Exhibit 2.2
ASSET PURCHASE AGREEMENT
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BY AND BETWEEN
MENASHA CORPORATION
AND
LIBBEY INC.
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DATED AS OF DECEMBER 2, 2002
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TABLE OF CONTENTS
Page
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1. DEFINITIONS..............................................................................................1
2. PURCHASE AND ASSIGNMENT OF ASSETS OF SELLER..............................................................9
2.1 Assets Purchased................................................................................9
2.2 Seller Retained Assets.........................................................................11
2.3 Purchase Price.................................................................................12
2.4 Post-Closing Adjustment........................................................................13
3. ASSUMPTION OF LIABILITIES...............................................................................15
3.1 Assumed Liabilities............................................................................15
3.2 Excluded Seller Liabilities....................................................................16
4. REPRESENTATIONS AND WARRANTIES WITH RESPECT TO SELLER AND THE PURCHASED ASSETS..........................16
4.1 Corporate Matters Regarding Seller.............................................................16
4.2 Governmental Consents..........................................................................17
4.3 Financial......................................................................................17
4.4 Absence of Changes.............................................................................17
4.5 Powers of Attorney.............................................................................18
4.6 Litigation.....................................................................................18
4.7 Licenses; Compliance With Laws and Regulations.................................................18
4.8 Title to and Condition of Purchased Assets; Sufficiency of Assets..............................19
4.9 Taxes..........................................................................................19
4.10 Contracts......................................................................................20
4.11 Intellectual Property..........................................................................22
4.12 Environmental Matters..........................................................................23
4.13 Transactions with Affiliates...................................................................24
4.14 Benefit Plans..................................................................................24
4.15 Real Property..................................................................................24
4.16 Insurance......................................................................................25
4.17 Intercompany Transaction and 2001 Seller Restructuring.........................................26
4.18 Inventories....................................................................................26
4.19 Accounts Receivable............................................................................26
4.20 Suppliers......................................................................................27
4.21 Customers......................................................................................27
4.22 Warranties.....................................................................................27
4.23 Rebates........................................................................................27
4.24 Inter-company Contracts and Services...........................................................27
4.25 Employees......................................................................................27
4.26 Brokers, Finders...............................................................................28
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TABLE OF CONTENTS
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(CONTINUED)
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4.27 NO OTHER REPRESENTATION OR WARRANTY............................................................28
5. REPRESENTATIONS AND WARRANTIES WITH RESPECT TO PURCHASER................................................28
5.1 Corporate Matters Regarding Purchaser..........................................................28
5.2 Governmental Consents..........................................................................29
5.3 Litigation.....................................................................................29
5.4 Brokers; Finders...............................................................................29
6. CLOSING.................................................................................................29
6.1 Closing Date...................................................................................29
6.2 Closing Deliveries.............................................................................29
7. COVENANTS OF SELLER.....................................................................................31
7.1 Liability for Transfer Taxes...................................................................31
7.2 Further Acts...................................................................................31
7.3 Resin Supplies.................................................................................32
7.4 Books and Records..............................................................................34
7.5 Corporate Name.................................................................................34
7.6 Use of Business Name...........................................................................34
7.7 Covenant Not to Compete; Non-Solicitation......................................................34
7.8 Assistance for Certain Consents................................................................36
8. COVENANTS OF PURCHASER..................................................................................37
8.1 Further Acts...................................................................................37
8.2 Product Matters................................................................................37
9. MUTUAL COVENANTS AND WARRANTIES.........................................................................37
9.1 Publicity......................................................................................37
9.2 Further Actions Regarding Transferred Assets...................................................37
9.3 Access to Information..........................................................................38
9.4 Employees......................................................................................38
10. SURVIVAL; INDEMNIFICATION...............................................................................40
10.1 Survival.......................................................................................40
10.2 Indemnification by Purchaser...................................................................42
10.3 Indemnification by Seller......................................................................42
10.4 Indemnification Process........................................................................44
10.5 Limitation on Indemnification..................................................................48
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TABLE OF CONTENTS
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(CONTINUED)
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10.6 Exclusive Remedy...............................................................................48
11. GOVERNING LAW...........................................................................................48
12. NOTICES.................................................................................................49
13. EXHIBITS................................................................................................49
14. ENTIRE AGREEMENT; BINDING EFFECT........................................................................49
15. HEADINGS................................................................................................50
16. EXPENSES................................................................................................50
17. AMENDMENT...............................................................................................50
18. WAIVER..................................................................................................50
19. TIME OF THE ESSENCE.....................................................................................50
20. ASSIGNMENT..............................................................................................50
21. SPECIFIC PERFORMANCE....................................................................................50
22. NO THIRD PARTY BENEFICIARY..............................................................................51
23. SEVERABILITY............................................................................................51
24. COUNTERPARTS; FACSIMILE SIGNATURE.......................................................................51
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ASSET PURCHASE AGREEMENT
THIS AGREEMENT is made as of December 2, 2002, by and between MENASHA
CORPORATION, a Wisconsin corporation (the "Seller") and LIBBEY INC., a Delaware
corporation (the "Purchaser").
RECITALS
WHEREAS, prior to the Closing Date, Traex Company, a Wisconsin
corporation and wholly-owned subsidiary of Seller ("Traex"), which operated the
Acquired Business (as herein defined) and owned all of the Purchased Assets (as
herein defined) was dissolved and liquidated into Seller, such that Seller is
the owner of all of the Purchased Assets and the operator of the Acquired
Business as of the Closing Date through the Division (the "Intercompany
Transaction");
WHEREAS, purchaser desires to purchase the Acquired Business with the
intent, and for the purpose, of expanding the products manufactured, sold,
marketed and distributed by the Acquired Business to include stemware,
beverageware and dinnerware items; and
WHEREAS, Purchaser desires to purchase, and Seller desires to sell,
substantially all of the assets of the Acquired Business as a going concern upon
the terms and subject to the conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and of the mutual
promises herein made, and in consideration of the representations, warranties
and covenants herein contained, the parties hereto hereby agree as follows:
1. DEFINITIONS. For purposes of this Agreement, the following
definitions shall apply:
Accounting Expenses. "Accounting Expenses" shall have the
meaning specified in Section 2.4(f) of this Agreement.
Affiliate. "Affiliate" shall mean, with respect to any
specified Person, any other Person that directly, or indirectly through one or
more intermediaries, controls, is controlled by, or is under common control
with, such specified Person.
Acquired Business. "Acquired Business" shall mean the business
of designing, developing, manufacturing, distributing, servicing, selling and
marketing plastic and metal foodservice products and supplies operated (i) by
Traex prior to the closing of the Intercompany Transactions and (ii) by the
Division prior to the Closing Date.
Acquired Business Products. "Acquired Business Products" shall
have the meaning specified in Section 7.7(d) of this Agreement.
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Acquired Business Software. "Acquired Business Software" shall
have the meaning specified in Section 4.11(d) of this Agreement.
Agreement. "Agreement" shall mean this Asset Purchase
Agreement.
Annual Financial Statements. "Annual Financial Statements"
shall mean the annual balance sheets, statements of income and cash flows for
the Acquired Business as and for the fiscal years ended December 31, 2001 and
2000 heretofore delivered to Purchaser.
Arbitrating Accountant. "Arbitrating Accountant" shall have
the meaning specified in Section 2.4(c) of this Agreement.
Arbitrating Appraiser. "Arbitrating Appraiser" shall have the
meaning specified in Section 2.3(c).
Assignment Documents. "Assignment Documents" shall have the
meaning set forth in Section 6.2(a) of this Agreement.
Assignment and Assumption Agreement. "Assignment and
Assumption Agreement" shall mean the assignment and assumption agreement in the
form of Exhibit A attached hereto.
Assumed Liabilities. "Assumed Liabilities" shall mean the
liabilities of Seller assumed by Purchaser pursuant to Section 3.1 of this
Agreement.
Benefit Plans. "Benefit Plans" shall mean any pension plan,
profit sharing plan, bonus plan, incentive compensation plan, stock ownership
plan, stock purchase plan, stock option plan, stock appreciation plan, phantom
stock, employee benefit plan, employee benefit policy, retirement plan, fringe
benefit program, employee insurance plan, severance plan, disability plan,
health care plan, sick leave plan, death benefit plan or any other plan or
program to provide retirement income, fringe benefits or other benefits to
former or current employees of the Seller who work or worked for the Division or
Traex.
Books and Records. "Books and Records" shall mean books,
records, documents, lists, manuals, plans, files, data and other materials (in
any form or medium) relating primarily to the Acquired Business, including,
without limitation, the following to the extent primarily related to the
Acquired Business, all records and materials maintained at the headquarters of
Seller or Traex , advertising matter, drawings, catalogues, price lists,
correspondence, mailing lists, lists of customers, distribution lists, price
lists, photographs, production data, sales and promotional materials and
records, purchasing materials and records, customer and supplier lists,
personnel records, manufacturing and quality control records and procedures,
blueprints, research and development files and media materials and plates,
accounting records, sales order files, copies of property Tax Returns related to
the Purchased Assets filed after December 31, 1999 and copies of Tax Returns
filed by Traex.
Business Employees. "Business Employees" shall mean active
employees of the Seller who perform services for the Acquired Business.
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Claim. "Claim" shall have the meaning specified in Section
10.4(a) of this Agreement.
Claim Notice. "Claim Notice" shall have the meaning specified
in Section 10.4(a) of this Agreement.
Closing. "Closing" shall mean the conference to be held on the
Closing Date at the offices of ▇▇▇▇▇▇▇ & ▇▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, at which the transactions contemplated by this Agreement
shall be consummated, provided the Closing shall be deemed to be effective at
9:00 p.m. on December 1, 2002.
Closing Balance Sheet. "Closing Balance Sheet" shall have the
meaning specified in Section 2.4(a)(i) of this Agreement.
Closing Date. "Closing Date" shall mean the date specified in
Section 6.1 of this Agreement.
Closing Working Capital. "Closing Working Capital" shall have
the meaning set forth in Section 2.4(a)(ii) of this Agreement.
Code. "Code" shall mean the Internal Revenue Code of 1986, as
amended, and the regulations issued thereunder.
Competing Business. "Competing Business" shall have the
meaning set forth in Section 7.7(d) of this Agreement.
Consent. "Consent" shall mean any consent, approval,
authorization, waiver, permit, grant, franchise, concession, agreement, license,
exemption or order of, registration, certificate, declaration or filing with, or
report or notice to, any Person, including but not limited to any Governmental
Authority.
Contract. "Contract" shall mean all sales contracts and the
other contracts, franchise agreements, covenants not to compete, purchase and
sales orders, licenses, leases and other agreements and contracts.
Damages. "Damages" shall have the meaning specified in Section
10.4(g) of this Agreement.
Division. "Division" shall mean the Traex Division of the
Seller which operates the Acquired Business.
Direct Claim. "Direct Claim" shall have the meaning specified
in Section 10.4(a) of this Agreement.
Disclosure Schedule. "Disclosure Schedule" shall have the
meaning set forth in Section 4 of this Agreement.
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Encumbrances. "Encumbrances" shall mean any security interest,
pledge, mortgage, lien, charge, easement, restrictive covenant, development
agreement, zoning by-law or restriction, right-of-way (from or onto the real
property and/or improvements thereon), building set-back requirements,
encroachment, building or use restriction, other encumbrance or title defect of
any kind, option to purchase, right of first refusal, right of first offer,
adverse claim, or other right of occupation.
Environmental Claims. "Environmental Claims" shall mean all
accusations, allegations, notices of violation, liens, claims, demands, suits,
or causes of action for any damage, including, without limitation, personal
injury or property damage, arising out of or related to Environmental
Liabilities or Materials of Environmental Concern or pursuant to applicable
Environmental Laws.
Environmental Liabilities "Environmental Liabilities" shall
mean any losses, damages, costs, expenses, liabilities, obligations and claims
of any kind arising out of, based on, resulting from or relating to: (a) acts,
omissions occurrences and circumstances forming the basis for any violation or
alleged violation of Environmental Laws related to the Facility or the Acquired
Business; (b) the presence, release, spill, emission, leaking, injection,
deposit, disposal, dispersal, leaching or migration into the ambient air,
surface water, ground water, land surface or subsurface strata of any Materials
of Environmental Concern related to the Facility or the Acquired Business,
including the off-site disposal of any Materials of Environmental Concern by the
Acquired Business, Traex or Seller to the extent it relates to the Acquired
Business; or (c) the presence of any Materials of Environmental Concern at the
Facility which pose a threat to human health or the environment, related to the
Facility or the Acquired Business.
Environmental Laws. "Environmental Laws" shall mean all Laws
relating to pollution or protection of human health or the environment
(including, without limitation, ambient air, surface water, ground water, land
surface or subsurface strata), including, without limitation, Laws relating to
emissions, discharges, releases or threatened releases of Materials of
Environmental Concern, or to the generation, manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Materials of Environmental Concern.
ERISA. "ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended, and the regulations issued thereunder.
Excluded Seller Liabilities. "Excluded Seller Liabilities"
shall have the meaning specified in Section 3.2 of this Agreement.
Existing Plans. "Existing Plans" shall mean the Benefit Plans
listed and described on Schedule 1.1 attached hereto which provide benefits to
current Business Employees.
Existing Resin Contacts. "Existing Resin Contracts" shall mean
(i) the Product Sales Agreement between Huntsman Polymers Corporation, Poly Hi
Solidur, Inc., Orbis Corporation and Traex , a Menasha division, dated January
1, 1999 and amended December 29, 2000 and February 14, 2002 and (ii) the
Contract for Sale of Polymers between Orbis Corporation and its subsidiaries,
Poly Hi Solidur, Inc, Traex, a division of Menasha Corporation and Equistar
Chemicals, LP, Polymers division dated March 4, 2002.
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Facility. "Facility" shall mean the real estate described on
Schedule 1.3 attached hereto, together with all buildings, structures,
improvements, building systems, equipment and fixtures thereon and all of
Seller's rights pertaining thereto.
Financial Statements. "Financial Statements" shall mean the
Annual Financial Statements and Interim Financial Statements, collectively.
GAAP. "GAAP" shall mean United States generally accepted
accounting principles and practices as in effect from time to time.
Governmental Authority. "Governmental Authority" shall mean
any federal, state, or local or any foreign government, governmental, regulatory
or administrative authority, agency or commission or any court, tribunal or
judicial body.
Indemnified Party. "Indemnified Party" shall have the meaning
specified in Section 10.4 of this Agreement.
Indemnifying Party. "Indemnifying Party" shall have the
meaning specified in Section 10.4 of this Agreement.
Intellectual Property. "Intellectual Property" shall mean all
patents, registered and unregistered copyrights, registered and unregistered
trademarks and service marks, trade names, all applications or registrations for
any of the foregoing, and trade names, brandmarks, brand names, trade dress,
logos, Internet domain names, trade secrets, confidential materials, know-how,
show-how, data, data paths or databases, software applications (including, but
not limited to, source code), HTML pages, file structures, artwork, drawings,
illustrations, photographs, videos, slogans and related information and
documentation and any similar type of proprietary intellectual property or
technology right.
Intercompany Transaction. "Intercompany Transaction" shall
have the meaning specified in the Recitals of this Agreement.
Intercompany Transaction Documents. "Intercompany Transaction
Documents" shall have the meaning specified in Section 4.17(b) of this
Agreement.
Interim Financial Statements. "Interim Financial Statements"
shall mean the unaudited, interim monthly financial statements (balance sheets,
statements of income and cash flows) of the Division as and for the nine-month
period beginning January 1, 2002 through September 30, 2002 heretofore delivered
to Purchaser.
Knowledge of Seller. "Knowledge of Seller" and terms of
similar import shall mean the actual knowledge of ▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇.
Law. "Law" shall mean any federal, state, local or other
governmental law, rule, code, ordinance or regulation of any kind, and the rules
and regulations promulgated thereunder.
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Licensed Software. "Licensed Software" shall mean all computer
software that is used, or held for use, by Seller or Traex in the operation of
the Acquired Business, excluding any software constituting part of the Seller
Retained Assets or software which is the subject of the Transition Services
Agreement.
Material Adverse Change. "Material Adverse Change" shall mean
any change, event or occurrence which has, or to Knowledge of Seller could
reasonably be expected to have, a material adverse effect upon the assets,
liabilities, business, operations, results of operation, or financial condition
of the Acquired Business.
Material Contracts. "Material Contracts" shall have the
meaning set forth in Section 4.10(a) of this Agreement.
Materials of Environmental Concern. "Materials of
Environmental Concern" shall mean any substance or material that is on the
Closing Date prohibited, regulated or defined as hazardous by any governmental
authority under any Environmental Law including, without limitation, chemicals,
pollutants, contaminants, wastes, toxic substances, hazardous substances,
petroleum, petroleum derivatives or other hydrocarbons, petroleum products,
asbestos, PCBs, VOCs, SVOCs or dangerous substances, all as defined in or
pursuant to any Environmental Law.
Negative Closing Date Adjustment Amount. "Negative Closing
Date Adjustment Amount" shall have the meaning specified in Section 2.4(i) of
this Agreement.
New 401(k) Plan. "New 401(k) Plan" shall have the meaning
specified in Section 9.4(e) of this Agreement.
New Resin Contracts. "New Resin Contracts" shall have the
meaning specified in Section 7.3(e) of this Agreement.
Non-Compete Period. "Non-Compete Period" shall have the
meaning specified in Section 7.7(a) of this Agreement.
Owned Software. "Owned Software" shall have the meaning
specified in Section 4.11(d) of this Agreement.
Packaging. "Packaging" shall have the meaning specified in
Section 7.5 of this Agreement.
Participate; Participating. "Participate," "Participating"
shall have the meaning specified in Section 7.7(d) of this Agreement.
