Agreement and Plan of Merger by and among Clarus Corporation, Everest/Sapphire Acquisition LLC, Everest Merger I Corp. Everest Merger II, LLC Gregory Mountain Products, Inc. and Kanders GMP Holdings, LLC, Schiller Gregory Investment Company, LLC Dated...
Exhibit 2.2
Execution
Version
by and
among
Clarus
Corporation,
Everest/Sapphire
Acquisition LLC,
Everest
Merger I Corp.
Everest
Merger II, LLC
Xxxxxxx
Mountain Products, Inc.
and
Kanders
GMP Holdings, LLC, Xxxxxxxx Xxxxxxx Investment Company, LLC
Dated as
of May 7, 2010
Table
of Contents
Page | |||
ARTICLE
I DEFINITIONS
|
1
|
||
1.1
|
Certain
Definitions.
|
1
|
|
1.2
|
Certain
Words and Symbols.
|
15
|
|
ARTICLE
II THE MERGER; PAYMENT OF MERGER CONSIDERATION
|
15
|
||
2.1
|
The
Merger.
|
15
|
|
2.2
|
Effective
Time of the First Step Merger and the Second Step Merger.
|
16
|
|
2.3
|
Closing
of the Merger.
|
16
|
|
2.4
|
Effects
of the First Step Merger and the Second Step Merger.
|
16
|
|
2.5
|
Effect
of First Step Merger on Capital Stock of Constituent
Corporation.
|
18
|
|
2.6
|
Payment
of Merger Consideration.
|
18
|
|
2.7
|
Exchange
for Merger Consideration.
|
18
|
|
2.8
|
Merger
Consideration Shares.
|
19
|
|
2.9
|
KSS
Award Cancellation Payment.
|
19
|
|
2.10
|
Transfer
Restrictions.
|
19
|
|
2.11
|
Closing
Indebtedness Payment; Certain Company Transaction
Expenses.
|
20
|
|
2.12
|
Tax
Treatment.
|
20
|
|
ARTICLE
III REPRESENTATIONS AND WARRANTIES REGARDING THE COMPANY
|
20
|
||
3.1
|
Organization
of the Company.
|
21
|
|
3.2
|
Capitalization
of the Company.
|
21
|
|
3.3
|
Authorization;
Enforceability.
|
21
|
|
3.4
|
Financial
Statements.
|
22
|
|
3.5
|
Governing
Documents; Books and Records.
|
22
|
|
3.6
|
Absence
of Undisclosed Liabilities.
|
22
|
|
3.7
|
Compliance
with Law; Governmental Authorizations.
|
22
|
|
3.8
|
No
Conflicts; Change of Control.
|
23
|
|
3.9
|
Contracts.
|
23
|
|
3.10
|
Litigation;
Disputes.
|
25
|
|
3.11
|
Taxes.
|
25
|
|
3.12
|
Absence
of Certain Changes or Events.
|
28
|
|
3.13
|
Employee
Benefit Plans.
|
30
|
|
3.14
|
Intellectual
Property.
|
32
|
|
3.15
|
Title
to and Condition of Properties; Liens.
|
34
|
|
3.16
|
Real
Property.
|
34
|
|
3.17
|
Accounts
Receivable; Inventory.
|
35
|
|
3.18
|
Related
Parties.
|
36
|
|
3.19
|
Environmental
Matters.
|
36
|
|
3.20
|
Labor
Matters.
|
37
|
|
3.21
|
Officers
and Employees.
|
38
|
|
3.22
|
Brokers
and Finders.
|
38
|
|
3.23
|
Banking
Relationships.
|
39
|
|
3.24
|
Customers
and Suppliers.
|
39
|
|
3.25
|
Products;
Product Liability.
|
39
|
|
3.26
|
Insurance.
|
39
|
|
3.27
|
Propriety
of Past Payments.
|
39
|
|
3.28
|
Takeover
Laws and Provisions.
|
40
|
|
3.29
|
Customs.
|
40
|
|
3.30
|
Full
Disclosure.
|
40
|
|
ARTICLE
IV REPRESENTATIONS AND WARRANTIES REGARDING THE
STOCKHOLDERS
|
40
|
||
4.1
|
Organization
of the Stockholders.
|
40
|
|
4.2
|
Authorization;
Enforceability.
|
41
|
(i)
4.3
|
Title
to Shares.
|
41
|
|
4.4
|
Investment
in the Merger Consideration Shares.
|
41
|
|
4.5
|
Non-public
Information Concerning the Purchaser and Purchaser Parent.
|
42
|
|
4.6
|
Black
Diamond Transaction.
|
42
|
|
ARTICLE
V REPRESENTATIONS AND WARRANTIES REGARDING THE PURCHASER, PURCHASER PARENT
AND MERGER SUBS
|
42
|
||
5.1
|
Organization.
|
42
|
|
5.2
|
Authorization;
Enforceability.
|
43
|
|
5.3
|
No
Conflicts; No Default.
|
43
|
|
5.4
|
Taxes.
|
43
|
|
5.5
|
Brokers
and Finders.
|
44
|
|
5.6
|
Public
Documents; Compliance.
|
44
|
|
5.7
|
Merger
Consideration Shares.
|
44
|
|
5.8
|
Litigation.
|
44
|
|
5.9
|
Black
Diamond Transaction.
|
44
|
|
5.10
|
Compliance
with Law.
|
44
|
|
5.11
|
Capitalization
of the Purchaser Parent
|
44
|
|
5.12
|
Disclosure.
|
45
|
|
ARTICLE
VI COVENANTS
|
45
|
||
6.1
|
Interim
Operations of the Company.
|
45
|
|
6.2
|
Access.
|
47
|
|
6.3
|
Confidentiality;
Publicity.
|
47
|
|
6.4
|
Efforts
and Actions to Cause Closing to Occur.
|
48
|
|
6.5
|
Notification
of Certain Matters.
|
48
|
|
6.6
|
Subsequent
Actions.
|
49
|
|
6.7
|
Acquisition
Proposals.
|
49
|
|
6.8
|
D&O
Tail Insurance. Immediately p
|
50
|
|
6.9
|
Payment
of Certain Indebtedness and Company Transaction Expenses.
|
50
|
|
6.10
|
Delivery
of Financial Statements and Certificates.
|
50
|
|
6.11
|
Company
Litigation.
|
50
|
|
6.12
|
Takeover
Laws and Takeover Provisions.
|
51
|
|
6.13
|
Certain
Communications.
|
51
|
|
6.14
|
Employee
Benefit Plans.
|
51
|
|
6.15
|
Reorganization.
|
51
|
|
ARTICLE
VII CONDITIONS PRECEDENT TO THE OBLIGATIONS OF PURCHASER,
MERGER SUBS AND PURCHASER PARENT
|
52
|
||
7.1
|
Representations
and Warranties.
|
52
|
|
7.2
|
Performance
of Agreements, Covenants and Obligations
|
52
|
|
7.3
|
Material
Adverse Effect.
|
53
|
|
7.4
|
Litigation.
|
53
|
|
7.5
|
Approval.
|
53
|
|
7.6
|
Company
Closing Certificate.
|
53
|
|
7.7
|
Opinions
of Counsel.
|
53
|
|
7.8
|
Consents
Obtained.
|
53
|
|
7.9
|
Compliance
with Antitrust Law.
|
||
7.10
|
Certificate
of Merger.
|
54
|
|
7.11
|
Payment
of Certain Indebtedness.
|
54
|
|
7.12
|
Delivery
of Company Common Stock Certificates.
|
54
|
|
7.13
|
Good
Standings; Governing Documents.
|
54
|
|
7.14
|
Officer
Certificate.
|
54
|
|
7.15
|
Books
and Records.
|
54
|
|
7.16
|
Stockholders
Ancillary Agreements.
|
54
|
|
7.17
|
Fairness
Opinion.
|
54
|
|
7.18
|
Black
Diamond Acquisition.
|
54
|
(ii)
7.19
|
Participant
Releases.
|
54
|
|
7.20
|
General.
|
55
|
|
ARTICLE
VIII CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY AND THE
STOCKHOLDERS
|
55
|
||
8.1
|
Representations
and Warranties.
|
55
|
|
8.2
|
Performance
of Agreements, Covenants and Obligations.
|
55
|
|
8.3
|
Litigation.
|
55
|
|
8.4
|
Purchaser
Closing Certificate.
|
55
|
|
8.5
|
Good
Standings; Charter Documents.
|
55
|
|
8.6
|
Officer
Certificates.
|
56
|
|
8.7
|
Compliance
with Antitrust Law.
|
56
|
|
8.8
|
Purchaser
Ancillary Agreements.
|
56
|
|
8.9
|
Merger
Consideration.
|
56
|
|
8.10
|
Certificate
of Merger.
|
56
|
|
8.11
|
General.
|
56
|
|
ARTICLE
IX TAX MATTERS
|
56
|
||
9.1
|
Tax
Covenants.
|
56
|
|
9.2
|
Tax
Indemnification and Related Matters.
|
58
|
|
9.3
|
Reorganization.
|
58
|
|
ARTICLE
X TERMINATION
|
60
|
||
10.1
|
Termination
Events.
|
60
|
|
10.2
|
Effect
of Termination.
|
61
|
|
10.3
|
Exclusive
Pre-Closing Remedy.
|
62
|
|
ARTICLE
XI SURVIVAL; INDEMNIFICATION
|
62
|
||
11.1
|
Survival.
|
62
|
|
11.2
|
Investigation.
|
62
|
|
11.3
|
Indemnification.
|
62
|
|
11.4
|
Notification
of Claims.
|
63
|
|
11.5
|
Limitations
on Indemnification.
|
65
|
|
11.6
|
Payment
of Claims.
|
65
|
|
11.7
|
No
Circular Recovery.
|
66
|
|
11.8
|
Exclusive
Remedy
|
66
|
|
ARTICLE
XII MISCELLANEOUS
|
66
|
||
12.1
|
Expenses.
|
66
|
|
12.2
|
Successors.
|
66
|
|
12.3
|
Further
Assurances.
|
67
|
|
12.4
|
Waiver.
|
67
|
|
12.5
|
Entire
Agreement.
|
67
|
|
12.6
|
Governing
Law.
|
67
|
|
12.7
|
Consent
to Jurisdiction.
|
67
|
|
12.8
|
Waiver
of Jury Trial.
|
68
|
|
12.9
|
Assignment.
|
68
|
|
12.10
|
Remedies;
Specific Performance.
|
68
|
|
12.11
|
Notices.
|
68
|
|
12.12
|
Headings.
|
69
|
|
12.13
|
Counterparts.
|
69
|
|
12.14
|
Exhibits
and Schedules.
|
70
|
|
12.15
|
Severability.
|
70
|
|
12.16
|
No
Third Party Beneficiaries.
|
70
|
|
12.17
|
Time
of the Essence.
|
70
|
|
12.18
|
Negotiation
of Agreement.
|
70
|
|
12.19
|
Amendment.
|
70
|
(iii)
Table
of Schedules
Schedule
|
Description
|
|
Schedule
1.1(a):
|
Working
Capital
|
|
Schedule
3.1:
|
Organization
of the Company
|
|
Schedule
3.2:
|
Capitalization
of the Company
|
|
Schedule
3.4:
|
Financial
Statements
|
|
Schedule
3.5
|
Governing
Document; Books and Records
|
|
Schedule
3.6:
|
Absence
of Undisclosed Liabilities
|
|
Schedule
3.7:
|
Compliance
with Law; Governmental Authorizations
|
|
Schedule
3.8:
|
No
Conflicts; Change of Control
|
|
Schedule
3.9:
|
Contracts
|
|
Schedule
3.10:
|
Litigation;
Disputes
|
|
Schedule
3.11:
|
Taxes
|
|
Schedule
3.12:
|
Absence
of Certain Changes or Events
|
|
Schedule
3.13:
|
Employee
Benefit Plans
|
|
Schedule
3.14:
|
Intellectual
Property
|
|
Schedule
3.15:
|
Title
to and Condition of Properties; Liens
|
|
Schedule
3.16:
|
Real
Property
|
|
Schedule
3.17:
|
Accounts
Receivable; Inventory
|
|
Schedule
3.21:
|
Officers
and Employees
|
|
Schedule
3.23:
|
Banking
Relationships
|
|
Schedule
3.24:
|
Customer
and Suppliers
|
|
Schedule
3.25:
|
Products;
Product Liability
|
|
Schedule
3.26:
|
Insurance
|
|
Schedule
6.4(c)(i):
|
Estoppels
|
|
Schedule
6.4(c)(ii):
|
Consents
|
|
Schedule
6.16
|
Purchaser
Parent Equity Plan
|
|
Schedule
6.17
|
Company
Intellectual Property
|
Table
of Exhibits
Exhibit
|
Description
|
|
Exhibit
A:
|
Form
of Subordinated Note
|
|
Exhibit
B:
|
Form
of Registration Rights Agreement
|
|
Exhibit
C:
|
Form
of Lock-up Agreement
|
|
Exhibit
D:
|
Form
of Company Legal Opinion
|
|
Exhibit
E:
|
Form
of Restrictive Covenant Agreement
|
|
Exhibit
F:
|
Black
Diamond Merger Agreement
|
|
Exhibit
G:
|
Form
of Participant Releases
|
|
Exhibit
H:
|
Form
of Stockholders Release
|
|
Exhibit
I:
|
Certificate
of Merger
|
|
Exhibit
J:
|
Company
Intellectual Property Letter of Acknowledgment
|
|
Exhibit
K:
|
Written
Consent of the Company’s Board of Directors
|
|
Exhibit
L:
|
Written
Consent of the
Stockholders
|
(iv)
Agreement
and Plan of Merger, dated as of May 7, 2010 (this “Agreement”), by and
among Clarus
Corporation, a Delaware corporation (“Purchaser Parent”);
Everest/Sapphire
Acquisition LLC., a Delaware limited liability company and wholly-owned
direct subsidiary of Purchaser Parent (“Purchaser”); Everest
Merger I Corp., a Delaware corporation and a wholly-owned direct
subsidiary of Purchaser (“Merger Sub
One”); Everest
Merger II, LLC, a Delaware limited liability company and a wholly-owned
direct subsidiary of Purchaser (“Merger Sub Two” and
together with Merger Sub One (“Merger Subs”)); Xxxxxxx
Mountain Products, Inc., a Delaware corporation (“Company”); and each
of Kanders
GMP Holdings, LLC, a Delaware limited liability company,
and Xxxxxxxx
Xxxxxxx Investment Company LLC, a Florida limited liability
company (each a “Stockholder”, and
collectively, the “Stockholders”).
RECITALS
Whereas,
each of the respective board of directors or managers, as the case may be, of
Purchaser Parent, Purchaser, the Merger Subs and the Company has approved this
Agreement and the transactions contemplated hereby, and deems it advisable and
in the best interests of their respective stockholders or members, as the case
may be, to enter into this Agreement and consummate the transactions
contemplated hereby pursuant to which, among other things, and as a single
integrated transaction, Purchaser will acquire the Company through (i) the
merger of Merger Sub One with and into the Company (the “First Step Merger”)
upon the terms and conditions set forth herein and in accordance with the DGCL
with the Company as the surviving entity of the First Step Merger (and in such
capacity is sometimes referred to herein as the “Interim Surviving
Corporation”), and (ii) promptly following the Effective Time and, as
part of the same overall transaction, the merger of the Interim Surviving
Corporation with and into Merger Sub Two (the “Second Step Merger”
and together with the First Merger, the “Merger”) upon the
terms and conditions set forth herein and in accordance with the DGCL and the
LLC Act, with Merger Sub Two as the surviving entity of the Second Step Merger
(and in such capacity is sometimes referred to herein as the “Surviving
Company”);
Whereas,
for Federal income tax purposes, it is intended that the Merger qualify as a
“reorganization” within the meaning of Section 368(a) of the Internal Revenue
Code of 1986, as amended (the “Code”), and the regulations promulgated
thereunder, and that this Agreement will be, and hereby is, adopted as a plan of
reorganization”;
Whereas,
each of the parties hereto expect that the Merger will further certain of their
business objectives; and
Whereas,
each of the Stockholders has approved this Agreement and the transactions
contemplated hereby.
Now,
therefore, in consideration of the mutual covenants set forth herein, it
is hereby agreed as follows:
ARTICLE
I
Definitions
1.1
Certain Definitions.
For
purposes of this Agreement, the following terms shall have the following
meanings:
1
“Acquisition Proposal”
shall mean any inquiries, proposals or offers from any Person other than
Purchaser, its Affiliates or representatives relating in any way to (i) any
investment in the Company, (ii) any acquisition of direct or indirect control of
the Company, (iii) the purchase of any of the Company’s securities, (iv) any
significant amount of the assets or businesses of the Company, or any lease,
exchange, mortgage, pledge, transfer or other disposition thereof (other than
assets leased, exchanged, mortgaged, pledged, transferred or other disposed of
in the Ordinary Course of Business and not in connection with the sale of or
transfer of a business), or (v) any business combination or other transaction
relating to the sale or transfer of any business or business line of the Company
including, without limitation, any merger, consolidation, acquisition, tender or
exchange offer, recapitalization, reorganization, dissolution, liquidation,
issuance, disposition, or other similar transaction of any nature that would
have a similar financial result as the Merger.
“Affiliate” shall
mean, with respect to any Person, any other Person who directly or indirectly,
through one or more intermediaries, controls, is controlled by, or is under
common control with, such Person. For purposes of this definition,
the term “control” means the possession, directly or indirectly, of the power to
(i) vote 50% or more of the voting securities of such Person or (ii) direct or
cause the direction of the management and policies of such Person, whether
through the ownership of voting securities, by Contract or otherwise, and the
terms and phrases “controlled” and “controlling” have meanings correlative
thereto.
“Agreement” shall have
the meaning set forth in the first paragraph hereof.
“Balance Sheet” shall
mean the audited balance sheet of the Company as of December 31, 2009, that is
included in the Financial Statements.
“Balance Sheet Date”
shall mean December 31, 2009.
“Benefit Plans” shall
have the meaning set forth in Section 3.13(a).
“Black Diamond” shall
mean Black Diamond Equipment, Ltd.
“Black Diamond Merger
Agreement” shall mean the Agreement and Plan of Merger dated
April 30, 2010, by and among, Purchaser Parent,
Purchaser, Everest/Sapphire Acquisition Corp., Sapphire Merger Corp., Black
Diamond and Xx XxXxxx.
“Business Day” shall
mean any day other than a Saturday, Sunday or other day on which commercial
banks in New York, New York are authorized or required by Law to
close.
“Capital Lease” shall
mean, with respect to any Person, any lease of, or other arrangement conveying
the right to use, property by such Person as lessee that would be required to be
accounted for as a capital lease on a balance sheet of such Person prepared in
conformity with GAAP.
“CERCLA” shall have
the meaning set forth in Section 3.19(e).
“Certificate of
Merger” shall have the meaning set forth in Section 2.2.
“Change of Control
Agreements” shall mean the Contracts designated as such on Schedule 3.8(a)
and any other similar Contracts entered into by the Company prior to Closing
requiring or triggering a payment or a potential payment as a result of the
consummation of any of the transactions contemplated by this
Agreement.
2
“Change of Control
Payments” shall mean, without duplication, an amount equal to any
payments made and any expenses paid (before or after the Closing) in connection
with (i) obtaining any of the required estoppels, waivers or consents set forth
on Schedule
6.4(c)(i) and Schedule 6.4(c)(ii)
hereto, (ii) payments or potential payments under the Change of Control
Agreements that will be triggered or caused by, or result from, in whole or in
part, the consummation of any of the transactions contemplated by this
Agreement including,
for the avoidance of doubt, amounts payable to Xxxx Xxxxxx in the aggregate
amount of $1,000,000 pursuant to that certain Agreement, dated as of June 15,
2009, by and among the Company, Xxxx Xxxxxx and the other parties thereto, and
excluding, for the avoidance of doubt, the KSS Award Cancellation Payment, and
(iii) expenses in connection with the recording of any releases of any security
interest under the Xxxxx Fargo Loan Documents with the United States Trademark
and Patent Office or applicable Governmental Authority to the extent they are
not included in the Closing Indebtedness Payment.
“Closing” shall have
the meaning set forth in Section 2.3.
“Closing Adjustment”
shall mean an amount equal to the sum of the Working Capital Adjustment and the
Indebtedness Adjustment.
“Closing Date” shall
have the meaning set forth in Section 2.3.
“Closing Indebtedness
Payment” shall have the meaning set forth in Section 6.9.
“COBRA” shall have the
meaning set forth in Section 3.13(d).
“Code” shall mean the
Internal Revenue Code of 1986, as amended, and the rules and regulations
promulgated thereunder.
“Common Stock Merger
Consideration Amount” shall have the meaning set forth in Section
2.6(b).
“Company” shall have
the meaning set forth in the first paragraph hereof.
“Company Ancillary
Agreements” shall mean each of the executed Written Consent of the
Company’s Board of Directors, Company Closing Certificate, Company Officer’s
Certificate, and the Company Intellectual Property Letter of
Acknowledgment.
“Company Closing
Certificate” shall mean the certificate to be delivered pursuant to
Section 7.6.
“Company Common Stock”
shall mean the common stock of the Company, par value $0.01.
“Company Common Stock
Certificates” shall have the meaning set forth in Section
2.5(a).
“Company Disclosure
Schedule” shall have the meaning set forth in the first paragraph of
Article III.
“Company Indemnified
Parties” shall have the meaning set forth in Section
11.3(b).
“Company Insurance
Policies” shall have the meaning set forth in Section 3.26.
“Company Intellectual
Property” shall have the meaning set forth in Section
3.14(a).
3
“Company Intellectual
Property Letter of Acknowledgment” shall mean the Company Intellectual
Property letter of acknowledgment, in the form attached hereto as Exhibit
J.
“Company Licensed
Intellectual Property” shall have the meaning set forth in Section
3.14(c).
“Company Material Pre-Closing
Events” shall have the meaning set forth in Section 7.1.
“Company Officer’s
Certificate” shall mean the certificate to be delivered pursuant to
Section 7.12.
“Company Owned Intellectual
Property” shall have the meaning set forth in Section
3.14(b).
“Company Preferred
Stock” shall mean the preferred stock of the Company, par value
$0.01.
“Company Transaction
Expenses” shall mean, without duplication, all of the following which are
accrued, should have been accrued under GAAP or are due and owing, but remain
unpaid and outstanding immediately prior to the Closing: (a) the fees and
expenses of counsel, brokers, bankers, accountants and other professionals
engaged or used by the Company in connection with the preparation for,
negotiation of, or entering into this Agreement or the consummation of the
transactions contemplated hereby (which will also include a reasonable estimate
of unbilled expenses and a reasonable estimate of potential post-Closing legal
fees and expenses), (b) an amount equal to the Change of Control Payments, (c)
one-half of the cost of the insurance premium for the D&O Tail Insurance, if
any, and (d) an amount equal to one-half of the Transfer Taxes (as set forth in
Section 9.1(c) hereof).
“Company Transaction
Termination Expenses” shall mean all documented costs and expenses
reasonably incurred by the Company in pursuit of the Merger including, without
limitation, investment banking and advisory fees, accounting and legal fees,
travel, due diligence and related expenses.
“Constituent
Companies” shall have the meaning set forth in Section
2.1(b).
“Contract” shall mean,
with respect to a Person, any contract, undertaking, agreement, arrangement,
commitment, indemnity, indenture, note, guaranty, instrument, lease or
understanding, including any and all amendments, supplements, and modifications
(whether oral or written) thereto, whether or not in writing to which such
Person is legally bound.
“Copyrights” shall
have the meaning set forth in the definition of “Intellectual
Property.”
“Current Assets” shall
mean the sum of the accounts receivable, inventory (including, inventory in
transit), and current prepaid assets of the Company, each determined in
accordance with GAAP; provided, that
Current Assets shall not include any amount of cash.
“Current Liabilities”
shall mean the sum of the accounts payable and other current liabilities of the
Company, each determined in accordance with GAAP; provided, that
Current Liabilities shall not include the current portion of any long term
Indebtedness or any Company Transaction Expenses.
“D&O Tail
Insurance” shall have the meaning set forth in Section
6.8(b).
“Defect” shall mean a
defect or failure in the design or manufacture of a Product, such that it either
(i) does not perform as designed for its intended use or (ii) creates a latent
or patent dangerous condition for any user thereof.
4
“Determination Date”
shall mean April 30, 2010.
“Determination Date Balance
Sheet” shall mean a balance sheet of the Company as of the Determination
Date.
“Determination Date Working
Capital” shall mean the Working Capital of the Company as of the
Determination Date.
“DGCL” shall mean the
Delaware General Corporation Law.
“Due Diligence
Documentation” shall mean all of the documentation set forth in the
Electronic Data Room as of immediately prior to the entering into this
Agreement, a copy of all of which will be delivered to Purchaser by the
Company on one or more CD-ROMS by overnight delivery postmarked as of the date
of this Agreement.
“Effective Time” shall
have the meaning set forth in Section 2.2.
“Electronic Data Room”
shall mean the files contained in the Xxxxxxx Corp. electronic virtual data room
maintained by the Company in which the Company has provided Due Diligence
Documentation in connection with the Merger and the transactions contemplated by
this Agreement.
“Eligible Employee Purchaser
Award Amount” means $1,108,820.
“Eligible Employee
Shares” shall have the meaning set forth in Section 2.9.
“Eligible Employees”
shall mean Xxx BoisD’Enghien, Xxxx Xxxxx, Xxxx Xxxxxxxxxxx, Xxxxx Xxxxxxx, and
Xxxxx Xxxxxx.
“Environmental Claim”
shall mean any and all administrative, regulatory or judicial orders, suits,
demands, claims, liens, investigations, proceedings, or notices of noncompliance
or violation (written or oral) by any Person (including, without limitation, any
Governmental Authority) alleging liability or potential liability (including,
without limitation, potential responsibility for or liability for enforcement,
investigatory costs, cleanup costs, governmental response costs, removal costs,
remedial costs, natural resources damages, closure costs, supplemental
environmental projects, property damages, personal injuries, penalties, and
leaking underground storage tanks) arising out of, based on or resulting from
(a) the presence, or Release or threatened Release, of any Hazardous Materials
at any location owned, operated, leased or managed by the Company (or any of
their predecessors or current or former Affiliates), or (b) any and all claims
by any third party seeking damages, contribution, indemnification, cost
recovery, compensation or injunctive relief resulting from the presence or
Release of any Hazardous Materials.
“Environmental Enforcement
Liability” shall have the meaning set forth in Section
3.19(b).
“Environmental Law”
shall mean all applicable foreign, federal, state and local Laws (including
common law), statutes, ordinances, codes, rules, requirements, regulations,
orders, judgments, decrees, injunctions, agreement or Contract with or by any
Governmental Authority relating to pollution, the protection of the environment
(including, without limitation, air, surface water, groundwater, land surface or
subsurface strata) or protection of human health as it relates to the
environment including, without limitation, Laws relating to Releases of
Hazardous Materials, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Hazardous Materials or relating to management of asbestos or polychlorinated
biphenyls (“PCBs”) in buildings, structures, or equipment, including, without
limitation, as amended, the United States Comprehensive Environmental Response,
Compensation, and Liability Act, 42 U.S.C. § 9601 et seq., Emergency Planning
& Community Right to Xxxx Xxx, 00 X.X.X. § 00000 et seq., Solid Waste
Disposal Act and Resource Conservation and Recovery Act, 42 U.S.C. § 6901, et
seq., Clean Air Act, 42 U.S.C. § 7401, et seq., Federal Water Pollution Control
Act, 33 U.S.C. § 1251, et seq., Oil Pollution Act of 1990, 33 U.S.C. § 2701, et
seq., and Toxic Substances Control Act, 15 U.S.C. § 2601 et
seq.
5
“Environmental
Permits” shall have the meaning set forth in Section
3.19(a).
“Equity Interests”
shall mean, with respect to any Person, the (a) capital stock, partnership
interests, membership interests, beneficial interests or any other equity or
ownership interests in the Person referenced or (b) any instruments convertible
into or exchangeable for, or whose value is determined by reference to, any such
interests.
“ERISA” shall mean the
Employee Retirement Income Security Act of 1974, as amended.
“ERISA Affiliate”
shall mean with respect to any Person (i) any corporation which is a member of a
controlled group of corporations, within the meaning of Section 414(b) of the
Code, of which that person is a member, (ii) any trade or business (whether or
not incorporated) which is a member of a group of trades or businesses under
common control, within the meaning of Section 414(c) of the Code, of which that
Person is a member, (iii) any member of an affiliated service group, within the
meaning of Section 414(m) of the Code, of which that Person or any entity
described in clause (i) or (ii) is a member, and any other entity required to be
aggregated with such Person pursuant to Section 414(o) of the Code.
“Exchange Act” shall
mean the Securities and Exchange Act of 1934, as amended.
