SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
Current Report Pursuant
to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of report (Date of earliest event reported): June 29, 1999
ISOLYSER COMPANY, INC.
(Exact Name of Registrant as Specified in Its Charter)
Georgia
(State or Other Jurisdiction of Incorporation)
0-24866 58-1746149
(Commission File Number) (I.R.S. Employer Identification No.)
4320 International Boulevard, Norcross, Georgia 30093
(Address of Principal Executive Offices (Zip Code)
(770) 806-9898
(Registrant's Telephone Number, Including Area Code)
(Former Name or Former Address, if Changed Since Last Report)
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Item 2. Acquisition or Disposition of Assets
On June 29, 1999, Isolyser Company, Inc. ("Isolyser") sold to Premier
Products LLC ("Premier") all of the capital stock of its wholly-owned
subsidiary, White Knight Healthcare, Inc., a manufacturer of a broad line of
non-woven infectious control products and protective apparel marketed primarily
to healthcare markets. Premier is not an "affiliate" of Isolyser within the
meanings of the Securities Act of 1933, as amended. The purchase price payable
for the stock was approximately $8.2 million. The purchase price was negotiated
at arms' length.
Item 7. Financial Statements and Exhibits
(a) Financial Statements of Businesses Acquired:
Not applicable.
(b) Pro Forma Financial Information:
The required unaudited pro forma financial information will be
filed not more than sixty days after the date this current report must be filed.
(c) Exhibits:
2.1 Stock Purchase Agreement dated June 10, 1999, between
Premier Products LLC and Isolyser Company, Inc.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has caused this report to be duly signed on its behalf by the
undersigned hereunto duly authorized.
ISOLYSER COMPANY, INC.
By: /s/ PETER A. SCHMITT
------------------------------------------
Peter A. Schmitt, Executive Vice President
and Chief Financial Officer
Dated: July 8, 1999
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EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
- ----------- -----------
2.1 Stock Purchase Agreement dated June 10, 1999, between
Premier Products LLC and Isolyser Company, Inc.
EXHIBIT 2.1
-----------
STOCK PURCHASE AGREEMENT
Dated June 10, 1999
between
PREMIER PRODUCTS LLC
and
ISOLYSER COMPANY, INC.
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TABLE OF CONTENTS
STOCK PURCHASE AGREEMENT
ARTICLE I. PURCHASE AND SALE.......................................... 1
SECTION 1.1 Agreement to Purchase and Sell Shares.................. 1
SECTION 1.2 Purchase Price......................................... 1
SECTION 1.3 Closing................................................ 1
ARTICLE II. REPRESENTATIONS AND WARRANTIES OF SHAREHOLDERS............. 2
SECTION 2.1. Disclosure Schedule................................... 2
SECTION 2.2 Incorporation and Qualification of the Company......... 2
SECTION 2.3 Capital Stock of the Company........................... 2
SECTION 2.4 Subsidiaries and Other Business Entities............... 3
SECTION 2.5 Corporate Authority of Shareholder; No Conflicts of
Shareholder............................................ 4
SECTION 2.6 No Conflicts of Company; Consents...................... 4
SECTION 2.7 Corporate Records of the Company and Subsidiaries...... 5
SECTION 2.8 Financial Statements; Undisclosed Liabilities.......... 5
SECTION 2.9 Absence of Certain Changes or Events................... 6
SECTION 2.10 Litigation............................................ 6
SECTION 2.11 Compliance with Applicable Laws....................... 6
SECTION 2.12 Environmental Matters................................. 7
SECTION 2.13 Title to Properties................................... 8
SECTION 2.14 Intellectual Property................................. 9
SECTION 2.15 Insurance............................................. 9
SECTION 2.16 Employee Benefit Matters.............................. 9
SECTION 2.17 Labor Matters.........................................11
SECTION 2.18 Material Contracts....................................11
SECTION 2.19 Brokers...............................................12
SECTION 2.20 Permits...............................................12
SECTION 2.21 Bank Accounts.........................................12
SECTION 2.22 Taxes.................................................12
SECTION 2.23 Transactions With Related Parties.....................13
SECTION 2.24 Powers of Attorney....................................14
SECTION 2.25 Other Information.....................................14
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER............14
SECTION 3.1 Organization and Authority of Purchaser................14
SECTION 3.2 No Conflicts...........................................14
SECTION 3.3 Investment Purpose.....................................15
ARTICLE IV. ADDITIONAL COVENANTS.......................................15
SECTION 4.1 Conduct of Business Prior to the Closing...............15
SECTION 4.2 Access to Information..................................16
SECTION 4.3 Inventory Storage......................................16
SECTION 4.4 Maintenance of Records; Audit..........................16
SECTION 4.5 Consents...............................................16
SECTION 4.6 Notices of Certain Events..............................17
SECTION 4.7 Certain Tax Matters....................................17
SECTION 4.8 Transactions to Conform to Closing Balance Sheet.......18
SECTION 4.9 Public Announcements...................................20
SECTION 4.10 Governmental Filings..................................20
SECTION 4.11 Confidentiality Agreement.............................20
SECTION 4.12 Benefit Plans.........................................20
SECTION 4.13 Assumption of Contracts...............................21
SECTION 4.14 Contracting with Fortunique...........................21
SECTION 4.15 Closing Logistics.....................................22
SECTION 4.16 Protected Information.................................22
ARTICLE V. CONDITIONS TO CLOSING......................................22
SECTION 5.1 Conditions to Obligations of the Shareholder...........22
SECTION 5.2 Conditions to Obligations of Purchaser.................24
SECTION 5.3 Further Assurances.....................................26
ARTICLE VI. INDEMNIFICATION, LIABILITY.................................26
SECTION 6.1 Survival of Representations and Warranties.............26
SECTION 6.2 Indemnification by Shareholder.........................26
SECTION 6.3 Indemnification by Purchaser...........................26
SECTION 6.4 General Indemnification Provisions.....................27
SECTION 6.5 Limits on Indemnification and Liability................28
<PAGE>
ARTICLE VII. TERMINATION, AMENDMENT AND WAIVER..........................29
SECTION 7.1 Termination............................................29
SECTION 7.2 Waiver.................................................29
ARTICLE VIII. GENERAL PROVISIONS.........................................29
SECTION 8.1 Notices................................................29
SECTION 8.2 Headings...............................................30
SECTION 8.3 Severability...........................................30
SECTION 8.4 Entire Agreement.......................................30
SECTION 8.5 Assignment.............................................31
SECTION 8.6. No Third-Party Beneficiaries..........................31
SECTION 8.7 Amendment..............................................31
SECTION 8.8 Counterparts...........................................31
SECTION 8.9 Certain Expenses.......................................31
SECTION 8.10 Binding Agreement.....................................31
SECTION 8.11 Governing Law.........................................31
EXHIBITS:
Exhibit A OREX Conversion Agreement
Section 2.1 Knowledge Inquiry
Section 2.2 Foreign Qualifications
Section 2.3 Capitalization
Section 2.4 Subsidiaries; Capitalization; etc.
Section 2.5 Corporate Authority of Shareholders; No Conflicts of Shareholder
Section 2.6 No Conflicts of Company; Consents
Section 2.8 Closing Balance Sheet
Section 2.9 Certain Changes
Section 2.10 Litigation
Section 2.11 Compliance with Applicable Laws
Section 2.12 Environmental Matters
Section 2.13 Title, etc.
Section 2.14 Intellectual Property
Section 2.15 Insurance
Section 2.16 Employee Benefit Matters
Section 2.17 Labor Matters
Section 2.18 Material Contracts
Section 2.20 Permits
Section 2.21 Bank Accounts
Section 2.22 Taxes
Section 2.23 Related Party Transactions
Section 2.24 Powers of Attorney
Section 4.1 Conduct of Business
Section 5.2 Exempted Consents
Section 5.2(g) Thantex Condition
Section 6.2 Indemnification Matters
<PAGE>
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "Agreement") made and entered into
as of June 10, 1999, by and between PREMIER PRODUCTS LLC, a Delaware limited
liability company ("Purchaser"), and ISOLYSER COMPANY, INC., a Georgia
corporation (the "Shareholder").
W I T N E S E T H:
WHEREAS, the Shareholder owns 100% of the issued and outstanding shares
of stock (the "Shares") of WHITE KNIGHT HEALTHCARE, INC., a Pennsylvania
corporation (the "Company");
WHEREAS, the Shareholder desire to sell, and Purchaser desires to
purchase, all of the Shares.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
ARTICLE I.
PURCHASE AND SALE
SECTION 1.1 Agreement to Purchase and Sell Shares. Subject to the terms
and conditions of this Agreement, the Shareholder agrees to sell to Purchaser,
and Purchaser agrees to purchase, on the Closing Date (as hereinafter defined),
all of the Shares free and clear of all security interests, pledges, liens,
encumbrances, charges or restrictions.
SECTION 1.2 Purchase Price. The purchase price (the "Purchase Price")
for the Shares will be equal to the sum of (1) $4,923,103, (2) $2,903,325, which
is the amount of the cash on the Closing Balance Sheet referred to at Section
2.8, (3) $154,750, which is the amount of the Fortunique deposit recorded on the
Closing Balance Sheet, and (4) $174,870, which is the amount of the Commissions
(as defined in Section 4.8). The Purchase Price shall be payable by wire
transfer of funds available for immediate credit at Closing (as hereinbelow
defined) in accordance with the directions of the Shareholder.
SECTION 1.3 Closing. The closing of the transactions contemplated in
this Agreement (the "Closing") shall take place at the offices of Arnall Golden
& Gregory, LLP, 1201 West Peachtree, 2800 One Atlantic Center, Atlanta, Georgia
on or before the fifth day following the satisfaction or waiver of the
conditions set forth in Sections 5.1 and 5.2, or such later date as may be
mutually agreed by Shareholder and Purchaser, as the case may be (the "Closing
Date"). The Closing shall be effective for accounting purposes as of the close
of business at midnight on May 31, 1999 (the "Effective Date").
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ARTICLE II.
REPRESENTATIONS AND WARRANTIES
OF SHAREHOLDER
As an inducement to the Purchaser to enter into this Agreement, the
Shareholder hereby represents and warrants to Purchaser as follows:
SECTION 2.1. Disclosure Schedule. The Shareholder has caused the
Company to deliver to Purchaser a schedule (the "Disclosure Schedule")
containing information regarding the Company as indicated at various places in
this Agreement. The Disclosure Schedule shall be deemed for all purposes of this
Agreement to constitute an integral part of this Agreement and the
representations and warranties of the Shareholder contained herein. The
disclosures on the Disclosure Schedules shall relate only to the representations
and warranties in the section of the Agreement to which they expressly relate or
refer and not to any other representation or warranty in this Agreement. For
purposes of this Article II, "knowledge" shall mean the actual knowledge of the
executive officers of Shareholder and the information which the persons
identified in Section 2.1 of the Disclosure Schedule provide to the Shareholder
in writing in response to Shareholder's inquiry of such persons as set forth in
Section 2.1 of the Disclosure Schedule.
