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CONFIDENTIAL/SUBJECT TO CONFIDENTIALITY AGREEMENT

Confidentiality Agreement

CONFIDENTIAL/SUBJECT TO CONFIDENTIALITY AGREEMENT | Document Parties: BROWN FORMAN CORP | BROWN-FORMAN CORPORATION | DEPARTMENT 56, INC You are currently viewing:
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BROWN FORMAN CORP | BROWN-FORMAN CORPORATION | DEPARTMENT 56, INC

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Title: CONFIDENTIAL/SUBJECT TO CONFIDENTIALITY AGREEMENT
Governing Law: Delaware     Date: 7/27/2005
Industry: Beverages (Alcoholic)     Law Firm: Ogden Newell Welch PLLC;Dorsey Whitney LLP     Sector: Consumer/Non-Cyclical

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CONFIDENTIAL/SUBJECT TO CONFIDENTIALITY AGREEMENT

 

 

 

 

 

 

 

 

 

 

 

                            STOCK PURCHASE AGREEMENT

 

                                     BETWEEN

 

                            BROWN-FORMAN CORPORATION

                                     SELLER

 

                                       AND

 

                               DEPARTMENT 56, INC.

                                      BUYER

 

 

 

 

 

 

 

 

 

                            DATED AS OF JULY 21, 2005

 

 

<PAGE>

 

                                TABLE OF CONTENTS

 

 

ARTICLE 1   CERTAIN DEFINITIONS....................................1

      1.1   Defined Terms..........................................1

      1.2   General Rules of Construction and Interpretation......10

 

ARTICLE 2   PURCHASE AND SALE OF STOCK............................11

      2.1   Sale..................................................11

      2.2   Purchase Price; Initial Payment.......................11

      2.3   Closing Working Capital Statement.....................12

      2.4   Settlement............................................13

      2.5   Expenses..............................................13

 

ARTICLE 3   CLOSING...............................................13

      3.1   Time and Place........................................13

      3.2   Simultaneous Actions..................................13

      3.3   Deliveries by Seller..................................13

      3.4   Deliveries by Buyer...................................14

 

ARTICLE 4   REPRESENTATIONS AND WARRANTIES REGARDING SELLER.......14

      4.1   Organization..........................................14

      4.2   Power.................................................15

      4.3   Authorization.........................................15

      4.4   Noncontravention......................................15

      4.5   Consents..............................................15

      4.6   Stock Ownership.......................................15

      4.7   Litigation............................................15

      4.8   Brokers...............................................16

 

ARTICLE 5   REPRESENTATIONS AND WARRANTIES REGARDING COMPANY......16

      5.1   Organization..........................................16

      5.2   Capitalization........................................16

      5.3   Company Subsidiaries..................................17

      5.4   Noncontravention......................................17

      5.5   Consents..............................................17

      5.6   Financial Statements..................................17

      5.7   Absence of Undisclosed Liabilities....................18

      5.8   Absence of Changes....................................18

      5.9   Real Property.........................................18

      5.10 Company Contracts.....................................19

      5.11 Litigation............................................20

      5.12 Compliance............................................20

      5.13 Environmental.........................................21

      5.14 Employment Matters....................................21

      5.15 Employee Benefit Plans................................22

      5.16 Intercompany Transactions.............................24

      5.17 Intellectual Property.................................24

 

 

                                         i

<PAGE>

 

      5.18 Ownership of Necessary Assets and Rights..............25

      5.19 Tax Matters...........................................25

      5.20 Products..............................................26

      5.21 No Other Representations or Warranties................26

 

ARTICLE 6   REPRESENTATIONS AND WARRANTIES OF BUYER...............27

      6.1   Organization..........................................27

      6.2   Power.................................................27

      6.3   Authorization.........................................27

      6.4   Noncontravention......................................27

      6.5   Consents..............................................27

      6.6   Investment Intent.....................................28

      6.7   Litigation............................................28

      6.8   Brokers...............................................28

      6.9   Financial Capability..................................28

      6.10 Environmental Audits..................................28

      6.11 Non-Reliance..........................................29

 

ARTICLE 7   COVENANTS OF THE PARTIES UNTIL CLOSING................29

      7.1   Conduct of Business Pending Closing...................29

      7.2   Negative Covenants....................................29

      7.3   Access................................................31

      7.4   Consents..............................................31

      7.5   HSR Act...............................................32

      7.6   Public Statements.....................................32

      7.7   Satisfaction of Company Debt..........................32

      7.8   Satisfaction of Conditions............................33

      7.9   No Sale...............................................33

      7.10 No Negotiations.......................................33

 

ARTICLE 8   CONDITIONS TO OBLIGATION OF BUYER.....................34

      8.1   Representations and Warranties........................34

      8.2   Performance of Agreements.............................34

      8.3   Approvals.............................................34

      8.4   Legal Matters.........................................35

      8.5   Material Adverse Effect...............................35

      8.6   Financing.............................................35

 

ARTICLE 9   CONDITIONS TO OBLIGATION OF SELLER....................35

      9.1   Representations and Warranties........................35

      9.2   Performance of Agreements.............................35

      9.3   Approvals.............................................35

      9.4   Legal Matters.........................................35

      9.5   Release of Guarantees.................................36

 

ARTICLE 10 TERMINATION...........................................36

      10.1 Termination...........................................36

 

 

                                       ii

 

<PAGE>

 

      10.2 Effect of Termination.................................36

 

ARTICLE 11 POST-CLOSING COVENANTS; TAX MATTERS...................37

      11.1 Access to Records.....................................37

      11.2 Further Assurances....................................37

      11.3 Tax Matters...........................................37

      11.4 Environmental Obligations.............................43

      11.5 Cash Sweep............................................44

      11.6 Confidentiality.......................................44

      11.7 Noncompete; Nonsolicit................................46

      11.8 Litigation Support....................................48

      11.9 Insurance.............................................48

 

ARTICLE 12 EMPLOYEE MATTERS COVENANTS............................48

      12.1 General...............................................48

      12.2 Welfare Plans.........................................49

      12.3 Severance Benefit.....................................51

      12.4 Omnibus Compensation Plans............................51

 

ARTICLE 13 INDEMNIFICATION.......................................51

      13.1 Survival..............................................51

      13.2 Indemnification.......................................52

      13.3 Third Party Claims....................................55

      13.4 Remedies Exclusive....................................56

      13.5 Recoveries............................................56

      13.6 Characterization......................................57

 

ARTICLE 14 MISCELLANEOUS.........................................57

      14.1 Expenses..............................................57

      14.2 Binding Effect........................................57

      14.3 Entire Agreement; Amendments..........................57

      14.4 Notices...............................................57

       14.5 Counterparts..........................................58

      14.6 Governing Law.........................................59

      14.7 Jurisdiction..........................................59

      14.8 Waivers...............................................59

 

 

                                       iii

 

 

<PAGE>

 

                            STOCK PURCHASE AGREEMENT

 

      This STOCK PURCHASE   AGREEMENT   (this   "AGREEMENT")   is entered into as of

July 21, 2005 by and between   Brown-Forman   Corporation,   a Delaware corporation

("SELLER"); and Department 56, Inc., a Delaware corporation ("BUYER").

 

      WHEREAS,   Seller owns all of the issued and   outstanding   capital stock of

Lenox, Incorporated,   a New Jersey corporation ("COMPANY"),   which Buyer desires

to purchase;

 

      WHEREAS,   Company and Company   Subsidiaries   are engaged   primarily in the

business   of   designing,   marketing   and   manufacturing   dinnerware   and   silver

flatware, collectibles and other tabletop and giftware products (the "BUSINESS,"

but excluding the UK Subsidiary and its business); and

 

      WHEREAS,   this Agreement   sets forth the terms and   conditions   upon which

Seller   will sell to Buyer,   and Buyer   will   acquire   from   Seller,   all of the

outstanding shares of capital stock of Company (the "SHARE PURCHASE");

 

      NOW,   THEREFORE,   in   consideration   of the   mutual   agreements   contained

herein, the parties agree as follows:

 

                                   ARTICLE 1

                              CERTAIN DEFINITIONS

 

     1.1 DEFINED TERMS.   As used in this   Agreement,   the following   terms shall

have the respective meanings set forth below:

 

      "338(H)(10) ELECTIONS" is defined in Section 11.3.

 

      "ADJUSTMENT AMOUNT" is defined in Section 2.2.

 

      "AFFILIATE" means, with respect to any Person,   each Person that controls,

is controlled by or is under common control with such Person. For the purpose of

this   definition,   "control" of a Person shall mean the possession,   directly or

indirectly,   of the power to direct or cause the direction of its   management or

policies,   whether   through the ownership of voting   securities,   by contract or

otherwise.

 

      "AGREEMENT" is defined in the preamble.

 

      "ARBITRATOR" is defined in Section 2.3.

 

      "BALANCE SHEET" and "BALANCE SHEET DATE" are defined in Section 5.6.