“Existing Confidentiality
Agreement” shall mean that certain confidentiality letter agreement dated
as of January, 2010 by and among Purchaser Parent, Black Diamond and the Company
in connection with maintaining confidentiality of confidential
information.
“Excluded Information”
shall have the meaning set forth in Section 4.5.
“Final Determination”
shall have the meaning set forth in Section 11.6(a).
“Financial Statements”
shall have the meaning set forth in Section 3.4(a).
“First Step Merger”
has the meaning set forth in the Recitals.
“Fully Diluted Company
Shares” shall mean (a) all shares of the Company Common Stock issued at
the Effective Time less (b) shares of
Company Common Stock held in the treasury of the Company at the Effective
Time.
“GAAP” shall mean
United States generally accepted accounting principles, consistently
applied.
“Governing Documents”
means, with respect to any Person, (a) the articles of incorporation,
certificate of incorporation, certificate of formation, the memorandum and
articles of association (or the equivalent organizational documents) of such
Person, (b) the bylaws or operating agreement (or the equivalent governing
documents) of such Person and (c) any document setting forth the designation,
amount or relative rights, limitations and preferences of any class or series of
such Person’s authorized stock or other Equity Interests.
6
“Governmental
Authority” shall mean (i) any government or any agency, body, bureau,
board, commission, court, department, official, political subdivision, tribunal
or other instrumentality thereof, whether international, federal, state or
local, domestic or foreign (including without limitation, any state or local
attorney general) or (ii) any arbitrator having authority with respect to any
applicable matter that has been submitted to arbitration.
“Hazardous Material”
shall mean (a) any petroleum or any products, by products or fractions thereof,
(b) asbestos in any form, (c) urea formaldehyde foam insulation, (d) any form of
natural gas, explosives, PCBs, lead, lead based paint, radon or other
radioactive material, (e) any chemicals, materials or substances (including,
without limitation, waste materials, raw materials, by-products, co-products or
finished products), provided the foregoing are, under Environmental Law, defined
as, or regulated as, or included in the definition of, “hazardous substances,”
“hazardous wastes,” “hazardous materials,” “extremely hazardous substances,”
“restricted hazardous wastes,” “toxic substances,” “toxic pollutants,”
“pollutants,” “contaminants,” “solid wastes,” “special wastes,” or words of
similar import under any Environmental Law, and (f) any other substances of any
kind regulated or forming the basis of liability under any Environmental
Law.
“Indebtedness” means,
as to any Person at a particular time, the sum of all of the following without
duplication, whether or not included as indebtedness in accordance with GAAP (a)
all obligations of such Person for borrowed money, and all obligations of such
Person evidenced by bonds, debentures, notes, loan agreements or similar debt
instruments; (b) all obligations of such Person to pay the deferred purchase
price of any property or services (other than accrued expenses and trade
accounts payable in the Ordinary Course of Business); (c) all indebtedness
(excluding prepaid interest thereon) secured by a Lien on property owned or
being purchased by such Person (including indebtedness arising under conditional
sales or other title retention Contracts), whether or not such indebtedness
shall have been assumed by such Person or is limited in recourse; (d) all
Capital Leases; (e) all fees, penalties and other payments, including, without
limitation, breakage fees, prepayment fees and change of control fees, payable
with respect to indebtedness described in the foregoing clauses (a) through (e)
as a result of or in connection with the Merger, (f) all interest, fees and
other expenses owed with respect to indebtedness described in the foregoing
clauses (a) through (f), and (g) all indebtedness referred to in the foregoing
clauses (a) through (f) which is directly or indirectly guaranteed by the
Company. Indebtedness specifically excludes (i) trade payables that
are Current Liabilities, any liability under commercial letters of credit, and
(ii) any liability under the undrawn portion of any outstanding standby letters
of credit.
“Indebtedness
Adjustment” shall mean an amount (which shall be expressed as a negative
number) equal to the outstanding Indebtedness of the Company on the
Determination Date.
“Indemnification
Threshold” shall have the meaning set forth in Section
11.5(a).
“Indemnified Party”
shall have the meaning set forth in Section 11.4(a).
“Indemnifying Party”
shall have the meaning set forth in Section 11.4(a).
“Intellectual
Property” “shall mean any United States, foreign, international and state
(a) patents and published patent applications (or unpublished patent
applications filed of record in any jurisdiction), and continuations, reissues,
or divisions relating thereto or utility models (collectively, “Patents”); (b)
trademarks, service marks, and trademark or service xxxx registrations and
applications, trade names, and trade dress together with all goodwill related to
the foregoing (collectively, “Trademarks”); (c)
Internet domain names; (d) copyrights, copyright registrations, renewals and
applications for copyright registrations, and mask works (collectively, “Copyrights”); (e)
Software; and (f) trade secrets and confidential information, including such
rights in know-how, proprietary and confidential processes, formulae,
algorithms, models and methodologies (collectively, “Trade Secrets”) and
(g) rights of privacy and publicity.
7
“Interim Financial
Statements” shall mean the internally prepared and unaudited balance
sheet of the Company as of the last Business Day of each calendar month ending
after the Balance Sheet Date, and the related internally prepared and unaudited
statements of income and of cash flows for each such calendar
month.
“Interim Constituent
Corporations” shall have the meaning set forth in the Section
2.1(a).
“Interim Surviving
Corporation” shall have the meaning set forth in the
Recitals.
“IRS” shall mean the
Internal Revenue Service of the United States or any successor agency, and, to
the extent relevant, the United States Department of the Treasury.
“Knowledge” or “Known” shall mean (a)
with respect to the Company or Stockholders, the actual knowledge of Xxxxxx X.
Xxxxxxx, Xxxxxx X. Xxxxxxxx, W. Xxxx Xxxxxxx, and Xxxxx Xxxxxx without a duty of
additional investigation and (b) with respect to Purchaser Parent, Purchaser or
Merger Subs, the actual knowledge of Xxxxxx X. Xxxxxxx and Xxxxxx X. Xxxxxxxxx,
without a duty of additional investigation.
“KSS” shall mean KSS
Outdoor Holdings, LLC, a Delaware limited liability company.
“KSS Award” shall mean
an award issued pursuant to the KSS Incentive Plan.
“KSS Award Cancellation
Payment” shall mean an amount equal to $369,604 payable as set forth in
Section 2.9 herein.
“KSS Incentive Plan”
shall mean the KSS Equity Appreciation Incentive Plan.
“Law” shall mean, with
respect to any Person, any statute, code, law, rule, regulation, ordinance,
treaty, administrative action, Order, or other requirement of any Governmental
Authority (including those requirements imposed by common law), applicable to
such Person (or any of its properties or assets) or any of its officers,
directors, employees, consultants or agents in connection with activities taken
on behalf of such Person.
“Leased Property”
shall have the meaning set forth in Section 3.16(a).
“Leases” shall have
the meaning set forth in Section 3.16(a).
“Liabilities” shall
have the meaning set forth in Section 3.6.
“License Agreements”
shall have the meaning set forth in Section 3.14(c).
“Licensed Intellectual
Property” shall have the meaning set forth in Section
3.14(c).
“Licenses” shall have
the meaning set forth in Section 3.7(b).
“Lien” shall mean any
lien, pledge, mortgage, deed of trust, security interest, claim, charge, option,
hypothecation, security, title retention, easement, right of way, encroachment
or other survey defect, transfer or title restriction, voting trust agreement or
other encumbrance (whether arising by contract or by operation of
law).
8
“Limited Indemnification
Cap” shall have the meaning set forth in Section 11.5(a).
“Litigation” shall
mean any dispute, claim, action, grievance, suit or inquiry or any legal,
administrative, arbitration, investigation, inquiry, enforcement or other
proceedings by or before any Governmental Authority.
“LLC Act” shall mean
the Delaware Limited Liability Company Act.
“Lock-up Agreement”
shall mean the lock-up agreement, with respect to the portion of the
Subordinated Note Merger Consideration Amount and Common Stock Merger
Consideration Amount subject to the Right of Set-off and with respect to the
Eligible Employee Shares, in the form attached hereto as Exhibit C.
“Losses” shall mean,
with respect to any Person or Persons, the full amount of all Liabilities,
damages, claims, deficiencies, fines, fees, assessments, losses, Taxes,
penalties, interest, awards, settlements, recourses, judgments, costs and
expenses (including, without limitation, reasonable fees and disbursements of
counsel) of any kind or nature whatsoever which may at any time be imposed on,
incurred by or asserted in any way against such Person or Persons.
“Material Adverse
Effect” shall mean, with respect to a Person, any change or changes,
effect or effects, event or events, or circumstance or circumstances, that
individually or taken together in the aggregate are or could reasonably be
expected to (a) be materially adverse, whether in the short term or long term,
to (i) the business, assets, properties, condition (financial or otherwise),
Liabilities or results of operations of such Person and its Subsidiaries, taken
as a whole, or (ii) the ability of such Person to perform its respective
obligations under this Agreement, or (b) result in Losses to the Company in an
aggregate amount equal to or exceeding $2,250,000.00; provided, that none
of the following shall be deemed, individually or in the aggregate, to
constitute, and none of the following shall be taken into account in determining
whether there has been, or will be, a Material Adverse Effect: (u) the
announcement of this Agreement by Purchaser Parent, (v) the Purchaser Parent’s
announcement or other disclosure of its plans or intentions with respect to the
conduct of the Company’s business (or any portion thereof), (w) changes in
global, national or regional political conditions (including any outbreak or
escalation of hostilities, war or acts of terrorism) other than hostilities, war
or acts of terrorism occurring within or with respect to the United States of
America, or any state, territory or possession thereof, or any of their
respective properties, that has or could reasonably be expected to have a
material adverse effect to the business, assets, properties, condition
(financial or otherwise), Liabilities or results of operations of such Person
and its Subsidiaries, taken as a whole, (x) changes in general local, domestic,
foreign or international economic conditions, (y) changes affecting generally
the industry in which the Person operates or (z) any changes in applicable Laws
or accounting rules or principles, provided, however, that with
respect to clauses (x), (y) and (z) above, the effect of such changes,
individually or in the aggregate, does not have a disproportionate effect on
such Person and/or any of its Subsidiaries, taken as a whole, compared with
other companies in the same industry.
“Material Contract”
shall mean any Contract which is set forth on, or is required to be set forth
on, Schedule
3.8(a) or Schedule
3.9(a).
“Merger” shall have
the meaning set forth in the Recitals to this Agreement.
“Merger Consideration”
shall mean $45,000,000 as increased by the
Merger Consideration Increase Amount and decreased by the
Merger Consideration Decrease Amount, as applicable.
9
“Merger Consideration
Shares” shall have the meaning set forth in Section 2.6(b).
“Merger Consideration
Decrease Amount” shall mean an amount equal to the sum of the
following:
(i) Indebtedness
outstanding;
(ii) the
Closing Adjustment, if a negative number;
(iii) to the extent that (A)
unrestricted cash of the Company on the Determination Date minus (B) the Company
Transaction Expenses, is less than $300,000.00, an amount equal to such
deficit;
(iv) the KSS Award
Cancellation Payment; and
(v) Eligible Employee Purchaser Award
Amount.
“Merger Consideration
Increase Amount” shall mean an amount equal to the sum of the
following:
(i) the
Closing Adjustment, if a positive number; and
(ii) to the extent that (A)
unrestricted cash of the Company on the Determination Date minus (B) the Company
Transaction Expenses exceeds $600,000.00, an amount equal to such
excess.
“Merger Consideration Price
Per Share” shall mean (a) the sum of the Merger Consideration divided by (b) the
aggregate number of Fully Diluted Company Shares.
“Merger Subs” shall
have the meaning set forth in the first paragraph of this
Agreement.
“Multiemployer Plan”
shall have the meaning set forth in Section 3.13(a).
“Note Offset
Percentage” means 50%, or such higher percentage as determined by the
Purchaser Indemnified Parties in their sole discretion.
“Order” shall mean any
judgment, decree, order, writ, injunction, permit or license of any Governmental
Authority.
“Ordinary Course of
Business” shall mean, for any Person, the ordinary course of business of
such Person, consistent with past custom and practice (including with respect to
quantity and frequency).
“Owned Property” shall
have the meaning set forth in Section 3.16(a).
“Participant Releases”
shall mean the releases in the form attached hereto as Exhibit G.
“Patents” shall have
the meaning set forth in the definition of “Intellectual Property.”
“PBGC” shall mean the
Pension Benefit Guaranty Corporation or any successor thereto.
10
“Permitted Liens”
shall mean any and all (a) mechanics’ liens, workmen’s liens, statutory liens of
landlords, common carrier liens, warehousemen’s liens and other similar liens,
and liens arising under worker’s compensation, unemployment insurance, social
security, retirement and similar legislation, in each instance to the extent
incurred in the Ordinary Course of Business; (b) any and all matters of record,
zoning, variances, encumbrances, restrictions, easements or other imperfections
of title or Liens on any Real Property or other property or asset that do not
materially diminish the value thereof or materially interfere with the use
thereof in the operations of the Company as presently conducted; (c) liens on
goods in transit incurred pursuant to documentary letters of credit; and (d)
liens for Taxes not yet due and payable.
“Person” shall mean
any individual, corporation, limited liability company, partnership, firm, joint
venture, association, joint stock company, trust, unincorporated body or
organization, or other body or organization, whether or not a legal entity, and
any Governmental Authority.
“Pre-Closing Tax
Period” shall have the meaning set forth in Section 9.1(b).
“Product” shall mean
any product designed, manufactured, shipped, sold, marketed, distributed and/or
otherwise introduced into the stream of commerce by or on behalf of the Company,
including any product sold by the Company as the distributor, agent, or pursuant
to any other contractual relationship with a non-U.S. manufacturer.
“Property Taxes” shall
have the meaning set forth in Section 9.1(b).
“Proportional Share”
shall mean: (i) with respect to Kanders GMP Holdings, LLC, 65.82%; and (ii) with
respect to Xxxxxxxx Xxxxxxx Investment Company, LLC, 34.18%.
“Purchaser” shall have
the meaning set forth in the first paragraph hereof.
“Purchaser Ancillary
Agreements” shall mean each of the executed, Subordinated Notes,
Registration Rights Agreement, and each of the certificates to be delivered at
Closing pursuant to Sections 8.4 and 8.6.
“Purchaser’s Fairness
Opinion” shall mean the opinion of Ladenburg Xxxxxxxx & Co., Inc.
that the Shares to be received by the Purchaser in exchange for the Merger
Consideration are fair to the stockholders of Purchaser Parent from a financial
point of view.
“Purchaser Indemnified
Parties” shall have the meaning set forth in Section
11.3(a).
“Purchaser Material
Pre-Closing Events” shall have the meaning set forth in Section
8.1.
“Purchaser Parent”
shall have the meaning set forth in the first paragraph hereof.
“Purchaser Parent Common
Stock” shall mean the Purchaser Parent’s common stock, par value
$.0001.
“Purchaser Transaction
Expenses” shall mean all documented costs and expenses reasonably
incurred by Purchaser in pursuit of the Merger, including without limitation,
investment banking and advisory fees, accounting and legal fees, travel, due
diligence and related expenses.
“Real Property” shall
have the meaning set forth in Section 3.16(a).
11
“Real Property
Permits” shall have the meaning set forth in Section
3.16(d).
“Receivables” shall
have the meaning set forth in Section 3.17(a).
“Related Parties”
shall have the meaning set forth in Section 3.18.
“Release” shall have
the meaning set forth in CERCLA.
“Return” or “Returns” shall mean
all returns, declarations of estimated tax payments, reports, estimates,
information returns and statements, including any related or supporting
information with respect to any of the foregoing, filed or to be filed with any
Taxing Authority in connection with the determination, assessment, collection or
administration of any Taxes.
“Registration Rights
Agreement” shall mean the registration rights agreement in the form
attached hereto as Exhibit B.
“Restrictive Covenant
Agreement” shall mean the restrictive covenant agreement between each of
Xxxxxx X. Xxxxxxx and Xxxxxx X. Xxxxxxxx and the Purchaser in the form attached
hereto as Exhibit E.
“Right of Set-off”
shall have the meaning set forth in Section 11.6(b).
“Rights” shall mean,
with respect to a Person, any subscriptions, options, warrants, rights
(including phantom stock or stock appreciation rights), preemptive rights,
voting, approval or proxy rights, or other Contracts, including any right of
registration, conversion or exchange under, any outstanding security, instrument
or Contract obligating such Person, or any Affiliate of such Person, to issue,
sell, purchase or register any Equity Interests of such Person or to grant,
extend or enter into any security, instrument or Contract with respect to the
Equity Interests of such Person.
“SEC” shall mean the
United States Securities and Exchange Commission.
“Second Step Merger”
has the meaning set forth in the Recitals.
“Secretary of State”
shall have the meaning set forth in Section 2.2.
“Securities Act” shall
mean the Securities Act of 1933, as amended, and each of the rules and
regulations promulgated thereunder.
“Shares” shall mean
(i) all shares of the Company Common Stock issued and outstanding on Closing
Date less (ii)
shares of Company Common Stock held in the treasury of the Company on the
Closing Date Time.
“Significant Customers and
Suppliers” shall mean, collectively, the 10 largest customers (as
measured by dollar volume of sales) and suppliers (as measured by dollar volume
of purchases) of the Company for each of (i) the twelve-month period ending
December 31, 2009 and (ii) the three-month period ending March 31,
2010.
“Software” shall mean
any and all (a) computer programs, including any and all software
implementations of algorithms, models and methodologies, whether in source code
or object code form, (b) databases, compilations, and any other electronic data
files, including any and all collections of data, whether machine readable or
otherwise, (c) descriptions, flow-charts, technical and functional
specifications, tool kits or other work product used to design, plan, organize,
develop, test, troubleshoot and maintain any of the foregoing, (d) without
limitation to the foregoing, the software technology supporting any
functionality contained on the Internet site(s), of any Company, (e) all
computer-aided design software, including the underlying data, and (f) all
written or electronic documentation, including technical, end-user, training and
troubleshooting manuals and materials, relating to any of the
foregoing.
12
“Stock Offset
Percentage” means a percentage equal to one (1) minus the Note Offset
Percentage.
“Stock Set-off Amount”
shall have the meaning set forth in Section 11.6(b).
“Stockholder” or
“Stockholders”
shall have the meaning set forth in the first paragraph hereof.
“Stockholders Ancillary
Agreements” shall mean the Registration Rights Agreement, Lock-up
Agreement, Non-Competition Agreement, Participant Releases, Stockholders
Releases and Written Consent of the Stockholders.
“Stockholders Indemnified
Parties” shall have the meaning set forth in Section
11.3(b).
“Stockholders
Releases” shall mean the releases in the form attached hereto as Exhibit
H.
“Straddle Period”
shall have the meaning set forth in Section 9.1(a).
“Subordinated Note”
shall mean the promissory note in the form attached hereto as Exhibit
A.
“Subordinated Note Merger
Consideration Amount” shall have the meaning set forth in Section
2.6(a).
“Subsidiary” shall
mean, with respect to a Person, any corporation or other organization or entity,
whether incorporated or unincorporated, (a) of which such Person or any other
subsidiary of such Person is a general partner (excluding partnerships, the
general partnership interests of which held by such Person or any subsidiary of
such Person do not have a majority of the voting interests in such partnership);
(b) at least (i) a majority of the voting rights or (ii) a majority of the
securities or other interests of which having by their terms ordinary voting
power to elect a majority of the board of directors or others performing similar
functions with respect to such corporation or other organization is directly or
indirectly owned or controlled by such Person or by any one or more of its
subsidiaries, or by such Person and one or more of its subsidiaries; or (c) is
otherwise controlled, directly or indirectly, by such Person.
“Surviving Company”
shall have the meaning set forth in the Recitals.
“Takeover Laws” shall
mean any “moratorium”, “control share”, “fair price”, “affiliate transaction”,
“business combination”, or other applicable anti-takeover Laws or regulations
applicable to the transactions contemplated by this Agreement or the Company
Ancillary Agreements including, without limitation, Section 203 of the
DGCL.
“Takeover Provisions”
shall have the meaning set forth in Section 3.28.
“Tax”, “Taxation” or “Taxes” shall mean all
forms of Federal, state, county, local, municipal, foreign and other taxes,
levies, dues, imposts, assessments, duties, tariffs or similar charges of any
kind whatsoever of any jurisdiction imposed or charged by a Taxing Authority,
including all corporate franchise, income, sales, supplies, occupation, use,
goods and services, ad valorem, receipts, value added, profits, license,
withholding, payroll, employment, unemployment, excise, premium, property,
customs, net worth, capital gains, capital transfer, unclaimed property,
inheritance, social security, foreign social insurance and/or benefits,
alternative minimum, recapture and other taxes, and including any interest,
fines, penalties and additions imposed with respect to such amounts, whether
disputed or not.
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“Tax Claim” shall have
the meaning set forth in Section 9.2(c).
“Taxing Authority”
shall mean any domestic, foreign, Federal, national, state, county or municipal
or other local government, any subdivision, agency, commission or authority
thereof, or any quasi governmental body exercising any taxing authority or any
other authority exercising tax regulatory authority.
“Terminable Contracts”
shall mean any Contract that can be terminated by the Company for any reason at
the option of the Company, as the case may be, on not more than 90 days notice
without material penalty to the Company.
“Termination Date”
shall have meaning set forth in Section 10.1(b)(ii).
“Third Party Claim”
shall have the meaning set forth in Section 11.4(b).
“Third Party Licensed
Intellectual Property” shall have the meaning set forth in Section
3.14(c).
“Trade Secrets” shall
have the meaning set forth in the definition of “Intellectual
Property.”
“Trademarks” shall
have the meaning set forth in the definition of “Intellectual
Property.”
“Transfer Taxes” shall
have the meaning set forth in Section 9.1(c).
“Treasury Regulations”
means the United States Treasury Regulations promulgated under the Code, and any
reference to any particular Treasury Regulation section shall be interpreted to
include any final or temporary revision of or successor to that section
regardless of how numbered or classified.
“Voting Debt” shall
mean indebtedness having general voting rights and debt convertible into
securities having such rights.
“WARN Act” shall mean
the Worker Adjustment and Retraining Notification Act.
“Xxxxx Fargo Loan”
shall mean the loan and credit made available to the Company pursuant to the
Xxxxx Fargo Bank Loan Documents.
“Xxxxx Fargo Bank Loan
Documents” shall mean (i) Line of Credit Letter Agreement dated January
1, 2009, between the Company and Well Fargo Bank, National Association; (ii)
First Amendment dated October 1, 2009, to Line of Credit Letter Agreement
between the Company and Well Fargo Bank, National Association; (iii) Revolving
Line of Credit Note dated January 1, 2009; (iv) Continuing Security Agreement:
Rights to Payment and Inventory dated January 1, 2009, between the
Company and Well Fargo Bank, National Association; and (v) Security
Agreement: Equipment dated January 1, 2009, between the Company and Well Fargo
Bank, National Association.
“Working Capital”
shall mean the Current Assets of the Company less the Current
Liabilities of the Company, as calculated in a manner consistent with the
calculation of the Working Capital Target.
“Working Capital
Adjustment” shall mean the Determination Date Working Capital minus the
Working Capital Target.
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“Working Capital
Target” shall mean the average Working Capital of the Company for the
twelve-month period ended April 30, 2010, calculated as of the last day of each
such month and in the manner set forth on Schedule
1.1(a).
“Work Interference”
shall have the meaning set forth in Section 3.20(a).
“Written Consent of the
Company’s Board of Directors” shall have the meaning set forth in Section
6.18.
“Written Consent of the
Company’s Stockholders” shall have the meaning set forth in Section
6.18.
“Written Consents”
shall mean the Written Consent of the Company’s Board of Directors and the
Written Consent of the Stockholders.
1.2 Certain Words and
Symbols. (a) The
words “hereof,” “herein,” “hereby” and “hereunder,” and words of like import,
refer to this Agreement as a whole and not to any particular section
hereof. References herein to any section, schedule or exhibit refer
to such section of, or such schedule or exhibit to, this Agreement unless the
context otherwise requires. All pronouns and any variations thereof
refer to the masculine, feminine or neuter gender, singular or plural, as the
context may require. Words in the singular include the plural and in
the plural include the singular. All references to “dollars” or “$”
in this Agreement refers to United States dollars. A reference to a
particular statute, statutory provision or subordinate legislation is a
reference to it as it is in force from time to time taking account of any
amendment or re-enactment and includes any statute, statutory provision or
subordinate legislation which it amends or re-enacts and subordinate legislation
for the time being in force made under it.
(b) References
to (i) any United States legal term for any action, remedy, method of judicial
proceeding, legal document, legal status, court, official, or any legal concept
or thing shall, in respect of any jurisdiction other than the United States be
deemed to include that which in that jurisdiction most nearly approximates to
the legal term in question, (ii) any event described in this Agreement as
occurring in the United States or as a result of United States law shall include
any analogous event occurring outside the United States or as a result of the
Laws of a jurisdiction to which a Subsidiary is subject and; (iii) any laws of
the United States shall, if applied, to any Subsidiary incorporated otherwise
than in the United States, be deemed to include the most nearly
approximating Laws in each jurisdiction relevant to that
Subsidiary.
ARTICLE
II
THE
MERGER; PAYMENT OF MERGER CONSIDERATION
2.1 The Merger. (a) Upon
the terms and subject to the conditions set forth in this Agreement, and in
accordance with the DGCL, at the Effective Time, Merger Sub One shall be merged
with and into the Company in the First Step Merger, the separate corporate
existence of Merger Sub One shall thereupon cease and the Company shall continue
as the Interim Surviving Corporation of the First Step Merger and as a
wholly-owned Subsidiary of the Purchaser and shall succeed to and assume all of
the rights and obligations of the Company and Merger Sub One in accordance with
the DGCL. The Company and Merger Sub One are sometimes referred to
collectively herein as the “Interim Constituent Corporations.”
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(b) As
part of a single integrated plan, immediately following the First Step Merger,
upon the terms and subject to the conditions set forth in this Agreement and the
applicable provisions of the DGCL, the Interim Surviving Corporation shall be
merged with and into Merger Sub Two in the Second Step Merger, the separate
corporate existence of the Interim Surviving Corporation shall thereupon cease
and Merger Sub Two shall continue as the Surviving Company of the Second Step
Merger and as a wholly-owned Subsidiary of the Purchaser and shall succeed to
and assume all of the rights and obligations of the Interim Surviving
Corporation and Merger Sub Two in accordance with the DGCL. The
Interim Surviving Corporation and Merger Sub Two are sometimes referred to
collectively herein as the “Constituent Companies.”
2.2 Effective Time of the First
Step Merger and the Second Step Merger. (a)
At the Closing or as soon as practicable thereafter, the parties hereto shall
cause a certificate of merger substantially in the form attached hereto as
Exhibit I (the “Certificate of Merger”) to be executed and filed with the
Secretary of State of the State of Delaware (the “Secretary of State”) in
accordance with the relevant sections of the DGCL, and shall take all such other
and further actions as may be required by Law to make the First Step Merger
effective. The First Step Merger shall become effective as of the
filing of the Certificate of Merger with the Secretary of State. The
date and time of such effectiveness are referred to herein as the “Effective
Time.”
(b) Immediately
after the Effective Time of the First Step Merger, Parent shall cause the Second
Step Merger to be consummated under the DGCL and the LLC Act by filing a
certificate of merger in customary form and substance with the Secretary of
State of the State of Delaware in accordance with the applicable provisions of
the DGCL and the LLC Act.
2.3 Closing of the
Merger. The
closing of the Merger (the “Closing”) shall take
place in the offices of Xxxx Xxxxxxx, P.C., 1350 Avenue of the Americas, 00xx
Xxxxx, Xxx Xxxx, Xxx Xxxx, simultaneous with or as soon as practicable
thereafter upon the effective time of the merger pursuant to the Black Diamond
Merger Agreement and satisfaction or waiver (by the party entitled to the
benefits thereof) of the conditions set forth in Article VII and Article VIII,
other than those conditions that by their nature are to be satisfied at the
Closing but subject to the fulfillment or waiver of those conditions (the “Closing
Date”).
