0000950116-01-500975.txt : 20011019 0000950116-01-500975.hdr.sgml : 20011019 ACCESSION NUMBER: 0000950116-01-500975 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 20010902 FILED AS OF DATE: 20011017 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HUNT CORP CENTRAL INDEX KEY: 0000049146 STANDARD INDUSTRIAL CLASSIFICATION: PENS, PENCILS & OTHER ARTISTS' MATERIALS [3950] IRS NUMBER: 210481254 STATE OF INCORPORATION: PA FISCAL YEAR END: 1130 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-08044 FILM NUMBER: 1760568 BUSINESS ADDRESS: STREET 1: ONE COMMERCE SQ STREET 2: 2005 MARKET ST CITY: PHILADELPHIA STATE: PA ZIP: 19103 BUSINESS PHONE: 2157327700 MAIL ADDRESS: STREET 1: ONE COMMERCE SQ STREET 2: 2005 MARKET ST CITY: PHILADELPHIA STATE: PA ZIP: 19103 FORMER COMPANY: FORMER CONFORMED NAME: HUNT MANUFACTURING CO DATE OF NAME CHANGE: 19920703 10-Q 1 tenq.txt 10-Q FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 [X] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 2, 2001 ------------------------------------------------- OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number 1-8044 --------------------------------------------------------- HUNT CORPORATION ------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Pennsylvania 21-0481254 ------------------------------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) One Commerce Square 2005 Market Street, Philadelphia, PA 19103 ------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone no., including area code 215-656-0300 -------------------------------- Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ----- ----- As of September 30, 2001, there were outstanding 8,895,569 shares of the registrant's common stock. Page 2 HUNT CORPORATION INDEX
Page ------ PART I - FINANCIAL INFORMATION Item 1 - Financial Statements Condensed Consolidated Balance Sheets as of 3 September 2, 2001 and December 3, 2000 Condensed Consolidated Statements of Operations - 4 Three Months and Nine Months Ended September 2, 2001 and September 3, 2000 Consolidated Statements of Comprehensive Income (Loss) 5 - Three Months and Nine Months Ended September 2, 2001 and September 3, 2000 Condensed Consolidated Statements of Cash Flows - 6 Nine Months Ended September 2, 2001 and September 3, 2000 Notes to Condensed Consolidated Financial 7 - 10 Statements Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations 11-17 Item 3 - Quantitative and Qualitative Disclosures about Market Risk 18 PART II - OTHER INFORMATION Item 1 - Legal Proceedings 19 Item 6 - Exhibits and Reports on Form 8-K 20 Signatures 21
Page 3 Part I - FINANCIAL INFORMATION Item 1. Financial Statements Hunt Corporation Condensed Consolidated Balance Sheets (Unaudited) (In thousands except share and per share amounts)
September 2, December 3, ASSETS 2001 2000 ------------ ----------- Current assets: Cash and cash equivalents $ 12,134 $ 23,878 Estimated net proceeds from business to be divested 26,643 -- Accounts receivable, less allowance for doubtful accounts: 2001, $709; 2000, $873 32,120 35,058 Inventories: Raw materials 3,165 8,446 Work in process 1,388 2,784 Finished goods 4,004 10,593 --------- --------- Total inventories 8,557 21,823 Deferred income taxes 2,421 4,966 Prepaid expenses and other current assets 9,123 2,590 --------- --------- Total current assets 90,998 88,315 Property, plant and equipment, at cost, less accumulated depreciation and amortization: 2001, $41,970; 2000, $46,007 25,104 41,216 Excess of acquisition costs over net assets acquired, net 1,224 22,117 Other assets 9,288 11,884 --------- --------- Total assets $ 126,614 $ 163,532 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current portion of long-term debt $ 27,870 $ -- Accounts payable 5,371 7,876 Accrued expenses: Salaries, wages and commissions 2,032 2,460 Income taxes 329 1,297 Other 11,647 20,274 --------- --------- Total current liabilities 47,249 31,907 Long-term debt, less current portion 27,000 54,682 Deferred income taxes 1,152 2,434 Other non-current liabilities 14,122 12,539 Commitments and contingencies Stockholders' equity: Preferred stock, $.10 par value, authorized 1,000,000 shares; none issued -- -- Common stock, $.10 par value, 40,000,000 shares authorized; issued: 2001 and 2000 -16,152,322 shares 1,615 1,615 Capital in excess of par value 7,412 7,412 Accumulated other comprehensive loss (331) (6,840) Retained earnings 130,181 158,044 --------- --------- 138,877 160,231 Less cost of treasury stock: 2001 - 7,256,753 shares; 2000 - 6,324,933 shares; (101,786) (98,261) --------- --------- Total stockholders' equity 37,091 61,970 --------- --------- Total liabilities and stockholders' equity $ 126,614 $ 163,532 ========= =========
See accompanying notes to condensed consolidated financial statements. Page 4 Hunt Corporation Condensed Consolidated Statements of Operations (Unaudited) (In thousands except per share amounts)
Three Months Ended Nine Months Ended ---------------------------- ---------------------------- September 2, September 3, September 2, September 3, 2001 2000 2001 2000 (13 weeks) (14 weeks) (39 weeks) (40 weeks) ------------ ------------ ----------- ----------- Net sales $ 42,712 $ 46,750 $124,041 $132,226 Cost of sales 27,054 28,047 75,288 80,604 ---------- --------- --------- --------- Gross profit 15,658 18,703 48,753 51,622 Selling, administrative and general expenses 13,261 14,059 38,915 40,336 Restructuring and other (207) 3,631 (115) 3,530 ---------- --------- --------- --------- Income from operations 2,604 1,013 9,953 7,756 Interest expense 1,052 1,055 3,107 3,245 Interest and other income, net (31) (251) (389) (816) ---------- --------- --------- --------- Income from continuing operations before income taxes 1,583 209 7,235 5,327 Provision (benefit) for income taxes 432 (93) 2,405 1,809 ---------- --------- --------- --------- Income from continuing operations 1,151 302 4,830 3,518 ---------- --------- --------- --------- Discontinued operations: Loss from discontinued business, net of tax benefit of $115 and $194 in 2001, and $641 and $810 in 2000, respectively (1,132) (1,590) (2,149) (1,589) Estimated loss on disposal of discontinued business, net of tax benefit of $2,495 (27,715) -- (27,715) -- ---------- --------- --------- --------- Net income (loss) ($ 27,696) ($ 1,288) ($ 25,034) $ 1,929 ========== ========= ========= ========= Basic earnings per common share: Income from continuing operations $ 0.13 $ 0.03 $ 0.54 $ 0.35 Loss from discontinued business ($ 0.13) ($ 0.16) ($ 0.24) ($ 0.16) Estimated loss on disposal of discontinued business ($ 3.11) -- ($ 3.10) -- ---------- --------- --------- --------- Net income (loss) per share - Basic ($ 3.11) ($ 0.13) ($ 2.80) $ 0.19 ========== ========= ========= ========= Diluted earnings per common share: Income from continuing operations $ 0.13 $ 0.03 $ 0.54 $ 0.35 Loss from discontinued business ($ 0.13) ($ 0.16) ($ 0.24) ($ 0.16) Estimated loss on disposal of discontinued business ($ 3.11) -- ($ 3.10) -- ---------- --------- --------- --------- Net income (loss )per share - Diluted ($ 3.11) ($ 0.13) ($ 2.80) $ 0.19 ========== ========= ========= ========= Dividends per common share $ 0.103 $ 0.103 $ 0.205 $ 0.308 ========== ========= ========= =========
See accompanying notes to condensed consolidated financial statements. Page 5 Hunt Corporation Consolidated Statements of Comprehensive Income (Loss) (Unaudited) (In thousands)
Three Months Ended Nine Months Ended ---------------------------- -------------------------- September 2, September 3, September 2, September 3, 2001 2000 2001 2000 (13 weeks) (14 weeks) (39 weeks) (40 weeks) ------------ ------------ ------------ ------------ Net income (loss) $(27,696) $ (1,288) $(25,034) $ 1,929 Other comprehensive income (loss): Foreign currency translation adjustments, net of income tax expense (benefit) of $2,631 and $3,242 in 2001, and $(375) and $(2,059) in 2000, respectively 7,017 (661) 6,509 (3,980) -------- -------- -------- -------- Other comprehensive income (loss) 7,017 (661) 6,509 (3,980) -------- -------- -------- -------- Comprehensive income (loss) $(20,679) $ (1,949) $(18,525) $ (2,051) ======== ======== ======== ========
See accompanying notes to condensed consolidated financial statements. Page 6 Hunt Corporation Condensed Consolidated Statements of Cash Flows (Unaudited) (in thousands)
Nine Months Ended ---------------------------- September 2, September 3, 2001 2000 (39 weeks) (40 weeks) ------------ ------------ Cash flows from operating activities: Net income (loss) $(25,034) $ 1,929 Adjustments to reconcile net income to net cash provided by (used for) operating activities: Depreciation and amortization 5,964 6,692 Deferred income taxes 1,256 453 Gain on disposals of property, plant and equipment 22 66 (Gain) loss on business divestitures 27,715 (133) Payment for patent infringement litigation (3,919) -- Payments/credits for special charges (715) (3,654) Issuance of stock under management incentive bonus and stock grant plans 60 58 Changes in operating assets and liabilities (4,797) (17,499) -------- -------- Net cash provided by (used for) operating activities 552 (12,088) -------- -------- Cash flows from investing activities: Additions to property, plant and equipment (2,960) (4,762) Other, net (321) (108) -------- -------- Net cash used for investing activities (3,281) (4,870) -------- -------- Cash flows from financing activities: Proceeds from issuance of long-term debt 4,751 9,215 Payments on long-term debt, including current maturities (4,680) (10,676) Book overdrafts (2,692) (1,498) Purchases of treasury stock (3,680) (2,981) Dividends paid (2,734) (3,059) Other, net 8 (75) -------- -------- Net cash used for financing activities (9,027) (9,074) -------- -------- Effect of exchange rate changes on cash 12 (102) -------- -------- Net decrease in cash and cash equivalents (11,744) (26,134) Cash and cash equivalents, beginning of period 23,878 36,897 -------- -------- Cash and cash equivalents, end of period $ 12,134 $ 10,763 ======== ========
See accompanying notes to condensed consolidated financial statements. Page 7 Hunt Corporation Notes to Condensed Consolidated Financial Statements (Unaudited) 1. The accompanying condensed consolidated financial statements and related notes are unaudited; however, in management's opinion all adjustments (consisting of normal recurring accruals) necessary for a fair presentation of the financial position at September 2, 2001 and the results of operations and cash flows for the periods shown have been made. Such statements are presented in accordance with the requirements of Form 10-Q and do not include all disclosures normally required by generally accepted accounting principles or those normally made in Form 10-K. 2. On October 9, 2001, the Company completed the previously announced intended sale of its commercial Graphics Products business and related assets in the United States, United Kingdom, Netherlands, and Hong Kong to Neschen AG, a German manufacturer of self adhesive products. For accounting purposes, the sale was effective October 1, 2001. The purchase price, which was determined by arms' length negotiation between the parties, is expected to total approximately $33 million, subject to certain closing adjustments primarily relating to inventory. The Company plans to use $25 million of the proceeds to reduce the $50 million senior debt notes currently outstanding. In addition, the Company plans to repay the outstanding lines of credit facilities balances (totaling approximately $2.9 million as of September 2, 2001) at its foreign operations, since these operations were part of the commercial Graphics Products business sold. (See Note 3.) The Company recorded an estimated after-tax loss of $28.2 million, or $3.16 per share, related to this sale. This charge includes the loss on the sale of assets (net of the expected proceeds), severance costs, recognition of future lease obligations, and other related costs. The Company has retained $4.4 million of assets related to the divested business not included in the sale to Neschen. These assets have been reclassified from property, plant and equipment to assets held for sale (included in prepaid expenses and other current assets in the Condensed Consolidated Balance Sheet). The Company is actively pursuing the disposition of these non-strategic assets and expects to achieve their sale within the next twelve months. The divested business had net sales of approximately $12.3 million and $16.9 million in the third quarters of fiscal 2001 and 2000, respectively. Net sales for the divested business were $40.4 million and $55.0 million in the first nine months of 2001 and 2000, respectively. The divested business has been accounted for as a discontinued operation, and accordingly, has been segregated in the accompanying Condensed Consolidated Statements of Operations, and prior periods have been reclassified to conform to the current year's presentation. However, prior periods' Condensed Consolidated Balance Sheets, Consolidated Statements of Comprehensive Income (Loss), and Condensed Consolidated Statements of Cash Flows have not been reclassified. Page 8 During the third quarter of 2001, the Company recorded a tax benefit of $.5 million after-tax ($.05 per share) resulting from a resolution of a prior year tax exposure in connection with a 1997 divestiture. This item is included in the total tax benefit recorded for loss on disposal of discontinued business. 3. As a result of the sale of the commercial Graphics Products business, the Company is required to modify its existing debt arrangements with its senior note holders and banks. The Company has reached an understanding with its senior note holders to modify, in certain respects, the terms of the senior notes, subject to, among other things, the Company's securing and maintaining a $25 million bank credit facility. Additional modifications regarding the senior notes include: (1) a principal prepayment on the senior notes of $25 million at par, (2) an increase in the interest rate on the remaining balance of the senior notes from 7.86% to 8.36%, (3) changes to certain covenant requirements, and (4) certain restrictions on the Company's ability to repurchase its common stock. The Company plans to use $25 million of the proceeds from the sale of the divested business to reduce the $50 million senior note debt currently outstanding. In addition, the Company plans to repay the outstanding balance under its $50 million bank credit facility ($2.9 million at September 2, 2001). The Company has received a commitment from two banks for a new $25 million bank credit facility to replace the existing $50 million credit facility. The terms of the new credit facility are expected to include, among other things, LIBOR based loans, covenant requirements substantially similar to the existing bank credit facility, and limitations on borrowings based on levels of accounts receivable, inventory, and fixed assets. 4. A reconciliation of weighted average common shares outstanding to weighted average common shares outstanding assuming dilution in calculating the earnings per share is shown below (in thousands): Three Months Ended ------------------- Sept. 2, Sept. 3, 2001 2000 -------- -------- Average common shares outstanding - basic 8,895 9,857 Add: common equivalent shares representing shares issuable upon exercise of stock options and stock grants -- -- ----- ----- Average common shares and dilutive securities outstanding (antidilutive in 2001 and 2000) 8,895 9,857 ===== ===== Page 9 Nine Months Ended ------------------- Sept. 2, Sept. 3, 2001 2000 -------- -------- Average common shares outstanding - basic 8,949 9,930 Add: common equivalent shares representing shares issuable upon exercise of stock options and stock grants -- 18 ----- ----- Average common shares and dilutive securities outstanding (antidilutive in 2001) 8,949 9,948 ===== ===== 5. The following table sets forth the details and the cumulative activity for the nine months ended September 2, 2001 in the various accruals and reserves associated with the Company's 1999 restructuring plan included in the Condensed Consolidated Balance Sheet at September 2, 2001 (in thousands):
Balance at Cash Non-Cash Balance at December 3, 2000 Credits Activity Activity September 2, 2001 ----------------- ------- -------- -------- ----------------- Severance $ 790 $ (344) $ (353) $ 1 $ 94 Lease Obligations 249 -- -- -- 249 Fixed Assets 20 (7) (11) (2) -- ------ ------ ------ ------ ------ Total $1,059 $ (351) $ (364) $ (1) $ 343 ====== ====== ====== ====== ======
During the third quarter of fiscal 2001, the Company reduced by $.4 million pre-tax some of its reserves in connection with the Company's implementation of its 1999 restructuring plan. These reserve reductions related primarily to lower than anticipated severance costs. Approximately $.1 million of this amount is included in the loss from discontinued business, while the remaining balance is included in restructuring and other in the Condensed Consolidated Statements of Operations. 6. Several years ago, the Company was sued for patent infringement with respect to one of its minor products. After a jury trial in 1998, a judgment was entered against the Company in the amount of $3.3 million, plus interest and costs. The verdict was appealed, and, contrary to the expectations of the Company and its patent counsel, a three-judge panel of the U. S. Court of Appeals affirmed the judgment in July 2000. Subsequently, a request filed with the Court of Appeals by the Company to have the case reconsidered by all twelve judges of the Court of Appeals was denied in October 2000. As a result, the Company recorded a liability of $3.8 million pre-tax (including interest and costs) in fiscal 2000. The Company then petitioned for a review of the decision by the Supreme Court of Page 10 the United States, which petition was denied in April 2001. The Company recorded an additional liability of $.1 million pre-tax for interest costs during the first half of fiscal 2001, which is included in the accompanying fiscal 2001 Condensed Consolidated Statements of Operations under Restructuring and other. During the fiscal 2001 third quarter, the Company made a payment to the plaintiff in the amount of approximately $3.9 million in satisfaction of this judgment. However, the Company and its patent counsel continue to pursue other options for overturning the verdict. 7. As a result of the sale of the commercial Graphics Products business (see Note 2) and its impact on the internal organizational structure of the Company, management believes it now has a single reportable segment: Consumer Products. 8. In fiscal 2001 the Company adopted Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging Activities," as amended by SFAS No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging Activities." This standard requires that all derivative instruments be recorded on the balance sheet at fair value and establishes criteria for designation and effectiveness of the hedging relationships. There was no cumulative effect of adopting SFAS No. 133 on the Company's condensed consolidated financial statements as of September 2, 2001, since the Company had no outstanding derivatives as of December 3, 2000. During the second and third quarters of fiscal 2001, the Company entered into foreign exchange forward contracts to reduce its risk from exchange rate fluctuations associated with receivables and payables denominated in foreign currencies that arise primarily as a result of its operations outside the United States of America. The fair value of these contracts, which typically have maturities of approximately thirty days, was not material at September 2, 2001. Gains and losses on these instruments are recorded in other income, net in the Company's Condensed Consolidated Statement of Operations. Principal foreign currencies included the euro, the British pound sterling and the Canadian dollar. The Company does not hold or purchase any foreign currency contracts for trading purposes. Page 11 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations --------------------------------------------------------------- The following discussion includes certain forward-looking statements within the meaning of the Private Securities Litigation Act of 1995. Such forward-looking statements, including those related to future financial and business performance, represent management's assessment based upon information currently available, but are subject to risks and uncertainties which could cause actual results to differ materially from those set forth in the forward-looking statements. These risks and uncertainties include, but are not limited to, the Company's ability to successfully complete the implementation, and realize the anticipated benefits, of its restructuring and cost reduction plans on a timely basis; the effect of, and changes in, worldwide general economic conditions including the severity of any economic slowdown; price and availability of raw materials; foreign exchange rates; technological and other changes affecting the manufacture of and demand for the Company's products; competitive and other pressures in the marketplace; acts of terrorism; and other risks and uncertainties set forth herein and in the Company's 2000 Form 10-K and as may be set forth in the Company's subsequent press releases and/or Forms 10-Q, 8-K and other filings with the Securities and Exchange Commission. In October 2001, the Company sold its commercial Graphics Products business and related assets to Neschen AG. The Company believes that the sale of the divested business will allow the Company to focus on its profitable Consumer Products business and substantially reduce its cost structure, and further, that it will expand the range of possible strategic options open to the Company to enhance shareholder value. The decision to sell the commercial Graphics Products business resulted from an internal strategic assessment of the Company's business, assisted by outside advisors. The proceeds of this sale are expected to approximate $33 million, subject to certain closing adjustments principally relating to inventory. The Company plans to use $25 million of the proceeds to reduce the $50 million senior debt notes currently outstanding. In addition, the Company plans to repay the outstanding lines of credit facilities at its foreign operations, since these operations are part of the commercial Graphics Products business. The Company recorded an estimated after-tax loss of $28.2 million, or $3.16 per share, on this sale. The divested business had net sales of approximately $12.3 million in the fiscal 2001 third quarter and $40.4 million in the first nine months of 2001, and $16.9 million and $55.0 million in the corresponding fiscal 2000 periods. This divested business is presented as a discontinued operation in the accompanying Condensed Consolidated Statements of Operations. (See Note 2.) In addition, the Company is in the process of finalizing a plan designed to reduce its cost structure. The Company expects to record a pre-tax charge of $3 million to $4 million, principally relating to severance, outplacement, and other costs, in the fiscal 2001 fourth quarter in connection with the implementation of this plan. The annualized pre-tax cost savings to be generated from this plan are expected to range between $2.5 million and $3.0 million, although there can be no assurance that such future cost savings actually will be achieved. The following tables provide a comparison of the Company's reported results and the results excluding restructuring related items, estimated loss from Page 12 discontinued business, loss on disposal of discontinued business, and other special items for the three months and nine months ended September 2, 2001 and September 3, 2000 (in millions except per share data):
Three Months Ended September 2, 2001 ----------------------------------------------------------------------- Gross Income from Net Per Share Profit Operations Income Amount ------------- ---------------- ---------- --------------- Reported results $15.7 $ 2.6 $(27.7) $(3.11) Loss from discontinued business -- -- 1.1 .13 Estimated loss on disposal of discontinued business -- -- 27.7 3.11 1999 restructuring plan reversals -- (.2) (.2) (.02) 1999 restructuring plan implementation costs -- .1 .1 .01 ------------- ---------------- ---------- --------------- Results excluding special items $15.7 $ 2.5 $ 1.0 $ .12 ============= ================ ========== =============== Three Months Ended September 3, 2000 ----------------------------------------------------------------------- Gross Income from Net Per Share Profit Operations Income Amount ------------- ---------------- ---------- --------------- Reported results $18.7 $ 1.0 $ (1.3) $ (.13) Loss from discontinued business -- -- 1.6 .16 1999 restructuring plan implementation costs -- .1 -- -- Patent infringement litigation costs -- 3.6 2.4 .25 ------------- ---------------- ---------- --------------- Results excluding special items $18.7 $ 4.7 $ 2.7 $ .28 ============= ================ ========== ===============
Page 13
Nine Months Ended September 2, 2001 ----------------------------------------------------------------------- Gross Income from Net Per Share Profit Operations Income Amount ------------- ---------------- ---------- --------------- Reported results $48.8 $10.0 $ (25.0) $(2.80) Loss from discontinued business -- -- 2.1 .24 Estimated loss on disposal of discontinued business -- -- 27.7 3.10 1999 restructuring plan reversals -- (.2) (.2) (.02) 1999 restructuring plan implementation costs -- .3 .3 .03 Patent infringement litigation interest -- .1 .1 .01 ------------- ---------------- ---------- --------------- Results excluding special items $48.8 $10.2 $ 5.0 $ .56 ============= ================ ========== =============== Nine Months Ended September 3, 2000 ----------------------------------------------------------------------- Gross Income from Net Per Share Profit Operations Income Amount ------------- ---------------- ---------- --------------- Reported results $51.6 $ 7.8 $ 1.9 $ .19 Loss from discontinued business -- -- 1.6 .16 1999 restructuring plan implementation costs -- .4 .3 .03 Patent infringement litigation costs -- 3.6 2.4 .24 Gain on sale of business divestitures -- (.1) (.1) (.01) ------------- ---------------- ---------- --------------- Results excluding special items $51.6 $11.7 $ 6.1 $ .61 ============= ================ ========== ===============
Results of Operations --------------------- The Company's 2001 fiscal year is comprised of 52 weeks compared to 53 weeks for fiscal 2000. The third quarter of fiscal 2001 and fiscal 2000 contained 13 weeks and 14 weeks, respectively, while the first nine months of fiscal 2001 and fiscal 2000 contained 39 weeks and 40 weeks, respectively. The following discussion is on a continuing operations basis. All earnings per share amounts included in Management's Discussion and Analysis are presented on an after-tax, diluted basis. Page 14 Net Sales --------- Net sales from continuing operations of $42.7 million for the third quarter and $124.0 million for the first nine months of fiscal 2001 decreased 9% and 6%, respectively, from the corresponding periods of fiscal 2000. These decreases were largely due to lower sales of X-Acto brand knives, blades, and kits (down 19% for the third quarter and 11% for the first nine months), Bienfang brand paper products (down 19% for the third quarter and 10% for the first nine months), board products (down 9% for the third quarter and 5% for the first nine months), and framing products (down 27% for the third quarter and 22% for the first nine months). Export sales decreased 18% and 13% in the fiscal 2001 third quarter and first nine months, respectively, compared to the same prior year periods due to lower sales in Canada and Latin America. Management believes that the fiscal 2001 third quarter and nine month sales decreases were largely the result of a continuing slowdown in the U.S. and world economy, which slowdown was exacerbated by the September 11, 2001 terrorist attacks in the U.S. Thus far in the fourth fiscal 2001 quarter, the Company is continuing to experience softness in demand for some of its products, and management is uncertain how long this trend will continue. Gross Profit ------------ The Company's gross profit percentage decreased to 36.7% of net sales in the third quarter of fiscal 2001 from 40.0% in the third quarter of fiscal 2000 but was largely unchanged in the first nine months of fiscal 2001 compared to the same period of fiscal 2000. However, gross margin dollars decreased $3.0 million and $2.9 million in the third quarter and first nine months of fiscal 2001, respectively, from the same prior year periods. The decreases in gross margin dollars in fiscal 2001 were due largely to lower sales volume compared to the same prior year periods. The decrease in the third quarter gross profit percentage relative to the prior year period was primarily the result of lower net selling prices, unfavorable net inventory adjustments, and higher net pension costs versus a year ago. Since the end of fiscal 2000, the Company has experienced some cost reductions for certain of its raw materials. Management is uncertain if this trend will continue. Selling, Administrative and General Expenses -------------------------------------------- Selling, administrative and general expenses decreased $.8 million, or 6%, in the third quarter of fiscal 2001 and $1.4 million, or 4%, in the first nine months of fiscal 2001 compared to the same prior year periods. The decrease was partially due to lower marketing and selling expenses (e.g., lower sales volume, and recruiting and relocation expenses, partially offset by higher net promotional advertising and product display expenses). The decreases in marketing and selling expenses were partially offset by higher general and administrative expenses, due principally to a decrease in the cash surrender value of officers' life insurance policies, higher deferred compensation account expense, and higher professional services expenses, partially offset by lower bonus expense. Selling, administrative and general expenses, as a percentage of net sales, totaled 31.0% and 31.4% in the third quarter and first nine months of fiscal 2001, respectively, and 30.1% and 30.5%, respectively, in the same prior year periods. Page 15 Restructuring and Other ----------------------- The Company recorded interest cost of $.1 million in the first nine months of fiscal 2001 in connection with a previously reported patent infringement suit judgment for which the Company had recorded a liability of $3.8 million in fiscal 2000. During the third quarter of fiscal 2001, the Company made a payment to the plaintiff in the amount of approximately $3.9 million with respect to this judgment. In addition, during the third quarter and first nine months of fiscal 2001, the Company reduced by $.2 million a reserve related to its 1999 restructuring plan. This reserve reduction reflected lower than anticipated severance expenses. Provision (Benefit) for Income Taxes ------------------------------------ The Company's effective income tax rate on a continuing operations basis was 27.3% and 33.2% for the third quarter and first nine months of fiscal 2001, respectively. The Company realized an income tax benefit of $.1 million in the third quarter of fiscal 2000 due primarily to resolutions of prior year tax exposures, but recorded an income tax provision of $1.8 million for the first nine months of fiscal 2000. The Company's effective income tax rate on a continuing operations basis was 44.5% and 34.0% for the third quarter and first nine months of fiscal 2000, respectively. Net Income (Loss) and Earnings Per Share ---------------------------------------- Net loss was $27.7 million for the third quarter of fiscal 2001 compared to net loss of $1.3 million for the third quarter of fiscal 2000, and net loss was $25.0 million for the fiscal 2001 first nine months compared to net income of $1.9 million in the first nine months of fiscal 2000. Excluding the effects of special items recorded during the third quarter and first nine months of fiscal 2001 in connection with the discontinued operations, patent infringement litigation, implementation of the 1999 restructuring plan, and reduction of reserves related to its 1997 business divestitures, earnings per share on a continuing operations basis would have been $.12 and $.56 per share for the third quarter and first nine months of fiscal 2001, respectively, compared to $.28 and $.61 per share, respectively, for the same prior year periods. These decreases were due primarily to lower sales, lower net selling prices, unfavorable inventory adjustments, and higher administrative expenses, partially offset by the favorable impact of lower average common shares outstanding as a result of the Company's stock repurchase program (average diluted common shares outstanding were 8,895,000 and 8,949,000 in the third quarter and first nine months of fiscal 2001, respectively, and were 9,857,000 and 9,948,000, respectively, for the same prior year periods). Financial Condition ------------------- The Company's working capital decreased to $43.7 million from $56.4 million, and its current ratio decreased to 1.9 from 2.8, at the end of the third quarter of fiscal 2001 from the end of fiscal 2000, respectively. These decreases were largely due to the reclassification of $28.0 million of long-term debt to Page 16 current liabilities. (See Note 3.) The Company's debt/capitalization percentage increased to 60% at the end of the fiscal 2001 third quarter from 47% at the end of fiscal 2000 due primarily to the loss on the sale of the commercial Graphics Products business. (See Note 2.) Funds from operations and available cash balances were sufficient during the first nine months of fiscal 2001 to fund the repurchase of $3.7 million of the Company's common shares, to fund additions to property, plant and equipment of $3.0 million, and to pay cash dividends of $2.7 million. Current assets increased slightly to $91.0 million at the end of the third quarter of fiscal 2001 from $88.3 million at the end of fiscal 2000. Cash and cash equivalents decreased $11.7 million largely due to the items discussed in the preceding paragraph. The decreases in accounts receivable and inventories were due principally to the sale of the commercial Graphics Products business. In addition, the Company recorded a receivable for estimated net proceeds of $26.6 million in connection with the sale of the divested business. Prepaid expenses and other current assets increased $6.5 million from the $2.6 million balance at the end of fiscal 2000 due to an increase in income tax refund receivable and a reclassification from property, plant and equipment to assets held for sale of certain assets ($4.4 million) relating to the divested business (but not included in the sale to Neschen). The Company is actively pursuing the disposition of these non-strategic assets. Current liabilities increased to $47.2 million at the end of the third quarter of fiscal 2001 from $31.9 million at the end of fiscal 2000. This increase was largely attributable to the reclassification of $28.0 million of long-term debt to current liabilities, partially offset by lower raw material purchases ($2.5 million), a decrease in income tax liability ($1.0 million) due to timing of payments and expected receipt of income tax refunds, and a decrease in other liabilities ($7.8 million) due principally to the sale of the divested business. The $6.5 million decrease in the accumulated other comprehensive loss account in stockholders' equity was due to the elimination of the foreign currency translation adjustments account as a result of the sale of the divested business. As of September 2, 2001, the Company had a revolving credit agreement of $50 million and lines of credit facilities at its foreign operations of 1.5 million British pounds sterling (approximately $2.2 million) and 1.1 million Euros (approximately $1.0 million). There were outstanding borrowings totaling $2.9 million under these credit facilities at September 2, 2001. As a result of the sale of the divested business in October 2001, the Company is required to modify its existing debt arrangements with its senior note holders and banks. The Company plans to replace its $50 million revolving credit agreement with a new $25 million bank credit facility, and the outstanding line of credit facilities at the foreign operations are expected to be repaid from the proceeds of the sale of the divested business. (See Note 3.) Management believes that funds generated from operations and funds available under the anticipated new bank credit facility will be sufficient to meet the Company's currently anticipated working capital and other capital and debt service requirements. Should the Company require additional funds, management believes that the Company could obtain them at competitive costs. While subject to change, management currently expects that total fiscal 2001 expenditures for additions to property, plant and equipment to increase capacity and productivity will be approximately $4.0 million, of which approximately $3.0 million has been expended through the first nine months of fiscal 2001. Page 17 New Accounting Pronouncements ----------------------------- In June 2001, the Financial Accounting Standards Board ("FASB") approved its proposed Statements of Financial Accounting Standards ("SFAS") No. 141, "Business Combinations"; SFAS No. 142, "Goodwill and Other Intangible Assets"; and SFAS No. 143, "Accounting for Asset Retirement Obligations." SFAS No. 141 supercedes Accounting Principles Board (APB) Opinion No. 16, "Business Combinations." The most significant changes made by SFAS No. 141 are requiring the purchase method of accounting for all business combinations initiated after June 30, 2001, establishing specific criteria for the recognition of intangible assets separately from goodwill, and requiring that unallocated negative goodwill be written off immediately as an extraordinary gain. The Company does not expect a material impact from the adoption of SFAS No. 141 on its consolidated financial statements. SFAS No. 142 supercedes APB 17, "Intangible Assets," and primarily addresses accounting for goodwill and intangible assets subsequent to their acquisition (i.e., the post-acquisition accounting). The provisions of SFAS No. 142 will be effective for fiscal years beginning after December 15, 2001. The most significant changes made by SFAS No. 142 are that goodwill and indefinite lived intangible assets will no longer be amortized, goodwill will be tested for impairment at least annually at the reporting unit level, intangible assets deemed to have an indefinite life will be tested for impairment at least annually, and the amortization period of intangible assets with finite lives will no longer be limited to forty years. The Company is currently evaluating the impact of SFAS No. 142 on its consolidated financial statements. SFAS No. 143 requires that entities record as a liability obligations associated with the retirement of a tangible long-lived asset when such obligations are incurred, and capitalize the cost by increasing the carrying amount of the related long-lived asset. SFAS No. 143 will be effective for fiscal years beginning after June 15, 2002. The Company does not expect a material impact from the adoption of SFAS No. 143 on its consolidated financial statements. Additionally, in August 2001, the FASB approved its proposed SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." SFAS No. 144 supercedes SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of," and APB Opinion No. 30, "Reporting the Results of Operations - Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions." SFAS No. 144 establishes an accounting model based on SFAS No. 121 for long lived assets to be disposed of by sale, previously accounted for under APB Opinion No. 30. This Statement is effective for fiscal years beginning after December 15, 2001. The Company is currently assessing the impact of the adoption of this statement, but believes it will not materially affect the Company's financial position or results of operations. Page 18 Item 3 - Quantitative and Qualitative Disclosures about Market Risk ---------------------------------------------------------- The Company is exposed to the impact of foreign currency exchange rate changes. The Company's objective in managing the exposure to these changes is to reduce the risk on earnings and cash flow associated with foreign exchange rate changes. As a result, the Company enters into foreign exchange forward contracts to reduce risks associated with the value of its existing foreign currency assets, liabilities and anticipated foreign revenues and costs. The gains and losses on these contracts are intended to offset changes in the related exposures. The Company does not hedge its foreign currency exposure in a manner that would entirely eliminate the effects of changes in foreign exchange rates on the Company's consolidated net income. The Company does not hold or purchase any foreign currency contracts for trading purposes. As a result of the sale of the commercial Graphics Products business in October 2001, the Company's exposure to the impact of foreign currency exchange rate fluctuations is greatly reduced. The Company plans to continue to enter into foreign exchange forward contracts to reduce risks associated with its Canadian dollar transactions. In the normal course of operations, the Company also faces other risks that are either nonfinancial or nonquantifiable. Such risks principally include changes in economic or political conditions, other risks associated with foreign operations, commodity price risk and litigation risks. Page 19 PART II - OTHER INFORMATION ----------------- Item 1 - Legal Proceedings ----------------- Reference is made to Part I, Item 3 of the Company's fiscal 2000 Form 10-K and to Note 6 to the Condensed Consolidated Financial Statements herein. Page 20 Part II - OTHER INFORMATION Item 6 - Exhibits and Reports on Form 8-K -------------------------------- 2. Certain Agreements Relating to Sale of Commercial Graphics Products Business:* ------------------------------------------------------------------- (a) Form of Asset Purchase Agreement (U.S.) dated October 7, 2001, between the Company and two of its subsidiaries and Neschen AG and three of its subsidiaries. (b) Form of UK Asset Purchase Agreement dated October 7, 2001, between the Company and one of its subsidiaries and Neschen AG and one of its subsidiaries. (c) Form of Asset Purchase Agreement (The Netherlands) dated October 9, 2001, between the Company and two of its subsidiaries and Neschen AG and one of its subsidiaries. (d) Form of Share Purchase Agreement (Hong Kong) dated October 9, 2001, between Hunt Holdings Inc. and two other subsidiaries of the Company and Neschen International B.V. (e) Form of Employee and Employee Benefits Transitional Agreement dated October 9, 2001, between the Company and two subsidiaries of Neschen AG. (f) Form of Product Manufacturing and Transition Services Agreement dated October 9, 2001, between the Company and three subsidiaries of Neschen AG. (g) Form of Purchase and Supply Agreement (Foamboard) dated October 9, 2001, between the Company and three subsidiaries of Neschen AG. (h) Form of Purchase and Supply Agreement (Framing Consumables) dated October 9, 2001, between the Company and three subsidiaries of Neschen AG. (b) Reports on Form 8-K ------------------- No reports on Form 8-K were filed during the quarter for which this report is filed. ----------- * Certain schedules and similar attachments to, and as described in, the above agreements 2(a) through 2(h) are not being filed herewith, but the Company agrees to furnish supplementally to the Commission a copy of any omitted schedule upon request. Page 21 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. HUNT CORPORATION Date October 17, 2001 By /s/ William E. Chandler ---------------------- ------------------------------------- William E. Chandler Senior Vice President, Finance (Principal Financial Officer) Date October 17, 2001 By /s/ Donald L. Thompson ---------------------- ------------------------------------- Donald L. Thompson Chairman of the Board and Chief Executive Officer Date October 17, 2001 By /s/ John Fanelli III ---------------------- ------------------------------------- John Fanelli III Vice President, Corporate Controller (Principal Accounting Officer) EX-2.A 3 ex2-a.txt EX-2.A Exhibit 2(a) EXECUTION COPY ASSET PURCHASE AGREEMENT by and among HUNT CORPORATION, HUNT HOLDINGS, INC., HUNT GRAPHICS AMERICAS CORPORATION and NESCHEN AG, SEAL GRAPHICS AMERICAS CORPORATION, SEAL USA CORPORATION, SEAL GRAPHICS TECHNOLOGIES CORPORATION Dated October 7, 2001 TABLE OF CONTENTS -----------------
1. Purchase and Sale...................................................................................1 1.1. Sale of Business...........................................................................1 1.2. Purchased Assets...........................................................................2 1.3. Excluded Assets............................................................................3 1.4. Assumed Liabilities........................................................................4 1.5. Excluded Liabilities.......................................................................5 1.6. Closing Date...............................................................................7 1.7. Closing Obligations........................................................................7 1.8. Further Assurances........................................................................10 2. Purchase Price.....................................................................................11 2.1. Purchase Price............................................................................11 2.2. Payment of Purchase Price.................................................................11 2.3. Physical Inventory Adjustment.............................................................11 2.4. Closing Settlement........................................................................13 3. Representations and Warranties of the Seller.......................................................14 3.1. Organization; Good Standing; Power........................................................14 3.2. Effect of Agreement.......................................................................14 3.3. Corporate Authorization...................................................................15 3.4. Absence of Certain Changes or Events......................................................15 3.5. Intentionally Omitted.....................................................................16 3.6. Income Tax Matters........................................................................16 3.7. Title to Properties; Absence of Liens and Encumbrances, Etc...............................17 3.8. Condition and Sufficiency of Assets.......................................................17 3.9. Litigation, Etc...........................................................................18 3.10. Books and Records.........................................................................18 3.11. Affiliate Agreements; Guaranties..........................................................18 3.12. Financial Information.....................................................................18 3.13. Employee Benefit Plans....................................................................19 3.14. Intellectual Property Assets..............................................................20 3.15. Computer Systems..........................................................................23 3.16. Insurance.................................................................................24 3.17. Licenses, Authorizations and Permits......................................................24 3.18. Compliance with Law.......................................................................24 3.19. Employment of Officers, Employees and Consultants; Prior Conduct; Etc.....................24 3.20. No Unlawful Payments......................................................................26 3.21. No Commissions Due........................................................................26 3.22. Customers and Vendors.....................................................................26 3.23. No Untruths, Misstatements or Omissions...................................................26 3.24. Subsidiaries and Affiliates...............................................................27 3.25. Solvency..................................................................................27 3.26. Environmental Matters.....................................................................27
3.27. Assigned Contracts........................................................................30 3.28. Intentionally Omitted.....................................................................30 3.29. Product Warranty..........................................................................30 3.30. Product Liability.........................................................................31 3.31. Contracts; No Defaults....................................................................31 3.32. No Other Warranties.......................................................................33 4. Representations and Warranties of the Parent and the Buyers........................................33 4.1. Corporate Authorization...................................................................33 4.2. Due Incorporation; Good Standing..........................................................33 4.3. Commissions...............................................................................33 4.4. No Conflict...............................................................................33 4.5. Financial Condition.......................................................................34 4.6. Litigation................................................................................34 4.7. Investigation and Evaluation..............................................................34 4.8. Forecasts and Projections.................................................................34 5. Certain Covenants and Agreements Prior to Closing..................................................35 5.1. Access to and Information Concerning Properties and Records, Etc..........................35 5.2. Conduct of Business by the Sellers Pending the Closing Date...............................35 5.3. Third Party Consents; Compliance..........................................................36 5.4. Customers and Vendors.....................................................................37 5.5. Coordination as to Tax Matters............................................................37 5.6. No Negotiations...........................................................................37 5.7. Notification..............................................................................37 5.8. Required Approvals........................................................................38 5.9. WARN Act Notification.....................................................................38 5.10. Title Insurance...........................................................................38 5.11. Phase I Site Assessment...................................................................39 5.12. Products Liability Insurance Coverage.....................................................39 5.13. Agreements of the Parent and the Buyers...................................................39 6. Conditions Precedent to the Obligations of the Sellers.............................................39 6.1. Accuracy of Representations and Warranties................................................39 6.2. Performance of Agreements.................................................................40 6.3. Additional Documents......................................................................40 6.4. No Proceedings............................................................................40 6.5. Third Party Consents......................................................................40 7. Conditions Precedent to the Obligations of the Parent and the Buyers...............................41 7.1. Accuracy of Representations and Warranties................................................41 7.2. Performance of Agreements.................................................................41 7.3. Environmental Review......................................................................41 7.4. Title Insurance...........................................................................41
7.5. Additional Documents......................................................................41 7.6. Further Instruments, Documents............................................................42 7.7. Keys, Etc.................................................................................42 7.8. No Adverse Change.........................................................................42 7.9. Books and Records.........................................................................43 7.10. Third Party Consents......................................................................43 7.11. No Casualty...............................................................................43 7.12. No Proceedings............................................................................43 7.13. Other Purchase Agreements.................................................................44 8. Survival of Representations and Warranties; Indemnification; Etc...................................44 8.1. Survival..................................................................................44 8.2. Sellers' Agreement to Indemnify...........................................................45 8.3. Parent's Agreement to Indemnify...........................................................46 8.4. Indemnification Procedures................................................................46 8.5. Basket and Limitations....................................................................48 8.6. Exclusive Remedy..........................................................................49 8.7. Indemnification Payments..................................................................49 8.8. Right of Set-Off..........................................................................49 9. Additional Covenants...............................................................................49 9.1. Covenants of Sellers Regarding Post-Closing Activities....................................49 9.2. Covenants of the Buyers and the Parent Regarding Post-Closing Activities..................52 9.3. Payments Received.........................................................................53 9.4. Customer Rebates and Warranty Claims......................................................53 9.5. Non-warranty Product Returns..............................................................55 9.6. AquaSeal Warranty.........................................................................55 9.7. Employee Matters..........................................................................56 9.8. Removing Excluded Assets..................................................................56 9.9. Retention of and Access to Records........................................................57 9.10. License of Seal(R) Trademark and Name.....................................................57 9.11. Change of Corporate Names.................................................................58 10. Termination, Waiver and Amendment..................................................................59 10.1. Termination Provisions....................................................................59 10.2. Effect of Termination.....................................................................59 10.3. Amendment.................................................................................59 10.4. Waiver....................................................................................60 11. Miscellaneous......................................................................................60 11.1. Expenses..................................................................................60 11.2. Notices...................................................................................60 11.3. Entire Agreement..........................................................................61 11.4. Binding Effect and Benefit................................................................61
11.5. Assignability.............................................................................62 11.6. HC Guarantee..............................................................................62 11.7. Parent Guarantee..........................................................................62 11.8. Severability..............................................................................63 11.9. Headings; Interpretation..................................................................63 11.10. Counterparts..............................................................................63 11.11. Governing Law.............................................................................63 11.12. Schedules.................................................................................63 11.13. Announcements.............................................................................64 11.14. Dispute Resolution........................................................................64 11.15. Definitions...............................................................................64 11.16. Compliance with Bulk Sales Laws...........................................................65
INDEX OF DEFINITIONS --------------------
2000 Pro Forma Financial Statements.............18 Group...........................................64 Active Prospect.................................50 Hazardous Materials.............................29 Adjusted Inventory Amount.......................12 HC...............................................1 Affiliate.......................................52 HC Competitive Business.........................52 Agreement........................................1 Hearing.........................................13 AQUASEAL.........................................2 HGAC.............................................1 Arbitration.....................................13 HHI..............................................1 Arbitrator......................................13 Hong Kong Sale Agreement.........................1 Assigned Contracts...............................2 Improvements....................................18 Assignment and Assumption Agreement..............8 Integrated Graphic Protection System............55 Assumed Liabilities..............................4 Intellectual Property Assets....................20 Baseline Inventory Amount.......................11 Interim Pro Forma Financial Statements..........19 Basket..........................................48 Inventory........................................3 Benefit Plans...................................19 Inventory Adjustment............................12 Bill of Sale.....................................8 Inventory Evaluation Principles.................12 Business.........................................2 Inventory Holdback..............................11 Buyers...........................................1 Knowledge.......................................65 Change in Control...............................64 Land.............................................3 Closing..........................................7 Losses..........................................45 Closing Date.....................................7 Manufacturing Transition Services Agreement......9 Closing Documents...............................10 Marks...........................................20 Closing Inventory...............................11 Net Names.......................................21 Code............................................19 NL Sale Agreement................................1 Commitments.....................................32 Non-warranty Return.............................55 Competitive Business............................50 Ordinary Course of Business.....................65 Computer Systems................................24 Other Purchase Agreements........................1 Confidential Information........................51 Parent...........................................1 Consumable Products Warranty Costs..............53 Parent Indemnified Party........................45 Copyrights......................................20 Patents.........................................20 Customer Rebate and Warranty Claims Statement...54 Permits..........................................3 Customer Rebate Costs...........................53 Permitted Encumbrances..........................17 Decision........................................13 Person..........................................15 Dispute Notice..................................12 Pro Forma Financial Statements..................18 Effective Time...................................8 Products........................................57 Employee.........................................9 PROSEAL..........................................2 Employees.......................................56 Purchased Assets.................................3 Environmental Claim.............................29 REA.............................................39 Environmental Law...............................29 Real Property...................................17 Environmental Lien..............................29 Registered Marks................................20 Environmental Permit............................29 Royalty Agreement................................9 Equipment Warranty Costs........................53 SEAL.............................................2 ERISA...........................................19 Seal Marks......................................57 Excluded Assets..................................3 Seller Indemnified Party........................46 Excluded Liabilities.............................5 Sellers..........................................1 Existing Customer...............................50 Supply Agreements................................9 Facilities......................................56 Survival Date...................................44 Fixed Amount....................................11 Tail Coverage...................................39 Foamboard Supply Agreement.......................9 Trade Secrets...................................20 Framing Supply Agreement.........................9 UK Sales Agreement...............................1 WARN Act........................................25
AGREEMENT FOR PURCHASE OF ASSETS -------------------------------- THIS AGREEMENT, made and entered into the 7th day of October, 2001, by and among HUNT CORPORATION, a Pennsylvania corporation ("HC"), Hunt Holdings, Inc. a Delaware corporation ("HHI"), and Hunt Graphics Americas Corporation, a Delaware corporation ("HGAC") (HC, HHI and HGAC sometimes hereinafter referred to individually as the "Seller" and collectively as the "Sellers"), Neschen AG, a legal entity formed under the Federal Republic of Germany Corporation Law (hereinafter referred to as the "Parent"), Seal Graphics Americas Corporation, Seal USA Corporation and Seal Graphics Technologies Corporation, each a Delaware corporation and an indirect wholly-owned subsidiary of the Parent (hereinafter referred to collectively as the "Buyers"). WHEREAS, the Sellers wish to sell and the Buyers wish to purchase certain assets of the Sellers related to the Business (as hereinafter defined) and the Buyers wish to hire certain employees of the Sellers to operate the Business on behalf of the Buyers; and WHEREAS, the Sellers wish to assign to the Buyers, and the Buyers wish to assume, certain existing contracts of the Sellers identified in this Agreement; and WHEREAS, the Sellers and the Parent intend to enter into other agreements for the purchase of certain assets of the Sellers related to the Business located in the United Kingdom (the "UK Sale Agreement") and the Netherlands (the "NL Sale Agreement") and for the purchase of the shares of Hunt Graphics Pacific Limited, a Hong Kong subsidiary of HC (the "Hong Kong Sale Agreement") (collectively, the "Other Purchase Agreements") and the closing of the sale contemplated by this Agreement is conditioned upon the closing of such Other Purchase Agreements. W I T N E S S E T H: -------------------- In consideration of the mutual undertakings herein contained, the parties hereto hereby agree as follows: 1. Purchase and Sale ----------------- 1.1. Sale of Business ---------------- Subject to the terms and conditions and based upon the representations, warranties and covenants of the parties set forth in this Agreement, at the Closing, the Sellers shall, except as otherwise expressly provided herein, sell, assign, transfer and convey to the Buyers, and the Buyers shall buy from the Sellers, all of the assets and rights of the Sellers materially relating to the Business of every kind and description wherever located. For purposes of this Agreement, the term "Business" shall mean the graphics products business in the United States and Canada, as described in Schedule 1.1 to the Disclosure Letter, owned and operated by the Sellers, which the Buyers intend to continue to conduct as a part of their own business with the assets to be purchased hereunder. 1.2. Purchased Assets ---------------- The above-referenced assets and rights materially relating to the Business to be sold hereunder as of the Effective Time (as hereinafter defined) are generally described as follows: (a) all of the Sellers' contracts, claims and rights under the contracts and leases (whether as lessee or lessor) relating to the Business, including those enumerated on Schedule 1.2(a) to the Disclosure Letter (the "Assigned Contracts") ; (b) all outstanding proposals to customers and customer orders relating to the Business; (c) any and all goodwill, know-how, customers' and suppliers' lists, slogans, labels, trade secrets, all other trade rights, secret processes, advertising material, technical information and any other intangible property relating primarily to the Business, including the names "SEAL", "AQUASEAL" and "PROSEAL" and the tradenames, trademarks, patents and copyrights and the telephone and fax numbers enumerated on Schedule 1.2(c) to the Disclosure Letter; (d) all of the Sellers' equipment, tools, computers and computer software, telephone systems, trade fixtures, furniture and leasehold improvements relating to the Business, including those enumerated on Schedule 1.2(d) to the Disclosure Letter, with such changes in such items as shall occur in the Ordinary Course of Business between the date hereof and the Closing; (e) all of the Sellers' office supplies, together with any stationery, and business forms relating to the Business which do not bear the Sellers' or their affiliates names and addresses; (f) all permits, licenses, franchises, consents, authorizations and similar instruments or acts relating to the Business to the extent they may lawfully be assigned or transferred as enumerated on Schedule 1.2(f) hereto (the "Permits") ; (g) the covenant of the Sellers not to compete with the Buyers, as more particularly set forth in Section 9 hereof; - 2 - (h) the parcel of land located adjacent to the Sellers' leased facility in Sun Prairie, Wisconsin (the "Land") as described in the Deed set forth in Section 1.7(a)(iii) hereof; (i) all of the Sellers' inventory and work in process relating to the Business (the "Inventory") ; (j) all books, records, forms and files relating to the operations of the Business or reflecting the operations thereof, but excluding therefrom records reflecting other operations of the Seller or Sellers or the operations of HC as a whole, or records the Sellers and the Buyers shall have joint access to pursuant to other provisions of this Agreement; (k) all property and casualty insurance benefits (other than product liability insurance benefits), including rights and proceeds, arising from or relating to the Purchased Assets (as hereinafter defined) or the Assumed Liabilities (as hereinafter defined) prior to the Effective Time; and (l) all claims of the Sellers against third parties relating to the Purchased Assets, whether choate or inchoate, known or unknown, contingent or noncontingent, including all such claims set forth on Schedule 1.2(l) to the Disclosure Letter. For convenience of reference, all the assets, properties and rights to be transferred, conveyed and assigned to the Buyers in accordance with the provisions of this Section 1 are sometimes hereinafter collectively referred to as the "Purchased Assets" . 1.3. Excluded Assets --------------- Notwithstanding anything to the contrary contained in Section 1.2 or elsewhere in this Agreement, the following assets of the Sellers (collectively, the "Excluded Assets") are not part of the sale and purchase contemplated hereunder, are excluded from the Purchased Assets and shall remain the property of the Sellers after the Closing: (a) all cash, cash equivalents and short-term investments existing at the Effective Time; (b) all accounts receivable existing at the Effective Time and proceeds thereof; (c) all corporate names (other than a corporate name to the extent containing the names "SEAL", "AQUASEAL" or "PROSEAL"), minute books, stock records, corporate seals and tax returns and similar corporate records of HC and its subsidiary corporations and all shares of capital stock of HC subsidiary corporations; - 3 - (d) all claims for refund of taxes and other governmental charges of whatever nature; (e) all rights in connection with and assets of any employee benefit plans; (f) all rights of the Sellers under this Agreement and the other agreements and instruments of the parties set forth in Section 1.7; (g) the properties, assets, rights and claims expressly set forth on Schedule 1.3(g) to the Disclosure Letter. 1.4. Assumed Liabilities ------------------- At the Closing Date, the Buyers shall assume and agree to discharge only the following liabilities of the Sellers, effective as of the Effective Time (the "Assumed Liabilities") : (a) any liability to the customers of the Business incurred by the Sellers in the Ordinary Course of Business for orders outstanding as of the Effective Time reflected on the Sellers' books (other than any liability arising out of a breach that occurred prior to the Effective Time); (b) certain rebate obligations to customers of the Business with respect to invoices for sales of equipment, products and services dated after the Effective Time in accordance with Section 9.4(a) hereof; (c) bona fide warranty obligations, as described on Schedule 1.4(c) to the Disclosure Letter, for equipment and consumable products of the Business manufactured prior to the Effective Time, subject to Sellers' obligations set forth in Section 9.4(b) hereof; (d) any liability to the customers of the Business arising out of Non-warranty Returns of products of the Business after the Effective Time authorized either orally or in writing by the Buyers and the Parent prior to or after the Effective Time in accordance with Section 9.5 hereof. (e) any liability arising after the Effective Time under the Assigned Contracts (other than any liability arising under the Assigned Contracts described on Schedule 1.4(e) to the Disclosure Letter or arising out of a breach that occurred prior to the Effective Time); (f) any liability of the Sellers arising after the Effective Time under any Assigned Contract included in the Purchased Assets that is entered into by any of the Sellers after the date hereof in accordance with the provisions of this Agreement (other than any liability arising out of a breach that occurred prior to the Effective Time); and - 4 - (g) any liability of the Sellers described in Schedule 1.4(g) to the Disclosure Letter. 1.5. Excluded Liabilities -------------------- Such sale shall be made free and clear of, and the Sellers shall remain liable for, all liabilities, obligations and encumbrances, business, legal or other, whether incurred or accrued as of the Effective Time or thereafter, whether known or unknown (collectively, the "Excluded Liabilities"), except the Assumed Liabilities that are being assigned and transferred to the Buyers as contemplated by Section 1.4 hereof and except as otherwise provided in Sections 9.4, 9.5 and 9.6 of this Agreement. Notwithstanding anything to the contrary contained herein, Excluded Liabilities shall include, without limitation, every liability of the Sellers other than the Assumed Liabilities, including: (a) any liability arising out of or relating to products of the Sellers to the extent manufactured or sold prior to the Closing Date other than to the extent assumed under Section 1.4; (b) certain obligations for customer rebates committed to either orally or in writing by the Sellers with respect to invoices for sales of equipment, products and services dated prior to the Effective Time in accordance with Section 9. 4(a) hereof; (c) certain liabilities to customers related to the Business incurred by the Sellers under written warranty agreements in accordance with Section 9.4(b) hereof; (d) any liability of the Sellers arising out of Non-warranty Returns of products authorized either orally or in writing by the Sellers prior to the Effective Time in accordance with Section 9.5 hereof; (e) any liability under any Assigned Contract that arises prior to the Effective Time or that arises after the Effective Time but that arises out of or relates to any breach that occurred prior to the Effective Time; (f) any liability for taxes, including (A) any taxes arising as a result of the Sellers' operation of the Business or ownership of the Purchased Assets prior to the Effective Time, and (B) except as provided in Section 2.4(c) hereof, any taxes that will arise as a result of the sale of the Purchased Assets pursuant to this Agreement; (g) any liability under any contract not assumed by the Buyers under Section 1.4, including any liability arising out of or relating to the Sellers' credit facilities or any security interest related thereto; - 5 - (h) any liability under any Environmental Law (as defined in Section 3.26 hereof) or occupational safety and health law arising out of or relating to the operation of the Business prior to the Closing Date or the Sellers' leasing, ownership or operation of real property prior to the Closing Date; (i) any liability arising out of or relating to the Sellers' closing and/or vacating of any plant, factory, facility, office or other physical structure operated by the Sellers in connection with the Business that is not being leased by, or whose lease is otherwise not being assumed by, the Buyers; (j) any liability arising out of or relating to the Sellers' destruction, deconstruction or otherwise rendering inoperable of any equipment of the Sellers relating to the Business not being purchased by the Buyers; (k) any liability for accrued compensation or sales commissions and any liability under any employee benefit plans or relating to payroll, vacation, sick leave, workers' compensation, unemployment benefits, pension benefits, employee stock option or profit-sharing plans, health care plans or benefits or any other employee plans or benefits of any kind for the Sellers' employees or former employees or both; (l) except as in Section 2.4(b), any liability under any employment, severance, retention or termination agreement between any employee and any of the Sellers or any related person or entity; (m) any liability relating to the employment with the Sellers or any related person or entity (including the initial hiring and all terms, conditions, and events relating to the ongoing employment) or termination of employment with the Sellers or any related person or entity (including constructive termination) of any employee (including without limitation any current or former employee of the Sellers or of any related person or entity); (n) any liability arising out of or relating to any employee grievance arising out of or relating to any occurrence or event happening prior to the Closing Date whether or not the affected employees are hired by the Parent and the Buyers; (o) any liability of the Sellers to any shareholder of the Sellers or any related person or entity of the Sellers or any shareholder of the Sellers; (p) any liability to indemnify, reimburse or advance amounts to any officer, director, employee or agent of the Sellers; (q) any liability to distribute to any of the Sellers' shareholders or otherwise apply all or any part of the consideration received hereunder; - 6 - (r) any liability arising out of any proceeding, action or suit pending as of the Closing Date; (s) any liability arising out of any proceeding, action or suit commenced after the Closing Date and arising out of or relating to any occurrence or event happening prior to the Closing Date; (t) any liability arising out of or resulting from the Sellers' compliance or noncompliance with any law, ordinance, principle of common law, regulation or treaty or any order, injunction, judgment, decree, ruling or assessment or arbitration award of any governmental body or authority; (u) any liability of the Sellers under this Agreement or any other document executed in connection with the transactions contemplated hereby and thereby; and (v) except as otherwise specifically provided herein, any liability of the Sellers for the action or omission of the Sellers, their employees or agents in connection with services related to the Business performed by the Sellers, their employees or agents prior to the Closing Date. The Sellers shall indemnify and hold harmless the Parent, the Buyers, and their shareholders, officers and directors in accordance with Section 8 hereof from and against all Excluded Liabilities. 1.6. Closing Date ------------ The closing of the transactions contemplated hereby (the "Closing") shall occur October 9, 2001 (the "Closing Date"), unless this Agreement is terminated for failure of any condition set forth in Section 7 hereof to continue to be met satisfactorily as of or on said Closing Date. The Closing Date may be extended by mutual agreement of the parties hereto, provided that all conditions set forth in Section 7 continue to be satisfied, as of the new Closing Date, so extended. The Closing will take place at the offices of Drinker Biddle & Reath LLP at One Logan Square, 18th and Cherry Streets, Philadelphia, Pennsylvania 19103 on or before 11:00 a.m. on said Closing Date. The Closing shall be effective as of 11:59 p.m. (Eastern Time) on September 30, 2001 (the "Effective Time"). The Sellers shall be deemed to have operated the Business for the benefit of the Parent and the Buyers during the period between the Effective Time and the Closing Date. 1.7. Closing Obligations ------------------- In addition to any other documents to be delivered under other provisions of this Agreement, on the Closing Date: - 7 - (a) The Buyers shall take possession from the Sellers of and title to all of the Purchased Assets and the Sellers shall deliver to the Buyers and the Parent, together with funds sufficient to pay all taxes necessary for the transfer, filing or recording thereof: (i) a bill of sale for all of the Purchased Assets that are tangible personal property in the form of Exhibit A (the "Bill of Sale") executed by Sellers; (ii) an assignment of all of the Purchased Assets that are intangible personal property in the form of Exhibit B, which assignment shall also contain the Buyers' undertaking and assumption of the Assumed Liabilities (the "Assignment and Assumption Agreement") executed by Sellers; (iii) a Warranty Deed for the Land in the form of Exhibit C executed by the appropriate Seller; (iv) an Assignment and Assumption of Lease for the production facility located in Sun Prairie, Wisconsin, an Assignment and Assumption of Lease for the facility located in Ontario, California and a sublease to the Buyers of the facility located in Yuba City, California for a term up to six (6) months, in the forms of Exhibits D-1, D-2 and D-3 respectively, or such other appropriate leasehold document , as the case may require, in form and substance satisfactory to the Buyers the Sellers and their respective counsel and executed by the appropriate Sellers; (v) a landlord's estoppel certificate for the facility located in Sun Prairie, Wisconsin and the facility located in Ontario, California facility; (vi) a landlord consent to the Assignment and Assumption of Lease for the production facility located in Sun Prairie, Wisconsin, and the facility located in Ontario, California; (vii) a non-disturbance agreement for the production facility located in Sun Prairie, Wisconsin, pursuant to which the applicable mortgagee, trustee or ground lessor agrees not to disturb the tenant's possession of the applicable parcel of leased real property upon any foreclosure, deed-in-lieu of foreclosure or ground lease termination; (viii) a Replacement Guarantee for the production facility located in Sun Prairie, Wisconsin; (ix) assignments of all Intellectual Property Assets (as hereinafter defined) and separate assignments of all Registered Marks, Patents and Copyrights (as hereinafter defined) in the forms of Exhibits E-1, E-2 and E-3 executed by Sellers; - 8 - (x) such other deeds, bills of sale, assignments, certificates of title, documents and other instruments of transfer and conveyance as may reasonably be requested by the Buyers or the Parent, each in form and substance satisfactory to the Buyers and the Sellers and their respective legal counsel and executed by the appropriate Sellers; (xi) an employee and employee benefits transition services agreement in the form of Exhibit F executed by the appropriate Sellers (the "Employee Transition Services Agreement"); (xii) a product and manufacturing transition services agreement in the form of Exhibit G executed by the appropriate Sellers (the "Manufacturing Transition Services Agreement") ; (xiii) a supply agreement for foamboard in the form of Exhibit H-1 (the "Foamboard Supply Agreement") and a supply agreement for framing products in the form of Exhibit H-2 (the "Framing Supply Agreement"), each executed by the appropriate Sellers (the Foamboard Supply Agreement and the Framing Supply Agreement are collectively referred to herein as the "Supply Agreements"); (xiv) a royalty agreement relating to Project X in the form of Exhibit I executed by the appropriate Sellers (the "Royalty Agreement"); (xv) a certificate executed by the Sellers as to the accuracy of their representations and warranties as of the date of this Agreement and as of the Closing Date in accordance with Section 7.1 and as to their compliance with and performance of their covenants and obligations to be performed or complied with at or before the Closing Date in accordance with Section 7.2; (xvi) a certificate of the Secretary of each of the Sellers certifying, as complete and accurate as of the Closing Date, attached copies of the charters and bylaws of each of the Sellers, certifying and attaching all requisite resolutions or actions of each of the Sellers' board of directors approving the execution and delivery of this Agreement and the consummation of the transactions contemplated by this Agreement and certifying to the incumbency and signatures of the officers of each of the Sellers executing this Agreement and any other document relating to the transactions contemplated by this Agreement; and (xvii) an opinion of Drinker Biddle & Reath LLP, dated the Closing Date, in the form of Exhibit J. (b) The Buyers shall deliver to the Sellers: (i) the payments to the extent specified in Section 2.2; - 9 - (ii) the Assignment and Assumption Agreement executed by the Buyers; (iii) the Employee Transition Services Agreement executed by the Buyers; (iv) the Manufacturing Transition Services Agreement executed by the Buyers; (v) the Supply Agreements executed by the Buyers; (vi) the Royalty Agreement executed by the Buyers; (vii) a certificate executed by the Parent and the Buyers as to the accuracy of their representations and warranties as of the date of this Agreement and as of the Closing Date in accordance with Section 6.1 and as to their compliance with and performance of their covenants and obligations to be performed or complied with at or before the Closing in accordance with Section 6.2; (viii) an opinion of Cummings & Lockwood and Abels, Decker, Kuhfuss & Partner, dated the Closing Date, in the form of Exhibits K-1 and K-2. (c) a certificate of the Secretary of the Buyers certifying, as complete and accurate as of the Closing Date, attached copies of the charters and bylaws of the Buyers and certifying and attaching all requisite resolutions or actions of the Buyers' board of directors or other governing body approving the execution and delivery of this Agreement and the consummation of the transactions contemplated by this Agreement and certifying to the incumbency and signatures of the officers of the Buyers executing this Agreement and any other document relating to the transactions contemplated by this Agreement. (d) The documents enumerated in subsections (a), (b) and (c) above (other than the opinions of counsel) are referred to collectively as the "Closing Documents". 1.8. Further Assurances ------------------ (a) The Sellers shall, from time to time, at the Buyers' or the Parent's request and without further consideration, execute and deliver such instruments of transfer, conveyance and assignment in addition to those delivered pursuant to Section 1.7, and take such other action, as may be reasonably necessary to transfer, convey to or assign more effectively to the Buyers, or to put the Buyers in possession of, any property being transferred, conveyed or assigned and delivered hereunder. - 10 - (b) Further, the parties shall, from time to time, at the request of the other parties and without further consideration, take such actions as the other parties shall reasonably request in order to effectuate the purposes of this Agreement. 2. Purchase Price -------------- 2.1. Purchase Price -------------- Subject to the adjustments and prorations hereinafter required in this Section 2 and subject to the terms of this Agreement and in reliance upon the warranties, representations and covenants of the Sellers contained herein, the Buyers shall pay the Sellers, in full consideration for the Purchased Assets, (a) the sum of Five Million, Nine Hundred Twenty Five Thousand euros (5,925,000) (the "Fixed Amount") allocated among the Purchased Assets (other than inventory) in the manner set forth in Schedule 2.1(a); plus (b) the sum of Five Million, Three Hundred Ten Thousand dollars ($5,310,000) (the "Baseline Inventory Amount") , subject to adjustment pursuant to Section 2.3. 2.2. Payment of Purchase Price ------------------------- The Purchase Price shall be payable as follows: (a) The Fixed Amount shall be paid by wire transfer delivery of immediately available funds to the Sellers, said wire to be initiated by the Buyers on the Closing Date; and (b) Four Million, Three Hundred Forty-Nine Thousand dollars ($4,349,000), being an amount equal to eighty percent (80%) of the Baseline Inventory Amount, shall be paid by wire transfer of immediately available funds to the Sellers, said wire to be initiated by the Buyers on the Closing Date. The balance of the Baseline Inventory Amount (the "Inventory Holdback") shall be retained by the Buyers until released to the Sellers in accordance with Section 2.3 hereof. 