 

      "BASE CONSIDERATION" is defined in Section 2.2.

 

      "BASKET" is defined in Section 13.2.

 

      "BUSINESS" is defined in the preamble.

 

 

                                        1

<PAGE>

 

      "BUSINESS DAY" means any day that is not a Saturday, a Sunday or other day

on which banks in   Louisville,   Kentucky are   authorized   or obligated by Law to

close.

 

      "BUYER" is defined in the preamble.

 

      "BUYER DAMAGES" is defined in Section 13.2.

 

      "BUYER   MATERIAL   ADVERSE   EFFECT"   means   any   change,   effect,   event or

occurrence that is materially adverse to the business,   results of operations or

financial condition of Buyer and Buyer's subsidiaries,   viewed as a whole, or on

Buyer's ability to consummate the   transactions   contemplated   hereby;   provided

however,   that none of the following (nor the effects   thereof) shall be deemed,

individually or in the aggregate, to constitute,   and none of the following (nor

the effects   thereof) shall be taken into account in   determining   whether there

has been or will be, a Buyer Material Adverse Effect:

 

           (a)   this Agreement, the transactions   contemplated by this Agreement

                or the announcement thereof;

 

            (b)   changes or conditions   affecting   the United   States   economy or

                financial markets or foreign economies or financial markets;

 

           (c)   changes in or developments in any industry in which Buyer or any

                Buyer   subsidiary    operates   or   changes   in   customer   demand,

                including    seasonal    changes    (provided   that   Buyer   is   not

                disproportionately   affected   thereby   as   compared   to its peer

                companies); or

 

            (d)   changes or   conditions   resulting   from   political or regulatory

                conditions, acts of war, terrorism, escalation of hostilities or

                earthquakes or other natural occurrences.

 

      "BUYER PARTIES" means,   collectively,   Buyer and its officers,   directors,

employees, subsidiaries,   Affiliates (including Company and Company Subsidiaries

from and after   the   Closing)   and their   respective   successors   and   permitted

assigns.

 

      "BUYER TAX INDEMNITEE" is defined in Section 11.3.

 

      "BUYER'S ACCOUNTANTS" is defined in Section 2.3.

 

      "BUYER'S NOTICE" is defined in Section 2.3.

 

      "CAP AMOUNT" is defined in Section 13.2.

 

      "CAUSE" means (a) conviction of the   applicable   employee for committing a

felony under federal law or the law of the state in which such action   occurred,

(b)   dishonesty or gross   negligence in the course of fulfilling   the applicable

employee's   employment duties, or (c) willful and deliberate failure on the part

of the   applicable   employee   to   perform   his or her   employment   duties in any

material respect.

 

 

                                        2

<PAGE>

 

      "CLAIM" is defined in Section 13.3.

 

      "CLOSING"   means the   closing   of the   transactions   contemplated   by this

Agreement as described in Article 3.

 

      "CLOSING DATE" means the date on which the Closing actually occurs.

 

      "CLOSING WORKING CAPITAL STATEMENT" is defined in Section 2.3.

 

      "COBRA   COVERAGE"   means   the   continuation   coverage   requirements   under

Section 4980B of the Code and Part 6 of Title I of ERISA.

 

      "CODE" means the Internal Revenue Code of 1986, as amended.

 

      "COMMITMENT LETTER" is defined in Section 6.9.

 

      "COMPANY" is defined in the preamble.

 

      "COMPANY   CONTRACTS"   means the Contracts set forth on Section 5.10 of the

Disclosure Schedule (and additional Contracts entered into after the date hereof

which would be   required   to be   identified   in Section   5.10 of the   Disclosure

Schedule if they were in effect on the date hereof).

 

      "COMPANY   MATERIAL   ADVERSE   EFFECT"   means any change,   effect,   event or

occurrence that is materially adverse to the business,   results of operations or

financial   condition   of Company   and Company   Subsidiaries,   viewed as a whole;

provided however,   that none of the following (nor the effects thereof) shall be

deemed,   individually   or in the   aggregate,   to   constitute,   and   none   of the

following   (nor the effects   thereof) shall be taken into account in determining

whether there has been or will be, a Company Material Adverse Effect:

 

           (a)   this Agreement, the transactions   contemplated by this Agreement

                or the announcement   thereof,   including   disclosure of the fact

                that Buyer is the prospective buyer of Company;

 

           (b)   Buyer's   announcement   or   other   disclosure   of   its   plans   or

                intentions with respect to the conduct of the Business;

 

           (c)   changes,   conditions,   events,   effects or occurrences affecting

                the   United   States   economy   or   financial   markets   or foreign

                economies or financial markets;

 

           (d)   changes,   conditions,   events,   effects   or   occurrences   in   or

                developments   in any   industry   in which   Company or any Company

                Subsidiary   operates   or changes in customer   demand,   including

                seasonal    changes    (provided    that    the    Business    is   not

                disproportionately   affected   thereby   as   compared   to its peer

                companies);

 

 

                                        3

<PAGE>

 

           (e)   changes,   conditions,   events,   effects or occurrences resulting

                from political or regulatory conditions, acts of war, terrorism,

                escalation   of   hostilities   or   earthquakes   or   other   natural

                occurrences;

 

           (f)   changes,   conditions,   events,   effects   or   occurrences   to the

                extent   predominantly   arising from any action taken by Buyer or

                any of its Affiliates;

 

           (g)   any change,   condition,   occurrence,   effect or event   resulting

                from   Buyer's   refusal   to   consent   to   Company   or   a   Company

                Subsidiary   taking any action   otherwise   prohibited   by Section

                7.2; or

 

           (h)   any change in Laws or GAAP accounting rules.

 

      "COMPANY PLAN" is defined in Section 5.15.

 

      "COMPANY   SUBSIDIARY"   means   each   entity   listed on   Section   5.3 of the

Disclosure Schedule,   provided,   however, that such term does not include the UK

Subsidiary.

 

      "CONFIDENTIAL INFORMATION" is defined in Section 11.6.

 

      "CONFIDENTIALITY   AGREEMENT"   means the letter agreement dated as of March

2, 2005, entered into between Seller and Buyer.

 

      "CONTRACT" means any written contract,   lease,   undertaking,   agreement or

other arrangement to or under which Company or any Company Subsidiary is legally

bound, including any and all amendments and modifications thereto.

 

      "DISCLOSURE SCHEDULE" is defined at the beginning of Article 4.

 

      "EMPLOYEE BENEFICIARIES" is defined in Section 12.1.

 

      "ENCUMBRANCE"   means   any   mortgage,   pledge,   claim,   security   interest,

encumbrance,   lien,   assessment,   conditional   sale   or   other   title   retention

agreement, whether consensual, statutory or otherwise.

 

      "ENVIRONMENTAL   CLAIM" means any Proceeding seeking   Environmental Damages

or an order,   injunction   or   similar   relief   against   Company   or any   Company

Subsidiary by any Person, arising out of, based on, or resulting from any actual

or threatened (a) release or disposal,   or the presence in the   environment,   of

any Hazardous   Substances by Company or any Company   Subsidiary at any location,

(b) circumstances forming the basis of any violation,   or alleged violation,   of

any Environmental   Laws by Company or any Company   Subsidiary or (c) exposure to

any Hazardous Substances caused by Company or any Company Subsidiary.

 

      "ENVIRONMENTAL    DAMAGES"   means   any   and   all   liabilities,    costs   and

expenditures   (including any fees and expenses of attorneys and of environmental

consultants or engineers, and any fees, fines, penalties or charges imposed by a

Governmental Body) incurred in connection

 

 

                                        4

 

<PAGE>

 

with (i) any violation or alleged   violation of Environmental   Laws, or (ii) the

defense,   Remediation   or other   required   response to any Release of   Hazardous

Materials.

 

      "ENVIRONMENTAL LAWS" means all applicable Laws as in effect as of the date

hereof   (a)   related   to   Releases   or   threatened   Releases   of   any   Hazardous

Substances in soil,   surface   water,   groundwater or air, (b) governing the use,

treatment, storage, disposal, transport, or handling of Hazardous Substances, or

(c)   related   to the   protection   of the   environment,   human   health or natural

resources.   Such   Environmental   Laws   include   the   Resource   Conservation   and

Recovery   Act,   the   Comprehensive   Environmental   Response,    Compensation   and

Liability Act, the Toxic Substances   Control Act, the Clean Water Act, the Clean

Air Act, the Safe   Drinking   Water Act,   the   Emergency   Planning and   Community

Right-to-Know Act, and their respective state and local counterparts.

 

      "ENVIRONMENTAL    SITES"   means   such   Properties   of   Company   or   Company

Subsidiaries   and   other   locations   as are set   forth   at   Section   5.13 of the

Disclosure Schedule.

 

      "ERISA"   means the Employee   Retirement   Income   Security Act of 1974,   as

amended.

