Exhibit 10.1(a)
EXECUTION COPY
AGREEMENT AND PLAN OF MERGER
DATED AS OF DECEMBER 23, 2004
AMONG
HTI ACQUISITION LLC
HEADS & THREADS INTERNATIONAL LLC
AND
ALLEGHANY CORPORATION
TABLE OF CONTENTS
PAGE
1. Definitions............................................................................... 1
2. Merger.................................................................................... 1
2.1 The Merger.......................................................................... 1
2.2 Closing............................................................................. 1
2.3 Effective Time of the Merger........................................................ 1
2.4 Certificate of formation; Limited Liability Company Agreement....................... 2
2.5 Directors and Officers.............................................................. 2
2.6 Employment Agreements............................................................... 2
2.7 Effect of the Merger................................................................ 2
3. Treatment of Membership Interests......................................................... 2
3.1 Effect of the Merger on Membership Interests........................................ 2
3.2 Post-Closing Adjustment of Unadjusted Merger Consideration.......................... 3
3.3 Tax Treatment and Allocation........................................................ 5
4. Representations and Warranties by the Company and Alleghany............................... 6
4.1 Organization........................................................................ 6
4.2 Membership Interests Ownership...................................................... 6
4.3 Company Subsidiaries................................................................ 7
4.4 Authority........................................................................... 8
4.5 No Violation........................................................................ 8
4.6 Financial Statements................................................................ 9
4.7 No Undisclosed Liabilities.......................................................... 10
4.8 Absence of Certain Changes.......................................................... 11
4.9 Title to and Condition of Properties and Assets..................................... 12
4.10 Certain Properties.................................................................. 13
4.11 Taxes............................................................................... 13
4.12 Contracts........................................................................... 15
4.13 Litigation.......................................................................... 16
4.14 Intellectual Property............................................................... 17
4.15 Compliance with Laws................................................................ 17
4.16 Environmental Matters............................................................... 17
4.17 Governmental Authorizations and Regulations......................................... 18
4.18 Employee Benefit Plans.............................................................. 19
4.19 Related Party Transactions.......................................................... 20
4.20 Certain Practices................................................................... 20
4.21 Minute Books........................................................................ 21
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4.22 Insurance........................................................................... 21
4.23 Bank Accounts; Powers of Attorney................................................... 21
4.24 Product Warranties.................................................................. 21
4.25 Customers and Suppliers............................................................. 21
4.26 Certain Disclosures................................................................. 22
4.27 Employees........................................................................... 22
4.28 Brokers............................................................................. 22
5. Representations and Warranties by HTI Acquisition......................................... 22
5.1 Organization........................................................................ 22
5.2 Authority........................................................................... 22
5.3 No Violation........................................................................ 23
5.4 Litigation.......................................................................... 23
5.5 HSR Act............................................................................. 23
5.6 Financing........................................................................... 23
5.7 Interim Operations of HTI Acquisition............................................... 24
5.8 Solvency............................................................................ 24
5.9 Delivery of New Employment Agreements............................................... 24
5.10 Brokers............................................................................. 24
6. Covenants of the Company and Alleghany.................................................... 25
6.1 Access, Information and Documents................................................... 25
6.2 Conduct of Business Pending Closing................................................. 25
6.3 Cooperation with Respect to Financing............................................... 27
6.4 Consents and Approvals.............................................................. 27
6.5 Transferred Assets and Transferred Liabilities...................................... 27
6.6 Use of Name......................................................................... 27
6.7 No Solicitation of Offers........................................................... 27
6.8 Confidential Information............................................................ 28
6.9 The Company's Obligations........................................................... 28
6.10 Commercially Reasonable Efforts..................................................... 28
7. Covenants of HTI Acquisition.............................................................. 28
7.1 Confidential Information............................................................ 28
7.2 Consents and Approvals.............................................................. 28
7.3 Financing Obligation................................................................ 28
7.4 Acquisition Financing............................................................... 29
7.5 Annual Incentive Plan............................................................... 29
7.6 Payment of Certain Debt............................................................. 29
7.7 Certain Post-Closing Matters........................................................ 29
7.8 Commercially Reasonable Efforts..................................................... 31
8. Conditions Precedent to the Company's and Alleghany's Obligations to Effect the Merger ... 31
8.1 Representations and Warranties; Performance......................................... 31
8.2 Consents and Approvals.............................................................. 31
8.3 No Injunction....................................................................... 31
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8.4 Solvency Opinion.................................................................... 32
8.5 Certificates........................................................................ 32
9. Conditions Precedent to HTI Acquisition's Obligation to Effect the Merger ................ 32
9.1 Representations and Warranties; Performance......................................... 32
9.2 Consents and Approvals.............................................................. 32
9.3 Availability of Financing........................................................... 33
9.4 No Injunction....................................................................... 33
9.5 Certificates........................................................................ 33
10. Tax Matters............................................................................... 33
10.1 Tax Returns......................................................................... 33
10.2 Post-Closing Tax Matters............................................................ 35
10.3 Alleghany Indemnity for Taxes....................................................... 36
10.4 Matters Involving Income Tax Claims................................................. 36
10.5 Transfer Taxes...................................................................... 37
10.6 FIRPTA.............................................................................. 37
10.7 Survival............................................................................ 37
11. Termination............................................................................... 37
11.1 Termination by HTI Acquisition...................................................... 37
11.2 Termination by Alleghany............................................................ 37
11.3 Termination by Alleghany or by HTI Acquisition...................................... 37
11.4 Effect of Termination............................................................... 38
12. Survival of Representations and Warranties; Indemnification............................... 38
12.1 Survival of Representations and Warranties.......................................... 38
12.2 Alleghany's Indemnification Obligations............................................. 38
12.3 Limitation on Alleghany's Indemnification Obligations............................... 39
12.4 HTI Acquisition's Indemnification Obligations....................................... 40
12.5 Limitation on HTI Acquisition's Indemnification Obligations......................... 40
12.6 Other Limitations on Indemnification................................................ 41
12.7 Notice.............................................................................. 42
12.8 Right to Contest Claims of Third Parties............................................ 42
12.9 Indemnification Payments............................................................ 43
12.10 Treatment of Indemnification Payments............................................... 43
12.11 Exclusive Remedy.................................................................... 44
13. Non-Competition........................................................................... 44
14. Miscellaneous............................................................................. 44
14.1 Fees and Expenses................................................................... 44
14.2 Waiver.............................................................................. 45
14.3 Notices............................................................................. 45
14.4 Entire Agreement; Amendment......................................................... 45
14.5 Rights Under this Agreement; Nonassignability....................................... 45
14.6 Governing Law....................................................................... 45
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14.7 Waiver of Jury Trial................................................................ 46
14.8 Specific Performance................................................................ 46
14.9 Publicity........................................................................... 46
14.10 Headings; References to Sections, Exhibits and Schedules............................ 46
14.11 Counterparts........................................................................ 46
Acknowledgement and Signatures.................................................................. 46
Exhibits
A Definitions
B-1 Form of New Employment Agreement
B-2 Form of New Employment Agreement
B-3 Form of New Employment Agreement
C Form of Solvency Opinion
Schedules
4.1 Organization
4.3 Company Subsidiaries
4.5 No Violation
4.6 Financial Statements
4.7 Undisclosed Liabilities, Etc.
4.8 Certain Changes
4.9 Encumbrances
4.10 Certain Properties
4.11 Taxes
4.12 Contracts
4.13 Litigation
4.14 Intellectual Property
4.15 Compliance with Laws
4.16 Environmental Matters
4.17 Governmental Authorizations
4.18 Employee Benefit Plans
4.19 Related Party Transactions
4.22 Insurance
4.23 Bank Accounts; Powers of Attorney
4.24 Product Warranties
4.26 Certain Disclosures
4.27 Employees
6.2 Conduct of Business Prior to Closing
8.2 Consents and Approvals
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER ("Agreement") dated as of December 23,
2004 among HTI ACQUISITION LLC, a Delaware limited liability company ("HTI
Acquisition"), HEADS & THREADS INTERNATIONAL LLC, a Delaware limited liability
company (the "Company"), and ALLEGHANY CORPORATION, a Delaware corporation and
the owner of all of the issued and outstanding membership interests in the
Company ("Alleghany").
WHEREAS, each of the Board of Managers and the sole member of HTI
Acquisition and the Board of Directors and the sole member of the Company have
approved this Agreement and the merger of the Company with and into HTI
Acquisition (the "Merger"), upon the terms and subject to the conditions set
forth in this Agreement; and
WHEREAS, the Board of Directors of Alleghany has approved this
Agreement and the Merger, upon the terms and subject to the conditions set forth
in this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements contained herein, the parties hereto, intending to be
legally bound hereby, agree as follows:
1. Definitions. As used herein, defined terms have the meanings set
forth in Exhibit A.
2. Merger. Upon the terms and subject to the conditions of this
Agreement:
2.1 The Merger. In accordance with the Limited Liability
Company Act of the State of Delaware ("DLLCA"), at the Effective Time, the
Company shall be merged with and into HTI Acquisition. As a result of the
Merger, the separate existence of the Company shall cease and HTI Acquisition
shall continue as the surviving entity in the Merger (sometimes hereinafter
referred to as the "Surviving Entity").
2.2 Closing. Subject to the terms and conditions of this
Agreement, the closing of the Merger (the "Closing") will take place at the
offices of Xxxxxx Xxxxx & Xxxxxxx LLP, 000 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000
(or such other place upon which the parties shall mutually agree), at 10:00 a.m.
on December 31, 2004 or on such later date upon which the parties shall mutually
agree (the "Closing Date").
2.3 Effective Time of the Merger. Subject to the terms and
conditions of this Agreement, at the Closing, the parties shall cause the Merger
to be consummated by filing a certificate of merger (the "Certificate of
Merger") with the Secretary of State of the State of Delaware (the "Delaware
Secretary of State") pursuant to the DLLCA, in such form as required by and
executed in accordance with the relevant provisions of the DLLCA (the date and
time of the filing of the Certificate of Merger with the Delaware Secretary of
State (or such later date and time as may be specified in the Certificate of
Merger in accordance with the DLLCA with the written consent of HTI Acquisition
and Alleghany) being the "Effective Time").
2.4 Certificate of formation; Limited Liability Company
Agreement. At the Effective Time and without any further action on the part of
HTI Acquisition, the Company, Alleghany or the Surviving Entity:
(A) The certificate of formation of HTI Acquisition, as in
effect immediately prior to the Effective Time, shall be amended as a result of
the Merger to change the name of the Surviving Entity to "Heads & Threads
International LLC". The certificate of formation of HTI Acquisition as so
amended shall be the certificate of formation of the Surviving Entity following
the Merger, until thereafter further amended or repealed in accordance with its
terms and as provided under the DLLCA.
(B) The limited liability company agreement of HTI
Acquisition, as in effect immediately prior to the Effective Time, shall be the
limited liability company agreement of the Surviving Entity following the
Merger, until thereafter amended or repealed in accordance with its terms, the
terms of the certificate of formation of the Surviving Entity and as provided
under the DLLCA.
2.5 Directors and Officers. The directors of HTI Acquisition
immediately prior to the Effective Time shall be the initial directors of the
Surviving Entity following the Merger, and the officers of HTI Acquisition
immediately prior to the Effective Time shall be the initial officers of the
Surviving Entity following the Merger, in each case until their respective
successors are duly elected or appointed or until their earlier death,
resignation or removal in accordance with the certificate of formation and
limited liability company agreement of the Surviving Entity and as provided
under the DLLCA.
2.6 Employment Agreements. Simultaneously with the execution
and delivery of this Agreement, HTI Acquisition and each of the parties thereto
are entering into employment agreements in the forms of Exhibit X-0, X-0 and B-3
(the "New Employment Agreements"). Each of the New Employment Agreements by its
terms will take effect at the Effective Time.
2.7 Effect of the Merger. The Merger shall have the effects
set forth in this Agreement and in the DLLCA. Without limiting the generality of
the foregoing, and subject thereto, at the Effective Time, all properties,
rights, privileges, powers and franchises of HTI Acquisition and the Company
shall be vested in the Surviving Entity, and all debts, liabilities and duties
of HTI Acquisition and the Company shall attach to the Surviving Entity, and the
Surviving Entity shall continue its existence under the DLLCA.
3. Treatment of Membership Interests. The Membership Interests of
HTI Acquisition and the Company shall be treated as follows:
3.1 Effect of the Merger on Membership Interests. As of the
Effective Time, by virtue of the Merger and without any action on the part of
HTI Acquisition, the Company, Alleghany, the Surviving Entity or any holder of
any membership interests in HTI Acquisition or any membership interests in the
Company:
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(A) Membership Interests in HTI Acquisition. All of the
membership interests in HTI Acquisition outstanding immediately prior to the
Effective Time shall remain outstanding.
(B) Conversion of Membership Interests in the Company into
Right to Receive Merger Consideration. All of the membership interests in the
Company outstanding immediately prior to the Effective Time shall by virtue of
the Merger and without any action on the part of the holder thereof be converted
into the right to receive $54,656,000 in cash (the "Unadjusted Merger
Consideration"), which amount is equal to the Member's Equity in the Company as
set forth on the unaudited consolidated balance sheet of the Company and the
Company Subsidiaries as at November 30, 2004 referred to in Section 4.6, subject
to adjustment as set forth in Section 3.2. At the Closing, HTI Acquisition shall
pay the Unadjusted Merger Consideration to Alleghany by wire transfer of
immediately available funds. In addition, at the Closing, HTI Acquisition shall
cause the Alleghany Debt and the LaSalle Debt to be repaid in full. As of the
Effective Time, all membership interests in the Company shall automatically be
canceled and retired and shall cease to be outstanding and exist.
3.2 Post-Closing Adjustment of Unadjusted Merger
Consideration.
(A) Within sixty (60) days after the Effective Date, Alleghany
shall prepare a consolidated balance sheet of the Company and its consolidated
Company Subsidiaries as of the time immediately preceding the Effective Time (as
it may be audited or changed below, the "Closing Date Balance Sheet") in
accordance with generally accepted accounting principles applied in a manner
consistent with the application of such principles in the preparation of the
December 31, 2003 Balance Sheet, except for the absence of footnote disclosures
and other financial statements required thereby. Alleghany and HTI Acquisition
agree that except as explicitly set forth in this Agreement, the Closing Date
Balance Sheet will not give effect to the transactions contemplated hereby.
(B) The parties agree that the Closing Date Balance Sheet
shall give effect to (i) the deferred Tax assets, without giving effect to any
valuation allowance therefor, (ii) any Taxes to be refunded or recovered, (iii)
completion bonuses paid to officers or employees of the Company at or prior to
the Closing ("Completion Bonuses") to the extent that such Completion Bonuses
are paid by the Company, (iv) accruals made for periods prior to the Closing in
respect of the Company's 2004 annual incentive plans, (v) the transfer and
assignment of the Transferred Assets from the Company to Alleghany and (vi) the
transfer from the Company to Alleghany and the acceptance and assumption by
Alleghany of the Transferred Liabilities. The parties agree that the Closing
Date Balance Sheet shall not give effect to (i) any current Income Tax expense,
(ii) the termination of the Tax Sharing Agreement, (iii) any Completion Bonuses
paid by Alleghany, (iv) the repayment by HTI Acquisition of the Alleghany Debt
and the LaSalle Debt, (v) the New Employment Agreements, or (vi) the termination
of the Existing Employment Agreements.
(C) Alleghany shall cause the Closing Date Balance Sheet to be
audited by KPMG LLP or such other firm of certified independent public
accountants of national reputation mutually agreed to by all of the parties (the
"Designated Accountants") and shall cause the Designated Accountants to issue
and deliver the Closing Date Balance Sheet, as so
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audited, to Alleghany and to HTI Acquisition within sixty (60) days after the
Effective Date. Total assets less total liabilities as shown on the Closing Date
Balance Sheet is hereinafter referred to as the "Closing Date Book Value." The
parties agree that the fees and expenses of the Designated Accountants in
connection with the preparation of the audited Closing Date Balance Sheet shall
be paid by Alleghany, and that, in the event HTI Acquisition engages the
Designated Accountants to assist in its review of the audited Closing Date
Balance Sheet, the fees and expenses of the Designated Accountants in connection
with such review shall be paid by HTI Acquisition.
(D) During the preparation of the Closing Date Balance Sheet
by Alleghany as provided in Section 3.2(A) hereof, HTI Acquisition shall (i)
provide Alleghany and its representatives with reasonable access to all relevant
books, records and work papers in the possession of HTI Acquisition and all
former employees of the Company employed by HTI Acquisition, (ii) cooperate with
Alleghany and its representatives, including providing all information in the
possession of HTI Acquisition necessary or useful in the preparation of the
Closing Date Balance Sheet, and (iii) be entitled to observe and review the
preparation of the Closing Date Balance Sheet and the audit, including the
Designated Accountants' work papers, and shall have full access to the
Designated Accountants during such audit, which review shall not constitute any
approval of or acquiescence in the Closing Date Balance Sheet on the part of HTI
Acquisition. In order to prepare the Closing Date Balance Sheet, Alleghany shall
cause the Company to conduct a physical count of the inventory (including raw
materials, finished goods and work-in-progress) of the Company and its
consolidated Company Subsidiaries during the period from December 28, 2004
through December 31, 2004, or at such other time prior to the Closing as may be
mutually agreed to by all of the parties. Alleghany will roll forward the value
of such inventory, based on the purchases and use of such inventory from the
date of such physical count through the time immediately preceding the Effective
Time, to value the inventory of the Company and its consolidated Company
Subsidiaries as at the time immediately preceding the Effective Time. HTI
Acquisition and its representatives shall be entitled to participate in such
physical count.
(E) In the event that the Closing Date Book Value is greater
than the Unadjusted Merger Consideration, then HTI Acquisition shall pay to
Alleghany an amount equal to the difference. In the event that the Closing Date
Book Value is less than the Unadjusted Merger Consideration, then Alleghany
shall pay to HTI Acquisition an amount equal to the difference.
(F) In the event that HTI Acquisition does not disagree with
the Closing Date Balance Sheet pursuant to Section 3.2(G), then the payment to
be made pursuant to Section 3.2(E) shall be made in cash by wire transfer of
immediately available funds on or prior to the forty-fifth (45th) day after the
delivery of the Closing Date Balance Sheet as provided in Section 3.2(A).
