Annual Report of a Foreign Private Issuer — Form 20-F
Filing Table of Contents
Document/Exhibit Description Pages Size
1: 20-F Annual Report of a Foreign Private Issuer 51 229K
2: EX-5 Opinion re: Legality 1 6K
3: EX-13 Annual or Quarterly Report to Security Holders 40 152K
4: EX-14 Material Foreign Patent 14 51K
5: EX-15 Letter re: Unaudited Interim Financial Information 14 51K
6: EX-16 Letter re: Change in Certifying Accountant 59 240K
STOCK PURCHASE AGREEMENT
BY AND AMONG
INTERTAPE POLYMER GROUP INC.,
COATING TECHNOLOGIES INTERNATIONAL, INC.
AND
ANCHOR CONTINENTAL HOLDINGS, INC.
DATED AS OF AUGUST 19, 1998
TABLE OF CONTENTS
Preamble . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE 1 PURCHASE AND SALE. . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Purchase and Sale. . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Time and Place of Closing. . . . . . . . . . . . . . . . . . . . 2
1.3 Escrow Agreement . . . . . . . . . . . . . . . . . . . . . . . . 3
1.4 Purchase Price Payment; Closing Consolidated Stockholders'
Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.5 Funded Indebtedness. . . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE 2 REPRESENTATIONS AND WARRANTIES OF SELLER AND CTI . . . . . . . . 7
2.1 Organization, Standing, and Power. . . . . . . . . . . . . . . . 7
2.2 Authority of Seller and CTI; No Breach By Agreement. . . . . . . 7
2.3 Capital Stock. . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.4 Target Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . 9
2.5 Financial Statements . . . . . . . . . . . . . . . . . . . . . . 9
2.6 Absence of Undisclosed Liabilities . . . . . . . . . . . . . . . 9
2.7 Absence of Certain Changes or Events . . . . . . . . . . . . . . 10
2.8 Tax Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.9 Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.10 Intellectual Property. . . . . . . . . . . . . . . . . . . . . . 12
2.11 Reserved . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.12 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . 12
2.13 Labor Relations. . . . . . . . . . . . . . . . . . . . . . . . . 13
2.14 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . 13
2.15 Material Contracts . . . . . . . . . . . . . . . . . . . . . . . 15
2.16 Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . . 16
2.17 Regulatory Matters . . . . . . . . . . . . . . . . . . . . . . . 16
2.18 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
2.19 Affiliate Transactions . . . . . . . . . . . . . . . . . . . . . 16
2.20 Substantial Customers and Suppliers. . . . . . . . . . . . . . . 16
2.21 Accounting Practices . . . . . . . . . . . . . . . . . . . . . . 17
2.22 Corporate Name . . . . . . . . . . . . . . . . . . . . . . . . . 17
2.23 Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
2.24 Air Quality. . . . . . . . . . . . . . . . . . . . . . . . . . . 17
2.25 No Other Representations or Warranties . . . . . . . . . . . . . 17
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF BUYER. . . . . . . . . . . . . 18
3.1 Organization, Standing, and Power. . . . . . . . . . . . . . . . 18
3.2 Authority; No Breach By Agreement. . . . . . . . . . . . . . . . 18
3.3 Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . . 19
3.4 Regulatory Matters . . . . . . . . . . . . . . . . . . . . . . . 19
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3.5 Investment Intent. . . . . . . . . . . . . . . . . . . . . . . . 19
3.6 No Other Representations or Warranties . . . . . . . . . . . . . 19
ARTICLE 4 CONDUCT OF BUSINESS PENDING CONSUMMATION . . . . . . . . . . . . 19
4.1 Affirmative Covenants With Respect to Target . . . . . . . . . . 19
4.2 Negative Covenants With Respect to Target. . . . . . . . . . . . 20
4.3 Covenants of Buyer . . . . . . . . . . . . . . . . . . . . . . . 22
4.4 Adverse Changes in Condition . . . . . . . . . . . . . . . . . . 22
ARTICLE 5 ADDITIONAL AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . 23
5.1 Applications; Antitrust Notification . . . . . . . . . . . . . . 23
5.2 Agreement as to Efforts to Consummate. . . . . . . . . . . . . . 23
5.3 No Solicitation of Offers. . . . . . . . . . . . . . . . . . . . 23
5.4 Investigation and Confidentiality. . . . . . . . . . . . . . . . 24
5.5 Press Releases . . . . . . . . . . . . . . . . . . . . . . . . . 25
5.6 Reserved . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
5.7 Employee Benefits and Contracts. . . . . . . . . . . . . . . . . 25
5.8 PostClosing Access By Seller and CTI . . . . . . . . . . . . . . 26
5.9 Office Space and Equipment for Seller and CTI. . . . . . . . . . 26
5.10 Resignation of Directors . . . . . . . . . . . . . . . . . . . . 27
5.11 NonCompetition . . . . . . . . . . . . . . . . . . . . . . . . . 27
5.12 Tax Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . 28
ARTICLE 6 CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE. . . . . . . . 31
6.1 Conditions to Obligations of Each Party. . . . . . . . . . . . . 31
6.2 Conditions to Obligations of Buyer . . . . . . . . . . . . . . . 32
6.3 Conditions to Obligations of CTI and Seller. . . . . . . . . . . 33
ARTICLE 7 INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . . . . 34
7.1 Agreements to Indemnify. . . . . . . . . . . . . . . . . . . . . 34
7.2 Procedures for Indemnification . . . . . . . . . . . . . . . . . 36
7.3 Third Party Claims . . . . . . . . . . . . . . . . . . . . . . . 37
7.4 Indemnification Exclusive Remedy . . . . . . . . . . . . . . . . 38
7.5 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
7.6 Time Limitations . . . . . . . . . . . . . . . . . . . . . . . . 38
7.7 Limitations as to Amount . . . . . . . . . . . . . . . . . . . . 39
7.8 Tax Effect and Insurance . . . . . . . . . . . . . . . . . . . . 39
7.9 Escrow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
7.10 Subrogation. . . . . . . . . . . . . . . . . . . . . . . . . . . 40
7.11 Arbitration. . . . . . . . . . . . . . . . . . . . . . . . . . . 40
ARTICLE 8 TERMINATION. . . . . . . . . . . . . . . . . . . . . . . . . . . 40
8.1 Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . 40
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8.2 Effect of Termination. . . . . . . . . . . . . . . . . . . . . . 41
ARTICLE 9 MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . 42
9.1 Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . 42
9.2 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
9.3 Brokers and Finders. . . . . . . . . . . . . . . . . . . . . . . 49
9.4 Confidentiality. . . . . . . . . . . . . . . . . . . . . . . . . 49
9.5 No Third Party Beneficiary . . . . . . . . . . . . . . . . . . . 50
9.6 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . 50
9.7 Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
9.8 Waivers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
9.9 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
9.10 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
9.11 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . 52
9.12 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . 52
9.13 Captions; Articles and Sections. . . . . . . . . . . . . . . . . 52
9.14 Interpretations. . . . . . . . . . . . . . . . . . . . . . . . . 52
9.15 Enforcement of Agreement . . . . . . . . . . . . . . . . . . . . 52
9.16 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . 52
9.17 Updating Target Disclosure Memorandum. . . . . . . . . . . . . . 53
9.18 NonCompetition Agreements. . . . . . . . . . . . . . . . . . . . 53
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is made and entered into
as of August 19, 1998, by and among INTERTAPE POLYMER GROUP INC. ("Buyer"), a
Canadian corporation; COATING TECHNOLOGIES INTERNATIONAL, INC., a Delaware
corporation ("CTI"); and ANCHOR CONTINENTAL HOLDINGS, INC. ("Seller"), a
Delaware corporation.
PREAMBLE
CTI is the record and beneficial owner of all of the issued and
outstanding shares of Common Stock of Seller, and Seller is the record and
beneficial owner of all of the issued and outstanding shares of Common Stock of
Anchor Continental, Inc. ("Anchor Continental"), a Delaware corporation (the
shares of Anchor Continental referred to herein as the "Shares"). Anchor
Continental is the record and beneficial owner of all of the issued and
outstanding shares of Common Stock of Anchor Continental (Canada), Inc. ("Anchor
Canada"), a company organized under the laws of the Province of Ontario (the
"Anchor Canada Shares"). Seller desires to sell all of the Shares to Buyer, and
Buyer desires to purchase the Shares from Seller, upon the terms and subject to
the conditions set forth in this Agreement. The transactions described in this
Agreement are subject to the expiration of the required waiting period under the
HSR Act, and the satisfaction of certain other conditions described in this
Agreement. Unless referred to individually, Anchor Canada and Anchor
Continental are collectively referred to as "Target".
Certain terms used in this Agreement are defined in Section 9.1 of this
Agreement.
NOW, THEREFORE, in consideration of the above and the mutual warranties,
representations, covenants, and agreements set forth herein, the parties agree
as follows:
ARTICLE 1
PURCHASE AND SALE
1.1 PURCHASE AND SALE. Upon the terms and subject to the conditions of
this Agreement:
(a) Seller shall sell to Buyer, and Buyer shall purchase from
Seller, the Shares at the Closing (such transaction referred to herein as the
"Stock Purchase").
(b) Buyer shall acquire from CTI the intercompany indebtedness
owed by Anchor Canada to CTI as of the Closing, such amount being approximately
$2,000,000 as of the date of this Agreement, for the amount of such indebtedness
due at the Closing Date and Buyer shall pay such amount to CTI at the Closing.
(c) The aggregate purchase price for the Shares and the agreement
set forth in Section 5.11 (the "Purchase Price") is One Hundred Five Million
United States Dollars (U.S. $105,000,000) in cash less (i) the intercompany
indebtedness owed by Anchor Canada to CTI as described in Section 1.1(b) and
(ii) the consideration to be paid to D. Thomas Divird and Daniel E. Stansky for
the non-competition agreements described in Section 9.18 below. The Purchase
Price, which shall be subject to adjustment as provided in Section 1.4 below,
shall be paid as provided in Section 1.2(b).
1.2 TIME AND PLACE OF CLOSING.
(a) The closing of the transactions contemplated hereby (the
"Closing") will take place at 9:00 a.m. Eastern Standard Time, on the Closing
Date (defined below), or at such other time as the Parties, acting through their
authorized officers, may mutually agree. The Closing shall be held at the law
offices of Morgan, Lewis & Bockius LLP located at 101 Park Avenue, New York, New
York 10178 or such location as may be mutually agreed upon by the Parties. The
Parties shall use their reasonable efforts to cause the Closing to occur on the
first business day following the later to occur of (i) the effective date
(including expiration of any applicable waiting period) of the last required
Consent of any Regulatory Authority having authority over and approving or
exempting the Stock Purchase and (ii) after all the remaining conditions set
forth in Article 6 are satisfied or waived (such day referred to herein as the
"Closing Date").
(b) At the Closing:
(i) Buyer shall deliver (v) to each of D. Thomas Divird and
Daniel E. Stansky, the consideration for the non-competition agreements
described in Section 9.18 below, (w) to CTI, prior to 1:00 p.m. Eastern
Standard Time, immediately available funds by wire transfer to an account
specified by CTI in the amount required to acquire the principal and
accrued and unpaid interest on the intercompany indebtedness described in
Section 1.1(b), (x) to Seller, prior to 1:00 p.m. Eastern Standard Time,
immediately available funds by wire transfer to an account specified by
Seller in an amount equal to the Purchase Price MINUS the Escrow Amount
(described below), (y) to Seller the opinion, certificates and other
documents set forth in Section 6.3, (z) to SunTrust Bank, Atlanta, a
Georgia banking corporation (the "Escrow Agent"), prior to 1:00 p.m.
Eastern Standard Time, in immediately available funds by wire transfer to
the escrow account established pursuant to the Escrow Agreement (defined
below) an amount equal to the Escrow Amount. For purposes of this
Agreement, the Escrow Amount shall mean $5,250,000 LESS any amount that
CTI is required, pursuant to an agreement involving the recent sale of its
former subsidiary, The Holliston-Mills, Inc., to place in an escrow or a
letter of credit (with a maximum dollar amount of $3,500,000) for
potential consolidated federal and state income Taxes for periods prior to
Closing (the "Tax Escrow Amount"); and
(ii) CTI and Seller shall deliver to Buyer (v) the
certificate or certificates representing the Shares, either duly endorsed
for transfer to Buyer or accompanied by
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appropriate stock powers, (w) the promissory note evidencing the
intercompany debt described in Section 1.1(b) duly endorsed for
transfer to Buyer or accompanied by an appropriate note power, (x) the
opinion, certificates and other documents set forth in Section 6.2, (y)
resignations from each member of Target's Board of Directors, and (z)
sufficient evidence to reasonably satisfy Buyer that CTI and Seller
have paid the Tax Escrow Amount to an escrow agent or established a
letter of credit for such amount.
1.3 ESCROW AGREEMENT. In connection with the Closing, Buyer, Seller and
CTI shall have executed and delivered to the other an escrow agreement (the
"Escrow Agreement"), which shall be in the form of Exhibit 1.3.
1.4 PURCHASE PRICE PAYMENT; CLOSING CONSOLIDATED STOCKHOLDERS' EQUITY.
(a) At the Closing, Buyer shall pay to Seller the Purchase
Price. The Purchase Price shall be subject to post-Closing adjustment as
provided in subsection (b) below. Payment of the Purchase Price and any
post-Closing adjustments thereto in favor of Seller shall be made by Buyer on
the due date therefor by wire transfer of immediately available funds to
accounts designated in writing by Seller. Payment of any post-Closing
adjustment to the Purchase Price in favor of Buyer shall be made on the due
date therefor by Seller to Buyer by wire transfer of immediately available
funds to an account designated in writing by Buyer.
(b) The Purchase Price shall be adjusted up or down after the
Closing based on the difference, if any, between the "Estimated Consolidated
Stockholders' Equity" of Target and the actual Consolidated Stockholders' Equity
of Target, in each instance as of the Closing Date.
(i) The Estimated Consolidated Stockholders' Equity will be
calculated using $6,795,000 as the base, such amount being the Estimated
Consolidated Stockholders' Equity as at August 29, 1998. If the Closing
occurs on or before September 6, 1998, the Estimated Consolidated
Stockholders' Equity will be $6,795,000. For each day after September 6,
1998 up to and including September 27, 1998 that the Closing does not
occur, the Estimated Consolidated Stockholders' Equity will be increased
by $8,571. For each day after September 27, 1998 up to and including
October 3, 1998 that the Closing does not occur, the Estimated
Consolidated Stockholders' Equity will be increased by $17,143. No
further increases will occur through October 10, 1998. For each day after
October 10, 1998 up to and including October 31, 1998 that the Closing
does not occur, the Estimated Consolidated Stockholders' Equity will be
increased by $8,571. For each day after October 31, 1998 up to and
including November 7, 1998 that the Closing does not occur, the Estimated
Consolidated Stockholders' Equity will be increased by $17,143. Further
increases in the Estimated Consolidated Stockholders' Equity will be based
on repeating 28 day cycles: nil for the first seven days, $8,571 per day
for each of the next 14 days and $17,143 for each of the final seven days
of the 28 day cycle.
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(ii)(a) Promptly following the Closing Date, Buyer shall
cause Target to fully cooperate with Seller in the preparation of a
balance sheet of the Target Entities as of the Closing Date (the
"Closing Balance Sheet"). For purpose of the Closing Balance Sheet (and
notwithstanding the provisions of Section 1.5 of this Agreement) Funded
Indebtedness shall not be eliminated but shall be reflected on the
Closing Balance Sheet. Seller shall engage PricewaterhouseCoopers
("Seller's Accountants") to audit the Closing Balance Sheet, at
Seller's sole expense. Seller shall instruct Seller's Accountants to
prepare the Closing Date Financial Statements (defined below) in
accordance with GAAP on a basis consistent with previous years and to
audit the Closing Balance Sheet and related statement of income and
stockholders' equity in accordance with U.S. generally accepted
auditing standards. Seller shall prepare all letters and reports
reasonably requested by Seller's Accountants in connection with the
preparation of the Closing Date Financial Statements. During the
course of the audit, Seller shall instruct Seller's Accountants to keep
Ernst & Young LLP ("Buyer's Accountants") regularly informed as to
progress and to make available to Buyer's Accountants the working
papers of Seller's Accountants, subject to such customary requirements
as Seller's Accountants may impose with respect to access to its
working papers. As soon as practicable, but no later than 60 days
after the Closing, Seller shall cause Seller's Accountants to deliver
to Buyer the draft audited Closing Balance Sheet, related statements of
income and stockholders' equity, together with the draft opinion
thereon of Seller's Accountants (all such documents, collectively the
"Closing Date Financial Statements"). Target's actual Consolidated
Stockholders' Equity as indicated in the draft audited Closing Balance
Sheet shall become final and binding on the Parties on the thirtieth
(30th) day following delivery thereof to Buyer unless Seller or CTI, on
the one hand, or Buyer, on the other hand, gives written notice to the
other of its dispute thereof (a "Notice of Disagreement"). Any Notice
of Disagreement shall specify in reasonable detail the nature of any
disagreement so asserted. If a timely Notice of Disagreement is
delivered by Buyer, on the one hand, or Seller or CTI, on the other
hand, as the case may be, to the other, then the draft audited Closing
Balance Sheet shall become final and binding on the Parties on the
earlier of: (1) the date Buyer, on the one hand, and Seller or CTI, on
the other hand, resolve in writing any differences they have with
respect to any matter specified in a Notice of Disagreement; and (2)
the date any matters properly in dispute are finally resolved by the
Settlement Accountants (as defined below). Whichever Party delivers a
Notice of Disagreement, the other Party and its accountants shall be
entitled to review the Notice of Disagreement and the other Party's
accountants' working papers relating thereto. During the thirty (30)
days immediately following the delivery of any Notice of Disagreement,
the Parties shall in good faith seek to resolve in writing any
differences which they may have with respect to any matter specified in
such Notice of Disagreement. In the event any Party proposes any
adjustments during such thirty (30) day period, all Parties shall use
their reasonable efforts to resolve by written agreement (the "Agreed
Adjustments") any differences and, in the event and to the extent the
Parties so resolve any such differences, then such difference so
resolved shall be final and binding on the Parties, and, if all such
differences are resolved by Agreed Adjustments, the amount of actual
Consolidated Stockholders' Equity at the Closing Date thereby
determined shall be final and binding on
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the Parties. At the end of such 30-day period, either Seller or CTI,
on the one hand, or Buyer, on the other hand, may submit to the
Settlement Accountants for resolution any and all matters which remain
in dispute and which were included in any Notice of Disagreement, and
instruct the Settlement Accountants to review and resolve (in
accordance with GAAP and this Agreement) all matters which remain in
dispute. The resolution of any such disputed matters by the Settlement
Accountants shall be final and binding on the Parties. The Settlement
Accountants' resolution of any matters in dispute, shall become final
and binding on the Parties on the date the Settlement Accountants
deliver their final resolution to the Parties or the date on which
Buyer, on the one hand, and Seller and CTI, on the other hand, agree in
writing on the resolution of any remaining unresolved matters. As used
herein, the term "Settlement Accountants" shall mean a nationally
recognized firm of independent certified accountants (who have not
performed services for any of the Parties or their respective
Affiliates within the last five (5) years), selected by mutual
agreement of Seller and CTI, on the one hand, and Buyer, on the other
hand. The costs and expenses of the Settlement Accountants shall be
borne 50% by Buyer and 50% by Seller and CTI.