 

      "ERISA AFFILIATE"   means,   with respect to any entity,   trade or business,

any other   entity,   trade or business   that is, or was at the   relevant   time, a

member of a group   described in Section   414(b),   (c), (m) or (o) of the Code or

Section 4001(b)(1) of ERISA that includes or included the first entity, trade or

business,   or that   is,   or was at the   relevant   time,   a   member   of the   same

"controlled   group" as the first entity,   trade or business   pursuant to Section

4001(a)(14) of ERISA.

 

      "FINANCIAL STATEMENTS" is defined in Section 5.6.

 

      "FORM 8023" is defined in Section 11.3.

 

      "FORM 8883" is defined in Section 11.3.

 

      "GAAP" means, as of any date, generally accepted accounting   principles in

the United States as in effect on such date.

 

      "GOVERNMENTAL AUTHORIZATIONS" is defined in Section 5.12.

 

      "GOVERNMENTAL   BODY"   means   any   United   States   or   foreign,    national,

multinational,   federal, state, provincial or local governmental,   regulatory or

administrative   authority,   agency or commission or any court or self-regulatory

organization,   tribunal or judicial or arbitral body and any   instrumentality of

any of the foregoing.

 

      "HAZARDOUS   SUBSTANCE" means all hazardous or toxic substances,   wastes or

materials,   any pollutants or   contaminants   (including all oil and petroleum of

any kind and in any form,   asbestos and raw materials   which   include   hazardous

constituents),   or any other similar substances, or materials which are included

under or regulated by any applicable Environmental Law.

 

 

                                        5

<PAGE>

 

      "HSR ACT" means the Hart-Scott-Rodino   Antitrust Improvements Act of 1976,

as amended.

 

      "INCOME   TAXES" means U.S.   federal,   state or local net income or capital

gain   Taxes,   together   with any   interest or   penalties   imposed   with   respect

thereto.

 

      "INDEMNIFIED PARTY" is defined in Section 13.3.

 

      "INDEMNIFYING PARTY" is defined in Section 13.3.

 

      "INITIAL PAYMENT" is defined in Section 2.2.

 

      "INTELLECTUAL   PROPERTY"   means   all of the   following   owned   or   used by

Company or any Company Subsidiary in the operation of their business:

 

           (a)   United   States   and   foreign    trademarks,    service   marks   and

                trademark and service mark registrations and applications, trade

                names, logos, trade dress and slogans,   and all goodwill related

                to the foregoing;

 

           (b)   patent    applications,    patents,    inventions,     improvements,

                know-how,    formula    methodology,    research   and   development,

                business   methods,   processes,   technology   and   software in any

                jurisdiction,   including   re-issues,   continuations,   divisions,

                continuations-in-part, renewals or extensions;

 

           (c)   trade secrets;

 

           (d)   copyrights in writings,   designs,   software, mask works or other

                works, applications or registrations in any jurisdiction for the

                foregoing,   other   original   works of   authorship   and all moral

                rights related thereto; and

 

           (e)   Internet web sites, web pages, domain names and applications and

                 registrations   pertaining   thereto   (excluding   any   third-party

                websites linked to or from the websites of Company).

 

      "KNOWLEDGE OF SELLER" means such facts and other   information   that, as of

the date of this   Agreement,   are known to any of the   individuals   set forth in

Section   1.1A   of the   Disclosure   Schedule   after   review   of   this   Agreement,

including the Disclosure Schedule.

 

      "LAW" means any law,   statute,   ordinance,   regulation,   judgment,   order,

award or other decision or requirement of any Governmental Body.

 

      "LEASED   PROPERTIES"   means any real property that is leased by Company or

any Company Subsidiary.

 

      "LIST" means the United States Environmental   Protection Agency's National

Priorities List of Hazardous   Waste Sites or any other list,   official record or

determination made by any Governmental   Entity schedule log, inventory or record

maintained by any Governmental   Entity   identifying any sites at which there has

been a Release of Hazardous Materials.

 

 

                                        6

<PAGE>

 

      "LOSSES" is defined in Section 13.2.

 

      "MULTIEMPLOYER   PLAN" means any "multiemployer plan" within the meaning of

Section 4001(a)(3) of ERISA.

 

      "MULTIPLE   EMPLOYER PLAN" means any Plan that has two or more contributing

sponsors at least two of whom are not under common   control,   within the meaning

of Section 4063 of ERISA.

 

      "OTHER ANTITRUST REGULATIONS" is defined in Section 7.4.

 

      "OTHER PARTY" is defined in Section 11.7.

 

      "OTHER TAXES" means any Taxes other than Income Taxes.

 

      "OWNED   PROPERTIES" means any real property that is owned in fee simple by

Company or any Company Subsidiary.

 

      "PERMITS" is defined in Section 5.13.

 

      "PERMITTED ENCUMBRANCES" means

 

           (a)   Encumbrances for Taxes (and   assessments and other   governmental

                charges   or   levies)   not   yet due   and   payable   or due but not

                delinquent   or being   contested   in good   faith   by   appropriate

                proceedings;

 

           (b)   mechanics', builders', workmen's,   repairmen's,   warehousemen's,

                landlord's,   carriers'   or other   like   Encumbrances   (including

                Encumbrances   created by operation of law) with respect to which

                Company or any Company   Subsidiary   is not in default in payment

                or which are being contested by Company or a Company   Subsidiary

                in good faith;

 

           (c)   Encumbrances   in   respect   of   easements,    permits,    licenses,

                right-of-way,    restrictive    covenants   or    encroachments    or

                irregularities in, and other similar exceptions to title;

 

           (d)   zoning,    entitlement,    building,    planning,    land    use   and

                environmental restrictions or regulations and other Laws;

 

           (e)   Encumbrances   with respect to debt or other liabilities that are

                reflected on the Balance Sheet;

 

           (f)   such   other    imperfections    in   title,    easements,    charges,

                restrictions   and Encumbrances   which do not materially   detract

                from,   materially diminish the value of or materially   interfere

                with the present use of the affected property; and

 

           (g)   Encumbrances consented to by Buyer.

 

 

                                        7

<PAGE>

 

      "PERSON"   means an   individual,   a   partnership   (general or   limited),   a

corporation, a limited liability company, an association, a joint stock company,

Governmental   Body,   a   business   or other   trust,   a joint   venture,   any other

business entity or an unincorporated organization.

 

      "PLAN" is defined in Section 5.15.

 

      "PROCEEDING" means any suit, proceeding,   action, arbitration,   complaint,

decree or lawsuit before or involving any third party or Governmental Body.

 

      "PROPERTIES"   means   the   Leased   Properties   and   the   Owned   Properties,

collectively.

 

      "PROPOSED ADJUSTMENT" is defined in Section 2.3.

 

      "PURCHASE PRICE" is defined in Section 2.2.

 

      "QUALIFIED PLAN" is defined in Section 5.15.

 

      "QUALIFYING   TERMINATION"   shall mean a termination of the employment of a

Company employee

 

           (a)   if   terminated   by   Buyer   or   its   Affiliates,    other   than   a

                termination for Cause; or,

 

           (b)   if terminated by the Company   employee   following a reduction in

                base   salary   or a   required   relocation   that   would   move such

                 Company employee's principal place of employment by more than 50

                miles.

 

      "RELEASE" means the spilling, leaking, disposing,   discharging,   emitting,

depositing,    ejecting,    leaching,   escaping   or   any   other   release,   whether

intentional or unintentional, of any Hazardous Material.

 

      "REMEDIATION"   means   any   investigative,    response,   removal,   remedial,

treatment,   cleanup,   disposal,   monitoring   and other   corrective   actions with

respect   to   environmental   matters,   including   the   Release   of any   Hazardous

Material.

 

      "REPORTS" is defined in Section 5.13.

 

      "SELLER" is defined in the preamble.

 

      "SELLER DAMAGES" is defined in Section 13.2.

 

      "SELLER   GROUP"   means   Seller and any   subsidiary   of Seller,   other than

Company or any Company Subsidiary.

 

      "SELLER PARTIES" means,   collectively,   Seller, its Affiliates (including,

prior to   Closing,   Company   and the   Company   Subsidiaries),   their   respective

officers, directors and employees, and their respective successors and permitted

assigns.

 

      "SELLER RESTRICTED BUSINESS" is defined in Section 11.7.

 

 

                                        8

<PAGE>

 

      "SELLER TAX INDEMNITEE" is defined in Section 11.3.

 

      "SELLER'S ACCOUNTANTS" is defined in Section 2.3(b).

 

      "SHARE PURCHASE" is defined in the preamble.

 

      "SHARES" is defined in Section 2.1.

 

      "SUBSIDIARY"   means, with respect to any Person, any other Person of which

such   Person   (either   alone or through or together   with any other   subsidiary)

owns, directly or indirectly, a majority of the outstanding equity securities or

securities or interests   carrying a majority of the voting power in the election

of the board of directors or other governing body of such Person.

 

      "SURVIVAL DATE" is defined in Section 13.1.