(G) In the event that HTI Acquisition disagrees with the
Closing Date Balance Sheet, HTI Acquisition shall in writing advise Alleghany
within forty-five (45) days after the delivery of the Closing Balance Sheet as
provided in Section 3.2(A), specifying the nature of all such disagreements, the
reason therefor and its calculation of the amount of the payment it believes is
required by Section 3.2(E). HTI Acquisition may object to the Closing
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Date Balance Sheet only to the extent that such Closing Date Balance Sheet was
not prepared in accordance with generally accepted accounting principles applied
in a manner consistent with the application of such principles in the
preparation of the December 31, 2003 Balance Sheet. HTI Acquisition specifically
agrees that it will not object to the inclusion of the deferred Tax asset on the
Closing Date Balance Sheet as a result of the utilization of net operating
losses generated by the Company in the federal Consolidated Income Tax Return of
the affiliated group of which Alleghany is the common parent. HTI Acquisition
and Alleghany shall attempt to resolve all such disagreements. If HTI
Acquisition and Alleghany are unable to resolve all such disagreements within
fifteen (15) days after HTI Acquisition shall have advised Alleghany of such
disagreements, HTI Acquisition and Alleghany shall then select a mutually
acceptable firm of certified independent public accountants of national
reputation (the "Independent Accountants") to resolve the disagreements and to
determine the amount of the payment required by Section 3.2(E) (the "Revised
Amount"). The Independent Accountants shall deliver their determination of the
Revised Amount to HTI Acquisition and Alleghany as soon as practicable and such
determination shall be final and binding upon HTI Acquisition and Alleghany.
Payment of the Revised Amount shall be made in cash by wire transfer of
immediately available funds within five (5) Business Days of the receipt of the
determination of the Revised Amount as provided in this Section 3.2(G).
(H) The fees and expenses of the Independent Accountants shall
be shared equally by HTI Acquisition and Alleghany.
3.3 Tax Treatment and Allocation. Alleghany and HTI
Acquisition agree to treat the Merger as a sale of the assets of the Company and
Heads & Threads (PA) (other than the Transferred Assets) for all Tax purposes,
Alleghany intends to treat such sale as followed by the deemed distribution to
Alleghany of the Transferred Assets and the assumption by Alleghany of the
Transferred Liabilities in a completed liquidation of the Company pursuant to
Section 332 of the Code, and Alleghany and HTI Acquisition agree not to take any
contrary position (whether in audits, Tax Returns, or otherwise) unless required
to do so pursuant to a final determination within the meaning of Section 1313 of
the Code. HTI Acquisition shall prepare and deliver to Alleghany an allocation
of the Unadjusted Merger Consideration, as adjusted pursuant to Section 3.2(E)
(the "Merger Consideration"), any assumed liabilities of the Company, and all
other capitalized costs, among the assets of the Company and the Company
Subsidiaries in accordance with their respective fair market values pursuant to
Section 1060 of the Code and the Regulations promulgated thereunder, no later
than ninety (90) days after the determination of the Revised Amount pursuant to
Section 3.2(G), or, if HTI Acquisition does not disagree with the Closing Date
Balance Sheet pursuant to Section 3.2(G), no later than ninety (90) days after
the delivery of the Closing Date Balance Sheet as provided in Section 3.2(A)
(the "Allocation"). The parties hereto agree to consult in good faith regarding
the Allocation, and HTI Acquisition shall make such changes to the Allocation as
are reasonably requested by Alleghany; provided that Alleghany will accept HTI
Acquisition's determination of the Allocation provided such determination is
reasonable and consistent with applicable law. The parties shall report the sale
and purchase of the assets of the Company and Heads & Threads (PA) (other than
the Transferred Assets) on all Tax Returns (including, without limitation,
Internal Revenue Service Form 8594) in a manner consistent with the Allocation
as finally determined, unless required to do otherwise pursuant to a final
determination within the
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meaning of Section 1313 of the Code. The parties agree to consult with one
another with respect to any Tax audit, controversy or litigation relating to the
Allocation.
4. Representations and Warranties by the Company and Alleghany. The
Company and Alleghany represent and warrant to HTI Acquisition as follows:
4.1 Organization. The Company is a limited liability company
duly organized, validly existing, and in good standing under the laws of the
State of Delaware and has the power and authority to carry on its business as
now being conducted and to own and operate the properties and assets now owned
and being operated by it. The Company has delivered to HTI Acquisition complete
and correct copies of the Certificate of formation and limited liability company
agreement of the Company as in effect on the date hereof. The Company is duly
qualified or licensed to do business and is in good standing as a foreign entity
in each of the jurisdictions set forth in Schedule 4.1. The Company is not
required to be qualified or licensed to do business as a foreign entity in any
other jurisdiction except for such jurisdictions, if any, in which the failure
to be so qualified or licensed, individually or in the aggregate, has not had
and would not reasonably be expected to have a Company Material Adverse Effect.
The term "Company Material Adverse Effect" as used in this Agreement shall mean
any material adverse effect on the business, operations, financial condition or
results of operations of the Company and the Company Subsidiaries, taken as a
whole, other than effects caused by or resulting from (i) economic or financial
conditions affecting the U.S. economy, any non-U.S. economy or the global
economy generally, (ii) changes in interest rate levels, (iii) changes generally
affecting the industry in which the Company and the Company Subsidiaries
operate, (iv) the identity of HTI Acquisition as the acquirer of the Company,
(v) the announcement of the acquisition of the Company by HTI Acquisition, (vi)
the conduct of HTI Acquisition (including activities related to due diligence)
prior to the Closing, including the impact of the conduct of HTI Acquisition on
the relationships of the Company or any of the Company Subsidiaries with
suppliers, distributors, customers, employees and others having business
relationships with the Company, or (vii) any breach of any provision of this
Agreement by HTI Acquisition.
Alleghany is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware and has the corporate
power and authority to carry on its business as now being conducted and to own
and operate the properties and assets now owned and being operated by it.
Alleghany has made available to HTI Acquisition complete and correct copies of
the Certificates of Incorporation and By-Laws of Alleghany as in effect on the
date hereof.
4.2 Membership Interests Ownership. Alleghany owns all of the
outstanding membership interests in the Company, free and clear of all Liens,
and has full corporate power and authority to vote or give consents with respect
to such membership interests. Neither the Company nor Alleghany is a party to or
bound by any contract, agreement or arrangement to issue, sell or otherwise
dispose of or redeem, purchase or otherwise acquire any membership interest or
other security of the Company or any other security of the Company exercisable
or exchangeable for or convertible into any membership interest or any other
security of the Company, and, except for this Agreement, there is no outstanding
option, warrant or other right to subscribe for or purchase, or contract,
agreement or arrangement with
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respect to, any membership interest or any other security of the Company or any
other security exercisable or exchangeable for or convertible into any
membership interest or any other security of the Company.
4.3 Company Subsidiaries. Schedule 4.3 lists each of the
Company's directly and indirectly owned Subsidiaries (individually a "Company
Subsidiary" and, collectively, the "Company Subsidiaries"). Except as set forth
in Schedule 4.3, the Company does not own, directly or indirectly, any material
interest in any Person. Schedule 4.3 sets forth, with regard to each of the
Company Subsidiaries, a true and complete list of (i) its name and jurisdiction
of incorporation, formation or organization, as the case may be, (ii) its
authorized capital stock, membership interests or other equity interests, as the
case may be, (iii) the number of shares of capital stock, membership interests
or other equity interests, as the case may be, of each class thereof
outstanding, (iv) the number of shares of capital stock, membership interests or
other equity interests, as the case may be, of each class owned by the Company
or a Company Subsidiary and (v) the names and titles of its managers, directors
and executive officers. Except as set forth in Schedule 4.3, no shares of
capital stock, membership interests or other equity interests, as the case may
be, or any other security (including any debt security) of any Company
Subsidiary is held by any Person or entity other than the Company or one or more
of the Company Subsidiaries. Each Company Subsidiary is a corporation, limited
liability company or other business entity validly existing under the laws of
the jurisdiction of its incorporation, formation or organization, as the case
may be, and has the power and authority to carry on its business as now being
conducted and to own and operate the properties and assets now owned and being
operated by it. The Company has made available to HTI Acquisition complete and
correct copies of each of the Company Subsidiary's certificate of incorporation
and bylaws, certificate of formation and limited liability company agreement or
other organizational documents, as the case may be, as in effect on the date
hereof. Each Company Subsidiary is duly qualified or licensed to do business and
in good standing in each of the respective jurisdictions listed in Schedule 4.3.
No Company Subsidiary is required to be qualified or licensed to do business as
a foreign corporation, limited liability company or other business entity in any
other jurisdiction except such jurisdictions, if any, in which the failure to be
so qualified or licensed would not, individually or in the aggregate, reasonably
be expected to have a Company Material Adverse Effect. All outstanding
membership interests of each Company Subsidiary owned by the Company or a
Company Subsidiary have been duly authorized and validly issued, and are fully
paid and non-assessable. Except as set forth in Schedule 4.3 and except for the
LaSalle Lien, all outstanding equity interests in each of the Company
Subsidiaries is owned by the Company or one or more of the Company Subsidiaries
free and clear of all Liens, other than restrictions on transfer pursuant to
applicable law and, subject to compliance with such laws, are freely
transferable. Except as set forth in Schedule 4.3, neither the Company nor any
Company Subsidiary nor Alleghany is a party to or bound by any contract,
agreement or arrangement with any Person (other than the Company or another
Company Subsidiary) to issue, sell or otherwise dispose of or redeem, purchase
or otherwise acquire any equity interest in or any other security (including any
debt security) of any Company Subsidiary or any other security exercisable or
exchangeable for or convertible into any equity interest in or any other
security (including any debt security) of any Company Subsidiary. Except as set
forth in Schedule 4.3, there is no outstanding option, warrant or other right to
subscribe for or to purchase, or contract, agreement or arrangement with any
Person
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(other than the Company or another Company Subsidiary) with respect to, any
equity interest in or any other security (including any debt security) of any
Company Subsidiary, or any other security exercisable or exchangeable for or
convertible into any equity interest in or any other security (including any
debt security) of any Company Subsidiary.
4.4 Authority. The Company has the power to enter into this
Agreement and to perform its obligations hereunder. The execution, delivery and
performance of this Agreement and the consummation of the Merger and the other
transactions contemplated hereby have been duly authorized by the Board of
Directors of the Company and by its sole member and no other proceeding on the
part of the Company is necessary to authorize the execution, delivery and
performance of this Agreement and the consummation of the Merger and the other
transactions contemplated hereby. This Agreement has been duly executed and
delivered on behalf of the Company and, assuming the due authorization,
execution and delivery of this Agreement by HTI Acquisition, constitutes a
legal, valid and binding obligation of the Company enforceable against the
Company in accordance with its terms, except as enforceability may be limited by
bankruptcy, fraudulent conveyance, insolvency, reorganization, moratorium and
other similar laws relating to or affecting creditors' rights generally or by
general equitable principles (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
Alleghany has the power to enter into this Agreement and to
perform its obligations hereunder. The execution, delivery and performance of
this Agreement and the consummation of the Merger and the other transactions
contemplated hereby have been duly authorized by the Board of Directors of
Alleghany and no other corporate proceeding on the part of Alleghany is
necessary to authorize the execution, delivery and performance of this Agreement
and the consummation of the Merger and the other transactions contemplated
hereby. This Agreement has been duly executed and delivered on behalf of
Alleghany and, assuming the due authorization, execution and delivery of this
Agreement by HTI Acquisition, constitutes a legal, valid and binding obligation
of Alleghany enforceable against Alleghany in accordance with its terms, except
as enforceability may be limited by bankruptcy, fraudulent conveyance,
insolvency, reorganization, moratorium and other similar laws relating to or
affecting creditors' rights generally or by general equitable principles
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).
4.5 No Violation. Except as set forth in Schedule 4.5, neither
the execution, delivery nor performance of this Agreement by the Company nor the
consummation of the Merger or any of the other transactions contemplated hereby
(i) will violate or conflict with the Certificate of formation or limited
liability company agreement of the Company, (ii) will result in any breach of or
default under any provision of any loan agreement, real property lease or
Material Business Contract to which the Company is a party or by which the
Company is bound or to which any property or asset of the Company is subject,
(iii) is prohibited by or requires the Company to obtain or make any consent,
authorization, approval, registration or filing under any Applicable Law to
which the Company is subject, or to which any property or asset of the Company
is subject, (iv) will cause any acceleration of maturity of any note, instrument
or other obligation with respect to which the Company is an obligor or guarantor
or (v) will result in the creation or imposition of any Lien upon any property
or asset of the
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Company or give rise to any right on the part of any other Person to terminate,
cancel or revoke any agreement or instrument referred to above, other than, in
the case of clauses (ii), (iii), (iv) and (v), any such conflicts, violations,
breaches, defaults, revocations, Liens, rights or losses which, would not,
individually or in the aggregate, reasonably be expected to have a Company
Material Adverse Effect.
Except as set forth in Schedule 4.5, neither the execution,
delivery nor performance of this Agreement by Alleghany nor the consummation of
the Merger and the other transactions contemplated hereby (i) will violate or
conflict with the Certificate of Incorporation or By-Laws of Alleghany, (ii)
will result in any breach of or default under any provision of any loan
agreement, real property lease or other material agreement to which Alleghany is
a party or by which Alleghany is bound or to which any property or asset of
Alleghany is subject, (iii) is prohibited by or requires Alleghany to obtain or
make any consent, authorization, approval, registration or filing under any
Applicable Law to which Alleghany is subject or to which any property or asset
of Alleghany is subject, (iv) will cause any acceleration of maturity of any
note, instrument or other obligation with respect to which Alleghany is an
obligor or guarantor or (v) will result in the creation or imposition of any
Lien upon any property or asset of Alleghany or give rise to any right on the
part of any other Person to terminate, cancel or revoke any agreement or
instrument referred to above, other than, in the case of clauses (ii), (iii),
(iv) and (v), any such conflicts, violations, breaches, defaults, revocations,
Liens, rights or losses which would not, individually or in the aggregate,
reasonably be expected to have a material adverse effect on the ability of
Alleghany to perform its obligations hereunder or to consummate the transactions
contemplated hereby.
4.6 Financial Statements.
(A) Schedule 4.6 contains copies of the following financial
statements:
(i) the audited consolidated balance sheets of the
Company and the Company Subsidiaries as at December 31, 2001, 2002 and
2003 and related audited consolidated statements of income and changes in
financial position for each of the fiscal years ended on those dates,
together with the reports thereon of KPMG LLP, certified independent
public accountants (such audited financial statements being hereinafter
referred to as the "Audited Financial Statements" and the audited
consolidated balance sheet of the Company and the Company Subsidiaries as
at December 31, 2003 being hereinafter referred to as the "December 31,
2003 Balance Sheet");
(ii) the unaudited consolidated balance sheets of the
Company and the Company Subsidiaries as at September 30, 2003 and 2004 and
related unaudited consolidated statements of income and changes in
financial position for the nine-month periods ended on those dates (such
unaudited financial statements being hereinafter referred to as the
"Interim Financial Statements" and such unaudited consolidated balance
sheet of the Company and the Company Subsidiaries as at September 30, 2004
being hereinafter referred to as the "September 30, 2004 Balance Sheet");
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(iii) the unaudited consolidated balance sheet of the
Company and the Company Subsidiaries as at October 31, 2004 and related
unaudited consolidated statement of income (the "October 2004 Financial
Statements"); and
(iv) the unaudited consolidated balance sheet of the
Company and the Company Subsidiaries as at November 30, 2004 and related
unaudited consolidated statement of income (the "November 2004 Financial
Statements").
(B) The Audited Financial Statements were prepared in
accordance with generally accepted accounting principles ("GAAP") consistently
applied throughout the periods involved (except as may be indicated in the notes
thereto). The Audited Financial Statements have been audited by KPMG LLP, and
present fairly in all material respects the consolidated financial position of
the Company and the Company Subsidiaries at the respective dates thereof and the
consolidated results of operations of the Company and the Company Subsidiaries
for the respective periods then ended.
(C) The Interim Financial Statements were prepared in
accordance with GAAP consistently applied throughout the periods involved and in
a manner consistent with the application of such principles applied in the
preparation of the Audited Financial Statements. The Interim Financial
Statements do not contain any footnote disclosures and are subject to normal
recurring year-end adjustments, but otherwise present fairly in all material
respects the consolidated financial condition and consolidated results of
operations of the Company and the Company Subsidiaries as of the dates and for
the periods indicated therein except as otherwise set forth therein.
(D) The October 2004 Financial Statements and the November
2004 Financial Statements were prepared in accordance with GAAP consistently
applied throughout the periods involved and in a manner consistent with the
application of such principles applied in the preparation of the Audited
Financial Statements. The October 2004 Financial Statements and the November
2004 Financial Statements accurately reflect the consolidated financial position
and the consolidated results of operations of the Company and the Company
Subsidiaries for the respective periods covered thereby.
4.7 No Undisclosed Liabilities. Except for liabilities and
obligations provided for in this Agreement and pursuant to the transactions
contemplated hereby, neither the Company nor any Company Subsidiary has any
liability or obligation (absolute, accrued, contingent or otherwise) of any
nature, except (i) to the extent reflected or reserved against on the September
30, 2004 Balance Sheet, (ii) as set forth on Schedule 4.7 or on the other
Schedules hereto, or (iii) which, individually or in the aggregate, has not had
and would not reasonably be expected to have a Company Material Adverse Effect.
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4.8 Absence of Certain Changes.
(A) Since December 31, 2003, except (i) for the execution and
delivery of this Agreement and (ii) as set forth in Schedule 4.8 or on the other
Schedules hereto:
(i) the Company and the Company Subsidiaries have conducted the
Business only in the usual and ordinary course consistent with past
practice; and
(ii) there has not been any change, effect or circumstance which,
individually or in the aggregate, has had or would reasonably be
expected to have a Company Material Adverse Effect.
(B) Since September 30, 2004, except for the execution and delivery
of this Agreement and as set forth in Schedule 4.8 or on the other Schedules
hereto, or as otherwise contemplated by this Agreement, neither the Company nor
any Company Subsidiary has:
(i) suffered any damage, destruction or loss of physical property
(whether or not covered by insurance) which, individually or in the
aggregate, has had or would reasonably be expected to have a Company
Material Adverse Effect;
(ii) issued, sold or otherwise disposed of, or agreed to issue,
sell or otherwise dispose of, any shares of capital stock, membership
interests or any other security of the Company or any Company
Subsidiary and has not granted or agreed to grant any option, warrant
or other right to subscribe for or to purchase any shares of capital
stock, membership interests or any other security of the Company or
any Company Subsidiary;
(iii) incurred or agreed to incur any indebtedness for borrowed
money other than the LaSalle Debt;
(iv) paid or obligated itself to pay in excess of $100,000 in the
aggregate for fixed assets;
(v) except for the LaSalle Lien, mortgaged, pledged or subjected
to any Lien, or agreed to mortgage, pledge or subject to any Lien, any
of its properties or assets;
(vi) declared, set aside or paid any dividend (whether in cash,
property, capital stock or membership interest) with respect to any of
its shares of capital stock, membership interests or other equity
interests, as the case may be, or redeemed, purchased or otherwise
acquired, or agreed to redeem, purchase or otherwise acquire, any of
its shares of capital stock, membership interests or other equity
interests, as the case may be;
(vii) except for the Completion Bonuses, increased, or agreed to
increase, the compensation or bonuses or special compensation of any
kind of any of its officers, employees or agents over the rate being
paid to them on September 30, 2004, other
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than normal merit and/or cost-of-living increases pursuant to
customary arrangements consistently followed, or adopted or increased
any benefit under any insurance, Benefit Plan (as defined in Section
4.18(A)) or other arrangement made to, for or with any such officer,
employee or agent;
(viii) made or permitted, or agreed to make or permit, any
material amendment or termination of any Material Business Contract
other than in the ordinary course of business;
(ix) received notice of the resignation or termination of
employment of any of its officers or key employees or otherwise knows
of any impending or threatened resignation or resignations or
termination or terminations of employment of any of its officers or
key employees that has had or would reasonably be expected to have a
Company Material Adverse Effect;
(x) had any labor strike or work stoppage, nor are there any
pending proceedings relating to the certification or decertification
of any labor union;
(xi) made any material change in its accounting methods or
practices with respect to its condition, operations, business,
properties, assets or liabilities;
(xii) made any material change in its Tax methods or practices,
made any election with respect to Taxes (but, for the avoidance of
doubt, the foregoing shall not be applicable to any change in Income
Tax methods or practices or any election with respect to Income Taxes
of Alleghany, even if the Company or any Company Subsidiary is
required to conform to, or is bound by, such change or election) or
entered into any agreement or arrangement with respect to Taxes; or
(xiii) entered into any material transaction not in the ordinary
course of its business.