(ii)(b) The actual Consolidated Stockholders' Equity as of
the Closing Date shall be the shareholders' consolidated equity reflected
on the draft audited Closing Balance Sheet, adjusted as follows:
(1) downward by the amount that provisions for return on
gross asset bonus plans falls below $661,000;
(2) upward in the amount that the combined net state and
federal income tax provision exceeds $605,422, or
downwards in the amount that the combined net state and
federal income tax provision is less than $605,422;
(3) downward for any reduction in the total of the bad debt
reserves, vacation accruals, medical accruals,
obsolete/slow moving inventory provisions and impaired
asset reserves (which aggregate reserves are estimated
to be $2,593,000) to the extent such reduction exceeds
the total inventory revaluation adjustment required
after August 1, 1998; and
(4) downward for any business interruption claims
receivable.
(iii) In the event the actual Consolidated Stockholders'
Equity, as finally determined, is greater than the Estimated Consolidated
Stockholders' Equity, Buyer shall pay Seller the difference. In the event
the amount of the actual Consolidated Stockholders' Equity, as finally
determined, is less than the Estimated Consolidated Stockholders' Equity,
Seller shall pay the difference to Buyer. Any payments owing under this
clause (iii) shall be due and payable three (3) Business Days after the
actual Consolidated Stockholders'
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Equity has been finally determined in accordance with the procedures
outlined in clauses (i) and (ii) above and shall include interest
thereon at the Prime Rate as reported on the Closing Date for the
period of time beginning with the day after the Closing Date and ending
on the payment date.
(iv) In addition, Buyer shall pay to Seller immediately upon
receipt by Anchor Continental any net proceeds with respect to Anchor
Continental's business interruption insurance and the lightening strike
referred to in Section 2.7 of the Target Disclosure Memorandum. Seller
shall retain the complete authority to negotiate, collect and settle such
insurance claim. Buyer agrees to cooperate in good faith with Seller in
Seller's negotiations, collection efforts and settlement of any such
claim.
1.5 FUNDED INDEBTEDNESS.
(a) On the Closing Date, CTI or Seller shall deliver to the
holders of Funded Indebtedness an amount sufficient to repay all Funded
Indebtedness outstanding as of the Closing Date, or otherwise eliminate such
Funded Indebtedness, provided any action taken by CTI or Seller to eliminate
such Funded Indebtedness shall be reasonably acceptable to Buyer, with the
result that immediately following Closing, there will be no further monetary
obligations of Target with respect to any Funded Indebtedness outstanding
immediately prior to the Closing, and provided further, that neither Seller nor
CTI shall pay the indebtedness referred to in Section 1.1(b). Seller and CTI
may direct Buyer to direct part of the Purchase Price to repay such Funded
Indebtedness, with a concomitant reduction in the Purchase Price to be received
by Seller.
(b) In the event Funded Indebtedness reflected on the audited
Closing Balance Sheet exceeds $31,024,000 (which amount is the sum of a
revolving loan of $1,049,000, a term loan of $5,549,000, an Anchor Continental
note payable to CTI in the amount of $22,494,000 and an Anchor Canada note
payable to CTI in the amount of $1,932,000), Buyer will pay to Seller an amount
equal to the difference between such amount and the actual amount of Funded
Indebtedness (as reflected on the audited Closing Balance Sheet). Similarly, in
the event Funded Indebtedness reflected on the audited Closing Balance Sheet is
less than $31,024,000, Seller will pay to Buyer an amount equal to the
difference between such amount and the actual amount of Funded Indebtedness (as
reflected on the audited Closing Balance Sheet).
(c) Buyer agrees to, and will, reimburse Seller dollar for dollar
for all capital expenditure disbursements made by Target during the period
commencing on August 17, 1998 and continuing through the date immediately
preceding the Closing Date, which disbursements are actually cleared by Target's
banks during such period.
(d) Payments under (b) and (c) above will be paid at Closing or
within two (2) working days following the Closing.
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ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF SELLER AND CTI
Seller and CTI, jointly and severally, represent and warrant to Buyer as
follows:
2.1 ORGANIZATION, STANDING, AND POWER. Anchor Continental is a
corporation duly organized, validly existing, and in good standing under the
Laws of the State of Delaware and Anchor Canada is duly incorporated and validly
existing under the laws of the Province of Ontario, and each Target has the
corporate power and authority to carry on its business as now conducted and to
own, lease and operate its material Assets. Each Target is duly qualified or
licensed to transact business as a foreign corporation in good standing in the
States of the United States and foreign jurisdictions where the character of its
Assets or the nature or conduct of its business requires it to be so qualified
or licensed, except for such jurisdictions in which the failure to be so
qualified or licensed is not reasonably likely to have, individually or in the
aggregate, a Target Material Adverse Effect. The minute books and other
organizational documents for each Target have been made available to Buyer for
its review and, except as disclosed in Section 2.1 of the Target Disclosure
Memorandum, are correct and complete in all material respects as in effect as of
the date of this Agreement.
2.2 AUTHORITY OF SELLER AND CTI; NO BREACH BY AGREEMENT.
(a) Each of Seller and CTI has the right, power, authority, and
capacity to execute and deliver this Agreement and Seller's Closing Documents,
as applicable, and to perform its obligations under this Agreement and Seller's
Closing Documents and to consummate the transactions contemplated hereby and
thereby. The execution, delivery and performance by each of Seller and CTI of
this Agreement and, except for the CTI shareholder approval referenced below,
Seller's Closing Documents, and the consummation by each of Seller and CTI of
the transactions contemplated hereby and thereby have been duly and validly
approved by each of Seller and CTI and, except for the CTI shareholder approval
referenced below, no other action on the part of either Seller or CTI is
necessary to authorize the execution, delivery and performance of this Agreement
and Seller's Closing Documents and the consummation of the transactions
contemplated hereby and thereby. This Agreement has been duly executed and
delivered by each of Seller and CTI and represents a legal, valid, and binding
obligation of each of Seller and CTI, enforceable against each of Seller and CTI
in accordance with its terms (except in all cases as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, receivership,
conservatorship, moratorium, or similar Laws affecting the enforcement of
creditors' rights generally and except that the availability of the equitable
remedy of specific performance or injunctive relief is subject to the discretion
of the court before which any proceeding may be brought). Subject to CTI
shareholder approval, upon the execution and delivery by CTI and Seller of
Seller's Closing Documents, Seller's Closing Documents will constitute the
legal, valid, and binding obligations of CTI and Seller, enforceable against CTI
and Seller, as applicable, in accordance with their respective terms.
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(b) Neither the execution and delivery of this Agreement by CTI or
Seller, nor the consummation by CTI or Seller of the transactions contemplated
hereby, nor compliance by Seller and CTI with any of the provisions hereof, will
(i) conflict with or result in a breach of any provision of Target's Certificate
of Incorporation or Bylaws or the certificate or articles of incorporation or
bylaws of any Target Subsidiary or the governing instruments of Seller or CTI,
or (ii) except as disclosed in Section 2.2 of the Target Disclosure Memorandum,
constitute or result in a Default under, or require any Consent pursuant to, or
result in the creation of any Lien on any Asset of any Target Entity under, any
Contract or Permit of any Target Entity, where such Default or Lien, or any
failure to obtain such Consent, is reasonably likely to have, individually or in
the aggregate, a Target Material Adverse Effect, or (iii) subject to receipt of
the requisite Consents referred to in Section 6.1(b), violate any Law or Order
applicable to Seller, CTI or to any Target Entity or any of their respective
material Assets.
(c) Other than notices to or filings with the Internal Revenue
Service with respect to any employee benefit plans, or under the HSR Act, and
other than Consents, filings, or notifications which, if not obtained or made,
are not reasonably likely to have, individually or in the aggregate, a Target
Material Adverse Effect, no notice to, filing with, or Consent of, any public
body or authority is necessary for the consummation by CTI or Seller of the
transactions contemplated in this Agreement.
2.3 CAPITAL STOCK.
(a) The authorized capital stock of Anchor Continental consists of
1,500 shares of Common Stock, of which 1,010 shares are issued and outstanding
as of the date of this Agreement and not more than 1,010 shares will be issued
and outstanding on the Closing Date. The authorized capital stock of Anchor
Canada consists of an unlimited amount of shares of Common Stock, of which
426 shares are issued and outstanding as of the date of this Agreement and not
more than 426 shares will be issued and outstanding on the Closing Date. All of
the issued and outstanding shares of capital stock of Target are duly and
validly issued and outstanding and are fully paid and nonassessable under, the
DGCL in the case of Anchor Continental and the laws of the Province of Ontario,
in the case of Anchor Canada. None of the outstanding shares of capital stock
of Target has been issued in violation of any preemptive rights of the current
or past stockholders of Target.
(b) Except for the Shares and the Anchor Canada Shares, there are
no shares of capital stock or other equity securities of Target outstanding and
no outstanding Equity Rights relating to the capital stock of Target. Seller is
the owner of all right, title and interest (legal and beneficial) in and to the
Shares free and clear of all Liens other than Funded Indebtedness. The Shares
represent all of the issued and outstanding shares of Anchor Continental's
capital stock. Except as specifically contemplated by this Agreement, no Person
has any Contract or any right or privilege (whether pre-emptive or contractual)
capable of becoming a Contract for the purchase from Seller of any of the
Shares, or any Contract or Equity Right for the purchase, subscription or
issuance of any securities of Target.
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2.4 TARGET SUBSIDIARIES. Target has disclosed in Section 2.4 of the
Target Disclosure Memorandum all of the Target Subsidiaries (identifying its
jurisdiction of incorporation, each jurisdiction in which it is qualified and/or
licensed to transact business, and the number of shares owned and percentage
ownership interest represented by such share ownership). Anchor Continental
owns all of the issued and outstanding shares of capital stock (or other equity
interests) of each Target Subsidiary. No capital stock (or other equity
interest) of any Target Subsidiary is or may become required to be issued (other
than to another Target Entity) by reason of any Equity Rights, and there are no
Contracts by which any Target Subsidiary is bound to issue (other than to
another Target Entity) additional shares of its capital stock (or other equity
interests) or Equity Rights or by which any Target Entity is or may be bound to
transfer any shares of the capital stock (or other equity interests) of any
Target Subsidiary. There are no Contracts relating to the rights of any Target
Entity to vote or to dispose of any shares of the capital stock (or other equity
interests) of any Target Subsidiary. All of the shares of capital stock (or
other equity interests) of each Target Subsidiary held by a Target Entity are
fully paid and nonassessable and are owned by the Target Entity free and clear
of any Lien. Except as disclosed in Section 2.4 of the Target Disclosure
Memorandum, each Target Subsidiary is a corporation, and each such Subsidiary is
duly organized, validly existing, and in good standing under the Laws of the
jurisdiction in which it is incorporated or organized, and has the corporate
power and authority necessary for it to own, lease, and operate its material
Assets and to carry on its business as now conducted. Each Target Subsidiary is
duly qualified or licensed to transact business as a foreign corporation in good
standing in the States of the United States and foreign jurisdictions where the
character of its Assets or the nature or condct of its business requires it to
be so qualified or licensed, except for such jurisdictions in which the failure
to be so qualified or licensed is not reasonably likely to have, individually or
in the aggregate, a Target Material Adverse Effect. The minute book and other
organizational documents for each Target Subsidiary have been made available to
Buyer for its review, and, except as disclosed in Section 2.4 of the Target
Disclosure Memorandum, are correct and complete in all material respects as in
effect as of the date of this Agreement.
2.5 FINANCIAL STATEMENTS. Prior to the execution of this Agreement, CTI
or Seller has delivered to Buyer complete and correct copies of the Target
Financial Statements. All such Target Financial Statements are complete and
correct in all material respects and were (i) prepared from the books of account
or other financial records of Target and the Target Subsidiaries, (ii) prepared
in accordance with GAAP applied on a consistent basis throughout the periods
involved (except as may be indicated in the notes to such financial statements),
and (iii) fairly present in all material respects the consolidated financial
position of Target and its Subsidiaries as at the respective dates and the
consolidated results of operations and cash flows for the periods indicated,
except that the interim consolidated financial statements were or are subject to
normal and recurring year-end adjustments which were not or are not expected to
be material in amount or effect and do not have any footnote disclosures.
2.6 ABSENCE OF UNDISCLOSED LIABILITIES. Except as disclosed in Section
2.6 of the Target Disclosure Memorandum, no Target Entity has any Liabilities
that are reasonably likely to have, individually or in the aggregate, a Target
Material Adverse Effect, except Liabilities which are
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accrued or reserved against in the consolidated balance sheets of Target as of
September 27, 1997 and June 30, 1998, included in the Target Financial
Statements delivered prior to the date of this Agreement or reflected
specifically in the notes thereto. No Target Entity has incurred or paid any
Liability since June 30, 1998, except for (i) Liabilities incurred or paid in
the ordinary course of business consistent with past practice, (ii)
Liabilities that in the aggregate would not have a Target Material Adverse
Effect or (iii) Liabilities in connection with the transactions contemplated
by this Agreement.
2.7 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since June 30, 1998, except
as disclosed in the Target Financial Statements delivered prior to the date of
this Agreement or as disclosed in Section 2.7 of the Target Disclosure
Memorandum, (i) the Target Entities have been operated in the ordinary course of
business consistent with past practice, (ii) there have been no events, changes,
or occurrences which have had, or are reasonably likely to have, individually or
in the aggregate, a Target Material Adverse Effect, and (iii) the Target
Entities have not taken any action, or failed to take any action, prior to the
date of this Agreement, which action or failure, if taken after the date of this
Agreement, would represent or result in a material breach or violation of any of
the covenants and agreements of Target provided in Article 4.
2.8 TAX MATTERS.
(a) All Tax Returns required to be filed by or on behalf of any of
the Target Entities or any affiliated, combined, consolidated, unitary or
similar group of which any of the Target Entities is or was a member (a
"Relevant Group") have been timely filed or requests for extensions have been
timely filed, granted, and have not expired, except to the extent that all such
failures to file, taken together, are not reasonably likely to have a Target
Material Adverse Effect. All Tax Returns filed are complete and accurate in all
material respects. All Taxes due and owing by any of the Target Entities or by
any member of a Relevant Group (whether or not shown on filed Tax Returns) have
been paid. As of the date of this Agreement, there is no audit examination,
deficiency, or refund Litigation with respect to any Taxes and, to the Knowledge
of Target or any chief tax officer or tax director of any Target Entity, there
is no dispute or claim concerning any Tax Liability of any of the Target
Entities claimed or raised by any taxing authority, except as disclosed in
Section 2.8 of the Target Disclosure Memorandum. The three year statute of
limitations on assessment and collection of federal income taxes has expired
with respect to the fiscal year ended on October 1, 1994 and all prior fiscal
years. All Taxes and other Liabilities due with respect to completed and
settled examinations or concluded Litigation have been paid. There are no Liens
with respect to Taxes upon any of the Assets of the Target Entities.
(b) Except as otherwise disclosed in Section 2.8 of the Target
Disclosure Memorandum, none of the Target Entities has executed an extension or
waiver of any statute of limitations on the assessment or collection of any Tax
due that is currently in effect.
(c) The provision for any Taxes due or to become due for any of
the Target Entities (as opposed to any reserve for deferred Taxes established to
reflect differences between book
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and Tax income) for the period or periods through and including the date of
the respective Target Financial Statements that has been made and is
reflected on such Target Financial Statements is sufficient to cover all such
Taxes in all material respects. As of the Closing Date, such provisions, as
adjusted for the passage of time, will be sufficient for the then-unpaid
Taxes of each such Target Entity.
(d) Each of the Target Entities is in compliance with, and its
records contain all information and documents (including properly completed IRS
Forms W-9) necessary to comply with, all applicable information reporting and
Tax withholding requirements (including, without limitation, in connection with
amounts paid or owing to any employee, creditor, independent contractor or other
third party) under federal, state, and local Tax Laws, and such records identify
with specificity all accounts subject to backup withholding under Section 3406
of the Code.
(e) Except as disclosed in Section 2.8 of the Target Disclosure
Memorandum, none of the Target Entities has made any payments, is obligated to
make any payments, or is a party to any Contract that could obligate it to make
any payments that would be disallowed as a deduction under Section 280G or
162(m) of the Code.
(f) Except as disclosed in Section 2.8 of the Target Disclosure
Memorandum none of the Target Entities (i) is a party to or is bound by any
obligations under any tax sharing, tax indemnity or similar agreement or
arrangement, (ii) has agreed to, is required to make, or reasonably expects that
it might have to make, any adjustment under section 481 of the Code (or any
comparable provision of state, local or foreign law) by reason of a change in
accounting method or otherwise, (iii) is a party to any joint venture,
partnership or other arrangement that is treated as a partnership for federal
income Tax purposes, (iv) has ever been a member of any Relevant Group for any
Tax purpose, other than the U.S. federal consolidated group of which Seller or
CTI is the parent, (v) is a "United States real property holding company" within
the meaning of Section 897 of the Code, (vi) is a "consenting corporation"
within the meaning of Section 341(f)(1) of the Code, or comparable provisions of
any state or local statutes, and none of the assets of any such Target Entity is
subject to an election under section 341(f) of the Code or comparable provisions
of any state or local statutes, or (vii) has any liability for Taxes of any
Person other than a Target Entity (W) under Section 1.1502-6 of the U.S.
