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EXHIBIT 2.3
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RECAPITALIZATION AGREEMENT
Dated as of March 6, 1998
Among
ECCA MERGER CORP.,
EYE CARE CENTERS OF AMERICA, INC.,
and
THE SELLERS NAMED HEREIN
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TABLE OF CONTENTS
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ARTICLE I
Definitions
1.1 Defined Terms....................................................1
1.2 Other Definitions...............................................11
ARTICLE II
The Recapitalization
2.1 The Merger......................................................11
2.2 Effective Time; Closing.........................................12
2.3 Articles of Incorporation and By-Laws...........................12
2.4 Directors and Officers..........................................12
2.5 Company Actions Prior to the Effective Time.....................13
2.6 Effect on Capital Stock.........................................14
2.7 Capital Stock of Newco..........................................16
2.8 Exchange of Certificates........................................16
2.9 Dissenter's Rights..............................................17
2.10 Stock Transfer Books............................................18
2.11 No Further Ownership Rights in Company Stock....................18
2.12 Lost, Stolen or Destroyed Certificates..........................18
2.13 Adjustments to Merger Consideration.............................18
2.14 Authorization of Merger and this Agreement;
Waiver of Dissenter's Rights.................................21
2.15 Further Action..................................................22
2.16 Reservation of Right to Revise Transaction......................22
ARTICLE III
Representations and Warranties
3.1 Representations and Warranties of the Company and the Sellers...22
3.2 Representations and Warranties of Newco.........................40
ARTICLE IV
Conditions to Closing
4.1 Conditions to the Obligations of Sellers and Newco..............42
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4.2 Conditions to the Obligations of Newco..........................42
4.3 Conditions to the Obligations of the Sellers....................44
ARTICLE V
Covenants
5.1 Interim Operations of the Company...............................45
5.2 Access by Newco; Confidentiality................................47
5.3 Consents and Reasonable Best Efforts............................48
5.4 Notification of Certain Matters.................................49
5.5 Publicity.......................................................49
5.6 Notice of Cancellation..........................................49
5.7 Senior Notes Offer..............................................49
5.8 Employee Benefits...............................................50
5.9 Non-solicitation of Employees...................................50
5.10 Further Assurances..............................................50
5.11 Exclusivity.....................................................51
ARTICLE VI
Survival
6.1 Survival of Representations, Warranties and Covenants...........51
ARTICLE VII
Miscellaneous
7.1 Payment of Expenses.............................................51
7.2 Waiver of Conditions............................................51
7.3 Termination.....................................................52
7.4 Schedules.......................................................53
7.5 Counterparts....................................................53
7.6 Governing Law...................................................53
7.7 Notices.........................................................53
7.8 Entire Agreement, etc...........................................54
7.9 Captions........................................................54
7.10 Tax Matters.....................................................55
7.11. Seller Representative...........................................56
EXHIBITS
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A Form of Plan of Merger
B Form of Company's Charter
C Form of Opinion of Counsel to the Company
D Form of Non-Competition Agreement
E Form of Opinion of Counsel to Newco
SCHEDULES
Schedule 2.5 Sale and Purchase of the Securities
Schedule 2.6(g) Rollover Shares
Schedule 3.1(c) Authorized Capital
Schedule 3.1(e) Consents and Approvals (Company and Sellers)
Schedule 3.1(g) Compliance with Law
Schedule 3.1(h)(i) Lease Consents
Schedule 3.1(h)(ii) Owned Real Property
Schedule 3.1(h)(iii) Title and Leasehold Exceptions
Schedule 3.1(i) Subsidiaries
Schedule 3.1(j) Contracts and Commitments
Schedule 3.1(l) Certain Changes
Schedule 3.1(m) Certain Liabilities
Schedule 3.1(n) Plans
Schedule 3.1(o) Litigation
Schedule 3.1(p) Taxes
Schedule 3.1(q) Intellectual Property
Schedule 3.1(r) Environmental Matters
Schedule 3.1(s) Material Insurance Policies
Schedule 3.1(u) Employee Matters
Schedule 3.1(v) Contingent Payments
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RECAPITALIZATION AGREEMENT
RECAPITALIZATION AGREEMENT (this "Agreement"), dated as of March 6,
1998, among ECCA Merger Corp., a Delaware corporation ("Newco"), Eye Care
Centers of America, Inc., a Texas corporation (the "Company"), and the Sellers
identified on the signature pages to this Agreement (the "Sellers").
WHEREAS, the Sellers collectively own of record or beneficially
substantially all of the issued and outstanding capital stock of the Company and
all other securities of the Company that are convertible into or exercisable or
exchangeable for shares of capital stock of the Company other than the Class A
Warrants and the BNP Warrant (as such terms are defined herein); and
WHEREAS, each Seller owns (a) that number of shares ("Outstanding
Shares") of Common Stock, par value $.01 per share ("Common Stock"), of the
Company, (b) that number of shares ("Preferred Shares") of Preferred Stock (as
defined herein) of the Company, (c) that number of Class B Warrants (as defined
herein) of the Company and (d) Employee Options (as defined herein) to purchase
that number of shares of Common Stock of the Company, in each case as is set
forth opposite such Seller's name on Schedule 2.5; and
WHEREAS, the Boards of Directors of the Company and Newco have each
determined that it is advisable to effect a recapitalization of the Company by
means of a merger of Newco with and into the Company (the "Merger") upon the
terms and subject to the conditions set forth herein; and
WHEREAS, in furtherance of the Merger, the Boards of Directors of
the Company and Newco have each approved the merger of Newco with and into the
Company in accordance with the applicable provisions of the Texas Business
Corporation Act (the "TBCA") and the Delaware General Corporation Law ("DGCL"),
respectively;
NOW THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained herein, and subject to and on the terms and
conditions herein set forth, the parties hereto agree as follows:
ARTICLE I
Definitions
1.1 Defined Terms. For purposes of this Agreement, including the
Exhibits and Schedules hereto, the following terms have the meanings assigned to
them:
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"Actions" has the meaning specified in Section 3.1(o).
"Adjusted Net Working Capital" has the meaning specified in
Section 2.13(b).
"Adjustment Date" has the meaning specified in Section 2.13(b).
"Affiliate" shall mean a Person that directly or indirectly through
one or more intermediaries controls, is controlled by or is under common control
with the Person specified. For purposes of this definition and as used elsewhere
in this Agreement, the term "control" (including the terms "controlling,"
"controlled by" and "under common control with") of a Person means the
possession, direct or indirect, of the power to (i) vote 10% or more of the
voting securities of such Person or (ii) direct or cause the direction of the
management and policies of such Person, whether by contract or otherwise.
"Aggregate Funding Amount" has the meaning specified in Section
2.6(a).
"Aggregate Merger Consideration" has the meaning specified in
Section 2.6(a).
"Agreement" means this Recapitalization Agreement and includes the
Exhibits and Schedules hereto.
"Applicable Laws" means any federal, state, local or foreign
statute, law or ordinance, or any regulation, rule, order, policy or procedures
of any Governmental Authority, including without limitation any of the foregoing
which relate to fraud and abuse, kick-backs, false claims, physician referrals,
antitrust matters and Environmental Laws.
"BNP" means Banque Nationale de Paris.
"BNP Warrant" means the warrant to purchase Common Stock of the
Company held by BNP.
"BNP Warrant Shares" has the meaning specified in Section 2.6(f).
"Business Day" means any day other than a Saturday, Sunday or day on
which banks are required or authorized to close in The City of New York.
"CAI Credit Agreement" means the Amended and Restated Credit
Agreement, dated as of October 7, 1993, by and among the Company, Credit
Agricole Indosuez, New York Branch, and the Lending Institutions named therein,
as amended through the date hereof.
"Certificate" has the meaning specified in Section 2.8(a).
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"Class A Warrant Agreement" means the Warrant Agreement, dated as of
October 7, 1993, between the Company (formerly Eye Care Holdings, Inc.) and
United States Trust Company of New York, Warrant Agent.
"Class A Warrantholder" means a "Holder" as defined under the Class
A Warrant Agreement.
"Class A Warrants" means the warrants to acquire Common Stock issued
under the Class A Warrant Agreement.
"Class A Warrant Shares" has the meaning specified in Section
2.6(d).
"Class B Warrant Agent" means United States Trust Company of New
York, as Warrant Agent under the Class B Warrant Agreement.
"Class B Warrant Agreement" means the Warrant Agreement, dated as of
September 27, 1996, between the Company and United States Trust Company of New
York, as Warrant Agent.
"Class B Warrantholder" means each Seller having any number of Class
B Warrants set forth opposite such Seller's name on Schedule 2.5.
"Class B Warrants" means the Class B Warrants to Purchase Common
Stock issued under the Class B Warrant Agreement.
"Class B Warrant Shares" has the meaning specified in Section
2.5(a).
"Closing" has the meaning specified in Section 2.2.
"Closing Date" has the meaning specified in Section 2.2.
"Closing Time" means the time the Closing actually occurs on the
Closing Date.
"Code" means the Internal Revenue Code of 1986, as amended.
"Common Exchange Shares" means all Common Shares as to which the
Seller or Sellers owning such shares have elected to exchange such Common Shares
for shares of New Preferred Stock, as set forth on Schedule 2.6(g).
"Common Shares" means, collectively, the Outstanding Shares, the
Deferred Shares and the Class B Warrant Shares outstanding immediately prior to
the Effective Time.
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"Common Stock" has the meaning specified in the recitals hereto.
"Company" means Eye Care Centers of America, Inc., a Texas
corporation.
"Company Transaction Expenses" means the out-of-pocket fees and
expenses, including fees and expenses of accountants, attorneys and financial
advisers, incurred by the Company and the Sellers in connection with the
negotiation, preparation, documentation and closing of the transactions
contemplated by this Agreement (including the Senior Notes Offer). Company
Transaction Expenses also shall include an aggregate of up to $150,000 of
signing bonuses paid by the Company after the date of this Agreement and prior
to the Closing Date to senior executive officers hired by the Company during
such time. In no event shall Company Transaction Expenses include any premium,
penalty or interest accrued, paid or payable in respect of the Senior Notes or
any of them.
"Confidentiality Agreement" has the meaning specified in Section
5.2(c).
"Contract" means any agreement, lease, contract, note, purchase
order, instrument, order, mortgage, indenture, commitment, arrangement,
understanding or other similar obligation, whether written or oral.
"Consultants" has the meaning specified in Section 3.1(n).
"Deferred Shares" has the meaning specified in Section 2.5(f).
"Deferred Stock Plan Participant" means each participant having a
Deferred Stock Account under the Company's Deferred Stock Plan as of the date of
this Agreement.
"DGCL" has the meaning specified in the recitals hereto.
"Directors" has the meaning specified in Section 3.1(n).
"Dissenter's Shares" has the meaning specified in Section 2.9.
"Effective Date" has the meaning specified in Section 2.2.
"Effective Time" has the meaning specified in Section 2.2.
"Employee" has the meaning specified in Section 3.1(n).
"Employee Option" means each outstanding option, whether or not
vested, to purchase Common Stock, as set forth in Appendix 3.1(c)(1).
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"Employee Optionholder" means each Person listed in Appendix
3.1(c)(1) as a holder of Employee Options.
"Employee Option Shares" means the shares of Common Stock subject to
the Employee Options.
"Encumbrance" means any lien, charge, encumbrance, security
interest, pledge, equity, beneficial interest of others, option, warrant, call,
restriction (other than restrictions on resale without registration arising
under federal or state securities laws) or claim of third party rights of any
nature.
"Environmental Claim" means any written or oral notice, claim,
demand, action, suit, complaint, proceeding, request for information or other
communication by any person alleging liability or potential liability (including
without limitation liability or potential liability for investigatory costs,
cleanup costs, governmental response costs, natural resource damages, property
damage, personal injury, fines or penalties) arising out of, relating to, based
on or resulting from (i) the presence, discharge, emission, release or
threatened release of any Hazardous Substances at any location, whether or not
owned, leased or operated by the Company or any Subsidiary or (ii) circumstances
forming the basis of any violation or alleged violation of any Environmental Law
or Environmental Permit or (iii) otherwise relating to obligations or
liabilities under any Environmental Laws.
"Environmental Laws" means all applicable national, state,
provincial and local statutes, rules, regulations, ordinances, orders, decrees
and common law relating in any manner to contamination, pollution or protection
of human health or the environment, including without limitation the
Comprehensive Environmental Response, Compensation and Liability Act, the Solid
Waste Disposal Act, the Clean Air Act, the Clean Water Act, the Toxic Substances
Control Act, the Occupational Safety and Health Act, the Emergency Planning and
Community Right-to-Know Act, the Safe Drinking Water Act, all as amended, and
similar national, state, provincial and local laws.
"Environmental Permits" means all permits, licenses, registrations
and other governmental authorizations required for each of the Company and the
Subsidiaries and the operations of each of the Company's and the Subsidiaries'
facilities and otherwise to conduct its business under Environmental Laws.
"ERISA" has the meaning specified in Section 3.1(n).
"ERISA Affiliate" has the meaning specified in Section 3.1(n).
"ERISA Affiliate Plan" has the meaning specified in Section 3.1(n).
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"Xxxxx & Xxxxx" means Ernst & Young LLP, independent accountants to
the Company.
"Estimated Closing Date Balance Sheet" has the meaning specified in
Section 2.13(a).
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Exchange Agent" has the meaning specified in Section 2.8(b).
"Excluded Shares" has the meaning specified in Section 2.6(b).
" Final Balance Sheet" has the meaning specified in Section 2.13(b).
"Financing Deadline" has the meaning specified in Section 5.3(c).
"Financing Letters" means the Fund IV Letter and the letters, dated
March 5, 1998, previously delivered to the Company, providing for the respective
commitments of Bankers Trust Company, Xxxxxxx Xxxxx Capital Corporation and
Bankers Trust New York Corporation to provide senior and subordinated debt
financing for the Recapitalization.
"Fund IV" means Xxxxxx X. Xxx Equity Fund IV, L.P.
"Fund IV Letter" means the commitment letter of Fund IV, dated March
5, 1998, delivered to Newco and the Company providing for the commitment of Fund
IV to provide equity financing for the Recapitalization.
"GAAP" means generally accepted accounting principles in the United
States.
"Governmental Authority" means any federal, state, local or foreign
court, tribunal, governmental department, agency, board or commission,
regulatory authority or other governmental body or instrumentality.
"Hazardous Substances" means all hazardous or toxic substances,
wastes, materials or chemicals, petroleum (including crude oil or any fraction
thereof) and petroleum products, asbestos and asbestos-containing materials,
pollutants, contaminants and all other materials, substances and forces,
including but not limited to electromagnetic fields, regulated pursuant to, or
that could form the basis of liability under, any Environmental Law.
"HSR Act" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of
1976, as amended, and all applicable regulations promulgated thereunder.
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"Independent Firm" has the meaning specified in Section 2.13(b).
"Indicative Net Working Capital" has the meaning specified in
Section 2.13(a).
"Insurance Policies" has the meaning specified in Section 3.1(s).
"Intellectual Property" has the meaning specified in Section 3.1(q).
"Investor Sellers" means Indosuez Eye Care Partners and Xxxxxxx X.
Xxxxxxxx.
"KPMG" means KPMG Peat Marwick LLP, independent accountants to
Newco.
"Lease Agreements" has the meaning specified in Section 3.1(h).
"Lease Consents" has the meaning specified in Section 3.1(h).
