EXECUTION COPY
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RECAPITALIZATION AGREEMENT
by and among
THE SHAREHOLDERS LISTED ON SCHEDULE A HERETO,
as Sellers
J. CREW GROUP, INC.
and
TPG PARTNERS II, L.P.
as Buyer
July 22, 1997
TABLE OF CONTENTS
Page
SECTION 1. DEFINITIONS...........................................1
SECTION 2. PURCHASE AND REDEMPTION OF SHARES.....................8
2.1. Purchase and Redemption of Shares...................8
2.2. Closing.............................................8
2.3. Deliveries and Actions at the Closing...............9
SECTION 3. REPRESENTATIONS AND WARRANTIES REGARDING
SELLERS AND THE COMPANY.............................10
3.1. Organization and Good Standing of the
Company..........................................10
3.2. Subsidiaries.......................................11
3.3. Capitalization; Title to Shares....................12
3.4. Authority, Approvals and Consents..................12
3.5. Financial Statements...............................13
3.6. Absence of Material Adverse Change;
Conduct of Business..............................14
3.7. Taxes..............................................14
3.8. Legal Matters......................................15
3.9. Real Property......................................15
3.10. Contracts..........................................17
3.11. Employee Benefit Plans.............................17
3.12. Intellectual Property..............................18
3.13. Brokers............................................18
3.14. Environmental Matters..............................19
3.15. Transactions with Insiders.........................19
3.16. Insurance..........................................20
3.17. Certain Additional Items...........................20
3.18. No Other Representations or Warranties.............21
SECTION 4. REPRESENTATIONS AND WARRANTIES REGARDING
BUYER...............................................21
4.1. Organization of Buyer..............................21
4.2. Power; Authorization; Consents.....................22
4.3. Brokers............................................22
4.4. Investment Intent of Buyer.........................23
4.5. Financial Matters..................................23
4.6. No Reliance........................................23
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SECTION 5. COVENANTS............................................24
5.1. Access; Confidentiality............................24
5.2. Announcements......................................24
5.3. New Financing......................................25
5.4. Recapitalization...................................25
5.5. Consents; Cooperation..............................26
5.6. Additional Agreement...............................26
5.7. Notification of Certain Matters....................27
5.8. Xxxx-Xxxxx-Xxxxxx..................................27
5.9. Further Assurances.................................27
5.10. Retention of Books and Records.....................27
5.11. Personnel..........................................28
5.12. Conduct of Business Prior to the Closing...........28
5.13. Sellers' Rights with Respect to Resales............30
5.14. Transfer Taxes.....................................32
5.15. Landlord Consents..................................32
5.16. Retention of Shares................................32
5.17. Termination of Existing Shareholder
Agreement........................................32
5.18. Indemnification....................................33
SECTION 6. CONDITIONS TO THE OBLIGATIONS OF BUYER...............33
6.1. Representations and Warranties;
Covenants........................................33
6.2. Xxxx-Xxxxx-Xxxxxx..................................34
6.3. Opinion of Sellers' Counsel........................34
6.4. Absence of Injunction..............................34
6.5. Directors..........................................34
6.6. Certificates.......................................34
6.7. Shareholder Approval...............................35
SECTION 7. CONDITIONS TO THE OBLIGATIONS OF SELLERS.............35
7.1. Representations and Warranties;
Covenants........................................35
7.2. Xxxx-Xxxxx-Xxxxxx..................................35
7.3. Opinion of Buyer's Counsel.........................35
7.4. Absence of Injunction..............................36
7.5. Certificates.......................................36
7.6. Employment/Consulting Agreement....................36
SECTION 8. TERMINATION..........................................36
8.1. Termination........................................36
8.2. Effect of Termination..............................37
SECTION 9. SURVIVAL AND INDEMNIFICATION.........................37
9.1. Survival...........................................37
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9.2. Sellers' Indemnification...........................37
9.3. Buyer's Indemnification............................40
9.4. Claims by Third Parties............................41
9.5. Tax Claims of the Buyer............................43
SECTION 10. MISCELLANEOUS........................................44
10.1. Headings...........................................44
10.2. Notices............................................44
10.3. Assignment.........................................45
10.4. Entire Agreement...................................46
10.5. Amendment; Waiver..................................46
10.6. Counterparts.......................................46
10.7. Governing Law......................................46
10.8. Severability.......................................46
10.9. Consent to Jurisdiction............................47
10.10. Third Person Beneficiaries.........................47
10.11. Representations and Warranties;
Disclosure Schedule..............................47
10.12. United States Dollars..............................48
10.13. Expenses...........................................48
10.14. Liquidated Damages.................................48
Schedule A Shareholders
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Schedule B Seller Addresses
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Exhibit A Fees, Costs and Expenses
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Exhibit B Sellers Retained Shares
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Exhibit C Employment/Consulting Agreement
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RECAPITALIZATION AGREEMENT
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THIS AGREEMENT dated as of this 22nd day of July,
1997, by and among J. Crew Group, Inc., a New York corporation
(the "Company"), the holders of shares of Common Stock listed on
Schedule A hereto (each a "Seller," and collectively, the
"Sellers"), and TPG Partners II, L.P., a Delaware limited
partnership ("Buyer").
The parties hereto desire to effect a series of
transactions pursuant to which, among other things, the Buyer
will acquire from the Company equity securities of the Company,
which securities will represent all of the economic value and
voting power of the Company other than the Retained Shares (as
defined below), and Sellers will sell to the Company all of their
current equity ownership of the Company other than the Retained
Shares.
Accordingly, in consideration of the premises and of
the respective covenants and agreements contained herein, the
parties hereto hereby agree as follows:
SECTION 1. DEFINITIONS
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In this Agreement (including the recitals), except as
expressly provided or as the context otherwise requires:
"Affiliate" means with respect to any Person, any
other Person directly or indirectly controlling, controlled by,
or under direct or indirect common control with, such Person. A
Person will be deemed to control a corporation if such Person
possesses, directly or indirectly, the power to direct or cause
the direction of the management and policies of such corporation,
whether through the ownership of voting securities, by contract
or otherwise.
"Agreement" means this agreement including all
recitals, exhibits and the Disclosure Schedule relating hereto.
"Amended Charter" shall have the meaning given such
term in Section 5.4 hereof.
"Business Day" means any day which is not a Saturday,
Sunday or any other day on which banks in the State of New York
are authorized or required by law to close.
"Closing" means the closing of the purchase and sale of the
Recapitalization Shares and the Redeemed Shares pursuant to this
Agreement.
"Closing Date" means the date on which the Closing
occurs as determined by Section 2.2 of this Agreement.
"Closing Deadline" shall have the meaning given such
term in Section 2.2 hereof.
"Closing Deliveries" means the deliveries specified by
Section 2.3 of this Agreement.
"Closing Payments" means (a) the aggregate principal
amount of indebtedness outstanding under the Senior Notes, the
IRB Debt and the Revolving Facility on the Closing Date, (b) the
aggregate amount of accrued and unpaid interest and any premium
due on such indebtedness as of the Closing, (c) any unpaid fees
or expenses due on such indebtedness as of the Closing, (d) the
redemption price for all of the Preferred Shares as specified in
the Company's Certificate of Incorporation as in effect on the
date hereof, and, without duplication, (e) the aggregate amount
of fees, costs and expenses set forth on Exhibit A hereto.
"Code" means the Internal Revenue Code of 1986, as
amended.
"Common Shares" means all shares of Common Stock
issued and outstanding on the date hereof.
"Common Stock" means the common stock, par value $1.00
per share, of the Company.
"Company Agreement" means any mortgage, indenture,
note, agreement, contract, lease, license, franchise, obligation,
instrument or other commitment, arrangement or understanding of
any kind, to which the Company or a Subsidiary is a party or by
which the Company or a Subsidiary or any of their respective
property may be bound or affected.
"Confidentiality Agreement" means the Confidentiality
Agreement between Buyer and the Company dated April 26, 1996.
"Debt" shall mean any liability in respect of (i)
borrowed money, (ii) capitalized lease obligations, (iii)
obligations under interest rate agreements and currency
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agreements and (iv) guarantees of any of the foregoing, provided
that Debt shall not include any New Financing.
"Disclosure Schedule" means the disclosure schedule
relating to this Agreement.
"8% Preferred Shares" means all issued and outstanding
shares of 8% Cumulative Preferred Stock, par value $100 per
share, of the Company.
"Employee Benefit Plan" shall have the meaning given
such term in Section 3.11 hereof.
"Employment/Consulting Agreement" shall have the
meaning given such term in Section 7.6 hereof.
"Environmental Law" means any and all federal, state
or local laws, ordinances or regulations relating to pollution,
the protection of the environment and the discharge or release of
materials into the environment.
"ERISA" means the Employee Retirement Income Security
Act of 1974, as amended.
"Financial Statements" means the audited consolidated
balance sheets of the Company for the years ended February 3,
1995, February 2, 1996 and January 31, 1997, and the related
statements of income, stockholders equity and cash flow for the
periods then ended and the notes thereto accompanied by the
report thereon of Deloitte & Touche LLP.
"GAAP" shall mean United States generally accepted
accounting principles.
"Hazardous Material" shall mean any substance,
chemical, compound, product, solid, gas, liquid, waste or
byproduct which is classified or regulated as "hazardous" or
"toxic" pursuant to any Environmental Law and includes, without
limitation, asbestos, PCBs and petroleum (including crude oil or
any fraction thereof).
"HSR Act" means the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976, as amended.
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"Indemnitee" shall mean the Buyer, Sellers or Company upon
receipt by the Buyer, Sellers or Company of a Third Party Claim.
"Indemnitor" shall mean any of the Buyer, Sellers or
Company upon receipt by the Buyer, Sellers or Company of a claim
for indemnification from the Indemnitee pursuant to a Third Party
Claim.
"Insider" shall have the meaning given such term in
Section 3.15 hereof.
"Intellectual Property" means all of the following:
(i) trademarks and service marks (registered or unregistered) and
trade names, and all goodwill associated therewith; (ii) patents,
patentable inventions, discoveries, improvements, ideas, know-how
and processes; (iii) trade secrets and the right to limit the use
or disclosure thereof; (iv) copyrights in all works; and (v)
domain names.
"IRB Debt" means the aggregate principal amount
outstanding under the Deed of Assumption, dated as of December 1,
1985, between the Industrial Development Authority of the City of
Lynchburg, Virginia and the Company.
"Knowledge of Sellers", or words of similar import,
means the actual knowledge of Xxxxxx Xxxxxxx, Xxxxx Xxxxx and/or
Xxxxxxx XxXxxx.
"Leased Property" shall have the meaning given such
term in Section 3.9 hereof.
"Legal Requirements" means all statutes, ordinances,
codes, rules, regulations, standards, judgments, decrees, writs,
rulings, injunctions, orders and other requirements of
governmental, administrative or judicial entities that are
material and applicable to the Company and any of its property.
"Lien" means any encumbrance, mortgage, charge, right
or other security interest.
"Losses" means, in respect of Buyer or Sellers, any
and all losses, liabilities, claims and reasonable expenses of
defense thereof (including, without limitation, fees and
disbursements of counsel, but excluding compensation paid to
employees of Buyer or Sellers or their respective Affiliates, as
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the case may be, in connection with such defense), Liens or other
obligations of any nature whatsoever.
"Material Adverse Effect" means any material adverse
effect on the business, operations, assets, financial condition,
properties or results of operations of the Company and its
Subsidiaries, taken as a whole.