Treasury Regulations (or any similar provision of state, local or foreign law),
(X) as a transferee or successor, (Y) by contract or (Z) otherwise.
2.9 ASSETS.
(a) Except as disclosed in Section 2.9 of the Target Disclosure
Memorandum or as disclosed or reserved against in the Target Financial
Statements, the Target Entities have good and marketable title, free and clear
of all Liens, to all of their respective Assets, except for any such Liens or
other defects of title which are not reasonably likely to have a Target Material
Adverse Effect. All tangible properties material to the businesses of the
Target Entities are in good condition, reasonable wear and tear excepted, and
are usable in the ordinary course of business consistent with Target's past
practices.
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(b) All Assets which are material to Target's business on a
consolidated basis, held under leases or subleases by any of the Target
Entities, are held under valid Contracts enforceable in accordance with their
respective terms (except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, or other Laws affecting the
enforcement of creditors' rights generally and except that the availability of
the equitable remedy of specific performance or injunctive relief is subject to
the discretion of the court before which any proceedings may be brought), and
each such Contract is in full force and effect.
2.10 INTELLECTUAL PROPERTY. To the Knowledge of Target, each Target
Entity was or has valid and subsisting rights to use all of the Intellectual
Property used by such Target Entity in the course of its business. No Target
Entity is in, and the consummation of the transactions contemplated therein will
not result in, a Default under any of its Intellectual Property licenses.
Section 2.10 of the Target Disclosure Memorandum sets forth all registrations
and applications with respect to such Intellectual Property and each such
Intellectual Property license (other than "shrink-wrap" software licenses). All
of the registrations and applications set forth in Section 2.10 of the Target
Disclosure Memorandum are valid and in full force and effect and all necessary
registration, maintenance and renewal fees in connection therewith have been
made and all necessary documents and certificates in connection therewith have
been filed with the relevant patent, copyright, trademark or other authority in
the United States or foreign jurisdictions, as the case may be, for the purpose
of maintaining the registrations or applications for registration of such
Intellectual Property. All of the Intellectual Property owned or used by each
Target Entity is free and clear of any and all Liens (other than Funded
Indebtedness). Target has taken reasonable and adequate security measures to
protect the secrecy, confidentiality and value of its trade secrets and
proprietary information.
2.11 RESERVED.
2.12 COMPLIANCE WITH LAWS. Section 2.12 of the Target Disclosure
Memorandum contains a true and complete list of all material Permits issued to
or used in the business of the Target Entities. Each Target Entity has in
effect all material Permits necessary for it to own, lease, or operate its
material Assets and to carry on its business as now conducted, and there has
occurred no Default under any such Permit, other than Defaults which are not
reasonably likely to have, individually or in the aggregate, a Target Material
Adverse Effect. Except as disclosed in Section 2.12 of the Target Disclosure
Memorandum, none of the Target Entities:
(a) is in Default under any of the provisions of its Certificate
of Incorporation or Bylaws (or other governing instruments);
(b) is in Default under any Laws, Orders, or Permits applicable to
its business or employees conducting its business, except for Defaults
which are not reasonably likely to have, individually or in the aggregate,
a Target Material Adverse Effect;
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(c) except for environmental matters, since September 27, 1997,
has received any notification or communication from any agency or
department of federal, state, or local government or any Regulatory
Authority or the staff thereof (i) asserting that any Target Entity is not
in compliance with any of the Laws or Orders which such governmental
authority or Regulatory Authority enforces, where such noncompliance is
reasonably likely to have, individually or in the aggregate, a Target
Material Adverse Effect, (ii) threatening to revoke any Permits, or
(iii) requiring any Target Entity to enter into or consent to the issuance
of a cease and desist order, formal agreement, directive, commitment, or
memorandum of understanding, or to adopt any Board resolution or similar
undertaking; or
(d) are, to the Knowledge of Target, in non-compliance, in any
material respects, with any applicable laws respecting employment and
employment practices, terms and conditions of employment and wages and
hours, including but not limited to Title VII of the Civil Rights Act of
1964, the Age Discrimination in Employment Act, the Americans with
Disability Act, the Family and Medical Leave Act, the Fair Labor Standards
Act, the Occupational Safety and Health Act and the Worker Adjustment and
Retraining Notification Act.
2.13 LABOR RELATIONS. No Target Entity is the subject of any Litigation
asserting that it or any other Target Entity has committed an unfair labor
practice (within the meaning of the National Labor Relations Act or comparable
state law) or seeking to compel it or any other Target Entity to bargain with
any labor organization as to wages or conditions of employment. No Target
Entity is or has been within the last three years a party to any collective
bargaining agreement, nor is there any strike, slow down, picketing or other
labor dispute involving any Target Entity, pending or threatened, or to the
Knowledge of Target, is there any activity involving any Target Entity's
employees seeking to certify a collective bargaining unit or engaging in any
other organization activity.
2.14 EMPLOYEE BENEFIT PLANS.
(a) Target has disclosed in Section 2.14 of the Target
Disclosure Memorandum, and has delivered or made available to Buyer prior to
the execution of this Agreement copies, in each case, of all pension,
retirement, profit-sharing, deferred compensation, stock option, employee
stock ownership, severance pay, vacation, bonus, or other incentive plan, all
other written employee programs, arrangements, or agreements, all medical,
vision, dental, or other health plans, all life insurance plans, and all
other employee benefit plans or fringe benefit plans, including "employee
benefit plans" as that term is defined in Section 3(3) of ERISA, currently
adopted, maintained by, sponsored in whole or in part by, or contributed to
by any Target Entity or ERISA Affiliate thereof for the benefit of employees,
retirees, dependents, spouses, directors, independent contractors, or other
beneficiaries of any Target Entity and under which employees, retirees,
dependents, spouses, directors, independent contractors, or other
beneficiaries of any Target Entity are eligible to participate (collectively,
the "Target Benefit Plans"). Any of the Target Benefit Plans which is an
"employee pension benefit plan," as that term is defined in Section 3(2) of
ERISA, is referred to
- 13 -
herein as a "Target ERISA Plan." Each Target ERISA Plan which is also a
"defined benefit plan" (as defined in Section 414(j) of the Code) is referred
to herein as a "Target Pension Plan." No Target Pension Plan is or has been
a multiemployer plan within the meaning of Section 3(37) of ERISA.
(b) To the Knowledge of Target, all Target Benefit Plans are in
compliance with the applicable terms of ERISA, the Code, and any other
applicable Laws. Each Target ERISA Plan which is intended to be qualified under
Section 401(a) of the Code has received a favorable determination letter from
the Internal Revenue Service, and Target is not aware of any circumstances
likely to result in revocation of any such favorable determination letter. No
Target Entity has engaged in a transaction with respect to any Target Benefit
Plan that, assuming the taxable period of such transaction expired as of the
date hereof, would subject any Target Entity to a Tax imposed under Sections
4971 through 4980B of the Code or Section 502(i) or (l) of ERISA.
(c) No Target ERISA Plan has any "unfunded current liability," as
that term is defined in Section 302(d)(8)(A) of ERISA, and the fair market value
of the assets of any such plan exceeds the plan's "benefit liabilities," as that
term is defined in Section 4001(a)(16) of ERISA. Since the date of the most
recent actuarial valuation, there has been (i) no material change in the
financial position of any Target Pension Plan, (ii) no material change in the
material actuarial assumptions with respect to any Target Pension Plan, and
(iii) no increase in benefits under any Target Pension Plan as a result of plan
amendments or changes in applicable Law which is reasonably likely to have,
individually or in the aggregate, a Target Material Adverse Effect or materially
adversely affect the funding status of any such plan. Neither any Target
Pension Plan nor any "single-employer plan," within the meaning of Section
4001(a)(15) of ERISA, currently or formerly maintained by any Target Entity, or
the single-employer plan of any entity which is considered one employer with
Target under Section 4001 of ERISA or Section 414 of the Code or Section 302 of
ERISA (whether or not waived) (an "ERISA Affiliate") has an "accumulated funding
deficiency" within the meaning of Section 412 of the Code or Section 302 of
ERISA. No Target Entity has provided, or is required to provide, security to a
Target Pension Plan or to any single-employer plan of an ERISA Affiliate
pursuant to Section 401(a)(29) of the Code.
(d) Within the six-year period preceding the Closing Date, no
Liability under Subtitle C or D of Title IV of ERISA has been or is expected to
be incurred by any Target Entity with respect to any ongoing, frozen, or
terminated single-employer plan or the single-employer plan of any ERISA
Affiliate. No Target Entity has incurred any withdrawal Liability with respect
to a multiemployer plan under Subtitle E of Title IV of ERISA (regardless of
whether based on contributions of an ERISA Affiliate). No "reportable event,"
within the meaning of Section 4043 of ERISA has occurred with respect to any
Target Pension Plan or by any ERISA Affiliate within the 12-month period ending
on the date hereof.
(e) Except as disclosed in Section 2.14 of the Target Disclosure
Memorandum, no Target Entity has any Liability for retiree health and life
benefits under any of the Target Benefit Plans and there are no restrictions on
the rights of such Target Entity to amend or terminate any such retiree health
or benefit Plan without incurring any Liability thereunder.
- 14 -
(f) Except as disclosed in Section 2.14 of the Target Disclosure
Memorandum, neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (i) result in any
payment (including severance, unemployment compensation, golden parachute, or
otherwise) becoming due to any director or any employee of any Target Entity
from any Target Entity under any Target Benefit Plan or otherwise, (ii) increase
any benefits otherwise payable under any Target Benefit Plan, or (iii) result in
any acceleration of the time of payment or vesting of any such benefit.
(g) The actuarial present values of all accrued deferred
compensation entitlements (including entitlements under any executive
compensation, supplemental retirement, or employment agreement) of employees and
former employees of any Target Entity and their respective beneficiaries, other
than entitlements accrued pursuant to funded retirement plans subject to the
provisions of Section 412 of the Code or Section 302 of ERISA, have been fully
reflected on the Target Financial Statements to the extent required by and in
accordance with GAAP.
2.15 MATERIAL CONTRACTS. Except as disclosed in Section 2.15 of the
Target Disclosure Memorandum or otherwise reflected in the Target Financial
Statements, none of the Target Entities, nor any of their respective Assets,
businesses, or operations, is a party to, or is bound by, or receives benefits
under, (i) any employment, severance, termination, consulting, or retirement
Contract, (ii) any Contract relating to the borrowing of money by any Target
Entity or the guarantee by any Target Entity of any such obligation (other than
Contracts evidencing trade payables and Contracts relating to borrowings or
guarantees made in the ordinary course of business), (iii) any Contract which
prohibits or restricts any Target Entity from engaging in any business
activities in any geographic area, line of business or otherwise in competition
with any other Person, (iv) any Contract involving Intellectual Property (other
than "shrink-wrap" software licenses), (v) any Contract relating to the purchase
or sale of any goods or services (other than Contracts entered into in the
ordinary course of business and involving payments under any individual Contract
not in excess of $100,000), (vi) any Contract with independent contractors,
railroads, shipping companies, distributors, dealers, manufacturers'
representatives, sales agents or franchisees involving an annual payment to or
from Target of $100,000 or more, (vii) any Contract relating to any (1) merger,
consolidation or combination with any Person, (2) any sale, dividend, split or
other disposition of any capital stock or other equity interests of any Person,
(3) any tender offer (including without limitation a self-tender), exchange
offer, recapitalization, liquidation, dissolution or similar transaction, (4)
any sale, dividend or other disposition of all or a material portion of the
Assets and Operating Properties of any Person or (5) the entering into of any
agreement or understanding, or the granting of any rights or options, with
respect to any of the foregoing ((1) through (5) collectively referred to herein
as a "Business Combination"), (viii) any Contract between or among Target, on
the one hand, and any current or former officer, director, stockholder
(including Seller or CTI) or Affiliate of any Target Entity, and (ix) any other
Contract or amendment thereto that would be required to be filed as an exhibit
to a Form 10-K filed by Target with the SEC as of the date of this Agreement
(together with all Contracts referred to in Sections 2.9 and 2.14(a), the
"Target Contracts"). With respect to each Target Contract and except as
disclosed in Section 2.15 of the Target Disclosure Memorandum: (i) the Contract
is in full force and effect; (ii) no Target
- 15 -
Entity is in Default in any material respect thereunder; (iii) no Target
Entity has repudiated or waived any material provision of any such Contract;
and (iv) no other party to any such Contract is, to the Knowledge of Target,
in Default in any material respect, or has repudiated or waived any material
provision thereunder. All of the indebtedness of any Target Entity for money
borrowed is prepayable at any time by such Target Entity without penalty or
premium.
2.16 LEGAL PROCEEDINGS. There is no Litigation pending or, to the
Knowledge of Target, threatened against any Target Entity, or against any
director, employee or employee benefit plan of any Target Entity, or against any
Asset, interest, or right of any of them, that is reasonably likely to have,
individually or in the aggregate, a Target Material Adverse Effect, nor are
there any Orders of any Regulatory Authorities, court, or arbitrators
outstanding against any Target Entity. Section 2.16 of the Target Disclosure
Memorandum contains a summary of all Litigation as of the date of this Agreement
to which any Target Entity or Employee Benefit Plan is a party or for which any
Target Entity has any potential Liability.
2.17 REGULATORY MATTERS. No Target Entity, CTI or Seller has taken or
agreed to take any action or has any Knowledge of any fact or circumstance that
is reasonably likely to materially impede or delay receipt of any Consents of
Regulatory Authorities referred to in Section 6.1(b).
2.18 INSURANCE. Section 2.18 of the Target Disclosure Memorandum
contains a correct and complete list of all liability, property, workers'
compensation, fidelity, directors' and officers' liability, welfare pension and
other insurance policies currently in effect that insure the business,
operations or employees of the Target Entities or affect or relate to the
ownership, use or operation of any of the Assets and Operating Properties of the
Target Entities and that (i) have been issued to the Target Entities or (ii)
have been issued to any Person (other than the Target Entities) for the benefit
of the Target Entities. Each policy listed in Section 2.18 of the Target
Disclosure Memorandum is valid and binding and in full force and effect and all
premiums due thereunder have been paid when due and neither the Target Entities,
Seller nor CTI knows of any reason or state of facts that could reasonably lead
to the cancellation of such policies prior to the Closing Date. Except as set
forth in Section 2.18 of the Target Disclosure Memorandum, none of the Target
Entities, Seller or CTI has received notice that any insurer under any policy
referred to in this Section is denying liability with respect to a claim
thereunder or defending under a reservation of rights clause.
2.19 AFFILIATE TRANSACTIONS. Except as set forth in Section 2.19 of the
Target Disclosure Memorandum, the Target Entities are not party to any Contract
with any Affiliate, and except as disclosed in Section 2.19 of the Target
Disclosure Memorandum, each Contract identified in said Section 2.19 is on an
arm's-length basis.
2.20 SUBSTANTIAL CUSTOMERS AND SUPPLIERS. Section 2.20(a) of the Target
Disclosure Memorandum lists the 10 largest customers or clients of the Target
Entities on the basis of revenues for goods sold or services provided in 1996,
1997 and the first six months of 1998. Section 2.20(b) of the Target Disclosure
Memorandum lists the 10 largest suppliers of the Target Entities on the basis of
cost of goods or services purchased in 1996, 1997 and the first six months of
1998. No such
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customer, client or supplier has ceased or materially reduced its purchases
from or sales or provision of services to the Target Entities since June 30,
1998, or to the Knowledge of the Target Entities, Seller or CTI, has
threatened to cease or materially reduce such purchases or sales or provision
of services after the date hereof. To the Knowledge of the Target Entities,
Seller or CTI, no such customer or supplier is threatened with bankruptcy or
insolvency. Except as set forth in Section 2.20(a) of the Target Disclosure
Memorandum and except for deposits or other non-material amounts paid in the
ordinary course of business consistent with past practice, the Target
Entities have not accepted any prepayment of any sales price or fee or
license fee from any client or customer that relates to products not yet
delivered or services not yet performed by the Target Entities.
2.21 ACCOUNTING PRACTICES. The Target Entities make and keep accurate
books and records reflecting their respective assets and maintain internal
accounting controls that provide reasonable assurance that (i) transactions are
executed with management's authorization, (ii) transactions are recorded as
necessary to permit preparation of the Target Entities' financial statements and
to maintain accountability for the assets of the Target Entities, and (iii)
access to the banking and investment accounts of the Target Entities is
permitted only in accordance with management's authorization.
2.22 CORPORATE NAME. The Target Entities (i) have the exclusive right to
use their respective names as the name of a corporation or other business entity
in each jurisdiction in which the Target Entities do business, and (ii) have not
received or given any notice of conflict during the past five years with respect
to the rights of others regarding the names of the Target Entities. To the
Knowledge of Seller and CTI, no Person is presently authorized to use the name
of any Target Entity.
2.23 WARRANTIES. Section 2.23 of the Target Disclosure Memorandum sets
forth a list of all written warranties, guarantees and warranty policies of the
Target Entities with respect to their products and services (the "Warranty
Obligations") which are subject to any dispute or, to the Knowledge of the
Target Entities, Seller or CTI, threatened dispute.
2.24 AIR QUALITY. Target and its Operating Properties are in compliance
with air quality standards to which Target and its Operating Properties are
subject and with respect to the Air Operating Permit issued July 31, 1998 by the
South Carolina Department of Health and Environmental Control, and all air
compliance materials provided to Buyer by Target accurately describe the air
compliance status of Target (the "Seller's Air Quality Representation").