SECTION 2.2 Incorporation and Qualification of the Company. The Company
is a corporation duly incorporated, validly existing and in good standing under
the laws of the Commonwealth of Pennsylvania and has all corporate power and
authority, together with all material governmental licenses, authorizations,
consents and approvals, required to own, operate or lease the properties and
assets now owned, operated or leased by the Company and to carry on its
business. The Company is duly qualified as a foreign corporation to do business,
and is in good standing, in each jurisdiction where the character of its
properties owned, operated or leased or the nature of its activities makes such
qualification necessary and where the failure to qualify would have a Material
Adverse Effect upon the Company. All jurisdictions in which the Company is
qualified as a foreign corporation are set forth in Section 2.2 of the
Disclosure Schedule. For purposes of this Agreement, "Material Adverse Effect"
means a material adverse effect on the condition (financial or otherwise),
business, assets, results of operations or prospects of the Company and its
Subsidiary (as hereinbelow defined) taken as a whole, excluding any such effect
in the amount of $25,000 or less and any effect resulting from (x) the
consummation of the transactions set forth herein, or (y) any matter disclosed
in this Agreement.
SECTION 2.3 Capital Stock of the Company. The authorized capital stock
of the Company consists of 2,000,000 shares of common stock, $.01 par value (the
"Common Stock") and all of the issued and outstanding shares of Common Stock of
the Company consists of 767,209 shares of Common Stock. Each outstanding Share
has been duly authorized and validly issued, and is fully paid and
non-assessable. Except as otherwise set forth in Section 2.3 of the Disclosure
Schedule, Shareholder now has, and will have on the Closing Date, good, valid
and marketable title to the Shares, free and clear of any Stock Encumbrances (as
hereinbelow defined). There are no outstanding (a) shares of capital stock or
other voting securities of the Company except as set forth in this Section 2.3,
(b) securities of the Company convertible into or exchangeable for shares of
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capital stock or voting securities of the Company, (c) options (including
employee stock options), warrants or right of conversion or other rights,
agreements, arrangements or commitments obligating, or which may obligate, the
Company to sell or issue any additional shares of the Company's capital stock,
or (d) obligations of the Company to issue any voting securities or securities
convertible into or exchangeable for capital stock or voting securities of the
Company (the items in clauses (a) through (d), being referred to collectively as
the "Company Securities"). There are no outstanding obligations of the Company
to repurchase, redeem or otherwise acquire any of the Company Securities. Upon
Closing, the Shareholder shall transfer to Purchaser all right, title and
interest in and to the Shares free and clear of any Stock Encumbrances. As used
in this Agreement, "Stock Encumbrances" shall mean any security interest,
pledge, lien, charge, adverse claim of ownership or use, or any restriction on
ownership, use, voting, transfer or receipt of dividends, or any encumbrance of
any kind.
SECTION 2.4 Subsidiaries and Other Business Entities.
(a) Except as set forth in Section 2.4 of the Disclosure
Schedule, there are no corporations, partnerships, joint ventures or other
business entities (collectively, the "Subsidiary") in which the Company owns, of
record or beneficially, any direct or indirect equity interest or any right to
acquire the same.
(b) Section 2.4 of the Disclosure Schedule lists the name,
jurisdiction, date of incorporation, authorized stock and stock ownership of
each Subsidiary.
(c) Each Subsidiary is a corporation duly incorporated,
validly existing and in good standing under the laws of its respective
jurisdiction of incorporation; subject to Section 2.20 hereof, has all corporate
power and authority, together with all material governmental licenses,
authorizations, consents and approvals, required to own, operate or lease the
properties and assets now owned, operated or leased by such Subsidiary and to
carry on its business in all respects as currently conducted by such Subsidiary;
and is duly qualified as a foreign corporation to do business and is in good
standing, in each jurisdiction where the character of its properties owned,
operated or leased or the nature of its activities makes such qualification
necessary and where the failure to qualify would have a Material Adverse Effect
upon the Company or its Subsidiaries.
(d) Except as set forth in Section 2.4 of the Disclosure
Schedule, the Company owns all of the issued and outstanding shares of capital
stock of each Subsidiary free and clear of any Stock Encumbrances and such
shares are fully paid and nonassessable. There are no outstanding (i) shares of
capital stock or other voting securities of any Subsidiary except as set forth
in this Section 2.4(d), (ii) securities of any Subsidiary convertible into or
exchangeable for shares of capital stock or voting securities of such
Subsidiary, (iii) options (including employee stock options), warrants or rights
of conversion or any other rights, agreements, arrangements or commitments
relating to any subsidiary obligating a Subsidiary to issue additional shares of
capital stock, or (iv) obligations of any Subsidiary to issue any voting
securities or securities convertible into or exchangeable for capital stock or
voting securities of such Subsidiary (the items in clauses (i), (ii), (iii) and
(iv) being referred to collectively as the "Subsidiary Securities"). There are
no outstanding obligations of any Subsidiary to repurchase, redeem or otherwise
acquire any Subsidiary Securities.
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SECTION 2.5 Corporate Authority of Shareholder; No Conflicts of
Shareholder. Except as otherwise set forth in Section 2.5 of the Disclosure
Schedule (i) Shareholder has all necessary corporate power and authority to
execute and deliver this Agreement and the other agreements and instruments
contemplated hereby to be executed and delivered by the Shareholder hereunder,
and to carry out its obligations hereunder and thereunder, and to consummate the
transactions contemplated hereby; (ii) this Agreement has been duly authorized,
executed and delivered by Shareholder, and (assuming due authorization,
execution and delivery by Purchaser) constitutes, and such other agreements and
instruments contemplated hereby when executed and delivered by the Shareholder
will constitute, a legal, valid and binding obligation of Shareholder,
enforceable against Shareholder in accordance with its terms, subject to the
effect, if any, of bankruptcy, insolvency, reorganization, moratorium and other
similar laws affecting the rights of creditors generally and the effect, if any,
of general principles of equity; and (iii) the execution, delivery and
performance of this Agreement and such other agreements and instruments
contemplated hereby by Shareholder and the consummation by Shareholder of the
transactions contemplated hereby do not and will not (1) violate or conflict
with the certificate of incorporation or bylaws or other organizational document
of Shareholder, (2) except as would not result in a Material Adverse Effect on
the Company, conflict with or violate any law, rule or regulation of, or any
order, writ, judgment, injunction, decree, stipulation, determination or award
entered into by or with, any foreign, federal, state or local governmental
authority, regulatory or administrative agency, or governmental commission,
court, tribunal or arbitral body applicable to Shareholder, or (3) except as
would not result in a Material Adverse Effect on the Company, conflict with,
result in any breach of, constitute a default (or constitute an event which with
the giving of notice or lapse of time, or both, would become or result in a
conflict, breach or default) under, or give to others any Stock Encumbrance
rights upon the Shares, under any agreement or obligation to which Shareholder
is a party or by which the Shares are subject or bound.
SECTION 2.6 No Conflicts of Company; Consents. Assuming all consents,
approvals, authorizations and other actions described in Section 2.6 of the
Disclosure Schedule have been obtained and all filings and notifications listed
in Section 2.6 of the Disclosure Schedule have been made, the execution,
delivery and performance of this Agreement and the other agreements and
instruments contemplated hereby by the Shareholder does not and will not:
(a) violate or conflict with the certificate of incorporation or bylaws or
other organizational documents of the Company or any Subsidiary;
(b) except for matters that would not have a Material Adverse Effect on the
Company or its Subsidiaries, conflict with or violate any law, rule or
regulation of, or any order, writ, judgment, injunction, decree, stipulation,
determination or award entered by or with, any foreign federal, state or local
governmental authority, body, agency official, regulatory or administrative
agency, body or official, or governmental commission, court, tribunal, body,
agency official or arbitral body (singularly and collectively, the "Governmental
Authority") applicable to the Company, any Subsidiary or their respective
businesses;
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(c) except for matters that would not have a Material Adverse Effect on the
Company or its Subsidiaries, conflict with, result in any breach of, constitute
a material default (or constitute an event which with the giving of notice or
lapse of time, or both, would become or result in a conflict, breach or default)
under, or give to others any rights of termination, amendment, acceleration or
cancellation of, or result in the creation of any security interest, pledge,
mortgage, lien, charge, adverse claim of ownership or use or any encumbrance of
any kind (collectively, the "Encumbrance") on the Company, any Subsidiary or
their assets pursuant to any agreement, contract or other instrument, to which
the Company or any Subsidiary is a party or by which any of their assets or
properties are bound or affected.
SECTION 2.7 Corporate Records of the Company and Subsidiaries. The
stock records and minute books of the Company heretofore made available to
Purchaser by the Shareholder correctly show all corporate action taken by the
directors and shareholders of the Company and, since September, 1995, no meeting
of any such directors or shareholders of the Company and its Subsidiaries have
been held for which minutes have not been prepared and included in such minute
books (including action taken by consent without a meeting), and contain true,
correct and complete copies or originals of the certification of incorporation
and bylaws and all amendments thereto.
SECTION 2.8 Financial Statements; Undisclosed Liabilities. The Company
has previously delivered to Purchaser unaudited consolidated financial
statements (the "Financial Statements"), including an unaudited consolidated
balance sheet (the "Balance Sheet"), of the Company and the Subsidiary as of
December 31, 1998 and unaudited consolidated statements of income, earnings and
cash flows for the year then ended. The Financial Statements fairly present in
all material respects, in conformity with generally accepted accounting
principles applied on a basis consistent with past practice, the financial
condition of and the results of operation of the Company on a consolidated basis
for the year then ended. Included in Section 2.8 of the Disclosure Schedule is
the consolidated unaudited balance sheet of the Company and its Subsidiary as of
May 31 1999 (the "Closing Balance Sheet"). The "actual" column of the Closing
Balance Sheet fairly presents in all material respects, in conformity with
generally accepted accounting principles applied on the basis consistent with
past practice, the financial condition of the Company and the Subsidiary on a
consolidated basis as of the date of the Closing Balance Sheet, subject to
normal year-end adjustments.
There are no liabilities of the Company or any Subsidiary required to
be recorded or disclosed under generally accepted accounting principles for year
end consolidated financial statements of the Company and the Subsidiary, whether
accrued, contingent, absolute, determined, determinable or otherwise, other
than:
(a) liabilities which are or will be disclosed and/or provided for on the
Closing Balance Sheet;
(b) liabilities which do not exceed $10,000 individually or $75,000 in the
aggregate;
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(c) liabilities incurred in the ordinary course of business consistent with
past practice since the date of the Closing Balance Sheet, which in the
aggregate do not have a Material Adverse Effect; and
(d) liabilities under this Agreement or reflected in any schedule or
document delivered in connection with this Agreement, including without
limitation the liabilities, if any, referred to in Section 4.8(d) of this
Agreement.