"Material Agreement" means each Company Agreement that
is material to the business, operations, assets, financial
condition or properties of the Company and its Subsidiaries,
taken as a whole, including, without regard to materiality, each
of the following Company Agreements:
(a) any mortgage, indenture, note, installment
obligation or other instrument, agreement or arrangement
for or relating to borrowing of money by the Company or a
Subsidiary in excess of $100,000;
(b) any guaranty, direct or indirect, by the Company
or a Subsidiary of any obligation for borrowed money,
excluding endorsements made for collection in the ordinary
course of business in excess of $100,000;
(c) any obligation to sell or to register the sale of
any of the Common Shares or Preferred Shares or other
securities of the Company or a Subsidiary;
(d) any obligation to make payments, contingent or
otherwise, arising out of the prior acquisition of the
business of other persons;
(e) any collective bargaining agreement with any labor
union;
(f) any lease or similar arrangement for the use of
personal property involving payments by the Company or a
Subsidiary in excess of $100,000 per annum;
(g) any Company Agreement to which any Insider is a
party;
(h) any Company Agreement providing for aggregate
payments in excess of $100,000 per annum after the Closing
that is not terminable by the Company or a Subsidiary on
less than 180 days' notice without penalty;
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(i) any Company Agreement containing non-competition
covenants binding on the Company or a Subsidiary;
(j) any partnership, joint venture or similar
agreement to which the Company or a Subsidiary is a party;
and
(k) any employment contracts, arrangements,
commitments or understandings of any kind with any officer,
director, employee or consultant of the Company or a
Subsidiary which may not be terminated by the Company or a
Subsidiary without penalty upon not more than 90 days'
notice, pursuant to which payments may be required to be
made following the Closing.
"New Financing" shall have the meaning given such term
in Section 5.3 hereof.
"Owned Property" shall have the meaning given such
term in Section 3.9 hereof.
"Person" means and includes an individual,
corporation, partnership (limited or general), joint venture,
association, trust, limited liability company, any other
unincorporated organization or entity and a governmental entity
or any department or agency thereto.
"Preferred Shares" means the 6% Preferred Shares and
the 8% Preferred Shares.
"Property Leases" shall have the meaning given such
term in Section 3.9 hereof.
"Real Property" shall mean the Owned Property and the
Leased Property.
"Recapitalization Purchase Price" shall have the
meaning given such term in Section 2.1 hereof.
"Recapitalization Shares" shall have the meaning given
such term in Section 2.1 hereof.
"Redeemed Shares" shall mean all of the Common Shares
except the Retained Shares.
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"Release" shall mean any spilling, leaking, pumping,
pouring, emitting, emptying, discharging, injecting, escaping,
leaching, dumping, or disposing into the outdoor environment.
"Retained Shares" shall mean the Common Shares
retained by the Sellers pursuant to Section 5.16 hereof.
"Revolving Facility" means the $200,000,000 Credit
Agreement, dated as of April 18, 1997, among the Company, as
borrower, the Banks listed therein, the Issuing Banks listed
therein, and Xxxxxx Guaranty Trust Company of New York, as agent.
"Sellers Redemption Price" shall mean $347,770,000
less the sum of (i) the value of the Retained Shares as set forth
in Section 5.16 of this Agreement and (ii) $1,184,400,
representing the amount necessary to redeem the Preferred Shares
pursuant to Section 2.3(a).
"Senior Notes" means the Company's 8.10% Senior Notes
due 2004.
"6% Preferred Shares" means all issued and outstanding
shares of 6% Noncumulative Preferred Stock, par value $100 per
share, of the Company.
"Subsidiaries" or "Subsidiary" shall mean any
corporation of which the Company, directly or indirectly, owns a
majority of the common stock or has the power to vote or direct
the voting of sufficient securities to elect a majority of the
board of directors of such corporation, including, but not
limited to, those corporations listed in Section 3.2 of the
Disclosure Schedule.
"Tax" or "Taxes" means all taxes, charges, fees,
levies or other assessments, and all estimated payments thereof,
including but not limited to income, excise, property, sales,
use, value added, environmental, franchise, payroll, transfer,
gross receipts, withholding, social security, and unemployment
taxes, imposed by any federal, state, county or local government,
or any subdivision or agency thereof, and any interest, penalties
and expenses relating to such taxes, charges, fees, levies or
other assessments.
"Tax Returns" means all federal, state and local Tax
returns, reports and declarations which are due and required to
be filed by any applicable Tax law.
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"Third Party Claim" shall have the meaning given such
term in Section 9.4.
SECTION 2. PURCHASE AND REDEMPTION OF SHARES
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2.1. Purchase and Redemption of Shares. Upon and subject
to the terms and conditions of this Agreement, Buyer agrees to
purchase from the Company, and the Company agrees to sell to the
Buyer 48,400 shares of Common Stock, which immediately following
the Closing will constitute eighty-eight percent (88%) of all of
the outstanding common equity securities of the Company and all
of the then outstanding common equity securities of the Company
other than the Retained Shares (the "Recapitalization Shares").
The aggregate purchase price payable for the Recapitalization
Shares by the Buyer (the "Recapitalization Purchase Price") shall
be the amount equal to $549,600,000, less (i) the amount of
proceeds from the New Financing which the Company actually
receives and (ii) the value of the Retained Shares as set forth
in Section 5.16 of this Agreement. Buyer shall provide, or shall
cause one or more other Persons to provide, to the Company the
New Financing. Under no circumstances shall the failure of the
Company or the Buyer to obtain the New Financing relieve the
Buyer of its obligation to purchase the Recapitalization Shares
for the Recapitalization Purchase Price at the Closing. The Buyer
shall pay the Recapitalization Purchase Price in cash, by wire
transfer of immediately available funds to the account of the
Company as designated by the Company. Simultaneously with the
purchase of the Recapitalization Shares by the Buyer, the Company
shall redeem from the Sellers all of the Redeemed Shares for the
Sellers Redemption Price. The Sellers Redemption Price shall be
allocated among the Redeemed Shares in the manner set forth on
Schedule A hereto.
2.2. Closing.
(a) Subject to the satisfaction or waiver of
the conditions set forth in Sections 6 and 7 of this Agreement
(other than those requiring Closing Deliveries), the Closing will
take place at the offices of Xxxxxxx Xxxx & Xxxxxxxxx, at 10:00
A.M. on a date to be mutually agreed upon by the Sellers and
Buyer (the "Closing Date"), which date shall not be more than 90
days from and after the date hereof (the "Closing Deadline"), or
at such other time and place as the parties may agree. Buyer
shall
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use its best efforts to cause the Closing Date to occur not more
than 60 days from and after of the date hereof.
(b) If the Closing occurs at or before 12:00
noon New York time on the Closing Date, the Closing will be
effective as of the start of business on the Closing Date;
otherwise, the Closing will be effective as of the start of
business on the day following the Closing Date.
(c) Two business days prior to the Closing
Date, the Company shall deliver to Buyer a certificate of the
Chief Financial Officer of the Company, reflecting the best
available estimates of the Company of the amounts, as of the date
thereof, of the fees, costs and expenses set forth on Exhibit A
of this Agreement. To the extent that the amounts set forth in
such certificate, in the aggregate, exceed the aggregate of the
corresponding amounts set forth on Exhibit A of this Agreement by
at least $100,000, the Sellers Redemption Price payable to the
Sellers at the Closing shall be reduced by the amount by which
such excess exceeds $100,000 (which reduction shall be allocated
to the Sellers in proportion to the amounts set forth opposite
their names on Schedule A hereto).
2.3. Deliveries and Actions at the Closing.
Subject to the satisfaction or waiver of the conditions set forth
in Sections 6 and 7 hereof, at and in connection with the
Closing:
(a) the Company shall redeem the
Preferred Shares at the per share redemption price set
forth in the Company's Certificate of Incorporation as in
effect on the date hereof;
(b) the Company shall file the Amended Charter as
provided in Section 5.4 hereof;
(c) the Company shall borrow funds under the New
Financing;
(d) the Company shall deliver to the
Buyer:
(i) certificates representing the
Recapitalization Shares; and
(ii) all opinions, certificates and
other instruments or documents contemplated under
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Section 6 to be delivered by the Company at or prior to
the Closing;
(e) the Sellers shall deliver to the
Company or the Buyer, as the case may be, all opinions,
certificates and other instruments or documents
contemplated under Section 6 to be delivered by the Sellers
at or prior to the Closing;
(f) the Sellers shall deliver to the
Company certificates representing the Redeemed Shares duly
endorsed for transfer;
(g) the Buyer shall deliver to the
Company the Recapitalization Purchase Price in immediately
available federal funds by wire transfer to the bank
account or accounts designated by the Company prior to the
Closing;
(h) the Company shall (i) deliver to the
Sellers the Sellers Redemption Price in immediately
available federal funds by wire transfer to the bank
account or accounts designated by the Sellers prior to the
Closing and (ii) pay, or make arrangements to pay, the
Closing Payments; and
(i) the Buyer shall deliver to the
Company and the Sellers all opinions, certificates and
other instruments and documents contemplated under Section
7 to be delivered by the Buyer at or prior to the Closing.
SECTION 3.1. REPRESENTATIONS AND WARRANTIES REGARDING SELLERS AND
THE COMPANY
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Except as disclosed in this Agreement, Sellers hereby
represent and warrant to Buyer as follows:
3.1. Organization and Good Standing of the
Company. The Company is duly incorporated and is validly existing
as a corporation in good standing under the laws of the State of
New York, and has the corporate power and authority to own, lease
and operate the property used in its business and to carry on its
business as now being conducted. The Company is registered to do
business and is in good standing in all jurisdictions in which
the character of the properties owned or held under lease by it
makes qualification necessary, except where the failure to be so
qualified or in good standing would not have a Material Adverse
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Effect. Sellers have made available to Buyer true and complete
copies of the Certificate of Incorporation and all amendments
thereto of the Company and each Subsidiary to the date hereof and
the By-Laws of the Company and each Subsidiary as in effect on
the date hereof. The minute and stock transfer books of the
Company have been made available to Buyer and the originals
thereof will be delivered to Buyer at Closing.
3.2. Subsidiaries. Except as set forth in
Section 3.2 of the Disclosure Schedule, the Company does not own,
directly or indirectly, any debt, shares or other equity interest
or securities in any corporation, partnership, joint venture or
other Person, and has no agreement or commitment to purchase any
such interest. Except as set forth in Section 3.2 of the
Disclosure Schedule, each Subsidiary is duly incorporated,
validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has all requisite corporate
power and authority to own, lease and operate the property used
in its business and to carry on its business as now being
conducted, except where the failure to be in good standing would
not have a Material Adverse Effect. Except as set forth in
Section 3.2 of the Disclosure Schedule, each Subsidiary is
registered to do business and is in good standing in all
jurisdictions in which the character of the properties owned or
held under lease by such Subsidiary makes qualification
necessary, except where the failure to be so qualified or in good
standing would not have a Material Adverse Effect. Except as set
forth in Section 3.2 of the Disclosure Schedule, all of the
outstanding shares of capital stock of each Subsidiary of the
Company are validly issued, fully paid and non-assessable and
none of the Subsidiaries owns or controls, directly or
indirectly, any other equity interest in any corporation,
partnership, joint venture, limited liability company, trust,
firm or other entity. Except as set forth in Section 3.2 of the
Disclosure Schedule, the Company owns, directly or through a
Subsidiary, 100% of the outstanding capital stock of each
Subsidiary and there is no security, option, warrant, right,
call, subscription agreement, commitment or understanding of any
nature whatsoever to which the Company or the Sellers is a party,
that directly or indirectly (i) calls for the issuance, sale,
pledge or other disposition of any shares of capital stock of the
Subsidiaries or any securities convertible into, or other rights
to acquire, any shares of capital stock of the Subsidiaries, (ii)
obligates the Company or the Sellers to grant, offer or enter
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into any of the foregoing or (iii) relates to the voting or
control of such capital stock, securities or rights.