Pension Plan. "Pension Plan" shall have the meaning specified
in Section 4.14(c) of this Agreement.
Permitted Encumbrances. "Permitted Encumbrances" shall mean
the encumbrances against the Facility listed on Schedule 1.2 attached hereto.
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Person. "Person" shall mean a natural person, corporation,
trust, partnership, limited liability company, governmental entity, agency or
branch or department thereof, or any other legal entity.
Positive Closing Date Adjustment Amount. "Positive Closing
Date Adjustment Amount" shall have the meaning specified in Section 2.4(i) of
this Agreement.
Property Taxes. "Property Taxes" shall have the meaning set
forth in Section 2.3(d).
Prorated Property Taxes. "Prorated Property Taxes" shall have
the meaning set forth in Section 2.3(d).
Purchase Price. "Purchase Price" shall mean the total price
paid by Purchaser for the Purchased Assets as set forth in Section 2.3(a).
Purchase Price Allocation. "Purchase Price Allocation" shall
have the meaning set forth in Section 2.3(c) of this Agreement.
Purchased Assets. "Purchased Assets" shall have the meaning
set forth in Section 2.1 of this Agreement.
Purchaser. "Purchaser" shall have the meaning set forth in the
introductory paragraph.
Purchaser Indemnified Parties. "Purchaser Indemnified Parties"
shall have the meaning specified in Section 10.3 of this Agreement.
Real Property Laws. "Real Property Laws" shall have the
meaning specified in Section 4.15(c) of this Agreement.
Rebate Obligations. "Rebate Obligations" shall the meaning set
forth in Section 4.23 of this Agreement.
Reference Balance Sheet. "Reference Balance Sheet" shall mean
the balance sheet for the Division dated June 30, 2002 and attached hereto as
Schedule 1.4.
Reimbursement. "Reimbursement" shall have the meaning
specified in Section 10.4(d) of this Agreement.
Required Consents. "Required Consents" shall have the meaning
specified in Section 6.2(a)(iii) of this Agreement.
Required Software Agreements. "Required Software Agreements"
shall mean (i) Microsoft Select Agreement (No. 01S53822) between MSLI, GP, a
wholly-owned Microsoft company, and Menasha Corporation dated September 25,
2001, (ii) Microsoft Business Agreement No. U3162870 between MSLI, GP, a
wholly-owned Microsoft company, and Menasha Corporation dated May 17, 2000, and
related Microsoft Volume License, (iii)
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Microsoft Select Agreement No. 01S50170 between Menasha Corporation and MSLI,
GP, a wholly owned Microsoft Company, dated June 19, 2000 and related Microsoft
Volume Licenses, (iv) Microsoft Agreement No. 12178175, related Purchase Order
No. 8070295 and Open License Confirmation with Menasha Corporation, (v) Annual
Maintenance Agreement between Kronos Inc. and Traex/Menasha Corporation dated
▇▇▇▇▇ ▇, ▇▇▇▇, (▇▇) Microsoft Purchase Order 161961 and related Business
Agreement with Menasha Corporation, (vii) Microsoft Purchase Order No. 171001
and related Business Agreement with Menasha Corporation; and (viii) Dell DMLP
Service Contract and related Master Agreement with Menasha Corporation effective
May 25, 2001.
Seller. "Seller" shall have the meaning set forth in the
introduction paragraph.
Seller IP. "Seller IP" shall have the meaning set forth in
Section 7.5 of this Agreement.
Seller Indemnified Parties. "Seller Indemnified Parties" shall
have the meaning specified in Section 10.2 of this Agreement.
Seller Retained Assets. "Seller Retained Assets" shall have
the meaning specified in Section 2.2 of this Agreement.
Seller's 401(k) Plan. "Seller's 401(k) Plan" shall have the
meaning specified in Section 9.4(e) of this Agreement.
Subject Contracts. "Subject Contracts" mean (i) all Contracts
to which Traex is a party, (ii) all Contracts to which Seller, Traex or any of
their Affiliates is a party that relate substantially to the Acquired Business
and (iii) all Contracts by which any of the Purchased Assets are bound
(excluding any contracts or agreements which are Seller Retained Assets),
including, without limitation, all Contracts set forth on Schedule 1.5 hereof.
Statement of Objection. "Statement of Objection" shall have
the meaning specified in Section 2.4(c) of this Agreement.
Tax Benefit. "Tax Benefit" shall have the meaning specified in
Section 10.4(d) of this Agreement.
Taxes. "Taxes" shall mean all taxes of any kind, levies or
other like assessments, customs, duties, imposts or charges, including without
limitation, income, gross receipts, ad valorem, value-added, excise, real or
personal property, asset, sales, use, license, payroll, transaction, capital,
net worth, franchise (if not based on income), estimated taxes, withholding,
employment, social security, workers' compensation, utility, severance,
production, unemployment compensation, occupation, premium, windfall profits,
transfer and gains taxes or other governmental taxes imposed or payable to the
United States, or any state, county, local or foreign government or subdivision
or agency thereof, and in each instance such term shall include any interest,
penalties or additions to tax attributable to any such Tax, and such term shall
include any Tax liability that arises by reason of Seller or Traex being liable
for any Tax of any other Person pursuant to Treasury Regulation ss.1.1502-6 or
any analogous state or local Tax provision, or as a successor, transferee, by
contract or otherwise.
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Tax Returns. "Tax Returns" shall mean all returns,
declarations, reports, claims for refund and information returns and statements
of any Person required to be filed or sent by or with respect to, or in respect
of, any Taxes, including any schedule or attachment thereto and any amendment
thereof.
Third Party Claim. "Third Party Claim" shall have the meaning
specified in Section 10.4(a) of this Agreement.
Total Purchase Price. "Total Purchase Price" shall have the
meaning specified in Section 2.3(a) of this Agreement.
Traex. "Traex" shall mean Traex Company, a Wisconsin
corporation, which was a wholly owned subsidiary of Seller until being dissolved
pursuant to the Intercompany Transaction prior to the execution of this
Agreement.
Transfer Taxes. "Transfer Taxes" shall have the meaning
specified in Section 7.1 of this Agreement.
Transition Agreement. "Transition Agreement" shall mean the
Transition Services Agreement in substantially the form of Exhibit B attached
hereto.
2001 Seller Restructuring. "2001 Seller Restructuring" shall
have the meaning specified in Section 6.2(a)(iii) of this Agreement.
Welfare Plan. "Welfare Plan" shall have the meaning specified
in Section 4.14(e) of this Agreement.
Working Capital. "Working Capital" shall have the meaning set
forth in Schedule 2.4(b).
Working Capital Methodologies. "Working Capital Methodologies"
shall have the meaning specified in Section 2.4(b) of this Agreement.
2. PURCHASE AND ASSIGNMENT OF ASSETS OF SELLER.
2.1 Assets Purchased. Subject to and upon the terms and conditions
set forth in this Agreement, and except as provided in Section 2.2 hereof,
Seller hereby sells, transfers, assigns, conveys and delivers to Purchaser free
and clear of all Encumbrances, other than the Permitted Encumbrances, and
Purchaser accepts and acquires from Seller, all right, title and interest of the
Seller and its Affiliates in the following properties, assets, and rights of
every nature, kind and description, tangible and intangible (including
goodwill), whether real, personal or mixed, whether accrued, contingent or
otherwise (collectively, the "Purchased Assets"):
(a) all tangible personal property located at the Facility or
primarily related to or primarily used or held for use in connection with the
Acquired Business including, but not limited to, (i) fixed assets, machinery,
equipment, machine tools, tools, tooling, parts, dies, molds, furniture,
fixtures, furnishings, office equipment, computers, leasehold improvements and
vehicles and similar property (including, but not limited to, any of the
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foregoing purchased subject to any conditional sales or title retention
agreement in favor of any other Person), and (ii) all inventories of raw
materials, stores, work in process, and finished goods, component parts, parts
and supplies;
(b) all rights in and to products sold or leased by the
Acquired Business (including, but not limited to, products hereafter returned or
repossessed and unpaid sellers' rights of rescission, replevin, reclamation and
rights to stoppage in transition);
(c) all rights under the Subject Contracts, including, without
limitation, any right to receive payment for products sold or services rendered
(including all rebate payments to the extent such rebate is received by Seller
or the Acquired Business in connection with raw material inventory being
purchased by Purchaser from Seller hereunder), and to receive goods and
services, pursuant to such Subject Contracts and to assert claims and take other
rightful actions with respect of breaches, defaults and other violations of such
Subject Contracts;
(d) all credits, prepaid expenses, deferred charges, advance
payments security deposits and prepaid items relating to, or held for use
primarily for, the Acquired Business;
(e) all accounts receivable and other rights to receive
payments from other Persons relating to the Acquired Business;
(f) the Facility and all licenses, permits, approvals and
qualifications relating to the Facility;
(g) the "Traex" name;
(h) all Intellectual Property, and all rights thereunder or in
respect thereof owned by Traex, and all Intellectual Property, and all rights
thereunder or in respect thereof, primarily related to or primarily used or held
for use in connection with the Acquired Business, including, but not limited to,
rights to ▇▇▇ for and remedies against past, present and future infringements
thereof, and rights of priority and protection of interests therein under any
Law and all tangible embodiments thereof, including, without limitation, the
Intellectual Property set forth on Schedule 2.1(h) hereof;
(i) all warranties, indemnities and similar rights with respect
to any of the Purchased Assets;
(j) all permits; rights to royalty payments; telephone, telex
and telephone facsimile numbers and other directory listings; and any claims,
action, lawsuit, judgment or causes of action against third parties relating to
the Purchased Assets or the Acquired Business;
(k) all Books and Records;
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(l) "Canned" or "shrinkwrap" software loaded onto any personal
property included in the Purchased Assets which can be transferred to Purchaser
under the applicable license; and
(m) all other properties, assets, and rights of every nature,
kind and description, tangible and intangible (including goodwill), whether
real, personal or mixed, whether accrued, contingent or otherwise primarily
related to or primarily used or held for use in connection with the Acquired
Business.
2.2 Seller Retained Assets. Seller shall retain and not sell and
deliver to Purchaser pursuant to Section 2.1, and Purchaser shall not purchase
from Seller, the following assets of Seller, even though such assets may be used
primarily in the operation of the Acquired Business (collectively, the "Seller
Retained Assets"):
(a) Cash and cash accounts as of the Closing Date;
(b) Seller's franchise to be a corporation, corporate minute
books, corporate seal and stock transfer books;
(c) Seller's cancelled checks, bank statements, tax returns and
accounting records (except for accounting records related primarily to the
Acquired Business);
(d) Any capital stock or equity interest in any other
corporation or legal entity;
(e) All deferred finance and acquisition costs;
(f) Rights under the contracts, leases, licenses and other
agreements listed on Schedule 2.2(f) attached hereto and all intercompany
contracts between the Acquired Business or Traex and Seller and/or its
Affiliates (other than purchase orders in the ordinary course of business and
any Subject Contract listed on Schedule 1.5 hereof);
(g) All insurance policies and rights to refunds thereunder;
(h) All related party accounts and notes receivable set forth
on Schedule 2.2(h);
(i) Any rights to refunds with respect to Taxes and any Tax
credits that relate to Taxes which are Excluded Seller Liabilities;
(j) Any assets of Traex Europe B.V. or Traex Asia-Pacific SDN,
BHD; and
(k) The assets listed on Schedule 2.2(k) attached hereto.
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2.3 Purchase Price.
(a) Amount. On the terms and subject to the conditions set
forth in this Agreement, the Purchaser agrees to pay or cause to be paid to
Seller an aggregate of USD $16,750,000 as adjusted pursuant to Section 2.4 and
Section 2.3(d) (the "Purchase Price") and to assume the Assumed Liabilities as
provided in Section 3.1 (the sum of the Purchase Price and the amount of the
Assumed Liabilities constituting the "Total Purchase Price").
(b) Payment. Subject to the closing adjustments provided for in
Section 2.3(d) and the post-closing adjustment provided for in Section 2.4
below, if any, the Purchase Price shall be payable as follows:
(i) At Closing, Purchaser shall assume the Assumed Liabilities
as provided in Section 3.1 below by executing the Assignment and Assumption
Agreement; and
(ii) At Closing, Purchaser shall pay the amount set forth in
Section 2.3(a) above by wire transfer of immediately available funds to a
"qualified intermediary" (as defined in the Code) designated by Seller.
(c) Allocation. Within 45 days after the Closing Date,
Purchaser shall prepare an allocation of the Total Purchase Price (as required
pursuant to Section 1060 of the Code) among the Purchased Assets and the
Covenant Not Compete set forth in Section 7.7 of this Agreement (the "Purchase
Price Allocation"). Purchaser and Seller (and their Affiliates) shall then
cooperate in good faith to revise and finalize the Purchase Price Allocation. If
Purchaser and Seller (and their Affiliates) are unable to agree on the Purchase
Price Allocation within ninety (90) days after the Closing Date, Purchaser and
Seller will select an appraisal firm (the "Arbitrating Appraiser") mutually
acceptable to them to resolve any remaining disagreements regarding the Purchase
Price Allocation. If Purchaser and Seller are unable to agree on the choice of
the Arbitrating Appraiser, they will select a nationally recognized appraisal
firm by lot (after excluding any such firm engaged by Purchaser, Seller or their
Affiliates) to be the Arbitrating Appraiser. The cost of any such Arbitrating
Appraiser shall be borne equally by Purchaser and Seller. The Purchaser and
Seller shall be bound by the Purchase Price Allocation determined by the
Arbitrating Appraiser. Purchaser and Seller (and their Affiliates) shall file
all Tax Returns consistently with the Purchase Price Allocation and shall not
voluntarily take any action inconsistent therewith upon examination of any Tax
Return, in any refund claim, in any litigation, or otherwise with respect to
such Tax Returns, unless required to pursuant to a determination (as defined in
Section 1313(a) of the Code or any similar foreign, state or local Tax
provision).
(d) Property Taxes. General real estate, personal property and
any other property taxes related to the Purchased Assets (the "Property Taxes")
shall be prorated as of the start of the Closing Date. In the event tax bills
for the Property Tax year in which the Closing occurs are not available at
Closing, such proration shall be based upon the tax bills for the Property Tax
year immediately preceding the Property Tax year in which the Closing occurs,
and Seller's proportionate share thereof shall be subtracted from the payment
specified in Section 2.3(b)(ii) above (the credit for such proportionate share
being the "Prorated Property Taxes").
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(e) Like-Kind Exchange. Seller desires to structure the
transaction so as to qualify as a tax-deferred exchange pursuant to Section 1031
of the Code. Purchaser shall reasonably assist and cooperate in such exchange,
at no additional cost or expense to Purchaser, and shall execute such documents
as are reasonably necessary in connection with such exchange (subject to
reasonable approval of Purchaser's counsel). Seller may assign its rights
hereunder to a "qualified intermediary" as defined in the Code. As part of such
exchange, Purchaser shall not be required to acquire or convey any property or
assets other than the consideration being paid herein.
2.4 Post-Closing Adjustment.
(a) As of and promptly after the Closing Date, Purchaser shall:
(i) prepare or cause to be prepared and delivered to Seller
an unaudited closing balance sheet for the Acquired Business setting forth the
net book value of the Purchased Assets and book amount of the Assumed
Liabilities as of the Closing Date (such balance sheet is referred to herein as
the "Closing Balance Sheet"); and
(ii) from the Closing Balance Sheet, determine the amount
of the Working Capital as of the Closing Date (the "Closing Working Capital").
(b) The Closing Balance Sheet shall be made and prepared in
accordance with GAAP and consistent with the accounting principles and practices
applied in preparation of the Reference Balance Sheet and the calculation of the
Closing Working Capital will be determined in accordance with the methodologies
set forth on Schedule 2.4(b) hereof (the "Working Capital Methodologies"). The
Closing Balance Sheet and the determination of the Closing Working Capital shall
be completed by Purchaser and delivered to Seller within 60 days after the
Closing Date.
(c) In the event Seller does not agree as to the Closing
Balance Sheet or to the amount of the Closing Working Capital determined by
Purchaser, then Seller shall deliver to Purchaser a written statement describing
with reasonable detail the basis for any such claim within 30 days after
receiving the Closing Balance Sheet (the "Statement of Objection"). Purchaser
and Seller will use reasonable efforts to resolve any such claims themselves. If
they do not obtain a final resolution within 120 days after the Closing Date,
however, Purchaser and Seller will select an accounting firm from among the
"Final Four" accounting firms mutually acceptable to them to resolve any
remaining such claims. If Purchaser and Seller are unable to agree on the choice
of an accounting firm, they will select a nationally recognized accounting firm
by lot (after excluding any such firm engaged by Purchaser, Seller or their
Affiliates) (the "Arbitrating Accountant").
(d) Within ten (10) calendar days after the engagement of the
Arbitrating Accountant, Seller and Purchaser shall provide the Arbitrating
Accountant with copies of (i) this Agreement, (ii) Closing Balance Sheet
prepared by Purchaser, (iii) the Purchaser's calculation of Closing Working
Capital, (iv) the Statement of Objections, (v) a list of items remaining in
dispute, and (vi) a written submission from each of Seller and Purchaser setting
forth their respective positions with respect to each item remaining in dispute.