SECTION 2.9 Absence of Certain Changes or Events. Except as set forth
in Section 2.9 of the Disclosure Schedule, since December 31, 1998, each of the
Company and the Subsidiary has conducted its business only in the ordinary
course, and there has not been with respect to such business (i) any Material
Adverse Effect, (ii) any damage, destruction or loss, due to fire or other
casualty, whether or not covered by insurance, that has or reasonably could be
expected to have a Material Adverse Effect, (iii) any change in accounting
methods, principles or practices by the Company materially affecting its assets,
liabilities or business, except insofar as may have been required by a change in
generally accepted accounting principles, (iv) any sale, lease, transfer, or
assignment of any material assets other than in the ordinary course of business,
(v) any material capital expenditures other than in the ordinary course of
business, or (vi) any material capital investment in, or loan to, any other
person outside the ordinary course of business.
SECTION 2.10 Litigation. Except as set forth in Section 2.10 of the
Disclosure Schedule, as of the date of this Agreement, there are no claims,
actions, proceedings or investigations pending, or to the knowledge of
Shareholder, threatened against either the Company or the Subsidiary or any of
its assets or properties, before any court, arbitrator or administrative,
governmental or regulatory authority or body that are reasonably likely to have
a Material Adverse Effect on the Company. Except as set forth in Section 2.10 of
the Disclosure Schedule, neither the Company or the Subsidiary nor any of their
respective assets is subject to any order, writ, judgment, injunction, decree,
determination or award. Except as otherwise set forth in Section 2.10 of the
Disclosure Schedule, each of the matters listed on Section 2.10 of the
Disclosure Schedule is covered by insurance.
SECTION 2.11 Compliance with Applicable Laws. Except as set forth in
Section 2.11 of the Disclosure Schedule, within the preceding three years each
of the Company and the Subsidiary has not violated or failed to comply with any
statute, law, regulation, rule, judgment, decree or order of any governmental
authority applicable to its business, except for violations and failures to
comply that would not, individually or in the aggregate, have a Material Adverse
Effect on the ability of the Company and the Subsidiary to conduct its business
as currently conducted, and there is no action pending against the Company and
the Subsidiary charging failure to so comply. The conduct of the business of the
Company is in conformity with all federal, state and local governmental and
regulatory requirements applicable to its business and operations except where
such nonconformity would not, individually or in the aggregate, have a Material
Adverse Effect on the ability of the Company to conduct its business as
currently conducted. The Company and the Subsidiary have all permits, licenses,
franchises and certificates of occupancy from governmental authorities required
to conduct its business as now being conducted, except for such permits,
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licenses, franchises and certificates the absence of which would not, in the
aggregate, have a Material Adverse Effect. Insofar as the statements contained
in this Section 2.11 address compliance with the Federal Food, Drug and Cosmetic
Act and regulatory provisions associated with such Act, such statements shall be
deemed made without regard to any qualifications otherwise contained in this
Section by reference to Material Adverse Effect.
SECTION 2.12 Environmental Matters. Except as set forth in Section 2.12 of
the Disclosure Schedule:
(a) Except as would not have a Material Adverse Effect, to
Shareholder's knowledge each of the Company and the Subsidiary (i) is in
compliance with all applicable Environmental Laws and (ii) holds all
Environmental Permits necessary for its operations and properties and is in
compliance with the terms and conditions of all such Environmental Permits.
(b) The Company has not received any written claim, demand,
notice or complaint alleging violation of or liability (including without
limitation any liability for site investigation. cleanup or corrective action)
under any Environmental Laws concerning the Company's or the Subsidiary's
assets.
(c) Except as would not have a Material Adverse Effect, to
Shareholder's knowledge, none of the following exists at any real property owned
or leased by the Company or the Subsidiary: (i) asbestos-containing material in
any form or condition; (ii) materials containing polychlorinated biphenyls;
(iii) underground storage tanks or surface impoundments; or (iv) landfills,
surface impoundments or disposal areas.
(d) Except as would not have a Material Adverse Effect, each
of the Company and the Subsidiary has not treated, stored, disposed of, arranged
for or permitted the disposal of, transported, handled or released any Hazardous
Material, or owned or operated any facility or property, so as to give rise to
liabilities for response costs, natural resource damages or attorneys fees
pursuant to CERCLA or other Environmental Laws.
(e) No written notice of a release of a Hazardous Material has
been filed by or on behalf of the Company or the Subsidiary and no property or
facility now or previously owned or operated by the Company or the Subsidiary is
on the CERCLA National Priorities List (or proposed for such listing), the
Comprehensive Environmental Response, Compensation, and Liability Information
System list or any similar state or local list.
(f) Each of the Company and the Subsidiary has not, either
expressly or, to the Shareholder's knowledge, by operation of law, assumed or
undertaken any liability, including without limitation any obligation for
corrective or remedial action, of any other person relating to Environmental
Laws.
(g) For purposes of this Agreement:
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"CERCLA" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended.
"Environmental Laws" means any federal, state, local or
foreign statute, law, ordinance, regulation, rule or code, including any
judicial or administrative order, consent decree or judgment, relating to
pollution or protection of the environment or worker health and safety,
including, without limitation, those relating to the use, handling,
transportation, treatment, storage, disposal, release or discharge,
investigation or cleanup of Hazardous Materials, in effect as of the date
hereof.
"Environmental Permits" means any permit, approval,
identification number, license or other authorization required of the Company
under any applicable Environmental Law.
"Hazardous Materials" means (a) any petroleum, petroleum
products, by-products or breakdown products, radioactive materials,
asbestos-containing materials or polychlorinated biphenyls, (b) any chemical,
material or substance defined or regulated as toxic or hazardous under any
applicable Environmental Law or (c) anything that is a "hazardous substance"
pursuant to CERCLA, anything that is a "solid waste" or "hazardous waste"
pursuant to RCRA or any "pesticide", "pollutant", "contaminant", "toxic
chemical" or "noise".
"RCRA" means the Resource Conservation and Recovery Act, as
amended.
SECTION 2.13 Title to Properties. (a) Each of the Company and the
Subsidiary has good and marketable title to, or valid leasehold interests in,
all the properties and assets used by it or located on its premises and which
are recorded on the Closing Balance Sheet except for such as are licensed, as
are no longer useful in the conduct of its business or as have been disposed of
either in the ordinary course of business or in connection with the Company's
divestiture of its Industrial division and except for defects in title,
easements, restrictive covenants and similar impediments that, in the aggregate,
would not have a Material Adverse Effect on the ability of the Company to
conduct its business as currently conducted and, as to the real property owned
by the Company, would not have a material effect on the value of such property.
All such assets and properties, other than assets and properties in which the
Company has leasehold interests, are (or at Closing will be) free and clear of
all encumbrances except for (i) liens for taxes not yet due or being contested
in good faith by appropriate procedures, (ii) mechanics, carriers, workmen's,
repairmen's or other like liens arising or incurred in the ordinary course of
business for amounts that are not delinquent and which are not, individually or
in the aggregate, material to the Company's business, (iii) liens arising under
original purchase price conditional sales contracts and equipment leases with
third parties entered into in the ordinary course of business, and (iv) the
matters set forth at Section 2.13 of the Disclosure Schedule.
(b) Except as set forth in Section 2.13 of the Disclosure
Schedule, or as would not result in a Material Adverse Effect, the assets of the
Company are all of the assets which have been used, and which are necessary, to
operate the business of the Company as it has customarily been conducted.
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SECTION 2.14 Intellectual Property. Section 2.14 of the Disclosure
Schedule contains a complete and accurate list of (i) all trade names,
registered and material unregistered trademarks owned by the Company or used in
connection with the business conducted by the Company, (ii) all patents or
patent applications owned by the Company or used in connection with the business
conducted by the Company, and (iii) all MIS, MAPICS and related systems and
computer software owned and/or used by the Company in its business other than
commercially available software with an annual license fee of less than $1,000
(collectively, the "Intellectual Property"). Except as set forth in Section 2.14
of the Disclosure Schedule, Seller has not granted any licenses to any person
with respect to the Intellectual Property. Except as set forth in Section 2.14
of the Disclosure Schedule, to Shareholder's knowledge, the Company owns (free
and clear of all encumbrances) or has sufficient unrestricted right to use the
Intellectual Property in order to allow it to conduct, and continue to conduct,
its business as currently conducted in all material respects, and the
consummation of the transactions contemplated hereby will not alter or impair
such ability in any material respect. To Shareholder's knowledge, except as set
forth in Section 2.14 of the Disclosure Schedule, (a) the Company has not
infringed, misappropriated or is otherwise not in conflict with any intellectual
property right of any person in any material respect, and (b) the conduct of the
business of the Company as currently conducted or as currently contemplated to
be conducted does not and will not conflict in any material respect with any
license, trademark, trademark right, patent, patent right, invention, industrial
model, service mark or copyright of any third person. No claims are pending or,
to the knowledge of Shareholder, threatened by any person contesting or
challenging the ownership, validity, enforceability or use of the Intellectual
Property. To the knowledge of the Shareholder, there are no claims pending or
currently threatened by any person against the Company alleging infringement of
any intellectual property rights relating to the technology used in Company's
manufacturing process with respect to the Company's business. The Company has
not made a claim of a violation or infringement by others of its rights to or in
connection with the Intellectual Property.
SECTION 2.15 Insurance. Section 2.15 of the Disclosure Schedule sets
forth a complete list of all insurance policies (including policies providing
property, casualty, liability and workers' compensation coverage and bond and
surety arrangements) maintained by the Company.
SECTION 2.16 Employee Benefit Matters. (a) Section 2.16 of the
Disclosure Schedule sets forth a true and complete list of each "employee
benefit plan" (as defined by Section 3(3) of ERISA), and any other bonus, profit
sharing, pension, compensation, deferred compensation, stock option, stock
purchase, fringe benefit, severance, post-retirement, scholarship, disability,
sick leave, vacation, individual employment, commission, bonus, payroll
practice, retention, or other plan, agreement, policy, trust fund or arrangement
(each such plan, agreement, policy, trust fund or arrangement is referred to
herein as an "Employee Benefit Plan", and collectively, the "Employee Benefit
Plans") that is for the benefit of (i) directors or employees of the Company or
the Subsidiary, (ii) former directors or employees of the Company or the
Subsidiary or any other persons formerly performing services for the Company or
the Subsidiary, and/or (iii) beneficiaries of anyone described in (i) or (ii)
(collectively, the "Company Employees") or with respect to which the Company or
any "ERISA Affiliate" (hereby defined to include any trade or business, whether
or not incorporated, other than the Company, which has employees who are or have
been at any date of determination occurring within the preceding three years,
treated pursuant to Section 4001(a)(14) of ERISA and/or Section 414 of the
Internal Revenue Code as employees of a single employer which includes the
Company) has any obligation on behalf of any employee of the Company.