2.25 NO OTHER REPRESENTATIONS OR WARRANTIES. Except for the
representations and warranties contained in this Agreement, neither CTI, Seller
nor any other Person makes any express or implied representation or warranty on
behalf of CTI, Seller or Target, and Seller and CTI hereby disclaim any such
representation or warranty whether by Seller, CTI or any of their respective
Affiliates, officers, directors, employees, agents or representatives or any
other Person (including the Confidential Offering Memorandum provided by
Schroder & Co. Inc., dated June 1998).
- 17 -
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to CTI and Seller as follows:
3.1 ORGANIZATION, STANDING, AND POWER. Buyer is a corporation duly
organized, validly existing, and in good standing under the Laws of Canada, and
has the corporate power and authority to carry on its business as now conducted
and to own, lease and operate its material Assets. Buyer is duly qualified or
licensed to transact business as a foreign corporation in good standing in the
States of the United States and foreign jurisdictions where the character of its
Assets or the nature or conduct of its business requires it to be so qualified
or licensed, except for such jurisdictions in which the failure to be so
qualified or licensed is not reasonably likely to have, individually or in the
aggregate, a Buyer Material Adverse Effect.
3.2 AUTHORITY; NO BREACH BY AGREEMENT.
(a) Buyer has the corporate power and authority necessary to
execute, deliver and perform its obligations under this Agreement and to
consummate the transactions contemplated hereby. The execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated herein, including the Stock Purchase, have been duly and validly
authorized by all necessary corporate action in respect thereof on the part of
Buyer. This Agreement represents a legal, valid, and binding obligation of
Buyer, enforceable against Buyer in accordance with its terms (except in all
cases as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, receivership, conservatorship, moratorium, or
similar Laws affecting the enforcement of creditors' rights generally and except
that the availability of the equitable remedy of specific performance or
injunctive relief is subject to the discretion of the court before which any
proceeding may be brought).
(b) Neither the execution and delivery of this Agreement by Buyer,
nor the consummation by Buyer of the transactions contemplated hereby, nor
compliance by Buyer with any of the provisions hereof, will (i) conflict with or
result in a breach of any provision of Buyer's Certificate of Incorporation or
Bylaws, or (ii) constitute or result in a Default under, or require any Consent
pursuant to, or result in the creation of any Lien on any Asset of any Buyer
Entity under, any Contract or Permit of any Buyer Entity, where such Default or
Lien, or any failure to obtain such Consent, is reasonably likely to have,
individually or in the aggregate, a Buyer Material Adverse Effect, or,
(iii) subject to receipt of the requisite Consents referred to in Section
6.1(b), constitute or result in a Default under, or require any Consent pursuant
to, any Law or Order applicable to any Buyer Entity or any of their respective
material Assets.
(c) Other than in connection or compliance with the provisions of
the Securities Laws, applicable state corporate and securities Laws, and rules
of the American Stock Exchange, Inc. and Toronto Stock Exchange, and other than
Consents required from Regulatory Authorities, and other than notices to or
filings with the Internal Revenue Service or the Pension Benefit
- 18 -
Guaranty Corporation with respect to any employee benefit plans, or under the
HSR Act, and other than Consents, filings, or notifications which, if not
obtained or made, are not reasonably likely to have, individually or in the
aggregate, a Buyer Material Adverse Effect, no notice to, filing with, or
Consent of, any public body or authority is necessary for the consummation by
Buyer of the Stock Purchase and the other transactions contemplated in this
Agreement.
3.3 LEGAL PROCEEDINGS. There is no Litigation pending, or, to the
Knowledge of Buyer, threatened against any Buyer Entity, or against any
director, employee or employee benefit plan of any Buyer Entity, or against any
Asset, interest, or right of any of them, that is reasonably likely to have,
individually or in the aggregate, a Buyer Material Adverse Effect, nor are there
any Orders of any Regulatory Authorities, other governmental authorities, or
arbitrators outstanding against any Buyer Entity, that are reasonably likely to
have, individually or in the aggregate, a Buyer Material Adverse Effect.
3.4 REGULATORY MATTERS. No Buyer Entity or any Affiliate thereof has
taken or agreed to take any action or has any Knowledge of any fact or
circumstance that is reasonably likely to materially impede or delay receipt of
any Consents of Regulatory Authorities referred to in Section 6.1(b).
3.5 INVESTMENT INTENT. Buyer is acquiring the Shares for its own
account for investment purposes only and not with a view to, or for sale or
resale in connection with, any public distribution thereof or with any present
intention of selling, distributing or otherwise disposing of the Shares.
3.6 NO OTHER REPRESENTATIONS OR WARRANTIES. Except for the
representations and warranties contained in this Agreement, neither Buyer nor
any other Person makes any express or implied representation or warranty on
behalf of Buyer, and Buyer hereby disclaims any such representation or warranty
whether by Buyer or any of its Affiliates, officers, directors, employees,
agents or representatives or any other Person.
ARTICLE 4
CONDUCT OF BUSINESS PENDING CONSUMMATION
4.1 AFFIRMATIVE COVENANTS WITH RESPECT TO TARGET. From the date of this
Agreement until the earlier of the Closing Date or the termination of this
Agreement, unless the prior written consent of Buyer shall have been obtained,
and except as otherwise expressly contemplated herein, CTI and Seller shall
cause Target and each of its Subsidiaries to (a) operate its business only in
the usual, regular, and ordinary course, consistent with past practice, (b) use
commercially reasonable efforts to preserve intact its business organization, to
keep available to Buyer the services of Target's employees and to preserve the
current relationships of Target with its customers, suppliers and other persons
with which Target has significant business relationships, (c) maintain its books
and records in the usual, regular and ordinary manner consistent with past
practice, (d) use all reasonable efforts to continue to the Closing Date in full
force and effect its policies of insurance, (e) use all reasonable
- 19 -
efforts to maintain all of the Target Entities' Assets and Operating
Properties in good repair, working order and operating condition (subject
only to ordinary wear and tear), (f) comply with all material applicable
Laws, (g) file all Tax Returns required to be filed and make timely payments
of applicable Taxes when due (taking into account any duly obtained
extensions), (h) take all reasonable actions necessary to be in compliance
with, and to maintain the effectiveness of, all material Permits and (i) take
no action which would (1) materially adversely affect the ability of any
Party to obtain any Consents required for the transactions contemplated
hereby, or (2) materially adversely affect the ability of any Party to
perform its covenants and agreements under this Agreement.
4.2 NEGATIVE COVENANTS WITH RESPECT TO TARGET. From the date of this
Agreement until the earlier of the Closing Date or the termination of this
Agreement, unless the approval of Buyer shall have been obtained, which Buyer
will not unreasonably withhold or delay, and except as otherwise expressly
contemplated herein, CTI and Seller shall not permit Target to do or agree or
commit to do, or any of its Subsidiaries to do or agree or commit to do, any of
the following:
(a) amend the Certificate of Incorporation, Bylaws or other
governing instruments of any Target Entity; or
(b) incur any additional debt obligation or other obligation for
borrowed money (other than indebtedness of a Target Entity to another
Target Entity or third party indebtedness, all of which indebtedness will
be paid out of the Purchase Price at Closing) except in the ordinary
course of the business of Target Entities consistent with past practices,
or impose, or suffer the imposition, on any Asset of any Target Entity of
any Lien or permit any such Lien to exist (other than in connection with
Liens in effect as of the date hereof that are disclosed in the Target
Disclosure Memorandum); or
(c) repurchase, redeem, or otherwise acquire or exchange, directly
or indirectly, any shares, or any securities convertible into any shares,
of the capital stock of any Target Entity, or declare or pay any dividend
or make any other distribution in respect of Target's capital stock; or
(d) except for this Agreement, issue, sell, pledge, encumber,
authorize the issuance of, enter into any Contract to issue, sell, pledge,
encumber, or authorize the issuance of, or otherwise permit to become
outstanding, any additional shares of Target Common Stock or any other
capital stock of any Target Entity, or any stock appreciation rights, or
any option, warrant, or other Equity Right; or
(e) adjust, split, combine or reclassify any capital stock of any
Target Entity or issue or authorize the issuance of any other securities
in respect of or in substitution for shares of Target Common Stock, or
sell, lease, mortgage or otherwise dispose of or otherwise encumber
(y) any shares of capital stock of any Target Subsidiary (unless any such
shares of stock are sold or otherwise transferred to another Target
Entity) or (z) any Asset
- 20 -
having a book value in excess of $10,000 other than in the ordinary course
of business for reasonable and adequate consideration; or
(f) except for purchases of U.S. Treasury securities or U.S.
Government agency securities, which in either case have maturities of
three years or less, purchase any securities or make any material
investment, either by purchase of stock of securities, contributions to
capital, Asset transfers, or purchase of any Assets, in any Person other
than a wholly owned Target Subsidiary, or otherwise acquire direct or
indirect control over any Person, other than in connection with
foreclosures in the ordinary course of business; or
(g) grant any increase in compensation or benefits to the
employees or officers of any Target Entity, except in accordance with past
practice disclosed in Section 4.2(g) of the Target Disclosure Memorandum
or as required by Law; pay any severance or termination pay or any bonus
other than pursuant to written policies or written Contracts in effect on
the date of this Agreement and disclosed in Section 4.2(g) of the Target
Disclosure Memorandum; grant any material increase in fees or other
increases in compensation or other benefits to directors of any Target
Entity, except in accordance with past practice disclosed in Section
4.2(g) of the Target Disclosure Memorandum; or
(h) enter into or amend any employment Contract between any Target
Entity and any Person having a salary thereunder in excess of $100,000 per
year (unless such amendment is required by Law) that the Target Entity
does not have the unconditional right to terminate without Liability
(other than Liability for services already rendered), at any time on or
after the Closing Date; or
(i) adopt any new employee benefit plan of any Target Entity or
terminate or withdraw from, or make any material change in or to, any
existing employee benefit plans of any Target Entity other than any such
change that is required by Law or that, in the opinion of counsel, is
necessary or advisable to maintain the tax qualified status of any such
plan, or make any distributions from such employee benefit plans, except
as required by Law, the terms of such plans or consistent with past
practice; or
(j) commence any Litigation other than in accordance with past
practice, settle any Litigation involving any Liability of any Target
Entity for material money damages or restrictions upon the operations of
any Target Entity; or
(k) except in the ordinary course of business, enter into, modify,
amend or terminate any material Contract or waive, release, compromise or
assign any material rights or claims; or
(l) revalue any of its Assets, including, without limitation,
writing off notes or accounts receivable, other than in the ordinary
course of business consistent with past practice; or
- 21 -
(m) pay or discharge any material claim, Liability or Lien
(whether absolute, accrued, contingent or otherwise) or waive any right,
other than in the ordinary course of business consistent with past
practice or pursuant to binding contractual obligations of Target in
existence on the date hereof; or
(n) hire any new employees, except employees earning less than
$100,000 per annum to replace employees who have left the employ of
Target; or
(o) sell, lease, license or otherwise dispose of any fixed asset
or item of Intellectual Property having an individual value of $100,000 or
more; or
(p) change its accounting, financial reporting or Tax methods,
principles or practices, or make or change any material election in
respect of Taxes, adopt or change any accounting method in respect of
Taxes, enter into any Tax closing agreement, withhold any claim or
assessment in respect of Taxes or consent to any extension or waiver of
the limitation period applicable to any claim or assessment in respect of
Taxes; or
(q) abandon, modify, waive, terminate or otherwise change any of
the Permits described in Section 2.12 of the Target Disclosure Memorandum;
or
(r) take any action or course of action inconsistent with
compliance with the covenants and agreements contained in this Agreement.
4.3 COVENANTS OF BUYER. From the date of this Agreement until the
earlier of the Closing Date or the termination of this Agreement, unless the
prior written consent of CTI and Seller shall have been obtained, and except as
otherwise expressly contemplated herein, Buyer covenants and agrees that it
shall take no action which would (i) materially adversely affect the ability of
any Party to obtain any Consents required for the transactions contemplated
hereby, or (ii) materially adversely affect the ability of any Party to perform
its covenants and agreements under this Agreement; provided, that the foregoing
shall not prevent any Buyer Entity from acquiring any Assets or other businesses
or from discontinuing or disposing of any of its Assets or business if such
action is, in the reasonable judgment of Buyer, desirable in the conduct of the
business of Buyer and its Subsidiaries, provided that such actions shall not
materially delay the Closing Date or materially hinder consummation of the Stock
Purchase.
4.4 ADVERSE CHANGES IN CONDITION. Each Party agrees to give written
notice promptly to the other Party upon becoming aware of the occurrence or
impending occurrence of any event or circumstance relating to it or any of its
Subsidiaries which (i) is reasonably likely to have, individually or in the
aggregate, a Target Material Adverse Effect or a Buyer Material Adverse Effect,
as applicable, or (ii) would cause or constitute a material breach of any of its
representations, warranties, or covenants contained herein, and to use its
reasonable efforts to prevent or promptly to remedy the same. The giving of any
such notice under this Section 4.4 shall in no way change or modify the
representations or warranties of the Party giving such notice or the conditions
- 22 -
precedent to the other Party's obligations hereunder or otherwise affect the
remedies available to the other Party hereunder.
ARTICLE 5
ADDITIONAL AGREEMENTS
5.1 APPLICATIONS; ANTITRUST NOTIFICATION. CTI and Seller and, to the
extent necessary or appropriate, Buyer, shall prepare and file, or cause to be
filed, and CTI, Seller and Buyer shall cooperate in the preparation and, where
appropriate, filing of, applications with all Regulatory Authorities having
jurisdiction over the transactions contemplated by this Agreement seeking the
requisite Consents necessary to consummate the transactions contemplated by this
Agreement. To the extent required by the HSR Act, each of the Parties will
promptly file with the United States Federal Trade Commission and the United
States Department of Justice the notification and report form required for the
transactions contemplated hereby and any supplemental or additional information
which may reasonably be requested in connection therewith pursuant to the HSR
Act and will comply in all material respects with the requirements of the HSR
Act. The Parties shall deliver to each other copies of all filings,
correspondence and orders to and from all Regulatory Authorities in connection
with the transactions contemplated hereby.
5.2 AGREEMENT AS TO EFFORTS TO CONSUMMATE. Subject to the terms and
conditions of this Agreement, each Party agrees to use, and to cause its
Subsidiaries to use, its reasonable efforts to take, or cause to be taken, all
actions, and to do, or cause to be done, all things necessary, proper, or
advisable under applicable Laws to consummate and make effective, as soon as
reasonably practicable after the date of this Agreement, the transactions
contemplated by this Agreement, including using its reasonable efforts to lift
or rescind any Order adversely affecting its ability to consummate the
transactions contemplated herein and to cause to be satisfied the conditions
referred to in Article 6; provided, that nothing herein shall preclude either
Party from exercising its rights under this Agreement. Each Party shall use,
and shall cause each of its Subsidiaries to use, its reasonable efforts to
obtain all Consents necessary or desirable for the consummation of the
transactions contemplated by this Agreement.
5.3 NO SOLICITATION OF OFFERS.
(a) Prior to the termination of this Agreement in accordance with
its terms, CTI, Seller and their respective Affiliates, including Target, shall
not, nor shall they authorize or permit any Representative or other Person
retained by them to, directly or indirectly, take any action to solicit,
encourage or facilitate any action that might lead to, or accept any offers,
initiate or participate in negotiations or discussions with, or provide any
non-public information to, or enter into any letter of intent, preliminary
agreement or definitive agreement with any Person with respect to, any possible
merger, acquisition, reorganization, exchange offer or any sale of all or
substantially all of the Assets and Operating Properties, purchase or sale of
capital stock (whether outstanding shares, treasury or other shares) or change
in control of or any similar transaction or transactions
- 23 -
involving, directly or indirectly, Target. Seller, CTI and Target shall
promptly notify Buyer orally and in writing of any such inquiries or
proposals. Seller, CTI and Target shall immediately cease and cause to be
terminated any existing activities, discussions or negotiations with any
parties conducted heretofore with respect to any of the foregoing.
(b) Seller and CTI each acknowledge and agree that a violation by
it of Section 5.3(a) resulting in the termination of this Agreement will cause
irreparable damage to Buyer. Accordingly, Seller and CTI each agree that, in
the event of a breach of Section 5.3(a), Buyer shall be entitled to a temporary
or permanent injunction or restraining order to prevent breaches of Section
5.3(a) and to specifically enforce the terms and provisions thereof, such rights
to be cumulative and in addition to whatever other remedies at law or in equity
or otherwise Buyer may have pursuant to this Agreement.
5.4 INVESTIGATION AND CONFIDENTIALITY.
(a) From and after the date hereof until the Closing, Seller and
CTI shall cause Target to give Buyer and its authorized Representatives access
upon reasonable notice and during normal business hours to employees and
Representatives of Target and to Target's business and to key customers and
vendors, and subject to the Confidentiality Agreement, Seller and CTI shall
provide Buyer with such information concerning Target, the employees of Target,
and the business Buyer may reasonably request in order to review the legal,
financial and business condition and affairs of Target, for the purposes of
conducting Buyer's due diligence; provided, however, that (i) any disclosure of
this Agreement or the transactions contemplated hereby to key customers or key
vendors of Target or any discussions with such customers or vendors of Target
about Target shall only occur when Representatives of CTI or Seller, on the one
hand, and Buyer, on the other hand, are present, and (ii) all such due diligence
shall be reasonable in amount and conducted at mutually convenient times under
the supervision of CTI, Seller or their Representatives. After the date hereof
until Closing, Buyer shall not conduct a "Phase II" environmental assessment or
other intrusive investigation of Target's Operating Property without CTI's or
Seller's prior written consent.
(b) In addition to Buyer's obligations under the Confidentiality
Agreement, which is hereby reaffirmed and adopted, and incorporated by reference
herein, Buyer shall, and shall cause its advisers and agents to, maintain the
confidentiality of all confidential information furnished to it by Target
concerning Target and Target's Subsidiaries' businesses, operations, and
financial positions and shall not use such information for any purpose except in
furtherance of the transactions contemplated by this Agreement. If this
Agreement is terminated prior to the Closing Date, Buyer shall promptly return
or certify the destruction of all documents and copies thereof, and all work
papers containing confidential information received from Target.
