Index To Exhibits
Exhibit No. Description
- ----------- -----------
1.1 Proposed form of Underwriting Agreement.
2.2 Stock and Asset Purchase Agreement, dated as of January
23, 1997, by and between A&C Distributors, Inc. and
Inter-City Products Corporation (USA).
23.2 Consent of Arthur Andersen LLP.
23.3 Consent of Rhea & Ivy, P.L.C.
Draft of January 17, 1997 K&S Draft
WATSCO, INC.
COMMON STOCK
PAR VALUE $0.50 PER SHARE
---------------------------
UNDERWRITING AGREEMENT
__________ __, 1997
Goldman, Sachs & Co.,
Prudential Securities Incorporated,
Smith Barney Inc.,
Robert W. Baird & Co. Incorporated,
As representatives of the several Underwriters
named in Schedule I hereto,
c/o Goldman, Sachs & Co.,
85 Broad Street,
New York, New York 10004
Ladies and Gentlemen:
Watsco, Inc., a Florida corporation (the "Company"), proposes, subject
to the terms and conditions stated herein, to issue and sell to the Underwriters
named in Schedule I hereto (the "Underwriters") an aggregate of 3,000,000 shares
(the "Firm Shares") and, at the election of the Underwriters, up to 450,000
additional shares (the "Optional Shares") of Common Stock, par value $0.50 per
share ("Stock") of the Company (the Firm Shares and the Optional Shares that the
Underwriters elect to purchase pursuant to Section 2 hereof being collectively
called the "Shares").
1. The Company represents and warrants to, and agrees with, each of the
Underwriters that:
(a) A registration statement on Form S-3 (File No.
333-19803) (the "Initial Registration Statement") in respect of the
Shares has been filed with the Securities and Exchange Commission (the
"Commission"); the Initial Registration Statement and any
post-effective amendment thereto, each in the form heretofore delivered
to you, and, excluding exhibits thereto but including all documents
incorporated by reference in the prospectus contained therein, to you
for each of the other Underwriters, have been declared effective by the
Commission in such form; other than a registration statement, if any,
increasing the size of the offering (a "Rule 462(b) Registration
Statement"), filed pursuant to Rule 462(b) under the Securities Act of
1933, as amended (the "Act"), which became effective upon filing, no
other document with respect to the Initial Registration Statement or
document incorporated by reference therein has heretofore been filed
with the Commission; and no stop order suspending the effectiveness of
the Initial Registration Statement, any post-effective amendment
thereto or the Rule 462(b) Registration Statement, if any, has been
issued and no proceeding for that purpose has been initiated or
threatened by the Commission (any preliminary prospectus included in
the Initial Registration Statement or filed
with the Commission pursuant to Rule 424(a) of the rules and
regulations of the Commission under the Act is hereinafter called a
"Preliminary Prospectus"); the various parts of the Initial
Registration Statement and the Rule 462(b) Registration Statement, if
any, including all exhibits thereto and including (i) the information
contained in the form of final prospectus filed with the Commission
pursuant to Rule 424(b) under the Act in accordance with Section 5(a)
hereof and deemed by virtue of Rule 430A under the Act to be part of
the Initial Registration Statement at the time it was declared
effective and (ii) the documents incorporated by reference in the
prospectus contained in the registration statement at the time such
part of the Initial Registration Statement became effective or such
part of the Rule 462(b) Registration Statement, if any, became or
hereafter becomes effective, each as amended at the time such part of
the registration statement became effective, are hereinafter
collectively called the "Registration Statement"; such final
prospectus, in the form first filed pursuant to Rule 424(b) under the
Act, is hereinafter called the "Prospectus"; and any reference herein
to any Preliminary Prospectus or the Prospectus shall be deemed to
refer to and include the documents incorporated by reference therein
pursuant to Item 12 of Form S-3 under the Act, as of the date of such
Preliminary Prospectus or Prospectus, as the case may be; any reference
to any amendment or supplement to any Preliminary Prospectus or the
Prospectus shall be deemed to refer to and include any documents filed
after the date of such Preliminary Prospectus or Prospectus, as the
case may be, under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and incorporated by reference in such Preliminary
Prospectus or Prospectus, as the case may be; and any reference to any
amendment to the Registration Statement shall be deemed to refer to and
include any annual report of the Company filed pursuant to Section
13(a) or 15(d) of the Exchange Act after the effective date of the
Initial Registration Statement that is incorporated by reference in the
Registration Statement);
(b) No order preventing or suspending the use of any
Preliminary Prospectus has been issued by the Commission, and each
Preliminary Prospectus, at the time of filing thereof, conformed in all
material respects to the requirements of the Act and the rules and
regulations of the Commission thereunder, and did not contain an untrue
statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not
misleading; PROVIDED, HOWEVER, that this representation and warranty
shall not apply to any statements or omissions made in reliance upon
and in conformity with information furnished in writing to the Company
by an Underwriter through Goldman, Sachs & Co. expressly for use
therein;
(c) The documents incorporated by reference in the
Prospectus, when they became effective or were filed with the
Commission, as the case may be, conformed in all material respects to
the requirements of the Act or the Exchange Act, as applicable, and the
rules and regulations of the Commission thereunder, and none of such
documents contained an untrue statement of a material fact or omitted
to state a material fact required to be stated therein or necessary to
make the statements therein not misleading; and any further documents
so filed and incorporated by reference in the Prospectus or any further
amendment or supplement thereto, when such documents become effective
or are filed with the Commission, as the case may be, will conform in
all material respects to the requirements of the Act or the Exchange
Act, as applicable, and the rules and regulations of the Commission
thereunder and will not contain an untrue statement of a material fact
or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading; PROVIDED,
HOWEVER, that this representation and warranty shall not apply to any
statements or omissions made in reliance upon and in conformity with
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information furnished in writing to the Company by an Underwriter
through Goldman, Sachs & Co. expressly for use therein;
(d) The Registration Statement conforms, and the Prospectus
and any further amendments or supplements to the Registration Statement
or the Prospectus will conform, in all material respects to the
requirements of the Act and the rules and regulations of the Commission
thereunder and do not and will not, as of the applicable effective date
as to the Registration Statement and any amendment thereto and as of
the applicable filing date as to the Prospectus and any amendment or
supplement thereto, contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading; PROVIDED,
HOWEVER, that this representation and warranty shall not apply to any
statements or omissions made in reliance upon and in conformity with
information furnished in writing to the Company by an Underwriter
through Goldman, Sachs & Co. expressly for use therein;
(e) Neither the Company nor any of its subsidiaries has
sustained since the date of the latest audited financial statements
included or incorporated by reference in the Prospectus any material
loss or interference with its business from fire, explosion, flood or
other calamity, whether or not covered by insurance, or from any labor
dispute or court or governmental action, order or decree, otherwise
than as set forth or contemplated in the Prospectus; and, since the
respective dates as of which information is given in the Registration
Statement and the Prospectus, there has not been any change in the
capital stock or long-term debt of the Company or any of its
subsidiaries or any material adverse change, or any development
involving a prospective material adverse change, in or affecting the
general affairs, management, financial position, shareholders' equity
or results of operations of the Company and its subsidiaries, otherwise
than as set forth or contemplated in the Prospectus;
(f) The Company and its subsidiaries have good and
marketable title in fee simple to all real property and good and
marketable title to all personal property owned by them, in each case
free and clear of all liens, encumbrances and defects except such as
are described in the Prospectus or such as do not materially affect the
value of such property and do not interfere with the use made and
proposed to be made of such property by the Company and its
subsidiaries; and any real property and buildings held under lease by
the Company and its subsidiaries are held by them under valid,
subsisting and enforceable leases with such exceptions as are not
material and do not interfere with the use made and proposed to be made
of such property and buildings by the Company and its subsidiaries;
(g) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State
of Florida, with power and authority (corporate and other) to own its
properties and conduct its business as described in the Prospectus, and
has been duly qualified as a foreign corporation for the transaction of
business and is in good standing under the laws of each other
jurisdiction in which it owns or leases properties or conducts any
business so as to require such qualification, or is subject to no
material liability or disability by reason of the failure to be so
qualified in any such jurisdiction; and each subsidiary of the Company
has been duly incorporated and is validly existing as a corporation in
good standing under the laws of its jurisdiction of incorporation and
each has been duly qualified as a foreign corporation for the
transaction of business and is in good standing under the laws of each
other jurisdiction in which it owns or leases properties, or conducts
any business so as to require such qualification, or is
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subject to no material liability or disability by reason of failure to
be so qualified in any such jurisdiction;
(h) The Company has an authorized capitalization as set
forth in the Prospectus, and all of the issued shares of capital stock
of the Company have been duly and validly authorized and issued, are
fully paid and non-assessable and conform to the description of the
Stock contained in the Prospectus; all of the issued shares of capital
stock of each subsidiary of the Company have been duly and validly
authorized and issued, are fully paid and non-assessable and are owned
directly or indirectly by the Company, free and clear of all liens,
encumbrances, equities or claims; and there are no holders of the
securities of the Company or any of its subsidiaries having rights to
registration thereof that have not been fully exercised or waived
(except as otherwise described in the Prospectus) or pre-emptive rights
to purchase capital stock of the Company;
(i) The unissued Shares to be issued and sold by the Company
to the Underwriters hereunder have been duly and validly authorized
and, when issued and delivered against payment therefor as provided
herein, will be duly and validly issued and fully paid and
non-assessable and will conform to the description of the Stock
contained in the Prospectus;
(j) The issue and sale of the Shares by the Company
hereunder and the compliance by the Company with all of the provisions
of this Agreement and the consummation of the transactions herein and
therein contemplated will not conflict with or result in a breach or
violation of any of the terms or provisions of, or constitute a default
under, any indenture, mortgage, deed of trust, loan agreement or other
agreement or instrument to which the Company or any of its subsidiaries
is a party or by which the Company or any of its subsidiaries is bound
or to which any of the property or assets of the Company or any of its
subsidiaries is subject, nor will such action result in any violation
of the provisions of the Articles of Incorporation or By-laws of the
Company or any statute or any order, rule or regulation of any court or
governmental agency or body having jurisdiction over the Company or any
of its subsidiaries or any of their properties; and no consent,
approval, authorization, order, registration or qualification of or
with any such court or governmental agency or body is required for the
issue and sale of the Shares or the consummation by the Company of the
transactions contemplated by this Agreement, except the registration
under the Act of the Shares and such consents, approvals,
authorizations, registrations or qualifications as may be required
under state securities or Blue Sky laws in connection with the purchase
and distribution of the Shares by the Underwriters;
(k) Neither the Company nor any of its subsidiaries is in
violation of its Articles of Incorporation or By-laws or in default in
the performance or observance of any material obligation, agreement,
covenant or condition contained in any indenture, mortgage, deed of
trust, loan agreement, lease or other agreement or instrument to which
it is a party or by which it or any of its properties may be bound;
(l) The statements set forth in the Prospectus under the
caption "Underwriting", insofar as they purport to describe the
provisions of the laws and documents referred to therein, are accurate,
complete and fair;
(m) Other than as set forth or contemplated in the
Prospectus, there are no legal or governmental proceedings pending to
which the Company or any of its subsidiaries is a party or of which any
property of the Company or any of its subsidiaries is the subject
which,
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if determined adversely to the Company or any of its subsidiaries,
would individually or in the aggregate have a material adverse effect
on the current or future consolidated financial position, shareholders'
equity or results of operations of the Company and its subsidiaries;
and, to the best of the Company's knowledge, no such proceedings are
threatened or contemplated by governmental authorities or threatened by
others;
(n) The Company is not and, after giving effect to the
offering and sale of the Shares, will not be an "investment company" or
an entity "controlled" by an "investment company", as such terms are
defined in the Investment Company Act of 1940, as amended (the
"Investment Company Act");
(o) Neither the Company nor any of its affiliates does
business with the government of Cuba or with any person or affiliate
located in Cuba within the meaning of Section 517.075, Florida
Statutes;
(p) Arthur Andersen LLP and Rhea & Ivy, P.L.C, who have
certified certain financial statements of the Company and its
consolidated subsidiaries and Three States Supply Company, Inc. ("Three
States") and its consolidated subsidiaries, respectively, are
independent public accountants as required by the Act and the rules and
regulations of the Commission thereunder;
(q) Each of the Company and its subsidiaries owns or
possesses, or can acquire on reasonable terms, all material patents,
patent applications, trademarks, service marks, trade names, licenses,
copyrights and proprietary or other confidential information currently
employed by it in connection with its respective business, and neither
the Company nor any such subsidiary has received any notice of or
conflict with asserted rights of any third party with respect to any of
the foregoing that, singly or in the aggregate, if the subject of an
unfavorable decision, ruling or finding, would result in a material
adverse change in the condition (financial or otherwise), business
prospects, net worth or results of operations of the Company and its
subsidiaries, except as described in or contemplated by the Prospectus;
and
(r) Neither the Company nor any of its subsidiaries is in
violation of any federal or state law or regulation relating to
occupational safety and health or to the storage, handling or
transportation of hazardous or toxic material and the Company and its
subsidiaries have received all permits, licenses or other approvals
required of them under applicable federal and state occupational safety
and health and environmental laws and regulations to conduct their
respective businesses, and the Company and each such subsidiary is in
compliance with all terms and conditions of any such permit, license or
approval, except any such violation of law or regulation, failure to
receive required permits, licenses or other approvals or failure to
comply with the terms and conditions of such permits, licenses or
approvals that would not, singly or in the aggregate, have a material
adverse effect on the Company and its subsidiaries as a whole, except
as otherwise described in the Prospectus.
2. Subject to the terms and conditions herein set forth, (a) the
Company agrees to issue and sell to each of the Underwriters, and each of the
Underwriters agrees, severally and not jointly, to purchase from the Company, at
a purchase price per share of $........................, the number of Firm
Shares set forth opposite the name of such Underwriter in Schedule I hereto and
(b) in the event and to the extent that the Underwriters shall exercise the
election to purchase Optional Shares as provided below, the Company agrees to
issue and sell to each of the Underwriters, and each of
5
the Underwriters agrees, severally and not jointly, to purchase from the
Company, at the purchase price per share set forth in clause (a) of this Section
2, that portion of the number of Optional Shares as to which such election shall
have been exercised (to be adjusted by you so as to eliminate fractional shares)
determined by multiplying such number of Optional Shares by a fraction, the
numerator of which is the maximum number of Optional Shares which such
Underwriter is entitled to purchase as set forth opposite the name of such
Underwriter in Schedule I hereto and the denominator of which is the maximum
number of Optional Shares that all of the Underwriters are entitled to purchase
hereunder.
The Company hereby grants to the Underwriters the right to purchase at
their election up to 450,000 Optional Shares, at the purchase price per share
set forth in the paragraph above, for the sole purpose of covering
overallotments in the sale of the Firm Shares. Any such election to purchase
Optional Shares may be exercised only by written notice from you to the Company,
given within a period of 30 calendar days after the date of this Agreement,
setting forth the aggregate number of Optional Shares to be purchased and the
date on which such Optional Shares are to be delivered, as determined by you but
in no event earlier than the First Time of Delivery (as defined in Section 4
hereof) or, unless you and the Company otherwise agree in writing, earlier than
two or later than ten business days after the date of such notice.
3. Upon the authorization by you of the release of the Firm Shares, the
several Underwriters propose to offer the Firm Shares for sale upon the terms
and conditions set forth in the Prospectus.
4. (a) The Shares to be purchased by each Underwriter
hereunder, in definitive form, and in such authorized denominations and
registered in such names as Goldman, Sachs & Co. may request upon at
least forty-eight hours' prior notice to the Company, shall be
delivered by or on behalf of the Company to Goldman, Sachs & Co., for
the account of such Underwriter, against payment by or on behalf of
such Underwriter of the purchase price therefor by certified or
official bank check or checks, payable to the order of the Company in
New York Clearing House (next day) funds. The Company will cause the
certificates representing the Shares to be made available for checking
and packaging at least twenty-four hours prior to the Time of Delivery
(as defined below) with respect thereto at the office of Goldman, Sachs
& Co., 85 Broad Street, New York, New York 10004 (the "Designated
Office"). The time and date of such delivery and payment shall be, with
respect to the Firm Shares, 9:30 a.m., New York City time, on
............., 1997 or such other time and date as Goldman, Sachs & Co.
and the Company may agree upon in writing, and, with respect to the
Optional Shares, 9:30 a.m., New York time, on the date specified by
Goldman, Sachs & Co. in the written notice given by Goldman, Sachs &
Co. of the Underwriters' election to purchase such Optional Shares, or
such other time and date as Goldman, Sachs & Co. and the Company may
agree upon in writing. Such time and date for delivery of the Firm
Shares is herein called the "First Time of Delivery", such time and
date for delivery of the Optional Shares, if not the First Time of
Delivery, is herein called the "Second Time of Delivery", and each such
time and date for delivery is herein called a "Time of Delivery".
(b) The documents to be delivered at each Time of Delivery
by or on behalf of the parties hereto pursuant to Section 7 hereof,
including the cross receipt for the Shares and any additional documents
requested by the Underwriters pursuant to Section 7(k) hereof, will be
delivered at the offices of King & Spalding, 120 West 45th Street, New
York, New York 10036-4003 (the "Closing Location"), and the Shares will
be delivered at the Designated Office, all at such Time of Delivery. A
meeting will be held at the Closing Location at 2:00 p.m., New York
City time, on the New York Business Day next preceding such Time of
6
Delivery, at which meeting the final drafts of the documents to be
delivered pursuant to the preceding sentence will be available for
review by the parties hereto. For the purposes of this Section 4, "New
York Business Day" shall mean each Monday, Tuesday, Wednesday, Thursday
and Friday which is not a day on which banking institutions in New York
are generally authorized or obligated by law or executive order to
close.
5. The Company agrees with each of the Underwriters:
(a) To prepare the Prospectus in a form approved by you and
to file such Prospectus pursuant to Rule 424(b) under the Act not later
than the Commission's close of business on the second business day
following the execution and delivery of this Agreement, or, if
applicable, such earlier time as may be required by Rule 430A(a)(3)
under the Act and, if the Company elects to rely upon Rule 462(b), the
Company shall file a Rule 462(b) Registration Statement with the
Commission in compliance with Rule 462(b) by 10:00 p.m., Washington,
D.C. time, on the date of this Agreement, and the Company shall at the
time of filing either pay to the Commission the filing fee for the Rule
462(b) Registration Statement or give irrevocable instructions for the
payment of such fee pursuant to Rule 111(b) under the Act; to make no
further amendment or any supplement to the Registration Statement or
Prospectus prior to the last Time of Delivery which shall be
disapproved by you promptly after reasonable notice thereof; to advise
you, promptly after it receives notice thereof, of the time when any
amendment to the Registration Statement has been filed or becomes
effective or any supplement to the Prospectus or any amended Prospectus
has been filed and to furnish you with copies thereof; to file promptly
all reports and any definitive proxy or information statements required
to be filed by the Company with the Commission pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of
the Prospectus and for so long as the delivery of a prospectus is
required in connection with the offering or sale of the Shares; to
advise you, promptly after it receives notice thereof, of the issuance
by the Commission of any stop order or of any order preventing or
suspending the use of any Preliminary Prospectus or prospectus, of the
suspension of the qualification of the Shares for offering or sale in
any jurisdiction, of the initiation or threatening of any proceeding
for any such purpose, or of any request by the Commission for the
amending or supplementing of the Registration Statement or Prospectus
or for additional information; and, in the event of the issuance of any
stop order or of any order preventing or suspending the use of any
Preliminary Prospectus or prospectus or suspending any such
qualification, promptly to use its best efforts to obtain the
withdrawal of such order;
(b) Promptly from time to time to take such action as you
may reasonably request to qualify the Shares for offering and sale
under the securities laws of such jurisdictions as you may request and
to comply with such laws so as to permit the continuance of sales and
dealings therein in such jurisdictions for as long as may be necessary
to complete the distribution of the Shares, provided that in connection
therewith the Company shall not be required to qualify as a foreign
corporation or to file a general consent to service of process in any
jurisdiction;
(c) Prior to 10:00 a.m., New York City time, on the New York
Business Day next succeeding the date of this Agreement and from time
to time, to furnish the Underwriters with copies of the Prospectus in
New York City in such quantities as you may reasonably request, and, if
the delivery of a prospectus is required at any time prior to the
expiration of nine months after the time of issue of the Prospectus in
connection with the offering or sale of the Shares and if at such time
any event shall have occurred as a result of which the Prospectus as
then amended or supplemented would include an untrue statement of a
material fact or
7
omit to state any material fact necessary in order to make the
statements therein, in the light of the circumstances under which they
were made when such Prospectus is delivered, not misleading, or, if for
any other reason it shall be necessary during such period to amend or
supplement the Prospectus or to file under the Exchange Act any
document incorporated by reference in the Prospectus in order to comply
with the Act or the Exchange Act, to notify you and upon your request
to file such document and to prepare and furnish without charge to each
Underwriter and to any dealer in securities as many copies as you may
from time to time reasonably request of an amended Prospectus or a
supplement to the Prospectus which will correct such statement or
omission or effect such compliance, and in case any Underwriter is
required to deliver a prospectus in connection with sales of any of the
Shares at any time nine months or more after the time of issue of the
Prospectus, upon your request but at the expense of such Underwriter,
to prepare and deliver to such Underwriter as many copies as you may
request of an amended or supplemented Prospectus complying with Section
10(a)(3) of the Act;
(d) To make generally available to its securityholders as
soon as practicable, but in any event not later than eighteen months
after the effective date of the Registration Statement (as defined in
Rule 158(c) under the Act), an earnings statement of the Company and
its subsidiaries (which need not be audited) complying with Section
11(a) of the Act and the rules and regulations thereunder (including,
at the option of the Company, Rule 158);
(e) During the period beginning from the date hereof and
continuing to and including the date 90 days after the date of the
Prospectus, not to offer, sell, contract to sell or otherwise dispose
of, except as provided hereunder, any securities of the Company that
are substantially similar to the Shares, including but not limited to
any securities that are convertible into or exchangeable for, or that
represent the right to receive, Stock or any such substantially similar
securities (other than pursuant to employee stock option plans existing
on, or upon the conversion or exchange of convertible or exchangeable
securities outstanding as of, the date of this Agreement), without your
prior written consent;
(f) To furnish to its shareholders as soon as practicable
after the end of each fiscal year an annual report (including a balance
sheet and statements of income, shareholders' equity and cash flows of
the Company and its consolidated subsidiaries certified by independent
public accountants) and, as soon as practicable after the end of each
of the first three quarters of each fiscal year (beginning with the
fiscal quarter ending after the effective date of the Registration
Statement), consolidated summary financial information of the Company
and its subsidiaries for such quarter in reasonable detail;
(g) During a period of five years from the effective date of
the Registration Statement, to furnish to you copies of all reports or
other communications (financial or other) furnished to shareholders,
and to deliver to you (i) as soon as they are available, copies of any
reports and financial statements furnished to or filed with the
Commission or any national securities exchange on which any class of
securities of the Company is listed; and (ii) such additional
information concerning the business and financial condition of the
Company as you may from time to time reasonably request (such financial
statements to be on a consolidated basis to the extent the accounts of
the Company and its subsidiaries are consolidated in reports furnished
to its shareholders generally or to the Commission);
(h) To use the net proceeds received by it from the sale of
the Shares pursuant to this Agreement in the manner specified in the
Prospectus under the caption "Use of Proceeds"; and
8
(i) To use its best efforts to list, subject to notice of
issuance, the Shares on the New York Stock Exchange (the "NYSE").
6. The Company covenants and agrees with the several Underwriters that
the Company will pay or cause to be paid the following: (i) the fees,
disbursements and expenses of the Company's counsel and accountants in
connection with the registration of the Shares under the Act and all other
expenses in connection with the preparation, printing and filing of the
Registration Statement, any Preliminary Prospectus and the Prospectus and
amendments and supplements thereto and the mailing and delivering of copies
thereof to the Underwriters and dealers; (ii) the cost of printing or producing
any Agreement among Underwriters, this Agreement, the Blue Sky Memorandum,
closing documents (including compilations thereof) and any other documents in
connection with the offering, purchase, sale and delivery of the Shares; (iii)
all expenses in connection with the qualification of the Shares for offering and
sale under state securities laws as provided in Section 5(b) hereof, including
the fees and disbursements of counsel for the Underwriters in connection with
such qualification and in connection with the Blue Sky survey; (iv) all fees and
expenses in connection with listing the Shares on the NYSE; (v) the filing fees
incident to, and the fees and disbursements of counsel for the Underwriters in
connection with, securing any required review by the National Association of
Securities Dealers, Inc. of the terms of the sale of the Shares; (vi) the cost
of preparing stock certificates; (vii) the cost and charges of any transfer
agent or registrar; and (viii) all other costs and expenses incident to the
performance of its obligations hereunder which are not otherwise specifically
provided for in this Section. It is understood, however, that, except as
provided in this Section, and Sections 8 and 11 hereof, the Underwriters will
pay all of their own costs and expenses, including the fees of their counsel,
stock transfer taxes on resale of any of the Shares by them, and any advertising
expenses connected with any offers they may make.