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(b) Except as disclosed in Section 2.16 of the Disclosure
Schedule, each Employee Benefit Plan is in material compliance with the
provisions of ERISA and the provisions of the Internal Revenue Code applicable
to it. The Shareholder has made available to the Purchaser a true and complete
copy of each Plan and a true and complete copy of the following documents, to
the extent applicable, prepared in connection with each such Plan: (i) the most
recently received IRS determination letter, and (ii) the most recently prepared
financial statement (Form 5500's with attachments). Neither the Company nor any
ERISA Affiliate has maintained or contributed to any plan subject to the minimum
funding standards of Section 302 of ERISA or Section 412 of the Internal Revenue
Code and/or any "multiemployer plan" (as defined by Section 3(37) of ERISA). All
Employee Benefit Plans which are "pension plans" as defined in Section 3(2) of
ERISA have received favorable determination letters from the Internal Revenue
Service ("IRS") as to their tax-qualified status and the tax-exempt status of
any related trust under Sections 401(a) and 501 of the Internal Revenue Code,
respectively, which determinations are currently in effect.
(c) Other than as may otherwise be provided hereunder
(including, but not by way of limitation, Article 4 hereof), Purchaser shall
not, as a result of the transactions contemplated by this Agreement: (i) become
liable for any contribution, tax, lien, penalty, cost, interest, claim, loss,
action, suit, damage, cost, assessment or other similar type of liability or
expense of Seller or any ERISA Affiliate (including predecessors thereof) with
regard to any Employee Benefit Plan or any Employee Benefit Plan sponsored,
maintained or contributed to by an ERISA Affiliate (including predecessors
thereof) (assuming a like definition of "Employee Benefit Plan" were applicable
to ERISA Affiliates as to those same types of agreements, policies, trusts,
funds and arrangements sponsored, maintained or contributed to by them) (each
such plan of an ERISA Affiliate, an "ERISA Affiliate Employee Benefit Plan"),
including, without limitation withdrawal liability arising under Title IV,
Subtitle E, Part 1 of ERISA, liabilities to the Pension Benefit Guaranty
Corporation, or liabilities under Section 412 of the Internal Revenue Code or
Section 302(a)(2) of ERISA, or (ii) be or become a party to any Employee Benefit
Plan or any ERISA Affiliate Employee Benefit Plan.
(d) The Company, each ERISA Affiliate, each Employee Benefit
Plan and each Employee Benefit Plan "sponsor" or "administrator" (within the
meaning of Section 3(16) of ERISA) has complied in all material respects with
the applicable requirements of Part 6 of Subtitle B of Title I of ERISA and
Section 4980B of the Internal Revenue Code.
(e) Neither the Company nor any ERISA Affiliate maintains (i)
any employee benefit plan of the type described in Sections 4063 and 4064 of
ERISA or in Section 413(c) of the Internal Revenue Code (and regulations
promulgated thereunder), or (ii) any plan which provides health, life insurance,
accident or other "welfare-type" benefits to current or future retirees or
current or future former employees, their spouses or dependents, other than in
accordance with Section 4980B of the Internal Revenue Code or applicable state
continuation coverage law.
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SECTION 2.17 Labor Matters. (a) There are no material controversies pending
or, to the knowledge of the Shareholder, threatened, between the Company and any
of its employees; (b) except as set forth in Section 2.17 of the Disclosure
Schedule, each of the Company and the Subsidiary is not a party to any
collective bargaining agreement or other labor union contract applicable to
persons employed by the Company or the Subsidiary; (c) during the past three
years, there have been no unfair labor practice complaints filed or pending
against the Company or the Subsidiary before the National Labor Relations Board,
the Equal Employment Opportunity Commission, or any comparable governmental
body; (d) during the past three years, there have been no strikes, slowdowns,
work stoppages, lockouts, or, to the Shareholder's knowledge, threats thereof,
by or with respect to any employees of the Company or the Subsidiary; and (e)
during the past three years, the Company and the Subsidiary has complied in all
respects with the legal requirements relating to employment, equal employment
opportunity, nondiscrimination, immigration, wages, hours, safety and health,
and plant closing, except for failures to comply that would not, individually or
in the aggregate, have a Material Adverse Effect on the ability of the Company
and the Subsidiary to conduct its business as currently conducted. Neither the
Company nor the Subsidiary are liable for the payment of any compensation,
damages, taxes, fines, penalties, or other costs, for failure to comply with any
of the foregoing legal requirements, except as would not have a Material Adverse
Effect on the Company and the Subsidiary.
SECTION 2.18 Material Contracts. (a) Section 2.18 of the Disclosure
Schedule lists the following contracts (collectively, the "Material Contracts")
to which the Company or the Subsidiary is a party or by which its respective
assets may be bound:
(i) any commitment, contract, agreement, note, loan, evidence of
indebtedness, letter of credit and purchase orders issued in the ordinary
course to individual customers or vendors that Seller reasonably
anticipates will, in accordance with its terms, involve aggregate payments
by or to the Company of more than $20,000 within the 12 month period
following the date hereof and that is not cancelable by the Company without
liability within 60 days;
(ii) any lease of real or personal property involving an annual
expense in excess of $20,000;
(iii) any contract or agreement containing covenants limiting in any
respect the freedom of the Company or the Subsidiary to engage in any line
of business or compete with any person;
(iv) any agreement (or group of related agreements) under which the
Company or the Subsidiary has created, incurred, assumed or guaranteed any
indebtedness for borrowed money, or any capitalized lease obligations, in
excess of $50,000, or under which it has imposed an encumbrance on any of
its assets (other than any lien of the type described in the last sentence
of Section 2.13(a));
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(v) any material contract or agreement not entered into in the
ordinary course of the Company's business including, without limitation,
any agreement to indemnify any third party; and
(vi) any written employment agreement or oral agreement providing for
employment on other than an "at will" basis.
(b) The Company is not (and, to the knowledge of the
Shareholder, no other party is) in breach or violation of, or default under, any
of the Material Contracts. Each Material Contract is a valid agreement,
arrangement or commitment of the Company, enforceable against the Company in
accordance with its terms except where enforceability may be limited by
bankruptcy, insolvency or other similar laws affecting creditors' rights
generally and except where enforceability is subject to the application of
equitable principles or remedies.
(c) There is no pending, or to the Shareholder's knowledge,
threatened, claim, and there has been no claim (whether or not resolved) during
the past three years, against the Company or the Subsidiary under any agreement
to indemnify any third party.
SECTION 2.19 Brokers. Except for Morgan Keegan & Company, Inc. ("Morgan
Keegan"), no broker, finder or investment banker is entitled to any brokerage,
finder's or other fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
the Company or the Shareholder. The Shareholder is solely responsible for the
fees and expenses of Morgan Keegan.
SECTION 2.20 Permits. Section 2.20 of the Disclosure Schedule lists all
of the permits, licenses, consents, certificates and governmental approvals
required to conduct the business of the Company (the "Permits") the absence of
which would have a Material Adverse Effect on the Company. To the Shareholder's
knowledge, the Company is in full compliance with all Permits and no suspension,
revocation, limitation or cancellation of any of the Permits is threatened or
pending and no cause exists for such, except as would not have a Material
Adverse Effect on the Company.
SECTION 2.21 Bank Accounts. Section 2.21 of the Disclosure Schedule
lists all of the (a) names of each bank, savings and loan, or other financial
institution in which the Company or any Subsidiary has an account, including
cash contribution accounts, and the account numbers and names of all persons
authorized to draw thereon or have access thereto, and (b) locations of all
lockboxes and safe deposit boxes of the Company or any Subsidiary.
SECTION 2.22 Taxes.
(a) Tax Returns; Payment. The Company has filed or caused to
be filed on a timely basis, or will file or cause to be filed on a timely basis,
all tax returns that are required to be filed by it prior to or on the Effective
Date, pursuant to the law of each governmental authority with taxing power over
it. All such tax returns were or will be, as the case may be, correct and
complete. The Company has paid all taxes that have become due as shown on such
tax returns or pursuant to any assessment received as an adjustment to such tax
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returns, except (i) such taxes, if any, as are being contested in good faith and
disclosed on Section 2.22 of the Disclosure Schedule attached hereto, (ii) such
taxes that are fully reserved against on the Closing Balance Sheet, and (iii)
taxes accruing after the date of the Closing Balance Sheet that are not yet due.
The Company is not currently the beneficiary of any extension of time within
which to file any tax return. No claim has been made by a taxing authority of a
jurisdiction where the Company does not file tax returns that it is or may be
subject to taxation in that jurisdiction.
(b) Withholding. The Company has withheld and paid all taxes
required to have been withheld and paid prior to the Effective Date in
connection with amounts paid or owing to any employee, independent contractor,
creditor, stockholder or other third party.
(c) Assessments. There is no pending, or, to the knowledge of
Shareholder, threatened or anticipated, assessment of any additional tax against
the Shareholder or any subsidiary thereof (the "Shareholder Group") for any
taxable period during which the Company or any predecessor company was a member
of the Shareholder Group. No member of the Shareholder Group has waived any
statute of limitations in respect of any taxes or agreed to any extension of
time with respect to a tax assessment or deficiency for any taxable period
during which the Company was a member of the Shareholder Group. No tax audit or
examination is now pending or currently in progress with respect to the Company.
(d) Other Matters. Except as set forth in this Agreement, the
Company is not a party to any income tax allocation or sharing agreement which
will survive the Closing. The Company has not filed a consent under Code Section
341(f) concerning collapsible corporations. The Company has not made any
payment, nor is it obligated to make any payment, nor is it a party to any
agreement that under certain circumstances could obligate it to make any
payment, that will not be deductible under Code Sections 280G or 162(m). Since
September, 1995, the Company has not been (nor does it have any liability for
unpaid taxes because it once was) a member of an affiliated group (other than
the Shareholder Group) during any part of any consolidated return year within
any part of which consolidated return year any other corporation was also a
member of such group. The Company is not and has not been during the applicable
period specified in Code Section 897(c)(1)(A)(ii) a United States real property
holding corporation as defined in Code Section 897(c)(2).
(e) Affiliated Group. Shareholder and the Company and other
corporations constitute an affiliated group of corporations within the meaning
of Section 1504 of the Code and have joined in the filing of consolidated
federal income tax returns for the taxable year beginning on September 1, 1995
and for each taxable year thereafter. No subsidiary of the Company has joined in
the filing of consolidated returns of any such affiliated group.
SECTION 2.23 Transactions With Related Parties. Except as disclosed in
Section 2.23 of the Disclosure Schedules or set forth in this Agreement, no
Related Party: (i) owns any material asset used in the business of the Company,
or (ii) has any claim of any nature, including any inchoate claim, against the
Company. For this purpose, the term "Related Party" means (w) Shareholder, (x)
any entity controlled by, controlling or under common control with Shareholder,
(y) any officer or director of any person identified in clauses (w) or (x)
preceding, and (z) any spouse, sibling, ancestor or lineal descendant of any
natural person identified in any one of the preceding clauses.