(c) Each Party agrees to give the other Party notice as soon as
practicable after any determination by it of any fact or occurrence relating to
the other Party which it has discovered through the course of its investigation
and which represents, or is reasonably likely to represent, either a material
breach of any representation, warranty, covenant or agreement of the other Party
- 24 -
or which has had or is reasonably likely to have a Target Material Adverse
Effect or a Buyer Material Adverse Effect, as applicable.
5.5 PRESS RELEASES. Prior to the Closing Date, CTI, Seller and Buyer
shall consult with each other as to the form and substance of any press release
or other public disclosure materially related to this Agreement or any other
transaction contemplated hereby; provided, that nothing in this Section 5.5
shall be deemed to prohibit any Party from making any disclosure which its
counsel deems necessary or advisable in order to satisfy such Party's disclosure
obligations imposed by Law.
5.6 RESERVED.
5.7 EMPLOYEE BENEFITS AND CONTRACTS.
(a) GENERAL. Following the Closing Date, Buyer shall provide
generally to officers and employees of the Target Entities employee benefits
under employee benefit and welfare plans (other than stock option or other plans
involving the potential issuance of Buyer Common Stock and other than the Sale
Bonus Plan (as defined in Section 5.7(b) hereof)), on terms and conditions which
when taken as a whole are substantially similar to those currently provided by
the Buyer Entities to their similarly situated officers and employees. For
purposes of participation and vesting under Buyer's employee benefit plans, the
service of the employees of the Target Entities prior to the Closing Date shall
be treated as service with a Buyer Entity participating in such employee benefit
plans. Buyer also shall cause Target and its Subsidiaries to honor in
accordance with their terms all employment, severance, consulting and other
compensation Contracts disclosed in Section 5.7 of the Target Disclosure
Memorandum to Buyer between any Target Entity and any current or former
director, officer, or employee thereof, and all provisions for vested benefits
or other vested amounts earned or accrued through the Closing Date under the
Target Benefit Plans (other than with respect to the Sale Bonus Plan, as defined
in Section 5.7(b) hereof. At Closing, CTI and Seller shall transfer its
employees (other than D. Thomas Divird) listed in Section 5.7 of the Target
Disclosure Memorandum (including compensation levels) to Target and Buyer agrees
to cause Target to provide, at a minimum, comparable positions and compensation
to such employees (other than with respect to the Sale Bonus Plan, as defined in
Section 5.7(b) hereof. For purposes of this Section, such employees will be
deemed employees of Target.
(b) SALE BONUS PLAN. Notwithstanding anything which may be construed to
the, contrary herein, with respect to the Coating Technologies International
Inc. Sale Bonus Plan (the "Sale Bonus Plan"), Seller and CTI shall retain all
direct or indirect duties, liabilities, obligations and costs relating or with
respect to the Sale Bonus Plan, including, without limitation, and for purposes
of example only, the duties, liabilities, obligations and costs with respect to
the payment of any awards payable or claimed payable under the terms of the Sale
Bonus Plan (including but not limited to participant benefit claims arising out
of the Sale Bonus Plan), and the payment of any Taxes with respect to such
awards, including without limitation, withholding taxes (including but not
limited to excise taxes, if applicable, and Taxes relating to the
employer-portion of FICA taxes owing with respect to such awards), including any
costs or liabilities relating to the loss of Tax deductions with
- 25 -
respect to all or any portion of such awards to the extent applicable,
including to the extent such awards are subject to the provisions of Sections
280G or 4999 of the Code, and neither Buyer nor Target shall adopt, nor
become or be considered a sponsoring employer of, nor have or incur any
duties, liabilities, obligations and costs relating or with respect to, the
Sale Bonus Plan.
(c) SEVERANCE PAY. For a period of six months after the Closing Date,
Buyer shall provide Target's employees, not already a party to a written
severance agreement, in the event of the involuntary termination of any such
employee's employment not for "Cause", severance pay equal to one week for each
year of employment with Target ("Severance Pay"); provided, however, during such
six-month period, any Severance Pay actually paid to any employee shall not be
less than one month of Severance Pay. In calculating Severance Pay, Buyer shall
use the employee's weekly salary amount at the time of such severance. For
purposes of this paragraph, "Cause" shall be defined as (i) personal misconduct,
inability or refusal by the employee to perform his or her job duties for
Target and/or Buyer; (ii) engaging in any action or inaction which has the
potential for material injury to Target and/or Buyer; (iii) commission of a
willful act of dishonesty in the course of the employee's job duties for Target
and/or Buyer; (iv) conviction of a crime, other than a traffic violation; (v)
habitual drunkenness, or performance under the influence or with systemic
presence of illegal drugs or controlled substances (or their metabolites) except
as may be prescribed by the employee's treating physician; (vi) excessive
absenteeism other than for illness or disability; or (vii) failure to adhere to
the policies or standards of conduct of Target and/or Buyer.
5.8 POST-CLOSING ACCESS BY SELLER AND CTI. Buyer shall cause Target to
cooperate with Seller and CTI to make available to Seller and CTI all financial,
tax and other information (including the books and records of Target) reasonably
required by Seller or CTI in connection with (i) any audit or other
investigation by any taxing authority or any required reports or submissions to
any Regulatory Authority with respect to Target related to periods prior to the
Closing Date or (ii) matters relating to insurance coverage of Target, Third
Party Claim, proceedings and investigations. Buyer shall cause Target to
preserve such information and the books and records for at least six years after
the Closing Date, and thereafter to dispose thereof only after it shall have
given Seller and CTI 90 days' prior notice of such disposition and the
opportunity (at Seller's and CTI's expense) to remove and retain such
information and the books and records.
5.9 OFFICE SPACE AND EQUIPMENT FOR SELLER AND CTI. The Parties agree
that Buyer will cause Target to provide to Seller and CTI, for its operations, a
reasonable amount of office space (including filing, storage and such ancillary
facilities) and office equipment in each case comparable in quality to the same
as presently used by Seller and CTI for a period of up to one year following
Closing. Seller and CTI will have no obligations with respect to such space or
equipment and Target shall be responsible for all maintenance, taxes, insurance,
operational expenses related to the facilities and equipment, including the
replacement of such equipment with comparable equipment. Furthermore, Seller
and CTI will retain the personal computers that are currently being used in the
executive offices of Seller and CTI but any other computers, software or office
equipment being used by Seller and CTI in connection with Target's business will
be transferred to Target at Closing.
- 26 -
5.10 RESIGNATION OF DIRECTORS. CTI and Seller will cause the members of
the board of directors of Target to tender, effective at the Closing, their
resignations.
5.11 NON-COMPETITION.
(a) For a period commencing on the Closing Date and terminating on
the third anniversary thereof (the "Period"), as an inducement to Buyer to
execute this Agreement and complete the transactions contemplated hereby,
and in order to preserve the goodwill associated with the business of
Target being acquired pursuant to this Agreement, CTI and Seller will not,
and will cause its Subsidiaries not to, directly or indirectly, (1) engage
in, continue in, participate in or have any interest in any sole
proprietorship, partnership, corporation or business or any other Person
(whether as an employee, officer, director, partner, agent, security
holder, creditor, consultant or otherwise) that is engaged primarily or in
any material respect in the business of the manufacture, sale or
distribution of pressure sensitive tape and stencils serving either the
retail or industrial end markets (the "Business") in the United States of
America, Canada, Europe, South America and Asia (the "Territory"); (2)
consult with, advise or assist in any way, whether or not for
consideration, any corporation, partnership, firm or other business
organization which is now or becomes a competitor of the Target Entities
or Buyer in any aspect with respect to the Business, including, but not
limited to, advertising or otherwise endorsing the products of any such
competitor, soliciting customers or otherwise serving as an intermediary
for any such competitor or engaging in any form of business transaction on
other than an arm's length basis with any such competitor; or (3) offer
employment to or solicit for employment any employee of the Target,
without the prior written consent of Buyer; PROVIDED, HOWEVER, that
nothing herein shall be deemed to prevent (i) CTI or Seller from acquiring
through market purchases and owning, solely as an investment, less than
five percent of the equity securities of any class of any issuer whose
shares are registered under Section 12(b) or 12(g) of the Securities
Exchange Act of 1934, as amended, and are listed or admitted for trading
on any United States national securities exchange or are quoted on the
Nasdaq National Market, or any similar system of automated dissemination
of quotations of securities prices in common use, so long as CTI or Seller
is not a member of any "control group" (within the meaning of the rules
and regulations of the United States Securities and Exchange Commission)
of any such issuer, (ii) any offer by CTI or Seller to employ a person in
a business which does not compete with the business of Buyer or Target or
which is for a position outside the Territory, or (iii) CTI or Seller from
being acquired by a Person engaged in any business in competition with the
Business as long as both (a) such Person's gross revenues (as shown on its
income statement for the most recent year end), and (b) such Person does
not cause or permit CTI or Seller or any of CTI's or Seller's other
Affiliates to violate the terms of this Section 5.11.
The Parties agree that Buyer may sell, assign or otherwise
transfer this covenant not to compete, in whole or in part, to any person,
corporation, firm or entity that purchases all or substantially all of the
business of Target. The Parties further agree that the geographic scope
of this covenant not to compete shall extend to any city, county or other
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political subdivision of any country in the Territory, each of which is
deemed to be separately named herein. Recognizing the specialized nature
of the business transferred to Buyer and the scope of competition, Seller
and CTI each acknowledges the geographic scope of this covenant not to
compete to be reasonable. The parties intend that the covenant contained
in this Section 5.11(a) shall be construed as a series of separate
covenants, one for each city, county or political subdivision of each
country in the Territory, each of which is deemed to be separately named
herein, each for a series of one-year periods within the Period. Except
for geographic coverage and periods of effectiveness, each such separate
covenant shall be identical in terms. If in any judicial proceeding a
court shall refuse to enforce any of the separate covenants deemed
included in this Section 5.11(a), then such unenforceable covenant shall
be deemed eliminated for the purpose of that proceeding to the extent
necessary to permit the remaining separate covenants to be enforced.
In the event a court of competent jurisdiction determines that
the provisions of this covenant not to compete are excessively broad as to
duration, geographic scope or activity, it is expressly agreed that this
covenant not to compete shall be construed so that the remaining
provisions shall not be affected, but shall remain in full force and
effect, and any such over broad provisions shall be deemed, without
further action on the part of any person, to be modified, amended and/or
limited, but only to the extent necessary to render the same valid and
enforceable in such jurisdiction.
(b) CTI and Seller each agrees that the provisions and
restrictions contained in this Section 5.11 are necessary to protect the
legitimate continuing interests of Buyer in acquiring Target, and that any
violation or breach of these provisions will result in irreparable injury
to Buyer for which a remedy at law would be inadequate. Seller, CTI and
Buyer agree that in the event of a violation or breach and regardless of
any other provision contained in this Agreement, Buyer shall be entitled
to injunctive and other equitable relief as a court may grant after
considering the intent of this Section 5.11, and Buyer shall not be
entitled to any other form of relief from such violation or breach.
5.12 TAX MATTERS.
(a) PREPARATION AND FILING OF TAX RETURNS.
(i) CTI and Seller shall file or cause to be filed all Tax Returns
of the Target Entities for all taxable periods that end on or before the Closing
Date. CTI and Seller shall pay or cause to be paid all Tax liabilities shown by
such Tax Returns to be due (other than income Taxes to the extent specifically
reserved for on the Closing Balance Sheet and any schedules thereto.)
(ii) Buyer shall file or cause to be filed all Tax Returns of the
Target Entities for all taxable periods ending after the Closing Date.
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(iii) With respect to any Tax Return of a Target Entity for a
taxable period that begins on or before and ends after the Closing Date (a
"Straddle Period Return"), Buyer shall deliver a copy of such Tax Return to CTI
at least 45 calendar days prior to the due date therefore (giving effect to any
extension thereof), accompanied by an allocation between the Pre-Closing Period
and the Post-Closing Period of any Taxes shown to be due on such Tax Return
based on sub-paragraph (v) of this Section 5.12(a). Such Tax Return and
allocation shall be final and binding on CTI, unless, within 20 calendar days
after the date of receipt by CTI of such Tax Return and allocation, CTI delivers
to Buyer a written request for changes to such Tax Return or allocation. Buyer
shall adopt and incorporate in said returns changes reasonably requested by CTI.
In the event that Buyer disagrees with CTI's written request for changes, it
shall notify CTI in writing no more than five calendar days after its receipt of
CTI's written request for changes. If CTI shall, within five calendar days
after its receipt of notification of Buyer's disagreement, provide Buyer with an
opinion of an independent accounting firm reasonably satisfactory to CTI and
Buyer that substantial authority exists for the position advocated by CTI, Buyer
shall prepare the Tax Return consistent with the changes suggested by CTI.
(iv) In the case of each Straddle Period Return, not later than (i)
five Business Days before the due date (including any extension thereof) for
payment of Taxes with respect to such Tax Return or (ii) in the event of a
dispute, five Business Days after the resolution thereof either by mutual
agreement of the parties or by a determination of an independent accounting firm
reasonably satisfactory to CTI and Buyer, CTI shall pay or cause to be paid to
Buyer the portion of the Taxes set forth on such Tax Return that are allocable
to the Pre-Closing Period that has not been previously paid by CTI to Buyer or
to the appropriate taxing authority, after giving effect to any agreement of the
parties or any determination by the independent accounting firm, net of any
payments made prior to the Closing Date in respect of such Taxes, whether as
estimated Taxes or otherwise, and net of any income Taxes to the extent
specifically reserved for on the Closing Balance Sheet and any schedules
thereto.
(v) Taxes arising in a taxable period of a Target Entity that
includes but does not end on the Closing Date shall be allocated between the
Pre-Closing Period and the Post-Closing Period on the basis of an interim
closing of the books method as of the end of the Closing Date. For purposes of
this Agreement, any Tax resulting from the departure of a Target Entity from a
Relevant Group prior to the Closing Date is attributable to the Pre-Closing
Period.
(vi) With respect to any Tax Return of CTI or Seller for a taxable
period that ends before or which includes the Closing Date, CTI or Seller,
respectively, shall deliver a copy of such Tax Return to Buyer at least
45 calendar days prior to the due date therefor (giving effect to any extension
thereof). Buyer may review such Tax Return and deliver to CTI or Seller,
respectively, any comments it may have with respect to such Tax Return within
20 calendar days after the date of receipt by Buyer of such Tax Return.
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(b) SECTION 338(h)(10) ELECTION.
At the election of Buyer with sixty (60) days of Closing (but not
later), Buyer and Seller will join in making elections under Section 338(h)(10)
or Section 338(g) of the Code with respect to the acquisition of Target and any
of the Target Subsidiaries, in which case CTI and Seller will indemnify Buyer
for any Tax arising from such Section 338(h)(10) or Section 338(g) elections and
Buyer will indemnify Seller, and its successors and assigns, from and against
any and all Taxes incurred by Seller to the extent such Taxes exceed the Taxes
that would be incurred by Seller upon a sale of the stock of Target without a
Section 338(h)(10) or Section 338(g) election, including any Taxes incurred by
Seller as a result of the payments to Seller with respect to this indemnity and
any Losses related to all such Taxes. Subject to the last sentence of this
paragraph, no such elections shall be made unless and until Buyer and Seller
agree in writing as to the amount covered by this indemnity as a result of the
Tax Returns to be filed by Buyer and Seller as a result of the elections, and
Buyer pays to Seller such amount as a part of Seller's delivering such elections
to Buyer. Any subsequent obligations of Buyer, CTI and Seller pursuant to this
indemnity shall be covered by Section 7.1. CTI, Seller and Buyer agree to
cooperate and not to unreasonably withhold or delay any information, approvals
or consents reasonably requested by the other party with respect to the matters
covered in this paragraph.
(c) CARRYOVERS, REFUNDS AND RELATED MATTERS.
(i) All refunds of Taxes (including interest thereon) attributable
to a Pre-Closing Period and relating to a Target Entity, except for refunds
attributable to items shown on the Closing Balance Sheet as assets shall be paid
over to Seller within ten (10) calendar days after receipt thereof by Buyer or a
Target Entity (or retained by Seller if paid to them).
(ii) Any refund of Taxes (including any interest thereon) that
relates to a Target Entity and that is attributable to a Post-Closing Period or
to items shown on the Closing Balance Sheet as assets shall be the property of
such Target Entity (or, if applicable, promptly paid by CTI or Seller to the
Target Entity if any such refund (or interest thereon) is received by CTI or
Seller or any of its subsidiaries or affiliates).
(iii) In the event of the realization of any loss or credit for Tax
purposes by a party for any Post-Closing Period, the party realizing such loss
or credit may, in its sole discretion, carry forward such loss or credit.
(iv) CTI will not elect to retain any loss carryover of any Target
Entity or any subsidiary under Section 1.1502-20(g) of the Treasury Regulations.
(v) Buyer may, at its option, cause any Target Entity to elect,
where permitted by law, to carry forward any net operating loss or other item
that would, absent such elections, be carried back to a Pre-Closing period in
which such Target Entity filed a consolidated Tax Return.
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(vi) No Target Entity shall reserve any amount for or make any
payment of Taxes to (i) CTI or any affiliate of CTI, or (ii) any other person or
any taxing authority, except for such Taxes as are due or payable or have been
estimated in accordance with applicable law and GAAP as applied in a manner
consistent with past practices of CTI and each Target Entity.
(d) COOPERATION.
(i) Each Party shall, and shall cause its subsidiaries and
affiliates to, provide to each of the other Parties such cooperation and
information as any of them reasonably may request in filing any Tax Return,
amended Tax Return or claim for refund, determining a liability for Taxes or a
right to refund of Taxes or in conducting any audit or other proceeding in
respect of Taxes. Such cooperation and information shall include (A) the
retention of all returns, schedules and work papers, material records or other
documents relating to any tax matters of Target for the first taxable period
after the Closing Date, and all prior taxable periods until the later of (i) the
expiration of the applicable statute of limitations or (ii) six years after the
due date without extension for such returns and, providing copies of all
relevant portions of relevant Tax Returns, together with relevant accompanying
schedules and relevant work papers, relevant documents relating to rulings or
other determinations by taxing authorities and relevant record concerning the
ownership and Tax basis of property, which any such party may possess; and (B)
(upon the other party's request) the provision of such returns, schedules, work
papers, records or other documents. Seller agrees (A) to abide by all record
retention agreements entered into with any taxing authority; and (B) to give
Buyer reasonable written notice prior to transferring, destroying or discarding
any such books and records, and if Buyer so requests to allow Buyer to take
possession of such books and records. Each party shall make its employees
reasonably available on a mutually convenient basis at its cost to provide
explanation of any documents or information so provided. Subject to the
preceding sentence, each party required to file Tax Return pursuant to this
Agreement shall bear all costs of such Tax Return.