4.9 Title to and Condition of Properties and Assets.
(A) Except for the LaSalle Lien and except as set forth on
Schedule 4.9 hereto, and except for sales of inventory and other assets made in
the ordinary course of business since September 30, 2004, the Company and the
Company Subsidiaries have good and legal title, free and clear of all Liens, to
all of the properties and assets reflected as properties and assets owned by the
Company or any Company Subsidiary in the September 30, 2004 Balance Sheet.
(B) Except as set forth on Schedule 4.9 and except for sales
of inventory and other assets made in the ordinary course of business since
September 30, 2004, neither the Company nor any Company Subsidiary has sold,
transferred or disposed of any assets or properties, individually or in the
aggregate, having a book value or fair market value as of the date of sale,
transfer or disposal in excess of $ 100,000.
- 12 -
(C) The facilities, machinery, furniture, office and other
equipment used in the operation of the Business, taken as a whole, are in
commercially reasonable operating condition and repair, taking into account
their current use, age and ordinary wear and tear. EXCEPT FOR THE
REPRESENTATIONS AND WARRANTIES SPECIFICALLY PROVIDED FOR HEREIN, ALL OF THE
TANGIBLE ASSETS OF THE COMPANY ARE SOLD TO PURCHASER "WHEREAS" AND "AS IS"
WITHOUT IMPLIED WARRANTY OF MERCHANTABILITY, FITNESS FOR INTENDED USE OR
OTHERWISE.
4.10 Certain Properties. Neither the Company nor any Company
Subsidiary owns any real estate. Schedule 4.10 sets forth all of the real
property leased to the Company or any Company Subsidiary and specifies the
location of each property, the use of the facility thereon, the name of the
owner or the names of the lessor and the lessee, and the approximate square
footage of improvements which are leased, as specified in each lease. The
Company and Alleghany have delivered to HTI Acquisition (i) a copy of each lease
by which the Company or any Company Subsidiary acquired its interest in the real
estate described in Schedule 4.10 and (ii) to the extent in the possession of
the Company, any of the Company Subsidiaries or Alleghany, a copy of all
certificates of occupancy for the improvements on the real estate described in
Schedule 4.10 and a copy of any variance granted with respect to any of such
real estate described in Schedule 4.10, all of which documents are true and
complete copies thereof as in effect on the date hereof, except as may otherwise
be set forth in Schedule 4.10. Neither the Company nor any Company Subsidiary
nor Alleghany has received any written notice from any Governmental Authority,
with respect to any of the real estate described in Schedule 4.10 alleging a
violation of Applicable Law which is the responsibility of the Company or any of
the Company Subsidiaries to cure under a lease and which has not been cured.
Except as set forth in Schedule 4.10 there is no sublease, occupancy agreement
or like instrument to which the Company or any Company Subsidiary is a party
with respect to any of the real estate described in Schedule 4.10. Each lease
pursuant to which the Company or any Company Subsidiary leases any real property
is in full force and effect and, to the Company's knowledge, is valid and
enforceable in accordance with its terms. There is not under any such lease any
default by the Company or any Company Subsidiary with regard to the payment of
rent or any other material default including, without limitation, any default
that could be a basis for termination of the lease. To the Company's Knowledge,
there is no other default under any such lease by the Company or any Company
Subsidiary, nor has there occurred any event that with notice or lapse of time
or both would constitute such a default by the Company or any Company
Subsidiary. To the Company's Knowledge, there is not under any such lease any
default by any other party thereto or any event that with notice or lapse of
time or both would constitute such a default thereunder by such party.
4.11 Taxes. Except as set forth on Schedule 4.11:
(A) For all periods of its ownership of the Company during
which the Company was treated as a corporation for Income Tax purposes,
Alleghany has included (or, with respect to the taxable year including the
Closing Date, will include) the Company and any of its corporate Company
Subsidiaries in its federal Consolidated Income Tax Return as a member of the
affiliated group of which Alleghany is the common parent.
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(B) All material Tax Returns required to have been filed on or
before the Closing Date by or with respect to the Company or any Company
Subsidiary have been duly and timely filed (or, if due between the date hereof
and the Closing Date, will be duly and timely filed), and all Taxes shown as due
on any such Tax Return have been duly and timely paid (or, if due between the
date hereof and the Closing Date, will be duly and timely paid). Each state
Income Tax Return and each Non-Income Tax Return filed by or with respect to the
Company or any Company Subsidiary was true, correct and complete in all material
respects as of the time of its filing or after taking into account any changes
reflected on any amended Tax Returns.
(C) The accrued but unpaid Non-Income Taxes of the Company and
the Company Subsidiaries did not, as of September 30, 2004, exceed the provision
for Non-Income Tax liability set forth on the face of the September 30, 2004
Balance Sheet (rather than any notes thereto). Notwithstanding any statement on
Schedule 4.11 or any other Schedule hereto, the Non-Income Taxes of the Company
and the Company Subsidiaries that will have accrued (in accordance with GAAP
applied in a manner consistent with the preparation of the Audited Financial
Statements) but not been paid for taxable periods and portions thereof up to and
including the Closing Date will not exceed the provision for Non-Income Taxes of
the Company and the Company Subsidiaries on the Closing Date Balance Sheet. The
Company and the Company Subsidiaries have withheld and paid all Taxes required
to have been withheld and paid in connection with amounts paid or owing to any
employee, former employee, creditor, independent contractor, shareholder,
Affiliate, customer, supplier or other third party.
(D) There is no dispute or claim concerning any Tax liability
of the Company or any Company Subsidiary claimed or raised in writing by any
Taxing Authority. No issues have been raised in writing in any examination by
any Taxing Authority with respect to the Company or any Company Subsidiary which
by application of similar principles reasonably could be expected to result in a
proposed deficiency for any period not so examined. The Company has delivered to
HTI Acquisition complete and correct copies of (i) all of the relevant Income
Tax schedules, forms and information relating to the Company and the Company
Subsidiaries, complete in all respects, to permit their inclusion in the
Consolidated Income Tax Returns of Alleghany (but not the Consolidated Income
Tax Returns of Alleghany) and (ii) all state, local and foreign Income Tax
Returns filed by, and all Tax examination reports and statements of deficiencies
assessed against or agreed to by, the Company or any Company Subsidiary since
January 1, 2001.
(E) There are no outstanding written requests, agreements,
consents or waivers to extend the statutory period of limitations applicable to
the assessment of any Taxes against the Company or any Company Subsidiary. None
of the assets or properties of the Company or any Company Subsidiary constitute
tax-exempt bond financed property or tax-exempt use property, within the meaning
of Section 168 of the Code. None of the Company or any Company Subsidiary is a
party to any "safe harbor lease" that is subject to the provisions of Section
168(f)(8) of the Internal Revenue Code as in effect prior to the Tax Reform Act
of 1986. None of the Company or any Company Subsidiary is a party to any joint
venture, partnership or other arrangement that is treated as a partnership for
federal income tax purposes.
(F) Except as shall be terminated pursuant to Section 10.2(B),
none of the Company or any Company Subsidiary is a party to any agreement
providing for the
- 14 -
allocation or sharing of Taxes. None of the Company or any Company Subsidiary
has received or is subject to any written ruling of a Taxing Authority related
to Taxes or has entered into any written and legally binding agreement with a
Taxing Authority relating to Taxes. None of the Company or any Company
Subsidiary has any liability for Taxes of any Person or entity (i) under
Treasury Regulations Section 1.1502-6 or any similar provision of state, local
or foreign law, other than in respect of Alleghany and the Company Subsidiaries,
(ii) as a transferee or successor, (iii) by contract or (iv) otherwise.
(G) Except as set forth in Schedule 4.11, there are no liens
for Taxes upon the assets of the Company or any Company Subsidiary, except for
liens for Taxes not yet due and payable and liens for Taxes that are being
contested in good faith that are adequately reserved for on the Financial
Statements.
(H) The Company has been a properly treated as a corporation
for federal income tax purposes since January 1, 2000. Heads & Threads (PA) has
been disregarded as an entity separate from the Company for U.S. federal income
tax purposes, within the meaning of Section 301.7701-3(b)(ii) of the Treasury
regulations throughout the entire period of its existence. Heads & Threads
(Mexico) (LLC) and the Mexican Company Subsidiaries are corporations for U.S.
federal income tax purposes.
4.12 Contracts.
(A) Schedule 4.12 sets forth a true and complete list of all
of the following contracts (other than Benefit Plans) in effect as of the date
hereof to which the Company or any of the Company Subsidiaries is a party or by
which any of the assets or properties of the Company or any of the Company
Subsidiaries is bound (collectively, the "Material Business Contracts"):
(i) any contract with any labor union;
(ii) any employment or consulting contract or other
contract for services involving a payment of more than $75,000 annually;
(iii) any lease, whether as lessor or lessee, with
respect to Personal property providing for annual rental payments in
excess of $25,000;
(iv) other than the LaSalle Credit Agreement, any loan
agreement or other instrument relating to any debt for money borrowed;
(v) any contract of purchase or sale involving more than
$100,000, except for contracts relating to the purchase or sale of
inventory;
(vi) any written contract with any agent, dealer or
distributor providing for the marketing, sale and/or distribution of the
products sold or distributed by the Company or any of the Company
Subsidiaries;
(vii) any stand-by letter of credit, guarantee or
performance bond involving an amount in excess of $100,000;
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(viii) any contract or agreement restricting the freedom
or ability of the Company or any Company Subsidiary to engage in any line
of business or to engage in business in any geographical area anywhere in
the world; and
(ix) any other contract involving payment of more than
$50,000 per year, except for contracts entered into in the ordinary course
of business relating to the purchase of supplies or services or to the
sale of inventory.
(B) All of the stand-by letters of credit guarantees and
performance bonds to which the Company or any of the Company Subsidiaries is a
party or by which any of the assets or properties of the Company or any of the
Company Subsidiaries are bound involve in the aggregate an amount not in excess
of $100,000.
(C) Except for the consents identified on Schedule 4.5, no
Material Business Contract requires any consent, approval, waiver or
authorization by any third party for the consummation of the Merger and the
other transactions contemplated by this Agreement.
(D) Each of the Material Business Contracts is a valid and
binding obligation of the Company and/or the Company Subsidiaries party thereto.
To the Company's Knowledge, each of the Material Business Contracts is a valid
and binding obligation of each other Person party thereto and is in full force
and effect enforceable against the parties thereto in accordance with its terms.
Except as specified in Schedule 4.12(c), neither the Company nor any of the
Company Subsidiaries is in default under any of the Material Business Contracts,
except for such defaults which would not, individually or in the aggregate,
reasonably be expected to have a Company Material Adverse Effect. Except as
specified in Schedule 4.12(c), to the knowledge of the Company, no party (other
than the Company or any of the Company Subsidiaries) to a Material Business
Contract is in default under such Material Business Contract, except for such
defaults which would not, individually or in the aggregate, reasonably be
expected to have a Company Material Adverse Effect.
(E) The Company has made available to HTI Acquisition true and
complete copies of all of the Material Business Contracts.
4.13 Litigation. Except as set forth in Schedule 4.13, since
January 1, 2004, there has been no action, suit, proceeding or investigation,
either at law or in equity, by or before any commission or other administrative
authority in the United States or any foreign jurisdiction, or before any
arbitration panel, of any kind pending or, to the Knowledge of the Company,
threatened against the Company or any Company Subsidiary or any of their
respective properties or assets that, if asserted and decided adversely to the
Company or such Company Subsidiary, individually or in the aggregate, has had or
would reasonably be expected to have a Company Material Adverse Effect. Except
as set forth in Schedule 4.13, there is no outstanding judicial or
administrative judgment, order, decree or restraint against the Company or any
of the Company Subsidiaries or any of their respective properties or assets
that, individually or in the aggregate, has had or would reasonably be expected
to have a Company Material Adverse Effect.
-16-
4.14 Intellectual Property. Except as set forth in Schedule
4.14, neither the Company nor any Company Subsidiary owns any patent relating to
any product which it sells or any process used in the manufacture of any such
product, nor has any license under any patent been granted to the Company or any
Company Subsidiary relating to any such product or any such process, and to the
Knowledge of the Company there is no patent which would cover any such product
or any such process, and neither the Company nor any Company Subsidiary owns any
registered copyright, trademark or trade name, nor has any license to use any
registered copyright, trademark or trade name been granted to the Company or any
Company Subsidiary. Each of the patents, registered copyrights, trademarks and
trade names listed on Schedule 4.14 has been validly issued and is owned by the
Company or a Company Subsidiary, and the Company and the Company Subsidiaries
have the exclusive rights to use all such patents, copyrights, registered
trademarks and trade names (if any) in the Business. Except as set forth in
Schedule 4.14, the Company and the Company Subsidiaries own or have the right to
use all patents, copyrights, trademarks, trade names, know-how, trade secrets
and other proprietary rights (collectively, the "Proprietary Rights") necessary
to conduct the Business in the manner in which it has heretofore been conducted,
except where the failure to have such Proprietary Rights, individually or in the
aggregate, has not had and would not reasonably be expected to have a Company
Material Adverse Effect. To the Knowledge of the Company, there is no claim, nor
is there a basis for any claim, that the Company or any Company Subsidiary has
infringed any Proprietary Right of any other Person, except for those claims
which, whether or not asserted, individually or in the aggregate, have not had
and would not reasonably be expected to have a Company Material Adverse Effect.
4.15 Compliance with Laws. Except as set forth on Schedule
4.15, the Company and each of the Company Subsidiaries have complied and are in
compliance with all Applicable Laws (including, without limitation, Applicable
Laws relating to the importation of any inventory, labor union activities, civil
rights, and equal employment opportunity or other similar laws), except where
the failure to be in compliance with Applicable Laws, individually or in the
aggregate, have not had and would not reasonably be expected to have a Company
Material Adverse Effect.
4.16 Environmental Matters. Except as set forth in Schedule
4.16:
(A) The Company and the Company Subsidiaries have obtained and
hold all required Environmental Permits which are identified on Schedule 4.16
except where the failure to have such Permits, individually or in the aggregate,
have not had and would not reasonably be expected to have a Company Material
Adverse Effect and, to the Knowledge of the Company, each such Environmental
Permit will remain valid and effective after the Closing, without any notice to
or consent of any Governmental Authority.
(B) The Company and the Company Subsidiaries are in compliance
with all provisions of all applicable (i) Environmental Permits, and (ii)
Environmental Laws, except for such failures to be in compliance which,
individually or in the aggregate, have not had and would not reasonably be
expected to have a Company Material Adverse Effect.
(C) There are no pending, or to the Company's Knowledge,
threatened Environmental Claims against the Company or any Company Subsidiary,
except for such
-17-
pending or threatened Environmental Claims which, individually or in the
aggreate, have not had and would not reasonably be expected to have a Company
Material Adverse Effect.
(D) To the Knowledge of the Company, no Releases of Hazardous
Materials have occurred at, from, in, to, on, or under any Site which, under an
applicable lease, is the responsibility of the Company or any of the Company
Subsidiaries to remediate and which has not been remediated, and no Hazardous
Materials are present in, on, about or migrating to or from any Site that have
given rise or would reasonably be expected to give rise to an Environmental
Claim against the Company or any Company Subsidiary.
(E) To the Company's Knowledge, neither the Company nor any
Company Subsidiary nor any predecessor of the Company or any Company Subsidiary,
nor any entity previously owned by the Company or any Company Subsidiary, has
transported or arranged for the treatment, storage, handling, disposal, or
transportation of any Hazardous Material to any location at, from, in, to, on or
under which a Release of Hazardous Materials has occurred that has resulted in
or would reasonably be expected to result in an Environmental Claim against the
Company or any Company Subsidiary, and which is not in compliance with any
Environmental Permit or Environmental Law.
(F) To the Knowledge of the Company, no Site currently, or at
any time during the three year period ending on the date of this Agreement,
leased by the Company or any Company Subsidiary is a current or proposed
Environmental Clean-up Site.
(G) To the Knowledge of the Company, there are no (i)
underground storage tanks, active or abandoned, (ii) polychlorinated biphenyl
containing equipment, or (iii) asbestos containing material which is friable at
any Site which, under any applicable lease, is the responsibility of the Company
or any of the Company Subsidiaries, and which is not in compliance with any
Environmental Permit or Environmental Law. Except for liabilities and
obligations assumed pursuant to the terms of the real property leases set forth
on Schedule 4.10, neither the Company nor any Company Subsidiary has expressly
assumed or undertaken, or agreed to assume or undertake, responsibility for any
liability or obligation of any other Person, arising under or relating to
Environmental Laws, including, but not limited to, any obligation for
investigation, corrective or remedial action, nor, to the Company's Knowledge,
has the Company or any of the Company Subsidiaries assumed or undertaken any
such liability or obligation by operation of law, except, in each case, for such
liabilities and obligations the performance of which, individually or in the
aggregate, have not had, and would not reasonably be expected to have, a Company
Material Adverse Effect.
(H) There have been no environmental investigations, studies,
audits, tests, reviews or other analyses conducted by, on behalf of, or which
are in the possession of the Company or any Company Subsidiary (or, to the
Company's Knowledge, any representative of either thereof) with respect to any
Site currently, or at any time during the three year period ending on the date
of this Agreement, leased by the Company or any Company Subsidiary which have
not been delivered to HTI Acquisition prior to execution of this Agreement.
4.17 Governmental Authorizations and Regulations. Schedule
4.17 lists all licenses, franchises, permits and other governmental
authorizations (collectively, "Permits")
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held by the Company or any Company Subsidiary which are material to the conduct
of the Business. All such Permits are valid and in full force and effect, and,
except as set forth on Schedule 4.17, neither the Company nor any Company
Subsidiary nor Alleghany has received any notice that any Governmental Authority
intends to cancel, terminate or not renew any such Permit. The Company and the
Company Subsidiaries hold all Permits which are necessary for the lawful
operation of the Business, as conducted on the date hereof, except where the
failure to have such Permits, individually or in the aggregate, have not had and
would not reasonably be expected to have a Company Material Adverse Effect.
