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Title: |
Stock Purchase Agreement |
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2003 |
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$43 |
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#1139562 |
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STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (the "Agreement") is made and entered into
on the 2nd day of January, 2003 by and among John D. Whalen, Donald J.
Carrozzino, Frank Wallitsch, Jr. and Nancy S. Hansen (each of the foregoing,
individually, a "Seller"; and collectively, the "Sellers"), being the owners of
all of the issued and outstanding common stock of Pennsylvania Crusher
Corporation, a Delaware corporation (the "Company"), and PCC Acquisition Co., a
Delaware corporation (the "Buyer").
The Sellers own all of the issued and outstanding common stock of the
Company (the "Shares"), with each Seller owning the number of Shares set forth
after such Seller's name in column A of Exhibit A hereto. The Buyer desires to
purchase from the Sellers, and the Sellers desire to sell to the Buyer, all of
the Shares in accordance with the provisions of this Agreement.
NOW, THEREFORE, intending to be legally bound hereby, the parties hereto
agree as follows:
1. Sale and Purchase of Shares. Subject to the terms and conditions of
this Agreement and on the basis of and in reliance upon the representations,
warranties, covenants and agreements set forth herein, on the Closing Date (as
defined in Section 2(a) hereof) each Seller shall sell to the Buyer and the
Buyer shall purchase from each Seller all of the Shares owned by such Seller in
exchange for a purchase price determined and payable as follows:
(a) cash in the amount set forth after such Seller's name in column B of
Exhibit A hereto shall be paid by the Buyer to such Seller on the first business
day following the Closing Date (the "Payment Date") in the manner provided in
the last sentence of Section 2(b) hereof, with $19.5 million being the total
amount of cash to be paid to all of the Sellers on the Payment Date
(collectively, the "Closing Payments"). It is contemplated by the parties that
following the sale of the Shares (i) the Buyer will merge with and into the
Company, (ii) the Company will borrow funds from National City Bank and (iii)
the Company will, on the Payment Date, pay the Closing Payments in full by wire
transfer of immediately available funds as described in the last sentence of
Section 2(b);
(b) cash in the amounts set forth after such Seller's name in columns C, D
and E of Exhibit A hereto shall be paid by the Buyer to such Seller on each of
the second, third and fourth anniversaries of the Closing Date, respectively,
(or if any such payment date is not a day on which banks in New Jersey and
Pennsylvania are open for business, the next succeeding day on which banks in
such states are so open), with $4.0 million being the total amount of cash to be
paid to all of the Sellers on these three anniversary dates, together in each
case with simple interest on the unpaid balance thereof from the Closing Date at
the rate of 6% per annum, payable on and for the periods ending each April 2,
July 2, October 2 and January 2 until such deferred purchase price obligation
has been satisfied, with the final interest payment to be on the date of such
satisfaction; all of the foregoing, with respect to each Seller, to be satisfied
by the Buyer's delivery on the Closing Date of a promissory note made by the
Buyer's ultimate parent, K-Tron International, Inc. ("K-Tron"), in favor of such
Seller in the form attached hereto as Exhibit B (individually with respect to
each Seller, a "Seller Note", and collectively, the "Seller Notes"); and
(c) cash in an amount to be determined pursuant to Section 3 hereof shall
be paid by the Buyer to the Sellers, or by the Sellers to the Buyer, as the case
may be, in accordance with such Section 3.
1
<PAGE>
2. Closing. (a) The closing (the "Closing") of the sale and purchase of
Shares described in Section 1 hereof shall take place at the offices of Morgan,
Lewis & Bockius LLP, 1701 Market Street, Philadelphia, PA, commencing at 10:00
a.m., local time, on the date hereof and shall be deemed effective as of the
opening of business of the Company and its Subsidiary (as defined in Section 5.3
hereof) on that date. The date of the Closing is sometimes herein referred to as
the "Closing Date".