(ii) CTI and Seller each agrees, upon request, to use its best
efforts to obtain any certificate or other documents from any governmental
authority or customer or of Target as may be necessary to mitigate, reduce or
eliminate any Tax that could be imposed (including, but not limited to, with
respect to the transactions contemplated hereby).
(e) ALLOCATION OF PURCHASE PRICE.
The Purchase Price shall be allocated for United States federal
income tax purposes 90% to the purchase of the Shares and 10% to the agreement
described in Section 5.11 hereunder.
ARTICLE 6
CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE
6.1 CONDITIONS TO OBLIGATIONS OF EACH PARTY. The respective obligations
of each Party to perform this Agreement and consummate the Stock Purchase and
the other transactions
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contemplated hereby are subject to the satisfaction of the following
conditions, unless waived by both Parties pursuant to Section 9.8:
(a) REGULATORY APPROVALS. All Consents of, filings and
registrations with, and notifications to, all Regulatory Authorities
required for consummation of the Stock Purchase shall have been obtained
or made and shall be in full force and effect and all waiting periods
required by Law shall have expired.
(b) CONSENTS AND APPROVALS. Each Party shall have obtained the
Consents required for consummation of the Stock Purchase (other than those
referred to in Section 6.1(a)) or for the preventing of any Default under
any Contract or Permit of such Party which, if not obtained or made, is
reasonably likely to have, individually or in the aggregate, a Target
Material Adverse Effect or a Buyer Material Adverse Effect, as applicable.
(c) LEGAL PROCEEDINGS. No court or governmental or regulatory
authority of competent jurisdiction shall have enacted, issued,
promulgated, enforced or entered any Law or Order (whether temporary,
preliminary or permanent) or taken any other action which prohibits,
restricts or makes illegal consummation of the transactions contemplated
by this Agreement.
6.2 CONDITIONS TO OBLIGATIONS OF BUYER. The obligations of Buyer to
perform this Agreement and consummate the Stock Purchase and the other
transactions contemplated hereby are subject to the satisfaction of the
following conditions, unless waived by Buyer pursuant to Section 9.8(a):
(a) REPRESENTATIONS AND WARRANTIES. For purposes of this Section
6.2(a), the accuracy of the representations and warranties of CTI and
Seller set forth in this Agreement shall be assessed as of the date of
this Agreement and as of the Closing Date with the same effect as though
all such representations and warranties had been made on and as of the
Closing Date (provided that representations and warranties which are
confined to a specified date shall speak only as of such date). The
representations and warranties of CTI and Seller set forth in Section 2.3
(Capital Stock) shall be true and correct in all material respects (except
for inaccuracies which are de minimis in amount). There shall not exist
inaccuracies in the representations and warranties of CTI and Seller set
forth in this Agreement (including the representations and warranties set
forth in Section 2.3) such that the aggregate effect of such inaccuracies
has, or is reasonably likely to have, a Target Material Adverse Effect;
provided that, for purposes of this sentence only, those representations
and warranties which are qualified by references to "material" or
"Material Adverse Effect" or to the "Knowledge" of any Person shall be
deemed not to include such qualifications.
(b) PERFORMANCE OF AGREEMENTS AND COVENANTS. Each and all of the
agreements and covenants of CTI and Seller to be performed and complied
with pursuant to
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this Agreement and the other agreements contemplated hereby prior to the
Closing Date shall have been duly performed and complied with in all
material respects.
(c) LEGAL OPINION. Buyer shall have received from Alston & Bird
LLP, counsel to CTI, Seller and Target, a legal opinion addressed to Buyer
and dated the Closing Date in form and substance reasonably satisfactory
to Buyer.
(d) FIRPTA CERTIFICATE. CTI and Seller shall each deliver to
Buyer on the Closing Date duly completed and executed certifications of
non-foreign status pursuant to Section 1.1445-2(b)(2) of the U.S. Treasury
Regulations.
(e) CERTIFICATES. CTI and Seller shall each have delivered to
Buyer a (i) certificate, dated as of the Closing Date, and signed on its
behalf by its chief executive officer and its chief financial officer to
the effect that the conditions set forth in Section 6.1 as relates to
Seller and CTI and in Section 6.2(a) and 6.2(b) have been satisfied and
(ii) certified copies of resolutions duly adopted by CTI's and Seller's
Board of Directors evidencing the taking of all corporate actions
necessary to authorize the execution, delivery and performance of this
Agreement, and the consummation of the transactions contemplated hereby,
all in such reasonable detail as Buyer and its counsel shall request.
6.3 CONDITIONS TO OBLIGATIONS OF CTI AND SELLER. The obligations of CTI
and Seller to perform this Agreement and consummate the Stock Purchase and the
other transactions contemplated hereby are subject to the satisfaction of the
following conditions, unless waived by CTI and Seller pursuant to Section 9.8:
(a) REPRESENTATIONS AND WARRANTIES. For purposes of this Section
6.3(a), the accuracy of the representations and warranties of Buyer set
forth in this Agreement shall be assessed as of the date of this Agreement
and as of the Closing Date with the same effect as though all such
representations and warranties had been made on and as of the Closing Date
(provided that representations and warranties which are confined to a
specified date shall speak only as of such date). The representations and
warranties of Buyer in this Agreement shall be true and correct in all
material respects. There shall not exist inaccuracies in the
representations and warranties of Buyer set forth in this Agreement such
that the aggregate effect of such inaccuracies has, or is reasonably
likely to have, a Buyer Material Adverse Effect; provided that, for
purposes of this sentence only, those representations and warranties which
are qualified by references to "material" or "Material Adverse Effect" or
to the "Knowledge" of any Person shall be deemed not to include such
qualifications.
(b) PERFORMANCE OF AGREEMENTS AND COVENANTS. Each and all of the
agreements and covenants of Buyer to be performed and complied with
pursuant to this Agreement and the other agreements contemplated hereby
prior to the Closing Date shall have been duly performed and complied with
in all material respects.
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(c) CERTIFICATES. Buyer shall have delivered to CTI and Seller
(i) a certificate, dated as of the Closing Date and signed on its behalf
by its chief executive officer and its chief financial officer, to the
effect that the conditions set forth in Section 6.1 as relates to Buyer
and in Section 6.3(a) and 6.3(b) have been satisfied, and (ii) certified
copies of resolutions duly adopted by Buyer's Board of Directors
evidencing the taking of all corporate action necessary to authorize the
execution, delivery and performance of this Agreement, and the
consummation of the transactions contemplated hereby, all in such
reasonable detail as CTI and Seller and its counsel shall request.
(d) LEGAL OPINION. CTI and Seller shall have received from
Stikeman Elliott, Canadian counsel to Buyer, and Morgan, Lewis & Bockius
LLP, U.S. counsel to Buyer, legal opinions addressed to CTI and Seller and
dated the Closing Date in form and substance reasonably satisfactory to
CTI and Seller.
(e) SHAREHOLDER APPROVAL. CTI shall have received approval of
this transaction from its shareholders; provided that the Board of
Directors of CTI shall recommend approval of this transaction to its
shareholders and shall use commercially reasonable efforts to obtain the
same.
ARTICLE 7
INDEMNIFICATION
7.1 AGREEMENTS TO INDEMNIFY.
(a) Subject to the terms and conditions of this Article 7, CTI and
Seller shall jointly and severally indemnify, defend, and hold harmless Buyer
from, against, for and in respect of any and all Losses asserted against, or
paid, suffered or incurred by, Buyer and resulting from, based upon, or arising
out of:
(i) the inaccuracy, untruthfulness, or breach of any
representation or warranty of CTI or Seller contained in this Agreement or
in any agreement delivered pursuant to this Agreement;
(ii) a failure to perform any covenant or agreement of CTI or
Seller made in this Agreement;
(iii) any Losses for Taxes (x) imposed on CTI or Seller or
any of its Affiliates (other than the Target Entities) for any period,
(y) imposed on or relating to any Target Entity for any period or portion
thereof ending on or before the Closing Date, including, without
limitation (i) Taxes imposed on any member of a Relevant Group
attributable to any Pre-Closing Period, including any such Tax for which
a Target Entity may be liable under Section 1.1502-6 of the Treasury
Regulations (or any similar provision of
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state, local or foreign tax law), other than income Taxes to the
extent specifically reserved for on the Closing Balance Sheet and any
schedules thereto, and (ii) any Tax resulting from the departure on
or before the Closing Date of any of the Target Entities from any
Relevant Group (resulting from the transferring into income of
deferred intercompany transactions under Section 1.1502-13 of the
Treasury Regulations or excess loss accounts under Section 1.1502-19
of the Treasury Regulations or otherwise), and (z) any Tax arising
directly or indirectly from a breach of a representation or warranty
set out in Section 2.8 of this Agreement;
(iv) any Losses, other than the actual payment of Severance
Pay in accordance with Section 5.7(c), arising out of Buyer's payment of
Severance Pay in accordance with Section 5.7(c);
(v) any Losses incurred by Buyer as a result of the
inaccuracy, untruthfulness, or breach of CTI's and Seller's Air Quality
Representation; and
(vi) any obligation to Buyer pursuant to Section 5.12 hereof.
(b) Subject to the terms and conditions of this Article 7, Buyer
agrees to indemnify, defend, and hold harmless CTI and Seller from, against, for
and in respect of any and all Losses asserted against, or paid, suffered or
incurred by, CTI or Seller and resulting from, based upon, or arising out of:
(i) the inaccuracy, untruthfulness, or breach of any
representation or warranty of Buyer contained in this Agreement or in any
agreement delivered pursuant to this Agreement;
(ii) a failure to perform any covenant or agreement of Buyer
made in this Agreement;
(iii) all liabilities of Target Entities, except to the extent
such liabilities of the Target Entities give rise to an indemnity claim
against CTI or Seller under this Agreement;
(iv) any obligation to CTI or Seller pursuant to Section 5.12
hereof;
(v) the Tax liability resulting to Seller from the
allocation set forth in Section 5.12(e) (except that any indemnity
pursuant to this clause (v) shall be limited to the amount by which the
Tax liability resulting to Seller from the allocation set forth in
Section 5.12(e) exceeded the Tax liability that would have resulted to
Seller if the payment of the Purchase Price had been allocated 100% to the
purchase of the Shares); and
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(vi) any liabilities of CTI arising under or pursuant to that
certain Asset Sale Agreement, dated June 28, 1997 among CTI, Anchor
Continental and Base-Line, Inc.
7.2 PROCEDURES FOR INDEMNIFICATION. All claims for indemnification by
any party entitled to indemnification hereunder (an "Indemnitee") from any other
party hereunder (an "Indemnitor") under this Article 7 shall be asserted and
resolved as follows:
(a) An Indemnification Claim shall be made by an Indemnitee by
delivery of a two written notices (the first such notice to be delivered
promptly after receipt by the Indemnitee of notice thereof and the second such
notice to be delivered by the Indemnitee ten (10) days thereafter) to the
Indemnitor requesting indemnification and specifying the basis on which
indemnification is sought and the amount of asserted Losses and, in the case of
a Third Party Claim, containing (by attachment or otherwise) such other
information as such Indemnitee shall have concerning such Third Party Claim.
(b) If the Indemnification Claim involves a Third Party Claim the
procedures set forth in Section 7.3 shall be observed by the Indemnitee and the
Indemnitor.
(c) If the Indemnification Claim involves a matter other than a
Third Party Claim, the Indemnitor shall have 30 days after the date on which the
Indemnitor receives the notice of an Indemnification Claim to object to such
Indemnification Claim by delivery of a written notice of such objection to the
Indemnitee specifying in reasonable detail the basis for such objection. If
within 30 days after the date on which the Indemnitor receives the second notice
of the Indemnification Claim, the Indemnitor has not delivered to the Indemnitee
a notice objecting to all or any portion of the claimed Loss and setting forth
the amount of such claimed Loss objected to and the reasons for such objection,
the Indemnitee shall be entitled to indemnification for such Loss, and the
Indemnitor shall promptly pay the full amount of such Loss. If, within 30 days
after the date on which the Indemnitor receives the second notice of an
Indemnification Claim, the Indemnitor delivers to the Indemnitee an objection to
all or any portion of the claimed Loss, setting forth the amount of such Loss
objected to and the reasons for such objection, the Indemnitee shall be entitled
to reimbursement for the portion of such Loss not objected to by the Indemnitor
and the Indemnitor shall promptly pay the full amount of so much of the Loss as
to which the Indemnitor did not object. The Indemnitee shall be entitled to
indemnification for the portion of such claimed Loss to which the Indemnitor
objected to upon the earlier of (i) the Indemnitor's and Indemnitee's written
agreement with respect to the indemnification of such Loss, or (ii) a final
determination or award of an arbitrator as provided for in Section 7.11 hereof.
(d) Upon determination of the amount of an Indemnification Claim,
whether by agreement between the Indemnitor and the Indemnitee or by an
arbitration award or by any other final adjudication, the Indemnitor shall pay
the amount of such Indemnification Claim within ten days of the date such amount
is determined.
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7.3 THIRD PARTY CLAIMS. The obligations and liabilities of the parties
hereunder with respect to a Third Party Claim shall be subject to the following
terms and conditions:
(a) The Indemnitee shall give the Indemnitor written notice of a
Third Party Claim promptly after receipt by the Indemnitee of notice thereof and
a second written notice ten (10) days after the Indemnitee's first written
notice to the Indemnitor, and the Indemnitor may undertake the defense,
compromise and settlement thereof by representatives of its own choosing
reasonably acceptable to the Indemnitee. The failure of the Indemnitee to
notify the Indemnitor of such claim shall not relieve the Indemnitor of any
liability that it may have with respect to such claim except to the extent the
Indemnitor is prejudiced by such failure. The assumption of the defense,
compromise and settlement of any such Third Party Claim by the Indemnitor shall
not be an acknowledgment of the obligation of the Indemnitor to indemnify the
Indemnitee with respect to such claim hereunder. If the Indemnitee desires to
participate in, but not control, any such defense, compromise and settlement, it
may do so at its sole cost and expense. If, however, the Indemnitor fails or
refuses to undertake the defense of such Third Party Claim within fifteen (15)
days after the second written notice of such claim has been given to the
Indemnitor by the Indemnitee, the Indemnitee shall have the right to undertake
the defense, compromise and settlement of such claim with counsel of its own
choosing. In the circumstances described in the preceding sentence, the
Indemnitee shall, promptly upon its assumption of the defense of such claim,
make an Indemnification Claim as specified in Section 7.2 which shall be deemed
an Indemnification Claim that is not a Third Party Claim for the purposes of the
procedures set forth herein.
(b) No settlement of a Third Party Claim involving the asserted
liability of the Indemnitor under this Article shall be made without the prior
written consent by or on behalf of the Indemnitor, which consent shall not be
unreasonably withheld or delayed. Notwithstanding the immediately preceding
sentences, consent shall be presumed in the case of settlements of $20,000 or
less where the Indemnitor has not responded within ten (10) business days of the
second notice of a proposed settlement, such second notice to be given ten (10)
days after the first notice. If the Indemnitor assumes the defense of a Third
Party Claim, (a) no compromise or settlement thereof may be effected by the
Indemnitor without the Indemnitee's consent (which consent shall not be
unreasonably withheld or delayed) unless (i) there is no finding or admission of
any violation of law and no effect on any other claim that may be made against
the Indemnitee, (ii) the sole relief provided is monetary damages that are paid
in full by the Indemnitor, and (iii) the compromise or settlement includes, as
an unconditional term thereof, the giving by the claimant or the plaintiff to
the Indemnitee of a release, in form and substance satisfactory to the
Indemnitee, from all liability in respect of such Third Party Claim, and (b) the
Indemnitee shall have no liability with respect to any compromise or settlement
thereof effected without its consent.
(c) In connection with the defense, compromise or settlement of
any Third Party Claim, the parties to this Agreement shall execute such powers
of attorney as may reasonably be necessary or appropriate to permit
participation of counsel selected by any party hereto and, as may reasonably be
related to any such claim or action, shall provide access to (i) the counsel,
accountants and other representatives of each party and to (ii) the properties,
personnel, books, tax records,
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contracts, commitments and all other business records of such other party
during normal business hours and will furnish to such other party copies of
all such documents, in each case as may reasonably be requested (certified,
if requested).
7.4 INDEMNIFICATION EXCLUSIVE REMEDY. Absent fraud, if the Closing
occurs, except for remedies based upon fraud and except for equitable remedies,
the remedies provided in this Article 7 and in the Escrow Agreement constitute
the sole and exclusive remedies for recovery against a party to this Agreement
based upon the inaccuracy, untruth or breach of any representation or warranty
of such party contained herein or in any certificate, Target Disclosure
Memorandum or Exhibit furnished by such party in connection herewith, or based
upon the failure of such party to perform any covenant, agreement or undertaking
required by the terms hereof to be performed by such party, or based upon any
claim arising from any action of any party to this Agreement prior to the
Closing Date.
7.5 SURVIVAL. All representations, warranties and agreements contained
in this Agreement or in any certificate delivered pursuant to this Agreement
shall survive the Closing notwithstanding any investigation conducted with
respect thereto or any knowledge acquired as to the accuracy or inaccuracy of
any such representation or warranty.