4.18 Employee Benefit Plans.
(A) Each bonus, incentive compensation, deferred compensation,
pension, profit sharing, retirement, stock purchase, stock option, stock
ownership, stock appreciation rights, phantom stock, leave of absence, layoff,
vacation, day or dependent care, legal services, cafeteria, life, health,
accident, disability, workmen's compensation or other insurance, severance,
separation or other employee benefit plan, practice, policy or arrangement of
any kind, whether written or oral, or whether for the benefit of a single
individual or more than one individual including, but not limited to, any
"employee benefit plan" within the meaning of Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), (whether or not
subject thereto), contributed to, maintained or sponsored by the Company or any
Company Subsidiary or with respect to which the Company or any Company
Subsidiary could have any liability to make contributions (collectively, the
"Benefit Plans"), that is material alone or in combination with Benefit Plans of
similar type, is listed on Schedule 4.18.
(B) With respect to each Benefit Plan, the Company has made
available to the HTI Acquisition a true and correct copy of (i) the most recent
annual report (e.g., Form 5500), if any, for such Benefit Plan, (ii) any written
plan document constituting or containing such Benefit Plan, (iii) each trust
agreement, if any, relating to such Benefit Plan, (iv) the summary plan
description, if any, for such Benefit Plan, (v) the most recent actuarial report
or valuation, if any, relating to such Benefit Plan and (vi) the most recent
determination letter or opinion letter, if any, from the IRS which covers such
Benefit Plan, if such Benefit Plan is intended to be qualified under Section
401(a) of the Internal Revenue Code of 1986, as amended (the "Code").
(C) No Benefit Plan (i) is a "defined benefit plan" within the
meaning of Section 3(35) of ERISA (whether or not subject thereto), (ii) is a
"multiemployer plan" within the meaning of Section 3(37) of ERISA (whether or
not subject thereto), (iii) is sponsored or maintained by Alleghany or any of
its Affiliates (other than the Company or any of the Company Subsidiaries), or
(iv) except as set forth on Schedule 4.18, provides post-retirement health or
death benefit coverage (other than as required under Part 6 of Subtitle B of
Title I of ERISA or Section 4980B of the Code).
(D) Except as set forth on Schedule 4.18, to the Knowledge of
the Company, each Benefit Plan has at all times been maintained and administered
in all material respects in accordance with its terms and with the material
requirements of all Applicable Law, including ERISA and the Code. To the
Knowledge of the Company, each Benefit Plan intended to qualify under Section
401(a) of the Code has at all times since its adoption been so qualified,
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and each trust which forms a part of any such plan has at all times since its
adoption been Tax-exempt under Section 501(a) of the Code. There is no
commitment or agreement (whether written or oral) that would prevent the
termination or modification of any Benefit Plan that provides for
post-retirement welfare benefits without the Company incurring any obligation or
liability with respect to such termination or modification.
(E) To the Knowledge of the Company, neither the Company nor
any Company Subsidiary has incurred any liability (either directly, secondarily,
jointly or contingently) under Title IV of ERISA or Sections 4971 through 4980G
of the Code or under Section 502(i) or (1) of ERISA that has had or would have a
Company Material Adverse Effect.
(F) The consummation of the Merger and the other transactions
contemplated by this Agreement, will not either alone or in conjunction with any
other event, require any payment or benefit under any Benefit Plan that, in the
absence of the transactions contemplated by this Agreement, would not be
required, or accelerate the timing thereof. The Tax deductibility of any amount
payable under any Benefit Plan will not be limited by operation of Section 280G
of the Code.
(G) No suit, action or other litigation (excluding claims for
benefits incurred in the ordinary course of plan activities) which has had or
could reasonably be expected to result in a Company Material Adverse Effect has
been brought or, to the Knowledge of the Company, threatened with respect to any
Benefit Plan and, to the Knowledge of the Company, there are no facts or
circumstances known to the Company that could reasonably be expected to give
rise to any such suit, action or other litigation.
4.19 Related Party Transactions. Except as set forth in
Schedule 4.19, neither the Company nor any of the Company Subsidiaries is a
party to any transaction (other than employee compensation and other agreements
related to employment) and none is now proposed with any Person who is a
director or officer of the Company or any of the Company Subsidiaries, or with
Alleghany or any Company Subsidiary of Alleghany (other than the Company or a
Company Subsidiary of the Company).
4.20 Certain Practices.
(A) Accounting Practices. The books and records of the Company
are complete and accurate in all material respects, and are maintained in
accordance with customary business practices.
(B) Certain Other Practices. Neither the Company nor any
Company Subsidiary nor, to the Knowledge of the Company, any director, officer,
agent, or employee of the Company or any Company Subsidiary has used any funds
(corporate or otherwise) for any unlawful contribution, gift, entertainment or
other expense relating to political activity or made any direct or indirect
unlawful payment to any United States or foreign government official or employee
from corporate funds or violated or is in violation of any provision of the
Foreign Corrupt Practices Act of 1977.
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4.21 Minute Books. The Company's minute books which record the
minutes of the meetings of its members, Board of Directors and committees
thereof are complete and accurate in all material respects.
4.22 Insurance. Schedule 4.22 lists all policies of insurance
maintained by the Company or by any of the Company Subsidiaries as of the date
hereof, and each such insurance policy is a valid and binding obligation of the
parties thereto and is in full force and effect enforceable in accordance with
the terms. The Company and Alleghany have made available to HTI Acquisition
prior to the date hereof true and complete copies of all such policies.
4.23 Bank Accounts; Powers of Attorney. Schedule 4.23 sets
forth (i) the name of each bank, trust company or other financial institution in
which the Company or any Company Subsidiary maintains an account or safe deposit
box and the names of all Persons authorized to draw thereon or to have access
thereto, and (ii) the names of all Persons, if any, holding powers of attorney
from the Company or any Company Subsidiary and a summary statement of the terms
thereof.
4.24 Product Warranties. Schedule 4.24 sets forth the
Company's standard printed warranty used at all times since January 1, 2004 in
connection with the sale or distribution of its products. To the Company's
Knowledge, the Company has not used any other form of warranty which remains in
effect with respect to any product that it has previously sold or distributed.
There are no claims pending nor, to the Company's Knowledge, are there any
claims threatened against the Company based upon any product warranty. Neither
the Company nor any Company Subsidiary has manufactured any product during the
period January 1, 1999 through the date hereof.
4.25 Customers and Suppliers.
(A) The Company has heretofore delivered to HTI Acquisition
lists of the ten largest customers of and the ten largest suppliers to the
Company for the fiscal year of the Company ended December 31, 2003 and for the
ten-month period ended October 31, 2004, including in each case for such period
the approximate dollar amount of the sales to such customer or purchases from
such supplier. As of the date of this Agreement, none of the ten largest
customers of or suppliers to the Company identified for the ten-month period
ended October 31, 2004 has given the Company written notice that it intends to
terminate its business relationship with the Company.
(B) The Company has heretofore delivered to HTI Acquisition
(i) a list as of November 30, 2004 by scheduled month of delivery of all of the
outstanding purchase orders of the Company exceeding $100,000 and (ii) a
statement as to the approximate aggregate amount of all of the outstanding sales
orders of the Company as of November 30, 2004.
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4.26 Certain Disclosures. Schedule 4.26 contains:
(i) a list of all categories of products sold and/or
distributed by the Company or any Company Subsidiary during the ten-month
period ended October 31, 2004 through the date hereof; and
(ii) a list by location of all machinery and equipment
owned by the Company on the date hereof.
4.27 Employees. Schedule 4.27 sets forth a list of the names
of all of the employees of the Company and of each of the Company Subsidiaries
who were paid by the Company or any of the Company Subsidiaries salary and
bonuses during the year ended December 31, 2003 (or whom the Company anticipates
will be paid by the Company or any of the Company Subsidiaries salary and
bonuses during the year ending December 31, 2004) aggregating $50,000 or more
(excluding from such list (i) all Persons employed by the Atlas division of the
Company (which was sold in November 2004) and (ii) any Person whose employment
with the Company or any Company Subsidiary terminated on or before June 30,
2004), and their respective ages and positions with the Company or such Company
Subsidiary, as the case may be, and such other information relating to such
employees as is readily available to the Company or such Company Subsidiary. The
Company agrees to provide periodic updates to the list prior to the Closing as
may be reasonably requested by HTI Acquisition to reflect new hires and
terminations.
4.28 Brokers. Except for XXXX Capital, the fees and expenses
of which will be paid by Alleghany, no broker, finder or investment banker is
entitled to any fee or commission in connection with the transactions
contemplated hereby based upon arrangements made by or on behalf of the Company
or Alleghany.
5. Representations and Warranties by HTI Acquisition. HTI
Acquisition represents and warrants to the Company and Alleghany as follows:
5.1 Organization. HTI Acquisition is a limited liability
company duly organized, validly existing and in good standing under the laws of
the State of Delaware and has the power and authority to carry on the business
now being conducted by the Company and to acquire and own and operate the
properties, assets and business of the Company. HTI Acquisition has delivered to
Alleghany complete and correct copies of the Certificate of formation and
limited liability agreement of HTI Acquisition as in effect on the date hereof.
5.2 Authority. HTI Acquisition has the power to enter into
this Agreement and to perform its obligations hereunder. The execution, delivery
and performance of this Agreement and the consummation of the Merger and the
other transactions contemplated hereby have been duly authorized by the Board of
Managers of HTI Acquisition and by its members and no other proceeding on the
part of HTI Acquisition is necessary to authorize the execution, delivery and
performance of this Agreement and the consummation of the Merger and the other
transactions contemplated hereby. This Agreement has been duly executed and
delivered on behalf of HTI Acquisition, and, assuming the due authorization,
execution and delivery of this Agreement by each of the other parties hereto,
constitutes a legal, valid and
-22-
binding obligation of HTI Acquisition enforceable against HTI Acquisition in
accordance with its terms, except as enforceability may be limited by
bankruptcy, fraudulent conveyance, insolvency, reorganization, moratorium and
other similar laws relating to or affecting creditors' rights generally or by
general equitable principles (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
5.3 No Violation. Neither the execution, delivery and
performance of this Agreement nor the consummation of the Merger or any of the
other transactions contemplated hereby (i) will violate or conflict with the
certificate of formation or limited liability company agreement of HTI
Acquisition, (ii) will result in any breach of or default under any provision of
any loan agreement, real property lease or other material agreement of any kind
to which HTI Acquisition is a party or by which HTI Acquisition is bound or to
which any property or asset of HTI Acquisition is subject and (iii) except for
the filing of the Certificate of Merger with the Delaware Secretary of State, is
prohibited by or requires HTI Acquisition to obtain or make any consent,
authorization, approval, registration or filing under any Applicable Law to
which HTI Acquisition is subject, or to which any property or asset of HTI
Acquisition is subject, other than, in the case of clauses (ii) and (iii), any
such conflicts, violations, breaches or defaults which would not, individually
or in the aggregate, reasonably be expected to have a material adverse effect on
the ability of HTI Acquisition to perform its obligations hereunder or to
consummate the Merger and the other transactions contemplated hereby.
5.4 Litigation. There are no actions, suits, proceedings or
investigations, either at law or in equity, by or before any commission or other
administrative authority in the United States or any foreign jurisdiction, or
before any arbitration panel, of any kind pending or, to the Knowledge of HTI
Acquisition, threatened against HTI Acquisition or any of its properties or
assets that, if asserted and decided adversely to HTI Acquisition, would
reasonably be expected to, individually or in the aggregate, have a material
adverse effect on the ability of HTI Acquisition to perform its obligations
hereunder or to consummate the Merger and the other transactions contemplated
hereby.
5.5 HSR Act. No Person "controls" HTI Acquisition within the
meaning of the HSR Act. For purposes of the "size-of-the-parties" test under the
HSR Act, HTI Acquisition has less than $10,000,000 in total assets and less than
$10,000,000 in annual sales, and no requirements of the HSR Act apply to the
acquisition of the Company by HTI Acquisition provided for hereunder.
5.6 Financing. HTI Acquisition has delivered to Alleghany (i)
true, correct and complete signed counterpart(s) of commitment letters (the
"Equity Commitment Letters"), dated on or prior to the date hereof, whereby the
parties thereto (the "Equity Investors") have agreed, subject to the terms and
conditions set forth therein, to make or cause to be made in HTI Holding equity
investments in cash in the aggregate amount of not less than $25,000,000 (the
"Equity Commitment"); (ii) a true, correct and complete signed counterpart of a
letter agreement by and between HTI Holding and HTI Acquisition, dated on or
prior to the date hereof, whereby HTI Holding has agreed to contribute the
entire Equity Commitment to HTI Acquisition (the "Contribution Letter"); and
(iii) true, correct and complete signed counterpart(s) of commitment letter(s),
dated on or prior to the date hereof, pursuant to which
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the lenders party thereto have agreed, subject to the terms and conditions set
forth therein, to provided or cause to be provided debt financing in connection
with the transactions provided for herein and revolving credit to HTI
Acquisition (the "Commitment Letters" and, together with the Equity Commitment
Letters and the Contribution Letter, the "Commitments"). The Commitments have
not been amended in a manner that would be prohibited by the last sentence of
this Section 5.6 and are, to the Knowledge of HTI Acquisition, in full force and
effect. The Commitments are subject to no contingencies or conditions other than
those set forth in the copies of the Commitments delivered to Alleghany. Subject
to the terms and conditions of the Commitments, and subject to the terms and
conditions of this Agreement, the Commitments would provide HTI Acquisition with
acquisition financing at the Effective Time sufficient to consummate the Merger
upon the terms contemplated by this Agreement (the "Acquisition Financing").
Nothing contained in this Agreement shall prohibit HTI Acquisition or the Equity
Investors from entering into agreements relating to the financing or the
operation of HTI Acquisition or the Surviving Equity, including adding other
equity providers or operating partners; provided that (i) the aggregate amount
of the Equity Commitment shall not be reduced in any way to less than
$25,000,000 and (ii) HTI Acquisition shall have obtained any and all required
consents of the lenders under the Commitment Letters.
5.7 Interim Operations of HTI Acquisition. HTI Acquisition was
formed solely for the purpose of engaging in the transactions contemplated by
this Agreement. HTI Acquisition has not owned, operated or conducted and, prior
to the Effective Time, will not own, operate or conduct any businesses or
activities other than in connection with its organization, the negotiation and
execution of this Agreement, obtaining the Acquisition Financing (and any
Substitute Financing) and the consummation of the transactions contemplated
hereby.
5.8 Solvency. At the Effective Time, the Surviving Entity,
after taking into account consummation of the Merger, the transactions
contemplated by the Commitments (and any Substitute Financing) and the way HTI
Acquisition intends that the businesses of the Company be operated after the
Effective Time (including any agreements or arrangements by and among HTI
Acquisition and the parties to the Commitments), (i) will be able to pay its
debts, including its stated and contingent liabilities as they mature, (ii) will
not have unreasonably small capital for the business in which it is and will be
engaged and (iii) will be solvent.
5.9 Delivery of New Employment Agreements. HTI Acquisition has
delivered to Alleghany true, correct and complete and signed counterparts of the
New Employment Agreements.
5.10 Brokers. Except for Xxxxx X. Xxxxxxxxx, the fees and
expenses of which will be paid by HTI Acquisition, no broker, finder or
investment banker is entitled to any fee or commission in connection with the
transactions contemplated hereby based upon arrangements made by or on behalf of
HTI Acquisition.
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6. Covenants of the Company and Alleghany. The Company and Alleghany
covenant and agree with HTI Acquisition as follows:
6.1 Access, Information and Documents. From the date hereof
until the Closing, the Company will give to HTI Acquisition and to HTI
Acquisition's authorized representatives (including, but not limited to,
accountants, lawyers and appraisers) (collectively, "Representatives") full and
complete access to any and all of the properties, assets, books, records and
other documents of the Company and each Company Subsidiary to enable HTI
Acquisition to make such examination of the business, properties, assets, books,
records and other documents of the Company and each Company Subsidiary as HTI
Acquisition may determine, such access to be provided at all reasonable times,
upon reasonable notice and in a manner so as not to interfere with the normal
operation of the Business. The Company will furnish, and will cause each Company
Subsidiary to furnish, to HTI Acquisition such information and copies of such
documents and records as HTI Acquisition shall reasonably request.
6.2 Conduct of Business Pending Closing.
(A) From the date hereof until the Closing, except as set
forth on Schedule 6.2 or any of the other Schedules hereto, as contemplated by
this Agreement, or as consented to in writing by HTI Acquisition, the Company
and the Company Subsidiaries will continue to conduct the Business in the
ordinary course consistent with past practice.
(B) Except as set forth on Schedule 6.2 or any of the other
Schedules hereto, or as otherwise contemplated by this Agreement, from the date
hereof until the Closing, except with the prior written consent of HTI
Acquisition (which will not be unreasonably withheld or denied):
(i) The Company will maintain its existence as a limited
liability company duly organized, validly existing and in good standing
under the laws of the State of Delaware;
(ii) Neither the Company nor any of the Company
Subsidiaries will make any commitment or commitments to purchase or spend
involving $100,000 or more in any one instance or $500,000 or more in the
aggregate, except for purchases of inventory in the ordinary course of its
business;
(iii) The Company will not declare, authorize or pay,
and will not permit any of the Company Subsidiaries to declare, authorize
or pay, any distribution or dividend to any of its members (but the
foregoing shall not preclude the payment or distribution by the Company of
an amount in respect of the provision for current Income Taxes), and the
Company will not redeem, purchase or otherwise acquire or agree to redeem,
purchase or otherwise acquire, and will not permit any of the Company
Subsidiaries to redeem, purchase or otherwise acquire or to agree to
redeem, purchase or otherwise acquire, any of its membership interests;
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(iv) Except for the Completion Bonuses, the Company will
not, and will not permit any of the Company Subsidiaries to, increase the
compensation or employee benefits in effect on the date of this Agreement
of any of the directors, officers or employees of the Company or any of
the Company Subsidiaries, amend the current terms of any Benefit Plan or
adopt any new plan or arrangement providing compensation or employee
benefits for any of the directors, officers or employees of the Company or
any of the Company Subsidiaries;
(v) The Company will continue to carry, and will cause
each of the Company Subsidiaries to continue to carry, all of its existing
insurance policies (except that any such policy may be replaced, prior to
the Closing, by a policy providing substantially similar coverage, and
Schedule 4.22 may be updated prior to the Closing to reflect any such
replacements);
(vi) The Company will use, and will cause each of the
Company Subsidiaries to use, reasonable efforts to preserve the Company's
and each of the Company Subsidiaries' relationships with suppliers,
distributors and customers and others having business relationships with
the Company or any of the Company Subsidiaries;
(vii) The Company will not, and will not obligate itself
to, and will not permit any of the Company Subsidiaries to, or obligate
itself to, sell or otherwise dispose of or pledge or otherwise encumber
any of its properties or assets except for sales of inventory and except
for other sales of its properties or assets in the ordinary course of
business;
(viii) The Company will continue to maintain, and will
cause each of the Company Subsidiaries to continue to maintain, its
facilities, machinery and equipment in the ordinary couse of busienss
consistent with past practice;
(ix) The Company will not amend its certificate of
formation or limited liability company agreement, and the Company will not
permit any of the Company Subsidiaries to amend its organizational
documents;
(x) The Company will not make, and will not permit any
of the Company Subsidiaries to make, any material change in its accounting
methods or practices;
(xi) The Company will not make, and will not permit any
of the Company Subsidiaries to make, any change in its Tax methods or
practices, make any election with respect to Taxes or enter into any
agreement or arrangement with respect to Taxes (but, for the avoidance of
doubt, the foregoing shall not restrict Alleghany from making any change
in its Income Tax methods or practices or making any election with respect
to Income Taxes, even if the Company or any Company Subsidiary is required
to conform to, or is bound by,
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such change or election), if any such change, election, agreement or
arrangement would have the effect of increasing the Tax liability of the
Company and the Company Subsidiaries for any taxable period following the
Closing Date; and
(xii) Without limiting the foregoing, the Company and
Alleghany will consult with HTI Acquisition regarding all significant
developments, transactions and proposals relating to the Companies or any
of the Company's Subsidiaries' business or operations.