2.3. Physical Inventory Adjustment ----------------------------- (a) A physical inventory or cycle counting, or a combination of the two, as the Parent shall determine, of the Sellers' Inventory shall be performed by the Parent and the Sellers as of the Effective Time (the "Closing Inventory") within five (5) days after the Closing. The Closing Inventory shall be taken in accordance with the principles set forth on Schedule 2.3(a) to the Disclosure Letter (the "Inventory Evaluation Principles"). The Purchase Price shall be increased or decreased by the amount, if any, by which the amount of the inventory as so determined (the "Adjusted Inventory Amount") is greater than or less than the Baseline Inventory Amount. The resulting adjustment is called the "Inventory Adjustment". - 11 - (b) If the Adjusted Inventory Amount is greater than the Baseline Inventory Amount, then such excess amount and the Inventory Holdback shall be paid within thirty (30) days of the Closing Date to the Sellers by the Buyers, unless the Buyers deliver a Dispute Notice with regard to the Adjusted Inventory Amount to the Sellers in accordance with this Section 2.3. (c) If the Adjusted Inventory Amount is less than the Baseline Inventory Amount, then the Buyers shall offset the Inventory Holdback against any deficiency and either (i) the Buyers shall release to the Sellers any Inventory Holdback in excess of such deficiency or (ii) the Sellers shall pay to the Buyers any deficiency in excess of the Inventory Holdback. Any release or payment of funds pursuant to this subsection shall occur within thirty (30) days of the Closing Date unless the Sellers deliver a Dispute Notice with regard to the Adjusted Inventory Amount to the Buyers in accordance with this Section 2.3. (d) In the event either the Parent or the Buyers or the Sellers deliver a Dispute Notice to the other party, an interim Adjusted Inventory Amount shall be paid to the appropriate party based upon average of the Sellers' and the Parent's Adjusted Inventory calculations within five (5) days after the delivery of such Dispute Notice with an adjustment to be made, if required, upon a final resolution of such dispute in accordance with this Section 2.3. (e) Any amount owed either the Parent or the Buyers or the Sellers after a final resolution of a dispute in accordance with this Section 2.3 shall be paid to the appropriate party within five (5) business days after such final resolution. (f) In the event that the Parent and the Buyers and the Sellers do not agree upon the Adjusted Inventory Amount, then any party may deliver to the other parties written notice (a "Dispute Notice") within fifteen (15) days following the Closing Date. Such Dispute Notice shall set forth in reasonable detail a description of the Dispute. Within ten (10) days after the delivery of any such Dispute Notice, the Parent and the Seller shall meet at a mutually acceptable time and place and thereafter as often as such parties reasonably deem necessary and shall, in good faith, cooperate in an attempt to resolve such Dispute. (g) If any Dispute is not finally resolved within twenty (20) business days after the delivery of a Dispute Notice, as aforesaid, or if the parties shall fail to meet within ten (10) days after the delivery of any such Dispute Notice, then the Dispute shall be referred to Ernst & Young LLP (the "Arbitrator") for resolution in accordance with the terms hereof (the "Arbitration"), and in any event as soon as practicable. - 12 - (h) In the event that the Arbitrator referred to in (g) above is then unwilling or unable to serve as the Arbitrator, the American Arbitration Association office located in Philadelphia, Pennsylvania shall select another nationally recognized certified public accounting firm to serve as the Arbitrator. (i) The Arbitrator shall hold a hearing within thirty (30) days of the submission of the Dispute for arbitration (the "Hearing") and shall render a decision within thirty (30) days of the conclusion of such hearing. Each party hereto may file with the Arbitrator such briefs, affidavits and supporting documents as they deem appropriate. (j) The Arbitrator shall only be authorized on any one issue to decide in favor of and choose the position of either of the parties hereto or to decide upon a compromise position between the ranges presented by the parties to such arbitration. (k) The Arbitrator's decision regarding its final resolution of any Dispute (the "Decision") shall be in writing, shall set forth the calculations made in reaching its decision, shall describe the manner in which such calculations were made and shall include a representation that the manner so used was in accordance with the Inventory Evaluation Principles. The Decision shall specifically set forth the amount of any adjustment required to be made to the Purchase Price pursuant to Section 2.3(a). (l) Any such Arbitration shall take place in Philadelphia, Pennsylvania unless the parties shall mutually agree on another location. The Arbitration shall be governed by the United States Arbitration Act, 9 U.S.C. ss.ss. 1 through 16, and judgment upon the award of the Arbitrator may be entered by any court having jurisdiction thereof. (m) The fees and expenses of the Arbitrator shall be shared equally by the Buyers and the Sellers. Upon the request of the Arbitrator, each party hereto agrees to enter into an arbitration agreement providing reasonable protection to the Arbitrator, in such form as may be mutually acceptable to the Arbitrator and the parties hereto. 2.4. Closing Settlement ------------------ (a) All property and ad valorem taxes, rentals, lease payments, utility charges, payments under or pursuant to the Assigned Contracts, Permits, prepaids and other items set forth on Schedule 2.4 attached hereto relating to a period of time both prior to and after the Effective Time will be prorated between the Buyers, on the one hand, and the Sellers, on the other hand, as of the Effective Time. The parties agree to settle amounts due regarding such proration at the Closing; - 13 - (b) At the Closing, the Sellers shall pay the Buyers the sum of One Hundred Forty Nine Thousand dollars ($148,000) to satisfy, and the Buyers shall assume and be responsible for, any and all potential obligations of the Parent and the Buyers to make severance payments to employees located at the Yuba City, California facility that may arise after the Closing Date; and (c) At the Closing, the Sellers shall pay the Buyers the sum of Twenty-One Thousand Seven Hundred and Eleven dollars ($21,711), which sum shall represent the Sellers' total contribution to the Buyers for sales taxes, conveyance taxes and transfer taxes arising as a result of the sale of the Purchased Assets pursuant to this Agreement, and the Buyers shall pay all said taxes. (d) The amounts to be paid by the Sellers pursuant to this Section 2.4 shall be paid by deduction from the amounts payable by the Buyers to the Sellers set forth in Section 2.2. 3. Representations and Warranties of the Seller -------------------------------------------- The Sellers hereby jointly and severally represent and warrant to the Parent and the Buyers as follows: (The parties agree that each disclosure set forth in the Disclosure Letter with respect to a specific section of this Section 3 shall not constitute a disclosure with respect to any other specific section of this Section 3 unless specifically cross referenced therein.) 3.1. Organization; Good Standing; Power ---------------------------------- Each Seller is a corporation duly organized, validly existing and in good standing under the laws of the state of its incorporation and has all requisite power to own, lease and operate its properties and to carry on the Business as currently conducted by such Seller. Schedule 3.1 to the Disclosure Letter sets forth all the states where each Seller is duly qualified to do business and is in good standing. The failure by any of the Sellers to be qualified to business or be in good standing in any other state where it is required to be so qualified shall not adversely affect the Sellers' ability to consummate the transactions contemplated hereby or the Business, the Purchased Assets or Assumed Liabilities. A true and correct copy of the charter and the by-laws of each Seller as in effect on the date hereof have been delivered to the Parent and the Buyers. Each Seller is not, either actually or potentially, in violation of any provision of its charter or by-laws which violation would adversely affect the Sellers' ability to consummate the transactions contemplated hereby or the Business, the Purchased Assets or Assumed Liabilities. 3.2. Effect of Agreement ------------------- Except as set forth on Schedule 3.2 of the Disclosure Letter, the execution, delivery and performance of this Agreement and the Closing Documents by the Sellers, with or without the giving of notice and/or the passage of time, will not: (a) violate any provision of law applicable to the Sellers; (b) conflict with, result in the breach or termination of any provision of, or - 14 - constitute a default under the Sellers' charters or by-laws or any indenture, mortgage, note, deed of trust, license, permit, lease, obligation or other agreement or instrument to which any Seller is a party or by which the Sellers or any of the Purchased Assets of the Sellers may be bound; (c) accelerate or permit the acceleration of any performance of any duty or obligation for the payment of any indebtedness required of the Sellers; (d) result in the creation of any lien, charge or encumbrance upon any of the property or assets of the Sellers; (e) violate any order, ruling, writ, injunction or decree of any court, administrative agency or governmental body which violation would adversely affect the Sellers' ability to consummate the transactions contemplated hereby or the Business, the Purchased Assets or Assumed Liabilities; or (f) be an event which would permit any party to terminate any agreement relating to the Business. 3.3. Corporate Authorization ----------------------- This Agreement, the Closing Documents to which the Sellers are parties , and the consummation of the transactions contemplated hereby and thereby have been duly authorized and approved by the boards of directors and, to the extent required, the shareholders, of the Sellers, and this Agreement and such Closing Documents, have been duly executed and delivered on behalf of each of the Sellers. This Agreement and the other Closing Documents to which the Sellers are parties, when duly executed by the Sellers and delivered by all the parties hereto or thereto, as the case may be, will be the legal, valid and binding obligations of the Sellers, as the case may be, enforceable in accordance with their respective terms, except to the extent that such enforcement may be subject to applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect relating to creditors' rights and remedies generally and to general principles of equity (regardless of whether considered in a proceeding in equity or an action at law). 3.4. Absence of Certain Changes or Events ------------------------------------ Since December 3, 2000, the Business has been operated in the Ordinary Course of Business and the Sellers have used their reasonable efforts to preserve the goodwill of the person or entity (a "Person") or Persons with whom or which they have business relationships in connection with the Business and the Sellers have not: (a) incurred any obligation or liability relating to the Business (fixed or contingent) except in the Ordinary Course of Business; (b) mortgaged, pledged or subjected to lien, charge, security interest or to any other encumbrance (other than Permitted Encumbrances, as defined in Section 3.7 hereof) any of their assets relating to the Business; - 15 - (c) transferred, leased or otherwise disposed of any of their assets or properties relating to the Business except in the Ordinary Course of Business; (d) canceled or compromised any debt or claim relating to the Business except in the Ordinary Course of Business; (e) except as set forth on Schedule 3.4(e) to the Disclosure Letter, waived or released any rights of any material value relating to the Business; (f) transferred or granted any rights under any patent application, lease, license agreement, letter of patent, invention, trademark, trade name or copyright relating to the Business; (g) suffered any damage, destruction or loss in excess of $50,000 with respect to any asset relating to the Business, whether or not such damage, destruction or loss shall have been insured against; (h) except as set forth on Schedule 3.4(h) to the Disclosure Letter, suffered any other material adverse change in the financial condition or properties of the Business except such changes as are related to the general economic or market conditions; (i) made or entered into any contract or commitment to make any capital expenditure relating to the Business in excess of $50,000; (j) changed any significant method of accounting or accounting practice relating to the Business; (k) made or granted any general wage or salary increase other than in the Ordinary Course of Business to, or entered into any employment contract with, any employee of the Business; or (l) entered into any transaction relating to the Business other than in the Ordinary Course of Business with a value or cost to the Business in excess of $50,000. 3.5. Intentionally Omitted --------------------- 3.6. Income Tax Matters ------------------ The Sellers have filed and paid all necessary Federal, state, local or other income, franchise, privilege, excise, property or other tax returns or reports with respect to the Business. All Federal, state and local income, property and other taxes relating to the Business (including, but not limited to, withholding, social security, unemployment compensation and sales and use taxes) shown as due on such tax returns or reports or for which liability has - 16 - otherwise accrued in respect of the Business as of the Effective Time and any and all penalties payable thereon or asserted to be payable by the Sellers have been or will be paid in a timely fashion. The Sellers have not received notice, formal or informal, of any deficiencies or disputes in connection with such tax returns, or payments of tax, penalties or interest. The Sellers have no knowledge of any existing or pending audit of the tax records relating to the Business. The Sellers have not executed or filed with the Internal Revenue Service or any other taxing authority (domestic or foreign) any agreement which remains in effect extending the period for assessment or collection of any income taxes with respect to the Business. 3.7. Title to Properties; Absence of Liens and Encumbrances, Etc. ------------------------------------------------------------ As of the date hereof, the Sellers have, and on the Closing Date will have, except as set forth on Schedule 3.7 to the Disclosure Letter, good and marketable fee title to the Land and good and marketable title or a valid, binding, leasehold interest in all of the other assets (real and personal) which are necessary to conduct the Business substantially as conducted by the Sellers prior to the date of this Agreement free and clear of all liens, claims and encumbrances other than Permitted Encumbrances. On the Closing Date, the Sellers will transfer to the Buyers good and marketable title to, or a valid and binding leasehold interest in, the Purchased Assets, free and clear of all liens, encumbrances, mortgages, pledges and adverse claims other than Permitted Encumbrances. All of the tangible Purchased Assets will be located at one or more of the following locations: Statesville, NC, Sun Prairie, WI, Yuba City, CA, San Bernadino, CA and Mississauga, Canada. As used herein, "Permitted Encumbrances" shall mean (a) liens for taxes which are not due and payable as of the Closing Date and (b) liens, encumbrances, etc. that are set forth in Schedule 3.7 to the Disclosure Letter. 3.8. Condition and Sufficiency of Assets ----------------------------------- (a) Except as set forth in Schedule 3.8 of the Disclosure Letter the Purchased Assets described in Section 1.2,(i) meet the current needs of the Sellers in connection with the Business, (ii) are satisfactory (together with the assets and/or shares of subsidiaries of HC to be simultaneously acquired by affiliates of the Parent) for the needs of the Business as currently conducted by the Sellers and (iii) at the Closing Date, will be undamaged, in proper repair and working order and reasonably suitable for the uses for which intended. (b) Use of the Sellers' real property owned or leased for the various purposes for which it is presently being used in connection with the Business (the "Real Property") is permitted as of right under all applicable zoning legal requirements and is not subject to "permitted nonconforming" use or structure classifications. All buildings, structures, fixtures and improvements located on the Real Property (the "Improvements") are in compliance with all applicable legal requirements, including those pertaining to zoning, building and the disabled, are in proper repair and condition, ordinary wear and tear - 17 - excepted, and are free from defects. No part of any improvement encroaches on any real property not included in the Real Property, and there are no buildings, structures, fixtures or other Improvements primarily situated on adjoining property which encroach on any part of the Real Property. 3.9. Litigation, Etc. ---------------- Except as set forth on Schedule 3.9 to the Disclosure Letter, there is no lawsuit, arbitration, action, claim, investigation or administrative proceeding or governmental investigation by any Person pending against the Sellers in any court or before any Federal, state, municipal or other governmental agency or instrumentality or non-governmental body or to the Knowledge of the Sellers threatened against or affecting the Sellers' properties or assets or the Business, or the Sellers' directors or officers which, if adversely determined against them or the Business, as the case may be, could reasonably be expected to adversely affect the financial condition, business, assets or liabilities of the Business, and Sellers' have no Knowledge that there is any basis or ground for any such suit, action, claim, investigation or proceeding. 3.10. Books and Records ----------------- The books and records of the Sellers relating to the Business are in all material respects complete and correct and have been maintained in accordance with good business practice. 3.11. Affiliate Agreements; Guaranties -------------------------------- No employee, officer or director has any direct or indirect interest beneficially or of record (other than by way of his status as a shareholder, employee, officer or director of the Sellers) in, or is a party to, any lease, agreement, or other obligation of any kind relating to the Business to which any Seller is also a party, nor any of the material assets, real or personal, used by the Sellers in the Business. 3.12. Financial Information --------------------- The Sellers previously have delivered to the Parent the following (the "Pro Forma Financial Statements"): (a) the unaudited pro forma statement of operations of the Business for the fiscal year ended December 3, 2000, compiled by the Sellers' internal staff (the "2000 Pro Forma Financial Statements") ; and (b) the unaudited pro forma statement of assets of the Business as of June 3, 2001, and the unaudited pro forma statement of operations of the Business for the six month period ended June 3, 2001 compiled by Sellers' internal staff (the "Interim Pro Forma Financial Statements") . - 18 - (c) The 2000 Pro Forma Financial Statements are derived from HC's audited consolidated fiscal 2000 financial statements and the Interim Pro Forma Financial Statements are derived from HC's unaudited consolidated June 3, 2001 financial statements based on the assumptions and principles set forth in such consolidated financial statements. Such consolidated financial statements of HC have been prepared in accordance with U.S. generally accepted accounting principles consistently applied. The Pro Forma Financial Statements are in accordance with the books and records of the Sellers related to the Business and reflect, in the case of the pro forma statement of operations for the period ended June 3, 2001, the Sellers' good faith, reasonable allocations of costs and overhead between the Business and the other operations included in HC's consolidated financial statements. 3.13. Employee Benefit Plans ---------------------- (a) Schedule 3.13 to the Disclosure Letter lists the following in connection with the current employees of the Business: (i) each defined benefit plan and defined contribution plan, stock option or ownership plan, executive compensation, bonus, incentive compensation or deferred compensation plan, (ii) vacation pay, medical, dental, disability or death benefit plan, (iii) each severance pay plan, and (iv) any other employee benefit plan, program, arrangement, agreement or policy, including without limitation each "employee benefit plan" within the meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended and the rules and regulations promulgated thereunder ("ERISA") , in each case which is maintained or contributed to or by the Sellers (such plans, contracts, agreements, arrangements, programs and policies being referred to herein as the "Benefit Plans") . (b) There have been no "prohibited transactions" within the meaning of Section 4975 of the Internal Revenue Code of 1986 as amended, and the rules and regulations promulgated thereunder (the "Code") or Section 406 of ERISA with respect to any Benefit Plans that could result in material liability of the Buyers under Section 502(i) of ERISA or Section 4975 of the Code. (c) Each of the Benefit Plans and its administration are in compliance with its material terms and the material requirements of ERISA and the Code, except for such failures which could not reasonably be expected to have a material adverse effect on the condition of the Business or the Purchased Assets. (d) All contributions and other payments required to be made by the Sellers, any subsidiary or any member of a controlled group of corporations, or trades or businesses under common control, within the meaning of sections 414(b) and (c) of the Code, of which each of the Sellers is a member, to any of the Benefit Plans with respect to any period ending before or at or including the Closing Date have been made or reserves adequate for such contributions or other payments have been or shall be set aside therefor. - 19 - (e) Neither the Sellers, nor any member of a controlled group of corporations, or trades or businesses under common control, within the meaning of sections 414(b) and (c) of the Code, of which each of the Sellers is a member contributes or is obligated to contribute to any multiemployer plan (as defined in Section 4001(a)(3) of ERISA) on behalf of the current or former employees of the Business. (f) Each Benefit Plan which is a group health plan within the meaning of Section 5000 of the Code complies and in each case has complied with the applicable requirements of sections 601 through 608 of ERISA, Section 162(k) of the Code (through December 31, 1988) and Section 4980B of the Code (commencing January 1, 1989). 3.14. Intellectual Property Assets ---------------------------- (a) The term "Intellectual Property Assets" means the intellectual property owned or licensed (as licensor or licensee) by the Sellers relating to the Business (other than Excluded Assets) in which the Sellers have a proprietary interest, set forth below: (i) the trade names, registered trademarks ("Registered Marks") and unregistered trademarks, service marks and applications relating to the Business (collectively, "Marks") listed on Schedule 3.14(a)(i) to the Disclosure Letter; (ii) the patents, patent applications and inventions and discoveries that may be patentable relating to the Business (collectively, "Patents") listed on Schedule 3.14(a)(ii) to the Disclosure Letter; (iii) the registered copyrights, if any, listed on Schedule 3.14(a)(iii) to the Disclosure Letter and all unregistered copyrights in both published works and unpublished works relating to the Business (collectively, "Copyrights"); (iv) all rights in mask works, if any, relating to the Business; (v) all know-how, trade secrets, confidential or proprietary information, customer lists, software, technical information, data, process technology, plans, drawings and blue prints relating to the Business (collectively, "Trade Secrets"); (vi) the rights in the internet web sites and internet domain names presently used by the Sellers in connection with the Business listed on Schedule 3.14(a)(vi) to the Disclosure Letter (collectively "Net Names"). - 20 - (b) Schedule 3.14(b) to the Disclosure Letter contains a complete and accurate list and summary description, including any royalties paid or received by the Sellers, and the Sellers have delivered to the Parent and the Buyers accurate and complete copies, of all the Sellers' contracts and agreements relating to the Intellectual Property Assets, except for any license implied by the sale of a product and perpetual, paid-up licenses for commonly available software programs with a value of less than $10,000 under which any of the Sellers is the licensee. There are no outstanding and, to the Sellers' Knowledge, no threatened disputes or disagreements with respect to any such contract or agreement. (c) Except as set forth in Schedule 3.14(c) to the Disclosure Letter, the Intellectual Property Assets are all those necessary for the operation of the Business in all material respects as it is currently conducted. The Sellers are the owners or licensees of all right, title and interest in and to each of the Intellectual Property Assets, free and clear of all encumbrances, and has the right to transfer or use without payment to a third party all of the Intellectual Property Assets, other than as set forth in Schedule 3.14(c) to the Disclosure Letter. (i) Except as set forth in Schedule 3.14(c) to the Disclosure Letter, all former and current employees of the Sellers have executed written contracts or agreements with the Sellers that assign to the Sellers all rights to any inventions, improvements, discoveries or information relating to the Business. (d) Except as set forth in Schedule 3.14(d) to the Disclosure Letter: (i) All of the issued Patents are currently in compliance with formal legal requirements (including payment of filing, examination and maintenance fees and proofs of working or use), are valid, and, to the Sellers' Knowledge, enforceable, and are not subject to any maintenance fees or taxes or actions falling due within ninety (90) days after the Closing Date. (ii) No Patent has been or is now involved in any interference, reissue, reexamination, or opposition proceeding. To the Sellers' Knowledge, there is no potentially interfering patent or patent application of any third party. (iii) To Sellers' Knowledge, no Patent is infringed or, has been challenged or threatened in any way and none of the products manufactured or sold, nor any process or know-how used, by the Sellers infringes or, to the Sellers' Knowledge, is alleged to infringe any patent or other proprietary right of any other Person. (iv) All products made, offered for sale or sold under the Patents have been marked with the proper patent notice. - 21 - (e) Except as set forth in Schedule 3.14(e) to the Disclosure Letter: (i) All Registered Marks have been registered with the United States Patent and Trademark Office, are currently in compliance with all formal legal requirements (including the timely post-registration filing of affidavits of use and incontestability and renewal applications), are valid, and, to the Sellers' Knowledge, enforceable and are not subject to any maintenance fees or taxes or actions falling due within ninety (90) days after the Closing Date. (ii) No Registered Mark has been or is now involved in any opposition, invalidation or cancellation proceeding and, to the Sellers' Knowledge, no such action is threatened with respect to any of the Marks. (iii) To the Sellers' Knowledge, there is no potentially interfering trademark or trademark application of any other Person. (iv) To the Knowledge of the Sellers, no Registered Mark is infringed or, has been challenged or threatened in any way. None of the Marks used by the Sellers infringes or to the Knowledge of the Sellers' is alleged to infringe any trade name, trademark or service mark of any other Person. (v) All products and materials containing a Registered Mark bear the proper federal registration notice where permitted by law. (vi) Notwithstanding the foregoing, no qualification in this Section 3.14(e) as to the Sellers' Knowledge shall apply to the names "SEAL", "AQUASEAL", or "PROSEAL." (f) Except as set forth in Schedule 3.14(f) to the Disclosure Letter: (i) All of the registered Copyrights are currently in compliance with formal legal requirements, are valid and, to the Sellers' knowledge, enforceable, and are not subject to any maintenance fees or taxes or actions falling due within ninety (90) days after Closing Date. (ii) To the Sellers' Knowledge, no registered Copyright is infringed or, has been challenged or threatened in any way. None of the subject matter of any of the Copyrights infringes or, to the Sellers' Knowledge, is alleged to infringe any copyright of any third party or is a derivative work based upon the work of any other Person. (iii) All works encompassed by any registered Copyrights have been marked with the proper copyright notice. - 22 - (g) With respect to each Trade Secret material to the Business, the documentation relating to such Trade Secret is current, accurate and reasonably sufficient in detail and content to identify and explain it and to allow its full and proper use without reliance on the knowledge or memory of any individual. (i) The Sellers have taken reasonable precautions to protect the secrecy, confidentiality and value of all Trade Secrets material to the Business (including the enforcement by the Sellers of a policy requiring each employee and certain contractors to execute proprietary information and confidentiality agreements substantially in the Sellers' standard form, and all current and former employees of the Sellers have executed such an agreement). (ii) The Sellers have good title to and an absolute right to use the Trade Secrets owned by them and the right to use any such Trade Secrets licensed to them, subject to the terms of any such licensing agreement. The Trade Secrets material to the Business, to Sellers' Knowledge, are not part of the public knowledge or literature and, to the Sellers' Knowledge, have not been used, divulged or appropriated to the detriment of the Sellers. No Trade Secret is subject to any adverse claim or has been challenged or, to the Sellers' Knowledge, threatened in any way or infringes any intellectual property right of any other Person. (h) Except as set forth in Schedule 3.14(h) to the Disclosure Letter: (i) The Net Names have been registered in the name of the Sellers and are in compliance with all formal legal requirements. (ii) No Net Name has been or is now involved in any dispute, opposition, invalidation or cancellation proceeding and, to the Sellers' Knowledge, no such action is threatened with respect to any Net Name. (iii) To the Sellers' Knowledge, there is no domain name application pending of any other Person which would or would potentially interfere with or infringe any Net Name. (iv) To the Knowledge of the Sellers no Net Name is infringed or, has been challenged, interfered with or, to the Sellers' Knowledge, threatened in any way. No Net Name infringes, interferes with or is alleged to interfere with or infringe the trademark, copyright or domain name of any other Person. 3.15. Computer Systems ---------------- Schedule 3.15 to the Disclosure Letter identifies (i) all of the software and computer databases (collectively, the "Computer Systems") that are material to the conduct of the Business by the Sellers and used by the Sellers in the conduct of the Business, (ii) whether such Computer Systems are owned or - 23 - licensed by the Sellers and, (iii) if licensed, the name of such licensor. The Sellers have all legal right to use the Computer Systems as they are currently being used, and, except as set forth on Schedule 3.15 to the Disclosure Letter, the Buyers will continue to have the legal right to use the Computer Systems in this manner following the consummation of the transactions contemplated herein. The use of the Computer Systems owned by the Sellers does not, and to the Sellers' Knowledge the use of the Computer Systems licensed to the Sellers does not, infringe upon the rights of any other Person, nor have the Sellers received any notice of a claim of such infringement. Except as set forth in Schedule 3.15 to the Disclosure Letter, there are no licenses, sublicenses or other agreements relating to the use of the Computer Systems by the Sellers or third parties. 3.16. Insurance --------- The Sellers maintain such property and casualty insurance policies in such amounts of coverage relating to the Business and related assets as are reasonably adequate with respect to all risks usually insured against in connection with the operation of businesses similar to the Business. 3.17. Licenses, Authorizations and Permits ------------------------------------ The Sellers have all licenses, authorizations and permits which are required to conduct the Business as now conducted and to use the other Purchased Assets, all of which are listed on Schedule 3.17 to the Disclosure Letter. The Sellers are not in violation or default under any such license, authorization or permit. The Sellers know of no reason why any of the same should not be renewed upon expiration upon substantially the same terms as presently applicable. 3.18. Compliance with Law ------------------- The Sellers have complied with all Federal, state and municipal laws, ordinances, rules and regulations and any private limitations, restrictions, covenants or conditions relating to the Purchased Assets or the operation or conduct of the Business. The Sellers are in full compliance with all health and safety laws, and price and wage control laws. 3.19. Employment of Officers, Employees and Consultants; Prior Conduct; Etc. ----------------------------------------------------------------- (a) Except as disclosed in Schedule 3.19(a) to the Disclosure Letter the Sellers have no employment, retention, extension, continuation, or other similar contracts with any employee of the Sellers who is listed in Schedule 9.7. (b) Except as set forth on Schedule 3.19(b) to the Disclosure Letter, no labor organization or group of employees is, or during the past five years has been, recognized or certified as representatives to the Sellers for - 24 - any current or former employees of the Sellers in connection with the Business. No labor organization or group of employees of the Sellers has made a pending demand for recognition or certification, and there are no representation or certification proceedings or petitions seeking a representation proceeding presently pending or to the Knowledge of the Sellers, threatened to be brought or filed with the National Labor Relations Board or any other labor relations tribunal or authority. To the Knowledge of Sellers, there are no organizing activities involving the Sellers related to the Business pending with any labor organization or group of employees of the Sellers. There are no strikes, work stoppages, slowdowns, lockouts, arbitrations, grievances, or other labor disputes pending or threatened in writing to the Sellers against or involving the Business. (c) There has been no "mass layoff" or "plant closing" as defined by the Workers Adjustment and Retraining Notification Act of 1988, as amended (the "WARN Act") , with respect to the Business within the six months prior to the date hereof or within the six months prior to the Closing Date. (d) The Sellers have not violated any provision of federal, state, local or foreign law or any governmental rule or regulation, or any order, ruling, decree, judgment or arbitration award of any court, arbitrator or any governmental, quasi-governmental or regulatory agency regarding the terms and conditions of employment of employees, former employees or prospective employees of the Business or other labor related matters relating to the Business, including, without limitation, laws, rules, regulations, orders, rulings, decrees, judgments and/or arbitration awards relating to discrimination, fair labor standards, occupational health and safety, wrongful discharge or violation of the personal rights of employees, former employees or prospective employees. (e) Except as set forth on Schedule 3.19(e) to the Disclosure Letter no employee of the Sellers who is listed on Schedule 9.7 to become an employee of Parent and the Buyers at or after the Closing has any claim against the Sellers related to the Business (whether under federal, state, local or foreign law), under any employment agreement or otherwise, on account of or for: (i) overtime pay, other than overtime pay for the current payroll period; (ii) wages or salary for any period other than the current payroll period; (iii) any accrued benefits, including vacation, time off or pay in lieu of vacation or time off, or medical benefits other than vacation or time off (or pay in lieu thereof) that has been accrued in the Ordinary Course of Business in accordance with existing policies; or (iv) any violation of any statute, ordinance or regulation relating to payment of wages and fringe benefits, minimum wages or maximum work hours. (f) Schedule 3.19(f) to the Disclosure Letter lists all current employees of the Sellers related to the Business as of September 30, 2001, which list includes the base salary and job title of each such employee. - 25 - 3.20. No Unlawful Payments -------------------- Neither the Sellers or to the Knowledge of the Sellers any director, officer or employee acting on behalf of the Sellers in connection with the Business has used any funds for unlawful contributions, gifts, entertainment or other unlawful expenses relating to political activity, or made any direct or indirect unlawful payments to government officials or employees from corporate funds or established or maintained any unlawful or unrecorded funds, or violated any provisions of the Foreign Corrupt Practices Act of 1977 or any rules or regulations promulgated thereunder. 3.21. No Commissions Due ------------------ Except as set forth on Schedule 3.2 to the Disclosure Letter the Sellers have not entered into any contract with, or made any representations to, any Person, firm or corporation, including but not limited to any finder, agent, broker or investment banker, providing for any finder's or brokerage fee or other commission to be paid by the Sellers or the Buyers or the Parent in connection with or related to this Agreement or the transactions herein contemplated. 3.22. Customers and Vendors --------------------- Schedule 3.22 to the Disclosure Letter contains (a) a list of all written agreements and oral agreements with any customer of, or vendor to, the Business, including any arrangement for financing or assisting in the financing of such agreements, (b) a list of all of the customers of the Business who in the most recently completed full fiscal year and/or the first half of the current fiscal year accounted individually for more than 5% of the Seller's sales of products or services relating to the Business, and (c) a list of all vendors to the Sellers who in the most recent full fiscal year and/or the first half of the current fiscal year accounted individually for more than 10% of the Sellers' purchases of goods and/or services relating to the Business. The Sellers' relationship with significant customers of and vendors to the Business is good, and to the Knowledge of the Sellers there is no intention of any such customer or vendor to terminate or modify any of such relationships. 3.23. No Untruths, Misstatements or Omissions --------------------------------------- No representation or warranty by, or information furnished by the Sellers contained in this Agreement or the Disclosure Letter, contains or will contain any untrue statement or misstatement of a material fact or intentionally omits or will omit any statement of a material fact necessary to make the statements of fact contained herein or therein not misleading. - 26 - 3.24. Subsidiaries and Affiliates --------------------------- The Sellers (a) have no legal or equitable interest in any other company, partnership or business enterprise, other than the subsidiaries of the Seller, that owns or operates any assets related to the Business; and (b) have no contract or agreement for the purchase of a legal or equitable interest in any other corporation, partnership or business enterprise that would own or operate any assets related to the Business. 3.25. Solvency -------- (a) The Sellers are not now insolvent and will not be rendered insolvent by any of the transactions contemplated by this Agreement. As used in this section, "insolvent" means that the sum of the debts and other probable liabilities of the Sellers exceed the present fair saleable value of the Sellers' assets. (b) Immediately after giving effect to the consummation of the transactions contemplated by this Agreement: (i) the Sellers will be able to pay their liabilities as they become due in the usual course of its business; (ii) the Sellers will not have unreasonably small capital with which to conduct their present or proposed business; (iii) the Sellers will have assets (calculated at fair market value) that exceed their liabilities; and (iv) taking into account all pending and, to the Knowledge of the Sellers, threatened litigation, final judgments against the Sellers in actions for money damages are not reasonably anticipated to be rendered at a time when, or in amounts such that, the Sellers will be unable to satisfy any such judgments promptly in accordance with their terms (taking into account the maximum probable amount of such judgments in any such actions and the earliest reasonable time at which such judgments might be rendered) as well as all other obligations of the Sellers. The cash available to the Sellers, after taking into account all other anticipated uses of the cash, will be sufficient to pay all such debts and judgments promptly in accordance with their terms. 3.26. Environmental Matters --------------------- (a) Except as set forth in Schedule 3.26 to the Disclosure Schedule, the Sellers are and always have been in compliance with all applicable Environmental Laws with respect to the Business which compliance includes, but is not limited to, the possession by the Sellers of all Environmental Permits and other governmental authorizations and approvals required with respect to the Business under all Environmental Laws, and compliance with the terms and conditions thereof, and the proper handling and disposal of all Hazardous Materials. (b) Except as set forth in Schedule 3.26, there is no Environmental Claim related to the Business pending or to the Sellers' knowledge threatened against the Sellers. - 27 - (c) Except as set forth in Schedule 3.26, there are no past or present actions, activities, circumstances, conditions, events or incidents related to the Business, including, without limitation, the handling, manufacture, treatment, storage, use, generation, release, emission, discharge, presence or disposal of any Hazardous Materials related to the Business that could reasonably be expected to form the basis of any Environmental Claim related to the Business against the Sellers. (d) Without in any way limiting the generality of the foregoing: (i) except as set forth in Schedule 3.26, there is no asbestos contained in, on, or forming part of any land, building, building component, equipment, structure or office space related to the Business and being transferred by Sellers to the Buyers (by deed, assignment of lease, sublease or otherwise) hereunder, which asbestos is friable, deteriorating or in need of removal or replacement for the purpose of protecting human health or the environment. (e) Except as set forth in Schedule 3.26, the Sellers have not engaged in or permitted any release, discharge, dumping or disposal of any Hazardous Materials on, in, under or about any land, building, building component, equipment, structure or office space related to the Business and being transferred by Sellers to Buyers (by deed, assignment of lease, sublease or otherwise) hereunder other than in compliance with applicable Environmental Laws. (f) The sale of the Purchased Assets does not require the advance notice to or prior approval, consent or permission of any federal, state or local agency, board, body or official pursuant to Environmental Law. (g) Except as set forth on Schedule 3.26, the Sellers have not formerly and do not now own, control, or operate any above ground or below ground storage tanks for the storage of Hazardous Materials in or on any real property being transferred by the Sellers to the Buyers (by deed, assignment of lease, sublease or otherwise) hereunder, or engage in any activity related to the Business which requires an Environmental Permit. Sellers have delivered to the Buyers and the Parent accurate and complete copies of all reports, audits or assessments ever received by the Sellers related to the Business regarding Hazardous Materials in or on any real property being transferred by the Sellers to the Buyers (by deed, assignment of lease, sublease or otherwise) hereunder. (h) For purposes of this Section 3.26 the following terms shall have the meanings ascribed to them below: (i) "Environmental Claim" shall mean any notice of violation, fines, penalties, action, claim, Lien, demand, abatement or other writ, judgment, decree, suit, proceeding, injunction, or similar order or direction (conditional or otherwise) by any governmental or quasi-governmental authority or any Person for or relating to personal injury (including sickness, disease, or death), tangible or intangible property damage, damage to or other adverse effect on the environment (including natural resources), nuisance, - 28 - pollution, or contamination, if resulting from or based upon (i) a Release of, or exposure to, any Hazardous Material in, into, or onto the environment (including without limitation the air, soil, surface water, or ground water) at, in, by, from, or related to any real property being transferred by the Sellers to the Buyers (by deed, assignment of lease, sublease or otherwise); (ii) the environmental aspects of the transportation, storage, treatment, or disposal of Hazardous Materials generated by the Business; or (iii) the violation or alleged violation of any Environmental Laws or any order or Environmental Permits of or from any governmental authority relating to the Business at the real property being transferred by the Sellers to the Buyers (by deed, assignment of lease, sublease or otherwise). (ii) "Environmental Law" shall mean any Law relating to protection of the environment or to protecting public health and safety, including without limitation the Comprehensive Environment Response, Compensation, and Liability Act (42 U.S.C. ss. 9601 et seq.), the Hazardous Materials Transportation Act (49 U.S.C. ss. 1801 et seq.), the Resource Conservation and Recovery Act (42 U.S.C. ss. 6901 et seq.), the Clean Water Act (33 U.S.C. ss. 1251 et seq.), the Clean Air Act (33 U.S.C. ss. 2601 et seq.), the Toxic Substances Control Act (15 U.S.C. ss. 2601 et seq.), the Federal Insecticide, Fungicide and Rodenticide Act (7 U.S.C. ss. 136 et seq.), and the Occupational Safety and Health Act (29 U.S.C. ss. 651 et seq.) as such Laws are amended or supplemented, and the regulations promulgated thereto, and any and all analogous state or local statutes, laws, regulations, standards, guidelines, requirements, orders, codes, ordinances and rules in effect prior to or at the Closing Date. (iii) "Environmental Lien" shall mean any Lien in favor of any governmental entity for Environmental Claims or Remedial Actions. (iv) "Environmental Permit" shall mean any permit, approval, authorization, license variance, registration, or permission required under any Environmental Laws. (v) "Hazardous Materials" shall mean any chemical, substance, material, or waste which is regulated by any state or local governmental authority, or by the United States, including without limitation (a) petroleum, petroleum products, asbestos, urea formaldehyde foam insulation, polychlorinated biphenyls, flammable substances, explosives, and radioactive materials, (b) any other material or substance which is defined, now or at closing, as a "hazardous material," "hazardous substance," "extremely hazardous waste," "restricted hazardous waste," "pollutant," or "toxic substance" under any provision of Environmental Law, and (c) any other chemical, material, or substance, the exposure or presence of which is now or at closing prohibited, limited, or regulated by any Environmental Law. - 29 - 3.27. Assigned Contracts ------------------ The Sellers have delivered to the Buyers or made available to the Buyers a true and complete copy of each of the written Assigned Contracts and all amendments thereto. All Assigned Contracts are in full force and effect. With respect to goods and services delivered by the Sellers pursuant to the Assigned Contracts before the Closing, the Sellers have performed their obligations under the Assigned Contracts and complied with all specifications thereto, and the Sellers have not received any notice of default; nor are they in default; nor does any condition exist which with notice or the lapse of time, or both, will render the Sellers in default, under any of the Assigned Contracts. All the Assigned Contracts are fully assignable to the Buyers, provided that (a) certain of the Assigned Contracts require the consent of the other party(ies) thereto as indicated on Schedule 3.27 to the Disclosure Letter, and (b) each Assigned Contract with the United States Government may not be assigned without the consent of the Government and must be novated in accordance with the rules and regulations contained in Section 42.12, et seq., of the Federal Acquisition Regulations. The Sellers have no Knowledge that any party to any of such Assigned Contracts will not approve or consent to the assignment or novation of any of the Assigned Contracts or will otherwise prohibit or materially restrict the assignment or novation of any of the Assigned Contracts. To the Sellers' Knowledge, the other parties to the Assigned Contracts to the Business are in compliance with all material terms and conditions of such Assigned Contracts. To the Knowledge of the Sellers, no party to an Assigned Contract has notified the Sellers of its intention to terminate or materially change the nature of its transaction or relationship with the Sellers or the Buyers under any such Assigned Contract. 3.28. Intentionally Omitted --------------------- 3.29. Product Warranty ---------------- Schedule 3.29 to the Disclosure Letter sets forth an accurate, correct and complete statement of all written warranties and warranty policies, service agreements and maintenance agreements of the Sellers related to the Business. No products heretofore manufactured, processed, assembled, distributed, sold, delivered, leased or serviced by the Sellers in connection with the Business are now subject to any guarantee or warranty of the Sellers, claim for product liability, or patent or other indemnity, other than those set forth in Schedule 3.29 to the Disclosure Letter. All warranties are in conformity with the labeling and other requirements of applicable laws. The product warranty and return experience of the Sellers relating to the Business for the two (2) previous fiscal years and the first six (6) months of the current fiscal year is set forth in Schedule 3.29 to the Disclosure Letter. - 30 - 3.30. Product Liability ----------------- Schedule 3.30 to the Disclosure Letter sets forth an accurate, correct and complete list of all existing claims, liabilities, or obligations arising from, or alleged to arise from, any injury to person (including current and former employees) or property as a result of the manufacture, sale, ownership, possession, or use of any product of the Sellers related to the Business manufactured, sold, assembled, distributed, transported or serviced prior to the date hereof. All such claims are or will be fully covered by the Sellers' product liability insurance or otherwise provided for and the Sellers or its insurance carriers shall satisfy and discharge all such claims. There have been no recalls of the Sellers products relating to the Business, and none are threatened or pending. No report of safety concerns has been filed or is required to have been filed by the Sellers with respect to any products of the Sellers related to the Business under any applicable law, rule, or regulation. 3.31. Contracts; No Defaults ---------------------- (a) Schedule 3.31 to the Disclosure Letter contains a list of the following contracts, agreements, etc. which is true, complete and correct in all material respects. Sellers shall promptly provide the Buyers with a true and complete copy of such document or instrument upon request. (i) any and all leases of real property relating to the Business to which any Seller is a party (as lessor or as lessee); (ii) any and all existing contracts and commitments (including, without limitation, outstanding proposals to customers and customer orders, contracts for the purchase or sale of merchandise or services, mortgages, deeds of trust, indentures, loan agreements and credit agreements) relating to the Business or the Purchased Assets to which any Seller is a party which require further payments or have further obligations of a value in excess of $10,000; (iii) any and all agreements of guarantee or indemnification to which any Seller is a party relating to the Business or the Purchased Assets; (iv) any and all agreements or commitments to which any Seller is a party containing a covenant limiting or purporting to limit the freedom of the Sellers to compete with any Person in any geographic area or engage in any line of business to the extent any such agreement or commitment might relate to or affect the Business or any of the Purchased Assets; (v) any and all joint ventures, contracts or similar arrangements to which any Seller is a party relating to the Business or the Purchased Assets which involve a sharing of profits with or future payments to other Persons; - 31 - (vi) any and all agreements or commitments to which any Seller is a party relating to the Business or the Purchased Assets for the sale of any non-standard materials, products, services or supplies and the value of the undelivered balance of such materials, products or supplies exceeds $10,000; (vii) any and all license agreements, permits, distributorship agreements, dealer agreements, franchise agreements, manufacturer's representative agreements, sales agency agreements or other similar agreements or commitments to which any Seller is a party relating to the Business or the Purchased Assets; (viii) any and all agreements or commitments for the assignment, sale or other transfer by the Sellers of any contract or lease (or right to payment thereunder) relating to the Business by which it leases materials, products or other property to or from a third party; (ix) any and all agreements or commitments to which any Seller is a party for the acquisition, construction or sale of fixed assets relating to the Business or the Purchased Assets which require further payments, or have further obligations, in excess of $10,000; (x) any and all agreements or commitments to which present or former employees of the Business and the Sellers are parties; (xi) any and all agreements or commitments for the sale of any of the Purchased Assets or any other assets, properties or rights of the Sellers relating to the Business which require further payments or have further obligations in excess of $10,000 or for the grant of any preferential rights to purchase any of the Purchased Assets or the assets, properties or rights of any Seller relating to the Business; (b) The agreements, contracts, plans, leases, instruments, rights, registrations, applications, policies, permits, franchises, certificates, arrangements, licenses and commitments listed on Schedule 3.31 to the Disclosure Letter are collectively referred to herein as the "Commitments". The representations and warranties of the Sellers contained in Section 3.27 hereof relating to the Assigned Contracts shall also apply to the Commitments in the same manner as if they were recited herein. The Sellers further represent and warrant: (i) that all such Commitments which are oral are truthfully and accurately described on Schedule 3.31 to the Disclosure Letter; and (ii) except as set forth in Schedule 3.31 to the Disclosure Letter, to the Knowledge of the Sellers, no party to a Commitment has notified the Sellers of its intention to terminate or materially change the nature of its transaction or relationship with the Sellers or the Buyers under any such Commitment; - 32 - 3.32. No Other Warranties ------------------- In connection with the transactions contemplated hereby, except as expressly set forth in this Section 3, the Sellers make no representations or warranties whatsoever. 4. Representations and Warranties of the Parent and the Buyers ----------------------------------------------------------- The Parent and the Buyers jointly and severally hereby represent and warrant to the Sellers as follows: 4.1. Corporate Authorization ----------------------- This Agreement and the Closing Documents to which the Parent or the Buyers are parties and the consummation of the transaction contemplated hereby and thereby have been duly authorized and approved by the Board of Directors of the Parent and the Board of Directors or other governing body, and to the extend required, by the shareholders, of the Parent and the Buyers. This Agreement and the Closing Documents to which the Buyers and the Parent are parties, when duly executed by the Parent and the Buyers and delivered by all the parties hereto and thereto, as the case may be, will be the legal, valid and binding obligations of the Parent and the Buyers. 4.2. Due Incorporation; Good Standing -------------------------------- The Parent and each of the Buyers is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its formation and has all requisite corporate power and authority to enter into this Agreement and perform its obligations hereunder. 4.3. Commissions ----------- Neither the Parent nor the Buyers have entered into any contract with, or made any representation to, any Person, firm or corporation providing for any finder's or brokerage fee or other commission to be paid either by the Sellers or the Parent or the Buyers in connection with or related to this Agreement or the transactions herein contemplated. 4.4. No Conflict ----------- The execution, delivery and performance of this Agreement and the Closing Documents by the Buyers and the Parent, with or without the giving of notice and/or the passage of time, will not: (a) violate any provision of law applicable to the Buyers and the Parent; (b) conflict with, result in the breach - 33 - or termination of any provision of, or constitute a default under the Buyers' or the Parent's charter or by-laws or any indenture, mortgage, note, deed of trust, license, permit, lease, obligation or other agreement or instrument to which the Buyers or the Parent is a party or by which the Buyers or the Parent may be bound; (c) violate any order, ruling, writ, injunction or decree of any court, administrative agency or governmental body which violation would adversely affect the Buyers' or the Parent's ability to consummate the transactions contemplated hereby. 4.5. Financial Condition ------------------- The Parent has a written commitment from a financial institution to lend the funds necessary to enable the Parent and the Buyers to consummate the transactions and perform the obligations contemplated by this Agreement. 4.6. Litigation ---------- No action, suit, claim, investigation, administrative proceeding, arbitration or other proceeding of or before any court, arbitrator or governmental or regulatory official, body or authority is pending or, to the Parent's and the Buyers' Knowledge, threatened against either of them which challenges or seeks to prevent, enjoin, alter or delay the transactions contemplated hereby or otherwise could reasonably be expected to materially adversely affect the Parent's or Buyers' ability to consummate the transactions and perform the obligations contemplated hereby. 4.7. Investigation and Evaluation ---------------------------- The Parent and the Buyers acknowledge that: (a) they are experienced in the operation of the type of business to be acquired by the Buyers from the Sellers hereunder, (b) they and their representatives have been given the opportunity to examine, to the extent deemed necessary and desirable by them, all books, records and other information provided by the Sellers with respect to the Business, the Purchased Assets and the Assumed Liabilities, and (c) they are fully capable of evaluating the adequacy and accuracy of the information and material obtained by them in the course of such examinations. 4.8. Forecasts and Projections ------------------------- The Parent and the Buyers acknowledge that there are uncertainties inherent in attempting to make projections and forecasts and render opinions, they are familiar with such uncertainties, and they recognize that any projections, forecasts or opinions furnished to them by the Sellers are subject to such uncertainties and that the actual results of the Business could differ materially from any results anticipated in such projections, forecasts and opinions. - 34 - 5. Certain Covenants and Agreements Prior to Closing ------------------------------------------------- 5.1. Access to and Information Concerning Properties and Records, Etc. ----------------------------------------------------------------- The Sellers will give to the Parent and the Buyers and their counsel, accountants and other representatives, reasonable access during normal business hours throughout the period prior to the Closing Date to all of the properties (including, but not limited to, leased real property and equipment), books, contracts, commitments and records of the Sellers relating to the Business and will furnish to the Buyers and the Parent during such period all such information concerning its affairs as they may reasonably request. The Buyers and the Parent acknowledge that certain of the information heretofore and to be furnished to them is proprietary to the Sellers and confidential and is and shall be subject to the terms of the Mutual Nondisclosure Agreement between HC and the Parent dated April 25, 2001. 5.2. Conduct of Business by the Sellers Pending the Closing Date ----------------------------------------------------------- The Sellers hereby agree that, prior to the Closing Date and except as otherwise consented to or approved by the Parent in writing (which consent or approval shall not unreasonably be withheld), they will: (a) use reasonable efforts to operate the Business only in the usual, ordinary manner and, to the extent consistent with such operation, (i) preserve their present business organization intact; (ii) keep available the service of its present officers and employees; (iii) preserve their present relationships with Persons having business dealings with them in connection with the Business; and (iv) maintain in confidence all of the confidential relationships, rights and affairs relating to the Business, except to the extent shared solely with the Parent and the Buyers as herein provided; (b) maintain all of the properties relating to the Business in satisfactory repair, order and condition and maintain insurance upon all of such properties and with respect to the conduct of the Business in such amounts and of such kinds comparable to that in effect on the date of this Agreement; (c) maintain the books, accounts and records of the Business in accordance with generally accepted accounting principles in the usual and ordinary manner, on a basis consistent with prior years, and comply with all laws applicable to them and to the conduct of the Business and perform all of their obligations relating to the Business without default; (d) make no modification or adverse change in any existing right, license, lease, contract, obligation, indebtedness, commitment, agreement, permit, franchise, concession or certificate relating to the Business or any other document or understanding listed on Schedule 3.31 and make no sale or other disposition of any right or privilege relating to the Business accruing to them of a value in excess of $10,000; - 35 - (e) confer with the Parent prior to implementing operational decisions of a material nature related to the Business; (f) otherwise report periodically to the Parent regarding the operations and finances of the Business; (g) make no material changes in management personnel of the Business without prior consultation with the Parent; (h) comply with all legal requirements and contractual obligations applicable to the operations of the Business; (i) cooperate with the Parent and assist the Parent in identifying the governmental authorizations required by the Parent and the Buyers to operate the Business from and after the Closing Date and in either transferring existing governmental authorizations of the Seller relating to the Business to the Buyers, where permissible, or obtaining new governmental authorizations for the Buyers; (j) make no borrowing or mortgage or pledge of any of the properties or assets relating to the Business or the Purchased Assets and no sale or other disposition of any of the properties, rights, privileges or other assets relating to the Business or the Purchased Assets, otherwise than in the Ordinary Course of Business; (k) other than in the Ordinary Course of Business, not contract for the purchase of any services, not acquire any machinery or equipment or other capital assets and not execute any new lease or renew any existing lease relating to the Business for a cost in excess of $10,000 ; and (l) in addition to the foregoing requirements of subsections (a) to (k), and without limiting their scope and effect, the Sellers shall use reasonable efforts not to take any action or refrain from taking any action which would result in a breach of any of their representations and warranties contained in this Agreement, and shall cooperate with the Parent and the Buyers and use reasonable efforts to cause all of the conditions to the obligations of the parties hereunder to be satisfied on or prior to the Closing Date. 5.3. Third Party Consents; Compliance -------------------------------- The Sellers shall use reasonable efforts to obtain any and all necessary consents for the assignment or transfer of the Assigned Contracts and any other note, contract, lease, license, or permit to be assigned or transferred hereunder and to perform their duties under such notes, contracts, leases, licenses, and permits without default until the Closing. - 36 - 5.4. Customers and Vendors --------------------- The Sellers agree to introduce the Parent to, or otherwise facilitate a meeting with, such of the customers listed on Schedule 3.22 who in the most recent fiscal year and/or expired portion of the current fiscal year accounted individually for more than 5% of total sales of the Sellers relating to the Business as the Parent shall request. 5.5. Coordination as to Tax Matters ------------------------------ The Sellers and the Buyers and the Parent shall cooperate fully with each other in connection with the required disclosures pursuant to Section 1060 of the Internal Revenue Code of 1986, as amended, if applicable. 5.6. No Negotiations --------------- Between the date hereof and the Closing, the Sellers will refrain and use reasonable efforts to cause each other Person acting for or on behalf of the Sellers to refrain from taking, directly or indirectly, any action (i) to seek, encourage or accept any offer or proposal from any Person to acquire any assets related to the Business (other than in Ordinary Course of Business and consistent with past practice) or any interests therein or (ii) to dispose of or transfer or negotiate or reach any agreement or understanding (whether or not such agreement or understanding is absolute, revocable, contingent, or conditional) for, or otherwise to attempt to transfer any assets related to the Business (other than in the Ordinary Course of Business and consistent with past practice). If any of the Sellers receive from any Person (other than the Buyers and the Parent) any offer, proposal, or informational request that is subject to this Section 5.6, the Sellers will promptly so advise the Parent, will promptly advise such Person by written notice of the terms of this Section 5.6, and will promptly deliver a copy of such notice to the Buyers. 5.7. Notification ------------ (a) Between the date of this Agreement and the Closing, the Sellers, on the one hand, and the Parent and the Buyers, on the other shall promptly notify the other parties in writing if they become aware of (i) any fact or condition that causes or constitutes a breach of any party's representations and warranties made in or pursuant to this Agreement or (ii) the occurrence after the date of this Agreement of any fact or condition that would be reasonably likely to (except as expressly contemplated by this Agreement) cause or constitute a breach of any such representation or warranty of the Sellers or the Parent or the Buyers had that representation or warranty been made as of the time of the occurrence of, or the party's discovery of, such fact or condition. Should any such fact or condition require any change to a Schedule - 37 - of Sellers to this Agreement or the Disclosure Letter, the Sellers shall promptly deliver to the Parent a supplement to the appropriate Schedule specifying such change. Such delivery shall not affect any rights of the Parent under Section 9.2 and Article 11. (b) During the same period, the Sellers also shall promptly notify the Parent of the occurrence of any breach of any covenant of the Sellers in this Article 5 or of the occurrence of any event that may make the satisfaction of the conditions in Article 7 impossible or unlikely. (c) During the same period, the Parent and the Buyers also shall promptly notify the Sellers of the occurrence of any breach of any covenant of the Parent and the Buyers in this Article 5 or of the occurrence of any event that may make the satisfaction of the conditions in Article 6 impossible or unlikely. 5.8. Required Approvals ------------------ The Sellers shall use their reasonable efforts to obtain all consents, waivers, approvals, authorizations, or orders and the Sellers shall make all filings at its own expense and give all notices required in connection with the authorization, execution, and delivery of this Agreement by the Sellers and the consummation by the Sellers of the transactions contemplated hereby. The Sellers shall also cooperate with the Parent and its representatives with respect to all filings that the Parent elects to make or shall be required to make in connection with this Agreement or the transactions contemplated hereby. Except where prohibited by applicable statutes and regulations, the Sellers shall promptly provide the Parent (or its counsel) with copies of all filings made by the Sellers with any state or federal government entity (other than filings with the Securities and Exchange Commission) in connection with this Agreement or the transactions contemplated hereby. 5.9. WARN Act Notification --------------------- The Sellers agree to timely perform and discharge all requirements under the WARN Act, and under applicable and state and local laws and regulations for the notification of its employees arising out of the sale of the Purchased Assets to the Buyers. 5.10. Title Insurance --------------- Sellers shall cooperate with the Parent to either (i) have the title insurance policy on the Land dated April 9, 2001 re-issued to the Parent or (ii) obtain an equivalent title insurance policy on the Land, in each case as of the Closing Date and at the Parent's sole cost and expense. - 38 - 5.11. Phase I Site Assessment ----------------------- The Sellers shall cooperate with the Buyers and the Parent in obtaining from Resource Engineering Associates, Inc. ("REA") a Phase I Environmental Site Assessment on the Land, at the expense of the Buyers and the Parent. 5.12. Products Liability Insurance Coverage ------------------------------------- The Sellers shall purchase effective as of the Effective Time tail coverage for its existing Products Liability Insurance policy for the Business conducted in and from the United Kingdom, the Netherlands and Hong Kong ("Tail Coverage"), which Tail Coverage shall insure the Buyers, the Parent and the Sellers against claims arising out of acts, errors and omissions occurring prior to the Closing. The Tail Coverage shall be obtained at the Sellers' sole cost and expense, for a term expiring not earlier than six years from the Closing Date. Sellers shall provide the Parent and the Buyers with evidence of said Tail Coverage and that the premium has been fully paid prior to or at the Closing. In addition, the Sellers agree to continue to maintain in effect their current products liability insurance policy providing coverage for the Business as conducted prior to the Effective Time in and from North America for a period of not less than five years after the Closing Date and shall add and maintain the Buyers and the Parent as additional insured parties under said policy. 5.13. Agreements of the Parent and the Buyers. ---------------------------------------- Except as expressly provided herein, between the date hereof and the Closing, unless otherwise consented to in writing by the Sellers, the Parent and the Buyers shall use reasonable efforts not to take any action which would result in a breach of any of their representations and warranties contained in this Agreement, and they shall cooperate with the Sellers and use reasonable efforts to cause all of the conditions to the obligations of the Parent and Buyers and the Sellers under this Agreement to be satisfied on or prior to the Closing Date. 6. Conditions Precedent to the Obligations of the Sellers ------------------------------------------------------ The obligations of the Sellers to consummate the transactions contemplated by this Agreement are subject to the satisfaction at or prior to the Closing of each of the following conditions: 6.1. Accuracy of Representations and Warranties ------------------------------------------ The representations and warranties of the Parent and the Buyers herein contained shall have been true and correct in all material respects when made and shall continue to be true and correct in all material respects as of the Closing Date. - 39 - 6.2. Performance of Agreements ------------------------- The Parent and the Buyers in all material respects shall have performed or caused to be performed all obligations and agreements and complied with or caused to be complied with all covenants and conditions contained in this Agreement to be performed or complied with by the Parent and the Buyers at or prior to the Closing Date. 6.3. Additional Documents -------------------- The Parent and the Buyers shall have caused the documents and instruments required by Section 1.7(b) and the following documents to be delivered (or tendered subject only to Closing) to the Sellers: (a) such other documents as the Sellers may reasonably request for the purpose of: (i) evidencing the accuracy of any representation or warranty of the Parent and the Buyers; (ii) evidencing the performance by the Parent and the Buyers of, or the compliance by the Parent and the Buyers with, any covenant or obligation required to be performed or complied with by the Parent and the Buyers; or (iii) evidencing the satisfaction of any condition referred to in this Article 6. 6.4. No Proceedings -------------- Since the date of this Agreement, there shall not have been commenced and be continuing or threatened against the Sellers, or against any related Person of the Sellers, any proceeding (a) involving any challenge to, or seeking damages or other relief in connection with, the Purchased Assets and any of the transactions contemplated by this Agreement or (b) that may reasonably be expected to have the effect of preventing, delaying, making illegal, imposing material limitations or conditions on or otherwise materially interfering with any of the transactions contemplated by this Agreement. 6.5. Third Party Consents -------------------- All orders, consents, permits, authorizations, approvals, and waivers of every Person necessary to permit the Sellers to perform their obligations under this Agreement and to consummate the transactions contemplated hereby shall have been obtained and shall be in full force and effect. - 40 - 6.6. Other Purchase Agreements ------------------------- The Other Purchase Agreements shall have been executed and delivered and the transactions contemplated thereby shall have closed or shall be closed simultaneously with the transaction which is the subject of this Agreement. 7. Conditions Precedent to the Obligations of the Parent and the Buyers -------------------------------------------------------------------- The obligations of the Parent and the Buyers to consummate the transactions contemplated hereby is subject to the satisfaction at or prior to the Closing of each of the following conditions: 7.1. Accuracy of Representations and Warranties ------------------------------------------ The representations and warranties of the Sellers herein contained shall have been true and correct in all material respects when made and shall continue to be true and correct in all material respects as of the Closing Date. 7.2. Performance of Agreements ------------------------- The Sellers in all material respects shall have performed or caused to be performed all obligations and agreements and complied with or caused to be complied with all covenants and conditions contained in this Agreement to be performed or complied with by it or them at or prior to the Closing Date. 7.3. Environmental Review -------------------- The Parent shall be satisfied pursuant to the Phase I Environmental Site Assessment conducted by REA on the Land that no material environmental, health or safety risks exist with respect to the Land. 7.4. Title Insurance --------------- At the Parent's expense, the current title insurance policy on the Land shall have been re-issued to the Parent or the Parent shall have obtained an equivalent title insurance policy on the Land in each case as of the Closing Date. 7.5. Additional Documents -------------------- The Sellers in all material respects shall have caused the documents and instruments required by Section 1.7(a) and the following documents to be delivered (or tendered subject only to Closing) to the Parent and the Buyers: (a) Releases of all encumbrances on the Purchased Assets, other than Permitted Encumbrances and encumbrances permitted by the Parent and the Buyers, including releases of each mortgage of record and reconveyances of each deed of trust with respect to the Land; - 41 - (b) Certificates dated as of a date not earlier than the fifteenth business day prior to the Closing as to the good standing of the Sellers, executed by the appropriate officials of the jurisdiction in which the Seller is incorporated and is licensed or qualified to do business as a foreign corporation as specified in Schedule 3.1 to the Disclosure Letter; and (c) Such other documents as the Buyers or the Parent may reasonably request for the purpose of: (i) evidencing the accuracy of any of the Sellers' representations and warranties; (ii) evidencing the performance by the Sellers or the compliance by the Sellers with any covenant or obligation required to be performed or complied with by the Sellers; (iii) evidencing the satisfaction of any condition referred to in this Article 7; or (iv) otherwise facilitating the consummation or performance of any of the transactions contemplated by this Agreement. 7.6. Further Instruments, Documents ------------------------------ The Parent and the Buyers shall have received such other instruments and documents as they shall have reasonably requested. 7.7. Keys, Etc. ---------- The Buyers shall have received such keys, lock and safe combinations and other similar items as the Parent and the Buyers shall reasonably require to obtain full occupation and control of the assets purchased hereunder. 7.8. No Adverse Change ----------------- There shall have been no material adverse change to the Purchased Assets or the properties, financial condition of the Business being transferred hereunder since October 7, 2001 (other than changes related to general economic or market conditions). - 42 - 7.9. Books and Records ----------------- The Parent and the Buyers shall have received all books and records of or pertaining to the Business and the Purchased Assets which are required to be transferred to the Buyers at the Closing pursuant to Section 1 hereof. 7.10. Third Party Consents -------------------- (a) To the extent that any Assigned Contract listed on Schedule 7.10 to the Disclosure Letter or any material Assigned Contract subsequently entered into by the Sellers or between the date hereof and the Closing Date shall require the consent to any aspect of the proposed transaction of any other Person, such consent shall have been obtained. (b) All orders, consents, permits, authorizations, approvals, and waivers of every Person necessary to permit the Parent and the Buyers to perform their obligations under this Agreement and to consummate the transactions contemplated hereby shall have been obtained and shall be in full force and effect. (c) The Sellers shall have delivered to the Parent and the Buyers, to the extent practicable, duly executed subcontracts subcontracting to the Buyers the Sellers' performance of all the Assigned Contracts that may not be assigned without the consent of the other party each of which subcontracts shall remain in effect until the Buyers have received either (a) an assignment, with the consent of the other party, of the Assigned Contract to which the subcontract relates, or (b) a substitution of the Buyers for the Seller, in the Assigned Contract to which the subcontract relates. 7.11. No Casualty ----------- There shall not have occurred and be continuing any damage, destruction or loss (whether or not covered by insurance) in excess of an aggregate of $50,000 affecting the Purchased Assets. 7.12. No Proceedings -------------- Since the date of this Agreement, there shall not have been commenced and be continuing or threatened against the Parent or the Buyers, or against any related Person of the Parent or the Buyers, any proceeding (a) involving any challenge to, or seeking damages or other relief in connection with, any of the transactions contemplated by this Agreement or (b) that may have the effect of preventing, delaying, making illegal, imposing limitations or conditions on or otherwise interfering with any of the transactions contemplated by this Agreement. - 43 - 7.13. Other Purchase Agreements ------------------------- The Other Purchase Agreements shall have been executed and delivered and the transactions contemplated thereby shall have closed or shall be closed simultaneously with the transaction which is the subject of this Agreement. 8. Survival of Representations and Warranties; Indemnification; Etc. ----------------------------------------------------------------- 8.1. Survival -------- (a) All representations and warranties respectively made by the Sellers and the Buyers and the Parent in this Agreement, including without limitation, all representations and warranties made herein or in any Exhibit or Schedule hereto or to the Disclosure Letter or in the Closing Documents, shall survive the Closing until the last day of the twenty-first (21st) full month, excluding partial months, following the Closing Date, provided, however, that any claims arising in connection with a breach of any of the representations and warranties contained in Section 3.6 (Taxes), Section 3.13 (Employee Benefits), 3.19 (Employment), Section 3.21 (Commissions), Section 3.25 (Solvency), Section 3.26 (Environmental Matters), and 3.30 (Product Liability) shall survive until the date of expiration of the statute of limitations applicable to such claim and any extensions thereof; provided, further, that any claims with respect to any matter described in (i) Section 3.1(Organization), Section 3.7 (Title), Section 3.3 (Authorization), Section 4.1 (Corporate Authorization) and Section 4.2 (Due Incorporation) shall survive indefinitely and (ii) the representations and warranties in Section 3.29 (Product Warranty) shall survive for the period set forth in Section 9.3 hereof (collectively, as applicable, the "Survival Date"). (b) All covenants and agreements respectively made by the Sellers and the Buyers and the Parent in this Agreement to be performed after the Closing Date shall survive the Closing, and will remain in full force and effect thereafter until (i) in the case of all covenants and agreements that have specified terms or periods, until the expiration of the terms or periods specified therein; and (ii) in the case of all other covenants and agreements that do not have specified terms or periods, until the fulfillment thereof. (c) Notwithstanding the foregoing, any representation, warranty, or agreement as to which a bona fide claim for indemnification has been asserted in accordance with Section 8.2 or 8.3 hereof prior to the Survival Date set forth in Section 8.1(a) hereof will (with respect to such claim) survive, and such claim may be pursued, beyond the expiration of such Survival Date until such claim is resolved by arbitration or by settlement. The right to indemnification, payment of damages or other remedy based on such representations, warranties, covenants, agreements and obligations will not be affected by any investigation conducted with respect to, or any Knowledge acquired (or capable of being acquired) at any time, whether before or after the - 44 - execution and delivery of this Agreement or the Closing Date, with respect to the accuracy or inaccuracy of or compliance with, any such representation and warranty (as modified by the Disclosure Letter and schedules thereto at the time of the execution of this Agreement), covenant, or obligation. The waiver of any condition of Closing based on the accuracy of any representation or warranty, or on the performance of or compliance with any covenant or obligation, will not, unless otherwise agreed to in writing by both parties, affect the right to indemnification, payment of damages, or other remedy based on such representations, warranties, covenants, and obligations. 