3.3. Capitalization; Title to Shares. The
authorized capital stock of the Company consists of (i) 1,000,000
shares of Common Stock of which 227,988 shares are issued and
outstanding, (ii) 20,000 shares of 6% Preferred Shares of which
9,339 shares are issued and outstanding and (iii) 10,000 shares
of 8% Preferred Shares of which 2,505 shares are issued and
outstanding. All of the Common Shares have been validly
authorized and issued, and are fully paid and nonassessable.
Section 3.3 of the Disclosure Schedule sets forth the record and
beneficial owners of all of the Common Shares and Preferred
Shares. Except as contemplated by this Agreement, or as set forth
in Section 3.3 of the Disclosure Schedule, there is no security,
option, warrant, right, call, subscription agreement, commitment
or understanding of any nature whatsoever to which any of the
Sellers or the Company is a party, that directly or indirectly
(i) calls for the issuance, sale, pledge or other disposition of
any shares of capital stock of the Company or any securities
convertible into, or other rights to acquire, any shares of
capital stock of the Company, (ii) obligates Sellers or the
Company to grant, offer or enter into any of the foregoing or
(iii) relates to the voting or control of such capital stock,
securities or rights. Except as set forth in Section 3.3 of the
Disclosure Schedule, Sellers have good and marketable title to
the Common Shares, free and clear of any Liens.
3.4. Authority, Approvals and Consents. The
Company has the corporate power and authority to execute, deliver
and perform this Agreement and, subject to the requisite approval
of the filing of the Amended Charter by the shareholders of the
Company, to consummate the transactions contemplated hereby. The
execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby have been
duly authorized and approved by the board of directors of the
Company and, except for the requisite approval of the filing of
the Amended Charter by the shareholders of the Company, no other
proceedings on the part of the Company are necessary to authorize
and approve this Agreement or any of the transactions
contemplated hereby. This Agreement has been duly executed and
delivered by the Company and constitutes a valid and binding
bligation of the Company, enforceable against the Company in
accordance with its terms, except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization,
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moratorium, or similar laws affecting creditors' rights generally
or by the principles governing the availability of equitable
remedies. This Agreement has been duly executed and delivered by
the Sellers and constitutes a valid and binding obligation of
each Seller, enforceable against such Seller in accordance with
its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar
laws affecting creditors' rights generally or by the principles
governing the availability of equitable remedies. Except as
otherwise set forth in Section 3.4 of the Disclosure Schedule,
the execution, delivery and performance of this Agreement by the
Company and the Sellers and the consummation of the transactions
contemplated hereby do not and will not:
(a) contravene any provisions of the Certificate of
Incorporation or By-Laws of the Company;
(b) (after notice or lapse of time or both)
conflict with, result in a breach of any provision of,
constitute a default under, result in the modification or
cancellation of, or give rise to any right of prepayment
under or termination in respect of, any contract,
agreement, commitment, understanding or arrangement of any
kind to which Sellers or the Company is a party or to which
Sellers or any of Company's or any Subsidiary's property is
subject which is likely to have a Material Adverse Effect;
(c) violate or conflict with any Legal
Requirements applicable to Sellers, the Company or any
Subsidiary, except where such violation or conflict would
not have a Material Adverse Effect; or
(d) except for filings under the HSR Act,
require any authorization, consent, order, permit or
approval of, or notice to, or filing, registration or
qualification with, any governmental, administrative or
judicial authority which if not obtained or made is likely
to have a Material Adverse Effect.
3.5. Financial Statements. The Financial
Statements attached hereto as Section 3.5 of the Disclosure
Schedule have been prepared in accordance with the books and
records of the Company and its Subsidiaries and fairly present in
all material respects the financial position of the Company and
its Subsidiaries as of the dates indicated and the results of
-13-
operations of the business of the Company and its Subsidiaries
for the periods indicated, in conformity with GAAP applied on a
consistent basis.
3.6. Absence of Material Adverse Change;
Conduct of Business. Except as set forth in Section 3.6 of the
Disclosure Schedule or reflected in the most recent Financial
Statements of the Company, since the date of the most recent
Financial Statements, the business of the Company and its
Subsidiaries has been conducted in the ordinary course of
business and the Company and its Subsidiaries have not: (i)
experienced or suffered any change, occurrence or event that has
had a Material Adverse Effect; (ii) sold or otherwise disposed of
any assets or properties material to the Company and its
Subsidiaries, taken as a whole, other than sales of inventory in
the ordinary course of business; (iii) waived, released or
canceled any rights or indebtedness owing to the Company or any
Subsidiary that are material to the Company and its Subsidiaries,
taken as a whole, or prepaid any interest on any Debt; (iv) made
any material changes in its accounting systems, policies,
principles or practices; (v) acquired or leased any assets
material to the Company and its Subsidiaries, taken as a whole,
other than in the ordinary course of business; or (vi) taken any
of the actions addressed by Section 5.12(h) of this Agreement.
3.7. Taxes. Except as set forth in Section 3.7
of the Disclosure Schedule, each of the Company and its
Subsidiaries has filed all Tax Returns required to be filed by
any of them, and has paid (or the Company has paid on its
behalf), or has set up an adequate reserve for the payment of,
all material Taxes required to be paid in respect of the periods
covered by such Tax Returns. The information contained in such
Tax Returns is true, complete and accurate, except where a
failure to be so would not have a Material Adverse Effect. Except
as set forth in Section 3.7 of the Disclosure Schedule: (A) the
income Tax Returns have been examined by the Internal Revenue
Service or the appropriate state, local or foreign taxing
authority or the period of assessment of the Taxes in respect of
which such returns were required to be filed has expired; (B)
neither the Company nor any Subsidiary of the Company is
delinquent in the payment of any material Tax, assessment or
governmental charge; (C) no material deficiencies for any Tax
have been proposed, asserted or assessed against the Company or
any of its Subsidiaries that have not been finally settled or
paid in full, or for which adequate reserves have not been set
aside for the payment thereof; and (D) no
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requests for waivers of the time to assess any such Tax
are pending.
3.8. Legal Matters. Except as set forth in
Section 3.8 of the Disclosure Schedule, (i) there is no claim,
action, suit, litigation, formal investigation or proceeding
pending against, or, to the Knowledge of Sellers, threatened in
writing against, the Company or any Subsidiary before or by any
court, arbitrator, panel, agency or other governmental,
administrative or judicial entity which is likely to have a
Material Adverse Effect and (ii) neither the Company nor any
Subsidiary is subject to any judgment, decree, writ, injunction
or order of any governmental, administrative or judicial
authority which is likely to have a Material Adverse Effect. The
business of the Company is being conducted in compliance with all
Legal Requirements, except where the failure to comply would not
have a Material Adverse Effect. Except as set forth in Section
3.8 of the Disclosure Schedule, as of the date of this Agreement,
the Company has not received any written notice asserting any
noncompliance with any Legal Requirement, except for such
failures as would not have a Material Adverse Effect.
3.9. Real Property.
(a) Set forth in Section 3.9 of the Disclosure
Schedule are (i) a complete list of all real property (the
"Owned Property") owned by the Company or a Subsidiary of
the Company that is material to the Company and its
Subsidiaries considered as a whole; (ii) a complete list of
all real property (the "Leased Property") with respect to
which the Company or any Subsidiaries are parties to a
lease, sublease, license or other occupancy agreement,
together with a list of each lease, sublease, license or
other agreement or understanding pursuant to which any
party other than the Company or a Subsidiary occupies such
Leased Property; and (iii) a complete list of each lease,
sublease, license or other agreement or understanding, oral
or written, pursuant to which any party other than the
Company or a Subsidiary occupies all or any part of the
Owned Property or the Leased Property. (The Owned Property and
the Leased Property are sometimes collectively referred to
as the "Real Property.") True and complete copies of all
leases, subleases, licenses and other documents,
instruments, agreements and understandings to which the
Company or a Subsidiary is a party, whether as lessee,
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lessor, sublessee, sublessor, licensee or licensor,
pertaining to the current or future occupancy of any Real
Property or any current or future right to occupy any Real
Property, together with all material amendments,
modifications and supplements thereto (collectively, the
"Property Leases") have been made available to the Buyer.
(b) With respect to the Property Leases, no
breach or event of default on the part of any party thereto
and no event that, with the giving of notice or lapse of
time or both, would constitute such breach or event of
default, has occurred and is continuing, except where such
breach or event of default would not have a Material
Adverse Effect. All of the Property Leases are in full
force and effect and are valid and enforceable against the
parties thereto in accordance with their terms. All rental
and other payments due under each of the Property Leases
have been duly paid in accordance with the terms of such
Property Lease, except where a failure to make such
payments would not have a Material Adverse Effect. Except
as set forth in Section 3.9 of the Disclosure Schedule, the
transactions contemplated by this Agreement do not require
the consent of any party to, and will not constitute an
event of default under or permit any party to terminate or
change the existing terms of, any Property Lease except
where the failure to obtain such consent or where such
default, termination or change would not have a Material
Adverse Effect.
(c) The Company and, as applicable, each
Subsidiary, has good and marketable title in fee simple to
the Owned Property, good and marketable leasehold title to
the Leased Property, and good and marketable title to all
plants, buildings, fixtures and improvements located on the
Real Property, in each case free and clear of any
mortgages, deeds of trust, liens, security interests,
judgments, options, rights, claims, charges, encroachments,
easements, rights-of-way, squatters' rights, encumbrances,
covenants, conditions, restrictions and other imperfections
of title (collectively, "Impairments"), except for those
Impairment that are set forth in Section 3.9 of the
Disclosure Schedule, or except where such Impairments would not
have a Material Adverse Effect.
(d) To the Knowledge of the Sellers, there is
no Impairment encumbering the title of the lessor to any
Leased
-16-
Property or the plants, buildings, fixtures and
improvements thereon, except for those Impairments that are
set forth in Section 3.9 of the Disclosure Schedule, or
except where such Impairments would not have a Material
Adverse Effect.
3.10. Contracts. Sellers have made available to
Buyer for inspection true and complete copies of all Material
Agreements. Except as set forth in Section 3.10 of the Disclosure
Schedule, neither the Company nor, to the Knowledge of Sellers,
any other party to any of the Material Agreements, is in breach
of or default under any Material Agreement, except for breaches
or defaults which are not likely to have a Material Adverse
Effect.