7. The obligations of the Underwriters hereunder, as to the Shares to
be delivered at each Time of Delivery, shall be subject, in their discretion, to
the condition that all representations and warranties and other statements of
the Company herein are, at and as of such Time of Delivery, true and correct,
the condition that the Company shall have performed all of its obligations
hereunder theretofore to be performed, and the following additional conditions:
(a) The Prospectus shall have been filed with the Commission
pursuant to Rule 424(b) within the applicable time period prescribed
for such filing by the rules and regulations under the Act and in
accordance with Section 5(a) hereof; if the Company has elected to rely
upon Rule 462(b), the Rule 462(b) Registration Statement shall have
become effective by 10:00 p.m., Washington, D.C. time, on the date of
this Agreement; no stop order suspending the effectiveness of the
Registration Statement or any part thereof shall have been issued and
no proceeding for that purpose shall have been initiated or threatened
by the Commission; and all requests for additional information on the
part of the Commission shall have been complied with to your reasonable
satisfaction;
(b) King & Spalding, counsel for the Underwriters, shall
have furnished to you such opinion or opinions, dated such Time of
Delivery, with respect to the incorporation of the Company, the
Underwriting Agreement, the validity of the Shares being delivered at
such Time of Delivery, the Registration Statement, the Prospectus and
such other related matters as you may reasonably request, and such
counsel shall have received such papers and information as they may
reasonably request to enable them to pass upon such matters;
(c) Greenberg, Traurig, Hoffman, Lipoff, Rosen & Quentel,
P.A., counsel for the Company, shall have furnished to you their
written opinion (a draft of such opinion is attached
9
as Annex II(a) hereto), dated such Time of Delivery, in form and
substance satisfactory to you, to the effect that:
(i) the Company and each of its subsidiaries have
been duly incorporated and are validly existing as
corporations in good standing under the laws of their
respective jurisdictions of incorporation and are duly
qualified to transact business as foreign corporations and are
in good standing under the laws of all other jurisdictions
where the ownership or leasing of their respective properties
or the conduct of their respective businesses requires such
qualification, except where the failure to be so qualified
does not amount to a material liability or disability to the
Company and its subsidiaries, taken as a whole;
(ii) the Company and each of its subsidiaries have
corporate power to own or lease their respective properties
and conduct their respective businesses as described in the
Prospectus, and the Company has corporate power to enter into
this Agreement and to carry out all the terms and provisions
hereof to be carried out by it;
(iii) all of the issued shares of capital stock of
each subsidiary of the Company have been duly authorized and
validly issued, are fully paid and nonassessable and, except
as otherwise set forth in the Prospectus, are owned
beneficially by the Company free and clear of any perfected
security interests or, to the best knowledge of such counsel,
any other security interests, liens, encumbrances, equities or
claims;
(iv) the Company has an authorized capitalization as
set forth in the Prospectus; all of the issued shares of
capital stock of the Company have been duly authorized and
validly issued and are fully paid and nonassessable, have
either been issued in compliance with the registration
requirements of all applicable federal and state securities
laws or the applicable statute of limitation periods have
expired without any claim having been made in respect thereof,
and were not issued in violation of or subject to any
preemptive rights or other rights to subscribe for or purchase
securities; the Firm Shares have been duly authorized by all
necessary corporate action of the Company and, when issued and
delivered to and paid for by the Underwriters pursuant to this
Agreement, will be validly issued, fully paid and
nonassessable; the Firm Shares have been duly authorized for
listing on the NYSE; no holders of outstanding shares of
capital stock of the Company are entitled as such to any
preemptive or other rights to subscribe for any of the Shares;
and no holders of securities of the Company are entitled to
have such securities registered under the Registration
Statement;
(v) the description of the Stock of the Company
incorporated by reference in the Prospectus, insofar as such
statements purport to summarize certain provisions of the
capital stock of the Company, provide a fair summary of such
provisions;
(vi) the execution and delivery of this Agreement
have been duly authorized by all necessary corporate action of
the Company and this Agreement has been duly executed and
delivered by the Company;
10
(vii) to the best knowledge of such counsel, no legal
or governmental proceedings are pending to which the Company
or any of its subsidiaries is a party or to which the property
of the Company or any of its subsidiaries is subject that are
required to be described in the Prospectus and are not
described therein, and no such proceedings have been
threatened against the Company or any of its subsidiaries or
with respect to any of their respective properties; and no
contract or other document is required to be described in the
Prospectus or to be filed as an exhibit to the Registration
Statement that is not described therein or filed as required;
(viii) the issuance, offering and sale of the
Securities to the Underwriters by the Company pursuant to this
Agreement, the compliance by the Company with the other
provisions of this Agreement and the consummation of the other
transactions herein contemplated do not require the consent,
approval, authorization, registration or qualification of or
with any governmental authority, except such as have been
obtained and such as may be required under state securities or
blue sky laws;
(ix) Neither the Company nor any of its subsidiaries
is in violation of its charter documents or By-laws or in
default in the performance or observance of any material
obligation, agreement, covenant or condition contained in any
indenture, mortgage, deed of trust, loan agreement, lease or
other agreement or instrument to which it is a party or by
which it or any of its properties may be bound, or any statute
or any material judgment, decree, order, rule or regulation of
any court or other governmental authority or any arbitrator
known to such counsel and applicable to the Company or any of
its subsidiaries;
(x) The Company is not an "investment company" or an
entity "controlled" by an "investment company", as such terms
are defined in the Investment Company Act;
(xi) the Registration Statement is effective under
the Act; any required filing of the Prospectus has been made
in the manner and within the time period required by Rules 434
and 424(b); and no stop order suspending the effectiveness of
the Registration Statement or any post-effective amendment
thereto and no order directed at any document incorporated by
reference in the Prospectus or any amendment or supplement
thereto has been issued, and no proceedings for that purpose
have been instituted or threatened or, to the best knowledge
of such counsel, are contemplated by the Commission;
(xii) The documents incorporated by reference in the
Prospectus or any further amendment or supplement thereto made
by the Company prior to such Time of Delivery (other than the
financial statements and related schedules therein, as to
which such counsel need express no opinion), when they became
effective or were filed with the Commission, as the case may
be, complied as to form in all material respects with the
requirements of the Act or the Exchange Act, as applicable,
and the rules and regulations of the Commission thereunder;
and they have no reason to believe that any of such documents,
when such documents became effective or were so filed, as the
case may be, contained, in the case of a registration
statement which became effective under the Act, an untrue
statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the
statements therein not misleading, or, in the case of other
documents which were filed under the Exchange Act with the
Commission, an untrue statement of a material
11
fact or omitted to state a material fact necessary in order to
make the statements therein, in the light of the circumstances
under which they were made when such documents were so filed,
not misleading; and
(xiv) The Registration Statement and the Prospectus
and any further amendments and supplements thereto made by the
Company prior to such Time of Delivery (other than the
financial statements and related schedules therein, as to
which such counsel need express no opinion) comply as to form
in all material respects with the requirements of the Act and
the rules and regulations thereunder, although they do not
assume any responsibility for the accuracy, completeness or
fairness of the statements contained in the Registration
Statement or the Prospectus; they have no reason to believe
that, as of its effective date, the Registration Statement or
any further amendment thereto made by the Company prior to
such Time of Delivery (other than the financial statements and
related statements and related schedules therein, as to which
such counsel need express no opinion) contained an untrue
statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the
statements therein not misleading or that, as of its date, the
Prospectus or any further amendment or supplement thereto made
by the Company prior to such Time of Delivery (other than the
financial statements and related schedules therein, as to
which such counsel need express no opinion) contained an
untrue statement of a material fact or omitted to state a
material fact necessary to make the statements therein, in the
light of the circumstances under which they were made, not
misleading or that, as of such Time of Delivery, either the
Registration Statement or the Prospectus or any further
amendment or supplement thereto made by the Company prior to
such Time of Delivery (other than the financial statements and
related schedules therein, as to which such counsel need
express no opinion) contains an untrue statement of a material
fact or omits to state a material fact necessary to make the
statements therein, in the light of the circumstances under
which they were made, not misleading; and they do not know of
any amendment to the Registration Statement required to be
filed or of any contracts or other documents of a character
required to be filed as an exhibit to the Registration
Statement or required to be incorporated by reference into the
Prospectus or required to be described in the Registration
Statement or the Prospectus which are not filed or
incorporated by reference or described as required;
(d) On the date of the Prospectus at a time prior to the
execution of this Agreement, at 9:30 a.m., New York City time, on the
effective date of any post-effective amendment to the Registration
Statement filed subsequent to the date of this Agreement and also at
each Time of Delivery, Arthur Andersen LLP shall have furnished to you
a letter or letters, dated the respective dates of delivery thereof, in
form and substance satisfactory to you, to the effect set forth in
Annex I hereto (the executed copy of the letter delivered prior to the
execution of this Agreement is attached hereto as Annex I(a) and a
draft of the form of letter to be delivered on the effective date of
any post-effective amendment to the Registration Statement and as of
each Time of Delivery is attached hereto as Annex I(b));
(e) On the date of the Prospectus at a time prior to the
execution of this Agreement, at 9:30 a.m., New York City time, on the
effective date of any post-effective amendment to the Registration
Statement filed subsequent to the date of this Agreement and also at
each Time of Delivery, Rhea & Ivy, P.L.C. shall have furnished to you a
letter or letters, dated the respective dates of delivery thereof, in
form and substance satisfactory to
12
you, to the effect set forth in Annex III hereto (the executed copy of
the letter delivered prior to the execution of this Agreement is
attached hereto as Annex III(a) and a draft of the form of letter to be
delivered on the effective date of any post-effective amendment to the
Registration Statement and as of each Time of Delivery is attached
hereto as Annex III(b));
(f)(i) Neither the Company nor any of its subsidiaries shall
have sustained since the date of the latest audited financial
statements included or incorporated by reference in the Prospectus any
loss or interference with its business from fire, explosion, flood or
other calamity, whether or not covered by insurance, or from any labor
dispute or court or governmental action, order or decree, otherwise
than as set forth or contemplated in the Prospectus, and (ii) since the
respective dates as of which information is given in the Prospectus
there shall not have been any change in the capital stock or long-term
debt of the Company or any of its subsidiaries or any change, or any
development involving a prospective change, in or affecting the general
affairs, management, financial position, shareholders' equity or
results of operations of the Company and its subsidiaries, otherwise
than as set forth or contemplated in the Prospectus, the effect of
which, in any such case described in Clause (i) or (ii), is in the
judgment of the Representatives so material and adverse as to make it
impracticable or inadvisable to proceed with the public offering or the
delivery of the Shares being delivered at such Time of Delivery on the
terms and in the manner contemplated in the Prospectus;
(g) On or after the date hereof (i) no downgrading shall
have occurred in the rating accorded the Company's debt securities, if
any, by any "nationally recognized statistical rating organization", as
that term is defined by the Commission for purposes of Rule 436(g)(2)
under the Act, and (ii) no such organization shall have publicly
announced that it has under surveillance or review, with possible
negative implications, its rating of any of the Company's debt
securities, if any;
(h) On or after the date hereof there shall not have
occurred any of the following: (i) a suspension or material limitation
in trading in securities generally on the NYSE; (ii) a suspension or
material limitation in trading in the Company's securities on the NYSE;
(iii) a general moratorium on commercial banking activities declared by
either Federal or New York State authorities; or (iv) the outbreak or
escalation of hostilities involving the United States or the
declaration by the United States of a national emergency or war, if the
effect of any such event specified in this Clause (iv) in the judgment
of the Representatives makes it impracticable or inadvisable to proceed
with the public offering or the delivery of the Shares being delivered
at such Time of Delivery on the terms and in the manner contemplated in
the Prospectus;
(i) The Shares to be sold at such Time of Delivery shall
have been duly listed, subject to notice of issuance, on the NYSE;
(j) The Company has obtained and delivered to the
Underwriters executed copies of an agreement from each director,
executive officer and from certain shareholders of the Company,
substantially to the effect set forth in Subsection 5(e) hereof in form
and substance satisfactory to you;
(k) The Company shall have complied with the provisions of
Section 5(c) hereof with respect to the furnishing of prospectuses on
the New York Business Day next succeeding the date of this Agreement;
and
13
(l) The Company shall have furnished or caused to be
furnished to you at such Time of Delivery certificates of officers of
the Company satisfactory to you as to the accuracy of the
representations and warranties of the Company herein at and as of such
Time of Delivery, as to the performance by the Company of all of its
obligations hereunder to be performed at or prior to such Time of
Delivery, as to the matters set forth in subsections (a) and (e) of
this Section and as to such other matters as you may reasonably
request.
8. (a) The Company will indemnify and hold harmless each
Underwriter against any losses, claims, damages or liabilities, joint
or several, to which such Underwriter may become subject, under the Act
or otherwise, insofar as such losses, claims, damages or liabilities
(or actions in respect thereof) arise out of or are based upon an
untrue statement or alleged untrue statement of a material fact
contained in any Preliminary Prospectus, the Registration Statement or
the Prospectus, or any amendment or supplement thereto, or arise out of
or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse each Underwriter
for any legal or other expenses reasonably incurred by such Underwriter
in connection with investigating or defending any such action or claim
as such expenses are incurred; PROVIDED, HOWEVER, that the Company
shall not be liable in any such case to the extent that any such loss,
claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission
made in any Preliminary Prospectus, the Registration Statement or the
Prospectus or any such amendment or supplement in reliance upon and in
conformity with written information furnished to the Company by any
Underwriter through Goldman, Sachs & Co. expressly for use therein.
(b) Each Underwriter will indemnify and hold harmless the
Company against any losses, claims, damages or liabilities to which the
Company may become subject, under the Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon an untrue statement or alleged untrue
statement of a material fact contained in any Preliminary Prospectus,
the Registration Statement or the Prospectus, or any amendment or
supplement thereto, or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, in
each case to the extent, but only to the extent, that such untrue
statement or alleged untrue statement or omission or alleged omission
was made in any Preliminary Prospectus, the Registration Statement or
the Prospectus or any such amendment or supplement in reliance upon and
in conformity with written information furnished to the Company by such
Underwriter through Goldman, Sachs & Co. expressly for use therein; and
will reimburse the Company for any legal or other expenses reasonably
incurred by the Company in connection with investigating or defending
any such action or claim as such expenses are incurred.
(c) Promptly after receipt by an indemnified party under
subsection (a) or (b) above of notice of the commencement of any
action, such indemnified party shall, if a claim in respect thereof is
to be made against the indemnifying party under such subsection, notify
the indemnifying party in writing of the commencement thereof; but the
omission so to notify the indemnifying party shall not relieve it from
any liability which it may have to any indemnified party otherwise than
under such subsection. In case any such action shall be brought against
any indemnified party and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to
participate therein and, to the extent that it shall wish, jointly with
any other indemnifying party similarly notified, to assume the defense
thereof, with counsel satisfactory to such indemnified party (who shall
14
not, except with the consent of the indemnified party, be counsel to
the indemnifying party), and, after notice from the indemnifying party
to such indemnified party of its election so to assume the defense
thereof, the indemnifying party shall not be liable to such indemnified
party under such subsection for any legal expenses of other counsel or
any other expenses, in each case subsequently incurred by such
indemnified party, in connection with the defense thereof other than
reasonable costs of investigation. No indemnifying party shall, without
the written consent of the indemnified party, effect the settlement or
compromise of, or consent to the entry of any judgment with respect to,
any pending or threatened action or claim in respect of which
indemnification or contribution may be sought hereunder (whether or not
the indemnified party is an actual or potential party to such action or
claim) unless such settlement, compromise or judgment (i) includes an
unconditional release of the indemnified party from all liability
arising out of such action or claim and (ii) does not include a
statement as to or an admission of fault, culpability or a failure to
act, by or on behalf of any indemnified party.
(d) If the indemnification provided for in this Section 8 is
unavailable to or insufficient to hold harmless an indemnified party
under subsection (a) or (b) above in respect of any losses, claims,
damages or liabilities (or actions in respect thereof) referred to
therein, then each indemnifying party shall contribute to the amount
paid or payable by such indemnified party as a result of such losses,
claims, damages or liabilities (or actions in respect thereof) in such
proportion as is appropriate to reflect the relative benefits received
by the Company on the one hand and the Underwriters on the other from
the offering of the Shares. If, however, the allocation provided by the
immediately preceding sentence is not permitted by applicable law or if
the indemnified party failed to give the notice required under
subsection (c) above, then each indemnifying party shall contribute to
such amount paid or payable by such indemnified party in such
proportion as is appropriate to reflect not only such relative benefits
but also the relative fault of the Company on the one hand and the
Underwriters on the other in connection with the statements or
omissions which resulted in such losses, claims, damages or liabilities
(or actions in respect thereof), as well as any other relevant
equitable considerations. The relative benefits received by the Company
on the one hand and the Underwriters on the other shall be deemed to be
in the same proportion as the total net proceeds from the offering of
the Shares purchased under this Agreement (before deducting expenses)
received by the Company bear to the total underwriting discounts and
commissions received by the Underwriters with respect to the Shares
purchased under this Agreement, in each case as set forth in the table
on the cover page of the Prospectus. The relative fault shall be
determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by
the Company on the one hand or the Underwriters on the other and the
parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The
Company and the Underwriters agree that it would not be just and
equitable if contributions pursuant to this subsection (d) were
determined by PRO RATA allocation (even if the Underwriters were
treated as one entity for such purpose) or by any other method of
allocation which does not take account of the equitable considerations
referred to above in this subsection (d). The amount paid or payable by
an indemnified party as a result of the losses, claims, damages or
liabilities (or actions in respect thereof) referred to above in this
subsection (d) shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding
the provisions of this subsection (d), no Underwriter shall be required
to contribute any amount in excess of the amount by which the total
price at which the Shares underwritten by it and distributed to the
public were offered to the public exceeds the
15
amount of any damages which such Underwriter has otherwise been
required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation. The Underwriters' obligations in
this subsection (d) to contribute are several in proportion to their
respective underwriting obligations and not joint.
(e) The obligations of the Company under this Section 8
shall be in addition to any liability which the Company may otherwise
have and shall extend, upon the same terms and conditions, to each
person, if any, who controls any Underwriter within the meaning of the
Act; and the obligations of the Underwriters under this Section 8 shall
be in addition to any liability which the respective Underwriters may
otherwise have and shall extend, upon the same terms and conditions, to
each officer and director of the Company and to each person, if any,
who controls the Company within the meaning of the Act.
9. (a) If any Underwriter shall default in its obligation to
purchase the Shares which it has agreed to purchase hereunder at a Time
of Delivery, you may in your discretion arrange for you or another
party or other parties to purchase such Shares on the terms contained
herein. If within thirty-six hours after such default by any
Underwriter you do not arrange for the purchase of such Shares, then
the Company shall be entitled to a further period of thirty-six hours
within which to procure another party or other parties satisfactory to
you to purchase such Shares on such terms. In the event that, within
the respective prescribed periods, you notify the Company that you have
so arranged for the purchase of such Shares, or the Company notifies
you that it has so arranged for the purchase of such Shares, you or the
Company shall have the right to postpone such Time of Delivery for a
period of not more than seven days, in order to effect whatever changes
may thereby be made necessary in the Registration Statement or the
Prospectus, or in any other documents or arrangements, and the Company
agrees to file promptly any amendments to the Registration Statement or
the Prospectus which in your opinion may thereby be made necessary. The
term "Underwriter" as used in this Agreement shall include any person
substituted under this Section with like effect as if such person had
originally been a party to this Agreement with respect to such Shares.
(b) If, after giving effect to any arrangements for the
purchase of the Shares of a defaulting Underwriter or Underwriters by
you and the Company as provided in subsection (a) above, the aggregate
number of such Shares which remains unpurchased does not exceed
one-eleventh of the aggregate number of all the Shares to be purchased
at such Time of Delivery, then the Company shall have the right to
require each non-defaulting Underwriter to purchase the number of
Shares which such Underwriter agreed to purchase hereunder at such Time
of Delivery and, in addition, to require each non-defaulting
Underwriter to purchase its pro rata share (based on the number of
Shares which such Underwriter agreed to purchase hereunder) of the
Shares of such defaulting Underwriter or Underwriters for which such
arrangements have not been made; but nothing herein shall relieve a
defaulting Underwriter from liability for its default.
(c) If, after giving effect to any arrangements for the
purchase of the Shares of a defaulting Underwriter or Underwriters by
you and the Company as provided in subsection (a) above, the aggregate
number of such Shares which remains unpurchased exceeds one-eleventh of
the aggregate number of all the Shares to be purchased at such Time of
Delivery, or if the Company shall not exercise the right described in
subsection (b) above to require non-defaulting Underwriters to purchase
Shares of a defaulting Underwriter or
16
Underwriters, then this Agreement (or, with respect to the Second Time
of Delivery, the obligations of the Underwriters to purchase and of the
Company to sell the Optional Shares) shall thereupon terminate, without
liability on the part of any non-defaulting Underwriter or the Company,
except for the expenses to be borne by the Company and the Underwriters
as provided in Section 6 hereof and the indemnity and contribution
agreements in Section 8 hereof; but nothing herein shall relieve a
defaulting Underwriter from liability for its default.
10. The respective indemnities, agreements, representations, warranties
and other statements of the Company and the several Underwriters, as set forth
in this Agreement or made by or on behalf of them, respectively, pursuant to
this Agreement, shall remain in full force and effect, regardless of any
investigation (or any statement as to the results thereof) made by or on behalf
of any Underwriter or any controlling person of any Underwriter, or the Company,
or any officer or director or controlling person of the Company, and shall
survive delivery of and payment for the Shares.
Anything herein to the contrary notwithstanding, the indemnity
agreement of the Company in subsection (a) of Section 8 hereof, the
representations and warranties in subsections (b), (c) and (d) of Section 1
hereof and any representation or warranty as to the accuracy of the Registration
Statement or the Prospectus contained in any certificate furnished by the
Company pursuant to Section 7 hereof, insofar as they may constitute a basis for
indemnification for liabilities (other than payment by the Company of expenses
incurred or paid in the successful defense of any action, suit or proceeding)
arising under the Act, shall not extend to the extent of any interest therein of
a controlling person or partner of an Underwriter who is a director, officer or
controlling person of the Company when the Registration Statement has become
effective, except in each case to the extent that an interest of such character
shall have been determined by a court of appropriate jurisdiction as not against
public policy as expressed in the Act. Unless in the opinion of counsel for the
Company the matter has been settled by controlling precedent, the Company will,
if a claim for such indemnification is asserted, submit to a court of
appropriate jurisdiction the question of whether such interest is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
11. If this Agreement shall be terminated pursuant to Section 9 hereof,
the Company shall not then be under any liability to any Underwriter except as
provided in Sections 6 and 8 hereof; but, if for any other reason, any Shares
are not delivered by or on behalf of the Company as provided herein, the Company
will reimburse the Underwriters through you for all out-of-pocket expenses
approved in writing by you, including fees and disbursements of counsel,
reasonably incurred by the Underwriters in making preparations for the purchase,
sale and delivery of the Shares not so delivered, but the Company shall then be
under no further liability to any Underwriter in respect of the Shares not so
delivered except as provided in Sections 6 and 8 hereof.
12. In all dealings hereunder, you shall act on behalf of each of the
Underwriters, and the parties hereto shall be entitled to act and rely upon any
statement, request, notice or agreement on behalf of any Underwriter made or
given by you jointly or by Goldman, Sachs & Co. on behalf of you as the
representatives.
All statements, requests, notices and agreements hereunder shall be in
writing, and if to the Underwriters shall be delivered or sent by mail, telex or
facsimile transmission to you as the representatives in care of Goldman, Sachs &
Co., 85 Broad Street, New York, New York 10004, Attention: Registration
Department; and if to the Company shall be delivered or sent by mail, telex or
facsimile transmission to the address of the Company set forth in the
Registration Statement, Attention: Secretary; provided, however, that any notice
to an Underwriter pursuant to Section 8(c)
17
hereof shall be delivered or sent by mail, telex or facsimile transmission to
such Underwriter at its address set forth in its Underwriters' Questionnaire, or
telex constituting such Questionnaire, which address will be supplied to the
Company by you upon request. Any such statements, requests, notices or
agreements shall take effect at the time of receipt thereof.