6.3 Cooperation with Respect to Financing. Alleghany will
cause the Company to provide reasonable assistance to HTI Acquisition in
obtaining the Acquisition Financing (and any Substitute Financing), including by
participating in meetings and due diligence sessions.
6.4 Consents and Approvals. The Company shall use commercially
reasonable efforts to obtain, and to cause each of the Company Subsidiaries to
obtain, prior to the Closing all consents, authorizations and approvals under
all Applicable Laws of any Governmental Authority or of any other Person
required to be obtained by the Company or any of the Company Subsidiaries in
connection with the execution, delivery and performance of this Agreement and
the consummation of the Merger and the other transactions contemplated hereby;
provided, that the Company shall not be required to pay any landlord or other
Person any money or other consideration in order to obtain any such consent,
authorization or approval; provided, further, that the Company shall not
otherwise be required to incur any unreasonable expenses in order to obtain any
such consent, authorization or approval.
6.5 Transferred Assets and Transferred Liabilities. On or
prior to the Closing Date, (i) the Company will transfer and assign to
Alleghany, and Alleghany will accept and assume, the Transferred Liabilities and
(ii) in consideration of the acceptance and assumption by Alleghany of the
Transferred Liabilities, HTI will transfer and assign to Alleghany all of
Alleghany's right, title and interest in and to the Transferred Assets.
6.6 Use of Name. Alleghany will not use, and will not permit
any of its Affiliates to use, the name "Heads & Threads" or any derivative
thereof in any way whatsoever at any time after the Closing.
6.7 No Solicitation of Offers. From the date of this Agreement
until the Closing Date, other than in connection with the transactions
contemplated hereby, Alleghany shall not, and shall cause the Company and its
and their officers, directors, employees, representatives and agents not to,
solicit, propose or facilitate (including by way of providing information
regarding the Company to any third party), directly or indirectly, any
inquiries, discussions or proposals for, continue or enter into negotiations
looking toward, or enter into or consummate any agreement or understanding in
connection with any proposal regarding any purchase or other acquisition of all
or any portion of the assets or membership interests (whether newly issued or
currently outstanding) of the Company (other than the sale of services or
inventory or replacement of assets or other routine activities in the ordinary
course of business) or any merger, business combination or recapitalization
involving the Company.
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6.8 Confidential Information. Each of the Company and
Alleghany agrees to use reasonable efforts, consistent with those employed by it
prior to the date of this Agreement, to preserve and maintain the proprietary
information and trade secrets used in the Business, and neither the Company nor
Alleghany shall disclose to any third Person (other than HTI Acquisition and its
Representatives) any proprietary information or trade secrets used in the
Business other than such proprietary information or trade secrets which are a
matter of public knowledge. The covenants on the part of Alleghany contained in
this Section 6.9 shall survive the Closing, but the covenants of the Company
contained in this Section 6.9 shall terminate at the Closing.
6.9 The Company's Obligations. Alleghany agrees to cause the
Company to fully perform in all material respects each and every obligation of
the Company under this Agreement to be performed by the Company prior to the
Effective Time.
6.10 Commercially Reasonable Efforts. Subject to the terms and
conditions of this Agreement, and specifically subject to the limitations on the
obligations of the Company and Alleghany set forth in Section 6.4 hereof with
regard to consents and approvals, each of the Company and Alleghany agrees to
use all commercially reasonable efforts to take, or cause to be taken, all
actions, and to do, or cause to be done, all things necessary, proper or
advisable under all Applicable Laws to consummate the transactions contemplated
hereby, including, without limitation, satisfaction of the conditions set forth
in Section 9.
7. Covenants of HTI Acquisition.
7.1 Confidential Information. Prior to the Closing, HTI
Acquisition and its Representatives shall keep confidential all information and
documents provided to HTI Acquisition or its Representatives prior to the date
of this Agreement or pursuant to Section 6.1 hereof in accordance with the terms
set forth in the Confidentiality Agreement by and between Alleghany and Capital
Partners dated as of August 27, 2004 (the "Confidentiality Agreement"), and HTI
Acquisition agrees, on behalf of itself and each of its Representatives, to be
bound by all of the terms of the Confidentiality Agreement as if it were a party
thereto. The covenants of HTI Acquisition contained in this Section 7.1 shall
terminate at the Closing.
7.2 Consents and Approvals. HTI Acquisition shall use its best
efforts to obtain prior to the Closing all consents, authorizations and
approvals under all Applicable Laws of any Governmental Authority or of any
other Person required to be obtained by HTI Acquisition in connection with the
execution, delivery and performance of this Agreement and the consummation of
the Merger and the other transactions contemplated hereby; provided, that HTI
Acquisition shall not be required to pay any landlord or other Person any money
or other consideration in order to obtain any such consent; provided, further,
that HTI Acquisition shall not otherwise be required to incur any unreasonable
expenses in order to obtain any such consent, authorization or approval.
7.3 Financing Obligation. HTI Acquisition will use its best
efforts to do or cause to be done all things necessary to consummate the
Acquisition Financing. HTI Acquisition shall use commercially reasonable efforts
to cause the Equity Investors to comply with the terms of their respective
Equity Commitment Letters and to cause HTI Holding to
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comply with the terms of the Commitment Letter. HTI Acquisition shall not, and
shall use commercially reasonable efforts to cause the Equity Investors not to,
amend or modify the terms of (i) the Commitment Letters (including all exhibits,
annexes, schedules, fee letters and other ancillary documents) in a manner that
would increase the conditionality of the Commitment Letters or in a manner that
would adversely affect the ability of HTI Acquisition to consummate the
transactions provided for herein or the likelihood of the Merger or (ii) the
Equity Commitment Letters, in each case without the prior written consent of
Alleghany. If funds in the amounts set forth in the Commitment Letters, or any
portion thereof, become unavailable to HTI Acquisition on the terms and
conditions set forth therein, HTI Acquisition shall use commercially reasonable
efforts to obtain substitute financing ("Substitute Financing"). Prior to the
Effective Time, HTI Acquisition will not amend or modify, or agree to amend or
modify, any agreement or other document or plan, which, pursuant to the terms of
the Commitment Letters, requires the lenders' prior consent to amend or is a
condition to the lenders' obligations thereunder, without the prior written
consent of the lenders party to the Commitment Letters and any other Person
whose consent is required pursuant to the Commitment Letters, which consent(s)
shall acknowledge that such amendment or modification does not relieve such
lender or other Person of its obligations pursuant to the Commitment Letters.
For the avoidance of doubt, nothing contained in this Agreement shall obligate
any Equity Investor to provide any credit support, guarantee or other payment to
the lenders in addition to those currently contained in the Commitment Letters
(other than making their equity contributions pursuant to the Equity Commitment
Letters) in connection with HTI Acquisition obtaining the Acquisition Financing
or any Substitute Financing.
7.4 Acquisition Financing. The indebtedness contemplated by
the Commitment Letters (or any Substitute Financing) shall be incurred by HTI
Acquisition at or prior to the Effective Time.
7.5 Annual Incentive Plan. HTI Acquisition shall continue the
existing annual incentive plans of the Company in accordance with their terms at
least through December 31, 2004, and the Surviving Entity shall make all
incentive payments in respect of calendar year 2004 provided for thereunder in
accordance with the terms of such plans.
7.6 Payment of Certain Debt. At the Closing, HTI Acquisition
will repay in full (i) the Alleghany Debt and (ii) the LaSalle Debt.
7.7 Certain Post-Closing Matters.
(A) On and after the Closing Date, HTI Acquisition (or any
successor company) shall have all liability and responsibility for meeting all
requirements under "COBRA," as hereinafter defined, with respect to each Person
who becomes an "M&A qualified beneficiary," within the meaning of Treasury
Regulation Section 54.4980B-9, Q/A-4(b), because of the transactions
contemplated by this Agreement. For these purposes, "COBRA" shall mean the
health care continuation coverage described in Section 4980B of the Code,
Section 601 through 608 of ERISA and any applicable state law which requires the
continuation of health care coverage to a terminated employee.
(B) For policy periods commencing on and after April 1, 1996,
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Alleghany has mainted certain umbrella insurance policies for the benefit of
Alleghany and its subsidiaries on a group-wide basis (the "Alleghany Umbrella
Policies"). Coverage under some or all of such Alleghany Umbrella Policies may
be available to HTI Acquisition, as the Surviving Entity in the Merger, from and
after the Closing. HTI Acquisition agrees that, from and after the Closing, (i)
HTI Acquisition will assert any claim which it seeks to make under an Alleghany
Umbrella Policy only through Alleghany (and Alleghany agrees to use all
commercially reasonable efforts to assert any such claim on behalf of HTI
Acquisition), and (ii) HTI Acquisition will not seek to assert any claim which,
together with all other claims asserted by HTI Acquisition, would cause the
aggregate amount of claims asserted under an Alleghany Umbrella Policy to exceed
$5 million in any policy period. For the avoidance of doubt, Alleghany makes no
representation or warranty as to the availability of coverage under any
Alleghany Umbrella Policy to HTI Acquisition after the Effective Time.
(C) Following the Closing, HTI Acquisition shall allow
Alleghany, at Alleghany's expense and with counsel of its choice, to assume
complete control of the prosecution and collection of the Customs Refund. HTI
Acquisition shall fully cooperate with and assist Alleghany in the prosecution
and collection of the Customs Refund to the same extent as if it were an Income
Tax Claim described in Section 10.4, except that Alleghany shall have sole
control over the prosecution and collection of the Customs Refund and shall be
entitled to settle or dispose of the Customs Refund without HTI Acquisition's
consent. If, as, and to the extent any of the Customs Refund is received by HTI
Acquisition, HTI Acquisition shall promptly (and in any event within 5 business
days) pay the amount of the Customs Refund received by it to Alleghany. To the
extent that all or any part of the Customs Refund may be assigned or
transferred, upon the request of Alleghany, HTI Acquisition will assign or
transfer the Customs Refund in accordance with that request. HTI Acquisition's
sole obligation with respect to the Customs Refund shall be to cooperate with
Alleghany in the prosecution and collection of such Customs Refund and to
promptly pay over to Alleghany all or any part of the Customs Refund collected
(or to transfer and assign the Customs Refund as requested).
(D) Alleghany agrees to reimburse HTI Acquisition (or any
successor thereto) for the reasonable costs (including, without limitation,
administrative costs and any insurance premiums directly attributable to) of
providing retiree medical benefits to Xxxx Xxxxxxx and his spouse. HTI
Acquisition agrees that it will use a reasonable basis to determine such costs
and to submit to Alleghany not more frequently than each calendar quarter a
statement of such costs (in reasonable detail). Alleghany agrees to reimburse
such costs to HTI Acquisition promptly (and, in any event, within 30 days of
submission to Alleghany). HTI Acquisition agrees to continue to provide
post-retirement medical benefits to Xxx Xxxxxxx and his spouse pursuant to the
Heads & Threads Health Care Benefits Plan, as the same may be amended or
modified from time to time by HTI Acquisition (but no such amendment and
modification shall discriminate as between the medical benefits provided to
Xxxxxxx and his spouse and the comparable medical benefits provided to other
senior executives of HTI Acquisition, if applicable) as long as Alleghany
reimburses HTI Acquisition for such costs; provided that nothing herein shall
limit HTI Acquisition's right or ability to terminate or modify retiree medical
coverage provided to any other employee or retiree of HTI Acquisition. Alleghany
shall use its commercially reasonable best efforts to establish or provide
comparable or equivalent replacement retiree medical benefits for Xxx Xxxxxxx
and his spouse, which
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Alleghany shall reasonably pursue, and when Alleghany has established or
provided comparable or equivalent replacement retiree medical benefits for Xxx
Xxxxxxx and his spouse, the obligations of the parties under this Section 7.7(D)
(including, without limitation, the obligation of HTI Acquisition to provide
such post-retirement medical benefits) shall cease.
7.8 Commercially Reasonable Efforts. Subject to the terms and
conditions of this Agreement, and specifically subject to the limitations on the
obligations of HTI Acquisition set forth in Section 7.2 hereof with regard to
consents and approvals, HTI Acquisition agrees to use all commercially
reasonable efforts to take, or cause to be taken, all actions, and to do, or
cause to be done, all things necessary, proper or advisable under all Applicable
Laws to consummate the transactions contemplated hereby, including, without
limitation, satisfaction of the conditions set forth in Section 8.
8. Conditions Precedent to the Company's and Alleghany's Obligations
to Effect the Merger. The obligations of the Company and Alleghany to effect the
Merger is subject to the fulfillment prior to or at the Closing of each of the
following conditions (unless waived by the Company and Alleghany):
8.1 Representations and Warranties; Performance.
(A) All representations and warranties made by HTI Acquisition
contained in this Agreement shall be true and correct in all material respects
(except that materiality qualifiers contained in such representations and
warranties shall be disregarded for purposes of this Section 8.1(A)) as of the
date hereof and, except for any representations and warranties which are made as
of a particular date (which shall be true and correct as of such date), as of
the Closing Date, except for any changes permitted by the terms hereof or
consented to in writing by the Company and Alleghany.
(B) HTI Acquisition shall have performed and complied in all
material respects with all of the terms, provisions and conditions of this
Agreement to be performed and complied with by HTI Acquisition at or before the
Closing.
8.2 Consents and Approvals. All consents, authorizations and
approvals required to be obtained by Alleghany, the Company or HTI Acquisition
in connection with the execution, delivery and performance of this Agreement and
the consummation of the Merger and the other transactions contemplated hereby
from any Governmental Authority, including, without limitation, the expiration
or termination of the waiting period under the HSR Act, if applicable, shall
have been obtained. All consents, authorizations and approvals required to be
obtained by Alleghany, the Company or HTI Acquisition in connection with the
execution, delivery and performance of this Agreement and the consummation of
the Merger and the other transactions contemplated hereby from any Persons which
are not Governmental Authorities and which are set forth on Schedule 8.2 hereof
shall have been obtained.
8.3 No Injunction. No Governmental Authority of competent
jurisdiction shall have issued any order, injunction or decree that is in effect
and restrains, enjoins or otherwise prohibits the consummation of the Merger.
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8.4 Solvency Opinion. Xxxxxxxx Xxxxx Xxxxxx & Xxxxx shall have
delivered an opinion addressed to Alleghany in the form attached as Exhibit C
hereto.
8.5 Certificates. Alleghany shall have received a certificate
of a senior executive officer of HTI Acquisition, dated the Closing Date, to the
effect set forth in Section 8.1(A) and Section 8.1(B). In addition, Alleghany
shall have received certificates, dated the Closing Date, executed by each of
Xxxx Xxxxx, Xxxx X. Xxxxx and Xxxxxxx Xxxxx, respectively, certifying that, to
the best of such individual's knowledge, the representations and warranties made
by or on behalf of the Company in this Agreement are true and correct in all
material respects (except that materiality qualifiers shall be disregarded for
purposes of such certificates) as of the date hereof and, except for any
representations and warranties which are made as of a specified date (which
shall be true and correct as of such date), as of the Closing Date, except for
any changes permitted by the terms hereof or consented to in writing by HTI
Acquisition.
9. Conditions Precedent to HTI Acquisition's Obligation to Effect
the Merger. The obligation of HTI Acquisition to effect the Merger is subject to
the fulfillment prior to or at the Closing of each of the following conditions
(unless waived by HTI Acquisition):
9.1 Representations and Warranties; Performance.
(A) All representations and warranties made by the Company and
Alleghany contained in this Agreement shall be true and correct in all material
respects (except that materiality qualifiers contained in such representations
and warranties shall be disregarded for purposes of this Section 9.1(A)) as of
the date hereof and, except for any representations and warranties which are
made as of a particular date (which shall be true and correct as of such date),
as of the Closing Date, except for any changes permitted by the terms hereof or
consented to in writing by HTI Acquisition.
(B) Each of Alleghany and the Company shall have performed and
complied in all material respects with all of the terms, provisions and
conditions of this Agreement to be performed and complied with by it at or
before the Closing.
9.2 Consents and Approvals. All consents, authorizations and
approvals required to be obtained by Alleghany, the Company or HTI Acquisition
in connection with the execution, delivery and performance of this Agreement and
the consummation of the Merger and the other transactions contemplated hereby
from any Governmental Authority, including, without limitation, the expiration
or termination of the waiting period under the HSR Act, if applicable, shall
have been obtained. All consents, authorizations and approvals required to be
obtained by the Company or HTI Acquisition in connection with the execution,
delivery and performance of this Agreement and the consummation of the Merger
and the other transactions contemplated hereby from any third Persons which are
not Governmental Authorities shall have been obtained except for those consents,
authorizations and approvals which, if not obtained, would not, individually or
in the aggregate, (i) materially impair the ability of the Surviving Entity to
conduct the Business substantially as the Business is now being conducted or
(ii) have or reasonably be expected to have a Company Material Adverse Effect.
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9.3 Availability of Financing. The Acquisition Financing shall
have been consummated on the terms set forth in the Commitments, or HTI
Acquisition shall have received the proceeds of a Substitute Financing.
9.4 No Injunction. No Governmental Authority of competent
jurisdiction shall have issued any order, injunction or decree that is in effect
and restrains, enjoins or otherwise prohibits the consummation of the Merger.
9.5 Certificates. HTI Acquisition shall have received a
certificate of a senior executive officer of each of the Company and Alleghany,
dated the Closing Date, to the effect set forth in Section 9.1(A) and Section
9.1(B).