3.11. Employee Benefit Plans. Section 3.11 of
the Disclosure Schedule sets forth all pension plans,
profit-sharing plans or other employee pension benefit plans and
all bonus, severance, incentive, savings, insurance, welfare or
other employee benefit plans (including without limitation any
such plan within the meaning of Section 3(2) or 3(3) of ERISA)
maintained by the Company or a Subsidiary, in which any employee
of the Company or a Subsidiary participates ("Employee Benefit
Plans"). Except as set forth in Section 3.11 of the Disclosure
Schedule:
(a) Neither the Company nor any Subsidiary is
required to make contributions to any multi-employer plan (within
the meaning of Section 3(37) of ERISA), and no employee of the
Company or a Subsidiary participates in any multi-employer plan;
(b) With respect to each Employee Benefit Plan
and any other similar arrangement or plan either currently or
previously terminated, maintained, or contributed to by any
entity which either is currently or was previously under common
control with the Company as determined under Code Section 414, no
event has occurred during the period when such entity was under
common control with the Company and no condition exists that
after the Closing could reasonably be expected to subject the
Company or any Subsidiary, directly or indirectly, to any
liability including liability under any indemnification agreement)
under Section 412, 413, 4971, 4975, or 4980B of the Code or Section
302, 502, 515, 601, 606, or Title IV of ERISA that is likely to
have a Material Adverse Effect;
-17-
(c) All benefits due under each Employee
Benefit Plan have been paid and there is no lawsuit or claim that
is likely to have a Material Adverse Effect, other than routine
claims for benefits, pending, or to the Knowledge of Sellers
threatened, against any Employee Benefit Plan or the fiduciaries
of any such plan or otherwise involving or pertaining to any such
plan;
(d) No audit or investigation by any
governmental authority is pending, or to the Knowledge of Sellers
threatened, regarding any Employee Benefit Plan, and, to the
Knowledge of Sellers, no party dealing with any Employee Benefit
Plan has engaged in any prohibited transactions (within the
meaning of Section 406 of ERISA or Section 4975 of the Code) or
any breach of fiduciary duty that is likely to have a Material
Adverse Effect; and
(e) The Company is not obligated to make any payments
in connection with the transactions contemplated by this
Agreement pursuant to any severance, change of control or "golden
parachute" arrangements with any Insider or employee of the
Company.
3.12. Intellectual Property. Except as set forth in
Section 3.12 of the Disclosure Schedule:
(a) The Company either owns, or has by license
or otherwise the right to use, all Intellectual Property
owned by the Company or used in the business of the
Company; and
(b) To the Knowledge of Sellers, the conduct
by the Company or any Subsidiary of its business does not
infringe in any material respect on any valid Intellectual
Property rights of any other Person.
3.13. Brokers. Except for fees and expenses
payable by the Company to Xxxxxxx, Xxxxx & Co. listed on Exhibit
A hereto, which is acting for the Company, none of the Sellers
nor the Company has incurred or will incur any broker's, finder's
or similar fee, commission or expense, in each case in connection
with the transactions contemplated by this Agreement.
3.14. Environmental Matters. Except as set forth
in Section 3.14 to the Disclosure Schedule or otherwise disclosed
in environmental reports provided to or prepared by or on behalf
of Buyer, to the Knowledge of Sellers:
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(a) the Company's and its Subsidiaries' real
property complies with applicable Environmental Laws,
except for failures to comply that in the aggregate have
not had and would not be expected to have a Material
Adverse Effect;
(b) the Company and the Subsidiaries have
obtained all environmental consents, approvals, licenses
and permits required for its operations by any applicable
Environmental Law except for failures to obtain that in the
aggregate have not had and would not be expected to have a
Material Adverse Effect; and
(c) except as is not likely to have a Material
Adverse Effect, neither Sellers nor any other Person
(including the Company or any Subsidiary) has caused any
Release, threatened Release or disposal of any Hazardous
Material at or from the Company's or any Subsidiary's real
property and none of such real property is adversely
affected by any Release, threatened Release or disposal of
a Hazardous Material originating or emanating from any
adjoining property.
3.15. Transactions with Insiders. Set forth in
Section 3.15 to the Disclosure Schedule is a true and complete
list of the following agreements and transactions: (i) all
Company Agreements to which any Insider or, to the Knowledge of
Sellers, any Affiliate of the Company is a party and (ii) a true
and complete description of all transactions between the Company,
a Subsidiary or any Employee Benefit Plan, on the one hand, and
any Insider or, to the Knowledge of Sellers, any Affiliate of the
Company, on the other hand, other than benefits provided under
any Employee Benefit Plan in the ordinary course of business. For
purposes of this Agreement the term "Insider" means any
shareholder, director or officer of the Company or a Subsidiary.
3.16. Set forth in Section 3.16 of the
Disclosure Schedule is a complete and correct schedule of all
currently effective material insurance policies or binders of
insurance or programs of self-insurance which relate to the
business of the Company and its Subsidiaries. The coverage under
each such policy and binder is in full force and effect, and no
notice of cancellation or nonrenewal with respect to, or
disallowance of any claim under, or material increase of premium
for, any such policy or binder has been received by the Company
-19-
or any Subsidiary, except such notices, disallowances or
increases which are not likely to have a Material Adverse Effect.
3.17. Certain Additional Items . The aggregate
principal amount outstanding under the Senior Notes is
$85,000,000 and the aggregate amount of accrued but unpaid
interest and prepayment premium on the Senior Notes is
$5,490,500, in each case as of the date hereof. The aggregate
principal amount outstanding under the IRB Debt is $1,974,000 and
the aggregate amount of accrued but unpaid interest on the IRB
Debt is $6,000, in each case as of the date hereof. The aggregate
principal amount outstanding under the Revolving Facility is
$81,500,000 and the aggregate amount of accrued but unpaid
interest on the Revolving Facility is $342,000, in each case as
of the date hereof. As of the date hereof, there are no unpaid
fees or expenses due in respect of the Senior Notes, the IRB Debt
or the Revolving Facility. Neither the Company nor any Subsidiary
has any capitalized lease obligations on the date hereof. The
number of Preferred Shares is as set forth in Section 3.3, the
redemption price per Preferred Share is $100.00 and no dividends
on the Preferred Shares have been paid since January 31, 1997 nor
declared which have not been paid as of the date hereof. Exhibit
A hereto sets forth all fees, costs, expenses and payments to be
incurred by the Company specifically in connection with this
Agreement and the consummation of the transactions contemplated
hereby (except for the other Closing Payments, any fees, costs,
expenses and payments incurred or accrued in connection with
Section 5.14 and obtaining any consents under the leases or other
agreements relating to Leased Properties identified in Section
3.4 of the Disclosure Schedule, and any fees, costs, expenses and
payments to be incurred by Buyer in connection with its
obligations hereunder, in each case other than the fees and
expenses of legal counsel to the Company). It is understood and
agreed that, notwithstanding anything contained in this Agreement
to the contrary, (i) all fees, costs, expenses and payments
referred to in the preceding sentence, (ii) any prepayment
premium payable on the Senior Notes in excess of $4,000,000, and
(iii) solely for purposes of this Agreement, any amounts payable
to Xxxx Xxxxx pursuant to the letter agreement, dated January 29,
1997, by and between the Company and Xx. Xxxxx in excess of
$300,000, shall not be the responsibility and obligation of the
Sellers.
3.18. No Other Representations or Warranties.
Except for the representations and warranties contained in this
Section
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3, Sellers make no representation or warranty, express or
implied, written or oral, and Sellers hereby disclaim any such
representation or warranty (including without limitation any
warranty of merchantability or of fitness for a particular
purpose), whether by Sellers or the Company or any of their
officers, directors, employees, agents or representatives or any
other Person, with respect to the Company or the execution and
delivery of this Agreement or the transactions contemplated
hereby, notwithstanding the delivery or disclosure to Buyer, any
Affiliate of Buyer or any of its officers, directors, employees,
agents or representatives or any other Person of any
documentation or other information by Sellers or the Company or
any of their Affiliates, officers, directors, employees, agents
or representatives or any other Person with respect to any one or
more of the foregoing.
SECTION 4. REPRESENTATIONS AND WARRANTIES REGARDING BUYER
----------------------------------------------
Except as disclosed in this Agreement, Buyer
represents and warrants to the Sellers as follows:
4.1. Organization of Buyer. Buyer is duly
organized and is validly existing as a limited partnership in
good standing under the laws of Delaware, and has the requisite
power and authority to own, lease and operate the property used
in its business and to carry on its business as now being
conducted. Buyer is registered to do business in all
jurisdictions where it is required to be qualified as a foreign
entity except where the failure to be so qualified would not
impair Buyer's ability to execute, deliver and perform this
Agreement and consummate the transactions contemplated hereby or
have a Material Adverse Effect.
4.2. Power; Authorization; Consents. Buyer has the
requisite power and authority to execute, deliver and perform
this Agreement and to consummate the transactions contemplated
hereby. The execution, delivery and performance of this Agreement
and the consummation of the transactions contemplated hereby and
thereby have been duly authorized and approved by the general
partner of the Buyer, and no other proceedings on the part of
Buyer are necessary to authorize and approve this Agreement or
any of the transactions contemplated hereby. This Agreement has
been duly executed and delivered by Buyer and constitutes and
will constitute a valid and binding obligation of Buyer,
enforceable against Buyer in accordance with its terms,
-21-
except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, or similar
laws affecting creditors' rights generally or by the principles
governing the availability of equitable remedies. Except as
disclosed in Section 4.2 of the Disclosure Schedule, the
execution, delivery and performance of this Agreement by Buyer
and the consummation of the transactions contemplated hereby do
not and will not:
(a) contravene any provisions of the Certificate of
Limited Partnership or the Agreement of Limited Partnership
of Buyer;
(b) (after notice or lapse of time or both)
conflict with, result in a breach of any provision of,
constitute a default under, result in the modification or
cancellation of, or give rise to any right of termination
in respect of, any material contract, agreement,
commitment, understanding or arrangement of any kind to
which Buyer is a party;
(c) violate or conflict with any material Legal
Requirement applicable to Buyer or any of its business or
property; or
(d) except for filings under the HSR Act,
require any material authorization, consent, order, permit
or approval of, or notice to, or filing, registration or
qualification with, any governmental, administrative or
judicial authority.
4.3. Brokers. Except as disclosed in Section
4.3 of the Disclosure Schedule, Buyer has not employed any broker
or finder or has incurred or will incur any broker's, finder's or
similar fees, commissions or expenses, in each case in connection
with the transactions contemplated by this Agreement except for
such fees, commissions or expenses which will be borne by the
Buyer.
4.4. Investment Intent of Buyer. Buyer is
receiving the Recapitalization Shares delivered pursuant to this
Agreement for investment purposes for its own account, and not
with the view to or in connection with any distribution thereof.
Buyer understands that the Recapitalization Shares may not be
sold, assigned, offered for sale, pledged or otherwise
transferred unless such transaction is registered under the
Securities Act of 1933, as amended, and applicable state
securities laws, or
-22-
exemptions from such registration requirements are
available or such requirements are not applicable.
4.5. Financial Matters. Buyer has sufficient
funds available to it to meet its obligations to pay the
Recapitalization Purchase Price on Closing and all of the fees,
costs and expenses related thereto.
4.6. No Reliance. Buyer has conducted its own
investigation and examination of the Company and its assets,
liabilities (actual, accrued and contingent), condition
(financial and otherwise), businesses, operations, affairs and
prospects based primarily upon its own knowledge and experience
and upon information and data provided by management of the
Company, and Buyer has such knowledge and experience, and has
consulted with such legal, financial and other professional
advisers to review such information and data, in order to enable
Buyer, based upon such information and data and upon Buyer's own
knowledge and experience and such professional advice, as has
been necessary to evaluate the merits and risks associated with
the purchase of the Recapitalization Shares and the completion of
the transactions contemplated hereby. Buyer and its respective
officers, employees and representatives have been given such
access to the offices, properties, personnel, businesses,
contracts, books and records of the Company, and have been
furnished with all such information and data, as they have
considered sufficient to enable Buyer pursuant to this Agreement,
to purchase the Recapitalization Shares pursuant to this
Agreement and to complete the transactions contemplated hereby
without relying in any respect upon any representation or
warranty, whether written or oral, express or implied, of the
Sellers, the Company or any Affiliate thereof or any of their
respective directors, officers, employees, representatives and
controlling persons (except only for the representations and
warranties of the Sellers contained in Section 3 of this
Agreement).