"Liquidation Preference per Preferred Share" means $100, plus (i)
accumulated unpaid dividends on each share of Preferred Stock (whether or not
declared) to the Closing Date and (ii) interest on the amount in clause (i) at a
rate equal to 8% per annum, accrued from the date on which such unpaid dividends
were accumulated to the Closing Date.
"Major Marks" has the meaning specified in Section 3.1(q).
"Management Sellers" means all of the Sellers other than the
Investor Sellers.
"Material Adverse Effect" means a material adverse effect on the
financial condition, properties, business, prospects or results of operations of
the Company and the Subsidiaries, considered as a whole.
"Material Contract" has the meaning specified in Section 3.1(j).
"Merger" has the meaning specified in the recitals hereto.
"Newco" has the meaning specified in the recitals hereto.
"New Preferred Stock" means the Preferred Stock of the Surviving
Corporation having the designations, rights, preferences and limitations as
agreed by Fund IV.
"Net Working Capital" means, with respect to a consolidated balance
sheet of the Company and its Subsidiaries as of any date, (x) the sum of
accounts and notes receivable, inventory, and other current assets, MINUS (y)
the sum of accounts payable, accrued liabilities,
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taxes payable and other current liabilities. In no event shall Net Working
Capital be reduced by the current portion of long-term debt, accrued interest,
the Xxxxx Earnout Payment, or accrued Severance and Change in Control Payments.
"Objection" has the meaning specified in Section 2.13(b).
"Optometrists" has the meaning specified in Section 3.1(g).
"Outstanding Shares" has the meaning specified in the recitals
hereto.
"Owned Real Property" has the meaning specified in Section 3.1(h).
"PBGC" has the meaning specified in Section 3.1(n).
"Pension Plan" has the meaning specified in Section 3.1(n).
"Permits" means all licenses, permits, orders, consents, approvals,
registrations, authorizations, qualifications and filings with and under all
federal, state, local or foreign laws (including Environmental Laws) and
governmental or regulatory bodies and all industry or other non-governmental
self-regulatory organizations.
"Permitted Encumbrances" has the meaning specified in Section
3.1(h).
"Per Share Merger Consideration" has the meaning specified in
Section 2.6(a).
"Person" means an individual, corporation, partnership, trust,
unincorporated organization, government or any agency or political subdivision
thereof or any other entity that may be treated as a person under applicable
law.
"Plans" has the meaning specified in Section 3.1(n).
"Preferred Shares" has the meaning specified in the recitals hereto.
"Preferred Stock" means the Series A Cumulative Mandatorily
Redeemable Exchangeable Pay-in-Kind Preferred Stock, par value $.01 per share,
of the Company.
"Preferred Stockholder" means each Seller having any number of
shares of Preferred Stock set forth opposite such Seller's name on Schedule 2.5.
"Pro Rata Share" means, with respect to each holder of securities of
the Company entitled to receive the applicable Per Share Merger Consideration
under Article II, a fraction, the
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numerator of which is the aggregate Per Share Merger Consideration for all
of such securities of such holder and the denominator of which is the Aggregate
Merger Consideration.
"Recapitalization" means all of the transactions contemplated in
Article II, collectively.
"Relevant Group" has the meaning specified in Section 3.1(p).
"Retained Common Shares" means all Common Shares as to which the
Seller or Sellers owning such shares have elected to retain such Common Shares,
as set forth on Schedule 2.6(g).
"Rollover Shares" means all Retained Common Shares and all Common
Exchange Shares.
"Xxxxx Acquisition Agreements" means the second and sixth Contracts
identified on Schedule 3.1(j) under the caption "Documents Relating to the
Acquisition by the Company of The Xxxxx Group, Inc."
"Xxxxx Earnout Payment" has the meaning specified in Section 3.1(v).
"Securities Act" means the Securities Act of 1933, as amended.
"Seller Representative" means Xxxxx Capital Management Incorporated.
"Sellers" has the meaning specified in the recitals hereto.
"Senior Notes" means the 12% Senior Notes due 2003 of the Company
issued under the Senior Note Indenture.
"Senior Note Indenture" means the Indenture, dated as of October 7,
1993, between the Company (formerly Eye Care Holdings, Inc.) and United States
Trust Company of New York, as Trustee.
"Senior Notes Offer" has the meaning specified in Section 5.7.
"Severance and Change in Control Payments" means the aggregate
amount of cash payments required to satisfy in full the Company's obligations
under any severance, employment, consulting, change-in-control or similar
agreement in force as of the date hereof, as set forth on Schedule 3.1(j), upon
the consummation of the Merger.
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"Shareholders Agreement" means the Amended and Restated Shareholders
Agreement, dated as of March 31, 1994, by and among the Company and the
Shareholders listed therein.
"Subsidiary" means any Person in which the Company directly or
indirectly beneficially owns more than 50% of the outstanding capital stock or
other ownership interests, or has the right, directly or indirectly, to elect a
majority of the board of directors or other body performing similar functions.
"Surviving Corporation" has the meaning specified in Section 2.1.
"Tax" means all federal, state, local and foreign taxes, levies,
deficiencies or other assessments and other charges of whatever nature
(including income, gross receipts, license, payroll, employment, excise,
severance, stamp, occupation, premium, windfall profits, environmental, customs
duties, franchise, profits, withholding, backup withholding, social security,
unemployment, disability, real property, personal property, sales, use,
transfer, registration, value added, alternative minimum, and estimated) imposed
by any taxing authority, as well as any obligation to contribute to the payment
of Taxes determined on a consolidated, combined or unitary basis with respect to
the Company, any Subsidiary or any Affiliate, including any interest, penalty
(civil or criminal), or addition thereto, whether disputed or not, as well as
any expenses incurred in connection with the determination, settlement or
litigation of any liability.
"Tax Losses" has the meaning specified in Section 3.1(p).
"Tax Return" means any federal, state, local or foreign return,
declaration, report, claim for refund, amended return, declaration of estimated
Tax, information return or statement relating to Taxes, and any schedule or
attachment thereto, filed or maintained, or required to be filed or maintained
in connection with the calculation, determination, assessment or collection of
any Tax, and including any amendment thereof, as well as, where permitted or
required, combined, unitary or consolidated returns for any group of entities
that include the Company or any Subsidiary.
"TBCA" has the meaning specified in the recitals hereto.
"Transfer Taxes" has the meaning specified in Section 7.10(c).
"VisionWorks Acquisition Agreement" means the Stock Purchase
Agreement, dated August 15, 1996, among the Company, VisionWorks Holdings, Inc.
and the stockholders of VisionWorks Holdings, Inc.
"Year-End Financial Statements" has the meaning specified in
Section 3.1(k).
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1.2 Other Definitions. Capitalized terms not otherwise defined in
Section 1.1 hereof shall have the respective meanings assigned to them elsewhere
in this Agreement. The words "he", "him" and "his" as used herein shall be
deemed to refer equally to the female gender.
ARTICLE II
The Recapitalization
2.1 The Merger. At the Effective Time (as defined in Section 2.2):
Newco shall merge with and into the Company; the corporate existence of the
Company shall continue; and the separate existence of Newco shall cease. All
rights, title and interests to all real estate and other property owned by the
Company and Newco shall be allocated to and vested in the Company without
reversion or impairment, without further act or deed, and without any transfer
or assignment having occurred, but subject to any existing liens or other
encumbrances thereon. At the Effective Time, the Surviving Corporation shall
thenceforth be responsible and liable for all liabilities and obligations of the
Company and Newco, and any proceeding pending by or against the Company or Newco
may be prosecuted as if the Merger had not occurred or the Surviving Corporation
may be substituted in its place. Neither the rights of creditors nor any liens
upon the property of the Company or Newco shall be impaired by the Merger. The
Merger shall have other effects as provided for in Article 5.06 of the TBCA. The
Company as the surviving corporation after the Merger is hereinafter sometimes
referred to as the "Surviving Corporation". At the Closing, the Company and
Newco shall execute and deliver a Plan of Merger in substantially the form
attached hereto as EXHIBIT A (the "Plan of Merger").
2.2 Effective Time; Closing. Subject to satisfaction or waiver of
the conditions set forth in Article IV, the parties hereto shall cause the
effective date of the Merger (the "Effective Date" or the "Closing Date") to
occur on (1) the second Business Day after the day on which all the conditions
set forth in Article IV (other than conditions that by their terms may be
satisfied only at the Closing) have been satisfied or waived in accordance with
the terms of this Agreement or (2) such other date upon which the parties may
agree in writing. The parties shall cause the Merger to be consummated by filing
Articles of Merger as required by Article 5.04 of the TBCA in the office of the
Texas Secretary of State (the record time of such filing being the "Effective
Time") and by filing a Certificate of Merger as required by Section 252 of the
General Corporation Law of the State of Delaware in the office of the Delaware
Secretary of State. A closing with respect to the Merger and the other
transactions contemplated hereunder (the "Closing") shall take place at the
offices of Xxxxxxxx & Xxxxxxxx, 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx at 10:00
A.M. on the Effective Date.
2.3 Articles of Incorporation and By-Laws.
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(a) Articles of Incorporation. Upon such Merger, the Articles of
Incorporation of the Surviving Corporation shall be substantially in the form
attached as EXHIBIT B, with appropriate insertions to Article Four consistent
with the equity capital contemplated by the Recapitalization.
(b) By-Laws. The By-Laws of the Company, as in effect immediately
prior to the Effective Time but with such amendments thereto as the parties
hereto may mutually agree prior to the Effective Date, shall be the By-Laws of
the Surviving Corporation until thereafter amended in accordance with the TBCA,
the Articles of Incorporation of the Surviving Corporation and such By-Laws.
2.4 Directors and Officers. The directors of Newco immediately prior
to the Effective Time shall be the directors of the Surviving Corporation, each
to hold office in accordance with the Articles of Incorporation and By-Laws of
the Surviving Corporation, and the officers of the Company immediately prior to
the Effective Time shall be the officers of the Surviving Corporation, in each
case until their respective successors are duly elected or appointed and
qualified.
2.5 Company Actions Prior to the Effective Time.
(a) Exercise of Class B Warrants. As soon as practicable after the
date hereof but in any event prior to the Effective Time, each Class B
Warrantholder shall exercise all of the Class B Warrants held by such Class B
Warrantholder for the number of shares of Common Stock (the "Class B Warrant
Shares") set forth under the heading "Class B Warrant Shares" on Schedule 2.5 by
delivering to the Class B Warrant Agent, in accordance with Section 3.03 of the
Class B Warrant Agreement, an Election to Exercise (as defined in the Class B
Warrant Agreement) and a number of shares of Preferred Stock having an aggregate
Liquidation Preference per Preferred Share equal to the aggregate exercise price
for such Class B Warrants, and the Company shall deliver to each Class B
Warrantholder the number of Class B Warrant Shares certificates for the number
of Class B Warrant Shares for which such Class B Warrants are then exercisable.
(b) Repurchase of Preferred Shares. As soon as practicable after the
date hereof but in any event prior to the Effective Time, the Company shall take
action, including by adopting resolutions, giving notice to the Preferred
Stockholders and taking any other actions, to repurchase from each Preferred
Stockholder as of the Effective Time the number of Preferred Shares equal to (i)
the number of Preferred Shares set forth opposite such Preferred Stockholder's
name under the heading "Preferred Shares" on Schedule 2.5 LESS (ii) the number
of Preferred Shares surrendered to the Company in respect of the exercise of
Class B Warrants pursuant to Section 2.5(a), for a purchase price per share
equal to the Liquidation Preference per Preferred Share. The execution of this
Agreement by each Preferred Stockholder shall constitute
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a full and irrevocable consent by such Preferred Stockholder to the repurchase
of his Preferred Shares on the terms and conditions contained herein.
(c) Notice to Class A Warrantholders. As soon as practicable after
the date hereof but in any event prior to the Effective Time, the Company shall
take action, including by adopting resolutions, giving notice to the Class A
Warrantholders in accordance with Section 4.04(a) of the Class A Warrant
Agreement and taking any other necessary actions, to cause all of the Class A
Warrants, after adjustment to the number of shares of Common Stock issuable on
exercise of the Class A Warrants as contemplated by Section 8.01 of the Class A
Warrant Agreement, on the basis of current market values of the Common Stock
determined in good faith by the Board of Directors of the Company, to be retired
and canceled as of the Effective Time in accordance with Section 4.04(b) of the
Class A Warrant Agreement and on the terms and conditions contained herein.
(d) Employee Options. As soon as practicable following the date
hereof but in any event prior to the Effective Time, the Company shall take
action, including by adopting resolutions or taking any other actions, subject
to and contingent upon receiving the consent of each Employee Optionholder to
the extent such consent is required, to cancel as of the Effective Time, the
Employee Options which are outstanding immediately prior to the Effective Time,
whether or not such Employee Options to be canceled are then exercisable.
(e) BNP Warrant. As soon as practicable following the date hereof
but in any event prior to the Effective Time, the Company shall take action,
including by adopting resolutions or taking any other actions, subject to and
contingent upon receiving any consent of BNP that may be required, to cancel as
of the Effective Time the BNP Warrant for the consideration provided and
otherwise on the terms and conditions contained herein, whether or not such BNP
Warrant to be canceled is then exercisable.
(f) Deferred Shares. As soon as practicable following the date
hereof but in any event prior to the Effective Time, the Company shall take
action, including by adopting resolutions, amendments to Plans or taking any
other actions, subject to and contingent upon any consent of Deferred Stock Plan
Participants which may be required, to accelerate the vesting of all shares of
Common Stock held for the benefit of the Deferred Stock Plan Participants, as
set forth on Schedule 2.5 (the "Deferred Shares"), and to provide for the
distribution of such Deferred Shares prior to the Effective Time in connection
with the Recapitalization.
2.6 Effect on Capital Stock. At the Effective Time, by virtue of the
Merger and without any action on the part of the Company, Newco or the holders
of any of the following securities:
(a) Conversion of Capital Stock. Each Common Share issued and
outstanding immediately prior to the Effective Time (other than the Rollover
Shares, Excluded Shares and
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Dissenter's Shares) shall be converted into the right to receive the Per Share
Merger Consideration (as defined below). The "Aggregate Merger Consideration"
shall be equal to $300,000,000, subject to adjustment as provided in Section
2.13 (as adjusted, the "Aggregate Funding Amount"), LESS (i) the total
indebtedness of the Company immediately prior to the Effective Time (including
without limitation, capitalized lease obligations, the amount required to be
deposited in trust for the benefit of the holders of Senior Notes pursuant to
Section 4.2(l) and any other premiums, penalties and interest accrued or payable
in respect thereof), LESS (ii) if the Xxxxx Earnout Payment has not been paid in
full prior to the Effective Date, the Xxxxx Earnout Payment, LESS (iii) the
aggregate Severance and Change in Control Payments, LESS (iv) the aggregate
Liquidation Preference per Preferred Share in respect of all of the Preferred
Shares, whether surrendered in respect of the exercise of Class B Warrants
pursuant to Section 2.5(a) or repurchased by the Company pursuant to Section
2.5(b), LESS (v) the amount of the Company Transaction Expenses in excess of
$3,920,000, if any, LESS (vi) the amount of any Transfer Taxes paid by the
Company, LESS (vii) the amount by which the Company's cash and cash equivalents
as of the Closing Date are less than $2,500,000, PLUS (viii) the aggregate
exercise price of all of the Class B Warrants, PLUS (ix) the aggregate exercise
price of all Employee Options canceled pursuant to Section 2.5(d), PLUS (x) the
exercise price of the BNP Warrant, plus (xi) the aggregate amount of Company
Transaction Expenses (not to exceed $3,920,000 in the aggregate). The additions
and deductions to the "Aggregate Merger Consideration" shall not be duplicative.