(b) At the Closing, each Seller shall deliver to the Buyer, free and clear
of all pledges, liens, transfer and stamp tax obligations, encumbrances, claims
and other charges thereon of every kind, the certificates for the Shares to be
sold by such Seller in negotiable form, duly endorsed in blank, or with separate
stock transfer powers attached thereto and signed in blank, in exchange for the
delivery by the Buyer to such Seller (i) on the Payment Date, of the
consideration to be paid to such Seller pursuant to Section 1(a) hereof and (ii)
at the Closing, of the Seller Note to which such Seller is entitled pursuant to
Section 1(b) hereof. All cash payments pursuant to Section 1(a) hereof shall be
by wire transfer of immediately available funds to such accounts at such banks
as the Sellers or their counsel shall direct in writing delivered to the Buyer
no less than three business days prior to the Closing.
(c) The allocations set forth in columns B, C, D and E of Exhibit A hereto
have been provided to the Buyer by the Sellers, were determined by the Sellers
alone, and have been agreed among the Sellers acting alone. The Buyer shall have
no responsibility whatsoever with respect to the determination of the
allocations set forth in columns B, C, D and E of Exhibit A hereto.
(d) Immediately following the Closing, the Sellers shall make available to
the Buyer the written resignations of all the directors of the Company and its
Subsidiary effective as of the Closing, and shall cause to be made available to
the successor directors and to the officers of the Company and its Subsidiary,
including any new officers elected on the Closing Date (the "post-Closing
directors and officers"), all minute books, stock record books, books of
account, corporate seals, leases, contracts, agreements, securities, bank,
checking and money market accounts, other investments, deposits, customer and
subscriber lists, files and other documents, instruments and papers belonging to
the Company and its Subsidiary and shall cause full possession and control of
all of the assets and properties of every kind and nature, tangible and
intangible, of the Company and its Subsidiary and of all other things and
matters pertaining to the operation of the business of the Company and its
Subsidiary to be transferred and delivered to the post-Closing directors and
officers. At the Closing, the Sellers shall deliver to the Buyer, and the Buyer
shall deliver to the Sellers, the certificates, opinions and other instruments
and documents referred to in Sections 8 and 9 hereof, respectively.
3. Post-Closing Adjustment to Purchase Price. (a) As soon as reasonably
practical following (but not more than 60 days after) the Closing Date, the
Company (in consultation with the Chief Financial Officer of K-Tron and also
with the Sellers' Representative (as defined in Section 11.1 hereof)) shall
prepare and deliver to the Sellers and K-Tron an audited consolidated balance
sheet of the Company and its Subsidiary as of the close of business on the last
business day immediately preceding the Closing Date (the "Closing Balance
Sheet"), together with the report thereon of KMPG LLP. The Closing Balance Sheet
shall be prepared in accordance with this Agreement and generally accepted
accounting principles consistent with past practice in the Company's preparation
of its fiscal year 2001 audited balance sheet (the "2001 Balance Sheet"), except
to the extent that there is any new generally accepted accounting principle(s)
that must be adopted. Further, the Closing Balance Sheet shall not take into
account any of the transactions contemplated by this Agreement, or any fees,
expenses and costs of the Sellers (unless paid for by the Company or its
Subsidiary prior to the Closing despite the provisions of Section 11.2(a)
hereof, in which case their payment would be taken into account on the Closing
Balance Sheet) in connection with the consideration, preparation, negotiation
and completion thereof, other than as set forth in Section 11.2(a) hereof. All
expenses incurred in connection with the preparation of the Closing Balance
Sheet shall be the responsibility of the Company.
2
<PAGE>
(b) The Closing Balance Sheet shall become final and binding upon the
parties unless within 30 days following its submittal to the Sellers and K-Tron,
either all of the Sellers as a group notify K-Tron of their objection thereto,
or K-Tron notifies the Sellers of its objection thereto, which objection may
only be that the Closing Balance Sheet was not properly prepared under Section
3(a) hereof. Such 30-day period shall be extended for an additional 30 days at
the request of either all of the Sellers as a group, or K-Tron, should either
the Sellers or K-Tron reasonably require additional time to complete their
review of the Closing Balance Sheet. During such 30-day review period (or 60-day
review period, if so extended), the Company shall make reasonably available to
the Sellers, K-Tron and their respective representatives, and shall use
reasonable efforts to cause its representatives to make reasonably available to
the Sellers, K-Tron and their respective representatives, on a timely basis, all
books, records and appropriate personnel to provide the Sellers, K-Tron and
their respective representatives with such information regarding the Closing
Balance Sheet as the Sellers, K-Tron and their respective representatives may
reasonably request. If within 30 days following the receipt by the other party
of any notice of objection by K-Tron or the Sellers, any of such differences
have not been resolved, they shall be resolved by Ernst & Young LLP,
Philadelphia, Pennsylvania, whose decision thereon shall be final, binding and
not subject to any appeal. The fees and expenses of Ernst & Young LLP in
connection with any such resolution shall be allocated between (and paid by)
K-Tron and the Sellers in the same proportion that the aggregate amount of the
disputed items so submitted to Ernst & Young LLP that is unsuccessfully disputed
by each such party (as finally determined by Ernst & Young LLP) bears to the
total amount of such disputed items so submitted.