SECTION 5. COVENANTS
---------
5.1. Access; Confidentiality. Between the date
hereof and the Closing, Sellers will cause the Company and its
Subsidiaries, during normal business hours and upon reasonable
notice to the Company, to (i) provide to Buyer and its
representatives full access to the premises, property, files,
books, records, documents, and other information of or concerning
-23-
the Company and its Subsidiaries; (ii) furnish to Buyer and its
representatives financial, technical and operating data and other
information pertaining to the business and property of the
Company and its Subsidiaries; (iii) make available for inspection
and copying by Buyer and its representatives copies of any
documents relating to the foregoing; (iv) permit Buyer and its
representatives to conduct reasonable interviews of the
employees, sales representatives and auditors of the Company and
its Subsidiaries; and (v) make the officers of the Company and
the Subsidiaries reasonably available to cooperate with the Buyer
in obtaining financing for the transactions contemplated hereby;
provided, however, that (x) any such investigation will be
conducted in such a manner so (A) as to preserve the
confidentiality of the transactions contemplated hereby and (B)
as not to interfere unreasonably with the operation of the
business of the Company and its Subsidiaries and (y) Sellers may
limit such access described in clauses (i) through (v) above to
the extent such access could in the opinion of Sellers' counsel,
violate or give rise to liability under applicable law. During
the period from the date hereof to the Closing, all information
provided to Buyer or its representatives by or on behalf of
Sellers or the Company, or their representatives (whether
pursuant to this Section 5.1 or otherwise) will be governed and
protected by the Confidentiality Agreement.
5.2. Announcements. Prior to the Closing, no
party hereto will issue any press release or otherwise directly
or indirectly make any public statement or furnish any statement
or make any announcement to its customers with respect to the
transactions contemplated hereby without the prior consent of the
other, except as may be required by law.
5.3. New Financing. Buyer shall provide, or
shall cause one or more Persons to provide, to the Company
financing arrangements (the "New Financing") in an amount not
less than $474,600,000, the proceeds of which shall be used,
inter alia, to discharge Debt, to redeem the Preferred Shares, to
pay costs and expenses incurred by Buyer and the Company in
connection with the transactions contemplated hereby and the
other Closing Payments, to provide working capital to the Company
and the Subsidiaries, and to fund a portion of the Sellers
Redemption Price. To the extent Buyer is unable to obtain from
third parties the full amount of the New Financing, Buyer shall
provide the balance of the New Financing. Any amounts provided by
Buyer pursuant to the preceding sentence shall constitute New
Financing for purposes of
-24-
this Agreement. The failure of the Company to obtain
the New Financing shall not relieve Buyer of its obligations to
purchase the Recapitalization Shares for the Recapitalization
Purchase Price at the Closing. Neither the Company nor the
Sellers shall be required to pay any fees or other costs with
respect to the New Financing under any circumstances and any
agreements or understandings which the Company may make prior to
the Closing relating to the New Financing shall be conditioned
upon the occurrence of the Closing; provided, that the Company
may pay any fees or other costs with respect to the New Financing
following the Closing. The Company shall use all reasonable
efforts to assist Buyer in obtaining the New Financing, including
without limitation, by making available its senior officers to
participate in investor presentations and similar functions.
5.4. Recapitalization. The Recapitalization
Shares to be acquired by Buyer at the Closing shall consist of
48,400 shares of Common Stock, which immediately following the
Closing will constitute eighty-eight percent (88%) of all of the
outstanding equity securities of the Company and all of the then
outstanding equity securities of the Company other than the
Retained Shares. The Company and the Sellers agree to take or
cause to be taken all action necessary to effect the filing of an
Amended and Restated Certificate of Incorporation, in form and
substance reasonably satisfactory to Buyer and the Sellers (the
"Amended Charter"), immediately prior to the Closing as herein
contemplated.
5.5. Consents; Cooperation. Subject to the terms and
conditions hereof, Sellers, the Company and Buyer will use their
reasonable efforts:
(a) to obtain prior to the earlier of the date
required (if so required) or the Closing Date, all
authorizations, consents, orders, permits or approvals of,
or notices to, or filings, registrations or qualifications
with, any governmental, administrative or judicial
authority or any other Person that are required on their
respective parts, for the consummation of the transactions
contemplated by this Agreement;
(b) to defend, consistent with applicable
principles and requirements of law, any lawsuit or other
legal proceeding, whether judicial or administrative,
whether brought derivatively or on behalf of third persons
-25-
(including governmental authorities) challenging this
Agreement or the transactions contemplated hereby;
(c) to furnish to each other such information
and assistance as may reasonably be requested in connection
with the foregoing; and
(d) to take, or cause to be taken, all actions
and to do, or cause to be done, all things reasonably
necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the
transactions contemplated by this Agreement.
5.6. Additional Agreement. Notwithstanding the
provisions of Section 5.5(a) hereof, Buyer will use reasonable
efforts to eliminate any concern on the part of any court or
government authority regarding the legality of the proposed
transactions contemplated hereby and take or cause to be taken
all such action as may reasonably be required in order to
consummate the transactions contemplated hereby under applicable
antitrust and other laws and regulations regarding competition,
including, without limitation, promptly (i) taking all steps
reasonably necessary to secure government antitrust clearance,
(ii) taking all reasonable steps to make arrangements for or to
effect the sale or other disposition of assets, voting securities
or business of Buyer, any of its subsidiaries or the Company, the
ownership of which causes any governmental authority to withhold
such clearance, and (iii) entering into a hold-separate agreement
with government authorities pending such sale or other
disposition of assets, voting securities or business of Buyer,
any of its subsidiaries, the Company, including without
limitation pursuant to a trust or other arrangement that
restricts, limits or prohibits access by Buyer to any business or
subsidiary of Buyer to the Company or to the voting shares or
capital stock thereof.
5.7. Notification of Certain Matters. Between
the date hereof and the Closing, Sellers, the Company and Buyer
will give prompt notice in writing to the other of: (i) any
information known to Sellers, the Company or Buyer that indicates
that any representation or warranty of the Sellers, the Company
or Buyer, as the case may be, contained herein will not be true
and correct in any material respect as of the Closing and (ii)
the occurrence of any event known to Sellers, the Company or
Buyer which will result, or has a reasonable prospect of
-26-
resulting, in the failure to satisfy a condition specified in
Section 6 or 7 hereof.
5.8. Xxxx-Xxxxx-Xxxxxx. As soon as practicable
(but in no event later than 10 days) after the date hereof, Buyer
and the Company will prepare and file all documents with the
Federal Trade Commission and the United States Department of
Justice that are required to comply with the HSR Act. The Company
and Buyer will promptly respond to any "second request" made in
connection with such filings and will promptly furnish all
materials requested by any of the regulatory agencies having
jurisdiction over such filings.
5.9. Further Assurances. Any time after the
Closing, Sellers and Buyer will, and Buyer will cause the Company
to, promptly execute, acknowledge and deliver any other
assurances or documents reasonably requested by Buyer or Sellers,
as the case may be, to satisfy or in connection with its
obligations hereunder.
5.10. Retention of Books and Records. For a
period of six years after the Closing Date (or in the case of
books, records and other documents relating to Taxes until the
expiration of the applicable statute of limitations), Buyer will
cause the Company to retain all books, records and other
documents pertaining to the Company in existence on the Closing
Date and to make the same available after the Closing Date for
examination and copying by Sellers or their representatives, at
such Sellers' expense, upon reasonable notice. No such books,
records or documents will be destroyed by Buyer or the Company
without first advising Sellers in writing and providing Sellers a
reasonable opportunity to obtain possession or make copies
thereof at such Seller's expense.
5.11. Personnel. For one year after the Closing,
Buyer shall cause the Company to continue in effect its Employee
Benefit Plans as are in effect on the date hereof; provided,
however, that the Company may replace or amend any such Employee
Benefit Plan if the benefits thereafter provided are at least
comparable to those provided prior to the Closing and the costs
to the employees therefor are not appreciably increased.
5.12. Conduct of Business Prior to the Closing.
From the date hereof to the Closing, Sellers shall cause the
business of the Company and each of its Subsidiaries to be
conducted in
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the ordinary course and shall cause the Company and
each of its Subsidiaries to use their commercially reasonable
efforts to preserve the current business organization and
existing business relationships. In addition, Sellers shall not
cause or permit the Company or any of its Subsidiaries to do any
of the following without the prior written consent of Buyer:
(a) except as contemplated by this Agreement, amend
its Certificate of Incorporation or By-Laws;
(b) except as set forth in Section 5.12 of the
Disclosure Schedule, make or grant any increase in
compensation or employee benefits or in severance or
termination pay to, any officer, executive officer,
employee, director, agent or consultant, or enter into any
employment agreement with any executive officer or other
individual, except as may be required under employment,
collective bargaining or termination agreements in effect
on the date hereof or, solely with respect to employees
other than officers, executive officers and directors, in
the ordinary course of business;
(c) except as set forth in Section 5.12 of the
Disclosure Schedule, acquire or agree to acquire by merging
or consolidating with, or by purchasing a substantial
portion of the assets of, or by any other manner, any
business or any corporation, partnership, association or
other business organization or division thereof or
otherwise acquire or agree to acquire, other than in the
ordinary course of business, any assets which are material,
individually or in the aggregate, to the Company;
(d) except as set forth in Section 5.12 of the
Disclosure Schedule, sell, pledge, mortgage, assign, lease,
give a security interest in or otherwise encumber or
dispose of, or agree to do any of the foregoing with
respect to, any of its assets, except in the ordinary
course of business;
(e) except in the ordinary course of business,
enter into or amend any other commitment, contractual
obligation or transaction which calls for aggregate
payments in excess of $100,000 and which does not expire or
is not terminable without cost or penalty at the Company's
option within a 180 day period;
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(f) except in the ordinary course of business,
accelerate the receipt of amounts due with respect to the
Company's trade accounts receivable or any other accounts
receivable;
(g) except in the ordinary course of business,
lengthen the period for payment of the Company's accounts
payable;
(h) (i) declare, set aside, pay or make any
dividend or other distribution or payment (whether in cash,
stock or property) with respect to, or, except as
contemplated by this Agreement, purchase or redeem, any
shares of capital stock, or (ii) make any other payments or
benefits to Insiders, other than payments contemplated by
this Agreement or under any employment arrangement in
existence on the date hereof;
(i) except as set forth in Section 5.12 of the
Disclosure Schedule, (i) incur any Debt (excluding for this
purpose any interest, fees or premiums accruing on Debt
outstanding on the date hereof and borrowings in the
ordinary course of business for seasonal working capital
needs under the Revolving Facility and any interest, fees
and premiums thereon), (ii) prepay any interest on any
Debt, (iii) except in the ordinary course of business, make
any loans, advances or capital contributions to, or
investments in, any other person, other than the Company or
any direct or indirect wholly owned Subsidiary of the
Company or (iv) issue any shares of capital stock of the
Company;
(j) except as set forth in Section 5.12 of the
Disclosure Schedule, make or agree to make any new capital
expenditure or capital expenditures in excess of $100,000
in the aggregate, except in the ordinary course of
business; or
(k) except as set forth in Section 5.12 of the
Disclosure Schedule, except in the ordinary course of
business or except as is not likely to have a Material
Adverse Effect, modify, amend or terminate any Material
Agreement.