10. Tax Matters.
10.1 Tax Returns.
(A) Alleghany shall, or shall cause the Company and the
Company Subsidiaries to, prepare and timely file all Tax Returns of or including
the Company and/or the Company Subsidiaries that are required to be filed (with
extensions) on or before the Closing Date and shall timely pay all Taxes shown
as due on such Tax Returns. All such Tax Returns will be prepared and filed by
Alleghany, the Company or the Company Subsidiaries in a manner consistent with
the prior practice of Alleghany, the Company or the Company Subsidiaries, as
applicable. HTI Acquisition shall, or shall cause the Company and the Company
Subsidiaries to, prepare and file all Tax Returns of or including the Company or
any of the Company Subsidiaries (other than any federal Income Tax Returns) that
are required to be filed (with extensions) following the Closing Date for all
taxable periods ending prior to, or that include, the Closing Date and (subject
to Section 10.1(C) in respect of Income Tax Returns) shall pay any Taxes shown
as due on such Tax Returns. All such Tax Returns that are Income Tax Returns
will be prepared and filed by HTI Acquisition in a manner consistent with the
prior practice of Alleghany, the Company or the Company Subsidiaries, as
applicable.
(B) For each taxable year of Alleghany for which the Company
and any of the Company Subsidiaries are included for all or any part of such
taxable year on any Consolidated Income Tax Return of Alleghany that is due
(with extensions) to be filed after the Closing Date, HTI Acquisition shall
prepare, or shall cause the Company Subsidiaries to prepare, in a manner
consistent with the prior practice of the Company, and deliver to Alleghany no
later than June 15th of the immediately following calendar year, all relevant
Tax schedules, forms and information relating to the Company and the Company
Subsidiaries, complete in all material respects, to permit their inclusion in
the Consolidated Income Tax Returns of Alleghany for each such taxable year.
(C) In the case of any Income Tax Return of the Company or any
of the Company Subsidiaries that is not a federal Income Tax Return and that is
required to be filed with respect to any taxable period that ends before or
includes the Closing Date (each, a "Pre-Closing Income Tax Return"), HTI
Acquisition shall provide Alleghany with a copy of such completed Pre-Closing
Income Tax Return, together with the related work papers and such other
documents as Alleghany shall reasonably request, no later than 30 days before
the due date for
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the filing of such Pre-Closing Income Tax Return. Alleghany and its authorized
representatives shall have the right to review the Pre-Closing Income Tax
Returns received from HTI Acquisition pursuant to this Section 10.1(C). If the
Pre-Closing Income Tax Return is not in a Straddle Period, HTI Acquisition shall
make such changes to any Pre-Closing Income Tax Return as requested by Alleghany
for which there is a reasonable basis in fact and law, and if the Pre-Closing
Income Tax Return is for a Straddle Period and Alleghany disputes the treatment
of any items on the Income Tax Returns prepared by HTI Acquisition, Alleghany
and HTI Acquisition agree to consult with each other and attempt to resolve in
good faith any such dispute. If the parties are unable to resolve any dispute
with respect to a Pre-Closing Income Tax Return for a Straddle Period within 60
days after the receipt of any such Pre-Closing Income Tax Return, the parties
shall submit such dispute to a mutually acceptable national accounting firm
(which shall not be the accountants who regularly audit the financial statements
of Alleghany or HTI Acquisition), whose decision shall be conclusive and binding
on the parties. Alleghany and HTI Acquisition shall each pay one-half of the
fees and expenses of such accounting firm. No fewer than 5 days before the due
date for the filing of such Pre-Closing Income Tax Return, Alleghany shall pay
to HTI Acquisition an amount equal to the Income Tax shown on such Pre-Closing
Income Tax Return, or if the Pre-Closing Income Tax Return is for a Straddle
Period, the amount of such Income Tax that is attributable to Alleghany pursuant
to Section 10.1(D). However, if any dispute relating to a Pre-Closing Income Tax
Return for a Straddle Period has not been resolved prior to the due date for the
filing of such Pre-Closing Income Tax Return, the Tax Return in question, to the
extent any issues thereon remain unresolved, shall be filed (and Alleghany shall
make payments pursuant to this Section 10.1(C)) in accordance with the positions
taken by HTI Acquisition; provided that the fact that such Tax Return will have
been filed in accordance with HTI Acquisition's position shall not be taken into
account for purposes of any dispute resolution under this Section 10.1(C). If a
determination is made through the dispute resolution process after a Pre-Closing
Income Tax Return is filed that HTI Acquisition's position was inappropriate,
HTI Acquisition shall promptly file an amended Income Tax Return in respect of
such taxable period (to the extent permitted by Applicable Law) reflecting the
final decision of the accounting firm and an adjusting payment will be made by
Alleghany to HTI Acquisition or HTI Acquisition to Alleghany, as the case may
be, to reflect any difference between the Income Tax due with respect to the
amended Income Tax Return and the Income Tax due with respect to the Income Tax
Return as originally filed.
(D) Alleghany and HTI Acquisition agree that for all Income
Tax purposes, the taxable period of the Company and the Company Subsidiaries
which began on January 1st of the calendar year in which the Closing Date occurs
shall be terminated as of the close of business on the Closing Date and items of
income, gain, loss, deduction or credit shall be apportioned for all Income Tax
purposes on a basis consistent with, or the principles applicable in the
preparation of, the Closing Date Balance Sheet. Alleghany and HTI Acquisition
further agree to file all Income Tax Returns, handle the contest of any audit
and otherwise act for all Tax purposes consistent with the provisions of this
paragraph 10.1(D). If any taxable period for a non-federal Income Tax begins
before but ends after the Closing Date (a "Straddle Period"), then the portion
of any Income Tax in such Straddle Period for which Alleghany shall be
responsible for all purposes of this Section 10 shall be calculated as if the
portion of the Straddle Period ending on the Closing Date was a separate taxable
period, except
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that exemptions, allowances, deductions or credits that are calculated on an
annual basis (such as the deduction for depreciation or capital allowances)
shall be apportioned on a per diem basis.
10.2 Post-Closing Tax Matters.
(A) To the extent relevant for a taxable period for which the
requesting party is charged with payment responsibility for Taxes under this
Section 10, each of Alleghany and HTI Acquisition will provide the other (and
the other's attorneys, accountants and agents) with, and the Surviving Entity,
after the Closing Date, shall provide, and shall cause the Company Subsidiaries
to provide, Alleghany (and Alleghany's attorneys, accountants and agents) with,
the right, at reasonable times and upon reasonable notice, to have access to,
and to copy and use, any records or information and personnel which may be
relevant for the preparation of any Tax Returns, the determination of amounts
due under Section 10.3, any audit or other examination by any Taxing Authority,
the filing of any claim for a refund of Tax or for the allowance of any Tax
credit, or any judicial or administrative proceedings relating to liability for
Taxes. The party requesting assistance hereunder shall reimburse the other party
for reasonable out-of-pocket expenses incurred in providing such assistance. Any
information obtained pursuant to this Section 10.2(A) shall be held in strict
confidence and shall be used solely in connection with the reason for which it
was requested.
(B) Alleghany shall cause the Tax Sharing Agreement and/or any
similar arrangement with respect to Taxes involving the Company or the Company
Subsidiaries to be terminated effective as of the Closing Date. To the extent
any such agreement or arrangement obligates the Company or the Company
Subsidiaries to make any payments with respect to Taxes after the Closing Date,
none of the Company, the Company Subsidiaries or Alleghany shall have any
obligation under any such agreement or arrangement for any past, present or
future period. Except as agreed to by HTI Acquisition, all powers of attorney
granted by the Company and any of the Company Subsidiaries with respect to Taxes
shall be revoked as of the Closing Date.
(C) Except as otherwise provided in this Agreement, any refund
of Income Taxes (other than any refund of Income Tax shown as an asset on the
Closing Date Balance Sheet) with respect to the Company or any of the Company
Subsidiaries that is received with respect to any Pre-Closing Tax Period or the
portion of any Straddle Period for which Alleghany is responsible pursuant to
Section 10.1(D) shall be for the account of Alleghany, and to the extent that
HTI Acquisition or any of the Company Subsidiaries receives any such refund (or
such refund is applied against any Tax for which Alleghany is not responsible)
after the Closing Date, the amount of such refund and interest thereon or fairly
attributable thereto (net of any Taxes imposed with respect to the receipt or
accrual of such refund and interest and any reasonable expenses incurred in
connection with obtaining the refund) shall be promptly paid to Alleghany.
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10.3 Alleghany Indemnity for Taxes. Alleghany shall pay and
shall indemnify and hold harmless HTI Acquisition, the Company, the Company
Subsidiaries and all Affiliates of HTI Acquisition against any and all Losses
resulting from or relating to:
(i) Income Taxes of the Company and the Company
Subsidiaries for all Pre-Closing Tax Periods and the portion of any
Straddle Period for which Alleghany is responsible (including, for the
avoidance of doubt, all Income Taxes resulting from the Merger);
(ii) the several liability of the Company and the
Company Subsidiaries in respect of Income Taxes pursuant to Treasury
Regulations Section 1.1502-6 or any analogous state, local or foreign law
or regulation or by reason of the Company and the Company Subsidiaries
having been a member of any consolidated, combined or unitary group on or
prior to the Closing Date; and
(iii) Income Taxes of any Person or entity other than
the Company or any of the Company Subsidiaries pursuant to any agreement
or contract, whether written or unwritten, entered into by the Company or
any of the Company Subsidiaries on or before the Closing Date, or as a
transferor or successor, by contract or otherwise.
and any and all actions, suits, demands, assessments or judgments with respect
to any claim arising out of or relating to the subject matter of the
indemnification.
10.4 Matters Involving Income Tax Claims. If a claim is made
or threatened by any Taxing Authority that, if successful, may result in an
indemnity payment under Section 10.3 (an "Income Tax Claim"), HTI Acquisition
shall notify Alleghany stating the nature and basis of such claim, and the
amount thereof, to the extent known. Failure to give such notice shall not
relieve Alleghany from any liability that it may have on account of this
indemnification or otherwise, except to the extent that Alleghany is precluded
from, or materially prejudiced in, the defense of such claim thereby. Alleghany
will have the right, at its option, upon timely notice to HTI Acquisition, to
assume at its own expense control of any audit or other defense of any Income
Tax Claim with its own counsel. Alleghany's right to control an Income Tax Claim
will be limited to issues in respect of which amounts in dispute would be paid
by Alleghany or for which Alleghany would be liable pursuant to Section 10.3.
Costs of such Income Tax Claims are to be borne by Alleghany unless the Income
Tax Claim relates to a Straddle Period, in which event such costs shall be
fairly apportioned. HTI Acquisition, the Company and the Company Subsidiaries at
their own expense shall cooperate with Alleghany in contesting any Income Tax
Claim, which cooperation shall include the retention and, upon Alleghany's
request, providing of records and information that are reasonably relevant to
such Income 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, (i) Alleghany shall not have the right
to solely control any Income Tax Claim unless it first acknowledges in writing
its obligation to fully indemnify HTI Acquisition for the Income Taxes at issue
in the proceeding, (ii) no settlement or disposition of any Income Tax Claim
shall be made without HTI Acquisition's consent (which consent shall not be
unreasonably withheld,
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conditioned or delayed) if the same could reasonably be expected to adversely
affect HTI Acquisition's, the Company's or any of the Company Subsidiary's
Income Tax Liability for Taxes in a taxable year or period beginning after the
Closing Date, and (iii) HTI Acquisition and Alleghany shall jointly control all
proceedings taken in connection with any claims for Income Taxes relating solely
to a Straddle Period of any of the Company or the Company Subsidiaries, and each
party shall bear its own out-of-pocket costs and expenses of the contest and all
joint costs and expenses of the contest shall be borne in the same ratio as the
applicable proposed Income Tax would be allocated.
10.5 Transfer Taxes. Alleghany and HTI Acquisition shall each
pay one-half of all Transfer Taxes, if any, that result from the Merger.
Alleghany and HTI Acquisition shall cooperate in the preparation and filing of
all Tax Returns and other documentation relating to any such Transfer Taxes
including any that relate to any applicable exemption therefrom.
10.6 FIRPTA. On the Closing Date, Alleghany shall cause the
Company to provide HTI Acquisition with a certificate in the form required by
Treasury Regulation Section 1.1445-2(b)(2) of the Code and the regulations
promulgated thereunder to the effect that the Company is not a "foreign person"
within the meaning of Section 1445(f) of the Code.
10.7 Survival. All rights and obligations under this Section
10 shall survive the Merger and continue indefinitely, except that the survival
of the representations and warranties in Section 4.11 shall be governed by
Section 12.1.
11. Termination. This Agreement may be terminated at any time prior
to the Closing by the mutual agreement in writing of HTI Acquisition and
Alleghany. In addition, this Agreement may be terminated at any time prior to
the Closing as follows:
11.1 Termination by HTI Acquisition. HTI Acquisition may,
without liability to the Company or Alleghany, terminate this Agreement by
written notice to Alleghany if an event occurs that makes it impossible to
satisfy any condition to Closing set forth in Section 9 of this Agreement;
provided, that the right to terminate this Agreement pursuant to this Section
11.1 shall not be available to HTI Acquisition if any breach on the part of HTI
Acquisition of any provision of this Agreement has been the cause of, or
resulted in, such impossibility.
11.2 Termination by Alleghany. Alleghany may, without
liability to HTI Acquisition, terminate this Agreement by written notice to HTI
Acquisition if an event occurs that makes it impossible to satisfy any condition
to Closing set forth in Section 8 of this Agreement; provided, that the right to
terminate this Agreement pursuant to this Section 11.2 shall not be available to
Alleghany if any breach on the part of Alleghany or the Company of any provision
of this Agreement has been the cause of, or resulted in, such impossibility.
11.3 Termination by Alleghany or by HTI Acquisition. Either
Alleghany, on the one hand, or HTI Acquisition, on the other hand, may terminate
this Agreement upon written notice to the other if the Closing shall not have
occurred on or before
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February 28, 2005 (the "Termination Date"); notwithstanding the foregoing, (i)
the right to terminate this Agreement pursuant to this Section 11.3 shall not be
available to HTI Acquisition (x) if any breach on the part of HTI Acquisition of
any provision of this Agreement has been the cause of, or resulted in, the
failure of the Closing to occur on or before the Termination Date, or (y) if HTI
Acquisition has failed to comply in all material respects with its obligations
set forth in Section 7.3 and Section 7.8 of this Agreement; and (ii) the right
to terminate this Agreement pursuant to this Section 11.3 shall not be available
to Alleghany (x) if any breach on the part of Alleghany or the Company of any
provision of this Agreement has been the cause of, or resulted in, the failure
of the Closing to occur on or before the Termination Date, or (y) if either
Alleghany or the Company has failed to comply in all material respects with its
obligations set forth in Section 6.12 of this Agreement.
11.4 Effect of Termination. If this Agreement is terminated,
this Agreement shall no longer be of any force or effect and there shall be no
liability on the part of any party or its respective directors, officers or
shareholders other than for damages to the extent arising from a prior breach of
this Agreement which is a willful and material breach; provided, however, that
the Confidentiality Agreement, including the obligations of HTI Acquisition and
its Representatives thereunder as set forth in this Agreement, shall continue in
full force and effect in accordance with its terms.
12. Survival of Representations and Warranties; Indemnification.
12.1 Survival of Representations and Warranties. All
representations and warranties contained in this Agreement shall survive the
Closing and remain operative and in full force and effect, regardless of any
investigation heretofore made or hereafter made by any of the parties hereto,
for a period of 18 months; provided, however, (i) all representations and
warranties made pursuant to Sections 4.11 (Taxes) and Section 5.8 (Solvency)
shall survive the Closing for a period continuing until 60 days from and after
the expiration of all applicable statutes of limitations (including extensions)
and (ii) all representations and warranties made pursuant to Sections 4.2
(Membership Interests Ownership), Section 4.4 (Authority) and Section 5.2
(Authority) shall survive indefinitely.
12.2 Alleghany's Indemnification Obligations. Subject to the
terms and conditions of this Section 12, and other than in respect of matters
with respect to which Alleghany is obligated to provide indemnification pursuant
to Section 10.3, which are governed solely by Section 10 hereof, Alleghany
agrees to indemnify and hold HTI Acquisition harmless against any and all
Losses, except as expressly limited by the terms of Section 12.3, resulting from
or relating to:
(A) any breach of any representation or warranty of the
Company or Alleghany contained in this Agreement or in any certificate delivered
by the Company or Alleghany at the Closing; provided that any claim for
indemnification made by HTI Acquisition for indemnification from Alleghany under
this paragraph (A) may be made no later than a date 18 months from and after the
Closing Date, excepting only that (i) any claim for breach of any representation
or warranty under Section 4.11 (Taxes) may be made no later than a date 60 days
from and after the expiration of all applicable statutes of limitation
(including extensions) and (ii)
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any claim for breach of any representation or warranty under Section 4.2
(Membership Interests Ownership), or Section 4.4 (Authority) may be made at any
time;
(B) any breach of any covenant of the Company or Alleghany
contained in this Agreement; provided that any claim made by HTI Acquisition for
indemnification from Alleghany under this paragraph (B) for the breach of any
covenant of the Company or Alleghany contained in this Agreement may be made no
later than a date one year from and after the last day of the period during
which such covenant was to be performed; and
(C) for any obligation, liability (including any liability
under Section 4062, 4063 or 4064 of ERISA), lien, fine, penalty or Tax with
respect to, or by reason of, any employee benefit plan (within the meaning of
Section 3(3) of ERISA) of any entity (other than the Company or any of the
Company Subsidiaries) which has ever been considered a single employer with
Alleghany under Section 4001(b) of ERISA or Section 414(b), (c), (m) or (o) of
the Code prior to the Closing Date.
For purposes of the indemnification provided in Section
12.2(A), in determining whether the representations and warranties of the
Company or Alleghany have been breached, no effect will be given to any
materiality qualifier set forth in such representations and warranties or
related definitions.
For purposes of determining the extent to which Alleghany has
breached any representation contained in Section 4.11 of this Agreement, in the
case of any Straddle Period, (i) in the case of any Non-Income Tax of the
Company or any of the Company Subsidiaries that is based on specific receipts,
transactions, events or occurrences, the portion of such Non-Income Tax that is
attributable to the portion of the Straddle Period ending on the Closing Date
shall be determined by reference to the date of the receipt, transaction, event
or occurrence giving rise to the liability for such Non-Income Tax, and (ii) in
the case of any Non-Income Taxes of the Company or any of the Company
Subsidiaries that are imposed on a periodic, annual or other basis not related
to specific receipts, transactions, events or occurrences, the portion of such
Non-Income Taxes of the Company or any of the Company Subsidiaries attributable
to the portion of the Straddle Period ending on the Closing Date shall equal the
total amount of such Non-Income Taxes for the period in question, multiplied by
a fraction, the numerator of which is the number of days in such period in the
Straddle Period through and including the Closing Date, and the denominator of
which is the total number of days in such period with respect to which such
Non-Income Tax accrues or is imposed in the Straddle Period.