13. This Agreement shall be binding upon, and inure solely to the
benefit of, the Underwriters, the Company and, to the extent provided in
Sections 8 and 10 hereof, the officers and directors of the Company and each
person who controls the Company or any Underwriter, and their respective heirs,
executors, administrators, successors and assigns, and no other person shall
acquire or have any right under or by virtue of this Agreement. No purchaser of
any of the Shares from any Underwriter shall be deemed a successor or assign by
reason merely of such purchase.
14. Time shall be of the essence of this Agreement. As used herein, the
term "business day" shall mean any day when the Commission's office in
Washington, D.C. is open for business.
15. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK.
16. This Agreement may be executed by any one or more of the parties
hereto in any number of counterparts, each of which shall be deemed to be an
original, but all such counterparts shall together constitute one and the same
instrument.
18
If the foregoing is in accordance with your understanding, please sign
and return to us one for the Company and for each of the Representatives plus
one for each counsel counterparts hereof, and upon the acceptance hereof by you,
on behalf of each of the Underwriters, this letter and such acceptance hereof
shall constitute a binding agreement between each of the Underwriters and the
Company. It is understood that your acceptance of this letter on behalf of each
of the Underwriters is pursuant to the authority set forth in a form of
Agreement among Underwriters, the form of which shall be submitted to the
Company for examination upon request, but without warranty on your part as to
the authority of the signers thereof.
Very truly yours,
Watsco, Inc.
By:................................
Name:
Title:
Accepted as of the date hereof:
Goldman, Sachs & Co.
Prudential Securities Incorporated
Smith Barney Inc.
Robert W. Baird & Co. Incorporated
By:.......................................
(Goldman, Sachs & Co.)
On behalf of each of the Underwriters
19
SCHEDULE I
NUMBER OF OPTIONAL
SHARES TO BE
TOTAL NUMBER OF PURCHASED IF
FIRM SHARES MAXIMUM OPTION
UNDERWRITER TO BE PURCHASED EXERCISED
----------- --------------- ------------------
Goldman, Sachs & Co...................
Prudential Securities Incorporated....
Smith Barney Inc......................
Robert W. Baird & Co. Incorporated....
[NAMES OF OTHER UNDERWRITERS].........
--------------- ------------------
Total............... 3,000,000 450,000
--------------- ==================
20
ANNEX I
FORM OF COMFORT LETTER
Pursuant to Section 7(d) of the Underwriting Agreement, the accountants
shall furnish letters to the Underwriters to the effect that:
(i) They are independent certified public accountants with
respect to the Company and its subsidiaries within the meaning of the
Act and the applicable published rules and regulations thereunder;
(ii) In their opinion, the financial statements and any
supplementary financial information and schedules (and, if applicable,
financial forecasts and/or pro forma financial information) examined by
them and included or incorporated by reference in the Registration
Statement or the Prospectus comply as to form in all material respects
with the applicable accounting requirements of the Act or the Exchange
Act, as applicable, and the related published rules and regulations
thereunder; and, if applicable, they have made a review in accordance
with standards established by the American Institute of Certified
Public Accountants of the consolidated interim financial statements,
selected financial data, pro forma financial information, financial
forecasts and/or condensed financial statements derived from audited
financial statements of the Company for the periods specified in such
letter, as indicated in their reports thereon, copies of which have
been separately furnished to the representatives of the Underwriters
(the "Representatives") and are attached hereto;
(iii) They have made a review in accordance with standards
established by the American Institute of Certified Public Accountants
of the unaudited condensed consolidated statements of income,
consolidated balance sheets and consolidated statements of cash flows
included in the Prospectus and/or included in the Company's quarterly
reports on Form 10-Q incorporated by reference into the Prospectus as
indicated in their reports thereon copies of which have been separately
furnished to the Representatives; and on the basis of specified
procedures including inquiries of officials of the Company who have
responsibility for financial and accounting matters regarding whether
the unaudited condensed consolidated financial statements referred to
in paragraph (vi)(A)(i) below comply as to form in all material
respects with the applicable accounting requirements of the Act and the
Exchange Act and the related published rules and regulations, nothing
came to their attention that caused them to believe that the unaudited
condensed consolidated financial statements do not comply as to form in
all material respects with the applicable accounting requirements of
the Act and the Exchange Act and the related published rules and
regulations;
(iv) The unaudited selected financial information with respect
to the consolidated results of operations and financial position of the
Company for the five most recent fiscal years included in the
Prospectus and included or incorporated by reference in Item 6 of the
Company's Annual Report on Form 10-K for the most recent fiscal year
agrees with the corresponding amounts (after restatement where
applicable) in the audited consolidated financial statements for such
five fiscal years which were included or incorporated by reference in
the Company's Annual Reports on Form 10-K for such fiscal years;
(v) They have compared the information in the Prospectus under
selected captions with the disclosure requirements of Regulation S-K
and on the basis of limited procedures specified in such letter nothing
came to their attention as a result of the foregoing procedures that
caused them to believe that this information does not conform in all
material respects
with the disclosure requirements of Items 301, 302, 402 and 503(d),
respectively, of Regulation S-K;
(vi) On the basis of limited procedures, not constituting an
examination in accordance with generally accepted auditing standards,
consisting of a reading of the unaudited financial statements and other
information referred to below, a reading of the latest available
interim financial statements of the Company and its subsidiaries,
inspection of the minute books of the Company and its subsidiaries
since the date of the latest audited financial statements included or
incorporated by reference in the Prospectus, inquiries of officials of
the Company and its subsidiaries responsible for financial and
accounting matters and such other inquiries and procedures as may be
specified in such letter, nothing came to their attention that caused
them to believe that:
(A) (i) the unaudited condensed consolidated statements
of income, consolidated balance sheets and consolidated
statements of cash flows included in the Prospectus and/or
included or incorporated by reference in the Company's
Quarterly Reports on Form 10-Q incorporated by reference in
the Prospectus do not comply as to form in all material
respects with the applicable accounting requirements of the
Exchange Act and the related published rules and regulations,
or (ii) any material modifications should be made to the
unaudited condensed consolidated statements of income,
consolidated balance sheets and consolidated statements of
cash flows included in the Prospectus or included in the
Company's Quarterly Reports on Form 10-Q incorporated by
reference in the Prospectus, for them to be in conformity with
generally accepted accounting principles;
(B) any other unaudited income statement data and
balance sheet items included in the Prospectus do not agree
with the corresponding items in the unaudited consolidated
financial statements from which such data and items were
derived, and any such unaudited data and items were not
determined on a basis substantially consistent with the basis
for the corresponding amounts in the audited consolidated
financial statements included or incorporated by reference in
the Company's Annual Report on Form 10-K for the most recent
fiscal year;
(C) the unaudited financial statements which were not
included in the Prospectus but from which were derived the
unaudited condensed financial statements referred to in Clause
(A) and any unaudited income statement data and balance sheet
items included in the Prospectus and referred to in Clause (B)
were not determined on a basis substantially consistent with
the basis for the audited financial statements included or
incorporated by reference in the Company's Annual Report on
Form 10-K for the most recent fiscal year;
(D) any unaudited pro forma consolidated condensed
financial statements included or incorporated by reference in
the Prospectus do not comply as to form in all material
respects with the applicable accounting requirements of the
Act and the published rules and regulations thereunder or the
pro forma adjustments have not been properly applied to the
historical amounts in the compilation of those statements;
(E) as of a specified date not more than five days
prior to the date of such letter, there have been any changes
in the consolidated capital stock (other than issuances of
capital stock upon exercise of options and upon conversions of
2
convertible securities, in each case which were outstanding on
the date of the latest balance sheet included or incorporated
by reference in the Prospectus) or any increase in the
consolidated long-term debt of the Company and its
subsidiaries, or any decreases in consolidated net current
assets or shareholders' equity or other items specified by the
Representatives, or any increases in any items specified by
the Representatives, in each case as compared with amounts
shown in the latest balance sheet included or incorporated by
reference in the Prospectus, except in each case for changes,
increases or decreases which the Prospectus discloses have
occurred or may occur or which are described in such letter;
and
(F) for the period from the date of the latest
financial statements included or incorporated by reference in
the Prospectus to the specified date referred to in Clause (E)
there were any decreases in consolidated net revenues or
operating profit or the total or per share amounts of
consolidated net income or other items specified by the
Representatives, or any increases in any items specified by
the Representatives, in each case as compared with the
comparable period of the preceding year and with any other
period of corresponding length specified by the
Representatives, except in each case for increases or
decreases which the Prospectus discloses have occurred or may
occur or which are described in such letter; and
(vii) In addition to the examination referred to in their
report(s) included or incorporated by reference in the Prospectus and
the limited procedures, inspection of minute books, inquiries and other
procedures referred to in paragraphs (iii) and (vi) above, they have
carried out certain specified procedures, not constituting an
examination in accordance with generally accepted auditing standards,
with respect to certain amounts, percentages and financial information
specified by the Representatives which are derived from the general
accounting records of the Company and its subsidiaries, which appear in
the Prospectus (including documents incorporated by reference in the
Prospectus) or in Part II of, or in exhibits and schedules to, the
Registration Statement specified by the Representatives, and have
compared certain of such amounts, percentages and financial information
with the accounting records of the Company and its subsidiaries and
have found them to be in agreement.
3
ANNEX III
FORM OF COMFORT LETTER
Pursuant to Section 7(e) of the Underwriting Agreement, the accountants
shall furnish letters to the Underwriters to the effect that:
(i) They are independent certified public accountants with
respect to Three States and its consolidated subsidiaries within the
meaning of the Act and the applicable published rules and regulations
thereunder;
(ii) In their opinion, the financial statements and any
supplementary financial information and schedules (and, if applicable,
financial forecasts and/or pro forma financial information) examined by
them and included or incorporated by reference in the Registration
Statement or the Prospectus comply as to form in all material respects
with the applicable accounting requirements of the Act or the Exchange
Act, as applicable, and the related published rules and regulations
thereunder; and, if applicable, they have made a review in accordance
with standards established by the American Institute of Certified
Public Accountants of the consolidated interim financial statements,
selected financial data, pro forma financial information, financial
forecasts and/or condensed financial statements derived from audited
financial statements of Three States for the periods specified in such
letter, as indicated in their reports thereon, copies of which have
been separately furnished to the representatives of the Underwriters
(the "Representatives") and are attached hereto.
EXHIBIT 2.2
- -------------------------------------------------------------------------------
STOCK AND ASSET PURCHASE AGREEMENT
BY AND BETWEEN
A&C DISTRIBUTORS, INC.
AND
INTER-CITY PRODUCTS CORPORATION (USA)
Dated as of January 23, 1997
- -------------------------------------------------------------------------------
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS................................................................ 2
ARTICLE II
SALE AND PURCHASE OF SHARES AND DISTRIBUTION CENTERS....................... 7
SECTION 2.1 Sale and Purchase of Shares.......................... 7
SECTION 2.2 Sale and Purchase of Distribution
Center............................................... 7
SECTION 2.3 Closing............................................. 11
SECTION 2.4 Purchase Price...................................... 11
SECTION 2.5 Prorations.......................................... 14
SECTION 2.6 Allocation of Purchase Price........................ 14
SECTION 2.7 ICP Closing Deliveries.............................. 14
SECTION 2.8 A&C Closing Deliveries.............................. 16
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF ICP..................................... 17
SECTION 3.1 Organization, Good Standing and
Authority of ICP.................................... 17
SECTION 3.2 Articles of Incorporation; Bylaws;
Minute Books........................................ 17
SECTION 3.3 Due Authorization, Execution and
Delivery............................................ 18
SECTION 3.4 Title to Shares; Capitalization; etc................ 18
SECTION 3.5 Subsidiaries........................................ 19
SECTION 3.6 Consents; No Conflict............................... 19
SECTION 3.7 Tax Matters......................................... 20
SECTION 3.8 Employees, Labor Matters, etc....................... 22
SECTION 3.9 Financial Statements................................ 22
SECTION 3.10 Changes of Financial Condition...................... 23
SECTION 3.11 Real Property....................................... 23
SECTION 3.12 Tangible Personal Property.......................... 24
SECTION 3.13 Inventory........................................... 25
SECTION 3.14 Accounts Receivable................................. 25
SECTION 3.15 Vehicles............................................ 25
SECTION 3.16 Contracts........................................... 26
SECTION 3.17 Litigation and Claims............................... 27
SECTION 3.18 Compliance With Laws and Orders..................... 27
SECTION 3.19 Employee Benefits................................... 27
SECTION 3.20 Permits............................................. 30
SECTION 3.21 Insurance Policies.................................. 30
SECTION 3.22 Environmental Matters............................... 30
SECTION 3.23 Relationship With Affiliates........................ 32
SECTION 3.24 Brokers............................................. 32
SECTION 3.25 No Guarantees....................................... 32
SECTION 3.26 Bank Accounts....................................... 32
SECTION 3.27 Customers and Suppliers............................. 32
SECTION 3.28 Warranties and Product Claims....................... 33
SECTION 3.29 Absence of Undisclosed Liabilities.................. 33
SECTION 3.30 Disclosure.......................................... 33
- i -
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF A&C..................................... 34
SECTION 4.1 Organization and Authority.......................... 34
SECTION 4.2 Articles of Incorporation; Bylaws................... 34
SECTION 4.3 Due Authorization, Execution and
Delivery............................................ 34
SECTION 4.4 Consents; No Conflicts.............................. 34
SECTION 4.5 Brokers............................................. 35
SECTION 4.6 Securities Matters.................................. 35
SECTION 4.7 Disclosure.......................................... 36
ARTICLE V
ADDITIONAL AGREEMENTS OF ICP OR A&C....................................... 36
SECTION 5.1 ICP's Operation of Business......................... 36
SECTION 5.2 Access to Books and Records of Business............. 38
SECTION 5.3 Exclusivity......................................... 38
SECTION 5.4 Consents............................................ 38
SECTION 5.5 Post-Closing Receipts of ICP........................ 39
SECTION 5.6 A&C Directors....................................... 39
ARTICLE VI
ADDITIONAL MUTUAL AGREEMENTS.............................................. 39
SECTION 6.1 Confidentiality..................................... 39
SECTION 6.2 Further Assurances.................................. 39
SECTION 6.3 HSR Filings......................................... 40
SECTION 6.4 Tax Agreements...................................... 40
SECTION 6.5 Reasonable Efforts to Close......................... 41
SECTION 6.6 Maintenance of Records.............................. 42
SECTION 6.7 Cooperation in Litigation........................... 42
SECTION 6.8 A&C Employment Offers............................... 42
SECTION 6.9 Benefit Plans....................................... 43
SECTION 6.10 Services Agreement.................................. 43
ARTICLE VII
CONDITIONS TO OBLIGATIONS OF A&C.......................................... 43
SECTION 7.1 Accuracy of Representations and
Warranties.......................................... 43
SECTION 7.2 Performance of Agreements........................... 43
SECTION 7.3 Closing Deliveries. I............................. 44
SECTION 7.4 Material Adverse Change............................. 44
SECTION 7.5 No Adverse Proceedings.............................. 44
SECTION 7.6 Other Assurances.................................... 44
SECTION 7.7 Consents and Approvals.............................. 44
SECTION 7.8 Resignation of Officers and Directors............... 44
ARTICLE VIII
CONDITIONS TO OBLIGATIONS OF ICP.......................................... 44
SECTION 8.1 Accuracy of Representations and
Warranties.......................................... 45
SECTION 8.2 Performance of Agreements........................... 45
SECTION 8.3 Closing Deliveries.................................. 45
SECTION 8.4 No Adverse Proceedings.............................. 45
SECTION 8.5 Other Assurances.................................... 45
SECTION 8.6 Consents and Approvals.............................. 45
SECTION 8.7 Payment............................................. 46
- ii -
ARTICLE IX
SURVIVAL AND INDEMNIFICATION.............................................. 46
SECTION 9.1 Survival............................................ 46
SECTION 9.2 Indemnification by ICP.............................. 46
SECTION 9.3 Indemnification by A&C.............................. 46
SECTION 9.4 Method of Asserting Claims.......................... 46
SECTION 9.5 Continued Liability for Indemnity
Claims.............................................. 50
SECTION 9.6 Limitations on Indemnification...................... 50
SECTION 9.7 Time Limits on Claims............................... 50
SECTION 9.8 Sources of Payment.................................. 51
ARTICLE X
TERMINATION............................................................... 51
SECTION 10.1 Grounds for Termination............................. 51
SECTION 10.2 Effect of Termination............................... 51
SECTION 10.3 Termination for Breach.............................. 52
ARTICLE XI
MISCELLANEOUS............................................................. 52
SECTION 11.1 Notices............................................. 52
SECTION 11.2 Fees and Expenses................................... 53
SECTION 11.3 Public Announcements................................ 53
SECTION 11.4 Entire Agreement.................................... 53
SECTION 11.5 Waiver; Remedies.................................... 53
SECTION 11.6 Amendment........................................... 53
SECTION 11.7 Benefits and Binding Effect......................... 53
SECTION 11.8 Captions; References................................ 53
SECTION 11.9 Exhibits and Schedules.............................. 54
SECTION 11.10 Governing Law....................................... 54
SECTION 11.11 Counterparts........................................ 54
SECTION 11.12 Severability........................................ 54
SECTION 11.13 No Third Party Beneficiary.......................... 54
SECTION 11.14 Bulk Sales.......................................... 54
SECTION 11.15 Survival............................................ 54
SECTION 11.16 Attorneys' Fees..................................... 55
SECTION 11.17 Risk of Loss........................................ 55
SECTION 11.18 Specific Performance................................ 55
SECTION 6.9 Benefit Plans....................................... 57
- iii -
LIST OF EXHIBITS
Exhibit A Bill of Sale
Exhibit B Assignment and Assumption Agreement
Exhibit C Lease Assignments
Exhibit D Distribution Agreements (including
licenses)
Exhibit E ICP Bringdown Certificate
Exhibit F ICP Secretary's Certificates
Exhibit G ICP Legal Opinion
Exhibit H A&C Bringdown Certificate
Exhibit I A&C Secretary's Certificate
Exhibit J A&C Legal Opinion
Exhibit K Watsco Guaranty
LIST OF SCHEDULES
Schedule 1 Net Present Value Calculation
Schedule 2.2(a)(iii) Tangible Personal Property
Schedule 2.2(a)(iv) Facility Leases
Schedule 2.2(a)(v) Equipment Leases
Schedule 2.2(a)(vi) Transferred Contracts
Schedule 2.2(c)(ix) Educational Reimbursement
Obligation
Schedule 2.6 Allocation of Purchase Price
Schedule 3.1 Qualifications to Do Business
Schedule 3.4(b) Capital Stock
Schedule 3.5 Subsidiaries
Schedule 3.6 Consents
Schedule 3.7(a) Tax Return Exceptions
Schedule 3.7(b) Tax Compliance
Schedule 3.7(c) Tax Claims
Schedule 3.7(d) Tax Waivers
Schedule 3.7(e) Tax Elections
Schedule 3.7(g) Tax Sharing Agreements
- iv -
Schedule 3.7(i) Tax Return Jurisdictions
Schedule 3.8(a) Employee Matters
Schedule 3.8(b) Salaries and Wages
Schedule 3.9 Financial Statements
Schedule 3.10 Changes of Condition
Schedule 3.11(b) Leased Real Property
Schedule 3.11(d) Condition of Improvements
Schedule 3.12 Tangible Personal Property of
Coastline and CDS Holdings
Schedule 3.13 Location of Inventory
Schedule 3.14 Accounts Receivable
Schedule 3.15 Vehicles
Schedule 3.16 Contracts
Schedule 3.17 Litigation and Claims
Schedule 3.18 Compliance With Laws
Schedule 3.19(a) Benefit Plans
Schedule 3.19(b) ERISA Compliance
Schedule 3.19(c) ERISA Filings
Schedule 3.19(f) Underfunded Benefit Plans
Schedule 3.20 Permits
Schedule 3.21 Insurance Policies
Schedule 3.22(a) Environmental Compliance
Schedule 3.22(b) Superfund Sites
Schedule 3.22(e) Underground Tanks and Other Matters
Schedule 3.22(f) Handling Matters
Schedule 3.22(g) Compliance with Environmental Laws
Schedule 3.22(h) Environmental Liability and Liens
- v -
Schedule 3.23 Relationship With Affiliates
Schedule 3.26 Bank Accounts
Schedule 3.27 Customers and Suppliers
Schedule 3.28 Warranty Matters
Schedule 3.29 Undisclosed Liabilities
Schedule 4.4 Consents and Other Matters
- vi -
STOCK AND ASSET PURCHASE AGREEMENT
THIS STOCK AND ASSET PURCHASE AGREEMENT (the "AGREEMENT") is made and
entered into as of the 23rd day of January, 1997, by and between A&C
DISTRIBUTORS, INC., a Florida corporation ("A&C"), and INTER-CITY PRODUCTS
CORPORATION (USA), a Delaware corporation ("ICP").
BACKGROUND
A. ICP is engaged in the business of designing, manufacturing, selling
and distributing for light commercial and residential markets central air
conditioners, heat pumps, combination gas/electric air conditioners, and gas,
electric and oil furnaces and parts and supplies for the foregoing, some of
which are manufactured for it by OEMS, (collectively, the "ICP PRODUCTS") under
the HEIL, TEMPSTAR, ARCOAIRE and COMFORTMAKER trademarks (each an "ICP BRAND"
and collectively the "ICP BRANDS").
B. ICP owns all of the issued and outstanding capital stock of CDS
Holdings, Inc., a Delaware corporation ("CDS HOLDINGS"). CDS Holdings owns all
of the issued and outstanding capital stock of Coastline Distribution, Inc., a
Delaware corporation with its headquarters in Sanford, Florida ("COASTLINE").
C. Coastline distributes ICP Products in Florida, Alabama and Georgia.
D. ICP leases and operates distribution centers located in Norcross,
Georgia; Charlotte, North Carolina; Savage, Maryland; and Chino, California from
which ICP Products are marketed (collectively, the "DISTRIBUTION CENTERS").
E. On the terms and subject to the conditions set forth herein, A&C
desires to purchase from ICP, and ICP desires to sell to A&C, all of the issued
and outstanding capital stock of CDS Holdings and substantially all of the
assets and business comprising the Distribution Centers.
F. It is a mutual condition to the Closing of the transactions
contemplated by this Agreement that ICP enter into distribution agreements with
A&C and Coastline, pursuant to which ICP will appoint A&C and Coastline, and
Coastline and A&C agree to act as such, as exclusive distributors of certain ICP
Products in certain counties.
G. Watsco, Inc., a Florida corporation ("WATSCO"), as the ultimate
parent of A&C, is joining in this Agreement for the limited purposes set forth
herein.
Accordingly, in consideration of the premises and of the mutual
covenants contained herein, the receipt and sufficiency of
which are hereby acknowledged, the parties hereby agree as follows:
ARTICLE I
DEFINITIONS
In addition to the terms defined in the preamble, in the Background
section and in other Articles of this Agreement, as used in this Agreement, the
following terms have the meanings indicated below:
"A&C'S ACCOUNTANTS" means Arthur Andersen LLP or such other independent
and nationally recognized accounting firm as A&C may engage from time to time in
connection with this Agreement.
"ACQUIRED BUSINESS" means the (1) Transferred Assets and Transferred
Liabilities, (2) the business conducted by ICP at the Distribution Centers on
the date hereof and on the Closing Date, and (3) the assets and Liabilities of,
and business conducted by, CDS Holdings and Coastline on the date hereof and on
the Closing Date.
"AFFILIATE" of a Person or entity means a Person or entity that directly
or indirectly through one or more intermediates controls, is controlled by, or
is under common control with, the first Person or entity. "CONTROL" (including
the terms "controlled by" and "under common control with"), whether or not
capitalized, means the possession, directly or indirectly, of the power to
direct or cause the direction of the management policies of a Person or entity,
whether through the ownership of voting securities, by contract, as trustee or
executor, or otherwise. Without limiting the foregoing, for purposes of clarity,
(1) ownership of twenty-five percent (25%) or more of the voting securities of a
corporation shall be presumed to constitute control, and (2) until (but not
after) the Closing, CDS Holdings and Coastline are Affiliates of ICP.
"AFFILIATED GROUP" means the affiliated group as defined in Section 1504
of the Code (and any analogous combined, consolidated or unitary group defined
under state, local or foreign income Tax law) of which ICP, CDS Holdings and
Coastline are members and of which ICP is the parent.
"BENEFIT PLAN" means any Plan established by ICP, CDS Holdings or
Coastline, or any predecessor or ERISA Affiliate of ICP, CDS Holdings or
Coastline, existing at the Closing or prior thereto, to which ICP, CDS Holdings
or Coastline contributes or has contributed on behalf of any present (as of the
date of this Agreement or as of the Closing Date) or former employee, or under
which any such Person or any beneficiary thereof is covered, is eligible for
coverage or has benefit rights.