2.4 Effects of the First Step
Merger and the Second Step Merger. (a) At
the Effective Time of the First Step Merger:
(i) the
certificate of incorporation of the Company as in effect immediately prior to
the Effective Time shall be the certificate of incorporation of the Interim
Surviving Corporation until thereafter changed or amended as provided therein or
by applicable Law;
(ii) the
bylaws of the Company as in effect immediately prior to the Effective Time will
be the bylaws of the Interim Surviving Corporation until thereafter changed or
amended as provided therein or by applicable Law;
(iii) the
directors of Merger Sub One shall be the initial directors of the Interim
Surviving Corporation and such directors will hold office until the earlier of
their resignation or removal or until their respective successors are duly
elected and qualified, as the case may be;
(iv)
the officers of Merger Sub One immediately prior to the Effective Time shall be
the officers of the Interim Surviving Corporation, each to hold office in
accordance with the certificate of incorporation and bylaws of the Interim
Surviving Corporation, in each case until their respective successors are duly
elected and qualified;
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(v) except
as specifically set forth in this Agreement, the Interim Surviving Corporation
shall possess all the rights, privileges, powers and franchises of a public, as
well as of a private nature, of each of the Interim Constituent Corporations,
and all property, real, personal and mixed, including contract rights, and all
debts due on whatever account, and all other choses in action, and all and every
other interest of or belonging to or due to each of the Interim Constituent
Corporations shall be taken and deemed to be transferred to and vested in the
Interim Surviving Corporation without further act or deed, all in accordance
with the applicable provisions of the DGCL; and
(vi)
the Interim Surviving Corporation shall thenceforth be subject to all
restrictions, disabilities and duties of and be responsible and liable for all
liabilities and obligations of each of the Interim Constituent Corporations, and
any action or proceeding pending by or against either of the Interim Constituent
Corporations may be prosecuted as if such First Step Merger had not taken place
or the Interim Surviving Corporation may be substituted in its place; and
neither the rights of creditors nor Liens upon the property of either of the
Interim Constituent Corporations shall be impaired by the First Step Merger, all
in accordance with the applicable provisions of the DGCL.
(b) At
the effective time of the Second Step Merger:
(i) the
certificate of formation of Merger Sub Two as in effect immediately prior to the
effective time of the Second Step Merger shall be the certificate of formation
of the Surviving Company until thereafter changed or amended as provided therein
or by applicable Law; provided; however, that such
certificate of formation shall be amended such that the name of the
Surviving Company shall be “Xxxxxxx Mountain Products,
LLC”;
(ii) the
limited liability agreement of Merger Sub Two as in effect immediately prior to
the effective time of the Second Step Merger will be the limited liability
agreement of the Surviving Company until thereafter changed or amended as
provided therein or by applicable Law;
(iii) the
managers of Merger Sub Two shall be the managers of the Surviving Company and
such managers will hold office until the earlier of their resignation or removal
or until their respective successors are duly elected and qualified, as the case
may be;
(iv) the
officers of Merger Subs immediately prior to the effective time of the Second
Step Merger shall be the officers of the Surviving Company, each to hold office
in accordance with the certificate of formation and operating agreement of the
Surviving Company, in each case until their respective successors are duly
elected and qualified;
(v) except
as specifically set forth in this Agreement, the Surviving Company shall possess
all the rights, privileges, powers and franchises of a public, as well as of a
private nature, of each of the Constituent Companies, and all property, real,
personal and mixed, including contract rights, and all debts due on whatever
account, and all other choses in action, and all and every other interest of or
belonging to or due to each of the Constituent Companies shall be taken and
deemed to be transferred to and vested in the Surviving Company without further
act or deed, all in accordance with the applicable provisions of the DGCL and
the LLC Act; and
(vi) the
Surviving Company shall thenceforth be subject to all restrictions, disabilities
and duties of and be responsible and liable for all liabilities and obligations
of each of the Constituent Companies, and any action or proceeding pending by or
against either of the Constituent Companies may be prosecuted as if such Second
Step Merger had not taken place or the Surviving Company may be substituted in
its place; and neither the rights of creditors nor Liens upon the property of
either of the Constituent Companies shall be impaired by the Second Step Merger,
all in accordance with the applicable provisions of the DGCL and the LLC
Act.
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2.5 Effect of First Step Merger
on Capital Stock of Constituent Corporation.
(a) Company Shares. As
a result of the First Step Merger and without any action on the part of the
holders thereof, at the Effective Time, all shares of Company Common Stock shall
cease to be outstanding and each certificate shall be cancelled and retired and
shall cease to represent any rights with respect to the Company Common Stock,
and each of the Stockholders (other than Purchaser Parent, Purchaser and Merger
Sub One, if any such parties are then Stockholders) shall thereafter cease to
have any rights with respect to such shares of Company Common Stock, except the
right to receive, subject to the terms and conditions set forth in this Article
II, the Merger Consideration Price Per Share, without interest, upon the
surrender of a certificate or certificates representing such shares of Company
Common Stock (the “Company Common Stock
Certificates”) to the Purchaser pursuant to Section 2.7
hereof. At the Effective Time, each share of Company Common Stock and
Company Preferred Stock then held in the Company’s treasury shall, by virtue of
the First Step Merger and without any action on the part of the holder thereof,
cease to be outstanding and shall be cancelled without payment of any Merger
Consideration or any other consideration therefor.
(b) Merger Sub
One. Subject to the terms and conditions of this Article II,
at the Effective Time, each share of Merger Sub One common stock issued and
outstanding immediately prior to the Effective Time shall continue to be issued
and outstanding and shall constitute the only issued and outstanding shares of
the Interim Surviving Corporation.
2.6 Payment of Merger
Consideration. At the
Effective Time, the Merger Consideration shall be payable by the Purchaser to
the Stockholders, as follows:
(a) an
amount equal to one-half of the Merger Consideration (the “Subordinated Note Merger
Consideration Amount”), shall be payable by the Purchaser by issuance and
delivery of a Subordinated Note by Purchaser Parent to each of the Stockholders
in a principal amount equal to the Subordinated Note Merger Consideration Amount
multiplied by the Proportional Share of each Stockholder; and
(b) an
amount equal to one-half of the Merger Consideration (the “Common Stock Merger
Consideration Amount”) shall be payable by the Purchaser by issuance and
delivery of a stock certificate representing a number of duly authorized and
non-assessable shares (the “Merger Consideration Shares”) of Purchaser Parent
Common Stock to each of the Stockholders with a value equal to the Common Stock
Merger Consideration Amount multiplied by the Proportional Share of each
Stockholder and calculated pursuant to Section 2.8 hereof.
2.7 Exchange for Merger
Consideration. At the
Effective Time, the Stockholders shall deliver to the Purchaser all of the
Company Common Stock Certificates representing the Shares. Any
Company Common Stock surrendered shall forthwith be cancelled. No
interest will be paid or will accrue on any cash payable upon surrender of any
of the Company Common Stock. From and after the Effective Time, and
until surrendered as contemplated by this Section 2.7, each Company Common Stock
Certificate shall be deemed at any time after the Effective Time for all
purposes, to represent only the right to receive upon surrender thereof the
Merger Consideration with respect to the shares formerly represented thereby
pursuant to the terms hereof. From and after the Effective Time,
there shall be no transfers on the stock transfer books of the Company of the
shares of Company Common Stock that were outstanding immediately prior to the
Effective Time. All shares of Company Common Stock delivered to the
Purchaser in accordance with the terms of this Article II and any Merger
Consideration paid pursuant to this Article II shall be deemed to have been paid
at the Effective Time in full satisfaction of all rights pertaining to the
shares of Company Common Stock.
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2.8
Merger Consideration
Shares. For
purposes of determining the number of shares of Purchaser Parent Common Stock
which shall constitute the Merger Consideration Shares and the Eligible Employee
Shares, whether issuable at the Effective Time to Stockholders in accordance
with Section 2.6(b), or cancelable in connection with the Right of Set-Off of
any indemnification claim made by the Purchaser Indemnified Parties against the
Stockholders for indemnifiable Losses by means of a cancellation and reduction
in the number of Merger Consideration Shares pursuant to Section 11.6(b), the
value of Purchaser Parent Common Stock shall be $6.00 per share. If,
on or prior to the date any shares of the Purchaser Parent’s Common Stock are
issued to the Stockholders and the Eligible Employees, Purchaser Parent should
split or combine the Purchaser Parent Common Stock, or pay a stock dividend or
other stock distribution in Purchaser Parent Common Stock, or otherwise change
the Purchaser Parent Common Stock into any other securities, or make any other
dividend or distribution on the Purchaser Parent Common Stock (other than normal
quarterly dividends, as the same may be adjusted from time to time and in the
ordinary course), then the number of Merger Consideration Shares issuable at the
Effective Time will be appropriately adjusted to reflect such split,
combination, dividend or other distribution or
change.
2.9 KSS Award Cancellation
Payment. As of the
Closing, each outstanding KSS Award held by an Eligible Employee shall be
cancelled and extinguished and converted into the right to receive each Eligible
Employee’s portion of the KSS Award Cancellation Payment as set out on Schedule
6.16 attached hereto, and shall be payable at Closing: (i) one-half in cash,
less any applicable withholding Taxes, and (ii) one-half in shares of Purchaser
Parent Common Stock issued by the Purchaser Parent directly to each of the
Eligible Employees (the “Eligible Employee Shares”). The payment of
the KSS Award Cancellation Payment is subject to each Eligible Employee
executing and delivering a Participant Release to the Company.
2.10 Transfer
Restrictions.
(a) The
Merger Consideration Shares to be issued to the Stockholders pursuant to this
Agreement as well as the Eligible Employee Shares to be issued to the Eligible
Employees shall be subject to the transfer restrictions set forth in the Lock-Up
Agreement.
(b) Upon
the original issuance thereof, and until such time as the same is no longer
required under applicable requirements of the Securities Act or applicable state
laws and accompanied by an opinion of counsel reasonably satisfactory to the
Purchaser Parent that registration under the Securities Act is not required,
each certificate representing the Merger Consideration Shares and the Eligible
Employee Shares, as well as all certificates issued in exchange for or in
substitution of the Merger Consideration Shares, shall bear a legend to the
following effect:
“THE
TRANSFER OF THE SECURITIES EVIDENCED HEREBY IS RESTRICTED BY THE TERMS OF A
LOCK-UP AGREEMENT DATED ________, 2010, BETWEEN THE REGISTERED HOLDER HEREOF AND
THE ISSUER HEREOF. A COPY OF THE LOCK-UP AGREEMENT IS ON FILE AT THE
PRINCIPAL OFFICES OF THE ISSUER. IN ADDITION, THE SECURITIES
REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES
ACT OF 1933, AS AMENDED, (THE “SECURITIES ACT”) AND MAY BE OFFERED, SOLD,
ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED ONLY PURSUANT TO AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT (PROVIDED BY RULE 144
THEREUNDER OR OTHERWISE, INCLUDING AN OFFER, SALE, OR TRANSFER OUTSIDE THE
UNITED STATES IN ACCORDANCE WITH RULE 904 OF REGULATION S UNDER THE SECURITIES
ACT AND IN COMPLIANCE WITH ANY APPLICABLE UNITED STATES SECURITIES LAWS), IF
ACCOMPANIED BY AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE ISSUER THAT
REGISTRATION UNDER THE SECURITIES ACT IS NOT REQUIRED. HEDGING
TRANSACTIONS INVOLVING THE SECURITIES REPRESENTED HEREBY MAY NOT BE
CONDUCTED."
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(c) Upon
the original issuance thereof, and until such time as the same is no longer
required under applicable requirements of the Securities Act or applicable state
laws and accompanied by an opinion of counsel reasonably satisfactory to the
Purchaser Parent that registration under the Securities Act is not required,
each Subordinated Note representing the Subordinated Note Merger Consideration
Amount, as well each Subordinated Note issued in exchange for or in substitution
of the Subordinated Note Merger Consideration Amount:
“THIS
NOTE HAS NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS
AMENDED, AND MAY NOT BE OFFERED, SOLD, ASSIGNED OR TRANSFERRED IN THE ABSENCE OF
AN EFFECTIVE REGISTRATION STATEMENT UNDER SAID ACT OR UNLESS THE ISSUER HAS
RECEIVED AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE ISSUER THAT
REGISTRATION UNDER SAID ACT IS NOT REQUIRED."
2.11
Closing Indebtedness
Payment; Certain Company Transaction Expenses. At the
Closing, Purchaser shall, in accordance with Section 6.9, pay the Closing
Indebtedness Payment and any and all amounts of outstanding Company Transaction
Expenses set forth on the Company Closing Certificate.
2.12 Tax Treatment. The
parties intend the Merger to constitute a “reorganization” within the meaning of
Section 368(a) of the Code and adopt this Agreement as a “plan of
reorganization” within the meaning of Treasury Regulations Section 1.368-2(g)
that includes the parties hereto as parties to the
reorganization. Purchaser Parent will report the Merger, and will
cause the Company to report the Merger, on their U.S. and other applicable
income tax returns in a manner consistent with the Merger constituting a
reorganization within the meaning of Code Section 368(a) and will comply with
all reporting and record-keeping obligations of such reorganization and such
transaction as set forth in the Code and the Treasury Regulations promulgated
thereunder, including the record-keeping and information filing requirements of
Treasury Regulations Section 1.368-3. Notwithstanding the foregoing,
the parties acknowledge and agree that if the Merger does not for any reason
qualify as a reorganization within the meaning of Section 368(a) of the Code,
the First Step Merger shall constitute a “qualified stock purchase” of the stock
of the Company within the meaning of Section 338(d)(3) of the Code.
ARTICLE
III
REPRESENTATIONS
AND WARRANTIES REGARDING THE COMPANY
Simultaneously
with the execution of this Agreement, the Company has delivered to the Purchaser
Parent and Purchaser a disclosure schedule with numbered sections and
subsections corresponding to the relevant schedules (and subsections thereof)
identified in this Agreement (the “Company Disclosure
Schedule”). Each item set forth on the Company Disclosure
Schedule is identified by reference to, or grouped under a heading referring to,
or by specific cross references to, a specific section or subsection of this
Agreement. Any item disclosed in any section or subsection of the
Company Disclosure Schedule shall be deemed to have been made with respect to
each other section or subsection of the Company Disclosure Schedule so long as
it is reasonably apparent from the context of such disclosure that the
disclosure in such other section or subsection is also applicable to the
relevant section or subsection notwithstanding the omission of a cross-reference
thereto. Capitalized terms used and not otherwise defined in the
Company Disclosure Schedule shall have the respective meanings ascribed to them
in this Agreement.
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In order
to induce the Purchaser, Purchaser Parent and Merger Subs to enter into this
Agreement and to consummate the transactions contemplated hereby, the Company
represents and warrants to Purchaser, Purchaser Parent and Merger Subs as
follows:
3.1 Organization of the
Company. The
Company is a corporation duly organized, validly existing and operated and, with
respect to its corporate formation and existence, is in good standing under the
Laws of the State of Delaware and in accordance with its Governing
Documents. The Company has all requisite entity power and authority
to own, operate and lease their respective assets and to carry on its respective
businesses as now being conducted and as proposed to be conducted and is
qualified or licensed to do business and in good standing and validly operated
in each jurisdiction where the nature of its business or the ownership, leasing
or operation of its assets and properties renders such qualification, license or
good standing necessary, except where such failures to be so qualified or in
good standing would not, in the aggregate, have or reasonably be expected to
have a Material Adverse Effect. Schedule 3.1 sets
forth, with respect to the Company, the jurisdiction in which each is
constituted, registered, organized and qualified or licensed to do
business.
3.2 Capitalization of the
Company. (a) The
authorized capital stock of the Company consists solely of (a) 10,000 shares of
Company Common Stock, of which 83.87 shares are issued and outstanding and held
of record by the Persons and in the amounts set forth on Schedule 3.2(a)
hereto, and (b) 5,000 shares of Company Preferred Stock, none of which have been
issued or are reserved for issuance. There are no Rights issued and
outstanding for capital stock or Equity Interests of the Company. All
of the issued and outstanding shares of Company Common Stock are issuable, duly
authorized, validly issued, fully paid and non-assessable.
(b) At
the Closing, after giving effect to the transactions contemplated to occur at or
prior to Closing hereunder, no Rights will be or become exercisable or
exchangeable for, convertible into, or otherwise give its holder any right to
acquire any Equity Interests of the Company.
(c) The
Company does not control directly or indirectly or has any direct or indirect
Equity Interests, Rights or equity participation in any corporation,
partnership, trust, or other business association and there is no other Person
with respect to which (i) the Company may be deemed to be in control because of
factors or relationships other than the quantity of stock or other interests
owned in such Person (if any) or (ii) the Company may be liable under any
circumstances for the payment of additional amounts with respect to its interest
in such Person, whether in the form of assessments, capital calls, installment
payments, general partner liability or otherwise.
(d) There
is no Voting Debt of the Company.
3.3 Authorization;
Enforceability. The
Company and each of the Stockholders have full entity power and authority to
execute, deliver and perform this Agreement and any Company Ancillary Agreement
to which it is a party, and to consummate the transactions contemplated hereby
and thereby, subject only to receiving the affirmative vote of Stockholders
holding a majority of the issued and outstanding shares of the Company Common
Stock, which is the only class or series of capital stock of the Company
necessary to approve the Merger and this Agreement and the transactions
contemplated hereby. The execution, delivery and performance of this
Agreement, the Company Ancillary Agreements and all other documents and
agreements to be delivered by the Company or the Stockholders pursuant hereto or
thereto, and the consummation of the transactions contemplated hereby and
thereby, have been duly and validly approved and authorized by all requisite
entity action on the part of the Company or the Stockholders, as the case may
be. This Agreement has been (and each of the Company Ancillary
Agreements when executed will be) duly and validly executed and delivered by the
Company and the Stockholders, as the case may be, and, constitutes (or, in the
case of each of the Company Ancillary Agreements when executed will constitute),
the legal, valid and binding obligation of the Company or the Stockholders, as
the case may be, enforceable against it in accordance with its respective terms,
except as such enforcement may be limited by bankruptcy, insolvency,
reorganization, or other similar Laws affecting or relating to the rights of
creditors generally or by general principles of equity.
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3.4
Financial
Statements. Schedule 3.4 contains
true and complete copies of the following: (a) the audited balance sheets and
related audited statements of income, stockholders’ equity, and cash flows for
the Company as of and for the fiscal years ended December 31, 2009, 2008 and
2007 (the “Financial
Statements”), and (b) the Interim Financial Statements through March 31,
2010. The Financial Statements, such Interim Financial Statements
and, when prepared and delivered the Determination Date Balance Sheet, and any
additional Interim Financial Statements required to be delivered hereunder will
have been prepared from, and are or will, as the case may be, in accordance with
and accurately reflect, in all material respects, the books and records of the
Company. The Financial Statements, and the Interim Financial
Statements delivered herewith and, when prepared and delivered, the
Determination Date Balance Sheet, and any additional Interim Financial
Statements required to be delivered hereunder will have been prepared in
accordance with GAAP (subject, in the case of the Interim Financial Statements,
and the Determination Date Balance Sheet, to normally recurring year-end audit
adjustments, the absence of footnotes and the last sentence of this Section 3.4)
for the periods presented. The Financial Statements and the Interim
Financial Statements delivered herewith fairly present and, when prepared and
delivered, the Determination Date Balance Sheet and any additional Interim
Financial Statements required to be delivered hereunder will fairly present in
all material respects, the financial position and, if applicable, the results of
operations and cash flows of the Company as of the times and for the periods
referred to therein. The Determination Date Balance Sheet when
delivered, shall contain an adequate accrual for Code Subpart F Income Taxes
regardless of whether required by GAAP.
3.5 Governing Documents; Books
and Records. A
true, correct and complete copy of (a) the Governing Documents of the Company,
(b) the stock ledgers and stock transfer records of the Company and (c) copies
of all minutes of the stockholders and board of directors and all committees
thereof (or equivalent) of the Company occurring since March 3, 2008 have
heretofore been made available to the Purchaser or its counsel in the Electronic
Data Room (subject to the redaction of information relating to the
sale of the Company hereunder or any similar alternative
transactions). Such Governing Documents, summary of stock
transactions and minutes of the Company are complete, true and correct in all
material respects, and have been maintained in accordance with all applicable
Laws. Except as set forth on Schedule 3.5, to the
Knowledge of the Company, the auditors of the Company have not found any
deficiency or material weakness in the Company’s internal controls under
applicable auditing standards.
3.6 Absence of Undisclosed
Liabilities. The
Company does not have any material direct or indirect Indebtedness, liability,
claim, loss, damage, deficiency, obligation or responsibility of a nature that
would be required to be reflected on a balance sheet prepared in accordance with
GAAP (“Liabilities”), other
than those Liabilities (a) which are not material in the aggregate, (b) which
are set forth or adequately provided for in the Financial Statements or the
Interim Financial Statements delivered herewith, (c) have been incurred since
the Balance Sheet Date in the Ordinary Course of Business or (d) are set forth
on Schedule
3.6.
3.7 Compliance with Law;
Governmental Authorizations. (a)
The Company has complied in all material respects with, is not in
violation of, and has not received notices of violation with respect
to any Law which, individually or in the aggregate with each such other
violation, noncompliance, notification or underlying matters in respect thereof,
could reasonably be expected to result in a material Liability to the
Company. The Company has previously made available to the Purchaser
or its counsel the Electronic Data Room true and correct copies of all reports
of material inspections received by it with respect to each of the businesses
and properties of the Company under applicable Laws which occurred since March
3, 2008, and resulted in, or would result in, Losses to the Company equal to or
exceeding an aggregate amount of $50,000.00. To the Knowledge of the
Company, no investigation, inspection, audit, or other proceeding by any
Governmental Authority involving an allegation of violation of any applicable
Law is threatened or contemplated.
22
(b) Except
as set forth on Schedule 3.7(b), the
Company has obtained all licenses, permits, certificates, consents and approvals
from Governmental Authorities (the “Licenses”) that are
necessary for the business and operations of the Company as presently
conducted. All material Licenses of the Company are in full force and
effect, and no written notice of any pending violation, removal, revocation or
non-renewal has been received by the Company in respect of any such material
Licenses. The Company does not have any Knowledge that any material
License of the Company will not be renewed in the ordinary course or will be
revoked, terminated, suspended or impaired nor does the Company have Knowledge
of any circumstances that would result in the same. The consummation
of the transactions contemplated hereunder and the operation of the business of
the Company by the Surviving Company in the manner in which the Company
currently operates will not require or result in the transfer of any License
that may not be transferred without the consent or approval of any Governmental
Authority or other Person.
3.8 No Conflicts; Change of
Control. (a)
the execution, delivery and performance by the Company and the Stockholders
of this Agreement and the Company Ancillary Agreements and Stockholders
Ancillary Agreements, and the consummation of the transactions contemplated
hereby and thereby will not (i) violate any provision of the Governing Documents
of the Company or the Stockholders, (ii) with the exception of the Xxxxx Fargo
Loan, violate, or be in conflict with, or constitute a default (or an event
which, with notice or lapse of time or both, would constitute a default) under,
or result in, or provide the basis for, the termination of, or accelerate the
performance required by, or excuse performance by any Person of any of its
obligations under, or cause the acceleration of the maturity of any Indebtedness
or obligation pursuant to, or result in the creation or imposition of any Lien
upon any material property or assets of the Company or the Stockholders under
any Material Contract to which the Company or any Company Subsidiary is a party
or by which any of their properties or assets are bound, or (iii) violate any
Law or Order of any Governmental Authority applicable to the Company or the
Stockholders in any material respect, or require the consent, approval or action
of, filing with or notice to any Governmental Authority or except as set forth
on Schedule
3.8(a), any other Person in order for the Company or the
Stockholders, to consummate the transactions contemplated by this Agreement or
any of the Company Ancillary Agreements or Stockholders Ancillary
Agreements.
(b) Except
as set forth on Schedule 3.8(b), the
transactions contemplated by this Agreement will not constitute a “change of
control” under, require the consent from or the giving of notice to a party
pursuant to, permit a party to terminate or accelerate vesting, repayment or
repurchase rights, or create any other material detriment under the terms,
conditions or provisions of, any Material Contract.
3.9 Contracts. (a) Set
forth on Schedule
3.9(a) is a list each of the following Contracts to which the Company is
a party or is otherwise bound:
(i) each
Contract or series of related Contracts that in the aggregate (A) involves a
commitment or potential commitment for expenditure or other obligation or
potential obligation, or which provides for the receipt (other than sale or
purchase orders for goods and materials) by the Company of an amount or value in
excess of $100,000.00, other than any Terminable Contracts entered into in the
Ordinary Course of Business; or (B) that is executory in whole or in part, was
not entered into in the Ordinary Course of Business and that involves
expenditures or receipts of the Company in excess of $25,000.00 in respect of an
individual Contract or $100,000.00 in the aggregate;
23
(ii) each
real property lease, sublease, rental or occupancy Contract, license,
installment Contract, conditional sale Contract or other Contract with material
outstanding obligations or liability, contingent or otherwise, to which the
Company is a party or is otherwise bound relating to the sale, purchase,
ownership, title, lease, use or occupancy of real property or material personal
property other than Contracts described in Section 3.9(a)(i) or Contracts
entered into in the Ordinary Course of Business for services, repair,
construction or maintenance with payment obligations of less than $50,000.00 per
Contract;
(iii) each
collective bargaining Contract and any other material Contract to or with any
labor union, trade union or other employee representative, body or organization
of a group of employees of the Company;
(iv) each
joint venture, partnership or similar Contract involving a sharing of profits,
losses, costs or Liabilities by the Company with any other Person;
(v) each
Contract containing outstanding covenant or other obligations that in any way
restricts the business activity of the Company or limits the freedom of the
Company to engage in any line of business or to compete with any
Person;
(vi) each
Contract (A) relating to any Company providing for commission, compensation,
royalty or other payments to or by any Person based on sales, purchases or
profits (other than direct payments for goods), other than Terminable Contracts
entered into in the Ordinary Course of Business, or (B) that is a sales,
distribution, supply or franchise Contract that is not a Terminable Contract and
provides for compensation at an amount or rate which is higher than is customary
or usual in the applicable business of the Company;
(vii) each
power of attorney that is currently effective and outstanding granted by and
relating to the Company (other than powers of attorney delivered in the Ordinary
Course of Business to (A) customs brokers and similar Persons involved in the
transport of Company or Company Subsidiary goods, (B) the Company’s auditors,
accountants and fiscal agents with respect to Tax matters and (C) the attorneys
for the Company in connection with the prosecution of Intellectual Property
rights);
(viii) each
written warranty, guaranty, and/or other similar undertaking with respect to
either Products or contractual performance extended by the Company, other than
those which are otherwise set forth in the Material Contracts;
(ix) each
written or oral Contract with any key employee, consultant, director or officer
of the Company, including any employment or compensation agreements, other than
at will oral employment Contracts that are Terminable Contracts;
(x) each
Contract (A) relating to Indebtedness of the Company for borrowed money, (B)
relating to security given in respect of, or the guaranty by the Company of, any
Indebtedness of the Company for borrowed money or any other liability or
obligation of such Person, (C) imposing a Lien, other than Permitted Liens, on
any asset of the Company or (D) relating to any loans or advances to, or
investment in, or guaranty, financial support, or security given in respect of,
Indebtedness or any other liability or obligation of any Person;
(xi) each
Contract related to Company Intellectual Property, including License Agreements,
other than (a) “click-through” Contracts for off-the-shelf Software entered into
in the Ordinary Course of Business or (b) standard dealer agreements
substantively in the form(s) previously made available to Purchaser in the
Electronic Data Room granting a right to use the Company
Trademarks;
24
(xii) each
other Contract which the termination of, or expiration without renewal of would
be materially adverse to the Company.
(b) The
Company has performed all of the material obligations required to be performed
by it and is entitled to all material benefits under, and is not in default in
respect of, any Material Contract to which it is a party or by which it or any
of its undertaking, assets or properties is bound. The Company has
not received written notice or, to the Company’s Knowledge, oral notice, of a
breach or default which remains uncured or a pending or threatened cancellation,
revocation or termination of any Material Contract and, to the Knowledge of the
Company, no event has occurred and no condition or state of facts exists which,
with the passage of time or the giving of notice or both, would constitute such
a default or breach by the Company or by any other Person.
(c) Each
Material Contract is in full force and effect and constitutes a valid and
binding obligation of the Company and, to the Knowledge of the Company, each
other party thereto, in accordance with its terms, except as such enforcement
may be limited by the effect of bankruptcy, insolvency, reorganization, or other
similar Laws affecting or relating to the rights of creditors generally or by
general principles of equity.
(d) None
of the Material Contracts was entered into other than in the Ordinary Course of
Business of the Company.
(e) Except
as set forth on Schedule 3.9(e), the
Company has made available to the Purchaser in the Electronic Data Room
complete, true and correct copies of all of the Material
Contracts. Such agreements set forth on Schedule 3.9(e) are
not, individually or in the aggregate, material to the Company.
3.10 Litigation;
Disputes. (a) Except
as set forth on Schedule 3.10(a),
other than Litigations that both (i) are solely for monetary damages against the
Company and (ii) under which the maximum Liability to the Company is not greater
than 50,000.00, there are no Litigations or governmental investigations pending
or, to the Knowledge of the Company threatened, against the Company, or, in
connection with the activities of the Company, any directors, officers,
employees or agents thereof, before or by any Governmental Authority, or which
questions or challenges the validity of this Agreement or any Company Ancillary
Agreement or any Stockholders Ancillary Agreement or any action taken
or to be taken by the Company or any Company Ancillary Agreement or any
Stockholders Ancillary Agreement or in connection herewith or
therewith. There are no pending or, to the Knowledge of the Company,
threatened claims against the Company in favor of directors, officers, employees
or agents of the Company.