The "Per Share Merger Consideration" will be equal to (a) the Aggregate Merger
Consideration divided by (b) the number of Common Shares outstanding immediately
prior to the Effective Time (including the Outstanding Shares, the Deferred
Shares and the Class B Warrant Shares) PLUS the number of Employee Option Shares
subject to Employee Options canceled pursuant to Section 2.6(e), PLUS the number
of Class A Warrant Shares subject to Class A Warrants retired and canceled
pursuant to Section 2.6(d), PLUS the number of BNP Warrant Shares subject to the
BNP Warrant canceled pursuant to Section 2.6(f).
(b) Cancellation. Each share of Common Stock held in the treasury of
the Company and each share of Common Stock owned by any direct or indirect
wholly owned subsidiary of the Company immediately prior to the Effective Time
("Excluded Shares"), if any, shall, by virtue of the Merger and without any
action on the part of the holder thereof, cease to be outstanding, be canceled
and retired without payment of any consideration therefor and cease to exist.
(c) Preferred Stock. At the Effective Time, each Preferred Share
repurchased by the Company pursuant to Section 2.5(b) shall be retired and
canceled and each Preferred Stockholder shall be entitled to receive an amount
in cash, payable at the Effective Time, equal to the product of (x) the number
of Preferred Shares repurchased and (y) the Liquidation Preference per Preferred
Share.
(d) Class A Warrants. At the Effective Time, each Class A Warrant
shall be canceled and each Class A Warrantholder shall be entitled to receive in
respect of such Class A
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Warrant an amount in cash, payable at the Effective Time, equal to the product
of (x) the number of shares of Common Stock subject to such Class A Warrant
("Class A Warrant Shares") immediately prior to the Effective Time and (y) the
excess of the Per Share Merger Consideration over the per share exercise price
of such Class A Warrant.
(e) Employee Options. At the Effective Time, each Employee Option
shall be canceled and each Employee Optionholder shall be entitled to receive in
respect of such Employee Option an amount in cash, payable at the Effective
Time, equal to the product of (x) the number of shares of Common Stock subject
to such Employee Option ("Employee Option Shares") immediately prior to the
Effective Time and (y) the excess of the Per Share Merger Consideration over the
per share exercise price of such Option.
(f) BNP Warrant. At the Effective Time, the BNP Warrant shall be
canceled and BNP shall be entitled to receive an amount in cash, payable at the
Effective Time, equal to the product of (x) the number of shares of Common Stock
subject to the BNP Warrant ("BNP Warrant Shares") immediately prior to the
Effective Time and (y) the excess of the Per Share Merger Consideration over the
per share exercise price of the BNP Warrant.
(g) Rollover Shares. (i) At and after the Effective Time, each
Retained Common Share (as determined pursuant to the formula set forth below in
this Section 2.6(g)) shall remain outstanding, shall have all of the rights and
preferences provided under the Articles of Incorporation of the Surviving
Corporation and shall not be entitled to any part of the Aggregate Merger
Consideration. The aggregate number of Retained Common Shares shall be equal to
the quotient obtained by dividing (x) $5,625,000 by (y) the Per Share Merger
Consideration. The number of Retained Common Shares to be retained by each
Seller shall be equal to the quotient obtained by dividing (x) the dollar value
to be retained by each Seller set forth opposite the name of such Seller under
column (2) on Schedule 2.6(g) by (y) the Per Share Merger Consideration. (ii) At
and after the Effective Time, each Common Exchange Share (as determined pursuant
to the formula set forth below in this Section 2.6(g)) shall be entitled to
receive one share of New Preferred Stock and shall not be entitled to any part
of the Aggregate Merger Consideration. The aggregate number of Common Exchange
Shares to be exchanged for shares of New Preferred Stock shall be equal to the
quotient obtained by dividing (x) $2,625,000 by (y) the Per Share Merger
Consideration. The number of Common Exchange Shares to be exchanged for shares
of New Preferred Stock by each Seller shall be equal to the quotient obtained by
dividing (x) the dollar value to be exchanged for New Preferred Stock set forth
opposite the name of such Seller under column (3) on Schedule 2.6(g) by (y) the
Per Share Merger Consideration.
2.7 Capital Stock of Newco. All shares of Newco's common stock, par
value $.01 per share, issued and outstanding immediately prior to the Effective
Time shall be converted into and exchanged for an aggregate number of validly
issued, fully paid and nonassessable
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shares of Common Stock of the Company equal to the quotient obtained by dividing
$69,375,000 by the Per Share Merger Consideration.
2.8 Exchange of Certificates. (a) At the Closing, each Seller shall
deliver certificates to the Surviving corporation (each, a "Certificate"), which
immediately prior to the Effective Time represented outstanding Common Shares
(other than Retained Common Shares), Preferred Shares. Upon surrender of such a
Certificate for cancellation, Certificate so surrendered shall forthwith be
canceled and the holder of such Certificate shall be entitled to receive in
exchange therefor the type and amount of consideration due in respect thereof
calculated in accordance with Section 2.6. All required cash payments to the
Sellers shall be paid by wire transfer of immediately available funds at the
Closing to the accounts specified by the Sellers not later than one Business Day
prior to the Closing Date.
(b) Promptly after the Effective Time, the Surviving Corporation
shall cause an exchange agent selected by it (the "Exchange Agent"), to mail to
each holder of record of Class A Warrants (i) a letter of transmittal specifying
that delivery shall be effected, and that risk of loss and title to the
Certificates which immediately prior to the Effective Time represented Class A
Warrants shall pass, only upon delivery of such Certificates (or affidavits of
loss in lieu thereof) to the Exchange Agent, such letter of transmittal to be in
such form and have such other provisions as the Company may require, and (ii)
instructions for surrendering such Certificates in exchange for the cash
consideration such Class A Warrantholder is entitled to receive in respect of
such Class A Warrants pursuant to Section 2.6(d). Upon surrender of such
Certificate for cancellation to the Exchange Agent together with such letter of
transmittal, duly executed, the holder of such Certificate shall be entitled to
receive in exchange therefor a check in the amount (after giving effect to any
required tax withholdings) of such consideration.
(c) Anything herein to the contrary notwithstanding, no interest or
dividends shall accrue or be payable or paid on any portion of the applicable
consideration payable to any person pursuant to this Article II. At and after
the Effective Time, each holder of a Certificate to be canceled pursuant to this
Section 2.8 shall cease to have any rights as a securityholder of the Company,
except for the right to surrender such Certificates in the manner prescribed by
this Section 2.8 in exchange for payment of the applicable consideration.
2.9 Dissenter's Rights. No holder of Common Shares immediately prior
to the Effective Time who shall have perfected his dissenter's rights in
accordance with Article 5.12 of the TBCA and shall not have effectively
withdrawn or lost such holder's right to dissent from the Merger under the TBCA,
(each, a "Dissenting Shareholder") shall be entitled to vote or exercise any
other rights of a shareholder, including without limitation, any rights to any
dividends or other distributions pursuant to this Article II, and any Dissenting
Shareholder shall be entitled to receive only the payment as provided by Article
5.12 of the TBCA with respect to Company Shares owned by such Dissenting
Shareholder ("Dissenter's Shares"). If any Person who would otherwise be deemed
a Dissenting Shareholder shall have failed properly to perfect or
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shall have effectively withdrawn or lost the right to dissent with respect to
any Common Shares, such shares shall thereupon be treated as though such shares
had been converted into the right to receive the Per Share Merger Consideration
pursuant to Section 2.6(a). The Company shall give Newco (i) prompt written
notice of any dissenters' demands for payment, attempted withdrawals of such
demands and any other instruments served pursuant to applicable law received by
the Company relating to dissenters' rights and (ii) the opportunity to direct
all negotiations with respect to dissenters under the TBCA. The Company shall
not, without the prior written consent of Newco, voluntarily make any payment
with respect to any demands for payment by Dissenting Shareholders, offer to
settle or settle any such demands or approve any withdrawal of such demands.
2.10 Stock Transfer Books. At the Effective Time, the stock transfer
books of the Company shall be closed, and there shall be no further registration
of transfers of capital stock thereafter on the records of the Company.
2.11 No Further Ownership Rights in Company Stock. The Applicable
Merger Consideration delivered upon the surrender of each Certificate in
accordance with the terms hereof shall be deemed to have been issued in full
satisfaction of all rights pertaining to such Shares. If, after the Effective
Time, Certificates are presented to the Surviving Corporation for any reason,
they shall be canceled and exchanged as provided in this Article II.
2.12 Lost, Stolen or Destroyed Certificates. In the event any
Certificates shall have been lost, stolen or destroyed, the Surviving
Corporation shall issue in exchange for such lost, stolen or destroyed
Certificates, upon the making of an affidavit of that fact by the holder thereof
and delivery of bond in such sum as the Surviving Corporation may reasonably
direct as indemnity against any claim that may be made against the Surviving
Corporation with respect to the Certificates alleged to have been lost, stolen
or destroyed, such Per Share Merger Consideration as may be required pursuant to
Section 2.6.
2.13 Adjustments to Merger Consideration.
(a) Adjustment at Closing. Two Business Days prior to the Closing
Date, the Company shall deliver or cause to be delivered to Newco a projected
consolidated balance sheet (the "Estimated Closing Date Balance Sheet") of the
Company and its Subsidiaries as of the Closing Date. The Estimated Closing Date
Balance Sheet (i) shall set forth the Net Working Capital as of the Closing Date
(the "Indicative Net Working Capital"), without giving effect to the
Recapitalization and the transactions contemplated hereby, and (ii) be prepared
in accordance with GAAP applied on a basis consistent with the principles,
practices and methodologies used in the preparation of the consolidated balance
sheet of the Company and its Subsidiaries for the year ended January 3, 1998.
the event that the Indicative Net Working Capital is less than $7,000,000
("Target Net Working Capital"), the Aggregate Funding Amount shall be decreased
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by the amount of such shortfall and the Aggregate Merger Consideration shall be
adjusted accordingly.
(b) Post-Closing Adjustment. (i) Within 60 days after the Closing
Date, the Sellers shall deliver or cause to be delivered to the Company a
consolidated balance sheet of the Company and its Subsidiaries as of the Closing
Date, together with an unqualified opinion thereon by Ernst & Young (the "Final
Balance Sheet"). All the parties to this Agreement accept, for purposes of the
calculation of the adjustment provided for in this Section 2.13(b), the
principles, practices and methodologies, consistent with GAAP, used in the
preparation of the consolidated balance sheet of the Company and its
Subsidiaries for the year ended January 3, 1998.
(ii) The Company after the Closing Date shall cause Ernst &
Young to have access to the records and personnel of the Company
reasonably requested by them for purposes of preparing or auditing
the Final Balance Sheet. The Company shall cause KPMG to take such
reasonable steps as they deem necessary to calculate the Net Working
Capital of the Company and its Subsidiaries as of the Closing Date
and to review the procedures and materials (including work papers)
employed by Ernst & Young in connection therewith. Not later than 30
days after receipt of the Final Balance Sheet, the Company shall
deliver to the Seller Representative a written notice ("Objection"),
setting forth any items with which the Company disagrees and a
description of the basis for such disagreement.
(iii) In the event that the Company delivers an Objection to
the calculation of the Net Working Capital of the Company and the
Subsidiaries set forth in the Final Balance Sheet, the Seller
Representative shall negotiate in good faith with the Company, and
the Company hereby agrees to negotiate in good faith with the Seller
Representative, for a period of 30 days after receipt of such
Objection, to seek to resolve their differences with respect to the
Final Balance Sheet. If the Company and the Seller Representative
are unable to resolve all of such disagreements within such 30 day
period, then no later than seven days following such 30 day period
they shall refer their remaining differences to Xxxxxx Xxxxxxxx or
any other internationally recognized firm of independent public
accountants as to which the Seller Representative and the Company
mutually agree (the "Independent Firm") who shall, acting as experts
and not as arbitrators, determine, only with respect to the
remaining differences so submitted, whether and to what extent, if
any, the Net Working Capital, as derived from the Final Balance
Sheet, requires adjustment. The parties shall instruct the
Independent Firm to deliver its written determination to the Company
and the Seller Representative no later than the twentieth day after
the remaining differences underlying the Objection are referred to
the Independent Firm. The Independent
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Firm's determination of Net Working Capital shall be conclusive and
binding upon the Company and Sellers absent manifest error. The fees
and disbursements of the Independent Firm shall be shared equally by
the Company and Sellers. The Company and Sellers shall make readily
available to the Independent Firm all relevant books and records and
any work papers (including those of the parties' respective
accountants) relating to the Final Balance Sheet and all other items
reasonably requested by the Independent Firm.
(iv) The "Adjusted Net Working Capital" shall be the Net
Working Capital included in (i) the Final Balance Sheet as delivered
by the Sellers in the event that (x) the amount of Net Working
Capital is unchanged from the Estimated Closing Date Balance Sheet
to the Final Balance Sheet; (y) no Objection is delivered to the
Seller Representative during the 30 day period specified above or
(z) Seller Representative and the Company so agree, (ii) the Final
Balance Sheet, as adjusted in accordance with the Objection, in the
event that the Seller Representative does not dispute the Objection
within the 30 day period following receipt by the Seller
Representative of the Objection, or (iii) the Final Balance Sheet,
as adjusted by either (x) the agreement of the Seller Representative
and the Company or (y) the Independent Firm.
(v) If Adjusted Net Working Capital is less than both Target
Net Working Capital and Indicative Net Working Capital, then the
Aggregate Merger Consideration shall be adjusted downward by the
amount by which Adjusted Net Working Capital is less than Indicative
Net Working Capital and the Sellers shall pay this shortfall amount
(the "Shortfall Amount") to the Company; PROVIDED, HOWEVER, that no
adjustment payment shall be required unless the Shortfall Amount is
greater than $100,000, in which event the Sellers shall pay the
entire Shortfall Amount to the Company; PROVIDED, FURTHER, HOWEVER,
that if Indicative Net Working Capital is greater than Target Net
Working Capital and Adjusted Net Working Capital is less than Target
Net Working Capital then the Shortfall Amount shall not exceed the
amount by which the Adjusted Net Working Capital is less than Target
Net Working Capital. Each Seller shall pay to the Company only such
Seller's proportionate share of the Shortfall Amount, calculated for
each Seller by multiplying the Shortfall Amount by a fraction, the
numerator of which is the portion of the Aggregate Merger
Consideration paid to such Seller, and the denominator of which is
the sum of the portions of the Aggregate Merger Consideration paid
to all Sellers.
(vi) If Adjusted Net Working Capital is greater than
Indicative Net Working Capital and Indicative Net Working Capital is
less than Target Net Working Capital, the Aggregate Merger
Consideration shall be adjusted upward by the amount by which
Adjusted Net Working Capital exceeds Indicative Net
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Working Capital and the Company shall pay to the Sellers an
aggregate amount equal to the excess (the "Excess Amount");
PROVIDED, HOWEVER, that the amount of any upward adjustment to the
Aggregate Merger Consideration, and any resulting payment by the
Company to the Sellers, shall not exceed the amount by which
Indicative Net Working Capital is less than Target Net Working
Capital; and PROVIDED, FURTHER, HOWEVER, that no adjustment payment
shall be required unless the Excess Amount is greater than $100,000,
in which event the Company shall pay the entire Excess Amount to the
Sellers. Any Excess Amount payable by the Company shall be allocated
among all securityholders of the Company receiving any part of the
Aggregate Merger Consideration in accordance with such holders'
respective Pro Rata Shares.