(c) Within ten days following the final determination of the Closing
Balance Sheet in accordance with Section 3(b) hereof, either
(i) if the consolidated stockholders' equity on the Closing Balance
Sheet is less than $9 million, then the Sellers shall pay to the Buyer (or
to the Company as its successor by merger), as a decrease in the purchase
price for the Shares, the amount of such shortfall (together with simple
interest thereon, from the Closing Date to the date of payment, at the
rate of 6% per annum); or
(ii) if the consolidated stockholders' equity on the Closing Balance
Sheet is greater than $9 million, then the Buyer (or the Company as its
successor by merger) shall pay to the Sellers, as an increase in the
purchase price for the Shares, the amount of such excess (together with
simple interest thereon, from the Closing Date to the date of payment, at
the rate of 6% per annum).
In the case of any payment to or by the Sellers under this Section 3(c), each
Seller shall be paid or pay that part of the total payment due equal to such
total payment multiplied by the percentage set forth after such Seller's name in
column A of Exhibit A hereto, all of which percentages have been provided to the
Buyer by the Sellers, were determined by the Sellers alone, and have been agreed
among the Sellers acting alone. The Buyer shall have no responsibility
whatsoever with respect to the determination of the percentages set forth in
column A of Exhibit A hereto.
(d) Nothing in this Section 3 shall preclude any party from exercising, or
shall adversely affect or otherwise limit in any respect the exercise of, any
right or remedy available to it hereunder or otherwise for any misrepresentation
or breach of warranty hereunder, but (i) neither the Buyer nor any Seller shall
have any right to dispute the Closing Balance Sheet or any portion thereof once
the Closing Balance Sheet has been finally determined in accordance with Section
3(b) hereof and (ii) the Buyer shall not have the right to be indemnified
hereunder for any breach of any representations or warranties contained in this
Agreement regarding the value of the accounts receivable, inventory or other
items classified as current assets on the Closing Balance Sheet.
3
<PAGE>
4. Individual Representations and Warranties of the Sellers. Each Seller,
separately and individually, and not jointly, represents and warrants to the
Buyer as follows:
4.1 Share and Interest Ownership; Authority. Each Seller is the lawful
owner of record and beneficially of the number of Shares set beside such
Seller's name in column A of Exhibit A hereto, free and clear of all pledges,
liens, encumbrances, claims and other charges and restrictions thereon of every
kind, including without limitation any agreements, subscriptions, options,
warrants, calls, commitments or rights (contingent or otherwise) of any
character granting to any person any interest in or right to acquire from such
Seller at any time, or upon the happening of any stated event, any Shares owned
by such Seller. Each Seller has full right, power and authority to execute,
deliver and perform this Agreement. This Agreement has been duly executed and
delivered by each Seller. This Agreement constitutes the legal, valid and
binding obligation of each Seller enforceable against each Seller in accordance
with its terms, except as such enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or hereafter in
effect relating to creditors' rights generally and by general principles of
equity (whether considered in an action at law or in equity).
4.2 Validity of Contemplated Transactions; Etc. The execution, delivery
and performance of this Agreement by each Seller will not contravene or violate
(a), any law, rule or regulation to which any Seller is subject or (b) any
judgment, order, writ, injunction or decree of any court, arbitrator or
governmental or regulatory official, body or authority which is applicable to
any Seller; nor will such execution, delivery or performance violate, be in
conflict with or result in the breach (with or without the giving of notice or
lapse of time, or both) of any term, condition or provision of, or require the
consent of any other party to, any contract, commitment, agreement, lease,
license, permit, authorization, document or other understanding, oral or
written, to or by which any Seller is a party or otherwise bound or affected. No
authorization, approval or consent of, and no registration or filing with, any
governmental or regulatory official, body or authority is required in connection
with the execution, delivery and performance of this Agreement by any Seller.