"BUSINESS DAY" means any day which is not a Saturday, Sunday or legal
holiday in Miami, Florida or Nashville, Tennessee.
-2-
"CERCLA" means the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended, and the rules and regulations promulgated
thereunder.
"CERCLIS" means the Comprehensive Environmental Response and Liability
Information System, as provided for by 40 C.F.R. ss.300.5.
"CLOSING DATE BALANCE SHEET" has the meaning ascribed to such term in
SECTION 2.4.
"CODE" means the Internal Revenue Code of 1986, as amended, and the
rules and regulations promulgated thereunder.
"CONTRACT" means all written and oral contracts, agreements, license
agreements, leases, assignments, purchase agreements, indentures, mortgages,
instruments of indebtedness, security agreements, guaranties, purchase orders,
sales orders, and distribution agreements.
"EMPLOYEE" means each full-time employee of ICP based at the
Distribution Centers, and each employee of Coastline.
"ENVIRONMENTAL LAW" means all Laws and Orders concerning pollution or
protection of the environment, public health and safety, or employee health and
safety, including laws relating to emissions, discharges, releases, or
threatened releases of pollutants, contaminants, or chemical, industrial,
hazardous, or toxic materials or wastes into ambient air, surface water,
groundwater, or lands or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport, or handling of
pollutants, contaminants, or chemical, industrial, hazardous, or toxic materials
or wastes including, without limitation, CERCLA, the Resource Conservation and
Recovery Act, as amended, the Clean Air Act, as amended, the Clean Water Act, as
amended, and the Occupational Safety and Health Act, as amended, and similar
state and local laws, rules and regulations.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the rules and regulations promulgated thereunder.
"ERISA AFFILIATE" means any Person which is under common control with
ICP, CDS Holdings or Coastline who, together with any of ICP, CDS Holdings or
Coastline (as the case may be), is treated as a single employer within the
meanings of Sections 414(b), (c), (m) and (o) of the Code.
"GAAP" means United States generally accepted accounting principles,
consistently applied.
"GOVERNMENTAL AUTHORITY" means any court, tribunal, arbitrator,
authority, agency, commission, official or other instrumentality of the United
States, any foreign country or any
-3-
domestic or foreign state, county, city or other political subdivision.
"HAZARDOUS MATERIALS" means (1) any petroleum or petroleum products,
flammable or explosive materials, radioactive materials, asbestos in any form
that is friable, urea formaldehyde foam insulation and transformers or other
equipment that contain dielectric fluid containing levels of polychlorinated
biphenyls (PCBs); (2) any chemicals or other materials or substances which are
now or hereafter become defined as or included in the definition of "hazardous
substances," "hazardous wastes," "hazardous materials," "extremely hazardous
wastes," "restricted hazardous wastes," "toxic substances," "toxic pollutants"
or words of similar import under any Environmental Law; and (3) any other
chemical or other material or substance, exposure to which is now or hereafter
prohibited, limited or regulated by any Governmental Authority under any
Environmental Law.
"HSR ACT" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, and the rules and regulations promulgated thereunder.
"ICP'S ACCOUNTANTS" means Coopers & Lybrand or such other independent
and nationally recognized accounting firm as ICP may engage from time to time in
connection with this Agreement.
"ICP INVENTORY PROFIT" means, with respect to ICP Products included in
the Transferred Assets or owned by Coastline on the Closing Date, the excess, if
any, of (1) the value of such inventory as shown on the final Closing Date
Balance Sheet as audited pursuant to Section 2.4 hereof over (2) ICP's standard
cost of manufacturing, or in the case of ICP Products purchased by ICP from an
OEM the price paid by ICP for, such ICP Products in each case which shall
include provision for freight and warranty costs and cooperative advertising.
"INSURANCE POLICIES" means all casualty, liability or other policies of
insurance of ICP, CDS Holdings or Coastline relating to the Acquired Business,
any Employees, or insuring any of the Transferred Assets or any of Coastline's
or CDS Holdings' assets.
"IRS" means the United States Internal Revenue Service.
"KNOWLEDGE OF ICP" or "KNOWN TO ICP" means the actual knowledge of any
director, officer or senior management personnel or branch general manager of
ICP or of the President of Coastline.
"LAWS" means all laws, statutes, rules, regulations, ordinances and
other pronouncements having the effect of law of the United States or any state,
county, city or other political subdivision or of any Governmental Authority,
including common law.
-4-
"LIABILITIES" means all indebtedness, debt, commitments, obligations and
other liabilities of a Person (whether absolute, accrued, contingent, fixed or
otherwise, whether accrued or unaccrued, whether asserted or unasserted, whether
known or unknown, or whether due or to become due).
"LIENS" means any mortgage, pledge, assessment, security interest,
lease, lien, adverse claim, levy, charge or other encumbrance of any kind, or
any conditional sale contract, title retention contract or other Contract to
give any of the foregoing.
"LOSSES" means any and all damages, fines, costs, fees, Liabilities,
penalties, deficiencies, losses, amounts paid in settlement, and expenses
(including, without limitation, interest, court costs, fees of attorneys,
accountants and other experts or other expenses of litigation or other
proceedings or of any claim, default or assessment).
"NET BOOK VALUE OF COASTLINE" means as of the Closing Date (1) the net
book value of Coastline's assets as determined in accordance with GAAP, provided
that, in calculating the net book value of such assets, it is agreed that
inventory shall be valued on a FIFO basis, net of reasonable reserves for
obsolete inventory and less any ICP Inventory Profit included in the value of
the inventory as it appears on Coastline's books, LESS (2) the net book value of
trade payables, notes payable, and accrued expenses of Coastline determined in
accordance with GAAP, provided that, in calculating the net book value of such
obligations, (A) the net book value of the notes owing to Louise Shivers, Linda
East and Codisco shall be their net present value calculated in a manner
consistent with SCHEDULE 1 hereto, (B) the net book value of the earnouts owing
to Louise Shivers, Linda East and Don Bauerle Sr. shall be zero and (C) the net
book value of Coastline's deferred tax assets shall be zero.
"NET BOOK VALUE OF THE DISTRIBUTION CENTERS" means as of the Closing
Date (1) the net book value of Transferred Assets as determined in accordance
with GAAP, provided that, in calculating the net book value of such assets, it
is agreed that inventory shall be valued on a FIFO basis, net of reasonable
reserves for obsolete inventory and less any ICP Inventory Profit included in
the value of such inventory as it appears on ICP's books, less (2) the net book
value of the Transferred Obligations determined in accordance with GAAP.
"NPL" means the National Priorities List under CERCLA.
"ORDER" means any writ, judgment, decree, injunction or similar order of
any Governmental Authority (in each such case, whether preliminary or final).
"ORDINARY COURSE OF BUSINESS" means the ordinary course of business of
the Acquired Business consistent with past custom and practice (including with
respect to quantity and frequency).
-5-
"PBGC" means the Pension Benefit Guaranty Corporation established under
ERISA.
"PENSION BENEFIT PLAN" means each Benefit Plan which is a pension
benefit plan within the meaning of Section 3(2) of ERISA.
"PERMITS" means all licenses, permits, certificates of authority,
variances, authorizations, approvals, registrations, franchises and similar
consents granted or issued by any Governmental Authority.
"PERSON" means any natural person, corporation, general partnership,
limited partnership, proprietorship, limited liability company, joint venture,
other business organization, trust, union, association or Governmental
Authority.
"PLAN" means any bonus, incentive compensation, deferred compensation,
pension, profit sharing, retirement, stock purchase, stock option, stock
ownership, stock appreciation rights, phantom stock, leave of absence, layoff,
vacation, day or dependent care, legal services, cafeteria, life, health,
accident, disability, workmen's compensation or other insurance, severance,
separation, unemployment or other employee benefit plan, practice, policy or
arrangement of any kind, whether written or oral, including, but not limited to,
any "employee benefit plan" as defined in Section 3(3) of ERISA.
"PRELIMINARY CLOSING BALANCE SHEET" means a consolidated balance sheet
of the Acquired Business as of November 30, 1996, prepared by ICP in accordance
with GAAP.
"QUALIFIED PLAN" means each Benefit Plan which is intended to qualify
under Section 401(a) of the Code.
"RELATED AGREEMENTS" means the Bill of Sale, the Assignment and
Assumption Agreement, the Lease Assignments, the License Agreements, the
Distribution Agreements, the Services Agreement, the ICP Bringdown Certificate,
the A&C Bringdown Certificate, the ICP Secretary's Certificates, and the A&C
Secretary's Certificates.
"TAX RETURNS" means any return, declaration, report, claim for refund,
or information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
"TAX" means any federal, state, local or foreign income, gross receipts,
license, payroll, employment, excise, severance, stamp, occupation, premium,
windfall profits, environmental (including taxes under Code Section 59A),
customs duties, capital stock, franchise, profits, withholding, social security
(or similar), unemployment, disability, real property, personal property, sales,
use, transfer, registration, value added,
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alternative or add-on minimum, estimated, or other tax of any kind whatsoever,
including any interest, penalty, or addition thereto, whether disputed or not.
"TREASURY REGULATIONS" means the regulations prescribed under the Code.
"WATSCO GUARANTY" means a guaranty agreement dated the Closing Date from
Watsco in favor of ICP substantially in the form attached hereto as EXHIBIT K.
ARTICLE II
SALE AND PURCHASE OF SHARES AND DISTRIBUTION CENTERS
SECTION 2.1 SALE AND PURCHASE OF SHARES. Subject to the terms and
conditions set forth herein, at the Closing (as defined below), ICP shall sell
to A&C free and clear of any Liens, and A&C shall purchase, all of the issued
and outstanding capital stock of CDS Holdings, which consists of 400 shares, par
value of $.01 per share, of common stock (the "SHARES").
SECTION 2.2 SALE AND PURCHASE OF DISTRIBUTION CENTERS.
(a) TRANSFERRED ASSETS. Subject to the terms and conditions set
forth herein, at the Closing, ICP shall sell, convey, assign and deliver
to A&C, free and clear of any Liens, and A&C shall purchase, acquire and
accept delivery of, all of ICP's right, title and interest in and to the
following assets (other than the Excluded Assets, defined below) to the
extent that they are located at or used primarily in the operation of
the Distribution Centers (the assets to be sold to A&C are collectively
referred to herein as the "TRANSFERRED ASSETS"):
(i) All finished goods inventory of ICP Products located
at the Distribution Centers, or in transit to or from the
Distribution Centers, on the Closing Date, and including all
rights of ICP against the manufacturers or suppliers of such
inventories;
(ii) all of ICP's accounts and notes receivable and other
rights to receive payment (other than warranty receivables);
(iii) all supplies, equipment, machinery, vehicles,
furniture, furnishings, fixtures, spare parts, tools, packaging
supplies, leasehold improvements and other tangible property,
including, but not limited to, the tangible personal property
listed on SCHEDULE 2.2(a)(iii), together with all rights of ICP
against the manufacturers or suppliers of such items;
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(iv) the leases for real property listed on SCHEDULE
2.2(a)(iv) (collectively, the "FACILITY LEASES");
(v) all leases for personal property including, but not
limited to, those listed on SCHEDULE 2.2(a)(v) (collectively, the
"EQUIPMENT LEASES");
(vi) all Contracts including, but not limited to, those
listed on SCHEDULE 2.2(a)(vi) but excluding leases for real or
personal property (collectively, the "TRANSFERRED CONTRACTS");
(vii) all utility, security and other deposits, prepaid
expenses and other prepayments; and
(viii) (A) the business conducted by ICP at the
Distribution Centers as a going concern, technical and business
information and methods of operation and all related goodwill,
(B) the telephone numbers, customer lists, vendor lists, referral
lists and contacts, and other data located at or related to the
Distribution Centers or the business conducted at the
Distribution Centers, (C) all books, computer software and media,
files, papers, records and other data of ICP located at the
Distribution Centers or relating to the business conducted at the
Distribution Centers, and (D) Permits relating to the conduct of
business at the Distribution Centers, except those Permits which
by their terms are not transferable.
At the Closing, ICP shall deliver to A&C, free and clear of any
Liens, good and marketable (or, in the case of Transferred Contracts,
Facility Leases and Equipment Leases, good and assignable title pursuant
to the terms of the applicable lease or Contract) to and possession of
the Transferred Assets.
(b) EXCLUDED ASSETS. The following assets are specifically
excluded from the meaning of the term "Transferred Assets", and
ownership of these assets shall remain with ICP (collectively, "EXCLUDED
ASSETS"):
(i) All rights, properties, and assets which have been
used or held for use in connection with the Acquired Business and
which shall have been transferred (including transfers by way of
sale) or otherwise disposed of prior to the Closing, provided
such transfers and disposals shall have been in the Ordinary
Course of Business of the Acquired Business;
(ii) rights to or claims for refunds or rebates of Taxes
and other governmental charges and the benefit of net operating
loss carryforwards, carrybacks or
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other tax benefits or credits of ICP, in each case whether or not
attributable to the Acquired Business;
(iii) claims or rights against third parties arising with
respect to events or breaches occurring prior to the Closing Date
under the Transferred Contracts;
(iv) all insurance policies and rights thereunder,
including but not limited to, rights to any cancellation value as
of the Closing Date;
(v) proprietary or confidential business or technical
information, records and policies that relate generally to ICP or
any of its Affiliates and are not used primarily in the Acquired
Business, including, without limitation, organization manuals and
strategic plans;
(vi) all trademarks and service marks owned by ICP or its
Affiliates, including, without limitation, any and all trademarks
or service marks, trade names, slogans or other like property
relating to or including the name "HEIL," "TEMPSTAR," "ARCOAIRE,"
and "COMFORTMAKER" or any derivative thereof and any ICP logo or
any derivative thereof, and ICP's proprietary computer programs
or other software, including but not limited to Seller's
proprietary databases, accounting and reporting formats, systems
and procedures; and
(vii) Consulting Agreement dated January 1, 1996 by and
between William B. Furlong d/b/a W. B. Furlong Enterprises and
ICP; and
(viii) all other assets of ICP not located at the
Distribution Centers or used primarily in connection with the
Acquired Business, including but not limited to, assets used by
ICP or its Affiliates in other businesses of ICP or its
Affiliates and assets used primarily in connection with ICP's
corporate functions (including but not limited to the corporate
charter, taxpayer and other identification numbers, seals, minute
books and stock transfer books), whether or not used for the
benefit of the Acquired Business.
(c) TRANSFERRED OBLIGATIONS. At the Closing, A&C shall assume
only the following Liabilities of ICP (the "TRANSFERRED OBLIGATIONS"),
and no others:
(i) All Liabilities arising after the Closing Date under
the Transferred Contracts;
(ii) all Liabilities arising after the Closing under the
Facility Leases;
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(iii) all Liabilities arising after the Closing under the
Equipment Leases;
(iv) all of the accounts payable, other accrued expenses
and any other items shown as "current liabilities" on the Closing
Date Balance Sheet (other than employee compensation expenses
such as payroll, benefits, commissions, withholdings, and Taxes);
(v) the Liabilities expressly assumed by Buyer pursuant to
this Agreement;
(vi) all Liabilities under open purchase orders that were
entered into by ICP on behalf of the Acquired Business in the
Ordinary Course of Business and which provide for the delivery of
goods or services to the Acquired Business (and in either case
for payment) subsequent to the Closing Date;
(vii) as provided in Section 2.5 hereof, all Liabilities
in respect of real or personal property Taxes, utilities, gas and
other services but only to the extent that they pertain to
periods after the Closing Date;
(viii) all Liabilities arising from the operation of the
Acquired Business from and after the Closing Date; and
(ix) the Liability described on SCHEDULE 2.2(c)(ix).
Except for the Transferred Obligations, A&C shall not assume or
be responsible at any time for any Liabilities of ICP or any of its
Affiliates. Without limiting the generality of the foregoing, ICP
expressly acknowledges and agrees that ICP shall retain, and that A&C
shall not assume or otherwise be obligated to pay, perform, defend or
discharge, except for the Transferred Obligations, (1) any Liabilities
of ICP or any of its Affiliates for Taxes (except as provided in (vii)
above), whether measured by income or otherwise, (2) any Liabilities of
ICP or any of its Affiliates in connection with employee compensation
expenses with respect to periods prior to Closing including, but not
limited to, payroll, benefits, commissions, withholdings, and Taxes or
with any Benefit Plan (with respect to the Employees or otherwise),
including, without limitation, any liability of ICP or any of its
Affiliates under ERISA, (3) any Liabilities of ICP or any of its
Affiliates under any Environmental Laws, (4) any Liabilities pertaining
to products sold by ICP prior to the Closing Date, including, but not
limited to, product liability and returns and obligations under any
warranty, (5) any Liabilities under or related to that certain
Consulting Agreement dated January 1, 1996 by and between William B.
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Furlong d/b/a Furlong Enterprises and ICP (except that A&C agrees to
comply with the confidentiality provisions of such agreement with regard
to any information delivered to it hereunder) or under or related to the
Stock Purchase Agreement described on SCHEDULE 2.2(a)(vi) or under or
related to the transactions contemplated by such agreements, or (6) any
other Liabilities which otherwise arise or are asserted by reasons of
events, acts (or failures to act) or transactions occurring, or the
conduct of business at any or all of the Distribution Centers prior to
the Closing Date, including, but not limited to, any Liabilities
incident to, arising out of or incurred with respect to this Agreement
and the transactions contemplated hereby. ICP further agrees to satisfy
and discharge as the same shall become due all Liabilities of ICP or any
of its Affiliates with respect to the Acquired Business not specifically
assumed by A&C hereunder. A&C's assumption of the Transferred
Obligations shall in no way expand the rights or remedies of third
parties against A&C as compared to the rights and remedies which such
parties would have had against ICP had the transactions contemplated by
this Agreement not been consummated.
SECTION 2.3 CLOSING. The closing of the sale and purchase of the Shares
and the Transferred Assets (the "CLOSING") shall take place at the offices of
Tuke Yopp & Sweeney at Suite 1100, NationsBank Plaza, Nashville, Tennessee 37219
on January 27, 1997 or such other time and date as the parties may agree to in
writing (the date on which the Closing occurs is referred to herein as the
"CLOSING DATE"). For all purposes, the Closing shall be deemed to be effective
as of 12:01 A.M. on the Closing Date.
SECTION 2.4 PURCHASE PRICE.
(a) PURCHASE PRICE; ESTIMATED CLOSING PAYMENT. As consideration
for sale of the Shares and the Transferred Assets, A&C shall pay to ICP
an amount equal to the sum (the "PURCHASE PRICE") of (i) the Net Book
Value of Coastline and (ii) the Net Book Value of the Distribution
Centers. The Purchase Price shall be calculated in the manner provided
in (c) below.
At the Closing, as an estimate of the Purchase Price, subject to
adjustment as provided below, A&C shall pay to ICP an amount equal to
ninety percent (90%) of the sum of the Net Book Value of Coastline and
the Net Book Value of the Distribution Centers, in each case calculated
using the Preliminary Closing Balance Sheet (the "Closing Payment").
Simultaneously with the Closing, A&C shall pay or shall cause Coastline
to pay to ICP or ICP's Affiliates all notes payable and advances (but
not trade or other accounts payables) owing from Coastline to ICP and
ICP's Affiliates (net of notes receivable by Coastline from ICP and
ICP's Affiliates and ICP Inventory Profit in the inventories of
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Coastline), which amount as of November 30, 1996 was $16,403,000.
(b) METHOD OF PAYMENT; INTEREST. Payment of the Closing Payment
and any adjustments to the Closing Payment in favor of ICP shall be made
by A&C on the due date therefor by wire transfer of immediately
available funds in Nashville, Tennessee to an account designated in
writing by ICP. Payment of any adjustments to the Closing Payment in
favor of A&C shall be made by ICP on the due date therefor by ICP to A&C
by wire transfer of immediately available funds in Miami, Florida to an
account designated in writing by A&C. Any amounts owing by one party to
the other party under this Agreement which are not paid when due shall
bear simple interest at the lesser of (i) seven percent (7%) per annum
or (ii) the highest rate allowed under applicable Law.
(c) CALCULATION OF PURCHASE PRICE; DISPUTES. Promptly after the
Closing and in any event within thirty (30) days of the Closing Date,
ICP shall deliver to A&C a balance sheet of the Acquired Business dated
as of the Closing Date, certified by its Chief Financial Officer as
having been prepared in accordance with GAAP, this Agreement and on the
same basis as the Preliminary Closing Balance Sheet (the "CLOSING DATE
BALANCE SHEET").
In connection with the foregoing, A&C shall make employees of the
Acquired Business reasonably available to assist ICP (without charge)
and such employees shall be instructed by A&C to reasonably cooperate
with ICP. A&C agrees that following the Closing and until the final
resolution of the calculation of the Purchase Price, A&C will not take
any actions with respect to the accounting books, records, policies and
procedures of the Acquired Business that are not consistent with GAAP
applied in the manner consistent with the past practices of the Acquired
Business and consistent with the Preliminary Closing Balance Sheet. A&C
shall also cause A&C's Accountants, and ICP shall cause ICP's
Accountants, to cooperate with each other and with the Settlement
Accountants in connection with the resolution of any disputes related to
the calculation of the Purchase Price, including but, not limited to,
sharing of work papers.
(d) During the ninety (90) days immediately following A&C's
receipt of the Closing Date Balance Sheet, A&C and A&C's Accountants
shall be entitled to review and audit the Closing Date Balance Sheet and
review ICP's and ICP's Accountant's working paper relating to the
Closing Date Balance Sheet. The Closing Date Balance Sheet shall become
final and binding upon the parties on the ninetieth (90th) day following
delivery thereof to A&C unless A&C gives written notice to ICP of its
disagreement with the Closing Date Balance Sheet (a "NOTICE OF
DISAGREEMENT") prior to such date. Any Notice of Disagreement shall
specify in
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reasonable detail the nature of any disagreement so asserted.
If a timely Notice of Disagreement is received by ICP with respect to
the Closing Date Balance Sheet, then the Closing Date Balance Sheet (as
revised in accordance with clause (e) below), shall become final and
binding upon the parties on the earlier of: (1) the date the parties
hereto resolve in writing any differences they have with respect to any
matter specified in a Notice of Disagreement; or (2) the date any
matters properly in dispute are finally resolved in writing by the
Settlement Accountants (as defined below). Notwithstanding the
foregoing, within ninety (90) days after the receipt by A&C of the
Closing Date Balance Sheet, A&C shall remit to ICP or ICP shall remit to
A&C, as the case may be, in immediately available funds, any undisputed
amount as to which there is required to be a Closing Payment Adjustment
(as hereafter defined).
(e) During the thirty (30) days immediately following the
delivery of any Notice of Disagreement, ICP and A&C shall seek in good
faith to resolve in writing any differences which they may have with
respect to any matter specified in such Notice of Disagreement. At the
end of such 30-day period, ICP and A&C shall submit to a nationally
recognized firm of independent certified accountants (the "SETTLEMENT
ACCOUNTANTS") for review and resolution any and all matters which remain
in dispute and which were properly included in any Notice of
Disagreement, and the Settlement Accountants shall reach a final,
binding resolution of all matters which remain in dispute. The Closing
Date Balance Sheet, with such adjustments necessary to reflect the
Settlement Accountants' resolution of the matters in dispute, shall
become final and binding on A&C and ICP on the date the Settlement
Accountants deliver their final resolution to the parties. The
Settlement Accountants shall be Price Waterhouse, or if such firm is
unable or unwilling to act, such other nationally recognized firm of
independent certified accountants (who have not performed services for
either of ICP, A&C or their respective Affiliates within the last five
(5) years) selected by mutual agreement of ICP's Accountants and A&C's
Accountants. The costs and expenses of the Settlement Accountants shall
be borne 50% by A&C and 50% by ICP.
(f) ADJUSTMENT TO THE PURCHASE PRICE. In the event the Purchase
Price, as finally determined in accordance with (a) and (c) above,
exceeds the Closing Payment, A&C shall pay the amount of such excess to
ICP. In the event the Purchase Price, as finally determined in
accordance with (a), (c), (d) and (e) above, is less than the Closing
Payment, ICP shall pay the amount of such deficiency to A&C. Payments
owing under this subsection (f) are referred to herein as "CLOSING
PAYMENT ADJUSTMENTS" and shall be due and payable in immediately
available funds three (3) Business Days after the Purchase Price as has
been finally determined in accordance with (a), (c), (d) and (e) above.
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SECTION 2.5 PRORATIONS. The operation of the Acquired Business at the
Distribution Centers prior to the Closing shall be for the account of ICP up to
the Closing, and thereafter shall be for the account of A&C. Expenses for
utilities, real or personal property Taxes and assessments, rents, royalties,
subscriptions, and similar items, to the extent they are among the Transferred
Obligations, shall be prorated between A&C and ICP as of the effective time of
the Closing.