(vii) If both Adjusted Net Working Capital and Indicative Net
Working Capital are equal to or greater than Target Net Working
Capital no adjustment shall be made to Aggregate Merger
Consideration and no post-closing payment shall be required to be
made to any Person pursuant to this Section 2.13(b)
(viii) Any amount owing pursuant to this Section 2.13(b) shall
be paid, by certified or official bank check or checks payable in
New York Clearing House (next day) funds not later than two Business
Days following final determination of the Adjusted Net Working
Capital in accordance with this Section 2.13(b).
(ix) No adjustment or other action taken pursuant to this
Section 2.13(b) shall affect the rights and obligations of the
parties under this Agreement or with respect to the transactions
contemplated hereby other than to the extent directly related to the
determination of the Adjusted Net Working Capital.
2.14 Authorization of Merger and this Agreement; Waiver of
Dissenter's Rights. The Board of Directors of the Company have (i) approved the
Merger, this Agreement, the Plan of Merger, and the transactions contemplated
herein, (ii) recommended that the shareholders of the Company approve the
Merger, the Plan of Merger and the transactions contemplated therein, and (iii)
directed that the Merger, Plan of Merger and the transactions contemplated
therein be submitted to the shareholders of the Company for their approval at a
special meeting of the shareholders of the Company to be held on or before April
30, 1998 (the "Special Meeting"), all in accordance with Section 5.03 of the
TBCA. The Company shall submit the Merger and the Plan of Merger to the
shareholders of the Company for their approval at the Special Meeting to be held
on or before April 30, 1998. The Sellers covenant and agree to vote their Common
Shares in favor of the Merger and the Plan of Merger at the Special Meeting.
(b) Prior to the Effective Date, Newco shall submit the approval and
adoption of the Merger and this Agreement to its sole stockholder.
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(c) By the execution and delivery of this Agreement by the Sellers,
each Seller electing to receive a cash payment equal to the Per Share Merger
Consideration hereby waives any dissenter's rights which such Seller may have
against the Company pursuant to Articles 5.11, 5.12 and 5.13 of the TBCA.
2.15 Further Action. If, at any time after the Effective Time, any
further action is necessary or desirable to carry out the purposes of this
Agreement and to vest the Surviving Corporation with full right, title and
possession to all assets, property, rights, privileges, powers and franchises of
the Company and Newco, the officers and directors of the Company and Newco
immediately prior to the Effective Time are fully authorized in the name of
their respective corporations or otherwise to take, and will take, all such
lawful and necessary action.
2.16 Reservation of Right to Revise Transaction. Newco and the
Company may at any time change the method of effecting the Recapitalization
(including without limitation the provisions of this Article II) if and to the
extent they mutually deem such change to be desirable; provided, however, that
no such change shall (A) alter or change the amount or kind of consideration to
be issued to holders of the Company's capital stock or warrants or options to
acquire any of the Company's capital stock provided for in this Agreement, (B)
materially impede or delay receipt of any required regulatory approval or the
consummation of the transactions contemplated by this Agreement, (C) alter any
contractual or other arrangement made by the Company or any of its Subsidiaries
(except as specifically provided herein) unless, in any such case, the requisite
approval of the stockholders of the Company is obtained.
ARTICLE III
Representations and Warranties
3.1 Representations and Warranties of the Company and the Sellers.
The Company and each Management Seller, severally and not jointly, hereby
represent and warrant to Newco and each of the Investor Sellers hereby
represents and warrants to Newco solely as to the matters set forth in
paragraphs (a), (c), (d), (e) and (f), insofar as such matters relate to such
Investor Seller individually, as follows:
(a) Organization and Authority of Sellers. Each Seller has full
power and authority (corporate, partnership or other) to enter into this
Agreement and to perform its obligations hereunder. This Agreement has been duly
authorized, executed and delivered by such Seller and constitutes a valid and
binding obligation of such Seller, enforceable in accordance with its terms,
subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or affecting
creditors' rights and to general equity principles, and no other proceedings on
the part of such Seller are necessary to authorize this Agreement and the
consummation of the transactions contemplated hereby.
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(b) Organization, Authority and Qualification of Company. The
Company is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of Texas and has full corporate power and
authority to carry on its business substantially as it is now being conducted,
to enter into this Agreement and to perform its obligations hereunder. The
Company is duly licensed or qualified to do business, and has all Permits, in
each jurisdiction in which the nature of the business conducted by it or the
character or location of the properties and assets owned, leased or operated by
it makes such licensing or qualification necessary except where the failure to
be so qualified or licensed would not be reasonably likely to have a Material
Adverse Effect. This Agreement has been duly authorized, executed and delivered
by the Company. The Board of Directors have (i) adopted and approved the Merger,
this Agreement, the Plan of Merger and the transactions contemplated herein,
(ii) recommended that the shareholders approve the Merger, the Plan of Merger
and the transactions contemplated therein, and (iii) directed that the Merger,
the Plan of Merger and the transactions contemplated herein be submitted to the
shareholders of the Company for their approval at the Special Meeting, all in
accordance with Article 5.03 of the TBCA. The Sellers have the requisite number
of Outstanding Shares and Preferred Shares to adopt and approve the Plan of
Merger and the Merger at the Special Meeting in accordance with Article 5.03 of
the TBCA. Upon the adoption and approval of the Merger, the Plan of Merger and
the transactions contemplated thereby at the Special Meeting, no further
proceedings on the part of the Company will be necessary to approve the Merger
and the Plan of Merger. This Agreement constitutes a valid and binding
obligation of the Company, enforceable in accordance with its terms, and, except
for approval of the shareholders of the Company in accordance with Article 5.03
of the TBCA, no other proceedings on the part of the Company are necessary to
authorize this Agreement and the consummation of the transactions contemplated
hereby.
(c) Authorized Capital. The authorized capital stock of the Company
consists of 3,000,000 shares of Common Stock, of which 1,011,989 shares are
issued and outstanding, and 1,011,902 shares are owned by the Sellers, as of the
date hereof; and 1,000,000 shares of Preferred Stock, of which 110,000 shares
are issued and outstanding as of the date hereof. All of the issued and
outstanding shares of Common Stock and Preferred Stock have been duly authorized
and validly issued and are fully paid and nonassessable. As of the date hereof,
70,000 Class A Warrants are outstanding and 150,000 Class B Warrants are
outstanding. Except as set forth above, as provided under Sections 2.6 of the
Shareholders Agreement or as disclosed on Schedule 2.5, there are no preemptive
rights nor any outstanding subscriptions, options, warrants, rights (including
without limitation, stock appreciation rights), convertible securities or other
agreements or commitments of any character of the Company or any Seller relating
to the issued or unissued capital stock of the Company. Schedule 2.5 lists the
name of each Employee Optionholder and the number of Employee Options held by
each such Employee Optionholder.
(d) The Securities. Such Seller is the record and beneficial owner
of the number of Common Shares, Preferred Shares and Class B Warrants identified
to such Seller on
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Schedule 2.5. Schedule 2.5(d) lists the name of each recordholder of Class A
Warrants and the number of Class A Warrants held by each such holder.
(e) Consents and Approvals. Except for the Lease Consents, as set
forth on Schedule 3.1(e) or as required by the HSR Act, no consent, approval or
authorization of, or declaration, filing or registration with, any Governmental
Authority or any other Person, is required to be made or obtained by the
Company, any Subsidiary or any Seller in connection with the execution, delivery
and performance of this Agreement and the consummation of the transactions
contemplated hereby, except for such consents, approvals, authorizations,
declarations, filings or registrations which the failure to make or obtain,
individually or in the aggregate, would not be reasonably likely to have a
Material Adverse Effect or to prohibit or materially impair the Company's or the
Sellers' ability to perform their respective obligations under this Agreement.
(f) Non-contravention. The execution and delivery of this Agreement
by the Sellers and the Company do not, and the consummation by the Sellers and
the Company of the transactions contemplated hereby on their part will not,
constitute or result in (i) a breach or violation of, or a default under, the
articles of incorporation or by-laws (or comparable constitutional documents) of
the Company, any Subsidiary or any Seller that is not a natural person or (ii)
subject to obtaining the consents referred to in Section 3.1(e) as being
required hereunder (including those set forth on Schedule 3.1(e)) and the Lease
Consents, a breach or violation of, a default under, or the acceleration of or
the creation of an Encumbrance on assets of the Company or any Subsidiary (with
or without the giving of notice or the lapse of time) pursuant to, (A) any right
or obligation of the Company or any Subsidiary under any Contract, or (B)
assuming compliance with the matters set forth in Section 4.1, any law, rule,
ordinance or regulation or judgment, decree, order, award or governmental
Permit, in either case to which the Company, any Subsidiary or any Seller, is
subject or by which any of them or their respective properties or assets is
bound, except where, in all cases (other than those relating to the articles of
incorporation or by-laws (or comparable constitutional documents) of the Company
or any Subsidiary, any Material Contract or any governmental Permit the failure
of which to maintain would be reasonably likely to impair the ability of the
Company or any Subsidiary to conduct its business substantially in the ordinary
and usual course consistent with past practice), such breach, violation,
default, acceleration or creation, individually or in the aggregate, would not
be reasonably likely to have a Material Adverse Effect, or would not be
reasonably likely to prohibit or materially impair the Company's or the Sellers'
ability to perform their respective obligations under this Agreement.
(g) Compliance with Law. Except as set forth in Schedule 3.1(g), the
Company and the Subsidiaries are not in violation of any Applicable Laws, are in
compliance with all billing policies and procedures of Governmental Authorities
applicable to the operation of their respective businesses, and all governmental
Permits required to be held by the Company and the Subsidiaries to conduct their
respective businesses have been obtained and are in full
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force and effect and are being complied with in all respects, except for any
violation, non-compliance or failure to hold a Permit which, individually or in
the aggregate, would not be reasonably likely to have a Material Adverse Effect.
Notwithstanding the foregoing or any other representation or warranty in this
Agreement, neither the Company nor any Seller makes any representation or
warranty with respect to whether the businesses of doctors of optometry having
contractual arrangements with the Company or any of its Subsidiaries are in
violation of any Applicable Laws, in compliance with applicable billing policies
and procedures or in possession of required Permits to conduct their respective
businesses, except in each case to the extent that the foregoing affects the
Company's compliance with Applicable Laws, billing policies and procedures, or
the Company's need to possess Permits.
(h) Title to Properties; Absence of Encumbrances, etc.
(i) Schedule 3.1(h)(i) hereto lists all real property leases
and subleases entered into by the Company or its Subsidiaries at the
locations described thereon as of the date hereof (the "Lease
Agreements"). Each Lease Agreement which by its terms requires the consent
of any Person to be obtained in connection with the execution, delivery
and performance of this Agreement or the consummation of the transactions
contemplated hereby is designated as such on Schedule 3.1(h)(i) (such
consents, the "Lease Consents"). With respect to each Lease Agreement:
(A) the Lease Agreement is and, subject to obtaining the
applicable Lease Consents, will continue to be legal,
valid, binding, enforceable against the Company or its
Subsidiary, as applicable, and in full force and effect
on identical terms following the consummation of the
transactions contemplated hereby;
(B) neither the Company nor the applicable Subsidiary party
thereto or, to the knowledge of the Company and the
Management Sellers, any other party is in breach or
default, and, subject to obtaining the applicable Lease
Consents, no event has occurred which, with notice or
lapse of time, would constitute such a breach or default
or permit termination, modification, or acceleration
thereunder;
(C) to the knowledge of the Company and the Management
Sellers, there are no disputes, oral agreements, or
forbearance programs in effect as to the lease or
sublease;
(D) neither the Company nor any Subsidiary has assigned,
transferred, conveyed, mortgaged, deeded in trust, or
encumbered any interest in the leasehold or
subleasehold; and
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(E) all facilities leased or subleased thereunder are
supplied with utilities and other services necessary for
operation of said facilities;
EXCEPT, in each case (A) through (E), for any failure of such
representations and warranties to be true and correct which, individually
or in the aggregate, would not be reasonably likely to have a Material
Adverse Effect.
(ii) Schedule 3.1(h)(ii) lists all real property owned by the
Company or the Subsidiaries as of the date hereof other than those
properties that are not material to the Company and the Subsidiaries
considered as a whole (the "Owned Real Property").
(iii) Except as set forth on Schedule 3.1(h)(iii), each of the
Company and the Subsidiaries has good and, in the case of the Owned Real
Property, marketable title to, or a valid and binding leasehold interest
in, all of the properties and assets owned or leased by the Company or any
Subsidiary, free and clear of any Encumbrances, except for: (A) any
Encumbrances incurred or created since January 3, 1998 in the ordinary and
usual course of business consistent with past practice and which,
individually or in the aggregate, are not reasonably likely to have a
Material Adverse Effect; (B) any Encumbrances for taxes, assessments and
other governmental charges not yet due and payable or due but not
delinquent or being contested in good faith by appropriate proceedings;
(C) any mechanics', workmen's, repairmen's, warehousemen's, carriers' or
other like liens and encumbrances arising in the ordinary and usual course
of business consistent with past practice or being contested in good faith
by appropriate proceedings (all of the foregoing Encumbrances, "Permitted
Encumbrances"); and (D) any Encumbrances which are matters of public
record or would be shown by a current title report or survey or physical
inspection, such as easements, quasi easements, covenants, licenses,
rights of way, land use, zoning or other legal requirements, ordinances or
plans, which, individually or in the aggregate, would not materially
adversely affect the ability of the Company and its Subsidiaries,
considered as a whole, to conduct their business substantially as
heretofore conducted.
(i) Subsidiaries. Schedule 3.1(i) contains a complete and correct
list of each Subsidiary, together with (i) their respective jurisdictions of
organization and (ii) the respective authorized and outstanding capital stock
(which term, for the purposes of this Section 3.1(i), includes any equivalent
equity interests) of each. All outstanding shares of capital stock of the
Subsidiaries have been duly and validly authorized and issued and, to the extent
applicable, are fully paid and nonassessable. The Company owns, directly or
indirectly, all of the issued and outstanding capital stock of each Subsidiary,
free and clear of any Encumbrance or agreement with respect thereto, including,
without limitation, any agreement, understanding or restriction affecting the
voting rights or other incidents of record or beneficial ownership pertaining to
such capital stock. There are no preemptive rights nor any outstanding
subscriptions, options, warrants, rights, convertible securities or other
agreements or commitments of any character
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giving any person a right to subscribe for or acquire any capital stock of any
Subsidiary. Each Subsidiary is a corporation duly incorporated, validly existing
and in good standing under the laws of its jurisdiction of incorporation and has
full corporate power and authority to carry on its business substantially as it
is now being conducted. Each Subsidiary is duly licensed or qualified to do
business, and has all Permits, in each jurisdiction in which the nature of the
business conducted by it or the character or location of the properties and
assets owned, leased or operated by it makes such licensing or qualification
necessary except where the failure to be so qualified or licensed would not be
reasonably likely to have a Material Adverse Effect. Schedule 3.1(i) contains a
complete and correct list of (a) all direct or indirect interests of the Company
or any Subsidiary in the securities of any corporation, partnership, joint
venture or other entity and (b) any agreement, understanding, contract or
commitment relating to the capital stock of or any other investment in any such
entity.
(j) Contracts and Commitments. (i) Except as set forth in Schedule
3.1(j) or Schedule 3.1(h)(i), neither the Company nor any Subsidiary is a party
to or bound by any Contract of any kind which is to be performed, or as to which
the Company or any Subsidiary may have any right or obligation, on or after the
Closing Date other than:
(A) Contracts which have been entered into in the
ordinary course of business consistent with past practice (including
purchase orders, leases and general contracts relating to store
construction); or
(B) Contracts pursuant to which the Company or any
Subsidiary, as the case may be, is or would be obligated to expend,
or entitled to receive, less than $250,000 in any 12-month period or
which is subject to cancellation by the Company or the Subsidiary,
as the case may be, upon less than three months' notice, without
incurring any expenditure and without penalty or increased cost.
(ii) Each Contract required to be disclosed in Schedule 3.1(j)
and each Lease Agreement identified as a significant Lease Agreement on
Schedule 3.1(h)(i) (each, a "Material Contract") is a valid and binding
agreement of the Company or a Subsidiary, as the case may be, and
(assuming in the case of each Material Contract other than the Xxxxx
Acquisition Agreements and the VisionWorks Acquisition Agreement the due
authorization of parties other than the Company or such Subsidiary, as the
case may be) enforceable in accordance with its terms, subject to
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium
and similar laws of general applicability affecting creditors' rights and
to general equity principles, except, in the case of each Material
Contract (other than the Xxxxx Acquisition Agreements and the VisionWorks
Acquisition Agreement) for any failure of validity or enforceability
which, individually or in the aggregate, would not be reasonably likely to
have a Material Adverse Effect. Except as set forth on Schedule 3.1(i),
(i) the Company and its Subsidiaries have complied in all respects with
all contractual and administrative requirements of insurers and other
third
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party payors with whom the Company and/or any of the Subsidiaries have or
are conducting business, except for any failure of compliance which,
individually or in the aggregate, would not be reasonably likely to have a
Material Adverse Effect, (ii) since January 3, 1998, neither the Company
nor any Subsidiary, nor, to the Company's and the Management Sellers'
knowledge, any other party thereto has terminated, cancelled or
substantially modified any Material Contract and, (iii) neither the
Company nor any Subsidiary nor, to the Company's and the Management
Sellers' knowledge, any other party thereto is in default under any
Material Contract, except for any default or breach which, individually or
in the aggregate, would not be reasonably likely to have a Material
Adverse Effect. Except as otherwise disclosed on Schedule 3.1(j), there
are no Contracts between or among any of the Company and/or any of the
Subsidiaries, on the one hand, and any officer or director of the Company
or any Subsidiary or any person owning five percent (5%) or more of the
outstanding shares of Common Stock or Preferred Stock or any respective
family member or affiliate of such officer, director, stockholder or note
holder, on the other hand.
(k) Financial Information. Newco has received true and complete
copies of (i) the audited consolidated balance sheets of the Company as of
December 28, 1996 and the related audited consolidated statements of operations,
stockholders' equity and cash flows for the year then ended, together with the
notes thereto (the "Audited Financial Statements"), and (ii) the unaudited
consolidated balance sheets of the Company as of January 3, 1998 and the related
unaudited consolidated statements of operations, stockholders' equity and cash
flows for the year then ended, together with the notes thereto (the "Unaudited
Financial Statements" and, collectively, with the Audited Financial Statements,
the "Year-End Financial Statements"). The Year-End Financial Statements have
been prepared in accordance with GAAP applied on a consistent basis (except as
may be noted therein) throughout the periods indicated and present fairly, in
all material respects, the consolidated financial position of the Company and
its consolidated Subsidiaries as of the respective dates thereof or for the
periods then ended.
(l) Absence of Certain Changes. Except as set forth in Schedule
3.1(l), or Schedule 3.1(j), since January 3, 1998, the Company and each
Subsidiary has conducted its business only in, and has not engaged in any
material transaction other than in, the ordinary and usual course of its
business and there has not been:
(i) any change in the financial condition, properties,
business or results of operations of the Company and the
Subsidiaries, considered as a whole, except those changes that,
individually or in the aggregate, would not be reasonably likely to
have a Material Adverse Effect;
(ii) any declaration, setting aside or payment of any dividend
or other distribution with respect to the capital stock of the
Company or any Subsidiary other than dividends on the Preferred
Stock;
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(iii) any sale, assignment or transfer of any of the assets of
the Company or any of the Subsidiaries which has had or would be
reasonably likely to have a Material Adverse Effect;
(iv) any change by the Company or any Subsidiary in account
ing principles, practices or methods;
(v) any increase in excess of $15,000 per annum in the
compensation of any officer or director of the Company or any
Subsidiary or any employee whose total compensation in 1996 exceeded
$100,000, or any material increase in or acceleration of the
benefits under, or adoption or amendment of, any bonus, insurance,
pension or other employee benefit plan, payment or arrangement, for
or with any such officer, director or employee;
(vi) except as set forth on Schedule 3.1(c) or as contemplated
by this Agreement, any commitment of the Company or any Subsidiary
to issue any shares of capital stock or obligations or securities
convertible into or exchangeable for shares of capital stock other
than dividends on the Preferred Stock paid or payable in shares of
Preferred Stock; or
(vii) any material damage, destruction or loss adversely
affecting any material asset or property of the Company or any
Subsidiary not covered to the full extent thereof by insurance other
than any applicable deductible.
(m) Absence of Undisclosed Liabilities. Except as disclosed in or
reserved for in the Year-End Financial Statements or as set forth on Schedule
3.1(m), there are no debts, liabilities or obligations, whether or not accrued,
contingent or otherwise, of the Company or the Subsidiaries except for (i)
obligations and liabilities arising in the ordinary course of business
subsequent to the date of the Year-End Financial Statements and (ii) obligations
or liabilities incurred by Newco or caused to be incurred by the Company or any
Subsidiary as a result of the transactions contemplated by this Agreement.
(n) Employee Benefits.
(i) Schedule 3.1 (n) contains a complete and accurate list of
all material bonus, deferred compensation, incentive, pension,
retirement, profit-sharing, thrift, savings, employee stock
ownership, stock bonus, stock purchase, restricted stock, stock
option, severance, welfare and fringe benefit plans, employment or
severance agreements and all similar practices, policies and
arrangements in which any employee or former employee (the
"Employees"), consultant or former consultant (the "Consultants") or
director or former director (the "Directors") of the
Company or any Subsidiary participates or to which any such
Employees,
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Consultants or Directors are a party (the "Plans"). Neither the
Company nor any of its subsidiaries has any commitment to create any
additional Plan or to modify or change any existing Plan in a
material respect.
(ii) Each Plan has been operated and administered in all
material respects in accordance with its terms and with applicable
law, including, but not limited to, the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), and the Code. Each Plan
which is an "employee pension benefit plan" within the meaning of
Section 3(2) of ERISA (a "Pension Plan") and which is intended to be
qualified under Section 401(a) of the Code has received a favorable
determination letter (including a determination that the related
trust under such Plan is exempt from tax under Section 501 (a) of
the Code) from the Internal Revenue Service for "TRA" (as defined in
Rev. Proc. 93-39), and the Company is not aware of any circumstances
which could result in revocation of any such favorable determination
letter. There is no material pending or, to the best knowledge of
the Company or the Management Sellers, threatened legal action, suit
or claim relating to the Plans. Neither the Company nor any
Subsidiary has engaged in a transaction with respect to any Plan
that would reasonably be expected to subject the Company or any
Subsidiary to a material Tax or penalty imposed by either Section
4975 of the Code or Section 501 (i) of ERISA.
(iii) No liability (other than for payment of premiums to the
Pension Benefit Guaranty Corporation (the "PBGC") which have been
made or will be made on a timely basis) under Title IV of ERISA has
been or is expected to be incurred by the Company or any of its
Subsidiaries with respect to any ongoing, frozen or terminated
"single-employer plan", within the meaning of Section 4001(a)(15) of
ERISA, currently or formerly maintained by any of them, or any
single-employer plan of any entity (an "ERISA Affiliate") which is
or has been considered one employer with the Company under Section
4001(b) of ERISA or Section 414 of the Code (an "ERISA Affiliate
Plan"). Except for the Company's 401(k) plans or except as set forth
on Schedule 3.1(n), none of the Company, the Subsidiaries or any
ERISA Affiliate contributes to, sponsors, or maintains, or have ever
contributed to, sponsored, or maintained a single employer plan or
any Pension Plan subject to Section 412 of the Code. None of the
Company, the Subsidiaries or an ERISA Affiliate contributes to or
has ever contributed to a multiemployer plan under Title IV of
ERISA.
(iv) All contributions required to be made under the terms of
any Plan or ERISA Affiliate Plan have been timely made or have been
reflected on the Company's financial statements.
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(v) Except as set forth on Schedule 3.1(n), neither the
Company nor any Subsidiary has any obligations to provide retiree
health and life insurance benefits or other death benefits under any
Plan, other than benefits mandated by Section 4980B of the Code. To
the knowledge of the Company and the Management Sellers, there has
been no communication to Employees by the Company that would
reasonably be expected to promise or guarantee such Employees
retiree health or life benefits on a permanent basis, and each such
Plan may be amended or terminated without incurring liability
thereunder.
(vi) With respect to each Plan, the Company has provided or
made available to Newco, if applicable, true and complete copies of
existing: (A) current Plan documents and amendments thereto; (B)
current trust instruments and insurance contracts; (C) the latest
Forms 5500 filed with the IRS; (D) most recent actuarial report and
financial description; (E) forms filed with the PBGC; (F) most
recent determination letter issued by the IRS; (G) any Form 5310 or
Form 5330 filed with the IRS; and (H) most recent nondiscrimination
tests performed under ERISA and the Code (including 401(k) and
401(m) tests).
(vii) All Plans covering foreign Employees comply in all
respects with applicable local law. The Company and its Subsidiaries
have no material unfunded liabilities with respect to any Plan which
covers foreign Employees. Any liabilities of the Company and its
Subsidiaries with respect to any Plan which covers foreign Employees
are reflected in the Company's Year-End Financial Statements.
(viii) Except as expressly contemplated by this Agreement or
as set forth on Schedule 3.1(n), the consummation of the
transactions contemplated by this Agreement would not, directly or
indirectly (including, without limitation, as a result of any
termination of employment prior to or following the Effective Date)
reasonably be expected to (A) entitle any Employee, Consultant or
Director to any payment (including severance pay or similar
compensation) except as expressly contemplated by the agreements set
forth under the heading "Employment, Consulting and Related
Agreements" on Schedule 3.1(j), (B) result in the vesting or
acceleration of any benefits under any Plan, or (C) result in any
material increase in benefits under any Plan.
(ix) Except as set forth on Schedule 3.1(n), as a result,
directly or indirectly, of the transactions contemplated by this
Agreement (including, without limitation, as a result of any
termination of employment prior to or following the Closing Date),
none of Newco or the Company or any Subsidiary will be obligated to
make a payment to an individual who is a "disqualified individual"
that would be characterized as an "excess parachute payment" (as
such terms are
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defined in Section 280(b)(1) of the Code) without regard to whether
such payment is reasonable compensation for personal services
performed or to be performed in the future.
(o) Litigation. Except as disclosed in Schedule 3.1(o), there is no
action, order, writ, injunction, judgment or decree outstanding or suit,
litigation, proceeding, labor dispute (other than routine grievance procedures),
arbitral action, investigation known to the Company or the Management Sellers,
lawsuit or reported claim (collectively, "Actions") pending or, to the knowledge
of the Company or any Management Seller, threatened against or relating to the
Company or any Subsidiary, except for Actions which, if resolved adversely to
the Company or a Subsidiary, individually or in the aggregate, would not be
reasonably likely to have a Material Adverse Effect.
(p) Taxes. Except as set forth in Schedule 3.1(p), as reflected in
the Year-End Financial Statements or as would not be reasonably likely to have a
Material Adverse Effect,
(i) All Tax Returns required to have been filed by or with
respect to the Company or any Subsidiary or any affiliated,
combined, consolidated, unitary or similar group of which the
Company or any Subsidiary is or was a member (a "Relevant Group")
with any taxing authority have been duly filed, and each such Tax
Return is correct and complete in all respects and correctly and
completely reflects the Tax liability and all other information
required to be reported thereon. All Taxes owed by the Company or
any Subsidiary or any member of a Relevant Group (whether or not
shown on any Tax Return) have been paid or, in the case of Taxes
attributable to the Company and the Subsidiaries, are duly provided
for in the Year-End Financial Statements.
(ii) The reserves for Taxes due or owing by the Company and
the Subsidiaries (as opposed to any reserve for deferred Taxes
established to reflect timing differences between book and Tax
income) in the Year-End Financial Statements are and will be
sufficient for all unpaid Taxes, whether or not disputed, of the
Company and the Subsidiaries. As of the Closing Date, such reserves
as adjusted in accordance with past practice, will be sufficient for
the then-unpaid Taxes of the Company and the Subsidiaries
attributable to periods prior to and ending on the Closing Date.
(iii) Neither the Company nor any Subsidiary is a party to any
agreement extending the time within which to file any Tax Return. No
claim has ever been made by any taxing authority in a jurisdiction
in which the Company or any Subsidiary does not file Tax Returns
that it is or may be subject to taxation by that jurisdiction.
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36
(iv) The Company and each Subsidiary have withheld and paid
all Taxes required to have been withheld and paid and have complied
with information reporting and backup withholding requirements,
including all related record keeping requirements, in connection
with amounts paid or owing to any employee, creditor, independent
contractor or other third party.
(v) There is no dispute or claim concerning any Tax liability
of the Company or any Subsidiary either (i) claimed or raised by any
taxing authority or (ii) otherwise known to any Seller, the Company
or any Subsidiary. No issues have been raised in any examination by
any taxing authority with respect to the Company or any Subsidiary
which, by application of similar principles, reasonably could be
expected to result in a proposed deficiency for any other period not
so examined. Schedule 3.1(p) lists all federal, state, local and
foreign income Tax Returns filed by or with respect to the Company
or any Subsidiary for all taxable periods ended on or after December
31, 1993 (and the dates on which those Tax Returns were filed with
the relevant taxing authority), indicates those Tax Returns, if any,
that have been audited, and indicates those Tax Returns that
currently are the subject of audit. Sellers have made available to
Newco or its Affiliates complete and correct copies of all federal,
state, local and foreign income Tax Returns filed by, and all Tax
examination reports and statements of deficiencies assessed against
or agreed to by, the Company or any Subsidiary for taxable periods
ended on or after December 31, 1993.
(vi) Neither the Company nor any Subsidiary has waived any
statute of limitations in respect of Taxes or agreed to any
extension of time with respect to any tax assessment or deficiency.
(vii) Neither the Company nor any Subsidiary has made any
payments, is obligated to make any payments, or is a party to any
agreement that under certain circumstances could require it to make
any payments, that are not deductible under Section 280G of the Code
or that could give rise to an excise tax under Section 4999 of the
Code.
(viii) Neither the Company nor any Subsidiary is a party to
any Tax allocation or sharing agreement, tax indemnification or
guaranty or similar agreement regarding Taxes.
(ix) Neither the Company nor any Subsidiary is, or at any time
has been, a "United States real property holding corporation" within
the meaning of Section 897(c)(2) of the Code.
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(x) None of the assets of the Company or any Subsidiary
constitutes tax-exempt bond financed property or tax-exempt use
property, within the meaning of Section 168 of the Code. Neither the
Company or any Subsidiary is a party to any "safe harbor lease" that
is subject to the provisions of Section 168(f)(8) of the Code as in
effect prior to the Tax Reform Act of 1986, or to any "long-term
contract" within the meaning of Section 460 of the Code.
(xi) Neither the Company nor any Subsidiary is a "consenting
corporation" within the meaning of Section 341(f)(1) of the Code, or
comparable provisions of any state statutes, and none of the assets
of the Company or any Subsidiary is subject to an election under
Section 341(f) of the Code or comparable provisions of any state
statutes.
(xii) Except as disclosed in Schedule 3.1(p), neither the
Company nor any Subsidiary is a party to any joint venture,
partnership or other arrangement that is treated as a partnership
for federal income Tax purposes.
(xiii) There are no accounting method changes or proposed or
threatened accounting method changes, of the Company or any
Subsidiary, nor any other item, that could give rise to an
adjustment under Section 481 of the Code for periods after the
Closing Date, and the Company and its Subsidiaries will not be
required to make any such Section 481 adjustment as a result of the
transactions contemplated by this Agreement.
(xiv) Neither the Company nor any Subsidiary has received any
written ruling of a taxing authority related to Taxes or entered
into any written and legally binding agreement with a taxing
authority relating to Taxes.
(xv) Each of the Company and its Subsidiaries has disclosed
(in accordance with Section 6662(d)(2)(B)(ii) of the Code) on its
federal income Tax Returns all positions taken therein that could
give rise to a substantial understatement of federal income Tax
within the meaning of Section 6662(d) of the Code.
(xvi) Neither the Company nor any Subsidiary has any liability
for Taxes of any Person other than the Company or any Subsidiary (i)
under Section 1.1502-6 of the treasury regulations (or any similar
provision of state, local or foreign law), (ii) as a transferee or
successor, (iii) by Contract or (iv) otherwise.
(xvii) There currently are not and have not been in any
taxable year any limitations on the utilization of the net operating
losses, built-in losses, capital losses, tax credits or other
similar items of the Company or any Subsidiary
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(collectively, the "Tax Losses") under the Code or treasury
regulations promulgated thereunder or other applicable law.
(xviii) All deficiencies asserted or assessments made against
the Company or any Subsidiary as a result of any examinations by any
taxing authority have been settled and fully paid, or are fully
reflected as a liability in the Year-End Financial Statements. All
elections with respect to Taxes affecting the Company or any
Subsidiary, as of the date hereof, are set forth in the Tax Returns,
other than any such elections which are not required to be included
in the Tax Returns.
(xix) None of the Company or its Subsidiaries has taken any
action including, but not limited to, the sale of any asset using
the installment method that would have the effect of deferring any
material liability for Taxes for the Company or the Subsidiaries
from any taxable period ending at or before the date hereof to any
taxable period thereafter.
(xx) There are no Encumbrances on any of the assets of the
Company and its Subsidiaries with respect to Taxes, other than
Encumbrances for real property Taxes not yet due and payable.
(xxi) The Company and its Subsidiaries shall have fully
complied with all federal, state, local and foreign Tax withholding
obligations arising in connection with the cancellation or exercise
of the Company options, rights and warrants, and Newco shall have no
liability therefor.
(xxii) Any adjustment of Taxes of the Company or its
Subsidiaries made by the Internal Revenue Service in any examination
which is required to be reported to state, local, foreign or other
taxing authorities has been so reported, and any additional Taxes
due with respect thereto have been paid.
(xxiii) No power of attorney has been granted by the Company
or the Subsidiaries, and is currently in force, with respect to any
matter relating to Taxes.
(q) Intellectual Property. Schedule 3.1(q) sets forth a list and
brief description (including where applicable the country of registration and
registration numbers) of (i) all patents, patent applications, registered
trademarks, trademark applications, registered copyrights and copyright
applications ("Intellectual Property") that are owned by the Company or the
Subsidiaries and used in their businesses and (ii) all agreements under which
the Company or the Subsidiaries are licensed or otherwise permitted to use
Intellectual Property. Except as set forth in Schedule 3.1(q), (i) with respect
to the trademarks designated on Schedule 3.1(q) as "Major Marks," there are no
contractual, legal or equitable restrictions that would materially impair the
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use of the Major Marks in connection with the business of the Company and the
Subsidiaries and the Major Marks, to the knowledge of the Company and the
Management Sellers, do not infringe upon or otherwise violate the intellectual
property rights of any other Person, and (ii) no Person is challenging or, to
the knowledge of the Company and the Management Sellers, infringing or otherwise
violating the Intellectual Property of the Company and the Subsidiaries, except
in each case for restrictions, challenges, infringements or violations which,
individually or in the aggregate, would not be reasonably likely to have a
Material Adverse Effect.
(r) Environmental Matters. Except as disclosed in Schedule 3.1(r),
which disclosed items of noncompliance, individually or in the aggregate, would
not reasonably be expected to have a Material Adverse Effect with respect to the
Company and/or its Subsidiaries:
(i) The Company and its Subsidiaries hold and formerly held,
and are and have been, in compliance with, all Environmental
Permits;
(ii) The Company and its Subsidiaries are, and have been in
compliance with all applicable Environmental Laws;
(iii) Neither the Company nor any of its Subsidiaries has
received any Environmental Claim, and neither the Company nor any
Management Seller is aware after due inquiry of any threatened
Environmental Claim or of any circumstances, conditions or events
that could reasonably be expected to give rise to an Environmental
Claim against the Company or any of the Subsidiaries;
(iv) There are no (1) underground storage tanks, (2)
polychlorinated biphenyls, (3) asbestos or asbestos-containing
materials, (4) urea-formaldehyde insulation, (5) sumps, (6) surface
impoundments, (7) landfills, (8) sewers or septic systems or (9)
Hazardous Substances present at any facility currently or formerly
owned, leased, operated or otherwise used by the Company and/or any
of the Subsidiaries that could reasonably be expected to give rise
to liability of any of the Company or its Subsidiaries under any
Environmental Laws;
(v) There are no past (including, without limitation, with
respect to assets or businesses formerly owned, leased or operated
by the Company or any Subsidiary) or present actions, activities,
events, conditions or circumstances, including without limitation
the release, threatened release, emission, discharge, generation,
treatment, storage or disposal of Hazardous Substances, that could
reasonably be expected to give rise to liability of the Company or
any Subsidiary under any Environmental Laws or any contract or
agreement;
(vi) No modification, revocation, reissuance, alteration,
transfer, or amendment of the Company's or any Subsidiary's
Environmental Permits, or any
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review by, or approval of, any third party of such Environmental
Permits is required in connection with the execution or delivery of
this Agreement or the consummation of the transactions contemplated
hereby or the continuation of the business of the Company or any
Subsidiary following such consummation;
(vii) Hazardous Substances have not been generated,
transported, treated, stored, disposed of, released or threatened to
be released at, on, from or under any of the properties or
facilities currently or formerly owned, leased or otherwise used,
including without limitation for receipt of the Company's or any
Subsidiary's wastes, by the Company or any Subsidiary, in violation
of or in a manner or to a location that could reasonably be expected
to give rise to liability under any Environmental Laws;
(viii) Neither the Company nor any Subsidiary has assumed,
contractually or by operation of law, any liabilities or obligations
under any Environmental Laws;
(ix) The Company and each of the Subsidiaries have accrued or
otherwise provided, in accordance with GAAP, for all damages,
liabilities, penalties or costs that they may incur in connection
with any claim pending or threatened against them, or any
requirement that is or may be applicable to them, under any
Environmental Laws, and such accrual or other provision is reflected
in the Year-End Financial Statements.
(s) Insurance. Schedule 3.1(s) lists all material insurance policies
maintained by or on behalf of the Company or any of the Subsidiaries ("Insurance
Policies") (specifying the insurer, amount of insurance, type of insurance and
expiration date). All such Insurance Policies are in full force and effect, and
all premiums due and payable that are necessary to maintain such policies in
full force and effect have been paid.
(t) Brokers and Finders. No Person is or will be entitled to receive
from Newco, any of the Sellers, the Company or any of its Subsidiaries, or their
respective directors, officers, employees or agents, any broker's, finder's or
similar fee or commission in connection with the transactions contemplated by
this Agreement on account of services rendered to any Seller or the Company or
any Subsidiary other than the fees and expenses of Xxxxxxx, Xxxxx & Co., as
financial advisor to the Company.
(u) Employee Matters. Except as set forth on Schedule 3.1(u),
neither the Company nor any Subsidiary is a party to any written or oral
Contract relating to employment or severance obligations. None of the employees
of the Company or any Subsidiary is represented by a labor union. No petition
has been filed or proceedings instituted by any employee or group of employees
with any labor relations board seeking recognition of a bargaining
representative
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and, to the knowledge of the Company and the Management Sellers, there is no
organizational effort currently being made or threatened by or on behalf of any
labor union to organize any employees of the Company or any of its Subsidiaries.
There arc no controversies or disputes pending between the Company and its
Subsidiaries on the one hand and any of their employees on the other hand,
except for controversies and disputes with individual employees arising in the
ordinary course of business which have not had and are not likely to have,
individually or in the aggregate, a Material Adverse Effect
(v) Contingent Payments. Except as set forth on Schedule 3.1(v),
neither the Company nor any Subsidiary is, or may become, obligated to pay any
amount, or provide any item of value, to any Person in respect of any earnout or
other contingent payment arising out of the acquisition of any assets, stock or
business. The total amount that is required to satisfy in full the Company's
obligations for earnout payments to Xx. Xxxxxx X. Xxxxx and Dr. Xxxxxxx Xxxxxxxx
(the "Xxxxx Earnout Payment") does not exceed $2,250,000.
(w) Disclosure. The representations and warranties contained in this
Section 3.1 do not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the representations and
warranties contained in this Section 3.1 not misleading.
(x) No Other Representations or Warranties. Except for the
representations and warranties contained in this Section 3.1, none of the
Sellers nor any other Person makes any other express or implied representation
or warranty on behalf of the Sellers, the Company, its directors, officers,
agents, or the Subsidiaries.
3.2 Representations and Warranties of Newco. Newco hereby represents
and warrants to the Company and the Sellers that:
(a) Organization and Authority of Newco. Newco is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Delaware and has full corporate power and authority to carry on its business
as it is now being conducted, to enter into this Agreement and to perform its
obligations hereunder. This Agreement has been duly authorized, executed and
delivered by Newco and, except for the stockholder approval required by Section
2.14(b), has been approved by the holder of all of the issued capital stock of
Newco and no further proceedings on the part of Newco are necessary to authorize
this Agreement, and this Agreement constitutes a valid and binding obligation of
Newco, enforceable in accordance with its terms, and no other proceedings on the
part of Newco are necessary to authorize this Agreement and the consummation of
the transactions contemplated hereby.
(b) Consents and Approvals. Except as required by the HSR Act, no
consent, approval or authorization of, or declaration, filing or registration
with, any Governmental Authority or any other Person is required to be made or
obtained by Newco in connection with
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the execution, delivery and performance of this Agreement and the consummation
of the transactions contemplated hereby, except for such consents, approvals,
authorizations, declarations, filings or registrations which the failure to make
or obtain, individually or in the aggregate, would not be reasonably likely to
have a Material Adverse Effect or to prohibit or materially impair Newco's
ability to perform its obligations under this Agreement.
(c) Non-contravention. The execution and delivery of this Agreement
by Newco does not, and the consummation by Newco of the transactions
contemplated hereby on its part will not, constitute or result in (i) a breach
or violation of, or a default under, the certificate of incorporation or by-laws
of Newco or (ii) subject to obtaining the consents referred to in Section 3.2(b)
as being required hereunder (including those set forth on Schedule 3.2(b)), a
breach or violation of, a default under, or the acceleration of or the creation
of an Encumbrance on assets of Newco (with or without the giving of notice or
the lapse of time) pursuant to, (A) any right or obligation of Newco under any
Contract, or (B) assuming compliance with the matters set forth in Section 4.1,
any law, rule, ordinance or regulation or judgment, decree, order, award or
governmental Permit, in either case to which Newco is subject or by which it or
its properties or assets is bound, except where, in all cases (other than those
relating to the certificate of incorporation or by-laws of Newco), such breach,
violation, default, acceleration or creation, individually or in the aggregate,
would not be reasonably likely to have a Material Adverse Effect, or would not
be reasonably likely to prohibit or materially impair Newco's ability to perform
its obligations under this Agreement.
(d) Brokers and Finders. No Person is or will be entitled to receive
from Newco, or its directors, officers, employees or agents, any broker's,
finder's or similar fee or commission in connection with the transactions
contemplated by this Agreement on account of services rendered to Newco. Fees
and expenses payable under the Financing Letters and to THL Equity Advisors IV,
LLC pursuant to a separate agreement in connection with the Recapitalization
shall be paid by the Surviving Corporation in connection with the Closing.
(e) Financial Capability. On the Closing Date, subject to the
funding by the institutions which have executed the Financing Letters, the
Company and Newco will have sufficient funds to consummate the Recapitalization.
Schedule 3.2(e) is a true and accurate schedule of the sources and amounts of
all funds committed to Newco for the purpose of performing its obligations
hereunder.
(f) No Other Representations or Warranties. Except for the
representations and warranties contained in this Section 3.2, neither Newco nor
any other Person makes any other express or implied representation or warranty
on behalf of Newco, its directors, officers, agents and Affiliates.
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ARTICLE IV
Conditions to Closing
4.1 Conditions to the Obligations of Sellers and Newco. The
obligations of the parties to consummate the Recapitalization shall be subject
to the satisfaction or waiver by both parties prior to or at the Effective Date
of each of the following conditions:
(a) No Injunction. No injunction, temporary restraining order,
judgment or other order or decree of any Governmental Authority shall have been
issued or been entered, nor shall any statute, rule or regulation have been
enacted or promulgated, in either case which is in effect on the Closing Date
and prohibits or would materially impair the parties' ability to consummate the
Recapitalization on the terms provided hereunder.
(b) HSR Act. Each party required to do so by the HSR Act shall have
duly filed with the Federal Trade Commission and the Antitrust Division of the
Department of Justice the report required under the HSR Act with respect to the
sale and purchase of the Common Shares; and the waiting period required by the
HSR Act, and any extensions thereof obtained by request or other action of such
Governmental Authorities, shall have expired or been earlier terminated by such
Governmental Authorities.
4.2 Conditions to the Obligations of Newco. The obligation of Newco
to consummate the Recapitalization shall be subject to the satisfaction or
waiver by Newco prior to or at the Effective Date of each of the following
conditions:
(a) Representations, Warranties and Covenants. Each representation
and warranty of the Company and the Sellers shall be true and correct, in each
case when made and as of the Effective Date as if such representations and
warranties were made at and as of the Effective Date, provided that
representations and warranties expressly made as of a specific date need be true
and correct only as of such specific date; and the Company and the Sellers shall
have performed in all material respects all agreements and covenants required
hereby to be performed by the Company and the Sellers, respectively, prior to or
at the Effective Date. There shall be delivered to Newco certificates of the
Company and Management Sellers, respectively, to the foregoing effect.
(b) Opinion of Counsel to the Company. Cox & Xxxxx, Incorporated
counsel for the Company, shall have delivered to Newco an opinion, dated the
Closing Date, substantially in the form of EXHIBIT C.
(c) FIRPTA Certificate. The Company and the Sellers shall have
provided to Newco and the Company, both Company and stockholder FIRPTA
certificates, pursuant to Sections 897 and 1445 of the Code and the treasury
regulations thereunder.
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(d) Funding. The financing transactions contemplated by the
Financing Letters shall be consummated concurrently with the consummation of the
Merger and the other transactions contemplated by the Recapitalization.
(e) Other Regulatory Approvals and Consents. The Company shall have
obtained all consents and approvals of Governmental Authorities, if any, set
forth on Schedule 3.1(e).
(f) Releases. The Company shall have received a consent and release,
in a form reasonably acceptable to Newco, from the holder of the BNP Warrant and
each holder of Employee Options other than any Seller.
(g) Cancellation of Securities. Prior to or at the Effective Time,
all outstanding Employee Options, Class A Warrants, Class B Warrants, the BNP
Warrant, and all other securities convertible for or exercisable into shares of
the Company's capital stock, shall have been exercised or canceled in accordance
with Article II.
(h) Preferred Stock. All shares of the Preferred Stock shall have
been repurchased.
(i) Xxxxx Earnout Payment. The Xxxxx Earnout Payment shall have been
paid in full and a release, in a form reasonably satisfactory to Newco, shall
have been executed and delivered by each of Dr. Samit and Xx. Xxxxxxxx to the
Company in respect of the foregoing.
(j) Severance Obligations; Change in Control Payments. The Company
and its Subsidiaries shall have paid in full all of the Severance and Change in
Control Payments and the Company shall have received a release from each of the
recipients thereof in a form reasonably acceptable to Newco.
(k) Senior Credit Facility. All of the Company's obligations under
the CAI Credit Agreement shall have been terminated and all amounts outstanding,
accrued or payable in respect thereto, including all principal, interest,
penalties, premiums, fees, expenses and any other charges or liabilities
associated therewith, shall have been paid in full, all security interests,
pledges, guarantees and encumbrances in respect thereof shall have been released
and Credit Agricole Indosuez shall have delivered a certificate to the foregoing
effect in form reasonably acceptable to Newco, provided that the release of the
Company's guarantee of the indebtedness of Xxxxxx Xxxx, O.D. to Credit Agricole
Indosuez shall be effected concurrently with the refinancing of such
indebtedness by the Company's senior lenders pursuant to the Financing Letters.
(l) Repurchase of Senior Notes. Not less than 65% of the outstanding
Senior Notes shall have tendered into the Senior Notes Offer and shall have been
repurchased by the
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Company and the Company shall have deposited in trust for the benefit of the
holders of Senior Notes an amount of cash and/or U.S. Treasury securities to be
sufficient, as of October 1, 1998, to pay and discharge all amounts outstanding,
accrued or payable (including all principal, interest, premiums and penalties)
as of the Effective Date in respect of all of the Senior Notes not theretofore
tendered to and repurchased by the Company in connection with the Senior Notes
Offer.
(m) Noncompetition Agreement. The Sellers shall have executed and
delivered to Newco a non-competition agreement in the form attached hereto as
EXHIBIT D.
(n) The Shareholders Agreement shall have been terminated in
accordance with its terms, and shall no longer be in force as of the Effective
Time.
(o) Newco shall have received a true and complete copy of the
audited consolidated balance sheets of the Company as of January 3, 1998 and the
related audited consolidated statements of operations, stockholders' equity and
cash flows for the year then ended, together with the notes thereto (the "Fiscal
1997 Audited Financial Statements") which confirm the accuracy of the Unaudited
Financial Statements.
(p) All agreements (other than this Agreement and the other
agreements entered into with Newco's approval in connection with the
Recapitalization) between the Company or any of its Subsidiaries, on the one
hand, and Xxxxx Capital Management Incorporated or any of its Affiliates, on the
other hand, shall have been terminated, all amounts accrued or payable
thereunder shall have been paid in full and all the Company's obligations
thereunder shall have been fully discharged.
(q) The shareholders of the Company shall have approved the Plan of
Merger.
(r) The amount of the Company's cash and cash equivalents shall not
be less than $2,500,000 as of the Closing Date.
4.3 Conditions to the Obligations of the Sellers. The obligations of
the Sellers to consummate the sale of the Common Shares under this Agreement
shall be subject to the satisfaction prior to or at the Closing of each of the
following conditions:
(a) Representations, Warranties and Covenants. Each representation
and warranty of Newco shall be true and correct, in each case when made and at
and as of the Closing Date as if such representations and warranties were made
at and as of the Closing Date, provided that representations and warranties
expressly made as of a specific date need be true and correct only as of such
specific date; and Newco shall have performed in all material respects all
material agreements and covenants required hereby to be performed by Newco prior
to or at
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the Closing Date. There shall be delivered to the Seller Representative
certificates of Newco to the foregoing effect.
(b) Opinion of Counsel to Newco. Xxxxxxxx, Xxxxxxx & Xxxxxxx, A
Professional Corporation, counsel for Newco, shall have delivered to the Seller
Representative an opinion, dated the Closing Date, addressed to the Company and
the Sellers substantially to the effect set forth in EXHIBIT E.
(c) The Company shall have provided evidence reasonably satisfactory
to Newco that none of the payments made or scheduled to be made to any
"disqualified individual" of the Company (within the meaning of section 280G(c)
of the Code and the regulations issued thereunder) shall constitute "excess
parachute payments" (within the meaning of section 280G(b) of the Code and the
regulations issued thereunder), but only with respect to those individuals who
shall have timely requested of the Company in writing that such payments are to
not constitute "excess parachute payments" and who have agreed in writing with
the Company that any such payments shall be made only upon obtaining shareholder
approval in accordance with Section 280G(b)(5) of the Code and the regulations
issued thereunder.
ARTICLE V
Covenants
5.1 Interim Operations of the Company. Following the date hereof and
prior to the Closing, except as otherwise expressly permitted by this Agreement
or consented to or approved by Newco in writing, the Company agrees that, and
each Seller shall use its reasonable best efforts to ensure that:
(a) the Company and the Subsidiaries shall operate their business
only in the ordinary and usual course consistent with past practice and use
reasonable best efforts which are consistent with past practice to preserve
their properties (including, without limitation, intellectual property rights)
and business and relationships with suppliers, customers, employees, creditors,
sublessees, licensees and other Persons with whom they have commercial dealings;
(b) the Company shall not (i) amend its articles of incorporation or
by-laws; (ii) split, combine or reclassify the outstanding shares of capital
stock of the Company; (iii) issue, sell, pledge, dispose of or encumber any
shares of, or securities convertible or exchangeable for, or options, warrants,
calls, commitments or rights of any kind to acquire, any shares of capital stock
of any class of the Company or any Subsidiary, except that (A) the Company may
issue or reserve for issuance additional shares of Preferred Stock to pay
dividends on the Preferred Stock in accordance with the Statement of Resolution
of the Preferred Stock and (B) the Company may issue shares of Common Stock upon
exercise of any Employee Options; or (iv) declare, set aside
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or pay any dividend payable in cash, stock or property with respect to any class
of capital stock other than dividends payable on Preferred Stock;
(c) neither the Company nor any Subsidiary shall (i) transfer,
lease, license, guarantee, sell, dispose of or create any Encumbrance with
respect to any individual capital asset of the Company or any Subsidiary if the
greater of the book value and the fair market value of such capital asset
exceeds $1,000,000, other than Permitted Encumbrances; (ii) incur or modify any
indebtedness for money borrowed or guarantee thereof, including without
limitation capitalized lease obligations, in excess of $500,000 other than
indebtedness incurred under the credit facilities of the Company in effect on
the date hereof in the ordinary and usual course of business consistent with
past practice; (iii) acquire directly or indirectly, by repurchase or otherwise
any shares of the capital stock of the Company or any Subsidiary except as
contemplated by this Agreement; (iv) except as expressly contemplated by the
Company's business plan for the fiscal year ending January 2, 1999 (the
"Business Plan"), a copy of which was previously delivered to Newco, authorize
any capital expenditure in excess of $500,000 individually or $1,000,000 in the
aggregate; or (v) except as expressly contemplated by the Business Plan, enter
into or renew any lease or other commitment in respect of real or personal
property to be performed over a period exceeding one year where the present
value of payments to be made thereunder exceeds $250,000 individually or
$1,000,000 in the aggregate;
(d) neither the Company nor any Subsidiary shall (i) except for
annual merit salary increases, which are being implemented in the ordinary
course of business and contemporaneously with the date of this Agreement,
increase the compensation payable by the Company or any Subsidiary to any of
their directors, officers or employees; or (ii) establish, amend, adopt, enter
into, or make any new (or accelerate or otherwise modify any existing) grants or
awards under, any Plan or award any bonus to any such director, officer or
employee;
(e) neither the Company nor any Subsidiary shall settle or
compromise any material claims or litigation or modify, amend or terminate any
of its Material Contracts or waive, release or assign any material rights or
claims;
(f) neither the Company nor any Subsidiary shall accelerate or delay
the delivery or sale of products or services, the incurrence of capital
expenditures, the satisfaction of payables or other liabilities or the
collection of receivables;
(g) the Company and the Subsidiaries shall maintain in full force
and effect the Insurance Policies;
(h) the Company and the Subsidiaries shall continue performance in
the ordinary course of their obligations under all Contracts;
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(i) the Company and the Subsidiaries shall continue to discharge
liabilities and obligations in the ordinary course of business;
(j) neither the Company nor any Subsidiary shall dispose of any
Owned Real Property;
(k) neither the Company nor any Subsidiary shall voluntarily permit
to be incurred any Encumbrances on any of its material assets;
(l) neither the Company nor any Subsidiary shall sell, assign,
transfer, license or convey any of their respective intellectual property
rights, except in the ordinary course of business;
(m) neither the Company nor any Subsidiary shall make any investment
in international operations, except for investments in existing international
operations in the ordinary course of business but not to exceed $50,000 in the
aggregate per annum; and
(n) neither the Company nor any Subsidiary shall authorize or enter
into an agreement to do any of the foregoing.
5.2 Access by Newco; Confidentiality. The Company shall allow Newco,
during regular business hours and upon reasonable advance notice, to have
reasonable access to the properties, books and records of the Company and the
Subsidiaries, and to conduct such examination of their condition as Newco
reasonably deems necessary or advisable to familiarize itself with such
business, properties, books, records, condition and other matters, and to verify
the representations and warranties of the Sellers hereunder. No investigation by
Newco or other information received by Newco shall operate as a waiver or
otherwise affect any representation, warranty or other agreement given or made
by the Sellers hereunder.
(b) In the event of the termination of this Agreement, Newco at its
own expense shall promptly deliver (without retaining any copies thereof) to the
Company, or (at the Company's option) confirm in writing to the Company that it
has destroyed, all information furnished to Newco or its representatives by
Sellers, the Company, the Subsidiaries or any of their respective agents,
employees or representatives as a result hereof or in connection herewith,
whether so obtained before or after the execution hereof, and confirm in writing
to the Company that it has destroyed all analyses, compilations, forecasts,
studies or other documents prepared by Newco or its Affiliates or their
respective agents or representatives which contain or reflect any such
information. Newco shall at all times prior to the Closing Date, and in the
event of termination of this Agreement, cause any information so obtained to be
kept confidential and will not use, or permit the use of, such information in
its business or in any other manner or for any other purpose except as
contemplated hereby.
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(c) All information provided or obtained pursuant to clause (a)
above shall be held by Newco in accordance with and subject to the terms of the
confidentiality agreement, dated December 5, 1997, between Xxxxxx X. Xxx Company
and the Company.
5.3 Consents and Reasonable Best Efforts. (a) As soon as practicable
after execution and delivery of this Agreement (and in no event more than ten
Business Days after the date hereof), Newco and the Sellers shall make, or cause
their Affiliates to make, all filings required under the HSR Act. In addition,
Newco and the Sellers will promptly furnish all information as may be required
by the Federal Trade Commission and the Department of Justice under the HSR Act
in order that the requisite approvals for the purchase and sale of the Shares
pursuant hereto, and the transactions contemplated hereby, be obtained or to
cause any applicable waiting periods to expire. The Company, the Sellers and
Newco will, as soon as practicable (and in no event more than ten Business Days
after the date hereof), commence to take all other action required to obtain as
promptly as practicable all other necessary consents, approvals, authorizations
and agreements of, and to give all notices and make all other filings with, any
third parties, including Governmental Authorities, necessary to authorize,
approve or permit the consummation of the transactions contemplated hereby, and
to obtain from BNP and each Employee Optionholder other than the Sellers a
consent to the payment of the applicable Per Share Merger Consideration due to
such Persons pursuant to Article II, and the Company, Newco and the Sellers
shall cooperate with each other with respect thereto. In addition, subject to
the terms and conditions herein provided, each of the parties hereto covenants
and agrees to use its reasonable best efforts to take, or cause to be taken, all
action or do, or cause to be done, all things necessary, proper or appropriate
to consummate and make effective the transactions contemplated hereby and to
cause the fulfillment of the parties' obligations hereunder. The Company and the
Sellers further agree that, subject to the terms and conditions of this
Agreement, each of the Company and the Sellers shall use reasonable best efforts
to cause the Closing to occur on or prior to the date 60 days after the date
hereof.
(b) Newco and the Company agree to use their reasonable best efforts
to take, or cause to be taken, all action or do, or cause to be done, all things
necessary, proper or appropriate to consummate and make effective the
transactions contemplated by the Financing Letters, to cause the fulfillment of
the parties' obligations hereunder and to cause the Closing to occur on or prior
to the date 60 days after the date hereof. Such reasonable best efforts shall
not include any obligation to obtain the bridge loan contemplated by Section
5.3(c) within such 60-day period.
(c) In the event that the offering of up to $150,000,000 aggregate
principal amount of senior subordinated debt securities contemplated by the
Financing Letters shall not have been consummated on or before the date 90 days
after the date hereof (the "Financing Deadline"), Newco agrees that it shall
exercise its right to obtain, on behalf of the Company, the bridge loan
contemplated by the bridge loan commitment letter dated March 5, 1998, among
Newco, Bankers Trust New York Corporation and Xxxxxxx Xxxxx Capital Corporation
(the
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"Bridge Loan Commitment Letter"), and shall use its reasonable best efforts and
take all actions necessary promptly, and in no event later than 14 days
following the Financing Deadline, to effect the transactions contemplated by the
Bridge Loan Commitment Letter for the purpose of satisfying the condition set
forth in Section 4.2(d).
5.4 Notification of Certain Matters. The Sellers and the Company
shall give prompt notice to Newco, and Newco shall give prompt notice to the
Seller Representative, of (i) the occurrence, or failure to occur, of any event
which occurrence or failure would be likely to cause any representation or
warranty contained in this Agreement and required to be made by the notifying
party to be untrue or inaccurate in any material respect any time from the date
hereof to the Closing Date and (ii) any material failure of the Company, Newco
or any Seller, as the case may be, to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by it hereunder, and
each party shall use reasonable efforts to remedy such failure, provided,
HOWEVER, that no disclosure by any party pursuant to this Section 5.4 shall be
deemed to amend or supplement any representation, warranty or schedule to this
Agreement or to prevent or cure any misrepresentation, breach of warranty, or
breach of covenant.