12.3 Limitation on Alleghany's Indemnification Obligations.
Except as hereinafter provided in this Section 12.3, Alleghany shall have no
obligation to provide indemnification pursuant to Section 12.2(A) except to the
extent that the aggregate amount of indemnification to which HTI Acquisition,
but for this Section 12.3, otherwise shall have become entitled hereunder would
exceed $375,000 ("Alleghany's Basket"), in which event Alleghany shall be
obligated, subject to the next succeeding sentence, to provide indemnification
with respect to all amounts in excess of Alleghany's Basket. Notwithstanding
anything contained in this Agreement to the contrary, in no event shall
Alleghany have any
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liability for indemnification pursuant to Section 12.2(A) in an aggregate amount
in excess of $10,000,000 ("Alleghany's Cap").
Notwithstanding anything to the contrary in this Agreement,
Alleghany shall be obligated to provide indemnification pursuant to Section
12.2(A) for any and all amounts owing by Alleghany to HTI Acquisition pursuant
to Section 12.2(A) as a result of any fraud involving a Knowing breach of a
representation or warranty of the Company or Alleghany made in this Agreement,
and Alleghany's Basket and Alleghany's Cap referred to in the immediately
preceding paragraph shall be calculated without taking into account any such
amounts.
Notwithstanding anything to the contrary in this Agreement,
Alleghany shall be obligated to provide indemnification pursuant to Section 12.2
(B) and Section 12.2(C) without limitation and without regard to Alleghany's
Basket or Alleghany's Cap referred to in the immediately preceding paragraph.
12.4 HTI Acquisition's Indemnification Obligations. Subject to
the terms and conditions of this Section 12, and other than in respect of Income
Taxes, which are governed solely by Section 10 hereof, HTI Acquisition agrees to
indemnify and hold Alleghany harmless against any and all Losses, except as
expressly limited by the terms of Section 12.5, resulting from or relating to:
(A) any breach of any representation or warranty of HTI
Acquisition contained in this Agreement or in any certificate delivered by HTI
Acquisition to the Company or Alleghany at the Closing; provided that any claim
made by Alleghany for indemnification from HTI Acquisition under this paragraph
(A) may be made no later than a date 18 months from and after the Closing Date,
excepting only that (i) any claim for breach of any representation or warranty
under Section 5.8 (Solvency) may be made no later than a date 60 days from and
after the expiration of all applicable statutes of limitation (including
extensions) and (ii) any claim for breach of any representation or warranty
under Section 5.2 (Authority) may be made at any time; and
(B) any breach of any covenant of HTI Acquisition contained in
this Agreement; provided that any claim made by Alleghany for indemnification
from HTI Acquisition under this paragraph (B) for the breach of any covenant of
HTI Acquisition contained in this Agreement may be made no later than a date one
year from and after the last day of the period during which such covenant was to
be performed.
For purposes of the indemnification provided in Section
12.4(A), in determining whether the representations and warranties of HTI
Acquisition have been breached, no effect will be given to any materiality
qualifier set forth in such representations and warranties or related
definitions.
12.5 Limitation on HTI Acquisition's Indemnification
Obligations. Except as hereinafter provided in this Section 12.5, HTI
Acquisition shall have no obligation to provide indemnification pursuant to
Section 12.4(A) except to the extent that the aggregate amount of
indemnification to which Alleghany, but for this Section 12.5, otherwise shall
have become entitled hereunder would exceed $375,000 ("HTI Acquisition's
Basket"), in which
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event HTI Acquisition shall be obligated, subject to the next succeeding
sentence, to provide indemnification with respect to all amounts in excess of
HTI Acquisition's Basket. Notwithstanding anything contained in this Agreement
to the contrary, in no event shall HTI Acquisition have any liability for
indemnification pursuant to Section 12.4(A) in an aggregate amount in excess of
$1,000,000 ("HTI Acquisition's Cap"); provided, however, that HIT Acquisition's
Cap shall not apply, and no other limitation shall apply, to the indemnification
obligation of HTI Acquisition in respect of the breach of any representation or
warranty set forth in Section 5.8 (Solvency).
Notwithstanding anything to the contrary in this Agreement,
HTI Acquisition shall be obligated to provide indemnification pursuant to
Section 12.4(A) for any and all amounts owing by HTI Acquisition to Alleghany
pursuant to this Section 12.4(A) as a result of any fraud involving a Knowing
breach of a representation or warranty of HTI Acquisition made in this
Agreement, and HTI Acquisition's Basket and HTI Acquisition's Cap referred to in
the immediately preceding paragraph shall be calculated without taking into
account any such amounts.
Notwithstanding anything to the contrary in this Agreement,
HTI Acquisition shall be obligated to provide indemnification pursuant to
Section 12.4(B) without limitation and without regard to HTI Acquisition's
Basket or HTI Acquisition's Cap referred to in the immediately preceding
paragraph.
12.6 Other Limitations on Indemnification.
(A) The amount of any Losses sustained by an indemnified party
shall be reduced (i) by any amount received by such indemnified party with
respect thereto under any insurance coverage relating thereto (other than
insurance coverage provided by an Affiliate of such indemnified party) or from
any third party (not a party to this Agreement) alleged to be responsible
therefor, and (ii) by the amount of any Tax benefit actually realized with
respect to the Loss. Each of Alleghany and HTI Acquisition agrees to use
commercially reasonable efforts to collect any amounts available under such
insurance coverage and from any such third party alleged to have responsibility
and to realize any Tax benefit with respect to the Loss. If an indemnified party
realizes a Tax benefit or receives an amount under insurance coverage or from
any such third party with respect to Losses sustained at any time subsequent to
any indemnification provided pursuant to this Section 12, then such indemnified
party shall promptly reimburse the indemnifying party for any payment made by
such indemnifying party in connection with providing such indemnification up to
such amount realized or received by such indemnified party. Nothing in this
Section 12.6(A) shall limit in any way the ability of Alleghany or HTI
Acquisition to (i) take (or refrain from taking, as the case may be) any
reasonable position for Tax purposes that it determines to take (or refrain from
taking) in its sole discretion, or (ii) refrain from pursuing any third party
insurance recovery that Alleghany or HTI Acquisition, as the case may be,
determines would be commercially inadvisable to pursue.
(B) Each indemnified party shall be obligated to use its
reasonable best efforts to mitigate to the fullest extent practicable the amount
of any Loss for which its it entitled to seek indemnification hereunder, and the
indemnifying party shall not be required to make any
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payment to an indemnified party in respect of such Loss to the extent such
indemnified party has failed to comply with the foregoing obligation.
(C) Upon making any indemnification payment, the indemnifying
party will, to the extent of such payment, be subrogated to all rights of the
indemnified party against any third party in respect of the Loss to which the
payment relates; provided, however, that until the indemnified party recovers
full payment of its Loss, any and all claims of the indemnifying party against
any such third party on account of said payment are hereby made expressly
subordinated and subjected in right of payment to the indemnified party's rights
against such third party. Without limiting the generality of any other provision
hereof, each such indemnified party and indemnifying party will duly execute
upon request all instruments reasonably necessary to evidence and perfect the
above described subrogation and subordination rights.
(D) Neither Alleghany nor HTI Acquisition shall have any right
to set off any Losses against any payments to be made by such party pursuant to
this Agreement.
12.7 Notice. In the event that either Alleghany or HTI
Acquisition wishes to assert a claim for indemnification under this Section 12,
the party seeking indemnification (the "Indemnified Party") shall deliver
written notice (a "Claims Notice") to the other party (the "Indemnifying Party")
no later than twenty (20) Business Days after such claim becomes known to the
Indemnified Party, specifying the facts constituting the basis for, and the
amount (if known) of the claim asserted. Failure to deliver a Claims Notice with
respect to a claim in a timely manner as specified in the preceding sentence
shall not release the Indemnifying Party from any of its obligations under this
Section 12, except to the extent the Indemnifying Party is materially prejudiced
by such failure.
12.8 Right to Contest Claims of Third Parties.
(A) If an Indemnified Party asserts, or may in the future seek
to assert, a claim for indemnification hereunder because of an Action instituted
by any Person not a party to this Agreement (a "Third-Party Claimant") that may
result in a Loss with respect to which the Indemnified Party would be entitled
to indemnification pursuant to this Section 12 (an "Asserted Liability"), the
Indemnified Party shall deliver to the Indemnifying Party a Claims Notice with
respect thereto, which Claims Notice shall, in accordance with the provisions of
Section 12.7 hereof, be delivered as promptly as practicable and in any event no
later than twenty (20) Business Days after such Asserted Liability is actually
known to the Indemnified Party. The failure to deliver a Claims Notice with
respect to an Asserted Liability within twenty (20) Business Days of the
Indemnified Party's receipt of written notice of such Asserted Liability shall
not release the Indemnifying Party from any of its obligations under this
Section 12, except to the extent the Indemnifying Party is materially prejudiced
by such failure.
(B) (i) The Indemnifying Party shall, upon receipt of such
notice and upon its notifying the Indemnified Party in writing that it shall,
either unconditionally or subject to a reservation of rights, indemnify the
Indemnified Party in respect of such matter, be entitled to participate in or,
at the Indemnifying Party's option, assume at its own expense the defense,
appeal or settlement of such Asserted Liability with respect to which such
indemnity
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has been invoked with counsel of its own choosing (who shall be reasonably
satisfactory to the Indemnified Party), and the Indemnified Party shall fully
cooperate with the Indemnifying Party in connection therewith including
contesting such Asserted Liability or making any counterclaim against the Third
Party Claimant; provided, however, that if the Indemnifying Party assumes the
defense, appeal or settlement of such Asserted Liability, (i) the Indemnifying
Party shall reimburse the Indemnified Party for out of pocket expenses incurred
by the Indemnified Party (such as travel costs, but not internal time charges)
and (ii) if, in the reasonable opinion of counsel to the Indemnified Party, an
actual conflict of interest exists between the Indemnifying Party and the
Indemnified Party in respect of such Asserted Liability, the Indemnified Party
shall be entitled to employ one counsel to represent itself, and in that event
the reasonable fees and expenses of such counsel shall be paid by the
Indemnifying Party. An Indemnified Party is hereby authorized prior to the date
on which its receives written notice from the Indemnifying Party that it intends
to assume the defense, appeal or settlement of such Asserted Liability, to file
any motion, answer or other pleading and take such other action which it shall
reasonably deem necessary to protect its interest or that of the Indemnifying
Party until the date on which the Indemnified Party receives such notice from
the Indemnifying Party; provided that, prior to filing such motion, answer or
other pleading or taking such other action, the Indemnified Party shall have
made reasonable efforts to consult with the Indemnifying Party. In the event
that the Indemnifying Party fails to assume the defense, appeal or settlement of
such Asserted Liability within twenty (20) days after receipt of notice thereof
from the Indemnified Party, such Indemnified Party shall have the right to
undertake the defense or appeal of or settle or compromise such Asserted
Liability on behalf of and for the account and risk of the Indemnifying Party,
unless and until the Indemnifying Party notifies the Indemnified Party that it
has elected to assume such defense, appeal or settlement. If the Indemnifying
Party fails to assume the defense, appeal or settlement of such Asserted
Liability and the Indemnified Party undertakes such defense, appeal or
settlement, the Indemnified Party shall, upon the request of the Indemnifying
Party, keep the Indemnifying Party advised of relevant developments on a timely
basis.
(ii) Except as set forth in Section 12.8(B)(i), no claim or
demand may be settled by the Indemnified Party without the consent of the
Indemnifying Party, which consent shall not be unreasonably delayed or withheld.
Unless the claim or demand seeks only dollar damages (all of which are to be
paid by the Indemnifying Party), no such claim or demand may be settled by the
Indemnifying Party without the consent of the Indemnified Party, which consent
shall not be unreasonably delayed or withheld.
(iii) Alleghany and HTI Acquisition shall make mutually
available to each other all relevant information in their possession relating to
any Asserted Liability and shall cooperate with each other in the defense
thereof.
12.9 Indemnification Payments. Any indemnification payment
hereunder shall be made by wire transfer of immediately available funds to such
account or accounts as the Indemnified Party shall designate to the Indemnifying
Party in writing.
12.10 Treatment of Indemnification Payments. Alleghany and HTI
Acquisition agree to treat, to the maximum extent permitted by Applicable Law,
any payments
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under this Section 12 or under Section 10 hereof as an adjustment to the Merger
Consideration for all Tax purposes.
12.11 Exclusive Remedy. If the Closing occurs, absent any
fraud, the indemnification provided for in this Section 12 and in Section 10
hereof shall be the sole and exclusive remedy in any action seeking money
damages or any other form of monetary relief brought by any party to this
Agreement. The terms of this Section 12.11 shall not be construed as limiting in
any way whatsoever any remedy (i) in the event of any fraud or (ii) other than
for the recovery of money damages or another form of monetary relief.
13. Non-Competition. For a period of three years commencing on the
Closing Date (the "Non-Compete Period"), Alleghany will not, and Alleghany will
not permit any Company Subsidiary of Alleghany to, directly or indirectly,
market, sell or distribute, anywhere in the world (within or without North
America), any product which, at the time of Closing, is marketed, sold or
distributed, or which, to the Knowledge of Alleghany at the time of Closing, is
proposed to be marketed, sold or distributed, by the Company (any such
marketing, sale or distribution, a "Competing Activity"); provided, however,
that the foregoing restrictions shall not prevent Alleghany or any of the
Company Subsidiaries, during the Non-Compete Period, from (i) holding or
acquiring for investment purposes only any interest in securities of a Person
which are listed or quoted or traded on any generally recognized market;
provided that such securities amount to less than ten percent (10%) of the
outstanding securities of such Person and carry less than ten percent (10%) of
the voting rights attaching to the outstanding securities of that Person, or
(ii) purchasing an entity or group of entities (an "Acquired Entity") that
engages in a Competing Activity, so long as the gross revenues of the Competing
Activity do not exceed 15% of the gross revenues of the Acquired Entity during
the most recent fiscal year of the Acquired Entity ended before the date of
acquisition of the Acquired Entity. If, at the time of enforcement of this
Section 13, a court shall hold that the duration, scope or area restrictions
stated herein are unreasonable under circumstances then existing, the parties
agree that the maximum duration, scope or area reasonable under such
circumstances shall be substituted for the stated duration, scope or area and
that the court shall be allowed to revise the restrictions contained herein to
cover the maximum period, scope and area permitted by law.
14. Miscellaneous.
14.1 Fees and Expenses. Whether or not the Merger is
consummated, each of the parties will pay all of its own fees and expenses
(including, without limitation, the fees and expenses of attorneys, accountants,
investment bankers and other representatives and agents) incurred in connection
with this Agreement and the transactions contemplated hereby. Without limiting
the foregoing, all such fees and expenses of the Company incurred prior to the
Merger in connection with the performance of the obligations of the Company
pursuant to this Agreement and the transactions contemplated hereby shall be
paid by the Company and, except as specifically provided otherwise in Section
3.2 hereof, shall be fully accrued on the Closing Date Balance Sheet. The fees
and expenses of Xxxxxxxx Xxxxx Xxxxxx & Xxxxx shall be shared equally by
Alleghany and HTI Acquisition. For the avoidance of doubt, no fees and expenses
described in this Agreement as payable by HTI Acquisition (including without
limitation fees and expenses of the Designated Accountants payable by HTI
Acquisition pursuant to Section 3.2(C), fees and expenses of the Independent
Accountants payable by HTI
-44-
Acquisition pursuant to Section 3.2(H), fees and expenses of Xxxxx Xxxxxxxxx
payable by HTI Acquisition pursuant to Section 5.10, and fees and expenses of
Xxxxxxxx Xxxxx Xxxxxx & Xxxxx payable by HTI Acquisition pursuant to this
Section 14.1) shall be reflected on the Closing Date Balance Sheet.
14.2 Waiver. The parties hereto may by written agreement (i)
extend the time for or waive or modify the performance of any of the obligations
or other acts of the parties hereto or (ii) waive any inaccuracies in the
representations and warranties contained in this Agreement or in any document
delivered pursuant to this Agreement.
14.3 Notices. All notices, requests or other communications
hereunder shall be in writing and shall be deemed to have been duly given if
delivered or mailed first class certified mail postage prepaid addressed as
follows: if to HTI Acquisition, to HTI Acquisition LLC, c/o Capital Partners,
Inc. Eight Xxxxxxxxx Xxxxxx Xxxx, Xxxxx Xxxxx, Xxxxxxxxx, XX 00000, attention
Xxxxx X. Xxxxxxxxxx, Chairman (with a copy to Xxxxxx X. Xxxxxxxxxxx III, Esq.,
1211 Avenue of the Americas, 27th Floor, New York, New York 10036); if to the
Company or Alleghany, to Alleghany Corporation, 000 Xxxx Xxxxxx, Xxx Xxxx, XX
00000, attention Xxxxxx X. Xxxx, Esq., Senior Vice President and General Counsel
(with a copy to Xxxxxx X. Xxxxxx, Esq., Xxxxx Xxxxxxxxxx LLP, 1301 Avenue of the
Americas, New York, NY 10019-6092), or to such other address as may have been
furnished in writing to the party giving the notice by the party to whom notice
is to be given.
14.4 Entire Agreement; Amendment. This Agreement, together
with the Confidentiality Agreement, which shall continue in full force and
effect until Closing, embodies the entire agreement among the parties and there
have been and are no agreements, representations or warranties, oral or written
among the parties other than those set forth or provided for in this Agreement.
No party hereto has relied upon any oral or written statement, representation,
warranty, covenant, condition, understanding or agreement made by any other
party or any representative, agent or employee thereof, except for those
expressly set forth in this Agreement or in the Exhibits, Schedules or
certificates delivered pursuant hereto. Disclosure on any one of the Schedules
hereto constitutes disclosure on each other Schedule as applicable (to the
extent that the relevance of such disclosure for each such other schedule is
reasonably evident from the text thereof). This Agreement may be amended,
modified, superseded or supplemented only by an instrument in writing executed
and delivered by the parties hereto.
14.5 Rights Under this Agreement; Nonassignability. This
Agreement shall bind and inure to the benefit of the parties hereto and their
respective successors and assigns, but shall not be assignable by any party
without the prior written consent of the other parties, which consent shall not
be unreasonably withheld or delayed.
Nothing contained in this Agreement is intended to confer upon
any Person, other than the parties to this Agreement and their respective
successors and assigns, any rights, remedies, obligations or liabilities under
or by reason of this Agreement.
14.6 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, without regard
to any
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applicable conflicts of law provisions thereof that may require the application
of the laws of another jurisdiction. The parties hereby irrevocably submit to
the exclusive jurisdiction of the courts of the State of New York and the
federal courts of the United States of America located in the State of New York
in respect of all matters that arise out of or are related to this Agreement or
the documents referred to in or contemplated by this Agreement and the
transactions contemplated hereby and thereby and hereby waive, and agree not to
assert, as a defense in any action for the interpretation or enforcement hereof
or of any such document, that is not subject thereto or that such action may not
be brought or is not maintainable in said courts or that the venue thereof may
not be appropriate or that this Agreement or any such document may not be
enforced in or by such courts, and the parties irrevocably agree that all claims
with respect to such action shall be heard and determined in such a New York
State or federal court. The parties hereby consent to and grant any such court
jurisdiction over the Person of such parties and over the subject matter of such
dispute and agree that mailing of process or other papers in connection with any
such action in the manner provided in this Section 14.6 or in such other matter
as may be permitted by law shall be valid and sufficient service thereof.