 

      "SURVIVING ENTITY" is defined in Section 11.7.

 

      "TAX" OR "TAXES" means

 

           (a)   all taxes,   levies or other   assessments   of any kind or nature,

                including    U.S.,    state,    local   and   foreign   income   taxes,

                withholding   taxes,   branch profit taxes,   gross receipts taxes,

                franchise taxes,   transfer taxes, sales and use taxes,   business

                and occupation taxes, license taxes, property taxes, VAT, custom

                duties or imposts,   stamp taxes,   excise taxes,   payroll   taxes,

                employment taxes,   estimated taxes,   severance taxes,   occupancy

                taxes, intangible taxes and capital taxes;

 

           (b)   any   interest   or   penalties,   additions   to tax   or   additional

                amounts   imposed in   connection   with any item   described in the

                foregoing    clause   (a)   or   the   failure   to   comply   with   any

                 requirement imposed with respect to any Tax Return; and

 

           (c)   any obligation   with respect to Taxes described in the foregoing

                clause   (a) or (b)   payable   by reason of being a   successor   or

                indemnitor   or by reason   of   contract,   assumption,   transferee

                liability, operation of Law, Treasury Regulation ss.1.1502-6 (or

                any predecessor or successor thereof or any analogous or similar

                provision under Law) or otherwise.

 

      "TAX AFFILIATES" is defined in Section 5.19.

 

      "TAX   BENEFIT"   means   the Tax   effect of any item of loss,   deduction   or

credit or any other item which   decreases Taxes paid or payable or increases tax

basis,   including any interest with respect   thereto or interest that would have

been payable but for such item, net of any tax detriment associated therewith.

 

      "TAX   ITEM"   means any item of   income,   gain,   loss,   deduction,   credit,

recapture of credit or any other item which increases or decreases Taxes paid or

payable,   including an adjustment under Section 481 of the Code resulting from a

change in accounting method.

 

 

                                        9

<PAGE>

 

      "TAX   PROCEEDING"   means any Tax audit,   contest,   litigation,   defense or

other proceeding with or against any Taxing Authority.

 

      "TAX RETURN" OR "RETURN" means any return, report, declaration, statement,

extension, form or other documents or information filed with or submitted to, or

required to be filed with or submitted to, any   Governmental   Body in connection

with the determination, assessment, collection or payment of any Tax.

 

      "TAXING AUTHORITY" means any Governmental Body exercising any authority to

impose, regulate, or administer the imposition of Taxes.

 

      "THRESHOLD AMOUNT" is defined in Section 13.2.

 

      "TRANSITION SERVICES AGREEMENT" means the agreement referred to in Section

3.3(c).

 

      "TREASURY REGULATION" means the regulations   promulgated under the Code by

the United States Department of Treasury.

 

      "UK SUBSIDIARY" means Brooks & Bentley Limited, an English private company

limited by shares.

 

      "WELFARE   BENEFITS" shall mean the types of benefits   described in Section

3(1) of ERISA (whether or not covered by ERISA).

 

      "WELFARE   PLAN" shall mean any   employee   welfare   benefit plan within the

meaning of Section 3(1) of ERISA.

 

      "WITHDRAWAL LIABILITY" means liability to a Multiemployer Plan as a result

of a complete or partial withdrawal from such Multiemployer Plan, as those terms

are defined in Part I of Subtitle E of Title IV of ERISA.

 

     1.2 GENERAL RULES OF CONSTRUCTION AND INTERPRETATION.

 

          (a) The words "hereof," "herein," and "hereunder" and words of similar

import,   when used in this   Agreement,   shall refer to this Agreement as a whole

and not to any particular provision of this Agreement.

 

          (b) Terms defined in the singular shall have a comparable meaning when

used in the plural, and vice versa.

 

          (c) Any   reference to a   particular   gender shall be deemed to include

all other genders unless the context otherwise requires.

 

          (d) Headings   contained in this   Agreement are for reference   purposes

only and   shall not   affect in any way the   meaning   or   interpretation   of this

Agreement.

 

          (e) Unless an express reference is made to a different   document,   all

references   to a Section or Article will be understood to refer to the indicated

Section or Article of this

 

 

                                       10

<PAGE>

 

Agreement,   and all   references   to a Schedule or Exhibit will be   understood to

refer to the indicated Schedule or Exhibit to this Agreement.

 

          (f) Whenever the word "include,"   "includes" or "including" is used in

this   Agreement,   it   shall be   deemed   to be   followed   by the   words   "without

limitation."

 

          (g) In the event of an alleged   ambiguity   or a question   of intent or

interpretation,   this Agreement   shall be construed as if drafted jointly by the

parties   and   no   presumption   or   burden   of   proof   shall   arise   favoring   or

disfavoring   any party by virtue of the   authorship   of any   provisions   of this

Agreement.

 

          (h) The word "will"   shall be   construed   to have the same meaning and

effect as the word "shall."

 

          (i) The   Disclosure   Schedule,   and all other   Schedules   and Exhibits

attached hereto or referred to herein are hereby incorporated in and made a part

of this Agreement as if set forth in full herein.   Any capitalized terms used in

the   Disclosure   Schedule or any other Schedule or any Exhibit but not otherwise

defined therein shall have the meaning defined in this Agreement.

 

                                   ARTICLE 2

                           PURCHASE AND SALE OF STOCK

 

     2.1 SALE.   Upon the terms and subject to the conditions of this   Agreement,

on the Closing Date, Seller shall sell,   assign,   transfer and deliver to Buyer,

and   Buyer   shall   purchase   and   accept   from   Seller,   all of the   issued   and

outstanding capital stock of Company, consisting of 1000 shares of Common Stock,

par value $1 per share (the "SHARES"), free and clear of all Encumbrances.

 

     2.2   PURCHASE PRICE; INITIAL PAYMENT.

 

          (a) The purchase price (the   "PURCHASE   PRICE") to be paid by Buyer to

Seller   for   the   Shares    shall   be   One    Hundred    Ninety    Million    Dollars

($190,000,000.00) (the "BASE CONSIDERATION") plus the Adjustment Amount.

 

          (b) The   "ADJUSTMENT   AMOUNT"   (which   may be a positive   or   negative

number)   will be   equal   to the   working   capital   of   Company   and the   Company

Subsidiaries as determined from the Closing Working Capital   Statement   prepared

in accordance   with Section 2.3, minus Ninety Six Million Nine Hundred   Thousand

Dollars ($96,900,000.00).

 

           (c) At Closing,   Buyer will deliver to Seller,   as an initial   payment

(the "INITIAL   PAYMENT") of the Purchase   Price, an amount equal to (i) Seller's

estimate   of the   Adjustment   Amount,   estimated   on the   basis   of the   interim

unaudited balance sheet of Company and Company Subsidiaries as at the end of the

most recently   ended month for which such balance sheet is available at Closing,

estimated as though the end of such month were the Closing   Date,   plus (ii) the

Base Consideration.

 

 

                                        11

<PAGE>

 

     2.3 CLOSING WORKING CAPITAL STATEMENT.

 

          (a) As promptly as   practicable   following the Closing,   but not later

than 60 days thereafter, Seller shall

 

               (1)   prepare and deliver to Buyer a statement of the consolidated

                    current   assets and current   liabilities   of Company and the

                    Company Subsidiaries as of the close of business on the last

                    business   day    immediately    preceding   the   Closing   Date,

                    including   a   calculation   of   the   Adjustment   Amount   (the

                    "CLOSING   WORKING   CAPITAL    STATEMENT"),    which   shall   be

                    prepared in accordance   with   SCHEDULE 2.3 attached   hereto;

                    and

 

               (2)   deliver to Buyer a report of   PricewaterhouseCoopers   LLP or

                    another nationally-recognized   independent public accounting

                    firm   selected by Seller   ("SELLER'S   ACCOUNTANTS")   stating

                    that the Closing Working Capital Statement has been prepared

                    in accordance with SCHEDULE 2.3.

 

          (b)   Buyer   may   cause   another   independent   public   accounting   firm

selected by Buyer   ("BUYER'S   ACCOUNTANTS"),   to conduct a review of the Closing

Working   Capital   Statement.   Representatives   of Buyer and Buyer's   Accountants

shall have   reasonable   access to all journal   entries and other records used by

Seller in its preparation of the Closing Working   Capital   Statement.   Within 45

days after Buyer's receipt of the Closing   Working Capital   Statement and report

of   Seller's   Accountants,   Buyer shall   deliver   written   notice (the   "BUYER'S

NOTICE") to Seller   either (i) stating   that Buyer   accepts the Closing   Working

Capital Statement or (ii) describing in reasonable detail,   including the nature

and   amount   thereof,   each   adjustment   (a   "PROPOSED   ADJUSTMENT")   that Buyer

proposes be made to the Closing Working Capital   Statement;   PROVIDED,   HOWEVER,

that Buyer's   Notice of any Proposed   Adjustment   shall not be effective   unless

accompanied   by a special report of Buyer's   Accountants   stating that each such

Proposed   Adjustment   is required   to be made in order for the   Closing   Working

Capital   Statement   to have been   prepared   in   accordance   with   SCHEDULE   2.3.