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(e) The Arbitrating Accountant's engagement will be limited to
(i) reviewing the items placed in dispute pursuant to Section 2.4(d) above, (ii)
reviewing the written submissions provided by Seller and Purchaser pursuant to
Section 2.4(d) above, (iii) determining the appropriate and correct amounts for
any item in dispute in the Closing Working Capital in accordance with Section
2.4(a) and (b) hereof; provided, that in resolving a disputed item, the
Arbitrating Accountant may not assign a value of any particular item greater
than the greatest value of such item claimed by either party or less than the
smallest value for such item claimed by either party, in each case as presented
to the Arbitrating Accountant and (iv) determining the correct Closing Working
Capital amount. The Arbitrating Accountant shall make a written determination on
each disputed matter no later than 180 days after the Closing Date and such
determination will be conclusive and binding upon Purchaser and the Seller with
respect to that disputed matter. The proposed Closing Balance Sheet and the
Closing Working Capital will be revised as appropriate to reflect the resolution
of any such claims pursuant to this Section 2.4.
(f) The fees, charges and expenses of the Arbitrating
Accountant (collectively, the "Accounting Expenses") shall be borne by the
parties hereto in the following manner: (A) if the difference between the
Closing Working Capital determined by Purchaser and the Closing Working Capital
determined by the Arbitrating Accountant is greater than the difference between
the Closing Working Capital set forth in the Statement of Objections by Seller
and the Closing Working Capital determined by the Arbitrating Accountant, the
Purchaser will pay all of the Accounting Expenses; (B) if the difference between
Closing Working Capital determined by Purchaser and the Closing Working Capital
determined by the Arbitrating Accountant is less than the difference between the
Closing Working Capital set forth in the Statement of Objections by Seller and
the Closing Working Capital determined by the Arbitrating Accountant, then
Seller will pay all of the Accounting Expenses and (C) if the difference between
Closing Working Capital determined by Purchaser and the Closing Working Capital
determined by the Arbitrating Accountant is equal to the difference between the
Closing Working Capital set forth in the Statement of Objections by Seller and
the Closing Working Capital determined by the Arbitrating Accountant, then
Seller and Purchaser shall each pay one-half of the Accounting Expenses.
(g) Purchaser will make the work papers and back-up materials
necessary for the preparation of the Closing Balance Sheet, and any books,
records and financial staff of the Acquired Business, available to Seller and
its accountants and other representatives and to the Arbitrating Accountant
resolving any claim concerning the Closing Balance Sheet at reasonable times and
upon reasonable notice at any time during (i) the preparation of the Closing
Balance Sheet, (ii) the review by Seller of the Closing Balance Sheet, and (iii)
the resolution by Purchaser and Seller and/or the Arbitrating Accountant of any
objections thereto.
(h) Seller will make the work papers and back-up materials
necessary for the preparation of the Closing Balance Sheet available to
Purchaser and its accountants and other representatives and to the Arbitrating
Accountant resolving any claim concerning the Closing Balance Sheet at
reasonable times and upon reasonable notice at any time during (i) the
preparation of the Closing Balance Sheet and (ii) the resolution by Purchaser
and Seller and/or the Arbitrating Accountant of any objections thereto.
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(i) The Purchase Price will be adjusted if the Closing
Working Capital as finally determined under this Section 2.4 is greater than
$3,250,617 or less than $2,659,595. If the Closing Working Capital is greater
than $3,250,617, then the Purchase Price will be increased accordingly on a
dollar-for-dollar basis of the amount of such excess (the "Positive Closing Date
Adjustment Amount"). In such event, the Positive Closing Date Adjustment Amount
will be paid by Purchaser to Seller together with interest for the period from
the Closing Date to the date of payment at the rate of 2% per annum, by wire
transfer of immediately available funds to an account designated by Seller in
writing, no later than three business days after the completion of the Closing
Balance Sheet and the resolution of any disputes related thereto pursuant to
Section 2.4 of this Agreement. If the Closing Working Capital is less than
$2,659,595, then the Purchase Price will be decreased on a dollar-for-dollar
basis of the amount of such deficiency (the "Negative Closing Date Adjustment
Amount"). In such event, Seller will pay the Negative Closing Date Adjustment
Amount to Purchaser together with interest for the period from the Closing Date
to the date of payment at the rate of 2% per annum, by wire transfer of
immediately available funds to an account designated by Purchaser in writing, no
later than three business days after the completion of the Closing Balance Sheet
and the resolution of any disputes related thereto pursuant to Section 2.4 of
this Agreement.
3. ASSUMPTION OF LIABILITIES.
3.1 Assumed Liabilities. At Closing, as evidenced by the Assignment
and Assumption Agreement, Purchaser hereby assumes and is responsible for,
solely and exclusively:
(a) All accounts payable and accrued expenses of Seller related
primarily to the Acquired Business that have been incurred in the ordinary
course of business and are included in the determination of the Closing Working
Capital pursuant to Section 2.4 above;
(b) All (i) Contracts assigned pursuant to Section 2.1(c)
(except for liabilities, obligations or commitments resulting from (x) a breach,
violation (or acts, events or circumstances with which notice or passage of time
would constitute a breach or violation) of any such Contract on or prior to the
Closing Date by the Seller or Traex or any of their Affiliates, (y) to the
extent not accrued on the Closing Balance Sheet, nonpayment of any accrued
expenses, fees or amounts due under such Contracts by Seller, Traex or their
Affiliates, which amounts accrued or were otherwise due prior to the Closing and
(z) any stay bonuses or similar payments owed to any of the Business Employees);
(c) All Prorated Property Taxes specified in Sections 2.3(d)
above, provided Purchaser receives equivalent credits against the Purchase Price
under such Section;
(d) All product warranty claims of the Acquired Business
relating exclusively to products sold after Closing;
(e) Tuition reimbursement costs for the accounting course being
taken by ▇▇▇▇▇▇ ▇▇▇▇▇, an employee of the Acquired Business; and
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(f) All liabilities, commitments and obligations set forth on
the Closing Balance Sheet (collectively, the "Assumed Liabilities").
3.2 Excluded Seller Liabilities. Regardless of any disclosure of
Seller, Purchaser does not and shall not assume, incur or otherwise become
responsible for any liabilities, obligations and commitments of Seller or its
Affiliates, the Division, Traex or the Acquired Business, other than the Assumed
Liabilities, whether actual or contingent, matured or unmatured, liquidated or
unliquidated, or known or unknown, including, without limitation, all
liabilities, obligations and commitments (i) for Taxes of Seller or Traex,
including, without limitation, any Taxes arising from the transactions described
in this Agreement, but excluding the Prorated Property Taxes provided for in
Section 2.3(d), (ii) related to product liability claims involving or relating
to products sold by Seller, Traex or its Affiliates (including any of their
predecessors) or the Acquired Business prior to Closing, (iii) for any of
Seller's, Traex's or the Acquired Business's indebtedness for borrowed money,
including, without limitation, any inter-company indebtedness; (iv) associated
with or relating to any Seller Retained Asset, and (v) for any and all
Environmental Liabilities to the extent that such Environmental Liabilities
occur, arise or originate from acts or omissions on or prior to the Closing,
regardless of whether such Environmental Liabilities are discovered before or
after Closing (collectively, the "Excluded Seller Liabilities").
4. REPRESENTATIONS AND WARRANTIES WITH RESPECT TO SELLER AND
THE PURCHASED ASSETS. Seller represents and warrants to Purchaser that the
statements contained in this Section 4 are true and correct, except as set forth
in the disclosure schedule provided by the Seller to Purchaser on the date
hereof (the "Disclosure Schedule"):
4.1 Corporate Matters Regarding Seller.
(a) Organization; Power. Seller is a corporation duly organized
and validly existing under the Laws of the State of Wisconsin. Seller is duly
qualified or licensed, as the case may be, and in good standing as a foreign
corporation where the nature of the activities of the Division or the character
of the Purchased Assets require such qualification or licensing, except where
the failure to be so qualified or licensed would not result in a Material
Adverse Change. The jurisdictions in which Seller is so qualified or registered
are set forth in Section 4.1(a) of the Disclosure Schedule. Seller has, and
Traex had, all requisite corporate power and authority to own, lease and operate
the Purchased Assets and to carry on the Acquired Business as it is now being
conducted.
(b) Authorization; Validity. Seller has all requisite corporate
power and authority to enter into this Agreement and the other documents and
instruments to be executed and delivered by Seller pursuant hereto and to carry
out its obligations hereunder and thereunder. The execution and delivery by
Seller of this Agreement and the other documents and instruments to be executed
by Seller pursuant hereto and the consummation by Seller of the transactions
contemplated hereby and thereby have been duly authorized by all necessary
corporate action by Seller. No further corporate act or proceeding on the part
of Seller is necessary to authorize this Agreement or the other documents and
instruments to be executed and delivered by Seller pursuant hereto or the
consummation of the transactions contemplated
16
hereby and thereby. This Agreement and the related agreements, documents and
instruments referred to herein to which Seller is a party have been duly
executed and delivered by Seller and constitute the valid and legally binding
obligations of Seller, enforceable against it in accordance with their
respective terms.
(c) Compliance; Binding Effect. Except as set forth in Section
4.1(c) of the Disclosure Schedule, the execution and delivery by Seller of this
Agreement and the related agreements, documents and instruments referred to
herein to which Seller or any of its Affiliates is a party, the sale and
transfer of the Purchased Assets and the consummation of the transactions
contemplated hereby do not conflict with, contravene, result in a violation or
breach of or default under (with or without the giving of notice or the lapse of
time or both), give rise to a right or claim of termination, amendment,
modification, vesting, acceleration or cancellation of any right or obligation
or loss of any material benefit under, or result in the creation of any
Encumbrance upon any of the Purchased Assets (other than Permitted Encumbrances)
under (i) any Law, order, writ, injunction, judgment, arbitration award or
decree or other restriction of any kind or character to which either Seller, the
Acquired Business or the Purchased Assets are subject or bound, (ii) the
Articles of Incorporation or Bylaws of Seller or (iii) any Material Contract.
4.2 Governmental Consents. No Consent of any Governmental Authority
is required for the execution, delivery or performance of this Agreement by
Seller or the consummation by Seller of the transactions contemplated by this
Agreement, except those set forth in Section 4.2 of the Disclosure Schedule.
4.3 Financial. Seller previously has furnished to Purchaser true
and correct copies of the Financial Statements, all of which are attached hereto
as Section 4.3 of the Disclosure Schedule. Except as indicated in Section 4.3 of
the Disclosure Schedule, the Financial Statements are correct and complete in
all material respects, were prepared in accordance with GAAP consistently
applied through the applicable periods involved (except that the Interim
Financial Statements are subject to normal year-end adjustments and do not
include footnotes), and present fairly and accurately in all material respects
the financial condition of the Acquired Business as of the respective dates of
such Financial Statements and the results of operations for the respective
periods then ended. Except for the accounting for the contribution, transfer and
assumption of assets and liabilities pursuant to the 2001 Seller Restructuring
and the Intercompany Transaction, since December 31, 2000, there has been no
change in the accounting methods or practices of Seller or Traex relating to the
Acquired Business.
4.4 Absence of Changes. Except as set forth in Section 4.4 of the
Disclosure Schedule and except as disclosed in the Financial Statements, since
January 1, 2002, the Seller and Traex have conducted the Acquired Business in
the ordinary course of business, consistent with past practice and there has
been no (i) Material Adverse Change, (ii) material damage, destruction or loss
(whether or not covered by insurance) affecting the Purchased Assets or the
Acquired Business, (iii) increase or commitment to increase in either the rate
of compensation or the actual compensation payable or to become payable by
Seller or Traex to any of the employees of Seller or Traex employed in the
Acquired Business, except in the ordinary course of business, consistent with
past practice, (iv) termination of any previously existing contract, agreement
or license which, if not terminated, would have been required to be listed on
Schedule
17
4.10(a), other than terminations or expirations of such contracts, agreements or
licenses in the ordinary course of business, (v) cancellation or termination of
a relationship, or written notice to Traex or Seller of a future cancellation or
termination of a relationship, by any single supplier or customer who accounted
for more than 5% of the purchases or sales of the Acquired Business, determined
by reference to Seller's fiscal year ended December 31, 2001, (vi) made any
material changes in its sales practices or procedures other than in the ordinary
course of business, (vii) sell, lease, transfer, or assignment of any material
Purchased Asset, other than in the ordinary course of business, consistent with
past practice, (viii) accelerate, terminate, materially modify or cancel any
Contract material to the operation of the Business, other than in the ordinary
course of business, (ix) grant any license or sublicense of any rights under or
with respect to any Intellectual Property, (x) enter into any written employment
agreement or materially modify the terms of any such existing employment
agreement with any of the Business Employees, and (xi) delay or postpone the
payment of accounts payable and other liabilities outside the ordinary course of
business.
4.5 Powers of Attorney. Except as set forth in Section 4.5 of the
Disclosure Schedule, no employees or agents of Seller or its Affiliates hold
powers of attorney to act with respect to the Purchased Assets or the Acquired
Business.
4.6 Litigation. Except as set forth in Section 4.6 of the
Disclosure Schedule, (a) there is no suit, action, or legal, administrative,
arbitration or other proceeding pending or, to the Knowledge of Seller,
threatened against Traex, the Division or Seller relating to the Acquired
Business or the Purchased Assets; (b) there is no suit, action, or legal,
administrative, arbitration or other proceeding pending or, to the Knowledge of
Seller, threatened which questions the legality, validity or propriety of the
transactions contemplated by this Agreement; (c) there is no unfair labor
practice charge against Traex or the Seller related to the Acquired Business
pending or, to the Knowledge of Seller, threatened before the National Labor
Relations Board or any similar state agency; (d) there are no labor strikes
pending or, to the Knowledge of Seller, threatened against Traex or the Seller
relating to the Acquired Business and (e) to the Knowledge of Seller, there is
no governmental investigation pending or threatened against Traex, the Division,
or the Seller relating to the Acquired Business or which questions the legality,
validity or propriety of the transactions contemplated by this Agreement.
4.7 Licenses; Compliance With Laws and Regulations.
(a) Governmental Licenses; Notices. Except as set forth in
Section 4.7(a) of the Disclosure Schedule, Seller, with respect to the Acquired
Business, has all Consents of, with or to any Governmental Authority necessary
to conduct of the Acquired Business as conducted on the date hereof, excluding
such material Consents required under Environmental Laws which are covered by
Section 4.12, and such Consents are in full force and effect and listed in
Section 4.7(a) of the Disclosure Schedule. Except as set forth in Section 4.7(a)
of the Disclosure Schedule, Seller, with respect to the Acquired Business and
the Purchased Assets, is in compliance in all material respects with all such
Consents of, with or to any Governmental Authority.
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(b) Compliance With Laws and Regulations. Except as provided in
Section 4.7(b) of the Disclosure Schedule, to the Knowledge of Seller, Seller,
with respect to the Acquired Business, is currently and for a five (5) year
period prior to January 1, 2002 was, with respect to the Acquired Business, and
since January 1, 2002 Traex was, in compliance in all material respects with all
applicable Laws relating to the operation of the Acquired Business and the
Purchased Assets, including, without limitation, those relating to employment
matters, labor matters, employee safety and health, zoning, building, fire, and
plumbing, but excluding Environmental Laws which are covered by Section 4.12
hereof.
4.8 Title to and Condition of Purchased Assets; Sufficiency of
Assets.
(a) Title. Seller owns or has a leasehold or license interest
in, or right to all of the Purchased Assets. At Closing, Seller will convey the
Purchased Assets to Purchaser free and clear of all Encumbrances, except for the
Permitted Encumbrances. Subject to (i) the Permitted Encumbrances, (ii) any
Encumbrances created by the Purchaser, (iii) any Laws which may prohibit or
limit the Purchaser's ability to own the Purchased Assets and except as
contemplated by Section 7.8(a), Purchaser will at Closing own or have valid and
enforceable leasehold or license interest in, or other valid and enforceable
rights to all of the Purchased Assets. The Purchased Assets constitute all of
the assets, rights and privileges necessary to run or operate the Acquired
Business as presently conducted, except for Seller Retained Assets.
(b) Condition. Each material tangible Purchased Asset
(excluding the Seller Retained Assets and inventory,) material to the Acquired
Business as presently conducted or material to the operation or use the Facility
or any material portion thereof is free of material defects, is in satisfactory
operating condition and repair (subject to normal wear and tear), and is
adequate for the purposes for which it presently is used. No asset essential to
the operation of the Acquired Business has been diverted to other uses in
contemplation of the sale of the Acquired Business and the Purchased Assets.
4.9 Taxes.
(a) Except as set forth in Section 4.9(a) of the Disclosure
Schedule, with respect to the Acquired Business, Seller and Traex (i) have
timely filed with the appropriate Governmental Authority all Tax Returns
required to be filed by them as of the date of this Agreement for all periods
ended on or prior to the Closing Date, and (ii) have timely paid all Taxes
payable with respect to the Acquired Business. All Tax Returns filed by Seller
and Traex are correct and complete in all material respects.
(b) All Taxes that Seller and Traex are required by Law to
withhold or collect with respect to the Acquired Business for all periods ending
on or prior to the Closing Date have been withheld or collected, and have timely
paid all such Taxes due any Governmental Authority.
(c) Except as set forth in Section 4.9(c) of the Disclosure
Schedule, neither Seller nor Traex has received any written notice from a taxing
authority in a jurisdiction where either of them does not file Tax Returns such
that either of them may be subject to taxation by that jurisdiction by virtue of
the operation of the Acquired Business.
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(d) Neither Seller nor Traex has agreed to, and is not required
to, make any adjustments pursuant to Section 481(a) of the Code or any similar
provision of state or local Law by reason of a change in accounting method
initiated by Seller or Traex which relates to or affects the Acquired Business
and, to the Knowledge of Seller, neither the Internal Revenue Service nor any
other taxing authority has proposed any such adjustment or change in accounting
method, and neither Seller nor Traex has any application pending with any taxing
authority requesting permission for any such changes in accounting methods which
relates to or otherwise affects the Acquired Business.
(e) There are no liens for Taxes (other than for current Taxes
not yet due and payable) on the Purchased Assets. None of the Purchased Assets
is property that is required to be treated for Tax purposes as being owned by
any other Person.