(b) The
Company is not, nor has it ever been, party to any Litigation that has resulted
in or will result in a Material Adverse Effect.
3.11 Taxes. (a) Except
as set forth on Schedule
3.11(a):
(i) All
Returns required to be filed by or on behalf of the Company through the date
hereof have been filed, or requests for extensions have been timely filed, and
any such extensions have been granted and have not expired; and all such Returns
required to be filed by or on behalf of the Company on or before the Closing
Date will be timely filed and all Taxes will be fully paid by that date or
provided for by reasonable reserves in accordance with GAAP, whether or not any
such Taxes were reported or reflected in any Returns. Each such
Return was, and in the case of Returns that will be filed after the date hereof
and before the Closing Date, will be, complete, true and correct in all material
respects.
25
(ii) All
material Taxes with respect to taxable periods covered by such Returns and all
other material Taxes required to be paid by the Company for the periods covered
by such Returns, except in the case of Taxes for which Returns are not required
to be filed, or with respect to which the Company has received written notice
from a Taxing Authority asserting potential liability, have been paid in full
and the Determination Date Balance Sheet reflects a reasonable reserve in
accordance with GAAP for all Taxes payable by the Company for all taxable
periods and portions thereof through the Closing Date.
(iii) Since
March 3, 2008, no Return of the Company is or has been under audit or
examination by any Taxing Authority, and no written or oral notice of such an
audit or examination has been received by the Company. Each material
dispute or claim resulting from any audit or examination relating to Taxes by
any Taxing Authority has been finally resolved and any amounts due as a result
thereof have been paid. No material issues relating to Taxes were
raised by the relevant Taxing Authority during any presently pending audit or
examination, if any, and no material issues relating to Taxes were raised by the
relevant Taxing Authority in any completed audit or examination that could
reasonably be expected to recur in a later taxable period. The
Company has not waived any statute of limitations in respect of Taxes or agreed
to any extension of time with respect to a Tax assessment or deficiency since
March 3, 2008. No claim has been made, nor to the Knowledge of the
Company, is any claim pending, by a Taxing Authority in any jurisdiction where
the Company does not file alleging that the Company is or may be subject to
Taxes in that jurisdiction.
(iv) No
Liabilities for Liens for Taxes exist with respect to any of the assets or
properties of the Company, except for statutory liens for Taxes not yet due or
payable or Taxes that are being contested in good faith and for which a
reasonable reserve in accordance with GAAP has been established on the
Determination Date Balance Sheet.
(v) The
Company is not a party to or bound by any tax sharing agreement, tax indemnity
obligation or similar Contract, arrangement or practice with respect to Taxes
(including any advance pricing agreement, closing agreement or other agreement
relating to Taxes with any Taxing Authority).
(vi) The
Company is not required to include in a taxable period ending after the Closing
Date taxable income attributable to income that accrued in a prior taxable
period ending on or before the Closing Date but was not recognized in any prior
taxable period as a result of the installment method of accounting, the long
term contract method of accounting, or Section 481 of the Code or comparable
provisions of state, local or foreign Tax Law, or for any other
reason.
(vii) No
person has made with respect to the Company or any property held by the Company,
any consent under Section 341 of the Code.
(viii) There
is no Contract or other document, agreement, formal or informal arrangement
extending, or having the effect of extending, the period of assessment or
collection of any Taxes of the Company and no power of attorney with respect to
any such Taxes has been executed or filed with any Taxing Authority by or on
behalf of the Company.
(ix) The
Company has within the time and the manner prescribed by Law, withheld from and
paid over to the proper Governmental Authorities all material Taxes required to
be so withheld and paid over under applicable Laws and all records as required
by the applicable Laws have been maintained in respect of all such payments and
withholdings.
26
(x) The
Company has not in any tax year participated in or cooperated with an
international boycott (within the meaning of Section 999(b)(3) of the
Code).
(xi) The
Company has prior to the date hereof made available to Purchaser in the
Electronic Data Room (i) complete, true and correct copies of all material
Returns of the Company relating to Taxes for all taxable periods for which the
applicable statute of limitations has not yet expired, (ii) complete, true and
correct copies of all private letter rulings issued in respect of Taxes of the
Company, and (iii) complete, true and correct copies of all material (and
currently effective, unresolved or pending, as the case may be) notices of
proposed deficiencies.
(xii) Schedule 3.11(a)(xii)
lists (A) each jurisdiction in which the Company joins or has joined for any
taxable period ending after March 3, 2008 in the filing of any consolidated,
combined or unitary Return, and (B) the common parent corporation and the other
individual members of the consolidated, combined or unitary group filing such
Return.
(xiii) Schedule
3.11(a)(xiii) lists each state, county, local, municipal or foreign
jurisdiction in which the Company, is required to file or has been required to
file a Return relating to state and local income, franchise, net worth and sales
and use Taxes or is or has been liable for any Taxes on a “nexus” basis at any
time for taxable periods ending after March 3, 2008.
(xiv) The
Company has not constituted either a “distributing corporation” or a “controlled
corporation” (within the meaning of Section 355(a)(1)(A) of the Code) in a
distribution of stock qualifying for tax free treatment under Section 355 of the
Code (A) within the two year period ending on the date of this Agreement or (B)
which could otherwise constitute part of a “plan” or “series of related
transactions” (within the meaning of Section 355(e) of the Code) in conjunction
with the transactions contemplated by this Agreement.
(xv) The
Company is not a United States real property holding corporation within the
meaning of Section 897 of the Code.
(xvi) The
Company has not ever (A) made an election under Section 1362 of the Code to be
treated as an S corporation for Federal income tax purposes or made a similar
election under any comparable provision of any state, local or foreign Tax Law
or (B) been a member of a tax group that has filed an election under Treasury
Regulation Section 1.1502-75(c) or any similar provision of national, foreign,
state or local law with respect to the Company.
(xvii) The
Company does not have any application pending with any Taxing Authority
requesting permission for any changes in accounting methods.
(xviii) Since
March 3, 2008, the Company has not made any material payments, are not obligated
to make any material payments, and have not become a party to any Contract,
including this Agreement, that under certain circumstances could obligate it to
make material payments, that are not or will not be, as the case may be,
deductible under Section 280G or 162(m) of the Code.
(xix) To
the Knowledge of the Company, the Company has not reported on its income tax
returns, or taken any positions therein that could give rise to, a substantial
understatement of federal or other income tax within the meaning of Section 6662
of the Code or penalties under any similar statute.
27
(xx) Since
March 3, 2008, the Company has not (A) at any time engaged in or entered into a
“listed transaction” within the meaning of Treasury Reg. §§1.6011-4(b)(2),
301.6111-2(b)(2) or 302.6112-1(b)(2), or (B) filed IRS Form 8275 or 8275-R or
any predecessor or successor thereof or analogous or similar Tax Return under
state, local or foreign law.
(xxi) The
Company has not engaged in any “intercompany transaction” in respect of which
income or gain that is material in the aggregate (disregarding any losses
arising from any such intercompany transaction) continues to be deferred
pursuant to Treasury Reg. § 1.1502-13 or any predecessor or successor thereof or
analogous or similar provision under state, local or foreign law.
(xxii) Neither
the Company nor the Stockholders has taken or agreed to take any action or
knows of any fact that is reasonably likely to prevent or impede the Merger from
qualifying as a “reorganization” within the meaning of Section 368(a) of the
Code.
(xxiii) The
Company operates at least one significant historic business line, or owns at
least a significant portion of its historic business assets, in each case within
the meaning of Reg.1.368-1(d).
(xxiv) Subsequent
to [the date Purchaser Parent and Company initiated merger discussions], no
Stockholder had a portion of such Stockholder’s Company interest redeemed by
Company, or received a distribution with respect to its Company interest, and no
corporation related to Company within the meaning of Reg. 1.368-1(e)(4)(i)(B)
acquired any stock of Company held by such Stockholder, where such disposition
or acquisition would reduce the aggregate fair market value of Purchaser Parent
stock received by such Stockholder (with such fair market value measured as of
the Closing Date) to an amount less than 50% of the fair market value of the
Company stock held by such Stockholder immediately before any of such
distribution, disposition, or acquisition.
3.12 Absence of Certain Changes
or Events. (a) Except
as set forth on Schedule 3.12(a),
since the Balance Sheet Date, the Company has conducted its business in the
Ordinary Course of Business in all material respects. Without
limiting the generality of the foregoing, except as set forth on Schedule 3.12(a),
since the Balance Sheet Date, the Company has not:
(i)
split, combined, classified, re-classified, varied the
rights attaching to, or taken similar action with respect to any of its issued
or authorized capital stock or other Equity Interests or proposed the issuance
of any other securities in respect of, in lieu of or in substitution for its
authorized or issued capital stock or other Equity Interests; granted any Rights
to purchase its securities; issued any Equity Interests; granted any
registration rights; purchased, redeemed, retired, or otherwise acquired any
Equity Interests; or adopted a plan of complete or partial liquidation or passed
any resolutions providing for or authorizing such liquidation or a dissolution,
merger, consolidation, restructuring, recapitalization or other reorganization
or declared or paid any dividend or other distribution or payment in respect of
its Equity Interests other than dividends or other distributions from a
Subsidiary to the Company;
(ii) amended
its Governing Documents;
(iii) paid
or increased any bonuses, salaries, severance, termination payments or other
compensation to any director, officer, employee, consultant or contractor (other
than in the Ordinary Course of Business) or to be paid as a Company Transaction
Expense;
(iv) (A)
adopted or terminated or (B) in any material respect, amended or increased the
payments to or benefits under, any Benefit Plan for or with any employees of the
Company;
28
(v) damaged,
destroyed or lost any assets or properties of the Company, whether or not
covered by insurance, where such damage, destruction or loss would result in
Losses to the Company equal to or exceeding an aggregate amount of
$50,000.00;
(vi) except
in the Ordinary Course of Business, materially amended, renewed, failed to
renew, terminated (other than due to any scheduled expiration) or received
written notice of termination (other than due to any scheduled expiration) with
respect to any Material Contract or entered into any new Material Contract or,
to the Knowledge of the Company, taken any action that jeopardizes the
continuance of its material supplier or customer relationships;
(vii) except
in the Ordinary Course of Business, sold, leased, licensed or otherwise disposed
of any asset or property material to the business of the Company (other than
tangible personal property that has been damaged or rendered obsolete), or
imposed a Lien upon any asset or property of the Company that is material to the
business of the Company;
(viii) (A)
incurred or assumed any Indebtedness except for borrowings and issuance of
letters of credit or bank guarantees under the Xxxxx Fargo Bank Loan Documents,
(B) assumed, guaranteed, endorsed or otherwise become liable or responsible
(whether directly, contingently or otherwise) for the obligations of any other
Person (other than endorsements of checks in the Ordinary Course of Business),
or (C) made any loans, advances or capital contributions to, or investment in,
any Person, other than employee travel and expense advances in the Ordinary
Course of Business;
(ix) paid,
discharged or satisfied any Liabilities, other than the payment, discharge or
satisfaction of Liabilities (A) in the Ordinary Course of Business or (B) that
were reflected or reserved against in the Balance Sheet;
(x) made
any change in any method of accounting or accounting practices, policies or
procedures;
(xi) sold,
disposed of or surrendered any material License or any portion
thereof;
(xii) accelerated
or delayed collection of notes or accounts receivable in advance of or beyond
their regular due dates or the dates when the same would have been collected in
the Ordinary Course of Business;
(xiii) delayed
or accelerated payments of any accounts payable or other liability beyond or in
advance of its due date or the date when such liability would have been paid in
the Ordinary Course of Business;
(xiv) failed
to replenish inventories and supplies of the Company in the Ordinary Course of
Business, or entered into any purchase commitment not in the Ordinary Course of
Business;
(xv) made
any acquisition of all or any significant part of the assets, capital stock,
Equity Interests, properties, securities or business of any other
Person;
(xvi) entered
into any collective bargaining Contract or any other Contract with any labor
union or association representing any group of employees, or been subject to any
strike, picket, work stoppage, work slowdown or labor dispute or been subject to
any application for certification or union organizing drive;
29
(xvii) made
any capital expenditure or any other investment (or series of related
investments), or entered into any Contract or commitment therefor, in excess of
$50,000.00 in respect of any such individual investment or Contract or
$200,000.00 in respect of any number of such investments or Contracts other than
capital expenditures contained in the fiscal year 2010 capital budget for the
Company that has been made available to Purchaser in the Electronic Data
Room;
(xviii) written
down the value of any inventory (including write-downs by reason of shrinkage or
xxxx-down) or written off as uncollectible any notes or accounts receivable in
excess of the Company’s reserves therefor that are set forth in the Financial
Statements; or
(xix) agreed,
whether orally or in writing, to do any of the foregoing.
(b) Since
the Balance Sheet Date, (i) the Company has not received written notice of any
event that has had or could reasonably be expected to have a Material Adverse
Effect with respect to the Company and (ii) to the Knowledge of the Company,
there has not been any event that has had, or could reasonably be expected to
have, a Material Adverse Effect on the Company.
(c) From
the Determination Date through the date hereof, except as set forth on Schedule 3.12(c), the
Company has been operated in compliance with, and has not taken any act
contravening any provision of, clauses (a) – (n) of Section 6.1.
3.13 Employee Benefit
Plans. (a) Except
as set forth on Schedule 3.13(a), and
except for customary payroll practices and policies, including overtime
compensation, paid vacation, holiday and sick days, paid leaves of absence,
travel and automobile allowances and expense reimbursements (all of which are
either (i) set forth in the employee handbook set forth in the Electronic Data
Room or (ii) if not in the such employee handbook, do not have a material impact
on the Company), the Company does not sponsor, maintain or contribute to or have
any obligation or liability (absolute, contingent or otherwise) with respect to,
and none of the employees of the Company is covered by, any bonus, deferred
compensation, incentive compensation, severance pay, pension, profit sharing,
retirement, group or individual insurance, welfare benefit, stock appreciation
right, stock purchase, stock option, employee stock ownership, employee
assistance, or other fringe benefit plan, arrangement or practice, written or
otherwise, or any “employee benefit plan,” as defined in Section 3(3) of ERISA,
whether formal, informal, funded or unfunded (collectively, the “Benefit
Plans”). In respect of any Benefit Plans set forth on Schedule 3.13(a), and
except as described on Schedule 3.13(a),
none of the Benefit Plans are, and the Company has not maintained or had an
obligation to contribute to, or incurred any other obligation with respect to,
(i) a plan subject to Section 412 of the Code or Title I, Subtitle B, Part 3 of
ERISA, (ii) a “multiemployer plan” as defined in Section 3(37) of ERISA, (a
“Multiemployer
Plan”), (iii) a “multiple employer plan,” as defined in ERISA or the
Code, or (iv) a funded welfare benefit plan, as defined in Section 419 of the
Code. The Company does not have any Contract or commitment to create
any additional Benefit Plan, or, except as may be required by Law or by the
terms of such Plan or as may be contemplated by this Agreement or the Merger, to
modify or change any existing Benefit Plan. The Company does not have
any ERISA Affiliates.
(b) With
respect to any and each Benefit Plan set forth on Schedule 3.13(a), the
Company has made available to Purchaser the Electronic Data Room, true, correct
and complete copies of (i) all documents which comprise the current version of
each of such Benefit Plan, including any related trust agreements, insurance
Contracts, or other funding or investment Contracts and any amendments thereto,
and (ii) with respect to each Benefit Plan that is an “employee benefit plan,”
as defined in Section 3(3) of ERISA, (i) the most recent Annual Report (Form
5500 Series) and accompanying schedules for each of the Benefit Plans for which
such a report is required, (ii) the current summary plan description (and any
summary of material modifications thereto), (iii) the most recently filed
certified financial statements for each of the Benefit Plans for which such a
statement is required or was prepared, and (iv) for each Benefit Plan intended
to be “qualified” within the meaning of Section 401(a) of the Code, the most
recent IRS determination letter issued with respect to such Benefit
Plan. Except as set forth on Schedule 3.13(b),
since the date of such documents, there has not been any material change in the
assets or Liabilities of any of the Benefit Plans or any change in their terms
and operations which could reasonably be expected to affect or alter the Tax
status or materially affect the cost of maintaining such Benefit Plan, and none
of the Benefit Plans has been or will be amended prior to the Closing
Date.
30
(c) In
respect of any Benefit Plans set forth on Schedule
3.13(a):
(i)
the Company is in material
compliance with the material terms and conditions of each of its Benefit Plans
currently maintained or maintained since March 3, 2008;
(ii) each
Benefit Plan (and each related trust, insurance Contract or fund) is in material
compliance with the requirements of all applicable Laws, including, without
limitation, ERISA, the Code and has been maintained and operated in material
compliance with its terms and the requirements of all such Laws;
(iii) each
Benefit Plan that is intended to be “qualified” within the meaning of Section
401(a) of the Code is presently qualified and each such Benefit Plan has been
determined by the IRS to be so qualified as evidenced by a determination letter
of the IRS and no event has occurred since the issuance of such letter that
could adversely affect such qualified status;
(iv) all
filings required by ERISA, the Code or other applicable Law as to each Benefit
Plan have been timely filed, and all reports, notices and disclosures to
participants and beneficiaries under each Benefit Plan required by either ERISA
or the Code have been timely and appropriately distributed or otherwise
provided;
(v) no
complete or partial termination or wind up of any Benefit Plan has occurred
since March 3, 2008, or is expected to occur; and
(vi) no
condition or circumstance exists that would prevent the amendment or termination
of any Benefit Plan, and the Company or any ERISA Affiliate may terminate or
cease contributions to any Benefit Plan without incurring any material
liability.
(d) All
group health plans covering employees of the Company have been operated in
material compliance with the continuation coverage requirements of Section 4980B
of the Code (and any predecessor provisions) and Part 6 of Title I of ERISA
(“COBRA”). Except
as set forth on Schedule 3.13(d), the
Company does not have any obligation to provide health benefits or other non
pension benefits to retired or other former employees (or their beneficiaries),
except as specifically required by COBRA.
(e) In
respect of any Benefit Plans set forth on Schedule
3.13(a):
(i)
full payment has been timely made of
all amounts which the Company is required, under applicable Law or under any
Benefit Plan or any Contract relating to any Benefit Plan to which the Company
is a party, to have paid, including all contributions and premiums thereunder,
as of the last day of the most recent fiscal year of such Benefit Plan ended
prior to the date hereof;
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(ii) all
contributions, premiums and payments paid or accrued with respect to any Benefit
Plan have been fully deducted or will be deducted for income tax purposes (to
the extent deductible) and no such deduction has been challenged or disallowed
by any Governmental Authority, and, to the Knowledge of the Company, no event
has occurred and no condition or circumstance has existed that could reasonably
be expected to give rise to any such challenge or disallowance;
(iii) no
amount, or any asset, with respect to any Benefit Plan is subject to Tax as
unrelated business taxable income under the Code; and
(iv) adequate
provisions have been made in the Company’s financial records and statements, in
accordance with GAAP applied on a consistent basis and prior practices of the
Company, for all obligations and Liabilities under all Benefit Plans that have
accrued but have not been paid because they are not yet due under the terms of
any Benefit Plan or related Contracts.
(f)
Neither the Company nor any other “disqualified person” or “party in interest”
as defined in Section 4975 of the Code and Section 3(14) of ERISA, respectively,
has engaged in any “prohibited transaction,” as defined in Section 4975 of the
Code or Section 406 of ERISA, with respect to any Benefit Plan that could result
in a material Liability nor have there been any fiduciary violations under
ERISA, except as set forth in Schedule 3.13(f) or
other event which would subject the Company (or any officer, director or
employee thereof) to any material penalty or Tax under Sections 502 of ERISA or
Chapter 43 of the Code.
(g) In
respect of any Benefit Plans set forth on Schedule 3.13(a),
with respect to any Benefit Plan: (i) no filing, application or, to
the Knowledge of the Company, other matter is pending with the IRS, the PBGC,
the United States Department of Labor or any other Governmental Authority, and
(ii) there is no action, suit or claim pending nor, to the Knowledge of the
Company, threatened, other than routine claims for benefits.
(h) Neither
the execution and delivery of this Agreement nor the consummation of any or all
of the transactions contemplated thereby will: (i) entitle any current or former
employee of the Company to severance pay, unemployment compensation or any
similar payment, or (ii) accelerate the time of payment or vesting or increase
the amount of any compensation due to any such employee or former
employee.
3.14 Intellectual
Property. (a)
Except as set forth on Schedule 3.14(a), to
the Company’s Knowledge the Company owns or has the right to use all
Intellectual Property necessary to carry out the business of the Company as
presently conducted (such Intellectual Property, together with the Company Owned
Intellectual Property and the Licensed Intellectual Property, the “Company Intellectual
Property”).
(b) Set
forth on Schedule
3.14(b) is a complete and accurate list (showing in each case, the
registered owner, title, xxxx or name, applicable jurisdiction, application
number or registration number and date of application or expiration, if any) of
all United States, foreign and state: (i) Patents; (ii) Trademark registrations
and applications; (iii) Internet domain names; and (iv) copyright registrations
and applications owned by the Company (the “Company Owned Intellectual
Property”).
(c) Set
forth on Schedule
3.14(c) is a complete and accurate list of (i) each Contract that is in
effect pursuant to which the Company uses the Intellectual Property of another
Person in any manner that is material to the conduct of the business of the
Company (the “Company
Licensed Intellectual Property”) and (ii) each Contract that is in effect
pursuant to which the Company grants to another Person the right to use a
Patent, Trade Secret, or Trademark owned by the Company, other than standard
dealer agreements granting a right to use the Company’s Trademarks (the “Third Party Licensed
Intellectual Property”, and collectively with the Company Licensed
Intellectual Property, the “Licensed Intellectual
Property”); all Contracts set forth on, or required to be set forth on,
Schedule 3.14
pursuant to this Section 3.14(c), are herein referred to as the “License
Agreements”).
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(d) Except
as set forth on Schedule 3.14(d), the
Company Owned Intellectual Property is solely and exclusively owned by the
Company, free and clear of all Liens. Except as set forth on Schedule 3.14(d), to
the Company’s Knowledge none of the Company-owned Patents or Trademark
registrations and applications set forth on Schedule 3.14(b),
except as set forth on Schedule 3.14(b) have
been cancelled, expired, or abandoned and all mandatory fees required for the
maintenance of such rights have been paid on time. Except as set
forth on Schedule
3.14(d), the Company has not received any written, or, to the Knowledge
of the Company, oral notification of any pending or threatened opposition,
interference, re-examination or cancellation proceeding before any court or
registration authority in any jurisdiction against any of the Company Owned
Patents or the Trademarks.
(e) To
the Company’s Knowledge there are no settlements, injunctions, forbearances to
xxx, consents, consents to use, judgments, or orders or similar obligations to
which the Company is a party which (i) restrict the rights of the Company to use
any Intellectual Property necessary to carry out the business of the Company, or
(ii) permit third parties to use any Intellectual Property which would otherwise
infringe any of the Company Owned Intellectual Property. No
royalties, honoraria or other fees are payable by the Company for the use of or
right to use any Company Intellectual Property in connection with their
respective businesses as currently conducted, except pursuant to the License
Agreements.
(f)
Except as set forth on Schedule 3.14(f), to
the Knowledge of the Company, the conduct of the business of the Company, as
currently conducted (“currently conducted” to include for purposes of this
Section 3.14(f) the making, using, selling and/or offering to sell in the future
Products currently in development but not yet on sale), does not infringe,
dilute or misappropriate the Intellectual Property rights of any
Person. Except as set forth on Schedule 3.14(f), the
Company has not received written notice that the conduct of the business of the
Company, as currently conducted, infringes, dilutes, misappropriates or
constitutes the unauthorized use of any Intellectual Property rights owned or
controlled by any third party (either directly or indirectly such as through
contributory infringement or inducement to infringe) or is defamatory or
violative in any way of any publicity, privacy, or other rights, except to the
extent that such infringement, defamation or violation could not reasonably be
expected to result in a material claim against the Company, or challenges the
ownership, use, validity or enforceability of any Company Intellectual
Property.
(g) To
the Knowledge of the Company, no third party is misappropriating, infringing,
diluting, or otherwise violating any Company Intellectual Property in a way that
would have a Material Adverse Effect, and no such claims are pending against a
third party by the Company or any Company Subsidiary.
(h) All
Company Intellectual Property was either (i) developed by an employee
of the Company within the scope of employment of the employee and pursuant to an
invention assignment or subject to the work for hire doctrine, (ii)
developed by a third party under a work for hire and/or assignment agreement, or
(iii) developed by a third party and transferred and assigned to either the
Company under a transfer and assignment agreement. After the deliveries provided
for in this Agreement have occurred, neither the Stockholders nor any current or
former officer, director or employee of the Company (or any family member
thereof) will retain any rights of ownership or use with respect to the Company
Intellectual Property.
33
(i) The
Company owns or has the right to use all Software material to its respective
business. No unlicensed copies of any mass market software that is
available in consumer retail stores or otherwise commercially available and
subject to “shrink wrap” or “click through” license agreements have been
installed or maintained on any Company’s computers or computer systems by, or at
the direction or with the express permission of a manager, division head or
similarly credentialed agent of, the Company, and no such unlicensed copies used
for the business of the Company are installed on the computers of the
Company.
(j) The
Company takes commercially reasonable measures to protect the confidentiality of
its respective material Trade Secrets. To the Knowledge of the
Company, no material Trade Secret of the Company has been improperly disclosed
or has been misappropriated by another Person.
3.15 Title to and Condition of
Properties; Liens. Except
as set forth on Schedule 3.15, the
Company, has good, valid and marketable title to, (or in the case of leased or
licensed property, has a valid leasehold or license interest in and to) each
material item of plant, machinery, equipment, furniture, leasehold improvements,
fixtures, vehicles, structures, any related capitalized items and any other
tangible and intangible personal property that the Company includes on its books
and records or otherwise purports to own, lease or license, as applicable, free
and clear of all Liens whatsoever except Permitted Liens. The rights,
properties and other assets presently owned, leased or licensed by the Company
include all such material rights, properties and other assets necessary to
permit the Company to conduct its business in all material respects in the same
manner as such businesses are presently conducted. Other than leased
or licensed assets, or other assets for which the Company has a valid right to
use, and except as set forth on Schedule 3.15, there
are no material assets owned by any third party which are used in the operation
or conduct of the business of the Company. To the Knowledge of the
Company, the material tangible property owned by the Company, or used by the
Company in the operation of its business, does not require replacement, repair
or maintenance that in the aggregate is in excess of the amounts set forth in
the fiscal year 2010 capital budget for the Company that has been made available
to Purchaser in the Electronic Data Room.
3.16 Real
Property. (a) Schedule 3.16(a) sets forth a complete list
of all real property owned by the Company (individually, an “Owned Property”).
All of the Real Property is used in the conduct of the business of the Company.
Schedule 3.16(a) also sets forth a complete list of all real property leased,
occupied or subleased (as lessee or sublessee) by the Company (individually, a
“Leased Property” and, together with the Owned Property, the “Real Property”),
and identifies all of the lease and sublease agreements, as amended to date
relating to the Leased Property (the “Leases”). In the event that any of the
Leases is a sublease, the Company, as sublessee or sublessor, as the case may
be, has obtained the required consent of the prime landlord to such sublease,
and (i) such prime lease is in full force and effect, (ii) there are no
outstanding uncured notices of default or termination, and (iii) no right of the
Company in any such sublease conflicts with such prime lease. To the Knowledge
of the Company, there are no subleases, licenses or other Contracts granting to
any Person other than the Company any right to the possession, use, occupancy or
enjoyment of the premises demised by the Leases.
(b) The
Company has good and marketable fee simple title to all Owned Property and good
and valid title to the leasehold estates in all Leased Property and to all
buildings, and improvements thereon, free and clear of any Liens, except for
Permitted Liens. The Company enjoys peaceful and undisturbed
possession of the Real Property. No Person other than the Company has
any right to use or occupy any part of the Real Property. The Real
Property is the only land and buildings owned, used or occupied by the Company
and the Company does not have any right of ownership, right to use, option,
right of first refusal or contractual obligation to purchase, or any other legal
or equitable right, estate, or interest in, or affecting, any land or buildings
other than the Real Property.
34
(c)
To the Knowledge of the Company, there are no defects in the condition of the
improvements on the Real Property that have a material effect on the business of
the Company.
(d) The
Company has obtained all material permits, licenses, franchises, approvals and
authorizations (collectively, the “Real Property
Permits”) which the Company is required to obtain from all Governmental
Authorities having jurisdiction over any of the premises comprising Real
Property and all such Real Property Permits are in full force and
effect. Since March 3, 2008, the Company has not received any notice
from any Governmental Authority having jurisdiction over any premises comprising
Real Property threatening a suspension, revocation, modification or cancellation
of any material Real Property Permit, and to the Knowledge of the Company, there
exists no violation of a material Real Property Permit.