Furthermore,   the Closing Working Capital   Statement shall not be subject to any

adjustment   unless   the   aggregate   amount of all such   adjustments   as   finally

determined   exceeds   $300,000;    PROVIDED,   that,   if   such   adjustments   exceed

$300,000,   then the final amount of such   adjustments (and not merely the excess

over $300,000) shall be included in the Closing   Working   Capital   Statement and

the final   determination   of the Adjustment   Amount.   If Seller has not received

Buyer's Notice within such 45-day period, Buyer shall be deemed to have accepted

the amount of the working capital and the   calculation of the Adjustment   Amount

set forth in the Closing Working Capital Statement.

 

          (c) If Buyer's Notice contains any Proposed Adjustment, then Buyer and

Seller   shall   negotiate in good faith to resolve such   Proposed   Adjustment   in

accordance with this   Agreement,   PROVIDED that if the parties have not resolved

all Proposed   Adjustments   within 30 days following   Seller's receipt of Buyer's

Notice, then Buyer and Seller shall engage Ernst & Young LLP (provided it is not

serving   as   Buyer's    Accountants)   or   another   mutually   acceptable   firm   of

independent   public   accountants   of   nationally    recognized    reputation   (the

"ARBITRATOR"). The Arbitrator shall act as an arbitrator to determine only those

Proposed Adjustments still in

 

 

                                       12

<PAGE>

 

dispute   and   the   resulting    computation   of   the   Adjustment   Amount,    which

determination   shall be made in   accordance   with the   terms of this   Agreement,

rendered within 60 days of the Arbitrator's   engagement,   and shall be final and

binding on all parties.

 

     2.4 SETTLEMENT. Within five business days following the final determination

of the   Adjustment   Amount in   accordance   with   Section   2.3 above,   whether by

agreement or deemed agreement of the parties or by the Arbitrator:

 

          (a) if the   Purchase   Price is more than the   Initial   Payment,   Buyer

shall deliver to Seller   immediately   available   funds in an amount equal to the

difference   between the Purchase Price and the Initial   Payment plus interest on

such   amount at the rate of 4.5% per annum   from the   Closing   Date to,   but not

including, the date of payment; or

 

          (b) if the Initial   Payment is more than the   Purchase   Price,   Seller

shall   deliver to Buyer   immediately   available   funds in an amount equal to the

difference   between the Initial   Payment and the Purchase Price plus interest on

such   amount at the rate of 4.5% per annum   from the   Closing   Date to,   but not

including, the date of payment.

 

     2.5 EXPENSES.   All expenses relating to the work to be performed by Buyer's

Accountants as contemplated by Section 2.3 shall be borne by Buyer, all expenses

relating to the work to be performed by Seller's   Accountants as contemplated by

Section 2.3 shall be borne by Seller,   and all expenses relating to the work, if

any, to be performed by the Arbitrator in accordance with Section 2.3 to resolve

disputes shall be borne equally by Buyer and Seller.

 

                                   ARTICLE 3

                                    CLOSING

 

     3.1 TIME AND PLACE.   The Closing shall take place at the offices of Seller,

Louisville,   Kentucky at 10:00 a.m.,   Louisville,   Kentucky   time, on the second

business day after the date on which all of the conditions to the Closing (other

than those that by their   terms are to be   satisfied   at   Closing)   set forth in

Article 8 and Article 9 have been satisfied or waived, or on such other date and

at such other time and place as Seller and Buyer may mutually agree.

 

     3.2 SIMULTANEOUS   ACTIONS. All proceedings to be taken and all documents to

be executed and   delivered by the parties at the Closing shall be deemed to have

been taken and executed   simultaneously and no proceedings shall be deemed taken

nor any documents executed or delivered until all have been taken,   executed and

delivered.

 

      3.3   DELIVERIES   BY SELLER.   On or before the   Closing   Date,   Seller   will

deliver to Buyer the following:

 

          (a) a   certificate,   dated   the   Closing   Date,   executed   by   Seller,

certifying   that the conditions to Buyer's   obligation to consummate the Closing

under Sections 8.1 and 8.2 have been satisfied;

 

          (b) the original   certificate(s)   evidencing the Shares accompanied by

duly   executed   stock   transfer   power(s) and any other   documents   necessary to

transfer to Buyer good title to the Shares;

 

 

                                       13

<PAGE>

 

          (c) the   Transition   Services   Agreement,   duly executed by Seller and

Company, in the form of EXHIBIT 3.3(C);

 

          (d) an   assignment   to   Buyer   of   Seller's   rights   with   respect   to

confidentiality agreements signed by other prospective purchasers of Company;

 

          (e) a certificate of good standing for Company and a certified copy of

the Certificate of   Incorporation of Company issued by the Secretary of State of

New Jersey, as of a recent date; and

 

          (f)   resignations of all members of the board of directors of Company,

to the extent received by Seller at or prior to Closing.

 

     3.4 DELIVERIES BY BUYER. On or before the Closing Date,   Buyer will deliver

to Seller the following:

 

          (a)   a   certificate,   dated   the   Closing   Date,   executed   by   Buyer,

certifying that the conditions to Seller's   obligation to consummate the Closing

under Sections 9.1 and 9.2 have been satisfied;

 

          (b) the Initial   Payment,   by wire transfer of   immediately   available

funds in United States currency to an account or accounts   designated in writing

by Seller; and

 

          (c) the Transition Services Agreement,   duly executed by Buyer, in the

form of EXHIBIT 3.3(C).

 

                                   ARTICLE 4

                REPRESENTATIONS AND WARRANTIES REGARDING SELLER

 

      Simultaneously   with the execution of this Agreement by Seller,   Seller is

delivering   to Buyer a disclosure   schedule   (the   "DISCLOSURE   SCHEDULE")   with

numbered   sections   corresponding   to   sections   in this   Agreement.   Any matter

disclosed in any section of the Disclosure Schedule shall be deemed disclosed in

all other sections of the Disclosure Schedule to the extent that such disclosure

is reasonably apparent to be applicable to such other sections,   notwithstanding

the   reference   to a   particular   section or   subsection.   The   inclusion of any

information   in the   Disclosure   Schedule   shall not be deemed an   admission   or

acknowledgement   that such   information   is required to be set forth   therein or

that such information is material or that such information   constitutes or would

reasonably be expected to constitute a Company Material Adverse Effect.

 

      EXCEPT AS SET FORTH IN THE   DISCLOSURE   SCHEDULE,   SELLER   REPRESENTS   AND

WARRANTS TO BUYER AS FOLLOWS:

 

     4.1 ORGANIZATION.   Seller is a corporation duly organized, validly existing

and in good standing under the laws of the State of Delaware.

 

 

                                        14

 

<PAGE>

 

     4.2 POWER.   Seller has all requisite   corporate   power and authority to own

the   Shares   and to enter   into   this   Agreement,   to   perform   its   obligations

hereunder,   and to   consummate   the sale of the   Shares   and other   transactions

contemplated by this Agreement.

 

     4.3   AUTHORIZATION.    The   execution,   delivery   and   performance   of   this

Agreement by Seller and the consummation of the transactions contemplated hereby

by Seller   have been duly and   validly   authorized   by all   necessary   corporate

action on the part of Seller.   This Agreement has been duly and validly executed

and   delivered   by   Seller,   and is a valid and   binding   obligation   of Seller,

enforceable   in accordance   with its terms,   subject to   applicable   bankruptcy,

insolvency, reorganization, moratorium and similar laws of general applicability

relating to or affecting creditors' rights and to general principles of equity.

 

     4.4   NONCONTRAVENTION.   Neither the execution,   delivery and performance of

this Agreement by Seller,   nor the   consummation   by Seller of the   transactions

contemplated   hereby nor compliance by Seller with any of the provisions   hereof

will:

 

          (a)   conflict   with or   result   in a breach   of any   provision   of the

Certificate of Incorporation or Bylaws of Seller;

 

          (b) cause a default,   or result in a   material   breach or give rise to

any right of   termination,   cancellation,   or   acceleration   under any   material

agreement or other   material   obligation to which Seller is a party,   except for

such matters as would not reasonably be expected to result in a material adverse

effect   upon the   ability   of Seller   to   perform   its   obligations   under   this

Agreement;

 

          (c) assuming   compliance   with the HSR Act,   violate any Law, order of

any Governmental Body or Governmental Authorization applicable to Seller, except

as would not reasonably be expected to result in a material   adverse effect upon

the ability of Seller to perform its obligations under this Agreement; or

 

          (d) result in the creation of any Encumbrance   upon the Shares held by

Seller.