8.2. Sellers' Agreement to Indemnify ------------------------------- The Sellers hereby jointly and severally agree to indemnify and save the Parent, its affiliates, including the Buyers, and their shareholders, officers and directors (each a "Parent Indemnified Party") harmless from or against any and all damages, losses, obligations, settlement payments pursuant to Section 8.7 hereof, liabilities, claims, actions or causes of action, encumbrances, costs, and expenses (including all reasonable attorney's fees, interest and penalties) (collectively, "Losses") suffered, sustained, reasonably incurred or required to be paid by a Parent Indemnified Party resulting from each of the following: (a) the untruth, inaccuracy or breach or nonfulfillment of any representation, warranty, covenant or agreement of the Sellers contained in this Agreement, the Closing Documents or in any Exhibit or Schedule hereto or to the Disclosure Letter. No materiality or Sellers' Knowledge qualification contained in the foregoing documents delivered hereunder shall be taken into account in determining the aggregate amount of the Parent Indemnified Parties' Losses, except for the Sellers' Knowledge qualifications set forth in Sections 3.9 (Litigation), 3.14(d), (e), (f), (g) and (h) (Intellectual Property Assets), 3.15 (Computer Systems), 3.22 (Customers and Vendors), 3.25(b)(iv) (Solvency), 3.26(b) (Environmental), 3.27 (Assigned Contracts) and 3.31(b) (Commitments); (b) the assertion against a Parent Indemnified Party or the Purchased Assets of any liability or obligation of the Sellers or their affiliates, shareholders, officers and directors not expressly assumed by the Parent or the Buyers pursuant to this Agreement (whether or not disclosed to the Parent), including but not limited to the Excluded Liabilities under Section 1.5 hereof; (c) except as otherwise specifically provided in Sections 9.4, 9.5 and 9.6 hereof, any product or component thereof manufactured by or shipped, or any services provided by, the Sellers, in whole or in part, prior to the Closing Date; (d) any liability for Losses arising out of any claims disclosed on Schedule 3.9 to the Disclosure Letter asserted by Brian T. Henry, Erin K, Henry, Drew P. Henry and Sarah H. Henry or any facts or circumstances upon which such claims or litigation were based. - 45 - 8.3. Parent's Agreement to Indemnify ------------------------------- The Parent and the Buyers jointly and severally hereby agree to indemnify and save the Sellers, their affiliates, shareholders, officers and directors (a "Seller Indemnified Party") harmless from or against any and all Losses suffered, sustained, reasonably incurred or required to be paid by a Seller Indemnified Party resulting from or relating to each of the following: (a) the untruth, inaccuracy or breach or nonfulfillment of any representation, warranty, covenant or agreement of the Parent or the Buyers contained in this Agreement, the Closing Documents or in any Exhibit or Schedule hereto; (b) any failure to satisfy any obligation or liability for any Assumed Liabilities; and (c) any liabilities or obligations arising out of the operation of the Business or the use of the Purchased Assets by the Parent or the Buyers after the Closing Date (except for those liabilities or obligations of the Sellers otherwise set forth in this Agreement). 8.4. Indemnification Procedures -------------------------- (a) No claim for indemnification shall be made against the Parent and the Buyers under this Agreement after the Survival Date unless prior to the Survival Date a Seller Indemnified Party shall have given written notice of such claim for indemnification. No claim for indemnification shall be made against the Sellers under this Agreement after the Survival Date, unless prior to such date a Parent Indemnified Party shall have given written notice of such claim for indemnification. Notwithstanding the foregoing, any representation, warranty, or agreement made by the Sellers or the Parent or the Buyers as to which a bona fide claim for indemnification has been asserted in accordance with Section 8 hereof (including the preceding sentences of this subsection (a)) during the applicable survival period set forth in Section 8.1 hereof will (with respect to such claim) survive, and such claim may be pursued, beyond the expiration of such survival period until such claim is resolved by arbitration or by settlement. (b) If an indemnitee becomes aware of any matter that it believes is indemnifiable pursuant to Section 8.2 or 8.3 hereof (irrespective of the Basket provided for in Section 8.5 hereof) and such matter involves: (i) any claim made against the indemnitee by any Person other than a Parent Indemnified Party or a Seller Indemnified Party or (ii) the commencement of any action, suit, investigation, arbitration, or similar proceeding against the indemnitee - 46 - by any Person other than a Parent Indemnified Party or a Seller Indemnified Party, the indemnitee will give the indemnifying party prompt written notice of such claim or the commencement of such action, suit, investigation, arbitration, or similar proceeding. Such notice will: (i) provide (with reasonable specificity) the basis on which indemnification is being asserted; (ii) set forth the actual or estimated amount of damages for which indemnification is being asserted, if known; and (iii) be accompanied by copies of all relevant pleadings, demands, and other papers served on the indemnitee. The failure to provide the notice promptly will not relieve the indemnifying party of its obligations under this Section 8 except to the extent of any damages that would not have been incurred if the notice had been given promptly. (c) If an indemnitee becomes aware of any matter that it believes is indemnifiable pursuant to Section 8.2 or 8.3 hereof (irrespective of the Basket provided for in Section 8.5) and such matter involves a claim or proceeding made by any Parent Indemnified Party or Seller Indemnified Party against the indemnitee, the indemnitee will give the indemnifying party prompt written notice of such claim. Such notice will: (i) provide (with reasonable specificity) the bases for which indemnification is being asserted; and (ii) set forth the actual or estimated amount of damages for which indemnification is being asserted. The failure to provide the notice promptly will not relieve the indemnifying party of its obligations under this Section 8 except to the extent any damages that would not have been incurred if the notice had been given promptly. The indemnifying party will have a period of 30 days after the delivery of each notice required by this Section 8.4(c) during which to respond to such notice. If the indemnifying party accepts (in writing) full responsibility for the claim described in such notice, the actual or estimated amount of damages reflected in such notice will be conclusively deemed a liability that the indemnifying party owes, and, subject to Section 8.5, will pay (in cash) within ten (10) days, to the indemnitee. If the indemnifying party has disputed such claim or does not respond within such 30-day period, the indemnifying party and the indemnitee agree to proceed in good faith to negotiate a resolution of such dispute. If all such disputes are not resolved through negotiations within 30 days after such negotiations begin, the indemnifying party and the indemnitee shall resolve such disputes through arbitration. (d) The indemnifying party will have a period of 30 days after the delivery of each notice required by Section 8.4(b) hereof during which to respond to such notice. If the indemnifying party elects to defend the claim described in such notice or does not respond within such 30-day period, the indemnifying party will be obligated to settle or defend such claim, at its own expense and by counsel chosen by the indemnifying party and reasonably satisfactory to the indemnitee. The indemnitee will cooperate fully with the indemnifying party and counsel for the indemnifying party in the defense against any such claim, and the indemnitee will have the right to participate at its own expense in the defense of any such claim. If the indemnifying party responds within such 30-day period and elects not to defend such claim, the indemnitee will be free to settle in good faith or defend (and control the defense of) such claim. The indemnitee's settlement in good faith or defense will not relieve the indemnifying party of its obligations under this Section 8. - 47 - 8.5. Basket and Limitations ---------------------- (a) The Sellers shall have no liability (for indemnification or otherwise) with respect to claims under Section 8.2(a) and the equivalent provisions to Section 8.2(a) hereof contained in the Other Purchase Agreements (each, an "Indemnity Provision") until the aggregate amount of the Parent Indemnified Parties' Losses with respect to such matters exceeds Three Hundred Thirty Thousand dollars ($330,000) (the "Basket") . No materiality or Sellers' Knowledge qualification contained in Section 3 shall be taken into account in determining the aggregate amount of the Parent Indemnified Parties' Losses, except for the Sellers' Knowledge qualifications set forth in Sections 3.9 (Litigation), 3.14(d), (e), (f), (g) and (h) (Intellectual Property Assets), 3.15 (Computer Systems), 3.22 (Customers and Vendors), 3.25(b)(iv) (Solvency), 3.26(b) (Environmental), 3.27 (Assigned Contracts) and 3.31(b) (Commitments). In the event the aggregate amount of such Losses exceeds the Basket, then the Sellers shall indemnify the Parent with respect to the aggregate amount of such Losses but only to the extent that they exceed Two Hundred Thousand dollars ($200,000). Notwithstanding the foregoing, this Section 8.5 will not apply to (i) claims or matters arising in respect of Sections 3.1 (Organization), 3.3 (Authorization), 3.6 (Taxes), 3.7 (Title), 3.13 (Employee Benefits), 3.19 (Employment), 3.21 (Commissions), 3.25 (Solvency), 3.26 (Environmental Matters), 3.29 (Product Warranty) or 3.30 (Product Liability) or (ii) any fraud or intentional breach by any Seller of any covenant or obligation, and the Sellers will be liable for all Losses with respect to such claims, matters, breaches or acts. (b) The amount of Losses subject to indemnification under this Article 8 shall be reduced (but not below zero) by any insurance proceeds (net of reasonable expenses and other costs in obtaining such proceeds) which the indemnified party under this Agreement shall receive or otherwise enjoy with respect to the event that triggered the losses. (c) The aggregate liability of the Sellers for Losses under the Indemnity Provisions shall not exceed Nine Million Nine Hundred Thousand dollars ($9,900,000). No materiality or Sellers' Knowledge qualification contained in Section 3 shall be taken into account in determining the aggregate liability of the Sellers for Losses under Section 8.2(a), except for the Sellers' Knowledge qualifications set forth in Sections 3.9 (Litigation), 3.14(d), (e), (f), (g) and (h) (Intellectual Property Assets), 3.15 (Computer Systems), 3.22 (Customers and Vendors), 3.25(b)(iv) (Solvency), 3.26(b) (Environmental), 3.27 (Assigned Contracts) and 3.31(b) (Commitments). Notwithstanding the foregoing, this Section 8.5(c) will not apply to (i) claims or matters arising in respect of Sections 3.1 (Organization), 3.3 (Authorization), 3.6 (Taxes), 3.7 (Title), 3.13 (Employee Benefits), 3.19 (Employment), 3.21 (Commissions), 3.25 (Solvency), 3.26 (Environmental Matters), 3.29 (Product Warranty) or 3.30 (Product Liability) or (ii) any fraud or intentional breach by any Seller of any covenant or obligation, and the Seller will be liable for all Losses with respect to such claims, matters, breaches or acts. - 48 - (d) Notwithstanding any other provision of this Agreement or of any of the Other Purchase Agreements, indemnified Losses recoverable with respect to any particular event, circumstance, state of facts, action or inaction pursuant to any of the Indemnity Provisions shall be reduced, dollar-for-dollar, by amounts actually paid with respect to such event, circumstance, state of facts, action or inaction to the Parent or any of its Affiliates pursuant to the Indemnity Provisions of any of the Other Purchase Agreements, it being the intent of this sentence to avoid possible double recovery of Losses by the Parent and its affiliates. 8.6. Exclusive Remedy ---------------- Except as set forth in this Section 8.6, from and after the Closing, the sole and exclusive remedy of the parties hereto with respect to any and all claims relating to or arising out of this Agreement shall be the indemnification provisions set forth in this Section 8. With respect to (i) fraud claims, (ii) a breach of the covenants set forth in Section 5.6, or (iii) a breach of the covenants set forth in Section 9, the remedies set forth in this Section 8 are cumulative and shall not be construed to restrict or otherwise affect any other rights or remedies that may be available to the indemnified party under any agreement, pursuant to law or otherwise. Notwithstanding the foregoing, nothing herein shall prevent any party from terminating this Agreement in accordance with Section 10. 8.7. Indemnification Payments ------------------------ The Sellers and the Parent agree that any payment required to be made under Section 8 will be paid within ten days after request or settlement between the parties or final resolution through arbitration. 8.8. Right of Set-Off ---------------- Upon written notice to the Sellers or the Buyers and the Parent, as applicable, specifying in reasonable detail the basis for a bona fide indemnification claim in accordance with Section 8.4 hereof, the claiming party may set-off the amount of the claim against sums due from the claiming party to the other party. Any disputed claim that is not resolved through negotiations between the parties shall be submitted to arbitration in accordance with Section 11.14 of this Agreement. 9. Additional Covenants -------------------- 9.1. Covenants of Sellers Regarding Post-Closing Activities ------------------------------------------------------ (a) For a period of five (5) years following the Closing Date, the Sellers covenant and agree that the Sellers will not anywhere in the world, directly or indirectly, whether as principal or as agent, consultant or - 49 - otherwise, alone or in association with any other Person, firm, corporation or other business organization, carry on, or be engaged, concerned or take part in, or render Competitive Business services to or own any interest or share in the earnings of or invest in the stock, bonds or other securities of, any Person, firm, corporation or other business organization which is in a Competitive Business. "Competitive Business" shall mean the graphics products business being sold by Sellers and their affiliates to the Buyers or its affiliates pursuant to this Agreement or other purchase agreements being entered into concurrently herewith as described in Schedule 1.1 hereto. Nothing herein contained, however, shall be deemed to prohibit the Sellers from (i) owning stock in public companies in pursuance of a passive investment program so long as it does not become an "Affiliate" thereof, as such term is defined in the Securities Exchange Act of 1934; (ii) engaging in any businesses being retained by the Sellers or their affiliates, as set forth in Schedule 1.1 hereto; and (iii) being acquired by any entity which is to any degree engaged in a Competitive Business. Notwithstanding the foregoing, nothing contained in this Section 9.1 shall preclude, prevent or restrict the Sellers from performing their obligations to the Buyers and the Parent under the Manufacturing Transition Services Agreement and the Foamboard Supply Agreement for the terms specified therein. (b) For a period of five (5) years following the Closing Date, the Sellers shall not, for whatever reason, whether for their own account or for the account of any other Person, firm, corporation or other business organization, solicit, sell to or accept business relating to a Competitive Business from any Existing Customer (as hereinafter defined) or any "Active Prospect" (as hereinafter defined) of the Business as conducted by the Sellers or the Buyers. Active Prospect shall mean a potential customer which actually has been solicited by the Sellers in connection with the Business or the Buyers at the later of the Closing Date or one which at such time holds, but has not accepted, a proposal prepared by the Sellers or the Buyers. "Existing Customer" shall mean any customer of the Sellers in connection with the Business or the Buyers at the Closing Date, such customers to include, without limiting the foregoing, those customers of the Sellers as of the Closing as listed in Schedule 3.22 hereto. (c) For a period of five (5) years following the Closing Date, the Sellers shall not, for whatever reason, whether for their own account or for the account of any other Person, firm, corporation or other business organization (i) solicit, induce or attempt to solicit or induce any customer, supplier, licensee or other business relation of the Business to cease doing business with the Business or the Buyers or the Parent or their affiliates; (ii) intentionally interfere in any way with the contracts between the Buyers or the Parent and any customer, supplier, licensee or other business relation of the Business; (iii) hire or participate in any solicitation or attempt to solicit or hire any Person who was an employee of the Sellers or any of its affiliates as of the Closing Date or within the six-month period prior thereto while such Person is an employee of the Parent or the Buyers or their affiliates or for six (6) months after the termination of the employment of such Person; or (iv) disparage, deprecate, or make any negative comment with respect to the Business or the Buyers or the Parent or their respective businesses, operations, or properties. - 50 - (d) The Sellers recognize that by reason of the Sellers' ownership of and/or operation of the Business, the Sellers may have acquired Confidential Information and trade secrets concerning the operation of the Business, the use or disclosure of which could cause the Parent or the Buyers or the Business substantial loss and damages that could not be readily calculated and for which no remedy at law would be adequate. Accordingly, in consideration for the payment of the Purchase Price, which is recognized as adequate by the Sellers, the Sellers covenant and agree with the Parent and the Buyers that the Sellers will not at any time, except in performance of the Sellers' obligations, if any, to the Buyers or the Parent or with the prior written consent of the Parent or the Buyers, directly or indirectly, disclose any Confidential Information that the Sellers have acquired or may acquire, or use such information in a manner detrimental to the interests of the Parent or the Buyers or the Business, unless (i) such information becomes known to the public generally through no fault of the Sellers, (ii) disclosure of such information is required by law, or (iii) the Sellers reasonably believe that such disclosure is required in connection with the defense of a lawsuit against the Sellers; provided, however, that prior to disclosing any information pursuant to this Section, the Sellers shall give prior written notice of such proposed disclosure to the Parent and the Buyers, provide the Parent and the Buyers with the reasonable opportunity to contest such disclosure, and shall reasonably cooperate with all efforts to prevent such disclosure. The term "Confidential Information" means information of a material nature not previously disclosed to the public with respect to the products, facilities, intellectual property (including, without limitation, methods and trade secrets), software, source code, systems, procedures, manuals, reports, price lists, customer lists, financial information, business plans, prospects, or opportunities of the Sellers or any of their affiliates related to the Business. (e) If any court of competent jurisdiction shall determine that the covenants and agreements contained in this Section 9.1 are unenforceable as to any portion of the geographical area defined or as to the duration of time stated, it may determine the rights of the parties hereunder on the balance of said geographical area or the balance of such time duration which said court determines to be just and equitable under the circumstances. (f) The Sellers acknowledge that the Parent and the Buyers have relied upon the covenants contained in this Section 9.1 and that said covenants are conditions to the Parent's and the Buyers' willingness to enter into and perform their obligations under this Agreement. (g) The parties agree that the Parent and the Buyers would be irreparably harmed if the Sellers do not comply with all of their obligations under this Section 9.1 and that money damages alone will not be sufficient to compensate the Buyers for such breach. Accordingly, the parties agree that Buyers shall be entitled to obtain an injunction against the continuation of any breach of this Section 9.1 without the necessity of showing money damages. - 51 - 9.2. Covenants of the Buyers and the Parent Regarding Post-Closing Activities ------------------------------------------------------------- (a) For a period of two (2) years following the Closing Date, the Buyers and the Parent covenant and agree that the Buyers and the Parent will not anywhere in North America, directly or indirectly, whether as principal or as agent, consultant or otherwise, alone or in association with any other Person, firm, corporation or other business organization, carry on, or be engaged, concerned or take part in, or render HC Competitive Business (as hereinafter defined) services to or own any interest or share in the earnings of or invest in the stock, bonds or other securities of, any Person, firm, corporation or other business organization which is in a HC Competitive Business. "HC Competitive Business" shall mean the Sellers' product lines as of the Closing Date in the framing business and in the retail foamboard business as described on Schedule 1.1 to the Disclosure Letter. Nothing herein contained, however, shall be deemed to prohibit the Buyers and the Parent from (i) owning stock in public companies in pursuance of a passive investment program so long as it does not become an "Affiliate" thereof, as such term is defined in the Securities Exchange Act of 1934; (ii) engaging in the Business, as set forth in Schedule 1.1 hereto, and (iii) being acquired by any entity which is to any degree engaged in a HC Competitive Business. In addition, one (1) year following the Closing Date the Buyers and the Parent shall be permitted to acquire any entity which is engaged in a HC Business and to thereafter engage in the business or businesses thereby acquired. Notwithstanding the foregoing, nothing contained in this Section 9.2 shall preclude, prevent or restrict in any way the Buyers' and the Parent's ability to (A) perform their obligations to the Sellers under the Manufacturing Services Agreement and the Framing Supply Agreement and (B) continue to manufacture and sell to the framing market: (i) mending and hinging tapes, (ii) self-adhesive textile tapes and (iii) pressure sensitive mounting and laminating films. (b) The Buyers and the Parent acknowledge that the Sellers have relied upon the covenants contained in this Section 9.2 and that said covenants are conditions to the Sellers' willingness to enter into and perform their obligations under this Agreement. (c) The parties agree that the Sellers would be irreparably harmed if the Buyers and the Parent do not comply with all of their obligations under this Section 9.2 and that money damages alone will not be sufficient to compensate the Sellers for such breach. Accordingly, the parties agree that Sellers shall be entitled to obtain an injunction against the continuation of any breach of this Section 9.2 without the necessity of showing money damages. - 52 - (d) If any court of competent jurisdiction shall determine that the covenants and agreements contained in this Section 9.2 are unenforceable as to any portion of the geographical area defined or as to the duration of time stated, it may determine the rights of the parties hereunder on the balance of said geographical area or the balance of such time duration which said court determines to be just and equitable under the circumstances. 9.3. Payments Received ----------------- (a) Except as otherwise may be provided in this Agreement or the Closing Documents, the Sellers shall promptly remit to the Buyers all monies received by the Sellers in respect of (a) performance from and after the Effective Time under the contracts included among the Purchased Assets or (b) any account or note receivable relating to the Business and arising or generated on or after the Effective Time. (b) Except as otherwise may be provided in this Agreement or the Closing Documents, the Parent and the Buyers shall promptly remit to the Sellers all monies received by the Parent and the Buyers in respect of (a) performance prior to the Effective Time under the contracts included among the Purchased Assets or (b) any account or note receivable relating to the Business and arising or generated prior to the Effective Time. 9.4. Customer Rebates and Warranty Claims ------------------------------------ (a) The Sellers agree to reimburse the Buyers and the Parent on a dollar for dollar basis for any customer rebates authorized by the Sellers prior to the Effective Time and incurred by the Buyers and the Parent on or after the Effective Time but only with respect to invoices for sales of equipment, products and services relating to the Business by the Sellers dated prior to the Effective Time (the "Customer Rebate Costs"). Any and all customer rebates with respect to invoices for sales dated on or after the Effective Time shall be the sole responsibility of the Buyers and the Parent whether or not such customer rebates were authorized by the Sellers. (b) The Sellers agree to reimburse the Buyers and the Parent on a dollar for dollar basis for costs of fulfilling bona fide warranty obligations for equipment ("Equipment Warranty Costs") and consumable products ("Consumable Products Warranty Costs") of the Business manufactured prior to the Effective Time, whether or not sold by the Sellers prior to the Effective Time, provided that: (i) in the case of equipment, the warranty claim is made by the customer not later than one (1) year following its original date of purchase by the customer and in any event no later than four (4) years after the Effective Time; and (ii) in the case of consumable products, the warranty claim is made by the customer not later than one (1) year following its original date of purchase and in any event not later than four (4) years after the Effective Time. Notwithstanding the foregoing, the Sellers shall have no obligation to reimburse the Buyers or the Parent for costs of warranty obligations with respect to any - 53 - consumable products sold by the Buyers or the Parent after the Effective Time if such consumables were more than three (3) years old at the time of such sale by the Buyers or the Parent. The reimbursement of Equipment Warranty Costs and Consumable Products Warranty Costs shall be subject to the following additional terms set forth below: (i) In the case of Equipment Warranty Costs, the Sellers shall reimburse the Buyers and the Parent for the costs of repair or replacement of the equipment including labor, spare parts, and reasonable expenses in connection with travel and third-party services. Equipment Warranty Costs arising out of the replacement of equipment or a discount on the price of equipment may be incurred by the Buyers and the Parent in their sole, good faith discretion up to an amount of $10,000 for any single warranty claim. The Parent and the Buyers shall consult with the Sellers with respect to the satisfaction of any equipment warranty claim in excess of $10,000. (ii) In the case of Consumable Products Warranty Costs arising out of the replacement of such products or a discount on the price of such products, the Buyers and the Parent may incur such costs in their sole, good faith discretion up to an amount of $5,000 for any single warranty claim. The Parent and the Buyers shall consult with the Seller prior to the satisfaction of any consumable products warranty claim in excess of $5,000. (c) The reimbursement procedures for Customer Rebate Costs, Equipment Warranty Costs and Consumable Products Costs shall be as follows: (i) Not later than thirty (30) days following the end of each fiscal quarter after the Closing Date, the Buyers shall deliver a statement setting forth in reasonable detail the customer rebates and the warranty claims (both for equipment and consumable products), facts reasonably demonstrating that such customer rebates and warranty claims are the obligation of the Sellers under the applicable provisions of this Section 9.4, and the dollar amounts of each (each a "Customer Rebate and Warranty Claims Statement"). The Parent and the Buyers shall make available to the Sellers the records or back-up or related materials used in preparing the Customer Rebate and Warranty Claims Statements at reasonable times and upon reasonable notice for inspection and photocopying within five (5) days of the request therefor by the Sellers. (ii) Any reimbursement required under this Section 9.4 shall be due and payable to the Buyers by the Seller within twenty (20) days of the Buyers' delivery of a Customer Rebate and Warranty Claims Statement. - 54 - 9.5. Non-warranty Product Returns ---------------------------- (a) The Sellers agree to reimburse the Buyer and the Parent for costs of Non-warranty Returns by customers of products of the Business occurring after the Effective Time that were authorized by the Sellers prior to the Effective Time. (b) The Buyer and the Parent agree to reimburse the Sellers if and to the extent that the Buyers' or the Parent's acceptance of any Non-warranty Returns from customers of products of the Business occurring after the Effective Time and not authorized by the Sellers should result in any charge back to or claim against the Sellers by the customer returning such products. (c) As used in this Section 9.5, a "Non-warranty Return" shall mean any return of products other than a warranty return. (d) The Sellers, on the one hand, and the Parent and the Buyers on the other, shall make available to the other parties the records or back-up or related materials used by such parties in determining the reimbursement obligations of the other party arising out of this Section 9.5 at reasonable times and upon reasonable notice for inspection and photocopying within five (5) days of the request therefor by the Sellers. 9.6. AquaSeal Warranty ----------------- (a) The Sellers agree to reimburse the Buyers and the Parent on a dollar for dollar basis for all costs of fulfilling good faith warranty obligations for "Integrated Graphic Protection System" products sold prior to the Closing Date provided that the warranty claim is made by the customer within the applicable period provided by the Sellers' Integrated Graphic Protection System Material Replacement Warranty (generally sixty (60) months after the application of the AquaSEAL product.) The obligation of the Sellers shall apply to all costs reasonably incurred by the Buyers and the Parent whether arising out of the SEAL brand AquaSEAL brand liquid lamination products, inks, substrate or any other product or cause covered by such warranty and irrespective of whether the warranty claim is attributable to the products, services, actions or inaction of the Sellers, The Valspar Corporation, Vutek, Forbo-Stamoid, Mehler Haku GMBH, or any other business entity. (b) Any reimbursement required under this section 9.6 shall be due and payable to the Parent and the Buyers by the Sellers within twenty (20) days of the Buyers' delivery of a statement setting forth in reasonable detail the amount of the warranty claim. (c) The Parent and the Buyers shall promptly notify the Sellers of its receipt of any such warranty claim. Further, the Parent and the Buyers shall make available to the Sellers the records or back-up or related - 55 - materials used by the Parent and the Buyers in determining the Sellers' reimbursement obligations arising out of the warranty obligations pursuant to subsection (a) hereof at reasonable times and upon reasonable notice for inspection and photocopying within five (5) days of the request therefor by the Sellers. 9.7. Employee Matters ---------------- (a) Effective as of the close of business on the day preceding the Closing Date, the employment with the Sellers of each of the persons listed on Schedule 9.7 to the Disclosure Letter (the "Employees") shall be terminated, except as otherwise provided on Schedule 9.7. Any and all liabilities and obligations arising in connection with such employment terminations, including, without limitation, any liability for accrued vacations, whether or not any such liability or obligation has been disclosed to the Parent, shall be the sole responsibility of the Seller. Each of the Employees shall become employees of the Buyers as of the Closing Date, except as otherwise provided on Schedule 9.7. The Sellers shall deliver all personnel information and records relating to the Employees to the Buyers and the Parent on or prior to the Closing Date. The Buyers and the Parent shall treat such information in the same manner as similar information relating to the Parent's other employees. (b) The Sellers shall use reasonable efforts to aid the Buyers and the Parent in continuing the employment of such Employees of the Sellers related to the Business at the Closing as the Buyers and the Parent desire to remain in the Business after the Closing. (c) The Parent and the Buyers agree that the Employees hired by the Parent and the Buyers shall receive credit for years of service with the Sellers for purposes of any severance pay program that the Buyers may adopt with respect to terminations of employment that occur within twelve (12) months after the Closing Date. 9.8. Removing Excluded Assets ------------------------ On or before the Closing Date, (or at such later date as the parties may agree), the Sellers shall remove all Excluded Assets from all facilities to be occupied by the Buyers (the "Facilities"), except those required by the Buyers and the Parent to perform their obligations under the Manufacturing Transition Services Agreement, and shall vacate the Facilities and Real Property. Such removal and evacuation shall be done in such manner as to avoid any damage to the Facilities and other properties to be occupied by the Buyers and any material disruption of the business operations to be conducted by Buyers after the Closing. Any damage to the Purchased Assets or to the facilities resulting from such removal and evacuation shall be paid by the Sellers. Should the Sellers fail to remove the Excluded Assets as required by this Section, the Buyers shall have the right, but not the obligation, (a) to remove the Excluded Assets at the Sellers' sole cost and expense; (b) to store the Excluded Assets and to charge the Sellers all storage costs associated therewith; (c) to treat - 56 - the Excluded Assets as unclaimed and to proceed to dispose of the same under the laws governing unclaimed property; or (d) to exercise any other right or remedy conferred by this Agreement. The Sellers shall promptly reimburse the Buyers for all costs and expenses reasonably incurred by the Buyers in connection with any Excluded Assets not removed by the Sellers on or before the Closing Date or other agreed upon date. Upon the expiration of the Manufacturing Transition Services Agreement, the Sellers shall promptly remove all Excluded Assets located at the Facilities which were not removed on or before the Closing Date in accordance with this Section. 9.9. Retention of and Access to Records ---------------------------------- (a) After the Closing Date, the Parent shall retain for a period of four (4) years those records of the Sellers delivered to the Parent. The Parent also shall provide the Sellers and their representatives reasonable access thereto, during normal business hours and on at least three days' prior written notice, to enable them to prepare financial statements or tax returns or deal with tax audits. Before destroying any of the aforementioned records of the Sellers, the Parent shall first make a written offer of such records to HC. If HC does not respond to such written offer within fifteen (15) days of receipt of such notice, the Parent shall have no further obligations to the Sellers with respect to such records. (b) After the Closing Date, the Sellers shall retain for a period of four (4) years those records of the Sellers relating to the Business that are Excluded Assets. The Sellers shall also provide the Parent and the Buyers and their representatives reasonable access to records relating to the Business that are Excluded Assets, during normal business hours and on at least three days' prior written notice, for any reasonable business purpose specified by the Parent or the Buyers in such notice. Before destroying any of the aforementioned records relating to the Business that are Excluded Assets, the Sellers shall first make a written offer of such records to the Parent. If the Parent does not respond to such written offer within fifteen (15) days of receipt of such notice, the Sellers shall have no further obligations to the Parent or the Buyers with respect to such records. 9.10. License of Seal(R) Trademark and Name ------------------------------------- (a) Effective upon the Closing, the Buyers hereby grant to the Sellers an irrevocable (subject to the terms hereof), royalty-free, non-exclusive, non-assignable, non-transferable, non-sublicensable, nonworldwide right and license to use the name Seal(R) and related names and trademarks, each as described with more particularity on Schedule 9.10(a) to the Disclosure Letter (collectively, the "Seal Marks"), in connection with (i) the production by the Sellers of the products listed on Schedule 9.10(b) to the Disclosure Letter (the "Products") for a period of up to six (6) months following the Closing, and (ii) the marketing and sale of such Products and existing inventory of Products for a period not to exceed two (2) years following the Closing. The Buyers grant a license to the Sellers to use the Seal Marks in such modified - 57 - form for a period of up to two (2) years following the Closing to produce the Products, and to market and sell such Products. Prior to using any such modified form of the Seal Marks, the Sellers shall submit the proposed modified form to the Buyers for its approval (which approval shall not unreasonably be withheld or delayed). The Sellers accept such grant of license, acknowledge and admit that no right, title, or interest in the Seal Marks is transferred to the Sellers other than the right to use the Seal Marks under the conditions set forth in this Section 9.10, and agree to do nothing inconsistent with the Buyers' ownership rights in or which would cause dilution of the Seal Marks. (b) The Sellers shall comply with the marking provisions of the trademark laws of the United States and other jurisdiction, as applicable. The Sellers agree that, unless otherwise expressly approved in writing by the Buyers, each use of a Seal Mark by the Sellers shall be followed by either the "(R)" symbol, if such use is in the United States, or the "(TM)" symbol, if such use is in any other country. (c) The Sellers shall use the Seal Marks only for the permitted uses set forth in Subsection 9.10(a) above. All Products bearing the Seal Marks shall conform, in design and quality, in all material respects with the inventory of Products existing as of Closing. If, in the reasonable opinion of the Buyers, the Products marketed by a Seller pursuant to subsection 9.10(a) above fail to conform to the foregoing standards at any time, the Buyers shall so notify the Sellers. Upon such notification, such Seller shall promptly (i.e., within 60 days) take steps reasonably satisfactory to the Buyers to cause such Seller's Products to conform to the foregoing standards. (d) In addition, the Sellers shall not adopt or use any variation of the Seal Marks or any word or mark likely to be confused with the Seal Marks, except as contemplated in Subsection 9.10(a) for a two (2) year period, or as otherwise permitted by Buyers. (e) The Sellers' agree and covenant to change the design of the Seal logo and modify the name Seal(R) and related names to incorporate additional differentiating words or phrases within six (6) months following the Closing and shall formulate a plan for transitioning away from the Seal Marks promptly following the Closing. Beginning on the date which is six (6) months after the Closing Date, the Sellers shall cease producing Products using the Seal Marks in unmodified form, and after the second (2nd) anniversary of the Closing, the Sellers shall cease manufacturing and selling any Product using any word or mark incorporating confusingly similar to the Seal Marks. 9.11. Change of Corporate Names ------------------------- Within fifteen (15) business days after the Closing Date, the Sellers shall take all actions and make all filings necessary to remove the words "SEAL" and "GRAPHICS" from any of the Sellers' corporate names. - 58 - 10. Termination, Waiver and Amendment --------------------------------- 10.1. Termination Provisions ---------------------- (a) This Agreement may be terminated at any time prior to the Closing by mutual consent of the Sellers and the Parent. (b) At any time prior to the Closing, the Parent may act alone to terminate the Agreement in the form of a written notice to the Sellers, (i) if there is or shall be any material misrepresentation, error, misstatement or omission in or material breach of any representation or warranty by the Sellers pursuant to this Agreement, the Closing Documents and any other document and instrument required to be delivered herewith, (ii) if the Sellers, in a materially adverse respect, shall breach any covenant in this Agreement, or (iii) if there shall be a failure of any of the conditions to which the Parent's or the Buyers' obligations are subject under this Agreement. (c) At any time prior to the Closing, the Sellers may act alone to terminate the Agreement in the form of a written notice to the Parent (i) if there is or shall be any material misrepresentation, error, misstatement or omission in or material breach of any material representation or warranty by the Parent or the Buyers pursuant to this Agreement, the Closing Documents and any other document and instrument required to be delivered herewith, (ii) if the Parent or the Buyers, in a materially adverse respect, shall breach any covenant in this Agreement, or (iii) if there shall be a failure of any of the conditions to which Seller's obligations are subject under this Agreement. (d) This Agreement may be terminated by either the Parent or the Sellers if the Closing has not occurred by the close of business on October 12, 2001. 10.2. Effect of Termination --------------------- (a) In the event of termination of this Agreement pursuant to Section 10.1(a), this Agreement shall forthwith become void and there shall be no liability on the part of any party hereto or any of its affiliates, directors, officers, or shareholders. (b) Termination of this Agreement pursuant to Sections 10.1(b), (c) or (d) shall not in any way terminate, limit or restrict the rights and remedies of any party hereto against any other party for breach of this Agreement. 10.3. Amendment --------- The parties hereto may amend, modify or supplement this Agreement in such manner as may be agreed upon by them in writing at any time. - 59 - 10.4. Waiver ------ Any party may waive in writing the performance of any covenant or the fulfillment of any condition of this Agreement. The failure of any party at any time or times to require performance of any provision hereof shall in no manner affect such party's right at a later time to enforce the same. 11. Miscellaneous ------------- 11.1. Expenses -------- The Parent, the Buyers and the Sellers shall pay the fees and expenses of their respective counsel, accountants and other experts representing them as well as all other expenses incurred by such parties incident to the negotiation and consummation of the transactions contemplated hereby. 11.2. Notices ------- All notices, consents or other communications required or permitted to be given under this Agreement shall be in writing and shall be deemed to have been duly given when delivered personally, delivery changes prepaid, or three business days after being sent by registered or certified mail, return receipt requested, postage prepaid or one business day after being sent by a nationally recognized express courier service, postage or delivery charges prepaid, to the parties at their respective addresses stated below. Any party may change its address for notice and the address to which copies must be sent by giving notice of the new address to the other parties in accordance with this Section 11.2, except that any such change of address notice shall not be effective unless and until received. (a) if to the Sellers, to Hunt Corporation One Commerce Square 2005 Market Street Philadelphia, PA 19103-6999 Attention: Donald L. Thompson, CEO Telephone No. - (215) 841-2400 Fax No. - (215) 656-3714 - 60 - with a copy (which shall not constitute notice) to: John C. Bennett, Jr. Drinker Biddle & Reath LLP One Logan Square 18th & Cherry Streets Philadelphia, Pennsylvania 19103-6996 Telephone No. - (215) 988-2810 Fax No. - (215) 988-2757 (b) if to the Parent or the Buyers, then to Neschen AG Hans Neschen Strasse 1 D-3165 Bueckeburg Germany with a copy (which shall not constitute notice) to: William Harnisch Cummings & Lockwood Four Stamford Plaza 107 Elm Street P.O. Box 120 Stamford, CT 06904-0120 Telephone No. - (203) 351-4287 Fax No. - (203) 550-9677 11.3. Entire Agreement ---------------- This Agreement, including the Exhibits and Schedules hereto and to the Disclosure Letter, constitutes the entire agreement among the parties and supersedes all prior agreements and undertakings, oral and written, among the parties hereto with respect to the subject matter hereof, except the Mutual Nondisclosure Agreement dated April 25, 2001 between HC and Parent. 11.4. Binding Effect and Benefit -------------------------- (a) This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective successors, heirs and assigns. Nothing in this Agreement, expressed or implied, is intended to confer on any other Person other than the parties hereto or their respective successors, heirs and assigns, any rights, remedies, obligations or liabilities under or by reason of this Agreement. - 61 - (b) If HC ceases to exist as a result of a transaction that involves a Change in Control (as defined in Section 11.15 hereof), it is specifically intended that any successor entity be bound by this Agreement. HC shall ensure that any agreement relating to a Change in Control requires the successor entity to specifically assume all liabilities under this Agreement. Failure of the successor to assume this Agreement shall be considered a breach of this Agreement by HC. (c) If the Parent ceases to exist as a result of a transaction that involves a Change in Control (as defined in Section 11.15 hereof), it is specifically intended that any successor entity be bound by this Agreement. The Parent shall ensure that any agreement relating to a Change in Control requires the successor entity to specifically assume all liabilities under this Agreement. Failure of the successor to assume this Agreement shall be considered a breach of this Agreement by the Parent. 11.5. Assignability ------------- (a) This Agreement shall not be assignable by any party hereto without the prior written consent of the other parties hereto; provided, however, that the Buyers, the Parent and any Seller shall be permitted to assign all or any part of their rights or obligations hereunder to any entity (i) in which it has a controlling interest, (ii) which has a controlling interest in it, or (iii) which is under common control with it. (b) Regardless of any assignment hereunder by the Sellers, HC shall continue to be bound by any and all obligations or liabilities of the Sellers under this Agreement, the Closing Documents and any other document or instrument required to be delivered in connection with this Agreement. (c) Regardless of any assignment hereunder by the Parent or the Buyers, the Parent shall continue to be bound by any and all obligations or liabilities of the Parent or the Buyers under this Agreement, the Closing Documents and any other document or instrument required to be delivered in connection with this Agreement. 11.6. HC Guarantee ------------ HC hereby fully and forever guarantees the performance of all obligations of HHI and HGAC arising from this Agreement and the Closing Documents; provided, however, that HC may assert any defense available to HHI or HGAC other than a discharge of such obligations of HHI and HGAC due to the institution of bankruptcy, receivership, insolvency, reorganization, dissolution or liquidation proceedings by or against HHI and/or HGAC. 11.7. Parent Guarantee ---------------- The Parent hereby fully and forever guarantees the performance of all obligations of the Buyers arising from this Agreement and the Closing Documents; - 62 - provided, however, that the Parent may assert any defense available to the Buyers other than a discharge of such obligations of the Buyers due to the institution of bankruptcy, receivership, insolvency, reorganization, dissolution or liquidation proceedings by or against the Buyers. 11.8. Severability ------------ If any provision of this Agreement is held invalid or unenforceable by any court of competent jurisdiction, the other provisions of this Agreement will remain in full force and effect. Any provision of this Agreement held invalid or unenforceable only in part or degree will remain in full force and effect to the extent not held invalid or unenforceable. 11.9. Headings; Interpretation ------------------------ Headings of sections and subsections contained in this Agreement are for reference purposes only and shall not affect the meaning or interpretation of this Agreement. 11.10. Counterparts ------------ This Agreement and each of the Closing Documents may be executed in any number of counterparts, each of which shall be deemed to be an original and all of which together shall be deemed to be one and the same instrument. The exchange of copies of this Agreement and the Closing Documents and the signature pages by facsimile transmission shall constitute effective execution and delivery of this Agreement and each of the Closing Documents as to the parties and may be used in lieu of the original Agreement and the Closing Documents for all purposes. Signatures of the parties transmitted by facsimile shall be deemed to be their original signatures for all purposes. As promptly as practicable after the Closing Date, each party hereunder shall deliver to the other parties the original executed signature pages, but the failure to deliver such pages shall not affect the validity or enforceability of this Agreement or any of the Closing Documents. 11.11. Governing Law ------------- This Agreement shall be construed, governed and enforced in accordance with the laws of the State of Delaware without giving effect to otherwise applicable principles of conflicts of law. 11.12. Schedules --------- All schedules which are attached hereto are incorporated hereby by this reference. - 63 - 11.13. Announcements ------------- Neither the Sellers, on the one hand, nor the Buyers or the Parent on the other, shall issue any press release or make any public announcement or disclosure relating in any way to the transactions contemplated hereby or to the negotiations of the parties concerning the same without prior written consultation with the other party as to form and content of such announcement or disclosure, provided, however, that, as to announcements or disclosures required of such party by law or by the applicable rules of any stock exchange or stock market, such party shall only be required to use its reasonable efforts to advise the other of the form and content of any such announcement or disclosure. 11.14. Dispute Resolution ------------------ All disputes arising out of or in connection with this Agreement and the transactions contemplated herein (other than disputes arising out of Section 2.3 hereof) shall be submitted to arbitration pursuant to the Rules of Arbitration of the International Chamber of Commerce. Such arbitration shall be held in Paris, France and shall be conducted in English by three (3) arbitrators appointed in accordance with said Rules. 11.15. Definitions ----------- (a) A "Change in Control" of HC or the Parent occurs when: (i) Any person, partnership, corporation, trust or similar entity or group, that does not control more than 25% of the voting securities of such party as of the Effective Time of this Agreement, acquires or obtains control of more than 25% of the voting securities of such party; (ii) More than 25% of the operating assets of such party are sold or otherwise disposed of, or such party liquidates more than 25% of its operating assets excluding in the case of HC the sale of the Business contemplated by this Agreement; or (iii) Such party merges with any other corporation, regardless of whether such party is the surviving entity after the merger, except for a merger in which the shareholders of such party who were shareholders of such party prior to a Change in Control continue to own 75% or more of the merged companies. For purposes of this definition, the term "group" shall mean any person who acts in concert within the meaning of Section 14(d)(2) of the Securities Exchange Act of 1934, as amended (or under similar provisions of any applicable foreign securities laws). (b) "Knowledge" - an individual will be deemed to have "Knowledge" of a particular fact or other matter if: (i) such individual is actually aware of such fact or other matter; or (ii) a prudent individual could - 64 - be expected to discover or otherwise become aware of such fact or other matter in the course of conducting a reasonable investigation concerning the existence of such fact or other matter. The Sellers will be deemed to have "Knowledge" of a particular fact or other matter if the officers of the Sellers have knowledge of such fact or other matter. (c) "Ordinary Course of Business" - an action taken by a Person will be deemed to have been taken in the Ordinary Course of Business only if that action: (i) is consistent in nature, scope and magnitude with the past practices of such Person and is taken in the ordinary course of the regular, day-to-day operations of such Person; and (ii) does not require authorization by the board of directors or shareholders of such Person (or by and Person or group of Persons exercising similar authority). (d) "Person" - an individual, partnership, corporation, business trust, limited liability company, limited liability partnership, joint stock company, trust, unincorporated association, joint venture or other entity or governmental body. 11.16. Compliance with Bulk Sales Laws ------------------------------- The parties hereto hereby waive compliance by the other with the bulk sales law and any other similar laws in any applicable jurisdiction in respect of the transactions contemplated by this Agreement. [Signature page immediately follows] - 65 - IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. HUNT CORPORATION By: ----------------------------------------- Name: Title: HUNT GRAPHICS AMERICAS CORPORATION By: ----------------------------------------- Name: Title: HUNT HOLDINGS, INC. By: ----------------------------------------- Name: Title: SEAL GRAPHICS AMERICAS CORPORATION By: ----------------------------------------- Name: Title: SEAL USA CORPORATION By: ----------------------------------------- Name: Title: - 66 - SEAL GRAPHICS TECHNOLOGIES CORPORATION By: ----------------------------------------- Name: Title: NESCHEN AG By: ----------------------------------------- Name: Title: - 67 - EX-2.B 4 ex2-b.txt EX-2.B Exhibit 2(b) UK ASSET PURCHASE AGREEMENT by and among HUNT CORPORATION, HUNT GRAPHICS EUROPE LIMITED NESCHEN AG and SEAL GRAPHICS UK LIMITED Dated 7th October, 2001 TABLE OF CONTENTS -----------------
1. Purchase and Sale...................................................................................1 1.1. Sale of Business...........................................................................1 1.2. Purchased Assets...........................................................................2 1.3. Excluded Assets............................................................................3 1.4. Assumed Liabilities........................................................................4 1.5. Excluded Liabilities.......................................................................5 1.6. Closing Date...............................................................................7 1.7. Closing Obligations........................................................................7 1.8. Further Assurances.........................................................................9 2. Purchase Price......................................................................................9 2.1. Purchase Price.............................................................................9 2.2 Payment of Purchase Price.................................................................10 2.3 Physical Inventory Adjustment.............................................................10 2.4 Closing Settlement........................................................................10 3. Representations and Warranties of the Seller.......................................................12 3.1. Capacity; Power...........................................................................12 3.2. Effect of Agreement.......................................................................13 3.3. Corporate Authorization...................................................................13 3.4. Absence of Certain Changes or Events......................................................13 3.5. Accounts..................................................................................14 3.6. Property/Purchased Assets.................................................................17 3.7. Condition and Sufficiency of Assets.......................................................16 3.8. Litigation, Etc...........................................................................16 3.9. Books and Records.........................................................................17 3.10. Affiliate Agreements; Guaranties..........................................................17 3.11. Employment and Pensions...................................................................17 3.12. Intellectual Property Assets..............................................................19 3.13. Computer Systems..........................................................................22 3.14. Insurance.................................................................................22 3.15. Licenses, Authorizations and Permits......................................................23 3.16. Compliance with Law.......................................................................23 3.17. Bribes....................................................................................24 3.18. No Commissions Due........................................................................23 3.19. Customers and Suppliers...................................................................23 3.20. No Untruths, Misstatements or Omissions...................................................24 3.21. Subsidiaries and Affiliates...............................................................24 3.22. Solvency..................................................................................24 3.23. Environmental Matters.....................................................................25 3.24. Assigned Contracts........................................................................26 3.25. Intentionally Omitted.....................................................................27 3.26. Product Warranty..........................................................................27 3.27. Product Liability.........................................................................27
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3.28. Contracts; No Defaults....................................................................28 3.29. No Other Warranties.......................................................................29 4. Representations and Warranties of the Buyer........................................................29 4.1. Corporate Authorization...................................................................29 4.2. Due Incorporation; Good Standing..........................................................30 4.3. Commissions...............................................................................30 4.4. No Conflict...............................................................................30 4.5. Financial Condition.......................................................................30 4.6. Litigation................................................................................30 4.7. Investigation and Evaluation..............................................................31 4.8. Forecasts and Projections.................................................................31 5. Certain Covenants and Agreements Prior to Closing..................................................31 5.1. Access to and Information Concerning Properties and Records, Etc.........................31 5.2. Conduct of Business by the Seller Pending the Closing Date................................31 5.3. Third Party Consents; Compliance..........................................................33 5.4. Customers and Suppliers...................................................................33 5.5. No Negotiations...........................................................................33 5.6. Notification..............................................................................33 5.7 Required Approvals........................................................................35 5.8. Agreements of the Parent and the Buyer....................................................34 6. Conditions Precedent to the Obligations of the Seller..............................................34 6.1. Accuracy of Representations and Warranties................................................35 6.2. Performance of Agreements.................................................................35 6.3. Additional Documents......................................................................35 6.4 No proceedings......................................................................... 6.5 Third Party Consents.................................................................. 7. Conditions Precedent to the Obligations of the Buyer...............................................36 7.1. Accuracy of Representations and Warranties................................................36 7.2. Performance of Agreements.................................................................36 7.3. Additional Documents......................................................................36 7.4. Further Instruments, Documents............................................................37 7.5. Keys, Etc.................................................................................37 7.6. No Adverse Change.........................................................................37 7.7. Books and Records.........................................................................37 7.8. Third Party Consents......................................................................37 7.9. No Casualty...............................................................................38 7.10. No Proceedings............................................................................38 7.11. Other Purchase Agreements.................................................................38 8. Survival of Representations and Warranties; Indemnification; Etc..................................38 8.1. Survival..................................................................................38
ii TABLE OF CONTENTS -----------------
8.2. Seller's Agreement to Indemnify.......................................................... 39 8.3. Buyer's Agreement to Indemnify ...........................................................40 8.4. Indemnification Procedures................................................................40 8.5. Basket and Limitations....................................................................42 8.6. Exclusive Remedy..........................................................................43 8.7. Indemnification Payments..................................................................43 8.8. Right of Set-Off..........................................................................43 8.9 Currenty Conversion.......................................................................43 9. Additional Covenants...............................................................................44 9.1. Covenants Regarding Post-Closing Activities...............................................44 9.2 Payments Received.........................................................................45 9.3 Employment Matters........................................................................45 9.4. Customer Rebates and Warranty Claims......................................................47 9.5. Non-warranty Product Returns..............................................................47 9.6 AquaSeal Warranty.........................................................................49 9.7. Removing Excluded Assets..................................................................50 9.8. Intentionally Deleted.....................................................................50 9.9. Retention of and Access to Records........................................................51 9.10. Change of Corporate Name..................................................................51 10. Termination, Waiver and Amendment..................................................................51 10.1. Termination Provisions....................................................................51 10.2. Effect of Termination.....................................................................52 10.3. Amendment.................................................................................52 10.4. Waiver 52 11. Miscellaneous......................................................................................52 11.1. Expenses..................................................................................52 11.2. Notices...................................................................................52 11.3. Entire Agreement..........................................................................54 11.4. Binding Effect and Benefit................................................................55 11.5. Assignability.............................................................................55 11.6. Severability..............................................................................56 11.7. Headings; Interpretation..................................................................56 11.8. Counterparts..............................................................................56 11.9. Governing Law.............................................................................56 11.10. Schedules.................................................................................56 11.11. Publicity.................................................................................57 11.12. Dispute Resolution........................................................................57 11.13. Definitions...............................................................................57 12(a). Hunt Guarantee.....................................................................................52 12(b) Neschen Guarantee..................................................................................52
iii TABLE OF CONTENTS -----------------
13. VAT ...............................................................................................52 14. Pensions ..........................................................................................52 15. Environmental......................................................................................60
iv AGREEMENT FOR PURCHASE OF ASSETS -------------------------------- THIS AGREEMENT, made and entered into the 7th day of October, 2001, by and among HUNT CORPORATION, a Pennsylvania corporation ("Guarantor"), HUNT GRAPHICS EUROPE LIMITED, a company incorporated in England and Wales with registered number 2467428 ("Seller") NESCHEN AG, a legal entity formed under the Federal Republic of Germany Corporation Law ( "Parent"), and SEAL GRAPHICS UK LIMITED, a company incorporated in England and Wales with registered number 4276307 ("Buyer"). WHEREAS, the Seller wishes to sell and the Buyer wishes to purchase certain assets of the Seller related to the Business (as hereinafter defined); and WHEREAS, the Seller wishes to assign to the Buyer, and the Buyer wishes to assume, certain existing contracts of the Seller identified in this Agreement; and WHEREAS, the Guarantor and the Parent intend to enter into other agreements for the purchase of certain assets of the Guarantor related to the Business located in the United States of America (the "US Sale Agreement") and the Netherlands (the "NL Sale Agreement") and to approve the purchase of the shares of Hunt Graphics Pacific Limited, a Hong Kong subsidiary of the Guarantor (the "Hong Kong Agreement") (collectively, the "Other Purchase Agreements") as of the date hereof and the closing of the sale contemplated by this Agreement is conditional upon the closing of such Other Purchase Agreements; WHEREAS, the Guarantor has agreed to enter into this Agreement to guarantee the obligations on the part of the Seller contained in this Agreement; and WHEREAS, the Parent has agreed to enter into this Agreement to guarantee the obligations on the part of the Buyer contained in this Agreement. W I T N E S S E T H: -------------------- In consideration of the mutual undertakings herein contained, the parties hereto hereby agree as follows: 1. Purchase and Sale 1.1. Sale of Business. Subject to the terms and conditions and based upon the representations, warranties and covenants of the parties set forth in this Agreement, at the Closing, the Seller shall as legal owner with full title guarantee, except as otherwise expressly provided herein, with effect from 11.59 pm on 30th September 2001 (Eastern Standard Time) (the "Effective Time") sell, assign, transfer and convey to the Buyer, and the Buyer shall buy from the Seller, all of the assets and rights of the Seller materially relating to the Business of every kind and 1 description wherever located on a going concern basis other than the Excluded Assets. For purposes of this Agreement, the term "Business" shall mean the graphics products business in England, as described in Schedule 1.1 to the Disclosure Letter, owned and operated by the Seller, which the Buyer intends to continue to conduct as a part of its own business with the assets to be purchased hereunder. 1.2. Purchased Assets The above-referenced assets and rights materially relating to the Business to be sold hereunder as of the Effective Time (as hereinafter defined) are generally described as follows: (a) all of the Seller's claims and rights under the contracts and leases (whether as lessee or lessor) relating to the Business including those enumerated on Schedule 1.2(a) to the Disclosure Letter (the "Assigned Contracts"); (b) all outstanding proposals to customers and customer orders relating to the Business at the Effective Time; (c) any and all goodwill, know-how, customers' and suppliers' lists, slogans, labels, trade secrets, all other trade rights, secret processes, advertising material, the Seller's technical information and any other intangible property relating primarily to the Business including the trademarks and patents and the telephone and fax numbers enumerated on Schedule 1.2(c) to the Disclosure Letter; (d) all of the Seller's equipment, tools, computers and computer software, telephone systems, trade fixtures, furniture and leasehold improvements relating to the Business, including those enumerated on Schedule 1.2(d) to the Disclosure Letter, with such changes in such items as shall occur in the Ordinary Course of Business between the Effective Time and the Closing; (e) all of the Seller's office supplies, together with any stationery, and business forms relating to the Business which do not bear the Seller's or the Guarantor's name and address; (f) all permits, licenses, franchises, consents, authorizations and similar instruments or acts relating to the Business to the extent they may lawfully be assigned or transferred as enumerated on Schedule 1.2(f) to the Disclosure Letter (the "Permits"); (g) all of the Seller's inventory and work in process relating to the Business at the Effective Time other than relating to the Excluded Business (the "Inventory"); (h) all books, records, forms and files relating to the operations of the Business or reflecting the operations thereof, but excluding therefrom the books of account and accounting records of the Seller relating to 2 the Business ("Books of Account") and records the Seller and the Buyer shall have joint access to pursuant to other provisions of this Agreement; (i) all property and casualty insurance benefits (other than product liability insurance benefits), including rights and proceeds, arising from or relating to the Purchased Assets (as hereinafter defined) or the Assumed Liabilities (as hereinafter defined) prior to the Effective Time; (j) all claims of the Seller against third parties relating to the Purchased Assets, whether known or unknown, contingent or noncontingent, including all such claims set forth on Schedule 1.2(k) to the Disclosure Letter; (k) all accounts receivable except as set out in Section 1.3(b). The Seller gives no warranty that the accounts receivable will be collectable and this is acknowledged by the Buyer. For convenience of reference, all the assets and rights to be transferred, conveyed and assigned to the Buyer in accordance with the provisions of this Section 1 are sometimes hereinafter collectively referred to as the "Purchased Assets". 1.3. Excluded Assets Notwithstanding anything to the contrary contained in Section 1.2 or elsewhere in this Agreement, the following assets of Seller (or, as the case may be, Aquabind) (collectively, the "Excluded Assets") are not part of the sale and purchase contemplated hereunder, are excluded from the Purchased Assets and shall remain the property of the Seller after the Closing: (a) all cash, cash equivalents and short-term investments existing at the Effective Time; (b) accounts receivable from affiliates of the Seller and accounts receivable relating to the Excluded Business (as defined in Section 1.3(i) below existing at the Effective Time and proceeds thereof); (c) the corporate names and corporate records of the Seller; (d) all claims for refund of taxes and other governmental charges of whatever nature at the Effective Time; (e) all rights of the Seller under this Agreement and the other agreements and instruments of the parties set forth in Section 1.7; (f) the properties, assets, rights and claims expressly set forth on Schedule 1.3(f) to the Disclosure Letter; (g) freehold land known as land to the east of Wollaston Way, Basildon, Essex as is registered with title absolute under title number EX649379 3 and leasehold land and buildings known as Unit 6, Scimitar Centre, Courtauld Road, Basildon, Essex registered with title absolute under title number EX463880 and the Seller's interest (if any) and Aquabind's interest in the freehold interest in land and buildings described as the Chester Property in Part A1(b) of Schedule 1.3(g) and the Seller's interest in the Wollaston Headlease as described in Part A1(a) of Schedule 1.3(g). (h) the Books of Account. (i) all right to sell foam board to Staples and sales of the X-ACTO product range (together "the Excluded Business"). 1.4. Assumed Liabilities As of the Closing Date, the Buyer shall assume and agree to discharge only the following liabilities of the Seller effective as of the Effective Time (the "Assumed Liabilities"): (a) any liability to the customers of the Business incurred by the Seller in the Ordinary Course of the Business for orders outstanding as of the Effective Time reflected on the Seller's books (other than any liability arising out of a breach that occurred prior to the Effective Time); (b) certain rebate obligations to customers of the Business with respect to invoices for sales of equipment, products and services dated after the Effective Time in accordance with Section 9.4(a) hereof; (c) bona fide warranty obligations, as described on Schedule 1.4(c) to the Disclosure Letter, for equipment and consumable products of the Business manufactured prior to the Effective Time, subject to the Seller's obligations set forth in Section 9.4(b) hereof; (d) any liability to the customers of the Business arising out of Non-warranty Returns of products of the Business after the Effective Time authorized either orally or in writing by the Buyer prior to or after the Effective Time in accordance with Section 9.5 hereof; (e) any liability arising after the Effective Time under the Assigned Contracts (other than any liability arising under the Assigned Contracts described on Schedule 1.4(e) to the Disclosure Letter or arising out of a breach that occurred prior to the Effective Time); (f) any liability of the Seller arising after the Effective Time under any Assigned Contract included in the Purchased Assets that is entered into by the Seller after the date hereof in accordance with the provisions of this Agreement (other than any liability arising out of a breach that occurred prior to the Effective Time). 4 1.5. Excluded Liabilities Such sale shall be made free and clear of, and the Seller shall remain liable for, all liabilities, obligations and encumbrances, business, legal or other, whether incurred or accrued as of the Effective Time or thereafter, whether known or unknown (collectively, the "Excluded Liabilities"), except the Assumed Liabilities that are being assigned and transferred to the Buyer as contemplated by Section 1.4 hereof and except as otherwise provided in Sections 9.4, 9.5 and 9.6 of this Agreement. Notwithstanding anything to the contrary contained herein, Excluded Liabilities shall include, without limitation, every liability of the Seller other than the Assumed Liabilities, including: (a) any liability arising out of or relating to products of the Seller to the extent manufactured or sold prior to the Effective Time other than to the extent assumed under Section 1.4; (b) certain obligations for customer rebates committed to either orally or in writing by the Seller with respect to invoices for sales of equipment, products and services dated prior to the Effective Time in accordance with Section 9.4(a) hereof; (c) certain liabilities to customers related to the Business incurred by the Seller under written warranty agreements in accordance with Section 9.4(b) hereof; (d) any liability of the Seller arising out of Non-warranty Returns of products authorized either orally or in writing by the Seller prior to the Effective Time in accordance with Section 9.5 hereof; (e) any liability under any Assigned Contract that arises prior to the Effective Time or that arises after the Effective Time but that arises out of or relates to any breach that occurred prior to the Effective Time; (f) any liability for taxes, including (A) any taxes arising as a result of the Seller's operation of the Business or ownership of the Purchased Assets prior to the Effective Time and (B) any taxes that will arise as a result of the sale of the Purchased Assets pursuant to this Agreement other than stamp duty which shall be paid in accordance with Section 11.1 and VAT which shall be paid in accordance with Section 13; (g) any liability under any contract not assumed by the Buyer under Section 1.4, including any liability arising out of or relating to the Seller's credit facilities or any security interest related thereto; (h) any liability under any Environmental Law (as defined in Section 3.23 hereof) arising out of or relating to: (a) the operation of the Business by the Seller prior to the Closing Date; or 5 (b) the Seller's or Aquabind's leasing, ownership or operation of the Properties (as defined in Section 3.6(a)) prior to either the Closing Date or the occupation by the Buyer of the Properties (whichever is the later); or (c) such actual liability as may be disclosed by a Phase 1a Assessment ("the First Audit") of the Properties to be carried out in accordance with Section 8 of Annex C of version 2 of the Environment Agency Guide for IPC Applicants dated December 2000 ("the report guidance") immediately after the Closing Date and which can be identified as having arisen prior to the Buyer's occupation and use of the Properties; or (d) any other liability not disclosed by the First Audit and not the liability of the Buyer pursuant to Section 15.1 which becomes apparent during or after the occupation by the Buyer of the Properties (as defined in Section 3.6(a)); (i) any liability arising out of or relating to the Seller's closing and/or vacating of any plant, factory, facility, office or other physical structure operated by the Seller in connection with the Business that is not being leased by, or whose lease is otherwise not being assumed by, the Buyer; (j) any liability of the Seller to any shareholder of the Seller or any related person or entity of the Seller or any shareholder of the Seller; (k) any liability to indemnify, reimburse or advance amounts to any officer, director, employee or agent of the Seller; (l) any liability to distribute to any of the Seller's shareholders or otherwise apply all or any part of the consideration received hereunder; (m) any liability arising out of any proceeding, action or suit pending as of the Effective Time; (n) any liability arising out of any proceeding, action or suit commenced after the Effective Time and arising out of or relating to any occurrence or event happening prior to the Effective Time; (o) any liability arising out of or resulting from the Seller's compliance or noncompliance with any law, ordinance, principle of common law, regulation or treaty or any order, injunction, judgment, decree, ruling or assessment or arbitration award of any governmental body or authority; (p) any liability of the Seller under this Agreement or any other document executed in connection with the transactions contemplated hereby and thereby; (q) except as otherwise specifically provided herein, any liability of the Seller for the action or omission of the Seller, its employees or agents in connection with services related to the Business performed by the Seller, its employees or agents prior to the Effective Time; 6 (r) subject to the provisions of paragraph 9 of Schedule 14 any liability arising out of or resulting from the fact that the Seller's Scheme (as defined in Schedule 14) is not fully funded at the Effective Time and any liability for a share of any debt on the employer that occurs in relation to the Seller's Scheme (as defined in Schedule 14) if the winding up process is commenced in relation to the Seller's Scheme prior to the Payment Date (as defined in Schedule 14); (s) any liability relating to the Excluded Business; (t) any liability relating to a leasing agreement for the car used by Derek Wotton; (u) any liability relating to any agreement between the Seller and any affiliate of the Seller or the Guarantor including distributorship agreements and inter-company accounts payable; The Seller shall indemnify and hold harmless the Buyer, and its shareholders, officers and directors in accordance with Section 8 hereof from and against all Excluded Liabilities. 1.6. Closing Date The closing of the transactions contemplated hereby (the "Closing") shall occur 9 October, 2001 (the "Closing Date"), unless this Agreement is terminated for failure of any condition set forth in Section 7 hereof to continue to be met satisfactorily as of or on said Closing Date. The Closing Date may be extended by mutual agreement of the parties hereto, provided that all conditions set forth in Section 7 continue to be satisfied, as of the new Closing Date, so extended. The Closing will take place at the offices of Maxwell Batley at 27 Chancery Lane London WC2A 1PA on the said Closing Date. The Closing shall be effective as of the Effective Time. The Seller shall be deemed to have operated the Business for the benefit of the Buyer during the period between the Effective Time and the Closing Date. 1.7. Closing Obligations In addition to any other documents to be delivered under other provisions of this Agreement, on the Closing Date: (a) The Buyer shall take possession from the Seller of and title to all of the Purchased Assets and the Seller shall deliver (or as the case may be) procure the delivery of to the Buyer: (i) assignments of all of the Purchased Assets that are intangible personal property in the form of Exhibit A, executed by the Seller; (ii) a sub-lease of leasehold land and buildings known as Unit 1, Watkins Close, Wollaston Way, Basildon, Essex as to which the Seller's reversionary title is registered with title absolute under title number 7 EX594560 ("the Wollaston Property") in the form of Exhibit B executed by the Seller in escrow pending formal consent of the superior landlord to the Wollaston Lease and the grant of a court order ("Wollaston Lease"); (iii) a lease of freehold land and buildings known as land and buildings on the east side of Chester Hall Lane, Pipps Hill Industrial Estate, Basildon, Essex as to which the Seller's reversionary title is registered with title absolute under title number EX533936 and land and buildings on the north side of Bentalls, Basildon, Essex registered with title absolute under title number EX311537 ("the Chester Property") in the form of Exhibit C executed by Aquabind Limited ("Aquabind") in escrow pending grant of a court order ("Chester Lease") (together with the Wollaston Lease "the Leases"); (iv) copies of the requisite consent in writing to the grant of the Wollaston Lease from the superior landlord PROVIDED THAT if such formal consent has not been issued in principle or executed and delivered by the reversioner of the Wollaston Lease by the Closing Date the provisions of Part B of Schedule 1.3(g) shall apply; (v) comfort letters from environmental bodies or evidence reasonably acceptable to the Buyer that permits will be transferred or new permits issued; (vi) such other deeds, assignments, documents and other instruments of transfer and conveyance as may reasonably be requested by the Buyer, each in form and substance satisfactory to the Buyer and the Seller and their respective legal counsel and executed by the Seller; (vii) a certified copy of the minutes of a meeting of the board of directors of the Seller approving the execution and delivery of this Agreement and other documents to be delivered at Closing; (viii) an opinion of Drinker Biddle & Reath LLP, dated the Closing Date, in the form of Exhibit D; (ix) court orders excluding the Leases from the provisions of Sections 24 to 28 of the Landlord and Tenant Act 1954 Part II PROVIDED THAT if such court orders are not available on the Closing Date or if the superior landlord of the Wollaston Lease requires amendment to the Wollaston Lease the provisions of Part C of Schedule 1.3(g) shall apply; (x) a side letter relating to repair of the Wollaston Property in escrow in the form of Exhibit E signed by the Seller. (b) The Buyer shall deliver to the Seller: (i) The payments to the extent specified in Section 2.2,; 8 (ii) the Wollaston Lease and the Chester Lease executed by the Buyer and the Parent (in the case of the Wollaston Lease) together with a signed letter relating to repair of the Wollaston Property signed by the Buyer in escrow in the same way as the Seller in the case of the Wollaston Lease together with an opinion letter from a German lawyer as to the capacity of the Parent for the reversioner, if available; (iii) an opinion of Abels , Decker, Kuhfuss & Partner, dated the Closing Date, in the form of Exhibit F; (c) a certified copy of the minutes of a meeting of the board of directors of the Buyer approving the execution and delivery of this Agreement and other documents to be delivered at Closing. (d) The documents enumerated in subsections (a), (b) and (c) above (other than the opinions of Counsel) are referred to collectively as the "Closing Documents". (e) The Buyer shall arrange for Employers Liability Insurance and Motor Insurance to be in force in respect of the Business on the Closing Date. 1.8. Further Assurances (a) The Seller shall, from time to time, at the Buyer's request and without further consideration, execute and deliver such instruments of transfer, conveyance and assignment in addition to those delivered pursuant to Section 1.7 including assignments of any or all of the Registered Marks and Patents listed in Schedule 3.12 to the Disclosure Letter, and take such other action, as may be reasonably necessary to transfer, convey to or assign more effectively to the Buyer, or to put the Buyer in possession of, any property being transferred, conveyed or assigned and delivered hereunder. (b) Further, the parties shall, from time to time, at the request of the other parties and without further consideration, take such actions as the other parties shall reasonably request in order to effect the purposes of this Agreement. 