(e) The
Company has not received any written notice of, and to the Knowledge of the
Company, any oral notice, of any currently pending or threatened condemnation or
eminent domain proceeding with respect to or affecting any of the premises
comprising Real Property or any part thereof and, to the Knowledge of the
Company, no such condemnations or proceedings have been proposed.
(f) Neither
the Company nor any Person that is or has at any time been a Subsidiary of the
Company has given any guaranty or indemnity for any liability relating to any
real property owned, leased or used by any Person.
(g) There
are no underground or above ground storage tanks, active or abandoned on the
Owned Real Property or, to the Knowledge of the Company, the Leased Real
Property.
3.17 Accounts Receivable;
Inventory. (a) Schedule 3.17(a)
contains a list of the aged trade accounts receivable of the Company as of March
31, 2010 (the “Receivables”). Such
Receivables arose in the Ordinary Course of Business for goods sold and
delivered or services rendered by the Company and constitute valid obligations
owed to the Company, and are, to the Knowledge of the Company, likely to be
collected in the Ordinary Course of Business consistent with the past practices
of the Company, subject to customary reserves. Since the Balance
Sheet Date, the Company has not received any notice from or on behalf of any
account debtor asserting any defense to payment, counterclaim or right of setoff
with respect to any accounts receivable of the Company in excess of amounts
reserved on the Financial Statements in respect of the applicable
period(s). All Receivables are recorded and booked on the books and
records of the Company in accordance with GAAP.
(b) All
of the inventories of raw materials, work in process and finished goods of the
Company consist of a quality and quantity usable and salable in the Ordinary
Course of Business, except for items of obsolete materials and materials of
below-standard quality, all of which items (i) have been written off or written
down on the books and records of the Company to fair market value or (ii) have a
reserve established for them on the books and records of the Company in an
amount not less than required in accordance with GAAP.
35
3.18 Related Parties.
Neither the Company, nor, any current (since March 3, 2008) director or officer
of the Company, nor, to the Knowledge of the Company, any of the Stockholders or
any family member of any of the Stockholders, (individually a “Related Party” and collectively the
“Related Parties”), nor any
Affiliate of the Company, or, to the Knowledge of the Company, any Affiliate of
any Stockholder: (a) owns, directly or indirectly, any interest in any Person
which is (i) a competitor of the Company, (ii) a supplier of the Company, or
(iii) a customer that resells Products of the Company (except as an owner of one
percent (1%) or less of the stock of any company listed on a national securities
exchange or traded in the over-the-counter market); (b) owns, directly or
indirectly, in whole or in part, any material property, asset or right, real,
personal or mixed, tangible or intangible (including, but not limited to, any of
the intangible property) which is utilized in the operation of the business of
the Company; (c) has an interest in or is, directly or indirectly, a party to
any Material Contract pertaining or relating to the Company, except for
employment, consulting or other personal service Contracts that may be in effect
and which are set forth on Schedule
3.9(a); or (d) to the Knowledge of the Company, has any cause of action
or other claim whatsoever against, or owes any amount to, the
Company.
3.19 Environmental
Matters. (a) The Company has obtained and complies with all
licenses, permits, authorizations, approvals and consents from Governmental
Authorities which are required in respect of its current business, operations,
assets or properties under any applicable Environmental Law (collectively, the
“Environmental
Permits”). The Company is in compliance in all material
respects with the terms and conditions of all Environmental
Law. Without limiting the generality of the foregoing, to the
Knowledge of the Company, no facts, conditions relating to the past or present
properties, facilities or operations of the Company prevent, hinder or limit
continued compliance with such Environmental Permits and Environmental
Law. The Company has made available to Purchaser in the Electronic
Data Room files containing all of the Environmental Permits and other
authorizations of the Company.
(b) No
Order, complaint or Environmental Claim has been received by the Company; the
Company has not received notice of any material penalty, damages or other costs
being assessed or awarded against the Company; and no settlement or Contract has
been entered into by the Company; and, to the Knowledge of the Company, no
investigation or review has been done by or at the request or direction of a
Governmental Authority with respect to the Company or any of its properties
(collectively, “Environmental Enforcement
Liability”), nor to the Knowledge of the Company, are any pending or
threatened by any Person with respect to any alleged continuing and/or
uncorrected failure by the Company to comply with any applicable Environmental
Law, including without limitation any alleged continuing and/or uncorrected
failure to have and comply with any required Environmental Permit, or with
respect to any treatment, storage, recycling, transportation, disposal or
unremediated Release of any Hazardous Material and the Company is not in
possession of any written materials indicating, any facts or circumstances which
could reasonably be expected to form the basis for any such Environmental
Enforcement Liability.
(c) (i)
The Company has not handled any Hazardous Material in violation of Environmental
Law (in such a manner as could be likely to result in a material liability of
the Company) on any property now or previously owned, operated or leased by the
Company or any Company Subsidiary; (ii) to the Knowledge of the Company, no
activities have been conducted in violation of Environmental Law on any property
owned, operated or leased by the Company, and (iii) without limiting
the foregoing, to the Knowledge of the Company (A) no polychlorinated biphenyls
are or have been Released, transported, disposed of or stored in violation of
Environmental Law or in a manner which could reasonably be expected to result in
material liability of the Company, (B) no asbestos is or has been present, (C)
there are no underground or above ground storage tanks, active or abandoned
which are in violation of Environmental Law or which have been maintained in a
manner which could reasonably be expected to result in material liability to the
Company, (D) no Hazardous Material has been Released in a quantity reportable
under, or in violation of, or which could reasonably be expected to result in
material liability pursuant to, any Environmental Law, at, on, under or from any
property now or previously owned, operated or leased by the
Company.
36
(d) The
Company has not received written notice that the Company has transported or
arranged for the transportation of any Hazardous Material to a location which is
the subject of any Environmental Enforcement Liability, action, suit,
arbitration or proceeding that could reasonably be expected to lead to any
Environmental Claim(s) that would result in a material liability to the Company,
and the Company has not transported or arranged for the transportation of any
Hazardous Material to any such location.
(e) No
written or, to the Knowledge of the Company, oral notification of a Release of a
Hazardous Material has been filed by or on behalf of the Company and no property
now or previously owned, operated or leased by the Company is listed or, to the
Knowledge of the Company, proposed for listing on the National Priorities List
promulgated pursuant to the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended, and the rules and regulations promulgated
thereunder (“CERCLA”) or on any
similar state list of sites requiring investigation or clean up.
(f) There
are no Liens arising under or pursuant to any Environmental Law on any Real
Property owned, operated or leased by the Company, other than any such Liens on
Real Property not individually or in the aggregate material to the Company, and
the Company has not received any written notice or, to the Knowledge of the
Company oral notice, of any action that is in process or has been taken by any
Governmental Authority which would subject any of such properties to such Liens,
and the Company has not been or, to the Knowledge of the Company is expected to
be, required to place any notice or restriction relating to the presence of
Hazardous Material at any such property owned by it in any deed to such
property.
(g) Since
March 3, 2008, there
have been no material environmental investigations, studies, audits, tests,
reviews or other analyses or reports thereof which were conducted by, or which
are in the possession of, the Company for any property or facility now or
previously owned, operated or leased by the Company which have not been made
available to Purchaser in the Electronic Data Room.
3.20 Labor Matters.
(a) There is no labor strike, sympathy strike, dispute, corporate
campaign, slowdown, sit-down, stay-in, sick-out, walk-out, work stoppage or
lockout, retarding of work, boycott or similar labor difficulty or other
interference against or affecting the Company (all of the foregoing referred to
as “Work Interference”) and, to
the Knowledge of the Company, no Work Interference is
threatened. Since March 3, 2008, no
Work Interference has occurred or, to the Knowledge of the Company, was
threatened.
(b) The
Company is not a party to or bound by any work rules, work practices or
collective bargaining or similar Contract with any labor organization, trade
union or employee association applicable to employees of the
Company.
(c) No
labor union (or any equivalent body) has been certified by a state labor
relations board, the National Labor Relations Board or any similar foreign
Governmental Authority in connection with acting as a bargaining agent for any
of the employees of the Company; no notice has been received by the Company from
any labor organization stating that it has been designated as the bargaining
agent for any of said employees; and, to the Knowledge of the Company, no
petition or application for certification has been filed by any labor union (or
any equivalent body) requesting an election to determine whether or not it is
the exclusive bargaining agent for any of said employees and, to the Knowledge
of the Company, there have been no union organizing activities among the
employees of the Company since March 3, 2008, nor does any question concerning
representation exist concerning such employees.
37
(d) The
Company has not received notice that an unfair labor practice charge or
complaint against the Company is pending before the National Labor Relations
Board or any similar state or foreign agency, nor, to the Knowledge of the
Company, has such a charge or complaint been threatened.
(e) A
true and complete copy of the employee handbook of the Company has been made
available to Purchaser in the Electronic Data Room, and such employee handbooks
contain each material written personnel policy, rule and procedure generally
applicable to the employees of the Company.
(f) The
Company is in compliance, in all material respects, with all applicable Laws
respecting employment and employment practices, terms and conditions of
employment, reductions in force, workers’ compensation, workers’ disability,
overtime compensation, wages, pay equity, hours of work and occupational safety
and health, privacy, and, to the Knowledge of the Company, is not engaged in any
unfair labor practices, as defined in the National Labor Relations Act or other
applicable Laws.
(g) No
charge with respect to or relating to the Company is pending before the Equal
Employment Opportunity Commission or any other agency responsible for the
prevention of discriminatory or other unlawful employment
practices.
(h) Since
March 3, 2008, (i) the Company has not effectuated a “plant closing” (as defined
in the WARN Act or any comparable provision of applicable state Law) affecting
any site of employment or one or more facilities or operating units within any
site of employment or facility of the Company, (ii) there has not occurred a
“mass layoff” (as defined in the WARN Act or any comparable provision of
applicable state Law) affecting any site of employment or facility of the
Company, (iii) the Company has not been affected by any transaction or engaged
in layoffs or employment terminations sufficient in number to trigger
application of any similar state, local or foreign “plant closing” Law or
regulation and (iv) none of the Company’s employees has suffered an “employment
loss”(as defined in the WARN Act or any comparable provision of applicable state
Law) during the six month period prior to the date hereof.
3.21 Officers and
Employees. Purchaser has been provided with a true and complete list of
the names, titles and current salaries of all full-time and part-time employees
and consultants of the Company, as of the date hereof. Except as set
forth on Schedule 3.21, there is
no employment Contract, employee benefit or incentive compensation plan or
program, severance policy or program or any other plan or program to which the
Company is a party (a) that is or could, pursuant to its terms, be triggered or
accelerated by reason of or in connection with the execution of this Agreement
or the consummation of the transactions contemplated by this Agreement except
Company Transaction Expenses or (b) which contains “change in control”
provisions pursuant to which the payment, vesting or funding of compensation or
benefits would be triggered or accelerated by reason of or in connection with
the execution of or consummation of the transactions contemplated by this
Agreement.
3.22 Brokers and Finders.
Other than Persons that will be paid in full at or prior to the Closing by the
Company or the Stockholders, no broker, finder, agent, investment banker,
financial advisor or similar intermediary has acted on the Company’s or
Stockholders’ behalf in connection with this Agreement or the Company Ancillary
Agreements or the Stockholders Ancillary Agreements or the
transactions contemplated hereby or thereby, and there are no brokerage
commissions, finders’ fees or similar fees or commissions payable in connection
therewith based on any Contract with the Company or any action taken by the
Company.
38
3.23 Banking
Relationships. Schedule 3.23 sets
forth the names and locations of all banking, lock box accounts, and safe
deposit boxes of the Company.
3.24 Customers and
Suppliers. Except
as set forth on Schedule 3.24, there
are no pending material disputes or controversies between the Company and any of
the Significant Customers and Suppliers and, to the Knowledge of the Company,
none of the Significant Customers and Suppliers (i) has or is contemplating
terminating or materially diminishing its business or relationship with the
Company with which it does business or (ii) has experienced any material work
stoppage or other material adverse circumstances or conditions that could
reasonably be expected to jeopardize or materially adversely affect the future
relationships of the Company with such Person.
3.25 Products; Product
Liability. There
are not presently pending, or, to the Knowledge of the Company, threatened, any
civil, criminal or administrative actions, suits, demands, claims, hearings,
notices of violation, investigations, proceedings or demand letters relating to
any alleged hazard or alleged Defect or any failure to warn or alleged breach of
express or implied warranty or representation, relating to any Product
manufactured, distributed or sold by or on behalf of the
Company. Since March 3, 2008, the Company has not sent or received
any correspondence to or from any Governmental Authority with respect to a
contemplated or ongoing actual recall, withdrawal, or suspension from the market
of any Product. Except as set forth on Schedule 3.25, to the
Knowledge of the Company, there are no Defects with respect to any Product sold
or otherwise distributed by the Company that may rise to a material Liability
and all finished goods inventory held by the Company is free of any material
Defect or other material deficiency, except to the extent that reasonable
reserves in accordance with GAAP have been established therefor in the Financial
Statements. The Company is not currently investigating or considering
a recall, withdrawal or suspension from the market of any Product.
3.26 Insurance. Schedule 3.26 sets
forth a true and complete list of all insurance policies, other insurance
arrangements and other Contracts for the transfer or sharing of insurance risks
by the Company in force on the date hereof with respect to the business or
assets of the Company (the “Company Insurance
Policies”). Except as set forth on Schedule 3.26, (a)
the Company has not received any notice of cancellation or non-renewal of any of
the Company Insurance Policies or arrangements nor, to the Knowledge of the
Company, is the termination of any of the Company Insurance Policies threatened,
(b) there is no material claim pending under any of the Company Insurance
Policies as to which coverage has been questioned, denied or disputed by the
underwriters of such policies, (c) the Company has not received any notice from
any of its insurance carriers that any insurance coverage presently provided for
will not be available to the Company in the future on similar terms as now in
effect (excepting general market pricing increases and coverage limitations),
(d) the Company does not maintain any self-insurance and (e) the Company
Insurance Policies contains all coverage necessary or required by the Company to
comply with the terms and conditions of the Material Contracts in all material
respects.
3.27 Propriety of Past
Payments. To
the Knowledge of the Company, neither the Company, nor any director, officer,
employee or agent of the Company or any other Person associated with or acting
for or on behalf of the Company has, directly or indirectly, on behalf of the
Company, made any illegal contribution, gift, bribe, rebate, payoff, influence
payment, kickback or other payment to any Person, private or public, regardless
of form, whether in money, property or services, (a) to obtain favorable
treatment for the Company, or any Affiliate of the Company in securing business,
(b) to pay for favorable treatment for business secured for the Company, or any
Affiliate of the Company, (c) to obtain special concessions, or for special
concessions already obtained, for or in respect of the Company, or any Affiliate
of the Company or (d) otherwise for the benefit of the Company, or any Affiliate
of the Company in violation of any Law, (including existing site plan approvals,
zoning or subdivision regulations or urban redevelopment plans relating to Real
Property) to which the Company is subject.
39
3.28 Takeover Laws and
Provisions. No Takeover Laws other than Section 203 of the DGCL
applies or purports to apply to the Company with respect to this Agreement, the
Merger or the transactions contemplated hereby. The Company has taken
all action required to be taken by it in order to make each of this Agreement,
the Merger and the transactions contemplated hereby and thereby to ensure that
the restrictions on "business combinations" under Section 203 of the DGCL do not
and will not apply thereto; and this Agreement and the transactions contemplated
hereby and thereby do and will comply with and will not otherwise violate the
requirements of any Articles, Sections or provisions of its Governing Documents
concerning “business combination”, “fair price”, “voting requirement”,
“constituency requirement” or other related provisions (collectively, “Takeover
Provisions”).
3.29 Customs. (a) The
Company is in compliance with the imported inventory valuation limitations
imposed under Code Section 1059A, (b) the Company does not have any material
liability for U.S. Customs duty, interest, or penalties, and (c) all of the
Harmonized Tariff Schedule of the U.S. classifications assigned to the imported
products of the Company are correct.
3.30 Full
Disclosure. No
representation, warranty, certification or statement by the Company contained in
this Agreement, the Company Disclosure Schedule or any Company Ancillary
Agreement delivered through and including the Closing Date by the Company or the
Stockholders to Purchaser Parent and/or Purchaser pursuant to the provisions
hereof, contains, or will contain at the time delivered, any untrue statement of
a material fact or omits or will omit to state any material fact necessary, in
light of the circumstances under which it was made, to make the statements
herein or therein not misleading. Purchaser acknowledges that neither
the Company nor anyone acting on its behalf has made any representations and
warranties regarding the subject matter of the Agreement except for
representations, warranties, certifications and statements of the Company and
the Stockholders contained in this Article III and any of the Company Ancillary
Agreements and Purchaser is not relying upon any other representations or
warranties.
ARTICLE
IV
REPRESENTATIONS
AND WARRANTIES REGARDING
THE
STOCKHOLDERS
In order
to induce the Purchaser, Purchaser Parent and Merger Subs to enter into this
Agreement and to consummate the transactions contemplated hereby, each of the
Stockholders, severally, represent and warrant to the Purchaser, Purchaser
Parent and Merger Subs as follows:
4.1 Organization of the
Stockholders. Each
of the Stockholders is a limited liability company duly organized, validly
existing and operated and, with respect to its company formation and existence,
is in good standing under the laws of their respective state of formation and in
accordance with its Governing Documents. Each of the Stockholders has
all requisite entity power and authority to own, operate and lease its
respective assets and to carry on its respective businesses as now being
conducted and as proposed to be conducted and is qualified or licensed to do
business and in good standing and validly operated in each jurisdiction where
the nature of its business or the ownership, leasing or operation of its assets
and properties renders such qualification, license or good standing
necessary.
40
4.2 Authorization;
Enforceability. Each of
the Stockholders has full entity power and authority to execute, deliver and
perform this Agreement and the Stockholders Ancillary Agreements to which it is
a party, and to consummate the transactions contemplated hereby and
thereby. The execution, delivery and performance of the Agreement and
the Stockholders Ancillary Agreements and all other documents and agreements to
be delivered by each of the Stockholders pursuant hereto or thereto, and the
consummation of the Merger and the transactions contemplated hereby and thereby,
have been duly and validly approved and authorized by all requisite entity
action on the part of each of the Stockholders, as the case may be, and each of
the Stockholders hereby waives any rights to seek appraisal of their respective
Shares in accordance with the applicable provisions of the DGCL. This
Agreement and the Stockholders Ancillary Agreements when executed will be duly
and validly executed and delivered by each of the Stockholders, and,
constitutes, the legal, valid and binding obligation of each of the
Stockholders, enforceable against it in accordance with its respective terms,
except as such enforcement may be limited by bankruptcy, insolvency,
reorganization, or other similar Laws affecting or relating to the rights of
creditors generally or by general principles of equity.
4.3 Title to
Shares. Each of
the Stockholders is the record and beneficial owner of, and has good and
marketable title to, the Shares, and such Shares owned by it is owned free and
clear of any Liens whatsoever, including, without limitation, claims or rights
under any voting trust agreements, shareholder agreements or other
agreements.
4.4 Investment in the Merger
Consideration Shares. (a) Each
of the Stockholders is acquiring the Merger Consideration Shares for its own
account and will not sell, transfer, or otherwise dispose of any of the Merger
Consideration Shares or any interest therein, without registration under the
Securities Act and applicable state “blue sky” laws, except in a transaction
which in the opinion of counsel reasonably acceptable to Purchaser Parent is
exempt therefrom. Each of the Stockholders is an “accredited investor” as that
term is defined in rules promulgated under the Securities Act. Each
of the Stockholders has such knowledge and experience in financial and business
matters as to be capable of evaluating the merits and risk of an investment in
the Purchaser Parent Common Stock and has obtained, in its judgment, sufficient
information from Purchaser Parent to evaluate the merits and risks of an
investment in the Purchaser Parent Common Stock. Each of the
Stockholders has been provided the opportunity to obtain information and
documents concerning Purchaser, Purchaser Parent and the Purchaser Parent Common
Stock, and has been given the opportunity to ask questions of, and receive
answers from, the directors and officers of the Purchaser Parent concerning the
Purchaser, Purchaser Parent and the Purchaser Parent Common Stock and other
matters pertaining to this investment and the Merger
Consideration. Each of the Stockholders acknowledges that the offer
of the Purchaser Parent Common Stock will not be reviewed by any Governmental
Authority and is being sold to each of Stockholders in reliance upon exemption
from the Securities Act. Each of the Stockholders is aware of the risks inherent
in an investment in the Purchaser Parent and specifically the risks of an
investment in the Purchaser Parent Common Stock. In addition, each of
the Stockholders is aware and acknowledges that there can be no assurance of the
future viability or profitability of the Purchaser Parent, nor can there be any
assurance relating to the current or future price of the Purchaser Parent Common
Stock, or market conditions generally.
(b) Each
of the Stockholders acknowledges that the Merger Consideration Shares have not
been registered under the Securities Act and agrees that it will resell the
Merger Consideration Shares only pursuant to registration under the Securities
Act or pursuant to an available exemption from registration, including in
accordance with the provisions of Regulation S adopted under the Securities Act,
and agrees not to engage in any hedging transaction with regard to the Merger
Consideration Shares.
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4.5 Non-public Information
Concerning the Purchaser and Purchaser Parent. Purchaser
and Purchaser Parent have, or may have obtained, material non-public information
concerning the Purchaser and Purchaser Parent or Purchaser Parent Common Stock
(“Excluded Information”) that (i) the Purchaser and Purchaser Parent are
precluded from disclosing to each of the Stockholders; and (ii) each of the
Stockholders has requested that the neither the Purchaser nor the Purchaser
Parent disclose to the Stockholders any of the Excluded
Information. Each of the Stockholders acknowledges that the Purchaser
and Purchaser Parent have complied with the Stockholders’ request not to
disclose to the Stockholders the Excluded Information and as a consequence of
such non-disclosure of the Excluded Information, there may exist a material
disparity of information between the parties with respect to the Purchaser and
Purchaser Parent or the Purchaser Parent Common Stock. Each of the
Stockholders acknowledges that if the Purchaser and Purchaser Parent had
informed the Stockholders of the Excluded Information, then the Stockholders may
believe that the Shares have a greater value than the Merger Consideration that
each of the Stockholders is receiving or otherwise determine not to sell the
Shares, and, therefore, it may not be in the Stockholders’ best interest to
proceed with the transaction contemplated by this Agreement at this
time.
4.6 Black Diamond
Transaction.
Each of the Stockholders acknowledge that a condition to Purchaser’s and
Purchaser Parent’s obligation to consummate the Merger is the simultaneous or
immediately prior to closing of the acquisition by the Purchaser of Black
Diamond pursuant to the terms of the Black Diamond Merger Agreement and that the
Purchaser has provided the Stockholders with a copy of such Black Diamond Merger
Agreement. Each of the Stockholders acknowledge that it has had the
opportunity to ask questions of, and receive answers from, officers of the
Purchaser regarding the terms and conditions of the Black Diamond Merger
Agreement and other documents and materials, and the transactions contemplated
thereby, as well as the affairs of Black Diamond. Each of the
Stockholders acknowledges that it has been provided with access to the
information and documents contained in the data room established with respect to
Black Diamond and has performed such due diligence as its has deemed necessary
with respect to Black Diamond.
ARTICLE
V
REPRESENTATIONS
AND WARRANTIES REGARDING
THE
PURCHASER, PURCHASER PARENT AND MERGER SUBS
In order
to induce the Company and Stockholders to enter into this Agreement and to
consummate the transactions contemplated hereby, Purchaser, Purchaser Parent and
Merger Subs, jointly and severally, represent and warrant to the Company and the
Stockholders as follows:
5.1 Organization. (a) Each
of the Purchaser and Merger Sub One is a corporation duly incorporated, validly
existing and operated and, with respect to its relevant corporate formation and
existence, is in good standing under the Laws of the State of Delaware, and is
qualified or licensed as a foreign entity to do business in each jurisdiction
where the nature of its business or the ownership, leasing or operation of its
assets and properties renders such qualification, license or good standing
necessary, except where such failures to be so qualified or in good standing
would not, in the aggregate, reasonably be expected to have a Material Adverse
Effect. Each of the Purchaser and Merger Sub One has the requisite
corporate power to own, operate and lease its assets and to carry on its
business as now being conducted.
(b) Each
of the Purchaser Parent the Merger Sub Two is a limited liability company duly
formed, validly existing and operated and, with respect to its relevant company
formation and existence, is in good standing under the Laws of the State of
Delaware, and is qualified or licensed as a foreign entity to do business in
each jurisdiction where the nature of its business or the ownership, leasing or
operation of its assets and properties renders such qualification, license or
good standing necessary, except where such failures to be so qualified or in
good standing would not, in the aggregate, reasonably be expected to have a
Material Adverse Effect. Each of the Purchaser Parent the Merger Sub
Two has the requisite company power to own, operate and lease its assets and to
carry on its business as now being conducted.
42
5.2 Authorization;
Enforceability. Each
of the Purchaser, Purchaser Parent and Merger Subs has full corporate or company
power, as the case may be, and authority to execute, deliver and perform this
Agreement and the Purchaser Ancillary Agreements to which it is a party, and to
consummate the transactions contemplated hereby and thereby. The
execution, delivery and performance of this Agreement, the Purchaser Ancillary
Documents and all other documents and agreements to be delivered pursuant hereto
or thereto, and the consummation of the transactions contemplated hereby and
thereby, have been duly and validly approved and authorized by all necessary
corporate or company action, as the case may be, on the part of the Purchaser,
Purchaser Parent and Merger Subs. This Agreement has been (and each
of the Purchaser Ancillary Agreements when executed will be) duly and validly
executed and delivered by the Purchaser, Purchaser Parent and Merger Subs, as
the case may be, and constitutes (or, in the case of each of the Purchaser
Ancillary Agreements when executed will constitute), the legal, valid and
binding obligation of the Purchaser, Purchaser Parent and Merger Subs, as the
case may be, enforceable against it in accordance with its respective terms,
except as such enforcement may be limited by bankruptcy, insolvency,
reorganization, or other similar Laws affecting or relating to the rights of
creditors generally or by general principles of equity. The
officer(s) executing this Agreement, the Purchaser Ancillary Documents and all
other documents and agreements to be delivered pursuant hereto or thereto, to
which the Purchaser, Purchaser Parent or Merger Subs are a party are duly
authorized to act on behalf of Purchaser, Purchaser Parent or Merger Subs, as
the case may be.
5.3 No Conflicts; No Default.
The
execution, delivery and performance by the Purchaser, Purchaser Parent and
Merger Subs of this Agreement and the Purchaser Ancillary Agreements, and the
consummation of the transactions contemplated hereby and thereby will not (a)
violate any provision of the Governing Documents of the Purchaser, Purchaser
Parent or Merger Subs, (b) violate, or be in conflict with, or constitute a
default (or an event which, with notice or lapse of time or both, could
constitute a default) under, or result in, or provide the basis for, the
termination of, or accelerate the performance required by, or excuse performance
by any Person of any of its obligations under, or cause the acceleration of the
maturity of any Indebtedness or obligation pursuant to, or result in the
creation or imposition of any Lien upon any material property or assets of the
Purchaser, Purchaser Parent or Merger Subs under any material Contract to which
Purchaser, Purchaser Parent or Merger Subs is a party or by which any of their
properties or assets are bound, or (c) subject to compliance with Antitrust Law,
violate any Law or Order of any Governmental Authority applicable to the
Purchaser, Purchaser Parent or Merger Subs, or require the consent, approval or
action of, filing with or notice to any Governmental Authority or other Person
in order for Purchaser, Purchaser Parent or Merger Subs, to consummate the
Merger or any of the Purchaser Ancillary Agreements. Neither the
Purchaser Parent, the Purchaser or Merger Subs is in default under or with
respect to any Contract that would, in the aggregate, reasonably be expected to
have a Material Adverse Effect.
5.4 Taxes.
Purchaser, Purchaser Parent and Merger Subs have filed or have caused to be
filed all tax returns that are required to be filed (except for returns that
have been appropriately extended) by the Purchaser, Purchaser Parent and Merger
Subs, and Purchaser, Purchaser Parent and Merger Subs, as the case may be, has
paid, or will pay when due, all taxes shown to be due and payable on said
returns and all other taxes, impositions, assessments, fees or other charges
imposed on them by any governmental authority, agency or instrumentality, prior
to any delinquency with respect thereto (other than taxes, impositions,
assessments, fees and charges currently being contested in good faith by
appropriate proceedings, for which appropriate amounts have been
reserved). No tax liens have been filed against Purchaser, Purchaser
Parent and Merger Subs, or any of their respective properties.