SECTION 2.6 ALLOCATION OF PURCHASE PRICE. Within thirty (30) days of the
date that the Purchase Price is finally determined in accordance with this
Article II, A&C shall deliver to ICP, for its review and approval, a Schedule
setting forth the allocation of the Purchase Price and the Transferred
Obligations for all purposes (including Tax and financial accounting purposes)
among (a) the Shares, (b) the Transferred Assets, and (c) the Transferred
Obligations (the "Allocation"). If A&C and ICP are not able to agree to the
Allocation within thirty (30) days, either of them may submit any unresolved
matter related to the Allocation to the Settlement Accountants to resolve all
unresolved matters related to the Allocation, and such resolution shall be
binding on both parties. The fees and expenses of the Settlement Accountants
shall be shared equally by A&C and ICP. ICP and A&C each agrees to report (and
to cause its Affiliates to report) all Tax consequences of the transactions
contemplated herein in a manner consistent with such Allocation (including the
filing of a reasonably acceptable IRS Form 8594, Asset Acquisition Agreement
under Section 1060 of the Code) and not to take any position inconsistent
therewith upon examination of any Tax Return, in any refund claim, in any
litigation, investigation or otherwise. A&C agrees to send to ICP a completed
copy of its Form 8594 (Asset Acquisition Statement under Section 1060) with
respect to this transaction prior to filing such form with the Internal Revenue
Service.
SECTION 2.7 ICP CLOSING DELIVERIES. At the Closing, ICP shall tender all
of the following documents, materials and instruments to A&C, each in form and
substance reasonably satisfactory to A&C:
(a) SHARES. One or more certificates representing all of the
Shares, duly endorsed in blank by an authorized officer of ICP or
accompanied by stock powers duly executed in blank by an authorized
officer of ICP, and bearing or accompanied by all requisite stock
transfer stamps.
(b) BILL OF SALE. A bill of sale in the form of the bill of sale
attached hereto as EXHIBIT A (the "BILL OF SALe"), duly executed by an
authorized officer of ICP.
(c) ASSIGNMENT. An assignment agreement in the form of the
assignment and assumption agreement attached hereto as EXHIBIT B (the
"ASSIGNMENT AND ASSUMPTION AGREEMENT"), duly executed by an authorized
officer of ICP.
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(d) LEASE ASSIGNMENTS. For each Facility Lease, a lease
assignment substantially in the form of the lease assignment attached
hereto as EXHIBIT C (the "LEASE ASSIGNMENTS"), each duly executed by an
authorized officer of ICP and by the applicable lessor.
(e) DISTRIBUTION AGREEMENTS. Distribution agreements (and
corresponding license agreements) in the form of the agreement(s)
attached hereto as EXHIBIT D (the "DISTRIBUTION AGREEMENTS"), each duly
executed by an authorized officer of ICP.
(f) SERVICES AGREEMENT. A services agreement pursuant to which
ICP would agree to continue to provide for a reasonable period following
Closing to the Distribution Centers, CDS Holdings and Coastline certain
of the support services that ICP had previously provided to the
Distribution Centers, CDS Holdings and Coastline prior to the date
hereof, the degree of support and the terms and conditions of the
support to be provided shall be determined in accordance with Section
6.10 hereof (the "SERVICES AGREEMENT"), duly executed by an authorized
officer of ICP.
(g) TITLES. Originals of any title or registration certificates
for any vehicles or titled equipment or assets included within the
Transferred Assets, duly endorsed in order to transfer ownership thereof
to A&C.
(h) BRINGDOWN. A certificate in the form of the certificate
attached hereto as EXHIBIT E (the "ICP BRINGDOWN CERTIFICATE"), duly
executed by an authorized officer of ICP.
(i) SECRETARY'S CERTIFICATES. A secretary's certificate of each
of ICP, CDS Holdings and Coastline in the form of the certificate(s)
attached hereto as EXHIBIT F (the "ICP SECRETARY'S CERTIFICATES"), each
duly executed by the Secretary or an Assistant Secretary of ICP, CDS
Holdings or Coastline, as the case may be, authorized to execute and
deliver such certificate.
(j) LEGAL OPINION. The opinion of Tuke Yopp & Sweeney, counsel to
ICP substantially in the form of the opinion attached hereto as EXHIBIT
G hereto (the "ICP LEGAL OPINION").
(k) LIENS AND CONSENTS. Evidence that all Liens on the
Transferred Assets, the Shares, the assets of CDS Holdings and Coastline
or otherwise affecting or relating to the Acquired Business have been
released and that all consents and notices required in the reasonable
opinion of A&C to be obtained or given in connection with the
consummation of the transactions contemplated hereby have been obtained
or given, including, but not limited to, the consents and notices listed
on SCHEDULE 3.6 hereto.
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(l) PRELIMINARY CLOSING BALANCE SHEET. The Preliminary Closing
Balance Sheet, certified by the Chief Financial Officer of ICP as having
been prepared in accordance with GAAP.
(m) MANUFACTURING COST. A statement, certified as true and
accurate by the Chief Financial Officer of ICP, setting forth ICP's
standard cost of manufacturing ICP Products, or in the case of ICP
Products purchased from an OEM, the purchase price paid to such OEM by
ICP, in each case sufficient for use in calculating ICP Inventory
Profit.
(n) MINUTE BOOKS AND SHARE CERTIFICATES. The original minute
books of CDS Holdings, Coastline and any Person that merged with or into
such entities, the corporate seals of such entities, the stock ledger
and stock books of such entities, and the original certificates
representing all of the issued and outstanding shares of capital stock
of Coastline.
ICP shall also execute and tender to A&C at Closing such other
documents, materials and instruments as A&C may reasonably request in order to
consummate the transactions contemplated hereby and vest in A&C, free of any
Liens, the Shares, the Transferred Assets and the Acquired Business.
SECTION 2.8 A&C CLOSING DELIVERIES. At the Closing, A&C shall tender
payment of the Closing Payment to ICP in the manner described in this Article II
and tender to ICP all of the following documents, materials and instruments,
each in form and substance reasonably satisfactory to A&C:
(a) ASSIGNMENT. The Assignment and Assumption Agreement, duly
executed by an authorized officer of A&C.
(b) LEASE ASSIGNMENTS. The Lease Assignments, duly executed by an
authorized officer of A&C.
(c) DISTRIBUTION AGREEMENTS. The Distribution Agreements (and
corresponding license agreements), each duly executed by an authorized
officer of A&C and Coastline.
(d) SERVICES AGREEMENT. The Services Agreement, duly executed by
an authorized officer of A&C.
(e) BRINGDOWN. A certificate in the form of the certificate
attached hereto as EXHIBIT H (the "A&C BRINGDOWN CERTIFICATE"), duly
executed by an authorized officer of A&C.
(f) SECRETARY'S CERTIFICATES. A secretary's certificate of each
of Watsco and A&C in the form of the certificate(s) attached hereto as
EXHIBIT I (the "A&C SECRETARY'S CERTIFICATES"), each duly executed by
the Secretary or an Assistant Secretary, of Watsco or A&C, as
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the case may be, authorized to execute and deliver such certificate.
(g) LEGAL OPINION. The opinion of Moore & Van Allen PLLC, special
counsel to A&C substantially in the form of the opinion attached hereto
as EXHIBIT J hereto (the "A&C LEGAL OPINION").
(h) WATSCO GUARANTY. The Watsco Guaranty, duly executed by
Watsco.
A&C shall also execute and tender to ICP at Closing such other
documents, materials and instruments as ICP may reasonably request in order to
consummate the transactions contemplated hereby and cause A&C to assume the
Transferred Obligations.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF ICP
ICP hereby makes to A&C all of the representations and warranties set
forth in this Article III:
SECTION 3.1 ORGANIZATION, GOOD STANDING AND AUTHORITY OF ICP. Each of
ICP, CDS Holdings and Coastline is duly organized, validly existing and in good
standing under the laws of the State of Delaware. Each of CDS Holdings and
Coastline is duly qualified to do business as a foreign corporation in the
jurisdictions set forth opposite its name in SCHEDULE 3.1, which are all the
jurisdictions where the character of the properties each of them owns, leases or
operates, or the conduct of each of their respective business, requires such
qualification. ICP is duly qualified to do business as a foreign corporation in
each state in which any of the Distribution Centers is located and in each other
jurisdiction where the character of the properties it owns, leases or operates
or the conduct of its business makes such qualification necessary other than
where the failure to so qualify could not reasonably be expected to have a
material adverse effect on the Acquired Business. Each of ICP, CDS Holdings and
Coastline has full corporate power and authority to own the properties and
assets owned by it, to lease the properties and assets held by it under lease,
to carry on the operation of the Acquired Business as it is now being conducted
by it, to operate the Acquired Business as heretofore operated by it and to
enter into this Agreement and the Related Agreements and perform its obligations
under this Agreement and the Related Agreements.
SECTION 3.2 ARTICLES OF INCORPORATION; BYLAWS; MINUTE BOOKS. True and
complete copies of the articles of incorporation and by-laws of each of ICP, CDS
Holdings and Coastline, as amended to and including the date hereof, have been
delivered to A&C. None of ICP, CDS Holdings or Coastline is in violation of any
provision of its articles of incorporation or by-laws. The minute books, stock
books and stock transfer records of each of
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CDS Holdings and Coastline, true and complete copies of which have been made
available to A&C, contain true and complete minutes and records of all issuances
and transfers of capital stock of CDS Holdings and Coastline (as the case may
be) and of all meetings, consents, proceedings and other actions of the
shareholders, board of directors and committees of the board of directors of CDS
Holdings and Coastline (as the case may be) from August 25, 1996 to and
including the date hereof and, to the Knowledge of ICP, from the respective date
of incorporation of CDS Holdings and Coastline (as the case may be) to and
including August 24, 1996.
SECTION 3.3 DUE AUTHORIZATION, EXECUTION AND DELIVERY. ICP has full
corporate authority to execute and deliver this Agreement and the Related
Agreements, to perform its obligations hereunder and under the Related
Agreements and to consummate the transactions contemplated hereby and thereby,
and ICP has duly executed and delivered this Agreement, and this Agreement
constitutes (and, when executed and delivered, the Related Agreements will
constitute) the legal, valid and binding obligations of ICP enforceable against
it in accordance with its terms, except that such enforcement (a) may be limited
by bankruptcy, insolvency, moratorium or similar laws affecting creditors'
rights generally, and (b) is subject to the availability of equitable remedies,
as determined in the discretion of the court before which such a proceeding may
be brought.
SECTION 3.4 TITLE TO SHARES; CAPITALIZATION; ETC.
(a) TITLE. ICP owns beneficially and of record all of the Shares
free and clear of any Liens. Upon the delivery of and payment for the
Shares as provided for in this Agreement, A&C will acquire good and
valid title to all the Shares, free and clear of any Lien other than any
Lien arising by any action taken by A&C. CDS Holdings owns beneficially
and of record all of the issued and outstanding capital stock of
Coastline free and clear of any Liens.
(b) AUTHORIZED AND ISSUED CAPITAL STOCK. The authorized and
issued capital stock of Coastline and CDS Holdings is as set forth on
SCHEDULE 3.4(b). The Shares and the shares of capital stock of Coastline
shown on SCHEDULE 3.4(b) to be issued and outstanding have been duly
authorized and validly issued, are fully paid and nonassessable and are
the only issued and outstanding shares of capital stock of Coastline or
CDS Holdings.
(c) NO EQUITY RIGHTS. There are no preemptive or similar rights
on the part of any holders of any class of securities of CDS Holdings or
Coastline. There are no subscriptions, options, warrants, conversion or
other rights, agreements, commitments, arrangements or understandings of
any kind obligating any of ICP, CDS Holdings or Coastline or any other
Person, contingently or
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otherwise, to issue or sell, or cause to be issued or sold, any shares
of capital stock of CDS Holdings or Coastline, or any securities
convertible into or exchangeable for any such shares, and no
authorization therefor has been given. There are no outstanding
contractual or other rights or obligations to or of any of ICP, CDS
Holdings or Coastline or any other Person to repurchase, redeem or
otherwise acquire any outstanding shares or other equity interests of
CDS Holdings or Coastline.
SECTION 3.5 SUBSIDIARIES.
(a) Except as set forth in SCHEDULE 3.5, Coastline does not own,
directly or indirectly, any shares of capital stock or other equity
interest (or any other interest convertible into an equity interest) in
any Person and has no commitment to contribute to the capital of, make
loans to, or share in the profits or losses of, any Person. C&M
Trucking, Inc., a Florida corporation, ("C&M TRUCKING") is an inactive
corporation. All of the issued and outstanding capital stock of C&M
Trucking of C&M Trucking is owned by Coastline. C&M Trucking does not
now have, nor has it ever had, any business operations, assets or
Liabilities.
(b) Other than the Shares, CDS Holdings does not have any assets
or Liabilities or own any equity interest (or any other interest
convertible into an equity interest) in any other Person, and has no
commitment to contribute to the capital of, make loans to, or share in
the profits or losses of, any other Person.
SECTION 3.6 CONSENTS; NO CONFLICT. Except as set forth in SCHEDULE 3.6
and for applicable requirements of the HSR Act, (a) no consent, authorization,
Permit or approval of any Person or from any Governmental Authority is required
as a condition to the execution and delivery of this Agreement by ICP or any of
the Related Agreements and the consummation of the transactions contemplated by
this Agreement and the Related Agreements by ICP, and (b) the execution and
delivery of this Agreement and the Related Agreements by ICP and the
consummation of the transactions contemplated hereby and thereby by ICP will not
conflict with, give rise to a right of termination of, contravene or constitute
a default under, or be an event which with the giving of notice or passage of
time or both will become a default under, or give to others any rights of
termination or cancellation of, or give rise to a right of acceleration of the
performance required by or maturity of, or result in the creation of any Lien,
Liabilities or loss of any rights with respect to ICP, CDS Holdings or Coastline
(which could reasonably be expected to have a material adverse effect on the
Acquired Business) pursuant to any of the terms, conditions or provisions of or
under any applicable Law, the articles of incorporation or by-laws of any of
ICP, CDS Holdings or Coastline, or under any Contract binding upon any of ICP,
CDS Holdings or Coastline, or to which any of the assets or properties of any of
ICP (related
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to the Acquired Business), CDS Holdings or Coastline or any of the Shares,
Transferred Assets or any portion of the Acquired Business is subject.
SECTION 3.7 TAX MATTERS.
(a) TAX RETURNS. Except as set forth on SCHEDULE 3.7(a), (i) each
of ICP, CDS Holdings and Coastline and the Affiliated Group has duly and
timely filed (or caused to be filed) (or where permitted or required,
the Affiliated Group of which ICP, CDS Holdings or Coastline is a member
has filed (or caused to be filed)) all Tax Returns that each was
required to file prior to the date hereof, (ii) all such Tax Returns
were correct and complete in all material respects, and (iii) none of
the Affiliated Group, ICP, CDS Holdings or Coastline is currently the
beneficiary of any extension of time within which to file any Tax
Return.
(b) COMPLIANCE. Except as set forth on SCHEDULE 3.7(b), (i) all
Taxes that are or may become payable by any of the Affiliated Group,
ICP, CDS Holdings or Coastline or that are chargeable as a Lien upon the
Transferred Assets or the Shares (whether or not shown on any Tax
Return) as of the date hereof have been duly and timely paid, and (ii)
each of ICP, CDS Holdings and Coastline have complied with applicable
Law relating to the reporting, payment and withholding of Taxes in
connection with amounts paid to its employees, creditors, independent
contractors or other third parties and has, within the time and in the
manner prescribed by Law, withheld from such amounts and timely paid
over to the proper Governmental Authorities all such amounts required to
be so withheld and paid over under applicable Law.
(c) CLAIMS. Except as set forth on SCHEDULE 3.7(c), (i) no claim
(other than a claim that has been finally settled) is pending by a
Governmental Authority in a jurisdiction where ICP, CDS Holdings or
Coastline does not file Tax Returns or pay or collect Taxes in respect
of a particular type of Tax imposed by that jurisdiction that any of
ICP, CDS Holdings or Coastline is or may be subject to an obligation to
file Tax Returns or pay or collect Taxes in respect of such Tax in that
jurisdiction and (ii) there is no pending claim or issue (other than a
claim or issue that has been finally settled) concerning any Liability
for Taxes of any of ICP, CDS Holdings or Coastline asserted, raised or
threatened by any Governmental Authority in writing and, to the
Knowledge of ICP, no such Liability for Taxes has otherwise been
threatened.
(d) WAIVERS. Except as set forth on SCHEDULE 3.7(d), neither the
Affiliated Group nor any of ICP, CDS Holdings or Coastline has (i)
waived any statute of limitations, (ii) agreed to any extension of the
period for assessment or
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collection or (iii) executed or filed any power of attorney in
each case with respect to any Taxes, which waiver, agreement or power of
attorney is currently in force.
(e) ELECTIONS. SCHEDULE 3.7(e) lists all material elections for
Income Taxes made by any of ICP, CDS Holdings or Coastline or the
Affiliated Group that are currently in force or to which any of ICP, CDS
Holdings or Coastline is bound.
(f) CONSENTS. None of ICP, CDS Holdings, Coastline or the
Affiliated Group has filed a consent under Section 341(f) of the Code
concerning collapsible corporations.
(g) TAX SHARING AGREEMENTS. Except as set forth on SCHEDULE
3.7(g), none of ICP, CDS Holdings or Coastline is a party to or bound by
or has any obligation under any Tax allocation, sharing, indemnity or
similar agreement or arrangement, and none of ICP, CDS Holdings or
Coastline (i) is or has ever been a member of any group of companies
(other than the Affiliated Group) filing a consolidated, combined or
unitary Income Tax Return or (ii) has any liability for the Taxes of any
Person under Section 1.1502-6 of the Treasury Regulations (or any
similar provision of state, local or foreign law); as a transferee,
successor, indemnitor or guarantor; by contract or otherwise.
(h) U.S. REAL PROPERTY HOLDING CORPORATION. Neither Coastline nor
CDS Holdings is a "United States real property holding corporation"
within the meaning of Section 897(c)(2) of the Code.
(i) TAX RETURN FILINGS. SCHEDULE 3.7(i) contains a listing of
each jurisdiction in which CDS Holdings or Coastline filed income Tax
Returns for the calendar year ending December 31, 1995.
(j) INCOME TAX RESERVES. The charges, awards and reserves for
Taxes that will, when delivered, be reflected on the Preliminary Closing
Balance Sheet and the Closing Date Balance Sheet with respect to ICP,
CDS Holdings and Coastline for any period (or portion thereof) ending on
or prior to the Closing are adequate to cover such Taxes.
(k) PRE-CLOSING INCOME. Neither CDS Holdings or Coastline will be
required to include any amount in taxable income or exclude any item of
deduction or loss from taxable income for any taxable period (or portion
thereof) ending after the Closing Date as a result of (i) a change in
method of accounting for a taxable period ending on or prior to the
Closing Date, (ii) any "closing agreement," as described in Code Section
7121 (or any corresponding provision of state, local or foreign income
Tax law), (iii) any deferred intercompany gain described in Treasury
Regulation Sections 1.1502-13 or former Treasury Regulations Section
1.1502-14
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or any excess loss account described in Treasury Regulation
Sections 1.1502-19 and 1.1502-32 (or any corresponding or similar
provision or administrative rule of federal, state, local or foreign
income tax law), (iv) any sale reported on the installment method where
such sale occurred on or prior to the Closing Date, or (v) any prepaid
amount received on or prior to the Closing Date.
(l) NET OPERATING LOSS. At December 31, 1995, Coastline's federal
income Tax Return indicated that it had a net operating loss
carryforward ("NOLs") in the amount of approximately $2,000,000
attributable to the years ended 1993, 1994 and 1995. ICP believes that
the NOLs were fully utilized by Coastline's and CDS Holdings' parent
prior to the acquisition of these companies by ICP and there now are no
NOLs available for utilization.
SECTION 3.8 EMPLOYEES, LABOR MATTERS, ETC.
(a) Except as set forth on SCHEDULE 3.8(a), none of ICP (with
respect to the Acquired Business), CDS Holdings or Coastline is a party
to or bound by any collective bargaining or other labor agreement with
or relating to any of the Employees, and there are no labor unions or
other organizations representing any of the Employees. To the Knowledge
of ICP, since January 1, 1995, there has not occurred or been threatened
any material strike, slowdown, picketing, work stoppage, concerted
refusal to work overtime or other similar labor activity with respect to
any of the Employees. Except as set forth on SCHEDULE 3.8(a), there are
no labor disputes currently subject to any grievance procedure,
arbitration or litigation and there is no representation petition
pending or threatened with respect to any of the Employees.
(b) SCHEDULE 3.8(b) sets forth the salaries and wages payable to
each of the Employees immediately prior to the date hereof and all bonus
payments made or to be made to any of the Employees since August 31,
1996 which were or will be outside of the Ordinary Course of Business.
SECTION 3.9 FINANCIAL STATEMENTS. SCHEDULE 3.9 contains true and
complete copies of the following financial statements of the Acquired Business
(collectively and together with the Preliminary Closing Balance Sheet and the
Closing Date Balance Sheet, the "FINANCIAL STATEMENTS"):
(a) Consolidated Balance Sheet of Coastline and its subsidiaries
as of November 22, 1996; and
(b) Consolidated Balance Sheet, Consolidated Statement of Income
and Consolidated Statement of Cash Flows of Coastline and its
subsidiaries at December 31, 1996 and for the five (5) months ended
December 31, 1996.
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Except as set forth in the notes thereto or as disclosed in SCHEDULE 3.9
hereof, all such Financial Statements (i) were (or, in the case of the
Preliminary Closing Balance Sheet and the Closing Date Balance Sheet, will be)
prepared from the accounting books and records of ICP, CDS Holdings and
Coastline in accordance with GAAP and (ii) fairly present (or, in the case of
the Preliminary Closing Balance Sheet and the Closing Balance Sheet, will
present) the financial condition and results of operations of the Acquired
Business as of the respective dates thereof and for the respective periods
covered thereby.
SECTION 3.10 CHANGES OF FINANCIAL CONDITION. Except for the execution
and delivery of this Agreement and the Related Agreements and as disclosed on
SCHEDULE 3.10 hereof, since August 31, 1996, there has not been any material
adverse change, or any event or development which, individually or together with
other such events or developments, has resulted in or may result in a material
adverse change in the business prospects, business, operations, property,
condition (financial or otherwise), Liabilities or relations with labor,
customers or suppliers of the Acquired Business. Since August 31, 1996, the
Acquired Business has been operated in the Ordinary Course of Business.
SECTION 3.11 Real Property.
(a) OWNED REAL PROPERTY. Neither CDS Holdings nor Coastline owns
any real property and the Transferred Assets do not include any real
property (other than leasehold interests under the Facility Leases).
(b) LEASED REAL PROPERTY. SCHEDULE 3.11(b) contains a true and
correct list of the Facility Leases and each parcel of real property
leased by Coastline or CDS Holdings, as lessee, under any real property
lease, sublease, license or other Contract. Neither CDS Holdings or
Coastline leases any real property as a sublessor, and ICP does not
sublet any portion of the premises leased under the Facility Leases.
Each of Coastline, CDS Holdings and ICP (in the case of the
Facility Leases) has a valid leasehold estate in the real properties
leased by such company, subject to the real property lease, sublease,
license or Contract relating thereto, for the full term thereof. Each
such real property lease or Contract is a legal, valid and binding
agreement of Coastline, CDS Holdings or ICP (whichever is a party
thereto), enforceable against such company in accordance with its terms
and, except as set forth in SCHEDULE 3.11(b), Coastline, CDS Holdings or
ICP (whichever is a party thereto) is not, and to the Knowledge of ICP
no other party thereto is, in default under such lease or Contract and
no event has occurred which, after notice or lapse of time or both,
would constitute a default thereunder.
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(c) DOCUMENTS. ICP has delivered to A&C prior to the execution of
this Agreement true and complete copies of the Facility Leases and all
other real property leases, subleases, licenses or other Contracts
(including any amendments and renewal letters relating thereto) with
respect to the Facility Leases or the real property leased by Coastline
or CDS Holdings.
(d) CONDITION OF IMPROVEMENTS. Except as disclosed in SCHEDULE
3.11(d), to the Knowledge of ICP, the improvements located on real
property leased by Coastline and CDS Holdings and on the real property
leased pursuant to the Facility Leases are in good condition and in good
repair, ordinary wear and tear excepted, and there are no condemnation
proceedings pending or, to the Knowledge of ICP, threatened against any
of such real property or improvements. To the Knowledge of ICP, all
utilities and similar systems which are required for the operation of
the Acquired Business at such leased real property are installed and
operating and are sufficient to enable such real property to continue to
be used and operated in the manner currently being used and operated by
Coastline, CDS Holdings and ICP.