2. Purchase Price 2.1. Purchase Price Subject to the adjustments and apportionments hereinafter required in this Section 2 and subject to the terms of this Agreement and in reliance upon the warranties, representations and covenants of the Guarantor and the Seller contained herein, the Buyer shall pay the Seller, in full consideration for the Purchased Assets, (a) the sum of eight million eight hundred and ninety five thousand euros (8,895,000) (the "Fixed Amount") allocated among the Purchased Assets (other than inventory and accounts receivable) in the manner set forth in Schedule 2.1(a) to the Disclosure Letter; plus 9 (b) the sum of one million four hundred and thirty thousand six hundred and eighty five pounds sterling ((pound)1,430,685) (the "Baseline Inventory Amount"), subject to adjustment pursuant to Section 2.3; plus (c) the sum of eight hundred and seventy one thousand six hundred and twenty four pounds sterling ((pound)871,624) for the accounts receivable. 2.2. Payment of the Purchase Price The Purchase Price shall be payable as follows: (a) the Fixed Amount and the sum for the accounts receivable shall be paid at the Closing by wire transfer of immediately available funds to the Seller, said wire to be initiated by the Buyer on the Closing Date; and (b) two hundred and four thousand eight hundred and twenty pounds Sterling ((pound)204,820) of the amount to be paid for the Baseline Inventory Amount (the "Escrow Amount") shall be paid at the Closing by wire transfer delivery of immediately available funds to the Escrow Account (as defined in Schedule 14) which shall be operated in accordance with the terms set out in Schedule 14; (c) nine hundred and thirty nine thousand seven hundred and twenty eight pounds Sterling ((pound)939,728), being an amount equal to eighty percent (80%) of the Baseline Inventory Amount less the Escrow Amount, shall be paid at the Closing by wire transfer of immediately available funds to the Seller to be initiated by the Buyer on the Closing Date. The balance of the Baseline Inventory Amount (the "Inventory Holdback") shall be retained by the Buyer until released to the Seller in accordance with Section 2.3 hereof. 2.3. Physical Inventory Adjustment (a) A physical inventory or cycle counting, or a combination of the two, as the Buyer shall determine, of the Seller's Stock other than stock relating to the Excluded Business shall be performed by the Buyer and the Seller as of the Effective Time (the "Closing Inventory") within five (5) days after the Closing. The Closing Inventory shall be taken in accordance with the principles set forth on Schedule 2.3(a) to the Disclosure Letter (the "Inventory Evaluation Principles"). The Purchase Price shall be increased or decreased by the amount, if any, by which the amount of the inventory as so determined (the "Adjusted Inventory Amount") is greater than or less than the Baseline Inventory Amount. The resulting adjustment is called the "Inventory Adjustment". (b) If the Adjusted Inventory Amount is greater than the Baseline Inventory Amount, then such excess amount and the Inventory Holdback shall be paid within thirty (30) days of the Closing Date to the Seller by the Buyer, unless the Buyer delivers a Dispute Notice with regard to the Adjusted Inventory Amount to the Seller in accordance with this Section 2.3. 10 (c) If the Adjusted Inventory Amount is less than the Baseline Inventory Amount, then the Buyer shall offset the Inventory Holdback against any deficiency and either (i) the Buyer shall release to the Seller any Inventory Holdback in excess of such deficiency or (ii) the Seller shall pay to the Buyer any deficiency in excess of the Inventory Holdback. Any release or payment of funds pursuant to this subsection shall occur within thirty (30) days of the Closing Date unless the Seller delivers a Dispute Notice with regard to the Adjusted Inventory Amount to the Buyer in accordance with this Section 2.3. (d) In the event either the Buyer or the Seller deliver a Dispute Notice to the other party, an interim Adjusted Inventory Amount shall be paid to the appropriate party based upon average of the Seller's and the Buyer's Adjusted Inventory calculations within five (5) days after the delivery of such Dispute Notice with an adjustment to be made, if required, upon a final resolution of such dispute in accordance with this Section 3.3. (e) Any amount owed by either the Buyer or the Seller after a final resolution of a dispute in accordance with this Section 2.3 shall be paid to the appropriate party within five (5) business days after such final resolution. (f) In the event that the Buyer and the Seller do not agree upon the Adjusted Inventory Amount, then either party may deliver to the other party written notice (a "Dispute Notice") within fifteen (15) days following the Closing Date. Such Dispute Notice shall set forth in reasonable detail a description of the Dispute. Within ten (10) days after the delivery of any such Dispute Notice, the Buyer and the Seller shall meet at a mutually acceptable time and place and thereafter as often as such parties reasonably deem necessary and shall, in good faith, cooperate in an attempt to resolve such Dispute. (g) If any Dispute is not finally resolved within twenty (20) business days after the delivery of a Dispute Notice, as aforesaid, or if the parties shall fail to meet within ten (10) days after the delivery of any such Dispute Notice, then the Dispute shall be referred to a partner at Ernst & Young, London (the "Arbitrator") for resolution in accordance with the terms hereof (the "Arbitration"), and in any event as soon as practicable. (h) In the event that the Arbitrator referred to in (g) above is then unwilling or unable to serve as the Arbitrator, the President for the time being of the Institute of Chartered Accountants for England and Wales shall select another nationally recognized firm of accountants to serve as the Arbitrator. (i) The Arbitrator shall hold a hearing within thirty (30) days of the submission of the Dispute for arbitration (the "Hearing") and shall render a decision within thirty (30) days of the conclusion of such hearing. Each party hereto may file with the Arbitrator such briefs, affidavits and supporting documents as they deem appropriate. 11 (j) The Arbitrator shall only be authorized on any one issue to decide in favor of and choose the position of either of the parties hereto or to decide upon a compromise position between the ranges presented by the parties to such arbitration. (k) The Arbitrator's decision regarding its final resolution of any Dispute (the "Decision") shall be in writing, shall set forth the calculations made in reaching its decision, shall describe the manner in which such calculations were made and shall include a representation that the manner so used was in accordance with the Inventory Evaluation Principles. The Decision shall specifically set forth the amount of any adjustment required to be made to the Purchase Price pursuant to Section 2.3(a). (l) Any such Arbitration shall take place in London unless the parties shall mutually agree on another location. The Arbitration shall be governed by the Arbitration Act 1996 and judgment upon the award of the Arbitrator may be entered by any court having jurisdiction thereof. (m) The fees and expenses of the Arbitrator shall be shared equally by the Buyer and the Seller. Upon the request of the Arbitrator, each party hereto agrees to enter into an arbitration agreement providing reasonable protection to the Arbitrator, in such form as may be mutually acceptable to the Arbitrator and the parties hereto. 2.4. Closing Settlement (a) All amounts of a periodical nature including payments under or pursuant to the Assigned Contracts, permits, prepaids, accrued salary costs and other items which are payable or receivable in respect of the Business set forth on Schedule 2.4 to the Disclosure Letter relating to a period of time both prior to and after the Effective Time has been apportioned between the Buyer, on the one hand, and the Seller, on the other hand, as of the Effective Time. The parties agree to settle amounts due regarding such apportionment at the Closing. (b) The amount to be paid by the Buyer pursuant to this Section 2.4 shall be paid to the Seller within seven days of agreement. 3. Representations and Warranties of the Seller The Seller hereby represents and warrants to the Buyer as follows: (The parties agree that each disclosure set forth in the disclosure letter of even date herewith from the Seller and the Guarantor to the Buyer (the "Disclosure Letter") with respect to a specific section of this Section 3 shall not constitute a disclosure with respect to any other specific section of this Section 3 unless specifically cross referenced therein.) 3.1. Capacity; Power The Seller is duly incorporated and validly existing under the laws of England and has all requisite power to own, lease and operate its properties and to carry on the Business as currently conducted by the Seller. A true and correct copy of the Memorandum and Articles of Association of the Seller as in 12 effect on the date hereof has been delivered to the Buyer. The Seller is not, either actually or potentially, in violation of any provision of its Memorandum and Articles of Association which violation would adversely affect the Seller's ability to consummate the transactions contemplated hereby or the Business, the Purchased Assets or the Assumed Liabilities. 3.2. Effect of Agreement Except as set forth on Schedule 3.2 of the Disclosure Letter, the execution, delivery and performance of this Agreement and the Closing Documents by the Guarantor and the Seller, with or without the giving of notice and/or the passage of time, will not: (a) violate any provision of law applicable to the Guarantor or the Seller; (b) conflict with, result in the breach or termination of any provision of, or constitute a default under the Guarantor's charters or by-laws or the Seller's Memorandum and Articles of Association or any indenture, mortgage, note, deed of trust, license, permit, lease, obligation or other agreement or instrument to which the Guarantor or the Seller is a party or by which the Seller or any of the Purchased Assets of the Seller may be bound; (c) accelerate or permit the acceleration of any performance of any duty or obligation or the payment of any indebtedness required of the Guarantor or the Seller; (d) result in the creation of any lien, charge or encumbrance upon any of the property or assets of the Seller (e) violate any order, ruling, writ, injunction or decree of any court, administrative agency or governmental body which violation would adversely affect the Guarantor's or the Seller's ability to consummate the transactions contemplated hereby or the Business, the Purchased Assets or Assumed Liabilities; or (f) be an event which would permit any party to terminate any agreement relating to the Business. 3.3. Corporate Authorization This Agreement, the Closing Documents to which the Guarantor and the Seller are parties, and the consummation of the transactions contemplated hereby and thereby have been duly authorized and approved by the boards of Directors and, to the extent required, the shareholders, of the Guarantor and the Seller, and this Agreement and such Closing Documents, have been duly executed and delivered on behalf of each of the Guarantor and the Seller. This Agreement and the other Closing Documents to which the Guarantor and the Seller are parties, when duly executed by the Guarantor and the Seller and delivered by all the parties hereto or thereto, as the case may be, will be the legal, valid and binding obligations of the Guarantor and the Seller, as the case may be, enforceable in accordance with their respective terms except to the extent that such enforcement may be subject to applicable bankruptcy, insolvency, reorganisation, moratorium or other similar laws, now or hereafter in effect relating to creditors, rights and remedies generally and to general principles of equity (regardless of whether considered in a proceeding in equity or an action at law). 3.4. Absence of Certain Changes or Events Since December 3, 2000, the Business has been operated in the Ordinary Course of Business and the Seller has used its reasonable efforts to preserve 13 the goodwill of the person or entity (a "Person") or Persons with whom or which it has business relationships in connection with the Business and the Seller has not: (a) incurred any obligation or liability relating to the Business (fixed or contingent) except in the Ordinary Course of Business; (b) mortgaged, pledged or subjected to lien, charge, security interest or to any other encumbrance (other than Permitted Encumbrances as defined in Section 3.6) any of its assets relating to the Business; (c) transferred, leased or otherwise disposed of any of its assets or properties relating to the Business except in the Ordinary Course of Business; (d) canceled or compromised any debt or claim relating to the Business except in the Ordinary Course of Business; (e) except as set forth on Schedule 3.4(e) to the Disclosure Letter waived or released any rights of any material value relating to the Business; (f) transferred or granted any rights under any patent application, lease, license, agreement, letter of patent, invention, trademark, trade name or copyright relating to the Business; (g) suffered any damage, destruction or loss in excess of (pound)35,000 with respect to the Business, whether or not such damage, destruction or loss shall have been insured against; (h) except as set forth on Schedule 3.4(h) to the Disclosure Letter suffered any other material adverse change in the financial condition of the Business except such changes as are related to the general economic or market conditions; (i) made or entered into any contract or commitment to make any capital expenditure relating to the Business in excess of(pound)35,000; (j) changed any significant method of accounting or accounting practice relating to the Business; (k) made or granted any general wage or salary increase or entered into any employment contract with any Employee of the Business earning in excess of (pound)35,000 per annum except as set forth in Schedule 3.4(k); or (l) entered into any transaction relating to the Business other than in the ordinary course in excess of (pound)35,000. 3.5. Accounts (a) The audited balance sheet of the Seller as at 3 December 2000 ("Accounting Date") and the audited profit and loss account of the Seller 14 for the financial year of the Seller ended on the Accounting Date and the directors' report and other documents annexed thereto ("the Accounts") disclosed in Schedule 3.5 to the Disclosure Letter comply with the requirements of the Companies Acts 1985 and 1989 and statutory instruments in force at the time of their preparation and other applicable statutes and regulations and (save as disclosed in the Accounts or in any note thereto) with generally accepted UK accounting principles and practices. Without prejudice to the generality of the foregoing: (i) the balance sheet contained therein gives a true and fair view of the state of affairs of the Seller at the Accounting Date; (ii) the profit and loss account contained therein gives a true and fair view of the profit of the Seller and of the nature and progress of the business of the Seller during the financial period to which it relates. (b) The management accounts of the Seller for the period from the Accounting Date to 3 June 2001 disclosed in Section 3.5 to the Disclosure Letter have been prepared in accordance with US GAAP and give a materially accurate view of the financial position of the Seller as at the end of the period to which they relate having regard to the nature of management accounts. 3.6. Properties/Purchased Assets (a) Part A1 of Schedule 1.3(g) specifies all land and buildings owned, used or occupied by the Seller (or in the case of the Chester Property, Aquabind) for the purposes of the Business whether freehold or leasehold or of any other tenure and situated in England and Wales (being the Wollaston Property and the Chester Property ("the Properties")) and Part A2 of the said Schedule specifies all the rights vested in the Seller and in the case of the Chester Property, Aquabind relating to the Excluded Properties not the subject of this agreement and: (b) all deeds and other documents necessary to establish title to each of the Properties are in the possession of or held to the order of the Seller or Aquabind as the case may be; (c) save as disclosed in the Disclosure Letter, replies to enquiries, replies contained in correspondence passing between the Seller's legal counsel and the Buyer's legal counsel there are no rights, interests, covenants, restrictions, reservations, licences or easements or any disputes or outstanding notices (whether given by a lessor, a local authority or any other person) or in the case of the Wollaston Headlease (as defined in Schedule 1.3(g)) rights for the lessor to break the term or (without prejudice to the generality of the foregoing) any other matters or things which would materially adversely affect the proper use and enjoyment of the Properties for the purpose of the business now being carried on or at the Properties by the Seller; (d) all covenants, restrictions and obligations (whether statutory or otherwise) affecting all or any part of the Properties disclosed in the Disclosure Letter or in replies to enquiries or in documents supplied to the Buyer's legal counsel have been complied with in all material respects and will 15 pending Closing continue to be save as revealed in the Disclosure Letter and replies to enquiries and (without prejudice to the generality of the foregoing) all outgoings in relation to the Properties have been paid to date and in the case of the Wollaston Headlease (but without prejudice to the generality of the foregoing) all rents have been paid to date and no notice of any alleged breach of any of the terms of documents set out in Part D of Schedule 1.3(g) to this Agreement or the Wollaston Headlease has been served on the Seller and the last demands (or receipts if received) for rents under the Wollaston Headlease are unqualified and the Wollaston Headlease remains in full force and effect and the Seller has experienced no problems in exercising rights of way to the highway of Chester Hall Lane; (e) the Seller has had no notice of any breach in respect of the carrying on of the Business at the Properties in breach of any provision of planning law or any statute or statutory instrument relating thereto. (f) excluding the Properties the Seller has good and marketable title or a valid, binding, leasehold interest in all of the other assets (real and personal) which are necessary to conduct the Business as conducted by the Seller prior to the date of this Agreement free and clear of all liens, claims and encumbrances other than Permitted Encumbrances. Excluding the Properties on the Closing Date, the Seller will transfer to the Buyer good and marketable title to, or a valid and binding leasehold interest in, the Purchased Assets, free and clear of all liens, encumbrances, mortgages, pledges and adverse claims other than Permitted Encumbrances. All of the tangible assets will be located at the Properties. As used herein "Permitted Encumbrances" means liens set out in Schedule 3.6 to the Disclosure Letter. 3.7. Condition and Sufficiency of Assets Except as set forth in Schedule 3.7 to the Disclosure Letter the Purchased Assets described in Section 1.2, (i) meet the current needs of the Seller in connection with the Business, (ii) are satisfactory (together with the assets and/or shares of subsidiaries of the Guarantor to be simultaneously acquired by affiliates of the Parent) for the needs of the Business as currently conducted by the Seller and (iii) except as set forth in Schedule 3.7 at the Closing Date, will be undamaged, in proper repair and working order and reasonably suitable for the uses for which intended. 3.8. Litigation, Etc. Except as set forth on Schedule 3.8 to the Disclosure Letter, there is no lawsuit, arbitration, action, claim, investigation or administrative proceeding or governmental investigation by any Person pending against the Seller in any court or before any state, municipal or other governmental agency or instrumentality or non-governmental body or to the Knowledge of the Seller threatened against or affecting the Seller's properties or assets or the Business, or the Seller's directors or officers which, if adversely determined against them or the Business, as the case may be, could reasonably be expected to adversely affect the financial condition, business, assets or liabilities of 16 the Business, and the Seller has no knowledge that there is any basis or ground for any such suit, action, claim, investigation or proceeding. 3.9. Books and Records The books and records of the Seller relating to the Business are in all material respects complete and correct and have been maintained in accordance with good business practice. 3.10. Affiliate Agreements; Guaranties No employee, officer or director has any direct or indirect interest beneficially or legally (other than by way of his status as a shareholder, employee, officer or director of the Seller or the Guarantor) in, or is a party to, any lease, agreement, or other obligation of any kind relating to the Business to which the Seller is also a party, nor any of the material assets, real or personal, used by the Seller in the Business. 3.11. Employment and Pensions (a) The employees whose names are set forth in Schedule 3.11 to the Disclosure Letter ("Employees") are the only employees of the Business, and full and accurate details of the terms and conditions of their employment including the date of commencement of their continuous period of employment and all the terms of their employment (including any arrangements or assurances, whether or not having the force of law as to the future variations, whether or not having retrospective effect) are set out in Schedule 3.11 to the Disclosure Letter and none of the Employees is under notice of termination of employment and no compensation or gratuitous payment of any kind has been made or promised by the Seller in connection with the actual or proposed termination or suspension of employment or variation of any contract of employment of any of the Employees. (b) No dispute exists between the Seller and a material number or category of its employees nor are there any present circumstances known to the Seller which are likely to give rise to any such dispute nor is there any contract, agreement or arrangement whether legally binding or otherwise between the Seller and any trade union or other body or organisation representing any employees of the Seller. (c) No undertaking or assurances (whether or not having the force of law) have been given to any of the Employees as to the continuance or introduction or increase or improvement of any pension rights or entitlements or as to redundancy payments (or any right or entitlement thereto) in excess of the statutory minimum payment or as to any other terms or conditions of employment which in any such case the Buyer would be required to implement in accordance with good industrial relations practice and whether or not there is any legal obligation so to do. (d) The Seller has in relation to each of the Employees complied with: 17 (i) all obligations imposed on it by all statutes, regulations and codes of conduct and practice relating to or affecting the employment of the Employees or in relation to any trade union and has maintained current, adequate and suitable records regarding the service and terms and conditions of employment of each of the Employees; (ii) all collective agreements, recognition agreements and customs and practices for the time being dealing with such relations or the conditions of service of the Employees; and (iii) all relevant orders, awards and recommendations made under any relevant statute, regulation or code of conduct and practice affecting the conditions of service or otherwise in relation to the Employees. (e) Within the period of one year ending on the date hereof the Seller: (i) has not given notice of any redundancies to the Secretary of State or started consultations with any independent trade union or unions under the provisions of Section 188 of the Trade Union and Labour Relations (Consolidation) Act 1992; and (ii) has not been a party to any relevant transfer as defined in the Transfer of Undertakings (Protection of Employment) Regulations 1981 and any subsequent re-enactment or modification thereof ("Transfer Regulations") nor has the Seller failed to comply with any duty to inform and consult any independent trade union under the said Transfer Regulations. (f) Material particulars, including where appropriate copies of all trust deeds and rules together with copies of all amending deeds and resolutions, of all plans, schemes, or arrangements in relation to death, disability or retirement for or in respect of the Employees as well as any obligations which cover death, disability or retirement for or in respect of the Employees which the Seller is currently making, or may become liable to make, have been disclosed and no death, disability or retirement gratuity is currently being paid or has been promised by the Seller to or in respect of any of the Employees. (g) Material particulars of the basis on which the Seller makes, or is liable to make, contributions to any of the plans, schemes or arrangements referred to in paragraph (f) hereof have been disclosed in writing to the Buyer. (h) All contributions which are payable by the Seller in respect of any of the plans, schemes or arrangements referred to in paragraph (f) hereof and all contributions due from the Business's Employees as members of such plans, schemes or arrangements have been duly made at the date hereof and the Seller has substantially fulfilled all its obligations thereunder at the date hereof. 18 (i) Save as disclosed in the Disclosure Letter and in respect of any such plan, scheme or arrangement so disclosed:- (a) liabilities for benefits accrued in respect of service completed at the date hereof are fully secured on the MFR basis taking account of salaries to the date of leaving and statutory increases to normal retirement date and increases in pensions on the basis of realistic actuarial and financial assumptions and the obligations imposed on such a plan, scheme or arrangement as a result of Barber -v- Guardian Royal Exchange; (b) any such plans, schemes or arrangements are exempt approved schemes and/or retirement annuities approved, or capable of being approved, under the Income and Corporation Taxes Act 1988 ("Taxes Act") and the Seller is not aware at the date hereof of any material reasons why any such approval could be withdrawn; (c) all plans, schemes or arrangements have been substantially administered in accordance with the preservation requirements within the meaning of section 63 of the Social Security Act 1973, the equal access requirements of Part IV of the Society Security Pensions Act 1975, the contracting-out requirements of Part III of the Social Security Pensions Act 1975 and substantially in accordance with the trusts, powers and provisions of such plans, schemes or arrangements; (d) no undertakings or assurances have been given to any Employee as to the continuance or introduction or increase or improvement of any pension rights or entitlements which any Employee and/or Buyer would be required to implement in accordance with good industrial relations' practice and whether or not there is any legal obligation so to do; (e) no power to augment benefits has been exercised subsequent to 1st October 2000; (f) no discretion has been exercised to admit to membership a present or former director or employee who would not otherwise be eligible for admission to membership; (g) no discretion has been exercised to provide in respect of a member a benefit which would not otherwise be provided; and (h) all benefits (other than a refund of contributions with interest where appropriate) payable on the death of a member while in service to which such plan, scheme or arrangement relates, or during a period of sickness or disability of a member, are, at the date hereof, fully insured under a policy effected with an insurance company to which the Insurance Companies Act 1982 applies. 19 3.12. Intellectual Property Assets (a) The term "Intellectual Property Assets" means the intellectual property owned or licensed (as licensor or licensee) by the Seller relating to the Business (other than Excluded Assets) in which the Seller has a proprietary interest, set forth below: (i) the trade names, registered trademarks ("Registered Marks") and unregistered trademarks, service marks and applications relating to the Business (collectively, "Marks") listed in Schedule 3.12(a)(i) to the Disclosure Letter; (ii) the registered patents, patent applications and inventions and discoveries that may be patentable relating to the Business (collectively, "Patents") listed in Schedule 3.12(a)(ii) to the Disclosure Letter; (iii) the copyrights in both published works and unpublished works relating to the Business (collectively, "Copyrights"); (iv) all proprietary know-how, trade secrets, and confidential information, customer lists, software, technical information, data, process technology, plans, drawings and blue prints relating to the Business (collectively, "Trade Secrets"); (v) all rights, if any, in internet web sites and internet domain names presently used by the Seller in connection with the Business listed in Schedule 3.12(a)(v) to the Disclosure Letter (collectively "Net Names"). (b) Schedule 3.12(b) to the Disclosure Letter contains a complete and accurate list and summary description, including any royalties paid or received by the Seller, and the Seller has delivered to the Buyer accurate and complete copies, of all the Seller's written contracts and agreements relating to the Intellectual Property Assets, except for any license implied by the sale of a product and perpetual, paid-up licenses for commonly available software programs with a value of less than (pound)7,000 under which the Seller is the licensee. There are no outstanding and, to the Seller's Knowledge, no threatened disputes or disagreements with respect to any such contract or agreement. (c) Except as set forth in Schedule 3.12(c) to the Disclosure Letter the Intellectual Property Assets are all those necessary for the operation of the Business in all material respects as it is currently conducted. The Seller is the owner or licensee of all right, title and interest in and to each of the Intellectual Property Assets, free and clear of all encumbrances, and has the right to transfer or use without payment to a third party all of the Intellectual Property Assets, other than as set forth in Schedule 3.12(c). (i) Except as set forth in Schedule 3.12(c) to the Disclosure Letter all current employees and to the Seller's Knowledge former employees of the Seller have executed written contracts or agreements with the Seller that assign to the Seller all rights to any inventions, improvements, discoveries or information relating to the Business. 20 (d) Except as set forth Schedule 3.12(d) to the Disclosure Letter: (i) All of the issued Patents are currently in compliance with formal legal requirements (including payment of filing, examination and maintenance fees and proofs of working or use), are valid and, to the Seller's Knowledge, enforceable, and are not subject to any patent office deadlines for the payment of fees or the taking of steps falling due within ninety (90) days after the Closing Date. (ii) No Patent has been or is now involved in any interference, reissue, reexamination, or opposition proceeding. To the Seller's Knowledge, there is no potentially interfering patent or patent application of any third party. (iii) To the Seller's Knowledge no Patent is infringed or, has been challenged or threatened in any way and none of the products manufactured or sold, nor any process or know-how used, by the Seller infringes or to the Seller's knowledge is alleged to infringe any patent or other proprietary right of any other Person. (iv) All products made, offered for sale or sold under the Patents have been marked with the proper patent notice. (e) Except as set forth in Schedule 3.12(e) to the Disclosure Letter: (i) All Registered Marks have been registered with the United Kingdom Patent and Trademark Office, are currently in compliance with all formal legal requirements are valid and, to the Seller's Knowledge, enforceable and are not subject to any trade mark registry deadlines for the payment of fees or the taking of steps, falling due within ninety (90) days after the Closing Date. (ii) No Registered Mark has been or is now involved in any opposition, invalidation or cancellation proceeding and, to the Seller's Knowledge, no such action is threatened with respect to any of the Marks. (iii) To the Seller's Knowledge, there is no potentially interfering trademark or trademark application of any other Person. (iv) To the Seller's Knowledge no Registered Mark is infringed or has been challenged or threatened in any way. None of the Marks used by the Seller infringes or to the Knowledge of the Seller is alleged to infringe any trade name, trademark or service mark of any other Person. (v) All products and materials containing a Registered Mark bear the proper notice where permitted by law. (f) Except as set forth in Schedule 3.12(f) to the Disclosure Letter: 21 (i) To the Seller's Knowledge no Copyright is infringed or has been challenged or threatened in any way. None of the subject matter of any of the Copyrights infringes or to the Seller's knowledge, is alleged to infringe any copyright of any third party or is a derivative work based upon the work of any other Person. (g) With respect to each Trade Secret material to the Business, the documentation relating to such Trade Secret is current, accurate and reasonably sufficient in detail and content to identify and explain it and to allow its full and proper use without reliance on the knowledge or memory of any individual. (i) The Seller has taken all reasonable precautions to protect the secrecy, confidentiality and value of all Trade Secrets material to the Business (including the enforcement by the Seller of a policy requiring each employee and to the Seller's Knowledge former employees or contractor to execute proprietary information and confidentiality agreements substantially in the Seller's standard form, and all current and former employees of the Seller has executed such an agreement). (ii) The Seller has good title to and an absolute right to use the Trade Secrets owned by it and the right to use any such Trade Secrets licensed to it, subject to the terms of any such licensing agreement. The Trade Secrets material to the Business to the Seller's Knowledge are not part of the public knowledge or literature and have not been used, divulged or appropriated either for the benefit of any Person (other than the Seller) or to the detriment of the Seller. No Trade Secret is subject to any adverse claim or to the Seller's Knowledge has been challenged or threatened in any way or infringes any intellectual property right of any other Person. (h) The Seller has no proprietary interest in any Net Names. 3.13. Computer Systems Schedule 3.13 to the Disclosure Letter identifies (i) all of the software and computer databases (collectively, the "Computer Systems") that are material to the conduct of the Business by the Seller and used by the Seller in the conduct of the Business, (ii) whether such Computer Systems are owned or licensed by the Seller and, (iii) if licensed, the name of such licensor. The Seller has all legal right to use the Computer Systems as they are currently being used, and except as set forth in Schedule 3.13 to the Disclosure Letter, the Buyer will continue to have the legal right to use the Computer Systems in this manner following the consummation of the transactions contemplated herein. The use of the Computer Systems owned by the Seller does not, and to the Seller's Knowledge the use of the Computer Systems licensed to the Seller does not, infringe upon the rights of any other Person, nor has the Seller received any notice of a claim of such infringement. Except as set forth in Schedule 3.13 to the Disclosure Letter there are no licenses, sublicenses or other agreements relating to the use of the Computer Systems by the Seller or third parties. 22 3.14. Insurance The Seller maintains such insurance policies in such amounts of coverage relating to the Business and related assets as are reasonably adequate with respect to all risks usually insured against in connection with the operation of businesses similar to the Business. 3.15. Licenses, Authorizations and Permits The Seller has all licenses, authorizations and permits which are required to conduct the Business as now conducted and to use the other Purchased Assets, all of which are listed on Schedule 3.15 to the Disclosure Letter. The Seller is not in violation or default under any such license, authorization or permit. The Seller knows of no reason why any of the same should not be renewed upon expiration upon substantially the same terms as presently applicable. 3.16. Compliance with Law The Seller has complied with all laws, orders, rules and regulations of the United Kingdom or elsewhere relating to the Purchased Assets or the operation or conduct of the Business. The Seller is in full compliance with all health and safety laws. The Seller has not in relation to the Business acted or engaged in any transaction otherwise than within the powers and in accordance with the provisions of its memorandum and articles of association. 3.17. Bribes No officer agent or employee of the Seller has paid any bribe or used any of the Purchased Assets unlawfully to obtain any advantage for any person. 3.18. No Commissions Due Except as set forth on Schedule 3.2 to the Disclosure Letter the Seller has not entered into any contract with, or made any representations to, any Person, firm or corporation, including but not limited to any finder, agent, broker or investment banker, providing for any finder's or brokerage fee or other commission to be paid by the Seller or the Buyer in connection with or related to this Agreement or the transactions herein contemplated. 3.19. Customers and Suppliers Schedule 3.19 to the Disclosure Letter contains (a) a list of all written agreements and oral agreements with any customer of, or supplier to, the Business, including any arrangement for financing or assisting in the financing of such agreements, (b) a list of all of the customers of the Business who in the most recently completed full financial year and/or the first half of the current financial year accounted individually for more than 5% of the Seller's sales of products or services relating to the Business, and (c) a list of all suppliers to the Seller who in the most recent full financial year and/or the first half of the current financial year accounted individually for more than 10% of the Seller's purchases of goods and/or services relating to the 23 Business. The Seller's relationship with significant customers of and suppliers to the Business is good, and to the Knowledge of the Seller there is no intention of any such customer or supplier to terminate or modify any of such relationships. 3.20. No Untruths, Misstatements or Omissions (a) No representation or warranty by, or information furnished by the Seller contained in this Agreement or the Disclosure Letter contains or will contain any untrue statement or misstatement of a material fact or intentionally omits or will omit any statement of a material fact necessary to make the statements of fact contained herein or therein not misleading. 3.21. Subsidiaries and Affiliates The Guarantor and the Seller (a) have no legal or equitable interest in any other company, partnership or business enterprise other than the subsidiaries of the Guarantor that owns or operates any assets related to the Business; and (b) have no contract or agreement for the purchase of a legal or equitable interest in any other corporation, company, partnership or business enterprise that would own or operate any assets related to the Business. 3.22. Solvency (a) The Guarantor and the Seller are not now insolvent and will not be rendered insolvent by any of the transactions contemplated by this Agreement. As used in this section, "insolvent" means that the sum of the debts and other probable liabilities of the Guarantor and the Seller exceed the present fair saleable value of the Guarantor's and the Seller's assets. (b) Immediately after giving effect to the consummation of the transactions contemplated by this Agreement: (i) the Guarantor and the Seller will be able to pay their liabilities as they become due in the usual course of their respective business; (ii) the Guarantor and the Seller will not have unreasonably small capital with which to conduct their present or proposed business; (iii) the Guarantor and the Seller will have assets (calculated at fair market value) that exceed their liabilities; and (iv) taking into account all pending and, to the Knowledge of the Guarantor and the Seller, threatened litigation, final judgments against the Guarantor and the Seller in actions for money damages are not reasonably anticipated to be rendered at a time when, or in amounts such that, the Guarantor and the Seller will be unable to satisfy any such judgments promptly in accordance with their terms (taking into account the maximum probable amount of such judgments in any such actions and the earliest reasonable time at which such judgments might be rendered) as well as all other obligations of the Guarantor and the Seller. The cash available to the Guarantor and the Seller, after taking into account all other anticipated uses of the cash, will be sufficient to pay all such debts and judgments promptly in accordance with their terms. (c) The Seller has not been a party to any transaction in respect of the Purchased Assets which could be avoided in a winding up. 24 3.23. Environmental Matters (a) Except as set forth in Schedule 3.23 to the Disclosure Letter, the Seller is and always has been in compliance with all applicable Environmental Laws with respect to the Business which compliance includes, but is not limited to, the possession by the Seller of all Environmental Permits and other governmental authorizations and approvals required with respect to the Business under all Environmental Laws, and compliance with the terms and conditions thereof, and the proper handling and disposal of all Hazardous Materials. (b) Except as set forth in Schedule 3.23 to the Disclosure Letter, there is no Environmental Claim related to the Business pending or to the Seller's Knowledge threatened against the Seller or pending or threatened against the Seller. (c) Except as set forth in Schedule 3.23 to the Disclosure Letter, there are no past or present actions, activities, circumstances, conditions, events or incidents related to the Business, including, without limitation, the handling, manufacture, treatment, storage, use, generation, release, emission, discharge, presence or disposal of any Hazardous Materials related to the Business that could reasonably be expected to form the basis of any Environmental Claim related to the Business against the Seller. (d) Without in any way limiting the generality of the foregoing: except as set forth in Schedule 3.23 to the Disclosure Letter, there is no asbestos contained in, on, or forming part of any land, building, building component, equipment, structure or office space related to the Business in or on the Properties which asbestos is friable, deteriorating or in need of removal or replacement for the purpose of protecting human health or the environment. (e) Except as set forth in Schedule 3.23 to the Disclosure Letter, the Seller has not engaged in or permitted any release, discharge, dumping or disposal of any Hazardous Materials on, in, under or about any land, building, building component, equipment, structure or office space related to the Business in or on the Properties other than in compliance with applicable Environmental Laws. (f) The sale of the Purchased Assets does not require the advance notice to or prior approval, consent or permission of any federal, state or local agency, board, body or official pursuant to Environmental Law. (g) Except as set forth on Schedule 3.23 to the Disclosure Letter, the Seller has not formerly and does not now own, control, or operate any above ground or below ground storage tanks for the storage of Hazardous Materials in or on the Properties, or engages in any activity related to the Business which requires an Environmental Permit. The Seller has delivered to the Buyer accurate and complete copies of all reports, audits or assessments ever received by the Seller related to the Business regarding Hazardous Materials in or on the Properties. (h) For purposes of this Section 3.23 the following terms shall have the meanings ascribed to them below: 25 (i) "Environmental Claim" shall mean any notice of violation, fines, penalties, action, claim, Lien, demand, abatement or other writ, judgment, decree, suit, proceeding, injunction, or similar order or direction (conditional or otherwise) by any governmental or quasi-governmental authority or any Person for or relating to personal injury (including sickness, disease, or death), tangible or intangible property damage, damage to or other adverse effect on the environment (including natural resources), nuisance, pollution, or contamination, if resulting from or based upon (i) the a Release of, or exposure to, any Hazardous Material in, into, or onto the environment (including without limitation the air, soil, surface water, or ground water) at, in, by, from, or related to the Properties the subject of the Leases; (ii) the environmental aspects of the transportation, storage, treatment, or disposal of Hazardous Materials generated by the Business; or (iii) the violation or alleged violation of any Environmental Laws or any order or Environmental Permits of or from any governmental authority relating to the Business at the Properties the subject of the Leases. (ii) "Environmental Law" shall mean any Law relating to the protection of the environment or to protecting public health and safety, including without limitation to common law, nuisance, The Public Health Acts, The Control of Pollution Act 1974, The Health and Safety at Work etc Act 1974, The Water Act 1989, The Water Resources Act 1991, The Water Industry Act 1991, The Statutory Water Companies Act 1991, The Land Drainage Act 1991, The Water Consolidation (Consequential Provisions) Act 1991, The Environmental Protection Act 1990 as such Laws are amended or supplemented at the Closing Date, and the regulations promulgated thereto, and all codes of practice issued thereunder or in connection therewith in effect prior to or at the Closing Date. (iii) "Environmental Lien" shall mean any Lien in favor of any governmental entity for Environmental Claims or Remedial Actions. (iv) "Environmental Permit" shall mean any permit, approval, authorization, licence variance, registration, or permission required under any Environmental Laws. (v) "Hazardous Materials" shall mean any chemical, substance, material, or waste which is regulated by any local governmental authority, or by the UK government, including without limitation (a) petroleum, petroleum products, asbestos, urea formaldehyde foam insulation, polychlorinated biphenyls, flammable substances, explosives, and radioactive materials, (b) any other material or substance which is defined, now or at closing, as a "hazardous material," "hazardous substance," "extremely hazardous waste," "restricted hazardous waste," "pollutant," or "toxic substance" under any provision of Environmental Law, and (c) any other chemical, material, or substance, the exposure or presence of which is now or at closing prohibited, limited, or regulated by any Environmental Law. 26 3.24. Assigned Contracts The Seller has delivered to the Buyer or made available to the Buyer a true and complete copy of each of the written Assigned Contracts and all amendments thereto. All Assigned Contracts are in full force and effect. With respect to goods and services delivered by the Seller pursuant to the Assigned Contracts before the Closing, the Seller has performed its obligations under the Assigned Contracts and complied with all specifications thereto, and the Seller has not received any notice of default; nor is it in default; nor does any condition exist which with notice or the lapse of time, or both, will render the Seller in default, under any of the Assigned Contracts. All the Assigned Contracts are fully assignable to the Buyer, provided that certain of the Assigned Contracts require the consent of the other party(ies) thereto as indicated on Schedule 3.24.to the Disclosure Letter. The Seller has no Knowledge that any party to any of such Assigned Contracts will not approve or consent to the assignment or novation of any of the Assigned Contracts or will otherwise prohibit or materially restrict the assignment or novation of any of the Assigned Contracts. To the Seller's Knowledge, the other parties to the Assigned Contracts to the Business are in compliance with all material terms and conditions of such Assigned Contracts. To the Knowledge of the Seller, no party to an Assigned Contract has notified the Seller of its intention to terminate or materially change the nature of its transaction or relationship with the Seller or the Buyer under any such Assigned Contract. 3.25. Intentionally Omitted 3.26. Product Warranty Schedule 3.26 to the Disclosure Letter sets forth an accurate, correct and complete statement of all written warranties and warranty policies, service agreements and maintenance agreements of the Seller related to the Business. No products heretofore manufactured, processed, assembled, distributed, sold, delivered, leased or serviced by the Seller in connection with the Business are now subject to any guarantee or warranty of the Seller, claim for product liability, or patent or other indemnity, other than those set forth in Schedule 3.26 to the Disclosure Letter. All warranties are in conformity with the labeling and other requirements of applicable laws. The product warranty and return experience of the Seller relating to the Business for the one (1) previous financial year and the first nine (9) months of the current financial year is set forth in Schedule 3.26 to the Disclosure Letter. 3.27. Product Liability Schedule 3.27 to the Disclosure Letter sets forth an accurate, correct and complete list of all existing claims, liabilities, or obligations arising from, or alleged to arise from, any injury to person (including current and former employees) or property as a result of the manufacture, sale, ownership, possession, or use of any product of the Seller related to the Business manufactured, sold, assembled, distributed, transported or serviced prior to the date hereof. All such claims are or will be fully covered by the Seller's product liability insurance or otherwise provided for and the Seller or its insurance carriers shall satisfy and discharge all such claims. There have been no recalls of the Seller products relating to the Business, and none are 27 threatened or pending. No report of safety concerns has been filed or is required to have been filed by the Seller with respect to any products of the Seller related to the Business under any applicable law, rule, or regulation. 3.28. Contracts; No Defaults (a) Schedule 3.28 to the Disclosure Letter contains a list of the following contracts, agreements, etc. which is true, complete and correct in all material respects. The Seller shall promptly provide the Buyer with a true and complete copy of such document or instrument upon request. (i) any and all existing contracts and commitments (including, without limitation, outstanding proposals to customers and customer orders, contracts for the purchase or sale of merchandise or services, mortgages, deeds of trust, indentures, loan agreements and credit agreements) relating to the Business or the Purchased Assets to which the Seller is a party which require further payments or have further obligations of a value in excess of (pound)7,000; (ii) any and all agreements of guarantee or indemnification to which the Seller is a party relating to the Business or the Purchased Assets; (iii) any and all agreements or commitments to which the Seller is a party containing a covenant limiting or purporting to limit the freedom of the Seller to compete with any Person in any geographic area or engage in any line of business to the extent any such agreement or commitment might relate to or affect the Business or any of the Purchased Assets; (iv) any and all joint ventures, contracts or similar arrangements to which the Seller is a party relating to the Business or the Purchased Assets which involve a sharing of profits with or future payments to other Persons; (v) any and all agreements or commitments to which the Seller is a party relating to the Business or the Purchased Assets for the sale of any non-standard materials, products, services or supplies and the value of the undelivered balance of such materials, products or supplies exceeds (pound)7,000; (vi) any and all license agreements, permits, distributorship agreements, dealer agreements, franchise agreements, manufacturer's representative agreements, sales agency agreements or other similar agreements or commitments to which the Seller is a party relating to the Business or the Purchased Assets; (vii) any and all agreements or commitments for the assignment, sale or other transfer by the Seller of any contract or lease (or right to payment thereunder) relating to the Business by which it leases materials, products or other property to or from a third party; 28 (viii) any and all agreements or commitments to which the Seller is a party for the acquisition, construction or sale of fixed assets relating to the Business or the Purchased Assets which require further payments, or have further obligations, in excess of (pound)7,000; (ix) any and all agreements or commitments to which present or former employees of the Business and the Seller are parties; (x) any and all agreements or commitments for the sale of any of the Purchased Assets or any other assets, properties or rights of the Seller relating to the Business which require further payments or have further obligations in excess of (pound)7000 or for the grant of any preferential rights to purchase any of the Purchased Assets or the assets, properties or rights of the Seller relating to the Business; (b) The agreements, contracts, plans, leases, instruments, rights, registrations, applications, policies, permits, franchises, certificates, arrangements, licenses and commitments listed on Schedule 3.28 to the Disclosure Letter (collectively referred to herein as the "Commitments"). The representations and warranties of the Seller contained in Section 3.24 hereof relating to the Assigned Contracts shall also apply to the Commitments in the same manner as if they were recited herein. The Seller further represents and warrants: (i) that all such Commitments which are oral are truthfully and accurately described on Schedule 3.28 to the Disclosure Letter; (ii) except as set forth in Schedule 3.28 to the Disclosure Letter to the Seller's Knowledge, no party to a Commitment has notified the Seller of its intention to terminate or materially change the nature of its transaction or relationship with the Seller or the Buyer under any such commitment; (iii) that there are no existing laws, regulations or decrees, nor, to the best Knowledge of the Seller, are there any proposed laws, regulations or decrees which adversely affect or will adversely affect any such Commitments. 3.29. No other warranties In connection with the transactions contemplated hereby, except as expressly set forth in this Section 3, the Seller makes no representations or warranties whatsoever. 4. Representations and Warranties of the Buyer The Buyer hereby represents and warrants to the Seller as follows: 4.1. Corporate Authorization This Agreement and the Closing Documents to which the Buyer is a party and the consummation of the transaction contemplated hereby and thereby have been duly authorized and approved by the Board of Directors of the Buyer, and to the extent required, by the shareholders, of the Buyer. This Agreement and the Closing Documents to which the Buyer is a party when duly executed by the Buyer and delivered by all the parties hereto and thereto, as the case may be, will be the legal, valid and binding obligations of the Buyer. 29 4.2. Due Incorporation; Good Standing The Buyer is duly incorporated and validly existing under the laws of England and the Buyer has all requisite corporate power and authority to enter into this Agreement and perform its obligations hereunder. 4.3. Commissions The Buyer has not entered into any contract with, or made any representation to, any Person, firm or corporation providing for any finder's or brokerage fee or other commission to be paid either by the Seller or the Buyer in connection with or related to this Agreement or the transactions herein contemplated. 4.4. No Conflict The execution, delivery and performance of this Agreement and the Closing Documents by the Buyer, with or without the giving of notice and/or the passage of time, will not: (a) violate any provision of law applicable to the Buyer; (b) conflict with, result in the breach or termination of any provision of, or constitute a default under the Buyer's Memorandum and Articles of Association or any mortgage, note, deed of trust, license, permit, lease, obligation or other agreement or instrument to which the Buyer is a party or by which the Buyer may be bound; (c) violate any order, ruling, writ, injunction or decree of any court, administrative agency or governmental body which violation would adversely affect the Buyer's ability to consummate the transactions contemplated hereby. 4.5. Financial Condition The Parent has a written commitment from a financial institution to lend the funds necessary to enable the Buyer to consummate the transactions and perform the obligations contemplated by this Agreement. 4.6. Litigation No action, suit, claim, investigation, administrative proceeding, arbitration or other proceeding of or before any court, arbitrator or governmental or regulatory official, body or authority is pending or, to the Buyer's Knowledge, threatened against any of them which challenges or seeks to prevent, enjoin, alter or delay the transactions contemplated hereby or otherwise could reasonably be expected to materially adversely affect the Buyer's ability to consummate the transactions and perform the obligations contemplated hereby. 30 4.7. Investigation and Evaluation The Buyer acknowledges that: (a) it is experienced in the operation of the type of business to be acquired by the Buyer from the Seller hereunder (b) it and its representatives have been given the opportunity to examine books, records and other information provided by the Seller with respect to the Business and the Purchased Assets and the Assumed Liabilities, and (c) it is fully capable of evaluating the adequacy and accuracy of the information and material obtained by them in the course of such examinations. 4.8. Forecasts and Projections The Buyer acknowledges that there are uncertainties inherent in attempting to make projections and forecasts and render opinions, they are familiar with such uncertainties, and they recognize that any projections, forecasts or opinions furnished to it by the Seller are subject to such uncertainties and that the actual results of the Business could differ materially from any results anticipated in such projections, forecasts and opinions. 5. Certain Covenants and Agreements Prior to Closing 5.1. Access to and Information Concerning Properties and Records, Etc. The Seller will give to the Buyer and its counsel, accountants and other representatives, reasonable access during normal business hours throughout the period prior to the Closing Date to all of the properties (including, but not limited to, real property and equipment), books, contracts, commitments and records of the Seller relating to the Business and will furnish to the Buyer during such period all such information concerning its affairs as it may reasonably request. The Buyer acknowledges that certain of the information heretofore and to be furnished to it is proprietary to the Seller and confidential and is and shall be subject to the terms of the Mutual Nondisclosure Agreement between the Guarantor and the Parent dated 25 April 2001. 5.2. Conduct of Business by the Seller Pending the Closing Date The Seller hereby agrees that, prior to the Closing Date and except as otherwise consented to or approved by the Buyer in writing (which consent or approval shall not unreasonably be withheld), it will: (a) use reasonable efforts to operate the Business only in the usual, ordinary manner and, to the extent consistent with such operation, (i) preserve its present business organization intact; (ii) keep available the service of its present officers and employees; (iii) preserve its present relationships with Persons having business dealings with it in connection with the Business; and (iv) maintain in confidence all of the confidential relationships, rights and affairs relating to the Business, except to the extent shared solely with the Buyer as herein provided; 31 (b) save as set forth in Schedule 5.2 (b) maintain all of the properties relating to the Business in satisfactory repair, order and condition and maintain insurance upon all of such properties and with respect to the conduct of the Business in such amounts and of such kinds comparable to that in effect on the date of this Agreement; (c) maintain the books, accounts and records of the Business in accordance with generally accepted accounting principles in the usual and ordinary manner, on a basis consistent with prior years, and comply with all laws applicable to it and to the conduct of the Business and perform all of its obligations relating to the Business without default; (d) make no modification or adverse change in any existing right, license, lease, contract, obligation, indebtedness, commitment, agreement, permit, franchise, concession or certificate relating to the Business or any other document or understanding listed on Schedule 3.28 to the Disclosure Letter and make no sale or other disposition of any right or privilege relating to the Business accruing to it of a value in excess of (pound)7,000; (e) confer with the Buyer prior to implementing operational decisions of a material nature related to the Business; (f) otherwise report periodically to the Buyer regarding the operations and finances of the Business; (g) make no material changes in management personnel of the Business without prior consultation with the Buyer; (h) comply with all legal requirements and contractual obligations applicable to the operations of the Business; (i) cooperate with the Buyer and assist the Buyer in identifying the governmental or local authority or other similar bodies authorizations required by the Buyer to operate the Business from and after the Closing Date and in either transferring existing governmental authorizations of the Seller relating to the Business to the Buyer, where permissible, or obtaining new governmental or local authority or other similar bodies authorizations for the Buyer; (j) make no borrowing or mortgage or pledge of any of the properties or assets relating to the Business or the Purchased Assets and no sale or other disposition of any of the properties, rights, privileges or other assets relating to the Business or the Purchased Assets, otherwise than in the Ordinary Course of the Business; (k) other than in the Ordinary Course of the Business, not contract for the purchase of any services, not acquire any machinery or equipment or other capital assets and not execute any new lease or renew any existing lease relating to the Business for a cost in excess of (pound)7,000; and 32 (l) in addition to the foregoing requirements of subsections (a) to (k), and without limiting their scope and effect the Seller shall use reasonable efforts not to take any action or refrain from taking any action which would result in a breach of any of its representations and warranties contained in this Agreement, and shall cooperate with the Buyer and use reasonable efforts to cause all of the conditions to the obligations of the parties hereunder to be satisfied on or prior to the Closing Date. 5.3. Third Party Consents; Compliance The Seller shall use reasonable efforts to obtain any and all necessary consents for the assignment or transfer of the Assigned Contracts and any other note, contract, lease, license, or permit to be assigned or transferred hereunder and to perform its duties under such notes, contracts, leases, licenses, and permits without default until the Closing. 5.4. Customers and Suppliers The Seller agrees to introduce the Buyer to, or otherwise facilitate a meeting with, such of the customers listed on Schedule 3.19 to the Disclosure Letter who in the most recent financial year and/or expired portion of the current financial year accounted individually for more than 5% of total sales of the Seller relating to the Business as the Buyer shall request. 5.5. No Negotiations Between the date hereof and the Closing the Seller will refrain and use reasonable efforts to cause each other Person acting for or on behalf of the Seller will refrain from taking, directly or indirectly, any action (i) to seek, encourage or accept any offer or proposal from any Person to acquire any assets related to the Business (other than in Ordinary Course of Business and consistent with past practice) or any interests therein or (ii) to dispose of or transfer or negotiate or reach any agreement or understanding (whether or not such agreement or understanding is absolute, revocable, contingent or conditional), for, or otherwise to attempt to transfer any assets related to the Business (other than in the Ordinary Course of Business and consistent with past practice). If the Seller receives from any Person (other than the Buyer) any offer, proposal, or informational request that is subject to this Section 5.5, the Seller will promptly so advise the Buyer, will promptly advise such Person by written notice of the terms of this Section 5.5, and will promptly deliver a copy of such notice to the Buyer. 5.6. Notification. (a) Between the date of this Agreement and the Closing, the Seller, on the one hand, and the Buyer, on the other shall promptly notify the other parties in writing if they become aware of (i) any fact or condition that causes or constitutes a breach of any party's representations and warranties made in or pursuant to this Agreement or (ii) the occurrence after the date of this Agreement of any fact or condition that would be reasonably likely to (except as expressly contemplated by this Agreement) cause or constitute a breach of any such representation or warranty the Seller or the Buyer had that 33 representation or warranty been made as of the time of the occurrence of, or the party's discovery of, such fact or condition. Should any such fact or condition require any change to a Schedule of Seller to this Agreement or the Disclosure Letter, the Seller shall promptly deliver to the Buyer a supplement to the appropriate Schedule specifying such change. Such delivery shall not affect any rights of the Buyer under Section 9.2 and Article 11. (b) During the same period, the Seller also shall promptly notify the Buyer of the occurrence of any breach of any covenant of the Seller in this Article 5 or of the occurrence of any event that may make the satisfaction of the conditions in Article 7 impossible or unlikely. (c) During the same period, the Buyer also shall promptly notify the Seller of the occurrence of any breach of any covenant of the Buyer in this Article 5 or of the occurrence of any event that may make the satisfaction of the conditions in Article 6 impossible or unlikely. 5.7. Required Approvals The Seller and the Guarantor shall use their reasonable efforts to obtain all consents, waivers, approvals, authorizations or orders and shall make all filings (if any) at their own expense and give all notices required in connection with the authorization, execution and delivery of this Agreement by the Seller and the Guarantor and the consummation of them of the transactions contemplated hereby. The Seller and the Guarantor shall also cooperate with the Parent and its representatives with respect to all filings that the Parent elects to make or shall be required to make in connection with this Agreement or the transactions contemplated hereby. Except where prohibited by applicable statutes and regulations, the Seller shall promptly provide the Parent (or its counsel) with copies of all filings made by the Guarantor or the Seller with any state or federal government (other than filings with the US Securities and Exchange Commission) entity in connection with this Agreement or the transactions contemplated hereby 5.8. Agreements of the Buyer Except as expressly provided herein, between the date hereof and the Closing, unless otherwise consented to in writing by the Seller, the Buyer shall use reasonable efforts not to take any action which would result in a breach of any of its representations and warranties contained in this Agreement, and it shall cooperate with the Seller and use reasonable efforts to cause all of the conditions to the obligations of the Buyer and the Seller under this Agreement to be satisfied on or prior to the Closing Date. 6. Conditions Precedent to the Obligations of the Seller The obligations of the Seller to consummate the transactions contemplated by this Agreement is subject to the satisfaction at or prior to the Closing of each of the following conditions: 34 6.1. Accuracy of Representations and Warranties The representations and warranties of the Buyer herein contained shall have been true and correct in all material respects when made and shall continue to be true and correct in all material respects as of the Closing Date. 6.2. Performance of Agreements The Buyer in all material respects shall have performed or caused to be performed all obligations and agreements and complied with or caused to be complied with all covenants and conditions contained in this Agreement to be performed or complied with by the Buyer at or prior to the Closing Date. 6.3. Additional Documents The Buyer shall have caused the documents and instruments required by Section 1.7(b) and the following documents to be delivered (or tendered subject only to Closing) to the Seller: (a) such other documents as the Seller may reasonably request for the purpose of (i) evidencing the accuracy of any representation or warranty of the Buyer, (ii) evidencing the performance by the Buyer of, or the compliance by the Buyer with, any covenant or obligation required to be performed or complied with by the Buyer or (iii) evidencing the satisfaction of any condition referred to in this Article 6. 6.4. No Proceedings Since the date of this Agreement, there shall not have been commenced and be continuing or threatened against the Seller, or against any related Person of the Seller, any proceeding (a) involving any challenge to, or seeking damages or other relief in connection with, the Purchased Assets and any of the transactions contemplated by this Agreement or (b) that may reasonably be expected to have the effect of preventing, delaying, making illegal, imposing material limitations or conditions on or otherwise materially interfering with any of the transactions contemplated by this Agreement. 6.5 Third Party Consents All orders, consents, permits, authorizations, approvals, and waivers of every Person necessary to permit the Seller and the Guarantor to perform their obligations under this Agreement and to consummate the transactions contemplated hereby shall have been obtained and shall be in full force and effect. 35 6.6 Other Purchase Agreements The Other Purchase Agreements shall have been executed and delivered and the transactions contemplated thereby shall have closed or shall be closed simultaneously with the transaction which is the subject of this Agreement. 7. Conditions Precedent to the Obligations of the Buyer The obligations of the Buyer to consummate the transactions contemplated hereby is subject to the satisfaction at or prior to the Closing of each of the following conditions: 7.1. Accuracy of Representations and Warranties The representations and warranties of the Seller herein contained shall have been true and correct in all material respects when made and shall continue to be true and correct in all material respects as of the Closing Date. 7.2. Performance of Agreements The Guarantor and the Seller in all material respects shall have performed or caused to be performed all obligations and agreements and complied with or caused to be complied with all covenants and conditions contained in this Agreement to be performed or complied with by it at or prior to the Closing Date. 7.3. Additional Documents The Seller in all material respects shall have caused the documents and instruments required by Section 1.7(a) and the following documents to be delivered (or tendered subject only to Closing) to the Buyer: (a) Releases of all encumbrances on the Purchased Assets, other than Permitted Encumbrances and encumbrances permitted by the Buyer; (b) Such other documents as the Buyer may reasonably request for the purpose of: (i) evidencing the accuracy of any of the Seller's representations and warranties; (ii) evidencing the performance by the Guarantor or the Seller or the compliance by the Guarantor or the Seller with any covenant or obligation required to be performed or complied with by the Guarantor or the Seller; (iii) evidencing the satisfaction of any condition referred to in this Article 7; or 36 (iv) otherwise facilitating the consummation or performance of any of the transactions contemplated by this Agreement. 7.4. Further Instruments, Documents The Buyer shall have received such other instruments and documents as they shall have reasonably requested. 7.5. Keys, Etc. The Buyer shall have received such keys, lock and safe combinations and other similar items as the Buyer shall reasonably require to obtain full occupation and control of the assets purchased hereunder. 7.6. No Adverse Change There shall have been no material adverse change to the Purchased Assets or the financial condition of the Business being transferred hereunder since7 October 2001 (other than changes related to general economic or market conditions). 7.7. Books and Records The Buyer shall have received all books and records of or pertaining to the Business and the Purchased Assets which are required to be transferred to the Buyer at the Closing pursuant to Section 1 hereof. 7.8. Third Party Consents (a) To the extent that any Assigned Contract listed on Schedule 7.8 to the Disclosure Schedule or any material Assigned Contract subsequently entered into by the Seller or between the date hereof and the Closing Date shall require the consent to any aspect of the proposed transaction of any other Person, such consent shall have been obtained or the parties agree that the provisions of Section 7.8(c) below shall apply. (b) All orders, consents, permits, authorizations, approvals, and waivers of every Person necessary to permit the Buyer to perform its obligations under this Agreement and to consummate the transactions contemplated hereby shall have been obtained and shall be in full force and effect. (c) Insofar as any consent or sanction of any third party is required to the transfer of any of the Purchased Assets and such consent or sanction shall not have been received to the satisfaction of the Buyer at Closing then: (i) nothing in this Agreement shall be deemed to operate as such a transfer or assignment as would give rise to any termination or forfeiture of any benefit, right or interest to any person in any of the said assets; 37 (ii) until such time as such consent or sanction is received to the satisfaction of the Buyer the Seller shall be deemed to be holding the relevant assets and the benefit thereof in trust for the Buyer absolutely and shall either account to the Buyer immediately, or pay to the credit of a specially designated trust bank account maintained separately from all other accounts of the Seller and account to the Buyer as soon as reasonably practicable thereafter, for any sums or other benefits received by the Seller in relation thereto and the Buyer shall indemnify and keep indemnified the Seller against all claims, actions, proceedings, demands, obligations, liabilities, losses and expenses which may be incurred or suffered by the Seller arising out of or in connection with any such contract (other than such as may be suffered or incurred by reason of any existing breach of contract by the Seller) provided that the Buyer shall have the right to perform, in place of the Seller, any contract as sub-contractor, agent, licensee or sub-licensee (as the case may be) to the extent that such performance may be permitted by any such contract; (iii) until such time as such consent or sanction is received to the satisfaction of the Buyer the Seller shall (so far as it lawfully may do so) act under the direction of the Buyer in all matters relating to such orders and contracts for so long as the Seller is required and authorised so to do by the Buyer. (d) The Buyer acknowledges to the Seller that it shall be the Buyer's responsibility to ensure that cars which are the subject of hire agreements are returned in the appropriate condition when returned to the hire company. 7.9. No Casualty There shall not have occurred and be continuing any damage, destruction or loss (whether or not covered by insurance) in excess of an aggregate of (pound)35,000 affecting the Purchased Assets. 7.10. No Proceedings Since the date of this Agreement, there shall not have been commenced and be continuing or threatened against the Buyer, or against any related Person of the Buyer, any proceeding (a) involving any challenge to, or seeking damages or other relief in connection with, any of the transactions contemplated by this Agreement or (b) that may have the effect of preventing, delaying, making illegal, imposing limitations or conditions on or otherwise interfering with any of the transactions contemplated by this Agreement. 7.11. Other Purchase Agreements The Other Purchase Agreements shall have been executed and delivered and the transactions contemplated thereby shall have closed or shall be closed simultaneously with the transaction which is the subject of this Agreement. 8. Survival of Representations and Warranties; Indemnification; Etc. 8.1. Survival 38 (a) All representations and warranties respectively made by the Seller and the Buyer in this Agreement, including without limitation, all representations and warranties made herein or in any Exhibit or Schedule hereto or to the Disclosure Letter or in the Closing Documents shall survive the Closing until the last day of the twenty first (21st) full month, excluding partial months, following the Closing Date, provided, however, that any claims arising in connection with a breach of any of the representations and warranties contained in Section 3.11 (Employment and Pensions), Section 3.18 (Commissions), Section 3.22 (Solvency) Section 3.23 (Environmental Matters), and 3.27 (Product Liability) shall survive until the date of expiration of the statute of limitations applicable to such claim and any extensions thereof; provided, further, that any claims with respect to any matter described in Section 3.1 (Organization), Section 3.6 (Properties/Purchased Assets), Section 3.3 (Authorization), Section 4.1 (Corporate Authorization) and Section 4.2 (Due Incorporation) shall survive indefinitely and (ii) the representations and warranties in Section (3.26) (Product Warranty) shall survive for the period set forth in Section 9.3 hereof (collectively, as applicable, the "Survival Date"). (b) All covenants and agreements respectively made by the Seller and the Buyer in this Agreement to be performed after the Closing Date shall survive the Closing, and will remain in full force and effect thereafter until (i) in the case of all covenants and agreements that have specified terms or periods until the expiration of the terms or periods specified therein and (ii) in the case of all other covenants and agreements that do not have specified terms or periods until the fulfillment thereof. (c) Notwithstanding the foregoing, any representation, warranty, or agreement as to which a bona fide claim for indemnification has been asserted in accordance with Section 8.2 or 8.3 hereof prior to the Survival Date set forth in Section 8.1(a) hereof will (with respect to such claim) survive, and such claim may be pursued, beyond the expiration of such Survival Date until such claim is resolved by arbitration or by settlement. The right to indemnification, payment of damages or other remedy based on such representations, warranties, covenants, agreements and obligations will not be affected by any investigation conducted with respect to, or any Knowledge acquired (or capable of being acquired) at any time, whether before or after the execution and delivery of this Agreement or the Closing Date, with respect to the accuracy or inaccuracy of or compliance with, any such representation and warranty (as modified by the Disclosure Letter and Schedules thereto at the time of the execution of this Agreement), covenant, or obligation. The waiver of any condition of Closing based on the accuracy of any representation or warranty, or on the performance of or compliance with any covenant or obligation, will not, unless otherwise agreed to in writing by both parties, affect the right to indemnification, payment of damages, or other remedy based on such representations, warranties, covenants, and obligations. 8.2. Seller's Agreement to Indemnify The Seller hereby agrees to indemnify and save the Buyer, and its shareholders, officers and directors (each a "Buyer Indemnified Party") harmless from or against any and all damages, losses, obligations, settlement payments pursuant to Section 8.7 hereof, liabilities, claims, actions or causes of action, encumbrances, costs, and expenses (including all reasonable legal fees, 39 interest and penalties) (collectively "Losses") suffered, sustained, reasonably incurred or required to be paid by a Buyer Indemnified Party resulting from each of the following: (a) the untruth, inaccuracy or breach or nonfulfillment of any representation, warranty, covenant or agreement of the Seller contained in this Agreement, the Closing Documents or in any Exhibit or Schedule hereto or to the Disclosure Letter. No materiality or Seller's Knowledge qualification contained in the foregoing documents delivered hereunder shall be taken into account in determining the aggregate amount of the Buyer Indemnified Parties' Losses except for the Knowledge qualifications set forth in sections 3.8 (Litigation), 3.12(d), (e) and (f) (Intellectual Property Assets), 3.13 (Computer Systems), 3.19 (Customers and Suppliers), 3.22(b)(iv) (Solvency), 3.23(b) (Environmental), 3.24 (Assigned Contracts) and 3.28(b) (Commitments). (b) the assertion against a Buyer Indemnified Party, or the Purchased Assets of any liability or obligation of the Seller or their affiliates, shareholders, officers and directors not expressly assumed by the Buyer pursuant to this Agreement (whether or not disclosed to the Buyer), including but not limited to the Excluded Liabilities under Section 1.5 hereof; (c) except as otherwise specifically provided in Sections 9.4, 9.5 and 9.6 hereof , any product or component thereof manufactured by or shipped, or any services provided by the Seller, in whole or in part, prior to the Closing Date. 8.3. Buyer's Agreement to Indemnify The Buyer hereby agrees to indemnify and save the Seller, its affiliates, shareholders, officers and directors (a "Seller Indemnified Party") harmless from or against any and all Losses suffered, sustained, reasonably incurred or required to be paid by a Seller Indemnified Party resulting from or relating to each of the following: (a) the untruth, inaccuracy or breach or nonfulfillment of any representation, warranty, covenant or agreement of the Buyer contained in this Agreement, the Closing Documents or in any Exhibit or Schedule hereto; (b) any failure to satisfy any obligation or liability for any Assumed Liabilities; and (c) any liabilities or obligations arising out of the operation of the Business or the use of the Purchased Assets by the Buyer after the Closing Date)(except for those liabilities or obligations of the Seller otherwise set forth in this Agreement). 8.4. Indemnification Procedures (a) No claim for indemnification shall be made against the Buyer under this Agreement after the Survival Date unless prior to the Survival Date a Seller Indemnified Party shall have given written notice of such claim 40 for indemnification. No claim for indemnification shall be made against the Seller under this Agreement after the Survival Date, unless prior to such date a Buyer Indemnified Party shall have given written notice of such claim for indemnification. Notwithstanding the foregoing, any representation, warranty, or agreement made by the Seller or the Buyer as to which a bona fide claim for indemnification has been asserted in accordance with Section 8 (including the preceding sentences of this subsection (a)) hereof during the applicable survival period set forth in Section 8.1 hereof will (with respect to such claim) survive, and such claim may be pursued, beyond the expiration of such survival period until such claim is resolved by arbitration or by settlement. (b) If an indemnitee becomes aware of any matter that it believes is indemnifiable pursuant to Section 8.2 or 8.3 hereof (irrespective of the Basket provided for in Section 8.5 hereof) and such matter involves: (i) any claim made against the indemnitee by any Person other than a Buyer Indemnified Party or a Seller Indemnified Party; or (ii) the commencement of any action, suit, investigation, arbitration, or similar proceeding against the indemnitee by any Person other than a Buyer Indemnified Party or a Seller Indemnified Party, the indemnitee will give the indemnifying party prompt written notice of such claim or the commencement of such action, suit, investigation, arbitration, or similar proceeding. Such notice will: (i) provide (with reasonable specificity) the basis on which indemnification is being asserted; (ii) set forth the actual or estimated amount of damages for which indemnification is being asserted, if known; and (iii) be accompanied by copies of all relevant pleadings, demands, and other papers served on the indemnitee. The failure to provide the notice promptly will not relieve the indemnifying party of its obligations under this Section 8 except to the extent of any damages that would not have been incurred if the notice had been given promptly. (c) If an indemnitee becomes aware of any matter that it believes is indemnifiable pursuant to Section 8.2 or 8.3 (irrespective of the Basket provided for in Section 8.5 hereof) hereof and such matter involves a claim or proceeding made by any Buyer Indemnified Party or Seller Indemnified Party against the indemnitee, the indemnitee will give the indemnifying party prompt written notice of such claim. Such notice will: (i) provide (with reasonable specificity) the bases for which indemnification is being asserted; and (ii) set forth the actual or estimated amount of damages for which indemnification is being asserted. The failure to provide the notice promptly will not relieve the indemnifying party of its obligations under this Section 8 except to the extent any damages that would not have been incurred if the notice had been given promptly. The indemnifying party will have a period of 30 days after the delivery of each notice required by this Section 8.4(c) during which to respond to such notice. If the indemnifying party accepts (in writing) full responsibility for the claim described in such notice, the actual or estimated amount of damages reflected in such notice will be conclusively deemed a liability that the indemnifying party owes, and subject to Section 8.5 will pay (in cash) within ten (10) days to the indemnitee. If the indemnifying party has disputed such claim or does not respond within such 30-day period, the indemnifying party and the indemnitee agree to proceed in good faith to negotiate a resolution of such dispute. If all such disputes are not resolved through negotiations within 30 days after such negotiations begin, the indemnifying party and the indemnitee shall resolve such disputes through arbitration. 