5.13. Sellers' Rights with Respect to Resales. In the
event that a Transfer (as defined below) occurs at any time
during the period commencing on the Closing Date and ending on
the date which is eighteen months from the Closing Date (the
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"Resale Period"), the Buyer agrees to pay or cause to be paid to
the Sellers an aggregate amount equal to (i) if such Transfer
occurs on or prior to the first anniversary of the Closing Date
(the "First Period"), 75% of the Resale Profit (as defined below)
on such Transfer, or (ii) in all other cases, 50% of the Resale
Profit on such Transfer, such amount to be paid in the same form
as the Transfer Consideration upon consummation of any such
Transfer such that the Sellers shall receive such percentage of
the Resale Profit in the kind and amount of cash, securities and
other property that they would have been entitled to receive had
they been holders of shares of capital stock of the Company
immediately prior to consummation of such Transfer. Buyer will
not, by amendment of the Company's charter or through a
reorganization, consolidation, merger, dissolution, sale of
assets or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms of this Section
5.13, but will at all times in good faith assist in the carrying
out of all such terms and in the taking of all such action as may
be necessary or appropriate in order to protect the rights of the
Sellers to receive any Resale Profit. A Transfer consummated
after the expiration of the Resale Period or the First Period
shall be deemed to have occurred during the Resale Period or the
First Period, as the case may be, and Resale Profit shall be
payable to the Sellers in respect of such a Transfer, if such
Transfer was effected pursuant to an agreement, arrangement or
understanding entered into prior to the expiration of the Resale
Period or the First Period, as the case may be.
For purposes of this Section 5.13, the following terms
have the meanings set forth below:
"Resale Profit" means, with respect to any Transfer,
an amount equal to the excess, if any, of (I) the sum of (a) the
aggregate value of the Transfer Consideration received by,
payable to or inuring to the benefit of, the Buyer and its
Affiliates, directly or indirectly, as a result of such Transfer,
plus (b) the value of any dividends or distributions of any kind
paid, at any time following the Closing, in respect of the
Recapitalization Shares or any other equity interests in the
Company held by the Buyer or its Affiliates or upon any
redemption or repurchase of such shares or equity interests, over
(II) the sum of (x) $75,000,000 less the value of the Retained
Shares, plus (y) the fees and expenses incurred by Buyer in
connection with such Transfer, plus (z) any additional equity
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capital contributed to the Company or its Subsidiaries by the
Buyer or its Affiliates following the Closing.
"Transfer" means any sale, conveyance, assignment,
disposition or other transfer, other than to an Affiliate of any
of the Buyer who agrees in writing to be bound by the provisions
of this Section 5.13, in one or a series of related transactions,
of (i) all or substantially all of the assets or stock of the
Company and its Subsidiaries, taken as a whole (whether by sale
of stock or assets, merger, consolidation or otherwise), (ii) the
consummation of any transaction (other than the sale of shares of
capital stock of the Company or any Affiliate of the Company in
an underwritten public offering but including, without
limitation, any merger or consolidation) the result of which is
that the Buyer ceases to be the "beneficial owner" (as such term
is defined in Rule 13d-3 and Rule 12d-5 under the Securities
Exchange Act of 1934) of a majority of the voting capital stock
of the Company. Notwithstanding the foregoing, a pledge or
assignment of interests or assets of Buyer or the Company to a
lender in the ordinary course of business (and the subsequent
exercise of remedies by such lender) shall not constitute a
Transfer for purposes of this Section 5.13.
"Transfer Consideration" means the value of all cash,
securities and other property paid, or to be paid, directly or
indirectly, by an acquiror to the Buyer, its Affiliates or the
Company in connection with the Transfer. The value of any
non-cash consideration shall be the fair market value of such
consideration, as determined in good faith by the Board of
Directors of the Company. Transfer Consideration shall also
include the aggregate amount of any liabilities assumed or paid,
directly or indirectly, by the acquiror.
5.14. Transfer Taxes. The Company shall properly
prepare and file on a timely basis any transfer Tax Returns
required in connection with the transactions described in this
Agreement, including, without limitation, any real property,
personal property or gains Tax Returns, and shall pay any Taxes
shown as due thereon.
5.15. Landlord Consents. Sellers shall use
commercially reasonable efforts to obtain the landlord lease
consents set forth on Section 5.15 of the Disclosure Schedule, in
a form reasonably acceptable to Buyer; provided, however, that
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the receipt of any or all of such landlord lease consents shall
not be a condition to the Closing under this Agreement.
5.16. Retention of Shares. At the Closing, the
Sellers shall retain such number of Common Shares as is set forth
opposite their respective names on Exhibit B hereto, which
immediately following the Closing will constitute twelve percent
(12%) of all of the outstanding common equity securities of the
Company and all of the outstanding common equity securities of
the Company other than the Recapitalization Shares. In the
aggregate, the Retained Shares shall represent 12% of the voting
power in the Company upon the Closing. For purposes of this
Agreement, the value of Retained Shares shall be $9,000,000.
5.17. Termination of Existing Shareholder Agreement.
Each of the Sellers and the Company hereby agree to terminate the
Agreement, dated as of April 18, 1997, by and among the Company
and the stockholders of the Company listed on the signature pages
thereof, and if requested by Buyer, any agreement between any
Seller or any entity controlled by a Seller, on the one hand, and
the Company or any Subsidiary, on the other hand, effective as
of, and conditioned upon, the Closing.
5.18. Indemnification. From and after the
Closing Date, the Company shall indemnify each present and former
director and officer of the Company and its Subsidiaries from any
and all claims arising out of or in connection with activities in
such capacity to the fullest extent provided under New York law,
and in addition, to the fullest extend provided in their
respective articles of incorporation, charters or by-laws, as
applicable, which obligations shall survive the Closing and shall
continue in full force and effect for a period of not less than
six years from the Closing Date; provided, however, that if any
claim or claims are asserted or made within such six-year period,
all rights to indemnification in respect of any such claim or
claims shall continue until disposition of any and all such
claims. Without limiting the foregoing, after the Closing Date,
the Company shall advance expenses (including reasonable
attorneys' fees and expenses) incurred with respect to the
foregoing, as they are incurred, to the fullest extent permitted
under applicable law, provided that the person on whose behalf
the expenses are advanced provides an undertaking to repay such
advances if it is ultimately determined that such person is not
entitled to indemnification.
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SECTION 6. CONDITIONS TO THE OBLIGATIONS OF BUYER
--------------------------------------
The obligations of Buyer required to be performed by
it at the Closing are subject to the satisfaction, at or prior to
the Closing, of each of the following conditions, each of which
may be waived by Buyer:
6.1. Representations and Warranties; Covenants. The
representations and warranties of the Sellers contained in
Section 3 of this Agreement will be true and correct as of the
Closing (except for those that are made as of a certain time,
which shall be true and correct as of such time and provided
that, for this purpose only, no effect shall be given to any
materiality qualifiers contained in such representations and
warranties), except for changes contemplated by this Agreement
and failures to be true and correct that do not, in the
aggregate, result in a Material Adverse Effect. Each obligation
of Sellers required by this Agreement to be performed by them at
or prior to the Closing will have been duly performed and
complied with in all material respects at the Closing provided
that the covenants contained in Section 2.3(d)(i) will have been
complied with in all respects. At the Closing, Buyer will have
received certificates, dated the Closing Date and duly executed
by or on behalf of each of the Sellers, to the effect that the
conditions set forth in the preceding sentences have been
satisfied.
6.2. Xxxx-Xxxxx-Xxxxxx. Any applicable waiting
period under the HSR Act and the rules and regulations
promulgated thereunder will have expired or been terminated.
6.3. Opinion of Sellers' Counsel. Buyer will
have been furnished with the opinion of Xxxxxxx Xxxx & Xxxxxxxxx,
dated the Closing Date, addressed to Buyer, in form and substance
reasonably satisfactory to Buyer with respect to (i) the first
sentence of Section 3.1, (ii) the first two sentences of Section
3.3 and (iii) the first four sentences of Section 3.4. In
rendering such opinion, such counsel may rely as to factual
matters upon certificates or other documents furnished by Sellers
and officers of the Company and by government officials and upon
such other documents and data, including opinions of local
counsel, as such counsel deem appropriate as a basis for such
opinion.
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6.4. Absence of Injunction. No order, stay,
judgment or decree will have been issued by any court and be in
effect restraining or prohibiting the consummation of the
transactions contemplated hereby.
6.5. Directors. Buyer will have received the
written resignation of any director of the Company or any
Subsidiary of the Company (or such directors will have otherwise
been removed) whose resignation it has requested.
6.6. Certificates. Sellers and the Company will
have furnished Buyer with such certificates of their respective
officers and others as Buyer may reasonably request to evidence
satisfaction of the conditions set forth in this Section 6, such
certificates to be made without personal liability of such
officer or other person signing such certificate.
6.7. Shareholder Approval. The shareholders of
the Company shall have approved in form and substance reasonably
satisfactory to Buyer and to the Company, in order to take
advantage of the exemption provided in Section 280G(b)(5) of the
Code, all payments and benefits that may be deemed to constitute
parachute payments under Section 280G of the Code, in connection
with the transactions contemplated hereby.
SECTION 7. CONDITIONS TO THE OBLIGATIONS OF SELLERS
----------------------------------------
The obligations of the Sellers to be performed by them
at the Closing are subject to the satisfaction, at or prior to
the Closing, of each of the following conditions, each of which
may be waived by the Sellers:
7.1. Representations and Warranties; Covenants.
The representations and warranties of Buyer contained in this
Agreement will be true and correct as of the Closing (except for
those made as of a certain date, which shall be true and correct
as of such date), except for changes contemplated by this
Agreement and failures to be true and correct that do not result
in a material adverse effect on Buyer. Each obligation of Buyer
required by this Agreement to be performed by it at or prior to
the Closing will have been duly performed in all material
respects at or prior to the Closing except that the obligations
of Buyer pursuant to Section 2.3(g) shall be performed in all
respects. At the Closing, Sellers will have received a
certificate, dated the Closing Date and duly executed by an
executive officer of Buyer (without personal liability to such
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officer) to the effect that the conditions set forth in the
preceding sentences have been satisfied.
7.2. Xxxx-Xxxxx-Xxxxxx. Any applicable waiting
period under the HSR Act and the rules and regulations
promulgated thereunder will have expired or been terminated.
7.3. Opinion of Buyer's Counsel. Sellers will
have been furnished with the opinion of Cleary, Gottlieb, Xxxxx &
Xxxxxxxx, counsel to Buyer, dated the Closing Date, addressed to
Sellers, in form and substance reasonably satisfactory to Sellers
with respect to (i) the first sentence of Section 4.1 and (ii)
the first three sentences of Section 4.2. In rendering their
opinion, such counsel may rely as to factual matters upon
certificates or other documents furnished by officers and
directors of Buyer and by government officials, and upon such
other documents and data, including opinions of local counsel, as
such counsel deem appropriate as a basis for their opinion.
7.4. Absence of Injunction. No order, stay,
judgment or decree will have been issued by any court and be in
effect restraining or prohibiting the consummation of the
transactions contemplated hereby.
7.5. Certificates. Buyer will have furnished
Sellers with such certificates of its officers and others as
Sellers may reasonably request to evidence satisfaction of the
conditions set forth in this Section 7, such certificates to be
made without personal liability of such officer or other person
signing such certificate.
7.6. Employment/Consulting Agreement. The
Company shall have executed and delivered the
Employment/Consulting and Non-Compete Agreement with Xxxxxx
Xxxxxxx in substantially the form of Exhibit C hereto (the
"Employment/Consulting Agreement").
SECTION 8. TERMINATION
-----------
8.1. Termination. This Agreement may be
terminated at any time prior to the Closing:
(a) by mutual consent of Buyer and Sellers;
(b) by Buyer, on or after the date 100 days
from the date hereof, if any condition contained in Section
6 (other than those requiring a Closing Delivery), has not
been
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satisfied or waived; by Sellers, on or after the date
100 days from the date hereof, if any condition contained
in Section 7 (other than those requiring a Closing
Delivery), has not been satisfied or waived; or
(c) by Buyer or Sellers, if any court of competent
jurisdiction or other governmental body has issued an order,
decree or ruling or taken any other action restraining,
enjoining or otherwise prohibiting the transactions
contemplated by this Agreement, and such order, decree,
ruling or other action has become final and non-appealable.