43
5.5 Brokers and
Finders. Other
than Persons that will be paid in full at or prior to the Closing by Purchaser,
Purchaser Parent and Merger Subs, no broker, finder, agent, investment banker,
financial advisor or similar intermediary has acted on the Purchaser’s,
Purchaser Parent’s, or Merger Subs’s behalf in connection with this Agreement or
the Purchaser Ancillary Agreements or the transactions contemplated hereby or
thereby, and there are no brokerage commissions, finders’ fees or similar fees
or commissions payable in connection therewith based on any Contract with the
Purchaser or Purchaser Parent or any action taken by the Purchaser, Purchaser
Parent Merger Subs.
5.6 Public Documents;
Compliance. The
forms, reports, schedules, registration statements, and documents filed by
Purchaser Parent with the SEC did not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading (in each case as of the respective
dates that they were filed with the SEC, or if amended or superseded by a filing
prior to the date of this Agreement, then on the date of such
filing). All forms, reports, schedules, registration statements and
documents required to be filed by Purchaser Parent with the SEC under the
Securities Act and the Exchange Act have been filed on a timely basis for the
last 12 months. Since the date of the latest financial statements of
Purchaser Parent included in any report filed by Purchaser Parent with the SEC,
there has been no material adverse change in the condition (financial or
otherwise), results of operations, assets, liabilities or business of Purchaser
Parent and its Subsidiaries, taken as a whole.
5.7 Merger Consideration
Shares. Any
Merger Consideration Shares to be issued pursuant to Section 2.2 upon issuance
will be, duly authorized, validly issued, fully paid and
non-assessable.
5.8 Litigation. There are
no actions, suits, investigations, arbitrations, claims or proceedings pending
or, to the Knowledge of Purchaser Parent, Purchaser or Merger Subs, threatened
before any court or by or before any Governmental Authority or arbitrator
against Purchaser Parent, the Purchaser or Merger Subs, or any of their
respective directors or officers, as such, relating to the Merger or that might
prevent or delay the consummation of such transaction.
5.9 Black Diamond
Transaction. The
Purchaser has provided the Stockholders with a true and correct copy of the
Black Diamond Merger Agreement as in effect on the date hereof.
5.10 Compliance with Law.
The
Purchaser Parent and each of its Subsidiaries has complied in all material
respects with, is not in violation of, and has not received notices of violation
with respect to any Law which, individually or in the aggregate with each such
other violation, noncompliance, notification or underlying matters in respect
thereof, has had or would reasonably be expected to have a Material Adverse
Effect upon the Purchaser Parent and the Purchaser taken as a
whole.
5.11 Capitalization of the
Purchaser Parent.
(a) The
authorized capital stock of the Purchaser Parent consists solely of (i)
100,000,000 shares of Purchaser Parent Common Stock, of which 17,366,747 shares
are issued and outstanding, and 75,000 shares of Purchaser Parent Common Stock
are held in the treasury of the Purchaser Parent; and (ii) 5,000,000 shares of
Purchaser Parent preferred stock, xxx xxxxx x.0000, xxxx of which have been
issued or are reserved for issuance. The Purchaser Parent SEC
Documents include information regarding equity securities reserved for issuance
under the Parent Purchaser’s equity incentive plans and employee stock purchase
plans and upon conversion of convertible securities as of the date
hereof. Except as set forth in the Purchaser Parent SEC Documents
filed prior to the date hereof, there are no other Rights issued and outstanding
for capital stock or Equity Interests of the Purchaser Parent. All of
the issued and outstanding shares of Purchaser Parent Common Stock are duly
authorized, validly issued, fully paid and non-assessable.
44
(b) At
the Closing, after giving effect to the transactions contemplated to occur at or
prior to Closing hereunder, no Rights will be or become exercisable or
exchangeable for, convertible into, or otherwise give its holder any right to
acquire any Equity Interests of the Purchaser Parent.
(c) There
is no Voting Debt of the Purchaser Parent.
5.12 Disclosure.
No
representation or warranty of the Purchaser Parent, Purchaser or Merger Subs
contained in this Agreement contains or between the date hereof and the Closing
Date will contain any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements contained herein or
therein, in light of the circumstances under which such statements were made,
not misleading.
ARTICLE
VI
COVENANTS
6.1 Interim Operations of the
Company. The
Company and each of the Stockholders covenants and agrees that, on or after the
date hereof and prior to the Closing Date, except as expressly provided in this
Agreement or as required to consummate the transactions contemplated by this
Agreement, or as may be agreed in writing in advance by Purchaser:
(a) The
business of the Company shall be conducted in the Ordinary Course of Business,
and the Company shall use its commercially reasonable efforts to (i) preserve
the business organization of the Company intact, (ii) keep available the
services of the current officers and employees of the Company and (iii) maintain
the existing relations with customers, suppliers, creditors, business partners
and others having business dealings with the Company, to the end that the
goodwill and ongoing business of the Company shall be unimpaired in any
materially adverse manner at the Closing Date. The Company shall not
institute any new methods of manufacture, purchase, lease, management,
accounting or operation or engage in any transaction or activity other than
changes in the Ordinary Course of Business;
(b) The
Company shall not: (i) amend its Governing Documents, (ii) issue,
sell, transfer, pledge, dispose of or encumber any shares of any class or series
of its capital stock or Voting Debt, or
securities convertible into or exchangeable for, or options, warrants, calls,
commitments or rights of any kind to acquire, any shares of any class or series
of its capital stock or any Voting Debt, in each case outstanding on the date
hereof, (iii) declare, set aside or pay any dividend or other distribution
payable in cash, stock or property with respect to any shares of any class or
series of its capital stock; (iv) split, combine or reclassify any shares of any
class or series of its stock; or (v) redeem, purchase or otherwise acquire
directly or indirectly any shares of any class or series of its capital stock,
or any instrument or security which consists of or includes a right to acquire
such shares;
(c) the
Company shall not organize any new Subsidiary or acquire any capital stock or
other equity securities, or equity or ownership interest in the business, of any
other Person;
(d) the
Company shall not (i) modify, amend or terminate any of its Material
Contracts or waive, release or assign any material rights or claims, except in
the Ordinary Course of Business or (ii) enter into a Change of Control
Agreement;
45
(e) the
Company shall not: (i) other than the Xxxxx Fargo Loan, incur or
assume any Indebtedness other than trade payables in the Ordinary Course of
Business; (ii) except in the Ordinary Course of Business, pay, repay, discharge,
purchase, repurchase or satisfy any Indebtedness issued or guaranteed
by the Company, except as required by the terms thereof or this Agreement; (iii)
modify the terms of any Indebtedness or, except in the Ordinary Course of
Business, any other Liability, (iv) assume, guarantee, endorse or otherwise
become liable or responsible (whether directly, contingently or otherwise) for
the obligations of any other Person (other than the Company), (v) enter into any
material commitment or transaction other than those entered into in the Ordinary
Course of Business; (vi) except in the Ordinary Course of Business, write down
the value of any inventory or write off as uncollectible any notes or accounts
receivable; or (vii) dispose of or permit to lapse any rights to any material
Company Intellectual Property;
(f)
the Company shall not lease, license, mortgage, pledge or
encumber any assets other than in the Ordinary Course of Business or transfer,
sell or dispose of any assets other than in the Ordinary Course of
Business;
(g) the
Company shall not make any change in the compensation payable or to become
payable to, or enter into or amend any employment, severance or termination or
other Contract, or make any loan or advance to, any of its officers, directors,
Affiliates or Related Parties, or enter into or amend any employment, severance,
consulting, termination or other Contract with, or employee benefit plan for, or
make any loan or advance, in excess of $25,000.00 individually or $100,000.00 in
the aggregate, to any of its employees, agents or consultants or make any change
in its existing borrowing or lending arrangements for or on behalf of any of
such Persons pursuant to an employee benefit plan or otherwise;
(h) the
Company shall not (i) pay or make any accrual or arrangement for payment of any
pension, retirement allowance or other employee benefit pursuant to any existing
plan, Contract or arrangement to any officer, director, employee or Affiliate or
pay or agree to pay or make any accrual or arrangement for payment to any
officer, director, employee or Affiliate of any amount relating to unused
vacation days, except to the extent the Company is obligated to do so on the
date hereof or is subsequently obligated to do so by Law or, in the case of
employees that are not officers would, in the Ordinary Course of Business, make
such payment, accrual or arrangement, (ii) adopt or pay, grant, issue,
accelerate or accrue salary or other payments or benefits pursuant to any
Benefit Plan, or any employment or consulting Contract with or for the benefit
of any director, officer, employee, agent or consultant, whether past or
present, except to the extent the Company is obligated to do so on the date
hereof or is subsequently obligated to do so by Law, or (iii) amend in any
material respect any such plan, Contract or arrangement in a manner inconsistent
with the foregoing;
(i) the
Company shall not permit any insurance policy naming it as a beneficiary or a
loss payable payee to be cancelled or terminated without notice to Purchaser,
except policies which are replaced without any material diminution of or gaps in
coverage;
(j) the
Company shall not enter into any Contract or transaction, or related series of
Contracts or transactions, involving the expenditure in excess of $50,000.00 and
relating to the purchase of assets other than in the Ordinary Course of Business
or pursuant to its existing capital expenditure budget made available to
Purchaser in the Electronic Data Room;
(k) the
Company shall not pay, repurchase, discharge or satisfy any of its claims,
liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, discharge or satisfaction in
the Ordinary Course of Business of claims, liabilities or obligations reflected
or reserved against in, or contemplated by, the Financial Statements or incurred
since the Balance Sheet Date in the Ordinary Course of
Business;
46
(l)
the Company shall
not adopt a plan of complete or partial liquidation, dissolution, merger,
consolidation, restructuring, recapitalization or other reorganization of the
Company;
(m) the
Company shall not take, or agree to or commit to take, any action that would
result in any of the conditions to the Closing set forth in Article VII and
Article VIII not being satisfied, or would make any representation or warranty
of the Company or the Stockholders contained herein inaccurate in any respect
at, or as of any time prior to, the Closing Date, or that would materially
impair the ability of the Company or Purchaser to consummate the Closing in
accordance with the terms hereof or materially delay such consummation;
and
(n) the
Company shall not enter into any Contract, commitment or arrangement to do any
of the foregoing, or authorize, recommend, propose or announce an intention to
do, any of the foregoing.
6.2 Access. Between
the date of this Agreement and the Closing, the Company shall, upon reasonable
prior notice, (a) afford Purchaser and its authorized representatives reasonable
access to all books, records, offices and other facilities, and to officers and
accountants of the Company, (b) permit Purchaser to review and to make copies of
such books and records as it may reasonably require and (c) furnish Purchaser
with such financial and operating data and other information as Purchaser may
from time to time reasonably request. Purchaser and its authorized
representatives shall conduct all such reviews in a manner that will minimize
disruptions to the business and operations of the Company. All such
access shall be conducted in a manner as not to interfere unreasonably with the
business operations of the Company.
6.3 Confidentiality;
Publicity.
(a) Existing Confidentiality
Agreement. The Existing Confidentiality Agreement, to the
extent not inconsistent with the terms of this Agreement, is hereby confirmed
and acknowledged as the continuing obligations of the parties; provided, that the
parties hereto agree that the Existing Confidentiality Agreement shall terminate
at Closing.
(b) Announcements. No
public announcement or other publicity regarding this Agreement or the
transactions contemplated hereby shall be made on or after the date hereof
without the prior written consent of the Stockholders, the Company and Purchaser
as to form, content, timing and manner of
distribution. Notwithstanding the foregoing, nothing in this
Agreement shall preclude any party hereto from making any public announcement or
filing that the disclosing party reasonably deems necessary to comply with
federal or state securities Laws (including voluntary filings with the SEC under
the Exchange Act) or any rules of a stock exchange upon which any of the shares
of such Person are listed.
47
6.4 Efforts and Actions to Cause
Closing to Occur; Certain Consents. (a) Prior
to the Closing, upon the terms and subject to the conditions of this Agreement,
Purchaser Parent, Purchaser, Stockholders and the Company shall use their
respective commercially reasonable efforts to take, or cause to be taken, all
actions, and to do, or cause to be done and cooperate with each other in order
to do, all things necessary, proper or advisable (subject to any applicable
Laws) to consummate the Closing as promptly as practicable including, but not
limited to the preparation and filing of all forms, registrations and notices
required to be filed to consummate the Closing and the taking of such actions as
are necessary to obtain any requisite approvals, authorizations, consents,
orders, licenses, permits, qualifications, exemptions or waivers by any third
party or Governmental Authority including, but not limited to, making all
necessary filings with respect to this Agreement required under the Securities
Act, the Exchange Act and any applicable federal or states securities
Laws. In addition, except as permitted hereby, no party hereto shall
take any action after the date hereof that would materially delay the Closing,
including any preventable delay in the expiration of a review period of, or the
obtaining of any permission, approval or consent from, any Governmental
Authority or other Person required to be obtained prior to Closing.
(b) Prior
to the Closing, each party shall promptly consult with the other parties hereto
with respect to, provide any necessary information with respect to, and, except
and to the extent prohibited by applicable Law, promptly provide the other
parties (or their respective counsel) with copies of, all filings made by such
party with any Governmental Authority or any other information supplied by such
party to a Governmental Authority in connection with this
Agreement. Each party hereto shall promptly provide the other parties
with copies of any written communication received by such party from any
Governmental Authority regarding the Merger unless and to the extent prohibited
by applicable Law. If any party hereto or Affiliate thereof receives
a request for additional information or documentary material from any such
Governmental Authority with respect to the Merger, then such party shall
endeavor in good faith to make, or cause to be made, as soon as reasonably
practicable and after consultation with the other parties, an appropriate
response in compliance with such request. To the extent that
transfers, amendments or modifications of permits (including environmental
permits) are required as a result of the execution of this Agreement, the
Company shall use its respective commercially reasonable efforts to effect such
transfers, amendments or modifications.
(c) The
Company shall use its commercially reasonable efforts to obtain, prior to the
Closing, the estoppels and waivers set forth in Schedule 6.4(c)(i),
and the consents, waivers, notices and termination letters set forth on Schedule 6.4(c)(ii)
in form reasonably acceptable to Purchaser. All such consents,
waivers, notices and termination letters which the Company is able to obtain
shall be in writing and executed counterparts thereof shall be delivered to
Purchaser at or prior to the Closing.
(d) In
addition to and without limiting the agreements of the parties contained above,
the Company, Purchaser and Purchaser Parent, shall, to the extent not prohibited
by applicable Law: (i) promptly notify the other parties hereto of any written
communication to that party from any Governmental Authority located in the U.S.
and, to the extent practicable, outside of the U.S. and, if practicable, permit
the other parties to review in advance any proposed written communication to any
such Governmental Authority and incorporate the other parties’ reasonable
comments, (ii) not agree to participate in any substantive meeting or discussion
with any such Governmental Authority in respect of any filing, investigation or
inquiry concerning this Agreement unless, to the extent reasonably practicable,
it consults with the other parties in advance and, to the extent permitted by
such Governmental Authority, gives the other parties the opportunity to attend,
and (iii) furnish the other parties with copies of all correspondence, filings
and written communications between them and their Affiliates and their
respective representatives on one hand, and any such Governmental Authority or
its respective staff on the other hand, with respect to this
Agreement.
6.5 Notification of Certain
Matters. (a) From
time to time prior to the Closing, the Company shall notify the Purchaser with
respect to any matter arising after the delivery of the Company Disclosure
Schedule that, if existing at, or occurring on, the date of this Agreement,
would have been required to be set forth or described in the Company Disclosure
Schedule. No such notification shall be deemed to amend or supplement
the Company Disclosure Schedule pursuant to this section or shall otherwise be
deemed to cure any breach of any representation, warranty or covenant made as of
the date of execution of this Agreement.
48
(b) The
Company shall give written notice to Purchaser promptly upon receipt of
Knowledge by the Company of (i) the occurrence or non-occurrence of any event
whose occurrence or non-occurrence could reasonably be expected to cause either
(A) any representation or warranty of the Company contained in this Agreement to
be untrue or inaccurate in any material respect when made or at the Closing
Date, (B) any condition with respect to the Company set forth in Article VII and
Article VIII to be unsatisfied in any material respect at any time from the date
hereof to the Closing Date, (ii) any material failure of the Company or any
officer, director, employee or agent thereof, to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it
hereunder and (iii) the occurrence of a Material Adverse Effect with respect to
the Company, taken as a whole; provided, however, that the
delivery of any notice pursuant to this section shall not limit or otherwise
affect the remedies available hereunder to the party receiving such
notice.
(c) Purchaser
shall give written notice to the Company promptly upon receipt of Knowledge by
the Purchaser of (i) the occurrence or non-occurrence of any event whose
occurrence or non-occurrence would cause either (A) any representation or
warranty of Purchaser contained in this Agreement to be untrue or inaccurate in
any material respect when made at the Closing Date or (B) any condition set
forth in Article VII or Article VIII to be unsatisfied in any material respect
at any time from the date hereof to the Closing Date and (ii) any material
failure of Purchaser or any officer, director, employee or agent thereof, to
comply with or satisfy any covenant, condition or agreement to be complied with
or satisfied by it hereunder; provided, however, that the
delivery of any notice pursuant to this section shall not limit or otherwise
affect the remedies available hereunder to the party receiving such
notice.
6.6 Subsequent
Actions.
If at any
time after the Closing, any deeds, bills of sale, instruments of conveyance,
assignments, assurances or any other actions or things are reasonably necessary
to (a) vest, perfect or confirm ownership (of record or otherwise) in Purchaser
its right, title or interest in, to or under any or all of the Shares, (b) vest,
perfect or confirm ownership (of record or otherwise) in the Company, any of its
rights, properties or assets or (c) otherwise to carry out this Agreement,
including, without limitation, with respect the Right of Set-off, the Company
shall execute and deliver all deeds, bills of sale, instruments of conveyance,
powers of attorney, assignments and assurances and take and do all such other
actions and things as may be reasonably requested by Purchaser in order to vest,
perfect or confirm any and all right, title and interest in, to and under such
rights, properties or assets in Purchaser, the Company, or otherwise to carry
out this Agreement. In case at any time after the Closing Date any
further action is necessary, proper or advisable to carry out the purposes of
this Agreement, each party hereto shall, as soon as reasonably practicable,
take, or cause its proper officers or directors to take, all such necessary,
proper or advisable actions, promptly upon request of another party
hereto.
6.7 Acquisition
Proposals.
(a) From
the date hereof until the earlier to occur of the Closing Date or the
termination of this Agreement pursuant to Section 10.1 hereof, the Company and
the Stockholders shall not, and the Company shall use its reasonable best
efforts to cause its directors, officers, trustees, employees, or any of its
investment bankers, attorneys or other advisors, agents or representatives not
to, directly or indirectly, , participate in any discussions or negotiations
regarding, or solicit, initiate or encourage the submission of, an Acquisition
Proposal or furnish to any Person any information for any purpose in connection
with an Acquisition Proposal or otherwise cooperate in any way with, or assist
or participate in, facilitate or encourage, any effort or attempt by any other
Person to do or seek to do any of the foregoing. The Company will (a)
immediately notify Purchaser orally and in writing if any discussions or
negotiations are sought to be initiated, any inquiry or proposal is made, or any
information is requested by any Person with respect to any Acquisition Proposal
or proposal which could lead to an Acquisition Proposal, (b) immediately notify
Purchaser of all material terms of any Acquisition Proposal including the
identity of the Person making the Acquisition Proposal or the request for
information, and (c) in the event a third party makes a written offer or
proposal to the Company with respect to any Acquisition Proposal, the Company
will promptly send to Purchaser a copy of any such written offer or
proposal. The Company and the Stockholders shall, and shall cause
each of its respective officers, directors, employees, investment bankers,
attorneys, accountants and other agents to, immediately cease and cause to be
terminated all discussions and negotiations that have taken place prior to the
date hereof, if any, with any Persons with respect to any Acquisition
Proposal. In addition, the
Company shall take all steps reasonably necessary to enforce any existing
standstill, non-solicitation, confidentiality or other agreements between the
Company and third parties relating to any Acquisition Proposal and shall not
terminate, waive or modify such agreements prior to the Closing without the
prior written consent of the Purchaser. The Company agrees
that it shall be responsible for any breach of this Section 6.7 by any of its
directors, officers, trustees, employees, or any of its investment bankers,
attorneys or other advisors, agents or representatives, as if the foregoing were
parties to this Agreement and bound by this Section 6.7.
49
6.8 D&O Tail
Insurance. Immediately prior to
the Closing, the Company shall purchase “tail coverage” for the existing
policies of directors’ and officers’ liability insurance and fiduciary liability
insurance and fiduciary insurance covering the directors and officers of the
Company as of the date hereof (which may include naming such individuals under
Purchaser’s existing policies) for a period of six (6) years after the Effective
Time, in respect of acts or omissions occurring prior to the Effective Time (the
“D&O Tail
Insurance”).
6.9 Payment of Certain
Indebtedness and Company Transaction Expenses.
The
Company shall deliver to Purchaser no later than three (3) Business Days prior
to Closing (a) such bills, invoices and other supporting documentation as
Purchaser may reasonably request in respect of the Company Transaction Expenses, and (b) with
respect to Xxxxx Fargo Loan, payoff, lien and related termination letters in
form reasonably acceptable to Purchaser to evidence the termination and
discharge of the Xxxxx Fargo Loan Documents, and all Liens and Indebtedness
thereunder. Subject to receipt of the foregoing, and satisfaction or
waiver of the closing conditions, Purchaser shall on the Closing Date pay off
(i) any and all amounts due and owing with respect to Indebtedness of the
Company incurred pursuant to the Xxxxx Fargo Loan to the holders thereof (the
“Closing Indebtedness Payment”), and the Company and the Purchaser, shall, with
the resources and credit arrangements of Purchaser, arrange for the backing up,
assumption, collateralization, replacement, guaranty or substitution for, all
outstanding and undrawn letters of credit issued under the Xxxxx Fargo Loan, if
any, and (ii) any and all amounts of any outstanding portion of the Company
Transaction Expenses as set forth on the Company Closing
Certificate.
6.10 Delivery of Financial
Statements and Certificates. Between
the date hereof and the Closing Date, the Company shall deliver any Interim
Financial Statements not previously delivered to Purchaser as soon as available
and in all events within twenty (20) days after the conclusion of each calendar
month; provided, that Company shall deliver the Interim Financial Statements for
the month prior to the Closing together with the Determination Date Balance
Sheet if the Closing shall occur prior to the twentieth (20th) day of the
month. No later than seven (7) Business Days prior to the Closing,
the Company shall deliver the Determination Date Balance Sheet, proposed
calculations of the Working Capital Target, the Determination Date Working
Capital and the Working Capital Adjustment proposed to be attached to the
Company Closing Certificate. At the Closing, the Company shall
deliver the Company Closing Certificate.
6.11 Company
Litigation. Until the
earlier of the termination of this Agreement in accordance with its terms and
the Effective Time, the Company shall permit Purchaser to monitor, at its own
expense and with separate counsel, the defense or settlement of Litigation
brought by any Person against the Company or the board of directors of the
Company relating to this Agreement or the Merger, and shall not settle any such
Litigation, without first consulting with Purchaser regarding the nature and
terms of such settlement. Unless Purchaser shall have approved in
writing the settlement of any Litigation, the Company shall not settle any
Litigation unless the payment by the Company of any cash amount is less than
$50,000.00 and such settlement does not impose any restriction on the business,
assets, or operations of the Company following the Closing
Date.
50
6.12 Takeover Laws and Takeover
Provisions. No party
hereto shall take any action that would cause the Merger and the transactions
contemplated hereby to be subject to requirements imposed by any Takeover Law
and each of them will take all reasonable steps within its control to exempt (or
ensure the continued exemption of) the Merger and the transactions contemplated
hereby from, or if necessary challenge the validity or applicability of, any
applicable Takeover Law, as now or hereafter in effect. No party
hereto will take any action that would cause the transactions contemplated
hereby not to comply with any Takeover Provisions and each of them will take all
reasonable steps within its control to make the Merger and the transactions
contemplated hereby comply with (or continue to comply with) the Takeover
Provisions.
6.13 Certain
Communications. The
Company shall provide Purchaser with copies of all letters, memoranda and other
correspondence to be circulated to the employees that describe the transactions
contemplated hereby or the Purchaser for its prior review and approval, which
review and approval shall not be unreasonably withheld or delayed.
6.14 Employee Benefit
Plans. The
Purchaser shall not cause the termination or modification of the Benefit Plans
of the Company set forth on Schedule 3.13(a)
hereto at the Closing. Following the Closing, the Purchaser may
amend, modify or terminate such Benefit Plans in such manner as it may determine
in its sole discretion.
6.15 Reorganization. The
Purchaser Parent and the Purchaser will, or will cause the Surviving Company to
continue at least one significant historic business line of Company, or use, or
will cause the Surviving Company to use at least a significant portion of
Company’s historic business assets in a business, in each case with the meaning
of Reg. 1.368-1(d), except that Purchaser Parent and Purchaser may transfer
Company’s historic business assets (i) to a corporation that is a member of
Purchaser Parent’s “qualified group,” within the meaning of Reg.
1.368-1(d)(4)(ii), or (ii) to a partnership if (A) one or more members of
Purchaser Parent’s “qualified group” have active and substantial management
functions as a partner with respect to Company’s historic business or (B)
members of Purchaser Parent’s “qualified group” in the aggregate own an interest
in the partnership representing a significant interest in Company’s historic
business, in each case within the meaning of Reg.
1.368-1(d)(4)(iii).
6.16 Purchaser Parent Equity
Incentive Plan. Within 15 days following the Closing, the Purchaser
Parent shall grant to the Eligible Employees that has executed and delivered to
the Company a Participant Release, a number of vested stock units and an amount
of deferred compensation, as set out on Schedule 6.16
attached hereto, with an aggregate value equal to the Eligible Employee
Purchaser Award Amount.
6.17 Company Intellectual
Property. (a) The Company and each of the Stockholders
acknowledges that pursuant to this Agreement, the Surviving Company shall
inherit all rights and liabilities associated with all of the Company’s
business, including without limitation all right, title and interest in and to
the Company Intellectual Property and the right and authority to, in the
Surviving Company’s name, oppose, cancel, file appeals, apply for judicial
reviews, and apply for retrials for the protection of the Company Intellectual
Property. The Company and each of the Stockholders further
acknowledges that the Surviving Company shall have the right to, in the
Surviving Company name, take all actions in connection with all of the Company’s
business, including all actions in connection with oppositions, cancellations,
appeals, judicial reviews, and retrials for the protection of the Company
Intellectual Property. For the avoidance of doubt, the Surviving Company shall
have the right to, in the Surviving Company’s name, oppose, cancel, file
appeals, apply for judicial reviews, and apply for retrials in respect of the
third party trademark applications and registrations set out in Schedule
6.17.
51
(b) The
Company and each of the Stockholders hereby authorizes the Surviving Company to,
in the Surviving Company’s name, oppose, cancel, file appeals, apply for
judicial reviews, and apply for retrials for the protection of the Company
Intellectual Property and to take all actions as it deems fit. For the avoidance
of doubt, Company and each of the Stockholders hereby authorizes the Surviving
Company to, in the Surviving Company’s name, oppose, cancel, file appeals, apply
for judicial reviews, and apply for retrials in respect of the third party
trademark applications and registrations set out in Schedule
6.17.
6.18 Company and Stockholder
Approval. Simultaneous with the execution and delivery of this
Agreement, the Company shall deliver to the Purchaser a fully executed and
effective unanimous written consents of the Company’s board of directors and
Stockholders contemplated by Sections 141 and 228, respectively, of the DGCL in
the forms attached hereto as Exhibit K (the “Written Consent of the
Company’s Board of Directors”) and as Exhibit L (the “Written Consent of the
Stockholders”). The Written Consents shall not be amended, modified or
rescinded in any respect without the prior written consent of
Purchaser.
ARTICLE
VII
CONDITIONS
PRECEDENT TO THE OBLIGATIONS OF
PURCHASER,
MERGER SUBS AND PURCHASER PARENT
The
obligations of Purchaser Parent, Purchaser and Merger Subs to complete the
Closing are conditioned upon the satisfaction, or waiver by Purchaser on behalf
of itself, Purchaser Parent and Merger Subs, as of the Closing Date, of the
following conditions:
7.1 Representations and
Warranties. All of
the representations and warranties of the Company and the Stockholders set forth
in this Agreement or any Company Ancillary Agreement, as applicable, that are
qualified as to materiality shall be true and complete in all respects and each
such representation or warranty that is not so qualified shall be true and
complete in all material respects, in each case, as of the date of this
Agreement or such Company Ancillary Agreement, as the case may be, and as of the
Closing Date; provided, however, that if any
of the representations and warranties of the Company in this Agreement are not
true and correct in the manner required above as of the Closing Date solely as a
result of events or circumstances that first become Known to the Company after
the date hereof (“Company Material Pre-Closing
Events”), the condition contained in this Section 7.1 shall be deemed
satisfied with respect to such representations and warranties that are not true
and correct due to such Company Material Pre-Closing Events; provided, further, disclosure
of any Company Material Pre-Closing Events and the deemed satisfaction of this
condition shall not impair or adversely affect the Purchaser Indemnified
Parties’ remedies and rights to indemnification pursuant to the terms and
conditions of Article XI hereof.