(f) The transactions contemplated herein are not subject to the
Tax withholding provisions of ss.3406 or of Subchapter A of Chapter 3 of the
Code or of any other tax withholding provisions of federal, state, local or
foreign law.
(g) Except as set forth in Section 4.9(g) of the Disclosure
Schedule, there is no claim, action, audit or other proceeding now pending or,
to the Knowledge of Seller, threatened relating to the Taxes of Seller or Traex
with respect to the Acquired Business, and no extension or waiver of a statute
of limitations relating to Taxes with respect to the Acquired Business is in
effect with respect to Seller or Traex.
4.10 Contracts.
(a) Material Contracts. Section 4.10 of the Disclosure Schedule
attached hereto contains a complete and correct list of (i) all Contracts to
which Traex is a party, (ii) all Contracts to which Seller, Traex or any of
their Affiliates is a party that relate substantially to the Acquired Business
and (iii) all Contracts by which any of the Purchased Assets are bound
(excluding any contracts or agreements which are Seller Retained Assets) of the
type set forth below (collectively, the "Material Contracts"):
(i) any Contract containing covenants limiting the Acquired
Business's ability to compete with any Person in any business or geographic
territory;
(ii) any Contract with any officer or director of Seller or
former officer or director of Traex or any of their Affiliates (other than in
their capacity as employees);
(iii) any Contract for the lease of personal or real
property to or from any Person providing for lease payments (individually or in
the aggregate under any master or universal lease agreement) in excess of
$50,000 per annum with respect to the Acquired Business;
(iv) any Contract (or series of related Contracts) for the
purchase of raw materials, commodities, supplies, products, or other personal
property, or for the furnishing or receipt of services with respect to the
Acquired Business, excluding any purchase orders which do not involve
consideration in excess of $75,000 per annum to one supplier;
20
(v) any Contract (or series of related Contracts) for the
sale to customers of products of the Acquired Business, excluding any sales
orders which do not involve consideration in excess of $75,000 per annum from
one sales customer;
(vi) any Contract providing for the disposition of a
material Purchased Asset, other than in the ordinary course of business;
(vii) any Contract which is an employment, consulting or
severance agreement of any Person on a full-time, part-time, consulting or other
basis whose compensation, including bonuses paid in the past 12 months and
excluding benefits under any Benefit Plans, is in excess of $60,000 or which
provides for severance benefits upon termination of employment or engagement;
(viii) any Contract with a sales representative, dealer or
distributor;
(ix) a partnership, joint venture or similar relationship;
(x) any collective bargaining agreements;
(xi) any Contract relating to the creation, incurrence,
assumption or guarantee of indebtedness for borrowed money;
(xii) any Contract creating an Encumbrance on the Purchased
Assets (other than Permitted Encumbrances);
(xiii) any guarantee of performance or guarantee of
liabilities of any other Person;
(xiv) any Contract for capital expenditures in excess of
$100,000 individually with respect to the Acquired Business;
(xv) any hedging arrangement with respect to the Acquired
Business;
(xvi) any Contract for the license to Seller, Traex or any
of their Affiliates of Intellectual Property (other than Licensed Software) used
in the operation of the Acquired Business;
(xvii) any Licensed Software, other than Licensed Software
which is commercially available on a shrink-wrap basis;
(xviii) any Contract for the license from Seller or Traex
of Intellectual Property;
(xix) any Contract for freight or transportation of
products or materials of the Acquired Business; and
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(xx) any other Contract involving payments of $75,000 with
respect to the Acquired Business in any twelve (12) month period, not otherwise
listed above.
(b) Defaults. Seller has delivered or made available to
Purchaser a correct and complete copy of each Material Contract. Except as set
forth on Section 4.10(b) of the Disclosure Schedule, with respect to each of the
Material Contracts, (i) such Material Contract is legal, valid and binding on
the Seller or its Affiliates party to such Contract and, to the Knowledge of
Seller, each other party thereto, and is in full force and effect as to Seller
and, to the Knowledge of Seller, each other party thereto, (ii) none of Seller
or Traex or any Affiliate is in breach or default thereunder and, to the
Knowledge of Seller (A) no other party is in material breach or default
thereunder, and (B) no event has occurred which with notice or lapse of time
would constitute a material breach or default, or permit termination, material
modification, or acceleration thereunder and (iii) to Knowledge of Seller, there
are no pending renegotiations of any material provisions thereof outside the
ordinary course of business.
4.11 Intellectual Property.
(a) Section 4.11(a) of the Disclosure Schedule sets forth a
complete and correct list of all patents, registered copyrights, trademarks and
service marks, trade names, Internet domain names and all registrations and
applications for any of the foregoing, owned or licensed by Seller and used in
connection with the conduct of the Acquired Business (other than the Seller
Retained Assets) as presently conducted.
(b) Except as set forth in Section 4.11(b) of the Disclosure
Schedule, all Intellectual Property that is listed in Section 4.11(a) of the
Disclosure Schedule and to the Knowledge of Seller, all other Intellectual
Property that is part of the Purchased Assets is exclusively owned by Seller
free and clear of all Encumbrances, and except for fees and costs required by
Governmental Authorities to prosecute and maintain such Intellectual Property in
effect, the Seller is not obligated to make any payments of any kind in respect
thereof. The Seller has properly maintained and renewed all registrations and
related filings with respect to (i) all of the registered Intellectual Property
listed in Section 4.11(a) of the Disclosure Schedule and (ii) any other
registered Intellectual Property that is included in the Purchased Assets, and
has used commercially reasonable efforts to enforce its rights therein against
any known infringement or dilution by third parties.
(c) Section 4.11(c) of the Disclosure Schedule sets forth a
complete and correct list of all licenses granted by or to the Seller with
respect to any Intellectual Property that is part of the Purchased Assets (other
than the Seller Retained Assets and Licensed Software). All such licensed
Intellectual Property is licensed, leased or otherwise used by the Seller
pursuant to terms of a binding Contract under which the Seller has the right to
use such Intellectual Property as currently used or intended to be used in the
Acquired Business.
(d) Section 4.11(d) of the Disclosure Schedule contains a
complete and correct list of all Owned Software. As used herein, "Owned
Software" shall mean all computer software that is owned by the Seller or an
Affiliate or is material to the conduct of the Acquired Business as presently
conducted (excluding any owned computer software that is a
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Seller Retained Asset). The Owned Software together with the Licensed Software
is referred to as the "Acquired Business Software."
(e) Except as disclosed in Section 4.11(e) of the Disclosure
Schedule, the Seller is not currently in receipt of any written or, to the
Knowledge of Seller, oral notice that the conduct of the Acquired Business
violates the Intellectual Property rights of any other Person. To the Knowledge
of Seller, (i) the use by the Seller of any Intellectual Property used in
connection with the Acquired Business (excluding the Seller Retained Assets) is
not violating, infringing, diluting or misappropriating any other Person's
Intellectual Property rights and (ii) no Person has threatened or claimed that
the use by the Seller of any Intellectual Property in connection with the
Acquired Business (other than Seller Retained Assets) is violating, infringing,
diluting or misappropriating such Person's Intellectual Property rights.
(f) Except as set forth in Section 4.11(f) of the Disclosure
Schedule, to the Knowledge of Seller, to the extent that any material
Intellectual Property included in the Purchased Assets (excluding Seller
Retained Assets) was created for the Seller or any predecessor of the Seller, by
or with the aid or assistance of an employee, non-employee, consultant or
independent contractor, the Seller has received all necessary written
assignments to the rights, title and interest in such Intellectual Property to
obtain for the Seller all rights, title and interest in such Intellectual
Property.
4.12 Environmental Matters.
(a) Except as set forth in Section 4.12(a) of the Disclosure
Schedule, Seller, with respect to the Acquired Business, is in compliance in all
material respects with all Environmental Laws. Neither Seller nor Traex has
received in the last five (5) years, any written notice from a Governmental
Authority, nor does the Seller have any Knowledge that (i) the Acquired Business
is not in compliance in all material respects with, or is in violation in any
material respect of, any Environmental Laws or (ii) any currently existing
circumstances are reasonably likely to result in (x) a failure of the Seller to
comply in all material respects with any Environmental Law, as it relates to the
Acquired Business or (y) a material violation by Seller of any Environmental
Law, as it relates to the Acquired Business. For any written notice described
above that was received prior to the last five (5) years, Seller and Traex have
resolved all outstanding issues related to such notice to the satisfaction of
the issuing authority.
(b) All material licenses and permits currently held by Seller
pursuant to Environmental Laws are identified in Section 4.12(b) of the
Disclosure Schedule and constitute all of the material licenses and permits
required under Environmental Laws to operate the Acquired Business. Except as
described in Section 4.12(b) of the Disclosure Schedule, Seller is in compliance
in all material respects with such licenses and permits.
(c) Except as set forth on Section 4.12(c) of the Disclosure
Schedule, there are no Environmental Claims (excluding any allegations or
accusations from such definition) pending or, to the Knowledge of Seller, there
are no Environmental Claims threatened against Traex or Seller relating to the
Acquired Business. Neither the Seller, nor Traex has received any written
notification, nor does Seller have Knowledge, of any allegation of any actual,
or potential responsibility for, or any inquiry or investigation regarding, any
disposal,
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release or threatened release of any Materials of Environmental Concern either
generated at or transported from the Facility. To the Knowledge of Seller, there
has been no transportation or other off-site disposal of any Materials of
Environmental Concern that has or could reasonably be expected to result in
Environmental Liabilities.
(d) Except as disclosed in Section 4.12(d) of the Disclosure
Schedule, there are no current or, to the Knowledge of Seller, past releases
(i.e., any past or present releasing, spilling, leaking, pumping, pouring,
emitting, emptying, discharging, migration, injecting, escaping, leaching,
disposing, or dumping) of Materials of Environmental Concern in such quantities
that would result in Environmental Liabilities.
4.13 Transactions with Affiliates. Except as set forth on Section
4.13 of the Disclosure Schedule, none of Seller's or Traex's shareholders,
officers, directors or other Affiliates has any material interest in any
Purchased Asset.
4.14 Benefit Plans.
(a) Seller has delivered to Purchaser true, correct and
complete copies of (i) each Existing Plan and all amendments thereto (or, if not
written a written summary of its material terms), including a summary of
material modifications, and (ii) the most recent determination or opinion
letter, if any, issued by the IRS with respect to any Existing Plan and any
pending request for such a determination letter. No Existing Plan is a
multiemployer plan within the meaning of Section 3(37) of ERISA.
(b) Each Existing Plan has in all material respects been
maintained in compliance with its terms and all material provisions of ERISA and
the Code applicable thereto.
(c) Each Existing Plan which is an employee pension plan within
the meaning of Section 3(2) of ERISA (a "Pension Plan"), which is intended to be
"qualified" within the meaning of Sections 401(a) and 501(a) of the Code has
been determined by the IRS to be so qualified and to Seller's Knowledge there
are no facts which would indicate that the qualified status of each such Pension
Plan or the tax exempt status of each trust created thereunder has been
adversely affected.
(d) Except as set forth in Section 4.14(d) of the Disclosure
Schedule, no Existing Plan which is an employee welfare benefit plan within the
meaning of Section 3(1) of ERISA provides post-retirement medical or life
coverage to any Business Employees, other than as required by COBRA.
4.15 Real Property.
(a) Except as set forth in Section 4.15(a) of the Disclosure
Schedule, the Facility constitutes all the fee and leasehold interest in real
property used or held for use in connection with the Acquired Business. Seller
owns and has good, valid, and marketable fee simple title to the Facility, free
and clear of all Encumbrances other than Permitted Encumbrances.
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(b) Except as set forth in Section 4.15(b) of the Disclosure
Schedule, (i) to the Knowledge of Seller, there are no planned or commenced
public improvements related to the Facility that may result in special
assessments for which the owner of the Facility would be responsible; (ii) to
the Knowledge of Seller, there is no planned condemnation or similar action or
material change in any zoning or building ordinance materially and adversely
affecting the Facility; (iii) there are no material structural or mechanical
defects in the Facility, and take as a whole, the Facility is in satisfactory
condition and repair in all material respects, subject to reasonable wear and
tear and is adequate for the purpose for which it is currently used; (iv) there
are no eminent domain or other similar proceedings pending or, to the Knowledge
of Seller, threatened affecting any portion of the Facility; (v) the use and
operation of the Facility does not violate in any material respect any
instrument of record or agreement affecting any portion of the Facility; (vi)
neither Seller nor Traex has received any written order requiring repairs,
alterations or correction of any existing conditions of the Facility that have
not been remedied; (vii) there is no writ, injunction, decree, order or judgment
outstanding, nor any action, claim, suit or proceeding, pending or, to Knowledge
of Seller, threatened, relating to the ownership, lease, use, occupancy or
operation by Seller or Traex of the Facility; (viii) to the extent necessary for
the conduct of Acquired Business as currently conducted thereon, all utility
services or systems for the Facility have been installed and are operational and
sufficient in all material respects for the operation of the Facility as
currently operated; (ix) there are no outstanding options or rights of first
refusal to purchase the Facility, or any portion thereof or interest therein;
(x) the Seller has not leased or otherwise granted to any Person the right to
use or occupy all or any portion of the Facility and (xi) the Seller has the
right of egress and access to the Facility necessary for the conduct of business
thereon.
(c) Except as set forth in Section 4.15(c) of the Disclosure
Schedule, the Facility is in compliance in all material respects with all
applicable building, zoning, subdivision and other land use and similar Laws
affecting the Facility (collectively, the "Real Property Laws"), and in the last
five (5) years neither Seller nor Traex has received any notice of violation or
claimed violation of any Real Property Law. No current use by the Seller of the
Facility is dependent on a nonconforming use or other governmental approval, the
absence of which would materially limit the use of the Facility in connection
with the operation of the Acquired Business as currently conducted.
(d) Except as set forth in Section 4.15(d) of the Disclosure
Schedule, each parcel included in the Real Property is assessed for real
property tax purposes as a wholly independent tax lot, separate from adjoining
land or improvements not constituting a part of that parcel.
4.16 Insurance. Section 4.16 of the Disclosure Schedule contains a
list of all insurance policies which Seller maintains that cover the Purchased
Assets. To the Knowledge of Seller, such insurance policies are in full force
and effect and Seller has not received any written notice of any cancellation of
such insurance. During the last two years, no insurance policy covering the
Purchased Assets has been cancelled, withdrawn or non-renewed by the insurer.
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4.17 Intercompany Transaction and 2001 Seller Restructuring.
(a) The Seller and Traex had the requisite corporate power and
authority to consummate the Intercompany Transaction and the 2001 Seller
Restructuring. The consummation by Seller or Traex of the Intercompany
Transaction and the 2001 Seller Restructuring has been duly and validly
authorized by all necessary corporate action and requisite stockholder or
shareholder action, on the part of Seller and Traex, and no additional corporate
action on the part of Traex or Seller was necessary in order to authorize or
consummate the Intercompany Transaction and the 2001 Seller Restructuring.
(b) All documents executed and delivered by Seller and Traex in
order to consummate the Intercompany Transaction (the "Intercompany Transaction
Documents") and the 2001 Seller Restructuring (the "2001 Restructuring
Documents") were duly executed by each of Seller and Traex and, as and if
required by applicable Law, filed with the appropriate Governmental Authority.
Each Intercompany Transaction Document and 2001 Restructuring Document
constitutes a legal, valid and binding obligation of each of Seller and Traex,
enforceable against each in accordance with its terms. The Intercompany
Transaction Documents effected the Intercompany Transactions in accordance with
all applicable Law. The 2001 Restructuring Documents effected the 2001 Seller
Restructuring in accordance with all applicable Law. Seller has provided
complete and correct copies of all Intercompany Transaction Documents to
Purchaser.
(c) Except as set forth in Section 4.17(c) of the Disclosure
Schedule, the execution of the Intercompany Transaction Documents and the 2001
Seller Restructuring Documents and the consummation of the Intercompany
Transaction and 2001 Seller Restructuring did not, (i) conflict with,
contravene, result in a violation or breach of or default under (with or without
the giving of notice or the lapse of time or both), (ii) give rise to a right or
claim of termination, amendment, modification, vesting, acceleration or
cancellation of any right or obligation or loss of any material benefit under,
or (iii) result in the creation of any Encumbrance (other than Permitted
Encumbrances) upon any of the Purchased Assets under (x) any Law, order, writ,
injunction, judgment, arbitration award or decree to which either Seller, Traex
or the Purchased Assets are subject or bound, (y) the articles of incorporation
or bylaws of Seller or Traex or (z) any Material Contract.
4.18 Inventories. Seller represents that, except as set forth on
Section 4.18 of the Disclosure Schedule and except to the extent disclosed and
reserved against in the Financial Statements, all inventories of the Acquired
Business are recorded on the books of the Acquired Business at the lower of cost
or market value on a first-in, first-out basis in accordance with GAAP.
4.19 Accounts Receivable. Seller represents that, except as set
forth on Section 4.19 of the Disclosure Schedule and except to the extent
disclosed and reserved against in the Financial Statements, all accounts
receivable of the Acquired Business represent bona fide claims against debtors
for sales made, services performed or other charges arising on or before the
Closing Date, and all of the goods delivered and services performed that give
rise to such accounts were delivered or performed in accordance with the
applicable Contracts.
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4.20 Suppliers. Section 4.20 of the Disclosure Schedule sets forth
the name of Acquired Business's top ten (10) suppliers of raw materials,
supplies, merchandise and other goods during the past twelve (12) months for the
Acquired Business. None of these suppliers have notified Seller or Traex in
writing that it intends to stop or materially curtail its sale of raw materials,
supplies, merchandise or other goods to the Acquired Business or to materially
alter the terms and conditions of sale and, to the Knowledge of Seller, none of
these suppliers intends to stop or materially curtail its sale of raw materials,
supplies, merchandise or other goods to the Acquired Business or to materially
alter the terms and conditions of sale.