If Buyer or Sellers terminate this Agreement pursuant
to the provisions hereof, such termination will be effected by
written notice to the other party specifying the provision hereof
pursuant to which such termination is made.
8.2. Effect of Termination.
(a) Upon termination of this Agreement
pursuant to Section 8.1 hereof, except as provided in
clause (b) below:
(i) this Agreement will forthwith become null
and void;
(ii) such termination will be the sole
remedy with respect to any breach of any
representation or warranty contained in or
made pursuant to this Agreement, and
(iii) no party hereto or any of their
respective officers, directors, employees,
agents, consultants, stockholders or
principals will have any liability or
obligation hereunder or with respect
hereto.
(b) The provisions of clause (a) above
notwithstanding, no party will be relieved of liability for
any willful breach of this Agreement.
SECTION 9. SURVIVAL AND INDEMNIFICATION
----------------------------
9.1. Survival. Notwithstanding any otherwise
applicable statute of limitations, no claim, lawsuit, or other
proceeding arising out of or related to the breach of any
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representation or warranty of the parties contained herein may be
made more than one year after the Closing Date.
9.2. Sellers' Indemnification.
(a) Sellers, severally but not jointly, subject to
the limitations set forth in this Section 9, will indemnify
Buyer against and in respect of any and all Losses, other
than Losses to the extent recoverable by Buyer or the
Company under any applicable insurance policy and net of
the present value of any tax benefit to Buyer or the
Company as a result of such Losses, which are incurred by
Buyer by reason of (i) the breach of any representation or
warranty made by Sellers in Section 3 of this Agreement or
(ii) of any breach of a covenant made by Sellers in this
Agreement.
(b) Notwithstanding anything to the contrary
in this Agreement (but subject to the last sentence of this
Section 9.2(b)), (i) the aggregate liability of Sellers
pursuant to Section 9.2(a) will not exceed ten percent of
the Sellers Redemption Price; (ii) Sellers will have no
liability or obligation to Buyer pursuant to this Section
9.2 or otherwise for any Losses arising out of any breach
of any representation or warranty made in this Agreement if
(x) disclosed in this Agreement or the Disclosure Schedule
hereto or (y) Buyer had knowledge of such breach as a
result of the disclosures made in this Agreement or in the
Disclosure Schedule hereto and (iii) Buyer will not be
entitled to recover consequential damages pursuant to this
Section 9.2. Notwithstanding the above, the limitations of
this Section 9.2(b) shall not apply to a breach of Sellers'
representations and warranties contained in the last
sentence of Section 3.3, clause (vi) of Section 3.6 or in
Section 3.17, in which event, the aggregate liability of
Sellers under this Section 9.2 shall in no event exceed the
Sellers Redemption Price.
(c) Buyer may make no claim for indemnification
pursuant to Section 9.2(a), (i) unless notice of such claim
(describing the basic facts or events, the existence or
occurrence of which constitute or have resulted in the alleged
breach of a representation or warranty made in this Agreement)
has been given to Sellers during the survival period set forth in
Section 9.1; and (ii) until such claims for which Losses are
otherwise recoverable hereunder by
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Buyer are in excess of (x) in the case of Losses
incurred by reason of a breach of Section 3.17 hereof, the
excess, if any, of (i) $100,000 over (ii) the amount by which the
aggregate of the amounts set forth on the officer's certificate
delivered pursuant to Section 2.2(c) exceeds the
aggregate of the amounts set forth on Exhibit A or (y) in
all other cases, the aggregate of 2% of the Sellers
Redemption Price (other than Losses to the extent
recoverable by Buyer or the Company under any applicable
insurance policy and net of the present value of any tax
benefit to Buyer or the Company as a result of such Losses)
and all reserves and accruals reflected on the Financial
Statements, after which Buyer will be entitled to make any
such claim for amounts in excess of such threshold, and
(iii) unless the amount of such claim as finally determined
exceeds $10,000; provided, however, that the limitations
set forth in this clause (c) shall not apply to Losses
incurred by reason of a breach of the representations and
warranties contained in the last sentence of Section 3.3,
clause (vi) of Section 3.6 or in Section 3.17 (except that
in the case of a breach of Section 3.17 the limitations set
forth in clauses (c)(i) and (c)(ii)(x) shall apply).
Nothing in this clause (c) shall affect the adjustment
provision relating to the Sellers Redemption Price under
clause (c) of Section 2.2 hereof.
(d) Any payment pursuant to this Section 9,
made by Sellers to Buyer, will be deemed an adjustment to
the Sellers Redemption Price.
(e) The rights of the Buyer under Section 8.1
and this Section 9.2 shall be the exclusive remedy of Buyer
with respect to breaches by Sellers of the representations
and warranties or covenants contained in this Agreement.
Buyer, on behalf of itself and its Affiliates (and its
partners, officers, directors and employees), hereby (i)
waives and releases each of the Sellers and their
respective Affiliates (and their shareholders, officers,
directors and employees) from any statutory or other rights
of contribution or indemnity (except as set forth in this
Section 9.2) with respect to Sellers' ownership of the
Common Shares and the Preferred Shares or operation of, or
otherwise relating to, the Company and (ii) waives and
releases all rights of subrogation with respect to claims
relating thereto.
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(f) In the event that any of the Sellers is
obligated to indemnify Buyer pursuant to this Section 9,
such Seller will, upon payment of such indemnity, be
subrogated to all rights of Buyer with respect to claims to
which such indemnification relates.
9.3. Buyer's Indemnification.
(a) Buyer, subject to the limitations set
forth in this Section, will indemnify the Sellers against
and in respect of any and all Losses, other than Losses to
the extent recoverable by Sellers under any applicable
insurance policy and net of the present value of any tax
benefit to Sellers as a result of such Losses, which may be
incurred by reason of (i) the breach of any representation
or warranty made by Buyer in Section 4 hereof or (ii) any
breach of any covenant made by Buyer in this Agreement.
Buyer will so indemnify the Sellers as a result of Losses
which may be incurred by such Sellers arising out of the
operations of the Company after the Closing Date.
(b) Notwithstanding anything to the contrary
in this Agreement (but subject to the last sentence of this
Section 9.3(b)), (i) the aggregate liability of Buyer
pursuant to Section 9.3(a) will not exceed ten percent of
the Sellers Redemption Price; (ii) Buyer will have no
liability or obligation to Sellers pursuant to Section
9.3(a) or otherwise for any Losses arising out of any
breach by Buyer of any representation or warranty made in
this Agreement if (x) disclosed in this Agreement or the
Disclosure Schedule hereto or (y) Sellers had Knowledge of
such breach as a result of the disclosures made in this
Agreement or in the Disclosure Schedule hereto and (iii)
Sellers will be entitled to recover no consequential
damages pursuant to this Section 9.3. Notwithstanding the
above, the limitations of this Section 9.3(b) shall not
apply to a breach of Buyer covenants contained in Section
2.1 or 2.3(g).
(c) No claim for indemnification may be made
by Sellers pursuant to Section 9.3(a)(i), (i) unless notice
of such claim (describing the basic facts or events, the
existence or occurrence of which constitute or have
resulted in the alleged breach of a representation or
warranty made in this Agreement) has been given to Buyer
during the
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survival period set forth in Section 9.1, and (ii)
until such claims for which Losses are otherwise recoverable
hereunder by Sellers are in excess of the aggregate of 2% of the
Sellers Redemption Price (other than Losses to the extent
recoverable by Sellers under any applicable insurance policy and
net of the present value of any tax benefit to Sellers as a
result of such Losses) after which such Sellers will be entitled
to make any such claim for amounts in excess of such threshold,
and (iii) unless the amount of such claim as finally determined
exceeds $10,000.
(d) Any payment pursuant to this Section 9,
made by Buyer to Sellers will be deemed an adjustment to
the Sellers Redemption Price.
(e) The rights of Sellers under this Section
9.3 will be the exclusive remedy of such Sellers with
respect to breaches by Buyer of representations and
warranties or covenants contained in or made pursuant to
this Agreement.
(f) In the event that Buyer is obligated to
indemnify Sellers pursuant to this Section 9, Buyer will,
upon payment of such indemnity, be subrogated to all rights
of Sellers with respect to claims to which such
indemnification relates.
9.4. Claims by Third Parties. Other than in the
case of any Tax Claim, which shall be governed by Section 9.5 of
this Agreement, if a party to this Agreement seeks indemnity
hereunder with respect to a claim by a third party:
(a) For the purposes of this Section 9.4,
"Third Party Claim" means any demand which has been made
on, or communicated to Buyer, Sellers or the Company by or
on behalf of any Person other than the entities
aforementioned in this Subsection 9.4(a) and which, if
maintained or enforced, might result in a claim for
indemnification in the nature described in Section 9.2 or
9.3 of this Agreement being made.
(b) Promptly upon receipt by Indemnitee of
notice of any Third Party Claim in respect of which the
Indemnitee proposes to demand indemnification from the
Indemnitor, the Indemnitee shall forthwith give notice to
that effect to the Indemnitor.
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(c) The Indemnitor shall have the right, exercisable by
giving notice to the Indemnitee not later than 30 days after
receipt of the notice described in Subsection 9.2 (c) or 9.3(c),
as the case may be, to assume the control of the defense,
compromise or settlement of the Third Party Claim.
(d) Upon the assumption of control by the
Indemnitor as aforesaid, the Indemnitor shall, at its
expense, diligently proceed with the defense, compromise or
settlement of the Third Party Claim at the Indemnitor's
sole expense, including employment of counsel reasonably
satisfactory to the Indemnitee, and in connection
therewith, the Indemnitee shall cooperate fully, but at the
expense of the Indemnitor, to make available to the
Indemnitor all pertinent information and witnesses under
Indemnitee's control and to make such assignments and take
such other steps as in the opinion of counsel for the
Indemnitor are necessary to enable the Indemnitor to
conduct such defense, provided always that the Indemnitee
shall be entitled to reasonable security from the
Indemnitor for any expense, costs or other liabilities to
which it may be or may become exposed by reason of such
cooperation.
(e) The final determination of any such Third
Party Claim, including all related costs and expenses, will
be binding and conclusive upon the parties hereto as to the
validity or invalidity, as the case may be, of such Third
Party Claim against the Indemnitor hereunder.
(f) Should the Indemnitor fail to give notice
to the Indemnitee as provided in clause (c) hereof or in
the event the Indemnitor declines to undertake the defense
of any Third Party Claim, action or proceeding when first
notified thereof, the Indemnitee shall keep the Indemnitor
advised as to the current status and progress thereof. The
Indemnitee agrees not to make any offer of settlement
without first having provided five (5) days advance written
notice thereof to the Indemnitor.
(g) In the event the Indemnitor undertakes the
defense of any such claim, action or proceeding, the
Indemnitee shall nevertheless be entitled to participate in
(but not direct) the defense thereof with counsel of its
own choice and at its own expense, and the parties agree to
cooperate fully with one another in connection with the
defense and/or
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settlement thereof; provided, however, that
any decision to settle any such claim, action or proceeding
shall be at the Indemnitor's sole discretion. From and
after delivery of the notice referred to in Section 9.4(c) above,
the Indemnitor shall be relieved of the obligation to reimburse
the Indemnitee for any other legal, accounting or other
out-of-pocket costs and expenses thereafter incurred by the
Indemnitee with respect to the defense of such claim,
action or proceeding notwithstanding any participation by
the Indemnitee therein.