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SECTION 2.24 Powers of Attorney. Except as set forth in Section 2.24 of
the Disclosure Schedule, there are no outstanding powers of attorney executed on
behalf of the Company or the Subsidiary.
SECTION 2.25 Other Information. No document or item referred to in any
schedule (including, without limitation, the Disclosure Schedule) or exhibit
hereto contains, and no information set forth in any such schedule, exhibit,
document or item contains, any untrue statement of a material fact or omits to
state a material fact necessary in order to make the statements of the Company
and the Subsidiary or the Shareholder contained therein not misleading.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
As an inducement to the Shareholder to enter into this Agreement,
Purchaser represents and warrants to the Shareholder as follows:
SECTION 3.1 Organization and Authority of Purchaser. Purchaser is a
limited liability company duly organized, validly existing and in good standing
under the laws of the State of Delaware and has all necessary power and
authority to enter into this Agreement and the other agreements and instruments
(collectively, the "Purchaser's Documents") contemplated hereby to be executed
and delivered by Purchaser hereunder, to carry out its obligations hereunder and
thereunder, and to consummate the transactions contemplated hereby. This
Agreement has been duly executed and delivered by Purchaser, and (assuming due
authorization, execution and delivery by the Shareholder) constitutes a legal,
valid and binding obligation of the Purchaser, enforceable against Purchaser in
accordance with its terms, subject to the effect, if any, of bankruptcy,
insolvency, reorganization, moratorium and other similar laws affecting the
rights of creditors generally and the effect, if any, of general principles of
equity.
SECTION 3.2 No Conflicts. The execution, delivery and performance of
this Agreement and the other Purchaser's Documents by Purchaser do not and will
not (a) violate or conflict with the certificate of organization or other
organizational documents of Purchaser; (b) conflict with or violate any law,
rule or regulation of, or any order, writ, judgment, injunction, decree,
stipulation, determination or award entered by or with, any Governmental
Authority applicable to Purchaser; or (c) conflict with, result in any breach
of, constitute a default (or constitute an event which with the giving of notice
or lapse of time, or both, would become or result in a conflict, breach or
default) under, any agreement or obligation to which Purchaser is a party or
subject and which would affect Purchaser's ability or authority to consummate
the transactions contemplated hereby.
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SECTION 3.3 Investment Purpose. Purchaser is acquiring the Shares solely
for the purpose of investment and not with a view to, or for offer of sale in
connection with, any distribution thereof. Purchaser acknowledges that the
Shares have not been registered.
SECTION 3.4 Brokers. Except for Banc One Capital Markets, Inc.("Banc One"),
no broker, finder or investment banker is entitled to any brokerage, finder's or
other fee or commission in connection with the transaction contemplated hereby
based upon arrangements made by or on behalf of the Purchaser. Purchaser is
solely responsible for the fees and expenses of Banc One.
ARTICLE IV.
ADDITIONAL COVENANTS
SECTION 4.1 Conduct of Business Prior to the Closing. Except as set forth
at Section 4.1 of the Disclosure Schedule, from the date hereof through the
Closing Date, the Shareholder covenants and agrees that the Company and each
Subsidiary shall conduct its business in the ordinary course consistent with
past practice and shall use its commercially reasonable efforts to preserve
intact its business organizations and relationships with third parties and to
keep available the services of its present officers and employees. Without
limiting the generality of the foregoing, except as set forth at Section 4.1 of
the Disclosure Schedule, from the date hereof until the Closing Date, the
Company will not (a) issue any shares of stock, warrants or stock equivalents or
declare or make any payment on account of the purchase, redemption, retirement
or acquisition or any of the Shares, (b) declare any dividends or make any
distributions to the Shareholder, (c) take any action that would have a Material
Adverse Effect, (d) incur any indebtedness for borrowed money except in the
ordinary course of business consistent with past practice, (e) subject the
assets of the Company or any Subsidiary to any additional liens or encumbrances
(except in the ordinary course of business consistent with past practice) or
mortgages, (f) adopt or propose any change in its articles of incorporation or
bylaws, (g) merge or consolidate with any other person, acquire a material
amount of assets of any other person or make any capital expenditure or acquire
any fixed asset except in the ordinary course of business consistent with past
practice, (h) sell, lease, license or otherwise dispose of any material assets
or property except (1) pursuant to existing contracts or commitments and (2) in
the ordinary course consistent with past practice; provided, however, that,
except as set forth at Section 4.1 of the Disclosure Schedule, in no event will
the Company sell, lease, license or otherwise dispose of any asset or assets
having a value greater than $10,000 singly or $75,000 in the aggregate without
the prior written consent of Purchaser, and provided, further, that nothing in
this subparagraph (h) shall prevent the Company or any Subsidiary from selling
inventory in the ordinary course of its business consistent with past practice,
(i) take or agree or commit to take any action that would make any
representation or warranty of the Shareholder inaccurate in any respect at, or
as of any time prior to, the Closing Date or omit or agree or commit to omit to
take any action necessary to prevent any such representation or warranty from
being inaccurate in any respect at any such time, and (j) permit the Company or
any Subsidiary to agree or commit to do any of the foregoing.
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SECTION 4.2 Access to Information. From the date hereof through the
Closing Date, the Shareholder agrees to (a) permit Purchaser and its employees
and representatives reasonable access to any and all of the offices, employees,
properties and records of the Company and each Subsidiary for the purpose of
Purchaser conducting a complete and thorough investigation, analysis and review
of the Company's and each Subsidiary's operations, (b) furnish to Purchaser, its
counsel, financial advisors, auditors and other authorized representatives such
financial and operating data and other information relating to the Company and
the Subsidiaries as such persons may reasonably request and is available to the
Shareholder without unreasonable effort or expense and (c) instruct the
employees, counsel and financial and other advisors of the Company and the
Subsidiaries to cooperate with Purchaser in its investigation of the Company and
the Subsidiaries.
SECTION 4.3 Inventory Storage. The Shareholder and the Purchaser shall
cooperate with one another to establish separate accounts and storage
arrangements with third party warehouses where the inventory (the "Shareholder
Inventory") of Shareholder and its affiliates (other than the Company), on the
one hand, and the inventory (the "Company Inventory") of the Company, on the
other hand, may be located in common. To the extent any such separate accounts
and storage arrangements are not in effect by the Closing Date, Shareholder and
Purchaser shall cooperate with each other in good faith to adjust as between
themselves the respective costs to be borne by each of them for such storage
services.
SECTION 4.4 Maintenance of Records; Audit. (a) Each of the Shareholder
and Purchaser agrees that it shall preserve and keep all books and records
relating to business units then owning or operating the Company, as they relate
to the Company as of the Closing Date, for a period of at least five years from
the Closing Date. During such five-year period, the Shareholder, Purchaser and
their respective representatives shall, upon reasonable notice, have access
thereto during normal business hours to examine, inspect and copy such books and
records. Without limiting the generality of the foregoing, and in recognition of
the difficulty of segregating records by product line respectively to be owned
by Shareholder or its affiliates and Purchaser or its affiliates, each of
Shareholder and Purchaser agrees to transfer the originals of such records (the
transferor preserving a copy as it may so elect to do) to the other to the
extent the other owns the product line to which such records are related
including, without limitation, sterilization records, device master records and
device history files.
(b) Purchaser shall permit Shareholder and its independent
auditors access to the books, records and facilities of the Company and
reasonable services and cooperation of the personnel of the Company to complete
the preparation, review and audit of the Shareholder's consolidated financial
statements for 1999. Such services shall include, without limitation, the
preparation of schedules, reports and other materials customarily included in
the auditing process; provided that the time required for such services shall
not exceed a reasonable amount of time.
SECTION 4.5 Consents. The Shareholder will use its commercially
reasonable efforts (which does not include the payment of money) to obtain all
consents from third parties in order to permit the consummation of the
transactions contemplated in this Agreement without impairing the validity or
effectiveness of any lease or other contract to which the Company or any
Subsidiary is a party, and to obtain the satisfaction on or before the Closing
Date of the conditions specified in Section 5.2.
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SECTION 4.6 Notices of Certain Events. The Shareholder shall promptly
notify Purchaser of:
(a) any notice or other communication (other than any routine
or incidental notice or communication) from any governmental or regulatory
agency or authority in connection with the transactions contemplated by this
Agreement;
(b) any actions, suits, claims, investigations or proceedings
commenced or, to the best of its knowledge, threatened against, relating to or
involving or otherwise affecting the Company or any Subsidiary which, if pending
on the date of this Agreement, would have been required to have been disclosed
pursuant to Section 2.10 or which relate to the consummation of the transactions
contemplated by this Agreement; and
(c) any fact or circumstance which would make any
representation or warranty untrue or inaccurate in any material respect as of
the Closing Date.
SECTION 4.7 Certain Tax Matters.
(a) For purposes of this Agreement, the term "tax" or "taxes"
means all income, gross receipts, sales, use, employment, franchise, profits,
property, transfer or other taxes, fees, stamp taxes and duties, assessments or
charges of any kind whatsoever (whether payable directly or by withholding),
together with any interest and any penalties, additions to tax or additional
amounts imposed by any taxing authority with respect thereto.
(b) From and after the Closing Date, the Shareholder agrees to
indemnify Purchaser and the Company against all taxes (i) imposed on the
Shareholder or any member of an affiliated group with which the Shareholder
files a consolidated or combined income tax return with respect to any taxable
period for which the Shareholder or any member of an affiliated group with
Seller files (or is required by law to file) an income tax return, and (ii)
imposed on the Company with respect to any taxable period or a portion thereof
that ends on or as of the Effective Date with respect to the Company's business,
except as provided in subsection (d) of this Section.
(c) From and after the Closing Date, Purchaser and the Company
shall indemnify the Shareholder and its affiliates against all taxes imposed on
or with respect to the business of the Company for any taxable period or portion
thereof beginning after the Effective Date.
(d) The other provisions of this Section notwithstanding,
Purchaser shall assume and be solely responsible for any accrual of taxes
(including, without limitation, accrued payroll taxes, accrued real estate and
property taxes and accrued foreign taxes) set forth or provided for in the
Closing Balance Sheet or accruing subsequent to the date thereof. In addition,
Purchaser shall assume the amounts set forth or provided for on the Closing
Balance Sheet as current liabilities for FICA withheld, federal income tax
withheld, state income tax withheld and sales tax payable.
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(e) Payment by the indemnitor of any amount due under this
Section shall be made within ten days following written notice by the indemnitee
that payment of such amount to the appropriate tax authority is due, provided
that the indemnitor shall not be required to make any payment (i) earlier than
two days before it is due to the appropriate tax authority or (ii) of any taxes
which the indemnitor has by all appropriate proceedings elected to contest and
is contesting diligently and in good faith. In the case of a tax that is so
contested, payment of the tax to the appropriate tax authority will not be
considered to be due earlier than a date of final determination to such effect
is made by the appropriate taxing authority or a court. The indemnitee will
cooperate in all manners reasonably requested by the indemnitor in order to
effectively prosecute any such contest.