4.3 No Claims Against the Company or its Subsidiary. No Seller has any
claim, either accrued, absolute, contingent or otherwise and whether known or
unknown, fixed or unfixed, choate or inchoate, liquidated or unliquidated,
secured or unsecured, against the Company or its Subsidiary for any reason,
other than claims in the ordinary course, consistent with past practice, for the
payment of salary, bonuses, commissions, expense reimbursements or payments
arising from other employee benefits to the extent accrued but not yet paid (all
of which shall be fully reflected on the Closing Balance Sheet).
5. Joint and Several Representations and Warranties of the Sellers. Each
Seller, jointly and severally, represents and warrants to the Buyer as follows:
5.1 Corporate Existence. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware,
and it has all requisite power and authority and all licenses, permits and
authorizations necessary to carry on its business as it has been and is now
being conducted and to own, lease and operate the properties used in connection
therewith. The Company is qualified as a foreign corporation authorized to do
business and is in good standing in each jurisdiction in which such
qualification is required, except for those jurisdictions where the failure to
be so qualified would not be reasonably expected to have a material adverse
effect on the Company's business, operations, assets, properties or condition
(financial or otherwise). Schedule 5.1 hereto sets forth all of the
jurisdictions in which the Company is qualified to conduct business as a foreign
corporation.
5.2 Capitalization. (a) The total authorized capital stock of the Company
consists of (i) 50,000 shares of Class A common voting stock, par value $.01 per
share, of which 12,826 shares and no others are issued and outstanding (all such
issued and outstanding shares have been previously defined as the "Shares") and
(ii) 50,000 shares of Class B common non-voting stock, par value $.01 per share,
none of
4
<PAGE>
which are issued and outstanding. All of the Shares have been duly authorized
and validly issued, are fully paid and non-assessable, were not issued in
violation of the terms of any agreement or other understanding binding upon the
Company and were issued in compliance with the Certificate of Incorporation and
By-Laws of the Company and all applicable federal, state and foreign securities
and other laws, rules and regulations. There are, and except as set forth on
Schedule 5.2 hereto have been, no preemptive rights with respect to the issuance
of the Shares or any other shares of capital stock of the Company, and there
have been no issuances in violation of any preemptive rights. All redemptions
and repurchases of shares of capital stock by the Company have been completed in
accordance with law and the terms thereof, and the Company has no liability or
obligation of any nature in connection therewith. Except for the agreements,
contracts and commitments listed on Schedule 5.2 hereto, the Company is not a
party to, and has not in the past five years entered into or made, any
agreement, contract or commitment in connection with any redemption or
repurchase of shares of its capital stock.
(b) Except as set forth on Schedule 5.2 hereto, there are no outstanding
subscriptions, options, warrants, convertible securities, calls, commitments,
agreements or rights (contingent or otherwise) of any character to purchase or
otherwise acquire from the Company or any Seller any shares of, or any
securities convertible into shares of, the capital stock of the Company.
5.3 Subsidiary; No Interest in Other Entities. (a) Jeffrey Specialty
Equipment Corporation (the "Subsidiary") is the only direct or indirect
subsidiary of the Company. The Subsidiary is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware,
and has all requisite power and authority and all licenses, permits and
authorizations necessary to carry on its business as it has been and is now
being conducted and to own, lease and operate the properties used in connection
therewith. The Subsidiary is qualified as a foreign corporation authorized to do
business and is in good standing in each jurisdiction in which such
qualification is required, except for those jurisdictions where the failure to
be so qualified would not be reasonably expected to have a material adverse
effect on the Subsidiary's business, operations, assets, properties or condition
(financial or otherwise). Schedule 5.3 hereto sets forth all of the
jurisdictions in which the Subsidiary is qualified to conduct business as a
foreign corporation.