 

     4.5 CONSENTS. No consent or approval by, or notification of or filing with,

any Governmental Body is required to be obtained or made by Seller in connection

with the execution, delivery and performance by Seller of this Agreement, or the

consummation   by Seller of the   transactions   contemplated   hereby,   except   for

compliance   with   the   HSR Act   and   except   for   any   such   consent,   approval,

notification   or   filing   the   failure   of which to   obtain   or make   would   not

reasonably   be expected   to result in a material   adverse   effect upon   Seller's

ability to perform its obligations under this Agreement.

 

     4.6   STOCK   OWNERSHIP.   Seller   has,   and   agrees to   transfer   to Buyer at

Closing, good and valid title to the Shares, free and clear of all Encumbrances,

options,   restrictions   on transfer or rights of refusal.   No Person owns or has

any   beneficial   interest   in any of the Shares   except   Seller.   Seller has not

transferred   or assigned,   or entered into any   agreement to transfer or assign,

any of the   Shares or any of the voting   rights or   dividend   rights   pertaining

thereto.

 

     4.7 LITIGATION.   No Proceeding has, as of the date of this Agreement,   been

commenced   or, to the   Knowledge   of   Seller,   threatened   against   Seller   that

challenges   the   validity

 

 

                                       15

<PAGE>

 

of   this   Agreement   or the   transactions   contemplated   hereby   or   that   would

reasonably be expected to have the effect of   preventing,   materially   delaying,

materially impairing or making illegal the transactions contemplated,   or have a

material   adverse effect on Seller's   ability to perform its   obligations   under

this Agreement.

 

     4.8 BROKERS.   Neither Seller nor Company has employed any broker, finder or

investment   banker in   connection   with the   transactions   contemplated   by this

Agreement which would be entitled to a fee or commission in connection with such

transactions,   except for any broker,   finder or investment banker whose fees or

commissions shall be the sole responsibility of Seller.

 

                                   ARTICLE 5

                REPRESENTATIONS AND WARRANTIES REGARDING COMPANY

 

      EXCEPT AS SET FORTH IN THE   DISCLOSURE   SCHEDULE,   SELLER   REPRESENTS   AND

WARRANTS TO BUYER AS FOLLOWS:

 

     5.1 ORGANIZATION. Company is a corporation duly organized, validly existing

and in good   standing   under   the laws of the   State of New   Jersey   and has all

requisite   corporate   power and authority to own, lease and operate its material

properties and to carry on its business as now being conducted.   Company is duly

qualified   and in good   standing to do business in every   jurisdiction   in which

such   qualification   is necessary   because of the nature of the property   owned,

leased or operated by it or the nature of the business   conducted by it,   except

where the failure to be so qualified or be in good standing   would not result in

a Company Material Adverse Effect.

 

     5.2 CAPITALIZATION. The entire authorized capital stock of Company consists

of 2000   shares of Common   Stock,   par value $1 per   share,   and 1000   shares of

Preferred   Stock,   par   value $5 per   share.   There   are   currently   issued   and

outstanding   only the Shares,   which are all duly   authorized,   validly   issued,

fully paid and nonassessable. There is no:

 

          (a) outstanding   security convertible into or exchangeable for capital

stock of Company;

 

          (b) option, warrant, put, call or other right to purchase or subscribe

to capital stock of Company;

 

          (c) stock restriction agreement, or contract,   commitment or agreement

of any kind relating to the issuance or disposition of Company   capital stock or

the issuance or disposition of any security convertible into or exchangeable for

Company capital stock; or

 

          (d)   registration   rights   agreement,   voting   trust,   proxy   or other

agreement or restriction on transfer with respect to the Shares.

 

The   Shares   are   all   duly    authorized,    validly    issued,    fully   paid   and

non-assessable, and in certificated form, and have been offered, sold and issued

by Company in compliance   with all   applicable   securities   and corporate   Laws,

agreements   or contracts   applicable   to Company and   Company's   Certificate   of

Incorporation and Bylaws, and in compliance with any preemptive   rights,   rights

of first refusal or other rights.   The   consummation   of the Share Purchase will

 

 

                                        16

<PAGE>

 

convey to Buyer good and valid title to the Shares,   of record and beneficially,

free and clear of all Encumbrances, except for those created by Buyer or arising

out of ownership of the Shares by Buyer.

 

     5.3 COMPANY   SUBSIDIARIES.   All entities of which Company owns, directly or

indirectly,   any capital stock, together with the jurisdiction of incorporation,

are set forth at Section 5.3 of the Disclosure Schedule.   Such entities are duly

organized,   validly   existing   and in good   standing   under   the   laws of   their

respective jurisdictions of organization, have all requisite corporate power and

authority to own, lease and operate their respective   material properties and to

carry   on their   respective   businesses   as now   being   conducted,   and are duly

qualified   and in good   standing to do business in every   jurisdiction   in which

such   qualification   is necessary   because of the nature of the property   owned,

leased or operated by such   entities or the nature of the business   conducted by

such   entities,   except   where   the   failure   to be so   qualified   or be in good

standing would not result in a Company Material Adverse Effect. Company owns all

of the issued and   outstanding   capital stock of each such entity free and clear

of all   Encumbrances,   options,   restrictions   on transfer and rights of refusal

other than Permitted Encumbrances.

 

     5.4   NONCONTRAVENTION.   Neither the execution,   delivery and performance of

this Agreement by Seller,   nor the   consummation   by Seller of the   transactions

contemplated   hereby   nor   compliance   by   Seller   or   Company   with   any of the

provisions hereof will:

 

          (a)   conflict   with or   result   in a breach   of any   provision   of the

Certificate of Incorporation or Bylaws of Company or any Company Subsidiary;

 

          (b) except as would not   reasonably be expected to result in a Company

Material Adverse Effect,   cause a default, or result in a breach or give rise to

any right of   termination,   cancellation,   or   acceleration   under   any   Company

Contract or other material obligation to which Company or any Company Subsidiary

is a party,   or by   which   Company   or any   Company   Subsidiary   or any of their

respective material properties or assets is or may be bound or benefited; or

 

          (c) except as would not   reasonably be expected to result in a Company

Material   Adverse Effect and except for compliance with the HSR Act, violate any

Law applicable to Company or any Company Subsidiary.

 

     5.5   CONSENTS.   Except   for   compliance   with the HSR Act or as   would   not

reasonably   be   expected   to result in a Company   Material   Adverse   Effect,   no

consent or approval by, or notification of or filing with, any Governmental Body

is   required to be   obtained   or made by Company or any   Company   Subsidiary   in

connection   with the   execution,   delivery   and   performance   by   Seller of this

Agreement, or the consummation of the transactions contemplated hereby.

 

     5.6 FINANCIAL STATEMENTS.

 

          (a) Seller has   delivered   to Buyer   true and   complete   copies of the

audited   consolidated   balance sheets of Company and Company   Subsidiaries as of

April 30, 2005 (the "BALANCE SHEET DATE", with the consolidated balance sheet as

of such date being referred to as the "BALANCE SHEET"), and April 30, 2004, with

the Company's   investment   in the UK   Subsidiary  

 

 

                                       17

<PAGE>

 

accounted for under the equity method, and the related statements of operations,

stockholder's    equity    and   cash   flow   for   the    fiscal    years   then   ended

(collectively, the "FINANCIAL STATEMENTS").

 

          (b) The Financial Statements

 

               (1)   have been prepared based on the books and records of Company

                    and Company Subsidiaries;

 

               (2)   have been prepared in accordance   with GAAP (in effect as of

                    the respective dates thereof),   consistently applied, in all

                    material   respects,   except that the UK Subsidiary   has been

                     accounted for under the equity   method,   and except that the

                    stock option expense for the Company employees participating

                    in the Brown-Forman   Corporation   Omnibus   Compensation Plan

                    for the   periods   ended   April 30,   2005 and   2004,   and the

                    associated   disclosures   required by   Statement of Financial

                    Accounting   Standard Number 123,   Accounting for Stock-Based

                    Compensation,    as   amended,   have   been   omitted   from   the

                    Financial Statements; and

 

               (3)   present   fairly   in   all   material   respects   the   financial

                    position    of   Company   and    Company    Subsidiaries    on   a

                     consolidated   basis as of the   respective   dates thereof and

                    the results of operations,   changes in stockholder's   equity

                    and cash flows for the periods covered thereby.

 

     5.7   ABSENCE   OF   UNDISCLOSED   LIABILITIES.   There   are no   liabilities   or

obligations of Company or any Company   Subsidiary   (whether   accrued,   absolute,

contingent,   unliquidated or otherwise),   in each case to the extent required by

GAAP to be disclosed or reserved against in the Financial Statements, other than

those that (a) are   accrued,   reflected,   disclosed   or reserved   against in the

Financial   Statements,   (b) have arisen in the ordinary course of business since

the   Balance   Sheet   Date,   (c)   were   incurred   pursuant   to   the   transactions

contemplated by this Agreement, (d) were discharged or paid in full prior to the

date hereof in the ordinary   course of business,   or (e) would not reasonably be

expected to result in a Company Material Adverse Effect.