7.2 Performance of Agreements,
Covenants and Obligations The Company and Stockholders shall not have failed to
perform or comply in any material respect with any agreement, covenant or
obligation of the Company or Stockholders to be performed or complied with by it
under this Agreement or any Company Ancillary Agreement, as
applicable.
52
7.3
Material
Adverse Effect. There
shall not have occurred a Material Adverse Effect on the Company.
7.4
Litigation. (a) There
shall not be any material Litigation pending or, to the Company’s Knowledge,
threatened before any Governmental Authority:
(i) seeking
to prohibit or impose any limitations on Purchaser’s ownership or operation (or
that of any of its Subsidiaries or Affiliates) of any portion of their or the
Company’s businesses or assets, or to compel Purchaser or the Company or the
Company’s Affiliates to dispose of or hold separate any portion of the business
or assets of the Company or Purchaser or any of their respective Subsidiaries or
Affiliates;
(ii) seeking
to restrain or prohibit the consummation of the Closing, or seeking to obtain
from the Company or Purchaser any damages that are material in relation to the
Company;
(iii) seeking
to impose material limitations on the ability of Purchaser effectively to
exercise full rights of ownership of the Company or the Surviving
Company,
nor shall
there be any statute, rule, or regulation, enacted, entered, enforced or
promulgated that is applicable to the Merger , or any other action taken by any
Governmental Authority, that could reasonably be likely to result, directly or
indirectly, in any of the consequences referred to in clauses (i) through (iii)
above.
(b) No
Order shall have been issued by any court or other Governmental Authority which
restrains or prohibits this Agreement or the consummation of the transactions
contemplated hereby.
7.5 Company and Stockholder
Approval. The
Written Consent shall continue to be in full force and effect.
7.6 Company Closing
Certificate.
A
certificate of the Company, dated the Closing Date, signed by the Chief
Executive Officer and the Chief Financial Officer of the Company shall have been
delivered to Purchaser certifying as to:
(a) each
of the conditions specified in Sections 7.1, 7.2, 7.3, 7.4, and 7.5 having been
satisfied in all respects;
(b) delivery
of a true and complete copy of the Determination Date Balance Sheet together
with the calculation of the Determination Date Working Capital and the Working
Capital Adjustment, and that each of such items were prepared in accordance with
this Agreement;
(c) a
complete list of the Company Transaction Expenses, together with payment
instructions therefor, if any; and
(d) a
complete list of Indebtedness of the Company as of the Closing Date, other than
the Excluded Indebtedness.
7.7 Opinion of
Counsel.
The
Company shall have delivered to Purchaser at the Closing an opinion of Xxxxxxxx
& Xxxxx LLP, special counsel to the Company, dated the Closing Date,
substantially in the form set forth on Exhibit
D.
7.8 Consents
Obtained.
The
estoppels and waivers set forth in Schedule 6.4(c)(i),
and the consents set forth in Schedule 6.4(c)(ii)
shall have been obtained in form reasonably satisfactory to Purchaser, and a
copy of each such estoppel, waiver and consent shall have been provided to or
made available to Purchaser at or prior to the Closing.
53
7.9 Certificate
of Merger.
At or
prior to the Effective Time, the Certificate of Merger shall be accepted for
filing with the Secretary of State.
7.10 Payment
of Certain Indebtedness.
The
Company shall have delivered to Purchaser evidence reasonably satisfactory to
Purchaser that upon payment of the Indebtedness in respect of the Xxxxx Fargo
Loan and Purchaser arranging for the backing up, assumption, collateralization,
replacement, guaranty or substitution for, all outstanding and undrawn letters
of credit issued under the Xxxxx Fargo Loan, each at Closing, such Indebtedness
and each of the Liens relating thereto shall be discharged and
terminated.
7.11 Delivery
of Company Common Stock Certificates.
The
Purchaser shall have received the stock certificates representing the Shares,
together with stock powers duly executed in blank.
7.12 Good
Standings; Governing Documents.
The
Company shall have delivered to Purchaser certificates issued by the Secretary
of State or other similar appropriate Governmental Authority, each dated within
seven (7) days of the Closing Date (i) evidencing the good standing of the
Company in its jurisdiction of incorporation and any jurisdictions in which its
is qualified as a foreign entity to do business, and (ii) certifying the
certificate of incorporation (or similar Governing Document) of the Company, as
amended through such date.
7.13 Officer
Certificate.
A
certificate of the Company, dated the Closing Date, signed by the Secretary of
the Company shall have been delivered to Purchaser and Merger Subs certifying
(a) the Company’s Certificate of Incorporation, (b) the Company’s bylaws, (c)
the resolutions of the board of directors of the Company and
the Stockholders approving the execution and delivery of the Merger,
this Agreement and the Company Ancillary Agreements, and the transactions
contemplated hereby and thereby, (d) that the KSS Incentive Plan has been duly
terminated, and (e) that, except as disclosed in the certificate, as of the date
of the Closing, there has been no change in the number of the outstanding Shares
from the amount set forth in Section 3.2 hereof and that no Rights have been
granted since the date hereof.
7.14 Books and
Records. The
Company shall have delivered to the Purchaser the minute books of the Company,
including corporate seals, unissued stock certificates, stock registers,
certificates of incorporation, bylaws and corporate minutes, and other formation
and organizational documents, certified by the Secretary of the
Company.
7.15 Stockholders Ancillary
Agreements. The
Purchaser shall have received an executed counterpart of each of the
Stockholders Ancillary Agreements from the Stockholders.
7.16 Fairness
Opinion. The Board
of Directors of Purchaser Parent shall have received the Purchaser’s Fairness
Opinion.
7.17 Black Diamond
Acquisition. The
simultaneous closing of the acquisition by the Purchaser of Black Diamond
pursuant to the terms of the Black Diamond Merger Agreement.
7.18 Participant
Releases. The
Purchaser shall have received executed Participant Releases from each of the
participants of the KSS Incentive Plan.
54
7.19 General. All
corporate proceedings required to be taken on the part of the Company and
Stockholders in connection with the Merger shall have been
taken. Purchaser and Merger Subs shall have received copies of such
other officers’ certificates and other customary closing documents as Purchaser
may reasonably request in connection with the transactions contemplated
hereby.
The
foregoing conditions are for the sole benefit of Purchaser, and may be waived by
Purchaser, in whole or in part, at any time and from time to time on or prior to
the Closing in the sole discretion of Purchaser.
ARTICLE
VIII
CONDITIONS
PRECEDENT TO OBLIGATIONS OF THE COMPANY AND THE STOCKHOLDERS
The
obligations of the Company and Stockholders to complete the Closing are
conditioned upon the satisfaction, or waiver by the Company, as of the Closing
Date, of the following conditions:
8.1 Representations
and Warranties. All of
the representations and warranties of the Purchaser Parent, Purchaser and Merger
Subs set forth in this Agreement or any Purchaser Ancillary Agreement that are
qualified as to materiality shall be true and complete in all respects and each
such representation or warranty that is not so qualified shall be true and
complete in all material respects, in each case as of the date of this Agreement
or such Purchaser Ancillary Agreement, as the case may be, and as of the Closing
Date; provided,
however, that
if any of the representations and warranties of the Purchaser Parent, Purchaser
or Merger Subs in this Agreement are not true and correct in the manner required
above as of the date hereof solely as a result of events or circumstances that
first become Known to the Purchaser Parent or Purchaser after the date hereof
(“Purchaser Material
Pre-Closing Events”) the condition contained in this Section 8.1 shall be
deemed satisfied with respect to such representations and warranties that are
not true and correct due to such Purchaser Material Pre-Closing Events;
provided, further, disclosure of any Purchaser Material Pre-Closing Events and
the deemed satisfaction of this condition shall not impair or adversely affect
the Company Indemnified Parties’ remedies and rights to indemnification pursuant
to the terms and conditions of Article XI hereof.
8.2 Performance of Agreements,
Covenants and Obligations. Neither
Purchaser Parent, Purchaser, nor Merger Subs shall have failed to perform or
comply in any material respect with any agreement, covenant or obligation of
Purchaser Parent, Purchaser or Merger Subs to be performed or complied with by
it under this Agreement or any Purchaser Ancillary Agreement.
8.3 Litigation. No Order
shall have been issued by any court or other Governmental Authority against the
Company which restrains or prohibits this Agreement or the consummation of the
transactions contemplated hereby.
8.4 Purchaser Closing
Certificate. A
certificate of the Purchaser, dated the Closing Date, signed by a senior officer
of the Purchaser certifying that each of the conditions specified in Sections
8.1 and 8.2 has been satisfied in all respects shall have been delivered to the
Company; provided, however, that the
delivery of such certification shall not limit or otherwise affect the remedies
available hereunder to the Company.
8.5 Good Standings; Charter
Documents. Purchaser
shall have delivered to the Company certificates issued by the Secretary of
State or other similar appropriate Governmental Authority, dated within seven
(7) days of the Closing Date, (a) evidencing the good standing of Purchaser
Parent and Purchaser in their respective jurisdictions of incorporation, and (b)
certifying the certificate of incorporation or other Governing Document of
Purchaser Parent and Purchaser, as amended through such date.
55
8.6 Officer
Certificates. Certificates
of Purchaser Parent and Purchaser, dated the Closing Date, signed by the
Secretary of Purchaser Parent and Purchaser, certifying their respective (a)
Certificates of Incorporation, (b) bylaws and (c) board of directors resolutions
approving the execution and delivery of this Agreement and the Purchaser
Ancillary Agreements, and the transactions contemplated hereby and thereby,
shall have been delivered to the Company.
8.7 Compliance with Antitrust
Law. The
requirements of Antitrust Law applicable to the Merger shall have been complied
with, and the waiting periods thereunder, if any, shall have expired or been
terminated.
8.8 Purchaser Ancillary Agreements.
The
Company and the Stockholders shall have received an executed counterpart of each
of the Purchaser Ancillary Agreements from the Purchaser.
8.9 Certificate of
Merger. At or
prior to the Effective Time, the Certificate of Merger shall be accepted for
filing with the Secretary of State.
8.10 General. All
corporate proceedings required to be taken on the part of Purchaser Parent or
Purchaser in connection with the transactions contemplated by this Agreement
shall have been taken. The Company shall have received copies of such
other officers’ certificates and other customary closing documents as the
Company may reasonably request in connection with the transactions contemplated
hereby, including a legal opinion as to the due authorization and valid issuance
of the Merger Consideration Shares, subject to customary qualifications and
assumptions.
8.11 Resale
Certificate. On the Closing Date, the Purchaser will furnish
to the Stockholders a resale certificate, in form and substance reasonable
satisfactory to the Purchaser, with respect to any Company inventory transferred
to the Purchaser pursuant to the transactions contemplated by this
Agreement.
The
foregoing conditions are for the sole benefit of Company and may be waived by
the Company in whole or in part, at any time and from time to time on or prior
to the Closing in the sole discretion of the Company and the
Stockholders.
ARTICLE
IX
TAX
MATTERS
9.1 Tax Covenants. The
parties hereto hereby agree as follows:
(a) Return
Filings. The Surviving Company shall prepare and timely file
or cause to be timely filed all Returns required to be filed by or with respect
to the Company for (i) taxable years or periods ending on or prior to the
Closing Date, the due date for filing of which (taking into account extensions)
is after the Closing Date, and (ii) taxable years or periods including, but
ending after, the Closing Date (any such period, a “Straddle Period”)
(with payment of Taxes in respect of such Returns to be made by the Surviving
Company). Any such Returns shall be prepared and filed in a manner consistent
with past practices employed by the Company with respect to the Company,
including the jurisdictions in which such Returns are filed, except to the
extent counsel for the Surviving Company determines there is no reasonable basis
in Law therefor. The Stockholders shall be entitled to review any
such Returns at least thirty (30) days prior to filing and may make reasonable
revisions thereto at least ten (10) days prior to filing.
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(b) Certain Straddle Period
Determinations. In the case of any Straddle Period (i) real,
personal and intangible property Taxes (“Property Taxes”) for
any period ending on, or prior to, the Closing Date (the “Pre-Closing Tax
Period”) shall be equal to the amount of such Property Taxes for such
entire Straddle Period multiplied by a fraction, the numerator of which is the
number of days during the Straddle Period that are in the Pre-Closing Tax Period
and the denominator of which is the number of days in the Straddle Period; and
(ii) all other Taxes for the Pre-Closing Tax Period shall be determined based on
actual closing of the books as if such taxable period ended as of the close of
business on the Closing Date.
(c) Transfer
Taxes. The Company and the Purchaser shall each pay one-half
all transfer, documentary, registration and similar Taxes incurred in connection
with and as a result of the transfer or conversion of the shares of Company
Common Stock and the Merger that are not based on net income, together with any
related fees, penalties, interest and additions to such Taxes (“Transfer
Taxes”). The Stockholders and the Purchaser shall cooperate in
timely preparing and filing all Returns as may be required to comply with the
provisions of such Tax Laws. Each party shall use its commercially
reasonable efforts to avail itself of any available exemptions from any Transfer
Taxes, and shall cooperate with the other parties in timely providing any
information and documentation, including resale certificates, that may be
necessary to obtain such exemptions.
(d) Tax
Elections. From the date hereof through the Closing, the
Company shall not make or change any Tax election, change an annual Tax
accounting period, adopt or change any Tax accounting method, file any amended
Return, enter into any closing agreement, settle any Tax Claim or assessment,
surrender any right to claim a refund of Taxes, consent to any extension or
waiver of the statute of limitations period applicable to any Tax Claim or
assessment, take any other action or omit to take any action, if any such
election, adoption, change, amendment, agreement, settlement, surrender, consent
or other action or omission would have the effect of increasing the Tax
liability or reducing any net operating loss, net capital loss, investment tax
credit, foreign tax credit, charitable deduction or any other credit or tax
attribute of the Company which could reduce Taxes (including, without
limitation, deductions and credits related to alternative minimum Taxes) without
the prior written consent of Purchaser, which shall not be unreasonably
withheld, conditioned or delayed.
(e) Additional Covenants and
Agreements. (i) Other than the consummation of the
transactions contemplated by this Agreement and other transactions in the
Ordinary Course of Business, (A) the Company shall not take any action on or
prior to the Closing Date that would increase the Tax liability of the
Purchaser, the Company without the prior written consent of Purchaser or (B) the
Purchaser Parent, Purchaser and Surviving Company shall not take any action (or
cause any Subsidiary of the Surviving Company to take any action) on or after
the Closing Date that would increase the amount of any indemnification under
Section 9.2, except to the extent counsel for the Surviving Company determines
there is no reasonable basis in Law for positions taken in Returns for Tax
periods ending on or prior to the Closing.
(ii) The
Company shall promptly provide or make available to Purchaser copies of all Tax
Returns, reports and information statements that are filed by the Company or any
Company Subsidiary after the date of this Agreement and prior to the Closing
Date.
(iii) Any
indemnity payment under this Agreement shall be treated as an adjustment to the
Merger Consideration for Tax purposes, unless a final determination (which shall
include the execution of a Form 870 or successor form) with respect to the
indemnified party or any of its affiliates causes any such payment not to be
treated as an adjustment to the Merger Consideration for United States Federal
income Tax purposes.
57
9.2 Tax Indemnification and
Related Matters.
(a) Indemnification. The
Purchaser Indemnified Parties shall be indemnified and held harmless from,
against and in respect of the full amount of any and all Losses incurred or
suffered by the Purchaser Indemnified Parties, or any of them, through the Right
of Set-off with respect to the following matters if, and only if, a notice of a
Tax Claim has been given in accordance with this Agreement on or prior to the
two year anniversary of the Closing:
(i) in
respect of Taxes of the Company in connection with any Pre-Closing Tax Period in
excess of the accrual therefor reflected on the Determination Date Balance Sheet
and taken into account in the Working Capital Adjustment;
(ii) in
respect of any breach or inaccuracy of a representation or warranty set forth in
Section 3.11 insofar as such Losses relate to Taxes; and
(iii) (as
a result of Treasury Regulation Section 1.1502 6(a) or otherwise) relating to
the Tax obligations of any Person (other than the Company) which is or has ever
been affiliated with the Company or with whom the Company otherwise joins or has
ever joined (or is or has ever been required to join) in filing any
consolidated, combined or unitary Return, prior to the Closing
Date.
(b) Limitations on Tax
Indemnification. If the Closing occurs, no indemnification
payment shall be made to the Purchaser Indemnified Parties pursuant to Section
9.2(a)(ii), until the amounts that the Purchaser Indemnified Parties would
otherwise be entitled to receive as indemnification under this Agreement
aggregate at least $50,000.00 (the “Tax Indemnification
Threshold”), at which time the Purchaser Indemnified Parties shall be
indemnified dollar-for-dollar for the full amount of indemnification hereunder
which exceeds the Tax Indemnification Threshold. The indemnification
provisions of Section 9.2(a) shall be subject to the Limited Indemnification Cap
provisions set forth in Section 11.5 hereof (after giving effect to each
indemnification claim made under Article XI hereof).
(c) Notification. If a
claim shall be made by any Taxing Authority, which, if successful, might result
in an indemnity payment to the indemnified parties pursuant to this Section 9.2,
the indemnified parties shall notify the indemnifying parties reasonably
promptly of such claim (a “Tax Claim”); provided, however, that the
failure to give such notice shall not affect the indemnification provided
hereunder except to the extent the indemnifying parties have actually been
prejudiced as a result of such failure.
(d) Control of
Proceedings. The Surviving Company and the Purchaser shall
control all proceedings taken in connection with any Tax Claim relating to the
Company or the Surviving Company and may make all decisions in connection with
such Tax Claim, provided, however, that the
Stockholders and counsel of their own choosing shall have the right, solely at
its own expense, to participate in the prosecution or defense of such Tax Claim;
provided, further, that no Tax
Claim with respect to an amount in controversy not exceeding $1,000,000.00 shall
be settled by the Company without the prior consent of the Stockholders, which
consent shall not be unreasonably withheld, conditioned or delayed.
9.3 Reorganization.
Purchaser
Parent and Merger Sub Two hereby make the following statements solely for
purposes of the intended qualification of the Merger as a reorganization within
the meaning of Section 368(a) of the Code:
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(a) Merger
Sub Two was formed solely for the purpose of effecting the Second Step Merger
and has conducted no business or other activities except in connection with the
Second Step Merger.
(b) Prior
to and as of the effective time of the Second Step Merger, each of Purchaser and
Merger Sub Two will be disregarded as an entity separate from Purchaser Parent
within the meaning of Section 301.7701-3(a) of the Treasury Regulations, and
Purchaser Parent has no plan or intention to cause either Purchaser or Merger
Sub Two to elect to be classified as an association taxable as a corporation
pursuant to such provision of the Treasury Regulations.
(c) Immediately
following the Second Step Merger, each of Purchaser and Merger Sub Two will be
disregarded as an entity separate from Purchaser Parent within the meaning of
Section 301.7701-3(a) of the Treasury Regulations. Purchaser Parent,
Purchaser, and Merger Sub Two have no plan or intention as of the Closing Date,
and are under no obligation, to cause Purchaser or Merger Sub Two to issue,
after the Second Step Merger, interests that would result in either Purchaser or
Merger Sub Two to have more than one (1) owner for federal income tax
purposes.
(d) Purchaser
Parent has no plan or intention as of the Closing Date to directly or indirectly
(through one or more related parties as defined in Treasury Regulations Section
1.368-1(e)(3)) reacquire any of its stock issued in the Merger, except for
acquisitions that would not cause less than forty percent (40%) of the total
consideration received by the Sellers pursuant to the transactions contemplated
by this Agreement (treating for this purpose any Company Common Stock exchanged
for Purchaser Parent Common Stock in the First Step Merger that are reacquired
as though such Company Common Stock had instead been exchanged for cash or other
property than Purchaser Parent Common Stock) to consist of Purchaser Parent
Common Stock.
(e) Except
for transfers described in both Section 368(a)(2)(C) of the Code and Section
1.368-2(k)(1) of the Treasury Regulations, Purchaser Parent has no plan or
intention to (A) liquidate Merger Sub Two, (B) merge Merger Sub Two with or into
any corporation, (C) sell or otherwise dispose of the interests in Merger Sub
Two, or (D) except for dispositions made in the ordinary course of business,
cause Merger Sub Two to sell or otherwise dispose of any of its assets or any of
the assets acquired from the Company.
(f) Merger
Sub Two intends as of the Closing Date to continue the Company’s historic
business or use a significant portion of its historic business assets in a
business following the Merger as provided in Section 1.368-1(d) of the Treasury
Regulations, except that Purchaser Parent and Purchaser may cause Merger Sub Two
to transfer Company’s historic business assets (i) to a corporation that is a
member of Purchaser Parent’s “qualified group,” within the meaning of Reg.
1.368-1(d)(4)(ii), or (ii) to a partnership if (A) one or more members of
Purchaser Parent’s “qualified group” have active and substantial management
functions as a partner with respect to Company’s historic business or (B)
members of Purchaser Parent’s “qualified group” in the aggregate own an interest
in the partnership representing a significant interest in Company’s historic
business, in each case within the meaning of Reg.
1.368-1(d)(4)(iii).
(g) Purchaser
Parent is not an investment company within the meaning of § 368(a)(2)(F) of the
Code.
(h) Purchaser
Parent is currently, and has no plan or intention as of the Closing Date to take
any action after the Closing Date that would cause it to cease to be, a
corporation for U.S. federal income tax purposes.
59
ARTICLE
X
TERMINATION
10.1
Termination
Events.
This
Agreement may be terminated and the Merger may be abandoned at any time prior to
the Effective Time without prejudice to any other rights or remedies either
party may have and notwithstanding any requisite approval and adoption of this
Agreement:
(a) by
written agreement, duly authorized by the Boards of Directors of Purchaser and
the Company;
(b) by
Purchaser or the Company:
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(i)
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if
any Governmental Authority shall have enacted, issued, promulgated,
enforced or entered any injunction, order, decree or ruling (whether
temporary, preliminary or permanent) which has become final and
nonappealable and has the effect of making consummation of the Merger
illegal or otherwise preventing or prohibiting consummation of the Merger;
provided, that the party seeking to terminate this Agreement shall have
used its commercially reasonable efforts to remove or lift such
injunction, order, decree or ruling and has otherwise complied in all
material respects with its obligations under this Agreement;
or
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(ii)
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if
the Merger shall not have occurred on or before October 1, 2010
(the “Termination
Date”); provided, that if any of the consents set forth on Schedule
6.4(c)(ii) have not been received (and are still pending and the
requirement for the delivery thereof at Closing has not been waived by
Purchaser), Purchaser or the Company may extend the Termination Date for
an additional period of up to thirty (30) days in order to obtain such
approvals by providing written notice thereof to the other; provided, further, that
the right to terminate this Agreement under this Section 10.1(b)(ii) shall
not be available to any party that has breached in any material respect
its obligations under this Agreement if such breach shall have been a
principal cause of, or resulted in, the failure to consummate the Merger
by such date;
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(c) by
Purchaser:
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(i)
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if
any representation or warranty of the Company or the Stockholders was
inaccurate or was breached in any material respect when made and the
Company or the Stockholders had Knowledge that such representation or
warranty was inaccurate or had been breached at the time it was
made;
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(ii)
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if
the Company or the Stockholders shall have failed to perform in any
material respect any of their covenants, agreements or other obligations
contained in this Agreement which failure to perform (A) gives rise to the
failure of a condition set forth in Article VII and (B) is incapable of
being cured, or, if curable, has not been cured by the Company or the
Stockholders within fifteen (15) calendar days after giving written notice
to the Company or the Stockholders of such breach or failure to
perform;
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(iii)
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if
any of the conditions set forth in Article VII shall have been rendered
impossible to satisfy; provided, however, that
termination by Purchaser under this subsection 10.1(c)(iii) may not be
elected prior to the Termination Date;
or
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60
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(iv)
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the
closing of the acquisition by the Purchaser of Black Diamond pursuant to
the terms of the Black Diamond Merger Agreement has not occurred on or
before July 1, 2010.
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(d) by
the Company:
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(i)
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if
any representation or warranty of the Purchaser Parent, Purchaser or
Merger Subs was inaccurate or was breached in any material respect when
made and Purchaser Parent, Purchaser or Merger Subs had Knowledge that
such representation or warranty was inaccurate or had been breached at the
time it was made;
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(ii)
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if
Purchaser Parent or Purchaser shall have failed to perform in any material
respect any of their covenants, agreements or other obligations contained
in this Agreement which failure to perform (A) gives rise to the failure
of a condition set forth in Article VIII and (B) is incapable of being
cured, or, if curable, has not been cured by Purchaser Parent, Purchaser
or Merger Subs within fifteen (15) calendar days after giving written
notice to Purchaser of such breach or failure to perform;
or
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(iii)
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if
any of the conditions set forth in Article VIII shall have been rendered
impossible to satisfy; provided, however, that
termination by Company under this subsection 10.1(d)(iii) may not be
elected prior to the Termination
Date.
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The
parties agree that in the event of a breach of a representation or warranty by
the Company or the Stockholders, on the one hand, or the Purchaser Parent,
Purchaser or Merger Subs on the other hand where the breaching party had no
Knowledge of the breach on the date of this Agreement, there shall be no right
to terminate this Agreement based on Section 10.1(c)(i) or Section 10.1(d)(i),
as the case may be or to refuse to proceed to Closing under Section
10.1(c)(iii)(based on the impossibility of satisfying the condition in Section
7.1 or in Section 7.6(c) in respect of Section 7.1) or Section 10.1(d)(iii)
(based on the impossibility of satisfying the condition in Section 8.1 or in
Section 8.4 in respect of Section 8.1), as the case may be; provided, however, that the
foregoing shall not limit the rights of any party to pursue any indemnification
claims for such a breach pursuant to Article XI hereof.
10.2
Effect of
Termination.
(a) The
rights and remedies on termination set forth in this Section 10.2 are the
exclusive rights and remedies of Purchaser and the Company upon the termination
of this Agreement prior to Closing.
(b) If
this Agreement is terminated pursuant to Section 10.1(a), Section 10.1(b),
Section 10.1(c)(iii), 10.1(c)(iv), or Section 10.1(d)(iii), the parties will
have no further liability under this Agreement except that the parties’
obligations with respect to Section 6.3 and Article XII of the Agreement will
continue.
(c) If
this Agreement is terminated by the Purchaser pursuant to Section 10.1(c)(i) or
Section 10.1(c)(ii), Purchaser shall be entitled to receive an amount payable in
cash equal to the sum of $1,350,000 plus the Purchaser Transaction Expenses from
the Company within ten (10) Business Days after such termination together with
all reasonable attorneys’ fees and expenses incurred in connection with the
pursuit and collection of such amounts if not timely paid.
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(d) If
this Agreement is terminated by the Company pursuant to Section 10.1(d)(i) or
Section 10.1(d)(ii), the Company shall be entitled to receive an amount payable
in cash equal to the sum of $1,350,000 plus the Company Transaction
Termination Expenses from the Purchaser within ten (10) Business Days after such
termination together with all reasonable attorneys’ fees and expenses incurred
in connection with the pursuit and collection of such amounts if not timely
paid.
10.3 Exclusive Pre-Closing
Remedy. The
parties hereto hereby acknowledge and agree that prior to Closing, the
provisions set forth in this Article X shall be the sole and exclusive rights
and remedies of the parties under this Agreement including, without limitation,
with respect to (a) any misrepresentation, breach or default of or under any of
the representations, warranties, covenants and agreements contained in this
Agreement, or (b) any failure to duly perform or observe any term, provision,
covenant or agreement contained in this Agreement; provided, however, that
nothing in this Article X shall be deemed to limit any rights or remedies of a
party in the event of a fraud by a party hereto; and, provided, further, that
nothing in this Agreement shall be deemed to limit the right of Purchaser
Parent, Purchaser and Merger Subs to seek equitable relief pursuant to Section
12.10.
ARTICLE
XI
SURVIVAL;
INDEMNIFICATION
11.1
Survival. All
representations, warranties, covenants and agreements contained in or made
pursuant to this Agreement, and the rights of the parties to seek
indemnification with respect thereto, shall survive the Closing Date through the
two year anniversary of the Closing Date. If proper notice of an
indemnification claim is given in accordance with this Agreement before
expiration of the applicable representation, warranty, covenant or agreement,
then notwithstanding the expiration thereof, any claim based on such
representation, warranty, covenant or agreement shall survive until, but only
for purposes of, the resolution of such claim.