(e) CURRENT USE. The current use of the leased real property by
Coastline, CDS Holdings and ICP (with respect only to the real property
encompassed by the Facility Leases) does not violate any of the leases
or Contracts with respect to such properties or, to the Knowledge of
ICP, any other instrument or Contract affecting such real property. To
the Knowledge of ICP, there is no violation of any covenant, condition,
restriction, easement, agreement or order of any Governmental Authority
having jurisdiction over any of such leased real property that adversely
affects such real property or the use or occupancy thereof. Since August
25, 1996, no damage or destruction has occurred with respect to any of
the real property leased by Coastline or CDS Holdings or leased by ICP
pursuant to the Facility Leases that, individually or in the aggregate,
has had or resulted in, or could have or result in, a material adverse
effect on the operation of the Acquired Business.
SECTION 3.12 TANGIBLE PERSONAL PROPERTY. Each of Coastline and CDS
Holdings is in possession of and has good title to, or has valid leasehold
interests in or valid rights under Contract to use, all the tangible personal
property used in the conduct of the Acquired Business by such company. Except as
disclosed in SCHEDULE 3.12, all such tangible personal property is free and
clear of all Liens and, to the Knowledge of ICP, is in all material respects in
good condition, ordinary wear and tear excepted.
ICP is in possession of and has good title to, or has valid leasehold
interests in or valid rights under Contract to use, all the Transferred Assets.
Except as disclosed in SCHEDULE 3.12
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hereof, all the Transferred Assets are free and clear of all Liens and, to the
Knowledge of ICP, are in all material respects in good condition, ordinary wear
and tear excepted. The sale of the Transferred Assets by ICP to A&C pursuant to
this Agreement will effectively transfer to A&C ownership of, or rights under
Contract to use, all tangible assets and properties constituting part of the
Transferred Assets, free and clear of all Liens.
SECTION 3.13 INVENTORY. All the inventory of Coastline and all of the
inventory included in the Transferred Assets consists of finished goods
inventory (and, in the case of the manufacturing operations of Coastline, raw
materials, work in process or finished goods inventory) of a quality and
quantity usable and salable in the Ordinary Course of Business, except for
obsolete items or items below standard quality as to which a provision
determined in a manner consistent with GAAP has been made on the books of such
company. ICP and Coastline, as the case may be, have good and marketable title
to such inventory, free and clear of all Liens. All of the inventory owned by
Coastline and all of the inventory included within the Transferred Assets is
located at the places identified on SCHEDULE 3.13 hereto. No such inventory is
held under a consignment or similar arrangement. The sale of the Transferred
Assets by ICP to A&C will effectively transfer to A&C title to the inventory
constituting part of the Transferred Assets, free and clear of all Liens.
SECTION 3.14 ACCOUNTS RECEIVABLE. Except as set forth in SCHEDULE 3.14,
the accounts receivable and notes receivable included within the Transferred
Assets and the accounts receivable and notes receivable of Coastline on the
Closing Date (a) arose from BONA FIDE sales transactions in the Ordinary Course
of Business; and (b) are collectible in the Ordinary Course of Business in the
aggregate recorded amounts thereof, subject to annual write-off adjustments
consistent with prior practice. ICP has good title to the accounts receivable
and notes receivable included in the Transferred Assets, free and clear of all
Liens. Coastline has good title to the accounts receivable and notes receivable
owned by Coastline, free and clear of any Liens.
SECTION 3.15 VEHICLES. SCHEDULE 3.15 hereof contains a true and complete
list of all vehicles included in the Transferred Assets and all vehicles owned
by CDS Holdings and Coastline. Each of ICP, CDS Holdings and Coastline (as the
case may be) has good and valid title to, or has valid leasehold interests in or
valid rights under Contract to use, all such vehicles, free and clear of all
Liens. The sale of the Transferred Assets by ICP to A&C pursuant to this
Agreement will effectively transfer to A&C the vehicles, free and clear of any
Liens.
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SECTION 3.16 CONTRACTS.
(a) Description of Contracts. Schedule 3.16 contains a true and
complete list of each of the following Contracts (true and complete
copies of which, together with all amendments and supplements thereto,
have been delivered to A&C prior to the execution of this Agreement)
which are Transferred Contracts or to which CDS Holdings or Coastline is
a party or by which the Acquired Business may be bound following the
Closing:
(i) All Contracts (excluding Benefit Plans) providing
for a commitment of employment or consultation services for a
specified term to, or otherwise relating to employment or the
termination of employment or the severance of, any employee;
(ii) all Contracts with any Person containing any
provision or covenant prohibiting or materially limiting the
ability of ICP, Coastline or CDS Holdings to engage in any
business activity or compete with any Person or prohibiting or
materially limiting the ability of any Person to compete with
ICP, Coastline or CDS Holdings;
(iii) all material partnership, joint venture or
shareholders' Contracts with any Person;
(iv) all Contracts with distributors, dealers,
manufacturer's representatives, sales agencies or franchisees
with whom ICP, CDS Holdings or Coastline deals which in any case
involve the payment or contingent payment, pursuant to the terms
of any such Contract, by or to ICP, Coastline or CDS Holdings of
more than $50,000 annually;
(v) all Contracts relating to the future disposition
or acquisition of any assets of or by ICP, CDS Holdings or
Coastline;
(vi) all other Contracts (other than Benefit Plans,
real estate leases listed on Schedule 3.11(b) and insurance
policies listed in Schedule 3.21) to which any of ICP, Coastline
or CDS Holdings is a party that (A) involve the payment or
potential payment, pursuant to the terms of any such Contract, by
or to ICP, CDS Holdings or Coastline of more than $50,000
annually and (B) cannot be terminated within thirty (30) days
after giving notice of termination without resulting in any
material cost or penalty to ICP, CDS Holdings or Coastline.
(b) STATUS OF CONTRACTS. Each Contract required to be disclosed
in SCHEDULE 3.16, lease listed on SCHEDULE 3.11(b), Transferred
Contract, and Equipment Lease is in
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full force and effect and constitutes a legal, valid and binding
agreement of Coastline, CDS Holdings or ICP (whichever is a party
thereto), enforceable against such company in accordance with its terms,
and, except as disclosed in SCHEDULE 3.16, neither the company party
thereto nor, to the knowledge of ICP, any other party to any such
Contract or lease is in violation or breach of or default under any such
Contract or lease (or with notice or lapse of time or both, would be in
violation or breach of or default under any such Contract or lease) the
effect of which, individually or in the aggregate, could have a material
adverse effect on the Acquired Business.
SECTION 3.17 LITIGATION AND CLAIMS. SCHEDULE 3.17 discloses each
instance in which ICP, CDS Holdings or Coastline is a party to or, to the
Knowledge of ICP, is threatened to be made a party to, any charge, complaint,
action, suit, arbitration, proceeding, hearing, or investigation which,
individually or in the aggregate with all other such items, could if adversely
determined have a material adverse effect on the Acquired Business.
SECTION 3.18 COMPLIANCE WITH LAWS AND ORDERS. Except as disclosed in
SCHEDULE 3.18, none of ICP, CDS Holdings or Coastline is in violation of or in
default under any Law or Order applicable to it the effect of which,
individually or in the aggregate with other such violations and defaults, could
have a material adverse effect on the Acquired Business.
SECTION 3.19 EMPLOYEE BENEFITS.
(a) DESCRIPTION OF BENEFIT PLANS. SCHEDULE 3.19(a) contains a
true and complete list of the Benefit Plans and identifies each Benefit
Plan that is a Qualified Plan. Except as disclosed on SCHEDULE 3.19(a),
no Benefit Plan provides health or other welfare benefits to former
Employees (except as required under Part 6 of Subtitle B of Title I of
ERISA and Code Section 4980B(f). Except as disclosed on SCHEDULE 3.19(a)
hereto, none of the Benefit Plans obligate Coastline, CDS Holdings or
ICP to pay any separation, severance, termination or similar benefit
solely as a result of any transaction contemplated by this Agreement.
(b) COMPLIANCE. Except as disclosed on SCHEDULE 3.19(b), (i) each
Benefit Plan (and each related trust or insurance contract) complies in
form and in operation in all material respects with its respective
governing documents and the applicable requirements of ERISA and the
Code, any applicable collective bargaining agreements and any other
applicable laws and regulations; (ii) there has been no application for
or waiver of the minimum funding standards imposed by Section 412 of the
Code with respect to any Benefit Plan, and ICP is not aware of any facts
or circumstances that would materially change the funded status
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of any such Benefit Plan; (iii) no asset of Coastline, CDS Holdings or
ICP that is to be acquired by A&C, directly or indirectly, pursuant to
this Agreement is subject to any Lien which arose with respect to any
Benefit Plan under ERISA or the Code; (iv) none of Coastline, CDS
Holdings or ICP has incurred any Liabilities under Title IV of ERISA
(other than for contributions not yet due) or to the PBGC (other than
for payment of premiums not yet due); and (v) to the Knowledge of ICP,
there are no pending or threatened actions, suits, investigations or
claims with respect to any Benefit Plan (other than routine claims for
benefits) which could result in liability to A&C, Coastline or CDS
Holdings (whether direct or indirect) or any facts which could give rise
to (or be expected to give rise to) any such actions, suits,
investigations or claims.
(c) FILINGS. Except as disclosed on SCHEDULE 3.19(c), all
required reports and descriptions (including without limitation Form
5500 Annual Reports, Summary Annual Reports, PBGC-1's, and Summary Plan
Descriptions) have been filed or distributed in a timely manner with
respect to each Benefit Plan. The requirements of Part 6 of Subtitle B
of Title I of ERISA and of Code Sec. 4980B(f) have been met with respect
to each group health plan.
(d) CONTRIBUTIONS. All contributions (including all employer
contributions and employee salary reduction contributions) which are due
have been paid to each Pension Benefit Plan and all contributions for
any period ending on or before the Closing Date which are not yet due
have been paid to each Pension Benefit Plan or accrued in accordance
with the past custom and practice of ICP, CDS Holdings and Coastline.
All premiums or other payments for all periods ending on or before the
date hereof have been paid with respect to each Welfare Benefit Plan (as
defined in ERISA Section 3(1)).
(e) DETERMINATION LETTERS. Each Pension Benefit Plan which is
required to comply with Code Section 401(a) satisfies the requirements
of Code Section 401(a) and has received a favorable determination letter
from the IRS regarding such status and has not, since receipt of the
most recent favorable determination letter, been amended or operated in
a way which would adversely affect such qualified status.
(f) ASSET VALUATION. Except as disclosed on SCHEDULE 3.19(f), no
Pension Benefit Plan (other than any Multiemployer Plan) has an
underfunded benefit obligation as determined under FASB Statement of
Financial Accounting Standards No. 87. No Pension Benefit Plan (other
than any Multiemployer Plan) has been completely or partially terminated
or been the subject of a reportable event as to which notices would be
required to be filed with the PBGC. No proceeding by the PBGC to
terminate any Pension Benefit
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Plan (other than any Multiemployer Plan) has been instituted or, to the
Knowledge of ICP, threatened.
(g) NO PROHIBITED TRANSACTIONS. To the Knowledge of ICP, there
has been no Prohibited Transaction (as defined in ERISA Section 406 and
Code Section 4975) with respect to any Benefit Plan. To the Knowledge of
ICP, no fiduciary with respect to any Benefit Plan has any Liability for
breach of fiduciary duty or any other failure to act or comply in
connection with the administration or investment of the assets of any
Benefit Plan. No material charge, complaint, action, suit, proceeding,
hearing, investigation, claim, or demand with respect to any Benefit
Plan (other than routine claims for benefits) is pending against any of
ICP, CDS Holdings or Coastline and, to the Knowledge of ICP, there is no
basis for any such charge, complaint, action, suit, proceeding, hearing,
investigation, claim, or demand.
(h) DOCUMENTATION. Each of ICP, CDS Holdings and Coastline has
delivered to A&C true and complete copies of (i) the plan documents and
summary plan descriptions for each Benefit Plan to which it is a party,
(ii) the most recent determination letters received from the Internal
Revenue Service for each Qualified Plan applicable to Coastline or CDS
Holdings, (iii) the most recent Forms 5500 Annual Report for each
Benefit Plan applicable Coastline or CDS Holdings, and (iv) all related
trust agreements, insurance contracts, and other funding agreements with
respect to each Benefit Plan applicable to Coastline or CDS Holdings.
(i) MISCELLANEOUS. Except as set forth on SCHEDULE 3.19(i), none
of ICP, CDS Holdings or Coastline is, and none of them have never been,
a member of a controlled group of corporations that, contributes to,
ever has contributed to, or ever has been required to contribute to any
multiemployer plan (as defined in Section 4001(a)(3) of ERISA) (a
"MULTIEMPLOYER PLAN") AND DOES NOT HAVE ANY LIABILITY (INCLUDING
"withdrawal liability as such term is defined in Section 4201 of ERISA)
under any Multiemployer Plan. None of ICP, CDS Holdings or Coastline has
incurred, and none of them has any reason to expect that any of them
will incur, and there are no events or circumstances which could
reasonably be expected to result in any Liability to the PBGC (other
than PBGC premium payments) or otherwise under Title IV of ERISA
(including any withdrawal Liability) or under the Code with respect to
any Pension Benefit Plan that ICP, CDS Holdings or Coastline or any
controlled group of corporations which includes ICP, CDS Holdings or
Coastline maintains or have ever maintained or to which any of them
contributes, has ever contributed, or has ever been required to
contribute. The actions contemplated by this Agreement will not give
rise to any Liability with respect to any "employee welfare benefit
plan" (as such term is defined in Section 3(1) of ERISA) that is a
"multiemployer plan" (as
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such term is defined in Section 3(37) of ERISA). None of ICP, CDS
Holdings or Coastline has any Liability with respect to any "employee
benefit plan" (as defined in Section 3(3) of ERISA) solely by reason of
being treated as a single employer under Section 414 of the Code with
any trade, business or entity other than each other.
SECTION 3.20 PERMITS. SCHEDULE 3.20 contains a true and complete list of
all material Permits of ICP, CDS Holdings, Coastline relating to the operation
of the Acquired Business, with the exception of any permits listed in SCHEDULE
3.22.
SECTION 3.21 INSURANCE POLICIES. SCHEDULE 3.21 contains a true and
complete list of all Insurance Policies maintained by ICP that cover or relate
to the Transferred Assets or the Acquired Business or by Coastline or CDS
Holdings. SCHEDULE 3.21 indicates the owner of each such policy. Each such
Insurance Policy is in full force and effect and all premiums due thereunder
have been paid. None of ICP, CDS Holdings, Coastline or any of their Affiliates
has received any notice of cancellation or termination with respect to any such
Insurance Policy and, to the Knowledge of ICP, none of ICP, CDS Holdings,
Coastline or any of their Affiliates, is in default thereunder in any material
respect.
SECTION 3.22 ENVIRONMENTAL MATTERS.
(a) COMPLIANCE. Except as disclosed on SCHEDULE 3.22(a), each of
ICP, CDS Holdings and Coastline has obtained, and complied with all the
terms and conditions of, all Permits required by any Environmental Law
in connection with the Acquired Business except where the failure to
obtain or comply with any such Permit which could not reasonably be
expected to have, individually or in the aggregate with other such
failures, a material adverse effect on the Acquired Business. Each such
Permit obtained by ICP, CDS Holdings or Coastline is in full force and
effect. ICP (with respect to the Distribution Centers), CDS Holdings and
Coastline are in compliance in all material respects with all applicable
Environmental Laws.
(b) LISTINGS. Except as disclosed in SCHEDULE 3.22(b), to the
Knowledge of ICP, none of the real property leased by ICP (pursuant to
the Facility Leases), CDS Holdings or Coastline is listed on the NPL,
CERCLIS or any similar state or local list of sites requiring
investigation or clean-up.
(c) NO NOTICE. No written notice or, to the Knowledge of ICP,
any other communication from Governmental Authority of any alleged
violation of any Environmental Law has been received by ICP (with
respect to the Distribution Centers) or, to the Knowledge of ICP, by CDS
Holdings or Coastline, except for notices or communications that have
been complied with in all respects.
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(d) Neither this Agreement nor the consummation of the
transactions contemplated hereby shall impose any obligations on A&C,
Coastline or CDS Holdings for site investigation or cleanup, or
notification to or consent of any Governmental Authority or third
parties under any Environmental Laws (including, without limitation, any
so- called "transaction triggered" or "responsible party transfer" laws
and regulations.
(e) To the Knowledge of ICP, except as disclosed on SCHEDULE
3.22(e), none of the following exists at any real property leased by ICP
(pursuant to the Facility Leases) or by Coastline or CDS Holdings:
(i) underground storage tanks or surface
impoundments;
(ii) asbestos-containing materials in any form or
condition; or
(iii) materials or equipment containing
polychlorinated biphenyls.
(f) To the Knowledge of ICP, except as disclosed on SCHEDULE
3.22(f), none of ICP (with respect to the Distribution Centers), CDS
Holdings or Coastline has treated, stored, disposed of, arranged for or
permitted the disposal of, transported, handled or released any
substance (including, without limitation, any Hazardous Substance) or
owned, occupied or operated any facility or property so as to give rise
to Liabilities of ICP (with respect to the Distribution Centers), CDS
Holdings or Coastline for response costs, natural resources damages or
attorneys' fees pursuant to CERCLA or any other Environmental Laws.
(g) Without limiting the generality of the foregoing, to the
Knowledge of ICP, except as disclosed on SCHEDULE 3.22(g), no facts,
events or conditions relating to the real property leased by ICP
(pursuant to the Facility Leases) or by CDS Holdings or Coastline, shall
prevent, hinder or limit continued compliance in all material respects
with Environmental Laws, give rise to any corrective, investigatory or
remedial obligations pursuant to Environmental Laws, give rise to any
other Liabilities pursuant to Environmental Laws (including, without
limitation, those Liabilities relating to onsite or offsite releases or
threatened releases of Hazardous Materials, substances or wastes,
personal injury, property damage or natural resource damage) that could
reasonably be expected to have a material adverse effect upon the
Acquired Business.
(h) Except as disclosed in SCHEDULE 3.22(h), none of ICP (with
respect to the Distribution Centers), CDS Holdings or Coastline has,
either expressly or by operation of Law,
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assumed or undertaken any Liability or corrective, investigatory or
remedial obligation of any other Person relating to any Environmental
Laws. To the Knowledge of ICP, no Lien, whether recorded or unrecorded,
in favor of any Governmental Authority, relating to any Liability of any
of ICP, CDS Holdings or Coastline arising under any Environmental Laws,
has attached to any real property leased by ICP (under a Facility Lease)
or by CDS Holdings or Coastline.
SECTION 3.23 RELATIONSHIP WITH AFFILIATES. Except as set forth in
SCHEDULE 3.23, neither ICP nor any Affiliate of ICP provides or supplies assets,
services or facilities which are individually or in the aggregate material to
the operation of the Acquired Business at the Distribution Centers or to CDS
Holdings or Coastline. Except as disclosed on SCHEDULE 3.23, each of the
transactions listed in SCHEDULE 3.23 is engaged in on an arm's- length basis.
SECTION 3.24 BROKERS. No broker or other representative has acted on
behalf of ICP, CDS Holdings or Coastline in connection with the transaction
contemplated hereby in such manner as to give rise to any valid claim by any
Person against A&C, CDS Holdings or Coastline for a finder's fee, brokerage
commission or similar payment.
SECTION 3.25 NO GUARANTEES. Except as disclosed on SCHEDULE 3.25, no
Liabilities of ICP or any of its Affiliates is guaranteed by or subject to a
similar contingent obligation of either CDS Holdings or Coastline.
SECTION 3.26 BANK ACCOUNTS. SCHEDULE 3.26 sets forth a complete and
correct list containing the names of each bank in which CDS Holdings or
Coastline has an account or safe deposit or lock box, the account or box number,
as the case may be, and the name of every Person authorized to draw thereon or
having access thereto.
SECTION 3.27 CUSTOMERS AND SUPPLIERS. SCHEDULE 3.27 hereto lists the ten
(10) largest vendors and the twenty-five (25) largest customers of Coastline and
of each of the Distribution Centers during the eleven (11) month period ending
November 30, 1996, together with the dollar amount of goods purchased by each
such customer or, in the case of vendors, the dollar amount of goods or services
purchased from such vendor during such period. To the Knowledge of ICP, no
Person listed on SCHEDULE 3.27 has indicated or threatened that it intends to
materially decrease the amount of business that it does with Coastline or the
applicable Distribution Center.
SCHEDULE 3.27 also summarizes all current customer incentive programs
offered or used by or at Coastline or any Distribution Center, whether written
or oral and whether or not deemed or considered to be legally enforceable.
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SECTION 3.28 WARRANTIES AND PRODUCT CLAIMS. SCHEDULE 3.28 summarizes any
differences in the warranties offered by, or the warranty or repair practices
of, or extended warranties offered by, Coastline or any Distribution Center from
those offered by ICP with respect to ICP Products. There is not presently, nor
has there been in the past three (3) years, any failure of any product sold by
Coastline or any Distribution Center which did, or which reasonably could be
expected to, require a general recall or repair or replacement campaign that
could have a material adverse effect upon the Acquired Business.
With the exception of product claims covered by the manufacturer's
warranties, no product liability claim is pending or, to the Knowledge of ICP,
threatened against Coastline, CDS Holdings or ICP (with respect to the Acquired
Business).
SCHEDULE 3.28 also identifies the warranty and warranty services
provided by ICP to the Distribution Centers and Coastline with respect to ICP
Products.
SECTION 3.29 ABSENCE OF UNDISCLOSED LIABILITIES. Except as set forth on
SCHEDULE 3.29, none of ICP (with respect to the Acquired Business), CDS Holdings
or Coastline has any Liability arising out of transactions entered into prior to
the Closing, or any action or inaction prior to the Closing, or any state of
facts existing prior to the Closing other than: (a) Liabilities reflected on the
Financial Statement; (b) Liabilities which have arisen after the date of the
Financial Statement in the Ordinary Course of Business (none of which is a
liability resulting from breach of contract, breach of warranty, tort,
infringement, claim or lawsuit); (c) other Liabilities expressly disclosed in
this Agreement or in the other Schedules to this Agreement or of the type that
would be required to be disclosed in this Agreement or the Schedules hereto but
for the materiality qualifications contained herein; (d) Liabilities that have
been repaid, discharged or otherwise extinguished; or (e) Liabilities that do
not exceed, individually, $25,000 or, collectively, $100,000.
SECTION 3.30 DISCLOSURE. The representations and warranties of ICP
contained in this Agreement and in any schedule, certificate, or agreement
furnished by ICP to A&C pursuant to this Agreement do not contain any untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements herein or therein, in the light of the circumstances
under which they were made, not misleading.
Notwithstanding the fact that the disclosure schedules attached hereto
are numbered and have been prepared to related to specific representations and
warranties contained in this Article III, each of the representations and
warranties made herein is modified and supplemented by each of the disclosures
in the disclosure schedules. Also, the parties agree that ICP shall have no
liability for the untruth or breach of any representations or warranties
contained in this Article III to the extent that A&C, as of the Closing Date,
has knowledge of
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information that would render such representation or warranty untrue, false or
misleading in any respect.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF A&C
A&C hereby represents and warrants to ICP:
SECTION 4.1 ORGANIZATION AND AUTHORITY. Each of A&C and Watsco is a
corporation duly organized, validity existing and in good standing under the
laws of the State of Florida. Each of A&C and Watsco is duly qualified as a
foreign corporation and is in good standing in each jurisdiction where the
character of their respective properties owned or held under lease or the nature
of their respective activities makes such qualification necessary and where the
failure to so qualify would have a material adverse effect upon A&C or Watsco.
A&C has full corporate power and authority to enter into this Agreement and to
consummate the transactions contemplated herein. Watsco has full corporate power
and authority to enter into the Watsco Guaranty.
SECTION 4.2 ARTICLES OF INCORPORATION; BYLAWS. True and complete copies
of the articles of incorporation and by-laws of A&C and Watsco, as amended to
and including the date hereof, have been delivered to ICP.