 

     5.8 ABSENCE OF CHANGES.   Since the Balance Sheet Date,   Company's   business

has operated in all material respects in the ordinary course and consistent with

past practice, and there has not been any Company Material Adverse Effect.

 

     5.9 REAL PROPERTY.

 

           (a)   Section   5.9 of the   Disclosure   Schedule   sets   forth a true and

complete list of the   addresses of all   Properties   (identifying   those that are

Owned Properties and those that are Leased   Properties) that are owned,   used by

or occupied by and, in each case,   material to the operations of Company and the

Company Subsidiaries, taken as a whole.

 

 

                                       18

<PAGE>

 

          (b)   Company   has   valid   title   in fee   simple   to   all of the   Owned

Properties and valid leasehold interests in all Leased Properties,   in each case

free and clear of any Encumbrance, except for Permitted Encumbrances.

 

          (c)   Neither   Seller nor   Company   has   received   written   notice with

respect to any Owned   Property or to any Leased   Property in either case that is

material to the   operation   of Company and the Company   Subsidiaries   taken as a

whole:

 

               (1)    that any   building   or   structure   thereon,   any   equipment

                     therein or the operation or   maintenance   thereof   violates

                     any   Law   in any   material   respect   (including   applicable

                     zoning ordinances);

 

               (2)    that any   building   or other   improvement   owned by Company

                      encroaches   upon   property   of   others or   encroaches   over

                     applicable setback lines in a way that would be material to

                     the operation of such building or improvement; or

 

               (3)    that any condemnation proceeding is pending or threatened.

 

          (d) Except as would not   reasonably be expected to result in a Company

Material Adverse Effect:

 

               (1)    neither   Company nor any Company   Subsidiary   is in default

                     under any lease for any   Leased   Property   and there are no

                     events   which   with the   passage   of time or the   giving of

                     notice or both would   constitute   a default by Company or a

                     Company Subsidiary under any such lease; and

 

               (2)    there   are no   outstanding   written   notices   of   breach or

                     default   given to   Company or a Company   Subsidiary   by any

                     party to any such lease that remains uncured.

 

     5.10 COMPANY CONTRACTS.   Section 5.10 of the Disclosure Schedule sets forth

a true and   complete   list of the   following   Contracts   to which   Company   or a

Company Subsidiary is a party:

 

          (a)   material    distributor,    dealer,    advertising,    agency,   sales

representative or similar material   Contracts   relating to the marketing or sale

of   Company's   products   (excluding   customer   purchase   orders   accepted in the

ordinary course of business);

 

          (b) Contracts in amounts in excess of $500,000 for the future purchase

or lease by Company or a Company   Subsidiary of material,   supplies,   equipment,

services or finished products purchased for resale;

 

          (c) Contracts having a term exceeding one year or involving amounts in

excess of   $500,000   for the   future   sale of   products   by Company or a Company

Subsidiary;

 

          (d) collective bargaining agreements with any labor union;

 

 

                                       19

<PAGE>

 

          (e) Contracts for the employment of any officer, director or employee,

or any other material Contracts with or commitments to any officer,   director or

employee;

 

          (f) Material joint venture, partnership, design or license agreements;

 

          (g)    indenture,     mortgage,    promissory    note,    loan    agreement,

reimbursement   agreement,   guaranty,   or other   Contract or   commitment   for the

borrowing of money,   for a line of credit or letter of credit,   or for a leasing

transaction   of a type   required   to be   capitalized   in   accordance   with   FASB

Statement of Financial Accounting Standards No. 13;

 

          (h)    agreement   for   the   sale   of   assets   of   Company   and   Company

Subsidiaries,   which   assets   have a book   value   of   $500,000   or   more   in the

aggregate, other than sales of inventory in the ordinary course of business;

 

          (i) all product licensing Contracts in which Company has guaranteed an

annual obligation of $500,000 or more; and

 

          (j) all Contracts or commitments for capital expenditures with respect

to which the remaining unpaid balance exceeds $500,000.

 

Neither   Company nor any   Company   Subsidiary   (i) is in breach or default   with

respect to any material   term of any Company   Contract   and, to the Knowledge of

Seller,   no other   party to any Company   Contract   is in breach or default   with

respect to any material term of any Company   Contract,   or (ii) has received any

written   notice   since   January 1, 2005 of any breach or default with respect to

any Company Contract which remains uncured.

 

     5.11 LITIGATION. Section 5.11 of the Disclosure Schedule sets forth a list,

as of the date of this   Agreement,   of all: (a)   Proceedings   pending or, to the

Knowledge of Seller,   threatened against Company or a Company Subsidiary,   which

(i) if resolved unfavorably to Company or any Company Subsidiary,   is reasonably

likely to result in   payments   by   Company or   Company   Subsidiary   in excess of

$500,000,   (ii)   would   materially   adversely   affect   the   ability of Seller or

Company to consummate the   transactions   contemplated by this   Agreement,   (iii)

would   materially   adversely affect the ability of Buyer to operate the Business

following   the Closing in   substantially   the same manner as operated by Company

prior to the   Closing,   or (iv)   involve   or relate to any   trade   practices   of

Company,   including   any   pricing,   promotion,   rebate,   discount,    commission,

allocation,    merchandising   practice   or   territorial    restriction;    and   (b)

judgments,   decrees,   injunctions   or orders of any   Governmental   Body having a

material continuing effect against Company or a Company Subsidiary.

 

     5.12 COMPLIANCE.

 

          (a) Company and each Company Subsidiary is in compliance with, and has

not received any written notice of any violation of,   applicable Laws (including

the U. S. Foreign Corrupt   Practices Act and applicable import and export Laws),

except, in each case, for such   non-compliance or violations as would not result

in a Company Material Adverse Effect.

 

          (b) Except as would not result in a Company   Material   Adverse Effect,

(i) Company and the Company   Subsidiaries   have all   governmental   licenses   and

permits   necessary   in

 

 

                                       20

<PAGE>

 

the   conduct   of   their    business    as    currently    conducted    ("GOVERNMENTAL

AUTHORIZATIONS"),   which   Governmental   Authorizations   are in   full   force   and

effect,   and (ii) no violations   are   outstanding or uncured with respect to any

such   Governmental   Authorizations   and, as of the date hereof, no Proceeding is

pending or, to the Knowledge of Seller, threatened to revoke any of them.

 

     5.13 ENVIRONMENTAL.

 

          (a)   Notwithstanding   the generality of any other   representations and

warranties in this   Agreement,   this Section 5.13 shall be deemed to contain the

only   representations   and   warranties   in this   Agreement or arising out of the

transactions   contemplated by this Agreement with respect to Environmental Laws,

Hazardous Substances,   Environmental Claims, the environment or workplace health

and safety.   Section 5.13(a) of the Disclosure Schedule lists each Environmental

Site with respect to which Company has incurred costs to investigate,   remediate

or settle   Environmental   Claims   that are,   to   Seller's   Knowledge,   not fully

resolved or has received notification of potential   Environmental Claims against

Company or any Company Subsidiary.

 

          (b)   Seller   has   provided   Buyer   true   and   complete   copies   of the

environmental   reports   listed in   Section   5.13(b) of the   Disclosure   Schedule

(which,   together with the environmental audits obtained by Buyer as referred to

in   Section   6.10,   are   collectively   referred   to as   the   "REPORTS").   To the

Knowledge   of Seller and except as set forth in the   Reports,   since May 1, 2003

there   has been no   storage,   disposition,   generation,   treatment,   Release   or

discharge of any Hazardous   Substance by Company or any Company   Subsidiary,   in

any manner or at a level that is in violation of applicable   Environmental   Laws

in any material respect, on, in, under, about or from the Properties or the land

and   buildings on and in which   Company or the Company   Subsidiaries   previously

conducted their operations.

 

          (c) To the Knowledge of Seller and except as set forth in the Reports,

Company and each Company   Subsidiary is in   compliance in all material   respects

with all   Environmental   Laws and   since May 1,   2003 has not   received   written

notice of any unresolved   potential   liability with respect to any Environmental

Law that would be material to the conduct of Company's business.

 

          (d)   Except   as set   forth   in the   Reports   or   Section   5.11   of the

Disclosure Schedule, there is no material Environmental Claim pending or, to the

Knowledge of Seller,   threatened   against   Company or any Company   Subsidiary or

otherwise   relating to any of the Properties.   Section 5.13(d) of the Disclosure

Schedule   sets   forth   insurance    settlement   and   PRP   agreements   related   to

Environmental Sites to which Company or a Company Subsidiary is a party.

 

          (e) Each of Company and the Company   Subsidiaries   have   obtained   all

permits,   licenses and approvals   ("PERMITS") relating to the Environmental Laws

necessary for its operation, except as would not have a Company Material Adverse

Effect.

