
paid in full.
TERM LOANS
7. In the event this Financing Agreement or the Line of Credit is
terminated by either CITBC or any of the Companies for any reason
whatsoever, the Term Loans shall become due and payable on the effective
date of such termination notwithstanding any provisions to the contrary in
the Promissory Notes or this Financing Agreement.
8. Patrick and/or RXI may prepay at any time, at their option, in whole
or in part, their respective Term Loans, provided that on each such
prepayment, Patrick and/or RXI shall pay accrued interest on the principal
so prepaid to the date of such prepayment.
9. Each such prepayment shall be applied to the then last maturing
installments of principal of the respective Term Loans, and subsequent to
the contemplated merger of the Companies, to Term Loan II evidenced by
Promissory Note B, and then to the last maturing installments of Term
Loan I evidenced by Promissory Note A.
10. Patrick and/or RXI hereby authorize CITBC to charge their respective
revolving loan accounts with the amount of all amounts due under this
Section 4 as such amounts become due. Patrick and RXI confirm that any
charges which CITBC may so make to their accounts as herein provided will
be made as an accommodation to Patrick and/or RXI and solely at CITBC's
discretion.
4. Section 8, Paragraph 1 of the Financing Agreement shall be, and hereby is,
renumbered to "1(a)" and the following subparagraphs designated 1(b) and (c)
shall be, and hereby are, added thereto as follows:
"(b) Interest on Term Loan I shall be payable monthly as of the end of each
month on the unpaid balance thereof or on payment in full prior to maturity
in an amount equal to one and one-half percent plus the Chemical Bank
Rate. In the event of any change in said Chemical Bank Rate the rate
hereunder shall change, as of the first of the month following any change,
so as to remain one and one-half percent (1.5%) above the Chemical Bank
Rate (or any successor thereof). The rate hereunder shall be calculated
based on a 360 day year. CITBC shall be entitled to charge Patrick's
account at the rate provided for herein when due until all Obligations have
been paid in full.
(c) Interest on Term Loan II shall be payable monthly as of the end of
each month on the unpaid balance thereof or on payment in full prior to
maturity in an amount equal to one and one-half percent plus the Chemical
Bank Rate. In the event of any change in said Chemical Bank Rate the rate
hereunder shall change, as of the first of the month following any change,
so as to remain one and one-half percent (1.5%) above the Chemical Bank
Rate (or any successor thereof). The rate
3
<PAGE>
hereunder shall be calculated based on a 360 day year. CITBC shall be
entitled to charge RXI's account at the rate provided for herein when due
until all Obligations have been paid in full."
5. In addition, it is hereby agreed that:
(a) The terms "Obligations" and "Term Loan(s)" as used in the Financing
Agreement shall also include, without limitation, all indebtedness,
liabilities and obligations of the Company to CITBC pursuant to Term
Loan I and Term Loan II (herein the "Term Loan Obligations") which
Term Loan Obligations shall be and hereby are secured by all
Collateral under the Financing Agreement and the security documents
executed in connection therewith.
(b) The form of Promissory Note attached hereto shall be attached to the
Financing Agreement as Exhibit B and shall constitute Promissory Note
B thereunder.
(c) The Companies shall pay to CITBC an additional Loan Facility Fee in
the amount of $20,000 (herein the "Additional Loan Facility") which
fee shall be due and payable in full immediately upon funding of Term
Loan II and may (at CITBC's option) be charged to the Companies'
Revolving Loan Accounts on the due date thereof.
6. The effectiveness of all of the amendments and/or waivers set forth above and
the extension of Term Loan II shall be, and hereby is, subject to the
fulfillment to CITBC's satisfaction of the Conditions Precedent. The
"Conditions Precedent" shall mean each of the following:
(i) the execution and delivery to CITBC of all documentation requested by
CITBC to validly perfect CITBC's first lien upon the Collateral, including
to reflect the RXI name change and to secure the Term Loan Obligations
(subject to such liens and encumbrances as may be satisfactory to CITBC in
its sole discretion), including, without limitation, on any and all of
RXI's Equipment located at the Vanguard Plastics facilities (all of which
shall be acceptable to CITBC in its sole discretion) and any other
documentation reasonably requested by CITBC in connection therewith;
(ii) the absence of (x) any Default and/or Event of Default after giving
effect to Term Loan II and (y) any material adverse change in the financial
condition, business, prospects, profitability, assets or operations of any
of the Companies;
(iii) CITBC's receipt of and satisfaction with an appraisal of the
Companies' Equipment, including the Vanguard Equipment, which appraisal
must indicate values of such assets which are acceptable to CITBC and must
be prepared by an appraiser mutually satisfactory to CITBC and the
Companies, which appraiser shall be retained by CITBC but paid for by the
Companies.
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<PAGE>
(iv) the Companies shall pay (x) all Out-of-Pocket Expenses incurred by
CITBC in connection with this agreement and Term Loan II, (y) a
Documentation Fee of $________ and (z) the Additional Loan Facility Fee.
(v) CITBC's receipt of a secretary's certificate certifying Board of
Directors Resolutions authorizing the execution, delivery and performance
by RXI and to the extent applicable the Companies, of this agreement,
Promissory Note B and all documents and transactions contemplated hereby;
(vi) each guarantor and/or pledgor signing below to confirm that (x) their
respective guaranties and/or pledge or security agreements executed in
favor of CITBC shall continue in full force and effect notwithstanding the
foregoing waivers, amendments and agreements and (y) the terms
"Obligations" and/or "Secured Obligations" as used therein shall extend to
and also include any and all such Obligations arising in connection with
the Term Loan Obligations;
(vii) the consummation of the Vanguard acquisition, the repayment of all
indebtedness due by Vanguard to Wells Fargo and the merger of Vanguard into
RXI concurrently with such funding, all in form and substance satisfactory
to CITBC and substantially as contemplated in the Consent Letter dated May
____, 1996; and
(viii) receipt by CITBC of consent and waiver documents from the Senior
Note Holders, along with any amendments, relating to the foregoing
transactions and CITBC's review and satisfaction thereof.
Except to the extent set forth herein, no other waiver of, or change in any of
the terms, provisions or conditions of the Financing Agreement is intended or
implied.
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<PAGE>
If the foregoing is in accordance with your understanding of our agreement,
kindly so indicate by signing and returning the enclosed copy of this letter.
Each of such guarantors and/or pledgors have signed below to confirm that
its respective guaranty and/or pledge or security agreement shall continue in
full force and effect notwithstanding the foregoing agreement and the
transactions contemplated hereby and shall, subject to the terms and
provisions thereof, extend to the Term Loan II Obligations
Very truly yours,
THE CIT GROUP/BUSINESS
CREDIT, INC.
By:____________________________
Title:
Read and Agreed to:
RXI PLASTICS, INC.
By:____________________________
Title:
TEXBERRY CONTAINER CORPORATION
By:____________________________
Title:
PATRICK PLASTICS, INC.
By:____________________________
Title:
6