4.21 Customers. Section 4.21 of the Disclosure Schedule sets forth
the name of the Acquired Business's top ten (10) customers during the past
twelve (12) months. None of these customers have notified Seller or Traex in
writing that it intends to stop or materially curtail its purchasing of products
from the Acquired Business or to materially alter the terms and conditions by
which it purchases such products from the Acquired Business and, to the
Knowledge of Seller, none of these customers intends to stop or materially
curtail its purchasing of products from the Acquired Business or to materially
alter the terms and conditions by which it purchases such products from the
Acquired Business.
4.22 Warranties. Traex's and the Seller's outstanding product
warranty claims with respect to products sold or delivered by the Acquired
Business do not exceed $5,000 in the aggregate.
4.23 Rebates. Seller has informed Purchaser of all rebates,
discounts, promotional allowances or similar payments or obligations to any
customers of the Acquired Business (the "Rebate Obligations"). All Rebate
Obligations are reflected in the Financial Statements in accordance with GAAP as
consistently applied or have been incurred after the date thereof in the
ordinary course of business, consistent with past practice.
4.24 Inter-company Contracts and Services.
(a) Section 4.24(a) of the Disclosure Schedule sets forth (i)
each material written agreement or contract in effect as of the Closing Date
between Traex or the Division, on the one hand, and Seller or any other
Affiliates of Seller on the other hand, which affects or relates to the
Purchased Assets or the Acquired Business and (ii) each Contract to which
neither Traex, nor the Division is a party but Seller or an Affiliate of Seller
is a party (other than Traex) and under which the Acquired Business receives
benefits or pursuant to which the Acquired Business is obligated or bound
pursuant to such Contract.
(b) Section 4.24(b) of the Disclosure Schedule lists the
categories of material services that Seller or its Affiliates provide to the
Acquired Business in connection with the operation of the Acquired Business as
presently conducted, other than the services described in the Transition
Agreement.
4.25 Employees. Except as set forth in Section 4.25 of the
Disclosure Schedule, neither Seller, nor any of its Affiliates or divisions have
solicited or sought to induce, directly or indirectly, any Business Employee
whose services are material to the operation of the Acquired Business to leave
their employment or position with the Acquired Business for another
27
position or employment with Seller or any of its Affiliates or divisions. Traex
is not delinquent in payments to any of its employees for any wages, salaries,
commissions, bonuses or other direct compensation for any services performed for
it or amounts required to be reimbursed to such employees. Traex is in
compliance in all material respects with all applicable Laws respecting labor,
employment, fair employment practices, terms and conditions of employment,
worker's compensation, plant closings, and wages and hours. Within the 90 day
period ending immediately prior to the Closing, Traex has not instituted any
layoffs or other reductions in force.
4.26 Brokers, Finders. 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 Seller.
4.27 NO OTHER REPRESENTATION OR WARRANTY. EXCEPT FOR THE
REPRESENTATIONS AND WARRANTIES SET FORTH IN THIS SECTION 4 OF THIS AGREEMENT,
THE SELLER MAKES NO REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, OF ANY KIND
WHATSOEVER, INCLUDING WITHOUT LIMITATION ANY REPRESENTATION OR WARRANTY
REGARDING THE CONDITION, QUALITY, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR
PURPOSE OF ANY PURCHASED ASSET AND ANY SUCH REPRESENTATION OR WARRANTY IS HEREBY
EXPRESSLY DISCLAIMED.
5. REPRESENTATIONS AND WARRANTIES WITH RESPECT TO PURCHASER. Purchaser
represents and warrants to Seller that:
5.1 Corporate Matters Regarding Purchaser.
(a) Organization; Power. Purchaser is a corporation duly
organized and validly existing under the Laws of the State of Delaware.
Purchaser has all requisite corporate power and authority to own, lease and
operate all of its properties and assets and to carry on its business as it is
now being conducted.
(b) Authorization; Validity. Purchaser has all requisite
corporate power and authority to enter into this Agreement and the other
documents and instruments to be executed and delivered by Purchaser pursuant
hereto and to carry out its obligations hereunder and thereunder. The execution
and delivery by Purchaser of this Agreement and the other documents and
instruments to be executed by Purchaser pursuant hereto and the consummation by
Purchaser of the transactions contemplated hereby and thereby have been duly
authorized by the Board of Directors and, if required, the shareholder, of
Purchaser. No further corporate act or proceeding on the part of Purchaser is
necessary to authorize this Agreement or the other documents and instruments to
be executed and delivered by Seller pursuant hereto or the consummation of the
transactions contemplated hereby and thereby. This Agreement and the related
agreements, documents and instruments referred to herein to which Purchaser is a
party have been duly executed and delivered by Purchaser and constitute the
valid and legally binding obligations of Purchaser, enforceable against it in
accordance with their respective terms.
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(c) Compliance; Binding Effect. Except as set forth in Schedule
5.1(c) attached hereto, the execution and delivery by Purchaser of this
Agreement and the related agreements, documents and instruments referred to
herein to which Purchaser is a party, the purchase of the Purchased Assets, the
assumption of the Assumed Liabilities and the consummation of the transactions
contemplated hereby do not conflict with, contravene, result in a violation or
breach of or default under (with or without the giving of notice or the lapse of
time or both), give rise to a right or claim of termination, amendment,
modification, vesting, acceleration or cancellation of any right or obligation
or loss of any material benefit under (i) the certificate of incorporation or
bylaws of Purchaser, (ii) any Law, order, writ, injunction, judgment,
arbitration award or decree or other restriction of any kind or character to
which the Purchaser is subject or by which the Purchaser is bound or (iii) any
material contract to which Purchaser is a party or by which Purchaser is bound.
5.2 Governmental Consents. No Consent of any Governmental Authority
is required for the execution, delivery or performance of this Agreement by
Purchaser or the consummation by Purchaser of the transactions contemplated by
this Agreement.
5.3 Litigation. There is no action, claim, suit or proceeding
pending or, to the knowledge of Purchaser, threatened against Purchaser which
questions the legality, validity or propriety of the transactions contemplated
by this Agreement.
5.4 Brokers; Finders. 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 Purchaser.
6. CLOSING.
6.1 Closing Date. The Closing of the transactions provided for
herein shall take place at such time and date as Seller and Purchaser may
mutually agree.
6.2 Closing Deliveries. The following items shall be delivered by
the parties at Closing:
(a) By the Seller. At the Closing, the Seller shall deliver to
Purchaser the following:
(i) Assignment of Purchased Assets: To effect the
assignment of the Purchased Assets and the assumption of the Assumed Liabilities
contemplated by this Agreement, Seller will execute and deliver at Closing, the
following documents, each of which will be reasonably satisfactory in form and
substance to Purchaser (collectively, the "Assignment Documents"):
A. bills of sale conveying to Purchaser all of Seller's
personal property included in the Purchased Assets;
B. assignments of all Contracts included in the Purchased
Assets which shall assign to Purchaser all of Seller's right, title and
interest therein and thereto;
29
C. assignments of patents and trademarks and other
Intellectual Property rights included in the Purchased Assets in
recordable form to the extent necessary to assign such rights to
Purchaser;
D. a special warranty deed for the Facility, together with
applicable transfer forms (subject to Assumed Liabilities and Permitted
Encumbrances);
E. certificates of title to all motor vehicles included in
the Purchased Assets, duly endorsed for transfer to Purchaser;
F. the Assignment and Assumption Agreement; and
G. such assignment documents and other instruments of
transfer as are necessary to properly transfer and assign the Purchased
Assets to Purchaser, each duly executed by Seller.
(ii) Transition Agreement. Transition Agreement, duly
executed by the Seller.
(iii) Consents. All Consents to, as the case may be,
required under or otherwise necessary to avoid any breach, default, violation of
any anti-assignment clause, cancellation or acceleration or triggering of any
rights under those Contracts set forth on Schedule 6.2(a)(iii) attached hereto
with respect to (A) the consummation of the transactions contemplated hereby
and/or (B) the Intercompany Transaction or any combination of these transactions
(the "Required Consents").
(iv) Secretary's Certificate. A certificate of a secretary
or assistant secretary of Seller dated the Closing Date certifying, (i) a true
and complete copy of the Articles of Incorporation of Seller, (ii) a true and
complete copy of the Bylaws of Seller and (iii) incumbency matters.
(v) Survey. A current survey of the Facility prepared by a
land surveyor certified or registered in Wisconsin and reasonably acceptable to
Purchaser, prepared in accordance with the requirements set forth in Schedule
6.2(a)(v) attached hereto, which shall have been prepared and delivered
sufficiently prior to Closing to allow for the issuance of the title insurance
policy specified in Section 6.2(a)(vi) of this Agreement.
(vi) Title Policy. A current owner's policy of title
insurance (or pro forma owners policy) from First American Title Insurance
Company with respect to the Facility meeting the requirements set forth in
Schedule 6.2(a)(vi) attached hereto.
(vii) FIRPTA Certificate. An affidavit in form and
substance satisfactory to Purchaser that satisfies Purchaser's obligations under
Treasury Regulation Section 1.1445-2(b)(2), duly executed by Seller.
30
(viii) Legal Opinions. An opinion of ▇▇▇▇▇▇▇ & ▇▇▇▇▇, LLP,
counsel to Seller, addressed to Purchaser dated as of the Closing Date in the
form set forth on Exhibit C-1 and opinion of in-house counsel of Seller,
addressed to Purchaser dated as of the Closing Date in the form set forth on
Exhibit C-2.
(ix) Intercompany Transaction Documents. All Intercompany
Transaction Documents.
(b) By Purchaser. At the Closing, Purchaser shall deliver to
the Seller, the following:
(i) Ancillary Agreements. The Assignment and Assumption
Agreement and Transition Agreement, each duly executed by Purchaser;
(ii) Secretary's Certificate. A certificate of Purchaser
dated the Closing Date and signed on its behalf by its secretary or assistant
secretary certifying (i) the adoption of attached resolutions of Purchaser's
Board of Directors authorizing the execution, delivery and performance of this
Agreement and the related agreements, documents and instruments referred to
herein, (ii) a true and complete copy of the certificate of incorporation of
Purchaser, (iii) a true and complete copy of the bylaws of the Purchaser and
(iv) incumbency matters;
(iii) Legal Opinion. An opinion of the general counsel of
Purchaser addressed to Seller dated as of the Closing Date in the form set forth
on Exhibit D; and
(iv) Payment. Payment by wire transfer of the Purchase
Price as provided in Section 2.3 of this Agreement.
7. COVENANTS OF SELLER.
7.1 Liability for Transfer Taxes. The Seller shall be responsible
for the timely payment of all sales, use, value added, documentary, stamp, gross
receipts, transfer, conveyance, excise, real estate recording and other similar
Taxes and fees ("Transfer Taxes"), arising out of or in connection with or
attributable to the transactions effected pursuant to this Agreement. The Seller
shall prepare and timely file all Tax Returns required to be filed in respect of
Transfer Taxes (including, without limitation, all notices required to be given
with respect to bulk sales taxes), provided that the Purchaser shall be
permitted to prepare any such Tax Returns that are the primary responsibility of
the Purchaser under applicable law. The Purchaser's preparation of any such Tax
Returns shall be subject to Seller's approval, which approval shall not be
withheld unreasonably.
7.2 Further Acts. On the Closing Date, or thereafter if necessary,
Seller shall, without cost or expense to Purchaser, execute and deliver to or
cause to be executed and delivered to Purchaser such further instruments of
transfer and conveyance and take such other action as Purchaser may reasonably
require to carry out more effectively and completely the transactions
contemplated by this Agreement.
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7.3 Resin Supplies.
(a) For a period of five (5) years after the Closing Date (the
"Resin Supply Period"), Seller covenants and agrees to use its best efforts to
afford Purchaser, or any designated Affiliate of Purchaser, the opportunity to
participate in the buying group for resin, and/or to be party to, any New Resin
Contract. To the extent that Seller or its Affiliates will incur any
Participation Costs as a result of Purchaser, or its designated Affiliate,
participating in a buying group for resin, or becoming party to any New Resin
Contract, Seller shall promptly provide Purchaser, or its designated Affiliate,
with written notice of such Participation Costs (which notice shall provide
reasonable evidence of such Participation Costs) (the "Participation Costs
Notice") prior to their participating in a buying group for resin, or becoming
party to, a New Resin Contract. If, upon receipt of the Participation Costs
Notice, Purchaser, or its designated Affiliate, agrees to participate in such
buying group for resin, or agrees to become a party to such New Resin Contract,
Purchaser, or its designated Affiliate, shall notify Seller in writing within
five (5) business days after receipt of such Participation Cost Notice of such
fact and of its agreement to pay the Participation Costs as set forth in the
applicable Participation Costs Notice. Purchaser, or its designated Affiliates,
shall pay such Participation Costs (i) to the extent practicable, before they
are incurred by Seller or Seller's Affiliate or, if not practicable, reimburse
Seller or Seller's Affiliates for such Participation Costs within ten (10) days
after receipt of written notice that they have been incurred, or (ii) if
applicable, assume such Participation Costs in accordance with the terms of the
New Resin Contact.
(b) If at any time during the Resin Supply Period, (i)
Purchaser or its designated Affiliate is unable to participate in a buying group
for resin or is unable to be a party to a New Resin Contract, or (ii) Seller is,
or its Affiliates are, prohibited from including, or unable to include,
Purchaser, or its designated Affiliate, as a participant in a buying group for
resin, or as a party to any New Resin Contract for purposes of satisfying the
Acquired Business's resin supply needs, Seller agrees to use its best efforts to
sell to Purchaser, or any designated Affiliate of Purchaser, solely for the
benefit of the Acquired Business, (x) resin of the type purchased by the
Acquired Business on the date hereof, which types of resin are set forth on
Schedule 7.3(b), and (y) any other resin that is used by the Acquired Business
to manufacture or produce any of the products manufactured as of the date hereof
by the Acquired Business which are set forth in the 2002 Traex Product Guide any
time during the Resin Supply Period, which resin can be available under a then
existing New Resin Contract. Such resin shall be resold to Purchaser, or its
designated Affiliate, at the same price and pursuant to the same terms that
Seller or its Affiliates may purchase the resin from the resin supplier under
the applicable New Resin Contract; provided, that, such resin shall be sold by
Seller or its Affiliates to Purchaser or its Affiliates on an AS-IS basis except
that Seller and its Affiliates shall pass along any warranty provided by the
resin supplier with respect to any resin purchased by Purchaser or its
Affiliates; provided, further that Purchaser, or its designated Affiliate, shall
receive its pro-rata share of all discounts, rebates or other economic benefits
under each of the New Resin Contracts its buys any resin from Seller under, with
such discounts applied, and such rebates paid, in accordance with applicable
terms and conditions of each New Resin Contract, as if Purchaser, or its
designated Affiliate, were a party to such New Resin Contract. Seller and its
Affiliates shall, at Purchaser's cost, provide such assistance to Purchaser or
its Affiliates in asserting any breach of warranty or other similar claim
against a resin supplier as Purchaser may reasonably request.
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(c) In the event Purchaser or its Affiliates are purchasing
resin from Seller or its Affiliate pursuant to subsection (b) above, during the
Resin Supply Period, Purchaser, or a designated Affiliate of Purchaser, may
(solely for the benefit of the Acquired Business) from time to time issue
purchase orders to Seller for the purchase of resin to be supplied pursuant to
subsection (b) above under the applicable New Resin Contracts ("Purchase
Order"), it being agreed to that notwithstanding the terms and conditions of
such Purchase Order, the terms of this Section 7.3 shall govern. Each such
Purchase Order for resin shall not become an effective order for the purchase of
resin until Purchaser, or its designated Affiliate, shall have received a
Participation Costs Notice from Seller and thereafter confirms in writing to
Seller that it intends to purchase the resin under such Purchase Order and pay
any Participation Costs in connection therewith. To the extent that Seller or
its Affiliates will incur any Participation Costs in connection with Seller's
resale of resin to Purchaser, or its designated Affiliate, Seller shall, within
ten (10) business days of receipt of such Purchase Order for resin, provide
Purchaser, or its designated Affiliate, with a Participation Costs Notice. If,
upon receipt of the Participation Costs Notice, Purchaser, or its designated
Affiliate, agrees to purchase the resin from Seller under such applicable
Purchase Order, Purchaser, or its designated Affiliate, shall notify Seller in
writing confirming its previous Purchase Order (the "PO Confirmation") and its
agreement to reimburse Seller or its Affiliates for the Participation Costs set
forth in the Participation Costs Notice within five (5) business days after
receipt thereof. Purchaser, or its designated Affiliates, shall reimburse Seller
or its Affiliates for such enumerated Participation Costs within ten (10)
business days of receipt of the PO Confirmation.
(d) For the purpose of this Section 7.3, (i) "New Resin
Contract" shall mean any contract, agreement or arrangement regarding the supply
of resin (including, without limitation, resin colorants) to the Seller or any
of its Affiliates from resin suppliers during the Resin Supply Period and (ii)
"Participation Costs" shall mean any costs, fees or other expenses (including
without limitation any increase in resin prices) which a resin supplier imposes
on Seller or any Affiliate of Seller in connection with the Purchaser or any
Affiliate of Purchaser participating in any buying group, becoming a party to
any New Resin Contract or purchasing resin from Seller or any Affiliate of
Seller, as the case may be, including any reasonable out-of-pocket costs and
expenses incurred by Seller or any Affiliate of Seller in connection with
Purchaser or any Affiliate of Purchaser participating in any buying group,
becoming a party to a New Resin Contract or purchasing resin from Seller or any
Affiliate of Seller, as the case may be.