14.7 Waiver of Jury Trial. EACH PARTY HEREBY IRREVOCABLY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ALL RIGHTS TO TRIAL BY JURY IN
ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED UPON CONTRACT, TORT OR
OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OF THE
TRANSACTIONS CONTEMPLATED HEREBY.
14.8 Specific Performance. Without intending to limit the
remedies available to any party hereto, each party (i) acknowledges that breach
of this Agreement will result in irreparable harm for which there is no adequate
remedy at law, and (ii) agrees that any party seeking to enforce this Agreement
shall be entitled to injunctive relief, including specific performance, or other
equitable remedies upon any such breach.
14.9 Publicity. No party to this Agreement shall, without the
prior written consent of the other parties hereto, issue any press release or
otherwise make any public statement with respect to this Agreement or the
transactions contemplated hereby, except for such press releases or other
statements as the disclosing party may reasonably determine are required by
applicable law.
14.10 Headings; References to Sections, Exhibits and
Schedules. The headings of the Sections, paragraphs and subparagraphs of this
Agreement are solely for convenience and reference and shall not limit or
otherwise affect the meaning of any of the terms or provisions of this
Agreement. The references herein to Sections, Exhibits and Schedules, unless
otherwise indicated, are references to Sections of and exhibits and schedules to
this Agreement.
14.11 Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be an original, but which together
constitute one and the same instrument.
REMAINDER OF PAGE INTENTIONALLY LEFT BLANK -
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IN WITNESS WHEREOF, the parties have duly executed this Agreement as
of the date first above written.
HTI ACQUISITION LLC
By: /s/ Xxxxx X. Xxxxxxxxxx
------------------------------------
Xxxxx X. Xxxxxxxxxx
Chairman
HEADS & THREADS INTERNATIONAL LLC
By: /s/ Xxxx X. Xxxxx
------------------------------------
Xxxx X. Xxxxx
Vice President - Finance and
Chief Financial Officer
ALLEGHANY CORPORATION
By: /s/ Xxxxx X. Xxxxxx
------------------------------------
Xxxxx X. Xxxxxx
Senior Vice President
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EXHIBIT A
The following terms have the following meanings and such meanings
are equally applicable to both the singular and the plural forms of the terms
defined:
"Acquired Entity" has the meaning set forth in Section 13.
"Acquisition Financing" has the meaning set forth in Section 5.6.
"Affiliate" means, in respect of any Person, a Person that, directly
or indirectly, through one or more intermediaries, controls, is controlled by or
is under common control with such Person.
"Alleghany Debt" means all of the outstanding indebtedness of the
Company to Alleghany, which amount as of the date hereof is and at the Closing
will be $3,081,000.
"Alleghany Umbrella Policies" has the meaning set forth in Section
7.7(B).
"Alleghany's Basket" has the meaning set forth in Section 12.3.
"Alleghany's Cap" has the meaning set forth in Section 12.3.
"Allocation" has the meaning set forth in Section 3.3.
"Applicable Law" means any applicable order, law, statute,
regulation, rule, ordinance, writ, injunction, directive, judgment, decree,
principle of common law, constitution or treaty enacted, promulgated, issued,
enforced or entered by any Governmental Authority, including any amendments
thereto that may be adopted from time to time.
"Asserted Liability" has the meaning set forth in Section 12.8(A).
"Audited Financial Statements" has the meaning set forth in Section
4.6(A).
"Benefit Plans" has the meaning set forth in Section 4.18(A).
"Business" means the business of the Company and the Company
Subsidiaries, taken as a whole.
"Business Day" means any day, other than a Saturday, Sunday and any
day which is a legal holiday in the State of New York, or is a day on which
banking institutions located in the State of New York are authorized or required
by Applicable Law or other governmental action to close.
"Claim" means any claim (including any cross-claim or counterclaim),
demand, investigation, chose in or cause of action, suit, default, assessment,
litigation, third party action, arbitral proceeding or proceeding by or before
any Governmental Authority or any other Person.
"Claims Notice" has the meaning set forth in Section 12.7.
"Closing" has the meaning set forth in Section 2.2.
"Closing Date" has the meaning set forth in Section 2.2.
"Closing Date Balance Sheet" has the meaning set forth in Section
3.2(A).
"Closing Date Book Value" has the meaning set forth in Section
3.2(C).
"COBRA" has the meaning set forth in Section 6.5.
"Code" has the meaning set forth in Section 4.18(B).
"Commitments" has the meaning set forth in Section 5.6.
"Commitment Letters" has the meaning set forth in Section 5.6.
"Company" has the meaning set forth in the Recitals.
"Company Subsidiary" or "Company Subsidiaries" has the meaning set
forth in Section 4.3.
"Company Material Adverse Effect" has the meaning set forth in
Section 4.1.
"Competing Activity" has the meaning set forth in Section 13.
"Completion Bonuses" has the meaning set forth in Section 3.2(B).
"Confidentiality Agreement" has the meaning set forth in Section
7.1.
"Consolidated Income Tax Return" means any consolidated, combined,
unitary or Affiliated Income Tax Return of Alleghany that the Company is
required or eligible to join.
"Contribution Letter" has the meaning set forth in Section 5.6.
"Customs Refund" means the right to receive the refund (plus any
interest thereon or credited with respect thereto) of the antidumping duties in
the approximate amount of $419,302 paid to the Bureau of Customs and Border
Protection, U.S. Department of Homeland Security, for excessive antidumping
duties on entries of helical lockwashers from October 1, 1997 through September
30, 1998.
"DLLCA" has the meaning set forth in Section 2.1
"December 31, 2003 Balance Sheet" has the meaning set forth in
Section 4.6(A).
"Delaware Secretary of State" has the meaning set forth in Section
2.3.
"Designated Accountants" has the meaning set forth in Section
3.2(C).
2
"Effective Time" has the meaning set forth in Section 2.3.
"Environment" means all air, surface water, groundwater, or land,
including land surface or subsurface, including all fish, wildlife, biota and
all other natural resources.
"Environmental Claim" means any and all Claims, pursuant to or
relating to any applicable Environmental Law by any Person based upon, alleging,
asserting, or claiming any actual or potential (i) violation of or liability
under any Environmental Law, (ii) violation of any Environmental Permit, or
(iii) liability for investigatory costs, cleanup costs, removal costs, remedial
costs, response costs, natural resource damages, property damage, personal
injury, fines, or penalties arising out of, based on, resulting from, or related
to the presence, Release, or threatened Release into the Environment, of any
Hazardous Materials at any location, including, but not limited to any location
to which Hazardous Materials or materials containing Hazardous Materials were
sent for handling, storage, treatment, or disposal.
"Environmental Clean-up Site" means any location which is listed or
proposed for listing on the National Priorities List, the Comprehensive
Environmental Response, Compensation, and Liability Information System, or on
any similar state list of sites requiring investigation or cleanup.
"Environmental Law" means any and all federal, state, local,
provincial and foreign, civil and criminal laws, statutes, ordinances, orders,
common law, codes, rules, regulations, Environmental Permits, judgments, decrees
or injunctions with any Governmental Authority, relating to the protection of
health and the Environment, worker health and safety, and/or governing the
handling, use, generation, treatment, storage, transportation, disposal,
manufacture, distribution, formulation, packaging, labeling, or Release of
Hazardous Materials, whether now existing or subsequently amended or enacted,
including, but not limited to: the Clean Air Act, 42 U.S.C. Section 7401 et
seq.; the Comprehensive Environmental Response, Compensation, and Liability Act
of 1980, 42 U.S.C. Section 9601 et seq.; the Federal Water Pollution Control
Act, 33 U.S.C. Section 1251 et seq.; the Hazardous Material Transportation Act
49 U.S.C. Section 1801 et seq.; the Federal Insecticide, Fungicide and
Rodenticide Act 7 U.S.C. Section 136 et seq.; the Resource Conservation and
Recovery Act of 1976 ("RCRA"), 42 U.S.C. Section 6901 et seq.; the Toxic
Substances Control Act, 15 U.S.C. Section 2601 et seq.; the Occupational Safety
& Health Act of 1970, 29 U.S.C. Section 651 et seq.; the Oil Pollution Act of
1990, 33 U.S.C. Section 2701 et seq.; and the state analogies thereto, all as
amended or superseded from time to time; and any common law doctrine, including,
but not limited to, negligence, nuisance, trespass, personal injury, or property
damage related to or arising out of the presence, Release, or exposure to a
Hazardous Material.
"Environmental Permit" means any federal, state, local, provincial,
or foreign permit, license, approval, consent or authorization required by any
Governmental Authority under or in connection with any Environmental Law.
"ERISA" has the meaning set forth in Section 4.18(A).
"Equity Commitment" has the meaning set forth in Section 5.6.
3
"Existing Employment Agreements" means the Employment Agreements in
effect as of the date hereof between the Company and each of Xxxxxxx X. Xxxxx,
Xxxx X. Xxxxx and Xxxxxxx X. Xxxxx.
"GAAP" has the meaning set forth in Section 4.6(B).
"Governmental Authority" means any government or political
subdivision thereof, whether foreign or domestic, federal, state, provincial,
county, local, municipal or regional, or any other governmental entity, agency,
authority, department, division or instrumentality of any such government,
political subdivision or other governmental entity, any court, and any
government self-regulatory organization or other quasi-governmental authority.
"Hazardous Material" means petroleum, petroleum hydrocarbons or
petroleum products, petroleum by-products, radioactive materials, asbestos or
asbestos-containing materials, gasoline, diesel fuel, pesticides, radon, urea
formaldehyde, lead or lead-containing materials, polychlorinated biphenyls; and
any other chemicals, materials, substances or wastes in any amount or
concentration which are now or hereafter become defined as or included in the
definition of "hazardous substances," "hazardous materials," "hazardous wastes,"
"extremely hazardous wastes," "restricted hazardous wastes," "toxic substances,"
"toxic pollutants," "pollutants," "regulated substances," "solid wastes," or
"contaminants" or words of similar import, under any Environmental Law.
"Heads & Threads (Mexico)" means Heads & Threads (Mexico) LLC, a
Delaware limited liability company, all of the outstanding membership interests
of which are owned by the Company.
"Heads & Threads (PA)" means Heads & Threads (PA) LLC, a Delaware
limited liability company, all of the outstanding membership interests of which
are owned by the Company.
"HSR Act" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of
1976, as amended, and the rules and regulations promulgated thereunder.
"HTI Acquisition" has the meaning set forth in the recitals.
"HTI Acquisition's Basket" has the meaning set forth in Section
12.5.
"HTI Acquisition's Cap" has the meaning set forth in Section 12.5.
"HTI Holding" means HTI Holding LLC, a Delaware limited liability
company, which owns all of the outstanding membership interests in HTI
Acquisition.
"Income Tax" or "Income Taxes" means all Taxes (x) based upon,
measured by, or calculated with respect to, net income or net receipts, proceeds
or profits, or (y) based upon, measured by, or calculated with respect to
multiple bases (including, but not limited to, corporate franchise and
occupation Taxes) if such Tax may be based upon, measured by, or calculated with
respect to one or more bases described in clause (x) above.
4
"Income Tax Claim" has the meaning set forth in Section 10.4.
"Income Tax Return" means a Tax Return in respect of an Income Tax.
"Indemnifying Party" has the meaning set forth in Section 12.7.
"Independent Accountants" has the meaning set forth in Section
3.2(G).
"Interim Financial Statements" has the meaning set forth in Section
4.6(A).
"Knowledge," "Knowing" and other correlative terms mean (i) with
respect to the Company, any fact or matter actually known to Xxxx Xxxxx, Xxxx X.
Xxxxx or Xxxxxxx Xxxxx, in each case, without independent investigation, and
(ii) with respect to Alleghany, any fact or matter actually known to Xxxxx X.
Xxxxxx, Xxxxxx X. Xxxx, Xxxxxxxxxxx X. Xxxxxxxxx or Xxxxx X. Xxxxxxxx, in each
case, without independent investigation. "Knowledge," "Knowing" and other
correlative terms mean, with respect to HTI Acquisition, any fact or matter
actually known to Xxxxx X. Xxxxxxxxxx or Xxxxxxx X. Xxxxxxxxx, in each case,
without independent investigation.
"LaSalle Credit Agreement" means the Credit Agreement, dated as of
April 30, 2003, as amended from time to time, between the Company and LaSalle
Bank National Association which provides for aggregate borrowings in a principal
amount not to exceed $30,000,000.
"LaSalle Debt" means all of the outstanding indebtedness of the
Company under the LaSalle Credit Agreement, the principal amount of which, as of
December 17, 2004 is $21,387,467.
"LaSalle Lien" means the Lien on substantially all of the assets of
the Company under the LaSalle Security Agreement.
"LaSalle Security Agreement" means the Security Agreement and
Financing Statement, dated as of April 30, 2003, as amended from time to time,
between the Company and LaSalle Bank, National Association, pursuant to which
substantially all of the assets of the Company secure the LaSalle Debt.
"Lien" means any mortgage, pledge, lien, encumbrance, charge,
adverse claim (whether pending or, to the Knowledge of the Person against whom
the adverse claim is being asserted, threatened) or restriction of any kind
affecting title or resulting in an encumbrance against any property, real or
personal, tangible or intangible, or a security interest of any kind, including,
without limitation, any conditional sale or other title retention agreement, any
lease in the nature thereof, and any filing of or agreement to give any
financing statement under the Uniform Commercial Code (or equivalent statute) of
any jurisdiction (other than a financing statement which is filed or given
solely to protect the interest of a lessor), other than Permitted Liens.
"Losses" means any and all obligations, liabilities, losses,
expenses and fees, including court costs and reasonable attorneys' fees and
expenses.
5
"Material Business Contract" has the meaning set forth in Section
4.12(A).
"Member's Equity" means total assets of the Company less total
liabilities of the Company.
"Merger" has the meaning set forth in the recitals.
"Merger Consideration" has the meaning set forth in Section 3.3.
"Mexican Company Subsidiaries" means Grupo Heads & Threads, S. de
X.X. de C.V., Operadora Heads & Threads, S. de X.X. de C.V., and Servicios Heads
& Threads, S. de X.X. de C.V.
"New Employment Agreements" has the meaning set forth in Section
2.6.
"Non-Compete Period" has the meaning set forth in Section 13.
"Non-Income Tax" means any Tax that is not an Income Tax.
"Non-Income Tax Return" means a Tax Return in respect of a
Non-Income Tax.
"November 2004 Financial Statements" has the meaning set forth in
Section 4.26.
"October 2004 Financial Statements" has the meaning set forth in
Section 4.26.
"Permits" has the meaning set forth in Section 4.17.
"Permitted Liens" means (i) liens for water and sewer charges and
Taxes not yet due and payable or being contested in good faith (and, in each
case, for which adequate accruals or reserves have been established) and (ii)
mechanics', carriers', workers', repairers', materialmen's, warehousemen's and
other similar liens arising or incurred in the ordinary course of business with
respect to a liability or obligation that is not yet due or delinquent and that
is not material in amount.
"Person" means any individual, firm, group, corporation, company,
joint stock company, limited liability company, partnership, joint venture,
trust, association, Governmental Authority, labor union or other organization,
entity or enterprise.
"Pre-Closing Tax Period" means a taxable period (or portion thereof)
ending on or prior to the Closing Date.
"Pre-Closing Income Tax Return" has the meaning set forth in Section
10.1(C).
"Proprietary Rights" has the meaning set forth in Section 4.17.
"Release" means any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, dumping, or disposing of a
Hazardous Material into the Environment.
6
"Representatives" has the meaning set forth in Section 6.1.
"Revised Amount" has the meaning set forth in Section 3.2(G).
"September 30, 2004 Balance Sheet" has the meaning set forth in
Section 4.6(B).
"Site" means any of the real properties currently or previously
owned, leased or operated by: (i) the Company or any Company Subsidiary; or (ii)
any entities previously owned by the Company or any Company Subsidiary, in each
case, including all soil, subsoil, surface waters and groundwater thereat.
"Straddle Period" has the meaning set forth in Section 10.1(D).
"Subsidiary" and "Subsidiaries" means, with respect to any Person,
any corporation, partnership, limited liability company, joint venture or other
entity in which such Person (i) owns, directly or indirectly, 50% or more of the
outstanding voting securities, equity interests, profits interest or capital
interest, (ii) is entitled to elect at least a majority of the board of
directors or similar governing body, or (iii) in the case of a limited
partnership or limited liability company, is a general partner or managing
member, respectively.
"Substitute Financing" has the meaning set forth in Section 7.3.
"Surviving Entity" has the meaning set forth in Section 2.1.
"Tax Return" means any report, return, document, declaration or
other information or filing, including any amendments thereto and related or
supporting information, required to be supplied to any Taxing Authority with
respect to Taxes.
"Tax Sharing Agreement" means the Tax Sharing Agreement, dated as of
January 1, 1999, by and between Alleghany and the Company.
"Taxes" means any and all taxes, charges, fees, levies or other
assessments, including, without limitation, income, gross receipts, excise, real
or personal property, sales, withholding, social security, occupation, use,
service, service use, value added, license, net worth, payroll, franchise,
transfer and recording taxes, fees and charges, imposed by any Taxing Authority,
whether computed on a separate, consolidated, unitary, combined or any other
basis; and such term shall include any interest, penalties or additional amounts
attributable to, or imposed upon, or with respect to, any such taxes, charges,
fees, levies or other assessments.
"Taxing Authority" means the Internal Revenue Service or any other
authority (whether domestic or foreign, including, without limitation, any
state, local or foreign government or any subdivision or taxing agency thereof
(including a United States possession)) responsible for the administration of
any Tax.
"Termination Date" has the meaning set forth in Section 11.3.
"Third Party Claimant" has the meaning set forth in Section 12.8(A).
7
"Transfer Taxes" means all transfer, documentary, sales, use, stamp,
registration, value added and other similar such Taxes and fees (including any
penalties and interest) including any real property transfer tax and any similar
Tax.
"Transferred Assets" means the General American Life Insurance
Company policies numbered 1917746 and 1901611 and the Northwestern Mutual Life
Insurance Company policy numbered 9946381, all insuring the life of Xxxx
Xxxxxxx.
"Transferred Liabilities" means all liabilities and obligations of
the Company relating to (i) deferred compensation and post-termination welfare
benefits to Xxxx Xxxxxxx, and (ii) deferred compensation to Xxxx X. Xxxxx, in
each case pursuant to the Benefit Plans identified in Schedule 4.18, subject to
the obligations set forth in Section 7.7(D).
"Unadjusted Merger Consideration" has the meaning set forth in
Section 3.1(B).
8