41 (d) The indemnifying party will have a period of 30 days after the delivery of each notice required by Section 8.4(b) hereof during which to respond to such notice. If the indemnifying party elects to defend the claim described in such notice or does not respond within such 30-day period, the indemnifying party will be obligated to settle or defend such claim, at its own expense and by counsel chosen by the indemnifying party and reasonably satisfactory to the indemnitee. The indemnitee will cooperate fully with the indemnifying party and counsel for the indemnifying party in the defense against any such claim, and the indemnitee will have the right to participate at its own expense in the defense of any such claim. If the indemnifying party responds within such 30-day period and elects not to defend such claim, the indemnitee will be free to settle in good faith or defend (and control the defense of) such claim. The indemnitee's settlement in good faith or defense will not relieve the indemnifying party of its obligations under this Section 8. 8.5. Basket and Limitations (a) The Seller shall have no liability (for indemnification or otherwise) with respect to claims under Section 8.2(a) and the equivalent provisions of the Other Purchase Agreements (each, an "Indemnity Provision") until the aggregate amount of the Buyer Indemnified Parties' Losses with respect to such matters exceeds Three Hundred and Thirty Thousand dollars ($330,000) (the "Basket"). No materiality or Seller's Knowledge qualification contained in Section 3 shall be taken into account in determining the aggregate amount of the Buyer Indemnified Parties' Losses except for the Knowledge qualifications set forth in sections 3.8 (Litigation), 3.12(d), (e) and (f) (Intellectual Property Assets), 3.13 (Computer Systems), 3.19 (Customers and Suppliers), 3.22(b)(iv) (Solvency), 3.23(b) (Environmental), 3.24 (Assigned Contracts) and 3.28(b) (Commitments). In the event the aggregate amount of such Losses exceeds the Basket, then the Seller shall indemnify the Buyer with respect to the aggregate amount of such Losses but only to the extent that they exceed Two Hundred Thousand Dollars ($200,000). Notwithstanding the foregoing, this Section 8.5 will not apply to (i) claims or matters arising in respect of Sections 3.1 (Organization), 3.3 (Authorization), 3.6 (Properties/Purchased Assets), 3.11 (Employment and Pensions); 3.18 (Commissions), 3.22 (Solvency), or 3.23 (Environmental Matters), 3.26 (Product Warranty) or 3.27 (Product Liability) (ii) any fraud or intentional breach by the Seller of any covenant or obligation, and the Seller will be liable for all Losses with respect to such claims, matters, breaches or acts. (b) The amount of Losses subject to indemnification under this Article 8 shall be reduced (but not below zero) by any insurance proceeds (net of reasonable expenses and other costs in obtaining such proceeds) which the indemnified party under this Agreement shall receive or otherwise enjoy with respect to the event that triggered the losses. (c) The aggregate liability of the Seller for Losses under Indemnity Provisions shall not exceed Nine Million Nine Hundred Thousand dollars ($9,900,000). No materiality or Seller's Knowledge qualification contained in Section 3 shall be taken into account in determining the aggregate liability of the Seller for Losses under Section 8.2(a) except for except for the Seller's 42 Knowledge qualifications set forth in sections 3.8 (Litigation), 3.12(d), (e) and (f) (Intellectual Property Assets), 3.13 (Computer Systems), 3.19 (Customers and Suppliers), 3.22(b)(iv) (Solvency), 3.23(b) (Environmental), 3.24 (Assigned Contracts) and 3.28(b) (Commitments). Notwithstanding the foregoing, this Section 8.5(c) will not apply to (i) claims or matters arising in respect of Sections 3.1 (Organisation), 3.3 (Authorization), 3.6 (Properties/Purchased Assets), 3.11 (Employment/Pensions), 3.18 (Commissions), 3.22 (Solvency), 3.23 (Environmental Matters), 3.26 (Product Warranty) or 3.27 (Product Liability) or (ii) any fraud or intentional breach by any Seller of any covenant or obligation, and the Seller will be liable for all Losses with respect to such claims, matters, breaches or acts. (d) Notwithstanding any other provision of this Agreement or of any of the Other Purchase Agreements, indemnified Losses recoverable with respect to any particular event circumstances, state of facts, action or inaction pursuant to any of Indemnity Provisions shall be reduced, pound for pound, by accounts actually paid with respect to such event, circumstance, state of facts, action or inaction of the Buyer or any of its affiliates pursuant to the Indemnity Provisions of any of the Other Purchase Agreements, it being the intent of this sentence to avoid possible double recovery of Losses by the Buyer and its affiliates. 8.6. Exclusive Remedy Except as set forth in Section 8.6, from and after the Closing, the sole and exclusive remedy of the parties hereto with respect to any and all claims relating to or arising out of this Agreement shall be the indemnification provisions set forth in this Section 8. With respect to (i) fraud claims, (ii) a breach of the covenants set forth in Section 5.6, or (iii) a breach of the covenants set forth in Section 9, the remedies set forth in this Section 8 are cumulative and shall not be construed to restrict or otherwise affect any other rights or remedies that may be available to the indemnified party under any agreement, pursuant to law or otherwise. Notwithstanding the foregoing, nothing herein shall prevent any party from terminating this Agreement in accordance with Section 10. 8.7. Indemnification Payments The Seller and the Buyer agree that any payment required to be made under Section 8 will be paid within ten days after request or settlement between the parties or final resolution through arbitration. 8.8. Right of Set-Off Upon written notice to the Seller or the Buyer, as applicable, specifying in reasonable detail the basis for a bona fide indemnification claim in accordance with Section 8.4 hereof, the claiming party may set-off the amount of the claim against sums due from the claiming party to the other party. Any disputed claim that is not resolved through negotiations between the parties shall be submitted to arbitration in accordance with Section 11.12 of this Agreement. 8.9. Currency Conversion 43 For the purpose of Section 8.5 only sterling amounts shall be converted into dollar amounts as at the date any claim is notified to the Seller by the Buyer or to the Buyer by the Seller or at the date of payment of a third party claim if earlier. 9. Additional Covenants 9.1. Covenants of the Guarantor and the Seller Regarding Post-Closing Activities (a) For a period of three (3) years following the Closing Date the Guarantor and the Seller covenant and agree that the Guarantor and the Seller will not, anywhere in the world directly or indirectly, whether as principal or as agent, consultant or otherwise, alone or in association with any other Person, firm, corporation or other business organization, carry on, or be engaged, concerned or take part in, or render Competitive Business services to or own any interest or share in the earnings of or invest in the stock, bonds or other securities of, any Person, firm, corporation or other business organization which is in a Competitive Business. "Competitive Business" shall mean the graphics products business being sold by the Seller and their affiliates to the Buyer or its affiliates pursuant to this Agreement or other purchase agreements being entered into concurrently herewith as described in Schedule 1.1 to the Disclosure Letter. Nothing herein contained, however, shall be deemed to prohibit the Seller from (i) owning stock in public companies in pursuance of a passive investment program so long as it does not become an "Affiliate" thereof, as such term is defined in the Securities Exchange Act of 1934 of the USA; (ii) engaging in any business being retained by the Seller or their affiliates, as set forth in Schedule 1.1 to the Disclosure Letter; and (iii) being acquired by any entity which is to any degree engaged in a Competitive Business. Notwithstanding the foregoing, nothing contained in this Section 9.1 shall preclude, prevent or restrict the Guarantor from performing its obligations to the Buyer and the Parent under the Manufacturing Transition Services Agreement and the Foamboard Supply Agreement (as defined in the US Sale Agreement) for the terms specified therein; (b) For a period of three (3) years following the Closing Date, the Guarantor and the Seller shall not, for whatever reason, whether for their own account or for the account of any other Person, firm, corporation or other business organization, solicit, sell to or accept business relating to a Competitive Business from any Existing Customer (as hereinafter defined) or any Active Prospect (as hereinafter defined) of the Business as conducted by the Seller or the Buyer. Active Prospect shall mean a potential customer which actually has been solicited by the Seller in connection with the Business or the Buyer at the later of the Closing Date or one which at such time holds, but has not accepted, a proposal prepared by the Seller or the Buyer. Existing Customer shall mean any customer of the Seller in connection with the Business or the Buyer at the Closing Date, such customers to include, without limiting the foregoing, those customers of the Seller as of the Closing as listed in Schedule 3.19 to the Disclosure Letter. (c) For a period of three (3) years following the Closing Date, the Guarantor and the Seller shall not, for whatever reason, whether for their own account or for the account of any other Person, firm, corporation or other business organization (i) solicit, induce or attempt to solicit or induce 44 any customer, supplier, licensee or other business relation of the Business to cease doing business with the Business or the Buyer or the Parent or their affiliates; (ii) intentionally interfere in any way with the contracts between the Buyer or the Parent and any customer, supplier, licensee or other business relation of the Business; (iii) hire or participate in any solicitation or attempt to solicit or hire any Person who was an employee of the Seller or any of its affiliates as of the Closing Date or within the six-month period prior thereto while such Person is an employee of the Parent or the Buyer or their affiliates or for six (6) months after the termination of the employment of such Person or; (iv) disparage, deprecate, or make any negative comment with respect to the Business or the Buyer or the Parent or their respective businesses, operations, or properties. (d) The Seller and the Guarantor recognize that by reason of the Seller's ownership of and/or operation of the Business, the Guarantor and the Seller may have acquired Confidential Information and trade secrets concerning the operation of the Business, the use or disclosure of which could cause the Parent or the Buyer or the Business substantial loss and damages that could not be readily calculated and for which no remedy at law would be adequate. Accordingly, in consideration for the payment of the Purchase Price, which is recognized as adequate by the Seller, the Seller and the Guarantor covenant and agree with the Parent and the Buyer that the Seller and the Guarantor will not at any time, except in performance of the Seller's obligations, if any, to the Buyer or the Parent or with the prior written consent of the Parent or the Buyer directly or indirectly, disclose any Confidential Information that the Guarantor or the Seller have acquired or may acquire, or use such information in a manner detrimental to the interests of the Parent or the Buyer or the Business, unless (i) such information becomes known to the public generally through no fault of the Guarantor or the Seller, (ii) disclosure of such information is required by law, or (iii) the Guarantor or the Seller reasonably believe that such disclosure is required in connection with the defense of a lawsuit against the Seller or the Guarantor; provided, however, that prior to disclosing any information pursuant to this Section, the Seller shall give prior written notice of such proposed disclosure to the Parent and the Buyer, provide the Parent and the Buyer with the reasonable opportunity to contest such disclosure, and shall reasonably cooperate with all efforts to prevent such disclosure. The term "Confidential Information" means information of a material nature not previously disclosed to the public with respect to the products, facilities, intellectual property (including, without limitation, methods and trade secrets), software, source code, systems, procedures, manuals, reports, price lists, customer lists, financial information, business plans, prospects, or opportunities of the Seller or any of their affiliates related to the Business. (e) If any court of competent jurisdiction shall determine that the covenants and agreements contained in this Section 9 are unenforceable as to any portion of the geographical area defined or as to the duration of time stated, it may determine the rights of the parties hereunder on the balance of said geographical area or the balance of such time duration which said court determines to be just and equitable under the circumstances. 45 (f) The Seller and the Guarantor acknowledge that the Parent and the Buyer have relied upon the covenants contained in this Section 9.1 and that said covenants are conditions to the Parent's and the Buyer's willingness to enter into and perform their obligations under this Agreement. (g) The parties agree that the Parent and the Buyer would be irreparably harmed if the Seller and the Guarantor do not comply with all of their obligations under this Section 9.1 and that money damages alone will not be sufficient to compensate the Buyer for such breach. Accordingly, the parties agree that Buyer shall be entitled to obtain an injunction against the continuation of any breach of this Section 9.1 without the necessity of showing money damages. (h) If any court of competent jurisdiction shall determine that the covenants and agreements contained in this Section 9 are unenforceable as to any portion of the geographical area defined or as to the duration of the time stated, it may determine the rights of the parties hereunder as the balance of such geographical area or the balance of such time duration which such court determines to be just and equitable under the circumstances. 9.2 Payments Received (a) Except as otherwise may be provided in this Agreement or the Closing Documents the Seller shall promptly remit to the Buyer all monies received by the Seller in respect of (a) performance from and after the Effective Time under the contracts included among the Purchased Assets or (b) any account or note receivable relating to the Purchased Assets and arising or generated on or after the Effective Time. (b) Except as otherwise may be provided in this Agreement or the Closing Document the Buyer shall promptly remit to the Seller all monies received by the Buyer in respect of (a) performance prior to the Effective Time under the contracts included among the Purchased Assets or (b) any account or note receivable relating to the Purchased Assets and arising or generated prior to the Effective Time. 9.3 Employment Matters (a) The Seller and the Buyer acknowledge that part of the undertaking of the Seller namely the Business will transfer to the Buyer for the purposes of the Transfer Regulations. The Buyer acknowledges that the respective contracts of the employees of the Seller specified in Schedule 3.11 to the Disclosure Letter (the "Employees") shall take effect from and after the Effective Time as if originally made between the Employees and the Buyer in accordance with the Transfer Regulations. (b) The Seller and the Buyer acknowledge that the Employees who remain in the employment of the Seller immediately before the Effective Time will become employees of the Buyer respectively and the Seller will use its best endeavours to assist in the transfer of the Employees to the employment of the Buyer and to ensure that the Employees consent to the transfer of their 46 respective employments to the Buyer. The Seller and the Buyer shall comply with the requirements of the Transfer Regulations applicable to each of them. (c) Prior to the Effective Time the Seller shall make an offer of continued employment within the Seller's Business Administration Department (which does not form part of this Business) to Derek Wotton and Karen Wyatt on the same terms and conditions as they currently enjoy and with continuity of employment preserved. The Buyer agrees not to bring any claim against Derek Wotton or Karen Wyatt by reason of their acceptance of the Seller's said offer of employment. (d) Immediately following Closing the Buyer shall communicate to each of the Employees a notice informing the Employees of the identity of their employer. (e) The Seller will indemnify the Buyer forthwith on demand from and against any reasonable cost, loss, damage or expense ("Costs") suffered or incurred in connection with or by reason of any proceeding, claim or demand by any Employee (or, where applicable, any trade union or other employee representative of any Employee):- (i) in relation to the employment or termination of employment of any Employee during the period prior to the Effective Time; (ii) under Regulation 5(5) of the Transfer Regulations by reason only of the change in the identity of his employer but not where the change is a significant change and to his detriment; (iii) in relation to the breach or non observance by the Seller during the period prior to the Effective Time of any collective agreement or other custom, practice or arrangement with a trade union or staff association in respect of any Employee; (iv) to the extent that it arises from any failure by the Seller to comply with its obligations under Regulation 10 of the Transfer Regulations in respect of any Employee; (v) arising out of the employment or termination of employment of Derek Wotton and/or Karen Wyatt (f) If any contract of employment other than a contract of employment of one of the Employees which has been disclosed in writing to the Buyer or if any collective agreement not disclosed in writing to the Buyer has effect at any time as if originally made between the Buyer and any employee or between the Buyer and the relevant trade union, as the case may be, as a result of the provisions of Regulation 5 or Regulation 6 of the Transfer Regulations, the Buyer may, upon becoming aware of the application of Regulation 5 or Regulation 6 to any such contract of employment or collective agreement, terminate the employment of the person concerned or that collective agreement forthwith and the Seller shall indemnify the Buyer from and against any 47 reasonable Costs arising out of any such termination and against any sums payable to or in respect of that employee in respect of his employment following the Effective Time or any sums payable to or on behalf of the relevant trade union, as the case may be. (g) The Seller confirms that the Employees are all the employees employed by the Seller at the date hereof and agrees that no other person will be employed by the Seller before Closing and except with the prior written consent of the Buyer the Seller will not dismiss any of the Employees or give notice of dismissal to them or any of them. (h) In the event that any individual (whether or not one of the Employees brings a claim against the Seller or the Buyer arising out of or in connection with the transfer or termination of that individual's employment, the Seller and the Buyer shall give to each other, as soon as practicable after any request therefor, all information which may reasonably be relevant to such claim and shall render to each other such assistance and co-operation as either might reasonably require in contesting, settling or dealing with any such claim. 9.4 Customer Rebates and Warranty Claims (a) The Seller agrees to reimburse the Buyer on a pound for pound basis for any customer rebates authorised by the Seller prior to the Effective Time and incurred by the Buyer on or after the Effective Time but only with respect to invoices for sales of equipment, products and services relating to the Business by the Seller dated prior to the Effective Time (the "Customer Rebate Costs"). Any and all customer rebates with respect to invoices for sales dated on or after the Effective Time shall be the sole responsibility of the Buyer whether or not such customer rebates were authorised by the Seller. (b) The Seller agrees to reimburse the Buyer on a pound for pound basis for costs of fulfilling bona fide warranty obligations for equipment ("Equipment Warranty Costs") and consumable products ("Consumable Products Warranty Costs") of the Business manufactured prior to the Effective Time, whether or not sold by the Seller prior to the Effective Time, provided that:(i)in the case of equipment, the warranty claim is made by the customer not later than (1) year following its original date of purchase by the customer and in any event no later than (4) four years after the Effective Time; and (ii) in the case of consumable products, the warranty claim is made by the customer not later than one (1) year following its original date of purchase and in any event not later than four (4) years after the Effective Time. Notwithstanding the foregoing, the Seller shall have no obligation to reimburse the Buyer for costs of warranty obligations with respect to any consumable products sold by the Buyer after the Effective Time if such consumables were more than three (3) years old at the time of such sale by the Buyer. The reimbursement of Consumable Product Warranty Costs shall be subject to the following additional terms set forth below: (i) in the case of Equipment Warranty Costs, the Seller shall reimburse the Buyer for the costs of repair or replacement of the equipment including labour, spare parts, and reasonable expenses in connection 48 with travel and third-party services. Equipment Warranty Costs arising out of the replacement of equipment or a discount on the price of equipment may be incurred by the Buyer in its sole, good faith discretion up to an amount of (pound)7,500 for any single warranty claim. The Buyer shall consult with the Seller with respect to the satisfaction of any equipment warranty claim in excess of (pound)7500. (ii) in the case of Consumable Products Warranty Costs arising out of the replacement of such products or a discount on the price of such products, the Buyer may incur such costs in their sole, good faith discretion up to an amount of (pound)3,500 for any single warranty claim. The Buyer shall consult with the Seller prior to the satisfaction of any consumable products warranty claim in excess of (pound)3,500. (c) The reimbursement procedures for Customer Rebate Costs, Equipment Warranty Costs and Consumable Products Costs shall be as follows: (i) not later than thirty (30) days following the end of each fiscal quarter after the Closing Date, the Buyer shall deliver a statement setting forth the customer rebates and the warranty claims (for consumable products), facts reasonably demonstrating that such customer rebates and warranty claims are the obligations of the Seller under the applicable provisions of Section 9.4, and the sterling amounts of each (each a "Customer Rebate and Warranty Claims Statement"). The Buyer shall make available to the Seller the records or back-up or related materials used in preparing the Customer Rebate and Warranty Claims Statement at reasonable times and upon reasonable notice for inspection and photocopying within five (5) days of the request therefor by the Seller; (ii) any reimbursement required under this Section 9.4 shall be due and payable to the Buyer by the Seller within twenty (20) days of the Buyer's delivery of a Customer Rebate and Warranty Claims Statement. 9.5 Non-warranty Product Returns (a) The Seller agrees to reimburse the Buyer for costs of Non-Warranty returns by customers of products of the Business occurring after the Effective Time that were authorized by the Seller prior to the Effective Time. (b) The Buyer agree to reimburse to the Seller if and to the extent that the Buyer's acceptance of any Non-warranty Returns from customers of products of the Business occurring after the Effective Time and not authorized by the Seller, should result in any charge back to or claim against the Seller by the customer returning such products. (c) As used in this Section 9.5, a "Non-warranty Return" shall mean any return of products other than a warranty return. (d) The Seller, on the one hand, and the Buyer on the other, shall make available to the other parties the records or back up or related 49 materials used by such parties in determining the reimbursement obligations of the other party arising out of this Section 9.5 at reasonable times and upon reasonable notice for inspection and photocopying within five (5) days of the request therefor by the other parties. 9.6. AquaSeal Warranty (a) The Seller agrees to reimburse the Buyer on a pound for pound basis for all costs of fulfilling good faith warranty obligations for "Integrated Graphic Protection System" products sold prior to the Closing Date provided that the warranty claim is made by the customer within the applicable period provided by the Seller's Integrated Graphic Protection System Material Replacement Warranty (generally sixty (60) months after the application of the AquaSEAL product). The obligation of the Seller shall apply to all costs reasonably incurred by the Buyer whether arising out of the SEAL brand AquaSEAL brand liquid lamination products, inks, substrate or any other product or cause covered by such warranty and irrespective of whether the warranty claim is attributable to the products, services, actions or inaction of the Seller, The Valspar Corporation, Vutek, Forbo-Stamoid, Mehler Haku GMBH, or any other business entity. (b) Any reimbursement required under this section 9.6 shall be due and payable to the Buyer by the Seller within twenty (20) days of the Buyer's delivery of a statement setting forth in reasonable detail the amount of the warranty claim. (c) the Buyer shall promptly notify the Seller of its receipt of any such warranty claim. Further, the Buyer shall make available to the Seller the records or back-up or related materials used by the Buyer in determining the Seller's reimbursement obligations arising out of the warranty obligations pursuant to subsection (a) hereof at reasonable times and upon reasonable notice for inspection and photocopying within five (5) days of the request thereof by the Seller. 9.7 Removing Excluded Assets On or before the Closing Date, (or at such later date as the parties may agree), the Seller shall remove all Excluded Assets from all facilities to be occupied by the Buyer (the "Facilities") and shall vacate the Facilities and the Properties. Such removal and evacuation shall be done in such manner as to avoid any damage to the facilities and other properties to be occupied by the Buyer and any material disruption of the business operations to be conducted by Buyer after the Closing. Any damage to the Purchased Assets or to the facilities resulting from such removal and evacuation shall be paid by the Seller. Should the Seller fail to remove the Excluded Assets as required by this Section, the Buyer shall have the right, but not the obligation, (a) to remove the Excluded Assets at the Seller's sole cost and expense; (b) to store the Excluded Assets and to charge the Seller all storage costs associated therewith; (c) to treat the Excluded Assets as unclaimed and to proceed to dispose of the same under the laws governing unclaimed property; or (d) to exercise any other right or remedy conferred by this Agreement. The Seller shall promptly reimburse the Buyer for all costs and expenses reasonably incurred by the Buyer in connection with any Excluded Assets not removed by the Seller on or before the Closing Date or other agreed upon date. 50 9.8 Intentionally Deleted 9.9 Retention of and Access to Records (a) After the Closing Date, the Buyer shall retain for a period of six (6) years those records of the Seller delivered to the Buyer. The Buyer also shall provide the Seller and its representatives reasonable access thereto, during normal business hours and on at least three days' prior written notice, to enable them to prepare financial statements or tax returns or deal with tax audits. Before destroying any of the aforementioned records of the Seller, the Buyer shall first make a written offer of such records to the Guarantor. If the Guarantor does not respond to such written offer within fifteen (15) days or receipt of such notice, the Buyer shall have no further obligations to the Seller or the Guarantor with respect to such records. (b) After the Closing Date, the Seller shall retain for a period of six (6) years those records of the Seller relating to the Business that are Excluded Assets. The Seller shall provide the Buyer and its representatives reasonable access to records of the Seller relating to the Business that are Excluded Assets including the Books of Account, during normal business hours and on at least three days' prior written notice, for any reasonable business purpose specified by the Buyer in such notice. Before destroying any of the aforementioned records relating to the Business that are Excluded Assets, the Seller shall first make a written offer of such records to the Buyer. If the Buyer does not respond to such written offer within fifteen (15) days of receipt of such notice, the Guarantor and the Seller shall have no further obligations to the Buyer with respect to such records. 9.10 Change of Corporate Name Within fifteen (15) business days after the Closing Date, the Guarantor shall take all actions and make all filings necessary to remove the word "Graphics" from the Seller's corporate name. 10. Termination, Waiver and Amendment 10.1 Termination Provisions (a) This Agreement may be terminated at any time prior to the Closing by mutual consent of the Seller and the Buyer. (b) At any time prior to Closing, the Buyer may act alone to terminate the Agreement in the form of a written notice to the Seller, (i) if there is or shall be any material misrepresentation, error, misstatement or omission in or material breach of any representation or warranty by the Seller pursuant to this Agreement, the Closing Documents and any other document and instrument required to be delivered herewith (ii) if the Guarantor or the Seller, in a materially adverse respect, shall breach any covenant in this Agreement, or (iii) if there shall be a failure of any of the conditions to which the Parent's or the Buyer's obligations are subject under this Agreement. 51 (c) At any time prior to Closing, the Seller may act alone to terminate the Agreement in the form of a written notice to the Buyer (i) if there is or shall be any material misrepresentation, error, misstatement or omission in or material breach of any material representation or warranty by the Buyer pursuant to this Agreement, the Closing Documents and any other document and instrument required to be delivered herewith (ii) if the Buyer, in a materially adverse respect, shall breach any covenant in this Agreement, or (iii) if there shall be a failure of any of the conditions to which Seller's obligations are subject under this Agreement. (d) This Agreement may be terminated by either the Buyer or the Seller if the Closing has not occurred by the close of business on 12 October, 2001. 10.2 Effect of Termination (a) In the event of termination of this Agreement pursuant to Section 10.1(a), this Agreement shall forthwith become void and there shall be no liability on the part of any party hereto or any of its affiliates, directors, officers, or shareholders. (b) Termination of this Agreement pursuant to Sections 10.1(b), (c) or (d) shall not in any way terminate, limit or restrict the rights and remedies of any party hereto against any other party for breach of this Agreement. 10.3. Amendment The parties hereto may amend, modify or supplement this Agreement in such manner as may be agreed upon by them in writing at any time. 10.4 Waiver Any party may waive in writing the performance of any covenant or the fulfillment of any condition of this Agreement. The failure of any party at any time or times to require performance of any provision hereof shall in no manner affect such party's right at a later time to enforce the same. 11. Miscellaneous 11.1 Expenses The Buyer and the Seller shall pay the fees and expenses of their respective solicitors, accountants and other experts representing them as well as all other expenses incurred by such parties incident to the negotiation and consummation of the transactions contemplated hereby except that stamp duty payable on accounts receivable shall be borne equally between the Seller and the Buyer. 11.2 Notices All notices, consents or other communications required or permitted to be given under this Agreement shall be in writing and shall be deemed to have been duly given when delivered personally, delivery charges prepaid, or three 52 business days after being sent by recorded delivery postage prepaid or one business day after being sent by a nationally recognized express courier service, postage or delivery charges prepaid, to the parties at their respective addresses stated below. Any party may change its address for notice and the address to which copies must be sent by giving notice of the new address to the other parties in accordance with this Section 11.2, except that any such change of address notice shall not be effective unless and until received. (a) if to the Seller, to Hunt Graphics Europe Limited C/O Hunt Corporation One Commerce Square 2005 Market Street Philadelphia, PA 19103-6999 Attention: Donald L. Thompson Chairman and CEO Telephone No (215) 841-2400 Fax No (215) 656-3714 with a copy (which shall not constitute notice) to: Pritchard Englefield 14 New Street London EC2M 4HE Attention: David Glass Tel: 020 7 972 9720 Fax: 020 7 972 9721 (b) if to the Guarantor, to Hunt Corporation One Commerce Square 2005 Market Street Philadelphia, PA 19103-6999 USA Attention: Donald L. Thompson. Chairman and CEO Telephone No: (215) 841-2400 Fax No: (215) 656-3714 with a copy (which shall not constitute notice) to: John C. Bennett, Inc. Drinker Biddle & Reath LLP One Logan Square 18th & Cherry Streets Philadelphia, Pennsylvania 19103-6996 USA Telephone No.: (215) 988-2810 Fax No: (215) 988-2757 53 (c) if to the Buyer, then to Seal Graphics UK Limited C/O Neschen AG Hans Neschen Strasse 1 D-3165 Bueckeburg Germany Attention: The Directors Telephone No: 49 57222070 Fax No: 49 5722207209 with a copy (which shall not constitute notice) to: Maxwell Batley 27 Chancery Lane London WC2A 1PA Attention: Christopher North Tel: 0207 440 4450 Fax: 0207 440 4444 (d) if to the Parent, then to Neschen AG Hans Neschen Strasse 1 D- 3165 Bueckeburg Germany Attention: The Directors Telephone No: 49 57222070 Fax No: 49 5722207209 with a copy (which shall not constitute notice) to: Abels, Decker, Kuhfuss & Partner Tersteegenstrasse 28 D- 40474 Duesseldorf Germany Attention: Prof. Dr. Iur. G. Real Telephone No: 49 211 47838125 Fax No: 49 211 47838111 54 11.3 Entire Agreement This Agreement, including the Exhibits and Schedules hereto and to the Disclosure Letter constitutes the entire agreement among the parties and supersedes all prior agreements and undertakings, oral and written, among the parties hereto with respect to the subject matter hereof, except the Nondisclosure Agreement dated 25 April 2001 between the Guarantor and Parent. The Buyer acknowledges that it has not been induced to enter into this Agreement by any representation, warranty, promise or assurance by the Seller, the Guarantor or any other person save for the warranties set out in this Agreement. The Buyer agrees that (except in respect of fraud) it or they shall have no right of remedy in respect of any representations, warranty, promise or assurance save for those contained in this Agreement. 11.4 Binding Effect and Benefit (a) This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective successors, heirs and assigns. Nothing in this Agreement, expressed or implied, is intended to confer on any other Person other than the parties hereto or their respective successors, heirs and assigns, any rights, remedies, obligations or liabilities under or by reason of this Agreement. (b) A person who is not a party to this Agreement has no right under the Contracts (Rights of Third Parties) Act 1999 to rely upon or enforce any term of this Agreement but this does not affect any right or remedy of a third party which exists or is available apart from the Act. Except in so far as this Agreement expressly provides, none of the parties may declare itself a trustee of the rights under this Agreement for the benefit of any third party. (c) If the Guarantor ceases to exist as a result of a transaction that involves a Change in Control (as defined in Section 11.13 hereof), it is specifically intended that any successor entity be bound by this Agreement. The Guarantor shall ensure that any agreement relating to a Change in Control requires the successor entity to specifically assume all liabilities under this Agreement. Failure of the successor to assume this Agreement shall be considered a breach of this Agreement by the Guarantor. (d) If the Parent ceases to exist as a result of a transaction that involves a change in control (as defined in Section 11.13 hereof), it is specifically intended that any successor entity be bound by this Agreement. The Parent shall ensure that any agreement relating to a change of control requires the successor entity to specifically assume all liabilities under this Agreement. Failure of the successor to assume this Agreement shall be considered a breach of this Agreement by the Parent. 11.5 Assignability (a) This Agreement shall not be assignable by any party hereto without the prior written consent of the other parties hereto; provided, however, that the Buyer shall be permitted to assign all or any part of its rights or obligations hereunder to any entity (i) in which it has a controlling interest or (ii) which has a controlling interest in it or (iii) which is under common control with it. 55 (b) Regardless of any assignment hereunder by the Seller, the Guarantor shall continue to be bound by any and all obligations or liabilities of the Seller under this Agreement, the Closing Documents and any other document or instrument required to be delivered in connection with this Agreement. (c) Regardless of any assignment hereunder by the Buyer, the Parent shall continue to be bound by any and all obligations or liabilities of the Buyer under this Agreement (as above). 11.6 Severability If any provision of this Agreement is held invalid, illegal or unenforceable by any court of competent jurisdiction, the other provisions of this Agreement will remain in full force and effect. Any provision of this Agreement held invalid, illegal or unenforceable only in part or degree will remain in full force and effect to the extent not held invalid or unenforceable. 11.7 Headings; Interpretation Headings of sections and subsections contained in this Agreement are for reference purposes only and shall not affect the meaning or interpretation of this Agreement. 11.8 Counterparts This Agreement and each of the Closing Documents may be executed in any number of counterparts, each of which shall be deemed to be an original and all of which together shall be deemed to be one and the same instrument. The exchange of copies of this Agreement and the Closing Documents and the signature pages by facsimile transmission shall constitute effective execution and delivery of this Agreement and each of the Closing Documents as to the parties may be used in lieu of the original Agreement and the Closing Documents for all purposes. Signatures of the parties transmitted by facsimile shall be deemed to be their original signatures for all purposes. As promptly as practicable after the Closing Date, each party hereunder shall deliver to the other parties the original executed signature pages, but the failure to deliver such pages shall not affect the validity or enforceability of this Agreement or any of the Closing Documents. 11.9 Governing Law This Agreement shall be construed, governed and enforced in accordance with the laws of England and the Guarantor agrees that service upon the Seller of any proceedings relating to this Agreement or any document entered into pursuant hereto shall constitute good service upon the Guarantor and the Parent agrees that service upon the Buyer of any proceedings relating to this Agreement or any document entered into pursuant hereto shall constitute good service upon the Parent. 56 11.10 Schedules All schedules which are attached hereto are incorporated hereby by this reference. 11.11 Publicity Neither the Guarantor nor the Seller, on the one hand, nor the Buyer or the Parent on the other, shall issue any press release or make any public announcement or disclosure relating in any way to the transactions contemplated hereby or to the negotiations of the parties concerning the same without prior written consultation with the other party as to form and content of such announcement or disclosure, provided, however, that, as to announcements or disclosures required of such party by law or by the applicable rules of any stock exchange or stock market such party shall only be required to use its reasonable efforts to advise the other of the form and content of any such announcement or disclosure. 11.12 Dispute Resolution All disputes arising out of or in connection with this Agreement and the transactions contemplated herein (other than disputes arising out of Section 2.3 hereof) shall be submitted to arbitration pursuant to the Rules of Arbitration of the International Chamber of Commerce. Such arbitration shall be held in Paris, France and shall be conducted in English by three (3) arbitrators appointed in accordance with said Rules. 11.13 Definitions (a) A "Change in Control" of the Guarantor or the Parent occurs when: (i) Any person, partnership, corporation, trust or similar entity or group, that does not control more than 25% of the voting securities of such party as of the Effective Time of this Agreement, acquires or obtains control of more than 25% of the voting securities of such party; (ii) More than 25% of the operating assets of such party are sold or otherwise disposed of, or such party liquidates more than 25% of its operating assets in the case of the Guarantor excluding the sale of the Business contemplated by this Agreement; or (iii) Such party merges with any other corporation, regardless of whether such party is the surviving entity after the merger, except for a merger in which the shareholders of such party who were shareholders of such party prior to a Change in Control continue to own 75% or more of the merged companies. For purposes of this definition, the term "group" shall mean any person who acts in concert within the meaning of Section 14(d)(2) of the Securities Exchange Act of 1934 of the USA, as amended (or under similar provisions of any applicable foreign securities laws). 57 (b) "Knowledge" - an individual will be deemed to have "Knowledge" of a particular fact or other matter if: (i) such individual is actually aware of such fact or other matter; or (ii) a prudent individual could be expected to discover or otherwise become aware of such fact or other matter in the course of conducting a reasonable investigation concerning the existence of such fact or other matter. The Seller will be deemed to have "Knowledge" of a particular fact or other matter if the officers of the Seller have knowledge of such fact or other matter. (c) "Ordinary Course of Business" - an action taken by a Person will be deemed to have been taken in the Ordinary Course of Business only if that action: (i) is consistent in nature, scope and magnitude with the past practices of such Person and is taken in the ordinary course of the regular, day-to-day operations of such Person; (ii) does not require authorization by the board of directors or shareholders of such Person (or by and Person or group of Persons exercising similar authority). (d) "Person" - an individual, partnership, corporation, business trust, limited liability company, limited liability partnership, joint stock company, trust, unincorporated association, joint venture or other entity or governmental body. (e) "affiliate" - in relation to a party means any subsidiary or holding company of that party or any other subsidiary of that holding company and holding company and subsidiary company shall be defined in accordance with the Companies Act 1985 (as amended). (f) "dollars" - US Dollars 12. (a) Hunt Guarantee 12.1 In consideration of the Parent and the Buyer ("Neschen Guarantee Parties") entering into this Agreement the Guarantor hereby unconditionally and irrevocably guarantees to the Neschen Guarantee Parties the due and punctual performance by the Seller of all its obligations under this Agreement and under all agreements entered into pursuant hereto (including all variations, extensions and renewals), and undertakes to indemnify and keep indemnified the Neschen Guarantee Parties against all losses, damages, costs and expenses of whatsoever nature (including legal fees) which may be suffered or incurred by any of them by reason of any default or delay on the part of the Seller in the performance of the said obligations upon receipt of any of the Neschen Guarantee Parties' first demand in writing. 12.2 The Guarantor hereby irrevocably waives any right to require that any of them brings proceedings first against the Seller. 12.3 The Guarantor shall be liable as a principal debtor in respect of any sums due under Article 12.1 and the Guarantor shall not be discharged or 58 released from its undertaking hereunder by any arrangement made between the other parties hereto or by any alteration in the obligations on the part of the Seller under this Agreement or by any other release, variation, dealing, act, event or omission (including, without limitation, any change in the Memorandum or Articles of Association or other constitutional documents of the Seller or the Guarantor or the liquidation, dissolution, reconstruction or amalgamation of the Seller or the Guarantor) which but for this provision might operate to impair or discharge the Guarantor's liability hereunder or by any time or other indulgence granted by the Buyer to the Seller. 12.4 The obligations of the Guarantor under this Guarantee shall continue notwithstanding Closing and this Guarantee shall remain in force until all obligations of the Seller hereby guaranteed have been discharged in full. This Guarantee is in addition to and shall not prejudice or be prejudiced by any other guarantee, indemnity or other security or right against any third party which any of the Neschen Guarantee Parties may have for the due performance of the obligations concerned. 12.5 Until the obligations and liabilities of the Seller hereunder have been performed or satisfied in full (whether by it or by the Guarantor under the provisions of this Article): (a) the Guarantor shall not claim or prove against the Seller in competition with the any of Neschen Guarantee Parties in respect of any payment made by the Guarantor to any of the Neschen Guarantee Parties hereunder; and (b) the Guarantor shall not claim or have the benefit of: (i) any set-off, counterclaim or proof against the Seller; (ii) any dividend, composition or payment by the Seller; (iii) any other security to which any of the Neschen Guarantee Parties may be entitled in respect of the said obligations and liabilities or share therein. 12 (b) Neschen Guarantee 12.1 In consideration of the Guarantor and the Seller ("Hunt Guarantee Parties") entering into this Agreement the Parent hereby unconditionally and irrevocably guarantees to the Hunt Guarantee Parties the due and punctual performance by the Buyer of all its obligations under this Agreement and under all agreements entered into pursuant hereto (including all variations, extensions and renewals), and undertakes to indemnify and keep indemnified the Hunt Guarantee Parties against all losses, damages, costs and expenses of whatsoever nature (including legal fees) which may be suffered or incurred by any of them by reason of any default or delay on the part of the Buyer in the performance of the said obligations upon receipt of any of the Hunt Guarantee Parties' first demand in writing. 59 12.2 The Parent hereby irrevocably waives any right to require that any of them brings proceedings first against the Buyer. 12.3 The Parent shall be liable as a principal debtor in respect of any sums due under Article 12.1 and the Parent shall not be discharged or released from its undertaking hereunder by any arrangement made between the other parties hereto or by any alteration in the obligations on the part of the Buyer under this Agreement or by any other release, variation, dealing, act, event or omission (including, without limitation, any change in the Memorandum or Articles of Association or other constitutional documents of the Buyer or the Parent or the liquidation, dissolution, reconstruction or amalgamation of the Buyer or the Parent) which but for this provision might operate to impair or discharge the Parent's liability hereunder or by any time or other indulgence granted by the Seller to the Buyer. 12.4 The obligations of the Parent under this Guarantee shall continue notwithstanding Closing and this Guarantee shall remain in force until all obligations of the Buyer hereby guaranteed have been discharged in full. This Guarantee is in addition to and shall not prejudice or be prejudiced by any other guarantee, indemnity or other security or right against any third party which any of the Hunt Guarantee Parties may have for the due performance of the obligations concerned. 12.5 Until the obligations and liabilities of the Buyer hereunder have been performed or satisfied in full (whether by it or by the Parent under the provisions of this Article): (a) the Parent shall not claim or prove against the Buyer in competition with the any of the Hunt Guarantee Parties in respect of any payment made by the Parent to any of the Hunt Guarantee Parties hereunder; and (b) the Parent shall not claim or have the benefit of: (i) any set-off, counterclaim or proof against the Buyer; (ii) any dividend, composition or payment by the Buyer; (iii) any other security to which any of the Hunt Guarantee Parties may be entitled in respect of the said obligations and liabilities or share therein. 13. VAT 13.1 The parties shall use their best endeavours to ensure that the provisions of Article 5 of the Value Added Tax (Special Provisions) Order 1995 ("Article 5") apply to the sale of the Purchased Assets pursuant to this Agreement. 13.2 The Seller undertakes with the Buyer that it will forthwith upon Completion apply to H.M. Customs & Excise for confirmation that Article 5 60 applies to the sale of Purchased Assets pursuant to this Agreement and that accordingly no VAT will be chargeable by the Seller to the Buyer and in the event that H.M. Customs & Excise notify the Seller in writing that the provisions of Article 5 are not applicable the Seller shall deliver a copy of such notification to the Buyer forthwith upon its receipt and subject to receipt by the Buyer from the Seller of a VAT invoice in respect of such sale of the Purchased Assets the Buyer shall pay the VAT due in respect thereof within 30 days of such receipt, provided that: (a) the Seller but at the Buyer's expense shall conduct all correspondence and proceedings in relation to the payment of such VAT; (b) in the event that the Buyer shall pay VAT which is subsequently recoverable by the Seller any supplements repayable to the Seller shall be paid over to the Buyer forthwith; and (c) the Seller shall provide the Buyer with copies of all correspondence with (and documents submitted to) H.M. Customs & Excise pursuant to this clause. 14. Pensions The provisions of Schedule 14 shall apply. 15. Environmental 15.1 The Buyer shall indemnify the Seller in respect of any liability arising under any Environmental Law (as defined in Section 3.23 hereof) arising out of or relating to the operation of the Business and the leasing or operation of the Properties by the Buyer after the Closing Date Provided Always that such liability on the part of the Buyer shall be limited to such actual liability as may be disclosed by the results of a Phase 1a Audit to be carried out in accordance with the report guidance ("the Second Audit") at expiry or sooner determination of the terms demised by the Leases or either of them ("Expiry") and which identifies the liability as arising directly from the Buyer's occupation and use of the Properties and the operation of the Business. 15.2 The Seller and the Buyer shall instruct Environmental Assessment Group Limited (EAG) (or other environmental consultant agreed between the Seller and Buyer, failing such agreement, an environmental consultant with not less than 5 years' experience relevant to environmental auditing nominated at the request of either the Seller or the Buyer by or on behalf of the Chief Executive for the time being of the Environmental Auditors Registration Association or, if he or she is unable to make such nomination within 28 days of the request made to him or her, by the Chartered Institute of Arbitrators) ("the environmental consultant") to carry out in relation to the Properties (1) the First Audit in accordance with Section 1.5 (h)(a)-(d) and (2) the Second Audit at or before Expiry PROVIDED THAT the parties agree that the standard of remediation, if any, for which either party shall be responsible to the other shall be fixed at the level of continuing industrial use of the Properties for the Business and not at 61 a higher level. The fees and expenses of the said environmental consultant shall be borne equally between the Seller and Buyer and his decision shall in the absence of manifest error be final and binding on the parties hereto 15.3 The Seller agrees with the Buyer that if an enforcement notice (the "Notice") is served by a relevant statutory authority before Expiry in relation to any liabilities incurred and identified in the First Audit as those liabilities identified in Section 1.5(h)(a)-(d) then the Buyer shall at the request of the Seller vacate the Properties or either of them if required by the Notice as soon as practicable and the Seller shall as soon as practicable undertake and complete such remediation works as are required by the Notice which works shall be carried out and completed to the satisfaction of the relevant statutory authority PROVIDED THAT if a Notice is served at any time before or after Expiry and the Second Audit reveals that the Notice relates in whole or in part to the operation by the Buyer at the relevant Property of the Business after the Closing Date then the Buyer shall indemnify the Seller for the whole or an appropriate percentage of all costs expenses and VAT incurred by the Seller in complying with the Notice. 62 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. HUNT CORPORATION By:____________________________ Name: Title: HUNT GRAPHICS EUROPE LIMITED By:____________________________ Name: Title: SEAL GRAPHICS UK LIMITED By:____________________________ Name: Title: NESCHEN A.G. By:_____________________________ Name: Title: SCHEDULE 1.3(g) Part A1 THE PROPERTIES A1(a) -------------------------------------------------------------------------------- WOLLASTON PROPERTY -------------------------------------------------------------------------------- Leasehold land and buildings known as Unit 1, Watkins Close, Wollaston Way, Basildon, Essex as is registered with title absolute at H. M. Land Registry under Title Number EX594560 -------------------------------------------------------------------------------- A1(b) -------------------------------------------------------------------------------- CHESTER PROPERTY -------------------------------------------------------------------------------- Freehold land and buildings known as:- (a) land and buildings on the east side of Chester Hall Lane, Pipps Hill Industrial Estate, Basildon, Essex registered with title absolute under Title Number EX533936 (b) land and buildings on the north side of Bentalls, Basildon, Essex registered with title absolute under Title Number EX311537 -------------------------------------------------------------------------------- PART A2 THE EXCLUDED PROPERTIES -------------------------------------------------------------------------------- Freehold land known as land to the east of Wollaston Way, Basildon as is registered with title absolute under Title Number EX649379 -------------------------------------------------------------------------------- Leasehold land and buildings known as Unit 6 Scimitar Centre, Courtauld Road, Basildon, Essex registered with title absolute under Title Number EX463880 -------------------------------------------------------------------------------- 2 PART B 1. CONDITIONS A. Agreement to Sell Subject to the terms and conditions of this Schedule:- 1. The Seller shall procure on Actual Completion grant or procure the grant of the Relevant Lease or Leases to the Buyer subject to the provisions hereunder. 2. The Leases are to have effect as if expressly made subject to all of the terms of Part B of this Schedule. B. Requisite Consent 1. Where Requisite Consent has not been obtained by the Closing Date but the Court Order has been obtained the Buyer may at any time elect to waive the Requisite Consent and call for the Wollaston Lease to be granted at its option and at its own risk. 2. The Seller will make application in the agreed terms for the Requisite Consent for the grant of the Wollaston Lease and will at the joint cost of the Seller and the Buyer use reasonable endeavours to obtain the Requisite Consent (but not so as to include any obligation on the Seller to pay or procure the payment of any monies to any reversioner save in respect of reversioner's professional fees). 3. The Buyer and the Seller shall jointly apply for the Court Order(s) (if not obtained on or before the date hereof) and shall do all that is reasonably necessary to procure that the court grants the Court Order(s) and the Buyer shall give to the Seller, without delay, all reasonable assistance, in each case, in respect of the grant of the Court Order(s) and/or the Requisite Consent (as the case may be) and the Buyer shall support the applications and proceedings under this clause. 4. If so reasonably required by the reversioner of the Wollaston Headlease, the Buyer shall agree to amend the Wollaston Lease and do all that is necessary to assist the Seller in an application for a fresh Court Order for the Wollaston Lease and the Buyer and the Parent shall promptly execute the Wollaston Lease and the Requisite Consent or other deed in order to give to the reversioner and/or superior lessor (if reasonably required) a direct covenant by the Buyer to pay any rent reserved by, and to perform and observe any other obligation on the part of the tenant contained in the Wollaston Headlease for the residue of the term thereof and shall provide for an opinion letter to be delivered in a form reasonably acceptable to the reversioner. 3 5. From the Closing Date to Actual Completion ("the Interim Period") where Requisite Consent and/or the Court Order has not been obtained:- (i) the Seller shall allow the Buyer to take actual possession of the Properties (or either of them) and to carry on business thereat at its own risk as if Actual Completion had been effected; (ii) the Buyer shall pay the rents, insurance rents, service charges and other sums and outgoings reserved by the Leases on the due date; (iii) if the reversioner of the Wollaston Lease objects to the fact of the Buyer making payment in accordance with sub-paragraph 2(ii) above, subject to first being put into funds by the Buyer which are to be used for such purpose, the Seller shall pay or shall procure the payment of the rents, service charges and other sums and outgoings reserved by the Wollaston Headlease together with value added tax; (iv) the Buyer will observe and perform the covenants and conditions contained in the Leases (and in the case of the Wollaston Property the Wollaston Headlease); (v) the Buyer acknowledges that as against any person from whom a Requisite Consent is to be obtained it has no right to possession or occupation of the Wollaston Property; (vi) the Buyer shall be subject to and have the benefit of the same rights exceptions reservations covenants conditions and other provisions as are contained in the Leases (so far as they are applicable to occupation by a licensee and not inconsistent with any provision of this Agreement); (vii) the Buyer shall indemnify the Seller against any losses damages claims liabilities costs and expenses (including without limitation legal costs and expenses) in any way arising from the occupation of the Properties by the Buyer prior to completion of the Leases (or in the case of the Wollaston Property incurred as a result of any forfeiture proceedings or any other action being taken by the reversioner arising out of a breach of the alienation covenants in the Wollaston Headlease and the Buyer shall have no claim against the Seller if the Buyer's occupation results in forfeiture of the Wollaston Headlease by the reversioner). 4 PART C Definitions for the purposes of this Schedule "Actual Completion Date" means the date on which completion of the grant of the Relevant Lease or Leases to the Buyer pursuant to Part B of this Schedule actually takes place and "Actual Completion" shall be construed accordingly; "Court Order" means an order or orders of the Mayors and City of London County Court granted at the application of the Seller, Aquabind and the Buyer, as the case may be for exclusion of the Lease(s) from the protection of Sections 24-28 of the Landlord and Tenant Act 1954 Part II "Documents" means all documents listed in Part D of this Schedule including without limitation (in relation to the Wollaston Property) the Wollaston Headlease, "Encumbrance" means a mortgage, charge, pledge, lien, option, restriction, right of first refusal, right of pre-emption, third party right or interest, other encumbrance or security interest of any kind; "Planning Acts" means the Town and Country Planning Act 1990, the Planning (Listed Buildings and Conservation Areas) Act 1990, the Planning (Hazardous Substances) Act 1990, the Planning (Consequential Provisions) Act 1990 and the Planning and Compensation Act 1991, and includes any other applicable town and country planning legislation; "Requisite Consent" means consent (or variation or waiver) from any reversioner or other third party in relation to the grant of the Wollaston Lease to the Buyer, and "reversioner" means the landlord or reversioner for the time being under the Wollaston Headlease; "Wollaston Headlease" means the headlease of the Wollaston Property more particularly described as Item 1 of Part D hereof as registered with title absolute at H. M. Land Registry under Title Number EX594560; "Leases" means (together) the Wollaston Lease and the Chester Lease and "Lease" and "Relevant Lease" shall be construed accordingly; "Properties" means (together the Wollaston Property and the Chester Property and where the context so admits shall include the whole and any part or parts thereof and "Property" and "Relevant Property" shall be construed accordingly PROVIDED THAT for the avoidance of doubt the Excluded Properties are not included in the definition of Properties for the purposes of this Agreement; "Wollaston Property" means the property more particularly described in Part A1(a) of the Schedule; "Chester Property" means the property more particularly described in Part A1(b) of this Schedule; 5 PART D The Documents In respect of the Wollaston Lease:-
-------- -------------------- --------------------------------- ----------------------------------------------- Date Document Parties -------- -------------------- --------------------------------- ----------------------------------------------- 1. 19 March 1998 Lease (1) Regent Square Estates Limited (2) Hunt Graphics Europe Limited -------- -------------------- --------------------------------- ----------------------------------------------- 2. 19 March 1998 Side Letter From Regent Square Estates (London) Limited re alterations to Hunt Graphics Europe Limited -------- -------------------- --------------------------------- ----------------------------------------------- 3. 19 March 1998 Licence for Alterations (1) Regent Square Estates Limited (2) Hunt Graphics Europe Limited -------- -------------------- --------------------------------- ----------------------------------------------- 4. 16 October 1998 Deed of Variation (1) Nestle UK Pension Trust Limited (2) Hunt Graphics Europe Limited -------- -------------------- --------------------------------- ----------------------------------------------- 5. Entries 1 and 3 on the property register and entries 1, 2, 3 and 4 on the charges register of title number EX594560 -------- -------------------- --------------------------------- -----------------------------------------------
In respect of the Chester Lease:-
-------- -------------------- --------------------------------- ----------------------------------------------- Date Document Parties -------- -------------------- --------------------------------- ----------------------------------------------- 1. All entries on the property and charges registers of title numbers EX311537 and EX533936 -------- -------------------- --------------------------------- -----------------------------------------------
6 SCHEDULE 14 ----------- 1. INTERPRETATIONS In this Schedule where the context so admits:- (1) "Actuarial Assumptions" means the actuarial assumptions and method set out in the Actuarial profession's MFR Guidance Note (GN27) (2) "Actuary" means a Fellow of the Institute of Actuaries or of the Faculty of Actuaries in Scotland; (3) "Buyer's Actuary" means Wolanski & Co or such other actuary as the Buyer may appoint for the purposes of this Schedule (4) "Buyer's Scheme" means the new Scheme to be established by the Buyer under paragraph 3 of this Schedule; (5) "Completion" means the Closing Date as defined in clause 1.6 of this Agreement; (6) "Employees" means employees of the Seller specified in Schedule 3.11 to the Disclosure Letter; (7) "Escrow Account" means an interest bearing deposit account to be opened with Coutts & Co., 440 Strand, London WC2R 0QS in the joint names of Maxwell Batley and Pritchard Englefield which account shall only be operated on the instructions of the authorised signatories from each firm and in accordance with the terms of this Schedule and shall be free from any lien charge encumbrance set-off or counterclaim; (8) "Escrow Agents" means Maxwell Batley and Pritchard Englefield; (9) "Interest" means in respect of any period and any principal sum an amount of interest (accruing daily and compounded monthly) at a rate equal to the rate from time to time payable on the Seller's Scheme's deposit account with Lloyd TSB Bank plc; (10) "Interim Period" means the period commencing on the Effective Time and ending on the day immediately preceding the Pension Transfer Date; (11) "Interim Value" means the cash equivalent in respect of the Transferring Employees calculated on the basis of pensionable service up to the day immediately preceding the Effective Time in accordance with the Actual Assumptions; (12) "MFR" means the minimum funding requirement referred to in section 56 of the Pensions Act 1995; (13) "Payment Date" means the date which falls seven days after the later of:- (a) the date upon which the amount of the Transfer Value is certified in accordance with paragraph 5.1; and (b) the date upon which the Buyer notifies the Seller in writing that the Buyer's Scheme is an Exempt Approved Scheme (within the meaning of Section 592 of the Taxes Act) or that the Board of Inland Revenue has confirmed that the Buyer's Scheme may accept a transfer payment from the Seller's Scheme and (in either case) that if the employment of the 7 Transferring Employees is to be contracted-out by reference to the Buyer's Scheme the Buyer holds or is named in a Contracting-Out Certificate in respect of the Buyer's Scheme; unless before the date first referred to in this definition the Transfer Value is paid in full in accordance with paragraph 5.2 in which event the date on which that payment is made; (14) "Pensionable Employee" means an Employee (other than Derek Frank Wotton and Karen Wyatt) who on the day immediately preceding the Effective Time is or but for being absent from work would be, in pensionable service under the Seller's Scheme; (15) "Pension Transfer Date" means 31 December 2001 or such earlier date as may be agreed between the Seller and the Buyer the agreement of the Seller not to be unreasonably withheld or delayed or as the Inland Revenue may require for the cessation of participation of the Buyer in the Seller's Scheme or (16) "Section 9 (2B) Rights" has the meaning as in the Occupational Pension Schemes (Contracting Out) Regulations 1996, as amended; (17) "Seller's Actuary" means COLIN D. BAMFORD of Entegria Limited of Clarkson House Canterbury Kent CT1 2UT (or such other Actuary as the Seller may appoint for the purposes of this Schedule); (18) "the Seller's Scheme" means the Hunt Graphics Europe Limited Pension Scheme which was established by a Trust Deed dated 26th April 1993 (or the Trustees from time to time of that scheme as the context requires); (19) "Transferring Employee" means a person who on the day immediately preceding the Effective Time is a Pensionable Employee and who:- (a) accepts the offer of membership of the Buyer's Scheme to be made pursuant to paragraph 3.2 and joins the Buyer's Scheme with effect from the Pension Transfer Date; and (b) consents in writing to a transfer payment being made in respect of him to the Buyer's Scheme from the Seller's Scheme; (20) "Transfer Value" means the cash equivalent in respect of the Transferring Employees calculated on the basis of pensionable service up to the Pension Transfer Date in accordance with the Actuarial Assumptions; (B) Contracting-out Terms In this Schedule where the context admits "contracted-out" "contracted-out scheme" "contracting-out certificate" "guaranteed minimum" and "guaranteed minimum pension" shall have the same meanings as in the Pension Schemes Act 1993 2. DATA The Seller and the Buyer shall each use all reasonable endeavours to procure that all such information as the Seller's Actuary or the Buyer's Actuary or any independent Actuary appointed under Paragraph 7 may reasonably request for the purposes of this Schedule is supplied promptly to such Actuary and that all such information is complete and accurate in all respects. 8 3. THE BUYER'S SCHEME 3.1 Buyer to provide Scheme The Buyer shall nominate or procure the nomination of a Retirement Benefits Scheme established before or as soon as practicable after Completion for the purposes of this Schedule which is 3.1.1 either designed to be capable of being an Exempt Approved Scheme (within the meaning of the Taxes Act Section 592) and is an arrangement capable of receiving the accrued rights under the Seller's Scheme of the Transferring Employees to guaranteed minimum pensions and if appropriate the Section 9 (2)(B) Rights or 3.1.2 is a personal pension scheme or fund, scheme or arrangement, approved by the Board of the Inland Revenue for the purpose of receiving the Transfer Value in respect of a Transferring Employee 3.1.3 and is an arrangement to which the Trustees of the Seller's Scheme can make a transfer of assets without prejudicing the position of the Seller's Scheme as approved as an exempt scheme under Chapter 1 of Part XIV of the Taxes Act. 3.2 Buyer to offer Membership The Buyer shall procure that the Pensionable Employees are offered membership of the Buyer's Scheme with effect from the Pension Transfer Date. The Buyer's Scheme shall (at the Buyer's option) be of either the final salary or money purchase type or a personal pension scheme and the Buyer shall procure that in respect of service before the Pension Transfer Date benefits are provided under the Buyer's Scheme as stated in 3.3 or 3.4 below (as applicable) subject to the transfer or payment being made in full in accordance with paragraph 5 or 6 and to the powers of amendment and discontinuance under the Buyer's Scheme. 3.3 Final Salary Scheme The Transferring Employees are credited under the Buyer's Scheme in respect of pensionable service up to the Pension Transfer Date with benefits which would (if the credit has been made on the Pension Transfer Date) have had on that date a capital value which in the opinion of the Buyer's Actuary (or as the case may be in the opinion of the independent Actuary appointed under paragraph 7) equals (or as nearly as may be) the Transfer Value and for this purpose the Actuarial Assumptions shall apply mutatis mutandis. 3.4 Money Purchase Scheme or Personal Pension Plan The benefits are such that the Buyer's Actuary (or as the case may be the independent Actuary appointed under paragraph 7) shall certify the apportioned amount of the Transfer Value to be credited to each Transferring Employee and that amount will be credited to an account in the Buyer's Scheme designated for that Transferring Employee and 9 that amount adjusted for investment return (positive or negative) less relevant expenses after the Payment Date shall (subject to the requirements for approval of the Buyer's Scheme by the Board of the Inland Revenue) be applied exclusively for the benefit of that Transferring Employee in respect of his service before the Pension Transfer Date. 4. INTERIM PERIOD 4.1 The Seller undertakes with the Buyer that 4.1.1 subject to the approval of the Seller's Scheme under Chapter 1 Part XIV of the Taxes Act not being prejudiced and subject to the Buyer fulfilling its obligations under paragraph 4.2 the Buyer shall participate as a Participating Employer in and the Pensionable Employees shall continue to participate as Members of the Seller's Scheme during the Interim Period; 4.1.2 The Seller shall use reasonable endeavours to assist the Buyer to procure that such of the Pensionable Employees as are in contracted out employment by reference to the Seller's Scheme on the day immediately preceding the Effective Time shall continue to be in contracted out employment by reference to the Seller's Scheme 4.2 The Buyer shall:- 4.2.1 pay promptly to the Seller's Scheme during the Interim Period and on the same days as now paid by the Seller the Employer's contributions and the Employees' contributions in respect of the Pensionable Employees, at the following rates Employer's contributions - 10.75% of Pensionable Salaries, Employee's contributions - 4.90% of Pensionable Salaries; 4.2.2 shall not take any action or omit to take any action during the Interim Period which would prejudice the approval of the Seller's Scheme as an exempt scheme or as a contracted out scheme; 4.2.3 shall not take any action in respect of the Interim Period which would cause the creation or increase any liability under the Seller's Scheme in respect of any of the Pensionable Employees without the prior agreement of the Seller (not to be unreasonably withheld or delayed) and in particular shall not make any increases to the Pensionable Salaries (as defined in the Rules of the Seller's Scheme) of any of the Pensionable Employees; 4.2.4 take such steps as are necessary or desirable to assist the Seller in ensuring (if necessary) that a separate contracting out certificate is obtained from the DSS Contribution Agency for the Buyer in relation to the Seller's Scheme with effect from the Effective Time; 10 4.3 During the Interim Period the Seller shall procure that (save with the consent of the Buyer or as required by law or as is necessary or desirable to avoid prejudicing the position of the Seller's Scheme as a scheme which is approved or capable of approval as an exempt approved scheme under Chapter 1 of Part XIV of the Taxes Act) 4.3.1 There shall be no increase in contributions payable in respect of the Pensionable Employees; 4.3.2 No action shall be taken to alter the Definitive Trust Deed and Rules of the Seller's Scheme or amend the Seller's Scheme in such a way as to affect materially and adversely the amount to be received by the Trustees of the Buyer's Scheme pursuant to this Schedule 4.3.3 The Seller's Scheme shall not be terminated as regards the Pensionable Employees 4.4 The Seller and the Buyer shall use their reasonable respective endeavours and co-operate so as to obtain the approval of the Pension Schemes Office to the Buyer's participation in the Scheme during the Interim Period in respect of the Pensionable Employees and complete a Deed of Adherence in the agreed form. 4.5.1 The Seller and the Buyer acknowledge that the Pensions Act 1995 and regulations already made under it or to be made under it in the future (the Pensions Legislation) impose requirements and discretions on employers under and in relation to the Seller's Scheme 4.5.2 The Buyer agrees that the Seller may make all decisions and exercise all discretions in relation to the Seller's Scheme envisaged or desirable by or under the Pensions Legislation as though the Seller were the sole employer participating in the Seller's Scheme provided that the Pensionable Employees are not therein prejudiced 4.5.3 While the Buyer remains an employer in relation to the Seller's Scheme the Buyer shall in relation to the Seller's Scheme: 4.5.3.1 exercise no right or discretion conferred on it by or under the Pensions Legislation without the prior written consent of the Seller (such consent not to be unreasonably withheld or delayed); 4.5.3.2 exercise each right or discretion conferred on it by or under the Pensions Legislation as directed from time to time in writing by the Seller; 4.5.3.3 from time to time execute all such deeds, documents, agreements consents or approvals for the purpose of complying with its obligations under sub-paragraphs 4.5.2 and 4.5.3.2 above as may reasonably be considered necessary or desirable by the Seller; 4.5.3.4 co-operate with the Seller and the Trustees of the Seller's Scheme in providing information about, and access to, its employees from time to time; and 11 4.5.3.5 if requested by the Seller execute a deed irrevocably appointing the Seller as its attorney to execute (in the name of the Buyer) from time to time any of the deeds, documents, agreements, consents or approvals specified in paragraph 4.5.3.3 above. 4.5.4 Without prejudice to the generality of the foregoing, the Buyer shall at the request of the Seller irrevocably: 4.5.4.1 nominate the Seller as the "appropriate person" and the person to act for it for the purposes of sub-section 21(9) of the Pensions Act 1995 (as inserted by paragraph 1 (1) (g) of Schedule 3 to the Occupational Pension Schemes (Member nominated Trustees and Directors) Regulations 1996, as amended) in relation to the Seller's Scheme; 4.5.4.2 agree that the consultation required by section 35(5)(b) of the Pensions Act 1995 by the Trustees of the Seller's Scheme with the employer in relation to the written statement of investment principles may be with the Seller to the exclusion of the Buyer and nominates the Seller as the representative of the Buyer for the purposes of paragraph (b) of section 35(5) of the Pensions Act 1995 (as amended by regulation 11 of the Occupational Pension Schemes (Investment) Regulations 1996) in relation to the Pension Scheme; and 4.5.4.3 nominate the Seller as the representative of the Buyer for the purposes of paragraph (a) of section 58(4) of the Pensions Act 1995 (as amended by paragraph 2 of Schedule 5 to the Occupational Pension Schemes (Minimum Funding Requirement and Actuarial Valuations) Regulations 1996, as amended) in relation to the Seller's Scheme. 5. PAYMENT OF TRANSFER VALUE 5.1 Calculation Immediately following the Pension Transfer Date the Seller shall instruct the Seller's Actuary to calculate the amount of the Transfer Value (including as part of the calculation the Interim Value) and submit his findings in writing to the Buyer's Actuary within 30 days of the Pension Transfer Date. If the Buyer's Actuary agrees the amount of the Transfer Value (including the Interim Value) the Buyer shall procure that the Buyer's Actuary and the Seller shall procure that the Seller's Actuary jointly certify that amount as the Transfer Value. If however the Buyer's Actuary and the Seller's Actuary fail to agree within two months from the date upon which the Seller's Actuary first submits his findings to the Buyer's Actuary as aforesaid the matter may at the option of either the Seller or the Buyer be referred to an independent Actuary pursuant to paragraph 8 5.2 Conditions to be satisfied before payment Before payment of the Transfer Value the Buyer shall procure that 5.2.1 evidence to the satisfaction of the Seller and the Trustees of the Seller's Scheme is produced that insofar as any part of the payment would represent amounts in respect of accrued rights to guaranteed minimum pensions or Section 9(2B) Rights, the Buyer's Scheme is a contracted-out scheme and the effect of the making of the payment to the Buyer's Scheme is to discharge the making of the payment to the Buyer's Scheme to 12 provide guaranteed minimum pensions and benefits pursuant to Section 9 (2B) Rights to and in respect of the Transferring Employees; 5.2.2 evidence to the satisfaction of the Seller and the Trustees of the Seller's Scheme is produced that the payment of the Transfer Value to the Buyer's Scheme will not prejudice the position of the Seller's Scheme as approved (or capable of approval) by the Commissioners of Inland Revenue as an exempt approved scheme under Chapter I of Part XIV of the Taxes Act and approval for such payment to the Buyer's Scheme has been specifically given to the Seller's Scheme in writing by the Inland Revenue; 5.2.3 the trustees of the Buyer's Scheme confirm in writing to the Trustees of the Seller's Scheme that in relation to each Transferring Employee the Buyer's Scheme will treat that part of the Transfer Value which the Buyer's Scheme receives from the Seller's Scheme as may be notified by the Trustees of the Seller's Scheme as being referable to members' contributions of a Transferring Employee in the same way as if the relevant Transferring Employee had made a contribution to the Buyer's Scheme of the amount notified; 5.2.4 the Trustees of the Seller's Scheme receive (in form and substance satisfactory to them) any undertakings and information from the Buyer, any employer or the Trustees of the Buyer's Scheme required by the Trustees of the Seller's Scheme to comply with statutory, Inland Revenue or DSS Contribution Agency requirements; 5.2.5 the Trustees of the Seller's Scheme receive undertakings from the Trustees of the Buyer's Scheme that the Buyer's Scheme will accept transfer payments from the Seller's Scheme in respect of the Transferring Employees and will grant benefits complying with paragraph 3.3 or 3.4 of this Schedule; 5.2.6 the Buyer's Actuary has delivered a certificate addressed to the Seller and to the Trustees of the Seller's Scheme in such terms as shall be agreed between the Buyer's Actuary and the Seller's Actuary confirming that at the Pension Transfer Date the terms of the Buyer's Scheme provide for, or announcements have been made to Transferring Employees granting benefits complying with paragraphs 3.3 or 3.4 of this Schedule; 5.2.7 the Trustees of the Seller's Scheme have received as soon as practicable after the Pension Transfer Date (and in any event at least 14 days before the Payment Date) the originals of the relevant forms of consent and discharge referred to in the definition of Transferring Employees; and 5.2.8 the Trustees of the Buyer's Scheme have delivered written evidence satisfactory to the Seller and the trustees of the Seller's Scheme that the Buyer's Scheme will, following receipt of the relevant transfer payments from the Pension Scheme and the grant of benefits to Transferring Employees in accordance with paragraphs 3.3 or 3.4 of this Schedule, be adequately funded on the Actuarial Assumptions; 5.3 Payment The Seller shall use all reasonable endeavours to procure that the Seller's Scheme transfers to the Buyer's Scheme on the Payment Date the Transfer Value in cash (or if the Seller and the Buyer so agree transfer assets equal in value to the Transfer Value). 13 6. SHORTFALL 6.1 For the purposes of this Schedule, the Shortfall Amount means the lesser of:- 6.1.1 the value of the Transfer Value and 6.1.2 the value of the Interim Value less the value as at the Pension Transfer Date of the assets in the Seller's Scheme apportioned to the Transferring Employees (adjusted by the Interest in respect of the period from the Pension Transfer Date until the date on which the Shortfall Amount is paid) 6.2 If a Shortfall Amount is disclosed in the Transfer Value then as soon as practicable after the Transfer Value has been certified in accordance with paragraph 5.1 the Seller shall pay to the Trustees of the Seller's Scheme an amount equal to the Shortfall Amount. 7. ADDITIONAL VOLUNTARY CONTRIBUTIONS 7.1 For the purpose of the foregoing provisions of this Schedule there shall be disregarded:- 7.1.1 any benefits under the Seller's Scheme which are attributable to Additional Voluntary Contributions made to it by the Members of the Seller's Scheme and in respect of which the Members are not entitled to benefits based on their final pensionable earnings (however defined);- 7.1.2 any such contributions; and 7.1.3 any transfer in respect of any such benefits or contributions. 7.2 The Seller shall nevertheless procure that the Seller's Scheme transfers to the Buyer's Scheme on the Payment Date for the benefit of the Transferring Employees all such funds and assets of the Seller's Scheme which represent any such contributions made by the Transferring Employees and the investment return on them. 8. DISPUTES Any dispute between the Buyer's Actuary and the Seller's Actuary concerning the amount of the Transfer Value or any other matter to be agreed between them in accordance with this Schedule may at the option of either the Buyer or the Seller be referred to an independent Actuary to be appointed by the agreement between the Buyer and the Seller or in default of agreement within 14 days from the first nomination of an Actuary by one party to the other by the President for the time being of the Institute of Actuaries on the application of either the Seller or the Buyer. The independent Actuary shall act as an expert and not as an arbitrator. His decision shall save in the event of manifest error be final and binding on the parties and his costs be paid as he directs. 9. LIABILITY ON BUYER FOR MFR FROM THE EFFECTIVE TIME Notwithstanding that the Seller shall during the Interim Period remain the Principal Employer in the Seller's Scheme and without prejudice to the liability of the Seller to pay the Shortfall Amount the Buyer shall be liable to make up any deficit in the MFR in respect of all the Pensionable 14 Employees suffered by the Seller's Scheme at any time on or after the Effective Time and whether or not all the Pensionable Employees join the Buyer's Scheme and consent to transfer payments being made in respect of them to the Buyer's Scheme and the Buyer shall indemnify and keep indemnified the Seller from and against all claims demands actions proceedings liabilities damages losses costs and expenses whatsoever incurred by the Seller in connection therewith 10. INDEMNITY FOR SELLER The Buyer shall indemnify and keep indemnified the Seller from and against all claims, demands, actions, proceedings, liabilities, damages, losses, costs and expenses whatsoever incurred by the Seller in connection with or arising directly or indirectly from the Buyer's failure to provide for the Pensionable Employees an arrangement which provides with effect from the Pension Transfer Date benefits in respect of such Pensionable Employees broadly comparable in value to those provided under the Seller's Scheme or in connection with the Buyer's failure to provide appropriate compensation for such Pensionable Employees for failure to provide such an arrangement. 11. ESCROW ACCOUNT 11.1 In the event that there is a Shortfall Amount due to the Seller's Scheme from the Seller in accordance with paragraph 6.2 of this Schedule, the Buyer and the Seller shall within 2 business days of the Shortfall Amount becoming due jointly instruct the Escrow Agents in writing to pay the money to the Seller's Scheme. 11.2 Any balance remaining in the Escrow Account after any payment made pursuant to paragraph 11.1 including interest shall be paid to the Seller. 11.3 The Seller shall be responsible for Pritchard Englefield's costs and the Buyer shall be responsible for Maxwell Batley's costs in respect of any work done in relation to the Escrow Account. 11.4 The Escrow Agents may withdraw from the Escrow Account an amount of taxation on the interest earned in respect of money held in the Escrow Account for which they are or may become liable. 11.5 The Seller and the Buyer agree to deliver irrevocable instructions to the Escrow Agents so as to enable them to deal with the Escrow Account in accordance with the provisions in paragraph 11. 15 EX-2.C 5 ex2-c.txt EX-2.C Exhibit 2(c) Execution Copy ASSET PURCHASE AGREEMENT ------------------------ between HUNT GRAPHICS EUROPE B.V. ------------------------- and PEAK B.V. --------- jointly as Seller and HUNT CORPORATION ---------------- as Seller's Guarantor and SEAL GRAPHICS EUROPE B.V. ------------------------- as Buyer and NESCHEN AG ---------- as Buyer's Guarantor ----------------------------------------------- for the acquisition by Buyer of certain assets and liabilities of Seller ----------------------------------------------- 2 TABLE OF CONTENTS ----------------- 1. Purchase and Sale......................................................................................6 1.1. Sale of Business....................................................................................6 1.2. Purchased Assets....................................................................................6 1.3. Excluded Assets.....................................................................................8 1.4. Assumed Liabilities.................................................................................8 1.5. Excluded Liabilities................................................................................9 1.6. Closing Date.......................................................................................11 1.7. Closing Obligations................................................................................12 1.8. Further Assurances.................................................................................12 2. Purchase Price........................................................................................13 2.1. Purchase Price.....................................................................................13 2.2. Payment of Purchase Price..........................................................................13 2.3. Physical Inventory Adjustment......................................................................14 2.4. Proration..........................................................................................15 3. Representations and Warranties of the Seller..........................................................15 3.1. Organization; Power................................................................................15 3.2. Effect of Agreement................................................................................16 3.3. Corporate Authorization............................................................................16 3.4. Absence of Certain Changes or Events...............................................................16 3.5. [Intentionally Omitted]............................................................................17 3.6. Title to Properties; Absence of Liens and Encumbrances, Etc........................................17 3.7. Condition and Sufficiency of Assets................................................................18 3.8. Litigation, Etc....................................................................................18 3.9. Books and Records..................................................................................19 3.10. Affiliate Agreements; Guaranties...................................................................19 3.11. Financial Information..............................................................................19 3.12. Employee Benefit Plans.............................................................................19 3.13. Intellectual Property Assets.......................................................................20 3.14. Computer Systems...................................................................................23 3.15. Insurance..........................................................................................23 3.16. Licenses, Authorizations and Permits...............................................................24 3.17. Compliance with Law................................................................................24 3.18. Employment of Officers, Employees and Consultants; Prior Conduct; Etc..............................24 3.19. No Unlawful Payments...............................................................................24 3.20. No Commissions Due.................................................................................25 3.21. Customers and Vendors..............................................................................25 3.22. No Untruths, Misstatements or Omissions............................................................25 3.23. Subsidiaries and Affiliates........................................................................25 3.24. Solvency...........................................................................................25