(e) For purposes of notice under this Section 7.3, Seller and
Purchaser shall notify each other within thirty (30) days of the Closing Date of
the person and coordinates of the person who shall receive all notices under
this Section 7.3 (each the "Notice Person"). Any time thereafter, each party may
notify the other in writing of any change in the applicable party's Notice
Person. Any notices or other communications required or permitted under this
Section 7.3 shall be in writing and shall be considered delivered in all
respects when delivered by hand or by facsimile transmission (but only if
followed by transmittal by national overnight courier or hand delivery on the
next business day) or on receipt after dispatch by registered or certified mail,
postage prepaid or on the next business day if transmitted by national overnight
courier to the applicable Notice Person.
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7.4 Books and Records. As soon as reasonably practical after the
Closing Date, Seller shall deliver or cause to be delivered to Purchaser all of
the Books and Records in the possession of Seller or its Affiliates; provided,
however, that Purchaser recognizes that certain Books and Records may be part of
other books and records of Seller which are not part of the Purchased Assets;
provided, Seller shall use its reasonable efforts to separate or extricate the
Books and Records from the data and materials which are not part of the
Purchased Assets and provide Purchaser with such Books and Records in usable
electronic or hard copy form.
7.5 Corporate Name. To the extent the trademarks, service marks,
brand names, logos or trade, corporate or business names of Seller or of any of
Seller's Affiliates ("Seller IP") are not included in the Purchased Assets but
are used by the Acquired Business on existing supplies of packaging or printed
advertising and promotional materials, catalogs, inventories or like materials
(collectively, the "Packaging") included in the Purchased Assets, Purchaser and
the Acquired Business may use such Packaging or sell such inventories after the
Closing Date (without altering or modifying such Packaging and Inventories)
until such Packaging is exhausted and in any event no later than December 31,
2003. Seller and its Affiliates, as applicable, hereby grant to Purchaser a
royalty free, non-exclusive and nontransferable license to use Seller IP as it
exists on such Packaging in the ordinary course of business until December 31,
2003.
7.6 Use of Business Name. After the Closing, Seller shall not,
directly or indirectly, use or do business, or allow any Affiliate to use or do
business, or assist any third party in using or doing business, under the name
and ▇▇▇▇ "Traex" (or any other name confusingly similar to such names and
marks).
7.7 Covenant Not to Compete; Non-Solicitation.
(a) For a period of five (5) years from and after the Closing
Date (the "Non-Compete Period"), Seller and Seller's Affiliates shall not, and
Seller shall cause its Affiliates not to, directly or indirectly, own, manage,
operate, participate in, engage in, or have an investment interest in a
Competing Business anywhere in the world, whether as a manufacturer,
distributor, reseller, partner, stockholder, equity holder, member, sole
proprietor, contractor, owner, consultant or otherwise except with respect to
the services to be provided to the Acquired Business and Purchaser pursuant to
the Transition Agreement or as permitted below.
(b) Except for the persons listed in Section 4.25 of the
Disclosure Schedule, for a period of three (3) years from and after the Closing
Date, Seller and its Affiliates shall not, and Seller shall cause its Affiliates
not to, directly or indirectly solicit or seek to induce any of the employees of
the Acquired Business on or after the Closing Date to leave their employment or
positions with the Acquired Business or Purchaser, provided, however, that
"solicit or seek to induce" shall not include, and none of Seller or any of its
Affiliates shall be prohibited from (i) advertising employment opportunities in
any national newspaper, trade journal or other publication in a major
metropolitan area, e.g. Milwaukee, Wisconsin and (ii) participating in any third
party hiring fair or similar event open to the public or negotiating with,
offering employment to or employing such persons contacted through such event.
Seller shall be
34
responsible for any violation of this covenant by any of its Affiliates,
employees, agents or representatives.
(c) Nothing in the foregoing provisions of this Section 7.7
shall restrict or prohibit:
(i) Seller from continuing to manufacture, distribute,
service, sell or market (x) any products currently produced by Seller or any
current Affiliate of Seller and (y) any other products which are comparable
items which are typically manufactured or sold by Seller or its current
Affiliates, other than those products which are currently produced by the
Acquired Business itself;
(ii) Seller from owning less than 5% of the stock of a
publicly-held corporation whose stock is traded on a national securities
exchange or listed with the Nasdaq Stock Market; or
(iii) Seller acquiring a business which derives less than
$5 million of its gross revenues (as determined based on such business's most
recently completed fiscal year) from the sale of Acquired Business Products.
(d) As used in this Section 7.7, (i) "Competing Business" shall
mean the design, development, manufacture, distribution, servicing, sale or
marketing of the Acquired Business Products; (ii) "Acquired Business Products"
shall mean: (x) plastic and metal products and articles used for (1) the
dispensing to the end user consumer of paper, tissue, napkins, straws,
toothpicks, beverage containers and lids; or (2) tabletop items used or consumed
by patrons of bars, hotels, restaurants and similar eating and drinking
establishments which are comparable to the items typically manufactured or sold
by, and/or which could be readily be manufactured or sold by, the Acquired
Business, including, but not limited to, salt and pepper dispensers, ash trays,
menu covers, check trays, flower vases, baskets, ramekins, liquid dispensers,
tumblers and stemware and similar beverageware items, plates, bowls, and similar
dinnerware items, cutlery and chafers (excluding items made entirely of metal);
and (y) any article or service offered for sale in the 2002 Traex Product Guide.
(e) If the final judgment of a court of competent jurisdiction
declares that any term or provision of this Section 7.7 is invalid or
unenforceable, the parties hereto agree that the court making the determination
of invalidity or unenforceability shall have the power to reduce the scope,
duration, or area of the term or provision, to delete specific words or phrases,
or to replace any invalid or unenforceable term or provision with a term or
provision that is valid and enforceable and that comes closest to expressing the
intention of the invalid or unenforceable term or provision, and this Agreement
shall be enforceable as so modified after the expiration of the time within
which the judgment may be appealed.
(f) Seller agrees that the Acquired Business and Purchaser and
its Affiliates may suffer irreparable harm from a breach of any of the covenants
and/or agreements contained in this Section 7.7. In the event of an alleged or
threatened breach by Seller or any of its Affiliates of any of the provisions of
this Section 7.7, the Acquired Business or Purchaser or any of its Affiliates or
successors and assigns may, in addition to all other rights and remedies
35
existing in their favor, apply to any court of competent jurisdiction for
specific performance and/or injunctive or other relief in order to enforce or
prevent any violations of the provisions hereof (including the extension of the
Non-Compete Period by a period equal to the length of the violation of this
Section 7.7), without the Purchaser or any of its affiliates being obligated to
post any bond or other security. In the event an alleged breach or violation by
Seller or any of its Affiliates of any of the provisions of this Section 7.7,
the Non-Compete Period shall be tolled for the period of the violation by Seller
or its Affiliates if such alleged breach or violation is resolved against Seller
or its Affiliates.
(g) The parties hereto acknowledge that the covenants in this
Section 7.7 are intended to benefit Purchaser, its Affiliates and the Acquired
Business, and their respective successors and assigns from and after the
Closing, but, in the event an Affiliate of Seller is acquired by a third party
which is not an Affiliate of Seller and will not be an Affiliate of Seller, such
covenants shall not be binding upon such Affiliate or the acquiror of such
Affiliate.
7.8 Assistance for Certain Consents.
(a) To the extent that any of the Purchased Assets are not
capable of being assigned or transferred without the Consent of the other party
thereto or any third party, or if such assignment or attempted assignment or
transfer would constitute a breach thereof or a violation of any Law, decree,
order, other governmental edict, this Agreement shall not constitute an
assignment or transfer thereof, or an attempted assignment or transfer of any
such Purchased Assets until properly transferred.
(b) If any of the Purchased Assets are not assigned to
Purchaser upon consummation of the transactions contemplated by this Agreement
due to circumstances described in Section 7.8(a) above, then Purchaser shall not
assume any liabilities or obligations related to or arising out of such
non-transferred Purchased Assets until such Purchased Assets can be properly
transferred to Purchaser; provided, however, if Seller provides Purchaser with,
or Purchaser receives, the benefits of such non-transferred Purchased Asset in
accordance with Section 7.8(c) below, Purchaser shall reimburse Seller for all
corresponding payments due under such non-transferred Purchased Asset during the
time such benefits are provided to Purchaser.
(c) The Seller is not obligated to transfer to the Purchaser
any of its rights and obligations in and to any of the Purchased Assets without
first having obtained all necessary Consents, including the Required Consents,
unless Purchaser otherwise notifies Seller in writing prior to Closing that such
assets should be assigned to Purchaser. Prior to the Closing Date, the Seller
shall have used its reasonable efforts to obtain the Required Consents without
conditions or requirements that are materially adverse to the Purchaser. To the
extent that the Consents necessary to properly assign, transfer or sublicense
any of the Purchased Assets to Purchaser are not obtained prior to Closing,
Seller shall, commencing on the Closing Date, and continuing for the duration of
each such Purchased Asset, or such shorter period if Purchaser notifies Seller
that it no longer desires such Purchased Asset, use commercially reasonable
efforts to (i) provide to Purchaser and the Acquired Business the benefits of
any such Purchased Asset not assigned, transferred, subleased or sublicensed due
to Seller's failure or inability to obtain such Consent during such period and
(ii) aid Purchaser and the Acquired Business in
36
obtaining any Consents required for the proper transfer of such Purchased Assets
to the Purchaser. With respect to the Required Software Agreements, Purchaser
will use commercially reasonable efforts to replace the services or software
provided under such agreements in the event it becomes evident to Purchaser that
Purchaser will not be able to obtain the required Consent necessary for proper
transfer of the applicable Required Software Agreement.
8. COVENANTS OF PURCHASER.
8.1 Further Acts. On the Closing Date, or thereafter if necessary,
Purchaser shall, without cost or expense to Seller, execute and deliver to or
cause to be executed and delivered to Seller such further documents and take
such other action as Seller may reasonably require to carry out more effectively
and completely the transactions contemplated by this Agreement.
8.2 Product Matters. Purchaser shall, at Seller's cost, provide
such assistance as Seller may reasonably request, including without limitation,
providing replacement products, in connection with any product warranty, product
liability or similar claim relating to products of the Acquired Business sold
prior to Closing.
9. MUTUAL COVENANTS AND WARRANTIES.
9.1 Publicity. No public announcement or other publicity regarding
the transactions referred to herein shall be made by any party hereto without
the prior written approval of all parties hereto as to form, timing and manner
of distribution or publication, except to the extent otherwise required by any
applicable Law, including any securities Laws, or on advice of counsel. A party
required to make a public announcement regarding the transactions described
herein shall use reasonable efforts to provide the other party with advance
notice of the timing and contents of such announcement.
9.2 Further Actions Regarding Transferred Assets.
(a) To the extent that time does not permit proper recordation
of such assignments contemplated by this Agreement (other than as to real
property), as for example in the case of certain assignments of Intellectual
Property, Seller shall cause the assignment of beneficial title therein to be
effected as of the Closing and, subsequent to the Closing, will at no cost to
Seller provide all assistance and cooperation as is reasonably necessary to
effectuate recordable assignment of such assets.
(b) Until March 31, 2004, if it is discovered by either of the
parties hereto that certain assets and properties of the Acquired Business were
not properly included in the Purchased Assets and assigned to Purchaser, Seller
shall promptly take all actions necessary to effect the proper assignment and
transfer of all right, title and interest in all such assets and properties to
Purchaser, as designated by Purchaser.
(c) Until March 31, 2004, if it is discovered by either of the
parties hereto that (i) any Seller Retained Asset was improperly assigned to
Purchaser or (ii) any Assumed Liability was not properly assumed by Purchaser
prior to the Closing which was
37
required to be assumed by the Purchaser pursuant to this Agreement and was not
properly assumed by the Purchaser at the Closing, Purchaser shall, and Purchaser
shall take all actions necessary to effect the assignment back to Seller of such
Seller Retained Assets, or the assumption by Purchaser of such Assumed
Liabilities, as the case may be.
9.3 Access to Information.
(a) Seller will grant to Purchaser access to any relevant
records related to operation of the Acquired Business that is reasonably
required by Purchaser and not transferred hereunder. Purchaser will grant to
Seller access to any relevant records related to the Acquired Business that is
reasonably required by Seller and transferred hereunder. Any such access shall
be during normal business hours where such data and records are regularly
maintained. However, such access to records shall be granted solely be for a
proper business purpose (e.g., litigation not covered by Article 10 hereof,
preparation of Tax Returns). To the extent such request for records relates to
any matter subject to Articles 10 hereof, then access to records shall be
governed by Section 10.4(e) hereof and not this Section 9.3(a). To the extent
any information provided to Purchaser hereunder does not relate to the Acquired
Business, Purchaser shall keep such information confidential. To the extent any
information provided by Purchaser to Seller is deemed confidential information
to the Acquired Business or the Purchaser by the Purchaser, Seller shall agree
to keep such information confidential, unless such information is required to be
disclose in connection with litigation or any filing with a Governmental
Authority.
(b) After the Closing Date, Seller will cooperate with
Purchaser, and Purchaser will cooperate with Seller, in the preparation of all
Tax Returns and will provide (or cause to be provided) any records and other
information the other so reasonably requests (including, without limitation,
information necessary to calculate the research tax credit pursuant to Section
41 of the Code (and any similar state, local or foreign tax provision) with
respect to the Acquired Business), and will provide reasonable access to, and
the reasonable cooperation of its employees and auditors. Seller will cooperate
in all reasonable respects with Purchaser and Purchaser will cooperate in all
reasonable respects with Seller in connection with any Tax investigation, audit
or other proceeding.
9.4 Employees.
(a) Except for those Business Employees set forth on Schedule
9.4(a)(i), Purchaser shall make offers of employment to all active Business
Employees, effective as of the Closing Date. For this purpose a Business
Employee shall be an "active" Business Employee if such employee is actively at
work on the Closing Date, or is absent from work on the Closing Date due to
holiday, vacation, jury duty or sick leave (provided such sick leave is not
reasonably likely to result in such Business Employee becoming entitled to
disability benefits under Seller's long term disability plan). Purchaser's offer
of employment shall be at the same wage and salary rate of compensation as such
individual received from Seller, and pursuant to the benefit plans as summarized
on Schedule 9.4(a)(ii). Each Business Employee who accepts Purchaser's offer of
employment and becomes an employee of Purchaser on the Closing Date shall be
referred to herein as a "Transferred Employee." Purchaser shall provide to the
Transferred Employees severance benefits under the terms of Purchaser's
severance plan;
38
provided that if the Transferred Employees set forth on Schedule 9.4(a)(iii)
otherwise become entitled to severance benefits under the terms of Purchaser's
severance plan between the Closing and December 31, 2003, the amount of and form
of severance benefits shall be as set forth on Schedule 9.4(a)(iii) (the
"Special Severance"). Prior to Closing, Seller shall inform the Transferred
Employees set forth on Schedule 9.4(a)(iii) of the Special Severance
arrangement. In the event Purchaser becomes obligated to provide Special
Severance to any of the Transferred Employees set forth on Schedule 9.4(a)(iii)
during the 120 days following Closing, then Seller shall reimburse Purchaser
within 10 business days of receipt of an invoice for the amount of such
severance, including the cost of the continued employee benefits; provided,
however, that the amount of the salary continuation component of such severance
reimbursement obligation shall not exceed the amount determined based on the
Transferred Employee's salary rate as in effect at the time of the Closing,
without regard to any increase following the Closing. Purchaser shall credit
each Transferred Employee with years of service with Seller and Traex (and any
predecessor thereof) for purposes of eligibility, and vesting under each
employee benefit program Purchaser maintains for Transferred Employees, and for
determining levels of benefits under Purchaser's severance, vacation and other
paid-time off programs, but not for benefit accrual purposes under any defined
benefit or cash balance pension plan. It is specifically understood and agreed
that Purchaser shall have the right, exercisable in its sole discretion to
terminate or layoff any Transferred Employees on or after the Closing Date.
(b) Purchaser agrees to establish flexible spending account
arrangements for Transferred Employees identical to those maintained by Seller
with respect to such Transferred Employees with initial account balances equal
to the account balances of such Transferred Employees under Seller's flexible
spending arrangements immediately prior to Closing. Purchaser shall reimburse
Seller from contributions received from Transferred Employees for any negative
balances under Seller's flexible spending arrangement as of the Closing Date.
Seller shall transfer to Purchaser all positive balances under Seller's flexible
spending arrangement.
(c) Except to the extent included in the Assumed Liabilities or
as otherwise provided in this Section 9.4, Seller shall retain all liability for
the Existing Plans.
(d) Purchaser shall establish, effective as of the Closing
Date, a group health plan containing the features set forth on Schedule
9.4(a)(ii) in which Transferred Employees and their qualifying dependents who
are covered under Seller's group health plan on the Closing Date shall be
eligible to participate effective on the day immediately following the Closing
Date.
(e) Seller shall fully vest all Business Employees in their
account balances under the Existing Plan which is a 401(k) plan (the "Seller's
401(k) Plan") on the Closing Date. As soon as practicable following the Closing
Date, Seller shall spin-off and transfer the account balances of each
Transferred Employee who is a participant in Seller's 401(k) plan to a 401(k)
plan maintained by Purchaser (the "New 401(k) Plan") in cash pursuant to a
trustee to trustee transfer in accordance with Section 414(l) of the Code. The
transfer of the account balance liability and related assets shall include a
trustee-to-trustee transfer of all participant loan accounts and liabilities
under Seller's 401(k) Plan.