 

     5.14 EMPLOYMENT MATTERS.

 

          (a) To the Knowledge of Seller,   Company and the Company   Subsidiaries

are in material compliance with all applicable Laws respecting labor, employment

and   employment  

 

 

                                        21

<PAGE>

 

practices,   terms and conditions of employment and wages and hours.   There is no

material   labor strike or work stoppage   pending or, to the Knowledge of Seller,

threatened   involving   Company or any Company   Subsidiary.   There is no material

unfair   labor   practice   complaint   against   Company or any   Company   Subsidiary

pending before the National Labor Relations Board or other Governmental Body. To

the Knowledge of Seller, there are no union organizational   activities currently

underway   with   respect   to   non-union   employees   of   Company   or   any   Company

Subsidiary.

 

          (b) As of the date of this Agreement,   there are no pending or, to the

Knowledge of Seller,   threatened material investigations,   audits, complaints or

Proceedings   against Company by or before any Governmental   Body,   respecting or

involving any applicant for employment,   any employee or any former employee, or

any class of the foregoing, including:

 

               (1)   the Equal   Employment   Opportunity   Commission   or any other

                    corresponding state or local agency relating to any claim or

                    charge concerning discrimination,

 

               (2)   the   United    States    Department   of   Labor   or   any   other

                    corresponding state or local agency relating to any claim or

                    charge concerning hours or wages,

 

               (3)   the Occupational Safety and Health Administration or any

                     other   corresponding   state or local agency relating to any

                     claim   or   charge   concerning   the   safety   and   health   of

                     employees or former employees,

 

               (4)   the    Office   of    Federal    Contract    Compliance    or   any

                    corresponding state agency, and

 

               (5)   the U. S. Citizenship and Immigration   Services, a bureau of

                    the Department of Homeland Security, with respect to matters

                    involving   employees   of Company who hold a   temporary   work

                    authorization,   including   H-1B,   F-1 or J-1   visas   or work

                    authorizations.

 

          (c) Company is not   obligated as of the date of this   Agreement to pay

any amounts pursuant to the requirements of the Worker Adjustment and Retraining

Notification Act of 1988.

 

     5.15 EMPLOYEE BENEFIT PLANS.

 

          (a) Section   5.15(a) of the   Disclosure   Schedule   lists each material

plan,   agreement,   arrangement or policy   providing for   compensation,   bonuses,

profit-sharing,   stock   option or other stock   related   rights or other forms of

incentive or deferred compensation,   vacation benefits, insurance (including any

self-insured   arrangements),   health or medical   benefits,   employee   assistance

program, disability or sick leave benefits, workers' compensation,   supplemental

unemployment   benefits,   change in   control   benefits,   severance   benefits   and

post-employment or retirement benefits (including compensation, pension, health,

medical or life

 

 

                                       22

<PAGE>

 

insurance   benefits),   or   other   employee   benefits,   in each   case,   which   is

maintained,   administered,   sponsored   or   contributed   to   by   Company   or   any

Affiliate   of   Company   for   the   benefit   of any   current   or   former   employee

(excluding,   as to employees of Company who also are or were employed by Seller,

those benefits   attributable   solely to their employment with Seller) of Company

or any Company   Subsidiary or which is between   Company or any of its Affiliates

and any such individual   (each,   individually,   a "PLAN" and   collectively,   the

"PLANS").   The Disclosure Schedule specifically denotes each Plan that is either

sponsored by Company or a Company   Subsidiary   or to which   Company or a Company

Subsidiary is party (each, a "COMPANY PLAN").

 

          (b) With respect to each Company   Plan,   Seller has made   available to

Buyer: (i) a true, correct and complete copy of such Company Plan; (ii) the most

recent   Annual   Report (Form 5500 Series) and   accompanying   schedules,   if any;

(iii) the most recent   annual   financial   report,   if any;   (iv) the most recent

actuarial report, if any; and (v) the most recent   determination letter from the

Internal   Revenue   Service,   if any. Seller has also made available to Buyer the

current summary plan description and any material modifications thereto for each

Plan in respect of which there exists a summary plan description.

 

          (c) Section 5.15(c) of the Disclosure Schedule identifies each Company

Plan that is intended   to be a   "qualified   plan"   within the meaning of Section

401(a) of the Code ("QUALIFIED PLAN"). The Internal Revenue Service has issued a

favorable   determination   letter   with   respect to each   Qualified   Plan and the

related   trust that has not been revoked,   and, to the   Knowledge of Seller,   no

events have occurred   that would   adversely   affect the qualified   status of any

Qualified Plan or the related trust.

 

          (d)   Company   or a Company   Subsidiary   has in all   material   respects

timely made or accrued all contributions   required with respect to any Qualified

Plan   subject   to   Title   IV   of   ERISA.   No   "accumulated   funding   deficiency"

(determined   under the rules set forth in   Section   412 of the Code and   related

Code sections and   regulations),   whether or not waived,   exists with respect to

any Qualified Plan subject to Title IV of ERISA. There have not, within the past

five years, been any "reportable   events" (within the meaning of Section 4043 of

ERISA) with respect to any Qualified Plan subject to Title IV of ERISA.

 

          (e) Neither any Plan nor any other employee benefit plan maintained by

an ERISA   Affiliate of Company is a   Multiemployer   Plan or a Multiple   Employer

Plan. None of Company,   any Company   Subsidiary or any of their respective ERISA

Affiliates has (i) at any time during the last six years, contributed to or been

obligated to contribute to any Multiemployer   Plan or Multiple Employer Plan, or

(ii) incurred any Withdrawal Liability that has not been satisfied in full.

 

          (f) The Plans are in material   compliance   both in form and   operation

with ERISA, the Code and other   applicable   Laws, and have been   administered in

all material respects in accordance with their terms.

 

          (g)   Consummation of the   transactions   contemplated by this Agreement

will not be a factor causing payments to be made by Company or any Tax Affiliate

that are not deductible (in whole or in part) as a result of the   application of

Section 280G of the Code.

 

 

                                       23

<PAGE>

 

     5.16   INTERCOMPANY   TRANSACTIONS.   Section 5.16 of the Disclosure   Schedule

sets forth a list of all material   Contracts   between Seller or its subsidiaries

(other than Company and Company Subsidiaries), on the one hand, and Company or a

Company Subsidiary,   on the other hand, and other material   arrangements whereby

Seller or its subsidiaries (other than Company and Company Subsidiaries) provide

goods or   services   to, or obtain   goods or   services   from,   Company or Company

Subsidiaries. All such arrangements will cease as of the Closing Date other than

(a) those   provided for in Contracts   specifically   noted at Section 5.16 of the

Disclosure   Schedule as continuing in effect after Closing,   which will continue

in effect in accordance with their respective   terms, and (b) as provided in the

Transition Services Agreement.

 

     5.17 INTELLECTUAL PROPERTY.

 

          (a)   Company or the   Company   Subsidiaries   own all   right,   title and

interest in and to, or have valid   licenses to use,   all   Intellectual   Property

that   is   material   to   the   current   operations   of   Company   and   the   Company

Subsidiaries   taken as a whole,   free and clear of all   Encumbrances   other than

Permitted Encumbrances.

 

          (b) Section   5.17(b) of the Disclosure   Schedule sets forth a true and

complete list of all material patents,   patents pending,   trademark/service mark

applications and registrations,   copyright   applications and registrations,   and

domain name registrations that are owned by Company or any Company Subsidiary.

 

          (c) To the Knowledge of Seller:

 

               (1)   there is no material infringement, misappropriation or other

                    misuse   being made by any third   person of any   Intellectual

                    Property   material   to the   business   of Company and Company

                    Subsidiaries as a whole;

 

               (2)   no claim is pending   or   threatened   to the effect   that the

                    operations   of Company or Company   Subsidiaries   infringe or

                    conflict   with the   asserted   rights of others in respect of

                    any   Intellectual   Property   material   to   the   business   of

                     Company and Company Subsidiaries as a whole; and

 

               (3)   no claim is pending   or   threatened   to the effect   that any

                    Intellectual   Property   material to the   business of Company

                    and    Company    Subsidiaries    as   a   whole   is   invalid   or

                    unenforceable.

 

          (d) Section 5.17(d) of the Disclosure Schedule sets forth the licenses

pursuant to which Company or any Company   Subsidiary   grants to any other Person

(other than   Company or any Company   Subsidiary)   the right to use   Intellectual

Property owned by Company or any Company Subsidiary   material to the business of

Company and Company   Subsidiaries as a whole, and the licenses pursuant to which

any other Person   grants to Company or any Company   Subsidiary   the right to use

Intellectual    Property    material   to   the   business   of   Company   and   Company

Subsidiaries   as a whole owned by any other Person   (other than   licenses to use

off-the-shelf software). To the Knowledge of Seller:

 

 

                                       24

<PAGE>

 

               (1)   neither   Company nor any Company   Subsidiary   is in material

                    breach or default with respect to any of such licenses;

 

               (2)   no other party thereto is in material breach or default with

                    respect to any o


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