3 3.25. Environmental Matters..............................................................................26 3.26. Assigned Contracts.................................................................................28 3.27. [Intentionally Omitted]............................................................................28 3.28. Product Warranty...................................................................................28 3.29. Product Liability..................................................................................29 3.30. Contracts; No Defaults.............................................................................29 3.31. Labour law and positive advice works council.......................................................31 3.32. No other Warranties................................................................................31 4. Representations and Warranties of the Buyer...........................................................31 4.1. Corporate Authorization............................................................................31 4.2. Due Incorporation..................................................................................31 4.3. Commissions........................................................................................32 4.4. No Conflict........................................................................................32 4.5. Financial Condition................................................................................32 4.6. Litigation.........................................................................................32 4.7. Investigation and Evaluation.......................................................................32 4.8. Forecasts and Projections..........................................................................33 5. Certain Covenants and Agreements......................................................................33 5.1. Information........................................................................................33 5.2. Conduct of Business by the Seller Pending the Closing Date.........................................33 5.3. Third Party Consents; Compliance...................................................................34 5.4. Customers and Vendors..............................................................................35 5.5. Coordination as to VAT.............................................................................35 5.6. [Intentionally Omitted]............................................................................35 5.7. [Intentionally Omitted]............................................................................35 5.8. Environmental Licence..............................................................................35 5.9. Employment.........................................................................................35 5.10. Collective Labour Agreement........................................................................36 5.11. Environmental Report...............................................................................36 5.12. Transfer of Employees..............................................................................36 6. [Intentionally Omitted]...............................................................................37 7. Condition Precedent to the Obligations of the Buyer...................................................37 8. Survival of Representations and Warranties; Indemnification; Etc......................................37 8.1. Survival...........................................................................................37 8.2. Seller's Agreement to Indemnify....................................................................38 8.3. Buyer's Agreement to Indemnify.....................................................................39 8.4. Indemnification Procedures.........................................................................39 8.5. Basket and Limitations.............................................................................40 8.6. Exclusive Remedy...................................................................................42 8.7. Indemnification Payments...........................................................................42 8.8. Right of Set-Off...................................................................................42
4
9. Additional Covenants..................................................................................42 9.1. Covenants Regarding Post-Closing Activities........................................................42 9.2. [Intentionally Omitted]............................................................................44 9.3. Payments Received..................................................................................44 9.4. Customer Rebates and Warranty Claims...............................................................44 9.5. Non-warranty Product Returns.......................................................................46 9.6. AquaSeal Warranty..................................................................................46 9.7. [Intentionally Omitted]............................................................................47 9.8. Removing Excluded Assets...........................................................................47 9.9. [Intentionally Omitted]............................................................................47 9.10. Retention of and Access to Records.................................................................47 9.11. Change of Corporate Names..........................................................................48 10. Termination, Waiver and Amendment.....................................................................48 10.1. Termination Provisions.............................................................................48 10.2. Effect of Termination..............................................................................49 10.3. Amendment..........................................................................................49 10.4. Waiver.............................................................................................49 11. Guarantors 49 11.1. Seller's Guarantor.................................................................................49 11.2. Buyer's Guarantor..................................................................................49 12. Miscellaneous.........................................................................................49 12.1. Expenses...........................................................................................49 12.2. Notices............................................................................................50 12.3. Entire Agreement...................................................................................53 12.4. Binding Effect and Benefit.........................................................................53 12.5. Assignability......................................................................................54 12.6. Severability.......................................................................................54 12.7. Headings; Interpretation...........................................................................54 12.8. Counterparts.......................................................................................54 12.9. Governing Law......................................................................................54 12.10. Schedules..........................................................................................54 12.11. Announcements......................................................................................55 12.12. Dispute Resolution.................................................................................55 12.13. Definitions........................................................................................55
5 ASSET PURCHASE AGREEMENT ------------------------ THE UNDERSIGNED: ---------------- (1) (a) Hunt Graphics Europe B.V., a private company with limited liability organised under the laws of The Netherlands, having its registered office at Kanaaldijk O.Z. 3, 8102 HL, Raalte (The Netherlands); (b) Peak B.V. a private company with limited liability organised under the laws of The Netherlands, having its registered office at Kanaaldijk O.Z. 3, 8102 HL, Raalte (The Netherlands) (jointly the "Seller"); (2) Hunt Corporation, a Pennsylvania corporation with its principal place of business at One Commerce Square, 2005 Market Street, Philadelphia, Pennsylvania 19103 (United States of America) (the "Seller's Guarantor"); (3) Seal Graphics Europe B.V., a private company with limited liability organised under the laws of The Netherlands, having its registered office at Kanaaldijk O.Z. 3, 8102 HL, Raalte (The Netherlands) (the "Buyer"); and (4) Neschen AG, a public company with limited liability organised under the laws of Germany, having its registered office at Hans Neschen Strasse 1, D- 3165 Bueckeburg (Germany) (the "Buyer's Guarantor") WHEREAS: -------- A. the Seller is active in the field of manufacturing and sale of machinery for the graphic industry and materials complementary thereto (the "Business"); B. the Seller wishes to sell and transfer and the Buyer wishes to purchase and accept certain assets and liabilities related to the Business and subject to the terms and conditions and for the Purchase Price as set forth in this agreement; C. the works council of the Seller has given a positive advice concerning the intended decision to enter into and to execute the transactions contemplated hereby; and D. the Seller's Guarantor and its subsidiary, Hunt Graphics Europe Limited, and the Buyer's Guarantor and its subsidiary, Seal Graphics UK Limited, are also entering into an other, more or less similar, agreement for the purchase of certain assets of Hunt Graphics Europe Limited related to its business located in England and the Seller's Guarantor and two of its subsidiaries, Hunt Holdings, Inc. and Hunt Graphics Americas Corporation, and the Buyer's Guarantor's subsidiaries, Seal Graphics Americas Corporation, Seal USA Corporation and Seal Graphics Technologies Corporation, are also entering into an other, more or less similar, agreement for the purchase of certain assets of the Seller's Guarantor, Hunt Holdings, Inc. and Hunt Graphics Americas Corporation, related to their businesses located in the United States of America and the Seller's Guarantor's subsidiaries Hunt 6 Holdings Inc. and Hunt Graphics Europe Limited and the Seller and the Buyer's Guarantor's subsidiary Neschen International B.V. are also entering into an other agreement for the purchase of the shares of Hunt Graphics Limited, a Hong Kong subsidiary of Seller's Guarantor, (such other agreements collectively the "Other Purchase Agreements") and the closing of the sale contemplated by this Agreement is conditioned upon the closing of such Other Purchase Agreements. W I T N E S S E T H: -------------------- In consideration of the mutual undertakings herein contained, the parties hereto hereby agree as follows: 1. Purchase and Sale 1.1. Sale of Business. Subject to the terms and conditions and based upon the representations, warranties and covenants of the parties set forth in this Agreement, at the Closing the Seller shall, except as otherwise expressly provided herein, sell, assign and transfer to the Buyer, and the Buyer shall buy, acquire and accept from the Seller, all of the assets and rights of the Seller materially relating to the Business of every kind and description wherever located. For purposes of this Agreement, the term "Business" shall mean the graphics products business in the Netherlands, as described in Schedule 1.1 to the letter of even date from the Seller to the Buyer and the Buyer's Guarantor (the "Disclosure Letter"), owned and operated by the Seller, which the Buyer intends to continue to conduct as a part of its own business with the assets to be purchased hereunder. 1.2. Purchased Assets The above-referenced assets and rights materially relating to the Business to be sold hereunder as of the Closing Date (as hereinafter defined) are generally described as follows: (a) all of the Seller's contracts, claims and rights under the contracts and leases (whether as lessee or lessor) relating to the Business as per the Effective Time, including those enumerated on Schedule 1.2(a) to the Disclosure Letter, excluding the contract referred to in Schedule 1.3 (f) (the "Assigned Contracts") ; (b) all outstanding proposals to customers and customer orders relating to the Business as per the Effective Time; 7 (c) any and all goodwill, know-how, customers' and suppliers' lists, slogans, labels, trade secrets, all other trade rights, secret processes, advertising material, the Seller's technical information and any other intangible property primarily relating to the Business, including trademarks, tradenames, patents, copyrights and the telephone and fax numbers, as enumerated on Schedule 1.2(c) to the Disclosure Letter; (d) all of the Seller's equipment, tools, computers and computer software, telephone systems, trade fixtures, furniture and leasehold improvements relating to the Business including those enumerated on Schedule 1.2(d) to the Disclosure Letter, as per the Effective Time with such changes in such items as shall occur in the Ordinary Course of Business between the Effective Time and the date hereof; (e) all of the Seller's office supplies, together with any stationery and business forms relating to the Business which do not bear the Seller's or their affiliates name and address; (f) all permits, licenses, franchises, consents, authorizations and similar instruments or acts relating to the Business to the extent they may lawfully be assigned or transferred as enumerated on Schedule 1.2(f) (the "Permits"); (g) all real property of the Seller, including but not limited to all buildings and structures thereon, including but not limited to the ground lease rights ("erfpachtrechten") and building rights ("opstalrechten") (the "Real Property") as enumerated in Schedule 1.2(g) to the Disclosure Letter and in the notarial deed of transfer of the Real Property attached to the Bill; (h) the sole right to use the trade names used by the Seller, with the exception of those including the name "Hunt", or any variations thereof; (i) all of the Seller's inventory and work in process relating to the Business as per the Effective Time (the "Inventory"); (j) all books, records, forms and files relating to the operations of the Business or reflecting the operations thereof, but excluding therefrom records reflecting the other operations of the Seller or the group of companies of which Seller is part of as a whole or records the Seller and the Buyer shall have joint access to pursuant to other provisions of this Agreement; (k) all property and casualty insurance benefits (other than product liability insurance), including rights and proceeds, arising from or relating to the Purchased Assets (as hereinafter defined) or the Assumed Liabilities (as hereinafter defined) prior to the Effective Time, except to the extent relating to Equipment Warranty Costs and/or Consumer Product Warranty Costs as referred to in Section 9.4 and/or the product warranty claim made by Sihl Direct GmbH on 10 September 2001; (l) all claims of the Seller against third parties relating to the Purchased Assets, whether choate or inchoate, known or unknown, contingent or noncontingent, including all such claims set forth on Schedule 1.2(l) to the Disclosure Letter, except to the extent relating to Equipment Warranty Costs and/or Consumer Product Warranty Costs as referred to in Section 9.4; and 8 (m) all accounts receivable as per the Effective Time set forth on Schedule 1.2(m) to the Disclosure Letter (the "Accounts Receivable"). The Seller gives no warranty that the accounts receivable will be collectable and this is acknowledged by the Buyer; (n) each of the Seller's other assets used by or useful or potentially useful to it in the Business. For convenience of reference, all the assets, properties and rights to be transferred and assigned to the Buyer in accordance with the provisions of this Section 1 are sometimes hereinafter collectively referred to as the "Purchased Assets". 1.3. Excluded Assets Notwithstanding anything to the contrary contained in Section 1.2 or elsewhere in this Agreement, the following assets of Seller (collectively, the "Excluded Assets") are not part of the sale and purchase contemplated hereunder, are excluded from the Purchased Assets and shall remain the property of the Seller after the Closing: (a) all cash, cash equivalents and investments (including shareholdings in any subsidiaries) as per the Effective Time; (b) all corporate names ("statutaire namen")(other than a corporate name containing the name "Peak"), minute books and stock records and tax returns and similar corporate records of the Seller's Guarantor and its subsidiary corporations; (c) all claims for refund of taxes and other governmental charges of whatever nature as per the Effective Time; (d) all rights in connection with and assets of any employee benefit plans as per the Effective Time; (e) all rights of the Seller under this Agreement and the other agreements and instruments of the parties set forth in Section 1.7; (f) the properties, assets, rights and claims expressly set forth on Schedule 1.3(f). 1.4. Assumed Liabilities At the Closing Date, the Buyer shall assume and agree to discharge only the following liabilities of the Seller, effective as of the Effective Time (the "Assumed Liabilities"): 9 (a) any liability to the customers of the Business incurred by the Seller in the Ordinary Course of the Business for orders outstanding as of the Effective Time reflected on the Seller's books (other than any liability arising out of a breach that occurred prior to the Effective Time); (b) certain rebate obligations to customers of the Business with respect to invoices for sales of equipment, products and services dated on or after the Effective Time in accordance with Section 9.4(a) hereof; (c) bona fide warranty claim obligations for equipment and consumable products of the Business manufactured prior to the Effective Time, subject to Seller's obligations set forth in Section 9.4(b) hereof; (d) any liability to the customers of the Business arising out of Non-warranty Returns of products of the Business after the Effective Time authorized either orally or in writing by the Seller prior to the Effective Time in accordance with Section 9.5 hereof. (e) any liability arising after the Effective Time under the Assigned Contracts (other than any liability arising out of a breach that occurred prior to the Effective Time); (f) any liability of the Seller arising after the Effective Time under any Assigned Contract included in the Purchased Assets that is entered into by the Seller after the date hereof in accordance with the provisions of this Agreement (other than any liability arising out of or relating to a breach that occurred prior to the Effective Time); and (g) any liability of the Seller described in Schedule 1.4(g). 1.5. Excluded Liabilities Such sale shall be made free and clear of, and the Seller shall remain liable for, all liabilities, obligations and encumbrances, business, legal or other, whether incurred or accrued as of the Effective Time or thereafter, whether known or unknown (collectively, the "Excluded Liabilities"), except the Assumed Liabilities that are being assigned and transferred to the Buyer as contemplated by Section 1.4 hereof. Notwithstanding anything to the contrary contained herein, Excluded Liabilities shall include, without limitation, every liability of the Seller other than the Assumed Liabilities, including: (a) any liability arising out of or relating to products of the Seller to the extent manufactured or sold prior to the Effective Time other than to the extent assumed under Section 1.4; (b) certain obligations for customer rebates committed to either orally or in writing by the Seller with respect to invoices for sales of equipment, products and services dated prior to the Effective Time in accordance with Section 9.4(a) hereof; 10 (c) certain liabilities to customers related to the Business incurred by the Seller under written warranty agreements in accordance with Section 9.4(b) hereof; (d) any liability of the Seller arising out of Non-warranty Returns of products authorized either orally or in writing by the Seller prior to the Effective Time in accordance with Section 9.5 hereof; (e) any liability under any Assigned Contract that arises prior to the Effective Time or that arises after the Effective Time but that arises out of or relates to any breach that occurred prior to the Effective Time; (f) any liability for taxes, including (A) any taxes arising as a result of the Seller's operation of the Business or ownership of the Purchased Assets prior to the Effective Time, and (B) any taxes payable by the Seller that will arise as a result of the sale of the Purchased Assets pursuant to this Agreement; (g) any liability under any contract not assumed by the Buyer under Section 1.4, including any liability arising out of or relating to the Seller's credit facilities or any security interest related thereto; (h) any liability under any Environmental Law (as defined in Section 3.25 hereof) or occupational safety and health law arising out of or relating to the operation of the Business prior to the Effective Time or the Seller's leasing, ownership or operation of real property (including the Real Property) prior to the Effective Time; (i) any liability arising out of or relating to the closing and/or vacating of any plant, factory, facility, office or other physical structure operated by the Seller in connection with the Business that is not being leased by, or whose lease is otherwise not being assumed by, the Buyer; (j) any liability arising out of or relating to the Seller's destruction, deconstruction or otherwise rendering inoperable of any equipment of the Seller relating to the Business not being purchased by the Buyer; (k) except as set forth on Schedule 1.5(k), any liability relating to benefit plans for the Seller's employees or former employees or both as of the Effective Time; (l) any liability under any severance, retention or termination agreement between any former employee and the Seller or any related person or entity; (m) any liability relating to termination of employment (including constructive termination) of any former employee of the Seller or of any related person or entity; (n) any liability arising out of or relating to any employee grievance arising out of or relating to any occurrence or event happening prior to the Effective Time whether or not the affected employees are hired by the Buyer; 11 (o) any liability of the Seller to any shareholder of the Seller or any related person or entity of the Seller or any shareholder of the Seller; (p) any liability to indemnify, reimburse or advance amounts to any officer, director, employee or agent of the Seller; (q) any liability to distribute to any of the Seller's shareholders or otherwise apply all or any part of the consideration received hereunder; (r) any liability arising out of any proceeding, action or suit pending as of the Effective Time; (s) any liability arising out of any proceeding, action or suit commenced after the Effective Time and arising out of or relating to any occurrence or event happening prior to the Effective Time; (t) any liability arising out of or resulting from the Seller's compliance or noncompliance with any law, ordinance, EU Directive, regulation or treaty or any order, injunction, judgment, decree, ruling or assessment or arbitration award of any governmental body or authority; (u) any liability of the Seller under this Agreement or any other document executed in connection with the transactions contemplated hereby and thereby; and (v) except as otherwise specifically provided herein, any liability of the Seller for the action or omission of the Seller, its employees or agents in connection with services related to the Business performed by the Seller, its employees or agents prior to the Effective Time. The Seller shall indemnify and hold harmless the Buyer, and their shareholders, officers and directors in accordance with Section 8 hereof from and against all Excluded Liabilities, including in case any such Excluded Liabilities transfer to the Buyer by operation of law. 1.6. Closing Date The closing of the transactions contemplated hereby (the "Closing") shall occur on 9 October 2001 (the "Closing Date"), unless this Agreement is terminated for failure of any condition set forth in Section 7 hereof to continue to be met satisfactorily as of or on said Closing Date. The Closing Date may be extended by mutual agreement of the parties hereto, provided that all conditions set forth in Section 7 continue to be satisfied, as of the new Closing Date, so extended. The Closing will take place at the offices of NautaDutilh at Amsterdam, The Netherlands on or before 5:00 p.m. (Amsterdam time) on said Closing Date. As between the parties hereto the Closing shall economically speaking be effective, and shall have retrospective effect, as of 30 September 2001, 11.59 p.m. (Amsterdam time) (the "Effective Time"). The Seller shall be deemed to have operated the Business for the benefit of the Buyer during the period between the Effective Time and the Closing Date. 12 1.7. Closing Obligations In addition to any other documents to be delivered under other provisions of this Agreement, on the Closing Date: (a) The Seller shall deliver to the Buyer (i) a bill of sale and transfer and assumption of liabilities pursuant to which the Seller sells and transfers to the Buyer the Purchased Assets and the Buyer assumes the Assumed Liabilities from the Seller in the form of Exhibit A including all annexes thereto (the "Bill"), executed (including, where appropriate, the annexes) by the Seller; (ii) such other deeds, bills of sale, assignments, certificates of title, documents and other instruments of transfer and conveyance as may reasonably be requested by the Buyer each in form and substance satisfactory to the Buyer, the Seller and their respective legal counsels and executed by the Seller; (iii) faxed copies of resolutions of the shareholders of the Seller and, to the extent applicable, the Seller's Supervisory Board; and (iv) the Disclosure Letter executed by the Seller. (b) The Buyer shall deliver to the Seller: (i) the payments to the extent specified in Section 2.2; and (ii) the Bill executed (including, where appropriate, the annexes) by the Buyer. (c) The Bill, the Disclosure Letter and the documents enumerated in subsections (a)(ii) above are referred to collectively as the "Closing Documents". 1.8. Further Assurances (a) The Seller shall, from time to time, at the Buyer's request and without further consideration, execute and deliver such instruments of transfer, conveyance and assignment in addition to those delivered pursuant to Section 1.7, and take such other action, as may be reasonably necessary to transfer, convey to or assign more effectively to the Buyer, or to put the Buyer in possession of, any property being transferred, conveyed or assigned and delivered hereunder. 13 (b) Further, the parties shall, from time to time, at the request of the other parties and without further consideration, take such actions as the other parties shall reasonably request in order to effectuate the purposes of this Agreement. 2. Purchase Price 2.1. Purchase Price Subject to the adjustments and prorations hereinafter required in this Section 2 and subject to the terms of this Agreement and in reliance upon the warranties, representations and covenants of the Seller contained herein, the Buyer shall pay the Seller, in full consideration for the Purchased Assets, (a) the sum of 8,336,660 Euro (the "Fixed Amount") allocated among the Accounts Receivable as indicated in Schedule 2.1 (a)(i) and the other Purchased Assets (other than Inventory) in the manner set forth in Schedule 2.1(a) (ii); with the understanding that the Buyer and the Seller have agreed that an amount of 39,600 Euro will be deducted from the Fixed Amount, which amount has been fixed in view of the Buyer's intention, whether or not pursued, to exercise the option to acquire full ownership of the part of the Real Property which at the Closing Date is held by way of a ground lease right; plus (b) the sum of 3,273,652 Euro (the "Baseline Inventory Amount"), subject to adjustment pursuant to Section 2.3. 2.2. Payment of Purchase Price The Purchase Price shall be payable as follows: (a) 6,497,060 Euro of the Fixed Amount, as adjusted in accordance with Section 2.1(a), shall be paid by wire transfer of immediately available funds to the Seller, said wire to be initiated by the Buyer to be received by the Seller on the Closing Date; and (b) 1,800,000 Euro of the Fixed Amount (equal to the amount allocated to the Real Property) shall be paid by wire transfer delivery of immediately available funds to Derdengelden Notarissen NautaDutilh Amsterdam, accountnumber 45.24.77.999 with ABN AMRO Bank N.V., reference to file number 5004.4326, which amount shall be paid out to the Seller to the bank account referred to at (a) in accordance with the notarial deed of transfer of the Real Property attached to the Bill; and (c) 2,618,922 Euro, being an amount equal to 80 % of the Baseline Inventory Amount, shall be paid by wire transfer of immediately available funds to the Seller, said wire to be initiated by the Buyer on the Closing Date. The balance of the Baseline Inventory Amount (the "Inventory Holdback") shall be retained by the Buyer until released to the Seller in accordance with Section 2.3 hereof. 14 2.3. Physical Inventory Adjustment (a) A physical inventory or cycle counting or a combination of the two, as the Buyer shall determine, of the Seller's Inventory was performed by the Buyer and the Seller as of the Effective Time (the "Physical Inventory"). The Physical Inventory shall be valued in accordance with the principles set forth in Schedule 2.3(a) to the Disclosure Letter (the "Inventory Evaluation Principles"). The Purchase Price shall be increased or decreased by the amount, if any, by which the amount of the inventory as so determined (the "Adjusted Inventory Amount") is greater than or less than the "Baseline Inventory Amount". The resulting adjustment is called the Physical Inventory Adjustment. (b) If the Adjusted Inventory Amount is greater than the Baseline Inventory Amount, then such excess amount and the Inventory Holdback shall be paid within twenty (20) days of the Closing Date to the Seller by the Buyer, unless the Buyer delivers a Dispute Notice with regard to the Adjusted Inventory Amount to the Seller in accordance with this Section 2.3. (c) If the Adjusted Inventory Amount is less than the Baseline Inventory Amount, then the Buyer shall offset the Inventory Holdback against any deficiency and either (i) the Buyer shall release to the Seller any Inventory Holdback in excess of such deficiency or (ii) the Seller shall pay to the Buyer any deficiency in excess of the Inventory Holdback. Any release or payment of funds pursuant to this subsection shall occur within twenty (20) days of the Closing Date, unless the Seller delivers a Dispute Notice with regard to the Adjusted Inventory Amount to the Buyer in accordance with this Section 2.3. (d) In the event either the Buyer or the Seller delivers a Dispute Notice to the other party, an interim Adjusted Inventory Adjustment shall be paid to the appropriate party based upon the average of the Seller and the Buyer's Adjusted Inventory calculations within five (5) days after the delivery of such Dispute Notice with an adjustment to be made, if required, upon a final resolution of such dispute in accordance with this Section 2.3. (e) Any amount owed either by the Buyer or the Seller after a final resolution of a dispute in accordance with this Section 2.3 shall paid to the appropriate party within five (5) business days after such final resolution. (f) In the event that the Buyer and/or the Seller do not agree upon the Adjusted Inventory Amount, then either party may deliver to the other party written notice (a "Dispute Notice") within fifteen (15) days following the Closing Date. Such Dispute Notice shall set forth in reasonable detail a description of the Dispute. Within ten (10) days after the delivery of any such Dispute Notice, the Buyer and the Seller shall meet at a mutually acceptable time and place and thereafter as often as such parties reasonably deem necessary and shall, in good faith, cooperate in an attempt to resolve such Dispute. (g) If any Dispute is not finally resolved within twenty (20) business days after the delivery of a Dispute Notice, as aforesaid, 15 then the chairman of the NIVRA (the Royal Netherlands Institute of Registered Accountants) shall be requested to select an independent auditor from a recognized certified public accounting firm in The Netherlands to serve as expert (the "Expert") to whom the Dispute shall be referred for resolution. (h) The Expert's decision regarding its final resolution of any Dispute (the "Decision") shall be in writing and shall be a "bindend advies" (and as such be final and binding). The Decision shall specifically set forth the amount of any adjustment required to be made to the Purchase Price pursuant to Section 2.3(a). (i) The fees and expenses of the Arbitrator shall be shared equally by the Buyer and the Seller. 2.4. Proration All property and ad valorem taxes, rentals, lease payments, utility charges, payments under or pursuant to the Assigned Contracts, Permits, prepaids and other items set forth on Schedule 2.4 attached hereto relating to a period of time both prior to and on or after the Effective Time will be prorated between the Buyer, on the one hand, and the Seller, on the other hand, in accord with local custom, as of the Effective Time. In this respect the Seller and the Buyer have established the meter settings of electricity, gas and water as of the Effective Time. The parties agree, to the extent possible, to settle amounts due regarding such proration at the Closing. To the extent that such amounts cannot be settled at the Closing (because at that time they cannot yet be established), such amounts shall be settled promptly after they will have been established . 3. Representations and Warranties of the Seller The Seller hereby represents and warrants to the Buyer and the Buyer's Guarantor as follows: (The parties agree that each disclosure set forth in the Disclosure Letter to a specific section of this Section 3 shall in all reasonableness not constitute a disclosure with respect to any other specific section of this Section 3 unless specifically cross referenced therein.) 3.1. Organization; Power The Seller is a company duly organized and validly existing under the laws of The Netherlands and has all requisite power to own, lease and operate its properties and to carry on the Business as currently conducted, free from any claim of any other person or entity (a "Person). The Seller's Guarantor is a company duly incorporated and validly existing under the laws of the state of its incorporation. The failure by the Seller to be qualified to do business or be in good standing in any other territory where it is required to be so qualified shall not adversely affect the Seller's ability to consummate the transactions contemplated hereby or the Business, the Purchased Assets or Assumed Liabilities. A true and correct copy of the deed of incorporation and the articles of association of the Seller as in effect on the date hereof have been delivered to the Buyer. The Seller is not, either actually or potentially, in violation of any provision of its current articles of association which violation would adversely effect the Seller's ability to consummate the transaction contemplated hereby or the Business, the Purchased Assets or Assumed Liabilities. 16 3.2. Effect of Agreement Other than set forth on Schedule 3.2 to the Disclosure Letter, the execution, delivery and performance of this Agreement and the Closing Documents by the Seller, with or without the giving of notice and/or the passage of time, will not: (a) violate any provision of law applicable to the Seller; (b) conflict with, result in the breach or termination of any provision of, or constitute a default under the Seller's articles of association or any indenture, mortgage, note, deed of trust, license, permit, lease, obligation or other agreement or instrument to which the Seller is a party or by which the Seller or any of the Purchased Assets may be bound; (c) accelerate or permit the acceleration of any performance of any duty or obligation or the payment of any indebtedness required of the Seller; (d) result in the creation of any lien, charge or encumbrance upon any of the property or assets of the Seller; (e) violate any order, ruling, writ, injunction or decree of any court, administrative agency or governmental body which violation would adversely affect the Seller's ability to consummate the transactions contemplated hereby or the Business, the Purchased Assets or Assumed Liabilities; or (f) be an event which would permit any party to terminate any agreement relating to the Business. This provision shall be likewise applicable to the Seller's Guarantor. 3.3. Corporate Authorization This Agreement, the Closing Documents to which the Seller is a party and the consummation of the transactions contemplated hereby and thereby have been duly authorized and approved by the Board of Directors and, to the extent required, the shareholders and the Supervisory Board, of the Seller, and this agreement and such Closing Documents have been duly executed and delivered on behalf of the Seller. This Agreement and the other Closing Documents to which the Seller is a party, when duly executed by the Seller and delivered by all the parties hereto or thereto, as the case may be, will be the legal, valid and binding obligations of the Seller, as the case may be, enforceable in accordance with their respective terms, except to the extent that such enforcement may be subject to applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect relating to creditors' rights and remedies generally. This provision shall be likewise applicable to the Seller's Guarantor. 3.4. Absence of Certain Changes or Events Since December 3, 2000, the Business has been operated in the Ordinary Course of Business and the Seller has used its reasonable efforts to preserve the goodwill of the person or entity (a "Person") or Persons with whom or which it has business relationships in connection with the Business and the Seller has not: (a) incurred any obligation or liability relating to the Business (fixed or contingent) except in the Ordinary Course of Business; 17 (b) mortgaged, pledged or subjected to lien, charge, security interest or to any other encumbrance (other than Permitted Encumbrances, as defined in Section 3.6 hereof) any of its assets relating to the Business; (c) transferred, leased or otherwise disposed of any of its assets or properties relating to the Business except in the Ordinary Course of Business; (d) canceled or compromised any debt or claim relating to the Business except in the Ordinary Course of Business; (e) waived or released any rights of any material value relating to the Business; (f) transferred or granted any rights under any patent application, concession, lease, license, agreement, letter of patent, invention, trademark, trade name or copyright relating to the Business; (g) suffered any damage, destruction or loss in excess of Euro 35,000 with respect to any asset relating to the Business, whether or not such damage, destruction or loss shall have been insured against; (h) suffered any other material adverse change in the financial condition or properties of the Business, except such changes as are related to the general economic and market conditions except such changes as are related to general economic or market conditions; (i) made or entered into any contract or commitment to make any capital expenditure relating to the Business in excess of Euro 35,000; (j) except for the Inventory Evaluation Principles, changed any significant method of accounting or accounting practice relating to the Business; (k) made or granted any general wage or salary increase other than in the Ordinary Course of Business to, or entered into any employment contract with any employee of the Business; or (l) entered into any transaction relating to the Business other than in the Ordinary Course of Business with a value or cost to the Business in excess of Euro 35,000. 3.5. [Intentionally Omitted] [ ] 3.6. Title to Properties; Absence of Liens and Encumbrances, Etc. On the Closing Date the Seller has, except as set forth in Schedule 3.6 to the Disclosure Letter, full title to the Real Property and full title or a valid, binding leasehold interest in all of the other assets (real 18 and personal) which are necessary to conduct the Business substantially as conducted by the Seller prior to the Effective Time free and clear of all liens, claims and encumbrances other than the Permitted Encumbrances. On the Closing Date, the Seller will transfer to the Buyer full title to, or a valid and binding leasehold interest in, the Purchased Assets, free and clear of all liens, encumbrances, mortgages, pledges and adverse claims other than the Permitted Encumbrances. All of the tangible Purchased Assets will be located at the Real Property. As used herein, "Permitted Encumbrances" shall mean (a) liens for taxes which are not due and payable as of the Closing Date and (b) liens, encumbrances, etc. that are set forth in Schedule 3.6 to the Disclosure Letter, and (c) the encumbrances referred to in the notarial deed of transfer of the Real Property as attached to the Bill. 3.7. Condition and Sufficiency of Assets (a) The Purchased Assets described in Section 1.2 (i) meet the current needs of the Seller in connection with the Business, (ii) are satisfactory for the needs of the Business as currently conducted by the Seller, and (iii) will be undamaged, in proper repair and working order and reasonably suitable for the uses for which intended. (b) Use of the Real Property owned or leased for the various purposes for which it is presently being used in connection with the Business is permitted as of right under all applicable zoning legal requirements and is not subject to "permitted nonconforming" use or structure classifications. All buildings, structures, fixtures and improvements located on the Real Property (the "Improvements") are in compliance with all applicable legal requirements, including those pertaining to zoning, building and the disabled, are in proper repair and condition, ordinary wear and tear excepted, and are free from defects. No part of any improvement encroaches on any real property not included in the Real Property, and there are no buildings, structures, fixtures or other Improvements primarily situated on adjoining property which encroach on any part of the Real Property. Schedule 3.7 to the Disclosure Letter sets forth the condition of the building. 3.8. Litigation, Etc. Except for the claim from Sihl Direct GmbH, as referred to under Section 1.2 (k), there is no lawsuit, arbitration, action, claim, investigation or administrative proceeding or governmental investigation by any Person pending against the Seller in any court or municipal or other governmental agency or instrumentality or non-governmental body or to the Seller's Knowledge threatened against or affecting the Seller's properties or assets or the Business, or the Seller's directors or officers which, if adversely determined against them or the Business, as the case may be, could reasonably be expected to adversely affect the financial condition, business, assets or liabilities of the Business, and the Seller has no Knowledge that there is any basis or ground for any such suit, action, claim, investigation or proceeding. 19 3.9. Books and Records The books and records of the Seller relating to the Business are in all material respects complete and correct and have been maintained in accordance with good business practice. 3.10. Affiliate Agreements; Guaranties No employee, officer or director has any direct or indirect interest beneficially or of record (other than by way of his status as a shareholder, employee, officer or director of the Seller) in, or is a party to, any lease, agreement or other obligation of any kind relating to the Business to which the Seller is also a party (except for their employment agreements and arrangements related thereto), nor any of the material assets, real or personal, used by the Seller in the Business. 3.11. Financial Information The Seller previously has delivered to the Buyer the following (the "Pro Forma Financial Statements"): (a) the unaudited pro forma statement of operations of the Business for the fiscal year ended 3 December 2000, compiled by the Seller's internal staff (the "2000 Pro Forma Financial Statements"); and (b) the unaudited pro forma statement of assets of the Business as of 3 June 2001 and the unaudited pro forma statements of operations of the Business for the six month period ended 3 June 2001 compiled by Seller's internal staff (the "Interim Pro Forma Financial Statements"); (c) the 2000 Pro Forma Financial Statements are derived from the Seller's Guarantor's audited consolidated fiscal 2000 financial statements and the Interim Pro Forma Financial Statements are derived from the Seller's Guarantor's unaudited consolidated June 3, 2001 financial statements based on the assumptions and principles set forth in such consolidated financial statements. Such consolidated financial statements of the Seller's Guarantor have been prepared in accordance with in the U.S. generally accepted accounting principles consistently applied. The Pro Forma Financial Statements are in accordance with the books and records of the Seller related to the Business and reflect, in the case of the pro forma statement of operations for the period ended June 3, 2001, the Seller's good faith, reasonable allocations of costs and overhead between the Business and the other operations included in the Sellers Guarantor's consolidated financial statements. 3.12. Employee Benefit Plans (a) Schedule 3.12 (a) to the Disclosure Letter lists the following in connection with the current employees of the Business: (i) each defined benefit plan and defined contribution plan, stock option or ownership plan, executive compensation, bonus, incentive compensation or deferred compensation plan, (ii) vacation pay, medical, dental, disability or death benefit plan, (iii) each severance pay plan, (iv) any other employee benefit 20 plan, program, arrangement, agreement or policy, and (v) pension benefits of the employees of the Business, in each case which is maintained or contributed to or by the Seller (such plans, contracts, agreements, arrangement, programs and policies being referred to herein as the "Benefit Plans"). (b) All contributions and other payments required to be made by the Seller, any subsidiary or any member of the Seller's group, to any of the Benefit Plans with respect to any period ending before or at or including the Effective Time have been made or reserves adequate for such contributions or other payments have been or shall be set aside therefor. Except as set forth in Schedule 3.12 (b), the Benefit Plans are all fully funded ("afgefinancierd") as per the Effective Time. 3.13. Intellectual Property Assets (a) The term "Intellectual Property Assets" means the intellectual property owned or licensed (as licensor or licensee) by the Seller relating to the Business (other than Excluded Assets) in which the Seller has a proprietary interest, set forth below: (i) the trade names, registered trademarks ("Registered Marks") and unregistered trademarks, service marks and applications relating to the Business (collectively, "Marks") listed on Schedule 3.13(a)(i) to the Disclosure Letter; (ii) the patents, patent applications and inventions and discoveries that may be patentable relating to the Business (collectively, "Patents") listed on Schedule 3.13(a)(ii) to the Disclosure Letter; (iii) the registered copyrights, if any, listed on Schedule 3.13(a)(iii) to the Disclosure Letter and all unregistered copyrights in both published works and unpublished works relating to the Business (collectively, "Copyrights"); (iv) all rights in mask works, if any, relating to the Business; (v) all know-how, trade secrets, confidential or proprietary information, customer lists, software, technical information, data, process technology, plans, drawings and blue prints relating to the Business (collectively, "Trade Secrets"); (vi) the rights in the internet web sites and internet domain names presently used by the Seller in connection with the Business listed on Schedule 3.13(a)(vi) to the Disclosure Letter (collectively "Net Names"). (b) Schedule 3.13(b) to the Disclosure Letter contains a complete and accurate list and summary description, including any royalties paid or received by the Seller, and the Seller has delivered to the Buyer accurate and complete copies, of all the Seller's contracts and agreements relating to 21 the Intellectual Property Assets, except for any license implied by the sale of a product and perpetual, paid-up licenses for commonly available software programs with a value of less than $ 10,000 under which the Seller is the licensee. There are no outstanding and, to the Seller's Knowledge, no threatened disputes or disagreements with respect to any such contract or agreement. (c) (i) Except as set forth in Schedule 3.13(c)(i) to the Disclosure Letter, the Intellectual Property Assets are all those necessary for the operation of the Business in all material respects as it is currently conducted. The Seller is the owner or licensee of all right, title and interest in and to each of the Intellectual Property Assets, free and clear of all encumbrances, and has the right to transfer or use without payment to a third party all of the Intellectual Property Assets, other than as set forth in Schedule 3.13(c)(i) to the Disclosure Letter. (ii) Except as set forth in Schedule 3.13(c)(ii) to the Disclosure Letter, all former and current employees of the Seller have executed written contracts or agreements with the Seller that assign to the Seller all rights to any inventions, improvements, discoveries or information relating to the Business. (d) Except as set forth in Schedule 3.13(d) to the Disclosure Letter: (i) All of the issued Patents are currently in compliance with formal legal requirements (including payment of filing, examination and maintenance fees and proofs of working or use), are valid and, to the Seller's Knowledge, enforceable, and are not subject to any maintenance fees or taxes or actions falling due within ninety (90) days after the Closing Date. (ii) No Patent has been or is now involved in any interference, reissue, reexamination, or opposition proceeding. To the Seller's Knowledge, there is no potentially interfering patent or patent application of any third party. (iii) to the Seller's Knowledge no Patent is infringed or has been challenged or threatened in any way and none of the products manufactured or sold, nor any process or know-how used, by the Seller infringes or is alleged to infringe any patent or other proprietary right of any other Person. (iv) All products made, offered for sale or sold under the Patents have been marked with the proper patent notice. (e) Except as forth in Schedule 3.13(e) to the Disclosure Letter: (i) All Registered Marks have been registered with the relevant authorities, are currently in compliance with all formal legal requirements (including the timely post-registration filing of affidavits of use and incontestability and renewal applications), are valid and, to the Seller's Knowledge, enforceable and are not subject to any maintenance fees or taxes or actions falling due within ninety (90) days after the Closing Date. 22 (ii) No Registered Mark has been or is now involved in any opposition, invalidation or cancellation proceeding and, to the Seller's Knowledge, no such action is threatened with respect to any of the Marks. (iii) To the Seller's Knowledge, there is no potentially interfering trademark or trademark application of any other Person. (iv) To the Seller's Knowledge, no Registered Mark is infringed or has been challenged or threatened in any way. None of the Marks used by the Seller infringes or to the Seller's Knowledge is alleged to infringe any trade name, trademark or service mark of any other Person. (v) All products and materials containing a Registered Mark bear the proper federal registration notice where permitted by law. (f) Except as forth in Schedule 3.13(f) to the Disclosure Letter: (i) All of the registered Copyrights are currently in compliance with formal legal requirements, are valid and, to the Seller's Knowledge, enforceable, and are not subject to any maintenance fees or taxes or actions falling due within ninety (90) days after Closing Date. (ii) To the Seller's Knowledge no registered Copyright is infringed or has been challenged or threatened in any way. None of the subject matter of any of the Copyrights infringes or, to the Seller's Knowledge', is alleged to infringe any copyright of any third party or is a derivative work based upon the work of any other Person. (iii) All works encompassed by any registered Copyrights have been marked with the proper copyright notice. (g) With respect to each Trade Secret material to the Business, the documentation relating to such Trade Secret is current, accurate and reasonably sufficient in detail and content to identify and explain it and to allow its full and proper use without reliance on the knowledge or memory of any individual. (i) The Seller has taken reasonable precautions to protect the secrecy, confidentiality and value of all Trade Secrets material to the Business (including the enforcement by the Seller of a policy requiring each employee or contractor to execute proprietary information and confidentiality agreements substantially in the Seller's standard form, and all current and former employees of the Seller have executed such an agreement). 23 (ii) The Seller has good title to and an absolute right to use the Trade Secrets owned by it and the right to use such Trade Secrets licensed to it, subject to the terms of any licensing agreement. The Trade Secrets material to the Business, to the Seller's Knowledge, are not part of the public knowledge or literature and, to the Seller's Knowledge, have not been used, divulged or appropriated to the detriment of the Seller. No Trade Secret is subject to any adverse claim or has been challenged or, to the Seller's Knowledge, threatened in any way or infringes any intellectual property right of any other Person. (h) Except as set forth in Schedule 3.13(h) to the Disclosure Letter: (i) The Net Names have been registered in the name of the Seller and are in compliance with all formal legal requirements. (ii) No Net Name has been or is now involved in any dispute, opposition, invalidation or cancellation proceeding and, to the Seller's Knowledge, no such action is threatened with respect to any Net Name. (iii) To the Seller's Knowledge, there is no domain name application pending of any other Person which would or would potentially interfere with or infringe any Net Name. (iv) To the Seller's Knowledge no Net Name is infringed or has been challenged, interfered with, or to the Seller's Knowledge, threatened in any way. No Net Name infringes, interferes with or is alleged to interfere with or infringe the trademark, copyright or domain name of any other Person. 3.14. Computer Systems Schedule 3.14 to the Disclosure Letter identifies (i) all of the software and computer databases (collectively, the "Computer Systems") that are material to the conduct of the Business by the Seller and used by the Seller in the conduct of its Business, (ii) whether such Computer Systems are owned or licensed by the Seller and, (iii) if licensed, the name of such licensor. The Seller has all legal right to use the Computer Systems as they are currently being used, except as set forth in Schedule 3.14 to the Disclosure Letter. The use of the Computer Systems owned by the Seller does not, and to the Seller's Knowledge the use of the Computer Systems licensed to the Seller does not infringe upon the rights of any other Person, nor has the Seller received any notice of a claim of such infringement. Except as set forth in Schedule 3.14 to the Disclosure Letter, there are no licenses, sublicenses or other agreements relating to the use of the Computer Systems by the Seller or third parties. 3.15. Insurance The Seller will maintain for the period up to the Closing Date such property and casualty insurance policies in such amounts of coverage relating to the Business and related assets as are reasonably adequate with respect to all risks usually insured against in connection with the operation of businesses similar to the Business. As of the Closing Date the Buyer will be responsible for taking out its own insurance policies relating to the Business. 24 3.16. Licenses, Authorizations and Permits The Seller has all licenses, authorizations and permits which are required to conduct the Business as now conducted and to use the other Purchased Assets, all of which are listed on Schedule 3.16 to the Disclosure Letter. The Seller is not in violation or default under any such license, authorization or permit. The Seller knows of no reason why any of the same should not be renewed upon expiration upon substantially the same terms as presently applicable. 3.17. Compliance with Law The Seller has complied with all laws, ordinances, rules and regulations and any private limitations, restrictions, covenants or conditions relating to the Purchased Assets or the operation or conduct of the Business. The Seller is in full compliance with all health and safety laws, and price and wage control laws. 3.18. Employment of Officers, Employees and Consultants; Prior Conduct; Etc. (a) Schedule 3.18 to the Disclosure Letter lists all current employees of the Seller related to the Business as of the Effective Time, which list includes the base salary and job title of each such employee. (b) There has been no "mass layoff" or as defined in the Notification Collective Dismissal Act, with respect to the Business within the six months prior to the Closing Date. (c) The Seller has not violated any provision of state, local or foreign law or any governmental rule or regulation, or any order, ruling, decree, judgment or arbitration award of any court, arbitrator or any governmental, quasi-governmental or regulatory agency regarding the terms and conditions of employment of employees, former employees or prospective employees of the Business or other labor related matters relating to the Business, including, without limitation, laws, rules, regulations, orders, rulings, decrees, judgments and/or arbitration awards relating to discrimination, fair labor standards, occupational health and safety, wrongful discharge or violation of the personal rights of employees, former employees or prospective employees 3.19. No Unlawful Payments Neither the Seller or to the Seller's Knowledge any director, officer or employee acting on behalf of the Seller in connection with the Business has used any funds for unlawful contributions, gifts, entertainment or other unlawful expenses relating to political activity, or made any direct or indirect unlawful payments to government officials or employees from corporate funds or established or maintained any unlawful or unrecorded funds. 25 3.20. No Commissions Due The Seller has not entered into any contract with, or made any representations to, any Person, firm or corporation, including but not limited to any finder, agent, broker or investment banker, providing for any finder's or brokerage fee or other commission to be paid by the Seller or the Buyer in connection with or related to this Agreement or the transactions herein contemplated. 3.21. Customers and Vendors Schedule 3.21 to the Disclosure Letter contains (a) a list of all current written and oral agreements with any customer of, or vendor to, the Business, including any arrangement for financing or assisting in the financing of such agreements, (b) a complete list of all of the customers of the Business who in the most recently completed full fiscal year and/or the first half of the current fiscal year accounted individually for more than 5% of the Seller's sales of products or services relating to the Business, and (c) a list of all vendors to the Seller who in the most recent full fiscal year and/or the first half of the current fiscal year accounted individually for more than 10% of the Seller's purchase of goods and/or services relating to the Business. The Seller's relationship with significant customers of and vendors to the Business is good, and to the Seller's Knowledge there is no intention of any such customer or vendor to terminate or modify any of such relationships. 3.22. No Untruths, Misstatements or Omissions No representation or warranty by, or information furnished by the Seller contained in this Agreement or the Disclosure Letter contains or will contain any untrue statement or misstatement of a material fact or intentionally omits or will omit any statement of a material fact necessary to make the statements of fact contained herein or therein not misleading. 3.23. Subsidiaries and Affiliates The Seller (a) has no legal or equitable interest in any other company, partnership or business enterprise that owns or operates any assets related to the Business; (b) has no contract or agreement for the purchase of a legal or equitable interest in any other corporation, partnership or business enterprise that would own or operate any assets related to the Business. 3.24. Solvency (a) The Seller is not now insolvent and will not be rendered insolvent by any of the transactions contemplated by this Agreement. As used in this section, "insolvent" means that the sum of the debts and other probable liabilities of the Seller exceeds the present fair saleable value of the Seller's assets. (b) Immediately after giving effect to the consummation of the transactions contemplated by this Agreement: (i) the Seller will be able to pay its liabilities as they become due in the usual course of its business; (ii) the Seller will not have unreasonably small capital with 26 which to conduct its present or proposed business; (iii) the Seller will have assets (calculated at fair market value) that exceed its liabilities; and (iv) taking into account all pending and, to the Seller's Knowledge, threatened litigation, final judgments against the Seller in actions for money damages are not reasonably anticipated to be rendered at a time when, or in amounts such that, the Seller will be unable to satisfy any such judgments promptly in accordance with their terms (taking into account the maximum probable amount of such judgments in any such actions and the earliest reasonable time at which such judgments might be rendered) as when as all other obligations of the Seller. The cash available to the Seller, after taking into account all other anticipated uses of the cash, will be sufficient to pay all such debts and judgments promptly in accordance with their terms. 3.25. Environmental Matters (a) Except as set forth in Schedule 3.25 to the Disclosure Letter, the Seller is and always has been in compliance with all applicable Environmental Laws with respect to the Business which compliance includes, but is not limited to, the possession by the Seller of all Environmental Permits and other governmental authorizations and approvals required with respect to the Business under all Environmental Laws, and compliance with the terms and conditions thereof, and the proper handling and disposal of all Hazardous Materials. (b) Except as set forth in Schedule 3.25, there is no Environmental Claim related to the Business pending or to the Seller's Knowledge threatened against the Seller. (c) Except as set forth in Schedule 3.25, there are no past or present actions, activities, circumstances, conditions, events or incidents related to the Business, including, without limitation, the handling, manufacture, treatment, storage, use, generation, release, emission, discharge, presence or disposal of any Hazardous Materials related to the Business that could reasonably be expected to form the basis of any Environmental Claim related to the Business against the Seller. (d) Without in any way limiting the generality of the foregoing: except as set forth in Schedule 3.25, there is no asbestos contained in, on or forming part of any land, building, building component, equipment, structure or office space related to the Business and being transferred by Seller to Buyer (by deed, assignment of lease, sublease or otherwise) hereunder, which asbestos is friable, deteriorating or in need of removal or replacement for the purpose of protecting human health or the environment. (e) Except as set forth in Schedule 3.25, the Seller has not engaged in or permitted any release, discharge, dumping or disposal of any Hazardous Materials on, in, under or about any land, building, building component, equipment, structure or office space related to the Business and being transferred by Seller to Buyer (by deed, assignment of lease, sublease or otherwise) hereunder other than in compliance with applicable Environmental Laws. 27 (f) The sale of the Purchased Assets does not require the advance notice to or prior approval, consent or permission of any authority or local agency, board, body or official pursuant to Environmental Law. (g) The Seller has not formerly and does not now own, control, or operate any above ground or below ground storage tanks for the storage of Hazardous Materials in or on any real property being transferred by the Seller to the Buyer (by deed, assignment of lease, sublease or otherwise) hereunder, or engage in any activity related to the Business which requires an Environmental Permit. Seller has delivered to the Buyer accurate and complete copies of all reports, audits or assessments ever received by the Seller related to the Business regarding Hazardous Materials in or on any real property being transferred by the Seller to the Buyer (by deed, assignment of lease, sublease or otherwise) hereunder, copies of which are included in Schedule 3.25(g) to the Disclosure Letter. (h) For purposes of this Section 3.25 the following terms shall have the meanings ascribed to them below: (i) "Environmental Claim" shall mean any notice of violation, fines, penalties, action, claim, lien, demand, abatement or other writ, judgment, decree, suit, proceeding, injunction, or similar order or direction (conditional or otherwise) by any governmental or quasi-governmental authority or any Person for or relating to personal injury (including sickness, disease, or death), tangible or intangible property damage, damage to or other adverse effect on the environment (including natural resources), nuisance, pollution, or contamination, if resulting from or based upon (i) a Release of, or exposure to, any Hazardous Material in, into, or onto the environment (including without limitation the air, soil, surface water, or ground water) at, in, by, from, or related to any real property being transferred by the Seller to the Buyer (by deed, assignment of lease, sublease or otherwise); (ii) the environmental aspects of the transportation, storage, treatment, or disposal of Hazardous Materials generated by the Business; or (iii) the violation or alleged violation of any Environmental Laws or any order or Environmental Permits of or from any governmental authority relating to the Business at the real property being transferred by the Seller to the Buyer (by deed, assignment of lease, sublease or otherwise). (ii) "Environmental Law" shall mean any law relating to protection of the environment or protecting public health and safety, including without limitation as such laws are amended or supplemented, and the regulations promulgated thereto, and any and all analogous state or local statutes, laws, regulations, standards, guidelines, requirements, orders, codes, ordinances and rules in effect prior to or at the Closing Date. (iii) "Environmental Lien" shall mean any lien in favor of any governmental entity for Environmental Claims or Remedial Actions. 28 (iv) "Environmental Permit" shall mean any permit, approval, authorization, license variance, registration, or permission required under any Environmental Laws. (v) "Hazardous Materials" shall mean any chemical, substance, material, or waste which is regulated by any Netherlands governmental authority, including without limitation (a) petroleum, petroleum products, asbestos, urea formaldehyde foam insulation, polychlorinated biphenyls, flammable substances, explosives, and radioactive materials, (b) any other material or substance which is defined, now or at closing, as a "hazardous material," "hazardous substance," "extremely hazardous waste," "restricted hazardous waste," "pollutant," or "toxic substance" under any provision of Environmental Law, and (c) any other chemical, material, or substance, the exposure or presence of which is now or at closing prohibited, limited, or regulated by Environmental Law. 3.26. Assigned Contracts The Seller has delivered to the Buyer or made available to the Buyer a true and complete copy of each of the written Assigned Contracts and all amendments thereto. All Assigned Contracts are in full force and effect. With respect to goods and services delivered by the Seller pursuant to the Assigned Contracts before the Closing, the Seller has performed its obligations under the Assigned Contracts and complied with all specifications thereto, and the Seller has not received any notice of default; nor is it in default; nor does any condition exist which with notice or the lapse of time, or both, will render the Seller in default, under any of the Assigned Contracts. All the Assigned Contracts are fully assignable to the Buyer, provided that the Assigned Contracts require the consent of the other party(ies) thereto. The Seller has no Knowledge that any party to any of such Assigned Contracts will not approve or consent to the assignment or novation of any of the Assigned Contracts or will otherwise prohibit or materially restrict the assignment or novation of any of the Assigned Contracts. To the Seller's Knowledge, the other parties to the Assigned Contracts to the Business are in compliance with all material terms and conditions of such Assigned Contracts. To the Seller's Knowledge, no party to an Assigned Contract has notified the Seller of its intention to terminate or materially change the nature of its transaction or relationship with the Seller or the Buyer under any such Assigned Contract. 3.27. [Intentionally Omitted] [ ] 3.28. Product Warranty Schedule 3.28 (i) to the Disclosure Letter sets forth an accurate, correct and complete statement of all written warranties and warranty policies, service agreements and maintenance agreements of the Seller related to the Business. No products heretofore manufactured, processed, assembled, distributed, sold, delivered, leased or serviced by the Seller in connection with the Business are now subject to any guarantee or warranty of the Seller, 29 claim for product liability, or patent or other indemnity, other than those set forth in Schedule 3.28 (ii) to the Disclosure Letter. All warranties are in conformity with the labeling and other requirements of applicable laws. The product warranty and return experience of the Seller relating to the Business for the three (3) previous fiscal years and the first six months of the current fiscal year is set forth in Schedule 3.28 (iii) to the Disclosure Letter. 3.29. Product Liability Schedule 3.29 to the Disclosure Letter sets forth an accurate, correct and complete list of all existing claims, liabilities, or obligations arising from, or alleged to arise from, any injury to person (including current and former employees) or property as a result of the manufacture, sale, ownership, possession, or use of any product of the Seller related to the Business manufactured, sold, assembled, distributed, transported or serviced prior to the date hereof. All such claims are or will be fully covered by the Seller's product liability insurance or otherwise provided for and the Seller or its insurance carriers shall satisfy and discharge all such claims. There have been no recalls of the Seller's products relating to the Business, and none are threatened or pending. No report of safety concerns has been filed by the Seller or is required to have been filed with respect to any products of the Seller related to the Business under any applicable law, rule, or regulation. 3.30. Contracts; No Defaults (a) Schedule 3.30 to the Disclosure Letter together with Schedule 1.2 (a) to the Disclosure Letter contains a list of the following contracts, agreements, etc. which is true, complete and correct in all material respects. Seller shall promptly provide the Buyer with a true and complete copy of such document or instrument upon request: (i) Any and all leases of real property relating to the Business to which the Seller is a party (as lessor or as lessee); (ii) Any and all existing contracts and commitments (including, without limitation, outstanding proposals to customers and customer orders, contracts for the purchase or sale of merchandise or services, mortgages, deeds of trust, indentures, loan agreements and credit agreements) relating to the Business or the Purchased Assets to which the Seller is a party which require further payments or have further obligations of a value in excess of $ 10,000; (iii) any and all agreements of guarantee or indemnification to which the Seller is a party relating to the Business or the Purchased Assets; (iv) any and all agreements or commitments to which the Seller is a party containing a covenant limiting or purporting to limit the freedom of the Seller to compete with any Person in any geographic area or engage in any line of business to the extent any such agreement or commitment might relate to or affect the Business or any of the Purchased Assets; 30 (v) any and all joint ventures, contracts or similar arrangements to which the Seller is a party relating to the Business or the Purchased Assets which involve a sharing of profits with or future payments to other Persons; (vi) any and all agreements or commitments to which the Seller is a party relating to the Business or the Purchased Assets for the sale of any non-standard materials, products, services or supplies and the value of the undelivered balance of such materials, products or supplies exceeds $ 10,000; (vii) any and all license agreements, permits, distributorship agreements, dealer agreements, franchise agreements, manufacturer's representative agreements, sales agency agreements or other similar agreements or commitments to which the Seller is a party relating to the Business or the Purchased Assets; (viii) any and all agreements or commitments for the assignment, sale or other transfer by the Seller of any contract or lease (or right to payment thereunder) relating to the Business by which it leases materials, products or other property to or from a third party; (ix) any and all agreements or commitments to which the Seller is a party for the acquisition, construction or sale of fixed assets relating to the Business or the Purchased Assets which require further payments, or have further obligations, in excess of $ 10,000; (x) any and all agreements or commitments to which present or former employees of the Business and the Seller are parties; (xi) any and all agreements or commitments for the sale of any of the Purchased Assets or any other assets, properties or rights of the Seller relating to the Business which require further payments or have further obligations in excess of $10,000 or for the grant of any preferential rights to purchase any of the Purchased Assets or the assets, properties or rights of the Seller relating to the Business; (b) The agreements, contracts, plans, leases, instruments, rights, registrations, applications, policies, permits, franchises, certificates, arrangements, licenses and commitments listed on Schedule 3.30 and Schedule 1.2 (a) to the Disclosure Letter are collectively referred herein as the "Commitments". The Seller's representations and warranties contained in Section 3.26 hereof relating to the Assigned Contracts shall also apply to the Commitments in the same manner as if they were recited herein. The Seller further represents and warrants: (i) that all such Commitments which are oral are truthfully and accurately described on Schedule 3.30 to the Disclosure Letter; and (ii) except as set forth in Schedule 3.30 to the Disclosure Letter, to the Seller's Knowledge, no party to a Commitment has 31 notified the Seller of its intention to terminate or materially change the nature of its transaction or relationship with the Seller or the Buyer under any such Commitment. 3.31. Labour law and positive advice works council The Seller has at all times in all material aspects complied with (i) the labour laws including (but not limited to) the "Arbeidsomstandighedenwet" and the "Wet op de ondernemingsraden" or "WOR" and implementing regulations applicable to it from time to time and (ii) the applicable Collective Bargaining Agreements (Collectieve Arbeidsovereenkomsten). Save as set forth in Schedule 3.31 there are no agreements with any works council or other representative body of employees or with any employees of the Seller with respect to their collective representation. In particular the works council of the Seller has rendered an unqualified and irrevocable positive advice, in accordance with article 25 of the WOR, concerning the intended decision to enter into and execute this Agreement and any obligation hereunder. 3.32. No other Warranties In connection with the transactions contemplated hereby, except as expressly set forth in this Section 3, the Seller make no representations or warranties whatsoever. 4. Representations and Warranties of the Buyer The Buyer hereby represents and warrants to the Seller and the Seller's Guarantor as follows: 4.1. Corporate Authorization This Agreement and the Closing Documents to which the Buyer is a party and the consummation of the transaction contemplated hereby and thereby have been duly authorized and approved by the Board of Directors of the Buyer and the Board of Directors or other governing body, and to the extent required, by the shareholders of the Buyer. This Agreement and the Closing Documents to which the Buyer and Seller are parties, when duly executed by the Buyer and delivered by all the parties hereto and thereto, as the case may be, will be the legal, valid and binding obligations of the Buyer. This provision shall be likewise applicable to the Buyer's Guarantor. 4.2. Due Incorporation The Buyer is a corporation duly organized and validly existing under the laws of the jurisdiction of its formation and has all requisite corporate power and authority to enter into this Agreement and perform its obligations hereunder. This provision shall be likewise applicable to the Buyer's Guarantor. 32 4.3. Commissions The Buyer has not entered into any contract with, or made any representation to, any Person, firm or corporation providing for any finder's or brokerage fee or other commission to be paid either by the Seller or the Buyer in connection with or related to this Agreement or the transactions herein contemplated. This provision shall be likewise applicable to the Buyer's Guarantor. 4.4. No Conflict The execution, delivery and performance of this Agreement and the Closing Documents by the Buyer, with or without the giving of notice and/or the passage of time, will not: (a) violate any provision of law applicable to the Buyer; (b) conflict with, result in the breach or termination of any provision of, or constitute a default under the Buyer's articles of association or any indenture, mortgage, note, deed of trust, license, permit, lease, obligation or other agreement or instrument to which the Buyer is a party or by which the Buyer may be bound; (c) violate any order, ruling, writ, injunction or decree of any court, administrative agency or governmental body which violation would adversely affect the Buyer's ability to consummate the transactions contemplated hereby. This provision shall be likewise applicable to the Buyer's Guarantor. 4.5. Financial Condition The Buyer' Guarantor has a written commitment from a financial institution to lend the funds necessary to enable the Buyer to consummate the transactions and perform the obligations contemplated by this Agreement. 