7.6 TIME LIMITATIONS.
(a) Neither CTI nor Seller will have any liability to Buyer under
or in connection with: (i) a breach of any of the representations or warranties
made, or the failure to perform any covenants or agreements (other than the
representations and warranties set forth in Sections 2.3 and 2.8 and those
covenants and agreements made by CTI and/or Seller in Sections 5.12,
7.1(a)(iii), 7.1(a)(vi) and 7.8) by CTI or Seller contained in this Agreement
unless written notice asserting an Indemnification Claim based thereon is given
to CTI or Seller prior to March 31, 2000; and (ii) a breach of any
representation or warranty made, or the failure to perform any covenant or
agreement made or to be performed by Seller or CTI contained in this Agreement
related to any Taxes, including without limitation, those representations and
warranties made by Seller and CTI in Section 2.8 and those covenants and
agreements made by Seller and/or CTI in Sections 5.12, 7.1(a)(iii), 7.1(a)(vi)
and 7.8, unless written notice asserting an Indemnification Claim based thereon
is given to Seller or CTI prior to the thirtieth (30th) day after the date upon
which the liability to which any such claim may relate is barred by all
applicable statutes of limitation; provided however that the representations and
warranties set forth in Section 2.3 shall survive indefinitely.
(b) Buyer will have no liability to CTI or Seller under or in
connection with a breach of any of the representations or warranties made, or
the failure to perform any covenants or agreements to be performed, by Buyer
contained in this Agreement unless written notice asserting an Indemnification
Claim based thereon is given to Buyer prior to March 31, 2000, except the
indemnities contained in Section 5.12 and clauses 7.1(b)(iii) and (b)(iv), and
Section 7.8, for which there shall be no time limit.
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7.7 LIMITATIONS AS TO AMOUNT.
(a) Indemnitor shall have no liability with respect to the matters
described in clauses (a) or (b) of Section 7.1 until the total of all Losses
with respect thereto exceeds $400,000 (the "Basket") and then only for the
amount by which such Losses exceed the Basket; PROVIDED, HOWEVER, that the
limitation set forth in this sentence shall not apply to the matters described
in Section 2.8, 5.12, 7.1(a)(iii), 7.1(a)(v), 7.1(a)(vi), 7.1(b)(iii),
7.1(b)(iv), 7.1(b)(v) or 7.1(b)(vi), which Losses shall be reimbursed dollar for
dollar. No single Loss shall be applied toward the Basket or be subject to
indemnity unless such Loss exceeds $10,000 prior to claims exceeding the Basket
or $5,000 after claims exceed the Basket ("Threshold Amounts"); PROVIDED,
FURTHER, HOWEVER, Losses arising out of the same transaction or occurrence may
be aggregated in determining any such Threshold Amounts. Claims shall be deemed
to have occurred when the matter first arises. The limitations set forth in
this Section shall not apply to any intentional misrepresentation or breach of
warranty of Indemnitor or any intentional failure to perform or comply with any
covenant or agreement of Indemnitor, and Indemnitor shall be liable for all
Losses with respect thereto.
(b) In no event shall the aggregate liability of an Indemnitor
under this Article 7 exceed $5,250,000, except that this limitation shall not
apply to any Tax for which a Target Entity may be liable under Section 1.1502-6
of the Treasury Regulations (or similar provision of state, local or foreign
law) that are not attributable to the income or operations of the Target
Entities.
7.8 TAX EFFECT AND INSURANCE. The liability of the Indemnitor with
respect to any Indemnification Claim shall be reduced by the tax benefit
actually received and any insurance proceeds received by the Indemnitees as a
result of any losses upon which such Indemnification Claim is based. For
purposes of this Section 7.8, a tax benefit is actually realized by an
Indemnitee (or a tax detriment suffered) as a result of Losses upon which in
Indemnification Claim is based only to the extent that the tax liability of such
Indemnitee is lower during any taxable year (or higher, in the case of a tax
detriment) as a result of Losses upon which an Indemnification Claim is based
than the tax liability of such Indemnitee would have been had there been no
Losses of this nature. Any reduction or increase in the liability of the
Indemnitor with respect to a Loss as a result of this Section 7.8 shall not be
reflected in a set-off or other direct adjustment to an Indemnitor's payment
obligation with respect to such Loss under this Article 7 but shall instead
result in a separate payment made only when and if the conditions of the second
sentence of this Section 7.8 are satisfied. Any dispute as to the amount of the
tax benefit actually realized (or the tax detriment actually suffered) shall be
resolved by arbitration as provided in Section 7.11 of this Agreement. Except
as otherwise required by law, the Parties shall treat any indemnification
payment made hereunder as an adjustment to Purchase Price.
7.9 ESCROW. Upon notice to CTI or Seller specifying in reasonable
detail the basis therefor, Buyer may give notice of a Claim under the Escrow
Agreement for any amount to which it may be entitled under this Article 7.
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7.10 SUBROGATION. Upon payment in full of any Indemnification Claim or
the payment of any judgment or settlement with respect to a Third Party Claim,
the Indemnitor shall be subrogated to the extent of such payment to the rights
of the Indemnitee against any person or entity with respect to the subject
matter of such Indemnification Claim or Third Party Claim.
7.11 ARBITRATION. All disputes arising under this Article 7 (other than
claims in equity) shall be resolved by arbitration in accordance with the
Commercial Arbitration Rules of the American Arbitration Association.
Arbitration shall be by three arbitrators experienced in the matters at issue
and selected by CTI, Seller and Buyer in accordance with the Commercial
Arbitration Rules of the American Arbitration Association. The arbitration
shall be held in such place in New York, New York as may be specified by the
arbitrator (or any place agreed to by CTI, Seller, Buyer and the arbitrator).
The decision of the arbitrator shall be final and binding as to any matters
submitted under this Article 7; provided, however, if necessary, such decision
and satisfaction procedure may be enforced by either Seller or CTI, on the one
hand, or Buyer, on the other hand, in any court of record having jurisdiction
over the subject matter or over any of the parties to this Agreement. The
Parties hereby waive any right to a jury trial in any action to enforce such
decision and satisfaction procedure. All costs and expenses incurred in
connection with any such arbitration proceeding (including reasonable attorneys
fees) shall be borne by the party against which the decision is rendered, or, if
no decision is rendered, such costs and expenses shall be borne equally by the
Indemnitor as one party and the Indemnitee as the other party. If the
arbitrator's decision is a compromise, the determination of which party or
parties bears the costs and expenses incurred in connection with any such
arbitration proceeding shall be made by the arbitrator on the basis of the
arbitrator's assessment of the relative merits of the parties' positions.
ARTICLE 8
TERMINATION
8.1 TERMINATION. Notwithstanding any other provision of this Agreement,
this Agreement may be terminated and the Stock Purchase abandoned at any time
prior to the Closing Date:
(a) By mutual consent of Buyer, on the one hand, and Seller and
CTI, on the other hand; or
(b) By either Party (provided that the terminating Party is not
then in material breach of any representation, warranty, covenant, or
other agreement contained in this Agreement) in the event of a material
breach by the other Party of any representation or warranty contained in
this Agreement which cannot be or has not been cured within 30 days after
the giving of written notice to the breaching Party of such breach and
which breach is reasonably likely, in the reasonable opinion of the
non-breaching Party, to have, individually or in the aggregate, a Target
Material Adverse Effect or a Buyer Material Adverse Effect, as applicable,
on the breaching Party; or
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(c) By either Party (provided that the terminating Party is not
then in material breach of any representation, warranty, covenant, or
other agreement contained in this Agreement) in the event of a material
nonperformance by the other Party of any covenant or agreement contained
in this Agreement which cannot be or has not been cured within 30 days
after the giving of written notice to the breaching Party of such breach;
or
(d) By either Party (provided that the terminating Party is not
then in material breach of any representation, warranty, covenant, or
other agreement contained in this Agreement) in the event any Consent of
any Regulatory Authority required for consummation of the Stock Purchase
and the other transactions contemplated hereby shall have been denied by
final nonappealable action of such authority or if any action taken by
such authority is not appealed within the time limit for appeal; or
(e) By either Party in the event that the Stock Purchase shall not
have been consummated by October 31, 1998, if the failure to consummate
the transactions contemplated hereby on or before such date is not caused
by any breach of this Agreement by the Party electing to terminate
pursuant to this Section 8.1(e).
The Party desiring to terminate this Agreement pursuant to clauses
(b) through (e) shall give written notice of such termination to the other
Party.
8.2 EFFECT OF TERMINATION.
(a) In the event of the termination and abandonment of this
Agreement pursuant to clauses (a) through (e) of Section 8.1, this Agreement
shall become void and have no effect, except that (i) the provisions of this
Section 8.2 and Article 9 and Section 5.4(b) shall survive any such termination
and abandonment, and (ii) a termination pursuant to Sections 8.1(b) or 8.1(c)
shall not relieve the breaching Party from Liability for an uncured willful
breach of a representation, warranty, covenant, or agreement giving rise to such
termination.
(b) In the event of (i) the approval of this Agreement by CTI's
Board of Directors, (ii) CTI's shareholders have not approved the Agreement and
(iii) Seller or CTI closes within six (6) months of the date of this Agreement
another transaction involving the sale of Shares, then CTI or Seller shall
promptly pay, or shall cause Target to promptly pay, Buyer the sum of
$4,000,000, which amount represents the Parties' best estimate of the value of
the management time, overhead, opportunity costs and other unallocated costs of
Buyer incurred by or on behalf of Buyer in connection with the transactions
contemplated by this Agreement which cannot be calculated with certainty.
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ARTICLE 9
MISCELLANEOUS
9.1 DEFINITIONS.
(a) Except as otherwise provided herein, the capitalized terms set
forth below shall have the following meanings:
"AFFILIATE" of a Person shall mean: (i) any other Person directly,
or indirectly through one or more intermediaries, controlling, controlled
by or under common control with such Person; (ii) any officer, director,
partner, employer, or direct or indirect beneficial owner of any 10% or
greater equity or voting interest of such Person; or (iii) any other
Person for which a Person described in clause (ii) acts in any such
capacity; provided however, that no shareholder of Seller shall be an
Affiliate for purposes of this Agreement.
"AGREEMENT" shall mean this Stock Purchase Agreement, including the
Exhibits and Target Disclosure Memorandum or Buyer Disclosure Memorandum
delivered pursuant hereto and incorporated herein by reference.
"ASSETS" of a Person shall mean all of the assets, properties,
businesses and rights of such Person of every kind, nature, character
and description, whether real, personal or mixed, tangible or
intangible, accrued or contingent, or otherwise relating to or
utilized in such Person's business, directly or indirectly, in whole
or in part, whether or not carried on the books and records of such
Person, and whether or not owned in the name of such Person or any
Affiliate of such Person and wherever located.
"BUSINESS DAYS" means any day that is not a Saturday, Sunday or a
day on which banking institutions in New York, New York, are not required
to be open.
"BUYER DISCLOSURE MEMORANDUM" shall mean the written information
entitled "Buyer Disclosure Memorandum" delivered prior to the date of this
Agreement to Target describing in reasonable detail the matters contained
therein and, with respect to each disclosure made therein, specifically
referencing each Section of this Agreement under which such disclosure is
being made.
"BUYER ENTITIES" shall mean, collectively, Buyer and all Buyer
Subsidiaries.
"BUYER MATERIAL ADVERSE EFFECT" shall mean an event, change or
occurrence which, individually or together with any other event, change or
occurrence, has a material adverse impact on the ability of Buyer to
perform its obligations under this Agreement or to consummate the Stock
Purchase or the other transactions contemplated by this Agreement.
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"BUYER SUBSIDIARIES" shall mean the Subsidiaries of Buyer, which
shall include any corporation or other organization acquired as a
Subsidiary of Buyer in the future and held as a Subsidiary by Buyer on the
Closing Date.
"CLOSING DATE" shall mean the date on which the Closing occurs.
"CODE" shall mean the Internal Revenue Code of 1986, as amended, and
the rules and regulations promulgated thereunder.
"CONFIDENTIALITY AGREEMENT" shall mean that certain Confidentiality
Agreement, dated June 9, 1998, between Buyer and Schroder & Co. Inc. (as
agent for Seller, CTI and Target).
"CONSENT" shall mean any consent, approval, authorization,
clearance, exemption, waiver, or similar affirmation by any Person
pursuant to any Contract, Law, Order, or Permit.
"CONTRACT" shall mean any written agreement, arrangement,
authorization, commitment, contract, indenture, instrument, lease,
obligation, restriction, understanding, or undertaking of any kind or
character, or other document to which any Person is a party or that is
binding on any Person or its capital stock, Assets or business.
"DEFAULT" shall mean (i) any breach or violation of, default under,
contravention of, or conflict with, any Contract, Law, Order, or Permit,
(ii) any occurrence of any event that with the passage of time or the
giving of notice or both would constitute a breach or violation of,
default under, contravention of, or conflict with, any Contract, Law,
Order, or Permit, or (iii) any occurrence of any event that with or
without the passage of time or the giving of notice would give rise to a
right of any Person to exercise any remedy or obtain any relief under,
terminate or revoke, suspend, cancel, or modify or change the current
terms of, or renegotiate, or to accelerate the maturity or performance of,
or to increase or impose any Liability under, any Contract, Law, Order, or
Permit.
"DGCL" shall mean the Delaware General Corporation Law.
"EQUITY RIGHTS" shall mean all arrangements, calls, commitments,
Contracts, options, rights to subscribe to, scrip, understandings,
warrants, or other binding obligations of any character whatsoever
relating to, or securities or rights convertible into or exchangeable for,
shares of the capital stock of a Person or by which a Person is or may be
bound to issue additional shares of its capital stock or other Equity
Rights.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
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"EXHIBITS" shall mean the Exhibits so marked, copies of which are
attached to this Agreement.
"FUNDED INDEBTEDNESS" shall mean any interest bearing debt on a
consolidated basis owed by Target to a third party or The CIT
Group/Business Credit, Inc.
"GAAP" shall mean United States generally accepted accounting
principles, consistently applied during the periods involved.
"HSR ACT" shall mean Section 7A of the Clayton Act, as added by
Title II of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, and the rules and regulations promulgated thereunder.
"INDEMNIFICATION CLAIM" shall mean a claim for indemnification under
Article 7.
"INTELLECTUAL PROPERTY" shall mean (i) copyrights, patents,
trademarks, service marks, service names and trade names, (ii)
applications and registrations therefor, (iii) technology rights and
licenses, computer software (including any source or object codes therefor
or documentation relating thereto), trade secrets, franchises, know-how,
inventions, and (iv) other intellectual property rights.
"KNOWLEDGE" as used with respect to a Person (including references
to such Person being aware of a particular matter) shall mean those facts
that are known by the president, chief financial officer, chief accounting
officer, chief operating officer, or any senior, or executive vice
president of such Person.
"LAW" shall mean any code, law (including common law), ordinance,
regulation, reporting or licensing requirement, rule, or statute
applicable to a Person or its Assets, Liabilities, or business, including
those promulgated, interpreted or enforced by any Regulatory Authority.
"LIABILITY" shall mean any direct or indirect, primary or secondary,
liability, indebtedness, obligation, penalty, cost or expense (including
costs of investigation, collection and defense), claim, deficiency,
guaranty or endorsement of or by any Person (other than endorsements of
notes, bills, checks, and drafts presented for collection or deposit in
the ordinary course of business) of any type, whether accrued, absolute or
contingent, liquidated or unliquidated, matured or unmatured, or
otherwise, but excluding any liability with respect to environmental
matters.
"LIEN" shall mean any conditional sale agreement, default of title,
easement, encroachment, encumbrance, hypothecation, infringement, lien,
mortgage, pledge, reservation, restriction, security interest, title
retention or other security arrangement, or any adverse right or interest,
charge, or claim of any nature whatsoever of, on, or with respect to any
property or property interest, other than (i) Liens for current property
Taxes not yet due
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and payable, and (ii) Liens which do not materially impair the use of, or
title to, or value of the Assets subject to such Lien.
"LITIGATION" shall mean any action, arbitration, cause of action,
claim, complaint, criminal prosecution, governmental or other examination,
hearing, administrative or other proceeding relating to or affecting a
Party, its business, its Assets (including Contracts related to it), or
the transactions contemplated by this Agreement.
"LOSSES" shall mean any and all demands, claims, actions or causes
of action, assessments, losses, damages, Liabilities, costs, and expenses,
including interest, penalties, cost of investigation and defense, and
reasonable attorneys' and other professional fees and expenses relating
thereto.
"MATERIAL" for purposes of this Agreement shall be determined in
light of the facts and circumstances of the matter in question; provided
that any specific monetary amount stated in this Agreement shall determine
materiality in that instance.
"OPERATING PROPERTY" shall mean any property owned, leased, or
operated by the Party in question or by any of its Subsidiaries, and,
where required by the context, includes the owner or operator of such
property, but only with respect to such property.
"ORDER" shall mean any administrative decision or award, decree,
injunction, judgment, order, quasi-judicial decision or award, ruling, or
writ of any federal, state, local or foreign or other court, arbitrator,
mediator, tribunal, administrative agency, or Regulatory Authority.
"PARTY" shall mean either Seller, CTI or Buyer, and "PARTIES" shall
mean Seller, CTI and Buyer, collectively.
"PERMIT" shall mean any federal, state, local, and foreign
governmental approval, authorization, certificate, easement, filing,
franchise, license, notice, permit, or right to which any Person is a
party or that is or may be binding upon or inure to the benefit of any
Person or its securities, Assets, or business.
"PERSON" shall mean a natural person or any legal, commercial or
governmental entity, such as, but not limited to, a corporation, general
partnership, joint venture, limited partnership, limited liability
company, trust, business association, group acting in concert, or any
person acting in a representative capacity.
"POST CLOSING PERIOD" means any taxable period or portion thereof
beginning after the Closing Date. If a taxable period begins on or before
the Closing Date and ends after the Closing Date, then the portion of the
taxable period that begins on the day following the Closing date shall
constitute a Post-Closing Period. Notwithstanding the foregoing,
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Post-Closing Period shall not include any taxable period or portion
thereof to which any Tax attributable to the transactions contemplated by
this Agreement is attributable.
"PRE-CLOSING PERIOD" means any taxable period or portion thereof
that is not a Post-Closing Period.
"PRIME RATE" shall mean the prime rate as published in the "Money
Rate" column of THE WALL STREET JOURNAL, Eastern Edition; in the event
that more than one such rate is reported, the Prime Rate shall equal the
average of such rates. Use of the term Prime Rate in this Agreement shall
mean per annum rate, simple interest.