(f) All sales, transfer, stamp, real property transfer and
similar taxes, if any, incurred as a result of the consummation of the
transaction set forth in this Agreement shall be shared equally between the
Shareholder and the Purchaser except with respect to taxes, if any, incurred
with respect to the distribution of certain assets to the Shareholder as
contemplated in Section 4.8(b), which shall be borne solely by the Shareholder.
(g) Pursuant to Treas. Reg. 1.1502-20, Shareholder
acknowledges that it will not be allowed to deduct certain losses recognized by
it on the sale of its stock in the Company to Purchaser. Shareholder
nevertheless agrees not to elect pursuant to Treas. Reg. 1.1502-20(g)(1) to
reattribute to itself the portion of consolidated net operating loss carryover
attributable to the Company up to the amount of such disallowed losses.
(h) Except as otherwise provided in this Agreement, subsequent
to the Closing, Purchaser shall not take any action or make any election that
may result in any increase in the tax liability of the Company or Shareholder
for the periods when the Company was a member of Shareholder's consolidated
group, except with the prior written consent of the Shareholder.
(i) Shareholder and its representatives shall have access to
all books and records of the Company to prepare and file federal and state
income tax returns for the partial 1999 tax year resulting from this
transaction, and shall have control over the contents thereof. Purchaser shall
cooperate and cause the Company to cooperate with Shareholder for such purposes.
Such cooperation shall include, without limitation, the services of personnel of
the Company for the preparation of schedules, reports and other materials,
appropriate for the preparation of such tax returns, provided that the time
required to provide such services shall not exceed a reasonable amount of time.
SECTION 4.8 Transactions to Conform to Closing Balance Sheet.
(a) The Closing Balance Sheet includes columns to reflect the
following adjustments (the "Pro Forma Adjustments"):
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(i) Exclude as an asset or liability of the Company
any assets (including inventory ("Isolyser Inventory"), receivables
("Isolyser Receivables"), any proprietary assets such as product
specifications ("Proprietary Assets")) or liabilities of the Company
arising as a result of products acquired or sold by the Company under
arrangements with the Shareholder or an affiliate of the Shareholder
including, by way of illustration, but not limitation, the
Shareholder's proprietary OREX and safety products.
(ii) Exclude as an asset or liability of the Company
any choses in action arising in connection with the purchase by the
Company of the CliniTech division of Sterile Concepts, Inc. ("Sterile
Concepts") including, without limitation, all rights of the Company to
make claims related to that certain Asset Purchase Agreement (the "SCI
APA") and that certain Product Purchase and Supply Agreement (the "SCI
Purchase Agreement"), each of which are dated February 8, 1993, and are
between the Company and Sterile Concepts, and all obligations, if any,
of the Company under those certain promissory notes made by the Company
payable to Sterile Concepts (the "SCI Notes"). The assets and
liabilities referred to in this clause are herein called the "SCI
Assets and Liabilities". The SCI Assets and Liabilities do not include
the "Business Assets" as defined and described in the SCI APA.
(iii) Exclude as an asset of the Company the prepaid
assets related to the Company's insurance policies ("Prepaid
Insurance").
(iv) Exclude as liabilities accruals with respect to
accrued retirement, medical claims, flexible spending, employee legal
plan, employee stock purchase plan, 401(k) savings plan, and life
insurance (the "Employee Benefit Accruals").
(v) Including as an accrued liability of the Company
sales commissions accruals on net sales of products for which a sales
person employed or engaged by Shareholder or an affiliate of
Shareholder accrues a commission through April 1999 (the
"Commissions").
(vi) Exclude (y) as a liability of the Company the
bond indebtedness now or formerly secured by a mortgage against the
so-called Struble & Moffitt plant located in Camden County, New Jersey,
and (z) as an asset of the Company any funds on deposit to pay such
bond indebtedness.
(b) As provided in Section 1.2, the Purchase Price shall
include the Commissions. Prior to Closing, (i) the Isolyser Inventory, the
Isolyser Receivables, the Proprietary Assets and the SCI Assets and Liabilities
shall be distributed to the Shareholder and (ii) the Shareholder shall cause the
Company's insurance policies reflected as Prepaid Insurance to be canceled and
the Shareholder shall be entitled to all refunds with respect to Prepaid
Insurance. All costs incurred by the Company in effecting any of the
transactions described in the preceding sentence of this Section 4.8(b) shall be
paid by the Shareholder or, if they are paid by the Company, the Company shall
be reimbursed by the Shareholder. The Shareholder shall be responsible for the
Employee Benefit Accruals. Purchaser shall pay or cause to be paid to Isolyser
the Commissions accrued for the month of May, 1999 within 30 days after the
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receipt by the Company of an invoice and report of the amount of such accrual;
provided, that Purchaser may exclude from such payment any Commission accrued to
Tom Kennelly upon the receipt by Isolyser of a release from Mr. Kennelly of such
amount in form and substance satisfactory to Isolyser.
(c) The Shareholder and Purchaser acknowledge and agree that
the purpose of excluding the SCI Assets and Liabilities from this transaction is
to preserve for the Shareholder and the affiliates of the Shareholder (other
than the Company) the right to seek damages or otherwise obtain a settlement for
the default of Sterile Concepts of its obligations under the SCI Purchase
Agreement. The Shareholder and the Purchaser (including, without limitation, the
Company) agree to cooperate with one another to the extent requested by the
Shareholder to achieve such objectives, provided that neither the Purchaser nor
the Company shall be required to incur any unreimbursed cost or expense or
assume any liabilities in so cooperating with the Shareholder. Such cooperation
of Purchaser and the Company shall include, by way of illustration but not
limitation, producing such accounting and business records as Shareholder may
reasonably request. The terms of this Section shall survive the Closing.
(d) Purchaser shall cause the Company to satisfy any amounts
payable by the Company in connection with purchases of Fiberweb products or the
failure to purchase target quantities of Fiberweb products regardless of whether
or not the accruals of the Company for such purposes are sufficient. Purchaser
shall cause to be paid and satisfied all (i) liabilities included on the Closing
Balance Sheet including without limitation the cash overdraft, and (ii) the
intercompanies reflected in Section 2.23 of the Disclosure Schedule.
SECTION 4.9 Public Announcements. Unless otherwise required by
applicable law or stock exchange requirements, no party to this Agreement shall
issue any press releases or make any public announcements in respect of this
Agreement or the transactions contemplated hereby or otherwise communicate with
any news media without the prior written notification to and consent of the
other party, and the parties will cooperate as to the timing and contents of any
public announcement. Each party may make a public announcement of this
transaction in connection with the Closing and the parties shall cooperate with
each other in such regard.
SECTION 4.10 Governmental Filings. The Shareholder, the Company and the
Subsidiaries will cooperate in preparing and, if necessary, executing all
documents and governmental filings, if any, necessary to the transaction
contemplated hereby.
SECTION 4.11 Confidentiality Agreement. The terms and conditions of
that certain Confidentiality Agreement dated December 18, 1998, executed and
delivered by Charles Hubbs, John Sopcisak and Thomas Kennelly with respect to
the transactions contemplated by this Agreement are incorporated herein and
shall remain in full force and effect, and Purchaser agrees that such agreement
shall remain in effect and be binding upon Purchaser until the Closing as if
Purchaser had executed such agreement in the first instance.
SECTION 4.12 Benefit Plans. (a) The employee benefits maintained by the
Shareholder and which are currently in effect with respect to the employees of
the Company will be terminated as a result of the Closing, and Purchaser shall
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be required to implement and maintain such employee benefit plans, programs or
arrangements for the benefit of the employees of the Company as Purchaser deems
appropriate which shall include, without limitation, medical benefit plans. To
the extent that service is relevant for purposes of eligibility, vesting, or
benefit accrual under any employee benefit plan, program or arrangement
established or maintained by Purchaser for the benefit of the employees of the
Company, such plan, program or arrangement shall credit such employees for
service on or prior to the Closing Date with the Company or any of its
affiliates. All such employees shall be allowed to participate from and after
the Closing Date in the medical benefit and qualified retirement plans of
Purchaser or its affiliates as employees of Purchaser or its affiliates. If the
Closing Date falls within an annual period of coverage under any group health
plan, Purchaser agrees that such employees shall be given credit for covered
expenses paid by that employee under comparable employee benefit plans of the
Company during the applicable coverage period prior to the Closing Date towards
satisfaction of any deductible limitation and out-of-pocket maximum that may
apply under that group health plan maintained by Purchaser.
(b) The Purchaser or its affiliates shall be responsible for
any severance related obligations for any employees of the Company which may
arise by virtue of actions or circumstances arising after the Closing. If, prior
to December 31, 1999, the Shareholder receives documentation evidencing
out-of-pocket severance payments or unconditional obligations for such severance
payments paid or to be paid by the Company to employees whose employment with
the Company is terminated after the Closing, the Shareholder shall reimburse the
Company for one-half of such severance payments, up to $150,000, as an
adjustment to the Purchase Price. The terms of this Section shall survive the
Closing.
SECTION 4.13 Assumption of Contracts. Purchaser acknowledges that the
Company will remain obligated under (a) that certain Face Mask Supply Agreement
(the "Face Mask Supply Agreement") dated August 11, 1998 between the Company and
White Knight Industrial, Inc. ("WKI"), (b) that certain Supply and Tolling
Agreement (the "Douglas Agreement") dated as of August 11, 1998 between the
Company and WKI, (c) the Interim Office/Warehouse Space and Services Agreement
(the "Interim Agreement") dated August 11, 1998 among the Company, WKI and
certain of their respective affiliates, (d) the Letter Agreement dated August
11, 1998 between the Company and WKI concerning the use by the Company of the
Lectra system owned by WKI located in WKI's Childersburg, Alabama plant, and (e)
the Master Indemnity Agreement (the "Indemnity Agreement") dated August 11, 1998
between, among other parties thereto, the Company and Thantex Holdings, Inc..
Purchaser shall use commercially reasonable efforts to cause WKI to release the
Shareholder from its guarantee of the obligations of the Company under the Face
Mask Supply Agreement upon the occurrence of the Closing including, without
limitation, preparing and providing financial statements for review by WKI.
Purchaser may also negotiate directly with the other parties to such agreements
such adjustments as Purchaser may desire, but the Shareholder cannot assure that
the other parties will agree to any such changes.