4.6. Litigation No action, suit, claim, investigation, administrative proceeding, arbitration or other proceeding of or before any court, arbitrator or governmental or regulatory official, body or authority is pending or, to the Buyer's knowledge, threatened against it which challenges or seeks to prevent, enjoin, alter or delay the transactions contemplated hereby or otherwise could reasonably be expected to materially adversely affect the Buyer's ability to consummate the transactions and perform the obligations contemplated hereby. This provision shall be likewise applicable to the Buyer's Guarantor. 4.7. Investigation and Evaluation The Buyer acknowledges that: (a) it is experienced in the operation of the type of business to be acquired by the Buyer from the Seller hereunder, (b) it and its representatives have been given the opportunity to examine all books, records and other information provided by the Seller with respect to the Business, the Purchased Assets and the Assumed Liabilities, (c) it has been given reasonable access to the Real Property, and (d) they are fully capable of evaluating the adequacy and accuracy of the information and material obtained by them in the course of such examinations. This provision shall be likewise applicable to the Buyer's Guarantor. 33 4.8. Forecasts and Projections The Buyer acknowledges that there are uncertainties inherent in attempting to make projections and forecasts and render opinions, it is familiar with such uncertainties, and it recognizes that any projections, forecasts or opinions furnished to them by the Seller are subject to such uncertainties and that the actual results of the Business could differ materially from any results anticipated in such projections, forecasts and opinions. This provision shall be likewise applicable to the Buyer's Guarantor. 5. Certain Covenants and Agreements 5.1. Information The Buyer acknowledges that certain information furnished by the Seller in connection with the transactions contemplated by this Agreement is proprietary to the Seller and confidential and is and shall be subject to the terms of the Mutual Nondisclosure Agreement between the Seller's Guarantor and the Buyer's Guarantor dated 25 April 2001. 5.2. Conduct of Business by the Seller Pending the Closing Date The Seller hereby agrees that, prior to the Closing Date and except as otherwise consented to or approved by the Buyer in writing (which consent or approval shall not unreasonably be withheld), it will: (a) use reasonable efforts to operate the Business only in the usual, ordinary manner and, to the extent consistent with such operation, (i) preserve its present business organization intact; (ii) keep available the service of its present officers and employees; (iii) preserve its present relationships with Persons having business dealings with it in connection with the Business; and (iv) maintain in confidence all of the confidential relationships, rights and affairs relating to the Business, except to the extent shared solely with the Buyer as herein provided; (b) maintain all of the properties relating to the Business in satisfactory repair, order and condition and maintain insurance upon all of such properties and with respect to the conduct of the Business in such amounts and of such kinds comparable to that in effect on the date of this Agreement; (c) maintain the books, accounts and records of the Business in accordance with generally accepted accounting principles in the usual and ordinary manner, on a basis consistent with prior years, and comply with all laws applicable to them and to the conduct of the Business and perform all of their obligations relating to the Business without default; (d) make no modification or adverse change in any existing right, license, lease, contract, obligation, indebtedness, commitment, agreement, permit, franchise, concession or certificate relating to the Business 34 or any other document or understanding listed on Schedule 3.30 and make no sale or other disposition of any right or privilege relating to the Business accruing to them of a value in excess of $10,000; (e) confer with the Buyer prior to implementing operational decisions of a material nature related to the Business; (f) otherwise report periodically to the Buyer regarding the operations and finances of the Business; (g) make no material changes in management personnel of the Business without prior consultation with the Buyer; (h) comply with all legal requirements and contractual obligations applicable to the operations of the Business; (i) cooperate with the Buyer and assist the Buyer in identifying the governmental authorizations required by the Buyer to operate the Business from and after the Closing Date and in either transferring existing governmental authorizations of the Seller relating to the Business to the Buyer, where permissible, or obtaining new governmental authorizations for the Buyer; (j) make no borrowing or mortgage or pledge of any of the properties or assets relating to the Business or the Purchased Assets and no sale or other disposition of any of the properties, rights, privileges or other assets relating to the Business or the Purchased Assets, otherwise than in the Ordinary Course of Business; (k) other than in the Ordinary Course of Business, not contract for the purchase of any services, not acquire any machinery or equipment or other capital assets and not execute any new lease or renew any existing lease relating to the Business for a cost in excess of $10,000 ; and in addition to the foregoing requirements of subsections (a) to (k), and without limiting their scope and effect the Seller shall use reasonable efforts not to take any action or refrain from taking any action which would result in a breach of any of its representations and warranties contained in this Agreement, and shall cooperate with the Buyer and use reasonable efforts to cause all of the conditions to the obligations of the parties hereunder to be satisfied on or prior to the Closing Date. 5.3. Third Party Consents; Compliance The Seller and the Buyer shall use reasonable efforts to obtain any and all necessary consents for the assignment or transfer of the Assigned Contracts and any other note, contract, lease, license, or permit to be assigned or transferred hereunder and to perform their duties under such notes, contracts, leases, licenses, and permits without default. 35 5.4. Customers and Vendors The Seller and the Buyer shall make a joint effort, at the request of the Buyer, to introduce the Buyer to the customers of the Seller. 5.5. Coordination as to VAT The parties intend that a totality of assets or part thereof is transferred to Buyer on the Closing Date and that according to article 31 of the VAT Act ("Wet op de omzetbelasting 1968") the transfer is not subject to VAT. 5.6. [Intentionally Omitted] [ ] 5.7. [Intentionally Omitted] [ ] 5.8. Environmental Licence The Seller shall indemnify and keep the Buyer harmless on a continuing basis for all reasonable costs and expenses which the Buyer may occur in connection with any objections the municipality of Raalte or any other party may raise against the notification relating to the "Besluit bouw- en houtbedrijven" from the Seller dated 14 August 2001, including any reasonable costs and expenses or other damages the Buyer may sustain in the event that such objections would result in the Buyer being required to obtain an environmental licence and/or any reasonable costs and expenses the Buyer may occur in making any reasonable adaptations to the Business in order to comply with the conditions of such required licence or in order to prevent such licence being required. The Buyer and the Seller shall discuss in good faith whether, if applicable, to elect to make reasonable adaptations to the Business in order to prevent a licence being required or to elect to apply for a licence. The aforementioned indemnification shall not apply to the extent that the Buyer would be required to obtain a licence as a result of changes made to the Business after the Closing Date or would be required to make any adaptations (in order to comply with the conditions of the required licence or in order to prevent such licence being required) as a result of changes made to the Business after the Closing Date. 5.9. Employment The Seller shall indemnify and keep the Buyer harmless on a continuing basis for all costs and expenses (including the costs and fees of the legal counsel directed by the Seller as referred to below) relating to the employment and the termination of such employment of the employees set out in Schedule 5.9. The Seller shall be primarily responsible for the termination of the employment (and as such be entitled to direct the legal counsel acting on behalf of the Seller and the Buyer in connection with the termination of the employment), taking into account the reasonable interests of the Buyer. The 36 Buyer shall not enter into any settlement with any of the employees without the express written consent of the Seller. 5.10. Collective Labour Agreement The Seller shall indemnify and keep the Buyer harmless on a continuing basis for all costs and expenses which the Buyer may incur as a result of any of the provisions of the Collective Labour Agreement applicable to the Seller's employees (either as a result of their respective employment agreement or otherwise) not having been complied until the Closing Date. 5.11. Environmental Report The Seller and the Buyer shall within 10 days after the Closing Date instruct Arcadis, or any comparable environmental surveyor (the "Surveyor"), to conduct an environmental survey of the Real Property in order to prepare an update of the environmental report from Heidemij dated 4 April 1997 (the "Updated Report"), the scope of which shall be reasonably acceptable to both the Seller and the Buyer. The Surveyor shall make available copies of the Updated Report to the Seller and the Buyer. The costs of the environmental survey and the Updated Report shall be shared equally between the Seller and the Buyer. In the event that the Updated Report provides for the advice to conduct a further environmental survey the Seller and the Buyer shall instruct the Surveyor to conduct such further survey and to prepare a further report thereon (the "Further Report"). In the event that the Updated Report or the Further Report indicates that any part of the Real Property may have been contaminated with any Hazardous Materials and the Buyer is required by the relevant governmental authority to clean-up the relevant part of the Real Property, then the Seller shall indemnify and keep the Buyer harmless on a continuing basis for all costs, expenses and damages incurred in performing such cleaning-up (to the extent such cleaning-up is required under the "state of the art" as it stands at the time of the Closing). The Buyer shall ensure that the Seller will have the opportunity to participate in any discussions regarding the cleaning-up and will appeal against any requirement for cleaning up imposed by the governmental authority, if so required by the Seller, and the Seller shall be entitled to elect the Person(s) who will perform the cleaning-up, provided that such Person(s) is (are) a reputable cleaning company(ies). The Buyer and the Seller will keep each other fully informed about the status of the cleaning-up. The cleaning-up shall take place in the most cost efficient manner as feasible and shall not go any further than to the minimum level as required by Environmental Law, under the "state of the art" as it stands at the time of the Closing. This provision shall not preclude the Buyer from claiming any further amounts from the Seller to the extent the Buyer would be entitled thereto under Section 3.25. 5.12. Transfer of Employees The Seller and the Buyer acknowledge that upon the transfer of the Business to the Buyer as contemplated by this Agreement becoming effective the rights and obligations of the Seller's employees towards the Seller shall transfer to the Buyer by operation of law in accordance with Section 7:662 et seq. of the Netherlands Civil Code. 37 6. [Intentionally Omitted] [ ] 7. Condition Precedent to the Obligations of the Buyer and the Seller The obligations of the Buyer and the Seller to consummate the transactions contemplated hereby is subject to the satisfaction at or prior to the Closing of the condition that the Other Purchase Agreements shall have been executed and delivered and the transactions contemplated thereby shall have closed or shall be closed simultaneously with the transaction which is the subject of this Agreement. 8. Survival of Representations and Warranties; Indemnification; Etc. 8.1. Survival (a) All representations and warranties respectively made by the Seller and the Buyer in this Agreement, including without limitation, all representations and warranties made herein or in any Exhibit or Schedule hereto or to the Disclosure Letter or in the Closing Documents shall survive the Closing until the last day of the twenty-first (21) full month, excluding partial months, following the Closing Date, provided, however, that any claims arising in connection with a breach of any of the representations and warranties contained in Section 3.12 (Employee Benefits), Section 3.18 (Employment), Section 3.20 (Commissions), Section 3.24 (Solvency), Section 3.25 (Environmental Matters) and 3.29 (Product Liability) shall survive until the date of expiration of the relevant statutory period of limitation applicable to such claim and any extensions thereof; provided, further, that any claims with respect to any matter described in (i) Section 3.1 and 4.1 (Organization), Section 3.6 (Title) or Section 3.3 (Authorization), Section 4.1 (Corporate Authorisation) and Section 4.2 (Due Incorporation) shall survive indefinitely and (ii) the representations and warranties in Section 3.28 (Product Warranty) shall survive for the period set forth in Section 9.4 hereof (collectively, as applicable, the "Survival Date"). (b) All covenants and agreements respectively made by the Seller and the Buyer in this Agreement to be performed after the Closing Date shall survive the Closing, and will remain in full force and effect thereafter until (i) in the case of all covenants and agreements that have specified terms or periods, until the expiration of the terms or periods specified therein; and (ii) in case of all other covenants and agreements that do not have specified terms or periods, until the fulfillment thereof. (c) Notwithstanding the foregoing, any representation, warranty, or agreement as to which a bona fide claim for indemnification has been asserted in accordance with Section 8.2 or 8.3 hereof 38 prior to the Survival Date set forth in Section 8.1(a) hereof will (with respect to such claim) survive, and such claim may be pursued, beyond the expiration of such Survival Date until such claim is resolved by arbitration or by settlement. The right to indemnification, payment of damages or other remedy based on such representations, warranties, covenants, agreements and obligations will not be affected by any investigation conducted with respect to, or any Knowledge acquired (or capable of being acquired) at any time, whether before or after the Closing Date, with respect to the accuracy or inaccuracy of or compliance with, any such representation and warranty (as modified by the Disclosure Letter and schedules thereto at the time of the execution of this Agreement), covenant, or obligation. The waiver of any condition of Closing based on the accuracy of any representation or warranty, or on the performance of or compliance with any covenant or obligation, will not, unless otherwise agreed to in writing by both parties, affect the right to indemnification, payment of damages, or other remedy based on such representations, warranties, covenants, and obligations. 8.2. Seller's Agreement to Indemnify The Seller hereby agrees to indemnify and save the Buyer, and its shareholders, officers and directors (each a "Buyer Indemnified Party") harmless from or against any and all damages, losses, obligations, settlement payments pursuant to Section 8.7 hereof, liabilities, claims, actions or causes of action, encumbrances, costs, and expenses (including all reasonable attorney's fees, interest and penalties) (collectively, "Losses") suffered, sustained, reasonably incurred or required to be paid by a Buyer Indemnified Party resulting from each of the following: (a) the untruth, inaccuracy or breach or nonfulfillment of any representation, warranty, covenant or agreement of the Seller contained in this Agreement, the Closing Documents or in any Exhibit or Schedule hereto or to the Disclosure Letter. No materiality or Seller's Knowledge qualification contained in the foregoing documents delivered hereunder shall be taken into account in determining the aggregate amount of the Buyer Indemnified Parties' Losses, except for the Seller's Knowledge qualifications set forth in Sections 3.8 (Litigation), 3.13(d), (e), (f), (g) and (h) (Intellectual Property Assets), 3.14 (Computer Systems), 3.21 (Customers and Vendors), 3.24(b)(iv) (Solvency), 3.25(b) (Environmental), 3.26 (Assigned Contracts) and 3.30(b) (Commitments); (b) the assertion against a Buyer Indemnified Party, or the Purchased Assets of any liability or obligation of the Seller or its affiliates, shareholders, officers and directors not expressly assumed by the Buyer pursuant to this Agreement, (whether or not disclosed to the Buyer), including but not limited to the Excluded Liabilities under Section 1.5 hereof; (c) except as otherwise specifically provided in Sections 9.4, 9.5 and 9.6 hereof, any product or component thereof manufactured by or shipped, or any services provided by the Seller, in whole or in part, prior to the Closing Date. 39 8.3. Buyer's Agreement to Indemnify The Buyer hereby agrees to indemnify and save the Seller, its affiliates, shareholders, officers and directors (a "Seller Indemnified Party") harmless from or against any and all Losses suffered, sustained, reasonably incurred or required to be paid by a Seller Indemnified Party resulting from or relating to each of the following: (a) the untruth, inaccuracy or breach or nonfulfillment of any representation, warranty, covenant or agreement of the Buyer contained in this Agreement, the Closing Documents or in any Exhibit or Schedule hereto; (b) any failure to satisfy any obligation or liability for any Assumed Liabilities; (c) any liabilities or obligations arising out of the operation of the Business or the use of the Purchased Assets by the Buyer after the Effective Time (except for those liabilities or obligations of the Seller otherwise set forth in this Agreement); 8.4. Indemnification Procedures (a) No claim for indemnification shall be made against the Buyer under this Agreement after the Survival Date unless prior to the Survival Date a Seller Indemnified Party shall have given written notice of such claim for indemnification. No claim for indemnification shall be made against the Seller under this Agreement after the Survival Date, unless prior to such date a Buyer Indemnified Party shall have given written notice of such claim for indemnification. Notwithstanding the foregoing, any representation, warranty, or agreement made by the Seller or the Buyer as to which a bona fide claim for indemnification has been asserted in accordance with Section 8 hereof (including the preceding sentences of this subsection (a)) during the applicable survival period set forth in Section 8.1 hereof will (with respect to such claim) survive, and such claim may be pursued, beyond the expiration of such survival period until such claim is resolved by arbitration or by settlement. (b) If an indemnitee becomes aware of any matter that it believes is indemnifiable pursuant to Section 8.2 or 8.3 hereof (irrespective of the Basket provided for in Section 8.5 hereof) and such matter involves: (i) any claim made against the indemnitee by any Person other than a Buyer Indemnified Party or a Seller Indemnified Party; or (ii) the commencement of any action, suit, investigation, arbitration, or similar proceeding against the indemnitee by any Person other than a Buyer Indemnified Party or a Seller Indemnified Party, the indemnitee will give the indemnifying party prompt written notice of such claim or the commencement of such action, suit, investigation, arbitration, or similar proceeding. Such notice will: (i) provide (with reasonable specificity) the basis on which indemnification is being asserted; (ii) set forth the actual or estimated amount of damages for which indemnification is being asserted, if known; and (iii) be accompanied by copies of all relevant pleadings, demands, and other papers served on the indemnitee. The failure to provide the notice promptly will not relieve the indemnifying 40 party of its obligations under this Section 8 except to the extent of any damages that would not have been incurred if the notice had been given promptly. (c) If an indemnitee becomes aware of any matter that it believes is indemnifiable pursuant to Section 8.2 or 8.3 hereof (irrespective of the Basket provided for in Section 8.5 hereof) and such matter involves a claim or proceeding made by any Buyer Indemnified Party or Seller Indemnified Party against the indemnitee, the indemnitee will give the indemnifying party prompt written notice of such claim. Such notice will: (i) provide (with reasonable specificity) the bases for which indemnification is being asserted; and (ii) set forth the actual or estimated amount of damages for which indemnification is being asserted. The failure to provide the notice promptly will not relieve the indemnifying party of its obligations under this Section 8 except to the extent any damages that would not have been incurred if the notice had been given promptly. The indemnifying party will have a period of 30 days after the delivery of each notice required by this Section 8.4 during which to respond to such notice. If the indemnifying party accepts (in writing) full responsibility for the claim described in such notice, the actual or estimated amount of damages reflected in such notice will be conclusively deemed a liability that the indemnifying party owes, and, subject to Section 8.5, will pay (in cash) within ten (10) days, to the indemnitee. If the indemnifying party has disputed such claim or does not respond within such 30-day period, the indemnifying party and the indemnitee agree to proceed in good faith to negotiate a resolution of such dispute. If all such disputes are not resolved through negotiations within 30 days after such negotiations begin, the indemnifying party and the indemnitee shall resolve such disputes through arbitration. (d) The indemnifying party will have a period of 30 days after the delivery of each notice required by Section 8.4(b) hereof during which to respond to such notice. If the indemnifying party elects to defend the claim described in such notice or does not respond within such 30-day period, the indemnifying party will be obligated to settle or defend such claim, at its own expense and by counsel chosen by the indemnifying party and reasonably satisfactory to the indemnitee. The indemnitee will cooperate fully with the indemnifying party and counsel for the indemnifying party in the defense against any such claim, and the indemnitee will have the right to participate at its own expense in the defense of any such claim. If the indemnifying party responds within such 30-day period and elects not to defend such claim, the indemnitee will be free to settle in good faith or defend (and control the defense of) such claim. The indemnitee's settlement in good faith or defense will not relieve the indemnifying party of its obligations under this Section 8. 8.5. Basket and Limitations (a) The Seller shall have no liability (for indemnification or otherwise) with respect to claims under Section 8.2(a) and the equivalent provisions to Section 8.2(a) hereof contained in the Other Purchase Agreements (each, an "Indemnity Provision") until the aggregate amount of a Buyer Indemnified Parties' Losses with respect to such matters exceeds three hundred thirty thousand dollars ($ 330,000) (the "Basket"). No materiality or Seller's Knowledge qualification contained in Section 3 shall be taken into 41 account in determining the aggregate amount of the Buyer Indemnified Parties' Losses, except for the Seller's Knowledge qualifications set forth in Sections 3.8 (Litigation), 3.13(d), (e), (f), (g) and (h) (Intellectual Property Assets), 3.14 (Computer Systems), 3.21 (Customers and Vendors), 3.24(b)(iv) (Solvency), 3.25(b) (Environmental), 3.26 (Assigned Contracts) and 3.30(b) (Commitments). In the event the aggregate amount of such losses exceeds the Basket, then the Seller shall indemnify the Buyer with respect to the aggregate amount of such Losses but only to the extent that they exceed two hundred thousand dollars ($ 200,000). Notwithstanding the foregoing, this Section 8.5 will not apply to (i) claims or matters arising in respect of Sections 3.1 (Organization), 3.3 (Authorization), 3.6 (Title), 3.12 (Employee Benefits), 3.18 (Employment), 3.20 (Commissions), 3.24 (Solvency), 3.25 (Environmental Matters), 3.28 (Product Warranty) or 3.29 (Product Liability) or (ii) any fraud or intentional breach by the Seller of any covenant or obligation, and the Seller will be liable for all Losses with respect to such claims, matters, breaches or acts. (b) The amount of Losses subject to indemnification under this Article 8 shall be reduced (but not below zero) by any insurance proceeds (net of reasonable expenses and other costs in obtaining such proceeds) which the indemnified party under this Agreement shall receive or otherwise enjoy with respect to the event that triggered the losses. (c) The aggregate liability of the Seller for Losses under the Indemnity Provisions shall not exceed nine million nine hundred thousand dollars ($9,900,000). No materiality or Seller's Knowledge qualification contained in Section 3 shall be taken into account in determining the aggregate liability of the Seller for Losses under Section 8.2(a), except for the Seller's Knowledge qualifications set forth in Sections 3.8 (Litigation), 3.13(d), (e), (f) and (g) (Intellectual Property Assets), 3.14 (Computer Systems), 3.21 (Customers and Vendors), 3.24(b)(iv) (Solvency), 3.25(b) (Environmental), 3.26 (Assigned Contracts) and 3.30(b) (Commitments). Notwithstanding the foregoing, this Section 8.5 will not apply to (i) claims or matters arising in respect of Sections 3.1 (Organization), 3.3 (Authorization), 3.6 (Title), 3.12 (Employee Benefits), 3.18 (Employment), 3.20 (Commissions), 3.24 (Solvency), 3.25 (Environmental Matters), 3.28 (Product Warranty) or 3.29 (Product Liability) or (ii) any fraud or intentional breach by any Seller of any covenant or obligation, and the Seller will be liable for all Losses with respect to such claims, matters, breaches or acts. (d) Notwithstanding any other provision of this Agreement or of any of the Other Purchase Agreements, indemnified Losses recoverable with respect to any particular event, circumstance, state of facts, action or inaction pursuant to any of the Indemnity Provisions shall be reduced, dollar-for-dollar, by amounts actually paid with respect to such event, circumstance, state of facts, action or inaction to the Buyer, the Buyer's Guarantor or any of its affiliates pursuant to the Indemnity Provisions of any of the Other Purchase Agreements, it being the intent of this sentence to avoid possible double recovery of Losses by the Buyer, the Buyer's Guarantor and its affiliates. 42 8.6. Exclusive Remedy Except as set forth in this Section 8.6, from and after the Closing, the sole and exclusive remedy of the parties hereto with respect to any and all claims relating to or arising out of this Agreement shall be the indemnification provisions set forth in this Section 8. With respect to (i) fraud claims, (ii) a breach of the covenants set forth in Section 5.6, or (iii) a breach of the covenants set forth in Section 9, the remedies set forth in this Section 8 are cumulative and shall not be construed to restrict or otherwise affect any other rights or remedies that may be available to the indemnified party under any agreement, pursuant to law or otherwise. Notwithstanding the foregoing, nothing herein shall prevent any party from terminating this Agreement in accordance with Section 10. 8.7. Indemnification Payments The Seller and the Buyer agree that any payment required to be made under Section 8 will be paid within ten days after request or settlement between the parties or final resolution through arbitration. 8.8. Right of Set-Off Upon written notice to the Seller or the Buyer, as applicable, specifying in reasonable detail the basis for such a bona fide indemnification claim in accordance with Section 8.4 hereof, the claiming party may set-off the amount of the claim against sums due from the claiming party to the other party. Any disputed claim that is not resolved through negotiations between the parties shall be submitted to arbitration in accordance with Section 12.12 of this Agreement. 9. Additional Covenants 9.1. Covenants Regarding Post-Closing Activities (a) For a period of three years following the Closing Date, the Seller covenants and agrees that the Seller will not, within the geographic area in which the Seller conducted Business active up until the Closing, directly or indirectly, whether as principal or as agent, consultant or otherwise, alone or in association with any other Person, firm, corporation or other business organization, carry on, or be engaged, concerned or take part in, or render Buyer Competitive Business services relating to the Business or own any interest or share in the earnings of or invest in the stock, bonds or other securities of, any Person, firm, corporation or other business organization which is in a Competitive Business. "Buyer Competitive Business" shall mean the graphics products business being sold by Seller and their affiliates to Buyer or its affiliates pursuant to this Agreement or other purchase agreements being entered into concurrently herewith as described in Schedule 1.1 hereto. Nothing herein contained, however, shall be deemed to prohibit the Seller from (i) owning stock in public companies in pursuance of a passive investment program so long as it does not become a "participation" thereof, as such term is defined in the 2:24(c) Dutch Civil Code; (ii) engaging in any businesses being retained by 43 the Seller or its affiliates, as set forth in Schedule 1.1 hereto; and (iii) being acquired by any entity which is to any degree engaged in a Buyer Competitive Business. (b) For a period of three years following the Closing Date, the Seller shall not, for whatever reason, whether for its own account or for the account of any other Person, firm, corporation or other business organization, solicit, sell to or accept business relating to a Buyer Competitive Business from any Existing Customer (as hereinafter defined) or any "Active Prospect" (as hereinafter defined) of the Business as conducted by the Seller or the Buyer. "Active Prospect" shall mean a potential customer which actually has been solicited by the Seller in connection with the Business or the Buyer at the later of the Closing Date or one which at such time holds, but has not accepted, a proposal prepared by the Seller or the Buyer. "Existing Customer" shall mean any customer of the Seller in connection with the Business or the Buyer at the later of the Closing Date, such customers to include, without limiting the foregoing, those customers of the Seller as of the Closing as listed in Schedule 3.21 hereto. (c) For a period of three years following the Closing Date, the Seller shall not, for whatever reason, whether for its own account or for the account of any other Person, firm, corporation or other business organization (i) solicit, induce or attempt to solicit or induce any customer, supplier, licensee or other business relation of the Business to cease doing business with the Business or the Buyer or its affiliates; (ii) intentionally interfere in any way with the contracts between the Buyer or the Parent and any customer, supplier, licensee or other business relation of the Business; (iii) hire or participate in any solicitation or attempt to solicit or hire any Person who was an employee of the Seller or any of its affiliates as of the Closing Date or within the six-month period prior thereto while such Person is an employee of the Buyer or its affiliates or for six (6) months after the termination of the employment of such Person; or (iv) disparage, deprecate, or make any negative comment with respect to the Business or the Buyer or its businesses, operations, or properties. (d) The Seller recognizes that by reason of such Seller's ownership of and/or operation of the Business, the Seller may have acquired Confidential Information and trade secrets concerning the operation of the Business, the use or disclosure of which could cause the Buyer or the Business substantial loss and damages that could not be readily calculated and for which no remedy at law would be adequate. Accordingly, in consideration for the payment of the Purchase Price, which is recognized as adequate by the Seller, the Seller covenants and agrees with the Buyer that the Seller will not at any time, except in performance of the Seller's obligations, if any, to the Buyer or with the prior written consent of the Buyer, directly or indirectly, disclose any Confidential Information that the Seller has acquired or may acquire, or use such information in a manner detrimental to the interests of Buyer or the Business, unless (i) such information becomes known to the public generally through no fault of the Seller, (ii) disclosure of such information is required by law, or (iii) the Seller reasonably believes that such disclosure is required in connection with the defense of a lawsuit against the Seller; provided, however, that prior to disclosing any information pursuant to this Section, the Seller shall give prior written notice of such proposed disclosure to the Buyer, provide the Buyer with the reasonable opportunity to contest such 44 disclosure, and shall reasonably cooperate with all efforts to prevent such disclosure. The term Confidential Information means information of a material nature not previously disclosed to the public by the management of the Seller or of the Business with respect to the products, facilities, intellectual property (including, without limitation, methods and trade secrets), software, source code, systems, procedures, manuals, reports, price lists, customer lists, financial information, business plans, prospects, or opportunities of the Seller or any of its affiliates related to the Business. (e) If any court of competent jurisdiction shall determine that the covenants and agreements contained in this Section 9 are unenforceable as to any portion of the geographical area defined or as to the duration of time stated, it may determine the rights of the parties hereunder on the balance of said geographical area or the balance of such time duration which said court determines to be just and equitable under the circumstances. (f) The Seller acknowledges that the Buyer has relied upon the covenants contained in this Section 9.1 and that said covenants are conditions to the Buyer's willingness to enter into and perform its obligations under this Agreement. (g) The parties agree that the Buyer would be irreparably harmed if the Seller does not comply with all of its obligations under this Section 9.1 and that money damages alone will not be sufficient to compensate the Buyer for such breach. Accordingly, the parties agree that Buyer shall be entitled to obtain an injunction against the continuation of any breach of this Section 9.1 without the necessity of showing money damages. 9.2. [Intentionally Omitted] [ ] 9.3. Payments Received (a) Except as otherwise may be provided in this Agreement or the Closing Documents the Seller shall promptly remit to the Buyer on a weekly basis all monies received by the Seller in respect of (a) performance from and after the Effective Time under the contracts included among the Purchased Assets or (b) any Account Receivable or any other account or note receivable relating to the Business and arising or generated on or after the Effective Time. (b) The Buyer shall promptly remit to the Seller on a weekly basis all monies due to Seller under this Agreement or the other Closing Documents in accordance with the terms of this Agreement and such Closing Documents. 9.4. Customer Rebates and Warranty Claims (a) The Seller agrees to reimburse the Buyer on a euro for euro basis for any customer rebates authorized by the Seller prior to the Effective Time and incurred by the Buyer on or after the Effective Time but only with respect to invoices for sales of equipment, products and services 45 relating to the Business by the Seller dated prior to the Effective Time (the "Customer Rebate Costs"). Any and all customer rebates with respect to invoices for sales dated on or after the Effective Time shall be the sole responsibility of the Buyer whether or not such customer rebates were authorized by the Seller. (b) The Seller agrees to reimburse the Buyer on a euro for euro basis for costs of fulfilling bona fide warranty obligations for equipment ("Equipment Warranty Costs") and consumable products ("Consumable Products Warranty Costs") of the Business manufactured prior to the Effective Time, whether or not sold by the Seller prior to the Effective Time, provided that: (i) in the case of equipment, the warranty claim is made by the customer not later than one (1) year following its original date of purchase by the customer and in any event no later than four (4) years after the Effective Time; and (ii) in the case of consumable products, the warranty claim is made by the customer not later than one (1) year following its original date of purchase and in any event not later than four (4) years after the Effective Time. Notwithstanding the foregoing, the Seller shall have no obligation to reimburse the Buyer for costs of warranty obligations with respect to any consumable products sold by the after the Effective Time if such consumables were more than three (3) years old at the time of such sale by the Buyer. The reimbursement of Equipment Warranty Costs and Consumable Products Warranty Costs shall be subject to the following additional terms set forth below: (i) In the case of Equipment Warranty Costs, the Seller shall reimburse the Buyer for the costs of repair or replacement of the equipment including labor, spare parts, and reasonable expenses in connection with travel and third-party services. Equipment Warranty Costs arising out of the replacement of equipment or a discount on the price of equipment may be incurred by the Buyer in its sole, good faith discretion up to an amount of $ 10,000 for any single warranty claim. The Buyer shall consult with the Seller with respect to the satisfaction of any equipment warranty claim in excess of $ 10,000. (ii) In the case of Consumable Products Warranty Costs arising out of the replacement of such products or a discount on the price of such products, the Buyer may incur such costs in its sole, good faith discretion up to an amount of $5,000 for any single warranty claim. The Buyer shall consult with the Seller prior to the satisfaction of any consumable products warranty claim in excess of $ 5,000. (c) The reimbursement procedures for Customer Rebate Costs, Equipment Warranty Costs and Consumable Products Costs shall be as follows: (i) Not later than thirty (30) days following the end of each fiscal quarter after the Closing Date, the Buyer shall deliver a statement setting forth the customer rebates and the warranty claims (both for equipment and consumable products) and the Euro amounts of each (each a "Customer Rebate and Warranty Claims Statement"). The Buyer shall make available to the Seller the records or back-up or related materials used in preparing the Customer Rebate and Warranty Claims Statements at reasonable times and upon reasonable notice for inspection and photocopying within five (5) days of the request therefor by the Seller. 46 (ii) Any reimbursement required under this Section 9.4 shall be due and payable to the Buyer by the Seller within twenty (20) days of the Buyer's delivery of a Customer Rebate and Warranty Claims Statement. 9.5. Non-warranty Product Returns (a) The Seller agrees to reimburse the Buyer for costs of Non-warranty Returns by customers of products of the Business occurring after the Effective Time that were authorized by the Seller prior to the Effective Time. (b) The Buyer agrees to reimburse the Seller if and to the extent that the Buyer's acceptance of any Non-warranty Returns from customers of products of the Business occurring after the Effective Time and not authorized by the Seller should result in any charge back to or claim against the Seller by the customer returning such products. (c) As used in this Section 9.5, a "Non-warranty Return" shall mean any return of products other than a warranty return. (d) The Seller, on the one hand, and the Buyer on the other, shall make available to the other party the records or back-up or related materials used by such party in determining the reimbursement obligations of the other party arising out of this Section 9.5 at reasonable times and upon reasonable notice for inspection and photocopying within five (5) days of the request therefor by the Seller. 9.6. AquaSeal Warranty (a) The Seller agrees to reimburse the Buyer on a dollar for dollar basis for all costs of fulfilling good faith warranty obligations for "Integrated Graphic Protection System" products sold prior to the Closing Date provided that the warranty claim is made by the customer within the applicable period provided by the Seller's Integrated Graphic Protection System Material Replacement Warranty (generally sixty (60) months after the application of the AquaSEAL product.) The obligation of the Seller shall apply to all costs reasonably incurred by the Buyer whether arising out of the SEAL brand AquaSEAL brand liquid lamination products, inks, substrate or any other product or cause covered by such warranty and irrespective of whether the warranty claim is attributable to the products, services, actions or inaction of the Seller, The Valspar Corporation, Vutek, Forbo-Stamoid, Mehler Haku GMBH, or any other business entity. (b) Any reimbursement required under this section 9.6 shall be due and payable to the Buyer by the Seller within twenty (20) days of the Buyer's delivery of a statement setting forth in reasonable detail the amount of the warranty claim. (c) The Buyer shall promptly notify the Seller of its receipt of any such warranty claim. Further, the Buyer shall make available to the Seller the records or back-up or related materials used by the Buyer in determining the Seller's reimbursement obligations arising out of the warranty obligations pursuant to subsection (a) hereof at reasonable times and upon reasonable notice for inspection and photocopying within five (5) days of the request therefor by the Seller. 47 9.7. [Intentionally Omitted] [ ] 9.8. Removing Excluded Assets On or before the Closing Date (or at such later date as the parties may agree), the Seller shall remove all Excluded Assets from all facilities to be occupied by the Buyer and shall vacate such Facilities and Real Property. Such removal and evacuation shall be done in such manner as to avoid any damage to the Facilities and other properties to be occupied by the Buyer and any material disruption of the business operations to be conducted by Buyer after the Closing. Any damage to the Purchased Assets or to the facilities resulting from such removal and evacuation shall be paid by the Seller. Should the Seller fail to remove the Excluded Assets as required by this Section, the Buyer shall have the right, but not the obligation, (a) to remove the Excluded Assets at the Seller's sole cost and expense; (b) to store the Excluded Assets and to charge the Seller all storage costs associated therewith; (c) to treat the Excluded Assets as unclaimed and to proceed to dispose of the same under the laws governing unclaimed property; or (d) to exercise any other right or remedy conferred by this Agreement. The Seller shall promptly reimburse the Buyer for all costs and expenses reasonably incurred by the Buyer in connection with any Excluded Assets not removed by the Seller on or before the Closing Date or other agreed upon date. 9.9. [Intentionally Omitted] [ ] 9.10. Retention of and Access to Records (a) After the Closing Date, the Buyer shall retain for a period of seven (7) years those records of the Seller delivered to the Buyer. The Buyer also shall provide the Seller and its representatives reasonable access thereto, during normal business hours and on at least three days' prior written notice, to enable them to prepare financial statements or tax returns or deal with tax audits. Before destroying any of the aforementioned records of the Seller, the Buyer shall first make a written offer of such records to the Seller's Guarantor. If the Seller's Guarantor does not respond to such written offer within thirty (30) days of receipt of such notice, the Buyer shall have no further obligations to the Seller with respect to such records. (b) After the Closing Date, the Seller shall retain for a period of seven (7) years those records of the Seller relating to the Business that are Excluded Assets. The Seller shall also provide the Buyer and its representatives reasonable access to records relating to the Business that are Excluded Assets, during normal business hours and on at least three days' prior written notice, for any reasonable business purpose specified by the Buyer in such notice. Before destroying any of the aforementioned records relating to the Business that are Excluded Assets, the Seller shall first make a written offer of such records to the Buyer. If the Buyer does not respond to such 48 written offer within thirty (30) days of receipt of such notice, the Seller shall have no further obligations to the Buyer with respect to such records. 9.11. Change of Corporate Names (a) The Seller procure that within twenty five (25) days after the Closing Date all actions shall be taken necessary to remove the words "Graphics" and "Peak" from any of the Seller's corporate names. 10. Termination, Waiver and Amendment 10.1. Termination Provisions (a) This Agreement may be terminated at any time prior to the Closing by mutual consent of the Seller and the Buyer. (b) At any time prior to the Closing, the Buyer may act alone to terminate the Agreement in the form of a written notice to the Seller, (i) if there is or shall be any material misrepresentation, error, misstatement or omission in or material breach of any representation or warranty by the Seller pursuant to this Agreement, the Closing Documents and any other document and instrument required to be delivered herewith (ii) if the Seller, in a materially adverse respect, shall breach any covenant in this Agreement, or (iii) if there shall be a failure of any of the conditions to which the Buyer's obligations are subject under this Agreement. (c) At any time prior to the Closing, the Seller may act alone to terminate the Agreement in the form of a written notice to the Buyer (i) if there is or shall be any material misrepresentation, error, misstatement or omission in or material breach of any representation or warranty by the Buyer pursuant to this Agreement, the Closing Documents and any other document and instrument required to be delivered herewith, (ii) if the Buyer, in a materially adverse respect, shall breach any covenant in this Agreement, or (iii) if there shall be a failure of any of the conditions to which Seller's obligations are subject under this Agreement. (d) This Agreement may be terminated by either the Buyer or the Seller if the Closing has not occurred by the close of business on 12 October 2001. (e) The Seller and the Seller's Guarantor on the one side and the Buyer and the Buyer's Guarantor on the other side hereby explicitly waive their rights under Sections 6:265 et seq. of the Dutch Civil Code (Burgerlijk Wetboek) to rescind (and to claim rescission of) this Agreement and the Bill and the agreements and transactions contemplated hereby, except as provided at (a), (b), (c) or (d) above. 49 10.2. Effect of Termination (a) In the event of termination of this Agreement pursuant to Section 10.1(a), this Agreement shall forthwith become void and there shall be no liability on the part of any party hereto or any of its affiliates, directors, officers, or shareholders. (b) Termination of this Agreement pursuant to Sections 10.1(b), (c) or (d) shall not in any way terminate, limit or restrict the rights and remedies of any party hereto against any other party for breach of this Agreement. 10.3. Amendment The parties hereto may amend, modify or supplement this Agreement in such manner as may be agreed upon by them exclusively in writing, including this clause, at any time. 10.4. Waiver Any party may waive in writing the performance of any covenant or the fulfillment of any condition of this Agreement. The failure of any party at any time or times to require performance of any provision hereof shall in no manner affect such party's right at a later time to enforce the same. 11. Guarantors 11.1. Seller's Guarantor The Seller's Guarantor shall irrevocably and unconditionally be jointly and severally liable for the obligations of the Seller under this Agreement and the Bill. 11.2. Buyer's Guarantor The Buyer's Guarantor shall irrevocably and unconditionally be jointly and severally liable for the obligations of the Buyer under this Agreement and the Bill. 12. Miscellaneous 12.1. Expenses The Buyer and the Seller shall pay the fees and expenses of their respective counsel, accountants and other experts representing them as well as all other expenses incurred by such parties incident to the negotiation and consummation of the transactions contemplated hereby. 50 12.2. Notices All notices, consents or other communications required or permitted to be given under this Agreement shall be in writing and shall be deemed to have been duly given when delivered personally, delivery changes prepaid, or three business days after being sent by registered or certified mail, return receipt requested, postage prepaid or one business day after being sent by a nationally recognized express courier service, postage or delivery charges prepaid, to the parties at their respective addresses stated below. Any party may change its address for notice and the address to which copies must be sent by giving notice of the new address to the other parties in accordance with this Section 12.2, except that any such change of address notice shall not be effective unless and until received. If to the Seller: ----------------- Hunt Graphics Europe B.V. p/o Hunt Corporation One Commerce Square 2005 Market Street Philadelphia, PA 19103-6999 USA Attn: Donald L. Thompson. Chairman and CEO Telephone No. - (215) 841-2400 Fax No. - (215) 656-3714 With copy (which shall not constitute notice) to: ------------------------------------------------- Schaap & Partners Parklaan 17 3016 BA Rotterdam The Netherlands Attn.: Mr. J.Ph. van der Veen Telephone No. - 31 10 2770300 Fax No. - 31 10 4364977 51 If to the Seller's Guarantor: ----------------------------- Hunt Corporation One Commerce Square 2005 Market Street Philadelphia, PA 19103-6999 USA Attention: Donald L. Thompson. Chairman and CEO Telephone No. - (215) 841-2400 Fax No. - (215) 656-3714 with a copy (which shall not constitute notice) to: --------------------------------------------------- John C. Bennett, Jr. Drinker Biddle & Reath LLP One Logan Square 18th & Cherry Streets Philadelphia, Pennsylvania 19103-6996 USA Telephone No. - (215) 988-2810 Fax No. - (215) 988-2757 52 If to the Buyer: ---------------- Seal Graphics Europe B.V. Kanaaldijk Oostzijde 3 8102 HL Raalte The Netherlands Attn.: F.H.P. Knaap Telephone No. -31 76 5439960 Fax No. - 31 76 5439962 With copy (which shall not constitute notice) to: ------------------------------------------------- (i) the Buyer's Guarantor; and (ii) Nauta Dutilh Prinses Irenestraat 59 1077 WV Amsterdam The Netherlands Attn.: Mr. J.H.J. Timmermans Telephone No. - 31 20 5414646 Fax No. - 31 20 6612827 If to the Buyer's Guarantor: ---------------------------- Neschen AG Hans Neschen Strasse 1 D- 3165 Bueckeburg Germany Attn.: the Dirtectors Telephone No. - 49 57222070 Fax No. - 49 5722207209 53 With copy to: ------------- Abels, Decker, Kuhfuss & Partner Tersteegenstrasse 28 D- 40474 Duesseldorf Germany Attn.: Prof. Dr. Iur. G. Real Telephone No. - 49 211 47838125 Fax No. - 49 211 47838111 12.3. Entire Agreement This agreement, including the Exhibits and Schedules hereto and to the Disclosure Letter (the "Agreement"), constitutes the entire agreement among the parties and supersedes all prior agreements and undertakings, oral and written, among the parties hereto with respect to the subject matter hereof, except for the Mutual Nondisclosure Agreement dated 25 April 2001 between the Buyer's Guarantor and the Seller's Guarantor. 12.4. Binding Effect and Benefit (a) This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective successors, heirs and assigns. Nothing in this Agreement, expressed or implied, is intended to confer on any other Person other than the parties hereto or their respective successors, heirs and assigns, any rights, remedies, obligations or liabilities under or by reason of this Agreement. (b) If the Buyer's Guarantor or the Seller's Guarantor ceases to exist as a result of a transaction that involves a Change in Control (as defined in Section 12.13 hereof), it is specifically intended that any successor entity be bound by this Agreement. The Buyer's Guarantor or the Seller's Guarantor, as the case may be, shall ensure that any agreement relating to a Change in Control requires the successor entity to specifically assume all liabilities under this Agreement. Failure of the successor to assume this Agreement shall be considered a breach of this Agreement by the Buyer's Guarantor or the Seller's Guarantor, as the case may be. 54 12.5. Assignability (a) This Agreement shall not be assignable by any party hereto without the prior written consent of the other parties hereto; provided, however, that the Buyer shall be permitted to assign all or any part of its rights or obligations hereunder to any entity in which it has a controlling interest or which has a controlling interest in it. (b) Regardless of any assignment hereunder by the Seller, the Seller's Guarantor shall continue to be bound by any and all obligations or liabilities of the Seller under this Agreement, the Closing Documents and any other document or instrument required to be delivered in connection with this Agreement. (c) Regardless of any assignment hereunder by the Buyer, the Buyer's Guarantor shall continue to be bound by any and all obligations or liabilities of the Buyer under this Agreement, the Closing Documents and any other document or instrument required to be delivered in connection with this Agreement. 12.6. Severability If any provision of this Agreement is held invalid or unenforceable by any court of competent jurisdiction, the other provisions of this Agreement will remain in full force and effect. Any provision of this Agreement held invalid or unenforceable only in part or degree will remain in full force and effect to the extent not held invalid or unenforceable. 12.7. Headings; Interpretation Headings of sections and subsections contained in this Agreement are for reference purposes only and shall not affect the meaning or interpretation of this Agreement. 12.8. Counterparts This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original and all of which together shall be deemed to be one and the same instrument. 12.9. Governing Law This Agreement shall be construed in accordance with and be governed exclusively by the laws of The Netherlands, without regard to its rules of applicable law. 12.10. Schedules All schedules which are attached hereto are incorporated hereby by this reference. 55 12.11. Announcements Neither the Seller, on the one hand, nor the Buyer on the other, shall issue any press release or make any public announcement or disclosure relating in any way to the transactions contemplated hereby or to the negotiations of the parties concerning the same without prior written consultation with the other party as to form and content of such announcement or disclosure, provided, however, that, as to announcements or disclosures required of such party by law or by the applicable rules of any stock exchange or stock market, such party shall only be required to use its reasonable efforts to advise the other of the form and content of any such announcement or disclosure. 12.12. Dispute Resolution All disputes arising out of or in connection with this Agreement and the transactions contemplated herein (other than disputes arising out of Section 2.3 hereof) shall be submitted to arbitration pursuant to the Rules of Arbitration of the International Chamber of Commerce. Such arbitration shall be held in Paris, France and shall be conducted in English by three (3) arbitrators appointed in accordance with said Rules. Notwithstanding the foregoing, nothing in this Article 19.2 shall preclude either Party for applying for injunctive relief in summary proceedings ("kort geding") to the competent District Court in the Netherlands. 12.13. Definitions (a) A "Change in Control" occurs when: (i) Any person, partnership, corporation or similar entity or group, that does not control more than 25% of the voting securities of the Buyer's Guarantor or the Seller's Guarantor, as the case may be, as of the Effective Time of this Agreement, acquires or obtains control of more than 25% of the voting securities of the Buyer's Guarantor or the Seller's Guarantor, as the case may be; (ii) More than 25% of the operating assets of the Buyer's Guarantor or the Seller's Guarantor, as the case may be, are sold or otherwise disposed of, or the Buyer's Guarantor or the Seller's Guarantor, as the case may be, liquidates more than 25% of its operating assets excluding the sale of the Business contemplated by this Agreement; or (iii) The Buyer's Guarantor or the Seller's Guarantor, as the case may be, merges with any other corporation, regardless of whether the Buyer's Guarantor or the Seller's Guarantor, as the case may be, is the surviving entity after the merger, except for a merger in which the shareholders of the Guarantor who were shareholders of the Buyer's Guarantor or the Seller's Guarantor, as the case may be, prior to a Change in Control continue to own 75% or more of the merged companies. For purposes of this definition, the term "group" shall mean any person who acts in concern within the meaning of Section 2:24b Netherlands Civil Code (or under similar provisions of any applicable foreign securities laws). 56 (b) "Knowledge" - an individual will be deemed to have "knowledge" of a particular fact or other matter if: (i) such individual is actually aware of such fact or other matter; or (ii) a prudent individual could be expected to discover or otherwise become aware of such fact or other matter in the course of conducting a reasonably investigation concerning the existence of such fact or other matter. The Seller will be deemed to have "knowledge" of a particular fact or other matter if the officers of the Seller have knowledge of such fact or other matter. (c) "Ordinary Course of Business" - an action taken by a Person will be deemed to have been taken in the Ordinary Course of Business only if that action: (i) is consistent in nature, scope and magnitude with the past practices of such Person and is taken in the ordinary course of the normal, day-to-day operations of such Person; and (ii) does not require authorization by the board of directors or shareholders of such Person (or by and Person or group of Persons exercising similar authority) and does not require any other separate or special authorization of any nature; (d) "Person" - an individual, partnership, corporation, limited liability company, limited liability partnership, joint stock company, unincorporated association, joint venture or other entity or governmental body. 57 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of 9 October 2001. HUNT GRAPHICS EUROPE B.V. By:_____________________ Name: Title: PEAK B.V. By: Hunt Graphics Europe B.V. By:_____________________ Name: Title: HUNT CORPORATION By:_____________________ Name: Title: SEAL GRAPHICS EUROPE B.V. By:_____________________ Name: Title: NESCHEN AG By:_____________________ Name: Title: EX-2.D 6 ex2-d.txt EX-2.D Exhibit 2(d) THIS AGREEMENT is made the 9th day of October 2001 BETWEEN: (1) HUNT HOLDINGS INC. of 103 Springer Building, 3411 Silverside Road, Wilmington Delaware 19810, United States of America ("the Vendor"); (2) HUNT GRAPHICS EUROPE LIMITED whose registered office is at Chester Hall Lane Basildon Essex SS14 3BG ("Hunt (UK)"); (3) HUNT GRAPHICS EUROPE B.V. incorporated in the Netherlands whose principal office is at Kanaaldijk 0Z3 8100 Raalte, The Netherlands ("Hunt (NL)"); and (4) NESCHEN INTERNATIONAL B.V. a corporation established under the laws of the Netherlands whose office is at Mijkenbroek 18 in NL - 4824 Breda, The Netherlands ("the Purchaser"). WHEREAS (A) The Vendor is the beneficial owner of 10,000 ordinary shares of par value HK$1.00 each in the capital of Hunt Graphics Pacific Limited ("the Company"). (B) The Vendor is named as the registered shareholder holding 9,999 ordinary shares of HK$1.00 each in the capital of the Company and Hunt (UK) is named as the other registered shareholder holding 1 share of HK$1.00 in the capital of the Company. (C) The Vendor and Hunt (HK) have now agreed to sell and the Purchaser has agreed to purchase a total of 10,000 shares of par value HK$1.00 each in the Company for HK$10,000.00 and upon the terms and conditions set out in this Agreement. (D) As at the date hereof, the Company is indebted to Hunt (UK) and Hunt (NL) in the respective sums of (pound)406,871.92 and EURO134,255.00 (together the "Debt"). (E) Hunt (UK) and Hunt (NL) have now agreed to sell and the Purchaser has agreed to purchase their rights to repayment of the Debt for the consideration as stated in Clause 3 hereof. (F) The Vendor, Hunt (UK) and Hunt (NL) are part of the same corporate group and the Vendor has all the necessary consent and authority from Hunt (UK) and Hunt (NL) to receive the consideration payable for the Debt on their behalf for the purpose of this Agreement. -1- (G) The Vendor is a party with others to other agreements, details of which are set out in Schedule 4 ("the Other Agreements"), for the sale of businesses in the United States of America, the United Kingdom and the Netherlands. (H) The parties now agree to enter into this Agreement to record the above upon the terms and conditions hereinafter set out. NOW IT IS HEREBY AGREED as follows: 1. INTERPRETATION 1.1 In this Agreement, unless otherwise expressed or required by context, the following words and expressions shall have the following meanings: "Business Day" a day (other than Saturdays Sundays and bank and other customary holidays) on which licensed banks are open for ordinary business in Hong Kong; "the Company" Hunt Graphics Pacific Limited, particulars of which are set out in the Schedule 1; "Completion" means completion of the sale and purchase of the Sale Shares and where the context requires also means the performance by the parties of their obligations contained in Clause 4 hereof; "Completion the balance sheet of the Company made up as of Accounts" the close of business at Completion and the profit and loss account of the Company prepared by the Vendor and then audited in accordance with the provisions of Clause 5 ; "Deed of the deed of assignment in the form and substance Assignment of of that as set out in Schedule 3; Debt" "EURO" the single currency unit adopted by a number of European countries; "Hong Kong" The Hong Kong Special Administrative Region of the People's Republic of China; "Management the management accounts of the Company which Accounts" identify the net asset value of the Company as at the date thereof, a copy of which is attached hereto as Annexure "A"; -2- "Net Asset the value of the bank cash balances, the net Value" accounts receivable, net inventory including goods in transit, prepayments and deposits, fixed assets at net book value LESS accounts payable and accrued liabilities of the Company at Completion as shown in the Completion Accounts; "Other those agreements detailed in Schedule 4 hereto; Agreements" "Sale Shares" the 10,000 issued ordinary shares of par value HK$1.00 each in the Company beneficially owned by the Vendor; "Warranties" the agreements, obligations, warranties, representations and undertakings of the Vendor contained in or referred to in Clause 6 or in Schedule 2; "HK$" dollars in the lawful currency of Hong Kong; "US$" dollars in the lawful currency of the United States of America; and "(pound)" pounds sterling in the lawful currency of the United Kingdom. 1.2 The headings are for ease of reference only and shall be ignored in interpreting this Agreement. 1.3 Reference to Clauses and Schedules are references to clauses and schedules of this Agreement. 1.4 Words and expressions in the singular include the plural and vice versa. 1.5 Reference to a person include any public body and any body of persons, corporate or unincorporated and words importing one gender include both genders and the neuter. 1.6 Reference to ordinances, statutes, legislation or enactments shall be construed as a reference to such ordinances, statutes, or enactments as may be amended or re-enacted from time to time and for the time being in force. -3- 2. SALE OF SALE SHARES AND ASSIGNMENT OF DEBT 2.1 The Vendor as legal and beneficial owner in respect of 9,999 of the Sale Shares and Hunt (UK) as registered shareholder in respect of 1 Sale Share now agree to sell and the Purchaser relying on the Warranties made or given by the Vendor and subject to the terms and conditions contained in this Agreement, agrees to purchase the Sale Shares from the Vendor and Hunt (UK) free from all claims, charges, liens, encumbrances, equities and third party rights and together with all rights attached thereto and all dividends and distributions declared, paid or made in respect thereof after the date hereof. 2.2 Each of Hunt (UK) and Hunt (NL) in the proportions in which they are entitled to repayment of the Debt now as beneficial owners agree to sell, and the Purchaser relying on the Warranties made or given by the Vendor and subject to the terms and conditions contained in this Agreement, agrees to purchase their rights to repayment of the Debt together with all rights, title, interest and benefit of Hunt (UK) and Hunt (NL) in and to the Debt which are now or which may at any time hereinafter be attached thereto or arising therefrom (including all accrued interest thereon) free from all claims, charges, liens, encumbrances, equities and third party rights. 3. CONSIDERATION 3.1 The consideration payable to the Vendor by the Purchaser for the sale of the Sale Shares shall be HK$10,000.00 ("Share Price"). 3.2 The consideration for Hunt (UK) and Hunt (NL) assigning to the Purchaser their rights to repayment of the Debt shall be an amount equal to the Net Asset Value ("Debt Price") paid in the manner as set out in the Deed of Assignment of Debt and apportioned between Hunt (UK) and Hunt (NL) in accordance with their respective interests in the Debt. 3.3 Hunt (UK) and Hunt (NL) hereby authorise the Vendor to receive the Debt Price on their behalf and the receipt by the Vendor of the Debt Price shall constitute a good discharge of the Purchaser's obligation to pay the Debt Price to Hunt (UK) and Hunt (NL). 3.4 All payments to be made hereunder are to be made either in HK$ or EURO. The exchange from HK$ and Euro and any other conversion needed under this Agreement shall be calculated by using the following exchange rates HK$ 11.4665 = (pound)1, HK$ 7.11 = EURO 1 and HK$ 7.80 = US$ 1. -4- 4. COMPLETION 4.1 Completion shall take place forthwith on execution and exchange of this Agreement at the offices of Maxwell Batley 27 Chancery Lane London WC2. 4.2 Upon Completion the Vendor shall :- 4.2.1 deliver to the Purchaser duly completed and signed transfers of the Sale Shares by the registered holders thereof in favour of the Purchaser (or as it may direct) together with the respective bought/sold notes and original share certificates in relation to the Sale Shares together with a letter of confirmation that any existing trust between the Vendor and Hunt (UK) is cancelled; 4.2.2 cause a board meeting of the Company to be held at which (inter alia) the existing directors of the Company shall :- (i) approve the registration of the Purchaser and or its nominee as members of the Company in respect of the Sale Shares subject to the production of duly stamped instruments of transfer; (ii) revoke all existing mandates for the operation of all the bank accounts of the Company and issue new mandates giving authority to persons nominated by the Purchaser provided that the Purchaser shall give at least 3 Business Days' advance notice of this in writing to the Vendor; (iii) appoint such persons as the Purchaser may nominate to be validly appointed as additional directors of the Company and upon such appointment forthwith cause all the existing directors of the Company to retire from their respective offices and resign as employees each delivering to the Purchaser a letter under seal in agreed terms acknowledging that the person so retiring and resigning has no entitlement to claim compensation for wrongful dismissal or unfair dismissal or to payment for redundancy or in respect of any other moneys or benefits due to him from the Company arising out of or in connection with his employment and/or its termination; (iv) [deleted] (v) deliver to the Purchaser a counterpart Deed of Assignment of Debt duly executed by Hunt (UK) and Hunt (NL) together with a letter of acknowledgement to the Deed of Assignment of Debt signed by the Company. 4.3 Upon Completion the Purchaser shall :- 4.3.1 effect a telegraphic transfer to the Vendor of HK$2,102,800 being the aggregate amount of the Share Price and the first instalment of the Debt Price as set out in the Deed of Assignment of Debt; -5- 4.3.2 deliver to the Vendor certified true copies of the board resolutions of the Purchaser approving the acquisition of the Sale Shares, the execution of this Agreement and the completion of this Agreement and the transactions contemplated thereby; and 4.3.3 deliver to the Vendor a duly executed counterpart Deed of Assignment of Debt. 4.4 As soon as practicable after Completion the Purchaser shall present the instruments of transfer together with the share certificates in respect of the Sale Shares to the Company for registration of the transfer. 4.5 All the transactions described in Clauses 4.2 and 4.3 above shall take place at the same time, so that in default of the performance of any such transactions by one party, the other party shall not be obliged to complete the sale and purchase aforesaid (without prejudice to any further legal remedies). 5. COMPLETION ACCOUNTS 5.1 Forthwith after Completion, the Vendor shall procure preparation of and make available to the Purchaser draft accounts showing the anticipated amount of the net asset value on Completion. 5.2 The Purchaser and the Vendor shall use all reasonable endeavours to procure that such draft accounts shall in all respects comply with current legislation and Hong Kong standard accounting principles and practices. 5.3 Following the preparation of such draft accounts, the Purchaser's accountants shall audit them applying the same bases and principles referred to in Clause 5.2 and shall then produce a certificate ("Certificate") stating the amount of the Net Asset Value. 5.4 The Purchaser's accountants shall be deemed to act as experts and not as arbitrators. 5.5 If the Purchaser's accountants shall not be able to produce the Certificate in accordance with Clause 5.3 within fourteen (14) days of the date on which the Completion Accounts were first submitted to them (or such other period as the Vendor and the Purchaser may agree) or the Vendor disputes the form and content of the Completion Accounts or the Certificate the matter may be referred by either the Vendor or the Purchaser to an independent chartered accountant selected by agreement between them or, failing such agreement, a person nominated by the President for the time being of the Hong Kong Society of Accountants on the application of either the Vendor or the Purchaser and:- -6- 5.5.1 such chartered accountant shall be requested to settle any matter in dispute applying the same bases and principles referred to in Clause 5.2 and (unless both the Vendor and the Purchaser shall otherwise direct in writing) determine the form and content of the Completion Accounts and the amount of the Net Asset Value; 5.5.2 the decision of such chartered accountant as to the matter in dispute and its determination (if any) as to the form and content of the Completion Accounts and the amount of the Net Asset Value shall be final and binding on the parties hereto and such chartered accountant shall be deemed to act as an expert and not as an arbitrator. 5.6 The costs of the Purchaser's accountants in respect of the preparation and determination of the Completion Accounts and the costs of the independent chartered accountant (if any) shall be borne by the Purchaser. 5.7 The accounts as determined and prepared in accordance with this Clause 5 and as accepted and agreed by the Vendor and the Purchaser, shall be the Completion Accounts based on which the Net Asset Value shall be determined. 5.8 As soon as reasonably practicable after and in any event within three Business Days of issue of the Certificate or other determination of the Net Asset Value under Clause 5.5.1 and/or 5.5.2 of this Agreement, the Purchaser shall transfer the balance of the Debt Price to the Vendor by way of telegraphic transfer. In the event that the Net Asset Value is less than the first instalment of the Debt Price paid on the date hereof in accordance with the Deed of Assignment of Debt, Hunt (UK) and Hunt (NL) shall pay to the Purchaser, by way of refund, any excess amount. 6. WARRANTIES 6.1 The Vendor hereby represents and warrants to and undertakes with the Purchaser (for itself and for the benefit of its successors and assigns in title) that each of the matters set out in this Agreement and in Schedule 2 hereto is as at the date hereof and shall be for all times up to and including Completion, true and correct in all respects. 6.2 The Vendor hereby undertakes with the Purchaser that as from the date hereof and up to the Completion, the Company will not incur any liability other than as incurred in the ordinary course of its business. 6.3 Hunt (UK) and Hunt (NL) warrant that they are the legal and beneficial owners entitled to repayment of the Debt and have good right, power and title to sell and assign their rights to repayment of the Debt free and clear of any liens, charges, pledges, option, third party right and any incumbrances of whether nature. -7- 7. SEVERABILITY 7.1 If at any time any one or more provisions hereof is or becomes invalid, illegal, unenforceable or incapable of performance in any respect, the validity, legality, enforceability or performance of the remaining provisions hereof shall not thereby in any way be affected or impaired. 8. CHANGE OF NAME, FURTHER ASSURANCE 8.1 The Purchaser and the Vendor shall following Completion use all reasonable endeavours to procure that the name of the Company be changed as soon as reasonably practicable to a name not including the word "Hunt". 8.2 Each party hereby undertakes to each other that it will do all such acts and things and execute all such deeds and documents as may be necessary or desirable to carry into effect or to give legal effect to the provisions of this Agreement and the transactions hereby contemplated and so that each party shall be responsible for its own costs in connection with its obligations under this Clause. 9. PUBLICITY 9.1 Neither the Vendor nor Hunt (NL) nor Hunt (UK) nor the Purchaser shall issue any press release or make any public announcement or disclosure relating in any way to the transactions contemplated hereby or to the negotiations of the parties hereto concerning the same without prior written consultation with the other as to form and content of such announcement or disclosure, provided, however, that, as to announcements or disclosures required of such party by law or by the applicable rules of any stock exchange or stock market such party shall only be required to use its reasonable efforts to advise the other of the form and content of any such announcement or disclosure. 10. ENTIRE AGREEMENT 10.1 This Agreement constitutes the entire agreement and understanding between the parties in connection with the subject matter of this Agreement and supersedes all previous proposals, representations, warranties, agreements or undertakings relating thereto whether oral, written or otherwise and none of the parties has relied on any such proposals, representations, warranties, agreements or undertakings. 10.2 The Purchaser hereby admits that it has not been induced to enter into this Agreement by any representation or warranty not expressly incorporated herein. -8- 11. TIME 11.1 Time shall be of the essence of this Agreement. 11.2 No time or indulgence given by either party to the other shall be deemed or in any way be construed as a waiver of any of its rights and remedies hereunder. 12. CONFIDENTIAL INFORMATION 12.1 No party hereto shall make any announcement or release or disclose any information concerning this Agreement or the transactions herein referred to or disclose the identity of any other party (save disclosure to their respective professional advisers or client under a duty of confidentiality) without the written consent of all the other parties. 13. ASSIGNMENT 13.1 This Agreement shall be binding on and shall ensure for the benefits of the successors and assigns of the parties hereto but shall not be assigned by any party without the prior written consent of the other parties provided that any party hereto may without such consent as aforesaid assign the whole or any part of any benefit of this Agreement to any company which is its holding company or subsidiary or a fellow subsidiary of its holding company. 14. NOTICES 14.1 Any notice or other communication to be given under this Agreement shall be in writing and may be delivered by hand or given by facsimile transmission, telex or e-mail transmission. Any such notice or communication shall be sent to the party to whom it is addressed and must contain sufficient reference and/or particulars to render it readily identifiable with the subject matter of this Agreement. If so delivered by hand or given by facsimile, telex or e-mail transmission such notice or communication shall be deemed received on the date of despatch and if so sent by post (or, if sent to an address outside of Hong Kong, so sent by first class air-mail) shall be deemed received 2 business days after the date of despatch. 15. COSTS AND STAMP DUTY 15.1 Each party shall pay its own costs and expenses incurred in respect of the negotiation and preparation of this Agreement. 15.2 Stamp duty payable in respect of the transfer of the Sale Shares and on the Assignment of the Debt (if any) shall be paid and borne by the Purchaser. -9- 16. COUNTERPART 16.1 This Agreement may be signed in any number of counterparts and in this respect a single counterpart or a set of signed counterparts shall constitute an original agreement for all purposes. 16.2 The exchange of copies of this Agreement and the signature pages by facsimile transmission shall constitute effective execution and delivery of this Agreement as to the parties and may be used in lieu of the original Agreement for all purposes. Signatures of the parties transmitted by facsimile shall be deemed to be their original signatures for all purposes. As promptly as practicable after Completion, each party hereunder shall deliver to the other parties the original executed signature pages, but the failure to deliver such pages shall not affect the validity or enforceability of this Agreement 17. ARBITRATION 17.1 Any dispute or difference between the parties in connection with this Agreement shall be referred to arbitration in Paris and held in the English language with three arbitrators under The International Arbitration Rules of The International Chamber of Commerce. 18. GOVERNING LAW AND JURISDICTION 18.1 This Agreement shall be governed by and construed in accordance with the laws of Hong Kong and the parties hereto agree to submit to the non-exclusive jurisdiction of the courts of Hong Kong. AS WITNESS the parties hereto have executed this Agreement the day and year first above written. SIGNED by ) For and on behalf of ) HUNT HOLDINGS INC. ) In the presence of ) -10- SIGNED by ) For and on behalf of ) HUNT GRAPHICS EUROPE LIMITED ) In the presence of ) SIGNED by ) for and on behalf of ) HUNT GRAPHICS EUROPE B.V. ) in the presence of ) SIGNED by ) For and on behalf of ) ) NESCHEN INTERNATIONAL B.V. ) In the presence of : -11- SCHEDULE 1
THE COMPANY Name : Hunt Graphics Pacific Limited ( ( ) ) Place of Incorporation : Hong Kong Registration Number : 525192 Registered Office : 18th Floor, Nine Queen's Road Central, Hong Kong Authorized Share Capital : HK$10,000 divided into 10,000 shares of HK$1.00 each Issued Share Capital : HK10,000.00 Registered Shareholders : (i) Hunt Holdings Inc. (9,999 shares of HK$1.00 each) (ii) Hunt Graphics Europe Limited of Chester Hall Lane, Basildon, Essex SS14 3BG, United Kingdom (1 share of HK$1.00) Directors : William Everett Chandler William Ernest Precious Derek Frank Wotton Secretary : Barten Secretaries Limited