39
(f) To the extent accrued on the Closing Balance Sheet,
Purchaser shall assume the liability with respect to all accrued and unpaid
vacation and other paid time off with respect to Transferred Employees.
(g) (i) Seller and Purchaser shall adopt the alternative
procedure of Rev. Proc. 96-60 for purposes of filing IRS Forms W-4 (Employee's
Withholding Allowance Certificate) and W-5 (Earned Income Credit Advance Payment
Certificate). Under this procedure Seller shall provide to Purchaser all IRS
Forms W-4 and W-5 on file with respect to each Transferred Employee, and
Purchaser will honor these forms until such time, if any, that such Transferred
Employee submits a revised form.
(ii) With respect to garnishments, tax levies, child support
orders, and wage assignments in effect with Seller on the Closing Date for
Transferred Employees, Purchaser shall honor such payroll deduction
authorizations with respect to Transferred Employees and will continue to make
payroll deductions and payments to the authorized payee, as specified by the
court or governmental order which was filed with Seller on or before the Closing
Date, and Seller will continue to make such payroll deductions and payments to
authorized payees with respect to all other Business Employees. Seller shall, as
soon as practicable after the Closing Date, provide Purchaser with such
information in the possession of Seller as may be reasonably requested by
Purchaser and necessary for Purchaser to make the payroll deductions and
payments to the authorized payee as required by this subsection (ii).
(h) Seller shall cooperate with Purchaser in providing such
employee records, data and information necessary in order for Purchaser to
perform its obligations and responsibilities under this Section 9.4.
(i) No provision of this Section 9.4 shall create any third
party beneficiary or other rights in any Business Employee or former employee
(including any beneficiary or dependent thereof) of the Seller in respect of
continued employment (or resumed employment) with the Purchaser and no provision
of this Section 9.4 shall create any such rights in any such persons in respect
of any benefits that may be provided, directly or indirectly, under any Existing
Plans or any such similar plan or arrangement which may be established by the
Purchaser for Transferred Employees.
10. SURVIVAL; INDEMNIFICATION.
10.1 Survival.
(a) Representation and Warranties. The representations,
warranties, covenants and obligations of Seller and Purchaser contained in this
Agreement shall survive the Closing as follows (a) the covenants and obligations
of Seller and Purchaser shall survive indefinitely, unless otherwise limited by
their terms herein, (b) the representation and warranties of Seller and,
Purchaser not listed in (x)-(z) below shall survive until March 31, 2004 and (c)
the following representations and warranties of Seller and Purchaser shall
survive as follows: (x) the representations and warranties of Seller contained
in the first and last sentence of Sections 4.1(a) (Organization; Power), 4.1(b)
(Authorization; Validity), second and third sentences of 4.8(a)
40
(Title to Purchased Assets) and the second sentence of 4.15(a) (Real Property),
and the representations and warranties of Purchaser contained in Section 5.1(a)
(Organization; Power) and 5.1(b) (Authorization; Validity) shall survive
indefinitely, (y) the representations and warranties of Seller contained in
Sections 4.9 (Taxes) shall survive until forty-five (45) days following the
expiration of the applicable statute or similar period of limitations and (z)
the representations and warranties of Seller contained in Section 4.12
(Environmental Matters) shall survive for a period of five (5) years after the
Closing Date; it being understood that in the event notice of any Claim for
indemnification under Section 10.2(a) or Section 10.3(a) shall have been given
within the applicable survival period, the representations and warranties that
are the subject of such indemnification Claim shall survive with respect to such
Claim until such time as such Claim is finally resolved.
(b) Other Indemnities By Seller. Seller's obligation to
indemnify Purchaser pursuant to Sections 10.3 (e), (f), (h), (j), (k) and (l)
shall survive until the fifth anniversary of the Closing Date. Seller's
obligation to indemnify Purchaser pursuant to Section 10.3(d) shall survive
until the fifth anniversary of the Closing Date, provided, however, such
limitation on indemnification shall not limit or affect (in any manner) any of
the indemnification obligations of Seller set forth in Sections 10.3 (g), (i),
(m), (p) and (q) which are each indemnities of specified Seller Excluded
Liabilities. Seller's obligation to indemnify Purchaser pursuant to Section
10.3(n) and (o) shall survive until the one year anniversary of the Closing
Date. Seller's obligation to indemnify Purchaser pursuant to Section 10.3(p)
shall survive until forty-five (45) days following the expiration of the
applicable statute or similar period of limitations. Seller's obligation to
indemnify Purchaser pursuant to Sections 10.3(b) and (c) shall survive
indefinitely. Seller's obligation to indemnify Purchaser pursuant to Sections
10.3 (g), (i), (m) and (q) shall survive indefinitely, notwithstanding the fact
that the liabilities indemnified under such Sections are Seller Excluded
Liabilities, as such term is defined under Section 3.2 of this Agreement. The
termination of any indemnification obligations of Seller under Section 10.3 of
this Agreement pursuant to the terms of this Section 10.1(b) shall not any way
affect, or be interpreted to affect, the fact that Purchaser has assumed and is
responsible for, solely and exclusively, the Assumed Liabilities (as defined in
Section 3.1) and under no circumstances shall Purchaser or its Affiliates be
deemed to have assumed, incurred or become responsible for any of the Excluded
Seller Liabilities (as defined in Section 3.2), which liabilities Purchaser has
clearly and explicitly not assumed, incurred or become responsible according the
terms of this Agreement. It is understood and agreed to that in the event notice
of any Claim for indemnification under ▇▇▇▇▇▇▇▇ ▇▇.▇ (▇), (▇), (▇), (▇), (▇),
(▇), (▇) (n), (o) or (p) shall have been given within the applicable survival
period set forth above, Purchaser's right to indemnification and Seller's
obligation to indemnify such Claim under any such Sections shall survive with
respect to such Claim until such time as such Claim is finally resolved. It is
further understood and agreed, that notwithstanding the termination of any
indemnification obligations under Section 10.3(j) in accordance with this
Section 10.1(b), Purchaser shall, from and after the Closing be entitled to
avail itself of all remedies available under Law or equity, including without
limitation, the right to seek contribution, injunctive relief or specific
performance, as it relates to any Claims that relate to, arise out of or result
from matters covered under Section 10.3(j).
41
10.2 Indemnification by Purchaser. From and after the Closing,
Purchaser shall indemnify, save and hold harmless Seller and its Affiliates and
each of the foregoing's respective directors and officers (solely in their
capacity as officers or directors) (the "Seller Indemnified Parties") from and
against and all Damages arising out of, resulting from or incident to:
(a) the breach or inaccuracy of any representation or warranty
made by Purchaser in this Agreement as of the Closing Date without regard to any
qualification contained in any representation or warranty as to materiality;
(b) any breach, default or lack of performance on the part of
Purchaser of any of its agreements or covenants contained in this Agreement or
in any exhibit, schedule, certificate, or instrument of transfer delivered by
Purchaser hereunder; and
(c) any Assumed Liabilities.
10.3 Indemnification by Seller. From and after the Closing, Seller
shall indemnify, save and hold harmless Purchaser and its Affiliates and each of
the foregoing's respective officers and directors (solely in their capacity as
officers or directors) (collectively, the "Purchaser Indemnified Parties") from
and against any and all Damages arising out of, resulting from or incident to:
(a) the breach or inaccuracy of any representation or warranty
made by Seller in this Agreement as of the Closing Date without regard to any
qualification contained in any representation or warranty as to materiality;
(b) any breach, default or lack of performance on the part of
Seller of any of its agreements or covenants contained in this Agreement or in
any exhibit, schedule, certificate, or instrument of transfer delivered by
Purchaser hereunder;
(c) any Seller Retained Assets;
(d) any Excluded Seller Liabilities related to, incident to or
arising out of the Acquired Business or the Purchased Assets;
(e) any (x) breach, violation (or acts, events or circumstances
with which notice or passage of time would constitute a breach or violation) of
any such Contract on or prior to the Closing Date by the Seller or Traex or any
of their Affiliates, (y) to the extent not accrued on the Closing Balance Sheet,
nonpayment of any accrued expenses, fees or amounts due under such Contracts by
Seller, Traex or their Affiliates, which amounts accrued or were otherwise due
prior to the Closing;
(f) any claims, suits, actions, or proceedings made with
respect to any of the Business Employees or former employees of the Acquired
Business for worker's compensation or similar claims whether or not insured or
self-insured, to the extent the injury occurred prior to Closing, regardless of
when the claim is filed with the appropriate agency;
42
(g) claims, suits, actions, or proceedings (including those
related or arising out of product warranties) relating to or arising out of any
product, component or other item sold prior to Closing by or on behalf of
Seller, Traex or any predecessor thereto in connection with the Acquired
Business (other than product warranty claims that arise out of or relate to
products sold after the Closing);
(h) any violation of any Environmental Law that relates to or
arises out of any act or omission or occurrence prior to Closing or
circumstances or conditions existing prior to Closing as it relates to the
Facility or the Acquired Business;
(i) any release, discharge or migration of Materials of
Environmental Concern at any time to the extent arising or originating from any
release or discharge at or from the Facility at any time on or before the
Closing;
(j) any waste materials, including, but not limited to, any
waste water, any Materials of Environmental Concern or any product, that was
off-specification, damaged or otherwise unsold, that were generated or stored at
and transported from the Facility on or before Closing;
(k) any violation of the Wisconsin Uniform Commercial Code -
Bulk Sales Act resulting from or arising out of the consummation of the
transactions contemplated by this Agreement or arising out of the Intercompany
Transaction (except for any Assumed Liability);
(l) failure to comply with the requirements of Section 4980B of
the Code relating to each M&A qualified beneficiary as defined in the
regulations issued under Section 4980B of the Code whose qualifying event
occurred prior to or in connection with the transactions contemplated by this
Agreement;
(m) any claims, suits, actions or proceedings relating to or
arising out of any bodily injury, sickness or disease arising from or relating
to any exposure to or contact with any asbestos or other allegedly injurious
materials or substances prior to the Closing Date as it relates to the Acquired
Business or the Facility;
(n) the failure to obtain any Consent prior to Closing from any
third party required under or otherwise necessary to avoid any breach, default,
violation of any anti-assignment clause, cancellation or acceleration or
triggering of rights under the Contract for Sale of Polymers between Equistar
Chemicals, LP, Polymers Division, Orbis Corporation, Poly Hi Solidur, Inc. and
Traex, dated April 16, 2001;
(o) the failure to obtain any Consent prior to Closing from any
third party required under or otherwise necessary to avoid any breach, default,
violation of any anti-assignment clause, cancellation or acceleration or
triggering of rights under Required Software Agreements;
(p) any Taxes of Seller, Traex or any Affiliate of Seller
related or incident to the Acquired Business; and
43
(q) any indebtedness for borrowed money of Seller, Traex or an
Affiliate of Seller related to the Acquired Business, including, without
limitation, any intercompany indebtednesses.
10.4 Indemnification Process. The Person making a claim for
indemnification under this Section 10 shall be, for the purposes of this
Agreement, referred to as the "Indemnified Party" (provided that for the purpose
of clause (c) below such term shall refer to the party hereto to whom such
Person is related for purposes of obtaining the benefits of this Section 10) and
the party or parties against whom such claims are asserted under this Section 10
shall be, for the purposes of this Agreement, referred to as the "Indemnifying
Party." All claims by any Indemnified Party under this Section 10 shall be
asserted and resolved as follows:
(a) Notice of Claims. In the event that (i) any claim, action,
suit, arbitration, hearing or proceeding is asserted or instituted against any
Indemnified Party by any Person other than the parties to this Agreement or
their Affiliates which could give rise to Damages for which an Indemnifying
Party could be liable to an Indemnified Party for Damages under this Agreement
(such claim, demand or Proceeding, a "Third Party Claim") or (ii) any
Indemnified Party under this Agreement shall have a claim to be indemnified for
Damages by any Indemnifying Party under this Agreement which does not involve a
Third Party Claim (such claim, a "Direct Claim" and, together with Third Party
Claims, "Claims"), the Indemnified Party shall with reasonable promptness and in
any event within 10 business days of becoming aware of such Claim send to the
Indemnifying Party a written notice specifying in reasonably detail the nature
of such Claim, the amount of Damages sought in such Claim, if known, and the
provisions of this Agreement in respect of which such right of indemnification
is claimed or arises (a "Claim Notice"), provided that a delay or defect in
notifying the Indemnifying Party shall not relieve the Indemnifying Party of its
obligations under this Agreement except to the extent that (and only to the
extent that) the Indemnifying Party is materially prejudiced by such delay or
defect.
(b) Third Party Claims. In the event of a Third Party Claim,
the Indemnifying Party shall be entitled to assume and control the defense of
such Third Party Claim and to appoint counsel of the Indemnifying Party's choice
at the expense of the Indemnifying Party to represent the Indemnified Party and
any others the Indemnifying Party may reasonably designate in connection with
such Third Party Claim (in which case the Indemnifying Party shall not
thereafter be responsible for the fees and expenses of any separate counsel
retained by any Indemnified Party except as set forth below); provided that such
counsel is reasonably acceptable to the Indemnified Party, which approval shall
not be unreasonably withheld or delayed. Notwithstanding an Indemnifying Party's
election to appoint separate counsel to represent an Indemnified Party in
connection with a Third Party Claim, an Indemnified Party shall have the right
to employ one separate counsel (plus one local counsel, if necessary), and the
Indemnifying Party shall bear the reasonable fees, costs and expenses of such
one separate counsel (plus one local counsel, if necessary) if (i) there exists
a conflict of interest (including the availability of one or more legal defenses
to the Indemnified Party which are not available to the Indemnifying Party) that
would make it inappropriate in the reasonable judgment of the Indemnified Party
for the same counsel to represent both the Indemnified Party and the
Indemnifying Party, provided that the Indemnified Party and such counsel shall
contest such Third Party Claim in good faith or (ii) if the Claim seeks
injunctive relief which, if granted could materially and adversely affect the
44
Indemnified Party or its Affiliates. The Indemnified Party shall cooperate with
the Indemnifying Party and its counsel in such defense and make available to the
Indemnifying Party all witnesses, records, materials, and information in the
Indemnified Party's possession or under the Indemnified Party's control relating
thereto as may be reasonably requested by the Indemnifying Party. In the event
the Indemnifying Party fails to assume the defense of such Third Party Claim
within thirty (30) days after receipt of notice thereof in accordance with the
terms hereof, (i) the Indemnified Party against which such Third Party Claim has
been asserted shall have the right to undertake the defense, compromise or
settlement of such Third Party Claim on behalf of, at the expense of and for the
account and risk of the Indemnifying Party using one counsel, plus one local
counsel, if necessary, and (ii) the Indemnifying Party agrees to cooperate with
the Indemnified Party in such defense and make available to the Indemnified
Party, all witnesses, records, materials and information in the Indemnifying
Party's possession or under the Indemnifying Party's control relating thereto as
may be reasonably requested by the Indemnified Party.
(c) Settlement of Third Party Claims. In connection with the
settlement or compromise of any Third Party Claim, the Indemnifying Party shall
not, without the written consent of the Indemnified Party (which consent shall
not be unreasonably withheld or delayed), (i) settle or compromise any Third
Party Claims or consent to the entry of any judgment which does not include as
an unconditional term thereof the delivery by the claimant or plaintiff to the
Indemnified Party of a written release from all liability in respect of such
Third Party Claim of all Indemnified Parties affected by such Third Party Claim
or (ii) settle or compromise any Third Party Claim if the settlement or
compromise imposes equitable remedies or material obligations on the Indemnified
Party other than financial obligations for which such Indemnified Party will be
indemnified hereunder or (iii) settle or compromise any Third Party Claim if the
Indemnified Party will be required to make any payment with respect to such
compromise or settlement due to the application of the limitations of Section
10.5. No Third Party Claim which is being defended in good faith by the
Indemnifying Party or which is being defended by the Indemnified Party in
accordance with the terms of this Agreement shall be settled or compromised by
the Indemnified Party without the written consent of the Indemnifying Party
(which consent shall not be unreasonably withheld or delayed); provided,
however, if a Third Party Claim is being defended by an Indemnified Party
pursuant to the last sentence of clause (b) above (unless the Indemnifying Party
and Indemnified Party mutually agree that the Indemnified Party shall defend
such Third Party Claim), the limitations on the Indemnified Party's right to
settle or compromise set forth in this clause (c) shall not apply to such
Indemnified Party, unless the Indemnifying Party has been advancing (in a timely
manner) payment of such Indemnified Party's costs and expenses associated with
such defense (subject to the undertaking of the Indemnified Party to reimburse
such advances in the event such costs of defense are not ultimately to be
indemnifiable under this Section 10).
(d) Reduction of Damages.
(i) To the extent any Damages of an Indemnified Party are
reduced by receipt of payment under insurance policies, which payments are not
subject to retroactive adjustment or other reimbursement to the insurer in
respect of such payment, such payments (net of the expenses of the recovery
thereof) (such net payment, a "Reimbursement") shall be credited against any
such Damages; provided, however, the pendency of such payments
45
shall not delay or reduce the obligation of the Indemnifying Party to make
payment to the Indemnified Party in respect of such Damages. If any
Reimbursement is obtained subsequent to payment by an Indemnifying Party in
respect of any Damages, such Reimbursement shall be promptly paid over to the
Indemnifying Party.