SECTION 4.14 Contracting with Fortunique. Purchaser covenants and
agrees with Shareholder that Purchaser shall not directly or indirectly take any
action which would impede or make more expensive the ability of Shareholder to
contract directly with Fortunique Medical Products ("Fortunique"), a company
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owned or controlled by Charles Hubbs, from contracting with or for the benefit
of Shareholder for the conversion of OREX products in China. Shareholder
covenants and agrees with Purchaser that it shall not directly or indirectly
take any action which would impede or make more expensive the ability of
Purchaser or the Company to contract directly with Fortunique. Commercial
transactions in the ordinary course of business shall not be deemed to impede or
make more expensive any such dealings. The terms and provisions of this Section
shall survive the Closing.
SECTION 4.15 Closing Logistics. In order to obtain a portion of the
Purchase Price, Purchaser intends to borrow certain funds. The lenders to
Purchaser have insisted that the loans be made directly to the Company.
Accordingly, provided that it results in no direct or indirect (including,
without limitation, indirect liability by virtue of the ownership of the shares
in the Company) liability (contingent or otherwise) to Shareholder, in
connection with the Closing, Shareholder will take, and will cause the Company
to take, such actions as Purchaser may reasonably request to accommodate such
financing and the transactions contemplated by this Agreement. In no event shall
Shareholder be required to incur any direct or indirect costs or expense in so
cooperating.
SECTION 4.16 Protected Information. All information (except as provided
in the last sentence of this section) regarding products of the Company (other
than products manufactured by the Company under an implicit license from
Shareholder or an affiliate of Shareholder) shall be removed from the computers,
files and other records of the Shareholder and its affiliates promptly after the
Closing Date (other than information regarding the type and amount of Company
products included in custom procedure trays or kits sold by MedSurg Industries,
Inc.) and the Company shall, upon request, provide to the Shareholder or its
affiliates information concerning prior sales of Company products to the extent
requested for internal administrative purposes of the Shareholder or its
affiliates such as confirming the amount of commission owed to sales persons.
This section shall not apply to information that is or becomes publicly
available, information that becomes legally available on a nonconfidential basis
from any third party, and information that has been independently acquired or
developed without any violation of this section.
ARTICLE V.
CONDITIONS TO CLOSING
SECTION 5.1 Conditions to Obligations of the Shareholder. The
obligation of the Shareholder to consummate the transactions contemplated by
this Agreement shall be subject to the fulfillment, at or prior to the Closing
(or on such other date as may be agreed by the parties), of each of the
following conditions (any one or more of which may be waived by the Shareholder
in its sole discretion).
(a) Representations and Warranties; Covenants Performed;
Officer's Certificate. The representations and warranties of Purchaser contained
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in this Agreement shall be true and correct in all material respects as of the
Closing Date with the same force and effect as if made as of the Closing Date,
and all the covenants contained in this Agreement to be complied with by
Purchaser on or before the Closing Date shall have been complied with in all
material respects and the Shareholder shall have received a certificate to such
effect signed by a duly authorized officer of Purchaser.
(b) Consent. The Shareholder shall have received the consent
of The Chase Manhattan Bank (and its other lenders pursuant to the senior credit
facility maintained by the Shareholder) to the consummation of this transaction,
and such consent shall remain in full force and effect as of the Closing.
(c) Closing Deliveries. Purchaser shall have delivered to the
Shareholder each of the following, together with any additional items which the
Shareholder may reasonably request to effect the transactions contemplated
herein:
(i) the Purchase Price.
(ii) certified copies of the resolutions of the Board of
Directors (or other appropriate management committee) and members
of the Purchaser authorizing the transactions contemplated herein
and the execution, delivery and performance of this Agreement and
each of the other documents contemplated hereby, together with
incumbency certificates with respect to the officers of Purchaser
executing documents or instruments on behalf of Purchaser.
(iii) the Supply Agreement between the Company as vendor,
and Shareholder as vendee, in the form of Exhibit A, attached
hereto and incorporated herein by reference (the "OREX Supply
Agreement"), as duly executed on behalf of the Company.
(iv) an opinion of counsel to Purchaser in customary form to
the effect that Purchaser is duly organized and validly existing,
has the authority to enter into and to perform its obligations
under this Agreement and that this Agreement has been duly
authorized, executed and delivered on behalf of Purchaser.
(v) A release from Thomas Kennelly of the Shareholder and
its affiliated companies from any obligations owing by the
Shareholder and its affiliated companies to Mr. Kennelly for any
and all matters other than the matters arising under and by
virtue of this Agreement in form reasonably satisfactory to the
Shareholder.
(d) [Intentionally omitted.]
(e) No Challenge. There shall not be pending or threatened any
action, proceeding or investigation before any court or administrative agency by
any governmental agency or any pending action by any other person, challenging
or seeking material damages in connection with the acquisition by Purchaser of
the Shares or the transactions contemplated herein.
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(f) Legality. No federal or state statute, rule, regulation,
executive order, decree or injunction shall have been enacted, entered,
promulgated or enforced by any court or governmental authority which is in
effect and has the effect of making the transactions contemplated herein illegal
or otherwise prohibiting the consummation of the transactions contemplated
herein.
(g) Thantex Conditions. The conditions set forth in Section
5.2(g) of the Disclosure Schedule shall have been satisfied.
SECTION 5.2 Conditions to Obligations of Purchaser. The obligations of
the Purchaser to consummate the transactions contemplated by this Agreement
shall be subject to the fulfillment, at or prior to the Closing (or on such
other date as may be agreed by the parties), of each of the following conditions
(any one or more of which may be waived by Purchaser in its sole discretion):
(a) Representations and Warranties; Covenants Performed;
Shareholder' Certificate. The representations and warranties of the Shareholder
contained in this Agreement shall be true and correct in all material respects
as of the Closing Date with the same force and effect as if made as of the
Closing Date, and all the covenants contained in this Agreement to be complied
with by Shareholder on or before the Closing Date shall have been complied with
in all material respects, and Purchaser shall have received a certificate to
such effect signed by a duly authorized officer of the Shareholder; provided,
however, that to the extent that the certificate delivered by the Shareholder
shall contain any material modifications to the representations and warranties
of the Shareholder as of the Closing Date and to the extent, if any, to which
the covenants of the Shareholder have not been complied with in all material
respects by the Shareholder, Purchaser's election, if any, to close hereunder
will constitute a waiver of Purchaser's right that such representations and
warranties be true and correct and such covenants be complied with as of the
Closing Date.
(b) Consents. The Shareholder shall have obtained and
delivered to Purchaser written consents to the transactions contemplated herein
designated at Section 5.2 of the Disclosure Schedule.
(c) Closing Deliveries. The Shareholder shall have delivered
or caused to be delivered to the Purchaser each of the following, together with
such additional items which the Purchaser may reasonably request to effect the
transactions contemplated herein:
(i) The Shareholder shall have executed and delivered
to Purchaser a certificate or certificates representing the Shares,
duly endorsed for transfer to Purchaser;
(ii) A copy of the corporate resolutions of the
directors of the Shareholder authorizing the transactions contemplated
herein and the execution, delivery and performance of this Agreement
and the other agreements contemplated hereby, together with an
incumbency certificate with respect to the officers of the Shareholder
executing documents or instruments on behalf of the Shareholder;
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(iii) The OREX Supply Agreement as duly executed by
Shareholder;
(iv) The complete minute book, stock book and
corporate seal of the Company;
(v) Certificates of corporate existence or other
similar certificates respecting the Company from the offices of the
secretary of state of Pennsylvania and, to the extent in the
Shareholder's possession, each jurisdiction set forth in Section 2.2 of
the Disclosure Schedule verifying that the Company is validly existing
in each such respective jurisdiction;
(vi) Written currently effective resignations by all
directors and officers of the Company and the Subsidiary in form
reasonably satisfactory to Purchaser;
(vii) A pay-off letter from The Chase Manhattan Bank
("Chase") providing for the release of all financing statements and
other liens on assets of the Company held by Chase in connection with
the Closing in form reasonably satisfactory to Purchaser;
(viii) Transfers in compliance with applicable law of
all stock of the Subsidiary not already owned of record by the Company
so that at and after the Closing Purchaser or its designee shall own
all of the stock of the Subsidiary; and
(ix) The opinion of counsel to the Shareholder in
customary form to the effect that Shareholder is duly organized and
validly existing, has the authority to enter into and perform its
obligations under this Agreement, and that this Agreement has been duly
authorized, executed and delivered on behalf of Shareholder.
(d) No Material Adverse Effect. From the date of this
Agreement to the Closing, there shall not have occurred any Material Adverse
Effect on the Company or its subsidiaries taken as a whole.
(e) No Challenge. There shall not be pending or threatened any
action, proceeding or investigation before any court or administrative agency by
any government agency or any pending action by any other person, challenging, or
seeking material damages in connection with the acquisition of the Shares by
Purchaser.
(f) Legality. No federal state statute, rule, regulation,
executive order, decree or injunction shall have been enacted, entered,
promulgated or enforced by any court or governmental authority which is in
effect and has the effect of making the transactions contemplated herein illegal
or otherwise prohibiting the consummation of the transactions contemplated
herein.
(g) Other Conditions. The conditions set forth in Section
5.2(g) of the Disclosure Schedule shall have been satisfied.
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(h) Financing. Purchaser shall have obtained financing
substantially in accordance with the terms of Purchaser's commitment for
financing dated __________, 1999, from the CIT Group. Purchaser shall exercise
its reasonable efforts in good faith to cause this condition to be satisfied as
soon as practicable and shall keep Shareholder fully advised of Purchaser's
status in causing this condition to be satisfied.
SECTION 5.3 Further Assurances. At any time on or after the Closing
Date, each party will take such actions and execute and deliver any further
assignments, conveyances and other assurances, documents and instruments of
transfer reasonably requested by another party to consummate the transaction and
realize the purposes contemplated hereby.
ARTICLE VI.
INDEMNIFICATION; LIABILITY
SECTION 6.1 Survival of Representations and Warranties. The
representations and warranties of the Shareholder and Purchaser contained in
this Agreement, as modified by any certificates delivered at Closing, shall
survive the Closing through and expire on the first anniversary of the Closing,
provided, however, that the representations set forth in Sections 2.3, 2.4(d)
and 2.19 shall not expire until the expiration of the applicable statute of
limitations. If reasonably detailed written notice of a claim has been given
prior to, but not after, the expiration of the applicable representations and
warranties by the party in whose favor such representations and warranties have
been made to the party that made such representations and warranties, then the
relevant representations and warranties shall survive as to such claims so
notified, until such claim has been finally resolved.
SECTION 6.2 Indemnification by Shareholder. Except as otherwise limited
by this Article VI, Purchaser, the Company and the Subsidiary, and their
respective officers, directors, employees, agents, successors and assigns, shall
be indemnified and held harmless by the Shareholder for any and all liabilities,
losses, damages, claims, costs and expenses, interest, awards, judgments and
penalties (including, without limitation, reasonable legal costs and expenses)
arising out of or resulting from (a) the breach of any representation or
warranty by the Shareholder contained herein or in any document delivered
hereunder at the Closing; or (b) the breach of any covenant or agreement by the
Shareholder contained herein; or (c) the matters set forth in Section 6.2 of the
Disclosure Schedule.