(h) If the Indemnitee subsequently recovers
all or part of the Third Party Claim from any other person
legally obligated to pay the claim, the Indemnitee shall
forthwith repay to the Indemnitor the amounts recovered up
to an amount not exceeding the payment made by the
Indemnitor to the Indemnitee by way of indemnity.
9.5. Tax Claims of the Buyer. If a claim is made by any
Tax authority which, if successful, would result in a breach of a
representation or warranty contained in Section 3.7 hereof and is
likely to result in an indemnity payment to Buyer pursuant to
Section 9.2 of this Agreement, Buyer shall notify Sellers of such
claim (a "Tax Claim"), stating the nature and basis of such claim
and the amount thereof, to the extent known. Sellers will have
the right, at their option, upon timely notice to Buyer, to
assume control of any defense of any Tax Claim (other than a Tax
Claim relating solely to Taxes of the Company for a taxable
period that begins before but ends after the Closing Date (a
"Straddle Period")) with its own counsel, provided, however, such
counsel is reasonably satisfactory to Buyer. Sellers' right to
control a Tax Claim will be limited to amounts in dispute for
which Sellers would be liable pursuant to Section 9.2 of this
Agreement. Costs of such Tax Claims are to be borne by Sellers
unless the Tax Claim relates to taxable periods ending after the
Closing Date, in which event such costs will be fairly
apportioned. Buyer and the Company shall cooperate with Sellers
in contesting any Tax Claim, which cooperation shall include the
retention and, upon Sellers' request, the provision of records
and information which are reasonably relevant to such Tax Claim
and making employees available on a mutually convenient basis to
provide additional information or explanation of any material
provided hereunder. Notwithstanding the foregoing, Sellers shall
neither consent nor agree (nor cause the Company to consent or
agree) to the settlement of any Tax Claim with respect to any
liability for
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Taxes that is likely to affect the liability for
any state or federal income tax of the Company or any affiliated
group (as defined in Section 1504(a) of the Code) of which the
Company is a member for any taxable period ending subsequent to
the Closing Date without the prior written consent of Buyer,
which consent shall not be unreasonably withheld. Buyer and
Seller shall jointly control all proceedings taken in connection
with any claims for Taxes relating solely to a Straddle Period of
the Company.
SECTION 10. MISCELLANEOUS
10.1 Headings. The section headings herein are
for convenience of reference only, do not constitute part of this
Agreement and will not be deemed to limit or otherwise affect any
of the provisions hereof. References to Sections, unless
otherwise indicated, are references to Sections of this
Agreement.
10.2. Notices. All notices to be given pursuant
to this Agreement to any party must be in writing and will be
deemed to have been validly given:
(a) if delivered by hand to an officer or agent of
such party at its address given below; or
(b) if delivered by facsimile transmission, to
such party at its address given below.
The address of each party for the purposes of this
Agreement is as follows:
If to Sellers, to the addresses specified on Schedule B
hereto;
With a copy to:
Xxxxxxx Xxxx and Xxxxxxxxx
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Fax No. (000) 000-0000
Attention: Xxxx X. Xxxxxxx, Esq.
Xxxxxx X. Xxxxxx, Esq.
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If to Buyer:
TPG Partners II, L.P.
000 Xxxx Xxxxxx
Xxxxx 0000
Xxxx Xxxxx, Xxxxx 00000
Fax No. (000) 000-0000
Attention: Xxxxxxx Xxxxxxxxx, Esq.
With a copy to:
Cleary, Gottlieb, Xxxxx & Xxxxxxxx
Xxx Xxxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Fax No. (000) 000-0000
Attention: Xxxx X. Xxxx, Esq.
Either party may by notice to the other change its
address for notice and will so change its address for notice
whenever its existing address for notice ceases to be adequate
for delivery both by hand and by facsimile.
Notices so given will be deemed to be given and
received:
(c) on the date of delivery, if delivered by hand; and
(d) 24 hours from the time of the transmission
if sent by facsimile.
10.3. Assignment. This Agreement and all
provisions hereof will be binding upon and inure to the benefit
of the parties hereto and their respective successors and
permitted assigns; provided, however, that neither this Agreement
nor any right, interest, or obligation hereunder may be assigned
by any party hereto without the prior written consent of the
other party; and, provided further, that no party hereto or
successor or assignee has the ability to subrogate any other
person to any right or obligation under this Agreement.
10.4. Entire Agreement. This Agreement (including
the Disclosure Schedule, Schedules and Exhibits hereto and
thereto)
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embody the entire agreement and understanding of the
parties with respect to the transactions contemplated hereby and
thereby and supersede all prior written or oral commitments,
arrangements or understandings with respect thereto (other than
the Confidentiality Agreement, which will terminate at the
Closing). There is no restriction, agreement, promise, warranty,
covenant or undertaking with respect to the transactions
contemplated hereby and thereby other than those expressly set
forth herein or therein.
10.5. Amendment; Waiver.
(a) This Agreement may only be amended or
modified in writing signed on behalf of each of the parties
hereto.
(b) Any party hereto may, by an instrument in
writing, waive compliance with any term or provision of
this Agreement on the part of such other party or parties
hereto. The waiver by any party hereto of a breach of any
term or provision of this Agreement will not be construed
as a waiver of any subsequent breach.
10.6. Counterparts. This Agreement may be
executed in two or more counterparts, all of which will be
considered one and the same agreement and each of which will be
deemed an original.
10.7. Governing Law. This agreement will be
governed by the laws of the State of New York (regardless of the
laws that might be applicable under principles of conflicts of
law) as to all matters, including but not limited to matters of
validity, construction, effect and performance.
10.8. Severability. If any one or more of the
provisions of this Agreement is held to be invalid, illegal or
unenforceable, the validity, legality or enforceability of the
remaining provisions of this Agreement will not be affected
thereby, and Sellers and Buyer will use their reasonable efforts
to substitute one or more valid, legal and enforceable provisions
which insofar as practicable implement the purposes and intent
hereof. To the extent permitted by applicable law, each party
waives any provision of law which renders any provision of this
Agreement invalid, illegal or unenforceable in any respect.
10.9. Consent to Jurisdiction. Buyer and Sellers
hereby submit to the exclusive jurisdiction of the courts of the
State of New York or the courts of the United States located in
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the State of New York in respect of the interpretation and
enforcement of the provisions of this Agreement and any related
agreement and hereby waive, and agree not to assert, as a defense
in any action, suit or proceeding for the interpretation or
enforcement of this Agreement and any related agreement, that
they are not subject thereto or that such action, suit or
proceeding may not be brought or is not maintainable in such
courts or that this Agreement may not be enforced in or by such
courts or that their property is exempt or immune from execution,
that the suit, action or proceeding is brought in an inconvenient
forum, or that the venue of the suit, action or proceeding is
improper. Service of process with respect thereto may be made
upon Buyer or Sellers by mailing a copy thereof by registered or
certified mail, postage prepaid, to such party at its address as
provided in Section 10.2 hereof.
10.10. Third Person Beneficiaries. This Agreement
is not intended to confer upon any other Person other than the
parties hereto, any rights or remedies hereunder.
10.11. Representations and Warranties; Disclosure
Schedule. Neither the specification of any dollar amount in the
representations and warranties set forth in Section 3 nor the
indemnification provisions of Section 9 nor the inclusion of any
items in the Disclosure Schedule to this Agreement will be deemed
to constitute an admission by Sellers or Buyer, or otherwise
imply, that any such amounts or the items so included are
material for the purposes of this Agreement. All documents or
information disclosed in any section of the Disclosure Schedule
to this Agreement are intended to be disclosed for all purposes
under this Agreement and will also be deemed to be incorporated
by reference in each of the other sections of the Disclosure
Schedule to this Agreement to which they may be relevant. For
purposes of this Agreement, the determination as to whether any
item, event, circumstance or amount is "material" shall be made
with reference to the Company and its Subsidiaries, taken as a
whole, and references to "Material Adverse Effect" shall be
deemed to be qualified by "individually or in the aggregate."
10.12. United States Dollars. All dollar amounts
referred to herein will be in lawful currency of the United
States of America.
10.13. Expenses. Except as otherwise provided
herein, each of the parties hereto shall bear its own costs and
expenses
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(including legal fees and expenses) incurred in
connection with this Agreement and the transactions contemplated
hereby.
10.14. Liquidated Damages. Notwithstanding
anything to the contrary contained in this Agreement, in the
event that the Buyer shall fail to consummate the transactions
contemplated by this Agreement on or before the Closing Deadline
for any reason whatsoever, other than the Sellers' failure to
deliver the Redeemed Shares, the Buyer shall pay to the Company
$10,000,000 in cash. Such amount is in the nature of liquidated
damages and does not constitute a penalty. The parties agree that
the amount provided for in this Section 10.14 is reasonably
intended to compensate the Company for its expenses incurred in
connection with the negotiation of this Agreement and any lost
opportunity resulting from the Buyer's failure to consummate the
transactions contemplated hereby and, upon payment of such amount
by the Buyer, the Company and the Sellers waive any and all
rights to any payments, damages, amounts, costs, fees or other
expenses, and agree that they shall not bring any action, suit or
proceeding of any kind to recover any amounts in connection with
any breach by Buyer of this Agreement, other than such
$10,000,000.
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IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be duly executed as of the day and year first
above written.
J. CREW GROUP, INC.
By:________________________ ___________________________
Name: Xxxxxx Xxxxxxx
Title:
--------------------------- ---------------------------
Xxxxx Xxxxx Xxxxxxx Xxxxxxx
--------------------------- ---------------------------
Xxxxxx Xxxxxxx, Xx. Xxxx Xxxx
--------------------------- ---------------------------
Xxxx Xxxxxxx Xxxx Xxxxxxx
--------------------------- ---------------------------
Xxxxx Xxxxxxx Xxxxxxx Xxx Xxxxxxx
___________________________ TRUST U/A DATED DECEMBER 29, 1992,
Xxxxxx Xxxxxxx F/B/O XXXXXX XXXXXXX FAMILY,
BETWEEN XXXXXX XXXXXXX, AS GRANTOR
AND XXXXXXX X. XXXXX, AS TRUSTEE
By:________________________
Xxxxxxx X. Xxxxx, Trustee
TRUST U/A DATED DECEMBER 30, 1959 TRUST U/A DATED JUNE 14, 1955,
F/B/O XXXX XXXXXXXX XXXXXXX, F/B/X XXXX FAMILY, BETWEEN XXXXXXXX
BETWEEN XXXXXX XXXXXXX, AS GRANTOR XXXXXXX, AS GRANTOR AND XXXXX XXXX,
AND XXXXX XXXX, XXXXXX XXXX AND XXXXXX XXXXXXX AND XXXXX
XXXXX XXXXXXX, AS TRUSTEES XXXXXXX, AS TRUSTEES
By:________________________ By:________________________
Xxxxx Xxxx, Trustee Xxxxxx Xxxxxxx, Trustee
By:________________________ By:________________________
Xxxxxx Xxxx, Trustee Xxxxx Xxxx, Trustee
XXXXXX XXXXXXX CHARITABLE REMAINDER
UNITRUST U/A DATED APRIL 25, 1997,
BETWEEN XXXXXX XXXXXXX, AS GRANTOR
AND XXXXXXX XXXXXXX AND XXXX X.
XXXXXX, AS TRUSTEES
By:________________________
Xxxxxxx Xxxxxxx, Trustee
By:________________________
Xxxx X. Xxxxxx, Trustee
TPG PARTNERS II, L.P.
By: TPG Genpar II, L.P.
By: TPG Advisors II, Inc.
By:________________________
Name:
Title:
