AGREEMENT AND PLAN OF MERGER
BY AND AMONG
MASTERBRAND CABINETS, INC.
MBC ACQUISITION CORP.
AND
OMEGA HOLDINGS, INC.
DATED AS OF APRIL 4, 2002
TABLE OF CONTENTS
Page
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ARTICLE I
THE MERGER; EFFECTIVE TIME; CLOSING......................................................................2
1.1 The Merger.......................................................................................2
1.2 Closing..........................................................................................2
1.3 Effective Time...................................................................................2
1.4 Effect of the Merger.............................................................................2
ARTICLE II
CERTIFICATE OF INCORPORATION AND BYLAWS OF THE SURVIVING CORPORATION.....................................3
2.1 Certificate of Incorporation.....................................................................3
2.2 Bylaws...........................................................................................3
ARTICLE III
DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION......................................................3
3.1 Directors of the Surviving Corporation...........................................................3
3.2 Officers of the Surviving Corporation............................................................3
ARTICLE IV
MERGER CONSIDERATION; CONVERSION OR CANCELLATION OF SHARES IN THE MERGER.................................3
4.1 Effect of the Merger on the Shares...............................................................3
4.2 Payment for the Shares...........................................................................4
4.3 Stock Options....................................................................................7
4.4 Warrants.........................................................................................7
4.5 Payments at Closing..............................................................................8
4.6 Repayment of Company Indebtedness................................................................8
4.7 Further Assurances...............................................................................8
ARTICLE V
REPRESENTATIONS AND WARRANTIES...........................................................................9
5.1 Representations and Warranties of the Company....................................................9
5.2 Representations and Warranties of Parent and Merger Sub.........................................28
ARTICLE VI
COVENANTS; DELIVERIES; CONDITIONS.......................................................................30
6.1 Covenants.......................................................................................30
6.2 Documents to be Delivered Upon Signing..........................................................33
6.3 Conditions to Each Party's Obligations..........................................................33
6.4 Additional Conditions to the Obligations of Parent and Merger Sub...............................34
6.5 Additional Conditions to the Obligations of the Company.........................................34
ARTICLE VII
SURVIVAL; INDEMNIFICATION...............................................................................35
7.1 Survival Periods................................................................................35
7.2 Indemnification by Fully-Diluted Stockholders...................................................35
7.3 Indemnification by Parent.......................................................................36
7.4 Claims Procedures...............................................................................37
7.5 Tax Treatment of Indemnification Payments.......................................................37
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7.6 Directors' and Officers' Indemnification........................................................37
ARTICLE VIII
MISCELLANEOUS AND GENERAL...............................................................................39
8.1 Payment of Expenses; Representation.............................................................39
8.2 Counterparts; Amendment.........................................................................39
8.3 Governing Law...................................................................................40
8.4 Notices.........................................................................................40
8.5 Entire Agreement; Assignment....................................................................41
8.6 Parties in Interest.............................................................................41
8.7 Certain Definitions.............................................................................41
8.8 Obligations of Subsidiary.......................................................................49
8.9 Severability....................................................................................49
8.10 Specific Performance...........................................................................49
8.11 Trial by Jury..................................................................................49
8.12 Headings, Definitions..........................................................................50
8.13 Limitation on Remedies.........................................................................50
8.14 Jurisdiction...................................................................................50
ARTICLE IX
HOLDERS REPRESENTATIVE..................................................................................51
9.1 Appointment.....................................................................................51
9.2 Authorization...................................................................................51
9.3 Expenses of the Holders Representative..........................................................51
9.4 Irrevocable Appointment.........................................................................53
9.5 Parent's Reliance...............................................................................53
9.6 Binding Appointment.............................................................................53
ARTICLE X
TERMINATION.............................................................................................53
10.1 Termination by Mutual Consent..................................................................53
10.2 Termination by either the Company or Parent....................................................53
10.3 Effect of Termination..........................................................................54
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GLOSSARY OF DEFINED TERMS
2001 Balance Sheet...................................................................Section 5.1(e)
2001 Financial Statements............................................................Section 5.1(e)
280G Consent.........................................................................Section 6.1(e)
Acquisition Proposal.................................................................Section 6.1(d)
Action..................................................................................Section 8.7
Affiliate...............................................................................Section 8.7
Agreement..............................................................................Introduction
Business Day............................................................................Section 8.7
Canada Competition Act..................................................................Section 8.7
Canadian Exchangeable Shares............................................................Section 8.7
Cash....................................................................................Section 8.7
Certificates.........................................................................Section 4.2(a)
Certificate of Merger...................................................................Section 1.2
Closing.................................................................................Section 1.2
Closing Date............................................................................Section 1.2
Code....................................................................................Section 8.7
Company................................................................................Introduction
Company Acquisition Transaction......................................................Section 6.1(d)
Company Common Shares......................................................................Recitals
Company Indemnified Parties ............................................................Section 7.6
Company Intellectual Property ..........................................................Section 8.7
Company IP Agreements...................................................................Section 8.7
Company SEC Reports..................................................................Section 5.1(e)
Company Software........................................................................Section 8.7
Confidentiality Agreement..............................................................Section 8.13
Control.................................................................................Section 8.7
Controlled Group........................................................................Section 8.7
DGCL.......................................................................................Recitals
Disclosure Schedules....................................................................Section 5.1
Dissenting Shares....................................................................Section 4.1(c)
Effective Time..........................................................................Section 1.3
Employee Benefit Plan...................................................................Section 8.7
Employee Pension Benefit Plan...........................................................Section 8.7
Employee Welfare Benefit Plan...........................................................Section 8.7
Environmental Law(s)....................................................................Section 8.7
Environmental Permit....................................................................Section 8.7
ERISA...................................................................................Section 8.7
Escrow and Paying Agent..............................................................Section 4.2(a)
Exchange Act............................................................................Section 8.7
Excluded Licenses.......................................................................Section 8.7
Fully-Diluted Stockholders..............................................................Section 8.7
GAAP....................................................................................Section 8.7
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Governmental Authority..................................................................Section 8.7
Governmental Order......................................................................Section 8.7
Hazardous Substance(s)..................................................................Section 8.7
Holders Representative..................................................................Section 9.1
HSR Act.................................................................................Section 8.7
Improvements.........................................................................Section 5.1(q)
Indebtedness...........................................................................Schedule 8.7
Indemnity Escrow........................................................................Section 8.7
Indemnity Escrow Agreement..............................................................Section 8.7
Information Statement................................................................Section 6.1(j)
Intellectual Property...................................................................Section 8.7
Inventories.............................................................................Section 8.7
IRS.....................................................................................Section 8.7
Kitchen Craft Cash Bonus Amount.........................................................Section 8.7
Knowledge...............................................................................Section 8.7
Law.....................................................................................Section 8.7
Leased Real Property....................................................................Section 8.7
Leases...............................................................................Section 5.1(q)
Legal and Accounting Costs..............................................................Section 8.7
Letter of Transmittal................................................................Section 4.2(b)
Liability/Liabilities...................................................................Section 8.7
Licenses.............................................................................Section 5.1(n)
Lien....................................................................................Section 8.7
Losses..................................................................................Section 8.7
Management Notes........................................................................Section 8.7
Material Adverse Effect.................................................................Section 8.7
Merger.....................................................................................Recitals
Merger Consideration....................................................................Section 8.7
Merger Price............................................................................Section 8.7
Merger Sub.............................................................................Introduction
Net Indebtedness........................................................................Section 8.7
Net Indebtedness Certificate............................................................Section 8.7
Option Payments.........................................................................Section 4.3
Options.................................................................................Section 4.3
Ordinary Course of Business.............................................................Section 8.7
Owned Real Property.....................................................................Section 8.7
Parent.................................................................................Introduction
Parent Disclosure Schedules.............................................................Section 5.2
Parent Indemnified Parties..............................................................Section 7.2
Parent Material Adverse Effect..........................................................Section 8.7
Parties................................................................................Introduction
Permitted Liens.........................................................................Section 8.7
Person..................................................................................Section 8.7
Principal Stockholder......................................................................Recitals
Prohibited Transaction..................................................................Section 8.7
Real Property...........................................................................Section 8.7
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Receivables.............................................................................Section 8.7
Registered Intellectual Property........................................................Section 8.7
Release.................................................................................Section 8.7
Representative.......................................................................Section 6.1(d)
Restraints...........................................................................Section 6.3(a)
Scheduled Contract...................................................................Section 5.1(m)
SEC.....................................................................................Section 8.7
Securities Act..........................................................................Section 8.7
Senior Executive........................................................................Section 8.7
Senior Subordinated Notes...............................................................Section 8.7
Software................................................................................Section 8.7
Stock Option Plan.......................................................................Section 4.3
Stockholder Indemnified Parties.........................................................Section 7.3
Stockholders Agreement...............................................................Section 5.1(c)
Subsidiary..............................................................................Section 8.7
Surviving Corporation...................................................................Section 1.1
Tax..................................................................................Section 5.1(p)
Tax Deductions.......................................................................Section 5.1(p)
Threshold...............................................................................Section 7.2
Unregistered Intellectual Property......................................................Section 8.7
Voting Agreement...........................................................................Recitals
Warrant Payments........................................................................Section 4.4
Warrants................................................................................Section 4.4
Written Consent............................................................................Recitals
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EXHIBITS
Exhibit A-1 - Form of Voting Agreement
Exhibit A-2 - Form of Certificate of Merger
Exhibit B - Form of Letter of Transmittal
Exhibit C-1 - Form of Kitchen Craft Cash Bonus Award Agreement
Exhibit C-2 - Form of Stock Option Cancellation Agreement
Exhibit D - Form of Indemnity Escrow Agreement
Exhibit E-1 - Form of Opinion of Parent Counsel
Exhibit E-2 - Form of Opinion of Company Counsel
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of
April 4 2002, by and among MASTERBRAND CABINETS, INC., a Delaware corporation
("Parent"), MBC ACQUISITION CORP., a Delaware corporation and a direct
wholly-owned subsidiary of Parent ("Merger Sub"), and OMEGA HOLDINGS, INC., a
Delaware corporation (the "Company"). Parent, Merger Sub, the Company and,
solely with respect to Articles VIII and IX, the Holders Representative, are
referred to collectively herein as the "Parties."
RECITALS
WHEREAS, the Board of Directors of each of Parent, Merger Sub
and the Company have determined that it is in the best interests of each
corporation and their respective stockholders that the Parties consummate the
business combination transaction provided for herein in which Merger Sub will
merge with and into the Company with the Company continuing as the surviving
corporation (the "Merger");
WHEREAS, Parent, as the sole shareholder of Merger Sub, has
approved this Agreement, the Merger and the transactions contemplated by this
Agreement pursuant to action taken in accordance with the requirements of the
Delaware General Corporation Law (the "DGCL") and the bylaws of Merger Sub; and
WHEREAS, contemporaneously with the execution and delivery of
this Agreement, as a condition and an inducement to the willingness of Parent
and Merger Sub to enter into this Agreement, Parent is entering into a voting
agreement in the form attached hereto as Exhibit A-1 (the "Voting Agreement")
with Mezzanine Lending Associates III, L.P. (the "Principal Stockholder")
pursuant to which, on the terms and subject to the conditions thereof, the
Principal Stockholder has executed a written consent pursuant to Section 228 of
the DGCL (the "Written Consent") with respect to all of the shares of common
stock, par value $.01 per share of the Company (the "Company Common Shares")
owned of record and beneficially by the Principal Stockholder, in favor of the
adoption of this Agreement and approval of the transactions contemplated hereby
to be performed by the Company;
WHEREAS, prior to the Effective Time (as hereafter defined),
Parent, Merger Sub, the Company, the Holders Representative (as hereafter
defined) and the Escrow and Paying Agent (as hereafter defined) will execute and
deliver the Indemnity Escrow Agreement (as hereafter defined);
NOW, THEREFORE, in consideration of the mutual
representations, warranties, covenants and agreements set forth herein, the
Parties hereby agree as follows:
1
ARTICLE I
THE MERGER; EFFECTIVE TIME; CLOSING
1.1 The Merger. 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 shall be merged with and into the Company, the separate corporate
existence of Merger Sub shall thereupon cease and the Company shall continue as
the surviving corporation and shall succeed to and assume all the rights and
obligations of Merger Sub in accordance with the DGCL. The Company, as the
surviving corporation after the consummation of the Merger, is sometimes
hereinafter referred to as the "Surviving Corporation."
1.2 Closing. Unless this Agreement shall have been terminated and the
transactions contemplated herein shall have been abandoned pursuant to Article
X, the closing of the Merger (the "Closing") shall take place at 10:00 a.m.,
local time, at the offices of counsel for Parent, on the first Business Day
after all of the conditions (excluding conditions that, by their nature, cannot
be satisfied until the Closing Date) to the obligations of the Parties to
consummate the Merger as set forth in Sections 6.3, 6.4, and 6.5 have been
satisfied or waived, or such other date, time or place as is agreed to in
writing by the Parties (the actual time and date of the Closing being referred
to herein as the "Closing Date"). At the Closing, (i) the Company will deliver
to Parent, and Parent and Merger Sub will deliver to the Company, the various
certificates, instruments and documents referred to in Sections 6.3 6.4 and 6.5
below, (ii) the Company and Merger Sub will file with the Secretary of State of
the State of Delaware the certificate of merger in the form attached hereto as
Exhibit A-2 (the "Certificate of Merger"), and (iii) Parent will, or will cause
the Surviving Corporation to, deliver the Merger Price, Option Payments, Warrant
Payments and Indemnity Escrow to the Fully-Diluted Stockholders and the Escrow
and Paying Agent, in the manner provided below in Article IV.
1.3 Effective Time. Subject to the provisions of this Agreement, the
Parties shall cause the Merger to be consummated by filing the Certificate of
Merger with the Secretary of State of the State of Delaware as soon as
practicable on the Closing Date. The Merger shall become effective at such time
as the Certificate of Merger is duly filed with the Secretary of State of the
State of Delaware or at such subsequent date or time as the Parties shall agree
and specify in the Certificate of Merger (the date and time the Merger becomes
effective being hereinafter referred to as the "Effective Time").
1.4 Effect of the Merger. At and after the Effective Time, the effect
of the Merger shall be as provided in this Agreement and the applicable
provisions of the DGCL. Without limiting the generality of the foregoing, and
subject thereto, at the Effective Time, all the property, rights, privileges,
powers and franchises of the Company and Merger Sub shall vest in the Surviving
Corporation, and all debts, liabilities and duties of the Company and Merger Sub
shall become the debts, liabilities and duties of the Surviving Corporation.
2
ARTICLE II
CERTIFICATE OF INCORPORATION AND
BYLAWS OF THE SURVIVING CORPORATION
2.1 Certificate of Incorporation. As of the Effective Time, and without
any further action on the part of the Company and Merger Sub, the certificate of
incorporation of the Company shall be amended to read in its entirety as the
certificate of incorporation of Merger Sub reads as in effect immediately prior
to the Effective Time until thereafter changed or amended as provided therein or
by applicable law.
2.2 Bylaws. At and after the Effective Time, the bylaws of Merger Sub
as in effect immediately prior to the Effective Time shall be the bylaws of the
Surviving Corporation, until thereafter changed or amended as provided therein
or by applicable law.
ARTICLE III
DIRECTORS AND OFFICERS OF
THE SURVIVING CORPORATION
3.1 Directors of the Surviving Corporation. The directors of the
Surviving Corporation, as of the Effective Time, will be the directors of Merger
Sub immediately prior to the Effective Time.
3.2 Officers of the Surviving Corporation. The officers of the
Surviving Corporation, as of the Effective Time, will be the officers of Merger
Sub immediately prior to the Effective Time.
ARTICLE IV
MERGER CONSIDERATION; CONVERSION OR
CANCELLATION OF SHARES IN THE MERGER
4.1 Effect of the Merger on the Shares.
(a) Conversion of the Company Common Shares. At the Effective
Time, by virtue of the Merger and without any action on the part of the
holders thereof, each Company Common Share issued and outstanding
immediately prior to the Effective Time (other than (i) any Company
Common Shares held by the Company, which Company Common Shares, by
virtue of the Merger and without any action on the part of the holder
thereof, shall be cancelled and retired and shall cease to exist with
no payment being made with respect thereto and (ii) Dissenting Shares
(as defined in Section 4.1(c)), shall be cancelled and retired and
shall be converted into the right to receive the Merger Price, payable
to the holder thereof, without interest thereon (except as specifically
provided for in the Indemnity Escrow Agreement), upon surrender of the
certificate formerly representing such Company Common Share; provided,
however, that the amount payable to any holder of Company Common Shares
who is an obligor on a Management Note shall be reduced by the
principal amount of such Management
3
Note plus accrued interest thereon to the Effective Time in accordance
with Section 4.2(b) and such Management Note shall be deemed cancelled
thereafter.
(b) Conversion of Merger Sub Common Stock. At the Effective
Time, each share of common stock of the Merger Sub issued and
outstanding immediately prior to the Effective Time shall, by virtue of
the Merger and without any further action on the part of the holder
thereof, be converted into and become one validly issued, fully paid
and non-assessable share of common stock, par value $.01 per share, of
the Surviving Corporation.
(c) Dissenting Shares. To the extent that holders thereof are
entitled to appraisal rights under Section 262 of the DGCL, Company
Common Shares issued and outstanding immediately prior to the Effective
Time and held by a holder who has properly exercised and perfected such
holder's demand for appraisal rights under Section 262 of the DGCL (the
"Dissenting Shares"), shall not be converted into the right to receive
the Merger Price, but the holders of Dissenting Shares shall be
entitled to receive from the Surviving Corporation such consideration
as shall be determined pursuant to Section 262 of the DGCL; provided,
however, that if any such holder shall have failed to perfect or shall
effectively withdraw or lose such holder's right to appraisal and
payment under the DGCL, each of such holder's Company Common Shares
shall thereupon be deemed to have been converted as of the Effective
Time into the right to receive the Merger Price, without any interest
thereon (except as specifically provided for in the Indemnity Escrow
Agreement), upon surrender of the certificate formerly representing
such Company Common Shares and such shares shall not be deemed to be
Dissenting Shares.
(d) Fully-Diluted Stockholders; Merger Consideration.
Concurrently with the delivery of the Net Indebtedness Certificate, the
Company will deliver to Parent Schedule 4.1(d), which will be attached
to this Agreement and will set forth the Fully-Diluted Stockholders,
the aggregate Company Common Shares, Options or Warrants owned thereby,
and the portion of the Merger Consideration allocable to such
Fully-Diluted Stockholders calculated in accordance with the terms of
this Agreement.
4.2 Payment for the Shares.
(a) From and after the Effective Time, U.S. Bank National
Association shall act as paying agent (the "Escrow and Paying Agent")
in effecting the payment of the Merger Price in respect of certificates
(the "Certificates") that, prior to the Effective Time, represented
Company Common Shares entitled to payment of the Merger Price pursuant
to Section 4.1(a). At the Effective Time, Parent or Merger Sub shall
deposit, or cause to be deposited, with the Escrow and Paying Agent the
aggregate Merger Price (net of the aggregate principal amount of the
Management Notes plus accrued interest thereon to the Effective Time
held by holders of Company Common Shares) to which holders of the
Company Common Shares shall be entitled pursuant to this Article IV.
4
(b) At or prior to the Effective Time, the Company shall
provide to each record holder of Certificates that immediately prior to
the Effective Time represented Company Common Shares a form of letter
of transmittal in the form attached hereto as Exhibit B (the "Letter of
Transmittal") which shall, among other things, (i) specify that
delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon proper delivery of the Certificates
to the Escrow and Paying Agent, and instructions for use in
surrendering such Certificates and receiving the Merger Price in
respect thereof and (ii) include a waiver by such holder of any claims
against the Company or its Subsidiaries that such holder has in its
capacity as a stockholder of the Company. To the extent not previously
delivered to any Fully-Diluted Stockholder at the Effective Time,
Parent shall cause the Escrow and Paying Agent to mail the Letter of
Transmittal to such Fully-Diluted Stockholder as promptly as
practicable. Upon the surrender of each such Certificate, the Escrow
and Paying Agent shall pay the holder of such Certificate an aggregate
amount equal to (i) the Merger Price multiplied by (ii) the number of
Company Common Shares formerly represented by such Certificate, in
consideration therefor, and such Certificate shall forthwith be
cancelled. Notwithstanding the foregoing, the amount to be paid to any
obligor on a Management Note pursuant to this Section 4.2(b) in respect
of the Company Common Shares held by such obligor shall be reduced by
the principal amount of such Management Note plus accrued interest
thereon to the Effective Time and such Management Note shall be deemed
cancelled thereafter. Until so surrendered, each such Certificate
(other than Certificates representing (i) Company Common Shares held by
the Company or held in the treasury of the Company or (ii) Dissenting
Shares) shall represent solely the right to receive the aggregate
Merger Price relating thereto (net of the principal amount of the
Management Notes plus accrued interest thereon to the Effective Time).
Except as specifically provided in the Indemnity Escrow Agreement, no
interest or dividends shall be paid or accrued on the Merger Price. If
the Merger Price (or any portion thereof) is to be delivered to any
Person other than the Person in whose name the Certificate formerly
representing Company Common Shares surrendered thereof is registered,
it shall be a condition to such right to receive payment of such Merger
Price that the Certificate so surrendered shall be properly endorsed or
otherwise be in proper form for transfer and that the Person requesting
such payment shall pay to the Escrow and Paying Agent the transfer or
other similar taxes required by reason of payment of the Merger Price
to a Person other than the registered holder of the Certificate
surrendered, or shall establish to the satisfaction of the Escrow and
Paying Agent that such tax has been paid or is not applicable.
(c) Notwithstanding anything in this Agreement to the
contrary, the Escrow and Paying Agent shall not pay to the holders of
Company Common Shares that portion of the Merger Price represented by
the Indemnity Escrow and the Reimbursement Fund until such time as such
amount, if any, is distributable pursuant to the terms and conditions
of the Indemnity Escrow Agreement.
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(d) Promptly following the date that the Indemnity Escrow
Agreement terminates by its terms and the Escrow and Paying Agent
distributes cash in an amount equal to the Indemnity Escrow and the
Reimbursement Fund, or such lesser amount as is required to be
distributed to the Fully-Diluted Stockholders thereunder, the Escrow
and Paying Agent shall deliver to the Surviving Corporation all cash,
Certificates and other documents in its possession relating to the
transactions described in this Agreement, and the Escrow and Paying
Agent's duties shall terminate. Thereafter, each holder of a
Certificate formerly representing a Company Common Share may surrender
such Certificate to the Surviving Corporation and (subject to
applicable abandoned property, escheat and similar laws) receive in
consideration therefor the aggregate Merger Price relating thereto,
without any interest thereon (except as specifically provided for in
the Indemnity Escrow Agreement).
(e) After the Effective Time, there shall be no transfers on
the stock transfer books of the Surviving Corporation of any Company
Common Shares which were outstanding immediately prior to the Effective
Time. If, after the Effective Time, Certificates formerly representing
Company Common Shares are presented to the Surviving Corporation or the
Escrow and Paying Agent, they shall be surrendered and cancelled in
return for the payment of the aggregate Merger Price relating thereto,
as provided in this Article IV.
(f) None of Parent, Merger Sub, the Company, the Holders
Representative or the Escrow and Paying Agent shall be liable to any
Person in respect of any portion of the Merger Price delivered to a
public official pursuant to any applicable abandoned property, escheat
or similar law. If any Certificate has not been surrendered prior to
five years after the Effective Time (or immediately prior to such
earlier date on which the Merger Price in respect of such Certificate
would otherwise escheat to or become the property of any public
official), any such shares, cash, dividends or distributions in respect
of such Certificate shall, to the extent permitted by applicable law,
become the property of the Parent, free and clear of all claims or
interest of any Person previously entitled thereto.
(g) In the event that any Certificate shall have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by
the Person claiming such Certificate to be lost, stolen or destroyed
and, if required by the Surviving Corporation, the posting by such
Person of a bond in such reasonable amount, and otherwise in such
substance and form as the Surviving Corporation may reasonably direct
as indemnity against it, Parent and the Escrow and Paying Agent with
respect to such Certificate, the Escrow and Paying Agent will issue in
exchange for such lost, stolen or destroyed Certificate the Merger
Price with respect to such Certificate to which such Person is entitled
pursuant to this Article IV.
(h) Parent and Merger Sub shall be entitled to deduct and
withhold, or cause the Escrow and Paying Agent to deduct and withhold,
from the Merger
6
Price payable to a holder of a Certificate any withholding taxes and
such other amounts as are required under the Code or any applicable
provision of state, local or foreign tax law. To the extent that
amounts are so deducted or withheld by Parent, Merger Sub or the Escrow
and Paying Agent, such deducted or withheld amounts shall be treated
for all purposes of this Agreement as having been paid to the holder of
the Certificate in respect of which such deduction or withholding was
made by Parent, Merger Sub or the Escrow and Paying Agent and Parent
shall provide, or cause the Escrow and Paying Agent to provide, to the
holder of such Certificate written notice of the amounts so deducted or
withheld.
4.3 Stock Options. Prior to the Effective Time, the Company's Board of
Directors (or, if appropriate, any committee thereof) shall adopt appropriate
resolutions and take all other actions necessary to (i) provide for the
cancellation or exercise, effective at the Effective Time, of all the
outstanding stock options or similar rights (the "Options") heretofore granted
under the Equity Incentive Plan of Omega Holdings, Inc. (the "Stock Option
Plan"), without any payment therefor except as otherwise provided in this
Section 4.3, and (ii) terminate the Stock Option Plan as of the Effective Time.
Each Option, to the extent unexercised as of the Effective Time, shall
thereafter no longer be exercisable but shall entitle each holder thereof, in
cancellation and settlement therefor, to a payment in cash by the Company
(subject to any applicable withholding taxes), at the Effective Time, equal to
the product of (i) the total number of Company Common Shares as to which that
Option remains unexercised and (ii) the excess, if any, of (A) the Merger Price
over (B) the exercise price per Company Common Share subject to such Option
(such amounts payable hereunder being referred to as the "Option Payments"). At
the Effective Time, Parent or Merger Sub shall deposit, or cause to be
deposited, with the Escrow and Paying Agent the aggregate Option Payments due
pursuant to this Section 4.3 (net of the aggregate principal amount of the
Management Notes plus accrued interest thereon to the Effective Time held by
holders of Options and not otherwise deducted from the Merger Price pursuant to
Section 4.2). Upon surrender of the certificate for an Option by the holder of
such Option to the Escrow and Paying Agent, the Escrow and Paying Agent shall
pay to such Option holder, on behalf of the Company and subject to any
applicable withholding taxes, the Option Payments due under this Section 4.3
with respect to such Option. Notwithstanding the foregoing, (i) the Escrow and
Paying Agent shall not pay to the Option holder that portion of the Option
Payments represented by the Indemnity Escrow and the Reimbursement Fund until
such time as such amounts are distributable pursuant to the terms and conditions
of the Indemnity Escrow Agreement, and (ii) the amount to be paid pursuant to
this Section 4.3 to any obligor on a Management Note in respect of the Options
held by such obligor shall (solely to the extent such obligor's Merger Price was
not reduced as a result of such Management Note pursuant to Section 4.2) be
reduced by the principal amount of such Management Note plus accrued interest
thereon to the Effective Time and such Management Note shall be deemed cancelled
thereafter.
4.4 Warrants. Prior to the Effective Time, the Company's Board of
Directors (or, if appropriate, any committee thereof) shall adopt appropriate
resolutions and take all other actions necessary to provide for the cancellation
or exercise, effective at the Effective Time, of all the outstanding warrants to
purchase Company Common Shares
7
issued to BCC Industrial Services, Inc. (the "Warrants"), without any payment
therefor except as otherwise provided in this Section 4.4. Each Warrant, to the
extent unexercised as of the Effective Time, shall thereafter no longer be
exercisable but shall entitle each holder thereof, in cancellation and
settlement therefor, to a payment in cash by the Company (subject to any
applicable withholding taxes), at the Effective Time, equal to the product of
(i) the total number of Company Common Shares as to which that Warrant remains
unexercised and (ii) the excess, if any, of (A) the Merger Price over (B) the
exercise price per Company Common Share subject to such Warrant (such amounts
payable hereunder being referred to as the "Warrant Payments"). At the Effective
Time, Parent or Merger Sub shall deposit, or cause to be deposited, with the
Escrow and Paying Agent the aggregate Warrant Payments due pursuant to this
Section 4.4. Upon surrender of the warrant certificate by the holder of such
Warrant to the Escrow and Paying Agent, the Escrow and Paying Agent shall pay to
such holder, on behalf of the Company and subject to any applicable withholding
taxes, the Warrant Payments due under this Section 4.4 with respect to such
Warrant. Notwithstanding the foregoing, the Escrow and Paying Agent shall not
pay to the Warrant holder that portion of the Warrant Payments represented by
the Indemnity Escrow and the Reimbursement Fund until such time as such amounts
are distributable pursuant to the terms and conditions of the Indemnity Escrow
Agreement.
4.5 Payments at Closing. Parent shall cause the Escrow and Paying Agent
to, immediately following the Effective Time, pay by wire transfer of
immediately available funds the Merger Price, Option Payments and Warrant
Payments (subject to any applicable withholding taxes) payable pursuant to
Sections 4.2, 4.3 and 4.4 to each Fully-Diluted Stockholder who (i) together
with its Affiliates owns greater than 2.0% of the aggregate issued and
outstanding Company Common Shares (calculated on a fully-diluted basis assuming
the exercise or conversion of all outstanding Options and Warrants), and (ii)
has, prior to the Effective Time, delivered to the Escrow and Paying Agent
properly executed Letters of Transmittal and wire transfer instructions together
with the Certificates or other certificates representing such Fully-Diluted
Stockholder's Company Common Shares, Options and Warrants. Notwithstanding the
foregoing, the Escrow and Paying Agent shall not pay to such Fully-Diluted
Stockholders at the Effective Time that portion of the Merger Price, Option
Payments and Warrant Payments represented by the Indemnity Escrow and
Reimbursement Fund, which amounts shall be payable to such Fully-Diluted
Stockholders by the Escrow and Paying Agent at such time as such amounts are
distributable pursuant to the Indemnity Escrow Agreement.
4.6 Repayment of Company Indebtedness. At the Effective Time, Parent
will, or will cause the Surviving Corporation or any of its Subsidiaries to,
repay in full all amounts owing pursuant to, and discharge all of the Company's
and its Subsidiaries' obligations under, the agreements governing the
Indebtedness identified on the Net Indebtedness Certificate, other than with
respect to (i) the Senior Subordinated Notes and (ii) such Indebtedness which by
its terms may not be repaid at such time.
4.7 Further Assurances. At and after the Effective Time, the officers
and directors of the Surviving Corporation will be authorized to execute and
deliver, in the name and on behalf of the Company or Merger Sub, as applicable,
any deeds, bills of
8
sale, assignments or assurances and to take and do, in the name and on behalf of
the Company or Merger Sub, any other actions and things to vest, perfect or
confirm of record or otherwise in the Surviving Corporation any and all right,
title and interest in, to and under any of the rights, properties or assets
acquired or to be acquired by the Surviving Corporation as a result of, or in
connection with, the Merger.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
5.1 Representations and Warranties of the Company. The Company hereby
represents and warrants to Parent and Merger Sub that except as set forth in the
disclosure schedules attached hereto (the "Disclosure Schedules") or as
disclosed in the Company SEC Reports, the statements contained in Section 5.1
are true and correct as of the date hereof, except for representations and
warranties that speak as of a specific earlier date other than the date hereof,
which are true and correct as of such other date.
(a) Incorporation; Qualification and Corporate Power. Each of
the Company and its Subsidiaries is duly organized, validly existing
and in good standing under the laws of the jurisdiction of its
organization. Schedule 5.1(a) lists each such jurisdiction in which the
Company and its Subsidiaries are duly organized and validly existing
and in good standing and duly qualified to transact business. Each of
the Company and its Subsidiaries (i) has all requisite power and
authority (corporate or otherwise) to carry on its business as it is
now being conducted and as it proposes to conduct and to own its
properties and assets; and (ii) is in good standing and is duly
qualified to transact business in each jurisdiction in which the nature
of property owned or leased by it or the conduct of its business
requires it to be so qualified, except where the failure to have power
or authority, to be in good standing or to be duly qualified to
transact business, has not had and would not reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect.
True, correct and complete copies of the charter and by-laws (or other
constituent documents) of the Company and its Subsidiaries in effect on
the date hereof have been delivered or made available to Parent. The
minute books, stock certificate books and the stock ledgers (or similar
records) have been delivered or made available to Parent and are true,
correct and complete.
(b) Authorization; No Conflicts and Enforceability. The
Company has full corporate power to execute and deliver this Agreement
and to perform its obligations hereunder and, subject to the approval
of the Merger by the stockholders of the Company in accordance with the
DGCL, to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement, the performance of the Company's
obligations hereunder and the consummation of the transactions
contemplated hereby have been duly and validly authorized by all
necessary corporate proceedings on the part of the Company, its Board
of Directors and its stockholders and no other corporate proceedings on
the part of the Company are necessary to authorize this Agreement or to
consummate the transactions contemplated hereby. The execution,
delivery and performance of
9
this Agreement and the consummation of the transactions contemplated
hereby will not (i) violate any provision of the Company's certificate
of incorporation or by-laws, (ii) violate any provision of any charter
or by-laws or similar organizational instrument of any Subsidiary of
the Company, (iii) violate any provision of, or be an event that is (or
with the passage of time will result in) a violation of, or result in
the acceleration of or entitle any party to accelerate (whether after
the giving of notice or lapse of time or both) any obligation under, or
result in the imposition of any Lien upon any of the Company Common
Shares or any of the Company's or any of its Subsidiaries' assets or
properties pursuant to, any Lien, contract, lease, agreement,
instrument, order, arbitration award, judgment or decree to which the
Company or any of the Company's Subsidiaries is a party or by which any
of them is bound, except as has not had and would not reasonably be
expected to have, individually or in the aggregate, a Material Adverse
Effect or a Parent Material Adverse Effect, (iv) require any consent,
approval, authorization or permit of, or registration or filing with or
notification to, any Governmental Authority, except (A) in connection
with the applicable requirements of the HSR Act and the Canada
Competition Act, (B) the filing of the applicable certificates
evidencing the Merger pursuant to the DGCL and appropriate documents
with the relevant authorities of other states in which the Company or
its Subsidiaries are authorized to do business, or (C) where the
failure to obtain such consent, approval, authorization or permit, or
to make such filing or notification, would not reasonably be expected
to have, individually or in the aggregate, a Material Adverse Effect;
(v) cause the suspension or revocation of any authorizations, consents,
approvals or licenses currently in effect except where such suspension
or revocation would not reasonably be expected to have, individually or
in the aggregate, a Material Adverse Effect; or (vi) assuming the
consents, approvals, authorizations or permits and filings or
notifications referred to in this Section 5.1(b) are duly and timely
obtained or made, violate any order, writ, injunction, decree, statute,
rule or regulation applicable to the Company or its Subsidiaries or to
any of their respective assets, except for violations which would not
reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect or a Parent Material Adverse Effect. This
Agreement and the Voting Agreement have been duly executed and
delivered by the Company and the Principal Stockholder, respectively,
and, assuming the due execution hereof and thereof by Parent and Merger
Sub and the Principal Stockholder, respectively, this Agreement and the
Voting Agreement constitute the legal, valid and binding obligation of
the Company and the Principal Stockholder, respectively, enforceable
against the Company and the Principal Stockholder, respectively, in
accordance with their terms, subject to the effect of bankruptcy,
insolvency, reorganization, liquidation, dissolution, moratorium or
other similar laws relating to or affecting the rights of creditors
generally and to the effect of the application of general principles of
equity (regardless of whether considered in proceedings at law or in
equity).
(c) Company Capitalization.
10
(i) The entire authorized capital stock of the
Company consists of 1,000,000 Company Common Shares of which
82,237.3331 are issued and outstanding. The number of Company
Common Shares issued and outstanding on a fully-diluted basis,
assuming the exercise or conversion of all outstanding vested
and unvested options, warrants and other rights to acquire
securities is 90,580.2074.
(ii) There are no bonds, debentures, notes or other
indebtedness of the Company having the right to vote on any
matters on which stockholders may vote issued or outstanding.
(iii) All issued and outstanding Company Common
Shares: (A) have been duly authorized and validly issued; (B)
are fully paid and nonassessable; and (C) were issued in
material compliance with all applicable state and federal laws
concerning the issuance of securities. Other than as set forth
on Schedule 5.1(c)(iii), there are no options, warrants,
purchase rights, subscription rights, conversion or exchange
rights or other contracts or commitments that could require
the Company to issue, sell or otherwise cause to become
outstanding any of its capital stock. There are no outstanding
or authorized stock appreciation, phantom stock, profit
participation, or similar rights with respect to the Company.
Except as set forth in, or contemplated by, this Agreement or
the Stockholders Agreement, there are no voting trusts,
proxies, or other agreements or understandings with respect to
the voting of the capital stock of the Company. Schedule
5.1(c)(iii) sets forth a complete and accurate list of the
holders of the Options and the Warrants and the number of
Company Common Shares subject to such Options and Warrants.
(iv) Other than this Agreement, the Voting Agreement
and the Stockholders Agreement dated June 13, 1997, as amended
(the "Stockholders Agreement"), a copy of which has been
provided to Parent, there are no outstanding contractual
obligations of the Company (A) restricting the transfer of,
(B) affecting the voting rights of, (C) requiring the
repurchase, redemption or disposition of, or containing any
right of first refusal with respect to, (D) requiring the
registration for sale of, or (E) granting any preemptive or
antidilutive rights with respect to, any of the Company Common
Shares or any capital stock of, or other equity interests in,
the Company. There are no outstanding contractual obligations
of the Company to provide funds to, or make any investment (in
the form of a loan, capital contribution or otherwise) in, any
Person other than a Subsidiary of the Company.
(d) Present Compliance with Obligations and Laws. Neither the
Company nor any of its Subsidiaries is: (i) in violation of its charter
or bylaws or similar documents; (ii) in default in the performance of
any obligation, agreement or condition of any debt instrument which
(with or without the passage of time or
11
the giving of notice, or both) affords to any Person the right to
accelerate any indebtedness or terminate any right; (iii) in default
under or breach of (with or without the passage of time or the giving
of notice) any Scheduled Contract to which it is a party or by which it
or its assets are bound; or (iv) in violation of any Law applicable to
it or its business or assets, except where any violation, default or
breach under clauses (ii), (iii) or (iv) has not had and would not
reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect.
(e) 2001 Financial Statements and SEC Reports.
(i) The Company has delivered to Parent the audited
consolidated balance sheet of the Company and its Subsidiaries
as of December 29, 2001 (the "2001 Balance Sheet"), and the
related audited consolidated statements of operations and
statements of cash flows for the period then ended. Such
financial statements are attached hereto as Schedule 5.1(e)
(collectively, the "2001 Financial Statements"). The 2001
Financial Statements present fairly in all material respects
the financial position, results of operations and cash flows
of the Company and its Subsidiaries for the periods or as of
the dates set forth therein and were prepared in conformity
with GAAP on a consistent basis throughout the periods
involved. The unaudited balance sheet and unaudited income
statement of the Company and its Subsidiaries prepared as of
January 30, 2002 and February 28, 2002, in each case in the
form previously furnished to Parent, present fairly, in all
material respects, the financial position and results of
operations of the Company and its consolidated Subsidiaries as
of the respective dates or for the respective periods set
forth therein, all in conformity with GAAP consistently
applied during the periods involved except as otherwise noted
therein, and subject to the absence of footnotes and year-end
adjustments.
(ii) Since January 1, 1999, the Company and its
Subsidiaries has timely filed all required reports, schedules,
forms, statements and other documents required to be filed by
them with the SEC prior to the date hereof (collectively,
including all exhibits thereto, the "Company SEC Reports").
The Company SEC Reports, as of their respective dates (and, if
amended or superseded by a filing prior to the date of this
Agreement or the Closing Date, then as of the date of such
filing) and any Company SEC Reports filed with the SEC
subsequent to the date hereof and prior to the Effective Time
will not, contain any untrue statement of a material fact or
omit to state a material fact required to be stated (or
incorporated by reference) therein or necessary to make the
statements therein, in the light of the circumstances under
which they were made, not misleading. Each of the audited year
end financial statements (including the related notes)
included or to be included in, or incorporated by reference
into, the Company SEC Reports present fairly, in all material
respects, the financial position, results of operations and
cash flows of the Company and its consolidated Subsidiaries as
of the respective dates or for
12
the respective periods set forth therein, all in conformity
with GAAP consistently applied during the periods involved
except as otherwise noted therein. All of such Company SEC
Reports, as of their respective dates (and as of the date of
any amendment to the respective Company SEC Report filed prior
to the date hereof), complied in all material respects with
the applicable requirements of the Securities Act and the
Exchange Act and the rules and regulations promulgated
thereunder (as in effect on the dates on which such Company
SEC Reports, or amendments thereto, were filed).
(iii) Except as set forth in the 2001 Financial
Statements, and except for Liabilities and obligations
contemplated by this Agreement or incurred in the Ordinary
Course of Business since December 29, 2001, the Company does
not have any material undisclosed Liabilities or obligations
of any nature required by GAAP to be set forth on a
consolidated balance sheet of the Company.
(iv) The Company has delivered to Parent a complete
and correct copy of any amendments or modifications, which
have not yet been filed with the SEC, to all agreements,
documents or other instruments which previously had been filed
by the Company or its Subsidiaries with the SEC pursuant to
the Exchange Act.
(f) Indebtedness; Operations. Except as disclosed in Schedule
5.1(f) hereto, none of the Company or any Subsidiary thereof has any
Liability for Indebtedness or any guaranty thereof. As of the Effective
Time, the amount of Net Indebtedness shall be the amount set forth in
the Net Indebtedness Certificate. The Company has not engaged and is
not engaging in any business or operations other than owning the
capital stock of Omega Cabinets, Ltd.
(g) Absence of Certain Changes. Except as disclosed in
Schedule 5.1(g) hereto, since December 29, 2001, the Company and each
of its Subsidiaries has operated in the Ordinary Course of Business
and, except as disclosed on Schedule 5.1(g) or as contemplated hereby,
neither the Company nor any Subsidiary thereof has:
(i) permitted or allowed any of the material assets
or properties (whether tangible or intangible) of the Company
or any Subsidiary to be subjected to any Lien, other than
Permitted Liens or Liens that will be released at or prior to
the Closing;
(ii) made any loan to, guaranteed any Indebtedness of
or otherwise incurred any Indebtedness on behalf of any other
Person (other than the Company or a Subsidiary) in excess of
$100,000;
(iii) except in accordance with reasonable commercial
practices and in the Ordinary Course of Business and except
for matters that are
13
being contested in good faith, failed to pay any creditor any
amount owed to such creditor when due;
(iv) made any changes outside of the Ordinary Course
of Business of practices or policies relating to
manufacturing, purchasing, marketing, selling or pricing;
(v) merged with, entered into a consolidation with or
acquired an interest of 5% or more in any Person or acquired a
substantial portion of the assets or business of any Person or
any division or line of business thereof, or otherwise
acquired any assets (other than purchases of inventory,
supplies and other property in the Ordinary Course of
Business);
(vi) made any (A) capital expenditure outside of the
Ordinary Course of Business or (B) non-cancelable commitments
for any capital expenditures in excess of the amounts provided
for in the Company's budget, a copy of which has been provided
to Parent, that will remain outstanding after the Effective
Time in excess of $100,000 in the aggregate;
(vii) sold, transferred, leased, subleased, licensed
or otherwise disposed of any properties or assets, real,
personal or mixed (including, without limitation, leasehold
interests and intangible assets), other than in the Ordinary
Course of Business, including without limitation the sale of
Inventories or obsolete or worn out equipment;
(viii) other than in the Ordinary Course of Business,
(A) granted any material increase, or announced any material
increase or made any material alteration to the wages,
conditions, salaries, compensation, bonuses, incentives,
pension or other benefits payable by the Company or any
Subsidiary to its directors, officers or employees, or (B)
established, increased, otherwise amended or promised to
increase or otherwise amend any pension, profit sharing,
deferred compensation, group insurance, severance pay,
retirement or other employee benefits to its directors,
officers or employees, whether past or present under any
employee plan, fund or otherwise, in each case so as to
materially increase the cost thereof;
(ix) other than in the Ordinary Course of Business,
written down or written up the value of any Inventories or
Receivables or revalued any assets of the Company or any
Subsidiary thereof;
(x) shortened or lengthened in any material respect
the customary payment cycles for payables or Receivables;
(xi) other than in the Ordinary Course of Business,
amended, terminated, canceled or compromised any material
claims of the Company
14
or any Subsidiary thereof or waived any other rights of
substantial value to the Company or any Subsidiary thereof;
(xii) made any material change in any method of
accounting or accounting practice or policy used by the
Company or any Subsidiary thereof, other than such changes
required by GAAP;
(xiii) other than in the Ordinary Course of Business,
amended, modified or consented to the termination of any
Scheduled Contract or the Company's or any of its Subsidiary's
rights thereunder;
(xiv) amended or restated the certificate of
incorporation or the by-laws (or other organizational
documents) of the Company or any Subsidiary thereof;
(xv) other than terminations of employment in the
Ordinary Course of Business, terminated, discontinued, closed
or disposed of any office, plant or facility, or laid off any
employees or implemented any early retirement, separation or
other program providing early retirement window benefits
within the meaning of Section 1.401(a)-4 of the Treasury
Regulations or announced or planned any such action or program
for the future;
(xvi) other than in the Ordinary Course of Business,
settled or compromised any material liability with respect to
Taxes of the Company or any Subsidiary thereof;
(xvii) allowed any Permit that was issued or relates
to the Company or any Subsidiary thereof to lapse or terminate
or failed to renew any such Permit that is scheduled to
terminate or expire within 45 calendar days of the date
hereof, except where such lapsing, termination or expiration
has not had, and would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect;
(xviii) suffered any Material Adverse Effect; or
(xix) agreed, whether in writing or otherwise, to
take any of the actions specified in this Section 5.1(g) or
granted any options to purchase, rights of first refusal,
rights of first offer or any other similar rights or
commitments with respect to any of the actions specified in
clauses (v) or (vii) of Section 5.1(g), except in each case as
expressly contemplated by this Agreement.
(h) Tangible Properties and Necessary Assets. With the
exception of tangible properties disposed of since December 29, 2001 as
contemplated by Section 5.1(g) and except as set forth on Schedule
5.1(h) hereto, as of (i) December 29, 2001 and (ii) the date of this
Agreement, the Company or one of its Subsidiaries had and has, directly
or indirectly, owned free and clear of any Liens
15
other than Permitted Liens, all of their respective material tangible
properties or held and holds, such tangible properties by valid and
existing lease, license or other right to use, subject to the effect of
bankruptcy, insolvency, reorganization, liquidation, dissolution,
moratorium or other similar laws relating to or affecting the rights of
creditors generally and to the effect of the application of general
principles of equity (regardless of whether considered in proceedings
at law or in equity).
(i) Litigation; Orders. Except as disclosed on Schedule 5.1(i)
hereto, there are no Actions pending or, to the Company's Knowledge,
threatened against the Company or any of its Subsidiaries. Except as
disclosed on Schedule 5.1(i) hereto, there are no injunctions,
judgments, decrees or orders that have been entered against the Company
or any of its Subsidiaries or any of their respective properties or
businesses that limit (or would reasonably be expected to limit) the
operation the Company's or its Subsidiaries' businesses as presently
conducted.
(j) Intellectual Property.
(i) Schedule 5.1(j) hereto sets forth as of the date
hereof a true and complete list of all (A) patents and patent
applications, registered trademarks and trademark
applications, registered copyrights and copyright
applications, domain names owned and registered by the Company
and any Unregistered Intellectual Property owned by the
Company, and (B) Company IP Agreements. Except as has not had,
and would not reasonably be expected to have, individually or
in the aggregate, a Material Adverse Effect, the Company owns
or is licensed or otherwise possesses legally enforceable
rights to use all Company Intellectual Property.
(ii) Except as has not had, and would not reasonably
be expected to have, individually or in the aggregate, a
Material Adverse Effect, the consummation of the transactions
contemplated by this Agreement will not result in the
termination or impairment of any Company Intellectual Property
nor will it create an option to terminate or restrict a
Company IP Agreement.
(iii) Except as has not had, and would not reasonably
be expected to have, individually or in the aggregate, a
Material Adverse Effect, neither the Company nor any of its
Subsidiaries is infringing, misappropriating, diluting or
otherwise violating the Intellectual Property of any third
party. Other than as set forth on Schedule 5.1(j) there are no
unresolved or unsettled Actions that have been asserted, are
pending or, to the Company's Knowledge, threatened against the
Company or any of its Subsidiaries (A) alleging any of the
foregoing, (B) challenging or seeking to deny or restrict the
development, ownership, registration, use, licensing or other
transfer by the Company or its Subsidiaries of any of the
Company Intellectual Property, or (C) alleging that the
Company IP
16
Agreements are unenforceable, restricted or otherwise in
conflict with the terms of any license or other agreement. To
the Company's Knowledge, no third party is engaging in any
activity that infringes, misappropriates or otherwise violates
in any respect the Company Intellectual Property, except as
has not had and would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect.
(iv) Except as has not had and would not reasonably
be expected to have, individually or in the aggregate, a
Material Adverse Effect, the Company and each of its
Subsidiaries have taken reasonable steps to maintain the
confidentiality of its trade secrets and other confidential
Company Intellectual Property and any confidential
Intellectual Property of third parties in the possession of
the Company or its Subsidiaries.
(v) The Company is the licensee of, and, to the
Knowledge of the Company, has a valid right to use, free and
clear of any Liens (other than Permitted Liens), the Internet
web sites identified on Schedule 5.1(j) and all of the
contents thereof. Neither the Company nor any of its
Subsidiaries licenses any other Internet web sites.
(k) Labor Matters. Neither the Company nor any Subsidiary
thereof is a party to or bound by any collective bargaining or other
agreements with labor unions or associations representing employees of
the Company or its Subsidiaries. Except as disclosed in Schedule 5.1(k)
hereto, currently (i) to the Company's Knowledge, there are no
organizational campaigns, petitions or other unionization activities
seeking recognition of a collective bargaining unit; (ii) there are no
strikes, slowdowns or work stoppages pending or, to the Company's
Knowledge, threatened against the Company or its Subsidiaries, and
neither the Company nor any Subsidiary has experienced any such strike,
slowdown or work stoppage within the past three years; (iii) neither
the Company nor any of its Subsidiaries has breached or otherwise
failed to comply with the provisions of any collective bargaining or
union contract the breach or non-compliance with which has had or would
reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect and there are no grievances outstanding against
the Company or any of its Subsidiaries under any such agreement or
contract which have had or would reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect; and (iv)
the Company and each Subsidiary is currently in compliance with all
applicable laws relating to the employment of labor, including those
related to wages, hours, collective bargaining and the payment and
withholding of taxes and other sums as required by the appropriate
Governmental Authority except where the failure to be in compliance has
not had, and would not reasonably be expected to have, individually or
in the aggregate, a Material Adverse Effect.
(l) Insurance. All insurance policies to which the Company or
a Subsidiary of the Company is a party, a named insured, or otherwise
the
17
beneficiary of coverage, and such policies' deductible and coverage
amounts, are listed on Schedule 5.1(l). All premiums on such policies
which are due and payable have been paid in full.
(m) Scheduled Contracts. Schedule 5.1(m) hereto lists, as of
the date hereof, each of the following contracts, agreements, licenses
and leases of the Company and its Subsidiaries (each, a "Scheduled
Contract"):
(i) each contract, agreement and purchase order for
the furnishing of supplies or services to the Company, any
Subsidiary or otherwise related to the Company's business
under the terms of which the Company or any Subsidiary: (A) is
likely to pay or otherwise give consideration of more than
$250,000 in the aggregate during the fiscal year ending
December 31, 2002, (B) is likely to pay or otherwise give
consideration of more than $500,000 in the aggregate over the
remaining term of such contract or (C) involving consideration
in excess of $250,000 and which cannot be canceled by the
Company or such Subsidiary without penalty or further payment
and without more than 30 days' notice;
(ii) each contract, agreement and purchase order for
the sale of Inventory or for the furnishing of services by the
Company or any Subsidiary which: (A) is likely to involve
consideration of more than $500,000 in the aggregate during
the fiscal year ending December 31, 2002, (B) is likely to
involve consideration of more than $1,000,000 in the aggregate
over the remaining term of the contract, agreement or purchase
order or (C) involving consideration in excess of $500,000 and
which cannot be canceled by the Company or such Subsidiary
without penalty or further payment and without more than 30
days' notice;
(iii) all (a) distributor and dealer contracts and
agreements to which the Company or any Subsidiary thereof is a
party and which involve payments to the Company in excess of
$1,000,000 in any calendar year, and (b) broker,
manufacturer's representatives, franchise, agency, sales
promotion, market research, marketing consulting and
advertising contracts and agreements to which the Company or
any Subsidiary thereof is a party and which involve payments
from the Company in excess of $250,000 in any calendar year;
(iv) all contracts with consultants pursuant to which
the Company or any Subsidiary thereof is obligated to pay
amounts in excess of $100,000 and which are not cancelable
without penalty or further payment and without more than 30
days' notice;
(v) all notes, mortgages, indentures, guarantees, and
material contracts and agreements, in each case relating to
Indebtedness of the Company or any of its Subsidiaries in an
amount greater than $10,000;
18
(vi) all contracts and agreements that limit or
purport to limit the ability of the Company or any Subsidiary
thereof to compete in any line of business or with any Person
or in any geographic area or during any period of time that
are not terminable by the Company without penalty within 90
days;
(vii) all contracts and agreements between or among
the Company or any of its Subsidiaries on one hand and any
Affiliate of the Company or its Subsidiaries on the other; and
any employment, severance or consulting agreement or
commitment with any officer, Senior Executive or director;
(viii) any contract under which the Leased Real
Property is being leased; and
(ix) all other contracts and agreements providing for
payments to or from the Company or any of its Subsidiaries in
excess of $1,000,000.
Except as disclosed in Schedule 5.1(m), each Scheduled
Contract (i) is valid and binding on the respective parties thereto and
is in full force and effect and (ii) upon consummation of the
transactions contemplated by this Agreement, except to the extent that
any consents set forth in Schedule 5.1(m) are not obtained, shall
continue in full force and effect, enforceable in accordance with the
terms thereof without penalty or other adverse consequence, subject in
each case to the effect of bankruptcy, insolvency, reorganization,
liquidation, dissolution, moratorium or other similar laws relating to
or affecting the rights of creditors generally and to the effect of the
application of general principles of equity (regardless of whether
considered in proceedings at law or in equity). Neither the Company nor
any Subsidiary is in breach of, or default under, any Scheduled
Contract, except for such breaches, if any, as have not had and would
not reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect. To the Company's Knowledge, no other party to
any Scheduled Contract is in breach of, or default under, any Scheduled
Contract, except for such breaches, if any, as have not had and would
not reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect. The Company has made available to Parent true
and complete copies of all Scheduled Contracts.
(n) Licenses, Approvals, Other Authorizations, Consents,
Reports, Etc.
(i) Except as set forth in Schedule 5.1(n) hereto,
the Company or its Subsidiaries possess or have been granted
all governmental licenses, permits, franchises and all other
authorizations of any federal, state, local or foreign
governmental authority necessary for the operation of its
business as currently conducted (the "Licenses"), except where
such failure to possess or have granted has not had and would
not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect. Except as noted on
Schedule 5.1(n) hereto, all such Licenses are in
19
full force and effect except for those whose failure to be in
full force and effect has not had and would not reasonably be
expected to have, individually or in the aggregate, a Material
Adverse Effect. Except as noted on Schedule 5.1(n) hereto, no
proceeding is pending or, to the Company's Knowledge,
threatened seeking the revocation or limitation of any License
the revocation or limitation of which has had or would
reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect.
(ii) Schedule 5.1(n) hereto contains a list of all
registrations, filings, applications, notices, consents,
approvals, orders, qualifications and waivers required to be
made, filed, given or obtained by the Company or any of its
Subsidiaries with, to or from any Persons or Governmental
Authorities in connection with the consummation of the
transactions contemplated by this Agreement, except for those
(i) that become applicable solely as a result of the specific
regulatory status of Parent or its Affiliates, (ii) relating
to the notification requirements of the HSR Act or the Canada
Competition Act or (iii) where the failure to make, file, give
or obtain such registration, filing, application, notice,
consent, approval, order, qualification or waiver has not had
and would not reasonably be expected to have, individually or
in the aggregate, a Material Adverse Effect.
(o) Environmental Matters. Neither the Company nor any of its
Subsidiaries has assumed or is deemed to have assumed any environmental
liabilities from any other Persons by operation of Law. For purposes of
this Section 5.1(o), "Knowledge" shall be deemed to include the actual
knowledge of Xxxxxxx Xxxxxx. Except as has not had and would not
reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect:
(i) Compliance with Environmental Laws. The Company
and its Subsidiaries and all uses and conditions of the Real
Property (in each case since such Real Property was acquired
or leased, as the case may be, by the Company or its
Subsidiary) have been and are in compliance with all
applicable Environmental Laws, and neither the Company nor any
of its Subsidiaries has received since January 1, 2000 any
written notice of violation or other written communication or
has Knowledge of any facts or circumstances concerning any
alleged violation or liability arising under any Environmental
Law with respect to the Real Property or the business thereof
or any use or condition thereof. Any real property formerly
owned or leased by the Company or its Subsidiaries or
otherwise related to the business thereof was in compliance
with all applicable Environmental Laws during the Company's or
its Subsidiaries' period of ownership or operation and neither
the Company nor any of its Subsidiaries has received since
January 1, 2000 any written notice of violation or other
written communication or have Knowledge of any facts or
circumstances concerning any alleged violation or liability
arising
20
under any Environmental Law with respect to such formerly
owned or operated real property or any use or condition
thereof.
(ii) Handling of Hazardous Substances. Neither the
Company nor any of its Subsidiaries nor, to the Company's
Knowledge, any former owner, tenant, occupant or user of the
Real Property has used, handled, generated, produced,
manufactured, treated, stored or transported any Hazardous
Substance on, under, about, to or from the Real Property or
any real property formerly owned or operated by the Company or
any of its Subsidiaries in violation of or in a manner that
would reasonably be expected to form the basis of liability by
the Company or any of its Subsidiaries under any Environmental
Law.
(iii) No Release of Hazardous Substances. There is no
Release or threatened Release of any Hazardous Substance
existing on, beneath or from the surface, subsurface or ground
water of the Real Property or to the Company's Knowledge, any
real property formerly owned, leased or operated for offsite
disposal by the Company or any of its Subsidiaries, nor, to
the Company's Knowledge, is there or has there been any
Release or threatened Release of Hazardous Substances directly
adjacent to, from or in the vicinity of the Real Property
currently occurring or occurring at any time in the past.
(iv) Environmental Permits. The Real Property and the
operations of the Company and its Subsidiaries are in
compliance with all terms and conditions of all Environmental
Permits required by or issued pursuant to any Environmental
Law and neither the Company nor any of its Subsidiaries has
received since January 1, 2000 any written notice or other
written communication or have Knowledge of any facts or
circumstances concerning any alleged violation of any such
Environmental Permits.
(v) No Tanks, Asbestos or PCB's. There are no
aboveground or underground storage tanks currently or, to the
Company's Knowledge, formerly located on the Real Property
used or formerly used for the purpose of storing any Hazardous
Substance. There is no PCB-containing equipment or
PCB-containing material, in each case, as defined by
applicable Environmental Law, or any friable asbestos
containing material on the Real Property.
(vi) Lists and Liens. The Real Property and any real
property formerly owned, operated, leased, or used by the
Company or its Subsidiaries is not listed on any or nominated
for listing on the National Priority List promulgated by the
United States Environmental Protection Agency or any analogous
state remedial priority list.
21
(vii) Documents. The Company and each of its
Subsidiaries has provided Parent access to any and all
material documents, correspondence, pleadings, reports,
assessments, analytical results, Permits or other records
concerning Environmental Laws or Hazardous Substances.
(p) Taxes.
(i) The term "Tax" means any net income, capital
gains, gross income, gross receipts, sales, use, transfer, ad
valorem, franchise, profits, license, capital, withholding,
payroll, employment, excise, goods and services, severance,
stamp, occupation, premium, property, windfall profits or
other tax or customs duties, or any interest, any penalties,
additions to tax or additional amounts incurred or accrued
under applicable tax law or properly assessed or charged by
any taxing authority (domestic or foreign). For purposes of
the definition of Tax, any interest, penalties, additions to
tax or additional amounts that relate to taxes for any period,
or a portion of any period, ended on or before the Closing
Date shall include any interest, penalties, additions to tax,
or additional amounts relating to taxes for such periods,
regardless of whether such items are incurred, accrued,
assessed or similarly charged on, before or after the Closing
Date.
(ii) For purposes of this Section 5.1(p), the
"Company" shall be deemed to include any Subsidiary of the
Company, or any predecessor of the Company. The Company has no
liability for Taxes as a result of transferee liability, joint
and several liability, or contract.
(iii) The Company has timely filed materially
(measuring "materially" based on the consolidated tax
liability of the Company and its Subsidiaries taken as a
whole) true, correct and complete tax returns, reports and
estimates all prepared in accordance with applicable Laws in
all material respects (measuring "material" based on the
consolidated tax liability of the Company and its Subsidiaries
taken as a whole), for all years and periods (and portions
thereof) and for all jurisdictions (whether federal, state,
local or foreign) in which any such returns, reports or
estimates were due (such consolidated tax liability being
determined, in each case, without regard to the Tax Deductions
(as defined below)). All Taxes (determined without regard to
tax deductions attributable to Option Payments, Warrant
Payments, the Kitchen Craft Cash Bonus Amount and payments
made on or about the Closing Date under the Company's Deferred
Compensation Plan Effective June 13, 1997 (collectively, the
"Tax Deductions")), as due and payable in respect of such
returns, reports and estimates have been paid, and there is no
current liability for any Taxes (determined without regard to
the Tax Deductions) due in connection with any such returns.
All Taxes (determined without regard to the Tax Deductions)
not yet due and payable have been fully accrued on the books
of the Company in accordance with GAAP and adequate
22
reserves (determined without regard to the Tax Deductions)
have been established therefor. There are no unpaid
assessments for additional Taxes for any period. All charges,
accruals, and reserves for Taxes provided for on the 2001
Financial Statements are adequate and determined without
regard to the Tax Deductions. Copies of all federal, state and
foreign tax returns filed by the Company for the past five
years have been provided or made available to the Parent.
(iv) The Company has never been a member of any
consolidated, combined or unitary group for federal, state,
local or foreign Tax purposes other than the group of which
the Company is currently the parent corporation.
(v) The Company is not a party of any joint venture,
partnership or other arrangement that is treated as a
partnership for federal income Tax purposes.
(vi) The Company has (i) withheld all required
amounts from its employees, agents, contractors and
nonresidents and remitted such amounts to the proper agencies;
(ii) paid all employer contributions and premiums; and (iii)
filed all federal, state, local and foreign returns and
reports with respect to employee income Tax withholding,
social security unemployment Taxes and premiums, all in
compliance with the withholding Tax provisions of the Code as
in effect for the applicable year and other applicable
federal, state, local or foreign laws.
(vii) The federal income tax returns of the Company
have been examined by the IRS, or have been closed by the
applicable statute of limitations, for all periods through
December 31, 1997; the state tax returns of the Company have
been examined by the relevant agencies or such returns have
been closed by the applicable statute of limitations for all
periods through December 31, 1997; no deficiencies or
reassessments for any Taxes have been proposed, asserted or
assessed against the Company by federal, state, local or
foreign taxing authority.
(viii) The Company has not executed or filed with any
taxing authority (whether federal, state, local or foreign)
any agreement or other document extending or having the effect
of extending the period for assessment, reassessment or
collection of any Taxes, and no power of attorney granted by
the Company with respect to any Taxes is currently in force.
(ix) The Company has not received written notice of
any federal, state, local or foreign Tax audits or other
administrative proceedings or court proceedings with regard to
any Taxes or tax returns of the Company and no issues have
been asserted in writing against the Company in connection
with any existing audits of the Company.
23
(x) The Company has not entered into any agreement
with any taxing authority relating to Taxes, such as a closing
agreement, which affects any taxable year ending after the
Closing Date.
(xi) The Company has not agreed to and it is not
required to make any adjustment by reason of a change in
accounting methods that affects any taxable year ending after
the Closing Date. Neither the IRS nor any other agency has
proposed any such adjustment or change in accounting methods
that affects any taxable year ending after the Closing Date.
The Company has no application pending with any taxing
authority requesting permission for any changes in accounting
methods that relate to its business or operations and that
affects any taxable year ending after the Closing Date.
(xii) The Company is not and never has been a party
to any tax sharing agreement or similar arrangement for the
sharing of Tax liabilities or benefits.
(xiii) The Company has not consented to the
application of Code section 341(f).
(xiv) There is no contract, agreement, plan or
arrangement covering any employee or former employee of the
Company that, individually or collectively, could give rise to
the payment by the Company of any amount that would not be
deductible by reason of Code section 280G.
(xv) No asset of the Company is tax-exempt use
property under Code section 168(h).
(xvi) No portion of the cost of any asset of the
Company has been financed directly or indirectly from the
proceeds of any tax-exempt state or local government
obligation described in Code section 103(a).
(xvii) In the past five years, the Company has not
been a party to a transaction that is reported to qualify as a
reorganization within the meaning of Code section 368,
distributed a corporation in a transaction that is reported to
qualify under Code section 355, or been distributed in a
transaction that is reported to qualify under Code section
355.
(q) Real Estate. Schedule 5.1(q)(i) lists the location of each
parcel of Owned Real Property. The Owned Real Property and the Leased
Real Property comprise all the real property (or interests therein)
used in the operation of the business of the Company and its
Subsidiaries. Except as has not had and would not reasonably be
expected to have, individually or in the aggregate, a Material Adverse
Effect:
24
(i) The Company and each of its Subsidiaries has good
and marketable title to the Owned Real Property, subject only
to Permitted Liens.
(ii) Except as otherwise provided herein, Schedule
5.1(q)(ii) sets forth a true and complete list of all leases,
subleases and licenses and other occupancy agreements under
which the Company or any of its Subsidiaries is either a
tenant or subtenant (collectively, the "Leases") relating to
the Real Property.
(iii) Except as described in Schedule 5.1(q)(iii),
neither the Company nor any Subsidiary thereof has since
January 1, 2001 received notice of a violation of any Law
(including, without limitation, any building, planning or
zoning law) relating to any of the Real Property. Neither the
Company nor any Subsidiary thereof has received (since January
1, 2001) written notice that there are any contractual or
legal restrictions that preclude or restrict the ability to
use the Real Property for the purposes for which it is
currently being used.
(iv) Neither the Company nor any Subsidiary thereof
has received (since January 1, 2001) written notice of any
condemnation proceedings or eminent domain proceedings of any
kind pending or threatened against the Real Property.
(v) Neither the Company nor any Subsidiary thereof
has received (since January 1, 2001) any written notice of any
fence dispute, boundary dispute, boundary line question,
encroachment, setback line violation, water dispute, or
drainage dispute concerning or affecting the Real Property.
(vi) The buildings, fixtures, leasehold improvements
and other improvements used by the Company or any Subsidiary
thereof have not experienced any significant interruption in
the delivery of adequate quantities of any utilities
(including, without limitation, electricity, natural gas,
potable water, water for cooling or similar purposes and fuel
oil, but excluding any electricity interruption due to storm
damage) or other public services, including, without
limitation, sanitary and industrial sewer services, required
by the Company or any Subsidiary thereof in the operation of
the business of the Company and its Subsidiaries.
(r) Brokers, Finders, Etc. Neither the Company nor any of its
Subsidiaries has employed, or is subject to any valid claim of, any
broker, finder, consultant or other intermediary in connection with the
transactions contemplated by this Agreement who might be entitled to a
fee or commission in connection with such transactions.
25
(s) Receivables; Inventories.
(i) The Receivables reflected on the 2001 Balance
Sheet arose in the Ordinary Course of Business and, except as
reserved against on the 2001 Balance Sheet, constituted only
valid, undisputed claims of the Company or a Subsidiary
thereof that as of December 29, 2001 were not subject to
claims of set-off or other defenses or counterclaims other
than normal cash discounts accrued in the Ordinary Course of
Business.
(ii) Except as reserved for in the 2001 Balance
Sheet, the Inventories reflected on the 2001 Balance Sheet did
not consist of items that were obsolete or damaged or any
items held on consignment. Neither the Company nor any of its
Subsidiaries is under any obligation or liability with respect
to accepting returns of items of Inventory or merchandise in
the possession of its customers other than in the Ordinary
Course of Business. Schedule 5.1(s) contains a complete list
of the addresses of all warehouses and other facilities in
which the Inventories are located. Except as reserved for in
the 2001 Balance Sheet, the Inventories reflected on the 2001
Balance Sheet were in good condition, were suitable and usable
for the purposes for which they were intended and were in a
condition such that they could be sold or used in the Ordinary
Course of Business.
(t) Employee Benefits.
(i) Each Employee Benefit Plan (and each related
trust, insurance contract, or fund) is identified on Schedule
5.1(t) and complies in form and in operation with the
applicable requirements of ERISA, the Code, and other
applicable laws, rules and regulations, except where such
non-compliance has not had and would not reasonably be
expected to have, individually or in the aggregate, a Material
Adverse Effect.
(ii) All required reports and descriptions (including
Form 5500 Annual Reports, Summary Annual Reports, PBGC 1s, and
Summary Plan Descriptions) have been filed or distributed
appropriately with respect to each Employee Benefit Plan and
the requirements of Part 6 of Subtitle B of Title I of ERISA
and of Code ss. 4980B have been met with respect to each
Employee Benefit Plan that is subject to them, except where
such non-compliance has not had and would not reasonably be
expected to have, individually or in the aggregate, a Material
Adverse Effect.
(iii) All contributions (including all employer
contributions and employee salary reduction contributions or
other contributions) which are due have been paid to each
Employee Benefit Plan, and all contributions for any period
ending on or before the Effective Time which are not yet due
have been paid to each Employee Pension Benefit Plan or
accrued in accordance with the past custom and practice of the
Controlled Group,
26
except where such non-compliance or non-accrual has not had
and would not reasonably be expected to have, individually or
in the aggregate, a Material Adverse Effect. All required
premiums or other payments for all periods ending on or before
the Effective Time which are due have been paid with respect
to each Employee Benefit Plan, except where such
non-compliance or non-accrual has not had and would not
reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect.
(iv) Each Employee Benefit Plan that is an Employee
Pension Benefit Plan and is intended to be "qualified" under
Code ss. 401(a) has received a current favorable determination
letter from the Internal Revenue Service (or has been timely
submitted to the Internal Revenue Service for a current
favorable determination letter), and the Company has no
Knowledge of any fact, situation, circumstance, condition or
occurrence that would reasonably be expected to result in the
disqualification of such plan if not corrected or otherwise
addressed in accordance with Revenue Procedure 2001-17.
(v) No Employee Pension Benefit Plan is subject to
Section 302 or Title IV of ERISA or Section 412 of the Code.
No Employee Benefit Plan is a Multiemployer Plan.
(vi) The Company has delivered to Parent correct and
complete copies of the plan documents and summary plan
descriptions, summaries of material modification that have not
yet been incorporated into the summary plan descriptions,
award agreements, summaries of outstanding awards, the most
recent determination letter received from the Internal Revenue
Service, the three most recent Form 5500 Annual Reports
(including all attached schedules), the most recent plan
financial statements, a report of current premium costs, with
the employer- and employee-paid portions identified, and all
related trust agreements, insurance contracts, and other
funding agreements which implement each such Employee Benefit
Plan, together with any material correspondence from any
Governmental Authority regarding the Employee Benefit Plan.
(vii) There have been no Prohibited Transactions with
respect to any Employee Benefit Plan, which have had or would
reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect.
(viii) No Employee Welfare Benefit Plan provides (or
has in the past provided) for benefits in the nature of health
insurance for periods following termination of employment
(other than in accordance with Code ss. 4980B or health care
continuation provisions of applicable Law). Except as and to
the extent indicated on Schedules 5.1(p) and 5.1(t), the
transactions contemplated by this Agreement will not entitle
any employee
27
of the Controlled Group to any type of payment under any
Employee Benefit Plan, or to any payment that would be an
"excess parachute payment" under Code ss. 280G.
(u) Affiliate Transactions. Except as set forth on Schedule
5.1(u), neither any director, Senior Executive, 1% or greater
stockholder of the Company or its Subsidiaries, nor, to the Knowledge
of the Company, any spouse, child or other relative of any of such
persons, owns, or has any material interest, directly or indirectly, in
any of the Real Property or other material assets owned by or leased to
the Company or its Subsidiaries.
(v) Subsidiaries. Schedule 5.1(v) contains a list of all
Subsidiaries of the Company, and sets forth the legal form and
jurisdiction of incorporation of each such Subsidiary and the amount
(stated as a percentage of outstanding equity interests) of the equity
interest owned, directly or indirectly, by the Company. All of the
outstanding shares of capital stock or other equity interests of each
of the Subsidiaries of the Company have been duly authorized and
validly issued and are fully paid and non-assessable, are not subject
to any preemptive rights and are owned by the Company, directly or
indirectly, free and clear of all Liens (other than Permitted Liens).
There are no outstanding options, conversion rights, phantom stock
plans, warrants or other rights in existence to acquire from any of the
Subsidiaries any of such Subsidiaries' capital stock or other equity
interests. Other than the Subsidiaries identified on Schedule 5.1(v),
the Company does not own any equity interest, directly or indirectly,
in any other Person.
(w) Disclosure. To the Knowledge of the Company, none of the
representations or warranties contained in this Section 5.1 (including
the Disclosure Schedules referred to herein), taken as a whole, is
false or misleading in any material respect or omits to state a fact
herein or therein necessary to make the statements herein or therein
not misleading in any material respect.
5.2 Representations and Warranties of Parent and Merger Sub. Parent and
Merger Sub hereby represent and warrant to the Company that except as set forth
in the Parent disclosure schedules attached hereto (the "Parent Disclosure
Schedules"), the statements contained in Section 5.2 are true and correct as of
the date hereof, except for representations and warranties that speak as of a
specific earlier date other than the date hereof, which are true and correct as
of such other date.
(a) Incorporation; Authorization; Etc. Each of Parent and
Merger Sub is a corporation duly organized, validly existing and in
good standing under the laws of Delaware. Each of Parent and Merger Sub
has full corporate power to execute and deliver this Agreement, to
perform its respective obligations hereunder and to consummate the
transactions contemplated hereby. The execution and delivery of this
Agreement, the performance of Parent's and Merger Sub's obligations
hereunder and the consummation of the transactions contemplated hereby
have been duly and validly authorized by all necessary corporate or
other proceedings on the part of Parent and Merger Sub, their
28
respective Boards of Directors and their respective stockholders or
members and no other corporate proceedings on the part of Parent or
Merger Sub are necessary to authorize this Agreement or for Parent or
Merger Sub to consummate the transactions contemplated hereby. The
execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby will not (i)
violate any provision of the charter or by-laws or similar
organizational instrument of Parent, Merger Sub or any of their
respective Subsidiaries, (ii) violate any provision of, or be an event
that is (or with the passage of time will result in) a violation of, or
result in the acceleration of or entitle any party to accelerate
(whether after the giving of notice or lapse of time or both) any
obligation under, or result in the imposition of any Lien upon any of
Parent's, Merger Sub's or any of their respective Subsidiaries' assets
or properties pursuant to, any Lien, lease, agreement, instrument,
order, arbitration award, judgment or decree to which Parent, Merger
Sub or any of their respective Affiliates is a party or by which
Parent, Merger Sub or any of their respective Affiliates is bound,
(iii) violate or conflict with any other material restriction of any
kind or character to which Parent, Merger Sub or any of their
respective Affiliates is subject, that, in the case of clauses (ii) and
(iii), would reasonably be expected to have, individually or in the
aggregate, a Parent Material Adverse Effect or a material adverse
effect on any of the Fully-Diluted Stockholders, or (iv) assuming the
consents, approvals, authorizations or permits and filings or
notifications referred to in Section 5.2(c) are duly and timely
obtained or made and the approval of the Merger by the stockholders of
the Company in accordance with the DGCL has been obtained, violate any
order, writ, injunction, decree, statute, rule or regulation applicable
to Parent or Merger Sub or to any of their respective assets, except
for violations which would not reasonably be expected to have,
individually or in the aggregate, a Parent Material Adverse Effect or a
material adverse effect on any of the Fully-Diluted Stockholders. This
Agreement has been duly executed and delivered by Parent and Merger
Sub, and, assuming the due execution hereof by the Company, this
Agreement constitutes the legal, valid and binding obligation of Parent
and Merger Sub, enforceable against Parent and Merger Sub in accordance
with its terms, subject to the effect of bankruptcy, insolvency,
reorganization, liquidation, dissolution, moratorium or other similar
laws relating to or affecting the rights of creditors generally and to
the effect of the application of general principles of equity
(regardless of whether considered in proceedings at law or in equity).
(b) Brokers, Finders, Etc. Neither Parent nor Merger Sub has
employed, nor is Parent or Merger Sub subject to the valid claim of,
any broker, finder, consultant or other intermediary in connection with
the transactions contemplated by this Agreement who might be entitled
to a fee or commission from the Company or any of its Affiliates in
connection with such transactions.
(c) Approvals, Other Authorizations, Consents, Reports, Etc.
The execution, delivery and performance by Parent and Merger Sub of
this Agreement do not require any consent, approval, authorization or
other order of, action by, filing with, or notification to, any Person
or Governmental Authority, except for
29
any required filings under the HSR Act or the Canada Competition Act
and except as set forth on Schedule 5.2(c).
(d) Litigation. There is no legal proceeding pending or, to
the knowledge of Parent or Merger Sub, threatened against the Parent or
Merger Sub, other than those which would not reasonably be expected to
have a material adverse effect on any of the Fully-Diluted
Stockholders.
(e) Financing. The Parent has cash in an aggregate amount
sufficient to pay the amounts required to be paid by it, the Surviving
Corporation or Merger Sub pursuant to this Agreement and all
contemplated fees and expenses related to the transactions contemplated
by this Agreement to be paid by Parent, Merger Sub or the Surviving
Corporation; and Parent will use or make such cash available to Merger
Sub and the Surviving Corporation to allow them to fulfill all such
obligations.
(f) Disclosure. To the knowledge of Parent, none of the
representations or warranties contained in this Section 5.2 (including
the Parent Disclosure Schedules referred to herein), taken as a whole,
is false or misleading in any material respect or omits to state a fact
herein or therein necessary to make the statements herein or therein
not misleading in any material respect.
ARTICLE VI
COVENANTS; DELIVERIES; CONDITIONS
6.1 Covenants.
(a) Prior to the Effective Time, the Company shall deliver the
Net Indebtedness Certificate and Schedule 4.1(d).
(b) At the Effective Time, Parent shall cause Kitchen Craft of
Canada, Ltd. to pay the Kitchen Craft Cash Bonus Amount (subject to any
applicable withholding taxes and such amounts thereof as are to be paid
at the time of the distribution of the Indemnity Escrow in accordance
with the terms of such cash bonus awards) in accordance with the terms
and conditions of the Kitchen Craft Cash Bonus Award Agreements, each
substantially in the form attached hereto as Exhibit C-1. An estimate
of the Kitchen Craft Cash Bonus Amount is set forth on Schedule 6.1
hereto. Immediately prior to the Effective Time, the Company will amend
Schedule 6.1 hereto to provide the actual Kitchen Craft Cash Bonus
Amount (including the recipients thereof, the amounts to be paid at
Closing and the amounts to be paid at the time of the distribution of
the Indemnity Escrow), which actual amounts will not, in the aggregate,
exceed the aggregate amount set forth on Schedule 6.1 on the date
hereof.
(c) The Company covenants and agrees that during the period
from the date of this Agreement to the Effective Time (unless the
Parties shall otherwise agree in writing and except as otherwise
contemplated by this Agreement) it will,
30
and will cause each of its Subsidiaries to, in all material respects
(i) conduct its operations in the Ordinary Course of Business, with no
less diligence and effort than would be applied in the absence of this
Agreement, (ii) use commercially reasonable efforts to keep available
the service of its current officers and employees and preserve its
relationships with customers, suppliers and others having business
dealings with it, and (iii) timely file all Tax returns in accordance
with past practices and proceedings; provided, however, that none of
the following shall in themselves (either alone or in combination)
constitute a failure to comply with the foregoing provisions of this
Section 6.1(c), and none of the following shall be taken into account
in determining whether the Company has failed to comply with the
foregoing provisions of this Section 6.1(c): (A) any change, effect or
circumstance that arises by reason of a deterioration in the financial
markets, the economy or the industries in which the Company and its
Subsidiaries operate (whether in the United States, Canada or any
foreign country in which they operate), (B) any change, effect or
circumstance that is attributable to the disclosure of the fact that
Parent is the prospective acquiror of the Company or the announcement
or pendency of the transactions contemplated hereby; (C) any change,
effect or circumstance that directly arises out of action taken by
Parent or any of its Affiliates; (D) any change, effect or circumstance
arising from any change in accounting requirements or principles or any
change in applicable Laws; (E) any change, effect or circumstance
arising from compliance with the terms of, or the taking of any action
required by, this Agreement or (F) any change, effect or circumstance
attributable to any acts of war involving the United States or,
hostilities or terrorist activity involving the United States,
including without limitation any continuation or material worsening of
hostilities involving the combat of terrorism or other national
security issues involving the United States.
(d) (i) The Company shall immediately cease and terminate any
existing solicitation, initiation, encouragement, activity,
discussion or negotiation with any Persons conducted
heretofore by the Company, its Subsidiaries or any of their
respective representatives with respect to any proposed,
potential or contemplated Acquisition Proposal.
(ii) From and after the date hereof, without the
prior written consent of Parent, the Company will not
authorize or permit any of its Subsidiaries to, and shall use
its reasonable best efforts to cause all of its and their
respective officers, directors, employees, financial advisors,
agents or representatives (each a "Representative") not to,
directly or indirectly, solicit, initiate or encourage
(including by way of furnishing information) or take any other
action to facilitate any inquiries or the making of any
proposal which constitutes or may reasonably be expected to
lead to an Acquisition Proposal from any Person, or engage in
any discussion or negotiations relating thereto or accept any
Acquisition Proposal. The Company will as promptly as
practicable communicate to Parent any inquiry received by it
relating to any actual or potential
31
Acquisition Proposal and the material terms of any such
inquiry or proposal, including the identity of the Person
making the same. The Company shall as promptly as practicable
inform Parent of any developments with respect to the
foregoing.
(iii) The Company agrees not to release any Person
from, or waive any provision of, any standstill agreement to
which it is a party or any confidentiality agreement between
it and another Person who has made, or who may reasonably be
considered likely to make, an Acquisition Proposal or who the
Company or any of its Representatives have had discussions
with regarding a proposed, potential or contemplated Company
Acquisition Transaction.
(iv) For purposes of this Agreement:
(x) "Acquisition Proposal" shall mean, with
respect to the Company, any inquiry, proposal or
offer from any Person relating to any (A) direct or
indirect acquisition or purchase of a business of the
Company or any of its Subsidiaries, that constitutes
15% or more of the consolidated net revenues, net
income or assets of the Company and its Subsidiaries,
(B) direct or indirect acquisition or purchase of 15%
or more of any class of equity securities of the
Company or any of its Subsidiaries whose business
constitutes 15% or more of the consolidated net
revenues, net income or assets of the Company and its
Subsidiaries, (C) tender offer or exchange offer that
if consummated would result in any Person
beneficially owning 15% or more of the capital stock
of the Company, or (D) merger, consolidation,
business combination, recapitalization, liquidation,
dissolution or similar transaction involving the
Company or any of its Subsidiaries whose business
constitutes 15% or more of the consolidated net
revenues, net income or assets of the Company and its
Subsidiaries.
(y) Each of the transactions referred to in
clauses (A) through (D) of the definition of
Acquisition Proposal, other than any such transaction
to which Parent or any of its Subsidiaries is a
party, is referred to herein as a "Company
Acquisition Transaction."
(e) Upon public announcement of the transactions contemplated
under this Agreement by the Company and Parent, the Company will
prepare and mail an information statement substantially in the form
previously furnished to Parent containing the notices and other
information required by Section 228(d) and 262(d)(2) of the DGCL, as
applicable (as supplemented or amended from time to time, the
"Information Statement"). In addition, the Company will deliver to its
stockholders a disclosure statement satisfying the Company's disclosure
32
obligations under Code section 280G substantially in the form
previously furnished to Parent and will solicit the consent of its
shareholders to the transactions disclosed therein (the "280G
Consent"). The Company shall allow Parent to review the Information
Statement and the 280G Consent and any amendments or supplements
thereto prior to their distribution to the Company's stockholders. To
the extent it becomes necessary, the Company shall properly convene a
meeting of its stockholders and seek to obtain the requisite
stockholder approval for this Agreement and the Merger at such meeting.
(f) The Parties agree that they will consult with each other
concerning any proposed press release or public announcement pertaining
to this Agreement or the Merger in order to agree upon the text of any
such press release or the making of such public announcement, which
agreement shall not be unreasonably withheld, except as may be required
by applicable Law or by obligations pursuant to any listing agreement
with a national securities exchange, national automated quotation
system or other agreement, in which case the Party proposing to issue
such press release or make such public announcement shall use its
reasonable best efforts to consult in good faith with Parent or the
Company, as applicable, before issuing any such press release or making
any such public announcement.
6.2 Documents to be Delivered Upon Signing. On the date hereof, the
applicable Party shall cause the following to be delivered:
(a) the Company shall cause the Principal Stockholder to
deliver an executed copy of the Voting Agreement and the Written
Consent.
(b) Parent shall deliver an executed copy of the Voting
Agreement.
(c) the Company shall deliver evidence that the Management
Agreement between BCC Industrial Services, Inc., the Company and Omega
Cabinets, Ltd. will terminate as of the Effective Time and no amounts
shall be due thereunder.
(d) the Company shall deliver evidence that the Principal
Stockholder is concurrently exercising its "drag-along" rights pursuant
to the Stockholders Agreement.
(e) Parent shall deliver copies of the severance and
non-competition agreements offered to Xxxx Xxxxxx, Xxxx Xxxxxx, Xxxxx
Xxxxx and Xxxx Xxxxxx.
6.3 Conditions to Each Party's Obligations. The respective obligations
of each Party to consummate the Merger are subject to the satisfaction or waiver
by each of the Parties of the following conditions:
(a) Except in connection with the Canada Competition Act
(other than any injunction issued pursuant thereto), no judgment,
order, decree, statute, law, ordinance, rule or regulation, entered,
enacted, promulgated, enforced or issued by any court or other
Governmental Authority of competent jurisdiction shall be
33
in effect which (A) has the effect of making the consummation of the
Merger or the other transactions contemplated hereby illegal, or (B)
materially restricts, prevents or prohibits consummation of the Merger
or any of the other transactions contemplated hereby (collectively,
"Restraints"); and there shall not be pending any suit, action or
proceeding by any Governmental Authority which would reasonably be
expected to have any of the foregoing effects; provided, however, that
the Party asserting that the condition has not been satisfied shall
have used its commercially reasonable best efforts to prevent the entry
of such Restraint and to appeal as promptly as possible any such
Restraint that may be entered; and
(b) the waiting period(s) under the HSR Act shall have
expired.
6.4 Additional Conditions to the Obligations of Parent and Merger Sub.
The obligations of Parent and Merger Sub to consummate the Merger are subject to
the satisfaction or waiver by Parent of the following conditions:
(a) the requisite stockholder approval of this Agreement and
the Merger shall remain in full force and effect;
(b) Each of the Company and the Holders Representative shall
have executed and delivered the Indemnity Escrow Agreement;
(c) the Company shall have acquired all of the Canadian
Exchangeable Shares in exchange for an equal number of Company Common
Shares;
(d) the Company shall have delivered to Parent an executed
Cash Bonus Award Agreement, substantially in the form attached hereto
as Exhibit C-2, from each person identified on Schedule 6.4(e);
(e) the Company shall have delivered to Parent (i) an executed
Option Cancellation Agreement, substantially in the form attached
hereto as Exhibit C-2, from each person identified on Schedule 6.4(f),
and (ii) the updated Schedule 6.1 as contemplated by Section 6.1(b);
(f) the Company shall have delivered to Parent the Net
Indebtedness Certificate and Schedule 4.1(d);
(g) the Company shall have caused to be delivered to Parent an
opinion of Ropes & Xxxx, counsel to the Company, as to the matters set
forth on Exhibit E-2; and
(h) The Company shall deliver to Parent a certificate meeting
the requirements of Section 1.1445-2(c)(3) of the Code.
6.5 Additional Conditions to the Obligations of the Company. The
obligations of the Company to consummate the Merger are subject to the
satisfaction or waiver by the Company of the following conditions:
34
(a) Each of Parent, Merger Sub and the Escrow and Paying Agent
shall have executed and delivered the Indemnity Escrow Agreement;
(b) Parent shall have caused the Surviving Corporation to
execute and deliver the promissory note to the Escrow and Paying Agent
in accordance with the terms of the Indemnity Escrow Agreement;
(c) Parent shall have caused the letter of credit contemplated
in the Indemnity Escrow Agreement to be delivered to the Escrow and
Paying Agent in accordance with the terms thereof;
(d) Parent shall have delivered or have caused Merger Sub to
deliver cash in an amount equal to the Merger Price, Option Payments
and the Warrant Payments (a portion of which shall be deemed the
Reimbursement Fund) to the Escrow and Paying Agent as provided for in
Sections 4.2, 4.3 and 4.4 of this Agreement; and
(e) Parent shall have caused to be delivered to the Company
and the Holders Representative (on behalf of the Fully-Diluted
Stockholders) an opinion of Winston & Xxxxxx, counsel to Parent, as to
the matters set forth on Exhibit E-1.
ARTICLE VII
SURVIVAL; INDEMNIFICATION
7.1 Survival Periods. The respective representations and warranties of
the Parties set forth in this Agreement shall survive the Effective Time and
will remain in full force and effect for the 545 day period following the
Effective Time. The covenants set forth in Articles I, II, III, IV, VII, VIII,
and IX and Section 6.1 shall survive in accordance with their terms. Neither the
period of survival nor any liability of the Fully-Diluted Stockholders pursuant
to the Indemnity Escrow Agreement with respect to the Company's covenants,
representations and warranties shall be reduced by any due diligence or other
investigation made by Parent or Merger Sub at any time or by the disclosure of
any facts or circumstances to Parent or Merger Sub (whether prior to or after
the date of this Agreement).
7.2 Indemnification by Fully-Diluted Stockholders. From and after the
Closing Date, the Fully-Diluted Stockholders shall, pursuant to the terms and
conditions of the Indemnity Escrow Agreement, indemnify and hold harmless
Parent, the Company and its Subsidiaries, each of their respective directors,
officers, employees and agents (other than the Fully-Diluted Stockholders), and
each of the heirs, executors, successors and assigns of any of the foregoing
(collectively, the "Parent Indemnified Parties") from and against any and all
Losses incurred by, suffered by or asserted against any of the Parent
Indemnified Parties in connection with or arising from (i) any breach by the
Company of its covenants and agreements contained herein, and (ii) any breach by
the Company of its representations and warranties contained herein; provided,
that for purposes of this clause (ii), other than with respect to the
representations and warranties
35
set forth in Sections 5.1(e)(i) and (ii), (g)(xviii), (o)(vii), (p)(iii),
(t)(vi), (u) and (w), if any such representation or warranty contained herein is
qualified (either directly or by the use of the defined term "Material Adverse
Effect") by the word "material" (or by any word formed from such word), then
such representation and warranty will in all respects be construed as if the
word "material" (and such words formed therefrom) were not included in such
representation or warranty or included in the definition of "Material Adverse
Effect"; provided, further, that (A) the Fully-Diluted Stockholders shall be
required to indemnify the Parent Indemnified Parties only to the extent that the
aggregate Losses indemnifiable pursuant to this Section 7.2 exceed $2,000,000 in
the aggregate (the "Threshold") (provided, that, subject to clauses (B) and (C)
below, once such aggregate Losses exceed the Threshold, the Fully-Diluted
Stockholders shall be liable for the payment of all such Losses from the first
dollar thereof and not merely the amounts in excess of the Threshold); (B) the
Fully-Diluted Stockholders shall not be required to indemnify the Parent
Indemnified Parties in an aggregate amount in excess of $25,000,000 (minus the
portion of the Kitchen Craft Cash Bonus Amount not paid at Closing and available
for indemnity claims in accordance with the terms of the Kitchen Craft Cash
Bonus Award Agreements); and (C) no claim for indemnification may be made after
the 545 day period following the Closing Date. The limitations described above
in Section 7.2(A), (B) and (C) shall not apply to any Losses arising from or in
connection with any breach of Sections 7.6 or 8.13. To the extent that any of
the Fully-Diluted Stockholders undertakings set forth in this Section 7.2 may be
unenforceable, each of the Fully-Diluted Stockholders shall, pursuant to the
Indemnity Escrow Agreement, contribute the maximum amount that it is permitted
under applicable law to the payment and satisfaction of all indemnifiable
liabilities incurred by the Parent Indemnified Parties; provided that in no
event shall any of the Fully-Diluted Stockholders be required to contribute more
than it would have been required to pay from the Indemnity Escrow had such
undertaking been enforceable. Following the Closing, the Fully-Diluted
Stockholders shall have no liability for breaches of this Agreement except
pursuant to this Section 7.2 and the Indemnity Escrow Agreement.
7.3 Indemnification by Parent. From and after the Closing Date, Parent
shall indemnify and hold harmless the Fully-Diluted Stockholders, each of their
respective direct and indirect partners, directors, officers, employees and
agents, and each of the heirs, executors, successors and assigns of any of the
foregoing (collectively, the "Stockholder Indemnified Parties") from and against
any and all Losses incurred by, suffered by or asserted against any of the
Stockholder Indemnified Parties in connection with or arising from (i) any
breach by Parent or Merger Sub of its covenants and agreements contained herein
or (ii) any breach by Parent or Merger Sub of its representations and warranties
contained herein; provided, that for purposes of this clause (ii), other than
with respect to the representation and warranty set forth in Section 5.2(f), if
any such representation or warranty contained herein is qualified (either
directly or by the use of the defined term "Parent Material Adverse Effect") by
the word "material" (or by any word formed from such word), then such
representation and warranty will in all respects be construed as if the word
"material" (and such words formed therefrom) were not included in such
representation or warranty or included in the definition of "Parent Material
Adverse Effect"; provided, further, that (A) Parent shall be required to
indemnify the Stockholder Indemnified Parties only to the extent that the
aggregate
36
Losses indemnifiable pursuant to this Section 7.3 exceed the Threshold
(provided, that, subject to clauses (B) and (C) below, once such aggregate
Losses exceed the Threshold, Parent shall be liable for the payment of all such
Losses from the first dollar thereof and not merely the amounts in excess of the
Threshold); (B) Parent shall not be required to indemnify the Seller Indemnified
Parties in an aggregate amount in excess of $25,000,000 and (C) no claim for
indemnification may be made after the 545 day period following the Closing Date.
The limitations described in Section 7.3 (A), (B) and (C) shall not apply to any
Losses arising from or in connection with any breach of Sections 1.2(iii),
6.1(b), 7.6 or 8.13. To the extent that Parent's undertakings set forth in this
Section 7.3 may be unenforceable, Parent shall contribute the maximum amount
that it is permitted under applicable law to the payment and satisfaction of all
indemnifiable liabilities incurred by the Stockholder Indemnified Parties.
7.4 Claims Procedures.
(a) All claims under Section 7.2 shall be made and resolved in
accordance with the procedures provided in the Indemnity Escrow
Agreement.
(b) All claims for indemnification under Section 7.3 involving
third party claims against Stockholder Indemnified Parties shall be
made and resolved as hereinafter set forth. If a claim by a third party
is made against a Stockholder Indemnified Party, and if such
Stockholder Indemnified Party intends to seek indemnity with respect
thereto under this Article VII, such Stockholder Indemnified Party
shall promptly notify the Parent of such claims. The failure to provide
such notice shall not result in a waiver of any right to
indemnification hereunder except to the extent the indemnifying party
is actually materially prejudiced by such failure. With respect to a
claim by a Stockholder Indemnified Party, Parent shall undertake,
conduct and control, through counsel of its own choosing and at its own
expense, the settlement or defense thereof, and the Stockholder
Indemnified Party shall cooperate with it in connection therewith.
Parent shall not, except with the consent of the Stockholder
Indemnified Party, not to be unreasonably withheld or delayed, enter
into any settlement or consent to entry of any judgment that (i) does
not include as an unconditional term thereof the giving by the Person
or Persons asserting such claim to such Stockholder Indemnified Party
of an unconditional release from all liability with respect to such
claim, or (ii) imposes any restriction, condition or obligation on, or
requires any undertaking or admission by such Stockholder Indemnified
Party.
7.5 Tax Treatment of Indemnification Payments. All indemnification
payments under this Article VII shall be treated as adjustments to the Merger
Consideration.
7.6 Directors' and Officers' Indemnification.
(a) From and after the Effective Time, Parent, the Surviving
Corporation and the Company shall, to the fullest extent permitted
under applicable Law, indemnify and hold harmless each present and
former director or
37
officer of the Company and of each Subsidiary of the Company and each
such person who served at the request of the Company or any Subsidiary
of the Company as a director, officer, trustee, partner, fiduciary,
employee or agent of another corporation, partnership, joint venture,
trust, pension or other employee benefit plan or enterprise
(collectively, the "Company Indemnified Parties") against all costs and
expenses (including without limitation reasonable attorneys' fees),
judgments, fines, losses, claims, damages, liabilities and settlement
amounts paid in connection with any claim, action, suit, proceeding or
investigation (whether arising before or after the Effective Time),
whether civil, administrative, criminal or investigative, arising out
of or pertaining to any action or omission in their capacities as
officers or directors, in each case occurring at or before the
Effective Time (including without limitation the transactions
contemplated by this Agreement), in each case, to the fullest extent
permitted by the DGCL or any other applicable laws or to the fullest
extent permitted under the Company's certificate of incorporation and
bylaws or any applicable contract or agreement as in effect on the date
hereof). Without limiting the foregoing, in the event of any such
claim, action, suit, proceeding or investigation, (i) the Company,
Parent or the Surviving Corporation, as the case may be, shall pay the
reasonable fees and expenses of counsel selected by any Company
Indemnified Party, which counsel shall be Ropes & Xxxx or other counsel
reasonably satisfactory to the Company, Parent or the Surviving
Corporation, as the case may be, promptly after statements therefor are
received (unless the Surviving Corporation shall elect to defend such
action) and (ii) the Company, Parent and the Surviving Corporation
shall cooperate in the defense of any such matter; provided, however,
that neither the Company, Parent nor the Surviving Corporation shall be
liable for any settlement effected without its written consent (which
consent shall not be unreasonably withheld or delayed). Notwithstanding
anything else in this Section 7.6 to the contrary, in no event shall
Parent, the Surviving Corporation or the Company be obligated to
indemnify any Company Indemnified Party for any loss incurred by a
Company Indemnified Party arising from any claim by the Principal
Stockholder or any partner, fiduciary, employee, officer or agent
thereof.
(b) For a period of at least six years after the Effective
Time, Parent shall cause the certificate of incorporation of the
Surviving Corporation to continue to include a provision substantially
similar to Articles 8 and 9 of the Certificate of Incorporation of the
Company for the benefit of all directors and officers of the Company
and each Subsidiary of the Company prior to the Effective Time. In the
event that any claim or claims for indemnification are asserted or made
within such six-year period, all rights to indemnification in respect
of any such claim or claims shall continue until the disposition of any
and all such claims.
(c) For a period of three years after the Effective Time,
Parent shall cause to be maintained in effect the current directors'
and officers' liability insurance policies maintained by the Company
(provided that Parent may substitute therefor policies reasonably
satisfactory to the Company Indemnified Parties of at least the same
coverage containing terms and conditions that, in the
38
aggregate, are no less advantageous) with respect to claims arising
from facts or events that occurred at or prior to the Effective Time;
provided, however, that in no event shall Parent be required to expend
pursuant to this Section 7.6(c) more than an amount per year equal to
150% of current annual premiums paid by the Company and its
Subsidiaries for such insurance; provided, further, however, that if
the premium for such coverage exceeds such amount, Parent or the
Surviving Corporation shall purchase a policy with the greatest
coverage available for such 150% of the amount per annum spent by the
Company and its Subsidiaries for their fiscal year ending December 29,
2001.
(d) In the event the Company or the Surviving Corporation or
any of their respective successors or assigns (i) consolidates with or
merges into any other Person and shall not be the continuing or
surviving corporation or entity in such consolidation or merger or (ii)
transfers all or substantially all of its properties and assets to any
Person, then, and in each case, proper provision shall be made so that
the successors and assigns of the Company or the Surviving Corporation,
as the case may be, honor the indemnification and other obligations set
forth in this Section 7.6.
ARTICLE VIII
MISCELLANEOUS AND GENERAL
8.1 Payment of Expenses; Representation. Each Party shall pay its own
expenses incident to preparing for, entering into and carrying out this
Agreement and the consummation of the transactions contemplated hereby;
provided, the Company shall pay the Legal and Accounting Costs of the Principal
Stockholder relating to this Agreement and the transactions contemplated hereby.
To the extent not paid by the Company prior to the Effective Time, Parent shall
pay or cause the Company to pay the Legal and Accounting Costs at the Closing.
The filing fee for the required filing under the HSR Act shall be borne 50% by
Parent and 50% by the Company. The Company hereby agrees that following the
Closing, Ropes & Xxxx may act as legal counsel to the Principal Stockholder, the
Fully-Diluted Stockholders and the Holders Representative in connection with any
dispute arising in connection with the transactions contemplated under this
Agreement and immediately following the Effective Time, Parent shall cause the
Surviving Corporation and its Subsidiaries to acknowledge such agreement in
writing.
8.2 Counterparts; Amendment.
(a) For the convenience of the Parties hereto, this Agreement
may be executed in any number of counterparts, each such counterpart
being deemed to be an original instrument, and all such counterparts
shall together constitute the same agreement.
(b) This Agreement may be amended by written agreement
executed and delivered by duly authorized officers of Parent, on the
one hand, and holders of a majority of the Company Common Shares
(determined immediately prior to the date hereof), on the other hand.
39
8.3 Governing Law. This Agreement and any related disputes shall be
governed by and construed in accordance with the laws of the State of Delaware,
without giving effect to any principles of conflicts of law thereof or other law
that would cause the application of the domestic substantive laws of any other
State or jurisdiction.
8.4 Notices. All notices, instructions, demands, consents, approvals
and other communications to be given or ordered under or by reasons of the
provisions of this Agreement will be in writing and will be deemed to have been
given one (1) Business Day after personally delivered, mailed by guaranteed
overnight courier service, or telecopied to the recipient at the address or
telecopy number below indicated (provided in the case of a telecopy that a copy
is also sent by guaranteed overnight courier service). Unless receipt thereof is
acknowledged in writing by the intended recipient thereof, telecopied notices
shall not be effective unless followed by same day notices by guaranteed
overnight courier service with proof of receipt.
(a) if to Parent or Merger Sub, to:
c/o Fortune Brands, Inc.
000 Xxxxx Xxxxxxx
Xxxxxxxxxxxx, Xxxxxxxx 00000
Tel: 000-000-0000
Fax: 000-000-0000
Attn: Xxxx X. Xxxxx
with a copy to:
Winston & Xxxxxx
00 X. Xxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Tel: 000-000-0000
Fax: 000-000-0000
Attn: Xxxx X. XxxXxxxxx
(b) if to the Company or the Holders Representative:
Xxxxxx Capital Corporation
000 X. Xxxxxxxx, Xxxxx 000
Xxx Xxxxx, Xxxxxxxxxx 00000
Tel: 000-000-0000
Fax: 000-000-0000
Attn: Xxxxxx X. Xxxxx
with a copy in each instance to:
Ropes & Xxxx
Xxx Xxxxxxxxxxxxx Xxxxx
Xxxxxx, Xxxxxxxxxxxxx, 00000
40
Tel: 000-000-0000
Fax: 000-000-0000
Attn: Xxxxxxx Xxxxxxxxx
(c) if to any stockholder of the Company other than the
Holders Representative, to the address of such stockholder as set forth
on the books of the Company with a copy to the Holders Representative.
or such other address or telecopy number or to the attention of such other
Person as the recipient party shall have specified by prior written notice to
the sending party.
8.5 Entire Agreement; Assignment. This Agreement, including the
Schedules and the Exhibits attached hereto, the Confidentiality Agreement, the
Voting Agreement and the Indemnity Escrow Agreement, constitutes the entire
agreement among the Parties with respect to the subject matter hereof and
supersedes all other agreements, understandings and communications, both written
and oral, among the Parties or any of them with respect to the subject matter
hereof. This Agreement may not be assigned by operation of law or otherwise.
8.6 Parties in Interest. This Agreement shall be binding upon and inure
to the benefit of each Party hereto and their respective successors and assigns.
Nothing in this Agreement, express or implied, is intended to or shall confer
upon any other Person any rights, benefits or remedies of any nature whatsoever
under or by reason of this Agreement; provided, however, that the following
rights and provisions shall inure to the benefit of and shall be enforceable by
the Persons specified therein: (i) the right to receive the consideration
payable in accordance with the terms hereof including, without limitation, the
Merger Price, the Option Payments and the Warrant Payments pursuant to Section
1.2 and Article IV hereof, (ii) the indemnification rights under Article VII,
(iii) the provisions of Section 7.6, 8.6 and 8.13, and (iv) the Holders
Representative shall be entitled to the benefits of, and as contemplated by
Article IX, shall be entitled to enforce the provisions of this Agreement for
the benefit of, the former stockholders of the Company and any other Person
entitled to receive any consideration payable in the Merger (including, without
limitation, the Merger Price, the Option Payments and the Warrant Payments).
8.7 Certain Definitions. As used herein the following terms shall have
the following meanings and, unless the context otherwise requires, use of the
singular form shall include the plural and any gender shall be deemed to include
both genders:
"Action" shall mean any action, suit, arbitration, inquiry,
proceeding or investigation by or before any Governmental Authority.
"Affiliate" (and, with a correlative meaning, "Affiliated")
shall mean, with respect to any Person, any other Person that directly,
or indirectly through one or more intermediaries, Controls, or is
controlled by, or is under common control with, such first Person.
41
"Business Day" means any day on which banks are not required
or authorized to close in the City of New York.
"Canada Competition Act" means the Competition Act R.S.C.
1985, c. C-34, as amended.
"Canadian Exchangeable Shares" means the 2,904.7728 Class B
Common Shares of Kitchen Craft of Canada, Ltd.
"Cash" means all cash and cash equivalents.
"Code" means the Internal Revenue Code of 1986, as amended,
and all rules and regulations issued under it, as in effect from time
to time.
"Company Intellectual Property" shall mean all Intellectual
Property owned by or licensed to the Company or its Subsidiaries.
"Company IP Agreements" shall mean all written agreements
(other than Excluded Licenses) governing (a) licenses of Intellectual
Property by the Company or its Subsidiaries to third parties, (b)
licenses of Intellectual Property by third parties to the Company or
its Subsidiaries, or (c) the rights between the Company or its
Subsidiaries and third parties relating to the development or use of
Intellectual Property.
"Company Software" shall mean all Software (a) developed,
configured or licensed by the Company or its Subsidiaries (other than
software licensed by the Company pursuant to Excluded Licenses), and
(b) material to the operation of the business of the Company or its
Subsidiaries, including all Software operated or used by the Company or
its Subsidiaries in connection with processing customer or supplier
orders, storing customer or supplier information, or storing,
processing or archiving customer or supplier data.
"Control" shall mean possession, directly or indirectly, of
power to direct or cause the direction of the management or policies of
a Person (whether through ownership of securities or partnership or
other ownership interests, by contract or otherwise). The terms or
phrases "controlled by" and "under common control with" shall have the
meanings correlative to the term "Control."
"Controlled Group" means the group of corporations,
partnerships, trades and businesses described in Sections 414(b), (c)
and (m) of the Code, of which the Company is a member before the
Closing Date.
"Employee Benefit Plan" means any of the following
arrangements that is or was maintained or contributed to by the
Company, any of its Subsidiaries or any other member of the Controlled
Group, to which the Company or another member of the Controlled Group
has an obligation to contribute or under which the Company, any of its
Subsidiaries or any other member of the Controlled Group could
reasonably be expected to have any Liability: (a) nonqualified
42
deferred compensation or retirement plan or arrangement which is an
Employee Pension Benefit Plan; (b) qualified defined contribution
retirement plan or arrangement which is an Employee Pension Benefit
Plan (including any Multiemployer Plan); (c) qualified defined benefit
retirement plan or arrangement which is an Employee Pension Benefit
Plan (including any Multiemployer Plan); (d) Employee Welfare Benefit
Plan or material fringe benefit plan or program; or (e) any other
policy, plan or program, providing bonuses, stock, stock-based
compensation, shares, share-based compensation, incentive or deferred
compensation, or severance or supplemental retirement benefits.
"Employee Pension Benefit Plan" has the meaning set forth in
ERISA ss. 3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in
ERISA ss. 3(1).
"Environmental Law(s)" means each and every Law, Governmental
Order, Environmental Permit, or similar requirement of each and every
Governmental Authority, pertaining to (i) the protection of human
health, safety, the environment, natural resources and wildlife, or
(ii) the management, manufacture, possession, presence, use,
generation, transportation, treatment, storage, disposal, release,
threatened release, abatement, removal, remediation or handling of, or
exposure to, any Hazardous Substance.
"Environmental Permit" means any permit, written approval,
registration, identification number, license or other authorization
required under any applicable Environmental Law, together with their
conditions.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, and all regulations promulgated thereunder, as in
effect from time to time.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
"Excluded Licenses" means contracts, licenses, or other
agreements currently in effect relating to any Intellectual Property
that constitutes: (i) "shrink wrap" software; or (ii) third party
software generally available to the public at a cost of less than Ten
Thousand Dollars ($10,000) per year.
"Fully-Diluted Stockholder" means, as of the Effective Time,
each holder of outstanding Company Common Shares, each holder of
Options and each holder of Warrants.
"GAAP" means United States Generally Accepted Accounting
Principles.
43
"Governmental Authority" means any United States or foreign
federal, state or local government, governmental, regulatory or
administrative authority, agency, board or commission or any court,
tribunal, or judicial or arbitral body.
"Governmental Order" means any order, writ, summons, notice,
complaint, judgment, injunction, decree, stipulation, determination or
award issued or entered by or with any Governmental Authority.
"Hazardous Substance(s)" means any substance which is defined
or regulated as a hazardous substance, hazardous material, hazardous
waste, pollutant or contaminant under any Environmental Laws and also
includes, without limitation, petroleum hydrocarbons, crude oil or any
fraction thereof.
"HSR Act" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements
Act of 1976, as amended.
"Indebtedness" means, with respect to any Person, (a) all
indebtedness of such Person, whether or not contingent, for borrowed
money, (b) all obligations for borrowed money of such Person evidenced
by notes, bonds, debentures or other similar instruments, and (c) all
obligations, contingent or otherwise, of such Person under letters of
credit or similar facilities.
"Indemnity Escrow" means the portion of the Merger
Consideration consisting of the promissory note made by the Surviving
Corporation bearing interest at a floating rate equal to the rate on
A1/P1 commercial paper and backed by a letter of credit issued by Fleet
Bank, N.A. (or other bank reasonably acceptable to the Holders
Representative) and to be held by the Escrow and Paying Agent pursuant
to the Indemnity Escrow Agreement. The interest bearing note shall have
an initial aggregate principal amount equal to $25,000,000 minus the
portion of the Kitchen Craft Cash Bonus Amount not payable at the
Effective Time in accordance with the terms of the Kitchen Craft Cash
Bonus Award Agreements.
"Indemnity Escrow Agreement" means the Indemnity Escrow
Agreement in the form attached as Exhibit D hereto.
"Intellectual Property" means any or all of the following and
all rights in, arising out of, or associated therewith, whether
registered or unregistered, as applicable: (a) patents, patent
applications and statutory invention registrations, (b) trademarks,
service marks, domain names, trade dress, logos, and other source
identifiers, including registrations and applications for registration
thereof, (c) copyrights, including registrations and applications for
registration thereof, (d) Software, and (e) confidential and
proprietary information, including trade secrets, know-how,
manufacturing processes and methods, formulae and technology in
existence or under development.
"Inventories" means all finished goods, raw materials,
packaging, supplies, spare parts and other inventory related to the
Company's business
44
maintained, held or stored by or for the Company or any Subsidiary for
use in the Company's business.
"IRS" means the Internal Revenue Service.
"Kitchen Craft Cash Bonus Amount" means the aggregate dollar
amount set forth on Schedule 6.1 as amended immediately prior to the
Effective Time in accordance with the provisions of Section 6.1(b).
"Knowledge" means, with respect to the Company and its
Subsidiaries, the actual knowledge of each of Xxxxxx X. Xxxxx, Xxxx
Xxxxxx, Xxxx Xxxxxx, Xxxx Xxxxxx, and Xxxxx Xxxxx.
"Law" means any federal, state, local or foreign statute, law,
ordinance, regulation, rule, code, order, other requirement or rule of
law.
"Leased Real Property" means the real property leased by the
Company or any Subsidiary, in each case, as tenant, together with, to
the extent leased by the Company or any Subsidiary, all buildings and
other structures, facilities or improvements currently located thereon,
all fixtures thereon and all easements, licenses, rights and
appurtenances relating to the foregoing to the extent conveyed by the
lease with respect thereto.
"Legal and Accounting Costs" means the reasonable legal and
accounting costs incurred by the Principal Stockholder and the Company
and the management fees and overhead and out-of-pocket expenses payable
to the Principal Stockholder and BCC Industrial Services, Inc., in each
case in connection with the execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby.
"Liability" or "Liabilities" means any and all Indebtedness,
liabilities and obligations, whether accrued or fixed, absolute or
contingent, matured or unmatured, known or unknown or determined or
determinable, including, without limitation, those arising under any
Law (including, without limitation, any Environmental Law), Action or
Governmental Order and those arising under any contract, agreement,
arrangement, commitment or undertaking.
"Lien" means any security interest, pledge, hypothecation,
mortgage, lien (including without limitation, environmental and tax
liens), charge, encumbrance, proxy, voting trust, adverse claim
reversion, reverter, preferential arrangement or restriction on the
use, voting, transfer, receipt of income or other exercise of any
attributes of ownership.
"Loss" or "Losses" means all damages, penalties, fees, costs,
expenses, claims, judgments, injunctions, actions, suits, interest and
dues.
45
"Management Notes" means the promissory notes issued by
management stockholders in connection with the purchase of Company
Common Shares identified on Schedule 8.7 hereto.
"Material Adverse Effect" means any circumstance, change in or
effect on the Company or any Subsidiary of the Company or their
respective businesses that: (i) is materially adverse to the business,
assets and Liabilities, results of operations or condition (financial
or otherwise) of the Company and its Subsidiaries, taken as a whole; or
(ii) prevents or materially adversely affects the ability of any Party
to consummate the Merger; provided, however, that none of the following
shall in themselves (either alone or in combination) constitute, and
none of the following shall be taken into account in determining
whether there has been or will be, a Material Adverse Effect: (A) any
change, effect or circumstance that arises by reason of a deterioration
in the financial markets, the economy or the industries in which the
Company and its Subsidiaries operate (whether in the United States,
Canada or any foreign country in which they operate), (B) any change,
effect or circumstance that is attributable to the disclosure of the
fact that Parent is the prospective acquiror of the Company or the
announcement or pendency of the transactions contemplated hereby; (C)
any change, effect or circumstance that directly arises out of action
taken by Parent or any of its Affiliates; (D) any change, effect or
circumstance arising from any change in accounting requirements or
principles or any change in applicable Laws; (E) any change, effect or
circumstance arising from compliance with the terms of, or the taking
of any action required by, this Agreement or (F) any change, effect or
circumstance attributable to any acts of war involving the United
States or, hostilities or terrorist activity involving the United
States, including without limitation any continuation or material
worsening of hostilities involving the combat of terrorism or other
national security issues involving the United States.
"Merger Consideration" means an aggregate amount equal to (a)
(i) $571,371,279.04(1), plus (ii) the aggregate principal amount of the
Management Notes plus accrued interest thereon to the Effective Time,
minus (b) (i) the Net Indebtedness of the Company shown on the Net
Indebtedness Certificate, plus (ii) the Legal and Accounting Costs not
included in the calculation of Net Indebtedness on the Net Indebtedness
Certificate.
"Merger Price" means (a) the Merger Consideration, divided by
(b) the sum of (i) the number of Company Common Shares outstanding as
of immediately prior to the Effective Time, plus (ii) the aggregate
Company Common Shares issuable upon the exercise of the Options and the
Warrants as of immediately prior to the Effective Time, plus (iii)
5,036.3752.
----------------------
(1) For informational purposes only, it is noted that $571,371,279.04 was
calculated as follows: (i) $538,000,000, plus (ii) $9,148,000.52 (aggregate
option and warrant exercise price), plus (iii) $10,504,528.52 (agreed upon
adjustment amount related to the cash bonus), plus (iv) $17,000,000 (agreed upon
aggregate value of various tax deductions), minus (v) $3,281,250 (agreed upon
after tax cost of the call premium).
46
"Net Indebtedness" means the average daily (a) consolidated
principal and accrued and unpaid interest on all Indebtedness of the
Company and its Subsidiaries, in each case, of the type indicated in
clauses (a) and (b) of the definition of Indebtedness, minus (b) cash
of the Company and its Subsidiaries, in each case for the fifteen (15)
Business Day period ending as of the close of business on the second
(2nd) Business Day preceding the Closing Date; provided, however, that
any Legal and Accounting Costs paid during the period covered by the
Net Indebtedness Certificate shall be treated as paid on the first
Business Day of such period for purposes of such calculation.
"Net Indebtedness Certificate" means a certificate executed by
the Chief Financial Officer of the Company certifying the Net
Indebtedness.
"Ordinary Course of Business" means the ordinary course of
business of the Company and its Subsidiaries consistent with past
custom and practice.
"Owned Real Property" means the real property owned by the
Company or any Subsidiary, together with all buildings and other
structures, facilities or improvements currently or hereafter located
thereon, all fixtures thereon and all easements, licenses, rights and
appurtenances relating to the foregoing.
"Parent Material Adverse Effect" means any circumstance,
change in or effect on Parent or any Subsidiary of Parent which will or
would be reasonably likely to, prevent or materially impair the ability
of any of the Parties to consummate the Merger or the other
transactions contemplated by this Agreement.
"Permitted Liens" shall mean all Liens (a) that are set forth
on Schedule 8.7 hereto, (b) that arise out of Taxes or general or
special assessments not in default and payable without penalty or
interest or the validity of which is being contested in good faith by
appropriate proceedings, (c) of carriers, warehousemen, mechanics,
materialmen, landlords and other similar persons or otherwise incurred
in the Ordinary Course of Business for sums not yet delinquent or being
contested in good faith, (d) that relate to deposits made in the
Ordinary Course of Business in connection with workers' compensation,
unemployment insurance and other types of social security, or (e) any
Lien, easement or other encumbrance that does not have an adverse
effect on the use or operation of the property in the business of the
Company and its Subsidiaries as currently conducted.
"Person" means any individual or corporation, company,
partnership, trust, incorporated or unincorporated association, joint
venture or other entity of any kind.
"Prohibited Transaction" has the meaning set forth in ERISA
ss. 406 and Code ss. 4975.
47
"Real Property" means all Owned Real Property and Leased Real
Property.
"Receivables" means any and all accounts receivable, notes and
other amounts receivable by the Company or any Subsidiary from third
parties.
"Registered Intellectual Property" means all of the following
items of Intellectual Property owned by the Company or any of its
Subsidiaries: (i) United States and foreign patents, patent
applications (including provisional applications); (ii) registered
trademarks, applications to register trademarks, intent to use
applications or other registrations related to trade identity and
trademarks; (iii) registered copyrights and applications for copyright
registration; (iv) mask work registrations and applications to register
mask works; (v) all Web addresses, sites and domain names; and (vi) any
other Intellectual Property that is the subject of an application,
certificate or registration filed with, issued by, or recorded by, any
state, government, or other public legal authority.
"Reimbursement Fund" means $250,000.
"Release" means any spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching, dumping
or disposing into the environment (including without limitation the
abandonment or discarding of barrels, containers and other receptacles
containing any Hazardous Substance).
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder.
"Senior Executive" means each of Xxxx Xxxxxx, Xxxx Xxxxxx,
Xxxxx Xxxxx and Xxxx Xxxxxx.
"Senior Subordinated Notes" means the Omega Cabinets, Ltd. 10
1/2% Senior Subordinated Notes due 2007.
"Software" shall mean computer software, programs, files and
databases in any form, including all information contained therein,
Internet web sites, content thereof, all rights associated with links
and advertisements contained therein, source code, object code,
operating systems, specifications, data, database management code, data
formats, utilities, graphical user interfaces, methods of processing,
software engines, platforms, encryption keys and other security
features, all versions, conversions, updates, patches, corrections,
enhancements and modifications thereof and all related documentation,
developer notes, comments and annotations.
"Subsidiary" means, with respect to any Person, any other
Person of which such first Person (either alone or through or together
with any other Subsidiary) owns, directly or indirectly, a majority of
the stock or other equity interests the
48
holders of which are generally entitled to vote for the election of the
Board of Directors or other governing body of such Person.
"Unregistered Intellectual Property" means all Company
Intellectual Property, other than the Registered Intellectual Property
and Company Software, that is relevant to conducting the business as
now being conducted including: (i) disclosures on inventions; (ii)
trade secrets, documented know-how, proprietary processes, and other
documented proprietary information relevant to conducting the business
of the Company; (iii) unregistered trademarks; and (iv) all
unregistered Web addresses, sites and domain names.
8.8 Obligations of Subsidiary. Whenever this Agreement requires any
Subsidiary of a Party to take any action, such requirement shall be deemed to
include an undertaking on the part of such Party to cause such Subsidiary to
take such action; provided, however, that the Company and each of its
Subsidiaries shall be deemed not to Subsidiaries of the Principal Stockholder
for any purpose.
8.9 Severability. If any term or other provision of this Agreement is
invalid, illegal or unenforceable, all other provisions of this Agreement shall
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner materially
adverse to the Company or Parent, on the one hand, and the Holders
Representative, the former directors, officers and stockholders of the Company
and any Person entitled to payment of any portion of the Merger Price, Option
Payment, Warrant Payment or Kitchen Craft Cash Bonus Amount as contemplated by
Section 1.2, Article IV or Article VI hereof, on the other hand. Upon a judicial
determination that any term or other provision is invalid, illegal or incapable
of being enforced, the Parties agree for themselves and their respective
stockholders and Affiliates that (a) the court making such determination shall
have the power (and will be requested by the Parties and the Holders
Representative) to limit the scope of the term or provision or otherwise alter
such term or provision to render it valid, legal and enforceable in a manner
that comes closest to the original term or provision as would be legal, valid
and enforceable and (b) the Holders Representative and Parent shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
Parties as closely as possible in an acceptable manner to the end that the
transactions contemplated hereby are fulfilled to the maximum extent possible.
8.10 Specific Performance. The Parties hereto acknowledge that
irreparable damage would result if this Agreement were not specifically
enforced, and they therefore consent that the rights and obligations of the
Parties under this Agreement may be enforced by a decree of specific performance
issued by a court of competent jurisdiction. Such remedy shall, however, not be
exclusive and shall be in addition to any other remedies which any Party may
have under this Agreement or otherwise.
8.11 Trial by Jury. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO TRIAL BY JURY IN CONNECTION WITH
ANY LITIGATION ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE INDEMNITY
ESCROW
49
AGREEMENT, THE VOTING AGREEMENT OR MERGER OR ANY OF THE OTHER TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY.
8.12 Headings, Definitions. The Section and Article headings contained
in this Agreement are inserted for convenience of reference only and shall not
affect the meaning or interpretation of this Agreement. All references to
Sections or Articles contained herein mean Sections or Articles of this
Agreement unless otherwise stated. All defined terms and phrases herein are
equally applicable to both the singular and plural forms of such terms.
8.13 Limitation on Remedies. Subject to the subsequent sentence, and
except as set forth in Section 8.10 or to the extent any other remedy may be
provided by applicable law and such other remedy may not, under applicable law,
be waived or otherwise limited or excluded by agreement, (i) prior to the
Closing the rights set forth in Article X, and (ii) at and after the Closing the
rights of the Parties set forth in Section 7.2 and the Indemnity Escrow
Agreement and in Section 7.3, shall in each case be the sole and exclusive
remedies of the Parties with respect to claims (whether based in contract, tort
or otherwise) resulting from or relating to this Agreement or any of the
transactions contemplated hereby, including without limitation any claim
resulting from or relating to any misrepresentation, breach of warranty or
failure to perform any covenant or agreement contained in this Agreement;
provided each Party may enforce that certain Confidentiality Agreement dated as
of January 2, 2002 by and between the Company and Parent (the "Confidentiality
Agreement"). Except (i) to the extent any other remedy may be provided by
applicable law and such other remedy may not, under applicable law, be waived or
otherwise limited or excluded by agreement, (ii) as set forth in Section 8.10,
(iii) after termination of this Agreement in accordance with Article X, for
claims of Parent pursuant to Section 10.3, and (iv) after the Closing, for
claims of the Parent Indemnified Parties pursuant to Section 7.2 and the
Indemnity Escrow Agreement, Parent will not assert, and will cause its
Subsidiaries (including without limitation after the Closing the Company and its
Subsidiaries) and Affiliates and all Parent Indemnified Parties not to assert,
any claim against any of the Fully-Diluted Stockholders or any of their
Affiliates or any of their respective direct or indirect partners, directors,
officers, employees, stockholders, attorneys, representatives or controlling
persons, or seek to hold the Fully-Diluted Stockholders or any such Persons
liable, in respect of any claim relating to the Company, any of its
Subsidiaries, this Agreement or any of the transactions contemplated hereby and
shall indemnify and hold harmless the Fully-Diluted Stockholders and such
Persons against all such claims. Notwithstanding anything in this Agreement to
the contrary, no Party hereto shall be deemed to have waived any claim,
including any claim for fraud, which cannot be waived under applicable law
(common or otherwise).
8.14 Jurisdiction. EACH OF THE PARTIES SUBMITS TO THE JURISDICTION OF
ANY STATE OR FEDERAL COURT SITTING IN THE STATE OF DELAWARE, IN ANY ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT AND AGREES THAT ALL
CLAIMS IN RESPECT OF THE ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY
SUCH COURT. EACH OF THE PARTIES WAIVES ANY
50
DEFENSE OF INCONVENIENT FORUM OR ANY OTHER OBJECTION TO THE LAYING OF VENUE OR
TO THE MAINTENANCE OF ANY ACTION OR PROCEEDING SO BROUGHT AND WAIVES ANY BOND,
SURETY, OR OTHER SECURITY THAT MIGHT BE REQUIRED OF ANY OTHER PARTY. EACH PARTY
AGREES THAT A FINAL JUDGMENT IN ANY ACTION OR PROCEEDING SO BROUGHT SHALL BE
CONCLUSIVE AND MAY BE ENFORCED BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER
PROVIDED BY LAW OR AT EQUITY.
ARTICLE IX
HOLDERS REPRESENTATIVE
9.1 Appointment. The Company hereby irrevocably makes, constitutes and
appoints Mezzanine Lending Associates III, L.P. as its and its securityholders'
agent and representative (the "Holders Representative") for all purposes under
this Agreement and the Indemnity Escrow Agreement. In the event of the death,
resignation or incapacity of the Holders Representative, the Company shall
promptly designate another Person to act as its and its securityholders' agent
and representative under this Agreement so that at all times there will be a
Holders Representative with the authority provided in this Article IX. Such
successor Holders Representative shall be designated by the Company by an
instrument in writing signed by stockholders of the Company holding a majority
of the Company Common Shares (determined immediately prior to Closing), and such
appointment shall become effective as to the successor Holders Representative
when such instrument shall have been delivered to it and a copy thereof
delivered to Parent.
9.2 Authorization. The Company hereby authorizes the Holders
Representative, on its and the Fully-Diluted Stockholders' behalf, to:
(a) Receive all notices or documents given or to be given to
any of the Fully-Diluted Stockholders by Parent pursuant hereto or to
the Indemnity Escrow Agreement or in connection herewith or therewith
and to receive and accept service of legal process in connection with
any suit or proceeding arising under this Agreement or the Indemnity
Escrow Agreement;
(b) Deliver to Parent at the Closing all certificates and
documents to be delivered to Parent by any of the Fully-Diluted
Stockholders pursuant to this Agreement, together with any other
certificates and documents executed by any of the Fully-Diluted
Stockholders and deposited with the Holders Representative for such
purpose;
(c) Engage counsel, and such accountants and other advisors
for any of the Fully-Diluted Stockholders and incur such other expenses
on behalf of any of the Fully-Diluted Stockholders in connection with
this Agreement or the Indemnity Escrow Agreement and the transactions
contemplated hereby or thereby as the Holders Representative may in its
sole discretion deem appropriate; and
51
(d) Take such action on behalf of any of the Fully-Diluted
Stockholders as the Holders Representative may in its sole discretion
deem appropriate in respect of:
(i) waiving any inaccuracies in the representations
or warranties of Parent contained in this Agreement or in any
document delivered by Parent pursuant hereto;
(ii) waiving the fulfillment of any of the conditions
precedent to the Company's obligations hereunder or pursuant
to the Indemnity Escrow Agreement;
(iii) taking such other action as the Holders
Representative or any of the Fully-Diluted Stockholders is
authorized to take under this Agreement or the Indemnity
Escrow Agreement;
(iv) receiving all documents or certificates and
making all determinations, on behalf of any of the
Fully-Diluted Stockholders, required under this Agreement or
the Indemnity Escrow Agreement;
(v) all such other matters as the Holders
Representative may in its sole discretion deem necessary or
appropriate to consummate this Agreement or the Indemnity
Escrow Agreement and the transactions contemplated hereby and
thereby; and
(vi) all such action as may be necessary after the
Closing Date to carry out any of the transactions contemplated
by this Agreement, including, without limitation, the defense
and/or settlement of any claims for which indemnification is
sought pursuant to Article VII and any waiver of any
obligation of Parent or the Surviving Corporation.
All actions, decisions and instructions of the Holders
Representative shall be conclusive and binding upon all of the
Fully-Diluted Stockholders and no Fully-Diluted Stockholder nor any
other Person shall have any claim or cause of action against the
Holders Representative, and the Holders Representative shall have no
Liability to any Fully-Diluted Stockholder or any other Person, for any
action taken, decision made or instruction given by the Holders
Representative in connection with the Indemnity Escrow Agreement or
this Agreement, except in the case of his own gross negligence or
willful misconduct.
9.3 Expenses of the Holders Representative. The Holders Representative
shall be entitled to withdraw from the Escrow Account cash amounts held in the
Reimbursement Fund (or such greater amount as shall remain in escrow after the
indemnity obligations under Article VII of the Merger Agreement shall have been
satisfied) in reimbursement for out-of-pocket fees and expenses (including
legal, accounting and other advisors' fees and expenses, if applicable) incurred
by the Holders Representative in performing under this Agreement and the
Indemnity Escrow
52
Agreement. The Fully-Diluted Stockholders (i) shall have no claim or cause of
action against, may not assert any claim against, and shall indemnify and hold
harmless the Holders Representative from and against any and all Losses incurred
by the Holders Representative or any of its Affiliates and any of their
respective partners, directors, officers, employees, agents, stockholders,
consultants, attorneys, accountants, advisors, brokers, representatives or
controlling persons, relating to the Holders Representative's capacity as
Holders Representative other than such Losses resulting from the Holders
Representative's gross negligence or willful misconduct; and (ii) shall pay to
the Holders Representative, promptly upon request, such Fully-Diluted
Stockholder's pro rata share of any amounts paid by the Holders Representative
on behalf of the Fully-Diluted Stockholders and all costs and expenses
(including legal, accounting and other advisors' fees and expenses, if
applicable) incurred by the Holders Representative in connection with the
protection, defense or enforcement of any rights under this Agreement or the
Indemnity Escrow Agreement to the extent such costs, expenses and other amounts
exceed the amount available to the Holders Representative in the Reimbursement
Fund.
9.4 Irrevocable Appointment. The appointment of the Holders
Representative hereunder is irrevocable and any action taken by the Holders
Representative pursuant to the authority granted in this Article IX shall be
effective and absolutely binding on the Company and each stockholder thereof
notwithstanding any contrary action of, or direction from, the Company or any
Fully-Diluted Stockholder, except for actions taken by the Holders
Representative which are in bad faith.
9.5 Parent's Reliance. Parent shall not be obliged to inquire into the
authority of the Holders Representative, and Parent shall be fully protected in
dealing with the Holders Representative in good faith.
9.6 Binding Appointment. The provisions of this Agreement, including
without limitation Article IX hereof, shall be binding upon each Fully-Diluted
Stockholder and the executors, heirs, legal representatives and successors of
each Fully-Diluted Stockholder, and any references in this Agreement to a
Fully-Diluted Stockholder or the Fully-Diluted Stockholders shall mean and
include the successors to the Fully-Diluted Stockholders' rights hereunder,
whether pursuant to testamentary disposition, the laws of descent and
distribution or otherwise.
ARTICLE X
TERMINATION
10.1 Termination by Mutual Consent. This Agreement may be terminated
and the Merger may be abandoned at any time prior to the Effective Time by the
mutual written consent of the Company and Parent.
10.2 Termination by either the Company or Parent. This Agreement may be
terminated and the Merger may be abandoned at any time prior to the Effective
Time by action of the Company or Parent if:
(a) the Merger shall not have been consummated by April 23,
2002; or
53
(b) if any Restraint shall be in effect and shall have become
final and nonappealable.
10.3 Effect of Termination. In the event of termination of this
Agreement by either Parent or the Company as provided in this Article X, this
Agreement shall forthwith become void and there shall be no liability or
obligation on the part of the Parties or their respective Affiliates, officers,
directors or stockholders except (x) with respect to the payment of expenses
pursuant to Section 8.1 and (y) to the extent that such termination results from
the willful breach of a Party of any of its covenants or agreements hereunder.
[Signature Page Follows]
54
IN WITNESS WHEREOF, this Agreement and Plan of Merger has been
duly executed and delivered by the duly authorized officers of the Parties
hereto and shall be effective as of the date first herein above written.
MASTERBRAND CABINETS, INC.
By:
---------------------------------------
Name:
-------------------------------
Title:
------------------------------
MBC ACQUISITION CORP.
By:
---------------------------------------
Name:
-------------------------------
Title:
------------------------------
OMEGA HOLDINGS, INC.
By:
---------------------------------------
Name:
-------------------------------
Title:
------------------------------
Solely with respect to Articles VIII and IX,
--------------------
MEZZANINE LENDING ASSOCIATES III, L.P.
By: Mezzanine Lending Management, III, L.P.
its general partner
By: Xxxxxx Management Corporation
its managing general partner
By:
---------------------------------------
Name: Xxxxxxx Xxxxxx
Title: President