SECTION 6.3 Indemnification by Purchaser. Except as otherwise limited
by this Article VI, the Shareholder and its officers, directors, employees,
agents, successors and assigns, shall be indemnified and held harmless by
Purchaser and, from and after Closing, the Company for any and all liabilities,
losses, damages, claims, costs and expenses, interest, awards, judgments and
penalties (including, without limitation, reasonable legal costs and expenses)
arising out of or resulting from (a) the breach of any representation or
warranty by the Purchaser contained herein or in any document delivered
hereunder at the Closing; or (b) the breach of any covenant or agreement by the
Purchaser contained herein; or (c) from and after Closing, the breach by the
Company of any of its obligations under the Face Mask Supply Agreement, the
Douglas Agreement, the Interim Agreement or this Agreement.
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SECTION 6.4 General Indemnification Provisions.
(a) The indemnified party shall promptly notify the
indemnifying party of any claim, demand, action or proceeding for which
indemnification is sought under Section 6.2 or 6.3 of this Agreement and, if
such claim, demand, action or proceeding is a third party claim, demand, action
or proceeding, the indemnifying party will have the right, at its own expense,
to assume the defense thereof, using counsel reasonably acceptable to the
indemnified party. The indemnified party shall have the right to participate, at
its own expense, with respect to any such third party claim, demand, action or
proceeding. In connection with any such third party claim, demand, action or
proceeding, the parties thereto shall cooperate with each other and provide each
other with access to relevant books and records in their possession. No such
third party claim, demand, action or proceeding shall be settled without prior
written consent of the indemnified party, provided, however, that if a firm,
written offer is made to settle any such third party claim, demand, action or
proceeding and the indemnifying party proposes to accept such settlement and the
indemnified party refuses to consent to such settlement, then: (i) the
indemnifying party shall be excused from, and the indemnified party shall be
solely responsible for, all further defense of such third party claim, demand,
action or proceeding; and (ii) the maximum liability of the indemnifying party
relating to such third party claim, demand, action, or proceeding shall be the
amount of the proposed settlement if the amount thereafter recovered from the
indemnified party on such third party claim, demand, action or proceeding is
greater that the amount of the proposed settlement.
(b) Any indemnification payments to be made herein shall be
limited to the amount of any liability or damage that remains after deducting
therefrom any tax benefit to the indemnified party and any insurance proceeds
and any indemnity, contribution or other similar payment recoverable by the
indemnified party from any third person with respect thereto and adding thereto
any tax liability resulting from the indemnity payment. A tax benefit or
liability will be considered to be recognized by the indemnified party for
purposes of this section in the year in which the indemnity payment occurs, and
the amount of the tax benefit or liability shall be determined by assuming that
the indemnified party is in the maximum applicable statutory tax bracket after
any deductions or any allowances reportable with respect to a payment hereunder,
and assuming that the indemnification payment is treated for tax purposes as an
adjustment to the Purchase Price.
(c) Except as set forth in this Agreement, neither party is
making any representation, warranty, covenant or agreement with respect to the
matters contained herein. Each of the Shareholder and Purchaser hereby
acknowledges and agrees that its sole and exclusive remedy with respect to any
and all claims relating to the subject matter of this Agreement following the
Closing shall be pursuant to the indemnification provisions set forth in this
Article. Neither the Shareholder nor Purchaser shall have any liability to the
other under this Article VI for consequential damages. Each of the Shareholder
and Purchaser shall take, and shall cause to be taken, all reasonable steps to
mitigate any losses for which it might be entitled to indemnification under this
Article upon and after becoming aware of any event that could reasonably expect
to give rise to such losses.
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(d) Neither the Shareholder nor Purchaser shall be entitled to
indemnification under this Agreement with respect to the breach of any
representation or warranty, or the failure to comply with a covenant or
agreement to be performed prior to Closing if, on or prior to the Closing Date,
an executive officer of the Shareholder (if it is the indemnified party)
existing as of the Closing Date, or any of Charles Hubbs, John Sopcisak or
Thomas Kennelly (if Purchaser or its affiliates is the indemnified party) had
actual knowledge of the existence of such breach or failure. For purposes of
this subsection (d), the term "actual knowledge" shall mean the actual awareness
of a person and a person will be deemed to have knowledge of information
communicated by or on behalf of either party to this Agreement to the other
subsequent to April 1, 1998 in connection with the proposed sale of the Company
(but not necessarily due to incidental knowledge acquired by a person in a
capacity other than as a party prospectively involved in a transaction for the
sale of the Company).
(e) Any amount payable by the Shareholder to the Purchaser or
the Company under this Article VI may be set off against any amounts owing by
the Purchaser or the Company to the Shareholder or its affiliates. Any amount
payable by the Purchaser or the Company to the Shareholder under this Article VI
may be offset against any amounts owing by the Shareholder or its affiliates to
the Purchaser or the Company.
(f) In no event will Shareholder be liable under Section
6.2(a) of this Agreement for any matter based on facts or circumstances existing
prior to September 1, 1995 of which the executive officers of Shareholder do not
have actual knowledge at the date of Closing.
SECTION 6.5 Limits on Indemnification and Liability.
(a) Purchaser shall not be entitled to assert any right to
indemnification under this Agreement (other than claims identified in Section
6.2 of the Disclosure Schedule as not subject to this Section) unless the
aggregate amount of Purchaser's indemnified claims and liability exceed
$225,000, and then only to the extent the aggregate amount of Purchaser's
indemnified claims and liability exceed such amount.
(b) Notwithstanding anything to the contrary contained herein,
in no event will the Shareholder be liable for indemnification pursuant to this
Agreement (other than claims identified in Section 6.2 of the Disclosure
Schedule as not subject to this Section) for any amount exceeding $4,000,000.
(c) The limitations contained in this Section 6.5 shall not
apply to any breach of any of the Shareholder's representations and warranties
of which an executive officer of the Shareholder had actual knowledge as of the
date of Closing provided such breach was made with the intent to deceive
Purchaser amounting to fraud under common law.
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ARTICLE VII.
TERMINATION, AMENDMENT AND WAIVER
SECTION 7.1 Termination. This Agreement may be terminated at any time
prior to the Closing:
(a) by the mutual written consent of the Shareholder and Purchaser;
(b) by either the Shareholder or Purchaser if the Closing shall not have
occurred by June 25, 1999; or
(c) by Purchaser if there has been a material misrepresentation or material
breach of warranty or covenant on the part of the Shareholder, and by the
Shareholder if there has been a material misrepresentation or material breach of
warranty or covenant on the part of Purchaser.
SECTION 7.2 Waiver. At any time prior to the Closing, either the
Shareholder or the Purchaser may (a) extend the time for the performance of any
of the obligations or other acts of the other party hereto, (b) waive any
inaccuracies in the representations and warranties of the other party contained
herein or in any document delivered pursuant hereto or (c) waive compliance by
the other party with any of the agreements or conditions contained herein. Any
such extension or waiver shall be valid if set forth in an instrument in writing
signed by the party or parties to be bound thereby.
ARTICLE VIII.
GENERAL PROVISIONS
SECTION 8.1 Notices. All notices, request, demands or other
communications required or permitted hereunder shall be in writing and shall be
deemed to have been duly given upon delivery in person, upon receipt of a
facsimile confirmation when transmitted via facsimile (with all facsimile
transmissions to be confirmed by mail or next business day delivery), on the
following business day when consigned to a reputable overnight delivery service,
or upon the expiration of three days after the date of deposit, if mailed by
registered or certified air mail, postage prepaid, addressed to the parties at
the following addresses (or at such other address for a party as shall be
specified by a notice, provided that notice of change of address shall be
effective only upon receipt):
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If the Shareholder: Isolyser Company, Inc.
4320 International Boulevard
Norcross, Georgia 30093
Attn: Chief Financial Officer
Facsimile: (770) 806-8876
With a copy to: Arnall Golden & Gregory, LLP
2800 One Atlantic Center
1201 West Peachtree Street
Atlanta, Georgia 30309-3450
Attn: Stephen D. Fox
Facsimile: (404) 873-8529
If to Purchaser: Premier Products LLC
John M. Sopcisak
20 Sunset Summit
Asheville, NC 28804
Facsimile: (828) 252-1191
With a copy to: Kirkpatrick & Lockhart, LLP
1500 Oliver Building
Pittsburgh, Pennsylvania 15222-2312
Attn: John C. Rodney
Facsimile (412) 355-6501
SECTION 8.2 Headings. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
SECTION 8.3 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate n good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in an acceptable manner so
that transactions contemplated hereby are fulfilled to the greatest extent
possible.
SECTION 8.4 Entire Agreement. This Agreement constitutes the entire
agreement among the parties and supersedes all prior agreements and undertakings
with respect to the subject matter hereof.
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SECTION 8.5 Assignment. This Agreement may not be assigned; provided,
however, Purchaser shall have the right to assign all of the rights, assets or
agreements under this Agreement to any of its affiliates so long as the assignee
assumes all obligations of Purchaser hereunder and Purchaser guarantees such
affiliates' obligations hereunder. For purposes of this Agreement, the term
"affiliates" shall mean with respect to Purchaser a person that directly, or
indirectly through one or more intermediaries, controls or is controlled by, or
is under common control with Purchaser. This Agreement, however, shall be
binding upon and shall inure to the benefit of the successors and permitted
assigns of Purchaser and the Shareholder.
SECTION 8.6. No Third-Party Beneficiaries. This Agreement is for the
sole benefit of the parties hereto and nothing herein expressed or implied shall
give or be construed to give to any person or entity, other than the parties
hereto and their permitted assigns and the Company and the other parties
referenced in Article VI, any legal or equitable rights hereunder.
SECTION 8.7 Amendment. This Agreement may not be amended or modified
except by an instrument in writing signed by the parties hereto.
SECTION 8.8 Counterparts. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
SECTION 8.9 Certain Expenses. Subject to the provisions of Article VI
hereof, and Section 4.8 hereof, all legal and other costs and expenses incurred
in connection with this Agreement and the transactions contemplated hereby shall
be paid by the party incurring such expenses.
SECTION 8.10 Binding Agreement. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective heirs,
executors, administrators, successors and permitted assigns.
SECTION 8.11 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED UNDER AND IN ACCORDANCE WITH THE LAWS OF THE STATE OF GEORGIA WITHOUT
REGARD TO CONFLICTS OF LAWS PRINCIPLES.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first written above.
"PURCHASER"
PREMIER PRODUCTS LLC
By: /s/ JOHN SOPCISAK
--------------------------
Its: President
"SHAREHOLDER"
ISOLYSER COMPANY, INC.
By: /s/ MIGIRDIC NALBANTYAN
---------------------------
Its: President and CEO
790603v7