5.5 Publicity. Newco, the Company and the Seller Representative
agree to issue a joint press release announcing the execution of this Agreement
immediately following execution and delivery of this Agreement (the "Signing
Announcement"). Between the date hereof and the Closing (or, if the Closing does
not occur, the date this Agreement is terminated), Newco, the Company and the
Seller Representative agree not to issue any press release or make any similar
public announcement or communication, written or oral, in respect of the
transactions contemplated by this Agreement, other than the Signing Announcement
and any other press release, announcement or communication jointly approved by
Newco, the Company and the Seller Representative; provided, however, that no
party shall be restrained, after consultation with the others, from making such
disclosure as it shall be advised by counsel is required by Applicable Laws.
5.6 Notice of Cancellation. As soon as practicable after the date
hereof, the Company shall deliver to the Class A Warrantholders the notification
of a "Non-Surviving Combination" required under Section 4.04(a) of the Class A
Warrant Agreement.
5.7 Senior Notes Offer. As soon as practicable after the date
hereof, the Company shall deliver to the holders of Senior Notes an offer to
purchase all outstanding Senior Notes (the "Senior Notes Offer"). The Company
shall take all action necessary or advisable to consummate prior to the Closing
Date the purchase of all Senior Notes properly tendered to the Company as
contemplated by the Senior Notes Offer.
5.8 Employee Benefits. The Company will maintain, for a period of
one year after the Closing Date, without interruption, employee compensation and
benefit plans, programs and policies and fringe benefits (including
post-employment welfare benefits and severance) that
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will provide benefits to employees of the Company or the Subsidiaries who
continue employment that are in the aggregate no less favorable than those
provided pursuant to the Plans as in effect on the Closing Date. For a period of
one year following the Closing, the Company will honor all Plans pursuant to
their terms. Employees who continue employment shall be given credit for all
service with the Company and the Subsidiaries (or service credited by the
Company or the Subsidiaries for similar plans, programs or policies) under all
of the Company's employee benefit and fringe benefit plans, programs and
policies (other than equity compensation plans adopted on or after the Closing
Date) (including post-employment welfare benefits and severance) in which they
become participants for the first time after the Closing Date for all purposes
other than any benefit accrual.
5.9 Non-solicitation of Employees. Newco agrees that between the
date hereof and the Closing (or, if the Closing does not occur, the date this
Agreement is terminated), except with the prior written consent of the Company
or as expressly contemplated by this Agreement, Newco shall not, and shall
direct its subsidiaries and its and their respective directors, officers,
employees and representatives not to, directly or indirectly, hire, offer to
hire or entice away any officer or employee of the Company or in any other
manner persuade or attempt to persuade any such officer or employee to terminate
his relationship with the Company.
5.10 Further Assurances. Subject to the terms and conditions hereof,
the parties hereto agree to use their respective reasonable best efforts to
take, or cause to be taken, all actions, and to do, or cause to be done, all
things necessary, proper and advisable under Applicable Laws to consummate the
Recapitalization on the terms provided hereunder. In case at any time after the
Closing any further action is necessary, proper or advisable to carry out the
purposes of this Agreement, as soon as reasonably practicable the parties hereto
shall take all such action to effectuate such purposes.
5.11 Exclusivity. During the term of this Agreement, the Company and
each Seller agrees not to, directly or indirectly, solicit or initiate or enter
into discussions or transactions with, or encourage, or provide any confidential
information to, or continue to do any of the foregoing with any corporation,
partnership or other entity or group (other than Newco and its designees)
concerning any proposed sale of stock or partnership interest or any merger or
sale of securities or substantial assets of, or any similar transaction
involving, the Company or any of its component corporations or partnerships, and
the Company and each Seller shall cause each of the Subsidiaries to abide by the
foregoing restrictions. The Company and each Seller represents that neither he,
she or it nor any of his, her or its Affiliates is a party to or bound by any
agreement with respect to any such transaction other than as contemplated by
this Agreement.
ARTICLE VI
Survival
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6.1 Survival of Representations, Warranties and Covenants.
Notwithstanding any otherwise applicable statute of limitations, all
representations and warranties of the parties contained in this Agreement, and
any covenants or other agreements the performance of which is specified to occur
on or prior to the Closing or the Effective Date, shall not survive, and shall
terminate effective as of, the Effective Date.
ARTICLE VII
Miscellaneous
7.1 Payment of Expenses. Except as expressly provided in Sections
2.6(a) and 3.2(d), whether or not the transactions contemplated by this
Agreement shall be consummated, each party hereto shall pay all of his or its
own out-of-pocket and other expenses (including, without limitation, reasonable
attorneys' fees and disbursements) incident to preparing for, entering into and
carrying out this Agreement.
7.2 Waiver of Conditions. The conditions to each party's obligations
to consummate the transactions contemplated hereby are for the sole benefit of
such party and may be waived by such party in whole or in part to the extent
permitted by Applicable Laws. Any such waiver shall be valid only if set forth
in a written instrument signed on behalf of such party.
7.3 Termination. This Agreement may be terminated and the
transactions contemplated hereby abandoned:
(a) by mutual agreement of Newco, the Company and the Seller
Representative, on behalf of the Sellers;
(b) by Newco or by the Company and the Seller Representative, on
behalf of the Sellers, by giving written notice of such termination to the other
party, if (x) any condition to the terminating party's obligations hereunder has
not been satisfied or waived and (y) the Closing shall not have occurred on or
prior to September 30, 1998; provided, that the terminating party is not in
material breach of its obligations under this Agreement;
(c) by either Newco or the Company if the condition set forth in
Section 4.1(b) cannot be satisfied;
(d) by the Company and the Seller Representative on behalf of the
Sellers if the Closing shall not have occurred on or prior to 10 Business Days
following the satisfaction of all the conditions to Closing set forth in Article
IV hereof (other than conditions which, by their terms, are to be satisfied at
the Closing) as a result of any action or inaction by Newco;
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(e) by Newco if the Closing shall not have occurred on or prior to
10 Business Days following the satisfaction of all the conditions to Closing set
forth in Article IV hereof (other than conditions which, by their terms, are to
be satisfied at the Closing) as a result of any action or inaction by the
Company or any Seller; or
(f) by the Company and the Seller Representative, on behalf of the
Sellers, in the event that the condition to the Company's and the Seller's
obligations under Section 4.2(d) cannot be satisfied by the date 14 days after
the Financing Deadline;
in any case, without liability of any party hereto; provided, however, that
nothing herein shall relieve any party from liability for any breach of this
Agreement prior to such termination and no party shall be released from
liability hereunder if this Agreement is terminated and the transactions
abandoned by reason of (i) willful failure of such party to have performed its
obligations hereunder, or (ii) any knowing misrepresentation made by such party
of any matter set forth herein; and provided further that, notwithstanding any
termination of this Agreement, the provisions of Sections 5.2 (Access by Newco;
Confidentiality), 5.5 (Publicity), 7.1 (Payment of Expenses) and this Section
7.3 shall continue in full force and effect.
7.4 Schedules. The inclusion of any matter in any Schedule to this
Agreement shall be deemed to be an inclusion for all purposes of this Agreement,
including each representation and warranty to which it may relate, but only to
the extent that the relevance of such matter to a particular portion of this
Agreement, including any representation or warranty, is reasonably apparent from
the matter so disclosed.
7.5 Counterparts. 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.
7.6 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO
THE PRINCIPLES OF CONFLICTS OF LAWS THEREOF.
7.7 Notices. Any notice, request, instruction or other document to
be given hereunder shall be in writing and shall be given by hand delivery,
courier service, facsimile transmission (with confirmation of receipt) at the
following addresses, or at such other addresses as the parties may designate by
written notice in the manner aforesaid:
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If to Newco:
ECCA Merger Corp.
c/o Xxxxxx X. Xxx Company
00 Xxxxx Xxxxxx
Xxxxxx, XX 00000
Attn: Xxxxxxx X. XxXxxx
Facsimile: (000) 000-0000
With copies to:
Xxxxxxxx, Xxxxxxx & Xxxxxxx,
A Professional Corporation
000 Xxxxxxx Xxxxxx
Xxxxxx, XX 00000
Attn: Xxxxx Xxxxxx
Facsimile: (000) 000-0000
If to the Company or the Sellers:
Eye Care Centers of America, Inc.
00000 Xxxx Xxxxxx
Xxx Xxxxxxx, XX 00000
Attention: Xxxx X. Xxxxxxx
Facsimile: (000) 000-0000
and
Xxxxx Capital Management Incorporated
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx X. Xxxxxxxx
Facsimile: (000) 000-0000
With copies to:
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Xxxxxxxx & Xxxxxxxx
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx X. Xxxxxx, Esq.
Facsimile: (000) 000-0000
7.8 Entire Agreement, etc. This Agreement (i) constitutes the entire
agreement, and supersedes all other prior agreements, understandings,
representations and warranties, both written and oral, among the parties, with
respect to the subject matter hereof; (ii) shall inure to the benefit of and be
binding upon the parties hereto and their respective heirs, successors and
permitted assigns; (iii) is for the benefit only of such parties and is not
intended to create any obligations to, or rights in respect of, any other
persons or entities, except to the extent employee benefits are continued under
Section 5.8; and (iv) shall not be assignable by operation of law or otherwise;
provided, however, that (a) prior to the Effective Time, Newco shall be
permitted to assign or delegate any or all of its rights and/or obligations
hereunder to any affiliate of Newco reasonably satisfactory to the Company and
the Sellers and (b) at or after the Effective Time, the Company shall be
permitted to assign any or all of its rights hereunder to any Person.
7.9 Captions. The Article, Section, Schedule and paragraph captions
and the table of contents herein are for convenience of reference only, do not
constitute part of this Agreement and shall not be deemed to limit or otherwise
affect any of the provisions hereof.
7.10 Tax Matters.
(a) Cooperation on Tax Matters.
(i) Newco, the Company and any Subsidiary and Sellers shall
cooperate fully, as and to the extent reasonably requested by the
other party, in connection with the filing of Tax Returns and any
audit, litigation or other proceeding with respect to Taxes. Such
cooperation shall include the retention and (upon the other party's
request) the provision of records and information which are
reasonably relevant to any such audit, litigation or other
proceeding and making employees available on a mutually convenient
basis to provide additional information and explanation of any
material provided hereunder. The Company and any Subsidiary and
Sellers agree (A) to retain all books and records with respect to
Tax matters pertinent to the Company and any Subsidiary relating to
any taxable period beginning before the Closing Date until the
expiration of the statute of limitations including any extension
thereof of the respective taxable periods, and to abide by all
record retention agreements entered into with any taxing authority,
and (B) to give the other party reasonable written notice prior to
transferring, destroying or discarding any such books and records
and, if the other party so
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requests, the Company and any Subsidiary or Sellers, as the case may
be, shall allow the other party to take possession of such books and
records.
(ii) Newco and Sellers further agree, upon request, to use
their reasonable best efforts to obtain any certificate or other
document from any governmental authority or any other Person as may
be necessary to mitigate, reduce or eliminate any Tax that could be
imposed (including, but not limited to, with respect to the
transactions contemplated hereby).
(iii) Newco and Sellers further agree, upon request, to
provide the other party with all information that either party may
be required to report pursuant to Section 6043 of the Code and the
treasury regulations thereunder.
(iv) The Company agrees that all Tax Returns filed on or
before the Closing Date will be prepared consistent with past
practice. A draft of any such Tax Return will be provided to Newco
no less than 14 Business Days in advance of filing for Newco's
review and comment.
(b) Tax Sharing Agreements. All tax sharing agreements or similar
agreements with respect to or involving the Company and any Subsidiary shall be
terminated as of the Closing Date and, after the Closing Date, the Company and
any Subsidiary shall not be bound thereby or have any liability thereunder.
(c) Certain Taxes. All transfer, documentary, sales, use, stamp,
registration and other such Taxes and fees (including any penalties and
interest) incurred in connection with this Agreement (including any New York
State Gains Tax, New York City Transfer Tax and any similar tax imposed in other
states or subdivisions ("Transfer Taxes")), shall be paid by Sellers when due,
and Sellers will, at their own expense, file all necessary Tax Returns and other
documentation with respect to all such transfer, documentary, sales, use, stamp,
registration and other Taxes and fees, and, if required by applicable law, the
Company will, and will cause its Affiliates to, join in the execution of any
such Tax Returns and other documentation. The Sellers shall deliver to the
Company Form W-8 and W-9, as applicable, at the Closing and prior to any payment
for the securities pursuant to Article II. The Company shall withhold from
payments to Sellers any withholding taxes required by law.
7.11. Seller Representative. The Seller Representative is hereby
appointed by each Seller to act for the Sellers in connection with the
transactions contemplated by this Agreement, and any action under or in respect
of this Agreement taken by the Seller Representative shall be binding upon all
the Sellers. Each Seller agrees that the Seller Representative shall not be
liable for, and agrees to indemnify and hold the Seller Representative harmless
against, any claims, damages or losses that may arise out of any action or
omission of the Seller Representative in connection with its service in such
capacity, except any such claim,
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damage or loss that results from the Seller Representative's bad faith or
willful disregard of its duties hereunder.
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IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by the duly authorized officers of the parties hereto on the date
first hereinabove written.
ECCA MERGER CORP.
/s/ Xxxxxxx X. Brizins
------------------------------
By: Xxxxxxx X. Brizins
Title: Vice President
EYE CARE CENTERS OF
AMERICA, INC.
/s/ Xxxxxxx X. Xxxxxxx
------------------------------
By: Xxxxxxx X. Xxxxxxx
Title: President/CEO
SELLERS:
EQUITY LINKED INVESTORS L.P.
By: Xxxxx X. Xxxxx Associates
General Partner
/s/ Xxxxx X. Xxxxx
------------------------------
By: Xxxxx X. Xxxxx
Attorney-in-fact
EQUITY LINKED INVESTORS II
By: Xxxxx X. Xxxxx Associates - II
General Partner
/s/ Xxxxx X. Xxxxx
------------------------------
By: Xxxxx X. Xxxxx
Attorney-in-fact
59
INDOSUEZ EYE CARE PARTNERS
By: Indosuez XX XX, Inc., its
Managing General Partner
By: /s/ Xxxxx Xxxxxxxx
-------------------------
Xxxxx Xxxxxxxx
Vice President
By: /s/ Xxxxxxx X. Xxxxx
-------------------------
Xxxxxxx X. Xxxxx
Vice President
XXXXXXX X. XXXXXXX
/s/ Xxxxxxx X. Xxxxxxx
---------------------------------
XXXXXX X. XXXXXXXX
/s/ Xxxxxx X. Xxxxxxxx
---------------------------------
XXXXXXX X. XXXXXXXX
/s/ Xxxxxxx X. Xxxxxxxx
---------------------------------
AGT HOLDINGS, LLC
By: /s/ Xxxxxxx X. Treville
-------------------------
Xxxxxxx X. Treville
President
60
XXXXXXX X. XXXXX
/s/ Xxxxxxx X. Xxxxx
------------------------------
XXXX XXXXX XXXXXXX
/s/ Xxxx Xxxxx Xxxxxxx
------------------------------
61
EXHIBIT A
Form of Opinion of Counsel to the Company
62
EXHIBIT B
Form of Opinion of Counsel to Newco