(b) The authorized, issued and outstanding capital stock of the Subsidiary
is listed on Schedule 5.3 hereto. All of such issued and outstanding shares of
capital stock have been duly authorized and validly issued, are fully paid and
non-assessable, were not issued in violation of the terms of any agreement or
other understanding binding upon the Subsidiary and were issued in compliance
with the Certificate of Incorporation and By-Laws of the Subsidiary and all
applicable federal, state and foreign securities and other laws, rules and
regulations. There are no outstanding subscriptions, options, warrants,
convertible securities, calls, commitments, agreements or rights (contingent or
otherwise) of any character to purchase or otherwise acquire from the Subsidiary
or the Company any shares of, or any securities convertible into shares of, the
capital stock of the Subsidiary. There are, and except as set forth on Schedule
5.3 hereto have been, no preemptive rights with respect to the issuance of
shares of capital stock of the Subsidiary, and there have been no issuances in
violation of any preemptive rights.
(c) The Company is the lawful owner of record and beneficially of all of
the issued and outstanding shares of capital stock of the Subsidiary, free and
clear of all pledges, liens, encumbrances, claims and other charges and
restrictions thereon of every kind, including without limitation any agreements,
subscriptions, options, warrants, calls, commitments or rights (contingent or
otherwise) of any character granting to any person any interest in or right to
acquire from the Company or the Subsidiary at any time, or upon the happening of
any stated event, any shares of capital stock of the Subsidiary.
(d) Except as set forth on Schedule 5.3(d), neither the Company nor the
Subsidiary owns any shares of any corporation other than the Company's ownership
of the Subsidiary, and neither the
5
<PAGE>
Company nor the Subsidiary has any other ownership or other investment interest,
either of record, beneficially or equitably, in any association, partnership,
joint venture or legal entity, except for bank, checking and money market
accounts and other cash equivalent investments.
5.4 Financial Statements. (a) The Sellers have delivered to the Buyer
prior to the date hereof (i) the consolidated balance sheets of the Company and
its Subsidiary as of December 31, 2001, 2000 and 1999 and the related
consolidated statements of income, stockholders' equity and cash flows for the
12-month periods then ended, reported on without qualification by Arthur
Andersen LLP, independent certified public accountants (the "Audited
Financials"), and (ii) the unaudited consolidated balance sheet of the Company
and its Subsidiary as of September 30, 2002 (the "September Balance Sheet") and
the related consolidated statements of income and stockholders' equity for the
nine-month period then ended (the "Unaudited Financials"; and together with the
Audited Financials, the "Company Financials"). The Company Financials (including
without limitation all notes, comments, schedules and supplemental data
contained in or annexed to such statements), true, correct and complete copies
of all of which are attached hereto as Schedule 5.4, are accurate, complete and
in accordance with the books and records of the Company and its Subsidiary in
all material respects and present fairly the consolidated financial position and
assets and liabilities of the Company and its Subsidiary as of their respective
dates and the results of their consolidated operations for the periods then
ended, in conformity with generally accepted accounting principles applied on a
consistent basis except, in the case of the Unaudited Financials, for the
omission of footnote information and normal year end adjustments (none of which
will be material).
(b) The accounting books and records maintained by the Company and its
Subsidiary, and upon which all of the Company Financials are based, taken as a
whole, accurately reflect all of their items of income and expense, assets,
liabilities and businesses. The Company maintains a system of internal
accounting controls sufficient to provide reasonable assurances that
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain accountability for assets.
(c) The outstanding balance under the Loan Agreement, dated November 1,
1999, between the South Carolina Jobs-Economic Development Authority and the
Subsidiary, was paid in full on December 23,2002; the lender thereof has
terminated and released all rights and interests with respect thereto, and
neither the Company nor its Subsidiary has any remaining liability or obligation
in connection therewith.
5.5 Accounts Receivable. To each Seller's knowledge, none of the accounts
receivable of the Company or its Subsidiary are subject to valid defenses,
set-offs or counterclaims other than normal returns and allowances and all of
such accounts receivable were generated only in the ordinary course of business.
5.6 Inventory. All inventory of the Company and its Subsidiary consists of
items of a normal quality and quantity saleable in the ordinary course of their
businesses consistent with past practice.