11.2 Investigation. The
representations, warranties, covenants and agreements made herein, together with
the indemnification provisions herein, are intended to allocate the economic
costs and the risks inherent in the transactions contemplated by this Agreement
between the parties hereto and, accordingly, if the Closing occurs, each
Purchaser Indemnified Party and each Company Indemnified Party shall be entitled
to such indemnification by reason of any breach of any such representation,
warranty, covenant or agreement as set forth herein notwithstanding whether any
employee, representative, agent or Affiliate of such party knew or had reason to
know of such breach and regardless of any investigation by such party or any of
such party’s employees, representatives, agents or Affiliates prior to the
Closing.
11.3 Indemnification.
(a) By
the Stockholders. Subject to the limitations set forth in this
Article XI, and excluding the matters as to which separate indemnification is
provided under Section 8.2, each of Purchaser, the Purchaser Parent, Merger
Subs, and the Surviving Company and their respective directors,
officers, employees, agents, successors and assigns (collectively, the
“Purchaser Indemnified Parties”) shall, after the Closing, be indemnified and
held harmless by each of the Stockholders, severally and not jointly, from,
against and in respect of the full amount of any and all Losses incurred or
suffered by the Purchaser Indemnified Parties or any of them in respect of,
arising from, in connection with, or incident to:
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(i)
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any
breach of, or inaccuracy in, any representation, warranty or certification
made by the Company in this Agreement or any Company Ancillary Agreement
other than the representations and warranties made by the Company in
Section 3.11 or Article IX
hereof;
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62
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(ii)
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any
breach, violation, nonperformance or non-fulfillment of any covenants,
agreements or obligations of the Company in this Agreement or any Company
Ancillary Agreement to the extent required to be performed by it prior to
the Closing, unless waived in writing on or prior to the
Closing;
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(iii)
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any
breach of, or inaccuracy in, any representation, warranty or certification
made by a Seller in this Agreement or any Seller Ancillary Agreement;
and
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(iv)
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any
breach, violation, nonperformance or non-fulfillment of any covenants,
agreements or obligations of the Stockholders contained in this Agreement
or any Stockholders Ancillary
Agreement;
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provided, however, that any
notice provided to Purchaser pursuant to Section 6.5 and any exception or
proviso relating to certifications in the Company Closing Certificate in
connection with Company Material Pre-Closing Events shall each be disregarded
for purposes of this Article XI, and any such disclosures shall not operate to
diminish any rights to indemnification that the Purchaser Indemnified Parties
have under this Article XI.
(b) By Purchaser, Merger Subs and
Surviving Company. Subject to the limitations set forth in
this Article XI, the Stockholders and their respective heirs, distributees,
directors, officers, employees, agents, successors and assigns (collectively,
the “Company
Indemnified Parties”) shall, after the Closing, be indemnified and held
harmless, jointly and severally, by Purchaser, Merger Subs and the Surviving
Company from, against and in respect of the full amount of any and all Losses
arising from, in connection with, or incident to:
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(i)
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any
breach of, or inaccuracy in, any representation or warranty made by the
Purchaser Parent, Purchaser or the Merger Subs contained in this Agreement
or any Purchaser Ancillary Agreement;
and
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(ii)
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any
breach, violation, nonperformance or non-fulfillment of any covenants,
agreements or obligations of Purchaser Parent, Purchaser, Merger Subs or,
to the extent required to be performed or complied after the Closing, the
Surviving Company contained in this Agreement or any Purchaser Ancillary
Agreement, unless waived in writing on or prior to
Closing;
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provided, however, that any
notice provided to the Company pursuant to Section 6.5 in connection with
Purchaser Material Pre-Closing Events shall be disregarded for purposes of this
Article XI, and any such disclosures shall not operate to diminish any rights to
indemnification that the Company Indemnified Parties have under this Article
XI.
11.4
Notification of
Claims. (a) In
the event of the occurrence of an event which a Purchaser Indemnified Party or
Company Indemnified Party asserts constitutes a claim, the Purchaser Indemnified
Party or Company Indemnified Party asserting such claim (such party hereinafter
referred to as the “Indemnified Party”)
shall provide prompt notice of such event to (i) in the event of a claim by a
Purchaser Indemnified Party, the Stockholders and (ii) in the event of a claim
by a Company Indemnified Party, to the Purchaser (such party set forth in (i) or
(ii), as the case may be, hereinafter referred to as the “Indemnifying Party”)
and shall otherwise make available to the Indemnifying Party all relevant
information which is material to the claim and which is in the possession of the
Indemnified Party. An Indemnified Party’s failure to give timely
notice or to furnish the Indemnifying Party with any relevant data and documents
in connection with any Third Party Claim (as defined below) shall not constitute
a defense (in part or in whole) to any claim for indemnification by such party,
except and only to the extent that such failure shall result in any prejudice to
the Indemnifying Party. Notwithstanding the foregoing, the Purchaser
Indemnified Parties shall have no obligation hereunder to give notice for any
claims relating to any Losses arising from any matter described on any Schedule
or Exhibit to this Agreement.
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(b) If
such event involves the claim of any third party (a “Third Party Claim”),
the Indemnifying Party may elect, at such party’s sole expense (without
prejudice to the right of the Indemnified Party to participate at its own
expense through counsel of its own choosing), to assume control of the defense,
settlement, adjustment or compromise of any Third Party Claim, with counsel
reasonably acceptable to the Indemnified Party, if the Indemnifying Party gives
written notice of its intention to do so no later than thirty (30) days
following notice thereof by an Indemnified Party or such shorter time period as
required so that the interests of the Indemnified Party would not be materially
prejudiced as a result of the failure to have received such notice, and the
Indemnifying Party shall be entitled to maintain such control for so long as it
actively and diligently pursues such defense, settlement, adjustment or
compromise; provided, however, that if the
Indemnified Party shall have reasonably concluded that separate counsel is
required because either (i) a conflict of interest would otherwise exist, (ii)
the Third Party Claim could reasonably be expected to have a Material Adverse
Effect on the Indemnified Party or (iii) the Third Party Claim and any claims
that may be related thereto could reasonably be expected to exceed the amount of
indemnification available to the Indemnified Party (either pursuant to the terms
of this Article XI or as a result of the Indemnifying Party(ies) available
financial resources), the Indemnified Party shall have the right to select
separate counsel to participate in the defense of such action on its behalf, at
the expense of the Indemnified Party and the Indemnifying Party and Indemnified
Party shall use all commercially reasonable efforts to cooperate in such
defense. If the Indemnifying Party does not so choose to assume
control of the defense, settlement, adjustment or compromise of any such Third
Party Claim for which any Indemnified Party would be entitled to indemnification
hereunder, then the Indemnifying Party shall have the right to elect to join in
the defense, settlement, adjustment or compromise of any such Third Party Claim,
and to employ counsel to assist such Indemnifying Party in connection with the
handling of such claim, at the sole expense of the Indemnifying Party, and no
such claim shall be settled, adjusted or compromised, or the defense thereof
terminated by the Indemnified Party, without the prior consent of the
Indemnifying Party (which consent shall not be unreasonably withheld or delayed)
unless and until the Indemnifying Party shall have failed, after the lapse of a
reasonable period of time, but in no event more than thirty (30) days after
written notice to it of the Third Party Claim, to join in the defense,
settlement, adjustment or compromise of the same. No Indemnified
Party may settle, compromise or consent to the entry of any judgment in any
Third Party Claim for which indemnification may be sought hereunder unless such
settlement, compromise or consent also includes an express, unconditional
release of the Indemnifying Party and their directors, officers, agents,
stockholders, consultants, employees and controlling persons from all
liabilities and obligations arising therefrom. No Indemnifying Party
may settle, compromise or consent to the entry of any judgment in any Third
Party Claim for which indemnification may be sought hereunder without the prior
written consent of each Indemnified Party, which consent shall not be
unreasonably withheld or delayed if such settlement, compromise or consent (i)
is for money damages only, (ii) the Indemnifying Party assumes complete
financial responsibility for such settlement, compromise or consent (and
demonstrates to the Indemnified Party that it has available all required
financial resources therefor), (iii) could not otherwise be reasonably expected
to cause a Material Adverse Effect on the Indemnified Party and (iv) includes an
express, unconditional release of the Indemnified Party and their directors,
officers, agents, stockholders, consultants, employees and controlling persons
from all liabilities and obligations arising therefrom.
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11.5
Limitations on
Indemnification. (a) If
the Closing occurs, (i) no indemnification payment shall be made to the
Purchaser Indemnified Parties pursuant to Sections 9.2 and 11.3(a), until the
amounts that the Purchaser Indemnified Parties would otherwise be entitled to
receive as indemnification under this Agreement aggregate at least $125,000.00
(the “Indemnification Threshold”), at which time the Purchaser Indemnified
Parties shall be indemnified dollar-for-dollar for the full amount of
indemnification hereunder which exceeds the Indemnification Threshold; and (ii)
no indemnification payment in respect of indemnification required to be made
pursuant to Sections 9.2 and 11.3(a) shall be required to be made to the
Purchaser Indemnification Parties in excess of $2,250,000.00 in the aggregate
(the “Limited Indemnification Cap”); provided, however, that in the case of
fraud or Losses arising out of the representations and warranties contained in
Section 4.3 hereof, the Indemnification Threshold shall not apply and the
Limited Indemnification Cap shall be equal to the Merger Consideration, and in
the case of Losses arising out of the representations and warranties contained
in Section 3.21 hereof, the Indemnification Threshold shall not apply, subject
in each case to the last sentence of this Section 11.5(a). No
Stockholder shall be liable under Section 9.2 or 11.3(a) hereof for more than
such Stockholder’s Proportional Share of any indemnifiable Loss owed to the
Purchaser Indemnified Parties, and each Stockholder shall
be severally and not jointly liable for the full amount of any Losses
arising out of (A) any breach by it of any representations and warranties
contained in Article IV hereof, or (B) any breach by it of a Stockholders
Ancillary Agreement, subject in the case of the preceding clauses (A) and (B),
to the Indemnification Threshold and the Limited Indemnification
Cap.
(b) If
the Closing occurs, no indemnification payment shall be made to the Company
Indemnified Parties pursuant to Section 11.3(b) until the amounts that the
Company Indemnified Parties would otherwise be entitled to receive as
indemnification under this Agreement aggregate at least the Indemnification
Threshold, at which time the Company Indemnified Parties shall be indemnified
dollar-for-dollar for the full amount of indemnification hereunder which exceeds
the Indemnification Threshold; provided, however, that no
indemnification payment in respect of indemnification required to be made
pursuant to Section 11.3(b) shall be required to be made to the Company
Indemnification Parties in excess of the Limited Indemnification
Cap.
11.6
Payment of
Claims.
(a) Timing of
Payment. With regard to any and all claims that are disputed
and which indemnification becomes payable hereunder, such indemnification shall
be paid, upon the earliest to occur of (i) the entry of a judgment against the
Indemnified Party and the expiration of any applicable appeal period, or if
earlier, five (5) Business Days prior to the date that the judgment creditor has
the right to execute the judgment, (ii) the entry of an unappealable judgment or
final appellate decision against the Indemnified Party or (iii) a settlement of
the claim. The earliest to occur of clauses (i), (ii) or (iii) above
is referred to herein as a “Final
Determination”. Notwithstanding the foregoing, the reasonable
legal fees and expenses of counsel to the Indemnified Party shall be reimbursed
on a current basis by the Indemnifying Party if such legal fees and expenses are
a liability of the Indemnifying Party. With regard to undisputed
claims for which indemnification is payable hereunder, such indemnification
shall be paid promptly by the Indemnifying Party upon demand by the Indemnified
Party.
(b) Source of
Payment. The sole recourse of the Purchaser Indemnified
Parties after the Closing for amounts payable pursuant to indemnification claims
made pursuant to Article IX or Article XI will be to set-off and deduct the
aggregate amount of any Final Determination in favor of Purchaser (the “Right of Set-off”) by
reducing and canceling each Stockholders’ respective Proportional Share of (i)
the principal amount due under the Subordinated Notes by the Note Offset
Percentage multiplied by such Final Determination amount; and (ii) a number of
the Merger Consideration Shares equal to the product of the Stock Offset
Percentage multiplied by such Final Determination amount divided by $6.00
(pursuant to the requirements of Section 2.8 of this Agreement) (the “Stock Set-off
Amount”); provided,
however, that in lieu of the Right of Set-off being exercised with
respect to the Merger Consideration Shares, a Stockholder may, make payment to
the Purchaser of all or any portion of the Stock Set-off Amount in cash (by wire
transfer of immediately available funds), and such payment shall reduce or
eliminate, as the case may be, the Purchaser’s Right of Set-off against the
Merger Consideration Shares on a dollar-for-dollar basis.
65
(c) Reduction of Subordinated Notes and
Merger Consideration Shares. Upon a reduction and
cancellation of the Merger Consideration Shares or a reduction of the principal
amount due under the Subordinated Notes in connection with the exercise of the
Right of Set-off, each of the Stockholders agrees to immediately return to the
Purchaser the certificates representing the Merger Consideration Shares and the
Subordinated Notes and the Purchaser will deliver revised stock certificates and
Subordinated Notes in substitution thereof reflecting the reduction to the
Merger Consideration Shares or Subordinated Notes. In all other
respects the substituted stock certificates and Subordinated Notes shall be
identical to the previously outstanding stock certificates and Subordinated
Notes and shall carry the same rights to accrued and unpaid interest that were
carried by the previously outstanding stock certificates and Subordinated
Notes. In furtherance of any exercise by the Company of its Right of
Set-off, each of the Stockholders hereby appoints the Company as their
respective attorney-in-fact to take such action as is reasonably necessary to
cause the cancellation and the substitution of the certificates representing the
Merger Consideration Shares and the Subordinated Notes.
11.7 No Circular
Recovery.
After the
Closing, no Stockholder shall be entitled to any indemnification against
Purchaser Parent, Purchaser, Merger Subs, the Surviving Company or the Company
by reason of the fact that such Stockholder was a controlling person,
director, officer, employee or representative of the Company or was serving as
such for another Person at the request of Purchaser Parent, Purchaser, Merger
Subs, the Surviving Company or the Company (whether such claim is for Losses of
any kind or otherwise and whether such claim is pursuant to any statute,
Governing Document, contractual obligation or otherwise) with respect to any
claim brought by a Purchaser Indemnified Party pursuant to Article IX or Article
XI. With respect to any claim brought by a Purchaser Indemnified
Party relating to this Agreement or any Company Ancillary Agreement, no
Stockholder shall have any right of subrogation, contribution, advancement,
indemnification or other claim against Merger Subs, the Company, or the
Surviving Company with respect to any amounts owed to the Purchaser Indemnified
Parties pursuant to Article IX or Article XI.
11.8 Exclusive Remedy
The
parties hereto hereby acknowledge and agree that from and after Closing, the
indemnification provisions in Article VIIII and Article XI shall be the sole and
exclusive rights and remedies of the parties with respect to the transactions
contemplated by this Agreement, including, without limitation, with respect to
(a) any misrepresentation, breach or default of or under any of the
representations, warranties, covenants and agreements contained in this
Agreement, or (b) any failure to duly perform or observe any term, provision,
covenant or agreement contained in this Agreement; provided, however, that nothing
in this Agreement shall be deemed to limit the right of Purchaser Parent,
Purchaser and Merger Subs to seek equitable relief pursuant to Section
12.10.
ARTICLE
XII
MISCELLANEOUS
12.1 Expenses. Except as
expressly otherwise provided herein, each party shall bear its own expenses
incurred in connection with the preparation, execution and performance of this
Agreement and the transactions contemplated hereby, including all fees and
expenses of agents, representatives, counsel and accountants.
12.2
Successors. This
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors and permitted assigns.
66
12.3 Further
Assurances.
Each of
the parties hereto agrees that it will, from time to time after the date of this
Agreement, execute and deliver such other certificates, documents and
instruments and take such other action as may be reasonably requested by the
other party to carry out the actions and transactions contemplated by this
Agreement.
12.4 Waiver. Any
provision of this Agreement may be waived at any time in writing by the party
which is entitled to the benefits thereof.
12.5 Entire Agreement. This
Agreement (together with the certificates, agreements, exhibits, schedules,
instruments and other documents referred to herein) and the Existing
Confidentiality Agreement constitutes the entire agreement between the parties
with respect to the subject matter hereof and thereof and supersedes all prior
agreements, both written and oral, with respect to such subject
matter.
12.6 Governing Law. THIS
AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF DELAWARE APPLICABLE TO AGREEMENTS MADE AND PERFORMED IN SUCH STATE AND
WITHOUT REGARD TO CONFLICTS OF LAW DOCTRINES.
12.7 Consent to
Jurisdiction. EACH
PARTY TO THIS AGREEMENT, BY ITS EXECUTION HEREOF, (A) HEREBY IRREVOCABLY
SUBMITS, AND AGREES TO CAUSE EACH OF ITS SUBSIDIARIES TO SUBMIT, TO THE
EXCLUSIVE JURISDICTION OF THE COURT OF CHANCERY OF THE STATE OF DELAWARE (OR IF
JURISDICTION THERETO IS NOT PERMITTED BY LAW, THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE) FOR THE PURPOSE OF ANY ACTION, CLAIM, CAUSE OF
ACTION OR SUIT (IN CONTRACT, TORT OR OTHERWISE), INQUIRY PROCEEDING OR
INVESTIGATION ARISING OUT OF OR BASED UPON THIS AGREEMENT OR RELATING TO THE
SUBJECT MATTER HEREOF, (B) HEREBY WAIVES, AND AGREES TO CAUSE EACH OF ITS
SUBSIDIARIES TO WAIVE, TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAW, AND
AGREES NOT TO ASSERT, AND AGREES NOT TO ALLOW ANY OF ITS SUBSIDIARIES TO ASSERT,
BY WAY OF MOTION, AS A DEFENSE OR OTHERWISE, IN ANY SUCH ACTION, ANY CLAIM THAT
IT IS NOT SUBJECT PERSONALLY TO THE JURISDICTION OF THE ABOVE-NAMED COURTS, THAT
ITS PROPERTY IS EXEMPT OR IMMUNE FROM ATTACHMENT OR EXECUTION, THAT ANY SUCH
PROCEEDING BROUGHT IN ONE OF THE ABOVE-NAMED COURTS IS IMPROPER, OR THAT THIS
AGREEMENT OR THE SUBJECT MATTER HEREOF MAY NOT BE ENFORCED IN OR BY SUCH COURT
AND (C) HEREBY AGREES NOT TO COMMENCE OR TO PERMIT ANY OF ITS SUBSIDIARIES TO
COMMENCE ANY ACTION, CLAIM, CAUSE OF ACTION OR SUIT (IN CONTRACT, TORT OR
OTHERWISE), INQUIRY PROCEEDING OR INVESTIGATION ARISING OUT OF OR BASED UPON
THIS AGREEMENT OR RELATING TO THE SUBJECT MATTER HEREOF OTHER THAN BEFORE ONE OF
THE ABOVE-NAMED COURTS NOR TO MAKE ANY MOTION OR TAKE ANY OTHER ACTION SEEKING
OR INTENDING TO CAUSE THE TRANSFER OR REMOVAL OF ANY SUCH ACTION, CLAIM, CAUSE
OF ACTION OR SUIT (IN CONTRACT, TORT OR OTHERWISE), INQUIRY, PROCEEDING OR
INVESTIGATION TO ANY COURT OTHER THAN ONE OF THE ABOVE-NAMED COURT WHETHER ON
THE GROUNDS OF INCONVENIENT FORUM OR OTHERWISE. EACH PARTY HEREBY
CONSENTS TO SERVICE OF PROCESS IN ANY SUCH PROCEEDING IN ANY MANNER PERMITTED BY
DELAWARE LAW, AND AGREES THAT SERVICE OF PROCESS BY REGISTERED OR CERTIFIED
MAIL, RETURN RECEIPT REQUESTED, AT ITS ADDRESS SPECIFIED PURSUANT TO SECTION
12.11 IS REASONABLY CALCULATED TO GIVE ACTUAL NOTICE.
67
12.8 Waiver of Jury
Trial.
EACH OF
THE PARTIES HERETO HEREBY WAIVES AND COVENANTS THAT IT WILL NOT ASSERT (WHETHER
AS PLAINTIFF, DEFENDANT OR OTHERWISE) ANY RIGHT TO TRIAL BY JURY IN ANY FORUM IN
RESPECT OF ANY ISSUE OR ACTION, CLAIM, CAUSE OF ACTION OR SUIT (IN CONTRACT,
TORT OR OTHERWISE), INQUIRY, PROCEEDING OR INVESTIGATION ARISING OUT OF OR BASED
UPON THIS AGREEMENT OR THE SUBJECT MATTER HEREOF OR IN ANY WAY CONNECTED WITH OR
RELATED OR INCIDENTAL TO THE TRANSACTIONS CONTEMPLATED HEREBY, IN EACH CASE
WHETHER NOW EXISTING OR HEREAFTER ARISING. EACH OF THE PARTIES AGREE
AND ACKNOWLEDGE THAT IT HAS BEEN INFORMED THAT THIS SECTION 12.8 CONSTITUTES A
MATERIAL INDUCEMENT UPON WHICH THE OTHER PARTIES HERETO ARE RELYING AND WILL
RELY IN ENTERING INTO THIS AGREEMENT AND ANY OTHER AGREEMENTS RELATING HERETO OR
CONTEMPLATED HEREBY. ANY PARTY HERETO MAY FILE AN ORIGINAL
COUNTERPART OR A COPY OF THIS SECTION 12.8 WITH ANY COURT AS WRITTEN EVIDENCE OF
THE CONSENT OF EACH SUCH PARTY TO THE WAIVER OF ITS RIGHT TO TRIAL BY
JURY.
12.9 Assignment. None of
the parties may assign this Agreement to any other Person without the prior
written consent of the other parties hereto.
12.10 Remedies; Specific
Performance. The
Purchaser and the Company acknowledge and agree that the Purchaser will suffer
irreparable damage in the event that any of the provisions of this Agreement are
not performed by the Company in accordance with their specific terms or are
otherwise breached by the Company, and the Purchaser and the Company further
agree that the Purchaser shall be entitled to an injunction to prevent breaches
of this Agreement and to enforce specifically the terms and provisions of this
Agreement, this remedy being in addition to any other remedy to which the
Purchaser is entitled at law or in equity. In no event shall the
Company, the Stockholders or any other Person have a right of specific
performance hereunder or to otherwise seek to cause Purchaser Parent, Purchaser
or Merger Subs to effect the Closing or the Merger.
12.11 Notices. All
notices and other communications hereunder shall be in writing and shall be
deemed to have been duly given (a) when delivered personally, (b) when
transmitted by electronic means producing a written facsimile (receipt
confirmed), (c) on the fifth (5th)
Business Day following mailing by registered or certified mail (return receipt
requested), or (d) on the next Business Day following deposit with an overnight
delivery service of national reputation, to the parties at the following
addresses and facsimile numbers (or at such other address or facsimile number
for a party as may be specified by like notice):
If to
Purchaser Parent, Purchaser or Merger Subs:
c/o
Clarus Corporation
Xxx
Xxxxxxxx Xxxxxx, 00xx Xx
Xxxxxxxx,
XX 00000
Attn:
Executive Chairman
Fax: (000)
000-0000
with a
copy to:
Xxxx
Xxxxxxx, P.C.
1350
Avenue of the Xxxxxxxx, 00xx
Xxxxx
Xxx Xxxx,
Xxx Xxxx 00000
Attn.: Xxxxxx
X. Xxxxxxxx, Esq.
Xxxxxxx X. Xxxxxxx, Esq.
Fax: (000)
000-0000
68
If to the
Company (prior to the Closing):
0000 X
Xxxxxx, Xxxxx 000
Xxxxxxxxxx,
XX 00000
Attn: Xxxxxx
Xxxxxxxx
Xxxxxx Xxxxxxx
with a
copy to:
Xxxxxxxx
& Xxxxx LLP
000 Xxxx
Xxxx Xxxx
Xxxx
Xxxx, XX 00000
Attn: Xxxx
Xxxxxxxx
Fax: (000)
000-0000
If to
Stockholders:
Kanders
GMP Holdings, LLC
c/o
Kanders & Company, Inc.
Xxx
Xxxxxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxxx,
Xxxxxxxxxxx 00000
Attn: Xxxxxx
Xxxxxxx
Fax: 000-000-0000
Xxxxxxxx
Xxxxxxx Investment Company, LLC
0000
Xxxxxxxx Xxxxx Xxxx
Xxxxxxxxxxxx
XX 00000
Attn: Xxxxxx
Xxxxxxxx
Fax: 000-000-0000
with a
copy to:
Xxxxxxxx
& Xxxxx LLP
000 Xxxx
Xxxx Xxxx
Xxxx
Xxxx, XX 00000
Attn: Xxxx
Xxxxxxxx
Fax: (000)
000-0000
12.12
Headings. The
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this
Agreement.
12.13 Counterparts. This
Agreement may be executed in multiple counterparts, all of which shall be
considered one and the same agreement, and shall become effective when one or
more counterparts have been signed by each of the parties and delivered to the
other party, including by facsimile, it being understood that both parties need
not sign the same counterpart.
69
12.14 Exhibits and
Schedules.
The
exhibits and schedules to this Agreement are incorporated by reference herein
and are made a part hereof as if they were fully set forth herein.
12.15 Severability. The
invalidity of any term or terms of this Agreement shall not affect any other
term of this Agreement which shall remain in full force and effect.
12.16 No Third Party
Beneficiaries.
There are
no third party beneficiaries of this Agreement or of the transactions
contemplated hereby and nothing contained herein shall be deemed to confer upon
anyone other than the parties hereto (and their permitted successors and
assigns, and including, with respect to the Stockholders, the Stockholders) any
right to insist upon or to enforce the performance of any of the obligations
contained herein.
12.17 Time of the
Essence.
Time is
of the essence with respect to the obligations of the parties
hereunder.
12.18 Negotiation of
Agreement.
Each of
the parties acknowledges that it has been represented by independent counsel of
its choice throughout all negotiations that have preceded the execution of this
Agreement. Each party and its counsel cooperated in the drafting and
preparation of this Agreement and the other documents referred to herein, and
any and all drafts relating thereto will be deemed the work product of the
parties hereto and may not be construed against any party by reason of its
preparation. Accordingly, any rule of law or any legal decision that
would require interpretation of any ambiguities in this Agreement against the
party that drafted it is of no application and is hereby expressly
waived.
12.19 Amendment.
No
change, modification, extension, termination, notice of termination, discharge,
abandonment or waiver of this Agreement or any of its provisions, nor any
representation, promise or condition relating to this Agreement, will be binding
upon any party unless made in writing and signed by such
party. Subject to the provisions of the DGCL and the LLC Act, this
Agreement may be amended by the parties subsequent to the adoption of this
Agreement by the stockholders and equity holders of the Company and Merger Subs
by an amendment approved by the board of directors of each party prior to the
Effective Time.
[Signature
Page Follows]
70
In
Witness Whereof, the parties have executed this Agreement as of the date
first above written.
Purchaser
Parent:
|
Company:
|
|||
Clarus
Corporation
|
Xxxxxxx
Mountain Products, Inc.
|
|||
By:
|
/s/ Xxxxxx X. Xxxxxxxxx
|
By:
|
/s/ Xxxxxx X. Xxxxxxx
|
|
Name:
Xxxxxx X. Xxxxxxxxx
|
Name:
Xxxxxx X. Xxxxxxx
|
|||
Title: Chief
Financial Officer
|
Title: Chairman
of the Board
|
|||
Purchaser:
|
Stockholders:
|
|||
Everest/Sapphire
Acquisition, LLC,
|
Kanders
GMP Holdings, LLC
|
|||
By:
|
/s/ Xxxxxx X. Xxxxxxxxx
|
By:
|
/s/ Xxxxxx X. Xxxxxxx
|
|
Name:
Xxxxxx X. Xxxxxxxxx
|
Name:
Xxxxxx X. Xxxxxxx
|
|||
Title: Secretary
and Treasurer
|
Title: President
|
|||
Merger
Subs:
|
|
|||
Everest
Merger I Corp.
|
Xxxxxxxx
Xxxxxxx Investment Company, LLC
|
|||
|
||||
By:
|
/s/ Xxxxxx X. Xxxxxxxxx
|
By:
|
/s/ Xxxxxx X.
Xxxxxxxx
|
|
Name:
Xxxxxx X. Xxxxxxxxx
|
Name:
Xxxxxx X. Xxxxxxxx
|
|||
Title: Secretary
and Treasurer
|
Title: President
|
|||
Everest
Merger II, LLC
|
||||
By:
|
/s/ Xxxxxx X. Xxxxxxxxx
|
|||
Name:
Xxxxxx X. Xxxxxxxxx
|
||||
Title: Secretary
and Treasurer
|