"REGULATORY AUTHORITIES" shall mean, collectively, the SEC, the
NYSE, the NASD, the Federal Trade Commission, the United States Department
of Justice, and all other federal, state, county, local or other
governmental or regulatory agencies, authorities (including
self-regulatory authorities), instrumentalities, commissions, boards
or bodies having jurisdiction over the Parties and their respective
Subsidiaries.
"REPRESENTATIVE" shall mean any investment banker, financial
advisor, attorney, accountant, consultant, or other representative engaged
by a Person.
"SECURITIES LAWS" shall mean the Securities Act of 1933, as amended,
the Exchange Act of 1934, as amended, the Investment Company Act of 1940,
as amended, the Investment Advisors Act of 1940, as amended, the Trust
Indenture Act of 1939, as amended, and the rules and regulations of any
Regulatory Authority promulgated thereunder.
"SELLER'S CLOSING DOCUMENTS" shall mean the Escrow Agreement and all
certificates and other documents contemplated by this Agreement to be
delivered by Seller and/or CTI at Closing.
"STRADDLE PERIOD RETURN" has the meaning ascribed to such term in
Section 5.12(a)(iii) of this Agreement.
"SUBSIDIARIES" shall mean all those corporations, associations, or
other business entities of which the entity in question either (i) owns or
controls 50% or more of the outstanding equity securities either directly
or through an unbroken chain of entities as to each of which 50% or more
of the outstanding equity securities is owned directly or indirectly by
its parent (provided, there shall not be included any such entity the
equity securities of which are owned or controlled in a fiduciary
capacity), (ii) in the case of partnerships, serves as a general partner,
(iii) in the case of a limited liability company, serves as a managing
member, or (iv) otherwise has the ability to elect a majority of the
directors, trustees or managing members thereof.
"TARGET COMMON STOCK" shall mean the common stock of Target.
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"TARGET DISCLOSURE MEMORANDUM" shall mean the written information
entitled "Target Disclosure Memorandum" delivered prior to the date of
this Agreement to Buyer describing in reasonable detail the matters
contained therein and, with respect to each disclosure made therein,
specifically referencing each Section of this Agreement under which such
disclosure is being made.
"TARGET ENTITIES" shall mean, collectively, Target and all Target
Subsidiaries.
"TARGET FINANCIAL STATEMENTS" shall mean (i) the consolidated
balance sheets (including related notes and schedules, if any) of Target
and the related statements of income, changes in stockholders' equity, and
cash flows (including related notes and schedules, if any) for each of the
three fiscal years ended September 27, 1997, September 28, 1996 and
September 30, 1995, and the unaudited consolidated balance sheet
(including related notes and schedules, if any) of Target and the related
statements of income, changes in stockholders' equity and cash flows
(including related notes and schedules, if any) for the nine (9) months
ended July 27, 1998, and (ii) the consolidated statements of condition of
Target (including related notes and schedules, if any) and related
statements of income, changes in stockholders' equity, and cash flows
(including related notes and schedules, if any) with respect to periods
ended subsequent to June 27, 1998 (subject to normal recurring year-end
adjustments which are not material in the aggregate and the absence of any
or all footnote disclosures).
"TARGET MATERIAL ADVERSE EFFECT" shall mean a material adverse
effect on the business, assets, liabilities, operations, or results of
operations of Target and its Subsidiary; provided however that a Target
Material Adverse Effect shall not include the effect of any matter which
has or may have an industry-wide effect, or any general economic
conditions.
"TARGET SUBSIDIARIES" shall mean the Subsidiaries of Target,
which shall include the Target Subsidiaries described in Section 2.4
and any corporation or other organization acquired as a Subsidiary of
Target in the future and held as a Subsidiary by Target on the Closing
Date.
"TAX" or "TAXES" shall mean any federal, state, county, local, or
foreign taxes, charges, fees, levies, imposts, duties, or other
assessments, including income, gross receipts, excise, employment, sales,
use, transfer, license, payroll, franchise, severance, stamp, occupation,
windfall profits, environmental, federal highway use, commercial rent,
customs duties, capital stock, paid-up capital, profits, withholding,
Social Security, single business and unemployment, disability, real
property, personal property, registration, ad valorem, value added,
alternative or add-on minimum, estimated, or other tax or governmental fee
of any kind whatsoever, imposes or required to be withheld by the United
States or any state, county, local or foreign government or subdivision or
agency thereof, including any interest, penalties, and additions imposed
thereon or with respect thereto.
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"TAX RETURN" shall mean any report, return, information return, or
other information required to be supplied to a taxing authority in
connection with Taxes, including any return of an affiliated or combined
or unitary group that includes a Party or its Subsidiaries.
(b) The terms set forth below shall have the meanings ascribed thereto
in the referenced sections:
Agreed Adjustments Section 1.4(b)
Buyer's Accountants Section 1.4(b)
Closing Section 1.2(a)
Closing Balance Sheet Section 1.4(b)
ERISA Affiliate Section 2.14(c)
Escrow Agent Section 1.2(b)
Escrow Agreement Section 1.3
Escrow Amount Section 1.2(b)
Estimated Consolidated Stockholders' Equity Section 1.4(a)
Stockholders' Equity Adjustment Section 1.4(b)
Notice of Disagreement Section 1.4(b)
Purchase Price Section 1.1(c)
Relevant Group Section 2.8
Seller's Accountants Section 1.4(b)
Settlement Accountants Section 1.4(b)
Stock Purchase Section 1.1(a)
Target Benefit Plans Section 2.14(a)
Target Contracts Section 2.15
Target ERISA Plan Section 2.14(a)
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Target Pension Plan Section 2.14(a)
Tax Escrow Amount Section 1.2(b)
(c) Any singular term in this Agreement shall be deemed to include the
plural, and any plural term the singular. Whenever the words "include,"
"includes" or "including" are used in this Agreement, they shall be deemed
followed by the words "without limitation."
9.2 EXPENSES.
(a) Except as otherwise provided in this Section 9.2, each of the
Parties shall bear and pay all direct costs and expenses incurred by it or on
its behalf in connection with the transactions contemplated hereunder, including
filing, registration and application fees, printing fees, and fees and expenses
of its own financial or other consultants, investment bankers, accountants, and
counsel.
(b) Nothing contained in this Section 9.2 shall constitute or shall be
deemed to constitute liquidated damages for the willful breach by a Party of the
terms of this Agreement or otherwise limit the rights of the nonbreaching Party.
9.3 BROKERS AND FINDERS. Except for Schroder & Co. Inc. as to Seller
and CTI and except for Downer & Co. as to Buyer, each of the Parties represents
and warrants to the other Party that neither it nor any of its officers,
directors, employees, or Affiliates has employed any broker or finder or
incurred any Liability for any financial advisory fees, investment bankers'
fees, brokerage fees, commissions, or finders' fees in connection with this
Agreement or the transactions contemplated hereby. In the event of a claim by
any broker or finder based upon his or its representing or being retained by or
allegedly representing or being retained by Target, Seller or CTI, on the one
hand, or by Buyer, on the other hand, each of Seller and CTI, on the one hand,
and Buyer, on the other hand, as the case may be, agrees to indemnify and hold
the other Party harmless of and from any Liability in respect of any such claim.
9.4 CONFIDENTIALITY. From and after the Closing Date, Seller and CTI
shall keep confidential any information relating to Target and its Assets and
Operating Properties, except for any such information that (i) is available to
the public on the Closing Date, (ii) thereafter becomes available to the public
other than as a result of a disclosure by Seller or CTI or (iii) is or becomes
available to Seller or CTI on a non-confidential basis from a source that to
CTI's or Seller's knowledge is not prohibited from disclosing such information
to Seller or CTI by a legal, contractual or fiduciary obligation to any other
Person. Should Seller or CTI be required to disclose any such information in
response to a court order or as otherwise required by Law or administrative
process, it shall inform Buyer in writing of such request or obligation as soon
as possible after Seller or CTI is informed of it and, if possible, before any
information is disclosed, so that a protective order or other appropriate remedy
may be obtained. If Seller or CTI is obliged to make the disclosure, it shall
only make the disclosure to the extent to which it is so obliged but not further
or otherwise.
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9.5 NO THIRD PARTY BENEFICIARY. The terms and provisions of this
Agreement are intended solely for the benefit of each party hereto and their
respective successors or permitted assigns. It is not the intention of the
parties to confer third-party beneficiary rights, and this Agreement does not
confer any such rights, upon any other Person other than any Person entitled to
indemnity under Article 7 except with respect to employees pursuant to Section
5.7.
9.6 ENTIRE AGREEMENT. Except as otherwise expressly provided herein,
this Agreement (including the documents and instruments referred to herein)
constitutes the entire agreement between the Parties with respect to the
transactions contemplated hereunder and supersedes all prior arrangements or
understandings with respect thereto, written or oral (except, as to Section
5.4(b), for the Confidentiality Agreement). Nothing in this Agreement expressed
or implied, is intended to confer upon any Person, other than the Parties or
their respective successors, any rights, remedies, obligations, or liabilities
under or by reason of this Agreement.
9.7 AMENDMENTS. To the extent permitted by Law, this Agreement may be
amended by a subsequent writing signed by each of the Parties upon the approval
of each of the Parties.
9.8 WAIVERS.
(a) Prior to or on the Closing Date, Buyer, acting through its
Board of Directors, chief executive officer or other authorized officer, shall
have the right to waive any Default in the performance of any term of this
Agreement by Seller or CTI, to waive or extend the time for the compliance or
fulfillment by Seller or CTI of any and all of its obligations under this
Agreement, and to waive any or all of the conditions precedent to the
obligations of Buyer under this Agreement, except any condition which, if not
satisfied, would result in the violation of any Law. No such waiver shall be
effective unless in writing signed by a duly authorized officer of Buyer.
(b) Prior to or on the Closing Date, CTI, acting through its Board
of Directors, chief executive officer, or other authorized officer, shall have
the right to waive any Default in the performance of any term of this Agreement
by Buyer, to waive or extend the time for the compliance or fulfillment by Buyer
of any and all of its obligations under this Agreement, and to waive any or all
of the conditions precedent to the obligations of Seller and CTI under this
Agreement, except any condition which, if not satisfied, would result in the
violation of any Law. No such waiver shall be effective unless in writing
signed by a duly authorized officer of CTI.
(c) The failure of any Party at any time or times to require
performance of any provision hereof shall in no manner affect the right of such
Party at a later time to enforce the same or any other provision of this
Agreement. No waiver of any condition or of the breach of any term contained in
this Agreement in one or more instances shall be deemed to be or construed as a
further or continuing waiver of such condition or breach or a waiver of any
other condition or of the breach of any other term of this Agreement.
- 50 -
9.9 ASSIGNMENT. Except as expressly contemplated hereby, neither this
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned by any Party hereto (whether by operation of Law or otherwise) without
the prior written consent of the other Party; provided that Buyer may transfer
and assign any or all of its rights, interests and obligations hereunder
(including, without limitation, its rights under Article 1) to an Affiliate of
Buyer (now or hereafter organized), provided that any such assignee agrees in
writing to be bound by all of the terms, conditions and provisions contained
herein, and, unless CTI and Seller otherwise consent, Buyer remains fully liable
hereunder. Subject to the preceding sentence, this Agreement will be binding
upon, inure to the benefit of and be enforceable by the Parties and their
respective successors and assigns.
9.10 NOTICES. All notices or other communications which are required or
permitted hereunder shall be in writing and sufficient if delivered by hand, by
facsimile transmission, by registered or certified mail, postage pre-paid, or by
courier or overnight carrier, to the persons at the addresses set forth below
(or at such other address as may be provided hereunder), and shall be deemed to
have been delivered as of the date so delivered:
Seller or CTI: Coating Technologies International, Inc.
2000 South Beltline Boulevard
Columbia, South Carolina 29205
Telecopy Number: (803) 988-7919
Attention: D. Thomas Divird
Copy to Counsel
(which shall not
constitute notice): Alston & Bird LLP
1201 West Peachtree Street
Atlanta, GA 30309
Telecopy Number: (404) 881-4777
Attention: B. Harvey Hill, Jr.
Buyer: 110 E. Montee de Liesse
St. Laurent, Quebec H4T 1N4
Canada
Telecopy Number: (514) 731-5477
Attention: Melbourne F. Yull
- 51 -
Copy to Counsel
(which shall not
constitute notice): Morgan, Lewis & Bockius LLP
101 Park Avenue
New York, New York 10178
Telecopy Number: (212) 309-6273
Attention: Nancy H. Corbett, Esq.
Any Party may from time to time may change its address, telefax number or
other information for the purposes of notices to that party by giving notice
specifying such change to the other Parties hereto.
9.11 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the Laws of the State of Delaware, without regard to any
applicable conflicts of Laws.
9.12 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
9.13 CAPTIONS; ARTICLES AND SECTIONS. The captions contained in this
Agreement are for reference purposes only and are not part of this Agreement.
Unless otherwise indicated, all references to particular Articles or Sections
shall mean and refer to the referenced Articles and Sections of this Agreement.
9.14 INTERPRETATIONS. Neither this Agreement nor any uncertainty or
ambiguity herein shall be construed or resolved against any party, whether under
any rule of construction or otherwise. No party to this Agreement shall be
considered the draftsman. The parties acknowledge and agree that this Agreement
has been reviewed, negotiated, and accepted by both parties and their attorneys
and shall be construed and interpreted according to the ordinary meaning of the
words used so as fairly to accomplish the purposes and intentions of all parties
hereto.
9.15 ENFORCEMENT OF AGREEMENT. The Parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement was
not performed in accordance with its specific terms or was otherwise breached.
It is accordingly agreed that the Parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions hereof in any court of the United States or any state
having jurisdiction, this being in addition to any other remedy to which they
are entitled at law or in equity or in this Agreement.
9.16 SEVERABILITY. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
- 52 -
provisions of this Agreement in any other jurisdiction. If any provision of
this Agreement is so broad as to be unenforceable, the provision shall be
interpreted to be only so broad as is enforceable.
9.17 UPDATING TARGET DISCLOSURE MEMORANDUM. Seller and CTI may update or
supplement the Target Disclosure Memorandum in writing delivered to Buyer at any
time on or prior to Closing to reflect matters which occur subsequent to the
date hereof and do not result from the breach of any of the covenants contained
in Sections 4.1 or 4.2. Buyer in its sole discretion may (i) accept such Target
Disclosure Memorandum as modified and close the purchase and sale of the Shares,
thereby waiving any claim Buyer may have that such modification is a breach of
the representations and warranties given in Article 2 on the date of this
Agreement, or (ii) terminate this Agreement in the event such modification has,
individually or in the aggregate, a Target Material Adverse Effect.
9.18 NON-COMPETITION AGREEMENTS. At the Closing, Buyer and Target shall
enter into non-competition agreements with each of D. Thomas Divird and
Daniel E. Stansky, in form and substance satisfactory to Buyer, Target,
D. Thomas Divird and Daniel E. Stansky.
[Signatures on Next Page]
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IN WITNESS WHEREOF, each of Seller, CTI and Buyer has caused this
Agreement to be executed on its behalf by its duly authorized officers as of the
day and year first above written.
INTERTAPE POLYMER GROUP INC.
By: /s/ [ILLEGIBLE]
-----------------------------------
Name: [ILLEGIBLE]
-----------------------------------
Title: [ILLEGIBLE]
-----------------------------------
Witness: /s/ [ILLEGIBLE]
-----------------------------
Name: [ILLEGIBLE]
-----------------------------
COATING TECHNOLOGIES
INTERNATIONAL, INC.
By:
-----------------------------------
Name:
-----------------------------------
Title:
-----------------------------------
Witness:
-----------------------------
Name:
-----------------------------
ANCHOR CONTINENTAL
HOLDINGS, INC.
By:
-----------------------------------
Name:
-----------------------------------
Title:
-----------------------------------
Witness:
-----------------------------
Name:
-----------------------------
IN WITNESS WHEREOF, each of Seller, CTI and Buyer has caused this
Agreement to be executed on its behalf by its duly authorized officers as of the
day and year first above written.
INTERTAPE POLYMER GROUP INC.
By: /s/ Andrew M. Archibald
-----------------------------------
Name: Andrew M. Archibald
-----------------------------------
Title: CFO, Secretary
-----------------------------------
Witness: /s/ Paul Vogt
-----------------------------
Name: Paul Vogt
-----------------------------
COATING TECHNOLOGIES
INTERNATIONAL, INC.
By: /s/ D. T. Divird
-----------------------------------
Name: D. T. Divird
-----------------------------------
Title: CEO
-----------------------------------
Witness: /s/ B. H. Hildreth
-----------------------------
Name: B. H. Hildreth
-----------------------------
ANCHOR CONTINENTAL
HOLDINGS, INC.
By: /s/ D. T. Divird
-----------------------------------
Name: D. T. Divird
-----------------------------------
Title: V.P.
-----------------------------------
Witness: /s/ B. H. Hildreth
-----------------------------
Name: B. H. Hildreth
-----------------------------
Dates Referenced Herein and Documents Incorporated by Reference
| Referenced-On Page |
|---|
| This ‘20-F’ Filing | | Date | | First | | Last | | | Other Filings |
|---|
| |  |
| | 3/31/00 | | 42 | | | | | 6-K |
| | 6/1/99 |
| Filed on: | | 5/28/99 |
| For Period End: | | 12/31/98 |
| | 11/7/98 | | 7 |
| | 10/31/98 | | 7 | | 45 |
| | 10/10/98 | | 7 |
| | 10/3/98 | | 7 |
| | 9/27/98 | | 7 |
| | 9/6/98 | | 7 |
| | 8/29/98 | | 7 |
| | 8/19/98 | | 1 | | 5 |
| | 8/17/98 | | 10 |
| | 8/1/98 | | 9 |
| | 7/31/98 | | 21 |
| | 7/27/98 | | 51 |
| | 6/30/98 | | 14 | | 21 |
| | 6/27/98 | | 51 |
| | 6/9/98 | | 47 |
| | 9/27/97 | | 14 | | 51 |
| | 6/28/97 | | 40 |
| | 9/28/96 | | 51 |
| | 9/30/95 | | 51 |
| | 10/1/94 | | 14 |
| List all Filings |
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