SECTION 4.3 DUE AUTHORIZATION, EXECUTION AND DELIVERY. A&C has full
corporate authority to execute and deliver this Agreement and the Related
Agreements to which it is party, to perform its obligations hereunder and under
the Related Agreements and to consummate the transactions contemplated hereby
and thereby, and A&C has duly executed and delivered this Agreement. This
Agreement constitutes (and, when executed and delivered, the Related Agreements
to which it is a party will constitute) the legal, valid and binding obligations
of A&C enforceable against it in accordance with its terms, except that such
enforcement (a) may be limited by bankruptcy, insolvency, moratorium or similar
laws affecting creditors' rights generally, and (b) is subject to the
availability of equitable remedies, as determined in the discretion of the court
before which such a proceeding may be brought. Watsco has full corporate
authority to execute and deliver the Watsco Guaranty and, when executed and
delivered, the Watsco Guaranty will constitute the legal, valid and binding
obligation of Watsco enforceable against it in accordance with its terms, except
that such enforcement (a) may be limited by bankruptcy, insolvency, moratorium
or similar laws affecting creditors' rights generally, and (b) is subject to the
availability of equitable remedies, as determined in the discretion of the court
before which such a proceeding may be brought.
SECTION 4.4 CONSENTS; NO CONFLICTS. Except as set forth in SCHEDULE 4.4
and for applicable requirements of the HSR Act and consents and notices that
have been obtained or given, (a) no
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consent, authorization, Permit or approval of any Person or from any
Governmental Authority is required as a condition to the execution and delivery
of this Agreement by A&C or any of the Related Agreements and the consummation
of the transactions contemplated by this Agreement and the Related Agreements by
A&C or for the execution and delivery of the Watsco Guaranty by Watsco, and (b)
the execution and delivery of this Agreement and the Related Agreements by A&C
and the consummation of the transactions contemplated hereby and thereby by A&C,
and the execution and delivery of the Watsco Guaranty by Watsco, will not
conflict with, give rise to a right of termination of, contravene or constitute
a default under, or be an event which with the giving of notice or passage of
time or both will become a default under, or give to others any rights of
termination or cancellation of, or give rise to a right of acceleration of the
performance required by or maturity of, or result in the creation of any Lien,
Liabilities or loss of any rights with respect to A&C or Watsco (which could
reasonably be expected to have a material adverse effect on A&C or Watsco)
pursuant to any of the terms, conditions or provisions of or under, any
applicable Law, the articles of incorporation or by-laws of A&C or Watsco, or
under any Contract binding upon A&C or Watsco or to which any of the assets or
properties of A&C or Watsco is subject.
SECTION 4.5 BROKERS. No broker or other representative has acted on
behalf of A&C in connection with the transaction contemplated hereby in such
manner as to give rise to any valid claim by any Person against ICP for a
finder's fee, brokerage commission or similar payment.
SECTION 4.6 SECURITIES MATTERS.
(a) A&C and Affiliates of A&C have received, read and are
familiar with all information concerning the Shares and the business and
operations of CDS Holdings and Coastline that have been provided to them
for the purpose of making an informed investment decision with respect
to the Shares.
(b) A&C and Affiliates of A&C recognize the highly speculative
nature of an investment in the Shares.
(c) A&C's ultimate parent, Watsco, is an "accredited investor" as
that term is defined in Rule 506 of Regulation D promulgated under the
Securities Act of 1933, as amended, (the "1933 ACT").
(d) A&C and Affiliates of A&C who are assisting A&C have
sufficient knowledge and experience in financial and business matters
such that A&C is capable of evaluating the merits and risks of an
investment in the Shares.
(e) A&C will acquire the Shares for A&C's own account for
investment and not with a view to, or for resale in connection with, any
distribution of the Shares within the meaning of the 1933 Act.
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(f) A&C acknowledges that the Shares are not registered under the
1933 Act and may not be transferred, assigned or otherwise disposed of
unless the Shares are subsequently registered under the 1933 Act or an
exemption from such registration is available.
SECTION 4.7 DISCLOSURE. The representations and warranties of A&C
contained in this Agreement, and in any schedule, certificate or agreement
furnished by A&C pursuant to this Agreement do not contain any untrue statement
of a material fact or omit to state a material fact necessary in order to make
the statements herein or therein, in light of the circumstances under which they
were made, not misleading.
ARTICLE V
ADDITIONAL AGREEMENTS OF ICP OR A&C
SECTION 5.1 ICP'S OPERATION OF BUSINESS. From the date hereof until the
Closing Date, except to the extent A&C otherwise agrees in writing:
(a) ICP shall (and shall cause CDS Holdings and Coastline to)
operate the Acquired Business in the Ordinary Course of Business and use
reasonable commercial efforts to preserve the present business
organization and present relationships with Persons having material
business dealings with the Acquired Business and to retain all Employees
currently employed by ICP at the Distribution Centers or by Coastline or
CDS Holdings.
(b) ICP shall not (and shall cause CDS Holdings and Coastline not
to) take any action or fail to take any action that would cause any of
the representations and warranties made by ICP in this Agreement not to
remain true and correct in all material respects as if made at and as of
the Closing Date.
(c) ICP shall give prompt written notice to A&C (i) of any
material development affecting the Acquired Business or the Transferred
Assets, assets of Coastline or CDS Holdings, or the financial condition,
operations and results of operations of ICP, CDS Holdings and Coastline,
(ii) if any representation or warranty of ICP is or becomes no longer
true in any material respect, and (iii) of any material development
affecting the ability of ICP to consummate the transactions contemplated
by this Agreement.
(d) ICP shall not (and shall cause CDS Holdings and Coastline not
to) engage in any activity other than in the Ordinary Course of Business
which would (i) accelerate the collection of its accounts or notes
receivable, (ii) delay the payment or performance of its accounts
payable or other Transferred Obligations, (iii) delay its capital
expenditures, (iv) reduce or otherwise restrict, or unduly
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increase, the amount of inventory of Coastline or of the inventory
included in the Transferred Assets or (v) terminate, hire or relocate
Employees of the Acquired Business.
(e) ICP shall not (and shall cause CDS Holdings and Coastline
not to):
(i) remove from or sell, lease or otherwise dispose
of, any assets located at any Distribution Center or business
location of Coastline other than Inventory sold in the Ordinary
Course of Business;
(ii) acquire, enter into an option to acquire or
lease or exercise an option or Contract to acquire or lease
additional real property, incur additional indebtedness for
borrowed money or encumber assets;
(iii) in the case of CDS Holdings and Coastline, (A)
amend their respective Articles of Incorporation or Bylaws; (B)
issue, transfer from treasury or allocate any additional shares
of capital stock, effect any stock split, reverse stock split,
stock dividend, recapitalization or other similar transaction; or
(C) grant, confer or award any option, warrant, conversion right
or other right not existing on the date hereof to acquire any
shares of the capital stock of CDS Holdings or Coastline;
(iv) increase any compensation or enter into or amend
any employment agreement or Contract with any Employee or adopt
any new Benefit Plan covering any Employee, amend any existing
Benefit Plan covering any Employee or the individual benefits
provided to any individual Employee in any material respect,
except for changes which are less favorable to participants in
such plans, or terminate any existing Benefit Plan covering any
Employee except as contemplated by this Agreement;
(v) declare or set aside any dividend or any other
distribution or payment with respect to any shares of the capital
stock of CDS Holdings, or make any commitment for any such action
which would be distributed after Closing;
(vi) make any loans, advances or capital
contributions to, or investments in, any other Person;
(vii) to amend, extend or allow to lapse any Contract
listed on SCHEDULE 3.16 or any lease of real or personal property
listed on the Schedules hereto; or
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(viii) enter into any Contract that would have been
required to be disclosed on SCHEDULE 3.16 hereof or any lease for
personal property.
SECTION 5.2 ACCESS TO BOOKS AND RECORDS OF BUSINESS. From the date
hereof until the Closing Date or any earlier termination of this Agreement, ICP
shall (and shall cause CDS Holdings and Coastline to) give A&C and its officers,
employees, counsel, financial advisers, consultants and other representatives
(the "REPRESENTATIVES") access upon reasonable notice and during normal business
hours to the appropriate employees of ICP, CDS Holdings and Coastline, to ICP's,
CDS Holdings' and Coastline's accountants, to ICP's, CDS Holdings' and
Coastline's premises and to furnish A&C, subject to Section 6.1 of this
Agreement, with all such information concerning ICP, CDS Holdings and Coastline
as A&C may reasonably request in order to review the legal, financial and
business condition and affairs of ICP, CDS Holdings and Coastline.
SECTION 5.3 EXCLUSIVITY. Until Closing or until this Agreement is
terminated by its terms, ICP shall not (and shall not cause or permit any of its
Affiliates or Representatives or any other Person acting on behalf of ICP or any
of its Affiliates to) (a) solicit, initiate or encourage the submission of any
proposal or offer from any Person relating to any (i) liquidation, dissolution
or recapitalization of CDS Holdings or Coastline, (ii) merger or consolidation
of CDS Holdings or Coastline with or into any other Person, (iii) acquisition or
purchase of the Shares or any of the Transferred Assets or of any assets of CDS
Holdings or Coastline (other than sales of inventory in the Ordinary Course of
Business), or of any equity interest in, or any rights to acquire equity
interests in or of CDS Holdings or Coastline or (iv) any similar transaction or
business combination involving any of Distribution Centers, CDS Holdings or
Coastline or (b) participate in any discussions or negotiations regarding,
furnish any information with respect to, assist or participate in, or facilitate
in any other manner any effort or attempt by any other Person to do or seek any
of the foregoing. ICP shall (and ICP shall cause each of its Affiliates and
Representatives to) discontinue immediately any negotiations or discussion with
respect to any of the foregoing.
SECTION 5.4 CONSENTS. To the extent that an attempted assignment or
transfer of any Transferred Contract or Equipment Lease to be transferred to and
assumed by A&C hereunder, without the consent of a Person other than ICP (that
is a party thereto) would constitute a breach thereof, this Agreement shall not
constitute an assignment or attempted assignment thereof. In such a case, ICP
shall cooperate with A&C in any reasonable back-to-back arrangements requested
by A&C in order to provide for A&C the benefits intended to be assigned under
any such Transferred Contract or Equipment Lease (unless the third party thereto
rightfully terminates or cancels such Transferred Contract or Equipment Lease),
including, without limitation, the enforcement by ICP for the benefit of A&C of
any and all rights of ICP
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against a third party to such Contract or Equipment Lease arising out of the
breach by such third party or otherwise.
SECTION 5.5 POST-CLOSING RECEIPTS OF ICP. ICP shall hold in trust for,
and immediately remit to A&C, any amounts collected or received by ICP that
relate to any of the Transferred Assets or to sales made on or following the
date hereof and following Closing that relate to the Acquired Business.
SECTION 5.6 A&C DIRECTORS. Following closing and continuing until the
expiration or termination of both of the Distribution Agreements, A&C shall
allow ICP to appoint two (2) representatives to its Board of Directors, such
representatives to be executive officers of ICP. A&C shall cause its Board of
Directors to consist of five (5) Directors during such period.
ARTICLE VI
ADDITIONAL MUTUAL AGREEMENTS
SECTION 6.1 CONFIDENTIALITY. Each party hereto shall, and shall cause
its Affiliates and its Representatives to, (a) hold in strict confidence and not
utilize in its respective business or otherwise all information and documents
concerning any other party or any of its Affiliates ("CONFIDENTIAL INFORMATION")
furnished to it by such other party or its Representatives in connection with
this Agreement or the transactions contemplated hereby except where disclosure
may be required by judicial or administrative process or law or as may be
necessary for each party to enforce its rights under this Agreement (or any
documents executed pursuant hereto). Notwithstanding the foregoing, the
following will not constitute "Confidential Information" for purposes of this
Agreement: (i) Information which was already in the possession of the receiving
party or its Affiliates prior to the date hereof (unless previously furnished
pursuant to a confidentiality agreement), (ii) information which is
independently developed by the receiving party or any Affiliate thereof without
access to the Confidential Information, (iii) information which is obtained or
was previously obtained by the receiving party from a third Person who, insofar
as is known to the receiving party and its Affiliates, is not prohibited from
transmitting the information to the receiving party by a contractual, legal or
fiduciary obligation to the other party or any of its Affiliates, or (iv)
information which is or becomes generally available to the public other than as
a result of a disclosure by the receiving party or any of its Affiliates or
Representatives. Notwithstanding the foregoing, following the Closing, the
foregoing restrictions shall not apply to A&C's use of Confidential Information
in connection with the operation of the Acquired Business.
SECTION 6.2 FURTHER ASSURANCES. Each party agrees to cooperate fully
with the other parties hereto and to execute and deliver or cause to be executed
and delivered at all reasonable times and places such additional instruments and
documents as the
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other party may reasonably request for the purpose of carrying out this
Agreement.
SECTION 6.3 HSR FILINGs. The parties acknowledge that they have made all
filings, reports and documents as may be necessary to comply with the HSR Act in
connection with the transaction contemplated by this Agreement. The parties
shall cooperate with and assist one another to take such action as may be
reasonably required and as permitted under Law in connection with such filings.
SECTION 6.4 TAX AGREEMENTS.
(a) RETURNS AND INCLUSION OF INCOME FOR PERIODS THROUGH THE
CLOSING DATE. ICP shall file the Tax Returns for and include the income
of ICP, CDS Holdings and Coastline, respectively, (including any
deferred income triggered into income by Regulation Section 1.1502-13
and Regulation Section 1.1502-14 and any excess loss accounts taken into
income under Regulation Section 1.1502-19) on ICP's federal consolidated
Tax Returns and on all other Tax Returns for all periods through the
Closing Date and pay any Taxes attributable to such income. The income
of ICP, CDS Holdings and Coastline shall be apportioned to the period up
to and including the Closing Date and the period after the Closing Date
by closing the books of CDS Holdings and Coastline as of the end of the
Closing Date.
(b) COOPERATION. ICP and A&C shall reasonably cooperate, and
shall cause their respective Affiliates, officers, employees, agents,
auditors and Representatives reasonably to cooperate, in preparing and
filing all Tax Returns, including, but not limited to, maintaining and
making available to each other all records necessary in connection with
Taxes and in resolving all disputes and audits with respect to all
taxable periods relating to Taxes. A&C shall furnish Tax information to
ICP for inclusion in ICP's Tax Returns for the period which includes the
Closing Date in accordance with CDS Holdings' and Coastline's past
custom and practice.
(c) AMENDED RETURNS. ICP shall be responsible for filing any
amended consolidated, combined or unitary Tax Returns related to CDS
Holdings and Coastline for all periods ending on the Closing Date which
are required as a result of examination adjustments made by the Internal
Revenue Service or by the applicable state, local or foreign taxing
authorities for such taxable years as finally determined. For those
jurisdictions in which separate Tax Returns are filed by CDS Holdings
and Coastline, any required amended returns resulting from such
examination adjustments, as finally determined, shall be prepared by ICP
and furnished to A&C, or its successor, for approval (which approval
shall not be unreasonably withheld or delayed), signature and filing at
least 30 days prior to the due date
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for filing such returns. Nothing in this Agreement shall require ICP to
amend any Tax Return other than as set forth above.
(d) CARRYBACKS. ICP shall immediately pay to A&C any Tax refund
resulting from a carryback of a post-Closing Tax attribute of CDS
Holdings and Coastline into the ICP consolidated Tax Return, when such
refund is realized by ICP. A&C shall immediately indemnify and hold
harmless ICP from and against any and all Taxes that ICP or any of its
Affiliates may suffer or incur as a result of, arising out of, relating,
in the nature of or caused by disallowance of any such post-Closing Tax
attribute(s), on audit or otherwise. For purposes of this subsection
(d), any Tax attributes carried back by CDS Holdings or Coastline shall
be considered to produce a refund or reduce Tax liability only after all
Tax attributes of ICP and other members of ICP's Affiliated Group have
been used.
(e) ORDINARY CONDUCT. On the Closing Date, A&C shall cause CDS
Holdings and Coastline to conduct their businesses in the ordinary
course in substantially the same manner as presently conducted and on
the Closing Date shall not permit CDS Holdings and Coastline to effect
any extraordinary transactions (other than any such transactions
expressly required by applicable law or expressly permitted by this
Agreement) that could result in Tax Liability to CDS Holdings and
Coastline for periods on or before the Closing Date in excess of Tax
Liability associated with the conduct of its business in the Ordinary
Course of Business.
(f) TAX SHARING AGREEMENTS. ICP shall cause the provisions of any
Tax sharing agreement or policy between ICP and any of its Affiliates
(other than CDS Holdings and Coastline), on the one hand, and CDS
Holdings and Coastline, on the other hand, to be terminated on or before
the Closing Date.
(g) TAXES OF OTHER PERSONS. ICP shall be responsible for and pay
any Liability of CDS Holdings and Coastline for Taxes of ICP or any of
its Affiliates other than CDS Holdings and Coastline under Regulation
Section 1.1502-6 (or any similar provisions of state, local or foreign
law).
SECTION 6.5 REASONABLE EFFORTS TO CLOSE. Each party shall use
commercially reasonable efforts to (a) take or cause to be taken all actions,
and do or cause to be done all things, which are necessary, proper or advisable
to cause any other party's conditions set forth in Articles VII and VIII to be
fully satisfied (but not waived), and (b) consummate and make effective as
promptly as practicable the transactions contemplated by this Agreement,
including using commercially reasonable efforts to obtain the consents and
approvals referred to in Sections 7.7 and 8.6.
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SECTION 6.6 MAINTENANCE OF RECORDS. Inasmuch as certain of ICP's books,
records and documents are to be included as Transferred Assets and sold to A&C
hereunder, and certain other of ICP's books, records and documents relating to
the Acquired Business are to be retained by ICP, and A&C or ICP may have need to
have access to the books, records and documents held by the other after the date
hereof, ICP and A&C agree that each shall maintain (or shall provide for a
designated representative to maintain) for at least six (6) years after the date
hereof (or for such longer period as may be required by applicable law) the
respective books, records and documents sold or retained hereunder. Neither ICP
nor A&C shall destroy or otherwise dispose of any of such books, records, or
documents after the end of the period referred to in the preceding sentence
without first giving ninety (90) days prior written notice to the other of its
intent to so destroy or otherwise dispose thereof, specifying the books, records
and documents involved and giving such other party sixty (60) days within which
such other party, at such other party's expense, may assume physical possession
thereof.
During such six (6) year period, representatives of A&C shall be
permitted to inspect and make copies of any of such books, records, and
documents related to the Acquired Business retained by ICP during normal
business hours and upon reasonable notice for any reasonable business purpose.
During such six (6) year period, representatives of ICP shall be permitted to
inspect and make copies of books, records and documents sold to A&C hereunder
during normal business hours and upon reasonable notice for any reasonable
business purpose.
SECTION 6.7 COOPERATION IN LITIGATION. Each party hereto will reasonably
cooperate with the other party hereto in the defense or prosecution of any
litigation or proceeding (or order or settlement in connection therewith)
already instituted or which may be instituted hereafter against or by any party
hereto relating to or arising out of the conduct of the Acquired Business prior
to the date hereof (other than litigation arising out of the transactions
contemplated by this Agreement). The party requesting such cooperation shall pay
the out-of-pocket expenses (including, but not limited to, reasonable attorneys
fees and expenses) of the party providing such cooperation and of its employees
and agents reasonably incurred in connection with providing such cooperation,
but shall not be responsible to reimburse the party providing such cooperation
for the salaries or costs of fringe benefits or other similar expenses paid by
the party providing such cooperation to its employees and agents while assisting
in the defense or prosecution of any such litigation or proceeding.
Notwithstanding the foregoing, this Section 6.7 shall not apply to any
litigation which is the subject of a claim for indemnification pursuant to
Article IX hereof.
SECTION 6.8 A&C EMPLOYMENT OFFERS. A&C shall offer employment to all of
the Employees of ICP actively employed by ICP at the Distribution Centers on the
Closing Date. Such offers
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shall be at comparable levels of compensation as such Employees enjoyed with ICP
on the date hereof.
SECTION 6.9 BENEFIT PLANS. On or before the Closing Date, Coastline
shall take all action necessary to timely adopt a valid resolution of
Coastline's board of directors to terminate the Pension Benefit Plans sponsored
and maintained by Coastline, effective as of the Closing Date. After the Closing
Date, ICP shall take all action necessary or otherwise appropriate to distribute
the vested accrued benefits of Employees of ICP or its Affiliates participating
in any Pension Benefit Plan sponsored, maintained, or contributed to by ICP
pursuant to the terms of such Pension Benefit Plans and, to the extent
applicable, consistent with the provisions of Code Section 401(k)(10). Except as
described in this Section or as contemplated by any Schedule to this Section,
prior to the Closing, ICP, CDS Holdings, nor Coastline shall adopt or become
obligated under any new Benefit Plan and shall not materially change the terms
of any existing Benefit Plan.
SECTION 6.10 SERVICES AGREEMENT. Promptly after the execution of this
Agreement, the parties agree to negotiate in good faith the scope, terms and
conditions of the Services Agreement. ICP acknowledges that the purpose of the
Services Agreement is to ensure that ICP will continue to provide certain of the
support services to the Distribution Center, CDS Holdings and Coastline that it
provided to them prior to the date hereof for a reasonable period of time after
the Closing Date in order to allow A&C to transition the change in management of
the Acquired Business. A&C agrees to reimburse all reasonable out- of-pocket
costs incurred by ICP in providing such services.
ARTICLE VII
CONDITIONS TO OBLIGATIONS OF A&C
The obligations of A&C to consummate the transactions provided for
herein on the Closing Date are subject to the fulfillment on or before the
Closing Date of each of the following conditions, except to the extent that A&C
may, in its absolute discretion, waive one or more thereof in writing in whole
or in part:
SECTION 7.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties of ICP contained herein shall be true in all
material respects on and as of the Closing Date with the same force and effect
as if made on and as of such date.
SECTION 7.2 PERFORMANCE OF AGREEMENTS. ICP shall have performed in all
material respects all obligations and agreements, and complied in all material
respects with all covenants, contained in this Agreement, to be performed and
complied with by ICP at or prior to the Closing Date.
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SECTION 7.3 CLOSING DELIVERIES. ICP shall have delivered to A&C the
documents and instruments described in Section 2.7.
SECTION 7.4 MATERIAL ADVERSE CHANGE. There shall have been no material
adverse change in the business, operations, properties, condition (financial or
otherwise), business prospects, liabilities or relations with labor, customers
or suppliers of the Acquired Business (as it existed on the date hereof) whether
or not arising in the Ordinary Course of Business.
SECTION 7.5 NO ADVERSE PROCEEDINGS. No action, suit or proceeding before
any Governmental Authority shall have been commenced, no investigation by any
Governmental Authority shall have been commenced, and no action, suit or
proceeding by any Governmental Authority shall have been threatened, against any
of the parties to this Agreement or any of their Affiliates, wherein an
unfavorable judgment, order, decree, stipulation or injunction would (a) prevent
consummation of any of the transactions contemplated by this Agreement, (b)
cause any of the transactions contemplated by this Agreement to be rescinded
following consummation, or (c) adversely affect the right of A&C to own,
operate, or control the Acquired Business, the Transferred Assets or the Shares
following Closing (and no such judgment, order, decree, stipulation, injunction,
or charge shall be in effect.)
SECTION 7.6 OTHER ASSURANCES. ICP shall have delivered to A&C such other
and further certificates, assurances and documents as A&C may reasonably request
in order to evidence the accuracy of the representations and warranties of the
ICP, the performance of covenants and agreements to be performed by ICP pursuant
hereto at or prior to the Closing, and the fulfillment of the conditions to the
obligations of A&C.
SECTION 7.7 CONSENTS AND APPROVALS. All consents, waivers,
authorizations and approvals of any Governmental Authority, domestic or foreign,
and of any other Person required in connection with the execution, delivery and
performance of this Agreement, shall have been obtained and shall be in full
force and effect on the Closing Date and the applicable waiting period under the
HSR Act shall have expired or been terminated.
SECTION 7.8 RESIGNATION OF OFFICERS AND DIRECTORS. All officers and
directors of CDS Holdings and Coastline whose resignations shall have been
requested by A&C prior to the Closing Date shall have submitted their
resignations or been removed from office effective as of the Closing Date.
ARTICLE VIII
CONDITIONS TO OBLIGATIONS OF ICP
The obligations of ICP to consummate the transactions provided for
herein on the Closing Date are subject to the
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fulfillment on or before the Closing Date of each of the following conditions,
except to the extent that ICP may, in its absolute discretion, waive one or more
thereof in writing in whole or in part:
SECTION 8.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties of A&C contained herein shall be true in all
material respects on and as of the Closing Date with the same force and effect
as if made on and as of such date.
SECTION 8.2 PERFORMANCE OF AGREEMENTS. A&C shall have performed in all
material respects all obligations and agreements, and complied in all material
respects with all covenants, contained in this Agreement, to be performed and
complied with by A&C at or prior to the Closing Date.
SECTION 8.3 CLOSING DELIVERIES. A&C shall have delivered to ICP all of
the documents and other deliveries referred to in Section 2.8 hereof.