(ii) In the case any event shall have occurred which would
otherwise entitle either party to assert a claim for indemnification hereunder,
no Damages shall be deemed to have been sustained by such party to the extent of
(i) any actual Tax savings realized by such party with respect thereto (the "Tax
Benefit") and (ii) in the event of an indemnification claim for Damages for lost
profits, any Taxes that would have actually been payable as a result of such
indemnification payment being includible in the taxable income of the
Indemnified Party. Except as otherwise set forth in the preceding sentence, if
any receipt of Damages are reported as income on Purchaser's or any of
Purchaser's Affiliates income tax returns, Damages shall be increased by such an
amount necessary in order for the Indemnified Party to receive a net payment,
after paying any Taxes resulting from its receipt of any indemnification payment
for such Damages, equal to the amount of Damages otherwise determined in
accordance with this Section 10.4(d). The Tax losses, deductions, credits or
other items of the Indemnified Party resulting from Damages shall be deemed to
be realized proportionately with any other Tax losses, deductions, credits or
other items available to the Indemnified Party. To the extent there is a
determination (as defined in Section 1313(a) of the Code or any comparable
provision of state, local or foreign law) disallowing the Tax Benefit, the
Indemnifying Party shall refund to the Indemnified Party the amount of any
related reduction of Damages previously allowed pursuant to this Section
10.4(d).
(e) Access. From and after the delivery of a Claim Notice under
this Agreement, at the reasonable request of the Indemnifying Party, each
Indemnified Party shall grant the Indemnifying Party and its representatives all
reasonable access to the books, records and properties of such Indemnified Party
to the extent reasonably related to the matters to which the Claim Notice
relates. All such access shall be granted during normal business hours and shall
be granted under conditions which will not unreasonably interfere with the
business and operations of such Indemnified Party. The Indemnifying Party will
not, and shall require that its representatives do not, use (except in
connection with such Claim Notice) or disclose to any third Person other than
the Indemnifying Party's representatives or agents (except as may be required by
applicable Law) any information obtained pursuant to this Section 10.4(e) which
is designated as confidential by an Indemnified Party.
(f) Environmental Procedures. With respect to Seller's
indemnification obligations relating in any way to Environmental Laws, Materials
of Environmental Concern or Environmental Liabilities, the following provisions
shall apply:
(i) If such Claim relates to the release of Materials of
Environmental Concern at, on or under the Facility, the necessity for
investigation or remediation ("Corrective Action") shall be determined pursuant
to the Environmental Laws in effect at the Closing. If the Corrective Action is,
or may be required, in addition to providing access pursuant to Section 10.4(e)
above, Purchaser shall permit Seller to conduct its own investigation, testing
or corrective action with respect to the matter, at Seller's sole expense,
46
provided such investigation, testing or corrective action does not unreasonably
interfere with the operation of the Facility and the Acquired Business.
(ii) Purchaser and Seller shall provide the other with the
results, including analytical data, of any investigation or testing conducted by
either of them or, if available, any third party.
(iii) Except as may otherwise be required by Law, Purchaser
shall not contact any Governmental Authority with respect to the subject matter
of the indemnification Claim without prior notice to, and consultation with,
Seller.
(iv) Purchaser shall provide Seller a reasonable
opportunity to participate in any discussions or negotiations with any
Governmental Authority concerning such matter.
(v) If Corrective Action is required in any such matter
(pursuant to the standard above), Purchaser shall give Seller a reasonable
opportunity to develop and implement a plan of Corrective Action, such plan to
be subject to Purchaser's approval (not to be unreasonably withheld), and, if
requested by Seller, reasonably cooperate with Seller in the development and
implementation of such plan on a cost-effective basis.
(vi) Purchaser shall reasonably cooperate with Seller in
performing such tasks as Seller and its technical professionals and
representatives may reasonably request as being necessary to complete any
Corrective Action being undertaken by Seller pursuant to this Agreement, with
Purchaser being compensated for any expenses incurred in connection therewith
(excluding Purchaser's employee time). Without limiting the scope of the
foregoing, Purchaser shall cause its employees to reasonably cooperate with
Seller and to afford Seller, its agents, employees and technical professionals
reasonable access to relevant records relating to the matters which may be
Seller's responsibility under this Agreement, provided that such access shall
not unreasonably interfere with the operations of the Facility or the Acquired
Business.
(vii) With respect to any Corrective Action undertaken by
Seller, Seller shall be responsible for completing such Corrective Action only
to the extent necessary to obtain closure or a "no further action" designation
from the applicable Government Authority pursuant to applicable Environmental
Laws.
(g) Definition of Damages. "Damages" shall mean any and all
costs, losses, (including diminution in value) Taxes, liabilities, obligations,
damages, deficiencies and expenses (whether or not arising out of Third Party
Claims), including interest, penalties, costs of mitigation, losses in
connection with any Environmental Laws (including any clean-up or remedial
action), damages to the environment, consequential damages, lost profits and
other losses resulting from any shutdown or curtailment of operations of the
Acquired Business, damages to the environment and, reasonable attorneys' fees;
provided, that "Damages" shall not include punitive damages, exemplary damages,
multiple damages, and other penalty damages except to the extent such damages
relate to or arise out of any Third Party Claim, in which case such damages
shall be included in the definition of "Damages." The term "Damages" as used in
47
this Section 10 is not limited to matters asserted by third parties against
Seller or Purchaser, but includes Damages incurred or sustained by Seller
Indemnified Parties or Purchaser Indemnified Parties in the absence of Third
Party Claims.
10.5 Limitation on Indemnification.
(a) No amount shall be payable by any Indemnifying Party
pursuant to Section 10.2 (a) or Section 10.3(a) unless the aggregate amount of
Damages indemnifiable under Section 10.2(a) or Section 10.3(a), respectively,
exceeds $400,000 (at which point the Indemnified Party shall be entitled to the
last $300,000 of indemnifiable Damages accrued up to such threshold and all
amounts in excess of such threshold (subject to the other applicable limitations
set forth in this Section 10.5)); provided, however, that the above limitation
shall not apply to any indemnification obligations of Seller to Purchaser
Indemnified Parties arising from Seller's representations and warranties set
forth in Section 4.1(b) (Authorization; Validity), the second and third sentence
of 4.8(a) (Title to Purchased Assets), 4.9 (Taxes), and the second sentence of
Section 4.15(a) (Real Property) or indemnification obligations of any party
under any other provisions of Section 10.2 or Section 10.3.
(b) Notwithstanding anything to the contrary contained in this
Agreement, the maximum amount of indemnifiable Damages which may be recovered by
any Purchaser Indemnified Parties from Seller and by any Seller Indemnified
Parties from Purchaser arising out of, resulting from or incident to the matters
enumerated in Section 10.2(a) or Section 10.3(a) shall be an amount equal to $5
million; provided, however, that this limitation shall not apply to any
indemnification obligations of Seller to any Purchaser Indemnified Parties
arising from representations and warranties set forth in Section 4.1(b)
(Authorization; Validity), the second and third sentence of Section 4.8(a)
(Title to Purchased Assets), Sections 4.9 (Taxes), and the second sentence of
Section 4.15(a) (Real Property) or indemnification obligations of any party
under any other provisions of Section 10.2 or Section 10.3.
(c) The maximum amount of lost profits and other losses
resulting from any shutdown or curtailment of operations of the Acquired
Business which may be recovered as Damages by any Purchaser Indemnified Parties
from Seller arising out of, resulting from or incident to the matters enumerated
in Section 10.3 shall be an amount equal to $6,000,000.
10.6 Exclusive Remedy. Except as provided in Section 10.1(b) and
except for equitable relief, including injunctive relief or specific
performance, to which any party hereto may be entitled, from and after the
Closing, the indemnification obligations of Purchaser and Seller under this
Section 10 shall constitute the sole and exclusive remedies of Seller and
Purchaser, respectively, for the breach of any covenant or representation or
warranty in this Agreement by the Seller or the Purchaser, as the case may be.
11. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the domestic laws of the State of Wisconsin, without giving
effect to any choice of law or conflict of law provision or rule (whether of the
State of Wisconsin or any other jurisdiction) that would cause the application
of the laws of any jurisdiction other than the State of Wisconsin. No party
hereto, solely by virtue of executing this Agreement, shall be deemed to
48
have submitted to the personal jurisdiction of any forum or waived any objection
such party may have as to proper venue of any forum.
12. NOTICES. Any notices or other communications required or permitted
hereunder shall be in writing and shall be considered delivered in all respects
when it has been delivered by hand or overnight courier, by acknowledged
facsimile transmission followed by the original mailed by certified mail, return
receipt requested, or three (3) days after it is mailed by certified mail,
return receipt requested, first class postage prepaid, addressed as follows:
To Purchaser: With a copy to:
------------ --------------
Libbey Inc. ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇
P.O. Box 10060 Sears Tower, Suite 5800
Toledo, OH 43699 ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇ Fax: ▇▇▇-▇▇▇-▇▇▇▇
To Seller: With a copy to:
--------- --------------
Menasha Corporation ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Attn: Art Huge ▇▇▇▇▇▇▇ & ▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇.▇. ▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇ Fax: ▇▇▇-▇▇▇-▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
And
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Menasha Corporation
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇.▇. ▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
or such other addresses as shall be similarly furnished in writing by either
party.
13. EXHIBITS. All exhibits and schedules hereto are by reference
incorporated herein and made a part hereof.
14. ENTIRE AGREEMENT; BINDING EFFECT. This Agreement (including all
schedules and exhibits attached hereto) contains the entire agreement between
the parties hereto with respect to the transactions contemplated herein, and
there are no agreements or understandings between the parties other than those
set forth herein or executed simultaneously or in connection herewith. This
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective heirs, legal representatives, successors and assigns.
49
15. HEADINGS. The headings in this Agreement are inserted for
convenience only and shall not constitute a part hereof.
16. EXPENSES. Except as otherwise specifically provided herein, each of
the parties hereto shall be solely responsible for and pay its own consulting,
accounting, legal, and other charges and expenses incurred by such party in
connection with the negotiation, execution and performance of this Agreement,
the related agreements and the transactions contemplated hereby and thereby
without obligation to pay or contribute to the expenses incurred by any other
party; provided, however, (a) all fees and expenses incurred in connection with
the title policy (including all endorsements) delivered pursuant to Section
6.2(a)(vi) of this Agreement shall be borne solely by the Seller, (b) all fees
and expenses incurred in connection with obtaining the real estate survey
referred to in Section 6.2(a)(v) of this Agreement shall be borne solely by the
Purchaser, and (c) all fees and expenses incurred by Purchaser in obtaining any
environmental reports or other assessments or and appraisals of the Acquired
Business or Purchased Assets shall be borne solely by Purchaser.
17. AMENDMENT. This Agreement may be amended, modified, superseded or
cancelled, and any of the terms, covenants, representations, warranties or
conditions hereof may be waived, only by a written instrument executed on behalf
of all of the parties hereto or, in the case of a waiver, by the party waiving
compliance.
18. WAIVER. The failure of any party at any time or times to require
performance of any provision of this Agreement shall in no manner affect the
right to enforce that provision or any other provision hereof at any time
thereafter, except as specifically limited herein. Any waiver of any term or
condition shall not be construed as a waiver of any subsequent breach, or a
subsequent waiver of the same term or condition, or the waver of any other term
or condition.
19. TIME OF THE ESSENCE. Time is deemed to be of the essence with
respect to all of the terms, covenants, representations and warranties of this
Agreement.
20. ASSIGNMENT. Except as contemplated by Section 2.3(e), this
Agreement may not be assigned by operation of law or otherwise by Seller without
the prior written consent of Purchaser. This Agreement may not be assigned by
operation of law or otherwise by Purchaser without the prior written consent of
Seller, except, Purchaser may, without prior consent of any other party hereto,
transfer or assign by operation of law or otherwise this Agreement to any
Affiliate or subsidiary of Purchaser, provided that in the event Purchaser
assigns all or a portion of its rights and obligations under this Agreement,
Purchaser hereby unconditionally and irrevocably guarantees to the other parties
hereto the prompt and full discharge by such subsidiary or Affiliate of all of
Purchaser's obligations under this Agreement in accordance with the terms hereof
and Seller shall not be required to pursue any remedy against such subsidiary or
Affiliate hereunder prior to pursuing such remedy against Purchaser.
21. SPECIFIC PERFORMANCE. Each of the parties acknowledges and agrees
that the other party would be damaged irreparably in the event any of the
provisions of this Agreement are not performed in accordance with their specific
terms or otherwise are breached. Accordingly, each of the parties agrees that
the other party shall be entitled to an injunction or
50
injunctions to prevent breaches of the provisions of this Agreement and to
enforce specifically this Agreement.
22. NO THIRD PARTY BENEFICIARY. Except as provided in Section 10 as to
indemnified parties and except as contemplated by Section 2.3(e), this Agreement
shall be binding upon and inure solely to the benefit of the parties hereto and
their permitted assigns and nothing herein, express or implied, is intended to
or shall confer upon any other Person any legal or equitable right, benefit or
remedy of any nature whatsoever under or by reason of this Agreement.
23. SEVERABILITY. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any Law or public policy, all
other terms 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 by this Agreement 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 in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner in order
that the transactions contemplated by this Agreement are consummated as
originally contemplated to the greatest extent possible.
24. COUNTERPARTS; FACSIMILE SIGNATURE. This Agreement may be executed
in counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same agreement. Each of the parties to
this Agreement agrees that a signature affixed to a counterpart of this
Agreement and delivered by facsimile by any Person is intended to be its, his or
her signature and shall be valid, binding and enforceable against such Person.
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IN WITNESS WHEREOF, each of the parties hereto has executed this Asset
Purchase Agreement all as of the day and year first above written.
SELLER:
MENASHA CORPORATION
By: /s/ ▇▇▇▇▇▇ ▇. Huge
-----------------------------------------
Its: Vice President, CFO & Treasurer
----------------------------------------
PURCHASER:
LIBBEY INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-----------------------------------------
Its: Vice President
----------------------------------------
52
EXHIBITS
--------
Exhibit A Assignment and Assumption Agreement
---------
Exhibit B Transition Agreement
---------
Exhibit C-1 Opinion of ▇▇▇▇▇▇▇ & ▇▇▇▇▇ LLP
-----------
Exhibit C-2 Opinion of In-House Counsel for Seller
-----------
Exhibit D Opinion of General Counsel of Purchaser
---------
SCHEDULES
---------
Schedule 1.1 Existing Plans
------------
Schedule 1.2 Permitted Encumbrances
------------
Schedule 1.3 Facility
------------
Schedule 1.4 Reference Balance Sheet
------------
Schedule 1.5 Subject Contracts
------------
Schedule 2.1 Scheduled Intellectual Property
------------
Schedule 2.2(f) Excluded Assets - Contracts
---------------
Schedule 2.2(h) Excluded Assets - Related Party Accounts and Notes Receivable
---------------
Schedule 2.2(k) Other Seller Retained Assets
---------------
Schedule 2.4(b) Working Capital Methodologies
---------------
Schedule 5.1(c) Purchaser Compliance; Binding Effect
---------------
Schedule 6.2(a)(iii) Required Consents
--------------------
Schedule 6.2(a)(v) Survey Requirements
------------------
Schedule 6.2(a)(vi) Title Insurance Requirements
-------------------
Schedule 7.3 Resin Supplies
------------
Schedule 9.4(a)(i)
Schedule 9.4(a)(ii)
Schedule 9.4(a)(iii)
DISCLOSURE SCHEDULE
-------------------
Section 4.1(a) Jurisdictions
Section 4.1(b) Authorization; Validity
Section 4.1(c) Seller Compliance; Binding Effect
Section 4.2 Governmental Consents
Section 4.3 Financial Statements
Section 4.4 Absence of Changes
Section 4.5 Powers of Attorney
Section 4.6 Litigation
Section 4.7(a) Licenses and Permits
Section 4.7(b) Compliance with Laws
Section 4.8(a) Title to Purchased Assets
Section 4.8(b) Condition of Purchased Assets
Section 4.9(a) Taxes - Filing and Payment
Section 4.9)b) Taxes - Withholding and Collection
Section 4.9(c) Taxes - Notices
Section 4.9(d) Taxes - Adjustments
Section 4.9(e) Taxes - Liens
Section 4.9(f) Taxes - Withholding Provision
Section 4.9(g) Taxes - Proceedings
Section 4.10(a) Material Contracts
Section 4.10(b) Defaults
Section 4.10(a)(xvi) Intellectual Property (other than Licensed Software Used in
the Operation of the Acquired Business)
Section 4.10(a)(xvii) Licensed Software
Section 4.11(a) Intellectual Property
Section 4.11(b) Ownership
Section 4.11(c) Intellectual Property Licenses
Section 4.11(d) Owned Software
Section 4.11(e) No Violations
Section 4.11(f) Assignments
Section 4.12(a) Environmental Matters - Compliance
Section 4.12(b) Environmental Matters - Licenses and Permits
Section 4.12(c) Environmental Matters - Claims
Section 4.12(d) Materials of Environmental Concern
Section 4.13 Transactions with Affiliates
Section 4.14(a) Benefit Plans
Section 4.14(b) Benefit Plans - Compliance
Section 4.14(c) Benefit Plans - Pension Plans
Section 4.14(d) Benefit Plans - Post-Retirement Coverage
Section 4.15(a) Real Property Ownership
Section 4.15(b) Real Property - Other Matters
Section 4.15(c) Real Property Laws
Section 4.15(d) Real Property Tax Assessments
Section 4.16 Insurance Policies
Section 4.17(a) Inter-company Transaction and 2001 Seller Restructuring - Corporate Power
and Authority
Section 4.17(b) Inter-company Transaction and 2001 Seller Restructuring - Required
Documents
Section 4.17(c) Inter-company Transaction and 2001 Seller Restructuring - Conflicts
Section 4.18 Inventories
Section 4.19 Accounts Receivable
Section 4.20 Suppliers
2
Section 4.21 Customers
Section 4.22 Warranties
Section 4.23 Rebates
Section 4.24(a) Inter-company Contracts
Section 4.24(b) Affiliate Services in Effect
Section 4.25 Employees
Section 4.26 Brokers, Finders
3