-12- SCHEDULE 2 WARRANTIES GENERAL A. (1) The warranties, representations and undertakings set out in paragraph B of this Schedule 2 are given subject to terms of this Agreement . No other information relating to the Company shall prejudice any claim made by the Purchaser under such warranties, representations or undertakings of the Vendor or shall operate to reduce any amount otherwise recoverable by the Purchaser. (2) The warranties representations and undertakings set out in each sub-paragraph of paragraph B below shall be separate and independent and save as expressly provided shall not be limited by reference to any other sub-paragraph or anything in this Agreement or the Schedules. GIVING OF WARRANTIES B. The Vendor hereby warrants, represents and undertakes to the Purchaser and to any successors in title or assignees of the Purchaser as that at the date hereof and as at Completion : 1.1 The particulars of the Sale Shares and Debt contained in the recitals and in Schedule 1 to this Agreement are complete, true and accurate in all respects. 1.2 The Vendor is the beneficial owner of the Sale Shares and is entitled to sell and transfer or procure the sale and transfer the full legal and beneficial ownership of the Sale Shares free and clear of any lien, charge, or encumbrance or restrictions whatsoever to the Purchaser or its nominees and, upon Completion, the Purchaser will acquire full legal and beneficial ownership of the Sale Shares free and clear of any liens, charges, pledges, claims, agreements or other encumbrances or restrictions whatsoever, except that the Sale Share registered in the name of Hunt (UK) was intended to be held on trust for the Vendor as beneficial owner, any existing trust of which shall be cancelled upon Completion. 1.3 There are no options, rights to acquire, mortgages, charges, pledges, liens or other form of security or encumbrance on, over or affecting all or any of the Sale Shares and there is no agreement, understanding, arrangements contract or commitment to give or create any of the foregoing and no claim has been made by any person, firm, company or entity to be entitled to any of the foregoing. 1.4 The Vendor has full legal authority to enter into this Agreement and to perform all obligations and duties hereunder without the consent, approval, permissions, licence or concurrence of any third party. -13- 1.5 The Company does not have any liabilities other than those disclosed in its latest management accounts or subsequently incurred in the ordinary course of business. 1.6 The Vendor shall not be liable under the Warranties after the expiration of 21 calendar months from Completion except in respect of those matters which have been made subject to a claim hereunder prior to the expiration of such 21 calendar month period. 1.7 The aggregate liability of the Vendor in respect of any breach of Warranties hereunder together with the aggregate of all other liabilities of the Vendor and the Vendor's affiliates (being its holding company and subsidiaries and fellow subsidiaries of its holding company) under the indemnification provisions of Other Agreements shall not exceed Nine Million Nine Hundred Thousand US dollars (US$9,900,000). 1.8 The Vendor shall be under no liability in respect of any breach of Warranties hereunder:- 1.8.1 unless the amount claimed when aggregated with the amount of any other claims based on warranty provisions in the Other Agreements based on essentially the same or similar facts exceed US$ 330,000 and in such event only an amount or amounts in excess of US$200,000 shall be payable; 1.8.2 in respect of any matter, act, omission or circumstance which would not have occurred but for:- (i) any act, omission or transaction of the Purchaser after Completion; or (ii) the passing of, or any change in, after the date of this Agreement, any law, regulation or administrative practice of any government, governmental department, agency or regulatory body. 1.8.3 to the extent that any loss suffered by the Purchaser as a result of such breach has already been compensated under any other provision of this Agreement so that a claim under the Warranties for such loss would constitute double recovery by the Purchaser 1.8.4 unless full written particulars of such claim are delivered to the Vendor not later than the last day of the twenty first full month after the anniversary of Completion 1.9 In the event that any action or claim is brought against the Purchaser or the Company or any other circumstance arising in respect of which the Purchaser believes it is entitled to make a claim under the Warranties the Purchaser shall give to the Vendor prompt written notice thereof, specifying the subject matter of the claim or action and the amount claimed. The Vendor will then have a period of 30 days within which to respond in writing to the notice and if liability is admitted in part or in whole by the Vendor and subject to Clauses 1.6, 1.7 and 1.8 the Vendor shall within 30 days pay the amount claimed or if admitted in part then pay the amount admitted, failing which the matter shall be submitted to arbitration (pursuant to Clause 17) either as to the whole amount in dispute or such part as is not agreed. -14- 1.10 The amount capable of being claimed by the Purchaser under this paragraph shall be reduced (but not below zero) by any insurance proceeds (net of reasonable expenses and other costs in obtaining such proceeds) which any party under this Agreement shall receive or otherwise enjoy with respect to the event that gave rise to the claim. 1.11 The limitations on the Warranties as to amount and time shall not apply in the case of fraud or intentional breach of covenant by the Vendor. 1.12 Save as otherwise provided in this Agreement nothing in this Agreement shall relieve the Purchaser of its right or obligation to mitigate its loss in respect of any breach of the Warranties. -15- SCHEDULE 3 THIS DEED OF ASSIGNMENT is made this day of , 2001 BETWEEN (1) HUNT GRAPHICS EUROPE LIMITED a company incorporated in England whose registered office is at Chester Hall Lane Basildon Essex SS14 3BG ("Hunt (UK)"); and (2) HUNT GRAPHICS EUROPE B.V. a company incorporated in the Netherlands whose principal office is at Kanaaldijk 0Z3 8100 Raalte, The Netherlands ("Hunt (NL)); (and hereinafter collectively referred to as "the Assignors"); and (3) NESCHEN INTERNATIONAL B.V. a corporation established under the laws of the Netherlands whose office is at Mijkenbroek 18 in NL - 4824 Breda, The Netherlands ("the Assignee") WHEREAS : A. By the agreement for sale and purchase of shares in Hunt Graphics Pacific Limited ("Company") and Debts (as defined hereinafter) dated [ ] 2001 ("the Agreement") made between (inter alia) the Assignors and the Assignee, the Assignors agreed to sell and assign to the Assignee and the Assignee agreed to purchase and accept an assignment of all the benefits of the Debts from the Company subject to the terms and conditions therein contained. B. At the date hereof, the Company is indebted to Hunt (UK) and Hunt (NL) the Assignors by way of debts or otherwise in the total sum of HK$5,619,950 ("the Debts"). NOW THIS DEED WITNESSETH in consideration of the terms and conditions contained in the Agreement and in consideration of the net asset value of the Company determined in Clause 5 of the Agreement ("the NAV") to be paid by the Assignee to the Assignors as the consideration for assignment of the rights to repayment of the Debts, to be paid in two instalments, the first instalment being HK$2,092,800 to be paid on the date hereof and the second instalment being the balance of the NAV to be paid within 30 days from the date of Completion of the Agreement (receipt of the first instalment whereof the Assignors hereby acknowledge), the Assignors as beneficial owners hereby assign unto the Assignee their rights to repayment of the Debts together with all rights, title, interest and benefit of the Assignors which are now or which may at any time hereafter be attached thereto or arising therefrom (including all accrued interest thereon) free from all claims charges, liens, encumbrances, equities and third party rights to hold the same unto the Assignee absolutely. -16- IN WITNESS whereof the Assignors executed this Deed the day and year first above written. DULY EXECUTED AS A DEED but not delivered ) until it is dated ) for and on behalf of HUNT GRAPHICS EUROPE ) LIMITED ) By Director Director/Secretary DULY EXECUTED AS A DEED ) for and on behalf of HUNT GRAPHICS EUROPE ) B.V. ) By ) Duly Authorised ) -17- SCHEDULE 4 ---------- Other Agreements Asset Purchase Agreement by and among Hunt Corporation, Hunt Holdings Inc, Hunt Graphics Americas Corporation Neschen AG Seal Graphics Americas Corporation Seal USA Corporation and Seal Graphics Technologies Corporation UK Asset Purchase Agreement by and among Hunt Corporation Hunt Graphics Europe Limited Neschen AG and Seal Graphics UK Limited Netherlands Asset and Purchase Agreement between Hunt Graphics Europe BV Peak BV Hunt Corporation Seal Graphics Europe BV and Neschen AG All of October 2001 -18- ANNEXURE "A" ------------ MANAGEMENT ACCOUNTS Net Asset Value As At 2nd September 2001 (HK$) Bank and Cash Balances 171,958 Net Accounts Receivable 566,620 Net Inventory including Goods in transit 1,879,975 Prepayments and Deposits 194,319 Fixed Assets at NBV 26,516 LESS Accounts Payable 87,523 Accrued liabilities 135,865 NET ASSET VALUE 2,616,000 Financed By Balance due to Hunt UK 4,754,210 Balance due to Hunt NL 723,725 Share Capital 10,000 Retained Earnings & P&L account (2,871,935) TOTAL 2,616,000 -19- EX-2.E 7 ex2-e.txt EX-2.E Exhibit 2(e) EMPLOYEE AND EMPLOYEE BENEFITS TRANSITIONAL SERVICES AGREEMENT This Employee and Employee Benefits Transitional Services Agreement (the "Agreement") is made and entered into the 9th day of October, 2001 (the "Closing Date") by and between Hunt Corporation ("Seller") and Seal Graphics Technologies Corporation and Seal Graphics Americas Corporation (collectively the "Buyers"). WHEREAS, Seller and Buyers have entered into an Asset Purchase Agreement dated October 7, 2001 (the "Asset Purchase Agreement") pursuant to which the Buyers agreed to purchase and the Seller agreed to sell certain assets of the Seller related to the Business (as defined in the Asset Purchase Agreement) effective as of September 30, 2001 at 11:59 p.m. (the "Effective Time"); and WHEREAS, Buyers wish to hire certain employees of Seller to operate the Business on behalf of the Buyers; and WHEREAS, Seller and Buyers desire to enter into a separate agreement concerning the rights of the parties respecting employment and employee benefit matters for employees of the Business in the United States and Canada; and WHEREAS, Seller and Buyers desire that except for relevant provisions in the Asset Purchase Agreement, this Agreement shall be the exclusive agreement covering such matters and shall supersede any and all prior written or oral understandings respecting employment and employee benefit matters for employees of the Business in the United States and Canada; and NOW, THEREFORE, the parties hereto, intending to be bound hereby, agree as follows: I. Employees As of the Effective Time, Buyers shall offer employment at will to those employees actively employed by the Seller in the United States and Canada on that date and who are identified on Schedule 9.7 of the Asset Purchase Agreement ("Scheduled Employees"). Except as otherwise set forth herein with respect to the benefits to be provided by Buyers, any such offer of employment by Buyers to a Scheduled Employee shall be at such wages and subject to such conditions as Buyers shall determine. Scheduled Employees who accept employment with the Buyers and those persons listed on Schedule 1 hereto shall become employees of Buyers as of the Effective Time and shall be identified herein as "Buyers' Employees". -1- II. Benefits Transition Services Seller agrees to handle all aspects of administration of Seller's plans identified at Schedule II on behalf of Buyers' Employees during the period commencing as of the Effective Time and ending on the date Buyers' Employees participation in those plans terminates in accordance with the provisions of Section IV. III. Responsibility for Salary Seller shall be responsible for all salary and salary related administrative costs for all Business employees for the period prior to the Effective Time and all salary and salary related administrative costs for Business employees other than Buyers' Employees until their employment with the Seller is terminated. Seller shall indemnify, defend and hold harmless Buyers from and against any liability for all such salary and salary related administrative costs. Buyers shall be responsible for all salary and salary related administrative costs for Buyers' Employees for the period commencing as of the Effective Time. Seller agrees to administer the payroll with respect to Buyers' Employees during the period commencing as of the Effective Time and terminating on December 31, 2001 or on any earlier date designated by Buyers following reasonable notice (the "Transition Period") at the compensation level in effect for each such Buyers' Employee as of the Effective Time; no compensation adjustments (other than cessation of compensation as a result of termination of employment or an unpaid leave of absence) shall be made during such Transition Period. Buyers shall indemnify, defend and hold harmless Seller from and against any liability for all such salary and salary related administrative costs. For purposes of this Agreement, salary related administrative costs shall include, but not be limited to, FICA, FUTA and all administrative costs associated with administration of the payroll (including payroll provider, consultant and attorney's fees), the administrative costs to be determined, where possible, on a per capita basis. IV. Termination of Coverage Under the Seller Health and Welfare Plans Except as may otherwise be specifically provided in this Agreement, participation of all Buyers' Employees in each Seller employee benefit plan identified on Schedule II attached hereto shall terminate effective as of the earliest to occur of (a) December 31, 2001, (b) the first date the employee is eligible to participate in a plan maintained by Buyers providing a similar type of benefit, or (c) the date the employee's employment with Buyers terminates, except as otherwise provided under Section X with respect to COBRA continuation coverage. V. Seller 401(k) and Pension Plan Except as may otherwise be specifically provided in this Agreement, participation of all Buyers' Employees in Seller's 401(k) Plan and Seller's Pension Plan shall terminate effective as of the Effective Time. Any Buyers' Employee with an outstanding loan under Seller's 401(k) Plan may, however, continue to repay such loan until the earliest of (a) December 31, 2001, (b) the date the employee's employment with Buyers terminates or (c) the date such employee's account balance is transferred to a 401(k) plan established by Buyers. -2- Seller shall make contributions to Seller's 401(k) plan for the Buyers' Employees participating in such plan respecting salary deferral and matching contributions for the period ending on the later of the Effective Time or the date of termination of employment with Seller in accordance with the provisions of such plan. VI. Life and Travel Accident All Buyers' Employees participating in Seller's life insurance, supplemental life, business travel accident, and accidental death and disability plans shall continue to participate in those plans in accordance with the terms of those plans through the date their participation in those plans terminates in accordance with the provisions of Section IV. Buyers shall be responsible for the costs of such benefits normally paid by the Seller (determined in accordance with Seller's standard practices and procedures and including any related administrative costs) for the Buyers' Employees for the period commencing as of the Effective Time and ending on the date they cease participation in the plans in accordance with the provisions of Section IV. VII. Health Plans All Buyers' Employees participating in Seller's medical, dental, vision, employee assistance, and prescription drug plans (collectively, "Seller's health plans") shall continue to participate in those plans in accordance with the terms of those plans through the date their participation in those plans terminates in accordance with the provisions of Section IV. Seller shall charge back a premium equivalent rate for purposes of Seller's health plans whereby Buyers pay the premium and Seller is responsible for all Buyers' Employees' claims incurred during the period commencing as of the Effective Time and ending on the date they cease participation in the plans in accordance with the provisions of Section IV. If the cost of the services provided to Buyers' Employees under the health plan option administered by CIGNA (the "CIGNA option") during the period commencing as of the Effective Time and ending on the date of cessation of participation in Seller's health plans in accordance with the provisions of Section IV (other than those services for which Seller is responsible as provided in the next paragraph) exceeds the premium equivalent paid by Buyers, Buyers shall be responsible for and shall reimburse Seller for the difference between such actual cost and the premium equivalent, provided, however, that Buyers' total cost with respect to the CIGNA option shall not exceed $95,000. The cost of services provided to Buyers' Employees during the period commencing as of the Effective Time and ending on the date Buyers' Employees cease participation in the plans in accordance with the provisions of Section IV shall be determined at the end of the claim run-out period under the contract with CIGNA. Seller shall be responsible for any expense for Buyers' Employees participating in the plans in connection with services covered under the plans performed prior to the Effective Time, regardless of when a claim is submitted; provided, however, that claims for services performed prior to the Effective Time must be submitted within the time limitations and in accordance with the terms and -3- conditions contained in Seller's health plans. With respect to any Buyers' Employee or his or her insured eligible dependents who as of the Effective Time are confined in a hospital, sanitarium or other health care facility, Seller shall also be responsible for any expense in connection with services covered under the medical plan performed after the Effective Time and prior to discharge from such facility or any facility to which the insured eligible dependent or Buyers' Employee is directly transferred. For purposes of the dental plan, Seller shall also be responsible for services provided after the Effective Time during the "run-off" period specified under the particular dental option for dentures, crowns, root canal therapy and orthodontic services if such services initially commenced prior to the Effective Time. VIII. Spending Accounts All Buyers' Employees participating in Seller's medical and dependent care spending accounts shall continue to participate in those plans in accordance with the terms of those plans through the date their participation in those plans terminates in accordance with the provisions of Section IV. Seller shall be responsible for all claims submitted under its medical and dependent care spending account plans by a Buyers' Employee who participates in such plan, provided such claims were incurred prior to the date such Buyers' Employee's participation in the plan terminates and provided such claims meet the requirements set forth in the plan. Buyers' Employees must submit all such claims prior to the 90th day following the date their participation in such plan terminates. IX. Disability Buyers have contracted for short-term and long-term disability insurance providing disability benefits substantially similar to those under Seller's plans. Payroll deductions for these benefits shall continue during the Transition Period referred to in Section III in the same amounts as prior to the Effective Time. X. COBRA Continuation Coverage Each Buyers' Employee shall be permitted to continue coverage under Seller's group health plans as required by applicable law. No Buyers' Employee shall be entitled to COBRA continuation coverage from Buyers unless such individual or his or her eligible dependents is a Buyers' Employee and thereafter incurs an event which is covered by COBRA. Notwithstanding the foregoing, if any of Buyers' Employees elect COBRA continuation coverage under Seller's group health plans, Buyers shall remain responsible for and shall reimburse Seller for the cost of the services provided to Buyers' Employees during such COBRA continuation coverage period (even if the period extends beyond the Employees' employment with Buyers) to the extent such cost exceeds the premium paid by such Buyers' Employees, provided, however, that the amount to be paid by Buyer shall not exceed 175 percent of the aggregate COBRA premium for such Buyers' Employees minus the aggregate COBRA premium paid by such Buyers' Employees. -4- XI. Notice Requirement Buyers shall promptly notify Seller of any change in employment status of a Buyers' Employee or of any other change affecting the compensation and/or benefits payable or to be provided to any Buyers' Employee. Seller shall have no obligation to attempt to recoup any amount paid to a Buyers' Employee for which Seller did not receive timely notice that such Buyers' Employee was not entitled to such amount and Buyers shall also reimburse Seller for all expenses, including administrative-related expenses, incurred by Seller as a result of Buyers' failure to provide timely notice. XII. Reimbursement of Expenses Buyers will reimburse Seller for any salaries, benefits, cost and expenses Buyers are responsible for under this Agreement to the extent those salaries, benefits, costs and expenses have been paid by Seller. XIII. No Third Party Rights Nothing in this Agreement is intended to or shall create any third party beneficiary rights, it being understood that the agreements set forth herein are between and for the benefit of only Seller and Buyers. XIV. Amendments and Waivers This Agreement may not be amended except by an instrument in writing signed by the parties hereto. XV. Severability If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any law or public policy, all other terms and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner in order that the transactions contemplated hereby are consummated as originally contemplated to the greatest extent possible. XVI. Headings Descriptive headings are for convenience only and shall not control or affect the meaning or construction of any provision of this Agreement. -5- XVII. Incorporation of Attachments Any schedules annexed hereto are incorporated into this Agreement and shall be deemed a part hereof as if set forth herein. XVIII. Agreement; Asset Purchase Agreement To the extent that the terms of this Agreement conflict with the terms of the Asset Purchase Agreement, the terms of the Asset Purchase Agreement shall prevail with respect to the interpretation of any right or obligation set forth herein. XVIII. Governing Law This Agreement shall be governed by the laws of the State of Delaware. This Agreement may be signed in one or more counterparts. ---------------------------------- Hunt Corporation ---------------------------------- Seal Graphics Technologies Corporation ---------------------------------- Seal Graphics Americas Corporation EX-2.F 8 ex2-f.txt EX-2.F Exhibit 2(f) PRODUCT MANUFACTURING AND TRANSITION SERVICES AGREEMENT THIS PRODUCT MANUFACTURING AND TRANSITION SERVICES AGREEMENT (this "Agreement"), dated as of October 9, 2001, is made by and between SEAL GRAPHICS AMERICAS CORPORATION, a Delaware corporation, SEAL USA CORPORATION, a Delaware corporation, and SEAL GRAPHICS TECHNOLOGIES CORPORATION, a Delaware corporation, (collectively, the "Seal Parties"), and HUNT CORPORATION, a Pennsylvania corporation ("Hunt"). W I T N E S S E T H: WHEREAS, pursuant to an Asset Purchase Agreement, dated October 7, 2001 (the "Purchase Agreement"), by and among Neschen AG, the Seal Parties, Hunt, Hunt Holdings, Inc. ("HHI") and Hunt Graphics Americas Corporation (the "Sellers"), the Seal Parties are purchasing, as of the date hereof, certain assets of the Sellers related to the Graphics Products segment of Hunt (the "Business") and the Seal Parties will purchase and assume control over HHI's Sun Prairie, Wisconsin manufacturing facility (the "Wisconsin Facility") where, prior to the consummation of the transactions contemplated by the Purchase Agreement, the Sellers conducted the Business and the framing materials business (the "Framing Business"); WHEREAS, the parties desire to enter into an agreement for the provision of services by Hunt to the Seal Parties at Hunt's facility in Statesville, North Carolina (the "Statesville Facility") and Hunt's facility in Mississauga, Canada (the "Canada Facility" and together with the Statesville Facility, the "Facilities") and by the Seal Parties to Hunt at the Wisconsin Facility, for a limited period; WHEREAS, the execution and delivery of this Agreement is a condition to the closing of the transactions contemplated by the Purchase Agreement; and WHEREAS, capitalized terms used herein but not defined herein shall have the meanings set forth in the Purchase Agreement. NOW, THEREFORE, in consideration of the premises, the covenants set forth herein and the benefits to be derived herefrom, the parties, intending to be legally bound, hereby agree as follows: ARTICLE I. PRODUCT MANUFACTURE AND DISTRIBUTION 1.1. Product Manufacture and Distribution by Hunt. (a) Manufacture. For a period of time determined in accordance with Section 6.1 hereof) (the "Graphics Transition Period"), Hunt will (i) manufacture and convert, on behalf of the Seal Parties, the products of the Business set forth on Schedule 1.1(a) annexed hereto (the "Graphics Products") which Graphics Products were produced at Hunt's film conversion center and pouchboard assembly area within the Statesville Facility during the six month period preceding the date of this Agreement. (b) Procedures. Graphics Products shall be manufactured by Hunt in a quantity sufficient to timely meet delivery requirements for orders processed by Hunt pursuant to the terms of this Agreement, but in no event shall Hunt be required to manufacture Graphics Products at a faster rate than the recent historical practice prior to the Closing Date. Raw materials for production of Graphics Products will be obtained by Hunt from existing suppliers, to the extent practicable. (c) Information. To effect a smooth transition to the Seal Parties of the manufacturing process at the end of the Graphics Transition Period, Hunt shall provide to the Seal Parties, beginning no later than three (3) days after the date of this Agreement, during normal business hours and in a manner that does not interfere with Hunt's operations, access to Hunt's specifications and other information and details of the manufacturing process for each of the Graphics Products. Additionally, Hunt shall afford to representatives of the Seal Parties the opportunity to observe the manufacturing process, during normal business hours and without material disruption to the manufacturing processes. 1.2. Product Manufacture by the Seal Parties. (a) Manufacture. For a period of time determined in accordance with Section 6.1 hereof (the "Framing Transition Period") the Seal Parties will manufacture and distribute, on behalf of Hunt, the non-graphics products set forth on Schedule 1.2(a) annexed hereto (the "Framing Products"), which products were produced at the Wisconsin Facility, during the six month period preceding the date of this Agreement. (b) Procedures. Framing Products shall be manufactured by the Seal Parties in a quantity sufficient to timely meet delivery requirements for orders received by Hunt in the ordinary course of business, but in no event shall The Seal Parties be required to manufacture Framing Products at a faster rate than the recent historical practice prior to the Closing Date. 2 1.3. Product Pricing. During the Graphics Transition Period, pricing and terms of all promotions, rebates and allowances of Graphics Products will be based upon the terms of Hunt with respect to such matters in effect immediately prior to the date hereof. Any changes in pricing terms for Graphics Products that the Seal Parties may negotiate with customers will be instituted promptly after written notice thereof is provided to Hunt. 1.4. Product Distribution. (a) During the Graphics Transition Period, Hunt will use its reasonable best efforts to ship Graphics Products to customers under the Hunt freight tariff and carrier contract agreements. (b) Hunt shall request that the carriers used by it to ship Graphics Products during the Graphics Transition Period offer the Seal Parties after the Graphics Transition Period the same preferred rates. (c) During the Framing Transition Period, the Seal Parties shall ship Framing Products as reasonably directed by the Hunt Liaison(s) (as hereinafter defined). It is understood and agreed that the Hunt Liaison(s) will, to the extent practicable, direct the Seal Parties to distribute Framing Products pursuant to the same timelines and using the same carriers as were in effect or used prior to the Closing Date. (d) In no event shall either party be held liable for any carrier undercharges, or other liability relating to shipment of goods at a rate other than the contract rate for such shipments, regardless of the shipment type (i.e., less-than-truckload, truckload, small package or air freight). 1.5. Product Invoicing. (a) During the Graphics Transition Period, Hunt will segregate orders and invoices for the Business from Hunt's orders and invoices and Hunt will send out all invoices to customers for Graphics Products delivered during the Graphics Transition Period on letterhead of the Seal Parties. During the Framing Transition Period, Hunt will continue to receive orders and invoice customers for Framing Products in its sole discretion. (b) No later than ten (10) days after the Closing Date, Hunt will establish separate customer files for its customers that purchase both Graphics Products and Framing Products. After the Closing Date, Hunt shall promptly refer Graphics Products customers to the Seal Parties. (c) During the Graphics Transition Period, Hunt will maintain separate accounts receivable accounts records for the Business and will create and maintain an aged accounts receivable trial balance thereof for the Seal Parties. 3 (d) Customers transitioning over to the Seal Parties will be notified by Hunt immediately to remit payment to a new series of lockboxes established by the Seal Parties to be used only for the transactions of the Seal Parties, such notice to be given promptly after such information is received by Hunt. 1.6. Lease to Hunt; Repair and Replacement of Included Manufacturing Equipment. (a) The Seal Parties hereby lease to Hunt for the rental amount of one dollar ($1.00), the equipment and tooling required to perform the Hunt Services (as hereinafter defined) (the "Leased Graphics Products Equipment") during the Graphics Transition Period, unless this Agreement is terminated at an earlier date pursuant to the provisions of Section 6.3 hereof. (b) Hunt hereby leases to the Seal Parties for the rental amount of one dollar ($1.00) the equipment, tools and other assets used in the production of the Framing Products (the "Leased Framing Products Equipment") during the Framing Transition Period, unless this Agreement is terminated at an earlier date pursuant to the provisions of Section 6.3 hereof. (c) During the term of this Agreement, Hunt shall (i) perform routine maintenance on the Leased Graphics Products Equipment utilized by Hunt in accordance with the terms hereof and, at the Seal Parties' expense, shall promptly repair any item of Leased Graphics Products Equipment, which has experienced excessive wear or damage, and (ii) perform routine maintenance on the Leased Framing Products Equipment utilized by the Seal Parties in accordance with the terms hereof and, at its own expense, shall promptly repair any item of Leased Framing Products Equipment which has experienced excessive wear or damage. (d) Upon the expiration or termination of this Agreement, Hunt shall remove the Leased Framing Products Equipment from the Wisconsin Facility as promptly as reasonably practicable. The Seal Parties shall reasonably cooperate with Hunt during Hunt's removal of such Leased Framing Products Equipment from the Wisconsin Facility. Such removal shall be undertaken during normal business hours and without material disruption to the operation of the Business. (e) Upon the expiration or termination of this Agreement, the Seal Parties shall remove the Leased Graphics Products Equipment from the Statesville Facility as promptly as reasonably practicable. Hunt shall reasonably cooperate with the Seal Parties during the Seal Parties' removal of such Leased Graphics Products Equipment from the Statesville Facility. Such removal shall be undertaken during normal business hours and without material disruption to the business operations of Hunt at the Statesville Facility. 4 1.7. Hunt Warranty. (a) Hunt Warranty. Subject to the provisions and limitations of Section 4.1 of this Agreement insofar as they relate to the acts or omissions of the Seal Liaison (as defined in such Section 4.1), Hunt warrants to the Seal Parties that all Graphics Products manufactured by Hunt pursuant to the terms hereof shall: (i) conform to all written warranties distributed by Hunt to customers in connection with the Graphics Products, (ii) conform to the written specifications for such Graphics Products, (iii) be substantially free from defects in materials and workmanship, and (iv) be of the same quality, merchantability and fitness as the Products manufactured by Hunt in the ordinary course of the Business prior to the Closing Date. (b) Remedies of the Seal Parties. In addition to the Seal Parties' right to seek indemnification pursuant to Article V hereof for a breach of Hunt's warranty set forth in Section 1.7(a), Hunt shall be obligated, at its sole cost and expense, to ship replacement or repaired Graphics Products to any customer of the Seal Parties receiving Graphics Products that fail to comply with Hunt's warranty set forth in Section 1.7(a) above including the cost of freight, insurance and any similar charges. IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER PARTY FOR ANY CONSEQUENTIAL, INCIDENTAL OR SPECIAL DAMAGES SUFFERED BY SUCH PARTY ARISING OUT OF THIS AGREEMENT, WHETHER RESULTING FROM NEGLIGENCE OF THE OFFENDING PARTY OR OTHERWISE. ARTICLE II. TRANSITION SERVICES 2.1. Hunt Services. Hunt shall make available to the Seal Parties the following services (the "Hunt Services"), at levels substantially similar to the levels of the Hunt Services provided by Hunt in the in the ordinary course of the Business prior to the Closing Date, in the following categories: (i) Warehousing of finished goods Inventory, raw materials and work in process at the Facilities and packing of Products; (ii) Customer services; (iii) Accounting and related services; (iv) Product distribution services; (v) Other purchasing and production planning services as may be reasonably requested from time to time by the Seal Liaison; and 5 (vi) Administrative support during normal business hours for customer services, technical services, distributions services, accounting and information services, demand management and credit and collections for the Wisconsin Facility, the Canada Facility, the Statesville Facility and the other facilities of the Business located at San Bernadino, California and Yuba City, California requested by the Seal Parties; 2.2. Approvals for Acceptance of Orders. The Seal Parties will provide to Hunt a list of customers of the Business whose orders for the Products may be accepted without prior approval by the Seal Parties. Before acceptance of orders for the Products from other persons, Hunt will request approval from the Seal Parties. 2.3. The Seal Services. (a) The Seal Parties shall make available to Hunt the following services (the "Seal Services"): (i) Warehousing of raw materials, work-in-process and finished Framing Products inventory at the Wisconsin Facility and packing of Framing Products; (ii) Product distribution services. (b) Subject to the volume of available work with respect to Framing Products, the Seal Parties will use their reasonable best efforts to maintain and keep intact the assignments, responsibilities and other job duties of those employees of Hunt who, prior to the Closing Date, performed the services to be provided hereunder by the Seal Parties and will become employees of the Seal Parties and perform the Seal Services as of the Closing Date (such employees hereinafter referred to as the "Framing Personnel"). 2.4. Excluded Services. Notwithstanding anything to the contrary contained herein, neither party shall be required to provide legal services, research and development services or facilities, sales and marketing, or insurance or risk management services to the other party hereunder. 2.5. Standards of Services. (a) Unless otherwise requested by the Seal Parties Liaison and approved in advance by Hunt, Hunt shall cause its personnel providing the Hunt Services to perform such services with the same degree of care, skill and diligence utilized by such personnel in the ordinary course of the Business prior to the Closing Date. 6 (b) The Seal Parties shall not knowingly prevent or hinder the Framing Personnel providing the Seal Services from performing such services with the same degree of care, skill and diligence utilized by such personnel in the ordinary course of the Business prior to the Closing Date. 2.6. Separate Business Unit. Prior to the Closing Date, Hunt will segregate the Business on its financial books and records as a separate business unit to facilitate the accounting required under this Agreement. ARTICLE III. PRODUCTION AND SERVICE FEES 3.1. Hunt Amount. In consideration of the Graphics Product manufacturing and the Hunt Services to be provided by Hunt to the Seal Parties under Articles I and II of this Agreement, Hunt shall be entitled to receive throughout the Graphics Transition Period, an amount equal to the sum of the following (collectively, the "Hunt Manufacture and Service Fees"): (a) The actual cost of manufacturing each Graphics Product pursuant to the terms of this Agreement, as set forth on Schedule 3.1(a) annexed hereto; (b) The transportation costs for shipments out of Statesville and Canada and between the two locations, which shall consist of direct cost of freight and the indirect costs of the transportation and distribution departments allocated to the Seal Parties as a percentage of sales by product line; (c) Sixty-Thousand Dollars ($60,000) per month as a fixed management fee for the Hunt Services provided pursuant to Section 2.1, plus monthly reimbursement of actual personnel costs based upon the hours worked by Hunt employees in rendering the Hunt Services, as reflected on timesheets submitted by Hunt employees. (d) The costs of the Plant General and Administrative Departments (including Customer Service, Information Sources, Accounting, Demand Management, Technical Service, Credit and Collections) allocated to the Seal Parties in the same manner as allocated to the Business as of the Closing Date (the "Graphics Administrative Costs"). 3.2. Seal Parties Amount. In consideration of the Framing Product manufacturing and the Seal Services to be provided by the Seal Parties to Hunt under Articles I and II of this Agreement, the Seal Parties shall be entitled to receive throughout the Framing Transition Period an amount equal to the sum of the following (collectively the "Seal Manufacture and Services Fees"): (a) The actual cost of manufacturing each Framing Product pursuant to the terms of this Agreement, as set forth on Schedule 3.2(a) annexed hereto; and 7 (b) Any transportation costs incurred by the Seal Parties for shipments of Framing Products to or for Hunt out of the Wisconsin Facility. 3.3. Inventory. (a) The Seal Parties shall own all Graphics Products inventory produced by Hunt at the Facilities during the Graphics Transition Period. (b) Hunt shall own all Framing Products inventory produced by the Seal Parties at the Wisconsin Facility. 3.4. Invoicing. (a) Within ten (10) days of the end of each of Hunt's monthly fiscal accounting periods during the Graphics Transition Period (including any modifications as provided in Section 6.1 hereto), Hunt shall invoice the Seal Parties for the amount of the Hunt Manufacture and Service Fees in respect of the immediately preceding month (the "Hunt Monthly Invoice"). (b) Within ten (10) days of the end of each of the Seal Parties' monthly fiscal accounting periods during the Framing Transition Period, the Seal Parties shall invoice Hunt for the Seal Manufacturing and Services Fees for the same period (the "Seal Monthly Invoice" and together with the Hunt Monthly Invoice, the "Monthly Invoices"). (c) Each Monthly Invoice shall be accompanied by a statement and any other documentation reasonably adequate to enable the recipient to verify the amount of the costs incurred by the invoicing party. The net amount of each set of Monthly Invoices shall be paid net fifteen (15) days via wire transfer. 3.5. Review of Statement. (a) The recipient of a Monthly Invoice shall have the right to object in good faith to a Monthly Invoice, provided the recipient notifies the invoicing party in writing within thirty (30) days following its receipt of the applicable Monthly Invoice (a "Dispute Notice"). (b) In the event a Dispute Notice is delivered, an interim Manufacture and Service Fees amount shall be paid based upon the average of the Seal Parties' and Hunt's good faith estimates of the disputed Manufacture and Service Fees calculation within five (5) days after the delivery of such Dispute Notice with an adjustment to be made, if required, upon a final resolution of such dispute in accordance with this Section 3.5. 8 (c) Any Dispute Notice shall set forth in reasonable detail a description of the dispute. Within thirty (30) days after the delivery of any such Dispute Notice, the Seal Parties and Hunt shall meet at a mutually acceptable time and place and thereafter as often as such parties reasonably deem necessary and shall, in good faith, cooperate in an attempt to resolve such dispute. (d) If any dispute is not finally resolved within thirty (30) business days after the delivery of a Dispute Notice, as aforesaid, or if the parties shall fail to meet within fifteen (15) days after the delivery of any such Dispute Notice, then the dispute shall be resolved in accordance with the dispute resolution provisions set forth in Section 7.7 hereof. ARTICLE IV. PERSONNEL; SUPERVISION BY THE SEAL PARTIES 4.1. Seal Parties Personnel. (a) During the term of this Agreement, the Seal Parties shall designate one or more representatives to monitor the manufacture of the Graphics Products and the performance of the Hunt Services hereunder (each a "Seal Liaison"). Each Seal Liaison shall at all times be the employee, agent or other representative of the Seal Parties, and Hunt shall have no obligation, liability or other responsibility for the acts or omissions of any Seal Liaison. At all times during the term of this Agreement, each Seal Liaison shall comply with and adhere to all applicable (i) federal, state and local laws, regulations, statutes, rules and orders including, without limitation, those governing or regulating employment, safety and health matters, and (ii) the rules and regulations applicable to the employees and other personnel of Hunt at the Facility where each Seal Liaison may be situated from time to time including, without limitation, those governing employment, safety and health. Under no circumstances will a Seal Liaison have the right or authority to direct any of Hunt's personnel with respect to any matter covered hereby unless approved in advance by Hunt. (b) During the term of this Agreement, the Seal Parties' employees shall at all times be the employees of the Seal Parties, and Hunt shall have no obligation, liability or other responsibility for the acts or omissions of the Seal Parties' employees, except for any such act or omission taken at the direction of a Hunt Liaison. At all times during the term of this Agreement, the Seal Parties shall comply with and adhere to all applicable (i) federal, provincial, state and local laws, regulations, statutes, rules and orders including, without limitation, those governing or regulating employment, safety and health matters, and (ii) the rules and regulations applicable to the employees and other personnel of the Seal Parties including, without limitation, those governing employment, safety and health. 9 4.2. Hunt Personnel. During the term of this Agreement, Hunt shall designate one or more representatives to monitor the manufacture of the Framing Products and the performance of the Seal Services provided hereunder (each a "Hunt Liaison"). Each Hunt Liaison shall at all times be the employee, agent or other representatives of Hunt, and the Seal Parties shall have no obligation, liability or other responsibility for the acts or omissions of each Hunt Liaison. At all times during the term of this Agreement, each Hunt Liaison shall comply with and adhere to all applicable (i) federal, state and local laws, regulations, statutes, rules and orders including, without limitation, those governing or regulating employment, safety and health matters, and (ii) the rules and regulations applicable to the employees and other personnel of the Seal Parties at the Facility where each Hunt Liaison may be situated from time to time including, without limitation, those governing employment, safety and health. 4.3. Under no circumstances will a Hunt Liaison have the right or authority to direct any of the Seal Parties' personnel with respect to any matter covered hereby unless approved in advance by the Seal Parties. During the term of this Agreement, Hunt's employees shall at all times be the employees of Hunt, and the Seal Parties shall have no obligation, liability or other responsibility for the acts or omissions of Hunt's employees, except for any such act or omission was not at the direction of a the Seal Parties Liaison. At all times during the term of this Agreement, Hunt shall comply with and adhere to all applicable (i) federal, provincial, state and local laws, regulations, statutes, rules and orders including, without limitation, those governing or regulating employment, safety and health matters, and (ii) the rules and regulations applicable to the employees and other personnel of Hunt including, without limitation, those governing employment, safety and health. ARTICLE V. INDEMNIFICATION 5.1. Hunt Indemnification. Subject to any limitations set forth herein, Hunt shall indemnify, defend and hold harmless the Seal Parties and its affiliates, shareholders, officers and directors (each a "Seal Indemnified Party") from and against any and all damages, losses, obligations, settlement payments, liabilities, claims, actions or causes of action, encumbrances, costs and expenses (collectively, "Damages") suffered, sustained, incurred or required to be paid by a Seal Indemnified Party resulting from or relating to: (a) the breach of any representation, warranty, covenant or agreement of Hunt contained in or made pursuant to this Agreement or in any document or instrument referred to herein or required to be delivered in connection with this Agreement, including any schedule hereto or document delivered hereunder, or any facts or circumstances constituting a breach, (b) any act or omission of Hunt, its employees or agents in connection with this Agreement including, without limitation, for personal injury (including death), property damage, violations of any federal or state benefit claims, wages, or other compensation for any matter whatsoever or (c) actions brought by any governmental or regulatory agency, or any third party with standing to sue against a Seal Indemnified Party for matters referred to in Section 1.4(d) (unless such overshort or damage report is determined to be the fault of the Seal Parties), or (d) all reasonable 10 costs and expenses (including, without limitation, reasonable attorneys' fees, interest and penalties) incurred by a Seal Indemnified Party in connection with any action, suit, proceeding, demand, claim, assessment or judgment incident to any of the matters indemnified against in this Section 5.1, except, in each case, for Damages arising out of or related to the directions of a Seal Liaison. 5.2. Seal Parties Indemnification. Subject to any limitations set forth herein, the Seal Parties shall indemnify, defend and hold harmless Hunt and its affiliates, shareholders, officers and directors (each a "Hunt Indemnified Party") from and against any and all Damages suffered, sustained, incurred or required to be paid by a Hunt Indemnified Party resulting from or relating to: (a) the breach of any representation, warranty, covenant or agreement of the Seal Parties contained in or made pursuant to this Agreement or in any document or instrument referred to herein or required to be delivered in connection with this Agreement, including any schedule hereto or document delivered hereunder, or any facts or circumstances constituting a breach, (b) any act or omission of the Seal Parties, its employees or agents in connection with this Agreement, including, without limitation, for personal injury (including death), property damage, or any other matter whatsoever, unless the same shall have resulted from the acts or omissions of Hunt or (c) actions brought by any governmental or regulatory agent, or any third party with standing to sue against a Hunt Indemnified Party for matters referred to in Section 1.4(d) (unless such overshort or damage report is determined to be the fault of Hunt), or (d) all reasonable costs and expenses (including, without limitation, reasonable attorneys' fees, interest and penalties) incurred by a Hunt Indemnified Party in connection with any action, suit, proceeding, demand, claim, assessment or judgment incident to any of the matters indemnified against in this Section 5.2, except, in each case, for Damages arising out of or related to the directions of a Hunt Liaison. ARTICLE VI. TERM, EXTENSION PAYMENTS AND TERMINATION 6.1. Term. (a) The Graphics Transition Period shall terminate automatically one hundred twenty (120) days from the date hereof; provided, however, that (i) the Seal Parties, at their option, on no less than thirty (30) calendar days advance written notice to Hunt, may elect to shorten the Graphics Transition Period to the ending day specified in such notice. (b) The Framing Transition Period shall terminate sixty (60) days from the date hereof; provided, however, that Hunt, at its option, on no less than thirty (30) calendar days advance written notice to the Seal Parties, may elect to shorten the Framing Transition Period to the ending day specified in such notice. 11 (c) This Agreement shall terminate when both the Graphics Transition Period and the Framing Transition Period have terminated (except for the indemnification provisions and Article VII which shall survive termination). 6.2. Termination. (a) This Agreement may be terminated by the non-breaching party for a material breach of the other party's representations, warranties or covenants contained herein by delivering written notice to the other party, provided that the breaching party shall be afforded fifteen (15) days to cure any alleged breach. (b) This Agreement shall terminate automatically and without any notice if either the Seal Parties or Hunt: (i) is adjudicated an involuntary bankrupt, or a decree or order approving a petition or answer filed against such party asking for reorganization under the federal bankruptcy laws as now or hereafter amended, or under the laws of any state, shall be entered, or if a petition for involuntary bankruptcy has been filed against the such party and such petition (and the proceeding arising therefrom, if any) has not been dismissed within thirty (30) days of the filing; (ii) files or admits to the jurisdiction of the court and the material allegations contained in any petition pursuant, or purporting to be pursuant, to the federal bankruptcy laws as now or hereafter amended, or such party shall institute any proceeding for any relief under any bankruptcy or insolvency law or any law relating to the relief of debtors, readjustment of indebtedness, reorganization, arrangements, composition or extension; or (iii) makes any assignment for the benefit of creditors or applies for consent to the appointment of a receiver for itself or any of its properties. ARTICLE VII. MISCELLANEOUS 7.1. Books and Records. (a) Each party (in such capacity, a "Record-keeping Party") shall maintain accurate and complete records of all expenses incurred in connection with its manufacture of the products and the provision of services, in accordance with such party historical accounting practices consistently applied. All such records and all documents and materials will be maintained for a period of four (4) years following termination of this Agreement (the "Retention Period"). During the Retention Period, upon reasonable notice and during the normal business hours, the other party shall have the right, at its sole cost and expense, to audit, inspect and make copies of such records, documentation and materials. Before destroying any of the aforementioned records upon 12 expiration of the Retention Period, the Record-keeping Party shall first make a written offer of such records to the other party. If the other party does not respond to such written offer within fifteen (15) days of receipt of such notice, the Record-keeping Party shall be permitted to destroy such records and shall have no further obligations to the other party with respect to such records. (b) The Seal Parties will have access to all existing financial and sales reporting currently available for the Business. In addition, the Seal Parties will inform Hunt if any other special reporting is required and it will be provided by Hunt to the Seal Parties, if possible, on a billable hours basis. A designated financial representative from the Seal Parties will be given access to all financial and transactional information concerning the Business. 7.2. Capital Expenditures. (a) It is anticipated that during the Graphics Transition Period no capital expenditures for the Seal Parties' account will be required for the Business. No such expenditures shall be permitted without the approval of a designated representative of the Seal Parties. (b) It is anticipated that during the Framing Transition Period no capital expenditures for Hunt's account will be required for the Framing Business. No such expenditures shall be permitted without the approval of a designated Hunt representative. 7.3. Assignment. No party hereto may transfer or assign this Agreement or any of their respective obligations or rights herein without the consent of the other party, except as provided in Section 11.5 in the Purchase Agreement. 7.4. Independent Contractor. In manufacturing the products and performing the services hereunder, each party shall be considered to be an independent contractor, and in no event shall the Seal Parties and Hunt be deemed to be partners, co-venturers or agents of the other party. Unless otherwise approved in advance no party hereunder shall have any authority to determine or control any other party's manner of performing the manufacturing services or the services except as to specify the (i) quantity of the products to be manufactured within the limits set forth herein or, (ii) the types of the services to be performed hereunder within the limits set forth herein. 7.5. Notices. All notices, requests for approval and other communications hereunder shall be in writing and shall be deemed to have been fully given if delivered or mailed, first class mail, postage prepaid or sent by a recognized overnight delivery services as follows (or at such other address for a party as shall be specified by like notice; provided that notices of a change of address shall be effective only upon receipt thereof): 13 (i) To Hunt, as follows: Hunt Corporation One Commerce Square 2005 Market Street Philadelphia, Pennsylvania 19103 Attn: Donald L. Thompson, Chief Executive Officer With a copy to: John C. Bennett, Jr. Drinker Biddle & Reath LLP One Logan Square 18th & Cherry Streets Philadelphia, Pennsylvania 19103 (ii) To Neschen as follows: Neschen AG Hans Neschen Strasse 1 D-3165 Bueckeburg Germany With a copy to: William Harnisch, Esq. Cummings & Lockwood Four Stamford Plaza P. O. Box 120 Stamford, Connecticut 06904-0120 7.6. Governing Law. This Agreement shall be governed by and construed in accordance with laws of the State of Delaware, without regard to its principles of conflicts of laws. 7.7. Dispute Resolution. All disputes arising out of or in connection with this Agreement and the transactions contemplated herein shall be submitted to arbitration pursuant to the Rules of Arbitration of the International Chamber of Commerce. Such arbitration shall be held in Wilmington, Delaware and shall be conducted in English by one (1) arbitrator appointed in accordance with said Rules. 7.8. Severability. In the event that any one or more provisions of this Agreement is held to be unenforceable, invalid or illegal under applicable law, (i) such unenforceability, invalidity or illegality shall not affect any other 14 provision of this Agreement, (ii) this Agreement shall be construed as if said unenforceable, invalid or illegal provision had not been contained herein, and (iii) the parties shall negotiate in good faith to replace the unenforceable, invalid or illegal provision by such enforceable provision as has the affect nearest to the provision being replaced. 7.9. Headings. The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement or any provision hereof. 7.10. No Third Party Beneficiaries. Except as expressly provided herein, nothing in this Agreement shall entitle any person other than Hunt or the Seal Parties, or their respective affiliates, successors and assigns permitted hereby to any claim, cause of action, remedy or right of any kind. 7.11. Counterparts. This Agreement may be executed in any number of counterparts, no one of which needs to be executed by the parties hereunder, and this Agreement shall be binding upon the parties with the same force and effect as if the parties had signed the same document, and each such signed counterpart shall constitute an original of this Agreement. 7.12. Confidentiality. (a) Each party hereunder recognizes that by reason of such party's ownership of and/or operation of the Business or the Framing Business, as applicable, such party may have acquired Confidential Information and trade secrets concerning the operation of the Business or the Framing Business, the use or disclosure of which could cause the other parties hereunder or the Business or the Framing Business substantial loss and damages that could not be readily calculated and for which no remedy at law would be adequate. Accordingly, the parties hereunder covenant and agree that no party hereunder will at any time, except in performance of the their obligations hereunder, if any, to the other parties or without the prior written consent of the other parties, directly or indirectly, disclose any Confidential Information that the such party may have acquired or may acquire, or use such information in a manner detrimental to the interests of the other parties or the Business or the Framing Business, unless (i) such information becomes known to the public generally through no fault of the parties hereunder, (ii) disclosure of such information is required by law, or (iii) the party reasonably believes that such disclosure is required in connection with the defense of a lawsuit against such party; provided, however, that prior to disclosing any information pursuant to this Section, such party shall give prior written notice of such proposed disclosure to the other parties, provide the other parties with the reasonable opportunity to contest such disclosure, and shall reasonably cooperate with all efforts to prevent such disclosure. 15 (b) The term "Confidential Information" means products, facilities, intellectual property (including, without limitation, methods and trade secrets), software, source code, systems, procedures, manuals, reports, price lists, customer lists, financial information, business plans, prospects, or opportunities of the parties hereunder or any of their affiliates related to the Business or the Framing Business, as applicable. 7.13. Amendment. No modification or amendment of this Agreement shall be binding upon any party hereunder unless in writing and signed by the parties hereto. 7.14. Force Majeure. No party hereunder shall be responsible for failure or delay in the delivery of any service or product hereunder, nor shall any party be responsible for failure or delay in receiving such service or product, caused by act of God or public enemy, war, government acts, regulations, or orders, fire, flood, embargo, quarantine, epidemic, labor stoppage or other disruption, accidents, unusually severe weather, or other cause beyond the control of the defaulting party. 7.15. Entire Agreement. This Agreement, together with the Purchase Agreement and all schedules attached thereto, constitutes the entire agreement between the parties pertaining to the subject matter hereof, and supersedes all prior agreements, understandings, negotiations and discussions, whether oral or written, of the parties hereto regarding the subject matter hereof. 16 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date and year first above written. SEAL GRAPHICS AMERICAS CORPORATION By:_________________________________________ Name:_______________________________________ Title:______________________________________ SEAL USA CORPORATION By:_________________________________________ Name:_______________________________________ Title:______________________________________ SEAL GRAPHICS TECHNOLOGIES CORPORATION By:_________________________________________ Name:_______________________________________ Title:______________________________________ HUNT CORPORATION By:_________________________________________ Name:_______________________________________ Title:______________________________________ [SIGNATURE PAGE TO PRODUCT MANUFACTURING AND TRANSITION SERVICES AGREEMENT] EX-2.G 9 ex2-g.txt EX-2.G Exhibit 2(g) PURCHASE AND SUPPLY AGREEMENT (FOAMBOARD) This Purchase and Supply Agreement ("Agreement") is made as of this 9th day of October, 2001 by and between SEAL GRAPHICS AMERICAS CORPORATION, a Delaware corporation, SEAL USA CORPORATION, a Delaware corporation, and SEAL GRAPHICS TECHNOLOGIES CORPORATION, a Delaware corporation ("the Seal Parties") and HUNT CORPORATION, a Pennsylvania corporation ("Hunt"). RECITALS WHEREAS, pursuant to an Asset Purchase Agreement, dated of even date herewith (the "Purchase Agreement"), by and among Hunt, Hunt Holdings, Inc. and Hunt Graphics Americas Corporation (collectively, the "Sellers") and Neschen AG and the Seal Parties, the Seal Parties concurrently herewith will purchase from the Sellers certain assets of the Sellers related to the Graphics Products segment of Hunt (the "Business"); WHEREAS, the execution and delivery of this Agreement is a condition to the closing of the transactions contemplated by the Purchase Agreement; and WHEREAS, capitalized terms used herein but not defined herein shall have the meanings set forth in the Purchase Agreement. NOW, THEREFORE, in consideration of the premises, the covenants set forth herein and the benefits to be derived herefrom, the parties hereby agree as follows: ARTICLE I Supply and Purchase of Products 1.1 Supply. Effective as of 11:59 p.m. (Eastern Time) on September 30, 2001 and subject to the provisions of this Agreement, Hunt shall manufacture and supply to the Seal Parties the foamboard products for commercial graphics accounts in the United States and Canada set forth on Schedule 1.1 to this Agreement and any other products which may be listed on Schedule 1.1, as such schedule may be amended from time to time by written consent of the parties hereto (the "Products"), and the Seal Parties shall provide Hunt with written orders for Products. 1.2 Budget. In order to aid Hunt in its production projections, on or before the first day of the month immediately preceding each calendar quarter during which this Agreement is in effect (the "Budget Date"), the Seal Parties shall provide Hunt with a written good faith estimate of the maximum and minimum quantities that the Seal Parties estimate they will purchase each month during the upcoming calendar quarter (the "Budget Range"). In the event that Hunt determines that it may be unable to supply the amounts of Products set forth in the Budget Range, Hunt shall give notice to the Seal Parties that it cannot supply the amounts of Products set forth in the Budget Range. Hunt must give such notice within ten (10) days after receipt of the Budget Range and such notice shall set forth the maximum quantity that Hunt is able to supply during such periods. The parties understand and agree that the Budget Range reflects the Seal Parties' good faith estimate of their requirements and is not a binding order. The Budget Range may be updated periodically as set forth in Section 2.1. During the term of this Agreement (as defined in Section 5.1 below) (the "Term"), Hunt shall supply Products to the Seal Parties in such quantities as the Seal Parties may order under the terms and conditions set forth in this Agreement. The Budget Range in effect for the current calendar quarter as of the Closing Date shall be as previously agreed by the parties. 1.3 Non-Exclusivity. Subject to this Section 1.3, the Seal Parties shall purchase their requirements for Products from Hunt during the term of this Agreement. Notwithstanding the above, in the event that Hunt is unable to supply the amounts of Products set forth in the Budget Range established by the Seal Parties pursuant to Section 1.2 or Section 2.1 hereof, the Seal Parties shall be permitted to purchase from vendors other than Hunt that amount of Product within the Budget Range that Hunt is unable to supply. ARTICLE II Orders, Prices and Terms 2.1 Orders. At least ten (10) days prior to the first day of each month during the Term of this Agreement, the Seal Parties shall submit an order to Hunt for Products to be delivered during the upcoming month (which order shall be within the Budget Range for such month). All orders for Product under this Agreement shall be sent in writing, setting forth the quantity, shipping and delivery instructions for that order, and shall be accepted in writing by Hunt. Hunt shall accept every order that is within the Budget Range for the period. In the event that the Seal Parties have reason to believe, as of the date that an order is given, that the Budget Range has become inaccurate, the Seal Parties shall deliver an updated Budget Range with the then-current order, which reflects the Seal Parties' updated good faith estimate of their purchase requirements for the remainder of the current quarter (or for the following quarter if a Budget Range for such quarter is then in effect). Hunt may notify the Seal Parties that it cannot supply the amounts of Products set forth in the revised Budget Range. Hunt must give such notice within ten (10) days after receipt of such revised Budget Range and such notice shall set forth the maximum quantity that Hunt is able supply during such periods. The purchase orders will indicate that they are issued pursuant to this Agreement. 2 2.2 Inconsistencies. In the event of any inconsistencies between the terms on a purchase order and the terms of this Agreement, the terms of this Agreement shall take precedence. 2.3 Prices. Products shall be sold by Hunt to the Seal Parties at a price equal to a 16.9% mark-up over the total cost of production, which shall include, but not be limited to, raw materials, direct labor and factory overhead incurred by Hunt to manufacture the Products. Prices will be established by, and go into effect, on the second Monday of each of Hunt's fiscal quarters during the term of this Agreement and will be effective until the next fiscal quarter. Prices will equal the standard cost of the products produced plus a variance factor equal to the previous quarters production variances as a percent of the previous quarters standard cost of production. An exception to this is required for Hunt's first fiscal quarter only. Recognizing that new fiscal 2002 standard cost will be established at the end of the current fiscal year and that certain production variances such as fixed overhead variance and purchased material price variances should be reflected in the new standard cost, prices for the first fiscal quarter will be equal to the 2002 standard cost of production plus a variance factor equal to production scrap for the last six months of fiscal 2001 as a percent of standard cost of production for the same period. Hunt shall disclose to the Seal Parties all information regarding their cost of production for Products. 2.4 Terms of Payment, Shipping and Delivery. 2.4.1. The Seal Parties will pay to Hunt the full invoice price of Products not later than thirty (30) days after the receipt of such Products by the Seal Parties. 2.4.2. Delivery of any and all Products sold by Hunt to the Seal Parties hereunder shall be made F.O.B. Statesville, North Carolina. Risk of loss of the Products shall pass to the Seal Parties upon delivery by Hunt of the Products to the carrier. All freight costs shall be paid by the Seal Parties and all distribution costs, including the cost of warehousing and handling the Products, shall be paid by Hunt. ARTICLE III Hunt Warranty 3.1 General Provisions. Hunt warrants that any and all Products sold to the Seal Parties hereunder shall, upon delivery be free from defects in workmanship and materials and shall be in strict accordance with specifications. Hunt shall replace or repair, without charge, but at Hunt's option, any Product shown to be otherwise than as warranted, provided that the Seal Parties give Hunt notice of such defect within 30 days of receipt of the Product. The Seal Parties shall inform Hunt promptly of any warranty claims with 3 respect to Products and shall take all reasonable steps in order to avoid possible claims against the foregoing Warranty. In addition, the Seal Parties shall make no settlements with any of its customers with respect to warranty claims which will be binding upon Hunt without Hunt's consent. 3.2 Returns. The Seal Parties shall return Products subject to warranty claims to Hunt at the Seal Parties' cost. If such Products are found to be defective under the warranty, then Hunt shall reimburse the Seal Parties for such shipping costs. Notwithstanding the above, if the Seal Parties discover that Products "out of the box" are defective, then such Products will be returned to Hunt at Hunt's cost. 3.3 Exclusions. The warranty obligations hereunder shall not apply to any defects caused by neglect or misuse by the Seal Parties or normal wear and tear. ARTICLE IV Non-Competition 4.1 Non-Competition by Hunt. Hunt shall conduct all activities and operations pursuant to this Agreement in accordance with the terms of its covenant not to compete as set forth in Section 9.1 of the Purchase Agreement. ARTICLE V Term and Termination 5.1 Term. This Agreement shall have a term of one (1) year commencing on the date hereof (the "Initial Term"). Each of the parties hereunder may terminate this Agreement without liability to the other parties hereunder prior to the end of the Initial Term in accordance with Section 5.2. Unless a terminating party gives notice to the other parties hereunder of its intention to cause this Agreement to terminate at the end of the Initial Term or any extension (which notice shall be given in writing at least sixty (60) days prior to the end of the Initial Term), this Agreement shall automatically be renewed and continue thereafter for additional one (1) year terms ("Renewal Term") unless and until terminated by any of the parties hereunder by written notice sent at least sixty (60) days before the end of any Renewal Term. 5.2 Termination for Cause. Notwithstanding anything to the contrary set forth above, if any party hereunder shall fail to perform or observe any material condition or undertaking required to be performed or observed by it hereunder and such failure shall not have been cured within thirty (30) days following the giving of notice in writing thereof by any of the other party hereunder, or if any party hereunder shall be adjudicated bankrupt, or shall make an assignment for the benefit of or enter into a creditors' agreement or if a receiver shall be appointed for it, then, and in any such 4 case, the other parties hereunder may terminate this Agreement effective at once by giving notice of termination to the defaulting party. 5.3 Effect of Expiration or Termination of Agreement. 5.3.1. Upon the expiration or termination of the Initial Term or any Renewal Term in accordance with this Article V, any and all Products manufactured or otherwise produced by Hunt which have not been ordered by the Seal Parties (the "Inventory") shall remain the property of Hunt and Hunt shall bear all costs and other obligations arising out of such Inventory. 5.3.2. Upon the expiration or termination of the Initial Term or any Renewal Term in accordance with this Article V, Hunt shall sell or otherwise dispose of all Inventory in accordance with Section 9.1 of the Purchase Agreement. 5.4 Other Rights. No party hereunder shall be discharged, by reason of a termination pursuant to this Article V, from any liability or obligation to the other party hereunder which shall have accrued prior to such termination or which by the terms of this Agreement shall continue beyond the time after which this Agreement shall otherwise no longer be in force. ARTICLE VI General 6.1 Notices. All notices, requests for approval and other communications hereunder shall be in writing and shall be deemed to have been fully given if delivered or mailed, first class mail, postage prepaid or sent by a recognized overnight delivery services as follows (or at such other address for a party as shall be specified by like notice; provided that notices of a change of address shall be effective only upon receipt thereof): (i) To Hunt, as follows: Hunt Corporation One Commerce Square 2005 Market Street Philadelphia, Pennsylvania 19103 Attn: Donald L. Thompson With a copy to: John C. Bennett, Jr. Drinker Biddle & Reath LLP One Logan Square 18th & Cherry Streets Philadelphia, Pennsylvania 19103 5 (ii) To the Seal Parties as follows: Neschen AG Hans Neschen Strasse 1 D-3165 Bueckeburg Germany Attn: Stefan Zinn With a copy to: William Harnisch, Esq. Cummings & Lockwood Four Stamford Plaza P. O. Box 120 Stamford, Connecticut 06904-0120 6.2 Counterparts. This Agreement may be executed in any number of counterparts, no one of which needs to be executed by the parties, and this Agreement shall be binding upon the parties with the same force and effect as if the parties had signed the same document, and each such signed counterpart shall constitute an original of this Agreement. 6.3 Severability. In the event one or more of the provisions of this Agreement or any application thereof shall for any reason be held to be void, illegal or otherwise invalid or unenforceable, the same shall be severed herefrom and such voidance, illegality, invalidity or unenforceability shall not affect any other provision of this Agreement and such remaining provisions of this Agreement and any applications thereof shall be construed as if such void, invalid, illegal or unenforceable provisions had never been contained herein and the Agreement so altered shall continue in full force and effect. 6.4 Waivers. Any waiver by any of the parties hereunder of any rights arising from a breach of any covenants or conditions of this Agreement shall not be construed as a continuing waiver of other breaches of the same or other covenants or conditions of this Agreement. 6.5 Assignment. This Agreement shall not be assignable by any party hereto, except as provided in Section 11.5 of the Purchase Agreement. 6.6 Headings. The descriptive words or phrases at the heads of the various articles and sections hereof are inserted only for convenience and for reference and in no way are, or are intended to be, a part of this Agreement, or in any way define, limit or describe the scope or intent of the particular article or section to which they refer. 6 6.7 Governing Law. This Agreement shall be construed, governed and enforced in accordance with the laws of the State of Delaware without giving effect to otherwise applicable principles of conflicts of law. 6.8 Dispute Resolution. All disputes arising out of or in connection with this Agreement and the transactions contemplated herein shall be submitted to arbitration pursuant to the Rules of Arbitration of the International Chamber of Commerce. Such arbitration shall be held in Wilmington, Delaware and shall be conducted in English by one (1) arbitrator appointed in accordance with said Rules. 6.9 Force Majeure. Hunt shall not be responsible for failure or delay in the delivery of any service or product hereunder caused by act of God or public enemy, war, government acts, regulations, or orders, fire, flood, embargo, quarantine, epidemic, labor stoppage or other disruption, accidents, unusually severe weather, or other cause beyond the control of Hunt. 6.10 Entire Agreement. This Agreement sets forth the entire agreement and understanding between the parties hereof with respect to the purchase and supply of the Products to the Seal Parties and merges all prior discussions between them and no party hereunder shall be bound by any definition, condition, warranty or representation other than as expressly stated in this Agreement or as subsequently set forth in writing and executed by the party to be bound thereby. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be signed by their duly authorized and empowered representatives as of the day and year first above written. SEAL GRAPHICS AMERICAS CORPORATION By: ----------------------------------- Name: Title: SEAL USA CORPORATION By ----------------------------------- Name: Title: SEAL GRAPHICS TECHNOLOGIES CORPORATION By ----------------------------------- Name: Title: HUNT CORPORATION By ----------------------------------- Name: Title: [SIGNATURE PAGE TO PURCHASE AND SUPPLY AGREEMENT (FOAMBOARD)] EX-2.H 10 ex2-h.txt EX-2.H Exhibit 2(h) PURCHASE AND SUPPLY AGREEMENT (FRAMING CONSUMABLES) This Purchase and Supply Agreement ("Agreement") is made as of this 9th day of October, 2001 by and between SEAL GRAPHICS AMERICAS CORPORATION, a Delaware corporation, SEAL USA CORPORATION, a Delaware corporation, and SEAL GRAPHICS TECHNOLOGIES CORPORATION, a Delaware corporation (the "Seal Parties") and HUNT CORPORATION, a Pennsylvania corporation ("Hunt"). RECITALS WHEREAS, pursuant to an Asset Purchase Agreement, dated of even date herewith (the "Purchase Agreement"), by and among Hunt, Hunt Holdings, Inc. and Hunt Graphics Americas Corporation (collectively, the "Sellers") and Neschen AG and the Seal Parties, the Seal Parties concurrently herewith will purchase from the Sellers certain assets of the Sellers related to the Graphics Products segment of Hunt (the "Business"); WHEREAS, the execution and delivery of this Agreement is a condition to the closing of the transactions contemplated by the Purchase Agreement; and WHEREAS, capitalized terms used herein but not defined herein shall have the meanings set forth in the Purchase Agreement. NOW, THEREFORE, in consideration of the premises, the covenants set forth herein and the benefits to be derived herefrom, the parties hereby agree as follows: ARTICLE I Supply and Purchase of Products 1.1 Supply. Effective as of 11:59 p.m. (Eastern Time) on September 30,2001 and subject to the provisions of this Agreement, the Seal Parties shall manufacture and supply to Hunt the PrintGuard products and other framing consumables products for the framing business as set forth on Schedule 1.1 to this Agreement (the "Products"), and Hunt shall provide the Seal Parties with written orders for Products. 1.2 Budget. In order to aid the Seal Parties in its production projections, on or before the first day of the month immediately preceding each calendar quarter during which this Agreement is in effect (the "Budget Date"), Hunt shall provide the Seal Parties with a written good faith estimate of the maximum and minimum quantities that Hunt estimates it will purchase each month during the upcoming calendar quarter (the "Budget Range"). In the event that the Seal Parties determine that they may be unable to supply the amounts of Products set forth in the Budget Range, the Seal Parties shall give notice to Hunt that it cannot supply the amounts of Products set forth in the Budget Range. The Seal Parties must give such notice within ten (10) days after receipt of the Budget Range, and such notice shall set forth the maximum quantity that the Seal Parties are able to supply during such periods. The parties understand and agree that the Budget Range reflects Hunt's good faith estimate of its requirements and is not a binding order. The Budget Range will be updated periodically as set forth in Section 2.1. During the term of this Agreement (as defined in Section 5.1 below) (the "Term"), the Seal Parties shall supply Products to Hunt in such quantities as Hunt may order under the terms and conditions set forth in this Agreement. The Budget Range in effect for the current calendar quarter as of the Closing Date shall be as previously agreed by the Parties. 1.3 Non-Exclusivity. Subject to this Section 1.3, Hunt shall purchase its requirements for Products from the Seal Parties during the term of this Agreement. Notwithstanding the above, in the event that the Seal Parties are unable to supply the amounts of Products set forth in the Budget Range established by Hunt pursuant to Section 1.2 or Section 2.1 hereof, Hunt shall be permitted to purchase from vendors other than the Seal Parties that amount of Product within the Budget Range that the Seal Parties are unable to supply. ARTICLE II Orders, Prices and Terms 2.1 Orders. At least ten (10) days prior to the first day of each month during the Term of this Agreement, Hunt shall submit an order to the Seal Parties for Products to be delivered during the upcoming month (which order shall be within the Budget Range for such month). All orders for Product under this Agreement shall be sent in writing, setting forth the quantity, shipping and delivery instructions for that order, and shall be accepted in writing by the Seal Parties. The Seal Parties shall accept every order that is within the Budget Range for the period. In the event that Hunt has reason to believe, as of the date that an order is given, that the Budget Range has become inaccurate, Hunt shall deliver an updated Budget Range with the then-current order, which reflects Hunt's updated good faith estimate of its purchase requirements for the remainder of the current quarter (or for the following quarter if a Budget Range for such quarter is then in effect). The Seal Parties may notify Hunt that they cannot supply the amounts of Products set forth in the revised Budget Range. The Seal Parties must give such notice within ten (10) days after receipt of such revised Budget Range and such notice shall set forth the maximum quantity that the Seal Parties are able to supply during such periods. The purchase orders will indicate that they are issued pursuant to this Agreement. 2.2 Inconsistencies. In the event of any inconsistencies between the terms on a purchase order and the terms of this Agreement, the terms of this Agreement shall take precedence. 2 2.3 Prices. Products shall be sold by the Seal Parties to Hunt at a price equal to a 15.0% mark-up over the total cost of production, which shall include, but not be limited to, raw materials, direct labor and factory overhead incurred by the Seal Parties to manufacture the Products. Prices will be established by, and go into effect, on the second Monday of each of the Seal Parties' fiscal quarters during the term of this Agreement and will be effective until the next fiscal quarter. Prices will equal the standard cost of the products produced plus a variance factor equal to the previous quarters production variances as a percent of the previous quarters standard cost of production. An exception to this is required for the Seal Parties' first fiscal quarter only. Recognizing that new fiscal 2002 standard cost will be established at the end of the current fiscal year and that certain production variances such as fixed overhead variance and purchased material price variances should be reflected in the new standard cost, prices for the first fiscal quarter will be equal to the 2002 standard cost of production plus a variance factor equal to production scrap for the last six months of fiscal 2001 (incurred partially by Hunt) as a percent of standard cost of production for the same period. The Seal Parties shall disclose to Hunt all information regarding their cost of production for Products. 2.4 Terms of Payment, Shipping and Delivery. 2.4.1. Hunt will pay to the Seal Parties the full invoice price of Products not later than thirty (30) days after the receipt of such Products by Hunt. 2.4.2. Delivery of any and all Products sold by the Seal Parties to Hunt hereunder shall be made F.O.B. Basildon, United Kingdom. Risk of loss of the Products shall pass to Hunt upon delivery by the Seal Parties of the Products to the carrier. All freight costs shall be paid by Hunt and all distribution costs, including the cost of warehousing and handling the Products, shall be paid by the Seal Parties. ARTICLE III Warranty 3.1 General Provisions. The Seal Parties warrant that any and all Products sold to Hunt hereunder shall, upon delivery, be free from defects in workmanship and materials and shall be in strict accordance with specifications. The Seal Parties shall replace or repair, without charge, but at the Seal Parties' option, any Product shown to be otherwise than as warranted, provided that Hunt gives the Seal Parties notice of such defect within 30 days of receipt of the Product. Hunt shall inform the Seal Parties promptly of any warranty claims with respect to Products and shall take all reasonable steps in order to avoid possible claims against the foregoing Warranty. In addition, Hunt shall make no settlements with any of its customers with respect to warranty claims which will be binding upon the Seal Parties without the Seal Parties' consent. 3 3.2 Returns. Hunt shall return Products subject to warranty claims to the Seal Parties at Hunt's cost. If such Products are found to be defective under the warranty, then the Seal Parties shall reimburse Hunt for such shipping costs. 3.3 Exclusions. The warranty obligations hereunder shall not apply to any defects caused by neglect or misuse by Hunt or normal wear and tear. ARTICLE IV Term and Termination 4.1 Term. This Agreement shall have a term of one (1) year commencing on the date hereof (the "Initial Term"). Each of the parties hereunder may terminate this Agreement without liability to the other parties hereunder prior to the end of the Initial Term in accordance with Section 4.2. Unless a terminating party gives notice to the other parties hereunder of its intention to cause this Agreement to terminate at the end of the Initial Term or any extension (which notice shall be given in writing at least sixty (60) days prior to the end of the Initial Term), this Agreement shall automatically be renewed and continue thereafter for additional one (1) year terms ("Renewal Term") unless and until terminated by any of the parties hereunder by written notice sent at least sixty (60) days before the end of any Renewal Term. 4.2 Termination for Cause. Notwithstanding anything to the contrary set forth above, if any party hereunder shall fail to perform or observe any material condition or undertaking required to be performed or observed by it hereunder and such failure shall not have been cured within thirty (30) days following the giving of notice in writing thereof by any of the other parties hereunder, or if any party hereunder shall be adjudicated bankrupt, or shall make an assignment for the benefit of or enter into a creditors' agreement or if a receiver shall be appointed for it, then, and in any such case, the other parties hereunder may terminate this Agreement effective at once by giving notice of termination to the defaulting party. 4.3 Effect of Termination of Agreement. Upon the expiration or termination of the Initial Term or any Renewal Term in accordance with this Article IV, any and all Products manufactured or otherwise produced by the Seal Parties which have not been ordered by Hunt (the "Inventory") shall remain the property of the Seal Parties and the Seal Parties shall bear all costs and other obligations arising out of such Inventory. 4.4 Other Rights. No party hereunder shall be discharged, by reason of a termination pursuant to this Article IV, from any liability or obligation to the other party hereunder which shall have accrued prior to such termination or which by the terms of this Agreement shall continue beyond the time after which this Agreement shall otherwise no longer be in force. 4 ARTICLE V General 5.1 Notices. All notices, requests for approval and other communications hereunder shall be in writing and shall be deemed to have been fully given if delivered or mailed, first class mail, postage prepaid or sent by a recognized overnight delivery services as follows (or at such other address for a party as shall be specified by like notice; provided that notices of a change of address shall be effective only upon receipt thereof): (i) To Hunt, as follows: Hunt Corporation One Commerce Square 2005 Market Street Philadelphia, Pennsylvania 19103 Attn: Donald L. Thompson With a copy to: John C. Bennett, Jr. Drinker Biddle & Reath LLP One Logan Square 18th & Cherry Streets Philadelphia, Pennsylvania 19103 (ii) To the Seal Parties as follows: Neschen AG Hans Neschen Strasse 1 D-3165 Bueckeburg Germany Attn: Stefan Zinn With a copy to: William Harnisch, Esq. Cummings & Lockwood Four Stamford Plaza P. O. Box 120 Stamford, Connecticut 06904-0120 5 5.2 Counterparts. This Agreement may be executed in any number of counterparts, no one of which needs to be executed by both parties, and this Agreement shall be binding upon the parties with the same force and effect as if the parties had signed the same document, and each such signed counterpart shall constitute an original of this Agreement. 5.3 Severability. In the event one or more of the provisions of this Agreement or any application thereof shall for any reason be held to be void, illegal or otherwise invalid or unenforceable, the same shall be severed herefrom and such voidance, illegality, invalidity or unenforceability shall not affect any other provision of this Agreement and such remaining provisions of this Agreement and any applications thereof shall be construed as if such void, invalid, illegal or unenforceable provisions had never been contained herein and the Agreement so altered shall continue in full force and effect. 5.4 Waivers. Any waiver by any of the parties hereunder of any rights arising from a breach of any covenants or conditions of this Agreement shall not be construed as a continuing waiver of other breaches of the same or other covenants or conditions of this Agreement. 5.5 Assignment. This Agreement shall not be assignable by any party hereto, except as provided in Section 11.5 of the Purchase Agreement. 5.6 Headings. The descriptive words or phrases at the heads of the various articles and sections hereof are inserted only for convenience and for reference and in no way are, or are intended to be, a part of this Agreement, or in any way define, limit or describe the scope or intent of the particular article or section to which they refer. 5.7 Governing Law. This Agreement shall be construed, governed and enforced in accordance with the laws of the State of Delaware without giving effect to otherwise applicable principles of conflicts of law. 5.8 Dispute Resolution. All disputes arising out of or in connection with this Agreement and the transactions contemplated herein shall be submitted to arbitration pursuant to the Rules of Arbitration of the International Chamber of Commerce. Such arbitration shall be held in Wilmington, Delaware and shall be conducted in English by one (1) arbitrator appointed in accordance with said Rules. 5.9 Force Majeure. The Seal Parties shall not be responsible for failure or delay in the delivery of any service or product hereunder caused by an act of God or public enemy, war, government acts, regulations, or orders, fire, flood, embargo, quarantine, epidemic, labor stoppage or other disruption, accidents, unusually severe weather, or other cause beyond the control of the Seal Parties. 6 5.10 Entire Agreement. This Agreement sets forth the entire agreement and understanding between the parties hereof with respect to the purchase and supply of the Products to Hunt and merges all prior discussions between them and neither party shall be bound by any definition, condition, warranty or representation other than as expressly stated in this Agreement or as subsequently set forth in writing and executed by the party to be bound thereby. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be signed by their duly authorized and empowered representatives as of the day and year first above written. SEAL GRAPHICS AMERICAS CORPORATION By --------------------------------------- Name: Title: SEAL USA CORPORATION By --------------------------------------- Name: Title: SEAL GRAPHICS TECHNOLOGIES CORPORATION By --------------------------------------- Name: Title: HUNT CORPORATION By --------------------------------------- Name: Title: [SIGNATURE PAGE TO PURCHASE AND SUPPLY AGREEMENT (FRAMING CONSUMABLES)]