5.7 Absence of Undisclosed Liabilities. (a) Neither the Company nor its
Subsidiary is liable for or subject to any liability except for:
(i) those liabilities and obligations reflected on the September
Balance Sheet and not heretofore paid or discharged;
(ii) those liabilities and obligations arising in the ordinary
course of its business consistent with past practice under any contract,
commitment or agreement specifically disclosed on any Schedule to this
Agreement or not required to be disclosed thereon because of the term or
amount involved or otherwise; and
6
<PAGE>
(iii) those liabilities and obligations incurred, consistent with
past practice, in the ordinary course of its business since September 30,
2002, which liabilities and obligations in the aggregate are of a
character and magnitude consistent with past practice.
For purposes of this Section 5.7, the term "liabilities" shall include without
limitation any direct or indirect liability, indebtedness, guaranty,
endorsement, claim, loss, damage, deficiency, cost, expense, obligation or
responsibility, either accrued, absolute, contingent or otherwise.
(b) The Company does not have any liability for any dividends or
distributions to any stockholder and, except as disclosed in Schedule 5.7 or
Schedule 5.18 hereto, since September 30, 2002 has not paid or delivered or
become committed to pay or deliver any dividend or payment, or made or become
committed to make any distribution or payment, to any stockholder in respect of
its capital stock. Since June 30, 2002, the Company has not redeemed, purchased
or otherwise acquired any of its capital stock.
5.8 Existing Condition. Except as disclosed on Schedule 5.8 hereto, since
September 30, 2002, neither the Company nor its Subsidiary has:
(a) sold, assigned or transferred any of its assets or properties except
in the ordinary course of its business consistent with past practice;
(b) created, incurred, assumed or guaranteed any indebtedness for money
borrowed or incurred any other liabilities exceeding $10,000 in the aggregate
except for current liabilities incurred consistent with past practice;
(c) suffered any damage, destruction or loss, whether or not covered by
insurance, (i) materially and adversely affecting its business, operations,
assets, properties or condition (financial or otherwise) or (ii) of any item
carried on its books of account at more than $10,000;
(d) suffered any material adverse change in its business, operations,
assets, properties or condition (financial or otherwise);
(e) made any capital expenditure or capital addition or betterment
exceeding $10,000 in the aggregate except for such as may be involved in the
ordinary repair, maintenance and replacement of its assets;
(f) increased the salaries or other compensation of, or made any advance
(excluding advances for ordinary and necessary business expenses) or loan to,
any of its directors, officers or employees, or to any Seller, or made any
increase in, or any addition to, other benefits to which any of its directors,
officers or employees or any Seller may be entitled; or
(g) entered into any transaction other than in the ordinary course of its
business consistent with past practice.
Except as disclosed on Schedule 5.8 hereto, since December 31, 2001, neither the
Company nor its Subsidiary has made or suffered any amendment to or termination
of any material contract or commitment to which it is or was a party or by which
it or any of its properties are bound.
5.9 Assets and Properties. (a) Schedule 5.9 hereto contains a description
of each parcel of real property owned, leased or subleased by the Company or its
Subsidiary or in which the Company or its Subsidiary has any real estate
interest and each lease agreement under which the Company or its Subsidiary has
any direct or indirect leasehold interest in any real property (collectively,
"Real Property").
7
<PAGE>
Schedule 5.9 hereto also contains a list of all inventory, and all equipment
(having a value in excess of $10,000 individually on the books of the Company or
its Subsidiary), owned by the Company or its Subsidiary as of September 30,
2002. The Company and its Subsidiary own outright, have good, valid and
marketable title (and as to any owned Real Property, fee title) to and are in
possession of all of their Real Property and other owned properties and assets,
whether solely real, personal or mixed, including without limitation all of the
properties and assets reflected on the September Balance Sheet and those
acquired since September 30, 2002 (except in each case for properties and assets
sold or otherwise disposed of since September 30, 2002 in the ordinary course of
their businesses consistent with past practice), free and clear of all
mortgages, liens, pledges, security interests, charges, claims, restrictions and
other encumbrances and defects of title of any nature whatsoever, except liens
for current taxes not yet due and payable and items disclosed on Schedule 5.9
hereto. All leases or subleases in any manner related to the Real Property, or
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