SECTION 8.4 NO ADVERSE PROCEEDINGS. No action, suit or proceeding before
any Governmental Authority shall have been commenced, no investigation by any
Governmental Authority shall have been commenced, and no action, suit or
proceeding by any Governmental Authority shall have been threatened, against any
of the parties to this Agreement or any of their Affiliates or Coastline wherein
an unfavorable judgment, order, decree, stipulation or injunction would (a)
prevent consummation of any of the transactions contemplated by this Agreement,
(b) cause any of the transactions contemplated by this Agreement to be rescinded
following consummation, or (c) adversely affect the right of A&C to own,
operate, or control the Shares, the Transferred Assets, the Acquired Business,
the Distribution Centers or Coastline following Closing (and no such judgment,
order, decree, stipulation, injunction, or charge shall be in effect.)
SECTION 8.5 OTHER ASSURANCES. A&C shall have delivered to the ICP such
other and further certificates, assurances and documents as the ICP may
reasonably request in order to evidence the accuracy of the representations and
warranties of A&C, the performance of covenants and agreements to be performed
by A&C pursuant hereto at or prior to the Closing, and the fulfillment of the
conditions to the obligations of ICP.
SECTION 8.6 CONSENTS AND APPROVALS. All consents, waivers,
authorizations and approvals of any Governmental Authority, domestic or foreign,
and of any other Person required in connection with the execution, delivery and
performance of this Agreement, shall have been obtained and shall be in full
force and effect on the Closing Date other than consents which A&C shall have
waived and the applicable waiting period under the HSR Act shall have expired or
been terminated.
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SECTION 8.7 PAYMENT. The Closing Payment shall have been paid as
provided in Article II.
ARTICLE IX
SURVIVAL AND INDEMNIFICATION
SECTION 9.1 SURVIVAL. Subject to Section 9.7 hereof the parties hereto
agree that their respective representations and warranties, covenants and
agreements contained in this Agreement shall survive the Closing.
SECTION 9.2 INDEMNIFICATION BY ICP. Subject to the other provisions of
this Article IX, ICP shall indemnify and hold harmless A&C and its Affiliates
from and against any and all Losses suffered or incurred by A&C and its
Affiliates after the Closing as a result of or arising out of:
(a) The falsity or incorrectness of or breach of any
representation or warranty of ICP in this Agreement or in any schedule,
certificate or agreement furnished to A&C by or on behalf of ICP or any
of its Affiliates pursuant to this Agreement;
(b) the failure by ICP or any of its Affiliates to perform any
covenant or agreement of ICP or any of its Affiliates under this
Agreement or under any schedule, certificate or agreement furnished to
A&C by or on behalf of ICP or any of its Affiliates pursuant to this
Agreement; or
(c) the matter described in SCHEDULE 3.17 under the heading
"Robert Sorenson v. Coastline Distributing, Inc."
SECTION 9.3 INDEMNIFICATION BY A&C. Subject to the other provisions of
this Article IX, A&C shall indemnify and hold harmless ICP and its Affiliates
from and against any and all Losses suffered or incurred by ICP and its
Affiliates after the Closing as a result of or arising out of:
(a) The falsity or incorrectness of or breach of any
representation or warranty of A&C or any of its Affiliate in this
Agreement or in any schedule, certificate or agreement furnished to ICP
by or on behalf of A&C or any of its Affiliates pursuant to this
Agreement; or
(b) the failure by A&C or any of its Affiliates to perform any
covenant or agreement of A&C or any of its Affiliates under this
Agreement or under any schedule, certificate or agreement furnished to
ICP by or on behalf of A&C or any of its Affiliates pursuant to this
Agreement.
SECTION 9.4 METHOD OF ASSERTING CLAIMS. All claims for indemnification
by any Indemnified Party under this Article IX shall be asserted and resolved as
follows:
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(a) THIRD PARTY CLAIMS. If any claim or demand in respect of
which an Indemnified Party might seek indemnity under this Article IX is
asserted against such Indemnified Party by a Person (a "THIRD PARTY
CLAIM") other than ICP or A&C (it being understood that claims of
Affiliates of ICP and A&C shall not be considered Third Party Claims),
the Indemnified Party shall give written notice and the details thereof
including copies of all relevant pleadings, documents and information
(collectively a "THIRD PARTY CLAIM NOTICE") to the Indemnifying Party
within a period of thirty (30) days following the assertion of the Third
Party Claim against the Indemnified Party (the "THIRD PARTY CLAIM NOTICE
PERIOD"). If the Indemnified Party fails to provide the Third Party
Claim Notice within the Third Party Claim Notice Period, the
Indemnifying Party will not be obligated to indemnify the Indemnified
Party with respect to such Third Party Claim to the extent that the
Indemnifying Party's ability to defend has been prejudiced by such
failure of the Indemnified Party. The Indemnifying Party will notify the
Indemnified Party within a period of thirty (30) days after its receipt
of the Third Party Claim Notice by the Indemnifying Party (the "THIRD
PARTY CLAIM RESPONSE PERIOD"):
(i) Whether the Indemnifying Party disputes its
liability to the Indemnified Party under this Article IX with
respect to such Third Party Claim; and
(ii) whether the Indemnifying Party desires, at its
sole cost and expense, to defend the Indemnified Party against
such Third Party Claim.
If the Indemnifying Party notifies the Indemnified Party within
the Third Party Claim Response Period that the Indemnifying Party
desires to defend the Indemnified Party against the Third Party Claim,
then the Indemnifying Party at its sole cost and expense shall defend,
with counsel reasonably satisfactory to the Indemnified Party, such
Third Party Claim by all appropriate proceedings, which proceedings will
be diligently prosecuted to a final conclusion or will be settled at the
discretion of the Indemnifying Party (with the consent of the
Indemnified Party which shall not be unreasonably withheld or delayed).
The Indemnified Party will cooperate in such defense at the sole cost
and expense of the Indemnifying Party. The Indemnified Party may, at its
sole cost and expense, at any time prior to the Indemnifying Party's
delivery of the notice referred to in the last sentence of the preceding
paragraph, file any pleadings or take any other action that the
Indemnified Party reasonably believes to be necessary or appropriate to
protect its interests. The Indemnified Party, at its expense, may
participate in, but not control, any defense or settlement of any Third
Party Claim conducted by the Indemnifying Party pursuant to this Section
9.4(a).
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If the Indemnifying Party fails to notify the Indemnified Party
within the Third Party Claim Response Period that the Indemnifying Party
desires to defend the Third Party Claim or if the Indemnifying Party
gives such notice but fails to prosecute diligently or settle the Third
Party Claim, then the Indemnified Party shall defend, at the sole cost
and expense of the Indemnifying Party, the Third Party Claim by all
appropriate proceedings, which proceedings will be prosecuted by the
Indemnified Party in a reasonable manner and in good faith or will be
settled at the discretion of the Indemnified Party (with the consent of
the Indemnifying Party which shall not be unreasonably withheld or
delayed). The Indemnifying Party shall, at its sole cost and expense,
cooperate in such defense. Notwithstanding the foregoing provisions of
this paragraph, if the Indemnifying Party is determined not to be liable
for such Third Party Claim pursuant to the last paragraph of this
Section 9.4(a) and Section 9.4(c), the Indemnifying Party will not be
required to bear the costs and expenses of the Indemnified Party's
defense or the Indemnifying Party's participation therein pursuant to
this paragraph, and the Indemnified Party will reimburse the
Indemnifying Party in full for all reasonable costs and expenses
incurred by the Indemnifying Party in connection with such defense.
If the Indemnifying Party notifies the Indemnified Party that it
does not dispute its liability to the Indemnified Party with respect to
the Third Party Claim under this Article IX or fails to notify the
Indemnified Party within the Third Party Claim Response Period whether
the Indemnifying Party disputes its liability to the Indemnified Party
with respect to such Third Party Claim, the actual Losses as finally
determined will be conclusively deemed a liability of the Indemnifying
Party under this Article IX, and the Indemnifying Party shall pay the
amount of such Losses to the Indemnified Party on demand. If the
Indemnifying Party notifies the Indemnified Party within the Third Party
Claim Response Period that the Indemnifying Party disputes its liability
to the Indemnified Party with respect to such claim, the Indemnifying
Party and the Indemnified Party will proceed in good faith to negotiate
a resolution of such dispute, and if not resolved through negotiations
within a period of thirty (30) days from the date of such notice, such
dispute shall be resolved by arbitration in accordance with Section
9.4(c) hereof.
Notwithstanding the foregoing, ICP and A&C agree that following
Closing A&C shall control the defense and settlement of the matter
described in Section 9.2(c).
(b) OTHER CLAIMS. In the event any Indemnified Party should have
a claim under this Article IX against any Indemnifying Party that does
not involve a Third Party Claim or a claim under Article II for a
purchase price adjustment (which Article contains its own applicable
dispute
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resolution mechanism), the Indemnified Party shall promptly give
written notice and the details thereof, including copies of all relevant
information and documents (collectively, an "INDEMNITY NOTICE"), to the
Indemnifying Party within a period of thirty (30) days following the
discovery of the claim by the Indemnified Party (the "CLAIM NOTICE
PERIOD"). The failure by any Indemnified Party to give the Indemnity
Notice within the Claim Notice Period shall not impair the Indemnified
Party's rights hereunder except to the extent that an Indemnifying Party
demonstrates that it has been prejudiced thereby. The Indemnifying Party
shall notify the Indemnified Party within a period of thirty (30) days
after the receipt of the Indemnity Notice by the Indemnifying Party (the
"INDEMNITY RESPONSE PERIOD") whether the Indemnifying Party disputes its
liability to the Indemnified Party under this Article IX with respect to
such claim. If the Indemnifying Party notifies the Indemnified Party
that it does not dispute the claim described in such Indemnity Notice or
fails to notify the Indemnified Party within the Indemnity Response
Period whether the Indemnifying Party disputes the claim described in
such Indemnity Notice, the actual Losses as finally determined will be
conclusively deemed to be a liability of the Indemnifying Party under
this Article IX and the Indemnifying Party shall pay the amount of such
Losses to the Indemnified Party on demand. If the Indemnifying Party
notifies the Indemnified Party within the Indemnity Response Period that
the Indemnifying Party disputes its liability with respect to such
claim, the Indemnifying Party and the Indemnified Party shall proceed in
good faith to negotiate a resolution of such dispute, and if not
resolved through negotiations within a period of thirty (30) days from
the date of such notice, such dispute shall be resolved by arbitration
at the request of either party in accordance with Section 9.4(c) hereof.
(c) RESOLUTION OF DISPUTES. Any dispute required to be submitted
to arbitration pursuant to this Section 9.4 shall be finally and
conclusively determined in accordance with the Commercial Arbitration
Rules of the American Arbitration Association (the "RULES OF
ARBITRATION") then in effect by the decision of one (1) arbitrator (the
"BOARD OF ARBITRATION") selected in accordance with the Rules of
Arbitration. The Arbitration shall be held in Coconut Grove, Florida and
the arbitrator shall render its decision in writing with respect to and
stating the amount, if any, which the Indemnifying Party is required to
pay to the Indemnified Party in respect of the claim made by the
Indemnified Party. To the extent practical, the decision of the
arbitrator shall be rendered no more than thirty (30) days following
commencement of proceedings with respect thereto. The arbitrator shall
cause its written decision to be delivered to the Indemnified Party and
the Indemnifying Party. Any decision made by the arbitrator (either
prior to or after the expiration of such thirty (30) day period)
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shall be final, binding and conclusive on the Indemnified Party and the
Indemnifying Party and entitled to be enforced to the fullest extent
permitted by law and entered in any court of competent jurisdiction.
ICP and A&C each hereby consent to the jurisdiction of the
foregoing arbitrator and to the non-exclusive jurisdiction of any local,
state or federal court located in either the State of Tennessee or the
State of Florida for the purpose of enforcing the decision or award of
the arbitrator or otherwise. ICP and A&C agree that all service of
process may be made on any such party by personal delivery or by
registered or certified mail addressed to the appropriate party at the
address for such party set forth in Section 11.1 hereof.
All fees, costs and expenses of the Indemnified Party and the
Indemnifying Party in relation to the arbitration, including, but not
limited to, attorneys' fees shall be paid by such parties as determined
by the arbitrator. Each and every arbitration proceeding commenced
pursuant to this Section 9.4(c) shall be consolidated with any
arbitration proceeding simultaneously or previously commenced under this
Section 9.4(c).
SECTION 9.5 CONTINUED LIABILITY FOR INDEMNITY CLAIMS. The liability of
any Indemnifying Party hereunder with respect to claims hereunder shall continue
for so long as any claims for indemnification may be made hereunder pursuant to
Section 9.7 hereof and, with respect to any such indemnification claims duly and
timely made, thereafter until the Indemnifying Party's liability therefor is
finally determined and satisfied.
SECTION 9.6 LIMITATIONS ON INDEMNIFICATION.
(a) CERTAIN TYPES OF DAMAGES. No Indemnifying Party shall be
liable for special or consequential damages, other than those sought to
be recovered against an Indemnified Party in a Third Party Claim.
(b) THRESHOLD AMOUNT. (i) No amount of indemnity shall be payable
in the case of a claim by A&C under Section 9.2(a) or 9.2(c) unless,
until and only to the extent that A&C and its Affiliates has suffered or
incurred Losses aggregating in excess of $50,000 as a result of or
arising out of the matters described in Section 9.2(a) and 9.2(c); and
(ii) no amount of indemnity shall be payable in the case of a claim by
A&C under Section 9.3(a) unless, until and only to the extent that ICP
and its Affiliates has suffered or incurred Losses aggregating in excess
of $50,000 as a result of or arising out of the matters described in
Section 9.3(a).
SECTION 9.7 TIME LIMITS ON CLAIMS. Notwithstanding anything in this
Agreement to the contrary, a claim by any
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Indemnified Party under Section 9.2(a) or 9.3(a) may be made only within
eighteen (18) months following the Closing Date with the exception of (a)
Sections 3.7 and 3.19 with respect to which such representations and warranties
shall survive and claims thereon may be made until the expiration of the
applicable statute of limitation; (b) Section 3.22 with respect to which such
representations and warranties shall survive and claims thereon may be made for
five (5) years following the Closing Date and (c) representations and warranties
regarding matters of title to the Shares and the Transferred Assets included in
the various Sections of this Agreement with respect to which such
representations and warranties shall survive and claims thereon may be made
without any limitation as to time.
Notwithstanding anything in this Agreement to the contrary, any claim
pursuant to Sections 9.2(a) or 9.3(a) not made within the foregoing relevant
time period shall expire and be forever barred thereafter.
SECTION 9.8 SOURCES OF PAYMENT. To the extent any party hereto or any of
its Affiliates is entitled to indemnification for Losses under this Article IX
and such entitlement has either not been disputed by the other party hereto
within the time periods established in this Article IX or any dispute related
thereto has been resolved in favor of such party in accordance with this Article
IX (and such resolution has become final and non-appealable), then such party or
Affiliate may (but shall not be required to) set off such amounts against (and
deduct them from) any amounts owing to the other party or any of its Affiliates
under this Agreement or any Related Agreement but only with respect to any
indemnification right which has been so resolved and become final and
non-appealable. The foregoing right is in addition to any other rights that the
parties may have for indemnification.
ARTICLE X
TERMINATION
SECTION 10.1 GROUNDS FOR TERMINATION. Except as set forth in this
Section 10.1, this Agreement may not be terminated at any time prior to Closing
by either ICP or A&C; PROVIDED that ICP or A&C may terminate this Agreement, by
written notice to other parties to this Agreement, if the Closing shall not have
occurred prior to March 1, 1997, or such later date as may be approved by ICP
and A&C. This Agreement may also be terminated at any time by an agreement in
writing signed by ICP and A&C.
SECTION 10.2 EFFECT OF TERMINATION. If this Agreement is terminated
pursuant to Section 10.1, such termination shall be without liability of any
party, or any shareholder, director, officer, employee, agent, consultant or
representative of such party, to any other parties to this Agreement; PROVIDED
that if such termination shall result from the breach by a party of the
representations, warranties or covenants of such party contained
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in this Agreement, such party shall be liable for any and all Losses sustained
or incurred by the other parties to this Agreement.
SECTION 10.3 TERMINATION FOR BREACH. Nothing in this Article X shall
affect the rights which any party hereto might otherwise have to terminate this
Agreement as a result of a breach hereof by any other party hereto.
ARTICLE XI
MISCELLANEOUS
SECTION 11.1 NOTICES. All notices, requests and other communications
hereunder shall be in writing and will be deemed to have been duly given (a)
when personally delivered, (b) when sent by telefax to a party at the number
listed below for such party, (c) two (2) Business Days after the day on which
the same has been delivered prepaid to a national courier service or (d) three
(3) Business Days after the deposit in the United States mail, registered or
certified, return receipt requested, postage prepaid, in each case addressed to
the party to whom such notice is to be given at the following address for such
party:
If to A&C: A&C Distributors, Inc.
2665 South Bayshore Drive,
Suite 901
Coconut Grove, Florida 33133
Attention: Barry S. Logan
Telefax No.: (305) 858-4492
With a copy to: Moore & Van Allen, PLLC
NationsBank Corporate Center
100 North Tryon Street, Floor 47
Charlotte, North Carolina 28202
Attn: Aaron D. Cowell, Jr.
Telefax No.: (704) 331-1159
If to ICP: Inter-City Products Corporation (US)
650 Heil-Quaker Avenue
Lewisburg, Tennessee 37091
Attention: David P. Cain
Telefax No.: (615) 270-4220
With a copy to: Tuke Yopp & Sweeney
NationsBank Plaza, Suite 1100
414 Union Street
Nashville, Tennessee 37219
Attention: Gary M. Brown
Telefax No.: (615) 313-3310
Any party from time to time may change its address, telefax number or
other information for the purpose of notices to that party by giving notice
specifying such change to the other parties hereto.
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SECTION 11.2 FEES AND EXPENSES. ICP and A&C shall each bear its own
expenses in connection with the negotiation and preparation of this Agreement,
all documents and instruments contemplated hereby, and the consummation of the
transactions contemplated hereby, including without limitation the fees and
expenses of their respective counsel, accountants, investment bankers, finders
and consultants. ICP shall not permit or allow Coastline or CDS Holdings to bear
or pay any such expenses or agree to bear or pay any such expenses except to the
extent they are reflected on the Closing Date Balance Sheet.
SECTION 11.3 PUBLIC ANNOUNCEMENTS. Except as otherwise required by Law,
neither ICP or A&C shall (and each shall cause its respective Affiliates and
Representatives not to) issue any press release or make any other public
announcement with respect to the transactions contemplated hereby without the
approval of the other party, which approval shall not be unreasonably withheld
or delayed.
SECTION 11.4 ENTIRE AGREEMENT. This Agreement supersedes all prior and
contemporaneous discussions and all prior written agreements between the parties
with respect to the subject matter hereof and contains the sole and entire
agreement between the parties hereto with respect to the subject matter hereof.
SECTION 11.5 WAIVER; REMEDIES. Any term or condition of this Agreement
may be waived at any time by the party that is entitled to the benefit thereof,
but no such waiver shall be effective unless set forth in a written instrument
duly executed by or on behalf of the party waiving such term or condition. No
waiver by any party of any term or condition of this Agreement, in any one or
more instances, shall be deemed to be or construed as a waiver of the same or
any other term or condition of this Agreement on any future occasion. All
remedies, either under this Agreement or by Law or otherwise afforded, will be
cumu- lative and not alternative.
SECTION 11.6 AMENDMENT. This Agreement may be amended, supplemented or
modified only by a written instrument duly executed by or on behalf of each
party hereto.
SECTION 11.7 BENEFITS AND BINDING EFFECT. Neither this Agreement nor any
right, interest or obligation hereunder may be assigned by any party hereto
without the prior written consent of the other parties hereto and any attempt to
do so will be void, provided that A&C may assign its rights hereunder for
collateral security purposes to any lenders providing financing to A&C or any of
its Affiliates. Subject to the preceding sentence, this Agreement is binding
upon, inures to the benefit of and is enforceable by the parties hereto and
their respective successors and permitted assigns.
SECTION 11.8 CAPTIONS; REFERENCES. The captions used in this Agreement
(including the exhibits and schedules hereto) have been inserted for convenience
of reference only and do not define
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or limit the provisions hereof. Whenever required by the context, and as used in
this Agreement, the singular number shall include the plural and pronouns and
any variations thereof shall be deemed to refer to the masculine, feminine,
neuter, singular or plural, as the identification the person may require.
References to monetary amounts and specific named statutes and accepted
accounting principles are intended to be and shall be construed as references to
United States dollars, statutes of the United States of the stated name.
SECTION 11.9 EXHIBITS AND SCHEDULES. All exhibits and schedules referred
to in this Agreement, all attachments to exhibits or schedules, and any other
attachment to this Agreement are hereby incorporated by reference into this
Agreement and hereby are made a part of this Agreement as if set out in full.
SECTION 11.10 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the Laws of the State of Tennessee applicable to a
contract executed and performed in such State, without giving effect to the
conflicts of laws principles thereof.
SECTION 11.11 COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, but all of which
together will constitute one and the same instrument.
SECTION 11.12 SEVERABILITY. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction, shall as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
SECTION 11.13 NO THIRD PARTY BENEFICIARY. This Agreement shall not
confer any rights or remedies upon any Person or entity other than the parties
hereto and their respective successors and permitted assigns.
SECTION 11.14 BULK SALES. ICP and A&C hereby waive compliance with the
provisions of Article 6 of the Uniform Commercial Code, entitled "Uniform
Commercial Code -- Bulk Transfers" and comparable Laws relating to bulk
transfers as adopted in the various jurisdictions in which the Transferred
Assets are located, to the extent applicable to the transactions contemplated
hereby. ICP shall indemnify and hold harmless A&C from and against any and all
Losses (without taking into account any of the limitations or conditions
referred to in Article IX hereof) incurred or suffered by A&C or its Affiliates
arising as a result of such waiver or noncompliance.
SECTION 11.15 SURVIVAL. Any provision of this Agreement which
contemplates performance or the existence of obligations
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after the Closing Date, and any and all representations and warranties set forth
in this Agreement, shall not be deemed to be merged into or waived by the
execution and delivery of the instruments executed at the Closing, but shall
expressly survive Closing and shall be binding upon the party or parties
obligated thereby in accordance with the terms of this Agreement, subject to any
limitations expressly set forth in this Agreement.
SECTION 11.16 ATTORNEYS' FEES. In the event any suit or other legal
proceeding is brought for the enforcement of any of the provisions of this
Agreement, the parties hereto agree that the prevailing party or parties shall
be entitled to recover from the other party or parties upon final judgment on
the merits reasonable attorneys' fees (and sales taxes thereon, if any),
including attorneys' fees for any appeal and costs incurred in bringing such
suit or proceeding.
SECTION 11.17 RISK OF LOSS. Prior to the Closing, the risk of loss or
damage to, or destruction of, or destruction of, any and all of the Transferred
Assets or any of the assets of CDS Holdings or Coastline shall remain with ICP,
and the legal doctrine known as the "Doctrine of Equitable Conversion" shall not
be applicable to this Agreement or to any of the transactions contemplated
hereby.
SECTION 11.18 SPECIFIC PERFORMANCE. Each of the parties hereto
acknowledges that the rights of each other party to consummate the transactions
contemplated by this Agreement are special, unique and of extraordinary
character and that, in the event that a party violates or fails and refuses to
perform any covenant or agreement made by it in this Agreement, then each other
party may be without an adequate remedy at law. Each party agrees, therefore,
that in the event it violates or fails and refuses to perform any covenant or
agreement made by it in this Agreement, each other party may, in addition to any
remedies hereunder for damages or other relief, institute and prosecute an
action in any court of competent jurisdiction to enforce specific performance of
such covenant or agreement or seek any other equitable relief.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
INTER-CITY PRODUCTS CORPORATION (USA)
By:________________________________
Name:______________________________
Title:_____________________________
A&C DISTRIBUTORS, INC.
By:________________________________
Name:______________________________
Title:_____________________________
EXHIBIT 23.2
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
As independent certified public accountants, we hereby consent to the
incorporation by reference in this registration statement of our reports dated
March 29, 1996, included in (or incorporated by reference) in Watsco, Inc.'s
Form 10-K for the year ended December 31, 1995 and to all references to our Firm
included in this registration statement.
ARTHUR ANDERSEN LLP
Miami, Florida,
January 22, 1997.
EXHIBIT 23.3
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this registration statement
on Form S-3 of Watsco, Inc. of our report on our audit of the financial
statements of Three States Supply Company, Inc. dated February 5, 1996, except
for the matter discussed in Note 8 as to which the date is April 12, 1996,
included in Watsco, Inc.'s Form 8-K dated April 12, 1996. We also consent to the
reference to our firm under the caption "Experts."
RHEA & IVY, P.L.C.
Memphis, Tennessee
January 22, 1997.
